[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]
SETTING FISCAL PRIORITIES
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON HEALTH
OF THE
COMMITTEE ON ENERGY AND COMMERCE
HOUSE OF REPRESENTATIVES
ONE HUNDRED THIRTEENTH CONGRESS
SECOND SESSION
__________
DECEMBER 9, 2014
__________
Serial No. 113-185
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
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 FRANK PALLONE, Jr., New Jersey
JOHN SHIMKUS, Illinois BOBBY L. RUSH, Illinois
JOSEPH R. PITTS, Pennsylvania ANNA G. ESHOO, California
GREG WALDEN, Oregon ELIOT L. ENGEL, New York
LEE TERRY, Nebraska GENE GREEN, Texas
MIKE ROGERS, Michigan DIANA DeGETTE, Colorado
TIM MURPHY, Pennsylvania LOIS CAPPS, California
MICHAEL C. BURGESS, Texas MICHAEL F. DOYLE, Pennsylvania
MARSHA BLACKBURN, Tennessee JANICE D. SCHAKOWSKY, Illinois
Vice Chairman JIM MATHESON, Utah
PHIL GINGREY, Georgia G.K. BUTTERFIELD, North Carolina
STEVE SCALISE, Louisiana JOHN BARROW, Georgia
ROBERT E. LATTA, Ohio DORIS O. MATSUI, California
CATHY McMORRIS RODGERS, Washington DONNA M. CHRISTENSEN, Virgin
GREGG HARPER, Mississippi Islands
LEONARD LANCE, New Jersey KATHY CASTOR, Florida
BILL CASSIDY, Louisiana JOHN P. SARBANES, Maryland
BRETT GUTHRIE, Kentucky JERRY McNERNEY, California
PETE OLSON, Texas BRUCE L. BRALEY, Iowa
DAVID B. McKINLEY, West Virginia PETER WELCH, Vermont
CORY GARDNER, Colorado BEN RAY LUJAN, New Mexico
MIKE POMPEO, Kansas PAUL TONKO, New York
ADAM KINZINGER, Illinois JOHN A. YARMUTH, Kentucky
H. MORGAN GRIFFITH, Virginia
GUS M. BILIRAKIS, Florida
BILL JOHNSON, Ohio
BILLY LONG, Missouri
RENEE L. ELLMERS, North Carolina
_____
Subcommittee on Health
JOSEPH R. PITTS, Pennsylvania
Chairman
MICHAEL C. BURGESS, Texas FRANK PALLONE, Jr., New Jersey
Vice Chairman Ranking Member
ED WHITFIELD, Kentucky JOHN D. DINGELL, Michigan
JOHN SHIMKUS, Illinois ELIOT L. ENGEL, New York
MIKE ROGERS, Michigan LOIS CAPPS, California
TIM MURPHY, Pennsylvania JANICE D. SCHAKOWSKY, Illinois
MARSHA BLACKBURN, Tennessee JIM MATHESON, Utah
PHIL GINGREY, Georgia GENE GREEN, Texas
CATHY McMORRIS RODGERS, Washington G.K. BUTTERFIELD, North Carolina
LEONARD LANCE, New Jersey JOHN BARROW, Georgia
BILL CASSIDY, Louisiana DONNA M. CHRISTENSEN, Virgin
BRETT GUTHRIE, Kentucky Islands
H. MORGAN GRIFFITH, Virginia KATHY CASTOR, Florida
GUS M. BILIRAKIS, Florida JOHN P. SARBANES, Maryland
RENEE L. ELLMERS, North Carolina HENRY A. WAXMAN, California (ex
JOE BARTON, Texas officio)
FRED UPTON, Michigan (ex officio)
(ii)
C O N T E N T S
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Page
Hon. Joseph R. Pitts, a Representative in Congress from the
Commonwealth of Pennsylvania, opening statement................ 1
Prepared statement........................................... 3
Hon. Frank Pallone, Jr., a Representative in Congress from the
State of New Jersey, opening statement......................... 3
Hon. Gene Green, a Representative in Congress from the State of
Texas, opening statement....................................... 5
Hon. Michael C. Burgess, a Representative in Congress from the
State of Texas, opening statement.............................. 5
Hon. Fred Upton, a Representative in Congress from the State of
Michigan, prepared statement................................... 131
Hon. Henry A. Waxman, a Representative in Congress from the State
of California, prepared statement.............................. 134
Witnesses
Mark E. Miller, Executive Director, Medicare Payment Advisory
Commission..................................................... 6
Prepared statement........................................... 9
Answers to submitted questions............................... 136
Christopher W. Holt, Director of Health Care Policy, American
Action Forum................................................... 72
Prepared statement........................................... 74
Answers to submitted questions............................... 147
Marc Goldwein, Senior Policy Director, Committee for a
Responsible Federal Budget..................................... 80
Prepared statement........................................... 82
Answers to submitted questions............................... 154
Judy Feder, Professor of Public Policy, Georgetown Public Policy
Institute...................................................... 109
Prepared statement........................................... 111
Answers to submitted questions............................... 172
Submitted Material
Testimony of the Coalition to Preserve Rehabilitation, December
9, 2014, by Judith Stein, et al., submitted by Mr. Burgess..... 28
Report of the Medicare Rights Center, ``A Winning Strategy for
Medicare Savings: Better Prices on Prescription Drugs,'' July
2014, by Stacy Sanders and Ben Veghte, submitted by Ms.
Schakowsky..................................................... 48
Report, ``What Happens to Payments to Health Care Providers
Participating in Medicare When the Medicare HI Trust Fund
Reaches Exhaustion?,'' submitted by Mr. Gingrey................ 56
Issue Brief of the Leadership Council of Aging Organizations,
``Altering Extra Help Copayments: A Flawed Savings Approach,''
January 2014, submitted by Mr. Pallone......................... 118
SETTING FISCAL PRIORITIES
----------
TUESDAY, DECEMBER 9, 2014
House of Representatives,
Subcommittee on Health,
Committee on Energy and Commerce,
Washington, DC
The subcommittee met, pursuant to call, at 10:30 a.m., in
room 2123, Rayburn House Office Building, Hon. Joseph R. Pitts
(chairman of the subcommittee) presiding.
Members present: Representatives Pitts, Burgess, Shimkus,
Murphy, Blackburn, Gingrey, McMorris Rodgers, Lance, Griffith,
Bilirakis, Ellmers, Pallone, Engel, Schakowski, Green, Barrow,
Castor, and Sarbanes.
Staff present: Sean Bonyun, Communicatons Director;
Leighton Brown, Press Assistant; Noelle Clemente, Press
Secretary; Paul Edattel, Professional Staff Member, Health;
Brad Grantz, Policy Coordinator, Oversight and Investigations;
Sydne Harwick, Legislative Clerk; Robert Horne, Professional
Staff Member, Health; Michelle Rosenberg, GAO Detailee, Health;
Chris Sarley, Policy Coordinator, Environment and the Economy;
Adrianna Simonelli, Legislative Clerk; Heidi Stirrup, Policy
Coordinator, Health; Josh Trent, Professional Staff Member,
Health; Tom Wilbur, Digital Media Advisor; Ziky Ababiya,
Democratic Staff Assistant; Eddie Garcia, Democratic
Professional Staff Member; Kaycee Glavich, Democratic GAO
Detailee; and Karen Nelson, Democratic Deputy Staff Director,
Health.
Mr. Pitts. The subcommittee will come to order. The Chair
will recognize himself for an opening statement.
OPENING STATEMENT OF HON. JOSEPH R. PITTS, A REPRESENTATIVE IN
CONGRESS FROM THE COMMONWEALTH OF PENNSYLVANIA
Despite some recent progress in reducing the deficit, the
Federal Government faces enormous budgetary challenges. The
Congressional Budget Office projects that the annual Federal
budget deficit will once again approach the $1 trillion mark in
a few short years. At the end of November, the Federal debt
surpassed $18 trillion for the first time.
The consequences associated with the Federal Government
spending and debt problem can't be overstated. In fact, the
former Chairman of the Joint Chiefs of Staff concluded that,
quote, ``The single biggest threat to our national security is
our debt,'' end quote. Federal spending on healthcare programs
is the major driver of the spending and debt challenge that
America confronts.
Today's hearing is a critical step as the committee
approaches the 114th Congress and considers proposals to tackle
this problem. Our biggest challenge is mandatory spending,
particularly Medicare and Medicaid, which together accounted
for 25 percent of all Federal spending in fiscal year 2013.
Medicare is on an unsustainable trajectory. In fiscal year
2014, it covered some 54 million people at a cost of
approximately $618 billion. According to the 2014 Medicare
trustees report, the program will become insolvent in 2030, in
just 15 years. If Medicare spending accelerates in coming
years, as many economists expect, then Medicare's insolvency
could come much sooner.
Medicaid expenditures are set to increase dramatically as a
result of the Affordable Care Act's Medicaid expansion.
Spending on the program is set to double over the next decade,
even though it already comprises one in every four dollars in
an average State budget.
These programs need to be strengthened and modernized, not
just because millions of Americans depend on them for their
health care, but also because out-of-control entitlement
spending is crowding out other important priorities. For
example, researchers, scientists, patient advocates, and many
others have consistently told the committee that Congress
should consider stabilizing and strengthening the National
Institutes of Health as part of the 21st Century Cures
Initiative. The NIH and other discretionary program priorities
will continue to face budgetary challenges if entitlement
program spending continues to take a larger and larger share of
the budget.
The late Democratic Senator Paul Simon spoke to this larger
issue when he said, quote, ``A rising tide of red ink sinks all
boats,'' closed quote. The Federal Government's mandatory
spending on entitlement programs threatens Congress'
responsibility to spend dollars on programs like the NIH. We
need to consider solutions so that we can best target resources
to these areas of priority.
Today's hearing is also timely in another respect. Next
year, Congress faces a number of important funding cliffs. In
March, Congress will need to confront the Medicare physician
payment cliff and try to enact a permanent solution to the
sustainable growth rate or SGR. In addition, the Affordable
Care Act created a funding cliff for the States Children's
Health Insurance Program. Funding for the program ends in
September.
If Congress is going to tackle these problems and others
facing the next Congress, we will need to come up with
responsible ways to pay for these issues. Rather than turning
to blunt tools like the Medicare sequester, we need policies
that drive reform and savings that make sense. In addition,
given that the Affordable Care Act has been the law for over 4
years, targeted reductions to the ACA must be on the table as
we set fiscal priorities. I hope today serves as a catalyst to
continue these important discussions about setting fiscal
priorities.
I would like to welcome all of our witnesses on both panels
today. I look forward to your testimony, to your
recommendations on how to strength and save these critical
programs.
[The prepared statement of Mr. Pitts follows:]
Prepared statement of Hon. Joseph R. Pitts
Despite some recent progress in reducing the deficit, the
Federal Government faces enormous budgetary challenges. The
Congressional Budget Office projects that the annual Federal
budget deficit will once again approach the $1 trillion mark in
a few short years. At the end of November, the Federal debt
surpassed $18 trillion for the first time.
The consequences associated with the Federal Government's
spending and debt problem can't be overstated. In fact, the
former Chairman of the Joint Chiefs of Staff concluded that
``the single biggest threat to our national security is our
debt.''
Federal spending on healthcare programs is the major driver
of the spending and debt challenge that America confronts.
Today's hearing is a critical step as the committee approaches
the 114th Congress and considers proposals to tackle this
problem.
Our biggest challenge is mandatory spending, particularly
Medicare and Medicaid, which together accounted for 25 percent
of all Federal spending in FY2013.
Medicare is on an unsustainable trajectory. In FY2014, it
covered some 54 million people at a cost of approximately $618
billion. According to the 2014 Medicare Trustees report, the
program will become insolvent in 2030, in just 15 years. If
Medicare spending accelerates in coming years--as many
economists expect--then Medicare's insolvency could come much
sooner.
Medicaid expenditures are set to increase dramatically as a
result of the Affordable Care Act's Medicaid expansion.
Spending on the program is set to double over the next decade,
even though it already comprises one of every four dollars in
an average State budget.
These programs need to be strengthened and modernized, not
just because millions of Americans depend on them for their
health care, but also because out-of-control entitlement
spending is crowding out other important priorities.
For example, researchers, scientists, patient advocates,
and many others have consistently told the committee that
Congress should consider stabilizing and strengthening the
National Institutes of Health as part of the 21st Century Cures
Initiative.
The NIH and other discretionary program priorities will
continue to face budgetary challenges if entitlement program
spending continues to take a larger and larger share of the
budget.
The late Democratic Senator Paul Simon spoke to this larger
issue when he said, ``a rising tide of red ink sinks all
boats.'' The Federal Government's mandatory spending on
entitlement programs threatens Congress' ability to spend
dollars on programs like the NIH. We need to consider solutions
so we can best target resources to these areas of priority.
Today's hearing is also timely in another respect. Next
year, Congress faces a number of important funding cliffs.
In March, Congress will need to confront the Medicare
physician payment cliff and try to enact a permanent solution
to the Sustainable Growth Rate, or SGR. In addition, the
Affordable Care Act created a funding cliff for the State
Children's Health Insurance program. Funding for the program
ends in September.
If Congress is going to tackle these problems and others
facing us next Congress, we will need to come up with
responsible ways to pay for these issues. Rather than turning
to blunt tools like the Medicare sequester, we need policies
that drive reform and savings that make sense. In addition,
given that the Affordable Care Act has been the law for over 4
years, targeted reductions to the ACA must be on the table as
we set fiscal priorities.
I hope today serves as a catalyst to continue these
important discussions about setting fiscal priorities.
I would like to welcome of all our witnesses. I look
forward to your testimony and your recommendations on how to
strengthen and save these critical programs.
Mr. Pitts. And I yield the balance--I don't have much time.
I yield back the balance of my time and recognize the
ranking member, Mr. Pallone, for 5 minutes for an opening
statement.
OPENING STATEMENT OF HON. FRANK PALLONE, JR., A REPRESENTATIVE
IN CONGRESS FROM THE STATE OF NEW JERSEY
Mr. Pallone. Thank you, Chairman Pitts.
As a member of Congress, I believe that Government can help
all Americans succeed, including seniors and low-income
populations and still continue to strengthen our economy.
While I agree we must do these things with fiscal
responsibility, I do not agree that we need to balance the
budget on the backs of our safety net programs. Improving and
strengthening Medicare and Medicaid for generations to come is
a primary goal of mine, but what Republicans want to do when
they talk about setting fiscal priorities is to cut the
structural foundation of these programs.
For the past 4 years, the Republican budget proposals have
turned Medicare into a voucher program and turned Medicaid into
block grants. But these changes do nothing to tackle healthcare
costs; they simply undermine the program's guarantee of access
to care and shift costs to beneficiaries, providers, and
States. Shifting costs doesn't curb costs and doesn't shore up
the long-term sustainability of our healthcare systems.
The Affordable Care Act began to make improvements to our
healthcare system through delivery system reforms that improve
both efficiency and quality. And I would argue that the
Affordable Care Act was entitlement reform. It expands access
to life-saving health care while also reducing Medicare
spending. In fact, recent estimates show the increase in
Medicare's per-patient costs are at record lows.
In addition, the ACA laid the groundwork to reward value
over volume, to incentivize providers to coordinate care and
improve health. And that job needs to be finished, so we ought
to be setting our priority to send our SGR repeal and replace
the bill to the floor before we adjourn for Christmas unpaid
for, so that once and for all we can bring real sustainability
and predictability to its providers and seniors.
The fact is that we are faced with an inevitable reality,
our Nation's baby boomers are aging to the program at very high
rates. In fact, 11,000 new seniors become eligible for Medicare
every day. Meanwhile, the Medicaid program, as a result of the
ACA, will allow millions of uninsured Americans, particularly
the working class, to finally gain access to health care. But
this doesn't mean we have a spending problem; it means we have
a demographics problem. And to address that problem doesn't
mean we need to slash the programs that American families need
most.
Budgets, in my opinion, are about more than numbers and
dollars. They are real-life expressions of priorities, of
choices, and of values. These choices have an impact on the
lives of millions of Americans, not just for the fiscal year
each budget covers but for future years and future generations.
Now, I know that growing deficits are not good for the
future but we can't reduce the deficit and give tax cuts to the
wealthy on the backs of our safety net programs. Instead, let's
build on the ACA and continue to improve the value we get from
our programs in a thoughtful and sensible way and find ways to
take care of all Americans.
Now, Mr. Chairman, I would like to yield the time that
remains to the gentleman from Texas, Mr. Green.
OPENING STATEMENT OF HON. GENE GREEN, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF TEXAS
Mr. Green. Thank you, Mr. Chairman, and thank my ranking
member for yielding.
We all share the goal of saving money and bringing down
costs through making our healthcare system more efficient.
Rewarding value over volume ensures patients have coverage and
access to preventative primary care service and reducing
uncompensated care should be part of this effort. As we explore
key policy decisions facing Congress, cost shifting to the
beneficiaries simply passes growing cost onto patients but does
not address the true drivers of the growth in healthcare
spending.
The Affordable Care Act included a number of numerous
delivery system reforms that incentivize a more efficient
healthcare delivery system. These activities hold significant
promise for controlling spending while improving quality of
care. When considering changes in Medicare benefits packages a
strategy to bring down overall costs, it is important to
recognize the difference between change that is designed for
the benefit of the beneficiaries are those driven entirely by
reducing Federal spending are those proposals which result in
both?
I look forward to hearing from our witnesses this morning
and exploring meaningful reforms that protect the most
vulnerable populations and provide for the long-term stability
of our healthcare system.
And again, I thank my colleague and yield back my 35
seconds.
Mr. Pitts. The gentleman's time is expired.
Chair recognizes the vice chair of the Health Subcommittee,
Dr. Burgess, 5 minutes for an opening statement.
OPENING STATEMENT OF HON. MICHAEL C. BURGESS, A REPRESENTATIVE
IN CONGRESS FROM THE STATE OF TEXAS
Mr. Burgess. Thank you, Mr. Chairman.
Fiscal year 2014, the Government collected over $3 trillion
in taxes for the first time, thanks to the generosity of the
American taxpayer, and yet, we still had a deficit of almost .5
trillion. With our national debt reaching $18 trillion last
month, we face the gravest financial situation in our history,
and we must get serious about bringing that number down. If we
don't start making difficult decisions now, our children, their
children will inherit a burden unlike any generation previously
has ever seen.
Under the best reporting, the Medicare Trustees project
says that Medicare hospital insurance coverage is only solvent
until 2030 and, in fact, it may be exhausted much sooner.
Promises made to Medicare recipients exceed the payroll taxes
to be collected from those receiving them by well over $100
trillion. Failure to repeal and replace the SGR has now cost
over $170 billion over the last decade. Medicare Part B itself
surpasses $70 billion in 2012 alone.
This committee did do the right thing in repealing the SGR
formula, and, yes, it got it through the floor of the House. We
were awaiting activity in the Senate, but as the clock ticks
down on what remains in this Congress, it seems unlikely that
the Senate is going to act. It is a lost opportunity. If we did
the right thing and enacted the bipartisan bill H.R. 4015, over
the next decade, that would cost $144 billion, clearly less
than the $170 billion that has been spent over the past decade.
Last year alone, Medicaid grew to an unprecedented almost
$450 billion. With the State Children's Health Insurance
Program, it is more of the same. The last five trustees reports
have indicated that the Social Security's Old Age Survivors and
Disability Insurance Program would be depleted by the third
decade of this century. Time and again, the Government has
promised more money than it has or could ever hope to take in.
And we haven't begun to delve into the discretionary side,
but discretionary spending is $492 billion, and if all
nondefense discretionary spending were eliminated, it still
would not affect our debt. There are certainly investments that
must be made, but it is imperative that we invest wisely.
For example, we spend only $500 million annually on
Alzheimer's research, but well over $200 billion on care. The
Alzheimer's Association reports that if we could delay the
onset of Alzheimer's by 5 years, we would save approximately
$170 billion in care costs by the year 2030.
Cancer, diabetes, asthma, each finds us in a situation in
which we must decide how to prioritize our spending to help the
people in a most fiscally responsible manner. We simply cannot
ignore the challenges or pretend that they will go away by
themselves. It is a hard discussion, but it is one that we must
be brave enough to start. That is what we were elected to do.
That is what this subcommittee does, and that is what we are
here to do today.
I certainly want to thank our witnesses for being here. I
look forward to their testimony.
Mr. Chairman, I will yield back the time.
Mr. Pitts. The chairman thanks the gentleman.
We have two panels of witnesses today. On our first panel,
we have Dr. Mark Miller, Executive Director, Medicare Payment
Advisory Commission. Thank you for coming today. You will be
given 5 minutes for an opening statement. Your written
testimony will be made part of the record.
The Chair recognizes Dr. Miller for 5 minutes at this time.
STATEMENT OF MARK E. MILLER, EXECUTIVE DIRECTOR, MEDICARE
PAYMENT ADVISORY COMMISSION
Mr. Miller. Chairman Pitts, Ranking Member Pallone,
distinguished committee members, thank you for asking the
Medicare Payment Advisory Commission to testify today.
As you know, MedPAC was created by the Congress to advise
it on a range of Medicare issues. The commission's work is
guided by three principles, to assure that the beneficiary has
access to high-quality care, to protect taxpayer dollars, and
to pay providers and plans in a way to accomplish these two
goals.
The Federal Government is carrying a large debt. As the
testimony points out, even though Medicare spending has slowed
recently as a result of lower utilization and legislative
restraint on payment increases, we need to continue to look at
this program because the baby boom is transitioning into
Medicare and higher per-beneficiary spending is projected for
the future. In the short run, the commission has many
recommendations that would move Medicare away from a fragmented
system that is unnecessarily expensive towards one that is more
focused on coordinated care at a price the taxpayer and the
beneficiary can afford.
Examples of short-run recommendations that would both
restrain spending and remove financial incentives to focus on
certain types of patients include eliminating the automatic
updates for profitable fee-for-service provider sectors, like
long-term care hospitals and inpatient rehab facilities, and
actually reducing payment rates for skilled nursing facilities
and home health agencies. It includes site-neutral payments
that reduce the incentive to purchase physician practices and
bill at the higher outpatient rates for the same services,
recommendations that include site-neutral payments for similar
patients that are seen in different post-acute care settings,
and as you know, from our past research and recommendations,
they have resulted in laws that are transitioning to a
financially neutral payment between managed care plans and fee-
for-service.
Our more recent research and recommendations, if accepted,
would produce more competitively set payments for employer-
based managed care plans. All of these policies were
recommended after careful considerations on the effects of
access to services and to plans. And of course, the commission
continues to monitor the effects of these policies and report
back annually to the Congress.
Examples of short-run recommendations that would better
align provider incentives to focus on patient care coordination
and also to reduce unnecessary expenditures include an SGR
reform plan that would end the annual cycle of short-term
patches; a budget-neutral bonus payment for primary care
providers and services that would allow physicians and other
professionals greater flexibility to coordinate their care
around the patient; and readmission penalties, some of which
have been put into law, for hospitals, skilled nursing
facilities, and home health agencies that would have the effect
of discouraging expensive readmissions that disrupt the lives
of patients and families.
Examples of short-run recommendations that would better
align beneficiary incentives with the incentives outlined above
include a major redesign of the traditional fee-for-service
benefit where we recommended limiting total out-of-pocket
expenses for beneficiaries, rationalizing the deductible,
clarifying point-of-service cost-sharing liabilities, giving
the secretary authority to alter cost sharing based on the
value of a benefit, and imposing an additional charge on
supplemental coverage policies to better reflect the cost they
impose on the program and to send a clear price signal to the
beneficiary. We have also recommended copayments for certain
60-day home health episodes and lowering copayments to as
little as zero for low-income beneficiaries who use generic
drugs.
In closing, we now have three payment models in Medicare,
30 million beneficiaries and traditional fee-for-service, 5
million are in accountable care organizations, and nearly 16
million are in managed care plans. Each has its own payment
rules, risk adjustment and quality measurement criteria. Our
most recent report begins a discussion of the future for the
Medicare program that ideally would protect the patient by
establishing common-risk adjustment and quality standards
across these models, fairness among plans and providers within
a market by setting common financial and quality standards,
reduce the burden on plans and providers by reducing
unnecessary quality reporting and reducing regulations for
those who accept risk, and protecting the taxpayer by assuring
that the program pays for low-cost, high-quality care in any
given market.
I appreciate your attention to my comments, and I look
forward to your questions.
[The prepared statement of Mr. Miller follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Pitts. Chair thanks the gentleman.
And I will begin the questioning. Recognize myself 5
minutes for that purpose.
Dr. Miller, there have been five bipartisan plans to save
Medicare introduced in this President's term. First, Rivlin-
Dominici; second, Rivlin-Ryan; third, the Fiscal Commission;
fourth, Simpson-Bowles' own plan; and five, plan by former
Senator Joe Lieberman and Senator Tom Coburn.
The Lieberman-Coburn plan has been proposed in legislative
text and was scored by the actuary of the Medicare program. The
actuary said, page 6 of OACT analysis, that if this legislation
was adopted, it would prevent Medicare's insolvency for decades
and reduce senior's premiums so that they would be lower than
under current law.
Please tell us what you think are the most actionable
pieces of this proposal for this committee to consider adopting
next Congress?
Mr. Miller. I am not going to be able to comment on this
specific proposal. I am not that deep on it. But when you look
across those proposals including the one that you named, there
are elements of those proposals that also came out of
recommendations or at least are consistent with recommendations
that the commission has made.
If I remember correctly, and I really am not sure I do,
there is a lot of these things and a lot of details, they were
focused on some benefit redesign, including catastrophic caps,
and I also think that they had something on altering
supplemental coverage. The commission has this additional
charge. I think they took a different approach where they said
supplemental coverage wouldn't be able to cover the first few
dollars of coverage in order to assure that the beneficiary had
some price signal on a service that they consumed. And those
are consistent directions even if they are different mechanisms
for achieving the same thing.
I also think that there was some elements in some of those
plans to reduce the home health payments, and that is certainly
something that came out of our work. Off the top of my head,
that is a couple of things.
Mr. Pitts. I want to ask about Medicare benefit redesign
proposals. Some of my colleagues on the other side of the aisle
have examined MedPAC's recommendation on creating a combined
deductible for parts A and B, a catastrophic limit on out-of-
pocket spending, and Medigap reforms that would limit first-
dollar coverage. The minority is on record in their hearing
memo claiming that many patients might see higher cost under
these proposal plans.
I think the minority might be overlooking the savings that
accrue to a beneficiary over time as a separate 2011 analysis
concluded four out of five beneficiaries could save money if
such a proposal were adopted.
Could you please discuss the effect that such reforms would
have on beneficiaries especially over multiple years and can
you comment about whether or not a beneficiary who would
otherwise face higher costs could enroll in a Medicare
Advantage plan?
Mr. Miller. OK. I think you have a few questions in there.
The first thing that I would say is benefit redesign, when
you think about a catastrophic cap and adjusting the
deductible, there is several ways that it can affect the
beneficiary. But one thing to keep in mind is, is that what you
are doing, and it is almost inescapable is, is you are shifting
the liability across the distribution of beneficiaries.
Generally, what you are doing with these things when you go
for a catastrophic cap is there is a small set of beneficiaries
with very high liability that you help and other beneficiaries
who have less healthcare costs have more healthy experiences
probably pay more for a deductible. So there is some
redistribution.
But the other objective that you are up to here is by
setting a catastrophic cap, and, for example, in our
recommendation, making copayments as opposed to coinsurance,
which is less predictable, the beneficiary has clear a line of
sight on what their out-of-pocket liability would be. This
would mean that the beneficiary's need to buy a supplemental
policy should be less. That is the idea.
And to the extent that beneficiaries say, ``I no longer
need a supplemental policy,'' then that is an out-of-pocket
expense that they no longer incur and that is a place where
they could potentially achieve savings to the beneficiary. So
there is some moving around of liability and there is some
potential savings, depending on whether the beneficiary
continues to carry a supplemental premium.
You asked another question about the impact on the
beneficiary. In the short term, it does mean that certain
beneficiaries would incur greater liability because they might
have a higher deductible, for example. But over time, those
beneficiaries run a greater risk, because of their age and just
the natural progression of disease, run a greater risk of going
into the hospital or hitting the catastrophic cap. And we have
done some analysis which we can send to this committee where we
show that the percentage of people affected, helped by this,
for example, grows from 9 percent in the first year to 30
percent when you go out--or 19 percent when you go out 5 years,
30 percent when you go out 10 years.
So over time, more beneficiaries are likely to benefit from
a catastrophic cap or a reconfigured deductible depending on
their health experience, which they run greater risk over time.
Mr. Pitts. Chair thanks the gentleman--go ahead.
Are you finished?
Mr. Miller. I am done. No, go ahead. Sorry.
Mr. Pitts. I thank the gentleman.
And recognize the ranking member, Mr. Pallone, 5 minutes
for questions.
Mr. Pallone. Thank you.
Dr. Miller, in MedPAC's June 2012 report and in your
testimony for today's hearing, you note that the proposal for
Medicare benefit redesign reduces risk and increases
predictability for beneficiaries by adding an out-of-pocket
catastrophic cap and a lower combined deductible together with
predictable copayments for services. The proposal also
recommends a fee on supplemental insurance plans such as
Medigap and retiree plans. And as you can imagine, I have heard
some concern about this idea.
Your rationale appears to be because first-dollar coverage
can encourage inappropriate use of care that Medicare should
recover some of the increased program costs that result from
this excess use of services. Now, while I agree that an out-of-
pocket catastrophic cap would be an improvement, I have
concerns about the impact of your proposal on Medigap or
supplemental insurance policies, and particularly concerned
that these will be viewed as separate and unrelated proposals.
Can you clarify then, are these different policy options,
or are the two components of this proposal actually linked to
one another?
Mr. Miller. The commission was really clear on this, I
believe, that this was a package of proposals; that you do the
benefit redesign, as you outlined there, along with the
additional charge on the supplemental coverage.
Mr. Pallone. OK. Now, I understand your proposal retains
current protections for low-income seniors related to cost-
sharing and premiums. And one of my concerns is that I believe
the current low-income protections are inadequate. I am
concerned that taxing or otherwise discouraging these first-
dollar coverage supplemental plans would negatively impact the
near poor who do not currently qualify for assistance under
Medicaid. So could you just comment on that?
Mr. Miller. Yes. The commission did talk about this quite a
bit. There is collective concern that if that is your concern,
the Medigap product is not a particularly effective way to get
at that. Often, the premiums and the benefits that you get from
it just result in dollar churning, if you will, sort of dollar
trading, and some of the premiums can be quite high.
What the commission said is if that was a concern, and we
made a specific recommendation on this point, would be to alter
the Medicare savings programs and go more directly at providing
subsidy to the poor and near poor. And specifically what we
said is change the income qualification to be consistent with
the income qualification for part D (LIS) and raise it to 150
percent of poverty, and then have a premium subsidy for the QI
population, which starts to get into some complexity, but for
this answer, you have a premium subsidy for the QI
beneficiaries.
Then what they do, they are relieved of, let's just call it
$1,300 in part B premium, which they can then use to pay for
their out-of-pocket copayments and deductibles and that type of
thing. And within the package, we would see that as being
financed out of the savings that come out of the Medigap
portion of the proposal.
Mr. Pallone. OK. I know we use the term ``near poor,'' but
I wish we had a better term than ``near poor.'' It seems so
strange.
Let me ask another question. In MedPAC's proposal for
redesigning Medicare's benefit package, the commission is clear
that two overriding objectives are to give beneficiaries
better, more predictable protection against out-of-pocket
spending, and to create incentives for them to make better
decisions regarding discretionary care.
But many of us would agree there is a need to simplify the
structure of Medicare benefits in ways that make it more
understandable and user friendly for beneficiaries and provide
them with better protections by providing out-of-pocket
spending caps, like private insurance plans.
So my question is: Unfortunately, the notion of creating
incentives for beneficiaries to make better decisions is often
looked at only through the narrow lens of increased cost
sharing. Can you talk about ways other than cost sharing that
benefits can be structured to encourage use of appropriate
high-value services and discourage the use of unnecessary
services? In 40 seconds or less.
Mr. Miller. If I follow it, I think there is two comments:
One is, the portion of the recommendation that spoke to the
secretary's authority to adjust cost sharing on the basis of
value, I would just point out, just in case you missed it, that
toggle would go both ways. So if a benefit is high value, you
could actually lower the cost sharing or zero out cost sharing
for your diabetes visit or whatever the case may be.
Mr. Pallone. Right.
Mr. Miller. So the toggle doesn't entirely increase cost
sharing and could be lower cost sharing, just in case that got
by you.
The other thing, I mean, then I think you move to different
kinds of ideas. For example, a while back, we made
recommendations for prior authorization for very expensive
imaging services. I mean, I think then either you have to move
in that direction in fee-for-service or move in the direction
of a beneficiary being in an accountable care organization or a
managed care plan where those kinds of tools are more readily
available to manage the beneficiaries experience.
Mr. Pallone. All right. Thank you.
Mr. Pitts. Chair now recognizes Vice Chair of the
Subcommittee Dr. Burgess, 5 minutes for questions.
Mr. Burgess. Thank you, Mr. Chairman. Before I begin, let
me ask unanimous consent to submit written testimony for
today's hearing by the Coalition to Preserve Rehabilitation for
the record.
Mr. Pitts. Without objection, so ordered.
[The information follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Burgess. And again, Dr. Miller, thank you so much for
being here and sharing your expertise with us. Let's talk for a
minute about the trend of hospital acquisitions, hospital
acquiring practices and the consolidation that really seems to
have increased dramatically in the past couple of years.
In one of your earlier reports, you discuss the trends of
hospital acquisitions costing Medicare more and driving up
costs. The report discusses in great detail how this is
happening in cardiology. This past May, I asked if the
commission had seen this trend in other specialties,
specifically oncology. Do you have any additional information
that you can share with the subcommittee to add on this or to
build on this?
Mr. Miller. I probably can't do it very well off the top of
my head here, but there is some additional information that we
could give to you. We took a look at other requests at kind of
the trends in radiation therapy and in chemotherapy, and you do
see some trends there that are consistent with the things that
we have presented previously.
And I would also remind you, and I know this is a detail
that would not be readily apparent, in the recommendation that
we made on our site-neutral payments, which encompassed about
66-some-odd conditions where we said you should set payment
rates equal to or near what is paid in the physician's office,
a few of those conditions actually overlap the oncology, you
know, drug administration codes and that type of thing.
Keep in mind, in oncology, you have sort of two things
happening. The drugs are actually paid comparably. It is really
the administration and what goes on around the drugs that are
not paid comparably, and our recommendations would affect that.
But in any case, we have some of that contemplated in our
recommendation, and there is some additional information that I
could forward to you or your staff on a particular issue.
Mr. Burgess. Great. That would be good. Do you recall
overall if that trend is a trend upward in the cost curve, or
is it a flattening of the cost curve?
Mr. Miller. Yes, and I am going to do this off the top of
my head--which is really a dangerous thing--what I recall from
the work that we did is if you look at radiation therapy, it is
a lot more oblique. But if you look at chemotherapy, there does
seem to be a shift from the office setting to the hospital
setting. That is my take-away there.
Mr. Burgess. Well, and, again, it would be very helpful if
you could provide that information to us.
Mr. Miller. Uh-huh.
Mr. Burgess. If there were more parity in reimbursement
rates between the outpatients and acute care settings, for
example, raising reimbursements in certain settings, lowering
it in other settings, how do you think that would affect
consolidation?
Mr. Miller. If there was greater parity, is that what you
were saying?
Mr. Burgess. Parity. Yes.
Mr. Miller. Well, we think it would have some dampening of
the trend. Am I getting the question?
Mr. Burgess. Yes. And I think, overall how would that
affect the cost in the Medicare programs? Do you think that
would be a reduction in cost?
Mr. Miller. Absolutely. I mean, we have made two
recommendations, for example, to equalize the payment rates
between visits in the physician office setting in the hospital
outpatient setting, and then, as I said, develop this criteria
and identify these 66 other services that we would set the
rates. And for example, on those two, at about 1 billion-plus a
year, that would reduce spending of which, you know, just in
round numbers, 20 percent of that would be a reduction in the
beneficiary's cost sharing, which is something I would just
bring us all back to.
I mean, particularly when these services just shift and are
billed through the outpatient setting, it is important to keep
in mind here, we are not talking about people actually leaving
the office and going to the outpatient setting in most
instances. They are still going to their physician's office.
They are still getting the same service. The payment from the
program has gone up and the beneficiary's cost sharing has gone
up, and to the tune of about 1 billion, 1.5 billion per year,
if these two recommendations were put into place.
Mr. Burgess. Has the committee looked at what happens to
patient access costs with hospital acquisitions of specialties?
Mr. Miller. You could be asking me one of two questions. We
have----
Mr. Burgess. Well, when a hospital takes over what
traditionally has been like a cardiology practice, what are the
benefits of the cost of the patient when you move this site of
service?
Mr. Miller. What are the benefits?
Mr. Burgess. Yes, and what are the costs, well, for the
beneficiary? I meant, that is after all where the focus should
be.
Mr. Miller. Yes, our concern is that the benefit to the
beneficiary is pretty static, that they are getting the same
service. Like I said, in many instances they will walk into the
same office, see the same physician, and just pay a higher out-
of-pocket.
If there were hospitals sitting here, they would argue that
they do this in order to create systems of care and have
greater degrees of coordination. We have not seen access
problems, and we have not seen a lot of evidence to back up the
claim that this results in better coordination or better
outcomes for the beneficiary.
Mr. Burgess. Mr. Chairman, I see my time is expired. I have
an additional question on graduate medical education that I
would submit for the record. Thank you.
Mr. Miller. Thank you.
Mr. Pitts. Chair thanks the gentleman.
And now recognizes the gentleman from Texas, Mr. Green, 5
minutes for questions.
Mr. Green. Thank you, Mr. Chairman.
Dr. Miller, recent estimates from the Medicare Trustees
highlight continued success in reducing spending under the
Medicare program. Medicare spending per beneficiaries projected
increase by just 0.3 percent in 2014, well below the growth in
GDP. Is it correct that Medicare costs have grown at a
consistently slower rate than the private sector and total
healthcare spending growth has reached the lowest rates since
1960?
Mr. Miller. I can't stipulate each of those facts. What I
would say is this: There has been a general slowdown in
utilization in both the private and in the Medicare sector, so
both of those have actually seen slowdowns in spending. I would
guess that you are right that Medicare, depending on whether we
are talking about growth rates, may be slower than the private
sector because commercial insurers still have higher price
growth than Medicare had, so just distinguishing between use
and price. But there has been a broad-based slowdown in
spending on both the private and the Medicare side in terms of
utilization in the last few years.
Mr. Green. OK. Thank you.
The Centers for Medicare and Medicaid Services recently
reported that from 2012 to 2013 hospital readmissions in
Medicare were decreased by nearly 10 percent with the help of
Medicare's Hospital Readmission Reduction Program, translating
to 150,000 fewer hospital readmissions. Congress took further
action by enacting readmissions reduction program for nursing
homes under the Protecting Access to Medicare Act of 2014,
which established a skilled nursing facility value-based
purchasing program based on readmission reductions in the
fiscal year 2019.
Mr. Miller, what changes to current Medicare reduction
programs might you recommend the further increased care
coordination and cost reduction?
Mr. Miller. OK. There are a couple things I think I would
say in response to this. You know, ideally what you don't want
to do, unless you have to, is impose penalties for these kinds
of behaviors or, you know, abhorrent behaviors, high
readmission rate. But when you have a fragmented fee-for-
service sector you are sort of driven in that direction.
And so what the commission's view kind of works like this:
We have recommended a readmissions penalty for hospitals, which
has been implemented; as you said, skilled nursing facilities
is coming on line; we also have a standing recommendation on
home health readmission rates. The view there is, at least the
major actors involved in a readmission would have an incentive
to avoid it. They have an incentive to talk to each other and
stop this kind of stuff from happening. Nobody benefits from
this. Extra payments, beneficiary's families.
Now, ideally, where we would be moving to is think of
bundled payments or an ACO or a managed care plan where that
actually becomes their incentive, because if they can reduce a
provider or plan, if they can reduce the readmission, then that
actually turns into revenue for them.
Mr. Green. Yes.
Mr. Miller. The other thing I would just say about the
penalty, and I won't get into the weeds here, we want the
penalties--and we have some specific ideas on this--structured
in such a way that people avoid the readmission. In a sense, we
don't want the penalty; we want them to avoid the readmission,
which is a much more, you know, better event for everybody. And
we have some recommendations to change the readmission
penalties as they stand to get at that outcome a little more.
Mr. Green. OK. Well, and that is the concern, you know. I
know the penalty, and the penalty doesn't help anybody, but the
goal is to move that behavior so they actually treat that
person fully.
Mr. Miller. We think there is--well, go ahead. It is your
time.
Mr. Green. And I don't have a lot of time left, but I know
over the years we have also had some concerns about infection
rates from being in the hospital and there has been efforts to
do that. Can you compare in a short time now the readmission
rate issue with the penalties compared to what we have tried to
do on the broader scale in infection rates at some of our
hospital facilities?
Mr. Miller. Actually, I think I am going to have to come up
short here. I am much more familiar with what is going on with
the readmission rates. I am aware of the hospital-acquired
conditions, measures. I can't give you a good answer on what
effects and what observable effects there are. I am just not up
to speed on it.
Mr. Green. Again, appreciate you being here and thank you.
Mr. Miller. I apologize.
Mr. Green. Chairman, I yield back my time.
Mr. Pitts. Chair thanks the gentleman.
And now recognize the gentleman from Illinois, Mr. Shimkus,
5 minutes for questions.
Mr. Shimkus. Thank you, Mr. Chairman.
Dr. Miller, welcome. I like this discussion on this
readmission thing because my understanding is the penalty kicks
in even if the readmission has no relation to the original
hospitalization; is that correct?
Mr. Miller. Well----
Mr. Shimkus. There is a penalty. So, you know, someone is
in there for an internal procedure but then they leave and then
something else happens, they break their leg, they go in, they
are readmitted. There is no discrimination over the cause and
effect of why you are penalizing them; is that correct?
Mr. Miller. Yes, and I am just going to--I am going to
parse through this a little bit. You are decidedly correct that
people complain that there is not enough definition in the
readmission criteria that parses things like a planned
readmission or a readmission that is really related to the
initial admission.
But I will say two things: First of all, the commission's
position is it should be all condition, risk adjusted,
potentially preventable, and that is the code word for get the
planned ones out of there, and there is probably some clinical
judgment that applies to situations like you are saying.
But the key point that I want to get across to you, just in
case it is not clear: The penalty doesn't litigate on the basis
of readmission by readmission. It looks at the overall rates of
the hospital and says, if you are way to the right in the tail,
that is where the penalty applies. So even if there is some
disconnect, it is not case by case. I would just get that point
across to you.
Mr. Shimkus. So maybe percentage-wise, based upon the
overall admission, readmission rates that deal with that.
Mr. Miller. Exactly.
Mr. Shimkus. I think that is helpful. I would be adverse
not to use Sydne in one of her last days--although she's not
paying attention to me--in her ability to put charts up.
And I want to have her put up one, because your role is,
you know, the Medicare Payment Advisory Committee, and I bring
this up all the time just to make sure we highlight the
challenges that we face budgetarily and also the importance of
your role.
Because even when I go to my two questions, it would be, I
would say, nibbling around the edges versus really actuarially
trying to make a system whole and the red being mandatory
spending that has to go on regardless of what we do. The blue
is discretionary. That is what we fight about all the time.
Sydne, you can take that down. I wanted to harass her one
last time.
But to my question is, we asked last time you all came on
the 340B program and what affect it has on the Medicare
program. Can you comment on any ideas that you might have to
realize savings in Medicare as it relates to the 340B program?
Mr. Miller. Yes, we took that statement and statements that
other members said on the same point very seriously. And the
commission, if I remember correctly, things are running
together a little bit, I believe at our November meeting had an
extensive discussion about the 340B program, its growth, what
the various conflicting incentives were, what, you know, one,
the drug manufactures were arguing, what the hospitals were
arguing, all of that, because we were asked to kind of paint
the picture for the committees.
I just need to quickly say, by and large, all of this
program is beyond our jurisdiction. It is not Medicare and it
is not administered by CMS, but since the committee has asked,
we wanted to lay the picture out and now we will give that to
you and you guys will do what you do.
However, there was one thing in it, and we have only noted
it for the commissioners at this point. We haven't actually
taken action on it, and I think this is what you are getting
at. In the outpatient setting, Medicare pays what is called the
average sales price plus 6 percent, and that is what Medicare
reimburses and there is a whole bunch of details about how that
gets calculated. But if the hospital realizes a discount on the
340B then there is some difference between what the hospital
acquired that drug at and what Medicare is paying at, and
Medicare does not follow that.
And that is as far as we have gotten. We have put that in
front of the commission, but I have not much more to say about
it than that.
Mr. Shimkus. Great. And let me finish up, the President on
the part D and Low-Income Subsidy Program, the President's
proposal would encourage seniors to increase generic drug use
when a viable alternative to a brand name is available. Has the
commission taken a position on the low-income subsidy reform,
since this policy, we think, could save, obviously, money for
both the program and the seniors?
Mr. Miller. Yes. I don't remember where the President's
budget proposal came, whether it was before or after ours. I
think it was after. But we made a recommendation a while back
on this front, and our point was that even low income--and this
is tricky, but even low-income beneficiaries are price
sensitive. And if you say, for example, and give the plans the
flexibility to say you can zero out the premium for a generic
drug, and keep in mind, this policy would only be in situations
where there is a generic substitute, then the beneficiary may
gravitate more to that.
Because what we found in the data is, is that you have less
generic use in the low-income subsidy population. And I had
always had this perception, well, this is because they use
extremely expensive specialized drugs, and decidedly, some of
them do. But a lot of their profile is the standard drugs for
which there are generic substitutes, and so we thought that
this would help get some push there.
Mr. Shimkus. Thank the chairman.
Mr. Pitts. Chair thanks the gentleman.
And now recognizes the gentlelady from Florida, Ms. Castor,
5 minutes for questions.
Ms. Castor. Thank you, Mr. Chairman.
Thank you, Dr. Miller for being here. It is nice to focus
on something substantive and especially where some good news in
Medicare that we have seen a slowing in growth of health
spending, the fifth consecutive year of slower growth. And CMS
says this is the slowest growth since 1960, so we need to put
that to work in extending the life of the Medicare Trust Fund.
And more good news, the Affordable Care Act reforms are
working. We have talked a lot about hospital readmissions and
that is quantifiable already. And then we have a lot of reforms
dealing with the accountable care organizations and focused on
quality over quantity where the jury is still out but it looks
promising.
But we still have now this challenge with the baby boomers
beginning to retire and they are going to call on Medicare.
They are looking forward to coming onto Medicare. It remains
very popular. So we have a very important responsibility to
ensure Medicare remains strong. I think the past attempts to
look for quick solutions like turning it into a voucher, we
really need to move away from that divisive dialogue because
that is not going to solve anything. It simply shifts costs to
beneficiaries that can't afford it.
So the hard work is going to be getting into the details.
What is fraudulent? What will help bring greater efficiency?
What can we do to bring developments in modern diagnosis
medicine treatments to bare to extend the life of the trust
fund and provide care?
I want to ask you a variation on what Representative Green
was talking about in hospital readmissions but focus on post-
acute care settings. Under the current Medicare payment systems
there are no financial incentives for hospitals to refer
patients to the most efficient or effective setting so that
patients receive the most optimal but lowest cost care. Whether
a patient goes to a home health agency or skilled nursing
facility, for example, seems to depend more on the availability
of the post-acute care settings in a local market. The patient
and family preferences or financial relationships between
providers.
So since patients access post-acute care after a stay in
the hospital, what does MedPAC say we should be doing to ensure
patients receive care in the right setting after a hospital
stay?
Mr. Miller. I think there is a few things, and I will try
and build the answer this way: First of all, in the arriving
settings, like a skilled nursing facility or in home health, we
think that there are underlying incentives built into the
payment system now that encourage taking some patients and
avoiding others. So we think, at a very bumper sticker level,
what you want to do is take the physical rehab patients. You
want to avoid the medically complex patients. We think that
there is some very straightforward analytical adjustments or
technical adjustments to the payment system that start to
remove those incentives so you get something more of a
clinically driven referral instead of a financial referral.
I won't run through all it again, but the notion of having
a readmission penalty among the actors of saying you need to do
this carefully and get them to the right location. Otherwise,
if they come back to the hospital everybody has some impact,
then we think that would help.
Ms. Castor. OK.
Mr. Miller. There are also--well, just let me get these two
things out quickly. We have also made a whole set of
recommendations on accountable care organizations that we any
would make those more viable and workable, and within those we
think the incentives of all the actors are aligned.
And then the very last thing I will say--I am sorry--is we
just had a conversation, I think it was in November, in which
the commissioner started to ask themselves, even within fee-
for-service should we give hospitals greater flexibility to
steer patients on the basis of higher-quality facilities?
Now, that is not a recommendation but that is a discussion
that is in progress. Sorry to take your time.
Ms. Castor. OK. No, I was interested in your answer.
On Medicare Part D, spending now is well over $60 billion
per year and over 10 percent of all Medicare spending. Is
MedPAC satisfied right now that the competition among plans--
1,100 prescription drug plans, 1,600 Medicare Advantage PDPs,
great choices for consumers--is MedPAC satisfied that the
competition among plans is providing strong enough incentives
for cost saving?
Mr. Miller. Well, it is interesting you ask that question.
We are just about to start talking about that in some greater
detail. What we have been noticing over the last few years in
part D is that the most rapid growth in the program is our
reinsurance portion of the benefit. And so that is raising
questions in our mind about whether there is some re-
examination of the structure to relook at whether there is a
greater degree of competition that could be injected into that
program.
I don't have ideas for you right at the moment, but in the
back room, those are churning in order to come out in front of
the commissioners shortly.
Ms. Castor. Good. We will look forward to those.
Thank you.
Mr. Pitts. Chair thanks the gentlelady.
And now recognizes the gentleman from Pennsylvania, Dr.
Murphy, 5 minutes for questions.
Mr. Murphy. Thank you.
Welcome, here Dr. Miller. Good to have you.
I want to talk a little about some of the cost-shifting
issues. Basically, I am assuming when we are talking about cost
shifting, if a person may be seen in primary care, but if they
cannot get the specialty care they need, that person may face
other complications from their illness. Would you agree?
Mr. Miller. Yes.
Mr. Murphy. OK. And I saw a recent report that said those
persons who sometimes have the greatest problems with
readmission are people with low-income families. Would you
agree with that?
Mr. Miller. There is a relationship between readmission
rates and income, yes.
Mr. Murphy. And is that, some of that relation may also be
that sometimes people have maybe compliance issues, or perhaps
they don't have access to some of the things they need, some of
the specialists and medications, et cetera?
Mr. Miller. I would have a hard time telling you precisely
what the mechanisms are. I think there is a relationship there.
It might be the things that you are saying. I think there are a
lot of things that are said. I think the exact pathways that
lead to it are less----
Mr. Murphy. Let me describe one. I read research reports
that say that senior citizens with Medicare with chronic
illness, have double the rate of depression and some mental
illness. And that when it is untreated depression and chronic
illness, that doubles the cost. So access is important to make
sure that, under those circumstances, a person, for example,
with heart disease or cancer or diabetes, has an increased risk
for depression; and, therefore, treating that is an important
cost-savings factor.
So therefore, if that is not treated, that is a cost
shifting, that instead of providing the psychiatric or
psychological care that cost will be borne by further
complications with diabetes, cancer, heart disease, pulmonary
disease. Does that make sense?
Mr. Miller. I see that.
Mr. Murphy. Now, one of the issues I have been deeply
concerned about is of access to inpatient psychiatric care for
the severely mentally ill. As you may know, Medicare has a 190-
day limit on inpatient psychiatric care. But we don't impose
this for heart disease, do we, or lung disease or diabetes or
cancer? Do we have 190-day limit for those?
Mr. Miller. There is not a 190-day limit for that.
Mr. Murphy. So wouldn't you agree that this is
discriminatory?
Mr. Miller. I agree it should be looked at. The facts said
I am a little bit hazy on, but as you have presented it, I see
your point.
Mr. Murphy. But with 190 days, though, I mean psychiatric
diseases are brain diseases, but should we have a limit on
diseases in terms of the number of days you can be treated for
that?
Mr. Miller. The only thing I would like to do is have the
room to come back to you on this and make sure I understand
what the implications are of agreeing to that is.
Mr. Murphy. I am not sure what implications you are looking
for.
Mr. Miller. Well, a couple things. There may be limitations
on other parts of the benefit that I don't have right at the
front of my mind, and I wouldn't want to agree for the
commission to say yes without being able to tell you what the
cost implication of that would be.
Mr. Murphy. I understand. Well, and if there are limits, we
certainly would like to know that, because the issue becomes
one of what is the proper level of care.
Mr. Miller. Exactly. And that is all I am looking for is
some latitude on.
Mr. Murphy. And if there is 190-day limit for psychiatric
care but that is not enough to treat someone.
Mr. Miller. I hear you and I see the direction of your
question. I would just like some latitude to actually think
about it and come back to you.
Mr. Murphy. Can you also then, when you are looking at
that, find out how many seniors are affected by this cap? So
when looking at the number of seniors, we need to know the
costs of that.
Mr. Miller. That is what I want to make sure I don't
mislead you on and say, yes, no problem and then, you know,
come back with----
Mr. Murphy. And I appreciate your thoughtful approach, to
this, because we need those kind of facts. When we ignore the
mental health needs of seniors with chronic illness and that
leads to other costs, we are not saving anybody anything. We
multiply those costs.
And so sometimes when there is a resistance within Medicare
to change a rule, well, we can't afford more than 190 days, but
we will end up doubling the costs of oncology or cardiology or
something else. It just doesn't make sense to us. So I hope you
will give us a comprehensive look at that issue.
Mr. Miller. Absolutely. And, you know, I don't want you to
take the response as hostile to the ideas. I just don't want to
commit the commission to saying, ``Sure, go above 190 days''
without giving you more complete thought, because we are the
kind of people who would look at that and come back to you and
say, ``If you are going to do that, there may be some other
things that you want to do to make it a more episode-based type
of approach to the beneficiary's experience.''
For example, if the person leaves the inpatient psychiatric
facility, is there actually a set of ambulatory visits arranged
for that person when they walk out the door? Because I think
our experience is, that is where things begin to break down.
Mr. Murphy. Good to see it, and monitoring and integrating
that care. Same thing goes with pharmacology when you see that
the mass amounts of medications that people don't follow
through on leads to readmission or more complications, et
cetera. It is a huge cost.
Thank you so much. We look forward to hearing from you.
Mr. Miller. I would like to just think about it more
holistically. No hostility to the thought.
Mr. Murphy. No, I appreciate that. Thank you.
I yield back. Thank you.
Mr. Pitts. Chair thanks the gentleman.
Now recognizes the gentlelady from Illinois 5 minutes for
questions.
Ms. Schakowsky. Thank you, Mr. Chairman.
Thank you, Dr. Miller.
I just want to put in context some of the things we are
talking about. The average Medicare beneficiary lives on an
income of--half of all Medicare beneficiaries--$23,500 or less,
and a quarter of them live on $14,400 or less.
We are talking about how we strengthen Medicare for now and
for the future and costs. And we have done a lot, I want to
point that out, to actually reduce the costs of Medicare.
The Centers for Medicare and Medicaid Services, CMS,
recently reported that the Medicare Shared Savings Program and
the Pioneer Accountability Care Organizations, ACOs, that were
created by Obamacare have generated about half a billion
dollars in savings for the Medicare program.
A recent report by the Agency for Healthcare Research and
Quality found that we saved approximately $12 billion in
healthcare costs as a result of reductions in hospital-acquired
conditions from 2010 and 2013. $10.7 billion in fraud-fighting
tools under Obamacare. That is over $23 billion.
But the important thing to me is that it hasn't done
anything to reduce the benefits of the people who need it the
most. And so I just want to make sure that we have policy
solutions that save Medicare money but don't harm
beneficiaries.
And there is a recent report that I would like to put into
the record. Medicare Rights Center/Social Security Works
released a report, ``A Winning Strategy for Medicare Savings:
Better Prices on Prescription Drugs.''
Four strategies, including restoring the Medicare
prescription drug rebates, allowing Medicare to negotiate drug
prices for part D public option, and a solution--and let's
see--securing better discounts for drug manufacturers to close
the doughnut hole, promoting cost-effective prescribing for
part B prescription drugs.
And I would like to----
Mr. Pitts. Without objection, so ordered.
Ms. Schakowsky. Thank you.
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Ms. Schakowsky. So here is my question, though. I am very
concerned that this idea of making sure seniors have and people
with disabilities have more skin in the game, that we--the CMS
Medigap tool shows that in Evanston, my district, Evanston,
Illinois, the average cost of a Medigap plan for someone in
good health is between $129 and $318 a month for a Medigap C
Plan and $118 to $262 per month for a Medigap F Plan, both of
which include deductibles.
But CMS still estimates that, even with these plans
offering first-dollar coverage, a senior or person with
disability would still spend over $6,000 on health care each
year out of pocket.
So why should we ask these Medicare beneficiaries to pay
more, eliminating first-dollar Medigap coverage?
Mr. Miller. Well--and this goes back to the conversation on
the benefit design. And I want to be clear. I mean, the
Commission----
Ms. Schakowsky. Dr. Miller, could you pull your microphone
closer?
Mr. Miller. Oh, sorry about that. So nobody has heard
anything I have said for the hearing?
Ms. Schakowsky. No, it is just me. Just me.
Mr. Miller. So, let's see, where were we? Benefit redesign.
The Commission shares your concern. And, particularly, you
had a statement in your--``We should do reform, but we
shouldn't harm beneficiaries.'' OK? There was a lot of
discussion about this.
Now, one more time, just to go through this, the benefit
redesign works like this: It has a catastrophic cap. So that
beneficiary you are talking about now has an additional
protection, and particularly the person you are talking about
who starts running into $6,000, $7,000, $10,000, that is what a
catastrophic cap is all about: Stop, you know, the amount of
out-of-pocket headed out the door.
The second thing we would do is have copayments instead of
coinsurance. So, you know--and you have had this experience--
you pay 20 percent of a bill that you don't know what it is
going to be. It is hard to plan for, as opposed to I walk into
the physician's office, I pay 20 bucks, or I walk into a
specialist's office, I pay 30 bucks; I know what I am going to
pay. The thought process in all of this is that the beneficiary
has more protection and clearer line of sight.
And to be really clear on this, the Commission's principle
was that the beneficiary's liability, as it currently stands,
doesn't change under this benefit redesign. So we are not
putting more liability on the beneficiary. There is a
distributional change, meaning the sick get more coverage. But
there is no aggregate change in the liability.
Then we say, if you want to buy that coverage, the coverage
would come with a higher price, which reflects the cost that it
imposes on the program. But, ideally, you don't need it the way
you used to need it because the benefit is better and we
expanded the Medicare Savings Program up to 150 percent of
poverty to capture that group of people between 135 and 150 who
would potentially have a out-of-pocket problem.
Ms. Schakowsky. I am going to put some further follow-up in
writing. Thank you.
Mr. Pitts. All right. The Chair thanks the gentlelady.
I now recognize the gentleman from Georgia, Dr. Gingrey, 5
minutes for questions.
Mr. Gingrey. Mr. Chairman, thank you.
Before I ask my questions of Dr. Miller, I want to ask
unanimous consent. In 2012, Dr. Roe, myself, Dr. Barrasso, and
Dr. Coburn submitted a report titled ``What Happens To Payments
to Health Care Providers Participating in Medicare When the
Medicare Hospital Insurance Trust Fund Reaches Exhaustion?''
Since this is apropos to the discussion, I would like unanimous
consent to have that approved for the record.
Mr. Pitts. Without objection.
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Mr. Gingrey. I want to go back, Dr. Miller, to the line of
questioning that Ms. Schakowsky just had, because I think this
is hugely important and I want to make sure that I understand
it fully. It is somewhat controversial, but it seems like the
facts maybe speak for themselves.
You said approximately one in six Medicare beneficiaries
had an individually purchased Medicare supplemental insurance
policy in recent years, known as Medigap, and no other source
of supplemental coverage.
The Kaiser Family Foundation released a report evaluating a
proposal that would prohibit Medigap policies from paying the
first $550 of enrollees' cost-sharing and requiring that they
cover no more than half of Medicare's additional required cost-
sharing up to a fixed out-of-pocket limit.
The Kaiser Foundation revealed some notable findings, and
let me point those out, three bullet points. If this policy
were adopted, four out of five seniors would save money from
Medigap reform, and most of those that could face higher cost
would instead choose a Medicare Advantage plan. The second
bullet point: With this reform, some seniors would save more
than $1,000 from Medigap reform. And, thirdly, this policy
would also create savings, which would strengthen Medicare.
Given the obvious upside of the policy, why hasn't Congress
adopted this policy sooner? And what are the given obstacles to
adopting this commonsense policy?
Mr. Miller. Oh. So the question is why, as opposed to the
policy.
Mr. Gingrey. It is, indeed.
Mr. Miller. I would rather talk to you about the policy,
but I guess, just to be very direct, what I would say is that,
obviously, the people who sell the Medigap plans would oppose
such a policy. And I think one way you could think about trying
to navigate this--and just to be clear, this is all your turf--
is, you know, there are two ways to think about Medigap reform.
What has been said in the Kaiser study says only products
can be sold that don't have first-dollar coverage. So the
beneficiary has to pay something in order to get the service.
And this is what the Congresswoman was referring to. The other
way you could do it--and this is what the Commission said--is
you can buy any product you want, first-dollar or not first-
dollar, but the charge on it has to reflect the true cost of
the policy. Because the policy imposes the cost on the program,
and that is not reflected in the premium.
And I think reasonable people could take either of these
approaches, say, OK, I am going to say the product has to have
this structure, or put an additional charge on it. But the
folks who sell Medigap policies are not going to like either of
those.
On the beneficiary--I mean, I think the other resistance
that you get to this--and it is raised by the beneficiary
groups--is what about those people who--and I guess the term is
``near poor,'' at least in this area that we are talking about,
where they are not poor enough to be covered by Medicaid but
they don't have enough resources to pay their out-of-pocket.
And there, I think what the Commission would say is maybe you
fill in the Medicare Savings Program up to 150 percent to try
and help that crew out.
But I think your resistance is from the Medigap industry,
and then I think the beneficiary groups are concerned about
that bloc of people who are left without a supplemental.
And one more time, I am just going to say this. Ideally, if
the benefit redesign has a catastrophic cap and clearer cost-
sharing, the beneficiary's need for this should also be
reduced.
Mr. Gingrey. Yes. And, Dr. Miller, I would think that is
the most important point, the catastrophic cap.
Mr. Miller. Yes, because we are talking--I mean, the reason
that the Kaiser--I don't have all those facts in my head, but
the reason Kaiser said this is a savings to the beneficiary is,
I mean, these premiums are, you know, $1,300, $1,400 for these
products.
Mr. Gingrey. Right. And many people don't need that. They
will never reach that catastrophic cap, and it is really
unnecessary.
So, Mr. Chairman, I will yield back 28 seconds. Thank you
very much.
Thank you, Dr. Miller.
Mr. Pitts. The Chair thanks the gentleman.
Now recognize the gentleman from Maryland, Mr. Sarbanes, 5
minutes for questions.
Mr. Sarbanes. Thank you, Mr. Chairman.
You said that the policy impacts the cost of the program.
Just give me a couple examples.
Mr. Miller. The policy?
Mr. Sarbanes. The policy with the Medigap, like that the
nature of the policy has an impact on the cost to the----
Mr. Miller. Oh, OK.
Mr. Sarbanes [continuing]. Medicare program.
Mr. Miller. We think the research--if I follow your
question, and if not, redirect. We think the research on this
is very clear. What happens when you look at the presence of
the supplemental coverage, after you adjust for the risk of the
patient, you find a lot more discretionary services. So there
are more visits, more imaging, more testing, that type of
thing. It doesn't affect hospital, emergency room services.
Mr. Sarbanes. Right.
Mr. Miller. That goes on about its business. But these
policies, because there is no further----
Mr. Sarbanes. But ups utilization that spills over onto the
Medicare----
Mr. Miller. And then that is not reflected----
Mr. Sarbanes [continuing]. Coverage side.
Mr. Miller. And what I have tried to say, and perhaps not
clearly, is that doesn't get reflected in the premium.
Mr. Sarbanes. Right.
Mr. Miller. The person purchasing the product gets this
package which is priced to just the wrap-around benefit, but
there is a cost over here that travels on to the taxpayer and
to the beneficiary's broader premium.
Mr. Sarbanes. Right. Well, it is obviously very complex,
and----
Mr. Miller. Yes, it is.
Mr. Sarbanes [continuing]. It is gratifying that you are
approaching it as much based on the reams of data that Medicare
has at its fingertips as you possibly can.
I am glad that this discussion, wherever people may come
down on it--and, you know, you have the Medigap plans with
their perspective, insurers on one side and beneficiaries
potentially on the other side, and maybe there is some common
ground that can be achieved. But at least the whole discussion
is happening within the context of maintaining the basic tenets
of the Medicare program, which is that it is guaranteed
coverage of one kind or another.
So, in that sense, it is in strong contrast to some of the
proposals that we have seen in recent years--for example, the
proposal to turn Medicare into a voucher program, which
completely upends the basic principles upon which the program
is operated for all of these decades and is really at the heart
of it.
So we will kind of continue to find our way on what the
best sort of outcome is for this discussion, but I am glad it
is being done in a kind of fact-based environment and one that
doesn't abandon in any way the basic operating principles of
the program.
I was curious--and you may have a document like this, but
if not, would it be possible to produce for us a document that
just kind of takes a Medicare beneficiary who purchases a
Medigap plan and says, you know, here is the before picture of
how they are managing that situation and here is the after
picture under these two or three scenarios in terms of the
reform to give us a better sense of, in practical terms, what
that looks like from the beneficiary's standpoint?
And maybe what you do is you choose, if there are certain
categories of beneficiaries that assemble around one kind of an
option currently, take that category, show us the before
scenario and show us the after scenario, take the next category
and show us the before and the after, just so we can get a
sense.
I mean, for example, not all beneficiaries purchase these
Medigap plans, as you made very clear, so I don't know if the
before and after picture is pertinent to that group or not, but
it may be. But certainly for the folks that do, if they fall
into some distinct categories that allow for comparison, that
would be useful.
Because when we are talking to our constituents and trying
to translate this potential policy change to them as
beneficiaries, that would be the most useful way to capture the
data and the proposal for us. So I don't know if there is
something like that, but if it is possible to produce something
like that, I think it could be useful.
Mr. Miller. Yes, there are certainly, in the reports,
averages that do that type of thing, but I think your request
is a little bit different. You know, could you make it a little
bit more directly relevant to the beneficiary, a beneficiary
who looks like this----
Mr. Sarbanes. You know, and is paying X a month, and when
that X a month represents, kind of, on average what a whole
category of beneficiaries are paying, you know, this is what
would happen under this proposal. That would be helpful.
Mr. Miller. There might be an illustrative example or two
that we could put together that would bring this point home for
you. It would be very hard to represent, you know, the full
breadth of a beneficiary's experience.
Mr. Sarbanes. I understand.
Mr. Miller. It is going to necessarily be incomplete.
Mr. Sarbanes. Right.
Mr. Miller. But there might be a couple of illustrative
examples that we could put together for you.
Mr. Sarbanes. Thank you.
Mr. Pitts. The Chair thanks the gentleman.
Now recognize the gentleman from New Jersey, Mr. Lance, 5
minutes for questions.
Mr. Lance. Thank you, Mr. Chairman.
Dr. Miller, there is a growing concern over the high cost
of dual-eligible beneficiaries, eligible for both Medicare and
Medicaid. As you know better than most, there are two separate
funding streams. Different payment rates and coverage rules
often create conflicting financial incentives that result in
higher costs and poor coordination efforts.
In 2010, the President's fiscal commission recommended
giving Medicaid full responsibility for providing health
coverage to dual-eligible persons and requiring those persons
to be enrolled in Medicaid managed care programs. Would you
please comment on the merits of this policy, both pros and
cons?
Mr. Miller. I am not going to be able to. The Commission
has not taken that up, per se, and, you know, I am here to
represent their view, so there is not a lot I can bring to bear
on it.
There have been discussions around things like the dual-
eligibles' demonstrations and some of the issues there, and
there have been some discussions around those. These kinds of
conversations always kind of have a continuum to them, which
are, do you take this population and put it in the hands of the
State, and then you have to start asking questions about how
the Federal dollar follows in that instance? Versus the other
approach, which other people have argued, which is--and this
is, in a sense, what--not in a sense--directly what happened in
part D, where you say, OK, the beneficiary now becomes a
Federal responsibility, and then the dollars from the State
travel in that direction in order to support this.
The Commission has not broadly, for the dual-eligibles
population, talked about, in that continuum, you know, the
solution that should be considered. So I can't really give you
much there.
Mr. Lance. Given the aging of baby boomers and climbing
rates of obesity and obesity-related disease, do you expect
that the cost pressures created by dual-eligibles will continue
to increase?
Mr. Miller. Yes, I think that this is an expensive
population and a population that really, you know, is most
susceptible to the problems that arise from not coordinating
among the clinicians and actually not coordinating more broad
social types of services around these particular beneficiaries.
Although I do want to say quickly, we talk about--and I do
it, too--duals as kind of a monolithic group of people, and
they are very different--cognitive disabilities, physical
disabilities. There is a significant range of people within the
dual-eligible population.
But that said, I think this is a population where there is
need for people to be focused on more care coordination
activities, both around their clinical needs and around their
social needs. Otherwise, I think the price does go north.
Mr. Lance. Given the fact that there are different types of
people in dual-eligibles, should we differentiate between the
different type of person who is in the dual-eligible category?
Mr. Miller. That is a really fair question, and honestly--
and, again, this is a comment that is probably not so much the
Commission--my own thinking has gone back and forth.
Sometimes I have had this view that you have to really
think about designing programs around specific populations
within the dual population. And then, at other times, I have
sort of felt like, well, maybe you can think about coordinated
care plans but allow benefit flexibility within the plan, for
example.
And then there is a whole set of questions that, if the
beneficiary stays out in the fee-for-service environment, how
you actually build the coordination around that particular
environment, which I think continues to be complicated even if
you are not dual-eligible.
So I have to tell you, my own thinking has moved around on
this, and on any given day I am not sure what answer I would
give you on this.
But there has to be, I do think, some more--I think I would
say this--some more tailored approach. Because, you know, a
cognitive disability is not a physical disability, is not--you
know, there are different populations. And so there has to be
some flexibility to put the right kinds of providers and
services around a given population. There probably does need to
be some flexibility there.
Mr. Lance. Thank you very much.
Mr. Chairman, I yield back 10 seconds.
Mr. Pitts. The Chair thanks the gentleman.
Now recognize the gentleman from New York, Mr. Engel, 5
minutes for questions.
Mr. Engel. Thank you very much, Mr. Chairman. Thank you for
holding today's hearing.
I believe the reforms included in the Affordable Care Act
have improved Medicare's long-term fiscal situation and
protected beneficiaries' access to guaranteed benefits. And
just last week, the Centers for Medicare and Medicaid Services
reported that health costs grew just at 3.6 percent in 2013,
which is the smallest increase since 1960, and the reforms
included in the ACA resulted in the Medicare Trust Fund
remaining solvent till 2030, which is 13 years longer than the
projected date prior to the passage of the ACA.
With regard to protecting beneficiaries, HHS announced last
week that, from 2010 to 2013, there were 1.3 million fewer
hospital-acquired conditions, resulting in 50,000 lives saved
and $12 billion in healthcare costs avoided. The ACA pushed
healthcare providers to improve patient safety by providing
Medicare payment incentives to improve the quality of care
provided and launching the HHS Partnership for Patients
initiative.
Medicaid is a lifeline for many of my constituents. I am
pleased so many States, including my home State of New York,
have taken this opportunity to expand their Medicaid programs
and care for the most vulnerable citizens. However, certain
Governors have used the excuse of the uncertain Federal funding
for Medicaid as a reason not to expend their programs. I think
that is wrong and shortsighted.
Looking only at the dollar figures and associated
healthcare spending with regard to the ACA, Medicare, and
Medicaid fails to adequately convey the tremendous importance
these programs have to the basic wellbeing and health of
millions of vulnerable Americans, young and old. Their value in
this respect cannot be understated and should be our primary
focus as we look at the long-term fiscal situations surrounding
these programs.
Let me ask you, Dr. Miller--let me say this. MedPAC made
GME recommendations a few years ago that many people have used
to push for Medicare--GME, graduate medical education--cuts.
With one in six physicians trained in my home State of New
York, I have concerns that cutting Medicare support for GME or
physician training would make it very difficult for teaching
hospitals and medical schools to carry out their missions.
Additionally, these proposals would change the long-established
shared investment between medical schools, residency training
programs, and the Federal Government to financially support
doctor training.
So let me ask you this. By 2025, the Nation will face a
shortage of more than 130,000 physicians, split evenly between
primary and specialty care. Medical schools from across the
country have done their part to address the shortage by
increasing enrollment sizes, and teaching hospitals are
training residents above their cap. Medicare GME cuts could
financially exhaust the ability of teaching hospitals to train
additional resident physicians.
With this said, does MedPAC support the notion of cutting
Medicare GME funding?
Mr. Miller. What MedPAC said--MedPAC, in 2010 I think, made
a broad recommendation to reform the GME approach in Medicare,
and it has the following characteristics.
So the analysis that we did suggested that the curriculums
that were current in residency programs were not really focused
on team-based care, decision support instruments, that type of
thing, getting training outside of the hospital, getting
training in rural areas, that type of thing. So we made a
recommendation that there needed to be new criteria to have
reorganized residency programs. And then we took a little more
than half of the indirect medical education funding and said,
these dollars should be devoted to entities--and it wouldn't
just be hospitals--who are providing this more reformed
approach to graduate medical education.
So to try and answer your question directly, we didn't take
the dollars out of the system, but we said that the dollars
should be allocated differently than they are now. A hospital
can be a recipient of it if they are a part of these reformed
programs, but they are not necessarily the only entity for
which these dollars would be available.
Mr. Engel. OK.
Let me quickly switch, and just let me give you a general
question. Can you elaborate on what you believe are the most
promising efforts under way to encourage providers to deliver
high-quality, high-value care?
Because, in your written testimony, you stated that the
Commission remains focused on pursuing reforms that control
spending and create incentives for beneficiaries to seek and
providers to deliver high-value healthcare services.
So what do you believe are the most prominent, promising
efforts under way to encourage providers to deliver this kind
of high-quality, high-value care?
Mr. Miller. Well, I mean, it is kind of the whole array of
things that I mentioned here. So, you know, there are things in
the fee-for-service world like readmission penalties and
reformulating the way we pay for skilled nursing facility and
home health services. We have made recommendations on
accountable care organizations to make them more viable
options. We have made recommendations that Congress has adopted
on the way we make payments in managed care, and we think that
that industry is moving in a much more efficient direction.
There is a very long list here with time out here that--but
it is in the testimony. The testimony is basically, from first
to the last page, a list to answer your question.
Mr. Engel. All right. Thank you.
Thank you, Mr. Chairman.
Mr. Pitts. The Chair thanks the gentleman.
Now recognize the gentleman from Florida, Mr. Bilirakis, 5
minutes for questions.
Mr. Bilirakis. Thank you, Mr. Chairman. I appreciate it.
Thanks for holding this very important, very informative
hearing.
And, Dr. Miller, I appreciate your testimony.
My first question: Dr. Miller, one of the great things
about the Medicare Part D program design is that it harnesses
the forces of choice and competition to reduce costs while
improving the options for seniors. Premiums in the program have
been basically flat over the last few years, and seniors truly
love the program.
I noticed that MedPAC has examined and endorsed a
competitively determined Medicare planning bidding system for
the future of the Medicare program. Can you talk about the
merits of this approach and how it is similar to or different
than the Medicare Part D or Medicare Advantage?
And then could you also explain, to what extent would it
free Congress from annually having to adopt price controls to
pass Medicare's fee-for-service system?
Mr. Miller. OK.
The first thing I just need to clear up, we did not endorse
it. We did publish a chapter and sort of discuss the issues.
And what we were trying to do is kind of strike a balance in
the policy conversation.
You could take an approach broadly in Medicare like you
take in D, where you say there will be a competitively set
Government contribution, and then the beneficiary would select
a plan, and the plan is either a managed care plan or fee-for-
service, even though that is not a plan, and then pay the
difference, depending on how expensive it is. So that is the
thought, I believe, you are chasing here.
And what we said is that that is a legitimate conversation
that should occur, but there is a set of design issues that
become extremely important here in how well this is done and
how successful it is.
One right off the top that I think a lot of people miss is,
in the private sector, there has been tremendous provider
consolidation over the last decades. Your questions about the
site-neutral payments are all about that kind of phenomenon.
And to the extent that there has been greater consolidation,
commercial insurers have had a really hard time holding down
payment rates because you have a very consolidated provider in
certain markets.
So approaching these competitive models, you have to be
very conscious of how you are going to extract reduced prices
from these providers who in the private sector actually have
consolidated positions. In Medicare, you have administered
prices, so you don't deal with that.
Now, the technical, you know, questions about how you deal
with that are probably beyond a 5-minute answer, but the first
thing to keep in mind is, if these things aren't done right,
they can actually cost Medicare money. But there are technical
issues to navigate around that.
A couple of other issues are things like this: Do you
standardize the benefit, which would say it is very clear to
the beneficiary, be very clear to the Congress what they are
paying for and what works and what doesn't work, or do you
allow complete innovation in the benefit design, or something
in between? The MA plans, you have to provide certain services,
you have ability to play with the cost-sharing. And so you have
to think about that.
Another big issue that you have to think about if you go
down these roads is where you set the Government contribution.
If you do it at a national level, then there are certain parts
of the country where everybody pays, fee-for-service or managed
care, and other parts of the country where everybody gets a
premium rebate, for lack of a better word, whether you are in
managed care or fee-for-service. If you do it within the
market, that is probably a more rational way to go at it, but
there is probably then some subsidization that is occurring
across the country, and you will have to deal with the
implications there.
So what we tried to--oh, and then--I hate that this came
off as an afterthought--what are we going to do with the low-
income? So if there is a premium support here, then how are the
low-income going to be handled?
So what we did in this report is just blocked through a set
of issues and said, if we are going to have a serious
conversation about this, there have to be answers to each one
of these issues. And we kind of went through the pros and cons,
and we did a little simulation, very static, not high science,
but a little simulation of some of the distributional impacts.
And I would refer, if you want to have this conversation, refer
you to that.
Mr. Bilirakis. Very good. Thank you very much.
In November of 2012, CBO issued a paper on the offsetting
effects of the prescription drug use on Medicare spending.
Basically, proper adherence to a prescription drug regimen in
Medicare Part D would provide a savings from hospitalization in
Medicare Part A.
Can you talk a little about this spillover effect and
savings? Also, do you think that eliminating duplicative
medications and proper monitoring of dangerous drug
interactions could also add to savings in the Medicare program?
Mr. Miller. I mean, we decidedly have been--we had some
discussion of this on opioids just recently--decidedly
concerned about overmedication and, you know, drug-to-drug
interaction and that type of thing. And you want to deal with
that not just for savings reasons or even whether it saves or
not; you want to focus on that because of the impact on the
beneficiary.
Our research is in a little different place than CBO's. We
have seen that, we have talked to them, we went through it. I
believe they have done it very carefully, and there is a lot to
commend it.
Our own research has somewhat more ambiguous results. We
see this effect where you get the savings on the hospital side,
you know, your better drug compliance reduction and hospital
effect. But the hospital effect kind of goes away after 6
months, a year. And we are a bit confused by that, and we are
still kind of churning on it ourselves.
You know, great if compliance--I mean, you should probably
have compliance for medical and clinical and all the rest of
the reasons anyway. If it has a savings effect, great. We are
having a little trouble, you know, coming to the same
conclusion.
Mr. Bilirakis. All right. Thank you.
I yield back, Mr. Chairman.
Mr. Pitts. The Chair thanks the gentleman.
Now recognize the gentlelady from North Carolina, Mrs.
Ellmers, 5 minutes for questions.
Mrs. Ellmers. Thank you, Mr. Chairman.
And thank you, Dr. Miller, for being with us today.
I want to go back to some of the discussion of the site-
neutrality payments. And I, again, just for the purpose of my
questions, want to again clarify, has MedPAC taken a position
on whether or not Congress should act on the issue of site-
neutral payment reform?
Mr. Miller. Yes, we have made two recommendations as it
relates to E&M visits and then--I won't take you through all
the weeds, but----
Mrs. Ellmers. Uh-huh.
Mr. Miller [continuing]. The 66 conditions that we
carefully identified so that it didn't undercut the hospital's
mission and didn't create access issues for the beneficiary and
said those should be----
Mrs. Ellmers. What is the number-one reason that we should
address this policy change and reform?
Mr. Miller. I mean, I would say--you know, I have 17
commissioners, so I don't know, but my number-one reason is
that the beneficiary is out-of-pocket. If they are getting the
same service----
Mrs. Ellmers. Yes, the increased cost.
Mr. Miller. Right.
Mrs. Ellmers. OK. I just want to--there again, I do want to
clarify that. That is what we are seeing, and it seems to be a
discussion and a question of, you know, if you are receiving
the same care at a facility which is an ambulatory outpatient,
you know, minus the hospital, why then is the hospital charging
more, I guess I would say, for the consumer.
So, now, getting back to that issue, too, back in June of
2013, the report that came out from MedPAC discussed the cost
differences, especially in cardiology. And I think the question
was posed at that time, have you seen this in other
specialties? And for my purposes today, I am thinking about
oncology. Have you also seen this cost increase in oncology?
Mr. Miller. Right. And you made a specific request in our
last hearing, and we delivered to your office a response on
this very question. And this is what I was dragging up from my
memory to Mr. Burgess' questions.
Mrs. Ellmers. Uh-huh.
Mr. Miller. We looked at oncology. We looked at radiation--
divided it between radiation therapy and chemotherapy. Kind of
oblique results on the radiation therapy side. On the
chemotherapy side, it does look like there is an uptick----
Mrs. Ellmers. Increase.
Mr. Miller [continuing]. In the outpatient, which is really
the billing----
Mrs. Ellmers. Yes.
Mr. Miller [continuing]. And, you know, some shift between
the physician's office and the outpatient.
Mrs. Ellmers. OK. Yes. Thank you. Because I am kind of
coming off of what Dr. Burgess was asking you about.
I do have another question, which is kind of off my line of
questioning here, but I do want to make sure that I address it.
It goes in line with what my friend Congressman Shimkus was
talking about, some of the issues regarding readmission--I
believe it was Mr. Shimkus--the readmission within 30 days and
the loss of payment if there is a readmission.
And he addressed the issue of it being possibly a different
diagnosis but still receiving that loss of reimbursement. I
believe you said it has more to do with the number of
readmissions that that particular hospital is having.
But my understanding--and this is what I want to clarify
with you--is that it can also be a readmission to a different
hospital. And if it is a readmission to the different hospital,
how does that process work?
And I am very concerned about this, because my
understanding is that we are going to go to an increase in the
number of diagnoses of readmissions.
So can you clarify or shed some light on how that process
works? Does the initial hospital end up getting the ding if
there is a readmission to another hospital within 30 days?
Mr. Miller. Yes. That is correct.
Mrs. Ellmers. OK. So there that is. OK. Great.
Next question. And this has to do with North Carolina and
Medicare Advantage. I am very concerned. Medicare Advantage
facing $200 billion worth of cuts through the ACA. North
Carolina, 57,000 Medicare Advantage recipients are being told
that their plans will not be offered in 2015.
You know, Kaiser Family Foundation has found this to be
true and that other States are not facing the number of cuts to
some of these plans.
Can you shed any light on that or any of your--I mean, how
can my constituents deal with that, when they like their
Medicare Advantage plan so much?
Mr. Miller. Well, I can't speak to North Carolina
specifically in that particular set of plans. We have
documented this extensively and will do again next month at
our--or, actually, next week at our public meeting.
We have continued to see 9 percent annual growth in managed
care enrollment. We have seen more organizations entering. And
the average numbers of plans being offered, I think, is still 9
or 10, on average, in any given market. And, of course, some
markets, like Miami, have 30, and other markets have 5, but----
Mrs. Ellmers. Uh-huh.
Mr. Miller [continuing]. We have seen continued growth in
enrollment in this program.
Why those specific plans feel that they have to pull out--
and the dilemma for you and your colleagues in the Congress is
you want the beneficiary to have access to the plan and have
the extra benefits, but I think--and you have to decide this
for yourself--you want those extra benefits to be provided
because the plan is efficient relative to fee-for-service and
has the extra money because they are good at what they do. If
you just give them the extra benefit, then you are right back
to----
Mrs. Ellmers. Right.
Mr. Miller [continuing]. Your debt situation.
Mrs. Ellmers. Well, thank you, Dr. Miller.
And thank you, Mr. Chairman. I have gone over a little bit,
so I apologize. Thank you.
Mr. Pitts. That is all right. The Chair thanks the
gentlelady.
Now recognize the gentlelady from Tennessee, Ms. Blackburn,
5 minutes for questions.
Mrs. Blackburn. Thank you so much, Mr. Chairman.
And, Dr. Miller, I want to stay right with Mrs. Ellmers'
thoughts on Medicare. You just talked about the 9 percent
growth in enrollment in a lot of the programs. And one of the
things I hear from my seniors is they are beginning to realize
that, with the arrival of Obamacare, that you had about $700
billion of cuts that were made to Medicare, to the trust fund,
and that that money is now being used for new Government
programs that aren't for seniors.
And they are figuring this out because they are asking the
questions, why is my plan being terminated, or I don't have as
many options, or my copay is higher. And they are looking at
this, and they have figured out that that redirection has taken
place.
And, of course, they are looking at the pay-fors, and that
was the across-the-board annual reductions in the growth rates
of Medicare payments for hospitals. And these cuts are
scheduled to continue every year permanently. And, as a result,
the actuary of the Medicare program has said, basically, you
have a couple of choices here; you have up to 15 percent of the
hospitals could close and many hospitals could stop taking
Medicare patients, or Congress can reverse the cuts and
increase the rate of Medicare spending, accelerating the
insolvency of the program.
So, in your view, would it be better to scrap the
reductions and replace them with other policies? What would be
your advice there?
Because you have constituents like Ms. Ellmers who are
saying, well, we are beginning to catch the brunt of this, and
then you have the hospitals, where they are facing these
reductions and they are saying, well, we don't know how we are
going to keep our doors open. And I will tell you, quite
frankly, I have a lot of rural hospitals that deal with
underserved areas.
So what is your thought there? What is the better plan?
Mr. Miller. OK. Well, I will leave it to the Congress to
decide which plan----
Mrs. Blackburn. Well, we would just like your insight.
Mr. Miller. No, I will give you a couple.
Mrs. Blackburn. Good.
Mr. Miller. But, remember, our role here is just to put a
set of ideas in front of you and then let the Congress decide
what is the right thing.
Mrs. Blackburn. Well, and we appreciate that.
Mr. Miller. Right. And----
Mrs. Blackburn. That is what we are looking for, are those
thoughts and ideas.
Mr. Miller. Yes. And I will say two things in response to
your question, because there were two things in there, I think,
and maybe more, but at least two, that I teased out.
One is, on the managed care plans, regardless of whether
Obamacare or whatever the health reforms to the side, the
Commission looked at the managed care plans--and this is the
exchange I just had here--and said, look, before 2010, every
time we enrolled somebody in managed care, it cost the trust
fund money. Managed care plans were actually bidding to provide
the basic part A and part B benefit at a more cost than fee-
for-service. These are the managed care plans who said fee-for-
service is broken and we can do better, and they were actually
delivering it for greater cost.
So whether there is Obamacare or whatever, the Commission's
recommendation was that payment system was broken. And what we
were trying to drive it to--and we believe this has happened
now--managed care plans that are actually efficient, get the
efficiencies, then offer the extra benefits. And we are several
years down the road. Enrollment continues to increase, and
plans are actually, on average--or some plans--bidding below
fee-for-service, proving that they can be more efficient than
fee-for-service. I want to emphasize ``some plans.''
So we think, our view on that, that had nothing to do with
any health reform. You know, that is a different world. We were
saying that about managed care.
On the fee-for-service side, where you are seeing the cuts
and the concerns about hospitals, what I would say to you is we
come to you, by law, you know, the law that you created for us
to respond to, every year and tell you what we think is the
best thing that you should do for hospitals, physicians,
skilled nursing facilities, you name it.
And what we do is we look at the current law--and we are
not bound by current law in our recommendations. So we have
said things to take payment reductions below what is in PPACA,
the Accountable Care Act, in some instances, and in other
instances we have said, no, they are too low, you need to go
up.
So we actually come in--and there was a statement made by
the chairman, you know, we need policies that kind of think
through the circumstances. And that is what we try and provide
to you on an annual basis, is come to you and say, stay with
the law here, go below the law here, go above the law here. And
that is what we do every year in our March report. So we are
trying to help you navigate whatever your current set of
circumstances are on an annual basis.
Mrs. Blackburn. Well, and for our constituents who now
realize the cuts that Obamacare made to Medicare and how it
affects their hospital and their access and the reduced rate
that is going back, reimbursement rate going back to those
hospitals, it is a very tangible--very tangible consequence of
the implementation of this law.
And for seniors who have paid into the Medicare trust fund,
this is not working well. So it is going to be worthy of a
revisit, because that money is in the trust fund and it is now
being used for new programs, not for programs that benefit
seniors.
I yield back.
Mr. Pitts. The Chair thanks the gentlelady.
That concludes our round of questions. The Members will
have follow-up questions in writing. We will submit those to
you, Dr. Miller, and ask that you please respond to those
promptly.
Thank you very much for your informative exchange.
While the staff sets up for the next panel, the
subcommittee will take a 3-minute recess.
[Recess.]
Mr. Pitts. The subcommittee will reconvene.
And on our second panel today we have Mr. Chris Holt,
director of healthcare policy, American Action Forum--welcome;
Mr. Marc Goldwein, senior policy director, the Committee for a
Responsible Federal Budget; and Dr. Judy Feder, professor of
public policy, Georgetown Public Policy Institute.
Thank you all for coming. Your written testimony will be
made a part of the record. You will each have 5 minutes to
summarize your testimony.
And, Mr. Holt, we will start with you. You are recognized
for 5 minutes to summarize.
STATEMENTS OF CHRISTOPHER W. HOLT, DIRECTOR OF HEALTH CARE
POLICY, AMERICAN ACTION FORUM; MARC GOLDWEIN, SENIOR POLICY
DIRECTOR, COMMITTEE FOR A RESPONSIBLE FEDERAL BUDGET; AND JUDY
FEDER, PROFESSOR OF PUBLIC POLICY, GEORGETOWN PUBLIC POLICY
INSTITUTE
STATEMENT OF CHRISTOPHER W. HOLT
Mr. Holt. Thank you, Mr. Chairman, members of the
committee. It is certainly an honor to be asked to testify
before Congress but particularly for me this subcommittee. With
my past work with Representative Murphy and with the committee,
having had the opportunity to work with many of you and to come
to understand the dedication that you and your staff bring to
the important issues that this committee deals with makes this
a very humbling opportunity for me, and so I thank you very
much for that.
My written statement details some modeling that we have
done on Affordable Care Act provisions that--spending
provisions that we could dial up or dial down in order to
generate some savings. That modeling I am happy to go into if
people have questions. I think that those savings could be used
to pay for other spending priorities. But I was hoping to take
a step back and maybe talk a little more broadly today about
the topic that we are here to discuss.
When I arrived in D.C. 10 years ago as a congressional
intern, we had a Federal debt of about $7 trillion. As we all
know, today the Federal debt is now past $18 trillion.
We can point fingers and try and lay blame, but the reality
is that this is not entirely the fault of one party or the
other; we have gotten here together. And I think you can see
that if you look at the immediate last two Presidencies. During
the Presidency of George W. Bush, we saw the national debt
double, and under this Presidency of Barack Obama, we are
flirting with doing that again.
So we can argue about whether or not we have a spending
problem or a revenue problem, but I hope that we can agree that
we have a debt problem.
And while we all have, I am sure, our pet peeves for what
is driving that debt accumulation, the 800-pound gorilla in the
Federal budget is mandatory spending, which makes up 60 percent
of the Federal budget, and, in particular, mandatory spending
on health programs, which is about 30 percent of all Federal
spending. As this spending continues to grow, it is crowding
out discretionary spending, things like defense but also things
like funding the NIH.
And so, as we look at that, unfortunately, rather than
addressing that looming entitlement crisis, President Obama
chose to focus on passing the Affordable Care Act. In doing so,
he expanded spending in the Medicaid program and put more
people into that broken program.
He also created an entirely new entitlement, these
subsidies for the under-65 population available through the
health insurance marketplace, and then, all the while, largely
ignoring Medicare beyond the $700 billion in cuts that were
used to pay for the other priorities, particularly cuts to
Medicare Advantage and also to home health.
As we look to the 114th Congress, I think we can recognize
that the big policy agenda items that conservatives seek--
repealing and replacing the Affordable Care Act, large-scale
Medicare and Medicaid reform--are likely out of reach, but we
can and should take the opportunities that present themselves
to move towards those goals.
And so, in particular, as Congress looks at the entitlement
spending, both new and old, that continues to grow, I would
remind you that the Budget Control Act has largely left the ACA
unscathed. And, as such, I think it is appropriate that, as
Congress looks to fund other health priorities, particularly
the SGR reform that is coming up, that we can look to the ACA
as a mechanism by which those other priorities can be paid for.
And then, finally, briefly, I would say, with an eye
towards long-term fiscal priorities, I urge Congress to protect
the Medicare Part D and the Medicare Advantage programs. These
are excellent blueprints for how entitlements could be
structured and should be structured, and they provide a roadmap
for moving past the fee-for-service Medicare system today.
And, with that, I am happy to take your questions.
[The prepared statement of Mr. Holt follows:]
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Mr. Pitts. The Chair thanks the gentleman.
Now recognize Mr. Goldwein, 5 minutes for an opening
statement.
STATEMENT OF MARC GOLDWEIN
Mr. Goldwein. Thank you, Chairman Pitts, Ranking Member
Pallone, and other distinguished members of the committee, for
inviting me to testify on this important issue.
I would like to focus my remarks this morning on two
subjects. First, I would like to make the case for the
importance of continuing to focus on slowing Federal healthcare
cost growth. And, second, I would like to discuss the policies
which I believe have the best chance of making healthcare
spending both more effective and more affordable.
I have spent the bulk of my career working with bipartisan
efforts to put the debt on a more sustainable path. I worked on
the staff of the Simpson-Bowles Fiscal Commission, the
Hensarling-Murray Supercommittee, and with a number of Hill
offices on an informal basis. Every one of those efforts to
stabilize the debt has put identifying reforms to slow the
growth of health spending front and center as the central
issue.
Unfortunately, the combination of the recent fall in the
short-term deficit and the tremendous slowdown in healthcare
cost growth has led some to conclude that Medicare and Medicaid
reforms are no longer necessary. In my view, this couldn't be
further from the truth, especially considering our debt levels
are currently at record highs only seen around World War II and
are continuing to grow unsustainably if you look into the
future. The slowdown in Medicare and in health spending more
broadly is hugely encouraging but, for a variety of reasons,
should not be used as an excuse to stop reforms.
My written testimony explains this in more detail, but,
first of all, a large share of the recent slowdown is due to
temporary factors. These include economic and demographic
factors, one-time legislative cuts like sequestration, and
other temporary events like the recent prescription drug patent
cliff that we are sort of falling off right now.
Secondly, the portion of the slowdown which is structural
and permanent, some of it is probably because providers expect
future changes in fee-for-service, which means, without further
congressional action, they will revert and we will lose the
gains we have made so far in the slowdown.
Third, slowing healthcare cost growth will not be enough to
keep Federal health spending itself under control. The reason
is that the primary driver of Federal health spending over the
next quarter-century is not actually healthcare cost growth but
it is population aging. As a result, the Congressional Budget
Office projects that healthcare spending as a share of GDP,
Federal healthcare spending, will more than double by the early
2050s, possibly sooner.
And, finally, Congress and the President will have to
identify health savings early next year in order to offset
either a temporary doc fix or, preferably, a permanent SGR
fix--a permanent SGR reform. After all, we have offset 98
percent of doc fixes in the past and, as a result, generated
$165 billion worth of savings, mostly from within the
healthcare system.
Now, as Congress does look for savings, there are a number
of policies which have the potential for broad bipartisan
support. At CRFB, my organization, we like to categorize these
savings as benders, savers, or structural reforms. And my
advice to this subcommittee is to focus first and foremost on
the cost benders, those policies which will structurally change
the incentives within Medicare and Medicaid in order to slow
the growth of healthcare spending overall, not just shift who
bears the burden.
Now, these benders can't offer a free lunch. They can't
offer a situation where everybody is better off. But what they
can do is offer a discounted lunch, where as a society we are
better off and where the winners far outweigh the losers.
CRFB, my organization, the Committee for a Responsible
Federal Budget, recently released a plan we call the Prep Plan,
which identified a number of these benders and used them to pay
for the very thoughtful SGR reform that came out of this
committee, along with Ways and Means and Finance.
On the beneficiary side, we included reforms very similar
to the MedPAC recommendation. And I want to emphasize that if
you modernize Medicare cost-sharing, you can save money for
both the taxpayer and the beneficiary. Our plan would save $80
billion over 10 years for the Federal budget and reduce
beneficiaries' out-of-pocket costs by about $200 per person per
year.
Our plan also looks to change the incentives on the
provider side, including by moving to more bundled payments,
increasing penalties for unnecessary hospital readmissions,
encouraging doctors to administer lower-cost prescription
drugs, and rewarding States that move to more efficient payment
models within Medicaid.
In addition to these and other benders, which, again, are
in my written testimony, you are going to have to look at what
we call savers. Now, these are policies where we will save
money for the Federal Government by allocating it in a way that
is preferable.
There are already a number of these savers that have
bipartisan support: increased means testing for Medicare
premiums, reductions to certain overpayments to providers, and
clamping down on certain scams or certain games played by
States in order to increase their Medicaid matches.
You are going to have to look at all of these policies
carefully, along with others outside of the health arena, if we
truly are to get our health system and our debt under control.
There is no magic bullet, but there is an opportunity to work
together on a bipartisan basis and begin making reforms now to
give us a better healthcare system at a better price.
Thank you for allowing me to testify on this important
topic, and I look forward to working with all of you and your
staffs.
[The prepared statement of Mr. Goldwein follows:]
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Mr. Pitts. Thank you.
Dr. Feder, you are recognized for 5 minutes for your
summary.
STATEMENT OF JUDY FEDER
Ms. Feder. Chairman Pitts, Ranking Member Pallone, and
members of the committee, I appreciate the invitation to appear
before you today to express my own and my colleague Paul Van de
Water's views on setting fiscal priorities and the importance
of preserving Medicare and Medicaid.
I want to make five quick points.
First is that Medicare and Medicaid work. They provide
essential health and financial wellbeing to people who are
elderly, disabled, or poor. Over more than 40 years, Medicare
spending per enrollee has grown by an average of 1 percentage
point less than comparable private health insurance premiums.
Medicaid provides acute healthcare coverage at a substantially
lower cost per child and per non-elderly adult than private
coverage. And Medicaid is also the Nation's primary payer for
long-term services and support, a matter I know is of concern
to Mr. Pallone and others.
Second, Medicare and Medicaid are not in crisis. On the
contrary, Medicare spending has recently been growing at a
historically low rate, with spending per beneficiary growing
more slowly than GDP per capita.
The financial outlook for Medicare and Medicaid has
improved significantly in the past 4 years. Congressional
Budget Office estimates of Medicare and Medicaid spending for
the next decade have fallen by several hundred billions of
dollars since CBO first estimated the impact of the ACA. And
Medicare spending per beneficiary in 2014 is expected to be
$1,200 lower than CBO projected in 2010.
Third, as Mr. Goldwein said, it is not growth in spending
per beneficiary but it is growth in the number of beneficiaries
that have become the primary drivers of increased Medicare and
Medicaid spending. Even if cost growth remains moderate,
Medicare and Medicaid spending will keep rising as more baby
boomers become eligible for benefits. And I should note, with
candor, I am one. As boomers age, as we age, States will also
face considerable increase in the need for long-term care.
Does that mean that we can relax in our efforts to slow
cost growth? Of course not. But the focus should be on payment
and delivery reform and not capped Federal contributions.
In Medicaid, there is little room for savings from
efficiency, given already constrained provider payment rates,
widespread use of managed care, and existing opportunities for
State flexibility.
Most proposals that would secure more than modest Federal
savings, such as a block grant or a per capita cap, would do so
by shifting costs to States, and if that occurs, States are
likely to cut eligibility, benefits or provider payments,
enhanced reduced beneficiaries access to care. But Medicare
policymakers cannot only use the ACA, encourage research and
pilots to continue to gain value for the dollar, but can
further reduce spending without jeopardizing quality or access
to care.
Restoring the Medicaid rebate on prescription drugs for
low-income beneficiaries, eliminating overpayments, continued
overpayments to Medicare Advantage plans, and refining payments
mechanisms for post-acute care are a few examples of policies
likely to increase value for the Medicare dollar.
Only so much can be expected, however, of reducing Medicare
costs per beneficiary if that is done independent of lower cost
growth and the system as a whole. New revenues are therefore
needed to deal with a doubling of the elderly population over
the coming decades.
My fourth point: What current circumstances do mean is that
claims of cost growth or fiscal crisis cannot be used to
justify moves to radically reform Medicare and Medicaid. There
is no question that premium support or other mechanisms that
would change Medicare from a defined benefit to a defined
contribution program would raise the fundamental concern of a
cost shift from the Federal Government to beneficiaries.
The same is true for the block grant or per capita cap, as
I mentioned earlier, and that is because these mechanisms would
sever the tie between Federal contributions and the
beneficiary's costs. The more constrained the defined
contribution or the cap, the greater the shift. Premiums
support vouchers, block grants per capita caps or overly
ambitious spending targets might save Federal dollars but they
shift risks on beneficiaries who can ill afford to pay them.
My final point is to urge you to recognize that the deficit
has stabilized as a share of GDP, that healthcare spending is
growing at historically low rates. That is good news, and it
gives policymakers time to identify further steps that when we
needed to slow the growth of healthcare costs throughout the
entire U.S. healthcare system without impairing the quality of
care so that we can meet our responsibilities to an ageing
population just as we did in education when the very same
individuals entered public school about 60 years ago.
The Nation's fiscal capacity does not provide an excuse to
abdicate those responsibilities by radically restructuring
Medicare, by replacing Medicare's guaranteed coverage with a
premium support voucher, or by restructuring or severely
cutting Medicaid or other programs that protect low-income
Americans.
Thank you.
[The statement of Ms. Feder follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Pitts. Chair thanks the gentlelady.
I will begin the questioning. Recognize myself 5 minutes
for that purpose.
Mr. Goldwein, today Medicaid is the largest health
insurance program in the world, covering more than 70 million
people in 2013. Spending for this program is set to double in
the next 10 years, and the program already consumes $1 of every
$4. We have heard repeatedly from our colleagues on the other
side of the aisle that Medicaid is off the table when it comes
to considering any policy that would reduce Federal spending.
Do you think this is appropriate or sustainable? And please
elaborate.
Mr. Goldwein. I don't think that you can afford to take any
program off the table when it comes to healthcare cost growth.
That said, Medicare is much easier for the Federal Government
to address because we control the levers. We know how to--
Medicaid is a joint program with the States, and so I think the
best thing we can do for now is empower the States to find new
types of ways to save money, to have better payment systems.
There are certain places we can impose those savings. There
is borderline fraud, it is not quite fraud, but there are games
that States play we should clamp down on. But really, I think
the best thing we can do is give the States more freedom and
more power to experiment with new cost control ideas.
Mr. Pitts. Mr. Holt, the HHS Inspector General, GAO, and a
broad coalition of stakeholders have identified structural and
systemic concerns with the 340B programs. Research suggests the
programs discounts may be going to hospitals that do not
disproportionately serve Medicaid or the uninsured. Other
analysis suggests that the discounts are not passed on to the
low-income individuals for whom the program was designed.
Given these concerns, and with more people enrolled in
health coverage through the ACA, isn't it time for complete
revaluation of the 340B program; and, also, if the 340B program
was more targeted, would that free up more drug industry
dollars for additional research and development and life-saving
cures and life-enhancing therapies?
Mr. Holt. So yes and yes.
First, let me plug, we have a very good primer on the 340B
program and the American action forum that I am happy to share
with anyone who would be interested in. I think it is important
to remember this program exists largely because of Federal
meddling and what was already going on in the first place.
Originally, the pharmaceutical companies were providing some
discounts to some of these hospitals, and as we started getting
into things with ASP, they started rolling back those deals
because it was impacting what they could sell in Medicaid for.
Today, though, we have got hospitals like Johns Hopkins
which benefit from the 340B program dramatically because of the
locality that they are in, not necessarily their financial
standing. I absolutely think that in a post-ACA world we must
look at all of these programs that were intended to subsidize
uncompensated or undercompensated care, and we have to
reevaluate all of that.
Mr. Pitts. Please provide us with a primer. We will
circulate to the members.
Mr. Holt. Absolutely.
Mr. Pitts. Dr. Feder, the President's fiscal year 2015
budget endorses a policy of further increasing an income-
adjusted Medicare premium until capping the highest tier at 90
percent. As the President said in that budget, quote, ``This
proposal would help improve the financial stability of the
Medicare program by reducing the Federal subsidy of Medicare
cost for those who need the subsidy the least.''
Do you believe this would be a viable offset for paying for
the SGR package?
Ms. Feder. No, sir, I don't. I believe that the President
put forth those proposals in the context of discussing broader
budget agreements that would involve tax increases as well as
spending reductions and in the context of looking for a
balanced approach to reducing the deficit.
Standing on its own and using Medicare beneficiaries as a
piggy bank does not make sense to me. Medicare beneficiaries,
half of them, as was said earlier, live on incomes that are
below $26,000, including their spouse's income.
We do not have a tremendously large, wealthy, elderly
population, and I am concerned that efforts to further means
test the premiums can erode the universality of the program,
which is one of Medicare's greatest strengths.
Mr. Pitts. According to the Social Security Administration
records, there are 60,000 seniors with Medicare who have annual
incomes in excess of $1 million. Do you believe it is
appropriate we charge them more?
Ms. Feder. Well, Chairman Pitts, those beneficiaries have
paid payroll taxes into the system for Medicare on their entire
earnings, although the $1 million may not all come from wages,
but they have been paying them from wages and now they do pay
them also on overall earnings. So people are paying into the
system regardless of the income, and we already do have some
income relationship with our premiums. That, to me, is
legitimate.
I would also say that in terms of your earlier question of
using this to pay for the SGR, that in my testimony I have
offered you other mechanisms for savings in terms of refining
payment rates in Medicare, and I believe that you heard some
from Mark Miller that MedPAC has offered, which I think might
be far preferable if you are looking for offsets.
Mr. Pitts. But you do not believe it is appropriate to
charge them more?
Ms. Feder. They are charged more.
Mr. Pitts. The million dollar?
Ms. Feder. They are charged more.
Mr. Pitts. My time has expired.
The Chair recognizes the ranking member 5 minutes for
questions.
Mr. Pallone. Mr. Chairman, I would ask unanimous consent to
submit for the record an issue briefed by the Leadership
Council of Aging Organizations on MedPAC's extra help copayment
proposals.
Mr. Pitts. Without objection, so ordered.
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Mr. Pallone. Thank you, Mr. Chairman.
My questions are to you, Dr. Feder. I was troubled by the
policy proposals in the testimony of both Mr. Holt and Mr.
Goldwein that seemed to devalue the Medicaid program. And by
rolling back the Federal contribution to State Medicaid
programs and shifting greater costs onto State budgets, access
to care for those may be seriously hindered as State's restrict
enrollment due to budget shortfalls.
So my first question is, so what would be the result of
rolling back the Federal contribution to State and Medicaid
programs?
Ms. Feder. Well, Mr. Pallone, we also, as you well know, we
already see that States are constraining some of their services
based on their decisions about what they can afford and are
willing to spend, particularly in the area of long-term care
services for either elderly people or people with disabilities.
We know that there are long waiting lists for home care, for
example, which is a tremendous matter of concern.
We also know that Medicaid, one of its greatest values is
to be able to have the funding respond as needs arise. So in
the Great Recession, we found that Medicaid responded to the
growing need of the population, that we had so many low-income
people. We see Medicaid similarly respond when new drugs come
on line that are expensive but can make a real difference to
people's ability to get care they need.
So we have lots of experience on which we can draw and lots
of research shows that an arbitrary constraint in terms of the
Federal share, what the Feds are contributing to Medicaid costs
will have an impact on the programs, absolutely, but that
impact will fall on providers. They will get less payment. They
have been on beneficiaries who will get less access to service,
and that the program would be diminished as a result.
Mr. Pallone. I appreciate you bringing up long-term care
too, because I think a lot of times some of us forget the link
between Medicaid and long-term care nursing home care, which I
think is another issue that, you know, we really should be
addressing----
Ms. Feder. Absolutely.
Mr. Pallone [continuing]. In a significant way, you know,
what we are going to do about long-term care. But many
Governors, even Republican ones, even mine have opted to
participate in the Medicaid expansion offered as part of the
ACA because it is good for their States and good for their
citizens.
Moreover, there is empirical evidence showing that Medicaid
improves health. For instance, the 2008 Oregon study that
expanded Medicaid coverage had substantively and statistically
hired utilization of preventive and primary care, lower out-of-
pocket medical expenses and lower medical debt and better
physical and mental health.
So my second question is, it would appear that there is
actual empirical evidence to refute a devaluation of the
program and that Medicaid coverage not only helps improve
health but keeps people out of medical debt.
Do you want to comment on the benefits of the Medicaid
program in that respect?
Ms. Feder. I agree with you 100 percent that the value of
Medicaid to individuals who would, without it go without
coverage, has been demonstrated many times over. The evidence
you cite is recent evidence that researchers like because it is
not influenced by the differences in the population, the more-
likely-to-be-sick population that is in Medicaid versus the
other populations. And this evidence is particularly confirming
of Medicaid's value, although it too had some issues in not
fully capturing it.
So Medicaid on the health side for families and kids and on
the long-term services and supports for people who are elderly
or disabled is extraordinarily valued and we prove it all the
time.
Mr. Pallone. All right. I am going to try to get quickly to
this last thing. House Budget Committee Chairman Paul Ryan has
continued to propose to convert Medicare into a voucher system
for the purchase of private health insurance, and the Urban
Institute analysis show this would result in a fairly dramatic
shifting of cost to beneficiaries.
What is your analysis of this Ryan proposal, and what are
the dangers to Medicare and their beneficiaries from such a
proposal?
Ms. Feder. Well, I share with my colleagues at the Urban
Institute precisely that concern, that it is a shift of cost to
beneficiaries rather than a savings in cost. We know from
experience, we have seen some advocacy lately that competition
is working in Medicare Advantage plans, that we can see that
risk selection is no longer a problem, but those are claims
that are not supported by the evidence.
MedPAC demonstrates that when you have competing plans
there is, even as we refine our ability to adjust payments to
plans for differences in risk, that the risk selection occurs,
that healthier people are served by the plans and sicker ones
are avoided or end up disenrolling. And we see, as Mark Miller
said earlier, a decided risk that we will lose our capacity to
contain costs which Medicare has been so effective, relative to
the private sector and to private plans.
Mr. Pallone. Thank you.
Thank you, Mr. Chairman.
Mr. Pitts. Chair recognizes the gentleman from Florida, Mr.
Bilirakis, 5 minutes for questioning.
Mr. Bilirakis. Thank you, Mr. Chairman. I appreciate it
very much.
Mr. Goldwein, in your testimony, you talk about budget
choices and you classify some of the options as benders or
savers. I have been concerned about the prescription drug abuse
within the Medicare Part D program and overall program
integrity.
Would establishing a safe pharmacy network to provide a
single point of sale for at-risk beneficiaries and providing
part D plans additional authority against fraud be bender or a
saver? Would this save the Government and taxpayers, again,
real money?
Mr. Goldwein. So establishing a safe pharmacy, I think,
would save money. I can't quantify how much, and I have not
seen a CBO score on it. But by clamping down on basically abuse
of prescription drugs and overmedication, it will certainly
save Medicare money.
I also think this would categorize as a bender because this
is one of those wins-wins, where not only would Medicare be
better off, but the beneficiary that potentially could become
addicted to the drug is better off and society is as well. So
it is definitely something worth looking at.
Mr. Bilirakis. Thank you.
And next question for Mr. Holt. Private health insurance
was the model used to build the Medicare Part D program.
Congress used what was successful in the commercial sector and
brought that success into Medicare. Shouldn't we use the
innovation and tools in the private sector to address some of
the drug abuse and fraudulent billing practices in Medicare
Part D?
Mr. Holt. Yes, absolutely, and we already use similar
programs in, I think, about 46 of the State Medicaid programs.
So, and I think this is an excellent idea. I know both HHS and
CMS have said that they support it. I think the committee
largely is supportive of this policy, and I think if you can
get some savings on top of just good policy, I think that is an
excellent choice and move in that direction.
Mr. Bilirakis. Thank you very much.
I yield back, Mr. Chairman.
Mr. Pitts. Chair thanks the gentleman.
Now recognizes the gentleman from Texas, Mr. Green, for 5
minutes for questions.
Mr. Green. Thank you, Mr. Chairman.
I thank our panel for being here. As we have seen since the
passage of the Affordable Care Act, industry stakeholders have
continued to make claims that cuts to the Medicare Advantage
program would lead to reductions in benefits and increased
premiums, but the exact opposite has occurred over that period
of time. In fact, premiums have dropped 10 percent and
enrollment has increased nearly 30 percent since the ACA
required plans to be more efficient in their delivery.
Mr. Goldwein, in your testimony, you propose as one of your
saver policies to increase the coding intensity adjustment to
reclaim additional overpayments to Medicare Advantage plans.
Could you describe this policy and your rationale behind it?
Mr. Goldwein. Sure. Well, let me first say that the
policies I listed in my testimony, other than those which were
in our prep plan, are not my recommendations but just a list of
options.
Now, the President has proposed coding intensity
adjustments for Medicare Advantage, which essentially would
recoup money that shouldn't have been paid to these plans in
the first place, because in some cases, they are over-coding
activities, coding them at something that is more expensive
than they otherwise would be.
What the exact coding adjustments should be year to year, I
can't tell you. I think MedPAC could probably tell you better.
But this is the President's recommendation, and certainly we
should be continuing to make sure that Medicare Advantage is
spending its money as efficiently as possible.
Mr. Green. OK. Even today you heard in Mr. Holt's testimony
how payment reductions in Medicare Advantage plans would lead
to reduced benefits for enrollees in 2015. I believe the plans
were well suited to absorb these cuts by becoming more
efficient without harming beneficiaries, as MedPAC has
indicated.
Dr. Feder, one concern I have is that in 2014 planned
payments are on an average of 106 percent of fee-for-service.
If plans cannot compete at fee-for-service rates, do they
really belong in the program? We are paying them more and there
is no more concrete evidence that their quality is better.
Shouldn't we require better from plans as in more efficient
performance and better quality if they are to remain part of
Medicare?
Ms. Feder. I agree with that approach, Mr. Green, and with
your point that we continue to overpay Medicare Advantage plans
relative to payments in the traditional program. I don't see
any reason for that and have written and argue that payments
should not be higher than what we pay in the traditional plan
on the per-capita basis.
Mr. Green. Well, and that is one of my concerns. I was here
when we created Medicare Advantage and it was supposed to save
Medicare funding not cost many more. And I know I have
constituents, about 25 percent of my Medicare folks get
Medicare Advantage, but when I explain to them that you are
actually costing more for Medicare than the 75 percent that is
not, you know, then they think about it and say, oh, OK, they
didn't know that.
But, Dr. Feder, does it seem irresponsible for us to spend
taxpayer and beneficiary money to prop up private industry that
benefits only a third, at best, at the expense of the other 70
percent under traditional Medicare?
Ms. Feder. It does not, and although we have made, I think,
the reforms, and Mark Miller laid them out on the previous
panel, that have been made in payments to MA plans and through
the ACA have reduced those overpayments and are making strides,
I think it is not appropriate to over-subsidize those plans.
Mr. Green. OK. The title of today's hearing, Doctor, is
``Setting Fiscal Priorities,'' and it appears to solve an
economy against spending on entitlement programs for those
Americans with the greatest need. It seems that term
``entitlement'' has come to mean different things to different
people. Too often people think of entitlements through the
narrow lens of programs that provide the safety net for our
seniors and the most vulnerable in our society by considering
the fiscal impact of the tax entitlements, tax deductions,
exclusions, credits, and other tax preferences, which
disproportionately benefit well-to-do Americans.
Can you talk about entitlements, both those providing
essential services to seniors and low-income Americans and
those providing tax breaks to the more affluent, and the
relative role of each in the context of protecting the most
vulnerable in our society when addressing our long-term debt?
And I know that is a long question for the last 30 seconds.
Ms. Feder. I will try and go fast. The entitlements that
you speak of, I think, are colloquially defined
inappropriately. They accurately mean benefits to which
citizens have a right enforceable in court, and that they are
typically mandatory spending programs so that the money flows
with the population who is eligible for the program and the
costs of the benefits that are provided.
You are quite correct that they are provided through the
tax system as well as in direct spending, even when they are
social service benefits. So the tax benefits that we receive on
mortgages, on pension plans, on employer-sponsored health
insurance, are all entitlements that essentially go to the
upper end of the income distribution.
And a substantial, the bulk of those benefits do go to the
better off, and by virtue of their structure, with the
exception of benefits that are refundable tax credits like the
EITC, they do not go to low-income people. So the tax benefits
are skewed up the income scale, and I am talking about the
good, the social service type benefits. There are others that
are really skewed up the income scale.
By contrast, it is the low and modest income population who
benefits appropriately and probably disproportionately from the
benefits that are provided by Medicare and Medicaid and
benefits like that, that come through Social Security, that
come through direct payment.
Mr. Green. Thank you, Mr. Chairman. I know we are over time
and appreciate your courtesies.
I thank the panel.
Mr. Pitts. Chair thanks the gentleman.
Now recognize the gentlelady from Florida, Ms. Castor, 5
minutes for questions.
Ms. Castor. Thank you, Mr. Chairman.
And Congressman Green, I was glad you got back into the
Medicare questions involving the Affordable Care Act because
there have been, people have kind of played fast and loose with
some of the statements today by continuing to imply that the
Affordable Care Act cut Medicare, and you are implying to the
Medicare beneficiaries our older neighbors, our parents and
grandparents, that they have suffered, their benefits have been
cut, which could not be further from the truth.
Under the Affordable Care Act reforms, Medicare benefits
are better. Remember the doughnut hole is closing so you have
more money in your pocket when it comes to paying for your
prescription drugs. You get that free wellness visit every
year. You get the important visit for your mammogram or
colonoscopy or cholesterol check without a copay. Benefits have
gotten stronger; isn't that right, Dr. Feder?
Ms. Feder. Absolutely.
Ms. Castor. And meanwhile, what we focused on the
Affordable Care Act is cutting the waste in the overpayments to
health insurance companies that Dr. Miller, the MedPAC expert,
testified to. This is smart policy. So let's turn the page on
this and get to the fact that we have more work to do with the
aging population and the baby boomers retiring. We still have
to ensure that Medicare is there for future generations, like
Generation X and the Millenials, I hope so.
So let's talk also about Medicaid because I hear these
arguments too that Medicaid is not efficient, that this is a
huge cost--yes, it is a big draw on the Federal budget, so we
have got to focus on reforms. My colleagues on the other side
of the aisle often refer to the inefficiencies of Medicaid. In
fact, Medicaid's costs per beneficiary are substantially lower
than per beneficiary costs for private insurance, and
Medicaid's cost per beneficiary have been growing more slowly
than per beneficiary costs under private insurance. So it
appears that Medicaid is more efficient than private insurance,
and yet many conservatives say we need to replace Medicaid with
a voucher or cap its funding.
And what you are saying there is that our parents and
grandparents that relied on skilled nursing and need to go into
nursing homes, and with these baby boomers, the policy decision
is to take the access to the nursing home away or to children
with disabilities that we are not going to be there in a cost-
efficient manner to help you survive, I just don't think that
is smart policy.
So Dr. Feder, while this might save money, if you block
grant or you cut and you slash, how can we expect to really cut
healthcare costs while Medicaid is already cheaper than private
insurance?
Ms. Feder. Well, I think that your point is well taken and
that this is really not a way to save money. It may reduce
Federal spending, but it would shift costs to States and in all
likelihood, based on past experience, would leave beneficiaries
without needed services just as you describe. That is simply
not an acceptable way to meet our obligations to our most
vulnerable populations, and those demands are only going to
grow as the population ages, as more and more people need not
just nursing home care. We are more often now or more often
than we were providing care at home, which is where people want
to stay, and we need to be able to do that.
To expect Medicaid to do that on some notion that an
already lean program can somehow be magically more efficient
makes no sense at all. Medicaid can participate and is
participating with Medicare in the private sector in improving
delivery to minimize and reduce inefficiencies. But in all
likelihood, as the population ages, Medicaid needs more support
not less.
And I find it--if you would, for one more moment--I find it
interesting that your colleagues across the aisle want to spend
less on Medicaid and pull those Federal dollars back when we
know that States are arguing that--some States are resisting
Medicaid expansions because they think the Feds are not going
to come through with the needed dollars. So it seems to me that
this becomes a wish fulfillment on the part of those who are
opposed to adequate coverage.
Ms. Castor. Thank you very much. I yield back.
Mr. Pitts. Thank you.
We will go to one follow-up per side. I will recognize
myself 5 minutes for that purpose.
Mr. Holt, the New York Times has a story this morning about
a new report from the HHS Office of Inspector General that is
being issued today, and the report found, quote, ``Half of
providers listed as accepting Medicaid patients could not offer
appointments to enrollees,'' end quote, for non-urgent visits.
Now, the President's health law is fueling rapid growth in
Medicaid with enrollment up by 9 million people just this year.
The inspector general warned that, quote, ``When providers
listed as participating in a plan cannot offer appointments, it
may create a significant obstacle for an enrollee seeking
care,'' end quote.
According to HHS, the Nation is already going to be 20,400
primary care physicians short by 2020, just a few years from
now. Should Congress be concerned that the shortage of doctors
and low participation rates in Medicaid along with the Medicaid
expansion means that the most vulnerable patients will face
worse access problems?
Mr. Holt. Yes, absolutely. I haven't seen the study yet,
since it came out while we were sitting here, I think, but my
big concern about the Medicaid expansion has been that you are
putting more people into this program. There is already
difficulty in Medicaid beneficiaries getting access to doctors.
And we have to keep in mind that having coverage is not the
same as having access and having access is not the same as
having better outcomes.
And so I think it is very important that as we look at the
expansion, which sort of disincentivizes the enrolling of
lower-income individuals who were previously eligible because
they were met at a lower match but pays States quite a bit
more, right now 100 percent, to enroll, higher income, still
lower-income individuals that were sort of incentivizing the
States to focus on the wrong population, and we are making it
harder for those people, the most vulnerable, to get to
doctors, to get to care.
Mr. Pitts. Mr. Goldwein, under the Affordable Care Act,
States have the option to expand Medicaid to adults with no
children, with income under 138 percent of the Federal poverty
level. This was an unprecedented expansion of the program that
traditionally has covered low-income moms and kids, the
elderly, poor, the blind, and disabled. Under the expansion,
the Federal Government is paying 100 percent of the cost of the
expansion until 2016 when States have to start picking up some
of the tab.
Accordingly, under Federal rules today, the Federal
Government is paying the full cost of some prisoners' hospital
care who would otherwise be eligible for Medicaid, the medical
bills of multimillion-dollar lottery winners who States are
barred from disenrolling in the program. Do you think this is
an appropriate use of Medicaid dollars?
Mr. Goldwein. Well, I think, by and large, there was a
decision in the Affordable Care Act to use Medicaid rather than
the insurance subsidies to cover that population between 100
and 133 or 138 percent of poverty. And that was a reasonable
choice where you could have disagreed. Now, within that
population, there certainly are going to be some cases where
there are beneficiaries that don't really merit receiving
benefits, and there probably is an opportunity to look at those
on an individual basis and find places where States can cut off
those benefits.
Mr. Pitts. Dr. Feder, one of the concerns about Federal
spending on entitlement programs is that such spending is
crowding out other parts of the Federal budget. For example,
this committee has had a strong bipartisan tradition of
supporting research and science at the National Institutes of
Health. It will be impossible to find increases to the NIH
budget without some reforms to our entitlement programs.
Under current law and projections, should Congress be
concerned that discretionary portions of our budget like the
NIH will face increasing budgetary challenges without some
reforms to the mandatory healthcare spending?
Ms. Feder. Well, Chairman Pitts, I would like to reiterate
what I believe that Mr. Pallone said a little while ago, which
is that the Affordable Care Act was entitlement reform and has
generated enormous savings in the Medicare program. And, in
fact, if we look at the deficit reduction that has occurred
overall in the last several years, about three quarters of it
has come from spending reduction, not revenue increases. And as
I said earlier, if we expect to meet the demands of our
society, we cannot continue to constrain spending whether
discretionary spending is getting very hard hit, and I agree
with you that it is unacceptable.
But the way to address that is not to create inadequate
supports in strong programs; it is to adequately generate
revenues to support the needs of our population.
Mr. Pitts. Would you not agree that much of that spending
reduction is due to the use of generics?
Ms. Feder. Not the spending--that is true if you are
referring narrowly to some of the spending. Some of the
spending reduction in Medicare on part D, for example, lower
than was estimated, is due to an expansion of generics in part,
but to other factors as well that affected the whole industry
was not necessarily a reflection of the part D design, but I am
talking more broadly about the budget.
Mr. Pitts. Thank you. My time is expired.
Chair recognizes the ranking member, 5 minutes for
questions, follow-up.
Mr. Pallone. Thank you.
In my previous question I said that I believe that simply
turning Medicare into a voucher is shortsighted and simply
shifts costs onto seniors and people with disabilities, and I
believe there are more thoughtful ways to address healthcare
costs growth. And you sort of got into this, Dr. Feder, but the
Affordable Care Act sets the stage and began to put in place
some initiatives to address cost growth without harming patient
care.
Could you give me your views on the reforms and the ACA and
their ability to address cost growth?
Ms. Feder. Well, actually, we heard a lot about those in
the first panel.
Mr. Pallone. Right.
Ms. Feder. So I think that we are seeing efforts to tie
payments more closely to performance, to encourage providers to
be more efficient in their delivery of care. Prime example for
that is the penalty for readmission rates. I think that that
ought to be monitored and done properly, but I think we are
seeing positive results there.
The law went beyond that to create a new option in terms of
the way in which providers get paid instead of rewarding more
for ever more expensive and higher-volume services. We see the
creation of the accountable care organizations that rewards
providers if they meet performance standards, a very important
aspect of it and then labels them to share savings. And we see
many pilot programs exploring improved efficiency in the
delivery of care in both Medicare and Medicaid.
We see, for example, in the area we talked about earlier,
independence at home, which is having doctors serve and people
who need long-term care services going to the home. That is an
exciting change or benefit to explore. We are seeing health
homes where those same individuals get support services,
particularly focused on improvements for those who need
behavioral health services, which I heard a member talk about
earlier.
And we have a variety of demonstrations of various kinds
that are focused on holding providers accountable for the
delivery of quality care, rewarding them for that performance
rather than for higher-volume services.
Mr. Pallone. Thanks.
And you pointed out that the ACA improved Medicare's
financial solvency. It is now projected to be in good standing
for an additional 4 years until 2030, according to the Medicare
Trustees. Just talk a little bit about the financial health of
the Medicare program. What are the fiscal challenges? What kind
of timeframe are we looking at in terms of the ability of
current Medicare revenues and the Medicare hospital insurance
trust fund to continue to cover the cost of the program?
Ms. Feder. Well, as we look, we have to always remember the
different ways in which the program is funded and you hear
people talk about the exhaustion of funds. That is, as you have
correctly said, only about part A, where the funding is
generated by predetermined payroll tax rates. Part B and part D
are funded through general revenues in large part and to some
extent then through beneficiary premiums. So there is no issue
of exhaustion of trust funds when it comes to those other
programs.
On part A, we know that in Medicare, like as in Social
Security, that we have a growing elderly population dependent
on a now smaller working age population. And so when we talk
about the exhaustion of the trust fund, when the program will
still be able to pay three quarters of its benefits but not
all--I believe that is the number--we talk about exhaustion of
the trust fund, that reflects the fact that looking out that
payroll tax revenues that are already--or payroll tax rates are
not expected to generate sufficient revenues to support the
program at that time.
But that is, as you say, a long way from now. We have been
much closer to that exhaustion date, Congressman, in previous
years, Congress has always taken action to assure the soundness
of the program. And as I said in my testimony, with us
experiencing now the lowest health cost growth in the Nation's
history--anyway since 1960, that is not quite the Nation's
history--it is a time for us to continue to explore the payment
reforms and payment refinements, not just in Medicare or in
Medicaid but in the entire healthcare system so that we can
keep cost growth low and even though we will likely need new
revenues for a growing elderly population, with strong economy
and efficient healthcare systems, we are absolutely capable of
meeting our responsibility.
Mr. Pallone. Thanks so much.
Mr. Pitts. All right. That concludes member's questioning
for now. I am sure members will have follow-up questions they
will submit to you in writing those questions. We would ask you
to please respond promptly. I remind members they have 10
business days to submit questions for the record and they
should submit those questions by the close of business on
Tuesday, December 23.
Very informative hearing.
Thank you very much. Without objection, this subcommittee
is adjourned.
[Whereupon, at 1:12 p.m., the subcommittee was adjourned.]
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