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86–248 PDF 2014

STATE OF UNCERTAINTY: IMPLEMENTATION OF 

PPACA’S EXCHANGES AND MEDICAID EXPANSION 

HEARING 

BEFORE THE

SUBCOMMITTEE ON HEALTH 

OF THE

COMMITTEE ON ENERGY AND 

COMMERCE 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED TWELFTH CONGRESS 

SECOND SESSION 

DECEMBER 13, 2012 

Serial No. 112–185 

( 

Printed for the use of the Committee on Energy and Commerce 

energycommerce.house.gov 

COMMITTEE ON ENERGY AND COMMERCE 

FRED UPTON, Michigan 

Chairman 

JOE BARTON, Texas 

Chairman Emeritus 

CLIFF STEARNS, Florida 

ED WHITFIELD, Kentucky 

JOHN SHIMKUS, Illinois 

JOSEPH R. PITTS, Pennsylvania 

MARY BONO MACK, California 

GREG WALDEN, Oregon 

LEE TERRY, Nebraska 

MIKE ROGERS, Michigan 

SUE WILKINS MYRICK, North Carolina 

Vice Chairman 

JOHN SULLIVAN, Oklahoma 

TIM MURPHY, Pennsylvania 

MICHAEL C. BURGESS, Texas 

MARSHA BLACKBURN, Tennessee 

BRIAN P. BILBRAY, California 

CHARLES F. BASS, New Hampshire 

PHIL GINGREY, Georgia 

STEVE SCALISE, Louisiana 

ROBERT E. LATTA, Ohio 

CATHY MCMORRIS RODGERS, Washington 

GREGG HARPER, Mississippi 

LEONARD LANCE, New Jersey 

BILL CASSIDY, Louisiana 

BRETT GUTHRIE, Kentucky 

PETE OLSON, Texas 

DAVID B. MCKINLEY, West Virginia 

CORY GARDNER, Colorado 

MIKE POMPEO, Kansas 

ADAM KINZINGER, Illinois 

H. MORGAN GRIFFITH, Virginia 

HENRY A. WAXMAN, California 

Ranking Member 

JOHN D. DINGELL, Michigan 

Chairman Emeritus 

EDWARD J. MARKEY, Massachusetts 

EDOLPHUS TOWNS, New York 

FRANK PALLONE, JR., New Jersey 

BOBBY L. RUSH, Illinois 

ANNA G. ESHOO, California 

ELIOT L. ENGEL, New York 

GENE GREEN, Texas 

DIANA DEGETTE, Colorado 

LOIS CAPPS, California 

MICHAEL F. DOYLE, Pennsylvania 

JANICE D. SCHAKOWSKY, Illinois 

CHARLES A. GONZALEZ, Texas 

TAMMY BALDWIN, Wisconsin 

MIKE ROSS, Arkansas 

JIM MATHESON, Utah 

G.K. BUTTERFIELD, North Carolina 

JOHN BARROW, Georgia 

DORIS O. MATSUI, California 

DONNA M. CHRISTENSEN, Virgin Islands 

KATHY CASTOR, Florida 

JOHN P. SARBANES, Maryland 

SUBCOMMITTEE ON HEALTH

JOSEPH R. PITTS, Pennsylvania 

Chairman 

MICHAEL C. BURGESS, Texas 

Vice Chairman 

ED WHITFIELD, Kentucky 

JOHN SHIMKUS, Illinois 

MIKE ROGERS, Michigan 

SUE WILKINS MYRICK, North Carolina 

TIM MURPHY, Pennsylvania 

MARSHA BLACKBURN, Tennessee 

PHIL GINGREY, Georgia 

ROBERT E. LATTA, Ohio 

CATHY MCMORRIS RODGERS, Washington 

LEONARD LANCE, New Jersey 

BILL CASSIDY, Louisiana 

BRETT GUTHRIE, Kentucky 

JOE BARTON, Texas 

FRED UPTON, Michigan (ex officio) 

FRANK PALLONE, JR., New Jersey 

Ranking Member 

JOHN D. DINGELL, Michigan 

EDOLPHUS TOWNS, New York 

ELIOT L. ENGEL, New York 

LOIS CAPPS, California 

JANICE D. SCHAKOWSKY, Illinois 

CHARLES A. GONZALEZ, Texas 

TAMMY BALDWIN, Wisconsin 

MIKE ROSS, Arkansas 

ANTHONY D. WEINER, New York 

JIM MATHESON, Utah 

HENRY A. WAXMAN, California (ex officio) 

(II) 

(III) 

C O N T E N T S 

Page 

Hon. Michael C. Burgess, a Representative in Congress from the State of 

Texas, opening statement .................................................................................... 1 

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

Hon. Bill Cassidy, a Representative in Congress from the State of Louisiana, 

opening statement ................................................................................................ 4 

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

New Jersey, opening statement .......................................................................... 4 

Hon. John D. Dingell, a Representative in Congress from the State of Michigan, opening statement ....................................................................................... 5 

Hon. Phil Gingrey, a Representative in Congress from the State of Georgia, 

opening statement ................................................................................................ 6 

Hon. Henry A. Waxman, a Representative in Congress from the State of 

California, opening statement ............................................................................. 6 

Hon. Tammy Baldwin, a Representative in Congress from the State of Wisconsin, opening statement ................................................................................... 7 

Hon. Fred Upton, a Representative in Congress from the State of Michigan, 

prepared statement .............................................................................................. 187 

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

of Pennsylvania, prepared statement ................................................................. 188 

WITNESSES

Gary Cohen, Deputy Administrator and Director, Center for Consumer Information and Insurance Oversight, Centers for Medicare and Medicaid Services, Department of Health and Human Services ............................................. 9 

Prepared statement 1

Answers to submitted questions ...................................................................... 190 

Cynthia Mann, Deputy Administrator and Director, Center for Medicaid and 

CHIP Services, Centers for Medicare and Medicaid Services, Department 

of Health and Human Services ........................................................................... 11 

Prepared statement .......................................................................................... 14 

Answers to submitted questions ...................................................................... 205 

Dennis G. Smith, Secretary, Department of Health Services, State of Wisconsin .................................................................................................................... 30 

Prepared statement .......................................................................................... 32 

Answers to submitted questions ...................................................................... 215 

Bruce D. Greenstein, Secretary, Department of Health and Hospitals, State 

of Louisiana .......................................................................................................... 50 

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

Answers to submitted questions ...................................................................... 223 

Gary D. Alexander, Secretary, Department of Public Welfare, Commonwealth 

of Pennsylvania .................................................................................................... 75 

Prepared statement .......................................................................................... 77 

Answers to submitted questions ...................................................................... 229 

Joshua M. Sharfstein, Secretary, Department of Health and Mental Hygiene, 

State of Maryland ................................................................................................ 104 

Prepared statement .......................................................................................... 107 

Andrew Allison, Director, Division of Medical Services, Department of Health 

and Human Services, State of Arkansas ............................................................ 119 

Prepared statement .......................................................................................... 121 

Answers to submitted questions ...................................................................... 235 

1Mr. Cohen submitted a joint statement with Ms. Mann. 

Page

IV 

SUBMITTED MATERIAL

Letter, dated December 12, 2012, from American Academy of Family Physicians, et al., to Senators and Members of Congress, submitted by Mrs. 

Capps ..................................................................................................................... 146 

Letter, dated December 5, 2012, from Academic Pediatric Association, et 

al., to House and Senate leadership, submitted by Mrs. Capps ...................... 148 

Letter, dated December 12, 2012, from Lucinda Ehnes, President and Chief 

Executive Officer, California Children’s Hospital Association, submitted by 

Mrs. Capps ............................................................................................................ 156 

Letter, dated July 9, 2012, from Rick Perry, Governor of Texas, to Kathleen 

Sebelius, Secretary, Department of Health and Human Services, submitted 

by Mr. Burgess ..................................................................................................... 158 

Article, dated June 29, 2012, ‘‘This Week in Poverty: 89,000 Children in 

Pennsylvania Lose Medicaid,’’ by Greg Kaufmann for The Nation, submitted by Ms. Schakowsky .................................................................................. 177 

(1) 

STATE OF UNCERTAINTY: IMPLEMENTATION 

OF PPACA’S EXCHANGES AND MEDICAID 

EXPANSION 

THURSDAY, DECEMBER 13, 2012 

HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON HEALTH, 

COMMITTEE ON ENERGY AND COMMERCE, 

Washington, DC. 

The subcommittee met, pursuant to call, at 10:05 a.m., in room 

2123 of the Rayburn House Office Building, Hon. Michael Burgess 

(vice chairman of the subcommittee) presiding. 

Members present: Representatives Burgess, Shimkus, Murphy, 

Blackburn, Gingrey, Latta, Lance, Cassidy, Guthrie, Griffith, 

Pallone, Dingell, Engel, Capps, Schakowsky, Baldwin, Matheson, 

DeGette, Christensen, Sarbanes, and Waxman (ex officio). 

Staff present: Gary Andres, Staff Director; Matt Bravo, Professional Staff Member; Howard Cohen, Chief Health Counsel; Nancy 

Dunlap, Health Fellow; Paul Edattel, Professional Staff Member, 

Health; Julie Goon, Health Policy Advisor; Sean Hayes, Counsel, 

Oversight and Investigations; Robert Horne, Professional Staff 

Member, Health; Ryan Long, Chief Counsel, Health; Carly 

McWilliams, Legislative Clerk; Monica Popp, Professional Staff 

Member, Health; Andrew Powaleny, Deputy Press Secretary; Chris 

Sarley, Policy Coordinator, Environment and Economy; Heidi Stirrup, Health Policy Coordinator; Phil Barnett, Democratic Staff Director; Alli Corr, Democratic Policy Analyst; Ruth Katz, Democratic 

Chief Public Health Counsel; Purvee Kempf, Democratic Senior 

Counsel; Elizabeth Letter, Democratic Assistant Press Secretary; 

Karen Nelson, Democratic Deputy Committee Staff Director for 

Health; Anne Morris Reid, Democratic Professional Staff Member; 

and Matt Siegler, Democratic Counsel. 

OPENING STATEMENT OF HON. MICHAEL C. BURGESS, A 

REPRESENTATIVE IN CONGRESS FROM THE STATE OF TEXAS 

Mr. BURGESS. I call the hearing to order, ‘‘The State of Uncertainty: The Implementation of the Patient Protection and Affordable Care Act’s Exchanges and Medicaid Expansion.’’ This hearing 

is under the jurisdiction of the Energy and Commerce Committee. 

I do want to observe as we start, the chairman of the subcommittee, Mr. Pitts, is ill today and we all of course wish and 

pray for his speedy recovery, and I hope that is well underway and 

we look forward to his return here to join us in the Congress next 

week. 

2 

In the meantime, it has been 1,000 days since President Obama 

signed the Affordable Care Act into law. The Obama administration has not provided critical information to Members of Congress, 

to the States, or to the health plans that they need to begin implementing the health care law’s exchanges. We know Medicaid expansion is going to happen but we don’t know what it is going to 

look like. We know insurance market reforms are occurring but we 

are not sure about what is going to be expected of the plans themselves. 

The President’s law intends that the exchanges will be ready to 

begin enrollment by October 1st of next year. In less than 10 

months the administration asserts they will have a fully functioning, technologically advanced system by which Americans will 

be able to enroll in an exchange. The administration has yet to explain how it will share information between the three different 

Federal agencies that are involved in determining eligibility for the 

exchange: Treasury, DHS and Health and Human Services. And 

further, the administration has yet to explain how it will distribute 

the income subsidies, the cash to the beneficiaries to allow them to 

purchase coverage in the exchange, or how a State will be able to 

afford the administrative costs to deal with eligibility changes. 

While the administration has the ability to push back the dates 

of implementation for Federal provisions, the States and the plans 

that are required to meet statutory standards do not have that 

flexibility. It was not until last week that the administration released the proposed rules regarding the State health insurance exchanges and the essential health benefits. However, the latest proposed rules and the other 13,000 pages of rules that the administration has released on the Affordable Care Act fail to address the 

questions that the States and the policymakers have asked since 

the law was signed. 

Medicaid accounts for a quarter of most State budgets. Governors 

cannot be expected to plan for major changes and have legislative 

authority to prepare unless the administration makes clear the 

basic ground rules. Many State legislatures only meet for a limited 

time each year, or in the case of my State, they only meet every 

other year, and that time will be quickly evaporated while they are 

awaiting instruction on these rules. 

There is a lot to be sorted out between now and the end of the 

year in Congress in general but in this issue in particular. The uncertain regulatory environment and the overall lack of response 

from the Department of Health and Human Services is not encouraging to States or to health plans to move forward in cooperation 

with the agency. And let us be honest: time is running out and the 

future of our health care system, indeed, the future of the health 

of America’s patients becomes more uncertain every day. 

It is my hope that this hearing will bring light to the questions 

that the States and Congress have been asking of the administration for the past 2–1/2 years and provide the States with an opportunity to provide their perspective as they attempt to plan for the 

unknown effects of the Patient Protection and Affordable Care Act. 

[The prepared statement of Mr. Burgess follows:] 

3 


86248.001

Opening Statement of the Honorable Michael C. Burgess, M.D. 

Subcommittee on Health 

Hearing on "State of Uncertainty: Implementation of PPACA's Exchanges and Medicaid 

Expansion" 

December 13, 2012 

(As Prepared for Delivery) 

It has been nearly 1,000 days since President Obama signed the Affordable Care Act into law. However, 

the Obama administration has still not provided critical information to Congress, the states, or the health 

plans that they need to begin implementing the health care law's exchanges, Medicaid expansion, or 

insurance market reforms. 

The president's law intends that the exchanges will be ready to begin enrollment by September 30 of next 

year. In less than ten months the administration states they will have a fully-functioning, technologicallyadvanced system by which Americans will be able to enroll in an exchange. The administration has yet to 

explain how it will share information between three different federal agencies involved in determining 

eligibility for the exchange, how it will distribute the income subsidies to beneficiaries to purchase 

coverage in the exchange, or how a state will be able to afford the administrative costs to deal with 

eligibility changes. 

While the administration has the ability to push back dates of implementation for federal provisions, states 

and the plans that are required to meet statutory standards do not have that lUxury. 

Medicaid accounts for a quarter of most state budgets. Governors cannot be expected to plan for major 

changes and have legislative authority to prepare unless the administration makes clear the basic ground 

rules. 

There is a lot to be sorted out between now and the end of the year. The uncertain regulatory 

environment and the overall lack of response from HHS are not encouraging states or plans to move 

forward in cooperation with HHS. The time is running out. Meanwhile, the future of our health care system 

only becomes more uncertain. 

### 
4 

Mr. BURGESS. At this point I would like to yield the balance of 

the time to the Member from Louisiana, Dr. Cassidy. 

OPENING STATEMENT OF HON. BILL CASSIDY, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF LOUISIANA 

Mr. CASSIDY. Thank you, Dr. Burgess. 

First, I would like to thank Mr. Greenstein from my own State 

for being here and all the other panelists, and I will tell you, I have 

multiple concerns about how this is being implemented but I will 

say it is principally today about how this is going to affect the average American family. There is a McKinsey quarterly report from 

February 2011 that suggests about 30 percent of employers will 

definitely or probably put their employees in the exchange. Now, 

when I speak to brokers, they tell me most people opt for the 

bronze level, which has a 60 percent actuarial value. Then I pull 

up this from ASBE, which is a government agency which I can’t recall the acronym for, in which it shows that roughly 98 percent of 

these workers have actuarial values of 80 percent or more. We 

have got a law inducing that we put people into an exchange in 

which the actuarial value of their policy will decrease from 80 percent to 60 percent. I am not quite sure how this serves the average 

American family. And just to put this in perspective, we know that 

actuarial value has a $2,000 to $4,000 deductible and an out-ofpocket of $6,350 before it is completely paid for. Now, if we are 

trading 80 percent for 60 percent, I don’t see the value for the 

American worker, and I would love to discuss today how all this 

was determined. 

I yield back. Thank you. 

Mr. BURGESS. The gentleman yields back his time. The Chair 

now recognizes the ranking member of the subcommittee, Mr. 

Pallone of New Jersey, 5 minutes for your opening statement, sir. 

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

Mr. PALLONE. Thank you, Doctor, or I guess I should say Chairman Burgess. Thank you. You like doctor better? Polls better? OK. 

Let me start out by saying that I am beginning to learn the Republican playbook on the Affordable Care Act. First they spent a 

year and a half holding repeal votes, and when that didn’t work, 

they advocated that the Supreme Court would most certainly reverse the law, and of course, that didn’t happen, and finally they 

crossed their fingers and hoped that the President would lose the 

election, and when all else failed, their next move now is to delay 

implementation under the guise of lack of information. 

I want to stress that the President won the election. Implementation is going to move forward and the landmark health care law 

will continue to have a positive effect on millions of people’s lives, 

and I just hope that I will be here one day when the Republicans 

finally realize that we did the right thing, the world is not coming 

to an end, and in fact, the Nation will be better because of the Affordable Care Act. 

Now, I wanted to clear some things up for the record. One of the 

critical goals of the Affordable Care Act was to improve access to 

5 

health care for millions of uninsured and underinsured Americans 

because a healthy nation is a successful nation, and it simply is immoral to allow our fellow Americans to suffer because they can’t access health insurance. A key feature to accomplish that was expanded Medicaid to help cover millions of low-income Americans, 

and when the Supreme Court allowed States to choose whether or 

not to accept the Medicaid expansion provision, Republican governors became nothing but openly hostile. But there is no question 

that accepting the Medicaid expansion is a good deal for States because it is a boon to the States’ uninsured and its taxpayers. Today 

we are going to hear from both Maryland and Arkansas, two very 

different States, about their own cost-benefit analysis that proved 

this point with dramatic facts and figures. 

Another critical piece of the ACA is the creation of health insurance exchanges, which beginning in 2014 will provide a stronger 

marketplace that provides coverage options for millions of Americans, and plenty of States have forged ahead with implementation 

of their State-based or partnership exchanges. Now, those States 

that have not are simply using HHS’s regulation as an easy excuse. 

In fact, yesterday experts consulting with States on exchange development insisted that there is enough information and time to 

build an exchange. Meanwhile, as we will hear today from the director of CCIIO, the administration has been steadily working with 

States, providing flexibility, guidance and resources. 

Now, a lot more work needs to be done, and I recognize that challenges do exist, but implementation of the Affordable Care Act puts 

this Nation on a path to better health, and we must not allow 

States to continue to play politics, which is what some are doing. 

I expect a lively discussion today, so I appreciate the witnesses’ 

participation. 

I did want to yield initially to the gentleman from Michigan, 

Chairman Dingell. 

OPENING STATEMENT OF HON. JOHN D. DINGELL, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF MICHIGAN 

Mr. DINGELL. I thank my good friend, and I commend you, Mr. 

Chairman, for holding this hearing today. 

In my entire career, I have fought to secure the affordable, quality health care our citizens deserve and need. The passage of the 

Affordable Care Act by the House and Senate, ratification by the 

President and subsequent upholding of the law by the Supreme 

Court brought to fruition a dream that began with my father long 

before me. 

The health insurance exchanges and Medicaid expansion are two 

fundamental provisions of ACA that will achieve our goal of providing affordable health care of high quality to every American. 

Through the exchange, patients and small businesses will be able 

to easily opt for a health plan that best suits their needs, and the 

Medicaid expansion will provide millions of uninsured Americans 

will access to our Nation’s world-class health care system which 

heretofore has lacked the means of paying for it. Therefore, it is 

critical that we get them right, and I hope that this hearing will 

enable us to do so. 

6 

Mr. BURGESS. The gentleman yields back. The Chair now recognizes the gentleman from Georgia, Dr. Gingrey, for the purpose of 

an opening statement. 

OPENING STATEMENT OF HON. PHIL GINGREY, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF GEORGIA 

Mr. GINGREY. Mr. Chairman, I thank you. 

What the distinguished Member from Michigan didn’t say was that the Obamacare bill will cost $1.7 trillion and result in increased costs of health care, and it does not bring it down. So I find 

it remarkable, frankly, that 33 months after the passage of this 

bill, PPACA, a hearing like this is even necessary. We have States 

including my own of Georgia still looking for direction from HHS 

on provisions that come into effect within the next year. This type 

of uncertainty makes it impossible for such States to successfully 

budget for the future. What is more, State officials are left with no 

good options as HHS imposes arbitrary deadlines on them in regard to creation of the exchanges. That is why our State of Georgia, 

our Governor Deal, who served on this committee and indeed was 

chairman of this Health Subcommittee, has rejected the idea of the 

State of Georgia setting up its own exchange because the restrictions or handcuffs that are put on the States by HHS just almost 

make it prohibitive. And the same thing in regard to Medicaid expansion. Our State has taken the option, and again, I think Governor Deal is correct in doing this, in not expanding Medicaid because of the bottom-line cost to the State over an extended period 

of time. 

Unfortunately, this hearing today is very much needed. I hope 

that we are able to find some real answers from CMS which allow 

States to indeed plan for the future. 

And with that, Mr. Chairman, if there is anyone on our side that 

would like to have time yielded, I will be happy to do that. Otherwise I will yield the balance back. 

Mr. BURGESS. Seeing none, the gentleman yields back. The Chair 

recognizes the ranking member of the full committee, the Honorable Mr. Waxman of California, for purposes of an opening statement. 

OPENING STATEMENT OF HON. HENRY A. WAXMAN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA 

Mr. WAXMAN. Thank you, Mr. Chairman. 

In March of 2010, after decades of trying, Congress finally passed 

landmark legislation that extends access to affordable, quality 

health insurance to all Americans, and since then, the law has already provided remarkable benefits for American families. It has 

allowed over 6 million young adults to stay on their parents’ insurance. It has extended a lifeline in the form of the preexisting coverage insurance plan to over 90,000 people. It has lowered prescription drug costs for 5.5 million seniors and people with disabilities. 

It has given 86 million people in the private market and in Medicare access to preventive health benefits at no cost. And it has 

eliminated lifetime insurance company limits on coverage for 105 

7 

million individuals. That is an outstanding beginning. And now we 

stand on the threshold of full implementation. 

Despite the law’s many benefits, it has faced united opposition 

from the Republican Party since the day it was passed. There have 

been over 30 votes to repeal this law. There have been numerous 

court challenges to the law. There are States that have steadfastly 

refused to move forward to assure smooth and effective implementation. 

Yet none of these efforts have been successful. The House votes 

proved to be partisan political posturing. And the Supreme Court 

declared the law constitutional. Let us be clear: the Affordable 

Care Act is the law of the land. We should all be united in seeing 

that its implementation works. 

As we will hear today, HHS and CMS have done their job. They 

have provided a constant stream of assistance and information to 

those taking steps to make this law their own. 

For Some States, no information will ever be enough. And that 

is the tragedy of politicizing a law that will benefit so many Americans. 

But other States are acting responsibly. Two of those States are 

here today. And there are many others. Just this week, for example, Nevada’s Republican Governor announced that Nevada will 

move forward with the Medicaid expansion. The Republican Governor of Idaho said the State will set up a State-based exchange. 

I welcome and look forward to hearing from all of our witnesses. 

I am particularly interested in testimony from Dr. Sharfstein from 

Maryland and Mr. Allison from Arkansas on what they have been 

able to accomplish with regard to the ACA expansions. And I would 

also like to thank Mr. Cohen and Ms. Mann for their work, the 

work they have already done and the work we expect from them 

in the future. 

The Affordable Care Act is a solid law that will improve our Nation’s health and health system for decades to come. Let us move 

forward and work together to implement it efficiently and effectively. Why do we have to have this political fight over and over 

again? We have a law that is doing good already. It is going to do 

so much more if we make it work effectively, and it is time to stop 

the fighting about it and work together. 

I would like to now yield the rest of my time to Representative 

Baldwin from Wisconsin. 

OPENING STATEMENT OF HON. TAMMY BALDWIN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF WISCONSIN 

Ms. BALDWIN. Thank you, Mr. Waxman, and thank you to our 

chairman and Ranking Member Pallone as well as all of my colleagues on this subcommittee. I want to appreciate your dedication 

to health care issues, and it has been an honor serving with you 

in the House of Representatives. 

On the topic before us today, the Affordable Care Act is the law 

of the land, and it is now time for all of us to come together and 

put politics aside and make American’s new health law work for 

the American people. And that includes expanding health care coverage through Medicaid to those who need it most, and that inVerDate Aug 31 2005 15:01 Jan 16, 2014 Jkt 037690 PO 00000 Frm 00011 Fmt 6633 Sfmt 6633 F:\112-00~1\112-18~2\86248K.TXT WAYNE
8 

cludes creating health insurance exchanges that will provide individuals and small businesses with quality, affordable insurance options. If we all do our part, access to affordable health care will be 

within reach for all Americans and small businesses, strengthening 

their economic security. 

To that end, I am pleased to be in the same room today with 

leaders who are integral to implementing the Affordable Care Act. 

Our esteemed witnesses from HHS and State officials are making 

decisions that impact the lives of citizens, citizens who deserve to 

have us put progress ahead of politics, and I ask that in our discussions today, we keep those Americans in mind. 

I look forward to your testimony, and thank you for being here, 

and yield back. 

Mr. BURGESS. An observation from a Member of this side of the 

dais is, you are already starting to sound like a Senator and you 

filibustered a little long, but notice the Chair was very preferential 

and let you go. I hope the courtesy will be reciprocated when you 

are in the august higher house. The gentlelady’s time is expired. 

I do want to welcome our witnesses here today and make the observation that there will be a vote on the floor at some point. We 

generally allow 5 minutes for an opening statement, generally try 

to be pretty flexible with that. This morning I am going to ask if 

you would try to stay within the confines of that time so that when 

votes come, we perhaps could have gotten through the entire panel. 

We have a single panel today but it is a large one but it is a very 

distinguished one. 

Our first witness will be Mr. Gary Cohen, who is the Director for 

the Center for Consumer Information and Insurance Oversight at 

the Centers for Medicare and Medicaid Services, United States Department of Health and Human Services. We are also joined this 

morning by Ms. Cindy Mann, who is the Deputy Administrator and 

Director for the Center for Medicaid and CHIP Services within the 

Centers for Medicare and Medicaid Services. I am very grateful to 

acknowledge the presence of Mr. Dennis Smith, who is the Secretary of Department of Health Services, State of Wisconsin. We 

are also joined this morning by Mr. Greenstein, Secretary, Department of Health and Hospitals for the State of Louisiana. Mr. Gary 

Alexander, who is the Secretary of the Department of Public Welfare, the Commonwealth of Pennsylvania, Dr. Joshua Sharfstein, 

the Office of Secretary, very familiar to this committee from his 

time at the FDA, now works at the Department of Health and 

Mental Hygiene in the State of Maryland. We are also very fortunate to have Dr. Andrew Allison, the Director of the Division of 

Medical Services in the Department of Human Services for the 

State of Arkansas. 

Mr. Cohen, sir, we will begin with you, 5 minutes for your opening statement, sir. 

9 

STATEMENTS OF GARY COHEN, DEPUTY ADMINISTRATOR AND 

DIRECTOR, CENTER FOR CONSUMER INFORMATION AND INSURANCE OVERSIGHT, CENTERS FOR MEDICARE AND MEDICAID SERVICES, DEPARTMENT OF HEALTH AND HUMAN 

SERVICES; CYNTHIA MANN, DEPUTY ADMINISTRATOR AND 

DIRECTOR, CENTER FOR MEDICAID AND CHIP SERVICES, 

CENTERS FOR MEDICARE AND MEDICAID SERVICES, DEPARTMENT OF HEALTH AND HUMAN SERVICES; DENNIS G. 

SMITH, SECRETARY, DEPARTMENT OF HEALTH SERVICES, 

STATE OF WISCONSIN; BRUCE D. GREENSTEIN, SECRETARY, 

DEPARTMENT OF HEALTH AND HOSPITALS, STATE OF LOUISIANA; GARY D. ALEXANDER, SECRETARY, DEPARTMENT OF 

PUBLIC WELFARE, COMMONWEALTH OF PENNSYLVANIA; 

JOSHUA M. SHARFSTEIN, SECRETARY, DEPARTMENT OF 

HEALTH AND MENTAL HYGIENE, STATE OF MARYLAND; AND 

ANDREW ALLISON, DIRECTOR, DIVISION OF MEDICAL SERVICES, DEPARTMENT OF HEALTH SERVICES, STATE OF ARKANSAS 

STATEMENT OF GARY COHEN 

Mr. COHEN. Thank you, Chairman Burgess, Ranking Member 

Pallone and the members of the Health Subcommittee for having 

me here today to speak about implementation of the Affordable Insurance Exchanges. 

I have the privilege of serving as Director of the Center for Consumer Information and Insurance Oversight in the Centers for 

Medicare and Medicaid Services. I oversee Federal implementation 

of the exchanges as well as many of the provisions of the Affordable Care Act that are working to ensure more Americans have access to affordable, quality health insurance. 

I am confident that States and the Federal Government will be 

ready in 10 months when consumers in all States can begin to 

apply for quality, private health insurance through the Affordable 

Insurance Exchanges. Whether a State chooses to run its own exchange, partners with CMS or defers to the federal government to 

operate an exchange, consumers and small employers in every 

State and the District of Columbia will be able to shop for, select 

and enroll in high-quality, affordable health insurance beginning 

on October 1, 2013. 

This is a groundbreaking time for health care in our country. 

Many families will have health insurance for the first time, and 

many people who lost their insurance when they changed jobs or 

became sick will again have the security of knowing that their 

health care needs will be met. 

I know States are ready because they have the information and 

resources they need to decide whether to establish their own exchange or whether they need the federal government, at least at 

first, to take on some of the responsibilities of operating the exchange in their State. States that want to move forward are moving forward. For example, on Monday we announced that six States 

have already made enough progress in setting up their own exchanges that we have conditionally approved their plans. 

While there is more work to do before open enrollment in October, these six States, including Maryland, which one of my fellow 

10 

panelists is representing, have shown that they are on track to 

meet all exchange deadlines. 

We are pleased that many States are taking leadership roles and 

implemented exchanges in their States. That is what the Affordable Care Act envisioned: States taking the lead. We will make 

more announcements about State progress in the weeks and 

months to come. We hope every State will take an active role in 

operating its exchange. 

Since the enactment of the Affordable Care Act, we have been 

working hard with States to prepare for the day when exchanges 

will be open for business. We began issuing guidance for the States 

about the exchanges over 2 years ago in November of 2010. Since 

then, we have released regulations, guidance and fact sheets including a final establishment rule and the essential health benefits 

proposed rule as well as detailed IT information about the specific 

processes for implementing exchanges. My office has been in contact with States every day in order to provide technical assistance 

and answer questions. We have held hundreds of hours of 

webinars, teleconferences and meetings at which thousands of 

State workers have participated. And States are helping each other 

as well, sharing many tools and documents with other States to 

help each other get the job done. 

In addition to guidance and hands-on assistance, we have been 

working to ensure that States have the resources they need starting with Exchange Planning Grants and progressing on to Establishment Grants. States that were eager to move forward to establish an exchange could qualify for an Early Innovator Grant as 

early as October 2010 and the general funding for exchange implementation has been available since January of 2011. 

To date, 34 States and the District of Columbia have received 

about $2.1 billion in grants to fund their process and building their 

exchanges. These grants are available through 2014 to help States 

build exchanges or fund first-year start-up activities. In addition, 

States that choose to partner with the federal government to build 

their exchange may receive these grants to establish State functions that are performed in support of the federally facilitated exchange. 

Many States including the six we conditionally approved earlier 

this week are moving forward, and we are working to support 

them. At the same time, we are working with States that want to 

partner with us by taking on some of the key responsibilities of operating an exchange, and we will be ready to operate a federally 

facilitated exchange in States that choose not to pursue a Statebased or partnership exchange at this time. If a State elects to 

have a federally facilitated exchange at first, it is not a permanent 

choice. States may choose to operate a partnership exchange or 

State-based exchange in 2015 or beyond. 

Now, in operating the federally facilitated exchange, it is our goal 

to preserve the traditional State role as insurance regulator and 

not to duplicate State regulatory activity while also providing help 

for consumers based on where they live who have questions while 

selecting or enrolling in a health plan in their State’s exchange. 

We have made significant progress in developing the IT systems 

needed for the federally facilitated exchange including systems for 

11 

determination of eligibility for tax credits, enrollment in health 

plans and operation of the reinsurance, risk adjustment and risk 

corridor programs, which will help keep coverage affordable. We 

are now beginning to test these services so we can ensure they will 

be up and running in 10 months. 

Since the federally facilitated exchange will need to interact with 

State Medicaid and CHIP agencies, we have been working with 

States on the technical details of those interactions and have held 

webinars with all States on these issues. States that defer to a federally facilitated exchange will not have to pay for Federal operating costs, and those States can apply for Federal funding for any 

State functions that they perform in support of the federally facilitated exchange. 

This hard work, both in CMS and in the States, is beginning to 

pay off. As I said, six States have already demonstrated their readiness to stand up and operate exchanges. My office stands ready to 

aid any other States who would also like to move forward in establishing exchanges to offer affordable, accessible, quality private 

health insurance for their citizens. 

Thank you. 

[The prepared statement of Mr. Cohen follows Ms. Mann’s testimony.] 

Mr. BURGESS. Thank you. The gentleman’s time is expired. 

Ms. Mann, you are recognized for 5 minutes for the purposes of 

an opening statement. 

STATEMENT OF CYNTHIA MANN 

Ms. MANN. Thank you, Chairman Burgess, Ranking Member 

Pallone and members of the subcommittee, for the opportunity to 

testify today. 

For Medicaid, the implementation of the Affordable Care Act is 

occurring in the context of an existing program that is undergoing 

rapid change. Change is being driven by the broader transformation in the private health care marketplace by States that are 

focused on changing the way that care is delivered and paid for and 

by Federal action, both legislative action and administrative action. 

We at CMS have a clear focus on helping State Medicaid programs 

improve care delivery and reduce cost through those improvements. 

There is no one-size-fits-all model. Medicaid’s flexibility and the 

fact that it is run by 56 different jurisdictions assure that innovation is unfolding in different ways across the country. 

With this backdrop, let me turn to the initiatives that are underway to promote timely implementation of the Affordable Care Act 

and the Medicaid provisions in that Act. People are often surprised 

to learn that Medicaid does not already cover all low-income people. Its coverage of children and pregnant women is robust, and 

most of its spending is devoted to care provided to the elderly and 

people with disabilities but millions of low-income parents are not 

eligible for Medicaid, and before the new law, other adults weren’t 

eligible at any income level except through a waiver. The Affordable Care Act filled this gap and helps to establish a simplified, coordinated system of coverage. It does so by establishing one application, one set of eligibility rules that will apply to the Medicaid 

program, to the Children’s Health Insurance Program and to subVerDate Aug 31 2005 15:01 Jan 16, 2014 Jkt 037690 PO 00000 Frm 00015 Fmt 6633 Sfmt 6633 F:\112-00~1\112-18~2\86248K.TXT WAYNE
12 

sidies available on the exchange in the form of the premium tax 

credit, and by having a coordinated system for determining eligibility. Consumers will be able to apply, be found eligible for the appropriate program and enroll in a health plan without delay, but 

as we all know, much work is needed to implement these changes, 

and for States to be successful, they do need guidance and support 

from CMS. We have been working aggressively to provide that 

guidance and support. 

In April of 2011, we released a final rule that increased the support we provide for the development and operation of State Medicaid eligibility systems. Forty-eight States and the District of Columbia have received approval for that funding. In March 2012, we 

issued a final regulation covering all of the major new income rules 

effective in the Medicaid and CHIP program that will be effective 

in 2014, and we did that regulation at the same time that my colleagues in CCIIO issued their income rules so that States would 

have the full array of rules available at the same time as they 

moved forward to implement. This fall we released comments for 

the elements of the new application and we are continuing to consult with States and others as we finalize that application. We 

have issued guidance on the data services hub and ways in which 

State Medicaid and CHIP programs will interface with the hub as 

well as with the federally facilitated exchange as applicable in a 

given State. And last month, we issued guidance on the flexibility 

States have to construct their Medicaid benefit package that will 

be available to newly eligible adults. 

In addition to this guidance, we have been creating and sharing 

tools that help States move forward. We have shared, for example, 

a verification plan with States so that they can help construct their 

verification rules in the way that they design them to be consistent 

with our overall regulations. We have sent to each State the net 

income standards and disregards that will be applicable in their 

States and that will need to be converted to the new rules. 

Throughout the years, we have had a particular focus on helping 

States accelerate their system builds to save time and resources. 

Through various venues, we are making our development products 

available to States and facilitated States sharing their system artifacts with each other, with CMS making direct links depending 

upon a State’s design objective and the vendors that they are 

using. Complementing these efforts, we have conducted more than 

20 webinars with States on 2014 implementation and established 

a State operational technical assistance team for each State, which 

consists of a multidisciplinary team of CMS experts on systems, eligibility, benefits and outreach, so each State has one-stop shopping 

in terms of answering the questions that they individually and 

uniquely have. Since this summer, we have conducted 200 calls 

with States. 

It is important to say that the guidance and tools we have made 

available, and will continue to make available, have been created 

with substantial assistance from States themselves. We have numerous State work groups and learning collaboratives on a wide 

variety of topics. The vast majority of States, though not every 

State, has participated in one or more of these work groups. We 

think States have gotten the value from these work groups. We 

13 

know we have, and we appreciate their assistance and contribution. 

The Supreme Court’s decision did not alter the importance of any 

of this work. The decision left intact the provisions of the law other 

than the penalty provision relating to the new adult coverage. 

What the Court did was to make the decision to take up the Medicaid coverage expansion for low-income adults voluntary with each 

State. States are considering this important question. Soon after 

the Court’s decision, Secretary Sebelius wrote to the governors to 

say there was no deadline for when a State had to make the decision and that the Court’s ruling left fully intact the very significant 

Federal financial support available for that expansion. In a second 

letter, we confirmed to States that not only did they have the decision to decide when to come in and if to come in, but if they did 

decide to adopt the expansion, they could later drop it, and we also 

noted that the enhanced Federal funding for systems modernization would remain available to States without regard to whether a 

State decides to expand coverage. 

In mid-November, we issued further questions and answers, and 

on December 10th, we issued a comprehensive set of Q’s and A’s 

on a range of exchange and Medicaid matters. The releases continue as does the ongoing intensive technical assistance and support. Many States have been able to take the guidance, the tools, 

the technical support we are providing and move forward. This is 

a big job, and we are very much appreciative of all that needs to 

get done at the State level. 

Let me assure you that we are eager to work with every single 

State no matter what their current stage of development may be, 

and I join Gary Cohen in saying that we are confident that every 

State can be ready in time for open enrollment on October 1st. 

Thank you. 

[The prepared statement of Mr. Cohen and Ms. Mann follows:] 

14 


86248.002

STATEMENT OF 

DEPUTY ADMINISTRATOR AND DIRECTOR, 

CENTER FOR CONSUMER INFORMATION AND INSURANC 

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U. S. HOUSE OF REPRESENTATIVES COMMITTEE ON ENERGY & COMMERCE, 

SUBCOMMITTEE ON HEALTH 

DECEMBER 13, 2012 
15 


86248.003

U.S. House of Represeutatives Committee on Energy & Commerce 

Subcommittee on Health 

"Implementation ofthe Affordable Care Act's Exchanges and Medicaid Expansion" 

December 13,2012 

Chainnan Pitts, Ranking Member Pallone, and Members of the Subcommittee, thank you for 

your interest in the recent efforts of the Centers for Medicare & Medicaid Services (CMS) to 

implement the Affordable Care Act. The Affordable Care Act ensures that American families 

will get the health care they need and protects Americans from the worst insurance company 

abuses. CMS is focused on strengthening the private health insurance market in order to make 

coverage more available, affordable, and accountable to Americans. Our work continues 

towards 2014 with the implementation of the Affordable Insurance Exchanges along with 

Medicaid's streamlined modemization and eligibility expansion. CMS has been steadily 

working with States, issuing guidance and providing technical assistance, as well as building 

Exchange infrastructure and initiating the many information technology (IT) and business 

activities needed to assure readiness for Exchange open enrollment beginning October 1,2013. 

Improving Private Health Insurance 

Since enactment, CMS has worked to put into place the strong consumer protections that provide 

new coverage options and give consumers the tools needed to make informed choices about their 

health care included in the Affordable Care Act. These provisions allow for a stronger health 

insurance marketplace, and begin the transition to additional market reforms and the Affordable 

Insurance Exchanges to begin in 2014. 

Increasing Private Health Insurance Options 

The Affordable Care Act is strengthening the private health insurance market by making 

affordable, high-quality coverage accessible to millions of Americans. Because of important 

refonns in the Affordable Care Act, many young adults under 26 can now be covered under their 

parents' plans, people with costly pre-existing conditions are able to find health coverage, and 

health insurance companies are prohibited from denying children coverage on the basis of their 

1 
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86248.004

pre-existing conditions. The Affordable Care Act has helped 6.6 million young adults stay on 

their parents' plans until the age of26, including 3.1 million young adults who are newly 

insured. The Pre-Existing Conditions Insurance Plan (PCIP) is helping over 90,000 Americans 

with pre-existing medical conditions access critical health care services. The Early Retiree 

Reinsurance Program (ERRP) has provided reinsurance payment support to more than 2,800 

employers and other sponsors of retiree plans to help over 19 million individuals in plans that 

have received support. 

Strengthening Private Health Insurance Protections 

In addition to helping more people access private health insurance coverage, CMS is working to 

ensure private health insurance is working better for consumers. During the past two years, 

CMS has implemented important private health insurance reforms included in the health care law 

that are providing new rights and benefits to put consumers in charge of their health care. 

Specifically: 

Insurance companies cannot drop or rescind people's coverage because they made an 

unintentional mistake on their application, place lifetime limits on the dollar value of 

essential health benefits, or impose an annual dollar limit on essential health benefits of 

less than $2 million; and within 2014 they will no longer be able to place any annual 

dollar limits on essential health benefits. 

An estimated 54 million insured Americans are receiving expanded and lower-cost 

coverage of recommended preventive services, and have a new rights to appeal 

decisions made by their insurance company not to pay for medical care to an 

independent third party and to use the nearest emergency room without higher costsharing, regardless of whether it is in their plan's network. 

Health insurers and group health plans are required to provide a clear summary of benefits 

and coverage in a uniform format that can easily be compared by the millions of 

Americans shopping for private health coverage. If people are looking to buy private 

health insurance now, they also can compare plans at www.HealthCare.gov, which 

provides information about what health insurance coverage is available to consumers 

based on where they live. 

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Making Private Health Insurance Coverage More Affordable 

The Affordable Care Act helps make coverage more affordable by providing States with 

resources to improve their review of proposed health insurance rate increases and by holding 

insurance companies accountable for increases in premium rates. The law strengthens States' 

rate review activities by providing $250 million in resources to build and upgrade States' 

premium rate review infrastructures, hire new staff, and improve the availability of rate review 

information to consumers. CMS has awarded $160 million to date and plans to continue to award 

grants to States to strengthen their rate review programs. Insurers in all States are now required 

to provide ajustification for any rate increase of 10 percent or more, and all of those increases 

are reviewed by independent experts, who determine whether they are unreasonable. 

Additionally, the medical loss ratio (MLR) provision generally requires that insurance companies 

use at least 80 or 85 percent of premium revenue, depending on the market, to either provide or 

improve the quality of health care for their customers. Insurance companies that did not meet the 

MLR rule provided approximately 13 million Americans with more than $1.1 billion in rebates 

this year. By holding insurance companies accountable, together, rate review and the Affordable 

Care Act's MLR policy (or 80120 rule) have yielded an estimated $2.1 billion in savings to 

consumers in one year. 

Moving Private Health Insurance Forward 

We are continuing our progress towards 2014 by releasing new rules, guidance, and grants to 

help shape a consumer-friendly insurance marketplace and prepare the insurance market for the 

implementation of the Exchanges. For example, on November 30,2012, the Department 

released the proposed 2014 Notice of Payment Parameters which, when finalized, implements 

many of the key features of the premium stabilization programs along with additional guidance 

on the advance payments of the premium tax credit and cost-sharing reductions. Also in 

November of 20 12, CMS issued proposed rules to implement Affordable Care Act provisions 

that would make it illegal for insurance companies to discriminate against people with preexisting conditions, would'make it easier for consumers to compare health plans based on the 

essential health benefits provided, and would promote and encourage employee wellness. Over 

the last two years, eMS has worked hard to prepare for the implementation of the Exchanges, 

3 
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including publishing regulations that define the eligibility and enrollment processes for the 

Exchanges and Medicaid program, and providing financial and technical support for States 

establishing their Exchanges and Medicaid enrollment IT systems. 

Guaranteeing Availability o/Coverage and Fair Premiums 

The newly proposed rules include health insurance market reforms (CMS-9972-P)1 that would 

prohibit health insurance companies from discriminating against individuals because of a preexisting or chronic condition, beginning in 2014. Under this rule, insurance companies would be 

allowed to vary premiums based only on age, tobacco use, family size, and geography, and only 

within a certain range for each factor. In addition, health insurance companies would be 

prohibited from denying coverage to any American because of a pre-existing condition or from 

charging higher premiums to certain enrollees because of their current or past health problems, 

gender, occupation, and small employer size or industry. These provisions guarantee the 

availability and renewability of coverage, as well as ensuring Americans receive fair health 

insurance premiums. 

Additionally, the rule proposes that health insurance issuers maintain a single statewide risk pool 

for each of their individual and small employer markets, unless a State chooses to merge the 

individual and small group pools into one pool. This provision directs that the cost of health 

insurance is spread across all of an issuer's enrollees in the market, without regard to their health 

status. The proposed rule would also ensure that young adults and people for whom coverage 

could otherwise be unaffordable have access to a catastrophic plan in the individual market. 

Stabilizing Premiums 

The proposed Notice of Benefit and Payment Parameters for 20142 expands upon the standards 

set forth in the Premium Stabilization and Exchange final rules, and provides further information 

on risk adjustment, reinsurance and risk corridors programs, advance payments of the premium 

tax credit, and cost-sharing reductions. These programs are designed to reduce issuer incentives 

I Health Insurance Market Rules: file:!IIC:lUsersIM620IDownloadsICMS-2012-0 14] -OOOI.htm 

22014 Payment Notice: http://www.ofr.gov/OFRUpload/OFRDatal2012-29184 Pl.pdf 

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to avoid sicker Americans, lower premiums in the individual and small group markets, protect 

against uncertain rate setting, and make insurance more affordable. 

Providing Essential Health Benefits 

The Essential Health Benefits proposed rule3 (CMS-9980-P) outlines policies and standards for 

coverage of essential health benefits, while giving States flexibility to implement this provision 

of the health care law. States would have the flexibility to select a benchmark plan that reflects 

the scope of services offered by a "typical employer plan." This approach would give States the 

flexibility to select a plan that would best meet the needs of their citizens. If States choose not to 

select a benchmark, HHS proposes that the default benchmark will be the small group plan with 

the largest enrollment in the State. These plans are available for public comment. 

Beginning in 2014, non-grandfathered health plans in the individual and small group markets 

must meet certain actuarial values, or the percentage of total average costs for covered benefits 

that a plan will cover. The actuarial values to meet are 60 percent for a bronze plan, 70 percent 

for a silver plan, 80 percent for a gold plan, and 90 percent for a platinum plan. To streamline 

and standardize the calculation of actuarial values for health insurance issuers, the rules proposes 

a publicly available actuarial value calculator provided by CMS, which issuers can use to 

determine health plan actuarial values, based on a national, standard population. This approach 

provides consumers with the ability to more transparently compare plans available in the new 

marketplace in 2014. 

Under the Essential Health Benefits proposed rule, beginning in 2015, CMS will accept statespecific claims data sets for the standard population if States choose to submit alternate data for 

the calculator. The proposed rule includes standards and considerations for plans with benefit 

designs that the actuarial value calculator cannot easily accommodate. Recognizing that simply 

calculating the actuarial value of a high-deductible health plan based on the insurance plan alone 

could understate the value of the coverage, CMS proposed that employer contributions to health 

savings accounts and amounts newly made available under health reimbursement accounts 

] Essential Health Benefits: http://www.gpo.gov/fdsys/pkgIFR-2012-11-26/html/2012-28362.htm 

5 
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should count within the plan design. The proposed actuarial value calculator is posted on 

the Center for Consumer Information and Insurance Oversight website.4 

CMS also provided guidance to State Medicaid programs outlining how existing Alternative 

Benefit Plans in Medicaid can meet the standards of the Essential Health Benefits provision. The 

guidance clarifies the policy which allows States to use commercial plans as their benchmarks 

for Medicaid benefits for the population of adults who will be newly eligible in 2014. In 

addition, the guidance offers flexibility on how States can design, define, and target benefit plans 

to meet the needs of their Medicaid population. 

Encouraging Wellness 

The Wellness proposed rules (CMS-9979-P), jointly released by the Departments of Health and 

Human Services, Labor, and the Treasury, implements and expands policies to promote 

employment-based wellness programs that improve health and help control health care spending, 

while also ensuring that individuals are protected from unfair underwriting practices that could 

otherwise reduce benefits based on health status. 

These three newly proposed rules are shaping the marketplace Americans use to obtain 

insurance in the individual and small group markets, both inside and outside the Exchanges. 

By establishing these rules for insurers, we are preparing important stakeholders for the law's 

full implementation in 2014. 

Providing More Choices 

The Affordable Care Act also creates a new type of nonprofit health insurer, called Consumer 

Operated and Oriented Plans (CO-OPs). The CO-OP program offers low-interest loans to 

eligible private, nonprofit groups to help establish and maintain new health plans. CO-OPs are 

directed by their customers and designed to offer individuals and small businesses additional 

affordable, consumer-friendly, high-quality health insurance options. Starting January I, 2014, 

CO-OPs will offer health plans through Exchanges, and they may also offer health plans outside 

4 Actuarial Value Calculator: http://cciio.cms.gov/resources/regulations/index.html#pm 

, Wellness: http://www.gpo.gov/fdsys/pkglFR-2012-11-26/htmIl2012-28361.htm 

6 
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of an Exchange. To date, a total of 23 non-profits offering coverage in 23 States have been 

awarded loans for start-up and solvency requirements. 

Establishing the Affordable Insurance Exchanges 

CMS is continuing to work with States to implement Affordable Insurance Exchanges which, 

beginning in 2014, will provide improved access to insurance coverage choices for millions of 

Americans. The Congressional Budget Office has estimated that between 25 and 26 million 

people will ultimately receive coverage through the new Exchanges. Individuals will be able to 

access high-quality, affordable health insurance plan options through the Exchange market. This 

will be particularly helpful for consumers when they do not receive health benefits coverage 

through their employers. We expect the robust employer-sponsored insurance market to 

continue, with the additional protections and benefits described earlier that make private 

insurance fair and affordable for consumers. 

Exchanges will make purchasing private health insurance easier by providing eligible individuals 

and small businesses with one-stop shopping where they can choose qualified health plans that 

best fit their needs.6 New premium tax credits and cost-sharing reductions will help ensure that 

eligible individuals and families can afford to pay for the cost of a private qualified health plan 

purchased through the Exchanges. 

The planning, development, and testing necessary to build the Exchanges is well underway. 

CMS has been diligently working with States through Exchange Planning and Establishment 

Grants to support their infrastructure. To date, 34 States and the District of Columbia have 

received approximately $1.8 billion in Exchange Establishment Level One and Level Two 

cooperative agreements to fund their progress toward building Exchanges. CMS also issued 

6 Essential health benefits must include items and services within at least 10 categories •. ambulatory patient 

services, emergency services, hospitalization, maternity and newborn care, mental health and substance use disorder 

services, including behavioral health treatment, prescription drugs, rehabilitative and habilitative services and 

devices, laboratory services, preventive and wellness services and chronic disease management, and pediatric 

services, including oral and vision care. 

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guidance7 to help States understand the full scope of activities that can be funded under the 

available grant funding as they work to build Exchanges. 

CMS has encouraged States to establish their own Exchanges, and we have worked to provide 

States with the flexibility, guidance, regulations, and resources they need to do so. States are 

making progress towards establishing their own Exchanges. To date, HHS has received 35 letters 

from States in regards to the Declaration of an Exchange. Fifteen Declaration Letters have been 

received for State-Based Exchanges,8 four declaring a State partnership Exchange,9 and seven 

choosing to participate in a Federally-facilitated Exchange. 10 We have conditionally approved 

six State-Based Exchanges for 2014, and have received Blueprints from several more States. 

The Exchange Final Rule, released on March 12,2012 (CMS-9989-F),11 offers a framework to 

assist States in setting up their Exchanges. It allows States to decide whether their Exchanges 

should be operated by a non-profit organization or a public agency, how to select and certify 

plans to participate, and whether to work with HHS on some key functions. The rule offers 

significant additional flexibility regarding eligibility determinations for Exchanges and insurance 

affordability programs. It also lays out standards for small businesses to get qualified health plan 

coverage through the Small Business Health Options Program (SHOP). Through the SHOP, 

employers can offer employees a variety of qualified health plans, and their employees can 

choose the plans that fit their needs and their budget. 

HHS will operate a Federally-Facilitated Exchange in each of those States that do not establish a 

State-Based Exchange to ensure that residents of every State have access to the affordable health 

insurance offered through Exchanges in 2014. All Exchanges will open for enrollment in 

October 2013. The Federally-Facilitated Exchanges will operate in any State that chooses to 

7 Exchange Establishment Cooperative Agreement Funding FAQs: http://cciio.cms.gov/resources/factsheets/hie-estgrant-fa9-062920 12.html 

8 State-Based Exchanges: California, District of Columbia, Hawaii, Vermont, Mississippi, Colorado, Connecticut, 

Kentucky, Maryland, Minnesota, New York, Oregon, Rhode Island, and Washington 

9 State partnership Exchange: Delaware, Illinois, Iowa, and North Carolina 

10 Federally-Facilitated Exchange: Alabama, Alaska, Arizona, Nebraska, Oklahoma, Texas, and Wisconsin 

11 Exchange Final Rule: http://www.gpo.gov/fdsys/pkglFR-2012-03-27/pdf/20 12-6125.pdf 

8 
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utilize this model on a temporary or permanent basis. On May 16,201212 and November 30, 

2012,13 CMS released guidance describing our approach to implementing a Federally-Facilitated 

Exchange. We will provide consumer support to help purchasers of health insurance determine 

eligibility and apply for a qualified health plan. For example, we are building a website with 

interactive capabilities and a call center. Consumers will be able to use this to compare qualified 

health plans, check their eligibility for affordability programs, and enroll in a qualified health 

plan. 

CMS is building a tool called the data services hub to help with verifying applicant information 

used to determine eligibility for enrollment in qualified health plans and insurance affordability 

programs for all types of Exchanges, as well as for Medicaid and CHIP. CMS has completed the 

technical design and reference architecture for this work, and is establishing a cross-agency 

security framework and protocols, and has begun testing the hub. CMS is also establishing a 

system to detenninc consumer eligibility and a mechanism for eligible consumers to enroll in a 

qualified health plan. CMS has already released the elements of a streamlined, consumerfocused application that consumers applying for any insurance affordability program in all 

States that choose to use it will complete starting in the fall of2013. 14 The application will help 

individuals and families identify various insurance affordability programs such as advanced 

payment of premium tax credits for Exchanges or Medicaid that may be available to help them 

get and pay for health insurance. 

CMS has also released an Exchange Blueprint, 15 which sets forth the approval process for StateBased Affordable Insurance Exchanges. If a State chooses to operate its own Exchange, CMS 

will review and potentially approve or conditionally approve the State-Based Exchange no later 

than the statutory deadline of January 1, 2013. The Blueprint also sets forth the application 

process for States seeking to enter into a State Partnership Exchange in which the State will 

12 Federally-Facilitated Exchange Guidance: http://cciio.cms.gov/resources/files/ffe-guidance-05-16-20 12.pdf 

13 Federally-Facilitated Exchange Guidance: 

http://cciio.cms.govlresources/fileslFiles2/FFE%20Progress%20fact%20sheel.pdD? 

14 Application Elements: http://www.cms.gov/Regulations-andGuidance!LegislationIPaperworkReductionActofl995/PRA-Listing-ltems/C.r-.1S-1 0440.html 

15 Blueprint for Approval of Affordable State-Based and State Partnership Insurance Exchanges: 

hhttp://cciio.cms.goviresourceslfiles/hie-blueprint-ll 0920 12.pdf 

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operate the plan management or consumer assistance functions of the Exchange, or both. States 

may apply to operate a State Partnership Exchange by February 15,2013. Ifa State decides not 

to operate an Exchange for its residents, CMS will operate a Federally-Facilitated Exchange in 

that State. CMS will consult with a variety of stakeholders to implement Federally-Facilitated 

Exchanges in those States. A State may apply at any time to run an Exchange in future years. 

We are committed to providing States with the flexibility, resources, and time they need to 

deliver the benefits of the Affordable Care Act. On December 10, 2012, CMS issued Frequently 

Asked Questions 16 to respond to questions that we have received from States to ensure that 

States have all ofthe information they need to make their decisions. We will continue to provide 

additional guidance about the Exchanges as needed, and we will do everything possible to 

answer specific State questions on an one-on-one basis and provide technical assistance to States 

and stakeholders. 

Moving Medicaid Forward 

The Medicaid program provides care for more than 56 million Americans, and plays an 

important role in providing coverage for low-income children, pregnant women, people with 

disabilities and seniors needing long term care services and supports. Under the Affordable Care 

Act, Medicaid eligibility for adult coverage will be simplified and it will cover millions of lowincome people who are uninsured today. Because Medicaid is jointly funded by States and the 

Federal government, and is administered by States, we both have key roles as responsible 

stewards ofthe program. Under the Medicaid Federal-State partnership, the Federal government 

sets forth a policy framework for the program and States have significant t1exibility to choose 

options that enable them to deliver quality, cost-efficient care for their residents. Through our 

daily work with States, we are fostering health care transformation by finding new ways to pay 

for and delivcr care that improves health and health care while lowering costs. 

We are also modernizing the administration of the Medicaid program by moving from a paperdriven, process-intensive approach to more streamlined ways of doing business with States. 

16 http://cciio.crns.gov/resources/files/exchanges-faqs-12-1 0-20 12.pdf 

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Through our Federal-State partnership, CMS is working with States to build systems and 

standards that ensure Medicaid is working at optimal levels for beneficiaries, States, and health 

care providers. To help States fund these improvements, CMS has made available 90 percent 

matching funds for upgrades to State eligibility and enrollment systems through December 31, 

20 IS for eligibility system design and development, and the enhanced 75 percent matching rate 

will be available indefinitely for maintenance and operations of such systems as long as the 

systems meet applicable program requirements. Forty-eight States and the District of Columbia 

have been approved for over $2.4 billion in Federal matching for important investments to 

automate and modernize enrollment, eligibility, and other system operations. 

To further reduce system costs, we have promoted ways for States to share elements of their 

system builds with each other, and we will be sharing the business rules for adopting modified 

adjusted gross income in the new eligibility systems. In addition we are designing, with 

extensive State and stakeholder consultation, a new combined and streamlined application that 

States can adopt (or modify subject to Secretarial approval). And, we will continue exploring 

opportunities to ease processes or provide States additional support for the administrative costs 

of eligibility changes implementing the new coverage provisions of the Affordable Care Act. 

These and other initiatives relating to state systems development will lower administrative costs. 

This focus on improving Medicaid efficiency and modernizing its systems, at both the State and 

Federal level, ensures Medicaid coverage will be simplified, less burdensome for States and 

beneficiaries, enrollment will be coordinated with the Exchanges, and enrollment systems will be 

ready for the expansion in Medicaid eligibility provided by the Affordable Care Act in 2014. 

Thanks to new initiatives, new funding, and State efforts, today the Medicaid program is moving 

forward towards becoming a strong, modern program that provides quality care to the people we 

serve. 

Streamlining Medicaid and Coordinating with the Exchanges 

On March 23, 2012, CMS published its Medicaid eligibility and enrollment final rule (CMS2349-F) which defInes the streamlined, income-based rules set forth in the health care law. This 

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final rule provides States with flexibility and confinns the importance of coordination with the 

Exchanges to ensure the success of the Affordable Care Act in giving all Americans access to 

health coverage. Eligibility, enrollment and renewal processes will be modernized, building on 

the successful State efforts that are already underway. 

In particular, the rule implements the simplified financial eligibility set forth under the 

Affordable Care Act by relying on a single ;;Modified Adjusted Gross Income" (MAGI) standard 

for detennining eligibility for most Medicaid and CHIP enrollees and by consolidating eligibility 

categories into four main groups - adults, children, parents and pregnant women. The eligibility 

verification procedures are similarly modernized by relying primarily on electronic data sources, 

including through the Federal data services hub that links States with Federal data sources, which 

is being developed both for Exchange enrollment and Medicaid eligibility processes. These 

procedures reduce State and beneficiary burden, allowing Medicaid to work as quickly and 

efficiently as possible to get eligible people enrolled in a timely and efficient way. 

The new MAGI rules and enrollment procedures arc aligned with those that will apply for 

determining eligibility for an advance premium tax credit in the Exchange. Coordination with 

the Exchange is important to ensuring that consumers may apply for coverage and enroll in a 

plan through a single, streamlined process. 

While ensuring coordination, the final rule also offers States flexibility in how they will design 

the system of coordinated eligibility detenninations. The rule provides two options for States for 

applications submitted to the Exchange: the Exchange can detennine Medicaid eligibility based 

on the State's Medicaid eligibility rules as it considers eligibility for advance payment of 

premium tax credits; or the Exchange can make a Medicaid eligibility assessment and rely on the 

State Medicaid and CHIP agencies for a final eligibility detennination. Under either option, 

timely and coordinated eligibility determinations are ensured. 

Since the issuance of these regulations, eMS has continued to provide guidance that gives States 

support to modernize their systems and ensure they operate seamlessly with the Exchanges. On 

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December 10, 2012, we issued Frequently Asked Questions to respond to questions that we have 

received from States. 17 

Expanding Eligibility 

The Affordable Care Act not only modernized Medicaid eligibility rules and procedures, but it 

also included an eligibility expansion designed to close the coverage gap that now exists in the 

program for the lowest income adults. The law would bring eligibility for adults to 133 percent 

of the Federal poverty level (roughly $15,000 for a single individual and $30,600 for a parent in 

a family of four in fiscal year 20 12). Currently, parents are covered at state-established income 

eligibility levels equal to about 64 percent of the Federal poverty level in the median State. Prior 

to the enactment of the Affordable Care Act, States could not cover other nonelderly adultsyounger adults just starting out, older adults whose children are grown, and others without 

children--at any income level unless they were pregnant or disabled, except through a waiver. 

The Supreme Court's decision this summer upheld all aspects of the Affordable Care Act, 

including the Medicaid provisions, except that a State may not, as a consequence of not 

participating in the low-income adult expansion, lose Federal funding for its existing Medicaid 

program. In effect, the decision means that the choice to expand is left to States. Other aspects 

ofthe law affecting Medicaid remain in place including the very generous Federal support that 

will be available for the expansion. The Federal government will pay the full cost of coverage 

for newly eligible adults in 2014, 20 IS, and 2016. Beginning in 2017, the rate drops gradually, 

reaching 90 percent in 2020 and staying there indefinitely. This is the most generous matching 

rate applied to any coverage group in the history of the program. We have recently provided 

guidance on the benefit flexibility available to States if they cover this new adult population; 

benefits will be designed by States by reference to commercial benchmark plans. 

There is no deadline for a State to tell CMS its plans on the Medicaid eligibility expansion. We 

have advised States that they may choose to adopt the expansion at any time and if they adopt the 

expansion they may drop it at a later date if they so choose. We believe the very favorable 

17 http://medicaid .goy/State-Resource-Center/Frequently-Asked-QuestionslDownloads/Govemor-F AQs-12-1 0-

12.pdf 

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financing and the flexibility available to States to design benefits and establish their delivery 

systems will encourage States to move forward with this opportunity to provide coverage to the 

poorest working families in their States and, in so doing, to dramatically reduce the burden of 

uncompensated care on their hospitals and other health care providers. 

CMS continues to work closely with States to provide options and tools that make it easier for 

States to make changes in their Medicaid programs to improve care and lower costs. We have 

released guidance giving States flexibility in structuring payments to better incentivize higherquality and lower-cost care, provided enhanced matching funds for health home care 

coordination services for those with chronic illnesses, 18 designed new templates to make it easier 

to submit section 1115 demonstrations and to make it easier for a State to adopt selective 

contracting in the program,19 and developed a detailed tool to help support States interested in 

extending managed care arrangements to long term services and supports.20 We have also 

established learning collaboratives with States to consider together five focus areas, including 

improvements in data analytics, value-based purchasing and other topics of key concern to States 

and stakeholders,21 and the Center for Medicare and Medicaid Innovation has released several 

new initiatives to test new models of care relating to Medicaid populations.22 We welcome 

continued input and ideas from States and others. 

States can implement delivery system and payment refonns in their programs whether or not 

they adopt the low-income adult expansion. With respect to the expansion group in particular, 

States have considerable flexibility regarding coverage for these individuals. For example, States 

can choose a benefit package benchmarked to a commercial package or design an equivalent 

package. States also have significant cost-sharing flexibility for individuals above 100 percent of 

18 Health Homes for Enrollees with Chronic Conditions State Medicaid Director Letter: 

http://downloads.cms.gov/cmsgov/archived -downloads/SMDLI downloads/SMD I 0024.pdf 

19 Revised Review and Approval Process for Section 1115 Demonstrations State Medicaid Director Letter: 

http://www .medicaid.gov/F ederal-Policy-GuidanceIDownloads/SHO-12-00 I.pdf 

20 On-line resource for Managed Long Term Services and Supports: 

http://www.medicaid.gov/mitss/#Link706872Context 

21 For more information, please visit: http://www.medicaid.gov/State-Resource-Center/MAC-LearningCollaboratives!Medicaid-and-CHlP-Learning-Collab.html 

22 For more information, please visit: http://medicaid.gov/State-lnnovations.html 

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the Federal poverty level, and we intend to propose other cost-sharing changes that will 

modernize and update our rules. 

Additionally, we are interested in working with States to promote better health and health care at 

lower costs and have been supporting, under a grant program established by the Affordable Care 

Act,23 State initiatives that are specifically aimed at promoting healthy behaviors. Promoting 

better health and healthier behaviors is a matter of importance to the health care system 

generally, and State Medicaid programs, like other payers, can shape their benefit design to 

encourage such behaviors while ensuring that the lowest income Americans have access to 

affordable quality care. We invite States to continue to come to us with their ideas, including 

those that promote value and individual ownership in health care decisions as well as 

accountability tied to improvement in health outcomes. 

In the Years Ahead 

In the coming months, we will implement enhanced payments for primary care physicians and 

integrated care models that improve care and lower costs. But more work remains as we continue 

our partnership with state leaders and other stakeholders to establish and implement the 

Exchanges and increase access to the Medicaid program. These new rules and programs are 

stepping stones on the path to fully implementing the Affordable Care Act. In the meantime, 

CMS will continue our hard work to strengthen health insurance options with the help of our 

partners in Congress, state leaders, consumers, and other stakeholders across the country. Thank 

you for the opportunity to discuss the work that CMS has been doing to implement the 

Affordable Care Act. 

23 Initial Announcement for the Medicaid Incentives for Prevention of Chronic Diseases: 

http://innovation.cms.gov/Files/x/mipcd foa.pdf 

15 
30 

Mr. BURGESS. Time is expired. Let me just note that the bells are 

signaling that the House is in recess subject to the call of the 

Chair. It is not a vote. 

So I will recognize Mr. Smith for 5 minutes, sir. 

STATEMENT OF DENNIS G. SMITH 

Mr. SMITH. Thank you, Mr. Chairman. It is a pleasure to be with 

you and all the members of the subcommittee today. I thank Senator-elect Baldwin for being here and congratulate her. We look 

forward to your service in the Senate, ma’am. 

I want to preface my remarks. I have a lengthy statement for the 

record, and really did take my statement from the perspective of 

implementation. I bring with that perspective two things. First, 

Wisconsin already has done much of the work that the Nation is 

going to be catching up to. We have 90 percent insurance coverage 

in the State, over 90 percent if you add in the people who are today 

already eligible for Medicaid. If they simply showed up and enrolled, we would have 93 percent coverage for the State. We also 

have, I think, been one of the leaders in integrated eligibility systems in which people can apply on the Internet as well as by mail, 

phone, and of course face to face. So we have done a lot of the work 

of what to expect an exchange would be faced with. 

And I also bring experience from implementation at the Federal 

level. I was at the Centers for Medicare and Medicaid Services 

shortly after the Medicare Modernization Act of 2003 was passed, 

so was charged with part of the responsibility of preparing for implementation of the drug benefit. I would say CMS has a much 

more daunting job today than what we did in 2003 and yet in 2003 

we were adjusting through the very last minute and in fact, even 

months into it, we still had State partners assisting the Federal 

Government because we couldn’t quite pull it off all at once. But 

at that point in time, we had another eligible system called the Social Security Administration as a major partner that was trusted 

by our senior citizens. We had many things that were already intact. We knew exactly who we were enrolling. We were simply extending a new benefit to a set group of people. We knew a lot about 

their health care. So CMS has a far more daunting job than what 

we were charged with at that point in time. 

There are lots of good people doing their very best at CMS. I do 

not envy for the job that they have. But from the perspective that 

I have been looking at this throughout, that we take deadlines seriously. The deadline that States faced was the Secretary of HHS 

was going to start reviewing States January 2013, as in next 

month, to see if we were going to be ready. We took that deadline 

very seriously and decided a year ago that that job was too big, and 

I would say today, we still do not know who is eligible, who will 

get paid, how will cost sharing be transferred between the Federal 

Government to a health plan or to someone else. We do not—again, 

all of the rules and everything else, we have still some very fundamental things. At the end of the day, you are trying to connect a 

buyer to a seller, and the fundamental things that are required to 

do that are not yet in place. So we would not have been ready to 

have that review. We took that deadline very seriously. 

31 

The Wisconsin experience again, we submitted as part of my 

statement real-life eligibility standards of what is going to be faced 

out there in converting to Modified Adjusted Gross Income, MAGI. 

MAGI inherently has marriage penalties involved in it. You are 

going to have different outcomes for similarly situated households 

making the very same income, and you are very going to have different outcomes of whether or not different members of the family 

are going to be eligible for Medicaid, whether they are going to be 

eligible for the tax credit or not eligible at all. I think when some 

of those inequities start coming to light, there are going to be a lot 

of unhappy people. I think in the Federal exchange again, and I 

gave some of our Wisconsin experience in terms of volume of what 

needs to be anticipated, we don’t know again, call centers, who is 

that going to be for, what are the standards to be able to answer 

the phone in what period of time. The idea that you are going to 

train a whole set of eligibility workers who are going to know Wisconsin’s Medicaid eligibility, it is a little hard to accept that, given 

the short period of time. Again, we are 10 months away. 

Finally, affordability. Again, with the agreement of our partners 

at the Federal Government, we have been since last July modeling 

affordability. That is, we have been applying the percentage of income towards premiums because, again, Wisconsin has already expanded eligibility. We have parents, caretakers, adults up to 200 

percent of the Federal poverty level, people on transitional medical 

assistance who have income well above 200 percent of the Federal 

poverty level. So we have been modeling those premiums, and 

again, that experience, I think, needs to give everyone pause for 

what we have found. People at the lower income level, they aren’t 

thinking in terms of percentage of income. They think in dollar 

amounts: how much money is this going to cost me on a monthly 

basis. The good news at the lower income levels, we predicted pretty accurately what they were going to be willing to pay on average 

amounts of around $59 a month for their care, for their premium, 

and again, this is just the premium, this is not cost sharing. That 

is going to be applied on top of that. But when you get above 200 

percent and that dollar amount has now gone above $200 a month, 

individuals have dropped by half. The law does not determine what 

affordability is. People will determine what affordability is, and I 

think it is going to be a vastly different experience. 

Thank you. 

[The prepared statement of Mr. Smith follows:] 

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•

.......................... 

;:~+::': , "", ", 

State of Wisconsin 

Department of Health Services 

Scott Walker, Governor 

Dennis G. Smith, Secretary 

Statement of Dennis G. Smith 

Secretary, Wisconsin Department of Health Services 

On "State of Uncertainty: Implementation ofPPACA's Exchanges 

and Medicaid Expansion" 

Subcommittee on Health 

Committee on Energy and Commerce 

U.S. House of Representatives 

December 13, 2012 

Chairman Pitts, Ranking Member Pallone, and members ofthe Committee, thank 

you for the opportunity to participate in today's important hearing, "State of Uncertainty: 

Implementation ofPPACA's Exchanges and Medicaid Expansion." Although additional 

guidance was released by Secretary Sebelius on Monday, there is indeed still a great deal 

of uncertainty across the country as we are now less than 10 months away from when 

health insurance exchanges and eligibility changes to Medicaid systems must be 

operational. We believe the actual experience of many Americans will be different from 

the expectations that have been created. Thus, a good deal of irony will follow the 

uncertainty. 

Today's hearing is focused on implementation, not policy. Accordingly, my 

remarks are intended to focus only on the challenges of implementation. It is not my 

intent to neither re-open past policy debates nor prolong current ones. However my 

avoidance of those policy discussions, in which there is great passion on both sides, 

should not be mistaken for support of the positions taken by the Obama Administration. 

Let me also be clear that Wisconsin Governor Scott Walker has not yet made a decision 

on a Medicaid expansion. Of course, taxpayers pay 100 percent of the cost regardless of 
33 


86248.019

whether the funding comes from a state account or a federal account. Moreover, funding 

is not the only consideration for us and other states. The decision whether to expand 

Medicaid or not may also depend upon whether the federal government will relinquish 

some of its program control. We strongly believe that Medicaid for working families 

should be efficient and effective as well as more equitable. I would respond to those who 

insist that states cannot be left to act in the best interests of their citizens that more than 

half of the cost of Medicaid occurs because states that have expanded beyond the federal 

mandated requirements and also remind them ofthe success of the state Children's 

Health Insurance Program. 

The Reality of the Current Budget 

While today's hearing topic is uncertainty, I would like to share some of our 

realities. The cost of our current Medicaid program continues to increase while the 

percentage of the Wisconsin Medicaid programs paid with federal funds continues to 

decrease. Without budgeting for the implementation of PPACA, we have requested an 

8.9 percent increase in general revenues for state fiscal year 2014. This compares to the 

3.6 percent request for all state agencies and a 3.8 percent increase in general purpose tax 

revenues. If our request is approved by the Legislature, my Department will take nearly 

half of all additional tax revenues coming into the state next fiscal year. Included in our 

request is an increase of $196 million over the 2013-15 budget to make up for the lower 

match rate we will receive from the federal government during this period. We face other 

increased state costs to pay for Medicare obligations and a higher state contribution to 

fund the Medicare Part D drug benefit because of the federal government's inability to 

control the cost of Medicare. 

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In the current negotiations surrounding the "fiscal cliff," states are understandably 

concerned about potential cost shifts from the federal government to the states. In fact, 

Governor Walker, along with five other governors met with President Obama last week at 

the White House and expressed this very bipartisan concern. 

In regards to the economy, even though the unemployment rate has declined, we 

have nearly 200,000 more parents, caretakers, non-disabled childless adults and children 

on Medicaid than were enrolled in July 2008. With Medicaid enrollment 25 percent 

higher than pre-recession levels, the best solutions will be found in getting the economy 

back on its feet again and everyone fully back to work. 

Who is Currently Uninsured in Wisconsin? 

The Current Population Survey (CPS) and the American Community Survey 

(ACS) estimate the total number of non-elderly uninsured individuals to be 553,600 (out 

of 558,400 total uninsured) out of our total population of 5.7 million people. In other 

words, more than 90 percent of our citizens already have health insurance coverage. If 

all of the individuals who are currently eligible for Medicaid would enroll today, our 

coverage would be nearly 93 percent. Accordingly, a primary consideration must be to do 

no harm to Wisconsin's current system of health insurance. 

From the 553,600 non-elderly individuals who are uninsured, 267,200 are below 

133 percent of the federal poverty level (FPL). Of these, 41,300 are children and 45,843 

are parents/caretaker adults who are already eligible for Medicaid. There are another 

26,200 children in families with income between 133 percent and 300 percent FPL who 

are uninsured but likely eligible for Medicaid. Therefore, approximately 113,000 

individuals, or 20 percent of the total number of uninsured individuals are already eligible 

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for Medicaid. The state would not receive the 100 percent federal match for enrolling 

any of these individuals. 

We estimate there is a total of 178,461 childless adults below 133 percent ofFPL 

who are uninsured for whom the state would receive the temporary 100 percent match 

rate. Of these individuals, 130,350 childless adults are below 100 percent FPL. For the 

48,000 individuals between 100 and J 33 percent FPL, The U.S. Department of Health 

and Human Services (HHS) confirmed earlier this week they will be eligible for the tax 

subsidies if we do not expand Medicaid eligibility. 

There are 21,709 childless adults currently enrolled in Medicaid. Even if HHS 

determines this group to qualify for the J 00 percent federal match rate for these currently 

enrolled individuals, the additional payment for them clearly will not offset the cost of 

increasing Medicaid enrollment by 113,000 of the parents and children who are currently 

eligible. Thus, those who once believed that PP ACA would be a windfall to the state 

budget will be disappointed. It is not reasonable or prudent to make budget decisions on 

the hope that only certain individuals who have the highest match rate will enroll. It is 

also important to recall that PPACA expanded Medicaid because it was cheaper for the 

federal government to have individuals in Medicaid rather than payout tax subsidies. 

Four Areas of Uncertainty 

Even with some of the additional limited guidance HHS provided earlier this 

week, PPACA represents massive disruption to the distribution system of health 

insurance. To participate, will the health plans be required to hold financial risk as well 

as medical risk? Simply put, who pays and who collects? At this point, we do not know 

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how advanceable tax credits will be transferred from the federal Treasury to a health 

plan. Nor do we know how the low income subsidies for cost sharing will be processed. 

Insurers are struggling with great unknowns as to how to price their products. 

Without utilization data, it is difficult to determine rates that will be actuarially sound and 

competitive. Everyone simply needs to know what the rules are in order to be compliant. 

Getting at the heart oftoday's hearing, we find uncertainty and unforeseen 

outcomes in four areas: administration, affordability, cost, and simplification. 

Administration 

In addition to the 553,600 non-elderly individuals who are uninsured in 

Wisconsin, there are 180,000 people currently through the individual insurance market 

who will presumably want to shop the exchange. Another 360,000 individuals receive 

coverage in the small employer group market and are likely to be interested in at least 

browsing the exchange. Add in some employees from large employers and families in 

Medicaid whose income is above 100 percent FPL, and it is easy to envision that 1.5 

million people in Wisconsin alone, more than 25 percent of our population will hit the 

health insurance exchange looking for the lower cost and, better coverage promised by 

the federal government. 

To put this in greater perspective, even if only 20 percent of Americans tryout the 

new exchange tool- one in five Americans, that is more than 62 million people 

nationwide. Or in other words, approximately the entire state populations of Wisconsin, 

Florida, and California combined. This is a reasonable assumption as the PP ACA 

forecasts 36 to 40 million covered lives will be churned through the health insurance 

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market. All of these 36 to 40 million people will go through the new federal data services 

hub ("the Hub") to verify financial and non-financial eligibility information. 

Many of these individuals will not know whether they are eligible for Medicaid, 

tax subsidies, or not eligible at all. Many of these individuals will not be comfortable 

using only online information and will want to talk with a live person who can assist 

them. Our experience in Wisconsin in this regard might be instructive. For the 12-month 

period of October 20 II through October 2012, the Department and our local govemment 

partners received a total of 379,450 applications for assistance. As the table below 

shows, 38 percent of the applications were handled in person, by telephone or mail. 

Method Volume Percent 

• In Person 36,687 10% 

• Phone 31,117 8% 

• Mail-In 77,013 20% 

• On-Line 234,633 62% 

Projecting the Wisconsin experience of processing eligibility and enrollment 

applications on a population of 40 million people yields the following results: 

Method 

In Person 

Phone 

• Mail-In 

• On-Line 

National 

4,000,000 

3,200,000 

8,000,000 

24,800,000 

Assuming the federal government will end up processing half of the applications 

(participating state based exchanges and partnership states the other half); it will need to 

prepare to handle applications for seven million people who will conclude the internet 

does not meet their needs. Further, it is likely that a portion of the individuals applying 

on-line will require assistance from an eligibility worker. In Wisconsin, workers assist 

individuals on seven percent of those applications on-line. Most importantly, in 

Wisconsin cach and every application submitted online requires review by an eligibility 

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worker, and while HHS envisions a streamlined process that does not require such 

review, one has to question how much fraud and abuse will go unchecked or the tax 

burden that individuals may face when the IRS attempts to reconcile at tax time. There is 

little to suggest the federal government is prepared to handle this volume or what the 

contingency plans are to ensure quality service to consumers. 

Weare very concerned that the lack of federal preparation will mean many of 

these people will tum to our local and county agencies by default and in frustration. It 

costs $150 to process each application regardless of whether someone turns out to be 

eligible. We have estimated that it may cost nearly $50 million over the next biennium in 

local and county eligibility worker costs to accommodate the increased volume as a result 

of the exchanges and a possible Mcdicaid expansion. With additional costs associated 

with systems changes, we estimate the total administrative cost to reach $65 million over 

the next biennium ($29 million state share). 

Technical specifications related to the federally facilitate exchange (FFE) and 

federal data services Hub are just now starting to be released and HHS has stated publicly 

that the specifications are not complete and will be continuously updated. States do not 

have resources sitting on the bench waiting for HHS to provide complete information, 

and will be unable to integrate with the FFE on the timeline established. In building 

systems, especially when dealing with something so complex, sensitive, and critical as 

eligibility, you build, test, revise, and then implement. States are now in a position where 

they must accept the fact that work completed to date must be reviewed and significant 

rework may be required to comply with the ever changing federal guidance. To 

complicate this even more HHS has placed too many conditions on the enhanced funding 

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for systems development. Frankly, the most prudent decision for a state may be to forego 

changing their systems and avoid the Hub. 

In short, we are not confident that the federal government has adequately prepared 

for handling an unprecedented number of applications, verifications, and enrollments. 

This leaves us uncertain on whether the federal government will be ready to effectively 

administer this program less than 10 months from now. 

Affordability 

The federal government insists that health insurance will be more affordable. But 

what is affordable will be decided by people, not government rulemaking. People do not 

always live their lives according to the assumptions made by government officials. Some 

Wisconsin residents will pay more and be required to purchase richer benefits than they 

choose to purchase today. Even after the application oftax subsidies, 59 percent of 

Wisconsin's individual market will experience an average premium increase of31 

percent. 

40 percent of people currently in Wisconsin's individual market will be required 

to purchase benefits beyond their current coverage. This will likely lead to unnecessary 

utilization and increased health care costs which ultimately circles around to increases in 

premiums and cost sharing. 

Since July, we have been applying the PPACA premium rules to adults on 

Medicaid with income at or above 133 percent FPL. Adults are required to pay the same 

percentage of their income now as they will be required beginning January 1,2014. The 

premiums begin at 3 percent of income at 133 percent FPL and increase to 9.5 percent. 

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The results on average are consistent with our assumptions about participation 

rates. Overall, 77 percent are paying the required premiums. But as the premiums 

increase, participation declines. Individuals do not typically think about payments as a 

percentage of income, they view prices in absolute dollar terms. Enrollment of 

individuals with income between 200 and 300 perccnt FPL with an average monthly 

premium of $207.00 has dropped by 52 percent. 

In Wisconsin, individuals at the lower income levels are more consistently paying 

their premiums compared to individuals at higher income levels. The results to date 

suggest that there may be an alfordability "donut hole" for individuals that question the 

value of the health care that they will be required to purchase. If healthy individuals 

indeed conclude that their premiums are greater and the value of the benefits are less than 

meets their expectations, the Exchange could become a national high risk pool. If healthy 

individuals deem health insurance at PPACA prices to be unaffordable and risk paying 

the small penalty while assured of being able to get coverage later, the number of 

uninsured individuals will increase, not decrease. 

And ultimately, we still do not have final rules on two fundamental issues - who 

is eligible and how will a health plan get paid -leaving us again uncertain about the 

affordability of PP ACA. 

Cost 

The federal government assumes that adding 36 to 40 million covered lives to the 

health insurance market will lead to increased competition and a reduction in (premium) 

costs. But PP ACA also fragments the market by separating the non-disabled, non-elderly 

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Medicaid population from the rest of the insurance pool, even by separating children 

from their parents. 

We are concerned that the federalization of health insurance will lead to 

consolidation among health plans, which will ultimately drive costs higher yet. The big 

insurance companies can afford to become the banker if that is what the payment system 

demands. 

The impact on employer sponsored insurance is perhaps the greatest unknown. 

We have 180,000 people in the individual market. There are more than three million 

lives in the large b'fOUP market. Some hcalth carriers fear its erosion, while others are 

planning for it and positioning themselves for massive employer disruption over time. It 

is not difficult to see that the large health plans that can play in all four spaces-large 

group, small group, individual, and Medicaid-can squeeze out the smaller, regional 

companies. 

We see consolidation throughout the health care sectors-pharmaceuticals, 

hospitals, and physician practices. Federal officials frequently convey their belief that 

PPACA will stimulate competition. It is not difficult to foresee the opposite may occur. 

Even if a state chooses not to expand Medicaid and enrollment remains as is, the 

effects ofPPACA will still likely increase costs on the state in direct and hidden ways. 

Here are just two examples. First, the new tax on health plans will hit our Medicaid 

managed care plans. We have 700,000 people enrolled in managed care plans and those 

plans are certain to demand an increase in rates in order to pass the tax back to the 

taxpayers. If a health plan wants the privilege of marketing through the FFE, it will cost 

the plan another 3.5 percent of premiums. Here is a new twist on intergovernmental 

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transfers. The Centers for Medicare and Medicaid Services (CMS) will pay the 

Wisconsin Department of Health Services to make payments to managed care plans 

which will then pay the money back to the Internal Revenue Service (IRS). Collections 

by the IRS will increase - courtesy of CMS and the State of Wisconsin. 

Additionally, while the federal government will cover the benefit costs of the 

primary care provider rate increase for Medicaid to match Medicare rates over the next 

two years, states are still required to pay for a portion of the administrative costs to 

implement the changes. Coupled with the fact that HHS just released final guidance on 

the provision only increases the administrative burden on states to develop a retroactive 

change to re-process claims and adjust them to the new rate. Of course, we are faced 

with the uncertainty of what happens after the temporary adjustment and federal match 

rate increase expire. Repeating the federal experience of the Medicare "doc fix" is not an 

appealing prospect. 

Second, health care providers are also employers and will be affected by the 

mandate to provide health coverage to their own workers or pay a tax penalty. This may 

particularly affect small and mid-size employers such as personal care agencies or 

nursing homes that employ lower skilled workers. The Medicaid personal care rate is 

$16.08 per hour. Let's assume the average full time worker bills 1,500 hours a year and 

generates $24,000 of Medicaid revenue per year. If the provider chooses the less 

expensive option and elects to pay the $2,000 per employee penalty (excluding the first 

30 employees), that works out to about eight percent of revenue per employee. The 

employer, of course, will expect an increase in Medicaid rates to offset the new cost. 

11 
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86248.029

[n addition, Medicaid will have to compete against the new federal subsidies for 

providers. It is only prudent to anticipate that at some point, the state is certain to be 

forced to increase provider rates in order to ensure access for the Medicaid population. 

The amount of those increased rates, of which there is no additional federal match, 

remains uncertain at this point, adding to our overall uncertainty about the overall costs of 

PPACA. 

Simplification 

HHS seeks to create a streamlined process and application so that there is "no 

wrong door." In reality, HHS will force Wisconsin to make the current process and 

application more complicated. Wisconsin already has a streamlined, integrated eligibility 

application for Medicaid/CHIP, FoodShare (SNAP), TANF, and W2 and supports online 

application submissions. Each federal agency is establishing its own data use rules 

governing how the data can be used. For example, the IRS has indicated that the 

information provided by their agency through the new federal data hub can only be used 

for insurance affordability programs, the data cannot be used for determining eligibility 

for FoodShare. For Wisconsin this means that we will need to uncouple-not 

streamline--our integrated process. There is no added value to Wisconsin for integrating 

with the federal data Hub, only increased administrative cost and rules to follow to do 

what we already do today. 

While federal officials talk simplification, implementation ofPPACA seems to be 

going in the opposite direction. CMS needs to move to simpler solutions instead of more 

complex ones such as relying on the Hub which does not even exist today. We have yet 

to be able to match Social Security numbers with the Social Security Administration 

12 
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86248.030

(SSA) on a real time basis. Negotiations to do so have taken more than a year to 

complete, with more than 10 months to develop the integration with SSA at a total cost of 

$800,000. The insistence that the Hub, with integration to the SSA, IRS, and DHS, is 

going to be operational in 10 months is highly questionable. 

MAGI-based eligibility rules are a set of new household composition and income 

counting rules established by PPACA. MAGI refers to "Modified Adjusted Gross 

Income," which is defined by U.S. tax code and will be used as the basis for determining 

Medicaid and CHIP eligibility for certain populations starting in 2014. There is no 

additional federal funding for the increase in enrollment due to covering to MAGI. In 

addition to changing which types of income and expcnses are counted, MAGI introduces 

tax filing status and tax relationships as new factors in determining how households are 

tested for eligibility. The new rules are highly complex and will require massive systems 

and operational changes by state Medicaid agencies between now and January 2014. 

MAGI, by virtue of basing eligibility on tax filing status and tax relationships, 

creates significant inequities in eligibility results for families that are nearly identical in 

make-up. It is expected that these complex rulcs will cause mass confusion for Wisconsin 

residents. Furthermore, it seems unreasonable to expect families to understand that how 

they file their taxes at the end of the year will impact the health insurance options 

available to them. Additionally, it is unclear how states are going to successfully 

implement these rules and explain them to customers without requiring local and county 

eligibility workers to become tax experts. 

A few examples of the inequities and complexities of migrating to MAGI are 

attached as Appendix A. 

13 
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86248.031

The FFE will begin using MAGI to assess/determine eligibility for state 

Medicaid/CHIP programs in October 2013, even though it does not take effect until 

January 1,2014. The FFE will verify income through the federal data Hub using IRS 

data. This method of verifying income will lack accuracy for many of those at lower 

income levels that are not required to file income taxes or whose records are not current. 

Medicaid agencies in most cases will need to confirm current income and may have to 

maintain dual systems to accommodate these referrals from the FFE to test eligibility 

under current determination rules as well as MAGI. 

The FFE may tell consumers it looks like they are eligible for Medicaid based on 

the individual attesting to their income and then refer them to the Medicaid agency, but 

Medicaid may tell them they are not eligible because the FFE is not verifying attestations, 

or because they are not eligible based on current determination rules. This is hardly going 

to be a customer-friendly situation. Further, families that apply to the FFE may be sent in 

two different directions. Families with incomes between 133 percent and 300 percent 

FPL will be split with parents and caretakers enrolling in qualified health plans through 

the exchange and children being referred to states for enrollment in Medicaid. Again, we 

are uncertain that the federal government's attempt at simplification will actually benefit 

consumers and states. 

Conclusion 

Finally, in a previous governmental role, I served at the Centers for Medicare and 

Medicaid Services (CMS) during implementation of the Medicare Modernization Act of 

2003 (MMA). The history ofMMA holds some useful lessons for the topic at hand. In 

implementing a major new program, money is always important but timing is just as 

14 
46 


86248.032

critical to success. MMA was signed into law in December 2003, and the final rule was 

promulgated 13 months later in January 2005, giving everyone almost a full year to 

understand the rules before the benefits were to begin. Insurers were able to begin 

marketing plans in October 2005 and enrollment into the new Part D benefit began on 

November 15,2005 for January 1,2006 coverage. 

Bear in mind that PPACA is far more complex than MMA. In MMA, we knew 

exactly the universe of people we were going to serve. We knew a great deal about their 

utilization of health care. We had a well-functioning enrollment system called the Social 

Security Administration that seniors knew and trusted. The average premium turned out 

to be about $5 less than original estimates. We had solid partnerships with all 50 states 

and the District of Columbia that filled some critical roles at critical times. There were 

multiple partners at multiple levels. Redundancy provided us with some flexibility to 

make last minute adjustments when things did not go exactly to plan. For example, our 

state partnerships allowed us to auto-enroll several million dual eligible into drug plans. 

Despite all of our preparation, there were plenty of problems to be patched after the 

program began. States continued to serve duals for several months well into 2006. 

These were tremendous advantages compared to what CMS faces today in 

implementing PPACA. To increase the chance for success, the federal government 

needs more partners, not fewer. It needs to offer greater flexibility to solve problems, not 

less. But the hard line taken by the federal government, as further evidenced in the 

guidance this week, in response to state requests likely will mean federal officials and the 

American people will have to adjust their expectations for 2014. 

15 
47 


86248.033

Thank you for the opportunity to participate in today's hearing. I look forward to 

any questions you may have about Wisconsin's experience. 

16 
48 


86248.034

Appendix A 

All examples below assume Medicaid eligibility levels of 138% of the FPL for parents 

and caretakers and 200% of the FPL for children. 

MAGI and Tax Filing Examples 

Mary and Brad are not married. They have a daughter in common, Jessica (age 

10), and Brad has a son, Kris (age 15) from a previous marriage. Mary has 

$3,690/month in income from her job, and Brad has $2,1 OO/month in income 

from his job. 

Seenario 1 

Both Mary and Brad are filing taxes. Brad is claiming Jessica and Kris as his tax 

dependents. 

Mary's group includes herself. For a household of 1 with income of 

$3,690/month, Mary is at 396% FPL and is ineligible for Medicaid. 

Brad's group includes himself, Jessica and Kris. For a household of3 with 

income of $2, I ~O/month, Brad is at 132% FPL and is eligible for Medicaid. 

Jessica's group includes herself, Brad, Mary and Kris. For a household of 4 with 

income of$5,790/month, Jessica is at 301% FPL and is ineligible for Medicaid. 

Kris' group includes himself, Brad, and Jessica. For a household of3 with 

income of $2, 1 ~O/month, Kris is at 132% FPL and is eligible for Medicaid. 

Scenario 2 

Both Mary and Brad are filing taxes. Mary is claiming Jessica as her tax 

dependent and Brad is claiming Kris as his tax dependent. 

Mary's group includes herself and Jessica. For a household of2 with income of 

$3,690/month, Mary is at 292% FPL and is ineligible for Medicaid 

Brad's group includes himself and Kris. For a household of2 with income of 

$2,100/month, Brad is at 166% FPL and is ineligible for Medicaid. 

Jessica's group includes herself, Brad, Mary and Kris. For a household of 4 with 

income of$5,790/month, Jessica is at 301% FPL and is ineligible for Medicaid. 

Kris' group includes himself and Brad. For a household of2 with income of 

$2, I ~O/month, Kris is at 166% FPL and is eligible for Medicaid. 

There are a number of other inequities that are created as a result of basing Medicaid 

eligibility on tax rules. 

17 
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86248.035

The "Marriage Penalty" 

Jack and Diane are married and will file their taxes jointly. They have two children, ages 

5 and 8, whom they will claim as tax dependents. Diane earns $2,000/month at her job, 

while Jack receives $690/month in unearned income. Under MAGI, Jack and Diane and 

their children will be considered as part of the same household, and their income will be 

counted together. As a household of 4 with $2,690/month in income, the entire group is 

at 140% FPL. Under this scenario, the parents are ineligible for Medicaid and the 

children are eligible. 

Rob and Anna are not married. They have two children, ages 5 and 8, whom Anna will 

claim as tax dependents. Anna earns $2,000/month at her job, while Rob receives 

$690/month in unearned income. Under MAGI, Anna's group will include her two 

children. The children's group will include both children and both parents. Rob's group 

includes just Rob. With a household of 3 with $2,000/month in income, Anna is at 

126% FPL and is eligible for Medicaid. With a household of 4 with $2,690/month in 

income, the children are at 140% FPL and are eligible for Medicaid. With a household of 

1 with $690/month in income, Rob is at 74% FPL and eligible for Medicaid. 

In this scenario, Jack and Diane are both above 133% FPL and ineligible for Medicaid 

but Rob and Anna are both below 133% FPL and eligible for Medicaid - only because 

Jack and Diane are married and Rob and Anna are not. 

Child Support Disregard 

Lyle and Kate are married and have two daughters, ages 7 and 9. Kate has a son, age 13, 

from a previous marriage. Kate's son receives $300/month in child support, which is 

disregarded under MAGI rules. Kate and Lyle are filing jointly and claiming all three 

children as tax dependents. Lyle earns $1,600/month from his job, while Kate earns 

$1300/month from hers. As a household of 5 with $2,900/month in income, they are at 

129% FPL under MAGI rules and are eligible for Medicaid. 

Mike and Liz have two daughters, ages 7 and 9. Liz has a son, age 13, from a previous 

marriage. Mike and Liz are filing jointly and claiming all three children as tax 

dependents. Mike earns $1 ,600/month from his job, while Liz earns $1 ,300/month from 

one part-time job and $300/month from a second part-time job. As a household of 5 with 

$3,200/month in income, they are at 142% FPL. 

Under this scenario, total income for both families is $3,200/month. Lyle and Kate are 

cligible for Medicaid because the $300 of child support income is disregarded under 

MAGI. Mike and Liz, whose income is also $3,200/month, are ineligible for Medicaid 

because all oftheir income is earned income, and therefore counted towards their 

eligibility. 

18 
50 

Mr. BURGESS. Thank you. Time is expired. 

I recognize Mr. Greenstein for 5 minutes for purposes of an opening statement, sir. 

STATEMENT OF BRUCE D. GREENSTEIN 

Mr. GREENSTEIN. Thank you, and good morning, Vice Chairman 

Dr. Burgess and Ranking Member Pallone and the distinguished 

members of the subcommittee. Thank you for the invitation to testify on Louisiana’s position regarding the implementation of the 

Patient Protection and Affordable Care Act, PPACA, particularly as 

it relates to exchanges and Medicaid expansion. 

My name is Bruce Greenstein. I am the Secretary of the Louisiana Department of Health and Hospitals, and Senior Health Policy Advisor to Bobby Jindal. Earlier in my career at CMS during 

the Bush administration, I oversaw Medicaid programs in the 

Northeast and led the Federal Government’s efforts to reform the 

Medicaid programs in several States. In fact, I have two of my previous bosses here on the panel. 

In my current role, I have broad responsibility over an array of 

health service areas including Medicaid, behavioral health, public 

health and disability and aging services. Before I begin, I would 

like to pause to recognize the position that we are in. It feels somewhat awkward to be here testifying on the implementation of one 

of the largest expansions of entitlement programs in nearly 50 

years at the same time as ongoing discussions about Federal 

spending reductions to avert the fiscal cliff and raising the debt 

ceiling takes place. It is a little bit of a parallel universe. 

Nevertheless, we are here. As you know, Louisiana has continually shared its concerns regarding the practical and policy ramifications of PPACA. Our decision not to assume the risk of building 

a State-based exchange is not the product of political positioning, 

rather it was made after careful analysis of the laws and regulations. 

Beyond the past and ongoing legal challenges of the law, we have 

broad concerns about PPACA as policy. While the concept of a 

health insurance exchange is a good one, the PPACA-defined exchanges provide for rigid Federal control over coverage options 

available to consumers, raising costs and limiting choice. In fact, a 

study recently released by AHIP and the Louisiana Association of 

Health Plans estimates that PPACA premium tax will force policyholders in my State to pay over $2,000 more for single coverage 

and $4,500 more for family coverage for individuals over the next 

10 years. Similar increases are noted for small and large group employers. This is a significant burden on individuals and families in 

Louisiana and across the country. 

Beyond these concerns, there are major practical and implementation hurdles. With guidance having been largely delayed or altogether missing, the October 1, 2013, deadline to begin open enrollment seems unrealistic, considering the scope and complexity of 

building an exchange. The FAQs released earlier this week is certainly helpful but it is simply too little and too late. 

The State’s decision not to build an exchange should not be taken 

as general unwillingness to tackle a complex reform project. Rather, the number of remaining concerns and unanswered questions 

51 

simply do not give us the needed confidence. Regardless of the type 

of exchange that will operate within a State, there are five key 

issues fully outlined in my written testimony that need attention 

from Congress and action from HHS including administrative simplifications and adjustments to make timelines more realistic. 

In addition to our concerns regarding the exchanges, we have serious reservations about blanket expansion of the existing Medicaid 

program without fundamental reforms to improve health outcomes 

and lower costs. While States now have a choice, it is not surprising that many remain reluctant, even with enhanced Federal 

funding. Some organizations have heralded the expansion as ‘‘a 

great bargain’’ for States. However, State leaders must be careful 

before accepting the long-term liabilities of expanding a 1960s-era 

entitlement program. 

A recent Kaiser Family Foundation and Urban Institute report 

reveals that expansion creates winners and losers among States. 

There are cost estimates which we believe actually fail to capture 

the full administrative costs and other impacts. They vary widely 

among States. For example, the New England and Mid-Atlantic 

States combined will save almost $16 billion in State funds over 10 

years. At the same time, South Atlantic States will be paying about 

$22 billion more. Governors in States like Massachusetts, New 

York, Maryland and Vermont combined will shift nearly $23 billion 

of State costs to Federal taxpayers. At the same time, my State 

alone is projected to pay nearly $1.8 billion, and this all comes from 

the same report. 

Beyond the costs, we want to make sure we are providing individuals with access to coverage that makes sense for them, that it 

is cost-effective and gives them access to high-quality services. 

While groups like those who publish the report might declare victory through the simple act of handing out a Medicaid card, we 

know that that is simply not enough. 

However, I believe this if administration and Congress begins to 

engage with States interested in pursuing market-driven health 

care reform, we can create a more sustainable and effective program. Specifically, these discussions should be driven by several tenets of Medicaid reform that include eligibility simplification and 

flexibility that would allow us to keep families together on one coverage product. These points are fully outlined in my testimony, and 

again in even more detail in a 31-point report issued by Republican 

Governors last summer. 

President Obama himself said, ‘‘We can’t simply put more people 

into a broken system that doesn’t work.’’ He is right. Today’s Medicaid model doesn’t give States adequate flexibility to improve 

health outcomes or lower overall costs. Instead of rushing to expand, the administration should first engage in earnest discussion 

with States like Louisiana that are eager to further reform their 

existing programs now rather than spend more money on a rigid 

and expensive program that will not work for all States. 

Thank you. That concludes my testimony. I look forward to questions at the appropriate time. 

[The prepared statement of Mr. Greenstein follows:] 

52 


86248.036

Bobby Jindal GOVERNOR 

~tatt of llouiiSiana 

Department of Health and Hospitals 

Office of the Secretary 

TESTIMONY 

Hearing on 

Bruce D. Greenstein SECRETARY 

"State of Uncertainty: Implementation ofPPACA's 

Exchanges and Medicaid Expansion" 

I>ecember13,2012 

Statement of 

Bruce D. Greenstein 

Secretary 

Louisiana Department of I Iealth and IIospitals 

Before the 

Subcommittee on Health 

Committee on Energy and Commerce 

U.S. House of Representatives 

"An Equal OppOrltlnJty Employer" 
53 


86248.037

Executive Summary 

This testimony offers Louisiana's perspective regarding the challenges associated with implementation of the 

Patient Protection and Affordable Care Act (PPACA), particularly as it relates to the Health Insurance 

Exchange and the Medicaid expansion as it is contemplated in the law. Louisiana's decision to not assume 

the risk of building a state-based Exchange is based on concerns with the law and ensuing regulations, 

including: 

• Outstanding legal challenges, including provisions related to the employer mandate, federallyfacilitated Exchange subsidy, the preventative care mandate, Maintenance of Effort 

requirements, the origination clause, the Independent Payment Advisory Board (IP AB), and the 

legality of rulemaking/ guidance, and 

• Continuing policy concerns, inclnding the impact of the Exchange as deflned in PPACA on 

consumer choice, the cost of coverage and employers and their employees, and 

Ongoing implementation barriers, including a lack of formal guidance around federallyfacilitated and "partnership" Exchanges and unrealistic timelines. 

This testimony provides flve key issues that need attention from Congress and action from HHS regarding 

Exchanges, including adruiuistrative simpliflcation, the role of an Exchange, plan management 

responsibilities, eligibility determination and timelines for implementation. 

This testimony also offers Louisiana's concerns regarding a blanket expansion of its Medicaid program 

without fundamental reforms to improve the program. It offers tenets of Medicaid reform necessary to 

improve the program regardless of a state's decision to expand. These tenets seek flexibility in Medicaid 

eligibility determination, program design, use of the private insurance market, fInancing, the waiver process 

and improved accountability. 

Further, the testimony provides an overview of Louisiana's successful state-led health reform efforts. 

Page 2of23 
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86248.038

Introduction 

Good morning, Chairman Pitts, Ranking Member Pallone, and distinguished members of the Subcommittee. 

Thank you for the invitation to testify on Louisiana's position regarding the implementation of the Patient 

Protection and Affordable Care Act (PPACA), particularly as it relates to the Health Insurance Exchange and 

the Medicaid expansion as it is contemplated in the law. 

My name is Bruce Greenstein, and I am the Secretary of the Louisiana Department of Health and Hospitals 

(LDHH) and senior health policy advisor to Governor Bobby JindaL For over 20 years I have led efforts to 

improve health outcomes and quality, execute new quality initiatives and use innovative technology to solve 

health care challenges across the U.S. and globe. During President Bush's administration, I served as 

Associate Regional Administrator and as the Director of\Vaivers and Demonstrations for the U.S. 

Department of Health and Human Services (HHS). \'<;'lule at HHS, I oversaw the Medicaid programs in the 

Northeast and led the federal government's efforts to reform Medicaid programs in several states, including 

Massachusetts, Florida, Vermont and Iowa. In my current role leading Louisiana's health agency, I have 

broad responsibility over a vast array of critical and complex health service areas, including Medicaid, 

behavioral health, public health, emergency preparedness, health care facility licensure and regulation, health 

information technology, developmental disabilities and aging. At just over $8 billion, LDHH's annual budget 

represents roughly one-third of Lonisiana's entire state operating finances and our Medicaid program 

provides health coverage for over 1.24 million Louisiana residents, or approximately 28 percent of our state's 

population. 

PPACA Exchanges 

On March 23, 2011, the State of Louisiana announced that it would not assume the risk of building a statebased health insurance Exchange as outlined by the Patient Protection and Affordable Care Act (PPACA). 

Since the PPACA was signed into law, we have repeatedly shared our concerns regarding its policy 

implications, lack of sufficient guidance and unreasonable timelines for implementation. With the Supreme 

Page 3 of23 
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86248.039

Court's decision in National Federation of Independent Business v. Sebelius, the Court agreed with the State of 

Louisiana that at least one of the over 450 provisions of the PPACA is unconstitutional and the provision 

requiring all individuals to have insurance coverage can only be upheld as a tax. Even after the Supreme 

Court's decision, there remain many questions about the legality of the PPACA involving issues fundamental 

to all Americans, including religious freedom and unjust taxation. 

\1\lhile the Supreme Court ruled on the Constitutionality of some parts of the PPACA, it Was not an 

endorsement of its policy merits. In fact, Chief Justice Roberts underscored this fact when he wrote, 

"Members of this Court are vested with the authority to interpret the law; we possess neither the expertise 

nor the prerogative to make policy judgments." The PP ACA remains a flawed law that fails to ftx the 

fundamental existing problems in the United States health care system, particularly the unsustainable rising 

costs faced by American families and small businesses. Instead, we are faced with the prospect of a more 

tightly controlled federal-run health insurance market that will increase costs, undermine the private health 

care marketplace, and weaken private sector job creation. 

The Supreme Court's decision also fails to resolve the operational concerns of implementing tlle law. With 

incomplete regulations and unrealistic deadlines, both states and the Federal government will struggle to have 

a health insurance Exchange ready for open enrollment on October 1, 2013 that is not beset with major 

complications for the insurance market and the respective residents of the states. 

Exchange Legal Questions 

Louisiana was one of 26 states that ftled suit against the federal government concerning the legality of the 

PPACA, specifically focusing on two parts: § 1501 (the individual mandate) and Title II (the mandatory 

expansion of the Medicaid eligible population to 133 percent of the federal poverty level). In June of this year, 

the Supreme Court agreed tl,at the mandatory Medicaid expansion was unconstitutional. They also ruled that 

Page 40f23 
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86248.040

the individual mandate was unconstitutional under Congress's Commerce power, but upheld this provision as 

an example of Congress's taxing power, admitting that the purported penalty is actually a tax. 

While the Supreme Court effectively rewrote the PP ACA to uphold the individual mandate, they did not rule 

on the legality of the remainder of the law. Provisions that the Court did not rule on that are still being 

challenged include: 

The Employer Mandate 

The PPACA requires that all employers with fifty or more full-time employees provide adequate 

health care coverage to their employees. (§ 1513, §1514, and §10106). If they do not, these employers 

could face a tax of $2,000 or $3,000. 1 

Federally-Facilitated Exchange Subsidy 

In the PPACA, state-based health Exchanges are authorized to provide premium assistance subsidies 

to individuals from 100% to 400% of the Federal Poverty Level. However, the PI' ACA does not 

expressly authorize Federally-facilitated Exchanges to do the same. Subsequent regulations from the 

Internal Revenue Service have interpreted the law so that all Exchanges are able to provide premium 

assistance. The legality of these regulations is currently being challenged2 

Preventive Care Mandate 

Section 2713 of the PPACA allows for the Secretary to define preventive care services to be provided 

cost-free by all non-grandfathered insurance plans. In August 2011, the Secretary released a 

regulation that included contraceptive and some abortifacient services as preventative care. The 

regulation has been challenged by numerous groups and individuals (in over 35 lawsuits) who have 

1 Libert), Univenity elalv. Geilhnerela/, No. 6:1O-cv-0001S-nkm (W.D. Va.). 

2 Oklahoma v. Sebelins, No. CIV-ll-030-RAW (ED. Okla.). 

Page 50f23 
57 


86248.041

religious objections to paying for health insurance that includes coverage for contraception and some 

abortifacient services. 3 

Maintenance of Effort 

The Supreme Court's decision invalidated the provision of the PP ACA that coerced states to expand 

their Medicaid program by threatening existing Medicaid funding, Questions remain whether this 

applies to the maintenance of effort (MOE) requirement, requiring states to maintain their existing 

Medicaid eligibility until 2014, 4 

Origination Clause 

The Supreme Court decision made it clear that the individual mandate is a tax, not a penalty as 

claimed by the administration, The PPACA originated in the Senate. The Constitution (Article I, 

Section 7, Clause 1) is clear that all taxes are to originate in the House, and thus the legislation has 

been contested as unconstitutional. 5 

3 Belmont Abbry Co/lege p, Sebelills, No, 1:11-cv-01989-JEB (D,D.C); Colorado Christian University v. Sebelills, No, ll-cv-03350 

(D, Colo.); ElVIN p, Sebelills, No. 2:12-cv-00501 (N.D, Ala.); Pliests Jor live v, Sebelills, No. 1:12-cv-00753 (E.D,N.Y); 

Lollisialla College v. Sebelills, No, 1:12-cv-00463 (W.D. La,); Ave Maria v, Sebe/ills, No. 2:12-cv-00088 (MD, rIa); Geneva 

v. Sebelills, No, 2:12-cv-00207 (W,D. Pal; Nebraska v. HHS, No. 4:12-cv-03035 (D. Neb.); ArchdiOCese of St, LOllir v. 

No. 4:12-cv-924 (E.D. Mo.); Newland v, Selielills, No, 1:12-cv-01123 (D. Colo,); Legatlls v. Sebelills,2:12-cv-12061 

Mich); Roman Catholic Anhbishop oflVashingtol1 v, Sebelills, No, 1:12-cv-815 (D,D,C.); Roman Catholic Archdiocese of]>.T):, 

No. 1:12-cv-2542 (E.D.N.Y.); Rei!. DOllalcll17 Trautmall v. S,belilis, No. 1:12-cv-123 (WD,Pa,),Most Rev, David 

A. Zubik v. Sebelili)', No. 2:12-cv-676 (W.D, Pa.); Roman Catholic Diome of Dallas P. Sebelius, No, 3:12-cv-1589 (N.D, Tex,); 

Roman Cdthoke D,ome of}'.rt IFotth v. S,belill)" No. 4:12-cv-314 (N.D. Tex); FranciJCan U"ip. ofStabenpill, v. Sebelias, No. 

2: 12-cy-440 (S.1), Ohio); Roman Catholic Diocese of Biloxi p, Sebelias, No, 1:12-cv-158 (S.D. Miss.); Univ, of Notre Dame p. 

SebelillS, No. 3:12-cv-00253 (N.D, Ind,); Grace COl!. V. Sebelius, No. 3:12-cv-00459 (N.D. Ind,); O'Blie" l'. HHS, No, 4:12-

cv-00476 (E.D. Mo,); Conlon P. Sebelius, No. 1:12-cv-3932 (N,D, IlL); Trillne I-lealth Group v. Seb,lins, No, 1:12-cv-6756 

(N,D, lll.); Catholic Diocese o(Nashville p. Sebelia)', No, 3:12-cv-00934 (M,D. Tn.); Hobby Lobby p, Sebelius, No, 12-cv-1000 

(W,D. Okla,); College of the Ozarks P. Sebelills, No. 6:12-cv-03428 (W.D, Mo,); Tyndale HOllse v. Seb'lias, No, 1:12-cv-815 

(D.D.C. med May 12, 2012); Roman Catholic Archdiocese of Atlanta p, Sebeuus, No. 1:12-cv-3489 (N,D. Ga.); Aufomm Corp. v, 

S,b,fius, No. 1:12-cv-01096 (W.D.l'vlich,); Korte & Luitjohan Contractos p, Sebelills, No, 3:12-cv-01072 (SD, Ill.); Easl Texas 

Baptist University & Houston Baptist University v. Sebelills, No, 4:12-cv-03009 (S.D. Tx); Roman Catho/itArchdiocese of Miami P. 

Seb,liu)', No. 1:12-cv-23820 (S.D, Fl.); Grote Indllstties p, Sebelius, No. 4:12-cv-00134 (S.D. In,); ClisJVell College P. Seb,lill)" No. 

3:12-cy-04409 (N.D. Tx); and Attnex lvIedital P. Sebelill)" "lo, O:12-cv~02804 (D. Minn). 

4 Sebelius, No. 12-2058 (1st Cir). 

HIlS, No. 1:10-cv-01263-BMI (D.D,C), 

Page 6 of23 
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86248.042

Independent Payment Advisory Board (IPAB) 

Sections 3403 and 10320 of the PPACA created this IS-member federal board that is granted the 

authority to make payment changes fot the Medicate program without approval from Congress. 

There are also no administrative or judicial reviews of these decisions. 6 

Legality of Rulemaking/ Guidance 

\V'ith many of the provisions of the PPACA, formal rules and regnlations have ouly recently been 

released or arc still forthcoming. Many of the policies are being implemented through unofficial 

"guidance". There are remaining questions about the legality of this procedure in light of the 

Administrative Procedures Act. 

Policy Implications 

\'\'hile HHS has repeatedly said that the states serve as incubators of innovation, PPACA grcatly limits states' 

ability to enact meaningful state-led health care reform. The concept of a health insurance exchange 

originated as a free market idea to lower the cost of health insurance by increasing the pool of those 

purchasing health insurance and giving consumers more choice to select the insurance coverage that best fits 

their needs. However, the PPACA Exchange is a rigidly constructed enterprise that creates a vehicle for the 

Federal government to tightly control tl,e coverage options available to consumers, raising costs and limiting 

choice. Many employers wiUlikely drop the health insurance coverage they currently provide to employees, 

leaving individual health care options to be determined by the federal government. Specifically, the negative 

consequences of the PPACA Exchange and associated insurance changes include: 

Lack of Consumer Choice 

When the PPACA was proposed, the President promised that if individuals liked their current health 

care insurance, they could keep it. However, the PPACA model will often force individuals into the 

"Coons p. Geithner, No. CV-1O-1714-PHX-Gi\!S (D. Ariz). 

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broken, government-run Medicaid system and into heavily-regulated, government-run health care 

plans (deemed "minimal essential coverage" by the Federal government). 

Individuals should have the right to select what health care plan is best for them, and not be limited 

to a one-size-fits-all product that that meets what a political process deems is "essential". By 

mandating that certain benefits be provided in all insurance plans, the price of premiums will likely 

increase, leaving individuals unable to continue the coverage they like at a price they can afford. 

Increased Taxes 

The PI' ACA requires that all Exchanges be financially self-sufficient by 2015. This will require the 

Exchange to generate revenue, either by instituting user fees in the Exchange market or in the entire 

insurance market- essentially a tax on all insurance plans purchased. In fact, in the recently issued 

regulation, "Payment Protection and Affordable Care Act; HHS Notice of Benefit and Payment 

Parameters for 2014", HHS states that the FFE will charge a user fee in the exchange comparable to 

the user fees in state-based HIXs, capped at 3.5 percent of each enrollee. This will only further drive 

up the costs of premiums in the Exchange market for consumers and for individuals who will have 

to pay the premium assistance through their taxes. 

The PPACA also includes a tax on insurance premiums, which is proposed to be paid for by "the 

industry." It is troubling that these same taxes will affect managed care organizations, proven 

mechanisms for more effectively controlling cost for Medicaid and Medicare, especially needed for 

states with limited financial resources. 

The Louisiana Association of Health Plans (LAHP) and America's I Iealth Insurance Plans (AHIP) 

report in a recently released study that the ACA premium tax will force policyholders to pay more for 

their health insurance. In Louisiana, an individual will pay $2,128 more for single coverage and 

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$4,512 more for family coverage over the next ten years. A small group employer will pay $2,589 

more single coverage and $6,391 more for family coverage. A large group employer will pay $2,830 

more for single coverage and $6,836 more for family coverage. A Medicare policyholder would pay 

$4,111 more for coverage, all within the same time period in Louisiana. This is a significant burden 

on individuals and families in Louisiana and across the country. 

Impact on Employers and Employees 

The employer mandate, a tax on employers with fifty or more employees who do not provide 

"adequate" health insurance coverage to their employees, is a disincentive to provide coverage. 

Already, businesses arc attempting to modify their business structure to avoid the law's mandates 

(either by laying off employees or reducing the number of hours these employees work). Even those 

employers who provide coverage can be taxed an additional $3,000 if that employee is eligible and 

enrolls in coverage on the health insurance Exchange. So instead of building upon the existing 

insurance marke~ the PPACA is undermining it. 

Implementation Concerns 

The deadline for all Exchanges (both state and federally-facilitated) to be ready for open enrollment is 

October 1, 2013. However, we have serious concerns that exchanges will not be ready by that point, even in 

those states are electing to build a state-based Exchange. The guidance received from the Federal government 

is often delayed or not yet available. For a project as large and complicated as health care reform, this is an 

insurmountable hurdle for the states to overcome. 111ere are numerous unanswered questions and major 

issues remaining about Exchanges and the provisions of the PPi\CA, including: 

Exchanges in General 

In order for an Exchange to be ready for open enrollment on October 1, 2013, its blueprint must be 

approved or conditionally approved by January 1, 2013. However, there have been no formal 

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regulations outlining objective guidelines that HHS will use to determine if an Exchange is 

conditionally approved or not. Our only understanding is that HHS will use a standard of whether a 

state-based Exchange is making "significant progress" towards the requirements for a state-based 

Exchange and will be operationally ready for initial open enrolhnent beginning October 1, 2013. This 

is not a sufficient standard for conditional approval. 

HHS has assured states that there will be published cost comparisons between the Federallyfacilitated Exchange, the state-based Exchange, and the partnership Exchanges. Other than the 

capped 3.5 percent user fee, these cost estimates have not yet been made public. 

Federally-facilitated Exchanges 

To date, in addition to the incomplete final mle for health insurance Exchanges, there is stili not 

complete rulemaking regarding the Federally-facilitated Exchanges and their interactions with the 

respective states' eligibility systems. Promised in the March 2012 [l1lal Exchange regulation was 

further guidance regarding the Federally-facilitated Exchange. Since that point and other than the 

user fee explanation, only a questions and answers document, which does not bear the weight of law 

for either the federal government or the states, has been released. 

Numerous contracts have been signed for the development of the Federally-facilitated Exchange, 

but these documents have not been made public. The State of Louisiana filed a Freedom of 

Information Act request within the last few months for these contracts and has stili not received 

these documents. Senator Orrin Hatch of Utah requested similar documents in his role as Ranking 

Member on the U.S. Senate Committee on Finance and has not received a response. It is necessary 

for these documents to be made public so that states can make informed decisions concerning 

Exchanges. 

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Partnership Exchange 

We understand a partnership Exchange to be a Federally-facilitated Exchange with certain functions 

run by the state. It is an option ftrst introduced by an informal presentation and further expanded by 

a document entitled "General Guidance on Federally-facilitated Exchanges," but has yet to be 

deftned in federal regulations. The ftnal Exchange rule proposed no regulations regarding tllls 

option. 

There has been no formal answer from the Federal government concerrung whether the Federal 

government or the states will be responsible to pay for the state-run functions of a partnership 

Exchange. While HHS offtcials have repeatedly said that states will not be responsible for funding 

any portion of the FFE, including the Partnership, there is no formal regulation on how the state will 

be paid for conducting work on behalf of the Partnership Exchange or formally stating the roles, 

responsibilities and ftnancing of either the FFE or the Partnership Exchange. 

The Workings of an Exchange 

The Exchange is required to provide premium tax credits to those between 100% and 400% of the 

federal poverty line. Originally projected to cost the federal government $462 billion between 2012 

and 2019, these subsidies are now projected to be $574 billion during the same period by the 

Congressional Budget Offtce. Already, Medicare funding will be cut by $700 billion to pay for these 

premium tax credits. There is already some discussion that these levels of subsidies are unsustainable 

and that deftcit reduction action could reduce the number of Americans eligible for premium 

assistance subsidies. 

Essential Health Benefits and Actuarial Values 

All plans in the individual and small group markets (including plans sold on the respective state 

Exchanges) must meet "essential health beneftts." Regulations published last month say that these 

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benefits will be based off of the most popular small group plans in each state in addition to benefits 

specified by the PPPACA. At the same time, an "actuarial value calculator" to accurately determine 

actuarial values for plans sold on the Exchange was issued. 

For those states with federally-facilitated Exchanges, HHS has indicated that they ",-ill be responsible 

for enforcing these essential health benefit standards outside of the Exchange, yet further burdening 

the states in enforcing a federally mandated law. 

Reforms Needed 

Many states, including Louisiana, have opted to allow the federal government to establish and operate the 

Exchanges as envisioned by the Patient Protection and Affordable Care Act (PPACA), and many still have 

not yet made a commitment. These decisions should not be taken as a general unwillingness to tackle a 

complex reform project. In fact, states have consistently demonstrated a strong commitment to promoting 

the health of our residents and have an on-the-ground perspective from years of health care innovations and 

from running our respective Medicaid programs. Rather, the number of remaining concerns and unanswered 

questions simply do not give us the confidence needed to accept responsibility for tlus project. Regardless of 

the type of Exchange that will operate within a state, we see five key Exchange issues that need attention 

from Congress and action from HES: administrative simplification, improvements to the transaction 

processes, plan management, "tvledicaid/ CHIP eligibility determinacion, and the time1ines for implementation. 

Simplification 

The PPACA Exchange creates an extremely complex system to purchase insurance. For a consumer 

to access insurance on the Exchange, he or she will have to first qualify for advanced prenlium tax 

credits, and then select a plan. The Exchange will have to verify all of the information provided by 

the consnmer, cross-checking it across federal data sources. In addition, Exchanges and Medicaid are 

required to use a single application and to determine or assess eligibility for both Medicaid and 

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premium tax credits. This process should be simplified to allow individuals to easily purchase and 

enroll in coverage they need. 

Transaction Process 

Through the extensive authority granted by PPACA, HHS should allow states the option of creating 

an Exchange that is limited to solely being a vehicle to facilitate the transaction between a buyer and 

a seller. All other regulatory responsibilities should rest with existing state authorities and agencies. 

Any Exchange should serve to maximize the health insurance coverage options available to a 

consumer, and many opportunities to streamline this process exist. For example, rather than 

requiring complex fund flows between the Exchange, the federal government, and the insurance 

companies, HHS should allow insurance companies to use their claims expenses against taxes owed 

on their insurance returns. 

Plan Management 

An Exchange should be focused on determining eligibility and facilitating the purchase of insurance. 

Plan management should be left to the expertise of the state, which has the most experience 

managing insurance plans and products in their respective markets. \'Vhile states have been given the 

option to "partner" with the federal government by maintaining the plan management functions for 

Federally-facilitated Exchanges, it is not clear that this role allows true state control and discretion in 

plan management. In fact, HHS officials have made it clear that the state would be a "subcontractor" 

to the FFE. Even if the federal government is responsible for the technology that provides the 

information to the consumer, a state should still maintain control of the insurance market in every 

aspcct. If a statc chooses to assume the plan management functions for the Federally-facilitated 

Exchange, states need to have the option of controlling which qualified health plans they want in 

their statc's marketplace following state rules, not the rules provided by HHS. 

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Medicaid/CHIP eligibility 

States have long been responsible for the determination of an individual's eligibility for their 

respective Medicaid programs. Over time, they have developed systems to address fraud and abuse. 

It is not clear that a Federally-facilitated Exchange (PFE) will have the ability to match the expertise 

of the states, as evidenced by CMS's own published error rates as it relates to Medicare. %ether a 

state maintains the authority to dctermine eligibility for Medicaid or defers to the FFE, the state's 

policies and processes must be maintained. Furthennore, a state must not be held fmancially liable 

for an FFE's faulty determination or assessmcnt. . If an FFE makes a faulty assessment or 

determination, the federal government should compensate the state for all costs the state incurred 

because of that erroneous enrollment, including state share and administrative costs 

The use of Modified Adjusted Gross Income (MAGI) for eligibility determination, which is meant to 

simplify the process, actually complicates matters. Concepts like presumptive, rettoactive, and 

transitional medical assistance eligibility that are no longer relevant under PP ACA need to be 

discarded. Section 2202 ofPPACA permits hospitals to allow presumptive Medicaid determinations. 

This should be, as stated in the law, at the option of the states not at the option of the hospitals. 

Timeline 

There are still many questions regarding the feasibility of the current timelines related to Exchange 

implementation. The targeted date to begin open enrollment is October 1,2013, and states are still 

seeking complete regulatory guidance. States are also waiting for more complete information about 

the vast information technology systems necessary to support the Exchange. The federal government 

maintains that the necessary systems (the information hub, the actuarial value calculator, the FFE) 

will be ready in time, but states have no clear view of the current status or workflow of the federal 

government's progress. States also need to understand the contingency plan if these systems are not 

ready in time. It is becoming increasingly clear that more time is needed to permit success for any 

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type of Exchange. Once the necessary information is released, each state will need time to make a 

thoughtful and educated decision regarding its participation, and then sufficient time to complete the 

necessary procurements and enabling legislation within the context of each state's laws. 

In addition to addressing these issues, Louisiana fully expects HHS to coordinate its efforts regarding 

implementation of a Federally-facilitated Exchange in an effort to mitigate the negative impact on either our 

private insurance market or the Medicaid program. Our hope is that HHS will adhere to the four guiding 

principles included in the "General Guidance on Federally-facilitated Exchanges". In this light we expect that 

Hl-lSwill: 

Provide a full and complete briefIng to state offIcials regarding on-going implementation efforts; 

• Schednle routine meetings to update state officials on the implementation stams; 

Notify the state when all stakeholder, consumer, or any other public meetings or public outreach 

activities are scheduled; 

Work with the state au memorandums of understanding and! or contracts if the Federal-facilitated 

Exchange expects any support or assistance of the state so that the state is fairly and equitably 

compensated, including for the use of any state data used by the Federally-facilitated Exchange to 

verify income; 

Provide the terms of all contracts and names of all contractors who will be working in the state on 

the Federally-facilitated Exchange and the details about what activities these contractors will be 

involved in, including copies of all conrracts; 

After the establishment of the Exchange, provide regular (at least semi-annual) updates on its 

utilization, cost (including long-term fInancial health), and its impact on the state's insurance market, 

including, but not limited to the information that must be provided pursuant to §1311 (d) (7) of the 

PPACA; 

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If any changes to the Federally-facilitated Exchange model are anticipated, the state is notified 

immediately; and 

Inform the state of any navigator grant recipients and provide copies of memorandums of 

understanding between navigators and the Federally-facilitated Exchange, 

I respectfully urge Congress to carefully review I illS's plans for Exchange implementation, Hard questions 

should be asked regarding the ability to meet current timelines given the outstanding questions and 

technological developments that remain to be completed, Furthermore, as an integral part of this workflow, 

states must be at the tahle for these discussions regardless of the type of Exchange they are pursuing, 

Medicaid Expansion 

In addition to our concerns regarding the policy implications and implementation concerns of the Exchanges, 

we have serious reservations about a blanket expansion of the existing Medicaid program without 

fundamental reforms to improve health outcomes, clinical quality and lower costs, In August of 

2011, Republican governors provided 31 policy solutions to improve Medicaid, To date, we have yet to 

engage in a meaningful dialogue with this administration about the practical prohlems states have observed 

through their considerable experience administering the myriad of existing public assistance programs, 

Since the Supreme Court's ruling, each Governor and legislature is now faced with a decision regarding the 

expansion of the state's Medicaid program, However, faced with a decision to expand within the limits of the 

current Medicaid model, it is not surprising that many states remain reluctant--even with enhanced federal 

funding, 

The Kaiser Family Foundation and the Urban Instimte recently released a report calling the Medicaid 

expansion a bargain for states, \'Vhat many states recognize though is that the Medicaid program is based on 

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an outdate model. Costing billions of dollars a year and producing inconsistent or subpar outcomes, the 

program is in desperate need for modernization. 

Simply enrolling an individual in Medicaid does not guarantee their ability to access high quality health care 

services. Having a Medicaid card does not necessarily translate into better health. As administrators, we 

cannot afford to ignore the fact that we would be expanding an inefficient 1960s era entitlement program that 

lirnits choice and fails to fully integrate its recipients into the broader health care system. Without 

fundamental reform, expanding Medicaid is to millions of additional Americans is not the victory many claim 

it to be. 

\'{lith a willingness to meaningfully engage with states interested in pursuing market-driven health care reform, 

we can create a reality where families share an affordable health coverage product with cost-sharing and 

benefit design that promotes value and achieves optimal health outcomes. We want states to become more 

efficient purchasers of care, investing in improved health and giving individuals greater choice for themselves 

and their families. 

\"V'hile each state will have its own set of considerations regarding the future of its Medicaid program, our 

hope is that the admiuistration will open its doors for discussions with state leaders about the important 

issues in Medicaid today, regardless of their decision to expand. To make any health care reform truly 

successful, HHS should let states do what they do best - innovate and tailor solutions to the needs of their 

citizens. Specifically, d,ere are several tenets of Medicaid reform and flexibility that should drive these 

discussions, focusing on eligibility, benefit design, cost-sharing, use of the private insurance market, financing 

and accountability. 

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Tenets of Medicaid Reform 

1 First, the process to determine Medicaid eligibility should be simple, accurate and fair. 

There are far too many complicated categories of Medicaid eligihility. The process should be easier 

for consumers to navigate and states to administer. For any expansion, the rules for how to identify 

who is newly eligiblc for Medicaid versus those who would have traditionally been eligible must be 

administratively simple on the front end and not impose an overly difficult audit procedure at the 

end of the year. We cannot afford to base billions of dollars in payments to states on untested 

methodologies that pose significant risk to state budgets. 

Furthermore, HHS should immediately release all planning documents and the business plan for 

building the federal data hub-particularly how it will interact with a state's Medicaid program and 

the status of implementation. With additional information, states can be reassured regarding the 

implementation timeline and the states' role in interacting with the hub. This information is essential 

for states' ability to make timely and accurate decisions. Conversely, if the deadlines for the hub will 

not be met, the federal government should not waste any further taxpayer dollars. All components 

of the hub must be operational soon or states must have sufficient time to develop contingency 

plans. 

We also believe that the adoption and use of Modified Adjusted Gross Income (MAGI) will have a 

disruptive effect on the Medicaid eligibility system and create new inequities among households. 

States should not have to bear the additional costs of running multiple eligibility systems. 

The Exchanges should be held to the same program integrity rules and regulations as state Medicaid 

programs. States must maintain the authority for setting eligibility rules to protect the program's 

integrity. 

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2. States should be allowed to design their program to promote value and individual ownership 

in health care decisions. 

This includes using consumer-directed products, tk"ible benefit design and reasonable and 

enforceable cost-sharing requirements. States must be freed decades old rules that are no longer 

relevant to 21" century health care. Just like those of us with employer-sponsored coverage or 

Medicare, Medicaid recipients should not have free access to the emergency room for routine care. 

\Vhen individuals have no skin in the game, they are less likely to consume care responsibly. 

3. States should be able to make use of their private health insurance market through their 

Medicaid eligibility levels, program design and ability to offer premium assistance. 

States should have tbe ability to set eligibility requirements for both their current enrollees and 

expansion population. For example, states should be allowed the flexibility to set their Medicaid 

eligibility limits at less than 138% Federal Poverty Level and still receive the enhanced FMAP. 

Additionally, the law currently prevents states from moving children enrolled in their state's CHIP 

program to their parent's insurance coverage purchased in an Exchange until 2019. With reasonable 

plans from a state to provide for continued coverage for currently enrolled children, HHS should 

waive CHIP maintenance of effort (MOE) requirements not set to expire unti12019. This would 

allow children to be enrolled in private health insurance plans witl1 their parents or caretakers, rather 

tban shifting healthy risk from the private healtb insurance market and separating families into 

different public and private health coverage programs. There is value in keeping families together and 

having them engage with only one health plan, which will ease their use and promote utilization of 

routine preventive services. 

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HHS should allow a state to grant "premiwn assistance" for individuals to buy-into the exchange 

market place at any income level, rather than be forced into the Medicaid system simply because they 

are low-income. 

HI IS should also return full authority to states for setting reimbursement and payment policies, 

including flexibility to promote value-based insurance design. States should also have full authority 

for contracting and oversight of managed care, including the ability to place any Medicaid recipient 

into a managed care setting. 

4. Finally, HHS should streamline Medicaid financing and improve the waiver process to give 

states more flexibility, coupled with greater accountability tied to improvements in health 

outcomes. 

The process by which states negotiate for flexibility, called "waivers", is broken. Federal officials 

should have greater accountability for timely review of waiver applications. In particular, waivers 

already approved in other states should he fast-tracked for approval. 

HHS should allow states to opt-in to a more flexible long-term funding arrangement, allo,,~ng them 

to design programs that best meet their people's needs, rather than one-size-fits all programs that 

require the same package of services for every individual. At the same time, federal and state officials 

could agree to greater accountability for improvements in health outcomes, not just processes. 

President Obama himself said that, 'we can't simply put more people into a broken system that doesn't 

work.' He is right, and today's Medicaid model doesn't give states adequate flexibility to improve health 

outcomes or lower overall costs. Instead of rushing to expand, the President and Secretary Sebelius should 

first engage in carnest discussions \v1.th states like Louisiana who are cager to further reform their existing 

programs now, rather than spend more money on a rigid and expensive program that"~ not work for states. 

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Example of State Innoyation 

Recent successful reforms in the Medicaid program have been driven at the state level. Louisiana has spent 

the last five-year working toward a complete redesign of its Medicaid program. Our first attempt at reform 

through an 1115 Research and Demonstration Waiver failed to gain traction at CMS after this administration 

took office and became focused on its own reform agenda. Instead, our state continued to fight for reform, 

and over the course of the past year has launched two major program transformations for Medicaid and our 

behavioral health system. 

Bayou Health 

Friday,June 1, marked a milestone in Louisiana's health care history, as the Department of Healdl and 

Hospitals finished the initial implementation of its new Medicaid delivery model, Bayou Health. The majority 

of Louisiana's 1.2 million Medicaid and LaCHIP recipients now have their care coordinated through a Health 

Plan network. Of the nearly 900,000 recipients who are part of Bayou Health, nearly 40 percent proactively 

chose a Health Plan for their families. New enrollees coming onto the program are making a proactive choice 

two-thirds of the time, marking an unprecedented level of consumer engagement in Louisiana's Medicaid 

program. 

Bayou Health is the fIrst fundamental transformation of Louisiana's Medicaid program since it was created in 

the late 1960s, More importantly, it was carefully designed to ensure better, more coordinated care for those 

who depend 011 us. The program's focus is on improved access to quality health care and better health 

outcomes for recipients. Under Bayou Health, DHH contracted with fIve Health Plans - Amerigroup 

RealSolutions, Community Health Solutions, LaCare, Louisiana Healthcare Connections and 

UnitedHealthcare Community Plan -- that are responsible for coordinating health care for recipients and 

working with rhetn to address issues and empower them to take a more active role in their health. 

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The primary objectives of Bayou Health were to improve health outcomes, yield savings and improve budget 

predictability. With a nearly $7 billion Medicaid program covering 27% of population, it was unacceptable 

that we continued to deliver among the worst health outcomes as a date. Louisiana ranks 49,h in most major 

national health rankings, carns an "F" in pre-term birth and infant mortality from the March of Dimes each 

year, and continually reports high rates of chronic disease and low utilization of preventive services. 

Our health plan partners are contractually obligated and fl1lancially at risk to improve outcomes and better 

coordinate care. Bayou Health will collect and measure performance on 37 HEDIS quality measures. Plans 

are financially sanctioned quality or performance benchmarks are not reached. The program also includes 

more focus on preventive services, requirements for chromc condition management, and minimum standards 

for patient-centered medical homes (peMH). Designed to improve access, our health plans are required to 

provide adequate provider networks that meet enforceable time and distance requirements. They have 

demonstrated their flexibility to negotiate rates with specialists to enroll providers that have not traditionally 

served the Medicaid population. Furthermore, they provide additional benefits to their enrollees as well as 

incentives for compliance with care recommendations and healthy behaviors. 

Bayou Health is estimated to save Louisiana $135.9 million this fiscal year. Even after only a few short 

months of statewide implementation, the program has already demonstrated its ability to improve lives. 

Louisiana will continue to share information about Bayou Health and its effects on health outcomes through 

regular reports at MakingMedicaidBetter.com. 

Louisiana Behavioral Health Partnership 

In partnership with Magellan Health Services, we launched the Louisiana Behavioral Health Partnership in 

March to manage behavioral health services for Medicaid youth and adults as well as for people without 

Medicaid who are served in the safety net system. At full implementation, the Partnership is expected to 

manage care for about 100,000 adults and 50,000 youth with Severe Mental Illness or Addictive Disorders -

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with a goal of ensuring access to care while reducing costs by moving people out of institutions into 

community-based settings. 

Through the Partnership, Louisiana now has a single point of entry into our behavioral health system through 

a phone line manned by Louisiana professionals and clinicians 24-hours-a-day, 7-days-a-week. Since turning 

on its phones on March 1, 2012, Magellan has taken nearly 80,000 calls. The Partnership also includes an 

intensive case management program for special populations like pregnant women with addictive disorders 

and people with co-occurring disorders; and the plan works with the state's physical health Medicaid managed 

care companies (Bayou Health) to coordinate care for people with physical and behavioral health care needs. 

### 

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75 

Mr. BURGESS. Thank you. Time is expired. 

I recognize Mr. Alexander for 5 minutes for purposes of an opening statement. 

STATEMENT OF GARY D. ALEXANDER 

Mr. ALEXANDER. Good morning, Vice Chairman Burgess, Ranking Member Pallone and members of the committee. My name is 

Gary Alexander and I am the Secretary of Public Welfare for the 

Commonwealth of Pennsylvania. Thank you for asking me to discuss the operational implementation impact of the Affordable Care 

Act on the Commonwealth, and I encourage you to review my entire printed testimony. 

We in the Commonwealth have never witnessed a law so vast 

with such demands on State resources and lack of Federal guidance. The ACA is not just about the expansion of Medicaid or establishing an insurance exchange. It is about the hundreds of Federal mandates and procedural requirements that have escaped public attention but which we must, by law, obey. The fine print of this 

legislation is so complex, even the Federal Government struggles to 

understand it. Consequently, the States cannot fully understand 

the law’s impact on finances, staffing requirements, systems 

changes and operations. In short, this law completely overwhelms 

society’s safety net for the needy. 

Here are just a few of the problems in Pennsylvania created by 

the ACA. The law mandates that we expand our provider enrollment system to check with our Medicare data. Medicare databases, 

however, cannot handle automated changes. We will have to add 

staff resources to respond to 100,000 inquiries every month. We are 

mandated to create separate databases to accommodate IRS exchanges and some databases such as the Federal Death Master 

File we have not been given access to. 

The ACA mandates that we adopt passive Medicaid renewals, 

radically changing Pennsylvania’s tailor-made renewal systems 

that took years to refine and perfect. Unlike today, the ACA 

verification system will not be coordinated with other welfare programs, creating eligibility verification issues. 

The ACA mandates that we use the National Correct Coding Initiative. Pennsylvania already performs this task through Claim 

Check, a federally approved system that cost Pennsylvania $12 million to develop. The difference now is that the new system will be 

micromanaged by the Federal Government. 

The ACA mandates that we create new transaction methods for 

claim status and eligibility verifications. Our technology is more 

advanced than what is mandated, and no one will use the outmoded ACA method, but CMS has told us that the law requires us 

to develop it anyway. 

The ACA mandates that States implement the Modified Adjusted 

Gross Income methodology to determine Medicaid eligibility by 

2014. This mandate requires extensive eligibility changes and enhancements. That timeline is much too short for large IT system 

changes, which will prevent us from developing a system that delivers the best value to the taxpayers. This one change will cost the 

Commonwealth $250 million. 

76 

The ACA mandates that States have an HHS-approved single 

streamlined application. Pennsylvania already has one. We are 

struggling to include the changes and enhancements necessary to 

incorporate MAGI rules of Federal data. 

The ACA mandates that we use Medicaid to cover the health 

care needs of children between the ages of 6 and 18 living in households with incomes between 100 and 133 percent of the Federal 

poverty level. Pennsylvania already provides health coverage for 

these children through CHIP, a much less costly program. The Federal Government is thus mandating that we switch to a more costly 

and less efficient program. 

The ACA mandates that we cannot use asset tests, a welfare eligibility tool. When we removed the asset limit test for food stamps, 

we ended up with lottery winners on the program. We have since 

reinstituted the asset limit test but we are precluded from considering this tool for Medicaid. 

The ACA allows hospitals to do presumptive eligibility determinations for Medicaid. This change could create conflicts of interest. As with many other aspects of the law, CMS has not provided 

the guidance necessary to implement this requirement. This may 

leave the States to pick up additional costs. 

The ACA mandates us to pay primary care physicians Medicare 

rates. The feds will pay the difference through 2014. Thereafter, 

the States will be hit with increased costs. Starting in 2015, this 

change will cost Pennsylvania $45 million a year. 

To summarize, some of the timelines in the law are unrealistic 

and many of the mandates impose unnecessary duplications of effort that some of our States have already achieved. These changes 

add to our costs, and as mandates often do, impose a one-size-fitsall approach, making our processes less efficient, not more. 

We are told that the Federal Government will pay 90 percent of 

the costs of the ACA, making this a good deal. That claim overlooks 

the magnitude of the costs to the States. Ten percent of a huge 

number is still a very large number. Beyond that, the magnitude 

of the Federal deficits shakes our confidence that the Federal Government will be able to fulfill its end of the bargain. The ACA will 

likely have broader economic impacts that will also directly impact 

the Commonwealth. We do not have the time to go into these, but 

we note that businesses are already changing their hiring practices 

in order to transfer health care costs to the State. Perhaps the largest cost of the ACA is the failure to treat the States as true partners, which was the original intent of the Medicaid program. The 

Federal Government now dictates the States almost every detail of 

how to run this program. How is that a partnership? 

Finally, the ACA invites bureaucratic gridlock that works against 

its desirable goal of securing greater affordable health coverage for 

more Americans. To fix the problem, States and localities must be 

engaged and viewed as partners to create innovative solutions. 

There is a great deal of work to be done to make this law more 

reasonable and less burdensome for States, businesses and all 

Americans. Thank you. 

[The prepared statement of Mr. Alexander follows:] 

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Statement of Gary Alexander 

Secretary of Public Welfare for the Commonwealth of Pennsylvania 

Before the Committee on Energy and Commerce, Subcommittee on Health 

December 13, 2012 

The Challenges Facing Pennsylvania 

in Implementing the Health-Care Reform Law 

Introductory Remarks 

Chairman Pitts, Ranking Member Pallone, and members of the committee, I thank you for and 

appreciate this opportunity to discuss the impact of the Patient and Protection and Affordable 

Care Act (PPACA), as amended, on the Commonwealth of Pennsylvania. 

Throughout this testimony, I refer to PPACA, as amended, as the Affordable Care Act, ACA, or 

the health-care reform law, and I will use all these terms interchangeably. 

General Observations 

In all my years of public service, I have yet to witness a law so vast with such breathtaking 

scope, demands on state resources, and lack of federal guidance. I am not even referring to the 

optional expansion of Medicaid or the establishment of the insurance exchange. I am speaking 

of the myriad of mandates and onerous procedural requirements that have escaped public 

attention, but with which Pennsylvania must, by law, comply. Moreover, Pennsylvania's 

Governor, Tom Corbett, and I are both concerned with the economic changes that will impact 

the Commonwealth, although we do not fully know the full extent of what those changes will 

be. Even the federal government has not determined what each of the law's provisions mean, 

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and we at the state level still do not know in a definitive way the full scope of their impact in 

terms of finances, staffing requirements, system changes, and operations. Furthermore, the 

federal government lacks the necessary resources to implement its own law. We also know that 

Congress will have to make changes to the law, which creates additional uncertainty for states 

and the citizenry. 

The media has ignored the majority of challenges facing states. I have hundreds of policy, 

operational, and technical staffers working to implement this health-care reform law, and yet, 

we realized early on that we do not have the capacity or the financial resources to address all of 

the provisions and requirements of this complicated law. We have had to prioritize these 

requirements because we cannot do it all. Now, layer on top of this the fact that the U.S. 

Department of Health and Human Services (HHS) has not been timely or explicit in giving 

instructions to the states. Not that I blame HHS; it, too, is dealing with the enormity of the law. 

We had sent a letter to Secretary Kathleen Sebelius with twenty-one enumerated questions, 

and we are still awaiting answers to six of those questions. Thus, we do not have enough 

information and lack federal guidance regarding many aspects of the law. But there's more. 

Some of the time lines in the law are unrealistic. Some of the mandates impose unnecessary 

duplication of efforts, adding to our costs. Other mandates impose solutions we no longer use 

because we have adopted more advanced processes. Others are disconnected from the 

operational realities we face. Some mandates require access to federal systems that are beyond 

their technological capabilities. More generally, as mandates often are, they impose a one-sizefits-all approach and actually make our processes less efficient, not more efficient. 

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These costs are not simply high, but overwhelming. We are told that the federal government 

will pay 90 percent of the cost, making this a good deal because states only have to pay the 

remaining 10 percent. But this simple formula minimizes the magnitude of the total costs. Ten 

percent of a huge unknown number is still a very large number, and you still must come up with 

the 10 percent. A sale of 90 percent off the price of an item does a consumer no good if he 

cannot come up with the 10 percent. It is actually worse because these are not one-time costs, 

but ongoing costs. Given the magnitude of the ongoing federal deficits, I have doubts that the 

federal government will be able to fulfill its end of the bargain. 

A major weakness of the health-care reform law is that it fails to engage the states, the 

laboratories of democracy, as true partners. The law shows little faith in this important feature 

of the American federal system. The terms of the law are inflexible and heavy handed, with the 

federal government dictating to the states how things ought to be. Instead of trusting the 

states, the law creates a host of boards and commissions that serve to create even more rules 

and further removes decisions from the people by centralizing rulemaking by federal 

bureaucrats. If the federal government wants to set all of the rules and parameters, then why 

involve the states at all? Why not have the federal government run the entire Medicaid 

program, as it does with Medicare? Short of that option, I encourage members of Congress to 

treat the states as partners, and look to them for innovation and new ideas. That type of 

relationship would lead to better outcomes, lower costs and a more robust economy. 

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Medicaid and State Budgets 

Medicaid is the most significant budget cost for the states. One third of Pennsylvania's entire 

state budget is spent on Medicaid. We spend more on Medicaid than we spend on any other 

state priority, supplanting other important priorities including education and transportation. 

Medicaid is considered, rightly or wrongly, a "mandatory entitlement." Most other funding is 

discretionary. So there is less money for other state functions, which adversely impacts our 

schools, judicial systems, correctional institutions, and transportation infrastructure. We 

recently had to cut back state funding for higher education. We would not have been forced to 

make that choice had Medicaid expenditures not experienced exponential growth over the past 

ten years. Nationally, according to the HH5 Office of the Actuary, Medicaid expenditures nearly 

doubled between federal fiscal years 2000 and 2010. 

Keep in mind that when the Affordable Care Act was signed into law, states were already 

struggling to keep up with the runaway costs of Medicaid that have been slowly, but surely, 

crowding out other state funding priorities. The additional costs that the ACA adds to Medicaid 

are costs the states cannot afford. 

The Hidden Cost of Expansion 

Governor Corbett very much wants to address the problems of health-care coverage in 

Pennsylvania. We have innovative ideas on how to attain greater health coverage at sustainable 

costs. But the hea Ith-care reform law does not give us such flexibility; it only imposes a onesize-fits-all program that prevents innovation. If we expand Medicaid under the current rules, 

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we would lock ourselves into an unforgiving system, making innovation impossible or difficult. 

Who would suffer? Pennsylvania's most needy and vulnerable citizens. 

Until we have the flexibility to build a program that increases affordable and cost-effective 

coverage, Pennsylvania will delay the decision about expanding Medicaid for adults. Under the 

constraints of the health-care reform law, I do not think we can afford the expansion. After 

viewing Monday's letter from HHS, it is disappointing to see that the Obama Administration 

continues to show little interest in working with states by not allowing enhanced matching 

funds for states that choose a partial expansion. This decision, as noted by other governors this 

week, is shortsighted and will hinder the decision-making process. 

Pennsylvania already has 2.2 million people on Medicaid, 2.4 million counting the Children's 

Health Insurance Program (CHIP). Our forecasts estimate the ACA would add 800,000 to 

1,000,000 more persons onto Medicaid. This means that the ACA would boost the proportion 

of our population on Medicaid or CHIP from the current 19 percent to more than 25 percent. If 

we add the 15 percent of Pennsylvania's population on Medicare, after subtracting for persons 

on both Medicaid and Medicare, we would end up with more than 40 percent of our population 

on a federal health-care program. This number would approach the total employment numbers 

in our state. We have 5.7 million employed persons. But after the ACA expansion, we would 

have approximately 5.4 million residents on Medicaid, CHIP, or Medicare. 

The federal government is supposed to pay 100 percent of the cost for the newly eligible 

persons on Medicaid pursuant to the ACA for the first three years of the expansion. Yet we will 

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still incur costs: an estimated $222 million in the first state fiscal year of the expansion, $378 

million in the second, and $364 million in the third. For the next four years, the Federal Medical 

Assistance Percentages (FMAP) rate slowly drops to 90 percent, and we estimate a cost of $883 

million by state fiscal year 2020-21 as a consequence. Moreover, the Centers for Medicare and 

Medicaid Services (CMS) has yet to confirm that Pennsylvania would be eligible for the 100 

percent reimbursement of costs, which leaves open the possibility that our FMAP rate would 

be lower. If this assumption is wrong, then our estimated costs are too low. 

Furthermore, for the out years, our cost estimates may very well be overly optimistic, especially 

when we consider the fiscal situation of the federal government. It is not just that the federal 

government has been unable to balance its own budget since 2001. The problem is better 

explained by the sheer magnitude of the annual federal deficits and the enormous national 

. debt. Over the past four years, the magnitude of the federal deficit has been, on average, larger 

than the entire annual Gross Domestic Products of all but twelve countries of the world. 1 

Moreover, counting the total national debt, including that held by governmental entities, our 

debt exceeds our own Gross Domestic Product. In short, the federal government lacks a good 

track record when it comes to fiscal responsibility. Consequently, we see the FMAP rates as 

teaser rates that are unsustainable and will have to be lowered, pushing more of the costs onto 

the states in the near future. 

1. For Federal Fiscal Year 2012, it is likely that Mexico's Gross Domestic Product exceeded the 

U.S. federal budget deficit, thus making it thirteen countries for FFY 2012. Data source: 

Central Intelligence Agency, The World Fact Book. 

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Insurance Exchange 

Although my department has not been tasked with implementing an insurance exchange, this 

does not mean we will not be affected. My department will need to communicate with the 

federal hub in order to exchange information to determine Medicaid eligibility based upon 

current and new federal rules, including provisions related to federal tax credits. 

Yesterday, Governor Corbett announced that Pennsylvania would not be pursuing a state-based 

exchange at this time. The Commonwealth, through our Insurance Department, had spent two 

years trying to understand the impact an insurance exchange would have on Pennsylvania and 

its insurance market. The governor continues to have strong concerns that "state authority" to 

run a health insurance exchange is illusory-when in reality, Pennsylvania would end up 

shouldering all of the costs by 2015, but have no authority to govern the program. With 

regulations still to be finalized and with more forthcoming, too many unknowns remain for 

Pennsylvania to move forward with a state-based exchange at this time. 

The Many Other Mandates: A Heavy Lift 

When my department first began analyzing the ACA, we enumerated 76 program changessome optional, many mandatory. Nearly all changes require regulatory specifications and 

clarifications from federal agenCies, mostly from CMS. It became obvious from the beginning 

that we did not have the staff resources to implement all of the changes. Therefore, we 

prioritized and focused on the ones we believed were the most important, did not require 

federal guidance on implementation, or were due first. 

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Like the federal government, we have limited human resources. The state employees needed to 

implement the provisions of the ACA are the same employees we depend on to administer the 

many other Medicaid mandates we follow on a day-to-day basis, as well as to maintain an 

efficient and accurate program. Additionally, this impacts non-Medicaid programs because 

these same resources must support other welfare programs administered by the 

Commonwealth. State governments have been faced with limited resources since the last 

recession; we do have not have resources to hire additional staff or contractors. Although the 

health-care reform law would provide 90-percent funding, we have to muster together the 

resources first-and the process to apply for the 90-percent federal match is itself a 

bureaucratic ordeal that involves staff time, which is not part of the 90-percent deal. 

We attempted to estimate the total costs of implementing the health-care reform law, not 

including the expansion issue and the insurance exchange. This turned out to be a nearly 

impossible task. We don't have specifications from the federal government to estimate 

program costs and staff needs for many of the changes. Nor do we have the staff resources to 

work through in sufficient detail all the 76 major changes. Nonetheless, our fiscal office chose 

to estimate some of the larger items. My fiscal office estimated a cost of $134 million in state 

funds for state fiscal year (SFY) 2013-14. This cost nearly doubles to $267 million for SFY 2014-

15. These are not the costs to expand Medicaid eligibility or to set up an insurance exchange. 

These are costs that are above and beyond expansion and the insurance exchange, and these 

are costs that we must incur to comply with the health-care reform law. Keep in mind that 

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these costs are only what we were able to quantify. We anticipate many other costs that we do 

not yet have enough specificity to quantify. 

These state costs in the hundreds of millions of dollars may seem small to the federal 

government, but they are not small to the Commonwealth of Pennsylvania. They are larger 

than the total State General Fund budgets of many of our agencies. We had to cut back on 

many of our programs, and now we must allocate scarce resources to fund federal mandates 

instead of investing in education, highways, and other state priorities. Pennsylvania is also 

struggling to address a pension crisis. The combination of ACA mandates and the pension crisis 

will mean lean times for other state priorities going forward for the foreseeable future, severely 

restricting the decision-making options of our state legislature and its ability to make needed 

investments in infrastructure, projects that would create good-paying jobs and facilitate 

economic growth. 

Permit me to specify ways in which the new law, as currently written, imposes huge costs and 

burdens on Pennsylvania. 

Modified Adjusted-Gross Income (MAGI) 

States are required to implement the Modified Adjusted Gross Income (MAGI) methodology to 

determine Medicaid eligibility, effective January 1, 2014. This mandate requires extensive 

eligibility system updates, changes, and enhancements including the following: income 

methodology to determine Medicaid; no asset test or income disregards (other than the 

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composition and income-eligibility rules; and Medicaid net-income standards converted to 

equivalent MAGI standards. Those determined ineligible under MAGI rules must still have 

eligibility determined under the current Medicaid-income rules creating multiple 

methodologies that must be maintained. In addition, the MAGI methodology requires new 

written policies and procedures to be developed and implemented and will require staff 

training. 

MAGI rules are a challenge, to say the least, for our information technology (IT) systems. The 

cost for the changes needed to current systems is estimated to be more than $250 million, 

given the various delays in receiving gUidance. 

Further, due to the short timeframes to implement MAGI, many shortcuts will be needed in the 

development, testing, and training processes. Accordingly, in many cases we may have to incur 

additional costs to fix any errors after implementation. The January 2014 deadline will require 

Pennsylvania to implement the MAGI changes in a big-bang approach. 

In addition to hiring additional programmers, the state will be required to use its limited 

number of business analysts and project managers to focus solely on the implementation of the 

ACA. The current state budget is strained, and hiring freezes are in effect. Since this is such a 

large implementation and will require extensive resources, many current state priorities, 

including cost containment activities, will need to be put on hold. In difficult budget times, 

initiatives that contain costs and reduce fraud, waste and abuse are critical to balancing our 

budget. 

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CMS has set up a collaborative forum for states to share best practices and code. The reality is 

that the timeframes don't allow states to effectively use these resources, since most states are 

facing the same challenges in the development process. 

Pennsylvania currently has an integrated eligibility system. Although the A87 Cost Allocation 

waiver is helpful to allow states to leverage the ACA systems changes for non-Medicaid 

programs, the ACA is forcing us to build mUltiple processes. For example, the federal hub and 

its link to the Social Security Administration (SSA) can only be leveraged by the Medicaid 

program. For our non-Medicaid programs, we will still need to maintain separate exchanges 

with other federal programs. The use of Federal Tax Information (FTI) is one example. The FTI 

data can only be used for MAGI eligibility and cannot be used for non-MAGI programs. The 

inability to use FTI information across programs forces states to use and maintain multiple 

methodologies to capture income information for eligibility determinations. 

Even though CMS has allowed for 90-percent federal funding for all systems changes, the 

required lO-percent state funding is burdensome. As mentioned before, Pennsylvania's 

conservative estimate for all systems changes including staffing, development, project 

management, testing, independent verification and validation, training and implementation is 

more than $250 million. This will require approximately $25 million in state funding. In addition, 

Pennsylvania has a stand-alone CHIP program, and therefore the A87 Cost Allocation waiver 

does not apply. The cost to integrate the CHIP program into the Medicaid systems would only 

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be entitled to a 66 percent federal financial participation rate, as opposed to the 90 percent for 

other programs. 

Disproportionate Share Hospital Payments 

Disproportionate share hospital (DSH) adjustment payments are another area of concern. They 

provide funding to hospitals that: (1) serve a significantly disproportionate number of lowincome patients; or (2) are located in an urban area, have 100 or more beds, and can 

demonstrate that more than 30 percent of their revenues are derived from state and local 

government payments for the indigent and care provided to patients not covered by Medicare 

or Medicaid. 

States receive an annual DSH allotment to cover the costs of hospitals that provide care to lowincome patients that are not paid by other payers, such as Medicare, Medicaid, CHIP or other 

health-care insurance. This annual allotment is calculated by law and includes requirements to 

ensure that the DSH payments to individual DSH hospitals are not higher than their 

uncompensated care costs. 

Pennsylvania uses DSH funds to make payments to qualifying hospitals in accordance with the 

federal criteria identified above. In addition, teaching hospitals (academic medical centers) 

receive funding to promote training and access to additional medical personnel. Pennsylvania 

also uses DSH funding to provide several supplemental payment programs to support hospitals 

that provide access to a high volume of Medicaid individuals and specialized care (e.g., 

obstetrical and gynecological care, burn care, trauma care) to Medicaid and uninsured 

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individuals. The ACA makes significant changes to DSH funding, and there is little guidance in 

determining the fiscal impact of any DSH reductions on the Medicaid program and the hospitalprovider community. 

Expanded Provider Enrollment Requirement 

The health-care reform law requires my department to make burdensome system changes to 

our Medicaid Management Information System (MMIS) for both claims and providers. While 

not ali-inclusive, some of the more onerous changes from an operations perspective include the 

following: automating some screening and database checks; adding new fields and algorithms 

for fee collection and revalidation; entering additional information for every owner, manager, 

managing employee board member, and person with more than five-percent controlling 

interest; and requiring a national provider identifier (NPI) on all media. 

Additionally, as things stand now, staff are to enroll all prescribing, ordering, and referring 

providers. This is a significant change for all states. However, Pennsylvania has 67,000 unique 

rendering providers, and we estimate that this requirement alone will add at least 50,000 more 

providers to the enrollment workload. All of those providers are subject to the same screening 

requirements. Additionally, we have to check whether Medicare collected the institutional fee 

or not. If they did not, we must do so for every institutional service location and track it 

accordingly. There is no fee for individual providers or groups. By our estimates, the 

combination of all these things results in at least a seven-fold increase in the volume of work 

for my staff. 

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We already have many provider record systems and many areas of intake. It is a heavy lift for us 

to change the current structure in terms of creating new standardized policies and processes, 

and reorganizing staffing accordingly. 

The technical challenges are even more daunting. We are required to connect to federal 

databases, some of which do not even have basic indexing features. There are others that we 

still have not been given access to: for example, the Death Master File. Furthermore, we have 

notified federal agencies that it is impossible for us to implement these changes without 

modifications. To get the information we need, the Medicare database can only be queried 

manually, one provider at a time. It is simply not possible for us to conduct more than 100,000 

manual queries each month. We have been actively working with CMS to get a better system in 

place, but the outcome and timing remain uncertain. 

We are using Medicare requirements regarding site visits, fingerprinting, and background 

checks. However, we continue to await further guidance from CMS, and depending on how 

CMS promulgates the final requirements, we may need to implement additional enrollment 

steps and incur additional vendor costs to comply. 

I cannot tell you the total cost of the system and personnel changes we will need to make 

pertaining to provider-enrollment requirements. I do not want to give you a specific number 

because it will not be accurate, but the cost will certainly be in the millions of dollars. We are 

still awaiting speCifications from the federal government, and, quite frankly, the federal 

government's databases are not suitable for the tasks that are assigned to them. We now have 

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forty people across five offices working on day-to-day enrollment functions, and there is 

perhaps an equal number behind the scenes enabling the system to work. 

Primary-Care Physicians 

Another area of concern is the increased Medicaid payment rates for Primary-Care Physicians 

(PCP). For calendar years 2013 and 2014, the ACA requires state Medicaid payments to certain 

types of physicians for certain primary care services, like office visits, exams, consults, etc., to 

be at least 100 percent of the Medicare rate for those services. Like many states, Pennsylvania 

currently has Medicaid rates for these services that are below Medicare rates, so the ACA 

requirement will result in Medicaid fee increases. The federal government will fund the 

difference between the lower state Medicaid rate and the Medicare rate during 2012 and 2013. 

In theory, the fee increase will not impose additional Medicaid service costs on the states in 

those years. Absent additional federal legislation, however, the increased fee requirement and 

the additional federal funds only apply during the next two calendar years. Any continuation of 

the increased fees from that point on will involve additional state costs. It is unreasonable to 

expect that any state will be able to roll back those fees. 

CMS has provided guidance on increased payment rates to PCPs, but it has not been timely. 

eMS issued the final rule only on November 6,2012, yet it becomes effective on January 1, 

2013. CMS has still not released the Medicare 2013 fees. CMS issued proposed rules back in 

May, and issued final rules in early November. The federal agency also issued several briefs, 

summaries and fact sheets over the past 12 months, and recently conducted an all-states call to 

discuss the final rule. CMS has promised additional managed-care-related technical assistance 

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from a contractor beginning in January. Additionally, the quality of the federal guidance has 

varied widely. The recent verbal guidance on the final rule during the all-states call seemed 

sufficient; however, we have requested, but not yet received, confirmation in writing. The 

technical assistance will not start until at least January, and the tardiness of this information 

necessitates late implementation and retroactive or make-up payments to providers. CMS has 

already acknowledged how unreasonable the timeline is by acknowledging that the states will 

have to implement this mandate after the required effective date. 

National Correct Coding Initiative 

The ACA-mandated National Correct Coding Initiative (NCCI) is an unnecessary, duplicative 

effort that only costs us money and diverts limited state resources. Under the ACA, states were 

required to implement Medicaid Procedure-to-Procedure Edits (PTP) and Medically Unlikely 

Edits (MUE) for practitioners, ambulatory surgery centers, outpatient hospitals and medical 

suppliers, beginning April 1, 2011. This implementation would prevent providers from being 

paid for services that were incidental or mutually exclusive and also stop the payment of 

services that exceeded the number of units deemed appropriate by CMS during the same date 

of service. These types of edits had been in effect previously for Medicare providers. Based 

upon the information supplied to CMS, Pennsylvania Medicaid was given approval by CMS to 

implement in two stages. Stage 1 pertains to the PTP edits and was implemented on December 

1,2011, and stage 2 pertains to the MUE edits and was implemented on November 1, 2012. 

My department had already paid for ClaimCheck, which provided edits for mutually exclusive 

and incidental services. The NCCI edits now supersede the ClaimCheck edits under the 

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assumption that NCCI savings are much more significant, when in reality the department was 

already capturing these types of savings. CMS, PTP and M UE edits are at times in direct conflict 

with Pennsylvania Medicaid regulations, policy and billing directives. In order to prevent a 

claims payment conflict with the Pennsylvania Medicaid regulations, each quarterly update 

must be reviewed to determine when the CMS rules conflict with the Pennsylvania Medicaid 

rules. CMS only publishes the quarterly updates toward the end of the previous quarter, which 

does not leave the department sufficient time to review the new PTP pairings and MUE's 

before the beginning of the quarter in which they are effective. Requests for deactivation need 

to be forwarded to CMS in order for the department to provide claims payment that mirrors 

our policy, regulations and billing-guide directives. Updates to our claims-payment system 

(PROMISe) must be completed when the NCCI edits conflict with the department's policy, 

regulations and billing-guide directives. Many hours of work by two separate bureaus are 

dedicated to the review of the quarterly updates. In the last quarterly review, more than 

250,000 PTP edits needed to be reviewed, which resulted in other work projects being set 

aside. 

Administrative Simplification 

Administrative simplification provisions of the ACA may seem harmless enough, but they 

cannot simplify a process no one is using. As some of the less-publicized provisions of the ACA, 

administrative simplification has the seemingly innocuous goal of decreasing the administrative 

burden for both payers and providers (hospitals, physicians, and allied-care practitioners). 

Section 1104 of the Affordable Care Act directs the HHS Secretary to implement new "operating 

rules" that will govern the exchange of health-data transactions, such as eligibility, claim status, 

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electronic funds transfers, electronic-remittance advices and new data identifiers, such as 

health plan IDs. These new "operating rules" will be implemented over the next three to four 

years, beginning January 1, 2013. 

The first two transactions that require changes to be implemented are the claim-status 

transaction and the eligibility-verification transaction. There are two types of claims status 

transactions that are to be implemented on January 1, 2013: batch and interactive transactions. 

Both use a standardized protocol, and the information provided in the transaction is limited. 

Pennsylvania Medicaid has found that a majority of providers prefer to use our Internet portal 

to determine a claim status. Since January 2012, we have only one provider that uses the 

nightly batch transactions and no providers that use the interactive transaction. 

When the Office of Medical Assistance Programs within my department requested enhanced 

funding for the implementation of these transactions, we noted that we would be requesting a 

waiver of the implementation of the interactive transaction. This waiver was requested in 

August due to the lack of return on investment, based on the fact that we do not have 

providers using this form of transaction. The cost to implement this transaction is estimated to 

be approximately $50,000. In late November, we received notification from eMS that they do 

not have the authority to amend statutory and regulatory requirements. We are now working 

on a timeline to implement a transaction that very possibly no one will use. This appears to be 

an area where we could have saved both state and federal financial resources. 

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Program Integrity 

With regards to the program-integrity provisions in the ACA, Pennsylvania already has been 

doing most of them and has been far ahead of the game. While the provisions on program 

integrity are mostly good, one provision will be difficult to implement. Section 6402(h) of the 

ACA requires the suspension of Medicare and Medicaid payments pending investigation of 

credible allegations of fraud. This provision requires states to suspend payments to individuals 

or entities based upon credible allegations of fraud, unless HHS and the state find good cause 

not to do so. While this provision may be well-intended, the criteria that constitute "credible" 

must be defined, and the intricacies are difficult to implement and operationalize. The basis of a 

credible allegation for fraud-referral purposes must be detailed in a notification to the provider 

when payment is suspended. Documentation and reporting requirements have added 

complexity to the fraud-referral and tracking process. Finally, providers have raised due-process 

concerns because the payment is suspended one day after referral, and the state is required to 

notify the provider within five days of the suspension. 

Other Challenges 

The health-care reform law requires states to have an HHS-approved, single streamlined 

application. We already have one in Pennsylvania, but we are struggling with incorporating the 

updates, changes, and enhancements to incorporate MAGI rules and interaction with the 

federal data hub. CMS has not provided their final drafts of the online or paper application, has 

not defined all application data elements and fields, and has not provided necessary guidance 

on the interaction processes between the federal hub and a state's web-based applications. 

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Pennsylvania covers the health-care needs of children between the ages 6 and 18 living in 

households between 100 percent and 133 percent of the federal poverty level through CHIP. 

CMS, however, has said that the health-care reform law requires us to fund these children 

through Medicaid, not CHIP, a less costly program. 

The new MAGI rule mandates that resource-limit tests, also known as asset-limit tests, be 

excluded for eligibility. I question the wisdom of mandating their exclusion. Although 

Pennsylvania currently excludes asset-limit tests for Medicaid families with children under the 

age 21, this was an option selected by Pennsylvania. We do, however, have asset-limit tests for 

other welfare populations, as the test remains an important tool to determine welfare eligibility 

for programs including food stamps. 

Pennsylvania has an integrated eligibility system and must incorporate MAGI rules and logic into 

the system for Medicaid-eligibility determinations. This mandate requires incorporating into the 

eligibility system new rules and logic, keeping current rules and logic for non-MAGI groups and 

maintaining existing rules and logic for other programs, such as the Supplemental Nutrition 

Assistance Program (SNAP), cash assistance, and the Low Income Heating Energy Assistance 

Program (LlHEAP). This task is not easy. There are many complexities in designing, developing, 

testing and implementing all necessary system requirements. While CMS has acknowledged that 

many states do have an integrated eligibility system, it has not formally addressed questions, 

comments and concerns presented from states. 

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States must maintain Medicaid eligibility standards, methodologies and procedures that are no 

more restrictive than those in effect on March 23, 2010, the date the ACA was enacted. These 

are known as Medicaid Maintenance of Effort (MOE) provisions, which for the adult population 

is set to expire when the HHS secretary determines that an exchange, either federal or statebased, is fully operational in a state, scheduled for January 1, 2014. The MOE provisions for 

children under age 19, for both Medicaid and CHIP, are effective through September 30,2019. 

This MOE requirement has been a stumbling block for states to implement needed cost savings 

and reforms. In fact, the ACA has been effective in blocking many innovative ideas on cost 

containment and operational reforms that would have resulted in better-quality outcomes for 

recipients. Even efforts to "go green" by implementing paperless application processes are 

precluded by MOE requirements. 

ACA also contains provisions regarding administrative "passive" renewals. This involves 

completing benefit renewals for ongoing eligibility using data sources and sending a notice of 

eligibility at renewal. If eligibility cannot be determined through the use of data sources, states 

are to send a pre-populated form. Renewals for individuals enrolled through MAGI-based rules 

could be limited to no more than once every 12 months. These requirements would necessitate 

substantial system changes to the current eligibility and auto renewal/semi-annual review 

systems to meet requirements. States would need to develop and implement new written 

policies and procedures. Staff training also would be necessary. CMS has not yet provided 

guidance and definitive clarification on these processes, nor has CMS provided necessary 

guidance and clarification on the interaction processes between the federal hub and a state's 

eligibility and enrollment system. 

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ACA allows a hospital to be a qualified entity to do presumptive eligibility (PEl determinations 

for Medicaid. It requires the establishment of policies and procedures, which will entail system 

updates and Medicaid-eligibility training provided by the state. CMS stated that verification is 

not required by the Medicaid agency to authorize presumptive eligibility for Medical Assistance. 

This may contradict, or possibly preempt, Pennsylvania state law because verification of income 

must be provided prior to Medical Assistance authorization. Moreover, states have raised 

program-integrity concerns because they may be financially liable for any services paid to the 

hospital under PE, regardless of whether an individual is later found ineligible. CMS has not 

provided the final guidance or definitive clarification necessary to implement this requirement. 

The exchange of information to verify the income and eligibility of applicants and beneficiaries 

is required and must have adequate safeguards in place. It requires system updates and new 

written policies and procedures to be developed and implemented. States have concerns with 

the safeguarding and sharing of information, especially with integrated eligibility systems and 

with the electronic transfer of data in the verification process. CMS has, likewise, not released 

final guidance on this provision. 

Letter to Secretary Sebelius 

We have had a chronic issue with the timeliness of directions received from HHS. The poor 

response rate confirms the inability of HHS to cope with the magnitude of the health-care 

reform law. On August 23,2012, I wrote to Secretary Kathleen Sebelius, enumerating twentyone questions that Pennsylvania needs answers to before it can move forward with ACA 

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implementation. More than three months later, I have not received a direct response. We were 

able to glean answers to a number of those questions through various avenues, including a 

letter sent by Secretary Sebelius to the governors of various states just this past Monday. Even 

so, multiple questions in my letter remain unanswered. Ofthose answered, numerous 

responses demonstrate complete inflexibility. For example, CMS answered that we will have to 

run two concurrent databases and are prohibited by the health-care reform law to consolidate 

them into a single, more cost-effective system. Not only is this decision costly to Pennsylvania 

but it also could mean delays in receiving services for consumers. As another example, CMS told 

us that we had to change the financing of health care for children ages 6 through 18 from CHIP 

to Medicaid, thus costing the taxpayers additional funds and removing authority from the state. 

Economic Impact on States 

The challenges and costs discussed above will be worse in practice when the full weight of the 

health-care reform law impacts the general economy. I say this because our analyses are based 

on a static picture of the economy and the current configuration of business practices. The 

reality will be much more dynamic. We will certainly witness cost-avoidance behavior on the 

part of businesses that will move many more persons onto the Medicaid rolls. 

let me explain. The health-care reform law assesses a fee of $2,000 per full-time employee, 

excluding the first thirty employees, on employers with more than fifty employees that do not 

offer coverage and have at least one full-time employee who receives a premium tax credit. 

Employers with more than fifty employees that offer coverage but have at least one full-time 

employee receiving a premium tax credit, will pay the lesser of $3,000 for each employee 

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receiving a premium credit or $2,000 for each full-time employee, excluding the first thirty 

employees. Penalties do not apply to employers with under fifty employees. This creates an 

incentive to use more part-time and less full-time employees. 

We are already seeing this shift, according to data from the Bureau of labor Statistics. The 

recent drop in the unemployment rate has been because companies are hiring more part-time 

workers, not because of full-time hiring. This trend will become institutionalized; already 

companies have been changing their business models to utilize part-time help at low wages and 

no benefits. This trend will only increase over time as businesses look for ways to cut costs. 

The economic impact extends beyond the trend toward business relying more and more on 

part-time help, as opposed to full-time help. The taxes on the health-care industry contained in 

the ACA, such as the tax on medical devices and insurance companies, will increase the cost of 

providing health care, making the name of the law a misnomer. In combination with the 

anticipated cuts to Medicare providers because of the ACA, these same providers will be 

looking to offset their losses. Consequently, health care will become even more expensive in 

the private market and for the federal government. As health-care insurance costs rise, this will 

increase the amount of federal dollars needed for the tax credit and cost-sharing reductions. 

What this means is that even more people will become eligible for Medicaid or will be forced 

into government health care than our original estimates predicted. 

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Recommendations 

My first recommendation is to upgrade the federal information technology systems before you 

mandate states to create interchanges with them. Federal agencies lack resources and 

sophistication to fully implement the health-care reform law. Congress ought to alter deadlines 

or suspend requirements for those areas where federal agencies are inadequately prepared. 

Second, there are too many mandates imposed upon the states all at once. We cannot handle 

them all within the expected timeframe on top of the already burdensome mandates from 

Washington that we must follow. Not only do states lack the resources to comply with all these 

mandates, but the federal government also lacks the resources to adequately offer gUidance. 

Furthermore, the implementation of the ACA needs to be a partnership, not a top-down 

relationship where the federal government dictates each and every term to the states. 

Third, allow states to innovate and come up with solutions better suited to their specific 

circumstances. One way to accomplish this would be to grant waivers to the states from ACA 

requirements. Also, draft the waiver authority broadly to increase flexibility in favor of the 

states and allow for an expedited federal approval process with streamlined reporting 

requirements that are understandable to the taxpayers. Waivers mean nothing if they cannot 

be implemented for several months. 

Fourth, provide the ability for states to seek a "superwaiver" for demonstration projects, 

whereby a state could devise a system to integrate and coordinate better outcomes across all 

welfare programs that would empower recipients and improve outcomes. I would include all 

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welfare-related programs: health care, food stamps, housing, child-care, cash assistance, and 

social security disability. 

Fifth, keep a dose eye on DSH payments. like the Commonwealth, Pennsylvania's providers 

continue to face fiscal strains that over time will result in less access and poorer quality of 

health care for our residents. DSH payments are designed to compensate them for 

uncompensated care. The ACA cuts DSH payments even though the ACA does not guarantee a 

commensurate reduction in uncompensated costs. If uncompensated costs remain high even 

after the ACA is fully enacted, Congress must work with the states to reform this program and 

ensure that reform takes into account the unique programs different states have. 

Sixth, it is much more preferable that we allow for innovation by the states, but if the federal 

government insists on mandating system changes, then the federal government should pay for 

them all. If this is unacceptable, then at the very least, there should be a 90/10 split, which 

ought to be extended beyond the December 2014 termination date. 

Closing 

The choices you make as national legislators on the implementation of the ACA will exert 

consequences on the states and our nation for years to come. like many of my counterparts in 

other states, I have strong concerns about the unfunded and inflexible mandates as well as the 

timeframes associated with the national health-care reform law. The mandates have costs for 

the states that will have to be paid for by state and federal taxpayers and supplant other 

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funding priorities, including education and infrastructure. Also keep in mind that every $100 

spent on Medicaid benefits incurs $5.50 in administrative costs. Pennsylvania pays roughly 

$2.48 of that amount. 50 whenever the federal government increases spending on programs 

like this and pays 100 percent of the increased costs, administrative costs will also increase for 

the states. 

Finally, the ACA invites bureaucratic gridlock that works against its desirable goal of securing 

greater affordable health care coverage for more Americans. If we want a system that will 

work efficiently and effectively, states and localities must be engaged and viewed as partners to 

create innovative solutions to provide opportunity for our citizenry. The health-care reform law 

as it stands is not only beyond the capacity of state governments to fully comply with, it is also 

beyond the resources of the federal government. There is a great deal of work to be done to 

make this law more reasonable and less burdensome for states, businesses and all Americans. 

Thank you for taking the time to hear my testimony. I look forward to any questions that you 

may have. 

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Mr. BURGESS. The gentleman’s time is expired. 

I recognize Dr. Sharfstein for 5 minutes for the purpose of an 

opening statement, sir. 

STATEMENT OF JOSHUA M. SHARFSTEIN 

Mr. SHARFSTEIN. Thank you. Good morning, Chairman Burgess, 

Ranking Member Pallone, members of the Health Subcommittee. I 

am Dr. Joshua Sharfstein, Secretary of the Maryland Department 

of Health and Mental Hygiene. In this position, I oversee our 

State’s Medicaid program and I also serve as Chair of the Board 

of the Maryland Health Benefit Exchange. I am grateful for the opportunity this morning to speak with you about the implementation of the Affordable Care Act in Maryland. I am also a pediatrician, and with respect to the last three speakers, all my distinguished colleagues from other States, I think I am the answer to 

the Sesame Street question of ‘‘Which one of these is not like the 

other?’’ 

My testimony today will include, one, background on the key elements of Maryland’s health care system and the importance of improved access to care and cost control; two, a description of how 

broad public engagement has guided Maryland’s process implementing the Affordable Care Act; three, specific details on how 

Maryland with the support of HHS is customizing the tools in the 

new law; and four, a summary of the economic value of health care 

reform implementation in our State. 

So first, a little background. Over the course of several decades, 

Maryland has pursued innovation in health care financing and insurance markets to expand access to care, control costs and promote health. Important aspects of Maryland’s system include a 

unique all-payer approach to hospital payment; a small group market that has modified community rating and serves more than 

400,000 Marylanders; a high-risk pool, a health information exchange that includes data from all hospitals and allows doctors to 

have access to help patients at the point of care; An all-payer pilot 

for medical homes to improve primary care; and a Medicaid and 

CHIP program that covers children up to 300 percent of the Federal poverty line and expanded in 2008 to include parents of dependent children with incomes up to 116 percent of poverty. 

Now, I came onboard a couple years after that expansion, and I 

met some of the more than 97,000 Maryland parents who are covered, and I heard how the coverage allowed them to get back to 

work, to get over injuries that had happened, and I have met one 

like the mother on the Eastern Shore who said that because of coverage, ‘‘Now if I have to pick up a prescription, it is not I am not 

going to have to have the money, I am going to have to take it 

away from groceries.’’ You know, hearing that from somebody 

where they don’t have to take money from groceries in order to pay 

for health care is something that, you know, we deal with all the 

time at the State level, and I think it was the legacy of expanding 

Medicaid and having it be positive for the State that kind of overshadowed the implementation and kind of was what happened 

right before the Affordable Care Act passed. 

Now, despite this progress, major challenges face our health care 

system, challenges that are common to many States including sigVerDate Aug 31 2005 15:01 Jan 16, 2014 Jkt 037690 PO 00000 Frm 00108 Fmt 6633 Sfmt 6633 F:\112-00~1\112-18~2\86248K.TXT WAYNE
105 

nificant numbers of citizens who are uninsured, substantial disparities in health care, rising health care costs. 

So the second thing I would like to talk about is public engagement in the State. From the day after the Affordable Care Act was 

signed, Maryland has been working with hundreds of interested 

people from doctors, hospitals, insurance brokers, businesses and 

others, carriers, to design and think through how this set of tools 

could work for the State. That is included in early consensus that 

it made sense for Maryland to operate its own health insurance exchange, expand Medicaid and take advantage of other options within the law. There was wide understanding that the various aspects 

of the law that included allowing kids to stay on their parents’ coverage, improving seniors’ access to prescription drugs also provided 

great benefits to the State. There was a major report in 2011 that 

led to the exchange getting established in the legislative session. 

There are nine members of the board including six public members, 

and we have had more than six advisory committees with all sorts 

of representation and engagement across the State. They have met 

dozens of times. We have had numerous public input sessions, and 

that led to a second law that passed in 2012 that adopted a series 

of recommendations, 27 recommendations on how to structure the 

exchange. All these things were up to Maryland under the way the 

law was structured. 

We have made multiple decisions to tailor the law. These include 

allowing insurance brokers to sell inside the exchange and continue 

to be paid directly by carriers like they are now, selling adult dental plans as an option for participants, designing the Maryland 

Health Connection as a consumer portal for access, and today 

Marylanders can send a text message of ‘‘connected’’ to be notified 

when coverage is available. We have been customizing Medicaid including women in private health plans to become newly eligible for 

Medicaid to stay in their private plans while having Medicaid dollars pay for their premiums, and in making all these individual decisions, and there are many more in my written testimony, we have 

had tremendous support from both CCIIO and Medicaid as part of 

the regular process that they use to engage with State officials, and 

that is extended across into development of an integrated IT system which we have been working on for the last 2 years and will 

really be a leap forward for the State in terms of access to care and 

coverage. 

The last thing I just wanted to mention is that there was an 

independent economic analysis by the University of Maryland, Baltimore County, on the impact of health care reform implementation 

in Maryland, and the study found that implementation would benefit the State economy by about $3 billion per year and create more 

than 26,000 jobs. It would benefit the State’s budget by more than 

$600 million through 2020 through a series of mechanisms that are 

described in the testimony, and that it would generate more than 

$800 million in additional tax revenue just because of the economic 

activity. This incoming revenue exceeds the State cost of the Medicaid expansion, both considering the direct expansion and the potential woodwork effect. 

So I go around the State talking about all this work that is being 

done in the State, and people don’t ask me about the rules and the 

106 

guidance and our decisions; they ask me about when help is coming, and we are really excited for this to really launch next year. 

Thank you. 

[The prepared statement of Mr. Sharfstein follows:] 

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Implementation of the Affordable Care Act in Maryland 

Testimony of Dr. Joshua M. Sharistein 

Secretary, Maryland Department of Health and Mental Hygiene 

Before the Subcommittee on Health, Energy and Commerce Committee 

U.S. House of Representatives 

December 13, 2012 
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Good morning, Chairman Pitts, Ranking Member Pallone, and members of the Health 

Subcommittee. I am Dr. Joshua M. Sharfstein, a pediatrician and Secretary of the Maryland 

Department of Health and Mental Hygiene (OHM H). I oversee our state's Medicaid program 

and serve as Chair of the Board of the Maryland Health Benefit Exchange. I am grateful for the 

opportunity this morning to speak with you about the implementation of the Affordable Care 

Act in Maryland. 

My testimony today will include: 

(l) Background on the key elements of Maryland's health care system and the 

importance of improved access to care and cost control; 

(2) A description of how broad public engagement has guided Maryland's progress 

implementing the Affordable Care Act; 

(3) Specific details on how Maryland, with the support of the U.S. Department of Health 

and Human Services (HHS), is customizing the tools of the new law; and 

(4) A summary of the economic value of health reform implementation to Maryland, 

according to an independent analysis by the University of Maryland, Baltimore 

County. 

Over the course of several decades, Maryland has pursued innovation in health care 

financing and insurance markets to expand access to care, control costs, and promote health. 

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Important elements of Maryland's health care system include: 

• An all-payer approach to hospital payment that eliminates cost-shifting and provides 

a unique set of mechanisms to improve the value of care; 

• A small group market that features guaranteed issue and modified community rating 

and serves more than 400,000 Marylanders; 

• A high-risk pool called the Maryland Health Insurance Plan that provides coverage 

for more than 20,000 Marylanders who cannot currently obtain health coverage 

through the individual market; 

• A health information exchange that allows doctors and hospitals to obtain 

information about patients quickly, efficiently, and confidentially; 

• An all-payer pilot for primary care medical homes; and 

• A Medicaid and CHIP program that covers children up to 300% of the federal poverty 

line and that expanded in 2008 to include parents of dependent children with 

incomes up to 116% of the poverty line. 

As a result of this most recent Medicaid expansion, more than 97,000 Maryland parents 

currently have coverage. I've met some of these parents and listened to their stories. For 

many, injury or illness had pushed them out of jobs or school. Coverage helped them get back 

on their feet to support their families. In an interview, one mother who lives on the Eastern 

Shore reported: 

She no longer worries about her husband getting injured on the job and not having 

insurance. She says having access to health care, " ... gives you that freedom to be less 

stressed. And if I need to go to the doctor I'm not going to be, 'Where am I getting this 

money from?' I can just go and not worry about it. Or, if I have to pick up a prescription 

it's not, 'I'm not going to have the money I'm going to have to take it away from 

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groceries.'"l 

Despite this progress, major challenges face Maryland's health care system - challenges 

that are common to most U.S. states. In 2011, more than 700,000 of our citizens were 

uninsured; substantial disparities in health outcomes remain across the state; and rising health 

care expenditures and insurance premiums are creating serious concerns about affordability. 

Our priorities include further expanding access to care, addressing health disparities, 

and improving the value of health care by lowering costs, improving the coordination of care, 

and achieving better outcomes.2 Our goals include supporting a healthy workforce, healthy 

families, and a growing economy. 

On March 23, 2010, Congress passed and President Obama signed the Affordable Care 

Act. Starting the next day, Maryland began a process of public engagement that has defined 

our state's approach to implementation. 

On March 24, 2010, Governor Martin O'Malley signed an executive order establishing 

the Maryland Health Care Reform Coordinating Council to study the impact of the new lawchaired by Lt. Gov. Anthony Brown and the Health Secretary. In 2010 alone the Council and its 

workgroups held more than twenty public meetings across the state and received more than 

200 written comments. By January 2011, a broad consensus had emerged that: 

1 Health Care for All. Faces of Maryland's Newly Insured. 2010. Retrieved from 

lJltp:Uhealthcareforall.com/faces-of-marvlands-newly-insured/. 

2 Sharfstein J, Herrera L, Milligan C. Health Care Reform: Caring About Costs, Too. Baltimore Sun. 27 

September 2012. 

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• Marylanders will benefit from many provisions of the Affordable Care Act, such as 

allowing children to remain on their parents' policies, eliminating pre-existing 

conditions in the insurance market, expanding seniors' access to prescription drugs, 

and covering preventive services; 

• Maryland should develop a state-based health insurance exchange to integrate our 

insurance model with our broader initiatives in coverage and delivery system 

transformation; 

• Expanding Medicaid is the best decision for Maryland's providers, the state 

economy, and the uninsured, who will gain a pathway to primary and preventive 

health care services rather than simply accessing emergency room services, and 

• Health reform provides an opportunity to advance efforts to control costs, expand 

our health care workforce, integrate behavioral health services, and address 

unacceptable health disparities. 

During the 2011 state legislative session, informed by a report from the Coordinating 

Council,3 the Maryland General Assembly passed legislation authorizing the creation of a statebased exchange as a public corporation and an independent unit of state government.4 

The statute, signed in April, 2011 by Governor O'Malley, established a governing board 

of nine, including six public members. The law mandated the completion of six studies covering 

3 Maryland Health Care Reform Coordinating Council. Final Report and Recommendations. Retrieved 

from http://www.healthreform.maryland.gov!wp-content!uploads!2012!03!FINALREPORT.pdf. 

4 Maryland General Assembly. Maryland Health Benefit Exchange Act of 2011. 2011 Laws of Maryland, Ch 

2. Retrieved from http://mlis.state.md.us!20llrs!chapters_noln!Ch_2_hb0166T.pdf. 

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(1) how to finance the Exchange, (2) how to define the small group exchange, (3) the 

development of market rules to mitigate risk, (4) an operating model, (5) an advertising 

approach, and (6) the creation of a program to assist Marylanders in navigating the Exchange 

and selecting from its plans. 

To complete these studies, the Board turned to the deep wells of knowledge and 

experience in our state. We established four advisory committees with 66 Marylanders serving. 

Committee chairs included local health officials, advocates, insurance brokers, business owners, 

physicians, and researchers. These committees met a total of 22 times in 2011. 

The work of these committees culminated in the Board making a series of 27 specific 

recommendations for the policy structure of the health benefit exchange to the legislature. s 

These recommendations included keeping the non-group and small group markets separate, 

giving the Exchange the authority to set minimum standards for insurers, and establishing a 

program to combat waste, fraud and abuse. By this pOint in time, there was such broad 

consensus that the legislature and Governor O'Malley adopted virtually all of these 

recommendations in a second exchange-related bill in the 2012 legislative session.6 

The Board of the Maryland Health Benefit Exchange has hired a management team, led 

by Rebecca Pearce, with substantial experience in the insurance industry. To guide 

implementation, the team recently convened new advisory committees on outreach and plan 

management. Many more public meetings of these groups have occurred. Maryland has also 

5 Maryland Health Benefits Exchange. Recommendations for a Successful Maryland Health Benefits 

Exchange. A Report to the Governor and Maryland General Assembly. Retrieved from 

http://dhmh.maryland.gov/exchange/pdf/HB0166_MHBE-Report_oC2of2_12-23-11_0GA_1204.pdf. 

6 Maryland General Assembly. Maryland Health Benefit Exchange Act of 2012. 2012 laws of Maryland, Ch 

152. http://mlis.state.md.us/2012rs/chapters_noln/Ch_152_hb0443T.pdf 

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received public input on plans for exchange financing and essential health benefits. All of our 

Board meetings are public; we've met in Baltimore, Cecil, and Montgomery Counties and most 

meetings have at least 40 observers. Information about the Exchange and its meetings is 

available online at www.marylandhbe.com. 

These public consultations - and those yet to come - are the cornerstone of our 

approach to implementing the Affordable Care Act in Maryland. Getting input helps us make 

the best decisions and also helps us identify missteps early so we can change course. This 

broad and inclusive strategy has put us in position to succeed in 2014. 

Maryland has made multiple decisions to tailor implementation of the Maryland Health 

Benefits Exchange and the Medicaid expansion to the unique environment in our state. 

Significant efforts have been made to integrate the Exchange and Medicaid to create a 

seamless experience. We have also strived to integrate popular aspects of the existing private 

insurance market. 

Through statute, regulation, and policy, Maryland has made many decisions on the 

shape of the Maryland Health Benefit Exchange. These include: 

• To provide for a fair playing field, requiring that insurers over a certain size 

participate in the state-based Exchange; 

• Allowing insurance brokers to sell inside the exchange and continue to be paid 

directly by carriers, receiving compensation comparable to what they receive now; 

• Developing a connector program for outreach based on specific regions in the state; 

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• Selling adult dental plans as an option for participants; 

• Setting a path for involvement of essential community providers in health plans; 

• Establishing a partnership program to allow Maryland's third party administrators to 

continue managing the majority of our small group market; and 

• Designing the "Maryland Health Connection" as the consumer portal for access to 

coverage. Today, Marylanders can send a text message of "Connected" to 69302 to 

be notified when coverage is available. 

Led by our Medicaid Director Charles Milligan, Maryland is also taking advantage of the 

flexibility available to states with respect to the Medicaid expansion. Examples of our choices 

include: 

• Allowing women in private health plans who become newly eligible for Medicaid as 

a result of a pregnancy be allowed to stay in their private plans while having 

Medicaid dollars pay their premiums; 

• Using new tools to re-balancing long-term care services away from institutional 

settings such as nursing homes toward community and home-based care; and 

• Integrating our existing eligibility structure at local health department and social 

service offices into a new online eligibility system. 

Creating a state-based exchange in tandem with expanding Medicaid has allowed for 

significant collaboration and integration. We are developing a seamless eligibility system that 

has one entry point for the uninsured, regardless of whether they qualify for Medicaid or 

private insurance. Outreach programs and customer services will also be integrated, and we 

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are taking steps to ensure that individuals who "churn" between Medicaid and Exchange plans 

based on changes in their income will receive continuous care. 

Throughout this process, Maryland has received critical guidance and technical 

assistance from both the Center on Consumer Information and Insurance Oversight (CClIO) and 

the Center for Medicaid and CHIP Services (CMCS) at the Centers for Medicare and Medicaid 

Services (CMS). This support has been provided through multi-state meetings and regular 

consultation available to all states. CCiIO and CMCS have also provided Maryland-specific input 

on policy and implementation since our early efforts to begin implementation and have allowed 

Maryland flexibility to make choices that will most benefit our state. An internal working group 

has regular technical assistance phone and in-person meetings with CCiIO and CMSC, which 

have resulted in highly valuable guidance on technical issues such as eligibility rules and 

processes, income determination, and consumer assistance strategies. 

Funding from the CCiIO has been essential to our ability to rapidly implement the 

Affordable Care Act. Maryland was one of a small number of states to be awarded the Early 

Innovator Grant in March, 2011. We received $6.2 million to support early IT work, such as the 

development of a prototype for modeling the point of access for the Exchange and integration 

with state legacy and the federal portal systems. Second, we received a level 1 Establishment 

Grant in August, 2011 in the amount of $27 million. This funding has been used to fund the 

initial administration and operation of the Exchange and to scale-up the prototype 

infrastructure into an operational platform ready to be deployed. Finally, we received a level 2 

Establishment Grant in August, 2012. This grant, worth $123 million, is supporting the 

Exchange's operations, program integration, and education and outreach. Much of this funding 

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will also be used to develop applications that allow for instantaneous eligibility determinations 

and transfer of information to plan issuers and state agencies. 

A key challenge to effective implementation of health care reform in Maryland is 

developing an IT strategy that addresses new Medicaid eligibility rules and the launch of the 

Exchange. Our existing Medicaid eligibility system is antiquated and has significant limitations. 

Funding from HHS is giving Maryland the opportunity to develop a modern infrastructure that 

will have lasting value for state residents. 

We have developed a set of requirements and selected a lead contractor and set of 

software vendors in February, 2012 who are working to prepare for the October, 2013 launch. 

We are well into a series of development sprints and have shared many tools and documents 

with other states to help them prepare for implementation. We have developed and are 

executing the approach to link the new eligibility system with nearly ten other systems in the 

state, most notably Medicaid's payment system. 

None of this work is simple, but it is worth the effort. We have a tremendous, dedicated 

team working together to solve problems and put Maryland in a position to succeed. We are 

very pleased that on Monday, Maryland was one of six states to receive provisional certification 

for our state-based exchange from HHS. 

ECOfionti¢'Anlllys!s 

A central goal of implementing the Affordable Care Act has always been to help 

Marylanders find affordable health coverage that allows them to maintain their health and 

quality of life. A recent study in the New England journal of Medicine shows that state-led 

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expansions of health coverage translate into better health and significantly reduced mortality 

rates among individuals with low income.' It is also the case that implementing the Affordable 

Care Act will have positive effects beyond improved health. In addition to improving the health 

of our citizens, the law will improve the health of the Maryland economy. 

In July 2012, the Hilltop Institute, a nonpartisan research organization at the University 

of Maryland Baltimore County, released the results of a study of how implementation of the 

Exchange and Medicaid would impact health coverage and the state economy.8 Through the 

use of a simulation model, they were able to predict how many individuals would gain 

coverage, changes to the state unemployment rate, and the impact on the state budget. 

According to the study, the Affordable Care Act will expand health coverage to 284,000 

Marylanders through the Exchange and 187,000 through the Medicaid expansion. This will 

result in more than 9S percent of U.S. citizens in Maryland having health insurance. As more 

individuals gain health insurance, this creates additional economic activity in the health care 

industry, which then affects other aspects of the state economy. 

The study estimated this new economic activity would, by 2020, benefit the state by 

around $3 billion per year and create more than 26,000 jobs. It also estimated that the 

Affordable Care Act would benefit the state's budget by more than $600 million through 2020-

through such mechanisms as prescription drug rebates, a reduced need for state-funded 

prescription drug aSSistance, and increased revenues from premium assessments as the 

7 Sommers BD, Baiker K, Epstein AM. Mortality and Access to Care among Adults after State Medicaid 

Expansions. New England Journal of Medicine 2012;367:1025-1034. 

• Hilltop Institute. Maryland Health Care Reform Simulation Model, Detailed Analysis and Methodology. 

Retrieved from http://www.hilltopinstitute.org/publications!SimulationModeIProjections-July2012.pdf 

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number of insured individuals grows. In addition, the economic activity generated by the law is 

estimated generate more than $800 million in additional state and local tax revenue by 2020. 

According to the projection, this incoming revenue exceeds the state cost of the Medicaid 

expansion - both considering the direct expansion and the potential "woodwork" effect of 

more people obtaining coverage in existing eligibility categories. 

c!>n~luslqn _-

Implementation of the Affordable Care Act puts Maryland on a path for better health, a 

healthier workforce, and a stronger economy. Guided by public input and engagement, 

Maryland plans to make good use of the many tools that the law provides. 

As the Secretary of Health, I travel the state speaking to and hearing from Marylanders 

about health care reform. I always take questions. The questions are generally not about the 

latest Board decisions, recent guidance from CMS, or news from Washington, DC. The 

questions are driven by personal experience: about pain after an accident, or a feared cancer 

diagnosis, or concern about the future of a child with chronic disease, or a struggle with the 

emerging complications of diabetes. And the most common question I hear is: "When is help 

coming?" 

With respect to our state-based exchange and the Medicaid expansion, I say that we are 

very close. I am candid that much work remains to be done. I tell them that we are looking 

forward to a leap forward for health in January 2014. 

Thank you for the opportunity to testify, and I look forward to your questions. 

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Mr. BURGESS. The time is expired. 

We will note that there is a vote on the floor. I believe, though, 

we have time for Dr. Allison to go ahead with your 5 minutes at 

which time we may take a brief recess for votes, so proceed, sir. 

STATEMENT OF ANDREW ALLISON 

Mr. ALLISON. Thank you, Mr. Chairman. My name is Andy Allison. I am the Medicaid Director in Arkansas. I am also the President of the National Association of Medicaid Directors. I appreciate 

the committee’s invitation to Arkansas and to other States represented on this panel to hear about these important issues. 

My written testimony, which I have submitted, addresses the two 

main challenges that Medicaid faces today. Foremost is the challenge of the fiscal duress brought on by long-term rates of growth 

in the Medicaid program and also by the loss to our tax base suffered as a result of the economic shift that occurred in this country 

beginning in 2008. The second challenge is really an opportunity, 

and that is, the option for States created in the Affordable Care Act 

to extend health insurance coverage to poverty-level adults through 

the Medicaid program. I want to focus my brief remarks this morning on the decision Arkansas faces about whether to take up this 

option. 

Governor Beebe expressed his support for the Medicaid expansion this summer. His decision came after CMS confirmed that the 

expansion remains optional and could be revoked in the future. His 

support for the expansion is driven by the benefits it would provide 

to State taxpayers, for the State’s safety net, especially hospitals, 

and to the beneficiaries of the expansion themselves. 

Arkansas has a great many low-income uninsured adults, and we 

know that Medicaid saves lives, it improves health and it provides 

financial protection. The decision of whether to expand Medicaid in 

Arkansas now rests with its General Assembly, who meet beginning in January for three months. A supermajority, a 75 percent 

vote, is required to appropriate funds in Arkansas regardless of 

their source. This is the challenge. The legislature’s decision may 

rest heavily on the financial implications of expansion for the 

State. Arkansas’s estimates of the size of the Medicaid expansion 

use as a starting point the Urban Institute’s March 2011 Statelevel projections of the expansion. To those estimates, Arkansas 

added both costs and enrollees. The estimates include some crowdout of private insurance, include the woodwork effect. Current eligibles represent about 14 percent of the expected new enrollment. It 

also includes the added administrative costs. Overall, the gross 

costs of the expansion total about $900 million per year including 

both Federal and State payments. 

But there are also expected savings for the State of Arkansas associated with the expansion. The first source of savings stems from 

our expectation that a number of populations currently served 

through traditional Medicaid will migrate or will otherwise transition into the new expansion group of eligibles, thereby qualifying 

for a much higher Federal match rate. Key examples are individuals who currently enroll in Medicaid because of pregnancy or because they have suffered a catastrophic, high-cost medical event. In 

the future, these populations will already have health insurance 

120 

when these changes in their health status occur, and there will be 

no reason for them to switch to the old eligibility categories, which 

carry with them a much lower Federal match rate. 

The second source of savings to the State is a reduction in State 

spending on uncompensated care. If Medicaid expansion is approved, more than 200,000 additional Arkansans will have a payer 

for their health care. Consequently, uncompensated care provided 

by State programs outside of Medicaid should decline significantly. 

Program areas affected include health costs to the Department of 

Corrections as well as State subsidies to community health centers, 

community mental health centers and public hospitals. 

Finally, because of the unusual nature and size of the optional 

Medicaid expansion, Arkansas is making the unusual decision to 

consider its macroeconomic impact. If the State legislature approves the expansion, Federal Medicaid payments to the State are 

expected to grow by around $800 million per year. Given Arkansas’s small size versus the Federal tax base, Arkansas assumes in 

its estimates that Federal Medicaid payments for the expansion 

will come from taxpayers in other States. Put simply, Arkansas’s 

economy will be hundreds of millions of dollars larger if it chooses 

to expand Medicaid, and this difference in the State’s tax base will 

have some impact on tax revenue. All told, we estimate that the 

fiscal benefits will outweigh the costs and the expansion on net is 

expected to save or increase State tax dollars by $44 million in fiscal year 2014, $115 million in State fiscal year 2015, and about 

$700 million between now and 2025. 

Thank you, Mr. Chairman. 

[The prepared statement of Mr. Allison follows:] 

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Testimony of Andrew Allison, Ph.D. 

Director, Division of Medical Services, Department of Health Services, State of Arkansas 

Before The 

Committee on Energy and Commerce 

Subcommittee on Health 

U.S. House of Representatives 

"State of Uncertainty: Implementation of PPACA's Exchanges and Medicaid Expansion" 

December 13, 2012 

My name is Andy Allison. I am Arkansas's Medicaid Director, and I run the Division of Medical Services 

at the Department of Human Services in Little Rock. I have been in this position for a year, and before 

that Directed Kansas' health care programs, including Medicaid, for 6 years. I'm also the current and 

outgoing President of the National Association of Medicaid Directors, which I helped establish in 2010 as 

an independent organization in order to strengthen the voice of program directors in national policy 

discussions. I want to thank the Committee for inviting me and the other states represented here today 

to discuss these critical policy issues. 

In my testimony I would like to describe for you the decision process Arkansas is going through to 

determine whether to expand the Medicaid program under the authority granted by the Patient 

Protection and Affordable Care Act of 2010, and also provide comments on the future of the Medicaid 

program. The seismic economic shift that began in this country in 2008, along with passage of the ACA 

in the Spring of 2010, have in my view combined to make the present period arguably the most 

important in Medicaid's history. The risks and opportunities associated with the twin challenges of 

expansion and fiscal duress are compounded by what has, at times, been nearly overwhelming 

uncertainty regarding the future of the program. Unresolved debates in the courts and in Washington 

regarding the program's size, shape, and funding have made It more difficult for states to plan and 

improve the program even though the need to plan and improve is greater than ever, as is the 

opportunity to serve more Americans who need Medicaid's services. 

State consideration of the Medicaid expansion: Arkansas faces many challenges. It is one of the 

poorest states in the U.S. More than three out of four (78%) of Arkansans earn at or below 400% of the 

federal poverty level. The median household income for Arkansas is the third lowest in the country at 

$38,413. 

Lack of insurance is a significant problem for many Arkansans. One-quarter (25%) of 19-64 year olds are 

uninsured. This leads to problems in accessing and affording needed health care: 16.5% of Arkansans 

recently reported being unable to see a doctor due to cost. Arkansas's high rates of uninsurance are 

associated with growing uncompensated care costs. In 2010, uncompensated care costs to Arkansas 

hospitals were estimated at more than $338 million. In addition to the costs borne by hospitals for 

uncompensated care, Arkansas families with health insurance also pay for uncompensated care through 

increasing premiums. Premiums for insured Arkansans have risen an estimated $1,500 a year to cover 

the cost of uncompensated care. Arkansas families' average health insurance premiums nearly doubled 

over ten years to reach $11,816 in 2010. 

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DHS estimates that expanding Medicaid would result in an additional 250,000 Arkansans receiving 

coverage through Medicaid. In other states that have already expanded their Medicaid programs, the 

expansions have led to reduced adult mortality as well as higher levels of health insurance coverage, 

financial stability, access to health care and health status. [Sources: Benjamin D. Sommers, Katherine 

Baicker and Arnold M. Epstein, "Mortality and Access to Care among Adults after State Medicaid 

Expansions" New England Journal of Medicine; 367:1025-1034; September 13, 2012. Katherine Baicker 

and Amy Finkelstein, "The Effects of Medicaid Coverage - learning from the Oregon Experiment," New 

England Journal of MediCine; 365:683-685; August 25, 2011.] 

Medicaid Expansion in Arkansas - status of state's decision: Pursuant to the U.S. Supreme Court's 

decision in NFIB v. Sebelius, states now have the option to choose whether or not to expand their 

Medicaid programs to cover low-income adults. After receiving written confirmation this summer from 

the Centers for Medicare and Medicaid Services that states that cover the expansion group could later 

drop the coverage, Governor Mike Beebe offered his full support of expansion. His public support 

followed an already expressed inclination to moving forward after receiving detailed estimates from the 

Department of Human Services showing a positive net fiscal impact of Medicaid expansion on the state 

budget, particularly in light of the financial duress that Arkansas hospitals would experience without 

expansion, and recognizing the tremendous good that health insurance coverage would do for the more 

than 200,000 low-income adults who will gain coverage as a result of the expansion. A small number of 

staff in my agency are developing plans for a Medicaid expansion and are working closely with 

counterparts in the Arkansas Insurance Department to identify ways to enhance continuity of coverage 

and coordination of care for families and individuals who experience changes in income or family status 

and need to switch between Medicaid and private sources of coverage in the health insurance 

exchange. 

The decision of whether to expand Medicaid now rests with the Arkansas General Assembly. A 

supermajority (75%) vote is required to appropriate funds in Arkansas, regardless of source. In order for 

the Department to extend coverage to the expansion group of poverty-level adults, the legislature will 

need to increase my agency's budget by approximately $500 million to cover expenses between January 

and June 2014. Arkansas's legislature convenes its 2013 session in January and is scheduled to meet for 

approximately three months. Arkansas's legislature will experience significant turnover as a result of 

the November 2013 elections, and it is too soon to extend any prediction regarding the new 

legislature's choice. 

Note: DHS' estimates do not include inflation in either the costs or the savings items. Since inflation 

would tend to increase virtually all cost estimates as well as macroeconomic (tax) effects, its inclusion in 

the estimates would tend to make all of the dollar amounts in the estimates larger, thereby inflating the 

nominal value of the projected savings in the out years. To better communicate the impact of expansion 

to policy makers in Arkansas, inflation was ignored. Dollar costs in each year are intended to reflect 

"real" 2012 dollars. 

Estimated (gross) costs of the Medicaid expansion in Arkansas: Arkansas DHS first released 

comprehensive estimates of the impact of Medicaid expansion in July 2012, and recently updated those 

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estimates. The newer estimates will form the basis for legislative requests for appropriations that would 

be necessary as a result of the expansion. DHS estimates that the ACA Medicaid expansion would, if 

implemented in Arkansas, generate net savings or increased tax receipts totaling in excess of $700 

million dollars for the time period from federal fiscal year 2014 through 2025. The gross costs of the 

Medicaid expansion total approximately $900 million per year by 2017 and include estimated 

reimbursements and other payment to providers for services covered under the expansion (for the 

expansion group) or under the regular Medicaid program (for current eligibles who enroll as a result of 

the "woodwork" effect of the ACA expansion) as well as added administrative costs. DHS estimates that 

the net state savings of expansion persist in the long run, even after the percentage of expansion costs 

funded by the federal government fall to 90% in 2020. Along with this testimony, I am sharing the more 

detailed year by year estimates that we have recently updated, and will now explain the assumptions 

and analysis that have gone into those estimates. 

Enrollment: Arkansas DHS's estimates of the size of the Medicaid expansion use as a starting point the 

Urban Institute's March 2011 state-level projections of the expansion, which includes an estimate of 

additional enrollment due to "crowd-out." Crowd-out is when a government expansion of coverage 

displaces private insurance by inducing individuals to sign up for Medicaid instead of private coverage, 

or by inducing business to not offer insurance to their employees because some or all could enroll in 

Medicaid instead. Arkansas's Medicaid expansion estimates also include an additional 29,000 Medicaid 

enrollees (over and above the Urban Institute estimates) to allow for additional crowd-out, great 

program participation due to more effective outreach and enrollment, or other factors that might 

increase Medicaid enrollment in Arkansas. Overall, DHS's estimates assume a participation rate in 

Medicaid that is significantly higher than the Urban Institute's March 2011 state-level estimates. This 

estimate of additional participation helps protect Arkansas from the unexpected costs of enrollment 

that might occur if crowd-out is unusually high in Arkansas. In DHS's updated November 2012 estimate 

of the Medicaid expansion, a three-year ramp-up period is included to more realistically project the 

length of time it would take to reach full participation in the expansion. This three-year ramp-up 

coincides with the period of highest federal contributions to the costs of the expansion population, and 

its inclusion has very little (net) fiscal impact on the state. 

Costs per person: DHS's estimates of costs per new enrollee in Arkansas's Medicaid expansion estimates 

use as a starting point two separate but coinciding estimates of the cost of the adult expansion 

population. The first source is an estimate for 2011 from the Urban institute, which pegged per-person 

costs at around $295 per person using a variety of sources, and which was adjusted for the expected 

health status and health care needs of the expansion population. The second source is Arkansas's direct 

experience with working adults in approximately the same income range of the expansion population 

through ARHealthNetworks also under $300 per person. ARHealthNetworks is a state-initiated, 

Medicaid-financed limited expansion of coverage to low-income workers in small businesses. like the 

Urban Institute, DHS's estimates assume that new eligibles will be less expensive, on average, than 

adults currently participating in Arkansas Medicaid due to their higher income, work status, the fact that 

the expansion population will- by definition - not be categorically disabled, nor will they qualify for the 

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expansion because they (unlike some parents in Medicaid now) have incurred very large health care 

bills. 

There are likely to be some relatively high cost newly-eligible expansion enrollees who have significant 

physical or behavioral health needs, but are not (yet) disabled. However, there are a limited number of 

these individuals - and they are only in the new eligible category until they obtain a federal disability 

status. They will be dramatically outnumbered by low-income workers who are expected to have lower 

costs (as described above). Costs for these individuals should be incorporated into the Urban Institute 

estimates we used as a starting point given their comprehensive methodology. Even so, the possibility 

that there could be more high-cost individuals than Urban already accounts for, or that their costs could 

be higher than expected, helps explain the use of a per-capita cost figure somewhat higher than Urban's 

March 2011 estimate. 

DHS's estimates or participation and costs per person interact. The most likely new eligibles to enroll 

are those with the highest costs, i.e., those who most frequently seek services, incur costs, and come 

into contact with providers who are motivated to help the individual enroll in Medicaid. Arkansas's 

estimate of participation after the three-year ramp-up period is aggressive, and likely includes 

individuals with better health and lower health care need than those included in Urban Institute's March 

2011 estimates, which served as the starting point for our cost assumptions. However, to be 

conservative, DHS's estimates do not raise the per-person cost estimates for the expanded Medicaid 

population during the period in which the federal government is paying the full costs ofthe expansion 

(thereby minimizing the expected gains from the expansion's macroeconomic impact on tax revenue), 

and also do not lower the per-person cost estimate when full participation is reached (and the state 

begins to pay for a percentage of these costs). 

Woodwork effect: Health needs and medical bills are assumed to increase the likelihood of enrollment. 

Those currently enrolled in Medicaid are presumed to be more likely than those (eligibles) that have not 

enrolled to have incurred significant health bills, or otherwise have the greatest health needs. 

Providers, for example, often help facilitate or otherwise encourage patient enrollment in Medicaid to 

help assure a source of payment for the services provided. As a result, currently eligible nonparticipants are less likely than participants to have seen a provider. Therefore, those current eligibles 

that enroll because of the ACA's "woodwork" effect, e.g., from increased outreach, publicity, and 

streamlined enrollment procedures, are assumed to have fewer and less costly health needs than those 

already participating in Medicaid. 

Administrative costs: Administrative costs: Costs also indude administrative expenses associated with 

both groups of new enrollees (new eligibles and woodwork enrollees). Arkansas's administrative costs 

are low (approximately 4% of service costs), and include some fixed costs that would not increase with 

additional enrollees. Arkansas estimates an additional administrative cost of approximately $14 million 

per year at full implementation associated with the expansion. PHS' estimates include a predicted 

amount of new administrative spending for the expansion for added costs related to claims processing, 

provider and customer support, oversight and engagement. The total new administrative costs are 

estimated at $7.4 million all-funds in 2014 and $14 million all-funds in 2015 and each year thereafter. 

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The state general revenue impact for administrative costs would be $2.1 million in 2014 and $4 million 

per year in following years. Costs of the expansion are born primarily by the federal government in 

each year, but especially in the 2014-2016 period when the federal matching rate for new eligibles is 

100%. 

Estimates of Savings and increases in State General Revenue due to Medicaid Expansion: There are 

also expected savings for the State of Arkansas associated with the Medicaid expansion. Projected 

savings come from three general areas: (1) savings from the natural migration or explicit transition of 

select Medicaid populations to the newly eligible expansion group; (2) savings from reductions in 

uncompensated care costs provided by state agencies outside ofthe Medicaid program; and (3) savings 

from additional tax revenue associated with new federal spending that is contingent on the state's 

decision to expand Medicaid. 

Transition populations: A number of populations currently served through traditional Medicaid will 

migrate or will otherwise transition into the new eligible group, resulting in savings to the state. 

Medicaid transition populations include those currently participating in Medicaid or CHIP who will end 

up participating in the Medicaid expansion instead. They also include the ARKids B population, since the 

Federal government essentially picks up the full tab for them beginning in October 2014. Transition 

populations include ARHealth Networks, Arkansas's Medicaid waiver expansion group, since the 

Medicaid expansion (and to a lesser extent new tax subSidies) provides more complete coverage. 

TranSition populations also include some of the state's "medically needy," or "spenddown" Medicaid 

enrollees. The medically needy group that is assumed to transition to full coverage under the expansion 

represents those who currently have to medically impoverish themselves in order to reach Arkansas 

sub-poverty income thresholds. Under the expansion, these individuals will already be insured by 

Medicaid (and to a lesser extent new tax subsidies) due solely to their low income when they incur large 

health bills, and will not need to qualify under the older and more restrictive eligibility rules. 

ARHealthNetworks is a healthcare benefits program designed for small businesses and self-employed 

individuals without medical coverage. The population currently on the program will be able to receive 

coverage in the future via Medicaid expansion or with subsidies through the health insurance exchange, 

depending on their income level. DHS estimates that transitioning this program will save approximately 

$12 million a year in state general revenue. 

ARKidsB - enhanced FMAP - Arkansas's current FMAP '" + additional 32% FMAP increase =100% federal 

funding for this program starting October 1, 2015 will generate a projected $23 million a year savings in 

SGR 

AFDC Medically needy spend-down: Arkansas provides temporary Medicaid coverage to parents with 

low- but excessive incomes who experience a significant health care expense and, after netting out 

these health care bills, meet the income criteria for the program. These individuals may have suffered a 

catastrophic acute care cost and have spent nearly all their income on associated bills. Counting these 

bills against their income as a "spend-down," these individuals are subsequently conSidered to be 

"medically needy" for sox month intervals. Following an expansion of Medicaid, parents will be highly 

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likely to have coverage before they incur the high-dollar health care costs, and if so are unlikely to be 

able to spend down enough income to become Medicaid eligible under the old rules. Although Arkansas 

would be obligated to maintain this eligibility category even after a Medicaid expansion, DHS estimates 

that the category will largely de-populate. 

Pregnant women: In Arkansas, Medicaid currently pays for nearly 66% of all births. Under current 

pregnant women eligibility categories, women become eligible due to pregnancy status and lose 

coverage shortly after the birth of their child. After 2014, with the implementation of the health 

insurance exchanges and through Medicaid's new eligible group, a large percentage of these women will 

already be covered before becoming pregnant and their coverage will not be tied to pregnancy status. 

This will improve continuity of care and coordination of coverage. A single streamlined application will 

ask about pregnancy status at the time of application. If not pregnant at the time of application, the 

women will be enrolled in the new eligible group. Arkansas estimates a savings of $21 million in state 

general revenue from transitioning a large percentage (75%) of pregnant women to the new adult 

group. We have just learned about the positive impact on coverage of low-income pregnant women. 

Under 2012 regulations published by eMS, it is now clear that pregnant women will no longer need to 

wait until they are pregnant to have access to affordable care. Many will be covered through private 

insurance, and others will already be covered through the Medicaid expansion before they become 

pregnant. When they become pregnant, they will not need to switch back to Medicaid - nor transition 

from the new expansion Medicaid group back to the old (existing) Medicaid pregnant women eligibility 

group. They can simply remain in the affordable health plan they already have. This will promote 

continuity of coverage, better preventive and prenatal care, and will save the state millions of dollars. 

Also note that pregnant women above 138% of poverty will not have access to Medicaid after January 

2014, and this will help promote private (and continuous) coverage for them and their families. Many 

more women will already be covered. 

Achieving fiscal sustainability in Medicaid. I would like to conclude my remarks by addressing the fiscal 

duress the Medicaid program is facing. With two negligible exceptions, Medicaid spending in this 

country has grown as a percentage of the value of the nation's economic output every year since it was 

created. In Arkansas that growth has been even more pronounced in the last decade: Medicaid 

spending grew by 1.5 percentage points of the state's economic output over the 2001-2011 period. 

ObViously that trend cannot continue forever, a point that observers of Medicaid and other entitlement 

programs have been making for quite some time. Arkansas and other states have recognized that the 

time to address the long-run imbalance between growth in Medicaid and growth in the tax base that 

supports it. As it has become clearer in the economic aftershocks of the near-meltdown of our financial 

markets in 2008 that we now live in a somewhat different economy - and are not simply experiencing 

an especially long recession -- state interest in reduCing growth in Medicaid spending has taken on a 

new and, in some cases, unprecedented urgency. Since 2010, even with historically high levels of 

persistent unemployment, Medicaid spending growth has abated as states' imperative to manage costs 

has grown and the level of activity directed towards wise stewardship of public resources has 

intensified. In Kansas, where I helped lead state health care programs from 2006 through 2011, the 

Medicaid program is being transformed by a comprehensive, state-of-the-art implementation of 

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managed care. In Arkansas, we are engaged in comprehensive payment reforms designed to move 

almost completely away from a fee-for-service system that rewards utilization, and creating in almost 

every corner of the program, a focus on paying for quality outcomes and efficiency. Our goals are to 

transform and improve health care, and to slow the rate of growth in costs by as much as 2 percentage 

points per year. In other markets and with other types of goods, quality and value both improve over 

time. We are deciding in Arkansas that it is time to expect, support, and incentivize that kind of 

improvement in health care as well. 

State innovation in Medicaid -- Arkansas' Payment Improvement Initiative: Arkansas is in the midst of 

creating a sustainable patient-centered health system that embraces our Triple Aim: (1) improving the 

health of the population; (2) enhancing the patient experience of care, including quality, access, and 

reliability; and (3) reducing, or at least controlling, the cost of health care. Achieving this Triple Aim will 

require transforming our care delivery system from fragmented and encounter-based care to 

coordinated, patient-centered and cost-effective care, organized around consumers' comprehensive 

health needs across providers and over time. It also requires shifting away from pure fee-for-service 

payment mechanisms that lead to fragmented care with incentives to over-utilize services, to valuebased payment mechanisms that reward effective care coordination and superior outcomes with 

respect to both quality and cost containment. The description I offer of Arkansas' plans is taken from 

the state's application to the Center for Medicare and Medicaid Innovation's State Innovations Model 

(SIM) grant program. Arkansas is one of the many states seeking to take advantage of CMMI's offer of 

financial support, technical assistance, and programmatic flexibility to aid in the transformation of their 

health care systems through the Medicaid program. Arkansas is requesting support to offset the 

hundreds of millions of dollars of investments needed in its health system over the next few years to 

generate billions in savings in the years that follow. This level of federal support is critical in Medicaid, 

and appropriately reflects the fact that the proceeds of innovation achieved by anyone state Medicaid 

program, reflected in both program outcomes and fiscal relief, will accrue disproportionately to other 

states and the federal government. Without substantial federal aid and assistance for innovation, states 

will be faced with the choice to essentially donate most of benefits of its investments in change to other 

states and the federal government. 

Our goal is to fully develop this system within the next 3-5 years by adopting a model that integrates 

two complementary strategies for promoting clinical innovation on a multi-payer basis across the entire 

state: population-based care and episode-based care. 

Population-based care deliverv. Within 3-5 years, most Arkansans will have access to a medical home 

that offers a local pOint of access to care and proactively looks after his or her health on a "24-7" basis. 

Special needs populations with developmental disabilities (~O), those requiring long-term services and 

support (l TSS), and those with serious behavioral health (BH) needs will also have access to health 

homes. 

- The medical home will support patients to connect with the full constellation of providers who 

together form their health services team, customized for their personal care needs and with a focus on 

prevention and management of chronic disease. For patients with chroniC conditions, the medical home 

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will assist with monitoring their progress and coordinating care among what will often be a multidisciplinary provider team. The medical home will bear responsibility for coordinating care to address 

the complete health needs of a population. 

- The health home will be accountable for the full experience of individuals with special needs-the frail 

elderly, those with developmental disabilities, those with severe and persistent mental illness, and other 

high needs behavioral health clients. Accountability will include health outcomes, streamlining care 

planning, and ensuring each person has a single integrated plan across all types of care. To accomplish 

this, health home providers will work closely with consumers, their families, and other direct service 

providers, offering support and coaching in a community setting. The health home complements the 

medical home: the medical home will continue to retain responsibility for diagnosis, treatment, and 

referral, while the health home will help to ensure proper follow-up, treatment adherence, and 

communication between providers, individuals receiving services, and their families. 

Episode-based care delivery. Within 3-5 years, substantially all acute care and complex chronic 

conditions (50-70% of total health care spending) will be proactively managed by a principal accountable 

provider (PAP), who will embrace their role as the "quarterback" responsible for quality, access, and 

efficiency of all services delivered in response to a patient's immediate needs. PAPs will be evaluated on 

their performance over entire episodes of care, with an expectation of coordinated, team-based 

management of services. Better data will help PAPs to understand and improve their performance over 

time, thus enhancing quality and outcomes and increasing cost-effectiveness of care. 

Arkansas has developed and successfully implemented the first wave of episodic payment reforms, 

which focused on pregnancy and birth, attention deficit hyperactivity disorder, and upper respiratory 

infections. Arkansas worked closely with providers at the state level to develop the new payment 

incentives, and achieved regulatory approval at both the state and federal level this past summer. CMS' 

support for Arkansas' initiative is noteworthy. Arkansas was able to obtain approval from the Centers 

for Medicaid, CHIP and Survey and Certification (CMCS) for the new payment mechanisms through the 

standard Medicaid state plan amendment process in less than 90 days despite the ground-breaking 

nature of the changes, which introduce both positive and negative financial incentives associated with 

high-quality and efficient use of services. The nature of the amendments that were ultimately approved 

could serve as a model for other states, and greatly streamlines future additions to Arkansas' payment 

reforms (and there could be dozens if not a hundred or more to come). To help states transform their 

Medicaid programs and set Medicaid on a sustainable path, the pace and scale of such innovation will 

need to increase significantly -- potentially stretching the boundaries of current federal law, regulations, 

poliCies, and approval process. 

Reduced state spending on uncompensated care for the uninsured: If Medicaid expansion is approved, 

approximately 250,000 additional Arkansans will have a payer for their care; consequently, 

uncompensated care provided by state agencies outside of Medicaid should substantially decline. 

Program areas affected may include health costs for state prisoners, state subsidies to community 

health centers and community mental health centers, and (unmatched) state funding of the University 

of Arkansas for Medical Sciences hospital that helps them close the gap on unfunded care. DHS 

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estimates that offset savings for state spending on the uninsured will total $22 million in savings starting 

in 2014 and will rise to $58 million by 2019 and years thereafter. 

Additional tax revenue: Arkansas' decision to expand Medicaid under the ACA would carry with it 

significant macroeconomic consequences for the state. Without the expansion, federal Medicaid 

payments to the state (e.g., as reimbursement for added state reimbursements to providers) will be 

approximately $800 million less than they would be if the state did choose to expand Medicaid. 

Conversely, if the state legislature approves the expansion, federal Medicaid payments to the state are 

expected to grow by around $800 million. Given Arkansas' small size versus the Federal tax base 

approximately 1% of ali federal revenues associated with the added federal Medicaid payments would 

come from Arkansas taxpayers -- Federal Medicaid payments are treated in DHS' estimates as if they 

came from taxpayers in other states. Put simply, Arkansas' economy will be hundreds of millions of 

dollars larger if it chooses to expand Medicaid, and this economic expansion will have some impact on 

state tax revenue. To estimate the impact of additional federal Medicaid payments on Arkansas' 

economy and tax receipts, the Department made the simplifying assumption that each new federal 

dollar entering the state's economy through the Medicaid program during a fiscal year would be taxed 

once at an average rate of 4%. A more sophisticated analysis would have more carefully identified the 

proportion of federal dollars that would, through increased Medicaid reimbursements and 

administrative costs, accrue to Arkansas businesses and individual taxpayers as income, the rate of 

income taxation applied, the consumption rate of spending for those businesses and individuals, and the 

subsequent rate of state taxation of that consumption spending, including a reasonable assumption 

about the number of times a new federal dollar might cycle through to new tax-paying entities (Le., the 

"multiplier" effect). In lieu of such a sophisticated analysis, the Department instead made the very 

conservative assumption that the new federal payments would not cycle, and would be taxed just once 

as income at an average rate of 4%. The 4% tax revenue assumption generates a savings to the state of 

over $13 million in 2014 and in excess of $30 million in state general savings in years thereafter. 

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Mr. BURGESS. The gentleman’s time is expired. 

I would note that there is still over 7 minutes left on the vote 

on the House floor, so if it is agreeable with everyone, we will start 

with questions. I would ask that members who feel it necessary to 

leave because they are so slow that it takes them 7 minutes or over 

7 minutes to get to the floor, that we do leave quietly, but the committee will remain in session and we will recess when there is literally no time left on the votes. 

So I will start with myself, and Director Cohen, if I could, sir, 

I ask you, on November 26 of this year, Health and Human Services released the long-awaited rule detailing the essential health 

benefits that must be covered by any health plan offering a plan 

in the PPACA exchange. While I understand this rule has farreaching consequences on health care premiums, benefits that 

must be provided to those newly eligible for Medicaid and Federal 

and State budgets. Now, according to the notice in the Federal Register, the rule was approved at the Centers for Medicare and Medicaid Services by Administrator Tavenner on August 1, 2012. That 

is 3 months before. Yet the rule did not receive approval from Secretary Sebelius and the Office of Management and Budget until 2 

weeks ago. So what this committee would like to know is, why did 

it take nearly 3 months for the administration staff to conduct 

technical work and review and yet the public will have only 4 

weeks to review during this period of public comment on the rule 

that was issued on November 26? And I would also note that this 

is a time of year where people’s focus is generally on things other 

than long-awaited rules. So can you speak to that, sir? 

Mr. COHEN. Thank you, Chairman Burgess. I would be happy to. 

You know, we put out a bulletin on the essential health benefits 

quite some time ago and got comment on that bulletin and so the 

public and interested parties had an opportunity to provide public 

comment on essential health benefits before the proposed rule was 

put out. There were some changes in the proposed rule from what 

had been in the bulletin but by and large what is in the bulletin 

is what is in the proposed rule, so actually I think there has been 

ample opportunity for the public to comment on the rule, and they 

will have the additional formal comment period as you mentioned. 

Mr. BURGESS. So it is your opinion that Wisconsin, Pennsylvania 

and Louisiana had actually during that 3-month hiatus from the 

time the rule left HHS and circulated through OMB and came 

back, they actually knew what the rule was going to be and could 

be confident that they knew what the rule was going to be and 

could begin to make their plans accordingly? 

Mr. COHEN. They had the bulletin, which laid out our approach 

to essential health benefits using the benchmark approach, which 

basically said as the law does that essential health benefits are 

based on what is in a typical employer plan and they knew that 

the State had the option to choose from a range of available benchmark plans. Yes, they knew that. 

Mr. BURGESS. All right. I didn’t plan to ask this question, but 

Mr. Smith, can you tell us, was Wisconsin absolutely confident that 

what came out in August was circulated in a bulletin or a pamphlet was going to be what the rule eventually would be? 

131 

Mr. SMITH. Well, again, I think we still have questions about 

what the essential health benefit package is. 

Mr. BURGESS. Thank you. I accept that as your answer. That is 

going to be a no. 

So let me just ask you, Mr. Cohen, on November 20th, a paper 

that I don’t normally read that is called the New York Times— 

some people have heard of it—published an article by Robert Pear 

that the essential health benefits rule had been delayed—I am 

quoting here—‘‘had been delayed as the administration tried to 

avoid stirring up criticism from lobbyists and interest groups in the 

final weeks of the presidential campaign.’’ Now, that is accurate 

that there was a presidential election between August 1, 2012, and 

November 26, 2012. That is a fair statement, is it not? 

Mr. COHEN. Yes. I believe President Obama was reelected. 

Mr. BURGESS. Well, that being the case, was the rule delayed so 

as not to interfere with that happy occasion that you just referenced? 

Mr. COHEN. I am not aware of what Mr. Pear’s sources might be 

for that and I am not aware that that happened, no. 

Mr. BURGESS. Well, certainly for, you know, those of us who were 

preparing to lay down in the Elysian Fields of the Affordable Care 

Act, it did strike us as strange that the rule was available for discussion in August but not published as a rule until after Election 

Day, and not just under the auspices of the Affordable Care Act, 

there does seem to be a regulatory push now out of several Federal 

agencies to get things moving and up off the deck now that the 

election is settled. I know that—I am not cynical but, you know, 

there are people in Washington who are and would look at that 

and, again, I don’t read that newspaper, but apparently they felt 

that there was some relationship. 

Thirty-three months delay on the fundamental rule necessary for 

the operation of these exchanges does cause some of the people who 

are cynical in this town to repeatedly ask the question: what is the 

holdup? And this an important deal what you all are doing and it 

does seem to be—it appears to me that it is possible that these cynical people could be correct, that it was held up for political reasons. 

So what I am saying to you is, we are going to have a series of 

questions, and it is too long to go into here but I would appreciate—it has been hard to get information out of your agency, in 

all honesty, sir. The Governors have had trouble. Members of Congress have had trouble. I would appreciate the expeditious handling of those questions when they come to your attention. 

Mr. COHEN. We will do the best we can. 

Mr. BURGESS. My time is expired. All right. The vote on the floor 

is a motion to instruct conferees on the National Defense Authorization Act. The committee will stand in recess and will convene 

immediately after the last vote. 

[Recess.] 

Mr. BURGESS. The committee will reconvene. The committee is 

reconvened, and the Chair recognizes the ranking member of the 

subcommittee, Mr. Pallone of New Jersey, 5 minutes for questions, 

sir. 

132 

Mr. PALLONE. Thank you, Mr. Chairman. The title of this hearing is: ‘‘State of Uncertainty: Implementation of PPACA’s Exchanges and Medicaid Expansion.’’ I want to say, Mr. Chairman, 

that I think the title is provocative and I think it does a disservice 

to the progress and the people of this country with regard to the 

ACA. The fact is, the ACA has prevailed and it is the law of the 

land. It means that people have already experienced positive 

changes from the Affordable Care Act, whether it is through the 

elimination of lifetime limits, the ability to stay on their parents’ 

health insurance plan, coverage of preventative benefits with no 

cost sharing. Lower prescription drugs costs are another provision 

of this law. In any case, the Affordable Care Act is improving the 

lives of Americans already, and over the next decade, 30 million 

Americans who otherwise would be uninsured could have access to 

health care. Millions more will be put in charge of their health care 

as opposed to being at the mercy of insurance companies and the 

arbitrary limits and fine print denying coverage for critical services 

or overly burdensome cost sharing. And States have the options of 

flexibility to help make this a reality for their residents, and CMS 

has been working with those States that have been ready and 

wanting to move forward and make this work. 

My questions are to Mr. Cohen and Ms. Mann. Critics have cited 

a dearth of information, lack of answers, an inability to move forward. You have heard that from some of the other panelists. Can 

you talk about your outreach efforts to States, the engagement 

with them, the types of assistance you have provided over the past 

2 years? 

Mr. COHEN. Thank you, Ranking Member Pallone. I am happy 

to do that. 

Just in 2012 alone, CCIIO has hosted 119 different events of different kinds for States that total approximately 215 hours of technical assistance. We have done 69 webinars that over 3,000 State 

people have participated in. We had 48 teleconferences. Over 2,500 

State workers have participated in those. And we have held two inperson conferences where people have come in, over 1,000 

attendees have come to those, so we have been—in addition to that, 

we are on the phone literally every day with people from the States 

helping them, answering their questions, and enabling them to 

move forward. 

Mr. PALLONE. I appreciate that. 

Ms. Mann, and then I want to ask Dr. Sharfstein. 

Ms. MANN. Sure. Thank you, Mr. Pallone. You know, I think it 

has been a very different experience than past experiences in CMS 

where you usually put out guidance, put out regulations and hope 

for the best. We have been very aggressive with our partners at 

CCIIO to reach out to States and to bring them in partly for our 

decision-making and certainly for their decision-making as they are 

going forward by topic, by groups of States as well as very much 

individually. We do gate reviews on their systems developments individually with States. We do that together with CCIIO so that we 

are providing some coordinated technical assistance and support. 

We have pulled together work groups and learning collaboratives 

of groups of similar interest so that we can help them think about 

how to problem-solve with respect to the issues that are utmost in 

133 

their minds, and we have provided and increasingly are providing 

different tools for them so that as they are moving forward looking 

at our regulations, looking at our guidance and thinking about how 

to implement, they have easier ways of doing it than if they just 

reinvented the wheel and did it on their own. 

Mr. PALLONE. All right. Thank you. 

Dr. Sharfstein, can you talk about the interactions you have had 

with the Centers for Consumer Information and Insurance Oversight in preparing your State-based exchange for Maryland? 

Mr. SHARFSTEIN. Sure. We have had a terrific interaction. There 

are regular opportunities for all States that we have taken advantage of, and we have regular consultation, and what we have been 

really impressed with is that both CCIIO and CMS have really met 

us where we are on a particular issue. Sometimes it is general 

help. Sometimes it is very, very specific. And they have been really 

willing to move at the speed that we are moving on a particular 

issue and work together across organizations. So from Maryland’s 

perspective, the assistance we have gotten from HHS and the spirit 

of cooperation and support has allowed us to really customize implementation in a way we think works for our State. 

Mr. PALLONE. Thank you. 

I am going to try to get a question in to Mr. Allison. Despite 

claims to the contrary, the ACA was fully paid for when passed, 

and if repealed would actually increase this country’s budget deficit 

by more than $100 billion, and the ACA contains strong cost-containment measures aimed at reducing health care costs the right 

way by improving care. I was interested in Arkansas’s payment reform efforts. It seems aligned with the activities of the Center for 

Medicare and Medicaid Innovation. Could you tell us a little more 

about these payment reforms and how that would bring down 

costs, not just slash benefits or cost-shift? 

Mr. ALLISON. Yes, absolutely. We believe in Arkansas that the 

incentives that we face and the activities that we are engaged in 

and our payment improvement initiative are wholly aligned with 

the objectives of the Center for Medicare and Medicaid Innovation, 

CMMI. We are engaged in moving away from fee-for-service in 

order to pay for outcomes in health care instead of the process that 

we currently pay for. We are paying for team-based outcomes. We 

are engaged in population-based reforms. We are looking for patient-centered care, and if we look for that, that means we are 

going to have to pay for it. We haven’t done that in the past, and 

we are engaged in dramatic and sweeping changes working also 

with our private health insurance partners in Arkansas. We have 

worked very closely with CMS to make the first of these changes 

implementing in October through our State plan, not through waiver, an incentive-based episodic treatment payment reform that 

incentivizes for ADHD, for perinatal care and for upper respiratory 

infection, concentrated accountability and incentives for team-based 

care, and that happened very quickly and we appreciate CMS’s 

support in that. 

Mr. PALLONE. Thank you. 

Mr. BURGESS. The gentleman’s time is expired. I recognize the 

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

134 

Mr. SHIMKUS. Thank you, Mr. Chairman. Thanks for being here. 

When you hear both sides, it is kind of like a Jekyll and Hyde. Will 

this turn out to be the Jekyll or will this turn out to be the Hyde, 

and I don’t think we really know yet, unfortunately. 

The Patient Protection and Affordable Care Act implies that 

health insurance will be affordable in the exchanges. The claim put 

forth was that if you like your insurance, you can keep it, and that 

health care costs would go down. That is how it was sold to us, 

most of us, some of us reading the bill but most of us passing the 

bill before we could read it. The CMS recently proposed a 3.5 percent fee on all plans offering plans in a Federal exchange. Are you 

afraid this fee will get passed on directly to individuals and families purchasing coverage in your State? And this is a question for 

Mr. Smith and Mr. Greenstein and Mr. Alexander, and if you could 

be short, because there is a couple more questions I want to ask. 

Mr. SMITH. Well, they will be passed not only on to the purchaser 

in the exchange but these also apply to Medicaid managed care 

plans as well, so there is a direct impact on the State budget for 

these new fees. 

Mr. SHIMKUS. So more costs? 

Mr. SMITH. Yes, sir. 

Mr. GREENSTEIN. Yes, it puts these plans at a competitive disadvantage as well, and we fully expect that those costs get passed 

on rather than absorbed with already small margins for the plans 

that participate, at least in Medicaid managed care. 

Mr. SHIMKUS. Great. Mr. Alexander? 

Mr. ALEXANDER. The short answer is yes. I think I would concur 

with my colleagues. 

Mr. SHIMKUS. Great. I appreciate the shortness of those answers. 

Mr. Cohen and Ms. Mann, do you know what our national debt 

is right now? Just the national debt. It is on every debt Web site 

in the world. Sixteen trillion dollars. Do you know what our deficit 

spending of this country has been the last 4 years? In essence, how 

much we have spent more than we have taken in? You don’t know. 

Do you know? 

Ms. MANN. I don’t have that information right here. 

Mr. SHIMKUS. OK. Mr. Cohen, do you know? 

Mr. COHEN. I don’t know the exact number. 

Mr. SHIMKUS. Well, in 2009, it was $1.4 trillion. In 2010, it was 

$1.2 trillion. In 2011, $1.3 trillion. That is more spending than we 

have taken in. In 2012, I don’t know, $1 trillion. Already this year, 

first quarter, first two months, $292 billion more in spending than 

we have taken in, which if you push that through to the full year, 

it is probably $1.7 trillion additional deficit added to the $16 trillion debt. That is part of this debate because Medicare and Medicaid are entitlement programs, and that is part of the reason why 

we are going to be here until Christmas and New Year’s and have 

all the battles. 

Let me go to just—again, for Mr. Smith, Mr. Alexander and Mr. 

Greenstein, and this is really about the State of Illinois now. Estimates from earlier this year have the State of Illinois unpaid bills 

growing to $34 billion in 5 years. That will be $2 billion more than 

Illinois’s total projected revenue that year. The biggest problem? 

Can you guess what the biggest problem is, Mr. Smith? 

135 

Mr. SMITH. Medicaid. 

Mr. SHIMKUS. Mr. Greenstein? 

Mr. GREENSTEIN. Medicaid. 

Mr. SHIMKUS. Mr. Alexander? 

Mr. ALEXANDER. Medicaid. 

Mr. SHIMKUS. Illinois’s Medicaid has been on an unsustainable 

path for years and expected to increase more than 40 percent over 

the next 5 years to about $12 billion by 2017. Overall, this will create an estimated $21 billion in Medicaid payment backlogs, and 

this figure doesn’t even factor in the unknown additional costs from 

new Medicaid requirements from—what would you guess, Mr. 

Smith? 

Mr. SMITH. Medicaid. 

Mr. SHIMKUS. From the new health care law and the Affordable 

Care Act. Mr. Alexander? 

Mr. ALEXANDER. I concur. 

Mr. SHIMKUS. What do you believe will be the result for Medicaid 

providers and patients if these backlogs remain? What do you 

think, Mr. Smith? 

Mr. SMITH. Well, again, I think we have been looking at what 

happens to the Medicaid rates themselves. We are expecting to 

have to—again, I know there is a lot of discussion about the FMAP 

for the newly eligibles, but this affects the entire program. Otherwise we will not have providers who will see Medicaid payments 

unless the rates go up. 

Mr. SHIMKUS. Mr. Greenstein? 

Mr. GREENSTEIN. Yes, I worry about the participation in Medicaid from the provider perspective, but I also worry about programs like education that get crowded out within the context of the 

State’s budget because we continue to consume a greater proportion of the overall budget in our health care costs. 

Mr. SHIMKUS. Mr. Alexander? 

Mr. ALEXANDER. I concurred with the last one, so I was going to 

say I concur, but I would like to just add to Mr. Greenstein’s that 

the crowding out of other priorities is extremely important for 

Pennsylvania infrastructure. It’s extremely important in transportation. So the growth of these programs growing to 10 percent 

while revenues are growing at 2 percent keep crowding out education, transportation and thus have a direct impact on jobs. 

Mr. SHIMKUS. Thank you very much. Yield back my time, Mr. 

Chairman. 

Mr. BURGESS. I thank the gentleman for yielding. The Chair now 

recognizes the gentlelady from California, Ms. Capps, for 5 minutes 

for the purposes of questioning. 

Mr. WAXMAN. Mr. Chairman. 

Mr. BURGESS. The Chair recognizes the ranking member of the 

full committee, Mr. Waxman. I am sorry. I didn’t see you sitting 

there. 

Mr. WAXMAN. Thank you, Mr. Chairman. I thought I was next. 

Medicaid is an expensive program but we have a lot of people 

who are very poor in this country, and we can save a lot of money 

if we didn’t give them health care. Now, I suppose, Mr. Smith, Mr. 

Greenstein and Mr. Alexander, you think the way to solve the MedVerDate Aug 31 2005 15:01 Jan 16, 2014 Jkt 037690 PO 00000 Frm 00139 Fmt 6633 Sfmt 6633 F:\112-00~1\112-18~2\86248K.TXT WAYNE
136 

icaid problem is to put it in a block grant. Is that correct? Mr. 

Smith, do you like a block grant? Yes or no. 

Mr. SMITH. Yes. 

Mr. WAXMAN. Mr. Greenstein? 

Mr. GREENSTEIN. If given the choice, I would take it, gladly. 

Mr. WAXMAN. Mr. Alexander? 

Mr. ALEXANDER. Absolutely. 

Mr. WAXMAN. OK. You three would like a block grant on Medicaid. That simply shifts the costs. So the States can cut back on 

services for these people and the disabled and poor will go without 

health care. Your idea is not going to succeed. That was one of the 

issues in the presidential campaign, and you lost. 

So we have Medicaid, and let us accept that fact. You are running the programs. You ought to be supporting the program you 

are running in your States. The Medicaid expansion in the Affordable Care Act is a tremendous step forward for our health care system, and it is going to improve the lives of tens of millions of Americans. The expansion will dramatically reduce uncompensated-care 

costs in States around the country. It will provide States with extremely generous enhanced match rate from the Federal Government. We crafted this piece of Affordable Care Act to ensure that 

Medicaid expansion would not only be good for Americans’ health 

but for the health of State budgets. 

And a new report from the Kaiser Family Foundation shows just 

how beneficial this expansion will be to States around the country. 

The report found that over the next decade, with the Federal Government paying for well over 90 percent of the cost, Arkansas will 

reduce its uninsured population by nearly 150,000, Louisiana by 

270,000, Maryland by 140,000, Pennsylvania by over 310,000, and 

Wisconsin by nearly 125,000. I doubt that a block grant would accomplish those goals. The report also found that these States could 

dramatically reduce uncompensated-care costs through the Medicaid expansion, over $25 million in savings in Arkansas, over $260 

million savings in Louisiana, nearly $180 million in savings in 

Maryland, over $875 million in Pennsylvania that would be saved, 

nearly $250 million in Wisconsin. These are big, staggering, impressive numbers. 

But even more impressive is the fact that in two of the States 

here today, the report found that given the generous Federal match 

rate expanding Medicaid and dramatically reducing the number of 

uninsured would actually decrease the State’s overall Medicaid 

budget, saving an additional $250 million in Wisconsin and $1.75 

billion in Maryland. 

Mr. Allison, I assume you can talk about the importance of engaging in a detail that factual comprehensive analysis of the Medicaid expansion in Arkansas and the conclusions it led you to. You 

think it is going to be a good deal for your State, don’t you? 

Mr. ALLISON. I believe it is going to be a very good financial deal 

for the State of Arkansas. 

Mr. WAXMAN. Well, these expansions are going to be a good deal 

but it seems to me that the three witnesses in the center of the 

table have an ideological view that they would like the world 

redone. 

137 

Now, the Affordable Care Act is a pretty important piece of legislation, and Dr. Sharfstein, since your exchange planning is well underway, I understand that insurance companies are sending in a 

great number of letters saying they want to sell insurance in the 

exchange. And I am curious to know, are you concerned that insurers won’t show up or do you think they are going to show up? What 

are you seeing so far? 

Mr. SHARFSTEIN. We asked insurers in Maryland to send letters 

of intent to participate in the exchange, and we have gotten more 

insurers interested than actually serve the Maryland market now. 

So we think that under the Affordable Care Act in 2014, it is going 

to be drawing new insurers in Maryland including, you know, plans 

that are very focused on better health, improved value, and it is 

going to be a real positive for the market in the State. 

Mr. WAXMAN. Well, it just shows, if we have more insurance 

companies willing to offer insurance policies, the competitive model 

for the consumer choice is going to be more successful under those 

circumstances. I submit that the competitive model that Mr. Greenstein indicated he would like to see, which is called a consumer 

market-driven health care reform, is not going to work for Medicaid 

patients. Nobody is going to be vying for those Medicaid patients 

and all the range of services that Medicaid provides. 

The ACA has been law for nearly 3 years now. It has an impressive list of accomplishments, and the basic reforms are still ahead 

of us. After full implementation, over 30 million American uninsured will get quality, affordable care, etc. But the point I want to 

make is that many of us fear that the purpose of this hearing is 

simply to say that we can’t move forward, we can’t implement the 

law, that somehow we don’t have the information needed to do it. 

That is flat-out wrong. It seems to me this is just the latest approach to try to undo the Affordable Care Act. Republicans have 

failed to repeal the law. They didn’t want to pass it in the first 

place. Then they wanted to repeal it. They didn’t win the presidential election. They didn’t find that the law was declared unconstitutional. Let us not buy into this next line of attack that the law 

must be delayed. Let us recognize that we have got a law. Whether 

you wanted it or not, it is the law of the land. Many of us think 

it is going to do a lot of good. We are seeing a great deal of success 

already, and I think this hearing is just fitting for this Congress. 

It is a Groundhog Day Congress over and over and over again— 

‘‘It can’t work. We can’t do it. We can’t afford to cover people. Our 

debt is too great.’’ Well, let us make this thing work. 

Mr. BURGESS. The gentleman’s time is expired. 

Mr. SMITH. May I respond, Mr. Chairman? 

Mr. BURGESS. Please. 

Mr. WAXMAN. Wait a second, Mr. Chairman. If we are going to 

have the witnesses start responding, then I am going to be able to 

respond to them, I presume. My time is expired. I had the opportunity to use my time as I saw fit, and I don’t think this is an 

open-ended question to have witnesses respond, unless you guarantee that I can come back and respond to them. If you want to 

open the hearing up to a two-way exchange, I am willing to do 

that, but you do have other members waiting to be recognized. 

138 

Mr. BURGESS. I do think as a matter of courtesy that we ought 

to allow our witnesses to respond. That has long been the practice 

in this committee. But as the ranking member sees difficulty with 

that, we will recognize Mr. Murphy and perhaps Mr. Smith, if you 

will hold that thought, we will get a chance for you to visit with 

us. 

Mr. Murphy, you are recognized for 5 minutes for questions, sir. 

Mr. MURPHY. Thank you, Mr. Chairman. 

Mr. Alexander, you are from Pennsylvania and so am I, and you 

recognize that this is the law of the land, the Affordable Care Act? 

Am I correct on that? 

Mr. ALEXANDER. Yes. 

Mr. MURPHY. Are you trying to stop or undo its implementation? 

Mr. ALEXANDER. I don’t think anyone is trying to stop anything. 

I think we are trying to make sense of it. 

Mr. MURPHY. So let me ask you a number of things you said in 

your testimony, I want to ask you about that. You identified a 

number of problems that Pennsylvania is having, and certainly the 

other witnesses are welcome to respond to these too, but a number 

of those key ones, I wanted to ask about. You had mentioned that 

we have the CHIP program, the Children’s Health Insurance Program, in Pennsylvania. I know when I was a State senator, I 

worked on that as well. And you feel that actually works in a less 

costly manner and has good quality in the program. Is this something that you are able to ask—according to the law, are you able 

to ask for a waiver to use that instead of the other program right 

now as the law stands? Do you know? 

Mr. ALEXANDER. I don’t know of any waiver to be able to make 

that change. 

Mr. MURPHY. Is that something you would recommend that Congress address in terms of allowing for waivers? 

Mr. ALEXANDER. I think so. I think if things are working in the 

State, they should be kept that way, and especially if recipients are 

happy. 

Mr. MURPHY. Ms. Mann, are you aware, are States allowed any 

waivers for programs like that if they have a problem they think 

is working well? 

Ms. MANN. There is a wide range of waivers that are available 

for States. One of the things about the changes in the law that 

brings the CHIP kids over into the Medicaid program is right now 

their younger siblings are already eligible for Medicaid, so one of 

the reasons for the changes is to put families together. Right now 

we have children in the same family, same income—— 

Mr. MURPHY. I appreciate that. I am not opposed to bringing people together. 

Ms. MANN [continuing]. They are in different programs, depending upon their age. 

Mr. MURPHY. I know when we did the prescription drugs bill for 

Medicare, Pennsylvania already had a program for that and we 

were able to work in legislation to make sure that they did work 

smoothly, so that might be something we might want to work on 

in the future, and I would certainly hope that you can get together 

with Mr. Alexander. 

139 

Mr. Alexander, you also said you can’t use an asset test. What 

do you think is the benefit of having an asset test and what do you 

see in the law that restricts that? 

Mr. ALEXANDER. Well, an asset test is a program integrity tool 

to be able to ferret out if families or individuals have high incomes 

or assets that would—not incomes but assets that would—that they 

shouldn’t be on the program. So for example—— 

Mr. MURPHY. Such as? 

Mr. ALEXANDER. So for example, if somebody, you know, owned 

a large home and cars and they had these assets or specific accounts, we would be able to utilize them, the same way we do with 

the food stamp program. 

Mr. MURPHY. So you would like those same rules to be able to 

be applied? 

Mr. ALEXANDER. It should be an option. It was an option prior 

and it should be an option. 

Mr. MURPHY. Would you see similar things with regard to presumptive eligibility as another way of making sure that people who 

need these programs are eligible? 

Mr. ALEXANDER. It is another program integrity measure to be 

able to—presumptive eligibility would presume that people are eligible. We still don’t have guidance from CMS as to who would be 

on the hook for that money if these individuals later on are found 

not eligible. Would the State be paying that bill? Would the Federal Government be paying that bill? I don’t think anybody should 

be paying that bill. 

Mr. MURPHY. And I’m assuming you would ask for the same sort 

of assistance with what you referred to as adoption of passive Medicaid renewals, duplication of efforts, one-size-fits-all? Are you asking, Congress, Mr. Secretary, that one of the things we should do 

is either find out if we are missing something in the law to clarify 

that and in absence of that to look to this committee to pass some 

laws or rules that would help you do that so you are not adding 

to your costs if you are able to do things better? 

Mr. ALEXANDER. I think that would be very helpful. The more 

you engage the States, the better. We are on the ground. We know 

how to run these programs, and I think that the more information 

you have from all of the States be very important. The purpose in 

these programs is to provide quality care to low-income individuals, 

and we at the State level have to be vigilant in terms of being able 

to prevent people that have the ways and means to provide for 

themselves. 

Mr. MURPHY. Thank you. 

Mr. Smith, do you have any comments on those questions? 

Mr. SMITH. I would agree with Secretary Alexander. I think he 

summarized them very well. 

Mr. MURPHY. Thank you. 

The other witness, Mr. Greenstein? 

Mr. GREENSTEIN. Sure. I would echo that sentiment in that every 

day with a finite budget, at least in our State, we don’t have the 

option to run large deficits so we have to balance our budget every 

year, and that if there are resource decisions to make on how we 

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140 

cused on the people that need them the most rather than those 

that have the means to pay for part of the care themselves. 

Mr. MURPHY. Thank you. I see I am out of time. 

Mr. Chairman, I would hope you would ask the witnesses who 

have some specific recommendations that we might do some legislative actions that they would submit to you in writing some of 

those recommendations. And with that, I yield back, sir. 

Mr. BURGESS. The record will remain open for 5 legislative days 

for witnesses to submit. 

The Chair recognizes the chairman emeritus of the full committee, Mr. Dingell. 

Mr. DINGELL. Mr. Chairman, I thank you for your courtesy. 

Mr. Cohen, we appreciate you being here this morning, and I 

have the following questions to be answered yes or no. Recently we 

have heard a lot of talk about a $63 ACA fee that will go into the 

Reinsurance Fund. In your opinion, is this a tax? Yes or no. 

Mr. COHEN. No. 

Mr. DINGELL. It is not in the U.S. Internal Revenue Code. Is that 

right? 

Mr. COHEN. Correct. 

Mr. DINGELL. So we can call this a fee as opposed to a tax. Is 

that right? 

Mr. COHEN. Yes. 

Mr. DINGELL. Now, CMS had the authority to set this free 

through Section 1341 of ACA. Is that true? 

Mr. COHEN. Yes. 

Mr. DINGELL. Now, Mr. Cohen, this section does not set the perinsured fee, instead, it sets out a total amount to be raised. Is that 

right? 

Mr. COHEN. Yes. 

Mr. DINGELL. This fee will be $63 in 2014, lower for 2015 and 

2016. Is it true that this fee is short term and will end after the 

total amount is realized in 3 years? 

Mr. COHEN. Yes. 

Mr. DINGELL. Now, Mr. Cohen, I happen to be just a poor Polish 

lawyer from Detroit so I want to make sure I understand this correctly. The fee goes into a Reinsurance Fund that will stabilize premium costs in individual insurance markets. Is that correct? 

Mr. COHEN. Yes. 

Mr. DINGELL. Now, Mr. Cohen, this will help ACA to provide 

funds to insurance companies who deal with a large amount and 

a large number of vulnerable populations, those with serious preexisting conditions and high health care costs. Is that right? 

Mr. COHEN. Yes. 

Mr. DINGELL. So essentially it is a reinsurance fund. Is that 

right? 

Mr. COHEN. It is. 

Mr. DINGELL. Now, Mr. Cohen, this fee will lower insurance premiums in the individual market because insurers will not have to 

factor in the costs of disproportionate high costs of enrollment of 

high-risk patients. Is that correct? 

Mr. COHEN. Yes. 

Mr. DINGELL. And isn’t it true that this in turn will benefit employer plans and employees with stable prices because they will no 

141 

longer have to pay for the cost shift that occurs when there are 

people out there without the insurance or the means to pay for 

health care? Yes or no. 

Mr. COHEN. Yes, it will. 

Mr. DINGELL. Now, at the end of the day, this fee guarantees 

those in dire need of insurance or constituents with preexisting 

conditions are covered and by so doing we actually lower and stabilize the cost of health care for all of our citizens. Is this correct? 

Mr. COHEN. Yes. 

Mr. DINGELL. Thank you, Mr. Cohen. 

Now I want to say a few things, Mr. Chairman. We have the law 

of the land, the Affordable Care Act, and I am hearing no end of 

carping and complaining about it, but the hard and simple fact of 

the matter is that the health care costs in this country are running 

away from us and will destitute the Nation. We have to do something to get it dealt with. We have to get all the people covered and 

we have to see to it that we deal with the problems of inadequate 

health care for our people in the future. This is a very serious matter. It is going to attack almost every single program including 

Medicare and Medicaid, and the costs that the State are being compelled to meet with regard to Medicaid. 

I find myself very distressed because I feel that I am kind of in 

the company of a bunch of people who are looking at the donut and 

seeing only the hole. You know, we confront a situation where we 

have to address these problems by making intelligent investments, 

and one of the things that I find that terrifies me is, we have got 

a lot of people in this country who can look and who can see the 

cost of everything but they can’t see the value of anything, and the 

value of what we are trying to do here is to see to it that everybody 

has health care, to see to it that the health care of this country is 

affordable and available to all of our people and to see to it that 

the people of this country have a system which makes available to 

the ordinary citizen the right of health care, and it is, in my view, 

a right. It is not a privilege. There are a lot of people around here 

who seem to look at it as a privilege and they will do everything 

they can to save money on seeing to it that some other poor bastard doesn’t have health care. So I am hopeful that we will look 

at this as an investment in the future of the country and that we 

will try and do something to see to it that the health care in this 

country, which potentially is the greatest and the best in the world, 

is shared amongst the people and that they are not denied this and 

they are not dying because they don’t have health care. 

So I hope that this hearing will lead us to an understanding of 

these points, and I yield back the balance of my time. 

Mr. BURGESS. The gentleman yields back. At this time I recognize the gentleman from Louisiana, Dr. Cassidy, for 5 minutes for 

questions. 

Mr. CASSIDY. Just so folks now, we have had some effectively implied allegations that some of us don’t care about access to affordable care. I actually am a doctor who Tuesday and Monday will be 

in a safety-net hospital for the uninsured or the poorly insured, 

which includes Medicaid. And so just let us get that on the record. 

I have got lots of questions so hopefully I can run over. Mr. 

Cohen, I am not clear. Will CMS propose something about allowing 

142 

premiums to go into health savings accounts? Will that money of 

the premium which goes into the health saving account, will that 

be considered as regards the MLR? You follow what I am saying? 

So Medical Loss Ratio, will that—please. 

Mr. COHEN. Yes, it will be considered first-dollar coverage for 

purposes of the MLR to the extent that it is spent. 

Mr. CASSIDY. So if someone does not spend their money in their 

health savings account, the insurance company does not get credit 

for an expenditure as regards the MLR? 

Mr. COHEN. That is right. 

Mr. CASSIDY. So if somebody is frugal and doesn’t go and buy 

overpriced goods, does preventive medicine on their own, takes care 

of themselves, keeps their weight down, etc., the insurance company will be penalized? 

Mr. COHEN. No, they are not penalized. 

Mr. CASSIDY. But it won’t count against the MLR, and you are 

going to come back and take a portion of that and you are going 

to come back and make them rebate that cost. Is that correct? 

Mr. COHEN. Well, the Medical Loss Ratio provision of the 80/20 

rule requires that insurance companies spend 80 cents of every premium dollar on actual health care. If the money isn’t spent—— 

Mr. CASSIDY. Deposited in the HSA does not count as an expenditure, it is only if the patient spends the money. 

Mr. COHEN. Right. 

Mr. CASSIDY. So we are trying to hold down cost but we are basically putting in incentives to spend the money. By the way, it is 

hard to keep a straight face when Mr. Waxman speaks about access to affordable care. The only thing I have heard about this bill 

is that premiums have gone by $2,500 since it was passed. It is 

kind of curious, isn’t it? 

Dr. Sharfstein, only 65 percent of doctors in Maryland accept 

Medicaid patients. That is a statistic I can give you the source 

from, Health Affairs. How many of those Medicaid patients unable 

to find a primary care doctor seek their care in an emergency 

room? Do we know those statistics? Some States do know that statistic. 

Mr. SHARFSTEIN. I don’t know if I have a specific answer to that. 

Mr. CASSIDY. Then let me go on because I have limited time. I 

don’t mean to be rude to any of you. I apologize. 

Now, the issue is, in Maryland Medicaid, I presume there is no 

deductible. 

Mr. SHARFSTEIN. Correct. 

Mr. CASSIDY. Now, you all guys make out like a bandit. If I was 

a big blue State, I would be all for this expansion, because according to Kaiser Family Foundation, you are going to save $500 million over 10 years. Why wouldn’t you be for it? But let me put myself in the role of someone that I might be seeing Tuesday morning 

in a hospital if I were in Maryland instead of Louisiana. You are 

making 140 percent of Federal poverty level. The State grabs the 

money. Man, we are glad. It helps our budget. But now I am on 

the exchange. I have a $2,000 deductible. As Mr. Smith points out, 

I am paying $600 a year in a premium. Do we really think that 

family at 140 percent of Federal poverty can afford that $2,000 deductible? 

143 

Mr. SHARFSTEIN. Well, from my perspective, this has a lot to do 

with compared to what. Someone at—— 

Mr. CASSIDY. Compared to your current Medicaid plan. 

Mr. SHARFSTEIN. A hundred and forty percent, there is no access 

to Medicaid, so they have no—— 

Mr. CASSIDY. Well, I thought you said in your testimony that you 

have up to 200 percent of poverty level in your Medicaid plan. 

Mr. SHARFSTEIN. No, we do not. 

Mr. CASSIDY. Oh, then I misunderstood. 

Mr. SHARFSTEIN. For an adult. So they had no access. So we are 

able to give them affordable access through a subsidy. 

Mr. CASSIDY. Now, OK, let us just take that person at 140 percent. Do we really think they are going to be able to afford that 

$2,000 deductible? By the way, if I was an insurance plan, I would 

be moving to your State too. Now we have the Federal Government 

telling you you have to buy insurance. It isn’t competition; it is a 

forced market. Do we really think that family at 140 percent of 

Federal poverty can afford that $2,000 deductible? 

Mr. SHARFSTEIN. Well, we certainly think that there is a lot of 

value for them, and part of what we are going to be doing and what 

we are working with, so many people in Maryland, is to figure out 

how to develop an outreach plan that engages—— 

Mr. CASSIDY. Even though it is going to cost them $2,000? I tell 

you, I like Mr. Smith’s line. It is not a percentage, it is the dollar 

amount, and when you are at 140 percent of Federal poverty, 

$2,000 might as well be $50,000. 

Mr. SHARFSTEIN. It is not every family that has to pay $2,000. 

Mr. CASSIDY. Only if they access the insurance portion. 

Let me go to Mr. Allison—Dr. Allison. I am sorry. Dr. Allison, in 

your testimony, you mentioned that the State of Arkansas will 

have to come up with $500 million between January and June 14 

to implement this plan. Is that correct? 

Mr. ALLISON. That is not correct, sir. What will—— 

Mr. CASSIDY. That is your testimony. 

Mr. ALLISON. That is not what the testimony says. The testimony says that the legislature will have to appropriate $500 million for 

the second half of State fiscal year 2014. That would include, in 

this case, almost all Federal funding. 

Mr. CASSIDY. So that is going to be all Federal dollars? It won’t 

be State dollars? 

Mr. ALLISON. Almost all Federal funding. 

Mr. CASSIDY. OK. So they have to appropriate Federal dollars? 

Mr. ALLISON. Correct. 

Mr. CASSIDY. OK. That is interesting. And the economic aspect 

of this—by the way, let me just point out, the Kaiser Family Foundation study that Mr. Waxman had proposed is going to cost Louisiana $1.8 billion over 10 years, Arkansas $1.2 billion, and that is 

assuming that we don’t have to raise taxes on the Federal or State 

taxpayer to pay for this extra money, which is an assumption 

which seems a little silly. 

I am over time. I yield back. Thank you. 

Mr. BURGESS. I thank the gentleman for yielding back. The 

Chair now recognizes the gentlelady from California, Ms. Capps, 5 

minutes for the purposes of questions. 

144 

Mrs. CAPPS. Thank you, Mr. Chairman, and to all of our witnesses, thank you for your testimony today and for your availability. 

I want to give you, Mr. Cohen, just a minute to respond to the 

previous question Mr. Cassidy asked about the Medical Loss Ratio 

and the HSA contributions, but if you could be very brief? 

Mr. COHEN. So what we have said is that the 80/20 rule says insurance companies have to spend 80 cents of every premium dollar 

on care, so to the extent that the HSA dollars are actually expanded, they will be counted towards that 80 cents that the insurance company has to spend. 

Mrs. CAPPS. Thank you very much. 

I want to address some questions to you, Ms. Mann. The Affordable Care Act includes a provision that will bump up the payment 

for primary care providers in Medicaid to the rates we currently 

pay through Medicare. On average, this will improve primary care 

reimbursement by 67 percent on average nationally. In my State 

of California, the increase will be even more important, 113 percent 

increase for current reimbursement. Could you explain why raising 

primary care reimbursement for Medicaid providers is so important 

and how this will benefit patients but also the health care system 

as a whole, the role it plays? 

Ms. MANN. Of course. In the Medicaid program and in changes 

going on in the health care marketplace more generally, there is 

real appreciation of the value of primary care, and to avoid unnecessary high utilization of specialty care, to avoid catastrophic care, 

people need regular primary care preventive care, and what this 

primary care boost does is encourage more primary care practitioners to enroll in the Medicaid program, participate in the Medicaid program and to provide a greater share potentially of their 

hours of service to Medicaid beneficiaries. So we are very excited 

about the opportunity to expand and deepen access, particularly 

around primary care, and to reduce costs overall as a result. 

Mrs. CAPPS. Absolutely. I share your belief in that. As I understand it, the research on provider rates shows that States with 

higher rates have greater numbers of providers accepting new patients and States that have increased their rates have seen more 

providers willing to increase their participation. Given that, do you 

think that increasing rates to Medicare levels for primary care physicians with both increase the number of physicians participating 

in the program and allow some who are already participating to increase the number of Medicaid patients they see? That’s a big problem right now. 

Ms. MANN. I do think it will boost participation. I think there is 

a general agreement that it will boost participation. I do want to 

say that I think that rates are one of many factors that help us 

make sure we have good provider participation in the program but 

this will go a long way to assure greater participation, particularly 

in the needed area of primary care. 

Mrs. CAPPS. Thank you. And as you may know, there is a lot of 

talk from some in Congress that the Medicaid primary care payment bump should be used to pay for SGR. I have consistently 

voted to get rid of the SGR, and we even did so in the House 

version of health care reform. But this pay-for idea is frankly, in 

145 

my opinion, foolish. This would literally incentivize providers to 

take care of our seniors at the expense of the poor and the health 

care community, providers and patients alike, agree. You may have 

a comment on this, or I can move on and ask another question. 

Ms. MANN. I appreciate your support for assuring good primary 

care in the Medicaid program. Thank you. 

Mrs. CAPPS. Now, when States expand Medicaid under the Affordable Care Act, they pull in Federal dollars to provide health insurance to millions of people who don’t have it now. Right now 

these uninsured people are relying on health care safety-net providers and programs that are paid for by State dollars. Many of our 

States can’t afford to do this. Won’t States be able to actually save 

some significant dollars in their State health budgets on programs 

that pay for uncompensated care, on mental health savings, etc.? 

In fact, the net cost to State budgets of expanding Medicaid could 

be quite negligible, or even a net gain. Is that correct? 

Ms. MANN. I think that is absolutely correct. Different States 

have done their studies and different organizations have done studies, and it obviously varies by State but the amount of the increase 

overall under the Kaiser study that people have been citing today 

of the Medicaid expansion, just looking at the expansion, it is less 

than one-half of 1 percent in terms of the impact on States’ budgets, notwithstanding the big change in the number of people who 

would gain coverage, but then as you say, there’s offsetting savings. 

Uncompensated care will be reduced. And Governor Sandoval came 

out this week and supported the Medicaid expansion. One of the 

things he cited in Nevada is the reduction in State funding for 

mental health services that will no longer be necessary. Those were 

funded by the State to fill in the gap, and that gap will be filled 

through the Medicaid expansion. 

Mrs. CAPPS. Thank you very much for answering. 

And Mr. Chairman, as I close, I ask unanimous consent to enter 

the following letters into the record opposing this pay-for idea: a 

letter from the Family and Children’s Health Groups and Providers, a letter from the majority of our Nation’s physicians and a 

letter from the California Children’s Hospital. I request that these 

be submitted. 

Mr. BURGESS. Without objection, so ordered. 

[The information follows:] 

146 


86248.107

December 12, 2012 

Dear Senator/Congressperson: 

As organizations dedicated to the health of children, we respectfully urge you to protect access to health 

services for children by preserving current law's payment increase for primary care services financed by 

Medicaid. While our nation should be proud of the significant progress we have made in enrolling 

eligible children in Medicaid, guaranteeing that children have access to primary and specialty care has 

been much harder.' 

Section 1202 of the Health Care Education and Reconciliation Act requires state Medicaid agencies to 

reimburse specified participating physicians at Medicare rates for primary care services for two years. 

Regulations require that the increased payment include qualified primary care services furnished "under 

the personal supervision" of a physician, including those provided by nonphysician providers such as 

nurse practitioners and physician assistants. The policy is set to take effect in a matter of weeks on 

January 1,2013. 

The primary care payment increase is a critical step toward enhancing access to health care for the 

nation's children covered by Medicaid. Currently, on average, Medicaid reimburses pediatricians 30 

percent below Medicare rates for comparable services. While a number offactors have been found to 

deter or discourage provider participation in Medicaid, low payment consistently has been found to be the 

top participation barrier. In a recent survey, 74% of respondents rated "low provider payment" "very 

important" as a participation barrier.2 

Low payment rates have built significant barriers to provider participation in the Medicaid program and 

create concerns about the ability of children to access the medically necessary health care services they 

are entitled to under the program. Section 1202 applies to general pediatricians and pediatric 

subspecialists as physicians eligible for the payment increase. These physicians and nonphysician 

providers who work with them playa vital role in the provision of primary care services for children with 

the most complex health challenges. Their inclusion in the payment increase is essential to ensuring the 

greatest possible impact on improving access to care for children. 

We urge Congress to oppose any proposals that would eliminate the Medicaid primary care payment 

increase. Elimination ofthis policy would negatively impact access to care for children and further burden 

the Medicaid system. If we may provide further information or otherwise be of assistance, please contact 

Robert Hall at 202/347-8600 or RHall@aap.org. 

Sincerely, 

American Academy of Family Physicians 

American Academy of Ophthalmology 

American Academy of Pediatrics 

American College of Cardiology 

Association of Maternal & Child Health Programs 

Children's Hospital Association 

t "Although Medicaid and CHIP enrollment reached 54% of the total U.S. infant and child population in 2010 (up 

from 32% in 2000 according to CMS data), pediatricians' combined Medicaid and CHIP caseload increased merely 

3 percentage points to an average of 36% over the last decade, according to the AAP survey and a similar study 

conducted in 2000." See AAP News Vol. 33 No.7 July 1,2012, pp. 21 (doi: 1O.1542/aapnews.2012337-21). 

2 Ibid. 
147 


86248.108

Children's Advocacy Institute 

Children's Defense Fund 

Community Catalyst, New England Alliance for Children's Health 

Cystic Fibrosis Foundation 

Doctor!s for America 

Families USA 

Family Voices 

Foster Family-based Treatment Association 

Healthy Teen Network 

Medicaid Health Plans of America 

National Alliance of Children's Trust and Prevention Funds 

National Association of Social Workers 

National Coalition on Health Care 

National Partnership for Women & Families 

Nemours 

North American Council on Adoptable Children 

The Alliance for Children and Families 

The National Alliance to Advance Adolescent Health 

The Society for Social Work Leadership in Healthcare 

ZERO TO THREE 
148 


86248.109

December 5, 2012 

The Honorable John Boehner 

Speaker 

U.S. House of Representatives 

Washington, DC 20515 

The Honorable Eric Cantor 

Majority Leader 

U.S. House of Representatives 

Washington, DC 20515 

The Honorable Kevin McCarthy 

Majority Whip 

U.S. House of Representatives 

Washington, DC 20515 

The Honorable Nancy Pelosi 

Minority Leader 

U.S. House of Representatives 

Washington, DC 20515 

The Honorable Steny Hoyer 

Minority Whip 

U.S. House of Representatives 

Washington, DC 20515 

Dear Sirs and Madam: 

The Honorable Harry Reid 

Majority Leader 

U.S. Senate 

Washington, DC 20510 

The Honorable Richard Durbin 

Majority Whip 

U.S. Senate 

Washington, DC 20510 

The Honorable Mitch McConnell 

Minority Leader 

U.S. Senate 

Washington, DC 20510 

The Honorable Jon Kyl 

Minority Whip 

U.S. Senate 

Washington, DC 20510 

As organizations representing the majority of the nation's physicians, we write to express our strong 

opposition to proposals that would eliminate the Medicaid primary care payment increase that was 

recently finalized in a final rule issued by the Centers for Medicare and Medicaid Services (CMS) and 

scheduled to be implemented on January I. 

Elimination of this policy further burdens the already challenged Medicaid system of today. Patients will 

face obstacles to connecting with a patient-centered medical home and will be forced to rely on episodic, 

acute care services provided in other settings, foregoing the more cost-effective coordinated and 

preventive care services that primary care physicians provide. Policies aimed at improving access to 

physicians in the Medicaid program are strongly supported by our organizations because we understand 

that investments such as these lead to better quality of care for patients and decreased costs for state 

governments. 

The Medicaid payment increase ensures that Medicaid payments for eligible physician services in all 

states are no less than Medicare, independent of whether a state has chosen to participate in the Medicaid 

expansion authorized by the Affordable Care Act (ACA). By doing so, it will improve access to care for 

persons enrolled in both the existing Medicaid program and persons who may become newly eligible for 

Medicaid in states that accept the federal dollars to expand Medicaid. 

Over the past few years, our nation has taken significant steps towards improving access to health care for 

the uninsured and underinsured. A principal part of this effort has been the investment in primary care as 

the foundation of our nation's health care system. Expanding access to physicians, especially primary 
149 


86248.110

care physicians, is a priority for federal and state governments, as well as commercial insurance plans. 

Private and public health care systems are making this investment as a means of improving access to 

health care for patients and as a means of improving the overall quality and efficiency of care provided. 

Our members are dedicated to working individually and collectively to ensure that all patients, including 

low-income working families who depend on Medicaid, have access to needed primary care services. 

However, many physicians do not participate in the Medicaid program due to poor payment rates that, 

historically, are well below the actual costs of providing care. This results in reduced access to care for 

the most vulnerable patients and higher costs to federal and state governments. 

Although a principal goal of this Medicaid policy is to improve access to primary care, the policy also 

increases payments to many subspecialists in internal medicine and pediatrics, with the purpose of 

increasing participation and access to their services. 

A key to achieving our joint goals of ensuring increased access and improved quality is ensuring that 

Medicaid and Medicare payment policies are aligned with the access and quality goals established by 

public and private health care systems. The Medicaid payment increase is an important policy that 

attempts to better align payment rates with cost of care for primary care physicians, thus increasing access 

to primary care physicians for millions of Medicaid patients. 

We urge you to oppose elimination of the Medicaid primary care payment increase. 

Sincerely, 

Academic Pediatric Association 

Alliance for Academic Internal Medicine 

AMDA - Long Term Care Medicine 

American Academy of Allergy, Asthma & Immunology 

American Academy of Family Physicians 

American Academy of Neurology 

American Academy of Orthopaedic Surgeons 

American Academy of Pediatrics 

American Association of Clinical Endocrinologists 

American Association for the Study of Liver Diseases 

American College of Allergy Asthma and Immunology 

American College of Cardiology 

American College of Chest Physicians 

American College of Osteopathic Family Physicians 

American College of Osteopathic Internists 

American College of Osteopathic Pediatricians 

American College of Physicians 

American College of Rheumatology 

American Gastroenterological Association 

American Geriatrics Society 

American Medical Association 

American Osteopathic Association 

American Pediatric Society 

American Society for Blood and Marrow Transplantation 

American Society of Clinical Oncology 

American Socicty of Hematology 
150 


86248.111

American Society of Pediatric Hematology/Oncology 

Association of Medical School Pediatric Department Chairs 

Infectious Disease Society of America 

Joint Council of Allergy Asthma and Immunology 

MEDNAX National Medical Group 

National Physicians AlIiance 

North American Society for Pediatric Gastroenterology, Hepatology and Nutrition 

Pediatric Orthopaedic Society of North America 

Pediatrix Medical Group 

Renal Physicians Association 

Society for Adolescent Health and Medicine 

Society for General Internal Medicine 

Society for Pediatric Research 

Society of Hospital Medicine 

The Endocrine Society 

Medical Association of the State of Alabama 

Alabama Academy of Family Physicians 

Alabama Chapter, American College of Physicians 

Alabama Chapter, American Academy of Pediatrics 

Alaska State Medical Association 

Alaska Chapter, American College of Physicians 

Alaska Osteopathic Medical Association 

Arizona Medical Association 

Arizona Academy of Family Physicians 

Arizona Chapter, American College of Physicians 

Arizona Osteopathic Medical Association 

Arizona Chapter, American Academy of Pediatrics 

Arizona Society of the American College of Osteopathic Family Physicians 

Arkansas Medical Society 

Arkansas Academy of Family Physicians 

Arkansas Chapter, American College of Physicians 

Arkansas Osteopathic Medical Association 

Arkansas Chapter, American Academy of Pediatrics 

California Medical Association 

California Academy of Family Physicians 

California Chapter, American College of Physicians 

Osteopathic Physicians and Surgeons of California 

California Chapter 1, American Academy of Pediatrics 

California Chapter 2, American Academy of Pediatrics 

California Chapter 3, American Academy of Pediatrics 

Colorado Medical Society 

Colorado Academy of Family Physicians 

Colorado Chapter, American College of Physicians 

Colorado Society of the American College of Osteopathic Family Physicians 

Colorado Chapter, American Academy of Pediatrics 
151 


86248.112

Connecticut State Medical Society 

Connecticut Academy of Family Physicians 

Connecticut Chapter, American College of Physicians 

Connecticut Chapter, American Academy of Pediatrics 

Delaware Academy of Family Physicians 

Delaware Chapter, American College of Physicians 

Delaware State Osteopathic Medical Society 

Delaware Chapter, American Academy of Pediatrics 

Medical Society of the District of Columbia 

District of Columbia Academy of Family Physicians 

District of Columbia Chapter, American College of Physicians 

District of Columbia Chapter, American Academy of Pediatrics 

Florida Medical Association 

Florida Academy of Family Physicians 

Florida Chapter, American College of Physician 

Florida Society ofthe American College of Osteopathic Family Physicians 

Florida Chapter, American Academy of Pediatrics 

Medical Association of Georgia 

Georgia Academy of Family Physicians 

Georgia Chapter, American College of Physicians 

Georgia Chapter, American Academy of Pediatrics 

Hawaii Medical Association 

Hawaii Association of Osteopathic Physicians and Surgeons 

Idaho Medical Association 

Idaho Academy of Family Physicians 

Idaho Osteopathic Medical Association 

Idaho Chapter, American Academy of Pediatrics 

Illinois State Medical Society 

Illinois Academy of Family Physicians 

Illinois Chapter, American College of Physicians 

Illinois Chapter of the American College of Osteopathic Family Physicians 

Illinois Chapter, American Academy of Pediatrics 

Indiana Academy of Family Physicians 

Indiana Chapter, American College of Physicians 

Indiana Chapter, American Academy of Pediatrics 

Iowa Medical Society 

Iowa Academy of Family Physicians 

Iowa Chapter, American College of Physicians 

Iowa Osteopathic Medical Association 
152 


86248.113

Iowa Chapter of the American College of Osteopathic Family Physicians 

Iowa Chapter, American Academy of Pediatrics 

Kansas Medical Society 

Kansas Academy of Family Physicians 

Kansas Society of the American College of Osteopathic Family Physicians 

Kansas Chapter, American Academy of Pediatrics 

Kentucky Medical Association 

Kentucky Academy of Family Physicians 

Kentucky Chapter, American College of Physicians 

Kentucky Chapter, American Academy of Pediatrics 

Louisiana State Medical Society 

Louisiana Academy of Family Physicians 

Louisiana Osteopathic Medical Association 

Louisiana Chapter, American Academy of Pediatrics 

Maine Medical Association 

Maine Chapter, American College of Physicians 

Maine Osteopathic Association 

Maine Chapter, American Academy of Pediatrics 

MedChi-The Maryland State Medical Society 

Maryland Academy of Family Physicians 

Maryland Chapter, American College of Physicians 

Maryland Chapter, American Academy of Pediatrics 

Massachusetts Medical Society 

Massachusetts Academy of Family Physicians 

Massachusetts Chapter, American College of Physicians 

Massachusetts Chapter, American Academy of Pediatrics 

Michigan State Medical Society 

Michigan Academy of Family Physicians 

Michigan Chapter, American College of Physicians 

Michigan Association of Osteopathic Family Physicians 

Michigan Osteopathic Association 

Michigan Chapter, American Academy of Pediatrics 

Minnesota Medical Association 

Minnesota Academy of Family Physicians 

Minnesota Chapter, American College of Physicians 

Minnesota Osteopathic Medical Society 

Minnesota Chapter, American Academy of Pediatrics 

Mississippi State Medical Association 

Mississippi Academy of Family Physicians 

Mississippi Chapter, American College of Physicians 

Mississippi Osteopathic Medical Association 

Mississippi State Society of the American College of Osteopathic Family Physicians 
153 


86248.114

Mississippi Chapter, American Academy of Pediatrics 

Missouri State Medical Association 

Missouri Academy of Family Physicians 

Missouri Association of Osteopathic Physicians and Surgeons 

Missouri Society of the American College of Osteopathic Family Physicians 

Missouri Chapter, American Academy of Pediatrics 

Montana Medical Association 

Montana Academy of Family Physicians 

Montana Chapter, American College of Physicians 

Montana Chapter, American Academy of Pediatrics 

Nebraska Medical Association 

Nebraska Academy of Family Physicians 

Nebraska Chapter, American College of Physicians 

Nebraska Chapter, American Academy of Pediatrics 

Nevada State Medical Association 

New Hampshire Medical Society 

New Hampshire Academy of Family Physicians 

New Hampshire Chapter, American College of Physicians 

New Hampshire Osteopathic Association 

New Hampshire Chapter, American Academy of Pediatrics 

Medical Society of New Jersey 

New Jersey Academy of Family Physicians 

New Jersey Chapter, American College of Physicians 

New Jersey Chapter, American Academy of Pediatrics 

Medical Society of the State of New York 

New York Chapter, American College of Physicians 

New York State Osteopathic Medical Society 

New York Chapter 1, American Academy of Pediatrics 

New York Chapter 2, American Academy of Pediatrics 

New York Chapter 3, American Academy of Pediatrics 

New Mexico Medical Society 

New Mexico Academy of Family Physicians 

New Mexico Chapter, American College of Physicians 

New Mexico Chapter, American Academy of Pediatrics 

North Carolina Medical Society 

North Carolina Academy of Family Physicians 

North Carolina Society of the American College of Osteopathic Family Physicians 

North Carolina Chapter, American Academy of Pediatrics 

North Dakota Medical Association 

North Dakota Academy of Family Physicians 

North Dakota Chapter, American College of Physicians 
154 


86248.115

North Dakota Chapter, American Academy of Pediatrics 

Ohio State Medical Association 

Ohio Academy of Family Physicians 

Ohio Chapter, American College of Physicians 

Ohio Osteopathic Association 

Ohio State Society of the American College of Osteopathic Family Physicians 

Ohio Chapter, American Academy of Pediatrics 

Oklahoma State Medical Association 

Oklahoma Osteopathic Association 

Oklahoma Chapter, American Academy of Pediatrics 

Oregon Medical Association 

Oregon Academy of Family Physicians 

Oregon Chapter, American College of Physicians 

Pennsylvania Medical Society 

Pennsylvania Academy of Family Physicians 

Pennsylvania Chapter, American College of Physicians 

Pennsylvania Osteopathic Medical Association 

Pennsylvania Osteopathic Family Physicians Society 

Pennsylvania Chapter, American Academy of Pediatrics 

Rhode Island Medical Society 

Rhode Island Academy of Family Physicians 

Rhode Island Chapter, American College of Physicians 

Rhode Island Chapter, American Academy of Pediatrics 

Puerto Rico Chapter, American Academy of Pediatrics 

South Carolina Medical Association 

South Carolina Academy of Family Physicians 

South Carolina Chapter, American College of Physicians 

South Carolina Osteopathic Medical Society 

South Carolina Chapter, American Academy of Pediatrics 

South Dakota State Medical Association 

South Dakota Academy of Family Physicians 

South Dakota Chapter, American College of Physicians 

South Dakota Chapter, American Academy of Pediatrics 

Tennessee Medical Association 

Tennessee Academy of Family Physicians 

Tennessee Chapter, American College of Physicians 

Tennessee Osteopathic Medical Association 

Tennessee State Society of Osteopathic Family Physicians 

Texas Medical Association 

Texas Academy of Family Physicians 

Texas Osteopathic Medical Association 
155 


86248.116

Texas Society of the American College of Osteopathic Family Physicians 

Texas Chapter, American Academy of Pediatrics 

Utah Medical Association 

Utah Chapter, American Academy of Pediatrics 

Vermont Medical Society 

Vermont Academy of Family Physicians 

Vermont State Association of Osteopathic Physicians & Surgeons 

Vermont Chapter, American Academy of Pediatrics 

Virginia Academy of Family Physicians 

Virginia Chapter, American College of Physicians 

Virginia Osteopathic Medical Association 

Virginia Society of the American College of Osteopathic Family Physicians 

Virginia Chapter, American Academy of Pediatrics 

Washington State Medical Association 

Washington Academy of Family Physicians 

Washington State Chapter, American College of Physicians 

Washington Chapter, American Academy of Pediatrics 

West Virginia State Medical Association 

West Virginia Academy of Family Physicians 

West Virginia Osteopathic Medical Association 

West Virginia Chapter, American Academy of Pediatrics 

Wisconsin Medical Society 

Wisconsin Chapter, American College of Physicians 

Wisconsin Chapter, American Academy of Pediatrics 

Wyoming Medical Society 

Wyoming Chapter, American College of Physicians 

Wyoming Chapter, American Academy of Pediatrics 

Cc: Members of Congress 
156 


86248.117

CALIFORNIA 

CHILDREN'S 

HOSPITAL 

ASSOCIATION 

1215 K STREET SUITE 1930 

SACRAMENTO, CA 95814 

9!6.552.7111 

9!6.552.7119 FAX 

www.ccha.org 

Decem ber 12, 2012 

Dear Member of the California Delegation: 

I write on behalf of the California Children's Hospital Association to urge you to 

protect access to health services for children by preserving current law which allows for 

a two-year payment increase to primary care services financed by Medicaid. 

Guaranteeing that children always have access to primary and specialty care at the 

appropriate time has been challenging in California due in part to the low~ 

reimbursement for services under the Medicaid program. Low payment rates have built 

significant barriers to provider participation in the Medicaid program and create 

concerns about the ability of children to access the medically necessary health care 

services they are entitled to under the program. 

Section 1202 of the Health Care Education and Reconciliation Act requires allows 

Medicaid agencies to reimburse specified participating physicians at the Medicare rates 

(if higher than their Medicaid rate) for primary care services for two years. Regulations 

require that the increased payment include qualified primary care services furnished 

"under the personal supervision" of a physician, including those provided by nonphysician providers such as nurse practitioners and physician assistants. The policy is 

set to take effect on January 1,2013, and the state of California is working to develop 

their implementation plan. 

The primary care payment increase is a critical step toward enhancing access to health 

care for the nation's children covered by Medicaid. Currently, on average, Medicaid 

reimburses pediatricians 30 percent below Medicare rates for comparable services. 

While a number of factors have been found to deter or discourage provider 

participation in Medicaid, low payment consistently has been found to be the top 

participation barrier. Section 1202 applies to both general pediatricians and pediatric 

sub-specialists. These providers playa vital role in the provision of primary care 

services for children with the most complex health challenges. Their inclusion in the 

payment increase is essential to ensuring the greatest possible impact on improving 

access to care for children. 

We urge Congress to oppose any proposals that would eliminate the Medicaid primary 

care payment increase or use it to pay for another measure. Elimination of this policy 

would negatively impact access to care for children and further burden the Medicaid 

system. l am pleased to discuss this matter with you further if you require additional 

information. I can be reached at 916-552-71 1 1. 

Lucinda Ehnes 

President & CEO 

CH!lDREN'S HOSPITAL & RESEARCH CENTER OAKLAND· LUCILE PACKARD CHILDR!:N'$ HOSPITAL AT STANFORO 

Ct-lILDR!:N'S HOSPITAL CENTRAL CALIFORN!A. CHILDR£N'S HOSPITAL lOS ANGELES· lOMA L1NDA UNIVERSITY CHILDREN'S HOSPITAL 

t'liLLER CHILDREN'S HOSf>I1AL LONG BEACH' CHILDREN'S >iOSPrTAL Of ORANGE COUNTY' RADY CHILDREN'SHOSPITAL SAN DIEGO 
157 

Mr. BURGESS. I would also likewise like to insert into the record 

a letter from the Governor of my State. We have had several good 

States testify here today. Governor Perry also wrote a letter on this 

subject, and I would like to have that made part of the record as 

well, so without objection, so ordered. 

[The information follows:] 

158 


86248.118

RICK PERRY 

GOVERNOR 

July 9, 2012 

OFFICE OF THE GOVERNOR 

The Honorable Kathleen Sebelius 

Secretary 

U.S. Department of Health and Human Services 

200 Independence Avenue, S.W. 

Washington, D.C. 20201 

Dear Secretary Sebelius: 

In the ObamaCare plan, the federal government sought to force the states to expand their 

Medicaid programs by in the words of the Supreme Court - putting a gun to their heads. Now 

that the "gun to the head" has been removed, please relay this message to the President: I oppose 

both the expansion of Medicaid as provided in the Patient Protection and Affordable Care Act 

and the creation of a so-called "state" insurance exchange, because both represent brazen 

intrusions into the sovereignty of our state. 

I stand proudly with the growing chorus of governors who reject the PPACA power grab. Thank 

God and our nation's founders that we have the right to do so. 

Neither a "state" exchange nor the expansion of Medicaid under the Orwellian-named PPACA 

would result in better "patient protection" or in more "affordable care." What they would do is 

make Texas a mere appendage of the federal government when it comes to health care. 

The PPACA does not truly allow states to create and operate their own exchanges. Instead, it 

gives the federal government the final say as to which insurance plans can operate in a so-called 

"state" exchange, what benefits those plans must provide, and what price controls and cost limits 

will apply. It leaves many questions to be answered later through federal "future rulemaking." 

In short, it essentially treats the states like subcontractors through which the federal government 

can control the insurance markets and pursue federal priorities rather than those of the individual 

states. 

Through its proposed expansion of Medicaid, the PPACA would simply enlarge a broken system 

that is already financially unsustainable. Medicaid is a system of inflexible mandates, one-sizefits-all requirements, and wasteful, bureaucratic inefficiencies. Expanding it as the PPACA 

POST OFFICE Box 12428 AUSTIN. TEXAS 78711 (512)463-2000 (VOlCB)!DlAL 7-1-1 FOR RmAy SERVlCES 

VISIT www . .f:row;ONLINR.COM1l:U! OFFIOAL WEB 8m OF THE STATB OF TRXAS 
159 


86248.119

The Honorable Kathleen Sebelius 

July 9, 20]2 

Page 2 

provides would only exacerbate the failure of the current system, and would threaten even Texas 

with financial ruin. 

I look forward to implementing health care solutions that are right for the people of Texas. 

urge you to support me in that effort. In the meantime, the PPACA's unsound encroachments 

will find no foothold here. 

Rick 

~K~J Perry 

Governor 

RP:kwp 

cc: The Honorable David Dewhurst 

The Honorable Joe Straus 
160 

Mr. BURGESS. And the Chair now recognizes the gentleman from 

Georgia, Dr. Gingrey, 5 minutes for questions, sir. 

Mr. GINGREY. Mr. Chairman, thank you very much, and I want 

to thank all seven witnesses for bearing with us through the break 

and the vote series. 

My question is over a concern that I have in regard to the exchanges and the authority of the Secretary in regard to rulemaking, and I am going to direct my questioning to the Secretary 

of the Department of Health Services in Wisconsin, Mr. Dennis 

Smith, and hopefully we will be able to get all this done within 5 

minutes. 

The recently released request for information regarding health 

care quality for exchanges on November 27th specifically mentions 

a Section 1311 of PPACA which directs quality health plan issuers 

to, among other things, implement quality improvement strategies 

as directed by the Secretary. Specifically, subsection H of 1311 

would allow the Secretary to prevent physicians from treating patients in the exchange unless they implement such mechanisms to 

improve health care quality the Secretary may by regulation require. 

Let me restate that. Physicians must follow quality directives as 

defined by the Secretary or lose their business. Mr. Smith, are you 

aware of this provision in the law? 

Mr. SMITH. I am not familiar with that section, no, sir. 

Mr. GINGREY. OK. Well, let me ask you this then. In this provision, you may not know this either, but the word ‘‘quality’’ is not 

defined in the statute. So it is safe to assume that the Secretary, 

not just Secretary Sebelius but every Secretary to follow, Republican or Democratic administration, will be able to define through 

regulation what that word ‘‘quality’’ means. Yes or no? 

Mr. SMITH. I believe that is the correct interpretation. I think 

quality—again, we have tried to introduce quality performances 

into a variety of parts of our programs, both in managed care and 

the fee-for-service world. Again, this is another one of our concerns 

that we are going to have State standards, then we are going to 

have Federal standards. 

Mr. GINGREY. Well, it is a huge concern of mine as a physician 

member, and I know very well what ‘‘quality’’ means in regard to 

the specialty of obstetrics and gynecology as defined by the American College, the same thing for the American College of Surgeons, 

you know, the specialty societies define quality. If the Secretary decided to use this provision in the law under 1311(h) and it is there 

very clearly, and she or any Secretary uses this provision to determine, let us say, for example, mammographies for women under 

50, did not improve their health care because of false positives, like 

her, U.S. Preventive Services Task Force did back in 2009. You all 

remember that. Would a physician be able to treat patients in the 

exchange if they prescribed a mammogram for a 49-year-old 

woman? Can you answer that for me? 

Mr. SMITH. I don’t think I can. 

Mr. GINGREY. Well, I can answer it for you. The answer is no. 

If the Secretary decided that physicians who performed abortions 

were not practicing quality medicine because they endangered the 

life of a child, could the Secretary run providers who performed 

161 

abortions out of business? And I will answer that one for you too. 

The answer is yes. 

Mr. Chairman, I believe that this language in 1311 would allow 

the Secretary to control what physicians prescribe, what health 

care patients can access. Is there a single person in this room who 

thinks that the Secretary should have that kind of authority 

whether it is a Republican or a Democrat? 

Mr. Chairman, I have a bill, 6320, which repeals this clearly dangerous provision, and I plan to reintroduce this bill in the 113th 

Congress, and I hope that this committee in a bipartisan fashion 

can work together in this effort because look, I don’t know whether 

this Section 1311 or subsection H was an intentional provision or 

unintended consequences. I would rather like to think unintended 

consequences. But this is a thing you get in a 2,700-page bill that 

you have to pass and then finally find out what is in it, and maybe 

you will like it and maybe you won’t, but this clearly is a provision 

where any Secretary of Health and Human Services can pretty 

much determine what the quality of care is for physician providers 

in one of these exchanges in the 50 States and the territories and 

the District of Columbia and any specialty when each specialty society has clearly defined what is quality care but yet the Secretary 

now can just say well, you know, you are not providing quality care 

as determined by me under Section 1311 and therefore you are basically out of business, you can’t be part of a provider panel in the 

exchanges. This is clearly wrong and has to be repealed, and Mr. 

Chairman, I have probably gone a little beyond, but I will yield 

back now and just remind my colleagues H.R. 6320 just repeals 

that section and hopefully in a bipartisan way we can get that done 

in the 113th, and I yield back. 

Mr. BURGESS. The gentleman yields back. The Chair now recognizes the gentlelady from Wisconsin, Ms. Baldwin, for 5 minutes 

for your questions, please. 

Ms. BALDWIN. Thank you, Mr. Chairman. 

I am very proud of the work we did in this committee to pass 

the Affordable Care Act because access to affordable health care is 

an essential pillar of middle-class economic security. Many States 

are making very impressive progress in moving health care reform 

forward. We have heard Maryland and Arkansas as two great examples of two States that have, it seems, put politics aside and are 

doing the very hard work involved in implementation because they 

know it is the right thing to do for families and small businesses 

and others in their States. 

While these States have moved forward and certainly others 

have across the Nation, I have really been concerned about my 

home State of Wisconsin and the way it has been holding back. 

Earlier, Wisconsin returned an Early Innovator Federal grant that 

would have enabled our State to build a Wisconsin-run health insurance exchange. Building a State-based exchange, in my opinion, 

would have provided families and businesses with more choices for 

the quality coverage that our State has been known for providing 

to our citizens for years. I am committed to bringing people together and working collaborative to make our Nation’s new health 

law work for my home State of Wisconsin and other States. Our 

State has a strong tradition and history. Secretary Smith, you 

162 

talked about that history and tradition of being a national leader 

in advancing health care reforms, and it is my hope that we can 

continue in that proud tradition by extending our Medicaid eligibility so that those who need health coverage the most have access 

to it. 

Secretary Smith, you mentioned in your testimony, and I read 

Governor Walker’s comments, I believe, yesterday that he has not 

made a decision as of this moment of whether our State will participate in the Medicaid expansion. Is that correct? 

Mr. SMITH. That is correct. 

Ms. BALDWIN. I want to delve a little bit deeper in terms of a 

timeline in mind for making that final decision. I know you held 

some press availability yesterday in the State of Wisconsin in anticipation of this visit to Washington, DC. You made some comments that concern me about this impending decision. You said the 

math is just not going to work out, and yet the State has not yet 

completed its financial projections. There were comments you made 

about still continuing to build modeling, and yet you say it is a 

straightforward calculation. Based on those quotes, what is the 

timeline that you contemplate for doing that math and having the 

decision move forward with the administration? 

Mr. SMITH. Thank you so much, and again, if I can clarify, my 

comments about the math were a very specific part of that in terms 

of whether or not the Federal Government would buy out our existing childless adults population so, again, my comment was, we 

have about 21,700 childless adults. Even if we get 100 percent 

FMAP for them, that is not going to entirely offset the cost of all 

the new people who would come in to the program. That is what 

my comments were in reference to. 

Ms. BALDWIN. So in terms of just a timeline for the overall calculations that you need to do, how soon can we expect to hear? 

Mr. SMITH. The Governor’s budget, he will include in the Governor’s budget that decision whether or nor to expand. 

Ms. BALDWIN. OK. So when the Governor’s budget is released, we 

will know about—that is when he will announce his decision? 

Mr. SMITH. Yes. 

Ms. BALDWIN. OK. Thank you. 

Well, I just want to repeat that I believe it is crucially important 

that our State expand the coverage. According to the Kaiser Commission on Medicaid and the Uninsured, over 200,000 Wisconsinites could gain Medicaid coverage through the Affordable Care Act 

Medicaid expansion, and if it is uncertainty that we are concerned 

about, surely those 200,000 people in Wisconsin deserve the certainty of knowing that quality and affordable care will be there for 

them. 

You know, we know the impacts for those 200,000 people. Accessing preventive care can forestall more expensive and costly and 

sometimes deadly illnesses, and 200,000 people who we hope would 

be living healthier and more productive lives, are better able to 

manage chronic illnesses that they might experience. With 100 percent Federal funding for the new Medicaid population through 

2016, then phasing down to 90 percent funding after that point, 

our State could actually save a quarter of a billion dollars in Medicaid costs and another quarter of a billion, $250 million in uncomVerDate Aug 31 2005 15:01 Jan 16, 2014 Jkt 037690 PO 00000 Frm 00166 Fmt 6633 Sfmt 6633 F:\112-00~1\112-18~2\86248K.TXT WAYNE
163 

pensated-care costs, factors that we heard testimony from the Secretaries of Health in other States, and on that topic, although I see 

I am running out of my time, I was going to ask Director Allison 

to talk a little bit more about some of the other savings that you 

have realized that your State, Arkansas, can recognize. Given that 

I have run out of time, we will follow up in writing afterwards. 

Thank you. 

Mr. BURGESS. The Chair thanks the gentlelady. We would recognize the gentlelady from Illinois, Ms. Schakowsky, 5 minutes for 

your questions, please. 

Ms. SCHAKOWSKY. Thank you, Mr. Chairman. 

First, I want to thank Director Mann for working with Cook 

County, Illinois, my county, on the waiver that will allow Cook 

County to early enroll more than 115,000 individuals who will be 

eligible for Medicaid in 2014. You have given us the opportunity to 

get a head start on providing the many people who need the health 

care who are eligible for the care to be enrolled, so thank you very 

much. 

I wanted to set the record straight on a couple of things too. 

There was some talk about the expenses for Illinois that were 

made earlier. The Federal Government is going to provide almost 

$157 million to Illinois to support insurance coverage for 898,000 

Illinoisans with Medicaid, reducing our uninsured population by 

about half. How fantastic is that. And Illinois will save $953 million in uncompensated expenditures, and actually there will be increase in the cost for Illinois, about 1 percent, and look at what we 

are getting. I mean, it is just a miracle to me. 

I also wanted to point out that in terms of the overall increase 

in insurance cost that actually yes, costs for insurance have increased less than before the Affordable Care Act was passed, and 

the ACA saved an estimated $2.1 billion on health insurance premiums through the Medical Loss Ratio and Rate Review. Almost 

13 million consumers received a check because their insurance 

company spent too much money, over a billion dollars, and Rate 

Review saved consumers about a billion dollars. That is individual 

and small group markets. So these are victories, I think. 

A number of people on the panel have talked about the problem 

that somehow the Affordable Care Act messes up your opportunity 

to get rid of fraud and eligibility requirements, etc., and I wanted 

to talk for a minute about Pennsylvania. My understanding is that 

in the late summer, the Pennsylvania Department of Welfare 

began notifying hundreds of thousands of families by mail that 

they had 10 days to provide necessary documentation in order to 

keep their children enrolled in Medicaid, and if the family missed 

the deadline or even if they met the deadline, if the Department 

of Public Welfare failed to process the paperwork within 10 days, 

they were dropped from Medicaid, and in fact, 89,000 children were 

dropped from Medicaid. Here is my point. Are some of these socalled problems an excuse and the opportunity to set up barriers 

to actually bump people from the rolls? I think it is completely unfair, and Mr. Alexander, you certainly do have an opportunity to 

answer. To say that not only do you only have 10 days to keep your 

children in Medicaid, but if we can’t process your papers, then we 

are going to bump you off of Medicaid and that happened to 89,000 

164 

children. That is included in your fraud prevention numbers, and 

I think that it is a fraud to do that to children. So what do you 

think? 

Mr. ALEXANDER. Well, thank you very much for your comments. 

When we arrived, Governor Corbett arrived and I arrived at the 

department, we had hundreds of thousands of cases that had not 

been processed in years and left piling up in county assistance offices, and it is our duty as a State where mandated by Federal law 

to follow the laws that you pass. 

Ms. SCHAKOWSKY. Ten days? 

Mr. ALEXANDER. And indeed we do that. We went through meticulously to make sure that whichever family was eligible was eligible and whichever family was not eligible was not eligible. Now, 

this was not about children because we determined this as a family, so we are talking about families and individuals, not just children. 

Ms. SCHAKOWSKY. My understanding is that the records show 

that the 89,000 figure represents only children. 

Mr. ALEXANDER. There were much more than 89,000. Now let us 

get to what we did do. We meticulously went through after we sent 

them notices per Federal law. We followed the law and followed the 

regulations. 

Ms. SCHAKOWSKY. Is 10 days the regulation? 

Mr. ALEXANDER. It was more than 10 days. We followed the regulation. We followed the law. We sent them notices. If they did not 

reply, then they were terminated. So if they did not reply within 

the accounted time, then they were—so we gave them every chance 

possible to—— 

Ms. SCHAKOWSKY. And what if you couldn’t—— 

Mr. ALEXANDER. And even after that, we had done outreach. 

Ms. SCHAKOWSKY. And what if you couldn’t process? My understanding is if the Department of Public Welfare failed to process 

the paperwork within 10 days, they were dropped. 

Mr. ALEXANDER. That is incorrect. By law, it is a 30-day time period, so we gave them ample time, and in fact, it was extended past 

the 30 days for them to be able to contact us, and we told all of 

the families that if you come in and contact us and come in and 

have your paperwork, we will get you right back on the program. 

The point of the matter is, Congresswoman, is that when you come 

into a department like this and you have hundreds of thousands 

of cases that are piled up and hadn’t been gone through in years, 

there is a problem. We have a process that is given to us by Congress. We follow those laws. We have State rules and regulations 

that we need to follow. Now, if somebody tells us not to follow rules 

and regulations and they pass laws to that effect, then we will do 

that accordingly but we followed all of the rules and regulations. 

We have reached out to the families. We want everyone that is eligible for Medicaid to be on Medicaid, but if you are not eligible, 

then we don’t want you on the program. There is a difference. We 

are here to serve the truly needy eligible families and children. 

Mr. BURGESS. The gentlelady’s time is expired. The Chair recognizes the gentleman from New York. 

Ms. SCHAKOWSKY. Can I just say, with due respect, I have different numbers and I would like to submit them for the record. 

165 

Mr. BURGESS. The Chair would entertain a glance at those 

records. I recognize Mr. Engel for 5 minutes for questions, please. 

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

I want to talk about two issues and try to do it fast because I 

want to get it all in involving DSH payments and the ‘‘do gooder’’ 

States. I made sure when we were crafting the Affordable Care Act 

that my State, New York, which is a so-called do-gooder State was 

not penalized for it, and also DSH, because we have a lot of indigent people in the New York City metropolitan area, I wanted to 

make sure that we were not penalized. 

So the New York Medicaid program already covers most categories of individuals beyond the Affordable Care Act expansion 

threshold and plans to extend additional coverage to non-pregnant 

childless adults, thereby fully meeting the ACA parameters by 

2014. However, it is projected that after the ACA is fully implemented in New York, 10 percent of our residents will still remain 

uninsured, which means DSH funding will still be important. 

Ms. Mann, I know you and I spoke about the importance of DSH 

funding to New York a few months ago. I just want to reiterate 

how important this funding is to those States which already have 

broad eligibility for their Medicaid programs or do plan to expand 

their Medicaid programs. I hope the upcoming regulations will not 

punish these States, these States who did the right thing by expanding Medicaid eligibility with disproportionately deep DSH 

cuts. I don’t know that you have to answer, but as you know, that 

is a very big concern of mine. 

Let me ask Dr. Allison and Dr. Sharfstein, can you briefly talk 

about how declining funding for uncompensated care and DSH influenced your decision to push for Medicaid expansion in your 

States? 

Mr. SHARFSTEIN. Sure. Maryland, just to give one very specific 

example from Maryland because we have a unique way of funding 

uncompensated care, about a billion dollars a year in uncompensated care goes into a pool on the hospital side and there is about 

a 7 percent assessment that goes on every single person’s hospital 

bill in the State for every service to pay for that uncompensated 

care. So when that goes down because more people get covered, everybody benefits—small businesses, individuals, the State through 

the Medicaid program and so it is one of the factors that we use 

to see, and in Maryland it is very explicit because of this system, 

you can really see the specific savings that will accrue across the 

State. It is sort of eliminating a hidden tax. 

Mr. ENGEL. Dr. Allison? 

Mr. ALLISON. Congressman, we estimate so far we have found 

about $90 million per year that the State spends on non-Medicaid 

programs for uncompensated care. The legislature, the Governor 

will have to make decisions about how to use that funding going 

forward. We have assumed in our estimates that at least half of 

that would be diverted to the State general fund, really as an offset 

to the Medicaid expansion, which is not very different, by the way, 

from the Urban Institute’s assumptions. 

Mr. ENGEL. Thank you. Let me talk about the do-gooder State 

issue. As I mentioned before, New York has worked hard to ensure 

that low-income and vulnerable New Yorkers have access to health 

166 

care services by expanding eligibility for Medicaid beyond the Federal requirements even prior to the expansion included in the Affordable Care Act. Though the Federal support for newly eligible 

populations is incredibly generous, and the law includes provisions 

to benefit these do-gooder States, the reality is that New York will 

not see the same Federal support as States which have historically 

been less generous with their eligibility thresholds. 

So regardless of that, I am proud of the fact that New York intends to further expand its Medicaid program to meet the ACA 

threshold of 138 percent of the Federal poverty level. It is estimated that the State of New York will save $2.3 billion a year as 

a result of this enhanced Federal Medicaid support. With the Federal Government providing 100 percent of the funding for newly eligible populations for the first 3 years and providing at least 90 

percent of the funding beyond, I simply cannot understand why a 

State would choose not to provide health care coverage to its neediest citizens. 

So let me quickly ask both Dr. Sharfstein and Dr. Allison. Dr. 

Sharfstein, in your written testimony, you stated, and I quote, ‘‘Expanding Medicaid is the best decision for Maryland’s providers, the 

State economy and the uninsured.’’ Can you elaborate on the input 

you received from health care stakeholders regarding the Medicaid 

expansion? 

Mr. SHARFSTEIN. Sure. After the Affordable Care Act was passed, 

there was a process that involved hundreds of Marylanders, many 

of whom have submitted comments, the business community, the 

provider community, advocates, uninsured individuals, and there 

was a real consensus across the State that it made sense to expand 

coverage, that it not only has been proven to reduce mortality and 

improve health outcomes but it would have great benefits to Maryland’s health care system and economy, and so Maryland has 

moved forward from that point based on, you know, input that we 

received from across the State. 

Mr. ENGEL. Dr. Allison, same question to you. What input did 

you receive from health care stakeholders regarding a possible 

Medicaid expansion in Arkansas? 

Mr. ALLISON. Virtually all of the health care stakeholder associations in Arkansas have come you in favor of the Medicaid expansion. They understand the good that it would do for their patients. 

They understand the harm that it would do to them as the safety 

net if Medicaid were not expanded. 

Mr. ENGEL. Thank you. And Ms. Mann, did you want to make 

a comment on what I mentioned before about States do not get 

punished if they expanded their Medicaid eligibility? Am I done, 

Mr. Chairman? 

Mr. BURGESS. Yes, we have got other members who have been 

waiting a long time, Mr. Engel. 

Mr. ENGEL. OK. 

Mr. BURGESS. The gentleman’s time has expired. At this point 

the Chair would like to recognize the gentleman from Utah, Mr. 

Matheson, 5 minutes for your questions, please. 

Mr. MATHESON. Thank you, Mr. Chairman. I appreciate you 

holding this hearing. With tomorrow being the deadline for States 

to declare their intentions with regard to the Affordable Care Act 

167 

exchanges, I would like to focus my time on some outstanding 

questions that remain with regard to the function of the exchanges. 

There are other issues about the law I would like to address such 

as how the health insurance tax would be assessed and what effect 

it will ultimately have on consumers, but my time is limited as if 

the jurisdiction of our committee. 

Now, the Affordable Care Act envisions a seamless process for 

consumers to access health insurance coverage through the exchanges or expanded Medicaid or CHIP coverage, depending on eligibility. One of the potential unknowns in this process is the issue 

of how to provide for uninterrupted coverage for those whose eligibility changes during the course of the year due to fluctuations in 

income. The statute is not clear as to whether these consumers 

would be able to maintain their existing coverage or if they will be 

required to move between private coverage and Medicaid as their 

income shifts through the year. This potential for churning could 

not only place significant administrative burdens on consumers and 

on plans but could also threaten continuity of care as consumers 

move between plans with different provider networks. In the end, 

it is going to lead to adverse health outcomes for the beneficiary. 

So I guess I will direct the question, maybe Ms. Mann would be 

the one to answer this. Can you provide some clarity on this issue 

about how these individuals will be assessed and how best the system can maintain continuity of coverage for people who may fall 

into this situation? 

Ms. MANN. Absolutely. It is a very important question. The Affordable Care Act and the regulations ensure that there will be 

continuity of eligibility if income changes so the rules and the law 

are pretty explicit about ways in which there should be no gap in 

coverage if somebody’s eligibility changes from Medicaid to the exchange or from the exchange to Medicaid, but there is the issue of 

continuity of plan and provider, and in our recent questions and 

answers that we released on December 10th, we gave three options 

for States to consider to try and minimize this disruption of care. 

One of the first things States can do if they are running a Statebased exchange is, they are encouraged to have the same plans 

doing business on the exchange as they are doing business in the 

Medicaid and the CHIP program and then families have an ability, 

even if their eligibility changes, to stay in the same plan. 

Beyond that, we have noted some premium assistance options 

that States can use inside their State, options in the Medicaid program. It is a way of assuring continuity of coverage. They can purchase the coverage for a Medicaid- or CHIP-eligible person by contracting with a qualified health provider that happens to be doing 

business on the exchange. That way, if that individual’s eligibility 

changes from Medicaid and CHIP to eligibility on the exchange for 

a premium tax credit, they would switch to a tax credit for Medicaid but they wouldn’t have to switch plans. 

Mr. MATHESON. Thank you. My home State of Utah is one of several States deciding on which health exchange approach is most appropriate for our residents, and our Governor has raised some very 

relevant questions recently with regard to how the different approaches may operate, some of which I would like to explore with 

you, if I could. If several States band together to form a multi-State 

168 

exchange, what role would State regulators play in enforcing State 

law? Have we thought about that? 

Mr. COHEN. State regulators will have the same role that they 

do today in terms of reviewing policy forms, making sure they are 

consistent with any State law, State mandates, for example, as well 

as with the Federal law so there shouldn’t be a change in the role 

of State regulators in a multi-State exchange. 

Mr. MATHESON. Is that also the same if they are under the Federal exchange? 

Mr. COHEN. Yes. 

Mr. MATHESON. Do State policymakers relinquish any ability to 

provide counsel, advice or influence on the operation of a Federal 

exchange should the State opt out of operating their own Statebased exchange? 

Mr. COHEN. I think that we are always interested and will continue to be interested in working with States to make the exchanges work best for their State, whether it is a federally facilitated exchange or not. I think that there are some important decisions that States get to make themselves if they are in a State exchange or a State partnership exchange. For example, one example 

is just how the thing will be funded. We have proposed one funding 

mechanism which will work in the Federal exchange, but States 

could use a different funding mechanism if it is a State exchange. 

Mr. MATHESON. Thank you, Mr. Chairman. I will yield back. 

Mr. BURGESS. The gentleman yields back. The Chair recognizes 

the gentleman from Virginia, Mr. Griffith, for 5 minutes for your 

questions, sir. 

Mr. GRIFFITH. Thank you, Mr. Chairman, and I appreciate all of 

you all being here. I know it has been a long day, and I look forward to working with each of you and the members of this committee as we move forward. 

Mr. Chairman, I will yield my time to you for questions that I 

believe you may have. 

Mr. BURGESS. I thank the gentleman for yielding. 

Mr. Smith, and again, to everyone on the panel, thank you for 

your indulgence today. I believe it is the policy of this committee, 

we invite smart people to come and tell us what they think about 

things. If there is an opinion that needs to be offered, I think it 

should be offered. 

So Mr. Smith, a long time ago, Mr. Waxman offered some comments to which you wanted to respond. I know we have kind of removed the immediacy of your response to those questions, but if 

you had comments you would like to make, we would love to hear 

them now. 

Mr. SMITH. Thank you, Mr. Chairman. I appreciate that greatly, 

and it is nice to be with a bunch of smart people. 

The question about block grants, and I wanted to respond in a 

couple of different ways. First, the State Children’s Health Insurance Program is a block grant. That was one of the most successful 

programs that everyone has claimed great credit for. There are different forms of block grants. There was a per capita cap approach 

that during the Clinton administration, Clinton administration officials supported that type of approach. The block grants themselves, 

again for States, we do believe we can run these programs more 

169 

efficiently and more effectively than under Federal rules. First of 

all, more than half of Medicaid dollars are spent because States 

have expanded beyond Federal requirements. We have added eligibility, we have added benefits well beyond what the Federal law 

expands. So again, sort of the perspective that if the Federal Government doesn’t require it, the States aren’t going to do it, the history is actually the opposite. States have expanded beyond what 

the Federal requirements are, so we believe very strongly States 

can indeed be trusted. 

Most of the money is in people who are either senior citizens 

needing long-term care or individuals with disabilities. In Wisconsin, we have in fact lowered the cost of care because we have 

been able through waivers put people into private sector managed 

care situations. Again, regular Medicaid fee-for-service is the most 

expensive type of care, and in many respects least appropriate because the care is not being provided for. 

So from my perspective, when I look at all of these Medicaid dollars that are being spent under the different formulas that have 

been offered, which guarantee Federal dollars growing by population at least medical CPI or CPI plus one, I say absolutely, I can 

make that deal work. If my Federal dollars are guaranteed, I become more efficient. The State therefore actually increases the Federal match rate because the State match goes down because the 

Federal dollars are guaranteed to be there. So absolutely, we can 

make that situation work. Again, I go back to the very beginning 

before legislation was even put out. In December of 2008, Chairman Baucus at the Finance Committee put out a paper saying 

there is $700 billion in excess spending in the health care system. 

Through Medicare and Medicaid, the government spends almost 

half of those dollars. Medicaid and Medicare therefore do indeed 

have to be brought to the table, and there is a great deal of overutilization in the system. From our perspective, again, it is not the 

cost of health care, it is the excess cost of health care. The excess 

cost of health care is what we are going after. We have done it successfully in Wisconsin. We think we can go even further. 

Mr. BURGESS. Well, along that line, I am terribly disappointed to 

hear Mr. Cohen’s response to the Medical Loss Ratio question and 

health savings accounts. You know, Mr. Pallone, I sat on this committee with you down at the kids’ table while we heard all the comments about how to bring down cost of health care. That is what 

the Affordable Care Act was supposed to do. Remember the word 

‘‘affordable’’ is in the title. If we wanted to bring the cost of health 

care down, we would have invited Governor Mitch Daniels to this 

committee and asked him how he did that in his State, 11 reduction over 2 years. He did it with a health savings account for his 

State employees. It was voluntary, but he found out something important: people when they spend their own money for health care, 

something magic happens, even if it wasn’t their own money in the 

first place. It sounds like from your interpretation of the Medical 

Loss Ratio, that effect is going to be lost. That is yet more one failing of this very large law that came into being under very difficult 

circumstances. 

I will yield back my time and recognize Dr. Christensen 5 minutes for questions. 

170 

Mrs. CHRISTENSEN. Thank you, Mr. Chairman, and thank you to 

all the witnesses for your patience and being here with us today. 

I too am very proud of the work that we in this committee did on 

the Affordable Care Act and I don’t want to see any of the gains 

lost. I want to see every one of the over 30 million people who are 

going to receive coverage receive coverage including the 20 or so 

million who will receive coverage through Medicaid expansion, and 

a large percentage of those are people of color for whom the TriCaucus worked very hard as we put together this law to ensure 

that African Americans, Hispanics, Native American and Asian 

Americans had access to health care. I wanted to go to our one of 

our poorer States that is not about to accept the Medicaid expansion, I don’t think. No Medicaid expansion, no State exchange. 

Mr. Greenstein, you mentioned in your testimony that Louisiana 

has some of the worst health statistics and your State has some of 

the most persistent health disparities in the Nation. Numerous 

studies have shown that expanding access to health care through 

programs like Medicaid help to reduce health disparities. The National Urban League released a report last week about the economic cost of health disparities and found that the health disparities cost this Nation more than $82 billion in direct health care 

spending in just one year, and the highest burden, of course, is in 

the South where health disparities cost about $35 billion in just 

one year. So aren’t you concerned that not expanding Medicaid 

would exacerbate the disparities in your State, leaving more people 

as the sickest in our Nation and also increase the financial costs 

in the end because they are going to come to you at some point 

without having preventive care, without having health care maintenance, when they are very sick and cost the State more? 

Mr. GREENSTEIN. Thank you very, very much to focus the attention on what all the coverage is supposed to address, which is people’s health status and the health outcomes. Indeed, in my State 

and many other States nearby, we see great disparities in diabetes, 

in obesity, and they are dramatic. We have looked at the outcomes 

for people on Medicaid and those without insurance, and we don’t 

see a great deal of difference. This is distressing. We have a system 

that is not turning out the kind of health outcomes that we would 

expect for the amount of money that we put in. 

We have looked very deeply at expanding Medicaid, and let me 

share with you some of the numbers around it. I believe Chairman 

Waxman went through the numbers in Louisiana that we would 

expand Medicaid, how many people that don’t have insurance 

would get it, and he cited about 265,000. When we looked at our 

numbers in the first year alone, 467,000 people would join the Medicaid rolls. Of that, 187,000 people already have private health insurance today. We would see a cannibalization of the private health 

insurance market taking generally healthy risk from a system 

where people pay some portion of their care and move that into 

Medicaid. Hospitals, doctors would see reimbursement levels reduced. So this it not an easy way to think through that expansion 

equals better health outcomes for everyone. It doesn’t. 

Mrs. CHRISTENSEN. Nothing, as I understand it, precludes you 

from making changes within the Medicaid system to address some 

of the areas that, you know, may not be working so that where you 

171 

now see that Medicaid-covered patients don’t do any better than 

patients how are insured. 

Ms. Mann, is there anything that—I have heard several of the 

panelists say that, you know, the law dictates to the States, does 

not allow them the flexibility? Is that the case, or can’t they also 

fix whatever is wrong with their Medicaid system? 

Ms. MANN. They can, and we would hope that they do, and we 

will be prepared to work closely with Louisiana to do just that. 

There is a study in Oregon that recently came out that looked at 

people on Medicaid and people not on Medicaid had a control 

group. It was considered a gold standard study. It showed definitively that the care and the well-being and the health outcomes for 

the people receiving the Medicaid coverage were far superior to 

those who weren’t having health care coverage and who were uninsured. There are lots of issues in Louisiana that are difficult, are 

challenging for anyone to tackle, but the evidence around the country is that you can make Medicaid work well for beneficiaries and 

improve health outcomes. The discretion around designing the program, determining the delivery system, contracting with the providers, those are all decisions that are fundamentally State decisions in the Medicaid program. 

Mr. SMITH. May I offer an idea on eligibility? You mentioned Native Americans as a specific population. When we are switched to 

Modified Adjusted Gross Income, in Medicaid currently where Native Americans are exempt from cost-sharing entirely in the program, in Wisconsin, we disregard certain income that is available 

to them as members of the tribe. That gets changed under MAGI. 

Those people will become tax-credit eligible where they will be paying cost-sharing rather than Medicaid eligible. 

Mrs. CHRISTENSEN. I don’t think that is the case, but my time 

is up and, you know, I hope that Ms. Mann and Mr. Cohen will 

have a chance to respond to that because I don’t think that is the 

case. 

Mr. BURGESS. The gentlelady’s time is expired. I recognize a 

member of the full committee, Mr. Sarbanes, 5 minutes for your 

questions, please. 

Mr. SARBANES. Thank you, Mr. Chairman, and thank you for letting me participate today in the hearing. I appreciate it very much. 

I just want to say to Mr. Cohen and Ms. Mann, thank you for 

your tremendous work on this. It is incredibly exciting actually 

what you are doing because you are helping to build an expanded 

infrastructure that is going to provide more access to millions of 

Americans and over time I think also begin to reign in health care 

costs in a very effective way for individuals and for the system as 

a whole. 

I wanted to ask you, Ms. Mann, real quickly, what do you anticipate when we get to the end of this process in terms of the number 

of States that will actually have done a State-based exchanged 

versus those that will have done a partnership exchange versus 

those who will be federally facilitated? Any kind of sense of 

where—— 

Mr. COHEN. I think that is actually for me. We don’t know yet. 

There is a deadline on the State-based exchange that is coming up 

this Friday. So far we have heard from 14 States and the District 

172 

of Columbia have said they want to be State-based exchanges. 

There may be more by Friday but we don’t know that. The second 

deadline that comes along is February 15th of next year, which is 

when we have asked States to tell us that they want to be in a 

partnership exchange, so we will know more in February as far as 

how many are going to work with us. 

Mr. SARBANES. All right. Well, let me ask you, Dr. Sharfstein. 

First of all, thanks for being here. Congratulations on the work in 

Maryland. I know you and Governor O’Malley and others that are 

a part of this effort have really been part of the vanguard in demonstrating that these State-based exchanges can work and can get 

in place, and we are very proud of that in Maryland. 

I wanted to ask you, in view of the fact that States soon will be 

making a judgment about whether they think they can stand up 

a State-based exchange and in other instances will be look at the 

partnership model, you talked to your colleagues around the country who are making these decisions. What are the kinds of anxieties they express to you that you are able based on Maryland’s experience to say look, there is a way to do this and, you know, 

whether it is certain technical things that you would comment on 

or just the process of sort of how you get consensus behind it and 

get people comfortable moving forward, what are you saying to 

your colleagues who maybe want to get there but are worried a little bit about it based on the Maryland experience that can give 

them some comfort and confidence that they can do this? 

Mr. SHARFSTEIN. Sure. Thanks for your question, and thanks for 

your leadership in Maryland. We really appreciate it. 

There is a lot of engagement with the States that are moving forward on the State-based exchanges. There are a number of calls 

that happened. There is exchange of documents. Sometimes it is 

very explicit like a document or analysis that we will do other 

States will use directly or we will use something that they have 

done, and sometimes it is more just talking over, you know, different situations. A couple days ago up in west Baltimore, we had 

a meeting of the exchange board, probably 75 people in the public 

watching. We worked our way through a bunch of issues that we 

have been talking to our peers around the country, how billing 

would be done. We resolved that the exchange would take the first 

payment but the carriers would do the payments after that, and 

that is an issue where there is, you know, different ways to go. We 

have figured out a way to partner effectively with insurance brokers and we adopted some policies related to that. We decided to 

offer adult dental and vision plans if possible in the exchange. 

So for each of these things, there is a discussion, and I understand there are a lot of details involved but, you know, we have 

gotten energy from talking to people about those details both within our State and with other States, and systematically step by step, 

you know, moving forward with each part. 

Mr. SARBANES. I just want to emphasize that from the beginning 

of this process, obviously a State looking at it without any peers 

having undertaken the process, without CMS and others having, 

you know, fully gotten into it yet, you could look at it and it would 

appear very daunting, and States like Maryland decided, you know, 

we want to get out in front of this thing and other States did as 

173 

well. But we are now at a point as a result of this where the expertise that results in CMS, practical expertise about how implementation of this can happen, plus the expertise that resides in a peer 

group of States that have started to build these exchanges, have 

created the models, have looked at the computer systems and how 

all that is going to work. It means that States that, you know, 

maybe didn’t get started as fast as they could are now if they make 

the judgment to go forward are going to come to the table with a, 

let us call it a support group or a network of people that hammer 

through a lot of these issues and they will be able to get where 

they need to go maybe faster than you had to do it starting from 

scratch, but that is important, I think, in making people understand that this is very feasible, and if people get into this and start 

working on it, we are going to get this framework in place. Thank 

you very much. 

Mr. BURGESS. The gentleman’s time is expired. That concludes 

the questions from the members of the subcommittee and members 

of the full committee who wished to ask questions. We have time, 

I think, for two follow-up questions, one from each side. 

The Chair will recognize Dr. Cassidy for our side. 

Mr. CASSIDY. First, let us just give some reality to some of the 

quotes regarding Medicaid expansion improving health care. That 

Oregon study you quote, Ms. Mann, was a study limited to Oregon 

on an outpatient basis, and there is some evidence that people felt 

better just because they won the lottery. Secondly, as regards the 

New England Journal of Medicine article you quote, Dr. Sharfstein, 

it was by driven by New York solely, and in fact, in Maine, although it was not statistically significant, the Medicaid expansion 

resulted in poorer outcomes among those who were on Medicaid. 

Now, it was not statistically significant but that was entirely driven by the State of New York. 

And as regards Mr. Engel speaking of the do-gooder States, I will 

point out that New York pays physicians less well than does Louisiana and Texas, and only 60 percent of physicians in New York 

accept Medicaid. That is not access. 

Now, that said, just to clear up the record a little bit, now that 

we know, Mr. Smith, that the one thing that has been shown to 

lower costs, which is health savings accounts, will not be allowed 

in the MLR unless it is actually spent, i.e., we are no longer lowering costs, we are now encouraging insurance companies either 

not to sell them or perhaps insurance company to encourage a person to sell it, what data do you have in your State on the effect 

of the increased premium cost on someone who is, say, 200 percent 

of Federal poverty level who is currently employed with employersponsored insurance, dumped into the expansion as McKinsey 

Quarterly says about 30 percent of these employers will do, now 

has an actuarial value of 60 percent, what do you project is going 

to happen to that person? 

Mr. SMITH. Thank you, Mr. Cassidy. Again, we have been modeling the PPACA premiums in Wisconsin Medicaid since the first 

of July. 

Mr. CASSIDY. So you actually are seeing—this is not a computer 

model, you have actually got real-life data? 

174 

Mr. SMITH. Yes, sir. This is the actual experience. Wisconsin has 

already expanded Medicaid coverage. We have parents, caretakers, 

relatives up to 200 percent of poverty. Some of our eligibility 

groups have transitioned to medical assistance, individuals with income above 300 percent of poverty. We have started applying only 

the premiums, not any of the additional cost-sharing. 

Mr. CASSIDY. Not the $2,000 deductible? 

Mr. SMITH. No, sir, this is only premiums, not any additional 

cost-sharing that would be in effect. So in the results to date, people at the lower income level, again, because they are looking at 

a dollar amount, they are not thinking of a percentage—— 

Mr. CASSIDY. Yes, in Washington, we speak about percentages 

but we are actually talking about a dollar amount. 

Mr. SMITH. Yes, sir, so at 133 to 150 percent of poverty, again, 

because the poverty level includes not only someone’s income but 

also the size of the family, and so a percentage of your gross income. So—— 

Mr. CASSIDY. Please hurry. 

Mr. SMITH. I apologize. For people making over 200 percent of 

poverty, the average now of $200 premium, participation was cut 

in half. So people are saying we are not paying $200. 

Mr. CASSIDY. So 50 percent more people are without insurance? 

Mr. SMITH. Fifty percent of people who had been enrolled 

dropped their Medicaid coverage when premiums—— 

Mr. CASSIDY. So when that working family’s employer puts them 

on the exchange and they have an actual value of 80 percent with 

the employer but it may be 60 percent on the bronze level, they are 

facing premiums and deductibles they never faced before, they are 

dropping their coverage potentially? 

Mr. SMITH. Exactly, because you have, again, the employer—— 

Mr. CASSIDY. This is good for the American worker? 

Mr. SMITH. I think the results are going to be quite different. 

Mr. CASSIDY. And this is not theoretical, this your actual experience, correct? 

Mr. SMITH. Yes. 

Mr. CASSIDY. Now, Mr. Greenstein, we speak of percentages in 

DC, isn’t it interesting, and that Kaiser Family Foundation based 

on the Urban League speaks about how much Louisiana is going 

to get, but actually it is going to cost our State, according to that 

study, $1.8 billion over 10 years. 

Mr. GREENSTEIN. We suspect that those figures actually are understated and don’t capture the full administrative costs. 

Mr. CASSIDY. And they also, I might say, probably understate the 

amount of taxes that will have to be raised for those costs, a macro 

effect that it has ignored. Continue. 

Mr. GREENSTEIN. Likely. When we looked at the study, we recognized that there were very large shifts in winners and losers. Some 

States end up reducing their overall burden, some States increase. 

But when we talk—and a good part of the discussion today has 

been about how States are going to save so much money by Medicaid expansion. It is just shifting cost from one place to another. 

At the same time, this is all net new spending. 

Mr. CASSIDY. I agree with that. So one more question for Ms. 

Mann or Mr. Cohen. 

175 

Mr. BURGESS. We better cut it off. 

Mr. CASSIDY. Oh, my gosh. 

Mr. BURGESS. You can submit it in writing. You have until December 27, sir. 

Mr. CASSIDY. Thank you all. 

Mr. BURGESS. I recognize the ranking member of the subcommittee 5 minutes for your questions, please. 

Mr. PALLONE. Thank you, Mr. Chairman. 

Ms. Mann, I just wanted to give you an opportunity to respond 

to the comments made by Mr. Smith, if you would. 

Ms. MANN. On the issue of the block grant, I think, is where I 

was trying to jump in. 

Mr. PALLONE. Whatever you like. 

Ms. MANN. Yes. A couple things to say. Thank you for the opportunity. One, Mr. Smith harkened back to noting that the Children’s 

Health Insurance Program is essentially a capped allotment, it 

functions as a block grant. That is true, and what we need to recall, I know it is hard to remember back that far, is that in the 

early years of the CHIP program, States ran out of money. States 

were desperate because the dollars allotted was what Congress 

thought they needed and of course it was a set amount of dollars, 

and it turned out that the enrollment was higher and the needs 

were higher, and States were on the verge of shutting down their 

programs or putting their State dollars on the table to cover children. That is the nature of a block grant. It is a capped amount 

of money and it shifts risks onto States and ultimately onto vulnerable Americans who are covered by those programs. Mr. Smith 

talks about who can do a better job, can the States do a better job, 

can the feds to a better job. It is really not about trust. It is really 

about having a financial partnership that works. I would submit 

that without that financial partnership, we would be moving into 

2014 with States operating 20-year-old legacy systems if we didn’t 

provide some additional Federal funding to help States finance 

their eligibility. I would submit probably without that flexible financing, we would not have had the situation where over the years 

people with HIV and AIDS were able to get the care that they 

needed, expensive care, and then were able to live healthy and productive lives, or poor children with leukemia or with autism were 

able to get effective care to help them. When you have a capped 

amount of money where the Federal Government says that it is all 

I am going to do and I am going to do no more, we risk those kinds 

of results. 

What we need and what is good about that partnership, while it 

is fraught with some tensions, is that it keeps us all at the table 

to make sure the program is as strong as possible. We all have incentives to get better care and to do that at lower cost, and that 

partnership helps us get there. 

Mr. PALLONE. Thanks. And I just wanted to give Dr. Sharfstein 

and Mr. Allison an opportunity to talk briefly in closing. Why is 

Medicaid expansion the right answer for your States, and if you 

had to convince the three other States here, what would you say 

to them about it? 

Mr. SHARFSTEIN. I would ask them to spend some time with individuals who would get coverage and who need coverage or who benVerDate Aug 31 2005 15:01 Jan 16, 2014 Jkt 037690 PO 00000 Frm 00179 Fmt 6633 Sfmt 6633 F:\112-00~1\112-18~2\86248K.TXT WAYNE
176 

efit from Medicaid coverage. I think we all agree that there needs 

to be more value in health care. I think we all agree that we need 

to get excess cost out, but I think basic services and basic health 

care for people shouldn’t be consider excess. 

A couple nights ago, I was at a church in Howard County with 

about 300 people in the developmentally disabled community, and 

a mom got up and talked about what Medicaid meant for her 

daughter born with a heart defect, and it was just a harrowing 

story, and then the little girl ran across and basically gave me a 

hug, and it was a moment where we could just stop and say this 

is what Medicaid stands for. 

We want to get Medicaid to work. We need health care to work, 

but it shouldn’t be don’t expand, keep people out first. It should be, 

let us get people in and move forward with the health care system. 

Mr. PALLONE. OK. Thanks. 

Mr. Allison? 

Mr. ALLISON. Congressman, thank you for the opportunity. I 

would just say that Congress passed and the Supreme Court 

upheld a law that provides significant incentives to States to save 

the lives of its own citizens, to improve their health, to provide to 

them financial protection. I represent a poor State with many who 

are uninsured and who without this support never be able to afford 

care. We know that care makes a difference. It may be that we face 

challenges in the future to assure that this remains financially sustainable, the new commitment that we are making, but I would 

just encourage my fellow States to consider the opportunity which 

has presented itself now. 

Mr. PALLONE. OK. Thank you very much. Thank you, Mr. Chairman. 

Mr. BURGESS. The gentleman yields back his time, all time having expired on the committee. 

Mr. Pallone, there was a unanimous-consent request from your 

side about providing some data about Pennsylvania, and without 

objection, I am going to make that part of the record. 

[The information follows:] 

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86248.120

This Week ill Poverty: 89,000 Children in Pellllsylnlllia Lose Medicaid 

Greg Kaujil1of1f1 on June 29, 2012 - 9:20 AM ET 

The Nation. 

Since August 2011,89,000 children in Pennsylvania have lost their Medicaid coverage, 

including many with life-threatening illnesses who were mistakenly deemed ineligible. The state 

currently hasn't a clue whether many of these children have any healthcare coverage at all. 

How did this happen? 

In late summer, the Pennsylvania Department of Welfare (DPW) began notifying hundreds of 

thousands of families by mail that they had ten days to provide necessary documentation in order 

to keep their children enrolled in Medicaid. If the family missed the deadline-or even if they 

met it but fJl'lYjililed to process the paperwork within the ten days-they were dropped from 

Medicaid. 

Federal law indeed requires that families prove their Medicaid eligibility annually. Pennsylvania 

requires verification every six months. During the previous administration, under Democratic 

Governor Ed Rendell, caseloads grew as a result of the recession, while county assistance offices 

were shorthanded due to budget cuts. Caseworkers simply couldn't keep pace with the workload 

and there was a backlog of renewal applications. 

Enter Republican Governor Tom Corbett and his anti-spending, anti-government secretary of 

public welfare, Gary Alexander. They decided to plow ahead with their new approach to 

eligibility verification: ten days to receive and process the overdue renewals, and an assumption 

of ineligibility if the applications weren't reviewed during that time period. 

Predictably, the offices couldn't keep up with the new deluge of mail. It doesn't seem a stretch to 

suggest that a Republican administration-hostile to Medicaid-had identified a weakness in the 

system, exploited it, so that it could reduce spending while bolstering its claim that the system is 

broken. 

Who are some of the victims wronged by the Corbett-Alexander approach to children's health? 

A 5-year-old with leukemia; a 2-year-old with a congenital heart disorder; a severely disabled 

12-year-old who requires home healthcare; 9-year-old twins, one with autism, the other with a 

hearing impairment; a I-year-old with cerebral palsy. 

Imagine, a parent of a toddlcr battling canccr, and suddenly a need to-as one advocate put it-

"engage in a Kafkaesque process of getting your kid back on Medicaid." 

What is also deeply disturbing is this: normally when a child is no longer Medicaid-eligible in 

Pennsylvania parents are referred to the Children's Health Insurance Program (CHIP), a 

federally subsidized healthcare program for low-income kids. The state takes great pride in near 

universal coverage of children-it offered one of the first CHIP programs in the country in 1992. 

But as advocates watched Medicaid enrollment fall nITa clitl-89,000 dropped between August 

2011 and January 20 12-CHIP enrollment remained flat. 

http://www.thenation.com/blog/168665/week-poverty-89000-children-pennsylvania-Iosemedicaid 
178 


86248.121

Where the hell are the kids? advocates began to ask. 

DPW's initial explanation was that the 89,000 kids dropped included families that moved out of 

state or were no longer income-eligible. But, when pressed for an accounting, DPW's own 

analysis revealed that the number offamilies falling within these categories is paltry. 

Secretary Alexander also played games with the numbers. As recently as May 1, during an 

interview on Pennsylvania public radio, he said: "It wasn't children that were removed, it was 

families. We call them cases-so that there are parents and children." 

But Penns), j,/mia P,lrtnerships t'JI" Children, a nonpartisan organization dedicated to improving 

the health, education and wellbeing of children and youth throughout the state, says that simply 

isn't true. It points to DPW's own records, which show that the 89,000 figure represents children 

dropped from Medicaid. 

Secretary Alexander also offered this explanation for the state's actions: "The problem we have, 

of course, is that We have federal rules and regulations that we have to follow and we have to do 

those redetenninations every six months." 

Actually, the problem the secretary has is either ignorance or lying: federal law requires 

eligibility renewals only once a year, and in some states even a verbal statement regarding 

income is sufficient. 

Alternatives to DPW's current neglectful approach have been offered: What about following up 

with phone calls and multiple mailings to ensure that children weren't improperly denied 

coverage? Or a moratorium on dropping kids from the program until DPW is certain it is 

adequately processing the renewals? Or at least halting six-month eligibility reviews of children 

with the most serious illnesses? All of these options are pennitted under federal law. 

Every proposal or idea has been rejected, and tens of thousands of kids remain virtually 

disappeared by the Corbett-Alexander approach to healthcare. 

Pennsylvania Set to Eliminate Safety Net of Last Resort 

"On Sunday, nearly 70,000 Pennsylvanians with disabilities will lose their sole source of income 

overnight," legal aid lawyer Michael Froehlich of Community Legal Services in Philadelphia 

told me yesterday. 

The sudden elimination of the "safety net oflast resort"-the General Assistance (GA) 

program-is especially troubling when one considers who is currently eligible for it: disabled or 

sick adults without children; domestic violence survivors, many of whom have just fled abusers 

(lifetime benefit capped at nine months); adults participating in alcohol and other drug treatment 

programs (also capped at nine months); adults caring for someone sick or disabled, or an 

unrelated child; and children living with an unrelated adult. 

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lnall, over 90 percent of recipients are temporarily or permanently disabled. The 68,000 people 

in the program--or just about one in every 200 residents-receive approximately $205 per 

month. Those funds enable many people to rent a room, pay for transportation to needed 

appointments, cover co-pays, or escape abuse. DPW estimates that eliminating the GA program 

will save the state $150 million annually. 

According to Froehlich, when the GA rolls were trimmed in 1982, 1994 and 1996, people were 

provided sixty days notice. But this time "many people won't find out until they go to 

withdrawal their money next week to pay their July rent." 

There are reports that the welfare office in Philadelphia is bringing in additional guards to protect 

staff on Monday. 

Froehlich and Community Legal Services are part of PA Carcs for All, a coalition of more than 

100 organizations that initially fought to save the program and then offered an alternative 

proposal: eliminate GA assistance for approximately 40,000 people, but maintain it for 30,000 of 

thc most sick and disabled; plus children, domestic violence survivors and people actively 

participating in drug and alcohol treatment programs. That plan would cost $42.1 million 

annually, and allow an annual savings of $107.9 million. 

"We've just tried every way we can to mitigate the harm," said Froehlich. 

The coalition has pressed its case on both moral and economic grounds. In a May 22 "Open 

Letter to Pennsylvania House and Senate Members," the coalition writes: "No child should be 

homeless. In fact, no one should be homeless. People with disabilities and older adults should be 

able to live safely and with dignity. Women and children should be able to live free from 

violence, especially in their own homes." 

The coalition also argues that cutting the program makes absolutely no fiscal sense. 

"The loss of General Assistance will be more expensive for taxpayers," the letter reads, noting 

that if just 7 percent of current recipients enter the criminal justice system, $150 million in 

savings from eliminating the program will suddenly be a $9 million overall cost to taxpayers. If 

just I percent of current recipients end up in psychiatric hospitals the overall cost of eliminating 

the program will be $20 million; and if just 20 percent end up in homeless shelters that will mean 

a $23 million hit to taxpayers instead of any savings. (And the coalition projects that the number 

of current GA recipients turning to the shelter system will be much higher than 20 percent; 

people will quickly overwhclm the sheltcrs, houses of worship and human services providers.) 

According to Froehlich, the most frustrating part about this decision is that the resources are 

available if Governor Corbett or the legislature had any interest at all in preserving the program. 

In fact, the state just announced a $1.65 billion tax credit to Shell Oil over twenty-five years in 

order to bring an ethylene cracker plant to Western Pennsylvania. According to the Pennsylvania 

Budget and Policy Center, "the 400 permanent jobs at the plant will come at a hefty price to 

taxpayers, $165,000 per year per job, or $4.125 million per job over the 25-year life of the 

program." 

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"And the administration's saying we can't come up with $42 million for our alternative proposal 

to help the very most vulnerable, most needy Pennsylvanians?" said Froehlich. 

Froehlich has begun getting calls from clients who are asking, "What's next? What are we going 

to do?" 

"I don't have an answer for most of them," he said. "I got nothing." 

Poverty and Pride 

Tomorrow is the last day of LGBT Pride Month: a time for individuals to be visible and out, and 

for a movement of LGBT and non-LGBT people to demonstrate that we're here and not going 

anywhere. It's also a time to reflect on the progress we've made and to recommit to the work that 

remains in order to achieve full equality. 

Some of that work involves paying much more attention to LGBT folks living in poverty. 

A report issued by the Movement Advancement Project, Family Equality Council, and Center for 

;\merican Progress (CAP)--";\Il Children Matter: How Legal and Social Inequalities Hurt 

LULU Families"-notes that there are now an estimated 2 million children being raised in LGBT 

families, and they are twice as likely to be poor than children of heterosexual married couples. 

The average household income for LGBT families with children is 20 percent less than 

heterosexual couples with children. LGBT families live in 96 percent of US counties, and samesex couples in the South are more likely to be raising children than those in other regions ofthe 

country. 

"It's true, we actually don't just live in California, New York and DC," says report co-author Jeff 

Krehely, vice president of LGBT research and communications at CAP. "We live all across the 

country-some of us have kids, some of us don't. We're all races and ethnicities, and our 

earnings run the gamut. We basically reflect the diversity of this country." 

Krehely says that even national advocates sometimes fail to recognize LGBT diversity, and the 

demographics in the South are a great example of that. He suggests that a lower cost ofliving 

combined with less social mobility for low-income families might explain why so many LGBT 

families remain in a region "not exactly known for being welcoming to gay people or 

minorities." 

"But knowing these kinds of demographics isn't just about thinking more accurately about 

LGBT realities," says Krehely. "It's about being more effective as an advocate and realizing, for 

example, if we say, 'We're not going to get marriage equality in Mississippi or Alabama anytime 

soon, so we're not going to play in those states,' well, then we're leaving behind a lot of 

people-including some of very the people who are most in need, and most in need of our 

advocacy." 

At the heart of the economic struggles for LGBT families rich, poor, and in between, is what the 

report calls the "legal stranger" issue. In contrast to a child of a heterosexual couple, a child born 

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to (or raised by) two LGBT parents "may have one parent deemed a legal stranger by law, 

threatening to undercut family permanency." These children lack protection when their parents' 

relationship dissolves or a parent dies; the relationship to his or her parents will be recognized in 

fewer than half of all US states; fear of a parent's deportation hangs over the heads of too many 

children of bi-national, same-sex couples. 

"Say one parent is here on a student visa or a work visa," says Krehely. "The visa expires-that 

parent could be deported, taken away from his or her kids. It's more than just heart wrenching. If 

that parent is the breadwinner-the family's economic security is at stake. This all impacts the 

well being of kids when there is this kind of instability in terms of emotional support, love, being 

taken care of and being provided for financially and materially." 

The legal stranger definition also leads to difficulties accessing the safety net since benefits 

depend on "legal" household size and income. Cash assistance, health insurance, child care 

assistance, educational loans and other forms of assistance may not be available to LGBT 

families due to the narrow legal definition offamily. LGBT families often can't take advantage 

of the Child Tax Credit or Earned Income Tax Credit-both of which have a signiticant antipoverty effect and ease the financial costs of raising children. Social Security and Survivors 

Benefits are denied if a non-recognized parent dies, even if the children were financially 

dependent on the parent, and even if the parents are legally married in their state; surviving 

same-sex spouses are also denied benefits. 

"The legal stranger issue is something that most people who don't know much about LGBT 

people can relate to," says Krehely. "Everybody gets into positions where you rely on those 

relationships to help a family member in need. What would happen if that just didn't exist for 

you? " 

Some of the recommendations the report makes include: recognizing LGBT families across 

safety net programs and providing equitable treatment in the tax code; passing parental 

recognition laws at the state level to fully protect children in LGBT families; legalizing and 

federally recognizing marriage for gay and lesbian couples; creating stronger support services for 

LGBT families, particularly families of color, low-income and transgender parents. 

Pride Month is great, but there are eleven other months in the year that require the same kind of 

commitment if we are going to get the work done. You can get involved with the groups that 

authored this report, Immigration Equality, llall" in Ten, and many others. Anti-poverty 

advocates also can ensure that the concerns of LGBT people are addressed in their ongoing 

work. 

"This isn't about 'special rights,'" says Krehely. "It's about leveling the proverbial playing 

field." 

Thc Supreme Court and Medicaid 

When I heard the news about Chief Justice John Roberts's big surprise for America I was just as 

excited as the next guy. But then I read that the Court struck down the formidable stick that the 

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legislation provided the federal government to compel states to expand Medicaid. Suddenly, a 

good day for most Americans seemed-as usual-like a mixed bag or worse for the poor as 

decisions on Medicaid expansion would be left to the states (see Pennsylvania above for 

implications). 

I tweeted-because I try to do that just like the young folks now: "not to be a buzz kill, but I 

think the #Medicaid decision potentially sucks for poor people. Fed gov loses stick to compel 

states to expand." 

Then r did what I should have done before r tweeted (which is why r used to avoid tweeting 

altogether) and surveyed people who know a hell of a lot more about this stuff than I do. Here 

are some observations from the Center on Budget and Policy Priorities for your consideration if 

you are still trying to figure out the implications: 

"The typical state [Medicaid program] only covers working parents who make less than 63 

percent of the poverty line ($12,790 a year for a family of three) and non-working parents with 

incomes below 37 percent of the poverty line ($7,063 a year). Only a handful of states provide 

coverage to any low-income adults without dependent children .... The Medicaid expansion 

would cover these poor and low-income adults by expanding Medicaid to 133 percent of the 

poverty line ($25,390 for a family of three). CBO assumed an additional 17 million adults would 

receive Medicaid coverage by 2022, as a result.. .. The federal government will bear nearly 93 

percent of the costs of the Medicaid expansion over its first nine years .... Because the expansion 

is such a good deal for states, they should move forward and cover low-income adults in their 

states. But what happens in states that do not go ahead and provide coverage? The poorest 

adults--primarily parents and other adults working for low wages-will be left out in the cold." 

-Judy Solomon, vice president for health policy, Center on 

Budget and Policy Priorities 

"The single biggest challenge may lie in the decisions that states make regarding health coverage 

for uninsured people living below the poverty line-primarily working-poor parents and other 

adults who work for low wages .... A state would have little basis for refusing to implement the 

Medicaid expansion, other than for narrow ideological reasons. But in any state that does refuse 

to implement the expansion, a shocking inequity will arise. People with incomes between 100 

percent and 400 percent of the poverty line will be eligible for subsidies to help them afford 

coverage in the new health insurance exchanges. But people below the poverty line will not be 

eligible, because the Affordable Care Act assumes they'll be in Medicaid instead." 

-Robert Greenstein, president, Center on Budget and Policy 

Priorities 

I think it's safe to say that a lot of work lies ahead to make sure that the poor aren't once again 

cut out of a good deal. 

Houston Janitors (continued) 

The story of Adriana Vasquez and 3.400 fcllo\\ janitors down in Houston continues to gain 

traction. Nation editor Katrina vanden Heuvel wrote about it in her weekly column for the 

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Washington Post, and her tweet brought the story to the attention of NPR's Here & Now. The 

Jlollhel1' Filipowicz Show also gave the story quite a bit of airtime. 

This Sunday, civil rights activist and actor Danny Glover will visit the city to meet privately with 

a delegation of janitors. They will later be joined by faith and civil rights leaders at a news 

conference at 2 PM (Third Ward Multi-Services Center, 3611 Ennis Street). 

"It's magnificent. It's great that an actor like Danny Glover cares about janitors-you just don't 

see that very often," Vasquez told me. "I hope this will bring further attention to the plight of 

janitors and working people in Houston and across the United States." 

Get Involved 

Act ~()W to Support WIC 

Events 

Welcome Home the NUllS on the Bus: Monday, July 2, 12-1 PM, United Methodist Building, 100 

Maryland Avenue NE, Washington, DC. The Soul Sisters wrap up their nine-state, twenty-eightcity bus tour to call attention to the House Republican-passed Ryan budget and the damaging 

effects it would have on poor, vulnerable and struggling people throughout America. Help give 

them the welcome and thanks they deserve. 

50 Y cars Since The Other America: Understanding & Addressing Poverty in the 21 st Century: 

Tuesday, July 10, 9am - Spm, The Newseum Knight Conference Center, Washington, DC. 

Leading researchers, practitioners, and journalists will assess how economic and policy trends 

are affecting poverty today, and will discuss promising new policies and strategies for lifting and 

keeping Americans out of poverty. 

2012 Kansas COJ1fcr~nce on Poverty: July 25-27, Hyatt Regency, Wichita, Kansas. I'll be there 

and I'm honored to be speaking. But I'm also staying for the whole shindig, because I'm going 

to learn a lot from the people running this show, and so can you. The Kansas Association of 

Community Action Programs and the Kansas Community Action Network have their fingers on 

the pulse of poverty and what's happening in the anti-poverty community. Plus Deborah 

Weinstein, executive director of the Coalition on Human Needs, is keynoting. My opinion: 

through her thirty years of advocacy experience she's pretty much like some sort of Jedi Master 

on all things poverty-related. It's kinda scary. 

Articles and Other Resources 

"EI1'C Encourages Work and Success ill School and Rcduces Povcrty," Jimmy Charite, Indivar 

Dutta-Gupta, and Chuck Marr 

"Children's Share of Federal Budget Decreasing," First Focus 

"Evidence Free Policy Decisions; Driving an Epidemic," Dr. Deborah Frank 

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"I IOl11cics:, Families Tum to City It)r I !ell' llind No Rooms. Risk Child Welfare Inquiry," Annie 

Gowen 

"Women \Vho Don't Havc Anything Close (0 'It All'," Katrina vanden Heuvel 

"Faith Reflection on the May Jobless Numbers and Older Workers," Interreligious Working 

Group on Domestic Human Needs 

"Culting Food Stamps While (Jiving the Sugar Lobby Billions," Zaid Jilani 

Vital Statistics 

US poverty (less than $22,314 for a family of four): 46 million people, 15.1 percent of 

population. 

Children in poverty: 16.4 million, 22 perccnt of all children, including 39 percent of AfricanAmerican children and 35 percent of Latino children. 

Number of poor children receiving cash aid: one in five. 

Poverty rate for people in female-headed families: 42 percent. 

Single mothers with incomes under $25,000: 50 percent. 

Single mothers working: 67 percent. 

Deep poverty (less than $11,157 for a family offour): 20.5 million people, 6.7 percent of 

population. Up from 12.6 million in 2000. 

Increase in deep poverty, 1976-2010: doubled-3.3 percent of population to 6.7 percent. 

Americans with no income other than food stamps: 6 million, 2 percent of population. 

Twice the poverty level (less than $44.628 for a family of four): 103 million people, roughly I in 

3 Americans. 

Families receiving cash assistance, 1996: 68 for every 100 families living in poverty. 

Families receiving cash assistance, 20 I 0: 27 for every 100 families living in poverty. 

Impact of public policy, 20 I 0: without government assistance, poverty would have been twice as 

high-nearly 30 percent of population. 

Quote of the Week 

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"Nothing like this in recent history." -Pennsylvania resident and longtime advocate for children 

and families, on the state's Medicaid debacle 

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Mr. BURGESS. But Mr. Alexander, I think in fairness to you, I am 

going to submit a question to you about this data and I would be 

very grateful for your reply to that. The same courtesy will be afforded to Ms. Schakowsky as well, and I want to remind all members, I said earlier 5 business days, it is actually 10 business days 

to submit questions for the record, and we will ask the witnesses 

to respond to those questions promptly. Members should submit 

their questions by the close of business on Thursday, December 

27th, and by happy occurrence, we will be here on Thursday, the 

27th. 

So without objection, the subcommittee is adjourned. 

[Whereupon, at 1:29 p.m., the subcommittee was adjourned.] 

[Material submitted for inclusion in the record follows:] 

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Opening Statement of the Honorable Fred Upton 

Subcommittee on Health 

Hearing on "State of Uncertainty: Implementation of PPACA's Exchanges and Medicaid 

Expansion" 

December 13, 2012 

(As Prepared for Delivery) 

Only 13 months remain until PPACA is fully implemented and many questions still remain 

unanswered, leaving states in the dark about the future of the health insurance markets as well 

as clouding the status of their largest annual budgetary expenditure. Families are also left 

wondering whether their personal health plan that protects them today will be around in 2014 at a 

price they can afford. 

States continue to express their frustration with the federal government's delay to provide the 

rules of the road of this massive regulatory undertaking. Since enactment of the preSident's law 

nearly three years ago, thousands of pages of regulations have been issued for states to review 

and analyze. Yet despite the daily rules and notices printed in the federal register, basic 

questions remain unanswered. For example, no final rules detailing federal benefit mandates and 

actuarial value have been issued for health plans operating in the exchanges. Benefit 

requirements and cost-sharing rules for those newly eligible for Medicaid remain unresolved. 

Despite numerous requests for guidance after the Supreme Court declared PPACA's Medicaid 

mandate unconstitutional, states received little information from the administration for five months 

- until just three days ago, when the administration finally issued a non-binding "Frequently Asked 

Questions" document. This release however only addressed a fraction of questions. It should also 

be noted the administration issued the guidance for states with only three days remaining until 

tomorrow's HHS deadline forcing states to make a final decision on an exchange. This is not the 

way the federal government is supposed to work - especially when one-sixth of our economy is 

being transformed. 

If the administration's inability to respond and answer states' questions and concerns is any 

indicator of how the rest of PPACA is going to be implemented, America faces indefinite 

uncertainty. 

The administration's actions to date show that states are servants, not partners, under PPACA. 

The administration has not shown any willingness to work in partnership with the states; it is no 

wonder so many states have said no to the law's exchanges and Medicaid expansion. 
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Rep. Joseph R. Pitts 

Opening Statement 

Energy and Commerce Snbcommittee on Health 

"State of Uncertainty: Implementation of PP ACA's Exchanges and Medicaid Expansion" 

December 13, 2012 

On January 1,2014, less than 13 months from now, the Affordable Care Act's health exchanges 

and Medicaid expansion are to be up and running. 

The health care law was passed over 33 months ago. Since then, the Obama Administration has 

released thousands of pages of regulations, and yet has failed to give states the critical 

information they need to make informed decisions about whether to set up state-based health 

exchanges and whether to proceed with the Medicaid expansion. 

The Administration has been particularly non-communicative on these topics. 

On July 2nd of this year, the National Governs Association (NGA) sent Health and Human 

Services (HHS) Secretary Kathleen Sebelius a detailed letter raising concerns and questions from 

the bipartisan group of governors in light of the Supreme Court ruling striking down the ACA's 

mandate on states to expand their Medicaid programs. 

On July 3rd, the National Association of Medicaid Directors sent a similar letter to the Centers 

for Medicare and Medicaid Services (CMS). 

And, on July lOth, the Republican Governors Association (RGA) sent a letter to President Obama 

outlining basic operational and implementation questions related to ACA. 

The RGA sent yet another letter to Secretary Sebelius on July 23rd after CMS failed to 

substantively answer the 30 specific questions posed in its earlier letter. 

Unfortunately, the responses to these letters were merely formal thank you and receipt of 

acknowledgement letters or incomplete responses with general information. 

On August 20th, Full Committee Chairman Fred Upton and I sent a letter to CMS requesting an 

update regarding the Administration's failure to respond to the states' specific questions. On 

October 4th, we sent a similar letter to Sec. Sebelius. 

My home state of Pennsylvania sent three letters of its own to HHS this ~ear asking for clear 

guidance on exchange and Medicaid expansion issues, dated January 26t , August 23rd, and 

September 26th. None of them were answered. 

Apparently, HHS believes that its "Frequently Asked Questions" release of December 10th 

provides states with all of the guidance needed to make these critical decisions, despite having no 

firm answers on benefit mandates, actuarial value, and the details of the federal exchange. 
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HHS continues to trumpet the "flexibility" states will have in running their own health insurance 

exchanges. However, the ACA is quite clear that it is HHS not the states that has the power 

to make all key determinations. 

In state-run exchanges, HHS will choose the essential benefits that must be paid for by 

individuals and families; select the doctors and other health care professionals that allowed to 

provide care in exchange plans; decide whether your plan's provider network is "adequate" 

(regardless of whether it covers your doctor); impose price controls on health coverage; establish 

cost-sharing requirements regardless of their effect on premiums; impose certification and 

decertification plan requirements written by HHS; and determine whether state exchange rules 

conflict with or prevent the application offederal regulations; among many others. 

That is not "flexibility." 

Tomorrow, December 14th, is the deadline by which states are to inform HHS if they will set up 

and run their own health exchanges. Based on the lack of guidance from HHS, the illusion of 

true flexibility, the uncertainty surrounding what is expected of the states and how the exchanges 

and expansion will be paid for, Pennsylvania Governor Tom Corbett announced yesterday that 

he will not pursue a state-based health insurance exchange, and he is delaying a decision on 

whether the state will expand its Medicaid program. 

Enrollment in the health exchanges is to begin October I, 2013. As of today, only 18 states have 

decided to run their own exchanges. 

These next 13 months will see a flood of new regulations from Washington and impossible 

burdens placed on states. 

I would like to thank all of our witnesses for being here today. I am interested in hearing from 

our Administration witnesses what efforts they have taken to work with states on these important 

decisions and what plans they have to help the states meet the quickly approaching 

implementation deadlines. 

From our state witnesses, I am hoping to learn about their experiences with the law and with 

HHS, and I would give a special welcome to Gary Alexander, Secretary of the Department of 

Public Welfare in my home state of Pennsylvania. 
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Gary Cohen's Hearing 

"Exchanges & Medicaid Expansion" 

Before 

House Energy & Commerce Committee 

Subcommittee on Health 

December 13, 2012 

The Honorable Joseph R. Pitts 

1. It appears that the Administration is ignoring the letter of the law when it's convenient. 

I have a series of legal questions related to highly questionable action taken by the 

Administration during implementation. 

a) Can you point to the provision of the law that defines what a "state partnership 

exchange" is or provided HHS the authority to create such an entity? 

Answer: Yes. A State Partnership Exchange is a variation of a Federally-facilitated Exchange 

as authorized in section 1321 (c) of the Affordable Care Act. This section establishes that if a 

state will not have an Exchange operational by January 1,2014, or has not taken actions to 

implement the requirements to operate an Exchange, then HHS shall either establish and operate 

an Exchange or take such actions as are necessary to implement an Exchange in that state. A 

State Partnership Exchange is simply a form of the Federally-facilitated Exchange called for in 

the statute, and because HHS is committed to flexibility for states, the State Partnership 

Exchange enables states to engage actively with the Federal Government in the operation of 

certain aspects of an Exchange with which they have considerable expertise. 

b) Can you explain what provision ofthe law provides CMS the authority to fund a 

"state partnership exchange" with money allotted under 1311(a)? This provision 

of the law makes no mention of a state partnership exchange. 

Answer: Yes. Under section 131 I (a)(3), funds may be used "for activities (including 

planning activities) related to establishing" an Exchange. Activities undertaken by a State 

Partnership Exchange contribute to the establishment of an Exchange. 

2. Please provide us the nnmber of states who as of today have submitted an application to 

CClIO to run an Obamacare state-based exchange. 

Answer: As of December 13,2012, fourteen states and the District of Columbia have submitted 

applications or letters of intent to run State-Based Exchanges.l 

l They are California, Hawaii, Vermont, Mississippi, Colorado, Connecticut, Kentucky, Maryland. Minnesota, New 

York, Oregon, Rhode Island, Washington, and Idaho. 
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3. Please provide the Committee with a detailed list of all contracts entered into by HHS 

related to the creation, development, planning, staffing, or any other activity related to 

federally facilitated exchanges administered by the Secretary under authority granted 

to HHS by Section 1321(c) of PPACA. The response should include the dollar amount 

and summary of the scope of work associated with each contract. 

Answer: As part of the efforts to implement the Federally-facilitated Exchange and to provide 

key support both to states that plan to operate Exchanges, Medicaid, and the state Children's 

Health Insurance Program (CHIP), CMS released a request for proposals (RFP) on 

June 24, 2011. CMS awarded two separate task orders to two separate contractors. A contract 

for the Data Services Hub was awarded to Quality Software Services, Inc. (QSSI) on 

September 30, 20 II. The Hub is an important part of the infrastructure that will enable all 

Exchanges, regardless of the model, and state agencies administering Medicaid and CHIP to 

provide accurate and timely eligibility determinations. Functioning as a sophisticated router 

system, the Hub will enable Exchanges and state agencies administering Medicaid and CHIP to 

securely obtain information from Federal data sources, such as the Internal Revenue Service, 

Social Security Administration and Department of Homeland Security to verify key elements of 

the application. 

The contract for the Federally-facilitated Exchange portion of the original RFP was awarded to 

CGI Federal on September 30, 20 II. Under this contract, CGI will help to build and support the 

information technology systems of the Federally-facilitated Exchange. 

4. Please provide the Committee with a detailed list of all expenditures incurred by CCIIO 

related to implementation of PP ACA. The response should include the dollar amount, 

summary of work associated with each expenditure, and source of funding. 

Answer: Please refer to the attachment for a list of all expenditures incurred by CCIIO related 

to implementation of the Affordable Care Act, which includes a description of the work and 

source of funding associated with each expenditure. 

2 
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The Honorable Michael C. Burgess, M.D. 

i. While the federal government can continue to push deadlines and hold rnles, the States 

and health plans are left on the hook. Have you considered the economic implications if 

plans are not equipped with the necessary guidance to begin enrollment in a few 

months? If we are not prepared to go live - have yon contemplated the financial impact 

on health plans who will be required by statute to meet requirements but have not been 

given the tools to do so? 

Answer: Since the Affordable Care Act became law, CMS has been working with many 

stakeholders, including states and issuers to implement the law. CMS has issued numerous 

regulations, guidance documents, and fact sheets. In addition, CMS has already issued several 

proposed rules which will soon become final, that issuers need to price policies for the 2014 plan 

year. We continue to hold weekly calls with issuers, and release rules, guidance and other 

documents so that all issuers can be ready for 2014. This work will continue as states prepare 

and CMS implements the Federally-facilitated exchange. Lastly, CMS has hosted 119 events for 

states, totaling approximately 215 hours of technical assistance in 2012. States that want to 

move forward have the information they need and CMS stands ready to work with any state that 

wishes to implement an Exchange. We are confident both states and issuers will be ready for 

open enrollment in 2013. 

2. Cau you explain how the actuarial value calculation will work for family plans? My 

understanding is that the calculator provides the A V for self-only coverage but it is 

unclear how A V for a family plan will be calculated. 

Answer: Actuarial Value (A V) is an average of expected plan spending across a population, 

calculated at the plan level, not the individual. The A V calculator works the same for self-only 

coverage as it does for family coverage. As directed by statute, A V is calculated with respect to 

a standard population. The difference between calculating A V for a self-only policy as opposed 

to a family policy is that the amount of expected plan spending increases in proportion to the 

number of enrollees in a plan. 

3. The Obama Administration and HHS have commonly referred to the states as 

"partners" with the federal government in the Exchanges. Yet, to date, only 18 states 

have committed to running an exchange. Why do you think partiCipation is so low? 

Furthermore, how does HHS plan to coordinate their operation of a federallyfacilitated exchange with existing state laws and regulations? 

Answer: Weare committed to flexibility for states, and each state makes its own decisions 

about whether or how to establish an Exchange, based on its own circumstances. States initially 

electing to have a Federally-facilitated Exchange (FFE) may transition to a State-based Exchange 

for 2015 or beyond. 

When establishing an FFE, we are working closely with States to preserve existing state 

programs, laws, and the responsibilities of the state insurance department wherever possible. If 

CMS operates an FFE in a state, we will work with the state to avoid any unnecessary 

duplication of activities and regulatory oversight. All call center and website personnel for the 

FFE will be trained on relevant state insurance laws and Medicaid eligibility standards so that 

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they can advise consumers about state-specific concerns. CMS has been and will be in constant 

contact with states while developing the FFE, and will remain in communication to provide 

updates after the FFE is established. 

4. In your testimony you refer to the role the federal exchange will play nationwide. The 

Administration has contiuually promised to provide operational details regarding the 

federal exchange. Will the Admiuistration put forward an actual rule related 

exclusively to the federal exchange or will you continue to issue informal guidance on 

the entity that will be running the insurance market in more than 30 states? 

Answer: In states that do not elect to establish a State-based Exchange, HHS will operate a 

Federally-facilitated Exchange (FFE). Regardless of the Exchange model, the standards codified 

in 45 CFR Parts ISS, 156, and 157 (Patient Protection and Affordable Care Act; Establishment 

of Exchanges and Qualified Health Plans; Exchange Standards for Employers, published 

March 27, 2012, or "Exchange Final Rule") will apply. Since publishing the Exchange Final 

Rule, CMS has released several documents clarifying the FFE operations including: the 

interaction between the FFE and state Medicaid and CHIP agencies, general guidance on the 

FFE guidance outlining plan management and consumer support functions for states performing 

these functions, and multiple questions and answers. CMS will and continue to be in frequent 

contact with states while developing the FFE, and will provide updates to states after the FFE is 

operational. 

5. In your testimony you referred to the federal data hub that HHS will use to determine 

eligibility, enrollment, and subsidies in the federal exchange. The Administration has 

continued to refer to this 'federal data services hub', but has not provided any guidance 

or direction ou the hub. When does the Administration plan to release guidance on this 

federal data services hub? 

Answer: CMS has been in close contact with States as they develop information technology 

systems to support Exchanges. In May 20 II, CMS released Guidance for Medicaid and 

Exchange Information Technology (IT) systems, version 2.0.2 This is the primary IT guidance 

that CMS has given to states, and was designed to assist states as they design, develop, 

implement, and operate technology and systems projects related to the establishment and 

operation of Exchanges as well as coverage expansions and improvements under Medicaid and 

the state Children's Health Insurance Program (CHIP), and premium tax credits and cost-sharing 

reductions under the Affordable Care Act. In addition, as issues have arisen, CMS has clarified 

in regulation, such as the Exchange final rule as well as other guidance, specific policies that 

inform state development of IT systems and their interaction with the data services Hub, 

including what applicant information must be verified with Federal data sources. In recent 

months, CMS has also shared with states detailed descriptions and specifications for the various 

eligibility verification and reporting services that will be provided by the data services Hub. 

6. How will the federal data services hub interact with state data systems in approving 

qualified health plans, multi-state plans, bridge plans? How will the federal hub 

2 The guidance is available at hltp:!!cciio.cms.govlresources/fileslexchange medicaid it guidance 053120 t l.pdf. 

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coordinate information between three different federal agencies, state Medicaid 

agencies, state insurance departmeuts, and health plan? 

Answer: The Hub will not have a role in certifying any health plans as qualified health plans. 

The Hub is a critical piece of infrastructure that will help all Exchanges and state agencies 

administering Medicaid and CHIP to communicate with one another. The Hub will help the 

Exchange and Medicaid agency provide accurate and timely eligibility determinations while 

protecting consumer privacy and security. Functioning as a sophisticated router system, the Hub 

will enable Exchanges and state agencies administering Medicaid and CHIP programs to 

securely share information with other data sources, such as the Internal Revenue Service, Social 

Security Administration, and Department of Homeland Security to verify factors of eligibility, 

including citizenship and immigration status and income. The Hub will also support the 

transmission of enrollment data for the Federally-facilitated Exchange to qualified health plans. 

The Hub will not store any personal information; it will route specific eligibility and enrollment 

information to the relevant data source. 

7. Who will have ultimate authority for eligibility decisions and qualified health plan 

certification? Will the federal contractors working on the hub be delegated 

responsibility? 

Answer: Exchanges are required to certify qualified health plans. It is not a function of the 

Hub, which, as noted above, serves only as an information routing device. 45 CFR Part 155 

Subpart K describes Exchange responsibilities with respect to certification of qualified health 

plans, and 45 CFR Part 156 Subpart C describes qualified health plan minimum certification 

standards. The entity responsible for certification depends on the type of Exchange. In states 

electing to operate their own exchange, the State-based Exchange will be responsible for 

certifying qualified health plans. In states electing to operate a State Partnership Exchange, HHS 

will take the results of state reviews of qualified health plan applications but will ultimately be 

responsible for certifying qualified health plans. In states where a Federally-facilitated Exchange 

is operating, HHS will be responsible for certifying qualified health plans. 

With respect to eligibility, an Exchange is responsible for determining eligibility for enrollment 

in a qualified health plan, advance payments of the premium tax credit and cost sharing 

reductions. States have the option to have the Exchange determine eligibility for Medicaid or to 

assess eligibility for Medicaid, in both cases using the state's eligibility rules and subject to 

certain standards. As previously noted, the Hub will provide connections to data sources used by 

Exchanges and state agencies to support eligibility and enrollment operations, but the Hub will 

not make eligibility decisions. 

8. Are pediatric dental benefits included in the list of 10 esseutial health benefits? 

a. Will qualified health plans inside the Exchange (and outside in the individual and 

small group markets) have to offer pediatric dental benefits? 

Answer: Section 1302 of the Affordable Care Act outlines the requirements for health plans to 

cover the ten categories of the essential health benefits (EHBs). Section 131 1 (d)(2)(B)(ii) of the 

Affordable Care Act, as codified in 45 CFR 155.1065, allows the pediatric dental component of 

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EHBs to be offered through a stand-alone dental plan in an Exchange. If a stand-alone dental 

plan is available in an Exchange, section 1302(b)(4)(F) of the Affordable Care Act permits QHPs 

offered in that Exchange to exclude coverage of the pediatric dental component of the EHBs. 

In addition, beginning on January 1,2014, section 2707(a) of the Public Health Service Act 

requires health insurance issuers that offer non-grandfathered health insurance coverage in the 

individual or small group market to ensure that such coverage includes the EHB package under 

section 1302(a) of the Affordable Care Act. Section 2707(a) extends the requirement to offer the 

EHB package to non-grandfathered individual and small group market plans outside the 

Exchange. 

b. To be clear, pediatric dental coverage IS REQUIRED to be offered in the Exchange 

but NOT BY Qualified Health Plans, only be standalone plans? 

Answer: Pediatric oral services are among the ten categories of benefits that are listed as EHBs 

in section 1302 of the Affordable Care Act. Consistent with the statute, these benefits may be 

offered as part of a qualified health plan or as a stand-alone dental plan. While qualified health 

plans have the option to omit the pediatric dental EHB if there is a stand-alone dental plan in the 

Exchange, the QHPs can also decide to include the pediatric dental EHB. Further, if there is not a 

stand-alone dental plan offered through a particular Exchange, the QHPs in that Exchange must 

cover the pediatric dental benefits that are EHBs. 

c. Does that mean individuals and families purchasing coverage in the Exchange (and 

outside in the individual and small group markets) have to buy 2 plans in order to 

meet the requiremeut to carry Essential Health Benefits (both a pediatric deutal 

staudalone piau aud another QHP)? 

Answer: The Affordable Care Act does not require individuals and families to purchase a standalone dental plan. The Affordable Care Act requires health insurance issuers that offer health 

insurance coverage in the individual and small group markets inside and outside Exchanges, 

beginning on January 1, 2014, to ensure that such coverage includes the EHB package. As stated 

above, if a qualifying stand-alone dental plan is available in an Exchange, section 1302(b)(4)(F) 

of the Affordable Care Act permits QHPs offered in that Exchange to exclude coverage of the 

pediatric dental component of the EHBs. In this way, the ten full EHBs must be available to all 

consumers inside of the Exchange, but HHS does not interpret the Affordable Care Act to require 

individuals and families to purchase a stand-alone dental plan. 

d, Will HHS/the Exchange issne a certificate of qualified pediatric dental coverage to 

purchasers? 

Answer: As directed by statute, Exchanges must allow limited-scope dental plans that meet 

certain certification standards to be offered on Exchanges. Section 45 CFR 155.1065 of the 

Exchange Final Rule states that stand-alone dental plans must meet QHP certification standards, 

except for any certification requirement that cannot be met because the plan covers only the 

pediatric dental EHB. The section describes other specific standards that apply to stand-alone 

dental plans and include a requirement that the plan cover at least the pediatric dental EHB. 

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Thus, no stand-alone dental plan that does not include the pediatric dental EHB will be allowed 

to be offered on an Exchange. 

e. How will the IRS know if someone has actually purchased coverage that includes all 

10 Essential Health Benefits? 

Answer: This question is outside the purview of CMS; we would refer you to the Internal 

Revenue Service. We note that there are several types of coverage identified in the statute as 

Minimum Essential Coverage. Section5000A(f) of the Internal Revenue Code contains a list of 

these types of coverage. Not all coverage that is recognized as minimum essential coverage is 

subject to the EHB requirements of the Affordable Care Act. Beginning January I, 2014, new 

non-grandfathered plans in the individual and small group markets must offer coverage that 

meets the EHB requirements. 

f. So it is possible that a single individual or a family without children will be able to 

decline purchase of pediatric dental benefits? 

Answer: Section 1302 of the Affordable Care Act outlines the requirements for health plans to 

cover the ten EHB categories. The only exception permitted under section 1302 is for QHPs 

offered through an Exchange to exclude coverage of the pediatric dental EHB if there is a standalone dental plan offered in the Exchange. Section 1311 of the Affordable Care Act requires all 

Exchange stand-alone dental plans to cover the pediatric dental EHB. In this way, sections 1302 

and 131 I require that the full set of EHBs be offered to people purchasing coverage through the 

Exchange. However, HHS does not interpret these sections to require the purchase of the full set 

ofEHBs. Thus, in an Exchange, a person (with or without a child) could purchase a QHP that 

does not cover the pediatric dental EHB without purchasing a stand-alone dental plan. This 

interpretation would not preclude a state from requiring the purchase of stand-alone dental 

coverage in a State-based Exchange. 

g. Won't a separate, standalone pediatric dental plan in the exchange lead immediately 

to significant adverse selection since it will be purchased by those who know that 

their family will have dental issues? 

Answer: The inclusion of stand-alone dental plans in Exchanges is required by statute. Because 

the pediatric dental benefit involves mostly routine and preventive care, a family's decision to 

purchase pediatric dental benefits may not necessarily be directly linked to dental health status. 

h. Isn't lack of pediatric dental coverage something that has been a significant health 

problem in the Medicaid? Presumably the Medicaid population will be taken care 

of, but doesn't the way this is being implemented give you concern for the health of 

the near-poor individuals and families in the Exchange who may forego pediatric 

dental benefits? 

Answer: CMS views oral health as inseparable from overall health and dental care as an 

essential element of primary care for children. All children enrolled in Medicaid and CHIP have 

coverage for dental services, though ensuring access to these services remains a concern that we 

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are working to address. In Medicaid, children's dental benefits are required through the Early 

Pediatric Screening, Diagnostic, and Treatment (EPSDT) benefit. In CHIP, the children's dental 

benefit became mandatory in FY 20 \ 0 through the Children's Health Insurance Program 

Reauthorization Act of 2009 (CHIPRA). CMS has been working with its Federal and state 

partners, as well as the dental and medical provider communities, children's advocates, and other 

stakeholders to improve access to pediatric dental care. CMS is currently working with states to 

develop oral health action plans, strengthening technical assistance to states and Tribes, 

improving outreach to providers, developing outreach to beneficiaries, and partnering with other 

governmental agencies in order to meet our goals to increase the rate of children who receive 

preventive dental services. 

Pediatric oral services are among the ten categories of benefits that are listed as EHBs in 

section 1302 of the Affordable Care Act. As previously noted, section 13JJ(d)(2)(B)(ii) of the 

Affordable Care Act, as codified in 45 CFR \55.1065, allows the pediatric dental component of 

the EHB to be offered through a stand-alone dental plan in an Exchange. If a stand-alone dental 

plan is available in an Exchange, section 1302(b)(4)(F) of the Affordable Care Act permits QHPs 

offered in that Exchange to exclude coverage of the pediatric dental component of the EHB. 

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The Honorable Marsha Blackburn 

1. Mr. Cohen, I am growing concerned with the timing and lack of guidance from CCIIO 

on the administration of the cost-sharing reduction subsidy. In particular, the lack of 

attention to the operational challenges certain qualified health plans will face in 

tracking and reporting on the subsidy is troubling. The systems used for tracking and 

adjudicating the Part D drug benefit subsidy are not necessarily portable to the 

commercial market. Fnrthermore, the Medicare low income subsidy benefit does not 

have to be coordinated across ten separate benefit categories (the essential health 

benefits) as will the cost sharing subsidy reduction. Thus, companies will need more 

time to build out their claims systems to accommodate the administration of the ACA 

subsidy, yet the proposed rule requires that these systems be in place on day 1 for 

proper tracking and reporting. I'm wondering if this issue has been brought to your 

attention and do you intend to allow additional time for companies to make the proper 

changes to their claims systems? 

Answer: On December 7,2012, the Department published the proposed Notice of Benefit and 

Payment Parameters for 2014. Standards for cost-sharing reduction subsidies are outlined in this 

proposed rule that include a simplified methodology, advance payments to issuers, and annual 

reconciliation. After reviewing public comments, the Department will finalize this rule in early 

2013. Exchange open enrollment begins in October 2013 and we are continuing to work with 

issuers. 

The Honorable Joe Barton 

1. There will be people who, because of the mandated change to MAGI eligibility 

determination and the 5% income disregard, will newly qualify for Medicaid, even 

though a state's eligibility levels do not change. Will CMS recognize these newly 

eligible people as an optional expansion population? If not, will states be eligible for 

100% FFP for this population since they were not previously eligible? 

Answer: The Federal matching rate for newly-eligible beneficiaries, which starts at 100 percent 

in 2014 and phases down to 90 percent in 2020 and beyond, is only available for adults in the 

new low-income group in states that expand Medicaid to 133 percent of the Federal poverty 

level (FPL). If a state expands coverage to this group and there are individuals in the adult 

group, who. because ofthe change to modified adjusted gross income (MAGI) methodologies 

meet the definition of newly-eligible, the state will be able to claim the enhanced Federal 

matching for them. For a state that does not expand, the change to the MAGI methodology alone 

would not result in the higher Federal matching rate being available, as the conversion, under the 

law, does not affect eligibility levels, but simply how they are calculated .. 

2. In the response to Question 34 of the December 10 FAQs to state Governors, Secretary 

Sebelius says that that CMS will support options for the Medicaid expansion popUlation 

that encourage personal responsibility, depending on the design of the program, and 

invites states to come to you with their ideas. Why is this limited to only the expansion 

population? Why are states discouraged, and even prohibited, from implementing 

policies to encourage greater personal responsibility, such as cost-sharing, with the 

entire Medicaid population? 

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Answer: Many Governors have articulated an interest, as you have here, in adopting costsharing requirements for Medicaid beneficiaries. Medicaid already permits certain cost-sharing, 

and we have committed to provide additional authority and flexibility to states in this area. 

Existing cost-sharing requirements for Medicaid recipients vary based on family income, and 

there is significant state flexibility to impose cost-sharing for individuals with incomes above the 

poverty line. Many state Medicaid programs already charge copayments for prescription drugs, 

non-emergent emergency room visits, and dental services. Acknowledging the desire for greater 

authority in this area, CMS plans to publish a proposed rule in 2013 asking for comments on 

updating and simplifying policies around cost-sharing requirements to promote the most 

effective use of services and to assist states in identifying cost-sharing flexibilities. CMS also 

plans to propose to allow states to establish higher cost-sharing for non-preferred drugs, and to 

impose higher cost-sharing for non-emergency use of the emergency department. This costsharing flexibility would apply to individuals at all income levels. 

3. In that same December 10 FAQ, in response to a question on whether CMS will 

approve global waivers with an aggregate allotment, state flexibility, and accountability 

if states are willing to initiate a portion of the expansion, Secretary Sebelius answers, 

"Consistent with the guidance provided above with respect to demonstrations 

available under the regular and enhanced matching rates, CMS will work with 

states on their proposals and review them consistent with the statutory 

standard of furthering the interests of the program" 

Can you provide any insight or additional details on what that means and how that 

would look for states? For example, when Arizona asked for a waiver amendment to 

implement a no-show fee of $25 for missed Medicaid physician appointments, they were 

told "ok" IF they: 

i. Lowered the fee to $3 

ii. Excluded the two most populous counties where a significant number of the 

Medicaid recipients live 

iii. Required providers to submit plans certifying that Medicaid recipients be 

notified of all appointments 48 hours in advance, offered notification in 

multiple ways (phone/text/email) and tracked how notifications were given. 

Would requirements like these be part of a global waiver you refer to or do you 

envision greater flexibility for states? 

Answer: Weare interested in working with states to promote better health and health care at 

lower costs and have been supporting, under a grant program established by Section 4108 of the 

Affordable Care Act, state initiatives that are specifically aimed at promoting healthy behaviors 

that help prevent chronic disease. Promoting better health and healthier behaviors is a matter of 

importance to the health care system generally, and state Medicaid programs, like other payers, 

can shape their benefit design to encourage such behaviors while ensuring that the lowest income 

Americans have access to affordable quality care. We invite states to continue to come to us 

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86248.142

with their ideas, including those that promote value and individual ownership in health care 

decisions as well as accountability tied to improvement in health outcomes. 

II 
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86248.143

Attachment - Question 4 

1/31/2013 

Center for Consumer Information and Insurance Oversight (CCIIO) Outlays 

Through September 30, 2012 

1. Consumer Assistauce Grants 

Consumer Assistance Grants Outlays 

Total Consumer Assistance Grants 

Cum ulative Total 

(Actual $$) 

09/30/2012 

$ $10,750,819 

This funding provides for federal grants to States to establish, expand, or provide support for the 

establishment of independent offices of health insurance consumer assistance or ombudsman 

programs. In tbe ACA, Congress appropriated $30 million in FY 2010 to establish health insurance 

consumer assistance programs. As a condition of receiving grant funds, consumer assistance or 

ombudsman programs must: assist consumers with filing complaints and appeals, assist consumers 

with enrollment into health coverage, and educate consumers on their rights and responsibilities 

with respect to group health plan and health insurance coverage. In addition, these programs must 

collect data on consumer inquiries and complaints to help the Secretary identify problems in the 

marketplace and strengthen enforcement. 

2. Grants to States for Premium Reviews 

Grants to States for Premium Reviews Outlays 

Grants 

Total Rate Reviews 

$ 

$ 

Cumulative Total 

(Actual $$) 

09/30/2012 

33,533,359 

33,533,359 

The statute, authorized in Section 2794 of the Public Health Services Act as amended by the ACA, 

directs the Secretary to carry out a program to award grants to states to help them develop, or 

improve and enhance their current health insurance rate review and reporting processes, and provide 

information and recommendations to the Secretary. Congress has appropriated $250 million to be 

awarded in federal fiscal years (FFYs) 2010-2014. 

3. Temporary High Risk Insurance Pool (PCIP) 

Temporary High Risk Insurance Pool (PCIP) Outlays 

Payroll 

Travel 

Training 

$ 

$ 

$ 

Cumulative Total 

(Actual $$) 

09/30/2012 

5,633,990 

128,677 

2,365 
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86248.144

Attachment - Question 4 113 J/2013 

Supplies 

Other Contracts 

Direct Payments - Federal Fallback 

Federal Fallback Reimbursable Payments 

State High Risk Pool Direct Payments to States 

TototPCIP 

$ 

$ 

$ 

$ 

$ 

$ 

6,163 

58,277,790 

808,126,798 

90,549,094 

1,069,739,394 

2,032,464,271 

Congress appropriated $5 billion to fund the Pre-Existing Condition Insurance Plan (PCIP) Program 

to make health insurance available to uninsured individuals who have been denied coverage due to a 

pre-existing condition. Funding for this temporary program is used to pay claims and 

administrative costs in excess of premiums collected from enrollees in the program. 

4. Temporary Reinsurance Program (ERRP) 

Temporary Reinsurance Program (ERRP) Outlays 

TotalERRP $ 

Cumulative Total 

(Actual $$) 

09/30/2012 

4,901,620,255 

Congress appropriated funding of $5 billion for the Early Retiree Reinsurance Program (ERRP) 

program. This funding reimburses sponsors with certified plans for a portion of the cost of health 

benefits for early retirees and their spouses, surviving spouses and dependents. The program 

provides reimbursement to participating employment-based plans for a portion of the cost of health 

benefits for early retirees and their spouses, surviving spouses and dependents. 

5. Affordable Insurance Excbanges Grants to States 

Affordable Insurance Exchanges Grants to States Outlays 

Total Exchanges Grants $ 

Cumulative Total 

(Actual $$) 

09/30/2012 

192,091,431 

Section 1311 (a) of the Affordable Care Act provides grant funding to states for activities related to 

establishing an Exchange. These grants are available for states seeking to establish a State-based 

Exchange, to build functions that a State elects to operate in partnership with the Federal 

government, and to support state activities to build interfaces with a Federally-Facilitated Exchange. 

Grants may be awarded through December 31, 2014 for all types of Exchanges, and grant funds are 

available for approved and permissible establishment activities. The first year of Exchange activity 

is critical to ensuring Exchange self-sufficiency. 

6. Consumer Operated and Oriented Plan Program (CO-OP) 

Consumer Operated and Oriented Plan Program (CO-OP) -

Program Account Outlays 

Total CO-OP (Program) $ 

Cumulative Total 

(Actual $$) 

09/30/2012 

38,279,379 
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86248.145

Attachment - Question 4 

113112013 

Consumer Operated and Oriented Plan Program (CO-OP) -

Financing Account Outlays 

Total CO-OP{ProgramJ $ 

Cumulative Total 

(Actual $$) 

09/30/2012 

56,652,674 

This funding provides loans to capitalize eligible prospective CO-OPs with a goal of having at least 

one CO-OP in each state. The statute permits the funding of multiple CO-OPs in any state, 

provided that there is sufficient funding to capitalize at least one CO-OP in each state. The statute 

directs the Secretary to give priority to applicants that will offer CO-OP qualified health plans on a 

statewide basis, will use integrated care models, and have significant private support. At the time of 

this hearing, $3.4 billion was available to carry out the program. However, since that time, the 

American Taxpayer Relief Act of2012 rescinded 90 percent of the unobligated balance and 

transferred the remaining funds into a contingency account. 

7. Health Insurance Implementation Fund 

Health Insurance Implementation Fund Outlays 

Tota/lmplementation Fund 

Cumulative Total 

(Actual $$) 

09/30/2012 

$ $122,279,040 

The Health Care and Education Reconciliation Act of2010 (P.L. 111-152) appropriated 

$1,000,000,000 to the Office of the Secretary to allocate at the discretion of the Secretary to provide 

additional funding for Federal administrative costs related to implementation ACA. This funding 

has supported ccrro contracts related to the Federally Facilitated Exchanges and oversight 

responsibilities, ccno infrastructure expenses and staff payroll. This amount does not include 

funding solely related to oversight and technical assistance provided to state-based Exchanges. 

8. General Department Management 

General Department Management Outlays 

Total General Deportment Management $ 

Cumulative Total 

(Actual $$) 

09/30/2012 

63,355,299 

This funding provides supplemental funding for implementation of the Affordable Care Act 

requirements by contractors. 
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86248.146

Attachment - Question 4 1/31/2013 

9. Program Management 

Program Management Outlays 

Total Program Management $ 

Cumulative Total 

(Actual $$) 

09/30/2012 

20,061,293 

These funds pay for travel, training, supplies, contracts, and salaries and benefits of employees that 

administer and implement the Insurance Exchange Marketplace program. These funds also account 

for employee salaries for which the direct appropriations (e.g., Health Insurance Premium Review 

program) do not otherwise allow for funding of those costs. 
205 


86248.147

Cindy Mann's Hearing 

"Exchanges & Medicaid Expansion" 

Before 

House Energy & Commerce Committee 

Subcommittee ou Health 

December 13, 2012 

The Honorable Joseph R. Pitts 

1. You note in your FAQs to statcs from late last year, that states are not allowed to receive 

100 percent federal match (or the enhanced match) if they decide to expand their 

Medicaid eligibility levels up to a level less than 138% of FPL. I'm sure you recognize 

that the budget deficits states face for FY 2013 alone were in the tens of billions. Becanse 

there is in fact a state cost associated with any expansion, why not provide states the 

flexibility they need to implement a partial Medicaid expansion below 138% ofFPL at 

the enhanced FMAP- especially when there is existing authority for you to do so under 

the statute? 

Answer: Congress directed that the 100 percent matching rate be used to expand coverage for 

adults to 133 percent of the Federal poverty level (FPL). The law does not provide for a phasedin or partial expansion. As such, and as we said in our recently released Frequently Asked 

Questions document, we will not consider partial expansions for populations eligible for the 

100 percent matching rate in 2014 through 2016. If a state that declines to expand coverage to 

133 percent FPL would like to propose a demonstration that includes a partial expansion, we 

would consider such a proposal, at the regular Federal matching rate, to the extent that it furthers 

the purposes of Medicaid. For newly-eligible adults, States will have flexibility under the statute 

to provide benefits benchmarked to commercial plans and they can design different benefit 

packages for different populations. 

In 2017, further demonstration opportunities will become available to states under State 

Innovation Waivers with respect to the Exchanges, and the law contemplates that such 

demonstrations may be coupled with section 1115 Medicaid demonstrations. These waivers offer 

states significant flexibility while ensuring the same level of coverage, affordability, and 

comprehensive benefits at no additional cost to the Federal government. We will consider 

section 1115 Medicaid demonstrations, with the enhanced Federal matching rates, in the context 

of these overall system demonstrations. 

2. Last year, the Republican Governors Association released a comprehensive document 

outlining key flexibilities and reforms they believe to be important in sustaining the 

future of the Medicaid program for the most vulnerable Americans in their states. With 

that organization now representing 30 states, have you reviewed such flexibilities and do 

you intend to work with states to ensure a more expedited waiver process so that states 

with innovative models can move forward without waiting years for CMS approval? 

Answer: We appreciate the feedback and suggestions from our state partners in order to meet 

our shared goal of continually improving operational efficiencies to better serve Medicaid 

beneficiaries. We recently outlined many of the programmatic flexibilities currently available to 
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Page 1 

states in a letter to Governors. We continue to outline additional flexibilities and work directly 

with our state partners to determine where additional flexibility would improve the program. 

Additionally, we have taken a number of steps to improve the way the Centers for Medicare & 

Medicaid Services (CMS) interacts with states. With respect to section 1115 demonstrations, we 

created a template, which is now available on Medicaid.gov, that states can use in developing 

new applications. We believe the template will help states ensure the demonstration application 

contains required elements and enable CMS to review the application more efficiently. 

In addition to improving the process for submitting 1115 demonstration applications, we have 

also issued two State Medicaid Director letters 1 that provide states with information related to 

creating integrated care models. In the second of these communications, we outlined how States 

could pursue these models through the state plan process without an 1115 demonstration. 

Finally, we are working on the development and release of our "MACPro Portal," which will 

provide states with an online tool for, among other things, electronically submitting State Plan 

amendments. We believe that the adoption of MAC Pro will streamline State-Federal 

administrative activities. 

3. You have recently issued a final rule on the two-year physician payment bump in 

Obama Care, which took effect on January 1 " of this year. From your perspective, who 

will continue to pay these enhanced rates on January 1, 2015 when the program snnsets? 

Answer: CMS has published a Final Rule implementing the Affordable Care Act provision that 

helps states boost their payment rates to primary care providers to the rates paid by Medicare in 

2013 and 2014. Under the provision, the Federal government will pay 100 percent of the 

increased cost associated with increasing the Medicaid rates to Medicare levels. This new 

enhanced payment will help ensure that people enrolled in the Medicaid program will be able to 

easily access providers and services they need. Increasing Medicaid primary care reimbursement 

to Medicare rates will help ensure that states are able to construct robust provider networks for 

current and future beneficiaries and ensures that doctors are paid the same for treating Medicare 

and Medicaid patients. This bump in payment rates recognizes the important role of primary care 

and preventive services by better rewarding physicians for providing this care. We are confident 

that a sufficient number of providers will continue to participate in the Medicaid program after 

the enhanced rates end in 2014 and CMS will continue, as we do now, to work with states to 

ensure a sufficient number of providers are available to meet the needs of Medicaid 

beneficiaries. 

4. In their July 2012 letter, the Medicaid Directors asked whether or not the expansion of 

Medicaid to children enrolled in foster care is optional? Can you please walk through 

Medicaid coverage for foster children and what the eligibility levels are for foster 

children, what the income eligibility caps arc and when individuals are able to transition 

to private coverage? 

I Letters are available at http://www.medicaid.govfFederal-Policy-GuidancefdownloadsfSMD-12-00 I.pdf and 

http://www.medicaid.gov/Federal-Policy-Guidanccfdownloads/SMD-12-002.pdf. 
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Page 2 

Answer: The only foster care children for whom Medicaid enrollment is required are children 

receiving foster care maintenance payments under title IV -E of the Social Security Act. 

Otherwise, a foster care child can qualify for Medicaid based on meeting the State's 

requirements for the various mandatory and optional groups covered by the State. However, 

Medicaid coverage for "former foster care children" is required starting in 2014. 

Sections 2004 and J0201(a) and (c) of the Affordable Care Act add a new section 

J902(a)(10)(A)(i)(IX) of the Social Security Act under which states must provide mandatory 

Medicaid coverage for individuals under age 26 who were in foster care and receiving Medicaid 

when they turned age 18 or aged out of foster care at a higher age. Eligibility under the adult 

group at § 435.119 of the regulations (as specified in the March 23, 2012 Medicaid eligibility 

Final Rule at http://www.gpo.gov/fdsys/pkglFR-2012-03-23/htmIl2012-6560.htm) will not take 

precedence over coverage under the mandatory group of former foster care children. 
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The Honorable Michael C. Bnrgess, M.D. 

1. The Affordable Care Act includes an annual tax on health insurance companies that 

not only applies to the commercial market but to plans covering Medicaid beneficiaries 

as well. Statutory actuarial soundness requirements snggest that the insurer tax must 

be accounted for when States set reimbnrsements for these Medicaid plans. Milliman, 

an independent actuarial firm, concluded that the application of the insurer tax to 

Medicaid will result in costs to State and Federal governments of $13.6 billion and $24.8 

billion, respectively. In light ofthat, what is CMS doing to prevent the potential impact 

this will have on Medicaid costs both to States and the Federal government? Does it 

make sense to assess a tax that is ultimately covered by State and Federal dollars? 

Answer: Under current regulations, states are required to construct actuarially-sound capitation 

rates which are subject to specified standards and to approval by the Centers for Medicare & 

Medicaid Services (CMS). Actuarially-sound capitation rates are based on services covered 

under the state plan, services provided under the contract, and costs related to providing these 

services. 

2. You noted in your FAQ document this week that the Department is backing away from 

the proposed blended rate, which the President has proposed as his key Medicaid 

reform proposal twice in Congress. Please explain why the Administration has made 

such a switch and provide details on what your alternative proposal is for Medicaid 

reform and deficit reduction? 

Answer: We continue to seek efficiencies and identify opportunities to reduce waste, fraud and 

abuse in Medicaid, and we want to work with Congress, states, and stakeholders to achieve those 

goals while expanding access to affordable health care. The Supreme Court decision has made 

the higher matching rates available in the Affordable Care Act for the new groups covered even 

more important to incentivize states to expand Medicaid coverage. The Administration is 

focused on implementing the Affordable Care Act and providing assistance to States in their 

efforts to expand Medicaid coverage to these new groups. 

3. You also noted in your FAQ document this week that the Department may work with 

states in 2017 who had not yet expanded through an 1115 waiver to possibly provide 

greater flexibilities to the state and some level of an enhanced federal match. If you 

believe that flexibility is available in 2017, why not in 2014? 

Answer: Congress directed that the enhanced matching rate be used to expand coverage for 

adults to 133 percent of the Federal poverty level. The law does not provide for a phased-in or 

partial expansion and as such, we will not consider partial expansions for populations eligible for 

the 100 percent matching rate in 2014 through 2016. Therefore, in the first three years of the 

expansion, only states that wish to fully implement the Medicaid expansion are eligible for the 

enhanced matching rate. In 2017, when demonstration opportunities become available to states 

under State Innovation Waivers, we will consider section 1115 Medicaid demonstrations, with 

the enhanced Federal matching rates, in the context of overall system demonstrations. 

4. Are pediatric dental benefits included in the list of 10 essential health benefits? 

a. Will qualified health plans inside the Exchange (and outside in the individual and 

small group markets) have to offer pediatric dental benefits? 
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Answer: Section 1302 of the Affordable Care Act outlines the requirements for health plans to 

cover the ten categories of the essential health benefits (EHBs). Section 131 I (d)(2)(B)(ii) of the 

Affordable Care Act, as codified in 45 CFR 155.1065, allows the pediatric dental component of 

EHBs to be offered through a stand-alone dental plan in an Exchange. If a stand-alone dental 

plan is available in an Exchange, section 1302(b)(4)(F) of the Affordable Care Act permits QHPs 

offered in that Exchange to exclude coverage of the pediatric dental component of the EHBs. 

In addition, beginning on January 1,2014, section 2707(a) of the Public Health Service Act 

requires health insurance issuers that offer non-grandfathered health insurance coverage in the 

individual or small group market to ensure that such coverage includes the EHB package under 

section 1302(a) of the Affordable Care Act. Section 2707(a) extends the requirement to offer the 

EHB package to non-grandfathered individual and small group market plans outside the 

Exchange. 

b. To be clear, pediatric dental coverage IS REQUIRED to be offered in the Exchange 

but NOT BY Qualified Health Plans, only be standalone plans? 

Answer: Pediatric oral services are among the ten categories of benefits that are listed as EHBs 

in section 1302 of the Affordable Care Act. Consistent with the statute, these benefits may be 

offered as part of a qualified health plan or as a stand-alone dental plan. While qualified health 

plans have the option to omit the pediatric dental EHB ifthere is a stand-alone dental plan in the 

Exchange, the QHPs can also decide to include the pediatric dental EHB. Further, if there is not a 

stand-alone dental plan offered through a particular Exchange, the QHPs in that Exchange must 

cover the pediatric dental benefits that are EHBs. 

c. Does that mean individuals and families purchasing coverage in the Exchange (and 

outside in the individual and small group markets) have to buy 2 plans in order to 

meet the requirement to carry Essential Health Benefits (both a pediatric dental 

standalone plan and another QHP)? 

Answer: The Affordable Care Act does not require individuals and families to purchase a standalone dental plan. The Affordable Care Act requires health insurance issuers that offer health 

insurance coverage in the individual and small group markets inside and outside Exchanges, 

beginning on January I, 2014, to ensure that such coverage includes the EHB package. As stated 

above, if a qualifying stand-alone dental plan is available in an Exchange, section 1302(b)(4)(F) 

of the Affordable Care Act permits QHPs offered in that Exchange to exclude coverage of the 

pediatric dental component of the EHBs. In this way, the ten full EHBs must be available to all 

consumers inside of the Exchangc, but HHS does not interpret the Affordable Care Act to require 

individuals and families to purchase a stand-alone dental plan. 

d. Will HHS/the Exchange issue a certificate of qualified pediatric dental coverage to 

purchasers? 

Answer: As directed by statute, Exchanges must allow limited-scope dental plans that meet 

certain certification standards to be offered on Exchanges. Section 45 CFR 155.1065 of the 

Exchange Final Rule states that stand-alone dental plans must mect QHP certification standards, 

except for any certification requirement that cannot be met because the plan covers only the 
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Page 5 

pediatric dental EHB. The section describes other specific standards that apply to stand-alone 

dental plans and include a requirement that the plan cover at least the pediatric dental EHB. 

Thus, no stand-alone dental plan that does not include the pediatric dental EHB will be allowed 

to be offered on an Exchange. 

e. How will the IRS know if someone has actually purchased coverage that includes all 

10 Essential Health Benefits? 

Answer: This question is outside the purview of CMS; we would refer you to the Internal 

Revenue Service. We note that there are several types of coverage identified in the statute as 

Minimum Essential Coverage. Section 5000A(t) of the Internal Revenue Code contains a list of 

these types of coverage. Not all coverage that is recognized as minimum essential coverage is 

subject to the EHB requirements of the Affordable Care Act. Beginning January 1,2014, new 

non-grandfathercd plans in the individual and small group markets must offer coverage that 

meets the EHB requirements. 

f. So it is possible that a single individual or a family without children will be able to 

decline purchase of pediatric dental benefits? 

Answer: Section 1302 of the Affordable Care Act outlines the requirements for health plans to 

cover the ten EHB categories. The only exception pennitted under section 1302 is for QHPs 

offered through an Exchange to exclude coverage of the pediatric dental EHB if there is a standalone dental plan offered in the Exchange. Section 1311 of the Affordable Care Act requires all 

Exchange stand-alone dental plans to cover the pediatric dental EHB. In this way, sections 1302 

and 1311 require that the full set of EHBs be offered to people purchasing coverage through the 

Exchange. However, HHS does not interpret these sections to require the purchase of the full set 

ofEHBs. Thus, in an Exchange, a person (with or without a child) could purchase a QHP that 

does not cover the pediatric dental EHB without purchasing a stand-alone dental plan. This 

interpretation would not preclude a State from requiring the purchase of stand-alone dental 

coverage in a state-based Exchange. 

g. Won't a separate, standalone pediatric dental plan in the exchange lead immediately 

to significant adverse selection since it will be purehased by those who know that 

their family will have dental issues? 

Answer: The inclusion of stand-alone dental plans in Exchanges is required by statute. Because 

the pediatric dental benefit involves mostly routine and preventive care, a family's decision to 

purchase pediatric dental benefits may not necessarily be directly linked to dental health status. 

h. Isn't lack of pediatric dental coverage something that has been a significant health 

problem in the Medicaid? Presumably the Medicaid population will be taken care 

of, but doesn't the way this is being implemented give you concern for the health of 

the near-poor individuals and families in the Exchange who may forego pediatric 

dental benefits? 

Answer: CMS views oral health as inseparable from overall health and dental care as an 

essential element of primary care for children. All children enrolled in Medicaid and CHIP have 

coverage for dental services, though ensuring access to these services remains a concern that we 
211 


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Page 6 

are working to address. In Medicaid, children's dental benefits are required through the Early 

Pediatric Screening, Diagnostic, and Treatment (EPSDT) benefit. In CHIP, the children's dental 

benefit became mandatory in FY 2010 through the Children's Health Insurance Program 

Reauthorization Act of2009 (CHIPRA). CMS has been working with its Federal and state 

partners, as well as the dental and medical provider communities, children's advocates, and other 

stakeholders to improve access to pediatric dental care. CMS is currently working with states to 

develop oral health action plans, strengthening technical assistance to states and Tribes, 

improving outreach to providers, developing outreach to beneficiaries, and partnering with other 

governmental agencies in order to meet our goals to increase the rate of children who receive 

preventive dental services. 

Pediatric oral services are among the ten categories of benefits that are listed as EHBs in 

section 1302 of the Affordable Care Act. As previously noted, section 1311 (d)(2)(B)(ii) of the 

Affordable Care Act, as codified in 45 CFR 155.1065, allows the pediatric dental component of 

the EHB to be offered through a stand-alone dental plan in an Exchange. If a stand-alone dental 

plan is available in an Exchange, section 1302(b)(4)(F) of the Affordable Care Act permits QHPs 

offered in that Exchange to exclude coverage of the pediatric dental component of the EHB. 
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Page? 

The Honorable Joe Barton 

1. There will be people who, because of the mandated change to MAGI eligibility 

determination and the 5% income disregard, will newly qualify for Medicaid, even 

though a state's eligibility levels do not change. Will CMS recognize these newly 

eligible people as an optional expansion population? If not, will states be eligible for 

100% FFP for this population since they were not previously eligible? 

Answer: The Federal matching rate for newly-eligible beneficiaries, which starts at 100 percent 

in 2014 and phases down to 90 percent in 2020 and beyond, is only available for adults in the 

new low-income group in states that expand Medicaid to 133 percent of the Federal poverty 

level (FPL). If a state expands coverage to this group and there are individuals in the adult 

group, who, because of the change to modified adjusted gross income (MAGI) methodologies 

meet the definition of newly-eligible, the state will be able to claim the enhanced Federal 

matching for them. For a state that does not expand, the change to the MAGI methodology alone 

would not result in the higher Federal matching rate being available as the conversion, under the 

law, does not affect eligibility levels, but simply how they are calculated. 

2. In the response to Question 34 of the December 10 FAQs to state Governors, Secretary 

Sebelius says that that CMS will support options for the Medicaid expansion population 

that encourage personal responsibility, depending on the design of the program, and 

invites states to come to you with their ideas. Why is this limited to only the expansion 

population? Why are states discouraged, and even prohibited, from implementing 

policies to encourage greater personal responsibility, such as cost-sharing, with the 

entire Medicaid population? 

Answer: Many Governors have articulated an interest, as you have here, in adopting costsharing requirements for Medicaid beneficiaries. Medicaid already permits certain cost-sharing, 

and we have committed to provide additional authority and flexibility to states in this area. 

Existing cost-sharing requirements for Medicaid recipients vary based on family income, and 

there is significant state flexibility to impose cost-sharing for individuals with incomes above the 

poverty line. Many state Medicaid programs already charge copayments for prescription drugs, 

non-emergent emergency room visits, and dental services. Acknowledging the desire for greater 

authority in this area, CMS plans to publish a proposed rule in 2013 asking for comments on 

updating and simplifying policies around cost-sharing requirements to promote the most 

effective use of services and to assist states in identifying cost-sharing flexibilities. CMS also 

plans to propose to allow states to establish higher cost-sharing for non-preferred drugs, and to 

impose higher cost-sharing for non-emergency use of the emergency department. This costsharing flexibility would apply to individuals at all income levels. 

3. In that same December 10 FAQ, in response to a question on whether CMS will 

approve global waivers with an aggregate allotment, state flexibility, and accountability 

if states are willing to initiate a portion of the expansion, Secretary Sebelius answers, 

"Consistent with the guidance provided above with respect to demonstrations 

available under the regular and enhanced matching rates, CMS will work with 

states on their proposals and review them consistent with the statutory 

standard of furthering the interests of the program" 
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Page 8 

Can you provide any insight or additional details on what that means and how that 

would look for states? For example, when Arizona asked for a waiver amendment to 

implement a no-show fee of $25 for missed Medicaid physician appointments, they were 

told "ok" IF they: 

i. Lowered the fee to $3 

ii. Excluded the two most populous counties where a significant number of the 

Medicaid recipients live 

iii. Required providers to submit plans certifying that Medicaid recipients be 

notified of all appointments 48 hours in advance, offered notification in 

multiple ways (phone/text/email) and tracked how notifications were given. 

Would requirements like these be part of a global waiver you refer to or do you 

envision greater flexibility for states? 

Answer: We are interested in working with states to promote better health and health care at 

lower costs and have been supporting, under a grant program established by the Affordable 

Care Act, State initiatives that are specifically aimed at promoting healthy behaviors that help 

prevent chronic disease. Promoting better health and healthier behaviors is a matter of 

importance to the health care system generally, and state Medicaid programs, like other payers, 

can shape their benefit design to encourage such behaviors while ensuring that the lowest income 

Americans have access to affordable quality care. We invite states to continue to come to us 

with their ideas, including those that promote value and individual ownership in health care 

decisions as well as accountability tied to improvement in health outcomes. 
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Page 9 

The Honorable Tammy Baldwin 

1. A central qnestion with regard to the Medicaid expansion in Wisconsin remains the 

federal matching rate for our eligible population of non-caretaker adults under 138 

percent of the poverty level. The FAQ issued on December 10, 2012 appears to clarify 

that Wisconsin would initially receive the 100 percent federal match rate for all or 

nearly all of those adults because our existing coverage, which has been capped, is a 

limited benefit. Does the US Department of Health and Human Services agree with the 

assessment in the recent Urban Institute and Kaiser Family Foundation's report that 

the 11 states with limited benefit programs, including Wisconsin's BadgerCare Core 

program, will receive the higher 100 percent match rate in 2014 for all expansioneligible adults? 

Answer: The Centers for Medicare & Medicaid Services (CMS) understands that the 

detennination of how to apply the appropriate Federal matching rate to services for eligible 

beneficiaries will have an impact on states' budgets. CMS is working directly with states to help 

them make this determination. 

In the specific case of Wisconsin, the answer will depend on the nature of the health benefits 

coverage provided under the BadgerCare program as in effect on December 1,2009. 

The Affordable Care Act establishes a new adult eligibility group (see 

section 1902(a)(lO)(A)(i)(VIIl) of the Social Security Act), beginning on January 1,2014, for 

individuals whose income is up to 133 percent of the Federal poverty level. Furthcnnore, the 

Federal matching rate for the expenditures for individuals in the new adult eligibility group who 

meet the definition of "newly-eligible" (in section 1905(y)(2) of the Social Security Act) is 

100 percent beginning January 1,2014. Such increased Federal matching is lowered to 

90 percent effective January 1,2020. The Affordable Care Act defines a "newly-eligible" 

individual as an individual "who, as of December I, 2009, is not eligible under the state plan or 

waiver of the plan for full benefits or for benchmark coverage .... or for benchmark-equivalent 

coverage." We will work with the state to determine whether the BadgerCare program, as in 

effect on December 1,2009, offered such coverage. 
215 


86248.157

February 4, 20]3 

Joseph R. Pitts 

Chairman 

State of Wisconsin 

Department of Health Services 

Scott Walker, Governor 

Dennis G. Smith, Secretary 

Committee on Energy and Commerce 

Subcommittee on Health 

2125 Rayburn House Office Building 

Washington, DC 20515-6115 

Dear Chairman Pitts: 

Tbank you again for the opportunity to appear before the Subcommittee on Health on December 13, 2012, 

to provide important testimony regarding the unceltain state impacts of the Patient Protection and 

Affordable Care Acet (PPACA), Exchanges and Medicaid Expansion. 

Per your request I am providing responses to the additional questions submitted by Members following 

the hearing. Should you have any ftlrther questions please do not hesitate to contact me. 

Sincerely, 

Dennis G. Smith 

Secretary 

I West Wilson Street. Post Office Box 7850. Madison, WI 53707-7850 • Telephone 608-266-9622. 

dhs.wisconsin.gov 

Protecting ali(I promotillg tlte fIealtlt all/I safety aftlle people oj WlYconsill 
216 


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Page 2 of8 

Joseph R. Pitts, Chairman, Committee on Energy and Commerce 

February 4, 2013 

Tile Honorable Michael C. Burgess, M.D. 

1. In Secretary Sebelius' letter to states on Monday, December 10, 2012, she cited that states 

are likely to see net savings from the Medicaid expansion. In my home state of Texas there 

are 3.3 million people currently enrolled in the Medicaid program. This costs Texas 

taxpayers $7 billion annually from the state's general revenue fund alone. Medicaid 

provisions in the Patient Protection and Affordable Care Act (PPACA) are projected to add 

an additional $9.1 billion in order to maintain CUlrent service levels in Texas and it is unclear 

how the state will cover those extra costs. How will your respective states (Wisconsin, 

Pennsylvania, and Louisiana) cover the costs incurred due to the health care law-both 

in the first three years, when federal funding is available, and into tile futnre? 

In ilie current bieflnium, the increase in funding for our Medicaid programs was provided 

through a disproportionate share of new state revenues and diversion in resources from other 

priorities such as education. We believe that without fundamental Medicaid reform, this 

experience is likely to be repeated and continue well into ilie fhture. 

Wisconsin has not yet made a decision on expanding Medicaid. We will do so as part of the 

state's biennial budget process. We have done considerable analysis as input to the decision 

making process, but even at this late date, we still do not know key information. Wisconsin 

had previously expanded eligibility for adults but we do not know whether we will receive 

the 100% federal matching rate for the childless adult population. That decision will swing 

hundreds of millions of dollars between the federal budget and the state budget over time. Of 

course, the taxpayer pays 100% of the cost regardless of which government entity is paying. 

You will note that Secretary Sebelius indicated that States are "likely" to see net savings 

from the Medicaid expansion. That is far from a guarantee and fails to reflect future 

obligations. Several provisions in PPACA shift costs back to States over time. While the 

.PPACA provides enhanced funding for the new adult group statting in 2014, it does not 

account for other residual impacts that States are most certain to face as a result. Of these we 

are most concerned with the impacts on existing populations due to the individual mandate, 

employer behavior, and provider rates. If the PPACA's individual mandate has a similar 

impact as ilie one contained in the Massachusetts's law, States existing Medicaid populations 

could see a significant increase due to the potential woodwork effect. 

We believe it is most prudent to project a high take-up rate after all, that is the goal and 

expectation. Based on previous experience in the state Children's Health Insurance Program 

(CHIP), and ilie highly anticipated outreach campaign that will begin this year, it seems 

likely that States will realize this impact. As you know, PPACA contains no enhanced 

funding for the increase to existing populations. Large employers are facing a daunting 

decision in 2014, provide aflordable health coverage as dictated by PPACA or drop coverage 

and pay a penalty. The PPACA includes a penalty on employers for employees that receive 

federal tax credits offered through exchanges, or employer sponsored coverage that is 

deemed unaffordable based on the employee's income. In both situations, it may be in the 

employer's financial interest to simply pay the penalty and allow ilie employee to obtain 
217 


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Page30fS 

Joseph R. Pitts, Chainnan, Committee on Energy and Commerce 

February 4, 2013 

coverage through the exchange, or through the state's Medicaid program. The Annual 

Employer Health Care Benefits Survey for greater Milwaukee shows iliat as many as 10 

percent of Wisconsin's largest employers may drop coverage, which would equate to more 

than 300,000 Wisconsin employees losing employer sponsored coverage. Of these 300,000 

employees, we estimate that as many as 16,000 would be eligible for Medicaid. Finally, we 

are very concerned about the impact on provider rates. Should coverage of the existing 

popUlations increase we do not believe the provider community is adequately prepared to 

handle the resulting demand and increased utilization. There will be tremendous pressure to 

increase rates. It is obvious that HHS recognizes this dynamic given the PPACA provision to 

increase Medicaid primary care physician rates. But what about the rest of the provider 

community? States that do not increase program rates may see access restricted, sending 

more people into emergency rooms and urgent care clinics for routine care. 

Certainly, it is likcly that some individuals cun-ently on Medicaid will migrate to the health 

exchange and tax subsidies. But on balance, we do not believe savings will offset the costs 

overtime. 

Do you anticipate your states seeing the supposed "net savings" the Secretary claims 

will accrue to states? 

For the reasons previously cited we are skeptical that States are likely to realize a net savings 

due to the expansion. In fact, ilie headline in the Milwaukee Journal SenJinel on January 26, 

2013 read, "State Could Save Money by Not Expanding Medicaid Program." We also 

believe States and will be left trying to find additional state revenues or reductions in other 

state priorities, such as education, to cover other impacts associated with the PP ACA. 

2. After reading pOltions of the law and regulations iliat have been issued, it seems very clear 

that the design and operation of exchanges are controlled by the requirements of the statute 

and rules issued by HHS-regardless of whether a state chooses to run it or default into a 

federal exchange. There seems to be a discrepancy related to federal versus state authority 

under the law which prompts the following questions: 

a. Must states follow new federal requirements related to essential health benefits? 

b. Must states follow federal requirements related to guaranteed issue and 

community rating? 

c. Must states follow new federal rules regarding medical loss ratio? 

d. What about requirements related to network adequacy? 

In light of these requirements, does the Jaw provide you any real discretion or flexibility 

to oversee and design your insurance markets as you see fit? 

There are important distinctions between the statutory requirements and how the Secretary 

has chosen to use her authority. We were initially hopeful that state-ba~ed exchanges that met 

the functional requirements of the statute would be possible. But this optimism faded over 
218 


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Page 40f8 

Joseph R. Pitts, Chainnan, Committee on Energy and Commerce 

February 4, 2013 

time as regulatory and sub-regulatory guidance became available. We also stress that we took 

seriously the statutory deadlines that the Secretary would begin reviewing state exchanges in 

January 2013. We had to make critical decisions and commitments of state resources that 

could not wait for the delays that have occurred. Now, of course, deadlines have been further 

delayed and key functional parts such as the data hub will not work as previously promised. 

Our decision not to pursue a state based exchange has been validated by events. 

Many of the problems associated with the exchanges were could have been avoided had the 

federal govemment chosen to given States true flexibility. Instead, the federal government 

will is going to spend billions of dollars creating massive new government agencies that will 

leave consumers confused and TI.'ustrated. Scarce resources will be wasted as we are getting 

systems changes in a piecemeal fashion. Tills will mean much work will have to be redone. 

We continue to believe that the federal government lacks the experience and knowledge 

necessary to regulate a competitive health insurance market in Wisconsin. We are very 

concerned about the impact to our competitive and diverse health insurance market that has 

served the people of Wisconsin so well. 

Federal exchanges that bcgin in October 2013 are not going to be the "real time," consumer 

friendly experience that has been promised. The federal govemment has yet to share a viable 

business plan for bringing federal exchanges on line. Nor has it shared its contingency plan. 

3 . You noted in your testimony that you are not confident the federal government has 

adequately prepared for handling an tmprecedented number of applications, verifications, and 

enrollments in 2014. With more than $14 Billion in overpayments made in the Medicaid 

program each year due to poor eligibility review, wllat policy changes do you 

recommend that can ensure states and tile federal government are enrolling individuals 

properly? 

There are various sources of Medicaid overpayments. Overall, PPACA will likely make the 

situation worse, not better. Start with repealing the new provision giving hospitals the right to 

provide presumptive eligibility. Allowing a provider, with no opportunity for the state to 

intervene, the authority to commit taxpayer dollars should be viewed as an impermissible 

delegation of authority. One of the basic tenets of public administration is responsibility and 

authority should not be separated. Whcn they are separated, unintended consequences are 

sure to follow. 

Medicaid is also one of the most complicated eligibility systems to run efficiently and 

accurately. PPACA has shifted the burden of pro off rom individuals applying for the 

program to the state which raises concerns. Of all of the public assistance programs, the 

value of Medicaid benefits is at the top of the list. For the vast majority of individuals and 

families on Medicaid, these services will be provided at no cost to them. Requiring 

appropriate documentation and procedures to protect the taxpayer's interest should not be 

vicwed as a burden or an unrealistic expectation. It is also a mistake to place a 

disproportionate reliance on automated data systems because they are not currently capable 
219 


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Page 5 of8 

Joseph R. Pitts, Chairman, Committee on Energy and Commerce 

Februaty 4, 2013 

of doing everything policymakers think they can do. There will always be a human element 

to the process. 

In order to minimize eligibility determination errors, the federal govemment would be wise 

to follow Wisconsin's lead in accessing and utilizing the most current financial and non· 

financial data sources. The majority oflow income individuals seeking health care do not file 

annual income taxes, and relying on attestations for those individuals seeking the new federal 

tax credits will result in exceedingly higher error rates and overpayments. Furthermore, 

eligibility for Medicaid and tax credits should be synchronized. Using 18·month old tax 

records for those individuals that do file taxes annually will result in frustration at filing 

should the individual's income have increased resulting in an unforeseen tax burden. HHS 

and IRS are investing millions in a federal data services hub that will do nothing to prevent 

these types of overpayments but simply move current information around more efficiently. 

Instead they should be investing in a way to obtain information that is current and accurate. 

Federal regulations also assume armies ofinstll'ance agents, navigators, and community 

helpers are going to be trained in complex policies that still have not been finalized. 

The Honorable Marsha Blackburn 

1. I'm curious if you agree with the numerous independent studies which show the health 

insurance tax will drive up premiums for individuals, families, small businesses, and 

seniors, result in higher overall health care costs, and slow job growth, 

Wisconsin agrees with these studies. The new excise tax facing insurers in 2014 will come on 

top of the existing medical loss ratio requirements, and insurers will be forced to pass on 

these additional costs through higher premiums and cost sharing for individuals, employers, 

and public assistance programs. Many small employers in the health care sector, such as 

nursing homes and home health agencies will be hit with new costs that they will expect to 

pass back to the Medicaid program. 

2. The health insurance tax also covers Medicare Advantage and Medicaid Managed Care. As a 

result, the government is taxing itself. Particularly for our state witnesses, do you think 

that the health insurance tax will negatively impact your state Medicaid program? 

Yes, Wisconsin believes that the State will minimally need to make up for 40 percent of the 

tax increase through higher capitation rates or a comparable tax shift for the existing 

popUlations enrolled in a managed care program. 
220 


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Page 6 of8 

Joseph R. Pitts, Chairman, Committee on Energy and Commerce 

February 4,2013 

How will your state respond? Are you likely to raise taxes or cut other programs and 

services? 

The Wisconsin BadgerCare Plus Program will likely cover the increased tax through taking a 

larger share of the state's genel'all'evenue and/or reduce funding for other state priorities such 

as education as a result of the gap created by the tax. 

Since the authors of the law states at the time that the health insurance tax was 

intended to pay for the subsidies in the exchanges and the Medicaid expansion, 

shouldn't the federal government delay or reconsider altogether the collection of this 

tax since many states have opted to run their own exchange or expand their Medicaid 

programs? 

Now that the differences between the authors' assumptions and economic realities are 

apparent, federal officials have an obligation to reconsider the inequities and unintended 

consequences that accompany PP ACA. Reform was supposed to lower the cost of health 

care. That fundamental promise is not being kept. As the flaws in PPACA are exposed, the 

authors have the obligation to fix them, not merely shift blame for their poor design and 

flawed economic theories to the States. 

PPACA provides no direction to what HRS or IRS must do with unspent funds. Why 

should the IRS collect this tax, and drive up costs, harm and already fragile economy, 

for benefits that do not seem to be imminent? 

This could not be more true in the State of Wisconsin. Wisconsin has already achieved the 

majority ofPPACA's objectives having one of the nation's lowest uninsured rates in addition 

to outstanding quality of care. PP ACA has the potential to actually increase the number of 

uninsured in Wisconsin due to the loss of employer-based coverage and costlier health care 

for individuals and employers. 

If you accept the premise of why the tax was included in the law, would you not delay or 

reconsider the collection of the tax now, in order to conform it to the reality in the 

marl{ctplacc? 

Yes, minimally the tax provision should be modified to be conditional on the actual impacts 

as a result of PP ACA. With that said, even a delay or reconsideration of the tax likely creates 

sufficient uncertainty for insurers that they will need to factor in some type of increase as it is 

based on enrollment preminm and wonld be applied retroactively. 

3. First off, I understand that most States have adopted Medicaid managed care to improve 

outcomes and lower costs in their program. In fact, more than two-thirds of States use 

comprehensive managed care to cover more than half of all Medicaid beneficiaries across the 

country. Wouldn't you agree that managed care-and the organizations that provide 

it-are essential partners in delivering care to enrollees and are poised to cover the 

majority ofthe expansion population? 
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Page 7 of8 

Joseph R. Pitts, Chairman, Committee on Energy and Commerce 

February 4, 2013 

For SFY12 Wisconsin's non-elderly/disabled managed care enrollment is 85 percent. 

Consequently, if Wisconsin expanded coverage to the new adult group in 2014 the vast 

m~ority would be enrolled in managed care and it would be very important that we work 

closely with these organizations in developing a benchmark health plan that provides 

essential benefits. 

4. We all are aware that many States are still facing very hard budget choices. State lawmakers 

are trying to find savings anywhere they can, and many are looking to expand managed care 

in order to make Medicaid more efficient. Why has CMS dragged its feet in approving 

managed care waivers and allowing states to use proven approaches to controlling 

program costs and improving quality? 

CMS should do more to help States implement innovative service delivery models. In 

Wisconsin, we spent more than a year negotiating with CMS on the design of a medical 

home for foster children. We have also been trying to work with CMS on the design of a 

managed care model we call "Virtual PACE," which aims to truly integrate funding streams 

and care delivery for Medicaid emollees who are also Medicare eligible and who live in 

nursing homes. The goal of the project is to improvc care outcomes for recipients while also 

securing savings for both the state and federal government. We remain enthusiastic to work 

with Melanie Bella and the Medicare-Medicaid Coordination Office. But it has become 

apparent over time that there is great resistance to change in other eMS offices. It is 

frustmting when senior CMS officials publicly and frequently acknowledge that there are 

excess costs in serving the dual-eligible population that are avoidable but maintaining the 

status quo seems to be the priority for the agency. 

If the federal government truly intends to bring innovation to health care, it is going to have 

to re-examine its underlying perspective that the federal government must control every 

decision. There are several examples offederal initiatives within CMS that are failing 

because of unnecessarily rigid and prescriptive federal policies. Innovation, by its very 

nature, involves risk-taking and challenging the status quo. The creativity of States should be 

welcomed, not stifled. 

5. Even though States are trying their hardest to control Medicaid costs, they still continue to 

increase. What's the average annual increase in Medicaid program costs? And what is 

driving the cost increases? 

Total expenditures in the Wisconsin Medieaid program grew by 42 percent from SFY 2008 

to SFY 2012. The program has experienced cost increases in recent years both in enrollment 

and costs per enrollees. Caseloads increased by nearly 40 percent during that same time 

period. Costs per enrollee increased by an average of 5 percent from 2004 to 2009, but has 

slowed since. Before factoring in the impact of PP ACA, we project that total Medicaid costs 

in Wisconsin (reflecting both enrollment and cost per enrollee) will grow by 3.9 percent in 

SFY 13,1.3 percent in SFY 14, and 4.4 percent in SFY 15. Nationally, Medicaid 

expenditures are expected to grow by 6 percent through 2015. The below average growth we 

project for Wisconsin's Medicaid program, compared to the national average, stem from cost 

savings reforms that we have implemented in the last two years. 
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Joseph R. Pitts, Chairman, Committee on Energy and Comm~rce 

F ebmaty 4, 2013 

6. How does the rate of Medicaid cost growth compare to the rate of growth in payments 

made to managed care organizations to deliver Medicaid benefits? lfthe costs of 

Medicaid benefits are increasing each year, it stands to reason that payments to managed care 

organizations would need to be adjusted accordingly so these companies could cover their 

increasing claims expenses. But rates are not keeping pace. Why don't rates reflect 

Medicaid market realties? 

In Wisconsin, we set Medicaid managed care rates to reflect current service utilization 

among HMO enrollees. Federalmles require states to set Medicaid managed care rates that 

are "actuarially sound." Each year, the Department works with its actuaries to project what 

services HMO members will use, based on prior year trends. The cost of these services is 

then calculated based on CUlTent fee for service rates, with additional allowances for 

administration and case management. 

7. One of the reasons that States seek f1exibility for the Medicaid Programs is due to the fact 

that medical inflation continues to skyrocket. Frankly, States want to shift that fmancial risk 

to the private sector. But in doing so, shouldn't wc make sure that both the States and Federal 

Government are adcquately acknowledging the costs that drive rates paid to managed carc 

organizations? eMS and States have the authority and responsibility to ensure that rates for 

managed care organizations are sufficient. What is your Agency doing to ensure an 

adequate rate for these managed care organizations? If we fail to ensure the rates are 

sufficient, won't these companies be forced to leave the market just when the Medicaid 

program is scheduled to expand? Haven't some companies already gotten out of 

mauaged care in some States because the rate environment was no longer viable? 

As stated in the answer to question 6, the Department conducts a rigorous actuarial analysis 

to develop managed care rates. These rates are reviewed and approved by eMS. While some 

managed care organizations have chosen to leave certain Medicaid product lines in specific 

regions of the state for their own business reasons, Wisconsin Medicaid continues to have a 

very robust managed care program with several high quality, financially sound lIMOs 

participating. 
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86248.165

State of Uncertainty: Implementation of PPACA's Exchanges and Medicaid Expansion 

Responses to follow-up questions 

Bruce D. Greenstein, Secretary 

Louisiana Department of Health and Hospitals 

Jannary 30, 2013 

The Honorable Michael C. Burgess. M.D. 

1. In Secretary Sebelius' letter to states on Monday, December 10, 2012, she cited that states are 

likely to see net savings from the Medicaid expansion. In my home state of Texas there are 3.3 

million people currently enrolled in the Medicaid program. This costs Texas taxpayers $7 

billion annually from the state's general revenue fund alone. Medicaid provisions in PPACA 

are projected to add an additional $9.1 billion in order to maintain cnrrent service levels in 

Texas and it is unclear how the state will cover those extra costs. How will your respective states 

(Wisconsin, Pennsylvania, and Louisiana) cover the costs incurred due to the health care lawboth in the first three years, when federal funding is available, and into the future? Do you 

anticipate your states seeing the supposed "net savings" the Secretary claims will accrue to 

states? 

ANSWER: Louisiana has chosen not to participate in the Medicaid expansion due in part to the longterm liabilities associated with growing the entitlement program. In fact, the Kaiser Family 

Foundation and the Urban Institute report recently released reveals that the expansion creates winners 

and losers among states. Their cost estimates, which actually fail to capture the full administrative 

costs and other impacts, vary widely among states. For example, the New England and Mid-Atlantic 

region states combined will save almost $16 billion in state funds over 10 years. During that same 

time, states in the South-Atlantic, will be paying at least almost $22 billion more. The Governors of 

Massachusetts, New York, Maryland and Vermont combined alone will shift nearly $23 billion of 

state costs to federal taxpayers. At the same time, my state is projected in the same report to see a 

growth in state costs of at least nearly $1.8 billion. 

2. After reading portions of the law and regulations that have been issued, it seems very clear that 

the design and operation of exchanges are controlled by the requirements ofthe statute and 

rules issued by HHS - regardless of whether a state chooses to run it or default into a federal 

exchange. There seems to be a discrepancy related to federal versus state authority under the 

law, which prompts the following questionsa. Must states foUow new federal requirements related to essential health benefits? 

b. Must states follow federal requirements related to guaranteed issue and commnnity 

rating? 

c. Must states follow new federal rules related to actuarial value? 

d. Must states follow new rules regarding medical loss ratio? 

e. What about requirements related to network adequacy? 

In light of these requirements, does the law provide you any real discretion or flexibility to 

oversee and design your insurance markets as you see fit? 

ANSWER: The State of Louisiana agrees with your concern regarding lack of flexibility in the 

design and operation of the Exchanges. Because we can discern no meaningful difference between a 

state running its own Exchange or a state deferring to the Federal government, the State of Louisiana 
224 


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Page I 

decided not to accept the risks associated with assuming the responsibility for creation and operation 

of a State-Based Exchange. 

The Federal government requires that either states enforce most of the requirements you cited on its 

insurance market (for the Medical Loss Ratio, HHS has primary enforcement authority) or the federal 

government will step in and enforces these requirements mandated by the PPACA in the state. HHS 

has repeatedly said that it does not want this responsibility and wants States to retain their traditional 

regulatory authority over insurance. However, HHS has not provided complete information about 

how a State is supposed to pay for enforcing these Federal requirements. 

For example, the PPACA requires that all plans on the small group and individual marketplaces meet 

essential health benefits and actuarial value. This applies to plans both inside and outside ofthe 

Exchange. In recent guidance, the federal government has stated that it expects a state, no matter what 

Exchange model it will have, will enforce these wider market reforms. However, there is no 

guaranteed funding stream to do this. For 2014, HHS has said grant funding will be available. 

However, past 2014, "HHS anticipates continued funding, under a different funding vehicle ... " This 

funding vehicle has not been specified. HHS therefore expects that if state law does not meet the 

standards prescribed by the PPACA, federal law will preempt the state law and the state will enforce 

the federal requirements without a funding stream for reimbursement of the S\state's expenditures. It 

makes no sense for states to take this additional role and thus become responsible for these additional 

costs, especially since HHS will assume regulatory authority of the specific requirement ifthe state 

enforcement does not meet federal standards. 

With this high level of regulation on states' private insurance markets, there is no opportunity for 

states to have discretion or flexibility to innovate their insurance markets for our residents' benefit. 

The Honorable Marsha Blackburn 

1. I'm curions if you agree with the numerous independent studies which show the health 

insurance tax will drive up premiums for individuals, families, small businesses, and seniors, 

result in higher overall health care costs, and slow job growth. 

ANSWER: Yes, the PPA CA -defined Exchanges provide for rigid federal control over the coverage 

options available to consumers, raising costs and limiting choiee. In fact, a study recently released by 

AHIP and the Louisiana Association of Health Plans estimates that the ACA premium tax will force 

policyholders in my state to pay over $2,000 more for single coverage and over $4,500 more for 

family coverage for individuals over the next ten years. Similar increases are noted for small and 

large group employers. This is a significant burden on individuals and families in Louisiana and 

across the country. 

See the report here: http://www.ahip.org!News/Press-Room/20 12/Health-Insurance-Tax-to-RaiseCosts-for-Louisiana-Consumsrs,-Employers-by-More-than-$l-Billion.aspx 

2. The health insurance tax also covers Medicare Advantage and Medicaid Managed Care. As a 

result, the government is taxing itself. Particularly for our state witnesses, do you think that the 

health insurance tax will negatively impact your state Medicaid program? How will your state 

respond? Are you likely to raise taxes or cut other programs and services? 
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Page 2 

ANSWER: Yes, the health insurance tax will impact the cost of our Medicaid managed care program, 

Bayou Health. According to a Milliman study from January 2012, the PPACA health insurer fee is 

expected to raise Medicaid managed care rates between 2.1 % to 2.4% in the State of Louisiana over 

the next few years, which means that there will be a cost to the State in the hundreds of millions of 

dollars. It is uncertain how our state will respond to these additional costs. However, given our state's 

lean fiscal picture, it is likely that additional service reductions in other programs would be necessary. 

Managed care has proven itself to lead to savings for state Medicaid programs, and this health insurer 

tax penalizes states for sound fiscal management. 

3. Since the authors of the law stated at the time that the health insurance tax was intended to pay 

for the subsidies in the exchanges and the Medicaid expansion, shonldn't the federal 

government delay or reconsider all together the collection of this tax since many states have 

opted not to run their own exchange or expand their Medicaid programs? PPACA provides no 

direction to what HHS or IRS must do with unspent funds. Why should the IRS collect this tax, 

and drive up costs, harm an already fragile economy, for benefits that do not seem to be 

imminent? If you accept the premise of why the tax was included in the law, would you not 

delay or reconsider the collection of the tax now, in order to conform it to the reality in the 

marketplace? 

ANSWER: The State of Louisiana shares concerns regarding the PPACA's requirement that we must 

pay this tax instead of providing needed health care services to our residents. It is not clear to our 

State why Congress decided to include this tax in the PPACA. However, the State of Louisiana 

supports the complete repeal of this tax or a change to this law exempting Medicaid managed care 

programs from this burdensome tax. 

4. First off, I understand that most States have adopted Medicaid managed care to improve 

outcomes and lower costs in their programs. In fact, more than two-thirds of States use 

comprehensive managed care to cover more than half of all Medicaid beneficiaries across the 

country. Wouldn't you agree that managed care - and the organi7.ations that provide it - are 

essential partners in delivering care to enrollees and are poised to cover the majority of the 

expansion population? 

ANSWER: While Louisiana is not participating the expansion as envision by PPACA, we agree that 

Medicaid managed care organizations are essential partners in improving health outcomes and better 

controlling costs. Louisiana launched a comprehensive statewide managed care program in 2012, 

which now covers two-thirds of our state's 1.24 million Medicaid enrollees. Participants choose 

among five health plans, divided between two models of delivery and financing: fully capitated 

MCOs and limited risk shared-savings organizations. The program is expected to save Louisiana 

$135.9 million in the current fiscal year. Furthennore, health plans will be measured against an 

exhaustive set of quality and performance metrics, facing financial rewards or penalties based on their 

performance. 

5. We all are aware that many States are still facing very hard bndget choices. State lawmakers 

are trying to find savings anywhere they can, and many are looking to expand managed care in 

order to make Medicaid more efficient. Why has CMS dragged its feet in approving managed 

care waivers and allowing states to use proven approaches to controlling program costs and 

improving quality? 

ANSWER: It is not clear to Louisiana why CMS has been slow to approve some reform efforts. 

Louisiana submitted a comprehensive research and demonstration waiver request to CMS in 

December 2008. Early in 2009, became clear to the state that CMS under President Obama and 
226 


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Page 3 

Secretary Scbelius would not be taking action on our request. CMS's lack of interest in pursuing 

Louisiana's innovative state-led reform effort forced the state to pursue other avenues to enact reform. 

In Louisiana's case, we ultimately sought authority through a State Plan Amendment (SPA), which 

necessitated timely action by CMS, but did not offer as much flexibility as an 1115 research and 

demonstration waiver. 

6. Even though States are trying their hardest to control Medicaid costs, they still continue to 

increase. What's the average annual increase in Medicaid program costs? And what is driving 

the cost increases? 

ANSWER: According to CMS's National Health Expenditure (NIlE) report, Medicaid spending 

nationally grew 2.5% to $407.7 billion in 2011. This is down from growth rates of5.9% in 2010, 

8.8% in 2009, 5.9% in 2006 and 6.4% in 2007. Since 2000, the average annual national Medicaid 

growth rate is 7.1%. The NHE report projects growth rates of9.2% in 2012 and 7% in 2013. 

Once normalized by the impacts of money management techniques, Louisiana's true Medicaid 

spending growth rate has been lower than the national growth rate or anticipated national growth rate 

since 2008. Since 2000, Louisiana's average annual Medicaid growth rate is 5.6%. 

These increases in costs can be attributed to a number of factors. Medicaid spending typically has an 

inverse relationship with economic performance. Spending growth accelerated during the recent 

recession period as enrollment surged in many parts of the country. Enrollment growth in Louisiana 

peaked in 2008, at nearly 8% in one year. 

Increases in service utilization, coupled with medical cost inflation, also contribute to cost growth in 

the program. Service utilization increases among long-term care programs can have the largest impact 

on overall cost as individuals age into the system. Louisiana has taken steps to address cost growth in 

its home and community-based waiver programs, and is actively seeking innovative ways to manage 

long-term care programs going forward. 

7. How does the rate of Medicaid cost growth compare to the rate of growth in payments made to 

managed care organizations to deliver Medicaid benefits? If the costs of Medicaid benefits are 

increasing each year, it stands to reason that paymeuts to managed care organizations would 

need to be adjusted accordingly so these companies could cover their increasing claims 

expenses. But rates aren't keeping pace. Why don't rates reflect Medicaid market realities? 

ANSWER: In Louisiana, the rates paid to managed care organizations do reflect Medicaid market 

realities under its managed care prepaid program. Our managed care plans are paid a risk-adjusted. 

actuarially sound capitation rate. This means that payment rates have been set based on historical 

utilization in the Louisiana Medicaid program for the services included in the plans' scope of 

responsibility. Louisiana works with its external, independent actuaries to ensure that the rate is 

adequate and meets applicable federal requirements. 

While our managed care program is still in its infancy, we are continually evaluating different aspects 

of the program. We have made some adjustments to rates as additional services were brought under 

the scope of the MCOs or calculations were refined. Louisiana will regularly update its rates (up or 

down) based on ongoing uti1i71ltion trends and changes in the program. 

Another significant point is that managed care plans have more tools at their disposal than fee-forservice Medicaid to better control costs and improve outcomes, primarily by preventing non-emergent 

use of the ER and unnecessary utilization of in-patient hospitalizations. Louisiana expects its 
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Page 4 

managed care health plans to better manage unnecessary utilization than has historically occurred in 

the legacy Medicaid program, slowing the program's rate of growth. 

As the Medicaid managed program begins to provide information to Louisiana regarding its actual 

experience, those costs and claims experience are being considered as rates are determined for future 

periods. 

It is important to note that there were some decreasing trends recognized within the Medicaid 

program prior to the effective date of the managed care program in Louisiana. Although the historical 

experience was not assumed to continue indefinitely, if a managed care organization's actual 

experience is materially different than what was assumed, there are processes for states to review and 

adjust accordingly. Louisiana is currently in discussions with the managed care organizations to 

understand their actual experience as well as identify overall care and cost management objectives for 

the program. It is important for states to maintain open and clear communications with its managed 

care plans. 

8. One of the reasons that States seek flexibility for their Medicaid Programs is due to the fact that 

medical inflation continues to skyrocket. Frankly, States want to shift that financial risk to the 

private sector. But in doing so, shonldn't we make sure that both the States and the Federal 

Government are adequately acknowledging the costs that drive rates paid to managed care 

organizations? eMS and States have the authority and responsibility to ensure that rates for 

managed care organizations are sufficient. What is your Agency doing to ensure an adequate 

rate for these managed care companies? If we fail to ensure that rates are sufficient, won't 

these companies be forced leave the market just when the Medicaid program is scheduled to 

expand? Haven't some companies already gotten out of managed care in some States because 

the rate environment was no longer viable? 

ANSWER: Some states have experienced the exit of managed care plans from the Medicaid 

managed care programs. In Connecticut, for example, there has been a complete exit in the market. 

Other states have seen various plans enter and leave the market. 

We agree that an adequate rate for the provision of services is, as described, a key element in the 

ongoing functioning of a Medicaid managed care program. The determination of an adequate rate, 

however, includes multiple issues that warrant consideration. Although rates are ultimately defined as 

specific per member per month (PMPM) amounts, various actuarial and policy considerations playa 

role in how such amounts are determined. 

In Louisiana's case, the Medicaid managed care program will reach a full plan year or experience on 

February 1, 2013, and therefore, understanding the managed care organization's experience remains a 

work in progress. Louisiana is working with the plans to obtain reliable encounter data, documenting 

the type and cost of services provided. Once encounter data is readily available for analysis, this will 

help the state and the managed care organizations better understand how the tools the plans have 

implemented have impacted costs and outcomes. 

We agree that managed care rates should reflect cost drivers associated with that type of delivery 

system; however, such an approach must also include assumptions regarding expected care and cost 

management. The managed care organization's costs are relevant to the rate process, but cannot be 

taken in isolation and must be evaluated in the context of expected performance. To that end, 

Louisiana is in the process of obtaining multiple sources of information regarding managed care 
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Page 5 

organization's actual experience in providing services and is seeking to use such infonnation in the 

rate setting process. 

Given the infancy of the program, some of this information will be provided directly by the plans, 

subject to review for accuracy, completeness and relevance of any infonnation provided to the state. 
229 


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Gary D. Alexander 

Secretary 

PA Dept. of Public Welfare 

January 30, 2013 

RE: December 13,2012 Health Subcommittee hearing follow-up questions from Rep. Burgess 

and Rep. Blackburn 

The Honorable Michael C. Burgess, M.D. 

I. In Secretary Sebelius' letter to states on Monday, December 10, 2012, she cited that 

states are likely to see net savings from the Medicaid expansion. In my home state of 

Texas there are 3.3 million people currently enrolled in the Medicaid program. This 

costs Texas taxpayers $7 billion annually from the state's general revenue fund alone. 

Medicaid provisions in PP ACA are projected to add an additional $9.1 billion in order 

to maintain current service levels in Texas and it is unclear how the state will cover 

those extra costs. How will your respective states (Wisconsin, Pennsylvania, and 

Louisiana) cover the costs incurred due to the health care law both in the first three 

years, when federal funding is available, and into the future? Do you anticipate your 

states seeing the supposed "net savings" the Secretary claims will accrue to states? 

In Pennsylvania we project there will be a net cost increase for the commonwealth 

of $222 million in the first year and totaling $4.1 billion through 2021. 

2. After reading portions of the law and regulations that have been issued, it seems very 

clear that the design and operation of exchanges are controlled by the requirements of 

the statute and rules issued by HHS - regardless of whether a state chooses to run it or 

default into a federal eXChange. There seems to be a discrepancy related to federal 

versus state authority under the law, which prompts the following questionsThe ACA requirements referenccd are amendments to the Public Health Service Act 

(PHSA). Under the PHSA, state laws continue to bc applicable "except to the extent 

that such standard or requirement prevents the application of a requirement" of the 

PHSA. See 42 U.S.C. §300gg-23, §300gg-62. Against that background: 

a. Must states follow new federal requirements related to essential health benefits? 

Yes. Under §2707 of the PHSA, added by § 1201 of the ACA, all individual and 

small group products offered in the state must include the essential health benefit 

package as sct forth in §1302(a) of the ACA. Note that under §1302(b)(4) of the 

ACA, the Secretary of Health and Human Services is authorized to "periodically 

update the essential health benefits." 

b. Must states follow federal requirements related to guaranteed issue and 

community rating? 

Yes. Under §2702 of the PHSA, as amended by §120l of the ACA, each 

employer in the small group market and each individual in the individual market 
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Page 1 

is guaranteed to be issued a policy by a healtb insurance issuer to whom they 

apply for coverage. Under §2701 of the PHSA, added by §1201 of the ACA, 

community rating (allowing limited variations only based on family size, 

geography, age, and tobacco use) is required in the state's individual and small 

group markets. 

c. Must states follow new federal rules related to actuarial value? 

Yes. Under §2707 of the PHSA, added by §1201 of the ACA, all individual and 

small group products offered in the state must include the EHB package as set 

forth in §1302(a) of the ACA. That subsection describes the EHB package as 

including the specifically listed benefits, limited cost-sharing, and actuarial value 

levels of coverage. 

d. Must states follow new rules regarding medical loss ratio? 

Ycs. Under §2718 of the PHSA, added by §1001 of the ACA, all health insurance 

issuers in the individual and small group markets must satisfy the 80% MLR 

requirement unless the state is granted an exception if the 80% level may 

destabilize the individual markct in the state. All health insurance issuers in the 

large group market must satisfy the 85% MLR requirement, unless a state 

imposes a highcr percentage. 

e. What about requirements related to network adequacy? 

Yes. Under §2702(c) of the PHSA, as amended by § 1201 of the ACA, health 

insurance issuers in the individual and group markets are subject to broad network 

adequacy requirements. Regulations issued pursuant to the ACA (at 45 C.F.R. 

§ 156.230) have articulated more precise network adequacy requircments for 

qualified health plans that may be offered on an exchange. 

In light of these requirements, does the law provide you any real discretion or 

flexibility to oversee and design your insurance markets as you see fit? 

No. As noted above, the state only has flexibility if its market rules do not 

"prevent the application" of the ACA/PHSA requirements. In reality, it will be 

difficult for states to see innovation in their insurance markets because of the 

requirement that state laws not to prevent the application of the federal laws. 

Current regulations promulgated by Health and Human Services do not provide 

states with meaningful flexibility to regulate their insurance markets. 

During the hearing, you engaged one of the Subcommittee members in a discussion on 

Pennsylvania's enrollment of individuals into Medicaid. Could you please elaborate on 

Pennsylvania's previous experience on Medicaid eligibility determinations and 

enrollment? 

Longstanding statutory and regulatory requirements require the Pennsylvania Department 

of Public Welfare ("Department") to conduct semi-annual and annual reviews to 

determine continuing recipient eligibility for certain public assistance programs, 

including Medical Assistance (MA). Over a period of time, a backlog of MA eligibility 
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Page 2 

reviews ("redeterminations") developed. Beginning in July 2011 and continuing through 

December 20 II, the Department took reasonable steps to resolve this operational backlog 

in a timely manner to ensure continued compliance with program requirements. 

The Department's goals in connection with this operational effort were to resolve the 

backlog of eligibility redeterminations, to continue to cnsure that those receiving benefits 

under the program are eligible, and to ensure that the program is being soundly 

administered. 

To accomplish these goals, the Department reemphasized with program staffthc 

requirements to apply existing policies and procedures for all redeterminations in 

accordance with applicable federal and state law. Through the efforts of the Department 

staff, the backlog of eligibility redeterminations was essentially resolved by the end of 

December 2011. 

During tbe Hearing certain data was noted which allegedly demonstrated a significant 

decline in Pennsylvania MA enrollment. In fact, Medicaid enrollment data shows that 

2,243,850 individuals were enrolled in Pennsylvania as of July 2011, and 2,199,885 

individuals were enrolled as of August 2012. The overall numbers above are consistent 

(less than a 2% difference), and demonstrate that there was not a mass decrease in 

enrollment. 

It is important to remember the fact that recipient eligibility is not static, as household 

circumstances change (for example, recipients move into the workforce, recipients move 

out of state, etc.), therefore, eligibility redeterminations, as required by law, are a 

common-sense practice to ensurc program integrity .. In conducting these legaUyrequired eligibility redeterminations, the Department ensures that both federal and state 

public resources are utilized in accordance with its legal authority. 

4. Governor Corbett annouuced yesterday that Pennsylvania would default into a federal 

exchange. In his announcement, he stated "It would be irresponsible to put 

Pennsylvanians on the hook for an unknown amount of money to operate a system 

under rules that have not been fully written." Can you elaborate further on how 

Pennsylvania will be on the hook for the cost of administering a program where the 

bulk of major rules will be written by the federal government? 

Exchanges are required to be self-sustaining, i.e., no federal grant funding, for continued 

operations beyond January 1,2015. ACA § 1311(d)(5). These funds may be generated 

by "assessments or user fees or otherwise", but in any event will need to be sufficient to 

operate the exchange in accordance with all of the laws and regulations issued by the 

federal government, as well as any operational rules not codified. 

5. As you mentioned during the hearing, Pennsylvania has some experience with asset 

tests. However, the Affordable Care Act does not allow for the use of asset tests when 

determining Medicaid eligibility. Should Congress be concerned that millionaires might 

become eligible for Medicaid? 

The sole use of modified adjusted gross income (MAGI) as the income eligibility 

standard is an incomplete measurement of an individual's wealth and provides a distorted 
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Page 3 

picture of who is truly in need of assistance. Eliminating states' ability to use asset tests 

could easily allow individuals with sufficient means to provide for themselves enrolling 

in Medicaid or other government programs reducing the ability of states to use their 

limited resources to provide for those most in need. Pennsylvanian raised this question, 

among many others, in an August 2012 letter to Secretary Sebelius asking if this was 

truly the intent ofHHS - to date we have received no response. 

The Honorable Marsha Blackburn 

1. I'm curious if you agree with the numerous independent stUdies which show the health 

insurance tax will drive up premiums for individuals, families, small bnsinesses, and 

seniors, result in higher overall health care costs, and slow job growth. 

Yes. We expect that the taxes and other fees required of health insurance issuers will be 

factored into the premium costs of policies. We also expect the overall effect of the ACA 

taxes and charges, as well as EHB and other market requirements, will result in a net 

increase in premium costs for most policyholders. 

2. The health insurance tax also covers Medicare Advantage and Medicaid Managed 

Care. As a result, the government is taxing itself. Particularly for our state witnesses, 

do you tbink that the health insurance tax will negatively impact your state Medicaid 

program? How will your state respond? Are you likely to raise taxes or cut other 

programs and services? 

The annual health insurance tax included in ACA is expected to be an industry-wide 

excise tax passed-through to consumers. State governments could bc responsible for part 

of the tax as a Medicaid consumer. The level of state responsibility for the tax depends 

on the portion of the tax that Medicaid managed care plans are able to pass along to 

consumers in each individual Medicaid managed care market. To avoid the tax, states 

could seek to contract with Medicaid managed care providers that are exempt from the 

tax. However, price considerations must be weighed in light of other provider factors, 

including breadth of the network, ability to coordinate care and quality measures. 

3. Since the authors of the law stated at the time that the health insurance tax was 

intended to pay for the subsidies in the exchanges and the Medicaid expansion, 

shouldn't the federal government delay or reconsider all together the collection of this 

tax since many states have opted not to run their own exchange or expand their 

Medicaid programs? PPACA provides no direction to what HHS or IRS must do with 

unspent funds. Why should the IRS collect this tax, and drive up costs, harm an 

already fragile economy, for benefits that do not seem to be imminent? If you accept 

the premise of why the tax was included in the law, would you not delay or reconsider 

the collection of the tax now, in order to conform it to the reality in the marketplace? 

The issue of collection and applicability of the taxes contained within the ACA are issues 

of federal law and not under the purview or jurisdiction of the states. 
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4. First off, I understand that most States have adopted Medicaid managed care to 

improve outcomes and lower costs in their programs. In fact, more than two-thirds of 

States use comprehensive managed care to cover more than half of all Medicaid 

beneficiaries across the country. Wouldn't you agree that managed care - and the 

organizations that provide it - are essential partners in delivering care to enrollees and 

are poised to cover the majority ofthe expansion population? 

Pennsylvania has a long history of Medicaid managed care, dating back to the early 

1990's. By March 1,2013, Pennsylvania will have implemented full statewide Medicaid 

managed care, and the vast majority of our current Medicaid recipients will be enrolled in 

physical and behavioral health managed care plans. We strongly believe in the benefits of 

managed care delivery systems and the ability of our contracted plans to provide better 

value for the state's money, as evidenced by our expansion of Medicaid managed care 

throughout the state, so we would certainly agree the managed care plans are essential 

partners in delivering care. At this point any new enrollees into the Medicaid program, 

regardless of whether the state decides to expand the program, will be enrolled in a 

managed care organization for the reasons we cite above. 

5. We all are aware that many States are still facing very hard budget choices. State 

lawmakers are trying to find savings anywhere they can, and many are looking to 

expand managed care in order to make Medicaid more efficient. Why has eMS 

dragged its feet in approving managed care waivers and allowing states to use proven 

approaches to controlling program costs and improving quality? 

In Pennsylvania's recent experience, we have not found CMS to have delayed its 

approval of our Medicaid managed care waivers. In December, 2012 CMS approved a 

renewal of our managed care waiver, involving consolidation of two previous 

geographically-oriented managed care waivers and the completion of our statewide 

managed care expansion. 

6. Even though States are trying their hardest to control Medicaid costs, they still continue 

to increase. What's the average annual increase in Medicaid program costs? And what 

is driving the cost increases? 

Over the last five years Pennsylvania has seen Medicaid program costs grow at an annual 

ratc of approximately 5.6 percent. Some of the key drivers of Medicaid cost growth are: 

Lack of flexibility in the program to incentivize healthy behavior 

Patient acuity 

Service utilization 

New expensive technology 

New drug treatments 

Loss of federal funding (FMAP) 

Increasing numbers of patients with high cost needs 

Growing elderly population 

Stagnant economy 
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Page 5 

7. How does the rate of Medicaid cost growth compare to the rate of growth in payments 

made to managed care organizations to deliver Medicaid benefits? If the costs of 

Medicaid benefits are increasing each year, it stands to reason that payments to 

managed care organizations would need to be adjusted accordingly so these companies 

could cover their increasing claims expenses. But rates aren't keeping pace. Why don't 

rates reflect Medicaid market realities? 

The Medicaid program continues to grow at an unsustainable rate, placing incredible 

strain on the Commonwealth budget. In fact, the Medicaid program now consumes more 

of our budget than any other state expenditure. With that challenge in mind, the 

Commonwealth continues to work with its Managed Care Organizations to find 

innovative ways to curb the growth in healthcare costs and, at the same time, provide fair 

rate adjustments as is required by law. The MCOs are our valued partners that provide 

critical access to healthcare for Pennsylvanians. Pennsylvania will always ensure that the 

MCOs receive the rate increases necessary to do their job. 

8. One of the reasons that States seek flexibility for their Medicaid Programs is due to the 

fact that medical inflation continues to skyrocket. Frankly, States want to shift that 

fiuancial risk to the private sector. But in doing so, shouldn't we make sure that both 

the States and the Federal Government are adequately acknowledging the costs that 

drive rates paid to managed care organizations? eMS and States have the authority 

and responsibility to ensure that rates for managed care organizations are sufficient. 

What is your Agency doing to ensure an adequate rate for these managed care 

companies? If we fail to ensure that rates are sufficient, won't these companies be 

forced leave the market just when the Medicaid program is scheduled to expand? 

Haven't some companies already gotten out of managed care in some States because the 

rate environment was no longer viable? 

All states are required by law to develop Medicaid managed care rates that are aetuarially 

sound. The regulation (42 CFR 438.6(c)) sets forth the requirements that must be 

followed by states in the development of Medicaid managed care rates. It is important 

that Managed Care Organizations are compensated fairly to ensure their ongoing 

participation in the marketplace. 
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January J 6, 20 J 3 

Mr. Andrew Allison, Ph.D. 

Director, Division of Medical Services 

State of Arkansas, Department of Human Services 

112 West 8th Street 

Little Rock, AR 72201-4608 

Dear Dr. Allison: 

Thank you for appearing at the Subcommittee on Health hearing entitled "State of Uncertainty: 

Implementation ofPPACA's Exchanges and Medicaid Expansion." 

Pursuant to the Rules of the Committee on Energy and Commerce, the hearing record remains 

open for 10 business days to permit Members to submit additional questions to witnesses, which are 

attached. The fonnat of your responses to these questions should be as follows: (I) the name of the 

Member whose question you are addressing, (2) the complete text of the question you are addressing in 

bold, and (3) your answer to that question in plain text. 

To facilitate the printing ofthe hearing record, please e-mail your responses, in Word or PDF 

format, to carly.mcwilliams@mail.house.gov by the close of business on Wednesday, January 30, 2013. 

Thank you again for your time and effort preparing and delivering testimony before the 

Subcommittee. 

Sincerely, 

Joseph R. Pitts 

Chairman 

Subcommittee on Health 

cc: Frank Pallone, Jr., Ranking Member, Subcommittee on Health 

Attachment 
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The Honorable Marsha Blackburn 

1. I'm curious if you agree with the numerous independent stndies which show the health 

insurance tax will drive up premiums for individuals, families, small businesses, aud seniors, 

result in higher overall health care costs, and slow job growth. 

The subject matter is beyond my area of expertise. In addition to the premium tax the ACA includes 

numerous other provisions affecting both the cost of health care to individuals and the cost of health 

insurance, as well as the sources of payment for both. For each individual, family, business, or state 

government, it is the net impact of all of these factors that will drive their insurance purchasing and 

related economic decisions. The net financial impact may differ substantially both within and across 

the different groups identified above. My area of focus is the Medicaid program and I do not have the 

background to evaluate the net impact of the ACA on individuals, families, small businesses and 

seniors. 

2. The health insurance tax also covers Medicare Advantage and Medicaid Managed Care. As a 

result, the government is taxing itself. Particularly for our state witnesses, do you think that the 

health insurance tax will negatively impact your state Medicaid program? How will your state 

respond? Are you likely to raise taxes or cut other programs and services? 

The State of Arkansas does not use managed care companies to administer its program, and we have 

not assessed the impact of this tax. 

3. Since the authors of the law stated at the time that the health insurance tax was intended to pay 

for the subsidies in the eXChanges and the Medicaid expansion, shouldn't the federal 

governmeut delay or reconsider all together the collection of this tax since many states have 

opted uot to run their own exchange or expand their Medicaid programs? PPACA provides no 

direction to what HHS or IRS must do with unspent funds. Why should the IRS collect this tax, 

and drive up costs, harm an already fragile economy, for benefits that do not seem to be 

imminent? lfyou accept the premise of why the tax was included in the law, would you not 

delay or reconsider the collection of the tax now, in order to conform it to the reality in the 

marketplace? 

I am not familiar with the funding required by the federal government to support exchange-based 

insurance subsidies and state-initiated Medicaid expansions, and am not in a position to comment on 

the scenarios described in the question. 

4. First off, I understand that most States have adopted Medicaid managed care to improve 

outcomes and lower costs in their programs. In fact, more than two-thirds of States use 

comprehensive managed care to cover more than half of all Medicaid beneficiaries across the 

country. Wouldn't you agree that managed care - and the organizations that provide it - are 

essential partners in delivering care to enrollees and are poised to cover the majority of the 

expansion population? 

The State of Arkansas has not chosen to use managed care companies to administer Medicaid 

benefits .. To the contrary, Arkansas is engaged in a multi-payer statewide effort to develop and 

implement a comprehensive sel of outcomes-based financial incentives that reward providers, rather 

than insurers, for improvements and efficiencies in health care. 
237 


86248.179

5. We all are aware that many States are still facing very hard budget choices. State lawmakers 

are trying to find savings anywhere they can, and many are looking to expand managed care in 

order to make Medicaid more efficient. Why has eMS dragged its feet in approving managed 

care waivers and allowing states to use proven approaches to controlling program costs and 

improving quality? 

I would defer this question to representatives from CMS who are familiar with the timing and content 

of managed care waiver approvals. 

6. Even though States are trying their hardest to control Medicaid costs, they still continue to 

increase. What's the average annual increase in Medicaid program costs? And what is driving 

the cost increases? . 

The average annual increase in Arkansas Medicaid service costs between fiscal year 2007 and fiscal 

year 2012 was approximately 5.5%. However, costs in Arkansas Medicaid grew at an annual rate of 

less than 3% through the first 6 months of state fiscal year 2013. Cost growth over the previous five 

years was driven primarily by increases in service use per enrollee. Overall, spending per enrollee -

consisting primarily of increases in service use -- explains 61% of the growth in Arkansas Medicaid 

spending over the last five years, while growth in the number of enrollees - especially the disabled --

explains the rest (39%). In the first half of state fiscal year 2013, per-person spending fell slightly, 

while enrollment continued to climb. Enrollment increases in 2013 are due primarily to growth in the 

number of aged and disabled beneficiaries. Growth in the number and costs of serving disabled 

beneficiaries explains just over half of the growth in Medicaid costs nationally between 1975 and 

2009 [51.2%, source: MACPAe's June 2012 Report to the Congress on Medicaid and CHIP, page 

81], and explains nearly exactly the same percentage of grov.1h in Medicaid costs in Arkansas over 

the last five years [50.9%]. 

7. How does the rate of Medicaid cost growth compare to the rate of growth in payments made to 

managed care organizations to deliver Medicaid benefits? If the costs of Medicaid benefits are 

increasing each year, it stands to reason that payments to managed care organizations would 

need to be adjusted accordingly so these companies could cover their increasing claims 

expenses. But rates aren't keeping pace. Why don't rates reflect Medicaid market realities? 

I am not aware of research that demonstrates an unequivocal difference in cost growth in states that 

use managed care companies to administer Medicaid benefits. Arkansas does not use managed care 

companies to administer Medicaid benefits, and as a result I do not have access to information on 

annual costs for services reimbursed through Medicaid managed care companies. 

8. One of the reasons that States seek flexibility for their Medicaid Programs is due to the fact that 

medical inflation continues to skyrocket. Frankly, States want to shift that financial risk to the 

private sector. But in doing so, shouldn't we make sure that both the States and the Federal 

Government are adequately acknowledging the costs that drive rates paid to managed care 

organizations? CMS and States have the authority and responsibility to ensure that rates for 

managed care organizations are sufficient. What is your Agency doing to ensure an adequate 

rate for these managed care companies? If we fail to ensnre that rates are sufficient, won't 

these companies be forced leave the market just when the Medicaid program is scheduled to 

expand? Haven't some companies already gotten out of managed care in some States because 

the rate environment was no longer viable? 
238 

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86248.180

With their unmatched size and programmatic diversity, states and the federal government are wellpositioned to internally finance the insurance risks associated with programs such as Medicare and 

Medicaid. Nevertheless, Arkansas is engaged in an effort to share the financial rewards of innovative 

improvements in care and service delivery with those who provide care and services to Medicaid 

beneficiaries. In this statewide multi-payer effort to transform health care payments, Arkansas 

Medicaid has not chosen to use private managed care companies. I am not familiar with the decisions 

of Medicaid managed care companies to leave markets in other states.