[Senate Hearing 118-166]
[From the U.S. Government Publishing Office]
S. Hrg. 118-166
IMPROVING CARE, LOWERING COSTS: ACHIEVING
HEALTH CARE EFFICIENCY
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HEARING
BEFORE THE
COMMITTEE ON THE BUDGET
UNITED STATES SENATE
ONE HUNDRED EIGHTEENTH CONGRESS
FIRST SESSION
__________
October 18, 2023
__________
Printed for the use of the Committee on the Budget
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
__________
U.S. GOVERNMENT PUBLISHING OFFICE
54-120 PDF WASHINGTON : 2024
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COMMITTEE ON THE BUDGET
SHELDON WHITEHOUSE, Rhode Island, Chairman
PATTY MURRAY, Washington CHARLES E. GRASSLEY, Iowa
RON WYDEN, Oregon MIKE CRAPO, Idaho
DEBBIE STABENOW, Michigan LINDSEY O. GRAHAM, South Carolina
BERNARD SANDERS, Vermont RON JOHNSON, Wisconsin
MARK R. WARNER, Virginia MITT ROMNEY, Utah
JEFF MERKLEY, Oregon ROGER MARSHALL, Kansas
TIM KAINE, Virginia MIKE BRAUN, Indiana
CHRIS VAN HOLLEN, Maryland JOHN KENNEDY, Louisiana
BEN RAY LUJAN, New Mexico RICK SCOTT, Florida
ALEX PADILLA, California MIKE LEE, Utah
Dan Dudis, Majority Staff Director
Kolan Davis, Republican Staff Director and Chief Counsel
Mallory B. Nersesian, Chief Clerk
Alexander C. Scioscia, Hearing Clerk
C O N T E N T S
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WEDNESDAY, OCTOBER 18, 2023
OPENING STATEMENTS BY COMMITTEE MEMBERS
Page
Senator Sheldon Whitehouse, Chairman............................. 1
Prepared Statement........................................... 34
Senator Charles E. Grassley, Ranking Member...................... 3
Prepared Statement........................................... 36
STATEMENTS BY COMMITTEE MEMBERS
Senator Chris Van Hollen......................................... 18
Senator Mike Braun............................................... 20
Senator Roger Marshall........................................... 22
Senator Ron Wyden................................................ 25
Senator Tim Kaine................................................ 29
WITNESSES
Dr. Matthew Fiedler, Senior Fellow, The Brookings Institution.... 6
Prepared Statement........................................... 39
Dr. Leemore Dafny, Professor, Harvard Business School and Harvard
Kennedy School................................................. 8
Prepared Statement........................................... 53
Dr. G. Alan Kurose, Chair, Rhode Island Foundation, and Former
President, Coastal Medical..................................... 10
Prepared Statement........................................... 70
Mr. Theo Merkel, Director of Private Health Reform Initiative,
Senior Research Fellow at the Paragon Institute, and Senior
Fellow at the Manhattan Institute.............................. 11
Prepared Statement........................................... 79
Dr. Chapin White, Director of Health Analysis, Congressional
Budget Office.................................................. 13
Prepared Statement........................................... 91
APPENDIX
Responses to post-hearing questions for the Record
Dr. Fiedler.................................................. 94
Dr. Dafny.................................................... 96
Mr. Merkel................................................... 97
Dr. White.................................................... 104
Charts submitted by Chairman Sheldon Whitehouse.................. 107
Documents submitted for the Record by Chairman Sheldon Whitehouse 109
Statement submitted for the Record by The OrthoForum............. 186
Statement submitted for the Record by Patient Rights Advocate.... 190
IMPROVING CARE, LOWERING COSTS: ACHIEVING HEALTH CARE EFFICIENCY
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WEDNESDAY, OCTOBER 18, 2023
Committee on the Budget,
U.S. Senate,
Washington, DC.
The hearing was convened, pursuant to notice, at 10:01
a.m., in the Dirksen Senate Office Building, Hon. Sheldon
Whitehouse, Chairman of the Committee, presiding.
Present: Senators Whitehouse, Wyden, Kaine, Van Hollen,
Grassley, Johnson, Marshall, Braun and R. Scott.
Also present: Democratic staff: Joshua P. Smith, Budget
Policy Director; Melissa Kaplan-Pistiner, General Counsel;
Anirudh Srirangam, Healthcare Policy Advisor; Dan RuBoss,
Senior Tax and Economic Advisor and Member Outreach Director.
Republican staff: Krisann Pearce, General Counsel; Nic
Pottebaum, Professional Staff Member; Ryan Flynn, Staff
Assistant.
Witnesses:
Dr. Matthew Fiedler, Senior Fellow, The Brookings
Institution
Dr. Leemore Dafny, Professor, Harvard Business School and
Harvard Kennedy School
Dr. G. Alan Kurose, Chair, Rhode Island Foundation, and
Former President, Coastal Medical
Mr. Theo Merkel, Director of Private Health Reform
Initiative, Senior Research Fellow at the Paragon Health
Institute, and Senior Fellow at the Manhattan Institute
Dr. Chapin White, Director of Health Analysis,
Congressional Budget Office
OPENING STATEMENT OF CHAIRMAN WHITEHOUSE \1\
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\1\ Prepared statement of Chairman Whitehouse appears in the
appendix on page 34.
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Chairman Whitehouse. I have the permission of the Ranking
Member to proceed while he comes here from the Finance
Committee. We will be having members in and out throughout the
morning because this is a very busy day for hearings in
Congress. In fact, I have three this morning. So, you'll see
people come and go.
I do want to use this hearing to build a record for ways
that we can save in the budget on health care costs. And so,
today's hearing is about excess costs in health care, and ways
we can reduce the budget by spending health care dollars more
efficiently.
As I point out often, and as this graph shows (insert
footnote in editing), the United States (U.S.) continues to
spend more on health care as a percentage of gross domestic
product (GDP) than any other peer Organisation for Economic
Cooperation and Development (OECD) country.
And at the same time, the vertical graph is life
expectancy. And our national, the average life expectancy in
this country is lower than that of most of our peer countries,
parallel to Estonia.
We also spend more on health care per person, not just per
GDP, over one and a half times more than the next closest
country, Switzerland. We're spending $4 trillion a year. And
the Centers for Medicare and Medicaid (CMS) actuary estimate
that health spending will grow to 20 percent of GDP by 2031.
Not only is our life expectancy in America lower than you
would expect compared to other OECD countries, for all the
money we spend, but has actually declined over the last two
years. An American's life expectancy is now the lowest it has
been in two decades. We can do better than to be on par with
Estonia, particularly when we're spending nearly double on
health care as a percentage of GDP.
Put very simply, we get very little bang for 4 trillion
bucks.
It is grim, but there are some signs of progress. And we'll
hear today from experts about how we can do better. The
Congressional Budget Office (CBO) has found that federal health
care spending between 2010 and 2020 was more than a trillion
dollars lower than CBO had projected prior to implementation of
the Affordable Care Act (ACA).
And as this chart shows, CBO now projects the U.S. will
spend $4.6 trillion less on the major federal health programs,
mainly Medicare and Medicaid, over the next decade than was
projected pre-ACA.
CBO also found growth slowed in spending per beneficiary.
While there are many contributing factors, the deceleration
shows that smart policymaking and reforms can help bend the
cost curve. The Affordable Care Act fundamentally changed
health care. And thanks to the payment modernization and care
transformation it initiated, we're seeing reduced health
spending. But our work isn't done.
Notwithstanding Medicare's new power to negotiate the price
of some drugs, thanks to the Inflation Reduction Act, Medicare
spending continues to grow faster than the rest of the federal
budget. And our national health expenditures are rising rapidly
still.
That's because our fragmented and endlessly complex health
care system creates the perfect environment for inefficiencies
to fester. It is where excess costs live and grow.
Today we will hear from experts about three areas of
inefficiency that have increased health care costs for
patients, families, and the Federal Government. And I would
add, also, increased frustration.
First, we will hear about the dizzying web of
administrative tasks, the billing, the reporting, and all the
non-clinical work incidental to the actual delivery of care
that providers face. We will hear how these burdens are
responsible for over half a trillion dollars in health care
spending every year, and annoyances like prior approvals that I
think for Accountable Care Organizations (ACOs) are not even
necessary.
Our discussion on this is especially timely. Research
released last week revealed possible savings between $40 and
$60 billion a year just from fixing the mess of health care
billing and claims.
Next, we'll hear about how consolidation in health care can
raise prices for patients, leading to higher federal health
spending. We'll also learn about potential solutions, like
health cost databases that don't just bring much needed
transparency into the opaque world of health prices, but also
enable stakeholders to take actionable steps to control
spending based on that data.
18 states, including Rhode Island, are already making use
of tools like these known as All-Payer Claims Databases, to
reduce patients' costs and improve care.
Then we'll hear from one of Rhode Island's leading health
care experts, Dr. Al Kurose, about how our fragmented health
system, with patients often navigating multiple providers at
different sites instead of obtaining care from a primary care
provider, results in worse care at higher cost.
We'll hear how delivery system reforms like Accountable
Care Organizations can promote higher quality care with less
money spent. Patients seeking care are often lost in the maze
of our current fee-for-service system. Transitioning to value-
based care, predicated on strong primary care, can help achieve
the long-sought triple aim of better care, better health, and
lower costs.
Within our current health care system there is no doubt
that value-based care is the best solution. Value-based care
rewards providers not based on how much care they deliver for
patients but on how well they deliver it.
A decade on from the implementation of the ACA we have
learned a great deal. We have learned that simplifying non-
clinical work in health care, changing how we pay for health
care, and transforming how we deliver health care can both
lower costs and improve outcomes. If we do all of this more
often and at scale, we can deliver the best and most accessible
health care for America's patients.
With that, I will turn to my distinguished Ranking Member
Chuck Grassley.
OPENING STATEMENT OF SENATOR GRASSLEY \2\
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\2\ Prepared statement of Senator Grassley appears in the appendix
on page 36.
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Senator Grassley. Thank you for this very important
hearing, Mr. Chairman, a very important subject of improving
health care and lowering costs. And thanks to all of our
witnesses for the time that you've put in, the extra time you
put into educating Congress and preparing for this.
Health care might be one of the few markets in our economy
where the consumer doesn't know the price before they buy it.
And they rarely pay for it directly. Yet, Americans spend more
than $4.3 trillion annually on health care. Our spending has
more than tripled as a percentage of gross domestic product
since 1960.
Growing health care costs don't just strain Americans'
pocketbooks, they also are key drivers of widening budget
deficits and the Federal Government's unsustainable fiscal
outlook. And it's not clear that we're getting our money's
worth for all that spending.
Major health care programs' spending eats up 32 percent of
federal revenue today, and it will be 45 percent of revenue
by--mid-century. Our health care system has plenty of waste and
inefficiencies that need fixing. Increasing transparency and
competition, fighting fraud, and getting rid of red tape are
some key areas to start with.
You should know what something costs before you buy it.
That's common sense for any consumer. That transparency is what
we need.
Until recently, we didn't apply sunshine to health care
prices. I'm glad hospitals and health plans are now required to
report their pricing data, but I'm not sure that it's in
consumer-friendly ways in which it's put out, and may not be as
effective as it was intended to be.
More transparency should also be applied to Pharmacy
Benefit Managers, a very opaque middle people between
pharmaceutical companies and the consumer. And I think this
would lower patient and taxpayer prescription drug costs.
Another way to lower health care costs is to ensure
taxpayer dollars are being used wisely. Last year alone our
federal major health care programs lost over $130 billion to
what we refer to around here as fraud, waste, and abuse.
I'm the author of a major and more recent update to the
Federal Government's most powerful tool in fighting fraud, the
False Claims Act. And since I got that adopted in 1986, we have
seen the Federal Government recover more than $72 billion lost
to fraud, and saved billions more by deterring would be
fraudsters.
We should also be reducing unnecessary red tape and
administrative burdens. Between 1975 and 2010, the number of
physicians grew 150 percent while the number of health care
administrators increased by 3,200 percent. This administrative
growth is driven by regulations which take more compliance time
and financial resources away from patient care.
We need policies, that promote the discovery of new cures
and better treatments, not overly-administrative price controls
that stifle innovation.
I worked for five years to allow the sale of over-the-
counter hearing aids with Senator Warren of Massachusetts.
Today, consumers can buy a pair of high quality and safe
hearing aids at $3,000 less compared to a year ago.
I also support improving value in our health care system.
But we need to accurately account for what's working and what's
not working.
Recently, the Congressional Budget Office found that the
Center for Medicare and Medicaid Innovation, a program created
with a goal of lowering costs, did not lower Medicare costs.
Let me emphasize, that's not Chuck Grassley saying that, the
Congressional Budget Office has said that.
CBO says the program increased federal spending. I invited
CBO to this hearing, and look forward to learning about their
analysis today.
We should look to the market-based solutions similar to
Medicare Part D, which I also led the team on Finance Committee
to get adopted in 2003, because it lowers costs and improved
care. In the first decade of Part D, the Congressional Budget
Office found that this Part D program ended up costing
taxpayers 36 percent less than projected.
Finally, we can't talk about waste and inefficiency in the
health care system without discussing the country's fiscal
situation. According to CBO, the federal budget deficit in the
fiscal year that just ended clocked in at about $2 trillion.
And future deficits are projected to be even higher, partly
because of growing health care spending.
Health care spending can be made more efficient without
compromising quality of care and reducing access, especially in
rural America. I hope that we can build upon the ideas that we
hear here today from this outstanding panel to address our
country's fiscal challenges, while also improving health care
for Americans.
Thank you.
Chairman Whitehouse. Thank you very much, Senator Grassley.
Our witnesses today are, first, Dr. Matthew Fiedler, who is
the Joseph A. Pechman Senior Fellow in Economics Studies at The
Brookings Institution, where his research examines a range of
topics in health care, economics, and policy.
Prior to joining Brookings, Dr. Fiedler served as Chief
Economist on the staff of the Council of Economic Advisors,
where he oversaw the council's work on health care, including
implementation of the Affordable Care Act.
We'll then hear from Dr. Leemore Dafny. Dr. Dafny is the
Bruce V. Rauner Professor of Business Administration at the
Harvard Business School, and Professor of Public Policy at
Harvard Kennedy School.
Professor Dafny's research focuses on competition and
consolidation in health care markets. She previously served on
the Panel of Health Advisors for the Congressional Budget
Office, and was Deputy Director for Health Care and Antitrust
in the Bureau of Economics at the Federal Trade Commission.
Then we'll hear from Dr. Al Kurose. Dr. Kurose worked as a
practicing primary care physician in a community-based office
for 20 years. In his second career as a health care executive
and community leader he has continued his focus on innovative
approaches to how care is delivered and paid for.
For 14 years, Dr. Kurose led Coastal Medical through its
transition into an ACO and, indeed, a star performer in the
Medicare Shared Savings Program. He'll be speaking to us today
about lessons from that experience and the movement to
accountable care that he and Coastal have been a part of.
Next will be Mr. Theo Merkel. He is the Director of the
Private Health Reform Initiative and a Senior Research Fellow
at the Paragon Institute, and Senior Fellow at the Manhattan
Institute.
Previously, he served as Special Assistant to the President
for Economic Policy at the National Economic Council in the
White House, and served as legislative director here in the
Senate for Senator Pat Toomey.
Our final witness today is CBO's own Dr. Chapin White, the
Director of Health Analysis at the Congressional Budget Office.
Dr. White first joined CBO in 2005 as a health economist, and
went on to serve as a Senior Health Researcher at the Center
for Studying Health System Change, as well as a Senior Policy
Researcher at the RAND Corporation, before rejoining CBO in
2020.
My hope is that this hearing sets a foothold or a
foundation for bipartisan discussions on ways that we can move
legislation to reduce the costs of care and improve the quality
of care in the health care system. And I hope we can focus on
that, not only today, but in the months ahead as the Committee
continues to rely on all of you for your expert advice.
Let me start with Dr. Fiedler. You all will have five
minutes each. Your full statements will be made a matter of
record.
STATEMENT OF DR. MATTHEW FIEDLER, SENIOR FELLOW, THE BROOKINGS
INSTITUTION \3\
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\3\ Prepared statement of Dr. Fiedler appears in the appendix on
page 39.
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Dr. Fiedler. Chairman Whitehouse, Ranking Member Grassley,
and members of the Committee, thank you for having me here
today. My name is Matthew Fiedler, and I am a health economist
and a Senior Fellow at The Brookings Institution.
My testimony today examines ways that policy makers can
reduce the administrative costs generated by interactions
between health care providers and payers. These interactions,
which include contract negotiations, claims transactions, prior
authorization activities, and quality reporting, are costly. A
reasonable estimate is that they generate administrative costs
totaling around $0.5 trillion per year, equivalent to about 11
percent of annual health care spending.
Most of these costs are ultimately borne by consumers and
taxpayers.
Importantly, administrative activities can be valuable.
Billing processes compensate providers for delivering care.
Prior authorization processes can help prevent delivery of
inappropriate services. And audit processes can help uncover
and deter fraud.
So, efforts to reduce administrative costs have to proceed
thoughtfully.
In exploring reforms, it's worth considering both targeted
policy changes and policy changes that would affect a broader
swath of provider-payer interactions.
A good example of a targeted policy change is eliminating
Medicare's Merit-Based Incentive Payment System, or MIPS. Under
MIPS, Medicare scores clinicians in several domains, including
the quality and efficiency of their care. Clinicians' payments
rates are then adjusted up or down based on their scores, with
the goal of encouraging high performance. Much of the
information used to score clinicians, particularly on quality,
is reported by clinicians themselves. And practices are
expected--practices are estimated to spend thousands of dollars
per physician, per year reporting the MIPS.
Yet, despite these large administrative costs, MIPS is
likely not improving patient care. One problem is that
clinicians can choose the measures they are evaluated on, which
makes it hard to meaningfully compare across clinicians. Plus,
past studies of programs like MIPS have found little evidence
that they improve performance. Since MIPS appears to be
generating large administrative costs with few benefits, there
is a strong case for eliminating MIPS and, ideally, replacing
it with something more effective and less burdensome.
There are other targeted changes that could also reduce
administrative costs with few tradeoffs, such as performing the
processes to determine prices for out-of-network services under
the No Surprises Act, and reforming the risk adjustment methods
used in Medicare Advantage.
But my larger point here is that many seemingly narrow
health care policy decisions affect administrative costs. And
it is worth being attentive to those effects.
Turning to broader reforms, one salient feature of our
health care system is that providers must deal with a menagerie
of public and private payers, all of which set different rules.
This may be a key reason that administrative costs are higher
in the United States than in many other countries. And it
suggests that standardizing billing, coverage, or quality
reporting processes across payers could help reduce
administrative costs.
Relative to the targeted reforms I just discussed, these
approaches may offer greater savings potential, but may also
present more significant risks and tradeoffs.
One target for standardization is the method that providers
and payers use to exchange claims information. Some have
proposed creating a central clearinghouse that would accept
claims from providers in a standardized format and route them
to payers, similar to approaches used in some other industries
and some other countries' health care systems.
This approach would likely more fully standardize claims
transactions than past federal efforts which have focused on
establishing standards to govern bilateral provider-payer
interactions. The key challenge would be ensuring that the
clearinghouse was well run, as a poorly run clearinghouse could
have few benefits or even do harm.
Policymakers could also consider trying to standardize the
substance of some payer rules around billing, coverage, or
quality reporting. This approach may have particularly great
potential to reduce administrative costs. But, at least in some
cases standardized processes might be less effective, whether
because they lack tailored specific payer circumstances or are
just poorly crafted.
For example, a standardized prior authorization process
might be less effective in deterring inappropriate utilization,
which could partially or even fully offset any administrative
savings. Thus, the attractiveness of this type of
standardization is likely to be highly case-specific.
Quality reporting may be one domain where the balance of
costs and benefits favors aggressive standardization, such as
by requiring all payers to rely on a standard set of quality
measures reported through a central clearinghouse. This
approach might not only reduce administrative costs, but also
make the resulting data more useful by increasing sample sizes,
and facilitating comparisons across payers.
It is also questionable whether payers currently produce
substantial value by tailoring quality measures to their
specific circumstances, which may reduce the potential
downsides of standardization.
Thank you again for the opportunity to testify. And I look
forward to your questions.
Chairman Whitehouse. Dr. Dafny.
STATEMENT OF DR. LEEMORE DAFNY, PROFESSOR, HARVARD BUSINESS
SCHOOL AND HARVARD KENNEDY SCHOOL \4\
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\4\ Prepared statement of Dr. Dafny appears in the appendix on page
53.
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Dr. Dafny. Chairman Whitehouse, Ranking Member Grassley,
and distinguished members of the Committee, thank you for the
opportunity to testify to you today.
My name is Leemore Dafny. I'm an academic health economist
with longstanding research interests in competition and
consolidation in the health care sector. Currently, I am a
professor at the Harvard Business School and at the Harvard
Kennedy School. Previously, I was a Deputy Director for Health
Care and Antitrust in the Bureau of Economics at the Federal
Trade Commission and a member of the Panel Health Advisors to
the Congressional Budget Office.
The U.S. spends a larger share of its GDP, over 18 percent,
on health care than any other country. Studies show that high
prices, not the type or quantity of services consumed, nor the
health of our population, are the primary driver of higher U.S.
spending. International comparisons also show the U.S. lags
other leading developed countries on most dimensions of health
care quality.
My focus today is on health care providers, such as
hospitals and physicians, who jointly account for half of our
health care spending.
As you are aware, government programs like Medicare set
prices for provider services, like hospital admissions. But the
private sector relies on market-based prices, and those prices
are high and growing. In the 90s, private prices were about 10
percent higher than Medicare prices. By 2012, they were 75
percent higher. And today, private insurers pay more than twice
what Medicare pays on average for hospital care.
While public insurance programs don't pay these commercial
prices, there are significant federal budgetary implications of
high commercial prices. High commercial prices mean high
employer-sponsored premiums, raising the cost of the tax
exclusion for employer-sponsored coverage.
High commercial prices also impact the premiums and,
therefore, the federal subsidies for enrollees purchasing
subsidized plans through the health insurance marketplaces.
Consolidation is a key driver of rising prices in the
health care industry. Scores of studies find that mergers and
acquisitions result in higher commercial prices, with little,
if any, evidence of improvement in quality. In addition,
Medicare's payment policy has driven some of that
consolidation, in particular, acquisition of physician
practices by hospitals.
Providers assert that high commercial rates are needed to
cover the costs of Government-insured patients for whom care is
reimbursed at lower rates, below their actual cost. This
dynamic ignores the fact that costs are themselves affected by
reimbursement. Economic research finds that hospital expenses
fall when prices fall. And health care at the current pace of
cost and price growth is untenable.
I have three recommendations to offer today:
First, establish a national All-Payer Claims Database, or
APCD, which contains insurance claims from public and private
insurers. Currently, researchers and regulators can't track
what's happening in order to understand where and why we are
paying more. The industry is running circles around us, mining
the data to their benefit and exploiting loopholes. And it's
too important and expensive for us to be this far behind.
The APCD could also be used by states, if they wish, to
regulate commercial health care prices. Setting price ceilings
or restrictions on price growth would not only address a
symptom of consolidation, it would also prevent additional
consolidation aimed at amassing market power to raise prices.
Second, invest in vigorous antitrust enforcement through
increased funding for the Federal Trade Commission and the
Antitrust Division of the Department of Justice.
While GDP increased in real terms by 55 percent between the
year 2000 and 2022, the budget allocation to the Antitrust
Division increased just 2.6 percent. If we are going to rely on
private markets to deliver health care, and on commercial
insurers to administer the majority of it, we need regulators
to help protect and promote competition in these markets.
Third, align Medicare's payment rates across ambulatory
settings. Stop paying more for the same health care services,
like routine office visits and lab work, when they are
delivered in hospital-owned practices or facilities. This
preference not only increases Medicare and non-Medicare
spending today, it fuels higher spending tomorrow because it
drives more integration of hospitals with physicians and
bolsters the market power of health care systems.
Adopting any and, ideally, all of these recommendations
would mitigate the root causes of our nation's high provider
prices, prices that lead to higher employer-sponsored insurance
premiums, lower tax revenue, higher subsidies for plans
purchased through the health insurance marketplaces, and higher
Medicare spending.
I urge you to evaluate the recommendations closely, as your
decisions can help us to achieve higher-value health care with
a price tag the nation can afford.
Thank you.
Chairman Whitehouse. Thank you.
I'll turn now to Dr. Kurose.
And I will note that in addition to his full testimony
being made part of the record in these proceedings, we're also
going to accept into the record a letter from the National
Association of ACOs, and several ACOs, including Rhode Island's
own Coastal and Integra, encouraging Congress to extend
Alternative Payment Model (APM) bonuses for physicians.\5\
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\5\ Document submitted by Chairman Whitehouse appars in the
appendix on page 109.
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So, that will be made a part of the record, without
objection.
Dr. Kurose, please go ahead.
STATEMENT OF DR. G. ALAN KUROSE, CHAIR, RHODE ISLAND
FOUNDATION, AND FORMER PRESIDENT, COASTAL MEDICAL \6\
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\6\ Prepared statement of Dr. Kurose appears in the appendix on
page on page 70.
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Dr. Kurose. Chairman Whitehouse, Ranking Member Grassley,
and other members of the Committee, thank you for having me
here today to discuss the topic of managing the care of
patients and the health of populations to reduce the total
costs of health care.
My name is Dr. Al Kurose. For the first 20 years of my
career I saw patients every day as a practicing primary care
internist.
For the last 15 years I've worked as a health care
executive and community leader on care transformation and
payment reform. My North Star has been pursuit of the Triple
Aim of better care and better health at a lower cost. From 2008
until last year I served as the President of Coastal Medical, a
large primary care practice in Rhode Island that transformed
itself into a physician-led ACO that has been one of the top
performers in the Medicare Shared Savings Program.
I have three main points I'd like to make today.
Number one, I believe that as an industry we can transform
how health care is delivered and paid for in ways that will
reduce costs and make things better for patients. In many cases
I'll argue that we already know what to do.
Number two, primary care is the foundation of any high-
performing health care system. And right now primary care is in
crisis, and urgent help is needed.
Number three, advanced primary care by itself is, in my
view, necessary but not sufficient to sustainably achieve the
Triple Aim. Continued movement away from fee-for-service and
toward value-based and prospective payment models is needed,
particularly for specialists and hospitals where more skin in
the game is needed when it comes to value-based payment.
The 2021 National Academy of Sciences, Engineering, and
Medicine Report on Primary Care concluded that ACOs achieved
modest cost savings, as well as improvements in quality and
patient satisfaction. Smaller physician-led ACOs with a greater
percentage of primary care physicians were the best performers.
And Coastal Medical was one of them.
On the poster to your left the green line represents the
average total cost of care for Coastal's Medicare beneficiaries
from 2009 through 2019. You can see that upon entry into the
Medicare Shared Savings Program in 2012, Coastal not only bent
its curve for total cost of care, it broke it.
An important question to ask, then, is whether learnings
from the success of smaller physician-led ACOs like Coastal are
generalizable to larger systems of care. I will argue that many
of them are. Coastal's Diabetes Management Program is a good
example.
In that program, select patients are equipped with glucose
meters that use cellular networks to automatically transmit
blood sugar results in real-time to a multi-disciplinary care
team that then engages with the patient if, and only if,
intervention is required for a high or low blood sugar.
In the old model of care 10 or 15 years ago, a patient with
a high sugar might have just written it down in their logbook
and planned to discuss it at their next visit with their doctor
in a couple of months. Now their phone is going to ring. And
that proactive outreach by the care team to address the high
sugar when it's happening may well prevent an emergency room
visit or hospitalization that might otherwise occur a day or
two later.
Clinical programs like this go well beyond what I first
imagined when we started the ACO work back in 2012. Generally,
such programs have been the result of cycles of iterative
learning, which have been a characteristic feature of many of
the most successful ACOs. It is these types of lessons about
delivering the right care, in the right place, at the right
time that I'm referring to when I assert that in many cases we
already know what to do.
As I mentioned, primary care is in crisis. We have a
perfect storm of an aging physician workforce, a shrinking
pipeline of new primary care physicians (PCPs), widespread
physician burnout, and a large cohort of baby boomers aging
into Medicare. Workforce initiatives such as those coming out
of the Health, Education, Labor, and Pensions (HELP) Committee
and improved compensation of primary care physicians are
important next steps.
I believe we also need to continue experimenting with
expanding the primary care team, and to pay more attention to
understanding and mitigating physician burnout.
Finally, primary care capitation as a payment model may
help to take primary care teams off the hamster wheel of back-
to-back visits, all day, every day.
In closing, I will reiterate my initial plea for more
value-based payment for specialty and hospital care. Primary
care cannot go it alone in this domain and sustainably succeed.
That said, I remain cautiously optimistic because I believe
that in many cases we already know what to do.
Thank you.
Chairman Whitehouse. Thank you, Dr. Kurose.
Mr. Merkel.
STATEMENT OF THEO MERKEL, DIRECTOR OF PRIVATE HEALTH REFORM
INITIATIVE, SENIOR RESEARCH FELLOW AT THE PARAGON HEALTH
INSTITUTE, AND SENIOR FELLOW AT THE MANHATTAN INSTITUTE \7\
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\7\ Prepared statement of Mr. Merkel appears in the appendix on
page 79.
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Mr. Merkel. Thank you, Chairman Whitehouse and Ranking
Member Grassley, for convening this hearing and giving me the
opportunity to testify.
The Federal Government spends more money in health care
than any other area, exceeding $2 trillion in 2022. For
context, this is now over twice as much as is spent on defense.
The pace of growth is unsustainable. The CBO projects
health care to absorb a larger and larger portion of GDP for
the foreseeable future. Perhaps most problematic, we do not get
a good return for our money.
For instance, Washington actually spent more on improper
payments for health care, $150 billion last year, than proper
payments for the Supplemental Nutrition Assistance Program,
housing assistance, or transportation infrastructure.
A widely-cited study by the National Academy of Medicine
estimated that 30 percent of all U.S. health spending does not
actually improve health. Last year the OECD compared health
spending in developed nations, and confirmed that the U.S.
spends more on just about everything, but the key contributors
to our outsized health spending are payments for hospital and
physician services. Ironically, given last Congress' action on
drug prices, we actually spend proportionally less on retail
pharmaceuticals than every G7 country but the United Kingdom.
Well-intentioned but ultimately counterproductive
Government policies increase prices and health spending by both
inflating demand and decreasing supply haphazardly.
First, far from being parsimonious with our federal health
care programs, we are one of the only nations that subsidizes
health care largely without limit.
If Medicare is billed for a covered item or service, it
will pay it.
If a state makes a Medicaid expenditure, Washington will
match it.
If insurers selling Affordable Care Act plans raise
premiums, the federal taxpayer covers the increase.
No matter how generous a health plan an employer chooses,
it receives a tax break. Ultimately, we generously subsidize
care that Americans need, but we also subsidize a lot of
inefficient care and waste.
Second, federal and state policies limit supply by
restricting who can provide health care items and services, and
where they can provide them. This insulates providers and
suppliers from competition, allowing them to command higher
prices and remain inefficient. It also severely limits
innovation, as it gives incumbent providers bureaucratic and
political tools to prevent the type of disruption that we have
seen in other sectors of the economy.
With only a few exceptions over the past several decades,
Congress has either exacerbated these two fundamental issues or
just tried to work around them with top-down approaches that
rely on government technocrats to try to manipulate the system
into efficiency. We are here today because those efforts have
largely failed.
Given its size and importance, Medicare is often the
epicenter of the policy debate. Since 1983 the reform of choice
has been price controls, starting with hospitals, moving to
physicians, and recently moving to prescription drugs. But
price controls largely just attempt to approximate the cost of
providing a service or producing an item. They avoid whether
that service or item should be provided, and the value that it
may offer relative to alternatives.
Simultaneously, despite the best efforts of the Center for
Medicare and Medicaid Services, price controls are inevitably
inaccurate and hugely distort how care is delivered and where
investment flows.
The Affordable Care Act put faith in a similarly top-down
approach that an entirely new agency of well-intentioned
bureaucrats, insulated from congressional meddling, would be
able to engineer better payment methods. Yet, the CBO recently
found that after a decade of work, the Center for Medicare and
Medicaid Innovation managed to add to the deficit.
Fortunately, there are many ways to reduce wasteful
spending while not reducing benefits on enrollees. I have a
list of proposals in my written testimony. But to highlight a
few principles:
One, shift financial risk away from taxpayers. This does
not mean we need to shift risk to beneficiaries. It could be
ACOs, other providers, insurers, states, or others. But our
major health care programs should no longer simply write blank
checks.
Two, get the government out of the business of dictating
who should be paid, how much, and where. Site-neutral payment
reforms being discussed in Congress would be a good incremental
step.
Three, favor bottom-up solutions like enabling patients and
employers through more coverage options and price transparency,
instead of the top-down approaches that have repeatedly failed
over time.
Thank you again for inviting me to testify. And I look
forward to your questions.
Chairman Whitehouse. And, finally, Dr. White.
STATEMENT OF DR. CHAPIN WHITE, DIRECTOR OF HEALTH ANALYSIS,
CONGRESSIONAL BUDGET OFFICE \8\
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\8\ Prepared statement of Dr. White appears in the appendix on page
91.
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Dr. White. Chairman Whitehouse, Ranking Member Grassley,
and members of the Committee, I appreciate the opportunity to
appear before you today.
In consultation with Budget Committee staff I've focused
this testimony on Accountable Care Organizations, Capability
Maturity Model Integration (CMMI), and the unexpected slowdown
in federal health care spending.
Because ACOs voluntarily assume responsibility for the
quality and costs of care for a defined group of patients, they
have the potential to reduce unnecessary care, improve care
coordination and patients' health, and reduce spending. Health
care providers participating in ACOs, or other value-based
payment arrangements, receive financial incentives to improve
the efficiency and quality of care. Such incentives contrast
with those found in Medicare's traditional fee-for-service
program in which separate payments are generally made for each
encounter or service delivered.
Fee-for-service, as many observers have pointed out, tends
to create incentives for providers to deliver additional and
more-complex services.
CMMI's goal is to identify approaches that reduce spending
or improve the quality of care. And to do so, it operates
models that test new ways to deliver and pay for health care,
including models that establish value-based payment
arrangements.
The ACA established a permanent ACO program in Medicare
known as the Medicare Shared Savings Program (MSSP). CBO has
reviewed the evidence on the performance of the MSSP, and found
that the program was associated with small budgetary savings in
the early years of its operation. The more recent evidence is
somewhat limited and challenging to interpret. It's become more
difficult to find reasonable control groups to use. And
providers have the ability to opt in and out of the ACO
program.
What were CMMI's budgetary effects over its first decade of
operation? As other folks have previewed, CBO has updated its
estimate of the budgetary effects of CMMI, and currently
estimates that CMMI's activities increased direct federal
spending by $5.4 billion, or 0.1 percent of net spending on
Medicare between 2011 and 2020. Specifically, CMMI spent $7.9
billion to operate models, and those models reduced spending on
health care benefits by $2.6 billion.
That estimate reflects CBO's review of public evaluations
of 49 models initiated in CMMI's first decade.
In terms of CBO's projections of CMMI's effects over the
current baseline projection period from 2024 to 2033, CBO
projects that CMMI will increase net federal spending by less
than $50 million, which is a star in CBO's tables.
Over that period, the estimated effect of CMMI's activities
transition from an annual net increase to an annual net
decrease, reflecting ongoing growth in the number of certified
models that continue to produce savings over time.
Legislative proposals that would affect CMMI could fall
into one of three categories: modifications to specific models,
changes to the parameters within which CMMI operates, and a
repeal of CMMI's statutory authority, or rescissions of
unobligated funding.
In general, CBO would analyze the evidence on specific
models if the legislation related to a specific model, or when
data are not available, or if the legislation is more general
than that, CBO would rely on a general framework using
information on CMMI's prior activities and performance. And, as
always, the estimated effects would depend on the details of
the legislation.
So, have alternative payment models contributed to the
slowdown in health care spending?
The implementation of MSSP and the creation of CMMI have
occurred during a period of unexpectedly slow growth in federal
health care spending. Whether that slow growth is related to
CMMI or other alternative payment models created under the ACA
is not entirely understood. But, CBO's review of the effects of
the MSSP and its estimate of the effects of CMMI in its first
decade of operation suggests that they together were not
factors in the broader slowdown.
Still, some researchers have posited that the existence of
CMMI may have led to broader system-wide changes that are not
attributable to a specific model.
Over the past decade, CBO has been tracking the slowdown of
federal health care spending and has previously pointed to
several contributing factors. Broader factors include decreases
in the growth of Medicare's payment rates, reduced spending on
patients with cardiovascular disease, and a shift in the
relative importance of technology in fueling the growth of
health care spending.
Federal spending on Medicare and Medicaid programs also
grew more slowly than CBO projected. A key factor underlying
Medicare's slower-than-expected growth was slower growth in net
spending on prescription drugs. For Medicaid, a key factor was
less-than-anticipated spending for long-term services and
supports.
Those are my prepared remarks.
Chairman Whitehouse. Thank you very much, Dr. White.
Let me start with Dr. Kurose.
You and I lived through, me much less so than you, all the
difficulties of transitioning Coastal Medical to an ACO and to
a very successful ACO. But if you look through all those
difficulties to the experience of your patients at the end of
the day, how do you evaluate Coastal Medical's patient
experience as a result of the successful transition?
Dr. Kurose. You know, as somebody who practiced primary
care for 20 years and ended that part of my career just as the
ACO movement was really getting up and running, the things that
I've seen happen at Coastal for patients really go way beyond
what I could have imagined.
There is a whole variety of centralized clinical programs
that improve access to care, timeliness of care. There are
disease management programs for specific chronic conditions.
There is--there are primary care urgent clinics nights,
weekends, holidays. There is a whole multi-disciplinary team
available to many of our patients, with members of the team
including clinical pharmacists, social workers, navigators, co-
located behavioral health providers.
And so I look at the movement to accountable care as really
being the impetus to allow that great expansion of services to
really deliver a level of care that we just couldn't do when I
was in practice.
Chairman Whitehouse. So, in order to save the millions for
Medicare that Coastal has saved, you were not obliged to cut
benefits to your patients; indeed, they saw new and improved
services?
Dr. Kurose. Yeah, I think that's an accurate statement. And
we have sort of a truism that we repeated often at Coastal,
which is that you have to spend more to save more. So, you have
to invest in the human and technology infrastructure to really
be able to execute population health management if you want to
be able to deliver the kinds of services that we're talking
about.
But it was the alternative payment models inherent in the
ACO model that allowed us to generate that additional revenue,
which we then reinvested to fund all that clinical programming,
which ultimately improved efficiency, improved care, reduced
total cost of care.
Chairman Whitehouse. The bureaucratic system did not always
entirely support that transition. One of the things that I
think makes sense in a fee-for-service system is prior
authorization, just to keep billings from going through the
roof. But once there is, as you say, skin in the game, the
rationale for prior approvals in a value-based system appears
to diminish, if not entirely evaporate.
Were you obliged nevertheless to continue to see prior
approvals, and if not, why not? Was that a success?
Dr. Kurose. We certainly did, and Coastal still does, see
requirements of that type. The sort of interim solution at
Coastal was to create teams of people who could assist
providers in that process so as to reduce the administrative
burden and the time commitment to that particular aspect of the
work.
But I agree completely with the underlying thesis that,
when you incent provider organizations to be accountable for
total cost of care, once you have that construct in place, then
you may not need to have all these administrative processes.
One thing that I'll add is that it's important, as we try
to build out and execute on these constructs, that we remember
that the payment model that an organization sees has to be
translated into an aligned compensation model for physicians if
you really want to lock in that mindset that we're counting on
to sort of control avoidable spending and improve efficiency.
So, knowing that there is alignment between organizational
payment models and physician compensation, I think, is
important if we expect to see the kind of outcomes you're
alluding to.
Chairman Whitehouse. Last point.
If I'm building a house or doing a major renovation, I hire
a general contractor to manage the project for me. And I expect
that general contractor to intermediate with electricians,
drywall folks, carpenters, all the specialists who do the work
of bringing the project to a successful conclusion.
Is that the way primary care presently works? And would it
be useful to try to put primary care providers into more of a
general contractor model so that they can intermediate between
the patient and the specialists and coordinate care more
effectively to the benefit of the patient?
Dr. Kurose. So, that's an interesting analogy. And I think
that there is a key role for primary care physicians to
coordinate care when a patient has multiple complex conditions
and requires the care of multiple specialists. I'm not sure all
my specialty colleagues would like the general contractor
analogy so much, but I think we could at least agree that what
we need is regular communication.
And I think the other thing that primary care docs are
uniquely positioned to do is to have a deeper understanding of
what the patient's own priorities and goals of care are. And in
that context, you know, the primary care doctor can really help
to shepherd the care of a patient through what you alluded to
earlier, I think correctly, as a very much fragmented system,
that is also highly complex.
For those of us who work in health care, even when we have
to help a family member try to navigate systems, even inside
baseball players find it challenging at times. And so, I think
that that's a really, really important aspect of the role of
primary care that we need to preserve and expand.
Chairman Whitehouse. Senator Grassley.
Senator Grassley. Thank you, Mr. Chairman, and thank you
all for your testimony.
Common sense supports all of us wanting to get more value
out of our health care system. I was proud to lead the effort
to implement Part D, nationwide prescription drug benefit for
seniors, a long time ago. We used a market-based approach.
Competition access and affordability has been a key hallmark of
Part D programs. And I think it--compared to what figures were
given by CBO at that time, it turns out to be a good steward of
the taxpayers' dollars, in the first decade costing 50 percent
less than CBO projected.
So, Dr. Merkel, what can we learn from Medicare Part D to
apply to other federal health care programs?
Mr. Merkel. Thank you for the question, Ranking Member
Grassley.
One of my key takeaways from Part D is there is often,
especially with entitlements, perceived unnecessarily to be
this tension between providing benefits and getting value for
both beneficiaries and taxpayers. I think Part D has been able
to show that this tension does not need to exist.
How did it do that? It mandated benefits, but it also
required that financial risk be shared between taxpayers
through Medicare, but also other entities which are Part D
plans. And very importantly for accountability, the
accountability of Part D plans is not just to the Government or
bureaucrats, but it's also to beneficiaries through choice.
They can choose plans or switch plans if they're unsatisfied
with the coverage options, and plans compete for beneficiaries.
The result has been seeking high value care. There has been
high utilization of generic drugs. You know, the United States
has higher utilization of generic drugs than many of our
international competitors. That's in part because of the way
that Part D works.
It's come in under budget, as you've noted, not just in the
first decade but, as Dr. White noted, it's come in under budget
again this most recent decade. And there's high beneficiary
satisfaction.
Senator Grassley. Yes. Dr. White, let me lead in with this,
the Center for Medicare and Medicaid Innovation receives $10
billion of mandatory funding every decade. Despite this
investment, CBO has found that CMMI has not lowered Medicare
spending.
Separately, CBO has found that Medicare's Shared Savings
Program was not a factor in slower growth of federal health
care spending.
Are these models that I just referred to validated by
independent third parties to determine if they save money?
And in addition to that question, if there are independent
analyses, what do they say?
Dr. White. Thank you, Ranking Member Grassley, for the
question.
First, I want to clarify. On CMMI the CBO's conclusion was
that it added to federal spending. Other researchers have come
to the same conclusion, including Brad Smith, who is a former
CMMI administrator, and Health Management Associates did a
study. Avalere did a study. So, CBO's conclusion on CMMI is
generally in line with the consensus.
On MSSP, CBO's conclusion was that it appears to produce
net savings. And the evidence is fairly clear from the early
years of the program. The evidence is a little harder to
interpret in more recent years. But that conclusion, that the
Medicare Shared Savings Program has produced small net
budgetary savings, is consistent with and partly based on what
outside researchers have said.
So, I think when I said that CMMI and MSSP were not a
factor in the slowdown, it's more to say that CMMI, over the
2011 to 2020 period, added a bit to federal health spending.
MSSP had net savings. Together, they were not a factor in the
fairly large slowdown during the 2011 to 2020 period.
Senator Grassley. Thank you, Mr. Chairman.
Chairman Whitehouse. Senator Van Hollen.
STATEMENT OF SENATOR VAN HOLLEN
Senator Van Hollen. Thank you, Mr. Chairman, and thank all
of you for being here.
Dr. Dafny, I'm going to start by asking you a question
related to the collection of data.
For many years, my state of Maryland has run an innovative
payment model that started with regulating hospital pricing in
the 1970s and now includes all-payer global budgets for
hospitals in the state, with incentives to reduce total cost of
care and improve efficiency and quality of care. So far, the
model has been meeting the Medicare savings goals and improving
care.
As part of this work, and it's ongoing work on pricing,
rate setting, and global budgeting, Maryland's All-Payer Claim
Database has strong hospital-based data. However, as you noted
in your testimony, many states struggle to obtain data on
Employee Retirement Income Security Act of 1974 (ERISA) plans
because these plans are regulated by federal statute and the
Supreme Court barred states from requiring self-insured plans
to submit data to address state databases, making obtaining
plan data more challenging.
How does greater access to claims data help regulators and
policymakers address costs and health equity issues?
And will the U.S. Department of Health and Human Services
(HHS) pricing transparency rules for insurers help fill the
gaps in price information that many states experience, or are
additional steps necessary to make sure that they have the
information that meets their needs?
Dr. Dafny. Thank you, Senator Van Hollen, for the question.
And, also, thank you to the state of Maryland for running some
very impactful experiments for us researchers to study and to
act as a laboratory for other states.
You asked me how does it help for us to have access to a
national All-Payer Claims Database? It helps enormously because
we cannot study the effects of mergers and acquisitions without
health insurance claims.
Right now, we rely on the largesse and interests of
commercial insurance companies. That interest has been waning,
and in order for us to assess the implications of a range of
phenomena, including private equity consolidation, including
the expanded geographic footprint of hospital systems, we
desperately need access to these data.
You mentioned the critical reason for the Federal
Government to act, and that is because of that 2016 Supreme
Court decision that ruled that states cannot compel self-
insured plans, which are regulated under ERISA, to supply their
claims data. So, we really need your help to enable an All-
Payer Claims Database.
And finally, you asked whether current efforts on price
transparency are enough. And my answer to that is simply no,
the transparency that is out there now. And that's for two
reasons.
One is that what is transparent now, to the degree that it
is transparent, as Senator Grassley mentioned, there are a lot
of issues with how it's being reported, is just price. And in
order to understand our nation's spending we need quantity,
too.
So, we have the prices for every possible--or could
theoretically have the prices for every possible combination of
service, insurance plan, and provider, but we don't know how
many of those triplets are actually being delivered. And
without any access to information about the quantity, we're
swimming in the dark.
And a second reason is that that data has been extremely
difficult for researchers to assemble because it is spread out
in a range of places and not uniformly reported.
Senator Van Hollen. I appreciate that answer and look
forward to working with you and others to try to address this
issue.
Dr. Fiedler, a question for you about hepatitis C, but
especially prescription models. And hepatitis C is a growing
disease with a rate of reported acute cases increasing 400
percent between 2010 and 2020. There are approximately 2.5 to 3
million people living with the disease. It also has lots of
side effects that lead to other complications.
But it is now curable with oral direct acting antivirals.
However, even with the competition and generic drugs in the
market, the cures can be incredibly expensive: $24,000 or more
for a course of treatment.
Louisiana, with the support of CMS during the previous
Administration, implemented an innovative subscription model
wherein they negotiated a bulk price in order to get unlimited
doses of medication for Medicaid and incarcerated patients. And
they also set up a screening and prevention program.
My question to you is do you agree that that subscription
model can work generally for diseases like this? And
specifically, how can we at the federal level learn from that
with respect to hepatitis C?
Dr. Fiedler. Thanks for the question.
I think it generally can make a lot of sense for a payer to
offer a manufacturer a somewhat larger total payment in
exchange for a much lower per dose price that facilitates
broader access. And I think a subscription model, as we've seen
in Louisiana, can be a very good way of achieving that.
I also think that there is a particular logic to the sort
of federally-run subscription model that's currently being
discussed in the hepatitis C context, given where some of the
access barriers we've seen here have come from.
There's something of a collective action problem among
payers, where society as a whole would be better off if there
was broad access to these drugs and we avoided the downstream
complications and the infections that come from active
infections. But since people bounce from payer to payer over
time, no particular payer is really that motivated to be the
one who makes the upfront investment in identifying cases and
treating them.
I think it's also relevant that Medicaid is an important
payer here, and historically, it's been a fairly stingy payer
across a variety of domains. We have seen that specifically in
the domain of the sort of coverage policies states have adopted
with respect to hepatitis C.
Against that backdrop, I think having the Federal
Government, you know, adopt the subscription model with respect
to hepatitis C, and then make the drugs available at very low
cost to Medicaid or other potential payers, has a strong
rationale.
Senator Van Hollen. Thank you. I appreciate that. We may
draw upon your expertise. We're in the process of putting
together legislation on that initiative.
Thank you, Mr. Chairman.
Chairman Whitehouse. Thanks, Senator Van Hollen.
Senator Braun.
STATEMENT OF SENATOR BRAUN
Senator Braun. Thank you, Mr. Chairman.
The amount of time I've spent on this issue before I got to
the U.S. Senate is a lot. I ran a business that, exactly what
we're talking about, became the biggest issue once it was of a
scale where it made a difference. And that started occurring
back in 2008.
I was finally sick and tired of hearing how lucky I was
that my premiums are only going up 5 to 10 percent a year.
That's the way you measure it in the real world, in a system
that's built upon remediation with a very inelastic demand once
you get sick or have a bad accident--with zero, nearly zero
consumer involvement.
It's easy to understand why we are where we are.
As pointed out, and I think very well, in both opening
statements, we're at that place where it's a tapeworm on the
economy. The providers are the same, whether it's a government
payer or a private system payer. So, unless we fix the
underlying system, don't expect much to change regardless of
what we do here. Because you can't--when it's that big a part
of your economy, it's not free market. It's like an unregulated
utility, if you want to really see what we've got as a health
care system.
Until we get our consumers engaged on primary health care
with their own skin in the game, the ones that can afford it,
you're probably going to have to have a system for those that
can't. Because I think in this country everybody ought to
deserve good health and well-being, but we've got a monstrous
system that we've evolved into.
I'm going to hope we have, with the number of people here,
a second round for questions. Do you think that looks possible,
Mr. Chair?
Chairman Whitehouse. It depends, but possible.
Senator Braun. Okay. So, I'm going to start here.
The largest sector of our health care economy is now
hospitals, large corporate hospitals. Back as recently as 10
years ago that was maybe \1/3\. Practitioners, doctors, and
nurses were about \1/3\, and the balance being split between
insurance companies and pharma. Now, hospitals are just under
50 percent.
The number of doctors I have spoken to that regret that
they've gotten into the business because they wanted their own
enterprise, they never imagined working for a big company
because they had to due to the arithmetic of their business.
I'm simply asking for one thing. That is transparency
throughout the system, like we have in all other markets. Get
rid of the barriers to entry that we've created here in
government helping hospitals, keep doctors from owning their
own hospitals and things like that. But I think that's where we
need to focus.
Secondarily are the insurance companies, because they work
together in an opaque system.
So, I've had a couple amendments, one recently with direct
CMS, to publish a list of hospitals not in compliance with the
price transparency rule that went through the court system to
even get out there. That was done during the Trump
administration. The other requires hospitals and insurers to
share specific prices they negotiate across plans.
Mr. Merkel, I've got a question for you.
What other reforms should Congress consider when trying to
take the biggest part of health care that is more and more
corporate, embraces none of the aspects of free enterprise? Do
you like those ideas, number one?
And what else can we do that would start the clock, at
least where most of our health care dollars are being spent
currently?
Mr. Merkel. Thank you very much for your question.
I think that you have hit the nail on the head with your
diagnosis of the problem. We're limiting supply at the same
time that we're increasing demand through federal programs. And
we are not enabling consumers and employers because we've just
put them in the dark.
I would absolutely start with what you have said: giving
consumers and employers price information to--basically, we
have left these powerful tools on the table, which are
consumers and employers seeking the best value for themselves.
And as you have noted, unfortunately, what we did in the Trump
administration, the compliance has been inadequate.
So, the legislation that you have put forth to codify those
rules and, I think, increasing enforcement mechanisms to
require them, as well as being clear who is being transparent
and who is not, would go a long way.
Senator Braun. One brief follow-up question, and I'd like
this to be answered by Dr. Fiedler.
Obamacare gave us, I think, some things that address the
fact that everybody should have access. It should be at a price
that you can afford.
What about some of the things that have been dysfunctional?
Like, I think what came from that, too, was that doctors cannot
own outpatient hospitals, nor can they grow ones that were in
place.
Is that something that ought to be changed? Why was that
ever done in the first place?
Dr. Fiedler. I do think that there were previsions placing,
limitations on physician-owned hospitals. I am generally of the
view that, I think consistent with the question you're asking,
that there's not a strong rationale for limits on the entry of
new hospitals into hospital markets and, in particular, limits
on who can own those hospitals.
I frankly think that this is probably not the main
contributor to why hospital markets are as consolidated as they
are. I think it's probably a fairly marginal factor. I think
the underlying rationale for the provisions was that physician-
owned hospitals may do a certain amount of cherry picking in
terms of the patients they treat. And so, other hospitals were
concerned that they would be left holding the bag.
I don't view that as a particular concern, and I think
there's unlikely to be much harm done by removing some of these
restrictions.
Senator Braun. Thank you.
Chairman Whitehouse. Senator Marshall.
STATEMENT OF SENATOR MARSHALL
Senator Marshall. All right. Mr. Chairman, thank you so
much for hosting this hearing. My first question is for
Professor Fiddler--Fiedler, probably. My bad. Fiedler, right?
Okay.
Prior authorization is the number one administrative
concern to physicians. It adds to their burden of their day,
having a patient scheduled for a hip replacement, have them in
the preoperative area, and then finding out that the insurance
company has not done the final prior authorization for that
particular process. I hope--I assume you are familiar with
prior authorization and how it's being used to ration care.
What is the prior authorization impact, do you think, on
health care expenses? Does it actually slow down? Does it make
it worse?
Any thoughts on prior authorization?
Dr. Fiedler. I think prior authorization is very much a
two-edged sword. On the one hand, I think exactly what you're
talking about can create a lot of administrative hassles for
providers but, frankly, for patients as well. If you're the
patient in that situation where the prior authorization hasn't
come through, that's a very real burden.
I think the flipside of this is there are cases where prior
authorization is used appropriately. We have evidence that it
meaningfully reduces use of inappropriate services and
therefore reduces claims spending, and premiums, and cost
sharing for people.
Senator Marshall. Appreciate that.
I think you'd agree with me that if there was a
streamlined, consistent process, that that would be very
beneficial to both sides of that coin?
Dr. Fiedler. I think there likely are opportunities to
streamline these processes and that's a fruitful place to
explore.
Senator Marshall. Okay. I'm going to go to Mr. Merkel next,
and kind of following up with Senator Braun's questions
regarding the physician-owned hospitals.
I may be the only person in the Senate or Congress that's
ran a hospital, owned a hospital, a private practice, oversaw
health departments. I understand health care, you know, pretty
good.
I always thought to drive down the cost of health care, we
needed more transparency, more innovation, and consumerism--
making patients consumers again, promoting competition. Whether
it's insurance companies or whether it's hospitals, Pharmacy
Benefit Managers (PBMs), we've seen this huge consolidation of
the industry, partially because of over regulations. And
basically, there is a moratorium on physicians to expand their
hospitals or to have any new ones as well.
I would brag on the physician-owned hospital. They have
better care, much better quality of care. They actually give
away more care than most non-profits do, is a sense as well. In
our particular case, we were the only hospital within 60 miles
with a, you know, Level 2 emergency room. We took all comers.
So, Mr. Merkel, what is your experience of physician-owned
hospitals and do you think that they would help drive the costs
down or up, at the end of the day?
Mr. Merkel. Thank you for your question, Doctor.
I think that, you know, with fee-for-service reimbursement
and our entitlement programs being basically unlimited in how
much taxpayer money that they will provide, you know, Congress,
over the years, has tied themselves into a lot of knots on how
to try to protect taxpayers while in that system. And industry
incumbents take advantage of those concerns and will utilize
those fears to try to block competition from things like
physician-owned hospitals or through Certificate of Need laws.
I think both of those restrictions come from the same
concern and demonstrate how industry incumbents basically use
them to prevent competition.
Senator Marshall. Great.
I want to finish up with a question. Not much time left.
We'll see if we can get through as many people as we can. We'll
start with you, Dr. Dafny.
I'm certainly a believer that our country needs a bigger
investment in primary care. Everybody--if you have a heart
attack, if you're in an automobile accident, you go to the
emergency room you're going to be taken care of, but we don't
have as much meaningful access to quality primary care. Maybe
we're spending half as a percentage of investment than many
other countries are.
Dr. Dafny, what do you think the impact of more primary
care would do on the overall costs of health care, the overall
expenses of health care?
Dr. Dafny. Thank you for the question, Senator Marshall.
I would say that as a country, we are extra--we spend far
less on primary care than they do. That results in pushing more
spending to specialists, who we know are more expensive.
I think it would be a tremendously valuable thing.
We ought to look at the compensation for primary care
relative to specialists and to encourage more entry into that
field. And would defer to the primary care physician to my
left, should you want more detail.
Senator Marshall. Dr. Kurose, yeah, please go ahead. Okay.
Dr. Kurose. I concur with all that. And I think that,
particularly given the complexity and fragmented nature of our
health care delivery system writ large, it's never been more
important for the patients, particularly those with complex or
chronic illnesses, to have a primary care physician that can
help guide them through that system, make decisions, coordinate
everything, and have them stay on top of things.
And you know, to me, that's foundational for a high
performing health care system of any kind.
Senator Marshall. Great.
Certainly, I concur that in this instance we're certainly
thinking that community health centers are a big part of that,
an opportunity where you can deliver health care to where the
patients are. Adding mental health support right there,
nutrition coaching, those types of things.
And since there's no one else standing in line, Dr. White,
what do you think about more primary care? How that would
impact the costs of health care for this country?
Dr. White. We have spoken to a number of experts about
alternative payment models and ACOs. And they have pointed out
that primary care is really central to ACOs in a very nuts and
bolts sense. To get patients attributed to an ACO, they have to
be receiving primary care services, so that's kind of
foundational.
But there's also this phenomenon that physician-led ACOs
are clearly more successful on reducing spending than hospital-
led ACOs. And----
Senator Marshall. Imagine that.
Dr. White [continuing]. And what we've gathered is that the
physician-led ACOs tend to focus on shifting care away from the
facility settings, the specialty care, imaging services. And
so, I think that's generally consistent with what you're
saying.
Senator Marshall. Okay. Thank you, Chairman. I yield back.
Chairman Whitehouse. Thank you.
Senator, while you were in your other hearing, we also had
a bit of a conversation about prior authorization. And Dr.
Kurose and, I think, with other heads nodding, made the point
that when you're in a fee-for-service system, there is some
rationale for prior authorization to prevent just piling on
with the billings. But once you move to a value-based system,
like Accountable Care Organizations run, then the logic, the
rationale for having prior authorization diminishes, if not
evaporates.
So, I appreciated your questions about prior authorization.
I wanted to fill you in on what the prior testimony had been.
And I do think that there is room, as we move towards more
value-based care in our health care system, to make sure that
the bureaucracies keep up with that, and you're not running
legacy prior authorization systems that require doctors to
maintain administrative staff that serve, actually, no real
purpose because you've reoriented the incentives so that it
really doesn't make sense to require a prior authorization.
Maybe there should be prior approvals for prior approvals.
Senator Marshall. We used to have that.
So, I certainly agree and concur that we need to go to
these value-based models, and it would eliminate some of the
need.
But in the meantime, 90 percent of the health care system
is going to fight that, and it will take years to see that
happening. And I think it's all the more important that we lean
in on some type of a streamlined fix to the prior authorization
issues, rather than punishing the 98 percent of physicians that
are doing the right thing, and focus on those focus--on those
folks that who indeed are abusing the system.
So, thank you. I appreciate those comments.
Chairman Whitehouse. And I'm now delighted to recognize
Chairman Wyden, who has stepped out of the Finance Committee
briefly. And I thank you, sir.
STATEMENT OF SENATOR WYDEN
Senator Wyden. I thank my colleague. And this is a very
good hearing.
And particularly, what we're trying to do in the Finance
Committee is look at the ways for the future to build around
some of the things that just are common sense.
For example, in the PBM area, we're looking at reducing the
role of middlemen. I just came from the Medicare, you know,
hearing, and these marketing middlemen, based on today's
numbers, are taking $6 billion out of the system, $1,300 a
patient just on marketing.
So, I want us to look at the promising models, and that's
what Chairman Whitehouse has given us a chance to do today. And
I want to explore with all of you--I'll probably start with
you, Dr. Kurose--chronic care.
When I was director of the Gray Panthers, which has now
been maybe a year or two ago, as I've been saying, Medicare was
an acute care program. It was--you know, you broke your ankle
and then you went to the hospital, and that was Part A of
Medicare. And if you had a horrible case of the flu, you went
saw your doctor, that was Part B of Medicare.
That is not Medicare today. Medicare today is
overwhelmingly chronic care: cancer, diabetes, and heart
diseases, strokes. And people who have two or more of these
conditions is now dominating the program.
And before he retired, Chairman Hatch worked with us--and
Senator Whitehouse remembers this--on a bill to say, we're
going to insure those acute care services, and therefore, we're
going to start building around chronic care. And we passed a
transformational chronic care bill, which included the
country's first really big investment on the health side in
telemedicine, in terms of laying out the infrastructure.
So, we passed it. And one day, I was sitting in my office
after Chairman Hatch had moved on to, you know, other matters,
and the Trump administration called and said, how would you
feel about our using the telemedicine provisions as the basis
for telemedicine services in COVID?
And I said, you're asking me how I feel? This is the
coolest day I can remember. I've got the Administration asking
me about something the Democrats and Republicans care about.
And that, in fact, was how we delivered COVID, COVID-
related services to a great extent during the pandemic is using
our telemedicine approach.
So, if you would, tell us why--as I understand, you've been
interested in this field--why you think that chronic care
coordination and building on these kind of models makes sense?
Dr. Kurose. You know, I think when we look at segments of
the patient population that are older with multiple chronic
medical illnesses, they certainly have an outsized impact on
the total cost of care for the broader population. And I think
there's an opportunity to really both control costs and improve
patient experience, patient outcomes, efficiency of care.
I think what you're alluding to in terms of acute versus
chronic illness goes to some extent to the distinction between
sort of reactive care models and proactive care models. And I
think, when you can have a proactive team-based approach to the
care of chronic illnesses, experience is just demonstrating how
effective that can be.
The timeliness of it is important. When you're proactive,
you can often diagnose a problem earlier when the interventions
that are required to return, restore wellness to the patient's
condition--it's much more effective when you intervene early.
So, right care, in the right place, at the right time is a big
piece of chronic illness management.
It's also an opportunity, as I alluded to earlier, to
incorporate the patient's values and their goals of care. When
you have an engagement with a patient with multiple chronic
illnesses, part of--a very important part of that is to
understand that aspect of their care and give them agency as
patients and decision-making power. And often, that will
actually allow you to avoid unnecessary care, or care that the
patient never wanted.
So, I think that those aspects of chronic care delivery are
very much incented and facilitated in an ACO model like the
Medicare program.
Senator Wyden. My time is up. And I just wanted to say to
you that we'll be back to you, because there are really two
issues here.
One, Senator Whitehouse and I have been very involved in
trying to update the Medicare guarantee. You know, Medicare is
a guarantee. It's not a voucher. It's not a piece of paper.
It's a guarantee. We've done that now, at least made a start
with the chronic care additions to Medicare.
But I think, as we learn more about what chronic conditions
are all about and how to treat them, maybe we're going to learn
some things about how to prevent them in the first place. And
I'm going to want to talk to you about that relationship as
well.
Mr. Chairman, good work, as always, and your leadership on
health care is long, long noted. And I look forward to working
with you on the things we're talking about today.
Chairman Whitehouse. Thank you, Chairman Wyden.
I have a number of questions I'll ask Dr. White. That
creates a second round, so I'll recognize Senator Braun. And
then I have another hearing to get off to, so I will close the
hearing after those two rounds.
Dr. White, CMMI looked at some programs that were cost
saving failures and others that were cost saving successes.
Your CMMI report notes models that produced statistically
significant savings, and that a third of the CMMI models that
have produced statistically significant savings were ACO
models--your colleague Dr. Kurose on the panel being one
example.
You noted also that certain features of the pioneer ACO
model have been incorporated now into the Medicare Shared
Savings Program and that, beginning next year, CMS has
announced that the Medicare Shared Savings program will also
incorporate aspects of the other successful ACO model, the ACO
investment model.
What are the qualities of those successful models that led
to their success, and where did those ACO models succeed in
achieving savings?
Dr. White. Thank you for the question, Chairman.
At a high level, MSSP has operated----
Chairman Whitehouse. Let me interrupt you for one second to
say that Senator Kaine has arrived. And I amend my previous
order for proceeding so that after Senator Braun, we'll
recognize Senator Kaine.
Dr. White. MSSP has operated one-side models for
participating providers may earn shared savings, and also two-
sided models, where providers can also incur financial
penalties. And a key feature of the pioneer ACO model was that
it incorporated a two-sided risk arrangement for all
participants by the second performance year. And the main MSSP
program is moving toward those two-sided models.
With the ACO investment model, one of its key features was
that it provided prepaid shared savings, which was intended to
support investment in infrastructure and the formation of ACOs,
and especially in rural areas and underserved areas.
Now, our report was at a fairly high level focusing on
budgetary impacts, so we didn't dig into the specific
operational details of those models. But the two-sidedness and
the funding for infrastructure investments are the features of
those two ACO models that stood out to us.
Chairman Whitehouse. There were winners in those ACO
models. And the winning features of those models are now being
propagated further into the Shared Savings Program; correct?
Dr. White. That's fair to say.
Chairman Whitehouse. What do experts that CBO hears from
say about the importance of primary care in the context of
successful delivery system reforms?
Dr. White. Sure. I'll reiterate the fact that primary care
is key to patient attribution in ACOs, but then, more broadly,
physician-led organizations have the ability and the incentives
to move care away from high cost specialty care facility
settings and focus on management of chronic conditions. That is
consistent with the ability to save money and reduce spending.
Chairman Whitehouse. And, finally, is it correct that CBO
communicated in a letter to our committee in March of this year
that CBO now projects that the United States will have spent
$6.3 trillion less between 2010 and 2033 than CBO's original
projections proposed in its 2010 baseline?
Dr. White. Yes.
And just to unpack that a little bit, this is from the
letter that we sent in March of this year.
Over the 2010 to 2020 period, we spent $1.1 trillion less
on health care than we projected in August of 2010. And looking
forward from 2021 to 2033, we now project we will spend $5.2
trillion less on major health programs than we projected in the
summer of 2010. That sums to the $6.3 trillion.
Chairman Whitehouse. Great. With that, I will make that
letter a matter of record. (insert footnote in editing)
Chairman Whitehouse. And I will turn to Senator Braun, and
then Senator Kaine.
Senator Braun. Thank you, Mr. Chairman.
We talked about hospitals earlier. They now occupy the
biggest percentage of the health care dollar.
Insurance, though, cannot go unmentioned. When I redesigned
my plan to make it to where we haven't had premium increases in
15 years, and threw the kitchen sink and everything at
wellness, creating health care consumers at the time, insurance
was never intended to take care of minor health care. Just like
to doesn't work in any other area of insurance, it's for
indemnification of a critical, unusual incident or issue. I
don't think it was ever intended, just evolved that way, to
cover everything.
Do we need insurance for primary health care? Or should it
go back to what it was intended for: indemnification against
critical illness or an accident?
I'm going to start with Dr. Fiedler. And why is that still
a part of the system? It's kind of like the Darth Vader that
keeps the glue of lack of transparency and everything there.
And then Dr. Dafny and Dr. Kurose. So, keep your answers at
about a minute or so, so we respect the time.
Dr. Fiedler, you can start.
Dr. Fiedler. I think one of the rationales for coverage of
some of these more routine services is that they have the
potential to prevent the need for more expensive services down
the road. And so, I think----
Senator Braun. Prevention is worth--an ounce of that is
worth a pound of cure.
Dr. Fiedler. Right. And it may not be that there are cost
savings, but it may be that the sort of benefits that they
provide, together with the cost savings they generate, means
they're worth it on net.
So, I think that is----
Senator Braun. But that doesn't work in any other arena of
insurance on minor stuff. Then you're mixing indemnification
and the cash flow that goes with it, and you're doing other
things. Well, why couldn't that be done directly between
patient and the provider and get rid of all the red tape and
costs of processing a claim?
Dr. Fiedler. I think another important reason that many of
these services are being covered through insurance is because
the insurer is actually playing a very important price
negotiation function in the private market.
Senator Braun. So, I want to stop there. You've made your
point. I think that is totally off base.
You've gotten rid of what works in every other market.
People shop around to save 50 bucks on a big screen T.V.
They're not doing any of that.
When I put that into my insurance plan, costs started going
down by 50 percent. You throw the wellness tools, you have your
cake and eat it, too. Dr. Dafny.
Dr. Dafny. Thank you for the opportunity, Senator Braun, to
answer this question.
I agree with you that insurance ideally does not have first
dollar coverage. Right? It's supposed to protect against the
unanticipable risks that one has.
However, what data show us is that when consumers have high
deductibles, that they cut back on their care, but they cut
back indiscriminately. They cut back on care that could reduce
spending later on. And to the extent that employers and
government payers then end up having to spend more because of
those decisions early on, that's a reason to subsidize that
kind of care.
Dr. Kurose. To me, your question at least in part--and I'll
see if you agree--raises a question of how should primary care
be compensated?
And it seems like when you're moving away from the purpose
of insurance as you described it, you could think about
capitated models of payment for primary care that gives you a
predictability on what the cost is.
Exactly how that gets funded and what the incentives are
for patients is sort of a different question, but I think that
the costs of primary care should be relatively predictable, and
that paying prospectively on a per member per month, per member
per year basis for primary care makes sense.
One of the things that I would add is that I think there is
value in having primary care have skin in the game in terms of
managing total cost of care because I believe that they play an
important role in that, although they can't do it alone.
Senator Braun. I think there, that is a dilemma because you
do, then, eliminate the market in that skin in the game.
And we've evolved that way. All I can tell you is I'm
seeing more and more, unless you're saying people would not
take care of their own well-being just because that's the way
it's been, I think you're sticking to a model that's broken.
And it has gotten us where we are today.
We need to get creative there. You bring health care costs
down. I did it, and it's been working for 15 years. And we've
got to be more creative and entrepreneurial in areas like that.
Mr. Merkel, do you want to weigh in quickly?
Mr. Merkel. Yes. I would say that you're right. Insurers'
raison d'etre is to insure against financial risk, and to the
extent that we have required them to do more, they do that
inefficiently. And while yes, currently, they're playing a role
to negotiate prices, I think that they haven't done that
particularly well.
And if we put more people--put more pressure on through
giving consumers, and patients, and providers a more active
role in doing that, I think we'd probably see better results in
the long run.
Senator Braun. Thank you.
STATEMENT OF SENATOR KAINE
Senator Kaine [presiding]. Thank you to all the witnesses
for being here today and helping the committee examine ways to
both maintain quality, but reduce costs as we're doing so.
I care very deeply about this topic. I have a bill with
Senator Bennett that I call the `Medicare-X Choice Act.' And I
want to talk about it a second.
Dr. Fiedler, I'll ask you a question about it.
Medicare-X Choice Act would create a public option that
would expand upon the successes of the Affordable Care Act,
making affordable coverage available for families, individuals,
and small businesses.
It would direct CMS to devise an insurance policy that
would cover the ACA essential benefits, and offer that policy
on the exchange for individuals and small businesses.
An individual choosing to purchase that policy, if they
qualified for the ACA subsidy, could apply that subsidy to
bring down the cost of the premium. Because the CMS-devised
policy would not need to cover a profit margin, fancy salaries,
ads on T.V., return to shareholders, it would likely be a very
affordable option for people. Wouldn't force people to buy a
government policy, but I think folks looking at the exchange
would find it to be a very attractive option.
The proposal would increase access to health care services
in parts of our country that have historically faced challenges
accessing care: rural Virginia, rural America, where often
there's inadequate options or choice on the exchanges.
People--because CMS exists in every ZIP Code in the
country, it could be available on every exchange in the
country. Somebody moving from Virginia to Oregon, not knowing
whether the insurance company that insures them in Virginia
even offers policies in Oregon, wouldn't need to worry about
whether the Medicare-X policy would be available because
Medicare already operates in every ZIP Code.
My colleagues and I have differing opinions about how to
achieve the goal of broadened access and reduced costs, but I
do think we have the common goal of doing those things. And
that was why I was so gratified when the Urban Institute issued
a report last year stating that, if implemented, the Medicare-X
Choice Act would reduce the number of uninsured people by about
1.1 million, save households about $10.9 billion a year, save
the Federal Government $20.3 billion a year, and cut total
spending on health care by $456 billion over a 10-year period.
Increased access to care is not only good for individuals.
It's good for communities.
Dr. Fiedler, I'd like to ask you to speak about how the
mechanics of Medicare-X would both increase access to care and
reduce health care spending over the long term.
Dr. Fiedler. Thank you for the question.
This is something that Dr. Dafny alluded to in her
testimony, but a striking feature of our health care system is
that private insurers pay much higher prices for the same
health care services than Medicare does.
And that's a reflection of the fact that private insurers
have to negotiate these prices with providers. And providers,
in many markets, wield a lot of market power, whereas Medicare
is able to pay lower prices by setting prices administratively.
Medicare-X would introduce a Medicare-like plan into the
individual and small group markets. And because Medicare-X
would pay these lower prices, it would offer lower premiums
than existing plans. It would probably be due to the lack of a
profit margin and probably somewhat lower administrative costs
that would add to the premium reductions. That's where the cost
savings would come from.
You also asked about access. In terms of access, there
would be sort of two main effects to think about.
One is that the lower premiums would cause some people who
are uninsured today to take up coverage, which would improve
their access to care.
And then, another is that the Federal Government would save
a lot of money on the subsidies delivered to people who are
currently insured. And the bill would then use some of those
federal savings to enhance the subsidies available to people
who have private coverage on the marketplace. And that would
pull additional people into the market in coverage, and improve
access to care.
Senator Kaine. Thank you, Dr. Fiedler.
You know, we don't have the votes to do Medicare-X yet, but
I believe it's the next step forward, that we started on a path
with the Affordable Care Act. I don't think we should just go
on a different path, but I think we should take the next step
forward on the path we began. And I think offering a Medicare-X
policy on the exchanges and allowing people, as they shop, to
do what Senator Braun said, to shop and try to find the most
economical plans, I think that would be a good thing.
I want to--Dr. White, I have a question for you, and then
we will close the hearing.
At a Budget Committee Hearing last month, I asked Dr.
Marilyn Moon about a New York Times article that caught my
attention. And I heard Senator Whitehouse referring to it.
The article was entitled `A Huge Threat to the U.S. Budget
Has Receded. And No One Is Sure Why.' And it was sharing the
work of the CBO that between 2010 and 2020, Medicare costs were
9 percent lower than expected.
The article was interesting in advancing different
scenarios. I asked Dr. Moon if she had thoughts about why this
happened, and she speculated two factors.
One, that passage of the Affordable Care Act and an
increase in people having insurance prior to joining Medicare
might mean that people are a little bit healthier when they
joined Medicare, and thus, their expenses might have been
lower, at least initially.
And then, she also pointed out that there is a demographic
aging bubble of a lot of people turning 65 at once--baby
boomers like me, I turned 65 in February--and younger seniors
tend to be healthier than older seniors. So, if you have a huge
bubble of young seniors coming into Medicare, that can also
affect costs.
Given that CBO was responsible for the work that has led to
this, this interesting phenomenon and speculation, can you talk
about the factors that CBO took into consideration when doing
the analysis and how those factors could potentially change
over the next 10-year budget cycle?
Dr. White. Sure.
There's a lot to unpack in that question, but let me start
with the baby boomers aging into Medicare. That's a demographic
phenomenon that's very well understood. It's very predictable,
and it's baked into our demographic factors. So, that is pretty
straightforward to have a handle on.
In terms of people having health insurance under age 65
because of the ACA and then aging into Medicare, that sounds
plausible. We haven't dug into that and pinned down the size of
that. The ACA did so many other things, big things in Medicare,
that that phenomenon, my sense is, is relatively small.
But one thing that I want to draw out is that the
unexpected slowdown in Medicare spending actually started
appearing well before 2014, when the coverage expansions went
into effect. And so, this is really a long-running slowdown
phenomenon.
And we know that we overestimated Part D spending. We know
that Medicaid spending on long-term services and supports has
turned down. We're taking those factors into account when we
project going forward.
And I want to make a general point that we use the most
recent historical evidence as our jumping off point. We look at
our misses. We scrutinize those misses. When we come to
understand our misses better, we explain for the world why
we've updated our thinking.
That showed up in the CMMI report in a big way, and our
predictions now, as always, we're trying to be in the middle of
the distribution. It's as likely to be too high as too low. The
future is always uncertain, but we're trying to take what we've
learned and really dig into the phenomenon that Dr. Moon
highlighted.
Senator Kaine. Great.
Well, thank you, Dr. White. The fact that the CBO manages
to make Democrats happy or unhappy, and Republicans happy or
unhappy--you know, I've railed at some CBO studies and been
entirely comforted by others, and everyone around this table
feels the same way. I think you're approaching the work that
you do in this space with, you know, with intellectual
integrity and an attempt to be evenhanded, and I appreciate
that.
And I do think it's important. I applaud analyzing your
misses because when you miss something, going back and trying
to understand why gives you the ability to calibrate and then,
you know, hopefully do a better job. I think the Samuel Beckett
line is `Ever tried. Ever failed. No matter. Try again. Fail
better.'
And so, it sounds like that's the method that you follow.
The hearing is now concluded. I want to thank the witnesses
for hearing--appearing before the committee. Your written
statements wholly will be included in the record.
Without objection, I submit statements for the record from
Milbank Memorial Fund, the Rhode Island Quality Institute, the
National Association of Accountable Care Organizations, from
Professor David Cutler and Nikhil Sahni, and a preprint
publication in Health Affairs titled ``Active steps to reduce
administrative spending associated with financial transactions
in US healthcare''.\9\
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\9\ Documents submitted for the Record appear in the appendix on
page 109.
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Information for all senators, questions for the record are
due by noon tomorrow, with signed hard copies delivered to the
Committee clerk in Dirksen 624. Emailed copies will also be
accepted.
We'll ask witnesses, if there are questions for the record
that are submitted, to respond to those questions within seven
days of receipt.
With no further business before the Committee, this hearing
is adjourned.
[Whereupon, at 11:43 a.m., Wednesday, October 18, 2023 the
hearing was adjourned.]
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