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



 
                     KEEPING THE PROMISE: ALLOWING SENIORS TO 
                       KEEP THEIR MEDICARE ADVANTAGE PLANS 
                       IF THEY LIKE THEM
=======================================================================



                                HEARING

                               BEFORE THE

                         SUBCOMMITTEE ON HEALTH

                                 OF THE

                    COMMITTEE ON ENERGY AND COMMERCE
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED THIRTEENTH CONGRESS

                             SECOND SESSION

                               __________

                             MARCH 13, 2014

                               __________

                           Serial No. 113-127


      Printed for the use of the Committee on Energy and Commerce

                        energycommerce.house.gov



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                    COMMITTEE ON ENERGY AND COMMERCE

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

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



                             C O N T E N T S

                              ----------                              
                                                                   Page
Hon. Joseph R. Pitts, a Representative in Congress from the 
  Commonwealth of Pennsylvania, opening statement................     1
    Prepared statement...........................................     2
Hon. Frank Pallone, Jr., a Representative in Congress from the 
  State of New Jersey, opening statement.........................     4
Hon. Gus M. Bilirakis, a Representative in Congress from the 
  State of Florida, opening statement............................     5
Hon. Henry A. Waxman, a Representative in Congress from the State 
  of California, prepared statement..............................   107
Hon. Fred Upton, a Representative in Congress from the State of 
  Michigan, prepared statement...................................   111

                               Witnesses

Hon. Erik Paulsen, a Representative in Congress from the State of 
  Minnesota......................................................     7
    Prepared statement...........................................     9
Hon. Jeff Denham, a Representative in Congress from the State of 
  California.....................................................    11
    Prepared statement...........................................    13
Hon. Dennis A. Ross, a Representative in Congress from the State 
  of Florida.....................................................    19
    Prepared statement...........................................    21
Hon. Keith J. Rothfus, a Representative in Congress from the 
  State of Pennsylvania..........................................    24
    Prepared statement...........................................    26
Hon. Jackie Walorski, a Representative in Congress from the State 
  of Indiana.....................................................    30
    Prepared statement...........................................    32
Frank Little, Medicare Beneficiary with a Medicare Advantage Plan    36
    Prepared statement...........................................    38
    Answers to submitted questions...............................   127
Mitchell Lew, M.D., CEO and Chief Medical Officer, Prospect 
  Medical System.................................................    41
    Prepared statement...........................................    43
    Answers to submitted questions...............................   130
Glenn Giese, Principal, Oliver Wyman Consulting Actuaries........    58
    Prepared statement...........................................    60
    Answers to submitted questions...............................   133
Judith Stein, Executive Director, Center for Medicare Advocacy...    67
    Prepared statement...........................................    69
Paul N. Van De Water, Senior Fellow, Center on Budget and Policy 
  Priorities.....................................................    81
    Prepared statement...........................................    83

                           Submitted Material

Letter of March 10, 2014 from The 60 Plus Association to the 
  subcommittee, submitted by Jeff Denham.........................    17
Letter of February 28, 2014 from Majority Members of Congress to 
  Centers for Medicare & Medicaid Services.......................   113
Letter of February 28, 2014 from Minority Members of Congress to 
  Centers for Medicare & Medicaid Services.......................   116
Minority Memorandum dated March 13, 2014.........................   120


KEEPING THE PROMISE: ALLOWING SENIORS TO KEEP THEIR MEDICARE ADVANTAGE 
                        PLANS IF THEY LIKE THEM

                              ----------                              


                        THURSDAY, MARCH 13, 2014

                  House of Representatives,
                            Subcommittee on Health,
                          Committee on Energy and Commerce,
                                                    Washington, DC.
    The subcommittee met, pursuant to call, at 10:00 a.m., in 
room 2123 of the Rayburn House Office Building, Hon. Joseph R. 
Pitts (chairman of the subcommittee) presiding.
    Members present: Representatives Pitts, Burgess, Whitfield, 
Shimkus, Murphy, Blackburn, Gingrey, Lance, Cassidy, Guthrie, 
Griffith, Bilirakis, Ellmers, Pallone, Engel, Green, Barrow, 
Christensen, and Waxman (ex officio).
    Staff present: Clay Alspach, Chief Counsel, Health; Sean 
Bonyun, Communications Director; Matt Bravo, Professional Staff 
Member; Noelle Clemente, Press Secretary; Paul Edattel, 
Professional Staff Member, Health; Sydne Harwick, Legislative 
Clerk; Robert Horne, Professional Staff Member, Health; Chris 
Sarley, Policy Coordinator, Environment & Economy; Heidi 
Stirrup, Health Policy Coordinator; Josh Trent, Professional 
Staff Member, Health; Tom Wilbur, Digital Media Advisor; 
Jessica Wilkerson, Legislative Clerk; Ziky Ababiya, Staff 
Assistant; Phil Barnett, Staff Director; Eddie Garcia, 
Professional Staff Member; Kaycee Glavich, GAO Detailee; Amy 
Hall, Senior Professional Staff Member; Karen Lightfoot, 
Communications Director and Senior Policy Advisor; and Karen 
Nelson, Deputy Committee Staff Director for Health.

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

    Mr. Pitts. The subcommittee will come to order. The chair 
will recognize himself for an opening statement.
    Nearly 15 million seniors, or almost 30% of Medicare 
beneficiaries, have chosen to enroll in a Medicare Advantage 
plan, an alternative to fee-for-service or traditional 
Medicare. Medicare Advantage or MA plans offer benefits not 
provided under traditional Medicare, such as reduced cost-
sharing, vision and dental coverage, preventive care, and care 
coordination services. Numerous studies show that MA enrollees 
enjoy better health outcomes and receive higher quality care 
than those in traditional Medicare.
    So who are MA beneficiaries? Medicare Advantage covers a 
disproportionate share of low-income and minority seniors when 
compared to traditional fee-for-service Medicare. Four in ten 
seniors with MA plans have incomes of $20,000 or less. Medicare 
Advantage is fundamentally about offering seniors the choice of 
better healthcare through traditional Medicare. Beneficiaries 
choose the plans that best meet their individual health needs. 
And, according to the latest CMS National Health Expenditures 
data, more than half of new Medicare enrollees are choosing 
Medicare Advantage plans.
    We should be encouraging seniors to take control of their 
healthcare and expanding this proven program. Instead, this 
Administration's policies are harming seniors by reducing their 
choices of high quality care through a series of cuts to the 
Medicare program that began with the Affordable Care Act.
    According to the Congressional Budget Office, ObamaCare cut 
more than $700 billion from Medicare and spent the money on new 
government programs not for seniors. CBO also has said more 
than $300 billion of those cuts come from Medicare Advantage. 
Last year, CMS imposed regulatory cuts of 4 to 6% on MA plans, 
resulting in benefit reductions of $30 to $70 per senior per 
month.
    And on February 21, 2014, CMS released its 2015 Advance 
Notice outlining changes to Medicare Advantage payment 
policies, which an Oliver Wyman study estimates will result in 
an additional cut of nearly 6%. This newest cut is projected to 
cause seniors to lose an additional $35 to $75 per month in 
benefits. According to experts, these cumulative cuts from the 
Democrats' policies on seniors could result in ``plan exits, 
reductions in service areas, reduced benefits, provider network 
changes, and MA plan disenrollment.''
    The week before last, this subcommittee held a hearing on 
the Administration's assault on Medicare Part D prescription 
drug plans. Now, we are learning about more crippling cuts to 
Medicare Advantage. Why is the Administration dead set on 
pushing policies that harm seniors and using their Medicare 
program as a piggy bank to fund other healthcare programs?
    Today, we will hear from a number of Members who have 
authored legislation that would improve the Medicare Advantage 
program for seniors. We also have witnesses who can speak to 
the harm that this Administration's policies have done to them.
    I would like to thank all of our witnesses for appearing 
today. I will yield at this point the remainder of my time to 
vice chair of the subcommittee, Dr. Burgess.
    [The prepared statement of Mr. Pitts follows:]

               Prepared statement of Hon. Joseph R. Pitts

    The Subcommittee will come to order.
    The Chair will recognize himself for an opening 
statement.Nearly 15 million seniors, or almost 30% of Medicare 
beneficiaries, have chosen to enroll in a Medicare Advantage 
(MA) plan, an alternative to fee-for-service (FFS) or 
traditional Medicare.
    MA plans offer benefits not provided under traditional 
Medicare, such as reduced cost-sharing, vision and dental 
coverage, preventive care, and care coordination services.
    Numerous studies show that MA enrollees enjoy better health 
outcomes and receive higher quality care than those in 
traditional Medicare.
    So, who are MA beneficiaries? Medicare Advantage covers a 
disproportionate share of low-income and minority seniors when 
compared to traditional fee-for-service Medicare. Four in ten 
seniors with MA plans have incomes of $20,000 or less.
    Medicare Advantage is fundamentally about offering seniors 
the choice of better health care than traditional Medicare. 
Beneficiaries choose the plans that best meet their individual 
health needs. And, according to the latest CMS National Health 
Expenditures data, more than half of new Medicare enrollees are 
choosing Medicare Advantage plans.
    We should be encouraging seniors to take control of their 
health care and expanding this proven program. Instead, the 
Obama Administration policies are harming seniors by reducing 
their choices of high quality care through a series of cuts to 
the Medicare program that began with Obamacare.
    According to the Congressional Budget Office, Obamacare cut 
more than $700 billion from Medicare and spent the money on new 
government programs not for seniors. CBO also has said more 
than $300 billion of those cuts come from Medicare Advantage.
    Last year, CMS imposed regulatory cuts of 4%-6% on MA 
plans, resulting in benefit reductions of $30-$70 per senior 
per month.
    And, on February 21, 2014, CMS released its 2015 Advance 
Notice outlining changes to Medicare Advantage payment 
policies, which an Oliver Wyman study estimates will result in 
an additional cut of nearly 6%.
    This newest cut is projected to cause seniors to lose an 
additional $35-$75 per month in benefits.
    According to experts, these cumulative cuts from the 
Democrats' policies on seniors could result in ``plan exits, 
reductions in service areas, reduced benefits, provider network 
changes, and MA plan disenrollment.''
    The week before last, this Subcommittee held a hearing on 
the Administration's assault on Medicare Part D prescription 
drug plans. Now, we're hearing about more crippling cuts to 
Medicare Advantage.
    Why is the Administration dead set on pushing policies that 
harm seniors and using their Medicare program as a piggy bank 
to fund other health care programs?
    Today, we will hear from a number of members who have 
authored legislation that would improve the Medicare Advantage 
program for seniors. We also have witnesses who can speak to 
the harm that this Administration's policies have done to them. 
I would like to thank all of our witnesses for appearing today.
    Thank you, and I yield the remainder of my time to Rep. --
--------------------------------.

    Mr. Burgess. I want to thank the chairman for yielding.
    We do spend a lot of time in Congress talking about the 
problems in healthcare. The problem is we are so busy triaging 
the mistakes that we don't think about the things that are 
actually working. And Medicare Advantage is one of those things 
that is actually working.
    What do we always talk about? We talk about disease 
management, coordinated care. We have talked about that in this 
committee in a bipartisan fashion for a long time, but guess 
what? Medicare Advantage plans are delivering on that promise. 
The President, however, decided to take money away from a 
working program in order to fund one that is dysfunctional. The 
President sold the Affordable Care Act on a foundation of false 
promises. You can keep your plan: false. You can keep your 
doctor: also not true.
    President Obama told seniors he would use the money from 
Medicare to fund the Affordable Care Act, and at the same time 
improve Medicare for beneficiaries. In reality, these payment 
cuts are not going back to Medicare but instead they are 
funding other provisions of the Affordable Care Act. Along with 
less money to Medicare Advantage plans, the Affordable Care Act 
burdened plans with additional requirements.
    The most recent proposed cuts to Medicare Advantage are 
part of a historic strategy of provider cuts that have always 
backfired. The sustainable growth rate is the leading example. 
It limits access for seniors and doesn't reduce cost. It is 
time for the Administration to shift gears and change 
strategies. Don't fix what is not broken. It is time for the 
Administration to start addressing the real problem, the 
Affordable Care Act, and not look for problems that are 
nonexistent.
    I yield back to the chairman.
    Mr. Pitts. The chair thanks the gentleman and now yields 5 
minutes for an opening statement to the ranking member, Mr. 
Pallone.

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

    Mr. Pallone. Thank you, Chairman Pitts. Unfortunately, I 
have to begin today's hearing expressing my disappointment in 
the tactics and process from your side of the aisle. This 
hearing has morphed from the future of Medicare Advantage, or 
MA, into what your side is now calling a legislative hearing, 
and we clearly have different definitions of what a legislative 
hearing should look like.
    You have invited seven Republican Members to come and talk 
about bills they have introduced or plan to introduce that will 
affect Medicare in some way. When we were told of this 
development, there were requests from staff on whether any 
Democratic bills on Medicare could be included today and those 
requests were ignored. In fact, I have a bill on Part D program 
integrity that is very similar to one presented, but for some 
reason, that bill was not given any consideration.
    So, Mr. Chairman, one bill in particular is quite 
egregious. It attempts to gut the coverage provisions of the 
Affordable Care Act in order to provide billions of dollars to 
private insurance companies. The others are not new ideas from 
Republicans; they involve allowing individuals to switch to 
high deductible health plans which do nothing but worsen the 
risk pool for those in comprehensive MA plans.
    Another bill would reinstate the second enrollment period 
for seniors, an issue that has already been litigated and 
determined to be confusing and unhelpful to beneficiaries.
    And I can go on and on about my concerns here, but most 
importantly, I wish we could hear from substantive witnesses 
today on how these bills would weaken--or as the other side 
claims, strengthen--the MA program, but unfortunately, we were 
not given that opportunity. So I hope that if the chairman 
intends to move forward on any of these bills, that the 
Administration, stakeholders, and Democratic staff would have 
an opportunity to weigh in. I don't have to remind you that 
recent history has shown that nothing becomes law out of this 
committee without bipartisanship.
    While the majority of Medicare's 52 million beneficiaries 
are in the traditional federally administered Medicare program, 
MA offers beneficiaries an alternative option to receive their 
Medicare benefits through private health plans. MA has become 
fairly popular among seniors with more than \1/4\ of all 
beneficiaries now enrolled in such plans across the country.
    The ACA included quality improvements of MA plans by 
rewarding plans that deliver high-quality care with bonus 
payments. Incentivizing quality patient care over quantity of 
services provided is key to improving health outcomes and 
reducing the rising cost of healthcare. The bottom line is the 
ACA reined in a program whose costs were excessive and put the 
program on a more sustainable footing. Since passage of the 
Affordable Care Act, MA enrollment has increased by nearly \1/
3\, premiums have dropped by nearly 10%, and over \1/3\ of MA 
contracts will receive 4 or more stars, an increase from 28% in 
2013.
    Despite warning cries to the contrary, the program is 
stronger than ever. Now, today, we will hear from some 
witnesses about a study commissioned by the plans themselves. 
They will claim that CMS' recent proposed cuts could devastate 
the MA market, but I would like to point out that these are not 
new cuts; these were expected cuts that bring MA plan payments 
in line with fee-for-service payments as required by law. And 
since by law MA plans are paid based on overall growth of 
Medicare, it is no surprise that when healthcare spending in 
Medicare slows, payments to MA plans will follow. And we should 
all think that is a good thing, especially those who 
continually take aim at the percentage of federal spending on 
healthcare.
    So not only were plans prepared for these reductions, Wall 
Street doesn't seem to think the outlook is as dire. In fact, 
some company stocks skyrocketed because the truth is, as more 
and more baby boomers age into Medicare, and hopefully, unless 
the Republicans mess it up, a permanent replacement for the SGR 
is passed into law, the MA program will become even more robust 
and will continue to be an area of growth for insurance 
companies.
    Regardless of the talking points from the other side and 
industry, I continue to believe that removing plan overpayments 
is the right policy for Medicare. To reverse course would raise 
costs for taxpayers and all Part B beneficiaries, drain from 
the solvency of the trust fund, and expand beneficiary 
inequities that disadvantage the overwhelming majority of 
Medicare beneficiaries who remain in fee-for-service.
    So I look forward to hearing from our second panel today, 
specifically from Ms. Stein and Mr. Van de Water, because a 
debate about how much we pay private insurance companies is 
overshadowing some important aspects of CMS' work in protecting 
beneficiaries. We should all work together to strengthen and 
improve the program and not weaken it.
    Thank you, Mr. Chairman.
    Mr. Pitts. The chair thanks the gentleman and now 
recognizes the gentleman from Florida, Mr. Bilirakis, for 5 
minutes for an opening statement.

OPENING STATEMENT OF HON. GUS M. BILIRAKIS, A REPRESENTATIVE IN 
               CONGRESS FROM THE STATE OF FLORIDA

    Mr. Bilirakis. Thank you very much. I appreciate it, Mr. 
Chairman.
    Thanks for holding this important hearing on how to protect 
Medicare Advantage. My bill, H.R. 3392, the Medicare Part D 
Patient Safety and Drug Abuse Prevention Act, will reduce fraud 
and abuse without negatively impacting Medicare beneficiaries 
by enacting cost-saving measures employed not only by TRICARE 
and the State Medicaid programs but also by private industry.
    H.R. 3392 creates a safe pharmacy access program to 
establish a single point-of-sale pharmacy system for the 
dispensing of controlled substances for high-risk 
beneficiaries. This will directly address the issue of doctor 
and pharmacy shopping where individuals go to multiple 
locations to fill multiple prescriptions.
    I would like to thank my cosponsor, Mr. Ben Lujan, and then 
I also want to yield now the balance of my time to Dr. Cassidy.
    Thank you, Mr. Chairman.
    Mr. Cassidy. Thank you, Mr. Bilirakis. Thank you, Mr. 
Chairman.
    I submit for the record a letter to the CMS that Mr. Barrow 
and I and over 200 of our congressional colleagues have signed.
    We are concerned about the proposed cuts to the MA program 
and the negative impact it will have on seniors. Over 15 
million seniors rely on Medicare Advantage, almost \1/3\ of 
Medicare beneficiaries. These plans are popular because they 
have been proven to contain costs and improve enrollee health 
outcomes by focusing on prevention and disease management. CMS 
is planning to cut MA plans for overall seniors by 5.9% in 
2015. In Louisiana that averages out that the MA beneficiary 
will have about a $55 to $65 cut per month, which of course is 
$660 to $780 per year in higher premiums, higher cost-sharing, 
and lower benefits for about 200,000 MA beneficiaries in my 
State.
    In response, Members of Congress are coming out of the 
woodwork to say to CMS stop these cuts, protect Medicare 
Advantage, protect seniors.
    Now, if Mr. Bilirakis will allow me to, I will yield 1 
minute to the gentleman from Georgia, Mr. Barrow.
    Mr. Barrow. Thank you, Dr. Cassidy, for yielding time, and 
thank you for your partnership on this issue.
    Mr. Chairman, Georgia is home to hundreds of thousands of 
Medicare Advantage beneficiaries who are worried about the 
stability of the program. The proposed cuts to Medicare 
Advantage would amount to a 5.9% cut. These cuts will reduce 
benefits and increase premiums by $35 to $75 per month for our 
Nation's 15 million seniors with Medicare Advantage. Further 
cuts to Medicare Advantage would dramatically alter the 
standard of care that folks have come to rely on. That is why, 
as of today, 204 of our colleagues have joined Dr. Cassidy and 
me to warn Administrator Tavenner against these proposed cuts.
    Mr. Chairman, thank you for calling this hearing. I look 
forward to learning much from the witnesses and working with 
you to strengthen this vital program.
    With that, I yield back the balance of my time to Dr. 
Cassidy.
    Mr. Cassidy. Would the gentleman yield for one second just 
to welcome our panel and my roommate Mr. Paulsen?
    Mr. Pitts. Thank you. And without objection, the letter 
that Dr. Cassidy submitted will be entered into the record.
    [The information appears at the conclusion of the hearing.]
    Mr. Pitts. We have two panels today. The first is a Member 
panel and I will introduce them at this time and they will 
speak in this order. First, Hon. Erik Paulsen, Member of 
Congress from Minnesota; then Hon. Jeff Denham, Member of 
Congress from California; Hon. Dennis Ross, Member from 
Florida; Hon. Keith Rothfus, Member from Pennsylvania; and Hon. 
Jackie Walorski, Member from Indiana.
    Thank you very much for coming today. Your written 
testimony will be made part of the record. You will be each 
given 5 minutes for your opening statement, so the chair 
recognizes Mr. Paulsen for 5 minutes.

 STATEMENTS OF HON. ERIK PAULSEN, A REPRESENTATIVE IN CONGRESS 
FROM THE STATE OF MINNESOTA; HON. JEFF DENHAM, A REPRESENTATIVE 
 IN CONGRESS FROM THE STATE OF CALIFORNIA; HON. DENNIS ROSS, A 
  REPRESENTATIVE IN CONGRESS FROM THE STATE OF FLORIDA; HON. 
 KEITH ROTHFUS, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF 
  PENNSYLVANIA; AND HON. JACKIE WALORSKI, A REPRESENTATIVE IN 
               CONGRESS FROM THE STATE OF INDIANA

                 STATEMENT OF HON. ERIK PAULSEN

    Mr. Paulsen. Thank you, Mr. Chairman. And, Chairman Pitts 
and Ranking Member Pallone, I want to thank you for holding 
this hearing today to ensure that our seniors and their 
Medicare Advantage (MA) plans are protected from unnecessary 
cuts.
    I have received many calls and emails and letters from my 
constituents, my seniors in my district, who are concerned 
about cuts to the Medicare Advantage program and the impact 
that it could have on their healthcare plans.
    The Medicare Advantage program is a resounding success in 
providing coordinated care for seniors with better quality, 
more choices, and greater savings for millions of Americans. 
Over 175,000 seniors in Minnesota are enrolled in an MA plan, 
including more than 50,000 in my congressional district alone. 
More than half of Medicare-eligible seniors in my district have 
opted to enroll in MA plans rather than the traditional fee-
for-service system.
    Nationwide, millions of Medicare beneficiaries have chosen 
a Medicare Advantage plan because they value access to better 
quality of care, innovative services, and additional benefits. 
The MA program enjoys high patient satisfaction and will reduce 
the cost of Medicare in the long run by providing evidence-
based, coordinated care for our seniors.
    Unfortunately, the future viability of the MA program is at 
risk. The MA program is facing ObamaCare-mandated payment cuts, 
the health insurance tax, and the coding intensity cut in last 
year's fiscal cliff deal. The latest threat is the 12% cut in 
regulatory cuts that have been proposed the last 2 years, 
including a 6% cut to plans this year. Seniors in my district 
could pay as much as $900 more per year as a result of these 
cuts. Many might lose benefits, and some could lose their plan 
completely.
    The Administration is also attacking Medicare Advantage's 
innovative delivery system reforms, like in-home risk 
assessments, that have been absent in fee-for-service. Home 
risk assessments are clinical encounters in a beneficiary's 
home designed to prevent, to detect, and to treat chronic 
diseases to reduce hospital admissions, decrease readmissions, 
and improve the overall quality of life for seniors.
    And instead of increasing costs for seniors and hindering 
plans' ability to utilize innovative models of care, Congress 
should be providing more flexibility to plans and make it 
easier for seniors to participate in MA-like plans.
    That is why I have authoring legislation, Mr. Chairman, 
H.R. 4177, to allow Medicare beneficiaries to contribute their 
own money to their Medicare Savings Accounts, these MSAs. 
Medical Savings Accounts are health savings accounts for 
Medicare Advantage plans. They allow seniors to utilize money 
in the accounts to pay for healthcare costs, including some 
costs that aren't covered by Medicare.
    Right now, seniors can't contribute their own money to 
their MSA like they can to a healthcare savings account. But by 
giving seniors more flexibility with these accounts, we will 
empower them to take charge of their own healthcare decisions. 
And this will strengthen the Medicare Advantage program and it 
will reduce healthcare costs for seniors and the system in the 
long-term. I encourage the committee to take a look at this 
legislation and maybe bring it up for consideration.
    Thankfully, Mr. Chairman, there is hope that we can avoid 
these additional cuts to Medicare Advantage. Over 200 Members, 
as was mentioned in earlier opening statements, of both 
parties, including myself, sent a letter to the Administration 
opposing these proposed cuts. We must protect our seniors and 
their healthcare plans by opposing these cuts.
    I sincerely appreciate the opportunity to testify and 
commend the committee for their work to protect seniors in 
Minnesota and around the country.

    [The prepared statement of Mr. Paulsen follows:]

    [GRAPHIC] [TIFF OMITTED] 

    Mr. Pitts. The chair thanks the gentleman and now 
recognizes Mr. Denham, 5 minutes for an opening statement.

                 STATEMENT OF HON. JEFF DENHAM

    Mr. Denham. This is straightforward legislation. It will 
serve to inform the more than 14 million seniors currently 
enrolled in Medicare Advantage about how the Affordable Care 
Act is affecting the healthcare plans that they rely on every 
day.
    For over 60,000 seniors who are enrolled in Medicare 
Advantage in the counties I represent, the Medicare Advantage 
program has been tremendously successful in improving health 
outcomes when compared to traditional Medicare fee-for-service. 
This is because the Medicare Advantage model emphasizes 
preventive services and managed care to keep beneficiaries 
healthy.
    Medicare Advantage plans also limit out-of-pocket costs, 
protecting vulnerable seniors from the threat of bankruptcy due 
to the complicated medical conditions. Maybe this is why a 
survey of Medicare Advantage beneficiaries found that 90% were 
satisfied with their coverage, 92% were satisfied with their 
choice of doctor, and 94% were satisfied with the quality of 
care received under Medicare Advantage.
    The 14 million seniors enrolled in Medicare Advantage plans 
nationwide deserve to know that the massive government overhaul 
of our healthcare system was paid for in part by the $300 
billion in cuts to Medicare Advantage plans and a health 
insurance tax that has just started this year.
    The combined effects of these payment cuts and the new 
health insurance tax are already being felt through cancelled 
plans, reduced benefits and increased copays. During this year 
alone, beneficiaries in over 2,000 counties will have fewer 
plan options compared to 2013 and on average will see their 
annual costs increased by nearly 10%. Unfortunately, the impact 
will only grow with time.
    As an example, in 2015, seniors in Stanislaus County in my 
district can expect to pay an additional $90 per month, or 
$1,080 per year for their Medicare Advantage plan. A large 
percentage of the 33,000 enrollees in Stanislaus County are 
low-income individuals earning under $20,000 per year. This 
rate increase will force them out of participating in the 
Medicare Advantage program altogether. Did the 111th Congress 
really mean to cut Medicare Advantage in order to subsidize the 
Affordable Care Act? Whether Congress meant to or not, seniors 
have a right to know that these changes are coming so that they 
can actually plan and budget for these increases that they are 
going to see.
    Mr. Chairman, as you are well aware, there have been at 
least 37 major alterations to the Affordable Care Act since it 
was enacted. Some of these were done in cooperation with the 
Congress, yet on 20 separate occasions, after it became clear 
that the implementation of the law was failing the American 
people, the Administration moved unilaterally to change the 
law. These delays and alterations are proof that the Affordable 
Care Act is not working as intended. Unfortunately for our 
seniors in our districts, while the promises of healthcare 
remain unfulfilled, the cuts and taxes on Medicare Advantage 
plans required to finance the law are moving forward as 
scheduled.
    Congress must act today to protect the future of Medicare 
Advantage by repealing the cuts and taxes on the program. This 
would prevent the immediate erosion of health security for 
Medicare Advantage beneficiaries while we work to replace the 
Affordable Care Act with a healthcare reform that puts patients 
and seniors first.
    Until we can enact such legislation, seniors have the right 
to know why their Medicare Advantage plans are being impacted 
and I urge this committee to support this bill.
    I would also like to thank the 60 Plus Association and the 
Association of Mature American Citizens for their support of 
this legislation and would like to submit their letters for the 
record.
    [The prepared statement of Mr. Denham follows:]

    [GRAPHIC] [TIFF OMITTED] 
    
    Mr. Pitts. Without objection, so ordered.
    The chair thanks the gentleman and now recognizes the 
gentleman from Florida, Mr. Ross, 5 minutes for an opening 
statement.

                STATEMENT OF HON. DENNIS A. ROSS

    Mr. Ross. Thank you, Chairman Pitts and Ranking Member 
Pallone, committee, for taking the time today to hold this 
hearing to highlight the significant threat facing the Medicare 
Advantage program.
    In 2012, healthcare spending in the United States accounted 
for 17.2% of our Nation's economic output, equal to $8,915 per 
person. Mr. Chairman, these statistics tell me that for a 
country with arguably the best healthcare in the world, we have 
yet to properly align patient and provider incentives to enable 
our healthcare system to be cost-efficient, highly accessible, 
and ultimately to achieve self-sustaining cost-containment with 
little need for government intervention.
    More than 3.5 million Medicare beneficiaries reside in my 
home State of Florida; 1.2 million of these beneficiaries have 
chosen a Medicare Advantage plan over Medicare's traditional 
and more costly fee-for-service structure. In fact, since 2008, 
the State of Florida alone has seen a 30% increase in the 
number of Medicare Advantage plan beneficiaries, while 
currently, 30% of our Nation's Medicare population have opted 
for a Medicare Advantage plan, serving as a clear testament to 
the high level of patient satisfaction the program has 
achieved.
    Among the many satisfied Medicare Advantage plan 
beneficiaries in the State of Florida are Michael and Sandra 
Cox from my hometown of Lakeland, Florida. Michael and Sandra 
did what so many Medicare Advantage plan beneficiaries have 
done since January 1, 2014, writing to their Members of 
Congress expressing a mix of anger, confusion, and panic at the 
senseless cuts that have been made to this effective program. 
Sandra and Michael wrote, ``Please explain the logic of the 
ObamaCare cuts to Medicare Advantage. My husband and I have 
never experienced such a high level of satisfaction with our 
health coverage as we have with our Medicare Advantage plan, 
and all with a much cheaper monthly Premium.''
    Unfortunately, Michael and Sandra learned on January 1 that 
the doctors that they had been seeing for more than 10 years 
were no longer available under the Medicare Advantage plan as a 
result of the continued cuts to the program. They would face 
the full out-of-pocket cost should they choose to continue 
seeing those providers they had come to know over the last 10 
years and their health status they treated so well.
    Mr. Chairman, was it not the Administration's goal to 
ensure patients develop a relationship with their provider 
resulting in better prevention and a more consistent continuum 
of care?
    Unfortunately, these cuts to Medicare Advantage, like so 
many other healthcare-related actions by this Administration 
are contradictory to the purported message. Even more baffling, 
past cuts have already crippled innovative programs like home 
health visits instituted by Medicare Advantage plan sponsors to 
ensure our seniors are able to maximize the value of healthcare 
services they receive. Going forward, additional cuts of this 
magnitude will devastate medical innovation in areas like tele-
health that show great promise for increasing efficiency and 
cost-containment in Medicare Advantage and the healthcare 
system at large.
    Overall healthcare spending and utilization habits are a 
critical threat to America's declining fiscal health. If we are 
to successfully curb healthcare costs, we must preserve and 
enhance the Medicare Advantage program because of its proven 
ability to achieve cost-efficiency while maximizing patient 
access to high-quality health services and providers.
    To be more specific, data collected between 2003 and 2009 
showed service utilization rates in areas like emergency 
department use and ambulatory surgery were 20 to 30% lower 
among Medicare Advantage beneficiaries than traditional 
Medicare.
    Overutilization of healthcare services, however, is only 
one facet of healthcare cost growth tempered by the Medicare 
Advantage plan structure. Although this current Administration 
has tried to discredit the power of market competition in 
creating organic, self-sustaining incentives for patients, 
providers, and insurers alike, the facts always prevail. 
Artificial market controls put in place by the Federal 
Government lead to more out-of-control health spending, as we 
have seen time and time and again.
    As far back as 1995, health economists have shown that 
combining coverage like that offered by Medicare Advantage with 
appropriate patient incentives leads to an avoidance of 
excessive doctor visits and tests, as well as more engaged 
patients seeking the best value for the healthcare service they 
need.
    In this same vein, I was proud to introduce H.R. 4180, the 
Preserving Health Savings Accounts for Medicare Beneficiaries 
Act, which would allow for this consistently proven economic 
strategy for reducing healthcare costs across the spectrum. My 
legislation would incentivize younger Americans to establish 
Health Savings Accounts with the promise that upon being 
Medicare-eligible, they are able toTransfer the HSA funds into 
a Medicare savings account.
    Simple enhancements like this one will help both Medicare 
Advantage and the entire healthcare system achieve organic 
alignment between insurers and patients and providers and 
creating a powerful, self-sustaining cost-containment tool. 
Patients have more control over their healthcare dollars, 
increasing awareness of reasonable health service costs and 
quality options, while also actively engaging providers to 
offer the highest quality service at the lowest reasonable cost 
in order to earn a patient's business.
    Mr. Chairman, this is what value in healthcare looks like. 
Unfortunately, through continued cuts to the Medicare Advantage 
program, this Administration will eliminate any possibility we 
currently have to build upon the Medicare Advantage program's 
success in curbing healthcare cost.
    And I yield back.
    [The prepared statement of Mr. Ross follows:]

    [GRAPHIC] [TIFF OMITTED] 

    Mr. Pitts. The chair thanks the gentleman.
    And now the chair is proud to introduce from the State of 
Pennsylvania Mr. Rothfus and recognize him for 5 minutes for an 
opening statement.

               STATEMENT OF HON. KEITH J. ROTHFUS

    Mr. Rothfus. Chairman Pitts, Ranking Member Pallone, and 
members of the subcommittee, thank you for having me here today 
to testify about H.R. 2453, the Medicare Beneficiary 
Preservation of Choice Act. I am very pleased to discuss this 
bipartisan legislation that Congressman Kurt Schrader and I 
introduced in June of 2013.
    Enacting H.R. 2453 is one small fix we can make to Medicare 
Advantage that can have a big impact on the lives of the 
seniors utilizing the program in our districts. It simply 
restores the open enrollment period that existed prior to 2011. 
This open enrollment period permitted seniors to change 
Medicare Advantage plans once between January and March if 
needed. It essentially let seniors test drive the Medicare 
Advantage plan they would have just selected and change plans 
if it turns out the plan is not working for them. H.R. 2453 is 
about choice and fairness for seniors.It is about empowering 
them to make decisions about their healthcare needs.
    Restoring the January to March open enrollment period also 
makes sense in light of the 2014 Medicare Advantage cuts and 
the new cuts just proposed by CMS. Last November, the Wall 
Street Journal reported that one of the Nation's largest 
Medicare Advantage providers had dropped thousands of doctors 
from network due to ``significant changes and pressures in the 
healthcare environment.''
    This is significant because seniors may not have known 
about the change in time to adjust their decisions during the 
October to December enrollment period. So if they liked their 
doctor, seniors may be finding out just now that they cannot 
keep him or her because they are no longer included in the 
plan. Passing H.R. 2453 and restoring the 90-day open 
enrollment period during the first quarter of the year would 
let seniors react to these types of plan changes, many of which 
are driven by the harmful cuts to Medicare Advantage that we 
see happening as the result of the Affordable Care Act.
    H.R. 2453 is a patient-centered option for improving 
Medicare Advantage. It will provide choice for seniors and it 
will ensure that they have access to the doctors they know and 
trust. That is why it is supported by America's Health 
Insurance Plans, the Association of Mature American Citizens, 
and the 60 Plus Association.
    The subcommittee members and its chairman should be thanked 
for their efforts to strengthen Medicare Advantage. Medicare 
Advantage delivers quality healthcare and peace of mind with 
consistently superlative satisfaction ratings from 
participants. Preserving the program and preventing more cuts 
to Medicare Advantage is a top priority for me and for the 
seniors in Pennsylvania's 12th District. Incidentally, in my 
district, utilization of Medicare Advantage is in excess of 
60%, more than double the national rate.
    Additional cuts to Medicare Advantage will lead to higher 
out-of-pocket costs, reduced benefits, and fewer plan options. 
Instead of limiting access to a successful program which 9 out 
of 10 seniors are satisfied with, we should be empowering them 
to make choices about what best suits them. We should make sure 
seniors have access to the healthcare providers they know and 
trust. Instead of cutting Medicare Advantage, we should be 
finding solutions to lower costs for seniors and sustain the 
program for the long run.
    I had an incident this past Monday with a senior in my 
district at a restaurant. She was the hostess and she expressed 
to me a real concern about the cuts to Medicare Advantage 
personally impacting her. I asked her to call my office and 
give us more background because I wanted to tell that story 
here in Washington. And she simply looked at me and said why? 
So the politicians can accuse me of lying? That is what is 
happening out there in the country. People are very concerned 
about what is happening with Medicare Advantage.
    I thank the chairman and I yield back.

    [The prepared statement of Mr. Rothfus follows:]

    [GRAPHIC] [TIFF OMITTED] 

    Mr. Pitts. The chair thanks the gentleman and now 
introduces the gentlelady from Indiana, Ms. Walorski. I 
recognize her for 5 minutes for an opening statement.

               STATEMENT OF HON. JACKIE WALORSKI

    Ms. Walorski. Thank you, Mr. Chairman. Chairman Pitts, 
Ranking Member Pallone, members of the subcommittee, it is an 
honor to be here today and I thank you for holding this hearing 
to examine Medicare Advantage, a vital program that is critical 
to the health and well-being of many of our nation's seniors.
    Over 15 million Americans depend on Medicare Advantage. 
Through this popular program, seniors and individuals with 
disabilities are able to select a private health plan of their 
choice that provides affordable, comprehensive coverage, 
disease management, and care coordination.
    The Affordable Care Act and other regulatory changes have 
placed significant financial strain on this program, the brunt 
of which will be borne by the seniors we have promised to 
protect. Cuts to Medicare Advantage mean higher out-of-pocket 
costs, a more limited choice of doctors, decreased management 
of chronic conditions, and decreased coverage for dental and 
vision services.
    In my home State of Indiana, 22% of Medicare-eligible 
Hoosiers have chosen to enroll in Medicare Advantage, and 
enrollment in my district is even as high as 27%. This program 
serves my constituents well, and I am deeply concerned about 
how cuts will impact seniors in theHoosier State.
    Marcia from Mishawaka told me she is very pleased with her 
Medicare Advantage program. She loves the quality of the 
services provided and the prescription drug program that is 
included. She is worried about the looming cuts because she 
wants to keep her current doctor. As a senior citizen living on 
a fixed income, it is important that her premiums remain low 
and she wonders who will take care of seniors if the cuts 
continue.
    Eighty-seven-year-old Phyllis and her 93-year-old husband 
Owen like the peace of mind that comes with knowing they will 
receive excellent care through their current healthcare plan. 
Back in June, Phyllis fell and broke her hip. She was promptly 
picked up by an ambulance, admitted to surgery, and received 
excellent follow-up care in rehab. Her Medicare Advantage plan 
took care of the costs. Owen had a pacemaker inserted last 
year, which was also taken care of by his MA plan. Originally, 
there was no premium for this plan. Now they pay $34 a month. 
Although $34 a month may not seem like much, Phyllis told me if 
their premiums become too high, they will have to cut back on 
other necessities. Phyllis and Owen never imagined the 
Affordable Care Act would negatively impact them, especially 
when the President said that you can keep your healthcare plan 
if you like it. But now their healthcare plan is in jeopardy, 
too.
    Medicare Advantage plans are particularly critical to low-
income and minority beneficiaries. According to a study by 
America's Health Insurance Plans, 1 of 5 of those enrolled in 
Medicare Advantage are minorities and 41% of enrollees have 
annual incomes of less than $20,000. Cuts to the program have 
the potential to disproportionately affect these most 
vulnerable populations.
    That is why I introduced H.R. 4211, the Advantage of 
Medicare Advantage for Minorities and Low-Income Seniors Act of 
2014. This legislation directs the Government Accountability 
Office to study the number of minority and low-income seniors 
enrolled in Medicare Advantage and to assess the impacts of 
Medicare Advantage payment reductions resulting from the 
Affordable Care Act and other administrative actions.
    Studies show that enrollees in Medicare Advantage have 
lower hospital readmissions, receive higher quality of care, 
and enjoy better health outcomes as compared to their 
counterparts in traditional fee-for-service Medicare. Medicare 
Advantage serves as a vital source of coverage for low-income 
and minority beneficiaries.
    On behalf of my constituents in the 2nd District and all 
Hoosiers, I look forward to working with both Congress and the 
Administration to keep the promise to maintain the integrity of 
Medicare Advantage. Thank you for the opportunity to appear 
before you this morning.
    [The prepared statement of Ms. Walorski follows:]

    [GRAPHIC] [TIFF OMITTED] 

    Mr. Pitts. The chair thanks the gentlelady and again thanks 
the Members for the testimony on your initiatives. We will be 
happy to work with you on those. Thank you for taking time out 
of your busy schedules to appear before us today.
    There will be no questions. I will excuse panel one at this 
time and call the second panel to the table and introduce them 
in the order that they will make presentations.
    First, Mr. Frank Little, a Medicare beneficiary with a 
Medicare Advantage plan; secondly, Dr. Mitchell Lew, CEO and 
Chief Medical Officer of Prospect Medical Systems; thirdly, Mr. 
Glenn Giese, Principal, Oliver Wyman Consulting Actuaries; and 
then Ms. Judith Stein, Executive Director, Center for Medicare 
Advocacy; and finally, Dr. Paul Van de Water, Senior Fellow, 
Center on Budget and Policy Priorities.
    Thank you all for coming today. Your written testimony will 
be made part of the record, and we will give each of you 5 
minutes to summarize your testimony.
    Mr. Little, we will start with you. You are recognized for 
5 minutes.

    STATEMENTS OF FRANK LITTLE, MEDICARE BENEFICIARY WITH A 
  MEDICARE ADVANTAGE PLAN; MITCHELL LEW, M.D., CEO AND CHIEF 
    MEDICAL OFFICER, PROSPECT MEDICAL SYSTEM; GLENN GIESE, 
  PRINCIPAL, OLIVER WYMAN CONSULTING ACTUARIES; JUDITH STEIN, 
 EXECUTIVE DIRECTOR, CENTER FOR MEDICARE ADVOCACY; AND PAUL N. 
   VAN DE WATER, SENIOR FELLOW, CENTER ON BUDGET AND POLICY 
                           PRIORITIES

                   STATEMENT OF FRANK LITTLE

    Mr. Little. Chairman Pitts and members of the committee, 
thank you for providing me this opportunity to testify about my 
personal experience with the Medicare Advantage plan.
    My name is Frank Little. I am a retired small business 
owner from Virginia Beach. I am 70 years old. My wife and I 
have been enrolled in three different Medicare Advantage plans 
over the past 5 years. We have received high quality, 
affordable coverage through our Medicare Advantage plans, but 
we are concerned that our plan choices are shrinking due to the 
deep funding cuts in this program.
    When I first became eligible for Medicare, I had a choice 
of four different Medicare Advantage plans that offered 
prescription drug benefits with no additional premiums. Over 
the years, uncertainty about the program funding has forced 
several of these plans to either withdraw from my area or 
increase premiums.
    Today, I am enrolled in a Medicare Advantage plan offered 
by Humana, which is still the only plan in my area offering a 
plan that includes prescription drug coverage with no 
additional premium. I am very satisfied with my Medicare 
Advantage plan and feel fortunate to have this option.
    To help the committee understand why my Medicare Advantage 
plan is important to me, I want to explain my experience over 
the last several years. I have had three major medical problems 
since I retired. I have had open-heart surgery, colon cancer, 
and a medical procedure on my lungs. I estimate that my medical 
bills for these conditions have totaled approximately $750,000 
over the last 5 years, and I am pleased to tell you that my 
Medicare Advantage plans have covered almost all of these 
expenses. I have paid only a few hundred dollars in out-of-
pocket costs. Without my Medicare Advantage plan, I would have 
faced a high deductible and 20% copayments if I had not been 
enrolled in the original Medicare program.
    Like many seniors, I live on a fixed income and such high 
costs would have had a devastating impact on my budget. I also 
want to emphasize that my Medicare Advantage plan has allowed 
me to receive high quality care from my personal physician, 
from outstanding specialists, and from an excellent hospital in 
my community.
    Other seniors in my community have several stories to tell 
about the quality coverage they receive through their Medicare 
Advantage plan. We appreciate that our plan provides 
prescription drug coverage as part of our medical coverage, 
while also taking care of our expenses to ensure that our out-
of-pocket expenses are affordable.
    My message to Congress is that I want you to make sure that 
Medicare Advantage continues to be a strong and adequately 
funded program. I am asking you to block any additional funding 
cuts. I am counting on both Congress and the Obama 
Administration to do the right thing and protect this program 
from any further funding cuts.
    In closing, I want to say that I love my Medicare Advantage 
plan and I will be deeply disappointed if I lose my plan. Thank 
you for considering my comments on this important issue.
    [The prepared statement of Mr. Little follows:]

    [GRAPHIC] [TIFF OMITTED] 

    Mr. Pitts. The Chair thanks the gentleman. I now recognize 
Dr. Lew 5 minutes for an opening statement.

                STATEMENT OF MITCHELL LEW, M.D.

    Dr. Lew. Thank you, Chairman Pitts, Ranking Member Pallone, 
and members of this committee for the invitation to testify 
today. My name is Dr. Mitchell Lew, and I am part of the CAPG 
National Board and am pleased to testify on behalf of CAPG, 
which is the largest association in the country of physician 
organizations that practice capitated coordinated care.
    CAPG members represent 160 medical groups in 20 states and 
serve 1.2 million Medicare Advantage enrollees. I also address 
you as a physician who practiced for 10 years before 
transitioning to a physician executive role 15 years ago. I am 
CEO of Prospect Medical Group, which is an IPA model with over 
4,500 physicians in three States and serving 225,000 members. 
This model allows us to contract with smaller physician 
practices under the umbrella of one large organization.
    For background, Prospect Medical began in 1985 and we have 
evolved over the years and we now offer a full range of 
coordinating care services and programs, and this has resulted 
in better value to our seniors. It is better care, better 
health with cost control. Prospect has grown and we now have 
physicians and hospitals in California, Texas, and Rhode 
Island.
    I come to emphasize the merits of Medicare Advantage and 
the coordinated care model and the need to preserve the 
financial support for Medicare Advantage and to continue our 
investment into the model. Medicare Advantage takes a 
population-based payment approach, which reduces the high 
utilization incentives of traditional Medicare. It is value 
over volume. It is team-based. Physician organizations are 
structured to provide the best care at the right time in the 
most appropriate setting. Seniors are managed across an entire 
continuum of care. They get preventive services, home visits, 
high-intensity case management for the sickest members, chronic 
disease management, palliative care. It allows for innovation. 
Physicians are held to performance standards and they receive 
quality incentive payments. Social and behavioral services are 
also delivered in a coordinated manner.
    The impact of Medicare Advantage is better care, lower 
admissions, lower readmissions, lower lengths of stay, better 
outcomes, higher member satisfaction, more benefits, and higher 
interest among the new seniors. And that is particularly 
important for the low-income seniors who like the enhanced 
benefits and they need the enhanced benefits. Medicare 
Advantage has grown by 30% over the last 3 years and now 50% of 
new Medicare enrollees are choosing Medicare Advantage.
    The proposed reductions and cumulative cuts pose very 
serious threats. It will cause an erosion of the coordinated 
care infrastructure, higher cost-sharing, which will have a 
profound impact on the lower-income and minority seniors, fewer 
benefits. These cuts will undermine all of the progress that we 
have made in developing the healthcare delivery system.
    Medicare Advantage should be the infrastructure that all of 
the newer models in fee-for-service should use to build 
coordinating care such as the ACOs and the medical homes. I 
urge Congress and the Administration to find ways that will 
strengthen, not cut Medicare Advantage, develop policies that 
will promote population-based payments.
    Medicare Advantage should be the foundation upon which the 
entire healthcare delivery system builds coordinated care. As 
you develop Medicare and fiscal policy, I ask that you consider 
all that Medicare Advantage has to offer and know that 
additional cuts will have very serious consequences on the 
coordinated care model and the seniors that it serves. Without 
Medicare Advantage, we have very little chance to transform our 
healthcare delivery system.
    Thank you very much, Mr. Chairman, and I look forward to 
your questions.
    [The prepared statement of Dr. Lew follows:]

    [GRAPHIC] [TIFF OMITTED]     

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

                    STATEMENT OF GLENN GIESE

    Mr. Giese. Chairman Pitts, Ranking Member Pallone, and 
members of the subcommittee, thank you for the opportunity to 
testify. I am Glenn Giese, a senior principal with Oliver Wyman 
Actuarial Consulting. My testimony today will focus on the 
findings of a recent analysis by Oliver Wyman commissioned by 
America's Health Insurance Plans, which estimates the potential 
impact of funding cuts that would be imposed by Medicare 
Advantage program by proposed changes to the MA payment 
methodology in 2015.
    Our analysis focused on the combined impact of preliminary 
payment policies and regulatory changes announced by CMS on 
February 21, 2014, in its 45-day notice and draft call letter, 
cuts included in the Affordable Care Act and other legislative 
provisions addressing MA payments.
    Specifically, we identified nine different factors that 
would impact MA payments in 2015, most of which would reduce 
payments. A detailed explanation of these factors is outlined 
in the appendix to my testimony. We have calculated that the 
projected overall impact of these policies would be to reduce 
MA payments by an estimated 5.9% in 2015. We note that the 
impact of these changes on individual plans will vary based on 
a number of factors, including the geographic area in which the 
MA organization participates.
    We further estimate that the 5.9% funding cut translates 
into a potential reduction of $35 to $75 per month or $420 to 
$900 for the year in funding that will be available to support 
the benefits of MA enrollees in 2015. These cuts, if 
implemented, would represent a second consecutive year of deep 
cuts in MA funding. Due to a combination of legislative and 
regulatory policies implemented for 2014, MA payments already 
have been cut by 4 to 6% this year, resulting in cost increases 
and benefit cuts of $30 to $70 per month for beneficiaries. If 
the new changes proposed by CMS are implemented, the program 
would be hit by a double-digit cut over just a 2-year period, 
causing cost increases and benefit reductions that could total 
as much as $1,740 per enrollee over 2 years according to our 
projections.
    MA cuts proposed for 2015 could have far-reaching 
implications for over 15 million seniors and individuals with 
disabilities who are enrolled in MA plans. In our report we 
explained that these cuts ``could result in a high degree of 
disruption in the MA market,'' including the potential for plan 
exits, reductions in service areas, reduced benefits, provider 
networks changes, and disenrollment from MA plans.
    We further cautioned that the proposed funding cuts would 
disproportionately affect beneficiaries with low incomes, 
including the 41% of MA enrollees who have annual incomes below 
$20,000. For these beneficiaries, the potential increase in 
out-of-pocket costs resulting from cuts would constitute a 
significant burden.
    Another serious concern we highlight is that individuals 
who utilize healthcare services the most would adversely be 
affected if they lose their MA plans and are forced to move 
back through the Medicare fee-for-service program with its 
higher cost-sharing and lack of coordinated care. This is a 
particular concern for enrollees in Special Needs Plans that 
serve beneficiaries who have severe or disabling chronic 
conditions or who reside in institutions.
    For example, Chronic Care SNPs offer services that are 
tailored to meet the specific medical needs of patients with 
diabetes, cardiovascular disease, and other conditions. The 
loss of these specialized services would be a serious blow to 
beneficiaries whose medical conditions require customized 
treatments and care.
    Thank you again for the opportunity to testify and I 
encourage the subcommittee and Congress to consider the 
findings of our analysis as you communicate with CMS about its 
proposed payment policies and regulatory changes to the MA 
program for 2015.
    [The prepared statement of Mr. Giese follows:]

    [GRAPHIC] [TIFF OMITTED]     

    Mr. Pitts. The chair thanks the gentleman and now 
recognizes Ms. Stein 5 minutes for an opening statement.

                   STATEMENT OF JUDITH STEIN

    Ms. Stein. Mr. Chairman Pitts, Ranking Member Pallone, and 
distinguished members of the subcommittee, thank you for 
inviting me to testify. I am Judith Stein, founder and 
Executive Director of the Center for Medicare Advocacy. I have 
dedicated my legal career to representing Medicare 
beneficiaries exclusively since 1977. The Center is a private, 
nonprofit organization based in Connecticut and Washington, 
D.C., with offices throughout the country. We responded to over 
7,000 calls and emails from Medicare beneficiaries and their 
families each year.
    Medicare beneficiaries have had the option to enroll in 
private health plans since the '70s. The Medicare private plan 
option, now called Medicare Advantage, prior Medicare Plus 
Choice, was supposed to provide equal or better coverage for 
beneficiaries at a lower cost than traditional Medicare. 
Unfortunately, that has not been the case. As you know, in fact 
on average, private MA plans, Medicare Advantage, are paid 
significantly more than it would cost to provide similar 
coverage in traditional Medicare.
    Now, we recognize that MA plans can be a viable option for 
some enrollees, but I must remind the committee that the vast 
majority, 36 million or more older and disabled people, are 
enrolled in traditional Medicare, which is no longer a fee-for-
service program, and 50% of all Medicare beneficiaries have 
incomes under $23,500 a year.
    At the Center, we regularly hear from families and 
individuals who have had problems with their MA plans. One of 
the most frequent issues we encounter concerning MA coverage 
relates to post-acute care. For example, over the last year the 
Center has received complaints from across the country about MA 
plans that have denied coverage for skilled nursing facility 
care despite the fact that the individuals at issue were 
receiving nutrition through feeding tubes, which under federal 
regulations and common sense is a skilled service. We have 
heard this from Ohio, Pennsylvania, Minnesota, and of course 
Connecticut.
    In fact, one of the beneficiaries who called us, or the 
family did, was granted coverage on appeal but the MA plan 
actually appealed that case to federal court. And we, a 
nonprofit that is not paid by our clients, had to go to federal 
court to make sure that that individual and the others like him 
in that MA plan would get coverage and care.
    These issues are not new and occurred even at the height of 
MA overpayments when plans were paid at an average of 114% of 
the amount traditional Medicare would spend on a similar 
individual. In 2009, for example, the Center had to take 
another case to federal court in order to obtain coverage for 
an individual receiving tube feeding. But the MA plan was so 
determined to deny coverage it continued that case into federal 
court in Minnesota.
    One of the most important health considerations for 
individuals is the ability to choose one's doctors and 
healthcare providers. This is the choice that people really 
care about. By design, as you know, MA plans contract with a 
limited network of providers to care for enrollees. Some 
coordinate care, but that is far from the normal course we have 
found with their beneficiaries over the 30 plus years I have 
done this work.
    For example, a Connecticut resident was referred to us by 
his Congressman because he had almost $100,000 in outstanding 
medical bills for his recently deceased wife that would have 
been covered had he been in traditional Medicare. That is 
because he traveled to Florida to be with his daughter where 
his wife fell. And while her fractured hip was taken care of 
and paid for by the plan, it turned out she had a brain tumor, 
and all the services related to the brain tumor were not 
covered by the MA plan.
    Sometimes Medicare Advantage enrollees face barriers close 
to home. When MA plans change their provider networks, as they 
often do annually, enrollees often have to make sure that their 
doctors will be in the plan in the coming year. As you may 
know, the largest plan in our State of Connecticut and in New 
York, Ohio, and Florida cut many, many providers, 2,250 doctors 
and healthcare facilities in Connecticut alone, including Yale 
New Haven Hospital where my mother, who is on traditional 
Medicare, recently had urgently needed neurosurgery, which she 
would not be able to have if she was in a Medicare Advantage 
plan. Neither physicians nor Medicare patients in that plan, 
the largest in Connecticut--and in Ohio, Florida, New York--
were given adequate notice regarding these extraordinary 
provider cuts.
    In addition to the concerns raised for Medicare 
beneficiaries by MA networks, too many plans fail to provide 
adequate coverage and access to care when enrollees are 
seriously ill. While I am grateful for the care that my co-
presenter has received from his MA plan, too often we find that 
when people become truly ill or injured, they are less 
satisfied with their MA plan. That has been the case with my 
uncle just this year, my mother's brother, who is 92 and has 
been in an MA plan all these years despite my protestations. He 
is not receiving coordinated care or the care he needs.
    Mr. Pitts. Can you wrap up, please?
    Ms. Stein. Instead of focusing on how much Medicare 
payments are being cut, which is not really a cut, Congress 
should focus on making sure they provide what we are paying 
for. It is simply unfair to ask beneficiaries and taxpayers to 
shoulder extra payments to private plans that truly don't 
provide uniformly better value. Enrollees in poor health often 
receive less coverage and all have less options of providers.
    Thank you.
    [The prepared statement of Ms. Stein follows:]

    [GRAPHIC] [TIFF OMITTED] 
    
    Mr. Pitts. The chair thanks the gentlelady and now 
recognizes Dr. Van de Water 5 minutes for an opening statement.

               STATEMENT OF PAUL N. VAN DE WATER

    Mr. Van de Water. Mr. Chairman, Ranking Member Pallone, and 
members of the subcommittee, I appreciate the opportunity to be 
with you this morning. My statement reviews the role of private 
health plans in Medicare, identifies the factors that will hold 
down payments to Medicare Advantage plans in 2015, and explains 
why the Administration and Congress should reject demands from 
some quarters to freeze Medicare Advantage payment rates in 
2015 at their 2014 levels.
    For 40 years, Medicare beneficiaries have been able to 
receive their benefits through private health plans. And as you 
have heard, in 2014, 29% of beneficiaries are enrolled in a 
private health plan through Medicare Advantage and virtually 
all beneficiaries have access to such a private plan. The 
remaining 70% or so of Medicare beneficiaries are in 
traditional Medicare.
    Congress' advisory body, the Medicare Payment Advisory 
Commission, has long recommended that Medicare's payment system 
be neutral, favoring neither Medicare Advantage plans nor 
traditional Medicare. But in recent years, the system has been 
substantially tilted in favor of private plans, the result of a 
large increase in MA payments enacted in the 2003 Medicare 
prescription drug law.
    In 2009, Medicare paid MA plans 14% more per enrollee than 
what it would have cost traditional Medicare to cover 
comparable enrollees. The Affordable Care Act is gradually 
reducing MA payment rates to bring them more in line with 
payments in traditional Medicare. This year in 2014, Medicare 
Advantage payments average only 6% higher than the levels in 
traditional Medicare. These overpayments, I must add, drive up 
premiums for beneficiaries and weaken Medicare's finances.
    The Centers for Medicare and Medicaid Services has recently 
announced preliminary 2015 payment policies for Medicare 
Advantage plans. Although the health insurance industry's trade 
association AHIP says that the CMS announcement includes ``new 
proposed cuts,'' the agency CMS is simply applying current law.
    The announced payment policies reflect four factors that 
will hold down MA payments in 2015. First, CMS continues to 
phase in the payment reductions that health reform requires, 
which curb some, but as I said, not all, of the excessive 
payments to MA plans.
    Second, since MA payments are tied in part to the cost per 
enrollee in traditional Medicare, the continuous slowdown in 
fee-for-service spending lowers MA payment rates.
    Third, CMS is implementing more accurate risk adjustment 
procedures as health reform requires. It will modestly reduce 
MA payments to address the problem of up-coding. Also, CMS will 
no longer include diagnoses identified during a home assessment 
visit rather than a clinical encounter in determining an 
enrollee's health status since these tend to make enrollees 
appear sicker than comparable enrollees in traditional 
Medicare.
    And fourth, ending a demonstration project that pays 
higher-quality bonuses to some plans will effectively lower 
payments in those plans in 2015 compared to 2014.
    Now, AHIP and other interest groups charge that the 
preliminary 2015 payment policies will substantially increase 
costs to MA participants and will reduce the choice of plans. 
They ask that MA payment rates be frozen in 2015 at their 2014 
levels, but I would argue that the Administration and Congress 
should reject those demands.
    The predictions of doom and gloom are greatly exaggerated. 
AHIP issued these same warnings about the MA payment cuts that 
were made in 2014, but MA enrollment, as you have noted, has 
nonetheless reached record levels. And the Congressional Budget 
Office projects that MA plans will continue to thrive despite 
further payment cuts. Nationwide, the number of plans available 
dropped by only 3% in 2014, a small change that reflects both 
the offsetting effects of newly entering plans and those 
departing the market.
    Plans also responded to the payment reductions by becoming 
more efficient. The unweighted average monthly premiums for MA 
plans with prescription drug coverage actually fell from 2013 
to 2014 and is lower today than in 2011 or 2012. And again, 
this is also despite the payment reductions.
    Wall Street certainly isn't pessimistic about Medicare 
Advantage. In the wake of the CMS announcement, shares of 
Humana, the second largest insurer in the MA market, recorded 
their biggest single-day increase in 4 years and reached their 
highest level in more than 30 years. Standard & Poor's overall 
index for managed healthcare plans also climbed.
    Finally, preventing overpayments to Medicare Advantage 
plans is sound policy. Along with the other cost-saving 
provisions in the Affordable Care Act, eliminating overpayments 
reduces premiums for all beneficiaries, including the large 
majority who are not enrolled in MA plans and extends the 
solvency of Medicare's Hospital Insurance trust fund.
    Thank you, Mr. Chairman.
    [The prepared statement of Mr. Van de Water follows:]

    [GRAPHIC] [TIFF OMITTED] 

Mr. Pitts. The chair thanks the gentleman. That concludes 
the opening statements. We will begin questioning. I will 
recognize myself for 5 minutes for that purpose.
    Mr. Little, I will go first to you. What would have 
happened to you if you had had a health episode and were not on 
an MA plan? How did your MA plan compare to what service you 
might have received under traditional Medicare if you could 
explain?
    Mr. Little. If I would have had traditional Medicare with 
my problems that I had, instead of being approximately $400 
out-of-pocket cost because I stayed 2 extra days at the 
hospital when I had the open heart, if I had had traditional 
Medicare, it would have cost me $150,000 and that is a 
financial burden.
    Mr. Pitts. Now, what would happen to you if you would lose 
your MA plan that you have today?
    Mr. Little. Well, if I had looked at the closest Medigap 
and it would add about $700 to $800 a year to my cost, which, 
because I am retired, something would have to be taken out of 
the budget to pay for the plan.
    Mr. Pitts. All right. Well, according to the Congressional 
Budget Office, the Affordable Care Act cut more than $300 
million from the Medicare Advantage program to spend on new 
government programs, new entitlement not for seniors. What is 
your reaction to that?
    Mr. Little. Well, I have seen the cuts. When I turned 65 5 
years ago, we had four plans to choose from and Medicare 
Advantage plans and I had always been with Blue Cross Blue 
Shield so I signed up with them. I was informed the following 
year that they were dropping that plan so I went to Optima. 
They had the next-best plan. The following May I got my letter 
that they were dropping me, and the third year I went to Humana 
because they were basically the only one left. And in my area 
that I live in, Virginia Beach, Humana offers the only Medicare 
Advantage plan available. The others said they had to drop it 
because of the higher cost and cuts.
    Mr. Pitts. Can you describe what your plan has done for you 
that you think may have prevented a hospitalization or from 
returning to the hospital?
    Mr. Little. Yes, sir. Every January and June part of the 
plan is to go into your GP and have a thorough checkup. And of 
course I have to go to my cardiologist and have a thorough 
checkup. But even the co-pay for those preventive is zero for a 
GP and of course my specialist is $35, which is easily 
affordable. So they keep me running.
    Mr. Pitts. If you could do a ballpark, how much do you 
think your health plan has saved you in costs out-of-pocket, 
you know, costs for the services you need so far?
    Mr. Little. Well, I know in the last 5 years it has saved 
me $140, $150,000.
    Mr. Pitts. Now, due to cuts in Medicare Advantage under the 
Affordable Care Act, some seniors may get to keep their plan at 
least this year but might still lose their doctor or lose 
affordable premiums or lose needed benefits. Have you lost your 
doctor or plan before?
    Mr. Little. No, sir.
    Mr. Pitts. Have you or your friends with Medicare Advantage 
plans experienced fewer choices and higher cost?
    Mr. Little. We have experienced fewer choices but the low 
cost is still there. And in fact, with all respect to Ms. 
Stein, I don't know which Medicare Advantage plan they have, 
but they need to switch.
    Mr. Pitts. All right. Let me go to Mr. Giese. What are the 
tools that CMS has at its disposal to legally reduce the impact 
of the cuts and the advance notice through administrative or 
regulatory means?
    Mr. Giese. Some of the cuts are statutory and some of the 
cuts are discretionary, so if Congress were to act, things like 
the ACA reductions, the demonstration plan, and the risk score 
stuff could be changed. But the other stuff that is 
discretionary is decided by CMS, so the rate book change, which 
are the trends in Medicare Advantage, we are not quite sure how 
CMS develops the trends. They are not really released to the 
public. So that could change. That is partially discretionary 
and I would say that is the biggest one.
    Mr. Pitts. My time has expired, unfortunately. The chair 
recognizes the ranking member 5 minutes for questions.
    Mr. Pallone. Thank you, Mr. Chairman.
    I wanted to ask questions initially of Mr. Van de Water. I 
have heard different views on whether the quality of care that 
Medicare beneficiaries receive from an MA plan is any different 
than fee-for-service Medicare. What is your take on the 
relative quality of care provided in fee-for-service versus MA 
plans?
    Mr. Van de Water. Mr. Pallone, I think the short answer is 
that we don't really have clear data. I like to rely on the 
Medicare Payment Advisory Commission. They are a good impartial 
source. And in their report from last March on Medicare payment 
policies, they said that according to them we have little 
information on which to base a comparison of MA quality 
indicators with those in private fee-for-service.
    That having been said, the evidence is mixed. There are 
some studies which some of the Members have referred to that 
suggest that at least in some particular MA plans, quality may 
be better. There is other data, for example, that MedPAC sites 
that suggests that the quality is about the same on average in 
Medicare Advantage plans and traditional Medicare. So I think 
the right answer is that the record is probably mixed that in 
some cases the quality is probably better but we can't make 
that conclusion across the board.
    Mr. Pallone. Well, I think we should strive to improve the 
quality provided to all Medicare beneficiaries both in the fee-
for-service system and the Medicare Advantage program. Now, 
fee-for-service has undertaken new payment models such as 
accountable care organizations, medical homes, and other 
initiatives, and Congress, including our committee, has made 
great bipartisan progress towards tying physician Medicare 
payments more closely to the quality of care provided. And now 
that MA plan payments are linked to quality performance, the 
plans are also working to improve quality. So what is your 
recommendation for steps we can take to continue to improve 
quality for all Medicare beneficiaries?
    Mr. Van de Water. Well, I think you are exactly right to 
focus on the whole system. You know, we are developing--this is 
referred to a mix of payment models. We have not only 
traditional Medicare on the one hand and Medicare Advantage 
plans, but we are developing intermediate models such as 
accountable care organizations. I think that what Congress has 
done to encourage these different payment models is exactly the 
right thing. In your proposed SGR legislation you have 
additional steps to develop models of that sort. The quality 
bonuses in MA plans, that makes sense. So I think in general 
you are on the right track.
    Mr. Pallone. All right. Let me ask you a question about the 
mechanics of how Medicare Advantage plans are paid. CMS 
reported that the proposed reductions will result in a 2.4 
decrease to MA plan benchmarks in 2015 while the witness from 
Oliver Wyman testified on their recent report and that is a 
report that I remind everyone that the insurance industry paid 
for, which claims that the plans' rates will be cut by 5.9%. 
And the plans are saying these reductions are going to either 
put them out of business, force them to hike premiums, reduce 
benefits, or take other drastic measures. On the other hand, 
they said this last year, too, and yet nothing really happened. 
But I know this is a very complex issue and I would like to get 
to the bottom of it.
    So let's just talk about the facts. Can you please explain 
the mechanics of how Medicare Advantage plans are paid, like 
what a benchmark is, what a bid is, and how plans' payments are 
determined?
    Mr. Van de Water. I will try to give a simple answer which 
will necessarily be a bit oversimplified, but, as you say, the 
key factors in determining what a plan gets paid are, one, the 
plan's bid, which represents how much the plan estimates that 
it will cost to provide Part A and Part B services to a 
representative group of people, that is people of sort of an 
average----
    Mr. Pallone. What I am trying to get at is whether the 
reductions that CMS has proposed to the plan, you know, whether 
the reductions are to the payments or the benchmarks? And given 
the reductions in benchmarks, will the plans on average end up 
getting less money than fee-for-service? But, you know, go 
ahead.
    Mr. Van de Water. OK. The answer is that the reductions 
that are being discussed are the reduction to the so-called 
benchmarks. What the plans actually get relates both to the 
benchmarks and to what they bid and to other factors, so there 
is a lot of intervening steps, and reductions in the benchmarks 
don't translate one-for-one into reductions in the plan 
payments.
    Mr. Pallone. So can we say that the proposed reductions and 
benchmarks will on the average end up that the plans get less 
money than fee-for-service Medicare?
    Mr. Van de Water. Other things being equal, they will tend 
to reduce what the Medicare Advantage plans get paid, but on 
average, in 2015 MA plans are still going to get paid, somewhat 
more than what it would cost to cover their enrollees under 
traditional Medicare.
    Mr. Pallone. All right. Thank you.
    Mr. Pitts. The chair thanks the gentleman and now 
recognizes the vice chairman of the subcommittee, Dr. Burgess, 
5 minutes for questions.
    Mr. Burgess. Thank you, Mr. Chairman. I would like to 
address this to Dr. Lew and Mr. Giese. I mean you heard the 
ranking member's question to Dr. Van de Water about the issue 
of quality between Medicare Advantage and traditional Medicare. 
Can you offer us your perspectives on that? Is there a 
difference in your estimation on the difference between the 
quality of care provided the enrollee in traditional Medicare 
versus Medicare Advantage? Dr. Lew, let's start with you.
    Dr. Lew. Yes. Thank you for that question. Absolutely I can 
attest to that, that the quality of care delivered in a 
coordinated care model is far superior to a fragmented fee-for-
service system because you have got the whole continuum of 
care. Again, as I mentioned, the home visits coordinated with 
inpatient, outpatient visits, palliative care and disease 
management. It is a team approach where you have got providers, 
nurses, pharmacists, social workers taking care of patients 
across the continuum.
    There was a mention about home care. Home care absolutely 
is an essential piece of this. You take out home care; that 
leaves a gap in our system. You know, it is not an up-coding 
situation. It is a situation where we do actually recognize 
what could be admission drivers. We look for areas where a 
patient, perhaps he would be at a fall risk. So there is a lot 
of information gathered at a home visit. But absolutely, 
quality measures, there is no question. We can reduce bed days, 
we reduce lengths of stay, we reduce costs, we get better 
outcomes and obviously patient satisfaction, and that is why 
members are wanting to migrate to Medicare Advantage.
    Mr. Burgess. Thank you.
    Mr. Giese?
    Mr. Giese. Thank you. There are studies out there that show 
that the quality in fee-for-service is lower than in MA on 
average, in fact, a number of studies. But going beyond that, 
think about your parents and if they are sick. They want to be 
taken care of. These people who sign up for Medicare Advantage 
plans are so happy that they are taken care of. They are called 
by the plan to say, did you take your prescription? Did you get 
a checkup? And the people love this. It is so important to 
these people who signed up for these plans.
    Mr. Burgess. Have there been any efforts to identify--you 
know, we talk on this committee a lot about readmission rates 
for patients with certain diagnoses. Is there any evidence to 
point to, say, the readmission rate for someone who is 
hospitalized with congestive heart failure that is partly 
controlled, that is hospitalized, gets toned up, gets sent 
home? Do they do better or worse on Medicare Advantage?
    Mr. Giese. Readmission rates are lower in Medicare 
Advantage. There have been some studies that show that.
    Mr. Burgess. Well, let me ask you a question and then 
because part of this is we overpay Medicare Advantage. But you 
have just identified one of the larger cost drivers and you say 
that is less with Medicare Advantage. So how can it be? A 
program that costs more is actually costing less? It is 
paradoxical, isn't it?
    Mr. Giese. Well, all of the----
    Mr. Burgess. It is a trick question, Mr. Giese. I am sorry. 
I couldn't help myself. Dealing with the Congressional Budget 
Office all the time----
    Mr. Giese. All of the so-called overpayments to Medicare go 
directly to beneficiaries. The rules for bids and the way the 
bids work, everything goes back to the beneficiary.
    Mr. Burgess. And I thank you for that. I did just want to 
point out we deal with the tyranny of the Congressional Budget 
Office all the time and it is bipartisan. Both sides of the 
dais feel the tyranny of the Congressional Budget Office.
    Mr. Little, I just have to ask you a question.
    Mr. Little. Yes, sir.
    Mr. Burgess. Your written testimony you have provided you 
said you were a small business owner?
    Mr. Little. Yes, sir.
    Mr. Burgess. So were you self-employed?
    Mr. Little. Yes, sir.
    Mr. Burgess. So being self-employed, you know of course you 
paid your taxes, your payroll taxes?
    Mr. Little. Yes, sir.
    Mr. Burgess. And for Medicare Part A, what was the payroll 
tax that you paid during most of your years?
    Mr. Little. Well, nobody in my organization was that old at 
that time.
    Mr. Burgess. Well, but I mean as you worked, in your 
working years you pay Social Security and Medicare----
    Mr. Little. Oh, yes.
    Mr. Burgess [continuing]. Every paycheck, right?
    Mr. Little. Oh, yes, sir.
    Mr. Burgess. Do you remember what the percentage was that 
you paid for Medicare?
    Mr. Little. The FICA was 6.2. The Medicare was--I don't 
know.
    Mr. Burgess. 1.3, I have it on good authority. It is said 
it is 1.3 so let's stipulate that that is correct. But you were 
a small business owner so for yourself you paid both the 
employer and the employee contribution, is that correct?
    Mr. Little. Yes, sir.
    Mr. Burgess. So you paid 2.6% of your earnings throughout 
your lifetime. So let me just ask you. Do you feel that what 
you are receiving now and Medicare is an entitlement or is that 
something for which you have paid?
    Mr. Little. Oh, I think it is something I have earned.
    Mr. Burgess. Yes, exactly. Exactly so. And I just wanted to 
make that point. It is then incumbent upon us to make sure you 
get the very best of what is available, and in your case, it 
sounds like that would be Medicare Advantage.
    I have gone over time. I will yield back.
    Mr. Pitts. All right. The chair thanks the gentleman. I now 
recognize the gentleman, Mr. Green, 5 minutes for questions.
    Mr. Green. Thank you, Mr. Chairman.
    CMS proposed to disallow the use of the home assessment 
diagnoses unless the beneficiary received appropriate follow-up 
care as a good policy. Mr. Van de Water, I understand that 
plans were allowed to use beneficiary diagnosis information 
obtained during home assessment visits to increase their risk 
adjustment payment. Basically what happened is that the plans 
were providing assessments for beneficiaries finding that there 
were certain diagnoses and using that information for increased 
payment.
    But this is important in that plans were not following up 
and providing the services the patient required as a result of 
that diagnosis. So the plans get more money and the patient 
doesn't receive anything. This seems like it is a scam on tax 
dollars. Just so we are clear, can you please explain exactly 
what CMS has proposed?
    Mr. Van de Water. Yes, sir. I think you actually provided a 
very good summary yourself. All I would add is that what CMS is 
proposing to do is not an anyway suggesting that these home 
assessment visits cannot be helpful or useful, but as you say, 
it is important that if a home assessment visit takes place and 
a condition is found, that the appropriate follow-up is 
provided. CMS is not saying that diagnoses identified during 
home visits are never going to be considered but simply they do 
have to be recognized by the subsequent encounter with a doctor 
or health professional to make sure that the appropriate 
follow-up is indeed taking place.
    Mr. Green. It seems like if they are getting paid for that 
assessment of that illness, they should be actually treating 
that patient----
    Mr. Van de Water. Exactly.
    Mr. Green [continuing]. Instead of just building up their 
payment.
    What is your take on this policy? Is it reasonable to 
require a plan if they wish to receive higher payments with 
identifying a diagnosis to require they provide that patient 
with those services?
    Mr. Van de Water. I am not sure we need to make the 
requirement but we certainly shouldn't allow plans to get the 
higher payments for the diagnoses if they are not followed up 
on.
    Mr. Green. In other words, that is a cost savings we could 
do. But we hear about in Medicare is overpayment if they are 
not receiving the services that they are actually being paid 
for.
    Mr. Van de Water. Yes. That is precisely what CMS has tried 
to do in the proposed policy.
    Mr. Green. Medicare Advantage overpayment often hurt 
beneficiaries and Medicare in the long run. Ms. Stein, I know 
that you have been a strong advocate for strengthening Medicare 
and ensuring it remains secure in the long run. That is why I 
have concerns about continuing to overpay Medicare Advantage. 
First, Medicare Part B premiums are based on program spending, 
so the extent Medicare is paying too much, it drives the 
beneficiary premiums up, isn't that right?
    Ms. Stein. That is exactly correct. The overpayments to the 
Medicare Advantage program are a problem not only for Medicare 
Advantage enrollees but for all Medicare beneficiaries because 
their Part B premiums increase and of course taxpayers pay more 
for Medicare as a whole.
    Mr. Green. We know that most beneficiaries have modest 
incomes, fixed incomes. They don't have a lot of disposable 
income to pay extra to manage care. How are beneficiaries 
affected by unjustified overpayments to private insurance 
companies while the minority who are enrolled in plans might 
see some additional benefits but how the vast majority of 
Medicare beneficiaries are affected? It seems like if you are 
raising premiums for--and I will take a number out of the air--
70% of the folks in my district, last numbers I saw, received 
regular Medicare, about 30% do Medicare Advantage. So you raise 
the premiums for 70% to provide some additional benefit to the 
30%.
    Ms. Stein. That is correct. And I have to even question the 
additional benefits. I mean what were mentioned were vision, 
which is usually some help with some eyeglasses, not very much, 
and preventive services, which are now zero based in Medicare 
as a result of the Affordable Care Act. And I have not seen a 
great deal of actual coordination. When there is true 
coordination, I applaud it, but very often, we have as much 
siloing of care in Medicare Advantage as we have in traditional 
Medicare. It is costing everybody more, even the vast majority 
who don't choose Medicare Advantage but stay in traditional 
Medicare.
    Mr. Green. Well, I only have a few seconds left and I have 
heard some folks argue that we can't take away access payments 
to plans and put them on parity with fee-for-service because 
some beneficiaries are low-income, rely on these plans for 
additional benefits. And they do. I know Medicare Advantage 
offers other things, but the problem is plans can change their 
benefits and cost-sharing from year to year. Just because a 
low-income person has a plan that would reduce cost-sharing 
today, that plan doesn't necessarily have to offer that extra 
benefit over that year.
    Ms. Stein. That is right. The plans can change the benefits 
from year to year so long as they are actuarially equivalent to 
traditional Medicare.
    And I just want to say CMS did do a study in 2012 that 
showed about low-income people, people with high-risk needs and 
health issues disproportionately disenroll from Medicare as 
they are dealing with those issues across the country.
    I have no skin in this game. My entire career is just 
representing mostly low- and moderate-income Medicare 
beneficiaries and protecting Medicare. That is all I care about 
here and getting access to care. And I think the Medicare 
Advantage plan is providing way too much money for way too 
little uniform value and it is hurting the Medicare program and 
most Medicare beneficiaries. I say that as an advocate, as a 
cancer survivor, and as the daughter of a woman who is just 
going through an extraordinary neurosurgery that was available 
to her because she was in traditional Medicare.
    I can't understand why it would cost Mr. Little $100,000 
and I hope he will call my office if we can ever help him. We 
don't charge for our services.
    Mr. Green. OK. Thank you, Mr. Chairman. I know I am over my 
time but I thank all of our witnesses for being here.
    Mr. Pitts. The chair thanks the gentleman and now 
recognizes the gentlelady from North Carolina, Mrs. Ellmers, 5 
minutes for questions.
    Mrs. Ellmers. Thank you, Mr. Chairman, and thank you to our 
panel for being here today.
    I just want to start off by associating myself with some of 
the comments, Dr. Lew, you said our seniors enjoy their 
Medicare Advantage plans, and it is so important that we work 
in Congress to protect them from these large cuts that will 
negatively affect 476,000 North Carolina seniors that I have 
the incredible honor to represent.
    I am very concerned about this issue because I do believe 
it is a choice that our seniors are able to make. I think that 
our seniors are in jeopardy when they cannot make choices for 
themselves. Mr. Little has made a choice of what it is that he 
would like to see for his coverage, and I don't understand why 
we would consider jeopardizing that ability. When something 
works for someone, they should keep it. Isn't that what our 
President said? If you like your healthcare plan, you should be 
able to keep it. Yet, now we are saying no, as a matter of 
fact, you can't.
    And, Dr. Lew, thank you for your comments about patients in 
the home-health setting. You know, our seniors want to take 
care of themselves. Our seniors want to be able to be 
independent, and if they are going to do a better job 
recovering from surgery or sickness, illness at home, I think 
that is where they need to be. I think these are all the things 
that are jeopardizing our system.
    And to the point that Dr. Burgess was making earlier about 
savings in one part of Medicare only to spend more money in 
another, if we are helping to keep seniors out of the hospital 
or the inpatient setting, that is a dramatic savings within 
Medicare. So it only makes sense to me that we would continue 
to advocate another program, or Medicare Advantage would help 
seniors be able to do that. You know, keeping people out of the 
hospital is the best way we can keep people healthy and safe in 
this country.
    Dr. Lew, as a physician, do you believe seniors in rural 
areas--I have a large rural area in my district. How do you 
feel about seniors in the rural setting? How do you feel that 
they respond to the higher premiums or potentially no Medicare 
Advantage offered? I mean, how will that affect them?
    Dr. Lew. Well, if Medicare Advantage plans pull out of 
certain markets, that will certainly leave seniors very 
vulnerable. You know, there are some parts of certain States 
that we do business in where there are very few Medicare 
Advantage plans. In fact, recently, one plan pulled out of one 
of these States where we do business and that left one dominant 
player, which is very vulnerable, because after that one player 
pulls out, the seniors are going to be left without physicians 
and without a network. But hopefully that won't happen.
    And, to your point about seniors liking choice and having 
choice, and having the better outcomes on the back end, that is 
all a result of what we have built, this coordinated-care model 
and what I consider an investment, not an overpayment, but an 
investment into this model that we have shown has worked that 
we are threatening now to jeopardize by cuts. That is what I am 
concerned about because that is going to impact the physicians 
and the seniors.
    Mrs. Ellmers. Absolutely. And, there again, to me it is a 
matter of common sense. I struggled with the idea that the 
Obama Administration and that CMS would choose to hit something 
that is working so well as Medicare Advantage when we have 
numerous programs that don't work at the federal level. As a 
fiscally responsible individual representing my constituents, 
this is simply not the place that we should go for savings. 
There are many others.
    And again, Mr. Little, I just want to thank you on behalf 
of my constituents, my seniors for coming forward and sharing 
your stories and your experience with the healthcare issues 
that you had to deal with, with heart disease and cancer, 
because that is just so important. Your recovery and your 
ability to recover on your own terms probably had a lot to do 
with the Medicare Advantage plan that you chose.
    Mr. Little. Yes, it did. And one thing I would like to 
interject that I didn't before, I have noticed it because I 
have been with the Medicare Advantage plan for 5 years. The 
costs are kept down mainly because of what they pay the 
hospitals, the physicians.
    Mrs. Ellmers. Yes.
    Mr. Little. I have noticed my checkup this year was $300. 
My doctor----
    Mrs. Ellmers. Yes.
    Mr. Little [continuing]. Got $74. There it is.
    Mrs. Ellmers. Yes.
    Mr. Little. There is your savings. It is not costing the 
government any extra money. They are negotiating, but of course 
that is why----
    Mrs. Ellmers. That is right.
    Mr. Little [continuing]. Several of the Medicare Advantage 
plans dropped out because they couldn't get down----
    Mrs. Ellmers. Yes.
    Mr. Little [continuing]. To that price.
    Mrs. Ellmers. Yes.
    Mr. Little. And also with every claim that I do, and they 
send me what I did, they also send a letter if you see any 
fraud or anything that was done that wasn't really done, please 
let us know immediately. So they self-govern themselves and I 
think that is how they are keeping the cost down.
    Mrs. Ellmers. Well, thank you again for being such a great 
advocate on this issue. We truly appreciate it and my 
constituents thank you.
    Mr. Little. You are welcome.
    Mrs. Ellmers. Mr. Chairman, I would like to submit to the 
record a letter that we sent to Ms. Tavenner from the Doctors 
Caucus. Members of the Doctors Caucus put it together; I would 
like to submit it for the record.
    Mr. Pitts. Without objection, so ordered.
    [The information appears at the conclusion of the hearing.]
    Mrs. Ellmers. Thank you, sir, and I yield back the 
remainder of my time.
    Mr. Pitts. The chair thanks the gentlelady and now 
recognizes the gentlelady from Virgin Islands, Dr. Christensen, 
5 minutes for questions.
    Mrs. Christensen. Thank you, Mr. Chairman.
    Ms. Stein, we have heard a lot today about Medicare 
Advantage plan choices and how seniors need to have a lot of 
choices of different plans, but like you, I believe that the 
most important choice that a senior can have is a choice of a 
doctor, the ability to access your physician or even a hospital 
where you are familiar with the services and you know you will 
get good care.
    You spoke about Connecticut where you are headquartered and 
where there was a serious problem when Medicare Advantage plans 
abruptly dropped providers from the network leaving 
beneficiaries, who had selected a plan based on being able to 
continue to see their doctors, in the lurch. To me, this 
highlights a very serious problem with Medicare Advantage. 
Plans make these choices to contract with a provider and that 
is a result of really business decisions. This is part of the 
downside of having private insurance companies whose main goal 
it is to make a profit serving vulnerable seniors. What 
recommendations might you have for how Congress and CMS could 
better protect seniors that Medicare Advantage plans from such 
disruption?
    Ms. Stein. Thank you. I appreciate this opportunity.
    I think that the choice that people want of whatever age is 
the choice of who is going to take care of them and where they 
are going to be taken care of. And traditional Medicare is 
pretty much an open network. You can go around the country. So, 
for example, my mother has just come from western Connecticut 
to eastern Connecticut to be in a nursing home near me. If she 
was in a Medicare Advantage plan in our State, that wouldn't be 
possible.
    So you can go near family, you can choose pretty much all 
the doctors that are providing care, not all but most, and 
also, as I said, Yale New Haven Hospital is no longer in the 
largest Medicare Advantage plan in our State and that is 
certainly not because of quality of care and that is because 
before these further level playing field of Medicare Advantage 
to the costs of traditional Medicare.
    One of the things I think is that we should relook at the 
definition of an adequate network in Medicare Advantage plans 
and make sure that the definition is truly going to meet the 
needs of the people who enroll. We should look to providing 
enrollees whose plans terminate contracts with their doctors, 
that they must be given notice regardless of what the plan 
thinks of the adequacy of the network after that doctor and 
their hospital is terminated. If the physician or local 
hospitals that this person is known to use have been terminated 
from that plan, they should be given notice of that before it 
is effective.
    We should ensure clear, meaningful differences between the 
different Medicare Advantage plans that a given sponsor is 
offering because it is very hard for people to know what they 
are choosing very often. We should standardize benefits within 
plans, as Congress intelligently did with Medicare supplement, 
Medigap, plans many years ago. You can really tell apples to 
apples and know what you are getting.
    I would say finally, perhaps most importantly, we should 
make sure that there is a true even, level playing field in 
benefits and payments to traditional Medicare and Medicare 
Advantage. If we want people to truly have choice, besides of 
their doctors, between Medicare Advantage and traditional 
Medicare, we should make sure that the benefits are available 
in both. Now, because of the Affordable Care Act, we have 
mostly zero cost preventive services in traditional Medicare. 
We should have the same reimbursement structure for those who 
provide care in traditional Medicare as in Medicare Advantage.
    We should offer prescription drug coverage in traditional 
Medicare because people often go to Medicare Advantage now 
because it is the only one-stop shopping. It is the place where 
it is simpler. You go there, you get your prescriptions usually 
and your other services. So they feel they don't have that 
choice.
    Also, it is called Medicare Advantage. People think they 
have some advantage. They think they are getting something on 
top of Medicare. There should be a level playing field between 
the two operating choices, the two models.
    Mrs. Christensen. Well, thank you. And I think some of 
those, especially the adequate network, could be applicable. 
There is a very troubling situation happening in Tennessee, 
Florida, and Texas in dental Medicaid managed care where 
providers are being dropped, and I hope that maybe at some 
point we can have a hearing on Medicaid managed care as well.
    Thank you for your time.
    Ms. Stein. It has been a huge issue in our State and we 
lost almost all our Medicare Plus Choice plans. And now, before 
these reductions and overpayments are in effect, United 
Healthcare dropped 2,250 physicians and hospitals and other 
care providers in Connecticut. That was a provider for 1 for 
every 200 Medicare beneficiaries in our State. It has been 
stunning. And I fear this is going to be used as an argument 
for even higher payments to Medicare Advantage when, if we 
could put that money into traditional Medicare, all 50 million 
Medicare beneficiaries would benefit and taxpayers would pay 
less.
    Mr. Pitts. The chair thanks the gentlelady, recognizes the 
gentleman from New Jersey, Mr. Lance, 5 minutes for questions.
    Mr. Lance. Thank you very much, Mr. Chairman.
    I recently had a constituent contact me to inform me that 
her Medicare Advantage plan had been canceled and her new plan 
requires her to pay $600 per month, which is $50 more than her 
previous plan, with no indication that she will maintain her 
current plan benefits or the doctor she likes. It is my 
experience that this woman, my constituent, is not alone. 
According to Oliver Wyman actuaries, New Jersey, the State I 
represent, will be one of the States hardest hit by these 
proposed cuts. Approximately 217,000 New Jerseyans are enrolled 
in Medicare Advantage and they may see a reduction in benefits.
    And, Mr. Little, thank you for being here with us today, 
and I am hoping you can tell us a little more about your 
experience with Medicare Advantage and I imagine it is similar 
to the experience of those in the district I serve who have 
reached out to me. Would you please explain, sir, to the 
committee why you chose a Medicare Advantage plan over 
traditional Medicare?
    Mr. Little. Well, I go to the gym.
    Mr. Lance. Yes. My wife tells me I should go more often.
    Mr. Little. Well, you will find it is really a convention 
of old people talking. We shoot the bull more than we exercise 
to be exact. But when I first became of age, 65----
    Mr. Lance. Yes, sir.
    Mr. Little [continuing]. All the men that were in the gym 
and stuff say, well, make sure you look at the advantage plan; 
that is what you want to go with.
    Mr. Lance. Yes, sir.
    Mr. Little. And so I Googled it and, of course, came up 
with four plans that were available. All of them were great. I 
took Blue Cross Blue Shield because I had been with them all my 
life when I was in business in a regular plan. Of course, they 
dropped it the following year due to financial things. Then, I 
shifted to Optima and then they dropped it the following year. 
So then I only had Humana left. That is the only one left in my 
place. And they had been great. Whatever my GP says, when he 
found the mitral valve going bad in my heart, he immediately 
sent me next door to the cardiologist, and at 6:00 a.m. the 
next morning they had my heart laying on the table fixing it. 
And of course Norfolk Heart is one of the top 10 in the Nation.
    There is never, ever in the last 5 years, between my 
pulmonary and my other physicians, anything about not being 
able to have the best service there is and the one of my 
choice. And of course for the last 12 years since I retired I 
have kept my same doctor.
    Mr. Lance. When you had your open-heart surgery, your 
primary care doctor worked with your specialist to ensure that 
you received the care you needed. Is that your testimony?
    Mr. Little. Yes, sir. He called right then. He said you 
need to go right now because he heard something. And I went to 
the cardiologist, which happened to have his office next door, 
and he picked up the phone and he said be at Sentara Heart 
tomorrow morning at 6:00 a.m. So it was fairly quick.
    Mr. Lance. Thank you. Under traditional Medicare without a 
supplemental policy I think that some senior citizens could 
face financial difficulty and perhaps even worse than financial 
difficulty due to the unpredictable cost-sharing from 
unexpected illnesses or hospitalization, and that is certainly 
one of my concerns.
    Dr. Lew, in your testimony you described how Medicare 
Advantage incentivizes value and coordinating care whereas that 
is not always the case with the fee-for-service Medicare 
program. Would you please elaborate on the importance of 
coordinated care and what this means for our Nation's senior 
citizens?
    Dr. Lew. Right. Coordinated care, essentially, is it is a 
team----
    Mr. Lance. Yes.
    Dr. Lew [continuing]. Not just physicians, the whole, you 
know, team of pharmacists and social workers and case managers 
working along a continuum of care. So it is not just when a 
patient comes into a hospital. It is home, hospital, office. It 
is throughout no matter what type of problem that they have.
    You know, and the other thing I wanted to note is we are 
not a health plan. We are a physician group.
    Mr. Lance. Yes, sir.
    Dr. Lew. And so we get 85 cents on the dollar that is 
passed to us. So what might look like a level playing field is 
not when it gets down to the physician level, and that is what 
we are dealing with when we are trying to deliver these extra 
services and provide the great care to the seniors.
    Mr. Lance. Thank you. I think the testimony has been 
compelling and certainly I hope that Medicare Advantage can 
continue. That is a certainly my perspective based on my 
representation of New Jersey.
    Thank you, Mr. Chairman.
    Mr. Pitts. The chair thanks the gentleman. OK. I guess Mr. 
Guthrie is here. The chair recognizes Mr. Guthrie 5 minutes for 
questions.
    Mr. Guthrie. Thank you, Mr. Chairman. Let me move over to 
the microphone so it will be picked up. Thank you, Mr. 
Chairman. I have a question for Dr. Lew.
    Some people have suggested that insurance companies are 
being overpaid for Medicare Advantage and rates should be cut 
to fee-for-service levels for equity. What do you think the 
impact would be for patients if it was cut to fee-for-service 
levels?
    Dr. Lew. Well, I think that the investment that was made 
has been made over the years to build this model, which I think 
now we are seeing the results of and the seniors like it and 
that is why they are migrating over. I think that was a smart 
investment.
    Now that we are facing cuts, which are really starting to 
roll in right now--just January of this year I see it happening 
with our company--you know, it is going to impact physician 
payments. It will impact programs and services that we are able 
to provide to seniors. And as these cuts continue throughout 
'14 and '15, I think that is just going to get worse.
    Mr. Guthrie. And how long have you cared for seniors with 
Medicare Advantage plans and what do you think they like the 
most about being in Medicare----
    Dr. Lew. I am sorry. I didn't hear that first question.
    Mr. Guthrie. How long have you cared for seniors in 
Medicare Advantage plans and what do you think they like the 
most about being in Medicare Advantage?
    Dr. Lew. Our company has been taken care of Medicare 
Advantage patients for 20 years and, you know, what I think the 
seniors like is, again, the coordinating care that it is not 
just the primary care and the specialist and the case manager 
or the touches with member services. They like that 
comprehensive treatment. And obviously we had given more 
benefits, too. I mean we provide transportation and a lot of 
other extra services.
    Mr. Guthrie. OK. Thanks.
    Mr. Giese, can you explain what types of choices plans face 
with the projected cuts under the ACA, what kind of choices 
will the plans have under these projected cuts?
    Mr. Giese. Plans have a bunch of levers that they have at 
their disposal to try to ward off these cuts. Those changes or 
these adjustments include increases in benefits, increases in 
premiums but of course CMS limits the amount of premiums and 
benefits they can change in a given year.
    They also can try to incorporate more care management 
programs, but that sometimes is a leap of faith because in 
their pricing, if they assume a certain level of care 
management and don't achieve it, it could lead to not 
successful results.
    Plans could exit, they could change their service area, 
they could limit their network, making it a stronger network 
with better physicians, more quality care that would help lower 
their costs as well.
    Mr. Guthrie. But less choice for the patient?
    Mr. Giese. But less choice for their patients.
    Mr. Guthrie. So if you like your doctor, you might not be 
able to keep that?
    Mr. Giese. Correct.
    Mr. Guthrie. Well, thank you, Mr. Chairman, and I will 
yield back.
    Mr. Pitts. The chair thanks the gentleman and now 
recognizes the gentleman from Illinois, Mr. Shimkus, 5 minutes 
for questions.
    Mr. Shimkus. Thank you, Mr. Chairman.
    I really appreciate your attendance. It is a great debate. 
I know there is some diversity of views.
    [Slide]
    Mr. Shimkus. When we talk about budgeting, that is the 2012 
fiscal budget. The red is mandatory spending. You will see 
Medicare is in there. The blue is discretionary budget, which 
is what we fight and shut down government about. Mandatory 
spending is spending that we can't control. Medicare is part of 
that, Medicare, Medicaid, Social Security, interest payments on 
the debt.
    I do this all the time because if you have a national debt, 
it is based upon mandatory spending and Medicare is part of 
that actuary problem that we have for future generations.
    Do you know why we are having this debate on Medicare 
Advantage? The President, through ObamaCare, cut $716 billion 
from Medicare. And that is not disputed. Secretary Sibelius was 
right there. She admitted in testimony to me in front of this 
committee that she double counted Medicare cuts.
    So now we have got to find the money. Now we are going 
after seniors and programs that--we should have both. We should 
have traditional fee-for-service for those who want it and we 
should have the Medicare Advantage plans that we promised them. 
This is the same debate we had last week on Medicare D. We were 
able to stop the Administration from hurting seniors and 
cutting Medicare D program. And so that is why these hearings 
are very, very important.
    And I know it is tough but, you know, facts and numbers are 
hard to dispute. That is why we are here, because of the attack 
on seniors from ObamaCare and the cutting of $716 billion.
    Dr. Lew, only 20% of this cut has been actualized right 
now. My guess is there is still 300 billion more projected to 
go in the future. What do you think for this big portion of 
seniors, if that is the true number, what is the future of 
Medicare Advantage and Mr. Little and the plan and healthcare 
that he enjoys writing out?
    Dr. Lew. Thank you for the question. As I said, we just are 
starting to feel the pain of the cuts, 20% or less, and as 
these cuts roll out, it is going to be very difficult and very 
unlikely that we can continue at the same level of programs and 
payments to physicians.
    Mr. Shimkus. So you are saying 300 billion more in cuts, 
Medicare Advantage might not even be----
    Dr. Lew. We are looking at double digit cuts----
    Mr. Shimkus [continuing]. Available as a program----
    Dr. Lew [continuing]. In 2014 plus 2015. I don't see how 
what we can do can be sustainable.
    Mr. Shimkus. All right. Let me go quickly because time runs 
fast. And talk to me about the better healthcare aspects of 
Medicare Advantage and the diversity of population that you see 
in Medicare Advantage plans.
    Dr. Lew. Better healthcare, you know, we can reduce 
hospitalizations, readmissions, we get better outcomes, shorter 
lengths of stay.
    Mr. Shimkus. Saving dollars?
    Dr. Lew. Absolutely saving. I mean investment with a great 
return. In terms of diversity in the markets that we are in, it 
is all demographics.
    Mr. Shimkus. Explain that. I mean it is a senior population 
so you are----
    Dr. Lew. Ethnicities, socioeconomic levels.
    Mr. Shimkus. Rich, poor, different ethnic backgrounds.
    Dr. Lew. Different ethnic backgrounds.
    Mr. Shimkus. Doesn't discriminate?
    Dr. Lew. No. No. It is all comers and it is not one 
particular demographic.
    Mr. Shimkus. All right. Let me ask you one more question 
and no one has raised this, but because of the funding problem, 
waste, fraud, and abuse is a big aspect on Medicare spending, 
right? And I have always argued because of fee-for-service, 
what do we do? We chase costs. We don't manage the illicit 
theft of the Medicare fund at the point of entry. We have to 
wait until there is 5, 10 years of data before we go after the 
provider.
    You may not know this but I would like for all of the panel 
to look at what is a better plan to address the waste, fraud, 
and abuse that we currently know in Medicare today, especially 
fee-for-service, and does Medicare Advantage provide a more 
timely response to fraud? And I think, Mr. Little, you kind of 
mentioned that, did you not?
    Mr. Little. Yes, sir. I get a monthly statement from Humana 
showing everything I spent and they caution you on the bottom 
if you have anything that you didn't have done, please call us 
immediately.
    Mr. Shimkus. Dr. Lew, do you want to jump in?
    Dr. Lew. Yes. I think that is the value of a population-
based payment. It is a fixed payment that forces us to manage 
the care quality, and so we contract with good providers that 
won't commit fraud, whereas you have got a fragmented fee-for-
service that incentivizes volume, a lot of potential for fraud.
    Mr. Shimkus. I appreciate it. Thank you, Mr. Chairman.
    Mr. Pitts. The chair thanks the gentleman and now 
recognizes the gentleman from Louisiana, Dr. Cassidy, 5 minutes 
for questions.
    Mr. Cassidy. Thank you, Mr. Chairman.
    I like Medicare Advantage because I think it aligns 
incentives. Ms. Stein, I am sure we can find horror stories 
with fee-for-service Medicare. I am a practicing doctor so I 
know some of those horror stories. But the nice thing I like is 
effectively it is a capitated payment which physicians are at 
risk. If they do what I think Dr. Lew's organizations do, they 
go two-sided risk with someone like Humana. So you align 
incentives and frankly you make money by keeping people out of 
the hospital and improving outcomes. If you don't, you lose 
them.
    Now, I am struck, Dr. Lew. I am so frustrated I can't open 
up my email account, but a physician practicing from southern 
California sent me a document about the dual-eligible project 
that is happening in southern California. And in this dual-
eligible project, so far, there is not a company which is 
certified. They all have the poor rating for quality and 
outcomes than the better rating. Now, that is not your 
organizations. This is something specifically set up for the 
dual-eligibles.
    And speaking to some folks like WellMed out of Austin, 
Texas, I gather that they selectively go after the dual-
eligibles, that they improve outcomes, that they are focusing 
resources knowing that if not, it breaks the bank. They are a 
two-sided risk and so with prospective assignment of patients 
and so that is where they earn the money, keeping that patient 
out of the hospital and in better health. Would you like to 
comment on that, please?
    Dr. Lew. Yes. Thank you, Mr. Cassidy. That is absolutely 
correct. In our model we don't make money unless we keep the 
population healthy. It is very simple.
    Mr. Cassidy. And the patient can change at the end of the 
year and you have quality indicators, so it is not like if you 
stiff them, you lose them, and if you stiff them, you get 
dinged.
    Dr. Lew. Right. There is transparency in quality metrics 
and so members can choose to opt out or switch to another plan.
    Mr. Cassidy. So what percent can you give me of a typical 
plan that you might represent would be dual-eligibles?
    Dr. Lew. Health Net. Is that what you mean? An actual plan?
    Mr. Cassidy. Medicare/Medicaid. Pick a typical plan that if 
dual-eligibles, would they be 10% of an enrollee group or 15%?
    Dr. Lew. OK. I would say out of the senior population it is 
probably 20%.
    Mr. Cassidy. OK. Now, a lot of these would be in the 
special needs plans as well?
    Dr. Lew. Special needs plan.
    Mr. Cassidy. Now, there has been specific cuts targeted to 
the special needs plans. I assume that that could in particular 
negatively impact folks who are most vulnerable. Is that a 
correct intuition?
    Dr. Lew. Definitely. I mean these patients, you know, by 
definition have more medical problems, chronic illness, chronic 
disease, and require a lot more intensive management. And so 
without an infrastructure to take care of them, those are the 
ones that are really going to be hurt.
    Mr. Cassidy. Well, and my concerns I think in some of the 
cuts they kind of make the home visit a second-class visit. 
Again, I treat lot of cirrhotics, and cirrhotics would 
typically be in a special needs plan. You want to go home and 
you want to look at their diet and you want to look at their 
cabinet. You want to see where their salt is coming from. 
Cirrhotics are very sensitive to salt overload. I kind of like 
that special needs visit, that home visit which looks at that.
    Again, any comments on the impact of decreasing the 
emphasis upon that?
    Dr. Lew. Yes. Well, that is again at a point--home visits 
for the special needs patient that are bed-bound or home-bound 
don't have transportation. It is essential that we get to the 
home and take care of them to look at, you know, cirrhotics 
that may have fluid overload and you have got to see what they 
are eating and what their diet is. It is important. You can 
assess a lot more from a patient in the house than you ever can 
in the clinic.
    Mr. Cassidy. I once visited a patient of mine and I saw he 
had a jar of salsa by his bed. I pointed out that salsa has a 
lot of salt and so, oh, really?
    Dr. Lew. Yes.
    Mr. Cassidy. I figure most men are pretty ignorant when it 
comes to their food and he was a man.
    OK. Now, Ms. Stein, you probably disagree with what I have 
been saying. What are your thoughts?
    Ms. Stein. My experience tells me, as does the research in 
report by CMS, that people with high medical needs and low 
income are disproportionately disenrolling from Medicare 
Advantage plans.
    And I don't think I am here to talk about horror stories. 
As I said earlier, I have no skin in this game. My job is 
solely to represent low-income----
    Mr. Cassidy. But in fairness, you are mentioning the person 
who went to Florida and his brain tumor wasn't covered.
    Ms. Stein. One of your colleagues referred to my office 
and, yes, there are problems in both models. But the point is 
that we are paying as taxpayers and your colleague earlier put 
up the pie chart which showed all the cost to Medicare. And the 
CBO says that we are spending as taxpayers $150 billion more 
than we would if these individuals were paid for in traditional 
Medicare.
    Mr. Cassidy. We can argue about that. I will point out--and 
I will finish with this, Mr. Chairman--that when Medicaid and 
Medicare pay differently, it disaggregates payment. When you 
disaggregate payment, you disaggregate care. So the dual-
eligibles are a particular interest of mine. That is why I have 
been looking at the demonstration projects in southern 
California. I am very disappointed that the companies that are 
running this are being rated so poorly, and I do contrast that 
with some of the folks who are doing kind of subcontracting for 
Humana and others and just seeing that they are getting 
superior outcomes. I think that kind of shows you the benefit 
of the special needs plans in Medicare Advantage.
    Ms. Stein. Actually, I suspect that my organization 
represents more dually eligible home health and nursing home 
organizations that anyone in the country. We have about 11,000 
open cases right now. I just completed a training seminar with 
all the home health agencies in Connecticut and one of the 
questions was do the rules with regard to coverage for home 
health--these are home health agencies--for people in 
traditional Medicare also apply for people in Medicare 
Advantage plans? And I said of course, yes. And there was 
general agreement in the group of home health agency providers 
that they have a much greater difficulty getting access to 
coverage admission, particularly from the community for people 
in Medicare Advantage plans----
    Mr. Cassidy. We are out of time----
    Ms. Stein [continuing]. And earlier----
    Mr. Cassidy [continuing]. But let me just say the nice 
thing about it is that if the beneficiary doesn't like the MA 
plan, they can change the next year. And that is the wonderful 
thing about markets. We have to yield back. I am sorry.
    Mr. Pitts. The chair thanks the gentleman.
    Ms. Stein. That is only helpful if the person can survive 
the year and that often doesn't happen.
    Mr. Pitts. The gentleman's time is expired.
    The chair recognizes the gentleman from New York, Mr. 
Engel, 5 minutes for questions.
    Mr. Engel. Thank you very much, Mr. Chairman and Mr. 
Pallone. Thank you for holding today's hearing.
    Let me try to put some things in perspective here. In 2009, 
prior to the passage of the Affordable Care Act, the rates paid 
to Medicare Advantage plans exceeded that of traditional 
Medicare by approximately 18%. The Affordable Care Act required 
changes to Medicare Advantage payment rates to better align 
them with the costs associated with traditional Medicare. These 
changes were estimated by the Congressional Budget Office to 
save over $135 billion over 10 years, something that I think my 
Republican friends would love. The ACA did not make any cuts to 
the benefits guaranteed to all Americans over the age of 65, 
whether or not they are in traditional Medicare or Medicare 
Advantage.
    So I think it is worth noting that while Republicans are 
aghast at this Administration that is moving forward and 
implementing the provider payment cuts included in the 
Affordable Care Act, my Republican friends included and voted 
in support of these very same provider payment cuts and their 
budget proposals for the last several years. So to act 
horrified about the changes that are being made to Medicare 
Advantage now after voting to support them for years strikes me 
as being disingenuous.
    I know in the past there have been concerns about Medicare 
Advantage plans cherry picking and sticking to enroll the 
healthiest of seniors leaving sicker beneficiaries enrolled in 
traditional Medicare. Ms. Stein, in your written testimony you 
mentioned a 2012 report from CMS that found disenrollment by 
individuals from Medicare Advantage plans back to traditional 
Medicare--and I am going to quote what you wrote--``continues 
to occur disproportionately among high-cost beneficiaries, 
raising concerns about care experiences among sicker enrollees 
and increased costs to Medicare.''
    So let me ask you, given your organization often assists 
patients when they have issues with the Medicare program, can 
you elaborate on some of the challenges sicker beneficiaries 
sometimes have with their Medicare Advantage plans?
    Ms. Stein. Yes, sir. Thank you very much.
    As Dr. Van de Water said a little earlier, there isn't a 
lot of data about actual healthcare outcomes, but we do know 
about disenrollment patterns, and you just expressed one of 
them, which is that people at risk, low-income and people who 
are ill, tend to disenroll from Medicare Advantage plans. And 
that is because they have much more difficulty in accessing a 
variety of specialists, different hospitals where they might 
get the treatment they want, being able to move around the 
country to be near their families because there are network 
limitations, and a variety of other problems.
    And we very, very often get calls from people who think 
that because the program itself is called Medicare Advantage, 
that they have got something on top of their Medicare. And when 
they find that they are ill and they need to go see a 
specialist and the doctor isn't in their network, they are 
terribly confused and didn't understand that when they enrolled 
initially.
    And while I don't think that Medicare Advantage plans are 
purposely closing their doors to people with particular 
conditions, we do know that of the 2,250 doctors and hospitals 
that were terminated in Connecticut alone, a very small State, 
this year by an MA plan, a lot of specialists who provide care 
for long-term illnesses, for instance, nephrologists were on 
the termination list and particularly in areas of low-income in 
Bridgeport and other areas in our State leading to significant 
problems for people who are ill with chronic conditions in MA 
plans.
    Mr. Engel. Well, thank you. My home State of New York, 
which is of course right next to Connecticut, we have countless 
doctors, hospitals, and health insurance plans that have always 
made it their mission to provide quality care to all New 
Yorkers regardless of whether or not their patients have 
private insurance, Medicaid, Medicare, or pay for their 
healthcare costs out of their own pockets.
    And we also have several Medicare Advantage plans which 
focus on providing Medicare coverage for the dual-eligible and 
low-income population in particular, often with more than half 
of their plan participants eligible for Medicare and Medicaid 
or receiving a low-income subsidy. Yet an overwhelming number 
of these plans have found it challenging to achieve the four 
stars needed to earn a bonus in 2015 despite having scored high 
on improvement measures.
    The let me again ask you, Ms. Stein or Mr. Van de Water, 
how can we better incentivize Medicare Advantage plans to take 
on more challenging beneficiaries so that these patients enjoy 
the same access to high-quality plans and choices available to 
healthier, more well-off beneficiaries?
    Mr. Van de Water. Well, I think the improved risk 
adjustment, which we have talked about this morning, is 
actually one of those ways. What we want to do is make sure 
that health plans are encouraged to attract customers through 
providing better quality service and not to make money through 
attracting healthier beneficiaries. So while this has been, you 
know, criticized on the one hand, actually I think it is a very 
positive step.
    Mr. Engel. Thank you. Thank you, Mr. Chairman.
    Ms. Stein. I also suggest that----
    Mr. Pitts. The chair thanks the gentleman.
    Ms. Stein [continuing]. I think it was a MedPAC study in 
March of 2013 that showed that about 20% of dual-eligible 
special MA plans did score well on the star model rating, and I 
think that we should look at what they are doing and encourage 
the other plans to do that because apparently it is possible to 
score well on that rating.
    Mr. Pitts. The gentleman's time is expired.
    Mr. Engel. Thank you.
    Mr. Pitts. The chair recognizes the gentleman from 
Virginia, Mr. Griffith, 5 minutes for questions.
    Mr. Griffith. Thank you, Mr. Chairman, I would say to you 
all, and appreciate you all being here. I would say that my 83-
year-old mother likes her Medicare Advantage plan. She has had 
to pay a little bit more for it than she had in some of the 
previous years. And even though we had Secretary Sebelius here 
April of last year saying that the plans were costing less 
nationwide, that hasn't been my mother's experience.
    I surveyed, and it was a very small group of constituents 
in my district that responded, but they responded that theirs 
were either staying the same or going up. So it does appear 
that there are some increases. Has that been your experience as 
well, Mr. Little?
    Mr. Little. They didn't increase the base but I have 
noticed this year that I am a paying 25% more for my 
prescriptions.
    Mr. Griffith. OK. I understand that. Mr. Giese, you have 
been kind enough. I am just wondering if there is something we 
haven't touched on? I have got some questions for Dr. Lew; I 
don't have any questions for you, but I thought maybe there was 
something that you have been sitting here that you wanted to 
say that you haven't had an opportunity to get out and I am 
going to give you that opportunity.
    Mr. Giese. No, not really.
    Mr. Griffith. All right. I appreciate that. You know, we 
sometimes have folks here and you have a lot of very good 
witnesses and then somebody, because of the way the flow of the 
discussion is going, they get left out and I always hate to see 
that because I know that your time is just as valuable as 
everybody else's. So I do appreciate that.
    Mr. Giese. A lot of people have read the report, I can 
tell, and have quoted it and so----
    Mr. Griffith. Very good.
    Dr. Lew, according to the CBO, the ACA cut more than $300 
billion from Medicare Advantage programs to spend on new 
government programs that weren't necessarily for seniors. What 
types of important health benefits do you think that the MA 
plans help provide the seniors that would have to be cut if the 
proposed cuts occur?
    Dr. Lew. Well, we have to look at what the investment from 
prior years did into building up the model----
    Mr. Griffith. Yes.
    Dr. Lew [continuing]. The coordinator care model and all 
the additional benefits that the seniors get. And we would have 
to look at how can we even sustain that with the 10% cuts over 
the next 2 years? So you are looking at jeopardizing programs, 
reduced payments to our physicians, and subsequently, it could 
impact care to the seniors.
    Mr. Griffith. Now, I don't know anything about the 
Connecticut situation, but with those 2,200 some healthcare 
providers that were eliminated from an MA plan there, is it at 
least reasonable to assume that maybe they couldn't afford to 
pay those doctors the rates that they previously were paying 
and that maybe one of the reasons--I know it has got to be more 
complicated than that--but could that be one of the reasons 
why?
    Dr. Lew. That is likely one of the reasons, sure.
    Mr. Griffith. Yes. In a recent letter, more than 140 
physician groups called on Medicare officials to hold MA rates 
flat. In the letter they said, ``cutting Medicare Advantage 
year after year will result in deterioration of the care 
coordination infrastructure and seniors will see a 
deterioration of benefits, and we are worried we will 
ultimately move back into fragmented fee-for-service care 
delivery models. This would be a bad outcome for seniors and a 
step backward on the healthcare delivery system.'' You have 
been saying the same thing----
    Dr. Lew. Saying exactly that same thing, yes.
    Mr. Griffith. And can you elaborate on that some?
    Dr. Lew. Yes. Well, I think that rather than going 
backwards is we need to use the platform that we have built to 
build more, to build more coordinated care. And even some of 
the newer models within fee-for-service such as ACOs, medical 
homes, you know, how can we take all that we have learned from 
the Medicare Advantage coordinated care model, how can we use 
that to build the newer models that we are trying to do in fee-
for-service?
    But this impacts all of the healthcare delivery system. It 
is not just Medicare Advantage. It is care for everybody in the 
country. And so, you know, if we want to really transform the 
delivery system, we don't want to touch Medicare Advantage and 
all that we have built.
    Mr. Griffith. All right. I appreciate that very much.
    Thank you all again, and, Mr. Chairman, I yield back.
    Mr. Pitts. The chair thanks the gentleman and now 
recognizes the ranking member of the full committee, Mr. 
Waxman, 5 minutes for questions.
    Mr. Waxman. Thank you very much, Mr. Chairman.
    I want to point out that there are a lot of things going on 
at the same time, additional subcommittee and another committee 
that I am involved with, so I haven't been here the full time.
    But, Mr. Chairman, I would like to ask unanimous consent to 
insert my opening statement in the record.
    Mr. Pitts. Without objection, so ordered.
    [The prepared statement of Mr. Waxman follows:]

               Prepared statement of Hon. Henry A. Waxman

    The topic of today's hearing started out as a look at 
Medicare Advantage. But now we are also considering a hodge 
podge of GOP bills that do not improve the Medicare Advantage 
program. I will return to those bills, but first I want to 
focus on the state of the Medicare Advantage program itself.
    In the five years since the enactment of the Affordable 
Care Act, the Obama Administration has accomplished what the 
Republicans couldn't accomplish in the 12 preceding years--even 
with tens of billions of overpayments that drained the Medicare 
Trust Fund.
    As a result of the ACA, the Medicare Advantage program is 
stronger than ever. Enrollment is at an all-time high and 
growing, premiums have declined, and benefits have improved 
along with the health of the Medicare Trust fund--while we have 
reduced overpayments and improved efficiency.
    Chicken Little, the sky is NOT falling.
    Mr. Chairman, I want to put a Democratic Staff memo into 
the record that details this history of exaggerated claims by 
some in the industry and critics of the ACA.
    Since the ACA was enacted, premiums are down by 10% and 
enrollment is up by 30%. Since CMS released its 2015 payment 
notice, independent analysts and the financial markets have 
expressed an optimistic view of Medicare Advantage plans. 
Insurance company stocks have risen rapidly and Medicare 
Advantage is poised for growth, even as we gradually reduce the 
overpayments they have received for years.
    Why did the ACA address Medicare Advantage over-payments? 
At the time, Medicare was paying on average $800 more per year 
for beneficiaries enrolled in private plans. Those excess 
payments drained the Trust Fund and drove up costs for all of 
Medicare.
    Even today, the overpayments are not yet completely phased 
out, and this year alone Medicare is paying on average 106% 
more than for care in Medicare Advantage. And as a result, ALL 
beneficiaries pay higher Part B premium costs.
    Seniors also didn't have a lot of confidence in the 
Medicare Advantage program before the ACA. Too many plan 
choices made picking one confusing. Differences among plans--on 
quality or value--were too difficult to discern. Consumer 
confidence was not strong as patients had no guarantee plans 
were even spending a minimum amount of their premiums on 
medical care.
    The ACA and the Obama Administration addressed that 
situation too.
    We need Medicare to be solvent for beneficiaries today and 
in the future. That's what the ACA did, and the Administration 
should be staying the course to improve quality and value.
    Some of the bills considered today turn back the clock on 
Medicare Advantage.
    The two tax bills would encourage healthier and wealthier 
people to switch to high-deductible health plans for tax 
sheltering purposes.
    Another bill would bar CMS from disapproving private 
insurance company marketing material--no matter how misleading, 
incomplete, or biased. A fourth bill would reinstate the second 
open enrollment period for Medicare Advantage--which was 
eliminated because it caused confusion for beneficiaries. And 
finally one of the bills eliminates the ACA's cost sharing 
reductions, which provide critical protections for lower income 
Americans, with the vague goal of giving those funds to 
Medicare Advantage plans.
    All of these bills have significant problems and I cannot 
support them as drafted.
    I hope today's hearing takes an honest look at the healthy 
state of the Medicare Advantage program. Demonizing the 
Affordable Care Act and falsely claiming that the sky is 
falling is not a productive use of our time.

    Mr. Waxman. And there is an awful lot of fear-mongering 
going on about Medicare Advantage program and it is not based 
on the facts. The Democratic staff released a memo this 
morning. The first one is that independent analysts and the 
financial markets do not agree with the industry's dire claims 
about the future of Medicare Advantage. And then the second 
point is that this scare campaign is not the first time the 
industry has cried wolf about commonsense reforms being flat 
wrong. The memo looks at the facts, not anecdotes or claims by 
industry-backed groups.
    And here are the facts we point out: Since the ACA was 
enacted, Medicare Advantage premiums are down almost 10% and 
enrollment is up 30%. After CMS released its payment notice and 
the industry claimed the sky was falling, independent experts 
examine the issue and found that the industry was wrong. They 
predict the future is bright for Medicare Advantage, and as a 
result, insurer stock rises have risen, not fallen, since the 
CMS announcement.
    And this is not the first time the industry has cried wolf 
on Medicare Advantage or other commonsense reforms. They said 
that the ACA would destroy Medicare Advantage but it is 
stronger than ever. They said the requirement that they pay 
back rebates if they spend more than 20% of premiums on profits 
and overhead would put patients at risk and it did not. 
Instead, it has resulted in more than $1.5 billion in rebates 
and $5 billion in lower premiums.
    Mr. Chairman, I would like to ask unanimous consent to 
insert the memo I referred to in the record.
    Mr. Pitts. Without objection, so ordered.
    [The information appears at the conclusion of the hearing.]
    Mr. Waxman. And the next thing I want to ask in the time I 
have is, Mr. Van de Water, we have heard a lot today about the 
Medicare Advantage changes in the Affordable Care Act. These 
changes strengthen the program in my view and help to improve 
the solvency of the Medicare trust fund as well preserving 
Medicare's health for a number of years. If you listen to my 
colleagues on the other side of the aisle, you would think 
these cuts were killing the program, but in fact, this has not 
been the case. Could you comment on what has happened in 
Medicare Advantage enrollment and premiums since the Affordable 
Care Act was enacted?
    Mr. Van de Water. Yes, Mr. Waxman, I would be happy to. In 
fact, in my prepared statement I cite some of the same figures 
that you have just reiterated about how enrollment has indeed 
grown over the past several years and how premiums have 
actually gone down. And you are absolutely right that the 
efficiencies in Medicare payments that were enacted as part of 
the Affordable Care Act had indeed made an important 
contribution to strengthening Medicare's Hospital Insurance 
trust fund. My recollection is that the CBO estimate is that 
the Affordable Care Act extended the life of the Hospital 
Insurance trust fund by roughly 8 years.
    Mr. Waxman. Well, if the health insurance companies like 
getting more money and the 30% of beneficiaries who are in 
these plans are generally happy, why not keep overpaying them?
    Mr. Van de Water. Well, one of your colleagues on the other 
side of the aisle showed a chart a few minutes ago showing 
that, you know, Medicare, as we all know, is a substantial part 
of the federal budget and we are concerned about reducing 
projected large deficits. So we----
    Mr. Waxman. Well, that gives us ideas about how we should 
make the elderly pay more for their healthcare costs but they 
don't want to reduce the cuts of overpayments to these Medicare 
Advantage plans.
    We have heard a great deal about ObamaCare cuts to Medicare 
Advantage, but didn't the Republican budget led by 
Representative Paul Ryan include the very same so-called cuts 
that were in the Affordable Care Act?
    Mr. Van de Water. Yes, it did.
    Mr. Waxman. I have been in Congress for 40 years. That is 
why I am retiring, among other reasons. And I remember when we 
first made Medicare managed plans available for Medicare 
reimbursement if the beneficiary chose to go with such plans. 
And we had it less than what the fee-for-service would be 
because they selected out some of the lowest risk people and 
the fee-for-service were covering the highest risk. We went 
from a little less than what fee-for-service was to way more 
than the fee-for-service without doubt in my opinion as I look 
at this program.
    Medicare Advantage is important. It serves a very useful 
purpose to beneficiaries free to choose it and many of them are 
very happy, but that is just not a reason to overpay them.
    Thank you, Mr. Chairman. I yield back my time.
    Mr. Pitts. The chair thanks the gentleman and now 
recognizes the gentleman from Florida, Mr. Bilirakis, 5 minutes 
for questions.
    Mr. Bilirakis. Thank you, Mr. Chairman. I appreciate it 
very much. And I have been going back and forth as well from 
CMT, but this is a very important hearing.
    Mr. Giese, 40 to 45% of my seniors in my district--and I 
have over 100,000 seniors in the Tampa area; I represent an 
area, the 12th Congressional District of Florida--on Medicare 
Advantage, 40 to 45%. That is higher than the national average. 
So, they really love their plans, and they love the fact that 
they have all these choices.
    I am concerned with some of the changes that CMS is doing 
to their risk model. It seems to me that CMS is ignoring or not 
factoring in certain chronic conditions when determining their 
risk model. When considering the risk adjustments, CMS seems to 
ignore or not count patients with certain chronic conditions. 
What is the impact of the 2014 changes to the risk model on 
sick and frail Medicare beneficiaries and particularly to those 
on the Special Needs Plans area?
    Mr. Giese. Well, changes to the risk model result in 
reductions in payments to plans, which means the plans have to 
react by increasing benefits to everyone, but in particular to 
the poor and actually sicker people who pay the cost-sharing. 
So these people have to pay more as a result of changes to the 
risk adjustment model.
    Mr. Bilirakis. Thank you. The next question is for Dr. Lew. 
In the 2015 Advance Notice, CMS eliminated the home health 
assistance assessments as part of the risk model. As I 
understand their change, CMS would only count the diagnosis 
identified in a home visit if and when it was confirmed in a 
later in-office doctor's visit. Can you explain the dangers of 
the payment change related to the home-based health 
assessments, especially for the elderly?
    Dr. Lew. Yes, thank you. As I had mentioned, home visits 
are part of the continuum of care and you take out home care 
and the benefits, it leaves a gap. If you are only going to 
count a visit or a diagnosis obtained at a visit if the patient 
is followed up in the office, a lot of these patients go to the 
hospital because, you know, that is the value of going to the 
home, early detection, catching something as opposed to a 911 
phone call and something a lot more serious. The patient can be 
sent to the hospital for care.
    So, you know, to only count a diagnosis where the patient 
has a follow-up visit in the doctor's office, that is very 
narrow in scope and it really discounts the advantage and the 
benefits of a home visit.
    Mr. Bilirakis. Thank you very much.
    Mr. Giese, this question is for you. For all these cuts to 
Medicare Advantage, these plans are dependent on the Star 
Ratings to survive. However, it seems to me that Special Needs 
Plans may be disadvantaged because of their unique population. 
Can you describe some of the challenges that Special Needs 
Plans face in the Star Rating program?
    Mr. Giese. Sure. First of all, a lot of the star ratings 
are based on survey data and sometimes it is hard to get to 
these people. Some of them are homeless, some of them, they 
don't know where they live. So it is hard to find them in these 
surveys. So special needs plans tend to have lower star ratings 
because we can't find the people and they don't respond well to 
the survey as well.
    Mr. Bilirakis. OK. Now, for Dr. Lew and Mr. Giese again, if 
the proposed cuts occur, what kind of benefits would no longer 
be provided to seniors in your opinion, an example of some of 
the benefits that they might lose if the cuts take place?
    Dr. Lew. Well, from our delivery side, you know, I think 
you are going to jeopardize all of the extra home visits 
perhaps. I mean that would be one example. I mean we have a lot 
of programs built around, again, the continuum of care, visits 
from pharmacists and social workers, which have sufficient 
costs. And, you know, if we are on a budget and our revenue is 
reduced, that is obviously going to jeopardize a lot of our 
programs.
    Mr. Giese. Remember that cuts and benefits are not just 
additional benefits over Part A and B; they are also changes in 
cost-sharing. So if the plan has to increase their cost-
sharing, that is a reduction in benefits.
    Mr. Bilirakis. OK. Very good. Thank you very much. I 
appreciate it.
    I yield back, Mr. Chairman.
    Mr. Pitts. The chair thanks the gentleman. That concludes 
the questions from the Members who are present. There are 
several committee meetings going on so other Members will have 
questions. We may have follow-up questions. We will submit 
those to you in writing. We ask that you promptly respond.
    And I recognize the ranking member for a UC request.
    Mr. Pallone. Mr. Chairman, I would just ask unanimous 
consent to submit for the record some Democratic comments in a 
letter to CMS.
    Mr. Pitts. Without objection, so ordered.
    [The information appears at the conclusion of the hearing.]
    Mr. Pallone. Thank you.
    Mr. Pitts. Thank you very much for your testimony. This is 
a very important issue and we appreciate you coming today.
    And I remind Members that they have 10 business days to 
submit questions for the record. Members should submit their 
questions by the close of business on Thursday, March 27.
    Without objection, the subcommittee is adjourned.
    [Whereupon, at 12:18 p.m., the subcommittee was adjourned.]
    [Material submitted for inclusion in the record follows:]

                 Prepared statement of Hon. Fred Upton

    Today we examine the future of the popular Medicare 
Advantage program under the president's health care law. Before 
this law passed, the president repeatedly promised, ``If you 
like your health care plan, you will be able to keep your 
health care plan, period. Nobody is going to take it away from 
you, no matter what.'' Unfortunately, many seniors who like the 
Medicare Advantage plan they have, are joining the millions of 
Americans who have learned the hard way that this is a promise 
the president cannot keep.
    The president's health care law raided more than $700 
billion from Medicare to spend on new government programs that 
do not improve health care for seniors. More than $300 billion 
of this came from the Medicare Advantage program. These cuts 
threaten the high quality, affordable health coverage that 
seniors enjoy. As numerous media outlets have already reported, 
Medicare Advantage plans have been forced to reduce seniors' 
benefits, increase their premiums, and reduce plan offerings in 
light of these cuts. Sadly, the situation is only going to get 
worse as only about 20% of the health law's cuts to Medicare 
Advantage have already been realized, with significant cuts in 
the hundreds of millions of dollars still on the horizon.
    According to Medicare data, in 2014 Medicare Advantage 
enrollment will total approximately 15 million enrollees--
roughly 29% of seniors in Medicare. The MA program also enjoys 
high popularity among seniors, evidenced by CMS' figures that 
MA enrollment as a percentage of total Medicare enrollment has 
increased by 173% over the past 10 years.
    Medicare Advantage provides millions of seniors better 
health care than traditional Medicare. MA plans provide seniors 
a cap against unlimited cost-sharing in the case of 
catastrophic medical event or hospitalization. The plans 
provide seniors coordinated care with medical teams working 
together, provide disease management programs, hotlines to 
access medical advice, and tools to help better manage chronic 
disease. All of these are benefits that traditional Medicare 
does not offer its patients. As a result, it is no surprise 
that studies and clinical research shows that seniors with MA 
plans have lower rates of hospitalization and emergency 
department utilization.
    Surveys also confirm that seniors are happy with their high 
quality, affordable Medicare Advantage options. Seniors who 
have MA plans they like should be able to keep them--just as 
the president promised so many times. Today, we will hear from 
witnesses on this important issue, including several of my 
colleagues who have brought forth ideas to improve the MA 
program and keep the promise to seniors. I appreciate their 
work.
    I want to thank Rep. Dennis Ross for his bill, H.R. 4180, 
which would permit rollovers from health savings accounts to 
Medicare Advantage savings accounts.
    I want to thank Rep. Erik Paulsen for his bill, H.R. 4177, 
which would allow Medicare beneficiaries participating in a 
Medicare Advantage savings account to contribute their own 
money to such an account.
    I want to thank Rep. Keith Rothfus for his bill, H.R. 3392, 
which would restore the Medicare Advantage open enrollment 
period that existed prior to the health law. This will once 
again allow seniors to try out their newly selected plan from 
January to March and make one switch if they discover the 
selected plan is not meeting their needs.
    I want to thank committee member Rep. Gus Bilirakis for his 
bill, H.R. 3392, which would establish a patient-assignment 
program in MA and Part D drug plans to protect patients who 
have demonstrated drug-abuse behavior and would help prevent 
drug diversion.
    I want to thank Rep. Jackie Walorski for her bill, The 
Advantage of Medicare Advantage for Minorities and Low-Income 
Seniors Act, which would require the Government Accountability 
Office to use data reported to the government to produce a 
study showing how the Medicare Advantage program is 
particularly beneficial to participants of lower-income and 
ethnic or racial minority status.
    I want to thank Rep. Bill Johnson for his bill, H.R. 4196, 
which would eliminate Obamacare's cost-sharing subsidies and 
reinvest the savings from that policy in the Medicare Advantage 
program.
    I want to thank Rep. Jeff Denham for his bill, H.R. 4201, 
which would enable Medicare Advantage plans to inform potential 
enrollees of how Obamacare's cuts to the program may impact 
their choices of plans.
    I commend all of these members for their contributions in 
the effort to keep the promise to America's seniors.
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