[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]
UNLAWFUL REINSURANCE PAYMENTS: CMS
DIVERTING $3.5 BILLION FROM TAXPAYERS TO PAY INSURANCE COMPANIES
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS
OF THE
COMMITTEE ON ENERGY AND COMMERCE
HOUSE OF REPRESENTATIVES
ONE HUNDRED FOURTEENTH CONGRESS
SECOND SESSION
__________
APRIL 15, 2016
__________
Serial No. 114-135
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Printed for the use of the Committee on Energy and Commerce
energycommerce.house.gov
__________
U.S. GOVERNMENT PUBLISHING OFFICE
20-615 PDF WASHINGTON : 2017
----------------------------------------------------------------------------------------
For sale by the Superintendent of Documents, U.S. Government Publishing Office,
http://bookstore.gpo.gov. For more information, contact the GPO Customer Contact Center,
U.S. Government Publishing Office. Phone 202-512-1800, or 866-512-1800 (toll-free).
E-mail, gpo@custhelp.com.
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
7_____
Subcommittee on Oversight and Investigations
TIM MURPHY, Pennsylvania
Chairman
DAVID B. McKINLEY, West Virginia DIANA DeGETTE, Colorado
Vice Chairman Ranking Member
MICHAEL C. BURGESS, Texas JANICE D. SCHAKOWSKY, Illinois
MARSHA BLACKBURN, Tennessee KATHY CASTOR, Florida
H. MORGAN GRIFFITH, Virginia PAUL TONKO, New York
LARRY BUCSHON, Indiana JOHN A. YARMUTH, Kentucky
BILL FLORES, Texas YVETTE D. CLARKE, New York
SUSAN W. BROOKS, Indiana JOSEPH P. KENNEDY, III,
MARKWAYNE MULLIN, Oklahoma Massachusetts
RICHARD HUDSON, North Carolina GENE GREEN, Texas
CHRIS COLLINS, New York PETER WELCH, Vermont
KEVIN CRAMER, North Dakota FRANK PALLONE, Jr., New Jersey (ex
JOE BARTON, Texas officio)
FRED UPTON, Michigan (ex officio)
(ii)
C O N T E N T S
----------
Page
Hon. Tim Murphy, a Representative in Congress from the
Commonwealth of Pennsylvania, opening statement................ 1
Prepared statement........................................... 3
Hon. Diana DeGette, a Representative in Congress from the State
of Colorado, opening statement................................. 5
Hon. Fred Upton, a Representative in Congress from the State of
Michigan, opening statement.................................... 6
Prepared statement........................................... 7
Hon. Frank Pallone, Jr., a Representative in Congress from the
State of New Jersey, opening statement......................... 7
Prepared statement........................................... 9
Witness
Andy Slavitt, Acting Administrator, Centers for Medicare &
Medicaid Services, Department of Health and Human Services..... 11
Prepared statement........................................... 13
Answers to submitted questions \1\........................... 54
Submitted Material
Subcommittee memorandum.......................................... 39
Letter, undated, from Brent Nathan Brown of Mosinee, Wisconsin,
to President Barack Obama, submitted by Ms. DeGette............ 45
Memorandum of February 23, 2016, from Congressional Research
Service to House Committee on Ways and Means and House
Committee on Energy and Commerce, submitted by Mr. Murphy...... 46
----------
\1\ Mr. Slavitt did not answer submitted questions for the record
by the time of printing.
UNLAWFUL REINSURANCE PAYMENTS: CMS DIVERTING $3.5 BILLION FROM
TAXPAYERS TO PAY INSURANCE COMPANIES
----------
FRIDAY, APRIL 15, 2016
House of Representatives,
Subcommittee on Oversight and Investigations,
Committee on Energy and Commerce,
Washington, DC.
The subcommittee met, pursuant to call, at 9:35 a.m., in
room 2123 Rayburn House Office Building, Hon. Tim Murphy
(chairman of the subcommittee) presiding.
Members present: Representatives Murphy, McKinley, Burgess,
Blackburn, Flores, Brooks, Mullin, Hudson, Collins, Upton (ex
officio), DeGette, Castor, Kennedy, Green, and Pallone (ex
officio).
Staff present: Gary Andres, Staff Director; Rebecca Card,
Assistant Press Secretary; Jessica Donlon, Counsel, Oversight
and Investigations; Emily Felder, Counsel, Oversight and
Investigations; Brittany Havens, Legislative Associate,
Oversight and Investigations; Charles Ingebretson, Chief
Counsel, Oversight and Investigations; Chris Santini, Policy
Coordinator, Oversight and Investigations; Jeff Carroll,
Democratic Staff Director; Ryan Gottschall, Democratic GAO
Detailee; Tiffany Guarascio, Democratic Deputy Staff Director
and Chief Health Advisor; Christopher Knauer, Democratic
Oversight Staff Director; Una Lee, Democratic Chief Oversight
Counsel; Elizabeth Letter, Democratic Professional Staff
Member; Andrew Souvall, Democratic Director of Communications,
Outreach, and Member Services; and Arielle Woronoff, Democratic
Health Counsel.
OPENING STATEMENT OF HON. TIM MURPHY, A REPRESENTATIVE IN
CONGRESS FROM THE COMMONWEALTH OF PENNSYLVANIA
Mr. Murphy. Good morning. We are here today at the
Oversights and Investigations hearing on unlawful reinsurance
payments to examine the transitional reinsurance program
established under the Patient Protection and Affordable Care
Act.
The administration has inexplicably changed its position on
a major component of this program and specifically how
reinsurance payments are allocated. Despite issuing two final
rules that allocated a portion of the reinsurance payments to
the U.S. Treasury, CMS changed its position to prioritize
payments to insurers. Essentially, CMS ruled that the Treasury
doesn't get any money until the insurers get paid.
CMS' latest interpretation contradicts the plain language
of the law. Repeatedly, this interpretation contradicts the
plain language of the law. This is just the latest in a long
line of examples of the administration breaking its own
signature law in an attempt to prop it up.
The reinsurance program was created to provide financial
assistance to insurance companies who offered plans through
Obamacare. The program incentivizes insurance companies to
continue selling plans through healthcare.gov and State
exchanges because it compensates them for enrolling high risk
individuals. Final payments for this 3-year program will end in
2017.
For each enrollee, insurance companies contribute a set
dollar amount to the program, and then the funds collected are
distributed to insurers who enroll the highest risk
individuals. Built into this program was a deficit reduction
measure, a proportion of each individual contribution is
allocated to the Treasury. The statute estimates that
approximately $5 billion would be designated to the Treasury
through this program with $20 billion going to insurers.
On March 11th, 2014, CMS issued a rule that spelled out how
to divide the fund between Treasury, insurance companies, and
administrative costs. CMS wrote that Treasury would receive
about 25 percent of the fund in 2015.
But while insurers have received billions of dollars from
the program, the Treasury has still received nothing. That is
because CMS changed its mind ten days later after issuing its
final March 11th, 2014 rule. Ten days later, CMS published a
rule completely reversing its policy position. In the new rule,
CMS prioritized payments to insurers over payments to the
Treasury and in short Treasury gets nothing until insurers are
paid in full. CMS finalized this rule in May of 2014.
But why did CMS dramatically reverse its own policy to
favor insurance companies? We look forward to getting a
straight answer from CMS today. We do know there is a cozy
relationship between insurance companies and this
administration, and the administration has worked to
incentivize insurers to stick with the exchanges. In fact, we
know that insurers have even emailed top White House officials
begging for more taxpayer money to lower premiums and keep
insurers selling Affordable Care Act plans.
I expect Mr. Slavitt will attempt to justify why CMS
changed its interpretation of the law, and he may argue that
the statute is ambiguous or silent about what to do if the fund
doesn't collect the full amount. However, the statute clearly
states in this statement here that the portion of the
contribution intended for the Treasury shall be deposited into
the general fund of the Treasury of the United States and may
not be used for a reinsurance program. This means that each
contribution includes a portion intended just for the Treasury
and CMS cannot divert those funds to pay insurance companies
instead.
Now the nonpartisan Congressional Research Service agrees
with us that the statute is not ambiguous and it is not silent
on the issue. CRS analyzed the statute and CMS'
interpretations. The CRS found that the statute, quote,
unambiguously states that each issuer's contribution contain an
amount that reflect its proportionate share of the U.S.
Treasury contribution and that these amounts should be
deposited in the general fund of the U.S. Treasury, unquote.
Mr. Slavitt may also argue that neither the law nor CMS
contemplated what to do if the reinsurance fund came up short
of the target amounts. The law states, however, that a portion
of what is collected must go to the Treasury. Moreover, CMS did
contemplate what would happen if the fund did not collect
enough money. In its final rule issued March 11th, 2014, CMS
predicted there would be a variance between the statutory
benchmark and actual amount received through the program.
When asked about the legal basis for diverting these funds
at a February 24th, 2016, hearing before our Subcommittee on
Health, Secretary Burwell provided no legal justification. The
Secretary emphasized that this program is temporary, implying
the committee's concerns are unimportant because the program
will be over in 2017.
I disagree. I think this issue holds the utmost importance.
CMS' actions exemplify a problem that goes beyond just this one
Affordable Care Act program. When the executive branch decides
to reprioritize the budget and divert money intended for the
Treasury it is a concern for Congress. When CMS officials
decide to ignore a clear mandate from Congress it is an affront
to this legislative body.
The administration cannot rewrite its own law to make it
more convenient for special interests. This sets a dangerous
precedent and is an affront to the separation of powers.
Moreover, this program funnels money to insurers, now with
money intended for the Treasury, in an attempt to prop up the
Affordable Care Act.
What will happen when this program runs out and there is no
mechanism to underwrite high risk individuals who sign up on
the exchanges? Will more insurers drop out? Will premiums raise
even higher? The administration's actions appear to be trying
to delay the inevitable, the collapse of the Affordable Care
Act if it is not reformed.
I thank Mr. Slavitt for being here today. I know he and I
have talked many times, and I appreciate his candor with me,
and I hope that he will pledge to return CMS' first, lawful
interpretation of the reinsurance program and allocate funds to
Treasury as required by law.
[The prepared statement of Mr. Murphy follows:]
Prepared statement of Hon. Tim Murphy
We are here today to examine the ``transitional reinsurance
program'' established under the Patient Protection and
Affordable Care Act. The administration has inexplicably
changed its position on a major component of this program-
specifically, how reinsurance payments are allocated.
Despite issuing two final rules that allocated a portion of
the reinsurance payments to the U.S. Treasury, CMS changed its
position to prioritize payments to insurers. Essentially, CMS
ruled that the Treasury doesn't get any money until the
insurers get paid.
CMS' latest interpretation contradicts the plain language
of the law. This is just the latest in a long line of examples
of the administration breaking its own signature law in an
attempt to prop it up.
The reinsurance program was created to provide financial
assistance to insurance companies who offered plans through
ObamaCare. The program incentivizes insurance companies to
continue selling plans through healthcare.gov and State
exchanges, because it compensates them for enrolling high risk
individuals. Final payments for this 3-year program will end in
2017.
For each enrollee, insurance companies contribute a set
dollar amount to the program, and then the funds collected are
distributed to insurers who enroll the highest risk
individuals. Built into this program was a deficit reduction
measure-a proportion of each individual contribution is
allocated to the Treasury. The statute estimates that
approximately $5 billion would be designated to the Treasury
through this program-with $20 billion going to insurers.
On March 11, 2014, CMS issued a rule that spelled out how
to divide the fund between Treasury, insurance companies and
administrative costs. CMS wrote that Treasury would receive
about 25% of the fund in 2015. But while insurers have received
billions of dollars from the program, the Treasury has still
received nothing.
This is because CMS changed its mind 10 days later after
issuing its final March 11, 2014 rule. 10 days later, CMS
published a proposed rule, completely reversing its policy
position. In the new rule, CMS prioritized payments to insurers
over payments to the Treasury. In short, Treasury gets nothing
until insurers are paid in full. CMS finalized this rule in May
2014.
Why did CMS dramatically reverse its own policy to favor
insurance companies? We look forward to getting a straight
answer from CMS today. We do know there is a cozy relationship
between insurance companies and this administration. And the
administration has worked to incentivize insurers to stick with
the exchanges. In fact, we know that insurers have even emailed
top White House officials begging for more taxpayer money to
lower premiums and keep insurers selling Obamacare plans.
I expect Mr. Slavitt will attempt to justify why CMS
changed its interpretation of the law. He may argue that the
statute is ambiguous or silent about what to do if the fund
doesn't collect the full amount. However, the statute clearly
states that the portion of the contribution intended for the
Treasury ``shall be deposited into the general fund of the
Treasury of the United States and may not be used for the
[reinsurance] program.'' This means that each contribution
includes a portion intended just for the Treasury--and CMS
cannot divert those funds to pay insurance companies instead.
The nonpartisan Congressional Research Service agrees with
us--the statute is not ambiguous or silent on this issue. CRS
analyzed the statute, and CMS' interpretations. CRS found that
``the statute unambiguously states that `each issuer's
contribution' contain an amount that reflects `its
proportionate share' of the U.S. Treasury contribution, and
that these amounts should be deposited in the General Fund of
the U.S. Treasury.'' Mr. Slavitt may also argue that neither
the law nor CMS contemplated what to do if the reinsurance fund
came up short of the target amounts. The law states, however,
that a portion of what is collected must go to the Treasury.
Moreover, CMS did contemplate what would happen if the fund
did not collect enough money. In its final rule issued March
11, 2014, CMS predicted there could be a variance between the
statutory benchmark and the actual amount received through the
program. When asked about the legal basis for diverting these
funds at a February 24, 2016 hearing before our Subcommittee on
Health, Secretary Burwell provided no legal justification. The
Secretary emphasized that this program is temporary, implying
the committee's concerns are unimportant because the program
will be over in 2017.
I disagree. I think this issue holds the utmost importance.
CMS' actions exemplify a problem that goes beyond just this one
ObamaCare program. When the executive branch decides to
reprioritize the budget and divert money intended for the
Treasury, it is a concern for Congress. When CMS officials
decide to ignore a clear mandate from Congress, it is an
affront to this legislative body. The administration cannot re-
write its own law to make it more convenient for special
interests. This sets a dangerous precedent and is an affront to
the separation of powers.
Moreover, this program funnels money to insurers-now with
money intended for the Treasury--in an attempt to prop up
ObamaCare. What will happen when this program runs out, and
there is no mechanism to underwrite high risk individuals who
sign up on the exchanges? Will more insurers drop out? Will
premiums rise even higher? The administration's actions appear
to be trying to delay the inevitable--the collapse of
Obamacare.
I thank Mr. Slavitt for being here today and hope that he
will pledge to return to CMS' first, lawful interpretation of
the reinsurance program -and allocate funds to Treasury as
required by the law.
Mr. Murphy. I now recognize the ranking member of the
subcommittee, Ms. DeGette of Colorado, for 5 minutes.
OPENING STATEMENT OF HON. DIANA DEGETTE, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF COLORADO
Ms. DeGette. Thanks, Mr. Chairman. Well, I guess nobody
here is surprised we are having yet another Oversight hearing
on the Affordable Care Act. This subcommittee has had 16
oversight hearings on the act since it was passed, and also we
have sent dozens of oversight letters to the Department of
Health and Human Services, to CMS, and others, pertaining to
the Affordable Care Act.
I know for a fact the agencies have spent countless staff
hours and taxpayer dollars preparing testimony for hearings
responding to these letters and providing documents,
information and briefings to satisfy the committee's oversight
interests.
Now I just want to ask one question. Has anything of value
been achieved through these efforts? Have we actually changed
or modified the Affordable Care Act to work better? No, we
haven't. Now listen, I believe in Government oversight. In
fact, I have urged the chairman of the full committee and you,
Mr. Chairman, to have meaningful oversight hearings around the
Affordable Care Act because I do believe there are some things
that can be fixed.
But, you know, good Government illuminates the shortcomings
and causes of institutional failures and thereby it informs any
substantive changes in public policy. Unfortunately, our
oversight over the act over the last 6 years has served neither
to enlighten the committee, improve the law nor help millions
of Americans. And I just use, for example, of what we are doing
here today is the hashtag that the majority is using on social
media, hashtag Great Obamacare Heist, or some of the
inflammatory statements in the press release that the majority
sent out about today's hearing and why we are having it.
Now you have heard over and over again for 6 years that the
ACA is destroying the lives of Americans, and also you just
heard that the administration has not followed the law. I mean,
I think that there may be a matter of misinterpretation or
different interpretation, but nobody can argue that 20 million
new Americans have insurance because of the Affordable Care
Act.
In this press release I just referenced, my colleagues
describe the reinsurance program which is the topic of today's
hearing as a, quote, ``taxpayer-funded giveaway.'' Now this is
a program, the reinsurance program, that the majority
understood was necessary and in fact put in their own bill on
Medicare Part D when they passed that in 2005.
The reason we have the ACA reinsurance program is because
it helped us transition from an individual market that relied
on medical underwriting to one in which insurers can no longer
discriminate against individuals for preexisting conditions and
cannot decline to offer coverage to somebody because they are
sick. This temporary transitional program achieves this goal by
collecting contributions from insurance companies which are
then in turn used to make payments to insurance companies in
the individual market which will offset the largest claims for
the sickest individuals. I would hardly call that a taxpayer
funded giveaway.
This self-same press release also described the
administration's decision to prioritize reinsurance payments to
insurers as, quote, unlawful. You just heard that in the
chairman's statement. Now this rhetoric is also unfair and
inaccurate, because what we have here is a difference of
opinion regarding a policy decision and a difference of views
on how to interpret a provision of the ACA.
So I look forward to hearing about those differences today,
but unlawful again seems to be a little bit extreme.
Now, I just want to put this in perspective, and I want to
read an excerpt of a letter from Brent Brown to President
Obama. Brent Brown is a lifelong Republican who recently
introduced the President at a speech in Milwaukee, Wisconsin,
and here is what he said.
Quote, I did not vote for you either time. I have voted
Republican for the entirety of my life. I proudly wore pins and
planted banners displaying my Republican loyalty. I was very
vocal in my opposition to you, particularly the ACA. Before I
briefly explain my story, allow me to say this. I am so very
sorry. I was so very wrong. You saved my life, Mr. President.
You saved my life and I am eternally grateful. I have a
preexisting condition and so could never purchase health
insurance. Only after the ACA came into being could I be
covered. Put simply to take not too much of your time if you
are in fact taking the time to read this, I would not be alive
without access to the care I received due to your law.
Mr. Chairman, I would like unanimous consent to enter Mr.
Brown's letter to the record.
Mr. Murphy. Without objection.
[The information appears at the conclusion of the hearing.]
Ms. DeGette. And I think it is time to have a productive
conversation about improving the ACA and the lives of all our
constituents, and I yield back the balance of my time.
Mr. Murphy. The gentlelady yields back. I now recognize the
chairman of the full committee, 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. Chairman. This hearing does
continue the subcommittee's thoughtful and necessary oversight
of the President's healthcare law. Today, the three-and-half-
billion-dollar question is why CMS is now diverting taxpayer
dollars to insurance companies without any legal authority to
do so.
Health law statute plainly states that a portion of the
contributions to the reinsurance program must be given to the
U.S. Treasury. Still, CMS has chosen to violate the law by
prioritizing reinsurance contributions to health insurers
rather than allocating the required portion to the U.S.
Treasury.
Initially, CMS followed the letter of the law and according
to its final rule issued on March 11th, 2014, and similar to
its rule the prior year, CMS planned to allocate contributions
to the reinsurance program between the health insurers, the
Treasury, and administrative costs. Less than two weeks later,
however, on March 31st, 2014, CMS switched gears and issued a
different proposed rule completely reversing their previous
position.
Rather than allocating a portion of the contribution to the
Treasury as dictated by law, CMS instead prioritized
reinsurance contributions to health insurers and finalized the
rule two months later. So why, the question is why the sudden
reversal to redirect billions away from the taxpayer?
Legal memorandum released earlier this year by the
nonpartisan CRS found that the statute does not permit CMS to
prioritize reinsurance payments to insurers. In fact, the
Congressional Research Service found that CMS' actions appear
to contradict the plain language of the law.
I would like to think that you have come to provide us some
answers to those questions today as we look to understand the
who, what, when, where, and why of that decision. The American
public deserves answers and we look forward to that discussion.
I yield back.
[The prepared statement of Mr. Upton follows:]
Prepared statement of Hon. Fred Upton
This hearing continues the subcommittee's thoughtful and
necessary oversight of the President's healthcare law.
Today, the 3.5-billion-dollar question is why CMS is now
diverting taxpayer dollars to insurance companies without any
legal authority to do so. The health law statute plainly states
that a portion of the contributions to the reinsurance program
must be given to the U.S. Treasury. Still, CMS has chosen to
violate the law by prioritizing reinsurance contributions to
health insurers rather than allocating the required portion to
the U.S. Treasury.
Initially, CMS followed the letter of the law. According to
its final rule issued March 11, 2014, and similar to its rule
the prior year, CMS planned to allocate contributions to the
reinsurance program between the health insurers, the U.S.
Treasury, and administrative costs. Less than two weeks later,
however, on March 21, 2014, CMS switched gears and issued a
different proposed rule completely reversing CMS' prior
position. Rather than allocating a portion of the contributions
to the Treasury as dictated by law, CMS instead prioritized
reinsurance contributions to health insurers and finalized this
rule two months later. Why the sudden reversal to redirect
billions away from taxpayers?
A legal memorandum released earlier this year by the
nonpartisan Congressional Research Service found that the
statute does not permit CMS to prioritize reinsurance payments
to insurers. In fact, CRS found that CMS' actions appear to
contradict the plain language of the law.
We hope Centers for Medicare and Medicaid Services' Acting
Administrator Andy Slavitt has come with answers today as we
look to understand the `who, what, when, where, and why' of
CMS' decision. The American public deserves answers.
I would note that on this date 104 years ago, the Titanic
sank after striking an iceberg. The President's health law is
taking on water, and the administration is doing everything in
its power, including violating the law, to keep it afloat.
Regardless of one's view of the President's health law, the
law and its implementation demand vigilant oversight. Congress
cannot stand silent when its laws are not being faithfully
executed.
Further, as we continue to see today, billions of taxpayer
dollars are at stake.
Mr. Murphy. The gentleman yields back. I now recognize 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. When we passed the
Affordable Care Act into law more than 6 years ago, we
dramatically changed the healthcare landscape in this country
and the law has been a historic success. It has achieved its
goals and made access to comprehensive health care a reality
for the American people. Thanks to the Affordable Care Act, 20
million more Americans now know the security of health
insurance, and for the first time ever the uninsured rate has
fallen below ten percent. And these are remarkable
achievements.
Before the Affordable Care Act was passed, the insurance
system in this country was broken. Even my Republican
colleagues who were obsessed with repealing the law acknowledge
that this is the case.
Absolutely no one is advocating for returning to the old
system of rapidly rising costs, gross inefficiencies, and
painful inequalities. It was a system where upwards of 129
million Americans, nearly one in two people, could be
discriminated against in the individual market for preexisting
medical conditions ranging from diabetes to breast cancer to
pregnancy. And these individuals could be charged more than a
healthy person for the same coverage and were often denied
coverage all together. Many insurance plans lacked important
benefits and limited coverage.
Fortunately, thanks to the Affordable Care Act, these
things are no longer true. People who were previously deemed
uninsurable because of preexisting conditions are finally
getting health insurance coverage and this has meant a big
change in how insurance companies do business.
Under the old system, insurers sought to protect their
bottom lines by avoiding the sickest and costliest patients in
the individual market, a practice known as medical
underwriting. Today, insurers must offer coverage to everyone
and they cannot cancel someone's policy because he or she gets
sick.
The law's temporary reinsurance program operates to smooth
this transition from a medically underwritten individual
insurance market to one in which everyone is guaranteed
coverage. Simply put, the reinsurance program spreads the cost
of large insurance claims for very sick individuals across all
insurers, helping to stabilize premiums during the early years
of the new marketplace. The program collects contributions from
health insurance companies, which are then used to make
payments to the insurance companies in the individual market to
offset the costs of their sickest enrollees.
Now my Republican colleagues on this committee have called
these payments, quote, handouts to insurance companies, and I
quote, taxpayer funded giveaways. And neither of these things
is true. The reinsurance program is a temporary program funded
entirely by contributions from insurance companies to smooth
the transition from a medically underwritten market to one
where everyone is guaranteed coverage.
Unfortunately, this type of overblown rhetoric and blatant
misinformation is typical when it comes to my Republican
colleagues and the Affordable Care Act. In fact, this same
framework is a permanent fixture of our Part D program, a law
that Republicans support, defend and promote. And I just find
it ironic and hypocritical that this framework is acceptable
for Medicare Part D, which was signed into law by a Republican
President, but it is supposedly a taxpayer funded giveaway
under a healthcare law from a Democratic President. You can't
have it both ways.
They have used similar rhetoric to describe the
administration's decision to prioritize reinsurance payments to
insurers over payments to the U.S. Treasury, the subject of
today's hearing. For instance, a March 22, 2016 press release
from the majority describes, and I quote, CMS' decision to loot
billions from the Treasury to pay off insurance companies and
calls on the agency, and I quote again, to stop unlawful
payments to insurers. And these characterizations by the GOP
are simply absurd.
Let's be clear. What is at stake here is simply a policy
disagreement about how to interpret statutory language in the
Affordable Care Act. The administration has interpreted the law
through a formal, transparent notice and comment rulemaking
process. It determined that the statute is silent on what the
agency should do in the event that collections are insufficient
to fully fund both payments to insurance companies and payments
to the U.S. Treasury. It then concluded that in the event of a
shortfall, payments to insurers should be prioritized and that
this prioritization furthers the statutory goals of the
program.
I know my Republican colleagues clearly disagree with this
interpretation and they are entitled to their view. But the
hyperbole and the misinformation is counterproductive and does
nothing to help a single person get health insurance.
So let me just conclude by expressing my disappointment in
the direction this committee continues to take in conducting
oversight of the Affordable Care Act. Hearings like this only
serve to hurt Americans and reverse the progress that has been
made for the millions who now benefit from the law. And I
believe we should instead work to improve the law and ensure
all of our constituents have access to the quality, affordable
health care they deserve.
I yield back, Mr. Chairman.
[The prepared statement of Mr. Pallone follows:]
Prepared statement of Hon. Frank Pallone, Jr.
When we passed the Affordable Care Act into law more than 6
years ago, we dramatically changed the healthcare landscape in
this country. The law has been a historic success. It has
achieved its goals and made access to comprehensive healthcare
a reality for the American people.
Thanks to the Affordable Care Act, 20 million more
Americans now know the security of health insurance, and for
the first time ever, the uninsured rate has fallen below 10
percent. These are remarkable achievements.
Before the Affordable Care Act was passed, the insurance
system in this country was broken. Even my Republican
colleagues who are obsessed with repealing the law acknowledge
that this is the case.
Absolutely no one is advocating for returning to the old
system of rapidly rising costs, gross inefficiencies, and
painful inequalities. It was a system where upwards of 129
million Americans--nearly one in two people--could be
discriminated against in the individual market for pre-existing
medical conditions, ranging from diabetes to breast cancer to
pregnancy.
These individuals could be charged more than a healthy
person for the same coverage and were often denied coverage
altogether. Many insurance plans lacked important benefits and
limited coverage.
Fortunately, thanks to the Affordable Care Act, these
things are no longer true. People who were previously deemed
uninsurable because of pre-existing conditions are finally
getting health insurance coverage.
This has meant a big change in how insurance companies do
business. Under the old system, insurers sought to protect
their bottom lines by avoiding the sickest and costliest
patients in the individual market, a practice known as medical
underwriting. Today, insurers must offer coverage to everyone,
and they cannot cancel someone's policy just because he or she
gets sick.
The law's temporary reinsurance program operates to smooth
this transition from a medically underwritten individual
insurance market to one in which everyone is guaranteed
coverage. Simply put, the reinsurance program spreads the cost
of large insurance claims for very sick individuals across all
insurers, helping to stabilize premiums during the early years
of the new marketplace. The program collects contributions from
health insurance companies, which are then used to make
payments to insurance companies in the individual market to
offset the costs of their sickest enrollees.
My Republican colleagues on this committee have called
these payments ``handouts to insurance companies'' and a
``taxpayer-funded giveaway.'' Neither of these things is true.
The reinsurance program is a temporary program, funded entirely
by contributions from insurance companies, to smooth the
transition from a medically underwritten market to one where
everyone is guaranteed coverage.
Unfortunately, this type of overblown rhetoric and blatant
misinformation is typical when it comes to my Republican
colleagues and the Affordable Care Act. In fact, this same
framework is a permanent fixture of our Part D program--a law
that Republicans support, defend and promote. I find it ironic
and hypocritical that this framework is acceptable for Medicare
Part D, which was signed into law by a Republican President,
but it is a supposed ``taxpayer-funded giveaway'' under a
healthcare law from a Democratic President. You can't have it
both ways.
They have used similar rhetoric to describe the
administration's decision to prioritize reinsurance payments to
insurers over payments to the U.S. Treasury, the subject of
today's hearing. For instance, a March 22, 2016 press release
from the Majority describes ``CMS' decision to loot billions
from the Treasury to pay off insurance companies,'' and calls
on the agency to ``stop unlawful payments to insurers.'' These
characterizations are absurd.
Let me be clear: what is at stake here is simply a policy
disagreement about how to interpret statutory language in the
Affordable Care Act.
The administration has interpreted the law through a
formal, transparent, notice and comment rulemaking process. It
determined that the statute is silent on what the agency should
do in the event that collections are insufficient to fully fund
both payments to insurance companies and payments to the U.S.
Treasury. It then concluded that in the event of a shortfall,
payments to insurers should be prioritized, and that this
prioritization furthers the statutory goals of the program.
My Republican colleagues clearly disagree with this
interpretation. They are entitled to their view. But the
hyperbole and the misinformation is counterproductive and does
nothing to help a single person get health insurance.
Let me conclude by expressing my disappointment in the
direction this committee continues to take in conducting
oversight of the Affordable Care Act. Hearings like this only
serve to hurt Americans and reverse the progress that has been
made for the millions who now benefit from the law.
We should instead work to improve the law and ensure all of
our constituents have access to the quality, affordable health
care they deserve.
Mr. Murphy. The gentleman yields back. Now let me introduce
our one witness here. Andy Slavitt is the Acting Administrator
for the Centers for Medicare and Medicaid Services. As Acting
Administrator, he oversees programs that provide access to
quality health care for 140 million Americans including
Medicaid and Medicare, the Children's Health Insurance Program,
and Health Insurance Marketplace. You have been before us in
this committee, so welcome back.
I ask unanimous consent also that the members' written
opening statements be introduced in the record, and without
objection, the documents will be entered into the record.
You are aware that this committee is holding an
investigative hearing, Mr. Slavitt, and when doing so has the
practice of taking testimony under oath. Do you have any
objections to testifying under oath?
Mr. Slavitt. I do not.
Mr. Murphy. And the Chair then would advise you that under
the rules of the House, under rules of committee, you are
entitled to be advised by counsel. Do you desire to be advised
by counsel during your testimony today?
Mr. Slavitt. No, thank you.
Mr. Murphy. In that case, would you please rise, raise your
hand, and I will swear you in.
[Witness sworn.]
Mr. Murphy. Thank you. You are now under oath and subject
to the penalties set forth in Title 18, Section 1001, of the
United States Code. You may now give a 5-minute summary of your
witness statement.
STATEMENT OF ANDY SLAVITT, ACTING ADMINISTRATOR, CENTERS FOR
MEDICARE & MEDICAID SERVICES, DEPARTMENT OF HEALTH & HUMAN
SERVICES
Mr. Slavitt. Chairman Murphy, Ranking Member DeGette, and
members of the subcommittee, I'm pleased to be here again and
look forward to discussing the Affordable Care Act's
transitional reinsurance program.
The transitional reinsurance program is a critical building
block in the new health insurance market from which so many
consumers are benefiting. By now you've heard the statistics,
an estimated 20 million Americans have gained coverage and the
Nation's uninsured rate is at its lowest recorded level.
When we talk about these numbers it's important to
understand that it just doesn't happen by itself. Critical
provisions of the ACA like reinsurance allow people with
significant medical expenses to be covered affordably. Reducing
the cost of health insurance is in everyone's interest, for
individuals in small businesses who pay premiums, and because
the Government gives Federal tax credits to people with modest
incomes it is a much better deal for the Treasury. We all
benefit. Covering people with significant medical expenses is a
core policy objective of the ACA.
I will refer to an example of the Hubbard family who live
in Dallas, Texas. Sean Hubbard is studying for a PhD, and his
wife Jamie works in a hair salon. They signed up for health
insurance through the marketplace. Sean described what happened
when his son Navin was born a month early. Other than being
small he appeared to be healthy, but doctors discovered that
Navin had a heart defect that would require surgery, and
transferred him to Medical City Children's Hospital.
In all, the bills have come to nearly $3 million, but we've
been covered through it all. The little fellow has come home in
mid-February, and though he's doing well he has more surgeries,
speech and physical therapy and other procedures in his future,
and it's comforting to know that because of the Affordable Care
Act Navin can't be denied coverage in the future because of
preexisting conditions.
My point isn't simply to remind us what's happening
throughout the country as millions of families get coverage for
the first time, but also to point to the importance of the
details that matter, critical policy provisions like
reinsurance.
We all know that the Hubbard situation could be visited on
any of us. Sometimes we need expensive health care to get well.
I spent more than two decades in the healthcare industry before
joining the Government and I can tell you that until 2014,
every day medical expenses like this haunted American families
for the rest of their lives. The Affordable Care Act
fundamentally changed that and changed the entire insurance
market. Insurance companies can no longer deny or put limits on
a consumer's coverage because they have a serious illness.
This is precisely why reinsurance is so important. It
spreads the risk across large populations. Every insurance
company pays a smaller amount of money in the confidence that
if they happen to enroll people like the Hubbards they'll
receive money back to help cover the costs of the complex
medical care. This is certainly not a concept unique to the
Affordable Care Act, Congress also included the reinsurance
program in Medicare Part D for similar reasons.
Let me directly address the implementation of this
provision and in particular how the allocation of funds were
determined. In the case of reinsurance the statute didn't
contemplate what should occur if collections either fell above
or below the mark indicated in the statute. While I've been in
Government only a short time, I can tell you that occasionally
across all of our programs including Medicare and Medicaid we
do encounter instances in which the statute is silent as to the
necessary details to implement the policy.
Given this, 2 years ago CMS proposed an approach of
reimbursing high cost claims as a first priority and sought
public comment on both the legal and policy reasoning of how to
address the specific scenarios that weren't contemplated by the
statute. CMS received universal public support for the policy
of returning payments back to cover claims as a first priority,
and no one, not one commenter questioned the legality or
appropriateness of the approach.
In the brief time that I've been with the agency, I can
tell you that we take concerns that we receive very seriously.
We understand that differences of interpretation sometimes
happen, and as the committee has more recently expressed. Our
lawyers carefully reviewed and assessed the recent memo from
the Congressional Research Service to confirm our approach is
supported by the statute.
As the CBO recently noted, the entire cost of the Treasury
of the ACA's coverage provisions is projected to be 25 percent
lower than originally estimated. The reinsurance program is
reducing costs. It continues to help many, many families like
the Hubbards and serves taxpayers well by lowering Federal tax
credit obligations.
This year we will add approximately $500 million to the
U.S. Treasury from the program as collections will exceed the
targeted amount to reimburse high cost claims for 2015. We are
committed to operating this program for American families and
with focus on efficiency for taxpayers. I look forward to
answering your questions now to the best of my abilities.
[The prepared statement of Mr. Slavitt follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Mr. Murphy. Thank you, Mr. Slavitt. Before I start I want
unanimous consent to include the CRS memo in the record, so
without objection, I will include that there.
[The information appears at the conclusion of the hearing.]
Mr. Murphy. I recognize myself for 5 minutes. On March
11th, 2014, CMS did issue a final rule that it allocated a
proportion of reinsurance contributions to Treasury in
accordance with the law, and just ten days later CMS issued
another rule reversing its position and prioritizing payments
to insurers over the Treasury. Why did CMS change its mind?
Mr. Slavitt. Thank you, Mr. Chairman. Well, this was before
my time at CMS so I couldn't give you other than what I've seen
in the regulation, which is first of all it's not uncommon for
new regulations to supplant older regulations as people learn
more, and I think it was laid out in the regulation that was
proposed subsequently that they were concerned about the
precision of the estimate and so they laid out the policy
reasoning and legal reasoning subsequently as to why they felt
like that was the right course.
Mr. Murphy. In its prior rulemaking though CMS had already
contemplated what would happen if the reinsurance fund did not
collect enough money and CMS said the Treasury would still
receive a portion of the funds, so this is out of CMS'
interpretation at the time. So the rule did not change because
CMS had to figure out what to do if the fund came up short,
correct?
Mr. Slavitt. I think the--I'm sorry. Can I ask you to
repeat that question?
Mr. Murphy. Sure. The rule did not change because CMS had
to figure out what to do if the fund came up short. I mean, was
that their motivation that it would come up short?
Mr. Slavitt. I think they were--I think there was
uncertainty as to how to handle situations if it did come up
short, and so I believe they looked at the situation and
determined that that was the best policy decision and sought
public comment as to whether or not that indeed was the right
policy decision, but also laid out the legal reasoning to get
comment on whether or not that was appropriate.
Mr. Murphy. But they had already contemplated that scenario
that it might come up short and again then made this leap to
change their interpretation, and this is what is so puzzling to
us. One day they interpret it one way according to the law, and
another day as you said some lawyers reviewed and changed their
minds on that. I would think that we have responded in truth
and the law instead of interpretations.
But let's go back to this nonpartisan Congressional
Research Service statute which does speak to directly to the
issue. I mean, CMS wrote that the law unambiguously states, and
let me read the whole quote here, because the statute
unambiguously states that each issuer's contribution contain an
amount that reflects its proportionate share of the U.S.
Treasury contribution and that these amounts should be
deposited in the general fund of the U.S. Treasury, a contrary
agency interpretation would not be entitled to deference under
Chevron. Now you have read the CMS memo, I am assuming?
Mr. Slavitt. Yes, I have, but more importantly so have our
lawyers.
Mr. Murphy. Well, I don't give a darn what your lawyers say
if they are wrong. I mean, what they are saying is, so this is
a very unambiguous statement from CMS and Congress made a clear
rule in this in the law. And just because some lawyer said,
well, we don't agree with what the law says and we don't even
agree with what CRS says, we are going to come up with our own
interpretation, I don't see where the law grants any latitude
to say, here is what the law says but this is open to the
interpretation of any lawyer who wants to see otherwise.
So help me with this. I don't understand where the
authority comes from to make that change.
Mr. Slavitt. Sure. Well, we believe we have the statutory
authority. And I think what is at root here is that the statute
is very clear on what happens in the circumstance where $12
billion is collected and the statute is silent on what happens
when different amounts are collected.
And I think as again because I wasn't here we'll piece this
back based on what I've learned is that that meant either
interpretations, there could be multiple interpretations of
what to do in those situations.
Mr. Murphy. I think the wording unambiguously is pretty
clear. I don't think that says there is multiple
interpretations. Have you seen the movie, The Big Short?
Mr. Slavitt. I have.
Mr. Murphy. So you know in there the whole issue was while
they are taking all these mortgages, AAA, AB rated, that the
banks were basically reselling these and repackaging these to
keep these bond packages strong, and other people were saying
it cannot be sustained, the banks at some point can't keep
doing this.
This whole thing looks to me of the same ilk, and I worry
here. Look, I like the story you told about people who have
insurance. I agree with you. I am glad people have that kind of
coverage now. What worries me is that when this whole thing
ends in a few months and they are not going to have this kind
of thing to prop it all up anymore, we are going to see some
collapse here in the health insurance market like occurred
there for the bond markets.
I am out of time. I now give 5 minutes to Ms. DeGette.
Ms. DeGette. Oh, OK. That was kind of an interesting
question about a movie, about the big banks and everything. Mr.
Slavitt, do you think--I haven't seen the movie, but I am going
to--do you think that what is happening here with the
reinsurance is the same thing that the big banks did in this
movie depiction?
Mr. Slavitt. No, Congresswoman.
Ms. DeGette. And why not?
Mr. Slavitt. Well, this is reinsurance payments, which is--
and I've been in the healthcare industry for quite some time.
Ms. DeGette. Right.
Mr. Slavitt. The premiums are funded by the plans
themselves in order to cover losses that they receive. So this
is not in fact taxpayer funded, as you pointed out earlier, but
it really is a very, very common technique to make sure that
people with large claims can get covered, particularly in the
early years of the market.
Ms. DeGette. It just smooths out the system, right?
Mr. Slavitt. Exactly, smooths it out.
Ms. DeGette. And this is going to be phased out once the
market is stabilized, right?
Mr. Slavitt. Right, after 3 years. Yes.
Ms. DeGette. Now you said you weren't at the, we know you
weren't at CMS at the time this policy was designed; is that
right?
Mr. Slavitt. That's correct.
Ms. DeGette. So when it was designed--but you say you have
gone back and you have researched it----
Mr. Slavitt. Yes.
Ms. DeGette [continuing]. And figured out what happened; is
that right?
Mr. Slavitt. That's correct.
Ms. DeGette. You also talked to your lawyers about it.
Mr. Slavitt. That's correct.
Ms. DeGette. OK. Now, so when in 2015 CMS proposed
prioritizing reinsurance payments to health insurance issuers
over payments to the U.S. Treasury in the event that
collections fell short of the amount needed to make both
payments in full, do you know how that proposal came about?
Mr. Slavitt. I don't know exactly how it came about, but I
know that because they were unsure given that the statute
didn't contemplate what to do, the approach they took was to
file a notice of proposed rulemaking with the Federal Register
for everybody to see so they could see comments both on the
approach at the policy as well as the legal reasoning for that.
Ms. DeGette. And did they go through that process then?
Mr. Slavitt. They did.
Ms. DeGette. And did they get any comments that this was
illegal?
Mr. Slavitt. No, they did not.
Ms. DeGette. Did they get any comments that it was a quote,
taxpayer funded giveaway?
Mr. Slavitt. No, they did not.
Ms. DeGette. OK. Do you know if the agency consulted with
its lawyers when it put the proposal together?
Mr. Slavitt. Yes. I can tell you that the lawyers
scrupulously review every regulation that the agency proposes.
Ms. DeGette. And the lawyers felt I assume that it would be
legal to do this kind of rulemaking; is that right?
Mr. Slavitt. That's correct.
Ms. DeGette. Now you told Mr. Murphy that you have
subsequently talked to the lawyers about whether this was legal
despite the language that Mr. Murphy cited to from the statute.
What was the advice that they gave you about why they thought
it was legal?
Mr. Slavitt. Well, so first of all it's not uncommon for
there to be differences of opinion and for there to be memos
that come in that don't agree. I think our practice, and I
followed up specifically with the lawyers, was to make sure
that upon reading that letter they still had the same
interpretation that they had before.
Indeed, their comment was that they believed that the
regulation's still very clearly supported by the statute and
that there's statutory authority for it.
Ms. DeGette. Even now?
Mr. Slavitt. Even now. And I would say, you know, I think
we have a very good track record of responding. So, for
example, the GAO over the last year, 2015, we have had 47
recommendations from the GAO and 43 times we've concurred with
those recommendations. Four times we didn't concur. So
sometimes, many times, we were in agreement. There are
occasions when we seek comments that we don't think we agree
with.
Ms. DeGette. And is this one of those four times?
Mr. Slavitt. This is one of those times.
Ms. DeGette. OK. So do you still think that this is an
appropriate rule?
Mr. Slavitt. Yes. This is a highly successful program. It's
benefiting many, many Americans and the taxpayers.
Ms. DeGette. And do you think that when it phases out that
the bottom is going to fall out of the insurance industry?
Mr. Slavitt. I don't think so.
Ms. DeGette. Why not?
Mr. Slavitt. Because I think the market now has a better
feel for the people that are being insured. And I think that
wasn't the case 3 years ago, and it was a little more so last
year and a little more so this year, but I think by the time we
get to the third year people have a pretty good understanding
of the illnesses that----
Ms. DeGette. And they will be able to smooth out the----
Mr. Slavitt. I believe so.
Ms. DeGette [continuing]. Discrepancies. OK, thank you. I
yield back.
Mr. Murphy. The gentlewoman yields back. I now recognize
the vice chairman of the committee, Mr. McKinley, for 5
minutes.
Mr. McKinley. Thank you, Mr. Chairman. And I would like to
follow up a little bit on the comments that were made when
Chairman Murphy raised about the change of opinions and
decisions that have been made under this administration.
Administrator, thank you for coming back. It is good to see
you again. But small rural hospitals all across this country
are in dire shape. We know that nearly 60 hospitals have closed
over the last 5 years in these rural hospitals. In my State,
over half the critical access hospitals are operating rural
health clinics and they are being adversely impacted by CMS'
decision to disallow the cost of operating these rural health
clinics.
Now this is in contrary to a previous decision that
approved it back in 2004, said that very specifically that you
could include the cost. Now it has been a reversal. CMS
apparently intends to enforce this new decision retroactively
over 5 years, and the cumulative impact of this on rural health
clinics and critical access hospitals in West Virginia is going
to force a back payment of millions of dollars when they can
barely afford to keep their doors open as they speak.
Now these hospitals as you well know are treating our poor
and our most vulnerable citizens in rural communities. Just
last week, West Virginia's Health and Human Resources wrote you
all, CMS, a letter. Are you aware of that letter?
Mr. Slavitt. Yes. I'm not familiar with it in detail.
Mr. McKinley. I am sorry?
Mr. Slavitt. I'm not familiar with it in detail.
Mr. McKinley. OK. I am just simply asking you at this point
since at stake is whether rural hospitals they simply can't
afford to make this retroactive payment, they simply can't do
it and it is almost a sixth of all the hospitals or 12 of the
hospitals, and so nearly 20 percent of all the hospitals in
West Virginia are threatened----
Mr. Slavitt. Right.
Mr. McKinley [continuing]. Whether or not they can make
this payment or not. So I am asking, please, they have reached
up this far up. They have been trying, and I know you all have
dug your heels in and I understand that. But this is a time
not, to maybe rethink that please, and see if there isn't some
kind of solution if we could work through this. Because they
were based on a previous decision and you have made another
decision, your department's made another decision that is
contrary to that.
We are just trying to prevent a retroactive payment. If it
has to go forward I think they can make the adjustment, but
going backwards I have got to appeal to your sensitivity. Will
you take a look at that? Will you try to take a good look at
that letter?
Mr. Slavitt. Yes, we will. And I know we've been working
with your staff on this issue, we'll continue to, and health
care in rural America is a foremost issue for us. We have
recently appointed a rural health task force and we will ask
this task force to look specifically into this for you.
Mr. McKinley. If you would, please. And would you also
agree to work with the State of West Virginia to provide some
technical assistance in drafting a Medicaid State plan
amendment that would recognize the important role that these
critical access hospitals serve in providing rural healthcare
services and consequently clarify their eligibility for
continued Medicaid DSH payments? Would you do that, please?
Mr. Slavitt. Yes. Yes.
Mr. McKinley. Just in closing, the last three questions.
Does CMS provide any grants or other forms of financial
assistance to rural hospitals so they can better cope and
address these situations that are occurring? Again with the
backdrop, all across America these small hospitals are closing.
Mr. Slavitt. Right, yes.
Mr. McKinley. We can't afford to have that as you well
know, but do you have anything like that of funding sources?
Mr. Slavitt. We have a number of initiatives that apply in
many specific situations that support the economics and the
long term economics in rural health. We have to look and see
what's appropriate in the case of West Virginia, but there are
a number of programs that I think are across the department.
Mr. McKinley. I am going to say you are agreeing, and can
you work with our office and also the State hospital
association to ensure they have the resource, if that is what I
am hearing you say that you may have some sources that they may
not be aware of?
Mr. Slavitt. Yes, we will absolutely do that.
Mr. McKinley. Thank you. Most importantly, just please,
don't make it retroactive. They can't do it. Thank you. I yield
back my time.
Mr. Slavitt. Thank you.
Mr. Murphy. Thank you. I now recognize Ms. Castor of
Florida for 5 minutes.
Ms. Castor. Thank you, Mr. Chairman. Good morning, Mr.
Slavitt.
Mr. Slavitt. Good morning.
Ms. Castor. Despite countless attempts by my Republican
colleagues in Congress to repeal, undermine, defund the
Affordable Care Act, the law is making affordable health
insurance a reality for so many American families and
especially in my State of Florida. Since passage of the ACA 5
years ago, an estimated 20 million Americans have gained
coverage through the ACA's various coverage provisions.
And I would like to think of the Affordable Care Act in a
couple of different categories. You have the improvements to
Medicare, the fact that so many of our older neighbors are
paying much less for their prescription drugs, billions of
dollars back into the pockets of our older neighbors. And then
lengthening the life of the Medicare trust fund is vitally
important, all of the preventive care that our older neighbors
on Medicare receive.
And I think about the consumer protections, ending
discrimination against people who had cancer, diabetes that
health insurance companies can no longer discriminate and keep
them out, they have gained coverage. And now after a few years
we can finally take a true measure on coverage for so many of
our neighbors.
According to a recent Gallup poll, the uninsured rate has
dropped to a historic low. As of the first quarter of 2016, the
rate has dropped 6.1 percentage points since the mandate
provision of the ACA took effect in 2014. And our African
American and Hispanic neighbors have experienced the greatest
decrease in uninsured rates by approximately ten percent. So
now we are at this overall historic low in America for the
uninsured rate.
And let me tell you the story of the State of Florida, my
home State, where we had one of the highest rates of uninsured
in the country. In Florida, 1.7 million Floridians selected or
were automatically re-enrolled in quality, affordable health
coverage through the marketplace. That is ten percent of the
entire country, because nationwide nearly 11.7 million
consumers selected a plan or automatically re-enrolled.
The tax credits have really helped. Seventy two percent of
Florida marketplace enrollees obtained coverage for $100 or
less after the tax credits in 2015. And in Florida, consumers,
we are fortunate to have a competitive market. We have
consumers could choose from 14 issuers in the marketplace last
year. That was up from 11 in 2014.
Florida consumers could choose from an average of 42 health
plans in their county for 2015 coverage. This was the goal, to
have a competitive marketplace so Americans can do what they do
best, go shopping and compare. And having the navigators kind
of help them through a lot of these decisions has been a
godsend.
And then there was the question would young adults, we need
healthy folks to enroll and that plays right into this
transitional reinsurance. And the good news is that in Florida
over a half million consumers under the age of 35 signed up for
marketplace coverage, and about half a million consumers 18 to
34, which was 28 percent of all plan selections, were signed
up.
So this continuing to harp on this has been a disaster. It
is just not true and now the facts bear it out. But I was
wondering if you could put this historic low of the uninsured
rate into perspective. What does this mean for our country to
have such a low uninsured rate?
Mr. Slavitt. Well, thank you, Congresswoman. Having been in
health care my entire career and never seeing the uninsured
rate decline, it certainly has been rewarding to see that
happen and to feel it. At least in my job you can see it in the
actual people as you can in your constituents.
Florida, I believe, as you said, has a lot to be proud of.
The uninsured rate, I believe, has declined by a third in
Florida, and if the State chooses to expand Medicaid at some
point, that will----
Ms. Castor. It will be even lower.
Mr. Slavitt [continuing]. Be even greater. So I think
there's a lot of good things that have happened and good things
to come.
Ms. Castor. Well, thank you to you and your team for
everything that you have done to help make health insurance
more affordable for so many of our neighbors across America.
Mr. Slavitt. Thank you.
Ms. Castor. Thank you.
Mr. Murphy. The gentlewoman yields back, and now Dr.
Burgess is recognized for 5 minutes.
Mr. Burgess. Thank you, Mr. Chairman. Thank you,
Administrator Slavitt, for joining us here in our committee
again. I think it is important that we continue to have these
types of discussions.
Certainly in the very early days of President Obama's
administration the statement was made repeatedly that
transparency would abound in this healthcare law. In many ways
it was meant as a criticism to Republicans that boy, if your
member is not on board with this everybody will know it; if
your member is standing with the insurance companies and not
with the administration everybody is going to know it because
it is all going to be transparent. It is all going to be on C-
SPAN, and then we found that it wasn't.
And in fact, even going back to 2009 when Henry Waxman was
chairman of this committee, I submitted a resolution of inquiry
asking for who was involved in crafting the things that
eventually became known as the Affordable Care Act. And to my
surprise, Mr. Waxman agreed about halfway with me and agreed
that I should have seven of the 11 things that I asked for. I
never got them, but it was a minor moral victory for me that I
got Mr. Waxman's concurrence during that. And as we have gone
on through this, time after time we bump up against things
where it just doesn't seem like it all adds up.
So at this point can you tell me which person, official,
office within CMS is responsible for interacting with HHS
leadership with the White House on these reinsurance payments?
Is there a single individual or office?
Mr. Slavitt. Thank you for the question. I think the best
way for me to answer that question--given that I wasn't here, I
couldn't name any specific individuals--is everybody. This was
a public, transparent rule put out that had to be reviewed and
cleared across the Government and so everybody had the
concurrence and the review, and then as it went into the
Federal Register that was also true for the general public and
everybody else.
Mr. Burgess. Yes.
Mr. Slavitt. So there was no attempt for someone to do
something without a broad review within the department and then
even broader review with the public.
Mr. Burgess. You know the old saying, too many people in
charge; no one in charge. Someone has to be in charge, so who
would have been the person who picked up the phone and called
the White House when it was seen that there were problems
meeting your obligations?
Mr. Slavitt. This is before my time so I don't know the
answer to that question.
Mr. Burgess. Could you research that for us and get us that
information from 2014 who that person would have been?
Mr. Slavitt. I certainly could try.
Mr. Burgess. So outside of the formal rulemaking process
did anyone outside the executive branch communicate with Health
and Human Service leadership or CMS about prioritizing
reinsurance payments or the resinsurance program generally?
Mr. Slavitt. Not to my knowledge. But again I wasn't here,
but not to my knowledge.
Mr. Burgess. Multiple reports in the press during the years
2012, 2013, 2015 about episodes where all of the insurance
executives were going down to the White House and meeting with
the President and his team and Secretary Sebelius. Would there
be any way the committee could know if these reinsurance
payments were part of those discussions that occurred at the
White House?
Mr. Slavitt. Not to my knowledge.
Mr. Burgess. Would there be any internal office memoranda
that would have been generated by these meetings? Would the
Secretary's office have responded to the White House with any
emails? We need to see those types of communications.
Mr. Slavitt. Yes, not that I have seen.
Mr. Burgess. Well, again, we have asked for the production
of some documents but what has been produced has not been
particularly helpful. Are there additional documents that you
are working on to provide to the committee?
Mr. Slavitt. Yes. I know we've provided a number of
documents and I know that we're working on more.
Mr. Burgess. When could the committee expect to receive
those documents?
Mr. Slavitt. I think quite soon. We're just, I can't give
you a date until I check with my team, but we can get back to
your staff and make sure we get this to you as quickly as we
can. I know they're working on it.
Mr. Burgess. To me quite soon is April 18th because that is
when our income taxes are due. Could it be that soon?
Mr. Slavitt. I can't commit to Monday, no.
Mr. Burgess. You know it has been a repetitive problem in
this subcommittee, and it is not just with HHS, as with
Department of Energy during Solyndra where it just seems like
there was a decision made internally to change the rules on
behalf of the administration. And it is troubling, this
committee continues to be troubled by that and unfortunately
today's hearing is just additional evidence that we are not
there yet as far as the transparency part.
Thank you, Mr. Chairman, I will yield back.
Mr. Murphy. Mr. Hudson, you are recognized for 5 minutes.
Mr. Hudson. Thank you, Mr. Chairman. And thank you, sir,
for being here today. I heard you answer an earlier question
about that once the transitional reinsurance program ends in
2017, the question of given that United Health pulled out were
you concerned about other companies pulling out of the program,
and you indicated that you didn't think there was much concern
of that.
But I am just curious as you are looking at that who are
you discussing this with? Are you talking to folks in the
marketplace? How are you basing your decision that you think
the market is stabilized?
Mr. Slavitt. So I'll start with some data. In 2016, the
average individual had, nine out of ten individuals had three
or more health plans to choose from. So what we call a full
shelf is present in 90 percent of the country. Now obviously
people are just beginning the rate filings process for 2017,
and so we're going to see and we'll certainly have to let that
speak for itself as people make their decisions.
I anticipate there will be additions and subtractions, and
in formal conversations that I've had with people throughout
the industry including State departments of insurance who of
course are monitoring these things very closely and what I hear
from companies themselves is indeed that. There may be some
people to pull out of certain markets and there will be people
that enter additional markets but that I don't see the overall
equation changing.
Mr. Hudson. OK. So it is not your anticipation then that
you are going to see a whole lot more companies withdrawing
from these exchanges once this reinsurance, I mean, supplement
is there? I mean, it is obviously creating a large liability
for these companies and we are already seeing some pull out
while they have still got the subsidy in place.
Mr. Slavitt. Yes. Our job is to make sure that people can
see it coming so they can price for it. But what people expect
of Government and what I expected when I was in the private
sector was some predictability and some visibility. So as long
as they know in advance, as they've long known that this is a
3-year temporary program, then as they submit bids for the
coming year they can submit them knowing what they now know
about the population which they didn't know earlier and about
the fact that there will no longer be a reinsurance program.
Mr. Hudson. Right. Well, has CMS discussed methods to
convince some of these insurers to stay in the exchanges in the
event that you see a dropout following the termination of this
transition period?
Mr. Slavitt. You know, most of the conversations that
occur, occur locally within a State between the State
department of insurance and the rate submission process. That
is generally handled there locally. We do whatever we can to
support and make sure that we are balancing out the marketplace
so that it can be a functional marketplace with stability and
with predictability.
So we tend to, I would say we tend to focus on the big
policy decisions that will make the market healthy for the long
term, not so much on the micro decisions that will affect an
individual plan here and there.
Mr. Hudson. Well, when you start with these policy options
what are you talking about exactly?
Mr. Slavitt. So to give you an example, we focused recently
on the rules for special enrollment periods and what should be
required of an individual to demonstrate that they're eligible
for insurance during a special enrollment period, in other
words outside of the open enrollment period.
Getting that right is important because if the rules are
too lenient then you end up with people who may just apply for
insurance when they get sick which disrupts the market, and if
they're too tight it will keep people, citizens who deserve
coverage and need coverage, away from having the coverage.
So those are the kinds of policy decisions that we recently
have been making decisions around, and I think it's our job to
watch the marketplace because it's still early, see what's
working and what's not working and make adjustments. And I
expect good Government will be continued with small adjustments
along the way.
Mr. Hudson. OK. But other than just going through the State
exchanges, you haven't had any discussions or any discussions
about specific things you could do with companies thinking
about pulling out of the exchange without this transitional
subsidy, that there is no really plans or discussion of any
other ways to try and convince them to stay?
Mr. Slavitt. Yes. I wouldn't characterize that our job is
to convince them to stay nor would I tell you that we've heard
concerns about the transitional policy going away. I think
people because they've long understood that it was a 3-year
plan that hasn't been a major topic of discussion at least to
my knowledge.
Mr. Hudson. OK, thank you. Mr. Chairman, as my time is
expiring I will yield back.
Mr. Murphy. Thank you. I know we have votes coming up in a
few minutes so we will move quickly. Mr. Green is recognized
for 5 minutes.
Mr. Green. Thank you, Mr. Chairman. Administrator Slavitt,
thank you for being here today, and I want to thank you for
making the Affordable Care Act and health reform work.
It first rolled out in our district in a very urban area of
Houston. Before the Affordable Care Act we were one of the
highest in the country of people who worked but didn't get
insurance through their employer. When it first rolled out we
identified 20,000 people who were able to get health insurance
and each renewable time we have increased that.
My frustration is that just recently we identified 50,000
of my constituents in urban Houston would be able to get health
care if the State would have expanded Medicaid, 50,000 just in
our district, and that is with a hundred percent Federal
reimbursement to State. Not a penny of State dollars for 3
years would have to go to that, so it is just frustrating.
My colleagues have been throwing around the 3.5 billion
figure. It is even part of today's title, but I think it is
important to talk about that number in context. Last month, the
Congressional Budget Office came out with a new Affordable Care
Act estimate stating that, quote, compared with the projection
made by CBO and JCT, the Joint Committee on Taxation, in March
of 2010 just before the ACA was enacted, the current estimate
of the net cost of insurance coverage over the 2016 to '19
period is lower by $157 billion, lowered by 25 percent. And I
repeat: $157 billion under budget. That is not something we see
here in the halls of Congress very often. That is 157 billion
left in the Treasury.
And I know that the insurance market and these estimates
are complex, and we have been talking about how important
reinsurance has been in creating stability in the market while
new consumer protections are created. My first question, is it
fair to say that reinsurance has played at least a role in the
success covering so many people while coming in substantially
under budget?
Mr. Slavitt. Yes, Congressman.
Mr. Green. We know that consumers win when the health
insurance premiums are low, but how does that impact the U.S.
Treasury?
Mr. Slavitt. Well, because the insurance premiums for
modest income Americans are subsidized in effect with tax
credits, everything we do to improve affordability for
consumers directly reduces the obligation of the Federal
Government. And so this $157 billion under budget is, I think,
in part a result as you point out of good stewardship and
effective execution of some of these programs like reinsurance.
Mr. Green. So does that suggest at the end of the day the
decision to prioritize reinsurance payments and make sure this
program works effectively as intended by the statute has been a
good deal for the taxpayers?
Mr. Slavitt. It has.
Mr. Green. I want to thank you for that. There are many
recent examples of counterproductive action by Congress to
thwart the overall goals of health reform. Successful attempt
by Republicans to limit payments to insurers under the risk
corridor program resulted in payouts of only 12 cents on the
dollar that insurers originally expected to receive. That was
hailed as a victory by my Republican friends, but it only
served to undermine and destabilize the health insurance market
while mainly harming smaller insurance.
Administrator Slavitt, if Congress takes the legislative
action to limit reinsurance payments what would be the effect
on premiums for consumers?
Mr. Slavitt. Anything that hurts the affordability of
health care is in my view something that we really ought to be
very, very careful about because it's counterproductive. And I
think it's all of our jobs to figure out how to continue to
reduce the cost of health care for American citizens and for
the entirety of the program, and reinsurance has been a vital
tool to do that.
Mr. Green. So this would be detrimental and disruptive to
the individual market?
Mr. Slavitt. Yes.
Mr. Green. If premiums did increase it seems likely that
that would be the consequences for the Treasury.
Mr. Slavitt. That would come in many cases, particularly
subsidized care, subsidized tax credits, it would come directly
out of the U.S. Treasury if premiums were to increase as a
result of that.
Mr. Green. Well, I hope today's hearing is not simply
another attempt to find new ways to obstruct and undermine the
Affordable Care Act through the legislative process. Congress
should be pursuing action to improve the functioning of the ACA
and help individuals get covered, not engaging in efforts to
destroy it.
I have said this many times at this committee, no law we
have ever passed in Congress is perfect, but for the last 6
years all we have seen is repeal after repeal instead of
sitting down working across the aisle to make sure it is best
for the taxpayer and it is also best for the people who need
that insurance. And I yield back my time.
Mr. Murphy. Thank you. We are going to recognize Ms.
Blackburn if we can get that done. And I want to say there are
two other members who want to come back and ask, and then also
Mr.----
Mrs. Blackburn. Yes, thank you.
Mr. Murphy [continuing]. But Ms. Blackburn will be
recognized.
Mrs. Blackburn. Thank you so much, Mr. Chairman. Mr.
Slavitt, I have got a couple of quick questions. I want to
follow up on something that Dr. Burgess was saying and
something the chairman had mentioned to you in the beginning.
You say that you feel like that the rule gives you the
authority, or the law gives you the authority to change the
rule.
Mr. Slavitt. Yes, we believe we have the statutory
authority.
Mrs. Blackburn. OK. Can you point out to me explicitly
where it says that? Is there any way that you can read this and
then tell me that we are not explicit in what this says and
where you could have put rules in place and then go back and
you change your mind and you decide to rework this? So can you
point to me, can you submit to us the memo that says this is
where we think we misread the law the first time and then we
changed our mind?
Mr. Slavitt. Sure. Thank you for the question.
Mrs. Blackburn. Do you know that memo exists?
Mr. Slavitt. The entire legal reasoning was made public in
the regulations, so we can make sure to get you a copy of that.
Mrs. Blackburn. OK. Well, that would be helpful, because I
was a little bit confused when you said you didn't know what
the process was or what the decisions were because you were not
there. But then you turned around and you said that it was a
public and transparent process. And in answering Ms. DeGette
you said that there was advice given and you knew that there
were memos to that effect.
So I think what we would like to see from you, since the
law is pretty explicit I think we would like to see from you
explicitly which memo and know what person decided that this
was going to be a good idea. So will you submit that for us and
can we have it within the next week?
Mr. Slavitt. Yes. We will submit the legal reasoning to
you, absolutely.
Mrs. Blackburn. OK. That will be good if you can give us
that entire paper trail. In answering another question you said
that you thought it was important for the insurers--I just want
to be sure I understood this right--for the insurers to see the
money coming so they can price for it.
Mr. Slavitt. I believe what I had said or intended to say,
can't remember exactly what I said, is that we give enough
visibility and clarity as to the rules and enough time that the
insurance companies know what's coming and know what to expect.
And that way if we are aiming to lower premiums for Americans,
which of course we all are, that that can be effective.
Mrs. Blackburn. So you think that we have got to put
additional taxpayer funds into this program in order for the
premiums to come down because we don't have enough money that
people are paying, or the insurance costs too much, or they
have access to the queue not to the care so the hospitals still
have a tremendous amount of uncompensated care; is that what I
am to understand from you?
Mr. Slavitt. No, Congresswoman, and I apologize if you
misinterpreted me. No taxpayer funds have gone into this
program. These are funds that come from the insurance
companies, from the employers and from individuals to fund and
smooth out large losses like the ones I talked about.
Mrs. Blackburn. OK. So then they have to have that money in
order to get the prices down, which means the consumer who is
buying the product is going to pay more so the insurance
company has access to the money to put back in the product; is
that correct?
Mr. Slavitt. Yes, I don't agree with that characterization,
with respect.
Mrs. Blackburn. OK.
Mr. Slavitt. I think----
Mrs. Blackburn. So the money just exists?
Mr. Slavitt. No, I think----
Mrs. Blackburn. So OK, let me move on. If we can
manufacture money I guess we can manufacture a lot of things.
In the reinsurance program what insurance company has gotten
the most money?
Mr. Slavitt. I don't know the answer to that, but I would--
--
Mrs. Blackburn. Would you find that out and get it to us?
Mr. Slavitt. Sure. We'll look at that.
Mrs. Blackburn. OK.
Mr. Slavitt. Yes.
Mrs. Blackburn. That sounds great. In the interest of time,
I will yield back.
Mr. Murphy. Thank you. I know we have a vote now, and there
is, I think, three members, Mr. Flores, Mr. Mullin and Ms.
Brooks want to come back. Can you stick around and we will just
do this after votes real quick? We will go right to the
questions and then wrap it up. I appreciate that. Thank you
very much. We will be back after votes.
[Recess.]
Mr. Murphy. All right, we are reconvening this hearing from
Oversight and Investigations on unlawful reinsurance payments,
and now I am going to recognize the gentleman from Oklahoma,
Mr. Mullin, for 5 minutes.
Mr. Mullin. Thank you, Mr. Chairman. And thank you for
being here today and thank you for hanging over as we had to
run and vote. They don't seem to care about hearings. They just
call votes whenever.
Anyways, look, there is a couple of questions that I think
is very important to us so we can get an understanding. One, if
you could answer this the best you can. I understand that on
March 21st, 2014, HHS issued a proposed rule for making
payments that are required by law under the reinsurance
program. It is my understanding that this rule accurately
reflect what was required by statute, the payments being made
in three areas, one to the Treasury, insurance companies and to
cover administration costs; is that correct?
Mr. Slavitt. I believe so.
Mr. Mullin. You believe so?
Mr. Slavitt. Yes.
Mr. Mullin. I mean that is what the law is, right?
Mr. Slavitt. Yes.
Mr. Mullin. Then ten days later HHS issued another proposed
rule that completely changed what was proposed in the first
rule. Now the payments would go to the insurance companies and
the Treasury would only get payments until a certain threshold
was made for the insurance companies; is that correct?
Mr. Slavitt. It is, yes.
Mr. Mullin. Can you explain why?
Mr. Slavitt. So because the statute was silent on how to
handle situations where either a lower amount or greater
amount----
Mr. Mullin. What do you mean silent? It specifically
addressed the three issues. It doesn't speak, it is a statute.
It is written.
Mr. Slavitt. Yes, it is written to address the estimated
collection of $12 billion. What it doesn't address is what
happens if a lower amount is collected or a higher amount is
collected, which is why the agency felt the need to put out a
public regulation.
Mr. Mullin. In the statute, it specifically says that it is
to go to the Treasury, insurance company, and to cover
administrating costs, not the insurance companies and then pay
only after a certain threshold. That wasn't specified in it; is
that correct?
Mr. Slavitt. The rules specified how to handle----
Mr. Mullin. No, no. The statute, not the rule. Not what you
guys issued, the statute.
Mr. Slavitt. I'm speaking of the statute, Congressman.
Mr. Mullin. Yes. Well, you mentioned rule. Go ahead.
Mr. Slavitt. Yes, so the statute speaks clearly to what
happens if $12 billion is collected in the first year. What--
again, this is before my time--but what the agency needed to do
is to put forward, and they put forward for public comment 2
years ago----
Mr. Mullin. Has that public comment been made public yet?
Mr. Slavitt. Yes.
Mr. Mullin. The opinions have been made back, the response
has been made back to the committee?
Mr. Slavitt. Yes.
Mr. Mullin. OK.
Mr. Slavitt. Yes. It sought public comment on how to
address situations like the one that arose where less than $12
billion was collected.
Mr. Mullin. Now what did the public comments suggest?
Mr. Slavitt. Public comments suggested that the policy of
first taking care of reimbursing the claims of the insurers was
the proper policy and was legally supportive.
Mr. Mullin. By whom, because that wasn't the intent of the
original statute and that is I am asking the question. We
obviously don't support it going back to the insurance
companies. Intention was to help pay down the debt. And yet
after a rule was issued, ten days later you reissued another
rule stating basically what you guys felt needed to be done.
Mr. Slavitt. And I understand that there is a difference of
opinion because----
Mr. Mullin. Well, it is not an opinion it is a statute,
which is why when it is law and when we have a question about
it and we want clarification on it and we ask a committee, or
we ask HHS for a response to it, we would like clarification.
What we never get is clarification.
Mr. Slavitt. Well, we believe that there's a statutory
authority. That legal reasoning was put forward publicly.
Mr. Mullin. So if there was clarification that needed to be
clarified why wouldn't you come back to the committee and seek
clarification on it? I mean, because a statute is a statute of
what it was, and so other than issuing a rule and then ten days
later coming back and issuing another rule, why wouldn't you
just simply come back here? We feel like what happened is that
HHS decided to ignore what the statute was, what the intent of
Congress was and decided to make your own decisions.
Mr. Slavitt. I don't think that's the case. It was put
forward----
Mr. Mullin. Well, then how else do you explain it? Because
you never came back here, and we were asking questions and
clarifications and we weren't receiving those.
Mr. Slavitt. This is 2 years ago. It was put forward for
public comment for everyone including the committee to opine on
the very public reasoning that was----
Mr. Mullin. It is my understanding when the committee asked
for clarification there was none issued.
Mr. Slavitt. I'd have to go back and check on that but it's
not my recollection. But I wasn't here, but that's not what I
learned.
Mr. Mullin. Well, we were still asking questions. We are
here today trying to get the questions figured out.
Mr. Slavitt. Yes. And we're doing our best to provide
answers including the legal and the policy reasons and that's
what I'm here today to answer.
Mr. Mullin. All right, thank you. I yield back.
Mr. Murphy. The gentleman yields back, and I now recognize
the gentleman from Texas, Mr. Flores, for 5 minutes.
Mr. Flores. Thank you, Chairman. And thank you, Mr.
Slavitt, for joining us today. A couple of preambles I wanted
to share with you, and I know you have heard a couple of these
already, before we get into the questions.
The CRS memo that we have talked about earlier today
determined that the statute is not ambiguous and that CMS
actions contradict the plain language of the law. And then in
February of 2016, in front of the Health Subcommittee of this
committee, Secretary Burwell was asked about the legal basis
for diverting the funds and she provided no legal
justification.
So it seems to me like we are still struggling to find the
legal justification under which the funds were diverted. I do
have some fact based questions to start with. The first one is
how much money have you collected for the reinsurance program
in 2014 from all the States?
Mr. Slavitt. I'll get back to you on the precise number. We
have it here somewhere.
Mr. Flores. I mean, I would assume you have got that number
in preparation for this committee meeting since that is what we
are talking about.
Mr. Slavitt. It's $9.7 billion.
Mr. Flores. 9.7?
Mr. Slavitt. Yes.
Mr. Flores. OK. And for the Treasury you collected zero, I
am assuming?
Mr. Slavitt. For 2014 that's correct.
Mr. Flores. OK. And how much did you pay the insurance
companies that year for calendar 2014?
Mr. Slavitt. I think it was 8 billion.
Mr. Flores. 8 billion. And the $1.7 billion difference,
where did that go?
Mr. Slavitt. That's still in a pool to be used against
claims that come through the reinsurance pool.
Mr. Flores. Moving to 2015, how much did you collect for
reinsurance?
Mr. Slavitt. 6.5 billion.
Mr. Flores. 6.5. The law says that it was supposed to be 6,
and then to the Treasury you were supposed to collect too. I am
assuming that was zero?
Mr. Slavitt. No, that'll be $500 million to the Treasury.
Mr. Flores. You did give 500 million to the Treasury, oK.
Mr. Slavitt. We will. We will, yes.
Mr. Flores. You will or you did?
Mr. Slavitt. We will, yes.
Mr. Flores. OK. And then what were the aggregate insurance
company payments for that fiscal year, for that calendar year?
Mr. Slavitt. Payments in--yes, they have not been made yet.
Mr. Flores. No payments, so you are sitting on 6 \1/2\
billion dollars from 2015, and a billion seven for 2014. Now
2016, what do you estimate to collect this year? What have you
collected and what do you estimate full year collections to be?
Mr. Slavitt. I don't have an estimation yet.
Mr. Flores. I am sorry?
Mr. Slavitt. I don't have an estimation yet.
Mr. Flores. OK. What do you anticipate collecting for the
Treasury for this year?
Mr. Slavitt. I don't yet have an estimation.
Mr. Flores. OK. Now I understand you have made early
payments? CMS has made early payments to the insurance
companies for 2016? What is that number?
Mr. Slavitt. That was 2.7 billion.
Mr. Flores. 2.7 billion for early payments to the insurance
companies, OK. Moving back to the underlying issue, CMS changed
its mind between March the 11th and March the 21st. As my
colleague from Oklahoma said a few minutes ago, in light of the
CRS memo, which contradicts the position of CMS with regard to
compliance with the statute, will CMS correct its rule to back
to the original interpretation of March the 11th?
Mr. Slavitt. Congressman, we still believe we have the
statutory authority to issue the rule that was issued.
Mr. Flores. OK, so you are not going to change back to the
original?
Mr. Slavitt. No. We believe the rule of what we're
following is supported by the statute.
Mr. Flores. I disagree with you, but there we are.
Moving to the second question, self-insured private
companies, basically self-funded companies that are self-
funding their employee health plans, are contributing to the
traditional reinsurance fund even though they continue to cover
employees and they haven't dropped employees from coverage,
thereby forcing them to buy coverage on the exchanges. In other
words, they aren't contributing to the reinsurance issues or to
the potential draw on reinsurance, and some of these companies
have paid out huge sums, over $50 million, to bring into this
program that ultimately aids insurance companies.
How can we justify the payouts to the insurance companies
from these private companies who have maintained self-insured
plans for the benefit of their employees and that don't have
any stake in the exchanges? How do we justify that?
Mr. Slavitt. That's what the statute contemplated
originally, is my understanding.
Mr. Flores. OK. And then so my question is how do you
justify the payouts to the insurance companies from the
employers that have no stake in the exchanges? Why did you
change the formula and pay them more?
Mr. Slavitt. Again this is all before my time, but that
appears to be what the statute contemplated and exactly what
happened.
Mr. Flores. Just as an editorial comment, I used to be a
CEO and I could not blame my predecessor. I could not say it
was before my time. When my board asked me a question they
wanted me to provide an answer, not to say, well, that is
before my time. So I just want you to know my opinion on that.
Thank you, I yield back.
Mr. Slavitt. Understood, thank you.
Mr. Murphy. I believe then that is all the questions we
have from our members. So I want to thank you, Mr. Slavitt, for
being here today. I want to ask you one quick question. Can we
get a commitment from you that the CMS will provide the
documents pursuant to our March 23rd request in a timely
manner? These are the ones regarding the reinsurance program.
Mr. Slavitt. Yes, Mr. Chairman.
Mr. Murphy. Thank you. And because what we have got so far
are the publicly available documents. Any idea when? Can you
please tell us when CMS will produce these documents?
Mr. Slavitt. We are working hard on it. We'll follow up
with your staff. As you know we have schedule on some other
documents we're working for you, so we can just put that right
on the schedule and make sure we get you dates certain.
Mr. Murphy. We would like that.
Mr. Slavitt. OK.
Mr. Murphy. Thank you very much. So in conclusion, thank
you so much for being with us today. And I want to remind
members they have ten business days to submit questions for the
record, and I ask Mr. Slavitt to respond promptly to those
requests as well. And with that, this hearing is adjourned.
[Whereupon, at 11:38 a.m., the subcommittee was adjourned.]
[Material submitted for inclusion in the record follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
[all]