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70–873 2011

THE PRESIDENT’S FISCAL YEAR 2012 BUDGET 

PROPOSAL WITH U.S. DEPARTMENT OF 

HEALTH AND HUMAN SERVICES 

SECRETARY KATHLEEN SEBELIUS 

HEARING 

BEFORE THE

COMMITTEE ON WAYS AND MEANS 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED TWELFTH CONGRESS 

FIRST SESSION 

FEBRUARY 16, 2011 

Serial No. 112–07 

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 

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

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

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

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

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

is further refined. 


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C O N T E N T S 

Page 

Advisory of February 9, 2011, announcing the hearing ....................................... 2 

WITNESS 

Kathleen Sebelius, Secretary, U.S. Department of Health and Human Services . 5 


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THE PRESIDENT’S FISCAL YEAR 2012 BUDGET 

PROPOSAL WITH U.S. DEPARTMENT OF 

HEALTH AND HUMAN SERVICES 

SECRETARY KATHLEEN SEBELIUS 

WEDNESDAY, FEBRUARY 16, 2011 

U.S. HOUSE OF REPRESENTATIVES, 

COMMITTEE ON WAYS AND MEANS, 

Washington, DC. 

The Committee met, pursuant to call, at 10:05 a.m., in Room 

1100, Longworth House Office Building, Hon. Dave Camp [Chairman of the Committee] presiding. 

[The advisory announcing the hearing follows:] 


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ADVISORY 

FROM THE COMMITTEE ON WAYS AND MEANS 

FOR IMMEDIATE RELEASE CONTACT: (202) 225–1721 

February 9, 2011 

Chairman Camp Announces a Hearing on the 

President’s Fiscal Year 2012 Budget Proposal with 

U.S. Department of Health and Human Services 

Secretary Kathleen Sebelius 

House Ways and Means Committee Chairman Dave Camp (R–MI) today announced that the Committee on Ways and Means will hold a hearing on President 

Obama’s budget proposals for fiscal year 2012. The hearing will take place on 

Wednesday, February 16, 2011, in 1100 Longworth House Office Building, 

beginning at 10:00 a.m. 

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

hearing will be from the invited witness only. The sole witness will be the Honorable Kathleen Sebelius, Secretary, U.S. Department of Health and Human Services 

(HHS). However, any individual or organization not scheduled for an oral appearance may submit a written statement for consideration by the Committee and for 

inclusion in the printed record of the hearing. 

BACKGROUND: 

On February 14, 2011, the President is expected to submit his fiscal year 2012 

budget proposal to Congress. The proposed budget will detail his tax, spending and 

policy proposals for the coming year, including his proposed budget for the Department of Health and Human Services and the programs it operates and oversees. 

Many of the Department’s programs such as Medicare, efforts to assist those who 

lack health insurance, and Temporary Assistance for Needy Families are within the 

Committee’s jurisdiction. 

In announcing this hearing, Chairman Camp said, ‘‘This hearing will give us 

an opportunity to examine the Democrats’ new health care law, its implementation, and the resulting cost increases and market disruptions already 

being felt across the country. Equally important, we will be able to address 

the looming expiration of the historic 1996 welfare reform law and what 

plans the Administration has to build on its successes in breaking the cycle 

of dependency and moving more Americans off of welfare and into private 

sector employment.’’ 

FOCUS OF THE HEARING: 

U.S. Department of Health and Human Services Secretary Sebelius will discuss 

the details of the President’s HHS budget proposals that are within the Committee’s 

jurisdiction. 

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 


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with the formatting requirements listed below, by the close of business on 

Wednesday, March 2, 2011. Finally, please note that due to the change in House 

mail policy, the U.S. Capitol Police will refuse sealed-package deliveries to all House 

Office Buildings. For questions, or if you encounter technical problems, please call 

(202) 225–1721 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 CAMP. The Committee will come to order. I want to 

thank everyone for being here this morning, especially our honored 

guest, the Secretary of the Department of Health and Human Services, Kathleen Sebelius. Madam Secretary, I trust you and the 

Members of this Committee have everything you will need to proceed smoothly with this hearing. But that in large part is due to 

the hard work of our staffs, and of one gentleman in particular, 

Reginald B. Green, or as he has been known to all of us who wander the halls of the first floor of Longworth Building, particularly 

those who enter this room, as Reggie. Yesterday Reggie marked his 

29th year with this Committee. And in those years, Reggie has 

helped many Members, including myself, as he has new Committee 

staff, with the ways of the Ways and Means Committee. And with 

a simple look or a discrete shake of the head or subtle gesture, 

Reggie has kept this Committee, its witnesses, and the audience on 

course. So Reggie, thank you, and we look forward to your continued service to this Committee, the House, and the Nation. 

Madam Secretary, thank you for joining us today. We are pleased 

to be the first committee to welcome you to the House of Representatives for a discussion of the 2012 budget. And as I looked through 

your testimony in preparation for today, I noticed that you referenced comments made by President Obama in last month’s State 


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of the Union Address. Speaking about the health care law, he said, 

and I quote, ‘‘Let me be the first to say that anything can be improved. If you have ideas about how to improve this law by making 

care better or more affordable, I am eager to work with you.’’ And 

the refrain from that night is becoming a familiar one for this Administration: If you don’t like it, we can fix it. 

Some in the Administration have said the 1099 reporting provision is too burdensome on small business, and it is. Some in the 

Administration have acknowledged that the health care law prevents millions from being able to keep the care they have and like, 

and it does. And still others, most notably you, have gone so far 

as to say that certain new entitlement programs, like the CLASS 

program, are financially unsustainable. And I would say you are 

right. And while I appreciate your willingness to fix some flaws 

here and there, the reality is the law is a mess, and so is the budget that is meant to finance its implementation. 

As I look through this budget, I see gimmick after gimmick, temporary patches paid for with permanent tax increases, a Medicare 

doc fix that is absent of any policy details, and hundreds of billions 

of dollars in exchange subsidies that can’t be accounted for. And as 

I noted to Secretary Geithner yesterday, I am also disappointed 

that this budget also lacks any mention of entitlement reform. Presumably from this budget, Medicare is doing just fine. And I think 

the facts suggest otherwise. 

So Madam Secretary, I hope that during your time with us today 

we can account for some of the missing items in this budget, and 

that you will be able to help us all fill in the blanks. And I look 

forward to your testimony. 

I will recognize the Ranking Member, Mr. Levin, for the purposes 

of an opening statement. 

Mr. LEVIN. Thank you very much, Mr. Chairman. For our opening statement, I now yield to the Ranking Member on the Health 

Subcommittee, Mr. Stark. 

Mr. STARK. Thank you, Mr. Levin. Thank you, Chairman Camp, 

for holding this hearing to review the President’s budget in regard 

to Health and Human Services, and I look forward to hearing from 

Secretary Sebelius and thank her for joining us today. 

The President outlined a tough budget on a number of fronts. I 

wouldn’t have made all the same choices, but I commend the President for trying to walk the fine line of reducing the deficit and continuing to meet people’s needs. In contrast, the House Republicans 

are debating a job-killing continuing resolution that independent 

analysts confirm would destroy 800,000 private and public sector 

jobs, cause the firing of thousands of police officers, firefighters, 

other public servants around the country, and kick more than 

200,000 children out of Head Start. Of particular concern for today’s audience is that we would endanger the ability of Medicare 

to pay doctors, hospitals, and other health care providers who treat 

Medicare patients, threatening seniors’ access to health care. 

I am pleased that, in his budget, the President proposed improvements to several vital programs within our jurisdiction, including 

foster care, child support enforcement, and child care. We look forward to working with the Administration to ensure these programs 

are protecting children, lifting families out of poverty. 


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In crafting his budget, the President acknowledges that the 

health reform law includes significant entitlement reforms to Medicare, improvements that will extend the lifetime of Medicare by 12 

years, according to CBO, and the Affordable Care Act, which reduces the deficit by $230 billion between now and 2019 and more 

than $1.2 trillion in the following decade. 

My friends on the other side of the aisle have been talking out 

of both sides of their mouths. In a hearing last week they are talking about how health care reform did too much to cut Medicare, 

and this week they are saying we need to cut even more out of 

Medicare and supporting a Republican roadmap that would turn 

Medicare into a voucher system. 

Taken together, Medicare changes in the health reform law add 

up to a significant, meaningful entitlement reform, but reform that 

protects taxpayers, the program, and the beneficiaries. The health 

reform law makes Medicare stronger, improves benefits for all 

beneficiaries. Senior citizens, people with disabilities who receive 

care through Medicare will have lower premiums for medical care 

and pay less when they go to the doctor or pick up prescriptions. 

Given the historic health reform effort and its deficit reduction 

achievements, it comes as no surprise that the President took a 

light touch to the health programs in his budget. As we might say, 

we already gave at the office. I look forward to hearing from the 

Secretary about why the President made the choices he did in this 

budget, and I am sure we will have a lively discussion after that, 

Mr. Chairman. Thank you very much. 

Chairman CAMP. Thank you. Again, Secretary Sebelius, welcome to the Ways and Means Committee. Your written statement 

will be made part of the record. And you have 5 minutes to summarize your statement. And you may begin. Thank you. 

STATEMENT OF KATHLEEN SEBELIUS, SECRETARY, 

U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES 

Secretary SEBELIUS. Well, thank you, Chairman Camp, and 

Ranking Member Levin, and Members of the Committee. It is my 

pleasure to be here today to discuss the President’s fiscal year 2012 

budget for the Department of Health and Human Services. 

I want to start with a personal aside. I am a constituent of two 

Members of this Committee. Our family has a house in Chairman 

Camp’s district, and Congresswoman Jenkins is my Congresswoman from the great State of Kansas. So I want to recognize 

them. I also want to add my congratulations to one of your Members, Congressman Lewis, who yesterday was given the Presidential Medal of Freedom. And congratulations for that enormous 

honor. 

In the President’s State of the Union Address, he did outline his 

vision for how the United States can win the future by out-educating, out-building, and out-innovating the world so we can give 

every family and business the chance to thrive. Our 2012 budget 

is a blueprint for putting that vision into action, and making the 

investments that will grow our economy and create jobs. 

The budget also recognizes that we can’t build lasting prosperity 

on a mountain of debt. Years of deficits have put us in a position 

where we need to make some tough choices. We can’t invest in the 


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future unless we also live within our means. So developing our 

budget, we looked at every program, we cut waste, we redesigned 

programs to put a focus on results, and in some cases cut programs 

that we wouldn’t have cut in better fiscal times. 

Now, I look forward to answering your questions, but I want to 

share some of the highlights. Over the last 101⁄2 months, we have 

worked around the clock with our partners in Congress and States 

to deliver on the promise of the Affordable Care Act to the American people. Now, thanks to the law, children can no longer be denied coverage because of their preexisting health conditions. Families have the protections of the new Patients’ Bill of Rights. Businesses are getting some immediate relief from health costs, and 

seniors have lower cost access to prescription drugs and preventive 

care. 

Later today, our Department will announce the award of seven new grants, creating a $241 million partisanship with States that 

will design and implement the information technology infrastructure needed to operate the new health insurance marketplaces, the 

State-based exchanges, allowing individuals and small businessowners to pool their purchasing power and negotiate lower rates. 

The budget builds on efforts like this one by supporting innovative 

new models of care that improve patient safety and quality, while 

reducing the burden of rising health costs on families, businesses, 

cities, and States. 

As Secretary Geithner said yesterday, the Affordable Care Act 

makes a significant step toward slowing down rising health care 

costs, and includes major delivery systems reform. For the first 

time ever, we are tackling some of the significant long-term problems. We make new investments in our health care work force, in 

community health centers, to make quality, affordable care available to millions more Americans, and create hundreds of thousands 

of new jobs around the country. 

At the same time, the budget includes additional proposals that 

will strengthen program integrity in Medicare, promote lower pharmaceutical costs, improve Medicare program operations, and reform the quality improvement organizations which help providers 

improve care. 

The budget also includes savings proposals to strengthen Medicaid and funding for the Medical Assistance program and Medicare part D premium assistance for low income beneficiaries. 

To make sure that America continues to lead the world in innovation, our budget increases the funding for the National Institutes 

of Health. New frontiers of research like cell-based therapies and 

genomics have the promise to unlock revolutionary treatments and 

cures for diseases, ranging from Alzheimer’s to cancer to autism. 

The budget allows the world’s leading scientists to pursue their discoveries, while keeping America at the forefront of biomedical research. 

Now, nothing is more important to our future than healthy development of our children, and our budget includes a significant increase in funding for child care and Head Start, following the 

science that shows that success in school is significantly enhanced 

by early learning opportunities, which makes these investments 

some of the wisest we can make. But our budget does more than 


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provide resources. It aims to raise the bar on quality child care programs, supporting key reforms to transform the Nation’s child care 

system into one that fosters both healthy development and gets 

children ready for school. We have a new Early Learning Challenge 

Fund, a Department of Education partnership that promotes State 

innovation in early education. 

The budget also supports a child support and fatherhood initiative that promotes strong family relationships by encouraging fathers to take responsibility for their children, changing policies so 

that more of that child support reaches the children, and maintains 

a commitment to vigorous enforcement, promoting healthy relationships between fathers and their children. There are funds for new 

performance-driven incentives for States to improve outcomes for 

children in foster care, such as reducing long term foster care stays 

and rates of child maltreatment reoccurrence. These children deserve to be part of our better future. 

Our budget also recognizes that at a time when so many Americans are making every dollar count, we need to do the same, and 

that is why we provide new support for President Obama’s unprecedented push to stamp out waste, fraud, and abuse in our health 

care system, an effort that more than pays for itself, returning a 

record of $4 billion to taxpayers in 2010 alone. 

We have a robust package of administrative improvements that conservatively deliver over $32 billion over the next 10 years in 

Medicare and Medicaid savings. They enhance prepayment scrutiny, expand auditing, increase penalties for improper actions, 

strengthen CMS ability to implement corrective actions, and address State schemes that increase Federal spending. 

We have made eliminating waste, fraud, and abuse a priority 

across our entire Department, but we know that is not enough. So 

we have programs in here that we have reformed and discontinued. 

Just an example is the CDC funding to help States reduce chronic 

diseases. Previously, those funds were split into disease categories, 

a grant for each disease area. It didn’t make sense, since a lot of 

the conditions have the same risk factors, like smoking and obesity. 

We want to give States one comprehensive grant that will allow 

them more flexibility to address chronic disease more effectively. 

So the 2012 budget we are releasing today, Mr. Chairman, 

makes tough choices smart, targeted investments so we can have 

a stronger, healthy, and more competitive America tomorrow. That 

is what it will take to win the future, and that is what we will determine to do. 

With that, Mr. Chairman, I would be pleased to answer your 

questions. 

[The prepared statement of Secretary Sebelius follows:] 


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Chairman CAMP. All right. Thank you. Thank you very much. 

Madam Secretary, this is the first budget, this 20 pounds of documents is the first budget that we have received since the health 

care law was passed. And I was just wondering what is the cost 

of the exchange subsidies? I can’t find it anywhere in the budget. 

I wonder if you could tell us what that cost is. 

Secretary SEBELIUS. Well, Mr. Chairman, the exchange subsidies really haven’t started yet because the exchanges don’t start 

until 2012. And it is a mandatory part of the funding in the ACA 

budget. We have had some planning grants that have gone to 

States in terms of—I think we have 48 States that have received 

about a million dollars to begin the planning for exchange grants. 

We are announcing $240 million today for early innovation in 

terms of IT pieces of it. But there are not subsidies that start until 

the exchanges are up and running. 

Chairman CAMP. It is a 10-year budget. And certainly you expect the exchanges will be running within that time period. And 

what is the estimate of the cost of the exchange subsidies over that 

time? 

Secretary SEBELIUS. Mr. Chairman, I really cannot give you an 

accurate cost until States figure out what they want to do. As you 

know, the law also includes the possibility that States, as many of 

you have suggested, will be working across State lines to put together exchanges. We really don’t even know at this point how 

many States will have an exchange, if there will be regional exchanges, what they will look like. So we do not have a cost estimate at this point. 

Chairman CAMP. So there is no estimate of what might be projected based on an analysis of what States might do? 

Secretary SEBELIUS. At this point I think it is preliminary because States are just beginning their planning process, and we do 

not have their plans. 

Chairman CAMP. All right. So given that there is no really accounting or number in the budget to account for these exchange 

subsidies, then would the deficit be understated if these exchange 

subsidies certainly will cost something? 

Secretary SEBELIUS. Well, I think, Mr. Chairman, the plan is 

that there is startup money in the Affordable Care Act, anticipating that the planning apparatus and setting up the infrastructure will be part of the funding of the Affordable Care Act. From 

that point on, the premiums provided by beneficiaries and participants in the exchanges will pay the ongoing costs. 

Chairman CAMP. By my count, the President is proposing about 

$55 billion in new Medicare spending and about $12 billion in 

Medicare spending reductions, so about a $40 billion increase on 

net. Given that Medicare is one of the largest contributors to our 

long-term deficit, do you think that it is a good idea that the President’s proposal is actually increasing overall Medicare spending? 

Secretary SEBELIUS. Well, Mr. Chairman, as you probably 

know, the first of the baby boomers are eligible for Medicare this 

year. The beneficiaries are expected to rise every year for the next 

number of years. And also the Affordable Care Act for the first 

time includes, I would say, a different approach to Medicare. It 

doesn’t assume that Medicare costs have to go up year in and year 


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out, but has over a 10-year window a decrease in the cost increase 

of Medicare, which is unheard of in the history of the program. So 

that we are looking at not harming any of the guaranteed benefits, 

but at the same time having a much more efficient and effective 

and quality-driven Medicare Program for the millions of additional 

beneficiaries who will come of age over the next several years. 

Chairman CAMP. There is a proposal to freeze Medicare physi- cian payments for 2 years, and that is at about a $54 billion cost. 

Then the budget proposes over the 7 years after that, from 2014 

to 2021, spending an additional $315 billion to provide SGR, or 

physician payment formula relief from 2014 onward. And obviously, many of us are interested in a long-term solution to the physician payment issue, and to do that in a fiscally responsible way. 

But my question is there is no mention of how this is paid for in 

the budget. And I wondered if you could mention how is this longterm fix going to be paid for? I don’t see any details or solutions 

in the budget. And what ideas might you have in that area? 

Secretary SEBELIUS. Well, Mr. Chairman, as you said, the 

budget includes more than 2 years of suggested pay-fors, about 

$62.5 billion of what would cover—I think the estimated costs of 

a 2-year fix is about $54 billion. So the President has put on the 

table suggestions for getting us started toward a long-term solution. He looks forward to working with Congress on the solution 

into the future. 

As you know, the SGR issue dates back to 2002. It has never 

been addressed in a permanent fix. We think that is very important to do, and we look forward to working with you and your Committee to come up with solutions as we move forward. But there 

is more than 2 years of pay-fors included in the President’s budget. Chairman CAMP. Yes, for that initial $54 billion. But I am sure 

you can understand our concern. $315 billion is a lot of spending 

to have absolutely no detail on how it is going to be reached. It is 

a big promise, but I don’t see how, from this budget document, how 

we will address that. So I look forward to trying to find those answers in the future. 

Secretary SEBELIUS. Well, again, I think the payment covers 

2011, 2012, and then into 2013. And we would hope that we could 

work very diligently to fulfill the promise to America’s doctors that 

they will actually be paid for the Medicare services they deliver. 

And I think that is a promise that has been not able to be fulfilled 

long term for a long time. And we need to fix that strategy going 

forward. 

Chairman CAMP. Do you anticipate other reductions in Medicare 

to meet that $315 billion obligation under the SGR? Other cuts to 

Medicare? 

Secretary SEBELIUS. Again, Mr. Chairman, I think it is important that we be accurate about what is happening with the Medicare Program. What the Affordable Care Act did, for the first time 

in a very long time, is make suggestions about ways to slow down 

the growth rate of Medicare. It is still anticipated that Medicare 

costs will increase at about the rate of 6 percent as opposed to 8 

percent increase year in, year out, which is where they were estimated to do. That is where the $500 billion comes from. Not a single guaranteed benefit is touched in that $500 billion. And in fact, 


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as you know, this year we are making a major step toward closing 

the gap in part D coverage, the donut hole that 8 million seniors 

find themselves in every year. So they will have a 50 percent reduction in brand name drugs this year. They also this year for the 

first time will have a new wellness benefit as part of their yearly 

Medicare benefits. And there is no copay for seniors any longer for 

preventive care. So in fact, we are making proposals that slow 

down the growth rate, which is I think what entitlement reform is 

about, slow down the growth rate of Medicare spending, and keep 

all of the guaranteed benefits very much in place. 

Chairman CAMP. Yeah, but I am sure you can understand our 

perspective with the almost half a trillion dollar cuts assumed in 

the health care law, then an unpaid for over $300 billion in payments for a new physician payment formula, if that is going to 

come out of other reductions in Medicare, we are over $800 billion 

without any real detailed plan of how to get there. 

So it is a major issue, and I know we will have to engage further 

on it. I appreciate your comments today, though. At this point I 

will yield to Mr. Levin for 5 minutes for the purpose of inquiring. 

Mr. LEVIN. Thank you, Mr. Chairman. I want to pick up those 

two threads. You know, the SGR is a problem created in part by 

someone who chaired this Committee. He led the efforts. He was 

then in the majority. And it has to be resolved. But I think we 

should remember that this hole was dug by one of our predecessors, at least he was partially responsible for it. 

Mr. Chairman, you said the law is a mess. I just want to say that 

the notion that the law is a mess is a myth. Among the myths that 

are being spread, one is that health care reform interferes with the 

patient-doctor relationship. Another myth is that it is essentially 

creating dictates from Washington. Another myth, and I hope we 

will touch on this, relates to Medicare Advantage and the notion 

that its role will be dramatically diminished. 

Another myth that was spread some months ago and continues 

to be spread, is that health care reform cuts Medicare payments. 

Another myth is that this law doesn’t involve entitlement reform. 

And so I would like to ask you, Madam Secretary, and welcome, 

to discuss how this new law attempts in a serious way to address 

the rate of increase in Medicare costs and payments. Clearly, there 

will be some increase in Medicare payments because many, many 

more people are going to be covered, as you mentioned. 

On page 4 of your testimony, you discuss, under improving 

health care quality and reducing health care costs, steps that are 

in this law. Could you review why really for the first time there 

are major efforts to try to bend the curve in terms of costs? 

Secretary SEBELIUS. Certainly, Congressman. I think that this 

Committee has had the opportunity to hear from Dr. Berwick, who 

is the new Administrator of the Centers for Medicare and Medicaid 

Services, and probably one of the leading experts in the country on 

quality care for patients combined with efficiency of payment. And 

the health care law for the first time gives Medicare some additional tools that we really didn’t have to look at not only innovative 

models of care, which help improve the patient-centered care and 

provider choices, but also lower costs. The Accountable Care Organization, which allows providers to come together, or providers and 


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hospitals, or health centers and hospitals to deliver better care in 

a coordinated fashion we know will lower costs because it is doing 

that in parts of the country, and this gives us an opportunity to 

drive that care. We know that having an initiative on hospitalbased infections has a significant impact not only in improving patient outcomes, but significantly lowering costs. And those tools are 

all part of the efforts moving forward to stop Medicare being a volume purchaser, where doing more pays more, but really looking at 

patient outcomes as one of the key features, and making sure that 

high quality care is delivered to patients according to their doctors’ 

wishes day in and day out, which is why I think we have so many 

providers who are very enthusiastic about the new opportunity 

practicing medicine the way they think it should be practiced, and 

the opportunities to really be compensated for what is high quality 

patient care day in and day out. 

Mr. LEVIN. And innovation centers? 

Secretary SEBELIUS. The innovation center has opened its 

doors. We look forward to everything from modeling programs of 

the dual eligibles, the so-called dual eligibles who are eligible for 

Medicaid and Medicare simultaneously and now navigate two very 

cumbersome programs in order to get care, and their providers are 

often handicapped, as well as a huge effort on waste, fraud, and 

abuse that has never been tackled in this way, with partnerships 

at Justice that, as I say, has already yielded last year over $4 billion. But we think that is just the tip of the iceberg, that we have 

a real opportunity to return dollars to the Medicare Trust Fund 

and to States’ Medicaid budgets. 

Mr. LEVIN. Thank you. 

Chairman CAMP. Thank you. Mr. Herger is recognized. 

Mr. HERGER. Thank you, Secretary Sebelius, for your testimony. In an auxiliary report to the Medicare trustees 2010 report, 

the CMS actuaries predicted that in large part because of the 

Democrats’ health care overhaul, Medicare payment rates will be 

lower than current Medicaid rates by 2019. If this were allowed to 

occur, the actuary said that, quote, ‘‘Medicare beneficiaries would 

almost certainly face increasingly severe problems with access to 

care.’’ And in CMS Chief Actuary Foster’s recent testimony before 

the House Budget Committee, he confirmed that the best case scenario under the current law is that Medicare rates will be equal 

to Medicaid rates in just 10 years. 

In my State of California, Medicaid’s reimbursement rates are so 

low that it is virtually impossible for many enrollees to find physicians who are willing to see them. Hospitals in my district lose far 

more money on Medicaid patients than they do treating the uninsured. People on Medicaid in California may technically have coverage, but they often do not have access to quality care. Under the 

new health law, Medicare beneficiaries will be in the same position 

in just a few years. 

Madam Secretary, how will you expect to preserve access to care 

for Medicare beneficiaries in the years ahead? 

Secretary SEBELIUS. Well, Congressman, I think there is no 

question that the pact made with the seniors in this country and 

the most disabled population 45 years ago, when Medicare was 

passed, is an important contract to keep. What is also very clear 


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is that if nothing changes in Medicare the trust fund will be out 

of money in a very near future. And in fact, passage of the Affordable Care Act added an additional dozen years to the trust fund, 

which we think is an important step forward. 

More importantly, I think, is the change in the overall program. 

I share your concerns that Medicaid rates in many States across 

the country are significantly low, and often jeopardize access to 

care, and part of that approach has been just to slash rates and 

not to reform the care delivery system. What the Affordable Care 

Act contains is for the first time some significant steps to look at 

the delivery of health care by Medicare, and hopefully by Medicaid 

also, making sure that we focus on what can be the best possible 

care to patients at a much reduced cost. 

We know that can happen because it is happening across the 

country. And Kaiser in your State, Kaiser Permanente, is one of 

the leaders in strategies to deliver high quality care at a significantly lower rate than many other parts of the country. So I would 

suggest that the kinds of delivery system reforms, combined with 

the efforts on waste, fraud, and abuse, can actually not only save 

the Medicare Program and make sure that we are fulfilling that 

commitment to seniors long term, not only this year and next year 

but 10 years and 20 years from now, but also end up with a much 

higher quality care for all of the beneficiaries than we have right 

now. 

Mr. HERGER. Well, thank you. And that is certainly our goal to 

move in that direction. The concern is maybe we want to make 

sure we are not going in the wrong direction. The health care law provided $1 billion to implement the health 

care overhaul. However, CBO estimated that implementation of a 

law of this magnitude would require up to $20 billion. My staff was 

informed by yours that almost all of the $1 billion in implementation funding will be exhausted by the end of this year. In fact, I 

am told the Center for Consumer Information and Insurance Oversight intends to spend $760 million this year alone to implement 

the new health care law. 

I fail to understand how HHS can go through this kind of money 

when many of the provisions it is supposed to implement do not 

take effect until 2014. And I would like you to provide the Committee in writing, and by hopefully early March, a detailed accounting of how HHS spent $161 million in 2010 and plans to spend 

$760 million this year to implement the new health care law. 

Chairman CAMP. The gentleman’s time has expired. The Secretary may respond in writing to that, but we do have to keep the 

hearing moving because there are other Members who are interested. If you want to respond just very briefly. 

Secretary SEBELIUS. Well, Mr. Chairman, I would just correct 

one thing, and we would be happy to provide it in writing. The 

$161 million is across all agencies, Congressman. We have spent 

about 125 at HHS. Treasury has some and OPM has some. The 760 

projected expenditure is also across all agencies, it is not HHS. But 

we would be happy to provide those details in writing. 

[The information follows: Did not receive.] 

Mr. HERGER. Thank you. I appreciate that. 

Chairman CAMP. Thank you. Mr. Johnson is recognized. 


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Mr. JOHNSON. Thank you, Mr. Chairman. Well, it seems to me 

you are doing a lot of increases in personnel. And you know, the 

President’s budget proposes the Department of Health and Human 

Services add 4,700 new positions. And every HHS division will see 

an increase in the number of Federal bureaucrats employed. CMS 

is going to add more than a thousand full-time positions, an increase of 21 percent compared to 2010. We are cutting payments 

to doctors and other health care services, yet increasing administration costs here in D.C. 

I am all for creating jobs, but how many Federal bureaucrats do 

we need to get the job done? I think we can all agree it is critical 

to pursue policies that create jobs, not eliminate them, but the 

health care reform law places significant restrictions on physician 

ownership of hospitals. Many projects in planning had to stop, and 

expansions were curtailed. And every one of those decisions had a 

negative impact on jobs in States like Texas. Industry experts tell 

me at least 30,000 jobs would have been created if this provision 

had not been enacted. 

Can you explain how the Administration can support a provision 

that negatively impacts well-paying health care jobs in many communities while advocating for a ton more Federal employees? 

Secretary SEBELIUS. Well, Congressman, the President’s budget 

does include employee additions at the Department of Health and 

Human Services that, as you say, will be in virtually every agency 

because we have had significant new duties assigned to our Department. Certainly implementation of the Affordable Care Act is 

one, but not nearly the scope of our new duties. The Food and Drug 

Administration has a new Food Safety Act that was passed by this 

Congress to implement new tobacco regulations, new translational 

science. The National Institutes of Health has new duties in terms 

of researching cutting-edge cures and strategies to keep Americans 

healthier. We are administering new programs in early childhood. 

Mr. JOHNSON. If you would make your answers short, I would 

appreciate it, because we have a limited amount of time. Why do 

you need that many more employees in your agency? You are trying to tell me, but you are telling me it is other agencies. 

Secretary SEBELIUS. No, these are all within the Department 

of Health and Human Services. These are our agencies. We have 

11 agencies that have a wide scope of programs. 

Mr. JOHNSON. So you are expanding government. Is that true? 

Secretary SEBELIUS. Pardon me? 

Mr. JOHNSON. So you are expanding government based on this 

health care bill. 

Secretary SEBELIUS. This has little to do with the health care 

bill, Congressman. What I am trying to explain to you is that over 

the scope of just the 2 years that you are comparing, the fiscal year 

2010 baseline and now, we have a host of new—— 

Mr. JOHNSON. I understand that. But here we are trying to reduce the size of government, and you are expanding it. Can you answer why you have to do that? Because you ought to be able to operate with the people you have. 

Secretary SEBELIUS. Well, I tried to explain that we have a 

host of new duties that have nothing do with the Affordable Care 

Act. That is certainly one of our new responsibilities. But food safeVerDate Nov 24 2008 07:24 Nov 14, 2011 Jkt 070873 PO 00000 Frm 00027 Fmt 6633 Sfmt 6602 I:\WAYS\OUT\70873.XXX 70873

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ty, delivery of health care to American Indians, child care, Head 

Start. 

Mr. JOHNSON. Thank you. Austan Goolsbee, Chairman of the 

Council of Economic Advisers, said the Administration would be 

willing to work with us on a provision for physician-owned hospitals provided quality care and reduced costs. Physician-owned 

hospitals have a well-established reputation for quality care measured by CMS, Health Grades and Consumer Reports. MedPAC has 

found that specialty hospitals may be an important competitive 

force that promotes innovation. 

Shouldn’t we work to bring patients more options for quality care 

in their community and allow that kind of competition and innovation instead of dictating from the Federal Government? 

Secretary SEBELIUS. Well, Congressman, my understanding is 

that the provision that you are referring to continues a sort of moratorium that had been in place. But I know from my home State 

of Kansas there are numbers of doctor-owned facilities. I know in 

your State of Texas there are numbers of doctor-owned facilities. 

And I would look forward to having this continued discussion with 

you about what can be done to make sure patients have adequate 

choices. 

Mr. JOHNSON. Thank you. I wish you would do that. 

CBO scored the provision as saving $500 million over 10 years, 

with no savings in the first 5. Yet CMS actuaries did not find any 

savings from the provision that cuts doctor-owned hospitals. And 

you might look at the difference in the scoring while you look at 

that. 

You have acknowledged there are parts of the recently enacted 

health care law that needs to be fixed. Do you think prohibition on 

physician-owned hospitals is one of those parts that we can look at? 

Yes or no. 

Chairman CAMP. If you could answer briefly. 

Secretary SEBELIUS. I said, Congressman, I would be happy to 

have this discussion with you. 

Chairman CAMP. All right. Thank you. Mr. Rangel is recognized. 

Mr. RANGEL. Thank you, Mr. Chairman. And welcome, Madam 

Secretary. As I often said, as rough as this has been on you personally, I think it is good for the Nation to better understand the program that the President has offered us. I don’t think that any person that is ill, that the doctor would ask whether they are Republican or Democrat. And everybody here on the Committee certainly 

knows that it will be a stronger, more productive America if we 

make certain that it is a healthier America. And so it would seem 

to me that now is the time, the campaign is over, to try to improve 

and correct and get a broad-based consensus as to how we can better serve America in terms of health care. 

Having said that, I just want to share with you the importance 

of the wellness provisions and the community health centers. I 

don’t know how many people have come from communities that are 

medically underserved. But when I was a kid, if my mom was taking the three kids to see a doctor and the neighbors would say, 

well, what’s wrong with your children, and she said there is nothing wrong with them, it is time for their checkup, they would think 

she has lost her mind. It almost is a part of the culture that you 


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don’t go to the hospital, you don’t see a doctor until you are sick. 

And of course the painful listening to the doctor says why didn’t 

you come earlier? If only you had let us know, this could have been 

prevented. And the number of people that ended up in intensive 

care only because they didn’t have a place in their community to 

go just for an examination. 

I don’t know how you interpret this in dollars and cents. And it 

just amazes me how this issue became polarized with parties. Because doctors don’t make partisanship a part of their career. So I 

want to thank you for persevering. And perhaps if you can share 

with us in talking with the opponents of this bill, not those that 

just oppose because of political reasons, what can we do to take 

down the firewall and to say we all want the same thing, a better, 

stronger, healthier America? Has there been anything that you 

have found from opponents that they are willing to say can we 

talk? 

Secretary SEBELIUS. Well, Congressman, I think that your 

mention of community health centers has certainly been traditionally a very bipartisan effort that has been supported by the previous Administration and this Administration as a critical part of 

the health infrastructure of the country. Right now about 20 million people, often in very underserved rural and urban areas, have 

high quality preventive primary care at a community health center. 

And through the investments both in the Recovery Act and the Affordable Care Act, that number will double to closer to 40 million 

Americans. These are community health centers which often are 

not only providing health advice and checkups to the family, but 

often have child care, and labor advice, and really are in the heart 

of communities. 

We are also, as you know, through the Affordable Care Act doubling the number of primary care physicians who will be available 

at those community health centers, and nurse practitioners, and 

mental health professionals to make sure that that high quality 

care is delivered. And then you reduce the number of people who 

inappropriately come through the doors of an emergency room to 

try and access health care at the least effective, most expensive 

juncture, and have a healthier America, healthier kids who can 

study in school and a healthier work force. 

Mr. RANGEL. These centers are not Democratic centers or Republican centers, they are based on need, aren’t they? 

Secretary SEBELIUS. Community health centers are located in 

the least served communities, whether they are rural or urban. 

Mr. RANGEL. You said earlier that before there used to be bipartisan support. There is an implication here that if you look at 

the votes of Democrats and Republicans, the Republicans would 

normally be protecting the insurers. And then you find Democrats 

fighting, as we do, in trying to protect the patient. As much as we 

would want to get back to bipartisanship, can you say now that we 

enjoy the same bipartisanship after the election as we did before? 

Secretary SEBELIUS. Well, I think that the—— 

Chairman CAMP. If the answer could be brief, because the red 

light is on. 

Secretary SEBELIUS. We look forward to working with both parties to improve the health of America. 


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Chairman CAMP. All right. Thank you. Mr. Brady is recognized. 

Mr. BRADY. Thank you, Mr. Chairman. Madam Secretary, 

thanks for joining us. I think the incentives in ObamaCare are 

flawed and will drive the budget numbers higher. For example, the 

requirement, obviously, that almost all businesses offer government-approved health care or pay a tax is flawed. Under the law, 

if you offer health care today but it doesn’t end up government-approved, you face a fine or a tax of $3,000 a worker. But if you just 

don’t offer it at all to your workers, you pay a tax of $2,000 per 

worker. It is an incentive for businesses to drop their health care 

and move their workers into the exchanges, which will drive up the 

costs of this plan. 

The incentives for individuals to buy health care I think are 

flawed as well, too low as a matter of fact. And I fear what we will 

see is the Massachusetts effect, where coverage of individuals went 

up, but new plans were purchased for an average of 5 months. So 

individuals were buying the plans when they were sick, dropping 

them when they were ill, driving up the costs. And I noted in the 

last numbers we got from Massachusetts, ER visits are actually up 

9 percent in that State. 

So this health care plan I think will drive workers out of the 

plans they have into the more expensive exchanges, not solve the 

problem, in fact drive up costs for those who are insured long term, 

and drive numbers in ERs at the local hospitals as well. 

Final point. We had our local small businesses’ health care insurers in our office yesterday. One of them was from Aetna, which has 

by their indication laid off up to 3,500 U.S. workers due in part to 

the medical loss ratio mandate. We had by estimates anecdotally 

losses within the industry of between 100,000 and 200,000 workers, 

again because of the inflexibility of the medical loss ratio. Then we 

just had one small business that has 15 employees, laid off one because he was swept through this medical loss ratio issue. In effect, 

government told him he had too many workers. He has lost one, 

did away with one. Their point is if this health care plan is so great 

for the economy, why are they having to lay off their own workers? 

And doesn’t that add to the budget deficit? 

Secretary SEBELIUS. Well, Congressman, I am not quite sure 

what the connection between the medical loss ratio and the job loss 

is. As you know, the medical loss ratio is a formula which determines that 80 cents of every health premium dollar should go to 

pay for health costs, not insurance company overhead and not salaries. It was not anybody in the Federal Government who determined what that formula should look like and what those factors 

were. It was actually—— 

Mr. BRADY. There is no formula within the law? 

Secretary SEBELIUS. It was actually the National Association of 

Insurance Commissioners, elected and appointed insurance commissioners from across the country who by unanimous vote gave us 

a recommendation of what that medical loss ratio should look like, 

the formula for insurers to determine what in fact could be part of 

that. 

Mr. BRADY. So State commissioners enforced this mandate or 

did the Federal Government enforce it? Because if I recall—— 


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Secretary SEBELIUS. No one is enforcing anything right now. 

We are collecting data. The MLR just went into effect in January. 

Insurers are beginning to give data to both their State commissioners and to HHS. At the end of the day, if they don’t meet the 

ratio they will owe their policyholders a refund. 

Mr. BRADY. The good news is you are saying there haven’t been 

any jobs lost to the medical loss ratio mandate? 

Secretary SEBELIUS. Well, again, the medical loss ratio is a formula about insurance premiums. 

Mr. BRADY. Sure. But to your knowledge, I mean I just want 

to sort of stay on the point, to your knowledge you are saying we 

have not lost U.S. jobs because of the medical loss ratio mandate? 

Secretary SEBELIUS. That is my understanding. It has not come 

to my attention. I don’t really know how data collection could cause 

job loss. And that is what insurers are doing right now. 

Mr. BRADY. Okay. Thank you, Mr. Chairman. 

Chairman CAMP. Thank you. Mr. Stark is recognized. 

Mr. STARK. Thank you, Mr. Chairman. Again welcome, Madam 

Secretary. 

There has been a lot of misinformation coming from people who 

would oppose the ACA, and the misinformation has been largely on 

the Medicare Advantage program. Yet last week we heard Administrator Berwick of CMS, that what is really happening is that 

Medicare Advantage is alive and well. 

Can you give us your take on Medicare Advantage, where it is 

going, and what its status is, please? 

Secretary SEBELIUS. I would be happy to. I know that there 

was a lot of concern and certainly speculation by some that the 

passage of the Affordable Care Act would mean the end of the 

Medicare Advantage program. And our first year of experience indicates that nothing could be further from the truth. Not only have 

we seen an increase in enrollment, about 6 percent more Medicare 

beneficiaries are in Medicare Advantage plans this year over last 

year, but they have some very good news. Their premiums have 

dropped from 2010 to 2011, largely as a result of the negotiating 

power that we acquired in the Affordable Care Act to make sure 

that excessive copays and out-of-pocket costs were not shifted to 

beneficiaries. Ninety-nine percent of beneficiaries have a Medicare 

Advantage program to choose from. And in fact, in most places 

there are about 26 Medicare Advantage plans per county to have 

as choices. Comprehensive benefits, according to our actuarial estimates, have actually been more substantial. And I think that the 

news is good. What will happen over time is that the overpayment 

to insurance companies that started to lure companies into this 

market decades ago is going to gradually be decreased. But we 

think that this year’s news—again, the Medicare actuary had predicted a dramatic decrease in population for Medicare Advantage 

plans and a dramatic increase in premiums, neither of which has 

occurred this year. And we think that is the start of a very good 

story about choice for Medicare beneficiaries. Our goal is to have 

beneficiaries have choices that deliver high quality care at a lower 

cost. 

Mr. STARK. Thank you. 

Chairman CAMP. Thank you. Mr. Nunes is recognized. 


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Mr. NUNES. Thank you, Mr. Chairman. As it relates to the 

Medicare Advantage, the increase in enrollees this year, when did 

the cuts start to Medicare Advantage in the ObamaCare bill? 

Secretary SEBELIUS. The rates were frozen for this year. 

Mr. NUNES. Oh, so there haven’t been any cuts yet? 

Secretary SEBELIUS. The rates were frozen. And with inflation, 

I think you would have a number of Medicare Advantage plans tell 

you that was a cut. But they were frozen this year. 

Mr. NUNES. Okay. As it relates to the exchange subsidies that 

the chairman pointed out are not in the budget, and you suggested 

that you are waiting on the States to do their analysis, when the 

States come in with their analysis on the costs of these exchange 

subsidies do you think it will be greater than zero or less than 

zero? The costs on the exchange subsidies? 

Secretary SEBELIUS. Are you talking about—I may have misunderstood the earlier question. The subsidies that will be available to people below 400 percent of poverty? 

Mr. NUNES. The chairman pointed out in the budget that was 

presented—— 

Secretary SEBELIUS. Is that what we are talking about? Because I was talking about the startup costs for exchanges. 

Mr. NUNES. I think what the chairman was pointing out is 

there are no costs in the budget. You stated that that is because 

you are waiting on the analysis of the States. So in the 10-year 

budget window there is no costs. And so it is a simple question, do 

you think when those costs come in will they be greater than zero 

or less than zero? 

Secretary SEBELIUS. Our budget actually will have no subsidies. The Treasury budget ultimately will have the subsidies in 

their budget. So the HHS budget will not have a bottom line for 

a projection of subsidies if we are talking about those that go directly to taxpayers. 

Mr. NUNES. The exchange subsidies are nowhere in the budget, 

Madam Secretary. 

Secretary SEBELIUS. I am not familiar with the Treasury budget. 

Mr. NUNES. Okay. Let me move on. In ObamaCare do you think 

we reduced—— 

Secretary SEBELIUS. I am sorry, Congressman, they are in the 

Treasury budget. I was just given that information. So yesterday—— 

Mr. NUNES. Well, my assumption is they will be greater than 

zero when the costs come in. 

Secretary SEBELIUS. I think that is accurate. But they are in 

the Treasury budget, not in the HHS budget. 

Mr. NUNES. Okay. With passage of ObamaCare, did we increase 

the unfunded liabilities of Medicaid? 

Secretary SEBELIUS. The bill anticipates an increase in enrollment in Medicaid, yes, sir. 

Mr. NUNES. How many people? 

Secretary SEBELIUS. It is projected, I think, that there will be 

about 16 million additional Medicaid beneficiaries around the country. 


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Mr. NUNES. And do you think that Medicaid payments are an 

appropriate amount now, average, should be better? What do you 

think in terms of the Medicaid—— 

Secretary SEBELIUS. Payments to providers? 

Mr. NUNES. Medicaid reimbursement rates, yes. 

Secretary SEBELIUS. As you know, Medicaid is a partnership 

with the States. And a State at a time decides what their reimbursement rates are. That is part of their State flexibility. 

Mr. NUNES. So at a time when the States are basically having 

budgets that are in the tens of billions in some cases like California 

in the red, is this going to increase the costs to States when you 

add on 16 million enrollees onto Medicaid? 

Secretary SEBELIUS. What the Affordable Care Act does, Congressman, is the Federal Government picks up a hundred percent 

of those additional enrollees for the first several years and 

then—— 

Mr. NUNES. Several years like in 2 years. 

Secretary SEBELIUS. Three years. 

Mr. NUNES. Oh, 3 years. Sorry. 

Secretary SEBELIUS [continuing]. And then 95 percent of the 

cost going forward. 

And I can tell you as a former Governor, the amount of uncompensated care we would carry as a State versus a 95–5 split Federal Government-State for those same uninsured people in my 

State would have been a wonderful bargain. 

Mr. NUNES. Right now, as you are aware, Mr. Herger pointed 

out that Medicaid in California, in some parts of California, I think 

most parts of California, you have very few doctors who will want 

to see Medicaid patients. So I am not exactly sure how, just because you give a government card that allows people to get Medicaid to 16 million new Americans, if that is really better health 

care or is that just saying you are covering people. 

Secretary SEBELIUS. Well, the other thing that the Affordable 

Care Act does is for at least the first several years increase provider, doctor rates, from Medicaid rates to Medicare rates, which 

is certainly something that the providers are very enthusiastic 

about. 

Mr. NUNES. That is for 2 years only, I think. 

Secretary SEBELIUS. For the first 2 years. And we would hope 

that Congress would take a look at that and would help us extend 

that. 

Mr. NUNES. But that is not in this budget. Those increased 

costs are not in the budget. 

Secretary SEBELIUS. Not past 2016. 

Chairman CAMP. Time has expired. 

Mr. NUNES. One more question. 

Chairman CAMP. We are past the 5 minutes. We really need to 

go to Mr. Tiberi now. 

Mr. Tiberi. 

Mr. TIBERI. Thank you, Mr. Chairman. 

Thank you, Madam Secretary, for being here today. 

I want to assure my colleagues on the other side that we do care 

about patients. In fact, as you know, Dr. Berwick was here last 

week; and I mentioned specifically my concern about patients being 


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left off of Medicare. And, ironically, 2 days later, my godmother got 

a note from her OB–GYN. She is on Medicare fee-for-service, and 

she was informed in writing that she would no longer—the doctor, 

a woman, would no longer be taking Medicare patients, including 

my godmother. And that is a trend that we continue to see, at least 

in Ohio. I can’t speak for any other part of the country. 

And as you know, Madam Secretary, the Medicare Advantage 

program is one that has, at least in central Ohio, high marks by 

seniors, incredibly high marks by seniors. 

The cut that we are speaking about has not occurred. You are 

absolutely right. But my understanding is in 2012 we will see the 

actual first cut over a 6-year period. In fact, the cut, my understanding is—and correct me if I am wrong—is $200 billion. That 

will encourage—the largest Medicare provider in my district is not 

an insurance company. It is a Catholic hospital. And they are reassessing whether or not they are going to continue in the Medicare 

Advantage program. That means all those Medicare Advantage 

beneficiaries, those seniors who chose to go into that Catholic hospital not-for-profit Medicare Advantage program will be back in the 

Medicare fee-for-service. 

As you know, Madam Secretary, a majority—a huge majority of 

seniors who are on Medicare fee-for-service have some sort of other 

coverage, whether it be retiree coverage, whether it be a MediGap 

plan, or Medicaid; and the largest MediGap provider in the country 

is AARP which supported the bill. So my constituents who are on 

this large Medicare Advantage program that may not exist after 

2012 or 2013 face the choice of buying a MediGap coverage probably from AARP, which obviously benefits AARP. 

And so the fact of the matter is—and I would love to have your 

comment on this—if we actually cut Medicare Advantage, Medicare 

Advantage providers are telling me that aren’t insurance companies, that they will be forced to choose to no longer be in the program. If that happens, what happens to the beneficiary? 

Secretary SEBELIUS. Well, again, Congressman, I think that 

there is not a lot of evidence that that will happen. And I share 

your concern that Medicare beneficiaries have a choice. 

But, right now, we have about 75 percent of the beneficiaries 

who are subsidizing about a thousand dollars a year more for those 

who are choosing Medicare Advantage, with no real health benefits 

to the Medicare Advantage customers. So that we are trying to address, as has been raised here and I think is certainly a concern 

that the Administration shares with all of Congress, that we address the rising health care costs which are well in excess of all inflationary costs. We spend two and a half times of what any nation 

on Earth spends, and we don’t have good health results. 

Mr. TIBERI. But during the debate on the health care bill, we 

were told that we were going to have greater access, that patients 

would have greater access. 

Secretary SEBELIUS. And as the data this year shows, we won’t. 

Six percent more in Medicare Advantage. 

Mr. TIBERI. I can give you a real-life example. My godmother 

on Friday who got a letter from her long-time OB-GYN that they 

are not taking Medicare patients anymore because of reimbursement issues. 


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Now it is great that we are going to increase Medicaid reimbursements, but doctors in Columbus, Ohio—and I know you are 

visiting soon—are telling me that this is a huge problem; and we 

haven’t even began the debate in Ohio where the Governor and legislature are facing a $1.6 billion hole on Medicaid. And they have— 

I know you say they have flexibility, but the flexibility they have 

is based upon a basic benefit. They can go above that basic benefit, 

but they can’t have any flexibility below that basic benefit on Medicaid. 

So we have providers telling me and patients telling me that 

Medicaid and Medicare are broken, and part of the fixes in the bill 

are expediting physicians from backing off both programs. 

Secretary SEBELIUS. Well, Congressman, again, I think we 

talked earlier about the sustainable growth rate. And at least what 

I have heard from doctors as I travel around the country is that 

their primary concern about Medicare deals with the uncertainty 

that has been created really since 2002 with any kind of addressing 

the payment rate. 

And I think that the President shares that concern. He has made 

it a 2-year pay-for, 21⁄2-year pay-for going forward. That would be 

the longest fix in the SGR in a very long time. We think it should 

be a permanent fix. We would look forward to—I think this is an 

area that should have a lot of bipartisan support. 

I would agree with you the uncertainty about payment for Medicare doctors has caused a huge concern throughout the country, 

and that is why the President is recommending that we fix it. 

Mr. TIBERI. My time has expired. Thank you. 

I will just tell you that patients and doctors are telling me it is 

not just the uncertainty, it is the bill that was passed. 

Chairman CAMP. Thank you. 

Mr. McDermott is recognized. 

Mr. MCDERMOTT. Thank you, Mr. Chairman; and welcome, 

Secretary Sebelius. Thank you for being here. 

This past Friday, the Republicans put out their plan to cut a 

hundred billion dollars from the Federal budget. The proposal 

clearly highlights Republican priorities related to the health and 

wellness of Americans as well as jobs and the economy. Three 

quick examples: 

The Republicans want to cut $1.3 billion from community health 

centers. If this cut is made, according to analysis from the Senate, 

more than 2.8 million people will lose access to their current primary care provider and over 5,000 health center staff will lose 

their jobs. 

Number two, Republicans propose cutting $850 million from the 

CDC. This is central to protecting America against flu outbreaks 

and other epidemics. If an infection were to break out, a decreased 

CDC funding would stand in a way of an effective response. This 

would devastate our economy and jobs. 

And, finally, the example of Republican priorities, they propose 

cutting $1 billion from the National Institutes of Health. Now this 

cut is just plain stupid. For every dollar spent by NIH, $2 are returned; thousands of jobs are created; and NIH research is keeping 

our country at the forefront of innovation. 


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A hundred billion dollar pledge was simply political theater with 

no merit whatsoever behind it. The cuts will actually hurt our 

economy and destroy jobs. What really accounts for Federal spending is mandatory Federal programs like Medicare and Social Security. 

Given that our witness today is the Secretary, I am going to 

focus on Medicare and what Republicans hope to do with these important programs. 

Republicans have always hated Medicare. A majority of them 

voted against it with the original passage in 1965. Speaker Gingrich said he hoped it would wither on the vine. And in the months 

to come, the Republicans are going to try to dismantle and eventually try to do away with Medicare. You don’t have to take my word 

for this. Republicans outlined their plan in a document called the 

Roadmap to America’s Future. The Republican plan would end 

Medicare as we know it, making it a voucher system. The plan 

would force seniors to go out and shop around for private health 

insurance coverage with a government voucher. 

Republicans want to force seniors to put more skin in the game 

when it comes to their health care, but seniors are already putting 

a third of their income into their health care. They can’t afford any 

more skin. 

Now, when it comes to priorities, I happen to believe that Medicare should be preserved. We extended its solvency by 12 years as 

I looked at the bill we passed. I believe we should focus improving 

on it. 

But I would like you, Secretary, to explain—you are formerly an 

insurance commissioner and you have been a Governor. Now tell 

me what you anticipate, if the Republican roadmap for the future 

passes and every senior is handed a $8,000, $9,000 voucher, whatever, and sent out into the insurance world, what will be the effect 

of that? 

Secretary SEBELIUS. Well, Congressman, I share your belief 

that the passage of Medicare was an important compact with the 

American people. In fact, I have a bit of a personal connection with 

that. My father was a Member of the Energy and Commerce Committee and helped to write the Medicare bill, and he will turn 90 

in 3 weeks and is now a beneficiary of that bill. So I start this conversation as a daughter. 

I think that we are responsible to do a couple of things. One is 

to help make sure that Medicare is here for generations to come, 

and 12 years of additional solvency is a step in that direction. I 

think that some of the delivery system reforms that are anticipated 

are another big step in that direction to make sure that we deliver 

high-quality care. 

I also have the experience, as you say, as an insurance commissioner and understand that people who are shopping on their own 

often do not have any market leverage, which is why people in the 

individual market are often penalized. They pay 18 to 20 percent 

more than those who are in large employer pools. One of the reasons for the health exchange is to help group people into pools so 

that they would have some purchasing power. 

So insurance experience, as you balance risk and if you are shopping on your own, there is no risk to balance but your own. 


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Mr. MCDERMOTT. Can you imagine your father at age 90 going 

out looking for a health insurance plan with a voucher? 

Secretary SEBELIUS. No, I cannot. 

Mr. MCDERMOTT. What would happen to him? 

Secretary SEBELIUS. Well, I think that the benefits of the Medicare program are having access to high-quality care that is there 

year in and year out, and that is something that we have committed ourselves to for 45 years. And the opportunity that the Affordable Care Act gives us and that the President is very committed to is making the kinds of not only payment reforms but delivery system reforms that can be instrumental in delivering that 

high-quality care for generations to come. 

Mr. HERGER [Presiding]. The gentleman’s time has expired. 

The gentleman from Kentucky, Mr. Davis, will inquire for 5 minutes. 

Mr. DAVIS. Just before moving forward I would like to correct 

a pleasant fiction being shared by my colleague from Washington 

State. The roadmap is one person’s idea. It is not representative of 

the party and Members such as myself, Chairman Camp, almost 

everybody I know in this Committee who has worked for years to 

bring Medicare into the 21st century and to leverage technologies. 

And I wish that you had taken me up on the invitation that you 

accepted when you were before the Committee 2 years ago to come 

and visit across the river from Cincinnati in Covington. Some tremendously innovative process ideas that were going on. 

Before my colleagues were removed from the majority and they 

jammed through the PPACA, the so-called health care reform, it 

eliminated this expansion or this ability to expand and lower costs 

to health care dramatically because of the provisions in the bill. 

And had you seen that firsthand I think that we might have had— 

actually had a bipartisan dialog on health care. 

Moving to an equally important subject under your jurisdiction 

and one that is personally important to me because of my own 

background growing up, as you know, the 1996 Welfare Reform 

Law replaced the former welfare system with a new Temporary Assistance for Needy Families, or TANF, block grant program. And 

the program has worked to promote and increase earnings, reduce 

poverty, independence. Still, we all acknowledge there continue to 

be issues such as a large number of adults continuing to collect 

TANF benefits without engaging in work and other productive activities. States have also learned how to game the system to avoid 

work requirements for such adults, among other concerns. 

As chairman of the Human Resources Subcommittee, this issue 

is of great personal interest to me; and I know that you state in 

your written testimony an interest in working with the Congress 

on TANF reauthorization. However, this budget is the second in a 

row in which the Administration has punted in terms of issuing 

specific recommendations for a comprehensive multi-year reauthorization of the TANF program. Why does the President’s budget not 

include a comprehensive multi-year TANF reauthorization proposal 

for the second year in a row? 

Secretary SEBELIUS. I think, Congressman, we are engaged in 

a broad outreach to stakeholders; and particularly in the recent recession we saw opportunities to have TANF be a more effective and 


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productive program. Work subsidies for instance were used in 

many, many States around the country including—I was going to 

say Ohio. I am not sure that they were implemented in Kentucky. 

But we want to make sure that, as TANF is reauthorized, we really 

take into account the very recent experience and work with Congress on a long-term strategy that reformats this program and 

makes it effective into the future. We learned some lessons in the 

last 2 years that I think have to be part of the principles going forward, and we are still in the process of collecting that information. 

Mr. DAVIS. On that same note, would you say in terms of welfare work rates, work and education requirements, the time limits 

over this 2-year hiatus, that the Administration feels the current 

law is fine? 

Secretary SEBELIUS. No, sir. I think we feel that it absolutely 

is an essential program but actually needs reformatting. But the 

recent downturn made it even more obvious that there were areas 

that needed to be addressed; and, again, we would look forward to 

working with you and your Subcommittee in terms of having that 

long-term discussion. 

Mr. DAVIS. We would like to have that discussion very much to 

rationalize assistance rates and make sure people get the help that 

they need, certainly, but also be able to have—would you agree 

that it would be helpful to have a comprehensive score not unlike 

on how we roll up costs in the private sector in all forms of assistance that an individual receives in a database that would be supportive of that so that we can get a good read from a fiscal perspective? To me, this is not partisan. It is simply process like we would 

do as good financial stewards. 

Secretary SEBELIUS. Well, I think to be informed by all of the 

information is important as we move—— 

Mr. DAVIS. So you would support that? 

Secretary SEBELIUS. I am not quire sure exactly what you are 

asking me. 

Mr. DAVIS. Well, basically, some of these benefit allocations are 

done without reference to other benefits that folks get or sometimes 

folks can fall off the cliff in one area and be forced into paying exorbitant taxes when in fact they are not really rational for where 

their level is. And the one way to do this is to get these programs 

connected and that would begin by having common metrics so we 

could see every program that a person is in receipt of. It would go 

a little bit outside your jurisdiction, but I think it would be helpful. 

Final question. Based on this desire to move forward and address 

some of these issues, do you believe—do you support—does the Administration support the current work requirements for welfare recipients that are included in the Deficit Reduction Act of 2005? 

Secretary SEBELIUS. I am not sure I can answer that question 

comprehensively. 

Mr. DAVIS. I tell you what we will do. We will get you that information, and you can comment, and we look forward to working 

with you on those reforms. 

Secretary SEBELIUS. I would be happy to do that. Yes. 

[The information follows: Did not receive] 

Chairman CAMP. Thank you. 

Mr. Lewis is recognized. 


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Mr. LEWIS. Thank you very much, Mr. Chairman. 

Madam Secretary, welcome. Thank you for your service, for your 

vision, for your leadership, and your commitment to health care for 

all Americans. 

Madam Secretary, it is my understanding that over 3 million 

seniors and individuals living with disability received assistance 

with their prescription drug costs last year as a result of the Affordable Care Act. If the Affordable Care Act were repealed, would 

those seniors have to pay the government back? 

Secretary SEBELIUS. I think that question is uncertain, Congressman. There is some belief that they may have to pay it back. 

Mr. LEWIS. Thank you. 

Something has been sort of bothering me for a while. I keep 

hearing some of my colleagues, especially on the other side, referring to the Affordable Care Act as ObamaCare. Now, if I am President of the United States, if I am Mr. Obama, I would embrace it. 

I would be very proud that people are referring to ObamaCare, the 

Affordable Care Act as Obama Care. Do you have any reaction to 

it? 

Secretary SEBELIUS. Well, Congressman, I think that there has 

been an effort to portray the Affordable Care Act as government 

takeover of health care; and I would just suggest that nothing 

could be further from the truth. This is a very State-based system, 

as you know. The expansion of health insurance to approximately 

30 million people will be private plans, State-based exchanges, run 

and chosen by the States. The regulation of insurance will stay a 

State-based mechanism. The oversight will be provided by States. 

The consumer outreach is provided by States. 

So I think the attempt of renaming the bill is to mischaracterize 

the efforts under way of somehow the Federal Government dictating health care. I would suggest this is a very provider- and patient-centered health reform. 

Mr. LEWIS. Thank you very much, Madam Secretary. 

Thank you, Mr. Chairman. I yield back. 

Chairman CAMP. Thank you very much. 

Mr. Reichert is recognized. 

Mr. REICHERT. Thank you, Mr. Chairman. 

Welcome, Madam Secretary. 

I have, in the last few hearings we have had, had an opportunity 

to question Mr. Goolsbee and Dr. Berwick on some issues—and we 

will just talk through the buzzer. I kind of want to follow the same 

line of questioning. Did you get a chance to see their interviews at 

all in their appearance here? 

Secretary SEBELIUS. I did not. 

Mr. REICHERT. I am concerned. There are a lot of promises in 

the health care bill. And you have listed off a number of them 

today. There is a promise to lower the cost for businesses, lower the 

cost for seniors; and I am not sure the American people really are 

buying all of the promises, promises to pay doctors. And I think 

part of the problem is we are getting mixed messages. 

I just thought—I want to just share a little quote with you that 

you gave in a press conference in June of 2010. You said, together 

what these rules mean is exactly what President Obama told the 


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American people from the start. Under the Affordable Care Act, if 

you like your doctor and your plan, you can keep it. 

I have asked Mr. Goolsbee and I have asked Dr. Berwick those 

same questions, and I can’t get a straight answer. 

Do you still believe that statement in this bill, you are able to 

keep your health care bill and your doctor if you like it? Is that an 

accurate statement? Just say yes or no. 

Secretary SEBELIUS. Congressman, it is accurate to the point 

that we are not tampering with the existing system. Employers 

make choices of plan changes and doctor changes that, right now, 

employees don’t control. 

Mr. REICHERT. Madam Secretary, please. My time is limited. 

Here is the problem. The people in America just want to know— 

I go to church on Sunday, and I hear from my senior citizens. They 

just want to know, can I keep my doctor? And I say, well, the plan 

says, yes, you can. The President, though, you may recall, said a 

year ago—and I was present, most of the Republican Members 

were present when he addressed our conference—and he said there 

may have been some language that snuck into the bill that runs 

contrary to that premise. Now how does that—— 

Secretary SEBELIUS. I don’t think there is any language in the 

bill that interferes with the current system. 

Mr. REICHERT. The President was inaccurate then when he 

made that statement? 

Secretary SEBELIUS. Congressman, I did not hear the President’s statement. What I can tell you, employers choose care for 

180 million Americans. That doesn’t change. 

Mr. REICHERT. Madam Secretary, please. 

If the President said that there is language in the bill that runs 

contrary to that promise and your quote in June, 2010, will you 

work to change the language in the bill to ensure that the American people can keep their doctor and keep their health plan? 

Secretary SEBELIUS. Congressman, I would be happy to work 

with you on that. But, as you know, we don’t order doctors to take 

care Medicare patients. You just heard of a doctor who did not— 

or take Medicaid patients. We don’t order employers to keep the 

same plan with the same network. That has never been part of the 

promise. 

Mr. REICHERT. Madam Secretary, you just made my point. 

The language in the bill over years will result in the American 

people having to leave their doctors that they like and leave their 

health care plans. We know that is going to be a fact. 

Secretary SEBELIUS. I would strongly disagree that that is the 

language in the bill. That is the current system. 

Mr. REICHERT. You believe that the current bill allows people 

to keep their health care plan and their doctor. That is what you 

said in June, 2010. 

However, there is another interesting quote that comes from your 

own agency’s regulation on grandfathered health plans, and it 

states that seven out of ten employers will not be able to maintain 

their grandfathered status. How is that consistent with your statement in 2010 that you can keep your health care plans if you like 

them? That is very inconsistent. 


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You see why the American people are so skeptical of this health 

care plan? Not only is it over 2,400 pages long, but they are being 

promised promises, and they don’t see the promises coming 

through true. They are already falling apart. You need to help us 

understand. 

Secretary SEBELIUS. I would be happy to work with you to help 

you understand. 

Mr. REICHERT. Thank you. I yield back. 

Chairman CAMP. Thank you. 

Dr. Boustany is recognized. 

Mr. BOUSTANY. Thank you, Mr. Chairman. 

Thank you, Madam Secretary, for being here today. 

As you know, many Americans are really opposed to the idea of 

being required to purchase or to have insurance or Washingtonmandated insurance. 

The new health law also requires participating employers to auto 

enroll all workers in the new CLASS entitlement program. Unless 

a worker pays very close attention, it takes time to opt out of this 

program. You call the program voluntary even though some enrollees might not want to join this. So if CLASS is truly voluntary, 

why did Washington Democrats allow American workers—why 

didn’t they allow all American workers to exclusively opt in instead 

of being automatically enrolled in this program? 

Secretary SEBELIUS. Well, sir, I need to correct something. 

First of all, there is no program that is together yet. There is no 

automatic auto enrollment. That is one of the considerations being 

discussed. But there is no framework yet for the CLASS program. 

One of the issues is how to get a take-up rate that is a sustainable 

program. There is no mandate for auto enrollment. 

Mr. BOUSTANY. Let me ask you this. If you do assume that 

fewer Americans would enroll in CLASS, if you gave them to freedom to opt in instead of forcing them to jump through the hoops 

to opt out, I mean, what do you think they are going to do? Are 

they going to opt in or op out? 

Secretary SEBELIUS. Well, again, I think CLASS has the potential of offering Americans a product that they currently don’t have 

available, which is to set aside their own money and pay for residential services, allowing them to age in place. It isn’t available in 

the private market. It isn’t available in the public market. We have 

heard from consumers across the country how incredibly valuable 

this would be to not be faced with a choice of forced nursing home 

or leaving their home. 

Mr. BOUSTANY. I understand the benefits of the program. 

Let me ask you this. I understand many employers plan to avoid 

CLASS participation due to what they foresee as administrative 

hassles and certainly the projected insolvency of this program. The 

U.S. Chamber, the President’s own deficit commission both have 

called for repeal of the program before implementation. 

You recently announced a massive $93.5 million PR program targeting employers. But what is the contingency plan if you cannot 

pressure enough employers to auto enroll workers in a program 

that Democratic Senator Kent Conrad calls a Ponzi scheme? I 

mean, are you going to have warnings in this from CBO and the 


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Medicare Actuary who have expressed major concerns about future 

deficits and this program being clearly unsustainable? 

Secretary SEBELIUS. Congressman, we very much share the 

concerns that have been expressed that, as written into the law, 

the framework of the program was not sustainable into the future. 

The deficit commission actually said it should be repealed or corrected. 

Mr. BOUSTANY. So should it be repealed? 

Secretary SEBELIUS. No, sir. We are actually in the process of 

correcting the framework so it can be solvent into the future and 

so we not only keep the commitment to the American people but 

also make sure that taxpayer—— 

Mr. BOUSTANY. Madam Secretary, would you share the information that you—the discussions you have had with Treasury on 

this on the mechanisms for enrollment and how the premiums are 

going to be collected? 

Secretary SEBELIUS. We would be happy to share. 

Mr. BOUSTANY. Thank you. And do you know when the first 

CLASS premiums will be collected? 

Secretary SEBELIUS. They are not scheduled to be started until 

2012. 

Mr. BOUSTANY. And will it begin prior to the establishment of 

the CLASS independence benefits plan? 

Secretary SEBELIUS. No, sir, because we can’t enroll anybody 

unless they know what it is that they would be setting money aside 

from. 

Mr. BOUSTANY. Okay. Thank you. 

Mr. Chairman, also, we heard a lot of discussions about delivery 

system reforms; and we heard vague platitudes by Dr. Berwick the 

other day to our questioning across the dais here. I have deep concerns as somebody who has really worked in delivery system reforms and quality issues in that area; and I haven’t heard anything 

specific from you today, either. I deliberately avoided the question. 

But I am going to send a letter to you in writing requesting a meeting with your experts at HHS to start extensive discussions on this. 

Because, clearly, this is at the heart of how we really manage costs 

in this; and I have not heard anything in public or in testimony 

to the effect that you guys understand what you need to do in that 

area. 

Secretary SEBELIUS. Well, we would be delighted to have those 

discussions. 

And let me just assure you, Congressman, that delivery system 

reforms initially are entirely voluntary, are coming to us from providers. This is not something that is being directed by CMS. It is 

a provider-driven, innovative approach, strategies that are in place 

and work. But we would be happy to have those extensive discussions. 

Mr. BOUSTANY. I will send you a formal letter requesting those 

meetings. 

Chairman CAMP. Mr. Neal is recognized. 

Mr. NEAL. Thank you very much, Mr. Chairman; and thank you, 

Madam Secretary. 

I want to thank you, first of all, for the productive meeting that 

you and the staff had with Caritas Christi. You went a long way 


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toward reassuring them of many of the issues that were raised earlier by my friend, Mr. Tiberi. 

I want to thank my friend, Mr. Brady, for looking out for those 

hospitals in Massachusetts, very important. I assure him right 

now, if he is ever ill, we will make sure that he has a space in that 

Mecca of medical care. I know that was on your mind. 

I will point out something else that I think is really important, 

Madam Secretary, and that is the customer satisfaction rate in 

Massachusetts with the health care plan that became the national 

model is above 77 percent. It is not limited to Democrats or Republicans. It is the population of the State that is very happy with access. 

And emergency room care everywhere is a drag on medical costs 

because of the issue of preventative care which they might have received at an earlier stage which in this legislation that you are explaining once again this morning addresses. 

Let me talk to you about the issue of children’s hospitals and 

graduate medical education that has had broad bipartisan support. 

Could you offer some clarity on how you see the future on that initiative? 

Secretary SEBELIUS. Well, I would say, Congressman, that was 

a very difficult budget decision, as you know. The 2012 budget does 

eliminate the GME for the 60-plus children’s hospitals and instead 

I would say focuses resources on programs that specifically train 

primary care doctors, recognizing that that is a huge need that has 

been long under attended in the past. 

In a better budget time, that would not have been the recommendation going forward, but that was the direction that the 

President wanted to take. 

Mr. NEAL. So it is front and center in your office still, the issue 

of how to address the program? 

Secretary SEBELIUS. Yes. 

Mr. NEAL. And I want to thank you on behalf of that 9-year-old 

who visited my office recently who has hemophilia. And maybe you 

could address, in light of that, the issue of lifetime caps. 

Secretary SEBELIUS. Well, I hear from parents and others all 

over the country who were terrified that their disease was going to 

cause them to run out of care or treatment at a very critical time. 

I actually participated on a health panel with a mother of a hemophiliac in Connecticut who told some incredible, compelling stories. 

As a parent, I can’t imagine what she and her husband are trying 

to go through. 

It is a very limited, as you know, percentage of the population. 

But for that percentage it is a life-or-death situation where they 

were confronted with a cap on life-or-death care or treatment going 

forward. 

So the removal of that cap, both gradually removing the yearly 

cap but the removal of the lifetime cap won’t affect a lot of people, 

but the people it affects have—we have literally provided them 

some lifesaving hope for the future. 

Mr. NEAL. And virtually every spring I have a group of visitors 

from my constituency, parents who have children with diabetes, 

and I want to assure you that they are very happy with the idea 


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that those children now can access not only care but, just as importantly, insurance. That is a huge victory. 

Secretary SEBELIUS. Well, I had the experience as a parent 

when my sons got out of school neither of them was headed for a 

job with insurance coverage. So I experienced personally keeping 

the young adult on a family plan would have been a huge help to 

my husband and me. 

But, also, one of our son’s great friends had some childhood illnesses; and what his father told me is that graduating from college 

for him was a very dangerous situation because his son was confronted with the insurance market and enormous blockades to getting any kind of insurance due to his health conditions when he 

was 9 and 10. Heath’s parents and others won’t have to worry 

about that anymore, and that is a big step forward. 

Mr. NEAL. Thank you, Mr. Chairman. 

Chairman CAMP. Mr. Roskam is recognized. 

Mr. ROSKAM. Thank you, Madam Secretary. Thank you, Mr. 

Chairman. 

Madam Secretary, one of the issues that has come up in my congressional district is this notion of waivers and the process by 

which waiver decisions are made, who is the beneficiary of a waiver. I know that there are all kinds of accounts out there. 

I am informed, from information from your office, that there is 

948 waivers that are presently in place. And you know this story. 

You know the criticism of it. It seems like there is almost a lineof-scrimmage, audible feeling to this. In other words, well, you 

know, come in and make your pitch and maybe you get a waiver 

and maybe you don’t. The other criticism is that the waivers are 

for a short time duration. 

So I represent a district west to northwest suburbs of Chicago. 

McDonalds Corporation gets a waiver, and I am not a critic of that 

waiver. But what do you say to the tool and dye manufacturer in 

the suburbs of Chicago who has a hundred employees that doesn’t 

have the political stick, isn’t a big story, doesn’t have the ability 

to come in and make a pitch for a waiver? Where are those employers being served in the waiver process? 

Secretary SEBELIUS. Congressman, there are really two categories of employer-based plans and other plans where the waiver 

situation has come up. 

One is, as you said, the McDonald’s area, where there are a number of employers, large and small, who offered very limited health 

benefit plans, the so-called mini-med plans. And early on there was 

notice given and information on the Web site, information available 

in the preliminary rule to recognize the fact that those plans will 

cease to exist in 2014 when there are affordable, viable competitive 

options in State-based exchanges. 

But, in the interim, the law gave our office the flexibility of collecting the first year of data. Because there really isn’t any data 

about how many are out there and what they look like and if indeed it meant losing coverage for employees who had some coverage even though they didn’t have comprehensive coverage to 

grant a waiver, and those waivers have been put in place. 

The other, the 900 that you referred to, is really a different category. It deals with one feature of the plan and that is the 


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$750,000 overall benefit, back to Congressman Neal’s question, 

about the lifetime cap. A number of plans were not able to reach 

that in a year’s period of time. And again the law says that our 

office is given the flexibility to look at serious market disruption 

and rate increases. 

The rule was published. The Web site is published. I would say 

I think, on average, 95 percent of the waiver requests that we received actually were given waivers. It was a fairly rapid turnover. 

Most plans have a January 1—or a bulk of plans have a January 

1 turnaround time, which is why we saw a big increase in that 

final quarter. And that again is a 1-year waiver to get a graduated 

movement toward that benefit ceiling that currently wasn’t in the 

plan. 

Mr. ROSKAM. So in that second group—am I interpreting this 

correctly—if you are the tool and dye manufacturer and your problem doesn’t line up with the problem that, let’s say, SEIU has, 

then, because your problem is different, the department is not willing to contemplate a waiver? 

Secretary SEBELIUS. It isn’t that the problem is different. That 

waiver authority was very specifically outlined in the bill for that 

one provision, and we are following the law. 

Mr. ROSKAM. So does the waiver provision limit your authority 

then to only those two areas and you have got to find within those 

two areas, either the mini-med or the short time duration, and beyond that you don’t have the authority to make a waiver? 

Secretary SEBELIUS. We don’t have the authority to waive the 

law—I mean, we have rulemaking authority, which we are using. 

We are doing extensive outreach with everybody from tool and dye 

makers—— 

Mr. ROSKAM. I understand. I am short on time. 

I just want to direct your attention. So is the two categories of 

waivers, Madam Secretary, are those categories of waivers? 

Secretary SEBELIUS. No, there is waivers of authority in the 

medical loss ratio that can be granted to an entire State; and there 

likely is other waiver authority. But those are the two that you 

mentioned in your opening comments. 

Mr. ROSKAM. Right. So it is an overstatement to say that your 

authority to make waivers is limited to the two things that we 

have discussed; isn’t that right? 

Secretary SEBELIUS. That would be correct. 

Mr. ROSKAM. So you are making decisions then based on how 

you are interpreting the statute; isn’t that correct? 

Secretary SEBELIUS. I am trying to follow the law, as is our 

staff, yes. 

Mr. ROSKAM. I yield back. 

Chairman CAMP. Time has expired. 

Mr. Becerra is recognized. 

Mr. BECERRA. Thank you, Madam Secretary; and congratulations to you for all of the work that you have engaged in over the 

last 2 years. It has probably been an interesting ride for you as 

Secretary. Obviously, your preparation, from being a Governor to 

having been an insurance commissioner, certainly put you in a 

good position to be able to be where you are today; and we thank 

you for all of the work that you have done. 


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We continue to hear the myths about the Affordable Care Act 

and what it meant to have this historic reform of health care to 

make our system far more productive, given that it is the most expensive in the world. And we are beginning to now have it seen 

through to the American people that the talk of these death panels 

was simply myth, that the talk of a government takeover of a system that relies on private health insurance companies to offer 

health care is difficult to swallow as truth, and, again, that one is 

myth. In fact, you and I and every Member on this Committee as 

Members of Congress receives, essentially, government-sponsored, 

taxpayer-sponsored health care through the Federal Employee 

Health Benefit Program. 

In fact, the support, the subsidy that you and I and every single 

Member, who I believe every single Member here has accepted that 

government-sponsored health care, the support we get through subsidy is greater than the support and subsidy that we provide in the 

Affordable Care Act to the 30 some odd million Americans who 

would qualify. So if there has been a takeover, the first people who 

should defy that are probably the Members of Congress who are receiving that same government-sponsored health care. 

But having heard about all of the myths, we are now beginning 

to see the reality, the facts coming through. I think you mentioned 

one of those, the myth that we were going to see seniors lose their 

health care if they got their health care through Medicare HMO, 

which is the Medicare Advantage Program. The myth was they 

were going to lose it. The fact I believe you mentioned was that we 

have actually seen an increase in the number of people who are receiving coverage and a reduction—am I correct—a reduction of the 

costs, 6 percent increase and a 6 percent in the number of people 

participating, and was it a 6 percent drop in the actual premiums 

that seniors under Medicare HMO receive have to pay? 

I believe as well, and Mr. Neal, my colleague, also pointed out, 

that the myths were that we were going to be denying people 

health care. The facts now are becoming evident that a lot of our 

children who are adults who are having a hard time finding insurance are able to qualify for insurance through our—in other words, 

through their parents health insurance policy. That is now a right 

that we as parents have. 

The Affordable Care Act, I believe—and you may have the number—how many seniors is it that qualify for the $250 support check 

they received because they fell into this donut hole, what we call 

the donut hole of prescription drug coverage where all of a sudden, 

having received support from the Federal Government to help pay 

for their prescription drugs, they all of a sudden fell into this black 

hole where they no longer received support. So, last year, they received $250 to support them from the Federal Government under 

the Act. 

Do you know how many people, seniors got that? 

Secretary SEBELIUS. As of the year’s end, about 3 million seniors had received that one-time check. 

Mr. BECERRA. So, without that Affordable Care Act, 3 million 

seniors would have had to put out of pocket another $250 to pay 

for their prescription drugs. And we know for many of these seniors 

on fixed income that could have been the difference between makVerDate Nov 24 2008 07:24 Nov 14, 2011 Jkt 070873 PO 00000 Frm 00046 Fmt 6633 Sfmt 6602 I:\WAYS\OUT\70873.XXX 70873

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ing the payment for the rent or perhaps buying the food for the 

month as well. 

We know, for example, that small businesses are beginning to 

take advantage of the tax credit that they are offered under the Affordable Care Act. Do you remember how much the credit is for 

small businesses? 

Secretary SEBELIUS. It starts at 30 percent, but it graduates 

up, thirty percent of the cost of employees’ health coverage. And, 

yes, indeed, that is causing an up-tick for the first time in a very 

long time in small businessowners purchasing insurance coverage. 

Mr. BECERRA. So we hear the myth. The cry is that small businesses are going to find this impossible to deal with and that we 

will find small businesses losing the opportunity to offer coverage 

to their employees. The facts are beginning to show that, with this 

credit, $3 out of $10 in providing the cost of health care to your 

employees will be covered through the Affordable Care Act, that a 

lot of small businesses are beginning to take advantage of that opportunity, many for the first time being able to tell their employees 

that they will be able to offer health care insurance to them. 

But I think one of the greatest achievements of the Affordable 

Care Act—and I thank you for having pushed for this—is that the 

whole process of discriminating against individuals because of their 

health condition that we saw by insurance companies is now going 

to be something of the past. So discrimination based on preexisting 

conditions will now be prohibited. So we thank you for all that 

help. 

And I thank you, Mr. Chairman, for the time. 

Chairman CAMP. Thank you. 

Dr. Price is recognized. 

Mr. PRICE. Thank you, Mr. Chairman; and welcome, Madam 

Secretary, to the Committee. 

We hear a lot of talk on the other side about myths that don’t 

exist. In fact, there is a lot of truths to what they call myths out 

there. As a physician, when I talk about health care, I like to talk 

about principles; and one of the principles is accessibility to health 

care. Everybody wants citizens across this great land to have accessibility to health care; and, in fact, accessibility is decreasing for a 

variety of reasons. One of them is we think the bill that was 

passed. 

But when physicians aren’t able to care for people because of reimbursement or because of all sorts of regulatory apparatus or the 

lawsuit abuse issues that exist out there that aren’t being addressed, then patients can’t find a doctor. And, as you know, in 

your former State, in your previous State where you were Governor, there are doctors who aren’t taking new Medicare patients 

for a variety of reasons, but they are not. So new Medicare patients 

are having difficulty finding a physician. 

In terms of affordability, premiums are increasing for people because of this law specifically. I know that you don’t want them to 

say that, but that is the truth. I would suggest to you that the 

quality of care is harmed and threatened by this law because it removes the ability of patients and families and doctors to make 

medical decisions, and I look forward to working with you on that, 

because I know that is not your goal. I know that is not your goal. 


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You mentioned about Medicare Advantage that, because it was 

frozen, that that was a cut in the fees that were being utilized for 

Medicare Advantage. Do you remember saying that just about an 

hour ago? 

Secretary SEBELIUS. I said that it has been portrayed by a 

number of companies who deliver Medicare Advantage that we did 

not keep up with the cost of inflation and they would characterize 

it as a reduction. 

Mr. PRICE. Would the same hold true for SGR, for physician reimbursement rates which for the past 9, 10 years have not increased relative to inflation at all? 

Secretary SEBELIUS. I definitely know that there are physicians 

who consider that a cut, yes, sir. 

Mr. PRICE. There are a lot of physicians that I—one of my 

former colleagues that I talk to, and they say they are not going 

to be able to continue in the Medicare Program anymore because 

of reimbursement rates and a variety of things. There are some 

who believe that as access to physicians decrease it is because of 

the rules and because of the reimbursement, that patients won’t be 

able to find physicians in a large number and that the response of 

the Federal Government will be to make certain to require that 

physicians have to participate in the Medicare program or the exchanges and base that upon licensure. 

Does the Administration support requiring physicians to participate in the program as a component of being able to get licensed 

in the State? 

Secretary SEBELIUS. As you know, licensure is a State issue. 

We have never had that discussion. I don’t have any idea, again, 

where that conversation is coming from, but that certainly—— 

Mr. PRICE. Would you support the Federal Government requiring physicians? 

Secretary SEBELIUS. No, sir. 

Mr. PRICE. And the Administration would not, you don’t believe? 

Secretary SEBELIUS. I can speak for myself. No, sir. 

Mr. PRICE. Well, I am curious. 

Secretary SEBELIUS. I can’t speak for anyone else. 

Mr. PRICE. You represent the Administration. 

Secretary SEBELIUS. I have never heard that conversation 

raised by anyone. So I find it difficult to be asked what people 

think about it, because I don’t know. But licensure is a State issue, 

as you know, and that is not a conversation. 

Mr. PRICE. There are some people who support Federal licensure of physicians, correct? 

Secretary SEBELIUS. I assume so. 

Mr. PRICE. And there are some individuals who believe that the 

Federal Government ought to require physicians to participate in 

these programs as a—— 

Secretary SEBELIUS. Congressman, as you know, though, that 

was never a part of anybody’s conversation to establish somehow 

mandatory participation and anything would be tied to this program. That is just not part of the reality of the bill. 

Mr. PRICE. You wouldn’t support that? 

Secretary SEBELIUS. I have said no. 


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Mr. PRICE. Okay. Medicare, in essence, price fixes the reimbursement that physicians are able to receive for services provided 

to patients. Do you believe that that is an appropriate thing, as, 

of necessity, prices will have to be decreased? 

Secretary SEBELIUS. Well, I think what is very appropriate is, 

for the first time, decoupling what physicians are paid from what 

they do in terms of volume of procedure. And that delivery system 

reform is something that I think has been long overdue. It will 

more appropriately provide physician payment for care delivery. 

Mr. PRICE. You think physicians ought to be able to charge outside of the reimbursement that they are provided by the Federal 

Government? 

Secretary SEBELIUS. To the patients? 

Mr. PRICE. Yes. 

Secretary SEBELIUS. They can in some instances, and in a lot 

of instances they cannot. And I think that is part of the Medicare 

pact, is that patients will not have additional expenses beyond 

their co-pays and payments. 

Mr. PRICE. Thank you, Mr. Chairman. 

Chairman CAMP. Thank you. 

Mr. Buchanan is recognized. 

Mr. BUCHANAN. Thank you, Mr. Chairman, for this important 

hearing; and, Madam Secretary, appreciate you being here today. 

I represent southwest Florida—Sarasota, Bradenton area. 

I want to talk a little bit about tort reform. I have noticed the 

last couple of days the President mentioning that, and he understands the importance of it. Could you just expound for a minute 

on that, and then I have got a couple of questions I want to follow 

up with. 

Secretary SEBELIUS. Certainly. 

Congressman, last year, the President directed our agency to use 

the authority we had to implement a series of grant programs 

which are now in place in 20 different areas, some with health systems, some with States, to look at a variety of measures that could 

increase patient safety, reduce frivolous lawsuits, reduce liability 

premiums, and ensure fair compensation. So we have planning 

grants and demonstration grants around the country and are monitoring those closely. 

This year’s budget includes a recommendation that under the Department of Justice there be an additional $250 million in grants 

to States to do health courts, safe harbors, early disclosure, and 

offer programs. 

Mr. BUCHANAN. All of our time is limited. 

Let me mention a couple of things. 

One, you are aware of the figures CBO came up with, a savings 

of $55 billion that we would save if we got incorporated in terms 

of the health care bill. 

But let me just say, as it relates, I work with our medical society 

because it is big. I have probably more seniors than any other district in the country, around 280,000 55 and older. But in dealing 

with a lot of doctors I know in terms of one neurosurgeon he is paying $200,000 a year in medical liability insurance. 

One of the lawyers—we don’t—this is back a couple of years 

ago—was telling me that he has a practice in bankruptcy. And I 


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was asking him who his clients were, because we don’t have a lot 

of large companies there. He said, primarily doctors. They are looking for asset protection. So I talked a little bit more, and he said 

many of the doctors come to him simply because they have practiced as surgeons for 20 years, they have created some net worth, 

and they are afraid that is exposed every day that they do any kind 

of surgery. 

And then also testing in terms of defensive medicine, people are 

very concerned. I have got to believe you talked to doctors and others. Everybody gets a test. Everybody gets a CAT scan, almost. And 

the cost that is there because of defensive medicine is really affecting the cost of doing business. And I am sure in Medicare, we are 

spending a lot more money than we need to. 

So I know it is something that you are looking at. I would just 

say we need to look at that much more aggressively. I don’t know 

of any doctors that don’t think it is a big problem. 

The other thing I just want to say in terms of the Affordability 

Act is, I don’t know—you know, I brought this up, and I continue 

to bring it up—what businesses that you are talking to, but I would 

love to have you come down to Sarasota, Bradenton and talk to our 

businesses. 

I don’t know—and I have been in business for 30 years. I chaired 

the Florida Chamber. I don’t know of any businesses that have any 

confidence that their premiums, number one, none of them are 

going down. Most of them are going up. One guy, a gentleman I 

talked to the other day, went up a million and a half. Another— 

but it is typically 20 percent, 25 percent. Then they look for ways 

to cut their expenses. 

If we are really looking to try to grow jobs as we need to—that 

is my number one priority—we have got to deal with bending the 

curve on health care for companies. I know the health care program we got out there, many feel that is a large entitlement, but 

it does little or nothing for small business. And I am just telling 

you the businesses are just being strangled; and many times they 

have got to pass it on to families, the working families in our area. 

So when you talk about the Affordability Act, tell me what businesses, based on what research you have done, are really seeing 

any savings. 

Secretary SEBELIUS. Well, Congressman, I think there is no 

question that particularly the small businessowners have been at 

the vortex of the cost increase in health care, which is, as you 

know, exceeding all other inflationary costs. And what we find— 

you know, I saw this in Kansas, I saw it across the country, small 

businessowners often pay 18 to 25 percent more for exactly the 

same coverage that the large employers have because they don’t 

have the market strength. They won’t see a big relief in that market strength until they have the option of the new exchanges, 

which have a much larger purchasing pool and much more ability 

to actually leverage those costs for providers. 

Mr. BUCHANAN. When do you see those exchanges—— 

Secretary SEBELIUS. Right now they are experiencing the assistance with employee coverage of the tax credits. And we are seeing in the Kansas City area, Blue Cross Blue Shield has said their 

small business market has actually increased for the first time in 


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years because people are linking the tax credit and coming back 

into the marketplace. 

Mr. BUCHANAN. Let me just say I have Blue Cross, we work 

a lot with Blue Cross, my companies have Blue Cross, 25 percent 

a year for the last 5 or 7 years. Nobody believes, other than you 

and maybe a few others in the Administration, that health care 

costs are coming down. They don’t see it. I walk into businesses 

and they will show me their bill just went up 22 percent. But I just 

want to bring that to your attention. 

Chairman CAMP. Time has expired. Mr. Doggett is recognized. 

Mr. DOGGETT. Thank you, Mr. Chairman. And thank you, 

Madam Secretary. I know a number of our Republican colleagues 

think they can defeat health insurance reform through anecdote. 

But fortunately, the facts really support the testimony that you 

have and the reform that we have underway. 

While I think that Dr. Berwick did an outstanding job last week 

in explaining the increased costs that seniors will face if what they 

call repeal and what I would call the Republican Senior Insecurity 

Act were to be approved. It means seniors pay more out of their 

pockets for prescription drugs. It means seniors pay more out of 

their pocket for a cancer screening. It means seniors pay more out 

of their pocket for health insurance premium increases. It means 

that seniors pay more out of their pocket for copays. And all we get 

out of that, other than seniors having to pay more, is that the solvency of the Medicare Trust Fund declines by over a decade if they 

are successful with their Senior Insecurity Act. 

I want to touch on some of the anecdotes, though, as well that 

they mentioned about Medicare. As far as the availability of physicians to seniors, something that we provide incentives for, in fact 

availability for all of Americans through our primary health care 

incentives in the new act, isn’t it correct that last year 96 percent 

of American physicians had Medicare participation agreements? 

Secretary SEBELIUS. I think that is a correct number. 

Mr. DOGGETT. So there may be some anecdotes out there, but 

it is according to CMS, almost all physicians in America have 

signed up to participate in Medicare. And I would offer for the 

record at this point a report prepared by our Ways and Means 

Democratic staff concerning Medicare beneficiaries reporting reliable access to physician services, Mr. Chairman. 

Chairman CAMP. Without objection. 

[The information follows: Mr. Doggett] 


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Mr. DOGGETT. And it shows that actually while this is an issue 

we need to keep working on, that seniors tend to have more access 

than some people do within the private health insurance system. 

While the focus on seniors is very important, I want to also be sure 

we have touched on the effect of this important health insurance 

reform that you are helping to implement on the rest of the population. If the Republicans were successful in satisfying the desire 

of the big insurance monopolies to undermine health insurance law 

reform, about how many young people age below 26 would lose 

health insurance coverage that they gained through the reform? 

Aren’t we talking about a couple million or so? 

Secretary SEBELIUS. Yes. Yes, sir. I think 2 to 3 million are the 

up to 26-year-olds who now can stay on their family’s policy. 

Mr. DOGGETT. That didn’t have it before. 

Secretary SEBELIUS. That is correct. 

Mr. DOGGETT. So they can call it repeal, but to a young person 

who is counting on that insurance, it means terminate their insurance coverage. What about the study that your Department did 

concerning preexisting conditions? Do you have an estimate of 

about how many Americans will now, if they are successful with repeal, will now see their coverage either terminated or limited as a 

result of a preexisting condition if we don’t have the guarantees 

that this new health insurance law provides? 

Secretary SEBELIUS. It is close to half of our population has a 

preexisting condition that by insurance companies’ terminology either changes their rate or actually could lock them out of the system. 

Mr. DOGGETT. So there are millions of Americans that really 

have a stake in not going back to the old system—— 

Secretary SEBELIUS. Hundreds of millions. 

Mr. DOGGETT [continuing]. Of letting the insurance company 

decide that you are not going to get insurance, or your insurance 

will be largely meaningless because of some preexisting condition 

that they have defined. 

And then as it relates to our small businesses, if they are successful in undermining health insurance reform, about how much 

in tax subsidies will our—tax incentives for providing health insurance coverage, about how much will small businesses across America lose? 

Secretary SEBELIUS. Well, we have right now about 4 million 

small businessowners who qualify for the graduated tax incentives 

that provide some help for them to provide employee coverage. So 

we will know at this year’s tax time how many actually took advantage of that. But there are 4 million potential businessowners. And 

again anecdotally, we know that a lot are beginning to connect 

with those benefits and come back into the marketplace. 

Mr. DOGGETT. Thank you very much for the important work 

you are doing in implementing this act. I believe we will see the 

original objectives of this act fulfilled with the work that you are 

doing. 

Chairman CAMP. All right. Thank you. Mr. Smith is recognized. 

Mr. SMITH. Thank you, Mr. Chairman. Thank you, Madam Secretary, for sharing your expertise and insights here today. 


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I have heard concerns from constituents, one in particular who 

has a diabetic child. And this is not an anecdotal scenario, but the 

concern from this parent is that the employer-provided plan under 

which her family is covered may be subject to the so-called tax on 

Cadillac plans. Is that a conceivable scenario? 

Secretary SEBELIUS. I assume there are plans that will be subject, the very high benefit plans could be subject to a tax. 

Mr. SMITH. Can you paint a picture of what that might be? 

Secretary SEBELIUS. According to the economic experts, the 

goal really is to again slow down the growth of health care costs 

and targeted plans that are significantly in excess of an average 

plan, to say that over a course of the next 4 or 5 years before that 

tax is implemented—— 

Mr. SMITH. What will the threshold be, basically? 

Secretary SEBELIUS. I don’t want—$30,000 I think, but I really 

don’t want to give you incorrect information. I would rather do that 

in writing. I am sorry. 

[The information follows: Did not receive] 

Mr. SMITH. Okay. But all plans above that level? 

Secretary SEBELIUS. Up until that threshold, wherever it ultimately was set in the bill, would again be available for the tax deduction that every other plan gets. The goal is to either apply taxes 

or discourage plans from offering the so-called Cadillac benefits. 

Mr. SMITH. So then above that threshold they would be subject 

to the tax? 

Secretary SEBELIUS. That is correct. 

Mr. SMITH. All plans would be subject to that tax? 

Secretary SEBELIUS. That is correct. 

Mr. SMITH. Okay. Now, it was characterized earlier that shopping for a plan may be considered a penalty. And I understand the 

complexity and the elderly perhaps having to review some of the 

complex conditions of various plans. I certainly understand that. 

But I would hate for the American people to be prohibited from 

shopping around. And our Tax Code basically does prohibit shopping around by requiring taxes being paid on something that is a 

health care benefit, health insurance benefit that is taken outside 

of an employer. 

Do you see any accommodation eventually of how we might be 

able to accommodate an individual being able to shop around as he 

or she might wish? 

Secretary SEBELIUS. Actually, the Affordable Care Act makes 

that not only feasible, but I would say encourages that with the 

State-based exchanges that will be up and running in 2014. For the 

first time ever, an individual, entrepreneur, small businessowner 

will have available, as one of a myriad of choices, two or three competitive programs with benefits offered that are in a large pool 

marketplace which he or she doesn’t have to join. 

Mr. SMITH. Would they be tax-deductible? That health insurance benefit policy premium, would that be tax-deductible? 

Secretary SEBELIUS. To the employer, yes, sir. 

Mr. SMITH. No, for someone wishing to purchase it. 

Secretary SEBELIUS. An individual? 

Mr. SMITH. Yes. 


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Secretary SEBELIUS. That did not change in the Tax Code. 

There is an individual—again, I don’t want to speak out of school, 

and I apologize, I don’t know the individual tax rate. There is a 

certain portion of health care that is deductible, but I don’t know 

where it stops. 

Mr. SMITH. Okay. The concern is that the personal prerogative 

in many ways, and the courts are weighing in on part of this, but 

the personal prerogative relating to health insurance may be eroding given the mandates, the individual mandate, and other things. 

And I don’t want to spend our time today on the legal intricacies 

of the individual mandate. But I am concerned that in the aggregate maybe some of the priorities aren’t in the proper order. For 

example, the SGR, we are talking about bipartisan concern, took 

a lower priority than the Affordable Care Act. And that is very discouraging when we know that there are issues out there that need 

to be addressed. Yet that was outside of the Affordable Care Act. 

And we can speculate on the reasons why, but it is very, I think, 

concerning. 

Now, adding 16 million people to the Medicaid rolls I think has 

not only short-term concerns but long-term concerns as well. So I 

offer that up, if you might respond outside of today’s meeting. I 

know my time has expired. But if you might be able to offer how 

we could encourage fewer Medicaid beneficiaries down the road 

rather than more. 

Thank you. 

Chairman CAMP. Thank you. Mr. Thompson is recognized. 

Mr. THOMPSON. Thank you, Mr. Chairman. Madam Secretary, 

thank you for being here. You know, an important part of the 

health care delivery system in my district, and a very important 

job creator, are the community health centers. And not only do 

they create jobs and provide great health care, I think they are reflective of the change in the delivery of health care. They deliver 

incredibly important primary health care, preventive care, they do 

it in a cost-effective way. And it is very, very high quality. It is, 

I think, great that we are here today talking about these things. 

At the same time, our Republican colleagues are on the floor debating a continuing resolution that would cut over $1 billion from community health centers across the country. 

As I understand this, if this were to become law, that nearly 130 

community health centers across the country would have to close 

their doors. It would mean thousands of lost jobs, and I believe it 

would lead to a very steep increase in health care costs. Because 

these folks wouldn’t have these facilities to go to; they would be 

seeking their care in emergency rooms and other inefficient delivery systems for this type of health care. And again, it would mean 

a huge loss of jobs. 

Do you read this the same way that I do? And would the President, if this thing were, this misguided effort were to pass Congress, would the President allow that to become law? 

Secretary SEBELIUS. Well, Congressman, I know that the President and I share your not only support of the community health 

centers as being an absolutely critical part of the public health infrastructure in this country, but data will show without doubt that 

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tainly through the doors of an emergency room. Along with a community health center of course is the National Health Service 

Corps, which is training additional primary care docs, nurse practitioners, mental health technicians, dentists to be in the community 

health centers. So the complication of access, which was mentioned 

by one of your colleagues earlier, would be severely hampered and 

compounded by any closure of community health centers. And certainly the physician pipeline and the health care pipeline that is 

so important, regardless of whether we had a new Affordable Care 

Act or not, we have a looming shortage of health care providers. 

And I think anything done to either hamper that training pipeline 

or eliminate these critical centers of care delivery is a huge step 

backward. 

Mr. THOMPSON. Thank you. I am glad you brought up the National Health Service Corps, because that was my second question. 

And as I understand this, the continuing resolution cuts over $140 

billion from that program. And not only does that truncate the 

pipeline, and everybody knows that we need more providers, and 

when you represent a district such as mine or any rural district in 

the country, it is very difficult to attract providers. And this is one 

of the many great things that the health care reform measure put 

in place to help us in underserved areas. And even urban underserved areas suffer from this. 

So these cuts on the heels of all of the gains that we have made 

are a bit hard to take. And I also want to raise the issue of the 

increase in reimbursement rates. Because access has been raised 

today. The amount that we pay Medicare providers has been raised 

today. And the health care reform bill increased reimbursement 

rates to primary care physicians, which is extremely important if 

we are ever going to get our arms around the soaring costs of 

health care. And there was also an increase for rural providers, 

which is very, very important. 

And what can we expect if these increases in these two critical 

areas are not realized? 

Secretary SEBELIUS. Well, I think, Congressman, you have 

identified, again, areas that we know are missing. If we truly are 

going to shift focus into a wellness and prevention and health system as opposed to a sickness care system, we are lacking the pipeline of primary care providers. We are also lacking the primary 

care providers who can be essential in the health home concept, 

which is built into the Affordable Care Act, which we know delivers 

better care to chronically ill patients, can dramatically decrease the 

number of hospital visits by wrapping care around patients. And 

that will be hard to fulfill. 

So I think that the shift in focus to addressing care before it gets 

chronic, addressing appropriate care in rural and urban areas is severely jeopardized by not only the lack of funding for a new provider pipeline and community health centers, but certainly the incentive pay for rural health providers and others who serve in critically underserved areas. 

Chairman CAMP. Thank you. Ms. Jenkins is recognized. 

Ms. JENKINS. Thank you, Mr. Chairman. And I just want to 

thank my fellow Kansan for joining us today. While we have disagreed about the repeal of the entire health care law, the AdminisVerDate Nov 24 2008 07:24 Nov 14, 2011 Jkt 070873 PO 00000 Frm 00056 Fmt 6633 Sfmt 6602 I:\WAYS\OUT\70873.XXX 70873

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tration has recently decided it agreed with Republican Members in 

Congress that the 1099 requirement should be repealed. However, 

as I understood the budget language, it would only repeal the requirement for goods, but keep it for services. And this seems to 

contradict the President’s strong support for repeal. 

So I was just hoping you could clarify the position of the Administration and provide any other caveats related to 1099s that we 

will need to know as we continue with our efforts this week on 

1099s. 

Secretary SEBELIUS. Well, I think that the President has made 

it clear not just recently, but for months, that he very much supported elimination of the 1099, which on balance has far more burdens than benefits for small businessowners and supports, as you 

know, the 1099 repeal passed on the Senate side. We supported 

that effort. I know there is consideration on this side. So we look 

forward to working with you to eliminate that burdensome requirement. 

Ms. JENKINS. But did I understand the language right, that he 

has just taken it out for goods and not services in the budget? 

Secretary SEBELIUS. I am not sure. 

Ms. JENKINS. Okay. 

Secretary SEBELIUS. You, Congresswoman, are an accountant, 

I am not. So I hesitate to—my understanding was we favored the 

entire repeal. I didn’t realize there was a delineation. 

Ms. JENKINS. Okay. Great. 

President Obama stated to the American Medical Association 

back in 2009 that he doesn’t support caps on medical liability 

claims. However, in his State of the Union Address just a few 

weeks ago he was willing to take a look at other ideas to bring 

down the costs, including medical malpractice reform to rein in 

these frivolous lawsuits. 

I am hoping just to get a sense from you today that despite your 

prior experience in working as the Director of the Kansas Trial 

Lawyers Association, you, like the President, have come around to 

the idea that liability reform is needed and cannot only decrease 

the deficit, but can also ensure continued access to care for Medicare patients, particularly in our rural areas. 

As you know, Kansas currently has a $250,000 cap on noneconomic damages. That was enacted back in the late ’80s. Prior 

to passage of the cap, Kansas liability premiums paid by physicians 

had increased to among the highest in the country. So given your 

experience as our insurance commissioner and Governor, do you believe that this cap served the State of Kansas well over the last 20 

years? Do you think it might be a good model for the country to 

use? And would you support a specific cap such as our $250,000 

cap? Or what other reforms do you think might work well? 

Secretary SEBELIUS. Well, I, like the President, do not support 

caps, which I think unfairly penalize injured patients. I do support, 

and have aggressively followed his directive in terms of exploring 

lots of other possibilities for liability reform. 

As you may know, across the country there is no direct connection between those States which have instituted various mechanisms and their liability payments. In fact, the data is hardly conclusive. One of the areas that is being funded right now by our ofVerDate Nov 24 2008 07:24 Nov 14, 2011 Jkt 070873 PO 00000 Frm 00057 Fmt 6633 Sfmt 6602 I:\WAYS\OUT\70873.XXX 70873

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fice and is enhanced by the President’s 2012 budget is the so-called 

safe harbor approach, creating a set of protocol whereby a physician would be essentially immunized from liability suits going forward if the practice fell within that. It shows a lot of promise. 

There are various health systems that have adopted that. And 

those are the kinds of reforms that I think the President supported 

when he was a Member of the U.S. Senate and is encouraged about 

supporting going forward. 

Ms. JENKINS. Okay. And then maybe just finally, as a followup to Congressman Buchanan’s line of questioning as it relates to 

the Justice Department grants to provide incentives for State medical malpractice reform, I was just curious if you will be supporting 

Kansas being chosen as one of the demonstration grants. 

Secretary SEBELIUS. Well, since, as you say, Kansas has had 

full tort reform since the ’80s, it is difficult to know what it is that 

they will be proposing. But I assume the Justice Department would 

certainly look at whatever it is and see if that is meritorious. 

Chairman CAMP. All right. Thank you. Mr. Blumenauer is recognized. 

Mr. BLUMENAUER. Thank you, Mr. Chairman. Thank you, 

Madam Secretary. I appreciate you and Dr. Berwick helping focus 

on what has actually happened in an area of deep concern, Medicare Advantage. It was comforting in the Budget Committee to 

hear him talk about how enrollment actually is increasing, that 

premiums are decreasing. And it appears that benefits are stable 

or even increasing. 

But I would like to just have you walk us through one other area 

of controversy, because some of my friends talk about hundreds of 

thousands of people, Medicare beneficiaries enrolled in Medicare 

Advantage who must change their plans due to health care reform. 

Now, my understanding is that this shakeout was a result of bipartisan legislation that we passed in 2008, and actually passed by a 

large overwhelming bipartisan majority over the veto of President 

Bush that has prompted a reassessment in dealing with some of 

the Medicare Advantage private fee-for-service plans that were of 

poor quality and had significant overpayments. 

Am I correct that the shakeout is due to prior legislation and is 

dealing to try and contend with some of the problems of delivery 

and overcharge? 

Secretary SEBELIUS. That is correct, Congressman. The Medicare fee-for-service, as you say, were not only some of the highest 

cost plans with the highest cost share for beneficiaries, but had the 

lowest outcomes value in terms of the whole spectrum of Medicare 

services. And as you know, one of the things that was done with 

the passage of the Affordable Care Act that you and your colleagues insisted on was not only to make sure that Medicare beneficiaries had access to choices like Medicare Advantage, but also 

that we ensured quality. So part of the new program is instituting 

the five-star rating for Medicare Advantage based on health quality. And in fact we are seeing already consumers appreciating that 

notice, because we have had a 5 percent increase in the number of 

beneficiaries who are enrolling in four- and five-star plans, giving 

consumers for the first time some real ability to choose plans based 

on health outcomes. 


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Mr. BLUMENAUER. Well, I must say I deeply appreciate what 

the Department has done in the administration of the new health 

care reform. I come from an area that is high value, low cost, and 

I appreciate the work that is being done to try and zero in on how 

we deal with some of these regional disparities, but that is based 

on rewarding value, not being penalizing at all. But it does seem 

to me that this is an area that all of us on the Committee ought 

to embrace. It is the reform of Medicare. And you were tireless in 

working with us to make sure that this legislation had virtually 

the entire smorgasbord of proposed reforms. They weren’t as strong 

perhaps as some of us would have liked in some areas, but isn’t 

that an argument for our working together to strengthen and accelerate the reforms rather than to put sand in the gears? 

Secretary SEBELIUS. Well, certainly you and your colleague Mr. 

Kind and others were, I would say, ferociously insistent during the 

course of this discussion that we not just add money to the system, 

that we actually look at ways that higher quality care could be delivered at a more effective rate, and capture some of the best practices around the country. So that is definitely a part of this reform 

effort, and we have an opportunity for the first time to accelerate 

those best practices, to highlight them, and to actually implement 

them across the system if they are shown to work. 

Mr. BLUMENAUER. Well, I am happy to convey again the commitment from our newly elected Governor, Dr. John Kitzhaber, to 

work with you so that our State can be a laboratory to accelerate, 

squeeze extra value, improve performance, and perhaps help with 

a national model that would make people more comfortable with 

the direction we are on. The fact is if we don’t change the direction 

we are on, all the budget cutting isn’t going to make any difference. 

Thank you so much. 

Chairman CAMP. Thank you. Just one moment. I think we are 

trying to get an answer here. We are going to reduce time to 3 minutes. And I want to thank the Secretary for her willingness to stay 

for just a few extra minutes. We just have 5 Members left who may 

inquire. So we will reduce the time to 3 minutes. 

Mr. Paulsen may inquire. 

Mr. PAULSEN. Thank you, Mr. Chairman. And Madam Secretary, thank you for being here today as well. 

I remember a couple weeks ago when the President had his State 

of the Union speech he talked about winning the future. And the 

budget that he also laid out claims one of his highest budget priorities is encouraging innovation. And I couldn’t agree more, coming 

from a State like Minnesota, where we have a high industry in 

medical device technology, for instance, which is very, very critical 

for jobs, critical for health care, and innovation that is there. 

Knowing that that is the message the President delivered not only 

in the State of the Union but also in the budget, why would we 

place a new $20 billion tax on medical technology products and device manufacturers? I am very concerned about that. You know, I 

was hoping there might be a repeal mechanism as a part of the 

budget, for instance, to kind of match some of the words that we 

heard recently. Why would we do that new tax? 

Secretary SEBELIUS. Well, I think the President believes certainly in accelerating innovation, and there is no doubt that medVerDate Nov 24 2008 07:24 Nov 14, 2011 Jkt 070873 PO 00000 Frm 00059 Fmt 6633 Sfmt 6602 I:\WAYS\OUT\70873.XXX 70873

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ical innovation is a major component of that. I think the balance 

is that as we move forward, the medical device companies will also 

have access to a large pool of new customers who they don’t currently serve and that the additional costs will be balanced amply 

by the additional customers in the pool of insured Americans. 

Mr. PAULSEN. Well, and I have heard that argument before. I 

know that the vast majority of device procedures are not elective, 

they are performed on older patients, for instance, the majority of 

whom have insurance with Medicare. And in Massachusetts, which 

has been mentioned this morning, it is the model upon which much 

of the new health care law was built. There was no increase in device utilization like you suggest. I just know that this tax is really 

going to affect, I think, the competitiveness of our companies. I 

tour these companies every week. We all know the larger companies that exist, and they may be able to withstand it. But there are 

smaller companies that are not yet profitable that are really working on these life-saving technologies that are going to be, I think, 

stifled to create new innovation. I think that is going to be a problem. And they have told me directly that they are worried about 

having to ship their research and development overseas. And I 

think this spills right into the mantra we have heard from the Administration about shipping jobs overseas. 

So I don’t know if you have any other feedback in there, but I 

know it is absolutely going to be a concern going forward. And I 

think if we eliminate this pipeline of venture capital and innovation, it is going to be very difficult, if not impossible, to get back. 

Secretary SEBELIUS. Well, again, Congressman, we share your 

view that accelerating innovation is important. It is one of the reasons that assets to the Food and Drug Administration and some of 

their translational science is so critical, that they have developed 

a new pipeline to accelerate devices coming to market as well as 

ensuring the safety of those devices. So we certainly share the balance, and think again that the additional consumers will again 

compensate for the modest tax increase. 

Chairman CAMP. Thank you. Mr. Kind is recognized. 

Mr. KIND. Thank you, Mr. Chairman. Madam Secretary, thank 

you for being here, and for your patience. And thank you for your 

leadership in the implementation of the Affordable Care Act. Outside of the President, you probably have one of the most difficult, 

yet most important jobs in this town today. And that is moving forward on health care reform. We are having a discussion all week 

long about decisions we have to make in order to get these budget 

deficits under control. But unless or until we figure out a way to 

bend the cost curve in the largest and fastest growing area of 

spending at the Federal, State, and local level, rising health care 

costs, everything else would be for naught. 

Now, I want to take you back to the conversation you were just 

having with Mr. Blumenauer about changing the way we pay for 

health care so it is value, not volume-based. And this is crucial, it 

is important, because studies show that we are spending close to 

one out of every three health care dollars in this country on tests 

and procedures that aren’t working. They are not improving patient care. And oftentimes because of the overutilization or the 


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overuse, too many patients are being left worse off rather than better off, which is all of our goal. 

Now, there are tools in place in health care reform to help us 

make this conversion, but it is going to take time. You don’t change 

the way you pay for one-fifth of the entire U.S. economy and the 

largest area of spending in the Federal budget overnight. And one 

of those tools was something I worked with Representative Braley 

and Senators Cantwell and Klobuchar, and that is the value-based 

modifier for physician reimbursement. That will take effect in 

2015. But on January 1 of next year, I think you are supposed to 

start publishing information on moving forward on this new value 

index for physician reimbursement. 

I am wondering if you could just give us an update on where that 

is right now, and if work has begun in that endeavor. 

Secretary SEBELIUS. Sure. I am happy to do that. As you know, 

there is an Institute of Medicine analysis underway directed to look 

at the value-based index, which I think is a critical component of 

moving toward a value-based payment system. We should have results back this spring, later this spring. We will be then sharing 

those results and having an extensive dialog as we move toward a 

system. 

But I would suggest, Congressman, in addition to that one mechanism, which is important, I think that the work underway with 

providers across this country who are enthusiastic about the accountable care organization model, where they can actually have a 

different model of delivery, about the bundled payment opportunities for released patients to have better care and fewer readmissions—— 

Mr. KIND. And the medical homes and the other tools that are 

in the bill. 

Secretary SEBELIUS. All of those I think are added together to 

have really the biggest transformation of the delivery system that 

we have ever seen. 

Mr. KIND. And that is what we need is this vast experimentation to start happening and sooner rather than later. And I want 

to thank you for coming to La Crosse, Wisconsin, last year, visiting 

with Gunderson Lutheran, learning more about their highly integrated and coordinated patient-focused care system that they have 

set up. And these are the type of models of care that we should be 

trying to duplicate nationwide to get a grip on the rising costs in 

the health care system. Again, thank you for your leadership. 

Secretary SEBELIUS. Sure. 

Chairman CAMP. Mr. Berg is recognized. 

Mr. BERG. Thank you, Mr. Chairman. Secretary—— 

Secretary SEBELIUS. If I can find you. 

Mr. BERG. I am here. And obviously, being from the Midwest, 

it is nice to have you here. I guess my question really revolves 

around some of the simplicity maybe in the Midwest. In North Dakota, obviously our legislature is kind of at a standstill, waiting for 

a Supreme Court decision on the health care bill. And so I guess 

I just quickly, you know, where is that at, and what are you doing 

or can be done to expedite that? We need a decision. It is just wasting a lot of time. 


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Secretary SEBELIUS. Well, as you know, the attorney general 

from Virginia has asked the Supreme Court for an expedited decision. They will make a decision I assume fairly quickly whether or 

not to grant cert on that or not. And you will then have some clarity. 

Mr. BERG. The other point that I guess I would like to make is 

on the insurance exchange, we need flexibility in that. What are 

you doing to provide the States flexibility in the insurance exchange? 

Secretary SEBELIUS. Actually, there is enormous flexibility 

built into the original exchange model and ongoing. I am working 

very closely with Governors, have met with all the new Governors, 

have met, as I say, there are planning grants out to States, but we 

think all kinds of models will work, and it should be a State-based 

model that works in their marketplace. 

Mr. BERG. Thank you. The final thing really is obviously we 

have got a lot of manpower tied up with the health care bill. And 

at the State level they are starting to see other work not as timely 

as it was in the past. And, you know, obviously if you are shifting 

work—again, I understand the workload that you have. You know, 

what are you doing to ensure that the normal work is getting done? 

And what assurances can you give back to the State that we are 

going to stay on the timelines that we were on before? 

Secretary SEBELIUS. Well, Congressman, we are working overtime to try and fulfill the mission that we have, which is critical 

health care services and essential human services, and I think that 

our staff has been not only timely, but enormously user-friendly. As 

a former Governor, I have really come to the office as a recipient 

of HHS dialog in the past. And I think that particularly our CMS 

folks, who are the ones who are closest in touch with often States, 

have been sending teams out to States, sitting down with new Governors, analyzing budgets, trying to do an enormous amount of 

technical assistance and support in a very timely fashion. Because 

we know people are trying to get their arms around their new 

budgets and their services. 

Mr. BERG. Thank you. 

Chairman CAMP. Thank you. Mr. Pascrell is recognized. 

Mr. PASCRELL. Two points, Mr. Chairman. Madam Secretary, 

thank you for the day. First is if we end Medicare, because that 

is the only alternative on the table right now, and that is to provide a voucher system, whereby seniors would be given a voucher 

and they would take care of their health care. 

Have you analyzed the depth or the consequences of us moving 

to the Republican plan of vouchers? 

Secretary SEBELIUS. I have not to a great extent. But I have 

certainly seen a model where individuals in the marketplace attempt to purchase their own coverage, and that is typically the 

least effective, most expensive kind of insurance arrangement. 

Mr. PASCRELL. Yeah. So those seniors are not only going to pay 

more money, but they are also not going to get the health care that 

is provided in the Health Care Reform Act. 

Second issue is the work force. What is the alternative plan to 

doing what we have done with regard to providing the providers 

with more doctors, more nurses, et cetera? That is very specific. 


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The work force proposals in health care reform are very specific to 

the issue about the shortage. Could you tell me what the alternative is that we have been asked to look at? Because if you are 

simply going to say the Health Care Reform Act doesn’t do what 

we wanted it to do, then what is the other side telling us about— 

how are we going to address the shortage in health care providers? 

Secretary SEBELIUS. Congressman, I don’t know that I can answer that question. What I can tell you is that the resources provided for work force first in the Recovery Act, amplified in the Affordable Care Act over time, and then followed up on in the President’s budget are essential to serving the health needs of Americans. This is an issue that has been long overlooked. We need a 

pipeline of health care providers, and this act plays an essential 

role in providing that pipeline. 

Mr. PASCRELL. So we all agree there is a shortage, but there 

is only one proposal on the table now that is going to address that 

proposal. So therefore, much of the criticism is not only a myth, but 

a fraud. 

Thank you, Madam Secretary. 

Chairman CAMP. Thank you. We have two Members left, and 

then this hearing will be over. Mrs. Black is recognized for 3 minutes. 

Mrs. BLACK. Thank you, Mr. Chairman. Madam Secretary, I 

know that there have been statements, and actually I guess in the 

health care bill that there will be an opportunity for a wide variety 

of plans through the exchanges, including those featured in the 

health care savings accounts. And having been in the health care 

field for over 40 years now, I think that one of the mistakes that 

we made in the health care field was taking the consumer out of 

the driver’s seat so that they really don’t understand what the cost 

of care truly is. So I believe that health care savings accounts certainly will help us, for those that it is reasonable, to put them back 

in the driver’s seat so they do understand what the cost of their 

care is, and they will have more freedom and choice there. 

While the health care law really does not include a blanket prohibition on exchanges offering HSA programs, it does contain some 

new restrictions on deductibles and cost sharing that would prevent many of the current HSA plans from being offered. More importantly, the law does not specify that cash contributions made to 

the HSA plans will be counted toward a new minimum Federal requirement under the new actuarial value metric. That is in section 

1302(D) of the statute that states very clearly that these parameters will be defined, and I quote, ‘‘under regulations issued by the 

Secretary.’’ 

In other words, it does not state it will determine whether they 

will be able to offer HSA coverage. It is the Secretary yourself that 

will be making those rules and regulations. And I would like for 

you to speak to what the intent of that is and if you think that the 

HSA plans are a good option as we move forward. 

Secretary SEBELIUS. Well, Congresswoman, I know that there 

is every opportunity to include in the State-based plans, plans that 

are coupled with HSAs. And the preliminary analysis is that the 

vast majority of those plans which are in the market right now 

would certainly meet any kind of qualifications. Again, the States 


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will be the ones to make the preliminary choice. So we are not at 

the point of that yet. But I understand the interest in HSAs being 

a component of the exchanges going forward and there is certainly 

no prohibition in that. 

Mrs. BLACK. Well, it does say that they will be defined, the parameters will be defined under the regulations issued by the Secretary. So do I understand you saying you would support regulations that would promote HSA plans? 

Secretary SEBELIUS. Well, we will certainly have regulations 

that allow for that to be an option if the State chooses that as an 

option. There won’t be any mandatory requirement for States. 

Chairman CAMP. All right. Thank you. Our final questioner, Mr. 

Heller, is recognized for 3 minutes. 

Mr. HELLER. Thank you, Mr. Chairman. Last but not least. 

Thanks for your patience. 

I guess it is fair to say that you are familiar with the access to 

affordable care demonstration that is part of the health care bill? 

Secretary SEBELIUS. Yes. 

Mr. HELLER. For those who don’t know, it is a demo program 

that will allow up to 10 States to develop State-based nonprofit 

public-private partnerships that provide access to comprehensive 

health care services to the uninsured at a reduced fee. And this 

demonstration model, which is an extremely successful program 

that started in my State in Nevada, it is called Access to 

Healthcare Network, or AHN. Mrs. Rice has been in my office numerous times, done a great job. Worked in northern Nevada, moved 

it down to southern Nevada. And I know she has met with your 

staff also, trying to help everybody understand how this demonstration program works. It is my understanding, though, that 

this demo is not funded. And there is no sign that the HHS will 

act on it any time soon. Is that reasonable or is that—can you respond to that? 

Secretary SEBELIUS. Well, Congressman, there are numerous 

provisions of the Affordable Care Act which were authorized but 

not funded. And we look forward to working with Congress about 

those critical programs. 

Mr. HELLER. AHN, the Access to Healthcare Network, is a medical discount plan. And it has provided quality, affordable medical 

care to 10,000 uninsured Nevadans. It is a shared responsibility 

model. The entire community, hospitals, providers, clinics, the insurance industry, employers, and even the banking industry have 

put aside what differences they may have to help the uninsured 

through this process. So I am just concerned as here is a program 

that works. We are insuring 10,000 Nevadans that are very, very 

difficult to insure. But one individual with her efforts, and obviously her clinic and the people that she has hired, has put together 

this program to get 10,000 of these people that would otherwise not 

be insured and put them in a program. So I guess I am concerned. 

I am concerned that—actually, what I want you to do is become 

more familiar with the model, because I think it does work. And 

I think that to be able to provide affordable, quality medical care 

to a population that otherwise would be very, very difficult to insure—in fact, I think after this post-health care reform there is 

still going to exist out there without health care—is something we 


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ought to take a good look at and try to determine and figure out 

how we can fund a program that works as smoothly and as well 

as this does. 

Secretary SEBELIUS. Well, it sounds like a model we definitely 

should take a look at. In fact, I think I have met with—as you describe it, I have met with the Nevada folks. It just didn’t, the title 

didn’t capture. But I think there certainly are opportunities going 

forward, and I look forward to working with you to figure out how 

we could do that. 

Mr. HELLER. If I could provide your office additional information. 

Secretary SEBELIUS. Great. 

Chairman CAMP. Thank you very much, Madam Secretary. 

Thank you for your testimony. Thank you very much for extending 

the time so that all Members could have an opportunity to ask a 

question. And if any Members have further questions, if they submit them by letter, if you would be kind enough to respond in writing, we would sure appreciate it. 

Secretary SEBELIUS. I would be happy to. 

Chairman CAMP. I do just want to make a quick announcement 

that the afternoon hearing with Budget Director Jack Lew has 

been moved to 2:30 because of votes that will start on the House 

floor about 1 o’clock. A notice has been sent to all the offices. 

Again thank you very much, Secretary Sebelius. 

Secretary SEBELIUS. Thank you, Mr. Chairman. 

Chairman CAMP. This meeting is adjourned. 

[Whereupon, at 12:45 p.m., the Committee was adjourned.] 

[Questions for the Record follow:] 


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