[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]




            A PERMANENT SOLUTION TO THE SGR: THE TIME IS NOW

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

                                HEARING

                               BEFORE THE

                         SUBCOMMITTEE ON HEALTH

                                 OF THE

                    COMMITTEE ON ENERGY AND COMMERCE
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED FOURTEENTH CONGRESS

                             FIRST SESSION
                               __________

                         JANUARY 21 & 22, 2015
                               __________

                            Serial No. 114-2





[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]






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                    COMMITTEE ON ENERGY AND COMMERCE

                          FRED UPTON, Michigan
                                 Chairman
JOE BARTON, Texas                    FRANK PALLONE, Jr., New Jersey
  Chairman Emeritus                    Ranking Member
ED WHITFIELD, Kentucky               BOBBY L. RUSH, Illinois
JOHN SHIMKUS, Illinois               ANNA G. ESHOO, California
JOSEPH R. PITTS, Pennsylvania        ELIOT L. ENGEL, New York
GREG WALDEN, Oregon                  GENE GREEN, Texas
TIM MURPHY, Pennsylvania             DIANA DeGETTE, Colorado
MICHAEL C. BURGESS, Texas            LOIS CAPPS, California
MARSHA BLACKBURN, Tennessee          MICHAEL F. DOYLE, Pennsylvania
  Vice Chairman                      JANICE D. SCHAKOWSKY, Illinois
STEVE SCALISE, Louisiana             G.K. BUTTERFIELD, North Carolina
ROBERT E. LATTA, Ohio                DORIS O. MATSUI, California
CATHY McMORRIS RODGERS, Washington   KATHY CASTOR, Florida
GREGG HARPER, Mississippi            JOHN P. SARBANES, Maryland
LEONARD LANCE, New Jersey            JERRY McNERNEY, California
BRETT GUTHRIE, Kentucky              PETER WELCH, Vermont
PETE OLSON, Texas                    BEN RAY LUJAN, New Mexico
DAVID B. McKINLEY, West Virginia     PAUL TONKO, New York
MIKE POMPEO, Kansas                  JOHN A. YARMUTH, Kentucky
ADAM KINZINGER, Illinois             YVETTE D. CLARKE, New York
H. MORGAN GRIFFITH, Virginia         DAVID LOEBSACK, Iowa
GUS M. BILIRAKIS, Florida            KURT SCHRADER, Oregon
BILL JOHNSON, Ohio                   JOSEPH P. KENNEDY, III, 
BILLY LONG, Missouri                     Massachusetts
RENEE L. ELLMERS, North Carolina     TONY CARDENAS, California
LARRY BUCSHON, Indiana
BILL FLORES, Texas
SUSAN W. BROOKS, Indiana
MARKWAYNE MULLIN, Oklahoma
RICHARD HUDSON, North Carolina
CHRIS COLLINS, New York
KEVIN CRAMER, North Dakota
                         Subcommittee on Health

                     JOSEPH R. PITTS, Pennsylvania
                                 Chairman
BRETT GUTHRIE, Kentucky              GENE GREEN, Texas
  Vice Chairman                        Ranking Member
ED WHITFIELD, Kentucky               ELIOT L. ENGEL, New York
JOHN SHIMKUS, Illinois               LOIS CAPPS, California
TIM MURPHY, Pennsylvania             JANICE D. SCHAKOWSKY, Illinois
MICHAEL C. BURGESS, Texas            G.K. BUTTERFIELD, North Carolina
MARSHA BLACKBURN, Tennessee          KATHY CASTOR, Florida
CATHY McMORRIS RODGERS, Washington   JOHN P. SARBANES, Maryland
LEONARD LANCE, New Jersey            DORIS O. MATSUI, California
H. MORGAN GRIFFITH, Virginia         BEN RAY LUJAN, New Mexico
GUS M. BILIRAKIS, Florida            KURT SCHRADER, Oregon
BILLY LONG, Missouri                 JOSEPH P. KENNEDY, III, 
RENEE L. ELLMERS, North Carolina         Massachusetts
LARRY BUCSHON, Indiana               TONY CARDENAS, California
SUSAN W. BROOKS, Indiana             FRANK PALLONE, Jr., New Jersey (ex 
CHRIS COLLINS, New York                  officio)
JOE BARTON, Texas
FRED UPTON, Michigan (ex officio)
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
                             C O N T E N T S

                              ----------                              

                            January 21, 2015

                                                                   Page
Hon. Joseph R. Pitts, a Representative in Congress from the 
  Commonwealth of Pennsylvania, opening statement................     1
    Prepared statement...........................................     2
Hon. Gene Green, a Representative in Congress from the State of 
  Texas, opening statement.......................................     4
Hon. Fred Upton, a Representative in Congress from the State of 
  Michigan, opening statement....................................     6
    Prepared statement...........................................     6
Hon. Frank Pallone, Jr., a Representative in Congress from the 
  State of New Jersey, opening statement.........................     8

                               Witnesses

Joseph I. Lieberman, Former United States Senator................    10
    Prepared statement...........................................    13
Alice Rivlin, Ph.D., Co-Chair, Delivery System Reform Initiative, 
  Bipartisan Policy Center, and Director, Engelberg Center for 
  Health Care Reform, Brookings Institution......................    29
    Prepared statement...........................................    31
Marilyn Moon, Ph.D., Institute Fellow, American Institutes for 
  Research.......................................................    37
    Prepared statement...........................................    39

                           Submitted Material

Letter of January 20, 2015, from 17 national nonprofit agencies 
  to the committee, submitted by Mr. Green.......................    79
Statement of Stand for Quality, submitted by Mr. Green...........    81
Statement of the Federation of American Hospitals, submitted by 
  Mr. Green......................................................    83
Statement of the American College of Clinical Pharmacy, submitted 
  by Mr. Pitts...................................................    89
Chart on Medicare spending, Henry J. Kaiser Family Foundation, 
  submitted by Ms. Capps.........................................    79
Statement of the National Association of Insurance Commissioners, 
  submitted by Ms. Castor........................................    95

                            January 22, 2015
                               Witnesses

Richard Umbdenstock, President and CEO, American Hospital 
  Association....................................................    98
    Prepared statement \1\.......................................   101
Geraldine O'Shea, First Vice President, AOA Board Of Trustees, 
  and Medical Director, Foothills Women's Medical Center in 
  California.....................................................   114
    Prepared statement...........................................   116
Alan Speir, Medical Director of Cardiac Surgical Services for 
  Inova Health System, and Chair, Workforce on Health Policy, 
  Reform, and Advocacy, The Society of Thoracic Surgeons.........   126
    Prepared statement...........................................   128
Kenneth P. Miller, Board President, American Association of Nurse 
  Practitioners..................................................   140
    Prepared statement...........................................   142
Barbara McAneny, Chair, AMA Board of Trustees, CEO, New Mexico 
  Oncology Hematology Consultants Ltd............................   160
    Prepared statement...........................................   162
Eric Schneidewind, President-Elect, AARP.........................   172
    Prepared statement...........................................   174

                           Submitted Material

Statement of the American Academy of Family Physicians, submitted 
  by Mr. Pitts...................................................   211
Statement of the American Ambulance Association, submitted by Mr. 
  Pitts..........................................................   218
Statement of various groups regarding standards of care and 
  Federal healthcare guidelines, submitted by Mr. Guthrie........   220
Statement of America's Essential Hospitals, submitted by Ms. 
  Castor.........................................................   226
Chart on out-of-pocket spending, submitted by Mrs. Capps.........   229

----------
\1\ The attachment to Mr. Umbdenstock's statement can be found 
  at: http://docs.house.gov/meetings/if/if14/20150122/102827/
  hhrg-114-if14-wstate-umbdenstockr-20150122.pdf.













 
        A PERMANENT SOLUTION TO THE SGR: THE TIME IS NOW, DAY 1

                              ----------                              


                      WEDNESDAY, JANUARY 21, 2015

                  House of Representatives,
                            Subcommittee on Health,
                          Committee on Energy and Commerce,
                                                    Washington, DC.
    The subcommittee met, pursuant to call, at 10:17 a.m., in 
room 2322, Rayburn House Office Building, Hon. Joseph R. Pitts 
(chairman of the subcommittee) presiding.
    Present: Representatives Pitts, Guthrie, Shimkus, Murphy, 
Burgess, Lance, Griffith, Bilirakis, Long, Ellmers, Bucshon, 
Brooks, Collins, Upton, Green, Engel, Capps, Schakowsky, 
Castor, Matsui, Lujan, Schrader, Kennedy, Cardenas, and 
Pallone.
    Staff Present: Clay Alspach, Chief Counsel, Health; Gary 
Andres, Staff Director; Sean Bonyun, Communications Director; 
Leighton Brown, Press Assistant; Noelle Clemente, Press 
Secretary; Brad Grantz, Policy Coordinator, O&I Robert Horne, 
Professional Staff Member, Health; Tim Pataki, Professional 
Staff Member; Michelle Rosenberg, GAO Detailee, Health; Chris 
Sarley, Policy Coordinator, Environment & Economy; Macey 
Sevcik, Press Assistant; Adrianna Simonelli, Legislative Clerk; 
Heidi Stirrup, Health Policy Coordinator; Ziky Ababiya, 
Minority Policy Analyst; Jeff Carroll, Minority Staff Director; 
Eric Flamm, Minority FDA Detailee; Tiffany Guarascio, Minority 
Deputy Staff Director and Chief Health Advisor; and Arielle 
Woronoff, Minority Health Counsel.

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

    Mr. Pitts. Good morning, ladies and gentlemen.
    The subcommittee will come to order.
    The chair will recognize himself for an opening statement.
    I would like to welcome everyone to the first Health 
Subcommittee hearing of the 114th Congress and officially 
welcome our new members on both sides. On our side, we have 
Larry Bucshon, Susan Brooks, Chris Collins, and Billy Long, who 
is on the committee, is now on the subcommittee, Health 
Subcommittee. So they will be a great addition.
    This subcommittee has made permanent repeal of the flawed 
Medicare sustainable growth rate formula, or SGR, a top 
priority for the last 4 years. In 2014, we reached a 
bipartisan, bicameral agreement on a replacement policy that 
enjoys widespread support both in Congress and among the 
stakeholder community.
    With the current doc fix expiring in less than 2 months, at 
the end of March, we are faced with the best opportunity in a 
decade to permanently dispose of the SGR. We are committed to 
rising to meet this challenge.
    And now, with the policy agreed to, the question we face is 
how to responsibly pay for SGR reform in a manner that can pass 
both houses of Congress and be signed by the President. Coming 
up with approximately $140 billion in offsets will not be easy, 
but it is a task we must embrace.
    Some argue that SGR reform does not need to be paid for. I 
respectfully disagree.
    First, if Members are serious about seizing this historic 
moment to pass SGR reform, as a purely practical matter, for 
the bill to pass the House of Representatives and Senate it 
must include sensible offsets. For example, in recent years, 
the Senate already tried to pass a full repeal of the SGR under 
a Democratically controlled Senate. On October 21st, 2009, the 
Senate considered Senator Stabenow's bill, S. 1776, and that 
bill failed on a 47-to-53 vote even though there were 60 
Democratic votes in the Senate.
    Second, the American people expect Congress to live within 
our means. The American people expect Congress to reduce the 
debt and prioritize spending. It is our responsible to lead 
accordingly.
    Third, not paying for SGR reform would ignore past 
precedent from Congress, whether it was controlled by Democrats 
or Republicans. As the Center for a Responsible Federal Budget 
has noted, ``Lawmakers deficit-financed the first doc fix back 
in 2003 but since then have offset 120 out of the 123 months of 
doc fixes with equivalent savings. That is 98 percent.''
    So today we are here to take the next step in our process, 
discussing a range of commonsense Medicare policies which can 
improve, modernize, and strengthen Medicare. Most of the 
policies we will be discussing have been endorsed by Members of 
both political parties, included in the President's Fiscal 
Commission recommendations or included in one of the 
President's budgets submitted to Congress.
    As we move forward to get SGR reform across the finish 
line, we look forward to be discussing these and other options 
with the minority and the Members in the Senate.
    And we are very happy to have with us today some extremely 
well-respected thought leaders who have demonstrated they are 
serious about helping save and strengthen Medicare and doing so 
in a bipartisan manner.
    So I welcome all of our witnesses. We look forward to 
hearing your testimony.
    [The prepared statement of Mr. Pitts follows:]

               Prepared statement of Hon. Joseph R. Pitts

    The Subcommittee will come to order.
    The Chair will recognize himself for an opening statement.
    I would like to welcome everyone to the first Health 
Subcommittee hearing of the 114th Congress and officially 
welcome our new members.
    This Subcommittee has made permanent repeal of the flawed 
Medicare Sustainable Growth Rate formula, or SGR, a top 
priority for the last four years. In 2014, we reached a 
bipartisan, bicameral agreement on a replacement policy that 
enjoys widespread support both in Congress and among the 
stakeholder community.
    With the current ``doc fix'' expiring in less than 2 
months, at the end of March, we are faced with the best 
opportunity in a decade to permanently dispose of the SGR. We 
are committed to rising to meet this challenge.
    Now with the policy agreed to, the question we face is how 
to responsibly pay for SGR reform in a manner that can pass 
both Houses of Congress and be signed by the President.
    Coming up with approximately $140 billion in offsets will 
not be easy, but it is a task we must embrace.
    Some argue that SGR reform does not need to paid for. I 
respectfully disagree.
    First, if members are serious about seizing this historic 
moment to pass SGR reform, as a purely practical matter, for 
the bill to pass the House of Representatives and Senate, it 
must include sensible offsets.
    For example, in recent years, the Senate already tried to 
pass a full repeal of the SGR under a Democratically-controlled 
Senate. On October 21, 2009, the Senate considered Senator 
Stabenow's bill, S. 1776. That bill failed on a 47 to 53 vote--
--even though there were 60 Democratic votes in the Senate. \1\
---------------------------------------------------------------------------
    \1\ 10/21/2009: Cloture on the motion to proceed to the bill not 
invoked in Senate by Yea-Nay Vote. 47----53. Record Vote Number: 325.
---------------------------------------------------------------------------
    Second, the American people expect Congress to live within 
our means. The American people expect Congress to reduce the 
debt and prioritize spending. It's our responsibility to lead 
accordingly.
    Third, not paying for SGR reform would ignore past 
precedent from Congress----whether it was controlled by 
Democrats or Republicans. As the Center for A Responsible 
Federal Budget has noted: ``Lawmakers deficit-financed the 
first ``doc fix'' back in 2003, but since then have offset 120 
out of the 123 months of doc fixes with equivalent savings. 
That's 98 percent.''
    So today we are here to take the next step in our process--
--discussing a range of common-sense Medicare policies which 
can improve, modernize, and strengthen Medicare. Most of the 
policies we will be discussing have been endorsed by members of 
both political parties, included in the President's Fiscal 
Commission recommendations, or included in one of the 
President's Budgets submitted to Congress.
    As we move forward to get SGR reform across the finish 
line, we look forward to be discussing these and other options 
with the minority and members in the Senate.
    We are very happy to have with us today some extremely 
well-respected thought leaders, who have demonstrated they are 
serious about helping save and strengthen Medicare-and doing so 
in a bipartisan manner. I welcome of all our witnesses. We look 
forward to your testimony.

    Mr. Pitts. And I yield the remainder of my time to our new 
vice chair, the gentleman from Kentucky, Mr. Guthrie.
    Mr. Guthrie. Thank you, Mr. Chairman.
    And I appreciate you holding this hearing and the 
opportunity to discuss the SGR, a critical issue for our 
Nation's seniors. And since coming to Congress, I have heard 
repeatedly from Kentuckians that solving the SGR permanently is 
essential for beneficiaries to have continued access to the 
care they rely on.
    I am proud of the work this committee has done over the 
past few years to get to this point. We have a bipartisan, 
bicameral replacement proposal that will repeal the SGR and 
move forward with a new payment structure that focuses on 
quality and innovation.
    Unfortunately, the issue of how we offset the $140-billion 
price tag for SGR is still unresolved. We must continue to 
focus on finding ways to pay for the SGR proposal, and I want 
to specifically thank our panelists today and tomorrow who have 
put forward thoughtful proposals.
    I am hopeful this hearing will be the beginning of 
meaningful discussions and produce real bipartisan, commonsense 
solutions to the real SGR, reduce Medicare costs, and protect 
the beneficiaries.
    And to echo what the chairman said, we have a very 
distinguished panel, very important thought leaders.
    And it is very much appreciated that you guys are here 
today.
    Thank you.
    Mr. Pitts. The chair thanks the gentleman.
    I am now very pleased to recognize our new ranking member, 
the gentleman from Texas, Mr. Green.
    I look forward to a good session working together.
    Five minutes.

   OPENING STATEMENT OF HON. GENE GREEN, A REPRESENTATIVE IN 
                CONGRESS FROM THE STATE OF TEXAS

    Mr. Green. Thank you, Mr. Chairman.
    And like you, we have some new members of our subcommittee. 
Congressman Lujan has been on our committee, full committee, 
but he is new to our subcommittee. And also new members to the 
full committee is Congressman Kurt Schrader from Oregon, who is 
new to the Energy and Commerce Committee and obviously new to 
the Health Subcommittee, and also Congressman Joe Kennedy from 
Massachusetts.
    Welcome, both of you, to the full committee and also to the 
Health Subcommittee.
    And, Ben Ray, you have been around a while. I am glad you 
are on Health now. So, appreciate it.
    Our other Members new to our Health Subcommittee and the 
committee: Tony Cardenas, who is not here right now but will be 
on the committee, and so will Doris Matsui and John Sarbanes, 
new members on the subcommittee.
    Thank you, Mr. Chairman, and thank our witnesses for being 
here today.
    Eliminating the sustainable growth rate, or the SGR, 
formula under Medicare will represent a major policy 
development. It is critically important that Congress institute 
a reasonable and responsible payment policy for physicians and 
reward value over volume.
    The repeal-and-replace legislation negotiated last Congress 
made a historic agreement between the House and Senate 
committees of jurisdiction. Together, a bipartisan bill was 
introduced to permanently repeal the SGR and replace it with a 
value-based system that provides stability for physicians and 
maintains beneficiary access.
    Since 2003, Congress has enacted 17 patches to delay cuts 
to Medicare physician payments derived from the flawed SGR 
formula. The total cost of these 17 patches has been $169.5 
billion. This amount exceeds the current cost of the bipartisan 
repeal-and-replace legislation developed last Congress. The 
Congressional Budget Office projects an SGR fix will cost $144 
billion over the next 10 years.
    Insisting SGR reform to be fully offset is a tough issue 
and a policy my Republican colleagues frequently abandon when 
it is politically convenient. Last week, the House passed a 
bill changing the definition of a full-time employee from 30 
hours a week to 40 hours. It added $53 billion to the Federal 
deficit over 10 years, but it was not paid for. And it passed 
the House.
    Responsible Federal spending is important; however, 
offsetting the cost of the SGR on the backs of the 
beneficiaries is unacceptable. Seniors already pay their fair 
share of Medicare. Half of all beneficiaries live on less than 
$24,000 a year. On average, health expenses account for 14 
percent of Medicare-household budgets. That is nearly three 
times as much as non-Medicare households.
    Most of the proposals for Medicare savings would increase 
what is already a substantial burden on beneficiaries and 
increasing out-of-pocket costs and limiting access to services.
    It is important to note that the Medicare program is 
stronger than ever. The 2014 Medicare Trustees Report estimates 
that the Medicare Part A trust fund will now be solvent until 
2030, 4 years longer than it was estimated in 2013. This is in 
part because of reforms in the Affordable Care Act.
    Projected Federal spending for Medicare and Medicaid has 
fallen by almost $1 trillion since 2010. When compared to the 
Congressional Budget Office's August 2010 and August 2014 
baselines, Medicare spending this year will be about $1,200 
lower per person than expected in 2010.
    Controlling costs alone without considering revenue is not 
a realistic approach to Medicare solvency and putting our 
Nation's seniors at risk. The flawed SGR formula has plagued 
our healthcare system for too long, but a fix in SGR that harms 
Medicare beneficiaries because of an insistence on offsets that 
reduce benefits and limit access is not an acceptable tradeoff. 
And I urge our colleagues to work together and enact a long-
term, overdue SGR reform for our seniors.
    And, with that, Mr. Chairman, I would like to ask unanimous 
consent to place into the record a letter signed by 17 national 
nonprofit agencies, a statement from Stand for Quality, and a 
letter from the American Federation of American Hospitals. I 
ask unanimous consent to have that placed into the record.
    Mr. Pitts. Without objection, so ordered.
    [The information appears at the conclusion of the hearing.]
    Mr. Green. And, with that, I will yield the remainder of my 
time to our colleague Congressman Kennedy.
    Mr. Kennedy. Thank you to the ranking member for yielding 
briefly.
    Thank you to the chairman for calling the hearing, and 
thank you for letting me join you. It is an exciting day for 
me. So, glad to be here.
    Like most of my colleagues, I was hopeful that last year's 
strong momentum to pass an SGR fix would result in bipartisan 
legislation that meets the needs of both beneficiaries and 
workers and providers as well. I am even more hopeful that we 
can reach an agreement that doesn't pass these costs to fix the 
system on to America's seniors.
    Half of all the Medicare beneficiaries live on less than 
$23,500 a year, and health expenses accounted for more than 14 
percent of Medicare-household budgets in 2012. These numbers 
tell a startling story about the economic reality most seniors 
face.
    As we take up a renewed push to fix the SGR, let's keep 
seniors at the forefront of this debate. They have earned their 
benefits. Now let's make sure we can afford them.
    I also want to thank the witnesses for being here today.
    Senator, thank you for your service to your country.
    Mr. Pitts. The gentleman yields back.
    The chair recognizes the chairman of the full committee, 
the gentleman Mr. Upton, for 5 minutes.

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

    Mr. Upton. Thank you, Mr. Pitts.
    This week's hearing is indeed an important opportunity to 
discuss bipartisan reforms to strengthen and improve the 
Medicare program while helping achieve the savings needed to 
pay for a permanent solution to the flawed SGR.
    Last Congress, this committee, along with our colleagues at 
Ways and Means and Senate Finance, came to an agreement on 
policy to finally remove the uncertainty that has plagued 
seniors and their doctors for way too long. Still to be 
resolved was a path to pay for this important policy change.
    The experts here this week will help us explore some 
bipartisan proposals to both strengthen the Medicare program as 
a whole while also finally removing the threat of the SGR 
permanently.
    This is an historic opportunity. Securing a permanent 
solution to the SGR is more than tinkering with how we pay 
doctors who treat Medicare patients. This can also be Medicare 
reform.
    And while it is important to pay for the policy, I want to 
caution us about framing our discussions as one of merely 
budgets or beneficiaries. The truth is Medicare's budget is out 
of control and the program is on the fast track to insolvency. 
That threatens the long-term access to care for millions of 
deserving seniors who depend on the program. That is not right.
    So the most pro-beneficiary reform that we can adopt this 
Congress are ones that will not only remove the threat of SGR 
but also shore up the Medicare program with sensible reforms 
that make the programs more sustainable for years, perhaps 
generations, to come.
    Failure to pass a permanent SGR before March would not be 
due to a lack of policy options but a failure of Congress to 
work together on offsets with the same bipartisan spirit that 
we exhibited on the policy itself. This subcommittee has proven 
that it is indeed capable of working together, and I think that 
we are ready to do it again. I am absolutely committed to 
working with my colleagues on this committee and the House and 
the Senate to finally get it done.
    There is a path forward. It involves targeted reforms, 
which save money without cutting care. It involves a balance of 
pay-fors, which are bipartisan policies. And it involves a 
spirit of cooperation with sustained commitment.
    Seniors in my State and others and across the country 
deserve the peace of mind that their trusted doctor will be 
able to answer their calls for care.
    [The prepared statement of Hon. Fred Upton follows:]

                 Prepared statement of Hon. Fred Upton

    This week's hearing is an important opportunity to discuss 
bipartisan reforms to strengthen and improve the Medicare 
program while helping achieve the savings needed to pay for a 
permanent solution to the flawed Sustainable Growth Rate. Last 
Congress this committee, along with our colleagues at the Ways 
and Means Committee and Senate Finance Committee, came to an 
agreement on policy to finally remove the uncertainty that has 
plagued seniors and their doctors for too long. Still to be 
resolved was a path to pay for this important policy.
    The experts here this week will help us explore some 
bipartisan proposals to both strengthen the Medicare program as 
a whole while also finally removing the threat of the SGR 
permanently.
    This is an historic opportunity. Securing a permanent 
solution to the SGR is more than tinkering with how we pay 
doctors who treat Medicare patients. This can also be Medicare 
reform.
    And while it is important to pay for this policy, I want to 
caution us about framing our discussions as one of merely 
budgets or beneficiaries. The truth is, Medicare's budget is 
out of control and the program is on the fast track to 
insolvency. That threatens the long-term access to care for 
millions of seniors who depend on the program. So the most pro-
beneficiary reforms we can adopt this Congress are ones that 
will not only remove the threat of the SGR, but also shore up 
the Medicare program with sensible reforms that make the 
program more sustainable for years to come.
    Failure to pass a permanent SGR solution before March would 
not be due to a lack of policy options, but a failure of 
Congress to work together on offsets with the same bipartisan 
spirit we exhibited on the policy. This subcommittee has proven 
it is capable of working together, and I think we're ready to 
do it again.
    I am committed to working with my colleagues on the 
committee, in the House and in the Senate finally get this 
done. There is a path forward, and it involves targeted reforms 
which save money without cutting care; it involves a balance of 
pay-fors which are bipartisan policies; and it involves a 
spirit of cooperation with sustained commitment. Seniors in 
Michigan and across the country deserve the peace of mind that 
their trusted doctor will be able to answer their calls for 
care.
    The time is now. So let us begin.

    Mr. Upton. I yield the balance of my time to Dr. Burgess.
    Mr. Burgess. I thank the chairman for yielding.
    I thank Chairman Pitts for calling the hearing.
    Ranking Member Green, it is good to see you sitting at the 
top of the dais as well, sir.
    It is important that this is the first hearing of this 
subcommittee in this term of Congress. This committee continues 
on a bipartisan basis to demonstrate previously unparalleled 
leadership in our efforts to repeal the sustainable growth rate 
formula. The countless hours of negotiations that Members and 
staff have devoted to this issue over the past 2 years have 
produced the only bipartisan, bicameral, tri-committee 
agreement, and that occurred on February 6th of last year.
    This work----and I was proud to help the chairmen and the 
ranking members----was embraced by organized medicine, 
beneficiary groups, and payers, producing over 750 letters of 
support.
    I want to thank the chairman for mentioning the votes that 
were taken in October and November of 2009. That was a 
particularly trying time for me. The Senate, of course, had the 
60 votes, but they could not pass a repeal of the SGR. Then, in 
what really can only be marked as an episode of legislative 
futility, after it had failed in the Senate, Speaker Pelosi 
brought it up on the House side. Really solidifying my 
allegiance to the patron saints of lost causes, I was the only 
Republican vote for that bill that was brought forward in the 
House in November of 2009. But this is how strongly I feel 
about this issue.
    If you go to a Web site called MedPage Today, the Number 
One clicked-on article last year was ``Get Me Out of Here: 
Doctors Looking to Get Out of Medicine.'' And the SGR is the 
proximate cause for their dissatisfaction with the profession 
that they work so hard for and that they love so much.
    So we have the bill, we have a draft, we are ready to go. 
All it takes is us agreeing to the offsets. It is hard work; I 
know it is difficult work. But I know this committee, this 
subcommittee is up to the task.
    And I really would ask my colleagues on the other side of 
the dais, let's work together, let's get this done for the 
patients of America, for the seniors of America, and the 
physicians that take care of them.
    And I yield back.
    Mr. Pitts. The chair thanks the gentleman.
    At this time is pleased to recognize the former ranking 
member of the Health Subcommittee, now the ranking member of 
the full committee, Mr. Pallone, for 5 minutes.

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

    Mr. Pallone. Thank you, Mr. Chairman.
    And I want to thank you for ensuring that the issue of a 
permanent solution to the SGR is at the forefront of this 
Congress' agenda. In addition, holding a hearing early in the 
session allows our new Members an opportunity to review both 
the policy and congressional background on the SGR.
    While I am very interested to hear from our two panels over 
the next 2 days, I strongly believe----and I hope the chairman 
does too----that after this hearing we should wait no longer to 
roll up our sleeves and get down to the work of ensuring the 
bipartisan, bicameral bill agreed to last year is enacted into 
law before the March 31st deadline.
    We all agree on the policy. We all agree that bill, the 
previous bill, is a good compromise. It also, most notably, has 
the support of both provider and beneficiary groups.
    The question that has plagued us, of course, is the 
offsets. And I believe that because the SGR is the result of a 
budget gimmick and we have already spent $169 billion paying to 
fix the problem, that offsets, especially those within our 
health programs, are not necessary. However, if we must include 
offsets, the war savings, which are known as the overseas 
contingency operations, or OCO, funds, could be used.
    I know some on the other side of the aisle do not share my 
view. What I hope is that we can agree first that SGR shouldn't 
be paid for off the backs of beneficiaries. Beneficiaries will 
already pay for their share of the cost of SGR repeal through 
higher premiums, and half of all beneficiaries live on less 
than $23,500 per year.
    And, second, this is not the time or the place to introduce 
controversial Medicare structural reforms or changes. These 
proposals, like raising the eligibility age or raising the 
deductible or additional means-testing, should not be 
considered in a vacuum and will become poison pills that will 
thwart the bipartisan progress that we have made on fixing the 
SGR problem.
    And, finally, if there is consensus that offsets are 
required here, then revenue should be on the table. It is 
shortsighted and arbitrary to cut health programs simply 
because budget rules say so.
    So I am hopeful that this is the year we can get the SGR 
done. If we do, it will be a bipartisan victory for Medicare, 
for physicians, and beneficiaries alike.
    Mr. Chairman, with the time left, I would like to split it, 
a minute or so to Representative Matsui and then the rest to 
Representative Schakowsky, if I can.
    Mr. Pitts. Without objection.
    Ms. Matsui?
    Ms. Matsui. Thank you very much, Ranking Member Pallone, 
for yielding me time today.
    We need to solve the SGR problem for our Medicare 
physicians and their patients, but we can't do it by causing 
new problems for Medicare beneficiaries. In fact, we should be 
providing more stability to seniors and people with 
disabilities by not subjecting the programs that they rely on 
to annual funding threats.
    This committee worked very hard last year with our 
colleagues on Ways and Means and Senate Finance to come up with 
a bipartisan, bicameral policy solution to the flawed SGR 
methodology. Now is the time that we should be having serious 
discussions about how to move this forward. We should not kick 
the can down the road once again.
    We need to move the system forward to reward value rather 
than volume, and we need to protect, strengthen, and expand 
Medicare and its programs. To do this, we need to make the so-
called SGR extenders permanent.
    The QI program provides premium assistance, and Aging/
Disability Resource Centers provide no-wrong-door resources to 
the lowest-income beneficiaries. As a co-chair of the Seniors 
Task Force, I am acutely aware that more than half of Medicare 
beneficiaries live on incomes of $23,500 or less and cannot 
afford to pay more for their health care.
    We owe it to our doctors and their patients to provide this 
much-needed stability in the Medicare program.
    I yield back.
    Mr. Pallone. I yield to Ms. Schakowsky.
    Ms. Schakowsky. Thank you.
    I am also the co-chair of the Seniors Task Force of the 
Democratic Caucus, and I am concerned because Medicare 
beneficiaries currently find themselves in an all-too-familiar 
situation, worrying that they could lose their doctors if 
Congress doesn't reach an agreement on the doc fix.
    And we do have an opportunity to end these worries forever. 
The Democrats, as Dr. Burgess, when we were in charge, pointed 
out, actually did that, a permanent repeal of the SGR. Passing 
the bipartisan, bicameral proposal would repeal the SGR formula 
and continue Medicare's transformation into a program that pays 
for quality, not volume.
    In passing the legislation, though, we should follow the 
precedent set by Republicans, who consistently pass healthcare 
legislation without offsets. Just earlier this month, the 
Republicans passed a bill to redefine ``full-time'' under 
Obamacare that cost $53 billion without offsets.
    If we must include offsets, then we must not cut benefits 
or ask beneficiaries to pay more. Let me just say that doing so 
would exchange beneficiaries' worries that their doctors will 
leave Medicare for worries that they can no longer afford to 
see their doctor under Medicare.
    I yield back.
    Mr. Pitts. The chair thanks the gentlelady.
    That concludes the opening statements of the Members. As 
always, any written opening statements of Members will be made 
a part of the record.
    Mr. Pitts. We have two panels----one today, one tomorrow--
--on this issue.
    And before I introduce the panelists, I have a UC request 
to enter into the record comments of the American College of 
Clinical Pharmacy. Without objection, we will put that in the 
record.
    So ordered.
    [The information appears at the conclusion of the hearing.]
    Mr. Pitts. On our panel today we have three witnesses: Joe 
Lieberman, highly respected former U.S. Senator----welcome, 
Joe----Dr. Alice Rivlin, Co-chair of the Delivery System Reform 
Initiative, Bipartisan Policy Center, and dDings Institution--
--I might add, former OMB Director under President Clinton and 
Vice Chair of the Federal Reserve----and, finally, Dr. Marilyn 
Moon, Institute Fellow at the American Institutes for Research.
    Welcome. Thank you for coming. You will each be given 5 
minutes to summarize your testimony. Your written testimony 
will be placed into the record.
    Senator Lieberman, we will start with you. You are 
recognized for 5 minutes for your summary.

    STATEMENTS OF JOSEPH I. LIEBERMAN, FORMER UNITED STATES 
SENATOR; ALICE RIVLIN, PH.D., CO-CHAIR, DELIVERY SYSTEM REFORM 
 INITIATIVE, BIPARTISAN POLICY CENTER, AND DIRECTOR, ENGELBERG 
   CENTER FOR HEALTH CARE REFORM, BROOKINGS INSTITUTION; AND 
MARILYN MOON, PH.D., INSTITUTE FELLOW, AMERICAN INSTITUTES FOR 
                            RESEARCH

                STATEMENT OF JOSEPH I. LIEBERMAN

    Mr. Lieberman. Thanks, Chairman Pitts and Ranking Member 
Green, members of the committee. It is an honor to be asked to 
testify before you.
    I must say that, a day ago, I got a call in my office from 
a reporter for a trade publication, and the essential question 
was, to my executive assistant, why is Senator Lieberman 
testifying about the SGR problem?
    So the answer is that there is a staff member of the full 
committee, Josh Trent, who used to work for Senator Tom Coburn. 
And in 2011 Dr. Coburn and I spent a lot of time working 
together to try to come up with a bipartisan program to save 
Medicare and to reduce the national debt, and, after a lot of 
work, we did. And I hope that I can bring some of that 
experience to bear on what you are facing now.
    Let me try to put it in this quick context of this 
morning's news. The President said last night in the State of 
the Union that the shadow of crisis has passed. And I would 
say, generally speaking, insofar as the deep recession we were 
in, the economic crisis, the shadow has passed. But there are 
other very, very deep, dark shadows over our future that have 
not passed, one of which is, obviously, our continuing-to-grow 
national debt.
    When Senator Coburn and I introduced our Medicare reform 
plan in 2011, the national debt was just at about a little over 
$14 trillion. It is 3 years later; we are now over $18 
trillion. And this is really unsustainable. It is sustainable 
only at the risk of putting a terrible burden of taxation on 
our children and grandchildren or forcing really unacceptable 
cuts in spending in Federal programs.
    The other crisis that has not passed relates to Medicare, 
which also is a big cause of the growing national debt. And the 
trustees of Medicare continue to say, just to make it as 
specific as I can, that Part A, the hospital insurance program, 
could be insolvent----which is to say, unable to pay the 
benefits due to seniors----as early as 2021 and maybe, under 
the best of circumstances, as late at 2030. So there is a real 
problem.
    The second thing I want to say is thank you. I mean, 
beginning in this subcommittee, working with colleagues on 
other subcommittees in the House and Senate and both parties, 
you have done something that has been really generally 
unheralded in a time when Congress has been so gridlocked and 
unproductive: You have come up with not a fix, but a solution, 
a replacement, a reform of the sustainable growth rate formula 
for physician reimbursement, which hasn't worked. And now the 
question is, how do you pay for it?
    Let me just say in passing, as others who have spoken have, 
as a Member of the Senate, certainly the public following this, 
certainly doctors, the SGR was a perpetual recurring crisis, a 
process crisis. People would use the need to fix it to attach 
all sorts of conditions to it and the rest.
    But there are two positive notes out of that suffering that 
we all went through. One is, as you have said, that in almost 
all the cases, 98 percent, the cost of the fix was offset. The 
second, to me, encouraging reality was that, generally 
speaking----well, let me put it this way: that the most 
significant Medicare reforms that have passed in the last 
decade were passed to finance fixes for SGR.
    So I would say first that I hope that you offset the cost 
of the solution, the repeal, the reform that you have come up 
with, because otherwise you are going to increase the national 
debt. That shadow is over our future.
    The second thing is to say that I hope you build on this 
hidden story of offsetting your repeal and reform of SGR, 
replacing it, as predecessor Congresses have, by using it as an 
opportunity to reform some elements of Medicare.
    And, obviously, I am happy to answer questions in the next 
section of the hearing, but I offer the work that Dr. Coburn 
and I did as an example. You don't fix the Medicare problem by 
making everybody happy, but the main thing you can do is to 
sustain this incredibly important, humane program for the long 
term.
    Dr. Coburn and I negotiated back and forth, and we did some 
things that are not popular with everybody. We replaced 
Medicare's current complicated cost-sharing requirements with a 
unified annual deductible of $550. But we also created an out-
of-pocket maximum of $7,500 so every Medicare recipient would 
have a cap on annual medical costs to protect them from 
financial hardship or bankruptcy.
    The Fiscal Commission, the President's commission, 
estimated that that kind of restructuring, along with the 
Medigap reform that we included, would save $130 billion over 
10 years. The total savings estimated by the Centers for 
Medicare and Medicaid and the President's Fiscal Commission and 
CBO were somewhere in the $500 billion to $600 billion range 
over the next decade. And, startlingly, because this is big 
numbers, over the long term, our proposal would have reduced 
the unfunded liabilities of Medicare by $10 trillion because it 
just continues to grow.
    We did reform Medigap to increase consumer utilization in a 
way that makes the system work better. We did recommend raising 
the eligibility age. We did it, incidentally, in what I thought 
was a very genuine compromise by Dr. Coburn, who opposed the 
Affordable Care Act, by referring to the Affordable Care Act 
and saying, at every point that we raise by 2 months the age of 
eligibility for Medicare, the eligibility for access under the 
Affordable Care Act also goes up 2 months. So you are giving 
people essentially a floor or an alternative to what they have 
now.
    The bottom line here is that this must be done and it can 
be done. And if you and your colleagues in both parties, both 
houses can get together with that same spirit as----and Dr. 
Coburn and I always used to say, when people from different 
interest groups would come, as they have and will to you, and 
say, ``You can't do this,'' we would always say to ourselves, 
privately of course, Tom, Joe, we have to think of our 
grandchildren. In other words, is Medicare going to be around 
for our grandchildren? And is the country going to be cutting 
back the debt so that they are not paying unreasonable parts of 
their income in Federal taxes or losing some of the basic 
benefits that government gives? Because our successors in 
Congress will have no choice but to cut Federal spending in 
discretionary programs to sustain Medicare.
    Bottom line, you have heard before, is that the only way to 
save Medicare is to change it, to reform it. And I think this 
is a committee where that can begin, and, ironically, the SGR 
repeal can be the occasion for doing that. I think you have the 
opportunity to confound the skeptics who don't believe this 
Congress can do that.
    Neither Democrats nor Republicans nor the administration 
will get all of what anybody wants in a final bill, if you get 
to a final bill, but you will get something much more 
important, which is a solution to a big problem, a real 
problem. And that, I think, is what the American people want of 
this Congress more than anything else.
    Thank you very much.
    [The prepared statement of Mr. Lieberman follows:]
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    Mr. Pitts. The chair thanks the gentleman and now 
recognizes Dr. Rivlin, 5 minutes, for summary of her testimony.

                STATEMENT OF ALICE RIVLIN, PH.D.

    Ms. Rivlin. Thank you, Mr. Chairman.
    I, too, am delighted that this committee is holding this 
hearing. I think you have a historic opportunity to do two 
things at once: You can replace the Medicare sustainable growth 
rate and halt this unfortunate budgetary practice of kicking it 
down the road every year, and at the same time you can begin 
phasing in new payment incentives that will nudge Medicare and, 
indeed, I believe, the whole health system toward high-quality, 
more cost-effective delivery of care.
    I would like to make four brief points.
    First, the point you have made yourself and others have 
made, the SGR should be fixed permanently. This formula, with 
its pending 20 percent or thereabouts cut in Medicare physician 
fee schedule payments, just creates unnecessary uncertainty for 
doctors and their patients. Keeping the formula in the law but 
postponing its impact every year just makes our legislative 
process look ridiculous.
    Second, replacing the SGR can advance payment reform. It 
can move the healthcare delivery system away from fee-for-
service, which is still very prevalent in Medicare, which 
rewards volume rather than value, and move it toward higher 
quality and less waste. And that is good for everybody, 
especially beneficiaries of Medicare.
    Now, the tri-committee bill that you have spoken of, Dr. 
Burgess' authored bill, is a very promising approach and does 
just that. It proposes that future Medicare payment rate 
updates for physician fee schedule providers be contingent on 
participation in alternative payment mechanisms beginning in 
2023.
    This bill is a good foundation, but we and many others 
think it could be strengthened. My colleagues at the Bipartisan 
Policy Center are releasing two papers today, which I believe 
you all have, which recommend accelerating the introduction of 
higher payments for providers that participate in alternative 
payment mechanisms from 2023 to 2018----you don't need to wait 
that long----and applying the incentives to all Medicare 
providers.
    Other recommendations involve other alternative payment 
mechanisms and, particularly, strengthening accountable care 
organizations and relating the updates to the amount of risk 
that they are willing to take on.
    These changes could alleviate many of the challenges that 
providers are struggling with today as they work to implement 
new models of care.
    Now, payment reform is still a work in progress, with many 
details to be developed. Nevertheless, Congress can develop, at 
this point, a roadmap that will give providers more certainty 
that it is worth investing in the infrastructure necessary to 
develop alternative payment mechanisms and that the future of 
healthcare delivery is rooted in shifting to new models of 
care. These types of reform, I believe, have the most potential 
to deliver on the promise of improved healthcare delivery that 
should be at the heart of every SGR fix.
    Bipartisan Policy Center is not alone in proposing the 
various ways of strengthening the bipartisan bill. My 
colleagues at the Brookings Institution have a set. We strongly 
endorse the thrust of the bill but urge beefing it up in many 
dimensions. And we are very happy to supply more information on 
that subject.
    Third, I believe that the SGR reform must not add to future 
deficits. Cost growth in health care has slowed in recent 
years, which makes projected health spending appear less 
daunting than it did in the past. Nevertheless, Medicare 
spending under the new payment model would be higher, about 
$144 billion higher over 10 years and more if you include 
Medicare extenders, than under the present SGR formula. That 
must be offset. The Congress should not set a precedent of not 
paying for anything, but especially not for a reform like SGR.
    But paying for the SGR is also an opportunity to find 
offsets that are also good health policy. There are a whole 
bunch of lists of such offsets, and I don't have time to go 
into them here orally, but I have referenced them in my 
testimony. And I think there are a sufficient number of quite 
plausible offsets, that the Congress should not have trouble 
finding a good set.
    That being said, if you have too much difficulty finding 
offsets, which will clearly be a heavy lift, we do have a 
suggestion for a semipermanent fix, working with 5 years 
instead of 10, which might be a helpful way out of that 
dilemma.
    Thank you, Mr. Chairman.
    [The prepared statement of Ms. Rivlin follows:]
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    Mr. Pitts. The chair thanks the gentlelady and now 
recognizes Dr. Moon, 5 minutes, for her summary.

                STATEMENT OF MARILYN MOON, PH.D.

    Ms. Moon. Thank you, Mr. Chairman.
    I am very pleased to be here today to testify. This is an 
area that I feel very strongly about. All of my research for 
many years, from initially working with Dr. Rivlin at CBO until 
today, has focused a lot, most of it, on beneficiary issues, 
protecting beneficiaries in the Medicare program. And that is 
where I am going to focus my testimony today.
    Eliminating the sustainable growth rate under Medicare 
would constitute a major policy improvement. And I believe that 
the instability in payment toward physicians and the 
contribution that that has made toward the many physicians 
opting out of the program is a serious problem for 
beneficiaries and qualifies, itself, as a beneficiary issue as 
well as an important payment issue for physicians.
    But I am concerned about the whole issue of offsets, and 
that is where I am going to spend most of my time today. There 
is a sense that there needs to be an offset to pay for this 
policy change, but I would point out that there is nothing 
about Medicare's stability that requires that Part B changes be 
covered by benefit cuts elsewhere. And that, I think, is a very 
important concept.
    Nonetheless, many of the SGR reform proposals are paired 
with changes in Medicare at the expense of beneficiaries. If 
offsets are deemed essential, a reasonable alternative would be 
to look for policies across the Federal Government that are 
similarly unwise for which repeal could generate savings and, 
in many cases, represent the same kind of poor policy that has 
been recognized over time but not dealt with.
    Part of the justification for focusing on Medicare, 
however, stems from the notion that the program is too large or 
out of control. But I would point out that Medicare's per-
capita growth rates have been less than the rates of growth in 
the private insurance world for more than 40 years. Medicare 
has simply done a better job than the private healthcare sector 
in controlling costs over time.
    And another source of growth in Medicare that causes people 
sometimes to be concerned about the program is the increase in 
the number of beneficiaries, to this point largely caused by an 
increase in life expectancy----again, a success story for 
Medicare, not something for which Medicare should be condemned.
    Finally, the rate of growth in spending on Medicare has 
declined in recent years. Efforts to introduce new ways to 
control costs seem to be working. And, indeed, building the SGR 
change on top of some of those promising reforms, as is part of 
your legislation that has been considered, is a good idea.
    But most of the major reform options being discussed for 
reducing Medicare spending focus on increasing the share that 
beneficiaries pay or reducing the number of people eligible. 
Since people must still get care somewhere, such options are 
essentially ways of asking beneficiaries to pay more.
    Medicare is in no way, however, an overly generous program. 
Medicare pays only about 70 percent of the costs of just the 
services it covers, forgetting the other things like vision and 
dental and other things that Medicare does not cover. 
Beneficiaries or their families or former employers are 
responsible for the remainder.
    And just as costs to the Federal Government have risen over 
time, so have the costs to beneficiaries. Beneficiaries' 
incomes have certainly not kept up with the increased costs in 
healthcare spending that they must themselves undertake over 
time.
    And the problem is particularly severe for those with 
modest incomes whose resources keep them above eligibility for 
Medicaid or special low-income protections but low enough to 
make it difficult to afford care.
    One of the most urgent areas of need is for better low- and 
moderate-income protections for Medicare beneficiaries, not 
increasing their burdens. Yet some of the proposals that even 
seem to be more neutral or across-the-board can have unintended 
consequences that harm beneficiaries, particularly these more 
vulnerable ones.
    For example, raising the age of eligibility is something 
that often sounds good, usually to people like me who like to 
continue working well past the age of eligibility. But for 
lower-income individuals who have poor skills and poor health, 
that simply is a major cut in benefits, and it is a major 
problem for those beneficiaries.
    Similarly, raising the premiums to beneficiaries over time 
would cast an enormous burden on, for example, a woman who is 
earning just above the paltry level that Medicare provides 
special benefits for of $18,000 a year, raising her out-of-
pocket costs from about 15 percent of her income to 17 percent 
of her income----certainly not moving in the right direction in 
terms of the changes.
    So I believe that it is important to recognize that any fix 
to the SGR that raises Medicare spending will also result in 
higher costs to beneficiaries when the payments to physicians 
rise. Beneficiaries will pay more by any fix that you do to the 
SGR because we are going to increase payments to physicians.
    The sustainable growth rate is poor public policy and ought 
to be fixed, but beneficiaries, I believe, should not be 
penalized for the poor policymaking that occurred so many years 
ago.
    Thank you.
    Mr. Pitts. The chair thanks the gentlelady.
    [The prepared statement of Ms. Moon follows:]
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    Mr. Pitts. That concludes the opening statements of our 
witnesses. I will begin the questioning and recognize myself 5 
minutes for that purpose.
    Senator Lieberman, you were eloquent in your testimony 
about the need to pay for the SGR, yet I am concerned that some 
voices continue to suggest that it need not be offset.
    As a practical matter, House leadership has said that a 
bill must be offset to be put on the floor for a vote. So I 
fear that Members or organizations who continue to suggest 
moving SGR without offsets actually are maybe at best not 
serious or at worst could doom SGR reform to certain defeat.
    In your opinion as a former legislator, do you believe that 
SGR reform can pass this Chamber without offsets?
    Mr. Lieberman. Obviously, in the end----thanks, Mr. 
Chairman----you all will notice and determine it more than I, 
but my sense, based on the results of the election last 
November and the stated opinions of those in the majority here 
and some in the minority, that this extraordinary achievement 
that began here in the subcommittee, which is to come to a 
bipartisan agreement on replacing the failed SGR formula, will 
not make it into reality unless there is an offset.
    And, again, there is nothing particularly, based on history 
here, radical about this. As you said, I believe, Mr. Green, 
maybe both of you, in 98 percent of the time the doc fixes have 
been offset for exactly the same reasons that your question 
raises.
    Mr. Pitts. What would your advice be for organizations 
considering making a push for an unpaid-for SGR bill in this 
Congress?
    Mr. Lieberman. Well, my advice----gratuitous, but you have 
asked me----is to think of what your goals are. And if you are 
an organization representing physicians, for instance, and you 
push for this SGR replacement reform with no offset, the danger 
is----and it is a high risk----that nothing is going to happen 
and physicians are going to suffer and, as has been said 
earlier, people are going to leave the medical profession, 
patients will suffer. If you are representing beneficiaries, 
obviously the same is true.
    So we have to give a little bit here to preserve the 
essential system, which is a great system. We are about to come 
to the 50th, if I am not mistaken, anniversary of Medicare, and 
it would be a tragedy in the midst of this year to have a 
failure of, I would say, will to find the money to fund this 
bipartisan agreement you have made.
    Incidentally, you can pick and choose from----you don't 
have to look to the Coburn-Lieberman proposal----although, 
frankly, we did this, too. We took a lot from the President's 
Fiscal Commission. And the President himself has recommended 
some changes in the last couple of budgets that would fund $50 
billion. That is the part where he increases the premiums on 
wealthier beneficiaries.
    Mr. Pitts. Thank you.
    Dr. Rivlin, there has been a lot of discussion in recent 
years about the slowdown in the annual growth rate of Medicare 
spending. You have probably been following the literature and 
CBO's analysis pretty closely, but my question is pretty 
simple.
    In your opinion, is the slowdown in Medicare spending a 
reason not to offset SGR reform? And based on your historical 
perspective, do you think it is likely to rebound in coming 
years closer to historical averages?
    Ms. Rivlin. I don't think we should use the slowdown as an 
excuse not to pay for the SGR reform.
    Whether this slowdown will continue, I think, depends in 
part on whether we make bolder moves to make the health system 
more efficient and more cost-effective. And the movement toward 
alternative payments, alternative payment mechanisms of various 
sorts----accountable care, medical homes, bundled payments----
is an effort to do exactly that.
    It seems to be working, and it may be part of the reason 
why the slowdown has occurred, but we can't be sure. And we do 
know there are going to be a lot more seniors in the future who 
are eligible for Medicare. And there are a lot more things that 
docs can do for us----really interesting and exciting things 
coming on line, and we are all going to want it.
    So the upward pressure on healthcare spending generally and 
Medicare in particular is going to continue. And that is the 
reason I think that we should combine fixing the SGR with 
strong incentives to use alternative payment mechanisms.
    Mr. Pitts. Thank you.
    My time has expired. The chair recognizes the ranking 
member, Mr. Green, 5 minutes, for questions.
    Mr. Green. Thank you, Mr. Chairman.
    Dr. Moon, some have suggested that the SGR and other 
reforms proposed should be paid for by shifting additional out-
of-pocket costs on to Medicare beneficiaries. However, seniors 
already bear a significant out-of-pocket cost in Medicare now, 
and most are living on very modest incomes. For example, half 
of all Medicare beneficiaries have incomes below $23,500.
    A Kaiser Family Foundation study found that an average 
Medicare household spent almost three times more out of pocket 
on health care as a percentage of income than the non-Medicare 
households, 14 percent versus 5 percent.
    To me, this a clear illustration that we should not be 
shifting costs to seniors. Instead, we should be working to 
strengthen and expand the programs that provide an assistance 
to the moderate-income seniors.
    Can you discuss the cost burden beneficiaries already bear 
on their relatively low income?
    Ms. Moon. Thank you, Mr. Green.
    Yes, I agree with you that the burdens are substantial. And 
particularly for those modest-income individuals that I 
mentioned, whose incomes are between 150 percent and, say, 250 
or 300 percent of poverty in the United States, receive no 
protection of any sort beyond the basic Medicare program. They 
are the ones that are particularly vulnerable and for whom even 
fairly simple and small changes in cost-sharing can have 
devastating impacts, because they could cause people to not go 
and get care, which then ends up costing the system more, 
ultimately, when they become sicker.
    I believe that the aspect that we need to think about in 
terms of this is that Medicare is not a really generous 
program. It is a less generous program than most of us who have 
employer-provided insurance or the standard programs that are 
offered through the ACA have, for example. So when you begin to 
raise premiums, raise cost-sharing, you are effectively cutting 
that back even further and making it a less and less generous 
program over time.
    Mr. Green. Well, and I think most of us don't actually 
object to paying for it, it is just how you do it. Although I 
have to admit, last week we passed a bill on the floor that 
cost $54 billion that wasn't paid for that affected the 
Affordable Care Act. So if it is good for the goose, it is good 
for the gander----but paying for it out of Medicare and making 
seniors come up with more cost-sharing.
    My next question: Aren't Medicare premiums already income-
related? More specifically, can you talk about the existing 
income-related premiums and what income levels it affects and 
how these income levels compare to what is considered upper or 
higher income in other Federal policy, such as tax policy?
    Ms. Moon. Yes. Medicare does have an income-related premium 
for both Part B and Part D now, and it starts at a level of 
$85,000 a year. So I rankle when I hear people talk about 
asking wealthy Medicare beneficiaries to pay higher premiums 
because, as a society, we like to talk about ``middle income'' 
stretching up to $250,000 a year of income but we are willing 
to talk about ``wealthy'' seniors at $85,000 a year.
    The reason for that is it is very difficult to get high 
levels of revenues from income-related premiums because there 
simply aren't enough seniors with such high incomes or persons 
with disabilities with such high incomes that make it easy to 
get more money.
    So when you begin to talk about further raising income-
related premiums, you either have to make even lower-income 
individuals subject to such premiums or you have to raise those 
premiums to such a level that no longer is Medicare a good deal 
for high-income individuals. And that concerns me, as well.
    Mr. Green. OK.
    Dr. Moon, we have heard a great deal over the past few 
years about entitlement reforms. And these entitlement reforms, 
particularly in Social Security, are the safety net for our 
society----Medicaid and Medicare for the seniors and most 
vulnerable in our society----without considering the fiscal 
impact of tax entitlements, tax deductions, exclusions, 
credits, and other tax preferences which disproportionately 
benefit well-to-do Americans. And I think the President talked 
about that last night.
    Can you talk about entitlements, both those providing 
essential services to seniors and low-income Americans and 
those providing tax breaks to more affluent Americans, and the 
relative role of each of these in the context of protecting the 
most vulnerable in our society and at the same time addressing 
our long-term debt?
    Ms. Moon. A small question.
    Mr. Green. In 15 seconds, by the way.
    Ms. Moon. Fifteen seconds.
    In addition to Medicare and Medicaid, Social Security is 
also considered an entitlement program. These programs all help 
support older people when they have retired. They enjoy 
enormous support. And they are also important in reducing some 
of the inequality that occurs as people go through their 
lifecycles and have bad things happen to them. Medicare and 
Social Security provide that underpinning of support.
    I believe they are really important programs. And if we are 
going to talk about changing programs like that, we ought to 
talk about revenue sources from other places if we are going to 
talk about making changes or looking for offsets.
    Mr. Green. Thank you, Mr. Chairman, for your patience.
    Mr. Pitts. The chair thanks the gentleman and now 
recognizes the vice chair of the subcommittee, Mr. Guthrie, 5 
minutes, for questions.
    Mr. Guthrie. Thank you, Mr. Chairman.
    And, Dr. Rivlin, I know you have been involved in a lot of 
different groups and think tanks in working on this issue. And 
a lot of times in Congress, we keep hearing, we need a lot more 
information, we need more information, we need more studies. I 
think Senator Lieberman said we just need some good courage and 
cooperation.
    And so my question is, do you believe the information is 
there for us to move forward, or do we need another study, or 
is it time for bipartisan negotiations to begin and move 
forward?
    Ms. Rivlin. I am a studier, so I don't want to say you 
don't need another study, but I think you have enough 
information to move ahead now and, indeed, that you should.
    And, in my testimony, I endorse the idea of actually 
accelerating the impact of the incentives to use alternative 
payment mechanisms that are built into the tri-committee bill. 
I think we know enough now to do that and to start them in, 
say, 2018 rather than 2023 and phase in over several years a 
movement to incent the medical profession to be in new kinds of 
organizations that take risk.
    That is not going to be easy. We will learn along the way. 
But I think you can start now.
    Mr. Guthrie. The trick is it is----the way you can measure, 
it is easier when somebody walks into an office, to know they 
walk in and pay for volume. It is hard to figure out how you 
pay for value, because it is hard----how do you determine in 
value. That is what is going to be interesting over the next 
few years to develop those models. So------
    Ms. Rivlin. Right.
    Mr. Guthrie [continuing]. There will be more studies with 
that for sure, so we will keep you studying.
    I know alternative payment models in the SGR. Is there 
specific things within Medicare currently today you think 
should be reformed in the current offsets to pay for it? Some 
suggestions in the current Medicare program?
    Ms. Rivlin. Yes, I think I do favor more means-testing of 
the premium. I think you can do that without hurting low-income 
people. I also think that the restructuring of the benefit 
package and the deductibles so you put together Parts A and B 
with a reasonable deductible, and then, in order to protect 
lower-income people but also not to discourage anybody from 
going to the doctor, you could have it not apply to physicians 
visits.
    And there are other things that you could do. Accelerating 
the movement, the incentives for moving to stronger accountable 
care organizations, for instance, would produce savings, we 
think, over time.
    I am not in favor, unlike Senator Lieberman, of raising the 
age, partly because it just doesn't save very much money 
because if you are going to do it, you do have to put those 
people into some other plan like the Affordable Care Act.
    Mr. Guthrie. Thank you very much.
    And, Senator Lieberman, you had an op-ed in The Hill, and 
you said earlier today about a final bill, nobody is going to 
get everything that they want----I think that is what you 
said----but we can work together so we can tackle big problems. 
And in the President's fiscal year 2015 budget, he did include 
a proposal to charge wealthier seniors on Medicare more for 
Part B and Part D premiums. And it would save $50 billion----I 
think is what was in his budget----and roughly a third of the 
cost of the entire SGR bill. Do you think there could be 
bipartisan consensus for the President's proposal in 2015, for 
the 2015 budget?
    Mr. Lieberman. Well, that certainly should be the beginning 
of it. Bipartisanship always comes as a result of negotiation 
and compromise and understanding that you are putting a larger 
interest, which is a national interest, ahead of a more focused 
interest so you couldn't just sort of pass that one alone. But 
that takes care of----the President's proposal takes care of 
more than a third of the cost of the SGR replacement reform. 
And I think you would have to come up with some others that 
would appeal to people on both sides that could get you to the 
numbers you need to get it passed. But, no, I think that is a 
very strong beginning.
    Mr. Guthrie. Thank you, Senator.
    I just have 17 seconds. I just want to say remember if we 
do nothing with Medicare Part A, by 2030, the most optimistic 
assessment----and I was born in 1964. That is when every baby 
boomer will be retired. And if you look at other parts of the 
budget, about that time, that is when Medicare, Social 
Security, and Medicaid, and the national debt will be 100 
percent of federal revenues. And even if you took the 
President's proposal in his campaign and went to the fiscal 
cliff and added, that is only another $40 billion. So unless 
you are going to go deeper into taxes and tax more people or 
you are going to reform these programs, they won't exist after 
2030 unless we step forward.
    Mr. Lieberman. I agree. I agree with Dr. Rivlin. The facts 
are there, and the question is what you and we all as a country 
are going to do about them.
    Mr. Guthrie. I yield back.
    Mr. Pitts. The chair thanks the gentleman.
    The chair recognizes the gentlelady from Illinois, Ms. 
Schakowsky, for 5 minutes of questioning.
    Ms. Schakowsky. Thank you, Mr. Chairman.
    I want to say that we do have a serious crisis in this 
country when it comes to budget. And, for me, it is the budget 
of the senior citizens. And right now we have a retirement 
crisis. People cannot afford to retire in the United States of 
America. And I say this at a time that our country has never 
been richer. This is the richest country on the face of the 
earth, and per capita GDP has never been higher, but as we all 
know, that is so unequally distributed that ordinary Americans 
have not seen an increase in wages for the last three decades, 
and all of the growth has really gone to the top 1 percent. And 
now we have a situation where I think we all agree that the SGR 
has got to go. And, as I said, when the Democrats were in the 
majority, we did exactly that.
    But this idea that we have to ask senior citizens, who are 
absolutely struggling right now, on this 50th anniversary of 
Medicare----one of the most successful programs we have ever 
seen, and undoubtedly this pay-for that we are talking about 
would put additional burdens on seniors: $85,000, as Dr. Moon 
pointed out, is now a rich senior. Some proposals have talked 
about lowering the income to $45,000, making people----seniors 
who make $45,000 considered rich enough to pay higher premiums.
    I say shame on us as a country that we can't afford to 
provide health care to our seniors and persons with 
disabilities. There are plenty of places to look. We just 
passed----what did we call it----the Tax Increase Prevention 
Act; extenders, $45 billion unpaid for. As I said in my opening 
remarks, just earlier this month, the Republicans passed a bill 
to redefine ``full time,'' and that cost $53 billion, unpaid 
for.
    But now we are saying in order for doctors to get what they 
deserve and continue to serve seniors, we are going to ask 
senior citizens to pay more. I find that repugnant----I am 
sorry, and my hair is on fire----to say that we should go to 
the elderly and the disabled in our country. I agree that we 
have debt, but you know, projected Federal spending for 
Medicare and Medicaid have fallen by almost a billion dollars 
since 2010. If we compare the CBO's August 2010 and the August 
2004 base lines, Medicare spending in 2015 will be about $1,200 
lower per person than expected in 2010. So we are adding 
incredible savings because of the reforms in the Affordable 
Care Act, et cetera, to lower the cost of Medicare. And now we 
are going to turn around and say the seniors in this country 
are just having to spend more in order to save future 
generations from debt. I say we have plenty of money, and if we 
don't start talking about reasonable revenue, as the President 
did last night in his State of the Union, then, again, I say 
shame on us. And I hope the senior citizens and the people with 
disabilities are paying attention to this important debate.
    I wanted to ask Dr. Moon, one of the things we expect to 
see in the budget that is proposed by the Republicans is, once 
again, this idea of a voucher program for Medicare. I wonder if 
you would comment on that and the kind of effect that that 
would have on Medicare beneficiaries.
    Ms. Moon. My concern about a voucher program is that if we 
turn over to the private sector the responsibility for meeting 
the same kind of challenges that now have to face the 
traditional Medicare program, we won't necessarily have solved 
anything. The only way that you can, quote-unquote, solve the 
problem and make the budget burden for the Federal Government 
lower is if you insist that you are going to pay in terms of 
those vouchers less and less over time as compared to what 
Medicare would otherwise cost.
    Then the question is whether or not private entities will 
do a better job at holding down the costs than Medicare does. I 
see no evidence of that over the last 40 years. And if that is 
the case, it will simply be then the shifting of costs on 
beneficiaries so that instead of premiums going up at the slow 
rate they have been going up in the last few years, they would 
have to go up faster and faster, unless we really find a way of 
either magically empowering the private sector to do a better 
job than it ever has, or we find a way to assume that simply 
handing it over to the private sector causes people to use 
fewer services and fewer numbers of people to age into the 
program. I just don't see it as a solution per se. It is only a 
solution in a budgetary context if what you do is pay less.
    Ms. Schakowsky. I referred to in my----well, we can call it 
a rant----the Affordable Care Act made some significant changes 
that actually has reduced the cost of Medicare. I wonder if you 
could talk a little bit about that and what we might expect 
going forward that will actually lower those costs even more.
    Ms. Moon. I think we have not as yet seen the full impact 
of the reforms that the Affordable Care Act was hoping to put 
into place. I think we have seen some reductions in spending on 
Medicare that are attributable to that in part because of 
anticipating what the impact will be. Because as yet we are 
still experimenting.
    We are still trying to figure out what these things will 
do, how well they will work, et cetera, but they are very 
promising at this point because, as Dr. Rivlin pointed out, 
they are really trying to emphasize quality and value rather 
than volume. That means coordination of care, which is a really 
essential part of improving health care in the United States of 
America. As a very recent primary caregiver for a very sick 
Medicare beneficiary, I can tell you coordination of care is 
very poor in the Medicare program now. A lot of efficiencies 
can be found if we make improvements in that area. That is what 
medical homes and ACOs have at their heart of what they are 
trying to do. We need to push for that, and I think it will pay 
off over the long run.
    Ms. Schakowsky. Thank you. I yield back.
    Mr. Guthrie [presiding]. Thank you. The lady yields.
    Dr. Murphy, from Pennsylvania, is recognized.
    Mr. Murphy. Thank you.
    Great to have you all here. This is very insightful.
    First of all, I want to say with regard to some of the 
issues of persons paying more their first dollar as a way of 
trying to save money, I recall the Gallup poll that was done, I 
think, last November or December that said 38 percent of middle 
class people with a household income between $30,000 and 
$75,000 have delayed medical care because of costs.
    So I ask this, Dr. Rivlin, if people delay care, does it 
lead to an increase in costs?
    Ms. Rivlin. Yes, and that is one of the reasons that I 
think you have to be very careful in how you do the cost 
sharing, and one of the proposals that we have looked at is to 
not have the deductible apply, as I said earlier, to physicians 
visits. I think that is a good idea. That means you aren't 
discouraging people, especially low-income people, from seeking 
physician care.
    Mr. Murphy. I have to keep moving. You support the 
Alternative Payment Model. I think that is an important point 
to acknowledge. I read here in the report from the Center for 
Healthcare Quality and Payment Reform, they say that the vast 
majority of healthcare spending doesn't go to physicians. These 
scheduled payments represent only 16 percent of total spending 
in Medicare Parts A, B and D. Physician fee-scheduled payments 
over the next decade are expected to represent only 12 percent 
of total Medicare spending. However, physicians prescribe, 
control or influence most lab tests, images, drugs, hospital 
stays and other services that make up the other 88 percent. 
Does that sound correct?
    Ms. Rivlin. I didn't quite follow.
    Mr. Murphy. Well, basically that physicians' fees are a 
very small slice of that pie, but all the tests and everything 
else are the larger costs.
    Ms. Rivlin. Yes. And the hospitals are the big cost centers 
in health care.
    Mr. Murphy. And so the current system that is up there, I 
just want to get these points out to make sure we are looking 
into proper savings areas. Physicians lose revenue if they 
perform fewer procedures or lower-cost procedures, even if 
their patients are better off. Would you say that is correct in 
the current system?
    Ms. Rivlin. Well, that may be right, but as Dr. Moon was 
pointing out, there are a lot of things that could be better if 
physicians coordinated better.
    Mr. Murphy. I agree. I want to get to that. Well, that is 
what I mean. For example, one area of coordinated care, we 
don't even have integrated electronic medical records. 
Behavioral medicine and physical medicine are just completely 
disjointed. And as a cap on, for example, psychiatric days, we 
don't do that for heart disease or diabetes and say, I am 
sorry; you are only going to get so many pills, or you are only 
going to have so many visits for your kidney problems. But 
persons who have a chronic illness double their risk for 
depression, very high amongst seniors, very high. Untreated 
depression and chronic illness doubles healthcare costs, but we 
keep ignoring this.
    So would you see an alternative payment model for you and 
Dr. Moon that really looked at pushing and rewarding medical 
care to coordinate their care to really improve health as a way 
to get savings out of this system far more than what we are 
trying to squeeze out in some of these SGR things?
    Ms. Rivlin. Yes, and I think you not only get savings; you 
get better medical care. You get better outcomes.
    But it has to be said, the knowledge here is very much a 
work in progress. We are learning how to do that. Accountable 
care organizations seem promising, and I would suggest we 
strengthen them, but we don't know all the answers here.
    Mr. Murphy. Well, let me add one other thing here then. And 
that is that Medicare has a couple of times invoked some models 
that they said we want to do this as a pilot study, and 
sometimes a set of across-the-board changes that they have made 
with the DRGs or the RBRVS physician fee schedules, they have 
just done that. So should we also include here a mechanism 
whereby physicians could voluntarily go into an accountable 
payment system, so an alternative payment system, because not 
everybody will be ready for it, as an incentive to say, Let's 
move you toward this as a mechanism for reviewing this for the 
next year.
    Dr. Moon, Dr. Rivlin, should we offer that?
    Ms. Moon. I think something like that is potentially a good 
idea. One of the problems we still have, however, is that it is 
very spotty where these organizations exist and where there is 
the capability to do that. And when we think about rural or 
isolated areas, we also don't want to penalize physicians that 
are kind of trying to do it on their own and doing a very good 
job.
    Mr. Murphy. That is why I say voluntary so that some who 
are ready can do it. Some who are not will need a few more 
years. That will give them more time but not force it upon 
them.
    Ms. Moon. But I just hope that it doesn't become something 
that is cost neutral and you say we are going to take it out of 
the hides of the folks who don't get involved because they may 
not be able to at this point.
    Mr. Murphy. I understand.
    Dr. Rivlin, final comment?
    Ms. Rivlin. Yes. I think that is the spirit of what we are 
suggesting. Reward physicians who are willing to go into 
alternative payment mechanisms.
    Mr. Murphy. Thank you.
    I yield back.
    Mr. Pitts [presiding]. The chair thanks the gentleman.
    I now recognize the gentleman from Oregon, Mr. Schrader, 5 
minutes for questions.
    Mr. Schrader. Thank you, Mr. Chairman. I appreciate the 
opportunity.
    To kind of follow up a little bit on Dr. Murphy's line of 
questioning with the Affordable Care Act, the incentives in 
there for incentive-based outcomes, for accountable care 
organizations, the coordinated care that I think is so 
important to really deliver the long-term health benefits, 
better quality care, as well as the big savings compared to all 
the other little things we are talking about and arguing about 
right now.
    Could you talk a little bit about how the accountable care 
organizations and increased utilization of patient-centered 
medical homes, where the primary care physician gets involved, 
how that could actually help in generating a lot of savings for 
Medicare going forward?
    Ms. Moon. I think that coordination, as I mentioned, is the 
real key here. One of the things, the low-hanging fruit, 
obviously, is making sure that you don't duplicate tests, that 
you don't duplicate things that don't need to be duplicated. 
When you don't have good recordkeeping and transportable 
electronic records, that is a problem. You want to improve in 
that area.
    You also want to try to encourage and find ways to provide 
the right incentives for the care to be delivered in the right 
place at the right time. And one of the things that we still 
don't quite know how to do is think about making that happen. 
Consider the example of bundled payment, where you are putting 
together payments to hospitals and post-acute care providers, 
like skilled nursing facilities and home health. Who do you put 
in control of that bundled payment? It probably makes a big 
difference in terms of then where the care is delivered. If the 
hospital is in control, more is going to be done in the 
hospital and less in the skilled nursing facility and home 
health.
    So there are a lot of things that still have to be worked 
out, and we have to figure ways to coordinate care.
    The other thing that I would mention that I think is really 
important and a challenge is how to get consumers involved. One 
of my big pet peeves is when people talk about a patient-
centered medical home, and they don't really involve the 
patient. They simply say we will do what is best for the 
patient. Patients need to be involved, not only to think about 
what care they need and don't need but also to cooperate and 
coordinate themselves to the extent to which they can. And we 
need to be realistic about it, but we need to get the patients 
involved.
    Mr. Schrader. And that is where the primary care physician 
or healthcare practitioner or nurse practitioner can help make 
that actually happen.
    Ms. Moon. Absolutely.
    Mr. Schrader. Dr. Rivlin, with regard to some examples, you 
have talked again, just like Dr. Moon and Senator Lieberman, 
about good outcomes, value-based outcomes. The discussion has 
been, well, how did you measure that? Can you really measure 
value-based outcomes? I think the answer is obviously yes. 
Could you give us some examples of value-based outcomes that 
are, indeed, very measurable?
    Ms. Rivlin. One success so far has been not rewarding 
hospitals when the patient is readmitted in a very short 
period. That is measurable. Maybe sometimes it is unfair, but 
it has had a serious effect on a hospital's being much more 
careful not to discharge a patient who might come back really 
quickly. So that is one example.
    Mr. Schrader. I will give you several others too. My state, 
we have gone to the, we call them coordinated care 
organizations, and we include rural areas. It is not impossible 
to do that in a rural area, quite frankly, especially in this 
day and age of telemedicine, where we have been able to 
actually drop the readmission rate in our hospitals anywhere 
from 10 to 20 percent. Stays for chronic obstructive pulmonary 
disease and heart issues, again dropping anywhere from 18 to 30 
percent. Patient-centered medical home visits up 11 percent. I 
think it is important for the committee and subcommittee to 
understand there are ways to actually measure these things.
    The last comment I would make, Mr. Chairman, is while I 
agree that Congress historically plays loose and fast with what 
the pay-fors are, whether or not we actually do pay-fors going 
forward, I think is extremely important that we do pay for 
this. The near-term situation is such that while our Medicare 
costs are, indeed, going down, I think it is part of the ACA. 
It is undoubtedly part of the ACA. It is also undoubtedly part 
of the economy. But we can't rely on that with the math problem 
we have in this country. We have a tsunami of folks my age and 
a bit younger becoming senior citizens, becoming eligible for 
Medicare. And that is not going to be cured under the current 
deficit reductions we are seeing. It would be unconscionable 
for us to avoid addressing this problem. We are so close. This 
committee and the other committees have come up with a very 
excellent solution for going forward on the SGR. We are this 
close to coming together on it. I think Senator Lieberman made 
a good point. All the points are out there that we need to 
figure out how to pay for this, $140 billion, $144 billion is 
probably the least costly fix to the SGR that we are going to 
see in our lifetime. And I would respectfully suggest that 
maybe the subcommittee, under the rubric of the committee, put 
together a task force to pick the least offensive ones.
    We can protect the low-income folks. We came up with a 
definition in this committee of what we consider more low 
income. Certainly it is well below $250,000. I don't know if it 
is $85,000 or less, but we can figure that out. And I would 
really urge the committee to sit down and work together and 
figure this thing out because we are going to pay for it under 
this Congress. Time to get the job done.
    I yield back. Thank you very much, Mr. Chairman.
    Mr. Pitts. The chair thanks the gentlemen and now 
recognizes the gentleman from Florida, Mr. Bilirakis, 5 minutes 
for questions.
    Mr. Bilirakis. Thank you very much, Mr. Chairman.
    I appreciate it. Thanks for holding this very important 
hearing. I am constantly reminded about the importance that 
Medicare plays in the lives of my constituents when I am back 
in my district in Florida in the Tampa Bay area. In 2012, there 
were about 145,000 Medicare-eligible beneficiaries in my 
district. Medicare is an important program. I want to make sure 
whatever we do in Washington, that we protect current 
beneficiaries and future beneficiaries. We need to make sure 
that Medicare is on strong financial footing to be there for 
our parents, for us, and for our children.
    Senator Lieberman and Dr. Rivlin, in your Medicare 
modernization proposal, you talked about providing a unified 
deductible access across Part A and B. Can you talk about how 
this would provide clarity to seniors when understanding their 
Medicare benefit and discuss how this would reduce 
overutilization.
    Mr. Lieberman. Thanks, Congressman.
    Very briefly, it is actually very hard to describe the 
current system of deductibles under Medicare. It is so 
confusing. So I think the first benefit of combining Part A and 
Part B into a single deductible----Senator Coburn and I 
recommended $550 annually----is the clarity. And incidentally, 
in most private insurance plans, there is a clarity in 
deductibles. There is no reason why we shouldn't give the 
Medicare beneficiaries the same clarity. The second hope, 
obviously, is that as you create that clarity, you will create 
in the beneficiary kind of a second thought about overutilizing 
services. You don't ever want anybody to not go to the doctor 
or the hospital or get a prescription drug because they are 
worried about the cost, talking about hospitals and doctors in 
this combined deductible.
    But there is clearly overuse. One of the more controversial 
recommendations that we made, but it has been included in some 
of the other studies done, is to limit the availability of the 
Medigap coverage because, for instance, not to have it pay for 
all of the deductible and have it pay for a limited amount of 
the out-of-pocket because there is study after study that show 
that people who have Medigap use 25 percent more Medicare 
services than people who don't without any discernible increase 
in healthcare results. So, look, if we are going to solve this 
problem, everybody is going to have to help do it, including 
the beneficiaries, and this is a way to try to incentivize 
them----not to stop going to the doctor or the hospital----but 
to make sure they need to before they do.
    Mr. Bilirakis. Thank you.
    Dr. Rivlin?
    Ms. Rivlin. Yes, I agree with that and especially would 
like to emphasize the part of that about Medigap. The effect of 
Medigap very often is to make health care free, and when it is 
free, you tend to overuse it. So putting some limits on that I 
think is important.
    One other proposal that often goes with restructuring the 
deductibles is to put a limit on the out-of-pocket costs, which 
we don't now have. That goes in the other direction. It would 
cost something, but it would be a big benefit to especially 
low-income seniors who run up against high out-of-pocket costs.
    Mr. Lieberman. That was one of the gives and takes----
excuse me, Mr. Chairman----that Tom Coburn and I were involved 
in. So we did what we just did about the deductible and 
Medigap, but Tom agreed that we should put a limit on how much 
out of pocket a Medicare beneficiary would have to pay, and 
that will have a significant----real but also psychological----
effect on our seniors.
    Mr. Bilirakis. Interesting.
    I have one more question, Mr. Chairman.
    Dr. Rivlin, in your testimony, you mentioned one idea was 
rewarding beneficiaries for using generic drugs. Can you 
elaborate on how to incentivize beneficiaries to choose lower-
cost options?
    Ms. Rivlin. Yes. I think it is----often the beneficiary 
doesn't care whether the doctor prescribes the generic or the 
brand name. It doesn't matter to them. It should matter. They 
should pay a little less if the generic is prescribed.
    Mr. Bilirakis. Thank you.
    I yield back, Mr. Chairman. I appreciate it. Thank you.
    Mr. Pitts. The chair thanks the gentleman.
    I now recognize the gentlelady from California, Ms. Capps, 
5 minutes for questions.
    Mrs. Capps. Thank you to Chairman Pitts and to Ranking 
Member Green for holding this important hearing.
    I have long been a supporter of fixing the SGR. It harms 
providers and consumers alike, the SGR. It keeps us from true 
innovation in the healthcare sector, but the conversation often 
stops right at the crisis point, how to make it to the next 
paycheck, and rarely moves to one where we can really discuss 
our vision for our healthcare system in the future and how to 
get there. Last year we finally got everyone on the same page, 
both in the provider community and here in Congress, but 
despite the massive effort undertaken by many of us here on 
this subcommittee in the last Congress to come up with a solid 
plan to end SGR and once and for all set Medicare on a path 
toward improved quality and stability, we never made it to the 
last mile. In the end, it was political disagreements, not 
policy concerns, that kept us from the finish line. And I don't 
believe we can afford to do that again.
    Mr. Chairman, I am a longtime member of this Health 
Subcommittee and a healthcare professional myself. And a 
permanent solution to the SGR problem must be our top priority, 
so I urge you to ensure that this hearing is but the beginning 
of swift action toward passage of a bipartisan, bicameral 
compromise legislation, agreed to last year by March 31, not 
just a box being checked before moving on to other matters. 
Anything less would be so unfair to Medicare patients, to the 
provider community, and to all who put their differences aside, 
which we did last year to find a strong policy compromise.
    I would like to also take a moment to remind the chairman 
and my colleagues that while SGR, the replacement policy for 
SGR, should not be reopened, we shouldn't forget the additional 
policies that need to be included with this bill. Commonly 
known as extenders, these programs, like lifting the Medicare 
outpatient therapy session cap and extending the qualifying 
individual programs that help low-income seniors afford their 
Medicare premiums, these are all critical to ensuring the 
strength of the Medicare system and must not be forgotten.
    And I have a concern that some of the conversations here 
today represent a step backward in finding a permanent 
solution, and I think we need to be clear. Reform the SGR on 
the backs of seniors and persons with disabilities who receive 
care is one of those damaging conversations.
    Now I have a question for you, Dr. Moon. We have heard a 
number of proposals that would reduce the Medicare benefit for 
those currently on the program or even eligible for Medicare. 
For example, Mr. Lieberman mentioned in his testimony that his 
proposal would gradually raise the Medicare eligibility age 
from 65 to 67. We have heard this proposal from leaders on the 
other side of the aisle as well.
    And I want to be clear about my view: This is a bad policy. 
It is shortsighted, and its consequences are so far reaching. 
It would break our Nation's longstanding promise to its people 
that if you work hard and pay into the system, it will be there 
for you when you turn 65. It would raise healthcare costs for 
these individuals at a time when they are most often in need of 
saving.
    In fact, the Kaiser Family Foundation estimates that two-
thirds of 65- and 66-year-olds----and that is 3.3 million 
people----would have to pay on average $2,200 more dollars for 
coverage than they would if they were on Medicare. So I would 
like to ask you, Dr. Moon, to speak to the policy effects of 
raising the Medicare eligibility age.
    Ms. Moon. Congresswoman, I agree with you that raising the 
age of eligibility has a lot of problems, particularly for the 
modest-income individuals who would find it difficult to afford 
that. Higher-income individuals now actually are pretty well 
taken care of by this because we have a Medicare secondary 
payer program in which if you have insurance through your 
employer and you are still employed, Medicare is secondary, and 
it is not very costly at all.
    Moreover, you would keep eligible those who are disabled in 
the program who are 65 and 66, and they are the expensive 
folks, so you wouldn't save very much money, but you would put 
at considerable risk folks who wouldn't qualify for disability, 
wouldn't qualify for low-income protections, and would have to 
pay these substantially higher premiums to get their insurance 
somewhere else.
    Mrs. Capps. Thank you. You know, I have a Kaiser Family 
Foundation chart here that I would like to submit for the 
record that shows that Medicare beneficiaries aged 70 and over 
account for 63 percent of Medicare spending, with persons with 
disabilities accounting for another 22 percent. Aren't most of 
the costs in Medicare programs generated by those older than 
67?
    Ms. Moon. Yes, they are, and when you take the 65- and 66-
year olds out of the program, the other thing that will happen 
is the premiums will go up in Medicare for everyone else 
because you are taking inexpensive people out of the program 
and leaving only the more expensive people in the program, 
another unintended consequence.
    Mr. Pitts. Without objection. We will enter that into the 
record.
    [The information appears at the conclusion of the hearing.]
    Mrs. Capps. Thank you very much.
    Mr. Pitts. The gentlelady yields back.
    The chair recognizes the gentleman from Indiana, Dr. 
Bucshon.
    Mr. Bucshon. Mr. Chairman, I was a practicing 
cardiovascular and thoracic surgeon for 15 years prior to 
coming to Congress, so, first of all, I would like to say I am 
grateful to be on the committee and on the subcommittee and 
discuss this very important topic.
    Briefly, I am going to comment on another thing that we are 
not really talking about today but to help the Medicare program 
is to really get overall healthcare costs, bending the cost 
curve; price transparency; quality transparency; work towards a 
more market-driven economy in health care versus a price-fixed 
economy; of course, tort reform to decrease the cost of 
defensive medicine, among many others. Coordination of care is 
very important, including coordinating medical records, 
electronic medical records, to be able to communicate with each 
other. This is a significant problem even within my own 
community.
    With that, Dr. Rivlin, in Senator Lieberman's testimony, he 
states that if we do nothing, Medicare Hospital Insurance Trust 
Fund will become insolvent at some point in the next decade. 
That means it will have exhausted its reserves, and it will pay 
out more in claims than it receives in taxes. As a former CBO 
Director, how real do you take this threat if Congress fails to 
act to improve the financing of the Medicare program?
    Ms. Rivlin. Oh, it is very real. Now, there isn't an exact 
drop-dead date. We change that estimate every year, depending 
on how rapidly costs are going up, but it is clear that on 
almost any trajectory you can imagine, that we will not have 
enough revenues coming in to support the current program for 
beneficiaries. Now, that doesn't tell you what to do about it, 
but it is a real problem.
    Mr. Bucshon. And what might be the result of that to 
seniors? Say that did happen, the next day, what would happen? 
What would be necessary with the program if we didn't change it 
and it got to that point?
    Ms. Rivlin. Well, you are assuming that Congress doesn't do 
anything. The Congress would do something, but it would be more 
expensive to wait than to gradually phase in the kinds of 
reforms that we have been talking about today, which we all 
hope will make the health system more efficient and give the 
beneficiaries of Medicare better care for less money or less 
rapidly increasing costs.
    Mr. Bucshon. The Congressional Research Service in a memo 
dated April 16, 2012, opined on what would happen should 
Congress fail to address the coming bankruptcy or insolvency 
date of the Medicare Hospital Insurance Trust Fund, and I 
quote, There are no provisions in the Social Security Act that 
govern what would happen if insolvency were to occur. For 
example, there is no authority in the law for the program to 
use general revenue to fund hospital services in the event of a 
shortfall. Plainly put, Medicare is not authorized to pick 
which claims to pay and which not to pay in the event the 
program no longer has funds to cover overall costs.
    Senator Lieberman, on that point, which I think is very 
important, if we do nothing, the Medicare Hospital Insurance 
Trust Fund will become insolvent. The Congressional Research 
Service says that there is no authority for Medicare to pay 
hospital claims in the event the program does go insolvent. I 
think you will probably agree with Dr. Rivlin that the problem 
is real, but how might this impact if there isn't action, how 
might this impact access to health care for senior citizens?
    Mr. Lieberman. Thanks, Doctor.
    The problem obviously is real statistically, as Dr. Rivlin 
said, under almost any imaginable set of scenarios. This 
prospect, Dr. Rivlin is probably right, in an atmosphere as we 
got up to midnight and it looked like the Hospital Insurance 
Trust Fund was going bankrupt, Congress would probably come in 
and fix it. But you just think about the instability that would 
cause in our healthcare system and the high anxiety it will 
cause among seniors. So this is a question of whether, like so 
many, whether Congress and the Executive work together to solve 
a problem before it becomes a crisis or a catastrophe, because, 
inevitably, that is what is going to happen. The people that 
have spoken today I respect. Obviously, to fix this you have 
got to ask people to do things they don't want to do.
    Dr. Coburn and I, I think, came up with a proposal that was 
ultimately pretty progressive and tried to share the 
responsibility for avoiding the catastrophe that you described. 
If that catastrophe was not on the horizon, of course, none of 
would do any of this. We would just keep going along, but that 
is putting our heads in the sand, and that is not what I know 
any of you came here to do.
    Mr. Bucshon. I think we can make the case for incremental 
reform, and the SGR proposal may be a great opportunity.
    I yield back.
    Mr. Pitts. The chair thanks the gentleman.
    I now recognize the ranking member of the full committee, 
Mr. Pallone, for 5 minutes of questions.
    Mr. Pallone. Thank you, Mr. Chairman.
    I have been going back and forth between the other 
subcommittee; so I apologize for that. But I do want to state 
for the record that even though I have a ``D'' next to my name, 
I do not associate myself with the comments of two witnesses 
here today. While I respect their prerogative to be here, I 
don't believe that we need to cut Medicare any further, 
especially on the backs of seniors. Robbing Peter to pay Paul 
is how I coin it, and I am deeply opposed to many proposals 
discussed here today. If we insist that we have to pay for the 
SGR fix bill, revenues and other offsets outside health 
programs should be on the table. And, unfortunately, all too 
often around here, our health dollars are used to pay for 
nonrelated bills, tax bills in fact, and the reverse should be 
the case.
    So, Dr. Moon, if I could ask a question, my Republican 
colleagues have proposed keeping tax levels at about 18 percent 
of GDP, which is in line with the average level 60 years ago. 
What we have known about the aging of poor populations and the 
increasing need for healthcare coverage under Medicare, which I 
might point out is a demographic problem, not a cost control 
problem, is it realistic to keep revenues at that level? That 
is my first question.
    Ms. Moon. I don't believe that it is realistic to keep 
revenues at that level if your goal is to have a healthy and 
viable Social Security, Medicare, and Medicaid program that 
serves this population.
    Interestingly, if you look at polling of citizens, they all 
say they are willing to pay additional taxes to make sure that 
these programs remain healthy. We also know that when Medicare 
was passed in 1965, people talked explicitly about the fact 
that there was going to be an aging of the population. The 
worker-to-retiree ratio was going to change. This was all 
known, and what was said at that point in time is that revenue 
increases would be necessary. Payroll tax rates would have to 
go up. Because they did not want to have them be so high in the 
beginning to be a drag on the economy, they thought this was 
better to be done in gradual increments over time.
    I believe that revenues need to be thought of as part of 
the package. I believe, even though I am a very strong 
supporter of beneficiaries and protecting the beneficiaries, 
that as a society, we think about what is the fairest way to 
ask people to pay for programs that we value as a society. And 
if that is partially from beneficiaries and partially from 
revenues, I am fine with that, but I think taking one side off 
the table and saying we are not even going to discuss it is 
very poor policy and not what the American public really wants 
to see happen.
    Mr. Pallone. Well, thank you.
    Let me ask you another question. In Congress we have been 
passing these so-called doc fixes to the SGR for more than 10 
years. We have been patching the SGR for so long that the 
Congressional Budget Office doesn't even take seriously the 
possibility we won't. Is it fair to say that the SGR has become 
a budget gimmick? Isn't it more fiscally responsible to pass 
the repeal-replace legislation without paying for it than to 
not pass it at all?
    Ms. Moon. Well, in many ways, that becomes a political 
issue. When I look at what Part B is all about, it says that 
you are supposed to pay for Part B out of general revenues and 
premium increases from beneficiaries as the costs go up over 
time. That will happen naturally if you change the SGR. There 
is nothing in the law----people want to talk about the law and 
the trust funds and so forth----that require you to pay for it.
    If as a Congress the Congress decides it wants to pay for 
things going forward, I don't have a problem with that. My 
problem is then to say that it can only come out of 
beneficiaries as a solution I think is way too narrow a reading 
of what is good public policy.
    Mr. Pallone. Let me try to get this last one in. My 
Republican colleagues insist that we pay for the SGR repeal. 
However, they had no problem voting to increase the deficit 
when it was politically convenient. For example, last week they 
passed another ACA, you know, the 30-to-40-hour rule that would 
cost $53 billion. And they didn't pay for that. And more than 
50 times, they repealed the Affordable Care Act. And that would 
have cost the country more than $100 billion each time. So 
these doc fix patches have cost the American people $169.5 
billion more than the $144 billion cost of the bipartisan, 
bicameral repeal. If we don't do our job and pass the SGR 
repeal, how much more money will be wasted that could have been 
used for the permanent fix?
    Ms. Moon. Kicking the can down the road, as people have 
said, and having only temporary fixes is a really poor way to 
do policy. It is the absolute worst of all possible options, I 
believe. On the other hand, you also don't want to see the SGR 
go into effect and slash payments to physicians and have people 
defect from the Medicare program. A question, I think, that you 
raise is a very legitimate one in terms of what is most 
important and how to achieve change. Just as I am opposed to 
having beneficiaries pay, I also think good policy means you do 
need to look at what you are going to do instead of this 
because we do make these decisions that affect health care 
going forward, but I think that there are a lot of solutions 
that one could look at and a lot of changes that need to be 
looked at, not as a way to pay for another fix but as policy 
unto themselves. If we think that raising taxes, there is a 
good reason to do it for some purpose, if we think that cutting 
benefits has a good purpose, those should be done on their own 
merits and not just because you are using them as an excuse to 
get another desirable policy change.
    Mr. Pallone. Thank you.
    Thank you, Mr. Chairman.
    Mr. Pitts. The chair thanks the gentleman.
    I now recognize the gentlelady from Indiana, Ms. Brooks, 5 
minutes for questions.
    Mrs. Brooks. Thank you, Mr. Chairman.
    I happen to be one of the members of this subcommittee that 
does believe we need to explore ways to pay for this, and I 
would like to start out with Dr. Rivlin, because based on the 
breadth of your experience and your time working as an honest, 
data-driven policy expert and studying bipartisan manners of 
doing things, what would you say is the best chance and the 
best package that we could put together in a bipartisan way to 
pay for the offset of the SGR? If you could be queen for the 
day and pick----and I know you have mentioned a few things 
already----but if you could put together the package that you 
would like to see us start with, what would be in that package, 
Dr. Rivlin?
    Ms. Rivlin. Well, there would be quite a few items, and I 
would put in the increasing premiums at the high end. I would 
put in accelerating the transition to----accelerating the 
incentives to payment reform that I think is good in itself and 
would generate the savings. And I would put in rewarding the 
use of generic drugs more. I would put in more competition, 
competitive bidding, starting with lab tests, but you can use 
competitive bidding in quite a lot of things that Medicare 
providers buy. But I would put the biggest emphasis, I think, 
on the transition to alternative payment models because that is 
not on the backs of beneficiaries. Beneficiaries will benefit 
if they have better coordinated care and care that is directed 
toward outcomes rather than just more services.
    Mrs. Brooks. And I am glad that you emphasized that at the 
end because the proposals that you put forward would not be to 
the detriment of beneficiaries in your studies. Is that 
correct?
    Ms. Rivlin. Yes. Except for the increase in premiums, I 
don't think the things that we are suggesting are on the backs 
of beneficiaries, as you have said.
    Mrs. Brooks. And, Senator Lieberman, knowing the 
congressional calendar the way that you do and based on your 
experience, and you have more experience----I am just starting 
my second term----negotiations on something as complex as this, 
binding the office offsets we believe necessary to pay for 
SGR----most of us believe----how important is it that we begin 
to work now on this, and what advice would you have for this 
subcommittee and how we should accomplish this task?
    Mr. Lieberman. Thanks very much for the question. I mean, 
obviously, the sooner the better because the session moves on, 
but also you are facing the SGR deadline, which will be another 
crisis, and you will be into another time when people will be 
attaching all sorts of things to it and holding up action. And 
meantime doctors and beneficiaries will be very anxious about 
what is going to happen, so I would say the sooner the better.
    The second is to acknowledge as you begin to negotiate that 
you have achieved something quite significant and a bit unusual 
in the current mood in Congress, which is you have agreed on an 
SGR replacement and reform. I would say that to finance it, I 
personally have said that I think you have to offset it, and, 
frankly, beyond the philosophy or ideology of it, I don't think 
it is going to pass if you don't offset it so you have got to 
deal with that reality. And then it is a question of finding a 
balance of ways to do so.
    Incidentally, the proposal I have talked about, it doesn't 
only, it doesn't even primarily build on asking beneficiaries 
to do more. It asks people based on their income to do a lot 
more. I think one thing that is missed here, Mr. Chairman, Mr. 
Green, is that in the current situation, most people don't 
realize----but I know the Members do----that most of Part B, 
doctors' insurance, 75 percent is not funded by payroll taxes; 
it is funded by general revenue. And more than 80 percent of 
Part D, prescription drug, also funded by general revenue, tax 
revenue. That is fairly progressive, but it also hits a lot of 
middle-income people. Therefore, it is not as if, if you don't 
do something here to ask a little more of beneficiaries and 
more of people of higher income, that the money is just going 
to come down from heaven. The general taxpayers are going to be 
paying more than their fair share.
    Look, you have been all through this. When the system 
works, people put the national interest ahead of everything 
else, and their constituents interest even though it is not 
short term, which this program is going to go belly up unless 
there is a compromise agreement to save it.
    Mrs. Brooks. Thank you. Thank you for continuing to care 
and to share with us your advice.
    Thank you. I yield back.
    Mr. Lieberman. Thank you.
    Mr. Pitts. The chair thanks the gentlelady.
    I now recognize the gentleman from Massachusetts, Mr. 
Kennedy, 5 minutes for questions.
    Mr. Kennedy. Thank you, Mr. Chairman.
    Thank you, Ranking Member.
    And, once again, thanks to the witnesses for your 
testimony. Thank you for your service and all the work that you 
have dedicated to these important issues. Thank you for 
sticking around so long this morning.
    It is a nice thing to do when you get all the way down to 
this end. So I appreciate it.
    Dr. Moon, there have been a number of comments today and we 
have heard from a number of folks, both elected officials and 
policymakers, that have suggested that the financial Outlook 
for Medicare is bleak, that it is potentially near bankruptcy, 
indicating that without urgent action, the program won't be 
financially solvent in the near future. That has been at times 
used to justify some pretty significant cuts to the program. 
Can you help us understand the financial health of Medicare and 
what fiscal challenges and what kind of time frame we are 
looking at in terms of ability for current Medicare revenues 
and the Medicare Hospital Insurance Trust Fund to continue to 
cover the cost of the program?
    Ms. Moon. The Medicare program and the Social Security 
program are both very different than other parts of the Federal 
budget because we look 75 years ahead and try to figure out 
what is happening in these programs. Technically speaking, the 
spending on defense faces insolvency at the end of this fiscal 
year because you have to fund it. That is not the case for 
Medicare and Social Security, and in many ways, I believe the 
trust funds were established to try to be an early warning 
device and not as a bludgeon to say, you are going to have to 
cut the program, but rather to say, what does it look like it 
will take to continue forward with the program?
    Then it is totally legitimate to ask when that outlook 
becomes bleaker, what should we do? Should we raise taxes? 
Should we cut benefits? Should we find others ways to change 
the program to improve it. I don't think anyone here would 
disagree that if you could find ways to make Medicare more 
efficient and more effective, we should do that in a heartbeat. 
The question is when you have done that as much as you can, 
then who do you hold accountable? Do you say, beneficiaries, 
you are the ones on the hook for this, or, as taxpayers, we are 
also on the hook for this, and I believe it has to be a shared 
responsibility. I believe, therefore, that it is convenient 
sometimes to talk about the trust fund as forcing us into 
action, and that can be used very effectively. It can also be 
used to justify poor policy as well in an emerging situation.
    It is also the case that the trust fund balance looks 
better and worse. I was a public trustee from 1995 to 2000, and 
my husband always likes to say I saved the program, that it 
went from 4 years before bankruptcy to 37 years. And it had 
almost nothing to do with me. It had to do with policy changes 
that were made, most of them in terms of improving the program 
over time and not penalizing beneficiaries.
    Mr. Kennedy. Just kind of bouncing off that for a second, 
Doctor, and some comments by the ranking member of the 
committee, Mr. Pallone, and actually Mr. Schrader as well, both 
of whom, and I am sure others have as well, mentioned the 
impact of the Affordable Care Act on the solvency. Could you 
discuss that a bit? And I understand that the trust fund is now 
in good standing for an additional 4 years out to 2030, given 
current estimates. But given the fact that there have been some 
savings realized, particularly over the past several years, 
forecasting that forward, what do you anticipate?
    Ms. Moon. Forecasting forward is always very difficult 
because there are a lot of things that can happen. No one 
expected Medicare to slow down as much as it did, although it 
was kind of a happy combination of several things----or an 
unhappy combination, I might say, in terms of the poor health 
of the economy certainly contributed as well as these reforms 
that we think are important.
    I believe we are on the cusp of making major changes in 
health care because we have to. Health care is expensive for 
everyone, not just for the Medicare program, but for all of us 
who use healthcare services. We need to get those costs under 
control. And I believe that we are now serious as a country 
about doing that. The ACA put in place a lot of reforms, not 
all of them aimed just at Medicare but aimed at changing the 
healthcare system overall that show promise and are supposed to 
be evidence-based in moving forward. There are going to be fits 
and starts. Some of them are going to work well. Some of them 
are not. We are not going to be able to put anything on 
automatic pilot. We are going to have to keep working at it.
    But I am reasonably optimistic that we are going to find 
ways to keep the costs of health care within bounds over time 
and that the health of the trust fund will look pretty good 
even if we don't do a lot of other things except work on these 
reforms over time.
    Mr. Kennedy. Thank you, Doctor.
    My time is up. I yield back.
    Mr. Pitts. The chair thanks the gentleman.
    I now recognize the gentleman from Texas, Dr. Burgess, 5 
minutes for questions.
    Mr. Burgess. Thank you, Mr. Chairman.
    Again, thanks for doing this hearing so early in the new 
term.
    Senator Lieberman and Dr. Rivlin, let me just ask you a 
question because I wasn't here when Medicare started. I am not 
implying that either of you were.
    Mr. Lieberman. I want to be clear that I wasn't either.
    Mr. Burgess. But my study of the situation, the Medicare 
Part B premium was originally 50 percent and was later reduced 
by Congress to 25 percent. Is that not correct?
    Mr. Lieberman. That is correct.
    Mr. Burgess. There has already been a major adjustment as 
to where those moneys actually come from. I do want to add just 
that it has been brought up by several other Members, but I 
think it is important that we pass this. It was important last 
year. I regret very much that the Senate did not attach as much 
importance to it as the House did. I think there was a real 
opportunity that was missed last year, but it is up to us to 
make our own opportunity this year. We do have to get to 218 
votes in the House. Last March, we got a vote on the repeal of 
the sustainable growth rate, the essential policy that I 
already referenced, and it attracted every Republican vote and 
two dozen Democrats. It was a significant vote. That path to 
218, I believe includes a path that is offset. And the overseas 
contingency operation money, maybe, maybe not, but I think 
those contingencies overseas are actually happening even this 
morning so that money may, in fact, no longer be there.
    Senator Lieberman and Dr. Rivlin, you have both been there; 
Dr. Rivlin, in the administration, and Senator Lieberman in the 
Senate. You have been there when big deals were done, when hard 
things were done, hard legislation was passed, and people had 
to come to agreements and compromises. Do you think that with 
what you know of where we have been already with this, isn't it 
now time to get that deal done and to get those compromises 
done? Can you foresee a path forward where this one can 
actually move?
    Ms. Rivlin. I can. I am also an optimist about these 
things, but there are many examples, welfare reform, for 
example, wasn't anything that either side exactly loved, but it 
did get done. And I think you are at that moment when you could 
have the advantages of fixing the SGR and also putting the 
whole health system on a better track.
    Using the overseas contingency fund seems to me to forego 
the opportunity that you have to pay for the SGR repeal with 
pay-fors that are actually good health policy. That is what you 
ought to be looking for, and I think there are quite a large 
number of them.
    Mr. Lieberman. Thanks, Congressman.
    It seems to me that, again, I repeat, you have taken a big 
first step in the agreement on SGR replacement. Now, in a way, 
you are at the hard part, which is, how do you pay for it? But 
if you have got the will, you can do that. There are all sorts 
of ways to pay for it reasonably.
    Now, the reason I am proposing that, if I may cite again 
the philosopher of Chicago, Mr. Emanuel, ``A crisis is a 
terrible thing to waste.'' You have got a crisis here------
    Mr. Burgess. That actually didn't work out for us so well.
    Mr. Lieberman. Yes. No. I remember that. I was hoping your 
memory was short, but the reality is that----let me cite these 
numbers that really struck me when I was working with Senator 
Coburn. So our proposal was estimated by the various 
authoritative groups to save between $500 billion and $600 
billion over 10 years, but here was the stunner: $10 trillion 
reduction in the 75-year projection of unfunded liabilities of 
Medicare.
    So if you use this SGR crisis, if I can refer to it that 
way, and then fund your answer to the problem, your solution to 
the problem, with some Medicare reforms you can agree on, then 
you are going to have an----you are not only going to solve 
that problem, you are going to have an enormous long-term 
effect on the viability of the Medicare fund.
    And, look, the public is----it is sort of unconventional 
politics. Maybe I see this more from outside than I did inside. 
I think the public really wants Members to do things that 
aren't conventionally political, and say no to some groups but 
say yes to the future of Medicare, to the future of the 
country, in the sense that it is not going to be burdened by 
unbelievable debt.
    Mr. Burgess. Dr. Rivlin, I just want to point out that 
along the lines of being an optimist, I have introduced an SGR 
repeal every term in Congress since 2003, even------
    Ms. Rivlin. Good.
    Mr. Burgess. So we only had to push one stone up one hill.
    Ms. Rivlin. Someday it will happen. Maybe this day.
    Mr. Lieberman. You deserve a medal.
    Mr. Pitts. The gentleman yields back.
    The chair recognizes the gentlelady from Florida, Ms. 
Castor, 5 minutes for questions.
    Ms. Castor. Well, thank you, Mr. Chairman.
    And, Mr. Chairman, and, to Ranking Member Green, thank you 
very much for making this one of our first hearings of the new 
session.
    There is nothing more nonsensical than the SGR patch from 
year to year by the Congress. It is absurd. And we need to act 
now to permanently repeal it. And time is of the essence, 
because the current patch runs out at the end of March. And I 
am heartened, because we did have a bipartisan bill last term. 
We came very close. And we need to work together to get that 
bill on the floor and fix this once and for all.
    That bill is important, because it repeals the SGR and it 
establishes a new framework for reform, what Dr. Rivlin has 
said, more efficiencies, and Dr. Moon says, a greater 
coordination of care. It simply now begins to transition 
Medicare from a volume-based system to one on value, 
coordinating care, the new medical homes. We are smarter now. 
We have learned the lessons of the past, and we need to put 
them to work.
    I would encourage my Republican colleagues, as they move 
towards the budget season, that they dispense with the very 
simplistic balance sheet policy that says Medicare should be a 
voucher system or premium support, because it simply shifts the 
cost to the beneficiaries; it does not solve the overarching 
issues of what we have learned over time. And it is an 
important----in reform, the much more difficult piece is going 
to be reform. And it is not one size fits all. It is 
pharmaceutical costs. It is working to weed out fraud and 
abuse. It is a lot of the ideas that have been floated today, 
but one idea that was floated that I think we need to set the 
record straight on right now is that asking beneficiaries to 
put more skin in the game, whether it is the Medigap or others, 
is going to save us money, because I know a lot of economists 
believe beneficiaries need to have more skin in the game, but 
the National Association of Insurance Commissioners reviewed 
the literature just recently and put together an expert 
analysis. They were unable to find any evidence that cost 
sharing encouraged appropriate use of healthcare services. In 
fact, they found that cost sharing would result in delayed 
treatments that could increase cost and result in adverse 
health outcomes.
    Dr. Moon, are you aware of this analysis? And do you 
agree------
    Ms. Moon. I am aware of this analysis and analyses that go 
back many, many years to where what you find in many cases is 
the way that cost sharing works is it pushes costs onto someone 
else. And if they can't afford to pay, then they don't get the 
care.
    It very seldom discourages use of unnecessary services. It, 
like the SGR, is a really broad-based penalty, where you are 
trying to discourage behavior that is a much more subtle 
behavior. You don't want people not to go to doctors. You want 
people not to get unnecessary care. And to have an across-the-
board requirement that people pay X percent or put certain 
amount of skin in the game just doesn't get you there.
    And, in particular, remember that most healthcare spending 
is for people once they are well in the grips of the healthcare 
system, and they are not asking any questions about use of 
services. Those are the very sick. Those of us who are healthy 
account for such a trivial part, that having us be a little bit 
savvier consumers just doesn't really work out.
    Cost sharing just is a pretty unsubtle mechanism to use. 
There may be times when you use it, and we certainly use it 
because we are asking people to share in the costs of 
healthcare, but let's not assume that it is this subtle 
mechanism. It is simply saying, we are going to ask you to pay 
more instead of us.
    Ms. Castor. Thank you very much.
    And I would like to ask unanimous consent, Mr. Chairman, to 
submit into the record the analysis and letter from the 
National Association of Insurance Commissioners on the topic. 
And America's Essential Hospitals also have submitted a letter 
for the record.
    Mr. Pitts. Without objection, so ordered.
    [The information appears at the conclusion of the hearing.]
    Ms. Castor. And I will just make one final point before I 
close, and that is to really encourage my colleagues on the 
Republican side. We were so close last year, and the SGR repeal 
was combined at one point with one of the----how many, 50----in 
the series of repeal of the ACA, wholesale repeals. This is too 
serious to do that again. We are ready----we are so close. And 
the longer we put it off, the more expensive it will be, so I 
will encourage us to get to work and really shoot for 
resolution by the March 31st deadline.
    Thank you, and I yield back.
    Mr. Pitts. The chair thanks the lady, and now recognizes 
the gentleman from Illinois, Mr. Shimkus, 5 minutes for 
questions.
    Mr. Shimkus. Thank you, Mr. Chairman.
    And I also want to thank you for staying a longer period of 
time. I am a fairly senior Member, but I didn't get here on 
time, so I got pushed down to the bottom.
    In fact, Senator Lieberman, I was here in 1997 when we 
attempted to balance the budget, and the SGR arrived.
    Mr. Lieberman. Right.
    Mr. Shimkus. And we have been fighting the battle ever 
since, so I am part of the problem of where we are at today.
    Mr. Lieberman. Both of us are.
    Mr. Shimkus. And so I thought----Tom Coburn served in this 
committee when he was a House Member, and we know him well.
    And, Dr. Rivlin, I was one of the 16 Republicans who 
supported the Simpson-Bowles------
    Ms. Rivlin. Good.
    Mr. Shimkus [continuing]. Vote that we had on the floor. 
There was only 38 Democrats who supported that, and 54. Just 
shows you the challenges we have.
    Mr. Lieberman. Right.
    Mr. Shimkus. I always put a chart up on the screen. It is a 
budget chart; I think it is 2013. And it just highlights what 
you all know and the message that we have got to continue. I 
think former chairman of the Joint Chiefs of Staff said the 
debt is a threat. Now we are at $18 trillion. So when we have 
these government shutdowns and battles, it is only on the blue 
portion. The red is running uncontrolled. It is an entitlement 
system, mandatory spending; it is things that we don't get 
control over.
    So I just think it is wonderful that you are here, because 
the proposal is, if I understand, listening to a lot of great 
questions, is that we have an opportunity to use the SGR debate 
and tweak the mandatory spending, or the entitlement side, 
which has to be done. We just can't no longer continue to go 
down this path. And I do think there are people willing to, but 
I was talking to Dr. Burgess, and I asked him, do you really 
think we could tie these two together? And you hear some of my 
colleagues, no, don't touch it. Let's fix SGR. We will live to 
fight on the mandatory spending another day.
    So insurance companies would do actuary tables. They would 
look at the amount of money they would have available to meet 
their obligations. So the question is tweaking that. And the 
benefits are really long term.
    I think, Senator Lieberman, on your opening testimony you 
said----well, you mentioned $10 trillion down.
    Mr. Lieberman. Yes.
    Mr. Shimkus. That is not chump change. That is real money 
here in Washington these days. So one of the simple questions 
is----and again, and, Senator Lieberman, in your testimony, you 
mentioned the Social Security Administration. There are a lot 
of seniors whose annual income is over $1 million, so can't we 
ask them to pay a little bit more into the Medicare beneficiary 
that they are receiving if they are taking that? I don't think 
that is out of line. In fact, these entitlement programs are 
for the most needed. There is always this debate. Well, they 
paid in it, they are entitled to it, so they get it, regardless 
of how many have been blessed by this country and the largesse 
of their ability to accrue wealth, and I think we better have 
it for the poor.
    Senator Lieberman?
    Mr. Lieberman. Look, we should ask the wealthy to pay more. 
And in the proposal that Senator Coburn and I put forward, we 
did ask the wealthy to pay more. Frankly, it is still----
Medicare is still a better deal than they could generally get 
in the private sector.
    And, again, I would say that because Part D and Part B are 
mostly paid for by general tax revenue, and I will----a 
disproportionate share of the general tax revenue comes from 
the wealthy. They are paying for a lot of the program. But I do 
want to come back to what I said: It is not as if the current 
system is fair to everybody. The middle class is also paying a 
lot of taxes, and those taxes are paying for most of Part B 
doctors and Part D prescription drugs.
    So sure, I mean, it is consistent with our whole system. We 
should arrange to fix this in the fairest and, dare I use the 
word, most progressive way we can.
    Mr. Shimkus. And, Dr. Rivlin, you talked about how raising 
taxes might be counterproductive in your testimony. Did I read 
that correctly?
    Ms. Rivlin. I don't remember saying that, but I am in favor 
of more revenues, actually, in general, but in a balanced way, 
in the way that we did in Simpson-Bowles and the Domenici-
Rivlin plan, which involves major tax reform, getting rid of 
many of the loopholes that benefit upper-income people. If you 
do that right, you can actually lower the rates.
    Mr. Shimkus. Right. Right. Well, again, these are debates 
that I have been yearning for, for my now 19th year of being 
here in Washington. We just can't hide underneath the rock. And 
I am glad you have come, and I look forward to working with 
you. Thank you very much.
    Mr. Lieberman. Thanks, Mr. Shimkus. Seize the moment.
    Mr. Pitts. The chair thanks the gentleman, and now 
recognizes the gentleman from New York, Mr. Engel, 5 minutes 
for questioning.
    Mr. Engel. Thank you very much, Mr. Chairman, and thank you 
for holding this hearing.
    And congratulations to Mr. Green for being in his position. 
And I want to thank all the panelists for really good 
testimony.
    My good, dear friend Joe Lieberman and Dr. Rivlin, Dr. 
Moon, thank you so much.
    What strikes me----because the questions I had to ask have 
long since been asked and answered----what strikes me in 
listening to the panel is you are all saying different things, 
but you are also really saying the same things. And I really 
agree with much of what each of you has really said.
    Dr. Rivlin, you just finished the last question with 
something I was going to ask. You know, yesterday President 
Obama spoke at the State of the Union and talked about a middle 
class tax cut and he talked about funding colleges, community 
colleges, with free tuition. And I agree with both of those 
proposals. And he said that in doing that, he would get the 
money by asking the very wealthiest to pay just a little bit 
more.
    You, Dr. Rivlin, just spoke about general tax revenues.
    You know, it seems to me there is a lot here that we all 
agree on both sides of the aisle. We recognize that the SGR 
needs to be repealed and reformed, that it needs to be fixed 
permanently, and that this is a very good opportunity to fix 
Medicare. Joe Lieberman, I think, laid out a compelling case 
about if we just do nothing, we are really going to be in 
trouble.
    And if we are going to be honest with each other, my 
colleagues, there is plenty of blame to go all around. On this 
side of the aisle, we won't even look at some of the things 
that people say we need to have if it is going to be balanced. 
And on the other side of the aisle, you won't even consider any 
kind of tax increases whatsoever. And the truth of the matter 
is we have to take our blinders off and kind of look and see.
    I agree that the beneficiaries should not bear the major 
cost of it, but I wonder if you could, Dr. Rivlin, just 
elaborate a little bit on what you started to say in answer to 
the last question about general tax revenue, about changing 
some of that to get more money into the Medicare program.
    Ms. Rivlin. Well, I favor, as I said, comprehensive tax 
reform, and I think you can do that in a way that raises more 
revenues and is more progressive. That is an OK term. But I 
would caution this committee against getting too far afield. 
You have already done a really constructive piece of work in 
this tri-committee bill. Strengthen it; and pay for it; and pay 
for it in a way that accelerates the payment reform in Medicare 
and makes Medicare a more efficient program. And you can find 
various ways of doing that, but I wouldn't take on the burden 
of reforming the whole tax system in this context, because you 
have got a big opportunity to do something very important right 
here in this committee.
    Mr. Engel. Well, I do think that if we are really going to 
hopefully down the road have a much greater fix, that we are 
going to have to talk and be honest about general tax revenues.
    Senator Lieberman, I am wondering if you could elaborate a 
little bit more on, in your proposal, general tax revenues were 
not a part of this. Is there a reason why? And do you think we 
could combine the two------
    Mr. Lieberman. Right.
    Mr. Engel [continuing]. And perhaps come up with a------
    Mr. Lieberman. Well, it is a good question. Thanks, 
Congressman.
    We were working really as best we could within the system, 
so we added some progressive elements to it. I mean, we asked 
the people, based on income, to pay more for Part B and Part D. 
We set a limit of out-of-pocket expenses for people at $7,500, 
which was something I appreciated very much that Dr. Coburn was 
willing to support, but we raised that up to $22,500 for 
individuals who make more money. So we tried to be 
comprehensive about it, but I think the other thing that has to 
be recognized----I repeat myself, and I apologize----is that it 
is general revenues that are paying for most of Part B doctors 
and Part D prescription drugs now.
    The system is a fairly progressive system now, not just the 
Medicare financing but our tax system overall. I am not against 
tax reform that in some ways makes it more progressive. But 
that has to result from a give and take in which both sides 
feel that they are getting something that they believe in.
    Mr. Engel. And, just in conclusion, the truth of the matter 
is, I believe there are a lot of people on both sides of the 
aisle that have political courage to do the right thing, but 
you want to have the political courage and do the right thing 
if you know it is real.
    Mr. Lieberman. You know it is real.
    Mr. Engel. It is real.
    Mr. Lieberman. I agree.
    Mr. Engel. If you have political courage, but it is not 
real, it is really a lose-lose situation.
    Mr. Lieberman. Yes.
    Mr. Engel. And I think, I hope that we can make this real, 
because we do know that this can't continue, and we don't want 
to hurt the beneficiaries. Thank you.
    Mr. Lieberman. I agree. It is great to see Mr. Kennedy 
here. There are some familiar names: Sarbanes, Matsui, Kennedy.
    But Teddy used to always say that, with his members of his 
committee particularly in the last period of his life----Mike 
Enzi, pretty conservative Republican----if we agree on 60 
percent or 70 percent or 80 percent on this given issue, let's 
do it. Let's forget about the other 40, 30, 20 percent. And 
President Reagan said that too. He would much rather get 50 
percent of what he wanted rather than sort of hold his flag 
high while he was going over the edge of a cliff. That makes a 
lot of sense.
    Mr. Guthrie. Thank you.
    The gentleman's time has expired.
    I recognize Mr. Griffith from Virginia.
    Mr. Griffith. Thank you, Mr. Chairman. I appreciate it. 
This is a marvelous panel. I appreciate listening to your 
testimony here today. I am proud of the work that we have done 
over the last 2 years, and hopefully we can finish it up this 
year.
    One of the champions in that cause in leading the way has 
been Dr. Burgess of Texas, and I accordingly now yield my time 
to the good doctor.
    Mr. Burgess. Well, I thank the gentleman for yielding.
    I just have a couple of follow-up things that I wanted to 
cover. And it is really too bad that Mr. Shimkus has left, 
because I wanted to give him some comfort that this actually--
----
    Mr. Shimkus. I am watching you. I have got your back.
    Mr. Burgess [continuing]. That some of the changes that led 
to the SGR were actually implemented in Congress in 1988, and 
that led to the update adjustment factor that got us into some 
of this mess where we are. So I wanted to alleviate that burden 
from my friend from Illinois because I know he carries it 
around, and it is a very heavy burden.
    I also want to address the issue of, we talk about how 
Medicare spending has been reduced. And, in many ways, it was a 
pleasant surprise in January of 2013 when the CBO came out and 
said, Hey, we put SGR repeal on sale. After the 2012 election, 
I had put a lot of hope in the fact that Governor Romney was 
going to win the election; Paul Ryan would be the vice 
president; we would have a full-throated implementation of 
premium support; and, over time, the SGR argument would simply 
go away, because premium support would replace it, there would 
no longer be a need for the SGR. Well, that didn't happen. But 
then the Congressional Budget Office came to the rescue of SGR 
reform and put it on sale.
    But, yes, the recession may have caused part of that. The 
SGR itself may be responsible for some of the reduction. The 
Affordable Care Act, yes, it hadn't really been implemented for 
all that long. But, 10 years ago, Part D happened, and a lot of 
us argued prior to the passage of Part D that, hey, if we pay 
for the Lipitor, there may be fewer episodes of congestive 
heart failure requiring hospitalization. And it is, in fact, 
and I have not seen any study now of the 10-year effect. Here 
is an interesting point. We are almost at the 10-year point of 
the implementation of Part D. Has anybody gone back and looked 
at what were the actual savings? We were all told what it was 
going to cost. It didn't cost that much.
    But there were actually some benefits, because when 
Medicare originally passed, it paid for the doctor visit, it 
paid for the hospitalization, it didn't cover prescription 
drugs. My dad was a general surgeon. I used to tease him; I 
said, Well, back then, you only had two drugs, penicillin and 
cortisone, and they were interchangeable. I know. He didn't 
think it was funny either. But the prescription drug part of 
Medicare was an important change that needed to occur, and now 
we may be reaping the benefit from that.
    But it would also be a shame to let this moment----I 
appreciate so much your forbearance and your indulgence today--
--to let this moment pass without fixing this. The gentlelady 
from Florida said, Well, last time you put a pay-for on it, it 
was untenable. Might I remind everybody, it passed the House 
with that offset. And we can do that again. There are actually 
more of us now than there were last March, and we can pass it 
in a partisan vote, if necessary, but how much better would it 
be if we all sat down and did that very, very difficult, very 
troublesome, very nettlesome work of providing the offset and 
made this a meaningful and lasting solution to a very 
nettlesome problem?
    I will accept your observations.
    Mr. Lieberman. Well, I say, Amen, really. The other thing I 
would say, you make a really important point----and, obviously, 
not every prescription that everybody gets reimbursed through 
Part D is exactly necessary----but overall, to me, it just 
seems----and we don't really say this enough and appreciate it 
enough----axiomatic, really self-evident that the part of why, 
generally speaking, we are living longer is because of the 
positive impact of prescription drugs on the health of the 
American people, and Part D made those drugs much more 
accessible to many, many more people, millions more people.
    Ms. Rivlin. Yes. Well, I would add my amen too, and the 
hope, as I have said before, that you seize this opportunity to 
move ahead and make Medicare----put it on a track to becoming a 
more cost-effective program than it is because the pay-fors 
that have been suggested are not just beneficiary cuts. They 
really would move in the direction of making Medicare a more 
efficient program.
    Mr. Burgess. I thank my friend from Virginia.
    I will yield back.
    Mr. Griffith. I yield back.
    Mr. Guthrie [presiding]. Thank you, gentleman.
    Time has expired.
    Mr. Collins from New York is recognized.
    Mr. Collins. Thank you, Mr. Chairman.
    Since I am last, I will be as brief as I can, but as the 
junior Member here, in listening to this testimony, it has been 
an eye-opening discussion where we all agree that we need 
sustainability and we can't keep kicking the can, as we have 
done with the SGR doc-fix that, Senator, you called broken and 
needs to be done away with.
    So here is my real question. I think what we are talking 
about is access. The difficulty of Medicaid is access. The 
doctors aren't paid much. Therefore, doctors don't see Medicaid 
patients. The fear of the SGR implementation would be if a 21-
percent cut took place, access would be problematic for our 
seniors. So that is----the overarching piece is access, and now 
we are into the details of pay-fors. And I certainly agree with 
Mr. Shimkus: Let's make sure this is real, and it doesn't add 
to the deficit and debt that our children are inheriting from 
us.
    So my question really, Dr. Rivlin, would be, when I look at 
our new program, a half of 1 percent increase for 3 or 4 years, 
then freezing that for the next 5 years, I am seeing a lot of 
long-term projections here that are talking about increases; we 
will fix it now, but then the increases the docs will see half 
of 1 percent a year, maybe 1 percent a year.
    Now, if we are in the inflationary environment we are 
today, which is all but no inflation, that is one thing, but I 
am curious, because you have spoken about access before all the 
way back to 2002 when we first were facing a potential 2 
percent cut, what do you think about the new payment plan and 
the fact that the increases are very small for the next 10-plus 
years, and could we be back having this discussion if inflation 
were to take off in any way? So just curious of your take on 
that.
    Ms. Rivlin. You could be. I don't see inflation as an 
imminent threat. And long before inflation generally comes 
back, I think you could get the whole health system on a better 
track such that almost everybody, and I don't mean just 
Medicare beneficiaries, was in some kind of integrated health 
plan that was coordinating their care and giving them as good 
care as they could get but not wasteful and excessive care.
    Mr. Collins. Yes.
    Ms. Rivlin. But I think you can move in that direction and 
that you have a way to do that starting with this bill that you 
have.
    Mr. Collins. Thank you.
    Senator, do you have any thoughts on that?
    Mr. Lieberman. Well, I agree that this is the moment.
    Mr. Collins. No. My question was, are we at all at risk, do 
you think, fixing it now and we would be done with it------
    Mr. Lieberman. Right.
    Mr. Collins [continuing]. But then the payment schedule set 
going forth has such small increases------
    Mr. Lieberman. Oh, you mean in the current SGR replacement?
    Mr. Collins. Yes. Are we opening the door to a problem down 
the road?
    Mr. Lieberman. It is possible, but I tell you, you have 
done something so significant that so improves on the status 
quo, and the repeated crises that called for the doc-fixes and 
the contortions that that invited here in both Houses of 
Congress by Members of both parties who took advantage of it 
and created a mess, really, in the public view, on balance, I 
don't have any hesitation to say that I think what you have 
done is worth supporting.
    It is not perfect, but when was the last time any of us did 
anything perfect? It is an improvement, and it is a bipartisan, 
bicameral improvement. And Lord knows, it might just start a 
cycle of virtue here in accomplishment in Congress that would 
go on to other areas as well.
    The people really need to be given a basis for hope, 
honestly, and you can begin it right in this subcommittee.
    Mr. Collins. Well, I agree.
    Your testimony has all been great today, and I personally 
want to thank you for staying over an extra half-hour, 45 
minutes while we did this.
    And thank you, Chairman. I yield back.
    Mr. Guthrie. Thank you.
    The gentleman yields.
    We really do appreciate the panel, it was outstanding, 
outstanding testimony and very informative, and we do have a 
lot of work ahead of us.
    All members have been recognized. I want to remind the 
members they have 10 business days to submit questions for the 
record.
    And I ask the witnesses to respond to the questions 
promptly.
    And members should submit their questions by the close of 
business on February the 4th, 2015.
    And, without objection, the subcommittee will stand in 
recess until 10:15 tomorrow morning.
    Without objection, so ordered.
    [Whereupon, at 12:46 p.m., the subcommittee was adjourned.]
    [Material submitted for inclusion in the record follows:]
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 
      







        A PERMANENT SOLUTION TO THE SGR: THE TIME IS NOW, DAY 2

                              ----------                              


                       THURSDAY, JANUARY 22, 2015

                  House of Representatives,
                            Subcommittee on Health,
                          Committee on Energy and Commerce,
                                                    Washington, DC.
    The subcommittee met, pursuant to call, at 10:15 a.m., in 
room 2322, Rayburn House Office Building, Hon. Joseph R. Pitts 
(chairman of the subcommittee) presiding.
    Present: Representatives Pitts, Guthrie, Barton, Murphy, 
Burgess, McMorris Rodgers, Lance, Griffith, Bilirakis, Long, 
Ellmers, Bucshon, Brooks, Collins, Green, Schakowsky, 
Butterfield, Sarbanes, Matsui, Schrader, Kennedy, Cardenas, and 
Pallone (ex officio).
    Staff Present: Clay Alspach, Chief Counsel, Health; 
Leighton Brown, Press Assistant; Noelle Clemente, Press 
Secretary; Robert Horne, Professional Staff Member, Health; Tim 
Pataki, Professional Staff Member; Michelle Rosenberg, GAO 
Detailee, Health; Krista Rosenthall, Counsel to Chairman 
Emeritus; Adrianna Simonelli, Legislative Clerk; Heidi Stirrup, 
Health Policy Coordinator; Josh Trent, Professional Staff 
Member, Health; Greg Watson, Staff Assistant; Ziky Ababiya, 
Minority Policy Analyst; Tiffany Guarascio, Minority Deputy 
Staff Director and Chief Health Advisor; Ashley Jones, Minority 
Director, Outreach and Member Services; and Arielle Woronoff, 
Minority Health Counsel.
    Mr. Pitts. Ladies and gentlemen, we have floor votes coming 
up, so we are going to get started. The subcommittee will now 
come to order.
    Today is the second day of our 2-day hearing on the 
permanent solution to the SGR. Yesterday we heard from a 
distinguished panel of experts on SGR financing issues. Today 
we have a panel of interested stakeholders.
    Before I do that, we have a UC request, and I ask for 
unanimous consent to include the following statements for 
today's hearing record from the American Academy of Family 
Physicians and the American Ambulance Association. Without an 
objection, so ordered.
    [The information appears at the conclusion of the hearing.]
    Mr. Pitts. We have on our second panel today six witnesses. 
Mr. Richard Umbdenstock, president and chief executive officer 
of the American Hospital Association. Dr. Geraldine O'Shea, 
first vice president of the American Osteopathic Association 
Board of Trustees. Dr. Alan Speir, the medical director of 
Cardiac Surgical Services for Inova Health System and the chair 
of the Workforce on the Health Policy, Reform, and Advocacy for 
the Society of Thoracic Surgeons. Dr. Ken Miller, board 
president of the American Association of Nurse Practitioners. 
Dr. Barbara McAneny, chair of the American Medical 
Association's Board of Trustees and CEO of the New Mexico 
Oncology Hematology Consultants; and Mr. Eric Schneidewind, 
president-elect of AARP.
    Hope I didn't butcher your names too much. But thank you 
for coming today. Thank you for testifying. Your written 
statements will be made a part of the record. You will each be 
given 5 minutes to summarize your testimony, and your entire 
written statement will be made a part of the hearing record.
    So we will begin with you, Mr. Umbdenstock. You are 
recognized for 5 minutes for your summary.

STATEMENTS OF RICHARD UMBDENSTOCK, PRESIDENT AND CEO, AMERICAN 
    HOSPITAL ASSOCIATION; DR. GERALDINE O'SHEA, FIRST VICE 
    PRESIDENT, AOA BOARD OF TRUSTEES, AND MEDICAL DIRECTOR, 
FOOTHILLS WOMEN'S MEDICAL CENTER IN CALIFORNIA; DR. ALAN SPEIR, 
MEDICAL DIRECTOR OF CARDIAC SURGICAL SERVICES FOR INOVA HEALTH 
  SYSTEM, AND CHAIR, WORKFORCE ON HEALTH POLICY, REFORM, AND 
  ADVOCACY, THE SOCIETY OF THORACIC SURGEONS; DR. KEN MILLER, 
 BOARD PRESIDENT, AMERICAN ASSOCIATION OF NURSE PRACTITIONERS; 
  DR. BARBARA MCANENY, CHAIR, AMA BOARD OF TRUSTEES, CEO, NEW 
   MEXICO ONCOLOGY HEMATOLOGY CONSULTANTS LTD.; AND MR. ERIC 
              SCHNEIDEWIND, PRESIDENT-ELECT, AARP

                STATEMENT OF RICHARD UMBDENSTOCK

    Mr. Umbdenstock. Thank you very much. Chairman Pitts, 
Ranking Member Green, and distinguished members of the 
subcommittee, on behalf of the Nation's hospitals, thank you 
very much for having me here today.
    Ensuring that physicians receive adequate reimbursement is 
important for patients and hospitals, and we support 
permanently replacing the Medicare sustainable growth rate, or 
SGR. We commend the Members of the House and Senate committees 
of jurisdiction, which last year unveiled legislation to fix 
the recurring physician payment problem by repealing the SGR 
formula.
    The bill, however, did not include suggestions on how to 
cover the costs of these proposals. The AHA cannot support any 
proposal to fix the physician payment problem at the expense of 
funding for services provided by other caregivers. Offsets 
should not come from other providers, including hospitals, who 
are themselves working to provide high quality, innovative, and 
efficient care to beneficiaries, but are already being paid 
less than the cost of providing these services. Congress needs 
to move away from this practice.
    Market forces and significant reforms in both the public 
and private sectors are actively reshaping America's healthcare 
delivery system. In 2013, hospitals employed about a third of 
the Nation's physicians, and this number is growing rapidly. To 
reduce hospital payments to prevent physician cuts is therefore 
counterproductive and would adversely impact the very 
physicians Congress is trying to help.
    Hospitals' ability to maintain the access to care their 
patients and communities expect is further threatened by 
repeated ratcheting down of payments for Medicare and Medicaid 
hospital services to pay for other priorities.
    Recognizing that the AHA cannot simply oppose hospital 
payment cuts without supporting other solutions, we would like 
to highlight policy changes where Congress could both 
positively impact Medicare's finances and pay for a permanent 
SGR fix. Specifically, we recommend taking steps to promote and 
reward accountability and to use limited healthcare dollars 
wisely.
    Our recommendations are drawn from an AHA report entitled 
``Ensuring a Healthier Tomorrow: Actions to Strengthen Our 
Healthcare System and Our Nation's Finances,'' which is 
appended to my written statement. Our recommendations are 
similar to ideas that have received bipartisan support from a 
number of commissions, lawmakers, and the administration, and 
would not only generate savings, but also put the Medicare 
program on firmer financial footing for years to come.
    First, modernize Medicare by combining Parts A and B with a 
unified deductible and coinsurance. Enrollees have conflicting 
incentives to weigh relative costs when choosing among options 
for treatment. Moreover, if Medicare patients incur extremely 
high medical costs, they can face a significant amount of cost 
sharing, because the program does not cap these expenses. This 
proposal would replace the current complicated mix of cost-
sharing provisions with a single combined annual deductible 
covering all services in Parts A and B; a uniform coinsurance 
rate for amounts above that deductible, including the inpatient 
expenses; and an annual cap on each enrollee's total cost-
sharing liabilities.
    The administration also has proposed increased beneficiary 
cost sharing, such as increased Part B deductibles for new 
Medicare beneficiaries. The AHA agrees with the 
administration's position that Medicare cost sharing, quote, 
``helps to share responsibility for payment of Medicare 
services between Medicare beneficiaries,'' and that increased 
cost sharing will serve to, quote, ``strengthen program 
financing and encourage beneficiaries to seek high-value 
healthcare services.''
    Second, make modifications to first-dollar Medigap 
coverage. Some Medigap plans cover all or almost all 
copayments, including even modest copayments for routine care 
that most beneficiaries can afford. This practice gives 
beneficiaries less incentive to consider the cost of services, 
leading to higher Medicare utilization, costs, and Part B 
premiums. There are various proposals for improving incentives 
under Medigap. Specifics on the structure of first-dollar 
Medigap changes can be discussed and determined by the 
Congress, and the AHA is open to the administration's and CBO's 
proposals.
    Third, increase income-related premiums under Medicare. The 
administration in its 2014 budget proposed doing this based on 
Medicare beneficiary income, and this is another approach the 
AHA believes Congress should explore.
    And, fourth, reform the medical liability system. Hospitals 
and physicians continue to face skyrocketing costs for 
professional liability insurance.
    In conclusion, there are many actions providers need to 
pursue, and we are working on those in areas of our control. 
For example, seeking to eliminate preventable infections and 
complications, as well as eliminating nonvalue-added 
treatments. And we are making real progress. Study after study 
confirms that hospitals are improving the quality and equity of 
care they deliver. Just last week the CDC announced that 
hospitals reduced central line associated bloodstream 
infections and surgical site infections by 46 percent and 19 
percent, respectively, between 2008 and 2013.
    The AHA's Health Research and Educational Trust directed a 
national project to reduce central line infections and is 
currently administering a program and fellowship to prevent 
catheter-associated urinary tract infections, as well as 
directing the Nation's largest hospital engagement network.
    All of this shows that real improvements in health and 
health care, not arbitrary cuts to provider payments, have the 
ability to put our country on a more sustainable fiscal path, 
and they have received bipartisan support.
    We look forward to working with the committee to solve the 
Medicare SGR problem. Thank you very much.
    Mr. Pitts. The chair thanks the gentleman for that very 
constructive testimony.
    [The prepared statement of Mr. Umbdenstock follows:]
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    [The attachment to Mr. Umbdenstock's statement has been 
retained in committee files and can be found at: http://
docs.house.gov/meetings/if/if14/20150122/102827/hhrg-114-if14-
wstate-umbdenstockr-20150122.pdf.]
    Mr. Pitts. Dr. O'Shea, you are recognized for 5 minutes.

                 STATEMENT OF GERALDINE O'SHEA

    Dr. O'Shea. Chairman Pitts and Ranking Member Green, 
members of the subcommittee, on behalf of the American 
Osteopathic Association, thank you for the opportunity to 
testify today on the importance of permanently reforming the 
Medicare physician payment system.
    My name is Geraldine O'Shea. I am a DO, I am a board 
certified osteopathic internist from Jackson, California. I 
have been practicing osteopathic medicine for 22 years. 
Osteopathic physicians, like MDs, are fully licensed to 
prescribe medicine and practice in all specialty areas, 
including surgery. DOs are trained to consider the health of 
the whole person and use their hands to help diagnose and treat 
their patients. DOs take care of people, not problems, and 
utilize a mind, body and spirit, patient-centered approach to 
healing itself. DOs use this approach in addition to all other 
modalities of modern medicine.
    Over 60 percent of practicing DOs specialize in primary 
care fields. The profession also has a longstanding history of 
training physicians who practice in rural and other underserved 
areas. I am currently the medical director of Foothills Women's 
Medical Center in Jackson, California. My practice is comprised 
of women's health and primary care and also hospital care, and 
I deliver it each day, and I have the opportunity to see and 
treat my patients. I also serve on the Board of Trustees for 
the American Osteopathic Association, which represents 110,000 
osteopathic physicians and osteopathic medical students, who 
are training in 30 colleges of osteopathic medicine in 42 
locations across our Nation.
    Today I will share with you my personal experience of the 
detrimental impact the current Medicare physician payment 
system has on all physicians and how it is a barrier to high-
quality care for our Nation's seniors. My charge here is not 
only to represent osteopathic physicians and medical students 
and our medical M.D. Colleagues, but really to advocate for the 
patients that we serve.
    Payment reform should no longer be an if, but must be a 
when, and the time is now. The current system is stifling 
innovation and preventing a move to a system focused on quality 
of care instead of volume. It is also stifling a move to 
delivery models focused on care coordination and a systems 
approach.
    As a DO, this fragmentation does not align with my training 
and the philosophy behind osteopathic medicine. It is time we 
looked past short-term solutions. We must instead consider the 
Medicare system as a whole, physicians and other providers, and 
most importantly our seniors. The impact of inaction today or 
continuation of only treating the short-term problem will have 
negative repercussions for the health of Medicare, and we must 
keep this in mind throughout today's discussions.
    The osteopathic profession continues to fully support the 
bicameral, bipartisan policy framework that was developed last 
year by all three committees of relevant jurisdiction in 
Congress, and we thank you all here too. We greatly appreciated 
that the committees incorporated input from the physician 
communities at every step of the way and gained overwhelming 
support of the house of medicine, and that is not an easy task.
    Quality of care will ultimately improve when payment 
incentives increase and are aligned with healthcare quality. 
The proposal would stabilize physician payments while 
transitioning into a system that promotes the delivery of high-
quality patient care. The new system includes strong 
recognition of the importance of primary care as supported by 
the patient-centered medical home. The AOA was one of the four 
organizations which developed the principles of the medical 
home.
    The proposal also works to align the current disjointed 
quality reporting programs to ease the administrative burdens 
placed upon physicians. This means we can spend less time with 
paperwork and more time with our patients, where we are needed 
most.
    There have been various proposals advanced and discussed 
over the years by lawmakers and advocates on how to 
specifically pay for or even not pay for a permanent fix to the 
SGR. However, we need to consider the whole system, just as the 
osteopathic physician considers the whole person in determining 
how an illness or issue might be impacting a patient.
    Recent congressional discussions on other healthcare 
priorities have included strong consideration of unpaid 
legislative solutions, and these considerations should also be 
extended to payment reform. We must recognize there cannot be 
significant legislative action on other important healthcare 
priorities until the physician payment issue is permanently 
resolved. It is not for us as physicians to be prescriptive in 
which specific approach Congress should take in offsetting a 
permanent solution to a reformed Medicare physician payment 
system.
    Whether targeted, unpaid, OCO, or a combination of these 
offset approaches, we urge Congress to consider the potential 
impact to the entire healthcare system, particularly on our 
patients. Jeopardizing patient access to care within the 
Medicare program cannot be an option. The AOA advocates for the 
patients we serve, including enhancing their access to care, to 
protecting the patient-physician relationship, because we 
believe this is vital to the delivery of quality health care.
    As leaders of Congress, we do implore you to take action 
now, before March 31, to fix the physician payment system 
permanently, protect seniors, and strengthen the Medicare 
program.
    I thank you for your time today. I am hopeful on behalf of 
my physician colleagues and patients that this Congress will 
get this issue resolved permanently. And I thank you very much.
    Mr. Pitts. We hope so. Thank you very much, Dr. O'Shea.
    [The prepared statement of Dr. O'Shea follows:]
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    Mr. Pitts. Dr. Speir, you are recognized for 5 minutes for 
your opening statement.

                    STATEMENT OF ALAN SPEIR

    Dr. Speir. Thank you. Good morning. Chairman Pitts, Ranking 
Member Green, and distinguished members of the committee, thank 
you for the opportunity to present testimony today on behalf of 
the Society of Thoracic Surgeons. My name is Alan Speir, and I 
am a practicing cardiothoracic surgeon and medical director of 
Cardiac Surgical Services just across the river in the Inova 
Health System. I am also chair of the Workforce on Health 
Policy, Reform, and Advocacy for the Society of Thoracic 
Surgeons, and chair of the Board of Directors for the Virginia 
Cardiac Surgery Quality Initiative.
    Founded in 1964, the STS is an international not-for-profit 
organization representing more than 6,800 surgeons, 
researchers, and allied healthcare professionals in 90 
countries who are dedicated to ensuring the best possible 
outcomes for surgeries of the heart, lung, and esophagus, and 
other surgical procedures within the chest.
    On behalf of the Society, I would like to applaud this 
committee for holding a hearing on Medicare physician payment 
reform just 11 days into this new Congress. We are grateful for 
your sense of urgency and are eager to work with you to ensure 
that permanent SGR repeal and Medicare payment reform are 
enacted this year.
    I would also like to thank you for introducing the SGR 
Repeal and Medicare Provider Payment Modernization Act in the 
last Congress. I would implore you not to leave this major 
policy achievement to languish beyond the current March 
expiration of the current SGR patch.
    I hope that my testimony today helps to demonstrate that 
the cost of continuing nothing will be far more devastating to 
Medicare patients and providers than the expense of 
implementing a meaningful payment reform policy.
    In my written comments, I provide additional information on 
the STS National Cardiac Database and the Virginia Cardiac 
Surgery Quality Initiative, both of which provide a foundation 
for our remarks here today. Established in 1989, the 
fundamental principle underlying the STS National Database has 
been that surgeon engagement in the process of collecting 
information on every case, combined with robust risk adjustment 
based on pooled national data and feedback of such data to the 
individual practice and institution, will provide the most 
powerful mechanism to change and it will improve the practice 
of surgery for the benefit of our patients. For example, 
published results of patients undergoing coronary artery bypass 
surgery between 2000 and 2009 in institutions participating in 
the database realized a 24 percent reduction in mortality and a 
26 percent reduction in perioperative stroke.
    The VCSQI is a regional collaborative that is voluntary 
within the Commonwealth of Virginia, comprised of 14 cardiac 
surgical practices and 18 hospitals, founded in 1994 to improve 
the results of cardiac surgical care and to reduce cost. By 
creating evidence-based protocols using patients' clinical 
information, matched with administrative and cost data, the 
VCSQI demonstrated improving quality will reduce costs. For 
example, the VCSQI generated more than $43 million in savings 
to all payers through blood product conservation efforts, and 
more than $20 million in savings by identifying the best 
treatment for cardiac surgical patients with a perioperative 
arrhythmia called atrial fibrillation.
    The STS has long advocated that claims information is 
critical to the effort to provide patient outcomes and care 
efficiencies. We are particularly grateful that the proposed 
SGR legislation would have allowed qualified clinical data 
registries to access Medicare administrative claims data. This 
legislation would also have provided a pathway for the 
development of specially driven alternative payment models that 
will allow payments and providers alike to benefit from quality 
and efficiency improvements.
    Essential to that transition is a period of predictable 
payment for physicians without the threat of SGR-related cuts. 
It is this last point, the opportunity to develop alternative 
payment models during a so-called period of stability, where I 
would like to focus my remaining comments.
    Inspired by this in innovative proposal, the STS convened 
our thought leaders and policy and registry experts to examine 
the procedures most frequently performed by the STS. Together, 
we worked to craft team-based alternative payment models for 
the Heart Team and Lung Cancer Care Team in hopes that these 
models will provide a blueprint for other care team models in 
our specialty. We are confident that we can use the STS cardiac 
database, combined with administrative claims data and quality 
information from others in the care team, to promote patient-
centered, team-based care that improves clinical outcomes and 
patient satisfaction, lowers healthcare costs, and rewards all 
providers by putting the patient first.
    While our APM concepts are not yet finalized, I wanted to 
demonstrate to this committee that the physician community is 
ready and eager for this opportunity. Unfortunately, as we wait 
for payment reform to become a reality, the Centers for 
Medicare and Medicaid Services is implementing policy that will 
decimate the proposed period of stability, stifle innovation, 
and limit our ability to transition to new alternative payment 
models. Specifically, CMS proposes to convert more than 4,000 
10- and 90-day global surgical CPT codes to a zero-day global 
by 2017 and 2018 respectively.
    Currently, the cardiothoracic surgeons receive a single 
bundled payment from Medicare for the surgeries they perform. 
This payment includes preoperative consultation, the operative 
procedure itself, perioperative and post-operative care, and 
coordination of medical specialty consultations and outpatient 
visits.
    Mr. Pitts. If you can summarize, please.
    Dr. Speir. Thank you.
    It is clear that the Medicare payment reform is fatally 
flawed. Furthermore, with the uncertainty of the SGR paradigm, 
compounded by CMS global payments issues, innovation and 
meaningful physician-led reform is nearly impossible.
    Mr. Pitts. Thank you very much, Dr. Speir.
    [The prepared statement of Dr. Speir follows:]
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    Mr. Pitts. We are presently voting on the floor. We are 
still going to try to get a couple more of you in. So the chair 
recognizes Dr. Miller for 5 minutes.

                    STATEMENT OF KEN MILLER

    Mr. Miller. Thank you, Chairman Pitts, Ranking Member 
Green, and members of the committee. I appreciate the 
opportunity to speak with you today on behalf of the American 
Association of Nurse Practitioners, the largest full-service 
professional membership organization for nurse practitioners of 
all specialties. With over 56,000 individual members and over 
200 organization members, we represent the more than 205,000 
nurse practitioners across the Nation.
    My name is Ken Miller, and I currently serve as the 
president of the American Association of Nurse Practitioners. I 
am a family nurse practitioner, and previously served as the 
associate dean for academic administration at the Catholic 
University of America here in the District.
    I am here to confirm our support of efforts to repeal the 
Medicare SGR, particularly SGR Repeal and Medicare Provider 
Payment Modernization Act of 2014 proposed in the last 
Congress.
    As you know, nurse practitioners have been providing 
primary, acute, and specialty care for half a century and are 
rapidly becoming the healthcare provider of choice for millions 
of Americans. According to our most recent survey data, more 
than 900 million visits were made to NPs in 2012, a number we 
anticipate will grow in the coming years. AANP strongly 
believes this serves as a testament to the trust that patients 
have in our workforce.
    We commend the committee for their bipartisan legislative 
proposal, which recognizes all Part B providers, including 
nurse practitioners. Throughout the development of this 
legislation, the committee gave all stakeholders the 
opportunity to provide comments. This open process led to a 
strong bipartisan product, and this process should serve as a 
model as we move forward.
    The legislation seeks to include all Medicare Part B 
providers by utilizing provider-neutral language. In addition, 
it includes a number of proposals that reflect the full 
partnership of nurse practitioners in the Medicare program, 
specifically the inclusion of nurse practitioners in the first 
year of the Merit-Based Incentive Payment System and ensuring 
that nurse practitioner-led Patient Centered Medical Homes are 
eligible to receive incentive payments for the management of 
patients with chronic disease.
    Every day, increasing numbers of baby boomers become 
eligible for Medicare. Projections show that the number of 
beneficiaries are expected to increase by 20 million over the 
next 10 years, resulting in approximately 72 million patients 
being treated. Nurse practitioners are ready to do their part 
to ensure these patients receive timely, high-quality care.
    According to the American Association of Colleges of 
Nursing, there are currently 63,000 students enrolled in nurse 
practitioner programs in the United States, with over 16,000 
students graduating in 2014. Nurse practitioners provide care 
in nearly every healthcare setting, including clinics, 
hospitals, emergency rooms, urgent care sites, private 
physician or NP practices, both managed and owned by NPs, 
nursing homes, schools, colleges, retail clinics, public health 
departments, nurse-managed clinics, and homeless clinics. It is 
important to remember that in many of these settings, nurse 
practitioners are the lead provider.
    Nurse practitioners have continuously played a key role in 
treating Medicare beneficiaries, and since 1998 NPs have 
received direct reimbursement for providing Medicare Part B 
services in all settings. Nearly 85 percent of the current 
workforce are treating Medicare beneficiaries. Additionally, 
Medicare data shows that almost 17 percent of the beneficiaries 
in traditional fee-for-service coverage receive one or more 
services every year from NPs that bill Medicare directly.
    The vast majority of NPs are primary care providers. 
Eighty-eight percent are educationally prepared to be primary 
care providers, and over 75 percent currently practice in 
primary care settings. NPs bring a comprehensive perspective to 
health care by blending clinical experience in diagnosing and 
treating acute and chronic illnesses with an added emphasis on 
health promotion and disease preventions.
    This comprehensive perspective is deeply rooted in nurse 
practitioner education. All NPs must complete a master's or 
doctoral program and have advanced clinical training beyond 
their initial professional registered nurse preparation. 
Didactic and clinical courses prepare them with specialized 
knowledge and clinical competency to practice in a variety of 
settings.
    Daily practice includes assessment, ordering, performing, 
supervising, and interpreting diagnostic and laboratory tests, 
making diagnoses, initiating and managing treatment, including 
prescribing medication, as well as nonpharmacologic treatments, 
coordination of care, counseling, educating patients, their 
families, and communities.
    In closing, the American Association of Nurse Practitioners 
would like to reiterate its support for the SGR Repeal and 
Medicare Provider Payment Modernization Act of 2014 proposed in 
the last Congress. AANP is ready to provide support throughout 
the legislative process in the 114th Congress and looks forward 
to working with the committee and this Congress on the passage 
of this bill in 2015. Thank you.
    Mr. Pitts. The chair thanks the gentleman.
    [The prepared statement of Mr. Miller follows:]
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    Mr. Pitts. Dr. McAneny, you are recognized for 5 minutes.

                  STATEMENT OF BARBARA MCANENY

    Dr. McAneny. Thank you, Chairman Pitts and Ranking Member 
Green, members of the committee. My name is Barbara McAneny, 
and I am an oncologist from Albuquerque, New Mexico, and I am 
chair of the American Medical Association Board of Trustees.
    The AMA believes that the Medicare sustainable growth rate 
formula, the SGR, presents one of the most important yet 
difficult challenges our healthcare system faces today. We 
commend this committee for its extensive work in the last 
Congress and for taking this first step in the 114th Congress 
to resolve this issue.
    The time is ripe for Congress to finish the task of 
repealing the SGR and replace it with payment reforms that 
enhance and support patient care. Congress should act quickly 
to enact the SGR Repeal and Medicare Provider Payment 
Modernization Act reported by this committee in the 113th 
Congress by a vote of 51 to 0 as part of a thoughtful, 
bipartisan, and bicameral process.
    This legislation represents an end to the fundamentally 
flawed SGR formula, which is a major barrier to the development 
and adoption of healthcare payment and delivery reforms that 
can improve the care for our Nation's seniors and the disabled 
while reducing overall spending. Also, TRICARE is tied to 
Medicare payments, so our Nation's military and their families 
will also benefit from its passage.
    The reforms included in this legislation enjoy the strong 
support of an array of stakeholders, including over 600 State, 
specialty and national medical associations, as well as 
organizations representing the interest of patients.
    Under this proposal, physicians who join new payment models 
would be supported in their transition into new models of care 
delivery that would improve the quality and deliver more 
coordinated care while saving the Medicare system money. There 
are now 424 accountable care organizations serving over 7.8 
million Medicare beneficiaries, and this has saved Medicare 
$417 million. The committee proposal would expand our ability 
as physicians to develop and participate in even more 
innovative ideas.
    Right now physicians are facing a tsunami of penalties from 
the various Medicare quality reporting programs: PQRS, 
Meaningful Use, and the Value-Based Payment Modifier. Under the 
committee proposal, we would report under one streamlined 
program known as the Merit-Based Incentive Payment System, or 
MIPS. We would no longer be forced to divert our attention and 
our resources towards complying with overlapping and often 
conflicting programs. Instead, we could focus those resources 
on making meaningful changes in our practices that benefit our 
patients.
    We need the flexibility that the MIPS program provides so 
that we would be free to demonstrate our quality of care 
according to the standards that match our specialty and our 
type of practice. Therefore, the committee proposal does far 
more than merely replacing the SGR, it is an important step 
forward to help physicians to successfully restructure our 
practices to provide better care at a lower cost.
    Please take this opportunity to build upon the progress 
that your committee has already made by continuing to work in a 
bipartisan manner to resolve the remaining barriers to these 
significant policy reforms.
    Everyone agrees that we need to contain Medicare spending, 
but the SGR was never the solution and it simply has not 
worked. The 17 SGR patches enacted since 2003 have cost the 
Federal Government over $169 billion, which is far more than 
the CBO's estimate of this committee's proposal. So the time to 
replace the SGR is now.
    We understand that the pathway forward must have the 
necessary bipartisan support to pass both chambers and to be 
signed into law by the President. Almost 10 months have passed 
since Congress set the latest deadline to enact the 
legislation, and time is running short. We urge this committee 
to commence negotiations to resolve these remaining questions. 
Only Congress can find the common ground to resolve the 
outstanding budgetary issues.
    We are very appreciative of the committee's leadership on 
Medicare physician payment reform, and the AMA stands ready to 
be a constructive partner. We thank you very much for the 
opportunity to share our views.
    Mr. Pitts. Thank you very much.
    [The prepared statement of Dr. McAneny follows:]
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    Mr. Pitts. We have got 1 minute left in the vote. We still 
have 260 people not voting. We will try the last one. So, Dr. 
Schneidewind, you are recognized for 5 minutes.

                 STATEMENT OF ERIC SCHNEIDEWIND

    Mr. Schneidewind. Chairman Pitts, Ranking Member Green, and 
members of the committee, thank you for holding this hearing on 
reforming Medicare physician reimbursement and for inviting 
AARP to speak from the Medicare beneficiary's perspective.
    My name is Eric Schneidewind and I am the AARP president-
elect. AARP is a nonpartisan organization of over 38 million 
members ages 50-plus, many of whom are Medicare beneficiaries. 
During the previous Congress, AARP was pleased to work with 
committee staff from both chambers and both parties in 
developing what became H.R. 4015.
    Permanently repealing the sustainable growth rate formula 
will bring stability and predictability to healthcare providers 
and Medicare beneficiaries. The reimbursement reforms in the 
bicameral bill are a significant step toward improving quality 
and value. We applaud the move toward more coordinated care, 
the streamlined quality measurement and reporting system, and 
greater data transparency. Thanks to the tireless work of many 
of the legislators and staff here today, we are closer than we 
have ever been to finally replacing this broken reimbursement 
system.
    However, the final bill introduced last Congress did not 
include important health extenders, which are usually included 
with the annual doc fix legislation. Three provisions in 
particular are crucial and should be made permanent along with 
permanent SGR repeal legislation.
    First, the Qualifying Individual, QI, Program pays Part B 
premiums for beneficiaries with incomes between 120 percent and 
135 percent of the federal poverty line. Most Medicare 
beneficiaries pay a monthly Part B premium of $104.90 and out-
of-pocket costs that low-income QI recipients cannot afford.
    Second, the Medicare therapy caps exception process allows 
access to needed care for people with long-term chronic 
conditions, most notably for those who require long-term 
therapy services.
    Third, funding for critical community-based resources is 
also expiring. This includes outreach and enrollment assistance 
to low-income Medicare beneficiaries, as well as funding aging 
and disability resource centers. AARP will not consider SGR 
repeal legislation complete unless those beneficiary 
protections are included.
    However, a question still remains on the need for budget 
offsets. In light of current and future savings in the Medicare 
program, Congress would be justified in not fully offsetting 
the costs of a permanent repeal at this time.
    As the committee considers legislation, it is important to 
remember that half of all Medicare beneficiaries live on an 
income of less than $23,500 per year and spend 17 percent of 
their income on health care. Additionally, standard beneficiary 
premiums are established to cover 25 percent of Part B 
spending. Given this, one-quarter of any increase in Medicare 
Part B spending over current law will automatically be borne by 
beneficiaries in the form of higher premiums. The typical 
Medicare beneficiary cannot afford to pay more out of pocket.
    AARP has long advocated for responsible solutions for 
slowing Medicare spending growth and improving the program. 
Other system reforms recommended by AARP to help reduce 
Medicare spending, not part of H.R. 4015, include expanding 
competitive bidding for durable medical equipment, equalizing 
payments based on physician site of service, recouping 
overpayments to Medicare Advantage plans, increasing support 
for transitional care and chronic care management, and ensuring 
full and effective use of all highly skilled clinicians.
    In addition, while lawmakers have considered shifting cost 
to beneficiaries, there has been little talk of reforming one 
of the most expensive areas of health care, prescription drugs. 
AARP believes that any discussion of budget offsets for 
Medicare reimbursement reform should include savings from 
prescription drugs.
    We urge you to give strong consideration to the following 
prescription drug proposals that could save at least $150 
billion: provide the Medicare program rebates for drugs for 
those who are dually eligible; enable the Secretary of HHS to 
negotiate for lower prescription drug prices; reduce the 
exclusivity period for biologic drugs; prohibit pay-for-delay 
agreements; and stop risk evaluation and mitigation strategies 
from being used to block generic drug and biosimilar product 
development.
    Again, thank you for holding this hearing and for making 
SGR and Medicare reimbursement a priority at the start of the 
114th Congress. AARP welcomes the progress that has already 
been made and looks forward to working with you to get 
physician payment reform across the finish line.
    I would be happy to answer any questions.
    Mr. Pitts. Thank you for your testimony.
    [The prepared statement of Mr. Schneidewind follows:]
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    Mr. Pitts. Time has expired on the vote. We have two votes 
on the floor, so members should go directly to the floor. 
Please come back immediately.
    Thank you for your patience. The committee stands in 
recess.
    [Recess.]
    Mr. Guthrie [presiding]. Thank you. We will bring the 
committee back to order. Thanks for your patience during our 
voting time. I guess we will have until 12:30 until the next 
set of votes, so hopefully we can get through the questions. 
And I will recognize myself for questioning.
    Yesterday we had a first panel in the subcommittee, and we 
heard from members of both sides of the aisle who said that SGR 
reform must be paid for. Former Senator Joe Lieberman warned 
that stakeholders who are pushing for unpaid SGR reform bill 
could actually sink the chances of getting a permanent fix 
adopted by Congress. We also heard from policy experts that 
there are bipartisan improvements to Medicare which can help 
pay for SGR reform.
    So I want to ask the panel, everybody, to answer to this 
question. So I would be curious in hearing very briefly from 
each of our witnesses the answer to this question: Would you 
rather see a permanent SGR fix pass in March with bipartisan 
pay-fors or see Congress be forced to do another patch? So pay-
for or patch? The option really isn't a question to say, well, 
an unpaid-for fix. It is a paid-for fix or a patch. And let's 
go briefly down the line of witnesses.
    Dr. Umbdenstock. Well, at the AHA, we would pick door 
number one. We think it needs to be fixed, frankly, should have 
been fixed a long time ago when the costs were lower, the 
problem was smaller. We put it off. At the moment, the rate of 
increase is so low that the projections are much lower as to 
the costs going forward. We think it should be taken care of, 
but I have to understand score again, not at the expense of 
payments to other providers.
    Mr. Guthrie. OK. Thanks.
    Dr. Umbdenstock. We have got to find other solutions.
    Mr. Guthrie. I am going to try to get down the list.
    Dr. O'Shea.
    Dr. O'Shea. As I said before, we know that it is not just 
for physicians to say, but we do know that offsetting needs to 
be done for a permanent solution. So we are actually for a 
permanent solution and not for a patch. A physician is never 
going to want a patch.
    Mr. Guthrie. Thanks.
    Dr. Speir.
    Dr. Speir. Permanent fix.
    Mr. Guthrie. Permanent fix.
    Dr. Miller.
    Mr. Miller. Permanent fix. We go with door one because the 
patch hasn't worked for so many years. We need to fix it.
    Mr. Guthrie. OK. Thanks.
    Dr. McAneny.
    Dr. McAneny. We also want a permanent fix to this. We are 
so close. You have developed great policy. If we can get the 
SGR out of the way, then we can move forward towards the more 
important work of trying to restructure how we actually deliver 
care to our patients.
    Mr. Guthrie. Thank you.
    Mr. Schneidewind.
    Mr. Schneidewind. AARP would support a permanent fix, and 
we have proposed means to pay for it.
    Mr. Guthrie. OK. Thank you. Thank you very much.
    For Mr. Umbdenstock from AHA, in your testimony you wrote 
down four different ideas you said for cutting funding. You 
expressed opposition to cutting funding for services provided 
by other caregivers, which you just reinforced, and I 
understand, and you suggested there is a tipping point of the 
repeated ratcheting down of payments for Medicare and Medicaid 
hospital services past which patients on these programs will 
face harder times or they will have longer wait times if we 
continue to go down.
    Could you just describe for the committee the scope of the 
cuts the hospitals have seen since 2010 and what type of cuts 
in the way of market basket adjustments are on the horizon? The 
situation the hospitals have been in since 2010.
    Dr. Umbdenstock. Be happy to. Thank you.
    Since 2010, hospitals have experienced $121 billion in the 
10 years after each of those cuts, $121 billion cumulative in 
cuts through the Medicare program, whether it was through 
sequestration cuts or cuts through coding offsets or reductions 
in bad debt payments under Medicare. A variety of different 
cuts have occurred totaling $121 billion.
    In addition, there are payment reductions in the ACA that 
were agreed to, to help pay for coverage under the ACA. Those 
cuts are now starting to kick in as well. They were not in the 
first couple of years. They started essentially just before 
coverage started and now will roll out in the later years. So 
market basket adjustments, reductions in DSH payments, 
disproportionate share payments, and so on are almost looming. 
So additional cuts on top of that would be untenable.
    Mr. Guthrie. You had several policy proposals when you did 
your testimony. Which ones that you brought forth would you 
suggest should be paired with SGR reform?
    Dr. Umbdenstock. Well, those are four that we wanted to 
highlight, in particular the combining of Parts A and B and the 
restructuring of that outdated method under Medicare; modifying 
the first-dollar coverage in Medigap policies to make more 
prudent buyers within the Medicare program; and increase 
income-related premiums, med mal reform; and I didn't mention, 
but always on our list is administrative simplification and 
regulatory relief.
    So we think that those have all been scored. They have all 
received bipartisan support and should be considered as pay-
fors.
    Mr. Guthrie. Thank you.
    And I will yield back 5 seconds because we are going to try 
to get everybody in before the next round of votes, if we can 
stick to the 5-minutes rule as close as we can.
    Mr. Green.
    Mr. Green. Thank you, Mr. Chairman.
    And I talked to some of you beforehand. All of us want to 
repeal the SGR. It is the issue of paying for it and how do we 
pay for it. I don't want to put it on the backs of the Medicare 
patients. And some of you know the kind of district I 
represent. It is a very urban area. We have a great medical 
center in Houston. Although I have a very urban area, and the 
physicians who practice in my area are the ones 45 percent or 
55 percent of their practice is senior citizens with Medicare. 
If we don't fix the SGR, they can't be in business.
    Now, my suburban physicians can because they have a lot of 
third-party coverage, whereas if with you have a load of 
seniors on Medicare, you can't. So that is why I want to fix 
it, because I want those doctors to still be in my district so 
people don't have to go to the suburbs to see a physician. But 
that is the problem with paying for it.
    Dr. McAneny, I understand the cost of a permanent repeal of 
SGR is $118.9 billion. I think that is the cheapest number I 
have seen since we have had it. It would cost $32 billion just 
to fix it for 2 years. And one of our concerns is, and I have 
heard all your and read all your testimony, is that how do we 
do it without impacting the patients who are part of Medicare, 
because, as we know, seniors on Medicare pay a huge percentage 
higher for health care, even though they have Medicare, than 
seniors under 65.
    And so that is our concern. Are there any suggestions? I 
know there are some reforms we can do, and the reforms may be 
good in idea, but if they save money, then we can use that as a 
pay-for.
    Dr. McAneny. The AMA has a large body of Medicare reform 
policy which we have carefully thought of over many years and 
would love to have the opportunity to go over. With any pay-
for, the question really will be in the detail. We feel that 
any solution is going to have to be bipartisan. It is going to 
have to be something that is bicameral and can be signed by the 
President. And we really look a lot to the leadership of this 
committee and Congress to lay the guidelines, and then we would 
be happy to work with you any way we can to try to look over 
the ideas that are presented.
    We do believe that by getting the SGR out of the way and 
letting physicians restructure their practices, that we can do 
a lot to save money going forward. In my own practice, we have 
an Innovation Center grant that has created an oncology medical 
home. We have cut hospitalizations for cancer patients by 
almost half. That saves money and it takes better care of our 
patients. So we think there are a lot of things out there that 
can really provide better care with lower costs and that that 
should be considered as part of the equation.
    Mr. Green. Thank you.
    Dr. Schneidewind, I know representing AARP, and your 
constituents are actually the Medicare recipients. Do you know 
if any of the health reforms that you have seen or heard today 
that would actually save enough money we could use it for a 
pay-for, but would also have more efficient delivery to your 
constituents, AARP members?
    Mr. Schneidewind. Well, I think embedded in the legislation 
itself, of course, are reimbursement reforms which are going to 
produce that result. And I think what we look to is reforms 
that impact, for instance, competitive bidding for durable 
medical equipment. In one 5-year period there were $70 billion 
of overpayments to Medicare Advantage plans, we believe for 
upcoding and that sort of thing. So that would offer $140 
billion over a 10-year period. Transitional care, we could 
support that better, and that obviously reduces readmission 
rates.
    But really the place to look for the savings, we think, are 
the drug costs, and steps like extending the rebates from just 
Medicaid to dual eligibles, you are talking about $140 billion 
over a 10-year period from that one alone. So we really 
respectfully suggest that this committee look hard at 
prescription drug costs as a place to save money, to leave 
these providers in a good position, and to make this Medicare 
program solvent and sound for the future.
    Mr. Green. And I appreciate that because, again, in a 
district like I have, we have a lot of dual eligibles already. 
But that is the issue.
    And, Mr. Chairman, I will yield back my 17 seconds.
    Mr. Guthrie. Thank you. Being efficient. Trying to get the 
votes.
    The next is also from Texas, Dr. Burgess.
    Mr. Burgess. Thank you, Mr. Vice Chair. I appreciate you 
not referring to me as the old vice chair.
    In the interest of time, I would like to actually pose a 
multipart question, or two questions, and then I would like to 
go down the line, starting with Rich and ending up at the AARP. 
And the two questions would be, as you understand the policy 
language of the 4015 in the previous Congress, are you 
supportive of that policy? And the second part to that 
question, would you support the committee making this a 
priority for this Congress? And not to lead the witnesses, but 
the correct answers are yes and yes.
    Dr. Umbdenstock. Thank you for that clarification. Yes and 
yes.
    Dr. O'Shea. Dr. Burgess, number one, we really want to 
thank you for all the work that you have done, we appreciate 
it, as the physician leader that you are.
    Yes and yes.
    Dr. Speir. Thank you, Dr. Burgess. Yes and yes.
    Mr. Miller. Thank you, Dr. Burgess. Yes and yes.
    Dr. McAneny. To be redundant, thank you, Dr. Burgess. Yes 
and yes.
    Mr. Schneidewind. Yes and yes. Thank you, Dr. Burgess.
    Mr. Burgess. Great. I am glad we all got that on the 
record.
    Dr. McAneny, I need to ask you a question. I may have to 
move to get to a right microphone.
    We have talked about the SGR for a long time. I have had a 
bill every term I have been in Congress. But a lot of people 
don't really understand what happens if we blow through a 
deadline, which we did at the end of 2005 when Republicans were 
in charge and we did three times in 2010 when the Democrats 
were in charge. Can you kind of trace out for us what the 
effect is on a physician's practice and a patient's access to 
their physician when we blow through those deadlines and why it 
is so critical that we not face those deadlines year in and 
year out?
    Dr. McAneny. Thank you, Dr. Burgess, for that question.
    I do manage my practice in Albuquerque and in little towns 
in New Mexico where we serve a lot of underserved people. What 
happens when we blow through one of those deadlines is that we 
suddenly cannot submit a bill. Our cash flow drops very quickly 
because not only do I have to make pay payroll every 2 weeks 
because my employees live on that, they have to pay their 
mortgages and buy food, but I cannot buy the supplies that I 
need to treat my patients. I cannot afford to purchase the 
chemotherapy to give to the patients who are in need of it.
    Then we incur double damage in that when we submit a bill 
and then there is a patch or a change that occurs later, then 
we have to resubmit the bill. The accounting nightmares are 
terrible to try to figure out what has actually been paid, what 
still is owed. I often have had to take out bank loans or lines 
of credit, which means that we lose the interest on that. And I 
am a small business, we have 200 employees, and a lot of people 
depend on us for their livelihoods. So this really is a 
devastating idea.
    And as we are trying to restructure what we do to provide 
better health care, the uncertainty of not knowing whether or 
not my major payer, Medicare, is going to be there, is going to 
cut my fees by 21 percent, or whether they are going to 
reinstitute a zero percent, which is actually a 3 percent loss 
because the expense goes up about 3 percent per year, I haven't 
been able to give my nurses and my staff a raise for the last 2 
years.
    So it is devastating to us as small businesses. It is 
devastating to us as physicians because we can't do what we 
were trained to do, which is to take care of the people who 
depend on us.
    Mr. Burgess. Well, and the reason I asked that question, of 
course, we have until March 31 for something to happen, which 
is get the President to sign the SGR fix or come up with a doc 
fix for whatever period of time, and I am concerned that if we 
spend too much time reinventing the wheel now we will burn 
through that daylight that is available to us and push up 
against the deadline.
    But let me just ask you as a practical matter, and perhaps, 
Dr. O'Shea, you as well, are you talking with your 
constituencies, your doctors who are part of your association, 
about the possibility that the full SGR cut might happen, that 
if Congress couldn't get its work done, that you might face 
this funding cliff that is set out in the statute?
    Dr. McAneny. Dr. Burgess, I think every physician, 
particularly those who manage a practice, considers that at 
about 3 in the morning, on a lot of mornings, of how am I going 
to keep the practice going if this happens. Yes, I think most 
physicians are aware that this would be devastating, and I 
think that more and more patients are becoming aware of what it 
would do to us if they couldn't get in to see their doctor at 
the time when they need their doctor.
    Mr. Burgess. Thank you.
    Dr. O'Shea. And I might say just, Dr. Burgess, say the same 
thing.
    Mr. Guthrie. Well, the time has expired. We are trying to 
get everybody's questions before the next vote. So I appreciate 
that.
    Ms. Matsui from California is recognized.
    Ms. Matsui. Thank you so much, Mr. Chairman.
    First of all, thank you very much for being here. 
Appreciate your testimony. It is a very important issue. And I 
know how much SGR repeal and replace means to each of your 
organizations.
    I have a huge healthcare sector in my district, four major 
hospital systems. I think Dr. O'Shea knows because you are a 
member of one of them essentially. But I think that we have to 
do this. The thing is, the pay-for is so difficult. Where we 
stand now is seeing how to figure that out, and what I am 
hearing a lot about today is we want to do this but we don't 
want to do it here or here or here. And I am not singling 
anyone out, but that is the way it is here. But what I am 
looking at is let's do this but not at the expense of the 
seniors. Now, I think each of us feel that way too and are 
trying to balance that out.
    So what I am looking at now is, let's be very specific, so 
some of these are questions I am hearing, currently Medicare 
beneficiaries have separate cost-sharing structures, when they 
see doctors versus when they go to the hospitals. There may be 
ways to simplify this and modernize Medicare benefits to look 
more like health insurance products we see today. But current 
proposals to redesign Medicare benefits such as combining Part 
A and B deductibles would redistribute the burden of healthcare 
costs to the most vulnerable in the program.
    So, Mr. Schneidewind, can you talk about the potential 
impact on beneficiaries of a combined Part A and B deductible?
    Mr. Schneidewind. Yes, Representative. The Part A 
deductible is significantly higher than the Part B deductible, 
and so if those two are combined into one average number, it is 
pretty clear that a senior going for medical services as 
opposed to hospital would end up paying a higher deductible 
than they had prior to the change.
    And what concerns us is that in that situation somebody who 
is using medical services a lot and hospital very little would 
effectively, number one, be penalized financially and have a 
disincentive to seek care from physicians. And I hope people 
will recognize that the average person who is receiving 
Medicare has an income of $23,500, half have less than that, 
they pay $4,000 out of that $23,500 for medical care already. 
So increasing that, in addition to the regular Part B increases 
that occur, is unaffordable.
    Ms. Matsui. OK. Thank you.
    Now, these new payment delivery models incentivize and the 
SGR repeal and replace policy can make Medicare services more 
effective and maybe more efficient. This will save money while 
improving care. However, these savings are often difficult to 
demonstrate and quantify, as they occur in long-term time 
windows, we know how difficult it is to even score those 
things, and involve savings to the overall health system, not 
to mention the improvement in quality care that can be an 
invaluable effect on a patient's life. You can measure and 
estimate the reduced hospitalization costs caused by better 
management of a senior's chronic conditions, but you can't put 
a price on how that impacts seniors and their caregivers' 
lives. So I believe a more holistic approach to patient care, 
including strong preventive care, saves costs and lives.
    So, Dr. O'Shea, please discuss the benefits of the holistic 
approach to care, and include any comments you may have about 
savings that can be achieved and how this fits into what we are 
trying to do today, because I think we have to apply a holistic 
approach to this SGR replace-and-repeal policy too.
    Dr. O'Shea. I appreciate the question.
    Taking a holistic approach is what I think we have been 
gearing up for, for many, many years here. So what I would be 
speaking of is implementations the greater part of physicians 
around the country have done is with an her. The her and the 
patient-centered medical home are just ready to do these 
things, taking the whole patient into consideration. I actually 
lead the diabetic program at Sutter Amador Hospital.
    Mr. Collins. Could you speak into the microphone?
    Dr. O'Shea. As doing that, and as working with the chronic 
care model, when you have more implementation of preventative 
services early on in the chronic care model, you are going to 
get larger savings, you are stopping the fast creep of a 
chronic and a high-cost patient into a much more controlled, 
extending the care in an ambulatory setting and not having to 
use the hospital setting.
    We can do that, and I would speak also for combining Part A 
and B, if that can be achieved, but doing that and making sure 
that the primary care home that is specific for the patient, 
because it has to meet patient needs, is implemented, and in 
doing that in an aggregated affront to these costs, making the 
patient, but also the physician, accountable and knowing with 
all the information that we now can look at ourselves and look 
at your own cost savings, making those numbers known to 
physicians, to physician societies, to different state 
societies. You know, looking and then comparing to one another. 
I think as physicians we are used to being compared in services 
and things like that. You will actually find that we can 
tolerate that, can get geared toward that a lot faster than 
just always rotating patients.
    Ms. Matsui. OK. Well, thank you very much.
    Mr. Guthrie. Thank you. The gentlelady's time has expired.
    The chair is going to recognize for unanimous consent a 
standard of care statement that has been offered by the 
Cooperative of American Physicians, NORCAL Mutual Insurance 
Company, PIAA, Texas Medical Liability Trust, The Doctors 
Company. Without objection, so ordered.
    [The information appears at the conclusion of the hearing.]
    Mr. Guthrie. The chair now recognizes Chairman Barton.
    Mr. Barton. Thank you, Mr. Chairman. It is good to see you 
in the chair. It is good to see Mr. Green as the ranking member 
of the Health Subcommittee. That is quite an honor. It is good 
to have you there.
    I haven't watched this on TV, nor have I read your 
testimony. So I am a total innocent. But I will make a bet 
right now that we have agreement that we need to fix the SGR, 
everybody has said that, but I bet not one of the panelists has 
offered a way to pay for it. Am I right or wrong?
    What? We had somebody offer a pay-for?
    Dr. Umbdenstock. I think the American Hospital Association 
put forward suggestions, as did----
    Mr. Schneidewind. As did AARP.
    Mr. Barton. Well, I would have lost that bet. You all 
should have taken me up on it. I would have bought everybody a 
free Dr. Pepper down in my office.
    Well, good for you. I was going to offer a proposed 
solution that the people that didn't testify had to pay for it, 
since you all weren't willing to pay for it.
    So do we have an agreement that there should be a pay-for? 
Is there anybody that opposes that?
    Mr. Schneidewind. We have raised the possibility that, 
given the reforms, there may not need to be, but out of respect 
for your desire for some information, we have proposed pay-
fors.
    Mr. Barton. Then the second part of is there a pay-for, I 
am going to ask the chairman if as a committee do we have a 
position that the pay-for should come out of the medical system 
or are we looking at pay-fors outside the medical system?
    Mr. Guthrie. From what I understand, we are still looking 
at pay-fors. There has been no overall----
    Mr. Barton. Within the medical----
    Mr. Guthrie. I think we are looking at all pay-fors, all 
opportunities for pay-fors.
    Mr. Barton. OK. Because if we were willing to look outside 
the system we could do some oil and gas revenue royalties from 
the OCS or Alaska or federal lands. I have an Internet poker 
bill that would probably generate $50 billion over 10 years.
    Mr. Green. If the gentleman would yield.
    Mr. Barton. I would be happy to.
    Mr. Green. Our side, we don't mind looking outside health 
care, but I have to admit, I can't sign on to your Internet 
poker bill.
    Mr. Barton. That would be theeasiest pay-for because the 
poker players of America would willingly pay that surcharge to 
be able to play poker on the Internet. And that was seriously 
looked at in the last Congress, actually. I mean, it is enough 
money that it is real.
    Well, I want to commend Dr. Burgess for the work that he 
has done over the last several years. He has been absolutely 
committed to fixing the problem. And as you all know, this last 
Congress we actually passed an SGR fix but we didn't have a 
pay-for and it foundered.
    I think Chairman Upton and Subcommittee Chairman Pitts are 
committed to going all the way this session with a real pay-for 
that solves the problem, and I will be a part of it, of the 
system at that point in time.
    With that, Mr. Chairman, I will yield to any other member 
who wishes my time.
    Dr. Burgess.
    Mr. Burgess. If the gentleman will yield for clarification. 
The bill that passed the floor of the House the middle of March 
of 2014 was paid for, was offset. The offset came from the 
Affordable Care Act. And for people who disagree with that 
strategy, I would simply offer that if you were going to reform 
health care in this country from soup to nuts, you ought to 
start by fixing the SGR. So that was a logical place to go. I 
am sorry people didn't agree with that over on the Senate side. 
I am willing to look at other pay-fors. But our bill was offset 
when it passed the floor of the House last March. And I yield 
back to the gentleman.
    Mr. Barton. I guess I will ask one more question. Does the 
panel think there are enough savings in Medicaid if we gave 
more flexibility to the States? All the State Governors and 
Medicaid directors are always asking us to give them more 
flexibility. Is that a potential pay-for that you all might be 
willing to work with us on?
    Dr. Umbdenstock. Well, from the hospital point of view, we 
find Medicaid to be a very stressed program already and are 
very concerned about further cuts to that program.
    Mr. Barton. So that is a no.
    Dr. Umbdenstock. For the record, if you decided to solve 
this problem without a pay-for, we would not object. Just for 
the record.
    Mr. Barton. Put me down as not surprised with that answer.
    With that, Mr. Chairman, I yield back.
    Mr. Guthrie. Thank you. The gentleman yields back.
    Recognize Mr. Schrader from Oregon.
    Mr. Schrader. Thank you, Mr. Chairman, appreciate it.
    I appreciate the panel. I appreciate the panel for the most 
part coming up with ideas for us to pay for the SGR reforms, 
since it has such broad support to get this done and get the 
Sword of Damocles off the physician and hospital community's 
backs, and, frankly, the seniors, seniors' backs. They have 
been up against. I think every one of us has had horror stories 
of seniors not being able to find physicians or nurse 
practitioners to take care of them because of what we are doing 
or not doing here.
    With that, just several questions. Dr. McAneny, maybe you 
could elaborate a little bit more on how the fee-for-service 
system is actually hurting or prohibiting----not prohibiting, 
but I think impairing physicians' and nurse practitioners' 
ability to provide the quality care that they think they can 
do. You alluded to that a little bit.
    Dr. McAneny. Thank you, Representative, for that question.
    The fee-for-service system worked well before there was 
much that we could do in the outpatient arena. There were 
limited things we could. It was easy to enact fees for those. 
Currently, now, if we want to manage patients in a different 
way, if we want to have nurses or other staff members on the 
phone talking to patients, intervening early, helping people 
manage problems at home, we are not paid for that. And 
physician practices find that they have to generate enough of 
the billable codes to pay the infrastructure that it diverts 
our attention away from some of the changes that we could make 
to better deliver that care.
    In addition, now with all the regulatory requirements that 
are there that are not paid for with trying to comply with 
Meaningful Use, PQRS, the value-based purchasing, et cetera, we 
are spending more and more time away from patients, away from 
anything that even generates a fee, and away from things that 
actually help us manage a patient. That is why we are so 
excited about this committee's proposed bill where you get rid 
of all that, consolidate it into one streamlined system so that 
we can take some of those resources, have the opportunity to 
try out systems that may include some fee-for-service but may 
include a lot of other options as well, and see if we can't 
design systems that will work in our individual practices to be 
able to deliver better patient care at a lower cost. So thank 
you.
    Mr. Schrader. Very good.
    Dr. Speir, maybe describe a little bit how comparative 
effectiveness research can improve care and provide, hopefully, 
physicians, particularly in the specialities, almost a safe 
haven in terms of liability and lawsuit issues.
    Dr. Speir. Thank you, sir. I think that we have shown in 
our region that by looking at the STS database outcomes linked 
to the clinical cost with evidence-based guidelines, which is 
actually door number C that was not alluded to before, that we 
can dramatically decrease the cost and improve the outcomes.
    And the pay-fors, as we discussed, while the focus has been 
off the top payments, we can continue to deliver such care 
which is reflective of what you had said, Congresswoman, and 
show the improvement in care while decreasing such cost. And I 
think that this is, to dovetail on your previous question 
regarding fee-for-service, that is a totally outcome-exclusive 
proposition that is only focused on volumes of patients, 
procedures performed or tests that are done.
    Mr. Schrader. Right. Completely the wrong incentive.
    Dr. Speir. That is correct.
    Mr. Schrader. I come from Oregon and very much into outcome 
based, and a nice way to marry up to primary care with the 
specialty care, and I think the way you guys are doing it is 
just really exciting and going to happen regardless of what we 
do, I think, here in Congress, and I am just really pleased 
with that.
    Last question, if I may, with Mr. Schneidewind. The biggest 
concern I think a lot of us have is foisting too much of the 
cost, if you will, on the beneficiaries, and we struggle with 
this. I have been involved in different work groups trying to 
figure out how can we minimize that impact. I don't think my 
seniors are afraid to pay a little bit more as long as everyone 
is paying something, but they want to make sure they get the 
quality care that they get at the end of the day.
    Some of the proposals with the means testing or the 
combining premiums, you talked a little bit about the 
deductible issues that seniors face, what if there were 
exclusions or work with your group and others to make sure that 
the low-income folks below----pick a number, 200 percent of 
poverty level or whatever it might be----are excluded from some 
of these beneficiary cost-sharing ideas, would AARP be willing 
to work with us on something like that?
    Mr. Schneidewind. Well, one of the concerns that we have, 
and we have seen this in the proposals to income relate, for 
instance, premiums, that right now somebody at the top range is 
paying three times the premium as somebody at the bottom. And 
we worry that the more those premiums go up, for instance, the 
more incentive these people have to simply go off Part B and 
seek their insurance elsewhere, because right now those 
premiums are very high. And some of the proposals we see, for 
instance, really start kicking in at $85,000 of income, whereas 
the IRS considers a wealth person $400,000.
    You are really starting to reach down and increase the cost 
of care for a lot of people. Right now, as I have said also, 
the people, let's say half of the people are at $23,000 of 
income, and they are already paying $4,000 of that in medical 
care, and they are paying premium increases as they occur, and 
they have incurred steadily.
    So we think with the very promising savings that are 
available in the prescription drug arena, through some other 
reforms, looking at the payments, for instance, to, you know, 
upcoding on Medicare Advantage----
    Mr. Schrader. OK. Very good. My time has expired. I will 
take that as a no, but thank you very much.
    Mr. Guthrie. Thank you, Dr. Schrader.
    Dr. Schrader's time has expired.
    Mr. Lance of New Jersey is recognized.
    Mr. Lance. Thank you very much, Mr. Chairman.
    I would have been surprised if anybody on the panel had not 
favored a permanent solution. And I have read the testimony, 
including the suggestions that have been made. In my own view, 
it will be very difficult to achieve this by March 31. And, for 
me, the question is, is there a method to pay for a permanent 
solution that can pass both houses of Congress, be signed into 
law by the President of the United States? I think that is an 
extremely difficult question to answer.
    And I am also concerned by the fact that the deadline 
approaches and we have other fundamental issues regarding 
healthcare policy that we may have to address in this session, 
particularly if the Supreme Court rules, as it may very well 
rule, that there can be no subsidies to the Federal exchange.
    Is there anybody on the panel who might be willing to 
address that potential as it relates to SGR?
    Don't all volunteer at once. Anybody on the panel?
    My point, obviously, is that these are great issues with 
moving parts, and they are not simply an issue that relates to 
SGR, although SGR is an important component of it.
    Mr. Umbdenstock, some say that SGR reform is Medicare 
reform rather than simply a physician payment bill, and in your 
report, ``Ensuring a Healthier Tomorrow,'' there have been a 
number of suggestions made. What was the catalyst for the 
report, and why do you think that Medicare reform is important, 
particularly in the context of SGR?
    Dr. Umbdenstock. Thank you very much, sir.
    First of all, the catalyst for the report was an update of 
our view of what additional changes need to happen, and that 
was done 2 years after the passage of the Affordable Care Act.
    Mr. Lance. Yes.
    Dr. Umbdenstock. So we updated our reform principles and 
framework. And in there we stressed not only the various issues 
that we think need to be addressed, but this notion of shared 
responsibility, that providers and consumers and suppliers and 
government and private sector, we are all going to have to make 
changes in order to get this done.
    Secondly, SGR is important. It is critical. It has been 
kicked down the road for too long. The uncertainty that comes 
with it for physicians and therefore for patients and access, 
we have just got to solve it. But it is not the sum total of 
Medicare reform. So we have to think about solving this problem 
in the context of how the solutions may also help us in the 
long-term reform of the program, and that is why we proposed 
some of the things that we did for your consideration.
    Mr. Lance. Thank you.
    And to Dr. Speir, the Society of Thoracic Surgeons has a 
national database, and you have discussed that in your written 
testimony, and you have discussed the fact that it might be 
applied to the Medicare program at large. And if you would 
discuss with the committee your views on that and the positive 
outcomes that you have experienced in your field from an 
innovative use of data and implementation of this program.
    Dr. Speir. Thank you. We feel very strongly that the 
registries are really applicable not only to procedurally based 
practitioners, but really to all physicians, and that the time 
is now for us to not only be accountable and begin to 
participate with such registries regardless of our 
specialization, but then use that data in the turnaround to 
improve our care and therefore reduce the cost.
    It is not only for the Medicare patients, but anyone that 
undergoes cardiac surgery or any procedures, or pulmonary 
resections for esophageal resections or anything to do within 
our specialty. These registries and the concept of that have 
also been expanded in other fields, whether it is vascular 
surgery, neurosurgery, and more and more are getting on board 
with that. But that is our future, all of us.
    Mr. Lance. Thank you.
    In conclusion, let me say I want to associate myself with 
the fine work of Dr. Burgess and also with the comments of 
Chairman Emeritus Barton. And I do think that we should look 
sincerely at Chairman Barton's suggestion regarding funding, 
perhaps to some extent from Internet poker. And the reason that 
this issue has not been resolved institutionally in Congress is 
that it is a very difficult issue, and we have panels come 
before us all the time saying a permanent solution is 
necessary. It is much more difficult to determine how to pay 
for it.
    Thank you, Mr. Chairman.
    Mr. Guthrie. The gentleman yields back.
    Recognize Mr. Butterfield of North Carolina.
    Mr. Butterfield. Thank you very much, Mr. Chairman, and let 
me apologize for being late. I have been multitasking all 
morning long, as all of my colleagues do every day.
    But thank you for coming, thank you to the six witnesses.
    And thank you, Mr. Chairman, for convening this hearing.
    I am encouraged by the hearing so that we can talk about 
the long-term concerns that are facing the Medicare program. My 
goal as just one single member of this subcommittee is to 
provide greater certainty for providers and beneficiaries, and 
I am happy, very happy, that there is a bipartisan agreement, 
as it appears, that is pursuing a permanent fix to the SGR as 
the most prudent way to go forward.
    Since 2003, Congress has patched the formula, as we all 
know, 17 times at least, each time causing trepidation among 
providers and beneficiaries. Seniors in my district, including 
more low-income individuals and many African-American citizens, 
do not know if they will be able to see the same doctor next 
year. My providers do not know if they will be able to serve 
the same patients next year.
    So we can, Mr. Chairman, and we must come together and find 
a long-term solution to this problem, and this bill is a step 
in the right direction. Mr. Chairman, we can fix this thing. 
The pay-for is obviously the problem, but I believe that if 
reasonable minds can come together and forget the partisanship, 
and I think if we sit together, we can figure this thing out 
and get a permanent fix to this problem.
    I will make the observation that it cost $144 billion to 
fix it over a 10-year period, and that is, indeed, a lot of 
money, but we have to talk about budgeting in relative terms. 
We spent $10 billion per month in Iraq, and that is 14 months 
of conflict in Iraq versus a permanent fix for the SGR. Mr. 
Chairman, we can do this thing.
    Let me ask my question to the president-elect of AARP. I 
cannot pronounce your name. I am from the rural South, and I 
dare not even try it. But, sir, we have heard a number of 
proposals that would reduce the Medicare benefit for those 
currently on the program or those even eligible for Medicare. 
For example, we have heard proposals from others on the other 
side of the aisle that would gradually raise the Medicare 
eligibility from 65 to 67. You know all about that.
    This proposal is very concerning to me because I think that 
it is a little bit shortsighted. Its consequences are far-
reaching. These people will still need coverage, and certainly 
they will get sick. I also believe this change would be 
breaking a longstanding intergenerational promise that we made 
to the American people.
    Very quickly, can you speak to the effects of raising the 
Medicare eligibility age, at least on the members that you 
represent?
    Mr. Schneidewind. Well, our feeling is that it represents 
really a cost shift, not a cost savings, and let me describe 
that. By raising the eligibility rate, you end up having people 
on their Affordable Care Act insurance, if they have it, for a 
longer period of time or their private insurance. That means 
that the pools there have to pay for an older population 
because the age to transfer to Medicare is extended. So the 
costs go up, and those costs are borne by businesses, by 
governments, and by those who provide insurance to their 
employees. So it hurts the economy.
    On the other hand, for Medicare, it ends up making the 
population in the pool older on average, because coverage 
starts at an older age, and that increases Medicare costs. So 
you have increased costs for Medicare, you have increased costs 
for private and ACA insurance, you have increased costs for 
employers who hire people, and, because those effects now are 
being looked at, my information is that the estimates of 
savings from this measure have been drastically reduced by the 
Government Accounting Office, because they have fully 
understood now what this would really do.
    Mr. Butterfield. So the cost of raising it by 2 years is 
insignificant in the scheme of things?
    Mr. Schneidewind. Well, it has turned out to be a lot. The 
savings have turned out to be almost nonexistent when you look 
at Medicare, the private insurance market now, the ACA, and the 
fact that rather than eliminating costs, you are simply 
shifting the cost to different forms of insurance. So our 
information is that, yes, indeed, the estimates of the overall 
savings have shrunk drastically.
    Mr. Butterfield. And that is the position of AARP?
    Mr. Schneidewind. Yes, that we oppose the raising of the 
Medicare eligibility rate, because it would make Medicare on 
average more expensive, because the risk pool is now older. It 
would shift costs to the current employers, government, 
businesses, and others, make their plight worse. And because of 
that, we don't see net savings, we just see shifting in cost.
    Mr. Butterfield. Thank you. Sir.
    I yield back, Mr. Chairman.
    Mr. Guthrie. Thank you. Gentleman yields back.
    Recognizes Ms. Brooks from Indiana.
    Mrs. Brooks. Thank you, Mr. Chairman.
    This is to Mr. Umbdenstock. Did I get your name right?
    Dr. Umbdenstock. Yes. Thank you.
    Mrs. Brooks. Each year, and in my district of northern 
Indianapolis into the north, I hear from hospitals all the 
time, they dedicate so many resources and so many dollars to 
avoid the unintentional technical violations of the Stark Act. 
And it seems to me that these paperwork-type of violations, 
which often come from often minor violations, result in the 
hospital paying millions of dollars in Stark Law penalties.
    And I was a cosponsor in the last Congress of the Boustany-
Kind, the Stark Simplification Act, that would limit the 
penalty a hospital can pay, can suffer for committing a 
technical violation, create an expedited process with CMS. But 
I think, more importantly, industry officials have produced 
reports showing they could generate a billion dollars in new 
revenue if this type of law were to be passed. Not a savings, 
but in fact revenue.
    Can you please comment on whether or not you agree with 
this? Does the AHA support the Stark Administrative 
Simplification Act in the last Congress, and do you believe 
that it will actually generate new revenue?
    Dr. Umbdenstock. Thank you very much for the question. And 
absolutely we are supportive and we appreciate your support of 
that bill. You are exactly right that hospitals are being tied 
up endlessly for situations that were unintentional, technical 
in nature, and had no adverse impact on the program or the 
beneficiaries. So we really want to see that type of relief 
instituted.
    I have to say that I am not familiar, I am sorry, with 
studies that would show how this would increase revenue to the 
government. Maybe you could help me.
    Mrs. Brooks. If this bill were to be reintroduced, is AHA 
going to be supportive of Stark simplification?
    Dr. Umbdenstock. Indeed. Indeed. Yes. Thank you.
    Mrs. Brooks. And do you think it at least could be and 
maybe should be part of the discussion about a pay-for for SGR 
repeal? And how could they be connected?
    Dr. Umbdenstock. Certainly, if it would produce savings and 
simplify the work experience, the overhead costs, the 
unnecessary costs of compliance to the hospital field, we would 
definitely see that as a plus.
    Mrs. Brooks. To Dr. McAneny, I have appreciated the way in 
which you have given us some very concrete examples of how your 
patients are impacted, and I again want to also commend Dr. 
Burgess for his leadership on this issue.
    Can you share with us a few more examples of how this bill 
would have the potential to help increase the quality and the 
services, delivery of care, to seniors and the disabled? How 
can we do a better job articulating to the general public how 
fixing the SGR will actually improve quality and delivery of 
care? You mentioned things of uncertainty in physicians' 
practices, but can we talk a little bit more specifically with 
respect to quality of care for patients?
    Dr. McAneny. Certainly, and I very much appreciate that 
question.
    Right now there is a limited amount of money in any 
physician practice that we can spend on improving what we do, 
and all of that money is currently getting diverted now into 
trying to comply with Meaningful Use, trying to comply with 
PQRS, filling out all of the various insurance company 
requirements for quality measures, often quality measures that 
are not applicable to our specific specialty. And this bill, I 
think, is a good vehicle to do that, to consolidate that. We 
could then take that amount of money and start to look at 
alternative payment programs.
    So to get very specific, in our practice and in the six 
other practices across the United States that are participating 
with us in creating the oncology medical home, what we have 
done is spend a lot more of those resources on teaching 
patients how to use the system, how to get help from us when 
they need it, what do they need, having pharmacy techs who can 
call up and re-explain what is going on with their medications, 
having nurses on the phone answering questions, having same-day 
visits and same-day appointments so that patients seek care at 
a lower cost side of service by physicians who know them rather 
than going to the emergency department who is set up to deal 
with car accidents and heart attacks and not really cancer 
patients.
    So the point is that many physicians in various specialties 
have the ability to really designate things that will make a 
difference in their individual practice if we weren't busy 
trying to use all our time, money, and resources on complying 
with these other entities.
    Mrs. Brooks. Thank you.
    And thank you all for saving lives. Appreciate it.
    Mr. Guthrie. Gentlelady's time has expired.
    We recognize Mr. Cardenas of California.
    Mr. Cardenas. Thank you very much, Mr. Chairman.
    I have a question for Mr. Schneidewind. Some proposals 
suggest one option for raising more money for Medicare is 
additional income relating to the Medicare Part B premium. 
Aren't Medicare premiums already income related?
    Mr. Schneidewind. Well, yes, they are. In fact, they span, 
they are multiplied almost three times from the basic level if 
you are at the upper-income level of about $213,000. So that 
the truth of the matter is they are heavily income related, and 
we fear that if they are increased too much more people who are 
paying that may find other forms of insurance attractive and 
leave the Medicare pool. And that is a problem because studies 
have found that the upper-income group tends to be more 
healthy, and, frankly, they are making a contribution to 
Medicare economics, and if they leave the plan will be 
disadvantaged.
    I guess the other thing is that proposals in terms of 
income relating are reaching down into levels of income that 
are hardly wealthy. I mean, IRS thinks that $400,000 of income 
is wealthy, and yet some of these proposals would reach down to 
people making $50,000, $40,000, and that is not wealthy.
    Mr. Cardenas. No, I would say it is not. It doesn't matter 
what part of the country you are in.
    Part of your response referred to the income averaging of a 
program. In other words, how revenue comes in and where do you 
get that revenue, et cetera. And if certain components are 
actually pushed out of the system or are encouraged to leave 
the system, then that would cause some kind of imbalance to the 
entire system, correct?
    Mr. Schneidewind. Right. If you push out of the system 
people, number one, who are paying the most, by a factor of 3 
right now, number two, tend to be healthier than average so 
they impose less cost on the system, what you have done is deal 
a blow to both the revenue and the cost adversely. You are 
raising costs and you are decreasing revenue. So we think that 
really at this point the income-relating features have gone 
about far enough, and if they go further, they will produce 
those undesirable effects.
    Mr. Cardenas. Now, on one side you referred to plan 
premium. In other words, how much somebodyis paying to have 
that plan in effect for them and/or their family. Yet at the 
same time, when somebodyis looking at a premium it doesn't 
necessarily mean that they are comparing apples to apples when 
it comes to what benefits they are getting for that other plan, 
correct?
    Mr. Schneidewind. Well, you mean----
    Mr. Cardenas. I mean, it is not inherent. For example, if 
somebody is paying X amount premium for coverage with Plan A, 
and then all of a sudden they are just looking at the premium 
mainly and they say, well, this premium is $10 less a month, I 
am going to go that, it doesn't necessarily mean that the 
person is getting equal coverage for less money. It could be 
that they are actually going to something that they don't 
realize until later, maybe after being it for a year or two or 
what have you and saying, wait a minute, I am talking to my 
friend Edna who lives next door, she stayed on Medicare, I went 
to this other plan, and she, as it plays out, I might be saving 
a few bucks a month, but at the same time the overall plan, she 
is actually getting more benefit.
    Mr. Schneidewind. That is correct. And I think AARP very 
strongly believes that it pays to be a smart shopper, that what 
we have seen is that there is a rapid annual shift in premiums, 
even the same plan. So we advise our members and try to help 
them seek out the most advantageous plans and compare apples to 
apples, as you have said.
    Mr. Cardenas. Well, I think it is important for us to 
understand that, especially the lower-income Americans, what 
have you, although they might be very smart or what have you, 
but might be making decisions without being very well informed. 
Yet at the same time when it comes to the plan layout as it is 
today, there was a lot of thought and calculus going into that 
already, correct? At least on the end of putting these plans 
out there.
    Mr. Schneidewind. Well, sticking just to Medicare, of 
course, you know, that is a uniform benefit, although there are 
chances to go to Medicare Advantage. You have that choice. If 
you go to a traditional Medicare there are certainly a lot of 
supplements out there. Customers have proven very capable of 
choosing among those. And as I said, AARP certainly has tried 
to make and help our members be wise purchasers.
    Mr. Cardenas. Yeah. I would like to commend AARP, because 
when they showed me how involved they were in this new paradigm 
shift, that they were actually one of the best Web sites I had 
seen out there, and they were doing it on their own volition. 
And I think it not only educated seniors, but it educated 
family members beyond that. I know that when my parents were 
around, us kids always got involved in these decision 
processes. So it was a learning experience not only for them 
every time we did that, but it was something we took with us. 
And now that I have my own family, I am glad that that 
opportunity took place.
    Thank you very much, Mr. Chairman. I yield back my time.
    Mr. Guthrie. Thank you. The gentleman's time has expired.
    The chair recognizes Mr. Collins from New York.
    Mr. Collins. Thank you, Mr. Chairman. If we could ask the 
witnesses to kind of speak right into the microphone to hear 
you. I mean, it is almost impossible.
    First of all, my question is going to be directed at Dr. 
McAneny and Mr. Umbdenstock. But first I want to thank Mr. 
Schneidewind for your comment on the age 67 cost shifting. It 
is a very poignant point.
    Mr. Guthrie. Mr. Collins, is your microphone on? I request 
that you speak into the microphone.
    Mr. Collins. I am speaking into it, but it wasn't on. I 
guess Ms. Brooks turned it off.
    But I also have a request. Can you take my wife's name off 
your mailing list? She doesn't want to be reminded she is 50 
years old. So if you could do that, I would appreciate it.
    Mr. Schneidewind. I will do my best.
    Mr. Collins. My comment really is on the defensive medicine 
side and the need for medical insurance liability reform, which 
the CBO says could pay for half of this SGR fix, but also save 
a lot of money in other areas beyond Medicare.
    If I could ask, Dr. McAneny, maybe spend 2 minutes on that 
or a little less, and then shift it over to Mr. Umbdenstock, 
how the defensive medicine piece plays in. And I have heard 
numbers it can be as much as 20 percent of our medical costs, 
running tests and the like that really aren't necessary. But 
defensive medicine against lawsuits.
    Dr. O'Shea. Dr. O'Shea will answer your question.
    I come from California. In California we have MICRA. MICRA 
is a gift. MICRA is a gift to physicians. MICRA contains our 
medical malpractice insurance. I always tell my patients I am 
glad that I have medical malpractice, I am human, if I make a 
mistake, I really want you to be able to garner the best 
benefits for it. But that doesn't mean outrageous fees for the 
pain and suffering that mostly don't go to the patient either.
    When you have contained costs this way, it lowers the 
overhead. And private practitioners will tell you we live on a 
margin. I know some of my OB-GYN colleagues, including my 
husband who is an OB-GYN, can work 4 to 5 months out of the 
year just to pay for their medical malpractice. Where does that 
leave a private practice to do any kind of innovation, to do 
any other kind of cost savings in their medical home, develop 
other systems to try and innovate for their patients, when you 
are your own practice? Medical malpractice is a big issue that 
is not going to go away. We do want to have it, but we want to 
have it where it actually benefits the patient and maybe not 
someone else.
    Dr. Umbdenstock. Thank you, sir, for the question, and I 
would agree with the sentiments just expressed. Yes, it is a 
big issue. Our costs in that area continue to rise. But as you 
point out, it does encourage defensive medicine. That only 
exposes patients to more interventions, for more potential for 
things to go sideways or not well. The estimates I have heard 
are similar to what you say, about 20 percent, one in five 
decisions some physicians tell me.
    I think we need to think about a more expeditious approach, 
to Dr. O'Shea's last comment, that really does help the 
aggrieved patient quicker, more simply, more respectfully, 
something that encourages the practitioner and provider 
organization to come forward and acknowledge if something has 
gone wrong, an open apology to the family, work together, but 
look for more of an administrative approach, and the AHA can 
provide ideas on how to do that.
    Mr. Collins. Thank you.
    One last word, then, from Mr. McAneny.
    Dr. McAneny. Yes. Thank you very much.
    TheAMA has extensive policy on the effects of professional 
liability on the ability to deliver care. It is at best a 
diversion from the things that we want to be able to do.
    If we were able to, again, redirect all of the efforts that 
are made towards triple checking and quadruple checking 
ourselves by getting more and more testing in order to be able 
to cover ourselves I think we would be able to divert a lot of 
that money into things that would be better care for patients. 
So the AMA is happy to work with the committee on trying to 
look at what the effects of professional liability reform would 
be.
    Mr. Collins. Real quickly, we have 30 seconds, could I just 
ask each of you, do you agree that the need for medical 
malpractice reform is right at the top of the list?
    Dr. Umbdenstock. Yes.
    Dr. McAneny. Yes.
    Mr. Miller. Absolutely.
    Dr. Speir. Yes.
    Mr. Schneidewind. I am not sure that that would be at the 
top of our list.
    Mr. Collins. But it is important.
    Mr. Schneidewind. It may be important. I haven't prepared a 
detailed answer on that, but we will look at it.
    Mr. Collins. Yeah. Very good. Thank you all very much for 
your participation.
    Yield back, Mr. Chairman, 5 seconds.
    Mr. Guthrie. Thank you. I appreciate the gentleman for 
yielding back.
    The ranking member of the full committee is recognized for 
5 minutes.
    Mr. Pallone. I am sorry, Mr. Chairman, I didn't realize who 
you were talking about. But that is okay. I guess it takes a 
while.
    I wanted to ask Mr. Schneidewind, hope I am pronouncing it 
properly, I am concerned that some would tie the SGR to other 
poison pills that would cut access to care or increase costs on 
beneficiaries. And seniors already bear significant out-of-
pocket costs in Medicare, and most are living on very modest 
incomes. In fact, half of all Medicare beneficiaries have 
incomes below $23,500. You have heard that figure.
    Can you talk a little about a typical income of Medicare 
beneficiaries and the out-of-pocket costs, you know, premiums, 
deductibles, other cost-sharing burdens that beneficiaries 
already bear as a share of their income.
    Mr. Schneidewind. First of all, the $23,500 income and 17 
percent of that income is spent on medical care, that is $4,000 
out of $23,500. I mean, that is huge already. It represents 
about 25 percent of the average Social Security benefit that 
these people get. Once again, huge amounts.
    Now, these people already pay a Part B premium of about 
$105 roughly per month, and then on top of that they pay their 
deductibles and copays, and some of them may end up buying, if 
they have standard or traditional Medicare, may end up buying 
supplemental coverage as well.
    So you can see that not only in percentage of income, but 
they have seen increases. They fully participate, for instance, 
every time Medicare Part B premiums go up, as they do and as 
they have, the people who buy that coverage are participating 
in paying for those increases.
    So we believe that the burden on, particularly, lower-
income people, but all people, is very significant, and AARP 
really believes that, if there are savings to be made, if there 
are offsets to be made, that we need to look at economies and 
prescription drugs in terms of payment reforms, such as are 
contained in this legislation, and other things, such as 
competitive bidding for durable medical equipment and things 
like that.
    Mr. Pallone. And then, I mean----yeah. I am kind of putting 
words into your mouth.
    But when costs are too high, I assume a lot of 
beneficiaries in some cases just forego care. And do you want 
to just talk about the consequences of that briefly.
    Mr. Schneidewind. Yes. You know, that is a particular 
concern of ours when discussion is had about increasing co-pays 
or deductibles.
    The downside of that is that people then are reluctant to 
go in and see their healthcare provider, whether it is a 
hospital or a doctor, and they may not get the care they need.
    And then, of course, down the road, it may be that they 
have a condition that worsens drastically for lack of a modest 
amount of care and then becomes a burden on the entire system.
    So we really believe that many of the proposals to increase 
deductibles and co-pays will produce higher costs for the 
system and have adverse consequences. We don't believe it is 
good for providers, the public, or the recipient.
    Mr. Pallone. OK. Thank you.
    Dr. O'Shea, I believe that ensuring appropriate access to 
primary care is critical to improving our healthcare system, 
and one of the goals behind the ACA was moving our system to 
one of prevention so that we are not always treating sickness 
because of the cost, in part.
    And, as you know, one of the provisions in the ACA was 
increasing payments for Medicaid primary care doctors to 
Medicare rates. Obviously, I think that is a good thing.
    And I guess----let me just skip some of this and ask you 
the two questions because we are running out of time.
    One, does the AOA support extending the primary care 
increase in Medicaid? And can you talk about what effect this 
bump has had across the country. And do you believe it is an 
effective way to address access?
    Dr. O'Shea. Can I say yes?
    Mr. Pallone. OK.
    Dr. O'Shea. No. Sir, the access to primary care is so 
necessary when you are actually talking about this mostly 
chronically ill. Why are----in California, we call it Medi-Cal.
    Why a lot of times are they actually at this level? It is 
not just income. They have already had acute and then 
chronically ill patients that can't work, can't, you know, 
economically have their own ways to have higher care.
    Yes. The bump has helped, especially in California, because 
there was a 10 percent cut not too many years ago where, you 
know, if you are not in a larger system, it is hard for smaller 
primary cares to actually accept those lower-paid patients. You 
know, they will pay us at something like 20 to 22 cents on the 
dollar for what other insurance will.
    So, yes, you have the most needy population that then would 
cost the most for the hospital systems because that is where 
they are headed if they don't get the primary intervention 
earlier. That small boost has been made.
    So primary care that has an efficient system can actually 
help those patients and it has been able to access more of 
those patients and provide care for them.
    Mr. Pallone. Thank you.
    Thank you, Mr. Chairman.
    Mr. Guthrie [presiding]. Thank you.
    The ranking member Mr. Pallone from New Jersey's time has 
expired.
    And I will recognize Mr. Long from Missouri.
    Mr. Long. Thank you, Mr. Chairman.
    And thank you all for being here today.
    Yesterday the subcommittee heard from policy experts with 
experience in building bipartisan consensus on Medicare 
reforms.
    And when they were asked about whether further study of 
various options was needed, their view was that Congress has 
enough information already, we are kind of talking the thing to 
death, and now is the time for Members to sit down and agree to 
a package of offsets to make SGR history.
    So I want to start with Mr. Umbdenstock. Is that it?
    Mr. Umbdenstock. Yes, it is.
    Mr. Long. Something like that.
    Mr. Umbdenstock. Thank you.
    Mr. Long. I knew I would call you ``Byalistock'' or 
something.
    But just a yes or no. I will start right there and go right 
down the line. Just a simple yes or no answer will suffice. And 
I want to hear briefly from each of you.
    Do you believe now is the time for Members to sit down on a 
bipartisan basis and agree to bipartisan offsets on SGR reform? 
Yes or no.
    Mr. Umbdenstock. Yes, sir. And we have put some suggestions 
in our testimony. So we would be happy to talk to you about 
those.
    Dr. O'Shea. Emphatically yes, sir.
    Dr. Speir. Yes. And, in part, your second question, if not 
now, when?
    Mr. Miller. Yes, sir.
    Dr. McAneny. Yes. We very much would appreciate you doing 
that. We have got such good policy that has come out of this 
committee. If we can push it over the line, we can get on with 
other changes we need to make. So, yes, please.
    Mr. Schneidewind. Yes, Congressman. We have a list of 
offsets that we have offered to help that process.
    Mr. Long. Unanimous. I like that.
    Because like I----in Washington, sometimes we can get in 
the habit of talking things to death. And everyone wants to do 
something in a bipartisan fashion and the public wants to see 
that. Our constituents are always asking, ``Why can't you do 
something in a bipartisan fashion?'' And I think the time is 
now.
    Mr. Umbdenstock, I realize that forging consensus within an 
industry trade association such as yours on changes to Medicare 
can be very challenging. However, the Hospital Association, as 
you know, has endorsed roughly $2 trillion in potential offsets 
for Congress to consider.
    Given your success in getting your members around these 
offsets, do you have any insights you can offer in working to 
build cooperation and consensus with others in the provider 
community and the Members of Congress?
    Mr. Umbdenstock. Just a couple of quick comments, sir.
    One would be that every thought we have about this has to 
be put up against the prospect of a 21 percent cut to 
physicians, with physicians probably backing----many of them 
backing out of the program and causing huge access problems for 
Medicare beneficiaries. Everything has to be seen in that 
light.
    Number two, hospitals have already consumed----absorbed 
$121 billion in cuts, and we don't believe that we should be 
asked yet again to make sacrifice in that sense.
    We need to see shared responsibility here. All of us need 
to contribute to the solution to this problem, and that is 
behind the paper that is appended to our testimony that went 
through about 500 different members in our group to put that 
together.
    Mr. Long. Do you think that we might suffer from a 
physician shortage if these cuts continue?
    Mr. Umbdenstock. Well, I think we already do. And we are 
supportive of lifting the caps on graduate medical education 
positions.
    That is going to be a long-term solution. We need other 
solutions in the meantime. But certainly it is going to 
encourage some physicians to think second and third about 
continuing the program or even retiring.
    Mr. Long. That is exactly what I faced with my personal 
doctor. And a lot of people I know, doctors have retired. Most 
doctors I talked to are looking for a way out. And with my 
daughter just about to graduate medical school, I know that 
this doctor shortage is coming.
    So, anyway, thank you all once again for your testimony.
    With that, I yield back 60 seconds.
    Mr. Guthrie. I appreciate the gentleman for yielding back.
    The chair recognizes Mr. Bilirakis of Florida.
    Mr. Bilirakis. Thank you, Mr. Chairman. I appreciate it 
very much.
    First question is for Mr. Richard Umbdenstock. I hope I 
pronounced it all right.
    Mr. Umbdenstock. Yes, sir.
    Mr. Bilirakis. In your testimony, you noted that 
traditional Medicare does not have an annual out-of-pocket 
maximum payment cap to protect seniors from financial hardship 
or bankruptcy in the event of a major illness.
    Yesterday, as part of my questioning, Senator Lieberman 
talked about how important a maximum out-of-pocket protection--
--how important that is and how this is the reason most 
Americans buy health insurance. Makes sense. Unfortunately, 
traditional Medicare does not offer seniors this peace of mind.
    Can you talk more about how this reform could lower 
Medicare spending and help seniors at the same time.
    Mr. Umbdenstock. Yes. Thank you very much.
    One overall comment: I think we need to think about the 
fact that structural changes are one thing and where you set 
the dollar limits of responsibility are another thing.
    If we just talk about dollar limits and impact without 
talking about structure and opportunities for change, I think 
we miss a lot of the important part of the conversation.
    As you point out, we may focus heavily on premiums, but if 
we don't focus on total costs and total financial 
responsibility, we miss the bigger picture.
    So, yes, we would be in favor, as we talk about the A and B 
construction or other structural changes, of seeing how we can 
maybe up the financial responsibility on some people----proper 
protections for those at low-income level, phase it in over 
time----do it right, but at the same time think about things 
that currently don't exist in the program, such as a cap. And 
that would be----in a catastrophic sense, that would be really 
important to do.
    Mr. Bilirakis. Thank you so much.
    Again, for you, sir, according to the CBO, Medicare 
spending will continue to climb over the coming decade, 
totaling more than $1 trillion in 2024.
    One of my worries is that, as Medicare costs grow and 
consume more general revenue dollars, it will crowd out other 
domestic discretionary priorities, such as NIH research and, of 
course, the VA health care, which I care about deeply.
    What Medicare reforms do you think could be adopted with 
the SGR that would help curb Medicare spending the most?
    Mr. Umbdenstock. Well, as was pointed out by the gentleman 
just a minute ago, we have put forth several suggestions in our 
testimony.
    We have also looked across all of the items that have been 
scored by CBO in the healthcare space and have offered that up 
on our Web site as a longer list of possibilities.
    I think we would have to talk about what changes and in 
combination with what other changes rather than any one major 
bullet, so to speak. May be a bad choice of term. Pardon me. 
But the ones that we put forth in our testimony are ones that 
we think hold great promise and should be examined.
    Mr. Bilirakis. OK. I would like to maybe mention one again 
for you, Mr. Umbdenstock.
    According to the Social Security Administration data, there 
are thousands of seniors with annual incomes of more than a 
million dollars.
    In your testimony, you address the issue of premiums and 
mention the Government subsidizes the premiums for everyone, 
including millionaires. You also mention that the American 
Hospital Association supports increasing income-related 
premiums.
    Can you talk about why you think it is reasonable to charge 
them more.
    Mr. Umbdenstock. Well, I think each of us has to share in 
this responsibility individually as well as organizationally. 
So that is the first principle.
    Secondly, we do want to see protections continue for those 
of low income and low means for sure. It doesn't help us at all 
to charge something to somebody that they can't afford.
    That just increases administrat----it certainly increases 
the negative experience for the patient. It increases our 
administrative costs. It increases our bad debt.
    We have had debates with Congress over the level of our bad 
debt reimbursement. So it doesn't solve any problem for us.
    But where somebody can afford it and where we can do it 
more efficiently with the right protections for those who 
can't, I think we should.
    Mr. Bilirakis. Very good.
    Thank you, Mr. Chairman. I will yield back my 29 seconds. 
Thank you.
    Mr. Guthrie. Thank you.
    The gentleman yields back his time.
    Mr. Bucshon of Indiana is recognized for 5 minutes.
    Mr. Bucshon. Thank you, Mr. Chairman.
    And many of you know I was a practicing cardiovascular and 
thoracic surgeon for 15 years prior to coming here. And this is 
one of the issues that got me to come here because I have a big 
concern, as we all do, basically, at the end of day, about our 
patient.
    And that is what this is all about. Everything we discuss 
today needs to be framed in the context of how we can better 
take care of patients, and I think that is what I try to do.
    I have supported outside pay-fors----pay-fors outside of 
the healthcare sector to try to address the SGR historically. 
And, by the way, I did submit all of my cases to the STS 
database.
    And I think the STS database is really on the forefront of 
quality analysis and it does definitely, I can tell you from 
personal experience, direct where you practice your----how you 
practice your medicine.
    I always compared myself to my peers and saw how things 
were going and tried to do everything I could to improve the 
quality of the care that I offered.
    The other thing is, briefly, when you also----in addition 
to the SGR, we clearly need to address overall healthcare 
costs. One of the ways to help Medicare, of course, is to have 
the cost of healthcare come down.
    And we need more, I think, as the STS database attests, 
quality information as well as price transparency for the 
consumer, which is a huge problem, in my estimation, as well as 
tort reform, which has been discussed. And there is a laundry 
list of other things that can help us get the overall cost of 
healthcare down.
    Dr. McAneny, I am going to ask you about----the AARP, as 
well as the AHA, have submitted ideas on the pay-fors for SGR. 
And, historically, the AMA has supported repealing the SGR 
without pay-fors. We could use your----we can really use your 
help----your organization's help in offering pay-fors.
    Can the AMA offer some substantial possible pay-fors for us 
to look at to help us repeal the SGR?
    Dr. McAneny. Thank you very much for that question.
    It is a very difficult one because, within the healthcare 
sector, so many people are struggling now just to keep their 
doors open to their patients that for us from within the 
healthcare sector to really come up with a specific pay-for may 
not be as useful until there are some guidelines set up by 
Congress on what are the rules of this particular budgetary 
process, how do we fit those things within that.
    I think the AMA stands ready to assist and help by weighing 
in on any given suggestions, but I think we are very uneasy and 
feel that we don't really have the ability to give you specific 
pay-fors. The devil in this is all very much in the details. 
So----
    Mr. Bucshon. The reason I say that is because----I think it 
is important that you really seriously consider offering some 
options.
    And the reason I say that is because, in the public's 
mind----okay?----the support of the AMA on an issue, for better 
or for worse, is often used as an up-or-down on something 
related to healthcare. And you know this as well as I do.
    Dr. McAneny. Right.
    Mr. Bucshon. Because, if the AMA, for example, offered pay-
fors, you know, around the country when this discussion comes 
up, it will list in there, ``And the AMA supported this.''
    If the AMA is not there and the AMA doesn't comment, then 
it is going to say, ``Well, we asked the AMA and they didn't 
respond to our request'' and so it appears that the AMA may not 
be supporting.
    You understand what I am saying?
    Dr. McAneny. [Nonverbal response.]
    Mr. Bucshon. And what it is used for is it is used 
politically. It is political. It is a political way to----if 
something is not tenable to certain groups, to use the AMA's 
up-or-down support on an issue as the reason for why it is not 
happening.
    And so I would just implore you to really reconsider that--
--you know, the AMA reconsider and maybe help us rather than 
waiting, you know, for other options and then coming out and 
saying, ``Well, up or down, we disagree'' or ``we agree.''
    I mean, I think, in all of our lives----right?----if you 
are going to offer an opinion at the end, then you should be 
part of the----offering solutions on the front side.
    Because, in fairness, I think, you know, whether it is 
within your own family or whether it is to solve this problem, 
if you are just going to wait and be a critic and not offer 
solutions yourself, to me, that is not very helpful.
    So with the remaining 18 seconds, just please reconsider 
and try to really help us. You can help us with this problem 
with offering solutions.
    Mr. Chairman, I yield back.
    Mr. Guthrie. Thank you.
    The gentleman yields back.
    Mr. Griffith of Virginia is recognized for 5 minutes.
    Mr. Griffith. Thank you, Mr. Chairman. I appreciate it.
    Let me touch on tort reform, medical malpractice, just 
briefly.
    I heard the testimony about California's plan. Works great 
for California. But we have had some bills in the past that 
wanted to take the California model and apply it nationally.
    One of the problems I have with that, coming from Virginia, 
is that California has a comparative negligence model in their 
entire----all of their torts, not just medical malpractice.
    Virginia is not a comparative negligence state. It is a 
contributory negligence state. So if you adopt the California 
model----it is one of the things we have to be careful for in 
Congress. If we adopt the California model and apply it 
statewide, we completely reverse 400 years of Virginia law.
    There are ways to have tort reform without making it one-
size-fits-all from Washington, and I think that is probably 
what most people would want us to do. So we just have to be 
careful.
    So if occasionally you see people talking about tort reform 
and then something happens on the way from here to the floor, 
you understand why that might occur.
    But you would agree that tort reform----and I will ask the 
gentlelady the question from California.
    You would agree that tort reform is something that would be 
helpful in this process as long as we make sure we are not 
trampling over the general laws of the State?
    Dr. O'Shea. I totally agree. And I can say, being a 
practicing physician in California, our Practice Act had been 
opened. And so it might be analogous to that, that you always 
have to----that the Pandora can jump in and many Pandoras jump 
back in again, out and in.
    But if it is an access to patient care, if it is not abling 
especially specialists or even primary care----if they want to 
treat indigents, if they want to treat others, you are lowering 
their ability to have their own funds that they need, that they 
have to generate some way. So there is another way. Is it 
coming from or is it going out of?
    So I would totally agree that we have to be sensitive to 
each State, but limiting malpractice is something that needs to 
be done.
    Mr. Griffith. And I would hope that the other respective 
States would do what California has done, what Virginia has 
done, what Texas has done now. And each State has their own 
model.
    In Virginia, they have done a great job. And I can't take 
any credit for it, although I served there. But the doctors and 
the trial lawyers got together and came up with caps.
    And sometimes they argue about it, but they come to the 
legislature generally with a plan of what we want to do, does 
the cap need to be raised, does this need to be changed, et 
cetera.
    And they have worked together as opposed to getting into 
pitched wars, which makes it a lot easier on legislators to 
figure out, ``OK. If they are in agreement and they can both 
live with it, then it is probably makes pretty good sense.'' 
And I would encourage the other States to do that as well.
    Let me ask Mr. Schneidewind this. Last May the Office of 
the Actuary at CMS said that Medicare's hospital insurance 
trust fund could be insolvent as soon as 2021 or as late as 
2030. Under current law, there is no ability for the program 
then to pay claims on behalf of seniors.
    Given these empirical facts, do you acknowledge that, if 
left unaddressed, Medicare's coming insolvency could present an 
access problem for seniors on Medicare? It is an easy answer.
    Mr. Schneidewind. Well, if it doesn't have the funds to pay 
claims, it would certainly have an impact on seniors.
    Mr. Griffith. Absolutely.
    On another policy issue both for you and the AMA, the 
President's 2015 budget to Congress includes a proposal that 
would apply----or included a proposal that would apply a $25 
increase to the Part B deductible in 2018, 2020 and 2022, 
respectively for new beneficiaries. Beginning in 2018, current 
beneficiaries or near-retirees would not be subject to the 
revised deductible.
    Has your organization taken a position on this policy? And, 
if so, what is it?
    Mr. Schneidewind. Yes. We have taken a position in 
opposition to that proposal.
    And we have said before the burden of medical costs on our 
members is significant. Half of them have an income of less 
than $23,500 a year and they pay----on average, that group pays 
$4,000 for medical costs. Also, as Medicare premiums, Part B, 
are raised, they pay those increases.
    So imposing yet another deductible increase or expense on 
this group is really, we think, unaffordable, and we think 
there are far better ways to restrain costs in healthcare, in 
general, and in the Medicare program, in particular, than 
raising premiums or deductibles.
    Mr. Griffith. And Dr. McAneny.
    Dr. McAneny. Thank you for the question.
    We don't have any immediate policy on the President's 
budget proposal that we just heard on the State of the Union 
very, very recently, but we do have policy that we want to help 
consumers pay our patients to spend wisely and make wise 
choices.
    Many of our specialty societies have adopted programs that 
we work with on choosing wisely to use those procedures that 
are helpful and not use the ones that are not needed or could 
be avoided.
    There is literature that deductibles and co-pays can both 
decrease access to useful care as well as unuseful care. So we 
think that this is going to be a more complicated issue. We 
will be happy to get back to you on that and work our way 
through that.
    Mr. Griffith. I appreciate that very much. Appreciate your 
testimony.
    And I yield back.
    Mr. Guthrie. Thank you. The gentleman's time has expired.
    All Members seeking recognition have been recognized. And I 
want to remind Members that they have 10 business days to 
submit questions for the record.
    And I ask the witnesses to respond to the questions 
promptly.
    Members should submit their questions by the close of 
business on Thursday, February the 5th.
    Without objection, the subcommittee is adjourned.
    [Whereupon, at 12:34 p.m., the subcommittee was adjourned.]
    [Material submitted for inclusion in the record follows:]
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