[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]
THE AFFORDABLE CARE ACT ON SHAKY GROUND: OUTLOOK AND OVERSIGHT
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON HEALTH
AND THE
SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS
OF THE
COMMITTEE ON ENERGY AND COMMERCE
HOUSE OF REPRESENTATIVES
ONE HUNDRED FOURTEENTH CONGRESS
SECOND SESSION
__________
SEPTEMBER 14, 2016
__________
Serial No. 114-168
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Printed for the use of the Committee on Energy and Commerce
energycommerce.house.gov
_________
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COMMITTEE ON ENERGY AND COMMERCE
FRED UPTON, Michigan
Chairman
JOE BARTON, Texas FRANK PALLONE, Jr., New Jersey
Chairman Emeritus Ranking Member
JOHN SHIMKUS, Illinois BOBBY L. RUSH, Illinois
JOSEPH R. PITTS, Pennsylvania ANNA G. ESHOO, California
GREG WALDEN, Oregon ELIOT L. ENGEL, New York
TIM MURPHY, Pennsylvania GENE GREEN, Texas
MICHAEL C. BURGESS, Texas DIANA DeGETTE, Colorado
MARSHA BLACKBURN, Tennessee LOIS CAPPS, California
Vice Chairman MICHAEL F. DOYLE, Pennsylvania
STEVE SCALISE, Louisiana JANICE D. SCHAKOWSKY, Illinois
ROBERT E. LATTA, Ohio G.K. BUTTERFIELD, North Carolina
CATHY McMORRIS RODGERS, Washington DORIS O. MATSUI, California
GREGG HARPER, Mississippi KATHY CASTOR, Florida
LEONARD LANCE, New Jersey JOHN P. SARBANES, Maryland
BRETT GUTHRIE, Kentucky JERRY McNERNEY, California
PETE OLSON, Texas PETER WELCH, Vermont
DAVID B. McKINLEY, West Virginia BEN RAY LUJAN, New Mexico
MIKE POMPEO, Kansas PAUL TONKO, New York
ADAM KINZINGER, Illinois JOHN A. YARMUTH, Kentucky
H. MORGAN GRIFFITH, Virginia YVETTE D. CLARKE, New York
GUS M. BILIRAKIS, Florida DAVID LOEBSACK, Iowa
BILL JOHNSON, Ohio KURT SCHRADER, Oregon
BILLY LONG, Missouri JOSEPH P. KENNEDY, III,
RENEE L. ELLMERS, North Carolina Massachusetts
LARRY BUCSHON, Indiana TONY CARDENAS, California
BILL FLORES, Texas
SUSAN W. BROOKS, Indiana
MARKWAYNE MULLIN, Oklahoma
RICHARD HUDSON, North Carolina
CHRIS COLLINS, New York
KEVIN CRAMER, North Dakota
Subcommittee on Health
JOSEPH R. PITTS, Pennsylvania
Chairman
BRETT GUTHRIE, Kentucky GENE GREEN, Texas
Vice Chairman Ranking Member
JOHN SHIMKUS, Illinois ELIOT L. ENGEL, New York
TIM MURPHY, Pennsylvania LOIS CAPPS, California
MICHAEL C. BURGESS, Texas JANICE D. SCHAKOWSKY, Illinois
MARSHA BLACKBURN, Tennessee G.K. BUTTERFIELD, North Carolina
CATHY McMORRIS RODGERS, Washington KATHY CASTOR, Florida
LEONARD LANCE, New Jersey JOHN P. SARBANES, Maryland
H. MORGAN GRIFFITH, Virginia DORIS O. MATSUI, California
GUS M. BILIRAKIS, Florida BEN RAY LUJAN, New Mexico
BILLY LONG, Missouri KURT SCHRADER, Oregon
RENEE L. ELLMERS, North Carolina JOSEPH P. KENNEDY, III,
LARRY BUCSHON, Indiana Massachusetts
SUSAN W. BROOKS, Indiana TONY CARDENAS, California
CHRIS COLLINS, New York FRANK PALLONE, Jr., New Jersey (ex
JOE BARTON, Texas officio)
FRED UPTON, Michigan (ex officio)
------
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)
C O N T E N T S
----------
Page
Hon. Joseph R. Pitts, a Representative in Congress from the
Commonwealth of Pennsylvania, opening statement................ 2
Prepared statement........................................... 3
Hon. Gene Green, a Representative in Congress from the State of
Texas, opening statement....................................... 3
Hon. Tim Murphy, a Representative in Congress from the
Commonwealth of Pennsylvania, opening statement................ 5
Prepared statement........................................... 6
Hon. Diana DeGette, a Representative in Congress from the State
of Colorado, opening statement................................. 7
Hon. Fred Upton, a Representative in Congress from the State of
Michigan, opening statement.................................... 8
Prepared statement........................................... 10
Hon. Frank Pallone, Jr., a Representative in Congress from the
State of New Jersey, prepared statement........................ 11
Witnesses
Andy Slavitt, Acting Administrator for Centers for Medicare &
Medicaid Services.............................................. 13
Prepared statement........................................... 16
Answers to submitted questions \1\........................... 103
Gloria Jarmon, Deputy Inspector General for Audit Services,
Office of Audit Services, Office of Inspector General.......... 26
Prepared statement........................................... 28
Seto Bagdoyan, Director of Forensic Audits and Investigative
Service, U.S. Government Accountability Office................. 38
Prepared statement........................................... 40
Submitted Material
GAO Report, September 2016, \2\ submitted by Ms. DeGette
Article entitled, ``Long's Short Report--Affordable Care Act's
effects on education,'' by U.S. Representative Billy Long...... 96
Article entitled, ``Uncertainty surrounds whether newly Medicaid-
eligible in Louisiana can keep their Obamacare plans if prefer
them,'' The Advocate, July 3, 2016, submitted by Mr. Guthrie... 98
----------
\1\ Mr. Slavitt did not respond to questions for the record.
\2\ Available at: http://docs.house.gov/meetings/IF/IF02/
20160914/105306/HHRG-114-IF02-20160914-SD003.pdf.
THE AFFORDABLE CARE ACT ON SHAKY GROUND: OUTLOOK AND OVERSIGHT
----------
WEDNESDAY, SEPTEMBER 14, 2016
House of Representatives,
Subcommittee on Health,
joint with the
Subcommittee on Oversight and Investigations,
Committee on Energy and Commerce,
Washington, DC.
The subcommittee met, pursuant to call, at 10:00 a.m., in
room 210 Capitol Visitor Center, Hon. Joe Pitts (chairman of
the subcommittee) presiding.
Members present: Representatives Pitts, Barton, Guthrie,
Shimkus, Murphy, Blackburn, McMorris Rodgers, Lance, McKinley,
Griffith, Bilirakis, Long, Ellmers, Bucshon, Flores, Brooks,
Mullin, Hudson, Collins, Barton, Upton (ex officio), Green,
Engel, Schakowsky, Castor, Matsui, Tonko, Yarmuth, Schrader,
Kennedy, Cardenas, and Pallone (ex officio).
Staff present: Gary Andres, Staff Director; Jennifer
Barblan, Counsel, Oversight & Investigations; Elena Brennan,
Staff Assistant; Adam Buckalew, Professional Staff, Health;
Rebecca Card, Assistant Press Secretary; Karen Christian,
General Counsel; Ryan Coble, Detailee, Oversight &
Investigations; Paige Decker, Executive Assistant; Paul
Edattel, Chief Counsel, Health; Emily Felder, Counsel,
Oversight & Investigations; Jay Gulshen, Legislative Clerk;
Brittany Havens, Professional Staff, Oversight &
Investigations; Charles Ingebretson, Chief Counsel, Oversight &
Investigations; Emily Martin, Counsel, Oversight &
Investigations; Chris Sarley, Policy Coordinator, Environment &
Economy; Jennifer Sherman, Press Secretary; Adrianna Simonelli,
Prof. Staff Member, Health; Heidi Stirrup, Health Policy
Coordinator; Luke Wallwork, Staff Assistant; Gregory Watson,
Legislative Clerk, Communications and Technology; Jean Woodrow,
Director, Information Technology; Jeff Carroll, Minority Staff
Director; Ryan Gottschall, Minority GAO Detailee; Tiffany
Guarascio, Minority Deputy Staff Director and Chief Health
Advisor; Chris Knauer, Minority Oversight Staff Director;
Elizabeth Letter, Minority Professional Staff Member; Miles
Lichtman, Minority Staff Assistant; Dan Miller, Minority Staff
Assistant; Rachel Pryor, Minority Health Policy Advisor;
Samantha Satchell, Minority Policy Analyst; Arielle Woronoff,
Minority Health Counsel; and C.J. Young, Minority Press
Secretary.
OPENING STATEMENT OF HON. JOSEPH R. PITTS, A REPRESENTATIVE IN
CONGRESS FROM THE COMMONWEALTH OF PENNSYLVANIA
Mr. Pitts. The subcommittee will come to order. The chair
will recognize himself for an opening statement. Today's
hearing is especially timely as we learn startling news over
the summer, confirming our worst fears that some of the most
significant health insurers--United Health, Aetna, Humana--are
opting out of the Affordable Care Act's health insurance
exchanges. This is concerning on several levels, the most basic
being for individuals who are paying more only to get less.
One of the most ambitious aspects of the Affordable Care
Act, the ACA, was the creation of the health insurance
marketplaces. Proponents of the ACA said it would increase
market competition and lead to lower costs for consumers and
insurers, but in fact just the opposite has happened. Consumer
health insurance options are now more limited and insurers have
been driven out of the ACA marketplace. The exchanges have
faced numerous problems: lower than expected enrollment with
sicker people enrolling; larger, unpredictable operational
costs; and insurers leaving the exchanges.
Of particular concern are the persistent vulnerabilities of
the application, eligibility,and enrollment processes. Just
this week, the Government Accountability Office released two
reports detailing the severity of the lack of real safeguards
in the exchanges. Of the 18 fictitious applications GAO made
for subsidized plans in 2015, 17 received coverage. GAO was
initially 15 for 15 in 2016, with one fictitious applicant
enrolling in three different states at the same time.
Also of interest, Section 1322 of the ACA established the
Consumer Operated and Oriented Plan, CO-OP program, but these
too are failing, one as recently as Tuesday, and disrupting
coverage for thousands of enrollees. CO-OPs were set up to
increase competition, but instead of the original 23 CO-OPs
funded with 2.3 billion taxpayer dollars only six are still in
existence, further reducing coverage for thousands of people in
the middle of the plan year, resulting in higher out-of-pocket
costs and changing doctors.
Our Oversight and Investigations Committee has conducted
critical work in this area as well as on the functionality of
state-based exchanges. The staff reports we will review today
are thorough and provide a sad reminder of the failed promises
this misguided law delivers.
We have before our committees today some of the very
officials who can answer our questions surrounding these
troubling reports: the acting CMS administrator, the HHS OIG
deputy inspector general for Audit Services, and the Government
Accountability Office.
I look forward to hearing about the oversight work
conducted by the GAO and HHS OIG, as well as the steps taken by
CMS to improve the exchange risks and CO-OP programs. The chair
now recognizes the ranking member of the Health subcommittee,
Mr. Green, 5 minutes for his opening statement.
[The prepared statement of Mr. Pitts follows:]
Prepared statement of Hon. Joseph R. Pitts
Today's hearing is especially timely as we learned
startling news over the summer, confirming our worst fears,
that the some of the most significant health insurers--
UnitedHealth, Aetna, Humana--are opting out of Obamacare's
health insurance exchanges. This is concerning on several
levels--the most basic being for individuals who are paying
more only to get less.
One of the most ambitious aspects of the Affordable Care
Act (ACA) was the creation of the health insurance
marketplaces. Proponents of the ACA said it would increase
market competition and lead to lower costs for consumers and
insurers. But in fact, just the opposite has happened. Consumer
health insurance options are now more limited, and insurers
have been driven out of the ACA marketplace.
The exchanges have faced numerous problems--lower than
expected enrollment with sicker people enrolling; larger,
unpredictable operational costs; and, insurers leaving the
exchanges.
Of particular concern are the persistent vulnerabilities of
the application, eligibility, and enrollment processes. Just
this week, the Government Accountability Office released two
reports detailing the severity of the lack of real safeguards
in the exchanges. Of the 18 fictitious applications GAO made
for subsidized plans in 2015, 17 received coverage. GAO was
initially 15 for 15 in 2016, with one fictitious applicant
enrolling in three different states at the same time.
Also of interest, Section 1322 of the ACA established the
Consumer Operated and Oriented Plan (CO-OP) program. But these,
too, are failing (one as recently as Tuesday)--and disrupting
coverage for thousands of enrollees. Co-ops were set up to
increase competition. But instead of the original 23 co-ops
funded with $2.3 billion taxpayer dollars, only six are still
in existence further reducing coverage for thousands of
people--in the middle of the plan year, resulting in higher out
of pocket costs and changing doctors.
Our Oversight and Investigations Committee has conducted
critical work in this area as well as on the functionality of
state--based exchanges. The staff reports we will review today
are thorough and provide a sad reminder of the failed promises
this misguided law delivers.
We have before our committees today some of the very
officials who can answer our questions surrounding these
troubling reports--the Acting CMS Administrator, the HHS OIG
Deputy Inspector General for Audit Services, and the Government
Accountability Office.
I look forward to hearing about the oversight work
conducted by the GAO and HHS OIG; as well as the steps taken by
CMS to improve exchange risks and CO-OP programs.
OPENING STATEMENT OF HON. GENE GREEN, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF TEXAS
Mr. Green. Thank you, Mr. Chairman. It is just 6 years
since enactment and 3 years since the major reforms of the
Affordable Care Act, the ACA, went into effect. The law is
delivered on a principal goal of covering millions of
previously uninsured Americans. Today, 20 million more people
have insurance, health insurance, and the percentage of the
uninsured Americans is at an all-time low. This is a historic
and dramatic improvement over where we were as a nation before
the ACA and should not be undervalued.
All this is achieved in spite of relentless political
opposition, constant efforts to undermine and chip away at the
law, severe underfunding, and the inherent challenges of
launching a stabilizing and new marketplace. As we look at the
future of the ACA great opportunities exist to improve the law,
but we can't take them unless we move from this bitter
partisanship. It is long past time for some to accept the ACA
as the law of the land and get back to work on behalf the
American people.
Prior to the Affordable Care Act, the individual health
insurance market was deeply broken. People were sold junk plans
at high cost, many individuals with preexisting conditions were
essentially locked out of the market altogether and plans could
drop you at the moment you got sick, the time when you needed
the coverage the most. As a result of the ACA, the newly
insured, previously insured are protected from the worst abuses
in the industry and the standard for what plans must cover is
significantly more robust.
Marketplace premiums are currently 12 to 20 percent lower
than the Congressional Budget Office predicted when the ACA was
passed. Premiums for 150 million Americans with employer
coverage have grown more slowly than before the law was
enacted. The marketplace created under the Affordable Care Act
is in its relative infancy, but with almost every new market
there is an adjustment period in the early years. We saw this
when Medicare Advantage and Part D programs were created.
Recent reports of high premium increase and carriers
entering and exiting the exchanges have garnered much
attention. We have seen similar headlines in years before, but
the reality on the ground has yet to reflect the predictions of
doom and gloom. Insurers will both enter and exit the
marketplace as they navigate the new landscape of millions of
new customers and consumer protections.
It is no surprise that companies are adapting at different
rates to the market. They compete for business on cost and
quality rather than cherry picking customers and denying
coverage to people with preexisting conditions. The Affordable
Care Act is working; like any law it is not perfect. It would
take an earnest effort on the part of Congress and the States
and regulators to bring forth solutions that further stabilize
the market. This can only be done if we are honest and separate
overblown portrayals that don't reflect the facts of the
meaningful critiques.
For several reasons 2017 is the unique transition year. One
reason is that the programs designed to support the market in
the early years are ending and will have a one-time effect on
cost. Yet we also see the marketplace risk pool strengthened by
robust outreach efforts to the young adults not yet taking
advantage of the opportunity to get coverage.
The Department of Health and Human Services, HHS, is also
taking steps such as developing new processes to prevent misuse
of special enrollment periods and curb abuse of short-term
plans that keep healthy customers out of the risk pool.
Nineteen states also need to expand Medicaid. In my
district in Texas, and Texas is one of those 19 states, if they
expanded Medicaid 50,000 of my constituents would have
Medicaid, if the state expanded it. The law was designed on the
assumption that all states would, and refusal to do distorts
the health care ecosystem.
A recent report from HHS shows that not only does Medicaid
expansion have enormous economic benefits for states, but on
the average marketplace premiums in expansion states are 7
percent lower than those non-expansion states. The ACA has led
to higher consumer satisfaction and lower uninsured rates. Data
supports the further stabilization of the marketplace in the
future.
It is now time for Congress to put aside partisanship and
finally come together and improve the law. The American people
are counting on it. And I look forward to hearing from our
witnesses, and I thank you, Mr. Chairman, and I yield back my
time.
Mr. Pitts. The chair thanks the gentleman and now
recognizes the gentleman from Pennsylvania, Dr. Murphy, chair
of the O&I Subcommittee, 5 minutes for an opening statement.
OPENING STATEMENT OF HON. TIM MURPHY, A REPRESENTATIVE IN
CONGRESS FROM THE COMMONWEALTH OF PENNSYLVANIA
Mr. Murphy. Thank you, Mr. Chairman. This committee began
its investigation of the state-based exchanges in the spring of
2015, and we aimed to examine why the state exchanges failed to
correctly and effectively utilize billions in federal grant
funding. The committee requested and received documents from
the 17 original state exchanges, and over the course of two
hearings we heard testimony from state exchanges' leaders and
federal officials.
Our investigation found that the Center for Medicare &
Medicaid Services, CMS, effectively wasted $4.6 billion in
grants due to excessively careless management and oversight.
Disappointingly, and despite the fact that four out of the 17
state exchanges have now closed down, a very small and very
inconsequential amount of improperly spent federal dollars have
been recouped by CMS.
We were told that state exchanges would be self-sustaining
by January 1st, 2015, and afterwards any continued use of
federal grant money would be illegal. Yet today every state
exchange is still using federal money. Moreover, some state
exchanges went so far as to violate federal rules and use
Medicaid dollars to pay for unallowable state-based exchange
expenses. The details and findings from the committee
investigations are outlined in our report that was released
yesterday, September 13, 2016.
In addition to the work that we have done on state
exchanges, the subcommittee held a hearing last November on the
CO-OPs and their costly failures. We examined the factors that
contributed to the collapse of now 17 out of 23 CO-OPs, what
oversight mechanisms CMS used to monitor the CO-OPs, and the
likelihood that the federal government would recoup any of the
loans awarded to the failed CO-OPs.
Since the hearing in November, five more CO-OPs have closed
leaving only six of the original 23 remaining. And these failed
CO-OPs have cost the taxpayers a total of $1.8 billion. Similar
to the state exchanges, the committee's investigation into the
CO-OPs found that they were disadvantaged from the start.
Rigorous loan agreements, restrictions to obtain outside
capital, and flawed premium stabilization programs made
financial stability near impossible.
What ultimately contributed to the failure of CO-OPs,
however, was CMS mismanagement and ineffective oversight as
they failed on numerous occasions to assist the CO-OPs when
needed. Recently, HHS OIG released a report which found that
the majority of CO-OPs are nearing bankruptcy, making it highly
unlikely that the remaining six CO-OPs will pay back any of
their loans. This will result in the loss of even more taxpayer
money and leaving hundreds of thousands of Americans displaced
with insurance coverage. The details and findings from the
committee's investigation are outlined in our report that we
released yesterday.
While we look forward to a productive dialogue with our
witnesses today, I want to note that on behalf of this
committee we are deeply troubled by the findings of this
investigation. Ultimately, what we are seeing is the Affordable
Care Act failing the American people. The objective of the law
was to provide health insurance to those who could not afford
it, yet these findings prove that the ACA is accomplishing just
the opposite.
Hundreds of Americans have been uprooted from their plans
and left without any insurance coverage, thousands I should
say. Both of the committee reports suggest recommendations for
legislative and administrative changes to address the concerns
highlighted in the reports. It is my hope then that we are able
to have an honest and open conversation about the reality of
this legislation and discuss solutions rather than continue to
identify its well known problems.
I thank the witnesses for testifying today and look forward
to hearing the questions, and with that Mr. Chairman I yield
back.
[The prepared statement of Mr. Murphy follows:]
Prepared statement of Hon. Tim Murphy
Today, we are here to examine two failed programs of the
Affordable Care Act (ACA): the State-Based Exchanges and the
Consumer Oriented and Operated Plans, known as ``CO-OPs''.
First, I want to highlight and thank the HHS Inspector General
and the Government Accountability Office for their continued
participation and good work for this Committee. This hearing,
as part of the ongoing oversight of the ACA, will specifically
focus on the current state of implementation and challenges of
the State-Based Exchanges and CO-OPs.
The Committee began its investigation of the State-Based
Exchanges in the spring of 2015. We aimed to examine why the
state exchanges failed to correctly and effectively utilize
billions in federal grant funding. The Committee requested and
received documents from the 17 original state exchanges, and
over the course of two hearings, heard testimony from state
exchange leaders and federal officials.
Our investigation found that the Centers for Medicare &
Medicaid Services (CMS) effectively wasted $4.6 billion in
grants due to excessively careless management and oversight.
Disappointingly--and despite the fact that four out of 17 state
exchanges have closed down--a very small, and very
inconsequential, amount of improperly spent federal dollars
have been recouped by CMS.
We were told that state exchanges would be self-sustaining
by January 1, 2015 and afterwards, any continued use of federal
grant money would be illegal. Yet today, every state exchange
is still using federal money. Moreover, some state exchanges
went so far as to violate federal rules and used Medicaid
dollars to pay for unallowable state-based exchange expenses.
The details and findings from the Committees' investigation are
outlined in our report that was released yesterday, September
13, 2016.
In addition to the work that we have done on State
Exchanges, the Subcommittee held a hearing last November on the
CO-OPs and their costly failures. We examined the factors that
contributed to the collapse of now 17 out of 23 CO-OPs; what
oversight mechanisms CMS used to monitor the CO-OPs; and the
likelihood that the federal government would recoup any of the
loans awarded to the failed CO-OPs.
Since the hearing in November, five more CO-OPs have
closed, leaving only six of the original 23 remaining. These
failed CO-OPs have cost the American taxpayers a total of $1.8
billion dollars. Similar to the state exchanges, the
Committee's investigation into the CO-OPs found that they were
disadvantaged from the start--rigorous loan agreements,
restrictions to obtain outside capital, and flawed premium
stabilization programs made financial stability near
impossible.
What ultimately contributed to the failure of CO-OPs,
however, was CMS' mismanagement and ineffective oversight, as
they failed on numerous occasions to assist the CO-OPs when
needed. Recently, HHS-OIG released a report which found that
the majority of CO-OPs are nearing bankruptcy, making it highly
unlikely that the remaining six CO-OPs will pay back their
loans. This will result in the loss of even more taxpayer money
and leaving hundreds of thousands of Americans displaced with
insurance coverage. The details and findings from the
Committees' investigation are outlined in our report that was
released yesterday, September 13, 2016.
While we look forward to a productive dialogue with our
witnesses today, I want to note that on behalf of this
Committee, we are deeply troubled by the findings of this
investigation. Ultimately, what we are seeing is the Affordable
Care Act failing the American people. The objective of the law
was to provide health insurance to those who could not afford
it, yet these findings prove that the ACA is accomplishing just
the opposite. Hundreds of Americans have been uprooted from
their plans and left without any insurance coverage. Both of
the Committee reports suggest recommendations for legislative
and administrative changes to address the concerns highlighted
in the reports. It is my hope, then, that we are able to have
an honest and open conversation about the reality of this
legislation and discuss solutions, rather than continuing to
identify its well-known problems.
Today we will hear from CMS' Acting Administrator Andy
Slavitt, the Deputy Inspector General for Audit Services at the
HHS OIG Ms. Gloria Jarmon, and Director of Audit Services for
GAO's Forensic Audit and Investigative Services mission team,
Mr. Seto Bagdoyan. I thank the witnesses for testifying today
and look forward to hearing answers to our questions.
Mr. Pitts. The chair thanks the gentleman and now
recognizes the ranking member of the Oversight and
Investigation Committee, Ms. DeGette from Colorado, 5 minutes
for opening statement.
OPENING STATEMENT OF HON. DIANA DEGETTE, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF COLORADO
Ms. DeGette. Thank you so much, Mr. Chairman. I have been
wondering about the Affordable Care Act. Do you know if it
covers treatment for deja vu, because there seems to be a mass
outbreak of that on Capitol Hill when it comes to the ACA. Here
are some of the symptoms.
One, between the Health Subcommittee and the Oversight
Subcommittee as you heard that I am ranking member of, we have
had over 40 hearings on the ACA since it became law in 2010.
Two, we have been through 6 years of efforts to repeal and
undermine the law. Three, we have seen any number of
administration officials, some of whom are sitting here today,
interrogated by hostile members of Congress about their work to
implement the law. These same officials have been the target of
countless letters requesting briefings and documentation of
every single aspect of their work.
But despite the hours and hours spent on these efforts,
House Republicans have nothing to show for it. Mr. Murphy, my
chairman on the Oversight Subcommittee, just mentioned the
recent Oversight & Investigations hearings that we have had in
our committee. Instead of conducting a good faith review of
these issues followed up by targeted, thoughtful bipartisan
legislation to improve the law as Congress did on other major
pieces of health care legislation like the Medicare Part D
program that was passed by the Republican Congress some years
ago, this Congress has used its oversight powers to highlight
failures over and over again while offering no solutions.
As we just heard from Mr. Murphy we have had two hearings
this Congress on the ACA state insurance marketplaces, but
again we are going to hear today about how some states struggle
to set up exchanges and make them work as efficiently as
possible. As you heard, we had a hearing earlier this Congress
about the CO-OPs and I am sure we are going to hear today again
about the fact that many CO-OPs, including one in my state of
Colorado, have failed or are facing challenges.
This is not news, folks. What would be news is if the
majority would actually sit down with us and try to work out
some solutions to help more and more Americans get affordable
and expansive health care insurance. I am not saying that these
issues are not worth congressional attention. But what I am
saying is it is time to stop having this kabuki dance over and
over again, and it is time to start figuring out how we can fix
the Affordable Care Act.
Highlighting solutions or making important course
corrections requires a willing Congress and at this point my
colleagues on the other side of the aisle don't seem to be
willing to admit to the public that the law has actually helped
millions of people and it simply needs fixing rather than being
repealed.
Now in conversation privately with me, many of my
colleagues on the other side of the aisle offer thoughts that
perhaps we can work on this together in the next Congress. But
in the meantime, all we are doing is having hearing after
hearing and wasting a lot of time and money that could be spent
giving more insurance to more people on these hearings.
Let me just briefly in the final remaining seconds that I
have remind people of what the ACA has done even with the flaws
that it has. We have had historic reductions in the number of
uninsured people in this country. The CDC reported last week
that the uninsured rate is at a historic low, the lowest that
we have had in four decades. That is an accomplishment. Since
the passage of the ACA, 20 million previously uninsured
Americans now have coverage. This includes millions of young
adults who can now stay on their parents' plans until age 26.
I just want to interject a personal note here. My daughter
Francesca who everybody on this committee knows, she just
graduated from college. She is 22 years old. She is also a type
1 diabetic. Francesca just left to go teach in Madrid for a
year, to teach English in Madrid for a year, and she is on my
insurance. And because of the Affordable Care Act she can't get
thrown off of my insurance because she has a preexisting
condition or because she is over 21. And furthermore, we were
able to get her a year's worth of diabetic supplies before she
left for Madrid.
There are thousands of families in the United States who
are benefiting in the way my family has, and I am going to
fight until the end to make sure that they can keep these
benefits and that we can keep expanding it so that every
American has high quality health insurance. I yield back.
Mr. Pitts. The chair thanks the gentlelady and now
recognizes the Chairman of the full committee, the gentleman
from Michigan, Mr. Upton, 5 minutes for an opening statement.
OPENING STATEMENT OF HON. FRED UPTON, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF MICHIGAN
Mr. Upton. Thank you, Mr. Chairman. So in 2009, the
American people were promised a new health care system, one
that would give patients a one-stop shop to choose a plan that
would be affordable. And of course at that time we remember the
President saying you will have your choice of a number of plans
that offer a few different packages, but every plan would offer
an affordable basic package.
So 6 years later the facts tell, I think, a different
story. Major health insurers like Aetna, Humana, United fleeing
the exchanges, leaving as many as one third of counties and
seven entire states with only one carrier. And with New
Jersey's collapse this week, 17 CO-OPs have now closed their
doors costing taxpayers nearly $2 billion and resulting in tens
of thousands of Americans without a plan. And today, just 12
states are running their own exchange, 12. Premiums are off the
charts; competition has dramatically declined; all in all, the
everyday patient is left paying for fewer choices.
But every number has a name and each one of these patients
indeed have a story to tell. Karen from Lawton, Michigan tells
us she pays $700 for insurance. She and her kids are in the
process of choosing between having a home or having health
insurance and moving back with her folks. She says because of
the Affordable Care Act my insurance has doubled. Please, you
have to do something to help me, help the hardworking middle
class in this country.
Lisa lives about an hour east of Karen and her kids. She
is paying $744 a month for a plan with a $3,000 deductible.
Before the ACA she paid less than $300 a month for her family's
health care, and my bet is she wishes she had the plan she had
before. Greg who lives with his wife of 40 years in Kalamazoo
is feeling the pain. He says ACA is a disaster; has been from
the start. I think he is right.
When this law was sold to struggling Michiganders and
patients across our country, they were promised that as many as
21 million new individuals would get coverage through exchanges
by the end of 2016. Sadly, even with the individual and
employer mandates, this number is set to come in at about half,
simply one reason why House Republicans have offered a better
way to help patients get and keep health insurance.
Our solution puts patients first, improves the quality of
care, lowers health care costs, restores freedom and
flexibility, it also keeps patients on their parents' insurance
until they are 26 years old and will not deny coverage based on
preexisting conditions. We want to lead the world in cures and
treatments, and our plan builds upon this important work
outlined in the 21st Century CURES Act to help deliver cures
now.
Recent nonpartisan analysis of our reform plan found that
solutions would, in fact, lower premiums by 10 to 35 percent,
increase access to doctors and boost medical productivity all
while cutting the deficit by nearly half a trillion dollars
over the next decade. The ambitious plan, one where nobody
would be priced out of health care, everyone in Michigan, these
three--Karen, Lisa and Greg--and across America deserves access
to quality and affordable health care. I yield the balance of
my time to the gentlelady from Tennessee.
[The prepared statement of Mr. Upton follows:]
Prepared statement of Hon. Fred Upton
In 2009, the American people were promised a new health
care system: one that would give patients a one-stop shop to
choose a plan that would be affordable. At the time, the
president said, and I quote, ``You will have your choice of a
number of plans that offer a few different packages, but every
plan would offer an affordable, basic package.''
Six years later, the facts tell a different story. Major
health insurers--like Aetna, Humana, and UnitedHealth--are
fleeing the exchanges, leaving as many as one-third of counties
and seven entire states with only one carrier. With New
Jersey's collapse this week, 17 CO-OPs have now closed their
doors, costing taxpayers over $1.8 billion and resulting in
tens of thousands of Americans without a plan. And today, just
12 states are running their own exchange.
Premiums are off the charts. Competition has dramatically
declined. All in all, the everyday patient is left paying more
for fewer choices. But every number has a name. And each one of
these patients has a story to tell.
Take Karen from Lawton, Michigan. She pays $700 a month for
her insurance. Karen and her kids are in the process of
choosing between having a home, or having health insurance and
moving back in with her parents.
``Because of the Affordable Care Act my insurance has
doubled. Please,'' Karen pleaded, ``you have to do something to
help the hard working middle class in this country.''
Or Lisa, who lives about an hour east of Karen and her
kids. She's paying $744 a month for a plan with a $3,000
deductible. Before the Affordable Care Act, Lisa paid less than
$300 a month for her family's health care.
Greg, who lives with his wife of 40 years in Kalamazoo, is
feeling the pain too. ``The ACA is a disaster,'' Greg said.
``has been from the start.''
Greg's right. When this law was sold to struggling
Michiganders and patients across our country, they were
promised that as many as 21 million individuals would get
coverage through exchanges by the end of 2016. Sadly, even with
the individual and employer mandates, this number is set to
come in at about half.
This is simply one reason why House Republicans have
offered a better way to help patients get--and keep--health
coverage. Our solutions put patients first, improve the quality
of care, lower health care costs, and restore freedom and
flexibility. It also keeps patients on their parents insurance
until they are 26 years old, and will not deny coverage based
on pre--existing conditions. We want to lead the world in cures
and treatments, and our plan builds upon the important work
outlined in the 21st Century Cures Act to help deliver cures
now.
A recent non-partisan analysis of our reform plan found
that the solutions would lower premiums by 10 to 35 percent,
increase access to doctors, and boost medical productivity--all
while cutting the deficit by $481 billion over the next decade.
It's an ambitious plan--one where nobody would be priced
out of health care. Everyone in Michigan--Karen, Lisa, Greg--
and across America deserves access to quality, affordable
health care.
Mrs. Blackburn. And thank you, Mr. Chairman, and thank you
all for being here to talk with us today. We do look at this
plan and we realize that the Affordable Care Act product is
unaffordable and that it is indeed on shaky ground as the
hearing title reflects.
I will spend some of my time today talking with you about
the special enrollment periods. I come from Tennessee. We had
TennCare. We know that these special enrollment periods have a
tendency to get these programs into trouble. Lack of
verification, inappropriate verification, delayed verification,
all of a sudden what you do is end up with a plan that is on
shaky ground and with out-of-balance risk pools.
So as you look at the imbalance within these, we will want
to drill down on that just a little bit. I do have legislation,
H.R. 5589, the Plan Verification and Fairness Act that would
get to the heart of this issue because it is a problem that
worsens every single day. And when you have a SEP where there
is not the appropriate oversight or due diligence, then you do
end up with the imbalances in these risk pools.
So welcome, we look forward to the hearing, and I yield
back.
Mr. Pitts. The chair thanks the gentlelady and now
recognizes the ranking member of the full committee, the
gentleman from New Jersey, Mr. Pallone, 5 minutes for opening
statement.
OPENING STATEMENT OF HON. FRANK PALLONE, JR., A REPRESENTATIVE
IN CONGRESS FROM THE STATE OF NEW JERSEY
Mr. Pallone. Thank you, Mr. Chairman. This will be our
committee's 10th hearing on the law, the Affordable Care Act,
just this Congress, and while I continue to hope that my
Republican colleagues will come to their senses and finally
hold a hearing to work in a bipartisan way to improve the ACA,
unfortunately once again this will not be that day.
It is clear that the GOP just wants to repeal the ACA and
continue to point out problems with the health care system in
general without proposing any alternatives. And we are here
today to discuss four reports on different aspects of the
Affordable Care Act, two of which were only made available to
staff and the public on Monday.
Now one report by the Office of the Inspector General on
the conversion of start-up loans by CO-OPs found that no
wrongdoing occurred. The report simply found that the CO-OPs
were in compliance with CMS guidance and accounting principles
when converting start-up loans.
Another report released by the GAO this month examines
health insurance market concentration and competition in 2014
finding that enrollees tend to be concentrated among only a few
issuers. However, since this report analyzes data collected
prior to the implementation of the ACA's insurance exchanges,
it does not shed light on whether the exchanges have affected
market concentration. We will also be discussing a report that
is a continuation of the GAO's fake shopper investigation in
which GAO used fake identities and fake documents to attempt to
enroll in coverage through the health insurance marketplaces
and Medicaid.
And let me just start by saying that I will continue to be
critical of the way the GAO carried out this investigation. It
is inconceivable to me that anyone would be skilled enough or
motivated enough to try to fraudulently gain health insurance
coverage this way, particularly since there is no possible
scenario in which an individual could financially gain from
gaming the system.
Even if someone were to obtain health insurance with
fraudulent information, they would still need to pay premiums
and any other out-of-pocket costs associated with their plan to
actually get medical services. Nevertheless, for the third year
in a row GAO continues with this farce. They created false
identities and attempted to enroll in coverage concluding that
the system remains vulnerable to fraud.
Republicans have translated this conclusion to mean that
this sort of fraudulent enrollment is rampant in the
marketplace, and I think to use this deeply flawed GAO report
to try to say that people can get so-called free health
insurance is utterly ridiculous. In fact, GAO's fake shoppers
paid premiums each month and did not seek any health care. This
report fails to answer two very important questions. Is this a
real problem, and if it is how can we fix it? These are
questions Democrats are interested in answering, yet once again
GAO has not provided CMS with the information and the fake
identities it created. This information could help the agency
learn from GAO's work and fix potential vulnerabilities in the
systems.
Now Democrats care about program integrity and oversight,
but once again I suspect this hearing is not about oversight
but about headlines. As I have already said, it seems entirely
unrealistic that some of the most vulnerable individuals in
this country would have the desire, time, money and expertise
to fraudulently gain coverage the way GAO did in their study,
and GAO's lack of recommendations in this report is very
disappointing. We and the Administration rely on GAO for
unbiased reports and recommendations, and these fake shoppers
provide neither.
Now let me talk about the success of the ACA because
Republicans would make you think that the health care system
was better off before the ACA. We can't forget that thanks to
the ACA, the uninsured rate is at an all-time low, 20 million
more people now have health coverage, and the vast majority are
satisfied with their coverage. It is important to remember that
because of the ACA, Americans now have access to free
preventive services, kids can stay on their parents' plan up to
26, and there are no lifetime or annual limits on coverage.
Since the enactment of the ACA, the solvency of the Medicare
Trust Fund has been extended for 13 years. In addition,
unnecessary hospital readmissions in Medicare have fallen for
the first time on record, resulting in a hundred thousand fewer
readmissions in 2015 alone.
The ACA's marketplaces are new. The ACA's consumer
protections are new. As with almost every new law there will be
necessary changes and adjustments, but what is different about
this law is that we have not been able to make those changes.
Instead of working together to make sure the law works for
everyone, my colleagues on the other side of the aisle have
tried to repeal this law more than 60 times and we have met
resistance at every turn.
There are absolutely ways that we can improve upon the
ACA's successes, expand access to affordable coverage, and
reduce the number of uninsured. Unfortunately, no one on the
Republican side wants to improve anything. All we hear from my
colleagues on the other side is negativity. My colleague from
Tennessee who I love is still talking about TennCare. I don't
know how many times I am going to hear about TennCare. I mean,
I don't even think TennCare exists anymore. If it does, it is
certainly not what it was.
And this is what we get. We just get the constant hearings,
efforts to say, oh, everything is terrible, everything stinks,
but whenever we have any suggestion from the--I don't hear
anything from the other side of the aisle other than, whatever
has been proposed and whatever we try to do to change the
system and make it better, which truly has been successful,
needs to be repealed, needs to be thrown out without any
suggestion about any alternative that is meaningful.
So obviously I am not too happy with this hearing today,
Mr. Chairman, but nonetheless----
Mr. Pitts. The gentleman's time is expired.
Mr. Pallone [continuing]. You will continue.
Mr. Pitts. The chair thanks the gentleman for his opening
statement. As usual, all the members' written opening
statements will be made a part of the record.
At this point I will introduce our panel. We have one panel
and I will introduce them in the order of their presentation.
First, Mr. Andy Slavitt, acting administrator of the Center for
Medicare & Medicaid Services, CMS; Ms. Gloria Jarmon, deputy
inspector general for Audit Services in the Office of Audit
Services within the Office of Inspector General, U.S.
Department of Health and Human Services; and Mr. Seto Bagdoyan,
director of the Forensic Audits and Investigative Service for
the U.S. Government Accountability Office.
Thank you for coming today. We look forward to your
testimony. Your written testimony will be made a part of the
record. You will each be recognized for 5 minutes for a
summary. You are aware that the committee is holding an
investigative hearing, and when doing so has had the practice
of taking testimony under oath. Do you have any objection to
testifying under oath?
The response is no. The chair then advises you that under
the rules of the House and the rules of the committee you are
entitled to be advised by counsel. Do you desire to be advised
by counsel during your testimony today?
The response is no. In that case, if you would please rise
and raise your right hand, I will swear you in.
[Witnesses sworn.]
Mr. Pitts. The response is I do. 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 written statement. The chair recognizes Mr. Slavitt for 5
minutes.
STATEMENTS OF ANDY SLAVITT, ACTING ADMINISTRATOR FOR CENTERS
FOR MEDICARE & MEDICAID SERVICES; GLORIA JARMON, DEPUTY
INSPECTOR GENERAL FOR AUDIT SERVICES, OFFICE OF AUDIT SERVICES,
OFFICE OF INSPECTOR GENERAL; AND SETO BAGDOYAN, DIRECTOR OF
FORENSIC AUDITS AND INVESTIGATIVE SERVICE, U.S. GOVERNMENT
ACCOUNTABILITY OFFICE
STATEMENT OF ANDY SLAVITT
Mr. Slavitt. Chairman Pitts and Murphy, Ranking Members
Green and DeGette, members of the subcommittees, thank you for
the invitation to this hearing to discuss the progress we have
made as a country under the Affordable Care Act as well as key
priorities for improvement.
With the enactment of the law we've taken a significant
step together as a nation to provide for the first time access
to quality care to all Americans regardless of their health or
financial status. For millions of Americans this represents the
largest shift in how our health care system works since the
creation of Medicare more than 50 years ago.
As you all know well, Medicare which has lifted millions of
seniors out of poverty was launched amidst great uncertainty.
It has succeeded by continually evolving to reflect the needs
of our seniors, adjusting to cover prescription drugs, new
modes of treatment, and payments which support high quality
care delivery. I continue to appreciate Congress' leadership on
Medicare's latest evolution, MACRA, and hope we can continue to
work together to fulfill your vision of a payment program that
is focused on affordable, high quality patient care.
Undertaking fundamental change is rarely easy. From the
outset, we knew that like Medicare the implementation of the
Affordable Care Act would be a multiyear process. As we look to
the fourth open enrollment, we are very proud of what we've
accomplished so far. More than 20 million people now have
coverage because of the law. And at 8.6 percent, the uninsured
rate for Americans is the lowest on record.
Let me turn to our priorities. First, CMS is learning from
the early years of implementation using data and feedback to
refine our policies to build a strong, sustainable marketplace.
The recommendations and input of the GAO and OIG who have
together conducted over 50 ACA audits have been especially
valuable in our efforts to strengthen our processes and
controls.
In this vein we've made improvements to the marketplace so
that it continues to function properly, predictably, and
securely. This has included changes to risk sharing mechanisms,
program integrity, and eligibility rules. We are targeting bad
actors for using the marketplace inappropriately, and we have
significantly increased compliance with documentation
requirements. Our mantra is to continually learn and adjust.
Second, we stand ready to work with states to expand
Medicaid eligibility and finish the job of covering all
Americans. Expanding Medicaid not only helps low income people
gain access to care, but helps reduce marketplace premiums for
middle income families, and data shows marketplace premiums are
about 7 percent lower in states that expand Medicaid.
Third, we know that costs are a critical consideration both
for purchasing coverage and for taxpayers. The good news for
the vast majority of Americans is that the Affordable Care Act
offers important protections to keep coverage affordable. Even
if premiums were to rise substantially next year, the vast
majority of federal marketplace consumers will still be able to
choose a plan for less than $75 per month.
And the good news for taxpayers is that we've achieved
these historic coverage gains at a 25 percent lower cost than
the CBO originally projected. And this has also benefited newly
covered Americans. Going into 2017, independent experts
calculate that marketplace premiums are currently 12 to 20
percent lower than initial predictions. There's no question
that as a country more people are paying less, getting more and
with greater consumer protections than before the ACA.
But of course any conversation on the cost of health
insurance is actually a conversation about the overall cost of
care and the value that we get for the money that we spend. At
CMS, access and affordability for the 140 million Americans we
serve every day is critical. This is why we must work to keep
medications affordable, prevent waste and coordinate care, and
why we have a special task force focusing on access to care in
rural America, for costs and the lack of competition have long
created concerns.
Personally, it's been very rewarding to serve at CMS during
a time of so much transformation. For the vast majority of my
25 years in health care it didn't seem possible that we'd ever
achieve a real reduction in the uninsured rate or see a time
that having a preexisting condition didn't disqualify a person
from coverage.
As the marketplace continues to grow and mature, we'll
continue to listen, add new capabilities and adapt to best
serve American patients and taxpayers. Thank you and I'll be
happy to answer any questions.
[The prepared statement of Andy Slavitt follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Pitts. The chair thanks the gentleman and now
recognizes Ms. Jarmon 5 minutes for your summary.
STATEMENT OF GLORIA JARMON
Ms. Jarmon. Good morning, Chairman Pitts and Murphy, and
Ranking Members Green and DeGette, and other members of the
subcommittee. Thank you for the opportunity to testify today
about the Office of Inspector General's oversight of health
insurance marketplaces. As part of our strategic plan to
oversee implementation of the Affordable Care Act, we have
completed a significant body of audits and evaluations
addressing federal and state marketplaces and other ACA
provisions.
Our marketplace oversight work focuses on payment accuracy,
eligibility systems, management and administration, and
security and data of systems. My testimony today focuses on our
most recent work which is the Consumer Operated and Oriented
Plans, or CO-OPs, and state marketplaces.
Regarding our CO-OP work, we recently looked at the
conversion of start-up loans into surplus notes. These notes
are bond-like instruments issued to provide capital. We
conducted this review to assess whether the CO-OPs complied
with the Centers for Medicare & Medicaid Services guidance and
applicable accounting principles.
We found that the CO-OPs generally complied with this
guidance and applicable accounting principles when converting
start-up loans into surplus notes. However, CMS did not
adequately document the potential impact of the conversions on
the federal government's ability to recover the loan payments
if the CO-OPs were to fail.
Based on our findings, we recommended that CMS improve the
decision making process for any future conversions of start-up
loans to surplus notes, and document any potential negative
impact from changes in distribution priority, and to quantify
the likely impact on the federal government's ability to
recover loan payments.
Following up on these recommendations, we are currently
reassessing the CO-OPs' financial condition to determine if any
improvements were made in 2015 and 2016. We are also monitoring
the actions made by CMS to address underperforming CO-OPs. This
work is expected to be issued during fiscal year 2017.
Regarding our state marketplaces work we recently completed
a series of reviews to determine whether marketplaces had
effective internal controls in place to ensure that individuals
signing up for health insurance and receiving financial
assistance through insurance affordability programs are
eligible. We reviewed the first open enrollment period at seven
state marketplaces. We found certain internal controls were
effective. However, most of the state marketplaces had some
ineffective internal controls for ensuring that individuals
were enrolled in a qualified health plan in accordance with
federal requirements.
With respect to establishment grant funds, we are in the
process of completing a series of state marketplace reviews and
their use of these funds. This work primarily focuses on
whether marketplaces allocated costs to their establishment
grants in accordance with federal requirements. Recently issued
reports have determined that some states reviewed used
allocation percentages based on outdated estimated enrollment
data instead of updated data that was available. Based on these
findings we recommended that the states refund misallocated
amounts or work with CMS to resolve the misallocated amounts.
With respect to privacy and security of state marketplaces
we have completed reviews of data and system security at five
states and are close to completing reviews of two others. All
of the states for which we have completed reviews have
implemented some security controls to protect personally
identifiable information or PII. However, vulnerabilities
existed in those states and each had at least one vulnerability
that if exploited could have exposed PII and other sensitive
information. States generally agreed with our recommendations
to improve security, and in many instances reported taking
action to correct identified vulnerabilities.
In closing, we appreciate the committee's interest in this
important issue and continue to urge CMS to fully address our
recommendations related to improving oversight and financial
solvency of the CO-OP program and state marketplaces. OIG is
committed to providing continued oversight of these programs to
help ensure that they operate efficiently, effectively and
economically.
This concludes my testimony. I would be happy to answer
your questions.
[The prepared statement of Gloria Jarmon follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Pitts. The chair thanks the gentlelady and now
recognizes Mr. Seto Bagdoyan 5 minutes for your opening
statement summary.
STATEMENT OF SETO BAGDOYAN
Mr. Bagdoyan. Thank you and good morning, Chairman Pitts
and Murphy, Ranking Members Green and DeGette, and members of
the subcommittees. I'm pleased to be here today to discuss
three recently issued GAO reports on health care issues.
This morning at the subcommittee's request I'll focus my
remarks on the results of undercover testing of enrollment
processes and related controls used by the federal marketplace
and the California state marketplace under the ACA for coverage
year 2016. I'd note that these results are not definitive
regarding the entire application population. Our work focused
on identifying indicators of potential enrollment fraud,
vulnerability and risk for further review as I'll highlight
shortly. We discussed our results with CMS and the California
exchange and their responses are included in our final report.
In terms of what's at risk, ACA coverage is a substantial
financial commitment for the federal government. About 11
million enrollees have coverage of which up to 85 percent
receive subsidies. CFBO estimates subsidy costs for fiscal year
2017 at about 56 billion and totaling 866 billion for the next
10 years. In this regard I would note that while subsidies are
paid directly to insurers, they nevertheless represent a
financial benefit to enrollees in the form of reduced overall
costs. That is, premiums and deductibles.
Turning to our coverage year 2016 results, we initially
obtained subsidized qualified health plan or Medicaid coverage
for all 15 fictitious applicants. In doing so we successfully
worked around all primary enrollment process checks, namely
identify proofing, submitting documents to clear
inconsistencies, and filing tax returns to reconcile subsidies.
We subsequently maintained coverage for 11 applicants to
the present that is well into the coverage year, even though
some had not filed tax returns or submitted documentation to
clear information inconsistencies as required. Our subsidies
totaled about $60,000 on an annualized basis. We failed to
maintain coverage for three applicants because of payment
issues, and for one applicant whose coverage was eventually
terminated because of intentional failure to submit requested
documentation.
These results, combined with those from our earlier work
involving coverage years 2014 and 2015, form a consistent
pattern of three principal interrelated fraud risk indicators
which we're pursuing further during our ongoing ACA related
work. First, no year-on-year changes in the enrollment
processes and controls are readily apparent, suggesting that
these remain fundamentally vulnerable to fraud at multiple
points along their entire spectrum--front, middle, and end--
raising the overall program integrity risk for ACA.
Second, applicants intending to act fraudulently to obtain
coverage in which they're not otherwise entitled, such as our
fictitious applicants, could exploit the enrollment process and
its various accommodations such as self-attestation, deadline
extensions, and relaxed standards for resolving inconsistencies
to their advantage and maintain policies virtually through the
entire coverage year.
Third, even if such applicants subsequently are flagged and
lose their coverage for administrative compliance issues
they're able to apply for new coverage the following open
season as allowed by program rules, thus engaging essentially
in a form of health coverage arbitrage.
In closing, I'd underscore that a program of this scope and
scale is inherently at risk for fraudulent activity and
accordingly it is essential that a high priority is placed on
implementing effective preventive enrollment processes and
controls up front and help narrow the window of opportunity for
such risk and safeguard the government's substantial
investment. In this regard CMS told us that it's responding to
eight recommendations we made in our February 2016 report and
if executed well and then sustained this represents a major
opportunity to address the vulnerabilities we identified to
reduce risk and enhance program integrity.
Chairman Pitts and Murphy, this concludes my remarks. I
look forward to the subcommittee's questions. Thank you.
[The prepared statement of Seto Bagdoyan follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Pitts. The chair thanks the gentleman. I will begin the
questioning and recognize myself 5 minutes for that purpose.
Let me just say in the beginning, GAO has been a great
government watchdog for taxpayers, and while the undercover
enrollment testing for the exchanges is thorough and helpful,
troubling to learn just how bad the vulnerabilities of the ACA
exchanges remain.
Mr. Bagdoyan, your testimony offered a preview of your
agency's findings in this space. Let's examine a few of the
numbers; talk about the fictitious scenarios. As I understand
it, this is the first year that coverage eligibility must be
verified to determine whether an applicant who previously
received an exchange plan filed federal tax returns; is that
correct?
Mr. Bagdoyan. Yes, Mr. Chairman. That's correct.
Mr. Pitts. The GAO tested fictitious applicants that you
previously used for plan year 2014. Now of the 15 applicants
that you attempted to gain coverage for, all 15 were initially
enrolled in plans. It is my understanding that still today, ten
of these fictitious applicants are receiving monthly advanced
premium tax credits, about $1,100 a month, and all ten qualify
for cost sharing reduction or CSR payments. Are any of these
ten fictitious enrollees false applicants you used in 2014 who
never paid federal taxes?
Mr. Bagdoyan. Four of those, Mr. Chairman, are essentially
revived identities from our 2014 work.
Mr. Pitts. Administrator Slavitt, CMS announced that APTC
and CSR subsidies would be ended for 2016 enrollees who
received APTCs in 2014 but did not reconcile these payments on
their federal taxes. In one of these fictitious cases, a
federal marketplace representative initially told the enrollee
they were not approved for subsidies.
But after the fictitious enrollee verbally attested that
they had filed a return, the representative approved the
subsidized coverage even though it was a false attestation. Why
does CMS allow applicants to self-attest to this safeguard
designed to protect taxpayer funded premium credit?
Put your mike on.
Mr. Slavitt. Yes, thank you, Chairman Pitts. And thank you
to Mr. Bagdoyan for the work that you all have done.
I think with respect to the people who have, we call them
people who have failed to reconcile who have received an
advanced premium tax credit but haven't yet filed, many of
those in our work with the IRS turn out to be people who are
filing taxes for the first time. And so what happened is that
when they came back to get coverage in 2015, if the IRS didn't
have a file for them that they filed, they were not able to get
coverage.
We did allow people to attest if they had an extension or
if they had filed taxes and they claimed that the IRS hadn't
received them yet, but that's not where we stop. And I think to
the heart of your question, we had 19,000 people who so
attested and many of them have since demonstrated that they
have paid their taxes. And then as of this month, those that
have not yet demonstrated that those people will be terminated
from advanced pay on a tax credit.
Mr. Pitts. So how many individuals have had their coverage
ended due to violating this safeguard?
Mr. Slavitt. As of this month it will be several thousand.
I don't have the exact figure here with me.
Mr. Pitts. OK. According to GAO, the IRS expressed concern
to your agency about this attestation approach, and I also
point out that a February 2016 report from GAO recommended that
CMS conduct a risk assessment of potential exchange fraud. Has
CMS conducted a risk assessment of the application eligibility
and enrollment process?
Mr. Slavitt. I'm not entirely sure what you're referring
to. I do know that the GAO gave us a recommendation earlier to
create a risk assessment framework through which we assess all
of the potential risks to the exchanges, and we have indeed
implemented that and it's actually been extremely helpful to
us.
Mr. Pitts. And can you provide the committee with a copy of
that report?
Mr. Slavitt. The report from the GAO?
Mr. Pitts. Yes, the recommendations.
Mr. Slavitt. The recommendations, sure. We'll get that.
Mr. Pitts. All right. We now have 3 years of undercover
testing. The results have not improved, and I know I speak for
taxpayers across Pennsylvania and our country when I say this
is frustrating and alarming. I will yield the balance of my
time to Cathy McMorris Rodgers for her comments.
Mrs. McMorris Rodgers. In my home in Eastern Washington--
oh, thanks--our state insurance commissioner recently approved
premium increases for 2017. On average they are increasing by
over 13 percent. Rate increases like these are being seen
across the country and they are far from affordable. In my
state they go from 4.6 percent to 22.75.
I want to take the moment here just to thank my colleagues
for their efforts to come up with common sense solutions to
ensure Americans will have access to high quality and the
lowest cost possible, and we must respect the sacred
relationship between the patient and the doctor. Thank you very
much.
Mr. Pitts. The chair thanks the gentlelady and now
recognizes the ranking member of the Health Subcommittee, Mr.
Green, 5 minutes for questions.
Mr. Green. Thank you, Mr. Chairman, and thank our witnesses
for being here today and the work you do. Let me talk a little
bit about Texas' experience. Under the Affordable Care Act
millions of Americans are able to access their vital care
resources in our communities. In my state Texas we realized the
following benefits.
During the last enrollment period over 1.3 million
individuals selected a marketplace plan. Forty eight percent of
those individuals were new consumers. Unfortunately, 1.2
million individuals who would otherwise be covered remain
uninsured because Texas refused to expand the Medicaid. As I
said earlier, 50,000 of that 1.2 million are my constituents.
As of 2015, the ACA provided community health centers
grantees in Texas with over 470 million in funding to offer a
broad array of primary care, extended hours of operation and
hire more providers and develop clinical spaces. Medicare
beneficiaries in Texas have saved more than $971 million on
prescription drugs because of the Affordable Care Act and the
closing of the donut hole that was created in 2003 with
Medicare Part D.
And I am proud of the progress that we have in our country
made with the ACA and I couldn't be more pleased with these
results, but Congress could make it better by stopping the
dozens of repeal efforts and help provide more health care for
our constituents. Regardless of whether you supported the ACA 6
years ago or when it passed into law, it is hard to deny that
there is historic success.
Before the Affordable Care Act was passed the insurance
system was broken. Premiums were increasing rapidly. For
example, in 2009-2010, according to Kaiser Family Foundation
survey, the average increase in individual market premiums for
individuals who were covered more than 1 year was 15 percent.
Under the pre-ACA system there were no protections for
consumers, and insurance companies could drop them within any
time.
Administrator Slavitt, before the ACA was passed could an
individual with preexisting condition be charged more for
insurance than his or her healthy peers?
Mr. Slavitt. Yes. In most places in the country, yes,
that's correct.
Mr. Green. Before the ACA was passed could insurers protect
their bottom lines by avoiding the sickest and costliest
patients in the individual market?
Mr. Slavitt. Yes, in almost every state in the country.
Mr. Green. Before the ACA was passed was there any
mechanism for the federal government to review health insurance
rates to ensure that the rates were reasonable; did consumers
have any recourse if their premiums went up 20, 30 or 40
percent?
Mr. Slavitt. No, not in most places, sir.
Mr. Green. Was there any out-of-pocket maximum or did
consumers have to shoulder potentially tens or hundreds of
millions, hundreds of thousands of dollars due to medical
emergencies?
Mr. Slavitt. There was not.
Mr. Green. Let me give you an example in my last time. When
I was in business we had a printing company. We had 13
employees and one of my jobs as the manager of it was to
negotiate for insurance rates. Small business, 13 employees; we
could never get one of the top companies to give us bids. But
we did select coverage because we also had a union contract for
our line folks so we had to match what the union plan would
have done, so we negotiated it and we would sign a 3-year
contract and with renewal opening of the premiums every year.
Well, in my experience in that every year of that 3-year
contract, they would come in and offer us, say, well, we need
20 or 25 percent more. We would negotiate it down. It ended up
I almost had to negotiate every year with a new company.
But my experience was with 13 employees one of our carriers
who had our insurance said, well, we need to raise your
premiums substantially because one of your employees actually
had a double mastectomy. And he said, what we would suggest, if
you keep your group at 12 people and buy a separate plan for
that 13th employee. And I said, well, I appreciate that option,
but that particular lady is the owner's wife, and I will be
glad to share you are willing to put them out on an individual
market. And believe me, our negotiations got much better.
That doesn't need to happen today because of the Affordable
Care Act. And that is why it is successful, and it could be
more successful if this Congress would do like we have done
every other piece of legislation that has ever been passed.
Something gets passed, you wait a few years and see what the
problems are and you go back in and fix it. But we haven't had
that opportunity since we have tried to repeal it over the last
6 years probably 60-something times.
But if you are looking for perfection in any piece of
legislation you don't come to Congress. We compromise, we work
to get things passed, so whatever we pass needs to be looked at
by new congresses or next congresses to make sure we can fix
it, but the Affordable Care Act has not been subjected to that
because of the repeal. I would love to see a plan that would
actually help expand coverage more than we have done.
Thank you, Mr. Chairman, and I yield back my time.
Mr. Pitts. The chair thanks the gentleman and now
recognizes the chair of the O&I Subcommittee, Dr. Murphy, 5
minutes for questions.
Mr. Murphy. Thank you, Mr. Chairman.
Mr. Slavitt, first I want to ask, you had mentioned in your
testimony that premiums have gone down in actuality or they
have gone, they are less than what CBO estimated?
Mr. Slavitt. I think what I said is after the second, after
2016, so current premiums are between 12 and 20 percent lower
than ingoing estimates. And I can get you the cite for that.
Mr. Murphy. Than estimates, they are lower than estimates?
Mr. Slavitt. They're lower than they were estimated to be
at this time. And I can get you the cite for that.
Mr. Murphy. Well, I just want to deal with reality not
estimates, because the CBO is not held in high esteem in terms
of always being accurate.
Mr. Slavitt. It wasn't CBO.
Mr. Murphy. But estimates, have you shared this information
with Aetna, United and Humana? Because the fact that they
bailed out of the market saying this is out of control, maybe
you have a breakthrough for them that all of these companies
haven't seen.
It is amazing to me. Health care costs have gone up. I saw
one Standard & Poor estimate said they have gone up about 69
percent in the last few years. Insurance premiums have gone up
so there is adverse selection. People enroll and then they
disenroll when they are well; co-pays and deductibles are still
high.
So I hope you can show us the source of this. I don't want
estimates. I want hard core data with regard to are premiums
going up or not. All the data we see is they are going up. In
the Pittsburgh market they are going up. In other communities
they are going up. CO-OPs are failing because they can't handle
the finances.
So unless something is heavily subsidized or old or a
problematic health program, the costs are going up and that is
why people aren't signing up. So it is not a matter of--I just
want accurate data so we can deal with this, so please get us
that.
Let me ask another question. The committee staff report
that we released yesterday examines how CMS awarded federal tax
dollars to state-based exchanges. The ACA states that state-
based exchanges were supposed to be self-sustaining by January
1, 2015, but CMS gave them extensions so that state-based
exchanges could continue to use federal money.
So Mr. Slavitt, your staff tells me that currently as of
September 2016, every state-based exchange is still using
federal money; is that correct?
Mr. Slavitt. Yes. So to clarify, no new money has been
certainly granted after that initial start-up date.
Mr. Murphy. They are still using federal money?
Mr. Slavitt. There are states that have no-cost extensions
which essentially allow them to continue to complete the start-
up activity that they began----
Mr. Murphy. They are still using federal money. And again I
say when you talk about premiums being down, the fact that they
are subsidized is phony, is absolutely phony. How can you have
a premium going down if you are still subsidizing it, if we are
still bailing out insurance companies? Premiums aren't going
down, it is being subsidized.
So when does CMS think that the federal money is actually
going to run out? 2017? 2018?
Mr. Slavitt. For state-based marketplaces?
Mr. Murphy. Yes. Yes.
Mr. Slavitt. I think it'll differ by state. I think we can
get you the schedule of that.
Mr. Murphy. And that is when we are really going to find
out what premiums are if we are not bailing them out. When the
federal money runs out do you think the state-based exchanges
will be sustainable?
Mr. Slavitt. Well, I think each state has its own
calculation. As people are probably aware, Kentucky most
recently has decided to move off of the state-based platform to
the federal platform. I wouldn't necessarily say that was for
reasons that they weren't sustainable, they just chose that
they'd rather be on the federal platform than the state-based
platform, and I think that happens for a variety of reasons.
Mr. Murphy. That is obfuscating here, because these are not
just things as, hey, let's all get together and let's just
switch to a different platform. It is because they have been
financial disasters.
And let's go to the CO-OPs. You have got 17 closures, one
closed just this week. HHS OIG issued an audit just a few
months ago finding that four of the remaining six CO-OPs fell
below CMS risk-based capital requirements. So do you think all
the remaining six CO-OPs will survive the next few months to
enroll individuals for the 2017 plan year?
Mr. Slavitt. So I think the assessment that the states will
make and we will make it along with the states is whether or
not the remaining CO-OPs have sufficient capital to get through
2017.
Mr. Murphy. And we have given them $1.8 billion in taxpayer
loans of the 17 that have failed. So when you say sufficient
capital we are going to have to give them more sufficient
capital to help them?
Mr. Slavitt. No, there is no additional capital. Congress
has in fact rescinded, I think it was $6 billion of capital
that was due to the CO-OPs and that's, so part of the capital
issues that they have. We have given the CO-OPs, in trying to
level the playing field, more options to raise outside capital,
and I think several of them may in fact do that.
Mr. Murphy. Raise outside capital, so that outside capital
being what? Premiums aren't paying for the plans then. They are
getting other outside sources to help bolster the plans so it
is not just shouldered by the people paying on premiums; am I
correct?
Mr. Slavitt. It would be the risk-based capital needed to
support their ability to write business----
Mr. Murphy. So I go back to my original point. If they have
risk-based capital coming in, if they have federal subsidies
coming in, anything you say about premiums going down, first of
all, I doubt that is true because we are not hearing that from
constituents. But the second thing is, if you are subsidizing
it any reduction is false. I yield back.
Mr. Pitts. The chair thanks the gentleman and now
recognizes the gentlelady from Colorado Ms. DeGette, 5 minutes
for questions.
Ms. DeGette. Thank you so much, Mr. Chairman.
Mr. Bagdoyan, I wanted to clarify about the GAO's
undercover study that they did here, a few things. As I
understand it from your statement, there were 15 attempts in
three states to get into the system; is that right? It wasn't
actually 15 people, it was 15 attempts by the GAO fake shoppers
to do this; is that right?
Mr. Bagdoyan. These are essentially----
Ms. DeGette. Yes or no will work.
Mr. Bagdoyan. No, that's not true.
Ms. DeGette. Fifteen attempts in three--OK, what was it
then?
Mr. Bagdoyan. It's 15 individuals attempting.
Ms. DeGette. Fifteen separate individuals?
Mr. Bagdoyan. Yes, ma'am.
Ms. DeGette. I thought there was one individual that tried
in three states, no?
Mr. Bagdoyan. That was to test identity theft and----
Ms. DeGette. I see, OK. But it was 15 individuals in three
states then.
Mr. Bagdoyan. Correct.
Ms. DeGette. OK. Now these were the fake shoppers, these
weren't actual consumers. These were people who were getting in
to try to see if they could do this, right?
Mr. Bagdoyan. Yes, these are fictitious people.
Ms. DeGette. Thank you. Now in these type of schemes that
the report discusses, these 15 fake shoppers, they pay their
premiums but then they don't get any health care benefits; is
that right?
Mr. Bagdoyan. That's correct.
Ms. DeGette. And in fact they didn't try to get any health
care benefits. They just wanted to see if they could get the
premium rebate.
Mr. Bagdoyan. That's correct, yes.
Ms. DeGette. Now, so I guess I am a little unclear about
why somebody would do this in real life, if they pay the
premium and then not try to get health care insurance. So I
guess I wanted to ask you, do you know of any actual cases of
real people who did this?
Mr. Bagdoyan. I do not.
Ms. DeGette. So you are not aware of any widespread fraud
of actual people trying to do this, you just know it could be
done theoretically?
Mr. Bagdoyan. We know it could be done based on----
Ms. DeGette. Thank you.
Mr. Bagdoyan [continuing]. The vulnerabilities of----
Ms. DeGette. Now I want to ask you something else because I
am really supportive of efforts to root out fraud in the
system, but I don't really understand how this is a useful
exercise in the real world to see if someone could pay a
premium, get a tax credit, and then not try to get insurance. I
don't think that would happen in the real world, and so what I
am wondering about is why this is useful.
But I want to ask about something else, and that is about
this GAO report that was released by your agency on Monday. We
are handing you a copy of that right now.
Mr. Bagdoyan. Thank you.
Ms. DeGette. What this report did is it looked at
enrollees' experiences during the first year of the ACA
exchanges and it collected consumer satisfaction information.
It is entitled and I am quoting--you can see it.
Mr. Bagdoyan. Yes.
Ms. DeGette. Most enrollees reported satisfaction with
their health plans, although some concerns exist. Do you have
that?
Mr. Bagdoyan. Yes, I do.
Ms. DeGette. Are you familiar with that report, sir?
Mr. Bagdoyan. Yes, I am.
Ms. DeGette. Oh, you are familiar. So then you know that
the main finding of the report is, ``most qualified health plan
enrollees who obtain their coverage through the exchanges
reported overall satisfaction with their plans.'' Is that
correct?
Mr. Bagdoyan. That's correct, yes.
Ms. DeGette. Thanks.
Mr. Chairman, I would like to enter this report into the
record.
Mr. Pitts. Without objection, so ordered. \1\
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\1\ The information has been retained in committee files and is
also available at http://docs.house.gov/meetings/IF/IF02/20160914/
105306/HHRG-114-IF02-20160914-SD003.pdf.
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Ms. DeGette. Thank you. Now there is another piece of
evidence that shows what exactly we are trying to do here. We
have one GAO report that shows 15 people, fake shoppers in
three states trying to do something that no real person would
do in real life, and then we have reports from the same agency
on the same day about enrollee satisfaction taken from large
national surveys.
But that is not the subject of this hearing today, only the
other thing that is not likely to happen in real life. And so I
just think we have to keep the record clear and we also again
have to focus as we move forward on fixing the ACA.
I just want to ask you, Administrator Slavitt, a question
about this new report about the census and the CDC data that
both show that uninsured rates are at historic lows. The census
showed that the uninsured rate fell to 9.1 percent in 2015 down
from 13.3 percent in 2013; is that correct?
Mr. Slavitt. Yes, that's correct.
Ms. DeGette. Now the CDC data showed a drop in the
uninsured rate to 8.6 percent down from 16 percent in 2010; is
that correct?
Mr. Slavitt. That's correct.
Ms. DeGette. And so it really shows that there are now 20
million Americans who have health insurance because of the
ACA's various coverage provisions; is that accurate?
Mr. Slavitt. Yes that is.
Ms. DeGette. Thank you. I yield back.
Mr. Pitts. The chair thanks the gentlelady and now
recognizes the gentleman from Illinois, Mr. Shimkus, 5 minutes
for questions.
Mr. Shimkus. Thank you, Mr. Chairman. Welcome to our
witnesses. And, you know, this is just a contentious issue and
facts are important and data, and customer satisfaction viewed
by our constituents is what drives a lot of this.
Mr. Slavitt, under the Affordable Care Act if you like your
health care plan will you be able to keep it? Yes or no.
Mr. Slavitt. If it continues to be offered, yes. If not,
then you'd switch to, shop and find a different plan.
Mr. Shimkus. OK, so no, you can't if the plan that you had
prior to the Affordable Care Act is no longer available to
Americans.
Mr. Slavitt. The plans available since the Affordable Care
Act are at much better benefits than prior to the Affordable
Care Act.
Mr. Shimkus. Let me ask the second question. If you like
your doctor you will be able to keep it with no changes prior
to the Affordable Care Act and now no.
Mr. Slavitt. I think it's always been true that physicians
and health plans continually change their relationships----
Mr. Shimkus. There are limited provider networks or you
will pay extra, so that is no longer true. Are premiums lowered
by $2,500 for a family of four?
Mr. Slavitt. I think if you are referring to the----
Mr. Shimkus. The promise by the President when he
campaigned for this----
Mr. Slavitt. I believe that analysis is that it's lower
than it would have otherwise been if it continued to grow.
Mr. Shimkus. OK, then the answer is really no, premiums
have increased. They haven't decreased. The promise was
premiums on average would decrease by $2,500 per family.
Obviously premiums have gone up. The other promise was 80 or 90
percent of all Americans, the insurance will be stronger,
better, and more secure. Do you think that is true?
Mr. Slavitt. Yes.
Mr. Shimkus. Well, let me read you two notes from
constituents of mine who obviously are living it. And these are
follow-ups from meetings I had with the August break.
Before this terrible bill I paid $78 a month for my child
health care coverage premium and had a good plan. I now pay
$167.44 a month and have a much worse plan with high out-of-
pocket cost. He recently got tubes in his ears, a common
procedure, and it cost us over $5,000. That is why this is real
to us and that is why we continue to have problems with the
Affordable Care Act.
Another constituent wrote--he is a retired senior, doesn't
qualify for Medicare yet. My wife and I pay a hundred percent
of the premium cost for the Bronze plan we purchased through
healthcare.gov. We had a Silver plan in 2015, but the cost of
the plan increased roughly $400 a month--that is a premium
increase--so we downshifted.
Although retired, we do not yet qualify for Medicare and
our investment income is too high to qualify us for subsidy
assistance. On the surface that would seem to be a good thing,
but we aren't that far above the income cutoff and without a
subsidy assistance these premiums are taking a large percentage
of our income and it is getting worse over time.
In 2015, we paid $14,000, almost 15, 14.9, which was 22
percent of our adjusted gross income. This year our premiums
will total $15,369 which what I estimate to be about 23 percent
of our income. We understand that our 2017 insurance companies
in Illinois are requesting premium increases of about 30
percent. That would amount to a total annual premium of
$19,980.32 for our Blue Cross Bronze plan that will be almost
30 percent of our income for premiums alone.
So following up on the comments of my colleagues, we have a
challenge and the premiums are up. And if you make the
statement that the premiums are not up, then you disregard the
fact that copays and deductibles are way up. So you keep siloed
in premiums, premiums are going up that is not disputable, but
you don't talk about the deductibles and you don't talk about
the copays which are making it unaffordable for average income
Americans under this health care plan and this health care
policy.
Mr. Slavitt, what do you consider to be a competitive
market? What is your definition of competition?
Mr. Slavitt. So I grew up in Illinois.
Mr. Shimkus. And to think about Illinois----
Mr. Slavitt. Yes.
Mr. Shimkus [continuing]. That is a good point, because
before the Affordable Care Act we did not have a state public
utility commissioner that set rates for health insurance. It
was only after the Affordable Care Act. And we had a very
robust, competitive market which we were proud about because
our health insurance was driven by competition on price and
quality without intervention of a government bureaucrat trying
to dictate the terms of the negotiated agreement between a
buyer and a seller. Go ahead.
Mr. Slavitt. Here's what I could tell you. The uninsured
rate in Illinois has dropped from about 15 1A\1/2\ percent to
about 8.7 percent. I think that's great news for the state.
Mr. Shimkus. Are you disputing these numbers of my
constituents that I mentioned in their stories?
Mr. Slavitt. Absolutely not.
Mr. Shimkus. OK, I yield back my time.
Mr. Pitts. The chair thanks the gentleman. I now recognize
the ranking member of the full committee, Mr. Pallone, 5
minutes for questions.
Mr. Pallone. Thank you, Mr. Chairman. I want to ask my
questions of Mr. Slavitt, but I have to say I continue to be
amazed by Republican attempts to suggest that things were
better before the ACA. I mean, it is clearly not the case.
Despite endless attempts by Republicans to repeal,
undermine, and defund the law, the Affordable Care Act is
making health coverage a reality for many Americans who didn't
have coverage before. Census data released yesterday found that
the uninsured rate was at 9.1 percent in 2015, down from 16
percent in 2010, and according to recent CDC data the uninsured
rate had dropped to a historic low of 8.6 percent in the first
quarter of 2016. For the first time more than 90 percent of all
Americans have health insurance and that is without the
expansion of Medicaid in states like Texas mentioned by our
ranking member Mr. Green.
So Administrator Slavitt, can you put this reduction in the
uninsured rate in historical perspective? How significant is
this drop, and can you comment on how the different coverage
provisions of the ACA have operated together to result in these
gains in insurance coverage?
Mr. Slavitt. Certainly, and thank you for the question. My
entire career, which was in the private sector, had not seen
any meaningful reduction in the uninsured rate, so seeing the
kind of numbers you talk about occur are incredibly gratifying
and I think a sign of progress. And as you say we have more
progress to make. There are still millions of people who live
in states that haven't chosen to expand Medicaid, and if they
did the uninsured rate would be even lower.
Mr. Pallone. Well, let me ask you this. I don't think there
is any question that we have made great progress in providing
coverage for individuals who were previously uninsured, but as
the number of uninsured shrinks the remaining individuals who
are eligible may be harder to reach. And it is incredible to me
how many people still are not aware of the fact that they can
go on the exchange and they have subsidies.
Most people aren't going to believe this, but within the
last 6 months I had one of my constituents come up to me and
say, and ask me when the federal government was going to make
available health insurance to those who don't get it through
their job. And I was like, well, we have the Affordable Care
Act. You know, you can go on this exchange and you are eligible
for a subsidy, because they gave me their information. And this
was less than 6 months ago. It is just incredible.
So according to some experts, many of the remaining
uninsured are actually still unaware or confused about how
federal subsidies are available to help them purchase
insurance. So could you tell me, how is CMS recalibrating its
outreach in enrollment strategy in order to communicate with
these harder to reach populations?
And also, am I correct in stating that more than 80 percent
of individual market consumers were eligible for tax credits as
are the majority of the remaining uninsured? So what is CMS
doing to communicate with these individuals that there is a
marketplace that they can get a subsidy?
Mr. Slavitt. So you're exactly right. There are still
several million individuals in this country who are eligible
for health insurance, many of them, in fact most of them below
$75 a month in premium and are still not aware. So we are
extremely excited about open enrollment for this upcoming
enrollment season that begins November 1st, and have a
significant effort to make sure we figure out how to reach
these new people and educate them.
A lot of it really requires in-person assistance. Health
insurance, particularly if you've never had it is very
complicated and people are sometimes intimidated by it. But we
do find as I have noted earlier that once people are covered
their satisfaction is high and they can start to afford their
prescription medicines. So really, we need to enlist people at
the local level continually and we're going to do that at this
open enrollment.
Mr. Pallone. I don't know. I don't want to put words in one
of my GOP colleague's mouth, but I think it was Mr. Murphy who
said something about reducing the amount of money that was
available for state exchanges. And I don't know if it is the
same thing. Maybe that is not the pot of money that they use
for outreach.
But it disturbs me because I don't want to see the GOP
efforts to say, look, we have got to cut back on this or cut
back on that, reduce the money for outreach. But you do have
that money available, right? That is not going to run out, the
money that you use for this kind of outreach?
Mr. Slavitt. That's right. And that is indeed what I think
states who run their own exchanges are accountable for.
Mr. Pallone. And so they will continue to have that money
available for some in the foreseeable?
Mr. Slavitt. That's right. They charge user fees typically
or have other appropriations and they use it for that purpose.
More is better.
Mr. Pallone. Thank you very much.
Mr. Slavitt. Thank you.
Mr. Pitts. The chair thanks the gentleman and now
recognizes the gentleman from West Virginia, Mr. McKinley, 5
minutes for questions.
Mr. McKinley. Thank you, Mr. Chairman. I think I am going
to address my remarks primarily to Mr. Slavitt, if I could,
please. Last fall I asked you if you could get back to us on
why the premiums are so high in West Virginia. We have the
seventh highest premium rate in the country. We have not heard
back from you since last fall, almost a year ago. We are still
waiting for that call about it, because we only have one
exchange in the state and we have seen the premium increases
logarithmically continue to increase.
So I need that answer. I am expecting that answer. But I am
also saying that look, this past year we had a 24 percent hike
in our premiums and now they are--excuse me. That is what we
had was 24, then this year there was approval of 32 percent
increase. And this coming year we have had a small group trying
to penetrate to give a second option to West Virginia and they
are asking for a 49.8 percent increase, and from what we
understand they are likely going to get it.
So my question in part to you is what is the incentive for
the regulators in West Virginia or any other state to hold down
premium increases if we are going to be subsidizing so many of
them?
Mr. Slavitt. So thank you. I'd say on the one hand that the
great news in West Virginia is that the uninsured rate has
dropped from about 17 percent to about 7 1A\1/2\ percent. On
the other hand as you point out, we are concerned with the cost
of health care particularly in rural America. It has always
been the case. This is not an ACA phenomenon. The lack of
competition in some parts of the country are areas that we need
to address.
I think that some of the protections in the ACA do help
speak to the issue you raise. So for example, if an insurance
company were to charge too much they're obligated to give back
in rebates to the consumers.
Mr. McKinley. I don't know how that ultimately breaks down,
if I could. I don't know how that breaks down, because they are
continuing to make these hikes and I don't think there is an
incentive for the regulators to hold that down, especially if
they are going to grant an increase of 50 percent hike with it.
Let me give you an example and maybe you can work my way
through this, because it is going to work out she is going to
have to have a subsidy again which falls back into why keep the
premiums down if you are going to give them a subsidy. A 60
year old lady who is working, her husband just lost his job,
and she was covered under his insurance policy. She was covered
under his, so now she doesn't have insurance coverage. And in
the past what she would have done--wait, she is 62. He is
retired and he went on Medicare. She doesn't have coverage.
When we spoke to her she said, I would have gotten
catastrophic coverage but I can't do that. I am not permitted
to under the ACA, so now I have to go out and buy coverage. And
it is going to cost her. The cheapest rate she could get was
$800. That means it is $9,600 a year she is going to have to
pay. But then I guess what you are going to say, you are going
to step in and say, well, we are going to provide her premium.
We are going to give her a subsidy to this; is that correct?
Mr. Slavitt. What I'd say is I don't know this particular
situation, glad to look into it. But I would say that for most
people in America who are in that situation they just prior to
the ACA weren't guaranteed access to insurance, particularly if
they were one of the 129 million Americans who had a
preexisting condition. So we think that's a really critical
advance. We know that costs matter. We think the subsidies are
important. We think the subsidies are a critical part of the
law.
Mr. McKinley. I appreciate it. I hope that we can do
something, because at $10,000 a year that is after taxes, how
much she would be dedicating her income in that what she is
making it is not a lot of money. But let me switch horses
entirely on the thing--and I hope that you can get back to me
on this other matter because you haven't the first time--but,
and that is that we are site-neutral.
We have got a hospital complex in West Virginia that has
been trying to get a permit for numbers of years. It took them
several years to get this permit to build an ancillary hospital
facility nearby. And as a result of being held up because of
the government for water permits and road permits,
environmental permits, it didn't occur until after November of
2015.
And now as a result of that by virtue of them now having
invested $30 million into this under the site-neutral plan they
will lose $4 1A\1/2\ million of revenue for that hospital. I am
asking if you can get back to us or have a conversation with us
about how much more flexibility we can have to go beyond that
because it was not of their doing. This was an arbitrary date
of November of 2015 that was established.
And I really would like to hear this because it is going to
have an impact. That $4 1A\1/2\ million it is going to cost, it
is going to be borne by somebody else. And that is once again
in rural America what it is going to impact is where we have
the cost shifting, and it doesn't have to happen if we could
just have a little flexibility in dealing with that site-
neutral deadline date. Can you get back to me?
Mr. Slavitt. Yes. And I think as you're aware we're in the
middle of a rulemaking process, so glad to get back to you and
listen to comments, and particularly in this particular
hospital situation make sure we understand all the details. So
yes, we'll get back to you.
Mr. McKinley. Very soon. Thank you very much. I appreciate
it and yield back.
Mr. Pitts. The chair thanks the gentleman and now
recognizes the gentlelady from California, Ms. Matsui, 5
minutes for questions.
Ms. Matsui. Thank you, Mr. Chairman. I want to thank the
witnesses for being here today. I have some few facts from
California. The Affordable Care Act makes significant
investments to improve the health of our nation and for
Californians. I would like to highlight a few of these
benefits.
Since last November over 1.5 million individuals in
California have gained coverage through the health insurance
marketplace. Because of the ACA there are 78,000 children in
California that cannot be denied health coverage because of
preexisting health condition. Between 2013 and 2014, the
uninsured rate in California dropped by over 6 percentage
points from 21.6 percent in 2014 to 15.3 percent in 2013.
And as the CDC reported last week, the national insurance
rate is now at a historic low. Under the ACA health insurance
companies must spend at least 80 percent of premium dollars on
health care or improvement to care as opposed to administrative
costs like salaries or marketing or they have to issue a
refund. As of 2015, more than 490,000 Californians with private
insurance coverage benefited for more than $11 million in
refunds.
The Affordable Care Act is doing great things in California
and I am proud to see that. We see how Medicaid expansion has
helped to bring the uninsured rate to its current historic low.
Gallup data from earlier this year found that seven of the ten
states with the largest reductions in uninsured rates were
Medicaid expansion states. Gallup also found that states that
have not expanded Medicaid were less likely to see improvement
in their uninsured rates compared to states that have expanded
coverage.
Unfortunately we are seeing a widening gap in the uninsured
rates between expansion states and non-expansion states.
Administrator Slavitt, do you expect that trend will continue
in the states that continue to choose not to expand Medicaid?
Mr. Slavitt. Yes, I do.
Ms. Matsui. Administrator Slavitt, if all states chose to
expand Medicaid do you imagine that we will see the uninsured
rate drop even lower than where it is now?
Mr. Slavitt. Yes, I think there's three to four million
people easily that would be covered.
Ms. Matsui. Thank you. We also know there are many other
benefits to expanding Medicaid. For example, premiums on the
individual insurance market on average 7 percent lower in
states that have expanded Medicaid. I am hopeful that we can
see the uninsured rate continue to drop and I hope more states
do right by their citizens by choosing to expand Medicaid.
Now every time one provision of the ACA has a bump in the
road we hear from our Republican colleagues that this is the
end of health reform. But the fact is that the law is
confirming benefits on millions of Americans across the country
and it is important to put these issues in context.
Administrator Slavitt, we have heard that 2017 is a
transition year for the marketplace. Why might we be seeing
higher premium increases in 2017 than we saw in previous years?
Mr. Slavitt. So I think there's two principal reasons and
both of them I think are one-time effects. The first is that
the law created a 3-year reinsurance pool that expires this
year, so by definition that will increase premiums pretty
meaningfully. Secondly, it's a fact that in the first couple
years of the exchange the insurers priced without having data
on what the claims costs would be. They now have that data.
I think in many cases in many states they've found that
they've priced too low and I think are asking for and receiving
some justifiable rate increases. But again the good news is
medical cost trends across the country are very low, so once
these one-time effects kick in, I think our expectation is that
we will see a very normalized continued low rate of growth.
Ms. Matsui. Now as the insurance market adjusts, the ACA
has other measures in place like tax credits to keep premium
affordable and provide choices for consumers. My understanding
is that the majority of current marketplace consumers, in fact,
benefit from these financial assistance measures.
Administrator Slavitt, how will these mechanisms including
tax credits and the opportunity to shop around for different
plans help consumers find affordable coverage as the market
stabilizes?
Mr. Slavitt. I think when consumers learn that the vast
majority of them are able to purchase coverage for $75 a month
or less in premiums, it is absolutely astounding to them given
the amount of financial security and health security that
they've never been able to obtain before in their lives have
had. So we think during the fourth open enrollment we're really
eager for people who haven't yet heard about the marketplace
and understand those benefits to come back.
Ms. Matsui. Oh, I thank you and I yield back.
Mr. Pitts. The chair thanks the gentlelady and now
recognizes the gentleman from Virginia, Mr. Griffith, 5 minutes
for questions.
Mr. Griffith. Thank you, Mr. Chairman.
Administrator Slavitt, on Friday last, CMS issued a five
paragraph memo on risk corridor payments for 2015. Several
insurance companies are suing the Administration over 2014
payments because they only collected 12.6 percent of what the
industry requested to be made whole. In the last paragraph of
the memo, your agency wrote, and I quote, as in all cases where
there is a litigation risk, we are open to discussing
resolution of those claims. We are willing to begin such
discussions at any time, end quote.
Does CMS take the position that insurance plans are
entitled to be made whole on risk corridor payments even though
there is no appropriation to do so, yes or no?
Mr. Slavitt. I think what we've always said is that the
risk corridor payments are an obligation of the federal
government and I think that----
Mr. Griffith. Yes or no?
Mr. Slavitt. I think that statement's just standard
practice.
Mr. Griffith. So it is yes?
Mr. Slavitt. I'm sorry. Can you rephrase the question for
me and I will----
Mr. Griffith. I will restate it. Does CMS take the position
that insurance plans are entitled to be made whole on risk
corridor payments even though there is no appropriation to do
so? And I took your answer as a yes; am I correct?
Mr. Slavitt. Yes. It is an obligation of the federal
government.
Mr. Griffith. So it is a yes? Just waiting to hear you say
yes.
Mr. Slavitt. If that's how you interpret that. Yes, sure.
Mr. Griffith. Seriously? All right. Do you intend to use
the judgment fund to make the risk corridor payments to
insurance plans? Yes or no?
Mr. Slavitt. I would say that further questions are--I
would not be comfortable commenting on any current legal
proceedings and I'd prefer to----
Mr. Griffith. You did an invitation to settlement. There is
no appropriation for the funds. Are you intending to use the
judgment fund, yes or no?
Mr. Slavitt. Again this is a case before Justice and so I'd
be more comfortable not talking publicly about that.
Mr. Griffith. So what you are saying is is that you have
turned this over to Justice and you have talked to the Justice
Department about the various suits?
Mr. Slavitt. I personally have not.
Mr. Griffith. You have not. Can you get me the names by the
16th of September, because this is time-sensitive. Can you get
me the names of those people that have spoken with Justice
about this matter?
Mr. Slavitt. Sure.
Mr. Griffith. Thank you. I appreciate that. Now which
insurance plans are suing or have indicated they intend to sue
CMS or the United States in relationship to the risk corridor
payments?
Mr. Slavitt. I don't have a list with me, so I can get that
to you.
Mr. Griffith. And again because it is time sensitive can
you get me a list by September 16th?
Mr. Slavitt. Absolutely.
Mr. Griffith. I appreciate that very much. Now you
indicated you haven't spoken to Justice, but do you know of
anyone in your Department that has discussed settlement plans
with the Department of Justice?
Mr. Slavitt. I know that our general counsel speaks to
Justice regularly, so I assume that they have but I don't know
any detail.
Mr. Griffith. Well, I am assuming that you authorized the
memo that I quoted earlier where you created an invitation to
settle. I would assume that you know that there were some
discussions with Justice prior to making an invitation to
settle with these companies; is that not correct?
Mr. Slavitt. That's correct.
Mr. Griffith. That is correct. So there have been
discussions by somebody with Justice about how you are going to
settle and you don't know where the money is going to come
from, but you assume somewhere it will come from.
Mr. Slavitt. Yes. They're representing us so we in fact
have talked to them. Yes.
Mr. Griffith. All right. I am curious. Have you had any
conversations about the lawsuits with your predecessor who is
now a top representative for the insurance industry about the
risk corridor situation? Yes or no.
Mr. Slavitt. No.
Mr. Griffith. And prior to issuing the memo, and I touched
on this briefly but I want to make sure I am clear. Prior to
issuing the memo, did Justice Department approve the memo that
you released on Friday which had an invitation in the last part
of it to settle the lawsuits?
Mr. Slavitt. I believe they reviewed the language, yes.
Mr. Griffith. All right. And has CMS spoken with any
insurance plan directly or indirectly about settlement of the
risk corridor lawsuits? Yes or no.
Mr. Slavitt. CMS has had inquiries from insurance companies
which we've then referred over to Justice.
Mr. Griffith. And do you remember which insurance companies
they were?
Mr. Slavitt. I can get you that.
Mr. Griffith. If you can get me that by September 16th I
would greatly appreciate it----
Mr. Slavitt. OK.
Mr. Griffith [continuing]. Because it is a time-sensitive
matter, as you can imagine.
Mr. Slavitt. OK.
Mr. Griffith. I do appreciate that. With the last few
seconds that I have I am going to switch gears a little bit.
And I have heard a lot of folks talk about the uninsured. One
of the problems that I am having when I get my complaints in my
district about Obamacare is underinsured; that with the copays
and the deductibles and in order to afford the insurance
because the rates have gone up, my folks are having to pay high
deductibles.
They in essence don't have significant enough insurance,
and when a catastrophic illness or injury occurs they are
finding that they are having to sell off assets that they have
had to work for for years including homes, et cetera. And I am
just wondering, does anybody keep numbers on those who I would
call the underinsured? They may have a plan but not one that
keeps them from being financially crippled should they have a
catastrophic illness or injury.
Mr. Slavitt. Yes. The most recent numbers that I've seen
despite the headlines show that in 2015 on the exchange the
median deductible was $850, which was a decrease from the prior
year where it was $900.
Mr. Griffith. And all I can say, Administrator Slavitt, to
that is that when folks come up to me at the New River Valley
Fair, who are average hardworking folks in a relatively poor
district, that is not what they are telling me. My time is up.
I yield back.
Mr. Pitts. The chair thanks the gentleman and now
recognizes the gentleman from Kentucky, Mr. Yarmuth, 5 minutes
for questions.
Mr. Yarmuth. Thank you very much, Mr. Chairman. I thank the
witnesses for appearing. This does sound a lot like the movie
Groundhog Day. We have been through all of these arguments
before and it becomes very frustrating. This hearing has a new
title, The Affordable Care Act on Shaky Ground, and I would
submit that if it is on shaky ground it is because Republicans
both in Congress and across the country where they have the
authority are planting dynamite in the ground under the system.
And I think that is why all of my colleagues have talked
about the fact that we continue to ignore the incredible
progress that has been made under the Affordable Care Act, not
only the number of people who have been insured who were
previously uninsured but also the people who have been
protected now against significant financial loss or even
unnecessary debt because they have coverage.
I want to talk about my state though. And in the chairman's
report, the CMS's regulation of exchanges and so forth, it
makes some statements about Kentucky's exchange that I think
dramatically mischaracterized what has gone on there. The last
time you were here I asked you a question because I knew our
new governor at that time had promised to dismantle Kynect, our
state exchange, during his campaign. And I asked you if you
could think of any way in which any Kentucky resident would be
better off on the federal exchange than the state exchange, and
you answered you couldn't; is that correct?
Mr. Slavitt. That's right.
Mr. Yarmuth. That is right. Do you think that anything
happened in Kentucky between that answer and the time that
Governor Bevin actually submitted his request or notification
to you that he was going to disconnect Kynect to make that
different?
Mr. Slavitt. Not to my knowledge.
Mr. Yarmuth. And in fact, the reason he did that was not
because of any reason that made sense either economically or in
terms of providing service for our citizens, but because he has
an ideological opposition to Kynect and promised to do it
during the campaign. You don't have to answer that; that is my
characterization.
But now what he is doing is even worse, because while we
had the most successful change, arguably, in the country that
he has basically dismantled, we also have one of the most
dramatic increases in, or reductions in uninsured because of
expanded Medicaid. More than 400,000 Kentuckians now have
coverage who didn't have it before.
And what Governor Bevin has done now is made a proposal for
a waiver to change a lot of the Medicaid system in Kentucky. He
has made a proposal to CMS which he counseled with you before,
you and your staff, before he made the proposal in which you
told him what might be acceptable and what might not be
acceptable under the proposal; is that not correct?
Mr. Slavitt. We did have a dialogue, yes.
Mr. Yarmuth. And in spite of that he has submitted a
proposal to you which I think according to the law you are
almost obligated to reject. On Page 15 of that proposal he says
if this demonstration project is not approved I will dismantle
Kynect. I will dismantle the Medicaid expansion in my state.
So what he is doing is setting up for you to reject the
proposal and then he is going to dismantle Medicaid expansion
in Kentucky, take insurance away from 400,000 of our citizens,
jeopardize many providers who are now being compensated for the
care they provide, and he is doing it again for ideological
reasons.
So the point I want to make is that yes, there are a lot of
problems and a lot of things going on in this state, in this
country right now that may call into question the Affordable
Care Act. But the things that are going wrong are things that
Republicans are doing to sabotage the functioning of the act,
the law.
And that is why we are so frustrated that instead of
offering suggestions to improve the ACA--which we could in
many, many ways; we all agree on that--the Republicans in
Congress again hold hearings like this, vote time and time
again, more than 60 times to repeal the ACA, and have never
proposed an alternative that is anything but going back to
where we were before the ACA when insurance companies
controlled the system.
They want to throw it back in the private system. That is
what Matt Bevin says he wants to do in Kentucky as if that is
some noble objective. And the reason that they have not
proposed a viable alternative to the ACA other than going back
to the pre-ACA situation, I am convinced, is because the only
other alternative is single payer. And if you listen to
virtually every complaint that is raised during this hearing
today and then every other hearing, those complaints would not
exist under a single payer system.
Now I don't think anybody is ready to go there right now.
We are going to end up there eventually, but I think we ought
to start being honest with the American people about what the
options are available to them and how important the ACA's
success is to them as well. I yield back.
Mr. Pitts. The chair thanks the gentleman and now
recognizes the gentleman from Missouri, Mr. Long, 5 minutes for
questions.
Mr. Long. Thank you, Mr. Chairman. And Mr. Slavitt, is it
true that the current CEO of the federal exchange
healthcare.gov is Kevin Counihan?
Mr. Slavitt. Yes, sir.
Mr. Long. It is also my understanding and I am sure you are
aware that he was invited to testify here today but did not
come. Do you know why he is not here?
Mr. Slavitt. He's on travel today, sir.
Mr. Long. I am sorry?
Mr. Slavitt. He's traveling today, sir. I believe he's in
South Carolina.
Mr. Long. South Carolina.
Mr. Slavitt. That's my understanding.
Mr. Long. OK. Do you have any idea of where he was back on
the September 6th or 7th, whenever Arizona, the same day that
Arizona's Blue Cross Blue Shield mysteriously decided to sell
plans in Pinal County? Do you know if he would have been in
Arizona at that time?
Mr. Slavitt. I don't know his schedule on September 6th or
7th.
Mr. Long. OK. Can you tell me if Mr. Counihan has had
conversations with Blue Cross Blue Shield of Arizona or
Connecticut after the deadline to sell plans on the federal
exchange?
Mr. Slavitt. I don't know the timing, but I'm sure he's had
conversations with most of the major health plans.
Mr. Long. What was the first part of your answer? I am
sorry. I couldn't hear you.
Mr. Slavitt. I can't tell you the dates, but I'm sure he's
had conversations with many of the major health plans.
Mr. Long. But you don't know whether or not he has had
conversations after the deadline?
Mr. Slavitt. I don't have any knowledge of the dates he's
had conversations.
Mr. Long. OK. Have you yourself had conversations with Blue
Cross Blue Shield of Arizona or Connecticut Care after the
deadline to sell plans on the federal exchange?
Mr. Slavitt. No.
Mr. Long. No negotiations after the deadline is passed?
Mr. Slavitt. I have not.
Mr. Long. OK. Is it fair to say that both carriers were
allowed to sell plans after your own deadline?
Mr. Slavitt. I'm not sure. I don't know.
Mr. Long. You are not sure that Pinal County was offering
to sell plans?
Mr. Slavitt. I'm not sure which deadline you're referring
to, but I'm happy to investigate and we will then get back to
you.
Mr. Long. OK. I would appreciate if you would. So you are
aware or not aware that deadlines have been passed and then
plans were offered after these deadlines passed; you are aware
of that or not aware of that?
Mr. Slavitt. Well, I'd have to understand what deadlines
you're talking about. I mean, we certainly give----
Mr. Long. Sell the plans, but----
Mr. Slavitt. We certainly give states dates in which we'd
like to receive things. Sometimes if we don't receive them on
those dates I'm sure that we extend those deadlines, but I
don't know that in this particular situation that that's
occurred. But that certainly wouldn't be absolutely out of the
question.
Mr. Long. OK. But do you have any idea why there would be
deadlines if the deadlines are not followed?
Mr. Slavitt. Well, yes. Typically our team has to do work
like loading plans and loading data and they like to have
enough time to do that and do it right. But certainly we're
going to always do what's in the best interest of the consumers
and the Americans in the state to make sure that they have
coverage options available. So if our team has to work a little
harder or work over the weekend in order to do that that's the
kind of dedication that we have on our team.
Mr. Long. OK, thank you. In my district in August I had the
opportunity to visit with a large school board there in the
district, and I was kind of surprised at the end of the meeting
when the chief financial officer that has been with the school
district 33 years looked at me and volunteered that she said, I
was thinking last night if I could ask you to do one thing for
me as congressman that one thing would be to get rid of
Obamacare.
And that honestly shocked me. Two of the more pressing
problems with the law that she referred to were the 30-hour
work week and the 26-week break for retired teachers. The 30-
hour work week, also known as employer mandate, requires all
businesses or organizations with 50 or more employees to
provide health insurance for their employees who work more than
30 hours a week.
This particular school district currently has 921 full-time
staff. The 26-week break is required for educational
organizations that are unable to provide health insurance to
faculty that recently retired. If ignored, the retired teacher
would be seen as a continuing employee which would require them
to offer health insurance.
These are the teachers, the retired teachers that know the
children in those schools. They know the school, they know the
system. They know the teachers and they have to take a 26-week
break because of this law.
And Mr. Chairman, I write a weekly column called Long's
Short Report and it just happened that today in our local
paper, the Gannett paper, the Springfield News-Leader published
my latest column on this very subject about my trip to the
school district. So without objection, I would like to offer
that into the record and I would encourage everyone to read
that; get more of the details of how this law has affected
school systems and small businesses.
Mr. Pitts. Without objection, so ordered.
[The information appears at the conclusion of the hearing.]
Mr. Long. I yield back.
Mr. Pitts. The chair thanks the gentleman and now
recognizes the gentlelady from Florida, Ms. Castor, 5 minutes
for questions.
Ms. Castor. Well, thank you, Mr. Chairman, and thank you to
the witnesses for being here today. The progress that we have
made since the adoption of the Affordable Care Act has been
very significant. And before we turn to questions I wanted to
focus on how meaningful it has been to my neighbors back home
in the state of Florida.
In Florida we are fortunate. We have a very competitive
marketplace so families and consumers have a lot of choices.
They have good affordable options. In fact, it looks like in
the coming year that 82 percent of marketplace consumers in
Florida will be able to purchase coverage for less than $75 per
month.
During the last open enrollment period, 1.7 million
Floridians signed up for coverage in the health insurance
marketplace including over one million women and children. And
this is important because we have very serious and growing
concerns in Florida because of the spread of the Zika virus.
The current Zika infection count in Florida is 800 individuals,
including 86 pregnant women that we know of, so this is very
concerning.
And what is especially troubling now is that Florida
hasn't expanded Medicaid. So even though we have over 250,000
women ages 18 to 34 in my state who have gained quality
affordable coverage in the marketplace, we have got more than
that that should be covered, could be covered if the state
expanded Medicaid. So you can see why this is particularly
troubling at a time of a growing public health crisis.
But there is a lot of good news too. Over 3.1 million
seniors are eligible for free preventive health services with
no deductibles or copays and they are taking advantage of it.
In 2014 alone, over 346,000 seniors in Florida received
Medicare Part D prescription drug discounts worth over $306
million, or on average $884 back into the pockets of
beneficiaries.
It is interesting that more than 38 percent or about
383,000 returning healthcare.gov consumers last year switched
plans. And this is something that we could work on in a
bipartisan way. It is very interesting. I guess we knew that
Americans love to shop and compare and they are doing that. But
we have got to work together to maintain these competitive
marketplaces so they have the ability to do that. When they
switched they saved on average about $34 per year.
And then for the vast majority, about 60 percent of
Floridians already have health insurance through their
employers and I thought it was quite interesting that there the
insurance premiums in Florida are now growing at the slowest
rates on record. This is also something we have got to continue
to analyze and make sure that this is the case overall.
But I would like to return to the Medicaid expansion
challenge, because in the state of Florida we have got so many
that are falling into the gap. And, you know, we know it is
fiscally irresponsible not to expand Medicaid. We know the most
important thing we could do for mental health coverage is to
expand Medicaid.
But there is a new piece of data that Administrator
Slavitt, I would like you to address. Medicaid expansion brings
down marketplace rates. You said it brings down premiums by 7
percent. Is that just in the marketplace, is that overall and
what is behind, what is going on in pressure in the
marketplace?
Mr. Slavitt. Well, no, that 7 percent is in the
marketplace, and I think, for everyone here who has an interest
in helping all of your constituents and all of their concerns
about affordability that's really one of the top most important
things that can be done is to eliminate all those places where
people are uncovered.
And a lot of those people who don't get coverage through
Medicaid sometimes find their way onto coverage in the
marketplace and that drives up costs needlessly. So it's a
critical priority that we complete the job and expand Medicaid
wherever we can.
Ms. Castor. And one of the things that drives a lot of
businesses and the folks of the Florida Chamber crazy is we are
sending so much money up to the federal government because
Medicaid is a state-federal partnership. We are not bringing
those dollars back and putting them to work creating jobs and
taking care of people. What happens to those dollars?
Mr. Slavitt. Well, they certainly go to the states that
have chosen to expand Medicaid. And I will just add one thing
for, Congressman Yarmuth raised the question of Kentucky. There
was a very interesting study in Kentucky a couple years ago
which, I think, showed that Kentucky saw 40,000 new jobs and
something to the effect of $30 billion improvement to the state
economy through 2021 in the expansion of Medicaid. So you can
imagine the economic benefits on top of which you're already
talking about are quite large.
Ms. Castor. Thank you very much.
Mr. Pitts. The lady yields back. The chair now recognizes
the gentleman from Indiana, Dr. Bucshon, 5 minutes for
questions.
Mr. Bucshon. Thank you, Mr. Slavitt, for being here. This
is directed at you. On mandates in the Affordable Care Act I
want to talk about the age rating ratio. Many states are using
a five-to-one ratio before 2010, meaning the most expensive
plan can only cost five times more than the least expensive
plan when it comes to patients' ages.
In my home state of Indiana we didn't have an age rating
mandate. The President's plan moved this to three-to-one for
all states regardless of their unique patient needs. This has
led to sicker insurance pools and driven younger, healthier
patients away from the marketplace, in my view. The baseline
has increased, so the argument that the three-to-one ratio
saves seniors money may not be true. In fact, I don't think it
is true. It has just increased costs for younger people.
So my question would be, is would moving the ratio back to
five-to-one have an immediate impact on the cost, do you think,
for many people who would potentially enroll?
Mr. Slavitt. No, I think this would have to be studied
based upon two factors. What does it do to the economics or the
cost and what does it do to the coverage and who benefits and
who doesn't? So I think it's the kind of proposal that should
be thoughtfully evaluated. I have not done that.
Mr. Bucshon. OK. Would moving the ratio back to five-to-one
attract younger, healthier patients to the plans? And the
reason I say that is because according to CBO, ``average
spending among people who are 64 years or older is about 4.8
times as high as average spending among people who are 21 years
old.'' That is cost to the health care system. So to me it
would make sense if you could shift the baseline back and get
the cost down for younger people, you would get more people
into the plans and that might help balance the demographics,
right?
Mr. Slavitt. Yes. That could be one of the benefits. I
haven't seen any studies on the topic, but----
Mr. Bucshon. Well, I would encourage you to look at that
because I actually have legislation to actually to allow states
to do that because that is the premise.
A couple other questions on global surgical payments in
MACRA, the replacement for the SGR, our language authorized CMS
to use a representative sample of docs for reporting data on
10- and 90-day global surgical codes. But the most recent
physician fee schedule is requiring all docs that perform
relative procedures to report under the claims analysis
section. And this is, in my view, not in line with the
intentions of Congress in MACRA.
So what we need really is an appropriate representative
sample. How the data is collected must change. The 10 minute
reporting increments is, I can tell you as a surgeon--I was a
surgeon before--is actually, it is impossible. So what I am
asking for is for CMS to give time to work with surgical
societies and other stakeholders to determine what is an
accurate representative sample. This is really important. So
what I am asking is can you commit, or whoever at CMS is
responsible for this, to working with my office and other
stakeholders to work this through?
Mr. Slavitt. Absolutely. As you can imagine we've gotten a
lot of feedback on this proposal. It's a proposal that I think
we're still working through the comment period. But we
absolutely need that input and we are committed to coming out
with a final rule which does get that right.
Mr. Bucshon. Well, that is really important because what we
want is accurate data, right? At the end of the day we want
accurate data.
Mr. Slavitt. Right.
Mr. Bucshon. One final question on the proposed rule for
Medicare Part B model, I am very concerned by statements from
the physician community that practices may be forced to send
patients to hospitals to receive care, particularly oncologists
particularly because hospital-based care can be more costly for
beneficiaries.
I have seen estimates that suggest that even 15 percent of
cancer treatment, for example, shifted to the hospital would
actually cost Medicare an additional $200 million. And the
intent of this was to try to get down drug costs for people,
and I understand that. There is bipartisan concerns to this
rule, proposed rule, as you know, so what I would suggest is I
would urge CMS to hold off on the rule until we can resolve
some of these issues.
So the question I have is did CMS factor in the potential
cost increase into its estimated savings from the program when
it developed the proposed rule?
Mr. Slavitt. So I think putting the proposal together we
were, in fact, looking for that exact type of feedback relative
to consequences and unintended consequences of anything we
test. We've got a lot of feedback. We will take that feedback,
including the specific feedback that you've mentioned which we
have heard, into account when we finalize this.
Mr. Bucshon. Well, I will appreciate that. And so if you do
have an analysis of that different than what I suggested, on
the increased costs because of shifting care to hospitals, if
you could share that with my office and the committee I would
appreciate it.
Mr. Slavitt. OK. We will look into that.
Mr. Bucshon. I yield back.
Mr. Pitts. The chair thanks the gentleman and now
recognizes the gentlelady from Illinois, Ms. Schakowsky, 5
minutes for questions.
Ms. Schakowsky. Thank you, Mr. Chairman. And I want to
apologize to members of the panel. I was at another
subcommittee hearing and was able to just arrive, but I thank
you for being here to testify.
I wanted to just highlight some of the benefits of the
Affordable Care Act to my state of Illinois. During the third
enrollment period 388,000 people from my state were able to
gain coverage by enrolling in the health insurance marketplace.
In 2014, nearly 195,000 people in Illinois with Medicaid saved
almost $180 million on prescription drugs because of the
Affordable Care Act with an average per person of $925 per
beneficiary. That is a big deal.
In 2015, the ACA funded 44 community health care centers in
Illinois that provide primary and preventive health care to
over 1.2 million Illinoisans including over 300,000 children
and 900,000 racial and ethnic minorities. Over 475,000
Illinoisans have gained Medicaid of CHIP coverage since the
first open enrollment period as a result of Illinois' decision
to expand Medicaid, and since November of last year, 200,000
Illinois women gained access to preventive health care services
with no cost sharing including reproductive health care,
domestic violence counseling, and screening for cervical
cancer.
Despite the challenges that we are facing in Illinois, this
law is doing incredible things for my constituents and I am
encouraged by the progress that we are seeing.
Mr. Slavitt, I wanted to talk to you about the increase in
the cost of prescription drugs. How have rising drug costs,
rising drug prices led to increases in insurance premiums and
should we be doing more to control growing the cost of
pharmaceuticals?
Mr. Slavitt. This is an incredibly important question,
Congresswoman, because when people are concerned as they should
be about the cost of health insurance because the law requires
that 85 percent of the cost be actual cost of health care, what
they're really concerned about is the cost of the underlying
health care system which is a top priority for us.
And prescription drugs and the insecurity that both seniors
as well as people on lower incomes face when they can't afford
their prescription drugs is a really significant issue and it's
only getting worse. And we are troubled when we see large
increases in prescription drug costs and we have proposals for
it as you know to attempt to find ways to begin to control
those costs in ways that still allow us to create cures and
innovations for our country, but also allows those cures and
innovations to be accessible to everybody in the country who
needs them.
Ms. Schakowsky. Right. Also CMS has taken action I know to
increase transparency for the price of drugs. For example, last
year CMS released the Medicare Drug Spending Dashboard which
details the price paid for many drugs covered by Medicare Parts
B and D. The Dashboard also includes the average annual price
increase of each drug and the average annual cost to
beneficiaries. And this data is incredibly helpful for
policymakers and providers to gain a better understanding of
how drug prices are impacting public health programs and
consumers.
So Mr. Slavitt, why is increased transparency for drug
pricing important and how will this information allow us to
better protect Medicare, Medicaid and the beneficiaries?
Mr. Slavitt. Well, first of all, these are federal dollars
that we are spending and so, these in effect are people that
are contractors to the federal government, and so it's
important that taxpayers have insight into what we're spending
our money on.
And because we are not, as you know, able to negotiate Part
D prices because we're restricted to, we think it's important
at least that there is visibility into what things cost and
particularly when there's cost increases, because in effect
that's at the heart of many of the concerns, I think, even at
this hearing today. As some of those underlying costs go up
people then see their insurance premiums go up and that's what
they have to deal with, so we're trying to bring more
visibility to the root cause as opposed to just the headline
issues.
Ms. Schakowsky. Thank you and I yield back.
Mr. Pitts. The chair thanks the gentlelady and now
recognizes the gentleman from Florida, Mr. Bilirakis, 5 minutes
for questions. Put your mike on, please. Thank you.
Mr. Bilirakis. Sorry about that. Administrator Slavitt,
last December HHS OIG issued a report titled, CMS Could Not
Effectively Ensure That Advanced Premium Tax Credit Payments
Made Under the Affordable Care Act Were Only for Enrollees Who
Paid Their Premiums.
In the report, OIG stated that CMS was paying advanced
premium tax credits based on the attestation of the insurance
companies without verifying on an individual level that the
monthly premiums were being paid. The OIG recommended that CMS
institute an automated policy-based payment process to verify
premium payments on a monthly or real-time basis.
Yes or no, please, has CMS instituted automated policy-
based payment process with insurers for the federal
marketplace?
Mr. Slavitt. Yes.
Mr. Bilirakis. OK, thank you. Are the state-based exchanges
using an automated policy-based payment process at this time?
Mr. Slavitt. I'd have to check.
Mr. Bilirakis. Please check. Does CMS have any plans of
running the policy payment process against prior years to find
individuals who may have improperly claimed cost sharing
reductions and premium tax credits when they were not current
on their payments?
Mr. Slavitt. I'm not sure if that's even possible, but I'd
be glad to get back with you.
Mr. Bilirakis. Please get back to us. I understand that the
state exchanges are not participating, but I need clarification
on that so please get back to me. Does CMS have a legal
obligation to recoup advanced premium tax credits or cost
sharing reductions that were improperly claimed or paid? Do
they have a legal obligation? Do you have a legal obligation,
CMS?
Mr. Slavitt. So I think it depends on the circumstances,
but some of this is under the provenance of the IRS.
Mr. Bilirakis. OK. Well, again I want more clarification on
that please.
Ms. Jarmon, has the OIG tested the automated policy payment
process that CMS is using?
Ms. Jarmon. Not yet. As part of our ongoing work I should
mention we reported on it in December of 2015. As part of our
follow-up on the open recommendations we'll be looking at that.
Mr. Bilirakis. When will you be looking at it?
Ms. Jarmon. As part of our work in 2017.
Mr. Bilirakis. In 2017?
Ms. Jarmon. Right. We're looking at it now but----
Mr. Bilirakis. So early part of '17?
Ms. Jarmon [continuing]. It will be reported on sometime in
2017.
Mr. Bilirakis. Early part of '17 or----
Ms. Jarmon. Probably sometime during the first part of '17,
yes.
Mr. Bilirakis. I am going to keep track of that.
Mr. Slavitt, when CMS instituted this policy-based payment
process for the federal marketplace how much did you find
enrollment reduced? Can you give me that answer?
Mr. Slavitt. I don't know. I don't know that it was
material, but I'm certainly glad to get back to you on what
that is.
Mr. Bilirakis. OK. Well, all right. Again I want to follow
up so let's get together soon. I need these answers.
Mr. Slavitt. OK.
Mr. Bilirakis. Thank you very much, and I will yield back,
Mr. Chairman.
Mr. Pitts. The chair thanks the gentleman and now
recognizes the gentleman from Oklahoma, Mr. Mullin, 5 minutes
for questions.
Mr. Mullin. Thank you, Mr. Chairman. And Mr. Slavitt, thank
you again for being here. I know you and I have visited before,
and the last time we visited you were in front of the O&I
Committee and we were visiting about the risk medication
program, the repayments that comes to it for the reinsurance.
Are you recalling that?
Mr. Slavitt. Was it risk adjustment or was it reinsurance?
Mr. Mullin. Reinsurance.
Mr. Slavitt. Reinsurance, OK.
Mr. Mullin. Right. And at that time in the opening
statement you said this year will add approximately 500 million
to the U.S. Treasury. From the program as collections we will
exceed the target amount to reimburse high cost claims for
2015. That was a quote from you; is that correct?
Mr. Slavitt. Sounds right.
Mr. Mullin. Have you made any payments to date to the
Treasurer on those?
Mr. Slavitt. I think our collection date, if I'm not
mistaken--this is from the top of my head--is either November
15 or December 15. So we'll make the payment after that next
collection.
Mr. Mullin. So have you made any payments out of the
reinsurance program?
Mr. Slavitt. No. That'll be the payment we make when we----
Mr. Mullin. Now have you made any payments to anybody out
of the reinsurance program?
Mr. Slavitt. Oh, to any companies?
Mr. Mullin. Yes.
Mr. Slavitt. This year?
Mr. Mullin. Yes.
Mr. Slavitt. I have to check.
Mr. Mullin. I believe according to the information we
received you have made several payments to carriers. In fact
this was, the payments were made right before the open
enrollment period. Are you familiar with that?
Mr. Slavitt. You mean last year?
Mr. Mullin. I believe so.
Mr. Slavitt. Of last year, yes.
Mr. Mullin. Yes. So has any payments to date been made to
the Treasurer on this reinsurance program?
Mr. Slavitt. As I said, the payment will be made after our
next collection which is either November or December 15, I
can't recall which.
Mr. Mullin. OK. The reason why I ask this is because there
has been a discussion of how much is supposed to be paid to the
Treasurer and the federal law which says that the Treasurer
should receive $5 billion not $500 million over the 3 years.
Are you on target to hit the $5 billion mark?
Mr. Slavitt. I recall the conversation from that hearing. I
believe that that's not our understanding of the law, so----
Mr. Mullin. I know. And I believe the interpretation of the
law seems pretty clear and you guys decided to change that
without notice. I am still----
Mr. Slavitt. No, I'm sorry. We went through notice. We went
through a proper formal notice and comment period.
Mr. Mullin. And you responded back to us. How do you
interpret the law?
Mr. Slavitt. I think the law was not clear in cases where
less than $12 billion----
Mr. Mullin. Do you have it where you could read it?
Mr. Slavitt. Pardon me?
Mr. Mullin. Do you have it where you could read it, because
it seemed pretty clear to us.
Mr. Slavitt. The law, I believe, stated that what to do in
cases where $12 billion was collected. The law was silent on
what happened if less than $12 billion collected what the
prioritization was.
Mr. Mullin. Did you ask----
Mr. Slavitt. Therefore we went through a formalized
rulemaking process.
Mr. Mullin. Did you ask guidance from Congress on that
before you made that----
Mr. Slavitt. We asked guidance from Congress and the
general public by making this an open rulemaking process and we
received----
Mr. Mullin. But in a public comment period you really don't
have to respond back to Congress on that. Did you specifically
ask for our guidance on that?
Mr. Slavitt. I believe we asked for everybody's guidance
during that process.
Mr. Mullin. If that is the case then why has there been
confusion on the payments on if that $5 billion should be paid
or shouldn't be paid?
Mr. Slavitt. Because nobody in our comment period, if I'm
not mistaken, objected to what we put forward in the proposal.
Mr. Mullin. How long was that comment period open?
Mr. Slavitt. I'll have to check. It was a standard comment
period. It wasn't shorter than any normal period.
Mr. Mullin. Because we have objected to it because we had
you in O&I and had this conversation with you about it, so
there has been a discussion on your interpretation of where the
funds should go to. It seems to us or, well, let me say myself.
It seems to me that the payments made to the insurance
companies is questionable without paying it to the Treasurer in
the amounts that is being repaid to them just to hold the
premiums down.
And it is not working, because in Oklahoma the only program
we have left on the exchange is Blue Cross Blue Shield. They
went up 42 percent already this year and I believe they are
asking to go up another 40 to 70 percent this year. We are
seeing prices skyrocket across the country right now when we
were told that this program was going to cost, or bring
premiums down.
And the question I guess that I am trying to get to is your
interpretation isn't working because it is still costing us
more and the Treasurer isn't receiving the taxpayer dollars
that we were promised in the $5 billion. And so if it is not
working, then let us work together and try changing it or at
least the tax dollars could be used to, in the appropriate way.
I yield back. Thank you.
Mr. Pitts. The chair thanks the gentleman and now
recognizes the gentleman from New York, Mr. Tonko, 5 minutes
for questions.
Mr. Tonko. I thank you, Mr. Chair. In the 6 short years
since its passage, the Affordable Care Act has transformed the
health care industry and made coverage more accessible, more
affordable, and more secure. And I would like to take this
opportunity to share some of the encouraging benefits of the
law that we have witnessed in my home state of New York.
In New York, over 450,000 individuals applied for coverage
in the marketplace during the ACA's third open enrollment
period. As of 2015, the ACA has provided community health
centers grantees in New York with over $445 million in funding
that offers a broader array of primary care services, extends
hours of operations, hires more providers, and develops
clinical spaces.
The nationwide uninsured rate continues to drop as the CDC
reported last week. In New York State alone, the number of
uninsured dropped by over 350,000 individuals between the years
2013 and 2014. New Yorkers, like all Americans, have seen
substantial benefits because of this law, and it is indeed
reassuring to know that our work has allowed for these results
to impact favorably those in New York.
If I could continue on now with the issue of premium
increases that I was hearing from the last individual, ever
since the Republicans gained the majority in the House they
have been sounding the alarm on the potential for skyrocketing
premiums resulting from the reforms of the Affordable Care Act
and the fact is that we have not seen this happen.
In fact, the nonpartisan Congressional Budget Office, or
CBO, made predictions about premiums around the time of the
ACA's passage, and so to Administrator Slavitt I ask, did CBO
predict that average premiums for 2016 would be higher than
what the insurers actually charged this year?
Mr. Slavitt. That's correct.
Mr. Tonko. And why do you think premiums are coming down?
Why are they lower than was expected or projected?
Mr. Slavitt. I think that in some cases the premiums are
lower because there's been good competition and good innovation
and I think that's been a terrific and welcome part of the
marketplace. And I think there's other occasions where the
premiums were priced too low because I think no one knew
exactly what things would cost, and therefore I think as a
result we'll see more increases this year than we have in the
past.
Mr. Tonko. While those early reports have suggested that we
may see those higher premiums in 2017, and why, can you explain
why that might be the case? Why would they be higher?
Mr. Slavitt. I think there's two principal reasons and most
of them--and the good news, I think, is a lot of these really
are centered on one-time effects. One is that by design the
reinsurance that supported the marketplace expires January 1,
2017, so there will be a meaningful increase just from that
alone.
And then secondly, I think now that you have insurance
companies that have a couple years' worth of data on what
things actually cost they can use that information to price
appropriately. And I'd like to remind people that as a country
this is the very first time we have said to people that if you
are sick we will take care of you and we will allow you to buy
insurance anyway. No one knew when we entered into this exactly
what that would cost, but the great news is we're doing it.
And no one likes to see costs go up and I don't think
they're going to continue to go up beyond this year very
significantly, on a large part because medical trends in this
country are still at historic lows, but we would do something
significant. We've got more work to do. We can do better. If
Medicaid expands we'll do even better, and I look forward to
continuing to work through this.
Mr. Tonko. So in a sense there is like an outlier effect
that impacted 2017, and would you expect 2018 to be different?
Mr. Slavitt. Far be it from me to predict the future, but
2018 will probably be a more normalized year and more in line
with where past years have been the first couple of years.
Mr. Tonko. OK. With that----
Mr. Green. Mr. Chairman, could the gentleman yield me your
last 10 seconds?
Mr. Tonko. Sure, absolutely.
Mr. Green. Thank you, Paul.
Our colleague from Oklahoma, I meant to try and get time
there. Blue Cross requested 45 percent. Mr. Slavitt, has that
been considered by the state of Oklahoma or by CMS? Isn't that
a request and it is not an actual increase?
Mr. Slavitt. Yes. I'm not sure exactly where that stands at
this point. Yes.
Mr. Green. OK. Although I normally agree with Mr. Markwayne
Mullin except on the football field but when our colleges play
each other, so I will mention it to him later.
Mr. Tonko. OK, with that I yield back, Mr. Chair.
Mr. Pitts. The chair thanks the gentleman and now
recognizes the gentleman from New York, Mr. Collins, 5 minutes
for questions.
Mr. Collins. Thank you, Mr. Chairman. Before I ask Mr.
Slavitt a couple of questions I would like to just maybe
briefly for the committee highlight some of the latest, very
troubling news on the Affordable Care Act as it impacts western
New York, the area of Buffalo that I represent.
So in August, a month ago, Governor Andrew Cuomo's
administration announced that the health insurance premiums for
those on the state's Obamacare exchange will increase--this is
after review--an average of 16.6 percent next year for over two
million people enrolled in the program, many of them in western
New York. Now I did say average. Some of the plans have already
now been approved with a 29 percent increase and even 89
percent for one plan.
Now at the same time, the individual mandates compelling
Americans to buy these health insurance plans with high
premiums we are also continuing to see in our area big increase
in deductibles and insurance companies facing multi-million
dollar losses, terminating plans. So I am not sure how Mr.
Slavitt could say he thinks this may be an outlier year.
We are not seeing any of those trends that wouldn't
continue on into the future. I don't think the President, I
don't think anyone at CMS ever will acknowledge what western
New Yorkers are living day to day, and that is the Affordable
Care Act, Obamacare, is fundamentally flawed. It can't be fixed
and is imposing unsustainable, ever-increasing costs on
Americans including my western New York constituents. Now
perhaps the next administration will have a better
understanding of the health care marketplace, the plight of the
middle class, and we can finally get rid of this unaffordable
plan.
But Mr. Slavitt, I would like to speak to you about an
often overlooked aspect of the Affordable Care Act, a provision
that many New Yorkers didn't know existed until they were
kicked off their plans last year, kicked off in November last
year.
So last October, 200,000 New Yorkers were informed out of
the blue that they would be kicked off Obamacare's CO-OP Health
Republic and forced to find a new plan immediately. This CO-OP
was propped up by more than $265 million of squandered taxpayer
funding and lasted less than 2 years. The Health Republic of
New York had the highest enrollment numbers in the nation so
this wasn't a low enrollment problem, yet they lost 35 million
in 2014, 53 million in the first half of 2015, basically the
CO-OP was never going to be able to operate properly, and
despite all these warnings and losses and losses, CMS neglected
to even place the CO-OP in a corrective action plan.
There is a couple words that come to mind--negligence,
incompetence. So I guess, Mr. Slavitt, my first question is
they weren't put into a corrective action plan, so if they are
not what was the purpose of even having something we called
corrective action plans?
Mr. Slavitt. So certainly, and I will acknowledge that it's
no secret that many of the CO-OPs across the country, not just
New York, faced significant financial challenges. These are,
you know, businesses that compete against much larger companies
with limited capital bases and they have very little cushion
for error.
And I think in the case of New York, they, in the beginning
of 2015, if I have my timing right I thought they were in a
relatively good financial position and saw losses mount as
claims costs came in throughout the year, I would say even more
aggressively than any plan we could put on paper. I had a whole
team up in New York working with the CO-OP and working with the
state. In fact, I think our auditors were ones that were
pointing out some of the problems to the CO-OP.
Mr. Collins. Now I mean, let me just say you can't defend
the indefensible. I hear you try. But, you know, Mr. Slavitt,
even after this what CMS did was even more egregious. They
forced current plans to take those people that were kicked off.
They told those plans they had to accept them at the low
pricing that Health Republic was charging, in November when
many of them had already hit deductibles, and the current
health plans then suffered millions upon millions of dollars of
additional losses because CMS said you have got to take these
people. I am sorry their deductibles are burned out. You can
only charge them what the low rates were to begin with.
And so what we ended up with, and I will use the words
again, after losses and losses and them not being placed, it
was negligence and incompetence of CMS which hurt taxpayers,
hurt participants and hurt other health insurance companies,
something I call a lose-lose-lose, and that to me was
unacceptable. I yield back.
Mr. Pitts. The chair thanks the gentleman and now
recognizes the gentleman from California, Mr. Cardenas, 5
minutes for questions.
Mr. Cardenas. Thank you very much. I have a bit of a
different narrative coming from the state of California as to
what the Affordable Care Act has done for millions of
Californians. I don't have time to speak to the tens of
millions of Americans across America who are in a better
position with their access to health care that they didn't have
before, but that having been said the Affordable Care Act has
improved millions of lives in my state.
For example, we have been able to expand Medicaid with over
three million Californians having gained access to Medicaid or
CHIP since 2013. I know you are not allowed to applaud in this
room, but I am sure you are applauding inside. As of April of
this year, 70 percent of Californians who were previously
uninsured before the Affordable Care Act now have quality,
affordable health insurance because of the Affordable Care Act.
Medicare beneficiaries in California have saved more than
1.2 billion on prescription drugs because of the Affordable
Care Act. The expansion of preventive services with no
deductible or copay under the Affordable Care Act allowed more
than 3.6 million Californians with the Medicare to access
preventive care services in 2014 alone.
I am pleased with the progress that has happened in
California, but yet at the same time any time a law is passed--
and with all due respect the Affordable Care Act is a product
of the legislative bodies of the United States of America. And
every time we have passed laws--I personally have been passing
laws for 20 years both at the state, local, and here at the
national level and I have never, ever written a law myself nor
have I ever seen any one of my colleagues that I have served
with in the last 20 years, Republican or Democrat, pass a
perfect law that doesn't need some changes subsequent to the
initial passage.
It is unfortunate I believe that we have a Congress of the
United States, the majority parties that want to just tear down
this law. It is unfortunate. What we should be doing is looking
at the disparities and the things that need to be fixed. I know
some of my colleagues on the other side of the aisle have been
talking about some of those things, but it is one thing to just
point out flaws and then throw up our hands and say, oh my
gosh, isn't this horrible.
That is not our job as legislatively elected people,
democratically elected individuals who are supposed to be
responsible and make sure that we fix things when we see
something wrong. And it is unfortunate that we haven't advanced
but very small, small minor changes to the Affordable Care Act
through the legislative process.
I do agree that there are many changes that need to be
made, but I am appalled at the idea that we take opportunities
like today to just say that this is wrong and it needs to be
repealed. That is not the case. I for one in a portion of my
life when I was a boy lived in a household where we didn't have
access to health care. And what that meant was that my mother
would give me some aspirin, send me to bed, and literally pray
that I would wake up the next day feeling better. And if I
didn't, what happened was my family with my hardworking father
providing for 13 people, 11 children and him and my mother,
every single day would go to work.
But because we didn't have health care coverage our only
alternative was to show up in the emergency room when we
thought somebody just might die. Because of the Affordable Care
Act, now over 20 million people in this country who were in
that situation literally overnight are no longer in that
situation. And the number of people who are getting true access
to health care is in fact growing.
That is what the Affordable Care Act is about. One life at
a time through a massive law, thousands of pages that yes, it
does have flaws. But the atrocity of the Affordable Care Act is
subsequent to that law being enacted that we as a legislature,
collectively, are not making the necessary changes that we all
can easily identify.
It is embarrassing that in the most capable country in the
world, in the most powerful elected bodies in the world that we
effectively have done almost nothing to improve the health care
of Americans since this law has been passed. I yield back.
Mr. Pitts. The chair thanks the gentleman and now
recognizes the vice chair of the Health Subcommittee, the
gentleman from Kentucky, Mr. Guthrie, 5 minutes for questions.
Mr. Guthrie. Thank you, Mr. Chairman. And I want to follow
on that. Governor Bevin is actually trying to take a program
that he inherited that was a hundred percent federal taxpayer
paid for now the state has got to start putting money into the
program and trying to make it work. He is trying to make the
improvements that people say, well, Republicans over here--it
is some political hit. He is actually trying to put a program
together that worked.
I heard my colleague earlier talk about Kentucky and I
heard him speak earlier back home during the break. And I went
and met, spent hours with Kentucky's Medicaid Task Force and
tried to figure out exactly what they are trying to do and what
they are trying to do is make a program work.
Now you cited a study, we could continue to cut
universities and education and move that money into Medicaid,
hire people on the short term and create jobs in health care
but it is not for long-term sustainability of our state. And so
what Governor Bevin is trying to do is trying to treat the
expanded population of able bodied, not traditional Medicaid of
frail, elderly, disabled people that are chronically ill, he is
trying to take able bodied and treat them more like traditional
insurance.
And Mr. Slavitt, is it unreasonable to treat able bodied,
non-traditional Medicaid, is it unreasonable to have a Medicaid
program set up for them in an expanded state that treats it
more like traditional insurance? That is what Governor Bevin is
trying to do. Is that unreasonable?
Mr. Slavitt. So I'm going to try to not get into commenting
on the status of this waiver request given that we are just
open for a public comment period and it would be inappropriate
for me to do that.
Mr. Guthrie. OK. I was wondering a couple of things. A
couple of things that I have heard my colleague from Kentucky
call a poison pill, he says able bodied, not traditional
Medicaid spent in Medicaid--should pay a premium that could be
up to $15 a month. We have heard people talk about paying 800,
900, $10,000 a year--at $15 a month.
The other one is if you are able bodied that you have to
have a community engagement requirement. Go to work for 20
hours a week, go to do a service project for 20 hours a week or
go to school for 20 hours a week because there is an
ideological difference as my friend from Kentucky said earlier.
One is, 25 percent of Kentucky is on Medicaid. The other
ideological difference is let's create a system and a Medicaid
program where people were transitioned off so they can improve
themselves, go to school, become productive and move forward.
And that is exactly what Governor Bevin is trying to do.
And if that is unreasonable to CMS, if that is unreasonable to
my colleague from Kentucky, I know it is not unreasonable to
the majority of Americans that people who receive something for
free should have--should, one, to improve themselves have an
education requirement at least to move forward and that is what
Governor Bevin is trying to do.
I want to switch to one other state real quick. In
Louisiana they just expanded Medicaid. This started July 1st.
But in Louisiana they also are allowing people that are
currently into the exchange if they want to continue in the
exchange they can continue in the exchange even if they are
Medicaid eligible.
And I have, if I could submit to the record The Advocate,
which is a Baton Rouge newspaper, and I will quote from it. It
says the State says that people who bought individual policies
through the federal marketplace but now qualify for Medicaid
under state expansion can keep their Obamacare plans if they
prefer them over Medicaid. They just have to keep paying their
premiums.
Mr. Slavitt, is that correct that if you qualify for
Medicaid you can maintain your Obamacare premium subsidized in
the marketplace?
Mr. Slavitt. I'd have to look at the details of that. I'm
not sure.
Mr. Guthrie. Well, when will CMS explicitly explain the
rules of the road and how do we know CMS isn't inappropriately
double-dipping? They could be Medicaid qualified and be
receiving premiums. I don't think within the statute allows
them to do that.
Mr. Slavitt. Yes, let me check on that. I hadn't seen that
article.
Mr. Guthrie. OK. Another one----
Mr. Pitts. Without objection, that article will be placed
in the record.
[The information appears at the conclusion of the hearing.]
Mr. Guthrie. Thank you. So moving on to another topic, in
February of this year, Secretary Burwell said CMS would check
whether exchange enrollees with subsidies are enrolled in
Medicaid or CHIP. She said I quote, notices will be--let me
start this over--whether exchange enrollees with subsidies are
also enrolled in Medicaid or CHIP. And she said notices will be
sent in May to consumers who are enrolled in both. Has that
moved forward?
Mr. Slavitt. Yes, it has.
Mr. Guthrie. Did that go forward in May or--there is a New
York Times article has talked about it happening in August.
Mr. Slavitt. I'm not sure of the date.
Mr. Guthrie. You don't have any consumers that have been
disenrolled in Medicaid or exchange coverage as a result of
this?
Mr. Slavitt. I don't know how many, but I'd be happy to get
back to you at your office.
Mr. Guthrie. OK, thank you. Any savings a taxpayer would
appreciate.
Mr. Slavitt. Yes.
Mr. Guthrie. Thank you very much and I yield back.
Mr. Pitts. The chair thanks the gentleman and now
recognizes the gentleman from New York, Mr. Engel, 5 minutes
for questions.
Mr. Engel. Thank you. Thank you, Mr. Chairman. Thank you,
Mr. Green. Thank you for holding today's hearings.
Let me say this in terms of an overview. You know, any
major bill or major undertaking that has been passed by
Congress needs to be tweaked once we see how effective it is,
what we see, when we see what the problems are. It is true with
Medicaid and Medicare, it is true with any big bill, and that
is true with the Affordable Care Act.
The way I look at it, the problem is our friends in the
majority don't want to fix it. They want to break it so it will
go away. There are some problems with it, there is no doubt
about it. But if we didn't vote to repeal it 63 times and voted
to improve it 63 times I think we would have a much better law.
And having been on this committee when we were first
drafting this law, I know that there are many different, you
know, opinions and there are many things that I and others
thought should have been put into the bill that were not put
into the bill because we took the Senate-based bill and we
thought we would be able to negotiate it, and then through
circumstances we couldn't do it.
So I would just say that I think, they say if it ain't
broke, don't fix it. Well, it is a little bit broken and it can
be fixed and we should fix it instead of trying to kill it. So
to echo Mr. Pallone, I am mystified by Republican attempts to
paint a rosy picture of the insurance market prior to the
passage of the Affordable Care Act.
Let's go back and let's remember what it was like denying
insurance to people with preexisting conditions, forcing
certain populations to pay outrageous rates, applying lifetime
limits to care. Before the ACA this was standard operating
procedure in the individual insurance marketplace and it was
incredibly harmful to our families, friends and constituents.
And again not to mention some popular things like keeping your
child on having insurance on your policy until he or she is 26
years old.
So we have come a long way. An estimated 20 million
Americans have gained health insurance through the ACA. My
state of New York, there are some problems but basically it is
going very, very well and we can rest easier knowing that a
sudden illness won't wreak havoc on our finances. And 129
million Americans with preexisting conditions like asthma or
diabetes can no longer be turned away or charged more on
account of their health status. More than 39 million seniors on
Medicare have received free preventive services without copays
thanks to the Affordable Care Act's preventive services
benefit.
And like any major legislation, as I said, it is not
perfect but we have made a world of difference for millions of
Americans who were once denied coverage or who could not afford
it. So, you know, I just think that we should do right by the
American people and stop trying to turn this into a partisan
issue. There are a lot of good ideas on both sides of the
aisle. You know, when I go back to my district I hear people
telling me, can't you guys get along? Can't you guys work
together? The American people want to see us work together, not
lurch from one thing to another.
So let me ask Mr. Slavitt--thank you for being here today.
I think as I mentioned before New York provides a good example
of what is possible when the federal government has a willing
and enthusiastic partner in ACA implementation. Every county in
New York has seen its uninsured rate decline, and on average
individual premium rates for qualified health plans are almost
50 percent lower than they were before ACA implementation.
So would you talk about what your experience has been in
states that have obstructed efforts to implement the ACA versus
your experience in states that have been good partners like New
York?
Mr. Slavitt. Yes. So I think there's a fairly well
documented difference in the uninsured rate now and
Congresswoman DeGette, I think, referred to this, where states
that have expanded Medicaid have lower rates of uninsured and
number of benefits than the other states.
I might also just comment, Congressman Engel, on your
earlier comment about working together, you know, my
understanding of the history of Medicare very much falls in
line with what you said, which is that there were a number of
efforts that were required after Medicare Advantage passed to
find the things that weren't working as well as they should and
to amend them.
And as a result I think we have one of the most popular,
longstanding bedrock programs today in our country in Medicare.
And so I think we have the same opportunity without a doubt
here to not just do what we've done but continue to do better.
And we look forward to working with the Congress on this.
Mr. Engel. If I might, thank you. You noted during your
testimony that CMS, and I quote you, has learned more about
what kinds of outreach are most effective as you seek to reach
out to the remaining Americans who are uninsured and eligible
to enroll in marketplace coverage. So I am pleased to hear that
CMS is drawing upon lessons learned to reach Americans who
remain uninsured.
Can you talk about why targeted outreach is so important
and how might we expect these efforts to affect the risk pool
of enrollees?
Mr. Pitts. The gentleman's time is expired.
Mr. Engel. OK. I will take it in writing.
Mr. Pitts. Please respond in writing.
Mr. Slavitt. I'll be happy to do that.
Mr. Engel. Thank you, Mr. Chairman.
Mr. Pitts. The chair thanks the gentleman and now
recognizes the gentlelady from North Carolina, Mrs. Ellmers, 5
minutes for questions.
Mrs. Ellmers. Thank you, Mr. Chairman. I thank the panel
for being here today.
Mr. Slavitt, I would like to go back to some of the issues
with premium increases that are projected for 2017. There has
been some discussion here today about the projected cost
increases for 2017 when it comes to the premiums, and I would
just like to shed some clarity on it. And I know that you feel
as strongly as we in Congress do about transparency and making
sure that information to consumers is readily available.
In North Carolina, one of the top insurers has projected
that there may need to be about a little less than 20 percent
increase in their premiums, and I have heard from some of my
colleagues here substantially larger increases in premiums. And
I really do believe that this is something that even though we
in Congress understand it because we have the ability to go to
the, you know, to get that information and our staff are able
to do that, the average person, the average American really
doesn't.
So I would like to understand what that process is. For
instance, in the discussion about the Oklahoma increases you
had basically said that you weren't sure that that had been
determined yet. At what point will Oklahoma's increases be
determined and how will the rest of America know each state's
premium increases?
Mr. Slavitt. Yes, thank you, Congresswoman. So right now,
you know, and each state is on a slightly different schedule,
states are going through a rate review process and each state
does it a little bit differently which is why it's hard to
generalize. And they're in the process of reviewing the rates
and then they'll finalize and approve them.
Most of the states, I can't think of one that doesn't, but
most of the states make that information public immediately
within their states as that happens and then they get reported
in a number of studies. So I think they've been quite visible,
but I can get back to you if you have any specific questions
about states.
Mrs. Ellmers. Well, I am concerned and I am wondering if
CMS, if you actually at some point post this information, you
know, so that it is readily available. And as far as a date, I
know that you said that the process is being played out right
now. Correct me if I am wrong, you said November 1st is the
beginning of the enrollment period for the Affordable Care Act,
so will these numbers be known by November 1st?
Mr. Slavitt. Yes. Consumers will have access to this, the
information beforehand. What we typically do is we open the Web
site up early so that even before November 1st consumers can
get a sense of what things cost and as a result the general
public also has access to that information.
Mrs. Ellmers. OK. So just for clarification purposes, any
American who is ready to sign up or start looking at insurance
for next year they can know that CMS is going to have that
information by November 1st.
Mr. Slavitt. Yes. That's what we've done historically, yes.
Mrs. Ellmers. In the past, OK. And I just, you know, for
the purposes of making sure this information is readily
available, I have dropped a bill, 5960, which is basically the
Consumer Healthcare Insurance Transparency Act, to make sure
that we are making that message known to CMS that we would love
for that information to be out there for consumers by November
1st. And I would like to see that happen and I hope that we
will be able to do that again for those same purposes that you
believe in which is consumer transparency.
In the remaining time that I have I would like to ask, for
the insurance companies that have come forward who have, I
mean, you know, three major insurance companies have said that
they are backing out of the Affordable Care plan or limiting
the number, the most recent being Humana, and others who have
discussed the possibility of this, what do you say to that? I
mean, if this is working within a manner where only minor
tweaks need to be made which, you know, my colleagues, Democrat
colleagues continue to say that we just need to make it better,
this really doesn't seem like it is getting better. So what do
you say to that?
Mr. Slavitt. Yes. Well, I think one thing we all have to
recognize is that it's not only change for us, it's not only
change for consumers, it's change for these insurance companies
as well. The business model is different in the way that they
historically operated where they would essentially be able to
assess people's health before they would write policies has
gone away.
And so, you know, insurance companies are adjusting and I
think they're all--it's hard to generalize, all adjusting
differently. Many, many companies are doing that well and doing
it successfully. Many, as it's been public as you pointed out
Congresswoman, have retrenched. Even those that have retrenched
a little bit are still committing hundreds of millions of
dollars of capital to do so, but they're doing it at different
paces. And I think that's just an acknowledgment of the kind of
transformation that I think everyone has to go through.
Mrs. Ellmers. Thank you so much, and I yield back.
Mr. Pitts. The chair thanks the gentlelady and now
recognizes the gentlelady from Indiana, Mrs. Brooks, 5 minutes
for questions.
Mrs. Brooks. Thank you, Mr. Chairman. Administrator
Slavitt, when you came before the Oversight Committee on
December 8, 2015, you came to testify about the sustainability
of the state-based exchanges. And at that hearing you testify,
and I quote, over 200 million of the original grant awards have
already been returned to the federal government and we are in
the process of collecting and returning more, end of quote.
And in fact, there was significant media attention that
went out that day indicating that CMS had recouped, recouped
over 200 million from failed state exchanges. The committee
then issued a report in May, and following the release of that
report you responded to the committee stating that in fact the
CMS had recouped $1.6 million from the 17 state-based
exchanges, not the 200 million initially stated during the
hearing. And you clarified that it was simply an estimate of
funds that CMS had de-obligated from states that didn't
establish the exchanges.
But could you please explain how CMS arrived at that
estimate initially when you came to testify in December,
because it is a pretty significant discrepancy.
Mr. Slavitt. So I believe that the transcript shows that I
was asked a question about 5 billion-plus of funds that were
sent out total, and at that time I estimated that of those 5
point, I think it was 5 billion, 200 million or so was being
covered. In fact that number is now over 300 million.
Since that time I've got a letter from the subcommittee
chair who said that wasn't, in fact, the question he thought he
was asking. He thought he was asking something different. So we
clarified that he was in fact asking about something different.
And I certainly will take responsibility for making sure that
I'm clear, because when I come before these committees whether
the news is good or bad my job is to tell it straight. And if I
don't do that then I need to do better, and I will.
But, so there was a miscommunication. I will say that as
for actual numbers, you know, we just, I believe, received a
check for about $14.2 million on funds recovered from a state
that did have trouble, so it's actually, it's more updated than
the 1.2 million and so that continues ongoing. And we do keep
the committee updated. I'm happy to continue to do that.
Mrs. Brooks. And so the discrepancy was with respect to
characterization of recouping versus de-obligating; is that
correct?
Mr. Slavitt. I think that's right.
Mrs. Brooks. And so the recoupment was actually 1.6 million
at that time?
Mr. Slavitt. It's greater than that today.
Mrs. Brooks. And can you tell me today, and thank you. That
was my next question. Can you please talk to me about an update
on the amount recouped from the 17 state-based exchanges today?
Mr. Slavitt. I don't have the exact figures with me, but I
know that it's at least higher by about $14 million because we
just received a check back from one of the states for over $14
million. So, but I can get you a complete accounting.
Mrs. Brooks. And which state is that?
Mr. Slavitt. The state of Maryland.
Mrs. Brooks. So State of Maryland just wrote a check back
for 14 million in addition to the 1.6 million, and at the time
the 1.6 million, do you have any idea how many states that had
come from, the 1.6 million?
Mr. Slavitt. I'm not sure exactly. It's three or four,
something like that.
Mrs. Brooks. OK. And so the other, then, you know, 12 or so
states, can you talk with us about what is being done with
respect to the recoupment of the funds?
Mr. Slavitt. Recoupment of which funds?
Mrs. Brooks. The recoupment that we initially began talking
about. Are you expecting to receive additional funds from other
states?
Mr. Slavitt. So we expect to recover funds that are
improperly spent and that we can document are improperly spent.
We, with the help of the OIG who's been very helpful in
providing analytics, you know, go out and look for and assess
when funds have been improperly spent. But, and those funds we
do recover when, and we also, I should say, review many funds
before they are spent. And so we don't need to go through a
collection process if we required an approval process which we
put in place as well.
Mrs. Brooks. And the 14 million that Maryland just
returned, was that for improperly spent funds?
Mr. Slavitt. So that was for their technology vendor, was
essentially the state got into a dispute with them for
overcharging them or wasting technology spending. They settled
the lawsuit and the 14 million was the down payment on the
federal share of that funding. I think the total that will come
in from Maryland is 32 million based on that specific thing.
Mrs. Brooks. Thank you, my time is up. However, I would be
interested in the committee receiving a report on the status of
where the recoupment of funds is today from all of the states.
Mr. Slavitt. We will update you.
Mrs. Brooks. Thank you. I yield back.
Mr. Pitts. The chair thanks the gentlelady. I would like to
clarify that Mr. Slavitt made the $200 million estimate in his
opening statement not in response to a question.
That concludes the first round of questions of members
present. We will go to one follow-up per side and I will start.
I recognize myself 5 minutes for that purpose.
To follow up on Mr. Griffith's questions about risk
corridors, Mr. Slavitt, you said that there is an obligation to
make insurers whole. My question is how does CMS plan to pay
for the risk corridor obligation to make insurers whole under
that program because there are no appropriated funds to do so?
Mr. Slavitt. I can't speak to that directly today, but I
mean, this is as you know as I've said earlier the subject of a
lawsuit, so I think we'll let that settle out.
Mr. Pitts. Well, this is not a question for DOJ because not
all insurers are in the litigation. And so the question is how
do you plan to pay for the obligation when there are not
appropriated funds to do so?
Mr. Slavitt. Well, I'll get back to you. I'll consult with
OMB and get back to you.
Mr. Pitts. Thank you. Another question, Mr. Slavitt, the
committee's investigation into the CO-OP failures examined the
negative impact of the 17 CO-OP closures and what they had on
individuals enrolled in health insurance plans and the closures
created uncertainty as individuals were forced to find new
health insurance coverage.
In some cases with mid-term shutdowns, individuals had to
ask fast in order to avoid gaps in coverage. Based on this
finding, one of the recommendations from the committee's report
released today is that the individuals be exempt from the
individual mandate penalty if their coverage under a plan
offered by a CO-OP is terminated due to the failure of a CO-OP.
We believe this recommendation is common sense as we should
not be punishing individuals who make a good faith effort to
comply with the individual mandate as a result of their plan no
longer being offered. Does CMS agree with this recommendation?
Mr. Slavitt. Well, we didn't receive that report until late
in the evening last night so I haven't had time to study it in
detail, but we will.
Mr. Pitts. Will you please respond to that question once
you view the report?
Mr. Slavitt. Will do.
Mr. Pitts. Thank you. That is the only follow-up questions
I had. The chair will recognize the ranking member, Mr. Green,
for his follow-up.
Mr. Green. Thank you, Mr. Chairman, and I have two issues.
One, my colleague from Denver, Colorado, earlier mentioned the
GAO study. If you would listen to all the questions on the
Republican side you would think the people are up in arms about
how bad the Affordable Care Act. But the GAO study that she
mentioned was that there were studies in Colorado, Indiana,
Montana, North Carolina and Vermont, and consumers, sister
shareholders concluded that most exchange customers are
satisfied with their coverage despite longstanding issues of
out-of-pocket expenses, health literacy and access.
Mr. Bagdoyan, is that something the GAO was going to
comment on, that study that was released on Monday?
Mr. Bagdoyan. In what sense, Mr. Green?
Mr. Green. Oh, just one, why you only did five states,
because a lot of us would like to see the consumer feelings on
the Affordable Care Act. I mean, you know, of course we trust
the GAO for your work.
Mr. Bagdoyan. Unfortunately I was not responsible for
running that engagement that resulted in that report, but we'll
be happy to get back to you in writing with an answer as to why
those----
Mr. Green. OK, I appreciate it.
Mr. Bagdoyan. Sure.
Mr. Green. We wasted countless hours in this committee, and
my Republican colleagues criticize provision after provision of
the Affordable Care Act and root for its failure. We should
instead be using this time to build the law's successes by
improving quality affordable care now available to our
constituents.
Administrator Slavitt, I applaud CMS's diligent work to
implement the law and I know your agency has taken steps where
possible to make administrative fixes, but some of the fixes
require legislative action. Unfortunately, my Republican
colleagues are only interested in undermining, weakening or
repealing the law.
Mr. Slavitt, what steps has the Administration taken to
help ensure the long-term success of the ACA, but more
importantly, I would like to ask if you know what steps should
be taken by statute for Congress to do to help make the
Affordable Care Act moving forward and to be more successful?
And again I don't think in the 2 or 3 minutes or so you
have, but I would be glad if you could get back with us----
Mr. Slavitt. OK.
Mr. Green [continuing]. And CMS could, one, list what CMS
has done, but then also say these are issues that you have that
Congress needs to act on them so we could fix it so we could
cover more people.
Mr. Slavitt. We'll be glad to do that. Thank you.
Mr. Green. OK. Mr. Chairman, I thank you and I yield back
my time.
Mr. Pitts. The chair thanks the gentleman. That concludes
the questions of the members present. We will have some follow-
up questions in writing and other members who maybe were not
able to attend may have questions in writing. We will provide
those to you. We ask that you please respond promptly.
And members should, they have 10 business days to submit
questions for the record, so members should submit their
questions by the close of business on Wednesday, September 28.
Another very informative and productive hearing, thank you very
much for your expertise and without objection, the hearing
stands adjourned.
[Whereupon, at 12:52 p.m., the subcommittee was adjourned.]
[Material submitted for inclusion in the record follows:]
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