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58–275 2011

THE MEDICARE PORTIONS OF THE 

PRESIDENT’S FISCAL YEAR 2009 BUDGET 

HEARING 

BEFORE THE

SUBCOMMITTEE ON HEALTH 

OF THE

COMMITTEE ON WAYS AND MEANS 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED TENTH CONGRESS 

SECOND SESSION 

FEBRUARY 14, 2008 

Serial No. 110–70 

Printed for the use of the Committee on Ways and Means 

( 


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COMMITTEE ON WAYS AND MEANS 

CHARLES B. RANGEL, New York, Chairman 

FORTNEY PETE STARK, California 

SANDER M. LEVIN, Michigan 

JIM MCDERMOTT, Washington 

JOHN LEWIS, Georgia 

RICHARD E. NEAL, Massachusetts 

MICHAEL R. MCNULTY, New York 

JOHN S. TANNER, Tennessee 

XAVIER BECERRA, California 

LLOYD DOGGETT, Texas 

EARL POMEROY, North Dakota 

STEPHANIE TUBBS JONES, Ohio 

MIKE THOMPSON, California 

JOHN B. LARSON, Connecticut 

RAHM EMANUEL, Illinois 

EARL BLUMENAUER, Oregon 

RON KIND, Wisconsin 

BILL PASCRELL JR., New Jersey 

SHELLEY BERKLEY, Nevada 

JOSEPH CROWLEY, New York 

CHRIS VAN HOLLEN, Maryland 

KENDRICK MEEK, Florida 

ALLYSON Y. SCHWARTZ, Pennsylvania 

ARTUR DAVIS, Alabama 

JIM MCCRERY, Louisiana 

WALLY HERGER, California 

DAVE CAMP, Michigan 

JIM RAMSTAD, Minnesota 

SAM JOHNSON, Texas 

PHIL ENGLISH, Pennsylvania 

JERRY WELLER, Illinois 

KENNY HULSHOF, Missouri 

RON LEWIS, Kentucky 

KEVIN BRADY, Texas 

THOMAS M. REYNOLDS, New York 

PAUL RYAN, Wisconsin 

ERIC CANTOR, Virginia 

JOHN LINDER, Georgia 

DEVIN NUNES, California 

PAT TIBERI, Ohio 

JON PORTER, Nevada 

Janice Mays, Chief Counsel and Staff Director 

Brett Loper, Minority Staff Director 

SUBCOMMITTEE ON HEALTH

FORTNEY PETE STARK, California, Chairman 

LLOYD DOGGETT, Texas 

MIKE THOMPSON, California 

RAHM EMANUEL, Illinois 

XAVIER BECERRA, California 

EARL POMEROY, North Dakota 

STEPHANIE TUBBS JONES, Ohio 

RON KIND, Wisconsin 

DAVE CAMP, Michigan 

SAM JOHNSON, Texas 

JIM RAMSTAD, Minnesota 

PHIL ENGLISH, Pennsylvania 

KENNY HULSHOF, Missouri 

Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public hearing records 

of the Committee on Ways and Means are also published in electronic form. The printed 

hearing record remains the official version. Because electronic submissions are used to 

prepare both printed and electronic versions of the hearing record, the process of converting 

between various electronic formats may introduce unintentional errors or omissions. Such occurrences are inherent in the current publication process and should diminish as the process 

is further refined. 


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C O N T E N T S 

Page 

Advisory of February 12, 2008, announcing the hearing ..................................... 2 

WITNESS 

Kerry Weems, Acting Administrator, Centers for Medicare and Medicaid 

Services, U.S. Department of Health and Human Services ............................. 5 

SUBMISSIONS FOR THE RECORD 

The Senior Citizens League, statement ................................................................. 15 

American Federation of State, County and Municipal Employees (AFSCME), 

statement .............................................................................................................. 16 

Linda Schmidt, statement ....................................................................................... 18 

Wim Kellett, statement ........................................................................................... 21 


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THE MEDICARE PORTIONS OF THE 

PRESIDENT’S FISCAL YEAR 2009 BUDGET 

THURSDAY, FEBRUARY 14, 2008 

U.S. HOUSE OF REPRESENTATIVES, 

COMMITTEE ON WAYS AND MEANS, 

SUBCOMMITTEE ON HEALTH, 

Washington, DC. 

The Subcommittee met, pursuant to notice, at 2:15 p.m., in room 

1100, Longworth House Office Building, Hon. Fortney Pete Stark 

(Chairman of the Subcommittee) presiding. 

[The advisory announcing the hearing follows:] 


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ADVISORY 

FROM THE COMMITTEE ON WAYS AND MEANS 

SUBCOMMITTEE ON HEALTH 

FOR IMMEDIATE RELEASE CONTACT: (202) 225–3943 

February 12, 2008 

HL–19 

Hearing on the Medicare Portions of the 

President’s Fiscal Year 2009 Budget with 

Acting CMS Administrator Weems 

House Ways and Means Health Subcommittee Chairman Pete Stark (D–CA) announced today that the Subcommittee on Health will hold a hearing on the Medicare portions of the President’s fiscal year 2009 budget. The hearing will take 

place at 1:00 p.m. on Thursday, February 14, 2008, in the main Committee 

hearing room, 1100 Longworth House Office Building. 

In view of the limited time available to hear witnesses, oral testimony at this 

hearing will be from invited witnesses only. However, any individual or organization 

not scheduled for an oral appearance may submit a written statement for consideration by the Committee and for inclusion in the printed record of the hearing. 

BACKGROUND: 

On February 4, 2008, President George W. Bush submitted his Fiscal Year 2009 

budget to Congress. Many of the spending and policy proposals related to the Centers for Medicare and Medicaid Services (CMS) in the Department of Health and 

Human Services fall under the jurisdiction of the Ways and Means Committee. 

The President’s budget proposes spending cuts for Medicare over the next 10 

years of $556 billion in legislative changes and $20 billion in regulatory changes. 

In total, the budget proposes $576 billion in cuts to Medicare over 10 years. Program-level funding for the administrative activities at CMS for 2009 would receive 

a slight increase, while the number of full-time equivalent employees (FTEs) is projected to decrease slightly. 

In announcing the hearing, Chairman Stark said, ‘‘The proposed Medicare 

cuts exclusively target traditional fee-for-service Medicare providers, while 

protecting the overpayments to private insurance companies that drain 

Medicare solvency and raise beneficiary premiums. This budget again reveals the Administration’s agenda to starve traditional Medicare and force 

beneficiaries and providers to rely on private plans. I look forward to hearing Acting Administrator Weems explain how these budget proposals are in 

the best interest of beneficiaries, providers and the overall strength of the 

program.’’ 

FOCUS OF THE HEARING: 

The hearing will focus on the Medicare portions of the President’s fiscal year 2009 

budget. 

DETAILS FOR SUBMISSION OF WRITTEN COMMENTS: 

Please Note: Any person(s) and/or organization(s) wishing to submit for the hearing record must follow the appropriate link on the hearing page of the Committee 

website and complete the informational forms. From the Committee homepage, 


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http://waysandmeans.house.gov, select ‘‘110th Congress’’ from the menu entitled, ‘‘Committee Hearings’’ (http://waysandmeans.house.gov/Hearings.asp?congress=18). 

Select the hearing for which you would like to submit, and click on the link entitled, 

‘‘Click here to provide a submission for the record.’’ Once you have followed the online instructions, completing all informational forms and clicking ‘‘submit’’ on the 

final page, an email will be sent to the address which you supply confirming your 

interest in providing a submission for the record. You MUST REPLY to the email 

and ATTACH your submission as a Word or WordPerfect document, in compliance 

with the formatting requirements listed below, by close of business Thursday, February 28, 2008. Finally, please note that due to the change in House mail policy, 

the U.S. Capitol Police will refuse sealed-package deliveries to all House Office 

Buildings. For questions, or if you encounter technical problems, please call (202) 

225–1721. 

FORMATTING REQUIREMENTS: 

The Committee relies on electronic submissions for printing the official hearing record. As always, submissions will be included in the record according to the discretion of the Committee. 

The Committee will not alter the content of your submission, but we reserve the right to format 

it according to our guidelines. Any submission provided to the Committee by a witness, any supplementary materials submitted for the printed record, and any written comments in response 

to a request for written comments must conform to the guidelines listed below. Any submission 

or supplementary item not in compliance with these guidelines will not be printed, but will be 

maintained in the Committee files for review and use by the Committee. 

1. All submissions and supplementary materials must be provided in Word or WordPerfect 

format and MUST NOT exceed a total of 10 pages, including attachments. Witnesses and submitters are advised that the Committee relies on electronic submissions for printing the official 

hearing record. 

2. Copies of whole documents submitted as exhibit material will not be accepted for printing. 

Instead, exhibit material should be referenced and quoted or paraphrased. All exhibit material 

not meeting these specifications will be maintained in the Committee files for review and use 

by the Committee. 

3. All submissions must include a list of all clients, persons, and/or organizations on whose 

behalf the witness appears. A supplemental sheet must accompany each submission listing the 

name, company, address, telephone and fax numbers of each witness. 

Note: All Committee advisories and news releases are available on the World 

Wide Web at http://waysandmeans.house.gov. 

The Committee seeks to make its facilities accessible to persons with disabilities. 

If you are in need of special accommodations, please call 202–225–1721 or 202–226– 

3411 TTD/TTY in advance of the event (four business days notice is requested). 

Questions with regard to special accommodation needs in general (including availability of Committee materials in alternative formats) may be directed to the Committee as noted above. 

f 

Chairman STARK. We begin the hearing late. I apologize to Administrator Weems’ staff and all of our guests who have been patiently waiting while we worked out a few problems on the floor, 

and I hope that we won’t be disrupted a lot with votes and can proceed. 

Many of our Members on both sides have been involved in these 

floor proceedings and hopefully will be finding their way here, but 

we’ll start out. As I had suggested to Mr. Weems that I had a great 

opening statement that blames him for all the ills of the Medicare, 

but after keeping him waiting that long, I think that would just not 

be very hospitable. 

I could just simply summarize where I think I was going and 

we’ll talk later is that I have been concerned that while we have 

reduced resources for a variety of Medicare Programs, whether you 

call it slowing the growth or making cuts. It’s indifferent to me. 


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We somehow overlooked doing anything with Medicare Advantage where there seemed to be some universal agreement among 

the experts that were overpaying, and I was concerned that we 

missed that opportunity with which we could have extended the 

trust fund a couple of years. The trigger would not have come into 

account had we reduced the payments. But, other than that, we 

can talk about a lot of issues. Mr. Camp. 

Mr. CAMP. Thank you, Mr. Chairman. 

I also will forego a formal opening statement in light of the fact 

we’ve had somewhat of an unusual floor procedure, but I do want 

to say that we did hear about the long-term problems facing Medicare yesterday. I think that there are a number of challenges, we 

all agree. 

I look forward to working with you in the time that we have left 

to develop some ideas that would improve the financial outlook for 

Medicare, while also preserving those important services that are 

offered to seniors through those programs. So, with that I would 

just ask unanimous consent to submit my statement for the record. 

Chairman STARK. Without objection, the statement will appear 

in the record. 

Administrator Weems, if you would like to add anything at this 

point to the record in addition to your statement that we will hear 

from you, we will make that part of the record. Why don’t you proceed to enlighten us? 

Mr. WEEMS. Thank you, Mr. Chairman and Congressman 

Camp. In keeping with the spirit of comity, I will forego my statement too, and wish you both happy Valentine’s Day. 

[The prepared statement of Kerry Weems follows:] 


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Chairman STARK. Without objection, it will appear in the 

record. I would ask you to talk about the Medicare Advantage 

plans, some of the concerns that I have are, let me just run 

through a few, and maybe you could address those. 

In spite of what Medicare Advantage Plans say they ‘‘offer’’ beneficiaries, there is very little record as to what they actually provide. 

To offer me a wall-climbing episode at the health club is a generous 

offer, but one that I would not be inclined to accept. We do find 

in the statements of some of the large private insurance companies 

where we can get the records that are publicly traded that their 

loss ratios have dropped. 

So, they’ve been spending less of their premium income on benefits. Also we know that some of them charge more than Medicare 

for certain copays, so that a beneficiary in certain plans will have 

a higher copay or deductible in copay than they would under traditional Medicare. So, there are a lot of those glitches in addition to 

what seems to be OMB, the year actuaries, our actuaries, all suggesting in Med-Pac that we are in varying amounts ‘‘overpaying’’ 

or paying more than we would pay for those services under fee-forservice. So, I guess, do you see some changes that we could make 

that would do two things: Save us some money and give some, say, 

protection if you will or a fairer treatment to our beneficiaries? 

Mr. WEEMS. Maybe we can talk about the premises. 

Chairman STARK. Pardon? 

Mr. WEEMS. Maybe we can talk about the premise from which 

you operate first. 

Chairman STARK. Okay. 

Mr. WEEMS. So, you know, what are the extra benefits that are 

offered to beneficiaries? We can see and track a good deal of them, 

because much of that is in reduced cost-sharing, buying down premiums, things like that. You know, we can tell you where that’s 

happening. 

Now with respect to what you say about copayments, that has to 

do with choice. There are plans that offer a variety of copayments, 

a variety of cost-sharing schemes where you may choose lower costsharing in one place and higher in another. 

Chairman STARK. That doesn’t wash. Are you sure they make 

low ball at me coming in with a bill premium or 25 bucks. 

Mr. WEEMS. Right. 

Chairman STARK. Okay, and I could bring out the litany of 

plans and suddenly I find that their hospital copay is 700 bucks a 

day. Where, under Medicare, it’s what—900 for the whole procedure—and so if you are in for 3 days, you get whacked with $2,100. 

Then if you combine that with the marketing problems where 

they haven’t been always as up front as we think they ought to be 

or as transparent, if I thought that the beneficiaries understood 

that and made that choice, but I don’t, so from that standpoint I 

think there are great sales people out there and they do a wonderful job marketing, but their job is to sell their plan. It’s just like, 

you know, Ford forgets to tell me there’s no spare tire. They’re not 

misleading me, they just forgot to tell me. 

So, that’s my concern. I would agree with you. If we could make 

it more transparent and clearer, and more easily understood by the 


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beneficiaries, no quarrel. But then you get to the cost issue, and 

it is costing us money to do it. So, let’s take that part of it. 

Mr. WEEMS. Let me just say one thing, if I can, about the sales, 

and then let’s go into cost. 

I actually, as you may know, have set through several of the 

sales pitches anonymously just to see what’s going on and to ask 

questions to get a better understanding. In several instances, I 

heard marketers sort of lay out plans, you know, for needs. 

Look, do you expect to go in the hospital? Not that that’s a 100 

percent guess, but they would lay out the benefit for the hospital. 

You know, do you see a doctor. Well, if you see a doctor a lot, this 

plan might be better. There was, I would say, an education moment 

where a beneficiary was educated about what their choices might 

be, especially with respect to cost-sharing. 

So, you know, I present that to you from actual experience. With 

respect to cost the Congress made a decision that nationwide people should have access to these kinds of products. They are, now, 

and the way that the benchmark system works, that is the result 

that we have. But more beneficiaries have more access to more 

choice than they had before. 

Chairman STARK. Mr. Camp. 

Mr. CAMP. Thank you, Mr. Chairman. 

I know CMS has been working on a number of initiatives on 

price transparency and quality and we’ve heard a lot from witnesses and through other meetings that if we are going to have 

real health care reform those are two areas that we certainly need 

to have better information. I believe Secretary Levitt yesterday 

touched on those as well. 

Also in connection with the August 2006 Presidential Executive 

Order to increase transparency in the health care system, can you 

just quickly outline some of the initiatives CMS is working on to 

facilitate informed choice regarding treatment? 

Mr. WEEMS. Certainly. We have a number of initiatives under 

way, first of all with respect to quality, and this is something that 

the Congress has come back to us on a number of occasions, and 

that’s the physician quality reporting initiative. It began in 2007 

and, you know, this year we are working to implement the enhancements that we have. 

If you look at many of the places where we have contact with 

beneficiaries—that’s the physician’s office—in ESRD we have a 

number of quality measures and quality initiatives. In the inpatient hospital arena, you know, our rule that goes into effect this 

next year has us no longer paying for certain types of infection, certain types of procedures. 

Those are all quality based. Now, with respect to transparency 

we have made information available for the cost of some procedures. In this year’s budget, and I would ask the Chairman to look 

especially closely at this, we are looking for a legislative means of 

making Medicare information available to the public in a transparent way. Right now we have conflicting court orders. We are 

seeking a resolution from the Congress so that we can make that 

information available so that people can use it. 

Now, we would like to make it available in a way that Medicare 

can still be the health care financing agency that we are and not 


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just turn into a data production agency. So, we would like to be 

able to do it in a rational way. As people understand quality, as 

people understand price, this Committee might be able to consider 

very rational changes to a program where—you know, I think we 

could all agree that maybe if the beneficiary were willing to choose 

a high-quality, low-cost provider—maybe their cost-sharing 

changes, things like that that would drive the system toward quality and to reduced costs. 

Mr. CAMP. All right. I just follow up on another issue. You 

know, yesterday I asked a question and the secretary, the average 

of out-of-pocket costs with traditional Medicare at the highest levels, there is certainly a big difference between that and what they 

spent in Medicare Advantage. I mentioned a scenario where it was 

about $2,100 difference if they were in a coordinated care plan. So, 

their significant savings for the highest and sickest beneficiaries in 

the program, can you comment on that? 

Mr. WEEMS. Certainly. In some programs we find that beneficiaries will do better in these programs, and, you know, as you 

said, certainly their cost-sharing is substantially lower in these 

plans, and it is because they are getting coordinated care and because it is a risk plan that has capitated payment. 

Mr. CAMP. All right, and thank you, Mr. Chairman. 

Chairman STARK. This is going to be the shortest hearing on 

record. We have been told that this vote will conclude in about 10 

minutes and then there is going to be, I think, 7 more 5-minute 

votes. There seems to be no willingness of our colleagues on the 

floor to shorten those to 2-minute votes. So, I don’t intend to ask 

you to stay. 

I might suggest and if we can find the time after the recess, Mr. 

Camp, that if we could ask you to return for an informal session 

with our Subcommittee on briefings on a lot of these issues of 

things that I know many of my colleagues wanted to talk about, 

plans for competitive bidding, the Iraq problems. I mean, there is 

a host of those things that we are hearing about from our constituents. 

The ESRD, the nursing home things, and we just unfortunately 

don’t have time. I would love to get into that today, but I think, 

if you would be agreeable and we could find some time after the 

recess. I want to note the arrival of Mr. Pomeroy. 

We are about to conclude, Earl, and I would be glad to let you 

enter into it, just suggesting that there are so many issues that we 

wanted to cover and won’t have time that I am going to ask Mr. 

Weems if he would come back and at least meet with us informally 

so that we would have a chance to go over a host of the issues that 

I know colleagues on both sides of the aisle want to find out in 

terms of what is going to happen this year. 

Mr. WEEMS. It would be my privilege. 

Chairman STARK. Would you? That would be good. 

Did you have any statement, make a statement part of the 

record, Earl, or if you had a question? 

Mr. POMEROY. Mr. Chairman, thank you for giving me this 

brief opportunity. The Administrator came all the way to North 

Dakota to look at a problem that we have had. We have been working with him to fix the problem. I am glad that we are going to 


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have a more fulsome opportunity to visit with the Administrator. 

He is not a sound bite guy; he is a program guy, and he knows this 

program inside and out. 

I believe that we could all learn from one another in a more generous time environment for the discussion. I really do appreciate 

the Administrator and his attention to the issues that we have had 

in North Dakota. Thank you. 

Mr. WEEMS. I learned a lot on that trip. Thank you. 

Chairman STARK. Could I just doublecheck this with you that 

we are in agreement on the Med-Pac and GAO recommendations 

to move to an ESRD bundling program without having to go 

through demonstrations? 

Mr. WEEMS. Yes, sir. We are actually prepared and we can go 

through the rationale. 

Chairman STARK. Yeah, fine. That’s one of the things that I 

thought we could proceed with. 

Mr. WEEMS. Yes, sir. 

Chairman STARK. Do you have anything else you would like to 

add? You have been waiting here for a chance to inform us. 

Mr. WEEMS. Just, I’m very grateful for the opportunity to appear. Just my own personal thought after 25 years as a career civil 

servant: It’s remarkable for me to sit here before you in this room. 

Chairman STARK. Well, I am afraid we have more to do than 

we are going to be able to accomplish. We aren’t going to be able 

to find pay-fors under our whatever that is we saddled ourselves 

with. We have the 10 percent doc cut. We have the trigger. You’ve 

got the trigger mechanism set for us yet? 

Mr. WEEMS. I expect that you will hear about that soon, sir. 

Chairman STARK. When I am on recess? I don’t have much 

time. Do you know when it is coming? Can you give me a hint? 

Mr. WEEMS. I am not in a position to give you a hint, but shall 

we say soon? 

Chairman STARK. We have that and then a host of other issues, 

some more complex. We must have had 50 or 60 hospital transition 

things, and I don’t know yet how we are going to handle that, but 

I will look forward to seeing if we can package up those things that 

we could all, Mr. Camp and I and you, could agree to, maybe wrap 

those up either in a quick procedure, get some of that off the table. 

Then we can worry about some of the bigger, more political issues, 

as we go along. There isn’t going to be much time. 

Mr. WEEMS. Well, you’ll find what for—— 

Chairman STARK. The conventions. After the 4th of July, I 

think we are done, quite frankly. That’s sad, but we’ve got the Schip thing, the doctors, and hopefully we can either get extensions 

or something to prevent any radical changes to either providers or 

beneficiaries. If we could get that done, I’d call it a good year. 

Mr. WEEMS. Hopefully you’ll find us an energetic and helpful 

partner. 

Chairman STARK. Thank you very much, and I again apologize 

for our fractured schedule today. 

If there are no concluding remarks, thank you. We’ll see you 

soon. The hearing is adjourned. 

[Whereupon, at 2:37 p.m., the hearing was adjourned.] 

[Submissions for the Record follow:] 


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1www.hhs.gov/budget/09budget/2009BudgetInBrief.pdf, p. 53–54. 

Statement of The Senior Citizens League 

On behalf of the approximately 1.2 million members of The Senior Citizens 

League (TSCL), a proud affiliate of The Retired Enlisted Association (TREA), thank 

you for the opportunity to submit a statement regarding the Medicare portions of 

the President’s Fiscal Year (FY) 2009 Budget. TSCL consists of active senior citizens, many of whom are low income, concerned about the protection of their Social 

Security, Medicare, and veteran or military retiree benefits. 

In 2003, legislation that overhauled Medicare included a provision that requires 

the President to propose changes to Medicare in the event that the entitlement was 

going to draw more than 45-percent of its funding from the government’s general 

revenue instead of the Medicare trust fund. This finding occurred in 2006 and 2007, 

and in the President’s proposed budget for Fiscal Year (FY) 2009, Medicare spending is reduced by $12.2 billion in FY 2009 and by $178 billion over five years. It 

is not clear at this time if there will be additional proposals. 

While TSCL fully understands the need to address the looming Medicare Trust 

Fund exhaustion, we are concerned that it may come at the expense of Medicare 

beneficiaries, many of whom are already financially strapped due to high premiums 

and an inadequate cost of living adjustment (COLA) to their Social Security benefits. Since 2000, Social Security benefits have increased 22%, and Part B premiums 

have increased 111%. 

The 2009 Budget includes several legislative proposals that the Administration 

believes could strengthen the longevity of the Medicare entitlement program, if 

signed into law. The proposals would: ‘‘encourage provider competition, efficiency, 

and high-quality care; rationalize payment policies; increase beneficiary responsibility for health care costs, improve Medicare’s fiscal sustainability, and improve 

program integrity.’’ 1

Encourage Provider Competition, Efficiency, and High-Quality Care 

TSCL agrees that reform is needed when it comes to provider reimbursement, especially in the case of physicians providing outstanding care to Medicare beneficiaries. In recent years, premiums have been announced prior to increases in physician reimbursements, meaning that actual program costs are higher than originally estimated. Although temporary fixes have been issued, TSCL is concerned that 

with the ‘‘trigger,’’ proposals could eventually lead to a substantial jump in Part B 

premiums to offset the rising cost of quality health care. 

Last year, the Medicare Trustees estimated that Medicare Part B and Part D premiums, deductibles, and coinsurance costs were taking one-third of the average Social Security benefit. Skyrocketing premiums, accompanied with a COLA that does 

not take adequately into account health care expenses are making it difficult for 

many seniors, especially those relying solely on their Social Security benefits, to get 

by. We should note, however, that TSCL and its members were pleasantly surprised 

with a Part B premium increase of $2.90 per month in 2008 for the majority of seniors. 

Increase Beneficiary Responsibility 

Increasing beneficiary responsibility on the surface may sound like a good idea 

to some. TSCL is concerned about the proposal to eliminate the annual indexing of 

income thresholds for Medicare Part B premiums, especially if Part D becomes subject to the same income thresholds. 

We fear that halting the annual index for income related premiums will lead to 

more and more middle income seniors paying higher rates. Although some advocates 

consider it to be fair for those with higher incomes, we fear that low and middleincome seniors will be the ones to suffer and eventually end up paying higher premiums as the threshold is lowered to make up for future funding shortcomings. Further, it seems unjust to have a group of beneficiaries paying more for the same care 

and coverage. As the snowball grows, more seniors could look outside of Medicare 

plans for quality health care insurance at a lower cost. 

TSCL also questions how private entities will be able to implement income indexing accurately. With the involvement of private companies, the Internal Revenue 

Service, and the Social Security Administration, the automatic deduction of premiums from monthly benefits could become more costly and onerous. It seems that 

the only way means testing could work for Medicare Part D is to consider eliminating private insurance companies from the equation, leaving Medicare to coordinate Part D as it does Part B. 


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2Duhigg, C., ‘‘Oxygen Suppliers Fight to Keep a Medicare Boom,’’ New York Times, Nov. 30, 

2007. 

Improve Program Integrity 

Greater program oversight is always a welcomed proposal. As reported in the new 

2009 Budget in Brief, the Health Care Fraud and Abuse Control (HCFAC) program 

is responsible for detecting and preventing health care fraud, waste, and abuse. This 

is accomplished through investigations, audits, educational activities and data analysis. From 1997 to 2007, HCFAC returned more than $10 billion to the Medicare 

Trust Fund. While this is impressive, we can only imagine how much more money 

could be saved and/or returned with a more streamlined process among the involved 

agencies. 

Equipping health care providers with knowledge about problems and ways to increase accuracy will undoubtedly save money. As reported for 2007, improper Medicare payments have dropped to a new low of 3.9 percent. TSCL supports strong enforcement and greater audits of claims, especially when considering the problems occurring with Part D plans. 

Also, it has been widely reported that the Medicare payment system should take 

a closer look at excessive payments for certain items. The New York Times has reported that Medicare pays much higher amounts for durable medical equipment 

than are charged to individuals buying the same product.2 According to the 2007 

NYT article, ‘‘. . . Even for a simple walking cane, which can be purchased online 

for about $11, the government pays $20, according to government data.’’ Another example of overspending occurs when the government rents oxygen equipment for up 

to 36 months at a cost of more than $8,000 per individual. The article reports that 

the same equipment could be purchased from a retailer for ‘‘as little as $3,500.’’ 

TSCL is not suggesting that oxygen equipment not be provided for those in need. 

What we do believe is that there are more fiscally responsible ways to provide the 

same care, which in the end could save Medicare billions of dollars annually. 

Conclusion 

Although we are pleased that the Administration has put together suggestions for 

strengthening the Medicare Trust Fund, TSCL and its members are concerned 

about what the cost to the public will be. While we do not have a perfect solution, 

there are some simple actions that could be taken in the meantime. 

For example, TSCL is encouraging all Members of Congress to support a recently 

introduced bill, H.R. 4338, introduced by Representative Timothy Walberg (MI–7). 

H.R. 4338, titled the Social Security and Medicare Lock-Box Act, would establish 

a procedure to safeguard the surpluses of the Social Security and Medicare hospital 

insurance trust funds. Thanks to Representative Stephanie Tubbs Jones (OH–11), 

an original cosponsor, this legislation had bipartisan support from the start. Additionally, similar legislation, S. 302, was introduced last year during the first session 

of the 110th Congress by Senator David Vitter (LA). 

As the Administration suggests, tougher enforcement and increased transparency 

will save Medicare billions of dollars annually. A significant portion of the expenditures comes from fraud and abuse that hurts the solvency of important entitlement programs like Medicare for current and even future retirees. 

Regardless of which solution Members of Congress believe is best, TSCL sincerely 

hopes that the Medicare and Social Security Trust Funds are protected and 

strengthened for future generations. 

f 

Statement of American Federation of State, 

County and Municipal Employees (AFSCME) 

The American Federation of State, County and Municipal Employees (AFSCME) 

represents 1.4 million employees who work for Federal, State, and local governments, health care institutions and nonprofit agencies, and an additional 230,000 

retiree members. AFSCME and its members are proud of labor’s historic role in the 

creation of Medicare and we remain strong defenders of the Medicare program from 

those who would undermine its foundations. 

When President Johnson signed Medicare into law on July 30, 1965, he spoke of 

the profound promise of Medicare to our Nation and its citizens: 

‘‘No longer will older Americans be denied the healing miracle of modern 

medicine. No longer will illness crush and destroy the savings that they 


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have so carefully put away over a lifetime so that they might enjoy dignity 

in their later years. No longer will young families see their own incomes, 

and their own hopes, eaten away simply because they are carrying out their 

deep moral obligations to their parents, and to their uncles, and their 

aunts. 

And no longer will this Nation refuse the hand of justice to those who 

have given a lifetime of service and wisdom and labor to the progress of 

this progressive country.’’ 

For today’s 44 million Medicare beneficiaries and our Nation, the need for Medicare to remain a sanctuary against financial ruin caused by the vicissitudes of illness and disability rings as true in 2008 as it did more than four decades ago. 

President Bush’s fiscal year 2009 budget would undermine Medicare by making 

substantial program cuts while protecting insurance company profits at the expense 

of moderate-income beneficiaries, hospitals and other providers. Instead of improving the fiscal solvency of Medicare by reducing the extra subsidies provided to insurance companies for offering a private alternative to Medicare, the Administration’s 

budget shields these privatized Medicare Advantage plans from direct cuts. 

Damaging Cuts to Medicare 

The President’s budget chops Medicare by more than $178 billion over the next 5 years, $556 over 10 years, and more than $10 trillion over the next 75 years. 

These extensive cuts are funded, in large part, by shifting roughly $6 billion of extra 

premium costs to moderate-income beneficiaries, nearly $21 billion in costs to hospitals that treat significant populations of indigent patients, and more than $117 

billion in reduced payments to hospitals, nursing homes, home care agencies and 

other providers. Cuts at this level will have significant short-term and long-term 

negative impact on traditional Medicare which, for most AFSCME retirees, is the 

foundation of their health care benefits. These cuts will negatively impact retirees’ 

health outcomes and quality of life by limiting access to care and by undermining 

the strength of traditional Medicare. 

Shifting Costs Onto Beneficiaries and Cutting Payments to Health Care 

Providers 

AFSCME is concerned with the President’s renewed legislative proposals to shift 

added Medicare premium costs onto limited and moderate-income beneficiaries. All 

beneficiaries are already paying higher Part B premiums, in part to subsidize overpayments to insurance companies offering Medicare Advantage plans. In addition, 

those with incomes above certain levels pay a surcharge on their Part B premiums. 

The President’s budget would abolish indexing the income threshold for the additional Part B premiums to the Consumer Price Index. The President’s budget would 

also put an un-indexed surcharge on Part D prescription drug premiums as well. 

Without indexing the income threshold to inflation, over time more moderate- and 

even lower-income beneficiaries will be affected, in the same way that, without indexing, the Alternative Minimum Tax has expanded to include more moderate-income taxpayers. When President Bush proposed the same un-indexed premium surcharge in his FY 2007 budget it was reported that in a few years the Part B premium surcharge would cover nearly one in ten beneficiaries. 

While the Medicare Payment Advisory Commission (MedPAC), the independent 

nonpartisan group charged with making recommendations to Congress on the Medicare program, has recommended some ways to adjust payments to providers, the 

President’s budget ignores the magnitude and scope of these recommendations in an 

arbitrary and unbalanced manner. For example, contrary to MedPAC recommendations, the President would cut Medicare payments targeted to hospitals that serve 

large numbers of low-income individuals by 30 percent over 2 years, forcing many 

public and safety net hospitals to absorb $20.7 billion over 5 years. This cut, along 

with other proposed cuts to providers, will limit beneficiaries’ access to care and 

jeopardize the health of significant numbers of people who are elderly, and may be 

frail, or have serious disabilities. 

Subsidies to Inefficient Privatized Medicare Advantage Plans, Which 

Threaten Medicare’s Financial Solvency, Remain Untouched 

While the President proposes cuts to providers who serve beneficiaries, his budget 

shields inefficient and costly Medicare Advantage plans from any direct cuts to their 

windfall subsidies. MedPAC has recommended that Congress curb the billions of 

dollars in excessive payments made to private insurance companies that offer a private alternative to supplant—not supplement—Medicare. 

When Congress opened up Medicare to private plans, it was based on the claim 

that the private health insurance industry would be more efficient, provide more coVerDate Nov 24 2008 10:58 Jan 25, 2011 Jkt 058275 PO 00000 Frm 00021 Fmt 6633 Sfmt 6621 I:\WAYS\OUT\58275.XXX APPS06 PsN: 58275

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ordinated care for seniors and the disabled, and do so with less cost to the taxpayers 

and beneficiaries than the traditional Medicare program. The promises of efficiencies and lower costs have been illusory; Medicare now pays private Medicare Advantage plans more than it would cost to cover the same beneficiaries through the 

traditional Medicare program. Current estimates are that for every dollar spent for 

benefits under traditional Medicare it costs $1.17 when a private fee-for-service plan 

provides the benefits. Not surprisingly, with that enhanced profit incentive, enrollment in Medicare Advantage private fee-for-service has grown at an alarmingly 

rapid rate over the past year. 

Growth in enrollment further exacerbates the strain on Medicare’s financial 

health by draining the Medicare Hospital Trust Fund and taxpayers’ resources. 

Over the next 10 years, these overpayments to insurance companies will cost an additional $150 billion. These overpayments shave two years off the financial solvency 

of the Hospital Trust Fund. The ballooning growth in overpayments to private plans 

will drive premiums even higher for beneficiaries, erode Medicare’s financial solvency and ultimately force major changes in the Medicare program, including substantial cuts in benefits. If left unchecked, these overpayments will ultimately lead 

our Nation backwards to a time when seniors were one illness away from poverty 

and were denied reasonable and necessary medical care because they could not afford to pay doctors or hospitals. 

AFSCME is concerned that these plans, as a substitute for traditional Medicare, 

also undermine the quality and integrity of the Medicare program. Medicare Advantage plans may offer additional benefits, such as gym memberships, or hearing aids 

and eyeglass coverage, but they modify their benefits to cut corners in more important areas, such as limiting hospital days or charging higher copays for rehabilitative care than Medicare. State officials who forced retirees into Medicare Advantage 

plans acknowledged that ‘‘we know that . . . retirees who use more medical care will 

be worse off under this plan.’’ We are concerned that Medicare Advantage plans 

deny claims more frequently to hold down costs and the appeals process is more difficult under these plans than under traditional Medicare. Retirees must go through 

the company rather than Medicare’s transparent appeals process and can be 

bounced between the Federal agency that administers Medicare and the insurance 

company when they seek redress. Medicare Advantage plans, unlike traditional 

Medicare, are not stable. These plans can and do pull out of markets, disrupting 

health care services and causing much anxiety among beneficiaries. There is a lack 

of access, quality and accountability for many of these private replacements for 

Medicare. The private fee-for-service plans are exempt from basic quality reporting 

and they limit access to care and choice because significant numbers of doctors and 

hospitals have refused to accept beneficiaries from these plans. 

Given these problems, Congress must act to rein in the runaway overpayments 

to these private plans. Congress must reject the President’s budget which does nothing to curb the escalating growth of these privatized Medicare plans, reduce the excessive subsidies to these plans or improve Medicare benefits for current and future 

beneficiaries. 

f 

Statement of Linda Schmidt 

The mission of the Michigan Department of Human Services (MDHS) is to assist 

children, families and vulnerable adults to be safe, stable and self-supporting. While 

MDHS appreciates the State-Federal partnership that enables us to perform this 

mission, the strength of this partnership has eroded over the past several years, 

leaving an increasing share of the burden on our State in the midst of a severe economic challenge. As needs have risen in the area of income security and family support, the amount of Federal investment in real dollars toward meeting these needs 

continues to fall. The President’s FY 2009 budget request falls $15 billion below the 

amount needed just to keep pace with inflation nationally. Given Michigan’s current 

economic outlook, a disproportionate amount of that imbalance will fall on the 

shoulders of Michigan’s vulnerable children and families. In addition, the programs 

we manage in partnership with the Federal Government have undergone increasingly complex reforms that limit the department’s ability to reallocate resources to 

meet growing demands. This testimony will highlight the areas that best represent 

my concerns with the proposed budget. 

Temporary Assistance to Needy Families (TANF) 

Michigan’s TANF block grant has not increased since it was established 11 years 

ago. The 1996 welfare reforms were predicated on the belief that welfare participaVerDate Nov 24 2008 10:58 Jan 25, 2011 Jkt 058275 PO 00000 Frm 00022 Fmt 6633 Sfmt 6621 I:\WAYS\OUT\58275.XXX APPS06 PsN: 58275

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tion would never rise above 1996 levels. Two interdependent assumptions of welfare 

reform are that workforce participation leads to self-sufficiency and that there are 

ample opportunities for families to work toward self-sufficiency if they are given appropriate temporary supports. In Michigan, we have found that traditional cash assistance caseloads have decreased, but that vulnerable families are finding it difficult to become entirely self-sufficient. Many continue to need some form of assistance, and workforce participation alone does not guarantee that a family will 

achieve self-sufficiency. Flexible funding to support programs that can address specific barriers to self-sufficiency is greatly needed. 

The President’s budget request includes a change in work participation requirements that is very welcome. This change eliminates the 90% work participation requirement for two-parent families that was established as part of the reauthorization of the TANF program in the Deficit Reduction Act of 2005. However, a number 

of very problematic rules related to TANF remain in effect. States need guidance 

on the application of TANF rules and work verification plans. MDHS suggests that 

Congress prohibits penalties to States that fail to meet work participation under the 

interim TANF rules if there was not an approved work verification plan in place 

over all or most of the period of review. Michigan was one of the first States in the 

country to receive approval of its Work Verification Plan, but that approval was not 

received until August 6, 2007—only 7 weeks before the end of the first fiscal year 

that the plan covered. MDHS has provided comments to HHS regarding the potential negative impact of Deficit Reduction Act implementation through the rulemaking process. While some issues were resolved in the TANF Final Rules issued 

last month, MDHS still has three outstanding concerns in this area: 

• English as a Second Language, high school completion, and General Equivalency Diploma courses do not count as core work activities. Clients without 

basic education and communication skills will find it extremely difficult to 

achieve and maintain self-sufficiency despite mandatory participation in work 

activities. • Substance abuse treatment, mental health treatment, vocational rehabilitation 

services and other ‘‘barrier removal activities’’ do not count as core activities beyond 4 consecutive weeks, or 6 weeks total in a year. MDHS suggests the definition of qualified work activities found in the PRIDE bill, which includes substance abuse counseling, rehabilitation treatment, work-related education or 

training, job search or job readiness, adult literacy programs, post-secondary 

education and barrier removal activities, as defined by the State, and allowed 

all of them to count as core work activities for up to 4 months. This flexibility 

would allow States to develop case plans that properly prepare parents for success in the workplace. • A work participation plan that includes reduced hours as a reasonable accommodation for a person with disabilities should count as full participation if the 

person is in compliance with that plan. 

Low-Income Home Energy Assistance (LIHEAP) 

Even with the help of Federal funding, the State of Michigan cannot ensure that 

vulnerable families can maintain heat and electricity in their homes. In FY 07, 

there were 10 weeks during which there were no State or Federal funds available 

for crisis assistance, regardless of the applicant’s financial eligibility. As energy 

costs and economic pressures steadily increase across the country, the demand for 

crisis assistance funding will continue to rise. The budget proposal, however, significantly reduces this vital resource. 

LIHEAP funding has also not been sufficient to fully fund the Home Heating 

Credit. In FY 07, Michigan had to prorate the Home Heating Credit paid to eligible 

households to 76%. In FY 08, the credit is prorated to 53%. Even though the State 

has been able to gain some funding through the Low Income Energy Efficiency fund 

established by the Michigan Public Service Commission, those funds have only decreased the overall amount of the shortage, not eliminated it. With the reductions 

in the Home Heating Credit and the total inability, at times, to provide crisis assistance, it is clear that Michigan cannot keep up with the dramatically increasing energy costs and demands for assistance. A significant increase in funding is needed 

to bridge this gap. 

Community Services Block Grant (CSBG) and Social Services Block Grant 

(SSBG) 

The President’s budget request for Health and Human Services once again proposes to eliminate the CSBG, relying on the Program Assessment Rating Tool 

(PART). This program’s purpose is to provide flexible funding to community-based 

organizations to promote innovative, community-generated actions to reduce the inVerDate Nov 24 2008 10:58 Jan 25, 2011 Jkt 058275 PO 00000 Frm 00023 Fmt 6633 Sfmt 6621 I:\WAYS\OUT\58275.XXX APPS06 PsN: 58275

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cidence and severity of poverty. In Michigan, this results in extending the StateFederal partnership to reduce poverty to local communities through grants to Community Action Agencies, providing services to over 220,300 vulnerable families in 

FY 06. The reliance on the PART to evaluate the effectiveness of this program provides an incomplete picture of its actual impact. The PART report for CSBG acknowledges that the program is unique, meets a specific need, and is effectively targeted. However, we disagree with the PART in the area of performance measures. 

Since community-based solutions are a core principle of this poverty reduction program, the system in place among Community Action Agency (CAA) partners to identify and measure results aligns with this core mission more appropriately than a 

federally imposed set of performance criteria. This accountability system, called Results Oriented Management and Accountability (ROMA), initiated by HHS, was chosen as a semi-finalist for the Innovations in American Government Award at Harvard University. MDHS appreciates the strong bipartisan support to fund CSBG 

after repeated requests to zero out this program, and we look forward to the resolution of this issue around performance indicators so that this funding uncertainty is 

relieved. 

Additionally, if the CSBG core funding is not there, then the weatherization program, having weatherized over 5,000 homes in the past year, would be in jeopardy 

as well as many other programs the CAAs operate. CAAs in Michigan leverage an 

additional $62.5 million in local and private funds and $12.9 million worth of volunteer support that benefit low-income families in their communities. 

Similarly, the issue of performance indicators erodes support for the Social Services Block Grant (SSBG). This program is intentionally flexible. In Michigan, SSBG 

funds support Adult Foster Care, Adult Protective Services, guardianship services 

for adults and other programming. The FY 2009 reduction of 30% and the FY 2010 

elimination of this program would add to our department’s existing staffing pressures in these areas and seriously limit services available to vulnerable adults. In 

Michigan, as elsewhere around the country, we expect the population in need of 

these services to grow in accordance with demographic shifts. This growth in demand and elimination of support for services will create severe hardships. 

Child Support (Title IV–D) 

MDHS continues to support a repeal of the cuts to child support mandated by the 

Deficit Reduction Act of 2005 which prohibit States from using incentive funds to 

match Federal funds, even though these funds had been evaluated as effective and 

responsible by the Office of Management and Budget Program Assessment Rating 

Tool. These cuts result in $50 million less Federal funding for child support programs in Michigan in FY 2008. Passage of H.R. 1386 and S.B. 803 would repeal 

these cuts. 

Child Care Development Block Grant and Head Start 

The Child Care Development Block Grant (CCDBG) remains level funded in the 

FY 2009 budget request. This results in an actual reduction in the amount and 

quality of child care MDHS can provide working families. Because of the ongoing 

trend of reduced support for child care, it would take an $874 million increase in 

funding to restore the program to 2002 levels. Continued flat funding of child care 

will cause 200,000 children to lose access to child care nationwide. 

Similarly, Head Start funding is not adequate to meet even current participation 

levels, which is acknowledged in the budget request itself. The increase in funding 

proposed in the budget request will not cover the costs of mandated quality improvements contained in the recent reauthorization of this program. Head Start providers 

should not be required to meet higher educational standards without more funding. 

Finally, MDHS supports the current Federal-local partnership and the Policy Council/shared governance structure for local Head Start providers that ensure parents 

and other stakeholders a voice in improving Head Start programs. 

Foster Care Funding Option 

Capping the amount of Federal support for foster care will force untenable choices 

on States. If Michigan can not rely on Federal support for children in care, other 

options will have to be considered including reducing payments to foster care parents, decreasing funds to private foster care providers or shifting funds from child 

protection to foster care, which might well result in more children in care or at risk. 

While theoretically advantageous, access to TANF contingency funds as proposed 

would not address the gaps in service capacity. Further, linking foster care and the 

needs of children in crisis to an additional process for drawing down Federal funds 

from another source contingent upon meeting definitions of ‘‘severe foster care crisis’’ is not a reasonable approach to ensuring that our most vulnerable children have 

timely access to basic services to ensure safety. 


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Title IV–B, Subparts 1 and 2 

The President’s budget request for HHS proposed level funding for child welfare 

services (Part 1) and Promoting Safe and Stable Families (Part 2), continuing a 

trend of level funding. As with other programs administered by MDHS, this results 

in an actual decrease in our capacity to meet the needs of vulnerable children. 

Children and Family Services Discretionary Programs 

MDHS is concerned that cuts to Child Abuse Prevention and Treatment Act funds 

would decrease our ability to meet the training and service needs that are essential 

to maintaining our child welfare system. The incentive program for States that meet 

requirements for timely interstate placement of foster children would benefit Michigan if it were reinserted in the FY 2009 budget. 

Title IV–E 

The President’s request proposes a $118 million decrease in funding for foster care 

based on HHS projections of decreasing foster care caseloads. MDHS finds this argument for reducing funding incomplete. Even if caseloads decline as predicted, increases in the costs of service provision are not fully accounted for, and would likely 

more than offset any savings due to caseload reductions. Service participation numbers and actual costs are both relevant to predicting funding needs. Without considering both factors, foster care remains in danger of funding levels that are severely 

out of alignment with the actual cost of service provision, leaving States to reduce 

services or try to bridge the gap by shifting funds from other programs that prevent 

foster care placement. Considerable reform in the area of foster care financing is 

necessary to ensure that States can meet the demand for the most basic supports 

for vulnerable children, and work toward creating stronger systems of care to shorten and prevent out-of-home placements while ensuring child safety. MDHS cautions 

that these needed reforms must not be seen as potential savings of Federal funds. 

Child welfare is severely underfunded and cannot be a source of budgetary savings 

even with significant Federal financing reforms. 

f 

Statement of Wim Kellett, Wando, SC 

I respectfully would like to comment on CMS and Congress’ continuing efforts to 

reduce reimbursement to the Home Medical equipment industry. Furthermore, 

while staying on the path of reducing reimbursement fees, Congress is not addressing CMS’s lack of accountability with fraudulent providers. It is unfortunate that 

there are people who fraudulently bill the Medicare system, there is bad and good 

in all sectors of industry and policymaking. CMS and Congress repeatedly comment 

on the growing expenses in Wheelchairs, Home Oxygen, Hospital Beds and other 

items we provide. The simple fact is the population of the ‘‘Baby Boomer’’ era is 

coming of Medicare coverage age. In addition, the correlation between the need for 

this type of service and the economic impact of Chronic Disease is very relevant. 

It is an unrealistic expectation to ‘‘REDUCE’’ Medicare expenditure when there are 

so many people becoming eligible. 

Medicare is the only payor source that does NOT require a ‘‘Prior Authorization’’ 

for Power Mobility products. This is a simple step that would allow CMS more time 

to review claims, thus reducing the chances of a fraudulent claim. One of the largest 

manufacturers has severed its relationship with The Scooter Store. Read the writing 

on the wall. Do you see any other manufacturers ending business ties with multimillion dollar clients? There are some indicators pointing to the companies abusing 

the system. Do something to protect the system and those of us who are trying our 

hardest to do it right. Cutting our reimbursement is not the solution. 

Our total company has 945 patients being serviced with Home Oxygen. We employ 13 service technicians (average income of $30,000/year) and 5 Respiratory 

Therapists (average income $63,000/year) to help maintain these patients in their 

homes. We employ 12 Customer Service Representatives (average income of $34,000/ 

year) that answer the phone and help process new orders and service tickets. These 

employees are critical in helping patients stay compliant according to written prescriptions. When patients stay compliant, there is a lower rate of time in which they 

have to go to the hospital. Simple facts; compare the number of people we employ 

and the costs associated with that of the hospital. The government has access to 

what the diagnosis of COPD costs the hospital per day. Compare that to the $6.04 

it cost with Home Oxygen with new technology portability. Where is the logic in 

this? 


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In addition to these employees we have five more in our billing department. They 

deal with Filing claims and working denials; which is an entirely different accountability problem that CMS has. Simply put, the comparison to Cost Effective Health 

Care is astounding. Even more frustrating is the Administration continuing efforts 

to reduce the most affordable Health Care model available. 

There are some questions regarding references regarding Oxygen Concentrators. 

First, illustrative Internet Pricing. Is CMS insinuating that a beneficiary purchase 

an Oxygen Concentrator, which produces a ‘‘LEGEND DRUG’’ over the Internet? 

The Oxygen Concentrator produces oxygen which is considered a drug and requires 

a prescription. The FDA and SC Board of Pharmacy regulate the distribution of oxygen and it would appear that CMS is suggesting the patients go on the Internet 

to purchase; there is significant flaw in this process. Second, the cost of the commodity is a small percentage of the dollars that go into keeping the patient happy 

and in their home. The labor involved in keeping the maintenance on the machines, 

assisting the patients with cleaning of filters and changing the disposable portions 

is very large. In a perfect world we would all agree that patients need to be responsible for their health care, including maintenance to some degree. This is not a perfect world and we are very involved. If our reimbursement rates are continually cut, 

then the government is impeding our ability to help the Medicare population. We 

need not have unreasonable expectations at the costs of the system. This patient 

population needs assistance and it is more cost effective to do this in their home. 

There are many of us that are trying to offer solutions. Congress and CMS make 

it very difficult for us to manage our businesses and fight off the frequent legislation 

issues that keep coming at us. 

Our industry is eager to meet and discuss the hurdles before us. Please act in 

accordance with the position you were elected to perform, and consult the people 

that will be impacted. The DME industry is not a large recipient of the overall 

Medicare expenditure, yet we are the most efficient at keeping people in the home. 

Æ 


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