[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]
EXAMINING TRADITIONAL MEDICARE'S
BENEFIT DESIGN
=======================================================================
HEARING
before the
SUBCOMMITTEE ON HEALTH
of the
COMMITTEE ON WAYS AND MEANS
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED THIRTEENTH CONGRESS
__________
FIRST SESSION
__________
FEBRUARY 26, 2013
__________
Serial No. 113-HL01
__________
Printed for the use of the Committee on Ways and Means
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COMMITTEE ON WAYS AND MEANS
DAVE CAMP, Michigan, Chairman
SAM JOHNSON, Texas SANDER M. LEVIN, Michigan
KEVIN BRADY, Texas CHARLES B. RANGEL, New York
PAUL RYAN, Wisconsin JIM MCDERMOTT, Washington
DEVIN NUNES, California JOHN LEWIS, Georgia
PATRICK J. TIBERI, Ohio RICHARD E. NEAL, Massachusetts
DAVID G. REICHERT, Washington XAVIER BECERRA, California
CHARLES W. BOUSTANY, JR., Louisiana LLOYD DOGGETT, Texas
PETER J. ROSKAM, Illinois MIKE THOMPSON, California
JIM GERLACH, Pennsylvania JOHN B. LARSON, Connecticut
TOM PRICE, Georgia EARL BLUMENAUER, Oregon
VERN BUCHANAN, Florida RON KIND, Wisconsin
ADRIAN SMITH, Nebraska BILL PASCRELL, JR., New Jersey
AARON SCHOCK, Illinois JOSEPH CROWLEY, New York
LYNN JENKINS, Kansas ALLYSON SCHWARTZ, Pennsylvania
ERIK PAULSEN, Minnesota DANNY DAVIS, Illinois
KENNY MARCHANT, Texas LINDA SANCHEZ, California
DIANE BLACK, Tennessee
TOM REED, New York
TODD YOUNG, Indiana
MIKE KELLY, Pennsylvania
TIM GRIFFIN, Arkansas
JIM RENACCI, Ohio
Jennifer M. Safavian, Staff Director and General Counsel
Janice Mays, Minority Chief Counsel
______
SUBCOMMITTEE ON TRADE
KEVIN BRADY, Texas, Chairman
SAM JOHNSON, Texas JIM MCDERMOTT, Washington
PAUL RYAN, Wisconsin MIKE THOMPSON, California
DEVIN NUNES, California RON KIND, Wisconsin
PETER J. ROSKAM, Illinois EARL BLUMENAUER, Oregon
JIM GERLACH, Pennsylvania BILL PASCRELL, JR., New Jersey
TOM PRICE, Georgia
VERN BUCHANAN, Florida
ADRIAN SMITH, Nebraska
C O N T E N T S
__________
Page
Advisory of February 16, 2013, announcing the hearing............ 2
WITNESSES
Glen M. Hackbarth, Chairman, Medicare Payment Advisory Commission 6
A. Mark Fendrick, M.D., Director, University of Michigan Center
for Value-Based Insurance Design............................... 31
Tricia Neuman, Senior Vice President and Director, Kaiser Program
on Medicare Policy, Kaiser Family Foundation................... 39
______
SUBMISSIONS FOR THE RECORD
AARP, letter..................................................... 81
AFL-CIO, statement............................................... 84
AFSCME, statement................................................ 89
Alliance for Retired Americans, statement........................ 93
American Academy of Actuaries, statement......................... 97
California Health Advocates, statement........................... 107
Center for Fiscal Equity, statement.............................. 117
Council for Affordable Health Insurance, statement............... 121
Leadership Council of Aging Organizations, letter................ 126
National Alliance on Mental Illness, statement................... 128
National Association for Home Care and Hospice, statement........ 133
National Committee to Preserve Social Security and Medicare,
statement...................................................... 143
UAW, statement................................................... 145
USW, statement................................................... 148
EXAMINING TRADITIONAL MEDICARE'S BENEFIT DESIGN
----------
TUESDAY, FEBRUARY 26, 2013
U.S. House of Representatives,
Committee on Ways and Means,
Subcommittee on Health,
Washington, DC.
The subcommittee met, pursuant to call, at 10:26 a.m., in
Room 1100, Longworth House Office Building, the Honorable Kevin
Brady [chairman of the subcommittee] presiding.
[The advisory of the hearing follows:]
HEARING ADVISORY
FROM THE
COMMITTEE
ON WAYS
AND
MEANS
Chairman Brady Announces Hearing on Examining Traditional Medicare's
Benefit Design
Washington, Feb. 2013
House Ways and Means Health Subcommittee Chairman Kevin Brady (R-
TX) today announced that the Subcommittee on Health will hold a hearing
to review the current benefit design of the Medicare Fee-For-Service
program and consider ideas to update and improve the benefit structure
to better meet the needs of current and future beneficiaries. The
hearing will take place on Tuesday, February 26, 2013 in 1100 Longworth
House Office Building, beginning at 10:30 a.m.
In view of the limited time available to hear from witnesses, oral
testimony at this hearing will be from invited witnesses only. However,
any individual or organization not scheduled for an oral appearance may
submit a written statement for consideration by the Committee and for
inclusion in the printed record of the hearing. A list of witnesses
will follow.
BACKGROUND:
Created in 1965, the Medicare benefit was originally modeled on the
Blue Cross Blue Shield plans that were prevalent throughout the nation
at that time. However, the last half-century has seen significant
changes in how health care benefits are designed and delivered. Yet
Medicare retains the original bifurcated system of hospital and
physician services, and has an array of confusing deductibles and
coinsurance levels that neither creates incentives for beneficiaries to
make better decisions about their health care needs nor protects
beneficiaries from unexpected health costs. Not surprisingly, many
beneficiaries purchase additional coverage to bring more certainty and
clarity to their out-of-pocket costs.
To address these and other concerns, the Medicare Payment Advisory
Commission (MedPAC) made recommendations in its June 2012 Report to
Congress to redesign the traditional Medicare benefit package. In this
report, MedPAC suggested improving and updating Medicare's current cost
sharing structure, by maintaining on aggregate the same level of cost
sharing as the traditional benefit, but redistributing cost sharing
through the use of tiered copayment, coinsurance and a new combined
deductible for Medicare Parts A and B. MedPAC also recommended
providing an out-of-pocket maximum for beneficiaries in traditional
Medicare, protection that is currently required of Medicare Advantage
plans or obtained by beneficiaries through the purchase of supplemental
insurance. A number of other bipartisan commissions have recommended
similar changes to traditional Medicare's benefit design.
In announcing the hearing, Chairman Brady stated, ``There is
bipartisan recognition that the current structure of the Medicare
benefit is outdated, confusing, and in need of reform, and taking steps
to improve the current array of confusing deductibles, copayments and
coinsurance is long overdue. This hearing will enable the Subcommittee
to investigate the limitations, inefficiencies and inadequacies of
traditional Medicare's cost sharing structure and identify ways to
bring the Medicare program into the 21st Century.''
FOCUS OF THE HEARING:
The hearing will review the current Medicare benefit design and
examine ways to improve it.
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Chairman BRADY. The subcommittee will come to order.
Welcome to the first hearing of the Health Subcommittee for the
113th Congress. Today we will review the outdated and confusing
benefit design of the traditional Medicare program, the
structure of which is essentially unchanged from its inception
in 1965 it maintain separate programs and benefits for hospital
and physician services, and doesn't coordinate care between the
two.
Because of the outdated structure of the Medicare benefit,
today's beneficiaries are inundated with an array of confusing
deductibles, coinsurance and copayments with no protection from
high healthcare costs unless they enroll in a private plan. As
a result, over 90 percent of seniors must obtain some type of
supplemental coverage, whether a purchase on their own, through
an employer or from Medicaid.
Despite vast improvements and innovations in the healthcare
sector that have transformed how care is delivered, Medicare
has lumbered through the past half century on the same
trajectory. Can you imagine a world where someone has to buy
hospital and nursing home coverage from one insurance company,
physician office coverage from another insurance company,
prescription drug coverage from yet another company, and likely
supplemental coverage from a fourth insurance company? Yet this
is exactly how the current Medicare benefit is designed. No
private insurance company in its right mind would design and
offer a benefit that looks like this. And given a choice, most
seniors wouldn't accept it.
The need to reform the outdated Medicare benefit is long
overdue. I appreciate the work of the nonpartisan Medicare
Payment Advisory Commission and bipartisan groups like the
Bowles-Simpson Commission and Bipartisan Policy Center to
further this issue. Their effort to dig into this complicated
topic and advance long-overdue reform has been critical.
Updating the Medicare benefit design will bring the program
into the 21st century and meet the needs of current and future
seniors. It will bring the traditional Medicare benefit in line
with the types of benefits and cost sharing that one in four
beneficiaries currently enjoy from Medicare Advantage plans.
These plans are able to offer predictable copayments versus
coinsurance, protection against high out-of-pocket costs, and
are often able to incentivize beneficiaries to receive care in
high-quality and efficient settings.
However, as we will hear today, because of changes included
in Obamacare and regulations developed by the Centers for
Medicare and Medicaid Services, Medicare Advantage plans have
fewer opportunities to design the benefit packages that
beneficiaries want. Instead of promoting this model, the
President's new healthcare law is pulling these plans and the
13 million beneficiaries enrolled in them back into the 1960s.
For the sake of our seniors, we need to break down barriers
and give these plans greater flexibility to continue to
innovate and offer affordable coverage while improving patient
outcomes. This is something traditional Medicare has not been
able to do. Moving from Medicare's half-century old design to
one that provides beneficiaries with rational cost sharing and
protection from high healthcare costs will be challenging, but
it is necessary. Simply maintaining the current outdated,
confusing and inefficient structure while the program remains
on a quiet path to insolvency, is not the answer. Instead we
have to move forward to improve this critical program,
providing greater protections for seniors and placing the
program on sound financial footing.
It is my hope that this hearing will be the start of
efforts to work in a bipartisan fashion to modernize the
Medicare program for all seniors and people with disabilities.
Before I recognize Ranking Member McDermott for the
purposes of an opening statement, I ask unanimous consent that
all Members' written statements be included in the record.
Without objection, so ordered.
Chairman BRADY. I now recognize Ranking Member McDermott
for his opening statement.
Mr. McDERMOTT. Thank you, Mr. Chairman. I look forward to
this process. And I was just sitting up here thinking that Mr.
Johnson and I were the only two people who sit on this
committee who remember the last time this committee tried to
reform the benefit package. That was 1988. It was a
catastrophic--it was called the Medicare Catastrophic Coverage
Act. It had an outpatient prescription drug benefit and a cap
on beneficiaries' out-of-pocket costs. And my first vote in the
Congress in 1989 in this committee was to vote against the
repeal of that change. So I think that as we move forward into
this area, we really ought to keep in mind what happened then.
Republicans often assert that Medicare is outdated and
needs reform, and I agree. No social program could ever be
designed that anticipates what is going to happen 50 years
later, or 60 or 70 years later, but they ignore that
substantial progress has already been made to strengthen the
essential program.
The ACA reduces Medicare spending, extends its solvency,
and brings growth to per-patient costs to record lows.
Preventive services are now free of charge to beneficiaries,
and we finally have laid the groundwork to reward treatment
value over volume.
Yet further improvements are needed, but much of the
current Republican proposal does more harm than good, in my
view. Benefit restructuring specifically to generate savings,
whether in the name of deficit reduction, paying for other
initiatives, or simply masquerading as reform, is bad policy
and bad politics; 1989. It may be tempting when running the
numbers and calculating the averages, but it is all too easy to
lose sight of the very real people whose lives and well-being
hang in the balance.
For example, we long sought to add catastrophic coverage to
Medicare, and I have talked about that. If it is combined with
a unified deductible to offset the change, it inevitably will
mean raising the costs to roughly four out of five
beneficiaries. Moving to a combined deductible of $500 or more
will triple the current Part B deductible. A surprising number
of beneficiaries have costs below $500 and so would pay monthly
premiums for benefits they never use. Meanwhile, the
catastrophic cap almost certainly will be set at such a high
level that it will benefit only a few, probably 5 percent or
so, of the beneficiaries.
These challenges become even more complicated if cost
sharing is reconfigured by creating new copays or increasing
coinsurance for current services like hospital visits and home
health care. And given the average beneficiary makes only about
$22,500 and already spends disproportionately more on health
care than a younger person, additional premium cost is done at
some risk.
At a minimum, benefit redesign would require a substantial
expansion of the Medicare Savings Program to ensure
affordability for low-income Medicare patients. And with all
but 12 percent of Medicare participants receiving supplemental
coverage that insulates them from potential changes, the
question is, why do it? The answer is because some want to
prohibit or discourage first-dollar coverage in supplemental
plans.
Then the tradeoffs get even more tricky. Do you want to
dictate terms of private insurance? Do you instead penalize
beneficiaries for choices they made in the free-enterprise
system? Do you tell employers what retiree benefits they can or
cannot offer? What do you say to people who have already traded
lower wages for better retiree coverage?
Now, we are all searching for the ever-elusive health
policy holy grail that promotes value over volume and quality
over quantity, but there isn't a simple answer. Our ability to
reliably measure quality and value is in its infancy, and there
is much work to be done. Even with good information, purchasing
health care is different from making other expenditures. Few
patients can shop around for bargains when their health is on
the line, nor should we expect it of them.
On a final note, I want to express my optimism that
bipartisanship will enable the committee to move forward on the
SGR reform. We are all tired of doing the SGR patch. The recent
Republican outline leaves plenty of room for agreement if
people want to find it. If done smartly, this issue could
reshape our entire health economy for the better, but costs
can't just be hoisted onto the backs of the beneficiaries.
There are better options with stronger policy justifications to
pay for the needed SGR policy changes.
With that, I look forward to discussing the many tradeoffs
inherent in reconfiguring Medicare's benefit package with
today's expert witnesses.
Thank you, Mr. Chairman.
Chairman BRADY. Great. Thank you, sir.
Chairman BRADY. Today we will hear from three witnesses:
Glenn Hackbarth, Chairman of the Medicare Payment Advisory
Commission; Dr. Mark Fendrick, director of the Center for
Value-Based Insurance Design at the University of Michigan; and
Tricia Neuman, senior vice president of the Kaiser Family
Foundation and Director of the Foundation's Program on Medicare
Policy.
Thank you all for being here today. I look forward to your
testimony. You will be recognized for 5 minutes for the
purposes of an opening statement.
Mr. Hackbarth, we will begin with you.
STATEMENT OF GLENN M. HACKBARTH, CHAIRMAN, MEDICARE PAYMENT
ADVISORY COMMISSION
Mr. HACKBARTH. Thank you, Chairman Brady, Ranking Member
McDermott, and members of this Health Subcommittee. It is a
pleasure to be here to talk to you about the Medicare benefit
design.
Mr. McDermott, I am also one who has very sharp memories of
catastrophic insurance. In 1988, I was the Deputy Administrator
of the Health Care Financing Administration, so I join you and
Mr. Johnson in those recollections.
The current Medicare benefit package is both inadequate and
confusing. It is inadequate because it lacks catastrophic
coverage, one of the most important features of any insurance
program, and it is confusing for all of the reasons that Mr.
Brady mentioned in his opening statement; Part A and B, and
various deductibles, and use of coinsurance instead of
copayments. Given that, it is not surprising that many Medicare
beneficiaries, in fact the vast majority, want to have
supplemental coverage to augment Medicare.
MedPAC has recommended redesign of the Medicare benefit
package using five principles as guideposts. First of all,
there should be no increase in average liability for Medicare
beneficiaries. We believe the existing Medicare benefit package
is not too rich. If anything, given the population served, it
may be too lean, and so we recommend no reduction in the
actuarial value of the benefit package.
Second, we recommend that an out-of-pocket limit be added
to the program, catastrophic coverage.
Third, we recommend that design of the benefit be
simplified so it is more readily understood and more
predictable for Medicare beneficiaries.
Fourth, we recommend that the Secretary of HHS be given
broad authority to modify cost sharing, both reduce and
increase cost sharing, based on the value of the services
provided, and that assessment, of course, should be based on
scientific evidence.
And finally, we recommend a charge on supplemental
insurance. When a beneficiary buys supplemental insurance, that
increases the cost of care incurred by the Medicare program.
The premium paid by the beneficiary only covers a fraction of
that added cost. We think it is appropriate for there to be a
charge on that supplemental insurance to reflect, in effect,
the implicit subsidy from the taxpayer for supplemental
coverage.
I want to emphasize that we do not recommend prohibiting
various types of supplemental coverage. If a beneficiary wishes
to buy first-dollar coverage, he or she should be able to do
that, but they ought to face more of the added cost to the
Medicare program resulting from that private choice.
Whenever you talk about patient cost sharing, two types of
concerns are raised. In fact, during MedPAC's discussion of
this issue, we spent a lot of time on each of these questions.
The first concern is that cost sharing reduces the use of both
appropriate and inappropriate services. The evidence is pretty
clear on that. So if our supplemental charge were to cause
Medicare beneficiaries to stop having first-dollar coverage and
face more cost sharing, there would be the risk that some
appropriate services would be stopped as well as inappropriate
services.
The fear, of course, is that when that happens, two bad
things can occur. One is the total cost of care could increase.
If patients don't get needed care, they could end up with
hospitalizations that cost more. In addition, they could end up
with a worse outcome, which none of us want. This is why it is
so important to give the Secretary of HHS authority to modify
copayments based on the value of the services provided. If a
service is shown to be a very high value for patients, we ought
to seek to lower the cost sharing. If the value is low, we
ought to seek to increase the cost sharing.
The second concern that is often raised when patient cost
sharing is discussed is the effect on low-income beneficiaries,
and that would be true, of course, also with our charge on
supplemental insurance. If the concern is protection of low-
income beneficiaries, as well it might be, we think a targeted
approach is preferable.
For example, expansion of the Medicare Savings Program, the
program for qualified Medicare beneficiaries that pays cost
sharing for low-income beneficiaries. That sort of a targeted
approach is preferable to this implicit subsidy that is offered
for supplemental coverage that is available to beneficiaries of
both low and high incomes. So target our response to these
problems.
With that, Chairman Brady, I look forward to your
questions.
Chairman BRADY. All right. Thank you, Mr. Hackbarth.
[The prepared statement of Mr. Hackbarth follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Chairman BRADY. Dr. Fendrick.
STATEMENT OF A. MARK FENDRICK, M.D., DIRECTOR, UNIVERSITY OF
MICHIGAN CENTER FOR VALUE-BASED INSURANCE DESIGN
Dr. FENDRICK. Good morning, and thank you, Chairman Brady,
Ranking Member McDermott and Members of the Subcommittee. I am
Mark Fendrick, a professor at the University of Michigan. I
address you today as a primary care physician, medical
educator, and a public health professional.
Mr. Chairman, I completely agree with your statement that
the current structure of the Medicare benefit is outdated,
confusing, and in need of reform. Moving from a volume-driven
to a value-based system requires both a change in how we pay
for care, and how we engage consumers to seek care.
With some notable exceptions, most U.S. health plans
including Medicare implement cost sharing in a ``one size fits
all'' way, in that beneficiaries are charged the same amount
for every doctor visit, every diagnostic test and every
prescription drug. As Mr. Hackbarth just mentioned, asking
Americans to pay more for all services results in decreases in
both non-essential and essential care. While this blunt
approach may reduce short-term expenditures, noncompliance with
high-value services often leads to adverse health outcomes and
higher overall costs. This is penny wise and pound foolish.
Conversely, asking Americans to pay less for all services can
lead to the overuse of harmful services and those that provide
little value. The concept that medical services differ in the
health benefits they produce is referred to as clinical nuance,
and clinical nuance should be utilized in the reallocation of
medical spending.
Mr. Chairman, does it make sense to you that my Medicare
patients pay the same copayment for a life-saving cancer drug
as a drug that will make their toenail fungus go away? Due to
the lack of appropriate incentives, Medicare beneficiaries use
too little high-value care, and too much low-value care. It is
common sense; when barriers to high-value treatments are
reduced and access to low-value treatments is discouraged, we
obtain more health for every dollar spent.
Medicare is a key component to our Nation's commitment to
our elderly and disabled, and it must be sustained. Even with
the recent advantage regarding preventive services, as Mr.
McDermott mentioned, traditional Medicare allows little
flexibility to implement clinically driven benefits.
Specifically program administrators cannot lower cost-sharing
levels for services recommended in clinical guidelines, and
they are also limited in the amount they can increase
coinsurance rates for a harmful procedure.
Since changes to traditional Medicare are difficult, an
interim step could be to legislate changes to Medicare
Advantage. Today the tools available to MA are also blunt
instruments. Legislative and regulatory restrictions prevent
clinical nuance in MA, including the lack of flexibility to
steer patients to high-performing providers in a very rigid
benefit design.
To this I recommend the following recommendations: First,
MA plans should have the flexibility to vary cost-sharing for a
particular service according to where the service is provided
and by whom. The Commonwealth Fund recently estimated that
nearly $200 billion in savings would accrue to Medicare over
the next decade if we were to ``develop a value-based design
that encourages Medicare beneficiaries to obtain care from
high-performing systems''. Currently MA plans use provider
networks, but they are limited in how they may vary cost-
sharing within that network. This restriction forces MA plans
to either exclude low-performing providers completely or permit
complete access to them. There is no intermediate step.
Second, MA plans should have the flexibility to impose
differential cost sharing based on evidence. There are
evidence-based services that I beg my patients to do, such as
critical treatments for asthma, diabetes, and depression. There
are also other services that are harmful or unnecessary, and
according to the literature, these services account to nearly
20 percent of Medicare expenditures.
Last, MA plans should have the flexibility to set enrollee
cost sharing based on clinical information, such as diagnosis.
MA plans are currently constrained by non-discrimination rules
that prohibit different benefits for targeted subgroups of
beneficiaries. Even though the clinical appropriateness of a
specific service may vary widely among MA enrollees, cost
sharing for any service must be the same for everyone. The
flexibility to enroll cost sharing based on scientific evidence
and clinical information is a crucial element to the safe and
efficient allocation of Medicare expenditures.
So as you consider changes to Medicare benefits, it is my
hope that you will take the commonsense step to allow MA plans
to vary cost sharing on the amounts of health produced. Despite
the urgency to bend the cost curve, Congress should avoid blunt
changes that reduce quality of care. Using benefit design to
encourage utilization of high-value services and deter access
to low-value services can improve health, enhance personal
responsibility, and reduce costs.
I look forward to your questions.
Chairman BRADY. Thank you, Doctor, very much.
[The prepared statement of Dr. Fendrick follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Chairman BRADY. Ms. Neuman.
STATEMENT OF TRICIA NEUMAN, SENIOR VICE PRESIDENT AND DIRECTOR,
KAISER PROGRAM ON MEDICARE POLICY, KAISER FAMILY FOUNDATION
Ms. NEUMAN. Thank you, Chairman Brady, Ranking Member
McDermott, and distinguished Members of the Subcommittee. I
appreciate the opportunity to testify at a hearing examining
the traditional Medicare benefit design.
Since the 1970s, the idea of simplifying benefits under
traditional Medicare has been under discussion, but proposed
solutions have typically involved very difficult tradeoffs. A
change in the benefit design could streamline and simplify
benefits, could provide greater financial protections to people
with significant expenses, and minimize the need for
supplemental insurance, but as structured to produce Medicare
savings, such a change could also be expected to increase costs
for the majority of beneficiaries.
Medicare provides highly valued health insurance for 50
million people, Americans, many of whom have significant
medical needs and modest incomes. Four in ten have at least
three chronic conditions; one in four has a mental or cognitive
impairment; half live on an income of less than $23,000.
As noted in your announcement for today's hearing, Medicare
has a complicated benefit structure. It also has high cost-
sharing requirements and no limit on out-of-pocket spending for
services covered under Parts A and B.
As a result people on Medicare tend to have relatively high
out-of-pocket costs, including cost-sharing requirements for
Medicare, but also premiums for Medicare, premiums for
supplemental coverage and for uncovered services. Health
expenses now account for nearly 15 percent of Medicare
household budgets. On average that is three times the share for
non-Medicare households.
Proposals to change the traditional Medicare benefits
design can have different goals which have direct implications
for beneficiaries and for program spending. Proposals to change
the benefit design could simplify benefits, encourage the use
of highly valued services as you have just heard, improve
benefits, or trim them back. Achieving Medicare savings could
be a high priority or not.
Several recent proposals would simplify benefits, set a
limit on cost-sharing obligations, and also reduce Federal
spending. The Kaiser Family Foundation, with Actuarial Research
Corporation researchers, examined an option to simplify the
benefit design and achieve Medicare savings based on an
approach specified by the Congressional Budget Office in their
budget options report in 2011. That option includes a $550
unified deductible for Parts A and B, a uniform 20 percent
coinsurance, and a new $5,500 limit on cost sharing. This
approach would be expected to reduce spending for a very small
share of the Medicare population, but generally people who are
very sick with high costs.
Five percent of beneficiaries in traditional Medicare are
expected to have lower out-of-pocket costs than they would
under current law, and they would receive substantial savings
on average. This would affect, for example, people with
multiple inpatient stays, or a lot of postacute care, so it
would be helped by the limit on out-of-pocket spending. But
most, and the analysis estimated 71 percent, would be expected
to face higher costs. So seniors in relatively good health who
may go to the doctor or see a couple of specialists in a year
would see their deductibles triple from current levels to $550.
And that illustrates the tradeoff.
This particular benefit redesign could be modified in a
number of ways. Lowering the cost-sharing limit would help more
people, but could also lead to higher Medicare spending.
Raising the limit would help even fewer people and generate
additional savings.
Another modification also described by the Congressional
Budget Office would include restrictions in supplemental
coverage along with a benefit design. It would prohibit Medigap
from covering the unified deductible by limiting Medigap
coverage beyond that point to a certain extent. This approach
would increase the Medicare savings, mainly because people who
have Medigap would be expected to use fewer services when
confronted with higher cost sharing. Under this option nearly a
quarter of people on Medicare would see costs decline, mainly
due to lower Medigap premiums, but half would be expected to
pay more; again, a difficult tradeoff.
Another modification would incorporate stronger protections
for low-income beneficiaries in conjunction with a benefit
design. Such an approach would simplify the program for all
beneficiaries, protect those with limited means, but could
diminish Federal savings, if not result in higher Federal
spending.
Mr. Chairman, Medicare today enjoys strong support among
seniors. Finding an approach that will streamline benefits,
encourage beneficiaries to use highly valued services, and
provide greater protections to those with high out-of-pocket
expenses, all without shifting undue costs onto beneficiaries,
remains a challenge, particularly in a deficit-reduction
environment.
And I thank you, and I look forward to working with you and
answering your questions.
Chairman BRADY. Great. Thank you.
[The prepared statement of Ms. Neuman follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Chairman BRADY. All three witnesses are very helpful.
Mr. Hackbarth, for seniors listening today, besides just
simplifying it and making it less confusing to handle all of
the deductibles, copays, everything that goes with that, are
the two biggest benefits to modernizing the design that, one, a
cap on that out-of-pocket cost so that you sort of have that
peace of mind that if you are one of those who hits the high-
cost health care, and many seniors do, you know you are limited
to what damage that might do? And secondly, looking at copays,
which is a fixed dollar amount, versus coinsurance, again on
that very expensive health care again, that too many seniors
fear, for seniors are those the two biggest benefits of
redesigning the system, and how many seniors will be impacted
by that over their lifetime?
Mr. HACKBARTH. Yes. Chairman Brady, those are, I think, the
two big benefits.
With regard to how many people benefit from catastrophic
coverage, it is important to look at that over time. So in any
given year, we estimate the number of beneficiaries that exceed
$5,000 in out-of-pocket costs is about 6 percent. But if you
look at a 4-year time horizon, that number doubles. And
obviously, over the duration in Medicare of the typical
Medicare beneficiary, the percentage grows and grows over time.
So it is important to look at that value not 1 year at a time,
but over the course of participation in Medicare.
Chairman BRADY. Yeah. And this is what I want to ask Ms.
Neuman. One, I appreciated reading your analysis and testimony.
Did you look at--is your analysis done over the lifetime of a
Medicare senior or someone on disabilities, again, who is
likely to face higher costs over a lifetime?
Ms. NEUMAN. No. We looked at a--we did a 1-year analysis of
what the effects would be, and I don't disagree with Mr.
Hackbarth. I think for a catastrophic benefit, there would
certainly be more people who would benefit from a spending
limit over time. Whether they perceive their lifetime risk is a
different question, but we did not look at that. We looked at a
single year.
Chairman BRADY. Can you do that? And here is why. One, the
analysis was very interesting to read, and helpful, but,
looking at 1 year of Medicare is like looking at the cost of 1
year of auto insurance, the year you didn't have an accident.
Yeah, the price looks pretty high, but spread over time, and
the difference here being everyone is likely to get sick. Many
are likely to be seriously ill. Most are going to drive up some
pretty healthy costs. So while on the front end there may be
higher monthly premiums, deductibles, copays, over time that
could be a significant savings for a senior. And Kaiser Health
Foundation has a great reputation. Would you consider redoing
that analysis and looking at it so we could look at a senior's
healthcare costs over a longer period?
Ms. NEUMAN. We would certainly be happy to take a look at
that.
Chairman BRADY. That would be very helpful. Thank you.
And, Dr. Fendrick, I read your testimony, but it was in
four-point type, and so for us old geezers, you might consider
making that a little bigger in the future, for those of us who
are struggling to read these days.
The design that both encourages the use of value-based--I
mean, the services you really need to make sure a senior
wouldn't skip health care that they really need, how would you
design--as we simplify it and unify it, how would you design it
to make sure that we are encouraging seniors into those
essential value services? What would be the key ingredient?
Dr. FENDRICK. First off, I would make sure----
Chairman BRADY. Can you hit that microphone?
Dr. FENDRICK. First thing I would recommend, no copayment
for you to see your eye doctor so you could read my testimony.
I think the nice thing about the three witnesses, we all
agree that the discussion should go beyond how much we spend on
Medicare, but instead how well. In this concept of clinical
nuances, you mentioned some good services which are highly
recommended by professional societies, other organizations, are
those that we would immediately identify and have already done
in hundreds of organizations in the private sector to say these
services are so important that patients should not pay a
substantial out-of-pocket for them. As Mr. McDermott mentioned,
that is currently the case for preventive services in most
public and private plans, and we are, in fact, trying to extend
these services for common chronic diseases for doctor visits,
diagnostic tests, and drugs that have been identified by
professional societies as the things that should be performed.
And that would be the basic premise for us to move forward on
the carrot side, or the high-value side, of value-based
insurance design.
Chairman BRADY. On a scale of 1 to 10, how difficult is it
now that--what we know today versus half a century ago?
Dr. FENDRICK. Given that almost all of your expenditures in
Medicare are in chronic diseases, and most of those chronic
diseases can be lumped into about 14 of them, and the fact that
there are guidelines that are evidence based in most of those
conditions, I would say that that is fairly straightforward.
Chairman BRADY. All right.
Well, thank you all very, very much. This was helpful.
Dr. McDermott.
Mr. McDERMOTT. Thank you, Mr. Chairman. I don't think--
there is general agreement across this dais, I am sure, on the
need for catastrophic limit. I don't think that is the
question. The question really is, how do you pay for it? Now,
we tried once in 1989, and maybe we will do better this time,
but that is really the issue here. And, Mr. Hackbarth, I--or
Dr. Hackbarth, I guess.
Mr. HACKBARTH. Mr.
Mr. McDERMOTT. Mr., did MedPAC in their looking at this, at
the redesign, expect any savings to come out of the redesign of
the way the payment was made?
Mr. HACKBARTH. From the redesign of the benefit package,
no. As I said in my comments, we think the existing benefit
package is not too rich, and so we were looking at a
restructuring of the benefit package while holding average
beneficiary liability at the current level.
Mr. McDERMOTT. If you shift the cost to beneficiaries, how
does that get paid for?
Mr. HACKBARTH. So the other major feature of our proposal
was the charge on supplemental insurance. And if you have a
charge on supplemental insurance set at about 20 percent, then
you generate additional revenues that can be used to either
reduce federal spending or to cover additional benefits.
Mr. McDERMOTT. What did you assume was too high a
supplemental coverage when you put that 20 percent surcharge
on?
Mr. HACKBARTH. Well, we don't say that you can't have a
particular type of supplemental coverage.
Mr. McDERMOTT. You could have it----
Mr. HACKBARTH. You could have it----
Mr. McDERMOTT [continuing]. But if you have a certain
income, you are going to pay a surcharge? Is that the way it
works out?
Mr. HACKBARTH. Yeah. What we modeled was everybody pays a
surcharge under supplemental insurance. Then there is the
question if you want to provide adequate protection to low
income beneficiaries, how do you do that? Rather than having no
surcharge, we think the way to do the low income protection is
through something like the Qualified Medicare Beneficiary
Program.
Mr. McDERMOTT. I remember in the Simpson-Bowles proposal,
there was a lot of talk about this whole issue, and they said
broad-based entitlement reform should include protections for
vulnerable population. So I think it is generally accepted by
everyone that whatever manipulation you do, you have to take
care of the people at the bottom. Is that fair to say?
Mr. HACKBARTH. Yes.
Mr. McDERMOTT. And it is true that any proposal needs to be
packaged with additional financial insurance--assurance for
those in need, including not just people at 135 percent of
poverty, but up to 200. Would you say?
Mr. HACKBARTH. Well, we have not made any recommendations
on exactly where to set that level. Under the Qualified
Medicare Beneficiary Program, the level is set at 100 percent
of poverty level.
Mr. McDERMOTT. Is that high enough?
Mr. HACKBARTH. Again, if your goal is to protect low income
beneficiaries, that number ought to be increased. Now, we do
have some additional Medicare savings programs that go a little
bit higher, but they are focused on paying the Part B premium
as opposed to cost sharing at the point of service.
Mr. McDERMOTT. Ms. Neuman, you are probably aware of the
National Association of Insurance Commissioners that reviewed
the literature and produced a letter that says that they were
unable to find evidence that cost sharing encouraged
appropriate use of health care service. Are you aware of that?
Ms. NEUMAN. Yes, I am.
Mr. McDERMOTT. I ask unanimous consent to have that letter
put into the record, Mr. Chairman.
Chairman BRADY. Without objection.
[The letter follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. McDERMOTT. What does that mean in terms of using copays
as a way of getting people to make decisions about their--I
mean, if you are in an automobile accident and the ambulance
comes and picks you up, do you shop at that point for which
emergency room to go to?
Ms. NEUMAN. Cost sharing can be a blunt instrument. In some
cases, for example, in the Part B drug benefit, it is a little
bit more straightforward with generics versus brand name drugs.
And even at the pharmacy, there is some----
Mr. McDERMOTT. I will give you drug benefit. Now, tell me
some----
Ms. NEUMAN. But beyond that----
Mr. McDERMOTT. Give me some other area where people shop--
--
Ms. NEUMAN. Beyond that point, this is where I was heading,
it gets----
Mr. McDERMOTT. Do people shop for artificial knees?
Ms. NEUMAN. I don't think so.
Mr. McDERMOTT. Well, I mean, one of my colleagues just had
his knee replaced. Do they go around and ask the doctor, how
much do you charge and how much do you charge? And I am going
to take the cheaper one?
Ms. NEUMAN. It is generally very difficult for patients to
do that, and often patients are motivated to do what their
doctors tell them to do. That is why a lot of the work that has
been done has been focused more on the providers side to give
providers information to drive people to more value-based
services, because in theory, the doctors have more information
to sift together in order to advise their--advise consumers, so
they don't use services that are not needed.
Mr. McDERMOTT. My point is, Mr. Chairman, patients don't
shop, they follow what doctors tell them to do.
Chairman BRADY. Hence the problem. Mr. Johnson, you are
recognized.
Mr. JOHNSON. Thank you, Mr. Chairman. I would like to
follow up on his question, because you didn't answer it. If you
break a leg or something and an ambulance comes, you don't have
a choice of where to go or what doctor to see, generally
speaking. They take you to the emergency room of some close
hospital, or the county hospital if it happens to be close by.
So how do you explain fixing that charge in Medicare? Any of
you. Hackbarth, you have addressed that before.
Mr. HACKBARTH. Yeah. So I agree that when a person is in an
automobile accident and they need to go to the emergency room,
there is zero opportunity for shop, and nobody is thinking
about which emergency room to go to and what the cost is. But
there are decisions that beneficiaries make where they do make
a decision about whether cost matters or not. For example, a
decision about how many times to see a physician, or decisions
about some tests. You hear from physicians all the time about
patients saying, well, you know, I want the extra test, I want
to be really sure. If there is some cost sharing on those
decisions, patient decisions change, and so it is at that end
of the spectrum, not the catastrophic illness end. We all agree
that we need complete coverage for really sick patients.
Mr. JOHNSON. Well, you know, I just experienced one with a
hospital right here in Washington. They ordered some x-rays,
and for crying out loud, you go in the x-ray room and they
don't x-ray what the doc tells them to x-ray. They x-rayed
about 10 or 15 other things, and they are going to charge you
for it.
Dr. FENDRICK. If I could----
Mr. JOHNSON. And you are a doctor. Tell me how you avoid
that?
Dr. FENDRICK. No. If I may, I think the very important
point that is emerging, as Ms. Neuman said, that most of the
initiatives that have come out both in the private and public
sectors have been how to change how we pay and manage care on
the supply side.
I think the important discussion, as we talk about
reforming Medicare's benefit design, is to absolutely make sure
that the patient and the doctors are aligned and, in fact,
there is no conflict. The example, Mr. Johnson, I will give you
is as I practice in a medical home, I am given a financial
bonus to get my patients' diabetes under control and get their
eyes examined. At the same time, cost sharing to get their
insulin and to get their eyes examined have gone up. So the
important alignment of provider and consumer incentives is
critical.
And as a physician I will tell you, the emergency example
is one reason why there is no recommendation in value-based
insurance design to lower or raise cost sharing, because it is
not a patient-sensitive issue, but the decision to get your
fourth endoscopy or to see your seventh specialist, I think
there are many situations where we could use soft paternalism
and cost sharing to get patients to make better informed
decisions, to A, get the high value care they need and, maybe
more importantly, to cut the 20 percent waste that is driven by
reasons that are not really understood.
Mr. JOHNSON. You know, it is kind of hard to get all the
docs on the same page all across this country, too, because of
the differences in where they live and how they operate. That
is a real problem.
You know, Mr. Hackbarth, I appreciate your work to figure
out which approach can improve the coordination of care in our
fragmented system, but I reject the notion that the bureaucrats
in Washington can tell providers how to care for patients, and
I am interested in how you think that using payment policies
to--reward good outcomes, and how do you approach that system
with the docs and hospitals?
Mr. HACKBARTH. Yeah. So our thinking about payment reform,
Mr. Johnson, is that we want to put more decision-making
authority in the hands of clinicians as opposed to in the hands
of bureaucrats. So one payment reform that moves those
decisions out, but when you do that, there needs to be
accountability for results both on total cost and quality. If
we don't have that sort of payment reform, what I fear is
increasing intrusion, defining the rules about what qualifies
for fee-for-service payment and the like. So I think we are in
accord on what the objective should be.
Mr. JOHNSON. Thank you, sir. Thank you, Mr. Chairman.
Chairman BRADY. Great. Thank you, sir. Mr. Thompson is
recognized.
Mr. THOMPSON. Thank you, Mr. Chairman. Thank you for
holding this very important hearing.
Ms. Neuman, is Medicare really as popular as those of us
who go back to our district every weekend hear from our
constituents? Do you have data or polling information?
Ms. NEUMAN. Yeah. I mean, our polling shows that Medicare
is not only popular with the general--with seniors, but also
very popular with the general public. Seniors like the way it
works and say it is working well for them.
Mr. THOMPSON. So as complicated as it is, what is it about
Medicare that makes it so popular with the general populace as
opposed to a big corporate plan?
Ms. NEUMAN. Medicare gives people peace of mind when they
get--have a disability or when they get older that they will
have most of their health expenses covered.
Now, Medicare, as we have been talking about, has high
cost-sharing requirements, but a lot of people have
supplemental coverage. A lot of people who are retirees have
gotten retiree health benefits from their former employers,
others have MediGap, the very low income have Medicaid, so a
lot of people have a pretty full package of benefits. That is
not to say they don't pay for the services they receive in many
instances, but they do have supplemental coverage.
Mr. THOMPSON. Thank you. As we deal with the whole issue of
benefit redesign, it seems to me that that is going to--
whenever you reform something, you are disrupting the current
system, so you are going to have some beneficiaries who end up
paying more and some who end up paying less. And I guess my
question to all of you is how is that going to be perceived in
the beneficiary community? Is it going to disrupt the
popularity of Medicare? Will beneficiaries think it is a fair
redistribution of the benefit? And we could start with you, Mr.
Hackbarth.
Mr. HACKBARTH. Yeah. I think, Mr. Thompson, the commune----
Mr. THOMPSON. I can't hear you.
Mr. HACKBARTH. I am sorry. I think that communication is
really important. The nature of insurance is a lot of people
pay a little so that a smaller number of people are protected,
and so the fact that a redesign might mean that a lot of people
pay a little bit more to provide catastrophic coverage for the
most seriously ill, that is just basic principles of insurance.
What people don't often take into account is the issue we
discussed earlier. Don't think of this on a 1-year basis; think
of this on the basis of your full time in Medicare as a
beneficiary. The likelihood that you are going to benefit from
that back-end protection grows dramatically over the course of
your time as a Medicare beneficiary. That is not well
understood, and it needs to be communicated.
Dr. FENDRICK. Mr. Thompson, I will just say two things:
First, the movement toward free or low cost preventive care,
both in public and private programs is universally accepted and
one of the most important and well received aspects of
healthcare reform.
As we have done focus groups in both commercial populations
and in seniors, the idea of explaining to them about this one-
size-fits-all system and giving them the comparison as opposed
to paying the same for a drug that will save your life as one
that is so dangerous, you wouldn't give to your dog, and
instead set up a system that will encourage you to get the
services that are recommended by their own doctors and their
professional societies, and make it a little bit harder to get
those services that are recommended by those same societies in
an initiative called Choosing Wisely is almost universally
accepted.
It is the communication piece that Mr. Hackbarth mentions
that is so important in explaining to them the system that does
not delineate your benefit design at all on what makes you
healthier and what makes you harmful. And you can imagine with
the right communications techniques, this is something in our
focus groups that is seen almost universally as positive.
Ms. NEUMAN. Mr. Thompson, I think it would be a massive
communication effort that would be required. In at least our
polling, people, seniors are----
Mr. THOMPSON. To preserve the popularity and----
Ms. NEUMAN. To preserve the popularity of the program with
what people perceive to be our increases in cost sharing. You
know, for good or for bad, the public is pretty resistant to
increases in cost sharing, perhaps because they are sensitive
to the costs that seniors are already incurring.
So a catastrophic benefit, while very important for
financial protection and would help more people if you look at
it over a life span, it may be difficult to convince the public
of that in the short term. And I am mindful of the experience
of the catastrophic coverage program, which would have provided
a catastrophic benefit, but it was a very tough sell and it was
a very tough repeal, and despite efforts at communications, it
just didn't work out.
Mr. THOMPSON. Thank you.
Mr. HACKBARTH. Could I just mention one other point on this
I think may be useful to the committee? What we found in focus
groups was that people who are not yet Medicare beneficiaries,
may be in their 40s or 50s, early 60s seem to have different
attitudes about redesign than current Medicare beneficiaries.
The younger people are more receptive to the idea of, oh, I pay
a little bit more at the front end in exchange for a better
protection at the back end. So that may be something to
consider also.
Chairman BRADY. Thank you, sir. Mr. Roskam is recognized.
Mr. ROSKAM. Thank you, Mr. Chairman. You know, I was
interested in the exchange, Ms. Neuman, between you and Mr.
Thompson a minute ago in that you were describing the
popularity of Medicare, which I agree with, but it is sort of
the smooth ride as we are going towards the cliff and then,
yeah, the road can be smooth and you can't maybe perceive the
problem, but 12 years out when insolvency is upon us, that is a
stark reality that this committee, I am sure you appreciate,
has to deal with. So popularity notwithstanding, there is a
real challenge there in terms of the reality.
The other thing was, I sensed from you a little bit of an
admonition and a word of caution about a massive effort being
required in terms of large changes, and yet at the very
beginning of this hearing, Mr. McDermott pointed out there is
going to be a massive effort and we were told to gird up in
terms of the calls and so forth into our district offices as it
relates to the implementation of the Affordable Care Act. So
Congress hasn't shied away in the past from some massive
efforts and it is upon us, but I think the reality is that
these things are here. So I don't expect a reply, but just a
word about the exchange.
Mr. Hackbarth, question. In your testimony, or in your
report, you highlighted how a lot of the durable equipment
doesn't have a copay, and that is basically a thing of the
past. Could you elaborate on that? Or it should be a thing of
the past?
Mr. HACKBARTH. Well, durable medical equipment does have a
copay under the----
Mr. ROSKAM. I am sorry, home health.
Mr. HACKBARTH. Yes. Home health services is one of the few
services under the current benefit that does not have any
copay. A year or so ago, we recommended the addition of a copay
on home health services. Again, we think part of any fee-for-
service insurance program is to have modest, appropriate
copays.
Mr. ROSKAM. And what is your hope and your expectation of
having that?
Mr. HACKBARTH. Well, you know, we have seen very rapid
growth in the number of home health episodes. And we are
talking about not people being admitted to home health after
hospital admissions, but admissions from the community. And
that care is, to some degree, discretionary care, and so we
think it is appropriate for the beneficiary to pay some
contribution to that so they think carefully about whether this
is needed versus other alternatives they might have.
Mr. ROSKAM. A minute ago you were referencing some of the--
shifting gears--you were referencing some of the attitudes of
younger----
Mr. HACKBARTH. Yes.
Mr. ROSKAM.--future beneficiaries. Could you speak to that?
Could you give us a sense of sort of the range of their
tolerance for change? The earlier you implement the change,
sort of is there an arc to it, is there a science to it? Did
you come to any conclusions?
Mr. HACKBARTH. Well, our information is based on focus
groups, so it doesn't lend itself to quantifying this dynamic,
but it was a pretty clear one that the younger population is
used to thinking about these trade-offs, they have experienced
change in their employer-based coverage perhaps, where, they
have been asked to pay more front end copays in exchange for
something else. So it is just more familiar, they are more
receptive to it. They don't have the same reflex reaction that
some existing beneficiaries might have.
Mr. ROSKAM. Thanks. And then, just another observation. It
seems in the discussion that the three of you had a minute ago
with Mr. Johnson, you know, there is this feeling that we have
got a system essentially where it is very difficult to interact
and get answers about price from a consumers point of view.
Dr. Fendrick, you used the phrase ``soft paternalism,''
which makes us all very nervous, and, you know, sounds like
slight discomfort during a medical procedure, but there is an
inability on the part of a lot of patients to find out just
sort of clear information. And we have--all of us are complicit
in creating a health care system where asking a physician the
cost of the procedure is almost--is a taboo question. And you
can imagine going in, hey, doc, what is this going to run me?
It is like, well, I don't--I don't know. It is almost as if we
have asked, you know, how much does your spouse weigh or
something. It is that kind of question. And we are admonished,
no, you got to go to talk to the front office. I don't deal
with this.
That is unsustainable, and that, I think, is one of the
factors that is driving part of our challenge today. And I
think that is why I appreciate the chairman having a hearing
focused in on redesign with an idea of patient empowerment,
setting aside the weaknesses of a market that isn't highly
functional in some areas, but is highly functional in others.
And I see the red light, so I will yield back.
Chairman BRADY. Thank you.
Dr. FENDRICK. I will just briefly say that in this issue of
deciding about clinical nuance or not, in a typical branded
drug copayment system, you pay the same out of pocket for
insulin, depression drugs, critically important drugs for
health as you would for drugs for allergies and male pattern
baldness and other types of things.
And terminology notwithstanding, when we talk to Medicare
beneficiaries and ask them do they understand inherently that
some physician visits are more important than others, that some
medications that they take are more important than others, they
universally say yes. And when asked, would you prefer to have
your insulin and your depression drugs and your anti-seizure
drugs to be lower cost because they are more important, as
opposed to the current system that make them lower cost because
they are lower cost and even though they might make you
healthier, is almost universally accepted.
Chairman BRADY. Right.
Dr. FENDRICK. And I think that is why we have seen clinical
nuance in terms of cost sharing recommended by all three of the
witnesses and from management and labor and a number of
organizations who see that one size fits all is truly archaic.
Chairman BRADY. Thank you, Doctor. Mr. Roskam, my favorite
is, ``You may feel a pinch with this.'' That means get ready
for searing pain coming your way. Mr. Kind.
Mr. KIND. Thank you, Mr. Chairman. And I want to thank our
panelists today. But just to stay on the line of questioning
about benefit redesign and greater cost sharing, Ms. Neuman, I
think you are exactly right. I think there will be great
resistance with current Medicare beneficiaries for any
increased cost sharing that might be asked of them. I was taken
aback a little bit with the stats that you were reading off at
the beginning of your testimony. One half of current Medicare
beneficiaries are surviving on $23,000 or less in the system?
So to be talking about greater cost sharing with that
population is going to be met with fierce political resistance,
I would predict.
And, Mr. Hackbarth, it is not surprising that the younger
population might be more amenable to some changes and greater
cost sharing or benefit redesign, but they are not the problem.
I mean, if we continue to exempt current Medicare beneficiaries
to any changes or the 55-and-above population, which is the
Baby-Boom generation, we are really not advancing the ball that
well and addressing the huge health care cost issue that we
face with the budget. So to me it tells me we have got to
continue today to move forward on delivery system and payment
reform today with the eye towards cost saving while still
enhancing quality and not jeopardizing access.
Dr. Fendrick, I understand your laudable goal of trying to
drive consumer decisions to more value-based care and less low
value care and have a price commensurate with that, but I have
always found that the health care field is different. We do
have asymmetrical information out there. I think the providers
are the experts. I am reasonably astute when it comes to health
care decisions, but when I go into a doctor's office, I don't
know if I need a CT scan or an MRI and I don't know what the
best course of treatment is going to be for me.
So at lot of this is going to have to be provider-driven,
which means they are going to need information on what makes
and what doesn't work, which brings us back to comparative
effectiveness research. Do you think that is something we need
to continue to go forward on, doing comparative effectiveness
research and driving that into the hands of doctors and
patients alike so they know what the most effective treatment
option is?
Dr. FENDRICK. So obviously as an academic, I support
research that will tell us the services that help patients and
the services that harm patients. I think that we have to think
very hard about this decision in understanding the asymmetry of
information, but it is possible. The enormous popularity of the
free preventative services in Medicare and in health care
reform justify that.
I think, given the numerous studies that show the large
amount of waste in the system, I have to go on record that I
would like to see increased cost sharing for harmful care. And
if--the initiative called Choosing Wisely, which I mentioned
forward, is over 20 medical specialty societies, not
bureaucrats, but physicians themselves saying that there are
services that individuals should talk with their doctors very
carefully about, because the evidence would suggest that not
that we are not sure, which I am totally happy leaving the
value-based cost sharing outside, but for those services where
the evidence is of harm, I do believe that this is a
conversation that we--all of the stakeholders are willing to
engage in.
Mr. KIND. Well, Dr. Fendrick, I mean, we had some bruising
battles, you know, discussing this over the last few years or
so, whether it was funding for comparative effectiveness
research under the American Recovery Act, under ACA. We
actually instituted the Patient Center Outcome Research
Institute to help sponsor clinical studies out there so we can
get better information into the hands of providers. Do you
think that was a good idea to move forward on?
Dr. FENDRICK. Research to answer the tough questions about
how to spend our health care dollars are important, both from
the private and public sector, but I think, Mr. Kind, what is
really important to say is that our own work shows that even in
the setting of solid scientific evidence, without the
appropriate incentives for both patients and their providers,
the best possible care is not provided. There are these no-
brainers. You know, we are not talking about in the middle.
There are these no-brainers: diabetic eye exams, physical
therapy that people don't----
Mr. KIND. Doctor, you got me on that.
Dr. FENDRICK. Okay.
Mr. KIND. I am in complete agreement. This is where we need
to be going as far as health care decisions and that, but I am
you a little surprised that in the course of today's hearing
and the questioning, the R word hasn't been mentioned yet,
because we are really talking about rationing. I mean, if you
are talking about changing the cost incentives within the
system and that and driving people to high value care and away
from less value care, that is a form of rationing, which I get,
I understand. We need smart rationing within the health care
system, because you don't want to be spending money on stuff
that doesn't work or leave patients even worse off when they go
in.
So I don't think we should be necessarily scared or
frightened from that concept, yet it is such a political
bludgeon around here. When you start talking about comparative
effectiveness research and making smart decisions, suddenly it
becomes rationing, and that is a big bugaboo that we can't
approach and that.
So, you know, I commend your message and what you have been
working on, but there are political minefields that, you know,
all this too that I just caution you about.
Dr. FENDRICK. All I will say, is very quickly, is that the
option that we have before us is whether the benefit design
should be nuanced or not. And if you feel that Medicare
beneficiaries should spend equal out-of-pocket amounts for
things that hurt them and things that incredibly well benefit
them, then I would keep the status quo.
What we have seen both in public and private plans thus far
is that people really do prefer a nuanced approach, working
from the edges for the things we are really certain on the
things that help and the things that harm, and avoid the
contentious issues that your committee and the public have
dealt with over decades.
Mr. KIND. Okay.
Chairman BRADY. The time has expired. Mr. Price.
Mr. PRICE. Thank you, Mr. Chairman. And I want to thank
you, congratulate you on chairing the Health Subcommittee and
look forward to working with you, and I want to thank you for
this most important hearing today, and I look forward to having
many more.
People ought to be sitting up and taking notice as we use
terms like ``soft paternalism'' and ``rationing'' within almost
the same paragraph.
The real question is how does this affect patients? As a
physician who took care of patients for over 20 years, I can
tell you that when they felt that somebody else was making the
decision that potentially adversely affected what their doctor
could do for them, that is when they said that this isn't the
system I want to participate in. We need to be very, very
careful in what direction we head.
The home health was talked about, I think, by Mr. Roskam.
The current design of a new benefits package for home health is
now in phase 2 by CMS. And I would suggest to you that it is
harming patients, making access to home health care more
difficult for patients. Is it going to cost less? Yeah. You
know, we will pound our chests up here and say how wonderful it
is because it costs less, but it is hurting people. And that is
the challenge that we have, is to design a system that doesn't
hurt people.
So then you have to ask the question, okay, well, who is
going to decide whether it hurts or not? And that is where the
whole issue of one-size-fits-all really gets to the heart of
the issue.
Dr. Fendrick, you talked about the current system being
one-size-fits-all, and it is. Do you have any concern that we
trade one one-size-fits-all system that doesn't necessarily
work for everybody for another one-size-fits-all system that
doesn't necessarily work for everybody but may work better for
government?
Dr. FENDRICK. My consideration is the Medicare beneficiary.
And I look at exorbitant amounts, billions of dollars that
could be spent on services that would improve the quality and
length of life of those beneficiaries that are instead being
wasted on things for which medical societies say harm patients.
So I understand that there are issues and challenges, but
all I can tell you, the popularity among patients and
physicians to see cost sharing removed for services that save
lives, whether they be preventive services or management of
chronic diseases, seems to me like something that we move
forward in. And almost all the implementations thus far of
clinically-nuanced benefit designs have been around subsidies
of high value services. Because most high value services, as
you well know, tend to increase costs in the short term instead
of lower them, the fiscal pressures that we have confronted has
required us to look at not just the motivation for me to get
into this is to make the high value services more accessible to
patients and their providers, but also understand this waste
problem. And it is MedPAC and other organizations that continue
to tell us the billions of dollars that are spent on harmful
care.
And I think as--having some fiscal responsibility, we need
to understand that we could reallocate these funds, maybe not
perfectly, but in a better way than we currently are with no
clinical oversight.
Mr. PRICE. Let's talk about the patient that we come up
with this grand design for a new benefits package for folks and
a system that is going to work better than the current system,
and we say to our senior population, you have got to see do
this, should there be any flexibility in that? Should a senior
be allowed to, I don't know, opt out of that system?
Dr. FENDRICK. You are the legislator, I am not. All I am
going to say is another----
Mr. PRICE. No. For the patient. You are talking about the
patient.
Dr. FENDRICK. I think the important point that I may have
glossed over is that these type of benefit designs never decide
what is covered and what is not. And for you as a physician as
well as a congressman know that there is a multiplicity of
small print in cost sharing, both in Medicare as well as in
private plans. So this idea of confusion is going on already.
And my simple point is instead of using profits or the cost of
a service to generate how often it is done, that we think about
taking advantage of the points that were made by a number of
you moving from volume to value, and value must include
clinical nuance.
Mr. PRICE. My time is short, but the concern that many of
us have is that value is quality over cost. And quality is in
the eye of the beholder, so what is quality for you as a
patient, what is quality for me as a patient or another patient
may be something completely different. That is not to say that
there ought not be comparative effectiveness research, because
there ought to be. As scientists, we all understand that you
have got to--that you want to know the best thing to do for a
patient. But at the end of the day, it is patients and families
and doctors that ought to be making these decisions about what
kind of care they receive, and not anybody else.
Dr. FENDRICK. I agree.
Mr. PRICE. Yield back.
Chairman BRADY. Thank you, sir. Mr. Blumenauer.
Mr. BLUMENAUER. Thank you. I find this very interesting and
very helpful. I guess my concern is that we have a situation
that too often it is not so much dictating services, we have a
system where nobody decides, where we kind of are a captive of
the original program design, add-ons that continue. I don't
know about soft paternalism or hard paternalism like just
cutting you off with money, or just going along till we run
out, or somebody figures out how to game the system. And what I
hear you saying is there may be some ways that we can do a
better job of incenting everybody to make the right decisions,
and I am comfortable with that.
We have had experience on this committee where people would
not agree to allow the results of comparative effectiveness
research to be used in determining how much the government is
going to pay for what. Seems kind of goofy, but that is the
political process. And the complexity that some people want is
just going to add costs and water down the ability to deliver
overall high quality service, which is, I think, in microcosm,
why we pay more than anybody else in the world for results that
are mediocre on average. And so I am intrigued with the--Mr.
Chairman, with your bringing the witnesses here and for us to
think about benefit structure and how it impacts it.
I want to just go back to something, Dr. Fendrick, you had
when you talked about infusing clinical nuance into Medicare
Advantage. That was the bold print that was 6-point type. But I
wonder, Mr. Hackbarth, I don't think you referred to Medicare
Advantage in your testimony. Would you react to that for a
moment? I mean, this is kind of a grand experiment that we have
had. We have found out that not all Medicare Advantage programs
are equal. Some are hopeless rip-offs, where we found some
people who figured out how to game the system. We had in the
Affordable Care Act some incentives to try and reward better
programs, and we are slightly ratcheting down the premium.
I am old enough to remember when Medicare Advantage was
supposed to deliver the same quality and quantity of health
care and it was supposed to be able to do so for 5 percent
less, using the magic of private sector and unshackling. Didn't
quite work out that way, but we are ramping down the subsidy
and we are seeing, at least the conversations I am having, that
some people are starting to take advantage of that platform.
But can you speak to ways from MedPAC that Medicare
Advantage might be an area where we could make some adjustments
to inject a little more nuance into the program and not
sacrifice either quality or, again, lose cost control?
Mr. HACKBARTH. Yeah. We think that Medicare Advantage,
offering a choice of private plans to the Medicare beneficiary
is an important part of patient engagement. So beneficiaries
ought to be able to go in that direction if they wish.
We do think that private plans have the opportunity to do
some things that traditional Medicare finds difficult to do;
for example, identify high value providers and steering
beneficiaries to those providers, which is one of the points
that Dr. Fendrick made. The regulations, we need to look at
those regulations, make sure that they provide appropriate
flexibility to private plans to identify high value providers.
Similarly, they need to have appropriate discretion to vary the
benefit structure.
So recently one of our recommendations was that rather than
having chronic care SNPs, special needs plans, that are focused
on particular chronic illnesses, what we ought to be doing is
give all Medicare Advantage plans the opportunity to adjust
their benefits for diabetics versus asthmatics versus patients
with cardiovascular problems. And, again, I think that is
something that Dr. Fendrick recommended.
Mr. BLUMENAUER. Thank you very much. Thank you, Mr.
Chairman.
Chairman BRADY. Thank you. Mr. Smith.
Mr. SMITH. Thank you, Mr. Chairman. And thank you to our
witnesses here today.
Dr. Fendrick, I know you are obviously well studied on a
lot of things relating to Medicare Advantage and current
limitations. Would you have specific recommendations on how to
break down some of the barriers to flexibility perhaps that
would end up improving care?
Dr. FENDRICK. I do. And I would just add on to what Mr.
Hackbarth just said. I think they come into two most elemental
buckets; is the first, the ability to allow the flexibility in
MA plans to alter cost sharing, depending on the provider that
chooses or where that is done. An example might be, for
instance, a highly recommended service for individuals over 50
is colonoscopy. You could get a colonoscopy in a number of
settings, as shown in the Pacific Northwest, at a cost between
$700 and $7,000. And I think to be able--in those situations,
when most people do believe that colonoscopy is performed at
reasonable, same quality in most places, that you might wants
to encourage people to go to the lower cost centers that
provide the same quality as those that are high.
So provider and venue is the first, but the second and most
important is this issue of allowing Medicare Advantage to alter
cost sharing for specific services based on clinical
information. And to follow up on what Mr. Hackbarth said, I
think that one of the easier things to say, given the comments
about the size of my testimony type, is the recommendation of a
diabetic to see an eye professional on an annual basis.
In Medicare Advantage, their current abilities now are to
make eye exams either low cost or high cost regardless of your
clinical condition. I would like to see a plan that offers
annual low cost eye exams to diabetics but not offer that same
benefit design for someone without that condition.
Mr. SMITH. Ms. Neuman.
Ms. NEUMAN. Medicare Advantage really could be an
opportunity to learn more about benefit design changes that are
being talked about today, because plans do have flexibility,
not quite as much as might work, but there could be
opportunities to learn more, and it may be something--the
committee might want to consider perhaps giving the highly
rated plans greater flexibility to modify the benefit design
and use that as a learning opportunity to see what changes
drive people to high value services and perhaps lower costs for
the program.
Mr. SMITH. Sure. And I realize that, you know, the term
``flexibility'' is very vague and oftentimes even
misunderstood, but the fact is representing a rural
constituency, I know that things are done differently in rural
America, and oftentimes more efficiently, but, you know, a
supply of health care means mere access in rural areas and it
means more competition in urban areas. And so in trying to
balance many of those things, I was wondering if, Chairman
Hackbarth, if you could reflect a bit on the impact to rural
communities, rural health care in terms of, you know,
recognizing some of those differences that are out there.
I mean, it amazes me how we empower medical professionals
to make very intricate decisions based on their expertise, and
yet in other areas of health care, we don't allow the judgment
to be utilized of the very same medical professions.
Mr. HACKBARTH. So you are talking, Mr. Smith, more broadly
about Medicare as opposed to just within Medicare benefit
design----
Mr. SMITH. Right.
Mr. HACKBARTH.--how do we--Well, as you well know, Medicare
has a large number of special provisions related to rural
providers. It tries to address the particular, the unique needs
of rural providers, for example, ensuring access to care for
beneficiaries in isolated areas through the Critical Access
Hospital Program.
One of the areas that we have started to look into a little
bit, based on the interest of one of our commissioners who
practices in South Dakota, is that medical professionals and
staff are used differently in isolated rural facilities than
they may be in an urban facility. And----
Mr. SMITH. And it would seem to me that oftentimes that is
undermined given a one-size-fits-all approach coming from
Washington.
Mr. HACKBARTH. Exactly. So I think that is one area to look
at, and we have just begun to pay some attention to that, but
we need to make adjustments to accommodate the unique
circumstances that exist in, say, an isolated rural hospital
and how they configure their staff and how they make decisions.
Mr. SMITH. Okay. Thank you. And, Mr. Chairman, I yield
back.
Chairman BRADY. Thank you. Mr. Pascrell.
Mr. PASCRELL. Thank you, Mr. Chairman. Ms. Neuman, can I
just get a clarification, if I may, on policy and demographics,
particularly on the issue of home health copays? Who are these
people?
Ms. NEUMAN. People who use home health services tend to be
old, frail women. These are the oldest, the frailest that
Medicare----
Mr. PASCRELL. The most vulnerable?
Ms. NEUMAN. Yes, sir.
Mr. PASCRELL. Would you use that word?
Ms. NEUMAN. Yes. I think that is fair.
Mr. PASCRELL. Okay. Look, you have heard it many times:
health care reform is entitlement reform. You may not agree
with it, some folks here. Not only did it reduce costs for
Medicare, but it also reduced costs for beneficiaries. That is
what we know.
The attempts to repeal reform and turn Medicare into some
kind of other program will hurt the beneficiaries, that is my
conclusion, because they have to pay more money out of their
pocket. That has to be clarified. So I am not going to be
disillusioned about the kinds of income seniors make. You
mentioned in your testimony that the beneficiaries have an
average income of close to $23,000, below $23,000, actually.
They already spend 15 percent of their incomes on health care.
And when you add that into how many people are living on their
Social Security check and how that is increased over the last
10 years, paying more out of pocket is just not an option for
many of our seniors. Would you agree with that?
Ms. NEUMAN. I would. And I want to come back to Mr.
Hackbarth's comment when he talked about expanding coverage for
the low income population and doing that in a targeted way. You
know, while some with very low incomes do qualify for Medicaid,
many low income Medicare beneficiaries are not on Medicaid----
Mr. PASCRELL. That is right.
Ms. NEUMAN [continuing]. Either because they are not
eligible based on their assets or their income, but there are
many people who would feel directly any change in cost sharing.
So a lot of the proposals have talked about protecting the low
income, but more work needs to be done on how that would be
done and what vehicle would be used and who be helped.
Mr. PASCRELL. Now, your organization, the Kaiser
Foundation, found that 70 percent of Americans prefer
Medicare's guarantied benefits to any other kind of plan. I
think that it provides a clear picture of how our Nation values
the program. The average Medicare beneficiary has an annual
income of $22,500.
So, Ms. Neuman, can you talk about these higher rates to
some seniors that they have to pay disproportionate or whatever
as you concluded?
Ms. NEUMAN. Well, there are certainly some people on
Medicare who are wealthy by standards that----
Mr. PASCRELL. Right.
Ms. NEUMAN [continuing]. Generally would be considered
wealthy, but only 5 percent of people on the program have
incomes of $85,000 or more. So for people with modest incomes,
an increase in out-of-pocket costs would be a real issue.
And what the research has shown is that it is people with
lower incomes and people in poorer health who are
disproportionately affected by increases in cost sharing,
because higher people can probably absorb to pay more if it is
worth to them.
Mr. PASCRELL. Or possibly leave the program. You may raise
the rates on those higher income seniors, which is a relative
term when we look at what they are making, they may move--leave
the program altogether. What is that going to result in?
Ms. NEUMAN. Well, the issue there, I think, has to do with
the Part B and Part D premiums----
Mr. PASCRELL. Right.
Ms. NEUMAN [continuing]. And the income-related premiums.
And already today, people with higher incomes are paying higher
premiums, and there is some discussion about expanding income
premiums to cover more people.
Mr. PASCRELL. What do you think about that?
Ms. NEUMAN. What do I think about that? Well, I think, you
know, the public certainly prefers to ask higher people to pay
more than everybody else, but depending on what the policy
looks like, it could scale back and start to hit middle income
people.
Mr. PASCRELL. But when you talk about higher income, that
is a relative term in terms of the seniors that we are talking
about who are very vulnerable. It is a different kind of
situation than we are talking about when we refer to our tax
policies, general tax policies. It is a very different
situation altogether.
We need to be very careful here about who we are helping
and then what are the consequences of helping a few, and many
people getting really hurt. So thank you, Ms. Neuman, for your
testimony.
Ms. NEUMAN. Thank you.
Mr. PASCRELL. Thank you, Mr. Chairman.
Chairman BRADY. Thank you. Ms. Schwartz.
Ms. SCHWARTZ. Thank you. And I appreciate the invitation of
the chairman to join you on this important discussion. And I do
have to say, I have had some of these discussions a bit about
redesign, benefits redesign, and I appreciate some of the work
that you have done on this. And actually, the notion of
simplifying the way we actually do this to make it more
understandable is certainly important to include beneficiaries
in this really very important debate we have about making sure
that seniors have access to the benefits that they expect and
they need, and doing it in the right way.
Everyone knows that I have done a lot of work on redesign
of the way we pay physicians and providers as key to this, and
potentially I think maybe more important, because as we have
all heard this morning, it really is very much in the--if your
doctor recommends it, you are sort of inclined to do it, and
you should be, and the potential of having copays get in the
way of necessary services, something that many of us are very
concerned about, and yet the--and you talked about it earlier,
we have to protect poorer seniors so that they actually don't--
so they are able to get the care they need. And maybe $50 a
copay is enough to say, I can't get it now. And I am sure,
Doctor, you have seen that. That we want to protect primary
care. We have talked about already doing that; that we want to
protect access to care of chronic--those with chronic diseases
so they don't get sicker; that we also want to protect the
sickest.
So we are starting to include a whole lot of seniors in
this. We are narrowing the window of who we are actually asking
to pay more.
So really my question and the real discussion I would want
to have is how we really don't pay doctors to sit down and
really talk to their patients about what they shouldn't get. I
mean, I think Dr. Price said let's not get in the way of the
doctor-patient relationship, but right now there is somewhat of
an incentive to say, here is a prescription, because that is
quicker than the conversation about, you know, you really don't
have to take this and you can call me in 3 days if you are not
better, than just giving them a prescription, which they may or
may not fill, of course, or some of the other--or go have this
test, and somebody might come in and say, I heard that it is
really important for me to get an EKG every month.
Now, I don't know if that is true or not. I just made it
up. I am not a physician. But, you know--but, in fact, maybe
that is not such a necessary thing, and it may not be harmful,
but it certainly is a cost to all of us. But taking time to
say, no, here are the things that you ought to do instead of
having these extra tests really does take more time.
So we don't reimburse very well, except under patients in
medical homes to do that, but can you speak to how important it
is for patients to, yes, take some responsibility in this and
not demanding more from their doctors than they necessarily
need, but for that communication between the doctor and
patients, and for us to incentivize providers to take that time
to really provide what is important and necessary, not more
than important.
And right now, while Dr. Price will say, you know, one size
doesn't fit all, right now we pay for everything, more or less,
and that is what you are sort of trying to get to: how can we
get the doctor and patient to actually engage in that
conversation when in fact it is very difficult for patients to
really know whether, in fact, they are asking for more than
what is appropriate or less than is appropriate. It really is
very much on the part of the provider.
I believe strongly we should pay providers differently
under this, under Medicare, and we ought to do it, but could
you speak to that, about whether we--the risk of redesign of
benefits really putting the burden on beneficiaries who really
have a difficulty making this judgment and really need that
relationship with their provider, it may be a doctor, may be a
nurse practitioner, and really having the information not just
about a cost, but really more about the appropriateness of
services and the utilization, excessive utilization potentially
of some services.
And maybe, Mr. Hackbarth, do you want to start with that?
Mr. HACKBARTH. Sure. So I want to emphasize that we think
that it isn't enough just to reform the Medicare benefit
package. You also need to reform how physicians and other
providers are paid.
Ms. SCHWARTZ. Yes.
Mr. HACKBARTH. And one dimension of that----
Ms. SCHWARTZ. Maybe first, even? I mean, do you think one
comes before the other?
Mr. HACKBARTH. I think it has to happen simultaneously. I
wouldn't put an order on it. And one dimension of that you have
touched on, Ms. Schwartz, which is we need to pay physicians
for communicating with patients. And there have been some
positive developments in that recently. Some new codes have
been added for transitional care, a big part of which is
communication with patients as they make a very difficult
transition from a hospital admission to the community. So I
think that is a very important complement to this.
Other approaches you have alluded to are like medical home,
where we are not even using the fee-for-service payment model
exclusively, we are adding additional payments. They go hand in
hand. It is not either/or, it is both are required.
Ms. SCHWARTZ. Okay. Thank you. Do we have time for others
to comment?
Dr. FENDRICK. Yes. Briefly I will just say that the most
important part is that we make sure that whatever is happening
with the incentives on the physician side and the provider
side, they must be aligned with the consumer side, because what
I see in both the public and private programs, often they are
in parallel, but often moving in the wrong direction.
Conceptually, though, speaking about it from the patient
side, cost sharing is an insurance tool to encourage
beneficiaries to think twice or thrice about things they may
not need. So when we think about home care or hospitalizations
or visits, it requires me to pause and think why would there be
cost sharing on something that is absolutely essential for the
patient's health, which is the entire motivation for clinical
nuance.
So thus, I would like to close where I started, is that, I
do believe that cost sharing has a role in Medicare and I think
cost sharing should have a substantial role on those services
that don't make beneficiaries any healthier.
Ms. SCHWARTZ. Well, it seems to me we have a fairly high
threshold on what is harmful or not. I mean, right now it is
not absolutely clear, we don't have all the information----
Dr. FENDRICK. I will just say----
Ms. SCHWARTZ.--about what is actually too much or----
Dr. FENDRICK. Very quickly, and why to the chairman's
credit, this initiative called Choosing Wisely, which I suggest
the staff learn about, is a physician-specialty society
motivated initiative to identify services that may be overused.
So this is a very important step not only for us to identify
the services that we should make less expensive for which the
evidence is strong, we also now have a physician-driven
movement to identify those services that we may do less of.
Ms. SCHWARTZ. I agree that is important.
Chairman BRADY. Thank you. Dr. McDermott has asked for a
question, and he is recognized.
Mr. McDERMOTT. Thank you, Mr. Chairman. And I want to say I
have appreciated your slow gavel so that we could allow the
witnesses to finish what they have to say, and I think the
committee is really interested in what happens. And one of the
issues that I would like to ask a further question about is the
whole question that you just raised, Dr. Fendrick, and beyond
that, I would like for the committee, that you would submit to
us, all of you, if you have it, evidence that backs up the
theory that people go to the doctor more often than they need
to, and if we put a copay on, they won't go.
And I want to give you an example to let you--and there are
thousands of examples. Everybody who is anticoagulated, who is
on Heparin or on Coumadin is supposed to go back in to the
doctor and get a checkup as to whether they are at the proper
level, too high or too low or just right. There are problems on
being too high, there are problems on being too low. The
patient has no sense of what that is. They don't feel anything
particularly until they have got a problem.
So the idea that I have to pay $10 to go back in and put my
finger out and have it stuck and have them then read it on a
machine and tell me, yep, you are right in the right place,
when I didn't feel anything, why would I do it if it is going
to cost me 10 bucks?
And so what I am looking for is how you think you can
design, and is there any evidence, is there any across-the-
board--same way with--the Time magazine this month has
tuberculosis on the front page. And taking pills, in my
experience personally, and I think probably for everybody in
this room, you take pills when you feel bad; when you don't
feel bad, you stop taking them, whether the doctor said you
should take all 10 days doesn't make any difference. Every drug
cabinet in every bathroom in this country has half finished ten
packs, or Z-Paks.
So what I am getting at is how do you--where is the
evidence that people go to the doctor just because they don't
have anything to do on Wednesday afternoon? That is really what
I am looking at.
Dr. FENDRICK. I will just start briefly by, your comment
basically hits the essence of clinical nuance, that someone on
Warfarin must be not only be discouraged, but must be
encouraged to follow the protocol to maximize the health of
that beneficiary. I am not so sure that someone not on Warfarin
should have the same ability to go to see the doctor to have
their blood checked to see how thin their blood is. And that
is, as I said, the essence of clinical nuance.
There is a lot of evidence that we are happy to supply to
the committee, but one of the best examples in Medicare is The
New England Journal of Medicine paper examining the impact of
increases in cost sharing on ambulatory visits in Medicare
Advantage.
As you might expect, Mr. McDermott, beneficiaries went to
the doctor less often. Those beneficiaries who went to the
doctor less often, went to the ER more and were hospitalized
more, and, in fact, total costs went up, which is why our
proposal is that primary care visits in Medicare Advantage and
in Medicare should be free.
Now, there are other services actually where the money is,
as Mr. Hackbarth knows better than anyone. It is not in primary
care visits and it is not in prevention. It is in
hospitalizations and the management of chronic diseases, for
which--to respond to the chairman's question earlier, for those
chronic diseases, we are fairly certain in the services that
should be encouraged for which cost sharing should be minimal
or not at all.
Mr. HACKBARTH. So what I would highlight, Mr. McDermott, is
the importance of doing both payment reform and appropriate
cost sharing for patients. So one piece of evidence that we
have that is relevant to your question is the prevalence of
repeat testing of various types. There is a lot of it, a lot of
it that exceeds all clinical guidelines, and there is huge
variation across the health care system. Probably the most
important reason for that is not patients demanding repeat
testing, but physicians have incentives to do repeat testing.
We need to change that, but when we change the physician
incentive and they say, oh, well, maybe you don't need to be
tested so often, you don't need so many return visits, we want
the patient also to be aligned with that. We don't want the
patient to say, well, I like the old pattern of, you know, I am
going to come every month or every 2 months, whatever. If there
is a modest appropriate copay, then the physician and patient
are talking the same language.
I believe physicians care about their patients and will
modify the recommendations if the patient has some cost sharing
involved, and will recommend things differently than if it is
absolutely free to the patient.
Ms. NEUMAN. Well, I would agree that there is a lot of
evidence on the side that says if you increase cost sharing, it
has an effect on utilization. I don't know about the evidence
on decreasing utilization and whether there is, for example,
too much of preventative services. And that might be something
that one could take a look at, but it would be hard to imagine
an effect like that in the literature, but we could take a look
at it.
I also agree on areas of where there is evidence of
overutilization, there are a number of ways to attack the
issue, one of which is cost sharing. And even then, in the
example of home health, there are different ways of doing that
that would have different effects on people depending on how--
whether it is, for example, a copayment or a co-insurance,
which would disproportionately affect the sickest of the sick.
But if the issue is that there are too many people using too
many services, then I would also agree on going at it, going
around and going at the provider side, the supplier side and
think about how to make changes that would slow the growth in
this benefit without necessarily asking beneficiaries to parse
out whether or not they need a service that their doctor has
told them they needed.
Mr. McDERMOTT. Thank you, Mr. Chairman.
Chairman BRADY. No. Thank you. I would like to thank all of
our witnesses for their testimony today. Obviously there is a--
the current structure of Medicare benefit design needs a hard
look at, has its challenges. I hope we continue to work
together in a bipartisan way, to explore how we can try to
limit those out-of-pocket costs, make a little more rational
sense out of the design, but just as Mr. Hackbarth has asked
Ms. Neuman,--go back, and I will send a letter to this effect,
take a look at again the changes of the design over the life of
a Medicare senior I think is very important.
The other area, we sort of looked at one side of the
ledger, okay, if you unify, A and B it may raise costs and some
others, but what we didn't explore is what is the impact of
MediGap, you know, do you need it? Does it have a different
side? Does it carry a different cost that offset some of that?
Any information any of you all have to that regard would be
very helpful.
As a reminder, any member wishing to submit a question for
the record will have 14 days to do so. If any questions are
submitted to the witnesses, I request you answer them as
promptly as possible, please.
With that, the subcommittee is adjourned.
[Whereupon, at 12:02 p.m., the subcommittee was adjourned.]
[Submissions for the record follow:]
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