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70–875 2011

MEDPAC’S ANNUAL 

MARCH REPORT TO CONGRESS 

HEARING 

BEFORE THE

SUBCOMMITTEE ON HEALTH 

OF THE

COMMITTEE ON WAYS AND MEANS 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED TWELFTH CONGRESS 

FIRST SESSION 

MARCH 15, 2011 

Serial No. 112–HL1 

Printed for the use of the Committee on Ways and Means 

( 


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COMMITTEE ON WAYS AND MEANS 

DAVE CAMP, Michigan, Chairman 

WALLY HERGER, California 

SAM JOHNSON, Texas 

KEVIN BRADY, Texas 

PAUL RYAN, Wisconsin 

DEVIN NUNES, California 

PATRICK J. TIBERI, Ohio 

GEOFF DAVIS, Kentucky 

DAVID G. REICHERT, Washington 

CHARLES W. BOUSTANY, JR., Louisiana 

DEAN HELLER, Nevada 

PETER J. ROSKAM, Illinois 

JIM GERLACH, Pennsylvania 

TOM PRICE, Georgia 

VERN BUCHANAN, Florida 

ADRIAN SMITH, Nebraska 

AARON SCHOCK, Illinois 

CHRISTOPHER LEE, New York 

LYNN JENKINS, Kansas 

ERIK PAULSEN, Minnesota 

RICK BERG, North Dakota 

DIANE BLACK, Tennessee 

SANDER M. LEVIN, Michigan 

CHARLES B. RANGEL, New York 

FORTNEY PETE STARK, California 

JIM MCDERMOTT, Washington 

JOHN LEWIS, Georgia 

RICHARD E. NEAL, Massachusetts 

XAVIER BECERRA, California 

LLOYD DOGGETT, Texas 

MIKE THOMPSON, California 

JOHN B. LARSON, Connecticut 

EARL BLUMENAUER, Oregon 

RON KIND, Wisconsin 

BILL PASCRELL, JR., New Jersey 

SHELLEY BERKLEY, Nevada 

JOSEPH CROWLEY, New York 

JON TRAUB, Staff Director 

JANICE MAYS, Minority Staff Director 

SUBCOMMITTEE ON HEALTH

WALLY HERGER, California, Chairman 

SAM JOHNSON, Texas 

PAUL RYAN, Wisconsin 

DEVIN NUNES, California 

DAVID G. REICHERT, Washington 

DEAN HELLER, Nevada 

PETER J. ROSKAM, Illinois 

JIM GERLACH, Pennsylvania 

TOM PRICE, Georgia 

FORTNEY PETE STARK, California 

MIKE THOMPSON, California 

RON KIND, Wisconsin 

EARL BLUMENAUER, Oregon 

BILL PASCRELL, JR., New Jersey 

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 March 8, 2011, announcing the hearing ............................................ 2 

WITNESS 

Glen M. Hackbarth, Chairman, Medicare Payment Advisory Commission ........ 5 

SUBMISSIONS FOR THE RECORD 

American College of Radiology, statement ............................................................ 64 

The American Health Care Association, statement .............................................. 67 


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MEDPAC’S ANNUAL 

MARCH REPORT TO CONGRESS 

TUESDAY, MARCH 15, 2011 

U.S. HOUSE OF REPRESENTATIVES, 

COMMITTEE ON WAYS AND MEANS, 

SUBCOMMITTEE ON HEALTH, 

Washington, DC. 

The Subcommittee met, pursuant to call, at 1:07 p.m., in Room 

1100, Longworth House Office Building, Hon. Wally Herger [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) 225–1721 

March 8, 2011 

HL–1 

Chairman Herger Announces a Hearing on 

MedPAC’s Annual March Report to Congress 

House Ways and Means Health Subcommittee Chairman Wally Herger (R–CA) 

today announced that the Subcommittee on Health will hold a hearing on the Medicare Payment Advisory Commission’s (MedPAC) annual March Report to the Congress which details the Commission’s recommendations for updating Medicare payment policies. The Subcommittee will hear from MedPAC’s Chairman, Glenn 

Hackbarth. The hearing will take place on Tuesday, March 15, 2011, in 1100 

Longworth House Office Building, beginning at 1:00 p.m. 

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

hearing will be from the invited witness 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: 

MedPAC advises Congress on Medicare payment policy. The Commission is required by law to submit its annual advice and recommendations on Medicare payment policy by March 15. In its March report to the Congress, MedPAC is required 

to review and make recommendations on payment policies for specific provider 

groups, including hospitals, skilled nursing facilities, physicians, Medicare Advantage plans, and other providers. 

In announcing the hearing, Chairman Herger stated, ‘‘MedPAC provides valuable technical advice and counsel to Congress on the Medicare program, 

ranging from recommendations on payment adequacy to ways in which we 

can improve the delivery and quality of care for seniors and people with 

disabilities. This hearing will offer the Subcommittee an opportunity for an 

indepth exploration of MedPAC’s recent recommendations and their impact on the Medicare program and its beneficiaries. As we confront the 

issues surrounding implementation of the health care overhaul law passed 

last year and the continued need to reform entitlement programs, the information we receive from MedPAC will be more important than ever.’’ 

FOCUS OF THE HEARING: 

The hearing will focus on MedPAC’s March 2011 Report to the Congress on Medicare payment policies. 

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, 

http://waysandmeans.house.gov, select ‘‘Hearings.’’ 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, submit all requested information. ATTACH your submission as a Word document, in compliance 

with the formatting requirements listed below, by the close of business on Tuesday, March 29, 2011. Finally, please note that due to the change in House mail 


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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 or (202) 225–3625. 

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 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. 

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. 

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

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

f 

/. 

Chairman HERGER. The Subcommittee will come to order. I 

want to welcome everyone to the first hearing in the Subcommittee 

on Health for the 112th Congress. Today we will be hearing from 

the Medicare Payment Advisory Commission, MedPAC, on the recommendations from their March 2011 report on Medicare payment 

policies. 

During this Congress, we must come together to address a fiscal 

crisis of monumental proportions. Every program, no matter how 

important, must be scrutinized to ensure that scarce taxpayer dollars are being used appropriately and efficiently. 

Therefore, I find it fitting that in our inaugural meeting we 

would hear from MedPAC. The insight and guidance we receive 

from MedPAC will be very important as we seek ways to reform 

the Medicare program and improve the accuracy of provider payments while also ensuring that Medicare beneficiaries have access 

to high-quality care. 

Congress relies on MedPAC’s Medicare provider payment recommendations because they are based on sound policy and strong 

data analysis. Traditionally Medicare spending has outpaced 

growth in the economy at large and is a major driver of our longterm debt. The Congressional Budget Office projects that Medicare 

spending will nearly double as a share of the U.S. economy over 

the next 25 years. 


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By 2050 the Big Three Federal entitlement programs—Medicare, 

Medicaid and Social Security—are expected to exceed total tax revenue, with Medicare being the largest of the three. We cannot 

bring about a fiscally sustainable future if these trends continue. 

MedPAC’s analysis is invaluable in helping us better understand 

when growth in Medicare spending is appropriate and when Medicare payments need to be adjusted. 

Last year Congress passed a massive health care overhaul law 

that permanently reduces Medicare payments to a number of providers. Less than 3 percent of the more than one-half trillion dollars in cuts from Medicare came from actual delivery reforms. 

We must do better than that, which is why we also rely on 

MedPAC’s June report to Congress to guide us toward proposals 

that offer real reform instead of just turning payment dials up or 

down. This will help ensure that Medicare savings yield better outcomes for Medicare’s beneficiaries. 

I think I speak for all of us up here, Republicans and Democrats 

alike, that we are still looking for the silver bullet that will permanently reform the physician payment system in a fiscally responsible manner, and look forward to working with MedPAC to find 

such a solution. 

I want to offer a warm welcome to our invited witness, MedPAC’s 

Chairman Glenn Hackbarth. Thank you for joining us today and I 

look forward to hearing your testimony. 

I would also like to extend a special word of thanks to MedPAC’s 

executive director, Mark Miller, and the entire MedPAC staff for 

their hard work on this report. 

Before I recognize Ranking Member Stark for the purpose of an 

opening statement, I ask unanimous consent that all Members’ 

written statements be included in the record. 

Without objection, so ordered. 

I now recognize Ranking Member Stark for his opening statement. 

Mr. STARK. Thank you, Mr. Chairman. I would like to join you 

in welcoming Glenn and MedPAC. It is the efforts of MedPAC and 

their staff that have helped us in the past. Many of the recommendations in the current law’s provisions are MedPAC’s work, 

and they have formed a number of the reforms that are in the law 

that modernize the delivery of health care that Federal rewards 

value over volume and encourages better coordination. 

They have helped us with ideas to lower their rate of preventable 

readmissions, the testing of bundled payments, medical homes, and 

hospital value-based purchasing. 

We have made difficult decisions in order to rein in rising health 

care costs, and it would not have been possible without the advice 

of MedPAC. 

The end result: A program with improved benefits that lower 

costs for beneficiaries, create taxpayer savings, and innovations 

that we hope will improve patient care and strengthen finances for 

the Medicare solvency for an additional number of years. This, we 

think, is better than the program that favors vouchers or shifting 

of costs to the very beneficiaries who Medicare was created to 

serve. 


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While my Republican colleagues and I have many areas where 

we disagree, there are several areas where we work together, including Medicare’s broken physician payment system. The House 

Democrats passed comprehensive reform for the physician payment 

system in the last Congress, and I hope getting a long-term solution is at the top of our to-do list. 

As this year progresses, I look forward to getting continued input 

and advice from Mr. Hackbarth and the MedPAC staff, and will 

continue to rely on your expertise and advice as we undertake our 

Medicare and oversight responsibilities. 

Thank you, Mr. Chairman. 

Chairman HERGER. Mr. Hackbarth, I would like you to go 

ahead and proceed with your testimony. We do have two votes 

going on now, so I would like to have you give your testimony, and 

then we will recess until following those two votes, and then we 

will come back. If you would proceed with your testimony, please. 

STATEMENT OF GLENN M. HACKBARTH, 

CHAIRMAN, MEDICARE PAYMENT ADVISORY COMMISSION 

Mr. HACKBARTH. Thank you, Mr. Chairman and Mr. Stark. I 

especially appreciate the warm welcome and the acknowledgment 

of the work of the MedPAC staff. We have a terrific staff and without them we couldn’t do our work. 

As you know, MedPAC is a nonpartisan congressional advisory 

body, so our goal, our mission, our sole mission is to help you with 

the difficult decisions that you must make each year. Each year we 

produce two reports, a March report which usually focuses primarily on payment updates, and then a June report that ranges 

more broadly across Medicare issues. 

We have 17 commissioners, as you know. Six of them have clinical training as either physicians or RNs. Six of our commissioners 

have high-level executive experience with health care delivery organizations; four high-level government experience; and then six academics who publish frequently in peer-reviewed journals. And some 

of us have more than one of these credentials. 

I mention the credentials to emphasize that we are people who 

have experience in different facets of the Medicare program, and 

our goal is to bring that experience to bear for the benefit of the 

program, the beneficiaries it serves, and the taxpayers who finance 

it. 

Because we have a lot of experience, it doesn’t necessarily mean 

that we are always right. We can be right or wrong, like everybody 

else, but you can be assured that our agenda as a Commission is 

the same as yours: High-quality care for Medicare beneficiaries at 

the lowest possible cost for taxpayers. 

Despite the diversity of the MedPAC commissioners, we typically 

have a high degree of consensus on our recommendations. This 

March report is no exception. There are 12 recommendations in our 

March report that represents a total of 187 ‘‘yes’’ votes, versus only 

two ‘‘no’’ votes, and three abstentions. 

The March report, as I say, here is the summary of the major 

recommendations in the March report. There are recommendations 

on payment updates for each of the payment systems that Medicare uses. For physicians, hospital inpatient and outpatient dialysis 


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services and hospice services, we are recommending a 1-percent increase in the Medicare rates. For ambulatory surgery centers, onehalf of 1-percent increase in the rates, and then zero update for 

skilled nursing facilities, home health agencies, inpatient rehab facilities, and long-term care hospitals. 

In the case of home health services, we are recommending a rebasing of the rates as we have in the previous year, as well as 

some changes in the case mix system and a per-episode copay for 

Medicare beneficiaries. 

And then, as we do each year in our March report, we also do 

a status report on the Part C Medicare Advantage Program and 

Part D, the prescription drug program. 

I want to pick up, Chairman Herger, on one of the points that 

you made in your introduction. This report is principally about how 

much the unit prices should change for Medicare services. But we 

can’t get to where we want to go in terms of an efficient Medicare 

program, providing high-quality care to Medicare beneficiaries at a 

reasonable cost for taxpayers, if we focus only on the unit prices. 

In addition to that, we must look at the relative values that we 

pay for different types of services. We must also look at the payment methods that we use and try new, innovative payment methods that create better incentives for high-value care. And then, finally, we must also look at the incentives for Medicare beneficiaries. 

So, Mr. Chairman, those are my summary of comments and I 

look forward to the opportunity to talk further about our report. 

Chairman HERGER. Thank you very much. 

[The statement of Mr. Hackbarth follows:] 


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Chairman HERGER. Again, as I mentioned earlier, to allow our 

Members to vote, we have two votes going on, we are going to recess and we will reconvene immediately after the second vote. With 

that, we stand in recess. 

[Recess.] 

Chairman HERGER. The Health Subcommittee of the Ways and 

Means Committee will reconvene. 

Mr. Hackbarth, I want to thank you for your testimony. In 

MedPAC’s report, you recommend that Congress should freeze 

Medicare rates for inpatient rehabilitation facilities, long-term care 

hospitals, and skilled nursing facilities. 

Can you explain what led the Commission to recommend freezing 

payment rates for these providers? 

Mr. HACKBARTH. Mr. Chairman, the analysis that we go 

through for each of the provider sectors takes into account a variety of different factors, one of which is their financial margin on 

Medicare business where that data is available, but we also look 

at access to capital, the quality of services to Medicare beneficiaries, whether facilities are opening or closing. 

So it is sort of a multifactorial analysis that we go through, so 

the specifics for each of those sectors varies a little bit. But in general, what they have in common is that the projected margins are 

pretty healthy for each of those, and we think that there is ample 

room for efficient providers of those services to operate within the 

existing rates, so no increase in the rates is necessary. 

Chairman HERGER. Thank you. Currently there is no copayment for home health care. In the March report, MedPAC recommends that most Medicare beneficiaries be required to pay a copayment for each episode of home health care they receive. The 

commissioners recommended that exceptions be made for low-income beneficiaries and those being discharged from the hospital. 

Could you explain why the Commission arrived at this recommendation and the impact it would have on overutilization and 

fraud? 

Mr. HACKBARTH. Yes. Well, this is a challenging issue for 

MedPAC. This is an issue where we actually did have a dissenting 

vote and an abstention, which, as I indicated earlier, is fairly unusual for us. 

We concluded, the majority of us concluded, the vast majority of 

us concluded that a $150 per episode copay was an appropriate and 

necessary step to help curb unnecessary utilization of home health 

services. As you know, home health is an area where utilization 

has increased rapidly and, in particular, in some parts of the country. And by its nature, it is a service where there aren’t clear, clinical guidelines as to appropriate use of the service. And under 

those circumstances, we think it is an appropriate thing to do to 

ask the beneficiaries to pay a modest copay. 

To put the $150 per episode copay in context, for a beneficiary 

with a typical number of visits, home health visits in an episode, 

it would work out to about $8 per visit, so a smaller amount than 

that same beneficiary would pay for a physician office visit or an 

outpatient therapy visit. So it is modest, but we think it is appropriate. 


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And I would emphasize the point that you picked up on, which 

is it is targeted to apply only to beneficiaries who are admitted to 

home health from the community. It doesn’t apply to Medicare 

beneficiaries following a hospital stay or a stay in a skilled nursing 

facility, and there is also an exemption from the copay for beneficiaries who use four or fewer home health visits. 

Chairman HERGER. Thank you for that. 

Some have expressed concerns that the addition of a home health 

copayment would drive seniors to other sites of care such as outpatient facilities. Are seniors currently required to pay a copayment for the care they receive in these outpatient settings? 

Mr. HACKBARTH. Yes, that is true. They are required to pay 

copays. Home health is one of the few services where Medicare 

beneficiaries are not required to pay a copay. 

And as I indicated in what we thought was an appropriate home 

health copay, we took into account how much beneficiaries paid for 

some of these alternative services. 

Chairman HERGER. So in your opinion, home health copayments would not shift a beneficiary to other sites of service? 

Mr. HACKBARTH. That is our expectation, yes. It would not 

shift them, yes. 

Chairman HERGER. I thank you again for your testimony. 

Now, the gentleman from California, Mr. Thompson, is recognized for 5 minutes. 

Mr. THOMPSON. Thank you, Mr. Chairman. Thank you, Mr. 

Hackbarth, for being here. 

In your March 10, 2010 report, you state that Medicare is the 

single largest payer in regard to Medicare, in regard to health care. 

And you also go on to say that for the next decade that that cost 

is going to slow vis-a`-vis the previous decade. I think it was are 

you looking at 6-percent growth between now and 2019? It was 

about almost 10 percent in the past decade. And I am assuming 

that part of that reason is because of the health care reform legislation that was passed, and the idea was to pass legislation that 

bends that cost that we have heard so much about that, and at the 

same time creating better care, better health, and lower costs. 

There was a very interesting article in the National Journal, I 

think it was last Friday, that is entitled, Adapt or Else. And they 

state that whether it wants to or not, the health care system is 

being forced to reinvent itself. The health care law is a clearinghouse of sorts for policies that have circulated among health care 

analysts for years but struggled to gain traction. 

Isn’t the truth of the matter that much of what was put into the 

health care reform bill either came from MedPAC advice or proposals that MedPAC itself put forward? 

Mr. HACKBARTH. Well, certainly there were many provisions 

that were linked to past recommendations of MedPAC. 

Mr. THOMPSON. So bundling around hospital administrations? 

Mr. HACKBARTH. Yes. 

Mr. THOMPSON. That was one of your recommendations that 

was in there. 

Mr. HACKBARTH. Yes, that is correct. 

Mr. THOMPSON. Reducing hospital readmissions, that was a 

MedPAC recommendation? 


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Mr. HACKBARTH. Yes. 

Mr. THOMPSON. Value-based purchasing aimed at rewarding 

quality? 

Mr. HACKBARTH. Yes. 

Mr. THOMPSON. Primary care investments and expanded primary care reimbursement? 

Mr. HACKBARTH. Yes. 

Mr. THOMPSON. Payment accuracy including reducing Medicare Advantage overpayments? 

Mr. HACKBARTH. Yes. 

Mr. THOMPSON. Adoption of comparative effectiveness research? 

Mr. HACKBARTH. Yes. 

Mr. THOMPSON. And expanded fraud fighting authorities? 

Mr. HACKBARTH. Yes. 

Mr. THOMPSON. Thank you. 

The other question I have is, as you know I think firsthand, I 

am very concerned about representation for rural areas. And as cochair of the bipartisan Rural Health Care Coalition, we have been 

very, very active in trying to bring attention to that issue. 

And rural health care delivery has a lot of unique challenges, 

shortages of health care providers, and probably spills over into 

other underserved areas as well, but geographic remoteness, lowpatient volume with disproportionately high Medicare populations, 

limited access to integrated health care systems, and a lack of electronic networks to efficiently manage health care. 

I understand that it is probably a challenge for you too, and I 

know you don’t do it personally, but it is a challenge to get that 

appropriateness, or proportionateness on the Commission. But in 

your report, there is not even a mention of the word ‘‘rural.’’ And 

I think it is a concern for those of us who live in rural areas and 

represent rural areas. 

Is there anything that you can tell us that we can look forward 

to? Are we going to address this issue? Are we going to get proportional representation on that board? 

Mr. HACKBARTH. Well, thank you, Mr. Thompson, for raising 

this. We have talked about this issue before. 

We share your concern about ensuring access to quality care for 

beneficiaries in rural areas and assuring appropriate payment for 

providers in rural areas. In fact, the very first report that I did, on 

becoming chairman of MedPAC, is ‘‘Medicare in Rural America,’’ a 

typically thick MedPAC report. And in every report since, in every 

March report since, there are in fact lots of analyses directed specifically at the issue of fair payment for rural providers. 

Let me cite a couple of examples. 

Mr. THOMPSON. I said ‘‘report,’’ I meant your testimony. I 

apologize for that. 

Mr. HACKBARTH. Okay. Well, in this March report, let me just 

highlight a couple of examples that are important. We have recommended changes in the payment systems for lots of different 

Medicare providers, but in this particular report we talk about fairness and payment for skilled nursing facilities and home health 

agencies, and we have made recommendations in changing the case 

mix system used to allocate those payments. 


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Among the benefits from those changes would be increased payments for rural providers of home health services and skilled nursing facility services. So throughout all of our reports, there are 

issues like that where we are trying to assure accuracy and fairness in payment, which we think is very important. 

On the specific issue of representation, we have four commissioners that have significant rural experience out of our 17. We 

have two physicians and then two people—— 

Chairman HERGER. The gentleman’s time has expired. Thank 

you. 

The gentleman from Texas, Mr. Johnson, is recognized for 5 minutes. 

Mr. JOHNSON. Thank you, Mr. Chairman. 

Thank you for being here today. I appreciate you saying you are 

out to get good value for what we spend in Medicare. I am committed to making sure that Medicare has provided high-quality 

care while at the same time being wise with taxpayer dollars. 

Your report mentions the variations between Medicare payments 

for the same services in different settings. Medicare generally pays 

more for a service in a hospital than in an ambulatory surgical center. 

Does this create an incentive for care to be provided in one setting over another, based on higher reimbursement? 

Mr. HACKBARTH. Yes, that is our concern, Mr. Johnson, and it 

is a growing concern. And we see some shift toward hospital-based 

services that may be driven, at least in part, by higher payment 

levels. 

Mr. JOHNSON. Are you looking to do something about it? 

Mr. HACKBARTH. We are, in fact. It is a tricky issue to deal 

with for a variety of reasons, but in particular, because the patients are often different. So it can be the exact same service—for 

example, some type of ambulatory surgery—but the patients that 

go to the hospital are sicker on average. They have more underlying conditions. They are at higher risk of a bad event. So they 

are done at the hospital outpatient department so that they are 

closer to backup in case something goes wrong. 

And so if you go to equal payment, you have to make sure that 

it is properly risk-adjusted for the different types of patients seen 

in the different settings. 

Mr. JOHNSON. Yes, I understand that, but you ought to be able 

to work that problem I think. 

Mr. HACKBARTH. And we are working on that, and I hope we 

will be making some recommendations. 

Mr. JOHNSON. Thank you. So you have got a plan for studying 

these payment variations? 

Mr. HACKBARTH. Yes, sir. 

Mr. JOHNSON. I appreciate that. Our health care delivery system needs to focus on the right procedures to the right patient at 

the right time and place. Does the current payment system make 

that hard to achieve? 

Mr. HACKBARTH. It does. It creates incentives often for more 

costly services than are absolutely necessary for patients and, as 

we just discussed a minute ago, sometimes not in the lowest cost, 

most efficient setting. 


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Mr. JOHNSON. Okay. We know you are interested in combating 

waste, fraud and abuse in the Medicare system, and we have heard 

about the problems across all areas of the country, including reports of alleged fraud in home health services occurring near my 

district in Dallas. Secretary Sebelius has said that her Agency is 

setting up new checks to screen providers before they are ever accepted into the system. 

Can you comment on what progress has been made in becoming 

more proactive rather than reactive in preventing fraud? 

Mr. HACKBARTH. Well, we are not specifically engaged in the 

operational side of enforcement, but we have recommended that 

the Secretary monitor home health use for unusual patterns, very 

high levels of use, and that the Congress give the Secretary the authority to do things like limit new providers, limit payment when 

abberant patterns of home health use are found. 

And so our contribution to this has been to mostly identify some 

of these very unusual patterns. So in some areas of the country, 

you will see home health use that is like seven times the national 

average, and we think that sort of analysis is a useful screening 

tool for the Secretary and the Justice Department to use. 

Mr. JOHNSON. Do you think she has taken your statistics and 

done anything with them? 

Mr. HACKBARTH. Our understanding is that they are intensifying their focus on Medicare fraud in general, but in particular 

in the home health area. 

Mr. JOHNSON. That is an interesting word you chose, ‘‘intensify.’’ 

Thank you, Mr. Chairman, I appreciate the time. 

Chairman HERGER. Thank you. The gentleman yields back. 

The gentleman from New Jersey, Mr. Pascrell, is recognized for 

5 minutes. 

Mr. PASCRELL. Thank you, Mr. Chairman. Mr. Chairman, I 

think that Glenn Hackbarth brings some unique qualities to our 

Committee in that the recommendations from MedPAC, many of 

them were incorporated into the affordable health care bill, which 

is now the law of the land. 

And so when people talk about they made cuts but they didn’t 

get into the entitlements where the real money is, we all know Social Security did not add to the debt; and now they miss the point 

about the health care legislation, because one-third of it dealt with 

Medicare and Medicaid, addressing the entitlement but specifically 

adopting many of your recommendations. That is a fact of life. 

We can point out chapter and verse where the recommendations 

the Commission made are in there. This is entitlement reform. 

And what was the purpose of your recommendations? Well, if you 

read your report, and not just read what somebody else said about 

it, but if you read your report, you are saying that this is—you 

didn’t use the word ‘‘reform,’’ this is changing how we look at Medicare and Medicaid. 

So one of the fundamental problems we face in health care deliverance—I mean, no use putting a system together if we don’t have 

the people to deliver it. So we spend quite a bit of time on work 

force. I know when we are putting the legislation together, quite 


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a bit of time, doctors and nurses, how to get more doctors and 

nurses. 

We know about the shortages. But you are going to cripple the 

system, regardless of what the system is and how we want to deliver it to the patient, if you don’t have the personnel that is properly trained, updated, et cetera. 

You offer two solutions, both of which were involved or implemented, put into the health care reform, which we hope will be implemented: the idea of a payment reform, like paying for quality 

outcomes and delivery system reforms, such as medical homes and 

the accountable care organizations. You were very, very specific. 

Do you think that these reforms, these two reforms, will help improve the delivery of health care for Medicare beneficiaries and, 

more importantly, do you think that these are essential changes to 

Medicare itself? 

Mr. HACKBARTH. Well, it is certainly our hope and expectation 

that those two reforms would both improve quality of care for 

Medicare beneficiaries and, we hope, also reduced the cost. In each 

case, medical homes and ACOs, there are a lot of important issues 

to be worked out. And each idea, I am sure, will evolve over time, 

but we think that they are promising steps. 

Mr. PASCRELL. Mr. Chairman, I want to bring to your attention 

something. Most of these reforms and changes were never scored, 

never scored’, which means we do not have a true picture of the 

amount of savings when we move from pay-per-service to proper 

care and help for the patient. 

We don’t know really what the results will be. That was never 

scored by CBO. And I would contend to you, if you look at your recommendations, and you look at very specifically the Health Care 

Reform Act, that you can find areas where it doesn’t take too much 

to conclude that there must be a savings from moving away from 

fee-for-service and into those specific things which you just mentioned. 

Would you agree with me? 

Mr. HACKBARTH. Well, certainly that is why we recommended 

them is that we think by moving away from straight fee-for-service 

payment, changing the incentives for providers, helping them focus 

on value, changing the organization of care delivery, can result in 

better care at lower cost. 

Mr. PASCRELL. So those editorials and those politicians and 

Congressmen on both sides of the aisle, I am going to ask you the 

question; let me make the statement, and it is like when did you 

stop beating your wife this time? 

Chairman HERGER. The gentleman’s time has expired. 

Mr. PASCRELL. Can I finish the question? 

Chairman HERGER. Very quickly, please. 

Mr. PASCRELL. Then I will try to answer it. The question is, 

the editorials and those Congressmen on both sides of the aisle who 

said, very specifically, that we need to get to entitlement in order 

for us to have true cuts in the budget—— 

Chairman HERGER. The gentleman’s time has expired. 

You can ask if we get a second round, or you can submit in writing. 

Chairman HERGER. Again, the gentleman’s time has expired. 


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I might also mention several of these issues that you brought up 

were scored, but they scored so small they weren’t listed. 

Mr. PASCRELL. Many of them were not, Mr. Chairman. I will 

go over them one by one with you if you wish. 

Chairman HERGER. The gentleman’s time has expired. 

Mr. PASCRELL. Thank you, Mr. Chairman. 

Chairman HERGER. With that, the gentleman from Georgia, Dr. 

Price, is recognized for 5 minutes. 

Mr. PRICE. Thank you, Mr. Chairman. 

In your assessment of the handout that we got, you have the volume growth increasing significantly. Can you cite for us the main 

drivers of that volume briefly? 

Mr. HACKBARTH. So, Dr. Price, you are referring to this one? 

Mr. PRICE. I think this one. 

Mr. HACKBARTH. Right. So the principal drivers are the top 

line, the red line, is spending per Medicare beneficiary. So a small 

piece of it is due to the annual updates and payment rates. That 

is the lowest line, sort of gold update line. 

The difference between the red line and the yellow line is due to 

changes in the volume and intensity of service. So more visits, 

more procedures, more imaging tests, things of nature. 

Mr. PRICE. What would you say would be the—are there 

incentivizations in the program itself that drive that volume? 

Mr. HACKBARTH. Well, the amount that we pay for a service 

can influence volume, and one of the issues that we—— 

Mr. PRICE. Anything else? 

Mr. HACKBARTH. Differences in, you know, burden of illness 

from year to year can affect volume. Changes in technology as new 

technology develops; concerns about malpractice can be a factor in 

volume growth. 

Mr. PRICE. Would you say that there are folks out there in the 

community, in the medical arena, that are working to decrease 

those costs as well on their own? 

Mr. HACKBARTH. Sure. Absolutely. 

Mr. PRICE. And when we as a government or as a society identify those, shouldn’t we use some of those as best practices? 

Mr. HACKBARTH. Absolutely. As somebody who ran a large 

physician practice, that was one of the things that we tried to do 

most often was learn from colleagues and practices. 

Mr. PRICE. Exactly. That is kind of the hallmark of health care, 

isn’t it, to find what works best and use it. 

Mr. HACKBARTH. It is best. 

Mr. PRICE. Then I would like you to address, please, the issue 

of physician-owned facilities, hospitals, ambulatory surgery centers. 

All of the reports that I have seen and read and all of my personal 

experience leads me to believe that they are one—oftentimes drive 

the highest quality of care at the greatest efficiency and the lowest 

possible cost per patient. Yet we as a society disincent and, in fact, 

punish them for doing what they are doing. 

How would you address that? 

Mr. HACKBARTH. Well, it is a tricky issue, Dr. Price. On the 

one hand, I ran a large multispecialty practice where we brought 

all kinds of services in-house; and so we were self-referring through 

our colleagues, and we thought that was good for patients. 


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On the other hand, there are instances where that sort of selfreferral can cause problems. 

Mr. PRICE. Then shouldn’t we be addressing, then, the self-referral, as opposed to saying you can’t have any of those things anymore? 

Mr. HACKBARTH. Yes. 

Mr. PRICE. Do you disagree with the fact that physician-owned 

entities out there oftentimes have the highest quality at the lowest 

cost per patient? 

Mr. HACKBARTH. No, I don’t disagree with that. I think that 

can often be the case. 

Mr. PRICE. Do you agree or disagree with the statement that we 

as a Congress and as a government have put in place policies that 

will actually diminish the ability of those kinds of services to be in 

existence? 

Mr. HACKBARTH. Yes, there are some policies. But here is the 

tricky part about it. The problem isn’t physician ownership per se 

or self-referral per se; it is the combination of self-referral with feefor-service payment that rewards more volume and intensity, and 

often missed pricing of services that creates real substantial profit 

opportunities. 

Mr. PRICE. So I hear you say, then, that if we had a level playing field and allowed physician-owned entities to compete with 

other entities, level playing field, same pricing mechanism and the 

like, the same reimbursement mechanism, that you would be supportive of that opportunity; is that right? 

Mr. HACKBARTH. The first step is to try to get the prices right 

so there aren’t undue profit opportunities. 

The second step is to try to move to new payment systems that 

don’t reward volume intensity, but reward better care. 

Mr. PRICE. Mr. Chairman, let me just say if I may, because my 

time is very, very brief, I think we are missing a huge opportunity 

by not rewarding those individuals that actually provide the highest quality of care at the lowest possible cost; and, in fact, we are 

punishing those individuals for doing what they are doing. And I 

look forward to my second round. 

Chairman HERGER. I thank the gentleman. The gentleman’s 

time has expired. 

The gentleman from Washington, Mr. Reichert, is recognized for 

5 minutes. 

Mr. REICHERT. Thank you, Mr. Chairman. Welcome, thanks for 

being here today. 

There is a movement among employers toward what people have 

called a value-based benefit design where preventive primary and 

chronic disease care is cheaper for employees and things like highend imaging and unnecessary emergency room visits, which we sort 

of touched on a little bit already, or high-cost drugs, those things 

that have been identified as not having I guess any, proven value, 

are more expensive. 

These coverage programs are combined with wellness programs 

and incentives for things like improved physical activity and nutrition. There are some great examples from Washington State, including Group Health, Costco, Boeing, which all use different apVerDate Nov 24 2008 12:23 Nov 28, 2011 Jkt 070875 PO 00000 Frm 00041 Fmt 6633 Sfmt 6602 I:\WAYS\WAYSPS\70875\70875.XXX 70875

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proaches to providing very structured, purposeful health care to 

their employees. 

Medicare, by comparison, seems to be behind the curve a little 

bit. Some have said maybe even in the dark ages. But Medicare 

Advantage offers promise, though, for coordinated care. Would you 

agree with that? 

Mr. HACKBARTH. Yes, I would. 

Mr. REICHERT. And MedPAC has encouraged Congress and 

CMS to add pay-for-quality components to the fee-for-service payment system in Medicare, but this is just one step. Could Medicare 

actually change its benefit structure to be more innovative and 

value-based? 

Mr. HACKBARTH. Yes. 

Mr. REICHERT. It even sort of goes to the doctor’s question of 

best practices. 

Mr. HACKBARTH. Yes. In fact, it is an issue that is currently 

on the MedPAC agenda, and we will have a chapter on the subject 

in our June report this coming June, and we are looking hopefully 

to moving toward some recommendations on redesign of the Medicare benefit package. 

Mr. REICHERT. Would it be possible for you to share some of 

those ideas that you are looking at today? 

Mr. HACKBARTH. Well, we are not to the point of concrete recommendations. We are drawn to the idea of value-based insurance 

design. In fact, one of the MedPAC commissioners, Mike Chernew, 

is one of the leading academic thinkers behind the value-based insurance design movement. 

Mr. REICHERT. So your discussion and your recommendations, 

how long has that discussion been ongoing? 

Mr. HACKBARTH. Well, on this particular issue, I think we had 

one session last year, and then we had a session in February, and 

then our upcoming meeting in a couple of weeks. 

Mr. REICHERT. So your awareness of this issue and discussion 

was started last year. You have had another meeting since, so we 

are sort of behind the curve here on this issue. So we have gone 

a year; what is the expectation on your recommendations being 

presented, published? 

Mr. HACKBARTH. Well, you know, I don’t want to get in front 

of my colleagues and presume a final conclusion. 

As I say, I think we will have a chapter in our June report. It 

could—it won’t include recommendations, bold-faced recommendations, but it could have some clear directional signals. And then if 

we have agreement in June, we would come back next year and potentially consider—— 

Mr. REICHERT. It could be a while before we see a value-based 

system, then, in Medicare? 

Mr. HACKBARTH. It will. And, of course, it would require legislation to change. 

Mr. REICHERT. All right. What could Congress do to help you 

speed the process up or probably, more likely, slow it down? 

Mr. HACKBARTH. Well, we are well aware of the interest in 

Congress in the issue, and there is a lot of interest among MedPAC 

commissioners. So it isn’t for a lack of interest or effort, but it is 

a complex issue to change the Medicare benefit package. 


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Mr. REICHERT. So are we looking at 2 years, 3 years, 4 years? 

Mr. HACKBARTH. Well, I would hope, if we are going to make 

recommendations, that it would be in our next cycle. We operate 

upon a September-to-June cycle so we would take them up in the 

fall. 

Mr. REICHERT. When is your next meeting? 

Mr. HACKBARTH. In 2 weeks. 

Mr. REICHERT. Is it a public meeting? 

Mr. HACKBARTH. All of our meetings are public. 

Mr. REICHERT. Could you provide me with the date and time 

of the meeting, please? 

Mr. HACKBARTH. Oh, absolutely. 

Mr. REICHERT. Thank you. I yield back, Mr. Chairman. 

Chairman HERGER. The gentleman yields back. The gentleman 

from California, the Ranking Member, Mr. Stark, is recognized for 

5 minutes. 

Mr. STARK. Thank you, Mr. Chairman. Glenn, thank you again 

for all the good work that MedPAC does. 

I know Mr. Herger has been concerned about copayment for certain beneficiaries that use home health services. It is my understanding that home health users are older, poorer, more frail, more 

likely to be female, than the overall Medicare population, and I am 

concerned about putting further cost-sharing on this population. I 

gather some MedPAC commissioners were as well, given that the 

Commission, as I understand it, was not unanimous on this proposal. 

What were the concerns of those who didn’t support the idea? 

Mr. HACKBARTH. Mr. Stark, they are much like what you just 

described; that the copay would fall disproportionately on a vulnerable portion of the Medicare population, which was an issue that 

all of us, including those of us who voted ‘‘yes’’ on the recommendation, took very seriously. And so what we tried to do was tailor our 

recommendation in ways that would minimize although not eliminate that impact. 

And it is also important to keep in mind, as you well know, that 

using copays is not new in Medicare; it is the norm in Medicare. 

And they inevitably fall on users of services who tend to be sicker 

and the like. 

So it is always a challenging balancing act. We think by having 

a modest copay, $150 targeted on admissions from the community, 

that we have tailored in a way that minimizes the adverse impact. 

Mr. STARK. Okay. And I know that you have a long history, 

MedPAC does, of recommending parity in payments between Medicare Advantage and the fee-for-service side. And your recent report 

summarizes your earlier recommendations about Medicare Advantage and the estimates that Medicare Advantage plans are paid, on 

average, 113 percent of the traditional fee-for-service. 

Didn’t private managed care plans originally come into Medicare 

saying they could do more for less; in other words, for 20 years 

they were paid 95 percent of our fee-for-service rate, I believe, or 

thereabouts, and over time we have actually moved from demanding they do better and trying to demand that they break even. 


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You have long recommended that there be a financial neutrality 

between Medicare Advantage and fee-for-service. I think that is 

correct. 

Mr. HACKBARTH. That is correct. 

Mr. STARK. And the Affordable Care Act takes steps to begin to 

bring financial neutrality between those two programs. Can you 

tell us what MedPAC is seeing in the 2011 landscape in terms of 

Medicare Advantage availability, enrollment, and premiums? 

Mr. HACKBARTH. Yeah. Well, enrollment is up. The number of 

plans is down somewhat, and the reduction is primarily due to the 

reduction in private fee-for-service plans. 

Mr. STARK. Okay. 

Mr. HACKBARTH. Because of the requirement enacted, not in 

PPACA, but several years ago in MIPPA, that fee-for-service plans 

could not operate if there were coordinated care, coordinated network plans available. So some of the private fee-for-service plans 

have left the program, and that is the single biggest factor in reduction in the number of available plans. 

Membership is, as I say, up in the most recent numbers. 

Mr. STARK. Again, thank you very much for your advice to this 

Committee. We appreciate it, appreciate the work you do. Thank 

you, Mr. Chairman. 

Chairman HERGER. I thank the gentleman who yields back. 

I now recognize for 5 minutes the gentleman from Pennsylvania, 

Mr. Gerlach, to inquire. 

Mr. GERLACH. Thank you, Mr. Chairman. I have a question 

with regard to your recommendations relative to radiologic and 

other imaging services. Can you briefly give me a summary of what 

your recommendations there are? 

Mr. HACKBARTH. Well, on the specific issue of the imaging in 

this report, I don’t think we made any specific recommendations in 

this report. In the past, in previous reports, we have made a number of recommendations related to how the price for imaging services is set. In some instances we think those prices have been too 

high, and we have recommended specific changes to reduce price. 

Mr. GERLACH. I understand that there is a professional component and a technical component to the reimbursement structure. 

Mr. HACKBARTH. That is correct. 

Mr. GERLACH. That there has already been an adjustment 

downward for the technical component. Is there also a recommendation that you want to implement to also reduce the professional component of that reimbursement for radiological services? 

Mr. HACKBARTH. We have looked at recommendations for reducing the professional component as well. 

Mr. GERLACH. What is that based on? 

Mr. HACKBARTH. For duplication of work would be an example. 

When two tests are done on the same patient at the same time, the 

amount of work is reduced because you don’t have to do some 

things twice. It is the same patient at the same time, and that may 

justify reduction in the professional component. 

Mr. GERLACH. Okay. So you are obviously concerned about utilization overall, and therefore by reducing the professional component aspect of that, you can reduce utilization? 


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Mr. HACKBARTH. Well, certainly there are indications that 

when the price is too high, you get more utilization. People go to 

areas that are more profitable, they invest in equipment if there 

is significant profit in that area. So it is very important to keep the 

prices right, as close to the cost of delivery as possible. 

Mr. GERLACH. Is there an understanding in your review process of how the services come about to begin with? For example, if 

a radiologist—I am thinking of one in one of my hospitals who does 

a service based upon a referral from another physician—if there is 

a reduction in the professional component of that radiologist’s service but the radiologist didn’t initiate the service, the radiologist just 

took a referral, how would a referral-based system, cutting the professional component for service based on a referral from somebody 

from the outside, how would that affect utilization? 

Mr. HACKBARTH. So what you are suggesting, I just want to 

make sure I understand the situation. So this is a radiologist who 

has received a referral for imaging service. And you are saying if 

their professional component is reduced? 

Mr. GERLACH. Yeah. As I understand, what you are talking 

about is reducing the professional component for that service. 

Mr. HACKBARTH. Again what we have talked about are making 

adjustments in very specific instances; for example, when you are 

doing multiple images on the same visit. 

Mr. GERLACH. Okay. 

Mr. HACKBARTH. Then we think there are some economies in 

doing it that way, and it is appropriate to reduce the professional 

component in instances like that. 

We have not just said across the board, oh, let’s reduce imaging 

services because we think we want to try to suppress utilization. 

We take a much more targeted approach than that. 

Mr. GERLACH. Is it only in cases of multiple services or imaging 

work being done with one patient at one time that you are suggesting that change? 

Mr. HACKBARTH. Specifically on the work component, I think 

it is multiple services. There have been, in the physician fee schedule also, changes in the practice expense for physician services that 

have changed the payment levels for different types of service. 

Mr. GERLACH. Okay. And in coming up with this recommendation, who did you talk to within the profession to get a sense of how 

patients come to undertake those imaging—have those imaging 

services undertaken, both referral and, in some instances, the physician is able to do imaging on his own or her own, based upon how 

they are set up as a practice. Who did you talk to in essence to 

come up with the conclusion that there ought to be a change in the 

professional component of those services of being reimbursed? 

Mr. HACKBARTH. Well, one of the things that I am most proud 

of in that MedPAC is that we do reach out to all of the relevant 

professional associations. As you well know, in this particular area 

there are also some coalitions of people in the imaging field, professional physicians and imaging equipment manufacturers. And we 

hear, believe me, often from those people and exchange ideas. All 

of our recommendations, when we make them we have open public 

discussion. Draft recommendation is discussed in a public meeting. 


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We solicit input from affected parties on those recommendations 

before we finally act. We have a very open process. 

Chairman HERGER. The gentleman’s time has expired. 

Mr. GERLACH. Thank you. I yield back. 

Chairman HERGER. The gentleman from California, Mr. Nunes 

is recognized for 5 minutes. 

Mr. NUNES. Thank you, Mr. Chairman. I would like to yield 5 

minutes to the gentleman from Georgia, Mr. Price. 

Mr. PRICE. I thank my friend from California for yielding, and 

I appreciate the continued response that you give me. 

I want to follow up on the comments that Mr. Gerlach was just 

making, or the line of questioning on the multiple tests. For example, if a patient is coming for a certain MRI procedure, one procedure, the costs of that procedure that are borne by the facility and 

by the physician involved in interpreting that are pretty much 

fixed, correct? 

Mr. HACKBARTH. On the interpretation side or the technical 

component related to the equipment? 

Mr. PRICE. Both. 

Mr. HACKBARTH. Well, the cost of operating the equipment is 

influenced by the volume of service provided. So you make a capital 

expenditure. The more you use that equipment, the lower your unit 

cost for the capital expense, you spread it over more units. 

Mr. PRICE. The machine doesn’t know whether it is one patient 

or two patients who are getting the two different procedures, right? 

The volume is the number of procedures itself; it is not how many 

patients there are. 

Mr. HACKBARTH. That is right. It doesn’t matter whether they 

are distinct patients or not. 

Mr. PRICE. All right. You have a patient coming in for an MRI 

of a cervical spine and a patient coming in for an MRI of a lumbar 

spine. Those two procedures are separate, distinct, and require the 

use of the machine itself, the technical side; and the interpretive 

side physician is using his or her best knowledge and information 

and expertise to interpret that. You wouldn’t say that that had a 

volume component, would you? 

Mr. HACKBARTH. In terms of interpreting—— 

Mr. PRICE. Yeah. 

Mr. HACKBARTH. No. 

Mr. PRICE. Okay. So the physician side ought to be fixed you 

just said, right? 

Mr. HACKBARTH. Professional. 

Mr. PRICE. We ought not decrease physician reimbursement 

based on whether or not it is one patient or two patients. 

Mr. HACKBARTH. Well, based on whether it is one versus two, 

no. But as new technology, imaging being one example, becomes 

more widely used, more frequently used, I do think it is reasonable 

for the cost per unit of service, as the experience level goes up, to 

go down. 

Mr. PRICE. That—— 

Mr. HACKBARTH. That happens in almost every market for 

every service in the economy. 

Mr. PRICE. I might be able, if it was two C-spine MRIs on the 

same patient, at the same time; but we are talking about two difVerDate Nov 24 2008 09:19 Nov 15, 2011 Jkt 070875 PO 00000 Frm 00046 Fmt 6633 Sfmt 6602 I:\WAYS\OUT\70875.XXX 70875

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ferent procedures on the same patient, requiring the same use of 

the machine, and the different brain power of the physician involved to interpret it. And so it is astounding to us—unless your 

goal is to simply decrease the cost, not worry about the quality and 

the access—if your goal is simply to decrease the cost, then that 

might make sense. But if you are interested in maintaining access 

to care and maintaining quality to care, then many of us believe 

that you are cutting right at the core of it. 

Mr. HACKBARTH. A couple points are key here, Dr. Price. First 

of all, the method for setting the relative values. As you know, 

MedPAC does not do that, CMS does not do that. An AMA-sponsored RUC does that. So it is people from the professional societies 

sit down together and determine the relative values for the work 

element. 

Mr. PRICE. If a specialty society says no, that is not the appropriate reimbursement for this procedure, do they have any ultimate 

authority in that? 

Mr. HACKBARTH. There is a very elaborate process. 

Mr. PRICE. Who makes the final decision? 

Mr. HACKBARTH. The ultimate decision on the fee schedule is 

in CMS. 

Mr. PRICE. There you go. 

Mr. HACKBARTH. But in the vast majority of cases, they adopt 

the recommendations from the AMA-sponsored RUC. 

Mr. PRICE. Can you name a single procedure? Because the cost 

that the government reimburses physicians, pays physicians for the 

care, allows for the access to care, right? 

Mr. HACKBARTH. That is true. 

Mr. PRICE. Okay. So can you name a single procedure for which 

physicians are being reimbursed in real dollars more today than 

when they were 15 years ago? 

Mr. HACKBARTH. Not off the top of my head. 

Mr. PRICE. Yeah. And I would love to have you get back, because I don’t think there is one. I say that in all sincerity and honesty. What we are doing is drastically limiting the access, availability, of patients—your mom, your folks, seniors across this country—to access to care because of how we are dealing with reimbursement issues. That is where we ought to be looking for—— 

Mr. HACKBARTH. What I would like do is, if we could put this 

slide up. Medicare payments to physicians have been going up 

quite rapidly in fact. 

Mr. PRICE. If I may, Mr. Chairman, the payment per—for a procedure for physicians, for visitation, the cost of a patient to come 

to an office for a visit is drastically reduced from where it was 15 

years ago. 

Mr. HACKBARTH. Yeah. 

Mr. PRICE. Right? 

Mr. HACKBARTH. I am not trying to be argumentative. 

Mr. PRICE. Nor am I. 

Mr. HACKBARTH. But there is an important point here, Mr. 

Chairman. The unit prices you and I would agree—the increase in 

unit prices, the price per office visit, the price per procedure, has 

gone up relatively slowly. That is that bottom line on this graph. 


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But the amount of income that physicians get from Medicare has 

gone up rapidly, the red line. 

Mr. PRICE. In real dollars, the inflation-adjusted dollars, that 

line goes below the access, as you well now. 

Mr. HACKBARTH. The red line represents a 51⁄2-percent increase, average increase per year per beneficiary, since the year 

2000. 

Chairman HERGER. The gentleman’s time has expired. 

Mr. PRICE. Thank you. 

Chairman HERGER. If time permits, we may try to go for a second round of questioning. 

Now the gentleman from Oregon, Mr. Blumenauer, is recognized 

for 5 minutes. 

Mr. BLUMENAUER. Thank you, Mr. Chairman. Welcome, Doctor, a Northwesterner here. 

Before I get to my questions, though, I want to just allow you to 

finish your thought that you had with my good friend from Georgia, because we watch a certain amount of different impulses. 

There are some who suggest that the solution to exploding Medicare costs is to basically voucher this and index it at a level that 

is dramatically below the cost of inflation, medical inflation, something that would be the curve going down, down. And if there are 

problems associated—and you folks try and split the difference. I 

mean, you are cognizant of the problems, you deal with practice 

patterns, you recommend year after year, after year, after year, to 

Congress and the Administration things that could help bend that 

cost curve. There is quite a bit of bipartisan pushback over the 

years. I mean, that is not political, that is just—because people get 

pinched and they don’t want to reduce that cost. 

My impression is that, as we constructed the Affordable Care 

Act, that we actually included most of the recommendations over 

the—they don’t maybe have the teeth that some would like, they 

don’t implement them instantly. There are too many, maybe pilot 

projects and test this, but they are there. 

I am curious if you want to just finish answering the question, 

because if the spending per beneficiary is going up compounded 

over 5 percent per year, it suggests that there are a whole lot of 

procedures and a whole lot of more expensive somethings that are 

going on there. And I just want to make sure you are able to complete your thought. 

Mr. HACKBARTH. All right. So I guess I would summarize our 

view on this with a few points. 

One is, overall, it is our sense that there is enough money in the 

physician fee schedule; Medicare pays enough for physician services overall to assure adequate access for Medicare beneficiaries. 

However, we are concerned about how the money is distributed. 

We think we pay too much for some types of services and too little for other types of services. Primary care would be an example 

where we are worried that the payments are too low. So we think 

some redistribution of the payments is appropriate. 

And then finally we think it ought to be a high-priority goal for 

Medicare to move to new payment systems that don’t just reward 

more volume and intensity, but reward higher value care for both 

Medicare beneficiaries and the program. 


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I would agree that just holding down the unit price increase, the 

way the yellow line has, is not the best way to get good care for 

Medicare beneficiaries. 

Mr. BLUMENAUER. And that, of course, is why we attempted 

to have a comprehensive approach that incorporated these elements in, and hopefully they can be implemented sooner rather 

than later, after they are tested, to be able to make a system that 

does reward health care value over volume. 

Mr. HACKBARTH. Right. 

Mr. BLUMENAUER. I find it a little bit ironic that some of my 

Republican friends talk about massive cuts in, for example, Medicare Advantage, when in fact it is a move to try and deal with the 

quality of the system. And they propose to replace it with something that would be far more draconian than any modest adjustment in Medicare Advantage. 

Mr. HACKBARTH. Mr. Blumenauer, if I may, could I just pick 

up on—— 

Mr. BLUMENAUER. Well, I only have 30 seconds left, and I 

gave 3 minutes to you. 

Mr. HACKBARTH. You were generous, I am sorry, go ahead. 

Mr. BLUMENAUER. But there is just one area that I wanted to 

leave for your review, because we are watching palliative care and 

hospice kind of merge, and there is an opportunity for us to be able 

to give higher quality care for our people. We used to talk about 

in the last 6 months of life, but we are finding because of palliative 

care, because of changes in treatment patterns, sometimes people 

in ‘‘hospice’’ live longer than people who are given intensive treatments, ICUs and chemo, expensive and really painful chemotherapies. 

I am wondering if there is a way going forward that we can work 

with you to think a little bit about the recalibration of what hospice 

care means, ways that better meet the needs of patients and families, actually might end up being less expensive but certainly better 

care. 

Chairman HERGER. The gentleman’s time has expired. 

Mr. BLUMENAUER. Thank you. 

Chairman HERGER. The gentlelady from Tennessee, Ms. Black, 

is recognized for 5 minutes. 

Mrs. BLACK. Thank you, Mr. Chairman. 

Mr. Hackbarth, I want to go to the issue of outpatient settings. 

And your report verifies something that I have heard within the 

district, in that there is a significant variation in the amount of 

Medicare payments for similar services that are provided in outpatient settings, with Medicare generally paying more for services 

that are furnished in a hospital outpatient department than in an 

ambulatory surgical center or in a physician’s office. And this variation of course results in an undesirable financial incentive, such 

as those ambulatory surgical centers being organized as more a 

hospital outpatient department, at least in part, to receive the 

higher payments. 

Does the Commission have a plan for studying this? And if so, 

do you have a sense for where those policy options will be that may 

result from this review? 


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Mr. HACKBARTH. Yes. It is an issue that we are actively looking at. We are concerned that the disparities in payment for the 

same service, based on the location where it is provided, can cause 

problems. And there is some evidence that, in fact, it is causing 

problems. As you indicate, people are converting to hospital status 

simply to get the benefit of the higher payment, and clearly that 

is a problem. 

As I indicated earlier in response to Mr. Johnson’s question, it 

is a little bit tricky in the sense that, although the service might 

be the same—for example, a given ambulatory surgical procedure— 

the patients receiving it could be different between the ASC and 

the hospital outpatient department. I know this from experience, 

having run a large group. We did surgery in both ASCs and hospital outpatient departments. And we would send, quite consciously, the more difficult patients to the hospital outpatient department; same surgery, but the riskier patients, because of 

comorbidities and the like. And we wanted them to be at the hospital in case something went wrong and we needed backup. 

Because they were sicker patients, we paid the hospital more for 

the same surgical procedure that we paid the ASC. It was an adjustment in effect for the higher risk of the patient. 

So what we need to do is move toward equal rates for the same 

service on a risk-adjusted basis. And that last part is the tricky 

part in this that we are looking at. 

Mrs. BLACK. Thank you. And that certainly makes sense. But 

at the current time where you look at apples to apples, it doesn’t 

appear to be that way. So I think that certainly is a wise thing to 

take a look at. 

Additional question. In your latest report the Commission notes 

that beneficiaries who receive the Part D low-income subsidy, they 

account for nearly 22 percent of all enrollees, and yet more than 

half—of them reach the doughnut hole. Further, these low-income 

subsidy enrollees account for about 2 million of the 2.4 million enrollees who reached that Part D catastrophic spending cap in 2008. 

Your report also notes that average per-capita spending for the 

low-income subsidy enrollees were double that of the non low-income subsidy enrollees. And I know that these low-income enrollees 

are probably for the most part sicker, and they require more medication, but this disparity really is very alarming. 

Do you have any recommendations on how we might be able to 

better control the cost for this population? 

Mr. HACKBARTH. We have not looked specifically at that. We 

have done some research that suggests that there may be differences in risk that aren’t fully captured by the existing risk-adjustment systems, and that may be a reason for the higher utilization. Because you are talking about a low-income population, the 

tool of using copays to try to limit access utilization is not one that 

is really available to serve people that don’t have much income and 

appropriately need to be protected from excessive copays. If we 

don’t do that, then there is the risk that they won’t get needed 

drugs, and we will have higher costs. 

Mrs. BLACK. I don’t discount that, but I think what I have seen 

in my experience as an emergency room nurse is that when people 

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able for them, they tend to overutilize those services just because 

they are available. And I am not casting any stones there. Because 

if we all go into a buffet, we eat a whole lot more food at the buffet 

than we would if we ordered an individual plate. 

And so trying to get at how do you do a better job while making 

sure that the services that are being required are actually services 

that are really needed and not just being utilized because they are 

there. 

Chairman HERGER. The gentlelady’s time has expired. The gentleman from Wisconsin, Mr. Kind, is recognized for 5 minutes. 

The Ranking Member is recognized. 

Mr. STARK. Mr. Chairman, I ask unanimous consent to put in 

this National Journal article from Mr. Thompson. 

Chairman HERGER. Without objection. 

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Chairman HERGER. The gentleman from Wisconsin for 5 minutes. 

Mr. KIND. Thank you. Thank you, Mr. Chairman, and thank 

you, Mr. Hackbarth and your staff, for the update that you are giving us today. And I think this is a very important hearing, just 

hearing the recommendations that you are making. We appreciate 

all the work that you put into this and the effort to provide us 

guidance and where we are going to go with the Medicare program. 

Now, I notice in your January 2011 report, you reported on various geographic variations in the health care system, utilization 

variation. And you found in that report that one area that was 

high, one are of utilization tended to be high in all areas of utilization. In fact, you specifically noted that the area with the greatest 

service use, Miami, is nearly twice the level of utilization than the 

least use area, which is my hometown of La Crosse, Wisconsin. 

And yet in the report then and today, you are not making any recommendations on how to deal with this geographic payment variation or utilization variation around the country. 

I am wondering why you are not being a little more explicit in 

the recommendations, and will you in the future provide greater 

guidance in this area? 

Mr. HACKBARTH. We think, Mr. Kind, that the best way to reward high-value health care delivery, whether it is in La Crosse or 

perhaps a provider in Miami, is through changing the payment system, moving away from fee-for-service payment to new payment 

methods. 

Mr. KIND. I agree. But are you going to come up with specific 

proposals on how do that? 

Mr. HACKBARTH. We have made many proposals, medical 

home, ACOs, bundling around hospital admissions, many of them 

picked up in PPACA. And so we think payment reform is the best 

way to move to value. 

Mr. KIND. Most of that is already in the Affordable Care Act. 

Mr. HACKBARTH. That is correct. 

Mr. KIND. Again, relying on your recommendations in the past. 

But what about systematic reform—— 

Mr. HACKBARTH. There is a lot of discussion in recent years 

about geographic variation. And one of the points that I think has 

been missed in that we can talk about regions of the country, and 

Florida is more expensive than Wisconsin, but there is variation 

within Wisconsin, there is variation within Florida. And so if you 

apply a geographic approach and say we want to reward Wisconsin 

and penalize Florida, there is going to be a lot of collateral damage. 

Mr. KIND. I agree, and that is the point. And that is the point 

that many of us have been trying to make for the last 2 or 3 years 

is this geographic variation is occurring within congressional districts, within communities themselves. So it is less Wisconsin 

versus Florida as it is from individual providers, no matter where 

you find them. 

And that is the point on payment reform. And you even recognize 

on page 4 of your March report—you are right—we recognize that 

managing updates and relative payment rates alone will not solve 

a fundamental problem with the current Medicare fee-for-service 

payment system; that providers are generally paid more when they 


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deliver more services, without regard to the quality or value of 

those additional services. 

I think that is going to be the key and the ultimate verdict on 

health care reform. If we can move to a different reimbursement 

or payment system, outcome and value, and that I think will solve 

a lot of the problems. 

As far as the cost curve that we were just talking about, but also 

the quality of care that we are striving for out there, and I was 

hoping MedPAC throughout the years would have been a little 

more affirmative in the recommendations in how we can get there 

other than through pilots and ACOs and medical homes and bundling, which is all necessary and good, but something more dramatic in proposal. 

Mr. HACKBARTH. Well, the challenge that we have—you know, 

everybody says that fee-for-service is bad because there are rewards of volume and intensity of service. And for sure, that is true. 

But from my perspective the worst legacy of fee-for-service is that 

we have a fragmented delivery system. 

Mr. KIND. Right. 

Mr. HACKBARTH. Where people don’t work together to improve 

care for patients. In too many instances they operate separately, 

they don’t communicate well, they don’t coordinate well. And the 

difficult thing about payment reform is that you can change payment methods, but there has to be somebody at the other end to 

receive it. 

Mr. KIND. Right. 

Mr. HACKBARTH. There has to be a reorganization. 

Mr. KIND. I agree. And you are probably aware that, again, 

under the Affordable Care Act, two things are going to happen, 

both through the Institute of Medicine. They are going to have an 

update for the first time in the Medicare reimbursement formula, 

using real data, realtime instead of the proxy data, which I think 

is long overdue. 

But second and most importantly, they have embarked on a 2- 

year study now to come up with an actionable plan to change feefor-service to a fee-for-value reimbursement system. That then can 

go to the Administration, and the IPAT Commission for implementation, which again I think is going to be key. That is already moving forward under health care reform, which again I think is going 

to be the key to sustaining the system that we have in a much 

more affordable basis but getting better outcomes, too. 

The thing with the accountable care organizations, medical 

homes bundling, that is fine for pilots, but it is basically saying you 

need to structure yourself in this fashion to be rewarded, instead 

of saying you will be rewarded for value and outcome of care; you 

figure it out as far as what is the best approach to achieve it. Because, obviously, smaller groups are going to have a little more difficulty than the larger providers to form in ACOs or some type of 

medical home model, wouldn’t you agree? 

Mr. HACKBARTH. Yeah. In fact one of the challenges with small 

providers, for example, physicians in solo practice, is it is difficult 

to assess their performance because of small—— 

Chairman HERGER. The gentleman’s time has expired. 

Mr. KIND. That is right. Thank you. 


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Chairman HERGER. We have—everyone has asked a question, 

maybe there are a couple of Members who would like to ask a second question, so we will begin to move to that. The gentleman from 

Georgia, Dr. Price, for 5 minutes. 

Mr. PRICE. Thank you, Mr. Chairman. I look forward—there are 

so many questions. I look forward to being able to provide some for 

you and respond in writing. 

The part A, primarily hospital services, part B, primarily physician services, is described. What percent of part B is physician reimbursement? 

Mr. HACKBARTH. Actually to M.D.s as opposed to other health 

professionals? 

Mr. PRICE. Yes. 

Mr. HACKBARTH. It is about 12 or 13 percent of total spending 

for physicians. Is that the number you are looking for? 

Mr. PRICE. Yes. 

Mr. HACKBARTH. Or what share of part B is physicians? 

Mr. PRICE. Well, both. But 12 or 13 percent is fine, because I 

think there is this sense by many that if you just whack away, and 

whack away, and whack away at the docs, that you will be able to 

control the cost. And in fact if we continue as a society to whack 

away at what the physicians are able to gain for their services, for 

their caring, compassionate, and knowledgeable services, we will 

truly harm the access to quality care in this country, because physicians are saying, ‘‘I can’t do that anymore, I can’t do that anymore.’’ 

And that is what I hear from my colleagues, former medical colleagues at home and across the country, who say—what I was trying to get to with the previous line of questioning, on not having 

any—any significant increase in reimbursement. And all insurance 

pegs itself to Medicare now, basically, in terms of reimbursement. 

So the Federal Government controls the payments to physicians for 

virtually every single procedure in this country. 

I want to talk about a couple other items in the short time that 

I have available. You mentioned about the RUC, having the availability to have significant input into the cost—payment for physician services; also agreed that it was CMS that had the final say. 

Mr. HACKBARTH. Right. 

Mr. PRICE. The RUC itself, as I understand it, has significant 

responsibility from the 90 percent of the costs—the payment for the 

services that are provided. That number may or may not be right. 

About half of Medicare visits are through primary care, yet the 

number of primary care physicians on the RUC is in the teens, and 

maybe even lower, maybe even single digits in terms of a percent. 

How do you reconcile that? 

Mr. HACKBARTH. Well, certainly that has been a sore point 

among primary care physicians, that they felt they have been 

underrepresented and that the process is skewed against them in 

various ways. 

Mr. PRICE. Isn’t that part of the problem, though, of setting up 

the kind of apparatus that we currently have, is that you rarely if 

ever can get to the right answer, because you rarely have the right 

people in the room. 


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Mr. HACKBARTH. Yeah. Medicare has very complicated payment systems, as you know. Better than most people, I am aware 

of not only the complexity but also some of the weaknesses. The 

problem, however, is that it is not like we can say, Oh, it is these 

Medicare-administered prices or prices set by the competitive market. As you just indicated, private insurers tend to say, Oh, Medicare’s way is better than what we were using, so we are going to 

adopt Medicare’s fee schedule. 

Mr. PRICE. So what we have is essentially price-fixing from the 

Federal Government. 

Mr. HACKBARTH. It is a difficult system, but there aren’t clear, 

better alternatives. One point on the—— 

Mr. PRICE. If there are clear, better alternatives, then I look forward to that discussion. 

Mr. HACKBARTH. Well, I would look forward to that as well. 

But let me just make one point how private insurers use the Medicare system. Typically what they use is the relative values, but 

they set their own conversion factor. 

Mr. PRICE. Let me talk about—— 

Mr. HACKBARTH. But the price is not the same. 

Mr. PRICE. That is true. It is 90 percent or 110 percent or 130. 

Let me talk about one of those relative values and that is the 

E&M codes, evaluation and management; the doc visit codes, if you 

will. My understanding—what evidence or what science went into 

the setting of those codes? Are you aware of the initiation of 

the—— 

Mr. HACKBARTH. Well, the original system back in the early 

nineties was based on an extensive research project done by Bill 

Showell at Harvard to set initial relative values. And then the 

RUC process was established for purposes of maintaining the system. 

Mr. PRICE. And ‘‘maintaining’’ is the right word. Because there 

hasn’t been, as I understand it, a critical evaluation of the E&M 

codes and what we are incenting in terms of office visits and—— 

Mr. HACKBARTH. Well, actually by law there is a 5-year review. Each 5 years they do a comprehensive review of the work values. That doesn’t mean every single code, but it is a far-reaching 

review of the work. 

Mr. PRICE. And it compares to what has been—I would suggest 

it compares to what has been the occurrence as opposed to looking 

at whether or not we are getting the desired—— 

Mr. HACKBARTH. In fact, a critical question in the whole system is do we want to base the prices for different services on estimates of the cost of producing them, or do we want to take into 

account the value of the service to patients? 

Mr. PRICE. Which brings me to a value question. All of the values comments seem to imply that every single patient can have an 

ideal outcome regardless of the diagnosis and regardless of the clinical status. How do you pay for value in a patient who has a terminal disease, is at the end of life, and needs caring, compassionate 

care for that? It will have a lousy outcome. 

Mr. HACKBARTH. Well, when I talk about pay for value, I am 

talking about, number one, looking at populations served and not 

individual cases, as I think you are pointing out. Individual cases, 


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sometimes there are unavoidable bad results. That is not a sign of 

poor care. So you look across broader populations, you risk-adjust 

for the underlying conditions, and you use measures that take into 

account things like patient satisfaction; it is not just outcomes. You 

know, a terminal patient could receive good care, and acknowledge 

it is high-quality, humane care, even though it is a bad outcome. 

Mr. PRICE. Thank you. 

Chairman HERGER. The gentleman’s time has expired. 

The gentleman from Washington, Mr. McDermott, is recognized 

for 5 minutes. 

Mr. MCDERMOTT. Thank you very much, Mr. Chairman. I was 

sitting down in my office watching this on the television, and I decided I better come up here and ask a question. 

Mr. HACKBARTH. Okay. 

Mr. MCDERMOTT. Because I think the least known Committee 

in the medical industrial complex in the United States is the RUC 

and the impact that they have. 

And I would like to submit for the record a graph from the Medical Group Management Association, Annual Physician Compensation Productive Survey. It is 1992 to 2008. 

[The information follows:] 


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Mr. MCDERMOTT. And you can see when the RUC started, and 

the top line is the specialist’s income and the bottom line is primary care. 

And so I started looking at the RUC and figuring out who is on 

the RUC and how do they do this, and they clearly submit their 

recommendations to CMS. And nine times out of ten, or more than 

that, maybe 95 times out of 100, the CMS accepts their recommendation; is that correct? 

Mr. HACKBARTH. That is correct, yes. 

Mr. MCDERMOTT. So it is not being set by CMS, but is being 

set by a private committee controlled by the American Medical Association; is that correct? 

Mr. HACKBARTH. That is correct. I would point out that what 

we have recommended—and this was 2 or 3 years ago now—is that 

CMS take a more assertive role and not just be a passive receiver 

of recommendations, but be more directive in what they need to 

look at, and change the dynamic that otherwise exists within the 

RUC. And they have taken some steps in that direction. That was 

the answer. 

Mr. MCDERMOTT. I would like to submit another article for the 

record, which is from the New England Journal of Medicine, dated 

22 March 2007, which says that in 2006 the RUC recommendations—well, MedPAC went up on 227 services and down on 26. 

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Mr. MCDERMOTT. So there has never been any bending of the 

curve on the basis of the RUC; is that correct? 

Mr. HACKBARTH. And that is precisely our concern. The dynamics of the RUC are that there are lots of incentives to identify 

a service for higher payment. There is very little incentive to collect 

data to document Oh, my service ought to go down. 

And so what we have said is that CMS needs to redress that imbalance in incentives within the RUC by directing them to look at 

particular services that are likely to be overvalued. 

Mr. MCDERMOTT. Do you think it might be better just to collect 

your own data and never mind the RUC? I mean, why should the 

medical association be setting their own fees? How are you ever 

going to get control of costs if you let the fox decide what the keys 

to the hen house are going to be used for? 

Mr. HACKBARTH. Well, what we have recommended is a hybrid 

approach where CMS does not turn over the keys to the fox, is 

much more assertive in the process, but then takes advantage of 

the expertise of the relevant specialties to provide input to that 

process. So it is a rebalancing of the system, we think mirroring 

professional expertise with data analysis done by CMS. 

Mr. MCDERMOTT. How about a rebalancing of the components 

inside the RUC? My looking at the list, depending how you look at 

people and what you can figure out is that mostly it is special— 

or it is a balance heavily weighted toward specialists, not toward 

primary care physicians. 

Mr. HACKBARTH. And that, too, is a concern of ours and certainly it is a concern of many of the primary care physicians in the 

relevant professional societies. 

Mr. MCDERMOTT. It seems to me that the biggest problem that 

those of us who are supporting of the President’s plan still have 

about what is going on, is that controlling costs is still not very 

well done. We have done well at access, in including more people 

through the exchanges and that sort of thing, but the question is 

ultimately going to be how come we are spending 16 percent of 

GDP, or 17 percent of GDP, and the Swiss are spending 11 percent, 

and the French are spending 12 and whatever? 

Where is that 5 percent coming from is what I have been looking 

at trying to figure out. And I keep coming back to the fact that 

Medicare allowed usual and customary fees in the original legislation, and we are continuing it with RUC is simply an extension of 

that as I see it. Am I misreading the facts? 

Mr. HACKBARTH. No. We believe how Medicare pays for services is an important contributor to the level of expenditure and the 

rate of growth. If we ever want to reduce the rate of growth, let 

alone reduce the level of expenditure, if we ever want to improve 

the value we get for our Medicare expenditures, we need to change 

the payment methods. 

Chairman HERGER. The gentleman’s time has expired. 

Mr. MCDERMOTT. Thank you, Mr. Chairman. 

Chairman HERGER. The gentleman from New Jersey, Mr. 

Pascrell, is recognized. 

Mr. PASCRELL. Thank you, Mr. Chairman. 

Mr. Chairman, I looked over the report from the Centers for 

Medicare and Medicaid Services, the CMS report of April 22nd of 


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2010, that also is an interesting document. And I just wanted to 

clarify something we started to get into before on the previous 

question. 

Clearly the CBO and the CMS scored all the legislative language. 

I misspoke, but I am trying to get to the point, I didn’t finish my 

point. It did score all of the words in the 970 pages or so of that 

health care reform bill in that bill, in the Act. They did not give 

as much credit, though, the point I am trying to make, to delivery 

system reforms that we believe, those of us who support the legislation, support the Act, will lead to better care at lower costs. 

Mr. HACKBARTH. Right. 

Mr. PASCRELL. We had the—Mr. Chairman, we had the CMS 

actuary here, if you remember, in this room last month. 

Mr. HACKBARTH. Right. 

Mr. PASCRELL. I asked him why these provisions weren’t 

worth—weren’t credited with more savings. If you look at the 

chart, they go—each one of the provisions, and you see a lot of 

zeros, of course, and you see a lot of low numbers and some other 

things, but things we were talking about before the pilot testing for 

pay for performance. 

The technical corrections to hospital value-based purchasing, 

support the patient-centered medical homes, which is only a small 

part of this. There is the whole list in the report which we were 

provided. It is very, very clear. 

The question, what we are saying, those of us who support the 

legislation in the Act, why we think these things will lead to better 

care and lower costs? Plus, why the hell did we put the bill together in the first place? We had the actuary here and I asked why 

those provisions weren’t credited with more savings than the charts 

would indicate. So you can score it and not give credit for the savings. I don’t think that is a score that—you know, we probably wait 

for the results because we didn’t get any results. They said, We 

don’t have enough information. 

Mr. HACKBARTH. Right. 

Mr. PASCRELL. Is that correct? 

Mr. HACKBARTH. That is my understanding of what they did. 

Mr. PASCRELL. Now, he answered this; he answered that he believed in their potential to save Medicare money, he stated for the 

record, but that he didn’t have enough data to estimate the amount 

of savings they would be given. How am I doing so far? 

Mr. HACKBARTH. I think you have accurately described the situation. The concepts can be sound. The concepts have to be turned 

into operational payment systems and then you have to get providers to convert to those new payment systems. There are certain 

connections there—— 

Mr. PASCRELL. Not unlike the changes we made to Medicare 

since its beginning in the sixties. We made dramatic changes to the 

Medicare program. Made dramatic changes when we prognosticate, 

when we went out from the point that we were at. So this is not 

unusual, this is not something that we say, Well, is it going to be 

in 2022? I mean the charts here go up to 2019. I think they are 

very optimistic, but I hope that all of us recognize these provisions. 


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These provisions, the breadth and the width of Medicare and 

Medicaid entitlement changes, we are changing business in the 

Health Care Act, aren’t we, Mr. Hackbarth? 

Mr. HACKBARTH. That is certainly the goal. That is why we 

recommended various provisions that we did that were included in 

the law. We think they have the potential to change. 

Mr. PASCRELL. Okay. So if these ideas in health care reform 

which would move us toward paying for the quality of care rather 

than the quantity of care, something my friend from Wisconsin 

keeps talking about, I would assume everybody understands, I 

know there will be pushbacks from the medical profession. 

Chairman HERGER. The gentleman’s time has expired. 

Mr. PASCRELL. And you have heard them. Cannot be identified 

as entitlement reform, then what the heck can be? Thank you, Mr. 

Chairman. 

Chairman HERGER. The gentleman’s time has expired. 

Mr. Hackbarth, the Commission intends to consider different approaches to updating physician payments in an attempt to provide 

options aimed at fixing the SGR problem. Can you preview the timing and the substance of the Commission’s work on this pressing 

issue? 

Mr. HACKBARTH. Yeah. Our hope is that we will have recommendations in the fall, draft recommendations in September, 

final recommendations for vote within the Commission in October. 

That is a hope. 

We have got to obviously do a lot of work between now and then 

and forge a consensus on what to do. The work we think is urgent. 

It is motivated by a growing concern among MedPAC commissioners that the SGR is a growing threat to access to services for 

Medicare beneficiaries. 

I want to be clear; we don’t see wide-scale evidence of that right 

now, but our concern is that the repeated difficult process of trying 

to avert large-scale cuts in physician payments, doing that over 

and over, sometimes multiple times in the same year, the cumulative effect of that exercise is undermining both physician and 

beneficiary confidence in the Medicare program. 

So for a long time I have been able to sit before the Subcommittee and say, yeah, SGR is a problem that we don’t see an 

imminent threat to access. We think we are getting closer to that 

tipping point. And so we are looking at options for potentially addressing that. 

Just if I may, Mr. Chairman, just one last point. I don’t want to 

create the false expectation that we may come up with a new payment system that is not going to have a budget score attached to 

it; that the big SGR budget problem is going to go away. I don’t 

think that there is a rational policy option that will make that 

number go away. 

I think the question for the Congress is not whether we are going 

to spend more than the SGR baseline says. I think everybody in 

this room, the CMS actuary, the Medicare trustees, everybody, 

knows we are going to spend more than the SGR says we will. The 

only question now is whether we are going spend more by making 

last-minute adjustments, plowing more money into the existing 


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payment system, or whether we are going to spend more strategically to achieve important goals for the Medicare program. 

We think that the latter course is the wise course, and so my 

hope is that we can develop a package that will have a cost, a 

budget cost to it, but will achieve some important goals for Medicare reform going forward. That is our goal. 

Now whether I can, you know, get the consensus within 

MedPAC, I won’t know until we are further into the process, but 

that is the mindset that I have. 

Chairman HERGER. All right. I thank you for your comments. 

And I am sure you know this is a bipartisan major concern that, 

as Members of the Committee each of us deal with as we talk with 

our physicians. It is one that we need to place; and it is important 

for to you know, as I am sure you do, that this is a high priority 

of us, of this Committee, and certainly of this Subcommittee. 

And, again, I want to thank our witness for your testimony 

today. 

As a reminder, any Member wishing to submit a question for the 

record will have 14 days to do so. Mr. Hackbarth, if any questions 

are submitted, I ask that you respond in a timely manner. With 

that, the Subcommittee is adjourned. 

[Whereupon, at 2:57 p.m., the Subcommittee was adjourned.] 

[Submissions for the Record follow:] 


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