[Senate Hearing 115-585]
[From the U.S. Government Publishing Office]
S. Hrg. 115-585
EXAMINING CMS'S EFFORTS TO FIGHT MEDICAID FRAUD AND OVERPAYMENTS
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HEARING
before the
COMMITTEE ON
HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS
UNITED STATES SENATE
ONE HUNDRED FIFTEENTH CONGRESS
SECOND SESSION
__________
AUGUST 21, 2018
__________
Available via the World Wide Web: http://www.govinfo.gov
Printed for the use of the
Committee on Homeland Security and Governmental Affairs
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
U.S. GOVERNMENT PUBLISHING OFFICE
34-574 PDF WASHINGTON : 2019
COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS
RON JOHNSON, Wisconsin, Chairman
JOHN McCAIN, Arizona CLAIRE McCASKILL, Missouri
ROB PORTMAN, Ohio THOMAS R. CARPER, Delaware
RAND PAUL, Kentucky HEIDI HEITKAMP, North Dakota
JAMES LANKFORD, Oklahoma GARY C. PETERS, Michigan
MICHAEL B. ENZI, Wyoming MAGGIE HASSAN, New Hampshire
JOHN HOEVEN, North Dakota KAMALA D. HARRIS, California
STEVE DAINES, Montana DOUG JONES, Alabama
Christopher R. Hixon, Staff Director
Gabrielle D'Adamo Singer, Chief Counsel
David N. Brewer, Chief Investigative Counsel
Jerome F. Markon, Senior Policy Advisor
Margaret E. Daum, Minority Staff Director
Brandon E. Reavis, Minority Counsel
Courtney C. Cardin, Minority Counsel
Laura W. Kilbride, Chief Clerk
Thomas J. Spino, Hearing Clerk
C O N T E N T S
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Opening statements:
Page
Senator Johnson.............................................. 1
Senator McCaskill............................................ 2
Senator Peters............................................... 14
Senator Hassan............................................... 17
Senator Carper............................................... 20
Senator Heitkamp............................................. 23
Senator Daines............................................... 25
Senator Jones................................................ 28
Senator Hoeven............................................... 31
Prepared statements:
Senator Johnson.............................................. 47
Senator McCaskill............................................ 48
WITNESSES
Tuesday, August 21, 2018
Hon. Seema Verma, Administrator, Centers for Medicare and
Medicaid Services, U.S. Department of Health and Human Services 7
Hon. Eugene L. Dodaro, Comptroller General of the United States,
U.S. Government Accountability Office.......................... 9
Alphabetical List of Witnesses
Dodaro, Hon. Eugene L.:
Testimony.................................................... 9
Prepared statement........................................... 66
Verma, Hon. Seema:
Testimony.................................................... 7
Prepared statement........................................... 52
APPENDIX
Health Care Spending Chart....................................... 88
Medicaid Spending Chart.......................................... 89
Improper Payments Chart.......................................... 90
Information submitted by Mr. Dodaro.............................. 92
Responses to post-hearing questions for the Record:
Ms. Verma.................................................... 93
EXAMINING CMS'S EFFORTS TO FIGHT MEDICAID FRAUD AND OVERPAYMENTS
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TUESDAY, AUGUST 21, 2018
U.S. Senate,
Committee on Homeland Security
and Governmental Affairs,
Washington, DC.
The Committee met, pursuant to notice, at 10:02 a.m., in
room SD-342, Dirksen Senate Office Building, Hon. Ron Johnson,
Chairman of the Committee, presiding.
Present: Senators Johnson, Hoeven, Daines, McCaskill,
Carper, Heitkamp, Peters, Hassan, Harris, and Jones.
OPENING STATEMENT OF CHAIRMAN JOHNSON
Chairman Johnson. Good morning. This hearing will come to
order.
I want to thank Administrator Verma and General Dodaro.
Well, we certainly appreciate you coming before us. This is
a follow up hearing to our June 27th hearing, where we really
explored the Government Accountability Office (GAO) report on
overpayments, primarily Medicaid, $37 billion, and we have the
Administrator here talking about some program initiatives she
announced in June. So we will have you testify, and then we
will have the General comment on how we can make these programs
kind of long-lasting.
I would ask consent that my written statement be entered in
the record,\1\ and I have a couple of charts that is in front
of everybody.
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\1\ The prepared statement of Senator Johnson appears in the
Appendix on page 47.
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Do the witnesses have the charts as well? It would be nice
if they did.
But just three charts kind of laying out the macro program
in terms of health care spending,\2\ and this is a modification
of a chart I have shown repeatedly that really lays out the--I
know this is a little more complex chart than I normally like
putting up, but it tells a pretty good story.
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\2\ The chart referenced by Senator Johnson appears in the Appendix
on page 88.
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The top line, the green line, is just an inversion of a
chart that shows what percent of health care spending is paid
directly by the patient. The fact that we have gone from about
21 percent in 1940 to 89 percent paid by other people--in other
words, less than 11 percent now is paid directly by the
patient. We have taken out the discipline of the free-market
system, and I think that is one of the reasons you see the
increase in health care cost.
But there is a very interesting series of articles in the
Wall Street Journal. They describe the American health care
system in 12 graphs. The most recent one was written by Joseph
Walker, and his chart really starts in 1970, and he just shows
the percent of total health care expenditures as a percent of
gross domestic product (GDP). And when you put these things in
similar scale, you see that they somewhat track.
But he points out he does it in 12 different time
increments, starting in 1970, shortly after the initiation of
Medicare and Medicaid, where back then, total health care
spending was around 5 percent of GDP. So over the next couple
of decades as Medicaid eligibility widened, you can just see
the increased expenditures as a percent of GDP.
Come around 1993, 1999 was the rise of health maintenance
organizations (HMOs), and you can actually see the curve
flatten out there for about 6 or 7 years. But then for whatever
reason--I cannot explain it, and by the way, this is not the
be-all-end-all in terms of what causes. Obviously, within
medicine, we can do a whole lot more things that obviously
increases expenditures as well, but again, this is just one
take on it.
You start seeing a rapid rise again right around the year
2000 when HMOs were starting to be moved away from by
providers. Hospitals began to merge. Again, the decline of
HMOs--and we also, in 2006, had the Medicare drug benefit,
which happens in that same timeframe, where you see a pretty
stark increase from somewhere of 12 percent of GDP to close to
17 percent, and then the recession hit. People did not have
enough money. Again, people do not have a lot of money, so
spending kind of leveled out. And then right around the
implementation of Obamacare, you see the curve start to
increase again.
But, again, I just thought that this was a pretty
interesting graph.
OPENING STATEMENT BY SENATOR MCCASKILL\1\
Senator McCaskill. Does the third-party payment include
insurance companies?
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\1\ The prepared statement of Senator McCaskill appears in the
Appendix on page 48.
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Chairman Johnson. Yes. This is insurance companies and
government.
Senator McCaskill. OK.
Chairman Johnson. So, again, the point there is when
consumers separate from the----
Senator McCaskill. So what you are saying is back when the
people were paying directly and did not have insurance, they
were paying 80 percent of the cost of their health care because
they did not have insurance?
Chairman Johnson. Right.
Senator McCaskill. And that now, they are not--they buy
insurance instead?
Chairman Johnson. Again, what I am saying, direct payment
for the product.
Senator McCaskill. OK.
Chairman Johnson. OK.
Senator McCaskill. But they are paying for insurance.
Chairman Johnson. Oh, but we pay for all this----
Senator McCaskill. Yes. OK.
Chairman Johnson [continuing]. Through taxes, through
insurance. OK. But, again----
Senator McCaskill. It is getting a little confusing because
third-party payment sounds like it is the government, and the
vast----
Chairman Johnson. Right.
Senator McCaskill. The majority of that is insurance
companies, private insurance companies.
Chairman Johnson. Right, which is why I am----
Senator McCaskill. Private free-market competitive
insurance companies, correct?
Chairman Johnson. Right, well, again, this is accommodation
of government and----
Senator McCaskill. I just want to make sure we are being
clear here that the third party is the ``free market..''
Chairman Johnson. Understand. That is why I am explaining.
The point I am making is when you separate the consumer of the
product from the direct payment of the product.
We care deeply what our taxes are. We care deeply how much
our insurance rates are, but when I go in to get a procedure,
the provider does not even know what it costs. The accounting
department does. The insurance guy knows. The Centers for
Medicare and Medicaid Services (CMS) knows, but the rest of us
are clueless.
Senator McCaskill. Correct.
Chairman Johnson. And, again, the results, we have gone
from 4 percent of GDP to about 17 or 18 percent, and it is just
going to continue.
So I generally make the point if we can reconnect the
consumer of the product to the payment of the product, bring
free-market disciplines back into health care as much as
possible, I personally think that would make a restraint.
Next chart.\1\ And this is just, again, the macro level. We
have seen this in our last hearing, the growth in Medicaid
spending.
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\1\ The chart referenced by Senator Johnson appears in the Appendix
on page 89.
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This chart shows in 2017, the Federal Government spent,
according to the Congressional Budget Office (CBO), about $430
billion. Total spending in 2017 is about $600 billion. You
project out another 10 years, CBO is estimating in 2027, the
Federal Government will spend $723 billion on Medicaid. Total
spending will be somewhere in the $1.1-$1.2 trillion. So,
again, it just shows why we need to control the cost of
Medicaid so that the people who really do need it, that the
funds are available.
And the final chart,\2\ then, is just the subject of this
hearing, to kind of bring this plane in for landing, the
improper payments. You can see were about $14.4 trillion before
the implementation of Obamacare. Now it is $37 billion. In my
own mind, I think the fact that States are being reimbursed 100
percent from Medicaid expansion is certainly one of the causes
of that when you take a look at the amount of ineligible
payments being made. One State in particular, California, it
just is screaming for greater controls, and that is really why
we have the administrator here.
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\2\ The chart referenced by Senator Johnson appears in the Appendix
on page 90.
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And, again, let me emphasize I really do appreciate the
initiatives that you have announced. We need a little more meat
on the bones there in terms of we need more audits, 50 State
audits, but in general, whatever these initiatives are,
whatever controls you put in place, I am hoping remain in
place. That this is not just a 1 or 2-year program or a one-
administration program. That we really do implement these
things long term, provide the control, because we simply cannot
afford to waste $37 billion out of this program. There are
people in need that really rely on this.
So, with that, I will turn it over to my Ranking Member,
Senator McCaskill.
Senator McCaskill. Thank you. Thank you, Mr. Chairman.
Thank you, Administrator Verma and Mr. Dodaro. Gene, thank
you always for being here and all the good work. I know you are
going to introduce your State auditors. You have told me you
had State auditors in the house. So I will let you introduce
them, but I am sending love to the State auditors. See, they
have important work they can be doing here, and I am glad that
we are going to cover that topic today. I think they are
underutilized as being our partners in accountability for the
Medicaid program.
Two months ago, we held a hearing to talk about the rate of
improper payments in the Medicaid program. I have said it
before, and I will say it again. This Committee has a
responsibility to ensure that the Medicaid program, which
provides vital health care to over 70 million Americans,
regardless of preexisting conditions, spends taxpayer dollars
appropriately and efficiently. This is true especially as
managed care increasingly demands a greater proportion of
Medicaid dollars.
In fact, both GAO and the Department of Health and Human
Services (HHS) Office of Inspector General (OIG) published
reports on continued weaknesses and program integrity risks and
Medicaid managed care. Clearly, there is a need for greater
transparency on how managed care organizations spend Federal
dollars and greater program integrity and oversight in Medicaid
in general.
Importantly, there is also a need to distinguish between
improper payments and outright fraud. I think often, we are
conflating those two terms, and when we throw out the figure
$37 billion and improper payments, I think the notion that is
conjured up in most Americans' minds is ``Oh my gosh, there are
$37 billion worth of frauds and cheats out there, and we are
somehow giving them money.''
That is not the case with improper payments. The reality is
that fraud accounts for only a portion of the total improper
payments, most of which result from provider screening and
enrollment errors.
Many times, the improper payments, once they are pointed
out, become proper payments because the error was just in the
enrolling of the recipient and information surrounding that,
not on whether or not they are actually entitled to the health
care benefits they are receiving.
We have to address this problem and distinguish between
beneficiary fraud and bureaucratic bungling. Those are two
different issues, and we should not use one to beat up the
other because the recipients are not deserving of the title
that somehow they are responsible for $37 billion in improper
spending.
Even as we discuss Federal efforts to prevent fraud in the
Medicaid program, we have to talk about other factors that lead
to negative health outcomes for Americans, particularly as we
look at health care spending. There are so many other issues
that are impacting the level of health care cost in this
country besides the viability of the Medicaid program. The
Medicaid program is not driving health care costs up. There are
a number of different factors, including misplaced incentives
and unbridled greed of the pharmaceutical industry.
First, we can fight back against skyrocketing prescription
drug prices. Earlier this year, I released a report--and I hope
you have read it, Administrator--that shows the average price
of the 20 most popular brand-name Medicare Part D program drugs
have risen 10 times the rate of inflation for 5 years running.
And last month, I released a second report showing that if
the Federal Government could negotiate directly on prices for
these drugs, like they do in every other country, except the
good old United States of America where the American people are
being asked to provide all the profits to these companies, the
taxpayers could save up to $2.8 billion a year.
Second, we can stop the over-prescription of opioids. For
too long, opioid manufacturers have used illegal marketing and
sales techniques to expand their market share and increase
dependency on powerful and awfully deadly painkillers.
We need to do more to ensure the perpetrators of the opioid
addiction crisis are held accountable. I would like us to
revisit the Drug Enforcement Administration (DEAs) ability to
hold the distributors accountable and stop the shipments that
are outside the bounds of reasonable before they occur, so we
are not sending thousands and thousands of pills to a community
that is very small.
Finally, we need to keep the consumer protections built
into the Affordable Care Act (ACA). In the latest attempt to
strip millions of Americans of their health insurance,
Republican Attorneys General (AG), including the Attorney
General of my State, have gone to court to take away every
single consumer protection in the law and the additional
payments that seniors get on prescription drugs to fill the,
``donut hole.''
This is decidedly not what the American people want. In
fact, as of 2016, an estimated 27 percent of adults under the
age of 65, 52 million Americans, had preexisting conditions
that would make it difficult, if not impossible, to obtain
affordable health care coverage if they did not have health
insurance at work.
I can tell you that when I talk about this issue in the
town halls of my State, even the reddest parts of my State
where I am not very popular, every head nods. The notion that
we are going to take away these consumer protections with
nothing in place to secure protections is outrageous.
You and I agree, Mr. Chairman, on the need to lower costs
in Federal health care programs, and you and I agree on
transparency in pricing.
I have told the story in this hearing many times. I am a
U.S. Senator. I had my knee replaced. Nobody could tell me what
it cost. I did this myself personally calling my doctor, the
hospital, the insurance company. I kept insisting on a number.
I finally got numbers from all three of them. Guess what?
None of them agreed on what it cost. I can go within a quarter
mile of my home in St. Louis and find the best cheeseburger,
know how much it costs, know how big it is, see pictures of it,
know how clean their bathrooms are, how good their service is,
but I cannot go online and find out what is comparable apples-
to-apples prices for a knee replacement and what the reviews
are of each facility and each doctor and how much I am going to
have to pay out of pocket. Why is that so hard? Why can we not
bring pricing--the American people are really good shoppers. We
cannot expect them to bring down the price of health care if
they have no idea what that price is.
The silos of profit are working overtime in this building
to keep us from busting these silos and letting the American
people decide whether or not they are getting a good deal on
their health care. I think that is some place that the Chairman
and I have 100 percent agreement, and I would love to work on a
bipartisan basis to see if we cannot bring transparency to
pricing within our health care system.
Thank you, Mr. Chairman.
Chairman Johnson. So let me give a quick answer to your
question. You asked why do we not know that? Because we are not
paying for it. The consumers are not paying for it directly.
Where they are in the private sector, for example, Walmart,
the State can look at, for example, a shoulder replacement.
Senator McCaskill. Well, I disagree with you.
Chairman Johnson. They are contracting with a particular
provider, and they know exactly what that cost--and that is the
private sector. But, again, they are the ones paying for it,
and so they actually know.
Senator McCaskill. No, we are paying for it with higher
insurance premiums.
Chairman Johnson. I know, but we are doing--when I say pay
directly for it.
Senator McCaskill. Yes.
Chairman Johnson. We are paying indirectly through taxes
and through insurance payments. Again, you do not have the
price transparency forced on them by the marketplace.
Postscript to my thing. I meant to mention this. Medicaid--
oh, by the way, the improper payments of Medicaid are a little
bit different than other improper payments in other agencies
because they are 99 percent-plus as all overpayment. They
represent 26 percent of all government improper payments, even
though Medicaid is about 9.6 percent of total Federal spending.
So, again, one of the reasons we are focusing on Medicaid
is it is just so out of whack in terms of its representation.
And oh, by the way, Medicare Part D providers do negotiate
with drug companies. So there is certainly drug----
Senator McCaskill. Not with the government.
Chairman Johnson. Yes. I mean, the providers do. The ones
that you actually contract to buy your drugs from, they do
negotiate prices. That is sometimes left out of the equation.
With all that being said, it is the tradition of this
Committee to swear in witnesses. So if you will both stand--
Senator McCaskill. We will quit debating and swear in the
witnesses.
Chairman Johnson. That is kind of fun, isn't it?
Do you swear the testimony you will give before this
Committee will be the truth, the whole truth, and nothing but
the truth, so help you, God?
Mr. Dodaro. I do.
Ms. Verma. I do.
Chairman Johnson. Please be seated.
Now I got to find my script. Do we have introductions?
[No response.]
OK. We did not have real big introductions. So our first
witness will be the Administrator of CMS, Seema Verma.
TESTIMONY OF HONORABLE SEEMA VERMA,\1\ ADMINISTRATOR, CENTERS
FOR MEDICARE AND MEDICAID SERVICES
Ms. Verma. Chairman Johnson, Ranking Member McCaskill, and
Members of the Committee, thank you for the invitation to
discuss CMS's efforts to increase accountability in the
Medicaid program. I appreciate this Committee's recent work on
this issue and share your commitment to improving program
integrity in the Medicaid program.
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\1\ The prepared statement of Ms. Verma appears in the Appendix on
page 52.
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Before coming to CMS, I spent most of my career working
alongside States to help them reform and strengthen their
Medicaid programs, whether it be seniors living in the
community through the support of personal care services or the
respite care that allows a parent to keep their child with a
disability living at home. I have seen firsthand the difference
that the Medicaid program makes in people's lives.
I believe that Medicaid is more than a safety net. It is
the lifeline, one that needs to be preserved and protected for
those who truly need and qualify for it. For all of Medicaid's
recipients, we work to provide for the best quality of life,
quality of care, and access to care so that they may live
healthier, more fulfilling, and more independent lives.
However, I believe that Medicaid should be stronger to
ensure that no deserving Americans fall through the cracks. We
must and we can serve them better. The status quo is not
acceptable.
When the Federal Government established the Medicaid
program, it was intended to be a partnership between the
Federal and State governments to care for society's most
vulnerable citizens, with both jointly contributing toward the
cost. However, that relationship has changed over the years.
With Medicaid being an open-ended entitlement, the program
has grown and grown, and States have spent more and more. In
1985, Medicaid spending consumed less than 10 percent of State
budgets and totaled just over $33 billion. In 2016, that number
had grown to consume 29 percent of total State spending at a
total cost of $558 billion.
However, despite our growth in spending, more than one-
third of doctors will not even see a Medicaid patient, and as
the program has greatly expanded, it has led to longer waits
for care and increased program integrity risks.
Our vision for Medicaid is to reset and restore the balance
to the Federal-State relationship, while at the same time
modernizing the program to deliver better outcomes for the
people we serve. This vision for transforming the Medicaid
program is centered on three principles: greater flexibility,
stronger accountability, and enhanced program integrity.
So let us start with flexibility. Every State has different
needs and challenges, and that is why Washington should not
design a cookie-cutter Medicaid program. Instead, CMS has
offered States unprecedented flexibility to design health
programs that meet the needs of their residents. CMS has
significantly reduced the time States have had to wait for
approval of their State plan amendments and waivers, and at the
request of many States, we have released new guidance on how to
incentivize community engagement in order to improve health
outcomes.
We are also equally committed to our second pillar,
strengthening accountability. That is why this year, CMS
released our first ever Medicaid Scorecard, which compiles
health outcome metrics. This is the first effort to publicly
report on States and Federal administrative performance. It is
time to be transparent about what our investment in Medicaid is
buying.
And that brings us to our third pillar, enhancing program
integrity, the topic of today's hearing. In June, we announced
a new Medicaid program integrity strategy that will bring CMS
into a new era of enhancing the accountability of how we manage
Federal taxpayer dollars in partnership with States.
First, CMS has launched new eligibility audits. The
expansion of Medicaid under the Affordable Care Act provided an
unprecedented level of financial support for newly eligible,
able-bodied adults. This created an opportunity for States to
shift cost to the Federal Government and requires us to ensure
States are accurately determining eligibility. These new audits
will include assessing the effects of Medicaid expansion and
its enhanced Federal match rate on State eligibility policy.
Second, we are taking steps to strengthen our oversight of
State financial claiming and managed care rate-setting. Through
our strengthened oversight, CMS has already recovered billions
from one managed care State. CMS will also audit States
contracting with managed care organizations, and we will be
closely reviewing financial reporting to ensure that rates are
appropriate and that costs are not inappropriately shifted to
taxpayers.
Third, we are working to optimize how we use State-provided
claims and provider data in our program integrity efforts. For
the first time, as of last month, every State, DC., and Puerto
Rico are now submitting data on their programs to the
transformed Medicaid Statistical Information System (T-MSIS).
We are now shifting from simply collecting the data to using
advanced analytics and other innovative solutions to improve
data and maximize the potential for program accountability and
integrity purposes.
Moving forward, we must continue to bolster our existing
efforts and optimize the use of data to drive better health
outcomes and improve program integrity efforts. Medicaid is too
vital a program to let fraud and inappropriate spending
threaten its sustainability, but as long as the program remains
an open-ended entitlement and there is a 90 percent match rate
for the expansion population, States have an incentive to find
new ways to draw down Federal dollars. CMS will need to
continually adapt and adjust our oversight policies.
Ultimately, we need to work together to consider structural
changes to the Medicaid program that would control spending and
incentivize fiscal responsibility while maintaining high-
quality care.
Thank you for the opportunity to testify before your
Committee, and I look forward to answering your questions.
Thank you.
Chairman Johnson. Thank you, Administrator Verma.
Our next witness really does not need an introduction, the
Comptroller General of the United States, the head of the
Government Accountability Office, Mr. Gene Dodaro.
TESTIMONY OF HONORABLE EUGENE L. DODARO,\1\ COMPTROLLER GENERAL
OF THE UNITED STATES, U.S. GOVERNMENT ACCOUNTABILITY OFFICE
Mr. Dodaro. Thank you very much, Mr. Chairman, Ranking
Member Senator McCaskill, and Members of the Committee. I am
very pleased to be here today to talk about the Medicaid
program, the risks that we have identified, the steps CMS is
taking to address those risks, and additional actions we
believe are necessary in order to ensure the integrity of the
Medicaid program going forward.
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\1\ The prepared statement of Mr. Dodaro appears in the Appendix on
page 66.
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There are three areas that I want to cover briefly in my
opening remarks. First, are the demonstrations. Demonstrations
allow CMS to give States flexibility to spend money that
normally would not be covered under the Federal matching
requirements. One-third of total Medicaid spending now is under
demonstration projects, which have been approved in three-
quarters of the States.
Our concern is that many of these demonstration projects
were formed on questionable practices and are leading to more
spending on Medicaid than would be normal under the original
program constraints. Also, the evaluations are done as to
whether or not the demonstrations are proving to lead to
effective policy operations in the future have limitations.
CMS has taken some action in this area. I am very pleased
that they are now limiting the amount of spending that could be
accrued under these demonstrations and carried over to the next
year. That one change alone has saved $100 billion in Federal
and State Medicaid money from 2016 to 2018, according to CMS's
estimates.
We think additional steps that CMS is planning to take will
better ensure the budget neutrality of these demonstrations and
we also believe that there needs to be more efforts made to
make sure the evaluations are reasonable, timely, and lead to
information that can help inform policy decisionmaking going
forward. So I am pleased they are taking action, but more
action is needed in this area.
Second, are supplemental payments. These are payments that
are made over and above reimbursement of claims for Medicaid or
encounters under the managed care portion. In fiscal year (FY)
16 these payments totaled $48 billion. We have raised concerns
in the past about the need for more accurate and complete
reporting on States' funds used to meet their own match, and
without this information, there is the possibility that the
States could be shifting cost to the Federal Government without
even CMS knowing about it.
In addition, these payments, particularly the non-
disproportionate health care payments, are supposed to be made
to ensure that they are economical and efficient, and we
believe there needs to be better criteria for that and it needs
to be well articulated going forward. And there also needs to
be the proper focus and attention on supplemental payments.
I know CMS is coming up with guidance or planning some
policy guidance to be issued next year, and we are hoping that
this policy guidance will address the recommendations that we
have made in these areas.
And the last area concerning supplemental payments that
needs to be addressed is to make sure that the payments are
clearly tied to Medicare spending as opposed to local sources
of funding in these areas. What we have found in the past is
that in some cases, the supplemental payments were given to
local providers who provided a large share to help the State
meet their match and not necessarily because they had the
highest level of uncompensated care for Medicaid recipients. So
this is important to clarify and ensure payment integrity.
The last area is the audits that need to be done. Ms. Verma
mentioned audits they are planning to put in place. These are
very important. I am glad they are resuming after a 4-year
hiatus--the beneficiary eligibility determinations. The managed
care is my big concern. Of the $36 or $37 billion in improper
payments, most of that is in the fee-for-service (FFS) and
beneficiary eligibility determination. Only $500 million of
that is in managed care. Managed care has grown over the years
without a lot of good payment integrity and oversight processes
in place. CMS is planning to start that, but I think State
auditors are a tremendous, untapped resource.
Two State auditors with us today have volunteered on their
own to come to this hearing. Beth Wood, the State Auditor of
North Carolina is on my left; she is also the president of the
State Auditors Association. Daryl Purpera, the State auditor
from Louisiana is with her. He will be the next president
taking over that association for State auditors.
But with Medicaid expenses expected to continue to rise
rather dramatically--it is one of the fastest-growing programs
in the Federal Government--we cannot afford to have the State
auditors on the sidelines here. They need to get in the game.
They need to have a substantive and ongoing role, and I think
it will pay huge dividends.
Administrator Verma and our team have had conversations on
this, and all our recommendations, I am pleased we are having a
very constructive dialogue on these issues.
This afternoon, our team will has arranged a meeting
between the State auditors and CMS to hopefully start a
dialogue that will lead to a very good role for them.
So I am very pleased to be here today. To us, this is a
very important program for the American people, and we need to
do everything we can to ensure the integrity of it and its
survival in the future.
Thank you very much, Mr. Chairman.
Chairman Johnson. Thank you, General Dodaro.
One thing I failed to mention, but I have another sheet
here, the dais, and this is right out of the GAO testimony.\1\
You were talking about State auditors. In neither one of your
testimonies, you really talked about some of the State
gimmicks. This is one, and this is pretty darn abusive. I am
not naming the State here, but this is where the Federal
Government has paid $155 million to the pot, the State put $122
million, for a total of $277 million that was paid to a county
health facility. The county health facility takes $6 million
and then paid back $271 million back to the State.
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\1\ The portion of Mr. Dodaro's testimony referenced appears on
page 84.
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Obviously, on paper, it looks like the State Government is
actually providing a match, but in reality, the Federal
Government is paying the $155 million.
And there are other gimmicks, whether it is sales tax,
whether it is loans to cities, that type of thing. I think that
is probably a hearing in and of itself, but hopefully, maybe
during questions and answers, somebody might raise this. If
not, I will at kind of the tail end.
But with that, I appreciate the attempts of our Members,
and out of respect for their time, I will defer my questioning,
starting with Senator McCaskill.
Senator McCaskill. Thank you, Mr. Chairman.
Let me start with a little bit on preexisting conditions.
Ms. Verma, you have worked with insurers in the health care
industry for years. Does it surprise you that GAO's review of
the data from insurers show that the aggregate application
denial rate for the first quarter of 2010 was 19 percent; that
is, 19 percent of the people who tried to get health insurance
on the private market were denied because of preexisting
conditions? Does that figure surprise you?
Ms. Verma. I am aware of that data, yes.
Senator McCaskill. OK.
I am assuming that there is nothing inherently in place if
the lawsuit that the Administration is supporting and that my
State Attorney General is supporting is successful, there is
absolutely nothing that can be done that would change the
market reverting to that, correct, unless the Congress took
action?
Ms. Verma. So I cannot speak to a pending lawsuit, but what
I will say is that I am deeply concerned about individuals with
preexisting conditions, and I think that we need to have
protections in place for those individuals. And so as the
Administrator of CMS, my job is to implement the law, and if
the law changes in some way, I would work with Congress to make
sure that we had protections in place for people with
preexisting conditions.
Senator McCaskill. Well, there is no reason a lawsuit could
not have exempted preexisting conditions. Did you weigh in with
the Department of Justice (DOJ) and ask them to in their
filings specifically say that they wanted severability so that
preexisting condition protection would remain?
Ms. Verma. I cannot speak to a pending lawsuit.
Senator McCaskill. If people cannot get affordable coverage
due to denials because they--or rescissions--because they
forgot to put ``acne'' on their application or some other
clerical error, which was certainly the case pre-ACA, is there
any system in place for a place those people can go and get
insurance?
Ms. Verma. I strongly support individuals that have
preexisting conditions.
Senator McCaskill. I just want you to walk us down what
happens if the Administration is successful in their lawsuit
and if this Congress--and we cannot even get the Majority
Leader to have a vote on bipartisan legislation that would
strengthen the exchanges that we have a lot of Republicans
supporting.
In fact, I think that one of the leadership in the
Republican Party actually said in the press last week, ``I do
not know what we would do if the lawsuit was successful. We
have no plan in place, legislatively, to pick up this
problem.''
So what I am trying to get at here, if people do not have
any place they can go and get insurance, what happens to their
health care?
Ms. Verma. I think it is very important that people that
have preexisting conditions have the appropriate protections in
place so that they can access the coverage that they need.
Senator McCaskill. But the point I am trying to make is
they will not have prevention. They will not have maintenance.
They will only have really emergency care. So, in other words,
diseases progress to the point that hospitalization is
necessary, and then, of course, we all pay, right?
Ms. Verma. I agree with you that those individuals should
have the appropriate protections in place, and if the law
changes in any way, shape, or form around that, we would work
with Congress to address that issue to make sure that they had
the appropriate protections in place.
Senator McCaskill. Well, it would be great if we could do
that here this month. It would be great if the Majority would
allow us to vote on a provision that would make sure those
protections were in place if the lawsuit was successful.
I certainly am willing to stay here weekends, 24/7, to make
sure those protections stay in place. There does not seem to be
any sense of urgency about the fact that this lawsuit is moving
its way through the courts and could blow up, I mean, all of
the rural protections, women paying more than men.
I love it when men say, ``Well, I should not have to cover
the cost of women having babies,'' and I always like to point
out, ``You have something to do with it.'' It is not fair that
women should have to pay more because they are the ones bearing
children.
The four largest insurance companies denied health
insurance to more than a half a million people based solely on
preexisting conditions based on information that was brought
out in 2010, and that is one in seven applicants that were
denied.
Let me get to improper payments and State auditors in the
time I have left.
Mr. Dodaro, you talked about this in your opening
statement. We talked about CMS's auditing plan. In response to
the Chairman's suggestion to you of private auditors, you
suggested that CMS should engage State auditors for these
efforts instead. Would you make sure that we have on the record
for the Committee and make sure that--and I am sure that
Administrator Verma is aware of this--that State auditors are
already required to do the single audit every year? State
auditors are already accustomed to looking at Federal programs
and the integrity of those Federal programs in their State.
Could you explain why this would be a seamless transition to
add to the single audit responsibilities--taking a look at
managed care and Medicaid particularly?
Mr. Dodaro. Yes. The State auditors can have very deep and
longstanding knowledge of the State Medicaid programs. In most
States--and Administrator Verma mentions this in her
statement--if not the number one budget item in the State, it
is number two, and in some States, it is almost 30 percent of
the entire budget of the State. So it is a very important
responsibility.
Under Federal law, the Single Audit Act, as you mentioned,
and OMB circulars, the States are required to perform an audit
every year of the Medicaid program along with other State
programs----
Senator McCaskill. Child support.
Mr. Dodaro [continuing]. That receive Federal money. Yes.
Senator McCaskill. There are all kinds of programs.
Mr. Dodaro. The Temporary Assistance for Needy Families
(TANF) program, for example.
Senator McCaskill. I mean, frankly, our State's budget--and
most States' budgets--is dominated by passthrough money from
the Federal Government.
Mr. Dodaro. Yes.
And in the OMB guidance on this, there is a circular that
specifies what compliance issues need to be checked by the
State auditors who are doing those audits.
Some of the States contract out those audits. Some do them
themselves. So the OMB compliance supplement is one vehicle
that CMS could use.
Also, the single audits are always intended to be the base.
That is, you start there, and then you can add other audits
that focus and do more in-depth work, which is what I think
could be done in a managed care arena.
In this area, CMS is starting to do audits on some of their
programs, but they are on a 3-year cycle where they are
covering one third of the States each year. So they will not be
finished with their cycle until 2020 or 2021, and if they use
the State auditors, they would have knowledgeable people to
start with. They could cover all the States every year if they
really wanted to.
I am not saying that there should not be a role for
contract auditors too, but to me, the State auditors are an
unused resource that could be very helpful.
Senator McCaskill. And by the way, they have a bigger
megaphone in each of their States. Their results and findings
are telegraphed in a very bold way to the policymakers in those
States. So, as you are working with the States to encourage
flexibility and waivers to allow them all to make their own
decisions, this is such a sensible partnership. It makes so
much sense, and it will save us a lot of money because I
guarantee you, State auditors, having some experience
contracting audits and some experience using auditors on my
staff, I will tell you, you will save a boatload of money if
you go through the State auditors as opposed to hiring private
contractual independent auditors.
Thank you, Mr. Chairman.
Chairman Johnson. I do want to quickly point out the
limitation of State auditors, though. They are probably not
going to be where you have a State really trying to expand
eligibility to get the 90 percent match on Medicaid expansion
or in the case of these gimmicks. I do not think you are going
to have State auditors blowing the whistle. You would need
Federal oversight.
Senator McCaskill. That is just not true. State auditors
blow the whistle on gimmicks that involve Federal spending on a
daily basis.
I will show you. In fact, I would ask the leadership of the
State auditors organization, why do not you give us examples
across the country so we can get some sampling of the kind of
audits that are done to shake up State policymakers about the
way Federal dollars are being spent.
Chairman Johnson. Again, I am not saying they will not blow
the whistle on some, but you certainly need a Federal oversight
role here. That is the point I am making.
Second, you started out your questioning really about
Obamacare and guaranteed issue. We do have plans. There is a
plan right now. I would love to vote on it, Graham-Cassidy-
Heller-Johnson, which would more equitably distribute the
Medicaid expansion and the advanced premium tax credit to the
States. It is pretty much ready to go. It definitely preserves
guaranteed issue.
By the way, I argued strenuously but unsuccessfully during
the debate as well to have things like invisible high-risk
pools in Maine that literally cut the costs for young people,
their premiums, to a third of the current level and half for
elderly individuals, while not doing away with guaranteed
issue.
There are ways of doing this, and I am happy to have the
debate. And I would love to take a vote on it as well.
That being said, our next questioner is Senator Peters.
OPENING STATEMENT OF SENATOR PETERS
Senator Peters. Thank you, Mr. Chairman, and both of our
witnesses, thank you again for being here today.
Administrator Verma, I was pleased in your opening comments
when you talked about how Medicaid is absolutely essential to
providing health care to folks in this country, and I hope that
you are focused on the goal, which I hope all of us have, is
that no matter who you are, no matter where you live, you
should have access to quality affordable health care in this
country. That should be our focus.
And as we are looking to make Medicaid more efficient,
which we should, we have to make sure taxpayer dollars are
being used the best way that they can. We look at that in the
spirit of strengthening the program and the ability to make
sure that those folks continue to get that care.
And when I raise that, I mean in particular to an epidemic
that I am very concerned about, which is the opioid epidemic,
which without question is a public health crisis in this
country that we have to deal with, and Medicaid is front and
center in dealing with it. In fact, most folks rely on Medicaid
for substance abuse counseling. So, in that spirit, I have a
few questions for you, and we all know that there is no silver
bullet when it comes to addressing this crisis.
But many health experts are looking at medication-assisted
treatment (MAT), as kind of the gold standard for treating
folks who are suffering from this addiction. We have seen this
approach be used successfully in other countries over the
years; in fact, in France in the 1990s which had a very serious
heroin epidemic, used this treatment to dramatically reduce--in
fact, by over 80 percent--the amount of deaths associated with
overdose.
So my first question is to you, What steps are you taking
at CMS to expand access to medication-assisted treatments?
Ms. Verma. Well, thank you for your question. I appreciate
it.
On a couple of issues in terms of dealing with the
devastating effects of the epidemic and substance use disorder
at large, as we look at this issue, one of the major steps that
we have taken is to make sure that individuals on the Medicaid
program have access to treatment, and we know that there has
been some barriers to obtaining care with some of the existing
Medicaid policy around institutions for mental disease (IMDs).
Those institutions were not available to individuals on the
Medicaid program.
And so one of the things that we have done is to put out
guidance to States in particular around waivers so that they
could have a waiver of this law and to allow Medicaid
recipients to obtain care at the IMDs. We think this has been
an important step in terms of improving access to care.
The previous Administration had taken action on this but
had put in place a lot of up-front barriers requiring States to
put a lot of different things in place before they could even
start accessing the treatment. So we have changed this around,
allowing individuals to have that immediate access to care
while asking States to put together a comprehensive plan that
would include addressing medication-assisted therapy.
By doing that already, we have approved 11 waivers today.
We have nine that are continuing to pend that we will be
hopefully addressing very soon.
In terms of your question on Medicaid-assisted therapy, I
think that is an important issue, and I would like somebody
from my staff to follow up with you as soon as possible on some
of our efforts on that, so thank you for the question.
Senator Peters. Well, I appreciate that. We will follow up,
and you actually answered my second about the guidance to the
States, so I appreciate that. We have to keep pushing that out
to make sure that the States are responding appropriately and
have proper guidance from CMS.
The second question relates to community health centers who
have been adapting their services, as you know, to respond to
the opioid crisis, particularly the extent to which they offer
Medicaid-assisted treatments.
Health centers disproportionately serve populations on
Medicaid or without any insurance whatsoever, which together
account for nearly half of non-elderly adults with opioid
addiction. They are also located in medically underserved rural
and urban areas, which are typically, as you well know, the
hardest hit by the crisis.
The survey found that health centers in Medicaid expansion
States are more likely to provide Medicaid-assisted treatment
than those in non-expansion States, and they are more likely to
increase the number of providers who can prescribe these
medications and are much less likely to rely on Federal grants
for the training.
In addition, they distribute the Naloxone, the life-saving
drug for reversing the effects, at almost twice the rate as in
non-expansion States, and this tells us that when more folks
affected by the opportunity crisis can pay for their services
through Medicaid versus no insurance, health centers can
provide more and better treatment to other folks as well.
So my question is, How would you describe the role of
Medicaid in treating individuals that suffer from opioid
addiction, and what can we do to make that even stronger?
Ms. Verma. So, generally, I would say that across the
board, with all of CMS's programs, whether it is Medicare,
Medicaid, or exchange programs, having access to coverage
increases an individual's ability to access treatment, and we
certainly acknowledge the important role that community health
centers play in serving our safety net populations. And we
appreciate their efforts.
Senator Peters. So you see Medicaid as a positive resource
for individuals who are suffering from opioid addiction?
Ms. Verma. It can be.
Senator Peters. It can be? How can it be--why would it be a
negative?
Ms. Verma. I think there has been some concerns that have
been raised in terms of having providers in the program that
may not have been screened appropriately that were providing
medications inappropriately, and that is not necessarily an
issue that is just a Medicaid issue. It is also across all
potential insurers as well.
Senator Peters. So, no question, there are problems with
efficiencies and whether or not there is fraud, whether or not
there is inappropriate prescribing, but on balance, these are
programs that are absolutely essential for us to deal with this
crisis. Would you agree?
Ms. Verma. I think it is important for people to have
access to treatment.
Senator Peters. OK. Thank you.
Chairman Johnson. Senator Hassan.
OPENING STATEMENT OF SENATOR HASSAN
Senator Hassan. Thank you, Mr. Chair and Ranking Member
McCaskill, and thank you to both of our witnesses for being
here today.
And I just want to know, Administrator Verma, I appreciated
very much your comments about the importance of protections for
people with preexisting conditions. One of the things a number
of us are eager to hear in the upcoming hearings on the Supreme
Court nomination of Judge Kavanaugh is for him to clarify his
position because he has written some remarks that indicate that
he perhaps does not believe that it is constitutional to
require coverage of those with preexisting conditions. So it is
one of the things I am waiting to hear through the hearing
process and the confirmation process.
But I wanted to turn to an issue that I think many
Americans are concerned about, Administrator. At the beginning
of the month, the Administration finalized a rule to allow
insurers to sell short-term junk health insurance plans to
cover people for up to a year. These are skimpy plans, and some
would hardly even describe them as health insurance at all.
They would expose consumers to a tremendous risk and come
without many of the most important protections established by
the Affordable Care Act.
These junk plans can deny coverage, exclude benefits, or
charge higher rates to people with preexisting conditions, and
they do not even have to cover all of the essential health
benefits like maternity care or prescription drugs.
This junk insurance rule is just one of a litany of actions
that the Trump administration has taken to sabotage the
Affordable Care Act. I really think putting politics over
patients.
I cannot understand why the Administration would finalize a
rule like this, given how much the American people have made it
clear that they value comprehensive coverage and protections
for preexisting conditions.
Administrator Verma, the Administration has said this junk
insurance rule will provide people with more options, but if a
person with heart disease is denied coverage by a short-term
plan, how is this an option for them? If someone with asthma
tries to buy a short-term plan and is told it will cover
everything except their asthma medication, how is this an
option for them?
If a woman or an older adult tries to buy a short-term plan
and they are quoted a price they cannot afford because of their
age or gender, how is that an option for them?
Ms. Verma. Thank you for your question.
Short-term limited duration plans are about giving choices
to Americans. Today, there are over 28 million Americans that
are uninsured. They cannot afford Obamacare's high rates.
Senator Hassan. Certainly, more people are insured today
because of Obamacare than before Obamacare, correct?
Ms. Verma. And rates have gone up over 100 percent. In your
State alone, in New Hampshire, since 2014, rates have gone up
64 percent.
Senator Hassan. You know how much they went up between 2002
and 2003, if I have my years right? It was, for some people,
about 200 to 300 percent. So the rise in insurance premiums has
not been a product of the Affordable Care Act alone.
I have a son today who is alive because of the research and
development (R&D) in the medical field that allows him to have
a baclofen pump, somewhere between 10 and 15 different high-
cost medications, a feeding tube, and a bunch of other things--
and home nursing, right? He would not have been alive a
generation or two ago.
So let us just talk about these short-term plans, OK?
Because the concern here is that we are saying to people,
``Hey, you can spend less money on a short-term plan,'' and
then when they actually need coverage, they find out that the
money they spent does not cover it. So how is that better for
them?
Ms. Verma. So there are individuals today that cannot
afford anything because of the high rates. This is intended to
give them a choice, an alternative.
Now, I am not saying that this is for everybody, and what
we have done is to strengthen the consumer protections. We make
sure that individuals are aware of what they are buying and
what the limitations are, but the reality is there are so many
individuals in our country, 28 million people, and the rates
have gone up over 100 percent. There is limited choice. There
is limited networks.
Many of the plans that are being offered have high
deductibles that people cannot afford, and these----
Senator Hassan. Which was also true before the Affordable
Care Act.
Ms. Verma. The short-term limited duration plans were
available before Obamacare and at the beginning of Obamacare.
Senator Hassan. They were available for much shorter times.
They were intended as a stop-gap between jobs. They were not
intended as something to mislead consumers about the coverage
they would get, and there are other methods we could take, some
of which you heard from the Ranking Member, that could help us
reduce health care costs overall.
So let me turn to some of the other ways where we could
really be getting at health care costs. As drug prices continue
to skyrocket, one particular area I continue to focus on is how
we can stop big pharmaceutical companies from taking advantage
of patients and our health care system. Big pharma is endlessly
creative when it comes to ways to game the system and pad its
pockets.
So let us take the Medicaid rebate program. Drug
manufacturers have to provide rebates or discounts to States as
a condition of having their drugs covered by Medicaid. States
then share that discount with the Federal Government.
Manufacturers are supposed to give larger discounts for
brand drugs, which are typically more expensive than generic
ones.
But true to form, some drug makers may have misclassified
their drugs in order to shirk their obligation to provide that
larger discount, leading to more than $1.3 billion in lost
discounts from drug manufacturers from 2012 to 2016.
People might remember this issue from when Mylan, the maker
of EpiPen, misclassified the EpiPen as a generic drug.
So, Administrator Verma, how is CMS tracking the
classification of drugs in the Medicaid rebate program to see
if there are any misclassifications?
Ms. Verma. So, first of all, in terms of the
classifications, I will add in terms of the Medicaid rebates
that the Affordable Care Act actually capped the amount of
rebates that manufacturers had to give. So, even as they have
increased their prices, the Affordable Care Act actually capped
the amount of rebates.
But in terms of the misclassifications, I agree with you
this has been a significant issue.
Senator Hassan. Yes.
Ms. Verma. We know in the case of Mylan that there was
definitely an issue there. We worked around a settlement of
that, that came to about $465 million that came back to
taxpayers.
What CMS has done is put out guidance to manufacturers to
make it very clear to them what the requirements are regarding
the classification.
The problem that we have, however, is that we do not have
any enforcement authority. So we can put out guidance, but if
they are not----
Senator Hassan. Right.
Ms. Verma [continuing]. Classifying appropriately, then we
are limited in the amount of action we can take.
Senator Hassan. So that was going to be--and I realize I am
running out of time, but my last piece of this question, I was
just going to ask you, Would you support additional authority
from Congress so that CMS can impose civil monetary penalties
on drug makers who knowingly misclassify their drugs in the
Medicaid rebate program?
Ms. Verma. Yes, we would, and I think that our efforts
around the Mylan settlement----
Senator Hassan. Right.
Ms. Verma [continuing]. Shows the amount of dollars that
taxpayers are losing, and so we would be very supportive of
that.
Senator Hassan. Thank you very much.
And thank you, Mr. Chair.
Chairman Johnson. Senator Hassan, I do want to point out,
short-term limited duration plans are a part of Obamacare.
Up until just leaving office, those things were for a term
of 364 days. On the way out the door, President Obama
restricted those to 90 days. So individuals that have been
seeing their premiums double, triple, quadruple, simply could
not afford it, and they were being forced to buy these limited
plans 90 days at a crack--so now what the Administration does
is made those--return them to where they were, 364 days, and
allowed renewability for up to 3 years. If people end up with a
preexisting condition cannot renew them, you have the Obamacare
exchanges.
So, again, this is just giving an option. It is going to
dramatically lower premiums for people that have been priced
out of Obamacare markets. It is called freedom.
Senator Hassan. Mr. Chair, if I may?
Chairman Johnson. Sure.
Senator Hassan. If they have an event that--with a
preexisting condition during the time that they are covered by
that short-term plan and it is not open enrollment on the
exchange, they are stuck.
And, second, what we also know is that by extending what--
these short-term plans were supposed to be here between jobs.
It is minimal coverage while you move to your next long-term
plan. What we know is it is going to drive the costs up for
everybody else. That is what we have good data about.
So I am happy to have this debate, but the reason they are
limited in duration is because you have people spending hard-
earned money on junk insurance that does not cover lifetime
illnesses and events.
Chairman Johnson. And the reason they are needed is
because----
Senator Hassan. And then the rest of us will pay for it.
Chairman Johnson. And the reason they are needed is because
Obamacare for individuals have been priced out of the market,
double, triple, quadruple the premiums. That is why. So we are
trying to give some option to those people that have been--the
forgotten men and women of Obamacare.
With that, Senator Carper.
OPENING STATEMENT OF SENATOR CARPER
Senator Carper. I am going to say something I had not
planned to say. One of the things we, every now and then around
here, actually work together, and to the best people we have
Lamar Alexander and Patty Murray. And some of us were invited
to participate less than a year ago in a series of hearings and
a series of offsite coffees that preceded those hearings to try
to figure out what are some things we can agree on to bring
down the cost of coverage in the exchanges.
And the witnesses included Governors. They included State
insurance commissioners, folks from health insurance companies,
providers, you name it, and they basically agreed on three
things. It was kind of amazing. First, they said at the end of
the day, what we need is to adopt an approach on reinsurance,
maybe sort of like what we have in Medicare Part D, but that
would be a good step.
Second, they said that cost sharing reduction (CSR), we
need to make sure the cost-sharing arrangement, so that they do
not go away, that they are going to be around, the insurance
companies can count on those. They have some certainty.
The third thing--the witnesses agreed one after the other
was that if we are going to get rid of the individual mandate,
we have to come up with some combination of alternatives, which
in their aggregate mimic the effect of the individual mandate.
We have some witnesses who said the reduction in premiums
in the exchanges could be 25, 30, or 35 percent if we would do
those three things, and regrettably, we have never voted on
that package, which is just beyond me.
One of my best friends, this guy named Kasich from Ohio, we
were freshman Congressmen together 400 years ago, and he was
asked why he decided to extend Medicaid in the State of Ohio a
few years ago, Medicaid expansion up to 135 percent. And he
said, ``When I stand at the pearly gates someday in the future
and I am trying to get into heaven and they ask me what did you
do to deserve getting in''--and I am paraphrasing him, but he
said, ``I just want to be able to say that when people needed
health care, I helped them get it.''
And when you read Matthew 25--my colleagues hear me quote
Matthew 25 from time to time--it says, ``When I was hungry, did
you feed me? When I was naked, did you clothe me? When I was
sick and in prison, when I was thirsty, did you give me to
drink when I was a stranger in your land?'' It does not say
anything about health care. It does not say a word about when I
did not have any access to health care, did you do anything
about it.
And Kasich says, ``Well, I want to be able to say we did
something about it.''
I think we have a moral imperative to the least of these in
our society, and as we are talking about here today, we have a
fiscal imperative because States face big fiscal challenges. We
do in other States too, and frankly, we in the Federal
Government face big fiscal challenges.
And so the timing of this hearing is ideal and it is
important. I have focused for years on improper payments. A
bunch of my colleagues have worked in those fields with me, and
so has Gene Dodaro and our friends at GAO.
I have a question on program integrity, and I want to ask
Mr. Dodaro.
Ms. Verma, I always note Gene Dodaro--if you will notice,
not a word on a piece of paper. He just sits there and gives a
statement, and then he answers questions. For the first few
times that he did it, first couple of years, I was like really
amazed, and then I noticed this lady who has like a white coat,
right behind him over his left shoulder. When he speaks, I see
her lips move. [Laughter.]
She is always there. So we welcome you both.
A question for Gene. Earlier this year, as you may know,
Senator McCaskill, Senator Johnson, and I introduced yet again
more improper payments legislation, and it was called the
Payment Integrity Information Act. And the bill takes a series
of steps or at least attempts to take a series of steps to
address the problems of improper payments across our
government, including the formation of a working group that
will enable Federal agencies to collaborate with each other and
with non-Federal partners, such as State governments, to
develop strategies for addressing key drivers of improper
payments.
And I would just ask, Mr. Dodaro, should this bill become
law--and it just might--what would you advise this working
group to focus on in order to combat improper payments in the
Medicaid program? What advice would you have?
Mr. Dodaro. First, I am very supportive of the legislation.
I hope that it becomes law.
Senator Carper. Would you like to be added as a cosponsor?
Mr. Dodaro. Well, Senator, I do not think the rules will
allow that.
Senator Carper. All right.
Mr. Dodaro. But from my vantage point, I think it is a good
piece of legislation. I think it would advance the focus on
improper payments. The advice I would give to the working group
would be to focus on the managed care portion of the Medicaid
program. That area has received very little attention over the
years. CMS is beginning to take action on that area, and I am
very pleased with what they are planning to do. But I think
more needs to be done in that area.
I would also encourage them to have some State auditors on
their working group to work together with them as they develop
their strategies. As the legislation is currently configured,
most of the people on the working group appropriately are
Federal officials, but I think they ought to bring in some
State and local auditors as well.
This was done on the Recovery Act, and I think to great
success in helping to eliminate, minimize fraud, waste, and
abuse, and I think it could be done here as well.
So we have a lot of other more technical recommendations we
can give the working group, but those would be my main points.
Senator Carper. Good. Thanks.
Another one for you, Gene, but Congress has mandated that
States submit Medicaid data to CMS to create, I think, a
national database of Medicaid data. It has an acronym, as you
might imagine, T-MSIS.
GAO has also found that States are delaying in providing
Medicaid data to CMS, both for expenditures and for utilization
of health care services.
And I would just ask, what should Congress do to help
States report data to this entity, T-MSIS? What should they do
to help States reporting in a more timely, efficient, and
accurate manner, and what resources do CMS and the States need
to adequately report data to CMS?
Mr. Dodaro. The States are beginning to report the data
now, but I think our concern is that the data be accurate and
complete. I know CMS is beginning to follow up on this. I think
that it would be appropriate to ask CMS to regularly report to
the Congress on the quality of the data and ask GAO to evaluate
that as well. This would also allow States to do comparability
assessments to compare their Medicaid program to other Medicaid
programs to learn good lessons.
The data are starting to come in now. This is a very
important issue because in the past, the data was 2 and 3 years
old. This requires monthly reporting, but the reporting data is
only one step. The data have to be good. It has to be complete
and accurate, and I think that is the next challenge here for
CMS and the States.
But Congress can help by regularly monitoring what is going
on in this area and encouraging greater actions by the States
as well as by CMS.
Senator Carper. Good.
Mr. Dodaro. And GAO will be happy to help. We will be
watching this.
Senator Carper. Good. Thanks. Thanks so much.
Ms. Verma, if we have a second round, I will be pleased to
ask some questions and direct them to you.
Ms. Verma. thank you.
Chairman Johnson. Senator Heitkamp.
OPENING STATEMENT OF SENATOR HEITKAMP
Senator Heitkamp. This should concern everyone. There is no
doubt about it. The question is can we afford it, and if we
cannot, how do we solve this problem? So no one here should
pretend that we do not have a problem.
But one thing that gets absolutely lost in the back-and-
forth on Obamacare is we should be talking about health care.
We should be talking about the increased cost of health care,
and so if we could all just turn away from our politics for a
minute and go directly to solving the problem, we would go a
lot further.
So there are three ways we can solve this problem. We can
address waste, fraud, and abuse. We can improve efficiency in
delivery, and we can reduce the amount of health care that is
being accessed. All of those things would go a long way.
The RAND Corporation did a study, and the study said 12
percent of all the people in this country who have four or more
chronic conditions cost the system 40 percent. What are we
doing to address that?
Seema, when you look at this, have you seen it increase?
North Dakota is a 50 percent State. We were as high as 80 at
one point before the Bakken boom. So are you seeing an increase
in the amount of Federal share overall in traditional Medicaid?
Ms. Verma. Yes. I mean, I think that is the concern that we
have, and Senator Johnson brought this up in terms of where we
are with the GDP.
Our actuary projects that by 2026, we are going to be
spending one in every five dollars on health care, so we are
deeply concerned.
Senator Heitkamp. Right, but that is not what I am asking.
The State and Federal Government share the cost of the
Medicaid program. So what percentage today overall, nationwide,
of the Medicaid program does the Federal Government spend?
Ms. Verma. Well, there are different matching rates,
depending on the population that we are serving, right? So if
we look at where we are over the next 10 years, our actuaries
project that we are going to be spending about $998 billion----
Senator Heitkamp. But what percentage of overall Medicaid
spending is that?
Ms. Verma. It depends on which program.
Senator Heitkamp. Yes, but----
Ms. Verma. For able-bodied adults, we are paying--the
Federal Government is paying 90 percent, and it depends on the
match rate.
Senator Heitkamp. Yes. No, I mean, this is an important
question because as we look at the economic challenges, State
by State, some States are wealthier than other States. If you
have a large State, that is not as wealthy.
Maybe you can answer this: What is the current Federal
Medical Assistance Percentages (FMAP) on average in Texas?
Ms. Verma. I think the FMAP in Texas is probably a little
bit--60s? About 65 percent.
Senator Heitkamp. Yes. And if that goes up to 70, you are
going to have increased cost.
So this does not help me much because I do not know what is
driving this other than utilization.
And so this is supposed to be a hearing about waste, fraud,
and abuse, and I think that I share Senator McCaskill's point
of view about the need to work with State auditors. They have
real skin in this game.
I had my director of the Department of Human Services tell
me that 28 percent of his budget went to pay for less than
3,000 people in nursing homes. Now, that is something we need
to talk about, and so instead of talking about all the things
that we get bogged down into, let us talk about health care.
So when you look at waste, fraud, and abuse, and you look
at the programs, are you committed over at CMS, Ms. Seema, to
responding and to having ongoing and consistent reports back to
this group about the Medicaid program?
Ms. Verma. Absolutely. And I think that this year since I
have come to CMS, we have taken a lot of different actions.
One of the things when I came to CMS, we inherited a
backlog of----
Senator Heitkamp. Yes, I know.
Ms. Verma [continuing]. GAO and OIG recommendations.
Senator Heitkamp. I do not think anyone should put any
blame. We had 13 years of inattention, but we have an
opportunity today to take that first step toward solving this
problem. And I want to make sure that you are working with GAO
to respond.
There is a number of GAO requests, but this is a very high
priority for our oversight.
Ms. Verma. I completely agree. We have made this a priority
in the organization. We meet with the GAO and OIG regularly. We
have taken action. We have taken action on the backlog of
disallowances. We have addressed some of the improper payments
that were going on with the Medicaid program in California, for
example, where we recovered by the end of this year, $9.5
billion.
We have also closed some of the loopholes in the designated
State health programs up to the tune of $25 billion.
The disallowances, that was $590 million that we went back
and addressed.
We are also doing some of our own audits around beneficiary
eligibility as well as managed care audits. We are restoring
the payment error rate measurement (PERM), the PERM audits as
well. We started doing those.
So we have taken a lot of actions, and I agree that we need
to do more.
Senator Heitkamp. Mr. Dodaro, let us assume that we run a
perfect system and there is no waste, fraud, or abuse. How much
do we reduce this number?
Mr. Dodaro. Probably marginally.
Senator Heitkamp. Yes. And that is the point, is that we
need to spend every dollar critically, but at the end of the
day, that is not going to solve our problem with this explosion
of Medicaid costs.
This is a product of aging, aging into the system. It is a
product of increased percentage of older, oldest who have
depleted their resources, where we need to take a look at
investments and research that is going to help people live in
their homes longer and not access these programs.
We have real work to do here, and it frustrates me to no
end that we do not begin to address the things that can, in
fact, make a difference long term.
And so I think that one of the next steps is how do you
deliver health care in States like mine, and I want to publicly
thank Ms. Verma for working with my office and working with me
to talk about rural health care delivery.
I know the article that was in the New York Times that
relay the situation in Claire's home State was absolutely eye-
opening, and it tells us we need to do better, especially for
those seniors who rely on this program.
But we have to start identifying those things where we can
actually save money and save money long term without curtailing
people's access to care.
And I want to just say one thing. It is disingenuous--and I
am not talking about you because you did not make this
decision, but it is disingenuous of this Administration to say
they believe in preexisting conditions, protections in Federal
law for preexisting conditions, when they are currently in
court arguing that they are unconstitutional. There is nothing
consistent about that position.
Now, I understand the complications with preexisting
conditions and the complications with eliminating the
individual mandate and preexisting conditions, but let us not
pretend that there is any commitment here from the Department
of Justice to preserve preexisting conditions as a protection
for the American public because you do not go to court and
argue that it is unconstitutional if you intend to preserve
that protection.
So it is not your decision, but I want that on the record.
Chairman Johnson. Senator Heitkamp, thank you.
A quick answer to your question, off of this chart,
according to CBO, it is about 72 percent, the $430 billion, 72
percent of the $600 billion total spend, when you combine the
two types of Medicaid expansion and core Medicaid.
And then there are multiple causes in terms of why health
care spending is a growing--take a look at this first sheet.
This is kind of an interesting one.
Senator Heitkamp. I saw it.
Chairman Johnson. I appreciate that. Senator Daines.
OPENING STATEMENT OF SENATOR DAINES
Senator Daines. Chairman Johnson, I want to thank you for
your continued attention to this important issue. I do hope the
Democrats and Republicans can make some breakthroughs here.
This is a chance for bipartisan ship.
I respect Senator Heitkamp's comments. There are multiple
factors driving up this spending, but the scope of this hearing
is to take a look at Medicaid fraud, Medicaid overpayments, and
that is, I think, an important place to start, where I think
there is probably some of the lowest-handing fruit for us,
perhaps in this area, that I hope we can agree on because if we
fail to do this--these are important safety nets that we have
in not only Medicaid, but I would argue Medicare.
If Medicaid spins out of control in terms of spending, it
puts all of these important safety nets at risk, and we need to
insure we safeguard these important safety nets for those who
truly need it.
These improper payments in Medicaid, these exponential
growth rates have been problems for years. I am struck by the
fact that by--I think it is about 2022, Mr. Chairman, where
Medicaid spending all in the Federal component, the FMAP, plus
the State component exceeds Medicare spending--and about 2022
is when those numbers cross is my understanding, some, what,
$835 billion, all in number in Medicaid compared to $828
billion in Medicare. And I do not think that is being talked
about enough right now.
We talk a lot about the challenges of ensuring we keep
Medicare protected long term, but Medicaid spending will exceed
Medicare spending all in.
And the numbers, Administrator Verma, that you shared about
California alone, that $9.5 billion, that is real money. I
think about how hard we fight on Capitol Hill, like on the
Land, Water, and Conservation Fund (LWCF), for example, to try
to get that fully funded. We could take 5 percent of the
California savings and fully fund LWCF.
I think about the backlog in our National Parks. I chair
the National Parks Subcommittee. We have about a $12 billion
maintenance backlog, of deferred maintenance. That is debt in
our National Parks. The California $9.5 billion recovery that
you all have made just about takes care of our National Park
deferred maintenance for the entire country. so these are
important discussions.
Administrator Verma, I applaud your efforts to improve the
program's integrity. The waste, the fraud, the abuse in
Medicaid is appalling, and now we have millions of healthier
working-age individuals who are being added to this program.
Enrollment in my home State of Montana has exploded and far
exceeds the initial actuarial projections.
My question is, Are you concerned that providing care to
the expansion population could bring about even more misuse of
taxpayer dollars?
Ms. Verma. So if we look at Medicaid expenditures for
adults, newly eligible adults, these are projected to amount to
$806 billion over the period of 2016 through 2025, so it is an
extraordinary amount of dollars.
Senator Daines. On the expansion.
Ms. Verma. On the expansion population alone.
Senator Daines. Right.
Ms. Verma. And if you look at the structure of that, it is
90 percent eventually that the Federal Government will pay for
this, and so I think that that diverts the focus from the rest
of the Medicaid program, the most vulnerable populations.
In terms of program integrity, this is why we are deeply
concerned about this. We have always had program integrity
efforts within the Medicaid program, but given now the change
with the match rate--and it is not only 90 percent, but it is a
completely open-ended entitlement----
Senator Daines. Right.
Ms. Verma [continuing]. The incentives are not in place
necessarily for the State to focus on program integrity because
as they are recovering dollars--for example, if they have
budget cuts or if they are focusing on program integrity for
the expansion population, they are only going to recover, only
up to 10 percent. So that is why I think it is incumbent on the
Federal Government to have a renewed and more focused attention
on this.
Senator Daines. Administrator Verma, you have worked both
the State side as well as the Federal side. You have worked
with Vice President Pence when he was Governor.
So if you put your hat on, if you were a Governor, and you
had basically an FMAP of 90 percent to 94 percent with the
expansion population and you have, in Montana's case, about a
65 to 66 percent FMAP with traditional Medicaid--you talked
about the incentives of integrity--arguably, would not there be
an incentive perhaps for the States? As much as I strongly
believe in the principle of federalism and empowering the
States, but with an open-ended entitlement on the expansion, do
you think there perhaps is an incentive for States to move
traditional Medicaid enrollees and move them on the expansion
FMAP? Because the algebra is pretty simple.
Ms. Verma. Yes, absolutely. And I think that is why we are
focused on doing more audits around eligibility because we know
that there have been problems with this.
Some of the audits have shown--that the GAO have done, that
we know that there has been system errors, whether some of
these are worker errors, but you are right. At the end of the
day, with that 90 percent match rate, States have a strong
incentive to draw down more Federal dollars.
I think also, in terms of their support of the program,
that those are dollars that they are putting toward able-bodied
adults that they are not putting toward vulnerable populations.
We know that access to care in Medicaid has been an issue
in terms of provider reimbursement. So those are dollars that
they are not putting toward vulnerable populations, increasing
rates to providers, and that they are putting for able-bodied--
--
Senator Daines. Arguably, we are subsidizing at a higher
rate able-bodied individuals at the expense of what Medicaid is
originally intended to protect, which are those who are truly
the most vulnerable in our society that do not have any other
options. It is just a concern.
Ms. Verma. I think it is a concern.
I think also the structure of how we have set this up, with
a 90 percent match and an open-ended entitlement, it really
does create an incentive for the States to spend more and more.
So as we are looking at program integrity at large and we
think about all of the efforts that we are taking and we
appreciate the support of the GAO, the State auditors, but at
the end of the day, we are constantly going to be--if we come
up, we audit. We find problems; we correct them. States are
going to figure out new ways, and until we change the dynamic
and the structure of the Medicaid program from being an open-
ended entitlement to one where States are responsible for a
fixed amount of dollars, we are always going to have these
issues around program integrity.
Senator Daines. You mentioned GAO. Last question over to
the General.
General Dodaro, to follow up on our conversation about 2
months ago, is GAO analyzing improper payments data pertaining
to the expansion population?
Mr. Dodaro. Yes. We have looked at that issue, raised a
number of recommendations to CMS to address. For example, in
some States, they have asked CMS to do the eligibility
determination for them, but they need to check to make sure
they have good quality controls in place. So that is a good
step forward. They are putting that in place. We are checking
it, and that should be OK.
The other thing is that they need to make sure they are
checking because some people can move between Medicare--or the
Medicaid program itself and the exchanges, and they can go back
and forth, depending on their income, their employment status
as well, and that needs to be measured because there are
different payments that accrue to them because of this.
And then there are also inconsistencies in eligibility
determination, both for financial and nonfinancial data, that
need to be resolved.
So we have looked at this. We have made recommendations.
CMS is taking action. In most of them, we have closed it. In
some areas, we are waiting for additional documentation.
Senator Daines. Thank you.
Mr. Chairman, I think there will be a spin in others who
would seek to try to perhaps challenge the motives of what this
Committee is trying to do, but I think--let us be clear. We
want to make sure we protect and that we save Medicaid and
Medicare, and by doing so, by eliminating the waste, fraud, and
abuse or minimizing it, that is the best way to ensure those
who need it the most will continue to see those benefits.
Thank you.
Chairman Johnson. Thank you, Senator Daines.
Now, my staff tells me that Senator Jones is next. Is that
true?
OPENING STATEMENT OF SENATOR JONES
Senator Jones. All right. Thank you, Mr. Chairman, and
thank you for the witnesses for being here.
Let me first--I just want to echo something that Senator
Heitkamp said, and I know, again, it is not there. But I want
to also talk about this preexisting condition issue because I
have just spent the last couple of weeks in a couple of
roundtables with listening to people affected, 900,000 people
in Alabama affected by preexisting conditions. And that is just
the people affected, not just their families.
I agree with Senator Heitkamp that I am just stunned at the
way that the Administration is saying they want to protect
that, but at the same time taking actions that are scaring my
citizens to death that they are not going to be able to have
insurance.
I just came from a Banking hearing involving sanctions, and
the mantra of the Administration is watch what we are doing on
sanctions, not what we are saying.
Here, it seems to be just the opposite, that watch what we
are saying and not what we are doing. So to the extent that
either of you can have any influence, please try to alter the
course of the Administration with regard to preexisting
conditions. Thank you.
Ms. Verma, let me ask you real quickly. The Medicare wage
index is a real problem, and I know you have seen letters from
members of my delegation. Alabama is at the lowest level on
that, and we were hoping there might be a little relief in the
most recent inpatient perspective payment system rule that came
out in August, but we did not get that.
How can we best work together to find a solution to that
for my State? I mean, we are having rural hospitals closing
left and right, and it is everywhere I go. The first thing they
say is it is because we are just not getting the same amount of
reimbursement.
What can we do together to try to get that changed, short
of a full-blown legislative fix that may or may not ever
happen?
Ms. Verma. Well, thank you.
I appreciate the issue that is going on in Alabama with the
hospitals, and I had an opportunity to meet with some of the
hospitals and the hospital association----
Senator Jones. Right.
Ms. Verma [continuing]. And appreciated their input. And I
am deeply sympathetic to the issue that they are facing in
Alabama.
I think the wage index is something that we are concerned
about, and so what we did in our rule was to put out a request
for information (RFI). That gives us an opportunity to hear
what the impact has been on the wage index, and that is
something that once we have that input, that gives us a basis
of looking at the methodology.
I am concerned when there are these types of disparities,
and whether you are a hospital in a rural area, you are still
paying the same amount for equipment.
Senator Jones. Right.
Ms. Verma. And so we do need to address that issue.
I am concerned about the closing of hospitals, and I want
to make sure that all Americans have access to care, whether
they are in a rural community or whether they are in an urban
community, so this is something that is important, which is why
we started out with putting an RFI. And this is something that
we are going to be looking at next year, so I appreciate it.
Senator Jones. Great.
Well, I am assuming from your answer that I can get your
commitment to continue to work with our office and the other
members of the delegation to try to address that.
Ms. Verma. Absolutely. I look forward to working with you
on this.
Senator Jones. Wonderful.
The other thing I want to ask, Ms. Verma, is about the
Medicaid exemption that Alabama has just recently requested and
I think has been sent back now.
Alabama is trying to impose some very strict work
requirements for Medicaid recipients I think in trying to
oppose like 35 hours of work. Alabama has incredibly strict
guidelines to begin with. It is very low, and the way I see our
failure to expand Medicaid has essentially turned this work
requirement into a work penalty.
And I know that has been sent back, but I would like to
have a little bit of information from you because I am strongly
opposed to what the State is trying to do because it is a
Catch-22 when people that are barely making above the poverty
level are either going to have to work or have insurance. That
is just it. So it is a real Catch-22.
So how are you going to be looking at that? Are you going
to be looking at factors about how it is going to impact the
children, how it is going to impact families that need child
care options? Are you looking at Head Start and those things?
What is going to go into effect? How are you going to look in
evaluating whether or not Alabama gets this exemption for what
I think is an ill-conceived requirement?
Ms. Verma. So let me speak generally to the issue of
community engagement. Our guidance came from requests from
States, many States trying to address generational poverty,
trying to do something with the Medicaid program to address
that issue to help people find a pathway out of poverty,
independence, finding a pathway to have the dignity of work.
It is also about improving health outcomes, and so that is
really where this was borne out of, were these particular
requests.
We know that the old way has not worked when people have
been living in poverty for so many years, and I think this is
about trying something different, trying to improve the lives
of Americans.
When we put together the community engagement guidance to
States, one of the things that we ask for is that they consider
special populations so that there are some populations.
This does not impact children. It does not impact people
living with disabilities. It does not impact pregnant women. It
does not impact individuals that are medically frail or
individuals that are addressing substance use disorder.
So when States are putting together their community
engagement proposals, we have asked them to address these
issues, address exemptions. There might be parts of the States
that may not be appropriate or may not have jobs available, but
I think at the end of the day, the work participation rates in
the United States have gone down. They are some of the lowest
that we have seen in many years, and we know that there is a
lot of jobs that are available. So this is the idea of helping
people to obtain independence and obtain the skills that they
need.
They can also participate--it is not only about work. It
could be--community engagement means volunteer work. It could
be job training. It could be participating in school. So there
is a variety of different ways that individuals could
potentially meet these requirements.
In the case of Alabama, we have also asked what is the
transition. We want to make sure that there is a pathway. So we
have asked them to look at their proposal. We do not want to
make sure there is some type of a subsidy cliff. We want to
make sure that that is smoothed out, and so we have asked them
to provide us some more information on that, and that is
something that we will be looking at as we consider their
proposal.
Senator Jones. Well, I would urge you to take that laundry
list of folks of impacted citizens that you looked at and look
very carefully at Alabama because my belief, based on what I
know, is that every one of those groups are going to be
impacted significantly, particularly children of single parent,
single moms who are going to have to go back to work and will
either not get their health insurance. So I would just urge you
to take a close look.
I know that in the community surveys, there was some--I
think roughly 800 comments, and 759 of those from hospitals and
doctors and stakeholders were absolutely opposed to this
because they did believe that it would significantly decrease
and hurt health outcomes in the State of Alabama. So thank you
for that in your consideration.
So thank you.
Thank you, Mr. Chairman.
Chairman Johnson. Senator Hoeven.
OPENING STATEMENT OF SENATOR HOEVEN
Senator Hoeven. I would like to thank both of you for being
here today.
Administrator Verma, I want to bring up first something you
and I have talked about previously, and that is Veterans
Affairs (VA) reimbursement for long-term care for our veterans.
In the VA MISSION Act, we included language that expressly
allows nursing homes to take VA reimbursement for veterans that
come into a nursing home or a long-term care facility, as well
as for in-home care products and services and the continuum of
care, to take VA reimbursement on the same basis as they take
Medicare or Medicaid reimbursement.
The reason that is important is because right now, only
about 20 percent of the providers in North Dakota take VA
reimbursement because if they take it, they are subject to
small business contracting rules, which create a whole second
set of inspections and regulatory red tape and bureaucracy that
they have to comply with, which is difficult and costly.
So, as a result, our veterans have limited choices, both in
long-term care facilities, but also in their home-based or
community care-type products and services in the long-term care
world.
And then they have to expend their own funds and dissipate
their own savings until they are gone and then they qualify for
Medicaid, and can get the long-term care services they need.
So this is a very important issue for our veterans, and
that is why we changed it in the VA MISSION Act. The key now is
that VA is putting the regulations in place. And it is very
important that we do not create new regulatory barriers in
place of the old regulatory barriers there by not accomplishing
what we are trying to do.
So I am asking for your help and your support, and I have
already approached the Department of Labor (DOL). The Secretary
of Labor is on board with this. The Secretary of the VA is on
board with this, and I want to make sure that you are on board.
As these regulations are written, we want it to end up with one
set of regulations and inspections and so forth, whether that
be long-term care facilities, home based or institutional care,
whether they are getting Medicaid, Medicare, or VA
reimbursement.
Ms. Verma. Yes. I think it is very important that our
veterans have access to the care that they need and different
choices about the care that they receive.
As you know, President Trump started something called Cut
the Red Tape, and as part of that CMS has initiated our effort,
which we call Patients Over Paperwork. And as we are talking
about the high cost of health care, one of the things that we
know drives health care cost is all the increase burden of
administrative costs. So we are very concerned about anything
that provides--or increases burdens to the extent that it does
not improve patient quality and safety.
Medicare already has extensive regulations and guidelines
for nursing facilities. So I think that as we are looking at
this, it would be helpful for providers not to have to have two
sets of regulations.
We also have a system of evaluating these facilities to
make sure that they are in compliance with our regulations. So
that is already in place, and we would look forward to working
with you on this to make sure that health care facilities do
not have to comply with two sets of regulations. We understand
that that is a significant burden for them.
And to the extent that it decreases access to care for our
veterans is something that we are very concerned about, and we
would be happy to work with you on this.
Senator Hoeven. Right.
Thanks for your help and support on this on behalf of our
veterans.
As the Administrator for CMS, you are the person that is
overseeing all the requirements for this reimbursement and
certainly, if we trust you to do it for Medicare and Medicaid,
that should work for VA reimbursement as well. So thank you for
your help and support on this.
In regard to the Medicaid program integrity strategy, I
would ask both of you, What are the very critical pieces that
you feel have to be implemented that have the most impact or
the greatest benefit? And what has to happen with the States in
terms of their cooperation to really make it happen?
Administrator, you can start----
Ms. Verma. Sure.
Senator Hoeven [continuing]. And then if you could follow
up as well, Gene.
Ms. Verma. Well, there are many initiatives, and I can go
through all of them. I think we provided that to you in our
written testimony, and we agree with many of the GAO
recommendations and are working to implement those.
But I would say that we are always going to be working on
program integrity. Our work is never going to be done. We need
to make sure that every dollar goes to the right place. As
costs are increasing, we cannot afford to not make sure that
patients have access to the care that they need.
That being said, I think the problems that we have are
related to the structure of the Medicaid program because it is
an open-ended entitlement, because there is so much Federal
dollars that are involved here with the match rates, that we
are always going to be chasing this until we go back and try to
address the fundamental structure of the Medicaid program, to
put it on a more sustainable path, to make sure that States
have the appropriate incentives in place to address program
integrity.
Senator Hoeven. Now, when you say that, do you mean both
FMAP as well as expansion, traditional FMAP as well as
expansion?
Ms. Verma. I think it is both. I think that the risk has
increased now that we have a higher FMAP rate or that the
Federal Government is paying 90 percent for the cost of able-
bodied individuals.
But even in the base Medicaid program, the structure of the
program, because it is an open-ended entitlement, it
incentivizes States to spend more and more, and now with the 90
percent match rate, now there is more of an increased risk.
I think that going forward, we have worked extensively with
the States on program integrity issues and will continue to do
that working with the State auditors, but because this program
for the able-bodied adults is funded 90 percent by the Federal
Government, I think the onus is going to be on us.
A case in mind was California. We had an issue there with
some of their payments to managed care organizations, and we
found that they owed the Federal Government $9.5 billion. So, I
mean, we are always going to have to be looking at this issue,
but I think the problem is the structure of the Medicaid
program. It is an open-ended entitlement.
Senator Hoeven. On traditional FMAP, we are a 50-50 State.
So on traditional FMAP, is that a problem, too, even at the 50-
50 structurally or not?
Ms. Verma. I think so, but it is more of a problem for the
able-bodied adult. So I would support structural changes to the
Medicaid program to address the open-ended entitlement issue,
more of an issue, though----
Senator Hoeven. So it is the open-ended aspect----
Ms. Verma. The open-ended----
Senator Hoeven [continuing]. That you think drives the
challenge with cost savings.
Ms. Verma. Correct.
Senator Hoeven. Mr. Dodaro, your thoughts? Again, where do
you really see that area where 10 percent of the effort gets
you the 90 percent result kind of thing versus the reverse.
Mr. Dodaro. There are two main things that I think are
really important and potentially game changers here. Number one
is I think we need to bring the State auditors into the picture
because they have the ability to monitor this on an ongoing
basis at the State level on the ground and can provide a great
degree of accountability and transparency, no matter how the
program is structured.
The CMS actuary estimates that by 2025--about 7 years from
now--total spending, Federal and State, will be $958 billion.
So we are knocking on the door of a trillion dollars a year for
Medicaid spending.
Your main accountability people at the State level are
there on a regular basis. This is a third of most States'
budgets, so there are always incentives, no matter what the
match is. The Federal Government and the State governments are
all on a unsustainable long-term fiscal path. So there is going
to be fiscal pressures and pulling and tugging, but you need
that at the State level, number one.
Senator Hoeven. Are they not there now?
Mr. Dodaro. No.
Senator Hoeven. They are not involved in that process?
Mr. Dodaro. Not in any substantive way looking at improper
payments on auditing managed care. Nobody is auditing managed
care right now including the managed care providers, and this
is about almost half of the Medicaid spending is managed care.
How the providers are making the payments there, that has not
been audited.
CMS, now has there is a rule. They are trying to change
this. We have been calling for this for years. They are going
to start doing some audits, but they have limited resources,
and they are only covering the audits on a 3-year cycle with
the States. So it will take 3 or 4 years to get through all the
States.
The State auditors are there. They are doing financial
auditing, but they are not doing performance auditing to focus
on this area. It could be a game changer if we get them
involved in a substantive and ongoing way.
At the Federal level, Ms. Verma is right. We need Federal
protection as well, and our recommendations have been to ask
CMS to be more specific and stringent on approving State
demonstrations, to get more information on the sources and uses
of the money States are using to fund their share of the
program, that they are not shifting cost. So the Federal
Government needs to be vigilant.
And while it is very appropriate--and I agree that States
need flexibility--it has to also protect the Federal interest.
And in the past, there have been approvals given to the States
that have not protected the Federal Government's interest, and
that is what is driving the cost.
The Administrator and I have had conversations about this,
and she agrees. And, hopefully, they are going to move in that
direction.
So you can give flexibility and accountability, but you
also need to protect the Federal Government's interest.
Senator Hoeven. Thank you.
Chairman Johnson. Thank you, Senator Hoeven.
Just during this hearing right here, I have already got
about three, four, or five other ideas for more hearings. To
start drilling down managed care would be one of these things.
I have a lot of questions. Let us first start talking a
little bit about what you were talking about with Senator
Hoeven and Senator Jones about, and I would call it the
unintended consequences of Medicaid expansion.
Administrator Verma, you talked about the reduction in work
participate rates. I read a really interesting article written
by Nicholas Eberstadt addressing that 20 percent of working-age
adult males are permanently out of the workforce. More than
half are on some kind of pain medication, oftentimes using
Medicaid.
We issued a report based on that where we just in 3 days,
when I asked my staff to take a look at the diversion, the use
of the Medicaid card, get opioids and then divert that into the
illegal drug market, more than 260 individuals or people being
charged with exactly doing that. We found when we issued the
report we got over 1,000. So that is an unintended consequence.
But another unintended consequence is if you have health
care, it is a huge incentive to work, quite honestly, if you do
not have it. So now all of a sudden the Federal Government is
providing that to a working-age childless--some say able-bodied
adult and you give them the Medicaid card where they can get a
little extra income by diverting drugs, you have created a
lifestyle.
So that also from my standpoint, when we talk about the 90
percent match, is a huge incentive for States to draw down
those Federal funds, right? They only have to hit 10 percent,
and if you throw the gimmicks, which we will talk about later,
on top of that, you can pretty well get 100 percent, OK?
So talk to me about, both of you, what have we found in
terms of the ineligible. What is the cause of that? California
is a big problem there. I would think there is a huge incentive
for States to transfer truly Medicaid-eligible individuals into
Medicaid expansion if they can get away with it because they
get a much larger match. Is that part of it? What else are you
finding in terms of people that are ineligible that are part of
that $37 billion improper payment?
I guess I will start with whoever wants to take it first.
Ms. Verma. Sure.
So if we look at the issue of eligibility and making sure
that the people that are in the program belong in the program,
when we looked at some of the GAO reports, some of those are
system problems.
I am very concerned about system problems when we have
invested at the Federal level millions, billions of dollars
into these eligibility systems, and I think that we need to
make sure that they are working appropriately. We certify these
systems, and if we certify these systems and they are making
mistakes, then I think that is a problem that we should hold
individuals accountable for that. So there is that area of
system issues.
There is always going to be worker errors that may be
inadvertent that may be part of it, and then there is also
beneficiary fraud. So there are sort of two or three areas with
that.
What I am concerned about and one of the things that we are
going to be looking at in terms of these eligibility reviews is
looking at States where we have seen very high levels of
enrollment that were beyond what was predicted. I think that is
an issue.
You brought up the issue of are they putting populations
that really should belong in a different category of Medicaid
with a lower match rate, are they doing that. I think there has
been some instances where that has been found. For example, a
pregnant woman, they should be in the other program. So those
are things that when we do our audits that we are going to be
looking for.
In terms of individuals that are disabled, if an individual
is receiving SSA or Supplemental Security Income (SSI), we
should be able to have those types of feeds so that they are
not being in the newly eligible category. So we need to make
sure that the State systems are not doing that.
There are some States that do not use the Federal
disability determination when they are making determinations
around disability. So I think in those States, that is
something that we need to review as well because we are not
able to look at whether they have already been classified under
the Federal definition. So those are some of the things that we
are going to be looking at.
The other thing that I would add is that when the GAO
reports were done, they were done early on when States had just
implemented the new eligibility system, the modified adjusted
gross income. So it is possible that over time, States have
improved their eligibility processing.
But something that we are concerned about, we have restored
the payment error rate measurement audits. As GAO noted, those
do happen every 3 years, but what we are doing is we are
requiring States to do their own eligibility audits in the
years in between. So those are some of the ways that we are
going to address that, and I think our own audits will also
address that issue.
Chairman Johnson. General Dodaro.
Mr. Dodaro. Yes. I think Administrator Verma has given a
very good overview of the issues.
I would just underscore the system problems. I think that
is the only way, given the volume of what is going on over
there, that you are really going to try to prevent these things
up front. So there is an appropriate focus on this. There is
appropriate matching, particularly for the income eligibility.
There is good data that is available to cross-check against the
self-reported data that people are providing.
I am very pleased that after a 4-year hiatus, they are back
doing the beneficiary eligibility audits before. I really did
not agree with the postponement of that. It happened in the
prior Administration, and I am glad to see this Administration
has plans to start these audits.
But when you make changes like we made in the Affordable
Care Act, you should increase your internal control audits at
the beginning, not step away and allow people to have extra
time. So I think we have lost a lot of time over the last 4
years.
We are also starting more work in this area now. The time
has passed, and we will be reporting to this Committee what we
find in the future.
Chairman Johnson. OK. We will have a second round because I
have more questions.
So with my limited time, let me go right to the audits. I
think we should use every resource we have: State auditors;
auditors within CMS, Federal Government; and then independent
auditors. If we do that, particularly with independent
auditors--this is for you, Administrator Verma--why not do all
50 States this year? Why not do it?
Ms. Verma. So if we did every State every year, that would
triple our cost. So I think that is always the issue that we
are going to have with all of this which is----
Chairman Johnson. So what do you think your cost is right
now in terms of auditing?
Ms. Verma. In terms of auditing on the PERM, it is about
$34 million a year, so that would triple our expenditures.
Chairman Johnson. OK. When we are spending $430 billion,
$30 million, I am happy to spend $90 million on doing it right
off the bat. I am dead serious about that. I think you really
ought to aggressively go after this.
You are not going to have the audits honed the first year,
but you have done it, and then we take a look at the results of
that. I would highly recommend, let us get in all 50 States,
and let us do the audits.
Again, you have independent auditors out there. I guess it
is back down to the Big Four. When I was going to college, it
was the Big Eight. But I would highly recommend that. Let us
get in there and get them done.
And with that, I will turn to Senator McCaskill.
Senator McCaskill. I will defer to Senator Carper.
Senator Carper. Thank you.
If I could just have 30 seconds. Thank you so much.
This has been a really good conversation, and it is one,
frankly, I would like to see continue.
Gene Dodaro is really good about coming to Capitol Hill and
meeting with us from time to time and going through his high-
risk list that GAO produces every 2 years and see how we are
doing in terms of making progress on that.
I do not know if it might be possible for you. I do not
know if you come to Capitol Hill very much, but if you do, you
might be willing to meet with some of us and our staff, both of
you, maybe together, and to pursue some of these. I would
appreciate it.
I would be remiss if I did not say one of the things I most
like about the Affordable Care Act were the provisions that
were originally sort of introduced by Senator John Chafee from
Rhode Island back in 1993. He had this great idea for these
exchanges and scale tax credits, individual mandate, all this
and was introduced as legislation. It ended up as Romneycare
and then ultimately ended up in the Affordable Care Act, and we
call them the exchanges. Some people call it Obamacare.
Actually, they are pretty good ideas.
And one of the things that frustrates the heck out of me is
how this Administration continues to try to undermine what was
originally a Republican idea, but actually has promise to
provide better health care and not just lay it all on the
Federal Government.
There are a couple of things that I would welcome the
chance to discuss with you, and I suspect some of my colleagues
would as well. And I would just lay that out there and hope
that you will find time in your schedules to do that this year.
Ms. Verma. I would be happy to visit with you anytime.
Senator Carper. Good. Thanks so much.
Chairman Johnson. Thank you, Senator Carper.
Let me quickly step through my remaining questions, then,
unless you want to go now.
Senator McCaskill. Well, no, I can go after you. It does
not matter to me.
Chairman Johnson. Oh, no. Go right ahead.
Senator McCaskill. Oh, OK. I was just trying to be sure.
Naloxone prices. I asked the Assistant Secretary for Health
at HHS in the Finance Committee in April to seek an explanation
for the Naloxone delivery device price increases.
According to you, CMS, Medicare Part D spending per dosage
unit on Evzio increased over 500 percent between 2015 and 2016.
This is Kaleo Pharma.
With total spending in 2016 of over $40 million, that could
pay for a lot of those audits.
I asked them to formally seek an explanation for these
price increases. Are you aware if there has been any outreach
to Kaleo since April regarding the price increase for Naloxone?
Ms. Verma. I cannot speak specifically, not necessarily
from my department, but one of the things we are concerned
about is making sure that we have transparency around all of
these increases. It is one of the things that we took action on
earlier this year, is to put out our Drug Dashboard, which
provides transparency to the American public about the year-
over-year increases in drug pricing. We think that is important
that people have that information.
Senator McCaskill. Do you agree that Secretary Alex Azar
would have the ability to negotiate directly with Kaleo to
reduce Part D spending if he chose to do so?
Ms. Verma. Generally, what we want to do in our strategy
around drug prices, something that we are very concerned
about--there is a lot of effort going on--one of the things
that we want to do is strengthen competition and negotiation.
We think negotiation is important. That is why we have our Part
D plans essentially in that role negotiating on our behalf, and
what we want to do is strengthen their negotiating position.
One of the things that we recently took action on was for
Medicare Advantage plans, to give them more authority around
negotiating with manufacturers for lower prices by giving them
the ability to do step therapy for Part B drugs. So we think
that is really important that we do everything that we can to
increase the negotiating power of our Part D plans as well as
Medicare Advantage plans.
Senator McCaskill. So they have the ability in the Part D
plans to negotiate now, but the Department of Veterans Affairs
gets a much better price on this drug than any of the Part D
plans. What do you attribute that to? Why is the VA able to get
such a better deal than all of these private plans?
Ms. Verma. They have a limited formulary. They have one
formulary, and I think our concern with Medicare directly
negotiating is that that would result in a single formulary.
That would decrease----
Senator McCaskill. Well, but maybe for opioid overdoses, I
mean, we are not talking about the difference between a variety
of different drugs we are talking about saving someone's life
from an opioid overdose. It seems very weird to me that the VA
can have this drug at a significantly lower price than Medicare
Part D.
I guarantee you if I put a jury of 12 in the box and tried
that case, they would say, ``What is going on? Why cannot we do
a single formulary price for a drug that reduces the impact of
an overdose and saves lives?''
Ms. Verma. So we want to make sure that all Americans,
especially those on our Medicare program, have access to the
most affordable drugs.
The issue, though, with extending what is going on in the
VA to the Medicare program is that that would limit choices for
seniors.
Senator McCaskill. Well, if you are dying of an opioid
overdose, I do not think you care what brand it is. With all
due respect, we are not talking about a drug where you are
deciding how you are going to treat your allergies or how you
are going to treat your high blood pressure or how you are
going to treat your cholesterol. We are talking about a drug
that reverses a death from overdose and the notion that that
has gone up, and the reason it has gone up in price is very
simple. It is because there is an increased demand, and so they
can raise the price. And that is what they are doing.
So I do not think the rationale for giving seniors choices
frankly carries much water when we are talking about a drug
like Naloxone.
Ms. Verma. We want to make sure that our Part D plans, our
Medicare Advantage plans have every negotiating tool at their
disposal to make sure that seniors are getting the lowest price
possible. So I agree with you on that point, but I----
Senator McCaskill. Well, they are not.
Ms. Verma. I also want to make sure that seniors have
access to a variety of medications and that they can choose the
plan that works best for them. I think that is important that
all Americans have choice about their health care.
Senator McCaskill. Sometimes an exception to the rule makes
the rule frankly a better rule, and I would think Naloxone,
with what is going on in this country right now, how many
people are dying--I do not know how many families you have
talked to, but in my job, it has been heartbreaking to talk to
these families. And the notion that someone cannot get Naloxone
because we are worried about choices for seniors and the Part D
program and all the private companies, whereas we know we could
drive a lower price because the VA has, that is what is really
frustrating.
Ms. Verma. Well, I agree with you, and the opioid epidemic
has been devastating. I know I have attended a funeral for a
young man, so I have been personally impacted by this. And I
certainly understand the anguish that many American families
are going through.
I will note that in the Medicare program, these drugs are
available, and we agree with you. And that is why we are
working toward strengthening the negotiating position to make
sure that Americans, especially our seniors, have access to
these drugs at an affordable price and that they have choices
about the types of plans that they pick, that it is going to
work well for them and their families.
Senator McCaskill. Well, I just know what I would do if I
was Secretary Azar and if I were you. I would say, ``There is a
lot of reasons for us to leave negotiating to these private
plans that you can justify. I just do not know how you guys
justify day in and day out the kind of price increase for this
particular drug, particularly compared to another government
entity that has done much better.''
Mandatory reporting of fraud, waste, and abuse. In November
2017, GAO issued a report that said CMS may have an incomplete
view of the opioid-related risk in Medicare Part D because it
does not require the plan sponsors to report over-prescription,
waste, fraud, or abuse in this area.
As a result, CMS, quote, ``is unable to determine whether
its related oversight efforts are effective or should be
adjusted.''
Senator Rob Portman and I reached the same conclusion in a
report we released in 2016, which found that mandatory
reporting of waste, fraud, and abuse could in fact help CMS
monitor plan sponsors.
I asked Kim Brandt also in April of this year at the
Finance Committee about the lack of reporting. She stated CMS,
quote, ``was exploring making that mandatory.'' I pressed her
to issue a rule requiring the reporting of fraud and abuse as
soon as possible because this is much bigger than taxpayer
dollars. This is about saving lives.
We had 644 people in my State die just in 2016, and I
personally watched my mother get addicted to opioids in the end
of her life through the Medicare Part D program. I had to
inject myself into her myriad of doctors to make sure everyone
understood that much of the pain she was complaining about was
the pain of withdrawal.
What progress has CMS made about this reporting issue so
that you have a better handle on the over-prescribing of
opioids among the senior population?
Ms. Verma. I think we have concurred with this
recommendation, and this is something that we are looking at
across the board. This will require rulemaking, and so as we go
through rulemaking, we are exploring all the different options
around this. But this is something that the agency is looking
at, and as I said, we have concurred with the GAO
recommendation around this.
Senator McCaskill. Well, I asked in April. It is now
August. I would like some kind of report from you other than
``We are looking at it'' because that is what I was told in
April, and people are dying every day. And a lot of those
opioids are making their way into hands of others. Seniors may
get them, but then others get hold of them, and the addiction
starts and has a very deadly ending.
So I would like you to follow up and give me some kind of
timeline as to looking at that issue.
Ms. Verma. Sure. We will have my staff follow up with you
and make sure you have updates on our progress.
Senator McCaskill. Thank you.
Chairman Johnson. Thank you, Senator McCaskill.
Administrator Verma, in your testimony on page 11,\1\ you
talked about intergovernmental transfers, which is why I had my
staff try and find this, because you can describe these things
in words, but I said I need some example where I see the
dollars coming together.
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\1\ The testimony referenced by Senator Johnson appears in the
Appendix on page 63.
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This is just one of many gimmicks. Can you talk about the
other gimmicks and also talk about do we have any sense of how
much that is really costing the Federal Government, kind of
replenishing, and if we do not have that cost, who is going to
calculate it for us? Because I think it is extremely important.
I will start with Administrator Verma.
Ms. Verma. So I agree with you. I think there are a lot of
issues with intergovernmental transfers. One of the things that
we are going to look at that we have put on our regulatory
agenda is looking at supplemental payments, and that is where
we are going to take action to address some of the GAO
recommendations.
But I think at large, when we are dealing with States, we
need to understand where the matching dollars come from. We
need to understand all of the back-end deals, how the match is
being provided, and then what money goes back to the State and
what money goes back to providers. I think we need to
understand that, and we need to have transparency around that
to make sure that those are appropriate.
Chairman Johnson. This will be its own separate hearing,
but again, I have heard of the sales tax, which is a good
little gimmick. Everybody knows about it. Again, these things
are all perfectly legal, but it is a way for States to get
more. So they just charge the providers a sales tax, which they
basically get back, but that is a cost to Medicaid then. And it
gets reimbursed from the Federal Government or gets matched by
the Federal Government.
Another one is sort of the loans made to a city. So you
make a million-dollar loan. They spend that on Medicaid, and
then they pay that loan back when they get the match.
But this one was shocking to me. I was thinking like a
million-dollar loan, $2 million. I mean, this is literally $122
million that the State put into it. The Federal Government puts
in $155 million. This is a State that gets more than a 50
percent match. The State gets $271 million back out of that
thing. So this is massive.
General Dodaro, do you have any idea? Do you have any idea
what the volume of these gimmicks are?
Mr. Dodaro. The potential for this range of gimmicks, as
you are calling them, is almost limitless. I mean, the States
have been very creative over the years, and as we were talking
earlier about whether they are going to try to put people in
the 90 percent match or the other area for individual people.
That is peanuts compared to this type of cost shifting that is
going on.
No one knows, and one of the recommendations we have----
Chairman Johnson. Has anybody ever really tried to figure
it out, though?
Mr. Dodaro. We have on an ad hoc basis over time, but you
have to have the data. There is not accurate and complete
reporting. This is one of the recommendations that we are
hoping that CMS will implement--to get that information.
There is also no reason in the world why there could not be
a requirement that the State auditors audit the sources and
uses of the money used to support the State match for the
Medicaid program, so you have an independent reporting. In my
opinion, that will completely stop the gimmicks.
Chairman Johnson. Well, again, the gimmicks are known, and
they are legal.
In this case, is not this where the State auditors--they
just have a conflict of interest. I mean, they work for the
State.
Mr. Dodaro. Well, they are independent.
Chairman Johnson. Actually, you have a State Governor
that----
Mr. Dodaro. Yes. Well----
Chairman Johnson. I understand. People will shake their
hand, but tell them----
Mr. Dodaro. I work for the Federal Government. I am
independent, and thereby, the standards that we issue the GAO,
generally accepted auditing standards, they are independent.
They will call it the way they see it, and we just have to give
them the resources and the support, and they will do the
professional and independent----
Chairman Johnson. OK. So you can expect a letter, and
hopefully, Senator McCaskill will join this.
Mr. Dodaro. All right.
Chairman Johnson. You are going to get a letter from me
asking GAO to study this and set up the auditing guidelines to
really delve into this.
Mr. Dodaro. OK.
Chairman Johnson. With all the different types of gimmicks
that we know about and how can we ferret that out and how can
we get the data and how can we get the information on it.
Did you want to chime in?
Senator McCaskill. Well, I just think it is really
important to understand that the role of State auditors is
identical to the role of GAO. They are not there to take the
side of--first of all, many of them are elected independently,
and some of them are not. There is a few that are appointed,
but most of them are elected independently. And the minute they
start carrying water for their party or for defending things in
their State that are a waste of taxpayer dollars, that is the
end of their career. I mean, they are done.
So to look at the State auditors in the context of State
spending any differently than we look at GAO in the context of
Federal spending is not fair to State auditors.
Chairman Johnson. I am not trying to be unfair, and I am
not questioning State auditors' integrity. I am just saying
there is a conflict of interest there, and when all these
things are legal, there is really nothing to report. That is my
point, and I think we need to take a look at this and go, ``OK.
I know it is legal. We are not calling it fraud, but it is like
the next best thing.''
Mr. Dodaro. Yes. But there are certain things that would be
beyond the guidelines.
For example, the local government portion of this is only
to be 60--it cannot be more than 60 percent of the State match.
So there are some guidelines that will be exceeded if they are
shifting the cost to the local government's back in a shell
game that comes back to them, and then the Federal Government
has to match.
Chairman Johnson. OK.
Mr. Dodaro. CMS also has other authorities that they could
impose and other requirements if they know what is going on.
In some of the cases that we found about this when we went
out and audited at the State and local level, CMS was unaware
of this.
So you cannot take action unless you are aware of it. So
step number one is awareness with good auditing information.
Chairman Johnson. So we are aware, and I am going to make
sure that we are even more aware.
Mr. Dodaro. Right.
Chairman Johnson. Administrator Verma, this all gets back
to data----
Ms. Verma. Yes.
Chairman Johnson [continuing]. And the GAO recommendations
on data. Is that something that you are also in complete
agreement with and completely dedicated, and can we get your
commitment to do everything we can to get the data?
Ms. Verma. We have, and we are. On the T-MSIS system which
is where--for the first time, we actually have all 50 States
reporting, Puerto Rico, and DC. I can tell you that when I am
looking at waivers, for example, one of the questions that I
always ask my staff is, Where are they on T-MSIS? Were they, A,
reporting?
Now that we have all the States reporting, my question is,
What about the quality of their data? Because we think that
that should be an important requirement when States are making
that request.
Going back, though, to the issue about these types of
arrangements and where States are getting matches from, I think
that this goes to my original point. It is the structure of the
program. As long as you have an open-ended entitlement, States
are creating all of these types of programs to try to draw down
Federal dollars, which is why we took action around the
designated State health programs (DSHP). This is an example
where States were saying, ``We are spending money on this
health care program. It is all funded by State dollars,'' and
CMS had allowed those States to count those dollars as matching
funds. So we cut that off. We closed that loophole. That was
worth about $25 billion since 2005.
And I think, as you said, some of these things are legal,
and with the State auditors, with all due respect to them, it
is not clear where the incentive is. In the case of California,
where CMS identified $9.6 billion of dollars that were owed to
the Federal Government, that did come from CMS.
Chairman Johnson. And let us face it. There are plenty of
people in this town that are just happy to spend the money and
send it to States too and look the other way. So we need to
start with the data.
It drives me nuts. Even the spending off of that chart
right there, the CBO has $430 billion. I think your numbers are
like $395. I am an accountant. That kind of stuff drives me
nuts. So we need to get the data. We need to understand the
exact incentives, where the abuse is occurring. We need to
report on it.
So this will be another hearing in and of itself, but a
letter to you.
I think my final question really goes back to--General
Dodaro, you were talking about the demonstration projects being
budget-neutral. Again, the whole point of that is, hey, we got
a better idea. This will be more efficient spending. So give us
this waiver, and at worst, we will spend the same amount of
money. At best, what we really ought to do is spend less. How
far off of budget-neutral are we, or are we right back there
going, ``We do not know''?
Mr. Dodaro. No, in some of the cases, we have quantified
the amount of money, and I will provide that for the record.\1\
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\1\ The information submitted by Mr. Dodaro appears in the Appendix
on page 92.
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Chairman Johnson. I mean, can you give me some general
sense right now? Tens of billions?
Mr. Dodaro. Well, it is billions. It is billions, yes.
Chairman Johnson. Again, none of this is in the $37 billion
improper payment.
Mr. Dodaro. No. It is not in the improper payment estimate.
Chairman Johnson. Again, all of these things we are talking
about, this is in core Medicaid right now and just people
really taking advantage of the system.
Mr. Dodaro. Yes, it was. For example, I just was handed a
note from the team. We found almost $1 billion in excess in
Arkansas, in one State alone.
Chairman Johnson. Is that in 1 year or over 10?
Ms. Verma. That was during the demonstration.
Mr. Dodaro. That was during the demonstration period, so I
am not sure.
Ms. Verma. It was 5 years.
Mr. Dodaro. Three-year----
Chairman Johnson. Five years?
Mr. Dodaro. Three-year demonstration period. This is a
significant amount of money. That is why we have one of the----
Chairman Johnson. There was a Dirksen study, a billion
here, a billion there, you are talking about real bucks.
Mr. Dodaro. Yes. This is significant, and I know CMS is
looking at this. They are going to propose they need clarity
about this.
It was the longstanding policy, but it was not being
implemented and enforced. And even when there were some
exceptions for some hypothetical cost situations, there was not
adequate documentation as to supporting even the hypothetical
cost area.
So this is an area that needs to be worked on, and I am
hoping that CMS will continue to focus on this.
Ms. Verma. And on the issue of budget neutrality, we will
be taking action on that this week. So you will see those
recommendations implemented.
Chairman Johnson. OK. Well, those are the questions I have.
Senator McCaskill, do you have any more?
Senator McCaskill. No.
Chairman Johnson. First, again, I want to thank you both. I
think from my standpoint, this was just a great hearing. We had
great questions from my colleagues here.
This really is just the start.
So, General Dodaro, we appreciate all the work you have
already done. We will be asking you to do more.
Administrator Verma, thank you for paying attention to this
stuff, and we are going to want to put more meat on the bones
in terms of this program integrity, what actual actions. If we
need to codify some of these things, I think we probably
should, and we will have to go to other committees to do so.
But the goal here is to get the data, have an ongoing
production of that same data, so this does not slip back in the
cracks again, and then put in place the controls that are going
to survive well beyond your tenure, well beyond this
Administration. We are spending way too many dollars. People
need these dollars, and we cannot afford literally to waste a
dollar of it.
So, again, I really do appreciate your testimony, you
taking the time here. I look forward to your future involvement
in our oversight work here.
And with that, the hearing record will remain open for 15
days until September 5 at 5 p.m. for the submission of
statements and questions for the record.
This hearing is adjourned.
[Whereupon, at 12:12 p.m., the Committee was adjourned.]
A P P E N D I X
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