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





    MEDICARE ADVANTAGE: WHAT BENEFICIARIES SHOULD EXPECT UNDER THE 
                      PRESIDENT'S HEALTHCARE PLAN

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

                                HEARING

                               BEFORE THE

                         SUBCOMMITTEE ON HEALTH

                                 OF THE

                    COMMITTEE ON ENERGY AND COMMERCE
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED THIRTEENTH CONGRESS

                             FIRST SESSION

                               __________

                            DECEMBER 4, 2013

                               __________

                           Serial No. 113-105



[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]




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

                                  (ii)





















                             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...........................................     2
Hon. Michael C. Burgess, a Representative in Congress from the 
  State of Texas, opening statement..............................     3
Hon. Frank Pallone, Jr., a Representative in Congress from the 
  State of New Jersey, opening statement.........................     7
Hon. Fred Upton, a Representative in Congress from the State of 
  Michigan, opening statement....................................     8
    Prepared statement...........................................     9
Hon. Bill Cassidy, a Representative in Congress from the State of 
  Louisiana, opening statement...................................     9
Hon. Phil Gingrey, a Representative in Congress from the State of 
  Georgia, opening statement.....................................    10
Hon. Henry A. Waxman, a Representative in Congress from the State 
  of California, prepared statement..............................   142

                               Witnesses

Douglas Holtz-Eakin, President, American Action Forum............    11
    Prepared statement...........................................    13
Joe Baker, President, Medicare Rights Center.....................    18
    Prepared statement...........................................    20
Robert Margolis, Chief Executive Officer, HealthCare Partners 
  Holdings, LLC, and Co-Chairman, Davita HealthCare Partners, 
  Inc............................................................    39
    Prepared statement...........................................    41
Marsha R. Gold, Senior Fellow, Mathematica Policy Research.......    59
    Prepared statement...........................................    61
Jon Kaplan, Senior Partner and Managing Director, The Boston 
  Consulting Group...............................................    76
    Prepared statement...........................................    78

                           Submitted Material

Article, dated June 6, 2012, ``Burgess: Medicare-less,'' by Rep. 
  Michael C. Burgess, Washington Times, submitted by Mr. Burgess.     5
Letter of December 3, 2013, from James L. Martin, Chairman, The 
  60 Plus Association, to Mr. Pitts, et al., submitted by Mr. 
  Pitts..........................................................   106

 
    MEDICARE ADVANTAGE: WHAT BENEFICIARIES SHOULD EXPECT UNDER THE 
                      PRESIDENT'S HEALTHCARE PLAN

                              ----------                              


                      WEDNESDAY, DECEMBER 4, 2013

                  House of Representatives,
                            Subcommittee on Health,
                          Committee on Energy and Commerce,
                                                    Washington, DC.
    The subcommittee met, pursuant to call, at 10:00 a.m., in 
room 2123 of the Rayburn House Office Building, Hon. Joe Pitts 
(chairman of the subcommittee) presiding.
    Members present: Representatives Pitts, Burgess, Shimkus, 
Murphy, Blackburn, Gingrey, Lance, Cassidy, Guthrie, Griffith, 
Bilirakis, Ellmers, Barton, Upton (ex officio), Pallone, 
Dingell, Engel, Schakowsky, Matheson, Green, Barrow, 
Christensen, Castor, Sarbanes, and Waxman (ex officio).
    Staff present: Sean Bonyun, Communications Director; Noelle 
Clemente, Press Secretary; Sydne Harwick, Legislative Clerk; 
Robert Horne, Professional Staff Member, Health; Katie Novaria, 
Professional Staff Member, Health; Monica Popp, Professional 
Staff Member, Health; Chris Sarley, Policy Coordinator, 
Environment and the Economy; Heidi Stirrup, Policy Coordinator, 
Health; Tom Wilbur, Digital Media Advisor; Ziky Ababiya, 
Democratic Staff Assistant; Phil Barnett, Democratic Staff 
Director; Amy Hall, Democratic Senior Professional Staff 
Member; Elizabeth Letter, Democratic Assistant Press Secretary; 
Karen Nelson, Democratic Deputy Staff Director, Health; and 
Rachel Sher, Democratic Senior Counsel.
    Mr. Pitts. The subcommittee will come to order. The Chair 
will recognize himself for an opening statement.

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

    The Medicare Advantage--MA--program, an alternative to the 
original Medicare fee-for-service--FFS--program, provides 
healthcare coverage to Medicare beneficiaries through private 
health plans offered by organizations under contract with the 
Centers for Medicare and Medicaid Services--CMS. MA plans may 
offer additional benefits not provided under Medicare FFS, such 
as reduced cost sharing, or vision and dental coverage. They 
also generally have a high rate of satisfaction, and 
approximately 28 percent of Medicare beneficiaries have chosen 
to participate in Medicare Advantage.
    The Affordable Care Act--ACA--as noted in a July 24, 2012, 
Congressional Budget Office--CBO--report, cut $716 billion from 
Medicare, including $308 billion from Medicare Advantage alone.
    In April of 2010, the Medicare Actuary projected that these 
payment cuts would result in an enrollment decrease in the MA 
program of as much as 50 percent.
    The ACA also required CMS, effective January 1, 2012, to 
provide quality bonus payments to MA plans that achieve four, 
four and half, and five stars on a five-star quality rating 
system developed by CMS. Rather than implement the bonus 
structure laid out in the law, which would have led to these 
cuts going into effect in 2012, CMS announced in November 2010 
that it would conduct a nationwide demonstration--the MA 
Quality Bonus Payment Demonstration--from 2012 through 2014 to 
test an alternative method for calculating and awarding 
bonuses.
    The Government Accountability Office--the GAO--in response 
to a request by Senator Orrin Hatch, noted that the 
demonstration project's design made ``it unlikely that the 
demonstration will produce meaningful results'' and recommended 
that HHS cancel the demonstration. GAO also stated: ``We remain 
concerned about the agency's legal authority to undertake the 
demonstration.''
    With a price tag of $8.35 billion over 10 years, the 
Medicare Actuary noted that this demonstration would offset 
more than one-third of the reduction in MA payments projected 
to occur under ACA from 2012 to 2014, effectively masking the 
first wave of ACA-mandated cuts until next year.
    A recent report by the Kaiser Family Foundation warned that 
more than half a million beneficiaries may have to switch to 
another MA plan or return to fee-for-service Medicare in 2014 
as a result of the ACA.
    In addition to plan availability, questions are now being 
raised about the possibility of rising costs and limited 
provider networks in the future as more ACA-mandated cuts go 
into effect.
    I would like to thank our witnesses for being here today, 
and I look forward to their testimony regarding how the ACA 
will impact the Medicare Advantage program.
    [The prepared statement of Mr. Pitts follows:]

               Prepared statement of Hon. Joseph R. Pitts

    The Medicare Advantage (MA) program, an alternative to the 
original Medicare fee-for-service (FFS) program, provides 
healthcare coverage to Medicare beneficiaries through private 
health plans offered by organizations under contract with the 
Centers for Medicare and Medicaid Services (CMS).
    MA plans may offer additional benefits not provided under 
Medicare FFS, such as reduced cost sharing or vision and dental 
coverage.
    They also generally have a high rate of satisfaction, and 
approximately 28% of Medicare beneficiaries have chosen to 
participate in Medicare Advantage.
    The Affordable Care Act (ACA), as noted in a July 24, 2012 
Congressional Budget Office (CBO) report, cut $716 billion from 
Medicare, including $308 billion from Medicare Advantage alone.
    In April 2010, the Medicare actuary projected that these 
payment cuts would result in an enrollment decrease in the MA 
program of as much as 50%.
    The ACA also required CMS, effective January 1, 2012, to 
provide quality bonus payments to MA plans that achieve 4, 4.5, 
or 5 stars on a 5-star quality rating system developed by CMS.
    Rather than implement the bonus structure laid out in the 
law, which would have led to these cuts going into effect in 
2012, CMS announced in November 2010 that it would conduct a 
nationwide demonstration--the MA Quality Bonus Payment 
Demonstration--from 2012 through 2014 to test an alternative 
method for calculating and awarding bonuses.
    The Government Accountability Office (GAO), in response to 
a request by Senator Orrin Hatch, noted that the demonstration 
project's design made ``it unlikely that the demonstration will 
produce meaningful results'' and recommended that ``HHS cancel 
the demonstration.''
    GAO also stated: ``we remain concerned about the agency's 
legal authority to undertake the demonstration.''
    With a price tag of $8.35 billion over 10 years, the 
Medicare actuary noted that this demonstration would offset 
more than one-third of the reduction in MA payments projected 
to occur under ACA from 2012 to 2014, effectively masking the 
first wave of ACA-mandated cuts until next year.
    A recent report by the Kaiser Family Foundation warned that 
more than half a million beneficiaries may have to switch to 
another MA plan or return to fee-forservice Medicare in 2014, 
as a result of ACA.
    In addition to plan availability, questions are now being 
raised about the possibility of rising costs and limited 
provider networks in the future as more ACA-mandated cuts go 
into effect.
    I would like to thank our witnesses for being here today, 
and I look forward to their testimony regarding how the ACA 
will impact the Medicare Advantage program.

    Mr. Pitts. Thank you, and I yield the remainder of my time 
to Representative Burgess.

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. I 
always want to thank the chairman for calling the hearing this 
morning.
    You know, we see the headlines and we see everything that 
is going wrong in health care, but sometimes we forget that 
there are some things that actually are going OK and there are 
things that this committee and previous Congresses have worked 
on to fix, and that is one of the things we are going to be 
discussing this morning, but sometimes we are so busy triaging, 
we don't allow ourselves the luxury of examining those things 
that are actually working as intended.
    In my opinion, Medicare Advantage is working, and it is 
important to hold hearings like this to learn from those 
successes and see where we can build upon those successes and 
where the potential threats that are undermining the benefits 
and services that now over 25 percent of seniors are 
experiencing and how those maybe threatened.
    Medicare Advantage allows integrated care coordination that 
this committee has sought to bring into fee-for-service 
Medicare. Medicaid Advantage plans in Texas are lowering costs. 
They are bringing greater disease management and care 
coordination to patients' lives. They are encouraging wellness 
activities and actually using physicians to the maximum ability 
of their license rather than always referring to a specialist. 
There are those conditions that can be satisfactorily managed 
by a general internist or family practice physician, and we 
ought to encourage that and not punish it. But as money is 
taking out of the system and plans have been forced to restrain 
networks and eliminate services that made them such a good deal 
for seniors, we have to keep a watchful eye.
    We are all hearing about people wanting to be able to keep 
their doctors. Well, the cuts in the Affordable Care Act pose a 
real danger to seniors keeping their doctors and the benefits 
that they now have in Medicare Advantage. The harm of these 
cuts is compounded when the money is not reinvested in the 
Medicare program. We have heard that before. You can't doubly 
count the money that you take out of Medicare and then count 
that again as a savings when you are not reinvesting the money 
in Part A or Part B.
    One small change that has been bipartisan, Mr. Gonzalez, 
who used to be part of this committee, when he was on the 
committee offered a bill that would allow seniors to switch 
plans between MA plans in the first three months of the year 
right after the open enrollment period. That was a reasonable 
suggestion of his at the time, and one that I think the 
committee could support.
    Mr. Chairman, I had some time to go through the archives, 
and I encountered a very brilliant and insightful opinion piece 
that was printed in the Washington Times June 16, 2012, and I 
would like to offer it for the record.
    Mr. Pitts. Without objection, so ordered.
    [The information follows:]


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


    
    Mr. Pitts. The gentleman yields back, and now the Chair 
recognizes the ranking member of the Health Subcommittee, Mr. 
Pallone, 5 minutes for an opening statement.

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

    Mr. Pallone. Thank you, Chairman Pitts, and thank you to 
our witnesses for being here to share your expertise.
    Today I am pleased we have the opportunity to talk about 
Medicare and the positive reforms introduced by the Affordable 
Care Act to Medicare Advantage. While the majority of 
Medicare's 52 million beneficiaries are in the traditional 
Federally administered Medicare program, Medicare Advantage, or 
MA, offers beneficiaries an alternative option to receive their 
Medicare benefits through private health plans. Fifteen million 
people, or 29 percent of all Medicare beneficiaries, are 
enrolled in MA plans as of September 2013, an increase of 30 
percent since 2010.
    The ACA included reforms to Medicare Advantage payment 
policies and added a number of benefits and protections for 
beneficiaries both through MA and traditional Medicare. For 
example, Medicare must cover wellness visits and preventative 
services with no copayments or coinsurance. The ACA also 
ensures that MA plans beginning in 2014 spend at least 85 cents 
of every dollar received in premiums on actual care. 
Beneficiaries will also receive discounts through the ACA on 
their medications when they reach the coverage gap, or donut 
hole, in Medicare Part D, and these discounts will grow over 
the next several years until the gap is closed.
    In addition, the ACA aims to improve the quality of MA 
plans by rewarding plans that deliver high-quality care with 
bonus payments. Incentivizing quality patient care over 
quantity of services provided is key to improving healthcare 
outcomes and reducing waste and the rising cost of health care.
    The ACA will also bring MA payments more in line with 
traditional Medicare payments. On average, Medicare has been 
paying more per enrollee to these private MA plans than the 
cost of care for those on traditional Medicare. By reducing MA 
payments over time, there will be greater parity between MA and 
traditional Medicare payments, resulting in savings that will 
benefit enrollees and help secure the solvency of the Medicare 
Trust Fund for a longer period of time.
    Now, critics of these payments reforms predicted that MA 
costs to enrollees would rise, that the provider networks and 
plan choices would decrease, and MA enrollment would drop. 
Changes in provider participation, pricing and coverage occur 
every year as an inherent part of insurers' business decision-
making including long before the passage of the ACA, and that 
is why we have provided tools to CMS to ensure that seniors are 
protected from potential changes that private plans may make.
    In addition, seniors continue to have the choice that best 
suits their individual health needs, and every year continue to 
maintain the ability to pick a new plan or traditional 
Medicare.
    So I look forward to hearing more from our witnesses on 
recent trends in Medicare Advantage. I think we can all agree 
that our work as a committee needs to continue beyond the 
improvements we made in the ACA. So your guidance today on ways 
we can continue to strengthen the program for our seniors is 
critical. We can't return to the ways before the Affordable 
Care Act. We must move our healthcare system to one of quality 
and efficiency in all of Medicare.
    So thank you again, Mr. Chairman, and I yield back the 
balance of my time.
    Mr. Pitts. The Chair thanks the gentleman, and now 
recognizes the chairman of the full committee, Mr. Upton, 5 
minutes for an opening statement.

   OPENING STATEMENT OF HON. FRED UPTON, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF MICHIGAN

    Mr. Upton. Well, thank you, Mr. Chairman.
    You know, every day we are hearing from folks and families 
across the country about how the President's healthcare bill 
has wreaked havoc on their own healthcare coverage, with 
millions receiving cancellation notices, millions more facing 
premium rate shock, and others still left to wonder if their 
applications on HealthCare.gov were even successful.
    This morning, we are going to focus on how the health care 
of our Nation's seniors and disabled could be affected by the 
changes in the President's healthcare plan.
    The President's healthcare law cut over $700 billion from 
the already struggling Medicare program to help fund the flawed 
new entitlement. Included in these cuts were over $300 billion 
in direct and indirect reductions to the Medicare Advantage 
program, and many of these cuts will start in 2014.
    Medicare's managed care program, also known as Medicare 
Advantage, currently provides coverage for more than 14 million 
Americans, over a quarter of all Medicare beneficiaries, and 
these patients choose Medicare Advantage plans over traditional 
Medicare for a variety of reasons including improved cost 
sharing, enhanced benefits, better care coordination, and in 
fact, higher quality of care. For millions of Americans, 
especially those with lower incomes, Medicare Advantage is a 
better option for delivering their care, and frankly, their 
choice.
    While Medicare Advantage continues to grow, the cuts made 
in the healthcare law threaten the future of the program and 
could put coverage at risk for thousands of beneficiaries in 
2014 and many more in the future.
    According to a report by the Kaiser Family Foundation, more 
than half a million beneficiaries may lose their existing 
Medicare Advantage plan next year, which would then force those 
seniors and disabled Americans to switch their current plan or 
return to a traditional fee-for-service plan. More than 100,000 
beneficiaries enrolled in a Medicare Advantage plan in 2013 
will not be able to enroll in a Medicare Advantage plan at all 
in 2014.
    Likewise, for thousands of America's most vulnerable, ``if 
you like your doctor, you will be able to keep your doctor'' is 
sadly another broken promise. Reports confirm that many 
Medicare Advantage enrollees will see a change in their 
provider networks next year as a result of the new law. So 
empty promises may be of little concern for some but they have 
real consequences for the Americans who expect us to do no 
harm. Americans deserve to know why their existing coverage is 
changing when they were promised otherwise, and this morning's 
hearing will be an important opportunity to get some answers 
from a number of good experts, and we appreciate you being 
here, and I yield to Dr. Cassidy.
    [The prepared statement of Mr. Upton follows:]

                 Prepared statement of Hon. Fred Upton

    Every day we hear from individuals and families across the 
country about how Obamacare has wreaked havoc on their 
healthcare coverage, with millions receiving cancellation 
notices, millions more facing premium rate shock, and others 
still left to wonder if their applications on HealthCare.gov 
were even successful. This morning, we will focus on how the 
health care of our Nation's seniors and disabled could be 
affected by the changes in the president's healthcare plan.
    The president's healthcare law cut over $700 billion from 
the already struggling Medicare program to help fund the flawed 
new entitlement. Included in these cuts were over $300 billion 
in direct and indirect reductions to the Medicare Advantage 
program. Many of these cuts will begin in 2014.
    Medicare's managed care program, also known as Medicare 
Advantage, currently provides coverage for more than 14 million 
Americans, over a quarter of all Medicare beneficiaries. These 
patients choose Medicare Advantage plans over traditional 
Medicare for a variety of reasons including improved cost-
sharing, enhanced benefits, better care coordination, and 
higher quality of care. For millions of Americans, especially 
those with lower-incomes, Medicare Advantage is a better option 
for delivering their care.
    While Medicare Advantage continues to grow, the cuts made 
in the healthcare law threaten the future of the program and 
could put coverage at risk for thousands of beneficiaries in 
2014 and many more in the future.
    According to a report by the Kaiser Family Foundation, more 
than half a million beneficiaries may lose their existing 
Medicare Advantage plan next year, which would force these 
seniors and disabled Americans to switch their current plan or 
return to a traditional fee-for-service plan. More than 105,000 
beneficiaries enrolled in a Medicare Advantage plan in 2013 
will not be able to enroll in a Medicare Advantage plan at all 
in 2014.
    Likewise, for thousands of America's most vulnerable, ``if 
you like your doctor, you will be able to keep your doctor'' is 
sadly another broken promise. Reports confirm that many 
Medicare Advantage enrollees will see a change in their 
provider networks next year as a result of the new law.
    Empty promises may be of little concern to this 
administration, but they have real consequences for the 
Americans who expect Washington to do no harm. Americans 
deserve to know why their existing coverage is changing when 
they were promised otherwise, and this morning's hearing will 
be an important opportunity to get some answers from a panel of 
expert witnesses.

  OPENING STATEMENT OF HON. BILL CASSIDY, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF LOUISIANA

    Mr. Cassidy. Thank you, Mr. Chairman.
    Over 37,000 of my constituents in Louisiana are enrolled in 
Medicare Advantage programs. MA plans offer higher quality care 
and additional benefits, more so than offered in traditional 
Medicare, and yet despite MA's popularity, MA has challenges.
    The President's healthcare law cuts Medicare Advantage by 
over $200 billion. Now, I am a doc. When I see that the people 
who would come to me are having this many cuts in the programs 
that cover them, intuitively, common sense tells you that they 
will have increased problems finding a doctor, they will have 
higher premiums, higher copays, fewer benefits and plan 
choices. Even now with only 20 percent of these cuts 
implemented, there are reports of these problems already.
    I along with Congressman Barrow and 60 other Members of 
Congress have signed a letter opposing other cuts to the MA 
program. I urge my colleagues on the committee to make the same 
commitment to their constituents who have come to rely upon 
Medicare Advantage.
    With that, I yield----
    Mr. Shimkus. Dr. Cassidy, will you yield me back the 
balance?
    Mr. Cassidy. I yield my time back to the chairman.
    Mr. Upton. Yield to Mr. Shimkus.
    Mr. Gingrey. Mr. Chairman, did you yield to me?
    I thank the chairman for yielding.

  OPENING STATEMENT OF HON. PHIL GINGREY, A REPRESENTATIVE IN 
               CONGRESS FROM THE STATE OF GEORGIA

    Look, Medicare Advantage has been around since, what, the 
late 1980s? It was Medicare Plus Choice, then it was Medicare 
Advantage, but the word ``advantage'' just means exactly what 
it says. It is an advantage.
    You know, it is kind of interesting that the Democrats in 
creating this Affordable Care Act demanded that policies have 
minimum coverage requirements, and that this why the cost of so 
many of those policies has gone up and people have been 
notified that they are not going to be able to keep those 
policies January 1, 2014, because they are demanded to include 
so many additional things. Well, why would Medicare Advantage 
not cost more because they are more things in it, more 
provisions, preventive care, annual physical examinations, a 
nurse checking up, making sure that the patient got the 
medications filled, that they return for their appointment and 
timely follow up? So to gut that program--and that is what this 
is all about.
    I am really looking forward to what the witnesses have to 
say about it but it made no sense to cut $300 billion out of a 
program that 29 percent of Medicare beneficiaries had chosen, 
and it has gone up over the years each and every year, and I 
yield back.
    Mr. Pitts. The gentleman's time has expired. The Chair now 
recognize the ranking member emeritus, Mr. Dingell, 5 minutes 
for opening statement.
    Mr. Dingell. I don't have an opening statement. I am going 
to have some fun with my questions. Thank you, Mr. Chairman.
    Mr. Pitts. The opening statements have been made by the 
members. I will now introduce our panel of five witnesses.
    The first is Mr. Douglas Holtz-Eakin, President, the 
American Action Forum; Mr. Joe Baker, President, Medicare 
Rights Center; Dr. Bob Margolis, CEO, HealthCare Partners, and 
Co-Chairman of DaVita HealthCare Partners; Ms. Marsha Gold, 
Senior Fellow, Mathematica Policy Research; and Mr. Jon Kaplan, 
Senior Partner and Managing Director of the Boston Consulting 
Group.
    Your written testimony will be made part of the record. You 
will have 5 minutes to summarize your testimony, and at this 
time, the Chair recognizes Mr. Holtz-Eakin for 5 minutes for 
opening statement.

STATEMENTS OF DOUGLAS HOLTZ--EAKIN, PRESIDENT, AMERICAN ACTION 
  FORUM; JOE BAKER, PRESIDENT, MEDICARE RIGHTS CENTER; ROBERT 
    MARGOLIS, CHIEF EXECUTIVE OFFICER, HEALTHCARE PARTNERS 
  HOLDINGS, LLC, AND CO-CHAIRMAN, DAVITA HEALTHCARE PARTNERS, 
    INC.; MARSHA R. GOLD, SENIOR FELLOW, MATHEMATICA POLICY 
RESEARCH; AND JON KAPLAN, SENIOR PARTNER AND MANAGING DIRECTOR, 
                  THE BOSTON CONSULTING GROUP

               STATEMENT OF DOUGLAS HOLTZ--EAKIN

    Mr. Holtz-Eakin. Thank you, Chairman Pitts, Ranking Member 
Pallone and members of the committee for the privilege of 
appearing today.
    Let me take this opportunity to emphasize a few points that 
I made in my written statement.
    The first, as has been pointed out by the chairman and 
others in their opening statements, is that Medicare Advantage 
is a valuable and popular part of Medicare with nearly 30 
percent of beneficiaries voluntarily enrolled in it, increasing 
enrollments each year, and it does provide extra services and 
innovative approaches to health care in the Medicare program. 
It disproportionately serves lower-income beneficiaries and 
minorities, and has been the program of choice for them, but 
most importantly, Medicare Advantage is not fee-for-service 
medicine and thus it represents an important opportunity to 
move away from the practice of medicine that has proven costly 
and that rewards volume over quality in the American healthcare 
system.
    Unfortunately, Medicare Advantage is under a four-fold 
funding reduction due to provisions in the Affordable Care Act 
and then others more recently. The first stems from reductions 
in fee-for-service spending per se; the second, the 
modification of the Medicare Advantage bench marks relative to 
fee-for-service spending in each county; the third, the 
implications of a health insurance tax that will come online in 
2014, which will affect many MA plans and further act as a 
pressure on the ability to provide benefits; and the fourth, 
the recent requirement that CMS provide changes in the coding 
intensity for Medicare Advantage plans.
    The results of these changes are inevitable. The first will 
be fewer plans. Estimates range from 60 to 140 fewer plans in 
2014. There are reports of 10,000 cancellation notices in Ohio, 
50,000 in the State of New Jersey, and these all represent 
further violations of the pledge that if you like your health 
insurance, you can keep it under the Affordable Care Act.
    In addition, there will be fewer enrollees. Projections are 
that there will be up to 5 million fewer enrollments by 2019 
when the ACA cuts are fully implemented, and these reductions 
are disproportionately borne by lower-income Americans. Our 
estimates are that about 75 percent of the impacts hit those 
making less than $34,200.
    The next step for those plans that do survive is to pass 
along these reductions in the form of either higher cost 
sharing or reduced benefits or more limited networks that 
provide beneficiaries with fewer choices. These are not the 
voluntary decisions of insurers; these are the natural 
consequences of the law which limits their ability to provide 
options to beneficiaries.
    Going forward, I would emphasize that it is very important 
to preserve this steppingstone to coordinated care and the 
better practice of medicine in Medicare and that it would be 
extremely undesirable for Congress to repeat the practice of 
using Medicare Advantage as a funding source for further 
expansions of other program initiatives. This is a valuable 
program that has proven on the ground to provide high-quality 
care, innovative approaches to medicine, and is the popular 
choice of many of the least well-off beneficiaries. Further 
reductions in its availability are an undesirable policy step.
    I thank you, and I look forward to answering your 
questions.
    [The prepared statement of Mr. Holtz-Eakin follows:]


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    Mr. Pitts. The Chair thanks the gentleman and now 
recognizes Mr. Baker 5 minutes for summary of his opening 
statement.

                     STATEMENT OF JOE BAKER

    Mr. Baker. Thank you, Chairman Pitts and Ranking Member 
Pallone and distinguished members of the subcommittee.
    Medicare Rights is a national nonprofit organization that 
works to ensure access to affordable care for older adults and 
people with disabilities, and we thank you for this opportunity 
to testify on the Medicare Advantage program.
    Each year we counsel thousands of people with Medicare 
Advantage about topics ranging from enrolling in a plan to 
appealing a denied claim. We find that Medicare Advantage plans 
are a good option for some but not all people with Medicare. 
Many of our callers are satisfied with their plan and their 
inquiries are easily resolved. Others find navigating a 
Medicare Advantage plan challenging. These callers may struggle 
to resolve billing issues, cope with coverage denials, compare 
plan details and other issues.
    In particular, we observe that people find choosing among 
Medicare Advantage plans sometimes a dizzying experience. We 
urge people every year to revisit their plan's coverage as 
annual changes to plan benefits, cost sharing, provider 
networks and other coverage rules are commonplace each year. 
Yet research suggests that inertia is widespread. Put simply, 
there are too many plans, too many variables to compare and too 
few meaningful choices among plans.
    The Affordable Care Act offers a blueprint for constructing 
a high-value healthcare system where insurance plans, 
physicians, hospitals and other providers are paid according to 
the quality of care that they provide. Medicare is the 
incubator for many of these reforms. As such, the ACA includes 
a set of policies designed to make the Medicare Advantage 
system more efficient and to enhance plan quality. Alongside 
physicians, hospitals and other healthcare providers, Medicare 
Advantage plans have been and should be playing an important 
role in this transformation.
    Medicare Advantage provisions included in the ACA are 
ultimately intended to secure higher-volume care; in other 
words, better quality at a lower price. Recent changes to MA by 
the ACA have strengthened the program. In addition to improving 
Medicare's overall financial outlook, the ACA enhanced Medicare 
Advantage through added benefits, fairer cost sharing and 
improved plan quality. For instance, the ACA expands coverage 
for preventive services, prohibits Medicare Advantage plans 
from charging higher cost sharing than original Medicare for 
renal dialysis, chemotherapy and skilled nursing facility stays 
and requires that plans spend 85 percent of beneficiary 
premiums and Federal payments on patient care. These and other 
changes that the ACA has brought to Medicare Advantage should 
be preserved.
    It is important to note that ACA savings secured largely 
from Medicare Advantage payment adjustments are producing 
positive returns for the Medicare program benefiting both 
current and future beneficiaries. Improving cost efficiency in 
Medicare translates into real progress for older adults and 
people with Medicare and people with disability. For example, 
in 2014, the Part B premium remains at its 2013 level, 
amounting to $104.90 per month.
    While many predicted that ACA changes to Medicare Advantage 
would lead to widespread disruption of the plan landscape, we 
have not seen that among our clients that we serve generally. 
The premiums, benefit levels and availability of plans remain 
relatively stable. In fact, the Medicare Advantage market is 
now better and more robust for consumers, and enrollment 
continues to be on the rise in this year.
    While there appears to be an increased incidence of 
slimming of Medicare Advantage provider networks this year, we 
must stress that we see this every year. Changing provider 
networks are an inherent risk of any managed care system. Our 
advice to Medicare beneficiaries remains the same: people can 
switch to another Medicare Advantage plan or back to original 
Medicare or traditional Medicare during the fall open 
enrollment period, which is occurring right now, in any 
situation where a current Medicare Advantage plan does not meet 
their needs.
    In closing, we believe that Congress should do more to 
simplify plan selection and coverage rules for people with 
Medicare Advantage. We recommend improving beneficiary notice 
regarding annual plan changes including changes in plan 
networks and further streamlining and standardizing plans, 
improving the appeals system, and adequately funding 
independent counseling resources like the SHIP program. We also 
urge Congress to expand the range of supplemental coverage 
options available to people with original Medicare for those 
cases where a Medicare Advantage plan is not the best fit for 
beneficiaries' needs and also to allow people to go back and 
forth between the Medicare Advantage plan and the original 
Medicare program with more facility.
    We really thank you for the opportunity to testify today.
    [The prepared statement of Mr. Baker follows:]


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    Mr. Pitts. The Chair thanks the gentleman and now 
recognizes Dr. Margolis 5 minutes for summary of his opening 
statement.

                  STATEMENT OF ROBERT MARGOLIS

    Mr. Margolis. Thank you, Chairman Pitts and Ranking Member 
Pallone and esteemed committee members for the invitation to 
address you today. I come to address the merits of Medicare 
Advantage, having had many years of experience in the program, 
and can tell you without any hesitation, it is the most 
effective Federal program moving seniors to higher-quality care 
through coordination and measurement of quality and outcomes.
    I come wearing multiple hats as my 40 years in health care 
and healthcare policy has taken me in many directions: the 
California Association of Physician Groups, which I chaired and 
which represents over 90 percent of all coordinated care 
patients in California, my board representation and 
chairmanship at NCQA, which has proven through extensive 
measurement and transparency that the quality and measurement 
that occurs in Medicare Advantage is superior to the fee-for-
service original alternative; as you mentioned, my role as CEO 
of HCP, HealthCare Partners, but mostly as a doctor at a 
practice for over 20 years in an urban inner-city hospital in 
Los Angeles serving primarily seniors and other disadvantaged 
patients where I saw that without equivocation, the fee-for-
service mentality of the original Medicare, or as we like to 
refer to it, fee for volume, is not coordinating care for 
seniors.
    Seniors who have multiple chronic diseases, who are 
vulnerable and especially those that are poor and with less 
than fewer resources, need an ideal system, a system that helps 
with great information and a physician advisor to help them 
navigate through a very difficult and complex healthcare system 
and manage them longitudinally across time. As a physician, I 
can tell you that every physician I know manages his or her 
patients with great desire to do the best outcome but does not 
have the infrastructure, the coordination and the resources to 
follow that patient longitudinally through their healthcare 
needs, and that is the one major advantage of coordinated care, 
population health, managed care, however you choose to name it. 
Population health, for those that perhaps are unfamiliar with 
that term, really is having patients select a doctor through a 
network, through a health plan, and then having that physician 
organization take responsibility through a per-member per-month 
or capitation for the total are of that patient. It totally 
changes the incentives, and incentives drive behaviors. The 
behaviors within a coordinated care program are one of health 
promotion, defer and delay chronic disease through much more 
intervention, disease management, pharmacy management, making 
sure that patients get to their specialist, get to their 
visits, have home care programs.
    So let me explain a little bit about how that works within 
our organization, which is relatively large. We care for now 
over 250,000 Medicare Advantage patients through our 11,000 
affiliated and employed physicians in five different States, 
and the way that works is through great information technology, 
which is a big investment but an important investment that 
allows us now to segment the patient population into areas of 
need and design programs specifically to those areas of need. 
So for instance, there are home care programs for those most 
vulnerable that have trouble getting into the doctor's office 
and avoids 911 calls and trips to the emergency room. There are 
comprehensive care clinics for those folks that have very 
complex diseases where there is individual care plans monitored 
by a team, and I have to say without equivocation, health care 
best delivered is a team sport. It is great to have a physician 
in the center of that team, but having care managers, having 
disease management, having social workers, having dieticians, 
having home care capabilities is a key component of making it 
an effective system, so I ask you without any equivocation, 
please continue to support MA, strengthen it, help it grow, 
support special needs program, support moving the duals into 
Medicare Advantage in a coordinated way with the States. It is 
a very vulnerable population that could use Congress's support 
with CMS to make that effective.
    And with that, I will yield the last 6 seconds back to you.
    [The prepared statement of Mr. Margolis follows:]


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    Mr. Pitts. The Chair thanks the gentleman, and now 
recognizes Ms. Gold 5 minutes for summary of her opening 
statement.

                  STATEMENT OF MARSHA R. GOLD

    Ms. Gold. Hello. Thank you, Chairman Pitts, Ranking Member 
Pallone and members of the subcommittee to talk to you about 
Medicare Advantage.
    As a Senior Fellow at Mathematica for the past 20-plus 
years, I have been examining Medicare Advantage for a long 
time, analyzing trends and plan participation, enrollment and 
benefits, looking at market dynamics and studying the 
implications for beneficiaries, working with the Kaiser Family 
Foundation and others.
    My testimony today makes three points that I hope will 
inform the Congressional debate on the Medicare Advantage 
program today. My independent findings, I should say, in 
general are closely aligned with the positions and opinions 
expressed by MedPAC.
    First and foremost, and we have heard this in a few other 
places here today, the MA program is strong with rising 
enrollment and widespread plan availability that is expected to 
continue through 2014, despite the concerns that the cutbacks 
in payment would discourage plan participation or make plans 
less attractive. There is 15 million people in the program, 29 
percent of all benefits an all-time high, although it varies a 
lot across the country, and I think it is important to 
recognize that health care is local and the circumstances are 
different. The kind of care Dr. Margolis mentions happens in 
some places and not others.
    Second, despite concerns over plan terminations in 2014, 
there are almost as many new plans entering in 2014 as 
terminating, and since the ACA was enacted, average in premiums 
to enrollees have declined, and they will still be lower in 
2014 than they were in 2010. Exit and entry are essential 
characteristics of a competitive market. Medicare beneficiaries 
today have an average of 18 Medicare Advantage choices as well 
as the option to stay in the traditional Medicare program and 
with or without a supplement. Medicare beneficiaries can keep 
their plan. It is called Medicare, whether you are in Medicare 
Advantage or Medicare traditional.
    It is difficult to see the rationale on a national basis 
for paying private plans more than Medicare currently spends on 
the traditional program, particularly when there is so much 
concern with the deficit and debt. Medicare has historically 
aimed to set payments to MA plans below or equal to what 
Medicare would expect to pay in the traditional program for 
beneficiaries who enroll in the plans. This changed in 2003, 
and by 2009, payments were considerably higher than Medicare 
would have paid for the same beneficiaries if they were in the 
traditional program. This costs every beneficiary more in added 
Part B premiums and it provides little incentive for MA plans 
to become more efficient. When I examined the 2009 plan bid 
data, I found wide variation in MA plans' costs relative to 
traditional Medicare spending, even controlling for plan types 
and payment levels. That suggests there was room for a lot more 
efficiency in the program variable across plans, and the policy 
changes that were in the ACA reflect recommendations that 
Congress's own Medicare Payment Advisory Commission has 
advocated for years.
    Third, many of the concerns raised about 2014 offerings 
from what I have looked at are not consistent with evidence or 
inherent part of the way competitive markets work, and they are 
already addressed by protections in place in the program. Only 
5 percent of enrollees in 2013 will have to shift plans. Most 
will be able to stay in the same type of plan. The average 
premium was down 21 percent from between 2010 and 2013 for a 
beneficiary, and premiums were stable in 2014. Some 
beneficiaries will see their premiums rise in 2014 but they 
will still be paying less than 2010, and if historical patterns 
hold, some of the beneficiaries will switch around so that they 
can get a better deal.
    Clearly, payment reductions can discourage plans from 
participating in Medicare Advantage but this doesn't yet appear 
to be an issue, and Medicare has a number of protections for 
this such as network adequacy and quality standards, required 
notice of change in plans and provider networks and other 
means. Because MA choice is voluntary, there is also the option 
to return to traditional Medicare.
    In its March 2013 report to Congress, MedPAC concluded that 
the payment changes under the Affordable Care Act have improved 
the efficiency of the program and may have encouraged plans to 
respond by enhancing quality, all the while continuing to 
increase MA enrollment through plans and benefit packages that 
beneficiaries find attractive. I believe my analysis and 
testimony is consistent with MedPAC's conclusion.
    Thank you for your time, and I look forward to any 
questions.
    [The prepared statement of Ms. Gold follows:]


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    Mr. Pitts. The Chair thanks the gentlelady and now 
recognizes Mr. Kaplan 5 minutes for summary of his opening 
statement.

                    STATEMENT OF JON KAPLAN

    Mr. Kaplan. Chairman Pitts, Ranking Member Pallone and 
members of the subcommittee, thank you for the opportunity to 
testify today.
    My name is Jon Kaplan, and I am a Senior Partner of the 
Boston Consulting Group. I have a healthcare background that is 
over 25 years, working closely with both nonprofit and for-
profit healthcare entities throughout the entire healthcare 
industry.
    Earlier this year, I led a BCG team that analyzed the 
differences in health outcomes between patients enrolled in 
traditional Medicare and those enrolled in private Medicare 
Advantage health plans. We found that patients enrolled in the 
Medicare Advantage plans had better health outcomes than those 
participating in traditional Medicare.
    There are three key findings from our research. First, the 
MA patients in our sample received higher levels of recommended 
preventive care and had fewer disease-specific complications. 
Second, during acute episodes requiring hospitalization, the 
patients in the MA plans spent almost 20 percent less time in 
the hospital than those in traditional Medicare. In addition, 
they had less readmissions into the hospital. Finally, the 
percentage of people who died in the year we studied was 
substantially higher in the traditional Medicare sample than 
those in the Medicare Advantage sample. This is a striking 
finding and one that we hope to explore further in a 
longitudinal, multiyear study.
    Our study did not directly address the causes of these 
differences. In my experience, however, the key factor is MA 
itself and how the plans are organized and managed. First, 
these plans align financial incentives with clinical best 
practice. Second, they recruit the most effective providers and 
include only those who practice high-quality medicine. Third, 
they put a strong emphasis on active care management and invest 
resources in prevention to keep patients healthy, stable and 
out of the hospital.
    There are many indications in our study that these three 
mechanisms are responsible for the better health outcomes of 
the MA patients. Take the example of diabetes. Two clinical 
standards for diabetes care are frequent HbA1c testing and 
regular screenings for kidney disease. Our data show that the 
MA sample had substantially higher number on both tests than in 
the traditional Medicare sample. This stronger focus on 
prevention helps keep patients healthy and avoids the need for 
highly disruptive and expensive acute care interventions. For 
example, we found that diabetic patients in MA had dramatically 
fewer foot ulcers and amputations than those patients in 
traditional Medicare.
    Aligned incentives and active care management also helps 
explain lower utilization rates. Take the example of emergency 
room visits. In our traditional Medicare matched sample, about 
four out of ten of the patients visited the emergency room at 
least once per year. For many portions of Medicare Advantage, 
however, this figure drops to around two out of ten.
    One last finding to share: Among the three types of MA 
plans that we studied, the very best health outcomes were for 
those patients in the capitated MA plan. The findings suggest 
that capitation is extremely effective at supporting provider 
investment and preventive medicine and active care 
coordination.
    Let me conclude by suggesting some implications of our 
study for health policy. In my opinion, Medicare Advantage 
plans are an example of a successful public-private 
partnership. These plans represent an integrated care delivery 
model that uses effective provider incentives, real-time 
clinical information and care coordination capabilities to 
improve quality and lower cost. In my opinion, Federal policy 
should be supporting and not discouraging more Medicare 
patients to enroll in MA. Their health outcomes and the entire 
U.S. healthcare system are likely to be better as a result.
    Thank you for inviting me to speak, and I look forward to 
answering your questions.
    [The prepared statement of Mr. Kaplan follows:]


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    Mr. Pitts. The Chair thanks the gentleman. That concludes 
the summaries.
    Before we go to questioning, I'd like to seek unanimous 
consent to submit for the record a letter from the 60 Plus 
organization. Without objection, so ordered.
    [The information follows:]


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    Mr. Pitts. I will now begin the questioning and recognize 
myself for 5 minutes for that purpose.
    Mr. Holtz-Eakin, since passage of the President's 
healthcare plan, millions of Americans and their families have 
received insurance cancellation notices. Do you think Medicare 
Advantage may be Obamacare's next victim, and if so, what might 
beneficiaries in Pennsylvania expect over the coming years in 
terms of plan choices, cost, foregone benefit offerings and 
provider networks?
    Mr. Holtz-Eakin. Thank you, Mr. Chairman. Indeed, I am 
concerned about the future of Medicare Advantage, as I said in 
my opening statement. The work we have done on the implications 
of ACA cuts, for example, in Pennsylvania, would suggest that 
in 2014, there would be an average loss of benefits per 
beneficiary of about $2,200, that this is about a 19 percent 
reduction in those benefits, and that we would see a decline in 
the activity of Medicare Advantage to about 113,000 
Pennsylvanians, and those numbers for 2014 are of concern but I 
am more troubled by the trajectory over the succeeding 5 years 
and the full cuts under the Affordable Care Act as to whether 
Medicare Advantage will remain a viable option within the 
Medicare program and deliver the comprehensive benefits.
    And I just want to echo the statements that we heard in 
many of the opening remarks. The Medicare population is so 
different than when Medicare was originated. It is now a 
population that has multiple chronic conditions and 
comorbidities. It requires a coordinated approach to care. That 
is the route to both better health and financial future for 
Medicare as a whole. Medicare Advantage, I think, is an 
important steppingstone to that future.
    Mr. Pitts. Thank you.
    Dr. Margolis, as you know, this committee has been 
committed in a bipartisan form to address access concerns in 
part by improving the flawed physician patient formula for 
participating Medicare doctors. However, I believe Medicare 
Advantage plays a key role in ensuring the physician-patient 
relationship for seniors and the disabled. What impact, in your 
opinion, will the permanent solution to the flawed SGR formula 
have on the viability of the Medicare Advantage program?
    Mr. Margolis. Thank you, Mr. Pitts. There is no question 
that the cuts that are proposed are coming down on Medicare 
Advantage, and I would specifically stress the rescaling of the 
risk adjustment factor, which really was a key component in 
what I believe is making it a positive incentive to care for 
the sick and fragile patient was to be paid based on the acuity 
of the patient, and so the potential of reducing significantly 
the payments relative to the most expensive patients starts to 
flip back to that possibility that the people will not be able 
to gain care if they are really sick, and that is a potential 
serious problem.
    And I would also like to just say that Medicare Advantage 
should not, in our opinion, be the pay-for for an SGR fix. I 
think that as you have heard from all these other witnesses 
that it is extremely important for the seniors of our country, 
10,000 more of which are entering Medicare every day, to be 
able to access good coordinated care and especially for that 5 
percent of patients that are eating up 52 percent of all 
healthcare dollars, those sickest and most fragile patients, to 
be able to access the doctors of their choice and get the care 
they need.
    Mr. Pitts. Thank you. Here is a question for the panel. 
Medicare Advantage has a proven record of success and is 
popular with seniors because it provides better services, a 
higher quality of care and increased care coordination. To 
ensure the program's viability, I believe there are several 
existing reform proposals for Medicare Advantage that merit 
further discussion and feedback, concepts like overlaying a 
value-based insurance design over the existing Medicare 
Advantage program to address a substantial variation in value 
across healthcare services and providers, bipartisan policies 
such as those introduced by Representative Keith Rothfus of 
Pennsylvania that would restore choices for Medicare Advantage 
beneficiaries and not limit their options to traditional FFS or 
their existing plans, improvement to the program's special 
needs plans and improvements to the program's risk adjustment 
framework that would improve accuracy of payments and account 
for chronic conditions.
    What, if any, short-term reforms could we consider that 
would ensure the viability of the program in promoting maximum 
value and high-quality coordinated care for Medicare 
beneficiaries? We will start with you, Mr. Kaplan.
    Mr. Kaplan. First of all, thank you, Mr. Chairman. The best 
way I would answer that question is, is that there are a lot of 
successes that are already in place in Medicare Advantage. I 
think everybody on the panel today has said that Medicare 
Advantage is a program to look at with some very positive 
reactions.
    What I think happens fundamentally in the Medicare 
Advantage program is that it allows for more of a freedom of 
choice among the different competitors in there being the 
insurance companies that are offering those programs and allows 
for the members who choose to go into those programs to 
navigate themselves around to different programs, to make a 
choice and to find what best meets their needs. That sort of 
freedom of choice has allowed for the programs to prosper based 
on what they offer to the members who sign up for their 
programs as opposed to mandating things in different ways.
    So the competitive model amongst the different insurance 
companies who are offering different programs in different 
States, I think that strong model has allowed for the growth of 
the program to be so successful and effective at practicing the 
medical care that we all are talking about that we want to do 
for the senior population.
    Mr. Pitts. Thank you. My time is expired. I will give you 
this question and I will submit it in writing and you can 
respond for the record.
    The Chair now recognizes the ranking member, Mr. Pallone, 5 
minutes for questions.
    Mr. Pallone. Thank you, Mr. Chairman.
    I am going to ask my questions of Mr. Baker because you 
seem to be able to clear up a lot of the myths that I am 
hearing from the Republican side.
    As you heard, opponents of the ACA say that the Medicare 
Advantage program will be obsolete because of cuts in the 
Affordable Care Act. The Republicans basically think the 
Affordable Care Act is the end of the world. I mean, you 
understand all that.
    Mr. Baker, do you feel that the Medicare Advantage program 
is stronger now and more secure for beneficiaries than before 
the Affordable Care Act? If you could just answer that?
    Mr. Baker. Sure. I think there are a couple components to 
that. One is that this equalization of payments between the 
Medicare Advantage program and the traditional or original 
Medicare program, I think once again there is an equity there 
that has been established as well as the fact that Part B 
premiums have come down or stabilized for everyone in the 
Medicare program. I think the other piece is that consumers are 
better protected in Medicare Advantage. Some plans had 
increased cost sharing for services like chemotherapy, higher 
cost sharing than is allowed in the traditional Medicare 
program. The Affordable Care Act has equalized once again cost 
sharing so that sicker beneficiaries aren't discriminated 
against--the 85 percent Medical Loss Ratio that is required in 
Medicare Advantage now, making sure that 85 percent of those 
premium dollars, both from consumers as well as from the 
government, are going towards medical costs, not other 
administrative costs. The star ratings--we now have a rating 
program where plans have one to five stars based upon their 
quality and plan performance. This has been an important tool 
for consumers to choose between plans and also that quality 
information has been getting out to consumers and I think more 
can be done in that regard but I think is very good.
    The other thing is the out-of-pocket maximums that were 
introduced over the course of the last few years and have 
provided important protections for consumers so that these 
Medicare Advantage protections not only make the program more 
equal, if you will, between the traditional or original 
Medicare program but also ensure that consumers are better 
protected with consumer rights and consumer protections once 
they are in the plan.
    Mr. Pallone. So obviously you feel that Medicare Advantage 
is stronger now and more secure because of the ACA?
    Mr. Baker. Yes, I do, and I think consumers are better 
protected within the Medicare Advantage program because of the 
ACA.
    Mr. Pallone. Do you think that the changes pursuant to the 
ACA give beneficiaries more confidence in the program, might 
even make them more comfortable in choosing a Medicare 
Advantage plan?
    Mr. Baker. I think it does. I think the ACA with the star 
ratings program, with other quality initiatives in the Medicare 
Advantage plan have made consumers more confident. We find that 
folks are looking at these star ratings or looking at these 
other quality metrics that are now available under the ACA. I 
think they also are--many of the consumers that we talk to 
appreciate that they have a choice between Medicare Advantage 
and original Medicare. So I think it is also important that the 
original Medicare program, which is the base of all of this, be 
kept strong and be kept as a very viable option for folks that 
Medicare Advantage either hasn't worked for or it won't work 
for in the future.
    Mr. Pallone. All right. And can you tell me how robust the 
choices are for seniors in the MA program? How many choices do 
they have?
    Mr. Baker. Right. I think on average, consumers continue to 
have about 18 plan choices, and I think Ms. Gold went through 
some of those metrics in her testimony. We find for the most 
part, and this is both true in the Medicare Advantage program 
as well as in the Part D prescription drug program, that 
consumers are really--the biggest question we have from 
consumers is, they have too many choices and they are too 
confused by the variety of plans. So over the last few years, 
the Centers for Medicare and Medicaid Services has made some 
headway in tamping down the number of choices that aren't 
meaningful. By that, I mean there might be one little tweak to 
a plan to make it somewhat different than another plan that a 
company is offering and, you know, folks get confused by those 
tweaks that don't have a real substantive component to them. 
And so narrowing choices in that way has helped people actually 
make better choices.
    Mr. Pallone. And you don't feel that--I mean, again, you 
don't buy the naysayers who say that the ACA is going to narrow 
choices for seniors in the MA program?
    Mr. Baker. It has not at this point, not substantively. We 
see plenty of plan choices out there in the markets where we 
are seeing clients. Once again, our problem in counseling most 
of our consumers, really all of our consumers, isn't that they 
don't have a choice, it is that they have too many choices of 
Medicare Advantage plans before passage of the ACA and after 
passage of the ACA.
    Mr. Pallone. Thank you very much.
    Mr. Pitts. The Chair thanks the gentleman and now 
recognizes the vice chairman of the full committee, Ms. 
Blackburn, 5 minutes for questions.
    Mrs. Blackburn. Thank you, Mr. Chairman, and thank you all 
for being here.
    Dr. Margolis, I want to come to you. You talked a bit about 
the fragile and vulnerable populations, and I want to go back 
to that--end-stage renal disease. I recently found out that 
those Medicare Advantage enrollees that have end-stage renal 
disease have access to a coordination of care that is not 
available to others. It is not an option for those that are in 
standard Medicare. So why should Medicare Advantage not be an 
option for all Medicare enrollees?
    Mr. Margolis. Thank you, Mrs. Blackburn. I support that. I 
believe that coordination of care is ideal for sick and fragile 
patients especially. ESRD, I know they are pilots now at CMS to 
try to incorporate population health for ESRD. I would 
encourage them to be strengthened. I think it is an artifact of 
the way the law was originally written that ESRD patients were 
not allowed to enroll in Medicare Advantage. That could and 
should be changed, in my view. The way that works is that if a 
patient has chronic renal disease and enrolls in Medicare 
Advantage and becomes an end-stage patient, they can stay in 
Medicare Advantage, but if they have already been diagnosed as 
end-stage renal disease, they are not allowed to enroll in 
Medicare Advantage.
    Mrs. Blackburn. It would be an element of fairness into the 
system that would allow----
    Mr. Margolis. I believe that would be an improvement, yes, 
ma'am.
    Mrs. Blackburn. All right.
    Mr. Kaplan, I want to come to you for a minute. I loved 
listening to your testimony today. I have to tell you, in my 
district, seniors love their Medicare Advantage. We have got a 
program called Silver Sneakers in our district, and people come 
to town hall meetings, they talk to me about Silver Sneakers 
and how they are doing, and I have looked at some of the work 
that they have done and the surveys, better outcomes for 
physical and emotional health, more activity. It has just been 
a great program.
    So as I have listened to you all today, talk to me for a 
minute. We talk about stabilizing Medicare, giving seniors more 
choices, giving them more options. Should Medicare Advantage 
not be the platform for Medicare reforms and give seniors more 
choice and options, not less?
    Mr. Kaplan. Well, first of all, thank you for the nice 
comments.
    I am a huge fan of Medicare Advantage for exactly the 
reasons you say. It aligns the incentives so that the providers 
and the payers work together to try to figure out what is the 
best way to take care of their members and their patients, and 
when they align the incentives, they start to work on things, 
and they say one of the most important things is to coordinate 
care, as Dr. Margolis talked about, which is, let us coordinate 
the care for especially these complex members and so forth, let 
us find things that can help them to prevent having the 
diseases either progress or even begin. All these things are 
aligned. All these things are the idea of aligning incentives, 
coordinating care, and it is all for the benefit of the member. 
And so therefore I do believe, as you said, that Medicare 
Advantage is a wonderful pilot for us as a society, because 
what it does is, it shows that we can find a way to curb the 
growth of healthcare costs, we can find a way to improve----
    Mrs. Blackburn. So curb the cost, give greater access and 
provide better outcomes?
    Mr. Kaplan. Correct.
    Mrs. Blackburn. Mr. Holtz-Eakin, do you want to weigh in?
    Mr. Holtz-Eakin. I would just echo the fairness issue, 
which I think is important, and we know that Medicare as a 
whole is facing a very, very problematic financial future. If 
we can find ways to control those costs and provide better 
care, we should, and this is a route to that.
    Mrs. Blackburn. Let me ask you this. When you look at the 
implementation of the ACA and the cuts that are being made, who 
is most impacted by the MA cuts that are there? Is it seniors? 
Is it physicians? Is it the support system for seniors? What in 
your research do you see? Yes, sir?
    Mr. Holtz-Eakin. This is impact directly to the seniors 
whose choices will be restricted, whose benefits will be 
reduced, and I am deeply concerned about the long implications. 
I understand the testimony of Mr. Baker about consumer 
protections and confidence in the program but that is at odds 
with the fact that the CBO, for example, projects that there 
will be 5 million fewer enrollees in Medicare Advantage in 
2019, if they felt more confident, we got 10,000 new seniors 
every day, you would expect the number to rise, not fall, and I 
think that is stark testimony to the financial underpinnings 
being not strong enough and then that will limit the benefits 
and the choices of seniors.
    Mrs. Blackburn. Yield back.
    Mr. Pitts. The Chair thanks the gentlelady and now 
recognizes the ranking member emeritus, Mr. Dingell, 5 minutes 
for questions.
    Mr. Dingell. Mr. Chairman, I thank you for your courtesy 
and for your kindness.
    This is an important moment, and the American people are 
counting on us. I am concerned that the committee might be 
holding another hearing to try to scare people about the 
Affordable Care Act and its impact on Medicare Advantage when 
the facts do not support those claims. The questions I have 
today will focus on how ACA impacts Medicare Advantage as well 
as traditional Medicare. I would point out that when we adopted 
the idea of Medicare Advantage, we were told that they were 
going to give us a lot more insurance and a lot less cost to 
senior citizens, and I have heard constant whining ever since 
that we have not done that.
    In any event, we have a problem here because that program 
is costing taxpayers significantly more than traditional 
Medicare while providing only similar services.
    So Mr. Baker, yes or no, is it correct that in 2009 before 
passage of ACA, CMS paid Medicare Advantage plans $14 billion 
more than if the same care had been provided under traditional 
Medicare? Yes or no.
    Mr. Baker. Yes.
    Mr. Dingell. And this averages out to about $1,000 per 
beneficiary? Yes or no.
    Mr. Baker. Yes.
    Mr. Dingell. Now, additionally, Ms. Gold, a 2009 MedPAC 
report found that Medicare Advantage payment benchmark was 118 
percent of what Medicare would spend. Is that correct?
    Ms. Gold. Yes.
    Mr. Dingell. Now, Mr. Baker and Ms. Gold, is it fair to say 
that the reforms made by ACA were intended to align Medicare 
Advantage payments with traditional Medicare payments? Yes or 
no.
    Ms. Gold. Yes.
    Mr. Baker. Yes.
    Mr. Dingell. Now, despite claims made by some of my 
colleagues, these reforms have not ruined Medicare Advantage. 
In fact, the program is strong and growing. Earnings are doing 
fine. Salaries, dividends, bonuses and all those other good 
things to the companies and their officers who are 
participating are growing.
    Now, Mr. Baker, how many people are enrolled in Medicare 
Advantage today? I believe the number is 15 million. Is that 
right?
    Mr. Baker. Correct. Yes.
    Mr. Dingell. Now, Mr. Baker, is it correct that Medicare 
Advantage enrollment has increased 30 percent from 2010 to 
2013? Yes or no.
    Mr. Baker. Yes, it is.
    Mr. Dingell. It seems like they are doing pretty well, 
doesn't it?
    Mr. Baker. Yes, it does.
    Mr. Dingell. Now, Mr. Baker, is it correct that the average 
Medicare beneficiary will have a choice between 18 plans 
available to them in 2014? Yes or no.
    Mr. Baker. Yes, it is.
    Mr. Dingell. So Mr. Baker and Ms. Gold, the Affordable Care 
Act has not resulted in a drastic decrease in the number of 
plans available to seniors who choose to participate in 
Medicare Advantage nor has it decreased the number of people 
participating in the program? Is that correct? Yes or no.
    Ms. Gold. Yes.
    Mr. Baker. Yes.
    Mr. Dingell. Thank you. Now, in fact, I note that ACA has 
provided many benefits to this population and will continue to 
do so. Most importantly, the ACA has improved the solvency of 
the entire Medicare program, something which is not properly 
addressed by people who are critical of ACA.
    Now, Mr. Baker, is it correct that Medicare hospital 
insurance trust fund is now solvent through 2026? That is 10 
years longer than prior to the passage of ACA. Yes or no.
    Mr. Baker. Yes.
    Mr. Dingell. That tends to show that this was quite helpful 
to the Medicare trust fund, right?
    Mr. Baker. Yes, it does.
    Mr. Dingell. Now, in 2012, 34.1 million Medicare 
beneficiaries were able to access preventive services such as 
mammograms and colonoscopies with limited cost sharing. Is that 
correct? Yes or no.
    Mr. Baker. Yes.
    Mr. Dingell. Now, some 7.9 million seniors have saved over 
$8.9 billion since the passage of ACA, and that is thanks to 
the donut hole being closed. Is that right?
    Mr. Baker. Yes.
    Mr. Dingell. And the donut hole is going to be closed 
completely by sometime around 2020. Is that right?
    Mr. Baker. That is correct, yes.
    Mr. Dingell. So thank you, gentlemen and ladies. This 
committee has a great tradition of working together to solve 
the pressing issues of the day. I hope we can resume this 
tradition with vigor and focus on the facts rather than 
continuing to try to scare people about the Affordable Care 
Act. Let us give it a chance. Let us work together. Let us see 
that it has a chance to provide the benefits to the society and 
the practice of medicine and to the sick, ill and ailing in 
this country that we want to have.
    Mr. Chairman, I thank you for your courtesy.
    Mr. Pitts. The Chair thanks the gentleman and now 
recognizes the vice chair of the subcommittee, Dr. Burgess, 5 
minutes for questions.
    Mr. Burgess. Thank you, Mr. Chairman.
    Dr. Holtz-Eakin, you were kind of left out of that last 
exchange. Do you have quick thoughts on the $14 billion excess 
cost for Medicare Advantage that Chairman Dingell referenced?
    Mr. Holtz-Eakin. The reimbursements should be aligned with 
quality, and I think the most important issue is the quality of 
care that seniors receive under Medicare Advantage as opposed 
to fee-for-service medicine.
    Mr. Burgess. Let me switch gears a little bit. You know, 
the Affordable Care Act, and I was here through the entirety of 
how it came through the committee and how it came through 
Congress, and it becoming pretty obvious today that there were 
some assumptions and some promises that were made in the 
Affordable Care Act that have now turned out to not be true, 
and I would submit that those weren't just errors in 
projections, those were actually active and purposeful 
deceptions. If the administration had been honest with 
Americans about this bill, it very likely never would have 
passed.
    So the Affordable Care Act does take $716 billion out of 
the Medicare program. Is that correct?
    Mr. Holtz-Eakin. That is correct.
    Mr. Burgess. And the portion that is taken from Medicare 
Advantage is about $150 billion. Is that correct/
    Mr. Holtz-Eakin. Yes.
    Mr. Burgess. So that is taken away from our seniors, the 
Medicare Advantage plans. I mean, I can remember distinctly 
speeches given, particularly during the Democratic Convention 
in 2012, that these are merely overpayments to doctors and 
hospitals; this is not a real cut. It is just taking away money 
that shouldn't have been paid in the first place. Do you recall 
those speeches?
    Mr. Holtz-Eakin. Not specifically but I remember the 
claims.
    Mr. Burgess. So do you agree with the administration, with 
the American Association of Retired Persons, Congressional 
Democrats that these cuts were merely ridding the plans of 
inefficient payments?
    Mr. Holtz-Eakin. I don't agree with that. They are part of 
an historic strategy of provider cuts that has always 
backfired. The SGR is the leading example. It limits access to 
seniors in the end. It doesn't take out excess costs. And a 
continued reliance on this strategy is going to damage Medicare 
and not save its financial future. We need to change 
strategies.
    Mr. Burgess. I agree with you.
    You know, there was an article in the paper recently that 
United Health Care was forced to limit access to some doctors 
because of reductions in Medicare Advantage. There was an 
article in USA Today that talks about a story about a patient 
named Dorothy Sanay that her doctor had some bad news after her 
last checkup but it wasn't about her diagnosis. Her Medicare 
Advantage plan from United was terminating her doctor's 
contract after February 1st, and she also found out she was 
losing her oncologist at the prestigious Yale Medical Group. 
She is 71 years old and on Medicare.
    So it kind of seems like this is a direct consequence of 
cutting the Medicare Advantage plans by $150 billion. Would I 
be correct in characterizing that as such?
    Mr. Holtz-Eakin. The insurers will be increasingly caught 
in the middle. They have obligations to limit cost sharing. 
They have obligations to provide benefits. There will be less 
money coming to them. Their only recourse will be to restrict 
whatever access to benefits they already had and limit the 
network so as to control costs.
    Mr. Burgess. So this is a story we are likely to hear 
repeated over time?
    Mr. Holtz-Eakin. Yes. I think what we have heard so far is 
just the leading edge of what will be a bigger problem.
    Mr. Burgess. So the American Association of Retired Persons 
has on its Web site myths about Medicare Advantage cuts, and 
one of the myths is that Medicare Advantage cuts would hurt 
seniors' ability to see their doctor. To quote the Web site: 
``If your current plan allows you to see a physician in the 
plan, nothing will change.'' Well, in light of this 
information, do you think that that is an accurate statement?
    Mr. Holtz-Eakin. No, I don't, and I think it will be 
increasingly inaccurate over time. To judge it by 2013 or 2014 
is a mistake. It is the trajectory over the foreseeable future 
that concerns me the most.
    Mr. Burgess. So, you know, again, I just can't escape the 
notion that the entirety of the Affordable Care Act was sold to 
the American people on deception. The consequences of that 
deception are not becoming more evident every day. As a 
physician, I am particularly sensitive to the fact that 
patients are going to be excluded from their doctors. I wish 
the administration had been more honest about this, and again, 
I can't help but feel it was an active and purposeful 
deception.
    Let me just ask you a question following up on some of the 
stuff that Chairman Dingell was asking. The cuts in Medicare 
Advantage, those cuts were taken out of Part A and Part B but 
not reinvested in Part A and Part B. Is that correct?
    Mr. Holtz-Eakin. No, those cuts will be used to pay for 
Medicaid expansions and insurance subsidies in the exchanges, 
and those monies will be gone at the moment they are spent. 
They will not be there for Medicare.
    Mr. Burgess. So I am not an economist. I am just a simple 
country doctor. But you are an economist, so how do you 
reconcile the fact that they are claiming that that is a 
savings that is increasing the solvency and longevity of Part A 
and Part B when the money was taken and then spent for some 
other activity?
    Mr. Holtz-Eakin. As the current CBO Director, Doug 
Elmendorf, has testified, and as any CBO Director would 
testify, that is an accounting fiction. There are no real 
resources in those trust funds to pay real bills from real 
providers for real patients.
    Mr. Burgess. I thank the Chair. I will yield back my time.
    Mr. Pitts. The Chair thanks the gentleman and now 
recognizes the gentlelady from Florida, Ms. Castor, 5 minutes 
for questions.
    Ms. Castor. Well, good morning, and welcome to the panel, 
and I would like to thank the chairman and ranking member for 
holding this hearing on how the Affordable Care Act is 
improving and strengthening Medicare and Medicare Advantage.
    According to a study that was done a couple of months ago, 
in my area of Florida, where we have a large percentage of our 
grandparents and parents who rely on Medicare, a number of 
statistics jumped out on the improved benefits in Medicare. One 
was what Mr. Dingell mentioned, the closing of the donut hole 
and the new discounts for prescription drugs. In the greater 
Tampa Bay area, over 77,000 of my neighbors now have major 
savings in their drug costs under Medicare Part D due to the 
drug discounts. They have been worth over $100 million to the 
Medicare beneficiaries in the greater Tampa Bay area. That is 
very substantial, and that is due to the Affordable Care Act.
    Also due to the Affordable Care Act, just in the greater 
Tampa Bay area, over 1 million seniors now have Medicare 
coverage that includes preventive services. They can go get the 
mammograms, the colonoscopies without copays or deductibles. 
That is a very important improvement to Medicare.
    And Mr. Baker, I think you testified that these 
improvements apply in traditional Medicare and in Medicare 
Advantage. Is that correct?
    Mr. Baker. Yes, that is true. Yes, some Medicare Advantage 
plans did offer those preventive benefits, others did not. So 
what the ACA did--and of course traditional Medicare did not. 
So what the ACA did was make sure that those preventive 
benefits applied across the board in both traditional Medicare 
and in all Medicare Advantage plans as well.
    Ms. Castor. Well, and I would like to take a page of how 
Mr. Dingell asks questions sometimes because my time is limited 
and I would like to get a yes or no answer.
    Earlier this year, Republicans here in the House adopted a 
budget that proposed drastic changes to Medicare. The budget 
that was adopted would end traditional Medicare and Medicare 
Advantage and put in place a new system beginning in 2024. So 
if you are 55 or younger, this would really impact your future 
in Medicare. Rather than enroll in traditional Medicare or 
Medicare Advantage under the Republican budget, instead 
beneficiaries would receive a voucher. It would privatize 
Medicare. You would get a voucher, a coupon, and most analysts 
raised grave concerns that this would in essence very shift 
costs to our parents and grandparents that rely on Medicare. It 
really appears to break the promise that you will be able to 
live your retirement years in dignity and be safe from a 
catastrophic diagnosis.
    I would like to know just yes or no from each of you, do 
you support that kind of drastic change to Medicare and 
Medicare Advantage? Yes or no.
    Mr. Holtz-Eakin. I do support that change, and the reason I 
do is, the CBO's report that came out this summer indicated it 
would save costs for beneficiaries and for the government, 
indicating it had broken the increase in cost.
    Ms. Castor. So, yes, you support turning Medicare into a 
voucher?
    Mr. Holtz-Eakin. It bent the cost curve, and that is 
important.
    Ms. Castor. And Mr. Baker?
    Mr. Baker. I do not support that proposal, and our 
organization does not support the proposal for the reasons that 
you indicated, that it would not, the value of that voucher 
would not keep up with healthcare costs and so more would come 
out of pocket of seniors and they would lose the health 
security that they currently have.
    Ms. Castor. OK. Doctor?
    Mr. Margolis. I believe it is important for Congress to 
assure health security for seniors. My apolitical answer, which 
is very hard to do here in Washington, I am sure, is to say 
this is about patients and patient care and that you should----
    Ms. Castor. So yes or no? Turn Medicare into a voucher 
under the Republican budget?
    Mr. Margolis [continuing]. Support integrated care and 
coordinated care system development whether it is though that 
program or not.
    Ms. Castor. Did you review the Republican budget proposal 
that privatizes----
    Mr. Margolis. No, ma'am, I did not review it.
    Ms. Castor. OK. Ms. Gold?
    Ms. Gold. We don't generally take positions on legislation. 
We let you guys do that. But there are a number of technical 
questions and issues that have been raised about those plans, 
about the cost shifting that would happen to Medicare 
beneficiaries that are important questions to answer before any 
change to a very popular program were made.
    Ms. Castor. OK. Mr. Kaplan, yes or no?
    Mr. Kaplan. I believe that the idea of using a voucher-type 
system, which is very akin to what is being done in the 
Medicare Advantage space already, is a good idea.
    Ms. Castor. OK. That Republican Paul Ryan budget also 
included provisions to repeal the Affordable Care Act including 
the important reforms to Medicare--the closing of Medicare Part 
D coverage gap, known as the donut hole, the preventive 
services that we talked about earlier that are such a great 
benefit to many of my neighbors, those annual wellness exams, 
and important Medicare fraud prevention provisions.
    Do you support the repeal of those provisions that have 
improved Medicare? We will start on this side. Mr. Kaplan, yes 
or no, because my time has run out.
    Mr. Kaplan. I can't give a wholesale answer.
    Ms. Castor. Just yes or no real quick, because my time has 
run out.
    Mr. Kaplan. Yes or no. The answer----
    Ms. Castor. You support repeal of those important reforms 
in Medicare that are included in the Republican budget, or not?
    Mr. Kaplan. I believe that are parts of ACA that should be 
repealed.
    Ms. Castor. Ms. Gold?
    Ms. Gold. I think beneficiaries would be pretty upset if 
they were repealed.
    Ms. Castor. Doctor?
    Mr. Margolis. I think protections for seniors are 
important.
    Ms. Castor. Mr. Baker?
    Mr. Baker. Those protections need to be continued and be in 
place.
    Mr. Holtz-Eakin. I would answer differently, depending on 
the provision.
    Ms. Castor. Thank you all very much.
    Mr. Pitts. The Chair thanks the gentlelady. The Chair 
recognizes the gentleman, the chair emeritus from Texas, Mr. 
Barton, for 5 minutes for questions.
    Mr. Barton. Mr. Chairman, I arrived late and didn't get to 
hear their testimony, so I don't have questions. I appreciate 
the opportunity, though.
    Mr. Pitts. The Chair now recognizes the gentlelady form 
Illinois, Ms. Schakowsky, 5 minutes for questions.
    Ms. Schakowsky. I just wanted to make the point that I 
think Representative Castor was getting at too, just to remind 
my colleagues who are now complaining about cuts to Medicare in 
the Affordable Care Act, these were the same cuts that were 
included in the Ryan budget, but instead of strengthening 
Medicare, the Republicans wanted to give tax breaks to 
millionaires.
    A couple of questions. The implication by my colleague, Dr. 
Burgess, was that changes that would eliminate and narrow 
networks are caused by the Affordable Care Act, and I am just 
wondering, Mr. Baker or Ms. Gold, in your research, I know with 
Part D it is important to check every year to make sure that 
the formulary is the same. With Medicare Advantage, aren't 
changes likely in the network or something prior to the 
Affordable Care Act as well?
    Mr. Baker. Yes. I think there is a lot of volatility in 
this private marketplace, in this private Medicare Advantage 
marketplace, as well as in the Part D marketplace. So every 
year we are very clear with beneficiaries that if they are in 
the Medicare Advantage plan, if they have a Part D plan, they 
need to check that coverage because the formularies, which are 
the list of covered drugs, change every year and provider 
networks change every year, and it is not just the plan that 
drives changes in provider networks; providers also decide to 
leave the network or to no longer be involved----
    Ms. Schakowsky. So this is not new to----
    Mr. Baker. No, this is an inherent part of the Medicare 
Advantage plan that has been around since the Medicare Plus 
Choice program in the mid-1980s and even before. So this is an 
ongoing issue. This kind of instability, if you will, is 
inherent and it is a part of the risks of the Medicare 
Advantage plan that go along with some of the benefits that we 
have talked about as well.
    Ms. Schakowsky. Thank you.
    Also, Ms. Gold, Mr. Holtz-Eakin said something about sort 
of the precarious future of Medicare and funding problems. I 
wonder if you could talk about the effect on solvency that the 
Affordable Care Act has had on Medicare. Do you have that?
    Ms. Gold. I can try.
    Ms. Schakowsky. OK. Or maybe Mr. Baker would have more----
    Ms. Gold. Yes, maybe. Go ahead.
    Mr. Baker. I think we noted earlier that two effects have 
occurred. One is that, as I was responding to Mr. Dingell's 
comment, that there is a longer period of solvency of the Part 
A trust fund, and to the extent that that has been looked at 
through the years as a bellwether for the health of the 
Medicare program, we are in one of the best places we have ever 
been. And secondly, something that has inured to the benefit of 
all people with Medicare is a stable Part B premium. Medicare 
costs are at historically low growth rates right now.
    Ms. Schakowsky. And that is what you had said too, Ms. 
Gold, right, that rates are down?
    Mr. Baker. Right, and so everyone, all of the people with 
Medicare are seeing the benefits of that cost containment in 
the ACA and other cost containment efforts that have occurred 
both in private plans as well as in the government-run Medicare 
program.
    Ms. Schakowsky. I also wanted to talk about low-income 
seniors. Medicare provides cost-sharing protections for low-
income seniors through the Medicare Savings Program, or the 
MSP. I am wondering, if we are truly concerned about 
protections for low-income beneficiaries rather than paying 
more than Medicare to the Medicare Advantage plans, wouldn't it 
be better to invest additional resources in the Medicare 
Savings Program, improving outreach, enrollment and coverage, 
etc.?
    Mr. Baker. The short answer to that is yes. I mean, we are 
very concerned. Our biggest problem on our help line is folks 
that can't afford their coverage, whether they are in the 
original Medicare program or in the Medicare Advantage program, 
and Medicare savings programs, as you say, are programs that 
help lower income above Medicaid income levels but lower-income 
folks. Fifty percent of people with Medicare have incomes under 
$22,500 a year, and many of them are struggling to afford 
coverage as well as dental work and other things that aren't 
covered by Medicare. So it is strengthening those Medicare 
savings programs or subsidy programs, particularly if we are 
looking at the SGR and doing that simultaneously.
    Ms. Schakowsky. Well, that I wanted to ask you about. We 
are certainly looking at the SGR. We would like to permanently 
repeal it, etc. But the qualified individual program which pays 
beneficiary Part B premiums is set to expire at the end of the 
year. So don't you think at the same time as we deal with the 
SGR, we ought to deal with that?
    Mr. Baker. I think it is imperative that that program be 
continued and it be continued to be dealt with with the SGR and 
continued and reauthorized, yes.
    Ms. Schakowsky. Thank you very much. I yield back.
    Mr. Pitts. The Chair thanks the gentlelady and now 
recognizes the gentleman from Illinois, Mr. Shimkus, 5 minutes 
for questions.
    Mr. Shimkus. Thank you, Mr. Chairman.
    Thanks for being here. Sorry I had to excuse myself during 
your testimony.
    A couple points. One is, I, like myself, another member, a 
handful of staffers went down to make sure we were enrolled in 
our new healthcare plan because we couldn't get confirmation. 
Fortunately, I got confirmation but I am finding out like 
everybody else is, I have less coverage at higher cost, and the 
real concern is, and exhibited by my constituents on Medicare 
Advantage, we are going to see the same thing occur in Medicare 
Advantage. And so I think this is really a timely hearing 
because it is just like everything else in this new movement of 
health care is, everybody is going to get less coverage and 
higher costs no matter who you are or where you are in this 
country because of these reforms.
    I was here in committee when Secretary Sebelius I guess 2 
years ago affirmed the fact that they double-counted the $500 
billion. You can just check the transcript. You can check her 
testimony. It took me 5 minutes to get it out of her. But in 
the end, she said we have double-counted because we have this 
$500 billion of savings out of Medicare is going to go to 
Obamacare and of course, we are also strengthening Medicare by 
$500 billion. Having that as part of the record, how can we say 
Medicare is strengthened? Doug, can we make this argument that 
Medicare is now stronger than it ever has been?
    Mr. Holtz-Eakin. I don't believe that the Part A trust fund 
reveals anything about the futures solvency of Medicare. The 
plain facts on the ground are that in recent years, the gap 
between premiums and payroll taxes going in and spending going 
out for the Medicare program as a whole is $300 billion. That 
is a gaping cash flow deficit. We get 10,000 new beneficiaries 
every day. In the absence of genuine reforms that allow people 
to continue to get the care they need and deserve and do it at 
a slower cost growth, this program will fall under its own 
financial weight.
    Mr. Shimkus. You know, my point is, numbers really matter, 
and again, for the Secretary to affirm $500 billion that is 
really not chump change in the big picture of healthcare costs, 
I am getting comments from constituents in my district who 
Medicare Advantage folks now their benefits are being reduced, 
they are losing access to their preferred physicians. This is 
under the current system right now. Again, back to Doug, my 
question is, how much worse can this get for my seniors who opt 
for Medicare Advantage?
    Mr. Holtz-Eakin. Again, if the strategy for controlling 
costs is this traditional one of just cutting provider 
reimbursements, whether it is doctors, hospitals, MA plans, it 
will backfire. We have seen again and again that that approach 
without reforms, without an approach that gives you the 
prevention, the coordination and the better care, Congress ends 
up having to put the money back in because you haven't solved 
the problem, and to not put the money back in is to deny 
seniors care. That is your choice.
    Mr. Shimkus. And Bob, a lot of my seniors through Medicare 
Advantage have access to dialysis and the like, and I know you 
have a special focus in that arena. As networks shrink, 
especially in rural America, what happens to our options? What 
could happen to our options?
    Mr. Margolis. Well, I think you have heard that the cuts 
are not advisable in the future. I must say with all due 
respect to the committee, I think that the parity adjustment to 
get Medicare Advantage back to fee-for-service, which was 
enacted, is not the issue that should be focused on. What 
should be focused on, in my view, is that we are potentially 
reducing the payment for acuity of the sickest patients, which 
will incent insurers and others to avoid managing sick 
patients. Those are the ones that need coordination, that need 
population health, that need the access to good care, and that 
that is the issue that I would hope the committee will take a 
serious look at, because without that, while we may or may not 
have shrinking networks, and I think we will because even today 
we see news reports of United and others canceling thousands of 
doctors from the MA program, the real issue in my view as a 
physician and as someone who cares about seniors is that the 
sickest and most fragile patients that eat up all of the costs 
in health care are the ones that ought to be protected, and 
they ought to be protected by having appropriate acuity-
adjusted payments to insurers or directly to the physician 
groups that are managing them in a way that supports better 
outcomes, transparency, performance measurement, all of the 
star measures are positive. Let us support quality, performance 
and outcomes, and pay accordingly based on managing our sickest 
seniors.
    Mr. Pitts. The Chair thanks the gentleman and now 
recognizes the gentleman from Texas, Mr. Green, 5 minutes for 
questions.
    Mr. Green. Thank you, Chairman Pitts and Ranking Member 
Pallone for having this today, and our witnesses for taking the 
time to testify.
    Medicare is critical to the well-being of our Nation's 
seniors and people with disabilities, many of whom have low to 
moderate incomes and complex healthcare needs.
    My first question is, the Affordable Care Act did extend 
the life of Medicare by putting more money into Medicare, and I 
would like a yes or no answer to that. Did it actually extend 
the life of Medicare? And we will start with Mr. Holtz-Eakin.
    Mr. Holtz-Eakin. No.
    Mr. Green. It didn't?
    Mr. Holtz-Eakin. No.
    Mr. Baker. Yes.
    Mr. Margolis. I have no knowledge of the facts.
    Mr. Green. Thank you.
    Ms. Gold. I don't study the trust fund.
    Mr. Green. OK.
    Mr. Kaplan. Same for me. I have not studied the trust fund.
    Mr. Green. OK. Well, I think that we have many a difference 
of opinion but I think that is acknowledged, that it did extend 
the life of Medicare with the Affordable Care Act.
    Mr. Baker, in your testimony you discussed changes to 
Medicare Advantage under the Affordable Care Act. The ACA 
included policies designed to make the Medicare Advantage 
system more efficient, reduce overpayments to bring plans more 
in line with traditional Medicare and enhance plan quality. Can 
you elaborate on some of these improvements in managed care 
under the Affordable Care Act?
    Mr. Baker. Well, as I said earlier, one of the improvements 
was making sure across the board that Medicare Advantage plans 
are covering preventive services as well as original Medicare. 
Another is the 85 percent Medical Loss Ratio so ensuring that 
85 percent of every dollar, whether it is a consumer dollar or 
a government dollar, to these plans is going towards medical 
costs. Once again, the star ratings program and the out-of-
pocket maximum, which I think have provided important financial 
protection to folks within the Medicare Advantage program, and 
the star ratings have made it easier, I think, for consumers to 
choose among plans. They do have, as I said, many choices in 
most markets, and the problem we frequently see is folks not 
being able to choose among plans so the star ratings have 
helped that a bit.
    Mr. Green. Well, and I know from my area, we have a really 
great Medicare Advantage plan with Casey Seabolt in Houston 
that actually quit taking general Medicare because they wanted 
all their patients to go in. Of course, they are a great 
facility.
    What recommendations would you have to further improve 
Medicare Advantage?
    Mr. Baker. Well, I think that once again we are very 
supportive of some of the good things that have come out of 
Medicare Advantage. We want to make sure that there are 
meaningful choices amongst plans, so really kind of 
standardizing plans to the extent that that is appropriate and 
possible. We would love to have more data on appeals within 
plans to see where there might be problems with a particular 
plan. We would like to make sure that there are better notices, 
so this issue that we have been talking about with regard to 
the slimming down of some of these networks, we do think that 
there could be more pinpointed notices sent to consumers in the 
fall. Many consumers find out about this from their doctor. It 
would be nice if they found out about it from their plan in 
September when they get their annual notice of change so that 
they can be ready in the open enrollment period, which begins 
on October 15th.
    And finally, I think we need to make sure that the original 
Medicare program continues to be a strong program and kind of a 
base program for folks, and by that, we could help by 
increasing the availability of Medi-gap policies and open 
enrolled Medi-gap policies so people can switch back and forth 
between the programs as necessary.
    Mr. Green. We have heard that Medicare Advantage would lead 
to wide changes in ACA and Medicare Advantage would lead to 
widespread of the Medicare Advantage market. From your 
perspective, has this been the case?
    Mr. Baker. We do not see widespread disruption at this 
point. We have seen some of these provider issues with 
providers leaving networks. Two things there: most of the 
consumers that have counseled have either chosen other plans 
that continue to have those providers in their network or have 
reverted to the original Medicare program where those providers 
are available to them.
    Mr. Green. Ms. Gold, you have researched and written 
extensively about Medicare and scientific studies must meet 
certain established standards for the findings to be accepted 
including transparency of data methods, peer review and 
confidence levels to establish the validity of the findings. As 
a professional researcher, I am interested to hear your 
thoughts on Mr. Kaplan's study which lacked, in my opinion, the 
standards. I believe there are many questions that we need to 
have answered before we can definitely say that his results 
have great meaning.
    Ms. Gold, would you agree that these are some of the 
questions that one would want to have answered before accepting 
the validity of the conclusions and the results of Mr. Kaplan's 
study?
    Ms. Gold. I do think, you know, usually when you have a 
study, they under peer review, the methods are laid out and you 
can look at it. I didn't have time to do a thorough review of 
the study but both I and a colleague looked at it quickly, and 
some of those details that you would want to see and which 
would ordinarily be there in a peer review paper were not 
there.
    I think the most major part of the study that wasn't really 
talked about in the testimony was the sort of finding that over 
1 year, so many people live longer if they were in MA, and I 
don't think anyone really, whether they are pro or con MA or 
anything else, expects that that is a plausible finding. So I 
think there is some real questions about the risk adjustment 
and the selection of facts that are in that study. So, you 
know, I think there are some questions.
    Mr. Green. I know I am out of time. Thank you, Mr. 
Chairman.
    Mr. Pitts. Mr. Kaplan, do you want to take a moment to make 
a comment?
    Mr. Kaplan. Yes. So I appreciate the comments, and thank 
you for the question. We did have our studies reviewed. We 
actually were surprised by the findings, and that really caused 
us to pause because we were so shocked by some of the data that 
the data showed. We didn't have an agenda walking into this. We 
wanted to figure out what it would show.
    So we did have it reviewed by a number of organizations, 
leading academic medical centers, because we wanted to 
challenge what we were saying. I understand that Ms. Gold did 
not review it or didn't have the time, and I respect that she 
didn't have the time to review it to be thorough, but we went 
through substantial reviews. What we said in this is that that 
one finding about mortality was the one that had greatest 
concern. That is why we wanted to go forward and do a 
longitudinal prospective study as opposed to just looking at it 
retrospectively.
    But I would not throw out all the findings here. Again, we 
recognize that mortality was the one that is most concerning 
and no one wants to publish the fact that if you sign up for 
Medicare Advantage, you have a higher probability of living 
than if you sign up for Medicare fee-for-service. We did not 
want to publish that, but it was a finding we found.
    Ms. Gold. It wouldn't have been accepted in a journal 
because your detail wasn't there. I mean, I am not saying there 
may not be questions, but the detail was not in the report to 
know whether in fact that was legitimate or not, and it 
wouldn't have gotten through peer review.
    Mr. Kaplan. As I said, we did have it reviewed. We had it 
reviewed by leading academic medical centers. We did not submit 
it for peer review because we wanted to get it out to the 
market as quickly as possible.
    Mr. Pitts. The Chair thanks the gentleman and now 
recognizes Dr. Gingrey 5 minutes for questions.
    Mr. Gingrey. Mr. Chairman, thank you very much.
    I will have to say that Mathematica Policy Research might 
sound a little more highbrow than Boston Consulting Group, but 
if any of you know anything about Boston Consulting Group, you 
know it is one of the most outstanding companies in this 
country, and I do know a little bit about that.
    Ms. Gold, in your testimony, you suggested--I am 
paraphrasing a little bit, but you suggested that the President 
fulfilled his promise to our seniors when he said if you like 
your healthcare plan, you can keep it, if you like your doctor, 
you can keep her. And you said it is called Medicare, 
suggesting, implying that if you got a notice from a Medicare 
Advantage plan that you had selected that you were no longer 
going to able to remain on the plan or they are going to have 
to get out of the business because of the $14 billion cut, 14 
percent cut per year over 10 years, something like $300 
billion, it was OK because you still had Medicare. You just 
diverted back into Medicare fee-for-service. I would suggest to 
you that that is pretty disingenuous to say if you like your 
plan, you can keep it, because you get kicked out of Medicare 
Advantage and you can go to Medicare fee-for-service if you can 
find a doctor.
    It is clear that the Medicare Advantage program is under 
attack and that these beneficiaries are beginning to feel the 
effects of the over $300 billion in direct and indirect cuts 
included in Obamacare, and with plan cancellation notices 
already sent to, what, tens of thousands of our country's 
seniors, some of the most vulnerable citizens are faced with 
this uncertainty that I just talked about. Individuals are 
losing coverage that they are happy with and the doctors with 
which they are comfortable, and this is a tragedy. It is a 
tragedy of the law, a bill that was rushed through Congress 
without any serious debate, strictly partisan vote, is now 
directly impacting people's lives and their personal healthcare 
decisions.
    Mr. Holtz-Eakin, let me ask you, would you please explain 
to the committee the reality for those potentially millions of 
people, seniors who lose coverage over the next few years, 
especially when it comes to a reduction in financial security 
and benefits?
    Mr. Holtz-Eakin. I think this is a very real possibility 
and something I am deeply concerned about, as you know. It is 
one thing to mandate that a Medicare Advantage plan cover 
certain benefits and offer those to seniors. It is another 
thing for that plan to be in existence so they can take 
advantage of it. And in the absence of a financial foundation, 
money trumps mandates. They won't have those choices, they 
won't have that care, and indeed, those who already have it, 
who made that choice, will see their plans taken away from them 
in violation of the promise.
    Mr. Gingrey. Well, you know, the distinguished chairman 
emeritus Mr. Dingell--he is not still here, had to leave--but, 
you know, he made that statement in talking with Mr. Baker 
about the $14 billion that was saved out of the Medicare 
Advantage program, but of course, that $14 billion was not kept 
in Medicare, and really, he was only presenting one side of the 
balance sheet. Yes, $14 billion may have been spent on Medicare 
Advantage. Whether that was a little too much is open to 
question. But the savings that occurred to Medicare and we the 
taxpayer because of this Medicare Advantage program that has 
preventive care and all these features that traditional 
Medicare fee-for-service does not have, certainly not care 
coordination.
    This benefit is used by seniors from all walks of life. It 
is especially prevalent for the seniors, and I think you said 
this earlier, Mr. Holtz-Eakin, with lower incomes. These cuts 
to benefits and coverage will affect lower-income seniors more 
directly than others. Is that correct?
    Mr. Holtz-Eakin. Yes, about 75 percent will be experienced 
by those making less than $32,000, ballpark.
    Mr. Gingrey. And what will the loss of predictable annual 
cost mean to these populations?
    Mr. Holtz-Eakin. These are the most vulnerable of the 
seniors, and this has been a program that has given them not 
just the services in traditional fee-for-service but additional 
services and done it in a fashion of coordinated care and high-
quality outcomes. It is a loss of their personal choice but it 
is a loss from the perspective of having a viable Medicare 
program for the future.
    Mr. Gingrey. Thank you, Mr. Holtz-Eakin. I appreciate your 
leadership on this issue.
    Seniors are just now learning that the upheaval of our 
health care is not limited to the individual insurance market. 
That is the purpose of this hearing today. They now know that 
it will affect them as well, and seniors may lose benefits. We 
have heard testimony from Mr. Holtz-Eakin, from Dr. Margolis, 
from Mr. Kaplan, seniors may lose benefits, they may lose 
access to doctors, and be forced to pay more for their 
coverage, plain and simple. And I yield back, Mr. Chairman.
    Mr. Pitts. The Chair thanks the gentleman and now 
recognizes the gentlelady from Virgin Islands, Dr. Christensen, 
5 minutes for questions.
    Mrs. Christensen. Thank you, Mr. Chairman, and welcome to 
our panelists this morning.
    From what I have read overall, Medicare beneficiaries 
should expect, in response to the question that we are 
answering today, and are already experiencing improvements from 
the Affordable Care Act, which have been enumerated by Chairman 
Dingell, my colleague, Ms. Castor, and others, and in part, 
those improvements, I think, have been made possible by the 
savings that came from equalizing the reimbursements of 
Medicare Advantage to those of traditional Medicare, and as a 
family physician and an old fee-for-service doc, I especially 
think that with the ACA reforms that the outcomes from both can 
be equally beneficial to the beneficiaries.
    But I represent a territory, the U.S. Virgin Islands, and 
sometimes we have unique circumstances and suffer unintended 
consequences. So I want to ask a question on behalf of my 
colleague from Puerto Rico, and the question is to Bob 
Margolis. With the revised methodology under the ACA for paying 
Medicare Advantage plans using benchmarks based on fee-for-
service data, should CMS coordinate the timing of the Medicare 
Advantage and fee-for-service processes? For example, in August 
of this year, CMS put out the 2014 fee-for-service inpatient 
rates that changed the Medicare disproportionate share payments 
to hospitals, but this was after the Medicare Advantage process 
for 2014 had closed in June, preventing the Medicare Advantage 
plans in Puerto Rico from recovering the substantially 
increased DSH payments they must now make to hospitals. 
Shouldn't CMS address this lack of internal coordination for 
2014 and its harm to Puerto Rico's Medicare Advantage plans and 
their beneficiaries?
    Mr. Margolis. Thank you, Dr. Christensen. Clearly, I am not 
an expert on the rate setting but I would say that my 
understanding is that Medicare Advantage base rates are set 
based on the fee-for-service equivalency and that it makes very 
logical sense to me that we should have all of the built-in 
fee-for-service costs in the base rate when the Medicare 
Advantage rates are set. So I believe that would answer or 
direct an answer, and I think it is well known that CMS has for 
years not calculated the fact that SGR would probably be pushed 
out further so that they have not given credit to the SGR fix 
each year in setting the base rates for Medicare Advantage. So 
there are a variety of administrative issues I think related to 
how Medicare base rates are set.
    Mrs. Christensen. Thank you. I hope that answers Mr. 
Pierluisi's question.
    Ms. Gold, I want to ask a question. We have heard a lot 
about the ACA causing spikes in premiums. While some plans have 
increased costs on beneficiaries, isn't it true that overall 
average premiums paid by enrollees have declined since the 
Affordable Care Act was enacted? And could you elaborate a 
little more on the premium changes? Premiums are not the same 
across all plans. So what factors contribute to differences in 
premiums among plans?
    So let me just add another part of this question because of 
time. Isn't it true that the more than 70 percent of 
beneficiaries who are in traditional Medicare are the ones 
subsidizing lower premiums for the people in Medicare 
Administrative?
    Ms. Gold. Taking your second question first, yes, it is 
true that all beneficiaries subsidize it, plus the taxpayers, I 
might add, because that covers it too.
    In terms of premiums, there is a lot of reasons. Costs vary 
a lot across the country, and some areas of the country are 
more efficient than others and some providers are more 
efficient than others. Premiums have often differed because 
fee-for-service payments are different. In some areas of the 
country, providers are stronger and they are able to negotiate 
higher rates. So there is less money available for extra 
benefits. In some areas of the country, some plans decide to 
give it back in less cost sharing at point of service rather 
than lower the premiums. So there is a lot of reasons things 
differ.
    And I should add, you know, this fight between doctors and 
health plans has a long history that goes back years, and it is 
attention. You are trying to get the most you can out of the 
system, and the best thing the policymakers can do, I think, 
and Congress is to set good standards and say we want to buy 
quality, we want to buy value, and to reinforce that. I think 
the stars do start to do that, and getting those rights and 
figuring out across both programs, both Medicare Advantage and 
Fred Fox, how to make care better for beneficiaries because I 
don't think that care is as good as it could be for Medicare 
beneficiaries no matter what you are in, and there is a lot of 
variation across plans in what they are doing, which is not 
even all their fault. A lot of it has to do with the providers 
in different areas and how willing they are to get together and 
how fragmented they are, and especially for beneficiaries who 
have chronic illness, they need providers who talk to each 
other, and that is hard to change, and the plans are dealing 
with that and we are dealing with that because otherwise the 
beneficiary gets caught with the bill and the costs go up.
    Mr. Pitts. The Chair thanks the gentlelady and now 
recognizes the gentleman from Louisiana, Dr. Cassidy, 5 minutes 
for questioning.
    Mr. Cassidy. Yes. Thank you. I thought I was a ways after.
    Ms. Gold, you sound like an advocate for MA plans because 
you are the one who is saying that there should be greater 
coordination of care.
    And I am going to go to you, Dr. Margolis, because as a doc 
speaking to a doc, I thought your testimony was most kind of 
about what the patient's experience is as opposed to what the 
economists might say.
    But Ms. Gold, just to point out, when you say that premiums 
will be lower in 2014 relative to 2010, that is because the 
market is actually offering lower-cost premiums with higher 
deductibles or allowing people to take their choice and 
therefore they are choosing a lower cost. It is not a function 
of the--that is what it is a function of.
    Ms. Gold. No, I don't believe so. Partly, we don't have 
good data on the other kinds of cost sharing but I don't 
believe that there is evidence yet that that is why that has 
happened.
    Mr. Cassidy. Common sense would suggest that. I will just 
say that. Because when people are voting with their pocketbook, 
they typically vote for a lower-cost plan.
    Ms. Gold. Well----
    Mr. Cassidy. And I am sorry, I have limited time.
    Dr. Margolis, we have a controversy here. We have a 
controversy between Mr. Kaplan and Ms. Gold that says that they 
are not sure that there is improved quality data with MA plans. 
Your testimony is excellent. My gosh, when you show that graph 
of MA plans versus fee-for-service and the readmission rate is 
so much lower, number of hospital days, etc., that is just 
proof of what you are describing as an increased model of 
coordinated care. Fair statement?
    Mr. Margolis. Well, thank you for that compliment, sir. I 
think that there are within the written testimony things that 
are very evident. First of all, I am a high promoter of 
transparency of quality results and payment related to quality, 
so I recognize the star program as a very good step forward.
    I wish there was a similar program in fee-for-service 
Medicare so we would have some evidence of whether Medicare 
fee-for-service is creating----
    Mr. Cassidy. So let me emphasize, though, because I am a 
liver doctor, I take care of special needs patients like 
cirrhotics. You mentioned end-stage renal disease. That is 
where coordinated care is most important, and yet you describe 
the cuts that go to the special needs program, correct?
    Mr. Margolis. Yes, I think I have said several times, I 
think the greatest threat at the moment is if we cut through 
this risk adjustment rescaling the benefit of adjusting payment 
based on acuity, we unfortunately then start to incentivize 
what used to be called cherry picking, which is avoiding high-
cost patients. That is a disaster for seniors, and as you can 
see in the written testimony, if you really manage the high-
cost seniors with comprehensive care, with palliative care, 
with end-of-life care with all those kinds of integrated 
programs, you can make a dramatic reduction in utilization.
    Mr. Cassidy. Dr. Margolis, I am going to cut you off a 
second because you have made your point, and I believe it. I 
have been struck that Ms. Gold and Mr. Baker continue to say 
they have not yet seen the problems that we are predicting and 
yet this wonderful graph in your testimony shows that we are 
just on the leading edge of these cuts and that there is 
compounding cuts that go through what you have in 2019 where 
there are dramatic cuts ultimately to MA plans will receive. Do 
I characterize your graph correctly?
    Mr. Margolis. Yes, sir. It is why I have said that 
unfortunately----
    Mr. Cassidy. Now, I am sorry, I just got a minute 30 left.
    Now, you have been describing the dire things that could 
happen to these important programs like special needs plans 
based upon 2015, but if we just extrapolate that out, if we 
have Mr. Baker and Ms. Gold come back in 2019, at that point is 
it fair to say that more likely than not they will be able to 
say at this point we have seen a negative impact of the 
cumulative effect of these cuts upon patient care?
    Mr. Margolis. I believe that is an accurate statement.
    Mr. Cassidy. Yes, so do I. Just as a doc who is going to go 
home and talk to a woman who is losing her MA plan and she is a 
diabetic, and she has had this wraparound service that has been 
able to help her so tremendously.
    Mr. Holtz-Eakin, can you just lay to rest this myth that 
the ACA actually prolonged the life of the Medicare trust fund?
    Mr. Holtz-Eakin. As I said, there are no real resources in 
that trust fund. There is no way to pay a Medicare doctor's 
bill out of that trust fund. All the money that flows into it 
flows right out. The Treasury has spent every dime of it, and 
it is gone.
    Mr. Cassidy. And so when Mr. Dingell or Mr. Green suggest 
that we have actually prolonged the life through the ACA and 
you flatly say no, with your credentials, you just totally 
dispute that?
    Mr. Holtz-Eakin. I have testified numerous times as CBO 
Director and in the years since about the fiction of government 
trust funds actually being able to pay any bills, and it is 
just a fiction.
    Mr. Cassidy. I yield back. Thank you.
    Mr. Pitts. The Chair thanks the gentleman and now 
recognizes the gentleman, Mr. Sarbanes, for 5 minutes for 
questions.
    Mr. Sarbanes. Thank you, Mr. Chairman. I appreciate the 
testimony of the panel.
    Congressman Gingrey said something earlier, which I wanted 
to respond to. He said that seniors are now learning that the 
ACA is going to cause them harm. I don't think seniors are 
learning that. I think seniors are being told that by fear-
mongering members of the other party who don't like the ACA, 
and I think that if seniors look carefully at their experience 
over the last couple of years, a period in which the positive 
impact of the ACA has begun to be felt, they will conclude that 
in fact the ACA is benefiting them. You look at the closing of 
the donut hole, you look at the new coverage of certain kinds 
of preventive care services, screening and other care services, 
annual wellness visits where copayments have been eliminated, 
you look at the incentive structures that have been put in 
place to help improve management of care and chronic conditions 
in a more sensible way within the traditional Medicare fee-for-
service context as well as obviously within the MA context, 
there is just item after item of improvements which are there 
because of the Affordable Care Act, which are making the 
Medicare plan and Medicare coverage more robust for our 
seniors. So it is just wrong to suggest that this is going to 
be harmful to the senior population.
    In a sense, this hearing is titled ``What beneficiaries 
should expect under the President's healthcare plan, Medicare 
Advantage,'' and I think they can expect good things. Everybody 
here generally is saying good things about the Medicare 
Advantage program. That is not the dispute we have. It is 
whether the Affordable Care Act is having a negative impact on 
what 29 percent of Medicare beneficiaries have access to or a 
positive impact. So when Mr. Baker and Ms. Gold say good things 
about the Medicare Advantage program, which they have, that is 
not somehow a contradiction on the other statements and 
testimony they are offering here. I think it is very 
consistent. It is just that you believe, in contrast to the 
other witnesses here, that the Affordable Care Act is actually 
strengthening and improving Medicare Advantage.
    My understanding, Mr. Baker, is that the premium that was 
offered initially to Medicare Advantage plans, which is, I 
think, 114 percent against what the fee-for-service rate is, 
was done because the government wanted to incentivize the 
market and the private health insurance industry to come in and 
innovate and was successful in doing that. If you have 29 
percent of beneficiaries that are now in those plans, it shows 
that that has happened. But along the way, because of good, 
rigorous analysis, we discovered that that premium was no 
longer justified, and in fact was going to some things that 
really ended up being a waste from the standpoint of the 
Medicare program. Can you just speak--I have used up most of my 
time here--but can you just talk again about two or three of 
the things that you think the Affordable Care Act has done to 
improve the Medicare Advantage program, which I think all of us 
want to see remain strong?
    Mr. Baker. I think, you know, three main things. One is the 
Medical Loss Ratio making sure most of the money that goes to--
85 percent goes to medical care. I think, two, closure of the 
donut hole and the addition of preventive care services. I 
would also add, and I haven't talked about this before, but the 
Affordable Care Act does set up a program to enhance 
coordinated care in the fee-for-service traditional Medicare 
program through accountable care organizations and through 
other mechanisms as well as, I think, strengthen Medicare 
Advantage-like programs in many States that are partnering with 
the Federal Government with regard to coordinated care for dual 
eligibles, people eligible for both Medicaid and Medicare, and 
that is an ACA-generated program that does have some promise. 
It needs to be monitored but it looks like it has some promise.
    Mr. Sarbanes. Thank you.
    Mr. Pitts. The Chair thanks the gentleman and now 
recognizes the gentleman from Virginia, Mr. Griffith, 5 minutes 
for questions.
    Mr. Griffith. Thank you very much, Mr. Chairman.
    I want to highlight a real-life example. My 83-year-old 
mother reports that her rates have risen for Medicare Advantage 
plan. In order for her to keep the policy that she has and 
likes, she is now paying higher rates. When Secretary Sebelius 
was here in April, she claimed Medicare Advantage rates were 
decreasing nationwide. So I did a survey in my district, and we 
found that more had rates going up, not a huge amount. As Mr. 
Baker testified, the biggest group, or a bigger group, was 
those who stayed about the same. There were a couple of folks 
who reported that their rates had gone down.
    I am just wondering, Mr. Holtz-Eakin, is this the case from 
your perspective nationwide that the Medicare Advantage rates 
are going down, as Secretary Sebelius testified earlier this 
year?
    Mr. Holtz-Eakin. We can get back to you with the data but I 
don't think those are the facts, but I would emphasize that 
there are big differences across counties, regions, States in 
the United States.
    Mr. Griffith. And let me go to that point because I had 
some curiosity as to whether that was one of the reasons was 
that I represent a very rural district where it takes hours 
sometimes to get to the nearest hospital, depending on where 
you are located, particularly since as a result of Obamacare 
and the cuts to Medicare we lost a hospital in one of my most 
rural counties a few months back. That was two of their top 
three reasons for why they were closing the hospital. Do you 
find that that is more likely to be a problem in rural areas 
where the rates are going up as opposed to more urban areas?
    Mr. Holtz-Eakin. Well, it is much harder to, you know, 
narrow networks, which is one of the ways to control costs in a 
rural setting because you don't have many choices, so they 
don't have the option to do that.
    Mr. Griffith. Yes, and in that particular county, they had 
one choice and now they have to drive a fairly--depending on 
what part of the county you live in, a fairly good distance to 
get to the next choice where they also only have one choice 
depending on what direction they go in. I do appreciate that.
    Dr. Margolis, I ask you a rural question to in that you 
were talking about the health care and Dr. Cassidy, who I 
respect very much, showed the chart from your testimony and how 
the cuts are coming, and you indicated earlier in your 
testimony that is going to limit access for some folks. Is that 
going to be far more worse in the rural districts like mine?
    Mr. Margolis. I think that it is predictable that cuts will 
affect rural areas where there are fewer choices rather than 
the urban areas where there is more competition but I can't say 
that I have evidence to support that.
    Mr. Griffith. But common sense would lead us to that 
conclusion, would it not?
    Mr. Margolis. Yes.
    Mr. Griffith. Ms. Gold, do you want to disagree?
    Ms. Gold. Yes, because the ACA has the lowest payment 
counties actually benefiting. In some of the rural counties, 
they are going to continue to have 115 percent of fee-for-
service. So I don't think it is payment in rural areas. I 
agree, there is a lot of problems in rural areas with managed 
care and getting it set up but I don't think it is the payment 
changes per se that are causing the problem.
    Mr. Griffith. So you would disagree with the folks who just 
had to close the hospital in Lee County, Virginia, and you 
would tell them that were mistaken in looking at their numbers?
    Ms. Gold. No, I can say that they have a real problem but 
it is not the ACA.
    Mr. Griffith. Well, unfortunately, those were two of the 
three things that they listed as the problem. The other one was 
the war on coal, in essence, the downgrading of the economy in 
our region also responsible to this administration.
    But the other two things they listed were the ACA and the 
cuts to Medicare, so two out of the top three have hurt my 
people, and obviously I am very concerned about it and now I 
think it is going to affect perhaps the elderly also 
disproportionately represented in the rural areas of my 
district.
    Mr. Holtz-Eakin, in that regard, you indicated that we 
shouldn't be looking at these Medicare Advantage rates based on 
2013 but we should be looking to the future. Can you explain 
that more fully?
    Mr. Holtz-Eakin. Well, I am concerned that the current 
experience has been amassed, as the Chair mentioned at the 
outset, by the demonstration program, the Medicare stars 
demonstration program, which I will just take this opportunity 
to say not all MA plans are uniformly wonderful. It is a good 
idea to have a stars program to rate them. The demonstration 
program is not a good program. It does not reward good 
performance, and it needs to be reformed so that it actually 
does. But they plowed $8 billion in and disguised the genuine 
financial future of Medicare Advantage for the near term.
    Mr. Griffith. And I appreciate that.
    And Mr. Chairman, with that, I yield back.
    Mr. Pitts. The Chair thanks the gentleman and now 
recognizes the gentleman from New York, Mr. Engel, 5 minutes 
for questions.
    Mr. Engel. Thank you, Mr. Chairman, and thank you, Mr. 
Pallone, for having this hearing today.
    You know, I have been listening to my Republican colleagues 
lamenting the fact that healthcare costs, they say, are going 
up. They claim that the ACA is causing this to happen, although 
it is not true, and yet when we identify savings and cost, then 
they conversely say how terrible it. Well, you really just 
can't have it both ways.
    In 2009, prior to the passage of the ACA, the rates paid to 
Medicare Advantage plans exceeded that of traditional Medicare 
by about 18 percent and the ACA required changes to Medicare 
Advantage payment rates to better align them with the costs 
associated with traditional Medicare, and these changes were 
estimated by the Congressional Budget office to save over $135 
billion over 10 years. So you just really can't have it both 
ways. Every time we identify a way to save money, my colleagues 
on the other side of the aisle say look, this is so terrible, 
this is being cut, that is being cut, and then they claim that 
the ACA is causing costs to rise. I mean, you just can't have 
it both ways.
    According to the 2010 Medicare Payment Advisory Commission 
report to Congress that in 2009 Medicare spent about $14 
billion more to beneficiaries enrolled in the Medicare 
Advantage plans than it would have spent if they had stayed in 
traditional Medicare. So I want to go along the lines of the 
questions that Mr. Sarbanes did, and ask Ms. Gold, how did we 
get to the point where we were paying so much for private 
insurers through Medicare Advantage to provide Medicare 
benefits and isn't it accurate that reforms in the ACA will 
help correct the overpayment problem with Medicare Advantage 
plans and play a role in extending Medicare solvency for all 
beneficiaries?
    Ms. Gold. Yes, I think it will have that effect.
    Mr. Engel. I think it is also worth noting that all of the 
cuts to Medicare that were included in the ACA were also 
included in each of the Republican budget proposals for the 
last 3 years. So under Republican proposals, these cuts to 
Medicare Advantage will continue too.
    On trust fund solvency, I want to mention the way we 
measure this solvency is by the Medicare trustees' report, and 
the trustees' report shows post-ACA solvency of Medicare is 
extended, and I think that is important to state as well.
    Mr. Baker, I know that in the past there have been concerns 
about Medicare Advantage plans cherry picking and seeking to 
enroll the healthiest of seniors, leaving sicker beneficiaries 
enrolled in traditional Medicare. Have you seen evidence of 
this practice continuing, or what steps did the ACA take to try 
to stop this practice?
    Mr. Baker. Well, once again, I think the provisions in the 
ACA that require Medicare Advantage plans to have similar cost 
sharing for benefits that are typically used by sicker 
beneficiaries, and by that I mean renal dialysis, skilled 
nursing facility care and chemotherapy is one of the ways that 
those plans have become more attractive to those sicker 
beneficiaries and are something the plans can't use to kind of 
cherry-pick healthier beneficiaries over sicker beneficiaries.
    I think what we see anecdotally, and it is borne out by 
some of the research, is that folks typically do join Medicare 
Advantage at a relatively younger and healthier age. As they 
age and become more chronically or severely ill, some do 
disenroll and enroll in traditional Medicare thinking that 
certain treatments, certain providers are more available in the 
original Medicare program. And so we do see that pattern emerge 
anecdotally in our work.
    Mr. Engel. Thank you, Mr. Baker. Let me ask you this 
question on a different subject. In New York, we have about 
2,100 physicians eliminated from United Health's Medicare 
Advantage provider network and is expected to impact about 
8,000 of New York seniors. This was a business decision made by 
a private company and CMS is prohibited by law--I think it is 
important to say that--from interfering in the payment 
arrangements between private health insurance plans and 
healthcare providers. But I do hope that CMS will use the 
authority it has to ensure adequate provider networks are in 
place for all Medicare Advantage plans to help ensure 
beneficiaries have access to healthcare services.
    So let me ask you, for seniors whose physicians are no 
longer a part of a specific Medicare Advantage network, what 
suggestions would you offer them? My understanding is that more 
than 90 percent of physicians in America are willing to accept 
new patients under the traditional Medicare program so is 
moving to traditional Medicare an option for them right now?
    Mr. Baker. Moving back to the original Medicare is an 
option for them right now or moving to another Medicare 
Advantage plan. It is our understanding that most of those 
physicians and most of the hospitals or other providers that 
have been dropped from United or other Medicare Advantage 
networks are in other Medicare Advantage networks or are, as 
you said, in the original Medicare program. So this happens 
every year to some extent and so our advice is consistently the 
same this year: look for another plan that has your provider in 
it or return to the original Medicare program if that is a 
better program for you overall and your provider is also 
involved in that program.
    Mr. Engel. Thank you. Thank you, Mr. Chairman.
    Mr. Pitts. The Chair thanks the gentleman and now 
recognizes the gentleman from Florida, Mr. Bilirakis, 5 minutes 
for questions.
    Mr. Bilirakis. Thank you, Mr. Chairman, and thank you for 
holding this very important hearing. I thank the panel for your 
testimony as well.
    Mr. Kaplan, I was reviewing your report about how Medicare 
Advantage provides better outcomes and greater savings than 
traditional Medicare. Why does capitated MA produce such 
dramatically better results?
    Mr. Kaplan. I think there are probably two or maybe three 
things to take away that I think drive that, so one is the 
alignment of incentives, so in a capitated world, I think we 
all understand that the incentives are aligned between those 
who pay for the health care and those who provide the health 
care. So with that alignment, things tend to be more productive 
in how they perform.
    The second point is that because of that alignment, what 
happens is that there is a huge investment in preventive care, 
so when they have the same goals and they are working towards 
the same, they are going to try to avoid these acute 
interventions to fix something that has gone dramatically wrong 
so they work with the member or the patient to try to manage 
them through it.
    And the third point I really want to emphasize, which is 
what Dr. Margolis said, which is the issue around many of these 
members become very sick with time, age as well as where they 
are socioeconomically, and when they are, of the sickest 
portion or the 5 percent that drives 52 percent of the costs 
that require even greater intervention and greater coordination 
and so when these ideas of coordinating care and aligning 
incentives are very important, in all aspects of health care, 
it is extremely important towards the more chronically sick 
individuals.
    Mr. Bilirakis. Thank you very much.
    Mr. Holtz-Eakin, in the last Congress, about 40 percent of 
the seniors in my district had Medicare Advantage plans. So 
they love their plans, and it is very popular in my area. Of 
course, again, they like their plans. Back in 2010, CMS's Chief 
Actuary did a report on the impact of Obamacare to Medicare 
Advantage. He wrote, and I quote, ``We estimate that in 
2017''--I know you touched on this, but elaborate, please--``We 
estimate that in 2017 when the MA provisions will be fully 
phased in, enrollment in Medicare Advantage plans will be lower 
by about 50 percent.'' Does this track with your own analysis 
of these cuts?
    Mr. Holtz-Eakin. Absolutely. As you have heard today, 
Medicare Advantage is a high-quality program. It is very 
popular. In your district, it is even more popular than 
nationwide. The senior population is rising, 10,000 new 
beneficiaries every day. One would expect that if nothing else 
changed, you would see more enrollment, a lot more enrollment; 
we are going to see less. What has changed is the financial 
foundation. The cuts under MA are going to make it impossible 
for plans to survive, and those that survive will have to 
change their networks and their benefits and their cost sharing 
in ways that seniors will find undesirable. The net result is 
going to be less availability of Medicare Advantage.
    Mr. Bilirakis. Thank you. Next question for you, sir. Some 
Democrats have been pushing the Accountable Care 
Organizations--ACOs--as a model for better care coordination 
and better cost savings. Doesn't Medicare Advantage promote the 
same concept with a proven track record of better outcomes and 
cost containment?
    Mr. Holtz-Eakin. MA has a track record, and it is by and 
large a high-quality track record, as I said earlier. Not every 
MA plan is created equal but it has a track record. ACOs are a 
concept at this point and unproven, and there is one big 
difference: seniors choose their MA plan, seniors are assigned 
to their ACO, and they have no choice, and that is the 
significant difference in the two concepts.
    Mr. Bilirakis. Thank you very much. I yield back, Mr. 
Chairman.
    Mr. Pitts. The Chair thanks the gentleman and now 
recognizes the gentlelady from North Carolina, Mrs. Ellmers, 5 
minutes for questions.
    Mrs. Ellmers. Thank you, Mr. Chairman, and thank you to our 
panel for being here on this issue.
    Surveying the 2nd District of North Carolina, I have been 
hearing since the rollout of Obamacare that my constituents who 
are losing their Medicare Advantage are very, very concerned 
about this issue, as you can imagine, and it is showing in 
North Carolina that the cuts to benefits for seniors in 
Medicare Advantage are over $2,000 per beneficiary. Now that we 
are seeing this play out, the things that I am hearing from my 
constituents are that they are losing their access to care to 
their physicians, the cost is going up, and again, as you can 
imagine, they are very, very concerned about this issue.
    To Mr. Holtz-Eakin, who is going to be most affected by 
these Medicare Advantage cuts? Which sector of population of 
our seniors? Because I keep hearing over and over again that it 
is helping our chronically ill patients who have this coverage 
and this is a better plan for them. Is that not who we are 
harming?
    Mr. Holtz-Eakin. This is a better plan for those with 
multiple chronic diseases in particular that need carefully 
coordinated care. They are typically lower income. There are 
typically more minority participants in MA. That is the 
population that will be affected, no question about it.
    Mrs. Ellmers. Now, can you identify some of the actual 
tangible benefits? I know you talked about coordination of care 
and items like that. Are there any more specifics that we can 
hear so that we all have a better understanding of what we are 
actually losing?
    Mr. Holtz-Eakin. I will cede to the greater wisdom of Mr. 
Margolis and let him go first.
    Mrs. Ellmers. Dr. Margolis, would you--and I actually have 
another question for you, Dr. Margolis, on that issue. You 
know, you had identified quite correctly that we really need to 
be talking about taking care of those patients who are at the 
end of life, the ones who--we know those are where the dollars 
are really being spent. How do you feel about the IPAP, 
Independent Payment Advisory Board? That is going to come into 
play there, don't you believe?
    Mr. Margolis. Yes, ma'am, I certainly do not think that 
organizations like that should make decisions about individual 
patient care, on the one hand. And let me just say relative to 
that very sensitive topic: almost nobody wants to die in a 
hospital----
    Mrs. Ellmers. Thank you.
    Mr. Margolis [continuing]. If they have support at home, 
and with coordinated care, integrated programs, spiritual 
counseling, palliative care, pain management and 24-hour access 
to caregivers, you can avoid almost everybody having that 
unfortunate event in their family. That is a big opportunity, 
and let us support special needs programs, the dually eligible, 
and move towards Medicare Advantage much more aggressively.
    Mrs. Ellmers. I appreciate those comments, and that is 
exactly why I am as concerned about this issue as you are.
    And Ms. Gold, I just have to ask you, yes or no, isn't that 
what you identified a few moments ago when you said that you 
thought coordination of care could be better served under 
another plan and under Affordable Care Act that that actually 
happens?
    Ms. Gold. I think there is a lot of problems with getting 
coordinated care.
    Mrs. Ellmers. But doesn't Medicare Advantage actually do 
that?
    Ms. Gold. No, only some plans do it. It has the potential--
--
    Mrs. Ellmers. No, I didn't----
    Ms. Gold [continuing]. But it doesn't have the reality----
    Mrs. Ellmers. Clarification here. I did not say that every 
Medicare Advantage plan, but I did say that Medicare Advantage 
plans offer these benefits. Is that yes or no?
    Ms. Gold. Yes.
    Mrs. Ellmers. Thank you. And just to finish out, we have 
got about a minute, and this question is actually to Mr. Holtz-
Eakin and to Mr. Kaplan.
    We have heard the bipartisan concerns here, and we want to 
make sure that we take care of our seniors, but we can see over 
and over again the Affordable Care Act is so negatively 
affecting our seniors with their Medicare Advantage plans. Just 
coming from a completely bipartisan perspective, what can we do 
now moving forward? What would you like to see in Medicare 
Advantage that we can move to that we can actually make a 
difference? Because we are going to have to make changes in 
Medicare, yes, and I would like to know from both of you what 
your thoughts are on what we need to do in Medicare so that we 
can make it better for our seniors.
    Mr. Holtz-Eakin. Well, I think it is very important that we 
have a sustainable social safety net for our seniors. Medicare 
needs to be a different program in the future both financially 
and because the care that seniors need is different than when 
Medicare was founded. Medicare Advantage is a great 
steppingstone to that future. It is not the end but it is a 
great steppingstone. It needs to be preserved, not wither on 
the vine in the next 5 years.
    Mrs. Ellmers. But we need that financial backing.
    Mr. Holtz-Eakin. And the near-term thing would be this risk 
adjustment issue that Dr. Margolis has mentioned. That is a 
very serious concern in terms of the funding.
    Mrs. Ellmers. Wonderful. And Mr. Kaplan, very quickly, if 
you can add to that.
    Mr. Kaplan. My simple answer is that this public-private 
partnership has been very successful and therefore, in my mind, 
we should invest in that and make that better as opposed to 
cutting it back.
    Mrs. Ellmers. Thank you so much. Thank you to all of you, 
and thank you to the chairman. I went over my time, so thank 
you for allowing me to do so.
    Mr. Pitts. The Chair thanks the gentlelady. That concludes 
our first round of questions. We will go to one follow-up per 
side, and Dr. Burgess will begin with 5 minutes of follow-up.
    Mr. Burgess. Dr. Holtz-Eakin, I just want to follow up on 
some stuff we were talking about earlier in the first round. It 
appears in Washington today there is a crisis in confidence. 
The President has sold the Affordable Care Act on just a raft 
of false promises. You can keep your plan--false. You can keep 
your doctor--false. These are broken promises and these in fact 
are the opportunity costs that Americans are paying for the 
Affordable Care Act.
    There was a promise made to seniors as well. The promise 
was that we are going to use your Medicare dollars as a piggy 
bank to fund the Affordable Care Act, and in doing that, we 
will improve Medicare and allow seniors to keep their doctors 
if they liked. So do you have an opinion as to whether or not 
this is yet another broken promise?
    Mr. Holtz-Eakin. It is.
    Mr. Burgess. And is it fixable?
    Mr. Holtz-Eakin. It is fixable in Medicare Advantage. I 
don't believe fee-for-service Medicare is fixable, it is the 
problem, so the focus should be on fixing Medicare Advantage in 
the ways that we described earlier, and----
    Mr. Burgess. But----
    Mr. Holtz-Eakin [continuing]. Promises are just that: they 
are promises. They are, you know, if you like your individual 
policy, you can keep it, but the regulations and the funding 
are at odds with the promise. The promise can't be held true.
    Mr. Burgess. So fixing it would involve alteration in the 
funding?
    Mr. Holtz-Eakin. Absolutely.
    Mr. Burgess. And at present, do you see any way or any 
mechanism by which that could happen? Is there anything to give 
you optimism that that funding in fact could be restored?
    Mr. Holtz-Eakin. Under current law, it won't happen. We 
need to change.
    Mr. Burgess. Let me ask you this. I wasn't here in 1988 and 
1989. I don't know if you were involved.
    Mr. Holtz-Eakin. I am old, yes.
    Mr. Burgess. But there was a--Dan Rostenkowski, the 
Democrat chairman of the Ways and Mean Committee, put forward a 
catastrophic care program. He was very proud of it. It passed 
the Congress, a bipartisan vote, as I recall. They went home 
all very satisfied with what they had done. And then something 
odd happened. People rejected the law that was passed, and they 
rejected it largely because in a similar way, it sort of moving 
funding around in a way that seniors thought would be 
deleterious to their well-being. So then do you remember what 
happened the spring after that?
    Mr. Holtz-Eakin. After they got the bill and after they 
chased him with the umbrellas, they repealed the law.
    Mr. Burgess. So there is a mechanism by which this problem 
could be fixed also if we follow the 1989 repeal as precedent?
    Mr. Holtz-Eakin. There is no question this is fixable. It 
requires the Congress to act and the President to sign.
    Mr. Burgess. And it may require the people with umbrellas 
chasing the chairman of the Ways and Means Committee down the 
street.
    Mr. Holtz-Eakin. No comment.
    Mr. Burgess. No comment.
    You know, I do have to just address the issue or ask, I 
mean, here we have all these experts in front of us. We get 
reports that the cost in Medicare has come down. In fact, we 
are going to get by the end of this week, I think the 
Congressional Budget Office is going to give us a projection on 
the proposed cut in the Sustainable Growth Rate formula, which 
is likely to be less than what everyone was anticipating. So 
that is good news. It may improve the score for repealing it.
    A lot of opinions out there as to why this cost reduction 
is occurring. Of course, the administration in USA Today 2 
weeks ago wanted to take credit for it and say it is all the 
Affordable Care Act. I don't know that is has really had time. 
Certainly the recession is playing a role but I don't know if 
that is the entirety of it. We are here just literally just 10 
years passed the signing of the Medicare Modernization Act with 
the provision of Medicare Advantage and the Medicare 
prescription drug benefit, and if we really do believe that it 
is better to a stitch in time saves nine and it is better to 
treat early before a disease gets well established, perhaps we 
are seeing some benefit from passing the Medicare Modernization 
Act. Do any of you have an opinion as to whether or not that 
may be playing a role in these lowered costs? Yes, sir.
    Mr. Holtz-Eakin. I don't know how much of the current 
slowdown in health spending growth we can attribute to 
prescription drug therapies but we know the CBO and others have 
found that the Part D program has reduced costs elsewhere in 
Medicare, and that has been an important part of the change in 
the cost structure of Medicare. It has also been an important 
part of the structure of the entitlement. The Part D program 
which will have its 10th anniversary on Sunday is probably our 
most successful entitlement, and we should try to model every 
reform we can as closely to that as possible.
    Mr. Burgess. And that was actually constructed to be more 
like insurance and less like entitlement, if I recall those 
discussions back in the midst of time 10 years ago.
    I thank everyone on the panel. It has been very 
informative. I know it has been a long morning, and Mr. 
Chairman, I will yield back.
    Mr. Pitts. The Chair thanks the gentleman and now 
recognizes the ranking member, Mr. Pallone, 5 minutes for 
follow-up.
    Mr. Pallone. Thank you, Mr. Chairman.
    I just wanted to say--I am going to ask my question of Mr. 
Baker but I just wanted to say with regard to Mr. Holtz-Eakin's 
testimony with regard to ACOs, I just disagree. You know, with 
ACOs and traditional Medicare, seniors have the ultimate 
choice. I mean, they can see any provider they want. They are 
not locked in for a year like they are with an MA plan. That is 
just my opinion. When I heard you talk about ACOs, I just 
wanted to express my view, which is that they are not locked 
in. They can choose whoever they want with ACOs in a 
traditional Medicare plan.
    Mr. Baker, I just wanted to ask you about how Medicare 
Advantage can be improved. I think all of us here today agree 
that the Medicare Advantage program is a crucial alternative to 
traditional Medicare, especially for individuals with complex 
healthcare needs. But in your opinion, based on your 
organization's work over the years in assisting Medicare 
beneficiaries, what recommendations do you have for how the 
Medicare Advantage program could be improved for beneficiaries?
    Mr. Baker. Of course. I mean, I think the promise of 
managed care when it was initially put forward in the 1980s and 
then mid-1990s, a big push was that it would actually save the 
Federal Government money and provide coordinated care and 
additional benefits to people with Medicare. I think we have 
talked a lot about the advantages of Medicare Advantage but 
some of that promise hasn't been met. As we have talked, some 
of the plans are better than others but overall the level of 
coordinated care does vary widely amongst plans. And so we 
think, you know, better monitoring and oversight by the Centers 
for Medicare and Medicaid Services to make sure that those 
promises are kept, once again, better information about appeals 
within those programs. We oversample for the complainers in my 
organization. People call us when they have problems, and 
consistently what we see in the Medicare Advantage plans are 
problems with access to care, with utilization management or 
other barriers put to a variety of care, and we work with 
physicians and the plans to ease those barriers for people with 
Medicare and Medicare Advantage.
    So having that information publicly available about which 
plans and how they are really kind of setting up maybe 
unnecessary barriers to care would be helpful and enable people 
to not only compare benefits but also to compare how those 
benefits are administered by particular plans and making sure 
that people are choosing those plans that actually are 
fulfilling the promise that a lot of us have talked about with 
regard to coordinated care, and I think, you know, once again, 
this idea of custom tailoring stars, if you will, the stars 
program, while it is good, needs to be better and that people 
really want to know when you are looking at your two cars in 
Consumer Reports, there is not only stars on the cars overall 
but also on engine performance and on brake performance and 
other kinds of performance measures. So we will get to a place 
where I think we can customize those stars even more, and that 
will also help folks choose between the programs.
    I want to reiterate that I think the original Medicare 
program or the traditional Medicare, which we have had since 
1965, is the bedrock. It is something that people continually 
know is there and go back to, and it has, you know, regardless 
of a lot of what we have said, if you look at over the last 30 
years, Medicare, the traditional Medicare program, and private 
insurance have done about the same job curtailing costs, good 
or bad. And so I think there is a lot of improvement that can 
be made in the original Medicare but there is also a lot of 
improvement that could be made in Medicare Advantage as well.
    Mr. Pallone. I only have a minute left, but some people 
including you have suggested we should consider establishing a 
so-called Medicare Part E, which would supplement original 
Medicare without beneficiaries having to pay for the overhead 
and profits of private insurance plans, and it intrigues me. 
Could you just elaborate a little on how you would envision 
that would be structured or how it would be an improvement to 
the current Medicare structure? You have a minute.
    Mr. Baker. In a whole minute? I think the Commonwealth Fund 
and others have put together a more comprehensive proposal on 
what is called Part E Medicare, and basically what it would do 
is combine Part A, Part B, Part D, prescription drug and Medi-
gap, Medicare supplemental, in a government-run program, and 
this would go toe to toe with Medicare Advantage and with the 
original Medicare program as it exists now. Once again, it is 
an alternative. It is something that would exist alongside, and 
it would allow more choice for consumers and could have a lot 
of these coordinated benefits and coordinated coverage that we 
have been talking about today.
    So I think that it is something that I think would put 
together in one place government-run program that has all of 
these components that people with Medicare value and need and 
could save money.
    Mr. Pallone. Thank you so much. Thank you, Mr. Chairman.
    Mr. Pitts. The Chair thanks the gentleman. The Chair thanks 
all the witnesses for your testimony. This has been an 
excellent hearing, very informational.
    The members may have follow-up questions. We will submit 
those to you in writing. We ask that you please respond 
promptly. I remind members that they have 10 business days to 
submit questions for the record, so they should submit their 
questions by the close of business on Wednesday, December 18.
    Without objection, the subcommittee is adjourned.
    [Whereupon, at 12:26 p.m., the subcommittee was adjourned.]
    [Material submitted for inclusion in the record follows:]


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