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20–030 2017

EXAMINING MEDICAID AND CHIP’S FEDERAL 

MEDICAL ASSISTANCE PERCENTAGE 

HEARING 

BEFORE THE

SUBCOMMITTEE ON HEALTH 

OF THE

COMMITTEE ON ENERGY AND 

COMMERCE 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED FOURTEENTH CONGRESS 

SECOND SESSION 

FEBRUARY 10, 2016 

Serial No. 114–115 

( 

Printed for the use of the Committee on Energy and Commerce 

energycommerce.house.gov 

(II) 

COMMITTEE ON ENERGY AND COMMERCE 

FRED UPTON, Michigan 

Chairman 

JOE BARTON, Texas 

Chairman Emeritus 

ED WHITFIELD, Kentucky 

JOHN SHIMKUS, Illinois 

JOSEPH R. PITTS, Pennsylvania 

GREG WALDEN, Oregon 

TIM MURPHY, Pennsylvania 

MICHAEL C. BURGESS, Texas 

MARSHA BLACKBURN, Tennessee 

Vice Chairman 

STEVE SCALISE, Louisiana 

ROBERT E. LATTA, Ohio 

CATHY MCMORRIS RODGERS, Washington 

GREGG HARPER, Mississippi 

LEONARD LANCE, New Jersey 

BRETT GUTHRIE, Kentucky 

PETE OLSON, Texas 

DAVID B. MCKINLEY, West Virginia 

MIKE POMPEO, Kansas 

ADAM KINZINGER, Illinois 

H. MORGAN GRIFFITH, Virginia 

GUS M. BILIRAKIS, Florida 

BILL JOHNSON, Ohio 

BILLY LONG, Missouri 

RENEE L. ELLMERS, North Carolina 

LARRY BUCSHON, Indiana 

BILL FLORES, Texas 

SUSAN W. BROOKS, Indiana 

MARKWAYNE MULLIN, Oklahoma 

RICHARD HUDSON, North Carolina 

CHRIS COLLINS, New York 

KEVIN CRAMER, North Dakota 

FRANK PALLONE, JR., New Jersey 

Ranking Member 

BOBBY L. RUSH, Illinois 

ANNA G. ESHOO, California 

ELIOT L. ENGEL, New York 

GENE GREEN, Texas 

DIANA DEGETTE, Colorado 

LOIS CAPPS, California 

MICHAEL F. DOYLE, Pennsylvania 

JANICE D. SCHAKOWSKY, Illinois 

G.K. BUTTERFIELD, North Carolina 

DORIS O. MATSUI, California 

KATHY CASTOR, Florida 

JOHN P. SARBANES, Maryland 

JERRY MCNERNEY, California 

PETER WELCH, Vermont 

BEN RAY LUJA ́ N, New Mexico 

PAUL TONKO, New York 

JOHN A. YARMUTH, Kentucky 

YVETTE D. CLARKE, New York 

DAVID LOEBSACK, Iowa 

KURT SCHRADER, Oregon 

JOSEPH P. KENNEDY, III, Massachusetts 

TONY CA ́ RDENAS, California 

(III) 

SUBCOMMITTEE ON HEALTH

JOSEPH R. PITTS, Pennsylvania 

Chairman 

BRETT GUTHRIE, Kentucky 

Vice Chairman 

ED WHITFIELD, Kentucky 

JOHN SHIMKUS, Illinois 

TIM MURPHY, Pennsylvania 

MICHAEL C. BURGESS, Texas 

MARSHA BLACKBURN, Tennessee 

CATHY MCMORRIS RODGERS, Washington 

LEONARD LANCE, New Jersey 

H. MORGAN GRIFFITH, Virginia 

GUS M. BILIRAKIS, Florida 

BILLY LONG, Missouri 

RENEE L. ELLMERS, North Carolina 

LARRY BUCSHON, Indiana 

SUSAN W. BROOKS, Indiana 

CHRIS COLLINS, New York 

JOE BARTON, Texas 

FRED UPTON, Michigan (ex officio) 

GENE GREEN, Texas 

Ranking Member 

ELIOT L. ENGEL, New York 

LOIS CAPPS, California 

JANICE D. SCHAKOWSKY, Illinois 

G.K. BUTTERFIELD, North Carolina 

KATHY CASTOR, Florida 

JOHN P. SARBANES, Maryland 

DORIS O. MATSUI, California 

BEN RAY LUJA ́ N, New Mexico 

KURT SCHRADER, Oregon 

JOSEPH P. KENNEDY, III, Massachusetts 

TONY CA ́ RDENAS, California 

FRANK PALLONE, JR., New Jersey (ex 

officio) 

(V) 

C O N T E N T S 

Page 

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

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

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

Hon. Marsha Blackburn, a Representative in Congress from the State of 

Tennessee, opening statement ............................................................................ 5 

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

New Jersey, opening statement .......................................................................... 6 

WITNESSES

Alison Mitchell, Analyst in Health Care Financing, Congressional Research 

Service ................................................................................................................... 8 

Prepared statement .......................................................................................... 10 

Anne Schwartz, Ph.D., Executive Director, Medicaid and CHIP Payment and 

Access Commission .............................................................................................. 13 

Prepared statement .......................................................................................... 15 

Answers to submitted questions ...................................................................... 106 

Carolyn Yocom, Director Of Health Care, Government Accountability Office ... 33 

Prepared statement .......................................................................................... 35 

Answers to submitted questions ...................................................................... 108 

John Hagg, Director of the Medicaid Audits, Office of Inspector General, 

U.S. Department of Health and Human Services ............................................. 49 

Prepared statement .......................................................................................... 51 

Answers to submitted questions ...................................................................... 113 

SUBMITTED MATERIAL

Chart entitled, ‘‘FY2014 Total Spending $3.5 Trillion, submitted by Mr. Shimkus ......................................................................................................................... 70

Statement of the Illinois Health and Hospital Association, submitted by Ms. 

Schakowsky .......................................................................................................... 90 

Statement of the American Academy of Pediatrics, submitted by Mr. Pitts ...... 91 

(1) 

EXAMINING MEDICAID AND CHIP’S FEDERAL 

MEDICAL ASSISTANCE PERCENTAGE 

WEDNESDAY, FEBRUARY 10, 2016 

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

The subcommittee met, pursuant to call, at 10:00 a.m., in room 

2123 Rayburn House Office Building, Hon. Joe Pitts (chairman of 

the subcommittee) presiding. 

Members present: Representatives Pitts, Guthrie, Shimkus, Murphy, Blackburn, Lance, Griffith, Bilirakis, Long, Ellmers, Bucshon, 

Brooks, Collins, Engel, Capps, Schakowsky, Castor, Sarbanes, Matsui, Luja AE1n, Schrader, Kennedy, Ca AE1rdenas, and Pallone (ex 

officio). 

Staff present: Rebecca Card, Assistant Press Secretary; Paul 

Edattel, Chief Counsel, Health; Tim Pataki, Member Services Director; Graham Pittman, Legislative Clerk, Health; Michelle Rosenberg, GAO Detailee, Health; Chris Santini, Policy Coordinator, 

Oversight and Investigations; Chris Sarley, Policy Coordinator, Environment and the Economy; Heidi Stirrup, Policy Coordinator, 

Health; Sophie Trainor, Policy Advisor, Health; Josh Trent, Deputy 

Chief Counsel, Health; Christine Brennan, Minority Press Secretary; Jeff Carroll, Minority Staff Director; Tiffany Guarascio, Minority Deputy Staff Director and Chief Health Advisor; Rachel 

Pryor, Minority Health Policy Advisor; Samantha Satchell, Minority Policy Analyst; and Andrew Souvall, Minority Director of Communications, Outreach, and Member Services. 

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

OF PENNSYLVANIA 

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

recognizes himself for an opening statement. 

Today’s hearing will provide an opportunity for members to discuss the Federal Medical Assistance Percentage or FMAP rate. The 

FMAP is the Federal statutory financing formula that is the basis 

for determining the federal government’s financial share of most 

Medicaid and Children’s Health Insurance Program expenditures, 

CHIP. 

While exploring the FMAP may seem like a dense topic to some, 

today’s hearing allows members to look under the cabinet to examine Medicaid’s plumbing, how money flows throughout the system. 

It is important for members to understand how the FMAP works, 

2 

because it impacts how an estimated $545 billion in program expenditures will be spent this year. 

Federal law specifies the formula for calculating Federal Medical 

Assistance Percentages and requires the Secretary of Health and 

Human Services to calculate and publish FMAP rates each year. 

The statutory formula compares the individual state’s per capita 

income to the Nation’s per capita income in order to determine the 

portion of Medicaid expenditures the federal government will finance in each state. The lower a state’s per capita income, the 

greater the assistance the state receives from the federal government, so, the higher the state’s FMAP. 

Federal statute specifies that the basic Medicaid matching rate 

for states will go no lower than 50 percent or higher than 83 percent. Medicaid has used the basic FMAP formula since its creation, 

more than 50 years ago. 

Since the creation of the Medicaid program, Congress has, over 

time, created several different levels of federal financial participation or federal matching for different services, benefits, and populations. These higher levels of federal matching are exceptions to 

the general FMAP. 

For example, since the 1970s, the federal government has paid 

100 percent for services furnished through Indian Health Services 

and tribal facilities and 90 percent for family planning services and 

supplies. These exceptions are higher than any state’s regular 

FMAP and apply uniformly to all states. Today we will be discussing numerous other exceptions to the regular FMAP. 

In recent years, Congress has twice increased FMAPs across the 

board to provide temporary fiscal relief to states during recessions. 

Most recently, Congress added a new level of increased federal 

matching through the Affordable Care Act’s expansion of the Medicaid program to non-disabled childless adults. For new expansion 

states, the Affordable Care Act included a matching rate of 100 

percent for the expansion population through this calendar year, 

after which federal matching levels decline over time to reach 90 

percent by 2020 and remain at that rate, at least under current 

law. 

I should also point out that the FMAP also serves as the basis 

for determining the federal government’s share of expenditures for 

the Children’s Health Insurance Program, CHIP. Section 2105(b) of 

the Social Security Act stipulates an Enhanced FMAP rate for both 

services and administration under CHIP. The E–FMAP rate reduces the state’s share under the regular FMAP rate by 30 percent. 

Additionally, the Affordable Care Act increased the E–FMAP by 23 

percentage points, not to exceed 100 percent, for fiscal years 2016 

through 2019. As a result, the federal government is now financing 

100 percent of the CHIP programs in 12 states. 

Overall, I think today’s hearing presents members with an important opportunity to better understand the FMAP rate that is 

hardwired into the heart of the program. I also hope members will 

grapple with the challenges created by the current FMAP formula, 

including the ways that the current patchwork of federal matching 

arrangements impacts the integrity of the federal and state costsharing relationship. 

3 

Today, we have one panel of knowledgeable experts from CRS, 

MACPAC, GAO, and HHS OIG who will present their ideas and 

recommendations on these issues and answer members’ questions. 

I appreciate each of the witnesses being here today. 

[The prepared statement of Mr. Pitts follows:] 

PREPARED STATEMENT OF HON. JOSEPH R. PITTS

The Subcommittee will come to order. 

The Chairman will recognize himself for an opening Statement. 

Today’s hearing will provide an opportunity for members to discuss the ‘‘Federal 

Medical Assistance Percentage’’ or ‘‘F–MAP’’ (FMAP) rate. The FMAP is the Federal 

statutory financing formula that is the basis for determining the Federal government’s financial share of most Medicaid and Children’s Health Insurance Program 

(CHIP) expenditures. 

While exploring the FMAP may seem like a dense topic to some, today’s hearing 

allows members to look under the cabinet to examine Medicaid’s plumbing—how 

money flows throughout the system. It is important for members to understand how 

the FMAP works, because it impacts how an estimated $545 billion in program expenditures will be spent this year. 

Federal law specifies the formula for calculating Federal Medical Assistance Percentages and requires the Secretary of Health and Human Services to calculate and 

publish FMAP rates each year. The statutory formula compares individual State’s 

per capita income to the nation’s per capita income in order to determine the portion 

of Medicaid expenditures the Federal government will finance in each State. The 

lower a State’s per capita income, the greater the assistance the State receives from 

the Federal government—so the higher the State’s FMAP. 

Federal statute specifies that the basic Medicaid matching rate for States will go 

no lower than 50% or higher than 83 percent. Medicaid has used the basic FMAP 

formula since its creation, more than 50 years ago. 

Since the creation of the Medicaid program, Congress has, over time, created several different levels of Federal financial participation, or ‘‘federal matching’’ for different services, benefits, and populations. These higher levels of federal matching 

are exceptions to the general FMAP. 

For example, since the 1970s, the Federal government has paid 100 percent for 

services furnished through Indian Health Services and tribal facilities and 90 percent for family planning services and supplies. 

These exceptions are higher than any State’s regular FMAP and apply uniformly 

to all States. Today we will be discussing numerous other exceptions to the regular 

FMAP. 

In recent years, Congress has twice increased FMAPs across the board to provide 

temporary fiscal relief to States during recessions. 

Most recently, Congress added a new level of increased federal matching through 

the Affordable Care Act’s expansion of the Medicaid program to non-disabled childless adults. For new expansion states, the Affordable Care Act included a matching 

rate of 100 percent for the expansion population through this calendar year, after 

which Federal matching levels decline over time to reach 90 percent by 2020—and 

remain at that rate, at least under current law. 

I should also point out that the FMAP also serves as the basis for determining 

the Federal government’s share of expenditures for the Children’s Health Insurance 

Program-CHIP. Section 2105(b) of the Social Security Act stipulates an Enhanced 

FMAP rate for both services and administration under CHIP. The E–FMAP rate reduces the State share under the regular FMAP rate by 30 percent. 

Additionally, the Affordable Care Act increased the E–FMAP by 23 percentage 

points (not to exceed 100 percent) for fiscal years 2016 through 2019. As a result, 

the Federal government is now financing 100 percent of the CHIP programs in 12 

states. 

Overall, I think today’s hearing presents members with an important opportunity 

to better understand the FMAP rate that is hardwired into the heart of the program. I also hope members will grapple with the challenges created by the current 

FMAP formula—including the ways that the current patchwork of Federal matching 

arrangements impact the integrity of the Federal and State cost-sharing relationship. 

Today we have one panel of knowledgeable experts from CRS, MACPAC, GAO, 

and HHS OIG who will present their ideas and recommendations on these issues 

and answer Members’ questions. 

4 

I appreciate each of the witnesses being here today and will now yield to the Vice 

Chairman of the full committee, Mrs. Blackburn. 

Mr. PITTS. And I yield back the balance of my time. I now recognize Mr. Schrader of Oregon for an opening statement. 

Mr. SCHRADER. Thank you, Mr. Chairman. I will probably reserve most of my comments for the question period but I wanted 

to yield some time to Mr. Luja AE1n. 

Mr. LUJA AE1N. Mr. Chairman, thank you so very much and to 

our ranking member, I really appreciate the time today. 

I care deeply about these programs. As we see the impact to people all across America, this landmark program makes a difference 

in the lives of the poor, our seniors, people with disabilities, and 

truly provides them the peace of mind that they can access affordable care without fear of financial ruin. We have to be mindful of 

that. 

One in three children in our country receive coverage through 

Medicaid and the Affordable Care Act’s expansion of this program 

is strengthening coverage throughout the United States. In my 

home State of New Mexico, more than 250,000 people have benefitted from the ACA’s Medicaid expansion. 

In New Mexico, we have also recently seen what happens to people when they can’t receive the care that they need. More than 2 

years ago, New Mexico’s Behavioral Health System was needlessly 

upended by the state when they suspended Medicaid payments to 

15 providers. This resulted in disruptions and gaps in patients’ 

care. 

On Monday, just a few days ago or just 2 days ago, ten additional 

providers were cleared of fraud. In total, 13 have now been exonerated. This manufactured crisis which has impacted some of New 

Mexico’s most vulnerable never should have occurred and left our 

Behavioral Health System in shambles. 

It takes decades to build a strong system of care in New Mexico’s 

largely rural underserved areas. Where sole providers become vital 

to the fabric of our community, those relationships and developing 

that trust with patients is critical and we have to rebuild that system now. 

To achieve that goal, I am finalizing a bill that would encourage 

states like New Mexico to make the necessary investments in their 

Behavioral Health Systems when Congress ask states to update 

and modernize their infrastructure for enrollment. We provided 

states with an Enhanced FMAP to do just that. If we want states 

to invest in behavioral health, we should provide an enhanced federal matching rate to prioritize these investments. The United 

States has never supported mental health in this way. Especially 

with the expansion of Medicaid across the country, we must ensure 

that states continue to improve their capacity to provide mental 

health services. 

I look forward to the testimony and discussing how we can use 

FMAP to strengthen our Behavioral Health System. 

And with that, Mr. Chairman, I would yield back the balance of 

my time to Mr. Schrader. 

Mr. SCHRADER. Thank you very much. Anyone else on the Democratic side? Ms. Matsui. 

5 

Ms. MATSUI. Thank you very much for yielding and I thank the 

witnesses for being here today and the chairman for having this 

hearing. 

For the past 50 years, the Medicaid program has successfully improved the ability of lower income Americans to access essential 

health services. Today, more than 72 million Americans depend on 

Medicaid and CHIP for their health insurance. The vast majority 

of these enrollees are children, the disabled, or the elderly. 

In addition to improving healthcare access, Medicaid is notable 

for its program efficiency. Medicaid provides more comprehensive 

benefits than private insurance and provides those benefits at 

lower out-of-pocket costs. In addition, Medicaid per beneficiary 

costs are lower than per beneficiary costs for Medicare and private 

insurance and those costs are growing far more slowly than either 

Medicare or private insurance. 

The Medicaid program continues to improve its efficiency and its 

demonstration projects allow the states the flexibility to test new 

models of delivery that improve program value. Instead of talking 

about ways to reduce Medicaid, we should be talking about ways 

to strengthen Medicaid, to expand coverage, to improve quality of 

care and, in turn, improve health outcomes for millions of Americans. Thank you and I yield back to Dr. Schrader. 

Mr. SCHRADER. Anyone else on the Democratic side? Mr. Pallone. 

Mr. PITTS. You will get your full time. 

Mr. SCHRADER. Mr. Pallone, I will give Mr. Sarbanes an opportunity then you will get your full time. 

Mr. PALLONE. Oh, sure. 

Mr. SCHRADER. Mr. Sarbanes. 

Mr. SARBANES. I will be very quick. I am looking forward to the 

testimony. 

I had the opportunity for about 18 years as an attorney to work 

with retirement communities, nursing homes, assisted living facilities in the State of Maryland and saw how critical the resource of 

Medicaid is for our seniors. And so keeping this program strong 

and also exploring opportunities to innovate with it and figure out 

how the program can support seniors in a number of different settings, as we move forward and the opportunity to do that in a way 

that can also save some of the costs and be efficient I think is 

something we want to explore. 

So, it is a really important program and this particular formula 

for funding has worked overall very well. So, we look forward to 

your testimony so we can understand that more and think about 

the potential for future development of the program. 

I yield back. 

Mr. SCHRADER. I yield back our time, Mr. Chairman. 

Mr. PITTS. The chair thanks the gentleman. I now recognize the 

vice chair of the full committee, Mrs. Blackburn, for 5 minutes for 

opening statement. 

OPENING STATEMENT OF HON. MARSHA BLACKBURN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF TENNESSEE 

Mrs. BLACKBURN. Thank you, Mr. Chairman. And I want to welcome you all and thank you for being here. 

6 

This is an issue that we continue to look at and review and it 

is appropriate that we do. When I am at home and in my district, 

one of the things I hear about most often are the efficiencies and 

the inefficiencies of working through the Medicaid delivery system 

which, in our state is TennCare. You all probably know it and 

know the stories of TennCare well. 

What we need to do as we continue to review these funding 

formularies and the mechanisms, transparency is important, continued oversight is important, integrity in the program is something that is important. I think another thing that is a topic for 

discussion as we look at the formulary and what the basis ought 

to be is saying is it time to give Medicaid back to the states for 

the states to administer this program. That is another way to look 

at it. And we will be interested to hear your thoughts on that. 

Many of our governors and many of our state elected officials 

would like to see us do that. They think they could be more efficient and Ms. Matsui mentioned the opportunity for some to innovate in their states. And yes, indeed, looking at new flexibilities 

that allow innovation is something that maybe we need to have 

greater discussion about that. 

So, welcome to all of you and thank you. And Mr. Chairman, I 

will yield to Mr. Shimkus, it looks like, is seeking time. Yield to 

Mr. Shimkus. 

Mr. SHIMKUS. Thank you. I appreciate my colleague from Tennessee. 

I am just going to throw something on the table. I have got questions later on. But Mr. Chairman, I was visited by a delegation of 

businessmen from Puerto Rico last night and they have—and I just 

want to raise this because I think for the average member this financial crisis, we are now starting to at least know a little bit 

about it. But since we are on Medicaid, I was told that they have 

a $300 million cap on spending. They are not in the Medicaid system. They don’t have FMAP. And there is an impending cliff coming in April of 2017 that I think is worthy of our attention and 

maybe a hearing and a discussion because if what I was told was 

true, it is an impending additional disaster for that part of our 

country that really doesn’t have a voting member of the House of 

Representatives. 

So with that, I will throw that out and I will yield back to my 

colleague. 

Mrs. BLACKBURN. I thank the gentleman. Anyone else seeking 

time before I yield it back to the chairman? 

Mr. Chairman, I yield back. 

Mr. PITTS. The chair thanks the gentlelady and I recognize the 

ranking member of the full committee, Mr. Pallone, for 5 minutes 

for an opening statement. 

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

Mr. PALLONE. Thank you, Mr. Chairman and thanks for holding 

the hearing for the witnesses being here today. 

I believe the government exists to help all Americans succeed 

and improving and strengthening Medicaid for generations to come 

7 

continues to be a primary goal of mine. Medicaid is not a welfare 

program. It is a health insurance program that more Americans depend on than any other single federal health program. In fact, 

Medicaid provides more than one in three children with a chance 

at a healthy start in life and one in seven Medicare seniors are actually also Medicaid seniors. The truth is, the overwhelming majority of the more 71 million Medicaid beneficiaries are children, the 

elderly, the disabled, and pregnant women, all our most vulnerable 

populations. 

Medicaid was designed at the federal level to expand and contract according to a state’s need and that is a tenant we must protect and improve, not reverse. And despite the incredibly complex 

nature of its shared federal and state financing, Medicaid is an efficient program, its cost per beneficiary is substantially lower than 

private insurance and Medicare and in recent years, these costs 

have grown far more slowly. 

The facts also show that Medicaid has a lower improper payment 

rate than many of our federal health programs, all of which cover 

less people. 

Every single state Medicaid program has undertaken projects 

testing new models of care delivery that promote quality and value 

in the Medicaid program. In fact, the Medicaid program is often 

called the innovation incubator. 

So, as you know more about Medicaid’s financing structure or 

FMAP today, let’s think how to build on these efforts. That is the 

right way to promote a value-based Medicaid program for the future. FMAP may not be perfect but merely looking at baselines, 

growth factors, and state contributions ignores the most critical 

issue, which is providing care in the most efficient way possible to 

some of our most complicated populations, the tens of millions of 

low-income vulnerable beneficiaries that rely on Medicaid and the 

healthcare providers and plans that serve them. 

I yield back, unless someone else—I think our other members 

have all had an opportunity, Mr. Chairman, so I yield back. 

Mr. PITTS. The chair thanks the gentleman. 

That concludes the opening statements. As always, all members’ 

written opening statements will be made a part of the record. 

We have one panel with us today, four witnesses. Let me introduce them in the order of their testimony. 

First of all, Allison Mitchell, Analyst in Health Care Financing, 

Congressional Research Service. Thank you for coming. Secondly, 

Dr. Anne Schwartz, Executive Director, Medicaid and CHIP Payment and Access Commission, MACPAC. Thank you for coming. 

Carolyn Yocom, Director of Health Care, Government Accountability Office, GAO. Thank you for coming. And John Hagg, is it? 

Hagg, Director of the Medicaid Audits, Office of Inspector General, 

U.S. Department of Health and Human Services. 

Thank you all for coming. You will each be given 5 minutes to 

summarize your testimony. Your written testimony will be made a 

part of the record. 

So, at this point, the chair recognizes Ms. Mitchell, for 5 minutes 

for her summary. 

8 

STATEMENTS OF ALISON MITCHELL, ANALYST IN HEALTH 

CARE FINANCING, CONGRESSIONAL RESEARCH SERVICE; 

ANNE SCHWARTZ, PH.D., EXECUTIVE DIRECTOR, MEDICAID 

AND CHIP PAYMENT AND ACCESS COMMISSION; CAROLYN 

YOCOM, DIRECTOR OF HEALTH CARE, GOVERNMENT ACCOUNTABILITY OFFICE; AND JOHN HAGG, DIRECTOR OF 

THE MEDICAID AUDITS, OFFICE OF INSPECTOR GENERAL, 

U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES 

STATEMENT OF ALISON MITCHELL 

Ms. MITCHELL. Chairman Pitts, members of the subcommittee, 

thank you for the opportunity to appear before you today to provide 

an overview of the Federal Medical Assistant Percentage, or the 

FMAP, and the exceptions to the FMAP. 

Medicaid is financed by both the federal government and the 

states and the federal share of Medicaid expenditures is determined by the FMAP. The FMAP varies by state and it has a minimum of 50 percent and a statutory maximum of 83 percent. And 

for a state with a 60 percent FMAP, the state gets 60 cents back 

from the federal government for every dollar it spends on its Medicaid program. 

The FMAP is also used to determine the federal share of other 

federal programs, such as the Temporary Assistance for Needy 

Families contingency funds and the FMAP is also used to calculate 

the Enhanced FMAP or E–FMAP, which determines the federal 

share for the state Children Health Insurance Program or CHIP. 

The FMAPs are calculated annually and they vary according to 

each state’s per capita income. So, states with high per capita income receive lower FMAP or matching rates and states with low 

per capita income receive higher matching rates. 

Currently, in fiscal year 2016, regular FMAP rates range from 50 

percent in 13 states to 74 percent in Mississippi. And the E–FMAP 

used by CHIP is higher than the regular FMAP and it is determined by reducing the state share under the FMAP by 30 percent. 

And for fiscal year 2016 through 2019, there is a 23 percentage 

point increase in the E–FMAP. That means the current statutory 

range for the E–FMAP is 88 percent to 100 percent and in fiscal 

year 2016, 12 states are receiving that 100 percent E–FMAP. 

The per capita income amounts used in the FMAP formula are 

equal to the average of the three most recent calendar years of 

data from the Department of Commerce. This helps to moderate 

the fluctuations in states’ FMAP rates over time. Also, the per capita income amounts used to calculate the FMAP rates are several 

years old by the time the FMAP goes into effect. 

The FMAP is impacted by each state’s income and population relative to the national average. The impact of the national economic 

downturn or upturn on a particular state will be related to that 

structure of that state’s economy. 

The FMAP changes from year to year for most states and these 

changes are often within one percentage point. However, even 

these small changes can have major budgetary implications. 

The exceptions to the regular FMAP have been made for certain 

states’ situations, populations, providers, and services. There are 

currently more than 20 exceptions to the FMAP. Some of these are 

9 

quite old and some of them are newer. For instance, since the beginning of the Medicaid program, most administrative services 

have been matched at a 50 percent for all states and starting in 

the 1970s, services provided to Medicaid enrollees at Indian Health 

Service facilities have been reimbursed at 100 percent. 

Also, the District of Columbia’s FMAP rate is not determined according to the statutory formula. It is set in statute at 70 percent 

and that has been the case since 1998. And the Patient Protection 

and Affordable Care Act added a couple of new FMAP exceptions. 

The main one there is the FMAP for the matching rate for the 

newly eligible individuals under the ACA Medicaid expansion. For 

these individuals, states receive 100 percent matching for 2014 

through 2016 and that phases down to 90 percent in 2020 and subsequent years. 

The federal share of Medicaid expenditures used to be about 57 

percent on average across all states in a typical year. However, 

with the exceptions to the FMAP added by the ACA, this has increased and in 2014, fiscal year 2014, the federal government paid 

about 60 percent of Medicaid expenditures on average across all 

the states. 

This concludes my statement and I would be happy to answer 

questions at the appropriate time. 

[The prepared statement of Alison Mitchell follows:] 

10 


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20030.002
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13 

Mr. PITTS. The chair thanks the gentlelady and now recognizes 

Dr. Schwartz, for 5 minutes for your summary. 

STATEMENT OF ANNE SCHWARTZ 

Ms. SCHWARTZ. Good morning, Chairman Pitts and the members 

of the subcommittee on Health. As MACPAC’s Executive Director, 

my testimony today reflects the consensus views of the commission 

itself anchored in a body of analytic work over the past 5 years and 

we appreciate the opportunity to share MACPAC’s views this 

morning. 

At the request of the leadership of this subcommittee and your 

colleagues in the Senate, MACPAC is engaged in a long-term work 

plan focused on advising Congress about policies and financing reforms to ensure Medicaid sustainability. To date, we have focused 

on documenting trends in Medicaid expenditures, looking at the 

drivers of this spending and considering the incentives created by 

the current system of financing. 

As others have already described, state Medicaid programs received federal fund to match the funds they spend on health services to Medicaid beneficiaries and its financing arrangement goes 

back to the program’s very beginnings 50 years ago. 

Today, the federal share is determined by the FMAP with higher 

matching rates to states that have lower per capita incomes relative to the national average and vice-versa with exceptions for certain populations, providers, and services. Spending for administration is general matched at 50 percent. CHIP has its own match 

rates, known as the Enhanced FMAP, which is substantially higher 

than those under Medicaid, in some cases at 100 percent. 

At various points in the program’s history, congressional regulatory action have increased the FMAP for specific activities. For 

example, to help execute certain program functions, such as implementation of modernized eligibility and enrollment systems to create stronger incentives for states to provide optional benefits and 

to encourage states to expand eligibility to optional groups, such as 

women diagnosed with breast and cervical cancer. 

Enhanced match has also been used to provide fiscal relief to 

states during economic downturns or when affected by disasters. In 

addition, increasing the federal match can allow Congress to make 

policy changes without imposing additional costs on states, for example, as was the case with the required increase in payments to 

primary care physicians in 2013 and 2014. 

As others on the panel will note, this system of financing has 

been criticized for providing open-ended amounts of federal funds 

and for not incentivizing states to be efficient. Moreover, it can encourage states to broaden Medicaid to include other health activities, where possible, in order to draw down federal funds. 

On the other hand, these incentives, while strong, are not absolute. States may not claim federal share unless they spend state 

dollars, raised from legal sources, on activities that are legally 

matchable. Mindful of their own budget constraints, as well as 

other political and economic factors that shape their health care 

markets and the design of their Medicaid programs, states respond 

differently at different times and in different circumstances. 

14 

So, let me provide a few examples. States do make informed 

choices about the design of their programs and thus, they don’t always take up the opportunity to draw enhanced match. Section 

2703 of the ACA provided authority for states to create health 

homes integrating care for people with chronic conditions and mental health conditions and it provided a 90 percent federal match for 

2 years and fewer than half of the states have done so, with only 

20 states and the District of Columbia adopting the model as of December 2015. 

Second, because states must raise state share, they do not always take advantage of all federal dollars that are available to 

them. 

In the case of CHIP, of the $21.1 billion in federal funds appropriated for fiscal year 2015, only $11.3 billion was provided to 

states in allotments based on their prior year spending. 

In addition to the other criticisms under the matching formula 

that will be discussed by others on the panel, I would add several 

other concerns that MACPAC has identified. First, the differential 

between the federal match for services and administration exerts 

downward pressure on states’ willingness to invest in activities 

such as measuring utilization and quality, collecting and analyzing 

data, and ensuring program integrity. In the 37 states where 

health services are matched at greater than 50 percent, states can 

increase the total Medicaid budget by prioritizing spending for 

services over administration. 

The federal government does provide enhanced matching funds 

for some administrative activities but enhanced match is not available for others that could improve efficiency and promote value. 

For example, the differential between the two match rates creates 

a disincentive for states to focus on prevention of fraud and abuse. 

Such functions are matched at 50 percent, while the activities of 

the Medicaid Fraud Control Unit which are aimed at detecting 

fraud and abuse after they have occurred are matched at 75 percent. 

Over the next several months, MACPAC will be focusing intensively on program financing and design questions. Our analysis 

will consider design questions and will also consider the impact of 

these approaches on states, plans, providers and beneficiaries. We 

look forward to sharing this work in our June report. 

[The prepared statement of Anne Schwartz follows:] 

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Mr. PITTS. The chair thanks the gentlelady and now recognizes 

Ms. Yocom, for 5 minutes for her summary. 

STATEMENT OF CAROLYN YOCOM 

Ms. YOCOM. Thank you. It is a pleasure to be here today to discuss the Medicaid formula, and GAO’s work surrounding this issue. 

As we have talked about, the FMAP formula is based on a state’s 

per capita income in relation to the national average. And it is over 

a 3-year period, which smooths out the fluctuations in the business 

cycle and focuses on longer-term trends. This is helpful to states 

in terms of their budgets and budgetary planning. 

In prior work, we have noted concerns regarding how FMAP formula allocates funds across the states, including during times of recession or economic downturn. My statement today focuses on the 

FMAP and options for more equitably allocating Medicaid funds 

across states and methods of better targeting increased assistance 

to states during an economic downturn. 

With regard to the more equitable allocation of Medicaid funds 

across states, per capita income is a poor proxy for states’ fiscal capacity, as well as for the size and composition of a state’s population in need of Medicaid. First, per capita income does not fully 

measure state resources. It includes some things, like wages, 

grants, and interest, but it does not include other resources such 

as corporate income. 

Second, per capita income does not take into account differences 

across the states in the health care service needs of low-income 

people, nor does it include any measure of geographic difference in 

the cost of providing such services. 

As an alternative to per capita income, GAO has identified three 

measures that could be used to allocate Medicaid funding more equitably. Two of these measures account for service demand and 

they also account for geographic cost differences. This improves equity among beneficiaries by ensuring that the level of services 

across states has the ability to offer a comparable level of services 

for each person in need. The third measure accounts for state resources and this improves taxpayer equity by ensuring that taxpayers in poorer states are not more heavily burdened than those 

in wealthier ones. These three measures could be combined to provide a basis for allocating Medicaid funds in a more equitable manner than what currently occurs using the FMAP. 

With regard to targeting increased assistance to states during recessions and other economic downturns, Congress has acted on 

multiple occasions to provide states with temporary increases in 

the FMAP. Such assistance is important, for during economic 

downturns, Medicaid enrollment often increases, while available 

state revenues decline. 

At the request of Congress, GAO was asked to consider methods 

of assisting states during economic downturns. We recommended 

that Congress consider enacting an FMAP formula that provides 

automatic timely and temporary FMAP assistance to states in response to an economic downturn. We developed a prototype formula 

that would automatically start and end assistance and it would target the amount of such assistance based on the extent to which 

each state is affected by a particular downturn. 

34 

Our prototype formula uses a monthly employment to population 

ratio and it begins when a threshold number of states experience 

declines in this ratio. This automatically triggers the start of the 

FMAP assistance. And once triggered, the assistance is calculated 

based on two factors. First, on increases in state unemployment. 

This serves as a proxy for changes in Medicaid enrollment. And 

then secondly for decreases in wages and salaries and this serves 

as a proxy for declines in available state revenue. 

Ending the temporary FMAP would be based on the employmentto-population ratio but with the ability to gradually return states 

to their regular FMAPs. 

In conclusion, our work has found that alternatives to the current FMAP could more equitably allocate funds to states and provide additional support during the economic downturns. 

This concludes my prepared statement. I would be pleased to answer questions at the appropriate time. 

[The prepared statement of Carolyn Yocom follows:] 

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Mr. PITTS. The chair thanks the gentlelady and now recognizes 

Mr. Hagg, for 5 minutes for his opening statement. 

STATEMENT OF JOHN HAGG 

Mr. HAGG. Good morning, Chairman Pitts and other distinguished members of the committee. Thank you for the opportunity 

to testify about the Officer of Inspector General’s work associated 

with the Federal Medical Assistance Percentage Matching Rates. 

My statement describes two vulnerabilities associated with the federal-state partnership that governs the financing of the Medicaid 

program. 

First, in certain areas of enhanced matching rates, OIG has seen 

states claim federal reimbursement for expenditures that do not 

qualify. Second, in some instances, we have seen states use financing mechanisms to shift costs to the federal government. I will 

briefly discuss each of these issues. 

Most Medicaid expenditures are eligible for federal reimbursement at their regular matching rate. The regular FMAP rate varies 

by state and, as said earlier today, cannot be lower than 50 percent 

or higher than 83 percent. There are numerous exceptions, however, that allow for the use of enhanced rates. For example, family 

planning services are reimbursed at a 90 percent FMAP rate. Enhanced FMAP rates provide states with additional federal funding 

for specified populations and services but they also create 

vulnerabilities that expenditures could be claimed incorrectly. 

The OIG has conducted audits to determine if expenditures were 

included in the correct enhanced rate categories. In general, we 

have found instances where states incorrectly claimed expenditures 

in one of the enhanced rate categories, instead of properly claiming 

the expenditures at the lower regular FMAP rate. As an example, 

we have found many cases where states use the 90 percent enhanced family planning rates for services that were Medicaid eligible but did not qualify as family planning. In total, we identified 

more than $82 million that states received inappropriately. 

In addition to vulnerabilities that exist with enhanced FMAP 

categories, the shared nature of Medicaid financing provides opportunities for states to shift cost and distort the federal-state costsharing partnership. While mechanisms such as provider taxes, 

intergovernmental transfers, and inflated payment rates increase 

state funds, they distort statutorily determined FMAP rates and 

undermine the federal-state partnership in financing the Medicaid 

program. 

In the 2014 review of health care provider taxes, we found that 

a gross receipts tax on Medicaid managed care organizations in one 

state appeared to be an impermissible health care related tax 

under federal requirements. Using this tax, the state obtained 

nearly $1 billion in federal Medicaid funds from 2009 to 2012. CMS 

issued guidance to states in July 2014 to clarify its policy. We are 

currently performing work to determine if states are in compliance 

with this guidance. 

State policies that inflate federal costs for Medicaid are not new. 

In a series of reports from 2000 to 2005, we found numerous examples in which states used intergovernmental transfers to increase 

the amount of Medicaid expenditures the federal government would 

50 

pay. In some cases, states transferred the additional federal money 

to their general treasury to be used for other purposes. Both Congress and CMS took action to close this loophole. While the changes 

dramatically improved the situation, they did not entirely eliminate 

the problem. Collectively, the findings of our work over a number 

of years suggest that improvements are still needed to safeguard 

federal Medicaid funds, including a definitive regulation linking 

payments for public providers to the actual cost of providing a service. 

In conclusion, the federal and state governments share responsibility for operating the Medicaid program and for the integrity of 

the dollars invested. Given projected growth in Medicaid, it is critical that CMS and states focus on strengthening program integrity. 

OIG is committed to providing effective oversights to help ensure 

that inappropriate payments are detected and that eligible beneficiaries receive the needed and appropriate health care services. 

I would be happy to answer your questions. 

[The prepared statement of John Hagg follows:] 

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Mr. PITTS. The chair thanks the gentleman. That concludes the 

opening statements of the witnesses. I will begin the questioning 

and recognize myself for 5 minutes for that purpose. 

Ms. Yocom, GAO has offered alternatives for allocating federal 

Medicaid funding in a more equitable way. Can you explain how 

GAO considers equity when thinking about the Medicaid funding 

formula? And can you explain how or why some states are advantaged and others are disadvantaged by the current FMAP formula? 

Ms. YOCOM. Yes, we look at equity from two perspectives. The 

first is that of the beneficiary and making sure that the state has 

the capacity to provide the same level of service as across all the 

states. It doesn’t mean that the state chooses to but it does mean 

that that capacity is there. 

And then secondly, we look from the perspective of the taxpayer 

and so that you make sure that a wealthier state is not paying 

more or less than a poorer state, that it is in relation to what is 

available for the state to fund the program. 

With regard to advantages and disadvantages of the formula 

itself, yes, right now the floor, as I believe Dr. Schwartz mentioned, 

the 50 percent floor of the FMAP does mean that some states are 

propped up with more assistance than other states. To date, no 

state has reached the top of the matching rate. There also is some 

research out there that shows that the matching formula is showing more and more compression to that 50 percent level. 

So, it is a mixed bag for the states. 

Mr. PITTS. Thank you. 

Dr. Schwartz, almost a year ago, I, along with Chairman Upton 

and Chairman Hatch asked MACPAC to engage in developing policy options to ensure the sustainability of the Medicaid program. 

However, it was not until MACPAC’s most recent meeting a few 

weeks ago that staff even briefed the commissions on old Medicaid 

ideas from the 1980s and 1990s. And with all due respect, why has 

this taken so long? What could be more important than developing 

solutions to strengthen Medicaid and CHIP? 

Ms. SCHWARTZ. Thank for that question. 

We began our discussion of financing alternatives actually beginning in February of last year with this session to discuss a range 

of alternatives. And in that particular session, we spoke a lot about 

shared savings. Subsequent to that, we spent time at every commission meeting since then: May, September, October, December, 

and again, as you say in January, focusing on spending trends, 

helping understand the context, understanding the policy levers 

that are available to state and federal governments, to address concerns about spending, and to understand the drivers of that spending. 

So, I have a long list of activities that we have undertaken, some 

issue briefs that we have published, the work that is leading up for 

our publication in our report to Congress in June and I would be 

happy to share that with you and brief your staff in detail about 

those activities. 

Mr. PITTS. All right, thank you. 

Mr. Hagg, your testimony noted that multiple Inspector General 

audits found repeated state errors in claiming the 90 percent Enhanced Family Planning Match and, as a result, OIG recommended 

60 

that 19 states return more than $82 million to taxpayers. Was this 

money ever returned? 

Mr. HAGG. I believe it has been. Our reports are issued to the 

states. We make recommendations to the states. And if we found 

overpayments, we would recommend they pay that money back. 

CMS, as the action official, would work with the states to get that 

money back, assuming CMS concurs with our recommendations. 

And I think in most cases, they have. 

Mr. PITTS. Do you know why CMS didn’t catch states’ errors in 

claiming federal financial participation before the claims were 

paid? 

Mr. HAGG. Not definitively. CMS has different controls in place. 

They could probably more fully answer that question as to why 

they wouldn’t catch errors. Based on what I know, they have staff 

located throughout the country who receive expenditures from the 

state on a quarterly basis. They are the front line for trying to review and identify any problems that might be out there. But of 

course, it is billions of dollars and they have a short amount of 

time to—— 

Mr. PITTS. Yes, maybe part of the problem could be a lack of specific federal statutory and regulatory definition of what family 

planning services are. 

Ms. Mitchell, the Speaker, the President, and members of the 

House have noted the financial crisis in Puerto Rico. Mr. Shimkus 

earlier mentioned Medicaid in Puerto Rico. Can you briefly discuss 

how Puerto Rico’s program compares or is different than an average state’s Medicaid program? 

Ms. MITCHELL. Sure. So, Puerto Rico and all five territories, the 

Medicaid program is financed a bit differently. Rather than the 

open-ended funding that states receive, the territories get caps on 

the funds. So, they have an annual cap. The ACA provided some 

additional funding that is available to the territories, and I believe 

that was the fiscal cliff that was referred to earlier is due to that 

funding. It was about $6.5 billion and the territories have through 

2019 to spend that money but it looks like Puerto Rico is going to 

spend through that faster than that. And their matching rate for 

the territories is set at 55 percent. It does not go through the statutory formula for the FMAP. 

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

The chair recognizes Mr. Schrader for 5 minutes for questions. 

Mr. SCHRADER. Thank you, Mr. Chairman. I appreciate that. 

Ms. Mitchell, would you say that the rates for Medicaid reimbursement are primarily cost-based? 

Ms. MITCHELL. Sorry, could you say that? 

Mr. SCHRADER. The rates that are set for Medicaid reimbursement are primarily cost-based? 

Ms. MITCHELL. The provider rates? 

Mr. SCHRADER. Yes. 

Ms. MITCHELL. Well, states set their own provider rates. They 

have a lot of discretion in setting their provider rates. 

Mr. SCHRADER. I apologize. No, I am talking about when you reimburse a state, it is based on the costs that are submitted by the 

state. Is that correct? 

61 

Ms. MITCHELL. Oh, yes. I am sorry. Yes, so there is a quarterly 

process where states, for every quarter, submit estimates on how 

much they are going to spend and they are provided an amount of 

money to draw down throughout the quarter. 

Mr. SCHRADER. Right. 

Ms. MITCHELL. And at the end of the quarter, they have to submit documentation for the actual expenditures. 

Mr. SCHRADER. I get that. 

Ms. Schwartz, do you think that is a good way to reimburse, just 

based on cost rather than quality or what they are actually getting 

for the type of service that you are paying for? 

Ms. SCHWARTZ. I guess as I noted in my testimony, that the 

FMAP, with the exception of the exceptions, is neutral on the type 

of spending. And you could certainly move to a system in which 

you valued certain services higher. It would be complicated but it 

is an area that could be tested on a smaller scale. I think doing 

that nationally would be exceedingly difficult across the many populations and the many services the Medicaid program offers. 

Mr. SCHRADER. I think that is why we have a number of waivers, 

so that each state can figure out what program probably works best 

for them, as long as it is officially audited, I think. 

Ms. Yocom, I am actually concerned about your report. Your report focuses on paying more for costs. And I think it is going to be 

a big additional cost to the United States taxpayer. The geographic 

diversity is purely cost-based. Where is the geographic diversity in 

your report regarding better quality of care in certain parts of the 

country versus other parts of the country for the dollars that are 

actually spent? That would be, I think, of great interest to the consumer, both the person getting the health care, as well as the taxpayer. 

Ms. YOCOM. Yes. Our report does focus on geographic differences. 

And to a certain extent, state spending itself reflects some of those 

differences. 

Mr. SCHRADER. But that just reflects the cost. It doesn’t reflect 

what you are getting for that. Is that correct? 

Ms. YOCOM. That is correct. 

Mr. SCHRADER. OK. I think that is the problem, Mr. Chairman 

and members of the committee, that we need to be focusing on. Say 

what you will about the ACA but regardless of that, I think the 

focus of health care going forward in our country is going to be 

about getting bigger bang for the buck. The reports from OIG and 

GAO, I think try and get at that in some ways but I think they 

are a little outmoded. Nowadays for health care, we need to be 

looking at better ways to do things. 

The coordinated care model pioneered in my state and several 

other states I think is something I would like to see some of these 

reports start to focus on. It is complicated. The formula proposed 

by Ms. Yocom is also pretty complicated, if I look at it closely. So, 

I would like to look at that quality part of the reimbursement. 

Mr. Hagg, given some of the uses of the Medicaid dollars you 

have identified that don’t seem to fit the classic category of Medicaid services, does seem kind of a play on what the chairman is 

talking about. Does CMS Medicaid actually have adequate revenues to police the program? 

62 

Mr. HAGG. Well, that is a big job, for sure. As I said before, CMS 

could probably provide a better answer about the resources they 

have and the way they use those resources right now to oversee 

state expenditures or additional resources they might need. 

I know they have staff located throughout the country who receive the state expenditures on a quarterly basis. They are the 

front line for the first review but, again, we are talking about hundreds of billions of dollars in a short amount of time that they have 

to review those expenditures. 

Mr. SCHRADER. But it sounds like they could use a few more dollars. 

Out of the five or six recommendations you make, are there two 

or three you would like or think Congress should particularly focus 

on in working with CMS to review? 

Mr. HAGG. Well, specifically, if you are talking about trying to 

make sure expenditures are in the correct enhanced FMAP categories, bottom line, it really comes down to states doing a better 

job and taking better care and making sure that those expenditures 

are claimed appropriately. It is the state’s job to do that. There is 

no way that CMS or any oversight is going to be able to get to 

every single layer that might be out there. So, states need to know 

their responsibilities and make sure that they claim properly. 

From CMS’ standpoint, it probably would be good for CMS to try 

to reinforce with the states what the states’ responsibilities are so 

the states clearly know the importance of properly claiming. 

Mr. SCHRADER. Very good. With that, I yield back, Mr. Chairman. 

Mr. PITTS. The chair thanks the gentleman and now recognizes 

the vice chair of the full committee, Mrs. Blackburn, for 5 minutes 

for questioning. 

Mrs. BLACKBURN. Thank you, Mr. Chairman. 

Ms. Yocom, I want to come to you. I thank you for being so persistent and consistent in coming to us. 

Let’s go back to the formulary issue. In looking at the FMAP, I 

want to hear from you when you look at the per capita or the total 

taxable resources, what do you think is the better option and why 

would that option be your choice? 

Ms. YOCOM. From GAO’s perspective, total taxable resources are 

a much better indicator of a state’s available resources to finance 

the program. I just looked at this yesterday and there is about a 

40 percent difference between the total taxable revenue and per 

capita income. So, 40 percent more additional spending is included 

within total taxable resources. And what happens is you have inequities across states in terms of what is reflected in the per capita 

income. States with a lot of people who work in one location and 

live in another, those kinds of things don’t always get counted in 

the correct manner. Corporate gains and corporate taxes and then 

also high-energy states are other areas where the allocations aren’t 

necessarily consistent. 

Mrs. BLACKBURN. OK, thank you for that. 

Let’s talk about additional assistance that is sometimes available 

during an economic downturn and how that affects a state and how 

would that affect the states’ incentives and how should we approach that. Because you want to be helpful but you don’t want to 

63 

have a system where they are dependent on this and just say oh, 

well. 

Ms. YOCOM. Right. Well, states, in the 50-year history of the program, have always been in a bind during an economic downturn. 

People lose their jobs and their children, at least, and sometimes 

the adults, qualify for Medicaid. So you have an increase in Medicaid enrollment. And then along with that, tax revenues go down 

because it is a recession or a downturn. So, they have more people 

in the program and less money to pay for it. 

One of the advantages of a federal-state partnership is the federal government offering that balancing of those circumstances. 

Mrs. BLACKBURN. Let me ask you this. States that have accessed 

those funds, once the economy recovers, how quickly do they go 

about removing those individuals from the rolls? 

Ms. YOCOM. It honestly varies a great deal. 

Mrs. BLACKBURN. OK. 

Ms. YOCOM. And probably the hardest part of any kind of automatic assessment, adjustment like we are talking about, is when 

to turn off the assistance. Unemployment tends to be a lagging economic indicator so recovery can be slow. 

Mrs. BLACKBURN. All right, thank you for that. 

Ms. Schwartz, MACPAC has publicly supported the extension of 

the Enhanced Federal Matching Rate for Medicaid Eligibility Systems. Talk to me about the criteria that MACPAC uses for assessing whether to support an enhanced federal matching rate, just if 

you will quickly articulate that. 

Ms. SCHWARTZ. Sure. In our letter commenting on that role, the 

criteria that compelled the commission in that instance to be supportive of the continued Enhanced FMAP were that the FMAP rate 

would be tied to concrete performance standards by the state and 

that these would improve the eligibility in the enrollment process, 

both from the perspective of the beneficiary and from program administrators who enhance data collection reporting and improve 

administrative capacity. And I think this enhanced rate also recognizes that Congress already approves enhanced match for mechanized systems and increasingly enrollment in eligibility processes, 

which would have once been largely administered face-to-face are 

no mechanized systems as well. So, those are the criteria used in 

that respect. 

Mrs. BLACKBURN. OK, thank you. I yield back. 

Mr. PITTS. The chair thanks the gentlelady and now recognizes 

the gentlelady from California, Ms. Matsui, for 5 minutes for questions. 

Ms. MATSUI. Thank you, Mr. Chairman. 

Dr. Schwartz, I want to ask you about long-term and FMAP enhancements. The majority of seniors and people with disabilities 

want to remain at home to receive long-term services and supports, 

instead of going to a nursing home or an institution. Research demonstrates that this is more cost-effective. Yet, despite some success, 

many states lag behind in providing services at home because of 

Medicaid institution bias, where nursing home coverage is mandatory and home and community-based services are optional. 

Congress has passed several FMAP incentives to fix this problem, such as Community First Choice, the Balancing Incentive ProVerDate Nov 24 2008 12:02 Aug 30, 2017 Jkt 037690 PO 00000 Frm 00069 Fmt 6633 Sfmt 6633 I:\MY DOCS\HEARINGS 114\114-115 CHRIS
64 

gram, and Money Follows the Person. Some have expired or will 

expire soon. I believe this committee should absolutely be having 

a conversation on reauthorization of these programs, which are 

overwhelmingly bipartisan. 

Dr. Schwartz, how well have those FMAP incentives worked? 

Ms. SCHWARTZ. The Balancing Incentives Program was focused 

on targeting states that spent less than half of their long-term 

services and supports money on home and community-based services to help them make this shift from facilities community-based 

services. And states were invited to submit a budget and a plan for 

how they would do that. 

Of the 17 states that had participated in the first quarter, 11 exceeded that threshold. It is not possible for me to say whether it 

was the Enhanced FMAP that did that or some of the other supports that were provided as part of that program and states may 

continue to make progress toward their goals, even though the enhanced match has expired. 

In addition, stats have many other avenues by which they can 

shift services from a nursing facility to home and community-based 

services, both through state plan options and through waiver services. 

So, there are a variety of approaches that states can take and 

tailor to their specific needs and populations. 

Ms. MATSUI. Can you comment on some of the organizations you 

would have to improve upon the incentives that we have to states 

to show that people can remain at home? 

Ms. SCHWARTZ. MACPAC has not made a recommendation on 

creating a financial incentive to do that. We closely monitor what 

is going on in the long-term services and support state space but 

are encouraged by the shift to home and community-based services, 

which is both fiscally promising and also responsive to patient and 

family needs and desires. 

And one area where we are closely monitoring is the move to 

manage long-term services supports, which we are still learning 

about and we still are looking forward to some of the outcome 

measures about how that shift is going. 

Ms. MATSUI. Thank you. I think you will realize how much interest there is in long-term care delivery, especially in a population 

that is growing and the families willing to in some way accede to 

the wishes of their parents. 

And so I think it is something where long-term delivery in this 

country, which Medicaid, the single largest payer, deserves a lot of 

our attention on this committee. 

Ms. Yocom, the committee has been very interested in GAO’s 

proposal for automatic trigger. I think the idea of making FMAP 

even more responsive to states leads to a worthwhile discussion. I 

have a couple of additional questions to clarify this proposal. 

Why does a prototype formula focus on providing increased assistance during national economic downturns and not regional 

downturns? 

Ms. YOCOM. Sure. The big issue with the regional downturn is 

it is not always regional. For example, if there is a recession that 

is association with energy, it can be spread across states, all the 

way across the country from Alaska to Texas, to Wyoming, and so 

65 

on. And it is much more difficult to think about targeting a small 

group of states like that. So, our focus has been more on the national downturn. 

Ms. MATSUI. Could we look at that a little bit more? Because I 

am thinking about our recent recession which was caused by the 

housing crisis. And there are certain areas of the country that were 

really hit harder than others. I think if you look on a map, you can 

kind of identify those areas. I am just saying that I think that is 

something to look at because I think if you wait to look at the national model, we will miss those really hard-hit regional areas. 

Ms. YOCOM. Yes. 

Ms. MATSUI. Something to consider with any discussion are the 

winners and losers of the policy, whether some states may benefit 

more on their policy than others. And I think, to a certain degree, 

we are talking about this when I talk about the regional downturn. 

So, what type of variation can be seen with the enactment of 

your emergency trigger proposal? 

Ms. YOCOM. Well, there is a lot of variation. That is maybe the 

bad news from your perspective. The good news is the variation is 

very dependent on which states are affected by the downturn and 

it changes from recession to recession. 

In our work, we looked at four different downturns and the differing effects that happened on states. So, while one state may not 

get an additional FMAP, it would be because they didn’t need it 

that particular time. 

Ms. MATSUI. OK, thank you very much. 

Mr. PITTS. The chair thanks the gentlelady and now recognizes 

the vice chair of the subcommittee, Mr. Guthrie, for 5 minutes for 

questions. 

Mr. GUTHRIE. Thank you. Thank you, Chairman, for calling this 

hearing. I know it is a very complex financing system we have. And 

I think a couple of things, one of its states it appears, you know 

what Mr. Hagg you have found is just improper billing. Another 

thing is just trying to find ways to maximize the way the FMAP 

formula works in ways that probably we didn’t intend but it is not 

necessarily wrong on their point. 

But in your testimony, you did note that provider taxes, intergovernmental transfers and upper payment limits have the effect of 

distorting the FMAP rates and ‘‘undermine the federal-state partnership in financing health care.’’ 

While this is a long-standing concern of OIG, can you comment 

on what degree you think this distortion may have increased in recent years, given the budget challenges states are facing? 

Mr. HAGG. Well, we haven’t studied the extent of which those 

mechanisms have increased in recent years. So, I don’t know definitively. I think it is safe to say, at least, generally speaking what 

we see specifically involving health care provider taxes, I think 

those have been on the rise in recent years. 

Mr. GUTHRIE. And Ms. Yocom, do you have any comments that 

shed light on that question? 

Ms. YOCOM. I can’t give you a specific number. I do know that 

our work has shown an increase in provider taxes and an increase 

in supplemental payments and these can be used to have an influence on the amount of federal money that is received. 

66 

Mr. GUTHRIE. Thank you for that. And then Ms. Yocom, I have 

a question for you as well. 

I would be interested to learn more about the assistance distributed under GAO’s prototype formula. Am I correct that this prototype formula would have been less costly than the assistance provided through the Recovery Act? 

Ms. YOCOM. Yes, you are. We tested it over several recessions and it ranged from providing $9 billion in assistance to about $36 

billion, which was under the big recession. 

The reality is, though, that the Recovery Act was attempting to 

do more than make Medicaid whole. They used Medicaid as a vehicle to provide additional state support. 

Mr. GUTHRIE. OK. And am I correct in understanding that if 

Congress were to implement the prototype formula compared to 

current law, not the Recovery Act but the current law, this change 

would need to be offset, since it would increase federal outlays during a downturn? 

Ms. YOCOM. I believe so. You would really have to work with 

CBO on that. They are the experts. 

Mr. GUTHRIE. OK, it appears to be. 

And Dr. Schwartz, when MEDPAC presents this committee with 

recommended changes to the Medicare program, it routinely also 

provides the committee with recommended policies to adopt to offset the changes. Unfortunately, MACPAC does not offer ideas 

about ways to offset Medicaid or CHIP changes. If MACPAC wants 

us to be able to move forward on your recommendations, why 

doesn’t MACPAC mirror MEDPAC’s practice? 

Ms. SCHWARTZ. To that point, I would first note that a number 

of our recommendations have had no budgetary impact and in that 

case, a no-saver would be needed. 

We are now engaging, as part of our work on children’s coverage, 

in particular, and the work that we would be doing for you on financing, looking to see what kinds of saving options might be out 

there. And we do always try to work with CBO in understanding 

the fiscal effects of the recommendations. And that has certainly affected the commission’s decision-making when considering different 

options. 

Mr. GUTHRIE. All right, thank you. 

And I will just close with this statement. I was in the state government in Kentucky and we do a biannual budget. So, just general revenue budget, my first one was the year 2000, so, for 2001 

and 2002. And our biannual budget in Kentucky is about $13 billion. That is not exact but it is close. And since then, talking about 

the strains on state budgets, since then I know we have cut universities, we have had a lot of strain. And I think last year’s biannual 

budget was close to $19 billion. So, it has gone up a third in a decade or whatever. And so it has been consumed, a large part, there 

is other things, drivers of the debt, but a large part of it is Medicaid. And so as these states are looking, I think, for opportunities 

to maximize FMAP and to make their budgets balance, it is just 

Medicaid is continuing to consume more and more of our federal 

deficit and more and more of what states do. 

So, this is helpful for us so we can get a handle on this. If we 

don’t there is going to be no discretionary money for states to spend 

67 

in educating our children and it is going to be difficult for us to 

ever get our budget balanced, if we don’t do so. 

So, your information today has been very helpful and I appreciate that very much. I yield back. 

Mr. PITTS. The chairman thanks the gentleman. And now I will 

recognize the gentleman from New Mexico, Mr. Luja AE1n, for 5 

minutes for questions. 

Mr. LUJA AE1N. Mr. Chairman, thank you very much. 

As we all know, Medicaid is a lifeline to so many but as I noted 

in my opening statement, New Mexico’s Behavioral Health System 

is in crisis as well. I described the upheaval that has resulted in 

the Susana Martinez administration going after so many of these 

providers. And as I said today, there were just on Monday ten more 

of those providers that had allegations against them of fraud were 

exonerated. And contractors were brought in from outside of the 

state to take over a system. The current infrastructure was dismantled and we need a lot of support there. 

But with that being said, during the New Mexico delegation’s 

many conversations with CMS on the crisis and its impact in New 

Mexico, we, the delegation, asked CMS to provide us with data that 

CMS was receiving from the State of New Mexico that they are collecting from them. We hope that the data could provide us with 

something insightful, with a better look at what was happening on 

the ground and not happening on the ground. Unfortunately, after 

months and months of delay, the response that the delegation from 

New Mexico received from CMS was that CMS admitted that the 

stated-provided data had, and I quote, ‘‘significant limitations.’’ 

This left CMS largely unable to determine which, ‘‘areas and populations may be experiencing decreases in utilization.’’ 

So, the data being collected right now, at least from the State of 

New Mexico, is not able to help anyone make any decisions. So, 

without access to meaningful data, how is it possible for the people 

of New Mexico or us here to make decisions and how can people 

hold policymakers accountable? 

Without access to meaningful data, no one can know if enough 

is being done to ensure that the most vulnerable are protected and 

without access to meaningful data, we can’t determine how best to 

strengthen the program for the most vulnerable. That is why I am 

interested in determining how we can use FMAP to help states 

build out and prioritize behavioral health infrastructure, data, and 

access. 

So, Dr. Schwartz, if we want states to build and maintain strong 

behavioral health systems, are there ways we can use FMAP to do 

so? 

Ms. SCHWARTZ. I would say first to the point of data, the issue 

of data is one that MACPAC has consistently noted and noted concern about the need for data for many purposes, for program integrity purposes, for the purposes of improving value and monitoring 

quality and improving quality. And this is an area where CMS has 

been working to change its system to something called the T– 

MSIS, the Transformed MSIS, which has been going much more 

slowly than anyone would have anticipated. 

There are many things that states could do to strengthen behavioral health systems. Of course, states might prefer Enhanced 

68 

FMAP. States have many options in the types of benefits that they 

can provide in behavioral health and states are, there is wide variation in how they do that. They have a wide variation in how they 

structure their systems in terms of the providers that they have, 

their use of managed care for behavioral health. So, a whole range 

of strategies. 

MACPAC’s work at the moment is trying to look at whether 

there are barriers and whether those barriers are in the practice 

environment, the state environment, or the federal environment for 

integration of behavioral health services with physical health services. Because for many of these populations, regular contact with 

a physical health provider is their major point of contact with the 

health system. 

Mr. LUJA AE1N. And so you answered the next question that I 

was going to pose, which was if you could speak how Congress has 

used FMAP to incentivize states to prioritize health care delivery 

systems. And one of the areas that it seems that Enhanced FMAP 

has worked is the long-standing family planning enhanced match, 

which appears to have drastically improved Medicaid access to 

families. 

But with that being said, the bill that I am working on provides 

an Enhanced FMAP to states that prioritize investments and infrastructure access and data collection. I would be curious to hear 

what types of suggestions you have about the interventions that 

are important that would maybe be most successful to help this 

program. 

Ms. SCHWARTZ. I would be happy to take a look at that for you 

and get back to you on the details of it. There may be some technical assistance that we can provide in that regard. 

Mr. LUJA AE1N. I appreciate that Dr. Schwartz. 

And Mr. Chairman, thank you so much for this important hearing today and I yield back the balance of my time. 

Mr. PITTS. The chair thanks the gentleman. I know recognize the 

gentleman from Illinois, Mr. Shimkus, for 5 minutes for questions. 

Mr. SHIMKUS. Thank you, Mr. Chairman. If Graham would put 

the slide up. 

Every time I deal with a Medicaid debate, of course, Ms. Yocom, 

you know you have seen this numerous times, the red is what the 

CBO would say is the mandatory spending, the blue is the discretionary budget. When we have a budget fight and there is a threatened shutdown, it is on the blue that the fight is about. So, this 

is a simple question but it is one that we, here out in the district, 

we use that term mandatory or we use the word for portions of the 

red, not all of them, as entitlement spending. 

Anyone want to comment on those two words as good words or 

bad words to use? Ms. Mitchell. What should they be called? Are 

they good? 

Ms. MITCHELL. I don’t know. I don’t know that I am qualified to 

answer that. 

Mr. SHIMKUS. OK. 

Ms. MITCHELL. But entitlement, meaning that Medicaid is an entitlement, meaning that both the states are entitled to Medicaid 

funding and individuals are entitled to Medicaid coverage, so that 

means there is no cap and states cannot put on—— 

69 

Mr. SHIMKUS. And that makes it mandatory because they are entitled to the coverage. 

Ms. MITCHELL. Yes. 

Mr. SHIMKUS. Dr. Schwartz? 

Ms. SCHWARTZ. Yes, all these—— 

Mr. SHIMKUS. These are important. It might sound like a goofy 

talk but it is really out there. People get confused. And if we are 

trying to deal with what Mr. Guthrie was talking about, the national debt, part of the national debt is our promises to pay entitled 

people with mandatory spending. 

Ms. SCHWARTZ. You know the labels are all extremely valueladen but you point out correctly that when states spend money on 

these services that are authorized within the statute, populations 

who are entitled to those services and deemed eligible by those 

states, those funds flow through and the federal share is mandatory. It is not subject to an appropriation. 

Mr. SHIMKUS. Great, thank you. 

Ms. Yocom, did I fairly, accurately talk through that? 

Ms. YOCOM. Yes, I think that your statement is accurate. 

Mr. SHIMKUS. Mr. Hagg? 

Mr. HAGG. I am not sure I would have anything new to add. Obviously, Medicaid is a very important program. For the people who 

receive their health insurance through it, it is a tremendously important program. 

Mr. SHIMKUS. Right but this is a 2014 pie chart of $3.5 trillion 

of federal spending and then, again, the discretionary portion is 

anywhere between $1 trillion and $1.2 trillion and the rest is, as 

you have identified entitled or mandatory payment to meet the entitlement. So, I appreciate that. 

[Slide shown.] 

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20030.060
71 

Mr. SHIMKUS. We had a discussion. In fact, Mr. Luja ́n also mentioned this 90 percent enhanced family planning match that we 

discussed based upon it. 

Mr. Hagg, does the OIG have the capacity to continually audit 

all states’ claimed federal matching for family planning services? 

Mr. HAGG. No, we don’t have that capacity. 

Mr. SHIMKUS. Given that the Medicaid program is a shared federal and state responsibility and given OIG’s limited resources, is 

it fair to say that states have a responsibility to do audits and 

prioritize oversight where there are known vulnerabilities? 

Mr. HAGG. Yes, I think that is fair to say. You know it starts 

with the states. The states have the responsibility to make sure 

that the expenditures they claim are accurate, in the case of family 

planning or other enhanced FMAP categories that the correct expenditures are in those categories. 

Mr. SHIMKUS. Great, thank you. 

And Dr. Schwartz, in your testimony, you noted one concern with 

the FMAP is that states have an incentive to broaden Medicaid to 

include other state health functions, where possible, in order to 

draw down federal funds. Can you elaborate and give an example 

of what you mean? 

Ms. SCHWARTZ. I think when state resources are tight, there are 

incentives to look for other sources of revenue, whether it is for 

school-based services, transportation, or public health services. 

From MACPAC’s perspective, our focus has always been on looking for policies to make sure that the eligibility decisions are made 

correctly, that the services are provided to, enrollees are medically 

necessary and appropriate and the providers meet the federal and 

state participation requirements. 

Mr. SHIMKUS. So, states are dipping into Medicaid dollars for 

other services that may not be appropriate, based upon the definition of Medicaid. They are gaming the system. 

Ms. SCHWARTZ. That is the distinction that I want to make. And 

I am sure that the gentleman from the OIG may speak to this as 

well. From MACPAC’s perspective, when states claim federal 

match, those services must be legally matchable from legal sources 

of revenue, even if they are provided in different settings. 

Mr. SHIMKUS. And that is your recommendation. Your recommendation is that they follow that. 

Ms. SCHWARTZ. Yes. 

Mr. SHIMKUS. OK, that is it. Thank you, Mr. Chairman. 

Mr. PITTS. The chair thanks the gentleman. I know recognize the 

gentlelady from Illinois, Ms. Schakowsky, for 5 minutes for questions. 

Ms. SCHAKOWSKY. Thank you. Thank you, Mr. Chairman. 

The importance of Medicaid just simply can’t be overstated. I 

want to start with that because just yesterday the CDC released 

new data showing that states that have expanded Medicaid have 

an uninsured rate of ten percent for adults age 18 to 64, probably 

still too many, but yet compared to an uninsured rate of 17.3 percent for non-expansion states. 

However, many states, including my home state of Illinois, received FMAP rates very close to the statutory minimum of 50 percent. In fact, Illinois receives an estimated 3.1 percent of annual 

72 

FMAP funding that covers 4.8 percent of the nation’s Medicaid 

beneficiaries. 

And I would like unanimous consent to enter into the record a 

document prepared by the Illinois Hospital Association which highlights the importance of Medicaid to Illinois. 

Mr. PITTS. Without objection, so ordered. 

Ms. SCHAKOWSKY. It is well-known that Medicaid payment rates 

are low, especially compared to the payment rates of Medicare and 

the private industry, private insurance. The need to adequate payments to Medicaid providers is incredibly important in providing 

stability in our healthcare system and ensuring access to providers 

for Medicaid beneficiaries. States have the flexibility of providing 

supplemental payments to providers and I believe this flexibility 

should be maintained. 

So, Ms. Schwartz, let me ask you. While some of the testimony 

today has focused on supplemental payments made to providers, I 

am more concerned about ensuring that providers receive adequate 

payments for services provided under Medicaid. Are underpayments to providers a systemic problem in the Medicaid program? 

Ms. SCHWARTZ. I think that on the physician side, the literature 

has really consistently shown a relationship between fees and physician participation. And when fees are lower, physicians are less 

willing to participate and, therefore, the potential for access problems. The lower rate that Medicaid generally pays for a physician’s 

services relative to Medicare is also well-documented and that was 

part of the thinking behind the primary care payment increase in 

2013 and 2014. 

On the hospital side, it is significantly more complicated because 

states can pay hospitals through many different mechanisms, including their base payment rates, non-DSH supplemental payments, and DSH payments. 

The degree to which total payments to hospital in the aggregate 

varies considerably across states and we don’t know a lot about 

hospital-specific payments. And for that reason, MACPAC has recommended 2 years ago and more recently in the DSH report that 

we released on February first that we need more data to better understand how hospitals are being paid. We recommended that the 

secretary collect and report hospital-specific data on all types of 

Medicaid payments that they receive and on the sources of the nonfederal share so we can determine net Medicaid payment and we 

can help answer the kinds of questions that are you are raising. 

Ms. SCHAKOWSKY. I am sorry. What happened February first, did 

you say? 

Ms. SCHWARTZ. On February first, MACPAC released a statutorily required report to look at Medicaid payments to Disproportionate Share Hospitals. 

Ms. SCHAKOWSKY. OK, thank you. 

States, including Illinois, use intergovernmental transfers or 

IGTs to legitimately, I believe, fund their Medicaid programs. Medicaid statute, since its inception, requires states to use state general funds to pay for 40 percent of their share of Medicaid funding. 

States are afforded flexibility to fund their portion and draw down 

the federal share. In addition, many states use provider assessments to ensure stability in their Medicaid programs. Without proVerDate Nov 24 2008 12:02 Aug 30, 2017 Jkt 037690 PO 00000 Frm 00078 Fmt 6633 Sfmt 6633 I:\MY DOCS\HEARINGS 114\114-115 CHRIS
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vider assessments, Illinois’ Medicaid program would cover less than 

70 percent of the cost for Illinois hospitals to care for the state’s 

most vulnerable population. 

So, Ms. Schwartz, is there a component of these legitimate payment mechanisms that—isn’t it really the states and the providers 

that are willing to put up their share and shifts the burden really 

to them, a burden that they are willing to accept, which I see as 

a good thing? 

Ms. SCHWARTZ. I guess just to build on what I said previously, 

states are allowed to use intergovernmental transfers. We know 

much less about those intergovernmental transfers than I think we 

would like to know and that is part of the rationale for our recommendation to collect more data on that. We have been relying 

on some work GAO did that is illustrative of the issue but not 

nearly as comprehensive that you would need to make a significant 

policy change in that area. 

Ms. SCHAKOWSKY. But isn’t it sort of obvious that if the states’ 

ability to creatively finance their Medicaid programs are further restricted, that it would led to cost them services and benefits for the 

beneficiaries? 

Ms. SCHWARTZ. It is hard for me to predict how states would 

react. States may have other sources and I couldn’t comment on 

the specific reaction that states would have to such a change. 

Ms. SCHAKOWSKY. And so you are looking more carefully into 

this. And when do we expect to know something? 

Ms. SCHWARTZ. Well, I think legislation is needed for the Secretary to collect those data. 

Ms. SCHAKOWSKY. I yield back. 

Mr. PITTS. The chairman thanks the gentlelady. 

Ms. SCHWARTZ. Excuse me. I am sorry, sir. 

Mr. PITTS. Yes. 

Ms. SCHWARTZ. I just need to correct what I said. The Secretary 

doesn’t need legislation but the Secretary has been reluctant to 

and, therefore, it might be wise on the part of the congress to actually direct the Secretary to do that. 

Mr. PITTS. The chair thanks the gentlelady. I now recognize the 

gentleman from Virginia, Mr. Griffith, for 5 minutes for questions. 

Mr. GRIFFITH. Thank you very, Mr. Chairman. 

Ms. Yocom, I have tremendous appreciation for the work that 

GAO does to evaluate policies and advise the committee. However, 

I am concerned that the current that the current process for appointing commissioners for MACPAC may be fundamentally 

flawed. 

For example, the MACPAC statute explicitly allows for Medicaid 

directors to serve on the commission, however, there is not one single Medicaid director serving on the commission today but Medicaid is supposed to be a federal-state partnership. So, I ask, why 

hasn’t GAO put someone on the commission who is actually running a Medicaid program today? 

Ms. YOCOM. Sir, I know that the Comptroller General is working 

on a response to the committee’s request and I would like to defer 

until that comes to you. 

Mr. GRIFFITH. I appreciate that. 

74 

And Dr. Schwartz, I have got to tell you, as an attorney, I am 

very troubled by an apparent conflict of interest from some of the 

commissioners. Having read Ms. Rosenbaum’s reply to Chairman 

Upton and Pitts, I have to tell you it was unsatisfactory in my 

judgment. In my opinion, when you read that letter carefully, it is 

a clear conflict under legal ethical standards that the chairwoman, 

even though she wasn’t chairwoman at the time, would sign onto 

a case adverse to the House of Representatives when she is a sitting MACPAC commissioner. It doesn’t matter whether she was 

chair or not at the time. 

And when you look at her letter, not only is she an attorney, 

which is clear in the letter, but she goes on to state that this case 

that she got herself involved in is ‘‘the focus of my life’s work.’’ It 

is so core to her that that is her number one concern. If that is not 

the appearance of impropriety or a conflict of interest in the standard legal definition, I, frankly, don’t know what is. 

And then she goes on in her letter to say that but now that I 

am chairwoman, I am not going to do any more work on that case. 

Well, if she has a conflict now as a chairwoman which she feels 

means she shouldn’t work on that case, she shouldn’t have worked 

on that case in the first place. 

And the issue is not resolved on the conflict of interest issue but 

it is also not exclusively her problem. One of the current commissioners sits on the board of a nonprofit which is involved in legal 

advocacy and has been involved in at least one class action suit 

against a state Medicaid program. Now, I have got to tell you, I 

can’t see how these are not conflicts of interest in the sense of I 

understand there is a financial conflict of interest people talk 

about. I am talking about a judgment conflict of interest. In the 

legal standards, as an attorney, one of them is not just that you 

have a direct conflict but that there is an appearance of impropriety. There is an appearance of impropriety. And I think that it 

ought to be of concern and you all ought to be disturbed at 

MACPAC that you didn’t anticipate that this would be a problem 

for the public and for members of congress. 

We need, as Congress, we need objective recommendations for 

strengthening Medicaid and CHIP. Given the concerns that the 

committee leaders have raised, I hope you understand my worry 

that MACPAC recommendations will be viewed as somewhat tainted, that there may be some conflict in there and that we can’t rely 

on that, as we ought to be able to, as credible or objective in all 

cases. 

Now you know I know folks are good people and I don’t know Ms. 

Rosenbaum but when you look at her letter, this is my life’s work. 

That is the sign of a good person. But in this case, there was a mistake made, an appearance of impropriety, and she shouldn’t be 

doing both her life’s work and filing briefs or amicus briefs in opposition to the United States House of Representatives. 

As members of this committee know, and as others who have followed me through the years know, it is not a new position for me 

to recommend that we change the way we do things and that perhaps these appointments ought to be made directly by Congress. I 

plan to introduce a bill that will make MACPAC directly appointed 

by both parties. It is not a partisan bill, in that sense. Both parties, 

75 

majority and minority would get appointments, House and Senate 

would get appointments. And I believe that is a proper way for us 

to proceed going forward. 

I look forward to working with folks to try to make that better. 

If they don’t like the way we have the numbers configured, that is 

obviously something that can be discussed. But as a legislative advisory panel, we need to know we are getting the right stuff and 

that people don’t have conflicts so steeped in their own personality 

that they would write a letter back to us and, in defense, say, ‘‘But 

this is my life’s work.’’ 

I yield back. 

Mr. PITTS. The chair thanks the gentleman and recognizes the 

gentlelady from California, Mrs. Capps, for 5 minutes for questions. 

Mrs. CAPPS. Thank you, Mr. Chairman, and thank you to the 

panelists for your testimony today. 

While I always appreciate the chance to talk about the importance of Medicaid and CHIP. To both families and communities, it 

is critical that any proposed changes do not undermine the program’s important role in our health care safety net. Unfortunately, 

we continue to see plans from some of my colleagues to cap services 

or to block the program, both ideas that would not make health 

care more affordable but would, instead, leave some of those who 

need the program without it and shift the cost to states and localities. This would undermine the fundamental principles of the program and I cannot express enough how damaging that would be to 

patients and my constituents. But we can all agree that there are 

ways to make the program more responsive on the financial end. 

Studies show that when the current federal formula for FMAP 

uses per capita income as a proxy to reflect a state’s financial resources and Medicaid needs, it is a poor proxy for both. This misrepresentation sustains significant funding disparities among 

states taxed by the federal government with serving the health 

needs of their low-income residents. And states like California that 

have relatively higher financial resources but also relatively higher 

poverty rates, are misunderstood as having lower Medicaid cost 

pressures than the already do. 

In fact, one study undertaken by California Common Sense, a 

nonpartisan research group in my state, found that by using a 

more accurate measure of poverty and need, California should be 

receiving a 15 percent higher FMAP rate. 

Dr. Mitchell, how does the current FMAP under-reimburse states 

like California who have higher Medicaid cost pressures than are 

reflected? 

Ms. MITCHELL. Well, GAO has done a lot of work in this area but 

you know with the current formula, they are only looking at the 

per capita income. So, they are not taking into consideration the 

number of poor people in the state, the number of people eligible 

for Medicaid. None of those factors are taken into account. 

Mrs. CAPPS. Without this more accurate measure that looks at 

the financial—well, maybe I should just stop and say does GAO 

want to respond. 

Ms. YOCOM. Ms. Mitchell is correct. Our work has shown one of 

the ways that it plays out is you can have two states with the same 

per capita incomes and the way it translates into the Medicaid proVerDate Nov 24 2008 12:02 Aug 30, 2017 Jkt 037690 PO 00000 Frm 00081 Fmt 6633 Sfmt 6633 I:\MY DOCS\HEARINGS 114\114-115 CHRIS
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gram has a really different effect. For example, a state with a high 

number of disabled and elderly individuals is going to be struggling 

to finance their program more than a state that is primarily comprised of children and families. 

Mrs. CAPPS. OK, thank you. 

So, without this more accurate measure that looks at the financial resources and Medicaid needs of the state, states like mine, 

California, have worked with their health care providers to maintain a stable functioning safety net health care system. One way 

they have done so is through our state’s provider fee, that is used 

to help pay for the non-federal share of their Medicaid program. 

Federal Medicaid law requires that provider assessments be 

broad-based and uniformly imposed and federal laws and regulations guard against the misuse of provider assessments by states 

that seek to receive higher federal matching rates than statutorily 

allowed. 

In California, the provider community is strongly supportive of 

the fee, even non-safety net providers. The fee has been approved 

by CMS and is used right. Money that comes from the state health 

care system goes right back into it, targeting the providers who 

provide the most under and uncompensated care. Over the years, 

however, we have heard rumblings against the program. To be 

clear, cutting provider fees would hurt all individuals in the state, 

not just working families. 

Before the California fee went into effect, a dozen safety net hospitals were about to close their doors, not because they didn’t have 

patients to care for but because they couldn’t afford to stay open. 

The provider fee has given them new life so that they are there in 

the community for both Medicaid patients but also any community 

member who needs care. 

And with that, Mr. Chairman, I yield back the balance of my 

time. 

Mr. PITTS. The chair thanks the gentlelady and now recognizes 

the gentleman from Missouri, Mr. Long, for 5 minutes for questions. 

Mr. LONG. Thank you, Mr. Chairman. 

Ms. Yocom, why is it that the current FMAP formula isn’t sufficient for dealing with economic downturns? 

Ms. YOCOM. A lot of it has to do with the timing and the fact 

that, as Ms. Mitchell talked about, the data that are represented 

by the FMAP calculation, in addition to not be complete enough, 

are also old. So, when you are in a steady economic time or a time 

of growth, it doesn’t cause a problem. It is during a downturn that 

the real effects take place because the FMAP is reflecting economic 

circumstances that were several years ago. 

Mr. LONG. OK, have you assessed how well the prototype formula would have worked in these previous downturns? 

Ms. YOCOM. We have. Our first effort to create a model like this 

addressed about 90 percent of recession-related costs. And where 

we found that it was lacking was for states that were slow to enter 

a downturn and slow to recover. And so then we adjusted the way 

that we end the assistance period, based on states’ activities and, 

did some slight improvement. I don’t think we calculated the perVerDate Nov 24 2008 12:02 Aug 30, 2017 Jkt 037690 PO 00000 Frm 00082 Fmt 6633 Sfmt 6633 I:\MY DOCS\HEARINGS 114\114-115 CHRIS
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centage of cost coverage since then but we believe it is a pretty 

strong formula. 

Mr. LONG. You believe it is what? 

Ms. YOCOM. It is a pretty strong formula for assessing states 

with their financial needs. 

Mr. LONG. OK, my next question here is for you or Dr. Schwartz, 

whoever wants to take it first. 

What type of other policy proposals have been proposed in the 

past replacing FMAP and improving financing to the Medicaid program? 

Ms. YOCOM. What types of policies have been proposed? 

Mr. LONG. Yes, what type of policy proposals have been proposed 

in the past for replacing the FMAP and improving financing in the 

Medicaid program? 

Ms. YOCOM. There was, at one point, legislation looking at adjusting the FMAP during a downturn. I do not know how far it got 

in the statutory path. 

Mr. LONG. Dr. Schwartz. 

Ms. SCHWARTZ. MACPAC has just conducted an historical review 

of major reform proposals and we are working on cleaning that up 

so that we can share it with the members of the committee and 

your staffs. Some of the ideas that have been talked about over the 

past 20 to 30 years include block grants, as have been stated earlier, per capita caps, capped allotments. Those are some of the proposals that we will be looking at going forward but we will provide 

you an analysis of some of those ideas. 

Mr. LONG. And how would those options change the incentives 

and disincentives facing states? 

Ms. SCHWARTZ. Well, they differ from each other in how they are 

designed but, in general, they change the nature of the relationship 

between the federal government and the states in providing more 

fiscal discipline in limiting the resources either in total or based on 

the number of enrollees or other mechanisms of that type. 

Mr. LONG. OK, so there would be incentives and disincentives for 

states. 

Ms. SCHWARTZ. Yes. 

Mr. LONG. OK, thank you all. I appreciate your testimony here 

today. With that, I yield back. 

Mr. PITTS. The chair thanks the gentleman. I now recognize the 

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

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

Mr. Hagg, I just have a couple of quick questions for you, based 

on the issues you have raised regarding my home State of New 

York. In your testimony, you noted past issues regarding reimbursement for developmental centers and residential habilitation 

centers. And in both of these instances, it was clear that both our 

state and CMS made administrative errors that resulted in overpayments for these services and, in both instances, all parties involved, including the State of New York and CMS largely agreed 

with OIG’s findings. Is that not correct? 

Mr. HAGG. Yes, I think that is correct. 

Mr. ENGEL. Yes. It is my understanding that, following this report, New York and CMS worked cooperatively to both fix the probVerDate Nov 24 2008 12:02 Aug 30, 2017 Jkt 037690 PO 00000 Frm 00083 Fmt 6633 Sfmt 6633 I:\MY DOCS\HEARINGS 114\114-115 CHRIS
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lem in the future, as well as agreed upon a financial settlement to 

resolve the issue. That is true as well. 

Mr. HAGG. That is correct, yes. Initially it was trying to fix the 

problem moving forward and then it required some audit work 

looking backwards to figure out the scope of the problem, the extent of the problem. And then yes, the state and CMS worked 

closely together to reach that settlement. Yes. 

Mr. ENGEL. Thank you. Your testimony today also included the 

results of many investigations and my reading of these reports 

would indicate that nearly all ended with cooperation between the 

states and CMS to resolve the issues at hand. Is that correct? 

Mr. HAGG. Well, are you talking about the audits involving some 

of the Enhanced FMAP claiming areas? 

Mr. ENGEL. Yes. 

Mr. HAGG. Yes, I think, I don’t have a list in front of me but I 

would think most, if not all, of those audits, CMS concurred with 

the recommendations that we made. I think in a lot of cases, the 

states agreed with our findings and recommendations as well. So, 

yes, CMS, as the action official, would work with the states to help 

implement those recommendations. 

Mr. ENGEL. OK. And finally, would you agree that most investigations on issues similar to New York’s are addressed in a generally cooperative manner that improves the program integrity in 

the long-run? 

Mr. HAGG. I am sorry. Could you repeat that again? 

Mr. ENGEL. That the investigations on issues similar to the ones 

we have in New York, as you pointed out New York wasn’t the only 

state, that those issues are generally addressed in a cooperative 

manner that improves program integrity in the long-run? 

Mr. HAGG. Generally speaking, yes. If CMS agrees with the recommendations we make in the states then, yes, there is a cooperative effort to try to help the program moving forward. Sometimes 

there are disagreements where states disagree with the findings 

that we have, with the recommendations that we make. Sometimes 

CMS disagrees with us. But by and large, when there is agreement, yes, there is a cooperative effort to help improve the programs moving forward. 

Mr. ENGEL. All right. Well, thank you. I just wanted to get those 

clarifications on the record. OIG has done very good, in my opinion, 

to ensure that reimbursements in the Medicaid program remain accurate and certainly, OIG has raised issues in the past but it is 

clear that these issues are solvable and always nearly end with 

both long-term program improvement and amicable agreement between the federal and state government. So, I just wanted to get 

that on the record. 

Thank you, Mr. Chairman. I yield the remainder of my time. 

Mr. PITTS. The chair thanks the gentleman and now recognizes 

the gentleman from Florida, Mr. Bilirakis, for 5 minutes for questions. 

Mr. BILIRAKIS. Thank you, Mr. Chairman. I appreciate it very 

much. I want to thank the panel for their testimony. 

GAO has listed Medicaid as a high-risk program for more than 

a decade. I am sure that you know that. The IG’s Office’s 2015 Top 

79 

Management and Performance Challenge Report has Medicaid 

fraud, waste, and abuse listed in the number one spot. 

Mr. Hagg, this week the Energy and Commerce Committee sent 

a letter to the IG’s office asking for additional information on Medicaid payments related to deceased beneficiaries and deceased providers. Do you know the size and scope of the problem, how much 

money is being wasted, there shouldn’t be any money wasted as far 

as I am concerned, what services or payments are being made, and 

why life status cannot be determined in a timely or accurate way? 

And I think it should be pretty simple but if you can answer that 

question, I appreciate it. 

Mr. HAGG. Yes, I don’t have an answer to the scope of the problem or the magnitude of the problem. 

Over the years, we have conducted various audits going back a 

number of years, where we would identify Medicaid payments that 

were made for people that were deceased. We currently have some 

ongoing work looking at a few different states, trying to determine 

the extent of the problem for those individual states. It wouldn’t be 

a national look but it would for individual states determine the extent of which payments are made for people that are deceased. 

Mr. BILIRAKIS. Well, why wouldn’t we look at all 50 states in this 

case? 

Mr. HAGG. That is a resource issue. It is a lot of data to crunch 

and review. And once you have things that look like errors, there 

is specific work that needs to be done to look behind to make sure 

that we are actually talking about someone who is deceased. So, it 

just requires a lot of resources. 

Mr. BILIRAKIS. Well, it is my understanding we have had spot 

checks before and it just hasn’t done anything. Why not a comprehensive look at the problem? As far as I am concerned, it is a 

big issue. 

Mr. HAGG. Well, I don’t disagree with you. And you would think 

it would be something that over time we would be able to get correct. 

Mr. BILIRAKIS. How do you engage with the states? 

Mr. HAGG. How do we engage with the states? 

Mr. BILIRAKIS. Yes. 

Mr. HAGG. Well, anytime—— 

Mr. BILIRAKIS. Get the information necessary for the analysis. 

Mr. HAGG. Well, just like all of our work, we try to look at areas 

that we believe are high-risk areas of vulnerabilities, whether it is 

across states or in specific states. We decide, once we see those 

vulnerabilities, to conduct audit work that would address those 

specific areas, those vulnerabilities. If we decide to audit a specific 

state, we obviously meet with the state and talk to them about the 

audit we are going to perform, the scope that it would entail, and 

the methods that we would use. And we work with the state to get 

the data we need to make determinations to fulfill our objectives. 

Mr. BILIRAKIS. How many states have you identified so far? 

Mr. HAGG. For payments for deceased beneficiaries? 

Mr. BILIRAKIS. Yes, and how much money is involved? 

Mr. HAGG. Well, currently, I don’t know the extent of the errors. 

We have ongoing work in two or three states, one that work is comVerDate Nov 24 2008 12:02 Aug 30, 2017 Jkt 037690 PO 00000 Frm 00085 Fmt 6633 Sfmt 6633 I:\MY DOCS\HEARINGS 114\114-115 CHRIS
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pleted. We can talk about our findings more. Right now, I don’t 

have any findings to report because the work isn’t completed. 

Going back 10 years or more, there would be audits conducted 

by us and other groups that would find Medicaid payments for deceased beneficiaries. I think the amounts would vary from a million 

or two million here or there to higher amounts like in twenty-five 

million or more. 

Mr. BILIRAKIS. That is outrageous as far as I am concerned. OK, 

well please keep me informed—— 

Mr. HAGG. We would be glad to do that. 

Mr. BILIRAKIS [continuing]. Because I need to follow up on this. 

Thank you very much. I yield back, Mr. Chairman. 

Mr. PITTS. The chair thanks the gentleman. I now recognize the 

gentleman from Indiana, Dr. Bucshon, for 5 minutes for questions. 

Mr. BUCSHON. Thank you, Mr. Chairman. 

Medicaid is a critical program. I was a physician in my previous 

career. I am still a physician but now I am here. But in my view, 

it needs broad reform and we are talking about some aspects of the 

law today. 

In many states, having Medicaid does not guarantee access to 

health care, other than through the emergency room and that is 

true today as it has been for quite a while. As the costs continue 

to rise overall in health care, more stress will be put on this critical 

program. 

One of the failures of the ACA is addressing coverage and not addressing cost. And without honestly looking at some of the things 

that are driving the cost and solving those, we are going to continue to be talking about coverage when we are missing the boat 

because it doesn’t guarantee access. 

Price transparency for the consumer in health care doesn’t exist. 

Quality transparency is getting better. The combination of those 

two is the value that you get from a service. 

Looking at tort laws, antitrust and stark law reforms, and many 

other things to try to help decrease the costs in our health care system will be imperative to the other things that we look at structurally within the Medicaid program. 

And this question goes to Dr. Schwartz or Ms. Yocom. Has anyone looked at Medicaid recipients and their ability to find access 

to a primary care physician, other than through the emergency 

room? So, for example, you have a Medicaid population. Has anybody surveyed them and found out the percentage of them that 

can’t find a primary care physician to take care of them? 

Ms. SCHWARTZ. There are a number of different surveys that 

have been done to look at access for Medicaid beneficiaries. One is 

using the National Health Interview Survey and asking a number 

of questions about access. Unfortunately, using that survey, we 

can’t get state estimates. So, some of the variables that would be 

important about how states design their programs, you can’t tell. 

Another approach that has been taken more recently by a group 

of researchers at the University of Pennsylvania is to do what they 

call Secret Shopper and call and pose as a private insurance patient or Medicaid patient and to see what the access barriers are. 

And they do see some differentials. In that study, they were also 

81 

looking at difference in fees and found that states that had higher 

fees in the Medicaid program did have fewer barriers to access. 

Ms. YOCOM. There is another national survey. Again, we cannot 

get down at the state level, which shows that from the perspective 

of the beneficiaries Medicaid access is viewed as comparable to that 

of private insurance with regard to initial primary care. And the 

difficulties reported in obtaining care get higher when you are talking about specialty care or behavioral health services, in particular. 

Now, what we don’t know is the frame of references of those individual respondents, if they were previously uninsured and being on 

Medicaid may make things easier. 

Mr. BUCSHON. Yes, I understand the study but amongst the community that I represent, we hear all the time about difficulty finding physicians and we are hearing more about Medicare patients, 

finding access to primary care physicians because physician practices are closed to those populations, based on the low reimbursement rates. 

Mr. Hagg, when the state claim a higher federal matching rate 

than they are entitled, what is the process for the federal government to be made whole? 

Mr. HAGG. Well, specifically tied to the work that we performed, 

if the state agrees and CMS agrees, it could be a fairly quick process. And the next quarter, the state would return the funds. 

Mr. BUCSHON. That is the question. So, the next quarter of the 

payment can be rectified? 

Mr. HAGG. If the state agrees that it is an overpayment. Now, 

if they disagree, there are certain appeal rights that they have that 

they can go through. Once those appeal rights are exhausted and 

it is still determined to be a legitimate overpayment, an overpayment that CMS agrees with, as the action official, CMS would issue 

a disallowance letter to the state. That may take several quarters 

to actually get the money back at that point, then. 

Mr. BUCSHON. OK, great. And Ms. Yocom, obviously, there is a 

tradeoff between complexity and accuracy involved in alternative 

measures to determine and to allocate Medicaid funding to the 

states. Can you just briefly comment on that? 

Is there any not complex, accurate way to do this or is it just a 

balance? 

Ms. YOCOM. Unfortunately, there probably isn’t. There is a tradeoff, though, between how complex you want your formula to be 

versus how simple it is to implement. 

I think really, at the end of the day, it is a congressional policy 

decision of how important it is to be as equitable as possible across 

the states. 

Mr. BUCSHON. Thank you. My time is up. I yield back. 

Mr. PITTS. The chair thanks the gentleman and now recognizes 

the gentleman from New York, Mr. Collins, for 5 minutes for questioning. 

Mr. COLLINS. Thank you, Mr. Chairman. 

Let me explain, perhaps, a problem I have and then we will ask 

a little input. I am from Buffalo, New York, Erie County, New 

York, one of the poorest cities in the United States of America and 

hence, one of the poorest counties, with a very high percentage of 

Medicaid. 

82 

So, it is my understanding that there are about 13 states out of 

50, New York being one, that forced the counties to pick up a large 

piece of the state’s share. Now in 37 out of 50 states, the state 

picks up their share, the federal picks up their share, and that is 

it. And that reimbursement rate is dependent on the state income 

level, compared to the national average. 

In New York and I think 12 other states, though, the state forces 

a big piece, as much as half of that state share down to the 62 

counties in New York. So, New York being considered a wealthy 

state because of New York City, Westchester County, we are at the 

lowest level. We are reimbursed 50 percent. But in a poor county, 

then, like Erie County, the largest upstate county in New York, 

that share comes back to the county. We are only getting 50 percent. Yes, Mississippi, which has the same relative income level, 

gets 74 percent. So, you can see where yes, it is a state issue, perhaps, but I believe this reimbursement was to protect, if you will, 

the taxpayers of the poor states. Well, think of Erie County as a 

state. We are a very poor county, yet we are only reimbursed at 

50 percent because of that. 

So, my thought would be having a state like New York that is 

62 counties that forces it back on the counties, we should have 62 

different reimbursement rates that accept that Erie County is a 

very poor county. 

And to put it in perspective, the county, little county, well it is 

a big county, but our county share of Medicaid was give or take 

$120 million a year, $120 million. Our entire county property tax 

was only $110 million. One hundred percent of our county property 

tax would not even cover our Medicaid portion. So, we had to dip 

into our sales tax collections to cover that. And then everything 

else in our budget from highways to all other services, jails, was 

covered by sales tax. 

So, I think you can see the dilemma we have as being one of the 

states where the state is forcing substantial costs, what they call 

the state share but in New York it is state and county share, and 

that we are a poor county. 

So, I guess the question, I don’t know, perhaps to Ms. Mitchell, 

I have to assume it wouldn’t be that hard to have 62 reimbursement rates, one for each county in New York. The data is easily 

available, I would presume. I know it would take a bill in Congress 

to say for those states which push it back to the local level, we will 

look at each county as a separate entity and recalculate that rate. 

And I know that is different than what we have now, but that 

wouldn’t be that difficult to do, would it? 

Ms. MITCHELL. I believe it could be possible to do that and unfortunately, at this point, those sort of decisions are made on a state 

level. States have a lot of discretion in how they design their program and how they fund their Medicaid program. 

Mr. COLLINS. But if a state did like New York, though, you could 

then go back to the federal government and say here is New York 

State’s program so, in this case, let us recalculate for the 62 counties. I know it would take an act of Congress to do that but I think 

you can sense my frustration, as the county executive of a very 

poor county, being treated like we were from Westchester County, 

83 

or Suffolk County, or Nassau County but we weren’t, you know 

home to the City of Buffalo, third poorest city in the United States. 

So, would anyone else want to comment on that? Have you heard 

this argument from others? I mean there are 12 or 13 other states 

that do likewise. A lot of people have no idea this even happens. 

So, with that, I guess I will yield back the balance of my time 

but my thought would be if you could get Congress to move, the 

first question would be how hard would it be? And I don’t think 

it would be that hard to calculate 62 different rates for New York, 

just the press of a spreadsheet button and there you go. 

Thank you very much, Mr. Chairman. I yield back. 

Mr. PITTS. The chair thanks the gentleman. I now recognize the 

gentlelady from Indiana, Mrs. Brooks, for 5 minutes for questions. 

Mrs. BROOKS. Thank you, Mr. Chairman and thank you to the 

witnesses for your testimony. 

I want to commend, actually, my home State of Indiana for taking the lead in developing a groundbreaking approach in what is 

known as Healthy Indiana Plan, HIP 2.0. And it is an innovative, 

consumer-drive, health insurance program, as you know, designed 

to empower members to take personal responsibility for the health 

care decisions. And just as HIP 2.0 encourages individuals to take 

responsibility, FMAP should encourage states to take responsibility 

of their financial health of the state Medicaid program. 

I would like to just talk about, because I think this is an important discussion, on how we maximize the federal dollars to provide 

for the best health outcomes for our nation’s most vulnerable populations. And Ms. Schwartz, last Congress, I joined a bipartisan 

group of colleagues from the Women’s Caucus to urge the renewal 

of CHIP. And moving forward, I want to ensure that we continue 

to provide care for those roughly 8 million children and pregnant 

women around the country, including roughly 84,000 children in 

Indiana. 

MACRA extended CHIP through the end of next September and 

the ACA increased CHIP’s already enhanced FMAP by 23 percent. 

So, under MACRA, the federal government is paying, as you said, 

all the costs for CHIP in 12 states and paying 90 percent of the 

costs in an additional 20 states. 

So, the last time that the MACPAC commented on CHIP, there 

was a 2-year extension. And now that there is a more in-depth examination, I hope the commission is examining as to what degree 

a lack of a state contribution may affect the state incentives to ensure that Medicaid payments are appropriate and accurate. Can 

you comment on that? 

Ms. SCHWARTZ. Certainly. The commission has a very aggressive 

work plan and is very focused and has committed to having a package of recommendations for Congress by the end of this calendar 

year, so that when Congress turns its attention again to funding 

for CHIP in the next Congress, that MACPAC’s recommendations 

will be available. We are looking at many different aspects of the 

program, benefits, affordability, state administration and financing. 

And all of these will fold into those recommendations. You can see 

that that will be on the agenda, consume a considerable amount of 

the commission’s time at every meeting over the course of this 

year. 

84 

Mrs. BROOKS. And is MACPAC evaluating incentives in CHIP’s 

current program financing? 

Ms. SCHWARTZ. Yes. 

Mrs. BROOKS. And what, if any actions, has CMS taken to ensure 

the accuracy and the appropriateness of federal and state payments? 

Ms. SCHWARTZ. I can’t speak to what CMS’ actions have been in 

this area. I can check into that and get back to you. 

Mrs. BROOKS. OK, thank you. 

Mr. Hagg, the list of top management challenges for HHS identified protecting the Medicaid program from waste, fraud, and abuse 

as the number one challenge. When do you expect OIG report of 

the findings on this issue will be made public and can you talk 

about will your analysis review whether individuals whose medical 

services were financed at the enhanced matching level were actually eligible under the statute? And you talked a bit about that in 

your testimony. Can you expand on that? 

Mr. HAGG. Well, yes, a few different things. One, the list of top 

management challenges is really to highlight for the Department 

and others, external parties, the areas that we believe have large 

vulnerabilities. It doesn’t tie to a specific report that we would put 

out to say specific problems have been solved or not. We have a 

body of work in Medicaid covering a lot of different areas and the 

results that we find leads us to the conclusion that Medicaid is a 

high-risk area. So, that is one thing. 

As far as some of the Enhanced FMAP rate categories, the one 

specifically you are talking about for the newly eligible population, 

we have some work ongoing. It is two different tracts, really. The 

first is some audit work that my team is doing. It is focused on 

states and the actions they are taking and claiming. The second 

tract is being done by our Office of Evaluations and Inspections. 

They are looking at CMS’ oversights and their responsibilities and 

the action that CMS is taking. 

We anticipate that work being done sometime later this year. For 

the audit work as early as, well, probably not before the end of this 

calendar year. For the work that focuses on CMS, probably no earlier than maybe late summer. 

Mrs. BROOKS. Is there a report that those of us who are working 

on Congressman Guthrie’s Medicaid Task Force Reform efforts, is 

there a report that you can point to where we can dig in on the 

waste, fraud, and abuse recommendations that OIG has made? 

Mr. HAGG. Yes. Well, one, you have seen the top management 

challenges. That will lay out some of the things that we found. We 

have a semi-annual report that we put out, obviously, that highlights some of the areas of the bigger issues that have been identified. 

We have a compendium of unimplemented recommendations that 

talk about specific things that we think can still be done to help 

improve the program. And then beyond that, I would be glad to try 

to provide some of reports involving some of the bigger impact or 

higher risk areas that we have identified issues. 

Mrs. BROOKS. Thank you. Thank you all for your work. I yield 

back. 

85 

Mr. PITTS. The chair thanks the gentlelady. That concludes the 

questions of members present. 

There will be follow-up questions that we will send. We will send 

those to you in writing. We ask that you please respond promptly. 

Mr. Schrader. 

Mr. SCHRADER. Thank you, Mr. Chairman. I just briefly want to 

recognize that Medicaid basically insures almost 40 percent of the 

children in the United States of America. So, the impact of Medicaid on children should not be far from our minds. We have heard 

a lot of testimony today to that effect. 

So, I would like to ask unanimous consent to submit a statement 

from the American Academy of Pediatrics for the record, sir. 

Mr. PITTS. Without objection, so ordered. 

Mr. SCHRADER. Could I make just one final comment? 

Mr. PITTS. Yes, sir. 

Mr. SCHRADER. Just to keep the hearing in perspective, I appreciate the hearing. It is very timely, very important. At this point 

in time, it is pretty clear that there has been an uneven economic 

recovery. The good vice chair alluded to the fact that Medicare enrollments have increased over the last few years and I think that 

is indicative of the fact that a lot of folks are struggling to keep 

up, despite the fact that unemployment is way down and we are 

getting back our mojo, I think, as a country, but it is uneven at 

best. 

So, Medicaid provides I think a very important role. I would also 

like to point out that despite the complexity and although we have 

heard a lot about some of the unclear rules maybe from CMS in 

how the Medicaid money should be administered. And OIG and 

GAO have done a good job, I think, in pointing out some of the potential problems with interpretations program, no one has done 

anything wrong. 

So, at the end of the day, I would just like to point out that as 

far as a government program goes, Medicaid has the lowest improper payment rates of any federal health program. So, let’s keep 

it in perspective and talk about what we need to be doing. 

Last comment, sir, thank you for your indulgence, is that the 

real answer to driving the cost down is, again, quality-based reimbursement. That is how you get the biggest bang for the buck without hurting the people that need the program the most. 

So, I am hoping that we have that opportunity to talk about this 

and some of the other ideas that come out of this hearing. And I 

really appreciate the fact that we have had this hearing. 

I yield back, Mr. Chairman. 

Mr. PITTS. The chair thanks the gentleman. Does the gentleman 

from Massachusetts seek recognition? 

Mr. KENNEDY. Yes, if I may. 

Mr. PITTS. The gentleman is recognized for 5 minutes for questioning. 

Mr. KENNEDY. Thank God. I apologize to all that were waiting 

and letting me catch my breath. 

Chairman, thank you for holding the hearing. To our witnesses, 

thank you for being here. Thank you for your testimony. 

Mr. Hagg, I wanted to direct the first question at you sir, if I 

may. One report that OIG has highlighted was a review of MedVerDate Nov 24 2008 12:02 Aug 30, 2017 Jkt 037690 PO 00000 Frm 00091 Fmt 6633 Sfmt 6633 I:\MY DOCS\HEARINGS 114\114-115 CHRIS
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icaid claim adjustments in Massachusetts between 2008 and 2010. 

I wanted to take a moment with you to discuss the report. The 

main finding, as I understand of the report was that our state over 

claimed federal revenue around the time of the American Recovery 

and Reinvestment Act. 

So, to start, the Recovery and Reinvestment Act was implemented in 2009. Is it true that nearly at the same time the Commonwealth implemented a new Medicaid management information 

system around that as well? 

Mr. HAGG. I believe that is correct. 

Mr. KENNEDY. And so is it correct that after OIG’s findings were 

raised that the Commonwealth agreed to address the issues, so 

long as CMS agreed with OIG’s interpretation? 

Mr. HAGG. I would have to go back and look at the report. At 

this point, I am not sure I remember specifically exactly what the 

state comments were on our findings. 

Mr. KENNEDY. OK. So, if I jogged the memory, and said that if 

OIG reported the Commonwealth overcharged by $106 million, 

does that strike you as—— 

Mr. HAGG. Yes, those were our findings. I just don’t recall what 

Massachusetts’ reaction was to those findings. 

Mr. KENNEDY. So my understanding, sir, is that under OIG’s interpretation on the other end of the ARA period, Massachusetts 

would have been undercharged by $108 million. Does that part ring 

a bell? 

Mr. HAGG. Well, I don’t know that our audit period looked 

through that far. I don’t think it covered that much. We focused on 

a specific period of time and the adjustments the state made during 

that time period. 

If the state believed that at the end of the period, the opposite 

effect would occur, then certainly, CMS, as the action official, 

would work with the state to take that into consideration and correct it. 

Mr. KENNEDY. I appreciate that. I think the issue was, looking 

at one time period, the state had overcharged the federal government $106 million but looking at another time period, was in fact 

overcharged by $108 million. And you are saying you don’t recall 

it but would look. 

Mr. HAGG. Well, again, CMS is going to be the action official on 

this. I am pretty sure that CMS concurred with our findings and 

recommendations. 

Now, without looking at that specific period that you are talking 

about or the state is talking about with an under claim, I really 

don’t have the answer to that, whether that is accurate or not. 

Mr. KENNEDY. Understood. 

Mr. HAGG. It really would be up to CMS, as the action official, 

to look at the information. If they wanted to come back and ask 

us to look at it, too, we would do that. But it would be up to CMS 

to try to resolve our findings and then the additional information, 

I guess, that the state has 

Mr. KENNEDY. Great. And I come at this from the perspective 

that I agree with you wholeheartedly that program integrity is absolutely critical. 

87 

And to the extent that the Commonwealth of Massachusetts OIG 

and CMS are able to work together to address the issue and didn’t, 

I think it is fantastic. I think it is an isolated issue that ended up 

coming from a series of concurrent changes, such as the new information systems launch and, at the same time, a one-time stimulus. 

Hopefully, those challenges are behind us. 

Ms. Mitchell, if I can ask, you noted in your report that the 

FMAP is utilized to determine the federal share of other programs 

in the government as well. I was hoping you could comment on this 

and lay out a few of them. 

Ms. MITCHELL. About what? 

Mr. KENNEDY. The ways that FMAP is used for other programs. 

Ms. MITCHELL. Sure. The regular FMAP is used to determine the 

federal share of a number of programs. And the ones that I am recalling right now are the Temporary Assistance for Needy Families 

Contingency Funds and the Foster Care Title IV–E funding. 

Mr. KENNEDY. And so, ma’am, if our committee were to adjust 

FMAP funding in any way, we would also be affecting the funding 

for those programs as well. Is that right? 

Ms. MITCHELL. I think it depends on how the legislation is written. If it is specific to the Medicaid program and you maintain the 

FMAP for the other programs, you could do that or it could apply 

to the other programs. 

Mr. KENNEDY. OK. Thank you very much. And I yield back, Mr. 

Chairman. 

Mr. PITTS. The chair thanks the gentleman. I now recognize the 

gentleman, Mr. Ca AE1rdenas, 5 minutes for questions. 

Mr. CA AE1RDENAS. Thank you very much, Mr. Chairman. 

I thank you all for joining us today. We appreciate your knowledge and your expertise on these matters. 

My first question is for Mr. Hagg. One report that OIG has highlighted was a review of federal reimbursement for family planning 

services in California, specifically in the San Diego area. I would 

like to take a moment to discuss a portion of the report. 

In this report, over half of the improper claims were noted to be 

for visits that included testing for sexually transmitted infections. 

Is it true that after this report, CMS released guidance clarifying 

that STI testing is classified as family planning services for the 

purpose of calculating the FMAP? 

Mr. HAGG. I am not sure that is true. I would have to look back 

at that. 

CMS put out a letter to the state Medicaid directors in 2014. I 

probably would need to refer back to that letter. I know it clarified 

some previous guidance and I think it revised some previous positions that CMS had taken. I should look back at the letter but I 

think that would have been, sexually transmitted infections would 

have been, classified as family planning-related, which would be 

claimed at the regular FMAP rate, not at the enhanced family 

planning rate. 

Mr. CA AE1RDENAS. OK, thank you. I appreciate that, Mr. Hagg. 

I also think it is also worth noting that as a result of OIG’s recommendations, we have made programmatic changes to maximize 

program integrity moving forward, such as implementing an ICDVerDate Nov 24 2008 12:02 Aug 30, 2017 Jkt 037690 PO 00000 Frm 00093 Fmt 6633 Sfmt 6633 I:\MY DOCS\HEARINGS 114\114-115 CHRIS
88 

based reimbursement system. OIG’s oversight has, indeed, provided 

worthwhile suggestions beyond STIs, which we are appreciative of. 

On the whole, I am pleased that this discrepancy in interpretations between the states and OIG has been resolved. I hope that 

with this administrative issue resolved, we can continue to move 

past this and past the simple difference of opinions and towards 

further actions that strengthen Medicaid for all of our beneficiaries. 

I have another one. My next question is for Dr. Schwartz. Again, 

thank you for joining us, doctor. 

I would like to ask you a question regarding upcoming work you 

noted in your testimony. In the summary sections, you noted that 

MACPAC is now focusing intensively on financing and design questions associated with alternatives, such as block grants, per capita 

caps, and capped allotments. I was somewhat alarmed that the 

sentence went on to describe that it would examine issues related 

to these alternatives, specifically baselines, growth factors, and 

state contributions. Were these three items only made as brief examples or does MACPAC plan to examine other effects of financing 

changes as well? 

Ms. SCHWARTZ. Yes, they are both design issues to consider, 

which are those that were mentioned in my written statement as 

well as issues of impact. And a work plan analysis will also look 

at the impact on states, plans, providers, and beneficiaries. And another type of impact that we intend to look at is how changes in 

financing could affect other programs that rely on Medicaid to finance medical care for populations they serve, such as child welfare and special education. 

Mr. CA AE1RDENAS. OK, so you are cognizant of what could occur 

as a result of these alternative financing mechanisms and how they 

would affect system deliveries amongst all of our states. 

Ms. SCHWARTZ. Yes, that is part of our work plan. 

Mr. CA AE1RDENAS. OK. One concern that has been raised is 

that alternatives to restructure Medicaid financing are often intended to reduce federal Medicaid expenditures. This subsequently 

places a larger burden on states and providers. I am concerned this 

could have a negative effect on access to care. Will this consideration be included in the June report? 

Ms. SCHWARTZ. Yes. 

Mr. CA AE1RDENAS. OK. When you say yes, to what effect do you 

elaborate on that? Do you give examples? Do you extrapolate out 

on previous examples where we have done cuts in the past? 

Ms. SCHWARTZ. I think our analysis will do both. We certainly 

have the experience from what states do now, when facing constrained spending. We can use data to help us look at the impact 

of different assumptions and so we can do both qualitative and 

quantitative analyses to look at those questions. 

Mr. CA AE1RDENAS. And are there potential examples where cuts 

have had negligible to beneficial effects on local output of services 

and do we have examples that you could actually point to that have 

had negative effects in the past? 

Ms. SCHWARTZ. The states have sort of a defined tool kit in which 

they currently use to address issues of spending growth. They can 

address enrollment. They can addresses, prices, payment rate. 

They can address covered benefits and they can also do innovations 

89 

to change the delivery of care and all of those provide good examples for helping us think about future approaches to finance. 

Mr. CA AE1RDENAS. Thank you so much, Mr. Chairman. 

Mr. PITTS. The chair thanks the gentleman. I believe that concludes questioning now. 

I remind members they have 10 business days to submit questions for the record. So, they should submit their questions by the 

close of business on Wednesday, February 24th. 

Good hearing. Very complicated issue. Important to educate all 

the members and the public. Thank you very much for your testimony. Without objection, the subcommittee is adjourned. 

[Whereupon, at 12:08 p.m., the subcommittee was adjourned.] 

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