[Senate Hearing 113-275]
[From the U.S. Government Publishing Office]
S. Hrg. 113-275
PRESIDENT'S FISCAL YEAR 2014
HEALTH CARE PROPOSALS
=======================================================================
HEARING
before the
COMMITTEE ON FINANCE
UNITED STATES SENATE
ONE HUNDRED THIRTEENTH CONGRESS
FIRST SESSION
__________
APRIL 17, 2013
__________
Printed for the use of the Committee on Finance
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COMMITTEE ON FINANCE
MAX BAUCUS, Montana, Chairman
JOHN D. ROCKEFELLER IV, West ORRIN G. HATCH, Utah
Virginia CHUCK GRASSLEY, Iowa
RON WYDEN, Oregon MIKE CRAPO, Idaho
CHARLES E. SCHUMER, New York PAT ROBERTS, Kansas
DEBBIE STABENOW, Michigan MICHAEL B. ENZI, Wyoming
MARIA CANTWELL, Washington JOHN CORNYN, Texas
BILL NELSON, Florida JOHN THUNE, South Dakota
ROBERT MENENDEZ, New Jersey RICHARD BURR, North Carolina
THOMAS R. CARPER, Delaware JOHNNY ISAKSON, Georgia
BENJAMIN L. CARDIN, Maryland ROB PORTMAN, Ohio
SHERROD BROWN, Ohio PATRICK J. TOOMEY, Pennsylvania
MICHAEL F. BENNET, Colorado
ROBERT P. CASEY, Jr., Pennsylvania
Amber Cottle, Staff Director
Chris Campbell, Republican Staff Director
(ii)
C O N T E N T S
__________
OPENING STATEMENTS
Page
Baucus, Hon. Max, a U.S. Senator from Montana, chairman,
Committee on Finance........................................... 1
Hatch, Hon. Orrin G., a U.S. Senator from Utah................... 3
ADMINISTRATION WITNESS
Sebelius, Hon. Kathleen, Secretary, Department of Health and
Human Services, Washington, DC................................. 5
ALPHABETICAL LISTING AND APPENDIX MATERIAL
Baucus, Hon. Max:
Opening statement............................................ 1
Prepared statement........................................... 29
Hatch, Hon. Orrin G.:
Opening statement............................................ 3
Prepared statement........................................... 32
Sebelius, Hon. Kathleen:
Testimony.................................................... 5
Prepared statement........................................... 34
Responses to questions from committee members................ 41
(iii)
PRESIDENT'S FISCAL YEAR 2014
HEALTH CARE PROPOSALS
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WEDNESDAY, APRIL 17, 2013
U.S. Senate,
Committee on Finance,
Washington, DC.
The hearing was convened, pursuant to notice, at 10:10
a.m., in room SD-215, Dirksen Senate Office Building, Hon. Max
Baucus (chairman of the committee) presiding.
Present: Senators Cantwell, Nelson, Menendez, Cardin,
Bennet, Casey, Hatch, Grassley, Crapo, Roberts, Thune, Isakson,
Portman, and Toomey.
Also present: Democratic Staff: Mac Campbell, General
Counsel; David Schwartz, Chief Health Counsel; and Matt Kazan,
Health Policy Advisor. Republican Staff: Chris Campbell, Staff
Director; Kim Brandt, Chief Healthcare Investigative Counsel;
and Stephanie Carlton, Health Policy Advisor.
OPENING STATEMENT OF HON. MAX BAUCUS, A U.S. SENATOR FROM
MONTANA, CHAIRMAN, COMMITTEE ON FINANCE
The Chairman. The committee will come to order.
Warren Buffett once said, ``Price is what you pay. Value is
what you get.'' This morning we are here to discuss the health
care proposals in the President's fiscal year 2014 budget. As
we do, we must determine the value in what we are paying.
Specifically, I would like to focus on the value of Medicare
and Medicaid. These programs touch the lives of more than 100
million Americans, nearly 1 in every 3 citizens.
I also want to examine the progress the administration has
made in implementing the health reform law. If the
administration implements it correctly, millions more Americans
will gain access to health care next year as a result of the
law. These programs fall under the purview of our witness this
morning, Secretary Kathleen Sebelius, and the President's
budget affects all of these programs.
I am sure you are quite busy, Madam Secretary. In just 167
days, millions of Americans will begin enrolling in health
insurance plans in their State's marketplace. Time is short.
You need to use each of these days to work with States to make
sure the marketplaces are up and running, ready to help
uninsured Americans access affordable coverage.
The President's budget requested a total of $5.2 billion
for program management at the Centers for Medicare and Medicaid
Services. Of this, $1.5 billion will be devoted to establishing
and supporting the health insurance marketplaces.
I am concerned that not every State, including Montana,
will have an insurance marketplace established in time. I want
to hear how the money requested in the budget will be used to
ensure those marketplaces will be ready to go on Day 1. The
President's budget also requests $554 million for outreach and
education for the health and insurance marketplaces.
For the marketplaces to work, people need to know about
them. People need to know their options, how to enroll. I would
like to hear the administration's outreach plan leading up to
the enrollment period which begins October 1st. What has been
done? I want these new marketplaces to be simple and
successful.
I think it would be good that small businesses be able to
focus on job creation, not confusion. More importantly, I want
to know the plan moving forward to better communicate the
benefits of the Affordable Care Act. I am concerned that lack
of clear information is leading to misconceptions and
misinformation.
People generally dislike what they do not understand. I
hear from people on the ground in Montana that they are
confused about the law. People are worried about the impacts of
new rules and how marketplaces will affect their families and
businesses. I especially hear that from small businesses in
Montana. They just do not know what to do.
I reached out to Steph Larsen, who works in Montana with
the Center for Rural Affairs. She has been traveling across the
State, talking to business groups and consumers about the new
marketplaces. She reported that few people are attending the
informational meetings, and those who are often express a lack
of understanding about the marketplaces and what they offer.
Steph told my staff, ``There is a lot of misinformation about
how all that is going to work.''
This difficulty is compounded by the unknown as to what the
marketplaces will look like. My constituents do not understand
the role of tax credits, because they simply do not have enough
information. The administration needs to do a better job.
And it is not just Montanans. There was a poll last month
by the Kaiser Family Foundation that found that 57 percent of
Americans say they do not have enough information about the law
to understand how it will affect them.
The lack of clear information is leading people to turn to
incorrect information. In fact, 40 percent of Americans thought
the law establishes a government panel to make end-of-life
decisions for people on Medicare. Forty percent thought that
under the Kaiser poll. Of course, the law does not provide
that.
The poll also found that 57 percent of Americans thought
the law includes a public option. Of course, the law does not
do that either. The administration's public information
campaign on the benefits of the Affordable Care Act, I think,
deserve a failing grade. We need to fix it.
The budget also offers belt-tightening measures to address
the deficit. The President's budget proposes $379 billion in
Medicare and Medicaid spending reductions. There are some
proposals I agree with to cut our debt: for instance, wealthy
beneficiaries should pay higher premiums.
Also, we should not pay private plans offering Medicare
benefits at a higher rate than traditional Medicare. And
efforts to root out fraud must be strengthened, because every
dollar invested in fighting fraud generates a 500-percent
return in taxpayers' money received. That is good.
But there are other policies that concern me. I am
concerned the proposed level of cuts to nursing homes may be
too high and reduce access to care. I also have concerns over
the President's chained CPI proposal. Moving to chained CPI not
only impacts Social Security, it also reduces payments to
Medicare providers and increases out-of-pocket costs for some
seniors.
Cutting Social Security and Medicare will hit our seniors
with a one-two punch. These chained CPI changes are on top of
the $360 billion in cuts to Medicare that the President
specified in his budget. Cutting our debt will require
compromise. Everyone will need to pitch in, but we cannot
balance the budget on the backs of America's seniors.
A plan to reign in our budget deficits cannot just be cuts
to Medicare. It cannot just be a package of tax increases. We
need a balanced approach that is fair to all. The
administration's budget also recognizes the need to work with
Congress to reauthorize the Temporary Assistance to Needy
Families, otherwise known as TANF.
This program is a vital lifeline for our Nation's poorest
families. I look forward to working with my Finance Committee
colleagues to update the TANF program so that it is a more
efficient job creator and a pathway out of poverty.
I am happy the budget makes an investment of $5.9 billion
in early learning, including child care. This will allow us to
make sure over 100,000 more kids start off on the road to
success with early education. Montana families understand the
value of good education in maintaining our responsibilities as
parents and neighbors.
Secretary Sebelius, as we think about these issues and
their effect on the budget, let us remember Mr. Buffett's
advice. While the price is what we see in the budget, the value
of what we receive is what matters.
[The prepared statement of Chairman Baucus appears in the
appendix.]
The Chairman. Senator Hatch?
OPENING STATEMENT OF HON. ORRIN G. HATCH,
A U.S. SENATOR FROM UTAH
Senator Hatch. Well, thank you, Mr. Chairman. Thank you for
scheduling today's hearing. Secretary Sebelius, we want to
thank you for taking time to come here to speak to us today.
Last week, the President released his proposed budget for
fiscal year 2014. Although the budget was 65 days late, it does
not appear that the administration used that extra time to find
ways to address the critical problems facing our country.
Perhaps most significantly, the President's budget fails to
address the fundamental challenge of health care entitlement
spending in any significant way. What this document lacks in
courage, it more than makes up for in the same partisan
rhetoric and policies.
Keep in mind, CBO Director Doug Elmendorff has stated that
our health care entitlements, Medicare and Medicaid, are our
``fundamental fiscal challenge.'' Apparently, if this budget is
any indication, the administration is not interested in taking
up this challenge.
Under the President's budget, Medicare and Medicaid
spending will reach nearly $11 trillion over the next decade.
Annual mandatory health spending will nearly double, from $771
billion in 2013 to $1.4 trillion in 2023. That is, if their
numbers are right. Although we are projected to spend nearly $7
trillion on Medicare over the next 10 years, the Hospital
Insurance trust fund will continue to run significant deficits.
According to the 2012 Medicare trustees' report, the trust
fund has $5.3 trillion in unfunded liabilities, and it is
expected to be insolvent by the year 2024. Under this budget,
the fund will continue on its path to insolvency.
The budget also fails to address many problems facing
Medicaid, even though we will be spending more than $4 trillion
on that program over the next 10 years. Under this budget,
Federal Medicaid spending as a percent of GDP will increase by
25 percent, from 1.6 percent to 2 percent over the next decade,
thanks to the expansion of the program courtesy of Obamacare.
It is unacceptable that a program that is the biggest line
item in most State budgets and is crowding out essential
spending in both education and public safety is barely
addressed. All told, we will spend more than $22 trillion over
the next 10 years on our major entitlement programs: Medicare,
Medicaid, and of course Social Security.
The President's budget would reduce that amount by only
$413 billion, or roughly 1.8 percent. No one seriously disputes
that entitlement spending is the main driver of our debts and
deficits, yet for the most part this budget has opted to ignore
that reality and kick the proverbial can even further down the
road.
These programs need serious structural reforms if they are
going to be around for future generations. Entitlement reform
is one of the fundamental challenges of our time. It will
require a united effort from members of both parties.
Sadly, this budget fails to show this much-needed courage.
I hope that we all will be willing to come to the table on
serious structural reforms to our entitlement programs. I
believe the President wants to do the right thing. What we need
now is action. As you know, on January 1st I went to the Senate
floor and unveiled five bipartisan entitlement reform
proposals, five structural reforms to Medicare and Medicaid
that have been supported by both Republicans and Democrats in
the recent past.
I have put these ideas forward in hopes of starting a
bipartisan conversation on entitlement reform. I have shared
these proposals with the President, and I am ready and willing
to work with him on solutions to these problems.
Secretary Sebelius, I will look forward to talking with you
about these critical issues, and I want to thank you once again
for being here, and I want to thank you, Mr. Chairman.
The Chairman. Thank you, Senator.
[The prepared statement of Senator Hatch appears in the
appendix.]
The Chairman. Welcome, Secretary Sebelius. We appreciate
you coming here. You have a big job, and we wish you the very
best. Your full statement will be in the record. Just tell us
what you think, and let her rip.
STATEMENT OF HON. KATHLEEN SEBELIUS, SECRETARY, DEPARTMENT OF
HEALTH AND HUMAN SERVICES, WASHINGTON, DC
Secretary Sebelius. Good morning. Thank you, Chairman
Baucus, Ranking Member Hatch, and members of the committee. I
appreciate the opportunity to be with you today to discuss the
President's 2014 budget for the Department of Health and Human
Services.
This budget supports the overall goals of the President's
budget by strengthening our economy and promoting middle-class
job growth. It ensures that the American people will continue
to benefit from the Affordable Care Act.
It will provide much-needed support for mental health
services and will take steps to address the ongoing tragedy of
gun violence. It strengthens education for our children during
their critical early years to help ensure they can succeed in a
21st-century economy. It secures America's leadership in health
innovation so that we remain a magnet for the jobs of the
future. It helps reduce the deficit in a balanced, sustainable
way.
I look forward to answering the members' questions about
the budget, but first I would like to briefly cover a few of
the highlights.
The Affordable Care Act, signed into law in March of 2010,
is already benefitting millions of Americans. Our budget makes
sure we can continue to implement the law. By supporting the
creation of new health insurance marketplaces, the budget will
ensure that, starting next January, Americans in every State
will be able to get quality insurance at an affordable price.
Now, our budget also addresses another issue that has been
on all of our minds recently: mental health services and the
ongoing epidemic of gun violence. I know, Mr. Chairman, that
the Senate later today will deal with legislation around
keeping dangerous individuals from getting their hands on a
gun.
As a Secretary of Health, a mother, and a new grandmother,
I hope that the Senate gives very serious consideration to that
common-sense bipartisan legislation that could indeed make this
tragedy that is seen every day on streets across America less
frequent than we see each and every day.
Now, we know that the vast majority of Americans who
struggle with mental illness are not violent, but recent
tragedies have reminded us of the staggering toll that
untreated mental illness can take on our society. That is why
our budget also proposes a major new investment to help ensure
that students and young adults get the mental health care they
need, including training of 5,000 additional mental health
professionals to join our behavioral health workforce.
Our budget also supports the President's call to provide
every child in America with access to high-quality early
learning services. It proposes additional investments in new
Early Head Start-Child Care Partnerships, and it provides
additional support to raise the quality of child care programs
and promote evidence-based home visiting for new parents.
Now, together, these investments will create long-lasting,
positive outcomes for families and provide huge returns for the
children and society at large. Our budget also ensures that
America remains a world leader in health innovation. The
budget's significant new investments in NIH will lead to new
cures and treatments and help create good jobs.
The budget provides further support for the development and
use of compatible electronic health record systems that have a
huge potential for improving care coordination and public
health. Even as our budget invests for the future, it helps to
reduce the long-term deficit by making sure that programs like
Medicare are put on a more stable fiscal trajectory.
Medicare spending per beneficiary grew at just four-tenths
of 1 percent in 2012, thanks in part to the $800 billion in
savings already included in the Affordable Care Act. The
President's 2014 budget would achieve even more savings. For
example, the budget will allow low-income Medicare
beneficiaries to get their prescription drugs at lower Medicaid
rates, resulting in savings of more than $120 billion over the
next 10 years.
In total, the budget would generate an additional $370
billion in Medicare savings over the next decade on top of the
savings already in the Affordable Care Act. To that same end,
our budget also reflects our commitment to aggressively
reducing waste across our Department.
We are proposing an increase in mandatory funding for a
health care fraud and abuse control program, an initiative that
saved the taxpayers nearly $8 for every $1 spent last year. We
are investing in additional efforts to reduce improper payments
in Medicare, Medicaid, and CHIP, and to strengthen our Office
of Inspector General.
This all adds up to a budget guided by the administration's
north star of a thriving middle class. It will promote job
growth and keep our economy strong in the years to come, while
also helping to reduce the long-term deficit.
Now, I know many of you have questions, and I am happy to
take those now. Again, thank you for having me here today.
The Chairman. Thank you, Madam Secretary.
[The prepared statement of Secretary Sebelius appears in
the appendix.]
The Chairman. I frankly have to leave this instant to take
a phone call and will be right back. Senator Hatch, why don't
you take over, and I will be right back?
Senator Hatch [presiding]. Secretary Sebelius, I am curious
as to how your Department is funding overall efforts under the
health law, now that much of the initial funding has been
depleted. A quick review of the HHS budget in brief seems to
suggest that you are diverting funds from other areas of the
Department to put towards implementation. Some estimates
estimate as much as half a billion dollars might be moved from
other portions of the budget.
Would you describe the authority under which you believe
you have the ability to conduct such transfers, and whether or
not you believe that Congress should be notified when these
transfers occur?
Secretary Sebelius. Senator, we did request additional
funding with the continuing resolution in 2013 and were not
given additional resources by the U.S. Congress, although we
have the duty to implement the law. So I have, for 2013, used
both my transfer authority, which is statutorily in our budget,
as well as the non-recurring expense fund, for one-time IT
costs, and a portion of funding for the prevention fund to use
for outreach and education.
You heard Chairman Baucus describe the level of concern and
questions in States around the country, and we want to make
sure that Americans fully understand the benefits that are
coming their way and the decisions that they can make. We have
requested in the budget that is before you, in the 2014 budget,
an additional $1.5 billion to fully implement the Affordable
Care Act.
Senator Hatch. All right.
Federal Medicaid spending as a percentage of the economy,
according to the budget, will increase by 25 percent over the
next decade, driven by the Affordable Care Act expansions in
long-term care spending. Now, that is more than $4 trillion
over the next decade, and that is not even counting the
trillions of dollars States will spend on Medicaid.
According to the National Governors Association, ``Medicaid
represents the single-largest portion of total State
spending.'' Now, Madam Secretary, this budget backs off of
prior proposals to lower spending on Medicaid, such as the
blended FMAP rate and provider tax reductions.
Now, this is especially discouraging since there are
bipartisan proposals that would have achieved significant
Medicaid savings and improved patient care. In fact, your
predecessor under President Clinton, Secretary of Health and
Human Services Donna Shalala, said that Medicaid per capita
caps mean ``there are absolutely no incentives for States to
deny coverage to a needy individual or to a family. It is a
sensible way to make sure that people who need Medicaid are
able to receive it.''
Unfortunately, your fiscal year 2014 budget only proposes
to save one-half of 1 percent in Medicaid, and it lacks any
serious reforms to the Medicaid program. Now, my question would
be, why does your budget completely fail to address one of the
country's fundamental, most serious challenges?
Secretary Sebelius. Well, Senator Hatch, I think there is a
very positive story to tell about Medicaid. Believe me, as a
former Governor, I am dealing with my former colleagues and the
CEOs of States around the country each and every day. Medicaid
spending last year, between 2011 and 2012, actually decreased
by almost 2 percent per beneficiary--decreased by 2 percent.
That is virtually unheard of.
We are engaged in a series of what I would call very
innovative strategies around the dual-eligible population,
often those individuals whom you have just referred to in
nursing homes, around progress on reforming high-quality,
lower-cost Medicaid health care delivery, working with States
who are engaged in just exactly what States do the best, which
is very innovative strategies looking at their overall health
care spending.
So I think that the Medicaid story is one that is
enormously positive, where Governors are very much engaged. We
have been very pleased at the number of Governors who are
interested in expanding their Medicaid population and providing
health benefits for some of the lowest-income workers in a very
cost-effective strategy.
Senator Hatch. Would you be open to work with us on
bipartisan ideas to improve patient care and of course save
money in the Medicaid program?
Secretary Sebelius. I would be happy to work with you and
others on that.
Senator Hatch. Well, thank you so much.
Thank you, Mr. Chairman.
The Chairman. Thank you, Senator.
As you somewhat know, Madam Secretary, I am a bit of a
Johnny One-Note on implementation of the law, especially with
respect to sign-ups and exchanges, et cetera, and am very
concerned that not enough is being done so far. Very concerned.
When I am home, small businesses have no idea what to do, what
to expect. They do not know what the affordability rules are.
They do not know when penalties may apply. They just do not
know.
I mean, I was talking to one CPA. He is not histrionic; he
is being straight with me. He says, ``Max, I just have to tell
you, my clients, small business people, are just throwing their
hands up, and I do not know what to tell them.'' That is just
from a small business perspective, let alone all the other
issues that are going to be arising here.
As I discussed earlier and as you well know, a lot of
people have no idea about all of this. People just do not know
a lot about it. The Kaiser poll pointed that out. I understand
you have hired a contractor. I am just worried that that is
going to be money down the drain, because contractors like to
make money more than they like to do anything else. That is
their job. They have to worry about their shareholders and
whatnot.
Also, the other agencies are all involved. I think people
are going to be really confused. You could maybe give some
thought to one-stop shopping somehow, so you go to one
location, a business person, to get the answers. I just would
tell you, I just see a huge train wreck coming down. You and I
have discussed this many times, and I do not see any results
yet. What can you do to help all these people around the
country wondering, ``What in the world do I do? How do I know
what to do?''
Secretary Sebelius. Mr. Chairman, as you know--and we have
had these discussions a number of times--we certainly take
outreach and education very, very seriously. It is one of the
reasons that I think we were incredibly disappointed that our
request for additional outreach and education resources was not
made available in the CR of 2013.
Having said that, we have engaged in efforts with the Small
Business Administration, which is doing regular meetings around
the country with our regional personnel. We have just released
a Request for Proposal for on-the-ground navigators,
individuals who come out of the faith community, out of the
business community, out of the patient community, out of the
hospital community, who will be available to answer questions,
walk people through scenarios, hold seminars.
We do regular seminars and webinars, but we also understand
that people have a lot of questions, and we are deploying as
many resources as we can to answer those questions and get
folks ready to engage in open enrollment on October 1st.
The Chairman. Well, do you have benchmarks? Do you have
dates by which a certain number of people know what is going
on? I mean, all these polls, for example, show that we are not
making much headway. Do you have a goal that 2 months or 30
days from now, when that same poll is taken, that that
percentage is down by X percent, in 60 days from now it is down
by X percent, so people know where to go and what to do?
Are you surveying the professional accountants who work
with businesses to get a certain percent who feel confident? I
mean, you need data. Do you have any data? You have never given
me any data, you just give me concepts, frankly. Government is
not a business, but you are going to have to have some data
benchmarks to figure out how much progress you are or are not
making.
Secretary Sebelius. Well, we do not have benchmarks for how
many people know what. We do not intend to do polling and
testing in terms of what people know. We do have some very
specific benchmarks around open enrollment, and we have a
campaign and a plan to lead up to open enrollment.
The Chairman. And what is it, the campaign and the plan?
Secretary Sebelius. Well, Mr. Chairman, as we have
discussed, there will be people on the ground starting this
summer. There will be----
The Chairman. How many?
Secretary Sebelius. I cannot tell you at this point.
The Chairman. At what point in the summer? Geographically,
what States? This is the kind of information I am asking for.
You are only going to be able to do a decent job if you know
the answers to these questions.
Secretary Sebelius. Yes, sir. And I would be happy to give
you all of the specifics. As I said, we just put out the
Request for Proposal. I cannot tell you about the numbers
because we do not have the information back yet about how many
people in which States are going to be actively engaged on the
ground, but I will be happy to share that with you as we move
forward.
The Chairman. And it depends upon States that have
exchanges and those that do not. There are just a lot of
factors here.
Secretary Sebelius. We will be focusing the Request for
Proposal for navigators at this point on the States where the
Federal marketplaces will be in place.
The Chairman. What is a navigator?
Secretary Sebelius. A navigator is going to be an
individual who will go through training and be available to
help educate individuals or groups of people----
The Chairman. How many Americans know what a navigator is?
Secretary Sebelius. Pardon me?
The Chairman. How many Americans do you think know what a
navigator is?
Secretary Sebelius. I have no idea.
The Chairman. I will bet you it is about--well, we have 2
here. All right. You can understand my angst. I am going to
keep on this until I feel a lot better about it. Thank you.
Next, Senator Nelson.
Senator Nelson. Thank you, Mr. Chairman. Madam Secretary,
thank you for your public service.
Back when we passed the health care bill in this committee,
I was kind of lonely in offering an amendment. There was great
angst that was taken in the White House for my amendment, which
was that the Federal Government, in paying for drugs for
Medicaid recipients, when they became 65 years of age, they
were suddenly eligible under Medicare for their drugs with the
prescription drug bill.
But, lo and behold, the U.S. Government, the taxpayers of
America, were not going to pay for the price of the drugs with
the discounts or rebates that they paid when they were 64 years
of age, but, when they turned 65, they got their drugs under
Medicare, and we were paying premium prices for the same drugs,
for dual-eligibles.
My amendment was defeated 10 to 13, and a very strong
position was taken by the White House in opposition. The
President has reversed course in this budget. It, when I
offered the amendment, saved $117 billion over 10 years. Now it
is $123 billion in savings in the President's budget, and CBO
scores it and says it is something in excess of $140 billion.
Why the change?
Secretary Sebelius. Well, Senator, I think that the wisdom
of your original proposal has finally been seen. There is no
question--again, you and I have both worked at the State level
in prior lives. Having negotiated Medicaid rates as a Governor
and then having that same individual, as you say, move into a
premium class, did not make a lot of sense, particularly as we
are looking to, not only save dollars in these very important
public insurance programs, but save dollars for the individual
who is, again, responsible for part of the drug benefit.
So I think this proposal captures what you were trying to
do years ago and will save these important programs some
significant dollars at the State and Federal level, which is
all good news.
Senator Nelson. Well, you know the attacks against the
President's proposal and the amendment 4 years ago. It is going
to reduce research, it is going to limit access, it is going to
result in higher consumer prices. How do you respond to those
attacks?
Secretary Sebelius. Well, I think that we have a pretty
good track record on Medicaid negotiated rates and the wide
variety of drugs available to individuals in the Medicaid
program. There is no question that the dual-eligible
population, the approximately 9 million Americans who qualify
for both Medicare and Medicaid, are often the most expensive
population in any Medicaid program in any State in the country,
so having a sensible, and I think proven, way to lower some
costs around that population, while not slashing benefits, is a
win-win situation.
Senator Nelson. Madam Secretary, we are losing a lot of
money to Medicare fraud, Medicaid fraud as well, and we are
going to be having a hearing on this in the Aging Committee.
Can you give us some sense of, do you see that we are going to
be making any progress, and what new activities are trying to
stop this hemorrhaging of all the money?
It is so bad in Miami that people open up a store front,
and there is no activity in the store front, and they start
billing Medicaid. Of course, just recently there was this
person down there who was billing, and ended up getting $50
million for mental health services. That is one way to save a
lot of money.
Secretary Sebelius. Well, Senator, I could not agree more.
I think that is one of the reasons the President's budget has
asked for additional mandatory fraud resources, because we have
a very good story to tell. This President asked the Attorney
General and me to elevate the anti-fraud effort to a Cabinet-
level position. We created a new joint task force.
Unfortunately, in your State are some of the hot spots, I would
say, in the country.
But we have implemented a variety of strategies: more on-
the-ground strikes, more prosecutions, more money than ever
before. In fact, we have doubled the amount returned to both
the Medicare trust fund and Medicaid beneficiaries but, in
addition, implemented re-credentialing for some of the known
areas where providers were just entering the program and
billing.
We have a much stricter standard to get in in the first
place. We also have implemented predictive modeling, a
computer-based system which tries to track the billing
irregularities the same way a credit card company could go
after someone who suddenly charged five flat screen TVs from
Dubai to your credit card, and they can spot that and call you
in advance and stop the payment going out the door. We finally
have that capability within the Medicare system. It never
existed before. So we are trying to approach this from multiple
fronts.
I think the story is good, but there is a lot more we could
do. Returning almost $8 for every $1 we spent last year I think
is very good news, but clearly this is a huge program.
Thousands of providers, millions of dollars go out the door
every day. We take fraud and abuse incredibly seriously and
want to use more resources to really beef up the efforts that
have proven successful.
Senator Nelson. Mr. Chairman, in closing I would just say
that all the new doctors we are going to need to implement the
health care bill, we cannot keep cutting graduate medical
education, which is a Medicare subsidy for residents. That has
happened to my State, it has happened to your State, it has
happened to Nevada. That is inadequate in the President's
budget.
Thank you, Mr. Chairman.
Senator Hatch [presiding]. Well, thank you, Senator Nelson.
Senator Roberts, you are next.
Senator Isakson. Mr. Chairman? Mr. Chairman? Down this way.
Senator Hatch. Yes?
Senator Isakson. Could I be so rude as to interject for 1
second? Last week I accommodated Senator Roberts and let him
take one question out of my time so he could go to a meeting. I
have to leave too, but I have one relevant point for Ms.
Sebelius with regard to Chairman Baucus's question on the
navigators. So, if Mr. Roberts would yield for just one second?
Senator Roberts. I would be more than happy to yield to my
distinguished colleague. It's ``Se-bee-lius,'' by the way, not
``Se-bay-lius.'' He was the composer, she is the Secretary.
[Laughter.]
Secretary Sebelius. From my Senator.
Senator Isakson. I stand corrected.
Senator Hatch. Both are good at composition, is all I can
say.
Senator Isakson. Right. Madam Secretary, Senator Baucus
asked you the question about these navigators.
Secretary Sebelius. Yes, sir.
Senator Isakson. I understand you are about to award $54
million in contracts to hire navigators in the States with
exchanges. Is that correct?
Secretary Sebelius. That is correct, sir.
Senator Isakson. Yet, CMS's rule on medical loss ratio is
putting most agents and insurance brokers in the business of
selling health insurance out of business because of the 85-
percent threshold for the medical loss ratio.
So we are spending $54 million to hire navigators, yet,
because of the rule on the medical loss ratio, we are cutting
out most of the people who provide these services in the
private sector, which costs the government nothing.
I have legislation with Ms. Landreiu and some others to
amend that, because I think we need to revisit that medical
loss ratio rule and see what effect it actually has on people
getting credible information from people who make a living
doing it, and have for years.
Secretary Sebelius. Well, Senator, I would be happy to take
a look at the legislation. There is no prohibition, first of
all, for agents and brokers to be navigators. Second, exchanges
at the State level can designate agents and brokers as part of
the funding stream to do the outreach, but we certainly have
not eliminated their ability to do their jobs and to actually
bring people into insurance companies as they have for a long
time.
The medical loss ratio, as you mentioned, deals with what
is characterized as medical costs versus what is characterized
as overhead costs. You are correct that the rule does not
include an agent and broker's salary or commission as part of
what is characterized as a medical cost.
Senator Isakson. I appreciate your looking at it, because,
as it is applied, what it basically does is preclude those
people from being compensated by the way the ratio applies.
That is the reason that we think it ought to be----
Secretary Sebelius. Well, they could easily be in the 20
percent of overhead. They just cannot be counted in the--it is
basically 80/20, but they cannot be counted in the 80 percent
that has to go to medical costs.
Senator Isakson. Thank you very much.
Thank you, Senator Roberts. I appreciate it.
Senator Hatch. Senator Roberts? Re-start the time for him.
Senator Roberts. I thank the Senator for his contribution
and his question. I know the Secretary will be taking a hard
look at that. And she was an insurance commissioner for our
State of Kansas prior to becoming Governor, so she certainly
has that background.
Madam Secretary, we have 83 hospitals, as I think you know,
that are designated critical access hospitals. In the budget on
page 53, I noticed that we are going to take a whack--another
Lizzie Borden whack--at the critical access hospitals' Medicare
reimbursement rate, and there is a mileage requirement. We are
back to that.
I can remember years ago when we had somebody from--at that
point it was Health, Education, and Welfare--indicating it was
100 miles, but it was all right to not include Goodland because
they had 4-wheel drive. I could never figure that out. So, I
hope we do not go back to that. I wish you would take a look at
the critical access situation. The chairman of the committee
has a lot of feeling about that in Montana, and I know in a lot
of other rural areas, so, if you could take a look at that, I
would appreciate it.
Then, on page 56 of the budget, there is a line here in
regards to IPAB. Well, my opinions about IPAB are well-known. I
think we would probably be at odds with that, but I think they
will ration patient care. They are going to set the Medicare
reimbursement according to a formula here. I will not read the
whole thing. It is a growth rate to meet the target, and they
are going to save $4.1 billion. So we have $1.4 billion out of
the critical access hospitals, $4.1 billion in regards to IPAB.
They are not even set up yet.
I just do not understand. They have not been set up, and we
have no idea how the recommendations are going to be
implemented, yet we are going to expand and strengthen them. I
wish you would take a look at that and see if you could get
back to us. I apologize for handing three questions to you,
but, because of the time limit, I wanted to cover these three.
About 53 people--we think 53 people--have died, and over
700 people have become ill as a result of the meningitis
crisis. I am talking obviously about pharmacy compounding. The
FDA has put forth a legislative proposal which has been
detailed on the Commissioner's blog, and she has stated:
``Funding will be necessary to support the inspections and
other oversight activities outlined in this framework, which
could include registration or fees.''
I am working on legislation, and so are the members of the
committee, that would hopefully be of help here, both to
guarantee the efficacy of the program and then access to
compounding. It is not mentioned in the President's budget. I
have looked, and we cannot get a cost estimate.
If you could provide that, with regards to the legislative
proposal put together by the Commissioner of FDA, I would
greatly appreciate it. If you could comment on that or anything
else that I have brought up, you have about 2 minutes.
Secretary Sebelius. Well, I would be happy to, Senator.
First of all, I will try to get a specific cost estimate for
the very important legislation I think that you and your
colleagues are working on with the Food and Drug
Administration, which I think would give some additional
authorities over the non-traditional compounding and make sure
that traditional compounding can move forward.
I do not think that the FDA has a legislative proposal that
is specific. They have been working around some principles with
the HELP Committee, so that may be part of the confusion. They
do not have a draft piece of legislation. I think they have
been providing technical assistance to the HELP Committee, but
I will see where we are on a dollar recommendation.
With IPAB, the President has recently sent to the
leadership of the House and Senate, majority and minority, a
request for recommendations for potential candidates. The
legislation contemplates the President making appointments, but
in consultation with the House and the Senate, so those letters
have been received by leadership.
The President's budget does suggest that the Independent
Payment Advisory Board would not kick in unless Medicare
spending exceeded the inflation by more than 0.5 perent, CPI
plus 0.5 perent. We do not anticipate, according to the latest
CBO initiatives, that that would hit until about 2019 on the
track that we are on.
So we are in the process of consulting with leadership
around potential members, but, as you know, those members would
have to be confirmed by the Senate, so there will be multiple
steps and opportunities for consultation before that board
would ever occur.
Finally, I share your concern about the incredible
importance of critical access hospitals, particularly in rural
communities, and we will certainly take a look at the specifics
in the budget and be back in touch.
Senator Roberts. I appreciate that. Thank you.
Secretary Sebelius. Certainly.
Senator Hatch. Thank you, Senator.
Senator Casey?
Senator Casey. Thank you.
Madam Secretary, thank you for being here today and for
your great public service. This is hard work that you are
doing, especially with regard to health care, in addition to
the other responsibilities you have. I appreciate the time we
spent prior to the hearing.
I wanted to ask you about children. But, as a preface to
that, I wanted to note in the budget a couple of highlights,
some of which you have already referred to, but the parts of
the budget that focus specifically on children bear mentioning.
The home visiting program, as well as Early Head Start and
the Child Care Partnerships, both of which you have set forth
on page 4, the Child Care Quality Fund, child support, and
fatherhood initiatives, all of those are so important, and I
want to commend you and the Department for that. I know that
for NIH, the proposed increase is $471 million. That is
commendable and necessary, despite all of the challenges we
have. If we are not investing there, we are making a big
mistake.
But I wanted to focus on maybe two questions, really, on
children. First, with regard to the Children's Hospital
graduate medical education program, I am told that we have
three great examples in Pennsylvania: two in Philly, one in
Pittsburgh--with Children's in both cities, and then St.
Christopher's in Philly. But I am told that these hospitals
comprise less than 1 percent of all hospitals, yet train nearly
half--the number, I guess, is 49 percent--of all pediatricians.
This is a budget allocation which has been in the 6-figure
millions. The proposal in the budget is just $88 million in
funding for that program. I think that is a mistake. I do not
agree with it. I do not know how we are going to get the
trained pediatricians that we need and I think the Affordable
Care Act contemplates, if we do not have that investment. If
you could give us the rationale for that $88 million.
Secretary Sebelius. Well, Senator, first of all, I do not
disagree at all that the children's hospitals provide not only
incredibly important service and health care for children, but
also training opportunities for pediatricians, so they are sort
of doing double duty.
What the President's budget reflects is graduate medical
education direct costs. What is eliminated from the budget
recommendation is the overhead and administrative costs. We
feel that this is sufficient to provide the number of residency
slots.
Often children's hospitals operate, frankly, at a more
significant margin than other hospitals do, and it is not a
choice we would have made in better budget times, but providing
the direct costs for the number of residency slots that are
currently in hospitals is one way to make sure that we train
the pediatricians of the future.
Senator Casey. Well, I hope we can spend some time on this,
because, when you have that small of a percentage of hospitals
providing that level of training, I think we should go back to
work on that so we can get back to you and spend some time on
that.
I also wanted to ask--and I raised a similar question or
two with regard to Marilyn Tavenner's confirmation hearing--how
children will fare in the new world of the exchanges and how
you see the Department's role in monitoring the impact on
children with regard to the exchanges and making sure that, if
a child would, under a different set of circumstances, get a
particular level of care, that they are going to still be able
to get that same kind of care and treatment under the
exchanges.
Secretary Sebelius. Well, I think it is a great question,
Senator. The CHIP program, which does offer, I would say,
enhanced benefits for children, as you know, continues to
exist. One of the benefits for children that is sort of an
indirect benefit, but I think can be very real, is that there
is a lot of evidence that indicates that, if parents have
insurance, children are more likely to go to the doctor on a
regular basis.
If the family does not have a health home, in spite of the
fact that a child may have access to services, if the family
really does not have family coverage, then the likelihood of
actually accessing those services is significantly diminished.
So I would say there are some value-added benefits around
family coverage that do not exist right now that will be the
case in the future.
While the exchange programs will not have a specific
mandated package of benefits for children, what I think does
exist in the commercial market right now, particularly in the
employer market which is being modeled as the benchmark plan,
is a pretty robust set of services and supports around
children's health, and it is there because of employee demand.
So we will watch that very closely, and we would be
delighted to continue to work with you and your office. I know
looking out for American's children is certainly one of the
areas that you have taken a great leadership role on, and we
would be happy to work with you as these plans are being
implemented.
Senator Casey. I appreciate that. I hope, as some of the
benefits from medical homes play out for families, that that
will have a positive impact on kids, especially children with
chronic and complex medical conditions.
Secretary Sebelius. Well, certainly the medical home model,
I think, and coordinated care models, both offer some enhanced
benefits for children who have, as you say, chronic or multiple
conditions. Right now, too often that care is segmented into a
variety of specialists who do not talk to one another, who may
not coordinate with the family, so I think testing some of
those models around chronic conditions--while people often
think of that as an older Americans issue, I think there are
cases where certainly it will be of enormous benefit to some of
our youngest patients.
Senator Casey. Thanks very much.
Senator Hatch. Senator Cardin?
Senator Cardin. Thank you, Mr. Chairman.
Madam Secretary, thank you for your extraordinary service
during a very difficult time. I want to bring up a couple of
subjects in regards to the implementation of the Affordable
Care Act and how the budget submitted by the President would
advance those goals. Shortly after the passage of the Act, you
and I had a chance to talk about the commitment we made to
minority health and health disparities, the elevation of the
Institute at NIH and the offices in all the relevant agencies,
including HHS.
You made a commitment then to adequately fund those
initiatives, and I thank you for following up on those
commitments. There is some concern today as to whether there is
adequate budget support to implement the type of grant-making
in the offices, including your Office of Minority Health, and
whether the Institute at NIH has adequate resources in order to
make the type of progress that we would like to see made as a
matter of what is right policy for this country, as well as
smart policies that reduce health care costs.
Can you just give me an update as to how your strategy is
being implemented to fund this commitment?
Secretary Sebelius. Yes, Senator. I think that there is no
question that we have taken very seriously the charge to not
only track health disparities, but reduce health disparities.
The passage of the Affordable Care Act and the full
implementation of the Affordable Care Act, I think, will
advance that cause, probably faster than any other single thing
that we could possibly do to close the gap in health coverage.
Having said that, while the budget, I think, in some of the
offices within the Secretary's office may have a reduction of
some grant funds, the overall budget has a significant increase
in funding for minority health issues, and that is one issue
that we take very seriously. I think there are an additional
couple hundred million dollars that are both in the Health
Resources and Services Administration and some funding within
the NIH.
Unfortunately, NIH funding does not increase as
significantly as we would like, and they also lost $1.5 billion
through the sequester cuts. So we are in a more restrained
situation I think than we would be otherwise, with not only a
tight budget moving forward, but also a fairly significant cut
in their grant-making authority that hit in 2013.
Senator Cardin. Thank you. I understand the challenge of
sequestration, and I would just urge us to be as strategic as
we can to make sure that mission moves forward.
Secretary Sebelius. Yes.
Senator Cardin. I am going to make a request of you to
personally take a look at a regulation that has been issued as
it relates to pediatric dental care. Ms. Tavenner was before
this committee, and I questioned her and then submitted
questions for the record.
As you are probably aware, you are in the process of
implementing a regulation that would allow for stand-alone
pediatric dental policies to have separate deductibles, with no
assurance that in fact individuals will have that coverage. I
believe both of those actions by HHS are contrary, clearly to
the intent of Congress, but I think also contrary to the legal
ability to issue such regulations.
We intended that pediatric dental care be an essential
benefit. ``Essential benefit'' means people have affordable
coverage. A $700 deductible per child is not a quality plan, it
is 2nd-class coverage. Most families will not reach $700 a year
in pediatric dental care. Why would they then buy insurance,
particularly if it is not going to be required? That to me is
contrary to what Congress intended, and I believe it is
contrary to law.
So I would just ask if you would personally review this
regulation and the legal basis of this regulation and make an
independent judgment as Secretary as to whether you believe
this is the right policy and the right legal path for us to
take as it relates to pediatric dental care.
Secretary Sebelius. Senator, I will commit to do that. I
know that concerns have been raised about what is a proposed
regulation. The comment period is still very much open, and so
this is not a settled formula going forward. But I hear your
concerns. We have heard them from a number of people, and I
will commit to taking a personal look at exactly what the
impact would be on the very families we want to serve.
Senator Cardin. Thank you. I appreciate that, Madam
Secretary.
Secretary Sebelius. Sure.
The Chairman. Senator Thune?
Senator Thune. Thank you, Mr. Chairman.
Madam Secretary, welcome back to the committee. Thank you
for being here.
I have worked with several of my colleagues on this
committee on a white paper which we issued yesterday, and it
outlines concerns we have about the electronic health record
program that was created by the stimulus bill.
One of the chief concerns is that the program was not
thoughtfully planned and that CMS and the Office of the
National Coordinator for Health IT are insufficiently focused
on the issue of interoperability.
I am also concerned that the Office of the National
Coordinator has a philosophy that is focused on simply pushing
Federal taxpayer dollars out the door and using the dollars out
the door as a measure of success of the program without
sufficient oversight of those payments. I am wondering if you
agree with that.
Secretary Sebelius. I do not.
Senator Thune. Well, it is noted in our report that
providers simply self-report that they have met the necessary
criteria to receive Federal incentive payments for adoption of
health IT with no documentary evidence necessary.
Your agency's Office of the Inspector General has warned
that this is a potential problem. The Inspector General issued
a report last year saying that Medicare ``does not verify the
accuracy'' of the self-reported information by health providers
claiming the incentives prior to the payment, and even noted a
few examples of providers who had reported themselves eligible
but had not actually met the requirements.
So my next question is, do you agree that self-attestation
is a problem in terms of them certifying themselves eligible?
Secretary Sebelius. Well, Senator, we take the adoption of
electronic health records very seriously. I cannot imagine any
other industry which represents close to 17 percent of our GDP
which is trading information on paper files.
So this is a significant move forward. We have about one-
third of the individual providers online, with another third in
the queue, and almost two-thirds of the hospitals are now in
the process of adoption.
I think what has to be attested to--my understanding is--
will be able to be tested more thoroughly when the
interoperability standards go live in 2014, as you know, in
Meaningful Use Stage 2. That is not yet up and running. There
is a lot of concern.
It is sort of the gold standard of electronic health
records. If they cannot talk to each other, it is really not a
venture that takes us very far. We understand that. But it is
not live and running, and it has been the focus of both the
Policy Committee and the Production Committee from Day 1.
Senator Thune. Well, in responses to questions from this
committee, Ms. Tavenner, the nominee to head CMS, stated in
written comments that there will now be a delay in
implementation of Stage 3. I asked the question. But given that
it seems clear that the leap to interoperability is not
possible from the already existing requirements for Stage 2 to
Stage 3, what are your plans for Stage 3 that ensure taxpayer
dollars are being wisely used to invest in interoperability?
Secretary Sebelius. Well, again, we have not gotten to
implementation of Stage 2 yet, so you may be reading the final
chapter before we launch it.
Senator Thune. Right.
Secretary Sebelius. January of 2014 is when the portion of
Stage 2 that deals with meaningful use will be up and running,
and I think we have full plans and a timetable to then move to
Stage 3. But we do not right now have a plan about what could
or could not happen, because we need to fully implement Stage
2.
Senator Thune. But are the rules for Stage 2 not final?
Secretary Sebelius. The rule is final? Yes. Yes.
Senator Thune. All right. Well, in terms of----
Secretary Sebelius. But it is not up and running yet. The
timetable has not been reached.
Senator Thune. The thing I guess I would say I am concerned
about is, the leap from the current Stage 2 requirements,
particularly with regard to interoperability, is going to be
very difficult in terms of the challenge that is going to be
faced by a lot of rural providers. So my next question is, what
are you doing to ensure that small rural providers' needs are
being considered in terms of Stage 2, and then ultimately Stage
3?
Secretary Sebelius. Well, Senator, part of the framework of
this implementation was really to create information and
technology exchanges in every part of the country. They are
focusing most specifically on critical access hospitals and on
small providers, knowing that the luxury to have a big IT
department or have people who could implement this in a
significant period of time was not there.
So in every State there are individuals who are sort of
the--I compare them to the farm extension services, folks who
are on the ground who literally come office to office, hospital
to hospital, spend time on how to convert what the best
strategies are, how to be engaged and involved.
We have found, at least in a State like Kansas, which
shares the challenges I think that you see in your State, that
that strategy has been enormously effective, and small
providers are engaged and enrolled with those extension
operations and find them to be kind of their service team on
the ground.
Senator Thune. Well, the only thing I would say is, I hope
that, as we move forward with this, that the focus really will
be on the issue of interoperability.
Secretary Sebelius. You bet.
Senator Thune. Because we have asked questions numerous
times at the committee here of folks who have testified in
front of the committee about what is happening with regard to
interoperability. It may be that a lot of providers are
creating their own health electronic records, but the idea that
somehow they are going to be able to communicate with others
just seems to be non-
existent in many cases.
So, you have these silos out there, but until they can talk
to each other, we have not solved this problem. And that is why
I say, a lot of the money that has gone out the door, that
seems to be the metric instead of, what is the metric or what
is the measuring stick for whether or not we are succeeding in
the issue of interoperability?
Secretary Sebelius. Well, I would say, again, Senator, from
the outset--and I would certainly agree with you that that has
to be the north star of whether electronic records work--it is
not whether paper files are in somebody's computer, but it is
whether or not you can measure, share information, not only
across a State, but across the country and conceivably across
the globe.
So that has been part of the framework of the formula to
look at what sort of IT systems would qualify, what the specs
have to be. It is part of what has to be attested to, that a
conversion to an electronic record system has to have the
capacity to actually get to Stage 3 along the way and
demonstrate that. It does not have to be part of the operating
system from Day 1, but it has to have the capacity to add that
on.
There are very specific kind of specs as a part of what
qualifies for the incentive payments, so I think that has been
part of what the technical committee that has been the advisor
to the Office of the National Coordinator from the beginning
has been focused on: how, at the end of the day, you make sure
that these systems actually work.
We were strongly advised, Senator--and it came at the
dismay of, I would say, some of the biggest IT companies--but
we were strongly advised not to choose one system, not to have
one winner in this market and everybody else a loser, but
rather to focus on a series of specs that would, at the end of
the day, make sure that these systems were interoperable but
then would allow providers, hospitals, and others to either
make conversions to the systems that they had or purchase any
variety of new equipment. That has really been the framework,
to have it be more open-source, but certainly with
interoperability at the end of the day.
Senator Thune. I am glad to hear that you are focused on
these specs. I do not know that these specs exist. Again, the
self-
attestation model that is being used seems to lack the kind of
documentary evidence that the folks who are eligible for some
of the assistance that is coming with this are actually focused
on, these right metrics that you are talking about.
So I guess the only thing I would say in conclusion is that
we look forward to engaging with you and your department on
this, and we are going to continue to solicit feedback from
stakeholders about where they are. I think this report that we
put out will maybe put a fine point and additional focus on
that. So, thank you.
Secretary Sebelius. Thank you.
Senator Cantwell [presiding]. Thank you, Senator Thune.
Madam Secretary, welcome. Thank you for being here. Thank
you for your help on the basic health plan. I appreciate that
very much. I also thank you for the President's budget as it
relates to $1 billion for mental health programs for substance
abuse and mental health services and $460 million for the
mental health block grant services. I think that will go a long
way to helping States deal with these issues, so I very much
appreciate that.
I wanted to follow up on my colleague from Pennsylvania's
question, particularly as it related to graduate medical
education. This is a big issue for all of us in the country,
obviously, with the shortage that we are looking at, something
like 90,000 specialists and primary care physicians by 2020.
For us in the WWAMI region--Washington, Wyoming, Alaska,
Montana, and Idaho--we are even below the national average now,
so that is why we care so much about this issue.
When it comes to figuring out the impact, he mentioned
Children's Hospital, which I could say probably the same about
Seattle's Children's Hospital. But the issue is also trauma
centers or burn centers like Harbor View Hospital. So, when you
look at this reduction in indirect medical education, it
impacts that workforce. They have residents there whom they are
not reimbursed for under the Medicare model.
So how do we look at this issue when there is specialized
training that goes on at these trauma centers, and they want to
get their graduate medical education? How do we look at this
and make sure that these facilities can keep running and
operating during this time period?
Secretary Sebelius. Well, again, Senator, I think certainly
the training of new doctors is of critical importance. We know
what an important role graduate medical education funding
through Medicare plays in that training, which is why I would
say, even in these very difficult budget times, there was an
attempt to make sure that we were funding the direct costs, as
well as doing some additional looking at where there were real
gaps in services.
A lot of the workforce analysis looking forward indicates
that it is in primary care providers, gerontologists, others
where we often have significant gaps. So we have not only tried
to have a budget that supports the direct cost of graduate
training, but also shifts some of the unused GME slots from
areas that may have been more focused on specialty care into
areas specializing in primary care, pediatric care, gerontology
care, hoping that the effort to address people's preventive
care needs at the front end will be met by a health care
provider.
So we would be interested in working with you and hearing
from you about the impact of this on a critical center like the
burn center and the trauma centers that you have in your area.
Senator Cantwell. Thank you. We will get you some
information on that.
Secretary Sebelius. Sure.
Senator Cantwell. I do not know that that is the intended
consequence, but I think people are concerned that that will be
the unintended consequence, because those costs are not
covered.
Secretary Sebelius. You bet.
Senator Cantwell. So maybe there is something we can do
there.
If you could comment, too--at the University of Washington,
we train so many primary care physicians. I think we are
number-one in the Nation. But we are also very high on the
list, in the top five, of institutions with NIH funding. So
this NIH budget issue is a very big issue. We understand what
you have done.
Obviously, for these institutions we are hoping to get
closer to $32 billion than $31.5 billion. And you think, that
is close, what is the difference? Why does that matter? Well,
for us, the total economic impact for research is 8,800 jobs
and $470 million in wages, so this will be a big impact to us.
In fact, one of our professors was quoted in the Wall Street
Journal as saying, ``People are asking me whether they should
leave science.''
So, given what is already in the budget, what is being
discussed as far as sequestration, are we having a chilling
effect on this investment in science? What can we do to help
mitigate the sequestration's impact on NIH funding?
Secretary Sebelius. Well, I think that the President has
proposed a budget going forward and a way to have a sustained
and balanced approach to both reducing the deficit, but making
some of the critical investments that we need to make.
Actually, the budget anticipates removing sequestration.
Senator Cantwell. I should just add--sorry to interrupt--we
are all cheers about the magnificent contribution for brain
research. Thank you.
Secretary Sebelius. Well, I think that is an example of the
President's belief that we cannot cut our way to prosperity in
the future, that we must invest. Certainly scientific research
is one of the most critical investments to keep the innovation
and research at the front end.
So he very much supports outlining the mapping strategy,
which could have a huge impact not only on cures of the future,
but when you think about health costs related to everything
from autism to Alzheimer's. If we want to really get our arms
around what is happening to health costs in the future, this
kind of brain mapping has an enormous impact.
As you say, I think Dr. Collins estimates that there is
about a 7:1 return, that every dollar in research grants
generates about $7 in economic activity in the community where
those research grants end up, in terms of jobs and scientists.
So this is clearly a win-win investment that the President very
strongly believes in and supports.
Senator Cantwell. Well I hope, as we continue to talk about
and see the impacts of sequestration, the administration will
speak out on this, because it is a very short-sighted approach,
particularly when it comes to the NIH budget.
I hope that we can get organizations and institutions,
whether it is the Institute of Medicine or others, to put
pencil to paper and really measure this, as you just did with
that 7:1 ratio. We may be saving a few dollars now, but it will
cost us millions, if not billions, more if we do not continue
the investment in research. So, I hope we can make that point
to our colleagues here. Thank you.
I think, Senator Portman, you are next.
Senator Portman. Thank you, Senator Cantwell. I think I am
last and only, as well as next. [Laughter.]
Senator Cantwell. You never know who might come back.
Senator Portman. Exactly. Well, thanks very much.
Madam Secretary, thank you for being here. We just had an
interesting exchange about the need for us to do more research.
I would just make the obvious point that that part of our
budget is being squeezed more and more and more by the reality
that the mandatory spending part of the budget--which is now 65
percent of the budget, which is the part that is on auto-pilot,
that is not appropriated every year--is the fastest-growing and
now obviously biggest part of the budget and one reason the
research dollars are tough to find, and one reason children's
hospitals are concerned as they see the squeeze, including our
great Children's Hospital in Cincinnati. On the mandatory side
of the budget, of course, the number-one cost driver is health
care, by far.
The Congressional Budget Office, which is a nonpartisan
group here in Congress, has just given us another report. This
one is looking forward to the next 10 years, what is going to
happen in terms of our budgets. They say there will be a 110-
percent increase over the next decade, from $800 billion to
about $1.65 trillion--a 110-percent increase in health spending
on the mandatory side.
They also make the point that if we do not address this
problem, obviously it continues to grow. Then, over the next 3
decades, they say that the health spending in essence bankrupts
the country, because you cannot raise income taxes, at least
not high enough, to catch that level of spending. It just
cannot be done.
I think it is indisputable that that is our number-one
problem in terms of the budget. Since we are here today talking
about the budget, I just wanted to get your thoughts on that.
The White House has proposals in the budget that, as I read
it, would reduce that growth from about 110 percent over the
next 10 years to about 100 percent, but it is actually 104
percent because it also assumes a permanent Medicare doctor
fix, and that estimate also does not include the $90 billion in
the canceled sequestration cuts to Medicare which would further
decrease health savings. So it is somewhat more than a 104-
percent increase in spending rather than 110 percent. No
structural reforms.
The question is, with the trustees having told us the
Medicare trust fund is insolvent in 2024, and again, with
everyone who has looked at this saying our number-one driver in
all this is Medicare, and once again the Medicare funding
trigger having been ignored--so no proposal from the
administration, even though it is required by law--my question
is, what do you suggest in terms of dealing with this problem
which everyone now acknowledges? How are we going to close
these tens of trillions of dollars in unfunded liabilities that
the trustees have estimated? Where is the administration's plan
to bring long-term solvency to our Medicare program?
Secretary Sebelius. Well, Senator, I think that there is no
question the President is eager to work with Congress to have a
long-term strategy that both ensures that we keep the
commitments that we made to seniors and others in the mid-1960s
around benefits in their senior years, as well as looking at
the viability of funding and support for Medicare and Medicaid
into the future.
I think, in the last 3 years, there is an enormously
positive story to tell, a very different story than we have
seen really over the history of the Medicare program. Last year
alone the per-beneficiary cost rose at the smallest level that
it has ever done in history. It is a four-tenths of 1 percent
increase per beneficiary.
As you know, part of the growth right now deals with
demographics, not health costs. I think that effort is very
much under way to really re-think and re-look at how we pay for
health care, shifting from a volume payment to a value payment,
testing models for the first time ever that could lead to
significantly better care at lower cost. Those efforts are very
much under way.
Medicaid spending is down 2 percent from 2011 to 2012,
again, a decrease in year-over-year spending. Again, that has
not been seen before. So I think, structurally, the CBO has
revised its estimates recently based on that cost trend. We
know that the Affordable Care Act added about 8 years to the
life of the trust fund.
The budget on the table adds another 4 years. But if this
cost trend continues, I am optimistic that we can revise that
even further. We would be eager to look at a longer-term
strategy around how we make sure that the commitments to
seniors and the most disabled Americans are fulfilled and not
shifting the costs onto them by destroying Medicare as we know
it, but also looking at the longer-term funding challenges.
Senator Portman. Well, with all due respect, no one is
talking about destroying Medicare as we know it. People are
looking at sensible ways to reform the program so it is strong
and can be there in future generations. And by the way, the
Congressional Budget Office's report is from a few weeks ago,
so it does include that data. Your own data indicates the same
thing, which is, these costs are unsustainable by any measure.
So I hope you will look at some reform that is more structural.
I know that you support in the budget some means-testing,
for instance, but I would ask you also to look at Medicare Part
D. Marilyn Tavenner, whom you know is your nominee for CMS,
came before this committee and told us the actual costs for
Part D are 40 percent less than the original estimates. CBO has
now reduced its 10-year cost projections by over $100 billion
in each of the last 3 years.
Your Deputy Administrator has said that Part D costs have
remained flat for years and are expected to decline in 2014.
You have also reported that, over the past 3 years, the average
monthly benefit premium has stayed essentially flat, right at
about 30 bucks a month.
So I believe this indicates that there is something going
on in Part D, which is frankly that the private sector has to
compete for the business of tens of millions of seniors. That
is one reason that those costs have been less than projected.
So I encourage you to learn from and not undermine Part D.
I notice in your budget you target Part D again, particularly
the Medicare Advantage programs, which as you know, given your
Ohio roots, is critically important in our State: over a third
of seniors enjoy it. So I would just ask for you to take a look
at that Part D success rate. In my view, I think that is where
some of the structural reforms can and should be made. I thank
you for your time today and for your service.
Secretary Sebelius. Thank you, Senator.
The Chairman. Thank you, Senator.
Senator Menendez?
Senator Menendez. Thank you, Mr. Chairman.
Madam Secretary, thank you for coming. There is a lot to
applaud in the budget, certainly the $100-million investment to
advance research education and outreach for Alzheimer's
Disease, something that took my mother's life; the funding for
community health centers is incredibly important; the quality
primary care in communities throughout the Nation. Those are
all great things.
There are still tough decisions to make, and savings to be
had. I think we did a lot of that in the Affordable Care Act. I
have long held that real long-term savings can and should be
found by encouraging the efficient delivery of health care
through measures such as increasing the use of electronic
medical records--we are on our way there--promoting the
efficient and well-managed delivery of medication, and
improving coordination between acute and post-acute providers
to ensure the appropriate care setting. Do you share those
views as they relate to how we save money in those areas?
Secretary Sebelius. Yes, Senator. I think all of those are
an enormously important shift in the way health care is
delivered as opposed to just paying for volume, really looking
at value proposals.
Senator Menendez. Yes. So, with that having been said, I am
a little dismayed at some of the so-called savings that are
identified in the Medicare program that, in my mind, are
nothing more than another set of cuts.
I look at that, and I say to myself--following on on
Senator Portman's question as it relates to Part D--is it not
true that the Part D program currently costs about 40 percent
less than the original estimates and that the CBO has reduced
cost projections by more than $100 million a year for each of
the last 3 years?
Secretary Sebelius. Yes, sir, that is accurate. I think
that some of the negotiating authority that you actually
directed to CMS as part of the Affordable Care Act had a
beneficial effect on some of those Part D negotiated----
Senator Menendez. Is it not further true that under the
Affordable Care Act, that with the donut-hole rebates and other
cost-
containment provisions, that beneficiaries have not only saved
about $6 billion in drug costs since the law was signed, but
that their premiums have been essentially flat?
Secretary Sebelius. Yes, sir.
Senator Menendez. And so, given that the program is proving
to be successful in providing seniors access to the drugs they
need at costs that continue to be below estimates, could you
ensure that the imposition of Medicaid-style rebates in the
Part D program will not ultimately lead to restricted
formularies, increased premiums, and higher out-of-pocket costs
for beneficiaries?
Secretary Sebelius. Well, Senator, we are confident that
the kind of drug strategies that provide available drugs for
dual-
eligibles are similar to what can be in place for those same
individuals, as Senator Nelson said, when they are 64, and it
should not change when they are 65. So we are confident that
this will not only be a savings to the government, but actually
make sure that beneficiaries have access to the critical drugs
they need.
Senator Menendez. So you do not believe that such a move
will create restricted formularies?
Secretary Sebelius. No, sir.
Senator Menendez. You do not believe that it will create
increased premiums?
Secretary Sebelius. I think that there is no question that
there may be some formularies that are in place, but, as you
know, a
dual-eligible does not lose any of his or her Medicare
benefits, so they must have the same benefit package going
forward.
Senator Menendez. So how do we ensure that the research and
development that makes us the leader in the world and that
makes us globally competitive, and, maybe even more important
than that, creates life-saving, life-enhancing drugs, does not
get diminished?
Secretary Sebelius. Well, I share those concerns, Senator,
but I feel that Medicare Part D, in spite of the fact that it
has come in under the original estimates when the benefit was
first created, is still paying at a much more substantial rate
than the Veterans Administration, than Medicaid programs, than
a variety of other programs, so we are still paying premium
dollars for a number of those drugs.
For these 9 million individuals, the budget assumes that,
on balance, this is an appropriate way to both save some
dollars going forward, but also make sure that those
beneficiaries receive the critical medications that they need.
Senator Menendez. I just do not think we will have the
research and development dollars. If I may have another minute,
Mr. Chairman?
The Chairman. Sure.
Senator Menendez. With reference to hospitals, one question
I had raised with you is, the imputed floor issue at CMS is
pending. It is something that was part of the Affordable Care
Act. It is a critical issue to New Jersey hospitals, and we are
awaiting a response. I just want to bring it up again, because
it is probably life or death for a whole host of New Jersey
hospitals.
In line with hospitals--the Medicare cuts to hospitals--the
President's budget calls for about $11 billion in cuts to
graduate medical education and a $177-million cut for
children's graduate medical education programs. Both of these
are critical to train the next generation of doctors.
One of the things we heard about as we were in this
committee debating the Affordable Care Act, which I was proud
to support, is, how do we have the health care workforce to
deal with millions more whom we obviously aspire to cover,
looking at the age of many doctors, particularly in certain
parts of our country?
So how is cutting back on the programs specifically
designed to train new physicians going to provide for the
needed increase in the workforce that we recognize we need?
Secretary Sebelius. Well, Senator, I understand the
concerns about the reduction in graduate medical education. The
budget is based on a design that would provide to hospitals and
children's hospitals the direct cost for those residency
training programs. It does not provide the overhead and
administrative costs.
We feel that having the direct costs continuing to be paid
should not diminish the number of residents who can be trained
in those programs, but, again, it would not be a budget choice
in a different budget time. It is a time of very scarce
resources, and we are trying to make sure that we can fulfill
all of our obligations.
Senator Menendez. Well, I appreciate that.
Mr. Chairman, this is a concern. At the end of the day,
after all the effort we exerted to provide coverage that was
affordable--which was a big goal of the committee, to make sure
we tried to control costs and at the same time amplify the
universe of which Americans would be further covered who
presently are not and stop having people going to the emergency
room--it creates the necessity for a cadre of physicians in our
country, and cutting in this particular field, while I
understand the challenges and the trade-offs, is just
undermining the very essence of some of the goals that we
intended under the Affordable Care Act. So, I hope we will be
able to visit it as we move forward in our deliberations in the
days ahead.
Thank you, Madam Secretary.
Secretary Sebelius. Thank you, Senator.
The Chairman. Thank you, Senator.
Madam Secretary, I know you are busy. I would just like to
ask a bit more about the concept of 1-stop shopping, one
resource center, someplace for businesses to go to so they do
not have to deal with so many different agencies with respect
to the implementation of the Affordable Care Act. Does that
make any sense?
Secretary Sebelius. Well, Senator, there will be a 1-stop
shop with the Shop Exchange up and running in January 2014, so
business owners will be able to enter the marketplace through a
1-stop area, get the information about what is available, have
a choice of plans. If the business owner qualifies for the
employer tax credit based on the number of employees and the
wages of those employees, that will automatically be part of
the program.
So there will be a 1-stop shop available to small business
owners who, as you know right now, often pay 18 to 20 percent
more in the market than their large competitors, and we are
very confident that they will have better choices, better
prices, with the new marketplace that will be up and running.
The Chairman. The real concern here is from the business
perspective more than consumers, individuals. I think I heard
you say that the shop--I have forgotten what it is exactly
called--will be delayed.
Secretary Sebelius. No, sir. That is not accurate. The shop
will be up and running in every market in the country. For the
States where the Federal Government will be operating the
marketplace, we are delaying one portion of the shop plan,
which is that employers, if they choose to do so, could offer a
wide variety of plans to their employees.
Year 1 for the Federal marketplaces, employers will have a
choice of coverage for their employees, but that choice will
then be passed along. Year 2 and beyond for the Federal
marketplaces, the employer, if he or she chooses, can then turn
to the employees and say, you can choose among 15 different
plans.
For State-based marketplaces, that employee choice could be
available from Day 1. But we will have two steps. So, in 2014,
all employers will have a choice. They will have a choice of
plans to offer their employees. They just will not be able to
say to that employee, should they choose to do so, you can
choose any plan in the shop market.
The Chairman. All right. Well, as I said, I will be
watching it.
Secretary Sebelius. Yes, sir.
The Chairman. We will be doing all we can. Let us know what
help you need too. It is a 2-way street.
Secretary Sebelius. I will be happy to do that.
The Chairman. All right.
Secretary Sebelius. Yes, sir.
The Chairman. Thank you.
Secretary Sebelius. Yes.
The Chairman. Good luck.
Secretary Sebelius. Thank you.
The Chairman. The hearing is adjourned.
[Whereupon, at 11:44 a.m., the hearing was concluded.]
A P P E N D I X
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