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86–938—PDF 2013

S. HRG. 113–205 

NOMINATION OF MARILYN B. TAVENNER 

HEARING 

BEFORE THE

COMMITTEE ON FINANCE 

UNITED STATES SENATE 

ONE HUNDRED THIRTEENTH CONGRESS 

FIRST SESSION 

ON THE

NOMINATION OF 

MARILYN B. TAVENNER, TO BE ADMINISTRATOR, CENTERS FOR MEDICARE AND MEDICAID SERVICES, DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

APRIL 9, 2013 

( 

Printed for the use of the Committee on Finance 

COMMITTEE ON FINANCE 

MAX BAUCUS, Montana, Chairman 

JOHN D. ROCKEFELLER IV, West Virginia 

RON WYDEN, Oregon 

CHARLES E. SCHUMER, New York 

DEBBIE STABENOW, Michigan 

MARIA CANTWELL, Washington 

BILL NELSON, Florida 

ROBERT MENENDEZ, New Jersey 

THOMAS R. CARPER, Delaware 

BENJAMIN L. CARDIN, Maryland 

SHERROD BROWN, Ohio 

MICHAEL F. BENNET, Colorado 

ROBERT P. CASEY, Jr., Pennsylvania 

ORRIN G. HATCH, Utah 

CHUCK GRASSLEY, Iowa 

MIKE CRAPO, Idaho 

PAT ROBERTS, Kansas 

MICHAEL B. ENZI, Wyoming 

JOHN CORNYN, Texas 

JOHN THUNE, South Dakota 

RICHARD BURR, North Carolina 

JOHNNY ISAKSON, Georgia 

ROB PORTMAN, Ohio 

PATRICK J. TOOMEY, Pennsylvania 

AMBER COTTLE, Staff Director 

CHRIS CAMPBELL, Republican Staff Director 

(II) 

C O N T E N T S 

OPENING STATEMENTS 

Page 

Baucus, Hon. Max, a U.S. Senator from Montana, chairman, Committee 

on Finance ............................................................................................................ 1 

Hatch, Hon. Orrin G., a U.S. Senator from Utah ................................................. 3 

CONGRESSIONAL WITNESSES 

Cantor, Hon. Eric, a U.S. Representative from Virginia ...................................... 5 

Warner, Hon. Mark, a U.S. Senator from Virginia ............................................... 6 

Kaine, Hon. Tim, a U.S. Senator from Virginia .................................................... 7 

ADMINISTRATION NOMINEE 

Tavenner, Marilyn B., nominated to be Administrator, Centers for Medicare 

and Medicaid Services, Department of Health and Human Services, Washington, DC ............................................................................................................. 9 

ALPHABETICAL LISTING AND APPENDIX MATERIAL 

Baucus, Hon. Max: 

Opening statement ........................................................................................... 1 

Prepared statement .......................................................................................... 41 

Cantor, Hon. Eric: 

Testimony .......................................................................................................... 5 

Grassley, Hon. Chuck: 

‘‘Tip on Policy Shift Jolted Health Shares,’’ by Brody Mullins and Tom 

McGinty, The Wall Street Journal, April 3, 2013 ...................................... 44 

Hatch, Hon. Orrin G.: 

Opening statement ........................................................................................... 3 

Prepared statement with attachments ........................................................... 48 

Kaine, Hon. Tim: 

Testimony .......................................................................................................... 7 

Tavenner, Marilyn B.: 

Testimony .......................................................................................................... 9 

Prepared statement .......................................................................................... 52 

Biographical information ................................................................................. 57 

Responses to questions from committee members ......................................... 71 

Warner, Hon. Mark: 

Testimony .......................................................................................................... 6 

COMMUNICATION

American College of Physicians (ACP) ................................................................... 185 

(III) 

(1) 

NOMINATION OF MARILYN B. TAVENNER, 

TO BE ADMINISTRATOR, 

CENTERS FOR MEDICARE AND 

MEDICAID SERVICES, DEPARTMENT OF 

HEALTH AND HUMAN SERVICES 

TUESDAY, APRIL 9, 2013 

U.S. SENATE, 

COMMITTEE ON FINANCE, 

Washington, DC. 

The hearing was convened, pursuant to notice, at 10:05 a.m., in 

room SD–215, Dirksen Senate Office Building, Hon. Max Baucus 

(chairman of the committee) presiding. 

Present: Senators Rockefeller, Wyden, Schumer, Cantwell, 

Menendez, Carper, Cardin, Brown, Bennet, Casey, Hatch, Grassley, 

Crapo, Roberts, Enzi, Thune, Burr, Isakson, and Portman. 

Also present: Democratic Staff: Mac Campbell, General Counsel; 

David Schwartz, Chief Health Counsel; Rory Murphy, International 

Trade Analyst; and Tony Clapsis, Professional Staff. Republican 

Staff: Chris Campbell, Staff Director; Jay Khosla, Chief Health 

Counsel Policy Director; and Kim Brandt, Chief Health Care Investigative Counsel. 

OPENING STATEMENT OF HON. MAX BAUCUS, A U.S. SENATOR 

FROM MONTANA, CHAIRMAN, COMMITTEE ON FINANCE 

The CHAIRMAN. The hearing will come to order. 

Douglas MacArthur once said, ‘‘A true leader has the confidence 

to stand alone, the courage to make tough decisions, and the compassion to listen to the needs of others.’’ Testifying before us today 

is Marilyn Tavenner, nominated to be the Administrator for the 

Centers for Medicare and Medicaid Services, otherwise known as 

CMS. 

Ms. Tavenner, you are being asked to draw on years of extensive 

experience to lead this agency and administer programs upon 

which millions of Americans rely. You will surely need confidence, 

courage, and compassion in this role. 

The head of CMS has a great responsibility. CMS administers 

health coverage to roughly one in three Americans. That includes 

50 million Medicare patients, 56 million Medicaid patients, and 

more than 5.5 million children through the Children’s Health Insurance Program. Some 167,000 seniors and 8,300 military retirees 

in Montana rely on Medicare, the largest program you will oversee 

at CMS. 

2 

These Montanans are my employers, and they, as well as millions more across the Nation, are your employers as well, Ms. 

Tavenner, so I encourage you to never forget that you are working 

for them. 

It is also important to remember who works for you. The Administrator of CMS oversees 5,800 employees. If confirmed, you must 

demand from these employees the utmost efficiency. Spread 

throughout 10 regional offices across the country, CMS employees 

are responsible for distributing more benefits than any other Federal agency. 

Benefit outlays for fiscal year 2012 totaled $819 billion. The 

agency’s administrative costs made up just one-half of 1 percent of 

this amount. That is significantly less than most private health 

care payers spend, and this efficiency must continue. There can be 

no room for error, no wasted time, effort, or taxpayers’ dollars. 

Ms. Tavenner, you have spent your entire career providing care 

to people in need. You started as a nurse, in my opinion one of the 

most important professions in the world. Then you rose up through 

the ranks to become a hospital administrator, and then Virginia’s 

Secretary of Health and Human Services. You joined CMS in 2010 

and became the Acting Administrator the next year. You have the 

knowledge, you have real-world experience, and I believe you have 

proven yourself to officially take the reins of CMS. 

Some have pointed out that CMS has not had a confirmed Administrator in several years. I am glad we are moving forward 

today to change that. With new Affordable Care Act programs coming online, it is a critical time to have someone with your knowledge in charge of CMS. We need strong leadership for successful 

implementation of health insurance marketplaces and other key 

provisions of the health law. 

As Administrator, you will have to make sure these programs are 

ready to go on, go up, and be working on day one. You need to ensure that the health care law’s programs work for the people whom 

they are intended to serve. There will be a lot of people watching 

you, myself included. The administration and CMS need to implement health care reform the way Congress intended. 

I was home in Montana the past 2 weeks, and I heard from small 

businesses that they need more clarity about rules. I heard this 

often. They need more information, more transparency. They are 

really quite concerned. I will be holding the administration’s feet 

to the fire to ensure that this is all done correctly. 

You also need to make sure America’s health care safety net is 

working. Medicaid is going through a period of significant transformation. The program is changing everything from how income is 

counted to how care is delivered and eligibility determinations are 

made. Millions of low-income Americans will have access to coverage for the first time starting next year. Medicaid needs strong, 

stable leadership overseeing these changes to ensure they go 

smoothly. 

Health reform also vastly improved the way Medicare delivers 

and pays for care. Medicare continues to slow its spending by 

transforming from a system that pays for volume to one that rewards value. CMS needs a leader focused on payment reforms that 

3 

incentivize providers to provide high-quality care in a cost-effective 

manner. 

One of the highest priorities for the Finance Committee, a responsibility I take very seriously, is protecting the integrity of Federal health care programs by fighting fraud, waste, and abuse. The 

Affordable Care Act included significant new authority and tools 

for CMS to protect Medicare and Medicaid and save taxpayer dollars. A confirmed Administrator is necessary to oversee and use the 

new tools that prevent and fight health care fraud. 

Last April, this committee held a hearing to examine what, at 

the time, was the biggest Medicare fraud take-down in history. 

Thanks to tools and increased resources from the Affordable Care 

Act, a joint HHS and Justice task force recovered $295 million. 

The fraud involved 70 individuals across six cities. We held that 

hearing to learn lessons to apply to future cases. We learned that 

every dollar invested to fight fraud generates a 500-percent return. 

We need the next Administrator to continue making fighting fraud 

a top priority. 

Your experience shows the ability to effectively administer health 

care programs and also an appreciation for the crucial services they 

provide. You are known as a pragmatist with an understanding of 

the ins and outs of health care administration. 

I recently read a profile of you in the Washington Post. The article detailed an incident in the 1980s. You were working as a nurse 

in an intensive care unit at Johnston-Willis Hospital in Richmond. 

At 2 a.m., a young woman in her late 20s was brought to the hospital by a rescue squad. She had been in a horrific car accident and 

crashed through the windshield of her old VW Bug. Badly injured 

and having suffered massive blood loss, she was pronounced dead. 

But you and the doctors went to work anyway trying to revive 

her. The surgeon on call told reporters, ‘‘Marilyn was very supportive in everything. We came up with a game plan, and it was 

right on target. We used about 60 units of blood, but the patient 

ultimately walked out of the hospital.’’ 

Ms. Tavenner, it sounds like you are someone who does not give 

up. Your experience is real and varied and will serve you well in 

your position. CMS faces a great task and requires a leader with 

the qualities General MacArthur described: confidence, courage, 

and compassion. 

Ms. Tavenner, I believe you have what it takes and will do very 

well as Administrator. I look forward to your testimony. 

[The prepared statement of Chairman Baucus appears in the appendix.] 

The CHAIRMAN. Senator Hatch? 

OPENING STATEMENT OF HON. ORRIN G. HATCH, 

A U.S. SENATOR FROM UTAH 

Senator HATCH. Well, thank you, Mr. Chairman. I want to thank 

Chairman Baucus for convening this hearing to consider the nomination of Marilyn Tavenner to serve as Administrator of the Centers for Medicare and Medicaid Services, CMS. 

This is a critical agency and, for a number of reasons, has been 

without a confirmed Administrator since the fall of 2006. CMS is 

the world’s largest health insurer. It has a budget of nearly $1 trilVerDate Nov 24 2008 19:28 Mar 13, 2014 Jkt 000000 PO 00000 Frm 00007 Fmt 6633 Sfmt 6633 R:\DOCS\86938.000 TIMD
4 

lion and processes over 1.2 billion claims a year for services provided to some of our Nation’s most vulnerable citizens receiving 

Medicare and Medicaid. 

If confirmed, Ms. Tavenner, you will have a daunting challenge 

ahead of you. While I believe you have the qualifications to do the 

job, there is still much that you will need to do in order to assure 

members of this committee that CMS is heading in the right direction and that your leadership will help steer the agency through 

the very turbulent times that lie ahead. 

One of the greatest challenges facing CMS in the near future is 

implementation of the Federal and State-based health insurance 

exchanges. In a speech last June you said that the health insurance exchanges ‘‘keep you up at night.’’ I can relate to that. They 

keep me up at night too, but probably not for all the same reasons. 

There are numerous obstacles and issues that will need to be addressed as CMS works to implement the exchanges and bring them 

online later this year. To date, CMS has not been able to provide 

satisfactory answers to a number of questions posed by myself, the 

chairman, and other members of the Congress regarding the exchanges. 

For example, we still know very little about how the exchanges 

will operate, what the key operational and implementation deadlines are, and how CMS is monitoring them to determine if things 

are on track or not. We are still waiting to see a breakdown of the 

budget for the federally facilitated exchange. 

If you are confirmed, it is essential that you work with this committee to provide us with this level of detail so that we can assess 

the implementation of the exchanges and work with you to address 

issues as they arise. The costs associated with the exchanges are 

of critical importance to this committee, as we are already seeing 

evidence that health insurance premium costs are continuing to 

rise and are projected to be, on average, 32 percent higher in the 

individual market. 

At the same time, the Congressional Budget Office has estimated 

that the number of people enrolled in the exchanges in 2014 will 

be 1 million lower than originally projected, and quotes from administration officials indicate that the number could be even lower 

than that. 

This is a perfect storm of unanticipated consequences that are 

combining to make this part of the so-called Affordable Care Act 

seem more like what I prefer to call it, the Un-Affordable Care Act. 

In addition to overseeing this massive new expansion of benefits, 

you will also be charged with helping to ensure the longevity and 

solvency of the existing Medicare trust fund, which is projected to 

go bankrupt in 2024. All told, between now and 2030, 76 million 

baby boomers will become eligible for Medicare. Even factoring in 

deaths over that period, the program will grow from approximately 

47 million beneficiaries today to roughly 80 million in 2030. 

Maintaining the solvency of the Medicare program while continuing to provide care for an ever-increasing beneficiary base is 

going to require creative solutions and a skillful Administrator at 

the helm. I believe that you will be up to that challenge, and I 

strongly support you. 

5 

Overseeing the complex infrastructure of an agency like CMS is 

not a job for the faint of heart. You will be expected to ensure that 

beneficiaries get the care they want from the providers they prefer, 

all while making sure that the claims get paid on time, that administrative and overhead costs are kept low, and that the congressional mandates are fully implemented. 

So I wish you the best of luck as you work to address these challenges. As you continue going through the confirmation process, 

you are going to need it, and we will try to help you up here to 

the extent that we can. 

Mr. Chairman, I would also like to take a minute to thank my 

colleagues, Senators Warner and Kaine, for being here to introduce 

Ms. Tavenner. I think it is great for you both to be here, and it 

means a lot to us. 

I would especially like to express my gratitude to Majority Leader Cantor for taking time out of what I know is a tremendously 

busy schedule to be here this morning. This bipartisan gesture 

means a lot to the committee, and especially to me, so I am really 

grateful for you folks taking the time to be with us. 

Thank you, Mr. Chairman. 

The CHAIRMAN. Thank you, Senator. Thank you very much. 

[The prepared statement of Senator Hatch appears in the appendix.] 

The CHAIRMAN. Congressman Cantor, Senator Warner, and Senator Kaine would like to introduce our witness. I would join Senator Hatch in thanking all of you for coming over here. But before 

you do introduce our witness, Ms. Tavenner, I would like you to 

take this opportunity to introduce any family you might have here 

with you, because they are all part of the same team. 

Ms. TAVENNER. Thank you, Mr. Chairman. To my right, my husband Bob. 

The CHAIRMAN. Bob. 

Ms. TAVENNER. My son-in-law David Leadbeater, and my daughter Sarah Leadbeater. 

The CHAIRMAN. Good. Let us give them all a round of applause. 

Thank you. [Applause.] 

Congressman Cantor, why don’t you proceed? 

STATEMENT OF HON. ERIC CANTOR, 

A U.S. REPRESENTATIVE FROM VIRGINIA 

Congressman CANTOR. Mr. Chairman, thank you very much, 

Ranking Member Hatch also. I appreciate the opportunity to be 

here before the Senate Finance Committee. To members, it is my 

pleasure to be here to join with my colleagues from Virginia in introducing and presenting to the committee for your hearing today 

Marilyn Tavenner. 

I know that, Mr. Chairman, you, as well as Senator Hatch, spoke 

about her wealth of experience in the private sector, as well as her 

service to the people of the Commonwealth. I am here to just underscore my faith in Marilyn Tavenner as an individual who is 

eminently qualified to take on the challenges of which you speak 

when it comes to the health care complexities that our country 

faces. 

6 

I first met Marilyn when I served in the Virginia House of Delegates, and it was plain to me very early on that she not only came 

from the private sector experience, she understood people. As you 

rightly point out, Mr. Chairman, Marilyn started as a nurse with 

the Hospital Corporation of America, having served with that company for 20 years, and ultimately rising in 2001 to be CEO of the 

Central Atlantic Division. 

Marilyn oversaw 20 hospitals. She really was a force to be reckoned with when it came to, not only the State legislature and the 

policies of Virginia at the time, but as somebody who was there to 

speak on behalf of patients. You pointed out the story of Marilyn’s 

health care delivery in that very daunting situation that you spoke 

of in the profile, but it is my experience with Marilyn that she does 

approach problems of health care from the patients’ perspective. 

Given her long experience in the private sector, I have complete 

faith that she is an individual who will be able to take on the challenges that we face on behalf of the constituents whom we represent. 

You mentioned also—and I know that both former Governors, 

now Senators, are here. But Marilyn did serve as Secretary of 

Health and Human Resources in Richmond, overseeing the Commonwealth’s health care agencies, including the Department of 

Medical Assistance Services, which is the State counterpart to 

CMS. It is a $9-billion agency and has 18,000 employees, so she 

has certainly stepped up to the task. 

I would end with saying this, Mr. Chairman. I do not think there 

is any secret that I differ with the Obama administration on a lot 

of matters of health care policy, and obviously the issue of 

Obamacare remains one that is very controversial. 

But if there is anyone whom I trust to try to navigate the challenges, it is Marilyn Tavenner. I feel that strongly about her, and 

that is why I am here. I am delighted to be here and say that I 

strongly endorse your confirmation of President Obama’s nomination of Marilyn Tavenner to be the next Administrator of the Centers for Medicare and Medicaid Services. Again, I yield back. 

The CHAIRMAN. Thank you very much, Congressman, for making 

the effort. I understand there was a little bit of traffic that you had 

to face coming here. 

Congressman CANTOR. I apologize for the tardiness. 

The CHAIRMAN. I deeply appreciate you making the extra effort 

to make it here. Thank you very much. 

Senator Warner? 

STATEMENT OF HON. MARK WARNER, 

A U.S. SENATOR FROM VIRGINIA 

Senator WARNER. Thank you, Mr. Chairman and Ranking Member Hatch. I want to echo the comments of my friend and colleague 

Eric Cantor, and I know they will be echoed as well by my friend 

Tim Kaine. 

I want to also lend my support. I think the President has made 

a great choice in nominating Marilyn Tavenner to be head of CMS. 

I have known Marilyn for over 20 years and can echo firsthand 

that she is the real deal and I think is a phenomenal choice to lead 

CMS. 

7 

As has been mentioned, and I think will probably come back in 

questions time and again, she brings, I think, a pretty unique set 

of skills to this job. She grew up in Southside, VA, in a rural community, and worked her way through school. As has been mentioned already, she started as a nurse, worked her way up to become a hospital CEO, then became administrator of a major hospital company. 

But Marilyn has always had a commitment to public service, always had a commitment to the people whom she served. She—and 

I know Tim will make mention of this—did a great, great job as 

the Commonwealth’s Secretary of Health. She came in direct contact with the kind of administration of the major, at least Medicaid 

programs. At the beginning of this administration, she joined CMS, 

where she served at the highest levels. 

So what I think she will bring to this job is not only a depth of 

background on the public sector side, but echoing what Majority 

Leader Cantor said, from her career in the private sector, I think 

she knows the impact that regulations and rules have on the real 

world and understands the importance, not just of achieving a policy goal, but making sure it actually works in practice. 

I also think, and I know that she was this way when she served 

in Virginia and from my interactions with her at CMS, she knows 

that it is our job in Congress to hold her feet to the fire in this very 

important—as both you and Senator Hatch mentioned—and complicated entity. She has a history of welcoming fair, fact-based discussions and will be the first person to tell you that she wants 

things done in a right, fair way. 

She is also held in extraordinarily high esteem by her peers. I 

think it is pretty remarkable that in February all the previous living Senate-confirmed CMS Administrators, the ones who really 

know what it takes to run that enormous agency, sent a letter urging her confirmation, noting that it was ‘‘hard to imagine a candidate more worthy of bipartisan support.’’ 

So, when you have the Majority Leader of the House and two 

Democratic Senators all coming together saying it is time to get a 

CMS Administrator fully confirmed so that she can go about her 

very important work, I commend her without reservation to this 

committee and look forward to having an opportunity to work with 

her in the future, and I thank the chairman for the opportunity to 

come and present her. 

The CHAIRMAN. Thank you, Senator, very much. I deeply appreciate your confidence in Ms. Tavenner. Thank you. 

Senator Kaine? 

STATEMENT OF HON. TIM KAINE, 

A U.S. SENATOR FROM VIRGINIA 

Senator KAINE. Thank you, Mr. Chairman and Ranking Member 

Hatch, committee members. It is a treat to be here with my colleagues from Virginia on behalf of Marilyn Tavenner to be the first 

confirmed CMS Administrator since 2006. 

I was the Mayor of Richmond, dealing with the challenges of an 

urban city and its health care safety net, when I first met Marilyn 

back in the late 1990s. When I was running for Governor, I made 

it a superstitious practice not to think about whom I might hire if 

8 

I became Governor, but Marilyn was one of the two people that I 

sort of broke my superstitious rule about and thought: if I ever get 

to be Governor, I would love to have her working on my team. 

I asked Marilyn to be the Cabinet Secretary over the Health and 

Human Resources portfolio and came to know her skills very well, 

and I support her strongly for this position. 

Four quick things. First, I support her because she is a nurse 

and she will always put patient care first. She was not a nurse in 

the past tense; she is a nurse in the present tense. There will never 

be an issue that she will wrestle with as the CMS Administrator 

where she will not be thinking primarily of patient care. Budgets 

are important numbers on a page, policy manuals are important, 

but everything this agency does deals with the real lives of people, 

many of them very vulnerable. Marilyn’s nursing background is exemplified by the story, Mr. Chairman, that you recounted, and so 

many others that will make sure that she will always put that 

first. 

This qualification is important for her, and I also think it is an 

important tribute to a profession that is increasingly at the core of 

health care. Her confirmation would send a wonderful signal. 

Second, her experience, as recounted by Congressman Cantor 

and Senator Warner, gives her a real understanding of the practicalities of what CMS needs to do. Again, it is not just about numbers on a page or policy regulations or rules, it has to be able to 

be implemented in hospital waiting rooms and in doctors’ offices, 

and it has to be simple to the folks in the public who are making 

claims. They have to be able to understand it. Marilyn is a person 

who has dealt her whole career with the practicalities and will 

carry out her mission at CMS in a very practical way because of 

that wide-ranging experience. 

Third, I support her because she has proven again and again 

that she is a creative problem solver. As Governor, I gave all of my 

Cabinet Secretaries problems to solve: ‘‘Marilyn, why are we 10th 

in the Nation in per capita income and 35th in the Nation in infant 

mortality? You have to find out the answer to that and help us 

solve it. What can we do to reduce youth smoking in a State that 

has a historical connection, and a strong one, to tobacco? Why are 

we facing shortages among nurses; why are we facing shortages 

among physicians, and what can we do about it?’’ 

Again and again, what Marilyn did was, in a non-ideological way, 

get the data, understand the problem, not just rely on conventional 

wisdom or anecdote, but understand the problem and then devise 

very specific and targeted solutions to go after the problem. 

Some of the problems that I gave to her were in her areas of expertise, but she oversaw not just health care but also human resources areas where she had not worked in her professional career. 

We had a broken foster care system. That was not something that 

she had worked on in the past. 

But I gave her that challenge, and she and her team did a wonderful job in helping reform Virginia’s foster care system. That creative and innovative approach to solving problems is an important 

skill that she will need every day at CMS. 

Finally, the reason I support her is the biggest challenge that I 

did not give to her, but the circumstances gave to her, was trying 

9 

to control costs. I have, I guess, not an accolade, it is sort of an 

achievement through no benefit of my own as Governor. I am the 

only Governor of Virginia who left office with a smaller general 

fund budget than the one I started with. I get no credit for it. It 

was constitutionally mandated, and I was Governor during a recession. 

But I had to give to my Cabinet Secretaries the very difficult 

task of, not reducing the rate of growth, but actually even reducing 

the size of expenditures during a tough time. The health care portfolio was the second-largest one in State government after education. Again and again and again, we had to go back and sharpen 

pencils and erase and start over again and find savings. 

I saw Marilyn and her team struggle very mightily with that. 

Her skill in doing that is a skill that is very precisely matched with 

the need of the moment: how to keep patient care first, because 

that is her first attribute, but nevertheless wrestle with difficult 

cost control issues not only for the good of the fisc, but also because, the more we control costs, the more affordable we make it 

for people and for businesses. Cost control is ultimately about 

health care access, and Marilyn understands that very, very well. 

So, for those four reasons and many others, I am proud to be 

here to support her. Voting to confirm her is a vote that you will 

never regret. Whether you are for patient care or cost control or 

just managerial efficiency, a vote for Marilyn Tavenner is a safe 

vote, and I am proud to recommend her to you. 

Thank you very much. 

The CHAIRMAN. Thank you very much, Senator. We appreciate 

you taking the time. 

Ms. Tavenner, why don’t you proceed? As you know, our practice 

here is for you to submit your testimony for the record and then 

just summarize it, please, the best you can. 

STATEMENT OF MARILYN B. TAVENNER, NOMINATED TO BE 

ADMINISTRATOR, CENTERS FOR MEDICARE AND MEDICAID 

SERVICES, DEPARTMENT OF HEALTH AND HUMAN SERVICES, WASHINGT0N, DC 

Ms. TAVENNER. Thank you, Mr. Chairman. 

Chairman Baucus, Ranking Member Hatch, I want to thank you 

for holding the hearing today and for the committee’s consideration 

of my nomination to be Administrator of the Centers for Medicare 

and Medicaid Services. 

I would like to start by acknowledging what we are all aware of: 

CMS is a large and complex agency. We have a very large Federal 

budget, and we provide services that are critical to our Nation’s 

health care. As such, this committee and all of Congress have a 

strong interest in the management of the agency, as they should, 

and as do I. 

So I would like to explain a little bit about myself and my background, why CMS is so important to me, how I have spent the last 

3 years managing the agency, and my vision for moving us forward. 

I will begin with my mother, Ruby Martin. I just celebrated her 

birthday with her down in the small rural town of Fieldale, VA, 

where I grew up. As a strong woman who raised four children 

10 

while working full-time in the textile industry for over 40 years, 

she has been, and she continues to be, an inspiration in everything 

I do. She relies on Medicare, and not just Medicare. She relies on 

the Qualified Medicare Beneficiary (QMB) or QI program, as we 

tend to call it here in DC. That is critical for her health care needs. 

My youngest child, Sarah, who is with me today, was diagnosed 

with type 1 diabetes at the age of 11. She, too, has been a strong 

inspiration in what I do, for different reasons. She relies on and 

needs access to health insurance, no questions asked. 

I think all of us know someone who relies on either the traditional programs we have been administering at CMS or the ones 

we are embarking on in 2014, and that makes it personal for a lot 

of us. It underscores the fact that what we do at CMS directly affects the lives of so many. 

I have been fortunate in my career path that it has given me a 

variety of perspectives on health care that I believe uniquely position me to lead CMS. I do have a clinical background from my 

early days as a staff nurse, a business perspective from my days 

as a hospital CEO and division president, and a government perspective both from my work as Virginia’s Secretary of Health and 

also the previous 3 years at CMS. 

Simply put, CMS needs an Administrator, and they need one 

with strong operational skills. While it is very important to have 

a vision for the agency, we also have an over $800-billion business 

to run that a large amount of the country has a stake in, from 

beneficiaries, to providers, to hospitals, to insurance companies, to 

Congress, to this administration, to the American taxpayer, and to 

our CMS employees and contractors. Therefore, I consider it essential to my leadership role at CMS to be a partner with all of those 

stakeholders, and I view my relationship with this committee and 

with Congress as a whole as a partnership. 

I have personally met with most of the members of this committee, and I have appreciated the opportunity to engage with all 

of you in an open dialogue. While we may not always share the 

same views, we have worked together to resolve challenges, and I 

would like the chance to continue to do so. 

My management style centers a lot around listening, pragmatism, and consistently trying to do what is right, even though 

it may not be the quickest or easiest path. This style has led to 

many achievements over the last 3 years, and I highlighted some 

of those in my written testimony, and I will not go over those now. 

But in closing, I would like to share my vision and the three primary focuses that we have for moving the agency forward. The first 

one is, we need to operate CMS as a business and act like business 

partners. This means having an open-door policy and to work together and listen to the concerns of all the groups that we are accountable to, those groups I listed earlier. 

Second, we have a large responsibility in the months ahead to 

implement key pieces of legislation to ensure all Americans have 

access to affordable health care coverage, whether it is through the 

health insurance marketplace, whether it is through Medicaid, 

CHIP, original Medicare, or Medicare Advantage. 

Last, we need to leverage the tools that you all have granted us 

to both reduce overall cost of care and improve the health care deVerDate Nov 24 2008 19:28 Mar 13, 2014 Jkt 000000 PO 00000 Frm 00014 Fmt 6633 Sfmt 6633 R:\DOCS\86938.000 TIMD
11 

livery system. These tools include new payment strategies connected to performance, innovative new models of care, and enhanced tools to combat fraud. 

Lastly, I would like to thank this committee and the staff for the 

respect and the working relationships we have built over the last 

several years. I want to thank you, Mr. Chairman and Senator 

Hatch, for holding this hearing and giving me the opportunity to 

speak before the committee and answer any questions. Thank you. 

The CHAIRMAN. Thank you very much, Ms. Tavenner. 

[The prepared statement of Ms. Tavenner appears in the appendix.] 

The CHAIRMAN. I would like to ask you a few questions about the 

Medicare secondary payment rule. I mention this because, living in 

Montana—I remember once I was visiting there about 10 years 

ago, and I met a group of folks there who are suffering from 

asbestos-related diseases, especially mesothelioma. 

A large percentage of that town, unfortunately, has passed away 

because of the asbestos produced by the company W.R. Grace. That 

asbestos has affected people in Libby, MT as well as around the 

country, because asbestos is found in lots of insulation products. 

When I visited them, one fellow there named Les Scramstad very 

much impressed me. We met earlier, and I told you about Les. I 

found a photograph for you I want you to have. Les said to me, ‘‘I 

am going to be watching you, Senator. A lot of people said they 

would help us, but they have not.’’ I knew Les meant it. He did not 

have to say it. 

Every once in a while you come across a situation where you are 

going to do whatever it takes to solve it. This was one. That is, 

make sure that people in Libby, MT can get justice. We have a photograph. There is Les. Les has passed away. He died of mesothelioma. When he came home from the mine caked with dust, he embraced his wife. His wife has the disease now too. The kids would 

jump in his lap. One of his children has now died because of mesothelioma. 

I will not go through all the ins and outs of health care treatment in Libby. It is also one of the largest super-fund sites in the 

country, and it is very similar to that book, that movie, A Civil Action, in Woburn, MA. The company then was W.R. Grace. It is the 

same company here, frankly. The point is this: the administration, 

very correctly, declared a national health care emergency for the 

people in Libby. That meant that people received Medicare payments. Even though they are not 65, they get Medicare. 

But as you know, under the Medicare Secondary Payer rule, if 

there is a settlement, as between folks in Libby and the company, 

the payments cannot be made pursuant to that settlement until 

Medicare determines what costs, if any, the person has to pay back 

to Medicare so that the settlement dollars get paid. There are 

many people in Libby who waited up to a year. There is one instance where a woman was waiting. Meanwhile, her husband died. 

Finally, a year later, CMS made a determination under the Secondary Payer rule. Even by then, she had died. When the determination was made after she died, it turned out that there is no 

reimbursement necessary from her to CMS. So there are a lot of 

people caught in this situation. There have been so many levels of 

12 

injustice in Libby, MT, but this is one of them. It is the delays in 

the Secondary Payer rule. I would deeply appreciate it if you could 

tell me what you are going to do to speed up the process so that 

people there who suffer from asbestos-related diseases are going to 

get some medical care. 

Ms. TAVENNER. Chairman Baucus, let me start by first of all 

thanking you on behalf of the residents of Libby. The work there 

has been amazing. When I first came to CMS, it was being done 

through the Health Resources and Services Administration, and obviously we were able to get coverage through the Medicare program. We have seen so many families benefit from the program. 

So, first of all, I personally thank you for that. 

But second, the Medicare Secondary Payer has also been a program that I have been intimately involved with over the last several months. We had some performance issues. I think we have corrected those, both with staff that we have brought on and with contractors that we work with. But more specific to your question, we 

did have a large number of cases that needed to be resolved, that 

needed to be moved through the system, so that people could understand what they were eligible for. 

I think by the end of this month we will have completed at least 

100 individual cases that I am aware of. There is also another 

large group that is moving through in a large settlement, so I think 

we will have done a good job of eliminating most of the backlog. 

You have my commitment that I will stay on top of it going forward. 

The CHAIRMAN. I appreciate it very much. I neglected to ask you 

four obligatory questions, which I will ask you before I turn it over 

to Senator Hatch. 

First, is there anything that you are aware of in your background 

that might present a conflict of interest with the duties of the office 

to which you have been nominated? 

Ms. TAVENNER. There is not anything I am aware of. I have 

signed recusals in two areas, and so I want to make the committee 

aware of those. The first area has to do with my—as you heard, 

I worked a long time for the Hospital Corporation of America, so 

I volunteered and asked for a recusal there in certain matters that 

are specific to HCA. But that was one that I initiated with our ethics department. 

The second one is with the State of Virginia. Although I had 

completed my time with the Secretary of Health position and I 

could have participated in matters, my husband works with the 

legislative division within the State, so I have recused myself from 

specific matters with the State of Virginia. 

The CHAIRMAN. You know, you are going to do a good job. You 

are the first witness who has answered that question without just 

saying ‘‘no.’’ That is, you have explained it. That has never happened before. [Laughter.] 

And Senator Grassley, who has been chairman of this committee 

for many years, just now said he could verify that. You are an impressive lady! 

Second—we will see what you do with this one. [Laughter.] 

Ms. TAVENNER. It can only go downhill from here. 

The CHAIRMAN. Yes. [Laughter.] 

13 

Do you know of any reason, personal or otherwise, that would in 

any way prevent you from fully and honorably discharging the responsibilities of the office to which you have been nominated? 

Ms. TAVENNER. I do not. 

The CHAIRMAN. Do you agree, without reservation, to respond to 

any reasonable summons to appear and testify before any duly constituted committee of Congress, if you are confirmed? 

Ms. TAVENNER. Yes, sir. 

The CHAIRMAN. Good. One more. 

Do you commit to provide a prompt response in writing to any 

questions addressed to you by any Senator of this committee? 

Senator GRASSLEY. And answer fully in the first letter back. 

Ms. TAVENNER. I will do my best. I know I have some areas of 

improvement there. 

The CHAIRMAN. All right. Thanks very much. 

Senator Hatch? 

Senator HATCH. Well, if you do, you will be one of the first ones, 

is all I can say. We hope you will, because this committee takes 

these responsibilities really, really seriously. I am proud of you. I 

am proud of the work that you have done through the years. I am 

really pleased with the effort that you are putting forth at CMS 

and how important it is to you and how you value that agency, 

even though it is a very, very difficult agency to administer. 

Let me ask you just a couple of specific questions. CBO recently 

estimated that 7 million people will enroll in the exchanges, which 

is 1 million lower than what CBO estimated at the time the law 

was being debated. Now, how much will the exchange user fees go 

up if enrollment targets are not met, and what is the lowest target 

enrollment that CMS anticipated when doing budget projections 

and will cause the agency to raise the user fees if the enrollment 

targets are not met? 

Ms. TAVENNER. That is a great question. Senator Hatch, we have 

actually followed the CBO’s guidelines, and so we are using the 

same estimate as the CBO. Our user fee was actually predicated 

on that number. When we were going through rulemaking, we had 

extensive discussions, so I think we believe that that number is appropriate and the user fee would cover that type of number. 

Senator HATCH. All right. 

Details on the implementation of title 1 of the Patient Protection 

and Affordable Care Act have been lacking, as you know, especially 

as it relates to the establishment of exchanges and efforts to educate consumers about enrollment. 

Now, could you commit to providing a bi-weekly update on the 

establishment of exchanges and enrollment, including milestones, 

deadlines, and progress reports? 

Ms. TAVENNER. Yes, sir. I think we have submitted some early 

work, but I certainly think at this point—you know, we are kind 

of going through four phases with the exchanges, and I think we 

are now entering the part where consumer outreach and education 

is becoming more important, so I think we will be able to give you 

bi-weekly updates. 

Senator HATCH. We would like to have that because it is something that we are really concerned about, and we want to make 

sure that we are on top of it as well. In public speeches, you have 

14 

said that the Patient Protection and Affordable Care Act has some 

of the strongest health care anti-fraud provisions in American history. 

Now, you mentioned in your testimony that the Centers for 

Medicare and Medicaid Services, the agency you are going to supervise, along with its partners, recovered a record $4.2 billion last fiscal year from individuals who tried to defraud the Federal health 

care program. Now, I think that is an impressive number, but I am 

interested in what CMS specifically did to contribute to that number and how much of it is attributable to CMS. 

During your time at CMS, which PPACA provisions has CMS 

used to reduce fraud, and can you provide quantifiable results for 

the CMS-specific actions undertaken? Now, even though that $4.2 

billion sounds like a lot, we know there is a lot more fraud than 

that, and we know that we are just beginning to really go after 

those who are defrauding our taxpayers. But if you could answer 

that for me. 

Ms. TAVENNER. I will. I will try to talk a little bit about how we 

have looked at—you are right, the Affordable Care Act gave us several tools to work with. So we have kind of gone through an implementation period. I would say we started first with the work that 

was done around providers, making sure we had legitimate providers in the system. 

Some of our early proposed and final rules dealt with that; also, 

assigning categories of risk to those providers, because I think, not 

only did we have a system that was probably a bit outdated, but 

it did not assign varying degrees of risk based on what we knew 

to be facts. 

So we have done that. So, if you are in a moderate- or a highrisk category, you are going to have on-site visits. There are going 

to be a lot more things, because we believe whatever we can do to 

preempt fraud on the front end versus this pay-and-chase—and the 

$4.2 billion is a great number, and I am proud of that number— 

that is also what we want to prevent in the first place. So that was 

the first thing. 

The second area that we went after, if you will, was the prepayment or our authorizations. The Affordable Care Act gave us 

the ability to withhold payment in the event of something suspicious, so we started doing that. 

The third area which we are now approaching will be how we 

look at the moratorium. You all gave us the ability in the Act to 

actually impose moratoriums on certain providers, so we are starting to look at that as kind of the third natural stage. There is also 

work in the Small Business Act that was done around predictive 

modeling, and we have had that up and running. And we submitted our first report to Congress, but we have more work to do 

in that area. 

So there are a lot of different tools, but I think our goal, our absolute primary goal, is to stop it before it happens. Once we are in 

the situation where the money has already been paid out, we have 

great working relationships with OIG and with DOJ, but it is much 

more difficult after the fact. 

Senator HATCH. Well, thank you. Thank you, Mr. Chairman. I 

appreciate that you are willing to serve. 

15 

The CHAIRMAN. Thank you, Senator. 

Senator Menendez? 

Senator MENENDEZ. Thank you, Mr. Chairman. 

Ms. Tavenner, congratulations on your nomination, again. 

Ms. TAVENNER. Thank you, Senator. 

Senator MENENDEZ. As we discussed when we met, I look forward to working with you on ways that we can address reducing 

costs throughout Medicare and improving health care to the Nation’s seniors. That includes moving past the SGR and finding new 

ways to pay physicians for the efficient, coordinated, and quality 

delivery of health care and utilizing methods that improve medication management, which has been shown to reduce unnecessary readmissions, provide significant savings, and improve health outcomes, and that includes using medications to their most efficient 

use and coordinating care delivery across the spectrum, especially 

for special populations like dual Medicare and Medicaid eligibles 

and those with severe disabilities so that both providers and patients are at the table to work together to improve health care. 

So, as we work to fully implement health care reform, we need 

to continue to look forward to new and innovative ways to reduce 

costs while improving care. I appreciate some of the efforts you 

have already taken in that regard as the Acting Administrator. 

I have a specific question with reference to one of the elements 

of the essential health benefits required of all plans offered in the 

exchange, or marketplace, which is coverage for behavioral health, 

including therapies for autism. It is a provision that I had the support of this committee on in including into the law. April is currently Autism Awareness Month. 

I am hearing from families in New Jersey and throughout the 

Nation, especially those in States without an existing autism benefit requirement. We are nervous that the rules regulating the essential health benefits will allow insurance companies to skirt this 

requirement by substituting benefit categories and offering actuarial equivalence benefits that in reality do not really cover these 

incredibly important services. 

So my question to you is, what specific steps will you take to ensure the intent of this committee and of the law to ensure that behavioral health benefits, especially those for autism and other developmental disabilities, are available in all qualified health plans, 

and that includes plans on federally facilitated exchanges and in 

States that lack existing State-level requirements? 

Ms. TAVENNER. Thank you, Senator Menendez. I also share your 

concerns about reducing costs and improving medication adherence. We have some work under way in those areas, and I would 

love the opportunity to come talk to you about those. 

Senator MENENDEZ. I would look forward to that. 

Ms. TAVENNER. The same is true with the issue of essential 

health benefits. I think it would be helpful if I could come sit down 

in your office and walk through some of these concerns. I had not 

heard this specifically, so I would like to get some more information from your staff and follow up with you. 

Senator MENENDEZ. Well, we would love to do that. I mean, it 

clearly was the intent of myself as the author, the broad support 

we received in the committee, and obviously in the final version of 

16 

the law, to have the inclusion of the benefits for behavioral health 

as part of the essential health benefits package, and to begin to 

water that down would clearly violate the intention of those of us 

who offered it. 

Finally, in a New Jersey-specific context, our Governor has indicated that he has no intention of doing anything to assist HHS 

with the establishment of the New Jersey health insurance exchange. There is not a State-based exchange; there is going to be 

a Federal exchange. 

Since many of the consumer protections and market reforms we 

instituted in health care reform require State regulators to enforce, 

I am concerned that people living in States like New Jersey where 

the State government is uncooperative it will not actually benefit 

from these protections. 

What specific role will State insurance regulators have under a 

federally facilitated exchange, and are you going to provide vigorous oversight and reject State certification of exchange plans if 

they do not meet the standards for quality required under the Affordable Care Act? 

Ms. TAVENNER. That is a great question as well, Senator. In most 

cases, States have continued to implement—if you remember, there 

was a certain section, if you will, of insurance reforms separate 

from the exchanges or the marketplace. We have had great cooperation with States, with insurance commissioners. We have also 

had the ability to work with the National Association of Insurance 

Commissioners. 

Wherever possible, both in proposed rulemaking and in final 

rules, we have gotten their feedback. So what we are seeing inside 

States is, they have very active rate review programs. We do have 

the authority under the statute to step in and supervise and have 

more rigorous oversight. We may ultimately end up doing that in 

a couple of States, but right now States have been very much a 

part of that process. 

In States where we are responsible for the exchange, we work 

with the issuers and with the State Insurance Office. The issuers 

will be submitting their plans. They will go through a series of reviews, first to make sure they fit, if you will, all of the 10 central 

categories, then to make sure that they are appropriate for services 

covered. So that process is actually under way even as we speak, 

and we handle that for any State that does not have a State-based 

exchange. 

Senator MENENDEZ. Well, my time is up. I would love to get feedback from you, as we move forward to—— 

Ms. TAVENNER. Absolutely. 

Senator MENENDEZ [continuing]. The specific New Jersey exchange, on how we are proceeding and whether we are getting the 

cooperation necessary. 

Thank you, Mr. Chairman. 

The CHAIRMAN. Thank you, Senator, very much. 

Senator Grassley? 

Senator GRASSLEY. I, too, join my colleagues in welcoming you, 

more importantly, for the work you have done thus far, and hopefully you will be able to continue. I particularly appreciated your 

coming to my office for some meetings, and I think it reinforces 

17 

what Senator Kaine said about you as you worked for him in that 

administration. I think you would make a fine Administrator, and 

I want to be able to support your confirmation. 

I have just one issue that, in the scheme of things that you deal 

with might be a little issue, I want to bring up with you. It is something that maybe back in 2011 from another angle I wrote to you 

about. So I would like to know how you would deal with a problem 

that has recently come to my attention. 

On Monday, April 1st, this year, at 3:42 p.m., Height Securities 

sent an advisory that told their clients of the CMS Medicare Advantage policy decision and that they supported related stocks. The 

consequences of a political intelligence firm having access to this 

information 18 minutes before the market closed is astonishing. 

In the 18 minutes remaining, trading minutes, on April 1st, the 

volume of Humana, United Healthgroup, and Aetna stock was 

more than half a billion dollars. More stock in those companies was 

traded in those 18 minutes than throughout the rest of the day. 

[The related Wall Street Journal article appears in the appendix 

on p. 44.] 

Senator GRASSLEY. When information leaks from the administration that has the ability to cause significant market movement, it 

is wrong and quite possibly illegal. 

I sent a letter last Thursday formally seeking information from 

you, and I hope you agree that ultimately you are responsible. 

What are you going to do to hold somebody accountable for this 

leak? 

Ms. TAVENNER. Senator Grassley, let me start by saying I, too, 

have appreciated our meetings. Second, I do not consider this a 

small issue. I consider this a huge issue. CMS takes all of this seriously, and we did receive your letter. We have initiated an internal 

review. It will be extensive, and obviously we will give you feedback from that review. 

But the second thing is, I have also asked that the Office of Inspector General be brought in on this issue as well, because we 

need a third impartial, if you will, review of this. CMS—I take a 

lot of pride in the staff at CMS, and this is not something that we 

want to happen ever, so we will do a thorough investigation, and 

we will give you feedback. 

Senator GRASSLEY. All right. And I thank you for inviting in the 

Inspector General, because I was going to ask you if you were going 

to do that, and you are. I assume that that gives you the authority 

that your investigation needs to compel the production of information within CMS. Would that be fair to conclude that the Inspector 

General can get all this information out, and you do not have to 

worry about authority? 

Ms. TAVENNER. Yes. 

Senator GRASSLEY. All right. 

I would be even more curious what authority your investigation 

has to compel the production of information beyond CMS—at HHS, 

OMB, or the White House. I assume that you are saying that that 

is the Inspector General who is going to do that. I hope that, if it 

is found that other agencies are involved, he has the authority to 

get that information out. 

18 

* The Medicare and Medicaid Fighting Fraud and Abuse to Save Taxpayer Dollars Act (S. 

1251). 

Ms. TAVENNER. I will follow up with that, Senator, because I do 

not want to give you incorrect information as to their authorities. 

Senator GRASSLEY. Now, I obviously do not believe that you can 

get the folks at HHS or OMB or the White House without some 

help, so I am going to pursue this. So you inform them that, if this 

is beyond CMS, I expect action to be taken, and I am going to get 

to the bottom of it one way or the other. Thank you very much. 

Ms. TAVENNER. Thank you. 

Senator GRASSLEY. And I know you are very sincere in what you 

said, and I am going to be following up with the Inspector General 

as well. 

Thank you very much, Mr. Chairman. 

The CHAIRMAN. Thank you, Senator. 

Senator Carper, you are next. 

Senator CARPER. Thanks very much. 

Welcome. Thank you for your service today and for your willingness to continue to serve. One of the things that we spoke about 

when you came to see us was legislation called the FAST Act* that 

Senator Coburn and I, joined by 36 of our colleagues in the last 

Congress, introduced. 

CMS was good enough, your department was good enough, to 

adopt a number of those provisions without the legislation being 

passed. We will be reintroducing the legislation. I would invite my 

colleagues to join us in the idea that there can be better health 

care results for the same amount of money or less money by going 

after some of the fraud that we all know exists, some of the waste 

and inefficiencies that exist. 

So I want to just thank you for the cooperation we have experienced thus far and invite the continued participation of your staff 

to help make the legislation better. And tell us what we need to 

do to enable you to do your jobs better on that front. 

I also want to mention an issue called improper payments. A lot 

of people think improper payments are the same as fraud. They are 

not. Improper payments are mistakes. They are accounting mistakes, financial mistakes. They are just human mistakes, and they 

add up to a lot of money, as we know. In 2002, we passed legislation, signed by former President Bush, that said agencies must 

begin reporting improper payments. 

In 2010, Senator Coburn and I introduced legislation, adopted 

and signed by President Obama, that said not only do they have 

to report improper payments, they have to stop making them, they 

have to begin to try to go out and recover money that has been improperly paid, and that we are going to hold accountable the folks 

who are running those agencies to make sure that they are adhering to the law. 

We have seen, I think, in the last 2, maybe 3 years now—even 

though almost every agency is now reporting them—the amount of 

improper payments actually is dropping, which is a very, very good 

thing. Even though the amount of improper payments being reported has gone up, the number of improper payments has gone 

down, which is a real positive. 

19 

Talk to us about your efforts to continue to drive down improper 

payments, not just do this pay-and-chase, where you actually pay 

a bill, a medical bill, and then find that it was wrong, and then 

we try to run the money down. What you are doing at the front 

end of the situation to stop the improper payments? Thank you. 

Ms. TAVENNER. Thank you, Senator Carper. 

Obviously, one of the first things we do has to do with training 

and education, not only for physicians and hospitals but also for 

their staffs and the individuals they work with. So we spend a 

great deal of time on what I will call the training and education 

piece on the front end. 

The second thing that we do, in some areas where we have seen 

consistent fraud, if you will—and you are right, it is not fraud in 

the terms of deliberate fraud; it is documentation difficulties, it is 

failure to submit the required documentation, it is review of documentation after the fact. 

One area where we had a tremendous amount of problems had 

to do with power mobility devices, the power wheelchairs. So we 

implemented a pilot in a prior authorization mode, which is somewhat more like private insurance tends to do. So now, since September of last year, for individuals who need power wheelchairs, 

there is actually a prior authorization process. 

What we have seen happen there is, it controls some of the 

abuse, and also beneficiaries are still able to get their wheelchairs 

within a short period of time. We have a 10-day threshold that we 

hold ourselves to to get this reviewed and turned around and out. 

So it is those kind of models, I think, that help more on the front 

end. 

We are seeing a reduction in improper payments, which is encouraging, but we also are looking at, are there other areas we 

need to look at? Are there things inside labs, or things inside DME 

that we can do on the front end? Obviously, some of the work 

around competitive bidding in DME had to do with some of the prevention on the front end. So we are open to new ideas. We enjoy 

working with you and your staff and supporting you. 

Senator CARPER. All right. Thanks. Thanks very much. I have 

some numbers that you might find interesting. Improper payments 

in 2010, $121 billion—billion! In 2011, down to $115 billion. That 

is still a lot of money. In 2012, down to $108 billion. We are seeing 

drops in Medicaid improper payments of several billion dollars. 

Medicare numbers are actually flat across those years, and we 

want to do better in that regard. 

The last thing. I spent some time this last week in Minnesota 

and visited Mayo, visited United Healthgroup. One of the things 

we talked about was, how do we move away from fee-for-service, 

how do we better collaborate delivery of health care, and what is 

the role that Medicare Advantage may play in that regard? 

Previously we have overpaid Medicare Advantage. I think we 

have corrected that. Just talk to us about the role you see Medicare 

Advantage playing in the next several years in moving away from 

fee-for-service, please. Thank you. 

Ms. TAVENNER. I think, as you are well-aware, the Medicare Advantage programs have grown and continue to grow. We have had 

great working relationships with some of their medical directors on 

20 

this issue of, how do we stop paying under a fee-for-service model? 

How do we look at, whether it is an Accountable Care Organization, if it is some type of coordinated approach—some of the folks 

whom you talked about are leaders in that area. So I think we are 

sharing ideas. 

Some of the things that we have learned in the Innovation Center, they are adopting; we are adopting some of their ideas. So, I 

see that role continuing to grow. They are great partners with us. 

Beneficiaries like the programs. They do good quality reviews, so 

I see that partnership continuing. 

Senator CARPER. Thanks. Mr. Chairman, I have just one last 

quick point just to share with my Republican colleagues. We have 

been a long time without a confirmed CMS Administrator. I think 

we have a good one here, and I would just hope that we can get 

her reported out of here, get her confirmed with great dispatch. 

She is a good candidate, an excellent candidate, and we are lucky 

that she is willing to serve. Thank you. 

The CHAIRMAN. That is my plan: do it quickly. 

Senator Enzi? 

Senator ENZI. Thank you, Mr. Chairman. That was an impressive group of introductions, and I really appreciate that you listed 

out the stakeholders in your statement. I used to be in the shoe 

business, so I call those customers. That is a great thing to have 

recognized. 

I am concerned about some recent reports that have identified 

some anti-competitive effects of excessive integration of hospital 

systems, including reductions in access and increases in costs for 

the consumer. What is CMS doing to ensure that the incentives 

that it is building into the Medicare program to better coordinate 

care or integrate services do not have an adverse effect on competition and the price of health care in the long run? Have you engaged 

the Department of Justice on this issue at all? 

Ms. TAVENNER. Senator Enzi, thank you. This is something that 

we do work on with the Department of Justice, but in a different 

way. We tend to look at models through the Innovation Center. 

That tends to be where we are engaging the Department of Justice 

to make sure that we are not creating any anti-competitive work 

in the demonstration areas. I think engaging them more and having them be a partner is a good suggestion, and that is something 

that we could do. 

Senator ENZI. In your answers to some of the questions, you 

mentioned your involvement with HCA. This one is a hospital 

issue, but I assume that your thing about it not being specifically 

about HCA precludes you from having to recuse yourself on that? 

Ms. TAVENNER. Right. 

Senator ENZI. All right. 

Now, the Society of Actuaries recently released a report in which 

they estimated that health insurance premiums in the individual 

market will increase 32 percent on the average nationally and in 

Wyoming specifically. The National Association of Insurance Commissioners released a paper just in the last week that outlined 

steps States can take to mitigate expected rate increases due to the 

health care law. 

21 

In fact, the NAIC paper concludes that States ‘‘should begin evaluating these and other strategies immediately in order to mitigate 

the rate increases when the major market reforms take effect in 

2014.’’ What is CMS doing to address the risks identified by that 

report and other reports? 

Ms. TAVENNER. Senator Enzi, first, I would say that we do not 

agree completely with the actuary report. I will give you some reasons why, but I will also remind this committee that, while I have 

great respect for actuaries and work with them daily, these are estimates or predictions about things that we do not know for certain. 

I will take us back to Part D and some of the estimates around 

Part D where I think we ended up at less than 40 percent of the 

original estimates for the cost of Part D. So I would just caution 

us about taking the word or the reports of actuaries as more than 

just estimates or speculation. 

But having said all that, there are some things in the Affordable 

Care Act that I think mitigate any type of insurance increases, and 

I will try to talk about those. But I will talk about them in three 

areas. The first area is, when individuals talk about premium increases, I think they would have you believe that that is the entire 

insurance market. I will remind you that what the Affordable Care 

Act is dealing with is the small market or the individual market, 

so less than 20 million max. 

Large employers are fairly exempt from the requirements, and 

large employers have seen the most modest increases in the last 3 

years that they have seen in some time, so I think our overall 

strategy, both in government and in the private sector, around controlling cost is bearing some fruit. 

The second issue is, in addition to the size of the market, these 

studies do not take into account those pieces of the Affordable Care 

Act that actually work to decrease premiums. First of all, there is 

the issue of the tax credit, which is obviously applied to the premium. Second, there is a variety in plans, so you can have a 

bronze, or a silver, or platinum plan, which changes the premium. 

Third, there is the availability of catastrophic coverage for individuals up to 30. Fourth, there is the issue of dependent coverage 

where, thanks to you all and the work in the law, we are covering 

individuals up to the age of 26. 

I could go on. There are issues around reinsurance. If you will 

remember, you put $10 billion into a reinsurance pool for the next 

3 years with the idea of mitigating any type of premium increases. 

The rate bands that we have—there is a long list. I will not bore 

you with the entire list, although I am happy to give it to you; we 

have it. 

The third area that I would mention is a reminder to folks, and 

I think we saw this in the Time magazine article: insurance is not 

necessarily insurance as we all tend to think of it, having worked 

for large employers and having pretty robust insurance policies. 

Some of these, if you will, low-cost premiums were low-cost for 

a reason. They did not really offer robust insurance, as many folks 

found out the first time they had to be hospitalized or they were 

diagnosed with cancer or another disease that required a lot of 

22 

treatment. So, as you can tell, I feel pretty strongly about this, but 

I would not agree with the actuarial assumptions. 

Senator ENZI. My time has expired, but I will have some specific 

follow-up questions, as the accountant. 

Ms. TAVENNER. Right. Thank you. 

Senator ENZI. And also some other questions that I hope you will 

answer. 

Ms. TAVENNER. Thank you. 

Senator ENZI. Thank you. 

The CHAIRMAN. Thank you, Senator. 

Senator Cardin? 

Senator CARDIN. Thank you, Mr. Chairman. 

Ms. Tavenner, I also want to thank you for your public service 

and thank your family for their willingness to serve, because it is 

a family effort, and we appreciate that. 

In your statement, you point out that you have many stakeholders, and that is true, but the most important stakeholders, as 

Chairman Baucus has pointed out, are taxpayers in this country 

and the families that depend upon the implementation of the Affordable Care Act, Medicare, Medicaid, and the CHIP program. 

So I want to talk about one aspect of that, which is pediatric dental care. Jon Blum, when he was before our committee, the Director 

of Medicare, said it would be a mistake to silo oral healthcare and 

treat it separately as we once did mental healthcare. But I am worried that that is exactly how we are moving, in treating pediatric 

dental care as a secondary issue, even though it is an essential 

health benefit. 

You have pointed out in a response to a letter from me that it 

is clear that the stand-alone policy, Congress wanted that, but, 

even though it is part of the essential health benefits, it is not a 

requirement for an individual to obtain pediatric oral health coverage. If their primary policy does not cover it, as it does not have 

to, then it looks like they do not have to take a stand-alone policy 

if they do not want to. 

You also have gone through the deductibles and you started with 

$1,000 in those plans that you are administering. Now you are 

talking about $700 as a separate deductible for dental, oral health. 

You cite as one of the reasons to me the cost issue, even though 

the Millman report reflects that the difference between $700 and 

$270 is less than $2 a month. 

So can you just assure me about how you are going to implement 

the Affordable Care Act to make sure that pediatric dental care 

does not become secondary coverage, that it is what Congress intended it to be—part of the essential health benefits—and how we 

are going to assure that all families have access to affordable pediatric dental care? We have made progress, and I acknowledge that, 

but I am concerned that this could be some backsliding. Please assure me that my fears are going to be alleviated. 

Ms. TAVENNER. Thank you, Senator Cardin. As you know from 

our conversations, I am very much supportive of pediatric dental, 

and obviously you all have done a tremendous amount of work in 

the Medicaid program, and we have come a long way. Obviously 

the tragedy in Maryland had a lot to do with that. 

23 

But I hear you on this issue, and I will tell you that we will go 

back and take a look at it. We did mitigate some of the cost sharing, if you will, at your recommendation. But on the coordination 

of the two, we may have more work to do, and I am happy to take 

a look at it and work with you. But we would have to do it in future rulemakings, because we are pretty far along right now, and 

that is the part I wanted to—— 

Senator CARDIN. I understand that. I just urge you—Congress allowed you to have stand-alone policies, but I do not think we intended that families would not have coverage. Now it looks like, because of the combination that you are interpreting it as not being 

required and the fact that you have high deductibles, meaning that 

families would have to make a decision, am I really going to reach 

$700 per child, do I really want a policy, it looks like many families 

will go without coverage, which is certainly not what Congress intended. I would very much appreciate you following up on that. 

Ms. TAVENNER. Will do. I would like to come meet with you and 

look at this report as well. 

Senator CARDIN. Thank you. 

Ms. TAVENNER. Thank you. 

Senator CARDIN. I also contacted you about an experience we had 

in our State with a private Medicare plan, Bravo Health Plan, that 

gave notice of termination 1 week before the end of the open enrollment period. This plan included a large number of people under a 

federally qualified plan in East Baltimore, where the individuals 

are of modest income. It is very difficult for them to travel; many 

of them do not have automobiles, and it is just difficult. It is a pretty closed community. 

As a result of the decision to terminate, they no longer have their 

primary care physician whom they had once before. They have 

been given information that they have to travel a long distance in 

order to get to a primary care physician. We asked for some relaxation of the open enrollment period in order to deal with this hardship. So far we have not heard anything positive about this. Can 

you look into this and perhaps find a way in which we can provide 

help to these individuals? 

Ms. TAVENNER. I will do that, and I will get back to you. 

Senator CARDIN. Thank you, Mr. Chairman. 

The CHAIRMAN. Thank you very much, Senator. 

On the list I have several Senators next in order, but I understand that Senator Roberts has a pressing engagement and is going 

to ask the indulgence of the Senators ahead of him. But that is up 

to Senator Roberts, as well as the Senators ahead of him. On the 

list I have Senator Isakson next, Senator Portman, and following 

him, Senator Bennet. 

Senator ROBERTS. I have not asked Senator Isakson if that would 

be possible. I do have permission from my friend and colleague, 

Senator Portman, however. But I would ask the Senator’s indulgence. 

Senator ISAKSON. I will voluntarily indulge the Senator from 

Kansas. [Laughter.] 

Senator ROBERTS. Ms. Tavenner, what do you want to be called? 

Do you want to be called Administrator? Madam Administrator? 

That does not sound very—— 

24 

Ms. TAVENNER. I actually prefer Marilyn. [Laughter.] 

Senator ROBERTS. Marilyn. I have a different name. Our State 

motto is, ‘‘To the stars through difficulty.’’ I apply that to CMS, 

farmers in Montana—for that matter, anywhere. Hope always 

springs eternal. They would never put the seed in the ground unless they thought they were going to have a crop, regardless of 3 

years of drought. 

You have been endorsed by the Kansas Hospital Association, the 

Kansas Medical Society. You have the support of hospices, you 

have the support of ambulance drivers, you have the support of 

nurses and doctors, you have the support of home health care, and 

the list goes on—all of our providers. 

There is a reason for that. That is because of everything that has 

been said about you. So I think I am going to dub you, at least for 

Kansas and the Dodge City area, as the new sheriff in town. You 

are going to wear a white hat. There are an awful lot of people in 

CMS who wear black hats, and that is just in the way that the 

rural health care delivery system has been treated. It is most unfortunate. 

When you say ‘‘CMS,’’ the line used by many of our providers is 

that there is a new acronym: ‘‘it’s a mess.’’ That is not a very nice 

thing to be saying about an agency that is supposed to be helping 

folks, but that is the way it is. 

Now, you and I have talked about this, and I appreciate you coming in. You have been through those chairs, which is exceedingly 

important. I expressed my concerns with the current regulatory 

process. We discussed the deviation from the traditional regulatory 

process of notice and comment, the lack of stakeholder input, especially as it relates to shortened comment periods and through the 

use of something called sub-regulatory guidance—postings, e-mails, 

bulletins, guidance, and something called FAQs, frequently asked 

questions. 

Unfortunately, nobody has any time to read this stuff or to be 

aware of this until somebody who has been contracted out knocks 

on the hospital door with a fine. That is not right. 

So, during our discussions, you had mentioned that these are all 

issues that CMS is aware of and that you expect to be addressed. 

Specifically, I have received commitments that there would be no 

more IFRs, what we call the ‘‘gotchas,’’ interim final rules, that 

stakeholders would be given more opportunity to participate in the 

regulatory process by allowing a 60-day comment period as has 

been done in the past; then, if enough suggestions have come in to 

tweak the proposed regulation or to change it, you could have another 60 days to get it right, and CMS would work with OMB to 

ensure the cost estimates included in the regulations are clear so 

that all of our health care providers can know what to expect as 

it relates to the costs associated with the regulatory actions. And 

you agreed with me, and I agreed with you in regards to your commitment. 

But I was dismayed that, following our most recent conversation, 

an IFR was issued to implement something called Benefit and Payment Parameters. Understanding that you are on a tight time line, 

this is a completely unacceptable process, however, and I would 

hope that your previous commitments to return to the traditional 

25 

notice and comment period—i.e., transparency—and make it such 

that CMS is not considered in the rural health care areas as welcome as a plague of locusts, that you would work with me. I think 

you said ‘‘yes’’ at that particular time. I hope that we could continue on that basis. I think the answer is ‘‘yes,’’ and I will yield 

back the balance of my time to Senator Portman or Senator 

Isakson. 

Ms. TAVENNER. Senator Roberts, the answer is ‘‘yes.’’ You did 

educate me about the four corners, and we will try to do our best 

to follow the regular process. There are obviously sometimes emergency situations where we do an IFR, so I do not want to leave you 

with the impression that we would never, ever consider an IFR, because I think—— 

Senator ROBERTS. I understand that. 

Ms. TAVENNER. But yes, I think we are more into the regular 

order of business, and I appreciate your support. 

Senator ROBERTS. Mr. Chairman, it is not often I give you 50 seconds back. 

Senator ROCKEFELLER [presiding]. That is true. 

Senator Isakson? 

Senator ISAKSON. Thank you, Mr. Chairman. 

The SGR. I was sworn in in February of 1999 to the U.S. House 

of Representatives, and, if I am correct, every year in December we 

had to, at the last minute, patch the SGR or physicians were going 

down the tubes on reimbursement. That still is the case now, and 

it is 2013. 

CBO recently gave us a good score, or a much lower score, on the 

cost of fixing the SGR. Will you encourage the President, if you are 

confirmed—and I assume you will be confirmed because you have 

done a great job—to adopt that as a priority this year? We have 

a window of opportunity to do it, and I would like to see us fix the 

SGR. 

Ms. TAVENNER. Yes, I will certainly work with the President and 

the President’s team. We agree that SGR needs to be replaced, and 

we need a permanent solution. 

Senator ISAKSON. Every doctor in America would agree with you 

as well. 

Ms. TAVENNER. Yes. 

Senator ISAKSON. The Georgia Department of Community Health 

has a Medicaid waiver application in to allow them to put foster 

children under Georgia’s care in a managed care program. As you 

know, foster kids move around a lot; they go from home to home 

a lot. They have, many times, complex medical issues. A managed 

care type of approach allows them to get away from fee-for-service, 

do it all over again when they move locations, and instead have 

good quality of coordination on their care. 

I work a lot with foster kids, and did when I was in the State 

legislature in Georgia. If you could check on that application and 

see if you could help expedite it, or help them expedite what they 

need to do, because foster kids are important people in our State’s 

care, and I would love to see us do that. 

Ms. TAVENNER. I can certainly do that. 

Senator ISAKSON. One other question. In the House, we did a 

piece of legislation, probably 10 years ago now, on needle sticks. I 

26 

have been a member of the Diabetes Caucus for a number of years 

and am aware of the number of complications that come from needle sticks with diabetes. 

I understand, from what I am told by my staff, that you have the 

flexibility with regard to diabetes to approve reimbursement for ancillary and related diabetes treatment and services. Needle stick 

devices, of which there are any number available right now, are an 

excellent way to avoid unwanted needle sticks and further complications and other problems. 

I have a piece of legislation that I have introduced with Senator 

Coons to try to get CMS to approve a reimbursement for needle 

stick devices, but, if you can do it administratively, it would seem 

to be a big help. We have a study done by United Healthcare that 

estimated the savings to those who had a needle stick destruction 

device, and the savings that would bring to CMS and to United 

Healthcare because of the number of other ancillary problems it 

would reduce. Would you look into that for me? 

Ms. TAVENNER. I certainly will. 

Senator ISAKSON. And that is all of my questions. Thank you. 

Ms. TAVENNER. Thank you, Senator Isakson. 

Senator ROCKEFELLER. Senator Casey? 

Senator CASEY. Mr. Chairman, thank you very much. 

Ms. Tavenner, I wanted to commend you for your public service 

already, the work that you have done over a long period of time 

in a very difficult area of our government, and also the work you 

have done in the private sector. 

I want to commend as well your family. I think the applause that 

we gave to your family earlier today was entirely appropriate, but 

not at all commensurate with the sacrifice that they have made, 

and we are grateful for that. 

I wanted to focus—and I will try to be brief because I know we 

have a number of other questioners—on children in the context of 

health care as we implement a very difficult piece of legislation to 

implement and get right. Those of us who supported it had better 

be committed to getting it right, especially as it relates to children. 

In our State, we have a little more than 900,000—at the last 

count about 919,300—children covered by Medicaid, about 45 percent of the total. As a lot of the experts tell us about children, when 

it comes to the kind of health care we have to provide to them, that 

children—these are not my words, but I try to remember them— 

are not small adults, they are different. Their health care needs are 

different. You know that from your experience better than I do. 

I wanted to focus maybe on two or three areas. One would be— 

instead of asking a broad question, because we probably do not 

have time for that—some of the challenges that will arise when we 

begin to see the exchanges being implemented, in particular, where 

kids in the exchanges who normally would get, by way of Medicaid 

or some other way, but mostly by way of Medicaid, so-called wraparound services if they have particularly difficult challenges. 

If a child is covered in the exchange at some future time, how 

do you deal with that to make sure that, if the private coverage 

does not meet their needs, that there is going to be something comparable to or similar to wrap-around services? Can you address 

that? 

27 

Ms. TAVENNER. Yes, sir. Senator Casey, let me start by saying— 

and I think we heard this from Senator Kaine in the opening comments—that we are very much committed to helping children in 

the Medicaid program and in private insurance. I think we heard 

that in regards to the oral care, dental care. We have done work 

around the Strong Start, and I know your State has a project there, 

and we appreciate your support of that. 

So there is a lot of work to be done around newborns and infant 

mortality, around childhood obesity, smoking, and so we have 

projects under way inside Medicaid, and I am happy to brief your 

staff on that. 

But we are committed to working on this. What we are seeing 

is that we may have parents in the exchange, children in CHIP, 

and vice versa. We are working with them as a family unit. I am 

happy to come sit down with your staff and walk through how we 

will put those added protections in, because, if they are in Medicaid, they obviously are eligible for all of the wrap-around benefits 

and the added protections. Wherever possible, we try to sync up 

both Medicaid policy and, if you will, the essential health benefits, 

and we can kind of give you some more detail in that area. 

Senator CASEY. That would be great. With all the changes, I just 

want to make sure we—meaning myself as well—meet these obligations. 

One of the challenges we are facing as well is, as in some States 

like Pennsylvania, we may be confronting a situation where the 

State is not part of the exchange and may not embrace the changes 

as they relate to Medicaid. So, in two major areas of health care 

implementation, our State may be in a different position than a lot 

of other States. I know we will continue to talk about this, but do 

you have any suggestions or any insights as it relates to States 

that are in that position, either not part of the exchange or not 

part of the Medicaid elements? 

Ms. TAVENNER. Yes, sir. Senator Casey, obviously Pennsylvania 

is one such State. We are actually meeting with the Pennsylvania 

team today. We are continuing to work with each State on the 

issue of Medicaid expansion to see if there are at least educational 

pieces we can give them, ways they can look at it, clarifying any 

questions they may have, and encouraging Medicaid expansion. 

In the issue of the exchanges, you actually have a bit of an advantage in Pennsylvania in that we have a regional office there. 

But I will remind folks that we do have 10 regional offices throughout the country, and so, in States where States are not having a 

State-based exchange or partnership, we will be mobilizing our regional staff to work inside each State. We will also be doing a series of webinars and educational programs, traveling inside the 

State. There are several other things we will be rolling out through 

the summer to help. 

Senator CASEY. Thank you very much. 

Thank you, Mr. Chairman. 

Senator ROCKEFELLER. Thank you. 

Senator Thune? 

Senator THUNE. Thank you, Mr. Chairman. 

Ms. Tavenner, welcome. Thank you for your service and willingness to come up here and answer all these questions today. 

28 

I want to ask a couple of things, really quickly. I am interested 

in the physician supervision of outpatient therapeutic services and 

a 2009 Medicare Prospective Payment Systems final rule in which 

CMS issued a new policy regarding direct physician supervision of 

outpatient therapeutic services. 

There are a lot of health care organizations that have recognized 

this as a burdensome and unnecessary policy change, but CMS 

characterized it as a clarification. It seems as if CMS retroactively 

interpreted the policy to require that a physician provide direct supervision instead of general supervision and be physically present 

in the same outpatient department at all times when outpatient 

therapeutic services are furnished. 

I am concerned that the clarification is in fact instead a significant change in Medicare policy that would place considerable burden on hospitals, especially facilities in rural areas. So I know 

there has been a panel convened, but I am also concerned that that 

panel is not sufficiently considering the input from rural critical access hospitals. So I am wondering if you would agree to return to 

the pre-2009 interpretation of this policy for critical access hospitals. 

Ms. TAVENNER. Senator Thune, I appreciate that question. After 

we talked yesterday, I thought there were a couple of things that 

we could do. First of all—and I think we discussed this with your 

staff yesterday—adding additional members representing the rural 

hospitals and critical access hospitals would be helpful so we would 

make sure we have a balanced dialogue about what direct supervision really means and what is required in these smaller hospitals 

in remote areas. 

I will go back and take a look and then sit down with your team. 

I think we have made some progress, so I would want the opportunity to sit down with your team and walk through what has been 

done, but we are certainly willing to look at the original standards 

and see where we are different. 

Senator THUNE. I guess my concern in all this—and I wish I had 

voiced it to you yesterday—is that there is not a sufficient avenue 

for rural voices to be heard in this process when the panel is predominantly from non-rural facilities, so I would appreciate any consideration that you could give for input from rural hospitals. 

Ms. TAVENNER. I think that is an excellent suggestion. 

Senator THUNE. The other question I wanted to raise with you 

is, I have been hearing from constituents in South Dakota about 

the impact of preferred pharmacy networks and the Part D program. For some seniors, they are not even aware of the preferred 

network until after open enrollment for Part D. 

For some seniors, it means the drug plan that they have been 

using for several years has changed, and those changes increase copays to go to their regular pharmacy instead of the pharmacy in 

the new preferred network. For some pharmacies, this is having an 

adverse impact, as you might expect, on their client base. 

I would like to know what is being done to ensure that seniors 

are aware of the impact of choosing a Part D drug plan with a preferred network and what that might mean in terms of them being 

able to access their pharmaceutical services from the pharmacy 

that they have been using previously. 

29 

Ms. TAVENNER. Senator Thune, after we talked about this one 

yesterday, I also went back and did a little homework last night 

in this area. I think we certainly try to educate beneficiaries about 

the plan they are in and what is involved, what pharmacies are in 

the network, but we need to do more in that area, obviously, if 

beneficiaries are still confused. So that is the first area. 

The second area is—and I think based on your feedback yesterday—we need to take a look at the policy and see if there are 

changes that we can make in the policy in the future that might 

make it a little easier on this issue. So I appreciate that. I was not 

as aware of that issue until we talked, so we will follow up with 

it. 

Senator THUNE. All right. Thank you. I appreciate your responses. 

Mr. Chairman, thank you. I yield back the balance of my time. 

The CHAIRMAN. Thank you, Senator. 

Senator Portman? 

Senator PORTMAN. Thank you, Mr. Chairman. 

Thank you, Ms. Tavenner, for your willingness to step forward. 

Thank you for coming by the office. I enjoyed our conversation on 

some of the issues I will raise today. Also, I think your background 

is going to be very helpful as you move from Acting Administrator, 

assuming you are successfully confirmed—I think you will be—to 

being the Administrator. 

I like your nursing background, I like your State background in 

Virginia, and I like your private sector background. You are going 

to have a huge job. A number of us are deeply concerned about how 

ACA is going to be implemented. We continue to have strong concerns about some of the policy decisions that were made here a couple of years ago, and yet, because our constituents are looking at 

huge changes, many of them, we want to be sure somebody is there 

who can help them work through that. 

So one thing that I am very concerned about is wellness and prevention and what ACA might do or not do to help that. As I travel 

around Ohio, I am constantly amazed by the companies that are 

doing innovative, state-of-the-art things in terms of encouraging 

their employees to get involved in wellness and prevention. Some 

are self-insured, some are not. 

I am very concerned about the regulations and the mandates 

that might actually take the country in the wrong direction in 

terms of what is starting to happen out there in the private sector. 

I would like to hear your comments on that and be sure you are 

sensitive to that. 

Second, within the Federal programs themselves, I think there is 

great opportunity, and particularly with regard to Medicare, but 

also Medicaid. As you know, Senator Wyden and I introduced a bill 

called the Better Health Rewards last year. We are planning to reintroduce it soon. 

It is really the only prevention and wellness idea I see out there 

on Medicare, but basically it says that people, as they go to their 

annual physicals that are paid for anyway, go through a process 

voluntarily, if they like, with six different criteria, including looking at diabetes, looking at smoking cessation, and so on, and then 

they get a reward if they go through the program. 

30 

So, could you comment on those two things? One, are you going 

to be sensitive to private sector initiatives in this area, and two, 

are you willing to look at more innovative programs within Medicare and Medicaid, in particular on wellness and prevention? 

Ms. TAVENNER. Thank you, Senator Portman. First of all, I am 

very much aware of the wellness and prevention programs in the 

private sector, and I certainly think they are critical and very important. We actually have a demonstration inside Medicaid where 

we have actually adopted some of those ideas around wellness and 

prevention, more from the standpoint of encouraging Medicaid recipients, so it is more the reward than the punishment look, if you 

will. But yes, we are open to wellness and prevention opportunities. 

As far as Medicare, I certainly would like to work with you on 

your legislation and offer assistance there. We have tried to look 

at that in a couple of ways, obviously as part of the Affordable Care 

Act, and this administration has been focused on covering more 

preventive services, because we think that it is key to preventing 

long-term, if you will expensive, illness. So, not only from a cost but 

from a quality perspective, it is a better place to be. 

Second, in how we are looking at changes in payment, I think 

that sends a strong signal to physicians and other providers that 

it is not about the volume of services you provide, it is about, what 

is the outcome of the individual, and that outcome should be as 

much focused on prevention and having optimal health as opposed 

to waiting until after the fact and dealing with expensive and lowquality type outcomes. 

Senator PORTMAN. Well, I appreciate those comments, and I hope 

that you will be willing to show respect for the private sector initiatives in this area, and, particularly with regard to the way regulations were formulated and mandates on coverage, that you are sensitive to that. 

Another issue big in Ohio is durable medical equipment. You and 

I have talked about this. There are a lot of companies in Ohio involved in this and a lot of patients in Ohio who rely on durable 

medical equipment. The current program has nine bidding areas 

total, two are located in Ohio. This summer, the number of bidding 

areas will expand to an additional 91 areas, including another six 

in Ohio. 

Again, access to durable medical equipment is critical to seniors, 

particularly in Ohio, but also around the country. They depend on 

it. Also, businesses that supply this equipment to our seniors are 

worried about the uncertainty. We all want to see savings, but we 

want to see it done in a smart way, and we certainly do not want 

to see it done at the expense of seniors’ access to necessary equipment. 

A number of constituents have contacted me, talking about how, 

once bidders win through this competition, they are not able to 

supply the necessary equipment for beneficiaries, because they 

come in with such a low bid. They get selected, and then they cannot complete the responsibilities. 

CMS, in your role as Acting Administrator, has provided assurance you are strengthening this bid review process to ensure that 

low bids are sustainable for the suppliers. Can you describe for us 

quickly the measures you have already taken to strengthen this reVerDate Nov 24 2008 19:28 Mar 13, 2014 Jkt 000000 PO 00000 Frm 00034 Fmt 6633 Sfmt 6633 R:\DOCS\86938.000 TIMD
31 

view process and what you are going to do in the future before expanding this program, including what you are going to do before 

you expand it later this summer? 

Ms. TAVENNER. Yes, sir. Senator Portman, let me start with, 

when Congress authorized the competitive bidding for DME—this 

was several years ago—we spent a long time in planning this effort, and obviously we rolled out the pilot a couple of years ago. 

The pilot was critical to determining and modifying the program, 

so I will give you some of the results from the pilot. 

In the first areas that we have done, what we have seen is, actually there were no issues with access. We have obviously seen reduction in cost. In fact, we still have over 90 percent of the original 

folks who bid still in the market, still supplying. We also were careful that we did not allow individuals to take too much of the market, if you will. 

We have kind of this informal cap, if you will, of about 20 percent so that we make sure we have at least five suppliers in an 

area providing a piece of equipment. We have ongoing, real-time 

evaluation with beneficiaries. We set up a separate call center. We 

have monitored their feedback. 

The feedback has been great from the beneficiaries, but we also 

have been careful to look at, what is the trend? Where are we seeing drop-offs in supplies that would cause concerns? We actually 

saw drops in two areas. One area was the CPAP disposable monitor, if you will, the mouthpiece, and the second area was in diabetic testing strips. So we actually called beneficiaries and said, 

what is going on? Why are you not getting these? Because those 

are pretty critical things, particularly diabetics’ testing strips. 

In fact, most of them had several months’ supply stored, so it 

was more of an inventory thing. They really did not need it, which 

is one of the issues that we were hoping to address in the competitive bidding, that we were getting folks what they needed but not 

more than they needed. So I think we have been comfortable. We 

will always continue to try to improve the program, but obviously 

we are getting ready to roll out the second portion very soon. 

The CHAIRMAN. Thank you very much. 

Senator Burr? 

Senator BURR. Ms. Tavenner, welcome. I join my colleagues in 

urging the chairman for an expeditious confirmation. I have enjoyed my meetings, plural, with you, and I am sure we will have 

more in the future. 

Ms. TAVENNER. Thank you, Senator. 

Senator BURR. Let me just, in full disclosure, say that I am not 

that confident about the Affordable Care Act and its implementation being seamless and its costs being predictable. I do not believe 

it is the panacea that many people present, both from that table 

and in some of the public comments. The truth is that the cost of 

the Affordable Care Act is very questionable. 

The most alarming thing to me today is, I cannot find anybody 

in the administration who has a Plan B. What if more people enroll 

in the State exchange, meaning there is an employer dump? What 

if 30 percent of those employees who are dumped qualify for a subsidy? What happens when we run out of money in a health care 

plan that has been designed based upon fees and taxes that are not 

32 

unlimited? What happens when there is not enough money to make 

the payments? These are all questions that have yet to be answered. 

Now, you quickly pointed to Part D and Part D’s success. Let me 

suggest to you, Part D is very different from what we have created 

with the Affordable Care Act. Part D was designed to generate 

fierce competition between suppliers. 

Part D was not designed with subsidies, it was not designed with 

fees, and it certainly did not have the degree of mandates that you 

find in the Affordable Care Act. One thing that I have learned in 

health care is, for everything that you require, health care is going 

to have a reaction to that, and usually it is an increasing cost. 

Let me ask you: you said that you are using CBO’s projections 

for enrollment in the exchange. Is that 7 million, or is it 8 million 

since CBO’s estimate was changed? 

Ms. TAVENNER. We are using 7 million. 

Senator BURR. You are using 7 million. What does CMS estimate 

it will cost to run the federally facilitated exchange? 

Ms. TAVENNER. Senator, I can get you that information, but I do 

not have that today. 

Senator BURR. Would you supply that for us? Would you also 

supply what the total budget for the exchanges is? 

Ms. TAVENNER. Yes, sir. 

Senator BURR. Thank you. 

Now, you said earlier that there are going to be no premium increases, and you cited a number of reasons as to why there would 

not be. Let me ask you: the 3.5-percent user fee applies to insurers 

in the exchange and outside the exchange, correct? 

Ms. TAVENNER. Yes, sir. 

Senator BURR. So, if we are going to require insurers outside the 

exchange to pay a 3.5-percent additional fee, you do not believe 

that is going to have an impact on premium increases on people 

outside the exchange? 

Ms. TAVENNER. I think some of the trends that we are seeing 

outside the exchange will offset some of those. 

Senator BURR. Some of those, but there will be a premium increase. As a matter of fact, most of the averages from the industry 

looking at this are that there will be a $600-per-year increase on 

a family plan. Do you dispute that? 

Ms. TAVENNER. I have not seen that, so I need to take a look at 

that. 

Senator BURR. All right. 

Let me suggest to you that to make the statement that subsidies 

do not allow premiums to go up is somewhat disingenuous. Subsidies mask the cost, so, when we put in a subsidy so that somebody does not feel the personal effects of it, we are masking the 

cost of that. I think one of the problems that we have with the Affordable Care Act is that nobody really understands what the costs, 

not just of implementation, but of running the Affordable Care Act, 

will be. 

Now earlier, Senator Enzi talked about actuaries, and you expressed your concern over actuaries. Let me ask you, though, will 

you commit to providing the committee with a timely, detailed preVerDate Nov 24 2008 19:28 Mar 13, 2014 Jkt 000000 PO 00000 Frm 00036 Fmt 6633 Sfmt 6633 R:\DOCS\86938.000 TIMD
33 

mium impact analysis for all title 1 reforms included in the health 

care law? 

Ms. TAVENNER. Yes, sir. But, going back to Senator Grassley’s 

comments earlier about Medicare Advantage and what happened 

last Monday, there is a point where we can go public with what 

the premiums are, but it will be later in the game, if you will, for 

the very reasons that we outlined. It is not until a premium is actually locked down that we would be able to share that, so I suspect that will be probably late August or September. 

Senator BURR. All right. That is fine. But I hope you understand 

that it is important for us all to be looking at the same numbers. 

You may interpret the impact differently; you are entitled to do 

that. But, if we are working off of two different sets of numbers, 

it makes it impossible to try to analyze where we are and, more 

importantly, where we are headed. 

Ms. TAVENNER. I understand. We will share those numbers. 

Senator BURR. Thank you for your time today. 

Thank you, Mr. Chairman. 

The CHAIRMAN. Thank you, Senator. 

Senator Schumer? 

Senator SCHUMER. Just quickly—and thank you for your good 

work. I know we have worked together on many issues, and I appreciate your expertise, your concern, and your caring. 

Two quick questions. One relates to a specific hospital called Samaritan Hospital Medical Center in Watertown, NY. It is less than 

250 beds. It is a rural hospital that serves 120,000 New Yorkers 

in, actually, a growing area of our State, because of Ft. Drum. The 

medical residency program was supposed to be exempt by law from 

cuts, but Samaritan was inappropriately misclassified in the spring 

of 2011. They were notified the Medicare program was reducing 

graduate medical education funding by three slots. 

The slots are important. This is a rural area. It uses NHS, the 

National Health Service, and all of that to get doctors. It is a very 

busy hospital. Now, here is the catch. CMS staff agreed that Samaritan was wrongly classified. There is no dispute that they 

should have been excluded, but they said there is no method of appeal for a wrong decision. That sounds more like Russia, Communist Russia, or Kafka-esque places, or whatever. So could you 

take a look at that for me, please? 

Ms. TAVENNER. Certainly, Senator. 

Senator SCHUMER. Great. 

The second issue is also specific, and then I will be out of everyone’s hair. Observation days. Senator Brown has introduced a bill; 

I have co-sponsored it. I do not know if he addressed it. Under current medical law, patients must be categorized as inpatient for 3 

days before entering a nursing or rehabilitation facility if they 

want Medicare to cover their costs. However, if no operation or 

major procedure is performed, they are in there 3 days, but they 

are called under ‘‘observation’’ status. 

Then if the hospital says, look, you do not need an operation but 

you need physical therapy, Medicare does not cover them. So you 

have, in my area, hundreds and hundreds of seniors—I am sure it 

is thousands across America—who, because of this catch-22 of observation days, end up having to pay $8,000, $10,000 for the rehaVerDate Nov 24 2008 19:28 Mar 13, 2014 Jkt 000000 PO 00000 Frm 00037 Fmt 6633 Sfmt 6633 R:\DOCS\86938.000 TIMD
34 

bilitation that they need. Had the hospital done a procedure, it 

would have been fine, they would have been inpatient, but they are 

called ‘‘observation’’ patients. 

So we have introduced legislation for this. The number of observation days is going way up. Could you take a look and see if there 

is a way, without legislation, that that can be rectified? 

Ms. TAVENNER. Yes, sir. We are happy to work with your team 

on it. 

Senator SCHUMER. Mr. Chairman, thank you. 

The CHAIRMAN. Senator Rockefeller? 

Senator ROCKEFELLER. Senator Schumer, I am working on a case 

in West Virginia which is precisely what you described—precisely. 

Then they are caught. 

Senator SCHUMER. Yes. 

Senator ROCKEFELLER. They cannot pay. Nobody pays. 

First of all, I want to say that both you and the Secretary have 

been before us on a number of occasions, and I have been quite 

critical, sometimes in meetings in my office or in open or closed 

meetings with the Finance Committee, as have others. 

But what has occurred to me is that both of you have sort of sat 

there all by yourselves and taken the questions and the hits. I am 

of the belief that the ACA is probably the most complex piece of 

legislation ever passed by the U.S. Congress. 

Tax reform obviously is going to be huge too, but it means, up 

to this point, it is just beyond comprehensive and adds all kinds 

of requests and individual insults, and this, that, and the other 

thing. But I have to say that I very much admire the way both of 

you handle it, the way you are stoic about it, and I look forward 

to supporting your nomination. 

A couple of questions. You approved for Arkansas—we began to 

talk about this before—premium assistance instead of expanding 

Medicaid as usual, which is in spite of the fact that even Arkansas 

admits that it is going to be 13 to 14 percent more expensive to 

do that. 

I do not understand why that allowance was made, why that 

waiver was given. Now, the whole business of the giving of waivers 

by CMS to States is still something of a mystery to me. I am sure 

there are explanations for some, and I am sure there are not very 

good explanations for the others. I do not know really what was involved. But this is a very clear case of going to something which 

is clearly more expensive. Did Arkansas want to pay more money? 

Ms. TAVENNER. So Arkansas—Senator Rockefeller, I think there 

has been a lot of confusion, and a lot of that generated by the 

press, about actually what is going on with Arkansas as it relates 

to premium assistance. They approached us with the idea of taking 

what has historically been done in premium assistance and trying 

to apply it to the Medicaid expansion, so we do not yet have a formal proposal from Arkansas, and we have not approved anything. 

So, let me start there. 

Senator ROCKEFELLER. Oh. 

Ms. TAVENNER. The second thing that is important to know, 

though, is we did put out some Q&A—I am glad I am not using 

Q&A right now in a bad way—some clarification around what premium assistance is and is not. One of the things that we have 

35 

stressed—we have a handful of States that are interested in this 

program. Arkansas is one of them. 

So we have tried to spend our time educating them that these 

are still Medicaid beneficiaries with the same rights and protections of Medicaid. On the issue of cost effectiveness, which before 

has always been a requirement and waiver, we will look at, is there 

a band that we are willing to take a look at if in fact this would 

reduce the churn and the movement back and forth? But there 

have been no decisions made, and there has been no approval 

granted to Arkansas. 

Senator ROCKEFELLER. Well, I am glad. 

I worry also particularly about the level of health care, the quality of health care, for children under such a program. 

Ms. TAVENNER. Yes. 

Senator ROCKEFELLER. Medicaid does very well by children. 

What premium assistance does for children under a Medicaid expansion program, I know not. 

Second, on the matter of Medicaid cost sharing, you put out a 

proposed rule, which means maybe you have not done it, which actually sort of goes up against what is authorized by the Affordable 

Care Act, and I am curious about that. 

Medicare beneficiaries obviously do not have much money to 

spend, and any kind of a study has shown that you just tweak a 

little bit in this direction and you cause a whole lot of damage. So 

I am confused by it. Are you still studying it? Are you still thinking 

about it? 

Ms. TAVENNER. It is still in a proposed rule, and we are accepting 

comments. 

Senator ROCKEFELLER. When you come to making a decision, will 

they be able to opt out of that? 

Ms. TAVENNER. I am happy to sit down and discuss this with you 

and your staff. Basically, if you will remember—you will remember 

well because you were very involved in it—below 100 percent of the 

poverty level, there is a very, very small cost sharing. In fact, it 

is in statute. In the 100- to 133-percent range, there is a little more 

openness, if you will, of cost sharing, a little higher percentage. So 

that is what we discussed in the proposed rule. 

But there is no opting out if a State decides they want to go that 

route, but there are very small caps. They are like $4 or $5 a visit. 

That is something that was in the proposed rule, and we are happy 

to come sit down and go over that with the team. 

Senator ROCKEFELLER. So individuals could not opt out? 

Ms. TAVENNER. It would depend on what the State applied for, 

so we would have to look at it on a State-by-State basis. But this 

is in a proposed rule, and right now we are just getting comments 

back on, is this something that States are interested in, and, if so, 

what would they like to see? 

Senator ROCKEFELLER. Mr. Chairman, just indulge me for a second. I get a lot of answers like that, that we are looking at it, when 

I thought something had been done because the word around the 

circle is that something has been done. 

Ms. TAVENNER. I know. 

Senator ROCKEFELLER. Then you say, let me get back to you on 

that, let me come talk with your staff on that—and we have had 

36 

very, very good staff meetings as a result. I mean, you have been 

very faithful and very good on that. But it worries me, because it 

is so complicated. If it is not done right the first time, it will simply 

get worse. 

The bill has been voted on, so it is not a question of trying to 

get constituencies, like exempting the hospitals from IPAB until 

2019. I mean, maybe that was necessary to get the American Hospital Association’s support, I have no idea. I did not like it. But we 

are past that point now. 

Ms. TAVENNER. Yes, sir. 

Senator ROCKEFELLER. So a rulemaking should be made in terms 

of the best interests of the Affordable Care Act, of course taking the 

needs of the State into mind. 

Ms. TAVENNER. Yes, sir. 

Senator ROCKEFELLER. Thank you very much. 

The CHAIRMAN. Thank you, Senator. 

Senator Cantwell? 

Senator CANTWELL. Thank you, Mr. Chairman. 

Ms. Tavenner, great to see you. Thank you for our previous conversations. You know I have been very concerned about the failure 

to implement the basic health plan by 2014. I recently received a 

letter from Secretary Sebelius saying that, no later than April 15, 

2013, you would issue a time line for guidance but that the program would be implemented as the law states, as fully operational 

with States being able to receive 95 percent of the tax credit value 

in 2015. 

So first I wanted to ask you—well, in general I wanted to ask 

you about your beliefs about the basic health plan, what you think 

is valuable about it and your commitment to that 2013, April 15th 

deadline. 

Ms. TAVENNER. Yes. We are committed to the April 15th deadline, and I realize that is Monday. So we will have information to 

you then. We have started to work informally with the States on 

this issue. We certainly understand that the basic health plan is 

an important piece of the Affordable Care Act, and so you have our 

commitment to implement it by January. 

Senator CANTWELL. What do you think is important about it? 

Ms. TAVENNER. I think it gives States options for those States 

that want to try something innovative, and it is obviously a costeffective strategy as well. 

Senator CANTWELL. So you think it saves money? 

Ms. TAVENNER. I think it certainly can, but I think that is not 

the only reason for doing it. But I think that is an important reason. I think it also can provide a coordinated approach and quality 

care to patients. 

Senator CANTWELL. Managed care. Is that what you are saying? 

When you say ‘‘coordinated care’’ do you mean ‘‘managed care’’? 

Ms. TAVENNER. No, I mean coordinated care. 

Senator CANTWELL. All right. Well, we will look forward to seeing 

those guidelines then by next Monday. Just to be clear, the basic 

health plan for individuals—let us take somebody who is making 

just over $17,000 a year who applies for this, they would save 

about, let us say, $1,161 in health care costs for an individual. So 

that, versus the exchange, is a huge savings for the individual. 

37 

The Urban Institute says that if all States implemented this— 

this is a report that they did in 2011—the Federal Government 

would save $1.3 billion a year. So there is obviously a lot at stake 

for the Federal Government in the savings, and individual States— 

for example, our State would save something like $173 million per 

year. This is the Urban Institute that has done this analysis. 

So what we have accomplished here is to be able to bundle up 

that population that is just above the Medicaid rate, bundle them 

up and make them interesting, where insurers were not interested 

in them before. The success of that has been to get a better rate 

for individuals and to get a better, obviously, cost-effective rate, 

both for providers—and that is why they have participated—and a 

cost-effective rate for us, the taxpayer. 

So I will certainly look forward to seeing that on Monday and 

certainly would love to support your nomination throughout the 

process, but definitely I want to see this information. So, thank you 

very much. 

The CHAIRMAN. Thank you, Senator. 

Just a couple of questions, Ms. Tavenner. Did you read the Steven Brill piece in Time magazine? 

Ms. TAVENNER. I did. 

The CHAIRMAN. Could you tell us what you think is most valid, 

the most valid criticisms about the American health care system, 

the most valid reasons in that article as to why we spend much 

more on our health care system in our country than we should? 

What were the best points there? 

Ms. TAVENNER. Chairman Baucus, I would say I will start with 

three observations from that piece, which is obviously a lengthy 

piece, and very well done. The first one is that, obviously, the issue 

of hospital charges is a tremendous problem. It is a tremendous 

problem from the standpoint of consumers trying to figure it out, 

and it is a tremendous problem from the standpoint of hospitals 

trying to have charges be relevant to their cost. 

The second take-away I had is it kind of highlighted, and I mentioned this earlier—— 

The CHAIRMAN. But that article basically stated and/or implied 

that the charge master was a set indication of prices which may 

or may not be relevant to what the costs actually were, and a lot 

of people did not know what the heck the charge master was. 

Ms. TAVENNER. Correct. I agree. 

The second piece is that, from the insurance perspective, going 

back to what I said earlier, I think a lot of people found out that 

they thought they had adequate insurance coverage, and then, 

when they got into a costly illness, they did not. So that was the 

second take-away. 

The third take-away is really that I thought—and maybe I cannot be objective on this issue—that Medicare and the work that 

Congress and CMS have done around Medicare costs looked pretty 

strong in the article. So my take-away from that is that there is 

no relationship between charges and cost, and how do we educate 

the American public about that? It is difficult to be educated when, 

quite honestly, you have broken your arm and you are on your way 

to the emergency department. So we are actually looking at ways 

38 

we can get more transparency out to the public around the issue 

of hospital charges and costs. 

The CHAIRMAN. But I also took away from that article the concern you mentioned, that it applies more to people who do not have 

insurance, or the individual market compared with employees who 

have insurance who work for a company. 

Ms. TAVENNER. Right. 

The CHAIRMAN. But even there, the difference between the actual 

costs and the charges is still quite significant. 

Ms. TAVENNER. Yes. 

The CHAIRMAN. Even with larger employers who provide health 

insurance for employees. 

Ms. TAVENNER. And, obviously, the more we educate employers 

and beneficiaries about that, the more they will start to pay attention to it as well. 

The CHAIRMAN. How much of this is education, though? This is 

such a complex subject. If someone gets a bill from the hospital, nobody can understand it. 

Ms. TAVENNER. Right. 

The CHAIRMAN. So is there more to it than just educating the 

public? 

Ms. TAVENNER. And I think that is what we are looking at now, 

and we would like to work with you on that. 

The CHAIRMAN. What might some of those things be? 

Ms. TAVENNER. Well, I think initially for us, understanding what 

we think are within our authorities, we certainly have the ability 

to publish this information and do some comparison. We also have 

the ability to encourage States. Some States have more robust programs about the relationship between charges and costs, so those 

are a couple of areas that we could start on, working with States, 

working nationally, to get the information out. 

The CHAIRMAN. Well, I urge you to be very aggressive in this 

area, because Medicare is such a large payer. 

Ms. TAVENNER. Yes. 

The CHAIRMAN. It can influence others in the private sector, that 

is, the commercial market. 

Second, many of us met with some experts—at least we thought 

they were experts—in health care economics. They are experts. 

One suggested quite strongly—and I will not mention his name, 

but you would certainly know him if I were to mention his name— 

that CMS can do a better job and move much more quickly in moving from fee-for-service to reimbursement based on quality and outcomes. 

So I asked the question of this person, what can be done? This 

person said, well, what CMS should do is just set a deadline. Like, 

10 years from now, 90 percent of reimbursement will no longer be 

fee-for-service, but it will be based on quality, whether it is through 

the ACOs, bundled payments, or whatnot. But he felt very strongly 

that somebody needs to light a fire under CMS, that it is not moving fast enough. 

Ms. TAVENNER. Chairman Baucus, that is interesting. I hear the 

opposite concern, needless to say, from consumers and the industries, that we are moving too fast. What we are trying to do is take 

a measured approach. We certainly have made more changes, and 

39 

the Affordable Care Act gave us a lot of that authority to do so, 

to get away from fee-for-service and move more to, whether it is 

payment for quality or avoiding the readmissions. 

So I think a lot of work has gone on in the last 3 years, and I 

am proud of that work, but there is no question there is a lot more 

to do. We could probably move faster in some areas, particularly 

if you look at our current growth and spending. It has kind of 

moved some from the work that we have done around hospitals to 

more the outpatient sector, so there are some probably targeted 

things we could do in the outpatient sector that could move a little 

faster. 

But I would be very nervous about setting an arbitrary target— 

and I think I know who the economist is who set that target, because I have heard these targets placed before—and then trying to 

back into a target. I would rather that we do an incremental, aggressive strategy moving forward. 

The CHAIRMAN. I appreciate that, but sometimes you need to set 

deadlines and dates to make things happen. Even if you do not 

make the target, you can just ask yourself, well, why didn’t we? 

Maybe the target was the wrong target. Maybe we did not do a 

good enough job. But if you do not set targets, you do not set dates, 

deadlines, and benchmarks, I would just submit you are going to 

not do as well as you otherwise would. 

Ms. TAVENNER. Right. And we do set a lot of those each year, and 

I am happy to share those with you. 

The CHAIRMAN. Yes. We are going to get to that. At some point 

we are going to ask you to share those so we can work together 

to get things done. 

Ms. TAVENNER. All right. 

The CHAIRMAN. All right. 

Senator Wyden? 

Senator WYDEN. Thank you very much, Mr. Chairman. I was 

chairing a hearing, and I appreciate your courtesy. I know you are 

trying to wrap up. 

Ms. Tavenner, welcome. We have appreciated the discussions 

with you. As you know, I feel very strongly that it is time for the 

government to finally mobilize and take care of the millions and 

millions of seniors who could be taken care of at home, and we 

have not been able to reach them with good quality care, largely 

because, over the years, we have just studied and studied and studied. 

It goes back to the days, I was telling my friend Senator Rockefeller, when I was director of the Gray Panthers. We were circulating petitions for Senator Rockefeller’s efforts then to get more 

care for seniors at home. Now we finally got, with Chairman Baucus’s support, the Independence at Home model into the Affordable 

Care Act. In effect, it is giving us a chance to really move like the 

VA has in order to get people better care where they want it and 

also to save substantial sums of money. 

My understanding is that you all are beginning something called 

the Rapid Cycle Evaluation Group. That is kind of a mouthful, but 

I gather it is a fast way to really determine how to look at these 

care models, like Independence at Home, and, when they do show 

40 

that you can get better quality at less cost, they can be accelerated 

and serve to address the needs of more seniors. 

Would you support including the Independence at Home program 

in this Rapid Cycle Evaluation Group? I hope I am using the right 

terminology. 

Ms. TAVENNER. You are using the right term. And, yes, of course. 

Independence at Home has been a great project, and I too support 

more care in the home, in the proper setting. So, yes, we will use 

the same type of evaluation, and we should know something soon. 

Senator WYDEN. Very good. 

The other question I had deals with chronic care. As you know, 

Independence at Home is for the very sickest individuals, people 

who so often are home-bound. But there are millions of other seniors who essentially need chronic care. They may not face the same 

kind of challenges in terms of being home-bound, but they are 

walking around, for example, with high blood pressure, diabetes, a 

host of problems. 

It seems to me that not enough has been done to address the 

needs of the chronic care population. Of course, this is about 70 

percent of the Medicare dollar. So, when we find better ways to 

take care of the chronic care population with better quality and 

lower costs, to a great extent we fix Medicare. We are having a lot 

of debate about raising the age and all kinds of things. Here is a 

way to help people get better quality care at lower cost. 

Have you all looked at trying to come up with a kind of health 

home option for States and Medicaid programs for the chronically 

ill beneficiary? Because it seems to me that this would be another 

way, using really existing authority, that we could step up our attack in terms of improving care for this population, as Senator 

Rockefeller started years and years ago. 

Ms. TAVENNER. Yes, sir, we have. We actually have some Medicaid health home models that have started. They are small in 

number, but they are starting to catch on. We work with States to 

make that happen. Obviously in Medicare, some of the work we are 

doing in the Innovation Center is around the medical health home. 

Senator WYDEN. The time for the vote is about to expire. 

Would you look at extending this model? We are talking about 

for Medicaid to Medicare. Yes or no? 

Ms. TAVENNER. Yes, I would look at it. 

Senator WYDEN. Very good. Thank you. I am looking forward to 

supporting you, and I appreciate your help in the office. 

Senator Rockefeller, thank you for the extra time. 

Senator ROCKEFELLER [presiding]. Thank you very much, Ms. 

Tavenner, for your presence. I look forward to voting for you. 

Ms. TAVENNER. Thank you, Senator Rockefeller. 

Senator ROCKEFELLER. The hearing is adjourned. 

[Whereupon, at 12:10 p.m., the hearing was concluded.] 

(41) 

A P P E N D I X 

ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD


86938001.eps
42 


86938.002

You have the knowledge. You have the real world experience. And I believe you have proven yourself 

to officially take the reins of CMS. 

Some have pointed out that CMS has not had a confirmed administrator in several years. I am glad we 

are moving forward today to change that. With new Affordable Care Act programs coming online, it is a 

critical time to have someone with your knowledge in charge at CMS. 

We need strong leadership for successful implementation of the health insurance marketplaces and 

other key provisions of the health law. As administrator, you will have to make sure these programs are 

ready to go on day one. And you need to ensure the health care laws programs work for the people 

they are intended to serve. There will be a lot of people watching you, myself included. 

The Administration and CMS need to implement health care reform the way Congress intended. I was 

home in Montana the past two weeks and I heard from small businesses that they need more clarity 

about rules. They need more information and transparency. I will be holding the administration's feet 

to the fire to ensure this is all done correctly. 

You will also need to make sure America's health care safety net is working. Medicaid is going through a 

period of significant transformation. The program is changing everything from how income is counted, 

how care is delivered, to how eligibility determinations are made. And millions of low-income 

Americans will have access to coverage for the first time starting next year. Medicaid needs strong, 

stable leadership overseeing these changes to ensure they go smoothly. 

Health reform also vastly improved the way Medicare delivers and pays for care. Medicare continues to 

slow its spending by transforming from a system that pays for volume to one that rewards value. CMS 

needs a leader focused on payment reforms that incentivize providers to provide high quality care in a 

cost-effective manner. 

One of the highest priorities for the Finance Committee - and a responsibility I take very seriously - is 

protecting the integrity of federal health care programs by fighting fraud, waste and abuse. 

The Affordable Care Act included significant new authority and tools for CMS to protect Medicare and 

Medicaid and save taxpayer dollars. A confirmed administrator is necessary to oversee and use the new 

tools that will prevent and fight health care fraud. 

Last April, this Committee held a hearing to examine what, at that time, was the biggest Medicare fraud 

takedown in history. Thanks to tools and increased resources from the Affordable Care Act, a joint HHS 

and Justice taskforce recovered $29S million. The fraud involved 70 individuals across six Cities. 

We held that hearing to learn lessons to apply to future cases. We learned that every dollar invested to 

fight fraud, waste and abuse, generates a SOO percent return. We need the next CMS administrator to 

continue making fighting fraud a top priority. 

Your experience shows an ability to effectively administer health care programs, and also an 

appreciation for the crucial services they provide. You are known as a pragmatist with an understanding 

of the ins and outs of health care administration. 
43 


86938.003

I recently read a profile of you in the Washington Post. The article detailed an incident in the 

1980s. You were working as a nurse in the Intensive Care Unit at Johnston-Willis Hospital in Richmond, 

Virginia. 

At 2:00 a.m. a young woman in her late twenties was brought to the hospital by a rescue squad. She 

had been in a horrific car accident and crashed through the windshield of her old VW bug. 

Badly injured and having suffered massive blood loss, she was pronounced dead, but you and the 

doctors went to work anyway, trying to revive her. 

The surgeon on call told reporters that, "Marilyn was very supportive in everything ... We came up with 

a game plan, and it was right on target. We used about 60 units of blood, but the patient ultimately 

walked out of the hospital." 

Ms. Tavenner, it sounds like you are someone who doesn't give up. Your experience is real and varied, 

and it will serve you well in this position. 

CMS faces a great task and it requires a leader with the qualities General MacArthur described: 

confidence, courage and compassion. Ms. Tavenner, I believe you have ably served as the acting 

administrator, and I look forward to our discussion today. 

11## 
44 


86938.004

SUBMITTED BY SENATOR GRASSLEY 

From The Wall Street Journal 

Tip on Policy Shift Jolted Health Shares 

By Brody Mullins and Tom McGinty 

April 3, 2013 

WASHINGTON-Alerted by a private message about a potential coming change in government 

health-care policy, certain investors earlier this week sparked a frenzy of trading in some of the 

industry's largest companies. 

The last-minute action, which drove the shares sharply higher before the close of trading, is 

throwing a spotlight on the controversial "political intelligence" industry, the subject of a report 

due Thursday by the investigative arm of Congress. 

The instigator for Monday's rally was a report from a Washington-based investment-research 

firm that often ferrets out policy news and analysis for investors, according to industry experts 

and market data from that afternoon. About 15 minutes before markets closed, the firm correctly 

predicted the Obama administmtion would reverse course on big spending cuts that would have 

hit health insurers. 

The resulting stock surge is one of the most dramatic examples in recent years of how tips and 

insights from Washington's burgeoning political-intelligence business can drive trading on Wall 

Street, potentially leading to big profits for those in the know. 

Shares in several big insurers rose as much as 6% between the time the firm, Height Securities, 

made its prediction at 3:42 p.m. and when markets closed. Volume for those companies in those 

final minutes was higher than the rest of the trading day put together. The government 

announced its change in policy about 35 minutes after the emailed scoop, which was reviewed by 

The Wall Street Journal. Shares continued to rise after the opening bell the next day. 

A Height executive acknowledged that the firm's alert led to the tmding surge but said it did 

nothing wrong. 

The activity came the same week the U.S. government is expected to release its first study of the 

political-intelligence business. The report by the Government Accountability Office is set for 

Thursday release and expected to signal the starting point for a congressional push to regulate the 

industry. 

According to people familiar with it, the report finds it is often difficult to prove how marketmoving information seeps from government insiders to stock tmders. 
45 


86938.005

According to people familiar with it, the report finds it is often difficult to prove how marketmoving information seeps from govermnent insiders to stock traders. 

"When a political-intelligence firm is able to anticipate a move by the federal govermnent and 

alert investors, that raises questions," said Sen. Charles Grassley (R., Iowa), one of the 

lawmakers who want such firms to disclose more information about their activities, referring to 

Monday's trading activity. 

If political-intelligence firms are getting their information from the agency, Congress or the 

White House, "that's unfair to everyday investors," Mr. Grassley said in a written statement. 

The business of "political intelligence" isn't illegal but has come under increasing scrutiny as it 

has grown rapidly. Last year, Congress came close to approving a provision that would require 

individuals who get paid to gather govermnent information for investors to make public their 

names and clients. 

That provision was eventually stripped from a related piece of legislation designed to limit the 

possibility ofinsider trading by lawmakers and their staffs. A measure requiring the GAO study 

was approved in its place. 

The rules regarding the political-intelligence industry are murky. Under Congress's new insidertrading law, passed last year, it is now clear that govermnent officials for the most part cannot 

intentionally pass along nonpublic, market-moving information to individuals if they know the 

information will be used to make stock trades. More broadly, securities laws generally prohibit 

trading on material nonpublic information about activities at federal agencies. 

Little, however, prevents lobbyists and other Washington insiders from gathering information, 

testing a hypothesis with former govermnent officials and making informed predictions about 

coming govermnent actions. Regulators have never brought an insider-trading case against a 

political-intelligence firm, member of Congress or congressional aide. 

Monday's before-the-c1ose trading was related to the possibility of a change in how the 

govermnent pays private insurers to run Medicare health plans for seniors and the disabled. 

Nearly one in three people on Medicare are on such plans, called Medicare Advantage. 

Once a year, the agency that oversees Medicare, the Centers for Medicare and Medicaid 

Services, or CMS, adjusts the amount of money it plans to allocate for the plans for the following 

year. The agency surprised Congress and Wall Street earlier this year when it announced that it 

would likely cut rates steeply. One key payment metric was set to fall 2.2%. 

Monday was the deadline for the agency to set fmal rates for 2014. Many health-care analysts 

didn't expect changes and health-insurance stocks were mostly flat during the day. 

At 3:42 p.m., Height Securities sent a report to its Wall Street clients with a surprising 

development: CMS planned to reverse course-a major boon for insurers. 
46 


86938.006

"We now believe that a deal has been hatched to protect Medicare Advantage rates," Height 

Securities wrote in the email. "This is a drastic change in historical policy aimed to smooth the 

confirmation" of a new head of CMS. 

Height Securities is a broker dealer regulated by the Securities and Exchange Commission. One 

of its services to clients is providing research on macroeconomic and policy developments in 

Washington. 

Andrew Parmentier, managing partner with Height Securities, said its health-care analyst had 

been following the issue for some time, and that no one at the firm did anything wrong. He 

acknowledged the firm appeared to be the source of the trading spike after it picked up a rumor 

that CMS would scratch the cuts. 

"Height Securities has established specific procedures to reduce the risk that is inherent in 

gathering information from government employees for investment purposes," he said. 

CMS didn't immediately respond to a request for comment. 

After the email, trading surged in shares of health insurers. Three of the biggest gainers were 

Humana Inc., UnitedHealth Group Inc. and Aetna Inc., which rank among the biggest companies 

that provide Medicare Advantage plans. 

Volume in the three stocks exploded after 3:43 p.m., according to a Journal analysis of trade data 

provided by Telvent D1N. In the final 17 minutes of trading, the value of trades in those three 

companies' shares totaled $662.8 million, more than the entire day up to that point. 

About 30 minutes after the markets closed, CMS announced it had reversed the payment cuts it 

had previously proposed. 

Insurance stocks rallied Tuesday, too. The three insurers each gained between 3.7% and 5.5%. 

Humana shares closed with a two-day gain of 14.5%. UnitedHealth and Aetna were up 7.9% and 

6.2%, respectively. 

Humana and Aetna declined to comment. UnitedHealth said it doesn't comment on its stock 

movements. 

-Jon Kamp contributed to this article 
47 


86938007.eps

Intelligent Trading 

Investors piled into health insurers Monday after a Washington 

broker-dealer correctly predicted a positive government decision on 

Medicare payments to those firms. These stocks saw additional 

runups of between 3.7% and 5.5% on Tuesday. 

PERCENTAGE CHANGE 

HWM PREVIOUS CLOSE 

8 Humana: ... 8.6% 

UnitedHealth 

6 Group:'" 3.1% 

Aetna: ... 2.4% 

4 .. " " ...... 

2·······~~·· _~ _v j 

o --------+--

-2 ' 

; 2 p.m. 1 14 

TRADING VOLUME OF ALL 

THREE COMPANIES 

$60 million· 

50 

40···· 

'r--' 

Final rninutes of trilding 

$662.8 

million 

30 .. 3:42 p.rn.: ----, 

Em;3i1 from the 

Washington 

20 .... broker-dealer 

went out 

10· 

Source: INS) analysis of trading data provided tv Telvent DTN The Wall Street Journal 
48 


86938.008

STATEMENT OF HON. ORRIN G. HATCH, RANKING MEMBER 

U.S. SENATE COMMITTEE ON FINANCE HEARING OF APRIL 9,2013 

NOMINATION OF MARILYN B. TAVENNER TO BE CMS ADMINISTRATOR 

WASHINGTON - U.S. Senator Orrin Hatch (R-Utah), Ranking Member of the Senate Finance 

Committee, today delivered the following remarks during a Senate Finance Committee hearing 

considering the nomination of Marilyn Tavenner to serve as Administrator of the Centers for 

Medicare and Medicaid Services (CMS): 

I want to thank Chairman Baucus for convening this hearing to consider the nomination 

of Marilyn Tavenner to serve as Administrator of the Centers for Medicare and Medicaid 

Services (CMS) . 

. This is a critical agency that, for a number of reasons, has been without a canfirmed 

Administrator since the fall of 2006. 

I want ta thank Ms. Tavenner for her willingness ta serve in this capacity. 

After serving as Deputy Administrator since 2010 and Acting Administratar far well over 

a year, you know full well the challenges involved with leading an agency as large as CMS and 

that this job is an unenviable and often thankless one. 

CMS is the world's largest health insurer. It has a budget of nearly one trillion dollars 

and it processes over 1.2 billion claims a year far services provided ta some of our nation's most 

vulnerable citizens receiving Medicare and Medicaid. 

If confirmed, you will have a daunting challenge ahead af you. 

While I believe you have the qualifications to da the job, there is still much that you will 

need to do In order ta assure members of this committee that CMS is heading in the right 

direction and that your leadership will help steer the agency through the very turbulent times 

that lie ahead. 

One of the greatest challenges facing CMS in the near future is implementation of the 

federal and state-based health insurance exchanges. 

In a speech last June, you said that the health care exchanges "keep you up at night. " 

I can relate. 

They keep me up at night too, but probably not for all the same reasons. 

There are numerous obstacles and issues that will need to be addressed as CMS works to 

implement the exchanges and bring them online later this year. 
49 


86938009.eps

To date, CMS has not been able to provide satisfactory answers to a number of questions 

posed by myself, the Chairman, and other members of Congress regarding the exchanges. 

For example, we still know very little about how the exchanges will operate, what the 

key operational and implementation deadlines are, and how CMS is monitoring them to 

determine if things are on track or not. 

And, we are still waiting to see a breakdown of the budget for the federally-facilitated 

exchange. 

If you are confirmed, it is essential that you work with this committee to provide us with 

this level of detail so that we can assess the implementation of the exchanges and work with 

you to address issues as they arise. 

The costs associated with the exchanges are of critical importance to this committee as 

we are already seeing evidence that health insurance premium casts are continuing to rise and 

are projected to be, on average, 32 percent higher in the individual market. 

At the same time, the Congressional Budget Office has estimated that the number of 

people enrolled in the exchanges in 2014 will be one million lower than originally projected, and 

quotes from the Administration officials indicate that the number could be even lower. 

This is a perfect storm of unanticipated consequences that are combining to make this 

part of the so-called Affordable Core Act seem more like what I prefer to call it: The 

Un affordable Care Act. 

In addition to overseeing this massive new expansion of benefits, you will also be 

charged with helping to ensure the longevity and solvency of the existing Medicare trust fund, 

which is projected to go bankrupt in 2024. 

All told, between now and 2030, 76 million baby boomers will became eligible for 

Medicare. 

Even factoring in deaths aver that period, the program will grow from approximately 47 

million beneficiaries today to roughly 80 million in 2030. 

Maintaining the solvency of the Medicare program while continuing to provide care for 

an ever-increasing beneficiary base is going to require creative solutions and a skillful 

Administrator at the helm. 

I hope that you will be up to the challenge. Overseeing the complex infrastructure of an 

agency like CMS is nat a jab for the faint of heart. 

You will be expected to ensure that beneficiaries get the care they want from the 

providers they prefer all while making sure that the claims get paid an time, that administrative 

and overhead costs are kept low, and that Congressional mandates are fully implemented. 

I wish you the best of luck as you work to address these challenges and as you continue 

going through the confirmation process. You will need it. 

### 

86938010.eps

Online 

Phone 

Mail 

In-Person 

Supported 

by Data 

Services 

Hub 

Enroll 

(Marketplac

Enroll 

(Medicaid/CH

INFORMATION NOT RELEASABLE TOTHE PUBLIC UNLESS AUTHORIZED BY LAW· This informatIOn bas not been publicly disclo>ed and may be privileged and confidential It is for internal government 

use only and must not be disseminated, distributed, or copied to persons not authOlized to receivE' the Informat1On. Unauthoflzed disclosure may result 1fl prosecution to the full extent of the law 

86938011.eps

2012 2013 2014 

JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC JAN FEG MAR APR MAY JUN JUl AUG SE? OCT NOV DEC JAN FEB MAR APR. 

Preparation 

• Build the infrastructure and customer service channels 

Conduct consumer research 

• Attend state Oesign Reviews and provide support to states 

• Procurements • Coordinate Federal Agency Workgroup and FACA 

• Technical assistance with states 

Basic Education / Stakeholder ·Engagement 

• Train partners and stak.eholders 

• Build awareness 

• Provide information on value of insurance, health and 

financial literacy, basic program parameters 

Anticipation / Get Ready 

Local assistance 

Customer service - Navigators, website & call 

center 

Act Now / Enroll 

Open Enrollment Begins 

Major launch effort 

• Field in action 

INFORMATION NOT RELEASABLE TO THE PUBLIC UNLESS AlITHORIZED BY LAW: This information has not been publidy dlsdosed and may be privileged and confidential. It is for internal government 

use only and must not be disseminated, distributed, or copied to persons not authorized to receive the information. Unauthorized disclosure may result in prosecution to the full extent oftne law. 
52 


86938.012

The United States Senate 

Committee on Finanee 

Opening Statement of Marilyn B. Tavenner of Virginia 

Nominee to be Administrator of the Centers for Medicare and Medieaid Senriees 

Department of Health and Human Senriees 

April 9, 2013 

Cbainnan Baucus, Ranking Member Hatch, and members of the Committee, thank you for 

holding this hearing today, and for the Committee's consideration of my nomination to be 

Administrator of the Centers for Medicare & Medicaid Services (CMS). 

I'd like to start by acknowledging what we are all aware of - CMS is a large and complex 

agency; we have a large federal budget, and we provide services that are critical to our nation's 

healthcare. As such, this Committee and all of Congress have a strong interest in the 

management of our agency, as they should and as do I, and so I'd like to explain a little bit about 

myself and my background, why CMS is so important to me, how I've spent the past three years 

managing the agency, and my vision for moving us forward. 

I'll begin with my mother, Ruby Martin; I just celebrated her 88111 birthday with her down in the 

small roraI town of Fieldale, Virginia where I grew up. As a strong woman who raised four 

children, she has been and continues to be a huge inspiration in everything I do - and she relies 

on Medicare. My yOlUlgest child, Sarah, was diagnosed with diabetes at the age of 11; she too 

has been a strong inspiration for what I do - and she relies on acceSS to health insurance. I think 

that all of us know someone who relies on either tlie traditional programs we've been 
53 


86938.013

administering at CMS, or the ones we are embarking on for 2014; that makes it personal for a lot 

ofus and it underscores the fact that what we do at CMS directly affects the lives of so many. 

I have been fortunate that my career path has given me a variety of perspectives on healthcare 

that I believe uniquely position me to lead CMS. I have a clinical perspective from my early 

days as a staff nurse, a business perspective from my days as a hospital CEO and Division 

President, and a government perspective both from my work as Virginia's Secretary for Health 

and Human Resources and the previous three years at CMS. 

Simply put, CMS needs an Administrator, and one with strong operational skills. While it is 

important to have a vision for the agency, we have an $820 billion dollar business to run that a 

large amount of this country has a stake in, from beneficiaries to providers to hospitals to 

insurance companies to Congress to the administration to our CMS employees and contractors. 

Therefore, I consider it essential to my leadership role at CMS to be a partner to all of those 

stakeholders. And, I view my relationship with this Committee, and Congress as a whole, as a 

partnership. I have personally met with most of the members of this Committee and have 

appreciated the oppormnity to engage with all of you in an open dialogue. While we may not 

always share the same views, we have worked together to resolve challenges and I'd like the 

chance to continue to do so. 

My management style centers a lot around listening, pragmatism, and consistently trying to do 

what is right, even though it may not be the quickest and easiest path. 
54 


86938.014

This style has led to many achievements over the past three years, and I would like to describe 

some of the accomplishments I am proud to have managed and led. 

First, and most basic, is the daily operation of Medicare. Every workday, the fee-for-service 

Medicare program pays out more than $1 billion from some 4.64 million claims within the 

statutory requirement of 14 to 30 days. 

The Medicare program and the coverage it provides is stronger and higher quality now than ever 

before. For example, more than one third of beneficiaries are enrolled in four or five star 

Medicare Advantage plans and 30 percent of stand-alone prescription drug plans available to 

beneficiaries received a star rating of four or higher. Thirty-four million Medicare beneficiaries 

now have increased coverage of preventive services and more than 6.3 million people with 

Medicare have saved over $6.1 billion on prescription drugs. Hospital readmissions in Medicare 

have fallen dramatically in the past year, resulting in an estimated 70,000 fewer patients 

returning to the hospital with dangerous and costly complications. 

Additionally, over the course of the last few years, eMS has implemented new strategies to 

reduce waste, fraud, and abuse. For example, along with our partners, we were able to recover a 

record-high $4.2 billion from individuals trying to defraud health care programs in Fiscal Year 

(FY) 2012, and have reduced the Medicare fee-for-service payment error rate from 10.8 percent 

in FY 2009 to 8.5 percent in FY 2012. 
55 


86938.015

CMS has also prioritized modernizing the administration of the Medicaid program. We are 

moving from the paper-driven, process-intensive approach to a more streamlined way of doing 

business with states. We are also supporting innovation and flexibility for states in both the 

Medicaid program and the state-based aspects of the Affordable Care Act 

We have improved our partnerships with the groups CMS does business with by streamlining 

regulations and improving data access. We have already fInalized two regulations that will 

reduce regulatory burden - particularly on rural providers - under the President's Executive 

Order on Improving Regulation and Regulatory Rules. We believe that these rules combined 

will save at least $5 billion across the health care system over 5 years. Under my leadership, 

CMS is improving data access and sharing with strong privacy protections to develop new tools 

for policy and decision makers both within and outside CMS. CMS has already announced a 

data set that leverages almost five billion Medicare claims over a four-year period into an easyto-use data resource, so that a variety of users can analyze the data to learn more about Medicare 

trends and geographic variation. 

These past three years managing CMS have been a busy time, and I am proud of these examples 

and everything else we have been able to accomplish. 

In closing, I want to share my vision and three primary focuses for moving this agency forward: 

1. We need to operate CMS as a business and act like business partners. This means having 

an "open door policy" to work together and listen to the concerns of all the groups we 
56 


86938.016

essentially do business with: beneficiaries, providers, hospitals, members of Congress, 

states, advocacy groups, insurance companies and our own employees and contractors. 

2. We have a large responsibility in the months ahead to implement key pieces oflegislation 

to ensure all Americans have access to affordable healthcare coverage, whether it is 

through the Health Insurance Marketplace, Medicaid, original Medicare, or Medicare 

Advantage. 

3. We need to levemge the tools Congress has granted us to both reduce overall costs of 

care and improve the healthcare delivery system. These tools include new payment 

strategies connected to performance, innovative new models of care, and enhanced tools 

to combat fraud. 

Lastly, I want to thank this Committee and staff for the respect and working relationships we've 

built over the past three years. And, I want to thank you, Mr. Chairman and Senator Hatch, for 

holding this hearing and giving me the opportunity to speak before the Committee and answer 

any questions. 
57 


86938.017

SENATE FINANCE COMMITIEE 

STATEMENT OF INFORMATION REQUESTED OF NOMINEE 

A. BIOGRAPHICAL INFORMATION 

1. Name: (Include any former names used.) 

Marilyn Barbour Tavenner 

2. Position to which nominated: 

Administrator, Centers for Medicare and Medicaid Services 

3. Date of nomination: 

February 7, 2013 

4. Address: (List current residence, office, and mailing addresses.) 

Permanent Residence: 

Office Address: 

TemporarvAddress: (During the week while working in DC, effective December 15, 2011) 

5. Date and place of birth: 

May 31, 1951 

Martinsville, VA 

6. Marital status: (Include maiden name of wife or husband's name.) 
58 


86938.018

7. Names and ages of children: 

8. Education: (List secondary and higher education institutions, dates attended, degree received, 

and date degree granted.) 

Virginia Commonwealth University, Richmond, Virginia, 1983-1989 

Masters in Health Administration (MHA),1989 

Virginia Commonwealth University, Richmond, Virginia, 1981-1983 

Bachelor of Science in Nursing (BSN),1983 

Roanoke Memorial Hospital, Roanoke, Virginia, 1969·1972 

Diploma in Nursing, 1972 

Fieldale-Collinsville High School, Collinsville, VA, 1964 - 1969 

High School Diploma, 1969 

9. Employment record: (List all jobs held since college, including the title or description of job, 

name of employer, location of work, and dates of employment.) 

December 2011 - Present 

April 2010 - July 2010 

Acting Administrator 

Centers for Medicare and Medicaid Services 

(Washington, DC) 

February 2010 - Present 

Principal Deputy Administrator and Chief Operating Officer 

Centers for Medicare and Medicaid Services 

(Washington, DC) 

January 2006 - January 2010 

Secretary of Health and Human Resources for the Commonwealth of Virginia 

(Richmond, VA) 

December 2003 - December 2005 

Group President of Outpatient Services 

Hospital Corporation of America (HCA) 

(Nashville, TN) 
59 


86938.019

May 2001 - December 2003 

President, HCA Central Atlantic Division 

Hospital Corporation of America (HCA) 

(Richmond, VA) 

February 1996 - May 2001 

Richmond Market President, HCA 

Hospital Corporation of America (HCA) 

(Richmond, VA) 

March 1995 - February 1996 

CEO, Chippenham Medical Center & Johnston-Willis Hospital 

Hospital Corporation of America (HCA) 

(Richmond, VA) 

Apri/1993 - March 1995 

CEO, Johnston-Willis Hospital 

Hospital Corporation of America (HCA) 

(Richmond, VA) 

1986 - 1993 

Director of Nursing 

Johnston-Willis Hospital 

(Richmond, VA) 

1984 - 1986 

Assistant Director of Nursing 

Johnston-Willis Hospital 

(Richmond, VA) 

1981- 1984 

Nursing Supervisor 

Johnston-Willis Hospital 

(Richmond, VA) 

1978-1981 

Nursing Supervisor 

Community Memorial Hospital 

(South Hill, VA) 

1973-1978 

Staff Nurse 

Southside Regional Medical Center 

(Petersburg, VA) 
60 


86938.020

1972-1973 

Staff Nurse 

University of Virginia Medical Center 

(Charlottesville, VA) 

10. Govemment experience: (List any advisory, consultative, honorary, or other part-time service 

or positions with Federal, State or local govemments, other than those listed above.) 

Appointed by Governor Mark Warner to serve on a committee to restore the Virginia Capitol 

(approximately 2004 - 2006). 

11. Business relationships: (List all positions held as an officer, director, trustee, partner, 

proprietor, agent, representative, or consultant of any corporation, company, firm, partnership, 

other business enterprise, or educational or other institution.) 

• Virginia Hospital Association, President and Board Member (approximately 1993-2005) 

• United Way, Chairman, Health Section (during 1990s; approximately 1-3 years) 

• American Hospital Association, Board Member (approximately 2003 - 2005) 

• Chesterfield Business Council, Chairman, 1995 (Member 1993 until 2001) 

• Hospital Corporation of America, Officer (approximately 2003-2005) 

12. Memberships: (List ali memberships and offices held in professional, fratemal, scholarty, civic, 

business, charitable, and other organizations.) 

• SI. Andrews Episcopal Church School, Board of Trustees Member (approximately 2009-

2010) 

• YMCA, Board of Directors(during 1990s; approximately 1-3 years) 

• Meals on Wheels, Board of Directors(during 1990s; approximately 1-3 years) 

• Science Museum, Board of Trustees Member (during 1990s; approximately 1-3 years) 

• Midlothian Rotary, UfBtime Member (approximately 1993 until present) 

• Salisbury Country Club, Member (1993-2009) 

• Federation of American Hospitals, Member (1993-2005) 

13. Political affiliations and activities: 

a. List ali public offices for which you have been a candidate. 

None. 
61 


86938.021

b. List all memberships and offices held in and services rendered to all political parties or 

election committees during the last 10 years. 

None. 

c. Itemize all political contributions to any individual, campaign organization, political party, 

political action committee, or similar entity of $50 or more for the past 10 years. 

Eric Cantor (Cantor for Congress) 

811812003 

812012003 

611712004 

911312004 

9/11/2011 

$500 

$775 

$500 

$250 

$250 

Ward Armstrong (Armstrong for Delegate of Virginia) 

7/2312011 

Democratic Party of Virginia 

911212006 

312712007 

101212007 

212212008 

Tim Kaine for Governor 

2005 

$500 

$500 

$2500 

$1000 

$2500 

$4350 

VA Hospital & Healthcare Association 

Approx. early 2000s $2000 

John Watkins for Senate 

Approx.early 2000s $1400 

Brian Moran for Governor 

2009 $1150 

Creigh Deeds for Governor 

2009 $1000 
62 


86938.022

Kaine Inaugural Committee 

2006 $800 

Jody Wagner for Lt. Governor 

2009 $500 

Tim Kaine for Lt. Governor 

2001 $450 

Jennifer McClel/an for Delegate 

2008 $250 

ActBlue Virginia 

Approx.2008 $250 

Scott York for Loudoun County Board Chair 

Approx. 2001 $100 

James P. Moran. Jr. (Moran for Congress) 

612612007 $1000 

Mark Warner (Friends of Mark Warner) 

121512007 

6/9/2008 

7125/2008 

812612008 

Forward Together PAC 

5110/2006 

$500 

$250 

$500 

$500 

$1000 

Federation of American Hospitals PAC 

6119/2001 

5/24/2005 

6/19/2003 

51412004 

$1500 

$2500 

$1500 

$2500 
63 


86938.023

Tim Kaine (Kaine for Virginia) 

5/712011 

812812012 

$250 

$200 

George W. Bush (Bush-Chenev '04 (Primary) Inc.) 

912412003 $1000 

The Committee for the Preservation of Capitalism 

411112005 $1000 

American Hospital Association PAC 

8110/2004 $1000 

Barack Obama (Obama for America) 

911112011 

911812012 

9125/2012 

$250 

$100 

$100 

14, Honors and Awards: (List all scholarships, fellowships, honorary degrees, honorary society 

memberships, military medals, and any other special recognitions for outstanding service or 

achievement.) 

• Recipient, March of Dimes Citizen of the Year Award (2007) 

• Honorary Doctor of Humane Letters, Virginia Commonwealth University(2008) 

• American College of Healtheare Executives, Past Fellow (approximately 1995 - 2005) 

• Star Award for NurSing, Virginia Commonwealth University (approximately 2005) 

YWCA, Outstanding Woman in Business(approximately 2003) 

15, Published writings: (List the titles, publishers, and dates of all books, articles, reports, or other 

published materials you have written,) 

• 2005 Award Winner; Marilyn Tavenner, HCA President Outpatient Services Group; 

WomenWorthWatching,com; June 1, 2005 

Governor's Plan Supports Abstinence Education; By Marilyn Tavenner (Virginia Secretary 

of Health and Human Resources) Richmond Times-Dispatch Guest Columnist; December 

3,2007 
64 


86938.024

Interview with Marilyn B. Tavenner, FACHE, Virginia Secretary of Health and Human 

Resources; Health Administration Press, Foundation of the American College of Healthcare 

Executives; Volume 53, Number 1 January/February 2008 

• Should Virginia Raise its Cigarette Tax? YES or NO?; By Marilyn Tavenner (Virginia 

Secretary of Health & Human Resources) and Frank Ruff, Richmond Times-Dispatch 

Guest Columnists; January 25, 2009 

• Connecting Care Through the Clinic and Community for a Healthier America; By Howard 

Koh& Marilyn Tavenner, American Joumal of Preventive Medicine, Volume 42, Issue 6, 

June 2012 

16. Speeches: (List all formal speeches you have delivered during the past five years which are on 

topics relevant to the position for which you have been nominated. Provide the Committee 

with two copies of each fonnal speech.) 

April 16, 2010 MedAxiom Spring Member-Only Meeting Washington, DC 

May 18,2010 National Institute for Health Care Washington, DC 

Management 

June 10, 2010 Blueskies& Brickwork Annual Summit Washington, DC 

June 16, 2010 FAH Annual Policy Conference Baltimore, MD 

___ .00"" 

June 17, 2010 Greater NY Hospital Association - Health New York, NY 

Reform Implementation Meeting ----- ~.-------

June 22, 2010 Advisory Panel on Medicare Education - Washington, DC 

Meeting 

July 15,2010 Health on Wednesday Washington, DC 

Aug 5,2010 Health Affairs - Press Conference on MU Washington, DC 

-.' Aug 19, 2010 HCA - Quarterly Meeting - panel presenter Washington, DC 

with other HHS staff 

Sept 14, 2010 NYS Public Employees Federation - Annual Washington, DC 

Convention 

Sept 30, 2010 University of Medicine & Dentistry, Newark- Washington, DC 

ACA informational event 

Oct 26,2010 Geisinger Health System - Sr. Leadership Danville, PA 

Meeting 

Nov 4, 2010 C-SPAN - Washington Journal TV interview Washington, DC 

on Medicare Open Enrollment ""---- March 22, 2011 Nashville Health Care Council- Health Care Nashville, TN 

Reform Policy Series 

March 29,2011 CQ Roll Call & Thomson Reuters - This Washington, DC 

Week in Health Care Forum 

Sept 23, 2011 CJW Annual Medical Society Meeting Richmond, VA 
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Oct 21, 2011 Virginia Oral Health Coalition Richmond, VA--i 

C5Ci26, 201 T East Coast Chief Medical Officers Summit New York NY 

Nov 8, 2011 National Association of State Medicaid Washington, DC 

Directors Conference 

Dec 5,2011 Virginia Commonwealth University's Dept of Richmond, VA 

Health Administration Students & Facultv 

Jan 4, 2012 Leadership Council of Aging Organizations Washington, DC 

Jan 24,2012 CMS' Innovation Advisors Kickoff Meeting Baltimore, MD 

Jan 26,2012 Care Innovation Summit (Co-Hosted by HHS, Washington, DC 

CMS, West Wireless Health Institute, Health 

Affairs) 

Jan 30,2012 CMS' Pioneer ACO Kickoff Meeting Washington, DC 

Feb 7, 2012 Advisory Panel on Outreach & Education Washington, DC 

Feb 14, 2012 American Medical Association National Advocacy Washington, DC 

Conference 

Mar 6, 2012 Federation of American Hospital's Public Policy Washington, DC 

Conference 

Mar 16, 2012 Virginia Telehealth Network Charlottesville, VA 

April 30, 2012 National Quality Forum INational Priorities Washington, DC 

Partnership Quarterly Meeting 

May 1, 2012 CMS' Comprehensive Primary Care Initiative Washington, DC 

Kickoff Meeting 

May 7,2012 American Hospital Association Annual Washington, DC 

Membership Meeting 

May 22, 2012 American College of Emergency Physicians Washington, DC 

Annual Advocacy Meeting , 

May 22, 2012 CMS' Health Insurance Marketplace (Exchanges) Washington, DC 

Grantee Conference 

June 7, 2012 3'" National ACO Summit hosted by: Engelberg Washington, DC 

Center for Health Care Reform at Brookings and 

the Dartmouth Institute for Health Policy and 

Clinical Practice 

June 12, 2012 Alliance for Health Reform Washington, DC 

June 21, 2012 Blue Cross Blue Shield Association Washington, DC 

Sept24,2012 Center for Excellence in Aging & Geriatric Health Williamsburg, VA 
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Oct 11, 2012 American Academy of Nursing Annual Meeting Washington, DC 

Oct 22,2012 Virginia Commonwealth University's Dept of Richmond, VA 

Health Administration and School of Nursing 

Lecture 

Dec 13, 2012 Annual QualityNet Conference Baltimore, MD 

Jan 29,2013 Alliance of Community Health Plans Washington, DC 

In addition, I gave several brief presentations and remarks to groups in my role as Virginia 

Secretary of Health and Human Resources from 2006 through 2009. I have not maintained 

and do not have access to records of those presentations or remarks. 

17. Qualifications: (State what, in your opinion, qualifies you to serve in the position to which you 

have been nominated.) 

I have served as the Principal Deputy Administrator of CMS since February 2010. From April 

2010 through July 2010 and again from December 2011 to the present, I have also served as 

the Acting Administrator of CMS. My responsibilities in these roles include implementation of 

programs in Medicare, Medicaid, Program Integrity and overall agency operations. 

Since the passage of the Affordable Care Act in March2010, my additional responsibilities 

have included expanding activities to combat fraud and abuse, establishing the Center for 

Innovation, creating the Medicare Medicaid Coordination Office, and working with the Center of 

Consumer Information and Insurance Oversight on health insurance marketplaces. 

My twenty-five years at the Hospital Corporation of America (HCA) prepared me well for this 

role. Starting as a nurse, I went on to serve in hospital management and then in regional 

management of multiple hospitals/systems. My work at HCA culminated in the creation of a 

Senior Vice President position focused on outpatient services. 

Those experiences taught me not only the importance of working closely with beneficiaries and 

their families but also how to manage complex financial institutions in the health care industry. 

My overall r.esponsibilities during this period with HCA included insurance negotiations, 

recruitment of physicians and hospital personnel, developing and implementing quality 

programs, and building relationships in the community. 

In 2006, I was appOinted by Governor Tim Kaine as Secretary of Health and Human 

Resources for the Commonwealth of Virginia. In that role, I oversaw several state agencies: 

Medicaid, Mental Health, Aging, Disabilities, Public Health, Social Services, Children's 

Services, and Health Professions. Those four years gave me a great deal of experience in 

Medicare and Medicaid and in the effective and efficient use of state and federal funds to 

achieve agency goals. 

My service as Principal Deputy Administrator and Acting Administrator for CMS for the past 

three years, combined with my four years in state government leadership, twenty-five years 
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managing multiple systems in the private sector health care industry, and my clinical 

background in nursing, have given me the solid background I will need, if confirmed, to move 

CMS forward in a manner that is fiscally responsible and improves the quality of healthcare. 

B. FUTURE EMPLOYMENT RELATIONSHIPS 

1. Will you sever all connections with your present employers, business firms, associations, or 

organizations if you are confirmed by the Senate? If not, provide details. 

No. I am currently employed by CMS. 

2. Do you have any plans, commitments, or agreements to pursue outside employment, with or 

without compensation, during your service with the government? If so, provide details. 

No. 

3. Has any person or entity made a commitment or agreement to employ your services in any 

capacity after you leave government service? If so, provide details. 

No. 

4. If you are confirmed by the Senate, do you expect to serve out your full term or until the next 

Presidential election, whichever is applicable? If not, explain. 

Yes. 

C. POTENTIAL CONFLICTS OF INTEREST 

1. Indicate any investments, obligations, liabilities, or other relationships which could involve 

potential conflicts of interest in the position to which you have been nominated. 

In connection with the nomination process, I have consulted with the Office of Government 

Ethics and the Department of Health and Human Service's designated agency ethics official to 

identify potential conflicts of interest. Any potential conflicts of interest will be resolved in 

accordance with the terms of an ethics agreement that I have entered into with the 

Department's Designated Agency Ethics Official and that has been provided to this Committee. 

I am not aware of any other potential conflicts of interest. 

2. Describe any business relationship, dealing or financial transaction which you have had during 

the last 10 years, whether for yourself, on behalf of a client, or acting as an agent, that could in 

any way constitute or result in a possible conflict of interest in the position to which you have 

been nominated. 

In connection with the nomination process, I have consulted with the Office of Government 
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Ethics and the Department of Health and Human Service's designated agency ethics official to 

identify potential conflicts of interest. Any potential conflicts of interest will be resolved in 

accordance with the terms of an ethics agreement that I have entered into with the 

Department's Designated Agency Ethics Official and that has been provided to this Committee. 

I am not aware of any other potential conflicts of interest. 

3. Describe any activity during the past 10 years in which you have engaged for the purpose of 

directly or indirectly influencing the passage, defeat, or modification of any legislation or 

affecting the administration and execution of law or public policy. Activities perfonmed as an 

employee of the Federal government need not be listed. 

Since 2006, I have not engaged in any such activities outside of my state and federal 

government employment. Prior to 2006, while working at HCA, I occasionally met with 

members of state legislatures and Congress to discuss legislation related to HCA's work, 

including legislation related to the Virginia Certificate of Public Need program and payment 

reform. In order to conduct such discussions, I was registered as a lobbyist for HCA in the 

Commonwealth of Virginia through 2003. 

4. Explain how you will resolve any potential conflict of interest, including any that may be 

disclosed by your responses to the above items. (Provide the Committee with two copies of 

any trust or other agreements.) 

In connection with the nomination process, I have consulted with the Office of Government 

Ethics and the Department of Health and Human Service's designated agency ethics official to 

identify potential conflicts of interest. Any potential conflicts of interest will be resolved in 

accordance with the terms of an ethics agreement that I have entered into with the 

Department's Designated Agency Ethics Official and that has been provided to this Committee. 

I am not aware of any other potential conflicts of interest. 

5. Two copies of written opinions should be provided directly to the Committee by the designated 

agency ethics officer of the agency to which you have been nominated and by the Office of 

Government Ethics concerning potential conflicts of interest or any legal impediments to your 

serving in this position. 

6. The following information is to be provided only by nominees to the positior;Js of United States 

Trade Representative and Deputy United States Trade Representative: 

Have you ever represented, advised, or otherwise aided a foreign government or a foreign 

political organization with respect to any international trade matter? If so, provide the name of 

the foreign entity, a description of the work performed (including any work you supervised), the 

time frame of the work (e.g., March to December 1995), and the number of hours spent on the 

representation. 

NIA 
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D. LEGAL AND OTHER MATTERS 

1. Have you ever been the subject of a complaint or been investigated, disciplined, or otherwise 

cited for a breach of ethics for unprofessional conduct before any court, administrative agency, 

professional association, disciplinary committee, or other professional group? If so, provide 

details. 

No. 

2. Have you ever been investigated, arrested, charged, or held by any Federal, State, or other 

law enforcement authority for a violation of any Federal, State, county or municipal law, 

regulation, or ordinance, other than a minor traffic offense? If so, provide details. 

No. 

3. Have you ever been involved as a party in interest in any administrative agency proceeding or 

civil litigation? If so, provide details. 

With the exception of those listed below, I have not been personally involved in such 

proceedings or litigation. However, in my current and previous positions I have occasionally 

been named as a party to litigation involving my employer. None of these cases involved 

allegations of wrongdoing on my part, and I was not asked to provide testimony in any of these 

cases. 

I was the plaintiff in two divorce proceedings, in 1978 and 2008. 

It has also come to my attention that in December 2002, a case was filed relating to a property 

that my husband and I had purchased. My understanding is that this case was dismissed in 

2003 and was related to some outstanding obligations of the prior owner. I was never served 

with any papers, nor was I aware of this case, until it was brought to my attention during this 

nomination process. 

4. Have you ever been convicted (including pleas of guilty or nolo contendere) of any criminal 

violation other than a minor traffic offense? If so, provide details. 

No. 

5. Please advise the Committee of any additional information, favorable or unfavorable, which 

you feel should be considered in connection with your nomination. 

None. 

E. TESTIFYING BEFORE CONGRESS 

1. If you are confirmed by the Senate, are you willing to appear and testify before any duly 
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constituted committee of the Congress on such occasions as you may be reasonably 

requested to do so? 

Yes. 

2. If you are confirmed by the Senate, are you willing to provide such information as is requested 

by such committees? 

Yes 
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~TEDSTATESSENATE 

COMMITTEE ON FINANCE 

NOMINATION HEARING FOR MARILYN B. TAVENNER TO BE ADMINISTRATOR 

OF THE CENTERS FOR MEDICARE AND MEDICAID SERVICES 

APRIL 9,2013 

QUESTIONS FOR MARILYN TAVENNER 

Questions from Senator Baucus 

Question 1 

Arguably, the single most important provision of the ACA was the creation of health 

insurance Marketplaces (also known as Exchanges). These marketplaces, where 

individuals can compare and shop for health insurance, need to work seamlessly come 2014 

ifthe law is to be considered a success. Consumer outreach and branding are essential to 

ensuring people are aware oftheir options and able to enroll in these new Marketplaces. 

How will CMS help businesses work in the Marketplaces? Can you describe the different 

types of outreach activities are CMS conducting to ensure consumers know about the 

Marketplaces? 

Answer: CMS has been busy implementing a 4 step plan for outreach. The Preparation phase 

began last year and continues until Open Enrollment begins. This includes conducting consumer 

research and building infrastructure for our customer service channels like the call center and 

website. The Education phase began in January 2013 and goes through June. It includes building 

awareness of the new Health Insurance Marketplace, by creating content for consumers, and 

training personnel and partners. 

The Anticipation - or "Get Ready" - phase of work begins this summer. It includes additional 

details about program operations (like web and call center) as they come online, as well as 

training for navigators and other certified assisters who will help consumers through the 

enrollment process. The Enrollment phase will run from October 2013 to March 2014. It 

includes a major launch effort that will engage all media channels, as well as provide new 

customer service channels and in-person assistance. 

An additional component of our efforts to enroll Americans in the Marketplace is the Navigator 

program. Through this program, CMS will ensure that consumers who need customer service can 

receive it from trained professionals. Navigators provide unbiased and impartial information to 

consumers about health insurance, the new Health Insurance Marketplace, qualified health plans, 

and public programs including Medicaid and the Children's Health Insurance Program. 

Navigators will serve an important role of ensuring that people understand the health coverage 

options available to them. The Navigators will also provide fair and impartial assistance to 

consumers to help them review their health coverage options as they learn about the new 

Marketplace. 

In addition to Navigators, consumers will also have access to assistance through services such as 

a call center, where customer service representatives can provide referrals to the appropriate state 
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or federal agencies, or other assistance programs such as in-person assistors and certified 

application counselors. To help educate small businesses, we plan to work with regions to 

provide updates on recent rollouts and to conduct business outreach. We held meetings in March 

- in Dallas, TX and Atlanta, GA - and look forward to working with other regional offices to 

provide more specific information on the impact ofthe Affordable Care Act on businesses. 

Question 2 

The Office of the Inspector General recently released a report describing problems with 

CMS's use of surety bond requirements. CMS currently requires durable medical 

equipment (DME) suppliers to have a $50,000 surety bond for each location. CMS can then 

use these bonds to collect payment from overpaid or fraudulent providers. However, as 

noted by the OIG, CMS has not effectively utilized surety bonds to collect overpayments. 

For example, CMS has not used authority granted to it under the Affordable Care Act to 

increase the size of the surety bond for providers with a high billing volume. What are you 

doing to make sure CMS is using all available tools to fight and prevent health care fraud? 

Answer: I challenge my management team each and every day to improve the way we do 

business and I have made it clear' that combatting fraud, waste and abuse in all of our programs is 

a top priority. We are continually looking at ways our Center for Program Integrity can leverage 

the expertise of other CMS components, our contractors and law enforcement partners. 

CMS understands the importance of surety bonds as a program integrity tool and is exploring 

multiple avenues to strengthen this important tool. Since January 2012, CMS has been working 

to recover overpayment debts from Durable Medical Equipment COME) suppliers by asserting 

claims against the surety companies. As of July 2012, CMS has collected $263,000 from surety 

companies for DME supplier debts. In addition, there have been cases where DME suppliers 

have repaid overpayments voluntarily once they become aware CMS referred their debt to the 

surety company for collection. CMS believes its efforts to collect outstanding obligations from 

surety companies will continue to spur DME suppliers to satisfY their Medicare debts. 

In addition to the surety bond requirement, CMS has implemented enhanced screening 

requirements for DME suppliers. All newly enrolling DME suppliers are in the highest risk 

category for screening and are subject to unannounced site visits and criminal background 

checks. These efforts will ensure that only qualified and legitimate providers and suppliers can 

provide health care items and services to Medicare beneficiaries. We are also leveraging other 

tools to more effectively combat DME fraud, waste and abuse through the use of the Fraud 

Prevention System and DME competitive bidding. 

Question 3 

The Affordable Care Act originally envisioned every state expanding Medicaid to cover all 

non-elderly individuals with incomes up to 133 percent of poverty. But following the 

Supreme Court's ruling in July, states may choose whether to expand Medicaid. Creating 

this choice for states gave CMS considerable power, because CMS must approve or deny 

every Medicaid state plan. For example, in the past few months, CMS has decided that 

states must expand all the way to 133 percent of poverty to qualify for the increased 

FMAP, rather than allowing states to stop at some lower coverage level, like 100 percent of 

poverty. Currently, CMS is deciding whether states can buy into the Exchange through 

Medicaid premium assistance, as contemplated by Arkansas and Montana. All of the 
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decisions significantly impact the shape of Medicaid today and in the future, so they must 

be made carefully and transparently. How is CMS approaching some of these tough 

decisions? How is CMS engaging the public in the process? 

Answer: As with all regulations and guidance developed by CMS, our first obligation is to 

ensure we faithfully implement Medicaid's statutory requirements. Our guidance to states on the 

Medicaid expansion has been rooted in the statute and Congressional intent. Additionally, 

implementation ofthe Affordable Care Act has required CMS to issue new regulations and 

Medicaid demonstration waiver transparency and public input process. Through these processes, 

we have meaningfully engaged the public and have drawn from their comments to shape final 

regulations and demonstrations. CMS is also in close contact with states and has used their 

experiences, questions and suggestions to develop and inform our policy guidance. As 

implementation continues, CMS will continue to engage our stakeholders to inform future 

decisions and the need for additional guidance. 

Question 4 

The Affordable Care Act (ACA) created a number of delivery system reform 

demonstrations and established the Center for Medicare and Medicaid Innovation (CMMI) 

within CMS. These demonstrations are intended to test and evaluate new models to reduce 

Medicare and Medicaid spending while preserving or enhancing the quality of care. CMS 

is running a number of demonstrations, but has performed few in rural areas. What more 

can be done at CMS to lower the cost and improve the quality of care in rural areas? 

Answer: CMS has worked very hard to ensure that its models have geographic distribution so 

that each model is tested in variety of communities nationwide. 

The Advance Payment Accountable Care Organization (ACO) model was designed for 

physician-based and rural providers with less access to capital to help increase the participation 

in the Shared Savings Program by these groups. Currently, there are 35 ACOs participating 

under this demonstration. The application for the Advance Payment ACO was designed with 

ACO's that serve rural populations in mind. 

Additionally, there are a number of rural participants in the Federally Qualified Health Center 

(FQHC) Advanced Primary Care Practice Demonstration. This demonstration is testing 

enhanced support to FQHCs to help them become medical homes. Finally, we are also testing 

models in rural areas through the Health Care Innovation Awards: 49 of our awards (nearly half) 

serve both urban and rural areas, with 16 serving exclusively rural areas. The Health Care 

Innovation Awards are funding grants to applicants who will implement compelling new ideas to 

deliver better health, improved care and lower costs to people enrolled in Medicare, Medicaid 

and Children's Health Insurance Program (CHIP), particularly those with the highest health care 

needs. 

We are aware that some rural stakeholders have had difficulty meeting some of the requirements 

ofthe existing programs and models. To address these concerns, we are working with them to 

find new models that might be appropriate for rural communities. For example, CMS is 

currently developing the Frontier Community Health Integration Demonstration Program for 
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very small critical access hospitals with an inpatient census of less than five in sparsely 

populated states. 

Question 5 

Unlike Medicare, most delivery system decisions in Medicaid are made at the state level. 

Within broad federal parameters, states decide which services to cover and how much to 

pay. This makes it much harder to promote delivery system reforms in Medicaid than in 

Medicare, because the federal government cannot simply change payment policies to 

incentivize certain care delivery models. However, states have made a lot of progress in 

changing how care is delivered - to promote prevention and higher quality, lower cost care 

- and eMS has been helpful in the process. Unfortunately, these efforts have not gotten a 

lot of attention and Medicaid continues to be criticized as an old, broken program. Please 

highlight some of these innovations, especially as they relate to individuals with disabilities 

and kids. Please also tell us how you plan to do more to improve Medicaid. 

Answer: We believe there are a number of important opportunities to test reform models in the 

Medicaid program and we are actively working with states to undertake these initiatives. The 

Innovation Center is currently carrying out three initiatives that include State Innovation Models 

initiative, the Strong Start initiative and the Comprehensive Primary Care initiative, all of which 

allow the participation of state Medicaid programs. In addition, the Innovation Center is 

overseeing the Medicaid Emergency Psychiatric Demonstration and the Medicaid Incentives for 

the Prevention of Chronic Diseases Model. 

We have a number of initiatives and programs that focus on improving the health and healthcare 

outcomes for pediatric populations, including the Strong Start for Mothers and Newborns 

initiative. The Strong Start initiative is an Innovation Center project focusing on reducing early 

elective deliveries and reducing the rate ofpreterm births among high-risk women in Medicaid 

and CHIP. Additionally, we have released the Initial Core Set of Child Health Care Quality 

Indicators for Medicaid and CHIP, established for voluntary use by state Medicaid and CHIP 

programs, which includes a range of children's quality measures encompassing both physical 

and mental health, including chronic conditions such as asthma and diabetes. CMS is pursuing 

several other initiatives to improve the health care that children enrolled in our programs receive, 

including the Pediatric Quality Measures Program and the Pediatric Electronic Health Record 

Format to help improve the health care that children enrolled in our programs receive. 

Additionally, the Innovation Center is testing medical homes for individuals with disabilities and 

complex health conditions, high-risk chronically ill children, and individuals with breast, lung, or 

colorectal cancer. 

As we do in all areas, we continue to look for opportunities to test promising models in the 

Medicaid program and understand the importance of delivering better, more efficient care to 

Medicaid beneficiaries. 

Question 6 

Medicare currently pays physicians on a fee-for-service (FFS) basis, which encourages 

doctors to maximize the amount of services they provide. As part of efforts to reform 

physician payment and replace the Sustainable Growth Rate (SGR), some have considered 

moving physician payment away from FFS and to alternative delivery system models, 
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including accountable care organizations (ACOs), bundled payments, and medical homes. 

These models should improve physicians' incentives to provide high quality, low cost care. 

However, CMS is still testing many of these models and it may be too early to determine 

their effectiveness. What role are physicians playing in the delivery system models the 

Innovation Center is testing? How can these new models play in providing an alternative 

to physician fee-for-service payment? 

Answer: One of the goals of the Innovation Center is to create a solid business case for 

physicians to engage in quality improvement. Therefore, during the development of models, the 

Innovation Center actively involves and receives ideas from stakeholders, such as physicians, 

clinicians, and analytical experts. Since its formation, the Innovation Center has held numerous 

regional meetings, listening sessions, and open-door forums to engage thousands of stakeholders 

from around the country. In addition, stakeholders have shared more than 500 ideas for 

improving health care through the Share Your Ideas section of the Innovation Center's website. 

We have made significant progress in developing these models, and will continue to engage 

physicians, payers, employers, states, and other stakeholders in our efforts. 

We are testing a variety of models through the Innovation Center that could help provide an 

improved payments system while improving care quality, coordinating care, and reducing the 

total cost of care. Many of these models are physician led. For example, the Comprehensive 

Primary Care Initiative is a multi-payer initiative where CMS pays primary care providers 

monthly care management fees for comprehensive care management on top of their regular 

Medicare fee-for service payment. After two years, CMS offers the providers the chance to 

share in any savings they generate. Other payers, often including Medicaid, are also providing 

enhanced payment for primary care services in alignment with this program. 

Another model we are testing is an Accountable Care Organization (ACO). The development of 

ACOs is one of the Affordable Care Act's key reforms to improve the delivery of care. ACOs 

are groups of doctors and other health care providers that have agreed to work together to treat 

beneficiaries and better coordinate their care across care settings. They share - with Medicare -

a portion of savings generated from lowering the growth in health care costs while furnishing 

high quality care including providing patient-centered care. 

Working in concert with the Medicare Shared Savings Program (Shared Savings Program), 

which is a permanent part of the Medicare program, the Innovation Center is testing two 

alternative ACO models-the Pioneer and Advance Payment model ACOs-both of which can 

inform future changes to the Shared Savings Program. The Innovation Center designed the 

Pioneer ACO model for health care providers that have experience coordinating care for patients 

across care settings. This model tests alternative payment models that include increasing levels 

of financial accountability. Thirty-two organizations are testing the Pioneer ACO model. 

The Advance Payment ACO model examines whether and how pre-paying a portion of future 

shared savings could increase participation in the Shared Savings Program from entities such as 

physician-owned and rural providers with less capital. Through this ACO model, selected 

participants receive upfront and monthly payments, which they can use to make important 

investments in their care coordination infrastructure. We expect that the assistance the Advanced 
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Payment model provides to smaller and rural practices will result in expanding access to this 

coordinated care effort to more fee-for-service Medicare beneficiaries. Thirty-five ACOs are 

participating in this model. 

Finally, the Bundled Payments for Care Improvement initiative is comprised off our broadly 

defined models of care, which link payments for multiple services beneficiaries receive during an 

episode of care. We think episode-based payment has great potential to transform the delivery 

system. We are confident that these initiatives will enable the Congress to build a reformed 

physician payment system. 

Question 7 

What do you think is the most pressing issue facing the Medicare program today? What 

are your biggest concerns around Medicaid? How is CMS planning to address these 

issues? 

Answer: I have three primary focuses for moving this agency forward: 

1. We need to operate CMS as a business and act like business partners. This means having 

an "open door policy" to work together and listen to the concerns of all the groups we 

work with and work for: beneficiaries, taxpayers, providers, hospitals, members of 

Congress, states, advocacy groups, insurance companies and our own employees and 

contractors. 

2. We have a responsibility in the months ahead to implement key pieces oflegislation to 

ensure all Americans have access to affordable healthcare coverage, whether it is through 

the Health Insurance Marketplace, Medicaid, original Medicare, or Medicare Advantage. 

3. We need to leverage the tools Congress has provided us to both reduce overall costs of 

care and improve the healthcare delivery system. These tools include new payment 

strategies connected to performance, new models of care, and enhanced tools to combat 

fraud. 

Questions from Senator Hatch 

Question 1 

Regarding Agency Coordination and Inter-Departmental Implementation: It is my 

understanding that all agencies supplying information for the Federal Data Services Hub 

bave signed service level agreements. Please provide a date for when tbose agreements 

were signed by each agency and a copy of each agreement, but have yet to receive a 

response. 

Answer: In order to exchange data among federal agencies, CMS needs to establish a series of 

agreements, business processes and formatting rules and protocols to ensure that data is 

exchanged securely and that interfaces between the federal data services hub and our partner 

agencies work properly. There are multiple types and levels of agreements that work together to 

facilitate the exchange of data. These include: 
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• Service Level Agreements, which establish procedures for mutual cooperation between 

the relevant organizations; 

• Business Service Definitions, which ensure that cross agency business processes and data 

sharing are based on common understandings so that technology decisions and that 

agency systems development efforts are in-sync; 

• Interface Document Controls, which provide a common set of formats, methods, and 

protocols to effectively define the interface between the Data Services Hub and other 

partner federal organizations. 

CMS began formalizing these processes and rules with our federal partners in July of2011 and 

has refined and updated them as the work to design and build the necessary interfaces has 

progressed. 

Ouestion 2 

CCIIO has indicated is an inter-departmental working group that includes a wide range of 

Federal agencies. Please provide a list of the agencies that are members or participants of 

the inter-departmental working group. 

Answer: The purpose of the inter-departmental working group is to leverage available resources 

across the federal government to ensure that the goals of the Affordable Care Act are met. Since 

a wide variety of agencies may come into contact with uninsured individuals, they can help CMS 

reach the broadest audience possible. Below is a list of the agencies or operating divisions: 

Department of Agriculture 

Department of Commerce 

Department of Defense 

Department of Education 

Department of Health and Human Services 

Substance Abuse and Mental Health Services Administration 

Centers for Medicare & Medicaid Services 

Department of Homeland Security 

Department of Housing and Urban Development 

Department of Justice 

Department of Labor 

Department of State 

Department of Transportation 

Department of Treasury - Internal Revenue Service 

Department of Veterans Affairs 

Census Bureau 

Corporation for National and Community Service 

Environmental Protection Agency 

Executive Office of the President 

General Services Administration 

Government Accountability Office 

Office of Management and Budget 
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Office of Personnel Management 

Office of National Drug Control Policy 

Small Business Administration 

Social Security Administration 

U.S. Agency for International Development 

United States Postal Office 

Question 3 

The implementation of Exchanges requires the development of complex software and data 

systems that determine eligibility, facilitate enrollment and manage conversations with the 

States and territories. Please explain how the Administration has organized itselfto 

implement the Exchange undertaking. Specifically, who has authority to finalize decisions 

related to policy issues, for translating those decisions into operational requirements, for 

communicating those decisions to the States and for executing the necessary interfaces with 

different State systems? 

Answer: Marketplace implementation activities follow the same decision and clearance process 

as other activities relating to CMS programs where decisions are made by CMS leadership and 

then executed by various components within CMS. The work of implementing the Marketplace 

crosses several components in CMS. The Center for Consumer Insurance Information and 

Oversight (CCIIO) is responsible- for implementing many provisions of the Affordable Care Act 

through developing regulatory guidance and coordinating the business side of building systems. 

The Office of Information Services (OIS) works in collaboration with CCIIO to develop the IT 

infrastructure of the Marketplace systems. The Center for Medicaid and CHIP Services (CMCS) 

is responsible for implementing provisions ofthe ACA affecting Medicaid and CHIP programs. 

In addition, Marketplace implementation requires cross-component work with the Office of 

Grants and Management (OAGM), which is responsible for all contracts, and the Office of 

Communications (OC), which manages the public-facing component of the Marketplace. 

Question 4 

By what date do you intend to have final the development of all of the necessary software, 

the building of all necessary Federal information technology (IT) infrastructure and the 

resolution of all database connectivity issues between Federal agencies and between the 

Federal government and the States and territories? Is this timeline consistent with the 

timelines that are considered standard industry practice for an undertaking of this nature? 

Have you built in a margin of error for various types of problems that may not be 

anticipated at this time but are common in a project ofthis scope and breadth, such as 

interoperability issues or software glitches? 

Answer: By September 2013, CMS intends to have finalized the development and testing ofthe 

information technology infrastructure for the Federally-facilitated Marketplace, as well as for the 

Data Services Hub. Testing has already begun and is ongoing, which will ensure sufficient time 

to address any problems that may arise. 
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Ouestion 5 

Will the eligibility determination for cost-sharing reductions (CSR) be aligned with the 

same eligibility criteria used by the Internal Revenue Service (IRS) for advance premium 

tax credits (APTC)? How will CSR payments be administered? 

Answer: Section 1402 of the Affordable Care Act provides for the reduction of cost sharing for 

certain individuals enrolled in a QHP through a Marketplace, and section 1412 provides for the 

advance payment of these reductions to issuers. Section 1402 further provides that eligibility for 

cost-sharing reductions is tied to eligibility for the premium tax credit, and uses the same 

methodologies for household size and household income as are specified for the premium tax 

credit. As finalized in the 2014 Payment Notice (78 FR 15410), issuers will reduce cost sharing 

for essential health benefits for individuals with household incomes between 100 and 250 

percent of the Federal poverty level (FPL) who are enrolled in a silver level QHP through an 

individual market Exchange and are eligible for advance payments of the premium tax credit. 

The statute also directs issuers to eliminate cost sharing for Indians (as defined in section 4(d) of 

the Indian Self-Determination and Education Assistance Act) with a household income at or 

below 300 percent of the FPL who are enrolled in a QHP of any "metal" level (that is, bronze, 

silver, gold, or platinum) through the individual market in the Exchange. 

Ouestion 6 

How is CCllO ensuring a level playing field with qualified health plans (QHPs) and MultiState Plans (MSPs) offered under the Multi-State Plan program (MSPP) since the law 

states that the Office of Personnel and Management (OPM) has the authority to modify the 

requirements of plans as it relates to essential health benefits, actuarial value and 

numerous other authorities allowing for different plan standards? 

Answer: CCIIO is working closely with the Office of Personnel Management (OPM), which is 

charged by Section 1334 of the Affordable Care Act with implementing the Multi-State Plan 

Program (MSPP). The goal of the MSPP is to foster competition among plans in the individual 

and small group health insurance marketplaces in all states and the District of Columbia, without 

providing a competitive advantage or disadvantage to the Multi-State Plans (MSPs). 

Accordingly, OPM has established working relationships with officials in state regulatory 

agencies and Marketplaces. 

OPM has also established a dispute resolution process by which a state may request that OPM 

reconsider a determination that a state Iilw does not apply to MSPs or MSPP issuers. This 

process will offer a formal avenue for states to raise concerns about the MSPP to OPM and to 

have those concerns adjudicated. CCIIO is working closely with our colleagues at OPM to 

ensure a level playing field with QHPs in the Marketplace. 

Regarding Federally-facilitated Exchange (FFE) Infrastructure and Operations: 

Information provided by CCIIO in response to my requests for information on the FFE 
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has been insufficient. Below is a list of requests I have made that have either not been 

answered or not answered in full. Please provide the following information: 

a) An annual budget estimate to maintain the FFE, including funding from user fees, 

mandatory accounts and appropriated accounts. 

Answer: The President's FY 2014 requests $1.5 billion for costs related to Marketplaces, 

including operation of a Federally-Facilitated Marketplace in each state that does not have its 

own Marketplace by January, 2014. The President's budget also estimates that $450 million in 

user fees will be collected in FY 2014 to support these Marketplaces. 

b) An accounting of all funds obligated related to the establishment ofthe FFE and the 

Federal Data Services Hub to date. 

Answer: The total spending on the FFE and Data Services Hub through March 31, 2013 is 

below. 

FFE and Data Hub Totals 

FY2010 

FY2011 

FY2012 

FY 2013 

$ 4,224,557 

$ 112,656,217 

$ 248,380,535 

$ 28,384,919 

c) A flow chart that describes what will occur once an individual application is 

submitted and begins to go through the eligibility determination process all the way 

through to when the application is approved. 

Answer: Please see attached chart that provides an overview of the application and eligibility 

process. After consumers submit their Marketplace application, the following steps occur: 

I. The Marketplace IT system certifies Social Security Numbers and citizenship or 

immigration status by receiving data through the Data Services Hub from the Social Security 

Administration (SSA) and the Department of Homeland Security (DHS). 

(Note: The Marketplace IT system and the Data Services Hub will not store or retain the data 

used to certify the application. ) 

2. If the consumer requested help paying for health coverage, the Marketplace IT system 

certifies income data by receiving data through the Data Services Hub from the Internal Revenue 

Service (IRS), and confirms income data contained in IRS records. 

3. With this certified data, there is a preliminary eligibility determination. A consumer can 

be eligible for: 

A qualified health plan selected through the Marketplace purchased with the advanced 

premium tax credit (and will therefore answer question about available employer-sponsored 

coverage or access to other health insurance); 
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• Medicaid (and will therefore answer specific Medicaid-eligibility questions); or 

CHIP (and will therefore answer specific CHIP-eligibility questions). 

4. After the preliminary eligibility determination is made and the application is signed, a 

final eligibility determination will be displayed. The applicant will then either proceed to the 

Plan Compare section of the Marketplace or the State-specific process for Medicaid or CHIP, 

depending on the final eligibility determination. 

d) An outline ofthe operational capabilities and functions of the FFE. 

Answer: The Federally Facilitated Marketplace (FFM) system enables individuals to find and 

purchase affordable coverage. CMS designed the Federally Facilitated Marketplace for use in 

states that do not operate a State Based Marketplace. Additionally, the Federally Facilitated 

Marketplace provides those functions that are that CMS performs for all states, regardless of 

whether they operate a State Based Marketplace or are part of the Federally Facilitated 

Marketplace. 

The FFM includes the following functions and capabilities: 

• Plan Management. Accept applications from issuers to offer Qualified Health Plans (QHP) 

and evaluate the applications with support from CMS and state Departments ofInsurance 

(DOl). Display the QHPs on the Marketplace portal for consumer shopping. 

• Enrollment and Eligibility. Facilitate determination of individual eligibility for' coverage, 

including interfacing through the Data Services Hub for verifications with other federal and 

state agencies such an income, citizenship, and enrollment in other health insurance 

programs. Facilitate individual enrollment into a Qualified Health Plan. Accept and process 

employer applications for SHOP. 

• Financial Management. Support financial management processes including the calculation 

of advanced premium tax credits and cost sharing reductions; risk adjustment, reconciliation, 

risk corridors; and reinsurance. 

e) A complete list of agencies that will interact with the Federal Data Services Hub. 

Answer: SSA, Treasury/IRS, DHS, VA, OPM, DoDtrricare, Peace Corps 

f) A date for when we can expect to have the Federal Data Services Hub operational 

and available to stakeholders for testing. 

Answer: We expect the eligibility and enrollment services the Hub performs to be ready by 

October 1,2013. 

Interagency testing with federal agencies leveraging the Data Services Hub, including IRS, SSA, 

and DHS began testing: 

• We have been engaged in functional testing with IRS since November 2012 
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• We have been engaged in functional testing with SSA scheduled since February 2013 

• We have been engaged in functional testing with DHS since February 2013 

• Formalized testing that includes tracking readiness indicators began in mid-March 2013 

with a small group of states. 

CMS will be on-boarding states for testing in approximately 4 phases starting in mid-March. 

g) How CCIIO will interact with State Insurance Commissioners in FFE States that 

are not implementing the law. 

Answer: As CMS articulated in the May 2012 in the FFE guidance 

(http://www.cciio.cms.gov/resources/files/ffe-guidance-05-16-20 12.pdf), there are four guiding 

principles in the implementation of the FFE. They include: commitment to consumers, market 

parity, leveraging the traditional state role, and engagement with states and other stakeholders. 

To the greatest extent possible, CMS intends to work with states to preserve the traditional role 

and responsibilities of state insurance departments, and we will seek to harmonize policies in the 

Federally Facilitated Marketplace (FFM). For example, CMS will not duplicate as part ofits 

QHP certification process reviews conducted by state departments of insurance under state law 

and authority. CMS has been engaged in state-specific consultations with a variety of state staff, 

including but not limited to staff at state departments of insurance, to plan the QHP certification 

process and jointly identify potential interactions between state laws and processes and federal 

standards. In addition, CMS continues to provide technical assistance to state departments of 

insurance to assist these staff in preparing for the 2014 plan year. 

h) If a decision is not provided in real time, how long consumers will need to wait for 

the agencies to reconcile enrollment application information and make a final 

decision. 

Answer: We are striving to process as many applications in real time as possible. When there is 

an inconsistency between an applicant's attestation regarding a factor of eligibility and a data 

source, the Marketplace, Medicaid agency, or CHIP agency will notify the individual and 

provide him or her with a period of time to provide satisfactory documentation or otherwise 

resolve the inconsistency. This can include working with SSA or DHS, for example, to correct 

information in their records. The processes for inconsistency ate laid out in the Exchange Final 

Rule at 45 CFR 155.315(f). When an inconsistency is related to SSN, citizenship, or 

immigration status, the applicant has 90 days to resolve the inconsistency, with the possibility of 

a "good faith" extension. The statute and regulations specify that, during this period, the 

applicant will receive a determination about eligibility for enrollment in a qualified health plan, 

advanced premium tax credit (APTC), cost-sharing reduction (CSR), Medicaid, or CHIP. This is 

also the process specified in statute for inconsistencies that are related to other factors of 

eligibility for individuals who are otherwise eligible for enrollment in a QHP with or without 

APTC and CSR. For inconsistencies that are related to factors of eligibility other than SSN, 

citizenship, and immigration status for individuals who are otherwise eligible for Medicaid or 

CHIP, pre-Affordable Care Act regulations provide for a shorter resolution period, and a 

determination regarding eligibility for Medicaid or CHIP is not provided until the inconsistency 

is resolved. 
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i) How application data will be protected to ensure no unautborized access to sucb 

data. 

Answer: The privacy and security of consumer data in the Marketplace is a top priority for 

CMS and other federal and state agencies. Consumer data in the Marketplace is safeguarded and 

secured through processes, controls, and standards that will be used not only by CMS, but also 

by federal agency partners including IRS and SSA. CMS will use a layered security approach to 

protect personal information which includes presentation of a secure web interface, use of secure 

transmission protocols, and validation of identity. Once information is captured, it is then 

protected through a wide variety of security measures and counter-measures during the entire 

time the data is being used within the Marketplace. CMS also reviews its internal security 

policies and procedures each year, and updates them accordingly to ensure a comprehensive 

information security program is in place and remains relevant and responsive to today's 

emerging threats. In addition, CMS and IRS have worked together to develop additional 

safeguards to protect sensitive tax return data that will be accessed in the Marketplace. CMS is 

also making use of commercial sources of information as an additional identifY-proofing 

measure. This approach has been successful with other Federal government websites, such as 

SSA's MyAccount. 

j) How CCIIO was able to provide an example of an individual purchasing insurance 

through the FFE in 30 minutes when the exchange is not fully operational and the 

eligibility determination system has yet to be built. 

Answer: CCIIO has provided hypothetical examples, designed to illustrate how consumers will 

interact with the Marketplace starting on October 1,2013. 

Question 8 

CCIIO has identified Section 1311(d)(5)(A) ofthe Patient Protection and Affordable Care 

Act (PPACA) as the statutory authority to collect user fees and indicated that funds 

provided through the user fee will be used for "qualified health plan certification, 

administration of APTCs, cost-sharing reductions, Navigators, and other functions." 

Please provide a complete list of what CCIIO means by "other functions." 

Answer: CMS will collect a 3.5 percent of premium user fee on participating issuers in the FFE 

as specified in the final 2014 Payment Notice, available at 78 FR 15410. The user fees funds the 

following: 

• Provision of consumer assistance tools; 

• Consumer outreach and education; 

• Management and operation of a Navigator program; 

• Oversight of agents and brokers; 

• Eligibility determinations; 

• Administration of advance payments of the premium tax credit and cost-sharing reductions; 

• Enrollment processes; 

• Certification processes for QHPs (including ongoing compliance verification, recertification 

and decertification); and 
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• Administration ofa SHOP Exchange. 

Question 9 

ccrro has indicated in testimony before this Committee that States are given options 

between whether the Exchange is an active purchaser or a passive market facilitator, and 

other specific policy decisions that are left up to the State related to accreditation and 

additional QHP standards. When will CMS outline the decision of the FFE as it relates to· 

the options left up to each individual Exchange? Will the decision be made in coordination 

with each of the 26 FFE States? Will the decision be different for each of the 26 States? 

Answer: CMS outlined the FFE purchasing policy for 2014 on May 16, 2012 

(http://cciio.cms.gov/resources/files/ffe-guidance-05-16-2012.pdf). To ensure a robust QHP 

market in each state where an FFE operates, and to promote consumer choice among QHPs, in 

the first year, HHS intends to certify as a QHP any health plan that meets all certification 

standards. HHS will analyze the QHP certification process and may identify improvements or 

changes to this process, as appropriate. 

CMS released the Letter to Issuers outlining our planned approach for QHP certification, and 

how CMS will interact with states in the FFE and Partnerships. As noted in previously released 

guidance, Plan Management State Partnership Marketplaces have some flexibility in their 

application ofQHP certification standards. States in which a State Partnership Marketplace is 

operating may use CMS's planned approach to conduct QHP certification reviews and arrive at 

certification recommendations, or adopt another approach that is consistent with the federal 

standards. 

CMS does not intend to duplicate reviews of potential QHPs conducted under state authority or 

as part of a state's enforcement of 20 14 market reforms (e.g., essential health benefits and 

actuarial value standards). CMS expects that states will enforce 2014 market reforms; 

accordingly, CMS expects to rely on states' reviews of market reforms as part of its QHP 

certification process. 

CMS is committed to stakeholder consultation as we implement the Affordable Care Act. We 

have undertaken extensive stakeholder consultation during the Marketplace rule making process, 

and solicited comments on Federally Facilitated Marketplace guidance. We will enhance our 

outreach and education efforts as we move toward open enrollment in 2013 and will seek to join 

state and local partners in that effort. 

Question 10 

ccrro has indicated that they are considering contingency plans for "every eventuality." 

Please provide a comprehensive list of eventualities and contingency plans that CCIIO is 

analyzing and developing. 

Answer: We are moving forward with Marketplace implementation for open enrollment 

beginning on October 1,2013. We are also working with states to provide the maximum amount 

of flexibility to enable them to perform the functions in their Marketplaces. A number of 
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different systems will be in place by October I to accommodate open enrollment, including IT, 

call center, and plan management systems, and we are carrying out the plans we have in place to 

ensure that all of these systems are operational and that the Marketplace will be available to all 

consumers on October I. 

We are also developing mitigation strategies for IT systems as provided in the guidance 

established by the National Institute of Standards and Technology, Special Publication 800-34, 

revision I (May 2010). The document provides guidance to help personnel evaluate information 

systems and operations to determine mitigation strategy requirements and priorities. 

Question 11 

Are you currently planning to implement certain aspects of the Exchanges in a manner that 

will require non-electronic communications, such as confirming an applicant's Medicaid 

eligibility status or incarceration status with a State or confirming immigration status or 

tax credit eligibility with Federal agencies? Can you provide a list organized by State of 

which ofthe various funcfjonalities you expect to carry out on a non-electronic basis? 

Answer: The Affordable Care Act set up a system of coordinated, streamlined processes to 

determine eligibility for enrollment in a qualified health plan, advance payments of the premium 

tax credit, Medicaid, or CHIP. Marketplaces must first rely on electronic data to verify 

eligibility. CMS expects that that the majority of transactions related to eligibility determinations 

will be electronic. Specifically, with respect to incarceration status, 45 CFR 155.315(e) specifies 

that Marketplaces must verify applicant attestations regarding incarceration status by relying on 

electronic data sources; however, if an approved electronic data source is not available, the 

Marketplace must accept the applicant's attestation regarding incarceration status without further 

verification, unless it is not reasonably compatible with information from other approved data 

sources. If the attestation is not reasonably compatible with information from approved data 

sources, the Marketplace must follow the inconsistency resolution procedure provided at 45 CFR 

155.315(f), which is also the procedure for verifying information any time required electronic 

data is not available. 

Question 12 

How will manual enrollment work under the FFE model if some of the necessary activities 

to enroll an individual either cannot be accomplished in real time, require certain steps to 

verify information, or the individual chooses to not enroll through the FFE website? Who 

will be conducting manual enrollment activities? What percent of enrollees be required to 

go through a manual enrollment process? 

Answer: In addition to the dynamic Web-based system supporting eligibility determinations for 

all insurance affordability programs, a paper application will be available, and eligibility workers 

will handle exceptions and manual processing, including for paper applications and in cases 

where verification documentation is needed (e.g., immigration documents). 
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CMS will provide consumer support to help purchasers of health insurance obtain an eligibility 

determination and select a plan through the FFE. CMS will fund a Navigator grant program in 

FFE states to provide consumers with fair, unbiased help with determining if they are eligible for 

tax credits, comparing QHPs, and the application process for health coverage. Training modules 

are under development and Navigator grants will be awarded in the summer of2013. 

CMS will launch a website with chat capabilities and a 24 hour call center for the Marketplace 

that consumers can use to identify and compare QHPs, check their eligibility for affordability 

programs to help them pay for coverage, and enroll in a QHP. As with all Marketplaces, 

consumers will be able to submit an application online, over the phone, through the mail, or in 

person at certain locations. 

Question 13 

In a meeting with members of the Committee, Secretary Sebelius indicated that the Federal 

Data Services Hub is 40% complete and that a contract will soon be signed established 

eligibility determinations and enrollment processes. As you are well aware, multiple 

systems must be complete for open enrollment on Qctober 1. Taking into account all 

systems necessary for a person to access the FFE website to enrolling an individual in a 

QHP, what is the total progress to date in having the system 100 percent complete by 

October I? 

Answer: CMS is creating and integrating several systems to support the business processes 

necessary for open enrollment on October 1: the Federally Facilitated Marketplace (FFM) 

system; the Federal Data Services Hub (the Hub); and Marketplace Data Warehouse and 

Analytics (MIDAS) system. The first major component of the FFM and DSH systems, Qualified 

Health Plan (QHP) applications, is now complete. The infrastructure for the data hub has been 

completed and testing has been successful. We met our April 1 deadline for allowing issuers to 

submit QHP applications, and states have successfully used the Hub in testing. We expect each 

of these systems to be fully operational and interoperable by open enrollment on October 1. 

Question 14 

Regarding the Federal Data Services Hub: Please provide a comprehensive list of all 

categories of data that will be routed through the Federal Data Services Hub. 

Answer: The following categories of data will be routed through the Federal Data Services 

Hub: 

Identity Proofing 

SSN validation 

Income and Family Size 

Calculation of Maximum Tax Credit Amounts 

Citizenship and Immigration Status 

Enrollment in Insurance Affordability Programs and Qualified Health Plans 

Enrollment in Minimum Essential Coverage 

Incarceration Status 
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86938.047

Ouestion 15 

Please provide a comprehensive report on Federal Data Services Hub testing activities, 

including a list of all tests, the date of the test, which agency or stakeholder tested the data 

hub in each event, the results of each test and when testing will be complete. 

Answer: CMS is also working with our partners on external testing. CMS is undertaking 

'Secure Communications' and the 'FEPS and Partner' functional testing with the IRS, which has 

been ongoing since October 2012. These tests have been successful in testing the services 

between IRS and CMS. 

The following federal agencies will begin similar testing in Spring 2013: 

Department of Homeland Security (DHS) 

Internal Revenue Service (IRS) 

Office of Personnel Management (OPM) 

Peace Corps 

Social Security Administration (SSA) 

TRICARE Management Activity (TMA) 

Veterans Health Administration (VHA) 

Several State Based Marketplaces and Federally-facilitated Marketplace states will begin 'Secure 

Communications' and 'FEPS and Partner' in the spring of2013. All states will participate in the 

'Regression and End to End' Testing in August 2013. Plan issuers are scheduled to begin testing 

plan management templates in the spring of2013. 

Together, internal and external testing will validate system functionality. Performance Stress 

Testing will examine infrastructure capacity and scalability with the most active trading partners. 

Security Testing will take place in the same manner as with all CMS systems. We have 

dedicated significant resources and personnel to work with developing a robust testing 

infrastructure that will allow for testing to occur once the system is operational. 

Ouestion 16 

Regarding the QHP Approval Process: It is my understanding that all QHPs, regardless of 

the exchange model, will be submitting plan and rate information to HHS through the 

Health Insurance Oversight System (HIOS). Can you please provide information on the 

capabilities and functions ofmOS? I am also interested in how HHS will be using the 

information collected from plans through HIOS. It has been said that information will be 

used to certify health plans, but that it will also be used for "other purposes." Please 

provide a comprehensive list of all "other purposes," and the statutory authority provided 

to use data for those purposes. 
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Answer: CMS issued the final Letter to Issuers modeled after the Medicare Part D program call 

letter. In this letter, we outlined specific application requirements and the appropriate electronic 

system for QHP certification applications. 

In states with Federally-facilitated Marketplaces, an issuer can submit QHP certification 

applications in HIOS between April 1,2013 and April 30, 2013. The QHP application will 

collect both issuer-level and plan-level benefit and rate data and information, largely through 

standardized data templates. Applicants will also attest to their adherence to the regulations set 

forth in 45 CFR parts 155 and 156 and other programmatic requirements. 

In a Plan Management State Partnership Marketplace, issuers will work directly with the state to 

submit all QHP issuer application data in accordance with state guidance. Most states are using 

the SERFF system to collect and review QHP data. The state will review issuer applications for 

QHP certification for compliance with the standards described above and will provide a 

certification recommendation for each plan to CMS. In Partnership states, CMS will review and 

confirm the state's recommendations, coordinate Plan Preview, make final certification 

decisions, and load certified QHP plans on the Marketplace website for the relevant State 

Partnership Marketplace. CMS will work closely with states to coordinate this process. 

The legal authority for any specific data collection has been articulated in rule making and 

guidance. Sections 1301 and 1311 of the Affordable Care Act contain the authority for QHP 

certification. 

The Health Insurance Oversight System (HIOS) has been used for various requirements in the 

Affordable Care Act such as www.healthcare.gov web submission, the medical loss ratio reports, 

and the rate review program for example. Most issuers and states are familiar with the system 

and have already registered in HIOS. The system has multiple functional modules and has the 

capability of accepting QHP certification applications. 

Question 17 

What considerations were taken into account in determining the QHP approval timeline? 

Have you heard any concerns from stakeholders regarding the uncertain and short period 

of time between plan approvals and open enrollment? 

Answer: CMS has solicited comment on the QHP certification approval time-frame on multiple 

occasions. We have worked with issuers, states, and other stakeholders to make certain that 

consumers in the new Marketplaces have robust choice of plans. 

Most recently, CMS solicited comments on the draft Letter to Issuers. In the final Letter, issued 

on April 3, 2013, CMS expressed willingness to work with issuers to provide them with 

additional time during the resubmission window. To prepare for this first year of operation, we 

must sign QHP certification agreements in early September 2013, to display benefits and rates to 

consumers in time for open enrollment to begin on October 1, 2013. 
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Question 18 

Regarding Program Integrity: The health care Exchanges represent the largest program 

expansion in healthcare since the Federal healthcare programs were created. Given the 

vast amounts of healthcare fraud that exist under current programs, with estimates of at 

least $60 billion being lost each year to healtbcare fraud, what program integrity efforts 

has Centers for Medicare and Medicaid Services (CMS) embedded as part of the 

infrastructure oftbe FFE? Are there similar efforts being implemented at the State level 

with respect to State Exchanges or the Partnership Exchanges? Are there any 

requirements for program integrity efforts included in either the Federal Exchange or 

Partnership Exchange guidances or regulations issued to date? Is there a comprehensive 

program integrity plan in place for addressing vulnerabilities in the Federal and/or Statebased Exchanges? Which entity within CMS is coordinating those efforts? How is 

information obtained from early detection or other program integrity efforts being shared 

witbin CMS and what is the plan for developing corrective actions when those instances are 

identified? How are CMS' program integrity efforts being coordinated with the IRS? 

Answer: CMS takes seriously its responsibility to monitor the implementation of these 

programs to protect consumers, prevent fraud and abuse, and ensure the programs achieve 'their 

goals. In addition to the program integrity efforts underway within CMS, CMS and IRS are 

working on a number of key operational issues which include program integrity matters. We 

will provide further detail on the oversight of Marketplace programs in future rulemaking and 

guidance. 

In states in which a federally-facilitated Marketplace is operating, CMS will focus on compliance 

concerns that are specific to the Marketplace and will look to existing state compliance and 

enforcement efforts for issues that fall under states' regulatory and enforcement authority. 

Question 19 

A good example of where program integrity will be critical is with respect to eligibility 

determinations. For tbose States under the FFE, there are two options: 1) let tbe FFE 

make all decisions of eligibility determinations or 2) let the FFE obtain the application and 

provide an assessment to the States, and the States can make the ultimate eligibility 

assessment. However, in botb cases, my understanding is tbat tbe Exchanges will rely 

100% on tbe individual to self-disclose tbat they live in the State tbey claim to live in. 

Wbile this may improve customer experience and make subsidies more easily accessible, 

numerous Office oflnspector General (OIG) and tbe U.S. Government Accountability 

Office (GAO) reports have shown tbe fraud that occurs wben self-reporting is allowed in 

programs oftbis size. 

a) Wbat steps will eMS and/or tbe IRS implement to verify tbat tbe self-reported 

information is accurate? 

Answer: With respect to residency, the Exchange final rule, at 45 CFR 155.315 (d) details 

Marketplace procedures for verifying residency. These rules apply to all Marketplaces, 

regardless of governance model. 
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In general, Marketplaces have two options. First, a Marketplace may accept attestations that an 

individual resides in a Marketplace service area. Second, a Marketplace may examine electronic 

data sources that are available to the Marketplace for this purpose, based on evidence showing 

that such data sources are sufficiently current and accurate, and minimize administrative costs 

and burdens. 

If an Marketplace chooses to accept attestations regarding residency, the regulations provide that 

if residency information provided by an applicant is not reasonably compatible with other 

information provided by the individual or in the records of the Marketplace (e.g. information 

from last year's eligibility determination), the Marketplace must examine available data sources. 

If this data matching cannot reconcile the discrepancy, the Marketplace must notify the 

individual and request an explanation or documentation. CMS will provide additional guidance 

in the future regarding policies and procedures for data matching. 

b) If a recipient falsifies an application and receives tax credits, who will inVestigate 

that fraud? 

Answer: Under section 1411 (h) of the Affordable Care Act, the Secretary of Health and 

Human Services may impose civil penalties on any person who fails to provide correct eligibility 

information if such failure is attributable to negligence or disregard of rules and regulations. 

Question 20 

Regarding Risk Programs: The proposed regulation pertaining to the Notice of Benefit 

and Payment Parameters eliminates the option for States to operate the temporary 

reinsurance program. Why was this change made? What stakeholder comments were 

taken into account in making this determination? Why are reinsurance funds collected 

and distributed nationally? Will not this lead to lower-cost States, like Utah, subsidizing 

higher-cost States? 

Answer: The final 2014 Payment Notice (78 FR 15410) does not eliminate the option for states 

to operate the temporary reinsurance program. States still retain this option under 45 CFR § 

153.210. The Affordable Care Act directs that a transitional reinsurance program be established 

in each state to help stabilize premiums for coverage in the individual market. The reinsurance 

program is designed to alleviate the need to build into premiums the risk of enrolling individuals 

with significant unmet medical needs and to lower premiums across the country. 

Federal collections will leverage economies of scale, reducing the overall administrative costs of 

the reinsurance program. The final payment policy provides reinsurance payments in an 

efficient, fair, and accurate manner, where they are needed most, to effectively stabilize 

premiums nationally. The cost of medical care is one variable, but CMS analysis indicates that 

other variables are also important. The extent to which issuers receive payments under the 

reinsurance program depends on their actual claims experience in plan year 2014. 
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Question 21 

Regarding State Coordination: In public statements and guidance documents, CMS has 

said that It will try to harmonize Exchange policy with existing State programs and laws 

whenever possible. However, with 26 States relying on the FFE, limitations on resources 

and time running out, it would seem difficult for the agency to tailor an Exchange to meet 

each State's unique insurance market needs. What are the specific details ofthe plan to 

harmonize these laws and regUlations in States under the FFE model? What are the 

necessary steps to ensure FFEs will be available to consumers in the 26 States as it relates 

to harmonizing State laws and regulations? 

Answer: CMS has been coordinating plan management activities with states, including QHP 

certification, monitoring and oversight, account management, and recertification. States. that are 

enforcing market-wide standards that are part ofQHP certification will be able to submit their 

findings for the Federally Facilitated Marketplace for use in its QHP certification reviews; the 

Federally Facilitated Marketplace does not intend to duplicate those reviews. The Federally 

Facilitated Marketplace will work with the state to review the state's recommendation and to 

provide a coordinated application process. 

CMS has worked with the National Association of Insurance Commissioners to standardize the 

collection of data needed to certify qualified health plans. We have also already released the 

data elements that insurance plans will need to integrate into this application. CMS will continue 

to work with states to ensure coordination with state eligibility processes. 

The Marketplace developed by CMS will be adapted to meet the needs of any state that chooses 

to utilize this model. The Federally Facilitated Marketplace will support the following operation 

functions; Eligibility and Enrollment, Plan Management, Financial Management, and Consumer 

Support. 

CMS is already testing IT data information exchange functions and expects to complete te~ting 

in the spring of2013. Consumer call centers are on track to open in the summer of2013. 

CMS is committed to stakeholder consultation as we implement the Affordable Care Act. We 

have undertaken extensive stakeholder consultation during the Marketplace rule making process, 

and solicited comments on FFE guidance. We have also begun consultation specifically in the 

Federally Facilitated Marketplace and partnership states through our regional offices. We will 

enhance our outreach and education efforts as we move toward open enrollment in 2013 and will 

seek to join state and local partners in that effort. 

Question 22 

It is anticipated that plans will begin submitting QHP applications starting March 28th for 

approval either through the National Association ofInsurance Commissioners' (NAIC) 

System for Electronic Rate and Form Filing (SERFF) and through HHS's Health 

Insurance Oversight System (HIOS). Can you please explain the purpose behind plans 

snbmitting QHPs to both systems in States with State-based Exchanges? Is this not 

duplicative, unnecessary, contrary to the goals of limiting administrative costs and an 

encroachment of State authority to regulation insurance in the State? 
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Answer: CMS issued the final Letter to Issuers modeled after the Medicare Part D program call 

letter. In this letter, we outlined specific application requirements and the appropriate electronic 

system for QHP certification applications. 

In states with Federally-facilitated Marketplaces, an issuer can submit QHP certification 

applications in HIOS between April 1, 2013 and April 30, 2013. The QHP application will 

collect both issuer-level and plan-level benefit and rate data and information, largely through 

standardized data templates. Applicants will also be required to attest to their adherence to the 

regulations set forth in 45 CFR parts 155 and 156 and other programmatic requirements. 

In a Plan Management State Partnership Marketplace, issuers will work directly with the state to 

submit all QHP issuer application data in accordance with state guidance. Most states are using 

the SERFF system to collect and review QHP data. The state will review issuer applications for 

QHP certification for compliance with the applicable standards and will provide a certification 

recommendation for each plan to CMS. CMS will review and confirm the state's 

recommendations, coordinate the plan preview period during which issuers may review their 

QHP data before it becomes public, make final certification decisions, and load certified QHP 

plans on the Marketplace website for the relevant State Partnership Marketplace. CMS will 

work closely with states in State Partnership Marketplace to coordinate this process. 

Question 23 

Regarding Application Counselors: The latest proposed regulation creates a new category 

of assisters called "Application Counselors." The proposed regulation says these assisters 

could be in hospitals or other provider offices. Can you shed more light on what role these 

Application Counselors will play? What would prevent such a counselor in a hospital from 

steering people to plans that benefit the hospital? 

Answer: We believe that making such assistance available for the Marketplaces will be critical 

to achieving a high rate of enrollment. Accordingly, the proposed regulation seeks to ensure that 

application counselors will also be available in the Marketplace to help individuals and 

employees apply for enrollment in Marketplace coverage and for insurance affordability 

programs. Under the proposed regulation, certified application counselors would provide help to 

consumers in applying for health insurance in the Marketplace beginning on October 1,2013. 

These counselors would serve as resources that individuals could tum to for help with filling out 

their applications and exploring their coverage options. Many organizations, like hospitals, 

community health centers and other social service organizations, already employ individuals in a 

similar capacity. These individuals, for example, may assist in patient registration, with the 

objective of determining eligibility for medical coverage under the terms of various private and 

public health care and financial assistance programs including Medicaid and Medicare to 

facilitate patient care. 

The proposed rule also would requires that these counselors act in the best interest of the 

consumer, and mandates that they will would be trained regarding qualified health plan options, 
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insurance affordability programs, eligibility, and benefits rules and regulations governing all 

insurance affordability programs operated in the state, as implemented in the state, prior to 

providing assistance. CMS is currently developing this training, and it will begin this summer. 

Question 24 

Regarding Qutreach and Education: What source of funding provided under PPACA or 

other laws will be used to fund outreach and education activities? What is the total budget 

for outreach and education activities? Will CMS fund outreach and education activities for 

all states, or just those under the FFE model? 

Answer: The President's Budget for FY 2014 requests $554 million for Marketplace-related 

Consumer Information and Outreach. We expect that other forms of consumer engagement, 

such as traditional and social media, will promote awareness of new insurance options across the 

nation. This funding will primarily support efforts in the Federally-facilitated and Partnership 

Marketplaces such as the Marketplace Contact Center and Navigator grants. 

Question 25 

Are you developing a communications plan to guide the public and manage expectations 

prior to the October 1 or January 1 deadline for enrollment and coverage? If so, please 

provide a copy of the plan with the Committee? 

Answer: CMS is developing and implementing an outreach and education plan to help ensure 

that Americans have access to quality, affordable health insurance. The plan seeks to raise 

awareness of the Marketplace as the official, objective source for finding affordable health 

coverage. A time line describing the plan is attached. 

Question 26 

Regarding Pre-existing Conditions Insurance Plan (pCIP) program: The President's 

budget indicates that the PCIP program a total 0($312 million in total unobligated 

balances but $937 million in total outlays. Given the flexibility under the law to address 

budget shortfalls, what plans does CMS have in place to ensure the program is funded 

through December 31, 2014? 

Answer: CMS is aggressively managing costs in the federal PClP program and has taken a 

variety of steps to ensure that the limited funds provided by the Affordable Care Act are applied 

efficiently in funding patient care and program administration These include a change in 

provider networks used by the federally-administered PClP, reducing both its negotiated and outof-network payment rate for providers; negotiation of additional discounts on reimbursement 

rates with targeted hospitals that were treating a disproportionate number of PClP enrollees; 

limiting the specialty drug benefit to provide coverage only if the specialty drug is dispensed by 

an in-network pharmacy, and consolidation of three benefit plan options into one, increasing the 

maximum out-of-pocket limit from $4,000 to $6,250 for in-network services. In February and 

March 2013, the PClP program suspended enrollment to manage costs in the last year of the 
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program as another step to ensure that current enrollees will have coverage through December 

31,2013. 

Ouestion 27 

Regarding Enrollment Process: Please explain how the Federal Data Services Hub, 

Exchanges (of any type) and Medicaid eligibility system will interact. 

Answer: When consumers access the Marketplace and fill out the single, streamlined 

application, the information they provide, including income information, will, via the Hub, be 

verified against other sources of information, including the IRS, DHS, and SSA. The Federallyfacilitated Marketplace will also use the Hub to connect to state Medicaid agencies to check 

whether an applicant is already enrolled in Medicaid. In the Hub, data will be routed through but 

not stored in the system, while ensuring that the data flows where it is needed. The Hub will 

access only the information needed to determine individual eligibility and will not be involved in 

the selection or certification of health plans. CMS has completed the Hub's technical design, has 

almost completed the services related to Federal and state agency interactions, and has already 

begun testing the Hub across agencies. For the Federally-facilitated Marketplace, when an 

applicant is assessed or determined eligible for Medicaid, the Hub will be used to transfer the 

applicant's information to the state Medicaid agency to complete the process. 

Ouestion28 

Regarding Data Security and Privacy: CMS has indicated that information provided in 

the streamlined application will be subject to strong privacy and security protections, that 

IRS data used to verify eligibility through the Federal Data Services Hub will be used in a 

manner consistent with existing IRS safeguards and that the agency has completed the 

framework for security across agencies to establish protocols for connectivity. Could you 

please elaborate on how information provided through an application, to the IRS for 

eligibility determinations and as other data shared between agencies will be protected from 

unauthorized uses? 

Answer: The privacy and security of consumer data is a top priority for CMS and other federal 

and state agencies. Consumer data is safeguarded and secured through processes, controls, and 

standards that will be used not only by CMS, but also by federal agency partners including IRS 

and SSA. CMS will use a layered security approach to protect personal information. This 

layered approach includes presentation of a secure web interface, use of secure transmission 

protocols, and validation of identity. Personal information is protected through using a variety of 

security measures and counter-measures during while the data is being used within the Hub. 

CMS also reviews its internal security policies and procedures each year, and updates them to 

ensure a comprehensive information security program is in place and remains relevant and 

responsive to today's emerging threats. In addition, CMS and IRS have worked together to 

develop additional safeguards to protect sensitive tax return data that will be accessed through 

the Hub. CMS is also making use of commercial sources of information as an additional 

identify-proofing measure. This approach has been successful with other Federal government 

websites, such as SSA's MyAccount. 
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Question 29 

Regarding Navigators: CMS recently published a $54 million funding announcement to 

eligible self-employed individuals and private and public entities applying to serve as 

Navigators. How many Navigators did CMS estimate will be trained in determining the 

amount to transfer from the Prevention and Public Health Fund to the Navigator 

program? What is the target number of Navigators needed to enroll the estimated 7 

million new enrollees in exchanges? What is the target Navigator to enrollee ratio and how 

will the Administration ensure that training continue to meet the demand as the number of 

exchange-enrollees increases over time? 

Answer: Navigators are charged with providing impartial education and guidance to consumers 

about the public and private health insurance options available to them in the Marketplaces. 

Navigators will playa significant role in enrolling Americans in coverage and in ensuring that all 

consumers who need customer service can receive it from trained professionals. 

The Funding Opportunity Announcement (FOA) is available for self-employed individuals, as 

well as public and private organizations that are interested in becoming Navigators in the 

federally facilitated and state partnership Marketplaces. At this time CMS has not estimated the 

total number of Navigator grantees and applicants or the number of that will receive funding 

through the FOA, although the regulation governing the Navigator program, 45 CFR 155.210, 

requires that at least two types of entities serve as Navigators in each Marketplace service area, 

and that at least one of those entities be a community and consumer-focused nonprofit 

CMS apportioned $54 million for the FOA based on the total number of uninsured (under age 

65) legal residents in each state with a Federally-facilitated Marketplace/State Partnership 

Marketplace, with a minimum award of$600,000 available per Federally-facilitated 

Marketplace/State Partnership Exchange service area. We invite public comments on the number 

of Navigator grantees that would be appropriate, as well as on the number of consumers expected 

to receive assistance in a particular state. 

In addition to Navigators, consumers will have access to assistance through services such as a 

call center, where customer service representatives can provide referrals to the appropriate state 

or federal agencies, or other forms of assistance, including certified application counselors and 

agents and brokers. 

Question 30 

Durable Medical Equipment (DME) Guidance re: Minimum lifetime requirement: In 

November 2011, CMS issued a Final Rule on the Medicare Program which impacted DME. 

This regulation, revised the definition ofDME to add a 3-year "minimum lifetime 

requirement" (MLR). As a result, items classified as DME after January 1,2012, must 

have an expected life of at least three years. In subsequent communications with Congress, 

you wrote that CMS will be providing additional guidance "in the near future." To this 

date, CMS has not yet provided guidance sought by members of the Finance of the 

Committee on how it will apply the Final Rule's 3-year MLR requirement to multi-
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component devices (which may have both durable and non-durable components). When 

will CMS issue a proposed rule or guidance on this important issue in order to provide 

further direction and consistency to innovators? 

Answer: CMS strives to promote innovation and competition while maintaining beneficiaries' 

access to critical items and services. CMS is taking a thoughtful and deliberate approach with 

respect to this important matter, and will be issuing more detailed guidance on this policy. We 

hope to move forward as soon as we can. I am happy to work with you to address any concerns 

regarding a particular product in development that may be impacted, and CMS is happy to 

discuss that specific product with your constituent. 

Question 31 

Regarding the use of technology in new provider payment arrangements: The Accountable 

Care Organization pilot program and other bundling initiatives being deployed by CMS 

use "benchmarks" that are determined using historical data. Due to this lag, they could 

penalize doctors that use cutting edge treatments and technologies that are more clinically 

appropriate for the patient or bring more value and better care outcomes over the longer 

term. Is there a comparable danger that ACOs and bundling will create incentives to stint 

on care? Are there technical modifications that can be made to the program that will 

neutralize the disincentives providers face when they want to use breakthrough treatments 

and technologies that are more expensive than the standard of care in the short run but will 

bring higher value to patients in the long term? Could time-limited technical adjustments 

to benchmarks be permitted to ensure that providers are not penalized by providing 

patient care with new technologies? 

Answer: Medicare accountable care organizations (ACOs) and organizations participating in 

the Bundled Payments for Care Improvement initiative must meet rigorous standards for care 

quality and beneficiary satisfaction. To assess the quality of care furnished by the organizations 

and safeguard against stinting of care, CMS has created a vigorous monitoring program that 

includes asking beneficiaries about their experiences as well as measurement of the quality 

provided by participating organizations. ACOs and organizations participating in the Bundled 

Payments for Care Improvement initiative must achieve certain quality thresholds in order to 

continue participating in the initiatives. 

Beneficiaries retain their original Medicare benefits and may choose to receive care from 

providers not participating in the initiative. Nothing in the initiatives will in any way restrict the 

ability of beneficiaries to access care from participating or non-participating providers, nor wiII it 

restrict the ability of participating ACOs to offer the latest medical technologies. 

We will continue to carefully assess the progress of our ACO program and we welcome your 

continued input on how we can improve the program. 

Question 32 

Regarding Molecular Diagnostic Coverage and Payment: Medicare contractors have been 

establishing payment rates for 2013, but we understand that the methodology used by the 

contractors lacks transparency. What steps is CMS taking to provide greater clarity 
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regarding the methodology used to establish specific payment rates, such that interested 

stakeholders are able to clearly understand how the rate was derived? Is there a way to 

allow stakeholders to participate in this process, particularly when there is disagreement 

regarding the level of payment that has been established? If not, what steps will CMS take 

to provide a public process for stakeholders? 

Answer: CMS uses CPT codes developed by the AMA in establishing payment rates for 

Medicare services. The AMA CPT Panel developed 114 new single CPT codes to replace 

multiple "stacking codes" (based on component steps) that were previously used to bill for 

molecular pathology tests. The old "stacking codes" were deleted at the end of2012 and are no 

longer available. 

While the new codes were issued in 2012, CMS decided to delay their use for a year to carefully 

consider whether they should be paid under the physician fee schedule (as pathologists preferred) 

or the clinical laboratory fee schedule (as preferred by laboratories). After requesting comments 

as part of the 2013 physician fee schedule rule, we decided to keep them on the lab fee schedule, 

with an additional payment available for interpretation by a pathologist. New rates for these tests 

(generally genetic tests) are being established through the "gap-filling" process, which enables 

the Medicare contractors to collect a wide range of relevant data. While this process is 

underway, the tests are being paid interim rates set by the contractors, which may reflect invoice 

amounts, old "stacking code" prices, or case-by-case determinations by the contractor medical 

directors. 

The local gap-fill prices will be submitted to CMS this month and will be open to public 

comment for 60 days. CMS will post final prices in September, at which point stakeholders may 

request reconsideration, with supporting evidence. The 2014 fee schedule, including national 

limitation amounts for the new test codes, will be issued in November. 

Ouestion 33 

Regar.ding Access to Diagnostic Imaging Services: According to data compiled by the Food 

& Drug Administration in 2013, there are now 200 fewer mammography facilities and 

nearly 1,000 fewer mammography scanners available to American women than in 2007, 

when several major Medicare imaging payment reductions were implemented. In addition, 

data from the FDA suggests that mammography imaging facilities that remained open have 

cut back the scope of services offered in order to remain in practice and combat lost 

revenue that resulted from reductions in payment rates. Centers for Disease Control and 

Prevention data also indicates that mammography screening rates have fallen slightly over 

the 2003 through 2010 period, which could attributed to a variety of causes, including 

Medicare payment policies. Is CMS monitoring the impact that Medicare payment rate 

cuts may be having on beneficiary access to important diagnostic imaging services, like 

mammography? If not, will CMS take steps to ensure we are monitoring access to these 

services for beneficiaries? 
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Answer: Medicare covers screening mammograms to check for breast cancer once every 12 

months for all women with Medicare age 40 and older. Beneficiaries pay nothing for the test if 

the doctor or other qualified health care provider accepts assignment. 

We believe access to these preventive services is important and we are monitoring access to care. 

Question 34 

Regarding Compounded Drugs: As we've all become aware in recent months, 

compounded drugs are commonly used, but can pose serious health risks if Good 

Manufacturing Procedures are not followed. Since a marked percentage of all hospital 

intravenous medications and those administered in the physicians' office are compounded 

or repackaged, could you elaborate on what CMS is doing to protect beneficiaries from 

risk? The CMS Benefit Policy Manual states that if FDA has determined that a drug is 

compounded in violation of the Federal Food, Drug and Cosmetic Act (FFDCA), that they 

do not meet the approval req uirements of the Medicare program and th us not covered. 

How will CMS ensure appropriate oversight of reimbursement for these types of drugs? 

Answer: We share your concern for the safety of drugs used by Medicare beneficiaries. We 

will continue to work with the FDA to ensure the denial of Medicare payments for compounded 

drugs that violate the FFDCA. 

With the exception of compounded drugs and some repackaged items, the majority of drugs paid 

under Part B are commercially available, FDA approved products that are purchased by a 

physician's office, administered in the office or clinic setting, and billed by the physician or other 

provider. 

Question 35 

Regarding Short Cycle Dispensing in Long-Term Care (LTC) Facilities: Under the 

Affordable Care Act, a provision was included to require so-called "short-cycling" of 

certain high-cost drugs in LTC facilities in order to eliminate waste. The CMS final rule 

only required short-cycle dispensing of brand name drugs. It did not require short-cycle 

dispensing of low cost generics, however, because the added cost of extra dispensing 

outweighed the cost benefit of reducing the wastage of cheap generic drugs. It seems 

unintentional that the final rule's definition of a "brand name" drug is being interpreted 

by some plans to require short-cycle dispensing of select generic drugs that were approved 

prior to 1984, before the creation ofthe ANDA process for approving generics, and thus, do 

not have an ANDA number. Isn't this interpretation of the policy, requiring short-cycle 

dispensing for the oldest and least expensive generics, inconsistent with the goal of saving 

costs for the Medicare program? What is CMS' justification for the policy? Are you open 

to a reconsideration of this policy for this subset of drugs? 

Answer: Part D regulations at 42 CFR 423.154 require 14-day-or-less dispensing cycles in the 

LTC setting for oral solid brand name drugs. In order to simplify administration of these 

requirements for Part D sponsors, CMS adopted in regulation the same definition of brand name 

drugs and generic drugs at 42 CFR 423.4 that sponsors are required to use when administering 
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other program requirements, including the statutory Low Income Subsidy copayments. We 

recognize the distinction between brand name drugs approved as NDAs and generics that were 

approved before the creation of the ANDA process. However, any such reconsideration of the 

regulatory definition of brand name drugs and generics would require notice and comment 

rulemaking. 

Question 36 

Regarding Physician Quality Reporting Feedback: The success of quality initiatives to 

influence physician behavior depends largely on the timeliness ofthe feedback they receive 

from CMS. Yet the data from Physician Quality Reporting System isn't made available to 

physicians for nearly two years after the fact. What is CMS' plan to address the data lag 

that currently exists from CMS to physicians? Has CMS determined an appropriate 

timeline for feedback that provides for an equitable determination of physician's quality 

performance? When will CMS provide public comment on a plan to disseminate quality 

information? 

Answer: Section 609(b) of the American Taxpayer Relief Act of 20 12 requires the Secretary to 

develop a strategy to provide providers with data on quality performance and utilization in a 

timely manner. The provision requires the Secretary to take into account specified items such as 

risk adjustment methods and the frequency of providing data so that the data is effective in 

improving provider performance. The provision also requires the Secretary to develop an 

interim strategy not later than one year after the date of enactment of the American Taxpayer 

Relief Act of2012. Pursuant to Section 609(b), the strategy must take into account feedback 

from providers and must be updated not later than 18 months after the date of enactment. We 

will address these questions as we develop the interim and updated strategy as required by the 

law. In addition, the Administration has proposed in our FY 2014 Budget to allow for greater 

dissemination of medical claims data directly to physicians through entities participating in the 

Medicare Data Sharing for Performance Improvement program. 

Question 37 

Regarding Worker Compensation Set-Asides: During the confirmation of William Schultz, 

the department's General Counsel, in response to a question about well-document 

problems with the CMS review of Worker Compensation Medical Set-aside Accounts 

(WCMSA), he indicated your agency is taking steps to become more transparent, is 

considering the adoption of an appeals process in order to ensure fairness and consistency, 

and is reviewing whether the use of evidence-based guidelines should be expanded. 

Unfortunately, since his answers were submitted, the agency released some documents that 

have been used to assess WDMSA submissions. The issue remains unaddressed. Instead, 

according to some observers, it only highlights the inconsistency and deficiency ofthe 

review process for WCMSAs, which continues to put the Medicare Trust fund and the 

interests of beneficiaries at risk. What additional steps will CMS take to ensure that 1) the 

review program is operated in a transparent and consistent fashion; 2) utilizes scientific, 

evidenced-based guidelines when reviewing submissions; and 3) establishes an appeals 

process in order to, as Mr. Schultz suggested, "ensure fairness and consistency"? 
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Answer: 

On June 15,2012, we published an Advance Notice of Proposed Rulemaking (ANPRM) to 

solicit public input on options that could be used to address future medical expenses related to an 

accident or injury for which there is third party liability, including in workers' compensation 

cases. We received over 100 comments. As noted in our ANPRM, we anticipate promulgating 

rules on these issues in the near future, consistent with the SMART Act that was enacted in 

January. 

We are always striving to improve the MSP program so that we operate in a transparent and 

consistent manner. In the past, we have heard from stakeholders that we should offer additional 

information about the operation of the MSP program, and we are working hard to provide 

guidance to help educate stakeholders about the operation of the MSP program. While the 

informal guidance we recently released does not yet address all of the concerns we have received 

regarding WCMSAs, it does list the criteria we will consider in making decisions about a 

particular WCMSA as well as the procedure for receiving and reviewing WCMSAs. We are 

considering the feedback received on the program as we consider potential improvements. 

Question 38 

Regarding Diagnostic Laboratory Payment Reform: The President's Budget has proposed 

additional cuts to the clinical lab fee schedule. Last year, CMS initiated re-pricing for 

several molecular diagnostics. Due to the antiquated nature of the fee schedule and the 

increased development of newer advanced diagnostics, the existing coverage and 

reimbursement platform used by CMS is in need of reform. What is CMS doing to 

modernize coverage and payment policies to appropriately reimburse for quality tests and 

create a stable foundation for encouraging the development of new technologies that 

improve quality and reduce costs? What new legislative authority or legislative guidelines 

does CMS need to achieve necessary reforms? 

Answer: We agree that the current statutory procedures and formulas governing clinical 

laboratory payment fail to provide the flexibility needed to modernize payment to reflect changes 

in laboratory practice, pricing, and technology. Toward that end, the President's FY 2014 budget 

includes a legislative proposal to provide the Secretary the authority to adjust payment rates 

under the Clinical Laboratory Fee Schedule in a budget-neutral manner, beginning in CY 2014. 

We welcome ideas on how we can improve our clinical laboratory payment system. 

Question 39 

Regarding Part B Drug Reimbursement: The reduction of reimbursement for physicianadministered drugs that will occur due to sequestration has led to articles highlighting the 

cost of cancer drugs and the impact on community oncology practices. Market participants 

have suggested that many patients have been redirected from the clinic to the more 

expensive hospital outpatient setting. Does CMS have data available that will confirm that 

this transfer of patient care is occurring? If not, what is CMS prepared to do to make this 

data available to Congress? 

Answer: We share your concern about the potential adverse impacts of the payment cuts 

mandated by sequestration, both with regard to Medicare payments, and more broadly across all 
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government programs. That is why the Administration has indicated that we stand ready to work 

with Congress on balanced approaches to replace sequestration to avoid its adverse impacts. 

CMS is committed to preserving Medicare beneficiaries' access to quality health care. We will 

continue to monitor the impact of provider payment cuts mandated under the Budget Control Act 

to assess their impact on Medicare beneficiaries and we are happy to share our results. 

Question 40 

Regarding CMS Coverage of Alzheimer's Diagnostics: An FDA-approved new diagnostic 

for helping detect if a patient has Alzheimer's is being considered by CMS for national 

coverage under Medicare (NCD). The Alzheimer's association and thought leaders in that 

community have endorsed the technology and have urged CMS to institute coverage 

without coverage with evidence development. The Alzheimer association and clinical 

community have adopted appropriate use criteria for the diagnostic to assure appropriate 

utilization. However, CMS has also discussed the potential additional use of coverage with 

evidence development (CED) for this diagnostic test. Can you provide an update on this 

NCD? Why is the appropriate use criterion developed by the medical community 

insufficient to protect from over utilization of this diagnostic? What will CMS do to ensure 

this diagnostic is available to the Medicare patients in need? 

Answer: CMS is actively engaged in reviewing new technology to ensure timely access to 

innovation for our beneficiaries. In October 2012, we opened a National Coverage Analysis (the 

first step in the National Coverage Determination (NCD) process) to reconsider a prior NCD on 

the use of Positron Emission Tomography (PET) scans, which provided national coverage of 

PET using only specified radioisotopes for certain indications, and conditional coverage for 

additional uses under the process known as Coverage with Evidence Development (CED). 

Reconsideration of this NCD was requested by a stakeholder who advocated coverage of PET 

using a new type of radiopharmaceutical approved by the FDA in 2012 to image beta-amyloid 

plaques in certain patients being evaluated for Alzheimer's disease and other causes of cognitive 

decline. To help inform this evidence review, we convened a meeting of the Medicare Evidence 

Development and Coverage Advisory Committee (MEDCAC) in January 2013. A proposed 

coverage decision is expected by July 2013, with a final decision (including consideration of 

public comments) expected by October 2013. 

Question 41 

Regarding State Authority to define qualified providers: Section 1902(a)(23) of the Social 

Security Act states that Medicaid providers must be "qualified to perform the service or 

services required," and the federal regulations implementing this statute (42 CFR Section 

431.51) allow states to set "reasonable standards relating to the qualifications of 

providers." Additionally, Section 1902(p)(I) infers that states have broad authority to 

exclude certain providers, and the legislative history from Senate Report 100-109 states 

"This provision is not intended to preclude a State from establishing, under State law, any 

other bases for excluding individuals or entities from its Medicaid program." A First 

Circuit court ruling in First Medical Health Plan, Inc. vs. Vega-Ramos found that Section 

1902(p)(l) "permit!s] a state to exclude an entity from its Medicaid program for any reason 

establish by state law." Do you agree with the premise oftbis court's ruling that states 

have broad authority to exclude certain provider entities from its program? If not, how do 
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you interpret "reasonable standards relating to the qualifications of providers" that may be 

set by a state to set in order to exclude certain providers from its Medicaid program? 

What are the limits on this state authority? 

Answer: Our regulations codified at 42 CFR 431.51 provide that beneficiaries may obtain 

services from any qualified Medicaid provider that undertakes to provide services to them, 

pursuant to section 1902(a)(23) ofthe Act. 42 CFR 431.51(a)(6) codifies section 1932(a) of the 

Act, which permits a state to restrict the freedom of choice required by section 1902(a)(23) of the 

Act under specified circumstances related to enrollment in managed care, for all services except 

family planning services. States are required to comply with the freedom of choice requirements 

as dictated by statute and codified in regulation. We do not believe that it is consistent with 

Section 1902( a)(23) for states to exclude providers for reasons unrelated to their ability to furnish 

the services at issue, or bill for the services properly and ensure program integrity. In context, 

section 1902(p)(1) ofthe Act permits states to have independent authority to protect program 

integrity, similar to the authority the Secretary exercises under sections 1128, 1128A or 

I 866(b )(2) ofthe Act. In the case you reference, we note that Puerto Rico is explicitly exempted 

from the freedom of choice requirement as codified in 42 CFR 431.51(b)(I). 

Question 42 

Regarding Per Capita Caps: As you know, Medicaid consumes the largest health-related 

share offederal revenues and federal spending as a share of the economy is set to grow by 

25 percent over the next 10 years. Clearly, Medicaid -like our other entitlement programs 

- must be reformed if we are to make a meaningful impact on our debt and deficit 

problems. President Clinton proposed Medicaid per capita caps back in the 1990s, and to 

quote the former Secretary of Health and Human Service when she testified in this 

Committee back in March of 1997, per capita caps mean "there are absolutely no 

incentives for States to deny coverage to a needy individual, or to a family ••• It is a sensible 

way to make sure that people who need Medicaid are able to receive it." Given the need to 

address health care entitlement spending and the bipartisan history behind Medicaid per 

capita caps, would you work with us on developing the details of this proposal to ensure we 

enact reforms that both protect taxpayers and patients? 

Answer: CMS strives to ensure that the current Medicaid program is run as efficiently as 

possible while ensuring that our beneficiaries have access to services delivered through a highquality health care delivery system. We view the Medicaid program as a partnership between 

CMS and the states and strive to use statutory and regulatory flexibility and the ingenuity of the 

states to regularly make improvements to the program. We have effectively managed Medicaid 

spending growth. The latest Medicaid Actuarial Report shows that Medicaid benefits spending 

per beneficiary is estimated to have decreased by 1.9% from 2011 to 2012. The Affordable Care 

Act has provided both CMS and the states with opportunities to enhance the quality of care 

delivered to Medicaid beneficiaries in a more efficient and coordinated manner. We are 

transforming our data systems so we have better and more accurate information about 

expenditures, we are moving beneficiaries from traditionally expensive long-term care settings to 

home and community based services, we are exploring new delivery system models like 

integrated care to replace more expensive delivery systems, and we are implementing incentives 

for states to comprehensively address the needs of their most chronically ill and expensive 
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beneficiaries. The President's budget proposes additional ideas to improve Medicaid efficiency 

without shifting costs to states or beneficiaries. 

Question 43 

Regarding Medicaid Premium Assistance: eMS recently released "Frequently Asked 

Questions" regarding Medicaid premium assistance proposals. I understand that you 

intend to approve some of these proposals under Section 1115 waiver authority. Do you 

believe that 1115 waiver authority gives the Secretary of Health and Human Services the 

ability to waive the "wrap-around" benefit requirements, if benefits offered under qualified 

health plans differ from those traditionally offered in Medicaid? 

Answer: As described in the Frequently Asked Questions (FAQs) released by eMS regarding 

the use of premium assistance, we will only consider demonstration proposals that make 

arrangements with qualified health plans (QHPs) to provide any necessary wrap around benefits 

and cost sharing. 

Questions from Senator Rockefeller 

Question 1 

On April 2, 2013, Governor Beebe announced that Arkansas received written approval 

from Secretary Sebelius for the state's Medicaid expansion "concept," which would use 

Medicaid funding to enroll beneficiaries into private coverage. However, many important 

details still must be sorted out in a more comprehensive demonstration proposal. Does 

eMS plan to use this process--first approving a concept memo and then approving a more 

detailed demonstration proposal-for all states interested in using the premium assistance 

model? What outstanding issnes is Arkansas expected to address in the demonstration 

proposal before they can move forward with implementation? 

Answer: As a regular course of business, eMS provides technical assistance and informal 

guidance to states as they develop proposals at the state level. States often request this assistance 

from CMS prior to making a formal proposal, in order to better understand applicable statutes 

and regulations and the impacts of those provisions on their proposals. CMS recently issued a 

set of Frequently Asked Questions (FAQs) regarding the use of premium assistance, providing 

more information to all states considering such an option. We would expect states that are 

interested in this option to use these F AQs as a guide when developing their proposals. Arkansas 

has yet to make a formal submission to CMS and without such a proposal it is premature to 

speculate on the items that may require additional information from CMS. 

Question 2 

How will HHS address the additional costs generated by enrolling Medicaid beneficiaries 

into private coverage in Arkansas and other states that are interested in using the premium 

assistance model for Medicaid expansion? How much ofthose additional costs be assumed 

by the federal government versus the states? 
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Answer: CMS recently released a set of Frequently Asked Questions (FAQs) that provide 

additional information to states interested in pursuing the use of premium assistance. 

Specifically, the FAQs described that the current Medicaid statute requires that premium 

assistance arrangements be "cost effective." "Cost effective" generally means that Medicaid's 

premium payment to private plans (plus the cost of additional services and required cost sharing 

assistance) will be comparable to what Medicaid would otherwise pay for the same services. 

Such a standard would need to be met if a state pursued the use of premium assistance through 

their State Plan. 

Additionally, some states have expressed interest in section 1115 demonstrations to provide 

premium assistance. CMS has indicated that we will consider approving a limited number of 

premium assistance demonstrations and that as part of such demonstration would consider states' 

ideas on cost effectiveness that include new factors introduced by the creation of Health 

Insurance Marketplaces and the expansion of Medicaid. As with all demonstration proposals, 

the actuarial, economic and budget justification (including budget neutrality) would need to be 

reviewed and, if approved, the program and budgetary impact would need to be carefully 

monitored and evaluated. 

Question 3 

There seems to be a trend toward Medicaid managed care organizations both in the 

Medicaid expansions and in the duals demonstration projects. I continue to hear 

complaints from beneficiaries about transitions to managed care. Assurances of continuity 

of care are not being met, and the result can be patient care ending mid-treatment, with 

negative health consequences. What steps is IllIS taking to monitor quality, plan 

performance and patient experience under these new Medicaid models? Will beneficiaries 

in these states have real options to opt-out of private coverage in to traditional Medicaid? 

Answer: Ensuring quality of care for our beneficiaries is CMS' top priority. Managed care is 

not new for Medicaid; most states contract with private managed care organizations to deliver 

services to their beneficiaries. More recently, states have expanded managed care to new 

populations and to new services, including long term care services and supports. States have the 

flexibility under the statute to adopt managed care without a waiver, but some have pursued the 

use of managed care to deliver benefits through 1115 demonstrations. CMS has worked with 

states to ensure the appropriate use of this delivery system, to promote quality and improve 

health outcomes. In approving demonstrations, CMS has exempted certain populations and 

ensured the readiness of the new delivery system prior to allowing enrollment in managed care. 

Additionally, demonstrations include ongoing monitoring plans to assure contract compliance, 

network and benefit adequacy and the quality of care provided and, particularly with respect to 

long term services and supports, we have worked with states to create or expand ombudsman 

offices to help beneficiaries with transition. In cases where the use of managed care has been 

approved through an 1115 demonstration, CMS and the state have agreed to a specific set of 

special terms and conditions whereby the state agrees to monitor and report on demonstration 

requirements. 
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Question 4 

I was pleased to see that the memorandums of understanding on duals demonstrations 

include some requirements for consumer engagement. However, I am concerned about 

whether and how that engagement will actually take place in the states. Can you speak to 

the importance of consumer engagement in the duals demonstration projects and how IllIS 

will make sure that the M.O.V. provisions to safeguard consumers are satisfied on the 

ground? 

Answer: As you know we've worked with each state to incorporate the most robust beneficiary 

protections from Medicare and Medicaid and will integrate and enhance the current protections 

to create a more accessible, seamless system of care for Medicare-Medicaid enrollees. 

Continuity of care provisions will ensure beneficiaries have access to their existing doctors and 

other providers for a specified period of time while they transition into demonstration plans, and 

Demonstration enrollees will retain all Medicare Part D beneficiary protections. 

In addition, beneficiaries will receive clear, understandable notices that have been reviewed by 

advocacy organizations and field tested with beneficiaries. Outreach and education will proceed 

through multiple channels at mUltiple points in time and will take into account the prevalence of 

cognitive impairments and mental illness in this population as well as the incidence of limited 

English proficiency. Independent resources, such as choice counselors and enrollment brokers, 

will assist beneficiaries in making enrollment choices. We will also leverage existing resources, 

such as State Health Insurance Programs and Aging and Disability Resource Centers, to provide 

one-on-one counseling on enrollment options. We will provide specialized training for 1-800-

Medicare operators to enable them to effectively assist beneficiaries. 

CMS will be working with each state to ensure that they comply with the terms of the 

Memorandums of Understanding, other related Demonstration agreements and all applicable 

laws and regulations. CMS is funding and managing the evaluation of each approved 

Demonstration. CMS has contracted with an external independent evaluator to. measure, 

monitor, and evaluate the overall impact of the Demonstrations, including impacts on MedicareMedicaid enrollees, expenditures, and service utilization. The evaluator will design unique, 

state-specific evaluation plans for each individual state participating in the Demonstration, as 

well as an aggregate analysis that will look at the Demonstration overall including 

Demonstration interventions and impact on key subpopulations within each state. The 

evaluation wiII use a mixed methods approach to capture and analyze quantitative and qualitative 

information. 

The Memoranda of Understanding for Massachusetts, Ohio, Washington, Illinois, and California 

provide examples of the types of areas that will be measured in all Demonstrations, including 

beneficiary experience with care and care transitions, the support afforded by community living, 

beneficiaries' access to services, and shifts in service utilization patterns. Additional quality 

measures, as well as qualitative evaluation components such as beneficiary focus groups and key 

informant interviews, will be included in the state-specific evaluation plans. CMS will apply 

Medicare Part D requirements regarding oversight, monitoring, and program integrity to 

Demonstration plans. 
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Question 5 

I strongly believe that Independent Payment Advisory Board will allow necessary, cost· 

saving changes to Medicare without harming beneficiaries. The Board would need to start 

its work this year and yet there have been no nominations yet. Where does this stand and 

what can you do to move it forward? 

Answer: We agree that the Independent Payment Advisory Board (IP AB) will help to ensure 

that Medicare continues on a sustainable financial footing. The President looks forward to 

working with Congress to begin the nomination process for IPAB Board members in the near 

future. Weare encouraged to see that our recent efforts to improve quality and efficiency in 

Medicare are contributing to historically low cost growth in the program. Under current 

assumptions, projected per capita Medicare spending will not exceed the statutory target for 

several years. 

Question 6 

As the marketplaces become up and running, it is important to make sure that children 

maintain access to the most affordable and comprehensive coverage. Can you discuss how 

CMS plans to navigate the intersection between the Medicaid and CHIP programs with 

marketplace coverage, while placing a priority on making sure that children are provided 

with the most comprehensive and affordable care? 

Answer: CMS is fully committed to helping providing high quality, affordable coverage to all 

children, including those with private insurance and in the Medicaid and CHIP programs. We are 

also fully aware that some families may receive coverage from different sources, for instance, a 

child may be enrolled in CHIP, while the parents purchase private insurance on the Marketplace. 

Whenever possible, we try to align the essential health benefits required for Marketplace plans 

with the comprehensive coverage received by Medicaid beneficiaries. 

CMS' final eligibility rules for both Marketplaces, Medicaid and CHIP outline standards for 

mutual agreements including the clear delineation of the respective responsibilities of programs 

in support of a coordinated and streamlined eligibility and enrollment process. There are 

additional agreements needed to exchange data among insurance affordability programs, and 

between states and the federal government in support of verifications. Development and 

finalization of those agreements is proceeding concurrently with operational and technical 

modeling and testing. 

Question 7 

According to pharmacy benefit manager Prime Therapeutics and Blue Cross and Blue 

Shield of Minnesota, specialty drugs will likely account for 50% of all drug costs by 2018, 

up from 28.7% of total prescription drug costs in 2012. In many cases these drugs account 

for more than half ofthe treatment costs for an illness (no opportunity for medical offset). 

Medicare will see these costs largely under Part B. How specifically is the agency 

responding to this financial threat? 

Answer: CMS agrees that prescription drugs playa large role in Medicare spending as well as a 

person's interaction with the health care system. 
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Improved medication adherence through policies like ACOs can help reduce other health care 

costs and improve quality. 

In addition, the recently released President's budget proposal for fiscal year 2014 includes 

proposals for reducing overpayments for drugs paid under Parts B and D. The Part D proposal 

would require manufacturers to pay the difference between rebates they negotiate with Part D 

plans and Medicaid rebate levels, beginning in 2014. This proposal would allow Medicare to 

benefit from the same rebates that Medicaid receives for brand name and generic drugs provided 

to beneficiaries who receive the Part D Low-Income Subsidy, beginning in 2014. The proposal 

would require manufacturers to pay the difference between rebate levels they already provide 

Part D plans and the Medicaid rebate levels. The Part B proposal would reduce payments of Part 

B drugs from the current methodology of average sales price (ASP) plus 6 percent to ASP plus 3 

percent. In order to preserve access to care, manufacturers would be required to provide a 

specified rebate in certain instances as determined by the Secretary. 

Questions from Senator Menendez 

Question 1 

Regarding Imputed Rural Floor - As you're aware, New Jersey and Rhode Island are 

unique among the states because they're considered "all urban" for Medicare wage 

indexing purposes. This means that hospitals in my state are ineligible for the myriad 

special payments available to hospitals located in rural areas or which have been specially 

classified as being in rural areas. As an attempt to provide some equity in the system, CMS 

devised the imputed rural Door. This policy serves the same purpose as the regular rural 

Door available to every other state and provides New Jersey hospitals with a more 

equitable payment structure that reOects the unique health care market in the state. The 

imputed rural Door is set to lapse at the end ofthe current fiscal year, but can be extended 

as part of the 2014 Inpatient Prospective Payment System (IPPS) rule. 

New Jersey hospitals are struggling to recover from Superstorm Sandy, facing significant 

payment reductions from sequestration, and working tirelessly to implement significant 

delivery system reforms. It would be devastating to New Jersey's health care 

infrastructure for CMS to cherry-pick the imputed Door out of the entire Medicare wage 

index system for expiration, especially while the rest of the system is allowed to remain as 

is. Earlier this year I sent a letter, signed by the entire New Jersey delegation, urging the 

extension ofthis vital policy. 

If confirmed, can you assure me that the imputed rural Door will continue until such time 

as Congress acts on a comprehensive overhaul ofthe wage index system? 

Answer: In FY 2005, CMS adopted the "imputed" floor as a temporary 3-year regulatory 

measure to address a concern that hospitals in aU-urban states were disadvantaged by the absence 

of rural hospitals to set a wage index floor in those states. The imputed floor was originally set 

to expire in FY 2007 but was extended for an additional year in FY 2008. In FY 2009, CMS 

extended the imputed floor for an additional 3 years through FY 20 II. In FY 2012, CMS 
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extended the imputed floor again through FY 2013. We will issue the FY 2014 IPPS proposed 

rule in short order, along with our decision on whether to propose extending the imputed floor. 

Ouestion 2 

Regarding Essential Health Benefits and Behavioral Health Services - In following up to 

my question during the hearing, I wanted to provide you with some additional information 

about the concerns I have regarding the essential health benefits (EBB) rule and the 

statutory requirement that qualified health plans (QHPs) offer behavioral health services, 

such as those used to treat autism spectrum disorders. 

The underlying reason I fought to have "behavioral health" explicitly codified in the EHB 

was because ofthe countless instances of people being denied access to needed behavioral 

health services because these services weren't deemed as being "medical" or "mental 

health" services covered under their insurance policy. The final EHB rule issued on 

February 25, 2013 does not adequately protect against this practice nor provide assurances 

that everyone enrolled in a QHP will have access to behavioral health services, as 

prescribed in law. 

The primary area of concern is that the rule allows plans to substitute benefits. While the 

rule ensures that substitution is only allowed within each benefit category, and that it be 

actuarially equivalent, there is still a strong likelihood that substitution could lead to 

limitations on the availability of behavioral health services. Because this benefit category 

also includes mental health and substance use disorder services, there are concerns plans 

could simply increase the availability of mental health or substance abuse services and 

decrease or essentially eliminate, in an actuarially equivalent manner, the availability of 

behavioral health services. This has the practical effect of continuing to allow issuers to 

deny access to these important services. 

Additionally, in a paragraph of the rule that explains the requirements needed to satisfy 

this benefit category the rule states that services "must be provided in a manner that 

complies with the Mental Health Parity and Addiction Equity Act of2008 (MHPAEA)." 

(78 FR 12843) However, a 2012 Report to Congress on the implementation ofMHPAEA 

states that, when it comes to behavioral health services, the "impact and protections" of 

MHPAEA are being interpreted and implemented as part of ACA. This circular logic 

provides no real assurances that behavioral health services are being meaningfully 

addressed in either case. 

In another section discussing the impact on issuers, the final rule reiterates that the statute 

requires "that all plans covering EBB offer mental health and substance use disorder 

service benefits, including behavioral health treatment and services." (78 FR 12861) 

However, the rule fails to elaborate further on the behavioral health aspect, only focusing 

on mental health parity. This again fails to address how issuers are to ensure access to 

these services in a meaningful way. 

Finally, when asked about the lack of assurances regarding behavioral health services CMS 

and ccrro stated that any shortcoming in coverage under the mental health and substance 
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abuse category will be made up in the rehabilitative and habilitative services benefit 

category. However, the rule itself clearly recognizes habilitative benefits "are not well 

defined." (78 FR 12844) The lack oCan established definition ofhabilitative service 

provides no assurances that behavioral health services will be included in any future 

definition, especially since issuers will (rightly) claim they belong in the mental health and 

substance use disorders category. The rule continues by saying states will "have the first 

opportunity to determine whicb babilitative benefits must be covered ... [and] ifstates have 

not cbosen to define habilitative benefits, the issuer's cboice remains." Tbis is 

understandably causing concern because states that do not yet bave a definition of 

babilitative services are likely to be tbose tbat also lack a requirement for behavioral bealtb 

services, meaning issuers in tbose states are likely to lack botb. 

Please address tbe concerns outlined above, including tbe lack of consistency witbin tbe 

EHB and MHPAEA rules; bow substitution of benefits does not equal discrimination or 

access limitation; and bow tbe definition of babilitative services could come to include 

bebavioral bealtb services. 

What specific policies and procedures are in place to ensure bebavioral bealtb services, 

including those for autism spectrum disorders, are included in every QHP offered in every 

state, as required by statute? Additionally, wbat are tbe specific policies to ensure tbis is 

tbe case iu states witb a federally-facilitated excbange and/or no existing state-based 

bebavioral bealtb requirements? 

Will eMS overrule tbe certification of a plan as a QHP if it substitutes benefits that 

diminisbes coverage of, or limits access to, bebavioral bealtb services, even if it's doue 

witbin tbe same benefit category and in an actuarially equivalent manner? 

Answer: Throughout the implementation of the essential health benefits (ERB), we have taken 

great care to ensure that the law is implemented consistently. The statute contains many 

provisions that affect how EHB and MHP AEA interact. Section 2707 of the PHS Act requires 

health insurance issuers offering non-grandfathered coverage in the individual and small group 

health insurance markets to cover the EHB package required under section 13020fthe 

Affordable Care Act. The Affordable Care Act grants the Secretary authority to derme EHB. 

The EHB final rule stated that plans are required to comply with the parity standards set forth in 

45 CFR 146.136 -the MHPAEA regulations - in order to satisfy the requirement to provide 

EHB. Section 1311(j) of the Affordable Care Act specifies that section 2726 of the PHS Actthe portion of the statute that contains the MHPAEA amendments to the Public Health Service 

Act - shall apply to qualified health plans in the same manner and to the same extent as such 

section applies to health insurance issuers and group health plans. For these reasons, HHS has 

concluded that plans must comply with the parity standards applicable to mental health and 

substance use disorder benefits set forth in 45 CFR 146.136 in both the individual and the small 

group markets in order to satisfy the requirement to cover EHB. 

As you know, the essential health benefits rule permitted states to select a benchmark plan from 

among several plans that currently exist in the market. This benchmark plan, known as the EHB 

benchmark plan, must include ten categories of items and services identified in the statute. 
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Among these categories is mental health and substance use disorder services, including 

behavioral health treatment. If a benchmark plan chosen by a state does not contain any benefits 

in a benefit category, it must supplement those benefits with the benefits from another 

benchmark plan option. The essential health benefits fmal rule requires that all qualified health 

plans provide benefits that are substantially equal to the EHB benchmark plan including both 

covered benefits and limitations on coverage including coverage of benefit amount, duration and 

scope. 

As you note, qualified health plans are permitted to substitute benefits only within categories and 

such substitution must be actuarially equivalent. The EHB final rule permits substitution to 

provide greater choice to consumers, and promote plan innovation through the use of various 

coverage and design options. We note that even if qualified health plans have substituted benefits 

those plans would still be subject to the non-discrimination provisions of the Affordable Care 

Act including section 1302 , which is codified in 45 CFR 156.125 providing that an issuer does 

not provide EHB if its benefit design, or the implementation of its benefit design, discriminates 

based on an individual's age, expected length oflife, present or predicted disability, degree of 

medical dependency, quality of life, or other health conditions. Finally, under the EHB final 

rule, states may, at their option, limit or prohibit benefit substitutions that would otherwise be 

permissible under our regulations, 

With respect to certification, a state implementing a state-based Marketplace is responsible for 

QHP certification. CMS will be responsible for certifying all QHPs in Federally-facilitated and 

State Partnership Marketplaces. 

Question 3 

Regarding Molecular Pathology Tests - As of January 1, 2013 clinical labs have been 

utilizing new CPT codes when billing for molecular pathology services. These new codes 

were originally going to be used in 2012. However CMS, recognizing the need for more 

time to fully implement them, delayed their use until this year. 

It has recently come to my attention that there are serious concerns about how CMS and, 

more specifically, the regional Medicare administrative contractors (MACs) are 

implementing and pricing these new codes. Despite the year reprieve, it appears that the 

MACs have yet to set prices for many ofthese new codes and, for the codes they have 

priced, set a rate that is inconsistent with both the historic prices and the tests' actual costs. 

In either case, there has been a serious lack of transparency in how the MACs are 

calculating the prices and what, if any, methodology they are using. 

The ongoing delay has resulted in clinical labs in New Jersey going without reimbursement 

for these tests since the beginning of the year, or being reimbursed at rates upwards of 90 

percent below the rates used just last year. I am concerned with how the process of 

implementing and pricing these new CPT codes will impact beneficiaries' ability to receive, 

physicians' ability to order, and labs' ability to conduct these molecular pathology tests. 
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What specific steps is CMS taking to address the ongoing concerns with these new 

molecular pathology codes, including providing oversight and guidance to the MACs, 

requiring transparency in the pricing methodology, and ensuing a timely and accurate 

reimbursement for tests that have already been conducted? 

Answer: CMS uses CPT codes developed by the AMA in establishing payment rates for 

Medicare services. The AMA CPT Panel developed 114 new single CPT codes to replace 

multiple "stacking codes" (based on component steps) that were previously used to bill for 

molecular pathology tests. The old "stacking codes" were deleted at the end of2012 and are no 

longer available. 

While the new codes were issued in 2012, CMS decided to delay their use for a year in order to 

consider whether they should be paid under the physician fee schedule (as pathologists preferred) 

or the clinical laboratory fee schedule (as preferred by laboratories). After requesting comments 

as part of the 2013 physician fee schedule rule, we decided to keep them on the lab fee schedule, 

with an additional payment available for interpretation by a pathologist. New rates for these tests 

(generally genetic tests) are being established through the "gap-filling" process, which enables 

the Medicare contractors to collect a wide range of relevant data. While this process is 

underway, the tests are being paid interim rates set by the contractors, which may reflect invoice 

amounts, old "stacking code" prices, or case-by-case determinations by the contractor medical 

directors. 

The local gap-fill prices will be submitted to CMS this month and will be open to public 

comment for 60 days. CMS will post final prices in September, at which point stakeholders may 

request reconsideration, with supporting evidence. The 2014 fee schedule, including national 

limitation amounts for the new test codes, will be issued in November. 

Questions from Senator Toomey 

Question 1 

I am concerned by reports of physicians closing their oncology practices due to 

reimbursement concerns. Is CMS tracking practice closings? Could CMS track National 

Provider Identifiers to see ifthose physicians are moving into a hospital system? As 

seq uester begins to take effect, could CMS track the mix of Medicare beneficiaries 

receiving oncology services in a physician office versus an outpatient department both pre 

and post sequester? 

Answer: We share your concern about the potential adverse impacts ofthe payment cuts 

mandated by sequestration, both with regard to Medicare payments, and more broadly across all 

government programs. That is why the Administration has indicated that we stand ready to work 

with Congress on balanced approaches to replace sequestration to avoid its adverse impacts. 

CMS is committed to preserving Medicare beneficiaries' access to quality health care. We will 

continue to monitor the impact of provider payment cuts mandated under the Budget Control Act 

to assess their impact on Medicare beneficiaries and we are happy to share our results. 
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Questiou 2 

PA is one ofthe most rural states in the country and health systems have been working 

towards expanding telemedicine to ensure expanded access to quality health services. How 

does CMS plan to expand telemedicine efforts? 

Answer: I am very supportive oftelehealth initiatives as a means to enhance access to needed 

services for Medicare beneficiaries. The Center for Medicare and Medicaid Innovation is testing 

several projects related to increased use of telehealth. A project in Hawaii received a Health Care 

Innovation Award for telehealth-based home monitoring for very high risk patients with complex 

health care needs in order to prevent hospitalizations. A project in Wyoming received a Health 

Care Innovation A ward to improve care coordination and communication with practitioners in 

ten rural Iowa counties using telehealth and web-based personal health records. In addition, the 

Affordable Care Act requires accountable care organizations (ACOs) participating in the 

Medicare Shared Savings program to coordinate care for beneficiaries, such as through the use of 

telehealth, remote patient monitoring, and other such enabling technologies. 

Under the fee for service Medicare benefit, although the statute stipulates that Medicare may pay 

for telehealth services only in rural health professional shortage areas or counties that are not 

metropolitan statistical areas, CMS has the flexibility to determine the types of services that are 

paid for. CMS annually evaluates whether to add services to this benefit and last year in the final 

rule for the CY 2013 Physician Fee Schedule, a variety of new services were added. Some of 

these new services include: alcohol and substance abuse and intervention services; annual 

alcohol misuse screening; annual depression screening; intensive behavioral therapy for 

cardiovascular disease; and intensive behavioral therapy for obesity. 

Question 3 

The Medicare wage index is an issue of particular importance to hospitals in parts of 

Pennsylvania as well as in other states. CMS has acknowledged that the Medicare wage 

index system needs to be fixed. How do you view this issue? How would you suggest 

addressing this issue and what would be your timeframe? 

Answer: Under the current hospital wage index system, hospitals are classified into 

geographically similar labor market areas. However, because some hospitals view their wage 

index as not accurately reflecting the labor costs they incur for hospital staff, a number of acute 

care hospitals seek to "reclassify" into other labor areas. 

In April of2012, CMS submitted a Report to Congress entitled, "Plan to Reform the Medicare 

Wage Index." In that report, we discussed a different approach to calculating the wage index 

that we believe would more accurately reflect the labor costs incurred by each hospital based on 

the hospital employees' commuting patterns. This "commuting-based wage index" would allow 

for the wage index to be calculated at a more granular level, down to the individual hospital. It 

could also potentially obviate the need for hospital reclassifications to other labor market areas. 

In the report, we indicated that more data on hospital employee commuting patterns may be 

necessary before adopting a commuting-based wage index. Additionally, we stated that certain 

special adjustments to the wage index under current law may no longer be applicable and should 
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be reviewed in order to detennine if they would still be relevant under the new system. Current 

law is prescriptive with respect to the wage index; nonetheless, we continue to evaluate whether 

improvements could be made under existing authority. 

Questions from Senator Nelson 

Onestion 1 

Regarding Medicaid expansion: There has been a lot of talk not only in my state but other 

states considering what is now being referred to as the "Arkansas model" for expanding 

their Medicaid programs through some variation of premium assistance to private 

insurers. 

It's my understanding that just because a beneficiary receives premium assistance, he or 

she does not lose the protections ofthe Medicaid program-they are still considered a 

Medicaid beneficiary and they still have retain Medicaid's benefits, protections, and costsharing restrictions. Can you discuss CMS's guidance to states on what their 

responsibilities are to Medicaid beneficiaries ifthe insurance plan does not have these 

protections? How can we be sure that if states are allowed to experiment they will 

adequately provide for their beneficiaries? How will CMS actively monitor these newer 

models to be sure that they are working as intended? 

Answer: CMS has recently released a set of Frequently Asked Questions (FAQs) regarding 

state interest in the use of premium assistance. Under al\ premium assistance arrangements, 

beneficiaries remain Medicaid beneficiaries and continue to be entitled to all benefits and costsharing protections. States must have mechanisms in place to "wrap-around" private coverage to 

the extent that benefits are less and cost sharing requirements are greater than those in Medicaid. 

Some states have expressed interest in section 1115 demonstrations to provide premium 

assistance. CMS has indicated that we will consider approving a limited number of premium 

assistance demonstrations and that as part of such demonstration would consider states' ideas on 

cost effectiveness that include new factors introduced by the creation of Health Insurance 

Marketplaces and the expansion of Medicaid. CMS has described the type of proposals that it 

will consider including only those proposals that provide beneficiaries with a choice of at least 

two qualified health plans, that make arrangements to provide any necessary wrap around 

benefits and cost sharing, that are limited to individuals whose benefits are closely aligned with 

the benefits available on the Marketplace and that end no later than December 31, 2016. As is 

our practice, CMS will include in any demonstration approval, requirements for the state to 

closely monitor and report on the demonstration's progress and has time limited the 

demonstrations to ensure these demonstrations will infonn policy for the State Innovation 

Waivers that start in 2017. 

Onestion 2 

Regarding Price Transparency: Stephen Brill's TIME magazine article, "The Bitter Pill," 

generated a fair level of conversation about the transparency of prices charged by hospitals 

for various procedures. However, the article did not mention the huge step forward the 

Affordable Care Act took in this direction. The provision of the ACA that establishes the 
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Medical Loss Ratio requirements for health insurers also includes an often-forgotten 

provision that requires hospitals to establish and make public a list of standard charges for 

items and services, including diagnosis-related groups. What work has been done to 

implement this provision? 

CMS has also run the "Hospital Compare" website for several years now, which allows 

Medicare beneficiaries to compare the quality ofbospitals in their area. Do you bave any 

recommendations to improve "Hospital Compare" to incorporate hospital pricing 

information so that beneficiaries can search hospitals based on tbe overall value of services 

provided? 

Answer: We believe that Hospital Compare is an extremely important tool in enhancing quality 

of care. Not only does it give patients the ability to evaluate the care that hospitals furnish, it 

give hospitals a direct and clear incentive to seek to improve the quality of care that they 

provide. 

Hospital Compare is now a rich source of data and includes the following measures: mortality 

rates; readmission rates; clinical process of care measures for heart failure, pneumonia, and acute 

myocardial infarction; surgical care measures; complications measures; and very importantly, 

survey measure data from our HCAHPS (Hospital Consumer Assessment of Healthcare 

Providers and Systems) survey. 

We have recently added measures of health care associated infections (HAl) to Hospital 

Compare, including measures of: Central Line Associated Bloodstream Infections (CLABSI), 

Catheter Associated Urinary Tract Infections (CAUTI), and Surgical Site infections from colon 

surgery and abdominal hysterectomy. In the next few years, we plan to add the additional HAl 

measures of MRS A and C-difficile, which are two measures that have recently been added to the 

hospital Inpatient Quality Reporting program. As the science of quality measurement rapidly 

evolves and more measures are added to the Hospital Inpatient Quality Reporting program, the 

data in the Hospital Compare website will become richer as well. 

Additionally, Hospital Compare includes information on Medicare payments to hospitals. We are 

exploring ways to make more information on hospital pricing publicly available in a manner that 

is consumer-friendly and helpful to individuals who are making decisions about where to seek 

care. We welcome your ideas on how we can make our health care system more transparent to 

consumers. 

We will consider your suggestion to incorporate hospital pricing information in Hospital 

Compare, as we work to continually improve this important tool. 

Question 3 

Regarding Medicare Fraud in the Mental Health Benefit: Recently, tbe HIlS Office ofthe 

Inspector General has highlighted skyrocketing fraud in tbe mental health benefit in 

Medicare. A number ofthe OIG's fraud recovery activities in the Medicare mental health 

benefit have focused on providers that are no longer licensed or have bad tbeir licenses 

revoked, but still bill Medicare for millions of dollars eacb year. My Committee bas 
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undertaken a broader investigation into the types offraud perpetrated, but I am very 

concerned already that beneficiaries in need of mental health services do not receive value 

for the taxpayer dollar. 

How does Medicare prevent fraud in mental health service billing? Are there additional 

challenges with fraud prevention and recovery activities in the mental health benefit as 

compared to other types of fraud? I know that Medicare requires these community mental 

health providers to follow state licensing rules- but how does the agency enforce this 

requirement and, in your opinion, is it adequate? What communication does CMS have 

with state licensure boards to ensure that the mental health provider billing Medicare for 

services is still licensed currently in their state? 

Answer: As a result of the new authorities and resources provided by the Affordable Care Act 

and the Small Business Jobs Act of 20 I 0, CMS has new powerful anti-fraud tools to shift the 

agency beyond a "pay and chase" approach to preventing fraud before it happens. As part of our 

enhanced program integrity efforts, CMS has implemented a risk-based screening process for 

newly enrolling and revalidating Medicare providers and suppliers. This screening process 

requires certain categories of providers and suppliers that have historically posed a higher risk of 

fraud to undergo greater scrutiny prior to their enrollment or revalidation in Medicare. 

Community Mental Health Centers (CMHCs) are in the moderate risk category and are subject to 

unannounced site visits along with licensure verifications. All providers and suppliers are 

required to meet applicable state licensure and certification requirements in order to enroll or 

participate in the Medicare program. 

In 2012, CMS began the implementation of the Automated Provider Screening System (APS). 

The APS is designed to verify the data submitted on enrollment applications against independent 

commercial and health care data, including licensure and certification checks, to establish 

eligibility for enrollment or revalidation in the Medicare program. Since March 2011, CMS 

validated or revalidated enrollment information for nearly 410,000 Medicare providers and 

suppliers under the enhanced screening requirements of the Affordable Care Act. Because of 

revalidation and other proactive initiatives, CMS has deactivated 136,682 enrollments and 

revoked 12,447 enrollments. 

CMS is also using cutting-edge fraud prevention tools such as predictive modeling on fee-forservice claims. Since June 2011, the Fraud Prevention System has screened over a billion claims 

for suspicious billing activity, including claims from CMHCs, while using models targeted to the 

services provided by CMHCs. CMS is also launching a pilot targeting the highest CMHC fraud 

risk states of Florida, Texas, and Louisiana. 

Similar efforts have produced promising results in the past. In 2009 and 2010, CMS conducted a 

special project, the South Florida High-Risk Provider Enrollment Project, which targeted fraud 

among especially susceptible provider types, including CMHCs, in South Florida. As part of the 

project, CMS contracted with the Medicare Administrative Contractor (MAC) and Zone Program 

Integrity Contractor (ZPIC) in that area to conduct specific actions designed to detect and deter 

CMHC fraud in Palm Beach, Broward, and Miami-Dade Counties, Florida (Le., South Florida). 

For example, the MAC conducted site visits to all South Florida CMHCs in its jurisdiction to 
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verify their existence and operations. CMS used the results of these site visits, along with other 

infonnation, to create a fraud-risk score for each of these CMHCs. CMHCs with high fraud-risk 

scores were subject to ZPIC investigation, which could result in referrals to law enforcement, 

payment suspensions, or revocations of billing privileges. 

As of May 2011, the South Florida High-Risk Provider Enrollment Project had resulted in 

revocations for 239 providers and suspensions for 8. Use of edits also avoided approximately 

$156 million in wasteful or fraudulent claims. 

Question 4 

Regarding Long-Term Care: As Chairman of the Senate Aging Committee, efficient 

quality care in the long-term care environment is an area of particular interest for me. 

However, I am concerned that most of our efforts have focused on acute care payers thus 

far. 

As you may know, 31.5 percent of Medicaid's $400 billion in shared federal and state 

spending goes to long-term care for the elderly and the disabled; a full 70 percent oflongterm care payments come from Medicaid dollars. Yet, I noticed that none ofthe current 

Medicaid demonstrations are in this area, despite the fact that Medicaid is the primary 

payer of long-term care services. How will CMS do a better job in the future to pilot 

quality activities in the long-term care environment? 

I am aware that there are actions in some of the states that are doing dual-eligible 

demonstrations surrounding long-term care, but what about the states that are not 

currently participating in the demonstrations? More broadly, please tell me what CMS' 

over-arching strategy has been thus far to ensure that equal attention is paid to reforming 

the post-acute care delivery system? 

I have also heard anecdotally from providers in my home state of Florida that CMS has not 

provided clear guidance to state entities on requirements for Medicaid long-term care 

proposals; for instance, one provider did not realize the edent of documentation needed 

showing partnership with the state's Medicaid program. Such confusion delays proactive 

ideas from the community related to innovation in the post-acute care space. 

What steps can the agency take right now to provide guidance to state and local entities 

that may wish to develop demonstration projects in the Medicaid post-acute care space? 

Are you soliciting the involvement and perspective of long-term care providers regularly? 

How has the agency engaged the long-term care community more broadly? 

Answer: We continue working with states, beneficiaries and advocates, providers and other 

stakeholders to provide efficient and quality long-tenn care. We continue to produce resources 

and develop technical assistance that will help nursing homes improve care through continuous 

attention to quality of care and quality of life. In addition, to provide efficient long-tenn care in 

the most integrated setting, we continue to work with states to provide home and communitybased alternatives to institutional care. The Money Follows the Person Medicaid Demonstration 

helps states rebalance their long-tenn care systems to transition Medicaid beneficiaries from 
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institutions to the community. As part of this demonstration, states must establish procedures to 

provide quality assurance and improvement of home and community-based services. The 

Balancing Incentive Program is a Medicaid grant program that helps states transform their longterm care systems by reducing cost through improved systems performance and efficiency, 

creating tools to assist with care planning and assessment, and improving quality measurement 

and oversight. The Innovation Center's Initiative to Reduce Avoidable Hospitalizations Among 

Nursing Home Residents is working to help Medicare and Medicaid beneficiaries avoid 

disruptive hospital admissions by placing nurse care managers in nursing facilities. Additionally, 

states have the option to create health homes under the Medicaid state p Ian for individuals with 

chronic conditions. Health Homes integrate and coordinate all primary, acute, behavioral health, 

and long-term services and supports. As always, we encourage states to develop innovative ways 

to provide long-term care services and we will continue to work with states to implement statespecific Medicaid demonstrations to enhance their long-term care systems. 

Question 5 

Regarding Care planning/wellness (Alzheimer's): Just last week, the New England Journal 

of Medicine published a study by the RAND Corporation that the cost of Alzheimer's and 

dementia on our health care system was somewhere between $157 and $215 billion, with 

Medicare paying a portion of that cost. 

Later this month, I will be holding a hearing in the Aging Committee on the first 

anniversary of the National Plan to Address Alzheimer's Disease. Qne of the issues we will 

be examining is the fact that the vast majority of people do not think about or plan for the 

long-term care they might need. This is particularly critical for people facing Alzheimer's 

and dementia because far too many people with Alzheimer's are not diagnosed until their 

symptoms have become severe, making it much more difficulfand complex for them and 

their loved ones to plan for the future. 

When confirmed, what will be your role and CMS's role in implementing the National 

Plan? What is CMS doing to link the public with both diagnostic and care planning tools? 

What is the agency is doing to ensure timely access and coverage to new technologies for 

Alzheimer'S disease as they become available, particularly diagnostic tools that can help 

individuals to get the care they need before it's too late? 

What is CMS doing to ensure that seniors know that detection of cognitive impairment as 

part of the annual wellness visit? 

Answer: CMS agrees that tackling Alzheimer's disease is a national priority. We are an active 

participant in the National Plan to Address Alzheimer's Disease, established by the Department 

of Health and Human Services (HHS) pursuant to the National Alzheimer's Project Act (NAPA) 

enacted in January 201 I. The National Plan sets forth five goals, including the development of 

effective prevention and treatment approaches for Alzheimer's disease and related dementias by 

2025. A National Alzheimer's Project Advisory Council (including a senior CMS 

representative) meets quarterly to discuss the efficacy of government programs in this area, and 

annually evaluates and updates the National Plan. 
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We are also actively engaged in reviewing new technology to ensure timely access to innovation 

for our beneficiaries. In October 2012, we opened a National Coverage Analysis (the first step in 

the National Coverage Determination (NCD) process) to reconsider a prior NCD on the use of 

Positron Emission Tomography (PET) scans, which provided national coverage of PET using 

only specified radioisotopes for certain indications, and conditional coverage for additional uses 

under the process known as Coverage with Evidence Development (CED). Reconsideration of 

this NCD was requested by a stakeholder to consider coverage of PET using a new type of 

radiopharmaceutical approved by the FDA in 2012 to image beta-amyloid plaques in certain 

patients being evaluated for Alzheimer's disease and other causes of cognitive decline. To help 

inform this evidence review, we convened a meeting of the Medicare Evidence Development and 

Coverage Advisory Committee (MEDCAC) in January 2013. A proposed coverage decision is 

expected by July 2013, with a final decision (including consideration of public comments) 

expected by October 2013. 

Finally, as you noted, an assessment of cognitive function is a required element of the new 

Annual Wellness Visit benefit established by the Affordable Care Act at no charge to 

beneficiaries. While this is still a relatively new benefit (beginning in 2011), over 3 million 

people with Original Medicare obtained an Annual Wellness Visit in 2012 (as weIl as additional 

beneficiaries in Medicare Advantage plans). CMS has undertaken a range of initiatives to 

educate providers and beneficiaries about the importance of prevention and Medicare coverage 

of preventive services including the Annual Wellness Visit. 

Question 6 

Regarding Medicare Part D: In the recent Medicare CaIl Letter there is an assertion that 

there is significant waste in part D in the mail order space. Can you please provide more 

information as to how CMS came to this conclusion? 

Answer: The 2014 Call Letter instructs Part D plans sponsors that they should ensure that 

Medicare beneficiaries only receive new prescriptions and refiIls that they have requested, for 

coverage year 2014. To meet this objective, Part D sponsors should require their network retail 

and mail pharmacies to obtain patient consent to deliver a prescription, new or refill, prior to 

each delivery. CMS has received complaints that beneficiaries have had medications delivered 

that had been previously discontinued or were otherwise unwanted and unnecessary at the time 

of delivery. Once the prescription is delivered, pharmacies are unable to return the medication to 

stock and generally do not reverse the claim ifthe patient does not want the prescription. 

Consequently, automatic delivery practices are potentially generating significant waste and 

unnecessary additional costs for beneficiaries and the Part D program overaIl. We believe 

unintended waste and costs could be avoided if pharmacies confirmed with the patient that a 

refill, or new prescription received directly from the physician, should be delivered. Shipment of 

unwanted medications is not only wasteful, but also a source of significant beneficiary 

aggravation and a financial imposition that can negatively affect enrollee satisfaction with the 

plan. Supporting this idea, we received a number of comments that indicate beneficiaries return 

large quantities of unneeded medications to community pharmacies for take-back programs 

because they were unable to stop auto-ship refill programs. 
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Questions from Senator Casey 

Question 1 

Much of the work CMS does focuses on older citizens and people with disabilities. But 

there are several million children who receive care through CMS run programs. How do 

you see your role as Administrator in serving their needs? What innovative initiatives are 

you looking to undertake that are children focused? 

Answer: Medicaid and the Children's Health Insurance Program (CHIP) provide health 

coverage to more than 43 million children, including half of all low-income children in the 

United States. One ofCMS' most important missions is to ensure that these programs continue 

to provide high-quality care to children. 

We have a number of initiatives and programs that focus on improving the health and healthcare 

outcomes for pediatric populations, including the Strong Start for Mothers and Newborns 

initiative. The Strong Start initiative is a project at the Center for Medicare and Medicaid 

Innovation (Innovation Center) focusing on reducing early elective deliveries and reducing the 

rate of pre term births among high-risk women in Medicaid and CHIP. Additionally, we have 

released the Initial Core Set of Child Health Care Quality Indicators for Medicaid and CHIP, 

established for voluntary use by state Medicaid and CHIP programs, which includes a range of 

children's quality measures encompassing both physical and mental health, including chronic 

conditions such as asthma and diabetes. CMS' Pediatric Quality Measures Program and the 

Pediatric Electronic Health Record Format also represent other initiatives the agency is pursing 

to help improve the health and care children enrolled in our programs receive. Additionally, the 

Innovation Center is testing medical homes for individuals with disabilities and complex health 

conditions, high-risk chronically ill children, and individuals with breast, lung, or colorectal 

cancer. 

As we do in all areas, we continue to look for opportunities to test promising models in the 

Medicaid program and understand the importance of delivering better, more efficient care to 

Medicaid beneficiaries. We are working closely with our colleagues at the Center for Medicaid 

and CHIP services to coordinate our collective efforts to identify new opportunities. 

Question 2 

CMS does an outstanding job using its Medicare data to support stUdies on how to improve 

health care. However, as we all know Medicare is mostly older citizens while Medicaid 

covers one in three children nationally, making it the largest health care program for 

children. One of the issues I have heard over the past few years is how challenging the 

Medicaid data is due to the tremendous variation from state to state. What is CMS doing 

to try to improve the quality and usability ofthe Medicaid data to support research to 

improve children's health care? 

Answer: While preparing for the future, CMS also continues to work on maintaining and 

improving the systems currently used to manage programs and monitor the quality of care 

provided to children in Medicaid and CHIP. CMS has several strategies focused on these goals. 

CMS is working to streamline several current Medicaid and CHIP data-collection and reporting 
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efforts through a unified data model. The two primary components of this model are: (I) the 

Medicaid and CHIP Program system, which will serve as the single repository for states to 

submit key programmatic information and the system of record for all state Medicaid and CHIP 

actions; and (2) the Transformed Medicaid Statistical Information System (T-MSIS), which is an 

expanded, streamlined MSIS, the claims-based system that serves at the primary data source to 

manage Medicaid and CHIP programs. 

Other data and quality measurement efforts include the Initial Core Set of Child Health Quality 

Indicators for Children in Medicaid and CHIP. The majority of states are now reporting one or 

more of these quality measures, which encompass both physical and mental health, including 

chronic conditions such as asthma and diabetes. CMS continues to make improvements to the 

CHIP Annual Reporting Template System (CARTS), the vehicle states use to report the 

children's quality measures to CMS. These changes aim to both facilitate more accurate and 

complete reporting by states, and also reduce potential burdens associated with this reporting. 

CMS has also made improvements to the Form CMS-416, the reporting tool used to assess the 

effectiveness of Medicaid's Early and Periodic Screening, Diagnostic and Treatment (EPSDn 

benefit. CMS developed a set of criteria to flag data that raise concerns about the accuracy of the 

data submitted on the CMS-416 and has conducted a state-by-state audit of the data and worked 

with states where concerns were identified. 

CMS expects that efforts to streamline, improve, or develop new information systems will help 

ensure that information is more accurate, complete, and uniform, having the potential to 

strengthen quality reporting for children, reduce health care costs associated with inefficiencies 

in the health care delivery system, and ultimately facilitate better health outcomes for children. 

Question 3 

One of the most challenging patient-care issues facing CMS is Alzheimer's Disease among 

Medicare and Medicaid beneficiaries. Last Congress, we enacted the National Alzheimer's 

Project Act (NAPA) and I want to commend the Department for moving quickly to develop 

a national plan. 

Now we need CMS' help to allow beneficiaries and their caregivers to better understand, 

diagnose and treat Alzheimer's Disease. Can you tell me how your agency will ensure that 

the new diagnostic and therapeutic innovations, approved by the FDA, will be available to 

the beneficiaries? 

Answer: CMS agrees that tackling Alzheimer's disease is a national priority. We are an active 

participant in the National Plan to Address Alzheimer's Disease, established by the Department 

of Health and Human Services (HHS) pursuant to the National Alzheimer's Project Act (NAPA) 

enacted in January 2011. The National Plan sets forth five goals, including the development of 

effective prevention and treatment approaches for Alzheimer's disease and related dementias by 

2025. A National Alzheimer's Project Advisory Council (including a senior CMS 

representative) meets quarterly to discuss the efficacy of government programs in this area, and 

annually evaluates and updates the National Plan. 
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We are also actively engaged in reviewing new technology to ensure timely access to innovation 

for our beneficiaries. In October 2012, we opened a National Coverage Analysis (the first step in 

the National Coverage Determination (NCD) process) to reconsider a prior NCD on the use of 

Positron Emission Tomography (PET) scans, which provided national coverage of PET using 

only specified radioisotopes for certain indications, and conditional coverage for additional uses 

under the process known as Coverage with Evidence Development (CED). Reconsideration of 

this NCD was requested by a stakeholder to consider coverage of PET using a new type of 

radiopharmaceutical approved by the FDA in 2012 to image beta-amyloid plaques in certain 

patients being evaluated for Alzheimer's disease and other causes of cognitive decline. To help 

inform this evidence review, we convened a meeting ofthe Medicare Evidence Development and 

Coverage Advisory Committee (MEDCAC) in January 2013. A proposed coverage decision is 

expected by July 2013, with a final decision (including consideration of public comments) 

expected by October 2013. 

Finally, as you noted, an assessment of cognitive function is a required element of the new 

Annual Wellness Visit benefit established by the Affordable Care Act at no charge to 

beneficiaries. While this is stilI a relatively new benefit (beginning in 2011), over 3 million 

people with Original Medicare obtained an Annual Wellness Visit in 2012 (as well as additional 

beneficiaries in Medicare Advantage plans). CMS has undertaken a range of initiatives to 

educate providers and beneficiaries about the importance of prevention and Medicare coverage 

of preventive services including the Annual Well ness Visit. 

Ouestion 4 

I have heard concerns from my constituents that some ofthe documentation requirements 

for the coverage of prostheses are causing problems for providers and that some 

beneficiaries are getting denied when auditors cite misunderstood documentation. I also 

understand that some of these new processes have begun without going through necessary 

procedures and some of the auditors do not have thorough guidelines to follow. While we 

all support necessary oversight and fraud prevention, can you please let me know what 

steps you are taking in conjunction with those processes to ensure beneficiaries are getting 

the care they need? 

Answer: Medicare beneficiaries are receiving high quality prosthetics and orthotics that help 

them live active and healthy lives, and CMS continues to ensure they have access to appropriate 

prosthetics and orthotics. In 2011, the HHS Office of the Inspector General (OIG) released a 

report that found Medicare claims for lower limb prosthetics had a high improper payment rate. 

CMS is working to educate providers and suppliers on Medicare coverage and documentation 

requirements for lower limb prosthetics to reduce the improper payment rate. In addition, CMS 

is developing a clinical template in consultation with prosthetic and orthotic suppliers to assist 

providers in complying with Medicare coverage policies. 

Question 5 

The Administration has indicated its strong interest in taking action to repeal the SGR. 

The President's budget, for example, would replace the current Medicare physician 

payment system by instituting a period of stable payments for providers and then 

transitioning into new accountable payment models. What role could the Center for 
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Medicare and Medicaid Innovation play in the development of these models and how 

would the agency engage providers and payers in the process? 

Answer: We are testing a variety of models that improve care quality, coordinate care, and 

reduce the total cost of care that may help inform reforms to physician payments. 

For example, the Comprehensive Primary Care Initiative is a multi-payer initiative where CMS 

pays primary care providers monthly care management fees for comprehensive care management 

on top of their regular Medicare Fee-for Service payment. After two years, CMS offers the 

providers the chance to share in any savings they generate. Other payers, often including 

Medicaid, are also providing enhanced payment for primary care services. 

Another model is the accountable care organization (ACO). In addition to the Medicare Shared 

Savings Program, we are testing the Pioneer ACO model and the Advance Payment ACO model. 

ACOs involve groups of doctors, hospitals, and providers that accept accountability for 

providing high quality coordinated care to Medicare beneficiaries. ACOs are eligible for shared 

savings and may be subject to losses. 

Finally, the Bundled Payments for Care Improvement initiative is comprised off our broadly 

defined models of care, which link payments for multiple services beneficiaries receive during an 

episode of care. We think episode-based payment has the potential to transform the delivery 

system. 

Question 6 

Both the GAO and MedPAC have looked at the Medicare in-office ancillary services 

exception (I0ASE), but neither has actually recommended repealing it. Yet, the 

President's budget seeks to exclude certain services from the IOASE. The administration's 

proposal would exclude "radiation therapy, therapy services, and advanced imaging from 

the in-office ancillary services exception to the prohibition against physician self-referrals 

(Stark law), except in cases where a practice meets certain accountability standards, as 

defined by the Secretary" and results in a savings of$6.1 billion over 10 years. I have 

several questions about this proposed policy. First, why did the administration decide to 

exclude these services from the IOASE? Second, when OMB modeled this proposal, how 

did they define "accountability standards?" Third, could you please share the analysis and 

the data used to determine the $6.1 billion savings? 

Answer: The in-office ancillary services exception was intended to allow physicians to selfrefer quick turnaround services. While there are many appropriate uses for this exception, certain 

services, such as advanced imaging and outpatient therapy, are rarely performed on the same day 

as the related physician office visit. For example, according to MedPAC's 2010 annual report, 

MRI and CT services were performed on the same day as an office visit less than a quarter of the 

time, with only 8.4 percent ofMRI scans of the brain being performed on the same day as an 

office visit. Additionally, evidence suggests that this exception may have resulted in 

overutilization and rapid growth of certain services. In a report released last September, GAO 

found that in 20 I 0, providers who self-referred likely made 400,000 more referrals for advanced 
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imaging services than they would have if they were not self-referring. GAO found that these 

additional referrals cost Medicare about $109 million. 

Effective calendar year 2015, the President's proposal would seek to encourage more appropriate 

use of select services by excluding radiation therapy, therapy services, and advanced imaging 

from the in-office ancillary services exception the prohibition against physician self-referrals 

(Stark law), except in cases where a practice meets certain accountability standards, as defined 

by the Secretary. 

Questions from Senator Grassley 

Ouestion 1 

Background: You sent a letter to eMS in 2011 asking about its policies on communicating 

with the political intelligence community. eMS replied a month later saying it did not 

track meetings with political intelligence firms. However, eMS does have policies in place 

concerning the dissemination of information to the public. 

On April 4, 2013, the WSJ reported that Height Securities successfully predicted eMS's 

policy decision on MA plans. Height Securities sent out an alert to clients at 3:42 pm 

successfully predicting eMS's policy decision on MA. This had major consequences on the 

market. 

You sent a letter on April 4, 2013, asking eMS who they told this information to prior to 

publicly releasing the information. This question follows up on your most recent letter to 

eMS. 

Lead-In: Ms. Tavenner, I have been impressed with you in our meetings. I think you 

would make a fine Administrator and want to be able to support your confirmation. But 

we have a problem here. 

On Monday, Aprill, 2013, at 3:42 p.m., Height Securities sent an advisory that told their 

clients of the eMS Medicare Advantage policy decision and that they supported related 

stocks. 

The consequence of a political intelligence firm having access to this information 18 

minutes before the market closed was astonishing. 

In the 18 remaining trading minutes on April 1, the volume of Humana, 

UnitedHealthGroup, and Aetna's stock was more than a half BILLION dollars! More 

stock in those companies was traded in those 18 minutes than throughout the rest ofthe 

day. When information leaks from the Administration that has the ability to cause 

significant market movement, it is wrong and quite possibly illegal. 

I sent a letter last Thursday formally seeking specific information from you. Ultimately 

you are responsible here. 

What you are doing to hold someone accountable for this leak? 
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Answer: I share your concern with the news that an outside entity issued an advisory about the 

2014 Medicare Advantage rates before CMS announced the rates. Given the seriousness of the 

issue, the HHS Acting General Counsel has referred the matter to the HHS Office of Inspector 

General. As you know, the IG has the investigative expertise to request and review relevant 

agency documents and to conduct any interviews with agency personnel that it deems necessary. 

I am committed to ensuring that CMS safeguards confidential and non-public information and 

intend to use the results of the OIG investigation to improve our processes as appropriate. I 

appreciate what you have done in this area and look forward to working with you to safeguard 

sensitive government information. 

Ouestion 2 

IF TAVENNER SAYS THAT SHE DOES NOT KNOW WHO THE LEAK WAS AND 

THAT IT WASN'T CMS AND THEY ARE CONDUCTING mEIR OWN 

INVESTIGATION. 

Thank you, Ms. Tavenner. I appreciate that you have started an investigation of your own. 

For it to be credible, you need to be including the Health and Human Services, Office of 

Inspector General. I'd be curious what authority your investigation has to compel the 

production of information within CMS. I'd be even more curious what authority your 

investigation has to compel the production of information at HHS, OMB or the White 

House. 

But how about his •.• why don't we work together? 

You can speak softly and I will bring a big stick. 

I don't believe you can get to folks at HHS or OMB or the White House without help. 

The sooner we figure out where the leak is, the sooner we can get you confirmed. 

Ouestion3 

Last year, CMS suspended implementation of the Quality Indicator Survey (QIS) for 

nursing homes. Why did CMS suspend implementation ofthe QIS? When will CMS 

resume implementation? How long do you expect it will take CMS to complete QIS 

training in every state? How do you plan to avoid similar complications or any other 

problems that would prevent a quick transition to the new survey system? 

Answer: CMS temporarily suspended implementation of the QIS based on feedback from states 

and regions about some hardware and software issues that could impact time on surveys or 

survey effectiveness. In addition, survey time for the QIS States has tended to exceed the survey 

time required for the traditional survey. This will require some redesign of the QIS survey 

before we can enable expansion to additional States within the available survey budget. We 

determined that addressing and resolving these issues before further implementation would 

facilitate a more effective computer-assisted survey process. 

CMS has already begun to bring on a few additional states through partnerships with states that 

have already successfully implemented QIS. We are evaluating the ability to bring on each new 
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state and are also looking at a multi-year strategy for completing the transition to QIS in all 

states. While we continue to address issues related to hardware, software, and survey time 

required for the QIS survey are resolved, CMS will continue to take a very deliberate approach 

to expanding QIS to additional states. 

We anticipate that completing QIS training in all states will take several years, especially in the 

largest states. CMS is also exploring new training strategies such as regional and state-based 

training models with reduced time to competency. 

Question 4 

Last year, CMS promoted an initiative to address overutilization of anti psychotics in 

nursing homes. The stated goal of the initiative was to reduce antipsychotic use 15 percent 

by the end of2012. Early projections indicate the initiative yielded an underwhelming four 

percent decrease. What caused the initiative to fall so short of its goal? Do you plan to 

continue the initiative this year? If yes, what are the goals for 2013 and what will CMS do 

to meet those goals? 

Answer: The Partnership to Improve Dementia Care is a national partnership to improve 

dementia care and optimize behavioral health for nursing home patients. By improving dementia 

care and person-centered interventions for behavioral health in nursing homes, this collaboration 

between federal and state partners, providers, advocacy groups, and caregivers set an ambitious 

goal; to reduce the national prevalence rate of antipsychotic medication use in nursing home 

residents by 15 percent by the end of2012. 

Partners used strategies such as enhanced training, increased transparency, and alternatives to 

antipsychotic medication to work toward this goa\. In addition, to address this challenge in the 

long-term CMS is conducting research to better understand the decision to use antipsychotic 

drugs in residents with dementia. Findings will be used to target and implement approaches to 

improve the overall management of residents with dementia, including reducing the use of 

antipsychotic drugs in this population. 

Early indications suggest that we are nearly halfway to our initial, ambitious goa\. Additionally, 

partner reported data indicates that three states have met or exceeded the 15 percent goa\. Given 

the short amount oftime the Partnership has been working, we consider this reduction a modest 

success. We also have data that suggests this rate of reduction may be increasing; more states 

and regions have become partners and are implementing changes. CMS believes that this 

initiative is facilitating changes that will be sustainable over time, and we will continue efforts to 

reduce the use of unnecessary antipsychotic medication in nursing homes. We intend to continue 

the National Partnership and believe that we will reach the goal of 15 percent reduction in the 

national prevalence rate in 2013. 

Question 5 

Accurate information about staffing levels is one ofthe most important quality indicators 

to measure nursing home quality. The current collection method allows nursing homes to 

self-report staffing data which has proven to be terribly unreliable. The Affordable Care 

Act required CMS to start collecting staffing data from payroll records, agency contracts, 
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and cost reports. The deadline to implement this requirement was March 2012. Why has 

CMS still failed to implement this important reform? What has CMS done to move toward 

this new data collection method and when will it be fully implemented? 

Answer: As part of a long-term plan to increase the accuracy and comprehensiveness of staffing 

data, CMS has been evaluating the use of payroll data as a basis for the information on Nursing 

Home Compare. Payroll data can be used to calculate measures of staff turnover and staff 

retention in addition to supporting more accurate calculation of the staffing measures currently 

posted. A two phase field study of the feasibility of collecting payroll data was completed. The 

first phase involved interviewing nursing homes, nursing home corporations, and payroll 

vendors. The second phase included providing data specifications to a sample offacilities to 

determine their capacity to generate and submit data. This second phase was achieved through a 

payroll-based staffing reporting pilot program in approximately 100 nursing homes in June 2012. 

This pilot program ended in December 2012 and yielded a great amount of complex data. As we 

analyze the results of the pilot project, we will work to determine the amount of resources 

needed to continue implementing this provision of the Affordable Care Act. 

Questions from Senator Crapo 

Ouestion 1 

Regarding Ambulatory Snrgical Centers - In a recent article in TIME Magazine called "A 

Bitter Pill: Why Medical Bills Are Killing Us." One ofthe conclusions of the increase in 

Medicare payments is the lack of competition and too much consolidate among hospitals in 

the nation. I have historically been an advocate of choices and competition in the 

healthcare marketplace. Unfortunately, there is a growing trend of physician practices, 

Ambulatory Surgical Centers, oncology centers and other providers being purchased by 

hospitals. In April, I requested data, with several of my colleagues on the impact that these 

purchases/conversions had on ASCs. I received a final answer in September. Is there 

something that Congress needs to do to provide CMS with greater statutory authority to 

measure how these changes are impacting costs in the Medicare program? 

Answer: We are aware that hospital acquisitions of other health care entities such as physician 

practices have been commonplace in the last few years. One ofthe ways that we are 

encouraging competition in hospital markets is through the operation of the Medicare 

accountable care organizations (ACOs). We believe that competition among ACOs will foster 

improvements in quality, innovation, and choice for Medicare beneficiaries. The antitrust 

agencies (Department of Justice and Federal Trade Commission) are monitoring the competitive 

effects of ACOs. These agencies issued guidance for providers seeking to become ACOs and 

established a voluntary expedited review process to give feedback to providers on potential anticompetitive activities. 

CMS is providing aggregate claims data to the antitrust agencies to assist them in their 

monitoring efforts to ensure ACO formation and implementation does not have a detrimental 

effect upon competition. The antitrust agencies have existing enforcement processes for 

evaluating concerns raised about an ACO's formation or conduct. In addition, we believe the 

testing of the Advance Payment ACO model had led to increased participation by smaller 
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organizations in the Medicare Shared Savings Program, thus increasing competition. I would be 

happy to work with you and your staff on how we can improve on these efforts. 

We also understand the published fiscal year 2012 Work Plan for the Department of Health and 

Human Services Office of Inspector General (OIG) includes work related to ASCs. Specifically, 

they plan to do an ASC payment analysis and also relayed an interest in looking into hospital 

acquisitions of ASCs. We look forward to the OIG findings and recommendations. 

Question 2 

Medicare Part D - In its 2014 Call Letter, CMS identified potential issues with preferred 

networks in the Part D program. Specifically, CMS expressed concern that preferred 

networks may be costing the Medicare program more than open networks, and beneficiary 

access to care may be threatened especially in rural areas. This is worrisome to me because 

the Part D program was made to drive down costs to the system and ensure more choice 

and access to beneficiaries and has been delivering on this goal so far. 

Can you tell me what potential issues CMS has identified with preferred networks and 

what CMS plans to do to make sure that preferred networks in Medicare Part D plans are 

not hindering beneficiary access to their prescriptions and are following their current goal 

of decreasing costs in the Part D program? 

Answer: Part D regulations that pennit lower cost sharing at some "preferred" network 

pharmacies also require that such cost sharing reductions must not increase CMS payments. In 

order to ensure that Part D sponsors with preferred pharmacy networks are meeting this 

requirement, we have begun to scrutinize Part D drug costs in PDPs with preferred networks, and 

comparing these to costs in the non-preferred networks, as well as to costs in PDPs without 

preferred networks. Our initial results suggest that for some plans, aggregate unit costs weighted 

by utilization (for the top 25 brand and top 25 generic drugs) may be higher in preferred 

"networks than in non-preferred networks. Combined with lower cost sharing, we are concerned 

that these higher unit costs may violate the requirement not to increase payments to such plans. 

We have contacted the plan sponsors identified in our analysis to initiate the validation of our 

findings. 

As we indicated in the 2014 Call Letter issued April I, we strongly believe that including any 

pharmacy that can meet the tenns and conditions of the preferred arrangements in the sponsor's 

preferred network is the best way to ensure that such networks promote price competition and 

lower costs in the Part D program. Opening preferred pharmacy networks to any pharmacy that 

can meet the network's tenns and conditions would also likely mitigate some beneficiary 

disruption and travel costs, especially in rural areas. Extending this policy to all Part D sponsors 

would require rulemaking by CMS. We welcome your ideas to ensure that the Part D program 

remains strong. 

Question 3 

Regarding Patient Protections- Non-Discrimination Rule - In Round 1 of CDP, suppliers 

limited the range of products offered to Medicare beneficiaries. CMS anticipated this 

problem in the CDP and established a rule that requires, "The items furnished by a 
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contract supplier ..• must be the same items that the contract supplier makes available to 

other customers." CMS reasoned, One of the main objectives of the Medicare DMEPOS 

Competitive Bidding Program is to ensure that beneficiaries have access to quality 

DMEPOS. Therefore, we have built safeguards into the competitive bidding program to 

ensure there is continued access to quality medical equipment and supplies. We believe the 

nondiscrimination clause will ensure that Medicare beneficiaries have access to the same 

items as other as individuals. 

CMS wanted to ensure that Medicare beneficiaries receive the same items that the contract 

supplier would furnish to other customers. 

Given that Congress extended the CBP single payment amount to retail settings, retailers 

will now have the same financial incentives to limit the range of diabetes testing supplies 

available. A group of stakeholders recently asked CMS to extend these patient protections 

to the retail channel, and CMS responded that it would monitor implementation to see if 

these protections prove to be necessary. If CMS felt that these protections were necessary 

to protect beneficiaries in anticipation of the CBP in mail order contexts, why does the 

agency not think that these same protections will be necessary in retail settings? Why wait 

and monitor? 

Answer: Retail pharmacies do not have the same incentives to provide certain items as mailorder contract suppliers. We note that retail pharmacies do not have to bill Medicare on an 

assignment-related basis, while mail-order contract suppliers do, and therefore can charge 

customers more than the Medicare-approved amount for diabetic test strips (which is commonly 

referred to as balance billing). Notice and comment rulemaking was required to include the nondiscrimination requirement as a term of the contract for suppliers under the national mail-order 

program for diabetic testing supplies. CMS will be closely monitoring access to necessary 

diabetic supplies following implementation ofthe new payment amounts, but we do not believe 

it is necessary to initiate rulemaking for the retail setting at this time. 

Questions from Senator Isakson 

Ouestion 1 

The Patient Protection and Affordable Care Act reduces Medicare spending by $750 billion 

over the next 10 years to pay for new health care programs. One of the largest of the law's 

Medicare cuts is a "productivity adjustment" that reduces the annual inflation updates to 

provider reimbursements. These productivity adjustments will have a compounding effect 

over time, and when the law was passed, the CMS Office of the Actuary projected that they 

would cause about 15 percent of hospitals, skilled nursing facilities, hospices, and other 

Part A providers to become unprofitable within the next 10 years. I am concerned that this 

may have an especially severe impact on rural areas, where providers are less able to shift 

costs to patients with private insurance. Already this year, two rural hospitals in my state 

have been forced to close their doors and have cited reimbursement cuts as a major factor. 

Do you believe your actuaries' projection is accurate? What are you doing to monitor the 

impact of these cuts and how will you act to prevent Medicare beneficiaries from losing 

access to care when their local providers close down? 
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Answer: The Affordable Care Act includes a number of important delivery system reforms that 

will enable Americans to get better care at lower costs and will help the health care system 

operate more efficiently. We continue to carefully monitor access to services,and to date, access 

to services remains strong. Hospitals will also benefit from the insurance coverage expansions in 

the Affordable Care Act, adding new sources of revenues for most health care providers. 

Furthermore, a number of provisions in the Affordable Care Act designed to strengthen the 

health care workforce, such as Medicare payment bonuses for primary care providers and 

providers in underserved areas and investments in health professional training programs to 

increase supply. We will continue to carefully monitor access to ensure our policies continue to 

lower costs while maintaining access to quality services. 

Question 2 

I appredate the work you and CMS have been doing to move the Medicare payment 

system away from silos and toward rewarding high-value care. One area where I've been 

concerned that current payment policies do not support the provision of the right care in 

the right setting is the lack of coverage for infusion therapies that can be provided in the 

home setting. In many cases, receiving infusion treatment at home is clinically appropriate 

and has the potential to reduce costs as well as preventing hospital acquired infections. 

Many private payers provide coverage for home infusion and have achieved positive 

results, but Medicare still lacks coverage for many of the services and supplies associated 

with home infusion. Would you agree that we ought to explore Medicare coverage for 

home infusion therapy to ensure that seniors and people with disabilities have access to this 

life-preserving treatment in whatever setting is most clinically appropriate and convenient 

for them? 

Answer: We agree that it is important that seniors and people with disabilities have access to 

life-preserving treatment in the most clinically appropriate setting. Medicare covers certain 

items and services for home infusion therapy. Generally, infusion pumps, as well as drugs and 

other supplies necessary for the effective use of the infusion pumps, are covered under the 

durable medical equipment (DME) benefit under Medicare Part B for treatment of certain 

conditions. In addition, the services of a home health nurse required to administer the 

medications safely and effectively may be covered under the home health benefit for those who 

qualifY for home health services, provided the services are reasonable and necessary to the 

treatment of the illness or injury. Home infusion supplies are covered under the home health 

benefit, only when related to "gravity" infusion. Beneficiaries who do not qualifY for home 

health services have access to these services and supplies in hospitals, outpatient'departments, 

and physician offices. Infusion drugs are also covered for those enrolled in the Part D benefit. 

The Part D plan is responsible for ensuring that beneficiaries have the necessary services and 

supplies for home infusion therapy before dispensing the infusion drugs. 

Medicare does not have a distinct home infusion benefit. Adding a home infusion benefit to the 

Medicare program would require a statutory change. In the recently enacted, "Medicare IVIG 

Access and Strengthening Medicare and Repaying Taxpayer Act of2012," CMS is required to 

establish and implement a demonstration project under Medicare Part B to evaluate the benefits 

of providing payment for items and services needed for the in-home administration of 
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intravenous immune globin. This demonstration project may provide insight into the benefits of 

a Medicare home infusion therapy benefit. 

Question 3 

Children with complex medical conditions represent approximately five percent ofthe 

children enrolled in Medicaid, but account for about 45 percent of Medicaid spending on 

children. Medicaid is critical to this population, but often our current system leaves them 

with fragmented care that does not work for them. How do you envision CMS will 

approach improving care coordination for children with complex medical needs and how 

will CMS partner with stakeholders as it addresses the needs oftbis population in 

Medicaid? 

Answer: CMS is working with state Medicaid programs to test medical homes for individuals 

with disabilities and complex health conditions, including high-risk chronically ill children. 

These Health Homes will operate under a "whole-person" philosophy to integrate and coordinate 

all primary, acute, behavioral health, and long-term services and supports to treat the whole 

person. Some ofthe Innovation Challenge A wards are also testing new ways to better care for 

such children, such as extending the skills available at a children's hospital to communities to 

care for children with chronic illness like asthma. 

Additionally, CMS has released the Initial Core Set of Child Health Care Quality Indicators for 

Medicaid and CHIP, established for voluntary use by state Medicaid and CHIP programs, which 

includes a range of children's quality measures encompassing both physical and mental health, 

including chronic conditions such as asthma and diabetes. CMS' Pediatric Quality Measures 

Program and the Pediatric Electronic Health Record Format also represent other initiatives the 

agency is pursing to help improve the health and care children enrolled in our programs receive. 

Question 4 

At a February 14 hearing before the Senate Finance Committee, I asked CCIIO Director 

Gary Cohen about the Administration's preparations for transitioning enrollees in the Preexisting Condition Insurance Plan (pCIP) to coverage through the exchanges. Public health 

officials in my state have been concerned about the lack of a clear plan for ensuring 

continuous care for these vulnerable patients. I was somewhat disturbed that while Mr. 

Cohen did not answer my question about whether the Administration expected to cut off 

enrollment in federally-run PCIPs, CMS announced the following day that new enrollment 

would be cut off effective immediately. In a subsequent conversation with my staff, CMS 

staff acknowledged that they will need to issue additional guidance regarding the 

"hand oW' of enrollees from PCIP to federal exchanges, but could not provide any 

information about when this guidance might be issued. When will CMS issue detailed 

guidance on how you plan to transition enrollees from PCIPs to federally facilitated 

exchange coverage? Also, what is CMS's contingency plan in the event that PCIP funding 

runs out before exchanges are ready for enrollment? 

Answer: Open enrollment for plans in the new Marketplaces begins October 1,2013, for 

coverage beginning January 1,2014, which generally coincides with the statutory end of the 

PCIP program. To help effectively transition PCIP members who wish to enroll in a qualified 
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health plan offered through the new Marketplaces, we are working with our PCIP contractors to 

ensure enrollees in both state-based PC IPs and the federally-administered program receive 

information about the new Marketplace. Specifically, we are developing three notices that will 

be sent to enrollees in federally-administered PCIP over the next several months explaining that 

PCIP coverage ends after December 31, 2013, describing the Marketplaces, how to enroll in 

coverage, and where enrollees can get assistance with enrolling in coverage. Additionally, we 

have directed our contractors to update their PCIP websites with transition content, train 

customer service representatives, and provide adequate staffing at their call centers during the 

last quarter of calendar year 2013 and the first quarter of calendar year 2014 to handle 

anticipated calls from transitioning enrollees. CMS is aggressively managing costs in the federal 

PCIP program and has taken a variety of steps to ensure that the limited funds provided by the 

Affordable Care Act are applied efficiently in funding patient care and program administration. 

These include a change in provider networks used by the federally-administered PCIP, reducing 

both its negotiated and out-of-network payment rate for providers; negotiation of additional 

discounts on reimbursement rates with targeted hospitals that were treating a disproportionate 

number ofPCIP enrollees; limiting the specialty drug benefit to provide coverage only if the 

specialty drug is dispensed by an in-network pharmacy, and; consolidation of three benefit plan 

options into one, increasing the maximum out-of-pocket limit from $4,000 to $6,250 for innetwork services. 

Question 5 

Over 5 million people in the United States have Alzheimer's disease. Getting a clear and 

early diagnosis is an important part of addressing this disease. Leading experts, including 

IllIS's own Alzheimer's website, stress the value of a timely and accurate diagnosis of 

Alzheimer's disease. Early diagnosis allows families to better plan for the course of the 

disease and caregiving needs, and it allows patients and medical experts to explore various 

treatments that may be able to help delay or mitigate symptoms associated with 

Alzheimer's. Diagnosing Alzheimer's has long been a challenge for the medical community, 

but new technologies are emerging that can help determine whether memory problems are 

resulting from Alzheimer's or another condition. What will you do to ensure that Medicare 

beneficiaries have appropriate and timely access to these diagnostic tools and other new 

innovations as they are approved by FDA? 

Answer: CMS agrees that tackling Alzheimer's disease is a national priority. We are an active 

participant in the National Plan to Address Alzheimer's Disease, established by the Department 

of Health and Human Services (HHS) pursuant to the National Alzheimer's Project Act (NAPA) 

enacted in January 2011. The National Plan sets forth five goals, including the development of 

effective prevention and treatment approaches for Alzheimer's disease and related dementias by 

2025. A National Alzheimer's Project Advisory Council (including a senior CMS 

representative) meets quarterly to discuss the efficacy of government programs in this area, and 

annually evaluates and updates the National Plan. 

We are also actively engaged in reviewing new technology to ensure timely access to innovation 

for our beneficiaries. In October 2012, we opened a National Coverage Analysis (the first step in 

the National Coverage Determination (NCO) process) to reconsider a prior NCD on the use of 

Positron Emission Tomography (PET) scans, which provided national coverage of PET using 
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only specified radioisotopes for certain indications, and conditional coverage for additional uses 

under the process known as Coverage with Evidence Development (CED). Reconsideration of 

this NCD was requested by a stakeholder to consider coverage of PET using a new type of 

radiopharmaceutical approved by the FDA in 2012 to image beta-amyloid plaques in certain 

patients being evaluated for Alzheimer's disease and other causes of cognitive decline. To help 

inform this evidence review, we convened a meeting of the Medicare Evidence Development and 

Coverage Advisory Committee (MEDCAC) in January 2013. A proposed coverage decision is 

expected by July 2013, with a final decision (including consideration of public comments) 

expected by October 20i3. 

Question 6 

Hospitals in my state have raised a number of concerns about Medicare's Recovery Audit 

Contractor (RAC) program, arguing that compliance with RAC audits is a severe burden 

on both their finances and time, and that the vast majority ofRAC denials are overturned 

on appeal. The RACs maintain that they are working to safeguard the Medicare Trust 

Fund by correcting improper payments, and that only a small percentage oftheir 

recoveries are overturned. Given your background as a hospital administrator, I would be 

interested to hear your personal views on how this program is working. What, if any, steps 

is CMS taking to ensure that there is an adequate balance between protecting the Trust 

Fund and avoiding an undue burden on health care providers who are trying in good faith 

to comply with the law? To the extent that a significant number of RAC denials are being 

overturned, especially at the Administrative Law Judge level, are there structural changes 

that could be made to the program to improve consistency and sharpen the focus on truly 

improper payments? 

Answer: Recovery Audit Contractors are an important tool in reducing improper payments and 

recovering overpayments. CMS is sensitive to the concerns of hospitals and suppliers, and 

continues to work with these communities to reduce the burden of the Recovery Audit review 

process. CMS has undertaken several efforts to help reduce provider burden. These include 

imposing additional limits on the number of medical records a Recovery Auditor may request, 

ensuring claims are not being reviewed by multiple Medicare entities, and allowing providers to 

send medical documentation electronically to Recovery Auditors. CMS understands that 

additional staffing is often required to address Recovery Auditor documentation request and we 

are constantly working to ensure providers can respond to requests without compromising 

beneficiary care. 

CMS also strives to reduce the appeal rate to decrease provider burden and administrative costs. 

Recovery Auditors are required to return any contingency fee if an improper payment is 

overturned on appeal, which creates an incentive to make accurate improper payment 

determinations. In FY 2011, 2.9 percent of all Recovery Auditor determinations were overturned 

on appeal. In addition, Recovery Auditors are subject to performance evaluations that hold them 

accountable for activities such as timely reviews of audits. 

Question 7 

The Patient Protection and Affordable Care Act included several incentive programs for 

primary care physicians. While I agree that we need to increase the primary care 
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workforce, I have heard concerns from some physician groups that these incentive 

programs do not adequately account for the need for cognitive care specialists, such as 

neurologists and rheumatologists. These specialists primarily bill"Medicare under 

evaluation and management (E&M) codes, rather tban procedural codes, and are not as 

highly compensated as the procedural specialties. However, they are ineligible for incentive 

programs that are specifically targeted to primary care. The March 2013 report of the 

National Commission on Physician Payment Reform, chaired by former Senate Majority 

Leader Bill Frist, recommended that physician payment reform should differentiate 

between E&M codes and procedural codes, rather than between primary care physicians 

and specialists. Would you agree that efforts to strengthen the primary care workforce 

should also include cognitive specialties that are similarly facing workforce shortages? 

Answer: Ensuring that beneficiaries of our programs have access to providers to furnish the 

care they need is important. We support efforts to strengthen the health care workforce that 

provide the full range of services that a beneficiary needs including the services of cognitive 

specialties. We recognize that a range of responses is needed to address workforce shortages in 

various geographic areas and among different specialists. I look forward to working with you to 

continue to develop and implement measures to address this issue. 

Question 8 

Round 2 of the durable medical equipment competitive bidding program is set to take 

effect on July 1 in 91 metropolitan areas across the country, including Atlanta and 

Augusta. Suppliers in my state are very concerned about the sustainabiIity of this program 

in its current form. I have heard anecdotal accounts of companies winning bids despite 

having no presence in the local region and no demonstrated ability to supply the type of 

medical equipment for which they were bidding. Some winning bidders appear to be 

desperately trying to find existing suppliers to subcontract, or even sell their business. Also, 

due to the "median price" structure employed by CMS, some suppliers report being 

offered contracts at prices significantly below their bids. If these suppliers determine tbey 

cannot accept the offered price, it is unclear to me how Medicare plans to ensure that there 

is adequate capacity to supply beneficiaries in these markets. What specific mechanisms 

are you putting in place to ensure that any access issues arising in Round 2 regions are 

promptly identitied, and how will identitied problems be corrected? What steps are you 

taking to monitor and verify the quality ofDME supplies under competitive bidding? 

Answer: eMS is confident that the Round 2 and national mail-order program single payment 

amounts provide appropriate payment for the equipment, supplies and related services. All 

bidders are evaluated to ensure that they meet all applicable state licensure requirements, 

financial standards, quality standards and accreditation requirements, and other program 

requirements. All bids submitted under the program are screened and evaluated to ensure that 

they are bona fide. eMS selects more than enough qualified suppliers to meet beneficiary 

demand for each product category in each area. 

In addition, eMS has implemented a robust monitoring program to track and resolve any issues 

that might occur with program implementation. To date, the program has maintained beneficiary 

access to quality products from accredited suppliers in the Round I Rebid areas. Extensive real-
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time monitoring data have shown successful implementation with very few beneficiary 

complaints and no negative impact on beneficiary health status based on measures such as 

hospitalizations, length of hospital stay, and number of emergency room visits compared to noncompetitive bidding areas. In addition to our real-time claims monitoring, CMS also requested 

feedback from beneficiaries through consumer satisfaction surveys conducted before and after 

the rollout of the program. CMS provides a local, on-the-ground presence in each competitive 

bidding area through the CMS regional offices and local ombudsmen, who closely monitor 

implementation of the program. There is also a formal complaint process for beneficiaries, 

caregivers, providers and suppliers to use for reporting concerns about contract suppliers or other 

competitive bidding implementation issues. In addition, contract suppliers are responsible for 

submitting quarterly reports identifying the brands of products they furnish, which is used to 

inform beneficiaries, caregivers, and referral agents. Finally, CMS has appointed a Competitive 

Acquisition Ombudsman who responds to complaints and inquiries from beneficiaries and 

suppliers about the application of the program and issues an annual Report to Congress. CMS 

will employ the same aggressive monitoring program for the competitive bidding areas added in 

Round 2. 

And to the extent an issue arises, CMS will act promptly to address it. If a supplier does not 

meet its contractual obligation, CMS may take one or more of the following actions: require the 

contract supplier to submit a corrective action plan; suspend the contract supplier's contract; 

terminate the contract; preclude the contract supplier from participating in the competitive 

bidding program; revoke the supplier's billing privileges; or impose other remedies allowed by 

law. 

With regard to the quality of supplies, Medicare requires that all suppliers in the program meet 

applicable state licensure requirements, meet strict quality and business standards, and be 

accredited by a national accreditation organization. Quality product-specific service standards 

include intake, delivery and setup, training and instruction of the beneficiary and/or their 

caregiver, and follow-up service. Business standards focus on administration, financial 

management, human resource management, consumer services, performance management, 

product safety, and information management. The quality standards ensure that Medicare 

beneficiaries only receive products as ordered by their physician. Products must meet applicable 

quality standards and be provided by qualified professionals. 

The program includes an anti-discrimination policy, meaning that suppliers have to offer their 

Medicare beneficiaries the same products they offer their other customers. This applies to all 

product categories. 

All items furnished under the competitive bidding program must meet applicable Food and Drug 

Administration requirements, including regulation and medical device effectiveness and safety 

standards. CMS believes beneficiaries are receiving quality items under the competitive bidding 

program because the agency has received few inquiries and complaints about the program and 

because the real-time monitoring shows that there have been no changes in beneficiary health 

status outcomes resulting from the competitive bidding program. 
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Question 9 

CMS recently responded to a letter that I sent along with Senator Chambliss regarding CY 

2013 changes in Medicare reimbursement for proton beam therapy. Emory University is 

currently developing the Georgia Proton Therapy Center, a state-of-the-art facility that 

will bring this life-saving treatment to residents of Georgia. In the response to our letter, 

CMS stated that ''we did not exclude the purportedly aberrant data in setting the final CY 

2013 payment rates for these services." I continue to have serious concerns with CMS's 

action because it is my understanding that only three hospitals submitted cost report data 

with respect to this therapy, and one of them subsequently identified an. error in the initial 

data submission and provided corrected data. Does CMS have any process for addressing 

errors of this nature, particularly in cases like this where one entity's cost report can have 

a significant impact on the aggregate data? Will you commit to working with us to ensure 

that this erroneous data is not perpetuated in future rate setting processes? 

Answer: We understand your concern that payment for these proton beam therapy services be 

accurate in order to provide these services to Medicare beneficiaries. Because few hospitals bill 

Medicare for proton beam therapy, and because we rely on the data submitted to us by hospitals 

in setting annual hospital outpatient prospective payment system (OPPS) rates based on our 

standard OPPS rate setting methodology, the payments for these services may vary over time. 

Each year, CMS updates payment rates using claims and cost report data reported by hospitals 

that pass edits and are paid through our claims processing system. An integral part of this 

process is our reliance on hospitals to code claims accurately and to subm it accurate cost report 

information on a timely basis, CMS will update the OPPS payment rates this year for the CY 

2014 rates, once again using the most recently available claims and cost report data submitted by 

hospitals and relying on hospitals to ensure accuracy of the data submitted. 

Question 10 

Section 644 of the American Taxpayer Relief Act of 2012 rescinded most unobligated funds 

for the Consumer Operated and Oriented Plan (CO-OP) Program. It also created a reserve 

fund of approximately $190 million to provide "assistance and oversight" to health 

insurance issuers who had already received loans or grants under the program. I was 

recently contacted by an organization in my state that had applied for CO-OP funding, 

Since they did not receive an award prior to the end of 2012, they understand that they will 

not be eligible to receive start-up funding. However, they noted that CMS's original 

funding announcement stated that applicants could receive up to $100,000 to cover the cost 

of preparing a feasibility study and business plan. Since they had already incurred this cost 

prior to the rescission; they are trying to determine whether they can stiU obtain 

reimbursement for these expenses and have not been able to get an answer from CMS on 

this question. 'Could you look into this issue and determine whether CMS has the authority 

to provide this limited reimbursement for already-incurred expenses from the CO-OP 

contingency fund? 

Answer: The CO-OP Funding Opportunity Announcement noted that costs up to a total amount 

oUlOO,OOO for preparing the feasibility study and business plan required with the application 

was considered an eligible cost for the Start-Up Loans. Loans for these costs were only provided 

to successful applicants who were awarded Start-Up Loans. 
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As you know, the American Taxpayer Relief Act of2012 (Pub. L. 112-240) transfers 10 percent 

of the unobligated balance of funds appropriated by section 1322(g) of the Affordable Care Act 

to a new CO-OP contingency fund and rescinds the remaining 90 percent of the unobligated 

funds. Due to this change in statute, CMS no longer has the authority to make loan awards to 

new borrowers or enter into loan agreements with new borrowers. As a result, CMS denied all 

applicants who did not have loan agreements in place by December 31, 2012 deadline. 

Questions from Senator Enzi 

Question 1 

The Medicare Trustees concluded in their 2012 report that the Medicare Advantage cuts 

included in the health care reform law would result in a 10 percentage point drop in 

enrollment in the program due to the increased premiums and reductions in benefits that 

would result. What is the updated estimated impact on Medicare Advantage premiums and 

benefits by the CMS Office of the Actuary on the combined impact of the Medicare cuts in 

the health reform law on Medicare Advantage and the health insurance tax? 

Answer: The Medicare Advantage (MA) program remains a strong and viable option for 

Medicare beneficiaries. MA premiums for 2013 are stable, increasing less than a $1.50 from last 

year and as of February 2013; total MA enrollment is 14.5 million, up from 13.1 million in 2012, 

an increase of II percent. Beneficiary access to the MA program also remains strong, with 99.6 

percent of beneficiaries having access to a MA plan. 

The number of non-employer MA plans for 2013 is 2,704, up from 2,532 in 2012, a 7 percent 

increase. The average number ofMA plans available in a county increased to 28 plans in 2013 

compared to 26 plans in 2012. 

The 2013 Trustees Report will provide updated enrollment and other information regarding the 

Medicare Advantage program. 

Question 2 

In the recently released Call Letter for the 2014 plan year CMS identified concerns it had 

with the use of preferred pharmacy networks in the Medicare Part D program, 

particularly the potential for beneficiary disruption and travel costs, especially in rural 

areas. CMS also indicated it was concerned that the structure of some preferred networks 

may actually be increasing costs for the Medicare program. 

As the use ofthese networks has become more widespread in recent years and is expected 

to continue to grow, what actions has CMS taken, or does CMS plan to take, to ensure that 

the use of preferred pharmacy networks in the Medicare Part D program does not affect 

beneficiary access and health, lessen quality of care or increase costs to the Medicare 

program? 
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Answer: Part D regulations that pennit lower cost sharing at some "preferred" network 

phannacies also require that such cost sharing reductions must not increase CMS payments. In 

order to ensure that Part D sponsors with preferred phannacy networks are meeting this 

requirement, we have begun to scrutinize Part D drug costs in PDPs with preferred networks, and 

comparing these to costs in the non-preferred networks, as well as to costs in PDPs without 

preferred networks. Our initial results suggest that for some plans, aggregate unit costs weighted 

by utilization (for the top 25 brand and top 25 generic drugs) may be higher in preferred 

networks than in non-preferred networks. Combined with lower cost sharing, we are concerned 

that these higher unit costs may violate the requirement not to increase payments to such plans. 

We have contacted the plan sponsors identified in our analysis to initiate the validation of our 

findings. 

As we indicated in the 2014 Call Letter issued April I, we strongly believe that including any 

phannacy that can meet the tenns and conditions of the preferred arrangements in the sponsor's 

preferred network is the best way to ensure that such networks promote price competition and 

lower costs in the Part D program. Opening preferred phannacy networks to any phannacy that 

can meet the network's tenns and conditions would also likely mitigate some beneficiary 

disruption and travel costs, especially in rural areas. Mandating this policy for all Part D 

sponsors would require rulemaking by CMS. We welcome your ideas to ensure that the Part D 

program remains strong. 

Question 3 

The OIG recently released a report stating that gaps exist in CMS's oversight ofthe 

Medicare Plan Finder reporting requirements. How is CMS ensuring that beneficiaries 

have access to all of the information they need about specific plan benefits, including 

whether or not a plan uses a preferred pharmacy network and which pharmacies are 

included in those networks? 

Answer: The Medicare Plan Finder continues to be refined to make sure that it provides the 

most accurate infonnation possible. As of April 2012, a beneficiary is now able to see drug price 

estimates that reflect if the phannacy selected is preferred or non-preferred for a given plan. If a 

phannacy is not in the selected plan's network, the full price of the drug is shown. Concerns 

about the Medicare Plan Finder being time-consuming may be a reflection of the increased 

number of inputs needed to generate an accurate cost estimate. Having the Medicare Plan Finder 

prompt the user for exact drug names, quantity and dosing regimen, Part D plan, subsidy 

eligibility, and choice of pharmacy provides beneficiaries access to highly valuable infonnation, 

to help select the best coverage option and to anticipate medical expenses for the coming year. 

Question 4 

We have heard significant concerns from the kidney care community that patient access to 

dialysis care could be disrupted if Medicare payments for End-Stage-Renal-Disease 

(ESRD) are not properly designed and implemented. I share these concerns, especially as 

they relate to patients in rural or underserved areas, and would appreciate your attention 

to this issue. Will you commit to working with me and my staff to ensure that the 

comprehensive ESRDbundled rate is adjusted fairly without harming patient access and 

quality of care? 
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Answer: We agree with the importance of appropriate payments to ensure access to dialysis 

treatment for ESRD beneficiaries. Section 632 ofthe American Taxpayers Relief Act of2012 

requires that the ESRD prospective payment system (PPS) rate be reduced beginning in 2014 to 

reflect the change in utilization of drugs and biological from 2007 with 2012. Before we make 

any changes to the ESRD PPS rate, we will carefully analyze the data on utilization and include 

the proposed payment change based on the data in a proposed rule for public comment. We will 

review comments taking into consideration issues raised by stakeholders to ensure that 

beneficiaries continue to have access to the medications they need before we make a final 

decision on the payment change. I welcome your input to help us ensure that payments are 

adequate and appropriate in the Medicare ESRD program. 

Ouestion 5 

The 2006 10M report on the Quality Improvement Organization (QIO) program stated 

that the QIOs should remain state-based and that if eMS did not have such a local field 

force to work on quality improvement, it would have to create it. Do you believe that any 

efforts to regionalize the QIO program directly contradict those findings by 10M? 

Answer: As we make plans to determine how to structure the QIO program in the II th SOW, we 

are keenly aware of the recommendations made in the 2006 10M report on Medicare's Quality 

Improvement Organization Program. This was a comprehensive and extensive study with 

multiple recommendations, among them that the QIO program should be updated and focus more 

on technical assistance for performance measurements and improvement. Many of the 

recommendations have already been incorporated into the structure of the program in recent 

years, and the added flexibility of the Trade Adjustment Assistance Extension act of2011 

provides an opportunity to incorporate enhancements that will allow us to achieve large scale 

improvements in health care quality. 

CMS is committed to the continued involvement oflocal physicians working in a community 

with their peers. We agree that improvements in health care occur at the local level and that this 

involvement is essential in many of the QIO improvement projects. While local access will be 

maintained, some quality improvement activities may be carried out more effectively under a 

modified structure that takes advantage ofthe most highly experienced and expert quality 

improvement entities in a region. 

Ouestion 6 

The federal government has invested considerable resources over the last three decades in 

the QIO program so that relationships could be built, so that we could continue to learn 

from past successes in an incremental way, and so that we could have a local field force 

achieving maximum results. Do you feel that a massive switch toward regional QIOs would 

undermine the current program by cutting those relationships and eroding institutional 

knowledge after we've made such a giant investment in the program? 

Answer: CMS is currently in the process of evaluating how to structure the QIO contracts in the 

11th Statement of Work (SOW) using the flexibility and new authority provided in the Trade 
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Adjustment Assistance Extension Act of 20 11. We plan to capitalize on the strengths and 

institutional knowledge of the QIO program that have been built throughout the years. 

Under the 11th SOW that we are developing, we will ensure that no locality will lose access to a 

Medicare QIO. While CMS is still determining the number ofQIO contracts to be awarded, the 

agency will require that every QIO--regardless of the size o fits jurisdiction-reach providers 

and beneficiaries at the local level. We also understand the importance of involvement of 

physicians in the peer review process and understand that the best way improve health care is to 

drive quality improvement at the local level. 

Question 7 

In your testimony, you state that "more than 6.3 million people with Medicare have saved 

more than $6.1 billion on prescription drugs." Please provide more details on how these 

savings have been achieved. I am concerned that the incentives in the coverage gap ofthe 

Part D program encourage people to remain with brand-name drugs, rather than switch to 

cheaper generic products. What steps has CMS taken to incenti"ize the use of generic 

drugs in the Part D program? What can Congress do to improve these incentives? 

Answer: These savings resulted from the one-time rebate provided in 20 I 0 to Medicare 

beneficiaries who hit the Part D coverage gap, as well as the manufacturer discounts on brand 

name drugs provided in the coverage gap. In addition to these savings, beneficiaries are saving 

from increasing coverage for generic medicines in the coverage gap. 

In 20 I 0, Medicare beneficiaries who hit the coverage gap or "donut hole" in the Medicare 

prescription drug benefit received a one-time $250 rebate, under the Affordable Care Act. In 

2011, as a result of the Affordable Care Act, Medicare beneficiaries began receiving a 50 percent 

discount on covered brand name drugs and coverage for 7 percent of the cost of generic drugs in 

the coverage gap. In 2012, Part D covered 14 percent of the cost of generic drugs in the 

coverage gap. Coverage for both brand name and generic drugs in the gap will continue to 

increase over time until 2020, when the coverage gap will be closed. 

The competitive Part D structure implemented through CMS regulation allows Part D sponsors 

the flexibility to implement benefit designs, such $0 or low copays for drugs on the generic tier, 

that incentivize beneficiaries to use lower cost generics. These incentives have been a key factor 

in restraining the growth in per-capita Part D costs. In fact, the Office of the Actuary's most 

recent estimates of trends in per capita Part D costs is resulting in a decrease in the standard 

deductible and out-of-pocket limit for 2014. 

In terms of Congressional action to improve incentives for generic utilization in Part D, the 

President's FY2014 budget includes proposals to lower the generic copayment for beneficiaries 

receiving the Part D Low Income Subsidy while raising copays for brand name drugs in 

therapeutic classes where a generic is available and therapeutic substitution is appropriate. The 

budget also includes proposals that would speed the entry of generic biologics onto the market 

and prohibit brand and generic drug manufacturers from entering into agreements that delay 

availability of new generic drugs and biologics. 
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Questions from Senator Wyden 

Question 1 

Medicare Secondary Payer reimbursements have been an area of concern for me. At the 

close oflast Congress, the SMART Act (p.L. 112-242), which streamlined the Medicare 

Secondary Payer system, became law. When do you expect to begin the process of 

implementing the law? 

I understand that CMS issued an Advanced Notice on Proposed Rulemaking on the issue of 

payment of future medicals costs in reference to Medicare as a secondary payer last year. 

In light of this Advance Notice, I want to be sure that changes will not impact the ability to 

maintain and improve access to services and supports for those individuals who have 

acquired a disability or chronic condition in relation to an unfortunate event resulting in a 

liability settlement. What are you doing to ensure that this rule is fair and won't result in 

consumers losing access to health care? What are your plans, if any, for next steps 

regarding this proposal? 

Answer: Since the enactment of the SMART Act, we have reviewed the legislation and expect 

to implement the law through notice and comment rulemaking so that stakeholders may provide 

feedback on our planned implementation. 

We received over 100 comments on the Advance Notice of Proposed Rulemaking (ANPRM) we 

published on June 15,2012. The ANPRM solicited public input on CMS' proposed options to 

address Medicare Secondary Payer (MSP) future medicals obligations, and it invited 

stakeholders to propose additional options for resolving MSP future medicals obligations. As we 

stated in the ANPRM, we intend to respond to comments received in response to the ANPRM in 

future rulemaking, consistent with the SMART Act. 

Question 2 

Regarding Analysis of Possible Market Consolidation - Given the growing trend of 

consolidation in the health care delivery system, what tools does CMS have at its deposal to 

monitor the impact integration and consolidation may be having on the health system? 

Similarly, what analysis - if any - is being done to identify the impact consolidation might 

be having on Medicare spending? Finally, given the incentives for providers to come 

together in integrated systems, how is CMS evaluating the impact that payment disparities 

between sites might have in incentivizing consolidation of providers? 

Answer: Our efforts to encourage competition in hospital markets include the operation of the 

Medicare accountable care organizations (ACOs). We believe that competition among ACOs 

will foster improvements in quality, innovation, and choice for Medicare beneficiaries. We 

intend to ensure that appropriate monitoring of the competitive effects of ACOs is underway by 

coordinating closely with the antitrust agencies (Department of Justice and Federal Trade 

Commission) throughout both ACO application process and the Medicare ACO's participation in 

the Medicare Shared Savings Program. These agencies issued guidance for providers seeking to 
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become ACOs and established a voluntary expedited review process to give feedback on 

providers' potential anti-competitive activities. 

CMS is providing aggregate claims data to the antitrust agencies to assist them in their 

monitoring efforts to ensure ACO formation and operation do not have a detrimental effect upon 

competition. In addition, the antitrust agencies have existing enforcement processes for 

evaluating concerns raised about an ACO's formation or conduct. 

In addition, we believe the testing ofthe Advance Payment ACO model has led to increased 

participation by smaller organizations in the Medicare Shared Savings Program, thus increasing 

competition. 

I would be happy to work with you and your staff on how we can improve on these efforts. 

Question 3 

Regarding Appropriateness Criteria for Advanced Diagnostic Imaging Services - The 

Medicare Improvements for Patients and Providers Act of 2008, or "MIPPA," required 

that CMS establish a two-year demonstration project beginning January 1, 2010, that 

would examine and collect data regarding physician compliance with clinical 

appropriateness criteria for advanced diagnostic imaging services. M1PPA also required 

CMS to submit a report to Congress on the demonstration, including legislative 

recommendations, within a year after completion ofthe demonstration. Incentivizing 

appropriateness criteria may prove to be a far more effective way to prevent misuse and 

over utilization than prior authorization and other arbitrary cuts to medical imaging. At 

what point in 2013 will Congress receive the report from CMS on the results of this 

imaging appropriateness demonstration? 

Answer: The Medicare Improvements for Patients and Providers Act of2008 required the 

demonstration to be conducted for a 2-year period. The demonstration started on October 1, 

2011 and is expected to conclude on September 30,2013. The statute also requires the Secretary 

to submit a report to Congress containing the results of the evaluation of the demonstration along 

with recommendations for legislative and administrative action. This report is required to be 

submitted not later than one year after the completion of the demonstration. 

Question 4 

Regarding Oregon's 1915(k) Waiver - My state has been a longstanding leader in home and 

community based services. Last September Oregon submitted a request for a Community 

First Choice waiver, and they feel they have worked diligently with your workgroups on 

this but it seems like there has been some conflicting information on the status of the 

request. Oregon has been hopeful that this waiver can be approved by July 1. What 

actions are necessary for Oregon to gain approval to implement the Community First 

Choice provisions by July 1, 2013? Will you commit to review Oregon's application and 

ensure it receives full and fair consideration? 
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Answer: We applaud Oregon's work in providing home and community-based alternatives to 

institutional care. Our work with Oregon on its proposal is wel1 underway and we are committed 

to continuing our work with the state mindful of the state's antiCipated July I implementation. 

Questions from Senator Portman 

Question 1 

I continue to have concerns regarding the Centers for Medicare & Medicaid's (CMS) 

competitive bidding program for durable medical equipment (DME). As we discussed 

during the hearing, two of the nine bidding areas are located in Ohio. This summer those 

nine bidding areas will expand to 91 areas, six of which will be in Ohio. 

CMS has provided assurance that it is strengthening the bid review process to ensure that 

low bids are sustainable for the suppliers. Can you describe the measures you have already 

taken to strengthen the review process and what you will do before moving forward with 

expansion of the program this summer? 

Uyou find that the existing measures are not adequate to ensure winning bidders are 

capable of supplying this equipment, would CMS be willing to delay the expansion planned 

for round two? 

Answer: We made numerous successful improvements to the program since the program started 

and are continual1y looking at ways we can improve the process. For the Round 2 and National 

Mail Order competitions, we increased our scrutiny of bids and enhanced our successful bidder 

education program. 

We already had a rigorous, comprehensive process in the Round I Rebid to check for 10w-bal1 

bids, which included the fol1owing steps: screening the bidders to verify that they meet al1 

requirements (i.e., that they are enrolled and accredited and meet financial standards, applicable 

licensing requirements, and other bidding requirements); screening the bids from qualified 

bidders using statistical measures to identify any bids that are very low in comparison to other 

bids; asking bidders that submitted bids that fel1 below the statistical screening thresholds to 

submit a rationale and documentation to prove that their bids are sustainable; and rejecting bids 

that are not proven feasible (and are not used to set prices). 

Even though we didn't see any problems with low-ball bids in the Round I Rebid, we made the 

following process enhancements for Round 2: 

• We improved our bidder education so that it more strongly emphasizes the need to submit 

bids that include the cost for the supplier to buy the item, overhead, and profit. 

• We targeted our screening to focus more on the highest cost, highest volume items that 

have the greatest impact on a supplier's composite bid. We applied tougher screens to 

these high cost, high volume items. 

• We had stricter rules about the information bidders could submit to prove that their bid 

prices are realistic. 
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The competitive bidding program includes many safeguards beyond the enhanced bona fide bid 

evaluation process to ensure that there are a sufficient number of qualified suppliers to meet 

beneficiary demand. We are confident that the single payment amounts for Round 2 and the 

National Mail-order program provide appropriate payment for the equipment and supplies and 

related services. Our comprehensive monitoring program has shown that the program has 

preserved beneficiary health status and access to medically necessary items while saving money 

for taxpayers and beneficiaries in the first nine areas. We will continue to aggressively monitor 

the program in all 91 Round 2 areas to ensure that there are no negative effects on either access 

or beneficiary heath status. 

Question 2 

I have heard from a number of Qhio business owners and their employees regarding the 

definition of a "full time employee" as someone who works 30 hours per week. There is 

significant concern that this will cause a shift of many full time employees to part time 

status. It also appears that the effects of this provision are hampering the ability of 

employers to hire even part time employees. The University of Akron recently announced 

that it is planning to limit not only the number of part time employees, but also the number 

of hours part time employees can work. The University Provost cited concerns stemming 

from the Affordable Care Act (ACA) in the University's decision-making. Several other 

colleges and Universities in Ohio have already made similar changes to their hiring of part 

time employees. This is just the latest example of the damaging effect the ACA is having on 

hiring in Ohio and throughout the country. The March 2013 report from the U.S. 

Department of Labor revealed the lowest labor force participation since 1979, so this is 

hardly the time to disrupt hiring practices and discourage full time employment. 

Would you be willing to work with members of Congress who want to change the ACA's 

definition of full-time employee to be consistent with the generally accepted 40 hours per 

week? Would you be willing to work with other agencies involved to re-evaluate the 

policy? 

Answer: The employer responsibility provision only applies to firms with 50 or more full-time 

equivalent employees. A 2009 Kaiser Health News study found that 95 percent of employers 

with at least 50 workers already offer their employees health insurance. The Affordable Care 

Act creates the Marketplace designed specifically to make it easier to provide health insurance to 

employees of small businesses, including through a tax credit for eligible participating 

employers. We have and will continue to work with the Department of Treasury as it 

implements the rules for these policies. 

Question 3 

IllIS recently announced that key components ofthe Small Business Health Options 

Program will be delayed until 2015. It is my understanding that this program is an 

essential part of the administration's vision for the Health Insurance Exchanges 

("Exchanges"). The provision in question was designed to let employers give workers a set 

amount of money to purchase insurance coverage in an online marketplace. The U.S. 

Department of Health & Human Services (HHS) cited "operational challenges" in their 

decision to delay this part of the Small Business Health Options Program. 
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Does the delay in the Small Business Health Options Program indicate a broader issue with 

the implementation timeline? Do you anticipate there being further delays? 

Answer: Both the Marketplaces and the SHOP will be ready for open enrollment beginning 

October I, 2013. Small employers will then have access to a variety of plans offered through 

SHOPs in all states. The Federal SHOP will provide qualified small employers with detailed 

infonnation on the qualifie.d health plans (QHPs) that offer coverage in their area and will 

provide the tools employers need to compare different QHPs and choose the QHP that best meets 

their needs. 

We have proposed a one-year transition in implementing "employee choice" function of the 

federal SHOP: "Employee choice" means that qualified employers would be able to offer each 

employee their own choice of health plans at the same level ("metal level") of coverage. Under 

the current proposal, the federally facilitated SHOP would enable employee choice for plan years 

beginning on or after January I, 2015. State-based SHOPs could choose to offer these functions 

on or after January I, 2014, and would be required to do starting January I, 20 15. 

We proposed the transition after reviewing public comments. CMS concluded that continuing 

the status quo of employers offering their employees a single QHP for the first year of SHOP 

would provide employers with price transparency, stability, and an online comparison of benefits 

and rates, maximize issuer participation in the SHOP in 2014, and build toward successful 

implementation of the employee choice model in 20 15. 

Question 4 

At last count, 26 states, including Ohio, will have federally-run Exchanges. An additional 

seven states will run partnership Exchanges with the federal government. These 

Exchanges are supposed to begin open enrollment on October 1st, 2013. 

Given that the October 1st deadline for open enrollment is quickly approaching, will the 

necessary Information Technology (IT) systems be ready to process the large amount of 

data and information on day one? Is CMS planning to test these IT systems prior to open 

enrollment to ensure that they will be able to handle such a large data volume? 

Answer: Yes, CMS is engaged in a variety of tests, both internally and with external partners, to 

ensure that IT systems are ready to handle the expected volume of data once open enrollment 

begins. CMS is undertaking 'Secure Communications' and the 'FEPS and Partner' functional 

testing with the IRS, beginning in October 2012. These tests have been successful in testing the 

services between IRS and CMS. 

The following federal agencies will begin similar testing in Spring 2013: 

Department of Homeland Security (DHS) 

Internal Revenue Service (IRS) 

Office of Personnel Management (OPM) 

Peace Corps 
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Social Security Administration (SSA) 

TRICARE Management Activity (TMA) 

Veterans Health Administration (VHA) 

Several State Based Marketplaces and Federally Facilitated Marketplace states will begin 

'Secure Communications' and 'FEPS and Partner' in the spring of2013. All states will 

participate in the 'Regression and End to End' Testing in August 2013. Plan issuers are 

scheduled to begin testing plan management templates in the spring of 20 13. 

Together, internal and external testing will validate system functionality. Performance Stress 

Testing will examine infrastructure capacity and scalability with the most active trading partners. 

Security Testing will take place in the same manner as with all CMS systems. We have 

dedicated significant resources and personnel to work with stakeholders in developing a robust 

testing infrastructure that will allow for testing to occur once the system is operational. 

Ouestion 5 

Providers are facing mUltiple compliance deadlines that are converging at once: 

meaningful use, billing code changes, value based modifier, and HIPAA privacy provisions. 

Many ofthese programs involve financial penalties for noncompliance. Providers are 

being asked to undertake these efforts at the same time they are trying to move into new 

payment and delivery models. 

What concrete steps is CMS taking to educate and assist providers in meeting these 

deadlines and complying with these programs? 

Answer: We have worked to align the requirements of various programs to minimize 

implementation and reporting burdens for providers. For example, we are better aligning the 

Physician Quality Reporting System, the Electronic Health Records Incentive program and the 

Physician Value-based Modifier with that goal that a physician will only have to report measures 

once for all three programs. While I understand that addressing the requirements of each of these 

programs can be time and resource intensive, I also believe that initiatives such as the ones you 

have named are important to improving quality and efficiency in the health care delivery system. 

We continue to think about how to minimize provider reporting burden and have been actively 

engaged with the provider community on these issues. 

Questions from Senator Brown 

Ouestion 1 

Regarding Medicaid Expansion: CMS has been negotiating with individual states about 

the details of coverage expansion. I know the Kasich Administration is in active 

discussions with CMS and is working toward expansion that works for Ohio. 

I understand some Governors are interested in using Medicaid expansion funds to 

purchase private insurance. I am concerned that state flexibility in this area - while an 

admirable goal- risks undermining the traditional benefits and protections afforded to 
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Medicaid beneficiaries. What sort of flexibility is CMS allowing for states interested in this 

alternative model and what is the Agency doing to ensure beneficiaries retain their rights 

under the Medicaid program? 

Are you confident CMS can work with states like Ohio? 

If Medicaid is expanded in Ohio, how many people will be helped and what will be the cost 

for the state's if Medicaid expansion occurs? 

Answer: eMS has recently released a set of Frequently Asked Questions (FAQs) regarding 

state interest in the use of premium assistance. Under all premium assistance arrangements, 

beneficiaries remain Medicaid beneficiaries and continue to be entitled to all benefits and costsharing protections. States must have mechanisms in place to "wrap-around" private coverage to 

the extent that benefits are less and cost sharing requirements are greater than those in Medicaid. 

Some states have expressed interest in section 1115 demonstrations to provide premium 

assistance. eMS has indicated that we will consider approving a limited number of premium 

assistance demonstrations and would also consider states' ideas on cost effectiveness related to 

the Health Insurance Marketplaces and the expansion of Medicaid. eMS will consider only 

those proposals that provide beneficiaries with a choice of at least two qualified health plans, that 

make arrangements to provide any necessary wrap around benefits and cost sharing, that are 

limited to individuals whose benefits are closely aligned with the benefits available on the 

Marketplace and that end no later than December 31, 2016. As is our practice, eMS will include 

in any demonstration approval, requirements for the state to closely monitor and report on the 

demonstration's progress. We have time limited the demonstrations to ensure they can inform 

policy for the State Innovation Waivers that begin in 2017. 

Additionally, eMS remains committed to addressing questions from and working with states, 

like Ohio, as they consider the low-income adult Medicaid eligibility expansion. We continue to 

believe that adopting the Medicaid expansion is beneficial for states. As you know, for the first 

three years, the expansion is fully paid for by the federal government and will lead to expanded 

coverage, improved health and lower rates of uncompensated care. 

Ouestion 2 

Regarding Part D Preferred Provider Networks: I am concerned with the growing use of 

preferred pharmacy networks in the Medicare Part D program, and have heard concerns 

from small and medium-sized pharmacies in Ohio about being excluded from the 

networks. It seems the insurance companies are inviting only a few big box and other large 

pharmacies to participate. In the recently released Call Letter for the 2014 plan year, CMS 

itself identified concerns with the use of preferred pharmacy networks in the Medicare 

Part D program, particularly the potential for beneficiary disruption and travel costs, 

especially in rural areas. CMS also indicated concern that the structure ofsome preferred 

networks may actually be increasing costs for the Medicare program. 

As the use of these networks has become more widespread, what actions does CMS plan to 

take to ensure that the use of preferred pharmacy networks in the Medicare Part D 
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program does not atIect beneficiary access,lessen quality of care, or increase costs to the 

Medicare program? 

Additionally, the Office of the Inspector General (lOG) recently reported that gaps exist in 

CMS's oversight of the Medicare Plan Finder reporting requirements. How is CMS 

ensuring that beneficiaries have access to all of the information they need about specific 

plan benefits, including whether a plan uses a preferred pharmacy network and which 

pharmacies are included in those networks? 

Answer: Part D regulations that penn it lower cost sharing at some "preferred" network 

phannacies also require that such cost sharing reductions must not increase CMS payments. In 

order to ensure that Part D sponsors with preferred pharmacy networks are meeting this 

requirement, we have begun to scrutinize Part D drug costs in PDPs with preferred networks, and 

comparing these to costs in the non-preferred networks, as well as to costs in PDPs without 

preferred networks. Our initial results suggest that for some plans, aggregate unit costs weighted 

by utilization (for the top 25 brand and top 25 generic drugs) may be higher in preferred 

networks than in non-preferred networks. Combined with lower cost sharing, we are concerned 

that these higher unit costs may violate the requirement not to increase payments to such plans. 

We have contacted the plan sponsors identified in our analysis to initiate the validation of our 

findings. 

As we indicated in the 2014 Call Letter issued April I, we strongly believe that including any 

pharmacy that can meet the tenns and conditions ofthe preferred arrangements in the sponsor's 

preferred network is the best way to ensure that such networks promote price competition and 

lower costs in the Part D program. Opening preferred phannacy networks to any pharmacy that 

can meet the network's tenns and conditions would also likely mitigate some beneficiary 

disruption and travel costs, especially in rural areas. Mandating this policy for all Part D 

sponsors would require rulemaking by CMS. 

We are continuing to refine the Medicare Plan Finder to ensure that it provides the most accurate 

infonnation possible. As of April 2012, a beneficiary is now able to see drug price estimates that 

reflect if the phannacy selected is preferred or non-preferred for a given plan. If a phannacy is 

not in the selected plan's network, the full price of the drug is shown. Concerns about the 

Medicare Plan Finder being time-consuming may be a reflection of the increased number of 

inputs needed to generate an accurate cost estimate. Having the Medicare Plan Finder prompt the 

user for exact drug names, quantity and dosing regimen, Part D plan, subsidy eligibility, and 

choice of pharmacy provides beneficiaries access to highly valuable infonnation, to help select 

the best coverage option and to anticipate medical expenses for the coming year. We welcome 

your ideas to ensure that the Part D program remains strong. 

Ouestion 3 

Investment in Pediatric Innovations 

The Center for Medicare and Medicaid Innovation was created to support the development 

and spread of delivery and payment reforms in Medicaid and Medicare that improve 

quality of care and reduce health care costs. The Innovation Center has supported a 

number of projects intended to innovate care for adults, but there has not been a similar 
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investment in innovations for children. In fact, some ofthe funding opportunities offered 

by the Innovation Center have excluded children. 

How will you ensure CMS invests in delivery system and payment reforms that can 

improve care for our nation's children, especially those with complex medical needs? 

Answer: We have a number ofinitiatives and programs that focus on improving the health and 

healthcare outcomes for pediatric populations, including the Strong Start for Mothers and 

Newborns initiative. The Strong Start initiative is an Innovation Center project focusing on 

reducing early elective deliveries and reducing the rate of preterm births among high-risk women 

in Medicaid and CHIP. Additionally, we have released the Initial Core Set of Child Health Care 

Quality Indicators for Medicaid and CHIP, established for voluntary use by state Medicaid and 

CHIP programs, which includes a range of children's quality measures encompassing both 

physical and mental health, including chronic conditions such as asthma and diabetes. CMS' 

Pediatric Quality Measures Program and the Pediatric Electronic Health Record Format also 

represent other initiatives the agency is pursing to help improve the health and care children 

enrolled in our programs receive. Additionally, the Innovation Center is testing medical homes 

for individuals with disabilities and complex health conditions and high-risk chronically ill 

children. 

As we do in all areas, we continue to look for opportunities to test promising models in the 

Medicaid program and understand the importance of delivering better, more efficient care to 

Medicaid beneficiaries. We are working closely with our colleagues at the Center for Medicaid 

and CHIP services to coordinate our collective efforts to identifY new opportunities. 

Question 4 

Regarding Primary Care Workforce: In many ways, the success ofthe ACA will depend 

on an I!,dequate supply of physicians, nurse practitioners, and nurses, especially primary 

care providers who provide a usual source of care for most seniors. 

How well do you think CMS is doing to ensure an adequate pipeline of primary care 

providers? 

Answer: We recognize the need to invest in the workforce to improve the health care system. 

New payment reforms, like Accountable Care Organizations and other models to promote 

coordination can playa role in addressing a shortage of physicians by encouraging a team 

approach to medicine. By using the skills of other providers, like nurse practitioners and 

pharmacists, this approach allows physician to more efficiently use their time. In addition, CMS 

has implemented the Affordable Care Act's 10 percent payment increase to primary care 

physicians. And the Innovation Challenge A wards are testing ideas to strengthen the primary 

care workforce. 

In 2012, CMS revised the hospital conditions of participation to broaden the concept of the 

medical staff and allow hospitals the flexibility to include other practitioners as eligible 

candidates for the medical staff in accordance with state law. Non-physician practitioners are 

capable of handling many common patient complaints, initial patient work-up and follow-up, 
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patient education and counseling, and other specific aspects of patient care. Physicians, as 

leaders of these teams due to their more extensive training and expertise, are then able to more 

fully turn their attention to more complicated patient problems. In this way, non-physician 

medical staff members allow physicians to more efficiently and effectively manage their time so 

that these physician leaders can focus on more medically complex patients. 

CMS has also implemented the Affordable Care Act's Graduate Nurse Education Demonstration 

to support hospitals for the cost of providing clinical training to advanced practice registered 

nurse students. Five hospitals were selected, including the Hospital of the University of 

Pennsylvania, Duke University Hospital, and Memorial-Hermann Texas Medical Center 

Hospital. 

Finally, CMS is working closely with our partner agencies across HHS, including the Health 

Resources and Services Administration (HRSA), to ensure an adequate pipeline of primary care 

providers is supported. 

What are you doing to enhance training opportunities in community outpatient settings? 

Answer: CMS is undertaking a number of initiatives to enhance community outpatient care 

and, as a result, the training opportunities in those settings. The Affordable Care Act amended 

the Social Security Act to allow any time spent by residents training in a nonprovider setting to 

count toward direct graduate medical education (GME) and indirect medical education (!ME) 

costs if the hospital incurs the costs of residents' salaries and fringe benefits. This change was 

effective for cost reporting periods beginning on or after July 1,2010, for direct GME, and for 

discharges occurring on or after July 1,2010, for lME and was finalized in the Calendar Year 

2011 Hospital Outpatient Prospective Payment System final rule. This change was expected to 

lead to an increased number of residents training in nonprovider sites such as community-based 

settings. 

The Health Care Innovation Awards are funding new models of payment and service delivery. 

The Innovation Awards recognized the need for an appropriate trained workforce to support new 

models of payment and service delivery. Applicants were encouraged to propose models that 

included a significant opportunity to develop and deploy health care workers in innovative ways, 

which can include community outpatient care. For example, in Michigan, the Michigan Public 

Health Institute received an award to integrate community health workers into primary care 

teams in order to coach patients on self-management and encourage regular primary care visits. 

Additional efforts to enhance training opportunities in community outpatient settings are 

supported by our sister agency, HRSA. 

Ouestion 5 

Regarding Pediatric Dental Care: I am concerned about the affordability of the pediatric 

oral health benefit. As you know, it is specifically listed as an essential health benefit and a 

part of the comprehensive set of pediatric services promised to families entering any 

exchange. However, the Center for Consumer Information and Insurance Oversight 

(CCIIO) has interpreted the "allow-ability" of stand-alone dental plans inside the exchange 
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to mean that families that opt for or are forced to choose a stand-alone dental plan will be 

faced with out of pocket limits above and beyond those established in the underlying law. 

Can you explain how you will ensure that pediatric dental care is reasonably affordable for 

average Americans? 

Answer: CMS has taken steps to implement the provisions regarding the pediatric dental 

essential health benefit in a manner that is consistent with the statute and provides as many 

consumer protections as possible. Essential health benefit requirements mandate that certain 

issuers offer certain benefits, but do not require individuals or families to obtain coverage for a 

particular benefit. As you note, the statute is different with respect to issuers inside 

Marketplaces. While the Affordable Care Act requires issuers offering non-grandfathered 

coverage in the individual and small group markets to offer the essential health benefits. Section 

1302 ofthe Affordable Care Act also allowed issuers in an Marketplace to opt not to offer 

pediatric dental coverage if there is a stand-alone dental plan offering the pediatric dental 

essential benefit operating in that Marketplace. 

There are several ways that the Affordable Care Act and the implementing regulations help with 

the affordability of pediatric dental essential health benefits. Specifically with respect to standalone dental plans, individuals may use premium tax credits to purchase a stand-alone dental 

plan. Our rules provide that if a family is enrolled in a QHP and a stand-alone dental plan, the 

premium tax credit is first applied to the portion of the premium for the QHP related to the 

essential health benefits, and any remaining amount is then applied to the portion of the premium 

for the dental plan related to essential health benefits. 

In addition, the final essential health benefits rule requires dental plan issuers to offer plans at 

either a low (70%) or high (85%) actuarial value. Actuarial value is a measure of expected plan 

spending across a standard population. This means that every stand-alone dental plan purchased 

in an Exchange will cover, on average, 70% or 85% of costs that individuals could be expected 

to incur in a year for pediatric essential dental benefits. 

Finally, as you note, the final essential health benefits rule established a separate annual 

limitation on cost-sharing for stand-alone dental plans provided that such limitation was 

reasonable, as defined by a Marketplace. For coverage year 2014, CMS has interpreted a 

reasonable limit to be $700 for a plan with one child enrollee or $1,400 for a plan with two or 

more child enrollees. It is important to remember that these annual limits on cost-sharing are 

catastrophic limits beyond which all pediatric essential health benefits would be covered in full. 

Ouestion 6 

Regarding Small Business: I have heard from Ohio business owners concern about their 

responsibilities under the Affordable Care Act. Some are looking at ways around 

providing insurance, such as cutting workforce hours or their number of employees. 

Businesses are also overwhelmed with trying to determine whether their health insurance 

plans are both affordable (cannot exceed 9.8% of employee's income) and provide 

minimum value. I have also heard that the tax incentives for small business are being 

under-utilized. 
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What are CMS and the IRS doing to help business owners make good decisions about 

employment and health insurance that will fit with the spirit of the ACA? 

Answer: The Small Business Health Options Program (SHOP) Marketplaces will help small 

businesses provide affordable, quality coverage for their employees. Eligible small businesses 

will be able to access tax credits and obtain access to information about coverage options 

through the SHOP. By pooling employers together, reducing transaction costs, and increasing 

transparency and competition, the Health Insurance Marketplace for individuals and small 

employer groups will be more efficient and competitive. 

The Affordable Care Act creates a Marketplace designed specifically to make it easier to provide 

health insurance to their employees, including through a tax credit for eligible participating 

employers who obtain coverage thorough the Marketplace. 

CMS has been developing SHOP-focused training and materials to help small businesses 

understand the Affordable Care Act and the opportunities it presents to them. And we have a 

strong partner in the Small Business Administration, which has created its own education 

sessions for small businesses that they will start offering the spring. We also expect agents and 

brokers to playa significant role in working with the small business community. 

To what degree do you think CMS is meeting goals for including small business into the 

process of working toward insuring workers? 

Answer: CMS has worked with our regional offices and the Small Business Administration to 

provide updates to small businesses on recent policies and regulations. Starting in 2014, small 

businesses will be able to purchase private health insurance for their employees through the 

Marketplace. CMS has also already released the draft single streamlined application for small 

businesses and has begun engaging small business to hear their input and communicate how the 

Marketplace will work and when it will be ready. These discussions, which are led by CMS 

regional offices, are the start of ongoing conversations with all stakeholders including the small 

business community. 

What in particular is CMS doing to help small businesses make necessary adjustments and 

make full use of tax incentives? 

Answer: CMS has been developing SHOP-focused training and materials to help small 

businesses understand the Affordable Care Act and the opportunities it presents to them. We 

also have a strong partner in the Small Business Administration, which has created its own 

education sessions for small businesses that they will start offering this spring. We also expect 

agents and brokers to playa large role in working with the small business community. 

Question 7 

Regarding Health Care Spending and Medicare Solvency: Earlier this year, report after 

report found that national health spending had slowed and created a smaller difference 

between the rate of health care growth and the rate of growth in the whole economy. Some 
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of the slowdown could be attributed to events before the Affordable Care Act (ACA) was in 

place and some to the transformation the ACA is having on delivery system reforms and 

attitudes. 

What effect is this slowdown having on Medicare's long-term solvency? Is CMS working 

to predict whether - at least for Medicare and Medicaid - the slowdown is a recession 

driven event or if this new trajectory will remain, at least for a time? 

Answer: Thanks partly to refonns in the Affordable Care Act-including anti-fraud measures 

and new incentives for doctors to eliminate duplication and waste-Medicare spending per 

beneficiary grew at a historically low rate of 0.4 percent in 2012. This slowdown reflects, in 

part, the successful implementation ofthe Affordable Care Act's provisions that strengthen the 

Medicare program. These statistics show that the Affordable Care Act has helped in part to set 

Medicare on a more sustainable path to keep its commitment to seniors and persons with 

disabilities today and well into the future. The President's 2014 Budget request would add 4 

years to the solvency of the Medicare Trust Fund. The success in reducing the rate of spending 

growth has been achieved without any reduction in guaranteed benefits for beneficiaries. To the 

contrary, Medicare beneficiaries have gained access to additional benefits, such as increased 

coverage of preventive services and lower cost-sharing for prescription drugs. 

The economic recession may have contributed to the 2010 to 2012 decrease in per beneficiary 

spending growth as consumers used less care due to its cost. However, as almost all Medicare 

beneficiaries have supplemental coverage and thus face relatively low out-of-pocket costs, it 

seems unlikely that consumer behavior alone is responsible for the slow growth in Medicare 

spending. 

Question 8 

Regarding Observation Status: Senator Schumer mentioned my legislation, the Improving 

Access to Medicare Coverage Act, during the hearing and I would like your thoughts on 

addressing this problem. Too many Ohio seniors have written to me about high out-ofpocket costs they are enduring because, while they required skilled nursing facility (SNF) 

care after a hospitalization, Medicare will not pay for it. 

Aside from legislation, what authority does CMS have to work with seniors to get these 

services covered? Additionally, has CMS been looking into why hospitals are increasingly 

leaving people in medical limbo for several hours and even days? 

Answer: We are also concerned about the recent increases in the length of time that Medicare 

beneficiaries spend as an outpatient receiving observation services. This can affect beneficiaries' 

financial liability during the hospital stay and their ability to meet the 3-day qualifying inpatient 

hospital stay requirement for coverage of skilled nursing facility services. We solicited 

comments from stakeholders on a rule last year that would address this issue. 

We heard from stakeholders that hospitals appear to be responding to the financial risk 

associated with admitting Medicare beneficiaries for inpatient stays that may later be denied 

upon contractor review by electing to treat beneficiaries as outpatients receiving observation 

services, often for longer periods oftime, rather than admitting beneficiaries as inpatients. In 
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addition, hospitals could only rebill under Part B for a limited set of services they furnished 

during these inpatient stays. As a step to address this concern, we recently released a Ruling and 

proposed rule that would allow hospitals to bill for additional services under Medicare Part B 

when a Part A inpatient claim is denied by our contractors. 

We also received comments on the 3-day qualifying inpatient stay requirement. Many 

commenters indicated that the statutory 3 -day qualifying inpatient stay requirement is obsolete, 

given the advances in medical care, the trend towards reduced length of stay, and the migration 

of services from the inpatient to outpatient setting. Some of these commenters recommended 

that the 3-day inpatient stay requirement be replaced with clinically meaningful criteria that are 

not time based or based on patient status. Other commenters expressed their support for 

legislation that would allow time in observation to be counted as inpatient time for purposes of 

SNF qualification. In addition, some commenters recommended waiving the 3-day rule for 

certain diagnoses that benefit from short inpatient stays and speedy access to post-acute 

rehabilitative services. We will consider these comments for possible future rulemaking. 

However, we cannot change the statutory requirements for Medicare coverage of skilled nursing 

facility services. Section 1861(i) of the Social Security Act defines post-hospital skilled nursing 

facility services as services furnished to a beneficiary after transfer from a hospital in which the 

beneficiary was an inpatient for not less than 3 consecutive days before discharge from the 

hospital. The Social Security Act is explicit on the requirements for coverage of skilled nursing 

facility services that the beneficiary be an inpatient prior to transfer from a hospital. By contrast, 

observation stay services are furnished on an outpatient basis and, therefore, do not meet the 

statutory criteria for the 3-day qualifying hospital stay requirement for coverage of skilled 

nursing facility services. 

Question 9 

Informing Seniors of Their New Benefits: Since 2010, seniors have been able to have 

annual wellness check-ups and preventive screenings. Over a million seniors have taken 

advantage of at least one screening, but fewer have had their annual check-up. We all know 

an ounce of prevention is worth a pound of cure. Encouraging prevention will improve the 

health ofseniors and save Medicare money. 

How is eMS ensuring that seniors understand and take advantage of the new benefits? 

Additionally, do you have a demographic breakdown of who is and who is not utilizing the 

screenings? Have you been able to calculate the amount of cost savings provided by these 

preventive screenings? 

Answer: Medicare covers a wide range of screening and preventive benefits, including services 

that have been covered by statute for many years (for example, influenza and pneumococcal 

vaccinations, Pap tests, and screening mammography), and services added through evidencebased National Coverage Determinations under authority granted by the Medicare Improvements 

for Patients and Providers Act of2008 (for example, tobacco cessation counseling, and intensive 

behavioral therapy for cardiovascular disease). In addition, the Affordable Care Act established 
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coverage of an Annual Wellness Visit beginning in 2011 (building on the one-time "Welcome to 

Medicare Visit" for new beneficiaries). 

Prior to 2011, people with Medicare had to pay cost-sharing for many preventive services. 

However, under the Affordable Care Act, many preventive services are now offered free of 

charge to beneficiaries, with no deductible or co-pay, so that cost is no longer a barrier for 

seniors who want to stay healthy and treat problems early. 

During 2012, an estimated 34.1 million people with Original Medicare or Medicare Advantage 

received one or more preventive benefits free of charge. Over 3 million people with Original 

Medicare took advantage of the new Annual Wellness Visit in 2012. In February 2013, CMS 

issued a report on use of Medicare's preventive services in 2011 and 2012, including a state-bystate breakdown on 2012 utilization in Original Medicare. 

CMS has undertaken a range of initiatives to educate providers and beneficiaries about the 

importance of prevention and Medicare coverage of preventive services, including the Annual 

Wellness Visit, and will continue to work toward increasing awareness and use of these 

important benefits. 

Questions from Senator Cornyn 

Question 1 

CMS has had three years to implement the SHOP program that would a1l0w employees of 

sma1l businesses to shop for insurance plans. Why is this one-year delay necessary? How 

long has CMS known that it would not be prepared to implement the SHOP program on 

time? Can we expect other PPACA implementation delays? 

Answer: The SHOP will be ready for open enrollment in October, 2013. The Federal SHOP 

will provide small qualified employers with detailed information on the qualified health plans 

(QHPs) that offer coverage in their area and will provide the tools employers need to compare 

different QHPs and choose the QHP that best meets their needs. 

We have proposed a one-year transition in implementing the "employee choice" function of the 

federal SHOP." "Employee choice" means that qualified employers would be able to offer each 

employee their own choice of health plans at the same level ("metal level") of coverage. Under 

the current proposal, the federally facilitated SHOP would enable employee choice for plan years 

beginning on or after January 1,2015. State-based SHOPs could choose to offer these functions 

on or after January 1,2015, and would be required to do starting January 1,2015. 

We proposed the transition after reviewing public comments. CMS concluded that continuing 

allowing employers to continue offering their employees a single QHP for the first year of SHOP 

would provide employers with price transparency, stability, and an online comparison of benefits 

and rates, maximize issuer participation in the SHOP in 2014, and build toward successful 

implementation of the employee choice model in the 2015 small group market. 
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Question 2 

A recent article published in Contingencies, a magazine of the American Academy of 

Actuaries, found that premiums for individuals in the nongroup market aged 21 to 29 who 

are not eligible for premium assistance will increase by 42 percent. For those aged 30 to 39, 

premiums are expected to increase by 31 percent. Administration officials have noted that 

the PPACA allows individuals under 30 to purchase a catastrophic plan option. However, 

the actuaries are predicting large increases for those over 30 and not eligible to purchase 

catastrophic plan options. In addition, Administration officials often point to the fact that 

the premium tax credits will offset these premium increases. However, actuaries note that 

adults up to 44 with incomes above 300 percent ofthe FPL (approximately $33,510) will see 

premium increases, even taking into account premium assistance. For those below 30, 

individuals at about 225 percent ofFPL (approximately $25,000) can expect to see 

premium increases, even after taking into account premium assistance. Do you believe that 

premiums will rise as a result ofthe PPACA? Are you concerned about these premium 

increases? 

Answer: 

The individual and small group markets - the markets that much of the Affordable Care Act is 

designed to improve in particular -- are broken. People are currently locked out of these markets 

because of their pre-existing conditions, or if they are able to buy insurance, they may find out 

their coverage will not extend to the care they need when they get sick. Young women who 

currently pay for their own insurance plan may discover that, simply on account of their gender, 

they are charged 50 percent more than young men are for the same plan. This fall, people are 

going to be able to buy comprehensive insurance without discrimination based on gender or preexisting conditions. Also, low- and middle-income people may qualify for premium tax credits 

to help them buy insurance. 

Starting in 2014, people will be able to choose their health plans based on the actuarial value 

they think fits their needs and their budget. Actuarial value means the percentage paid by a 

health plan of the total allowed costs of benefits. For example, if a plan has an actuarial value of 

70 percent, the average consumer would be responsible for 30 percent of the costs of the 

essential health benefits the plan covers. ·Plans will range from 60 to 90 percent of actuarial 

value. 

Additionally, the Marketplace will increase competition between issuers on the individual 

market. With transparent prices and standard tier benefits, CBO projects a 7 percent to 10 

percent decrease in premiums. 

Also, young adults and certain other people for whom coverage would otherwise be unaffordable 

may enroll in catastrophic plans, which have lower premiums, protect against high out-of-pocket 

costs, and cover recommended preventive services without cost sharing. Young people under 

the age of 26 are also generally allowed to stay on their parents' insurance, helping make 

insurance more affordable for that group. 
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There are also many provisions in the law to slow health care cost growth and create competition 

in the insurance marketplace. For example, the reinsurance and risk adjustment programs will 

help stabilize premiums. 

Question 3 

Will the Pre-Existing Condition Insurance Program (PCIP) program run out of its $5 

billion appropriation before 2014? What is CMS doing to ensure that funds remain 

available for individuals enrolled in this program? How is CMS planning to communicate 

information to these individuals about their transition out of the PCIP program? 

Answer: CMS is doing everything it can to ensure that the limited amount of funding 

appropriated to the program by Congress is available to continue providing covered services to 

enrollees until 2014. CMS is aggressively managing costs in the federal PClP program and has 

taken a variety of steps to ensure that the funds provided by the Affordab Ie Care Act are applied 

efficiently in funding patient care and program administration. These include a change in 

provider networks used by the federally-administered pelP, reducing both its negotiated and outof-network payment rate for providers; negotiation of additional discounts on reimbursement 

rates with targeted hospitals that were treating a disproportionate number of pelP enrollees; 

limiting the specialty drug benefit to provide coverage only if the specialty drug is dispensed by 

an in-network pharmacy and providers that were most cost effective, and; consolidation ofthree 

benefit plan options into one, increasing the maximum out-of-pocket limit from $4,000 to $6,250 

for in-network services. 

Qpen enrollment for plans in the new Marketplace begins Qctober 1, 2013, for coverage 

beginning January 1,2014, which generally coincides with the statutory end of the pelP 

program. To help effectively transition pelP members who wish to enroll in a qualified health 

plan offered through the new Marketplaces, we are working with our pelP contractors to ensure 

enrollees in both state-based pelPs and the federally-administered program receive information 

about the new Marketplaces. Specifically, we are developing three notices that will be sent to 

enrollees in federally-administered pelP over the next several months explaining that pelP 

coverage ends after December 31,2013, describing the Marketplaces, how to enroll beginning in 

October, and where enrollees can get assistance with enrolling in coverage. Additionally, we 

have directed our contractors to update their pelP websites with transition content, train 

customer service representatives, and provide adequate staffing at their call centers during the 

last quarter of calendar year 2013 and the first quarter of calendar year 2014 to handle 

anticipated calls from transitioning enrollees. 

Question 4 

The health reform law specifically states that the Independent Payment Advisory Board's 

(IPAB's) recommendations may not: 

Raise revenues; 

Raise Medicare beneficiary premiums; 

• Increase beneficiary cost-sharing (including deductibles, coinsurance, and 

copayments), or; 

Modify eligibility criteria. 
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What types of proposals do you believe the IP AD could propose? The health reform law 

also specifically prohibits the IP AD from making recommendations that would "ration 

health care" or "otherwise restrict benefits." Would you agree that provider payment 

rates can be cut so low that this ultimately leads to rationing of care? 

Answer: The Independent Payment Advisory Board (IPAB) builds on the commitment we have 

made to our seniors' health. The Affordable Care Act provides for consultation between the 

President and Congressional leadership in appointing members of the Board, and appointments 

are subject to the advice and consent of the Senate. The Board's primary responsibility will be to 

recommend certain improvements to Medicare. Recommendations of the IPAB will focus on 

ways to improve health care while lowering the growth in Medicare spending. For example, the 

Board could recommend approaches that would build on and strengthen the initiatives mentioned 

above, from reducing medical errors, to strengthening prevention and improving care 

coordination, or targeting waste and fraud. 

At the same time, the law contains important limitations on what the Board can recommend. The 

statute is very clear: the IP AB cannot make recommendations that ration care, raise beneficiary 

premiums or cost-sharing, reduce benefits, or change eligibility for Medicare. The IP AB cannot 

eliminate benefits or decide what care Medicare beneficiaries are entitled to receive. 

Considering the requirements and limitations on recommendations from the Board, we expect it 

will focus on ways to find efficiencies in the payment systems and align provider incentives to 

drive down costs without affecting our seniors' access to the care and treatment they need. The 

Board's recommendations are will not take effect unless Congress fails to act to keep Medicare 

cost growth in check. 

Ouestion 5 

In January 2012, the CDO released an issue brief on Medicare demonstration projects that 

finds: 

The evaluations show that most programs have not reduced Medicare spending: In nearly 

every program involving disease management and care coordination, spending was either 

unchanged or increased relative to the spending that would have occurred in the absence of 

the program, when the fees paid to the participating organizations were considered. 

Of the ten major demonstrations reviewed, CDO stated: "CDO finds that most programs 

tested in those demonstrations have not reduced federal spending on Medicare." 

Given CDO's findings regarding the lack of cost savings produced by demonstrations, what 

is different about the demonstrations conducted at CMMI? How can members of Congress 

be assured that the $10 billion appropriated to the CMMI in the PPACA is not wasted? Is 

CMS prepared to expand successful demonstrations quickly? 

Answer: The United States has one of the best and most innovative health care systems in the 

world. We are a global leader in developing new treatments, drugs and procedures to help heal 

patients. At the same time, we know that we need to do more to help ensure every patient gets 

the very best care - and that we are spending our health care dollars wisely. This CBO report 

outlined how difficult this challenge is. The same report recommended that future efforts focus 
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on collecting better data, targeting resources at the patients who need it most, and encouraging 

care providers to work together. The Innovation Center is charged with engaging doctors, 

hospitals, and other providers that want to try new approaches to keeping their patients healthy 

and out of the hospital. Even before the CBO was released, the Innovation Center was putting 

some of these lessons and recommendations into practice. 

Some examples of how the Innovation Center has already adopted some ofCBO's 

recommendations: 

CBO Recommendation: Gather timely data on the use of care, especially hospital 

admissions. 

o Innovation Center action: Health systems participating in the Pioneer ACO and 

ACO Shared Savings models will receive updates on care received by their 

patients within a few weeks of when it occurred, down from 6 months or more 

in previous demonstrations. 

CBO Recommendation: Focus on transitions in care settings. 

o Innovation Center action: The Community-Based Care Transitions Program 

will invest in organizations such as Area Agencies on Aging that help seniors as 

they leave the hospital, including through home visits. In addition, the 

Demonstration to Reduce Hospitalizations of Nursing Facility Residents will 

invest $134 million in providing additional care and supports to help reduce 

preventable hospitalizations among nursing home residents. 

CBO Recommendation: Use team-based care. 

o Innovation Center action: The Comprehensive Primary Care Initiative provides 

new supports from both Medicare and private health insurers to make sure that 

participating primary care practices have robust care teams - which could 

include nurses, pharmacists, and dieticians - available 7 days a week to 

coordinate care and avert visits to the emergency room. 

CBO Recommendation: Target interventions toward high-risk enrollees. 

o Innovation Center action: Along with the Medicare-Medicaid Coordination 

Office, the Innovation Center is empowering states to invest in new models 

targeted toward beneficiaries that are eligible for both Medicare and Medicaid, 

a group of beneficiaries at particularly high risk for having multiple chronic 

health conditions and high health care costs. 

CBO Recommendation: Limit the costs of intervention. 

o Innovation Center action: The Innovation Center is testing several new payment 

models, such as the Pioneer ACO Model and the Bundled Payments for Care 

Improvement, with no up front payments to participating doctors and hospitals. 

Rather, these groups will be rewarded once their innovative approach is proven 

to have reduced costs and kept patients healthier. 

The Innovation Center is committed to rapid cycle evaluation .. Instead ofthe usual process of 

waiting until the testing and evaluation are completed, the Innovation Center is monitoring the 
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outcomes of the initiative as it is ongoing. We are hopeful to identifY early indicators of success 

or failure and make any necessary modifications to the model as may be necessary. Once testing 

has begun, the Affordable Care Act requires the Innovation Center to terminate or modifY the 

model, unless the Secretary determines that the model is expected to improve the quality of care 

without increasing spending; reduce spending without reducing the quality of care; or improve 

the quality of care and reduce spending. The statute is clear that a model must reduce spending 

without reducing the quality of care, or improve quality of care without increasing spending 

(among other requirements) in order to be expanded by the Secretary through rulemaking. 

Question 6 

Members of this Committee have heard significant concern from the kidney care 

community that patient access to quality dialysis care could be disrupted if the payment 

adjustment to the Medicare ESRD bundle contained in the fiscal cliff bill is not properly 

designed and implemented. As you know, these patients are some of the most vulnerableapproximately 87 percent of patients are Medicare beneficiaries and nearly half are dual 

eligibles. Do I have your commitment that you will implement the bundle adjustment 

fairly to ensure that reimbursement remains adequate to maintain patient access to high 

quality care? 

Answer: We agree with the importance of appropriate payments to ensure access to dialysis 

treatment for ESRD beneficiaries. Section 632 of the American Taxpayers Relief Act of2012 

requires that the ESRD prospective payment system (PPS) rate be reduced beginning in 2014 to 

reflect the change in utilization of drugs and biologicals from 2007 with 2012. Before we make 

any changes to the ESRD PPS rate, we will carefully analyze the data on utilization and include 

the proposed payment change based on the data in a proposed rule for public comment. We will 

review comments taking into consideration issues raised by stakeholders to ensure that 

beneficiaries continue to have access to the medications they need before we make a final 

decision on the payment change. To date, the bundled payment system has not comprised access 

or availability of care. Any further changes will continue strong access and improved quality of 

care. 

Question 7 

Recent changes to the statute gover'ling Medicare quality improvement organizations 

(QIQs) give CMS broad authority to modify aspects of the program, including the 

geographic scope of the QIQ jurisdictions? What are the agency's plans for the future of 

the QIQs with regard to the geographic scope ofthe program? 

Answer: CMS is currently in the process of evaluating how to structure the QIO contracts in the 

11th Statement of Work (SOW) using the flexibility and new authority provided in the Trade 

Adjustment Assistance Extension Act of 20 II. We plan to capitalize on the strengths and 

institutional knowledge of the QIO program that have been built throughout the years. 

Under the 11th SOW that we are developing, we will ensure that no locality will lose access to a 

Medicare QIO. CMS is still determining precisely how many QIO contracts will be awarded; 

however, CMS will require that every QIO-regardless of the size of its jurisdiction-reach 

providers and beneficiaries at the local level. We also understand the importance of involvement 
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of physicians in the peer review process. CMS' best success in transfonning health care is to 

drive quality improvement at the local level. 

Question 8 

Last year, former Administrators of CMS met with the Senate Finance Committee to 

discuss alternatives to the sustainable growth rate (SGR). According to testimony from 

these former Administrators (from both parties), all agreed that CMS consider moving the 

physician rate setting function within CMS or create an independent physician Advisory 

Board that would assign the relative value for physician services. What is your opinion on 

this? 

Answer: The rate-setting process for the Physician Fee Schedule (PFS) is complex. Each year, 

through notice and comment rulemaking, we develop and propose appropriate adjustments to 

relative value units (RVUs). We consider and respond to all timely public comments, including 

those from medical specialty societies, as well as from a committee comprised of physicians 

representing various specialties that was fonned to review codes and estimate the resources 

involved with furnishing a service (such as clinical staff time, supplies, and equipment used in 

the provision of these services). We consider recommendations made by this committee as well 

as from MedPAC and other stakeholders in establishing the final relative values each year. In 

recent years, CMS has focused its work on identifying misvalued codes in order to eliminate 

mispricing in the fee schedule. We plan to continue that work and welcome input regarding how 

to improve the process. 

Question 9 

Recent press articles have raised concern that oncology clinics may have to close their 

doors or sell their practices to hospitals given concerns about inadequate Medicare 

reimbursements for cancer drugs due to sequestration. Have you met with stakeholders on 

this issue, and is CMS monitoring the potential consolidation and closures that are 

predicted? 

Answer: We share your concern about the potential adverse impacts of the payment cuts 

mandated by sequestration, both with regard to Medicare payments, and more broadly across all 

government programs. That is why the Administration has indicated that we stand ready to work 

with Congress on balanced approaches to replace sequestration to avoid its adverse impacts. 

CMS is committed to preserving Medicare beneficiaries' access to quality health care. We will 

continue to monitor the impact of provider payment cuts mandated under the Budget Control Act 

to assess their impact on Medicare beneficiaries and we are happy to share our results. 

Question 10 

While you have been Acting Administrator, what work has CMS engaged in to advance 

SGR reform? Will you commit to making SGR reform a priority if you are confirmed as 

Administrator? 

Answer: The current SGR system creates a level of uncertainty for the physician community, 

for our beneficiaries, and for the health plan payment systems that are tied to the physician 
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payment system. It can be challenging to manage the programs with an ever-present risk of 

significant cuts. I am committed to working with Congress to reform Medicare physician 

payments to provide predictable payments that incentivize quality and efficiency in a fiscally 

responsible way. The Administration supports replacing the SGR with a period of payment 

stability lasting several years to allow time for the continued development of scalable 

accountable payment models. Such models would encourage care coordination, reward 

practitioners who provide high quality, efficient care, and hold practitioners accountable through 

the application of financial risk for consistently providing low quality care at excessive costs. 

To help inform future reforms to physician payment systems, CMS is testing a variety of models 

through the Innovation Center that improve care quality, coordinate care, and reduce the total 

cost of care. For example, the Comprehensive Primary Care Initiative is a multi-payer initiative 

where CMS pays primary care providers monthly care management fees for comprehensive care 

management on top of their regular Medicare Fee-for Service payment. After two years, CMS 

offers the providers the chance to share in any savings they generate. Other payers, often 

including Medicaid, are also providing enhanced payment for primary care services. 

Another model is the accountable care organization (ACO). In addition to the Medicare Shared 

Savings Program, we are testing the Pioneer ACO model and the Advance Payment ACO model. 

ACOs involve groups of doctors, hospitals, and providers that accept accountability for 

providing high quality coordinated care to Medicare beneficiaries. ACOs are eligible for shared 

savings and may be subject to losses. 

Finally, the Bundled Payments for Care Improvement initiative is comprised offour broadly 

defined models of care, which link payments for multiple services beneficiaries receive during an 

episode of care. We think episode-based payment has a lot of potential to transform the health 

care delivery system. 

Question 11 

You have expressed your commitment to addressing behavioral health issues as 

Administrator of CMS. The number oftragic incidences involving people with serious 

mental illness - both as victims as well as perpetrators - seems to be escalating in number 

and magnitude over the last several years. What efforts are underway to ensure that 

Medicare and Medicaid beneficiaries with mental illness are receiving appropriate care 

and have access to adequate treatment options? 

Answer: CMS agrees that behavioral health issues are a serious concern, particularly in light of 

the number oftragic incidences involving people with serious mental illness. CMS programs 

help to ensure that people on Medicare and Medicaid have access to needed mental health 

services and other treatment options. Under the Medicaid program, the Early and Periodic 

Screening, Diagnostic and Treatment (EPSDT) benefit ensures that the health care needs of 

children and youth are addressed to maximize their growth and development, including 

prevention and early identification of mental health and substance use conditions. And for 

Medicare beneficiaries, Part B covered preventive and screening services cover depression 

screenings. These are just some of the ways the Medicare and Medicaid programs work to ensure 

beneficiaries' access to preventive care to more effectively identify and manage mental illness. 
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Question 12 

In Texas, 9.7 percent of adults have been diagnosed with diabetes. (The U.S. average is 9.3 

percent.) For minority communities in Texas, the numbers are even worse. Eleven percent 

of Hispanics and 16.5 percent of African Americans have been diagnosed with diabetes. In 

what ways is CMS working to address this health crisis and do you believe CMS has a role 

to play in ensuring thorough, yet timely review of new technologies and treatment options 

that could improve the quality of care for diabetes patients? 

Answer: CMS is working to address diabetes and other chronic conditions in a number of ways, 

including through Medicare's annual wellness visit, which provides beneficiaries with 

personalized prevention plan services at no cost. Such visits are crucial to the early detection and 

successful management of chronic conditions like diabetes. For beneficiaries' ongoing care, 

accountable care organizations (ACOs) are a CMS initiative to better coordinate care, which is 

particularly important for patients with multiple chronic conditions. ACOs are designed to 

promote accountability for a patient population, coordinate items and services, and encourage 

investment in infrastructure and redesigned care processes for high quality and efficient service 

delivery. Coordinated care helps ensure that patients, especially the chronically ill, get the right 

care at the right time, with the goal of avoiding unnecessary duplication of services and 

preventing medical errors. ACOs have the ability to redesign care to address their unique 

circumstances, patient populations and local community needs. Many ACOs have indicated that 

they plan to focus on chronic disease, patients transitioning care and high risk patient 

populations. 

This is also addressed through the Medicaid Incentives for the Prevention of Chronic Diseases 

(MIPCD) model, which is testing the effectiveness of providing incentives directly to Medicaid 

beneficiaries of all ages who participate in MIPCD prevention programs, and change their health 

risks and outcomes by adopting healthy behaviors. A total of ten states are participating in this 

model. 

Question 13 

You have indicated that CMS is now moving into a third phase of anti-fraud measures (i.e., 

use of moratorium authority). This authority would allow you to impose temporary 

moratoria on problem providers applying for Medicare participation numbers. Thus far, 

this authority has not been exercised. For instance, in 2010, 65 new provider numbers were 

established for new home health agencies in Miami-Dade county alone. Can you (1) 

explain how and why this happened; and (2) explain how, as Administrator of CMS, you 

would exercise your moratorium authority and when you will begin using it 

Answer: Currently all providers, including home health agencies, can enroll in Medicare so 

long as they meet our current eligibility application processes and enrollment standards. 

The use of an enrollment moratorium is a significant and powerful tool Congress provided us to 

fight fraud in Medicare and Medicaid under the Affordable Care Act. I take the authority to 

impose the use of this tool very seriously. We are closely evaluating the use of the enrollment 

moratorium authority in areas at high risk of fraud. 
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Since passage of the Affordable Care Act, CMS has implemented a comprehensive anti-fraud 

strategy that is using increased and enhanced provider enrollment checks, the ability to stop 

payments during an investigation of fraud, new requirements on ordering and referring high risk 

services, and a new predictive analytic claims screening system (using additional resources 

provided in the Small Business Jobs Act of201O). 

While CMS has yet to impose a moratorium, I have directed the agency to take implementing 

steps to impose one if warranted. In February 20 II, CMS issued final regulations setting out the 

criteria to be used when imposing a temporary enrollment moratorium on providers and/or 

suppliers under the Affordable Care Act. (See 75 Fed. Reg. 5862, Feb. 2, 2011). Because the 

moratoria authority extends beyond Medicare to also Medicaid, the agency is currently 

evaluating the impact moratoria would have on access to providers and suppliers in both 

programs. While high utilization and costs may be a factor in determining if there is a 

"significant potential for fraud, waste, or abuse with respect to a particular provider or supplier 

type or particular geographic area," it is not the deciding factor in whether a moratorium is 

warranted. We want to carefully strike a balance between combatting fraud in high-risk areas and 

making sure beneficiaries will not be adversely impacted by a moratoria. As detailed in our 

regulations we would announce any moratorium in the Federal Register explaining our 

underlying rationale for taking such action in the areas in which it would apply. 

Question 14 

The Food & Drug Administration reported this year that there are 200 fewer 

mammography facilities and nearly 1,000 fewer mammography scanners available to 

American women than in 2007, when several major Medicare imaging payment reductions 

were implemented. Centers for Disease Control and Prevention data also indicates that 

mammography screening rates have fallen slightly over the 2003 through 2010 period. In 

light ofthe critical role that early detection can play in improving clinical outcomes, is 

CMS monitoring the impact that Medicare payment rate cuts may be having on 

beneficiary access to important diagnostic imaging services, like mammography? 

Answer: Medicare covers screening mammograms to check for breast cancer once every 12 

months for all women with Medicare 40 and older. Beneficiaries pay nothing for the test if the 

doctor or other qualified health care provider accepts assignment. 

We believe access to these preventive services are important and are monitoring access to care. 

Question 15 

Is CMS monitoring potential health care consolidation that may result from policies set 

forward in the PPACA, such as accountable care organizations? Can you share this 

information with Congress? 

Answer: We are aware that hospital acquisitions of other health care entities, such as physician 

practices, by hospitals have been commonplace in the last few years. One ofthe ways that we 

are encouraging competition in hospital markets is through the operation of the Medicare 

accountable care organizations (ACOs). We believe that competition among ACOs will foster 
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improvements in quality, innovation, and choice for Medicare beneficiaries. The antitrust 

agencies (Department of Justice and Federal Trade Commission) are monitoring the competitive 

effects of ACOs. These agencies issued guidance for providers seeking to become ACOs and 

established a voluntary expedited review process to give feedback to providers on potential anticompetitive activities. 

CMS is providing aggregate claims data to the antitrust agencies to assist them in ensuring ACO 

formation and implementation does not have a detrimental effect upon competition. The 

antitrust agencies have existing enforcement processes for evaluating concerns raised about an 

ACO's formation or conduct. In addition, we believe the testing of the Advance Payment ACO 

model has led to increased participation by smaller organizations in the Medicare Shared Savings 

Program, thus increasing competition. I would be happy to work with you and your staff on how 

we can improve on these efforts. 

Questions from Senator Carper 

Question 1 

I think we can all agree that on the importance of curbing waste and fraud in Medicare 

and Medicaid. The GAQ estimates that for fIScal year 2012, improper payments for both 

programs totaled $63.5 billion. In addition, the Attorney General also notes billions more 

in fraud. 

The good news is that this figure is down slightly from the previous two years, even as 

overall spending on the two programs has increased. The bad news is that we still have a 

long way to go. However, I think it is also important to recognize that the Centers for 

Medicare and Medicaid Services, under your leadership, has continued to put strengthened 

controls and procedures, including the use of advanced cutting edge data analysis, as a high 

priority. The Centers for Medicare and Medicaid Services has adopted the philosophy of 

preventing waste and fraud, as opposed to simply pursuing "pay and chase" where the 

agency would make bad payments and then try to chase them down for recovery. 

Ms. Tavenner, during last congressional session, I joined with a bipartisan list of 37 Senate 

colleagues in legislation to take a number of important steps to fight waste and fraud in 

Medicare and Medicaid. Many of these ideas were even adopted by your agency, even 

without the bill becoming law. I also very much appreciate the fact that your staff 

reviewed the "Medicare and Medicaid "FAST" Act, giving a lot of Important technical 

advice. We plan on reintroducing a new and improved version ofthe bill this spring. 

Do you see some ongoing opportunities for continued improvement in the fight against 

Medicare and Medicaid waste and fraud? Do you believe that this progress represents 

significant savings for both programs? 

Answer: I appreciate your interest in improving the Medicare and Medicaid programs and 

combating the fraud, waste and abuse that could put these important programs at risk. As you 

know this administration considers fraud prevention a top priority and we appreciate the 

opportunity to work together to combat fraud in the Medicare, Medicaid, and CHIP programs. I 
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challenge my management team each and every day to improve the way we do business and I 

have made it clear that combatting fraud, waste and abuse in all of our programs is a top 

priority. We are continually looking at ways our Center for Program Integrity can leverage the 

expertise of other CMS components, our contractors and other partners, such as the States, OIG, 

FBI and the Department of Justice. 

I know you have been following the results of the FFS Recovery Audit program closely and to 

date the RACs have recovered more than $4 billion dollars. CMS is using new cutting-edge fraud 

prevention tools such as automated provider screening and predictive modeling on fee-forservice claims to help the agency stay one step ahead of fraudsters. We are also collaborating 

with new partners on fraud prevention in unprecedented ways through our joint HHS-DOJ 

HEAT Task Force, our Health Care Fraud Prevention Partnership (HFPP) and our Fraud 

Prevention System (FPS). 

Pursuant to new authority and resources provided under the Small Business Jobs Act of2010 

CMS began screening all fee-for-service Medicare claims through a predictive analytic modeling 

system similar to that used by financial sector companies to identifY fraud. To build the system 

CMS contracted with leading private sector companies that bring significant experience in the 

field of predictive analytics to the Medicare program. Since June 2011 the FPS has screened 

over a billion claims for suspicious billing activity. In its first year of implementation the FPS 

identified or prevented $115.4 million in inappropriate payments, generated leads for 536 

investigations, and augmented information for 511 pre-existing investigations. 

As you know CMS was provided several new tools under the Affordable Care Act to strengthen 

our fraud prevention efforts and stop improper payments particularly with respect to high risk 

providers such as home health agencies and DME suppliers. For example, the Affordable Care 

Act gave CMS the ability to use enhanced screening measures on all providers before letting 

them bill the Medicare program. Under our new screening rules, new DME suppliers arid home 

health agencies will be subject to higher levels of screening. We are also improving the 

enrollment standards for DME suppliers. Over the last four years, the Administration's 

enforcement efforts have recovered $14.9 billion, up from $6.7 billion over the prior four-year 

period. Since 1997, the HCFAC Program has returned more than $23 billion to the Medicare 

Trust Funds. 

Question 2 

I recently went to visit the Mayo Clinic and UnitedHealth and found that both health care 

providers and private insurers understand the pressing need to move away from fee-forservice payments in Medicare as quickly as possible. Many doctors and hospitals have 

recommended bundled payments as a promising way to pay for improved health outcomes 

and higher quality care. 

What does CMS need to expand bundled payments throughout Medicare more rapidly? 
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Answer: The Bundled Payments for Care Improvement initiative is testing whether a single 

bundled payment for an episode of care can improve coordination between health providers. We 

are testing this idea against four separate model designs. In January 2013, the Innovation Center 

announced the participants in Modell, which tests bundled payments for acute care hospital 

stays, as well as the participants in Phase One of Models 2 through 4 ofthe Bundled Payments 

for Care Improvement Initiative. Phase One is the initial period ofthe initiative where the 

participants and CMS prepare for implementation and assumption of financial risk by sharing 

data and information. Phase Two will begin this summer. Because we began testing in January, 

I do not have results to report yet. We are happy to work with you to provide updates on results 

as they become available. 

Ouestion3 

I see Medicare Advantage (MA) as a promising solution to move us away from fee-forservice Medicare more quickly. However, we have to ensure that we don't spend more on 

these private plans than we do in traditional Medicare and we also need to make sure that 

Medicare Advantage plans are fully available as a competitive option to all Medicare 

beneficiaries. I'm particularly concerned about states like Delaware and as many as nine 

other states that have 10 percent or less of our populations in Medicare Advantage plans, 

partially because there are often few MA plans to choose from. 

What could we do to expand Medicare Advantage and ensure that seniors in all of our 

states have a meaningful choice between high quality Medicare Advantage plans and 

traditional Medicare? At the same time, how could we ensure that traditional Medicare is 

able to compete with Medicare Advantage plans more effectively? 

Answer: Many beneficiaries have several high quality Medicare Advantage plan choices. 

People with Medicare will have access to 127 four and five-star Medicare Advantage plans, 21 

more top-performing plans than the previous year. Additionally, 30 percent of stand-alone 

prescription drug plans available to beneficiaries received a star rating of 4 or higher. More than 

37 percent of Medicare Advantage enrollees are now enrolled in a four- or five-star plan. 

To help provide beneficiaries with high quality care, CMS is working to make FFS care as strong 

as possible, with ACOs and other models, to better coordinate FFS care. At the same time, we 

want to make sure that our managed care program is as strong as possible and that we are 

incentivizing plans to improve their quality. CMS is focused on making sure both programs are 

as strong as possible so even if beneficiaries don't select managed&are, or do not have all the 

choices that other parts of the country have, they still receive the same care coordination and that 

high-quality managed care offers. 

Ouestion 4 

The federal government and states have paid out over twelve billion dollars to providers, 

doctors and hospitals for the electronic health record implementation incentive program. 

There is concern that this program has not delivered on the significant improvement in 

care that is given to U.S. citizens through expanded and improved data sharing across 

providers. 
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Can you explain what CMS is doing to adjust the program so that these monies are 

invested more effectively to enable patient's data to "electronically" follow the patient 

better as they move through the healthcare system? This would improve the coordination 

and quality of care delivery while reducing cost by eliminating duplicative services. 

Answer: Health IT that enables the secure exchange of information across providers is crucial 

to reforming the system, and must be a routine part of care delivery. 

I assure you that electronic health record technology will be significantly improved when Stage 2 

begins in 2014. This is due to the efforts of nearly 1,000 participants representing more than 500 

organizations from the health information technology standards community working with us 

over the past two years. 

In Stage 2, providers will have to demonstrate that they can exchange structured clinical 

summaries with other providers, regardless of the providers' EHR vendor, and vendors will have 

to demonstrate that they can support this interoperability. The Stage 2 final rules define common 

content, format, and structured data for these summaries and include basic clinical information 

regarding the care provided, such as medications, upcoming appointments, or other instructions. 

CMS will also increase its emphasis on ensuring electronic exchange across providers through 

many ofits policies and programs. We, along with the Office of the National Coordinator, have 

issued a request for information (RFI) seeking public input on what policies we believe will 

strengthen the business case for electronic exchange across providers to ensure patients' health 

information will follow them seamlessly and securely wherever they access care. 

Question 5 

My understanding is that there has been some significant delay, over a year since it was 

approved by the FDA, of making a new innovative imaging technique that contributes to 

the diagnosis of Alzheimer's disease available to Medicare and Medicaid beneficiaries. This 

delay continues despite the joint development and endorsement by both the Alzheimer's 

Association and the Society for Nuclear Medicine of Appropriate Use Criteria that 

provides physicians with a best practices diagnostic pathway for their patients with 

cognitive impairments. 

Could you explain how this new technology is outside the "reasonable and necessary" for 

the "diagnosis or treatment" standard which governs what the CMS should be making 

available to Medicare and Medicaid beneficiaries? 

Answer: CMS is actively engaged in reviewing new technology to ensure timely access to 

innovation for our beneficiaries. In October 2012, we opened a National Coverage Analysis (the 

first step in the National Coverage Determination (NCO) process) to reconsider a prior NCO on 

the use of Positron Emission Tomography (PET) scans, which provided national coverage of 

PET using only specified radioisotopes for certain indications, and conditional coverage for 

additional uses under the process known as Coverage with Evidence Development (CEO). 

Reconsideration of this NCO was requested by a stakeholder to consider coverage of PET using 

a new type of radiopharmaceutical approved by the FDA in 2012 to image beta-amyloid plaques 
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in certain patients being evaluated for Alzheimer's disease and other causes of cognitive decline. 

To help infonn this evidence review, we convened a meeting of the Medicare Evidence 

Development and Coverage Advisory Committee (MEDCAC) in January 2013. A proposed 

coverage decision is expected by July 2013, with a final decision (including consideration of 

public comments) expected by October 2013. 

Question 6 

Given that Congress extended the CBP single payment amount to retail settings, retailers 

will now have the same financial incentives to limit the range of diabetes testing supplies 

available. A group of stakeholders recently asked CMS to extend these patient protections 

to the retail channel, and CMS responded that it would monitor implementation to see if 

these protections prove to be necessary. 

If CMS felt that these protections were necessary to protect beneficiaries in anticipation of 

the CBP in mail order contexts, why does the agency not think that these same protections 

will be necessary in retail settings? 

Answer: Retail phannacies do not have all of the same incentives as mail-order contract 

suppliers in tenns of providing certain items. We note that retail phannacies do not have to bill 

Medicare on an assignment-related basis, while mail-order contract suppliers do, and therefore 

can charge customers more than the Medicare-approved amount for diabetic test strips (which is 

commonly referred to as balance billing). Notice and comment rulemakingwas required to 

include the non-discrimination requirement as a tenn of the contract for suppliers under the 

national mail-order program for diabetic testing supplies. CMS will be closely monitoring 

access to necessary diabetic supplies following implementation of the new payment amounts, but 

we do not believe it is necessary to initiate rulemaking for the retail setting at this time. 

Question 7 

Accountable Care Qrganizations and bundling payment programs present opportunities to 

lower costs and achieve higher quality care by changing payment incentive structures to 

encourage greater cooperation and coordination among providers. At the same time, these 

programs create incentives that could have the inadvertent effect of denying patients access 

to the most appropriate treatment for their condition as providers are now focused on 

shared savings and quality metrics. 

How is CMS assessing the impact ofthe ACQ and bundling arrangements on patient access 

to medical specialists and advances in medical treatments and technologies? What 

safeguards are in place to ensure clinically superior procedures/technology are not 

sacrificed purely for ACQ participants to reduce costs and increase financial gain through 

"shared savings?" 

Answer: CMS' first and most important responsibility is to ensure that its beneficiaries receive 

appropriate, high-quality care. The fee-for-service payment structure does not always 

incentivize quality or efficiency, since it pays for the quantity of care instead of the quality of 

care. Medicare is trying to transfonn the care delivery system by implementing effective 

practices that deliver higher quality care. 
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ACOs are working to encourage providers to work together to provide more coordinated care to 

their patients. ACOs agree to take responsibility for the cost and quality of their patients' care, 

to improve care coordination and safety, and to promote appropriate use of preventive health 

services. In return, if they meet quality standards, they may receive a portion of any savings 

gained. ACOs must meet performance measure standards on quality of care and patient 

satisfaction in order to receive any shared savings monetary rewards. Those measures include 

patient surveys about their doctors, shared decision-making, access to specialists, and health 

status, as well as patient safety measures such as hospital readmissions, medication 

reconciliation, and avoidable admissions. These quality and patient satisfaction measures 

provide an important incentive to ensure that providers use effective care that results in positive 

outcomes, even if the treatments required to achieve these outcomes are more costly in the short 

run. 

Questions from Senator Roberts 

Question 1 

The ACA depends on an adequate supply of physicians, especially primary care physicians. 

This is not a new issue. Many reports state that in fact we should expect access issues 

because there will not be enough physicians to meet the expanded demand. Yet, I've heard 

feedback that CMS objects to innovation in GME programs that provide support for 

primary care that would allow the money to folIow the resident, and other novel proposals. 

What approaches does CMS support and would CMS propose to address this issue? 

Answer: CMS agrees that ensuring an adequate supply of physicians is crucial to the success of 

the Affordable Care Act. The Affordable Care Act amended the Social Security Act to allow 

any time spent by residents training in a nonprovider setting to count toward direct graduate 

medical education (GME) and indirect medical education (\ME) costs if the hospital incurs the 

costs of residents' salaries and fringe benefits. This change was effective for cost reporting 

periods beginning on or after July 1,20 I 0, for direct GME, and for discharges occurring on or 

after July 1,2010, for IME and was finalized in the Calendar Year 2011 Hospital Outpatient 

Prospective Payment System final rule. This change was expected to lead to an increased number 

of residents training in non provider sites such as community-based settings. Because funding for 

Graduate Medical Education is awarded based on a statutory formula, CMS may not have 

flexibility to consider all innovative approaches. The President's budget includes a proposal that 

would give the Secretary the authority to set standards for teaching hospitals receiving Graduate 

Medical Education payments to encourage training of primary care residents and emphasize 

skills that promote high-quality and high-value health care delivery. I look forward to working 

with you on this and other ideas to improve Graduate Medical Education. 

Question 2 

ATRA directed the agency to reduce the ESRD PPS base rate in light of the significant 

reduction of drug utilization, which has coincided with an increase in the rate of nonbundled services (e.g., blood transfusions). How does the agency plan to ensure that: 
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a. The new PPS rate is adequate so dialysis providers aren't incentivized to 

inappropriately reduce necessary care in order to reduce costs, and 

b. in the face of incentives to reduce costs, that treatment decisions will not be 

detrimental to patient health and quality care and that the penalties for failing 

quality metrics be of sufficient consequence (financial or otherwise) to incentivize 

provider achievement and maintenance of quality guidelines. 

Answer: Before we make any changes to the ESRD PPS rate as required by section 632 of 

American Taxpayers Relief Act of2012, we will carefully analyze the data on utilization and 

include the proposed payment change based on the data in a proposed rule for public comment. 

We will review comments taking into consideration issues raised by all interested parties to 

ensure that beneficiaries continue to have access to the medications they need before we make a 

final decision on the payment change. 

Since the implementation of the ESRD PPS in January 2011, CMS has monitored real-time 

health outcomes and usage rates of ESRD-related drugs, biologicals, and related procedures for 

Medicare beneficiaries receiving outpatient maintenance dialysis. We will continue monitoring 

outcomes and access of ESRD beneficiaries as we implement the payment change required under 

section 632 of the American Taxpayers Relief Act of2012. 

Question 3 

The recent crisis with the New England Compounding Centers and the meningitis 

outbreak has generated renewed interest in compounding and compounded products. Can 

you clarify CMS policy as it relates to compounded products? There is some confusion in 

this area. I have heard that CMS has a broad policy not to reimburse for compounded 

products. However we also believe that there have been LCDs that contradict this NCD. 

In addition I am under the impression that CMS has codes for compounded products. 

Clarity on CMS policy in this area would be appreciated. 

Answer: We share your concern for the safety of drugs used by Medicare and Medicaid 

beneficiaries. While we believe that most patients' needs can be met with Food and Drug 

Administration (FDA)-approved drug products, we also believe it is medically appropriate for 

some patients to receive compounded drugs in certain situations, including when patients are 

allergic to inactive ingredients in FDA-approved drug products, or when dosage forms or 

strengths of drugs that are needed by the patient are not available in FDA-approved drug 

products. In such cases, we think it is appropriate for Medicare to pay for compounded drugs 

(when they meet other criteria for coverage and payment) to ensure beneficiaries and recipients 

have access to clinically appropriate drug therapies. 

Compounded drugs may be covered under Medicare Part B when the compounded drugs are 

created by a pharmacist in accordance with the Federal Food, Drug, and Cosmetic Act and when 

their use meets all other criteria for services incident to a physician's service. Medicare Part D 

plans may cover multi-ingredient compounds that contain at least one ingredient that is a Part D 

drug (Le., it contains an ingredient that is an FDA-approved drug product). Additionally, 

Medicare Part D plans may pay for only those ingredients within the compound that 
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independently meet the definition of a Part D drug. Consequently, Medicare Part D plans may 

not cover compounds made entirely from bulk active pharmaceutical ingredients. 

Ouestion 4 

The number of tragic incidences involving people with serious mental illness and substance 

use disorders seems to be escalating in number and magnitude over the last several years. 

At the same time innovative treatments are being approved by the FDA that patients don't 

have access to. What are the most prominent barriers to access, for the Medicare and 

Medicaid populations, for all FDA-approved products that have been shown to be safe and 

effective to treat people with serious mental illness and substance use disorders? What are 

your suggestions for making these treatments more accessible to the Medicare and 

Medicaid populations? 

Answer: Medicare and Medicaid beneficiaries have access to FDA approved products (for 

Medicaid beneficiaries, subject state supplemental rebate policies). CMS takes seriously issues 

of access to care for the Medicare and Medicaid populations and will be happy to work with you 

and your staff on specific issues related to access to benefits. 

Questions from Senator Bennet 

Ouestion 1 

In Colorado, we have a number of CMS activities, including the Comprehensive Primary 

Care effort, Medicaid Accountable Care Organizations, Bundled Payment pilots, the Care 

Transitions program and the state innovation modeL But while Coloradans have embraced 

transformation and innovation, they will need leadership from CMS to help navigate how 

all of these programs fit together. How is CMS planning to eventually integrate the results 

of all these various programs state-by-state to transform the delivery system? 

Answer: We are testing a number of ideas -- both at the local and national level and within 

different geographical settings -- that address the best way to change the incentive structure, 

reward integrated care, and explore payment alternatives to the fee-for-service system. There is 

no one solution to lowering costs while improving care across all populations, providers, and 

care settings. 

One of our first considerations when deciding whether to test a model is whether a model will be 

able to be expanded if it succeeds. Finding those types of successful models that can affect the 

Medicare or Medicaid on a large scale is the purpose of our Center for Medicare and Medicaid 

Innovation, and that is why we are testing a broad range of models. 

Since Medicare and Medicaid serve diverse populations in different settings, we know that every 

model may not be able to be expanded universally because it may not be applicable for every 

beneficiary or community. But, every model we test could potentially be expanded in some way. 

For example, a model that is tested in part of a frontier state could be scaled to serve 

beneficiaries in other frontier states. A model that succeeds in a rural area might not be 

appropriate for a large urban center, but we believe it is important to test models that may hold 
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answers for rural communities, or for certain populations, even if they may not be expanded to 

every community nationwide. 

Question 2 

For years, Congress has been looking for bipartisan ways to replace the Medicare fee-forservice system with a new payment reform that pays for quality-not quantity of service. 

While we wait for the results of various demonstrations and pilot projects, can CMS give 

any immediate options to Congress on ways to replace the Medicare fee-for-service system? 

Answer: As you mentioned, CMS is testing a variety of payment models that seek to better 

integrate care and better incentivize quality. We are also eager for results from these new 

payment models. For example, the Comprehensive Primary Care Initiative is a mUlti-payer 

initiative where CMS pays primary care providers monthly care management fees for 

comprehensive care management on top of their regular Medicare Fee-for Service payment. 

After two years, CMS offers the providers the chance to share in any savings they generate. 

Other payers, often including Medicaid, are also providing enhanced payment for primary care 

services. 

Another model is the accountable care organization (ACO). In addition to the Medicare Shared 

Savings Program, we are testing the Pioneer ACO model and the Advance Payment ACO model. 

ACOs involve groups of doctors, hospitals, and providers that accept accountability for 

providing high quality coordinated care to Medicare beneficiaries. ACOs are eligible for shared 

savings and may be subject to losses. Finally, the Bundled Payments for Care Improvement 

initiative is comprised of four broadly defined models of care, which link payments for mUltiple 

services beneficiaries receive during an episode of care. We think episode-based payment has the 

potential to transform the delivery system. 

Question 3 

We recently held a roundtable on mental health issues with Colorado mental health 

stakeholders. The participants highlighted issues regarding the rules and regulations 

around mental health treatment in both Medicare and Medicaid. Providers in Colorado 

tell me that Medicaid and Medicare have different rules on who can provide certain kinds 

of treatment, where they can be provided, and what services are covered. These different 

rules lead to an extraordinary amount of extra paperwork and billing time, all time that 

could be spent with patients. As we hope to see more alignment of mental health services 

with primary care, as Administrator, would you prioritize aligning the rules and 

regulations of mental health services between Medicare and Medicaid? 

Answer: I've been on the other side of regulations, and know we need to reduce the regulatory 

burden on hospitals and health care providers, so they can focus on the important work of 

serving their patients. CMS is aware that different rules between Medicare and Medicaid can 

cause confusion for both providers and beneficiaries. To help address these differences, the 

Medicare-Medicaid Coordination Office has launched the Alignment Initiative, with the goal to 

more effectively integrate the Medicare and Medicaid programs. Partnering with States, health 

care providers,. caregivers and beneficiaries, CMS is working to improve quality, reduce costs 

and improve the Medicare-Medicaid enrollee experience. Through the Alignment Initiative, the 
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Medicare-Medicaid Coordination Office seeks to transcend boundaries, facilitating a national 

conversation with stakeholders from around the country to identify opportunities for alignments 

and to improve the two programs. 

CMS is streamlining regulations that have been identified as unnecessary, obsolete, or 

excessively burdensome on health care providers. Under the President's Executive Order on 

Improving Regulation and Regulatory Rules, we have already finalized two regulations that will 

reduce this burden. The first rule revises the Medicare Conditions of Participation (CoPs) for 

hospitals and critical access hospitals (CARs). CMS estimates that annual savings to hospitals 

and CARs will be approximately $940 million per year. The second, the Medicare Regulatory 

Reform rule, will produce savings of $200 million in the first year by promoting efficiency. This 

rule eliminates duplicative, overlapping, and outdated regulatory requirements for health care 

providers. 

Question 4 

Alzheimer's disease is estimated to cost the nation $200 billion this year alone, and about 70 

percent of that - $140 billion - is shouldered by taxpayers in Medicare and Medicaid costs. 

If the current trajectory holds, this number will exceed $1 trillion annually in the coming 

decades. Leading experts and the government have stressed the value of an early and 

accurate diagnosis in treating Alzheimer's to prevent costly and time-consuming 

misdiagnoses, and the need to begin proper care planning earlier. At the same time, 

companies have been working to create diagnostic tests that could lead to an earlier finding 

of Alzheimer's. As diagnostic technologies for Alzbeimer's and other diseases continue to 

be developed and gain approval by the FDA, what measures can eMS take to prioritize 

coverage of diagnostic tools, particularly when early diagnosis of diseases like Alzheimer's 

and others can lead to dramatically lower costs? 

Answer: CMS agrees that tackling Alzheimer's disease is a national priority. We are an active 

participant in the National Plan to Address Alzheimer's Disease, established by the Department 

of Health and Human Services (HHS) pursuant to the National Alzheimer's Project Act (NAPA) 

enacted in January 20 II. The National Plan sets forth five goals, including the development of 

effective prevention and treatment approaches for Alzheimer's disease and related dementias by 

2025. A National Alzheimer's Project Advisory Council (including a senior CMS 

representative) meets quarterly to discuss the efficacy of government programs in this area, and 

annually evaluates and updates the National Plan. 

We are also actively engaged in reviewing new technology to ensure timely access to innovation 

for our beneficiaries. In October 2012, we opened a National Coverage Analysis (the first step in 

the National Coverage Determination (NCO) process) to reconsider a prior NCO on the use of 

Positron Emission Tomography (PET) scans, which provided national coverage of PET using 

only specified radioisotopes for certain indications, and conditional coverage for additional uses 

under the process known as Coverage with Evidence Development (CEO). Reconsideration of 

this NCO was requested by a stakeholder to consider coverage of PET using a new type of 

radiopharmaceutical approved by the FDA in 2012 to image beta-amyloid plaques in certain 

patients being evaluated for Alzheimer's disease and other causes of cognitive decline. To help 

inform this evidence review, we convened a meeting of the Medicare Evidence Development and 
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Coverage Advisory Committee (MEDCAC) in January 2013. A proposed coverage decision is 

expected by July 2013, with a final decision (including consideration ofpubJic comments) 

expected by October 2013. 

Question 5 

CMS recently announced that they will postpone rulemaking on Stage 3 meaningful use 

requirements until early next year. Timely implementation of Stage 3 meaningful use 

requirements as well as provider and hospital adoption of electronic health records are 

critical to improving patient outcomes and facilitating health care savings. As the Food and 

Drug Administration releases their Unique Device Identifier (UDI) System final rule in the 

coming year, ean you comment on ways that CMS could link UDI to improvement in health 

outcomes? 

Answer: CMS and the Office of the National Coordinator are working together to accelerate 

health infonnation exchange (HIE) and build a seamless and secure flow of infonnation essential 

to transfonning the health care system. We do not expect a delay in Stage 3 implementation. In 

2013, CMS is focusing on successful implementation ofMU2, program integrity, advancing 

interoperability, achieving alignment across programs, and hitting clear adoption targets by 

year's end. We think it is important to have an opportunity to learn from stakeholders during 

meaningful use implementation, and use this feedback to infonn Stage 3. 

We continue to coordinate with a wide range of stakeholders, including our federal partners, to 

infonn the electronic health records system and our quality measures. CMS and FDA work in a 

partnership that is facilitated by a fonnal Memo of Understanding (MOU). The partnership 

between the agencies enhances infonnation sharing efforts, promotes efficient utilization of tools 

and expertise for product analysis, validation and risk identification, and build infrastructure and 

processes that meet the common needs for evaluating the safety, efficacy, utilization, coverage, 

payment, and clinical benefit of drugs, biologics and medical devices. 

Question 6 

What steps do you plan to take to improve CMS' ability to measure the quality of care 

provided in ACOs? I see many providers in my state of Colorado willing to implement 

innovative technologies that are clinically appropriate, but they are concerned that quality 

measnres do not always keep up. What steps can CMS take to ensure that the use of such 

clinically appropriate technology and implementation of new innovations will not result in 

the provider being penalized on their quality score? Is there a mechanism to adjust the 

quality scores where quality measures may not have caught up to advanced care delivery? 

Answer: In the Medicare Shared Savings Program, accountable care organizations (ACOs) are 

accountable for the quality, cost, and overall care of the Medicare fee-for-service beneficiaries 

assigned to the ACO. ACOs have significant flexibility to invest in redesigned care processes for 

high quality and efficient service delivery, including implementing innovative technologies. 

The quality metrics proposed for ACOs and finalized after consideration of public comments 

were a careful balance between ensuring that quality of care is maintained while decreasing the 

reporting burden on ACOs. CMS is committed to developing and adopting a mix of process, 
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outcome, and patient experience of care measures, including measures of safety, care transitions, 

and changes in patient functional status. As the science of quality measurement evolves, we will 

be able to make determinations on which measures are the most meaningful to providers and 

health care professionals and will most effectively drive progress and improvement. In future 

rulemaking for the Medicare Shared Savings Program, we anticipate reviewing the selected 

quality measures and seeking public comment on other measures that could be used by ACOs. 

Ouestion 7 

Section 1341 of the Affordable Care Act establishes a transitional reinsurance program 

intended to stabilize premiums for coverage in the health care marketplace from 2014 to 

2016. Tbe Act requires $25 billion to be collected from bealth insurance issuers and group 

bealth plans, including self-insured employers, over the three-year period. Additionally, 

tbe HHS Notice of Benefit and Payment Parameters for 2014 (CMS-9964-P): Application of 

Transitional Reinsurance Program to Self-funded Health Plans proposes a national per 

capita fee in 2014 of $63 per covered life, including employees, dependents, early retirees, 

~nd COBRA-eligible individuals. I want to ensure tbat my constituents still bave access to 

robust, affordable, employer-sponsored health insurance. Has CMS performed an impact 

ana1ysis of tbe effects of the transitional reinsurance fee on employer-sponsored coverage? 

In particular, bow might it affect tbe cost to and coverage of dependents, early retirees, and 

participants? 

Answer: The Affordable Care Act directs that a transitional reinsurance program be established 

to help stabilize premiums for coverage in the individual market from 2014 through 2016. The 

reinsurance program is designed to aIleviate the need for issuers to build into premiums the risk 

of enrolling individuals with significant unmet medical needs. The program is expected to 

reduce premiums in the individual market by between 10 and 15 percent in 2014. 

To assist with the development of the payment parameters used for reinsurance, HHS developed 

a model with reference to existing national models such as those used by the Congressional 

Budget Office and Office of the Actuary. The policy resulting from the model maximizes the 

range of health insurance issuers and self-insured group health plans contributing to the 

reinsurance pool, lowering the cost per enrollee to the extent possible permitted by the law. Both 

reinsurance and market reforms such as guaranteed issue should lead to fewer unreimbursed 

health costs, lowering the costs for issuers and group health plans. 

Ouestion 8 

The American Taxpayer Relief Act included a payment adjustment to tbe End Stage Renal 

Disease bundled payment. The rebasing of dialysis care payment was estimated by CBO to 

be a cut of at least 4%. I bave been bearing concerns from my constituents in Colorado 

that this could adversely impact patient access, particularly in underserved areas. Dialysis 

providers have expressed concerns tbat facilities could close. As CMS implements this 

payment adjustment, what measures will you take to monitor and protect access for 

patients? 

Answer: We agree with the importance of appropriate payments to ensure access to dialysis 

treatment for ESRD beneficiaries. Since the implementation of the ESRD PPS in January 2011, 
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CMS has monitored real-time health outcomes and usage rates of ESRD-related drugs, 

biologicals, and related procedures for Medicare beneficiaries receiving outpatient maintenance 

dialysis. We will continue monitoring outcomes and access ofESRD beneficiaries as we 

implement the payment change required under section 632 of the American Taxpayers Relief 

Act of2012. 

In addition, before we make any changes to the ESRD PPS rate, we will carefully analyze the 

data on utilization and include the proposed payment change based on the data in a proposed rule 

for public comment. We will review comments taking into consideration issues raised by 

stakeholders to ensure that beneficiaries continue to have access to the medications they need 

before we make a final decision on the payment change. 

Question 9 

As you know, the pediatric dental benefit is an essential health benefit that may be 

provided as part of a comprehensive package or a standalone dental plan. Nevertheless, 

recent pronouncements from ccrro regarding the offer and purchase ofthe pediatric 

dental EBB h.ave resulted in confusion in the marketplace. Specifically, on the Colorado 

exchange, the pediatric benefit must be offered but its purchase is not required. Outside the 

exchange, the purchase is mandated (even for childless adults) and responsibility for the 

reasonable assurance that an individual has purchased the pediatric dental benefit of 

purchase rests with the major medical carrier. This lack of equitable treatment of the 

pediatric dental benefit inside and outside ofthe exchanges may preclude children from 

receiving access to important oral services from their current stand alone dental plan, 

which is required by the ACA. Bas CMS considered how this differing treatment in the 

Exchange will impact coverage of and access to dental care for kids? Can you ensure that 

CMS will provide equitable treatment for the pediatric dental benefit? 

Answer: CMS has taken steps to implement the provisions regarding the pediatric dental 

essential health benefit in a manner that is consistent with the statute and provides as many 

consumer protections as possible. Essential health benefit requirements mandate that certain 

issuers offer certain benefits, but do not require individuals or families to obtain coverage for a 

particular benefit. The Affordable Care Act requires issuers offering non-grandfathered coverage 

in the individual and small group markets to offer the essential health benefits. Section 1302 of 

the Affordable Care Act also allowed issuers in an Marketplace to not offer pediatric dental 

coverage if there is a stand-alone dental plan offering the pediatric dental essential benefit 

operating in that exchange. Outside the Marketplace, issuers are required to offer all essential 

health benefits, including the pediatric dental essential health benefit; however, the essential 

health benefit final rule provided a clarification regarding situations in which issuers outside of 

Exchanges would not be found to be non-compliant with the requirement to offer essential health 

benefits. In situations in which an issuer is reasonably assured that an individual has purchased a 

Marketplace-certified stand-alone dental plan, that issuer, as a matter of compliance with section 

2707(a) of the Affordable Care Act, would not be found non-compliant. 
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Questions from Senator Cardin 

Question 1 

In the Affordable Care Act, the Finance Committee and then the Congress clearly 

instructed your agency to establish an essential health benefits package that included a 

pediatric dental benefit. Congress did not intend to create a market advantage for standalone dental plans over an affordable pediatric dental benefit embedded in a 

comprehensive plan. 

In addition to the clear language ofthe ACA, you have also heard about this issue from 

several members ofthis Committee, urging you to follow the law and to not permit standalone dental plans to require an additional out-of-pocket limit for stand-alone plans in 

addition to the limit already established by the law. Your own Director of Medicare, Jon 

Blum, said to this Committee that it is a mistake to "silo" oral health care and treat it 

separately, as we once did with mental health care. 

In your final rule for state exchanges, you allow each state to determine its own separate 

pediatric dental out-of-pocket limit, creating a patchwork of unequal benefits across the 

nation. Congress did not permit states to set their own out-of-pocket limits for the 

comprehensive health plans-why are you discriminating against oral health? Then in 

the federally funded exchange rule, you proposed a separate out of pocket limit for 

pediatric dental plans 0($1000. When asked whether the limit was $1000 per family or per 

child, the statTwho wrote the proposed rule said they didn't know which. Later, we were 

told that the high out-of-pocket limit was to ensure that plans' premiums would be 

affordable. But the health plans' own analysis says differently. 

You also said that it would be too complex for dental insurance companies to coordinate 

benefits and determine when the out of pocket maximum had beeu met in the medical plan. 

Bot in CHIP, there is a limit on out-of-pocket expenses on both the medical and dental 

side. Those out of pocket expenses need to be coordinated between medical and dental 

plans. It is not the families' burden. 

I have reviewed the Stabenow-Lincoln Amendment that "allow(s) stand-alone dental plans 

to otTer the required pediatric deutal services and allows them to be offered in the 

individual and small group markets including within the insurance exchanges." I have also 

reviewed the transcript of Committee's deliberations on the ACA. It Is the view of the 

Finance Committee that nothing in the Stabenow-Lincoln amendment, the final law, or the 

committee's deliberations was intended to remove the ACA's consumer protections from, 

or impose additional cost-sharing requirements upon, enrollees in stand-alone pediatric 

dental policies. This was not based on Congressional intent and is in fact, contrary to the 

ACA as written. 

In what part of the law was CMS given the authority to eviscerate consumer protections 

for children enrolled in stand-alone dental plans? What in the law gave CCIIQ the 

authority to permit stand-alone plans to require .an additional out-of-pocket limit above 

and beyond what is In the law? 

Answer: eMS has taken steps to implement the provisions regarding the pediatric dental 

essential health benefit in a manner that is consistent with the statute and provides as many 
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consumer protections as possible. It is important to remember that when provided under a 

separate policy, certificate, or contract of insurance, or when they are otherwise not an integral 

part of the plan, limited scope dental benefits are excepted benefits, as defined by PHS Act 

section 279 I (and its implementing regulations at 45 C.F.R. § 146.145(c», and thus not subject to 

the requirements of Parts A and B of Title XXVII of the PHS Act This means that stand-alone 

dental plans are not subject to the insurance market reform provisions of the Affordable Care Act 

that amend tlie PHS Actand generally apply torioiFgrandfathere<ffiealth plans in the individual 

and group markets inside and outside the Marketplace, such as guaranteed availability and 

renewability of coverage. 

In light of this, CMS sought, through the regulatory process, to apply as many consumer 

protections as possible. These protections include prohibition on annual and lifetime limits (45 

CFR 155.1 065(a)(2), as well as a modified standard for the annual limitations on cost-sharing 

(45 CFR 155.150(a». 

In addition, the final essential health benefits rule requires dental plan issuers to offer plans at 

either a low (70%) or high (85%) actuarial value. Actuarial value is a measure of expected plan 

spending across a standard population. This means that every stand-alone dental plan purchased 

in an Exchange will cover, on average, 70% or 85% of costs that individuals could be expected 

to incur in a year for pediatric essential dental benefits. 

Finally, with respect the annual limitation on cost sharing, the essential health benefits final rule 

provided that stand alone dental plans covering the pediatric essential dental benefit must 

demonstrate that they have a reasonable annual limitation on cost-sharing, as defined by an 

Marketplace. For coverage year 2014, CMS has interpreted a reasonable limit to be $700 for a 

plan with one child enrollee or $ I ,400 for a plan with two or more child enrollees. It is important 

to remember that these annual limits on cost-sharing are catastrophic limits beyond which all 

pediatric essential health benefits would be covered in full. 

Ouestion2 

In the ACA, CMS had ample opportunity to encourage the coordination of medical and 

dental plans. A number of states have been interested in requiring qualified health plans to 

embed dental in the medical plan under one premium. Why has CMS determined that 

states cannot require the embedding of dental benefits in medical plans? 

Answer: CMS has interpreted section 1302 (b)(4)(F) of the Affordable Care Act to allow 

issuers in an Marketplace to not offer coverage ofthe pediatric dental essential health benefit if 

an exchange-certified pediatric dental plan is offered in that Marketplace. 

Ouestion3 

Is CCIIO policy consistent with the terms of the statute? The statute's limitations on 

payment of cost sharing reduction assistance for pediatric oral health coverage appear to 

be designed to ensure simply that QHPs that do not offer pediatric oral health benefits also 

do not receive cost-sharing reductions that instead are properly allocable to pediatric oral 

health services. Nothing in the provision of law cited by CCIIO appears to limit the 

entitlement itself, only the manner in which the entitlement is operationalized. Yet the 
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CCIIO policy appears to suggest that in cases in which children must be enrolled in two 

different plans, their cost-sharing entitlement will be reduced. 

Answer: Yes. Section 1402(c)(5) of the Affordable Care Act states ifan individual enrolls in 

both a QHP and a stand-alone dental plan, the provisions on cost-sharing reductions under 

sections 1402(a) and(c) of the Affordable Care Act do not apply to that portion of the costsharing reductions properly allocable to pediatric dental EHB. Thus, if an individual enrolls in 

both a QHP and a stand-alone dental plan offered on a Marketplace, cost-sharing reductions are 

not payable with respect to pediatric dental benefits offered by the standalone dental plan. 

Question 4 

What organizational options (such as linked offerings) can states - and the FFE - use to 

overcome the potential issues that arise when one EHB package is offered through two 

separate plans? CCIIO's policy does not address the strategies that states might utilize - or 

that the FFE will use - in order to assure that proper QHP/stand-alone dental packaging 

occurs so that children receive the full benefits to which they are entitled and premium 

credits and cost-sharing reduction assistance to which families are entitled are allocated 

properly across both plans. Having the Exchange play this role is parallel to the one played 

by employer plans that offer their participants and their families a menu of both medical 

and dental benefit plan choices. The only difference is that Exchanges automatically would 

enroll the children in such families in the dental plan as well as in the QHP, While adult 

dental plan enrollment would remain purely optional and without financial assistance. 

CCIIO has not yet indicated what flexibility SBEs, SPEs, or the FFE will have to package 

offerings and coordinate enrollment in order to ensure that children secure full EHB-Ievel 

coverage, while their families receive the full premium assistance and cost-sharing subsidy 

protection to which they are entitled. 

Answer: Section 1311 (d)(2)(ii) of the Affordable Care Act, codified at 45 CFR 155.1 065 aHows 

limited scope dental plans meeting the requirements of the pediatric dental essential benefit to be 

offered in a Marketplace either separately as a stand-alone plan or in conjunction with a qualified 

health plan. Thus, Marketplaces must allow for the offering of stand-alone pediatric dental plans 

as well as dental plans that are offered in conjunction with a QHP. 

Question 5 

Wbere in the law are you authorized to state that coverage for pediatric dental services is 

not required coverage? 

Answer: Sections 1302 of the Affordable Care Act and 2707(a) ofthe Public Health Service Act 

are requirements on health insurance issuers in the individual and small group markets to offer 

essential health benefits; they are not requirements on individuals or families to obtain coverage 

for a particular benefit. Section 1302(b)(4)(F) of the Affordable Care Act allows issuers in an 

Marketplace to not offer pediatric dental coverage if there is a stand-alone dental plan offering 

the pediatric dental essential benefit operating in that Marketplace. Because of this specific 

statutory exception, qualified health plans in a Marketplace, which are either individual or small 
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group market plans, do not fail to be qualified health plans solely because they do not offer 

coverage of the pediatric dental essential health benefit. 

Section 1501 of the Affordable Care Act added section 5000A to the Internal Revenue Code and 

requires that nonexempt individuals either maintain minimum essential coverage or make a 

shared responsibility payment. Some types of minimum essential coverage, such as Medicare, do 

not include coverage of the essential health benefits. 

Question 6 

I have also been engaged in ongoing discussions with you about protections for Medicare 

beneficiaries in private health plans, and I have mentioned one particularly troubling 

situation to you in recent months. It involves a private Medicare HMO plan in Maryland 

that terminated its agreement with a very popular provider group based at an FQHC with 

one week to go in the open enrollment period. The Medicare law only requires 60 days 

notice when a plan and provider terminate their contractual relationship without cause, 

and as it turned out, the plan chose to end its relationship with this provider group at the 

end of December. 

Physicians tried to contact all beneficiaries but were unable to reach all of them. We later 

learned that when beneficiaries called the health plan in mid-December to ask if their 

doctor would be on the plan's panel in 2013, they were told "Yes, your doctor is still in our 

plan." What they weren't told was that a little more than 60 days later, that would no 

longer be the case. Despite my written request to you, and that of Maryland's health 

secretary, to provide these seniors with additional options, to extend their open season, 

CMS did nothing to help them. 

On February 28, they lost their primary care physician. They are locked into this health 

plan until 2014, but they have lost their primary care physician. These are very vulnerable 

seniors who live in an area of Baltimore that is not affiuent. Their doctors were based at a 

Community Health Center that was convenient to their homes. The nearest participating 

provider who is accepting new Medicare beneficiaries is now a long bus or cab ride away 

from their homes. In fact, the plan is in the process of terminating agreements with other 

providers who are based in Baltimore City and is moving to operate primarily In wealthier 

suburban areas. I'd like to hear from you that you are truly committed to the people 

CMS was created to protect, Medicare, Medicaid and CHIP beneficiaries. However, when 

viewed along with other recent decisions by this agency, it appears that you may be acting 

with greater concern for health insurance companies than you are for patients. 

What will you do now to help these beneficiaries? What are you planning to do to protect 

other seniors from this type of abuse in the future? Will you support legislation that 

restricts plans from terminating contracts close to or during the open enrollment process? 

If not, why not? 

Answer: The law establishes specific election periods during which beneficiaries can change 

MA plans. As a result, there is an ongoing special enrollment period for individuals that have the 

Low Income Subsidy. The existing special enrollment period would allow affected enrollees to 
181 


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change, at any time. In addition, CMS has processes in place for assisting individuals on a caseby-case basis regarding their enrollment issues. Affected individuals who believe they enrolled 

in a plan based on misrepresented infonnation about the plan can contact 1-800-MEDICARE to 

see if they can enroll in another plan. 

We also become concerned when a network-based MA plan experiences a significant network 

change during the contract year. When this occurs, CMS reviews the situation to assure that the 

plan maintains an adequate network, follows our guidelines for member notification and 

mitigates' possible disruption of care for the impacted enrollees. 

When an individual enrolls in a MA plan, they are agreeing to receive Medicare benefits through 

the plan and its network of providers. An MA plan's provider network can change during the 

year and this possibility is conveyed to members through the plan's Evidence of Coverage, 

which is provided prior to the Annual Election Period for current members and upon enrollment 

for new members, and through CMS' educational materials, such as Medicare & You. To 

protect beneficiaries, CMS has requirements related to plan network changes. Ifan MA plan's 

provider network changes during the plan year, it must give its members at least 30-calendar 

days advance notice of the network change, and demonstrate that its network is still adequate to 

serve its members. 

Question 7 

According to 2 use 906, which clarifies the application of the sequestration cuts to 

Medicare, it appears that sequestration should only apply to "services furnished during the 

one-year period beginning on the first day ofthe first month beginning after the date the 

order is issued." Stated another way, it appears that Medicare sequestration only should 

apply to services furnished on or after April I, 2013 (i.e. the first day ofthe first month 

after the March 1,2013 sequestration order). 

However, eMS issued a guidance to health care providers which states that, " In general, 

Medicare FFS claims with dates-of-service or dates-of-discharge on or after April I, 2013, 

will incur a 2 percent reduction in Medicare payment." 

I am concerned that, by applying to home health claims submitted for an episode of care 

that ends after April I, 2013, the guidance you have issued may be interpreted as affecting 

payment for services ofthat episode that were furnished before April I, 2013. For 

example, it is unclear if payment for a claim submitted for an episode that began on March 

25, but ends on April 15, 2013 will be reduced under sequestration for !!Lof the services 

furnished under the episode, including services that were provided before Aprill. 

Does this mean that eMS would subject an entire home health episode of care that began 

on March 25 but ended on April 2 to the 2 percent reduction? If so, I believe such an 

interpretation is inconsistent with the statute and would ask that you issue further 

guidance clarifying that any home health services provided prior to April I, 2013 will not 

be reduced. 
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Answer: Under the Budget Control Act, the sequester applies to Medicare outlays. Home 

health episode claim payment rates are based on the final day of the episode (the "through date"), 

rather than the first day of the episode. In addition, the final payment for an episode is made at 

the end of the episode. Accordingly, the 2% reduction applies to all episodes that have end dates 

on or after April 1,2013, regardless of their start date, including episodes that began prior to 

April I, 2013. For example, because the [mal payment for an episode ending on or after April I, 

2013 would be made on or after April I, 2013, and the funds, or Medicare outlays, for such 

payment would leave the Trust Funds on or after April I, 2013, the entire episode is subject to 

sequestration. 

Question 8 

In the recently released Call Letter for the 2014 plan year CMS identified concerns it had 

with the use of preferred pharmacy networks in the Medicare Part D program, 

particularly the potential for beneficiary disruption and travel costs, especially in rural 

areas. CMS also indicated it was concerned that the structure of some preferred networks 

may actually be increasing costs for the Medicare program. As the use ofthese networks 

has become more widespread in recent years and is expected to continue to grow, what 

actions has CMS taken, or does CMS plan to take, to ensure that the use of preferred 

pharmacy networks in the Medicare Part D program does not affect beneficiary access and 

health, lessen quality of care or increase costs to the Medicare program? 

Additionally, the OIG recently released a report stating that gaps exist in CMS's oversight 

of the Medicare Plan Finder reporting requirements. How is eMS ensuring that 

beneficiaries have access to all of tbe information they need about specific plan benefits, 

including whether or not a plan uses a preferred pharmacy network and which pharmacies 

are included in those networks? 

Answer: Part D regulations that permit lower cost sharing at some "preferred" network 

pharmacies also require that such cost sharing reductions must not increase CMS payments. In 

order to ensure that Part D sponsors with preferred pharmacy networks are meeting th!s 

requirement, we have begun to scrutinize Part D drug costs in PDPs with preferred networks, and 

comparing these to costs in the non-preferred networks, as well as to costs in PDPs without 

preferred networks. Our initial results suggest that for some plans, aggregate unit costs weighted 

by utilization (for the top 25 brand and top 25 generic drugs) may be higher in preferred 

networks than in non-preferred networks. Combined with lower cost sharing, we are concerned 

that these higher unit costs may violate the requirement not to increase payments to such plans. 

We have contacted the plan sponsors identified in our analysis to initiate the validation of our 

findings. 

As we indicated in the 2014 Call Letter issued April!, we strongly believe that including any 

pharmacy that can meet the terms and conditions of the preferred arrangements in the sponsor's 

preferred network is the best way to ensure that such networks promote price competition and 

lower costs in the Part D program. Opening preferred pharmacy networks to any pharmacy that 

can meet the network's terms and conditions would also likely mitigate some beneficiary 
183 


86938.143

disruption and travel costs, especially in rural areas. Mandating this policy for all Part 0 

sponsors would require rulemaking by CMS. 

Regarding the Medicare Plan Finder, the Medicare Plan Finder continues to be refined to make 

sure that it provides the most accurate information possible. As of April 2012, a beneficiary is 

now able to see drug price estimates that reflect if the pharmacy selected is preferred or nonpreferred for a given plan. If a pharmacy is not in the selected plan's network, the full price of 

the drug is shown. Concerns about the Medicare Plan Finder being time-consuming may be a 

reflection of the increased number ofinputs needed to generate an accurate cost estimate. Having 

the Medicare Plan Finder prompt the user for exact drug names, quantity and dosing regimen, 

Part 0 plan, subsidy eligibility, and choice of pharmacy provides beneficiaries access to highly 

valuable information, to help select the best coverage option and to anticipate medical expenses 

for the coming year. 
(185) 

COMMUNICATION


86938144.eps

ACP 

AMERICAN CoLLEGE OF PHYSICIANS 

INTERNAL JdEDlClNE ! DO(;tf1TS far Ad1l1t~ 

February 28, 2013 

The Honorable Max Baucus 

Chairman 

U.S. Senate Committee on Finance 

511 Hart Senate Office Building 

Washington, DC 20510 

The Honorable Orrin G. Hatch 

Ranking Member 

U.S. Senate Committee on Finance 

104 Hart Senate Office Building 

Washington, OC 20510 

Dear Chairman Baueus and Ranking Member Hatch, 

On behalf of the American College of Physicians (ACP), I am writing to express our strong 

support fur the nomination of Marilyn Tavenner as administrator of the Cenlers for Medicare and 

Medicaid Services (CMS). ACP members include 133,000 internal medicine physicians 

(intemists), related subspecialists, and medical students. Internal medicine physicians are 

specialists who apply scientific knowledge and clinical expertise to the diagnosis, treatment, and 

compassionate care of adults across the spectrum from health to complex illness. 

As acting administrator for CMS, Marilyn Tavenner has shown her dedication to improving our 

health care system, ensuring patients have access to high quality care, and reducing health care 

costs. During her time as acting administrator, Ms. Tavenner has supported the important work 

of the Center for Medicare and Medicaid Innovation (CMMI). The CMMI has developed and 

piloted important programs and initiatives to test new payment and delivery models, such as the 

Comprehensive Primary Care Initiative (CPCI). In addition, under her leadership, the CMMI 

continues to conduct research on best practices and engage a broad range of stakeholders to 

develop additional models for testing. 

Ms. Tavenner's dedication to improving our delivery and payment systems, willingness to work 

with stakeholders, and test out new models was also demonstrated in the 2013 Medicare 

Physician Fee Schedule. Under her leadership, CMS included a new set of codes focused on 

transitional care management services (TCM). The new reimbursement policies for TCM 

services will allow physicians and other qualified health care providers to coordinate Medicare 

beneficiaries' transitions from facility to non-facility settings. This is an enormous step forward 

in ensuring that patients receive Ihe care they need and recognizing the important cognitive and 

coordinated care physicians provide. In addition, ACP applauds CMS and Ms. Tavenner for 

including in the 2013 Medicare Physician Fee Schedule a recognition ofthe growing evidence 

behind higher quality care provided through an advanced primary care practice that has 

implemented a patient-centered medical home (PCMH). 

As the acting administrator for CMS, Ms. Tavenner has proven to be an effective and thoughtful 

leader who is willing to work with stakeholders to achieve meaningful change in our health care 

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186 

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