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SETTING FISCAL PRIORITIES 

HEARING 

BEFORE THE

SUBCOMMITTEE ON HEALTH 

OF THE

COMMITTEE ON ENERGY AND 

COMMERCE 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED THIRTEENTH CONGRESS 

SECOND SESSION 

DECEMBER 9, 2014 

Serial No. 113–185 

( 

Printed for the use of the Committee on Energy and Commerce 

energycommerce.house.gov 

COMMITTEE ON ENERGY AND COMMERCE 

FRED UPTON, Michigan 

Chairman 

RALPH M. HALL, Texas 

JOE BARTON, Texas 

Chairman Emeritus 

ED WHITFIELD, Kentucky 

JOHN SHIMKUS, Illinois 

JOSEPH R. PITTS, Pennsylvania 

GREG WALDEN, Oregon 

LEE TERRY, Nebraska 

MIKE ROGERS, Michigan 

TIM MURPHY, Pennsylvania 

MICHAEL C. BURGESS, Texas 

MARSHA BLACKBURN, Tennessee 

Vice Chairman 

PHIL GINGREY, Georgia 

STEVE SCALISE, Louisiana 

ROBERT E. LATTA, Ohio 

CATHY MCMORRIS RODGERS, Washington 

GREGG HARPER, Mississippi 

LEONARD LANCE, New Jersey 

BILL CASSIDY, Louisiana 

BRETT GUTHRIE, Kentucky 

PETE OLSON, Texas 

DAVID B. MCKINLEY, West Virginia 

CORY GARDNER, Colorado 

MIKE POMPEO, Kansas 

ADAM KINZINGER, Illinois 

H. MORGAN GRIFFITH, Virginia 

GUS M. BILIRAKIS, Florida 

BILL JOHNSON, Ohio 

BILLY LONG, Missouri 

RENEE L. ELLMERS, North Carolina 

HENRY A. WAXMAN, California 

Ranking Member 

JOHN D. DINGELL, Michigan 

FRANK PALLONE, JR., New Jersey 

BOBBY L. RUSH, Illinois 

ANNA G. ESHOO, California 

ELIOT L. ENGEL, New York 

GENE GREEN, Texas 

DIANA DEGETTE, Colorado 

LOIS CAPPS, California 

MICHAEL F. DOYLE, Pennsylvania 

JANICE D. SCHAKOWSKY, Illinois 

JIM MATHESON, Utah 

G.K. BUTTERFIELD, North Carolina 

JOHN BARROW, Georgia 

DORIS O. MATSUI, California 

DONNA M. CHRISTENSEN, Virgin Islands 

KATHY CASTOR, Florida 

JOHN P. SARBANES, Maryland 

JERRY MCNERNEY, California 

BRUCE L. BRALEY, Iowa 

PETER WELCH, Vermont 

BEN RAY LUJAN, New Mexico 

PAUL TONKO, New York 

JOHN A. YARMUTH, Kentucky 

SUBCOMMITTEE ON HEALTH

JOSEPH R. PITTS, Pennsylvania 

Chairman 

MICHAEL C. BURGESS, Texas 

Vice Chairman 

ED WHITFIELD, Kentucky 

JOHN SHIMKUS, Illinois 

MIKE ROGERS, Michigan 

TIM MURPHY, Pennsylvania 

MARSHA BLACKBURN, Tennessee 

PHIL GINGREY, Georgia 

CATHY MCMORRIS RODGERS, Washington 

LEONARD LANCE, New Jersey 

BILL CASSIDY, Louisiana 

BRETT GUTHRIE, Kentucky 

H. MORGAN GRIFFITH, Virginia 

GUS M. BILIRAKIS, Florida 

RENEE L. ELLMERS, North Carolina 

JOE BARTON, Texas 

FRED UPTON, Michigan (ex officio) 

FRANK PALLONE, JR., New Jersey 

Ranking Member 

JOHN D. DINGELL, Michigan 

ELIOT L. ENGEL, New York 

LOIS CAPPS, California 

JANICE D. SCHAKOWSKY, Illinois 

JIM MATHESON, Utah 

GENE GREEN, Texas 

G.K. BUTTERFIELD, North Carolina 

JOHN BARROW, Georgia 

DONNA M. CHRISTENSEN, Virgin Islands 

KATHY CASTOR, Florida 

JOHN P. SARBANES, Maryland 

HENRY A. WAXMAN, California (ex officio) 

(II) 

(III) 

C O N T E N T S 

Page 

Hon. Joseph R. Pitts, a Representative in Congress from the Commonwealth 

of Pennsylvania, opening statement ................................................................... 1 

Prepared statement .......................................................................................... 3 

Hon. Frank Pallone, Jr., a Representative in Congress from the State of 

New Jersey, opening statement .......................................................................... 3 

Hon. Gene Green, a Representative in Congress from the State of Texas, 

opening statement ................................................................................................ 5 

Hon. Michael C. Burgess, a Representative in Congress from the State of 

Texas, opening statement .................................................................................... 5 

Hon. Fred Upton, a Representative in Congress from the State of Michigan, 

prepared statement .............................................................................................. 131 

Hon. Henry A. Waxman, a Representative in Congress from the State of 

California, prepared statement ........................................................................... 134 

WITNESSES

Mark E. Miller, Executive Director, Medicare Payment Advisory Commission . 6 

Prepared statement .......................................................................................... 9 

Answers to submitted questions ...................................................................... 136 

Christopher W. Holt, Director of Health Care Policy, American Action Forum . 72 

Prepared statement .......................................................................................... 74 

Answers to submitted questions ...................................................................... 147 

Marc Goldwein, Senior Policy Director, Committee for a Responsible Federal 

Budget ................................................................................................................... 80 

Prepared statement .......................................................................................... 82 

Answers to submitted questions ...................................................................... 154 

Judy Feder, Professor of Public Policy, Georgetown Public Policy Institute ...... 109 

Prepared statement .......................................................................................... 111 

Answers to submitted questions ...................................................................... 172 

SUBMITTED MATERIAL

Testimony of the Coalition to Preserve Rehabilitation, December 9, 2014, 

by Judith Stein, et al., submitted by Mr. Burgess ............................................ 28 

Report of the Medicare Rights Center, ‘‘A Winning Strategy for Medicare 

Savings: Better Prices on Prescription Drugs,’’ July 2014, by Stacy Sanders 

and Ben Veghte, submitted by Ms. Schakowsky ............................................... 48 

Report, ‘‘What Happens to Payments to Health Care Providers Participating 

in Medicare When the Medicare HI Trust Fund Reaches Exhaustion?,’’ 

submitted by Mr. Gingrey ................................................................................... 56 

Issue Brief of the Leadership Council of Aging Organizations, ‘‘Altering Extra 

Help Copayments: A Flawed Savings Approach,’’ January 2014, submitted 

by Mr. Pallone ...................................................................................................... 118 

(1) 

SETTING FISCAL PRIORITIES 

TUESDAY, DECEMBER 9, 2014 

HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON HEALTH, COMMITTEE ON ENERGY AND COMMERCE, Washington, DC 

The subcommittee met, pursuant to call, at 10:30 a.m., in room 

2123, Rayburn House Office Building, Hon. Joseph R. Pitts (chairman of the subcommittee) presiding. 

Members present: Representatives Pitts, Burgess, Shimkus, Murphy, Blackburn, Gingrey, McMorris Rodgers, Lance, Griffith, Bilirakis, Ellmers, Pallone, Engel, Schakowski, Green, Barrow, Castor, 

and Sarbanes. 

Staff present: Sean Bonyun, Communicatons Director; Leighton 

Brown, Press Assistant; Noelle Clemente, Press Secretary; Paul 

Edattel, Professional Staff Member, Health; Brad Grantz, Policy 

Coordinator, Oversight and Investigations; Sydne Harwick, Legislative Clerk; Robert Horne, Professional Staff Member, Health; 

Michelle Rosenberg, GAO Detailee, Health; Chris Sarley, Policy Coordinator, Environment and the Economy; Adrianna Simonelli, 

Legislative Clerk; Heidi Stirrup, Policy Coordinator, Health; Josh 

Trent, Professional Staff Member, Health; Tom Wilbur, Digital 

Media Advisor; Ziky Ababiya, Democratic Staff Assistant; Eddie 

Garcia, Democratic Professional Staff Member; Kaycee Glavich, 

Democratic GAO Detailee; and Karen Nelson, Democratic Deputy 

Staff Director, Health. 

Mr. PITTS. The subcommittee will come to order. The Chair will 

recognize himself for an opening statement. 

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

OF PENNSYLVANIA 

Despite some recent progress in reducing the deficit, the Federal 

Government faces enormous budgetary challenges. The Congressional Budget Office projects that the annual Federal budget deficit 

will once again approach the $1 trillion mark in a few short years. 

At the end of November, the Federal debt surpassed $18 trillion for 

the first time. 

The consequences associated with the Federal Government 

spending and debt problem can’t be overstated. In fact, the former 

Chairman of the Joint Chiefs of Staff concluded that, quote, ‘‘The 

single biggest threat to our national security is our debt,’’ end 

quote. Federal spending on healthcare programs is the major driver 

of the spending and debt challenge that America confronts. 

2 

Today’s hearing is a critical step as the committee approaches 

the 114th Congress and considers proposals to tackle this problem. 

Our biggest challenge is mandatory spending, particularly Medicare and Medicaid, which together accounted for 25 percent of all 

Federal spending in fiscal year 2013. 

Medicare is on an unsustainable trajectory. In fiscal year 2014, 

it covered some 54 million people at a cost of approximately $618 

billion. According to the 2014 Medicare trustees report, the program will become insolvent in 2030, in just 15 years. If Medicare 

spending accelerates in coming years, as many economists expect, 

then Medicare’s insolvency could come much sooner. 

Medicaid expenditures are set to increase dramatically as a result of the Affordable Care Act’s Medicaid expansion. Spending on 

the program is set to double over the next decade, even though it 

already comprises one in every four dollars in an average State 

budget. 

These programs need to be strengthened and modernized, not 

just because millions of Americans depend on them for their health 

care, but also because out-of-control entitlement spending is crowding out other important priorities. For example, researchers, scientists, patient advocates, and many others have consistently told 

the committee that Congress should consider stabilizing and 

strengthening the National Institutes of Health as part of the 21st 

Century Cures Initiative. The NIH and other discretionary program priorities will continue to face budgetary challenges if entitlement program spending continues to take a larger and larger share 

of the budget. 

The late Democratic Senator Paul Simon spoke to this larger 

issue when he said, quote, ‘‘A rising tide of red ink sinks all boats,’’ 

closed quote. The Federal Government’s mandatory spending on 

entitlement programs threatens Congress’ responsibility to spend 

dollars on programs like the NIH. We need to consider solutions so 

that we can best target resources to these areas of priority. 

Today’s hearing is also timely in another respect. Next year, Congress faces a number of important funding cliffs. In March, Congress will need to confront the Medicare physician payment cliff 

and try to enact a permanent solution to the sustainable growth 

rate or SGR. In addition, the Affordable Care Act created a funding 

cliff for the States Children’s Health Insurance Program. Funding 

for the program ends in September. 

If Congress is going to tackle these problems and others facing 

the next Congress, we will need to come up with responsible ways 

to pay for these issues. Rather than turning to blunt tools like the 

Medicare sequester, we need policies that drive reform and savings 

that make sense. In addition, given that the Affordable Care Act 

has been the law for over 4 years, targeted reductions to the ACA 

must be on the table as we set fiscal priorities. I hope today serves 

as a catalyst to continue these important discussions about setting 

fiscal priorities. 

I would like to welcome all of our witnesses on both panels today. 

I look forward to your testimony, to your recommendations on how 

to strength and save these critical programs. 

[The prepared statement of Mr. Pitts follows:] 

3 

PREPARED STATEMENT OF HON. JOSEPH R. PITTS

Despite some recent progress in reducing the deficit, the Federal Government 

faces enormous budgetary challenges. The Congressional Budget Office projects that 

the annual Federal budget deficit will once again approach the $1 trillion mark in 

a few short years. At the end of November, the Federal debt surpassed $18 trillion 

for the first time. 

The consequences associated with the Federal Government’s spending and debt 

problem can’t be overstated. In fact, the former Chairman of the Joint Chiefs of 

Staff concluded that ‘‘the single biggest threat to our national security is our debt.’’ 

Federal spending on healthcare programs is the major driver of the spending and 

debt challenge that America confronts. Today’s hearing is a critical step as the committee approaches the 114th Congress and considers proposals to tackle this problem. 

Our biggest challenge is mandatory spending, particularly Medicare and Medicaid, which together accounted for 25 percent of all Federal spending in FY2013. 

Medicare is on an unsustainable trajectory. In FY2014, it covered some 54 million 

people at a cost of approximately $618 billion. According to the 2014 Medicare 

Trustees report, the program will become insolvent in 2030, in just 15 years. If 

Medicare spending accelerates in coming years—as many economists expect—then 

Medicare’s insolvency could come much sooner. 

Medicaid expenditures are set to increase dramatically as a result of the Affordable Care Act’s Medicaid expansion. Spending on the program is set to double over 

the next decade, even though it already comprises one of every four dollars in an 

average State budget. 

These programs need to be strengthened and modernized, not just because millions of Americans depend on them for their health care, but also because out-ofcontrol entitlement spending is crowding out other important priorities. 

For example, researchers, scientists, patient advocates, and many others have 

consistently told the committee that Congress should consider stabilizing and 

strengthening the National Institutes of Health as part of the 21st Century Cures 

Initiative. 

The NIH and other discretionary program priorities will continue to face budgetary challenges if entitlement program spending continues to take a larger and 

larger share of the budget. 

The late Democratic Senator Paul Simon spoke to this larger issue when he said, 

‘‘a rising tide of red ink sinks all boats.’’ The Federal Government’s mandatory 

spending on entitlement programs threatens Congress’ ability to spend dollars on 

programs like the NIH. We need to consider solutions so we can best target resources to these areas of priority. 

Today’s hearing is also timely in another respect. Next year, Congress faces a 

number of important funding cliffs. 

In March, Congress will need to confront the Medicare physician payment cliff 

and try to enact a permanent solution to the Sustainable Growth Rate, or SGR. In 

addition, the Affordable Care Act created a funding cliff for the State Children’s 

Health Insurance program. Funding for the program ends in September. 

If Congress is going to tackle these problems and others facing us next Congress, 

we will need to come up with responsible ways to pay for these issues. Rather than 

turning to blunt tools like the Medicare sequester, we need policies that drive reform and savings that make sense. In addition, given that the Affordable Care Act 

has been the law for over 4 years, targeted reductions to the ACA must be on the 

table as we set fiscal priorities. 

I hope today serves as a catalyst to continue these important discussions about 

setting fiscal priorities. 

I would like to welcome of all our witnesses. I look forward to your testimony and 

your recommendations on how to strengthen and save these critical programs. 

Mr. PITTS. And I yield the balance—I don’t have much time. 

I yield back the balance of my time and recognize the ranking 

member, Mr. Pallone, for 5 minutes for an opening statement. 

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

Mr. PALLONE. Thank you, Chairman Pitts. 

4 

As a member of Congress, I believe that Government can help all 

Americans succeed, including seniors and low-income populations 

and still continue to strengthen our economy. 

While I agree we must do these things with fiscal responsibility, 

I do not agree that we need to balance the budget on the backs of 

our safety net programs. Improving and strengthening Medicare 

and Medicaid for generations to come is a primary goal of mine, 

but what Republicans want to do when they talk about setting fiscal priorities is to cut the structural foundation of these programs. 

For the past 4 years, the Republican budget proposals have 

turned Medicare into a voucher program and turned Medicaid into 

block grants. But these changes do nothing to tackle healthcare 

costs; they simply undermine the program’s guarantee of access to 

care and shift costs to beneficiaries, providers, and States. Shifting 

costs doesn’t curb costs and doesn’t shore up the long-term sustainability of our healthcare systems. 

The Affordable Care Act began to make improvements to our 

healthcare system through delivery system reforms that improve 

both efficiency and quality. And I would argue that the Affordable 

Care Act was entitlement reform. It expands access to life-saving 

health care while also reducing Medicare spending. In fact, recent 

estimates show the increase in Medicare’s per-patient costs are at 

record lows. 

In addition, the ACA laid the groundwork to reward value over 

volume, to incentivize providers to coordinate care and improve 

health. And that job needs to be finished, so we ought to be setting 

our priority to send our SGR repeal and replace the bill to the floor 

before we adjourn for Christmas unpaid for, so that once and for 

all we can bring real sustainability and predictability to its providers and seniors. 

The fact is that we are faced with an inevitable reality, our Nation’s baby boomers are aging to the program at very high rates. 

In fact, 11,000 new seniors become eligible for Medicare every day. 

Meanwhile, the Medicaid program, as a result of the ACA, will 

allow millions of uninsured Americans, particularly the working 

class, to finally gain access to health care. But this doesn’t mean 

we have a spending problem; it means we have a demographics 

problem. And to address that problem doesn’t mean we need to 

slash the programs that American families need most. 

Budgets, in my opinion, are about more than numbers and dollars. They are real-life expressions of priorities, of choices, and of 

values. These choices have an impact on the lives of millions of 

Americans, not just for the fiscal year each budget covers but for 

future years and future generations. 

Now, I know that growing deficits are not good for the future but 

we can’t reduce the deficit and give tax cuts to the wealthy on the 

backs of our safety net programs. Instead, let’s build on the ACA 

and continue to improve the value we get from our programs in a 

thoughtful and sensible way and find ways to take care of all 

Americans. 

Now, Mr. Chairman, I would like to yield the time that remains 

to the gentleman from Texas, Mr. Green. 

5 

OPENING STATEMENT OF HON. GENE GREEN, A 

REPRESENTATIVE IN CONGRESS FROM THE STATE OF TEXAS 

Mr. GREEN. Thank you, Mr. Chairman, and thank my ranking 

member for yielding. 

We all share the goal of saving money and bringing down costs 

through making our healthcare system more efficient. Rewarding 

value over volume ensures patients have coverage and access to 

preventative primary care service and reducing uncompensated 

care should be part of this effort. As we explore key policy decisions 

facing Congress, cost shifting to the beneficiaries simply passes 

growing cost onto patients but does not address the true drivers of 

the growth in healthcare spending. 

The Affordable Care Act included a number of numerous delivery 

system reforms that incentivize a more efficient healthcare delivery 

system. These activities hold significant promise for controlling 

spending while improving quality of care. When considering 

changes in Medicare benefits packages a strategy to bring down 

overall costs, it is important to recognize the difference between 

change that is designed for the benefit of the beneficiaries are 

those driven entirely by reducing Federal spending are those proposals which result in both? 

I look forward to hearing from our witnesses this morning and 

exploring meaningful reforms that protect the most vulnerable populations and provide for the long-term stability of our healthcare 

system. 

And again, I thank my colleague and yield back my 35 seconds. 

Mr. PITTS. The gentleman’s time is expired. 

Chair recognizes the vice chair of the Health Subcommittee, Dr. 

Burgess, 5 minutes for an opening statement. 

OPENING STATEMENT OF HON. MICHAEL C. BURGESS, A 

REPRESENTATIVE IN CONGRESS FROM THE STATE OF TEXAS 

Mr. BURGESS. Thank you, Mr. Chairman. Fiscal year 2014, the Government collected over $3 trillion in 

taxes for the first time, thanks to the generosity of the American 

taxpayer, and yet, we still had a deficit of almost .5 trillion. With 

our national debt reaching $18 trillion last month, we face the 

gravest financial situation in our history, and we must get serious 

about bringing that number down. If we don’t start making difficult 

decisions now, our children, their children will inherit a burden unlike any generation previously has ever seen. 

Under the best reporting, the Medicare Trustees project says 

that Medicare hospital insurance coverage is only solvent until 

2030 and, in fact, it may be exhausted much sooner. Promises 

made to Medicare recipients exceed the payroll taxes to be collected 

from those receiving them by well over $100 trillion. Failure to repeal and replace the SGR has now cost over $170 billion over the 

last decade. Medicare Part B itself surpasses $70 billion in 2012 

alone. 

This committee did do the right thing in repealing the SGR formula, and, yes, it got it through the floor of the House. We were 

awaiting activity in the Senate, but as the clock ticks down on 

what remains in this Congress, it seems unlikely that the Senate 

is going to act. It is a lost opportunity. If we did the right thing 

6 

and enacted the bipartisan bill H.R. 4015, over the next decade, 

that would cost $144 billion, clearly less than the $170 billion that 

has been spent over the past decade. Last year alone, Medicaid grew to an unprecedented almost $450 

billion. With the State Children’s Health Insurance Program, it is 

more of the same. The last five trustees reports have indicated that 

the Social Security’s Old Age Survivors and Disability Insurance 

Program would be depleted by the third decade of this century. 

Time and again, the Government has promised more money than 

it has or could ever hope to take in. 

And we haven’t begun to delve into the discretionary side, but discretionary spending is $492 billion, and if all nondefense discretionary spending were eliminated, it still would not affect our debt. 

There are certainly investments that must be made, but it is imperative that we invest wisely. For example, we spend only $500 million annually on Alz- heimer’s research, but well over $200 billion on care. The Alzheimer’s Association reports that if we could delay the onset of Alzheimer’s by 5 years, we would save approximately $170 billion in 

care costs by the year 2030. 

Cancer, diabetes, asthma, each finds us in a situation in which 

we must decide how to prioritize our spending to help the people 

in a most fiscally responsible manner. We simply cannot ignore the 

challenges or pretend that they will go away by themselves. It is 

a hard discussion, but it is one that we must be brave enough to 

start. That is what we were elected to do. That is what this subcommittee does, and that is what we are here to do today. 

I certainly want to thank our witnesses for being here. I look forward to their testimony. 

Mr. Chairman, I will yield back the time. 

Mr. PITTS. The chairman thanks the gentleman. 

We have two panels of witnesses today. On our first panel, we 

have Dr. Mark Miller, Executive Director, Medicare Payment Advisory Commission. Thank you for coming today. You will be given 

5 minutes for an opening statement. Your written testimony will 

be made part of the record. 

The Chair recognizes Dr. Miller for 5 minutes at this time. 

STATEMENT OF MARK E. MILLER, EXECUTIVE DIRECTOR, 

MEDICARE PAYMENT ADVISORY COMMISSION 

Mr. MILLER. Chairman Pitts, Ranking Member Pallone, distinguished committee members, thank you for asking the Medicare 

Payment Advisory Commission to testify today. 

As you know, MedPAC was created by the Congress to advise it 

on a range of Medicare issues. The commission’s work is guided by 

three principles, to assure that the beneficiary has access to highquality care, to protect taxpayer dollars, and to pay providers and 

plans in a way to accomplish these two goals. 

The Federal Government is carrying a large debt. As the testimony points out, even though Medicare spending has slowed recently as a result of lower utilization and legislative restraint on 

payment increases, we need to continue to look at this program because the baby boom is transitioning into Medicare and higher perVerDate Mar 15 2010 13:22 Apr 27, 2015 Jkt 037690 PO 00000 Frm 00010 Fmt 6633 Sfmt 6633 F:\113-185 FISCAL PRIORITIES ASK OK 4-22-15\113-185 FISCAL PRIORITIES PDF MADE
7 

beneficiary spending is projected for the future. In the short run, 

the commission has many recommendations that would move Medicare away from a fragmented system that is unnecessarily expensive towards one that is more focused on coordinated care at a 

price the taxpayer and the beneficiary can afford. 

Examples of short-run recommendations that would both restrain 

spending and remove financial incentives to focus on certain types 

of patients include eliminating the automatic updates for profitable 

fee-for-service provider sectors, like long-term care hospitals and 

inpatient rehab facilities, and actually reducing payment rates for 

skilled nursing facilities and home health agencies. It includes siteneutral payments that reduce the incentive to purchase physician 

practices and bill at the higher outpatient rates for the same services, recommendations that include site-neutral payments for similar patients that are seen in different post-acute care settings, and 

as you know, from our past research and recommendations, they 

have resulted in laws that are transitioning to a financially neutral 

payment between managed care plans and fee-for-service. 

Our more recent research and recommendations, if accepted, 

would produce more competitively set payments for employer-based 

managed care plans. All of these policies were recommended after 

careful considerations on the effects of access to services and to 

plans. And of course, the commission continues to monitor the effects of these policies and report back annually to the Congress. 

Examples of short-run recommendations that would better align 

provider incentives to focus on patient care coordination and also 

to reduce unnecessary expenditures include an SGR reform plan 

that would end the annual cycle of short-term patches; a budgetneutral bonus payment for primary care providers and services 

that would allow physicians and other professionals greater flexibility to coordinate their care around the patient; and readmission 

penalties, some of which have been put into law, for hospitals, 

skilled nursing facilities, and home health agencies that would 

have the effect of discouraging expensive readmissions that disrupt 

the lives of patients and families. 

Examples of short-run recommendations that would better align 

beneficiary incentives with the incentives outlined above include a 

major redesign of the traditional fee-for-service benefit where we 

recommended limiting total out-of-pocket expenses for beneficiaries, 

rationalizing the deductible, clarifying point-of-service cost-sharing 

liabilities, giving the secretary authority to alter cost sharing based 

on the value of a benefit, and imposing an additional charge on 

supplemental coverage policies to better reflect the cost they impose on the program and to send a clear price signal to the beneficiary. We have also recommended copayments for certain 60-day 

home health episodes and lowering copayments to as little as zero 

for low-income beneficiaries who use generic drugs. 

In closing, we now have three payment models in Medicare, 30 

million beneficiaries and traditional fee-for-service, 5 million are in 

accountable care organizations, and nearly 16 million are in managed care plans. Each has its own payment rules, risk adjustment 

and quality measurement criteria. Our most recent report begins a 

discussion of the future for the Medicare program that ideally 

would protect the patient by establishing common-risk adjustment 

8 

and quality standards across these models, fairness among plans 

and providers within a market by setting common financial and 

quality standards, reduce the burden on plans and providers by reducing unnecessary quality reporting and reducing regulations for 

those who accept risk, and protecting the taxpayer by assuring that 

the program pays for low-cost, high-quality care in any given market. 

I appreciate your attention to my comments, and I look forward 

to your questions. 

[The prepared statement of Mr. Miller follows:] 

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24 

Mr. PITTS. Chair thanks the gentleman. 

And I will begin the questioning. Recognize myself 5 minutes for 

that purpose. 

Dr. Miller, there have been five bipartisan plans to save Medicare introduced in this President’s term. First, Rivlin-Dominici; second, Rivlin-Ryan; third, the Fiscal Commission; fourth, SimpsonBowles’ own plan; and five, plan by former Senator Joe Lieberman 

and Senator Tom Coburn. 

The Lieberman-Coburn plan has been proposed in legislative text 

and was scored by the actuary of the Medicare program. The actuary said, page 6 of OACT analysis, that if this legislation was 

adopted, it would prevent Medicare’s insolvency for decades and reduce senior’s premiums so that they would be lower than under 

current law. 

Please tell us what you think are the most actionable pieces of 

this proposal for this committee to consider adopting next Congress? 

Mr. MILLER. I am not going to be able to comment on this specific proposal. I am not that deep on it. But when you look across 

those proposals including the one that you named, there are elements of those proposals that also came out of recommendations or 

at least are consistent with recommendations that the commission 

has made. 

If I remember correctly, and I really am not sure I do, there is 

a lot of these things and a lot of details, they were focused on some 

benefit redesign, including catastrophic caps, and I also think that 

they had something on altering supplemental coverage. The commission has this additional charge. I think they took a different approach where they said supplemental coverage wouldn’t be able to 

cover the first few dollars of coverage in order to assure that the 

beneficiary had some price signal on a service that they consumed. 

And those are consistent directions even if they are different mechanisms for achieving the same thing. 

I also think that there was some elements in some of those plans 

to reduce the home health payments, and that is certainly something that came out of our work. Off the top of my head, that is 

a couple of things. 

Mr. PITTS. I want to ask about Medicare benefit redesign proposals. Some of my colleagues on the other side of the aisle have 

examined MedPAC’s recommendation on creating a combined deductible for parts A and B, a catastrophic limit on out-of-pocket 

spending, and Medigap reforms that would limit first-dollar coverage. The minority is on record in their hearing memo claiming 

that many patients might see higher cost under these proposal 

plans. 

I think the minority might be overlooking the savings that accrue 

to a beneficiary over time as a separate 2011 analysis concluded 

four out of five beneficiaries could save money if such a proposal 

were adopted. 

Could you please discuss the effect that such reforms would have 

on beneficiaries especially over multiple years and can you comment about whether or not a beneficiary who would otherwise face 

higher costs could enroll in a Medicare Advantage plan? 

Mr. MILLER. OK. I think you have a few questions in there. 

25 

The first thing that I would say is benefit redesign, when you 

think about a catastrophic cap and adjusting the deductible, there 

is several ways that it can affect the beneficiary. But one thing to 

keep in mind is, is that what you are doing, and it is almost inescapable is, is you are shifting the liability across the distribution 

of beneficiaries. 

Generally, what you are doing with these things when you go for 

a catastrophic cap is there is a small set of beneficiaries with very 

high liability that you help and other beneficiaries who have less 

healthcare costs have more healthy experiences probably pay more 

for a deductible. So there is some redistribution. 

But the other objective that you are up to here is by setting a 

catastrophic cap, and, for example, in our recommendation, making 

copayments as opposed to coinsurance, which is less predictable, 

the beneficiary has clear a line of sight on what their out-of-pocket 

liability would be. This would mean that the beneficiary’s need to 

buy a supplemental policy should be less. That is the idea. 

And to the extent that beneficiaries say, ‘‘I no longer need a supplemental policy,’’ then that is an out-of-pocket expense that they 

no longer incur and that is a place where they could potentially 

achieve savings to the beneficiary. So there is some moving around 

of liability and there is some potential savings, depending on 

whether the beneficiary continues to carry a supplemental premium. 

You asked another question about the impact on the beneficiary. 

In the short term, it does mean that certain beneficiaries would 

incur greater liability because they might have a higher deductible, 

for example. But over time, those beneficiaries run a greater risk, 

because of their age and just the natural progression of disease, 

run a greater risk of going into the hospital or hitting the catastrophic cap. And we have done some analysis which we can send 

to this committee where we show that the percentage of people affected, helped by this, for example, grows from 9 percent in the 

first year to 30 percent when you go out—or 19 percent when you 

go out 5 years, 30 percent when you go out 10 years. 

So over time, more beneficiaries are likely to benefit from a catastrophic cap or a reconfigured deductible depending on their health 

experience, which they run greater risk over time. 

Mr. PITTS. Chair thanks the gentleman—go ahead. 

Are you finished? 

Mr. MILLER. I am done. No, go ahead. Sorry. 

Mr. PITTS. I thank the gentleman. 

And recognize the ranking member, Mr. Pallone, 5 minutes for 

questions. 

Mr. PALLONE. Thank you. 

Dr. Miller, in MedPAC’s June 2012 report and in your testimony 

for today’s hearing, you note that the proposal for Medicare benefit 

redesign reduces risk and increases predictability for beneficiaries 

by adding an out-of-pocket catastrophic cap and a lower combined 

deductible together with predictable copayments for services. The 

proposal also recommends a fee on supplemental insurance plans 

such as Medigap and retiree plans. And as you can imagine, I have 

heard some concern about this idea. 

26 

Your rationale appears to be because first-dollar coverage can encourage inappropriate use of care that Medicare should recover 

some of the increased program costs that result from this excess 

use of services. Now, while I agree that an out-of-pocket catastrophic cap would be an improvement, I have concerns about the 

impact of your proposal on Medigap or supplemental insurance 

policies, and particularly concerned that these will be viewed as 

separate and unrelated proposals. 

Can you clarify then, are these different policy options, or are the 

two components of this proposal actually linked to one another? 

Mr. MILLER. The commission was really clear on this, I believe, 

that this was a package of proposals; that you do the benefit redesign, as you outlined there, along with the additional charge on the 

supplemental coverage. 

Mr. PALLONE. OK. Now, I understand your proposal retains current protections for low-income seniors related to cost-sharing and 

premiums. And one of my concerns is that I believe the current 

low-income protections are inadequate. I am concerned that taxing 

or otherwise discouraging these first-dollar coverage supplemental 

plans would negatively impact the near poor who do not currently 

qualify for assistance under Medicaid. So could you just comment 

on that? 

Mr. MILLER. Yes. The commission did talk about this quite a bit. 

There is collective concern that if that is your concern, the Medigap 

product is not a particularly effective way to get at that. Often, the 

premiums and the benefits that you get from it just result in dollar 

churning, if you will, sort of dollar trading, and some of the premiums can be quite high. 

What the commission said is if that was a concern, and we made 

a specific recommendation on this point, would be to alter the 

Medicare savings programs and go more directly at providing subsidy to the poor and near poor. And specifically what we said is 

change the income qualification to be consistent with the income 

qualification for part D (LIS) and raise it to 150 percent of poverty, 

and then have a premium subsidy for the QI population, which 

starts to get into some complexity, but for this answer, you have 

a premium subsidy for the QI beneficiaries. 

Then what they do, they are relieved of, let’s just call it $1,300 

in part B premium, which they can then use to pay for their outof-pocket copayments and deductibles and that type of thing. And 

within the package, we would see that as being financed out of the 

savings that come out of the Medigap portion of the proposal. 

Mr. PALLONE. OK. I know we use the term ‘‘near poor,’’ but I 

wish we had a better term than ‘‘near poor.’’ It seems so strange. 

Let me ask another question. In MedPAC’s proposal for redesigning Medicare’s benefit package, the commission is clear that 

two overriding objectives are to give beneficiaries better, more predictable protection against out-of-pocket spending, and to create incentives for them to make better decisions regarding discretionary 

care. 

But many of us would agree there is a need to simplify the structure of Medicare benefits in ways that make it more understandable and user friendly for beneficiaries and provide them with betVerDate Mar 15 2010 13:22 Apr 27, 2015 Jkt 037690 PO 00000 Frm 00030 Fmt 6633 Sfmt 6633 F:\113-185 FISCAL PRIORITIES ASK OK 4-22-15\113-185 FISCAL PRIORITIES PDF MADE
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ter protections by providing out-of-pocket spending caps, like private insurance plans. 

So my question is: Unfortunately, the notion of creating incentives for beneficiaries to make better decisions is often looked at 

only through the narrow lens of increased cost sharing. Can you 

talk about ways other than cost sharing that benefits can be structured to encourage use of appropriate high-value services and discourage the use of unnecessary services? In 40 seconds or less. 

Mr. MILLER. If I follow it, I think there is two comments: One 

is, the portion of the recommendation that spoke to the secretary’s 

authority to adjust cost sharing on the basis of value, I would just 

point out, just in case you missed it, that toggle would go both 

ways. So if a benefit is high value, you could actually lower the cost 

sharing or zero out cost sharing for your diabetes visit or whatever 

the case may be. 

Mr. PALLONE. Right. 

Mr. MILLER. So the toggle doesn’t entirely increase cost sharing 

and could be lower cost sharing, just in case that got by you. 

The other thing, I mean, then I think you move to different kinds 

of ideas. For example, a while back, we made recommendations for 

prior authorization for very expensive imaging services. I mean, I 

think then either you have to move in that direction in fee-for-service or move in the direction of a beneficiary being in an accountable 

care organization or a managed care plan where those kinds of 

tools are more readily available to manage the beneficiaries experience. 

Mr. PALLONE. All right. Thank you. 

Mr. PITTS. Chair now recognizes Vice Chair of the Subcommittee 

Dr. Burgess, 5 minutes for questions. 

Mr. BURGESS. Thank you, Mr. Chairman. Before I begin, let me 

ask unanimous consent to submit written testimony for today’s 

hearing by the Coalition to Preserve Rehabilitation for the record. 

Mr. PITTS. Without objection, so ordered. 

[The information follows:] 

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Mr. BURGESS. And again, Dr. Miller, thank you so much for 

being here and sharing your expertise with us. Let’s talk for a 

minute about the trend of hospital acquisitions, hospital acquiring 

practices and the consolidation that really seems to have increased 

dramatically in the past couple of years. 

In one of your earlier reports, you discuss the trends of hospital 

acquisitions costing Medicare more and driving up costs. The report 

discusses in great detail how this is happening in cardiology. This 

past May, I asked if the commission had seen this trend in other 

specialties, specifically oncology. Do you have any additional information that you can share with the subcommittee to add on this 

or to build on this? 

Mr. MILLER. I probably can’t do it very well off the top of my 

head here, but there is some additional information that we could 

give to you. We took a look at other requests at kind of the trends 

in radiation therapy and in chemotherapy, and you do see some 

trends there that are consistent with the things that we have presented previously. 

And I would also remind you, and I know this is a detail that 

would not be readily apparent, in the recommendation that we 

made on our site-neutral payments, which encompassed about 66- 

some-odd conditions where we said you should set payment rates 

equal to or near what is paid in the physician’s office, a few of 

those conditions actually overlap the oncology, you know, drug administration codes and that type of thing. 

Keep in mind, in oncology, you have sort of two things happening. The drugs are actually paid comparably. It is really the administration and what goes on around the drugs that are not paid 

comparably, and our recommendations would affect that. But in 

any case, we have some of that contemplated in our recommendation, and there is some additional information that I could forward 

to you or your staff on a particular issue. 

Mr. BURGESS. Great. That would be good. Do you recall overall 

if that trend is a trend upward in the cost curve, or is it a flattening of the cost curve? 

Mr. MILLER. Yes, and I am going to do this off the top of my 

head—which is really a dangerous thing—what I recall from the 

work that we did is if you look at radiation therapy, it is a lot more 

oblique. But if you look at chemotherapy, there does seem to be a 

shift from the office setting to the hospital setting. That is my takeaway there. 

Mr. BURGESS. Well, and, again, it would be very helpful if you 

could provide that information to us. 

Mr. MILLER. Uh-huh. 

Mr. BURGESS. If there were more parity in reimbursement rates 

between the outpatients and acute care settings, for example, raising reimbursements in certain settings, lowering it in other settings, how do you think that would affect consolidation? 

Mr. MILLER. If there was greater parity, is that what you were 

saying? 

Mr. BURGESS. Parity. Yes. 

Mr. MILLER. Well, we think it would have some dampening of the 

trend. Am I getting the question? 

39 

Mr. BURGESS. Yes. And I think, overall how would that affect the 

cost in the Medicare programs? Do you think that would be a reduction in cost? 

Mr. MILLER. Absolutely. I mean, we have made two recommendations, for example, to equalize the payment rates between visits in 

the physician office setting in the hospital outpatient setting, and 

then, as I said, develop this criteria and identify these 66 other 

services that we would set the rates. And for example, on those 

two, at about 1 billion-plus a year, that would reduce spending of 

which, you know, just in round numbers, 20 percent of that would 

be a reduction in the beneficiary’s cost sharing, which is something 

I would just bring us all back to. 

I mean, particularly when these services just shift and are billed 

through the outpatient setting, it is important to keep in mind 

here, we are not talking about people actually leaving the office 

and going to the outpatient setting in most instances. They are still 

going to their physician’s office. They are still getting the same 

service. The payment from the program has gone up and the beneficiary’s cost sharing has gone up, and to the tune of about 1 billion, 1.5 billion per year, if these two recommendations were put 

into place. 

Mr. BURGESS. Has the committee looked at what happens to patient access costs with hospital acquisitions of specialties? 

Mr. MILLER. You could be asking me one of two questions. We 

have—— 

Mr. BURGESS. Well, when a hospital takes over what traditionally has been like a cardiology practice, what are the benefits of the 

cost of the patient when you move this site of service? 

Mr. MILLER. What are the benefits? 

Mr. BURGESS. Yes, and what are the costs, well, for the beneficiary? I meant, that is after all where the focus should be. 

Mr. MILLER. Yes, our concern is that the benefit to the beneficiary is pretty static, that they are getting the same service. Like 

I said, in many instances they will walk into the same office, see 

the same physician, and just pay a higher out-of-pocket. 

If there were hospitals sitting here, they would argue that they 

do this in order to create systems of care and have greater degrees 

of coordination. We have not seen access problems, and we have 

not seen a lot of evidence to back up the claim that this results in 

better coordination or better outcomes for the beneficiary. 

Mr. BURGESS. Mr. Chairman, I see my time is expired. I have an 

additional question on graduate medical education that I would 

submit for the record. Thank you. 

Mr. MILLER. Thank you. 

Mr. PITTS. Chair thanks the gentleman. 

And now recognizes the gentleman from Texas, Mr. Green, 5 

minutes for questions. 

Mr. GREEN. Thank you, Mr. Chairman. 

Dr. Miller, recent estimates from the Medicare Trustees highlight continued success in reducing spending under the Medicare 

program. Medicare spending per beneficiaries projected increase by 

just 0.3 percent in 2014, well below the growth in GDP. Is it correct that Medicare costs have grown at a consistently slower rate 

40 

than the private sector and total healthcare spending growth has 

reached the lowest rates since 1960? 

Mr. MILLER. I can’t stipulate each of those facts. What I would 

say is this: There has been a general slowdown in utilization in 

both the private and in the Medicare sector, so both of those have 

actually seen slowdowns in spending. I would guess that you are 

right that Medicare, depending on whether we are talking about 

growth rates, may be slower than the private sector because commercial insurers still have higher price growth than Medicare had, 

so just distinguishing between use and price. But there has been 

a broad-based slowdown in spending on both the private and the 

Medicare side in terms of utilization in the last few years. 

Mr. GREEN. OK. Thank you. 

The Centers for Medicare and Medicaid Services recently reported that from 2012 to 2013 hospital readmissions in Medicare 

were decreased by nearly 10 percent with the help of Medicare’s 

Hospital Readmission Reduction Program, translating to 150,000 

fewer hospital readmissions. Congress took further action by enacting readmissions reduction program for nursing homes under the 

Protecting Access to Medicare Act of 2014, which established a 

skilled nursing facility value-based purchasing program based on 

readmission reductions in the fiscal year 2019. 

Mr. Miller, what changes to current Medicare reduction programs might you recommend the further increased care coordination and cost reduction? 

Mr. MILLER. OK. There are a couple things I think I would say 

in response to this. You know, ideally what you don’t want to do, 

unless you have to, is impose penalties for these kinds of behaviors 

or, you know, abhorrent behaviors, high readmission rate. But 

when you have a fragmented fee-for-service sector you are sort of 

driven in that direction. 

And so what the commission’s view kind of works like this: We 

have recommended a readmissions penalty for hospitals, which has 

been implemented; as you said, skilled nursing facilities is coming 

on line; we also have a standing recommendation on home health 

readmission rates. The view there is, at least the major actors involved in a readmission would have an incentive to avoid it. They 

have an incentive to talk to each other and stop this kind of stuff 

from happening. Nobody benefits from this. Extra payments, beneficiary’s families. 

Now, ideally, where we would be moving to is think of bundled 

payments or an ACO or a managed care plan where that actually 

becomes their incentive, because if they can reduce a provider or 

plan, if they can reduce the readmission, then that actually turns 

into revenue for them. 

Mr. GREEN. Yes. 

Mr. MILLER. The other thing I would just say about the penalty, 

and I won’t get into the weeds here, we want the penalties—and 

we have some specific ideas on this—structured in such a way that 

people avoid the readmission. In a sense, we don’t want the penalty; we want them to avoid the readmission, which is a much 

more, you know, better event for everybody. And we have some recommendations to change the readmission penalties as they stand 

to get at that outcome a little more. 

41 

Mr. GREEN. OK. Well, and that is the concern, you know. I know 

the penalty, and the penalty doesn’t help anybody, but the goal is 

to move that behavior so they actually treat that person fully. 

Mr. MILLER. We think there is—well, go ahead. It is your time. 

Mr. GREEN. And I don’t have a lot of time left, but I know over 

the years we have also had some concerns about infection rates 

from being in the hospital and there has been efforts to do that. 

Can you compare in a short time now the readmission rate issue 

with the penalties compared to what we have tried to do on the 

broader scale in infection rates at some of our hospital facilities? 

Mr. MILLER. Actually, I think I am going to have to come up 

short here. I am much more familiar with what is going on with 

the readmission rates. I am aware of the hospital-acquired conditions, measures. I can’t give you a good answer on what effects and 

what observable effects there are. I am just not up to speed on it. 

Mr. GREEN. Again, appreciate you being here and thank you. 

Mr. MILLER. I apologize. 

Mr. GREEN. Chairman, I yield back my time. 

Mr. PITTS. Chair thanks the gentleman. 

And now recognize the gentleman from Illinois, Mr. Shimkus, 5 

minutes for questions. 

Mr. SHIMKUS. Thank you, Mr. Chairman. 

Dr. Miller, welcome. I like this discussion on this readmission 

thing because my understanding is the penalty kicks in even if the 

readmission has no relation to the original hospitalization; is that 

correct? 

Mr. MILLER. Well—— 

Mr. SHIMKUS. There is a penalty. So, you know, someone is in 

there for an internal procedure but then they leave and then something else happens, they break their leg, they go in, they are readmitted. There is no discrimination over the cause and effect of 

why you are penalizing them; is that correct? 

Mr. MILLER. Yes, and I am just going to—I am going to parse 

through this a little bit. You are decidedly correct that people complain that there is not enough definition in the readmission criteria 

that parses things like a planned readmission or a readmission 

that is really related to the initial admission. 

But I will say two things: First of all, the commission’s position 

is it should be all condition, risk adjusted, potentially preventable, 

and that is the code word for get the planned ones out of there, and 

there is probably some clinical judgment that applies to situations 

like you are saying. 

But the key point that I want to get across to you, just in case 

it is not clear: The penalty doesn’t litigate on the basis of readmission by readmission. It looks at the overall rates of the hospital and 

says, if you are way to the right in the tail, that is where the penalty applies. So even if there is some disconnect, it is not case by 

case. I would just get that point across to you. 

Mr. SHIMKUS. So maybe percentage-wise, based upon the overall 

admission, readmission rates that deal with that. 

Mr. MILLER. Exactly. 

Mr. SHIMKUS. I think that is helpful. I would be adverse not to 

use Sydne in one of her last days—although she’s not paying attention to me—in her ability to put charts up. 

42 

And I want to have her put up one, because your role is, you 

know, the Medicare Payment Advisory Committee, and I bring this 

up all the time just to make sure we highlight the challenges that 

we face budgetarily and also the importance of your role. 

Because even when I go to my two questions, it would be, I 

would say, nibbling around the edges versus really actuarially trying to make a system whole and the red being mandatory spending 

that has to go on regardless of what we do. The blue is discretionary. That is what we fight about all the time. 

Sydne, you can take that down. I wanted to harass her one last 

time. 

But to my question is, we asked last time you all came on the 

340B program and what affect it has on the Medicare program. 

Can you comment on any ideas that you might have to realize savings in Medicare as it relates to the 340B program? 

Mr. MILLER. Yes, we took that statement and statements that 

other members said on the same point very seriously. And the commission, if I remember correctly, things are running together a little bit, I believe at our November meeting had an extensive discussion about the 340B program, its growth, what the various conflicting incentives were, what, you know, one, the drug manufactures were arguing, what the hospitals were arguing, all of that, 

because we were asked to kind of paint the picture for the committees. 

I just need to quickly say, by and large, all of this program is 

beyond our jurisdiction. It is not Medicare and it is not administered by CMS, but since the committee has asked, we wanted to 

lay the picture out and now we will give that to you and you guys 

will do what you do. 

However, there was one thing in it, and we have only noted it 

for the commissioners at this point. We haven’t actually taken action on it, and I think this is what you are getting at. In the outpatient setting, Medicare pays what is called the average sales 

price plus 6 percent, and that is what Medicare reimburses and 

there is a whole bunch of details about how that gets calculated. 

But if the hospital realizes a discount on the 340B then there is 

some difference between what the hospital acquired that drug at 

and what Medicare is paying at, and Medicare does not follow that. 

And that is as far as we have gotten. We have put that in front 

of the commission, but I have not much more to say about it than 

that. 

Mr. SHIMKUS. Great. And let me finish up, the President on the 

part D and Low-Income Subsidy Program, the President’s proposal 

would encourage seniors to increase generic drug use when a viable 

alternative to a brand name is available. Has the commission 

taken a position on the low-income subsidy reform, since this policy, we think, could save, obviously, money for both the program 

and the seniors? 

Mr. MILLER. Yes. I don’t remember where the President’s budget 

proposal came, whether it was before or after ours. I think it was 

after. But we made a recommendation a while back on this front, 

and our point was that even low income—and this is tricky, but 

even low-income beneficiaries are price sensitive. And if you say, 

for example, and give the plans the flexibility to say you can zero 

43 

out the premium for a generic drug, and keep in mind, this policy 

would only be in situations where there is a generic substitute, 

then the beneficiary may gravitate more to that. 

Because what we found in the data is, is that you have less generic use in the low-income subsidy population. And I had always 

had this perception, well, this is because they use extremely expensive specialized drugs, and decidedly, some of them do. But a lot 

of their profile is the standard drugs for which there are generic 

substitutes, and so we thought that this would help get some push 

there. 

Mr. SHIMKUS. Thank the chairman. 

Mr. PITTS. Chair thanks the gentleman. 

And now recognizes the gentlelady from Florida, Ms. Castor, 5 

minutes for questions. 

Ms. CASTOR. Thank you, Mr. Chairman. 

Thank you, Dr. Miller for being here. It is nice to focus on something substantive and especially where some good news in Medicare that we have seen a slowing in growth of health spending, the 

fifth consecutive year of slower growth. And CMS says this is the 

slowest growth since 1960, so we need to put that to work in extending the life of the Medicare Trust Fund. 

And more good news, the Affordable Care Act reforms are working. We have talked a lot about hospital readmissions and that is 

quantifiable already. And then we have a lot of reforms dealing 

with the accountable care organizations and focused on quality over 

quantity where the jury is still out but it looks promising. 

But we still have now this challenge with the baby boomers beginning to retire and they are going to call on Medicare. They are 

looking forward to coming onto Medicare. It remains very popular. 

So we have a very important responsibility to ensure Medicare remains strong. I think the past attempts to look for quick solutions 

like turning it into a voucher, we really need to move away from 

that divisive dialogue because that is not going to solve anything. 

It simply shifts costs to beneficiaries that can’t afford it. 

So the hard work is going to be getting into the details. What is 

fraudulent? What will help bring greater efficiency? What can we 

do to bring developments in modern diagnosis medicine treatments 

to bare to extend the life of the trust fund and provide care? 

I want to ask you a variation on what Representative Green was 

talking about in hospital readmissions but focus on post-acute care 

settings. Under the current Medicare payment systems there are 

no financial incentives for hospitals to refer patients to the most efficient or effective setting so that patients receive the most optimal 

but lowest cost care. Whether a patient goes to a home health 

agency or skilled nursing facility, for example, seems to depend 

more on the availability of the post-acute care settings in a local 

market. The patient and family preferences or financial relationships between providers. 

So since patients access post-acute care after a stay in the hospital, what does MedPAC say we should be doing to ensure patients receive care in the right setting after a hospital stay? 

Mr. MILLER. I think there is a few things, and I will try and 

build the answer this way: First of all, in the arriving settings, like 

a skilled nursing facility or in home health, we think that there are 

44 

underlying incentives built into the payment system now that encourage taking some patients and avoiding others. So we think, at 

a very bumper sticker level, what you want to do is take the physical rehab patients. You want to avoid the medically complex patients. We think that there is some very straightforward analytical 

adjustments or technical adjustments to the payment system that 

start to remove those incentives so you get something more of a 

clinically driven referral instead of a financial referral. 

I won’t run through all it again, but the notion of having a readmission penalty among the actors of saying you need to do this 

carefully and get them to the right location. Otherwise, if they 

come back to the hospital everybody has some impact, then we 

think that would help. 

Ms. CASTOR. OK. 

Mr. MILLER. There are also—well, just let me get these two 

things out quickly. We have also made a whole set of recommendations on accountable care organizations that we any would make 

those more viable and workable, and within those we think the incentives of all the actors are aligned. 

And then the very last thing I will say—I am sorry—is we just 

had a conversation, I think it was in November, in which the commissioner started to ask themselves, even within fee-for-service 

should we give hospitals greater flexibility to steer patients on the 

basis of higher-quality facilities? 

Now, that is not a recommendation but that is a discussion that 

is in progress. Sorry to take your time. 

Ms. CASTOR. OK. No, I was interested in your answer. On Medicare Part D, spending now is well over $60 billion per 

year and over 10 percent of all Medicare spending. Is MedPAC satisfied right now that the competition among plans—1,100 prescription drug plans, 1,600 Medicare Advantage PDPs, great choices for 

consumers—is MedPAC satisfied that the competition among plans 

is providing strong enough incentives for cost saving? 

Mr. MILLER. Well, it is interesting you ask that question. We are 

just about to start talking about that in some greater detail. What 

we have been noticing over the last few years in part D is that the 

most rapid growth in the program is our reinsurance portion of the 

benefit. And so that is raising questions in our mind about whether 

there is some re-examination of the structure to relook at whether 

there is a greater degree of competition that could be injected into 

that program. 

I don’t have ideas for you right at the moment, but in the back 

room, those are churning in order to come out in front of the commissioners shortly. 

Ms. CASTOR. Good. We will look forward to those. 

Thank you. 

Mr. PITTS. Chair thanks the gentlelady. 

And now recognizes the gentleman from Pennsylvania, Dr. Murphy, 5 minutes for questions. 

Mr. MURPHY. Thank you. 

Welcome, here Dr. Miller. Good to have you. 

I want to talk a little about some of the cost-shifting issues. Basically, I am assuming when we are talking about cost shifting, if a 

person may be seen in primary care, but if they cannot get the speVerDate Mar 15 2010 13:22 Apr 27, 2015 Jkt 037690 PO 00000 Frm 00048 Fmt 6633 Sfmt 6633 F:\113-185 FISCAL PRIORITIES ASK OK 4-22-15\113-185 FISCAL PRIORITIES PDF MADE
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cialty care they need, that person may face other complications 

from their illness. Would you agree? 

Mr. MILLER. Yes. 

Mr. MURPHY. OK. And I saw a recent report that said those persons who sometimes have the greatest problems with readmission 

are people with low-income families. Would you agree with that? 

Mr. MILLER. There is a relationship between readmission rates 

and income, yes. 

Mr. MURPHY. And is that, some of that relation may also be that 

sometimes people have maybe compliance issues, or perhaps they 

don’t have access to some of the things they need, some of the specialists and medications, et cetera? 

Mr. MILLER. I would have a hard time telling you precisely what 

the mechanisms are. I think there is a relationship there. It might 

be the things that you are saying. I think there are a lot of things 

that are said. I think the exact pathways that lead to it are 

less—— 

Mr. MURPHY. Let me describe one. I read research reports that 

say that senior citizens with Medicare with chronic illness, have 

double the rate of depression and some mental illness. And that 

when it is untreated depression and chronic illness, that doubles 

the cost. So access is important to make sure that, under those circumstances, a person, for example, with heart disease or cancer or 

diabetes, has an increased risk for depression; and, therefore, treating that is an important cost-savings factor. 

So therefore, if that is not treated, that is a cost shifting, that 

instead of providing the psychiatric or psychological care that cost 

will be borne by further complications with diabetes, cancer, heart 

disease, pulmonary disease. Does that make sense? 

Mr. MILLER. I see that. 

Mr. MURPHY. Now, one of the issues I have been deeply concerned about is of access to inpatient psychiatric care for the severely mentally ill. As you may know, Medicare has a 190-day limit 

on inpatient psychiatric care. But we don’t impose this for heart 

disease, do we, or lung disease or diabetes or cancer? Do we have 

190-day limit for those? 

Mr. MILLER. There is not a 190-day limit for that. 

Mr. MURPHY. So wouldn’t you agree that this is discriminatory? 

Mr. MILLER. I agree it should be looked at. The facts said I am 

a little bit hazy on, but as you have presented it, I see your point. 

Mr. MURPHY. But with 190 days, though, I mean psychiatric diseases are brain diseases, but should we have a limit on diseases 

in terms of the number of days you can be treated for that? 

Mr. MILLER. The only thing I would like to do is have the room 

to come back to you on this and make sure I understand what the 

implications are of agreeing to that is. 

Mr. MURPHY. I am not sure what implications you are looking 

for. 

Mr. MILLER. Well, a couple things. There may be limitations on 

other parts of the benefit that I don’t have right at the front of my 

mind, and I wouldn’t want to agree for the commission to say yes 

without being able to tell you what the cost implication of that 

would be. 

46 

Mr. MURPHY. I understand. Well, and if there are limits, we certainly would like to know that, because the issue becomes one of 

what is the proper level of care. 

Mr. MILLER. Exactly. And that is all I am looking for is some 

latitude on. 

Mr. MURPHY. And if there is 190-day limit for psychiatric care 

but that is not enough to treat someone. 

Mr. MILLER. I hear you and I see the direction of your question. 

I would just like some latitude to actually think about it and come 

back to you. 

Mr. MURPHY. Can you also then, when you are looking at that, 

find out how many seniors are affected by this cap? So when looking at the number of seniors, we need to know the costs of that. 

Mr. MILLER. That is what I want to make sure I don’t mislead 

you on and say, yes, no problem and then, you know, come back 

with—— 

Mr. MURPHY. And I appreciate your thoughtful approach, to this, 

because we need those kind of facts. When we ignore the mental 

health needs of seniors with chronic illness and that leads to other 

costs, we are not saving anybody anything. We multiply those 

costs. 

And so sometimes when there is a resistance within Medicare to 

change a rule, well, we can’t afford more than 190 days, but we will 

end up doubling the costs of oncology or cardiology or something 

else. It just doesn’t make sense to us. So I hope you will give us 

a comprehensive look at that issue. 

Mr. MILLER. Absolutely. And, you know, I don’t want you to take 

the response as hostile to the ideas. I just don’t want to commit the 

commission to saying, ‘‘Sure, go above 190 days’’ without giving you 

more complete thought, because we are the kind of people who 

would look at that and come back to you and say, ‘‘If you are going 

to do that, there may be some other things that you want to do to 

make it a more episode-based type of approach to the beneficiary’s 

experience.’’ 

For example, if the person leaves the inpatient psychiatric facility, is there actually a set of ambulatory visits arranged for that 

person when they walk out the door? Because I think our experience is, that is where things begin to break down. 

Mr. MURPHY. Good to see it, and monitoring and integrating that 

care. Same thing goes with pharmacology when you see that the 

mass amounts of medications that people don’t follow through on 

leads to readmission or more complications, et cetera. It is a huge 

cost. 

Thank you so much. We look forward to hearing from you. 

Mr. MILLER. I would like to just think about it more holistically. 

No hostility to the thought. 

Mr. MURPHY. No, I appreciate that. Thank you. 

I yield back. Thank you. 

Mr. PITTS. Chair thanks the gentleman. 

Now recognizes the gentlelady from Illinois 5 minutes for questions. 

Ms. SCHAKOWSKY. Thank you, Mr. Chairman. 

Thank you, Dr. Miller. 

47 

I just want to put in context some of the things we are talking 

about. The average Medicare beneficiary lives on an income of— 

half of all Medicare beneficiaries—$23,500 or less, and a quarter of 

them live on $14,400 or less. 

We are talking about how we strengthen Medicare for now and 

for the future and costs. And we have done a lot, I want to point 

that out, to actually reduce the costs of Medicare. 

The Centers for Medicare and Medicaid Services, CMS, recently 

reported that the Medicare Shared Savings Program and the Pioneer Accountability Care Organizations, ACOs, that were created 

by Obamacare have generated about half a billion dollars in savings for the Medicare program. 

A recent report by the Agency for Healthcare Research and Quality found that we saved approximately $12 billion in healthcare 

costs as a result of reductions in hospital-acquired conditions from 

2010 and 2013. $10.7 billion in fraud-fighting tools under 

Obamacare. That is over $23 billion. 

But the important thing to me is that it hasn’t done anything to 

reduce the benefits of the people who need it the most. And so I 

just want to make sure that we have policy solutions that save 

Medicare money but don’t harm beneficiaries. 

And there is a recent report that I would like to put into the 

record. Medicare Rights Center/Social Security Works released a 

report, ‘‘A Winning Strategy for Medicare Savings: Better Prices on 

Prescription Drugs.’’ 

Four strategies, including restoring the Medicare prescription 

drug rebates, allowing Medicare to negotiate drug prices for part 

D public option, and a solution—and let’s see—securing better discounts for drug manufacturers to close the doughnut hole, promoting cost-effective prescribing for part B prescription drugs. 

And I would like to—— 

Mr. PITTS. Without objection, so ordered. 

Ms. SCHAKOWSKY. Thank you. 

[The information follows:] 

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Ms. SCHAKOWSKY. So here is my question, though. I am very concerned that this idea of making sure seniors have and people with 

disabilities have more skin in the game, that we—the CMS 

Medigap tool shows that in Evanston, my district, Evanston, Illinois, the average cost of a Medigap plan for someone in good health 

is between $129 and $318 a month for a Medigap C Plan and $118 

to $262 per month for a Medigap F Plan, both of which include 

deductibles. 

But CMS still estimates that, even with these plans offering 

first-dollar coverage, a senior or person with disability would still 

spend over $6,000 on health care each year out of pocket. 

So why should we ask these Medicare beneficiaries to pay more, 

eliminating first-dollar Medigap coverage? 

Mr. MILLER. Well—and this goes back to the conversation on the 

benefit design. And I want to be clear. I mean, the Commission—— 

Ms. SCHAKOWSKY. Dr. Miller, could you pull your microphone 

closer? 

Mr. MILLER. Oh, sorry about that. So nobody has heard anything 

I have said for the hearing? 

Ms. SCHAKOWSKY. No, it is just me. Just me. 

Mr. MILLER. So, let’s see, where were we? Benefit redesign. 

The Commission shares your concern. And, particularly, you had 

a statement in your—‘‘We should do reform, but we shouldn’t harm 

beneficiaries.’’ OK? There was a lot of discussion about this. 

Now, one more time, just to go through this, the benefit redesign 

works like this: It has a catastrophic cap. So that beneficiary you 

are talking about now has an additional protection, and particularly the person you are talking about who starts running into 

$6,000, $7,000, $10,000, that is what a catastrophic cap is all 

about: Stop, you know, the amount of out-of-pocket headed out the 

door. 

The second thing we would do is have copayments instead of coinsurance. So, you know—and you have had this experience—you 

pay 20 percent of a bill that you don’t know what it is going to be. 

It is hard to plan for, as opposed to I walk into the physician’s office, I pay 20 bucks, or I walk into a specialist’s office, I pay 30 

bucks; I know what I am going to pay. The thought process in all 

of this is that the beneficiary has more protection and clearer line 

of sight. 

And to be really clear on this, the Commission’s principle was 

that the beneficiary’s liability, as it currently stands, doesn’t 

change under this benefit redesign. So we are not putting more liability on the beneficiary. There is a distributional change, meaning the sick get more coverage. But there is no aggregate change 

in the liability. 

Then we say, if you want to buy that coverage, the coverage 

would come with a higher price, which reflects the cost that it imposes on the program. But, ideally, you don’t need it the way you 

used to need it because the benefit is better and we expanded the 

Medicare Savings Program up to 150 percent of poverty to capture 

that group of people between 135 and 150 who would potentially 

have a out-of-pocket problem. 

Ms. SCHAKOWSKY. I am going to put some further follow-up in 

writing. Thank you. 

55 

Mr. PITTS. All right. The Chair thanks the gentlelady. 

I now recognize the gentleman from Georgia, Dr. Gingrey, 5 minutes for questions. 

Mr. GINGREY. Mr. Chairman, thank you. 

Before I ask my questions of Dr. Miller, I want to ask unanimous 

consent. In 2012, Dr. Roe, myself, Dr. Barrasso, and Dr. Coburn 

submitted a report titled ‘‘What Happens To Payments to Health 

Care Providers Participating in Medicare When the Medicare Hospital Insurance Trust Fund Reaches Exhaustion?’’ Since this is apropos to the discussion, I would like unanimous consent to have 

that approved for the record. 

Mr. PITTS. Without objection. 

[The information follows:] 

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Mr. GINGREY. I want to go back, Dr. Miller, to the line of questioning that Ms. Schakowsky just had, because I think this is 

hugely important and I want to make sure that I understand it 

fully. It is somewhat controversial, but it seems like the facts 

maybe speak for themselves. 

You said approximately one in six Medicare beneficiaries had an 

individually purchased Medicare supplemental insurance policy in 

recent years, known as Medigap, and no other source of supplemental coverage. 

The Kaiser Family Foundation released a report evaluating a 

proposal that would prohibit Medigap policies from paying the first 

$550 of enrollees’ cost-sharing and requiring that they cover no 

more than half of Medicare’s additional required cost-sharing up to 

a fixed out-of-pocket limit. 

The Kaiser Foundation revealed some notable findings, and let 

me point those out, three bullet points. If this policy were adopted, 

four out of five seniors would save money from Medigap reform, 

and most of those that could face higher cost would instead choose 

a Medicare Advantage plan. The second bullet point: With this reform, some seniors would save more than $1,000 from Medigap reform. And, thirdly, this policy would also create savings, which 

would strengthen Medicare. 

Given the obvious upside of the policy, why hasn’t Congress 

adopted this policy sooner? And what are the given obstacles to 

adopting this commonsense policy? 

Mr. MILLER. Oh. So the question is why, as opposed to the policy. 

Mr. GINGREY. It is, indeed. 

Mr. MILLER. I would rather talk to you about the policy, but I 

guess, just to be very direct, what I would say is that, obviously, 

the people who sell the Medigap plans would oppose such a policy. 

And I think one way you could think about trying to navigate 

this—and just to be clear, this is all your turf—is, you know, there 

are two ways to think about Medigap reform. 

What has been said in the Kaiser study says only products can 

be sold that don’t have first-dollar coverage. So the beneficiary has 

to pay something in order to get the service. And this is what the 

Congresswoman was referring to. The other way you could do it— 

and this is what the Commission said—is you can buy any product 

you want, first-dollar or not first-dollar, but the charge on it has 

to reflect the true cost of the policy. Because the policy imposes the 

cost on the program, and that is not reflected in the premium. 

And I think reasonable people could take either of these approaches, say, OK, I am going to say the product has to have this 

structure, or put an additional charge on it. But the folks who sell 

Medigap policies are not going to like either of those. 

On the beneficiary—I mean, I think the other resistance that you 

get to this—and it is raised by the beneficiary groups—is what 

about those people who—and I guess the term is ‘‘near poor,’’ at 

least in this area that we are talking about, where they are not 

poor enough to be covered by Medicaid but they don’t have enough 

resources to pay their out-of-pocket. And there, I think what the 

Commission would say is maybe you fill in the Medicare Savings 

Program up to 150 percent to try and help that crew out. 

61 

But I think your resistance is from the Medigap industry, and 

then I think the beneficiary groups are concerned about that bloc 

of people who are left without a supplemental. 

And one more time, I am just going to say this. Ideally, if the 

benefit redesign has a catastrophic cap and clearer cost-sharing, 

the beneficiary’s need for this should also be reduced. 

Mr. GINGREY. Yes. And, Dr. Miller, I would think that is the 

most important point, the catastrophic cap. 

Mr. MILLER. Yes, because we are talking—I mean, the reason 

that the Kaiser—I don’t have all those facts in my head, but the 

reason Kaiser said this is a savings to the beneficiary is, I mean, 

these premiums are, you know, $1,300, $1,400 for these products. 

Mr. GINGREY. Right. And many people don’t need that. They will 

never reach that catastrophic cap, and it is really unnecessary. 

So, Mr. Chairman, I will yield back 28 seconds. Thank you very 

much. 

Thank you, Dr. Miller. 

Mr. PITTS. The Chair thanks the gentleman. 

Now recognize the gentleman from Maryland, Mr. Sarbanes, 5 

minutes for questions. 

Mr. SARBANES. Thank you, Mr. Chairman. 

You said that the policy impacts the cost of the program. Just 

give me a couple examples. 

Mr. MILLER. The policy? 

Mr. SARBANES. The policy with the Medigap, like that the nature 

of the policy has an impact on the cost to the—— 

Mr. MILLER. Oh, OK. 

Mr. SARBANES [continuing]. Medicare program. 

Mr. MILLER. We think the research—if I follow your question, 

and if not, redirect. We think the research on this is very clear. 

What happens when you look at the presence of the supplemental 

coverage, after you adjust for the risk of the patient, you find a lot 

more discretionary services. So there are more visits, more imaging, more testing, that type of thing. It doesn’t affect hospital, 

emergency room services. 

Mr. SARBANES. Right. 

Mr. MILLER. That goes on about its business. But these policies, 

because there is no further—— 

Mr. SARBANES. But ups utilization that spills over onto the Medicare—— 

Mr. MILLER. And then that is not reflected—— 

Mr. SARBANES [continuing]. Coverage side. 

Mr. MILLER. And what I have tried to say, and perhaps not clearly, is that doesn’t get reflected in the premium. 

Mr. SARBANES. Right. 

Mr. MILLER. The person purchasing the product gets this package which is priced to just the wrap-around benefit, but there is a 

cost over here that travels on to the taxpayer and to the beneficiary’s broader premium. 

Mr. SARBANES. Right. Well, it is obviously very complex, and—— 

Mr. MILLER. Yes, it is. 

Mr. SARBANES [continuing]. It is gratifying that you are approaching it as much based on the reams of data that Medicare has 

at its fingertips as you possibly can. 

62 

I am glad that this discussion, wherever people may come down 

on it—and, you know, you have the Medigap plans with their perspective, insurers on one side and beneficiaries potentially on the 

other side, and maybe there is some common ground that can be 

achieved. But at least the whole discussion is happening within the 

context of maintaining the basic tenets of the Medicare program, 

which is that it is guaranteed coverage of one kind or another. 

So, in that sense, it is in strong contrast to some of the proposals 

that we have seen in recent years—for example, the proposal to 

turn Medicare into a voucher program, which completely upends 

the basic principles upon which the program is operated for all of 

these decades and is really at the heart of it. 

So we will kind of continue to find our way on what the best sort 

of outcome is for this discussion, but I am glad it is being done in 

a kind of fact-based environment and one that doesn’t abandon in 

any way the basic operating principles of the program. 

I was curious—and you may have a document like this, but if 

not, would it be possible to produce for us a document that just 

kind of takes a Medicare beneficiary who purchases a Medigap 

plan and says, you know, here is the before picture of how they are 

managing that situation and here is the after picture under these 

two or three scenarios in terms of the reform to give us a better 

sense of, in practical terms, what that looks like from the beneficiary’s standpoint? 

And maybe what you do is you choose, if there are certain categories of beneficiaries that assemble around one kind of an option 

currently, take that category, show us the before scenario and show 

us the after scenario, take the next category and show us the before and the after, just so we can get a sense. 

I mean, for example, not all beneficiaries purchase these 

Medigap plans, as you made very clear, so I don’t know if the before and after picture is pertinent to that group or not, but it may 

be. But certainly for the folks that do, if they fall into some distinct 

categories that allow for comparison, that would be useful. 

Because when we are talking to our constituents and trying to 

translate this potential policy change to them as beneficiaries, that 

would be the most useful way to capture the data and the proposal 

for us. So I don’t know if there is something like that, but if it is 

possible to produce something like that, I think it could be useful. 

Mr. MILLER. Yes, there are certainly, in the reports, averages 

that do that type of thing, but I think your request is a little bit 

different. You know, could you make it a little bit more directly relevant to the beneficiary, a beneficiary who looks like this—— 

Mr. SARBANES. You know, and is paying X a month, and when 

that X a month represents, kind of, on average what a whole category of beneficiaries are paying, you know, this is what would 

happen under this proposal. That would be helpful. 

Mr. MILLER. There might be an illustrative example or two that 

we could put together that would bring this point home for you. It 

would be very hard to represent, you know, the full breadth of a 

beneficiary’s experience. 

Mr. SARBANES. I understand. 

Mr. MILLER. It is going to necessarily be incomplete. 

Mr. SARBANES. Right. 

63 

Mr. MILLER. But there might be a couple of illustrative examples 

that we could put together for you. 

Mr. SARBANES. Thank you. 

Mr. PITTS. The Chair thanks the gentleman. 

Now recognize the gentleman from New Jersey, Mr. Lance, 5 

minutes for questions. 

Mr. LANCE. Thank you, Mr. Chairman. 

Dr. Miller, there is a growing concern over the high cost of dualeligible beneficiaries, eligible for both Medicare and Medicaid. As 

you know better than most, there are two separate funding 

streams. Different payment rates and coverage rules often create 

conflicting financial incentives that result in higher costs and poor 

coordination efforts. 

In 2010, the President’s fiscal commission recommended giving 

Medicaid full responsibility for providing health coverage to dualeligible persons and requiring those persons to be enrolled in Medicaid managed care programs. Would you please comment on the 

merits of this policy, both pros and cons? 

Mr. MILLER. I am not going to be able to. The Commission has 

not taken that up, per se, and, you know, I am here to represent 

their view, so there is not a lot I can bring to bear on it. 

There have been discussions around things like the dual-eligibles’ demonstrations and some of the issues there, and there have 

been some discussions around those. These kinds of conversations 

always kind of have a continuum to them, which are, do you take 

this population and put it in the hands of the State, and then you 

have to start asking questions about how the Federal dollar follows 

in that instance? Versus the other approach, which other people 

have argued, which is—and this is, in a sense, what—not in a 

sense—directly what happened in part D, where you say, OK, the 

beneficiary now becomes a Federal responsibility, and then the dollars from the State travel in that direction in order to support this. 

The Commission has not broadly, for the dual-eligibles population, talked about, in that continuum, you know, the solution that 

should be considered. So I can’t really give you much there. 

Mr. LANCE. Given the aging of baby boomers and climbing rates 

of obesity and obesity-related disease, do you expect that the cost 

pressures created by dual-eligibles will continue to increase? 

Mr. MILLER. Yes, I think that this is an expensive population 

and a population that really, you know, is most susceptible to the 

problems that arise from not coordinating among the clinicians and 

actually not coordinating more broad social types of services around 

these particular beneficiaries. 

Although I do want to say quickly, we talk about—and I do it, 

too—duals as kind of a monolithic group of people, and they are 

very different—cognitive disabilities, physical disabilities. There is 

a significant range of people within the dual-eligible population. 

But that said, I think this is a population where there is need 

for people to be focused on more care coordination activities, both 

around their clinical needs and around their social needs. Otherwise, I think the price does go north. 

Mr. LANCE. Given the fact that there are different types of people 

in dual-eligibles, should we differentiate between the different type 

of person who is in the dual-eligible category? 

64 

Mr. MILLER. That is a really fair question, and honestly—and, 

again, this is a comment that is probably not so much the Commission—my own thinking has gone back and forth. 

Sometimes I have had this view that you have to really think 

about designing programs around specific populations within the 

dual population. And then, at other times, I have sort of felt like, 

well, maybe you can think about coordinated care plans but allow 

benefit flexibility within the plan, for example. 

And then there is a whole set of questions that, if the beneficiary 

stays out in the fee-for-service environment, how you actually build 

the coordination around that particular environment, which I think 

continues to be complicated even if you are not dual-eligible. 

So I have to tell you, my own thinking has moved around on this, 

and on any given day I am not sure what answer I would give you 

on this. 

But there has to be, I do think, some more—I think I would say 

this—some more tailored approach. Because, you know, a cognitive 

disability is not a physical disability, is not—you know, there are 

different populations. And so there has to be some flexibility to put 

the right kinds of providers and services around a given population. There probably does need to be some flexibility there. 

Mr. LANCE. Thank you very much. 

Mr. Chairman, I yield back 10 seconds. 

Mr. PITTS. The Chair thanks the gentleman. 

Now recognize the gentleman from New York, Mr. Engel, 5 minutes for questions. 

Mr. ENGEL. Thank you very much, Mr. Chairman. Thank you for 

holding today’s hearing. 

I believe the reforms included in the Affordable Care Act have 

improved Medicare’s long-term fiscal situation and protected beneficiaries’ access to guaranteed benefits. And just last week, the 

Centers for Medicare and Medicaid Services reported that health 

costs grew just at 3.6 percent in 2013, which is the smallest increase since 1960, and the reforms included in the ACA resulted 

in the Medicare Trust Fund remaining solvent till 2030, which is 

13 years longer than the projected date prior to the passage of the 

ACA. 

With regard to protecting beneficiaries, HHS announced last 

week that, from 2010 to 2013, there were 1.3 million fewer hospital-acquired conditions, resulting in 50,000 lives saved and $12 

billion in healthcare costs avoided. The ACA pushed healthcare 

providers to improve patient safety by providing Medicare payment 

incentives to improve the quality of care provided and launching 

the HHS Partnership for Patients initiative. 

Medicaid is a lifeline for many of my constituents. I am pleased 

so many States, including my home State of New York, have taken 

this opportunity to expand their Medicaid programs and care for 

the most vulnerable citizens. However, certain Governors have 

used the excuse of the uncertain Federal funding for Medicaid as 

a reason not to expend their programs. I think that is wrong and 

shortsighted. 

Looking only at the dollar figures and associated healthcare 

spending with regard to the ACA, Medicare, and Medicaid fails to 

adequately convey the tremendous importance these programs 

65 

have to the basic wellbeing and health of millions of vulnerable 

Americans, young and old. Their value in this respect cannot be 

understated and should be our primary focus as we look at the 

long-term fiscal situations surrounding these programs. 

Let me ask you, Dr. Miller—let me say this. MedPAC made GME 

recommendations a few years ago that many people have used to 

push for Medicare—GME, graduate medical education—cuts. With 

one in six physicians trained in my home State of New York, I have 

concerns that cutting Medicare support for GME or physician training would make it very difficult for teaching hospitals and medical 

schools to carry out their missions. Additionally, these proposals 

would change the long-established shared investment between 

medical schools, residency training programs, and the Federal Government to financially support doctor training. 

So let me ask you this. By 2025, the Nation will face a shortage 

of more than 130,000 physicians, split evenly between primary and 

specialty care. Medical schools from across the country have done 

their part to address the shortage by increasing enrollment sizes, 

and teaching hospitals are training residents above their cap. 

Medicare GME cuts could financially exhaust the ability of teaching hospitals to train additional resident physicians. 

With this said, does MedPAC support the notion of cutting Medicare GME funding? 

Mr. MILLER. What MedPAC said—MedPAC, in 2010 I think, 

made a broad recommendation to reform the GME approach in 

Medicare, and it has the following characteristics. 

So the analysis that we did suggested that the curriculums that 

were current in residency programs were not really focused on 

team-based care, decision support instruments, that type of thing, 

getting training outside of the hospital, getting training in rural 

areas, that type of thing. So we made a recommendation that there 

needed to be new criteria to have reorganized residency programs. 

And then we took a little more than half of the indirect medical 

education funding and said, these dollars should be devoted to entities—and it wouldn’t just be hospitals—who are providing this 

more reformed approach to graduate medical education. 

So to try and answer your question directly, we didn’t take the 

dollars out of the system, but we said that the dollars should be 

allocated differently than they are now. A hospital can be a recipient of it if they are a part of these reformed programs, but they 

are not necessarily the only entity for which these dollars would be 

available. 

Mr. ENGEL. OK. 

Let me quickly switch, and just let me give you a general question. Can you elaborate on what you believe are the most promising 

efforts under way to encourage providers to deliver high-quality, 

high-value care? 

Because, in your written testimony, you stated that the Commission remains focused on pursuing reforms that control spending 

and create incentives for beneficiaries to seek and providers to deliver high-value healthcare services. 

So what do you believe are the most prominent, promising efforts 

under way to encourage providers to deliver this kind of high-quality, high-value care? 

66 

Mr. MILLER. Well, I mean, it is kind of the whole array of things 

that I mentioned here. So, you know, there are things in the feefor-service world like readmission penalties and reformulating the 

way we pay for skilled nursing facility and home health services. 

We have made recommendations on accountable care organizations 

to make them more viable options. We have made recommendations that Congress has adopted on the way we make payments in 

managed care, and we think that that industry is moving in a 

much more efficient direction. 

There is a very long list here with time out here that—but it is 

in the testimony. The testimony is basically, from first to the last 

page, a list to answer your question. 

Mr. ENGEL. All right. Thank you. 

Thank you, Mr. Chairman. 

Mr. PITTS. The Chair thanks the gentleman. 

Now recognize the gentleman from Florida, Mr. Bilirakis, 5 minutes for questions. 

Mr. BILIRAKIS. Thank you, Mr. Chairman. I appreciate it. Thanks 

for holding this very important, very informative hearing. 

And, Dr. Miller, I appreciate your testimony. 

My first question: Dr. Miller, one of the great things about the 

Medicare Part D program design is that it harnesses the forces of 

choice and competition to reduce costs while improving the options 

for seniors. Premiums in the program have been basically flat over 

the last few years, and seniors truly love the program. 

I noticed that MedPAC has examined and endorsed a competitively determined Medicare planning bidding system for the future 

of the Medicare program. Can you talk about the merits of this approach and how it is similar to or different than the Medicare Part 

D or Medicare Advantage? 

And then could you also explain, to what extent would it free 

Congress from annually having to adopt price controls to pass 

Medicare’s fee-for-service system? 

Mr. MILLER. OK. 

The first thing I just need to clear up, we did not endorse it. We 

did publish a chapter and sort of discuss the issues. And what we 

were trying to do is kind of strike a balance in the policy conversation. 

You could take an approach broadly in Medicare like you take in 

D, where you say there will be a competitively set Government contribution, and then the beneficiary would select a plan, and the 

plan is either a managed care plan or fee-for-service, even though 

that is not a plan, and then pay the difference, depending on how 

expensive it is. So that is the thought, I believe, you are chasing 

here. 

And what we said is that that is a legitimate conversation that 

should occur, but there is a set of design issues that become extremely important here in how well this is done and how successful 

it is. 

One right off the top that I think a lot of people miss is, in the 

private sector, there has been tremendous provider consolidation 

over the last decades. Your questions about the site-neutral payments are all about that kind of phenomenon. And to the extent 

that there has been greater consolidation, commercial insurers 

67 

have had a really hard time holding down payment rates because 

you have a very consolidated provider in certain markets. 

So approaching these competitive models, you have to be very 

conscious of how you are going to extract reduced prices from these 

providers who in the private sector actually have consolidated positions. In Medicare, you have administered prices, so you don’t deal 

with that. 

Now, the technical, you know, questions about how you deal with 

that are probably beyond a 5-minute answer, but the first thing to 

keep in mind is, if these things aren’t done right, they can actually 

cost Medicare money. But there are technical issues to navigate 

around that. 

A couple of other issues are things like this: Do you standardize 

the benefit, which would say it is very clear to the beneficiary, be 

very clear to the Congress what they are paying for and what 

works and what doesn’t work, or do you allow complete innovation 

in the benefit design, or something in between? The MA plans, you 

have to provide certain services, you have ability to play with the 

cost-sharing. And so you have to think about that. 

Another big issue that you have to think about if you go down 

these roads is where you set the Government contribution. If you 

do it at a national level, then there are certain parts of the country 

where everybody pays, fee-for-service or managed care, and other 

parts of the country where everybody gets a premium rebate, for 

lack of a better word, whether you are in managed care or fee-forservice. If you do it within the market, that is probably a more rational way to go at it, but there is probably then some subsidization 

that is occurring across the country, and you will have to deal with 

the implications there. 

So what we tried to—oh, and then—I hate that this came off as 

an afterthought—what are we going to do with the low-income? So 

if there is a premium support here, then how are the low-income 

going to be handled? 

So what we did in this report is just blocked through a set of 

issues and said, if we are going to have a serious conversation 

about this, there have to be answers to each one of these issues. 

And we kind of went through the pros and cons, and we did a little 

simulation, very static, not high science, but a little simulation of 

some of the distributional impacts. And I would refer, if you want 

to have this conversation, refer you to that. 

Mr. BILIRAKIS. Very good. Thank you very much. 

In November of 2012, CBO issued a paper on the offsetting effects of the prescription drug use on Medicare spending. Basically, 

proper adherence to a prescription drug regimen in Medicare Part 

D would provide a savings from hospitalization in Medicare Part A. 

Can you talk a little about this spillover effect and savings? Also, 

do you think that eliminating duplicative medications and proper 

monitoring of dangerous drug interactions could also add to savings 

in the Medicare program? 

Mr. MILLER. I mean, we decidedly have been—we had some discussion of this on opioids just recently—decidedly concerned about 

overmedication and, you know, drug-to-drug interaction and that 

type of thing. And you want to deal with that not just for savings 

68 

reasons or even whether it saves or not; you want to focus on that 

because of the impact on the beneficiary. 

Our research is in a little different place than CBO’s. We have 

seen that, we have talked to them, we went through it. I believe 

they have done it very carefully, and there is a lot to commend it. 

Our own research has somewhat more ambiguous results. We see 

this effect where you get the savings on the hospital side, you 

know, your better drug compliance reduction and hospital effect. 

But the hospital effect kind of goes away after 6 months, a year. 

And we are a bit confused by that, and we are still kind of churning on it ourselves. 

You know, great if compliance—I mean, you should probably 

have compliance for medical and clinical and all the rest of the reasons anyway. If it has a savings effect, great. We are having a little 

trouble, you know, coming to the same conclusion. 

Mr. BILIRAKIS. All right. Thank you. 

I yield back, Mr. Chairman. 

Mr. PITTS. The Chair thanks the gentleman. 

Now recognize the gentlelady from North Carolina, Mrs. Ellmers, 

5 minutes for questions. 

Mrs. ELLMERS. Thank you, Mr. Chairman. 

And thank you, Dr. Miller, for being with us today. 

I want to go back to some of the discussion of the site-neutrality 

payments. And I, again, just for the purpose of my questions, want 

to again clarify, has MedPAC taken a position on whether or not 

Congress should act on the issue of site-neutral payment reform? 

Mr. MILLER. Yes, we have made two recommendations as it relates to E&M visits and then—I won’t take you through all the 

weeds, but—— 

Mrs. ELLMERS. Uh-huh. 

Mr. MILLER [continuing]. The 66 conditions that we carefully 

identified so that it didn’t undercut the hospital’s mission and 

didn’t create access issues for the beneficiary and said those should 

be—— 

Mrs. ELLMERS. What is the number-one reason that we should 

address this policy change and reform? 

Mr. MILLER. I mean, I would say—you know, I have 17 commissioners, so I don’t know, but my number-one reason is that the beneficiary is out-of-pocket. If they are getting the same service—— 

Mrs. ELLMERS. Yes, the increased cost. 

Mr. MILLER. Right. 

Mrs. ELLMERS. OK. I just want to—there again, I do want to 

clarify that. That is what we are seeing, and it seems to be a discussion and a question of, you know, if you are receiving the same 

care at a facility which is an ambulatory outpatient, you know, 

minus the hospital, why then is the hospital charging more, I guess 

I would say, for the consumer. 

So, now, getting back to that issue, too, back in June of 2013, the 

report that came out from MedPAC discussed the cost differences, 

especially in cardiology. And I think the question was posed at that 

time, have you seen this in other specialties? And for my purposes 

today, I am thinking about oncology. Have you also seen this cost 

increase in oncology? 

69 

Mr. MILLER. Right. And you made a specific request in our last 

hearing, and we delivered to your office a response on this very 

question. And this is what I was dragging up from my memory to 

Mr. Burgess’ questions. 

Mrs. ELLMERS. Uh-huh. 

Mr. MILLER. We looked at oncology. We looked at radiation—divided it between radiation therapy and chemotherapy. Kind of oblique results on the radiation therapy side. On the chemotherapy 

side, it does look like there is an uptick—— 

Mrs. ELLMERS. Increase. 

Mr. MILLER [continuing]. In the outpatient, which is really the 

billing—— 

Mrs. ELLMERS. Yes. 

Mr. MILLER [continuing]. And, you know, some shift between the 

physician’s office and the outpatient. 

Mrs. ELLMERS. OK. Yes. Thank you. Because I am kind of coming off of what Dr. Burgess was asking you about. 

I do have another question, which is kind of off my line of questioning here, but I do want to make sure that I address it. It goes 

in line with what my friend Congressman Shimkus was talking 

about, some of the issues regarding readmission—I believe it was 

Mr. Shimkus—the readmission within 30 days and the loss of payment if there is a readmission. 

And he addressed the issue of it being possibly a different diagnosis but still receiving that loss of reimbursement. I believe you 

said it has more to do with the number of readmissions that that 

particular hospital is having. 

But my understanding—and this is what I want to clarify with 

you—is that it can also be a readmission to a different hospital. 

And if it is a readmission to the different hospital, how does that 

process work? 

And I am very concerned about this, because my understanding 

is that we are going to go to an increase in the number of diagnoses of readmissions. 

So can you clarify or shed some light on how that process works? 

Does the initial hospital end up getting the ding if there is a readmission to another hospital within 30 days? 

Mr. MILLER. Yes. That is correct. 

Mrs. ELLMERS. OK. So there that is. OK. Great. 

Next question. And this has to do with North Carolina and Medicare Advantage. I am very concerned. Medicare Advantage facing 

$200 billion worth of cuts through the ACA. North Carolina, 57,000 

Medicare Advantage recipients are being told that their plans will 

not be offered in 2015. 

You know, Kaiser Family Foundation has found this to be true 

and that other States are not facing the number of cuts to some 

of these plans. 

Can you shed any light on that or any of your—I mean, how can 

my constituents deal with that, when they like their Medicare Advantage plan so much? 

Mr. MILLER. Well, I can’t speak to North Carolina specifically in 

that particular set of plans. We have documented this extensively 

and will do again next month at our—or, actually, next week at our 

public meeting. 

70 

We have continued to see 9 percent annual growth in managed 

care enrollment. We have seen more organizations entering. And 

the average numbers of plans being offered, I think, is still 9 or 10, 

on average, in any given market. And, of course, some markets, 

like Miami, have 30, and other markets have 5, but—— 

Mrs. ELLMERS. Uh-huh. 

Mr. MILLER [continuing]. We have seen continued growth in enrollment in this program. 

Why those specific plans feel that they have to pull out—and the 

dilemma for you and your colleagues in the Congress is you want 

the beneficiary to have access to the plan and have the extra benefits, but I think—and you have to decide this for yourself—you 

want those extra benefits to be provided because the plan is efficient relative to fee-for-service and has the extra money because 

they are good at what they do. If you just give them the extra benefit, then you are right back to—— 

Mrs. ELLMERS. Right. 

Mr. MILLER [continuing]. Your debt situation. 

Mrs. ELLMERS. Well, thank you, Dr. Miller. 

And thank you, Mr. Chairman. I have gone over a little bit, so 

I apologize. Thank you. 

Mr. PITTS. That is all right. The Chair thanks the gentlelady. 

Now recognize the gentlelady from Tennessee, Ms. Blackburn, 5 

minutes for questions. 

Mrs. BLACKBURN. Thank you so much, Mr. Chairman. 

And, Dr. Miller, I want to stay right with Mrs. Ellmers’ thoughts 

on Medicare. You just talked about the 9 percent growth in enrollment in a lot of the programs. And one of the things I hear from 

my seniors is they are beginning to realize that, with the arrival 

of Obamacare, that you had about $700 billion of cuts that were 

made to Medicare, to the trust fund, and that that money is now 

being used for new Government programs that aren’t for seniors. 

And they are figuring this out because they are asking the questions, why is my plan being terminated, or I don’t have as many 

options, or my copay is higher. And they are looking at this, and 

they have figured out that that redirection has taken place. 

And, of course, they are looking at the pay-fors, and that was the 

across-the-board annual reductions in the growth rates of Medicare 

payments for hospitals. And these cuts are scheduled to continue 

every year permanently. And, as a result, the actuary of the Medicare program has said, basically, you have a couple of choices here; 

you have up to 15 percent of the hospitals could close and many 

hospitals could stop taking Medicare patients, or Congress can reverse the cuts and increase the rate of Medicare spending, accelerating the insolvency of the program. 

So, in your view, would it be better to scrap the reductions and 

replace them with other policies? What would be your advice there? 

Because you have constituents like Ms. Ellmers who are saying, 

well, we are beginning to catch the brunt of this, and then you 

have the hospitals, where they are facing these reductions and they 

are saying, well, we don’t know how we are going to keep our doors 

open. And I will tell you, quite frankly, I have a lot of rural hospitals that deal with underserved areas. 

So what is your thought there? What is the better plan? 

71 

Mr. MILLER. OK. Well, I will leave it to the Congress to decide 

which plan—— 

Mrs. BLACKBURN. Well, we would just like your insight. 

Mr. MILLER. No, I will give you a couple. 

Mrs. BLACKBURN. Good. 

Mr. MILLER. But, remember, our role here is just to put a set of 

ideas in front of you and then let the Congress decide what is the 

right thing. 

Mrs. BLACKBURN. Well, and we appreciate that. 

Mr. MILLER. Right. And—— 

Mrs. BLACKBURN. That is what we are looking for, are those 

thoughts and ideas. 

Mr. MILLER. Yes. And I will say two things in response to your 

question, because there were two things in there, I think, and 

maybe more, but at least two, that I teased out. 

One is, on the managed care plans, regardless of whether 

Obamacare or whatever the health reforms to the side, the Commission looked at the managed care plans—and this is the exchange I just had here—and said, look, before 2010, every time we 

enrolled somebody in managed care, it cost the trust fund money. 

Managed care plans were actually bidding to provide the basic part 

A and part B benefit at a more cost than fee-for-service. These are 

the managed care plans who said fee-for-service is broken and we 

can do better, and they were actually delivering it for greater cost. 

So whether there is Obamacare or whatever, the Commission’s 

recommendation was that payment system was broken. And what 

we were trying to drive it to—and we believe this has happened 

now—managed care plans that are actually efficient, get the efficiencies, then offer the extra benefits. And we are several years 

down the road. Enrollment continues to increase, and plans are actually, on average—or some plans—bidding below fee-for-service, 

proving that they can be more efficient than fee-for-service. I want 

to emphasize ‘‘some plans.’’ 

So we think, our view on that, that had nothing to do with any 

health reform. You know, that is a different world. We were saying 

that about managed care. 

On the fee-for-service side, where you are seeing the cuts and the 

concerns about hospitals, what I would say to you is we come to 

you, by law, you know, the law that you created for us to respond 

to, every year and tell you what we think is the best thing that you 

should do for hospitals, physicians, skilled nursing facilities, you 

name it. 

And what we do is we look at the current law—and we are not 

bound by current law in our recommendations. So we have said 

things to take payment reductions below what is in PPACA, the 

Accountable Care Act, in some instances, and in other instances we 

have said, no, they are too low, you need to go up. 

So we actually come in—and there was a statement made by the 

chairman, you know, we need policies that kind of think through 

the circumstances. And that is what we try and provide to you on 

an annual basis, is come to you and say, stay with the law here, 

go below the law here, go above the law here. And that is what we 

do every year in our March report. So we are trying to help you 

72 

navigate whatever your current set of circumstances are on an annual basis. 

Mrs. BLACKBURN. Well, and for our constituents who now realize 

the cuts that Obamacare made to Medicare and how it affects their 

hospital and their access and the reduced rate that is going back, 

reimbursement rate going back to those hospitals, it is a very tangible—very tangible consequence of the implementation of this law. 

And for seniors who have paid into the Medicare trust fund, this 

is not working well. So it is going to be worthy of a revisit, because 

that money is in the trust fund and it is now being used for new 

programs, not for programs that benefit seniors. 

I yield back. 

Mr. PITTS. The Chair thanks the gentlelady. 

That concludes our round of questions. The Members will have 

follow-up questions in writing. We will submit those to you, Dr. 

Miller, and ask that you please respond to those promptly. 

Thank you very much for your informative exchange. 

While the staff sets up for the next panel, the subcommittee will 

take a 3-minute recess. 

[Recess.] 

Mr. PITTS. The subcommittee will reconvene. 

And on our second panel today we have Mr. Chris Holt, director 

of healthcare policy, American Action Forum—welcome; Mr. Marc 

Goldwein, senior policy director, the Committee for a Responsible 

Federal Budget; and Dr. Judy Feder, professor of public policy, 

Georgetown Public Policy Institute. 

Thank you all for coming. Your written testimony will be made 

a part of the record. You will each have 5 minutes to summarize 

your testimony. 

And, Mr. Holt, we will start with you. You are recognized for 5 

minutes to summarize. 

STATEMENTS OF CHRISTOPHER W. HOLT, DIRECTOR OF 

HEALTH CARE POLICY, AMERICAN ACTION FORUM; MARC 

GOLDWEIN, SENIOR POLICY DIRECTOR, COMMITTEE FOR A 

RESPONSIBLE FEDERAL BUDGET; AND JUDY FEDER, PROFESSOR OF PUBLIC POLICY, GEORGETOWN PUBLIC POLICY 

INSTITUTE 

STATEMENT OF CHRISTOPHER W. HOLT 

Mr. HOLT. Thank you, Mr. Chairman, members of the committee. 

It is certainly an honor to be asked to testify before Congress but 

particularly for me this subcommittee. With my past work with 

Representative Murphy and with the committee, having had the 

opportunity to work with many of you and to come to understand 

the dedication that you and your staff bring to the important issues 

that this committee deals with makes this a very humbling opportunity for me, and so I thank you very much for that. 

My written statement details some modeling that we have done 

on Affordable Care Act provisions that—spending provisions that 

we could dial up or dial down in order to generate some savings. 

That modeling I am happy to go into if people have questions. I 

think that those savings could be used to pay for other spending 

priorities. But I was hoping to take a step back and maybe talk a 

73 

little more broadly today about the topic that we are here to discuss. 

When I arrived in D.C. 10 years ago as a congressional intern, 

we had a Federal debt of about $7 trillion. As we all know, today 

the Federal debt is now past $18 trillion. 

We can point fingers and try and lay blame, but the reality is 

that this is not entirely the fault of one party or the other; we have 

gotten here together. And I think you can see that if you look at 

the immediate last two Presidencies. During the Presidency of 

George W. Bush, we saw the national debt double, and under this 

Presidency of Barack Obama, we are flirting with doing that again. 

So we can argue about whether or not we have a spending problem or a revenue problem, but I hope that we can agree that we 

have a debt problem. 

And while we all have, I am sure, our pet peeves for what is 

driving that debt accumulation, the 800-pound gorilla in the Federal budget is mandatory spending, which makes up 60 percent of 

the Federal budget, and, in particular, mandatory spending on 

health programs, which is about 30 percent of all Federal spending. 

As this spending continues to grow, it is crowding out discretionary 

spending, things like defense but also things like funding the NIH. 

And so, as we look at that, unfortunately, rather than addressing 

that looming entitlement crisis, President Obama chose to focus on 

passing the Affordable Care Act. In doing so, he expanded spending 

in the Medicaid program and put more people into that broken program. 

He also created an entirely new entitlement, these subsidies for 

the under-65 population available through the health insurance 

marketplace, and then, all the while, largely ignoring Medicare beyond the $700 billion in cuts that were used to pay for the other 

priorities, particularly cuts to Medicare Advantage and also to 

home health. 

As we look to the 114th Congress, I think we can recognize that 

the big policy agenda items that conservatives seek—repealing and 

replacing the Affordable Care Act, large-scale Medicare and Medicaid reform—are likely out of reach, but we can and should take 

the opportunities that present themselves to move towards those 

goals. 

And so, in particular, as Congress looks at the entitlement 

spending, both new and old, that continues to grow, I would remind 

you that the Budget Control Act has largely left the ACA unscathed. And, as such, I think it is appropriate that, as Congress 

looks to fund other health priorities, particularly the SGR reform 

that is coming up, that we can look to the ACA as a mechanism 

by which those other priorities can be paid for. 

And then, finally, briefly, I would say, with an eye towards longterm fiscal priorities, I urge Congress to protect the Medicare Part 

D and the Medicare Advantage programs. These are excellent blueprints for how entitlements could be structured and should be 

structured, and they provide a roadmap for moving past the fee-forservice Medicare system today. 

And, with that, I am happy to take your questions. 

[The prepared statement of Mr. Holt follows:] 

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Mr. PITTS. The Chair thanks the gentleman. 

Now recognize Mr. Goldwein, 5 minutes for an opening statement. 

STATEMENT OF MARC GOLDWEIN 

Mr. GOLDWEIN. Thank you, Chairman Pitts, Ranking Member 

Pallone, and other distinguished members of the committee, for inviting me to testify on this important issue. 

I would like to focus my remarks this morning on two subjects. 

First, I would like to make the case for the importance of continuing to focus on slowing Federal healthcare cost growth. And, 

second, I would like to discuss the policies which I believe have the 

best chance of making healthcare spending both more effective and 

more affordable. 

I have spent the bulk of my career working with bipartisan efforts to put the debt on a more sustainable path. I worked on the 

staff of the Simpson-Bowles Fiscal Commission, the HensarlingMurray Supercommittee, and with a number of Hill offices on an 

informal basis. Every one of those efforts to stabilize the debt has 

put identifying reforms to slow the growth of health spending front 

and center as the central issue. 

Unfortunately, the combination of the recent fall in the shortterm deficit and the tremendous slowdown in healthcare cost 

growth has led some to conclude that Medicare and Medicaid reforms are no longer necessary. In my view, this couldn’t be further 

from the truth, especially considering our debt levels are currently 

at record highs only seen around World War II and are continuing 

to grow unsustainably if you look into the future. The slowdown in 

Medicare and in health spending more broadly is hugely encouraging but, for a variety of reasons, should not be used as an excuse 

to stop reforms. 

My written testimony explains this in more detail, but, first of 

all, a large share of the recent slowdown is due to temporary factors. These include economic and demographic factors, one-time 

legislative cuts like sequestration, and other temporary events like 

the recent prescription drug patent cliff that we are sort of falling 

off right now. 

Secondly, the portion of the slowdown which is structural and 

permanent, some of it is probably because providers expect future 

changes in fee-for-service, which means, without further congressional action, they will revert and we will lose the gains we have 

made so far in the slowdown. 

Third, slowing healthcare cost growth will not be enough to keep 

Federal health spending itself under control. The reason is that the 

primary driver of Federal health spending over the next quartercentury is not actually healthcare cost growth but it is population 

aging. As a result, the Congressional Budget Office projects that 

healthcare spending as a share of GDP, Federal healthcare spending, will more than double by the early 2050s, possibly sooner. 

And, finally, Congress and the President will have to identify 

health savings early next year in order to offset either a temporary 

doc fix or, preferably, a permanent SGR fix—a permanent SGR reform. After all, we have offset 98 percent of doc fixes in the past 

81 

and, as a result, generated $165 billion worth of savings, mostly 

from within the healthcare system. 

Now, as Congress does look for savings, there are a number of 

policies which have the potential for broad bipartisan support. At 

CRFB, my organization, we like to categorize these savings as 

benders, savers, or structural reforms. And my advice to this subcommittee is to focus first and foremost on the cost benders, those 

policies which will structurally change the incentives within Medicare and Medicaid in order to slow the growth of healthcare spending overall, not just shift who bears the burden. 

Now, these benders can’t offer a free lunch. They can’t offer a situation where everybody is better off. But what they can do is offer 

a discounted lunch, where as a society we are better off and where 

the winners far outweigh the losers. 

CRFB, my organization, the Committee for a Responsible Federal 

Budget, recently released a plan we call the Prep Plan, which identified a number of these benders and used them to pay for the very 

thoughtful SGR reform that came out of this committee, along with 

Ways and Means and Finance. 

On the beneficiary side, we included reforms very similar to the 

MedPAC recommendation. And I want to emphasize that if you 

modernize Medicare cost-sharing, you can save money for both the 

taxpayer and the beneficiary. Our plan would save $80 billion over 

10 years for the Federal budget and reduce beneficiaries’ out-ofpocket costs by about $200 per person per year. 

Our plan also looks to change the incentives on the provider side, 

including by moving to more bundled payments, increasing penalties for unnecessary hospital readmissions, encouraging doctors 

to administer lower-cost prescription drugs, and rewarding States 

that move to more efficient payment models within Medicaid. 

In addition to these and other benders, which, again, are in my 

written testimony, you are going to have to look at what we call 

savers. Now, these are policies where we will save money for the 

Federal Government by allocating it in a way that is preferable. 

There are already a number of these savers that have bipartisan 

support: increased means testing for Medicare premiums, reductions to certain overpayments to providers, and clamping down on 

certain scams or certain games played by States in order to increase their Medicaid matches. 

You are going to have to look at all of these policies carefully, 

along with others outside of the health arena, if we truly are to get 

our health system and our debt under control. There is no magic 

bullet, but there is an opportunity to work together on a bipartisan 

basis and begin making reforms now to give us a better healthcare 

system at a better price. 

Thank you for allowing me to testify on this important topic, and 

I look forward to working with all of you and your staffs. 

[The prepared statement of Mr. Goldwein follows:] 

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Mr. PITTS. Thank you. 

Dr. Feder, you are recognized for 5 minutes for your summary. 

STATEMENT OF JUDY FEDER 

Ms. FEDER. Chairman Pitts, Ranking Member Pallone, and members of the committee, I appreciate the invitation to appear before 

you today to express my own and my colleague Paul Van de Water’s views on setting fiscal priorities and the importance of preserving Medicare and Medicaid. 

I want to make five quick points. 

First is that Medicare and Medicaid work. They provide essential 

health and financial wellbeing to people who are elderly, disabled, 

or poor. Over more than 40 years, Medicare spending per enrollee 

has grown by an average of 1 percentage point less than comparable private health insurance premiums. Medicaid provides 

acute healthcare coverage at a substantially lower cost per child 

and per non-elderly adult than private coverage. And Medicaid is 

also the Nation’s primary payer for long-term services and support, 

a matter I know is of concern to Mr. Pallone and others. 

Second, Medicare and Medicaid are not in crisis. On the contrary, Medicare spending has recently been growing at a historically low rate, with spending per beneficiary growing more slowly 

than GDP per capita. 

The financial outlook for Medicare and Medicaid has improved 

significantly in the past 4 years. Congressional Budget Office estimates of Medicare and Medicaid spending for the next decade have 

fallen by several hundred billions of dollars since CBO first estimated the impact of the ACA. And Medicare spending per beneficiary in 2014 is expected to be $1,200 lower than CBO projected 

in 2010. 

Third, as Mr. Goldwein said, it is not growth in spending per 

beneficiary but it is growth in the number of beneficiaries that 

have become the primary drivers of increased Medicare and Medicaid spending. Even if cost growth remains moderate, Medicare 

and Medicaid spending will keep rising as more baby boomers become eligible for benefits. And I should note, with candor, I am one. 

As boomers age, as we age, States will also face considerable increase in the need for long-term care. 

Does that mean that we can relax in our efforts to slow cost 

growth? Of course not. But the focus should be on payment and delivery reform and not capped Federal contributions. 

In Medicaid, there is little room for savings from efficiency, given 

already constrained provider payment rates, widespread use of 

managed care, and existing opportunities for State flexibility. 

Most proposals that would secure more than modest Federal savings, such as a block grant or a per capita cap, would do so by 

shifting costs to States, and if that occurs, States are likely to cut 

eligibility, benefits or provider payments, enhanced reduced beneficiaries access to care. But Medicare policymakers cannot only use 

the ACA, encourage research and pilots to continue to gain value 

for the dollar, but can further reduce spending without jeopardizing 

quality or access to care. 

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ments to Medicare Advantage plans, and refining payments mechanisms for post-acute care are a few examples of policies likely to 

increase value for the Medicare dollar. 

Only so much can be expected, however, of reducing Medicare 

costs per beneficiary if that is done independent of lower cost 

growth and the system as a whole. New revenues are therefore 

needed to deal with a doubling of the elderly population over the 

coming decades. 

My fourth point: What current circumstances do mean is that 

claims of cost growth or fiscal crisis cannot be used to justify moves 

to radically reform Medicare and Medicaid. There is no question 

that premium support or other mechanisms that would change 

Medicare from a defined benefit to a defined contribution program 

would raise the fundamental concern of a cost shift from the Federal Government to beneficiaries. 

The same is true for the block grant or per capita cap, as I mentioned earlier, and that is because these mechanisms would sever 

the tie between Federal contributions and the beneficiary’s costs. 

The more constrained the defined contribution or the cap, the 

greater the shift. Premiums support vouchers, block grants per capita caps or overly ambitious spending targets might save Federal 

dollars but they shift risks on beneficiaries who can ill afford to 

pay them. 

My final point is to urge you to recognize that the deficit has stabilized as a share of GDP, that healthcare spending is growing at 

historically low rates. That is good news, and it gives policymakers 

time to identify further steps that when we needed to slow the 

growth of healthcare costs throughout the entire U.S. healthcare 

system without impairing the quality of care so that we can meet 

our responsibilities to an ageing population just as we did in education when the very same individuals entered public school about 

60 years ago. 

The Nation’s fiscal capacity does not provide an excuse to abdicate those responsibilities by radically restructuring Medicare, by 

replacing Medicare’s guaranteed coverage with a premium support 

voucher, or by restructuring or severely cutting Medicaid or other 

programs that protect low-income Americans. 

Thank you. 

[The statement of Ms. Feder follows:] 

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Mr. PITTS. Chair thanks the gentlelady. 

I will begin the questioning. Recognize myself 5 minutes for that 

purpose. 

Mr. Goldwein, today Medicaid is the largest health insurance 

program in the world, covering more than 70 million people in 

2013. Spending for this program is set to double in the next 10 

years, and the program already consumes $1 of every $4. We have 

heard repeatedly from our colleagues on the other side of the aisle 

that Medicaid is off the table when it comes to considering any policy that would reduce Federal spending. Do you think this is appropriate or sustainable? And please elaborate. 

Mr. GOLDWEIN. I don’t think that you can afford to take any program off the table when it comes to healthcare cost growth. That 

said, Medicare is much easier for the Federal Government to address because we control the levers. We know how to—Medicaid is 

a joint program with the States, and so I think the best thing we 

can do for now is empower the States to find new types of ways 

to save money, to have better payment systems. 

There are certain places we can impose those savings. There is 

borderline fraud, it is not quite fraud, but there are games that 

States play we should clamp down on. But really, I think the best 

thing we can do is give the States more freedom and more power 

to experiment with new cost control ideas. 

Mr. PITTS. Mr. Holt, the HHS Inspector General, GAO, and a 

broad coalition of stakeholders have identified structural and systemic concerns with the 340B programs. Research suggests the programs discounts may be going to hospitals that do not disproportionately serve Medicaid or the uninsured. Other analysis suggests 

that the discounts are not passed on to the low-income individuals 

for whom the program was designed. 

Given these concerns, and with more people enrolled in health 

coverage through the ACA, isn’t it time for complete revaluation of 

the 340B program; and, also, if the 340B program was more targeted, would that free up more drug industry dollars for additional 

research and development and life-saving cures and life-enhancing 

therapies? 

Mr. HOLT. So yes and yes. 

First, let me plug, we have a very good primer on the 340B program and the American action forum that I am happy to share 

with anyone who would be interested in. I think it is important to 

remember this program exists largely because of Federal meddling 

and what was already going on in the first place. Originally, the 

pharmaceutical companies were providing some discounts to some 

of these hospitals, and as we started getting into things with ASP, 

they started rolling back those deals because it was impacting what 

they could sell in Medicaid for. 

Today, though, we have got hospitals like Johns Hopkins which 

benefit from the 340B program dramatically because of the locality 

that they are in, not necessarily their financial standing. I absolutely think that in a post-ACA world we must look at all of these 

programs that were intended to subsidize uncompensated or undercompensated care, and we have to reevaluate all of that. 

Mr. PITTS. Please provide us with a primer. We will circulate to 

the members. 

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Mr. HOLT. Absolutely. 

Mr. PITTS. Dr. Feder, the President’s fiscal year 2015 budget endorses a policy of further increasing an income-adjusted Medicare 

premium until capping the highest tier at 90 percent. As the President said in that budget, quote, ‘‘This proposal would help improve 

the financial stability of the Medicare program by reducing the 

Federal subsidy of Medicare cost for those who need the subsidy 

the least.’’ 

Do you believe this would be a viable offset for paying for the 

SGR package? 

Ms. FEDER. No, sir, I don’t. I believe that the President put forth 

those proposals in the context of discussing broader budget agreements that would involve tax increases as well as spending reductions and in the context of looking for a balanced approach to reducing the deficit. 

Standing on its own and using Medicare beneficiaries as a piggy 

bank does not make sense to me. Medicare beneficiaries, half of 

them, as was said earlier, live on incomes that are below $26,000, 

including their spouse’s income. 

We do not have a tremendously large, wealthy, elderly population, and I am concerned that efforts to further means test the 

premiums can erode the universality of the program, which is one 

of Medicare’s greatest strengths. 

Mr. PITTS. According to the Social Security Administration 

records, there are 60,000 seniors with Medicare who have annual 

incomes in excess of $1 million. Do you believe it is appropriate we 

charge them more? 

Ms. FEDER. Well, Chairman Pitts, those beneficiaries have paid 

payroll taxes into the system for Medicare on their entire earnings, 

although the $1 million may not all come from wages, but they 

have been paying them from wages and now they do pay them also 

on overall earnings. So people are paying into the system regardless of the income, and we already do have some income relationship with our premiums. That, to me, is legitimate. 

I would also say that in terms of your earlier question of using 

this to pay for the SGR, that in my testimony I have offered you 

other mechanisms for savings in terms of refining payment rates 

in Medicare, and I believe that you heard some from Mark Miller 

that MedPAC has offered, which I think might be far preferable if 

you are looking for offsets. 

Mr. PITTS. But you do not believe it is appropriate to charge 

them more? 

Ms. FEDER. They are charged more. 

Mr. PITTS. The million dollar? 

Ms. FEDER. They are charged more. 

Mr. PITTS. My time has expired. 

The Chair recognizes the ranking member 5 minutes for questions. 

Mr. PALLONE. Mr. Chairman, I would ask unanimous consent to 

submit for the record an issue briefed by the Leadership Council 

of Aging Organizations on MedPAC’s extra help copayment proposals. 

Mr. PITTS. Without objection, so ordered. 

[The information follows:] 

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Mr. PALLONE. Thank you, Mr. Chairman. 

My questions are to you, Dr. Feder. I was troubled by the policy 

proposals in the testimony of both Mr. Holt and Mr. Goldwein that 

seemed to devalue the Medicaid program. And by rolling back the 

Federal contribution to State Medicaid programs and shifting 

greater costs onto State budgets, access to care for those may be 

seriously hindered as State’s restrict enrollment due to budget 

shortfalls. 

So my first question is, so what would be the result of rolling 

back the Federal contribution to State and Medicaid programs? 

Ms. FEDER. Well, Mr. Pallone, we also, as you well know, we already see that States are constraining some of their services based 

on their decisions about what they can afford and are willing to 

spend, particularly in the area of long-term care services for either 

elderly people or people with disabilities. We know that there are 

long waiting lists for home care, for example, which is a tremendous matter of concern. 

We also know that Medicaid, one of its greatest values is to be 

able to have the funding respond as needs arise. So in the Great 

Recession, we found that Medicaid responded to the growing need 

of the population, that we had so many low-income people. We see 

Medicaid similarly respond when new drugs come on line that are 

expensive but can make a real difference to people’s ability to get 

care they need. 

So we have lots of experience on which we can draw and lots of 

research shows that an arbitrary constraint in terms of the Federal 

share, what the Feds are contributing to Medicaid costs will have 

an impact on the programs, absolutely, but that impact will fall on 

providers. They will get less payment. They have been on beneficiaries who will get less access to service, and that the program 

would be diminished as a result. 

Mr. PALLONE. I appreciate you bringing up long-term care too, 

because I think a lot of times some of us forget the link between 

Medicaid and long-term care nursing home care, which I think is 

another issue that, you know, we really should be addressing—— 

Ms. FEDER. Absolutely. 

Mr. PALLONE [continuing]. In a significant way, you know, what 

we are going to do about long-term care. But many Governors, even 

Republican ones, even mine have opted to participate in the Medicaid expansion offered as part of the ACA because it is good for 

their States and good for their citizens. 

Moreover, there is empirical evidence showing that Medicaid improves health. For instance, the 2008 Oregon study that expanded 

Medicaid coverage had substantively and statistically hired utilization of preventive and primary care, lower out-of-pocket medical expenses and lower medical debt and better physical and mental 

health. 

So my second question is, it would appear that there is actual 

empirical evidence to refute a devaluation of the program and that 

Medicaid coverage not only helps improve health but keeps people 

out of medical debt. 

Do you want to comment on the benefits of the Medicaid program 

in that respect? 

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Ms. FEDER. I agree with you 100 percent that the value of Medicaid to individuals who would, without it go without coverage, has 

been demonstrated many times over. The evidence you cite is recent evidence that researchers like because it is not influenced by 

the differences in the population, the more-likely-to-be-sick population that is in Medicaid versus the other populations. And this 

evidence is particularly confirming of Medicaid’s value, although it 

too had some issues in not fully capturing it. 

So Medicaid on the health side for families and kids and on the 

long-term services and supports for people who are elderly or disabled is extraordinarily valued and we prove it all the time. 

Mr. PALLONE. All right. I am going to try to get quickly to this 

last thing. House Budget Committee Chairman Paul Ryan has continued to propose to convert Medicare into a voucher system for the 

purchase of private health insurance, and the Urban Institute analysis show this would result in a fairly dramatic shifting of cost to 

beneficiaries. 

What is your analysis of this Ryan proposal, and what are the 

dangers to Medicare and their beneficiaries from such a proposal? 

Ms. FEDER. Well, I share with my colleagues at the Urban Institute precisely that concern, that it is a shift of cost to beneficiaries 

rather than a savings in cost. We know from experience, we have 

seen some advocacy lately that competition is working in Medicare 

Advantage plans, that we can see that risk selection is no longer 

a problem, but those are claims that are not supported by the evidence. 

MedPAC demonstrates that when you have competing plans 

there is, even as we refine our ability to adjust payments to plans 

for differences in risk, that the risk selection occurs, that healthier 

people are served by the plans and sicker ones are avoided or end 

up disenrolling. And we see, as Mark Miller said earlier, a decided 

risk that we will lose our capacity to contain costs which Medicare 

has been so effective, relative to the private sector and to private 

plans. 

Mr. PALLONE. Thank you. 

Thank you, Mr. Chairman. 

Mr. PITTS. Chair recognizes the gentleman from Florida, Mr. 

Bilirakis, 5 minutes for questioning. 

Mr. BILIRAKIS. Thank you, Mr. Chairman. I appreciate it very 

much. 

Mr. Goldwein, in your testimony, you talk about budget choices 

and you classify some of the options as benders or savers. I have 

been concerned about the prescription drug abuse within the Medicare Part D program and overall program integrity. 

Would establishing a safe pharmacy network to provide a single 

point of sale for at-risk beneficiaries and providing part D plans additional authority against fraud be bender or a saver? Would this 

save the Government and taxpayers, again, real money? 

Mr. GOLDWEIN. So establishing a safe pharmacy, I think, would 

save money. I can’t quantify how much, and I have not seen a CBO 

score on it. But by clamping down on basically abuse of prescription drugs and overmedication, it will certainly save Medicare 

money. 

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I also think this would categorize as a bender because this is one 

of those wins-wins, where not only would Medicare be better off, 

but the beneficiary that potentially could become addicted to the 

drug is better off and society is as well. So it is definitely something worth looking at. 

Mr. BILIRAKIS. Thank you. 

And next question for Mr. Holt. Private health insurance was the 

model used to build the Medicare Part D program. Congress used 

what was successful in the commercial sector and brought that success into Medicare. Shouldn’t we use the innovation and tools in 

the private sector to address some of the drug abuse and fraudulent billing practices in Medicare Part D? 

Mr. HOLT. Yes, absolutely, and we already use similar programs 

in, I think, about 46 of the State Medicaid programs. So, and I 

think this is an excellent idea. I know both HHS and CMS have 

said that they support it. I think the committee largely is supportive of this policy, and I think if you can get some savings on 

top of just good policy, I think that is an excellent choice and move 

in that direction. 

Mr. BILIRAKIS. Thank you very much. 

I yield back, Mr. Chairman. 

Mr. PITTS. Chair thanks the gentleman. 

Now recognizes the gentleman from Texas, Mr. Green, for 5 minutes for questions. 

Mr. GREEN. Thank you, Mr. Chairman. 

I thank our panel for being here. As we have seen since the passage of the Affordable Care Act, industry stakeholders have continued to make claims that cuts to the Medicare Advantage program 

would lead to reductions in benefits and increased premiums, but 

the exact opposite has occurred over that period of time. In fact, 

premiums have dropped 10 percent and enrollment has increased 

nearly 30 percent since the ACA required plans to be more efficient 

in their delivery. 

Mr. Goldwein, in your testimony, you propose as one of your 

saver policies to increase the coding intensity adjustment to reclaim additional overpayments to Medicare Advantage plans. Could 

you describe this policy and your rationale behind it? 

Mr. GOLDWEIN. Sure. Well, let me first say that the policies I 

listed in my testimony, other than those which were in our prep 

plan, are not my recommendations but just a list of options. 

Now, the President has proposed coding intensity adjustments 

for Medicare Advantage, which essentially would recoup money 

that shouldn’t have been paid to these plans in the first place, because in some cases, they are over-coding activities, coding them at 

something that is more expensive than they otherwise would be. 

What the exact coding adjustments should be year to year, I can’t 

tell you. I think MedPAC could probably tell you better. But this 

is the President’s recommendation, and certainly we should be continuing to make sure that Medicare Advantage is spending its 

money as efficiently as possible. 

Mr. GREEN. OK. Even today you heard in Mr. Holt’s testimony 

how payment reductions in Medicare Advantage plans would lead 

to reduced benefits for enrollees in 2015. I believe the plans were 

124 

well suited to absorb these cuts by becoming more efficient without 

harming beneficiaries, as MedPAC has indicated. 

Dr. Feder, one concern I have is that in 2014 planned payments 

are on an average of 106 percent of fee-for-service. If plans cannot 

compete at fee-for-service rates, do they really belong in the program? We are paying them more and there is no more concrete evidence that their quality is better. Shouldn’t we require better from 

plans as in more efficient performance and better quality if they 

are to remain part of Medicare? 

Ms. FEDER. I agree with that approach, Mr. Green, and with 

your point that we continue to overpay Medicare Advantage plans 

relative to payments in the traditional program. I don’t see any 

reason for that and have written and argue that payments should 

not be higher than what we pay in the traditional plan on the percapita basis. 

Mr. GREEN. Well, and that is one of my concerns. I was here 

when we created Medicare Advantage and it was supposed to save 

Medicare funding not cost many more. And I know I have constituents, about 25 percent of my Medicare folks get Medicare Advantage, but when I explain to them that you are actually costing more 

for Medicare than the 75 percent that is not, you know, then they 

think about it and say, oh, OK, they didn’t know that. 

But, Dr. Feder, does it seem irresponsible for us to spend taxpayer and beneficiary money to prop up private industry that benefits only a third, at best, at the expense of the other 70 percent 

under traditional Medicare? 

Ms. FEDER. It does not, and although we have made, I think, the 

reforms, and Mark Miller laid them out on the previous panel, that 

have been made in payments to MA plans and through the ACA 

have reduced those overpayments and are making strides, I think 

it is not appropriate to over-subsidize those plans. 

Mr. GREEN. OK. The title of today’s hearing, Doctor, is ‘‘Setting 

Fiscal Priorities,’’ and it appears to solve an economy against 

spending on entitlement programs for those Americans with the 

greatest need. It seems that term ‘‘entitlement’’ has come to mean 

different things to different people. Too often people think of entitlements through the narrow lens of programs that provide the 

safety net for our seniors and the most vulnerable in our society 

by considering the fiscal impact of the tax entitlements, tax deductions, exclusions, credits, and other tax preferences, which disproportionately benefit well-to-do Americans. 

Can you talk about entitlements, both those providing essential 

services to seniors and low-income Americans and those providing 

tax breaks to the more affluent, and the relative role of each in the 

context of protecting the most vulnerable in our society when addressing our long-term debt? 

And I know that is a long question for the last 30 seconds. 

Ms. FEDER. I will try and go fast. The entitlements that you 

speak of, I think, are colloquially defined inappropriately. They accurately mean benefits to which citizens have a right enforceable 

in court, and that they are typically mandatory spending programs 

so that the money flows with the population who is eligible for the 

program and the costs of the benefits that are provided. 

125 

You are quite correct that they are provided through the tax system as well as in direct spending, even when they are social service 

benefits. So the tax benefits that we receive on mortgages, on pension plans, on employer-sponsored health insurance, are all entitlements that essentially go to the upper end of the income distribution. 

And a substantial, the bulk of those benefits do go to the better 

off, and by virtue of their structure, with the exception of benefits 

that are refundable tax credits like the EITC, they do not go to 

low-income people. So the tax benefits are skewed up the income 

scale, and I am talking about the good, the social service type benefits. There are others that are really skewed up the income scale. 

By contrast, it is the low and modest income population who benefits appropriately and probably disproportionately from the benefits that are provided by Medicare and Medicaid and benefits like 

that, that come through Social Security, that come through direct 

payment. 

Mr. GREEN. Thank you, Mr. Chairman. I know we are over time 

and appreciate your courtesies. 

I thank the panel. 

Mr. PITTS. Chair thanks the gentleman. 

Now recognize the gentlelady from Florida, Ms. Castor, 5 minutes for questions. 

Ms. CASTOR. Thank you, Mr. Chairman. 

And Congressman Green, I was glad you got back into the Medicare questions involving the Affordable Care Act because there 

have been, people have kind of played fast and loose with some of 

the statements today by continuing to imply that the Affordable 

Care Act cut Medicare, and you are implying to the Medicare beneficiaries our older neighbors, our parents and grandparents, that 

they have suffered, their benefits have been cut, which could not 

be further from the truth. 

Under the Affordable Care Act reforms, Medicare benefits are 

better. Remember the doughnut hole is closing so you have more 

money in your pocket when it comes to paying for your prescription 

drugs. You get that free wellness visit every year. You get the important visit for your mammogram or colonoscopy or cholesterol 

check without a copay. Benefits have gotten stronger; isn’t that 

right, Dr. Feder? 

Ms. FEDER. Absolutely. 

Ms. CASTOR. And meanwhile, what we focused on the Affordable 

Care Act is cutting the waste in the overpayments to health insurance companies that Dr. Miller, the MedPAC expert, testified to. 

This is smart policy. So let’s turn the page on this and get to the 

fact that we have more work to do with the aging population and 

the baby boomers retiring. We still have to ensure that Medicare 

is there for future generations, like Generation X and the 

Millenials, I hope so. 

So let’s talk also about Medicaid because I hear these arguments 

too that Medicaid is not efficient, that this is a huge cost—yes, it 

is a big draw on the Federal budget, so we have got to focus on 

reforms. My colleagues on the other side of the aisle often refer to 

the inefficiencies of Medicaid. In fact, Medicaid’s costs per beneficiary are substantially lower than per beneficiary costs for private 

126 

insurance, and Medicaid’s cost per beneficiary have been growing 

more slowly than per beneficiary costs under private insurance. So 

it appears that Medicaid is more efficient than private insurance, 

and yet many conservatives say we need to replace Medicaid with 

a voucher or cap its funding. 

And what you are saying there is that our parents and grandparents that relied on skilled nursing and need to go into nursing 

homes, and with these baby boomers, the policy decision is to take 

the access to the nursing home away or to children with disabilities 

that we are not going to be there in a cost-efficient manner to help 

you survive, I just don’t think that is smart policy. 

So Dr. Feder, while this might save money, if you block grant or 

you cut and you slash, how can we expect to really cut healthcare 

costs while Medicaid is already cheaper than private insurance? 

Ms. FEDER. Well, I think that your point is well taken and that 

this is really not a way to save money. It may reduce Federal 

spending, but it would shift costs to States and in all likelihood, 

based on past experience, would leave beneficiaries without needed 

services just as you describe. That is simply not an acceptable way 

to meet our obligations to our most vulnerable populations, and 

those demands are only going to grow as the population ages, as 

more and more people need not just nursing home care. We are 

more often now or more often than we were providing care at 

home, which is where people want to stay, and we need to be able 

to do that. 

To expect Medicaid to do that on some notion that an already 

lean program can somehow be magically more efficient makes no 

sense at all. Medicaid can participate and is participating with 

Medicare in the private sector in improving delivery to minimize 

and reduce inefficiencies. But in all likelihood, as the population 

ages, Medicaid needs more support not less. 

And I find it—if you would, for one more moment—I find it interesting that your colleagues across the aisle want to spend less on 

Medicaid and pull those Federal dollars back when we know that 

States are arguing that—some States are resisting Medicaid expansions because they think the Feds are not going to come through 

with the needed dollars. So it seems to me that this becomes a 

wish fulfillment on the part of those who are opposed to adequate 

coverage. 

Ms. CASTOR. Thank you very much. I yield back. 

Mr. PITTS. Thank you. 

We will go to one follow-up per side. I will recognize myself 5 

minutes for that purpose. 

Mr. Holt, the New York Times has a story this morning about 

a new report from the HHS Office of Inspector General that is 

being issued today, and the report found, quote, ‘‘Half of providers 

listed as accepting Medicaid patients could not offer appointments 

to enrollees,’’ end quote, for non-urgent visits. 

Now, the President’s health law is fueling rapid growth in Medicaid with enrollment up by 9 million people just this year. The inspector general warned that, quote, ‘‘When providers listed as participating in a plan cannot offer appointments, it may create a significant obstacle for an enrollee seeking care,’’ end quote. 

127 

According to HHS, the Nation is already going to be 20,400 primary care physicians short by 2020, just a few years from now. 

Should Congress be concerned that the shortage of doctors and low 

participation rates in Medicaid along with the Medicaid expansion 

means that the most vulnerable patients will face worse access 

problems? 

Mr. HOLT. Yes, absolutely. I haven’t seen the study yet, since it 

came out while we were sitting here, I think, but my big concern 

about the Medicaid expansion has been that you are putting more 

people into this program. There is already difficulty in Medicaid 

beneficiaries getting access to doctors. And we have to keep in 

mind that having coverage is not the same as having access and 

having access is not the same as having better outcomes. 

And so I think it is very important that as we look at the expansion, which sort of disincentivizes the enrolling of lower-income individuals who were previously eligible because they were met at a 

lower match but pays States quite a bit more, right now 100 percent, to enroll, higher income, still lower-income individuals that 

were sort of incentivizing the States to focus on the wrong population, and we are making it harder for those people, the most vulnerable, to get to doctors, to get to care. 

Mr. PITTS. Mr. Goldwein, under the Affordable Care Act, States 

have the option to expand Medicaid to adults with no children, 

with income under 138 percent of the Federal poverty level. This 

was an unprecedented expansion of the program that traditionally 

has covered low-income moms and kids, the elderly, poor, the blind, 

and disabled. Under the expansion, the Federal Government is 

paying 100 percent of the cost of the expansion until 2016 when 

States have to start picking up some of the tab. 

Accordingly, under Federal rules today, the Federal Government 

is paying the full cost of some prisoners’ hospital care who would 

otherwise be eligible for Medicaid, the medical bills of multimilliondollar lottery winners who States are barred from disenrolling in 

the program. Do you think this is an appropriate use of Medicaid 

dollars? 

Mr. GOLDWEIN. Well, I think, by and large, there was a decision 

in the Affordable Care Act to use Medicaid rather than the insurance subsidies to cover that population between 100 and 133 or 138 

percent of poverty. And that was a reasonable choice where you 

could have disagreed. Now, within that population, there certainly 

are going to be some cases where there are beneficiaries that don’t 

really merit receiving benefits, and there probably is an opportunity to look at those on an individual basis and find places where 

States can cut off those benefits. 

Mr. PITTS. Dr. Feder, one of the concerns about Federal spending 

on entitlement programs is that such spending is crowding out 

other parts of the Federal budget. For example, this committee has 

had a strong bipartisan tradition of supporting research and 

science at the National Institutes of Health. It will be impossible 

to find increases to the NIH budget without some reforms to our 

entitlement programs. 

Under current law and projections, should Congress be concerned 

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creasing budgetary challenges without some reforms to the mandatory healthcare spending? 

Ms. FEDER. Well, Chairman Pitts, I would like to reiterate what 

I believe that Mr. Pallone said a little while ago, which is that the 

Affordable Care Act was entitlement reform and has generated 

enormous savings in the Medicare program. And, in fact, if we look 

at the deficit reduction that has occurred overall in the last several 

years, about three quarters of it has come from spending reduction, 

not revenue increases. And as I said earlier, if we expect to meet 

the demands of our society, we cannot continue to constrain spending whether discretionary spending is getting very hard hit, and I 

agree with you that it is unacceptable. 

But the way to address that is not to create inadequate supports 

in strong programs; it is to adequately generate revenues to support the needs of our population. 

Mr. PITTS. Would you not agree that much of that spending reduction is due to the use of generics? 

Ms. FEDER. Not the spending—that is true if you are referring 

narrowly to some of the spending. Some of the spending reduction 

in Medicare on part D, for example, lower than was estimated, is 

due to an expansion of generics in part, but to other factors as well 

that affected the whole industry was not necessarily a reflection of 

the part D design, but I am talking more broadly about the budget. 

Mr. PITTS. Thank you. My time is expired. 

Chair recognizes the ranking member, 5 minutes for questions, 

follow-up. 

Mr. PALLONE. Thank you. 

In my previous question I said that I believe that simply turning 

Medicare into a voucher is shortsighted and simply shifts costs 

onto seniors and people with disabilities, and I believe there are 

more thoughtful ways to address healthcare costs growth. And you 

sort of got into this, Dr. Feder, but the Affordable Care Act sets the 

stage and began to put in place some initiatives to address cost 

growth without harming patient care. 

Could you give me your views on the reforms and the ACA and 

their ability to address cost growth? 

Ms. FEDER. Well, actually, we heard a lot about those in the first 

panel. 

Mr. PALLONE. Right. 

Ms. FEDER. So I think that we are seeing efforts to tie payments 

more closely to performance, to encourage providers to be more efficient in their delivery of care. Prime example for that is the penalty for readmission rates. I think that that ought to be monitored 

and done properly, but I think we are seeing positive results there. 

The law went beyond that to create a new option in terms of the 

way in which providers get paid instead of rewarding more for ever 

more expensive and higher-volume services. We see the creation of 

the accountable care organizations that rewards providers if they 

meet performance standards, a very important aspect of it and 

then labels them to share savings. And we see many pilot programs 

exploring improved efficiency in the delivery of care in both Medicare and Medicaid. 

We see, for example, in the area we talked about earlier, independence at home, which is having doctors serve and people who 

129 

need long-term care services going to the home. That is an exciting 

change or benefit to explore. We are seeing health homes where 

those same individuals get support services, particularly focused on 

improvements for those who need behavioral health services, which 

I heard a member talk about earlier. 

And we have a variety of demonstrations of various kinds that 

are focused on holding providers accountable for the delivery of 

quality care, rewarding them for that performance rather than for 

higher-volume services. 

Mr. PALLONE. Thanks. 

And you pointed out that the ACA improved Medicare’s financial 

solvency. It is now projected to be in good standing for an additional 4 years until 2030, according to the Medicare Trustees. Just 

talk a little bit about the financial health of the Medicare program. 

What are the fiscal challenges? What kind of timeframe are we 

looking at in terms of the ability of current Medicare revenues and 

the Medicare hospital insurance trust fund to continue to cover the 

cost of the program? 

Ms. FEDER. Well, as we look, we have to always remember the 

different ways in which the program is funded and you hear people 

talk about the exhaustion of funds. That is, as you have correctly 

said, only about part A, where the funding is generated by predetermined payroll tax rates. Part B and part D are funded 

through general revenues in large part and to some extent then 

through beneficiary premiums. So there is no issue of exhaustion 

of trust funds when it comes to those other programs. 

On part A, we know that in Medicare, like as in Social Security, 

that we have a growing elderly population dependent on a now 

smaller working age population. And so when we talk about the exhaustion of the trust fund, when the program will still be able to 

pay three quarters of its benefits but not all—I believe that is the 

number—we talk about exhaustion of the trust fund, that reflects 

the fact that looking out that payroll tax revenues that are already—or payroll tax rates are not expected to generate sufficient 

revenues to support the program at that time. 

But that is, as you say, a long way from now. We have been 

much closer to that exhaustion date, Congressman, in previous 

years, Congress has always taken action to assure the soundness 

of the program. And as I said in my testimony, with us experiencing now the lowest health cost growth in the Nation’s history— 

anyway since 1960, that is not quite the Nation’s history—it is a 

time for us to continue to explore the payment reforms and payment refinements, not just in Medicare or in Medicaid but in the 

entire healthcare system so that we can keep cost growth low and 

even though we will likely need new revenues for a growing elderly 

population, with strong economy and efficient healthcare systems, 

we are absolutely capable of meeting our responsibility. 

Mr. PALLONE. Thanks so much. 

Mr. PITTS. All right. That concludes member’s questioning for 

now. I am sure members will have follow-up questions they will 

submit to you in writing those questions. We would ask you to 

please respond promptly. I remind members they have 10 business 

days to submit questions for the record and they should submit 

those questions by the close of business on Tuesday, December 23. 

130 

Very informative hearing. 

Thank you very much. Without objection, this subcommittee is 

adjourned. 

[Whereupon, at 1:12 p.m., the subcommittee was adjourned.] 

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