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MEDPAC’S JUNE REPORT TO CONGRESS 

HEARING 

BEFORE THE

SUBCOMMITTEE ON HEALTH 

OF THE

COMMITTEE ON WAYS AND MEANS 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED THIRTEENTH CONGRESS 

SECOND SESSION 

JUNE 18, 2014 

Serial No. 113–HL13 

Printed for the use of the Committee on Ways and Means 

( 


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COMMITTEE ON WAYS AND MEANS 

DAVE CAMP, Michigan, Chairman 

SAM JOHNSON, Texas 

KEVIN BRADY, Texas 

PAUL RYAN, Wisconsin 

DEVIN NUNES, California 

PATRICK J. TIBERI, Ohio 

DAVID G. REICHERT, Washington 

CHARLES W. BOUSTANY, JR., Louisiana 

PETER J. ROSKAM, Illinois 

JIM GERLACH, Pennsylvania 

TOM PRICE, Georgia 

VERN BUCHANAN, Florida 

ADRIAN SMITH, Nebraska 

AARON SCHOCK, Illinois 

LYNN JENKINS, Kansas 

ERIK PAULSEN, Minnesota 

KENNY MARCHANT, Texas 

DIANE BLACK, Tennessee 

TOM REED, New York 

TODD YOUNG, Indiana 

MIKE KELLY, Pennsylvania 

TIM GRIFFIN, Arkansas 

JIM RENACCI, Ohio 

SANDER M. LEVIN, Michigan 

CHARLES B. RANGEL, New York 

JIM MCDERMOTT, Washington 

JOHN LEWIS, Georgia 

RICHARD E. NEAL, Massachusetts 

XAVIER BECERRA, California 

LLOYD DOGGETT, Texas 

MIKE THOMPSON, California 

JOHN B. LARSON, Connecticut 

EARL BLUMENAUER, Oregon 

RON KIND, Wisconsin 

BILL PASCRELL, JR., New Jersey 

JOSEPH CROWLEY, New York 

ALLYSON SCHWARTZ, Pennsylvania 

DANNY DAVIS, Illinois 

LINDA SA ́ NCHEZ, California 

JENNIFER M. SAFAVIAN, Staff Director and General Counsel 

JANICE MAYS, Minority Chief Counsel 

SUBCOMMITTEE ON HEALTH 

KEVIN BRADY, Texas, Chairman 

SAM JOHNSON, Texas 

PAUL RYAN, Wisconsin 

DEVIN NUNES, California 

PETER J. ROSKAM, Illinois 

JIM GERLACH, Pennsylvania 

TOM PRICE, Georgia 

VERN BUCHANAN, Florida 

ADRIAN SMITH, Nebraska 

JIM MCDERMOTT, Washington 

MIKE THOMPSON, California 

RON KIND, Wisconsin 

EARL BLUMENAUER, Oregon 

BILL PASCRELL, JR., New Jersey 


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C O N T E N T S 

Page 

Advisory of June 20, 2014 announcing the hearing .............................................. 2 

WITNESS 

Mark E. Miller, Ph.D., Executive Director, Medicare Payment Advisory Commission .................................................................................................................. 7 

SUBMISSION FOR THE RECORD 

AHCA, statement ..................................................................................................... 42 


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MEDPAC’S JUNE REPORT TO CONGRESS 

WEDNESDAY, JUNE 18, 2014 

U.S. HOUSE OF REPRESENTATIVES, 

COMMITTEE ON WAYS AND MEANS, 

SUBCOMMITTEE ON HEALTH, 

Washington, DC. 

The Subcommittee met, pursuant to notice, at 10:03 a.m., in 

Room 1100, Longworth House Office Building, Hon. Kevin Brady 

[Chairman of the Subcommittee] presiding. 

[The advisory announcing the hearing follows:] 


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ADVISORY 

FROM THE COMMITTEE ON WAYS AND MEANS 

SUBCOMMITTEE ON HEALTH 

FOR IMMEDIATE RELEASE CONTACT: (202) 225–3625 

Wednesday, June 11, 2014 

No. HL–13 

Chairman Brady Announces Hearing on 

MedPAC’s June Report to Congress 

House Ways and Means Health Subcommittee Chairman Kevin Brady (R–TX) 

today announced that the Subcommittee on Health will hold a hearing on the 

Medicare Payment Advisory Commission’s (MedPAC) June report to the Congress. 

The report details the Commission’s recommendations for reforming Medicare payment policies. The Subcommittee will hear from MedPAC’s Executive Director, Mark 

E. Miller, Ph.D. The hearing will take place on Wednesday, June 18, 2014, in 

1100 Longworth House Office Building, beginning at 10:00 a.m. 

In view of the limited time available, oral testimony at this hearing will be from 

the invited witness only. However, any individual or organization not scheduled for 

an oral appearance may submit a written statement for consideration by the Committee and for inclusion in the printed record of the hearing. 

BACKGROUND: 

MedPAC advises Congress on Medicare payment policy. The Commission is required by law to submit two reports to Congress on an annual basis. The first report 

reviews Medicare payment policy and is due by March 15. The second report examines specific issues facing Medicare and is due by June 15. 

In its June 2014 report, MedPAC examines: 

• The need to compare Medicare’s policies across traditional fee-for-service, 

Medicare Advantage, and Accountable Care Organizations; • Policy options for financial assistance for low-income beneficiaries in the context of its June 2012 recommendation to restructure the Medicare benefit design; 

• Whether changes to Medicare’s risk adjustment methodology, which accounts 

for severity of patient illness, can improve payment accuracy; 

• Payment changes to bolster primary care and ensure access to these services; 

• How payments to Inpatient Rehabilitation Facilities (IRFs) and Skilled Nursing Facilities (SNFs) differ for the treatment of similar patients; and 

• The impact of improved medication adherence on overall Medicare spending. 

In announcing the hearing, Chairman Brady stated, ‘‘It is our duty to make 

sure we have a strong Medicare program that works for seniors and taxpayers. MedPAC is a key advisor in this effort. I am pleased that the Commission continues to call attention to the need to improve Medicare’s benefit design. This commonsense step would modernize the Medicare benefit 

so it looks more like other health plans. I commend the Commission for 

highlighting the need to compare fee-for-service to Medicare Advantage 

and other payment system options. We owe it to our seniors to provide an 

apples-to-apples comparison of quality and cost of these options in their geographic area. This hearing enables the Committee to hear MedPAC’s valuable insights on these and other important issues.’’ 

FOCUS OF THE HEARING: 

The hearing will focus on MedPAC’s June 2014 Report to Congress. 


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DETAILS FOR SUBMISSION OF WRITTEN COMMENTS: 

Please Note: Any person(s) and/or organization(s) wishing to submit for the hearing record must follow the appropriate link on the hearing page of the Committee 

website and complete the informational forms. From the Committee homepage, 

http://waysandmeans.house.gov, select ‘‘Hearings.’’ Select the hearing for which you 

would like to submit, and click on the link entitled, ‘‘Click here to provide a submission for the record.’’ Once you have followed the online instructions, submit all requested information. ATTACH your submission as a Word document, in compliance 

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

Wednesday, July 2, 2014. Finally, please note that due to the change in House 

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

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

(202) 225–3943 or (202) 225–3625. 

FORMATTING REQUIREMENTS: 

The Committee relies on electronic submissions for printing the official hearing record. As always, submissions will be included in the record according to the discretion of the Committee. 

The Committee will not alter the content of your submission, but we reserve the right to format 

it according to our guidelines. Any submission provided to the Committee by a witness, any supplementary materials submitted for the printed record, and any written comments in response 

to a request for written comments must conform to the guidelines listed below. Any submission 

or supplementary item not in compliance with these guidelines will not be printed, but will be 

maintained in the Committee files for review and use by the Committee. 

1. All submissions and supplementary materials must be provided in Word format and MUST 

NOT exceed a total of 10 pages, including attachments. Witnesses and submitters are advised 

that the Committee relies on electronic submissions for printing the official hearing record. 

2. Copies of whole documents submitted as exhibit material will not be accepted for printing. 

Instead, exhibit material should be referenced and quoted or paraphrased. All exhibit material 

not meeting these specifications will be maintained in the Committee files for review and use 

by the Committee. 

3. All submissions must include a list of all clients, persons and/or organizations on whose 

behalf the witness appears. A supplemental sheet must accompany each submission listing the 

name, company, address, telephone, and fax numbers of each witness. 

The Committee seeks to make its facilities accessible to persons with disabilities. 

If you are in need of special accommodations, please call 202–225–1721 or 202–226– 

3411 TDD/TTY in advance of the event (four business days notice is requested). 

Questions with regard to special accommodation needs in general (including availability of Committee materials in alternative formats) may be directed to the Committee as noted above. 

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

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

f 

/. 

Chairman BRADY. Good morning, everyone. I would like to welcome back the Medicare Payment Advisory Committee. Neither 

MedPAC nor its witness here today, Executive Director Mark Miller, is a stranger to this Committee. MedPAC is the key non-partisan advisor with a lot of analytical firepower. There is bipartisan 

interest in this work. 

MedPAC issues two reports annually to the Congress. Its March 

report focuses on the adequacy of payments made to the various 

Medicare providers. The Committee pays close attention to those 

important findings, and has had MedPAC testify on them in past 

years. The June MedPAC report focuses on how to improve the 

Medicare program. 


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Improving Medicare, that is the focus of our hearing today. We 

are at a critical juncture. The program faces serious financial challenges. The Part A Trust Fund, which was paid out to more than 

it takes in over the past several years is slated to go bankrupt in 

just over a decade. The funding needed for the Part B Trust Fund 

will be in—such an increasing drain on the treasury that it is sure 

to crowd out other priorities. According to independent researchers, 

this important program pays out, on average, three times the benefit it collects from workers over their lifetime. 

We are in a state of flux on how we pay our health care providers 

in Medicare. The popular Medicare Advantage program faces severe cuts after several years of the White House delaying the damaging Affordable Care Act cuts. Providers increasingly have their 

payments tied to performance, whether in traditional fee-for-service 

or some alternative payment model. 

The MedPAC June 2014 Report addresses a number of policy 

issues that are key to improving Medicare’s viability and future direction. The report reiterates MedPAC’s 2012 recommendation to 

improve the design of the confusing and outdated Medicare traditional fee-for-service benefit for seniors. It also discusses policy options that could help to ensure that the new benefit design works 

for low-income seniors. 

MedPAC has outlined a design that brings clarity through a single deductible and uniform cost sharing and peace of mind by capping the amount that seniors have to pay out of pocket. The design 

would also reduce the need to buy a supplemental policy. 

Benefit redesign is not a new issue. The Bowles-Simpson Commission appointed by President Obama, and the bipartisan Policy 

Center have also recommended it. The Committee has called attention to it, even devoting a hearing exclusively to the topic last year. 

At that hearing, I asked witnesses to conduct what I view as the 

most informative analysis: beneficiary impact over multiple years. 

The fact that a senior may pay a little more in any given year is 

not nearly so important as avoiding the years in which a senior 

may face frighteningly high costs. Any beneficiary who has high 

costs, such as those that come with a stay in the hospital, will see 

a significant reduction in out-of-pocket costs. Since we know the 

majority of seniors will have a hospital stay over the course of their 

lifetime—some, many trips to the hospital—this protects seniors 

from cost spikes in a year when they are particularly sick. 

With a mom who relies on the confusing Medicare system, I am 

sold. If it were up to me, this common-sense change would already 

be done. Hearing MedPAC’s views on how an improved design can 

work for low-income seniors furthers the discussion. I am confident 

that this reform can be done in a way that has net benefit for beneficiaries, even as it reduces future expenditures. Listening to those 

who have concerns, we must continue to work to make this happen. 

The report also highlights the need to be able to compare traditional fee for service, Medicare Advantage, and the accountable 

care organizations. We owe it to our seniors to provide an applesto-apples comparison of quality and cost of these options in their 

area. This effort can also provide vital information to set the stage 

for more sweeping reforms that further empower seniors and are 

more responsive to senior health care needs. 


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The report also examines how payments to in-patient rehab facilities and skilled nursing facilities differ for the treatment of similar patients. This is a continuation of a robust site-neutral payment 

policy discussion that has happened over the last few years. The 

House passed a site-neutral policy back in 2011. In fact, a provision 

establishing parity between in-patient hospital and long-term care 

hospital payments was signed into law late last year. This is a 

topic of great interest to Members of this Committee, and has significant impact not only on health care providers, but seniors and 

taxpayers. MedPAC’s work has been instrumental. We appreciate 

its continued focus. 

The report looks at whether the method of accounting for expected patient costs or risk adjustment can be improved. This is 

important, because we need to make sure payments to Medicare 

Advantage plans and providers are as accurate as possible. 

There is a lot of interest in the topic of medication adherence, 

which means taking medications exactly as prescribed by the doctor to result in better patient health and outcomes. The report examines the extent to which better adherence by seniors reduces 

overall Medicare spending. 

Finally, the report discusses possible payment policy changes to 

bolster access to primary care. 

Well, before we hear from Mr. Miller I want to say that this 

MedPAC report is not a book that will just sit on the shelf. For 

many of the issues, it represents an ongoing dialogue. This hearing 

is a valuable part of that conversation. I look forward to working 

with the Members of the Committee and MedPAC to enact policies 

that make the Medicare program work better for beneficiaries, for 

providers, and taxpayers. 

Before I recognize the Ranking Member, Dr. McDermott, for the 

purposes of an opening statement, I ask unanimous consent that 

all Members’ written statements be included in the record. 

[No response.] 

Without objection, so ordered. 

I now recognize the Ranking Member, Dr. McDermott, for 5 minutes for the purposes of his opening statement. 

Mr. MCDERMOTT. Thank you, Mr. Chairman. Welcome, Dr. 

Miller, for coming today to discuss MedPAC’s most recent report. 

It is an important hearing, and I hope that we can have a constructive conversation this morning that focuses on finding solutions to 

the challenges that Medicare faces in a way that protects beneficiaries. 

Through its expertise and non-partisan analysis, MedPAC in the 

past has helped Members of Congress come together to discuss options for reform that improve the payment system, cut down costs, 

and improve the quality of care that beneficiaries receive. Now, we 

may not always agree, but reports like the one we are discussing 

today often start as a good point for a starting point of a discussion. 

Unlike previous reports, the MedPAC has submitted to Congress 

a report that does not contain any recommendations. Instead, today’s report represents a number of ideas we can use as a framework for today’s discussion. We do not need to leap to any conclusions, there is no crisis. We should hear, listen, question, analyze 


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what we hear, and, after a careful review of the issues, we can then 

determine what proposals to move on. 

Whatever changes we make, we need to focus on some key principles. 

First, we need to make sure that beneficiaries are protected from 

having to bear an increased financial burden. Current Medicare 

beneficiaries pay a greater share of their income for health care 

than the average American. And yet, often the Republicans say 

they need more skin in the game. They pay taxes during their 

working years to earn eligibility, and they continue to shoulder a 

share of the load through premiums, co-pays, or co-insurance and 

deductibles. 

Second, we must get health care costs under control. We did a 

lot of great things through the Affordable Care Act, particularly in 

the protecting of consumers and expanding access to affordable 

health care coverage for millions of Americans. The ACA improves 

Medicare’s benefits by improving coverage of preventative care, and 

increasing prescription drug coverage. And the ACA helped constrain Medicare spending such that we have record low-per-capita 

spending growth, below inflation in the years following enactment 

of health care reform. 

We must continue this work by focusing on controlling costs and 

improving outcomes. Just this week a report from the Commonwealth Fund found yet again that the United States spends more 

per capita than any other country on health care, yet we don’t get 

the best results. We have to fix that. 

Third, we must make sure that payments are accurate and fair. 

This involves a careful review of how Medicare pays doctors and 

hospitals, with an eye towards overpayments, which need to be 

eliminated, and fraud, waste, and abuse in the system. This will 

allow us to strengthen the program without harming the beneficiaries. 

Finally, we should focus on saving money through innovative 

payment models. The ACA introduced a number of promising reforms to Medicare, including accountable care organizations and 

the Medicare shared savings plan, which will cut costs without 

harming beneficiaries. We need to continue to remove barriers to 

setting up these innovative programs. 

I am concerned that my Republican colleagues will use today’s 

hearing to suggest radical changes in Medicare. Whether it is a 

proposal to eliminate the program’s defined benefit through a 

voucher program, or increasing cost sharing for seniors, I have 

heard a lot of bad ideas in the past. MedPAC has not suggested 

we make any of these changes in its report, and I hope our conversation doesn’t use this hearing as a cover for those kind of bad 

ideas. I know that the chairman is interested in making changes 

to make Medicare stronger, and I hope to work with him. Thank 

you very much. And I yield back the balance of my time. 

Chairman BRADY. Thank you, Doctor. And we will now hear 

from Mr. Miller. And you are recognized 5 minutes for the purpose 

of your oral statement. 


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STATEMENT OF MARK E. MILLER, PH.D., EXECUTIVE 

DIRECTOR, MEDICARE PAYMENT ADVISORY COMMISSION 

Mr. MILLER. Chairman Brady, Ranking Member McDermott, 

distinguished Committee Members, thank you for asking the Commission to testify today. 

As you know, Congress created MedPAC to advise it on Medicare 

issues. And in the June report you will see themes that we have 

often repeated: moving the Medicare program away from a fragmented, volume-driven system to one that is coordinated across 

providers and settings, and focused on patient outcomes; rewarding 

providers and plans that take risk and improve quality with higher 

payments and reduced regulatory oversight; assuring that Medicare’s payment systems don’t favor one payment model over another; and assuring that traditional fee for service remains an option, but at the same time assuring that that payment system is 

accurate, accountable, and as fair as possible. 

Medicare now has 3 payment systems: 30 million beneficiaries 

are in traditional fee for service; 5 million are in accountable care 

organizations; and 15 million are in private plans. The Commission’s June report discusses synchronizing Medicare’s payment, 

quality measurement, risk adjustment, and regulatory oversight 

across the three payment systems. Our motivations are to protect 

the patient by setting common risk adjustment and quality standards, to assure fairness among plans and providers within a market by setting common financial and quality standards, and to protect the taxpayer by assuring that Medicare supports the lowest 

cost, highest quality payment system in any given market. 

Regarding this last point, we used data from 31 markets to compute current payments and to simulate a common benchmark for 

Medicare across ACOs, traditional fee-for-service, and private 

plans. There is a lot of technical details here, but here are two 

take-aways. A common benchmark could make ACOs and MA 

plans more competitive with fee-for-service. And, most importantly, 

the simulations show that driving volume to any one model may 

not be desirable because no one model is always the most efficient 

in a given market. 

Just as an aside, I would also note that on Monday we put out 

new guidance to the Congress and HHS on the next generation of 

ACOs that we believe is consistent with these longer-run goals. 

Moving on to quality measurement, the Commission has become 

concerned that Medicare’s quality programs are overbuilt, burdensome, focused on process, rather than outcomes, and out of synch 

with the private sector. To address these issues, the Commission 

discussions have evolved towards an alternative view that would 

focus on a small set of population-based outcomes and patient experience measures, and then to compare and report quality across 

traditional fee-for-service, ACOs, and private plans. For the purposes of rewarding and penalizing, our conversations are incomplete. But the direction of the discussion is around using those population measures for ACOs and managed care plans, while continuing to use provider-based outcome measures for fee-for-service. 

Moving on to modernizing fee-for-service, in this report we explore three ideas. With respect to beneficiaries, we provide information on the Medicare support programs and reiterate the CommisVerDate Sep 11 2014 14:43 Aug 23, 2016 Jkt 020997 PO 00000 Frm 00011 Fmt 6633 Sfmt 6602 I:\WAYS\WAYSPS\20997\20997.XXX 20997

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sion’s recommendation to increase eligibility for the program up to 

150 percent of poverty. This recommendation should be viewed in 

the context of the Commission’s broader recommendation on reforming the traditional fee-for-service benefit in order to rationalize 

that benefit design, to protect the beneficiary from high and unpredictable out-of-pocket costs, and to create price signals to discourage first dollar supplemental coverage. The MSP expansion will 

offer greater out-of-pocket assistance to low-income beneficiaries 

under the reform benefit design. 

With respect to provider payments, the report discusses primary 

care services, which the Commission believes are under-valued in 

the physician fee schedule. The policy idea would maintain the primary care add-on in a budget-neutral manner, but would move to 

paying for these services on a patient basis, rather than on a service basis. We believe that this would give physicians, advance practice nurses, and other qualified professionals the resources and 

flexibility to provide non-face-to-face services, and to provide coordination services. 

Finally, we continue the discussion of our site-neutral payment 

policy. As this Committee well knows, MedPAC has made recommendations to narrow payment differences in the ambulatory 

setting and between the in-patient hospital and the long-term care 

hospital setting. In this report we begin the discussion of narrowing payment differences for in-patient rehab and skilled nursing facilities—again, focusing on trying to identify comparable patients, where this makes sense. 

I would like to thank you for asking the Commission to testify 

today, and I look forward to your questions. 

[The prepared statement of Mr. Miller follows:] 


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Chairman BRADY. Thank you, Mr. Miller. I want to talk a little 

about—or ask you a little about—the recommendation to redesign 

the Medicare fee-for-service benefit. The current—for seniors, the 

current benefit design is very confusing. It really is, essentially, 

two different insurance products, one for the hospital nursing facility care, another one for physician services and other out-patients. 

Every one has its own deductible cost-sharing requirements, adding 

in a Part B medicine benefit and often a supplemental plan. You 

know, it is tremendously confusing. 

So, I am pleased the Commission wants to address these problems. Can you explain the benefits to seniors of a redesign? And 

my thinking is, you know, the current system works fine as long 

as you never go to the hospital, you know. But seniors are going 

to go to the hospital. And some—many times in their lifetime. And 

so, having a redesign that provides, you know, one clear deductible 

that creates a co-payment, rather than co-insurance, so there is 

more, I think, limits to those, and then an out-of-pocket cost where, 

in those years where you are ill and in the hospital, you are not 

going to go lose your life savings as a result of it. 

Can you talk a little about sort of the context we ought to be 

viewing this? And we all want to make sure that we are protecting 

low-income seniors, as well. 

Mr. MILLER. Okay. So I think, if you want to talk about it from 

the beneficiaries’ point of view—and I think that that was a motivation for a lot of the Commission’s work here—the first thing is 

that the benefit, as it is designed, doesn’t include a catastrophic 

cap. And the market has changed significantly on that point over 

time. The managed care plans all provide catastrophic caps, for example. 

And so, the first benefit to the beneficiary is to have a catastrophic cap, where their out-of-pocket would stop at some point. 

You know, we have modeled different options, but let’s just say 

$5,000. So that is the first thing. 

The second thing is line of sight on their out-of-pocket costs. So 

right now you have a couple different deductibles, as you have said, 

and you also have percentage-based co-payments. I am going to pay 

20 percent of something. And so, the Commission would rationalize 

those deductibles and move from co-insurance percentages to a copayment amount for a service. And the hope here is that the beneficiary has a clear line of sight on what their out-of-pocket will be. 

And then that, coupled with catastrophic, brings me to the third 

point, and make the need for the supplemental insurance significantly less, because they have greater protections and greater certainty about what they are going to be paying out of pocket. And 

so, the need for supplemental insurance, if that becomes much less, 

you have just relieved the beneficiary of the premium for—that 

they pay for the supplemental insurance. 

And then a final point, which you have also referred to, is if you 

have protections up to, say, 150 percent of poverty for low-income, 

then you are helping beneficiaries with any of their premium costs. 

Chairman BRADY. Two things to that point. Should we be looking at the Medicare savings plan program in the context of this redesign? 


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And, secondly, are there benefits to continuation of care by redesigning the Medicare benefit? 

Mr. MILLER. Yes, we are talking about 150 percent in the context of the broader re-benefit design. I am not sure if I followed the 

continuation of care—— 

Chairman BRADY. And the re-design is—by this providing clarity and line of sight, in looking at your recommendations there 

seems to be a suggestion that this also helps seniors as they experience a continuation of care, from leading in the hospital and—— 

Mr. MILLER. Right, I now follow your point. I am sorry I missed 

it. 

Yes, and we did—actually, we did some analysis for this Committee very directly on this question and gave it to you a while 

back. But for example, there are numbers like, you know, nine percent of beneficiaries have a hospitalization in a single year, but 

over multiple years—say 4 years—you can get up into 40 and 50 

percent of beneficiaries having a hospitalization. And so, the benefit, the insurance value benefit, if you will, to a redesigned, you 

know, benefit, is that it also provides protection over a longer run. 

Chairman BRADY. Can I switch about MedPAC’s discussion 

measuring quality by focusing on the entire patient population, as 

opposed to assessing each individual provider? Being able to compare quality in an area between fee-for-service, Medicare Advantage, and other options, I think, is a very important thing. I understand the Commission’s reluctance to adjust provider fee-for-service 

payments, because it makes them accountable for things outside 

their control. 

My question is, in the context of how Medicare pays physicians, 

considering that the current sustainable growth formula adjusts 

payments based on the collective actions of physicians nationwide, 

wouldn’t adjusting payments to physicians in a relatively small 

area signify an improvement? 

Mr. MILLER. I think this is something of a trade-off in the sense 

that at the national level it seems very clear that you have sort of 

a tragedy of the commons type of situation. So I might—if volume 

increases as a physician, I might be concerned about a fee reduction. But if that fee reduction is shared across the entire country, 

then I might benefit more in the short run by increasing volume, 

and then have the fee reduction shared by all physicians. 

It is arguable that doing that on a smaller basis would do two 

things: make the physician more aware of the pool of physicians 

that they are actually at risk with, and perhaps give them more 

of a jump-start to moving into more organized systems. Say, as 

long as I am being judged with other physicians, maybe I want to 

pick those physicians and go to an accountable care organization. 

However, it is really important for me to say this: the Commission was concerned that in that circumstance, in a fee-for-service 

environment, there is no unified entity, so they were concerned 

about judging providers on that basis because of that. But that is 

kind of your trade-off. 

Chairman BRADY. No, I appreciate it. A final point, not a question, but I appreciate the Commission’s work on trying to create an 

apples-to-apples comparison across all three of the payment models: spending benchmark, quality measurement, risk adjustment, 


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regulatory oversight. I think for us to continue to improve the 

Medicare system, it is really critical we have an apples-to-apples 

comparison. So thanks for the work you are doing there. 

Mr. MILLER. Thank you. 

Chairman BRADY. Dr. McDermott. 

Mr. MCDERMOTT. Thank you, Mr. Chairman. 

You made a passing comment about paying primary care physicians for per-patient amount, rather than per-service. I have always thought that we would have a much better system if everybody had a medical home, some general medical person who knew 

them and knew their situation. And it sounds to me like you are 

talking about a plan where you would give a fixed amount to a doctor to pay to do the general medical things that are necessary. 

They could then refer out for the rest of their care to the more general system. 

I would like you to talk a little bit about what you meant by 

that. 

Mr. MILLER. Yes. That is what we meant by that, that the notion would be that, instead of a primary care physician or advanced 

practice nurse, or whatever the professional is that is providing the 

primary care service, in order to get reimbursed they have to see 

the patient and they have to—you know, face to face, and provide 

a service. 

But I think the Commission’s view is that, particularly and more 

coordinated systems, you want that professional to have the flexibility to do things like make phone calls, deal with the patient 

through email and phone calls, and also the flexibility to coordinate 

their care, which they aren’t directly paid for now. So, the notion 

is moving to a payment for a population that you have responsibility for, rather than paying them service by service. 

To your medical home point, this concept is not inconsistent with 

that thought. We are not saying it has to be a medical home, but 

we are saying that the payment should move more to a patientbased payment, which then gives resources for the professional to 

be flexible. 

Mr. MCDERMOTT. Are you talking, then, to a large organization 

getting a certain payment to cover, let’s say, 30,000 people that get 

$100 a month for each one of—I am just picking numbers out of 

the—— 

Mr. MILLER. Doesn’t have to be a large organization. We would 

see this as, you know, this is how we would pay primary care providers and services in Medicare, whatever their situation is. So, no, 

it is not you have to be organized to do this. 

Mr. MCDERMOTT. I mean most seniors—8 out of 10—don’t go 

to the hospital in a given year—moreover, a four or five-year period, as Mr. Brady has said. Aren’t they protected by their supplemental insurance from the co-payment problems? 

Mr. MILLER. Yes. If I understand your question, yes. If you 

have a supplemental product, you can purchase products that cover 

your first dollar, your deductible in your hospital case, and you can 

purchase products that have a back end catastrophic coverage. 

That has produced a supplemental market. 

And without being, you know, too unpleasant about it, there is 

a lot of questions about the value of some of those products—the 


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premiums people pay in exchange for the value that they get. And 

those products also impose additional costs on the taxpayer, because they generate services. There is fairly clear evidence on that. 

And so, the thinking is—— 

Mr. MCDERMOTT. Tell me about the evidence that that—— 

Mr. MILLER. Say again. 

Mr. MCDERMOTT [continuing]. Having this supplemental policy 

generates—— 

Mr. MILLER. Yes, what we—— 

Mr. MCDERMOTT [continuing]. Services, where is the data that 

says—— 

Mr. MILLER. Okay, and we have published it, and we can make 

sure that we, you know, re-deliver it to you. There is a fair amount 

of evidence that when you—and not just a beneficiary, any person—of first-dollar coverage in their consumption of health care, 

utilization increases. And the issue with these products is the price 

I pay to get that product is about the actual wrap-around services, 

and the price doesn’t contemplate the additional cost to the program that the product imposes. 

Mr. MCDERMOTT. Is it—am I correct in thinking that 90 percent have supplemental coverage, about 90 percent? 

Mr. MILLER. Yes, and that is composed of three types. One is 

employer-sponsored insurance. One is the private Medigap—individual Medigap market. And then another number is their Medicaid supplemental. 

And the kind of comments I am making, and what the Commission is talking about with this benefit redesign pertain to the employer-provided and the Medigap products. And our view there is 

the beneficiaries should have the choice of accessing those products. But the products’ price should more fully respect—or reflect 

the full cost of purchasing that product, which is the wrap-around 

services and the additional costs that they impose on the program. 

Mr. MCDERMOTT. Thank you. 

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

Mr. JOHNSON. Thank you, Mr. Chairman. Mr. Miller, the Commission report talks a lot about how Medicare under-values primary care services, including the fact that average compensation 

for specialists can be more than double what primary care practitioners earn. 

It is also my understanding that cognitive physicians, like neurologists and rheumatologists, are in a similar position to primary 

care in income, recruiting, and even—cognitive providers perform 

care coordination for beneficiaries with multiple chronic conditions, 

often for an aging population. 

My question is, does the Commission have any plans to also recognize cognitive providers, along with primary care providers, in its 

recommendations? 

Mr. MILLER. Okay. And this is a matter of degree, rather than 

philosophical difference. 

So, if you think about the Medicare physician fee schedule, I 

think what the Commission—you know, if all 17 were here—would 

say to your answer—to your question is this. There is great concern 

that the procedural side of the fee schedule is over-valued. If you 

go to the cognitive side, there is concern that that is under-valued, 


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because we are talking about time-based services. You don’t have 

as much ability to generate volume and compensate yourself. 

And so, cognitive becomes more of the concern. But if you have 

to pick priorities, and there is limited amounts of dollars, then the 

Commission’s point is the first and primary—or first concern is the 

primary care sets of services, and I will stop in just one second. 

And I think part of that reasoning is they see that as so critical 

to the care coordination that many people are looking for in the 

system. 

So it is not—you know, I completely—you know, the Commission 

disagrees, it is really a matter about—of priorities. 

Mr. JOHNSON. Okay. But you are looking at it. 

Mr. Miller, the June report repeats a previous finding that Medicare Advantage beneficiaries who dis-enroll and return to fee-forservice Medicare have a 16 percent higher fee-for-service spending. 

Does that mean that Congress ought to build in extra incentives 

to keep beneficiaries in Medicare Advantage? 

Mr. MILLER. We haven’t made a recommendation on—a direct 

recommendation on this point yet, but you are picking up on, decidedly, what—the issue that is being raised in the report. The actual 

number these days—we have re-estimated it using some later 

data—it is about 12 percent. But your point still stands. And I 

think there is some concern here that if you find a plan that has 

excessive dis-enrollment relative to what you see out there in the 

environment generally, you might want to contemplate some kinds 

of incentives or penalties to forestall that kind of action. 

And one of the things I would relate that to is we can always try 

and prove risk adjustment. It will probably be imperfect for a long 

time, and maybe forever. There are other administrative actions 

that you can take to try and get the behavioral response that you 

are looking for, and that is one of them. 

But, yes, you get about a 4 percent dis-enrollment occurring 

every year, and those people tend to be about 12 percent more expensive than average. And I just don’t want to vilify the plans 

here. Beneficiaries dis-enroll for their own reasons, as well. So this 

is both the beneficiary and the plan that are involved in the disenrollment. 

Mr. JOHNSON. Thank you. I appreciate your comments. 

Mr. MILLER. Can I say one thing really quickly? I forgot to say 

to Mr. McDermott the other supplemental coverage is managed 

care. I didn’t mention that in answering your question. Sorry about 

that. 

Chairman BRADY. No, thank you. 

Mr. Thompson. 

Mr. THOMPSON. Thank you, Mr. Chairman. 

And, Mr. Miller, thank you for being here. I would like to touch 

on the under-value of primary care, as well. And specifically, in the 

ACA, we put in provisions to provide incentive payments for primary care docs. And in your report you state that access for beneficiaries seeking new primary care physicians raises more concerns 

than access for beneficiaries seeking new specialists. And I hear 

that in my district, as well. Folks tell me that they have long wait 

times for appointments, there is few docs, primary care docs, who 

will take new Medicare patients. 


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And why is this problem persisting? And have the incentive payments helped to reduce this—the extent of the problem? 

Mr. MILLER. Okay. I don’t—going to the last part of your question first, I don’t want to overstate that the primary care add-on 

payment, which we recommended—and we, you know, accept responsibility for, and the Congress enacted, and so we think that 

that is the right direct—I don’t want to overstate that this will correct the primary care, you know, wait times and difficulties that 

people are experiencing. 

But we think it is a really important signal to primary care providers about the value that they can potentially provide in care coordination in a reformed system. And we think that it is important 

that that signal persist. 

We do think that the fee schedule is out of balance for these 

types of services, and we are trying to say there is some attention 

to trying to rectify it. 

Last thing I will say and I will stop is we have also talked about 

other things to get greater value in that fee schedule, but I won’t 

go into them in the interest of your time. 

Mr. THOMPSON. So we should continue—— 

Mr. MILLER. Yes. 

Mr. THOMPSON [continuing]. After the 2015 date when the incentives expire, we should continue to do those? 

Mr. MILLER. The Commission has not made a hard recommendation on that, but the conversations that they are having, 

and that they are going to pick up with in the fall are all headed 

in that direction. 

Mr. THOMPSON. So thank you for being respectful of my 

time—— 

Mr. MILLER. Trying to. 

Mr. THOMPSON [continuing]. But let’s go into those other 

things that we should be doing—— 

Mr. MILLER. Okay—— 

Mr. THOMPSON [continuing]. In addition to the incentive payments. 

Mr. MILLER. No, no problem. I just didn’t want to get you off 

your point, and you may have had another one. 

So, for example, in our SGR recommendations that we have 

made to the Congress—and you know, these are not popular, but 

none of our stuff is—so one of the things is we have made a set 

of recommendations on data collection and requirements for the 

secretary to identify over-price procedures in the fee schedule. We 

think that most of those over-price procedures reside on the procedural side of the fee schedule. Then you would have resources that 

you could re-balance to the cognitive or to the primary care side of 

the fee schedule, as you saw fit. That is one thought. 

A second thought is that—and again, this is somewhat unpopular—in solving the SGR issue, in order to keep the cost of the SGR 

fix down—and, remember, it used to be a lot more expensive than 

it was—you can differentiate the conversion factor for primary care 

or cognitive, or whatever the Congress decided, relative to the procedural services. And that is another way to get a re-balancing effect. 


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Mr. THOMPSON. Is there anything else that Congress should do 

to try and get a handle on this problem? 

Mr. MILLER. I am sure I am forgetting something, but those are 

certainly the things off the top of my mind. 

Mr. THOMPSON. Okay. If you remember, why don’t you drop 

me a line? 

Mr. MILLER. We will do that. And we talk to your people all the 

time. 

Mr. THOMPSON. Thank you. I yield back. 

Chairman BRADY. Thank you. Dr. Price. 

Mr. PRICE. Thank you, Mr. Chairman, and I want to thank you 

again for holding this hearing. I appreciate MedPAC’s work in so 

many areas to try to make a health care system that works for patients. As I often times say, we tend to forget the patient in many 

of these discussions. We talk about money, we talk about other 

sorts of things, but often times forget the patient. 

I want to thank MedPAC for what appears to be a further maturation of and appreciation that patients in various medical specialties are actually different, that one-size-fits-all doesn’t often 

times—doesn’t work hardly at all, in terms of health care. 

To that end I want to talk a little bit about medical specialties 

and the difference that they have, and specifically pathologists, as 

it relates to meaningful use requirements and electronic health 

records. You are familiar with that program, are you not? 

Mr. MILLER. A bit. I am not real deep right at the moment, but 

I will do my best. 

Mr. PRICE. The kind of rewards, incentives that are being provided for physicians as it relates to electronic medical records and 

meaningful use are pretty much standard across the board. So we 

have got pathologists who, candidly, look at slides all day, or lab 

results all day, and are being asked to figure out whether or not 

that slide has an allergy or whether it smokes. And that doesn’t 

make a whole lot of sense, does it? 

Mr. MILLER. To the extent that I understand what conversation 

I am in the middle of, no. 

Mr. PRICE. Well, all right. 

[Laughter.] 

Maybe I could ask MedPAC to take a look at that, because this 

is resources that are being utilized and caring for Medicare patients in a way that, frankly, doesn’t make a whole lot of sense for 

either the patients or the physicians that—— 

Mr. MILLER. And the question is whether there should be differential requirements across specialties on the EHR—— 

Mr. PRICE. Exactly. 

Mr. MILLER [continuing]. Meaningful—— 

Mr. PRICE. Exactly. 

Mr. MILLER. I can take that question back. 

Mr. PRICE. Let me come to something that you have been pushing on for a long time, and that site-neutral payments in the surgical setting. Obviously, ambulatory surgery centers, you mention 

that we ought to be looking for the lowest cost and the highest 

quality. And ASCs often times provide the highest quality at the 

lowest cost, and you have been a champion on that. 


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I want to touch on the site-neutral payments that you have mentioned here in this report on SNFs and IRFs, skilled nursing facilities and in-patient rehab facilities. And I am curious as to whether 

or not CMS has given you any feedback on your recommendation. 

Mr. MILLER. And we have not made a recommendation yet. We 

are exploring this. We have just entered this particular area. They 

are aware that we are working on it. I don’t think I have gotten 

feedback as in, ‘‘Way to go,’’ or, ‘‘Stop what you are doing,’’ nothing 

like that. 

Mr. PRICE. Can you imagine any reason why CMS ought not be 

supportive of site-neutral payments for various facilities providing 

similar care to patients, regardless of that site? 

Mr. MILLER. Oh, and I didn’t mean to imply that they were 

broadly hostile to this at all. I was thinking very narrowly about 

the in-patient—or, sorry, the rehab and the skilled nursing facility. 

I haven’t gotten a lot of feedback on that. 

I think there is a sense and an understanding at CMS that this 

is an issue. I think there are some differences about how they 

would go about it, but I don’t think they are ignoring it. Let’s put 

it that way. 

Mr. PRICE. I think it is a healthy discussion to have, and I think 

we are actually having some admission on the part of CMS that, 

again, that one-size-fits-all doesn’t actually work. 

I want to also commend MedPAC for the work that you are recommending, or the discussion that you are having around quality 

measures. Those of us who have been physicians and practice clearly understand that one patient and another patient, even though 

they have exactly the same diagnosis, the quality treatment for 

each of those patients may be significantly different. Is that not 

true? 

Mr. MILLER. Agreed. And we are trying to not only get a more 

consistent set of quality measures, there is a very strong motivation on the part of the Commission to relieve the burden on the 

provider. 

Mr. PRICE. And to that end, wouldn’t it be most—do you think 

it would be helpful to have the quality measures be determined primarily by those folks actually providing the car, the specialty societies, and not have them be a—the kind of duplicative and often 

times contradictory measures that we currently have in place? 

Mr. MILLER. Well, this was going too well to last, and so here 

we are. 

[Laughter.] 

I think the Commission has great concern that the quality measures, if they are determined entirely by the specialty societies— 

there is two concerns. Number one, that it creates and reinforces 

silo types of approaches to care: ‘‘Here is my set of metrics for the 

thing I did,’’ as opposed to what was the general outcome for the 

patient throughout the entire episode; and I think the second concern that the Commissions have—and this is with all respect, but 

the specialty societies all say it about each other—some of them 

have rigorous standards, some of them less so. 

Mr. PRICE. And my time has run out, but I look forward to having—maybe we can get another round, Mr. Chairman, as we move 

forward. Thank you. 


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Mr. MILLER. And, if not, we are happy to get on the phone and 

talk to you about this, as always. 

Chairman BRADY. Thank you. Mr. Kind. 

Mr. KIND. Thank you, Mr. Chairman. Thanks for holding this 

hearing. 

Mr. Miller, thank you for your testimony today, and for the work 

MedPAC does. I wasn’t going to ask you this in my question period, 

but since Dr. Price raised it, I have teamed up with him in regards 

to the whole meaningful use with certain specialties, especially as 

it relates to pathologists. So maybe we can follow up with you in 

regards to legislation that we specifically introduced to try to get 

MedPAC’s response to it, as well as a letter that we are doing to 

CMS to try to highlight this issue. There have been some extensions, we are not sure if there is going to be another extension in 

the future. But, nevertheless, it would be nice to get MedPAC’s incentive on it. 

You know, in past MedPAC reports to this hearing, I have been 

not so much critical, but impatient with MedPAC’s recommendations in regards to payment reform. So I want to ask you yet here 

today—I mean there are a lot of tools out there, a lot of different 

payment models that are moving forward, a lot of experimentation 

taking place. But from MedPAC’s perspective, where can we be accelerating this payment from fee-for-service to a quality or valuebased reimbursement system? 

Where are there some very promising initial results coming back 

that is showing us that we can get much better quality of care, but 

also at a much better price? 

I think—I forgot who it was, Dr. McDermott or someone just 

cited the Commonwealth study that just came out this week, showing that we are still, by far, spending way too much per beneficiary 

in health care, as an entire system. And often times, getting worse 

results compared to most of the other developed countries around 

the world. 

And I think part of this is being driven by this archaic payment 

system that rewards volume over value. And I know MedPAC has 

had recommendations in the past. But right now, from, you know, 

where you see us today, where do you think we can be pushing 

more aggressively to get to a value or outcome-based reimbursement system? 

Mr. MILLER. Okay. That is a pretty—you know, broad and complicated. But I would say a few things. 

I think, you know, we are going to be living with fee-for-service 

for some period of time and, you know, perhaps forever. And I am 

not sure that that is a bad thing, because fee for service can be efficient and high quality in some parts of the country. But I think 

there are pursuits inside fee for service that can produce better 

quality results. Here is one. 

The re-admissions penalty, which is, again, not a popular idea, 

but it is—it looks like re-admissions are falling, and people are 

paying a lot more—hospitals are paying a lot more attention to it. 

On more of a systems-wide basis, you know, the ACO concept is 

still a concept, still entirely unproven, but we have been talking a 

lot to accountable care organizations on what is going on out there, 

and decidedly—at least for some of them—it changes the underVerDate Sep 11 2014 14:43 Aug 23, 2016 Jkt 020997 PO 00000 Frm 00038 Fmt 6633 Sfmt 6602 I:\WAYS\WAYSPS\20997\20997.XXX 20997

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lying dynamic. You know, generating services is working against 

you. And as long as the quality standards are clear and present, 

they move more in that direction. 

And I think another area that we are talking about in this report 

is the notion of population-based quality measures. So get out—and 

I know there is some conflict over here—but get above the individual process-based, ‘‘I did this particular thing,’’ and say, ‘‘Is this 

population avoiding admissions that are unnecessary? Are they 

staying out of the emergency room? Are they not being re-admitted?’’ 

A concept that we are only breaking ground on is the notion of 

can we count how many healthy days they have at home. That is 

what everybody wants. Can we start to construct measures that 

say, ‘‘This is really where you want to be?’’ 

And then, finally, I think, you know, bringing both the beneficiary and the provider into the—we, MedPAC, I think the Congress in general, have spent a lot of time on trying to design payment systems and measurement systems to incent the provider, 

but also bring the beneficiary into that process too, so that you 

have both actors at the point of contact involved. 

Mr. KIND. And that is—I would love to be able to follow up with 

you and see what we can explore and move forward on. 

But one other thing before my time expires. Obviously, we had 

the CMS data dump on physician reimbursements recently. And, 

yes, it does provide a glimpse, but it was an incomplete picture, because it also didn’t explain what results were happening, what the 

protocols of care—and I also discovered during that that you have 

multiple doctors using the same billing number. I mean, does that 

make sense? Don’t we want to dis-aggregate that information if we 

want to really drill down to find out where the reimbursements are 

going, and if there is perhaps some over-utilization occurring? 

Mr. MILLER. Yes. I think the ability—I mean there are 10 tax 

identification numbers, and then there are individual provider 

numbers. And I think it probably makes a lot more sense to be able 

to track through to the individual provider, because if there is a 

particular provider who is ordering a bunch of services that are 

really out of synch with general accepted practice, it is hard to get 

at that if you can’t get to the individual. 

Mr. KIND. All right, thank you. 

Thank you, Mr. Chairman. 

Chairman BRADY. Thank you. 

Mr. Smith, you are recognized. 

Mr. SMITH. Thank you, Mr. Chairman. 

Dr. Miller, thank you for joining us here today. Medicare Part D, 

we are learning that there is cost savings, that costs are less than 

originally projected. Can you speak briefly to that, and how and 

why you have seen that take place? 

Mr. MILLER. I think probably the single most important reason 

that that is the case is that there was a fairly heavy move to the 

use of generic drugs that was driven inside the Part D program 

that may have resulted in the expenditures that were less than 

what was being projected when the program was implemented. But 

if there was one thing to point to, I think it is probably that. 


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Mr. SMITH. And how about the penalty that is—rather than 

mandating seniors have Medicare Part D, there is a provision that 

is a penalty if they don’t sign up during the open enrollment period. 

Mr. MILLER. Which is pretty true throughout Medicare. If you 

don’t sign up for Part B, it is kind of the same—— 

Mr. SMITH. Right, but there is no individual mandate, if you 

will. Correct? 

Mr. MILLER. There is no individual mandate. That is correct. 

Mr. SMITH. And can you speak to the effectiveness of that provision? 

Mr. MILLER. In lowering cost? 

Mr. SMITH. Well, not necessarily just in lowering costs, but in 

incenting individuals to sign up. 

Mr. MILLER. Well, I think the existence of a penalty probably 

focuses the attention of the beneficiary, if that is what you mean. 

And I think it was put into Part D and into Part B because of the 

concern about selection. If you don’t move broad ranges of the population into these programs, what you get is the sickest, and then 

the premiums become unsustainable over time, and the program 

collapses—in the extreme. It is death spiral in the—you know, kind 

of the actuarial terms. 

So, those things are created to draw the beneficiary or whoever 

the person is, his attention to purchase the insurance, so that you 

get a relatively broad representation of risk. 

Mr. SMITH. Very well. I thank—— 

Mr. MILLER. Is that what you are asking? 

Mr. SMITH. Yes. Thank you very much. 

Mr. MILLER. Okay. 

Mr. SMITH. I yield the balance of my time to Dr. Price. 

Mr. PRICE. Oh, thank you. Thank you very much. I was—I am 

sorry Mr. Kind left, because I was remiss in not thanking him for 

his assistance on this issue of some specialties, especially pathologists, and the meaningful use in electronic medical records. 

And you did make a comment to—in response from Mr. Kind, 

though. You said that re-admissions were falling. Have you looked 

at the change in observation status in hospitals? 

Mr. MILLER. Observation status has been increasing. We have 

looked at the relationship between those two. We don’t think that 

that is driving the impact that we are seeing on admissions. But 

we are looking at observations. We do think that there are some 

real issues there. We are looking at the to-midnight rule, which I 

think has been a subject of some conversation. 

I am not in a position to give you, you know, data and analysis, 

although I may have some fact points. But the Commission—the 

staff right now—I haven’t rolled it out in front of the Commission— 

is looking at an alternative approach that would change—I don’t 

want to get too deep here—the in-patient payment system to make 

it more clear when a person is in-patient, and to pay on a more 

rational basis, so that there is not as much need for this observation spike—— 

Mr. PRICE. I think that would be extremely helpful, because all 

you have to do is go to an emergency room and you ask them 

where their observation beds, and they have increased—well, now 


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that we have observation beds. The only reason for that is because 

of a payment system that we have put in place, as you know. 

I want—— 

Mr. MILLER. This fall we will have some of this information out 

in our public meetings, and you and your staff can start paying attention. 

Mr. PRICE. Great. I would like to touch on the recommendation 

or the comment that you made in the report about paying—using 

a per-beneficiary payment. Some people have called that capitated 

payment system. How does what you envision to be appropriate differ from what some folks call concierge medicine, or personalized 

medicine? How does the paying a primary care physician or a medical home physician differ from what you are envisioning? 

Mr. MILLER. Well, I—— 

Mr. PRICE. Or does it? 

Mr. MILLER. Well, I think I see the linkage that you are making. 

The—I think the first distinction—and maybe it is the only one 

I can think of off the top of my head—is that what a concierge payment usually gets you is exclusive access to a physician. And generally, physicians use it to lower their panel counts, and then focus 

more attention on an individual patient. 

This wouldn’t have any exclusivity to it. The payment would be 

attached to the provider on the basis of a preponderance of contact 

with a patient. And we would say, ‘‘Okay, you seem to be seeing 

this patient for their primary care. Here is a block of dollars for 

you to coordinate and, you know, have non-face-to-face service with 

that beneficiary.’’ That portion does sound like the concierge type 

of experience. The exclusivity, I think, would be a difference, 

though. 

Mr. PRICE. Maybe we can take a peek at that. 

Mr. MILLER. Yes, absolutely. 

Chairman BRADY. Thank you. Mr. Pascrell. 

Mr. PASCRELL. Mr. Chairman, thank you. This year’s June 

MedPAC, Director Miller, reaffirmed—in my mind, anyway—that 

we don’t have to scrap the current system in order to save Medicare. I think it is conclusive evidence to that effect. 

We are talking today about strengthening Medicare. The Affordable Care Act is already hard at work actually testing the new payment system and the delivery system. That will lead to innovation, 

not only for Medicare, but everybody in the entire health care system. 

The point I would like to make is that health care reform is already moving Medicare, I think, in a new direction. That is my estimation of what is going on. And we should always be open to new 

ideas. There is no two ways about that. But I think my colleagues 

need to take a look at the work happening today that is making 

and moving Medicare towards paying for the quality of services, 

not necessarily the quantity of services, for our seniors. 

Here is my first question to you. Health care, to me—health care 

reform is entitlement reform. Not only did the Affordable Care Act 

reduce costs for Medicare, it also reduced costs for beneficiaries. 

Mr. Miller, can you discuss the ways in which the Affordable Care 

Act has helped the solvency of Medicare? 


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Mr. MILLER. Well, I mean, I think a couple of things. The 

changes in the basic payment rates for the fee-for-service providers 

that were restrained as part of the ACA meant that there would 

be lower spending for that reason. So, you know, the reductions in 

the market basket, I think, you know, might be a way to talk about 

that vocabulary. 

I think a second reason is the reduction in the managed care 

payments, which the Commission did a lot of work demonstrating 

that we were basically subsidizing and paying more than we needed to to get that benefit. And I think that lowered expenditures. 

What I think the jury is still out on is, for example, take ACOs. 

You now have five million people in ACOs. So decidedly, there is 

change occurring. There results are mixed, which, actually, I think 

everybody expected them to be. 

Mr. PASCRELL. Right. 

Mr. MILLER. So the ACOs are actually saving money. There 

seems to be increases in quality, pretty broadly, but some are saving money, some are not. 

Mr. PASCRELL. Before we get into out-of-pocket expenses—I am 

very concerned about that—you don’t disagree that the life of Medicare has been extended about eight years because of the ACA? 

Mr. MILLER. Well, I am not sure I have walked through that 

thinking for myself. I know the trust fund is extended. There is 

lower expenditures in Medicare rates right now. That is extending 

the life of the trust fund. There is big discussions about how much 

of that is secular and how much of that is ACA. 

But to your question, the things I pointed to did reduce Medicare’s spend. 

Mr. PASCRELL. The average Medicare beneficiary has an aver- age annual income of less than $23,000. I am concerned that if it 

doesn’t provide adequate financial assistance for lower income 

beneficiaries, benefit redesign puts these beneficiaries in a very, 

very vulnerable financial situation. And they may—it may discourage them from assessing—accessing the care they need because of 

the cost. I am very concerned about that. 

We discussed this when putting the bill together. While the intention of setting an out-of-pocket maximum is to protect beneficiaries from high out-of-pocket spending, it would only be effective 

for those who have the financial means to reach that threshold. 

When MedPAC proposed Medicare benefit redesign back in 2012, 

which was also referenced in the most current report in June, does 

MedPAC envision redesigning the benefit for the purposes of 

achieving cost savings of the program? Is that the reason why you 

have suggested that? 

Mr. MILLER. No, but I am going to parse my way through this 

answer carefully. 

The benefit redesign portion of our proposal is explicitly—and we 

say this very clearly—designed not to increase the aggregate liability for the beneficiaries. We all understand the distribution—— 

Mr. PASCRELL. Right. 

Mr. MILLER [continuing]. Can change, but the aggregate liability. 

However, we have said that the first dollar coverage should have 

an additional charge to it. And our hope is that people see that 


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they don’t need it, and then they drop the first dollar coverage, and 

that frees up more resources for them. But if they choose to hold 

on to it, then they would pay more for that product. 

Mr. PASCRELL. Right, because, Mr. Chairman, we have talked 

about this several times about out of pocket. So we need some kind 

of a balance here so that, you know, we don’t cut off our noses to 

spite our faces. 

Chairman BRADY. Let’s see if we can find that common ground 

as we go forward. 

Mr. PASCRELL. Thank you. 

Chairman BRADY. Which is why the recommendations are, I 

think, helpful in this discussion. So thank you. 

Mrs. Black. 

Mrs. BLACK. Thank you, Mr. Chairman. And I appreciate your 

allowing me to be sitting in on this Committee. 

Thank you, Mr. Miller, for being here today. This is such an important subject matter, and we need to continue to make sure we 

are discussing it. In your June report you discuss the quality in fee 

for service and in the Medicare Advantage program, and I would 

like to discuss just a few concerns about how the quality is measured in Medicare Advantage, especially among that dual eligible 

population. 

I don’t have to tell you, you know that dual eligibles only account 

for about 19 percent of Medicare beneficiaries, but they account for 

about 34 percent of all the Medicare spending. So this is an important population. And having been a nurse for over 40 years, and 

having worked with this population, I certainly recognize that they 

are the most vulnerable, they have the highest rates of chronic illness, of disability, mental illness, and frailty than the rest of the 

Medicare or the Medicaid populations. And this means that Medicare Advantage will play a critical part in getting those services 

that they so critically need, and the larger services in coordinated 

care and benefits to access those services that beneficiaries most in 

need of, and especially in care management, in managing their 

care, since they have so many issues. 

Would you agree that we need to take into account these fragile 

populations when we make comparisons across the fee-for-service 

and the accountable care organizations with Medicare Advantage 

plans to make sure that we are really comparing apples to apples 

in both our costs and our quality. 

And then, if so, I would like for you to speak to how you think 

we might be able to do that. 

Mr. MILLER. Okay. So let me take this through a couple of steps 

here. 

So, the plans in managed care that take a lot of dual eligibles, 

the special needs plans, are—take a lot of these populations, although these populations are throughout the plan types. 

What we have done is we have looked at the risk adjustment system. And a way to think about it is, if this is your distribution of 

your population—expensive people, not expensive people—the risk 

adjustment system overpays a bit for not expensive, underpays for 

expensive people. And then, if you, as a managed care plan, kind 

of go after this end of the distribution, you could be potentially disadvantaged. 


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We made three recommendations recently in which we said, ‘‘If 

you make these technical changes’’—and I will take you through 

them, if you really want to glaze over—but, ‘‘If you make these 

three changes, it will move a little bit more to this balance.’’ So we 

think that that is a way to approach these kinds of payments and 

quality measurement in a way that is a bit more equitable. 

Now, as everything in health care, things get a little bit complicated. When you look at these plans’ financial performance, they 

aren’t really on a profit basis. That disadvantage—I mean, in some 

cases, have the highest profits relative to other plans. And so, you 

know, what we think should happen here is that there should be 

a common suite of measurements across any plan type, so that the 

beneficiary can look at it and say, ‘‘This plan does well, this plan 

doesn’t do well,’’ whatever the—or fee-for-service, whatever the 

case may be. 

I have talked to these plans many, many times, and they say, 

‘‘You know, the way you do it in’’—or, ‘‘The way Medicare does it 

in managed care, it is not fair to us.’’ And I say to them, ‘‘What 

measures would you add to this suite that capture your line of 

business better than is happening now?’’ And I have to say they 

have not come forward with those measures. 

And so, I see your point. I—we have made these recommendations for the risk adjustment. We think if there are measures that 

this portion of the industry can come forward and say, ‘‘This is 

really what we are about,’’ the Commission’s view is let’s evaluate 

them and make them part of the measurement process. But, to 

date, there hasn’t been a lot forthcoming. 

Mrs. BLACK. Do you have any research that you are currently 

doing, or plan to do, in being able to put forward some measures 

that you think would be applicable? 

Mr. MILLER. See, we are a very small operation. There is 30 of 

us at the—on staff anyway, and we don’t really view ourselves as 

the people who create the measures. We try and draw them from 

the environment, evaluate them, point them out, and say, ‘‘Here is 

a good set of work that is occurring.’’ We can try and put effort into 

that. 

But to date, no, we have not come up with a set of measures that 

at least those special needs plans would say, ‘‘Yes, that is the setup measures.’’ We have talked to them a bit about them, but we 

haven’t gotten a lot of traction. 

Mrs. BLACK. I was just curious, because there are certainly 

areas such as the chronic illness, and the disability, and the mental 

illness that set a stage for saying, ‘‘Here are the disease processes 

that are going to cost more,’’ as to whether you have actually seen 

any measures out there that you think would be applicable for 

what is already there. 

Mr. MILLER. Now, to those types of things, at least, our risk adjustment recommendations should address some of that. So, if—one 

of the measures is basically a chronic condition count. And when 

you enter that into the model, it makes this risk adjustment system more balanced. 

So, to the extent that those are conditions that are present, we 

have made recommendations, and we have done research. I 

thought you were asking more about this is an activity that we are 


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engaged in, and we should be measured on this activity. That is 

where we haven’t brought new information to the conversation. 

Mrs. BLACK. I think it is both areas. 

Mr. MILLER. I agree with you. And one we have standing ideas. 

One we are trying to work with the industry to identify them. 

Mrs. BLACK. Thank you. Thank you, Mr. Chairman. 

Chairman BRADY. Thank you, Mrs. Black, for joining us. If anyone thinks this is a check-the-box hearing, they are wrong— 

MedPAC does a report, we hold a hearing, that is it. Truth is, this 

Committee has spent, as you would imagine, a lot of time on the 

rollout of the Affordable Care Act, and spent a lot of good time, and 

I think a fairly historic agreement on how we fix permanently how 

we reimburse our doctors in Medicare. 

Now we are turning to how do we improve the Medicare program. There is a lot of challenges to it, there is a lot of opportunities. And it is my hope that we will build on some of the recommendations, adjust them, and, on a bipartisan basis, find a way 

to improve Medicare for our seniors. 

As a reminder, any Member wishing to submit a question for the 

record will have 14 days to do so. If any questions are submitted, 

Mr. Miller, I ask that the witness respond in a timely manner. And 

I thank you for your testimony on behalf of MedPAC here today, 

and the hearing is adjourned. 

[Whereupon, at 11:09 a.m., the Subcommittee was adjourned.] 

[Submissions for the Record follow:] 


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