IPAB: THE CONTROVERSIAL CONSEQUENCES FOR 

MEDICARE AND SENIOR 

HEARING 

BEFORE THE

SUBCOMMITTEE ON HEALTH 

OF THE

COMMITTEE ON ENERGY AND 

COMMERCE 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED TWELFTH CONGRESS 

FIRST SESSION 

JULY 13, 2011 

Serial No. 112–73 

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IPAB: THE CONTROVERSIAL CONSEQUENCES FOR 

MEDICARE AND SENIORS 

HEARING 

BEFORE THE

SUBCOMMITTEE ON HEALTH 

OF THE

COMMITTEE ON ENERGY AND 

COMMERCE 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED TWELFTH CONGRESS 

FIRST SESSION 

JULY 13, 2011 

Serial No. 112–73 

( 

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 

JAY INSLEE, Washington 

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 

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 

JIM MATHESON, Utah 

HENRY A. WAXMAN, California (ex officio) 

(II) 

(III) 

C O N T E N T S 

Page 

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

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

Prepared statement .......................................................................................... 4 

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

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

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

Texas, opening statement .................................................................................... 7 

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

opening statement ................................................................................................ 8 

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

opening statement ................................................................................................ 8 

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

California, opening statement ............................................................................. 9 

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

prepared statement .............................................................................................. 305 

Hon. Joe Barton, a Representative in Congress from the State of Texas, 

prepared statement .............................................................................................. 307 

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

Tennessee, prepared statement .......................................................................... 308 

Hon. Leonard Lance, a Representative in Congress from the State of New 

Jersey, prepared statement ................................................................................. 309 

Hon. John D. Dingell, a Representative in Congress from the State of Michigan, prepared statement ...................................................................................... 311 

WITNESSES

Hon. George Miller, a Representative in Congress from the State of California ..................................................................................................................... 11 

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

Hon. John Cornyn, a United States Senator from the State of Texas ................ 17 

Prepared statement .......................................................................................... 20 

Hon. David P. Roe, a Representative in Congress from the State of Tennessee 24 

Prepared statement .......................................................................................... 27 

Hon. Allyson Y. Schwartz, a Representative in Congress from the Commonwealth of Pennsylvania ........................................................................................ 30 

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

Kathleen Sebelius, Secretary, Department of Health and Human Services ...... 35 

Prepared statement .......................................................................................... 38 

Answers to submitted questions ...................................................................... 312 

Christopher M. Davis, Analyst on Congress and the Legislative Process, Congressional Research Service, Library of Congress ............................................. 106 

Prepared statement .......................................................................................... 109 

David Newman, Specialist in Health Care Financing, Congressional Research 

Service, Library of Congress 1 .............................................................................

Diane Cohen, Senior Attorney, Scharf-Norton Center for Constitutional Litigation, Goldwater Institute ................................................................................. 132 

Prepared statement .......................................................................................... 133 

Judith Feder, Senior Fellow, Center for American Progress ............................... 151 

Prepared statement .......................................................................................... 153 

Avik S. Roy, Healthcare Analyst, Monness, Cespi, Hardt & Co. ......................... 158 

Prepared statement .......................................................................................... 160 

Stuart Guterman, Senior Program Director, Program on Medicare’s Future, 

The Commonwealth Fund ................................................................................... 199 

Prepared statement .......................................................................................... 202 

Scott Gottlieb, Resident Fellow, American Enterprise Institute ......................... 225 

Page

IV 

Scott Gottlieb, Resident Fellow, American Enterprise Institute—Continued 

Prepared statement .......................................................................................... 227 

Alex B. Valadka, The Alliance of Speciality Medicine .......................................... 255 

Prepared statement .......................................................................................... 258 

Mary R. Grealy, President, Healthcare Leadership Council ................................ 267 

Prepared statement .......................................................................................... 269 

Jack Lewin, Chief Executive Officer, American College of Cardiology ............... 274 

Prepared statement .......................................................................................... 276 

Teresa Morrow, Cofounder and President, Women Against Prostate Cancer .... 284 

Prepared statement .......................................................................................... 286 

SUBMITTED MATERIAL

Written statement of June 14, 2011, from Burke Balch, Director, Robert 

Powell Center for Medical Ethics at the National Right to Life Committee, 

submitted by Mr. Pitts ......................................................................................... 80 

Letter, dated July 8, 2011, from Sandra Schneider, President, American College of Emergency Physicians, to subcommittee leadership ............................. 85 

Letter, undated, from Thair Phillips, President, RetireSafe, to Mr. Pitts .......... 87 

Letter, dated June 24, 2011, from healthcare organizations opposing the 

Independent Payment Advisory Board to Members of Congress, submitted 

by Mr. Pitts ........................................................................................................... 88 

Written statement of July 13, 2011, from Karen Zinka, Men’s Health Network, submitted by Mr. Pitts .............................................................................. 98 

Letter, dated March 11, 2011, from Richard N. Waldman, President, American Congress of Obstetricians and Gynecologists, to Mr. Roe, submitted 

by Mr. Pitts ........................................................................................................... 101 

Letter, dated July 12, 2011, from Tim Laing, Chair, Government Affairs 

Committee, American College of Rheumatology, to committee leadership, 

submitted by Mr. Pitts ......................................................................................... 102 

Written statement of July 13, 2011, from the American College of Radiology, 

submitted by Mr. Pitts ......................................................................................... 103 

Letter, dated July 6, 2011, from Cecil B. Wilson, Immediate Past President, 

American Medical Association, to Mr. Roe, submitted by Mr. Pitts ................ 104 

Written statement of July 13, 2011, from Robert B. Blancato, Executive 

Director, National Association of Nutrition and Aging Services Programs, 

submitted by Mr. Pitts ......................................................................................... 105 

Letter, dated May 23, 2011, from Scott & White Healthcare to Mr. Cornyn, 

submitted by Mr. Burgess ................................................................................... 254 

1Mr. Newman did not present an opening statement. 

(1) 

IPAB: THE CONTROVERSIAL CONSEQUENCES 

FOR MEDICARE AND SENIORS 

WEDNESDAY, JULY 13, 2011 

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

The subcommittee met, pursuant to call, at 9:03 a.m., in room 

2123 of the Rayburn House Office Building, Hon. Joseph Pitts 

(chairman of the subcommittee) presiding. 

Members present: Representatives Pitts, Burgess, Whitfield, 

Shimkus, Myrick, Murphy, Blackburn, Gingrey, Latta, McMorris 

Rodgers, Lance, Cassidy, Guthrie, Pallone, Dingell, Capps, 

Christensen, Schakowsky, Gonzalez, Matheson, and Waxman (ex 

officio). 

Staff present: Gary Andres, Staff Director; Jim Barnette, General 

Counsel; Mike Bloomquist, Deputy General Counsel; Anita Bradley, Senior Policy Advisor to Chairman Emeritus; Howard Cohen, 

Chief Health Counsel; Paul Edattel, Professional Staff Member, 

Health; Debbee Keller, Press Secretary; Ryan Long, Chief Counsel, 

Health; John O’Shea, Professional Staff Member, Health; Andrew 

Powaleny, Press Assistant; Chris Sarley, Policy Coordinator, Environment and Economy; Heidi Stirrup, Health Policy Coordinator; 

Lyn Walker, Coordinator, Admin/Human Resources; Tom Wilbur, 

Staff Assistant; Jean Woodrow, Director, Information Technology; 

Alex Yergin, Legislative Clerk; Alli Corr, Democratic Policy Analyst; Tim Gronninger, Democratic Senior Professional Staff Member; Karen Lightfoot, Democratic Communications Director and 

Senior Policy Advisor; and Karen Nelson, Democratic Deputy Committee Staff Director for Health. 

Mr. PITTS. Everyone, please take their seats. The subcommittee 

will come to order. The chair recognizes himself for 5 minutes for 

an opening statement. 

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

OF PENNSYLVANIA 

Today’s hearing on the Independent Payment Advisory Board 

comes at a crucial time. It is a crucial time for health reform in 

general. It has been almost 16 months since the passage of President Obama’s massive overhaul of the healthcare system. And as 

the multitudes of provisions in the law go into effect, we are beginning to get an idea of how our healthcare system would look under 

PPACA. The fundamental concept underlying the administration’s 

2 

approach to health reform is that the government, or a group of 

government-appointed experts, knows better than patients and 

their doctors which healthcare services are valuable. 

It is also a critical time for the Medicare program in particular. 

A quick look at a few numbers will remind us of the importance 

and timeliness of today’s hearing. Ten thousand seniors become eligible for Medicare every day, and according to the program’s own 

actuaries, the program faces costs not covered by the Medicare tax 

of more than $30 trillion over the next 75 years. This staggering 

amount of money is more than double the current national debt. 

One of the most worrisome provisions in PPACA and a provision 

that highlights the administration’s fundamental approach to 

health reform is the creation of the Independent Payment Advisory 

Board or IPAB. The IPAB embodies what is objectionable in the 

President’s healthcare system overhaul and how the administration’s approach to health reform is fundamentally different from 

the Republican reform proposal. President Obama’s health reform 

legislation was pushed through Congress without meaningful bipartisan debate. In like fashion, the recommendations of IPAB will 

be pushed through Congress with very little time for discussion or 

for the development of realistic alternatives to these recommendations that will then become law. 

The IPAB is likely to profoundly influence the future of Medicare 

and even the healthcare system in general. In fact, the panel of 15 

experts that will make up the board will arguably have more influence over healthcare than any person, group of people, organization, or government agency has ever had—more than patients, physicians, professional organizations, MedPAC, CMS, or even Congress. 

However, we need be clear about one thing: this isn’t about 

‘‘death panels.’’ The intent of creating IPAB was not to kill seniors. 

But Democrats do believe that the best way to cut Medicare costs 

is to give an unaccountable board the power to limit treatment options. We disagree. We believe the solution to fighting costs is to 

give patients more power, more control, and more choices. Why 

should anyone—especially a government-appointed expert—secondguess patients and doctors? 

It is encouraging that there is widespread opposition to the 

IPAB. Physician groups, hospitals, consumer groups, patient advocacy groups, and others have all voiced their concern over the 

board. There is even bipartisan opposition in Congress. This is not 

surprising, since the decisions of the board will become law by a 

fast-track process that will bypass the usual legislative procedures, 

in effect superseding the customary jurisdiction of committees like 

this one. As Representative Pete Stark was recently quoted as saying when asked about IPAB, ‘‘Why have legislators?’’ 

The time for substantial Medicare reform is now and the decisions about how to achieve the necessary reform are crucial and 

fundamental to the future of the program. The Democrats would 

leave these decisions to 15 unelected, unaccountable government 

appointees. We believe that current and future Medicare beneficiaries know better. 

I want to thank the witnesses for agreeing to participate in this 

important hearing. I look forward to hearing their testimony. And 

3 

at this point, the chair recognizes the ranking member of the subcommittee, Mr. Pallone, for 5 minutes for his opening statement. 

[The prepared statement of Mr. Pitts follows:] 

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

Mr. PALLONE. Thank you, Mr. Chairman. And thank you for 

holding this very important hearing. 

I am very strongly opposed to the Independent Payment Advisory 

Board, or IPAB, created under the Affordable Care Act. I have 

never supported it, and I would certainly be in favor of abolishing 

it. However, I do not see IPAB as a significant factor in the Affordable Care Act. As you know, I am one of the strongest advocates 

for the Affordable Care Act for many reasons. The Affordable Care 

Act has finally set our healthcare system on a path to reform. It 

was the most significant improvement to Medicare passed in years 

and will reduce costs to Medicare through a number of broad efforts—most notably, by reforming the way in which doctors deliver 

care, incentivizing a focus on efficiency and value rather than just 

the number of services performed. 

Furthermore, it is important to note that the Affordable Care Act 

reduced projected Medicare spending growth to historically low levels. Over the past decade, Medicare cost growth per beneficiary was 

7.8 percent. The most recent trustees’ report projects that over the 

next 10 years, that growth rate will be just less than 3 percent. 

Now, it is becoming increasingly clear that the Republicans will 

use IPAB as just another way to oppose and deface the Affordable 

Care Act. But this issue, from my perspective, should be the furthest thing from partisan. It is an issue that I believe all legislators 

from all political backgrounds should take concern. It is about the 

legislative and executive branches. This is about congressional prerogatives being limited. We should absolutely not, under any circumstances, seed legislative power to the executive branch. This is 

simply not what our founding fathers wanted or intended. 

IPAB, like other independent commissions, encroaches upon our 

legislative authority. Indeed, I am opposed to independent commissions or outside groups playing a legislative role other than on a 

recommendatory basis. It is not the job of an independent commission to get involved in congressional matters—in this instance, 

healthcare policy for Medicare beneficiaries. We have had the counsel of MedPAC for a long time. But MedPAC is just that; it is counsel. Nothing MedPAC recommends is automatic. When Congress 

agrees, it enacts those recommendations. When Congress disagrees, 

we ignore those recommendations. This is how the process should 

work. This is how the process should continue. 

Unfortunately, the debate of IPAB reminds me of the Base Realignment and Closure or BRAC process. IPAB is just another 

BRAC, only the healthcare version. In fact, during discussion over 

the Affordable Care Act, it was mentioned by the administration 

and others that they were using BRAC as an example. I strongly 

believe that BRAC is a monumental failure. I voted against every 

BRAC in my 23 years in Congress. I have seen them run up costs 

and waste money. And the worst part is as an elected official who 

was sent to Congress by my constituents to represent their best interests, then I become powerless to stop things like BRAC. I certainly tried. I fought the closure of Fort Monmouth, New Jersey, 

with everything that I had in more ways than I can count, but it 

7 

wasn’t enough. Because like IPAB, the BRAC took away all legislative authority and prerogative, and to this day I fight to minimize 

its effects on my constituents. 

Mr. Chairman, as I said again, this is not about IPAB or its relation to Medicare. It is about a growing imperialistic presidency. I 

have been here for 23 years. Whether it was the first George Bush 

or it was President Clinton or was the second George Bush or now 

President Obama, the presidency continues to try to take over the 

prerogatives of Congress. We have to stop it. We have to reverse 

it. We can’t be a part of an effort to let that continue. Just because 

decisions are tough doesn’t mean Congress shouldn’t make them. 

I believe this committee and this Congress has the knowhow to 

make the tough choices that are still needed to improve our 

healthcare system. 

And frankly, I have told the President and everybody in the executive branch I actually like dealing with MedPAC and its recommendations. I like having hearings in this subcommittee where 

we review the MedPAC recommendations. And most of the time we 

adopt them. So the idea that somehow we don’t want to make the 

tough choices, we are not capable of making the tough choices, that 

is simply not true. That is why we are elected. That is why people 

continue to elect me in my opinion. 

So instead, let us build on the Affordable Care Act’s reforms and 

expand efforts to contain the growth and future healthcare costs. 

We can do it. We don’t need IPAB. 

I yield back, Mr. Chairman. 

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

vice chair of the subcommittee, Dr. Burgess, for 5 minutes for opening statement. 

OPENING STATEMENT OF HON. MICHAEL C. BURGESS, A 

REPRESENTATIVE IN CONGRESS FROM THE STATE OF TEXAS 

Mr. BURGESS. I thank the chairman for the recognition. I want 

to welcome our Senator from Texas, Senator Cornyn, and my fellow 

OB/GYN doctor, Dr. Roe, welcome them to committee and being 

here today. 

This healthcare law that was signed 15 months ago contains 

countless policies that will essentially disrupt the practice of medicine. Along with the many excesses and constrictions in the law, 

the Independent Payment Advisory Board represents the worst of 

both. 

I am a doctor, a Member of Congress, I am also someone in my 

60s who is soon to be Medicare-age and I am distressed by what 

I see happening with the Independent Payment Advisory Board. It 

is not accountable to any constituency. It only exists to cut provider 

payments to fit a mathematically-created target. Given that private 

insurers use Medicare as a benchmark for their own payment 

changes, the IPAB could have a far-reaching implication beyond 

Medicare for our Nation’s providers. 

The board exponentially and inappropriately expands the power 

of the executive branch, giving an unaccountable panel of 15 individuals the authority to make changes to the Medicare program. It 

takes the authority away from Congress. Congress has no say in 

8 

the board’s reports, yet their recommendations essentially hold the 

power of legislation. 

And yes, this board is appointed with the consent of the Senate 

but not necessarily because nine of these board members could be 

recess appointments. Nine of these board members would constitute a majority, therefore completely bypassing the legislative 

branch. 

Now, for patients, these bureaucrats may be able to cut payments too low that it will block care to seniors. It does change the 

fundamental nature of the relationship with the Federal Government, and those people who are cared for by insurance provided by 

the Federal Government now will be able to tell you who gets care, 

where the care is given, when it is given, but the fundamental 

change is now we will be able to tell you when you have had 

enough. 

The board is not a solution in search of a problem. Medicare’s unfunded liabilities are enormous. That is why Republicans want to 

be able to keep Medicare for future generations by lowering the 

cost to the Federal Government by providing better choices. 

Let me at this point yield to another doctor on the committee, 

Dr. Phil Gingrey. 

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

Mr. GINGREY. Mr. Chairman, thank you. And I thank the gentleman for yielding. 

I have got three posters I would like to share with my committee 

members and with the witnesses. This first poster, President 

Obama’s chief medical officer, ‘‘Most people who have serious pain 

do not need advanced methods. They just need the morphine and 

the counseling that have been available for centuries.’’ Again, 

President Obama’s chief medical officer, ‘‘The decision is not whether or not we will ration care. The decision is whether we will ration 

with our eyes open.’’ And the last slide, again, from President 

Obama’s chief Medicare officer, ‘‘I cannot believe that the individual healthcare consumer can enforce through choice the proper 

configurations of a system as massive and complex as healthcare. 

That is for leaders to do.’’ 

If anyone has any questions as to why Members of Congress are 

opposed to what has been deemed a denial-of-care board, as you 

just heard, I would simply suggest you read carefully the words of 

the head of CMS, Dr. Donald Berwick. And it is no surprise that 

he will remain interim head. You might even want to refer to him 

as Don Corleone. 

And I thank you for the time and I would now like to yield to 

my physician colleague from Louisiana, Dr. Bill Cassidy. 

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

Mr. CASSIDY. Thank you for yielding. 

I am a doctor who, for the last 20 years, has worked in a hospital 

for the uninsured. And one of the reasons I ran for office is that 

well-meaning politicians would have well-sounding laws which 

would make the lines grow longer at my hospital for the uninsured. 

9 

I have to say, with Obamacare, it is like de ́ja` vu all over again. 

Medicare is going bankrupt. Anticipating this, Obamacare has a 

provision of 15 appointed bureaucrats who have the ability to almost in an unfettered fashion decrease payment. Now, we say—Republicans, some Democrats—that this can decrease access. Defenders say oh, no, decreasing payment is not rationing. I ask those defenders to join me at my hospital for the uninsured and I will show 

you the reality. 

So although I look forward to Secretary Sebelius’ testimony, I 

feel like I have heard it before. A benign bureaucracy 

paternalistically looking after the interest of the individual while 

controlling global healthcare cost. It would be amusing if it were 

not so frightening. There is a better way, and the better way is to 

give the power to the patient and not to the bureaucrat. This is not 

where Obamacare is, but it is where I hope we arrive. 

Thank you. I yield back. 

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

the ranking member of the full committee, Mr. Waxman, for 5 minutes for opening statement. 

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

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

There was an attack on Dr. Berwick. He was invited once to appear before our committee and was cancelled out by the committee 

itself. Perhaps we ought to give him the opportunity to respond to 

some of these statements that have been made about his past 

writings. 

I regret to observe that this hearing today is very partisan and 

very hypocritical. It is partisan because this is another battle in 

war waged since January by the Republicans to tear down the Affordable Care Act. When the Republicans passed their repeal bill 

through the House in January, we were promised that a Republican replacement would be right behind it. But we are now in July 

and we have seen absolutely no sign of any Republican idea for addressing our Nation’s problems in healthcare—skyrocketing costs, 

50 million Americans without insurance, and the uneven quality of 

care. 

This is an exercise in hypocrisy because of the utter fallacy of the 

pious arguments made on the issue of Medicare and costs. I have 

been around long enough to remember when doctors said we didn’t 

need any government program. We take care of poor people because that is our obligation. And now we are told we can’t find a 

doctor because they are not paid enough. They don’t feel it is their 

obligation to take care of the poor unless they are paid adequately. 

I understand that, but let us skip the piety about it. 

The main Republican attack on the Affordable Care Act is that 

we cannot afford it. Too much coverage, not enough cost reduction, 

they say. They ignore the CBO’s estimates. They ignore the testimony from hundreds of economists and doctors and experts of all 

stripes. Republicans just assert it doesn’t control costs. And then 

they attack the new law for the comprehensive approach it takes 

10 

to controlling costs. And they do it the old-fashioned way, through 

fear. 

Dr. Burgess has called IPAB ‘‘Armageddon.’’ Dr. Gingrey compared the Republican plan for Medicare unfavorably to ‘‘throwing 

grandma off a cliff,’’ and said that IPAB is worse than that ‘‘because grandma could possibly survive the fall from a cliff but cannot survive IPAB.’’ Well, I have some concerns about some aspects 

of IPAB, but I don’t agree with the premise that we need IPAB to 

make Congress to do its job. No one should think that a hyperbole 

of IPAB’s Republican critics—rationing, death panels, faceless bureaucrats, pulling the plug on grandma—represents reality. 

It is a fact that IPAB is prohibited from rationing. It is also a 

fact that the savings CBO expects from IPAB over the next 10 

years amounts to just $2 billion, less than 10 percent of what Republicans proposed to cut from Medicare even before they would 

end the program in 2022 and replace it with their voucher plan. 

But the heart of the matter is Medicare and its future. What is 

the Republican plan for controlling costs in Medicare? Simple. End 

Medicare as we know it. The Republican plan shifts all of the burden for healthcare costs onto seniors, people with disabilities, onto 

the States. It would double costs for new enrollees in 2022 by 

$6,000 per person according to CBO. For people with disabilities, 

including people in nursing homes, Medicare cuts come almost immediately in 2013, meaning that people won’t be able to pay for 

nursing home care or the home-based care that will keep them out 

of a nursing home in the first place. 

Republicans are seeking to end Medicare’s guaranteed benefits, 

leaving seniors and people with disabilities on their own in the insurance market. They want to cut the program by $20 trillion over 

the next few decades. Fears about IPAB are hypothetical at this 

point and always leave alternatives to the Congress. The harm to 

Medicare from the Republican plan, if enacted, would be a certainty. 

With respect to IPAB, Mr. Chairman, Congress has the final say 

over Medicare policy. And if Congress has the final say over all 

IPAB recommendations, which will pass through this committee, I 

hope one day to return to the chairmanship of this committee, and 

if I do, I will certainly exercise this committee’s oversight duties 

over IPAB thoroughly. I am sure that Mr. Upton will do the same. 

So I think it is time we set aside efforts to repeal the Affordable 

Care Act, focus on real problems for American families in what 

they are facing today and stop this constant attack on anything 

that tries to do something about the problems that American families face, especially those who cannot buy insurance, who cannot afford insurance, who cannot pay their doctors adequately so they 

can be seen, and we just forget about them. We already have over 

50 million uninsured. Let us don’t add to the burden by taking 

away Medicare and Medicaid from those for whom they rely on 

those programs. 

I yield back. 

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

opening statements for the members. 

I want to thank the witnesses for agreeing to appear before the 

committee today. We have four panels today, and your written tesVerDate Aug 31 2005 10:40 May 24, 2012 Jkt 037690 PO 00000 Frm 00016 Fmt 6633 Sfmt 6633 F:\112-00~1\112-07~3\112-73~1 WAYNE
11 

timony will be entered into the official record. We ask that you 

summarize your opening statements in 5 minutes. 

The first panel—and in order of presentation I will introduce 

them—first, the Honorable George Miller, who represents the 7th 

Congressional District of California; second, the Honorable John 

Cornyn, Senator from the State of Texas; the Honorable David Roe, 

who represents the 1st Congressional District of Tennessee; and I 

believe we have the Honorable Allyson Schwartz representing the 

13th Congressional District of Pennsylvania coming. 

Congressman Miller, you may begin. 

STATEMENTS OF HON. GEORGE MILLER, A REPRESENTATIVE 

IN CONGRESS FROM THE STATE OF CALIFORNIA; HON. 

JOHN CORNYN, A UNITED STATES SENATOR FROM THE 

STATE OF TEXAS; HON. DAVID P. ROE, A REPRESENTATIVE 

IN CONGRESS FROM THE STATE OF TENNESSEE; AND HON. 

ALLYSON Y. SCHWARTZ, A REPRESENTATIVE IN CONGRESS 

FROM THE COMMONWEALTH OF PENNSYLVANIA 

STATEMENT OF HON. GEORGE MILLER 

Mr. MILLER. Thank you very much, Mr. Chairman and Ranking 

Member Pallone, for the opportunity to testify before the committee 

today. 

I came to Congress in 1975, and since that time, I have been involved in the debate over national health reform proposals. 

Throughout these debates, lawmakers struggled with how to control costs without harming care. Unfortunately, Congress chose to 

kick the can down the road for a very long time. Without action, 

healthcare costs have continued their endless rise, well in excess 

of inflation. As everyone here well knows, these costs have grown 

to unsustainable levels for families, for businesses, and for taxpayers. 

In the past decade, healthcare spending has increased an average of 6.8 percent a year and is expected to rise from 18 percent 

of GDP to 34 percent of GDP in 2040. At the same time, employerprovided insurance has fallen and out-of-pocket and premiums 

have skyrocketed for employees. The opportunity for reform finally 

changed with the Affordable Care Act. For the first time, Congress 

put in place specific, identifiable measures to make Medicare and 

our healthcare system more efficient. We need to give these innovations an opportunity to work. 

These innovations include stronger tools to combat fraud and 

abuse in Medicaid and Medicare—tools that have already started 

to save billions of dollars; to better coordinate the care through accountable care organizations; incentives to reduce hospital readmissions, and reward the delivery of high quality and efficient care; 

and improved patient safety through the Partnership for Patients 

initiative. These reforms were included based on what was worked 

on in the past and what was likely to work in the future. These 

cost-savings ideas are beginning to work. 

We did not make these decisions lightly. The debate was robust. 

But in the end, the majority agreed to give these ideas a chance. 

Our goal was to make Medicare stronger for seniors and sustainable for future generations so we wouldn’t have to go down the 

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road of rationing or turning Medicare into a voucher program. If 

Congress begins to roll back these reforms, then we will not see the 

efficiencies, we will not see the innovations that experts agree will 

stabilize our healthcare system. 

One of these ideas is the Independent Payment Advisory Board. 

This board serves as a backstop to ensure that our federal health 

programs operate efficiently and effectively for both seniors and for 

the taxpayers. Before the Affordable Care Act, Congress and other 

stakeholders had an unremarkable track record of controlling costs. 

535 Members of Congress cannot be doctors, although it looks like 

an awful lot of them are. I wondered where that doctor shortage 

was coming from. Five hundred thirty-five Members are not capable of knowing the best science and the best practices for every 

medical treatment and 535 Members of Congress are subject to unrelenting lobbying by special interests that have a financial stake, 

and in many cases, a financial conflict of interest in many of the 

decisions that they make—but not necessarily the best health of 

our seniors in mind. 

With these reasons, many experts have recommended the creation of an independent board of health experts to make the system 

improvement recommendations. And, as you know, Congress has 

often used independent boards to help with complex issues, such as 

MedPAC or the BRAC, which BRAC—Frank, I love you—but the 

fact is those bases would have never been closed and we would 

have been lugging the cost around for generations. 

The Independent Payment Advisory Board will not usurp the 

Congress. It will not be unaccountable. It will not be unfettered. It 

simply acts as a backstop in case government spending exceeds the 

benchmarks. Both CBO and Medicare trustees tell us that because 

of the Affordable Care Act reforms, they don’t expect the mandatory actions of the panel to be triggered in the immediate future. 

The President will nominate the doctors, health experts, and consumers to the board to examine all of the data and evidence on 

best practices and inefficiencies in healthcare spending. The Senate 

will consider and approve each nominee. The IPAB will make all 

of the recommendations to the Congress. The Congress can approve, disapprove, or modify each recommendation. It sounds like 

a heavy role for Congress. 

In other words, Congress retains the role in healthcare but in an 

improved and more efficient fashion. Ideally, IPAB recommendations could also be a driver for innovation, not only the public sector but for the private sector. 

Under the law, the Independent Payment Advisory Board guarantees the doctor-patient relationship. Doctors will retain full authority to recommend the treatments that they think are best for 

their patients. The law prohibits the recommendations that would 

ration care, change premiums, or reduce Medicare benefits. 

In conclusion, I testify here today as someone who deeply cares 

about the delivery of healthcare to the citizens of the United 

States. Everyone agrees that our Nation’s healthcare costs must 

come under control. With 76 million baby boomers just beginning 

to rely on Medicare, the time is now to push for innovative reforms 

that can help us contain the cost of the Medicare program. 

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The Independent Payment Advisory Board is about strengthening the Medicare program. Without the innovation and evidencebased decision-making, Medicare will be put in jeopardy. And the 

forces calling to end Medicare will gain the upper hand because of 

uncontrollable cost. The American people have firmly rejected the 

Republican budget plan to end Medicare, to voucherize Medicare. 

What they do support is accessible and affordable healthcare, and 

the only way we can guarantee that for future generations is by 

using the best science, the best medicine, the best evidence, and 

the best practices available for all of our citizens. We really have 

no alternative. 

Without these innovations, our current system is unsustainable 

for the Nation’s families, the Nation’s businesses, and the Nation’s 

taxpayers, and I strongly support IPAB and would oppose any effort by Congress to undermine it. 

And thank you so very much for allowing me to testify. 

[The prepared statement of Mr. Miller follows:] 

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Mr. PITTS. The chair thanks the gentleman. 

Senator Cornyn, you may begin your testimony. 

STATEMENT OF HON. JOHN CORNYN 

Mr. CORNYN. Chairman Pitts, Ranking Member Pallone, and 

members of the committee, thanks for giving me the opportunity to 

testify here today regarding the Independent Payment Advisory 

Board created by the Patient Protection Affordable Care Act. And 

unfortunately, this is a product that came from the Senate and not 

from the House. I am sorry about that. 

But, of course, the goal of IPAB is one we all share, as Congressman Miller just articulated. We have to find some way to control 

the cost in Medicare. Medicare trustees warned Congress that the 

program will be insolvent in 2024, which is 5 years earlier than 

previously predicted. I noted that Medicare’s unfunded liabilities, 

the gap between Medicare’s future cost benefits and future taxes 

and premiums it expects to collect, are more than $24 trillion and 

growing. 

The Medicare trustees have now issued a Medicare warning 

every year since 2006 in which they have alerted Congress that 

more than 45 percent of Medicare’s funding will come from general 

revenues. The nonpartisan Congressional Budget Office issued a 

warning of its own in June in its 2011 long-term budget outlook. 

CBO projects that if current law remains in place, spending on the 

major mandatory healthcare programs alone will account for approximately 6 percent of our gross domestic product today to 9 percent in 2035 and would continue to increase thereafter. 

So, as we all know, something has to be done about the 

unsustainable growth and the cost of the Medicare program. We all 

agree on that much. Like many Americans and many members of 

this committee, though, I do not believe that IPAB is the right answer. Everyone here knows how IPAB is supposed to function, but 

here are my specific concerns: 

First, I am concerned that the only tool in the IPAB toolbox will 

be cutting payments to providers. And we are already seeing how 

government price controls are restricting access to care—on one 

hand saying you are covered by a government program; on the 

other hand saying because of restrictive payments to providers, 

good luck finding a doctor who will see you at that price. 

The American Medical Association estimates that one of three 

primary care doctors limit the number of Medicare patients they 

see. As Dr. Burgess will confirm, in our State of Texas, 42 percent 

of physicians are considering opting out of Medicare completely due 

to low reimbursement rates. Although there is some concern recently about the rhetoric surrounding IPAB, continuously cutting 

reimbursement to Medicare providers will prevent access to care 

for Medicare beneficiaries. 

Secondly, I am concerned that IPAB’s enormous power will grow 

at the expense of Congress and the people’s elected representatives. 

In fact—as you probably know and no doubt do know—there is litigation challenging this delegation of legislative authority to this 

unelected body currently pending. Why Congress would voluntarily 

undermine its own authority in this area is really beyond me. We 

are the ones who are elected, we are the ones who are accountable 

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to the votes, and we are the ones who should be making those decisions. 

Congress created the Medicare program in 1965, and it should be 

Congress that is held accountable to the seniors who use Medicare 

as their healthcare system. But, as you know, IPAB has a different 

approach. Seniors subjected to IPAB recommendations cannot challenge the recommendations in court or remove members of the 

board. There is no accountability. The only way a member of the 

board can be removed is by the President for neglect of duty or 

malfeasance in office. 

My concerns should be familiar to many of you because these are 

the same concerns I am hearing from you and from my constituents, which I suspect you are hearing from your constituents as 

well. Scott & White Healthcare in Temple, Texas, recently wrote 

me in support of the bill on the Senate side that I am sponsoring 

for repealing IPAB. They write, ‘‘Scott & White Healthcare is supportive of initiatives to identify fraud and waste in the healthcare 

system and incentivized high-value healthcare in this country. But 

we have concerns and questions about the process that will be used 

by IPAB to implement cost savings in Medicare.’’ 

On June the 24th, 2011, over 270 different organizations from 

the Pennsylvania Medical Society to the New Jersey Academy of 

Ophthalmology wrote Members of Congress regarding their concerns saying that ‘‘not only will IPAB severely limit Medicare beneficiaries’ access to care, but also increase healthcare costs that are 

shifted onto the private sector.’’ And we are all very familiar with 

the cost-shifting that goes on when government reimburses at a 

lower rate and those with private insurance or private pay have to 

pick up the slack. They also cited concerns about IPAB’s lack of accountability and inability to improve the quality of care in the 

Medicare program. 

I want to thank the chairman and the ranking member and this 

committee for being skeptical of the IPAB from the beginning and 

for supporting repeal now. Of course, this is not a partisan issue. 

This is not part of an effort to repeal the healthcare bill. This is 

a narrowly targeted piece of legislation designed to deal with this 

particular provision, which I think deserves and does have bipartisan support. 

In January 2010, 72 House Democrats joined Republicans asking 

then-Speaker Pelosi to take IPAB out of the healthcare bill. On 

Monday, Congressman Pallone was quoted as he was here today 

saying he didn’t support IPAB and certainly would be in favor of 

abolishing it. Congressman Roe’s bill enjoys bipartisan support for 

the legislation in this House, and I hope some of my Democratic 

colleagues in the Senate will join me in our effort to repeal this 

particular provision in the healthcare bill. 

As we repeal the IPAB, we have got to look at a better way to 

achieve our bipartisan goal of controlling healthcare costs in the 

Medicare program. One model I believe that has worked pretty 

darn well is the Medicare Prescription Drug program, which has 

come in under budget by about 40 percent by providing transparency, competition, more quality and service, which has used 

market forces to discipline costs. The Prescription Drug Program 

has achieved these results, as I say, by injecting competition and 

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choice into the system. Many other programs at the state level and 

the private sector have also cut costs without sacrificing quality or 

access to care, goals that we all share. And Congress should continue to take a look at those as well. 

In conclusion, Mr. Chairman, let me just say that Medicare beneficiaries have paid their hard-earned money into Medicare for years 

and it should be these same beneficiaries, their families and providers who determine the healthcare that is right for them. 

Thanks for allowing me to testify here today, and I am happy to 

respond to any questions you might have. 

[The prepared statement of Mr. Cornyn follows:] 

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

Mr. BURGESS. Mr. Chairman, can I ask unanimous consent that 

the letters that Senator Cornyn referenced from Scott & White 

Clinic and New Jersey Medical Association be made part of the 

record here today? 

Mr. PITTS. OK. Could we see those and then we will act on that 

if you have copies. 

Mr. CORNYN. Absolutely. 

Mr. PITTS. Thank you. 

Congressman Roe, you are recognized for 5 minutes. 

STATEMENT OF HON. DAVID P. ROE 

Mr. ROE. I thank Chairman Pitts and Ranking Member Pallone 

and members of the subcommittee. Thank you for inviting me here 

to testify today. And I applaud this subcommittee’s effort to shine 

a light on the danger posed to seniors by the Independent Payment 

Advisory Board, better known as IPAB. 

I have practiced medicine for the past 31 years, not been in Congress. This is only my second term, and I am an OB/GYN doctor, 

and I found out delivering your own voters worked out pretty well 

for me. But I firmly in my core believe that healthcare decisions 

should be made between physicians, the patients, and their families, not by a board appointed by the President or anybody else, Republican or Democrat. 

Created as part of the Affordable Care Act that went into effect 

last year, the IPAB is charged with developing proposals to reduce 

the per-capita rate of growth in Medicare spending. Certainly, 

something has got to be done to ensure that this important program remains available not only for current retirees but for the 

next generation as well. The Medicare trustees recently projected 

that the Medicare Trust Fund will go bankrupt in 2024, and it has 

been stated that the Congressional Budget Office says that the 

fund will exhaust even sooner, in 2020. We already know what 

President Obama’s plan to save Medicare is, is the $500 billion in 

cuts to the program and the IPAB. The cuts speak for themselves, 

but the American people deserve to hear the truth about the IPAB 

as little more than a roadmap to potentially rationing care. 

Now, some say that the Affordable Care Act expressly prohibits 

rationing, raising revenues or beneficiary premiums, increasing 

cost-sharing or other restrictions on benefits. This is highly misleading because nothing in law prohibits cutting payments to physicians. Already Medicare pays physicians between 85 and 90 cents 

on the actual cost of the care, which has made it more difficult for 

beneficiaries to access the needed care. If reimbursements continue 

to fall even further, it could very well become economically impossible for physicians to see Medicare patients. With millions of baby 

boomers becoming eligible for Medicare, IPAB cuts couldn’t come at 

a worse time. 

The IPAB could adversely impact the quality of patient care. For 

example, look no further than Britain’s National Institute for 

Health and Clinical Excellence, or NICE. Decisions are based on 

cost, not quality or outcomes for an individual patient. Decisions 

regarding patient care shouldn’t be made by a panel of 15 

unelected bureaucrats who haven’t examined the specifics of an inVerDate Aug 31 2005 10:40 May 24, 2012 Jkt 037690 PO 00000 Frm 00030 Fmt 6633 Sfmt 6633 F:\112-00~1\112-07~3\112-73~1 WAYNE
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dividual’s unique case. Medicine is not a one-size-fits-all discipline. 

What is effective for treating one patient may be harmful for another. By centralizing medical care decision-making, the IPAB 

would put a Washington bureaucrat squarely between patients and 

the care recommended by their doctor. 

In addition to degrading access to and quality of care, IPAB has 

two significant structural problems: It is both unaccountable and 

unworkable. The board is empowered to make recommendations regarding Medicare without any input from Congress. Don’t just take 

my word for it. The former OMB Director, Peter Orszag, called the 

IPAB the single biggest yielding of power to an independent entity 

since the creation of the Federal Reserve. 

Even after the IPAB makes its recommendations, the hands of 

the Congress are still somewhat tied. The proposal would be considered under fast-track procedures and without 3/5 vote of the 

Senate, Congress can only modify the types of cuts, not the size. 

And if Congress fails to act on the board’s recommendations, they 

automatically go into effect. This isn’t government by the people. 

It is instead government by the bureaucrats. 

Questions have also been raised regarding IPAB’s ability to function as it is designed. In reference to IPAB, the CMS Chief Actuary, Richard Foster, wrote in the April 2010 memo that ‘‘limiting 

the cost growth for a beneficiary to a level below medical price inflation alone would represent an exceedingly difficult challenge.’’ 

The CBO, on the other hand, projects no savings resulting from 

IPAB over the next 10 years. In both cases, these expert analyses 

suggest that IPAB will not yield the results promised by its proponents. 

Further, the legislators who created the IPAB made it clear that 

they want this board to impact more than just Medicare. The Affordable Care Act requires the IPAB to make recommendations 

about how to restrain private-sector healthcare costs growth as 

well. While these recommendations do not automatically go into effect, they will no doubt serve to encourage private insurance companies to cut provider payments. Ultimately, cuts to provider insurance payments will result in even less access for Medicare beneficiaries because most providers shift cost onto private insurance to 

make up for Medicare losses. So everyone loses under this scenario. 

While it seems that there is little that our two parties can agree 

on in the current environment, both sides have acknowledged that 

the IPAB is a terrible idea. That is why my bill to repeal IPAB— 

the Medical Care Decisions Accountability Act—has more than 160- 

plus bipartisan cosponsors, and all but one physician in U.S. Congress has signed on. The American Medical Association has endorsed my legislation, as did a broad coalition of more than 270 

healthcare organizations. Even former Democratic leader Dick Gephardt called for the IPAB’s repeal. 

Mr. Chairman, it is time that we begin the fact-based conversation about reforming Medicare without the demagoguery that has 

marked recent months. I can’t think of a better place to start than 

a bipartisan effort to repeal IPAB. 

Let me finish with a couple of things. Ask yourself two things or 

two problems. Does this bill increase access and quality of care for 

seniors? And number two, how much oversight and power has ConVerDate Aug 31 2005 10:40 May 24, 2012 Jkt 037690 PO 00000 Frm 00031 Fmt 6633 Sfmt 6633 F:\112-00~1\112-07~3\112-73~1 WAYNE
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gress given up? And let me just give you a brief example. If you 

are a family practitioner and you are seeing Medicare patients and 

you want to continue to do that and let us say your practice grosses 

$300,000 this year, which is probably what a family practice would 

do. About $150,000 of that—50 percent if you run a very efficient 

practice—is overhead. If you cut the current—SGR growth cuts are 

recommended to be about 30 percent the end of this year, that family practitioner is making a very comfortable living at $150,000. 

His or her costs stay at $150,000, but their income will be cut to 

50. And how does that increase access? If IPAB basically can do 

that, how does that help our seniors? 

I very much appreciate the bipartisan support for this, and I 

thank you for having me here today. 

[The prepared statement of Mr. Roe follows:] 

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

Congresswoman Schwartz for 5 minutes for her opening statement. 

STATEMENT OF HON. ALLYSON Y. SCHWARTZ 

Ms. SCHWARTZ. Thank you, Chairman Pitts and Ranking Member Pallone, Mr. Waxman, and members of the committee, for the 

opportunity to testify this morning. 

First of all, let me say I have and continue to be a very strong 

supporter of the Affordable Care Act because it will extend access 

to affordable, meaningful health coverage to all Americans, 

strengthen Medicare, and contain costs for American families, businesses, and government. The potential for savings is significant. 

The Centers for Medicare and Medicaid Services (CMS) Office of 

the Actuary estimates that over the course of the first 10 years the 

Affordable Care Act will save Medicare more than $400 billion by 

attacking fraud and abuse, reducing overpayments to insurance 

companies, reducing medical errors and unnecessary duplication of 

services, increasing access to cost-effective primary care services, 

and improving care coordination across healthcare settings and 

transitioning to payment systems that reward value. 

CBO estimates that the law will reduce the deficit by more than 

$1 trillion over the next 20 years. And that is just the beginning. 

Healthcare reform has the potential to fundamentally transform 

the healthcare delivery and payment systems by creating a variety 

of models for improved delivery of care by incentivizing high quality, greater efficiency, and better outcomes. Successful implementation will ensure that seniors get the right care at the right time 

at a lower cost to taxpayers. 

My decision to support repeal of the Independent Payment Advisory Board reflects my confidence in the many cost-containment 

measures in the law. Despite Republican claims, IPAB is not a 

‘‘death panel’’ nor is it a ‘‘rationing board.’’ That is merely scare 

tactics. IPAB is simply the wrong approach to achieving the right 

goal. 

We all agree that the rate of growth in Medicare spending must 

be contained and that current Medicare payment systems are 

flawed and need to be reformed. But we cannot conceal fundamental flaws in our healthcare system by simply cutting reimbursements to hospitals and physicians or, even worse, ending 

Medicare as we know it, as the Republicans have proposed. The Republican plan to convert Medicare into a voucher program means 

that seniors will no longer have access to a guaranteed set of 

health benefits and, according to the CBO, the resulting premiums 

and co-insurance will increase out-of-pocket costs more than $6,000 

per senior per year and increase as healthcare costs rise. This is 

neither better quality care nor genuine cost savings. It is merely 

shifting the burden of increased cost to seniors. 

Congress must accept its responsibility for legislating sound 

health policy for Medicare beneficiaries, including reforms to the 

payment systems. Turning over this responsibility, whether to insurance companies as proposed by the Republicans, or to an unaccountable board, undermines our ability to represent the needs of 

seniors and the disabled and to ensure access to care. 

31 

Repealing IPAB—while preserving the essential health reforms 

in the Affordable Care Act—enables providers to focus on innovations that will achieve cost savings by incentivizing efficient, highquality healthcare. If we do not, IPAB is structured in such a way 

that the board may be forced to impose cuts on a narrow sector of 

the healthcare system, ignoring the need for broader changes. Arbitrary cuts on spending, absent fundamental reforms to underlying 

cost drivers, simply shift the cost burden. Thus, IPAB has the potential to stifle implementation of the promising innovations that 

would address these cost drivers just as they are beginning to take 

shape. 

The Obama Administration is already implementing healthcare 

reforms to reduce the rate of growth in healthcare spending by 

holding providers accountable for reducing costs through more coordinated care, the adoption of health information technology, improved quality, and better outcomes. Accountable Care Organizations, which create incentives for healthcare providers to work together to lower costs while meeting quality standards and putting 

patients first, could save up to $750 billion over the next 10 years. 

The Center for Medicare and Medicaid Innovation, established 

under the healthcare reform law, is advancing innovations such as 

the Patient-Centered Medical Home, Healthcare Innovation Zones 

and other innovative delivery models with the potential to achieve 

even more significant additional savings. The Center’s recently 

launched Partnership for Patients initiative will save costs by 

bringing together hospitals, physicians, and patients to dramatically reduce hospital-acquired conditions and hospitals readmissions. This program alone is expected to generate savings of up to 

$35 billion. 

These are reforms that we should build on to achieve greater cost 

efficiencies without risking access or quality. It is our job to identify the cost-efficient, cost-saving innovations and ensure that they 

are implemented broadly and successfully across the country. 

There are tough choices ahead as we work to contain the rate of 

growth in costs in healthcare. We should eliminate IPAB, reject the 

Republicans’ efforts to dismantle Medicare, and focus on reshaping 

payment and delivery systems to reward coordination, efficiency, 

and value to achieve these cost savings. And in so doing, we will 

meet our obligation both to seniors and to taxpayers. 

And I thank you for the opportunity. 

[The prepared statement of Ms. Schwartz follows:] 

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Mr. PITTS. The chair thanks the gentlelady. The chair thanks the 

witnesses of our first panel—very informative. I appreciate the bipartisan nature of it. And we will dismiss the first panel at this 

time and call the—— 

Mr. BURGESS. Mr. Chairman, did we rule on my unanimous consent request? 

Mr. PITTS. If the Senator can give us the documents, then we will 

rule on it. Can you make sure we get that? Not yet? We will act 

on it later. 

The second panel consists of a single witness. The Honorable 

Kathleen Sebelius is the United States Secretary of Health and 

Human Services. We welcome the Secretary to the hearing. 

Madam Secretary, your written testimony will be made part of 

the official record. Welcome. And we ask that you summarize your 

statement in 5 minutes and then be available after 5 minutes for 

questions. Could you hear me? I am sorry. We have had some problems with our mikes. Your written testimony will be made part of 

the official record. We ask that you summarize your opening statement in 5 minutes. So welcome, Madam Secretary. You may begin 

your testimony. 

STATEMENT OF KATHLEEN SEBELIUS, SECRETARY, 

DEPARTMENT OF HEALTH AND HUMAN SERVICES 

Ms. SEBELIUS. Well, thank you, Chairman Pitts and Ranking 

Member Pallone and members of the committee. I appreciate the 

opportunity to come today to discuss how the Affordable Care Act 

is strengthening Medicare for seniors today and tomorrow. 

My written testimony does provide more detail, but I want to 

highlight some of the steps we are taking as part of the healthcare 

law to fill the gaps in Medicare coverage, to improve care, and 

make the program more sustainable for the future while preserving 

the guarantees for seniors and those with disabilities. 

When Medicare became law in 1965, it served as a national 

promise that seniors wouldn’t go broke because of a hospital bill. 

In 2006, Medicare added coverage for prescription drugs, which 

make up a growing share of beneficiaries’ healthcare costs. But we 

know that too many seniors still struggle to afford their medications, and that is why the Affordable Care Act moved to assist the 

seniors falling into the donut hole with a one-time $250 check in 

2010 and this year starts a 50 percent discount for the approximately 4 million beneficiaries who now will get some assistance 

with the purchase of brand-name drugs. By 2020, that gap will be 

closed completely. 

We also know that too many seniors were going without the preventive care that can help prevent an illness before they occur, in 

some cases, because of expensive co-pays. And that shouldn’t happen. So beginning this year, the law allows Medicare beneficiaries 

to receive recommended preventive services like screenings for 

colon or breast cancer, as well as an annual wellness visit without 

paying a co-pay or deductible. It is the right thing to do and it is 

the smart thing to do because it helps physicians catch small 

health problems before they turn into big ones. 

The law is also helping to improve the quality and safety of care 

for people with Medicare. We know that there are model hospitals 

36 

across the country that have adopted best practices to dramatically 

increase the quality of care. In fact, for almost every major common 

medical error, we have examples of health systems that have significantly reduced or even eliminated them altogether. There is no 

reason why all Medicare beneficiaries shouldn’t enjoy that same 

high quality of care wherever they receive it. And that is why the 

Affordable Care Act provides unprecedented support to help those 

best practices spread. 

In March, we launched the Partnership for Patients, an historic 

partnership with employers, unions, hospital leaders, physicians, 

nurses, pharmacists, and patient advocates to reduce harm and 

error in our Nation’s hospitals. Last week, we announced that more 

than 2,000 hospitals have already signed up and are taking critical 

steps to improve care. They are aimed at two goals: reducing preventable readmissions and reducing hospital-acquired conditions. 

Under the law, we have also established the first of its kind, 

Medicare/Medicaid Coordination Office, working with States to improve care for those beneficiaries who are enrolled both in Medicare 

and Medicaid and often receive fragmented or duplicative care as 

a result. 

Through the new Medicare and Medicaid Innovation Center created by the law, we are testing a wide range of additional models 

for increasing the quality of care from strategies of helping seniors 

manage their chronic conditions to new models in which hospitals 

and doctors who keep their patients healthy and out of the hospital 

can share in the cost savings they create. 

Together, these reforms are beginning to dramatically strengthen 

Medicare today for seniors and Americans with disabilities. We 

also have the responsibility to preserve the promise of Medicare for 

future generations, and we can’t do that if costs continue to rise 

unchecked. Because doing care the right way often costs less than 

doing it the wrong way, many of the laws reforms to improve care 

also reduce Medicare costs. For example, the Partnership for Patients alone is estimated to save Medicare as much as $50 billion 

over the next 10 years by reducing errors and unnecessary care. 

But the law doesn’t stop there. It contains important new tools 

to stamp out waste, fraud, and abuse. And in fiscal year 2010, as 

we are beginning to build this new system, our anti-fraud efforts 

returned a record $4 billion to taxpayers. And the new tools will 

help us build on that progress. The Medicare trustees estimate that 

these reforms in the Affordable Care Act have already extended the 

solvency of the trust fund until 2024. Without the reforms, the 

trust fund would have been insolvent 5 years from now. 

But when it comes to Medicare’s future, we can’t take any 

chances, and that is why the law also creates the Independent Payment Advisory Board, or IPAB, a backstop, a failsafe to ensure 

Medicare remains solvent for years to come. IPAB is comprised of 

15 health experts, including doctors, other healthcare professionals, 

employers, economists, and consumer representatives. The Affordable Care Act provides for consultation between the President and 

congressional leadership on appointing members of the board, and 

appointments are subject to the advice and consent of the Senate. 

Each year, the board recommends improvements to Medicare. 

The recommendations must improve care and help controls costs. 

37 

For example, the board can recommend additional ways for Medicare to reduce medical errors and crack down on waste and fraud. 

And contrary to what some have said, IPAB by law is not allowed 

to ration care or shift costs to beneficiaries. In fact, it is specifically 

forbidden from making any recommendations that would ration 

care, reduce benefits, raise premiums or cost-sharing, or alter eligibility for Medicare. It leaves all final decisions in the hands of Congress. 

If Medicare spending begins to threaten the program’s future, 

IPAB is charged with making recommendations to Congress to create necessary savings without shifting the cost of care to seniors 

and those with disabilities. But then it is up to Congress to decide 

whether to accept those recommendations or come up with recommendations of its own to put Medicare on a stable, sustainable 

path. In other words, IPAB’s recommendations are only implemented when excessive spending growth is not addressed and no 

actions are being taken to put spending in line. 

The nonpartisan Congressional Budget Office and the independent Medicare Actuary both predict that IPAB is unnecessary 

anytime soon—indeed in the next decade—thanks to the work that 

we are already doing to slow rising costs. But we don’t know about 

the future, which why experts across the country, including independent economists and the CBO believe that IPAB is needed as 

a safeguard. And we agree. We believe the best way to strengthen 

Medicare for today and tomorrow is to fill the gaps in coverage, 

crack down on waste and fraud, and bring down costs by improving 

care, changing the underlying delivery system. And that is what we 

are working to do under the healthcare law. 

Over the last 16 months, our department has focused on working 

with Congress and our partners across the country to implement 

the law quickly and effectively, and in the coming months, I look 

forward to working with all of you to continue those efforts. 

Thank you again, Mr. Chairman, and I would be pleased to take 

your questions. 

[The prepared statement of Ms. Sebelius follows:] 

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Mr. PITTS. The chair thanks the Secretary for your opening statements. I will now begin the questioning and recognize myself for 

5 minutes for that purpose. 

And I have a couple of questions. I would like to ask you to respond yes or no. I am very concerned about IPAB. And assuming 

the cap is reached, suppose we reach a situation where IPAB then 

kicks in, I would like to walk through a couple of potential scenarios. 

Is it possible for IPAB to cut provider payments for dialysis, yes 

or no, if we reach that situation? 

Ms. SEBELIUS. Mr. Chairman, I have had this directed by law to 

take into account any cut in provider services before they make recommendations. 

Mr. PITTS. But the answer is yes, they may cut provider payments for dialysis? 

Ms. SEBELIUS. They don’t make any cuts whatsoever. They make 

recommendations to Congress. 

Mr. PITTS. For cuts in dialysis. So if they make a recommendation for cuts for payments for dialysis, if those occurred, would at 

least some providers no longer be able to provide dialysis services? 

Yes or no? 

Ms. SEBELIUS. Mr. Chairman, I have no idea what the scenario 

is, what the recommendations are, and what Congress would do 

with those recommendations, but I assume that we would have 

that information if we had a real example. 

Mr. PITTS. If the recommendations took place, would some—— 

Ms. SEBELIUS. What are the recommendations, sir, and what is 

the payment cut and what is the rate at which providers would be 

repaid and what scenario and over what kind of period of time? I 

have no idea. 

Mr. PITTS. Is it possible that some providers could be cut? 

Ms. SEBELIUS. By? 

Mr. PITTS. If those recommendations took place. 

Ms. SEBELIUS. If Congress accepted the recommendations and 

made a decision that cuts in dialysis were appropriate, I assume 

that there could be some providers who would decide that that 

would not be a service they would any longer delivery, the same 

way they do with insurance coverage each and every day that providers make determinations whether it be part of the network. 

Mr. PITTS. If that occurred, would fewer providers, as you have 

suggested could occur, mean that some seniors would have to wait 

longer for dialysis? Yes or no? 

Ms. SEBELIUS. Mr. Chairman, as you know, any cut in services, 

certainly cost-shifting to beneficiaries could mean huge reductions 

in care that seniors would have the opportunity to receive. What 

we have right now is guaranteed benefits. What I think the House 

Republican plan would do is shift that to a guaranteed contribution, which would dramatically change the ability of seniors to access care. 

Mr. PITTS. In this case we are talking about the law, not a proposal in the Republican budget. IPAB is commanded to save money 

by cutting reimbursements. They will have to make the decisions 

about which services are more or less critical, what patients can 

wait longer. Is that not rationing? 

54 

Ms. SEBELIUS. Mr. Chairman, IPAB is not directed to make recommendations based on cuts in reimbursements. It is directed to 

make recommendations based on ways to reduce costs overall if, indeed, the Medicare spending targets per capital exceed what the 

actuary hits as a target goal. I think that there are a variety of 

areas, and one is the work we are currently doing in the Partnership for Patients where you actually go after costs that are unnecessary and being paid right now in the system, $50 billion worth 

of costs for care that should have never been realized in the first 

place. Those are the kinds of recommendations I think that are significant and could make a huge impact. 

Mr. PITTS. Let me ask you about, again, the statute. Where in 

the statute is there prohibition on IPAB making recommendations 

that could reduce access to breast cancer treatment, say, mammograms? 

Ms. SEBELIUS. Well, IPAB is forbidden by law to make recommendations that would ration care and I would say any kind of 

prohibition on accessing treatment would be rationing care. 

Mr. PITTS. Are there any provisions in the law that explicitly 

state IPAB cannot reduce access to the treatments like that? 

Ms. SEBELIUS. They may not by law ration care. And I think anyone would suggest that a reduction or an elimination of a treatment is rationing care. That is forbidden by law. 

Mr. PITTS. Suppose someone believes that IPAB has, in fact, rationed care. What redress does that person have to challenge the 

board’s decisions? 

Ms. SEBELIUS. A court challenge. 

Mr. PITTS. Are the board’s recommendations exempt from judicial 

or administrative review? 

Ms. SEBELIUS. The judicial oversight that is limited is really, I 

think, regarding my or any future Secretary of HHS implementation of recommendations when they have followed the law. I don’t 

think anyone—certainly our general counsel feels very strongly 

that nothing in that language is consistent with language that is 

currently in the Medicare statutes as they move forward. Nothing 

would certainly give either the IPAB board or a future Secretary 

of HHS or the current Secretary of HHS any ability to violate the 

law, and that would always be subject to judicial review. 

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

ranking member, Mr. Pallone, for 5 minutes for questions. 

Mr. PALLONE. Thank you, Mr. Chairman. 

Madam Secretary, while today’s hearing is on IPAB and its consequences to seniors, we have yet to hold a hearing in this subcommittee on the Republican plan for Medicare, even though I 

have asked for that many times. And as you recall, the Republican 

budget ends the Medicare program. IPAB’s effects do not compare 

to the consequences for seniors of the Republican budget. Over the 

next 10 years, the Republican budget proposes to cut Medicare by 

$32 billion. CBO believes that IPAB will save about $2 billion over 

that same time period. So the Republican budget would cut 13 

times as much in the next decade, and that is even before they 

begin their plan to end Medicare starting in 2022. 

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over, and now it is IPAB. But the Republican plan for Medicare is 

so destructive it would actually end Medicare’s guaranteed hospital 

benefit. It would actually end Medicare’s coverage for surgical care 

and for chemotherapy, and coverage for all those services would be 

entirely dependent on whether you could first convince the plan to 

cover you and then on whether the plan includes hospital services 

or chemotherapy in its benefit package. And as you know, these 

kinds of problems are endemic in the individual insurance market, 

and that is why we have so many uninsured today and that is why 

we passed the Affordable Care Act to guarantee a good benefit 

package and eliminate a lot of the discrimination. 

I just wanted to ask you what do you think the Republican budget plan would mean for beneficiaries who would no longer have 

their Medicare benefits? 

Ms. SEBELIUS. Well, Congressman, I don’t know and I don’t know 

that anyone knows all the details of what the Republican plan is. 

What we do know is what is there in terms of numbers, that the 

current plan of giving a senior or someone with a disability an 

$8,000 voucher beginning in 2022 and having that voucher purchase whatever coverage is available in the private market would 

shift costs to beneficiaries. So beneficiaries would be paying for 

about 61 percent of their cost of care. Currently, they pay under 

30 percent. Within 8 years they would pay closer to 70 percent of 

the cost of care. In fact, an average senior who is relying on Social 

Security would be paying about 60 percent of that Social Security 

check in 2022 for healthcare. Right now, it is about a quarter of 

the Social Security check. So there would be a huge cost shift. 

It is unclear what the benefits actually would be available and 

who makes that determination. I gather that the Office of Personnel Management would negotiate some kind of package, but 

what kind of a benefit package would be mandated or not mandated is a little unclear at this point. What we know is that without controlling the underlying costs and continuing down this path, 

what the Republican plan does is shift costs onto seniors, and 

frankly, insurance companies are pretty adept at making decisions 

about what care is granted and what care isn’t granted, eliminating benefit packages. And that is done in a day-in and day-out 

basis, as well as determining what providers get paid, for what 

services, over what kind of period of time. 

Mr. PALLONE. Well, you know, the point I am trying to make is 

the Republican cuts to Medicare in the future far outstrip anything 

proposed in the Affordable Care Act, including IPAB, and we have 

to remember that Republicans objected to all of the savings in the 

Affordable Care Act, not just the IPAB. And despite that, their 

budget, amazingly enough, proposed to incorporate 96 percent of 

the Affordable Care Act savings, all of them essentially except for 

the IPAB. 

I just wanted to ask you, as I mentioned before, you know, we 

are talking a Republican budget that proposes to cut Medicare by 

32 billion. CBO says that IPAB will save about 2 billion over that 

same time period. So the Republican budget cut is 13 times as 

much. I just wanted you to comment on that or confirm that if you 

will. 

56 

Ms. SEBELIUS. Well, again, Mr. Chairman, I think there is no 

question that the Republican budget does contemplate an end to 

Medicare as know it, an end to the commitment that seniors will 

have benefits guaranteed once they turn 65, be able to choose their 

own doctor, be able to choose the health system that they find best 

treats their situation, and reliably understand that they won’t go 

bankrupt because of care delivery. So that period would come to an 

end and it would be a voucher system and a private insurance market, which is a very different kind of care delivery and a very different kind of commitment. 

Mr. PALLONE. Thank you. Thank you, Mr. Chairman. 

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

vice chairman of the subcommittee, Dr. Burgess, for 5 minutes for 

questions. 

Mr. BURGESS. Thank you, Mr. Chairman. 

Let me just continue on that for just a moment. You said that 

the Ryan plan would define the end of Medicare as we know it. 

Why does the IPAB not provide a similar definition? 

Ms. SEBELIUS. Well, I think, Congressman, the Independent Payment Advisory Board makes recommendations to Congress. It is 

forbidden by law to do exactly what the Republican budget plans 

do. 

Mr. BURGESS. Let me ask you a question. 

Ms. SEBELIUS. They may not shift cost to seniors. They may not 

change benefits—— 

Mr. BURGESS. Yes, as we—— 

Ms. SEBELIUS [continuing]. They may not—— 

Mr. BURGESS [continuing]. Know from reading the law, it is very, 

very difficult for people to appeal those decisions, and in fact we 

won’t even know because no one currently has standing until there 

is actually implementation of the board, which has not happened 

yet and care is denied and they take it through the courts. But I 

think we are going to find it is very, very difficult to overturn a 

decision of this board. 

Can you tell us the difference between a voucher and premium 

support? 

Ms. SEBELIUS. The difference between a voucher and premium 

support? 

Mr. BURGESS. Mr. Ryan’s articulated aspirational document in 

the Republican budget talked about premium support, a concept actually introduced during the Clinton Administration with the Commission to Save Medicare, the Bill Frist Commission. On the other 

side, the talking point is that he is going to give a voucher. 

Ms. SEBELIUS. A voucher is basically in, I think, insurance terms 

a guaranteed contribution as opposed to a guaranteed benefit. 

Mr. BURGESS. OK. 

Ms. SEBELIUS. Those are very different concepts. On one hand, 

in the current Medicare program, seniors and those with disabilities have guaranteed benefits. That would switch if it becomes a 

voucher in the—— 

Mr. BURGESS. And then what would premium support look like 

in that world? 

Ms. SEBELIUS. Pardon me? 

57 

Mr. BURGESS. What would premium support look like in that 

world? 

Ms. SEBELIUS. I am not as familiar with that term. I know what 

guaranteed contribution is. I know what a voucher is. I don’t—— 

Mr. BURGESS. So it is incorrect to use the terms interchangeably 

as so often happens in this committee? Premium support is a different phenomenon than a voucher? Premium support would be a 

request for proposals going out to insurance companies to provide 

the coverage, must as in Medicare Part D, so you should have some 

familiarity with it. 

Ms. SEBELIUS. Well, if you are assuming, Congressman, let me 

just ask if you are assuming that $8,000 provides the total benefit—— 

Mr. BURGESS. No, I am asking the questions, Madam Secretary. 

This is my brief time to be able to ask you questions, so I have got 

to insist upon that. 

Now, the budget for the Independent Payment Advisory Board 

begins October 1, correct, $15 million? 

Ms. SEBELIUS. It is available, yes, sir. 

Mr. BURGESS. Now, who has been nominated to that board and 

is awaiting confirmation? 

Ms. SEBELIUS. No one. 

Mr. BURGESS. And why is that? 

Ms. SEBELIUS. Well, I think, Congressman, the board is not activated until 2014 and I know that the President is in discussion 

with a number of potential nominees and I know he has consulted 

with various Members of Congress, but it will be appointed and up 

and running at the time—— 

Mr. BURGESS. So should we keep that $15 million that is due October 1 because you apparently don’t need it to set up the board 

because—— 

Ms. SEBELIUS. We have no intention of using money before there 

is a board up and running. 

Mr. BURGESS. Well, who does the check go to? 

Ms. SEBELIUS. I don’t think there is a check. I think there is 

money available that we draw down. 

Mr. BURGESS. Who cashes the check? Can we have that money 

back? We are in a debt crisis. You may have heard. 

Ms. SEBELIUS. I understand. I can assure you there will be no 

drawdown on the treasury of $15 million until there is a board and 

a functioning operation. 

Mr. BURGESS. Now, on this board, are they available to be a recess appointment by the President so that they would not be subject to Senate confirmation like your head of CMS is? 

Ms. SEBELIUS. I am not a lawyer. I can’t answer that question. 

Mr. BURGESS. Well, the CRS report that is available on this indicates that there would be the availability of a recess appointment. 

I count nine that wouldn’t require input from either the Speaker 

of the House or the minority leader on the Senate’s side. So nine 

would be a majority but in fact you don’t even need a numbers majority. You just need a majority of those who have been appointed, 

is that correct? 

Ms. SEBELIUS. That is correct. 

58 

Mr. BURGESS. Let me ask you this. It looks like in statute that 

you could not have a majority of the board made up as physicians. 

Is that correct? 

Ms. SEBELIUS. My understanding is that the prohibition is yes, 

that a majority could not be practicing physicians. 

Mr. BURGESS. Well, who can make up the majority? I mean the 

definition of who can be the members is actually a little bit vague. 

It is with people with national recognition for their expertise in 

health finance. That is an odd pool, but they can actually make up 

the majority? 

Ms. SEBELIUS. Well, I think, Congressman, the characteristics—— 

Mr. BURGESS. So think tanks can be the majority of this board. 

Ms. SEBELIUS. The characteristics of the board members are 

modeled after the characteristics that were defined for the MedPAC 

board members, which have very similar kinds of backgrounds and 

abilities but very significant differences that there is a very strong 

conflict of interest barrier for the IPAB where they could not be receiving payment from the system and making recommendations at 

the same time. 

Mr. BURGESS. The man who would have been your predecessor 

but he actually didn’t get confirmed, Tom Daschle, wrote a book 

called Critical. I don’t recommend anyone buy it, but he talks about 

this board. This board was something that he extolled in this book 

to a great degree, but it was actually patterned more after the Federal Employee Health Benefits program, which is, in fact, employer-sponsored insurance. Is it your vision that one day this 

board can be spread to further than just the Medicare world but 

could actually control the private health insurance world, much as 

the Center for Consumer Information Insurance Oversight now envisions controlling the private insurance market as well? 

Ms. SEBELIUS. Again, Congressman, the board doesn’t control 

anything. They make recommendations to Congress in the event 

that Congress has not acted to keep Medicare solvent. That is a 

recommendation board. They don’t control the Medicare program. 

Congress is in the driver seat. They make recommendations and I 

think that could be very helpful as look for ways to preserve beneficiaries’ right to health insurance and look for a program to be solvent on into the future. 

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

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

Mr. WAXMAN. Thank you, Mr. Chairman. Madam Secretary, I am 

pleased to see you even if you don’t see me. Now you do. 

You have been pressed on whether this is a premium support or 

a voucher. It is hard to distinguish it, but as I understand, premium support would keep increasing the amount of money that 

would be available for people to buy insurance, like Part D Medicare so that the amount of money would keep up with the costs. 

A voucher, as I understand being proposed by the Republicans—although we haven’t seen detail—is a defined contribution with no 

increase no matter what the cost increases may be in medical care. 

But I want to explore with you a different issue. We are hearing 

a lot today about all the things that IPAB is allegedly going to do 

to the Medicare program. I have also heard you describe all the 

59 

things IPAB can’t do like denying benefits and increasing costs for 

beneficiaries. I would like to know how the Republican plan for 

Medicare stacks up against all of the things that IPAB can and 

cannot do. For example, the Republican plan would end Medicare’s 

guaranteed benefits, the things like hospital stays and doctor visits. They would replace it with a cash voucher. Can IPAB do that? 

Ms. SEBELIUS. No, they cannot. 

Mr. WAXMAN. The Republican plan would increase cost-sharing 

for Medicare beneficiaries, more than doubling their out-of-pocket 

costs for new enrollees. Can IPAB do that? 

Ms. SEBELIUS. Well, no, the IPAB board cannot make recommendations that would do that kind of cost-shifting. 

Mr. WAXMAN. The Republican plan proposes to increase premiums and force people to negotiate their care with private plans 

on their own. Can IPAB do that? 

Ms. SEBELIUS. There is no ability in the law, I think, to make 

those kinds of recommendations that would change the beneficiaries’ benefits. No. 

Mr. WAXMAN. In fact, IPAB is prohibited from making all of 

these changes that would be harmful to beneficiaries, but the Republican plan enacts them all. Are you aware of any proposals in 

the Republican plan that would save money by reducing costs and 

not by shifting them to the beneficiaries? 

Ms. SEBELIUS. I have no seen any details of delivery system 

changes or cost reductions, no, sir. 

Mr. WAXMAN. Well, I think the right way to reform Medicare is 

to make care more efficient the way we have started to do under 

the Affordable Care Act. The wrong way is to wash our hands of 

the problem putting all of the costs onto the Medicare beneficiaries. 

Secretary Sebelius, at yesterday’s hearing before the House 

Budget Committee, there was a major topic of conversation about 

the ability of Medicare patients to see their doctors when they need 

to, and that is an important issue for all of us to monitor. But the 

premise of many Republican questions seems to be that Medicare 

patients are unable to see their doctors today. This is similar to 

their bizarre claim that it is better to be uninsured than to have 

Medicaid. Are you aware of any information on whether Medicare 

patients are more or less able than private patients to see doctors 

of their choice? 

Ms. SEBELIUS. No, sir. In fact, about 98 percent of the physicians 

in this country are enrolled in Medicare. I know that there are 

pockets in communities where doctors are just overbooked, but that 

would apply to private pay and Medicare patients. 

Mr. WAXMAN. Surveys from the Medicare Payment Advisory 

Commission and numerous other independent surveys all confirm 

Medicare patients have access to care, at least as good as the access private insurance patients enjoy, if not better. That is for primary care and for specialists. Now, certainly, we need to address 

the SGR if we are really going to guarantee access in Medicare for 

the future, but that problem exists whether we repeal IPAB or not. 

There is another problem with the Republican claims about access problems under the Affordable Care Act Medicare Savings. Republicans adopted all of those savings provisions in their own plan. 

Until they end the program in 2022, the Affordable Care Act is the 

60 

Republican plan for Medicare excluding IPAB. Do you know, 

Madam Secretary, how much of the act’s Medicare savings was 

from the IPAB? Well, I will tell you because you may not know. It 

was 4 percent. 

Ms. SEBELIUS. Yes. 

Mr. WAXMAN. Four percent. So the Republicans embraced 96 percent of the act’s cost savings in Medicare. They pile on trillions in 

cuts over the next several decades when they end the Medicare 

program, and they suggested Affordable Care Act will cause access 

problems but that their voucher plan won’t. It doesn’t add up and 

it doesn’t make sense. 

I want to ask you one last thing about—well, tell you what, I 

would go over my time and I would like to give other members 

their opportunity to ask questions. Thank you for being here. 

Thanks for responding to the questions. 

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

gentleman from Georgia, Dr. Gingrey, for 5 minutes for questions. 

Mr. GINGREY. Mr. Chairman, thank you. Madam Secretary, 

thank you for appearing. 

You know, we are here to talk about IPAB, Independent Payment Advisory Board, not today at least to express our outrage 

over Obamacare in general, but it seems like the discussion has expanded a bit, maybe on both sides of the aisle. I must say I am 

a little bit surprised of the questioning in regard to the difference 

in a voucher and premium support. You seemed to struggle just a 

tad over that. A voucher, as I understand it, is sending someone 

a check on a monthly basis to spend on healthcare at their own volition. They could basically, I guess, sign up for holistic medicine. 

They could have an acifidity bag around their neck. 

They could essentially do anything they wanted to with that 

voucher whereas premium support in the plan for prosperity, the 

Republican plan to reform and save Medicare for our current seniors and our future generations is talking about premium support 

where the Center for Medicare and Medicaid Services basically 

where the senior designates, they want to purchase their health insurance, a plan that best fits their needs, that premium is advanced to an insurance company as payment for those services. It 

doesn’t go directly to the patient. So that is a big difference in a 

voucher versus premium support. And I think we should describe 

it accurately. 

IPAB, in its report to Congress, is charged under Obamacare 

with including ‘‘recommendations that target reductions in Medicare program spending to sources of excess cost growth.’’ Madam 

Secretary, can you tell us where in Obamacare the term ‘‘excess 

cost growth’’ is defined? 

Ms. SEBELIUS. Sir, I don’t know if there is a statutory definition. 

I do want to respond briefly to your premium support issue because—— 

Mr. GINGREY. We are beyond that and my time is limited and I 

am just going to help you on this second question. It is not defined. 

‘‘Excessive cost growth’’ in Obamacare is not defined. Peter Orszag, 

in fact, President Obama’s former OMB director has defined the 

‘‘excessive cost growth’’ in Medicare as principally the result of new 

medical technologies and services and their widespread use by the 

61 

U.S. heath system. That is what Peter Orszag thinks in regard to 

excessive cost. 

Let me ask you this question. The head of CMS, Dr. Donald Berwick, interim head of CMS and it is likely that he will remain interim, has been quoted as saying ‘‘most people who have serious 

pain do not need advanced methods. They just need the morphine 

and counseling that have been available for centuries.’’ Madam Secretary, do you believe that limiting advanced methods to sick seniors in favor of morphine and counseling is an appropriate way to 

reduce Medicare costs? Yes or no? 

Ms. SEBELIUS. Congressman, I believe that seniors have a right 

to make choices with their doctors, which is what they do now 

under the Guaranteed Benefit program under the Medicare system. 

Under an insurance plan, that would no longer exist and I would 

also suggest that premium support typically means that there is an 

enhanced benefit and as a result—— 

Mr. GINGREY. Well, Madam Secretary, I agree with the first part 

of your response. It should be between the doctor and the patient 

and you don’t get that with IPAB. 

Madam Secretary, I am aware that the statute states that IPAB 

cannot propose plans that ration care. Can you tell me where the 

word rationing is defined in the Obamacare statute? 

Ms. SEBELIUS. It is not defined, sir. 

Mr. GINGREY. Well, you are absolutely correct on that. It is not 

defined. 

During questioning before the House Budget Committee yesterday, you referred to IPAB as merely a safeguard and a stopgap noting that it will only come into play if Congress failed to reduce 

Medicare spending, in fact, wouldn’t be recommending any cuts 

until the 10 years. Yet on Wednesday, April 13, President Obama 

in laying out his plan to reduce healthcare spending to the American people stated that IPAB was a major plank in his plan to 

make additional savings in Medicare. Madam Secretary, if President Obama had stated publicly that IPAB is a major plank of his 

plan to save Medicare and you are saying that IPAB, it is just a 

backstop to Congress coming up with a plan, should the American 

people infer from that that Obamacare is the President’s grand 

plan to save Medicare? Give me a yes or no or if you want to expand a little bit and the chairman will allow, I would like to hear 

your opinion on that. 

Ms. SEBELIUS. I don’t think there is any disagreement between 

the President and my statement. The way that the Independent 

Payment Advisory Board is structured is that recommendations are 

made on a yearly basis and recommendations are only impactful if, 

indeed, Congress has not taken the advice of the independent actuary that per capita spending has exceeded a targeted goal. If, indeed, the IPAB recommendations are not ones that Congress chooses to accept, they change the recommendations or move in a different direction and the recommendations never have any impact 

if, indeed, cost trends are below the independent actuary’s targeted 

goal. 

It is a backstop. It is a backstop for Congress taking the responsibility to keep Medicare solvent into the future. If, indeed, they 

62 

don’t act, there is a mechanism where these recommendations become law absent Congress rejecting the recommendation. 

Mr. GINGREY. Well, I have gone way over my time and I will just 

close out by saying I agree with Mr. Pallone and Ms. Schwartz that 

we ought to repeal IPAB. It is wrongheaded. It is boneheaded. And 

I yield back. 

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

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

Mrs. CAPPS. Thank you, Mr. Chairman. And thank you, Madam 

Secretary, for being here today. 

You know, I have been listening to this discussion. I have met 

with advocates in the past few months on both sides of the IPAB 

issue. The one thing they share is a concern for the unknown. One 

common concern is that due to protections for hospitals and other 

groups from IPAB changes before 2020, the only thing left would 

be to cut provider rates. Others note that this is not true. We have 

heard the same kind of discussion today. Can you please address 

this issue? What could IPAB recommend other than provider payment cuts? 

Ms. SEBELIUS. Well, I can give you a few quick examples of 

things that are on the table as we speak. For years there was a 

recommendation out of MedPAC, who can only, you know, make 

recommendations that we look at the overpayment to Medicare Advantage plans. That was never accepted by the United States Congress and yet when the Affordable Care Act was put together, Congress decided that that was an appropriate area to look at. 

Medicare Advantage, the private market strategy for Medicare 

which was supposed to introduce competition and choice and drive 

down costs, now runs at about 113 percent of the fee-for-service 

plan with no health benefits. So Congress implemented the 

changes recommended by MedPAC for years, and over the course 

of the next 10 years, the Congressional Budget Office says about 

$140 billion will be saved. That is an example of the kind of strategy that has been on the table. If it had been implemented years 

ago, $140 billion less would have been paid out over the last decade. 

But an overpayment, no health benefits, seniors will still have 

choices. We have a very robust program. We have begun to decrease the overpayment to Medicare Advantage plans. But I think 

that is a strategy that is in the Affordable Care Act. It is exactly 

the kind of strategy that I think is anticipated by this independent 

board. 

Mrs. CAPPS. Thank you. Conversely, the Republican majority has 

voted unanimously to essentially end the current Medicare program. The not hypothetical but known result would be a doubling 

in out-of-pocket costs for beneficiaries who would get a limitedamount voucher to cover a fraction of the cost of private insurance. 

It would leave our seniors and persons with disabilities on their 

own to haggle with insurance companies without any guarantee 

that there would be any policies available to them, let alone that 

they would be affordable. 

Madam Secretary, some talk about the Republican plan as a way 

to cut cost, but all I see is a huge cost shift placing the financial 

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forms in the plan to actually address the overall costs of 

healthcare. As you have analyzed the Ryan budget plan, are there 

any cost-containment strategies in it to privatize Medicare? Does 

that privatizing include any cost containment that you notice? 

Ms. SEBELIUS. Congresswoman, we have not been able to identify 

cost-containment strategies. And as I say, the case in point, Medicare Advantage, which has been in existence for years which was 

specifically put on the table to introduce cost and competition, was 

anticipated to drive down costs has done just the opposite. It is 

running at about 113 percent and every Medicare beneficiary, all 

49 million beneficiaries pay an extra $3.66 per member per month 

to pay for the additional supports for Medicare Advantage program 

that will, again, be gradually over time decreased. And I think 

thanks to the Affordable Care Act, that excess payment will cease 

to exist. 

Mrs. CAPPS. I think all of us in Congress understand the need 

to reign in healthcare spending. In fact, that is what so many innovations in the Affordable Care Act are set up to do, just that. I just 

have a few seconds. You have a few seconds. If you could talk 

about some of those aspects of the law. You mentioned Medicare 

Advantage. What are some of the other parts of the Affordable 

Care Act, particularly as it relates to Medicare, that are opportunities for cost containment? 

Ms. SEBELIUS. Well, I think, Congresswoman, certainly through 

the Innovation Center, we are already seeing some very exciting 

delivery system reform, which is really the underlying healthcare 

delivery system. So the Partnership for Patients goals, which I 

think are very on point, and not only impact Medicare but impact 

everyone that goes in and out of the hospital, reducing hospital-acquired infections, which kill 100,000 people in America every year, 

cause hundreds of thousands of people to stay in the hospital 

longer and put them in worse physical condition, but cost billions 

of dollars, and reduce unnecessary readmissions where one out of 

five Medicare patients cycles back to the hospital within 30 days. 

Many of them have never seen a healthcare provider. 

Those two initiatives, which already 2,000 hospitals and countless other partners have signed up to participate in will reduce 

Medicare spending by $50 billion. Better healthcare, lower cost. 

Mrs. CAPPS. Thank you very much. I yield back. 

Mr. PITTS. The chair thanks the gentlelady, recognizes the gentleman from Ohio, Mr. Latta, for 5 minutes for questions. 

Mr. LATTA. Well, thank you very much, Mr. Chairman. And Secretary, thank you very much for being with us today. If I can just 

go back on the line of questioning that Dr. Burgess had. Is there 

anything in the law that says how many members have to be appointed before the board starts functioning? 

Ms. SEBELIUS. Not to my knowledge, sir, but I can—— 

Mr. LATTA. Well, the reason I ask that with 15 members could 

3 members actually be appointed and start functioning as a board? 

Because just looking at what the law says here—— 

Ms. SEBELIUS. I am sorry. I am really having a very hard time 

hearing you. 

Mr. LATTA. I can probably talk louder than this microphone is 

picking this up. 

64 

Ms. SEBELIUS. I can put my ear to the microphone but that really 

doesn’t help. 

Mr. LATTA. That might help. This is the Energy and—you know, 

this is the technology here, too. 

Ms. SEBELIUS. Sorry. 

Mr. LATTA. But it says under the act, it says, ‘‘Quorum: a majority of the appointed members of the board shall constitute a 

quorum for the transaction of business, but a lesser number of 

members may hold hearings.’’ But again, I guess the question is if 

you have got only three members appointed, can they start functioning as the board? And then actually you could have fewer members of that three actually start holding hearings. Is that possible? 

Ms. SEBELIUS. Well, I certainly think fewer than a quorum could 

start holding hearings and I would think that that outreach function is critically important for any board who is going to make recommendations. I would be happy to get you the answer in writing. 

Mr. LATTA. I appreciate that. 

Ms. SEBELIUS. I don’t want to speak outside of the—— 

Mr. LATTA. Yes, I would appreciate that if you could. 

And if I can just go to your testimony on page 12, you said that 

the ‘‘IPAB cannot make recommendations that ration care, raise 

beneficiary premiums or cost-sharing, reduce benefits, or change 

eligibility for Medicare. The IPAB cannot eliminate benefits or decide what care Medicare beneficiaries can receive. Given a long list 

of additional considerations the statute imposes on the board, we 

expect the board will focus on ways to find efficiencies in the payment systems and align provider incentives to drive down those 

costs without affecting our seniors’ access to care and treatment.’’ 

OK. So what we are saying is, then, they are going to have pretty 

much the power of the purse. Would you say that would be the recommendations that they would have in this case and that they 

would have that power of the purse to say if they are not making 

the recommendations as to what care that a person would be receiving but they are going to be able to say how much money is 

going to be expended? Would that be a correct statement? 

Ms. SEBELIUS. I think, Congressman, again, they are recommendations that come to Congress. They are triggered at a point 

where the independent actuary sets a per capita spending target. 

Actions have not reached that spending target so they will make 

recommendations about appropriate ways to reach that within the 

bounds of the law. 

Mr. LATTA. OK. So going along those same lines, though, again, 

if someone has the recommendations of the power of the purse and 

they are saying well, we are going to have to reduce that—you already mentioned a little earlier in some other questions—how are 

we going to make up for those doctors and hospitals if their payments are going down? Wouldn’t they, then, have to cut back on 

the patients they see and the care that they provide? 

Ms. SEBELIUS. Well, again, I think, Congressman, I tried to give 

with Congresswoman Capps an example of the kind of strategy 

that can yield enormous cost savings without jeopardizing care or 

jeopardizing the kind of relationship between doctors and their patients. And that is really what is envisioned. I think a fundamental 

tenet of the current Medicare commitment to seniors and those 

65 

with disabilities is the ability to choose one’s own doctor, the ability 

to choose one’s own care system, and the knowledge that you have 

benefits that are available to you. That ceases to exist under the 

plan supported by the House Republicans, and I think that IPAB 

serves as an ongoing yearly group of experts who are not being 

paid by the system to make recommendations to Congress who can 

act on those recommendations or not. 

Mr. LATTA. Because, again, I represent a rather large area in the 

State of Ohio, a lot of rural areas that have a lot of community hospitals. You know, they are all very, very concerned about reimbursement. I have got a lot of my doctors that are very concerned 

about reimbursement and so, you know, as we are looking at this, 

they are reading this, too, and, you know, as they read the testimony about, you know, driving down costs and trying to, you know, 

for payment systems align provider incentives, they are nervous 

about their other payment. 

And Mr. Chairman, I see that my time has expired and I yield 

back. Thank you. 

Mr. PITTS. The chair thanks the gentleman and yields 5 minutes 

to the ranking member emeritus, the gentleman from Michigan, 

Mr. Dingell. 

Mr. DINGELL. Mr. Chairman, I thank you for your courtesy. Welcome back to the committee, Madam Secretary. 

Ms. SEBELIUS. Thank you, sir. 

Mr. DINGELL. Your father served here with distinction. It is particular pleasure to see you here this morning. 

Madam Secretary, do you believe that the emphasis on annual 

recommendations will limit the board’s focus to short-term fixes 

rather than lowering our Nation’s healthcare spending in long 

term? Yes or no? 

Ms. SEBELIUS. No. 

Mr. DINGELL. Madam Secretary, under the Republican plan, 

nothing will prevent private insurance companies from rationing 

care. Is that right? 

Ms. SEBELIUS. I am sorry. Nothing—— 

Mr. DINGELL. Under the Republican plan, nothing would prevent 

private insurance companies from rationing care, yes or no? 

Ms. SEBELIUS. That is correct. There is no prohibition. 

Mr. DINGELL. All right. Now, IPAB is legally prohibited in the 

legislation from making recommendations that would ration 

healthcare, is that right? 

Ms. SEBELIUS. Yes, sir. There is a prohibition for rationing care, 

shifting costs to beneficiaries, eliminating benefits. 

Mr. DINGELL. Now, Madam Secretary, who is in charge? Under 

the Republican plan, the insurance companies, is that right? 

Ms. SEBELIUS. If I understand it correctly, yes, the voucher 

would be paid to an insurance company. 

Mr. DINGELL. All right. The Republican plan also ends Medicare 

as we know it and repeals the Affordable Care Act giving free reign 

to the insurance companies to decide what care you could get and 

when with no clear limits to protect consumers or prevent insurance companies from taking in exorbitant profits, is that right? 

Ms. SEBELIUS. Well, the various features, including the medical 

loss ratio and consumer protections and rate review would all be 

66 

eliminated with the Affordable Care Act and companies would then 

be in charge of seniors—— 

Mr. DINGELL. And under the Affordable Care Act the individual 

and that individual’s doctor would be in control of matters and the 

President’s plan maintains Medicare as we know it. Is that right? 

Ms. SEBELIUS. Well, it is a—yes, a plan that maintains the Medicare benefit package understanding we need to look serious at outgoing costs. 

Mr. DINGELL. And the plan remains a defined benefit plan. Is 

that right? 

Ms. SEBELIUS. That is correct. 

Mr. DINGELL. Which, under the Republican plan, it is not? It is 

a defined payment plan, is that right? 

Ms. SEBELIUS. Yes, sir. 

Mr. DINGELL. All right. Now, the Republican plan would eliminate Medicare’s guaranteed benefits and limits on cost-sharings 

and premiums, is that right, yes or no? 

Ms. SEBELIUS. Yes. 

Mr. DINGELL. Instead, insurance companies could determine 

which benefits seniors on Medicare would receive and how much 

they would pay, is that right? 

Ms. SEBELIUS. I assume so, sir. I don’t think there is any written 

language about what the benefits would look like. 

Mr. DINGELL. OK. IPAB is, under the President’s plan, the President—or rather IPAB is legally prohibited from cutting premiums 

or increasing premiums and copayments. Is that right? 

Ms. SEBELIUS. Yes. There cannot be cost-shifting onto beneficiaries. 

Mr. DINGELL. Now, under the Republican plan, healthcare costs 

would rise which turns Medicare over to private insurance that 

have higher administrative costs and profits, is that right? 

Ms. SEBELIUS. Yes, sir. Currently, the Medicare program runs at 

under 2 percent administrative costs and I think the most efficient 

private insurers are at about 12 to 15 percent. 

Mr. DINGELL. Now, IPAB will make decisions based on what is 

best for seniors and Medicare and not who spends the most money 

in Washington, is that right? 

Ms. SEBELIUS. By law they are directed to protect the beneficiaries as they make recommendations. 

Mr. DINGELL. All right. Now, Madam Secretary, how will you 

and the board insure that consumers’ and patients’ views will be 

taken into consideration as the board drafts its recommendations? 

Ms. SEBELIUS. Well, Congressman, I think that there is no question that the President will look for members of this board who are 

eager to not only participate in the long-term solvency of Medicare 

but also pay close attention to the protection of the beneficiary, 

which is part of the fundamental direction—— 

Mr. DINGELL. We also hold public hearings on these matters, 

right? 

Ms. SEBELIUS. Public hearings, I think the appointment of people 

who don’t have a conflict—— 

Mr. DINGELL. Well, Madam Secretary, is it your belief that the 

board would benefit from soliciting public comment prior to issuing 

its recommendations—— 

67 

Ms. SEBELIUS. Absolutely. 

Mr. DINGELL [continuing]. In a manner similar to that specified 

in the Administrative Procedures Act? 

Ms. SEBELIUS. Yes, sir. 

Mr. DINGELL. I guess we could say that is a commitment on the 

part of the department, is that right? 

Ms. SEBELIUS. Yes, very much so. 

Mr. DINGELL. Madam Secretary, it is always a privilege to see 

you. 

Thank you, Mr. Chairman, for your courtesy. 

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

gentleman from Louisiana, Dr. Cassidy, for 5 minutes. 

Mr. CASSIDY. Thank you for being here, Secretary Sebelius. And 

if every now and then I cut you off, I am not being rude, but it is 

so valuable to have you here I am just trying to stay focused and 

I apologize at the outset. 

I will also say to my Democratic colleagues, Republicans do retain the savings, yes, 96 percent of them but we put them back into 

Medicare as opposed to spending them on another entitlement, and 

I think that is the difference between the two of us. 

Secretary, I am a doctor who works in a hospital for the uninsured but 20 to 50 percent of my patients have Medicaid. So I 

think it is fair to stipulate that when public insurance programs 

pay physicians below cost, then they really don’t have access. It 

may be access on paper but it is not access in power. Now, that 

said, Richard Foster currently estimates that under current law in 

9 years, Medicare will pay physicians below what they receive on 

average from Medicaid. Now, is it fair to accept with the given stipulation that that will hurt access of Medicare patients to their physician? 

Ms. SEBELIUS. Well, I don’t think there is any question, Congressman, that underpayment of any kind of provider certainly 

jeopardizes an adequate network, whether it is a private insurer or 

a public payer. 

Mr. CASSIDY. Now, if MedPAC already knowing that under current law—under current law physician reimbursement is cut by 21 

percent in the near future, I am sure you will agree that that 

would have disastrous effects upon a patient’s access. 

Ms. SEBELIUS. You mean failing to fix the SGR. 

Mr. CASSIDY. And of course part of the savings of SGR is into the 

trillion dollars of savings that the other side of the aisle claims for 

Obamacare. So I will tell you as a patient that sees Medicaid patients at a hospital for the uninsured, when I read that this board 

has the limited ability to cut but where they can cut is reimbursement to providers, I actually see that what we are really doing is 

effectively denying access. Now, I will also say that I have learned 

that rarely do government institutions admit that they are rationing. Rather, the queue gets longer. Would you disagree with that 

or do you think I am wrong? 

Ms. SEBELIUS. Well, Congressman, I think that there is no question that, again, I think the Republican budget plan on Medicaid—— 

Mr. CASSIDY. Well, I am speaking about current law. I am really—— 

68 

Ms. SEBELIUS [continuing]. Since you raised Medicaid in hospitals—— 

Mr. CASSIDY [continuing]. I see that you are pivoting here—— 

Ms. SEBELIUS [continuing]. Cutting $770 billion—— 

Mr. CASSIDY [continuing]. Again, when we speak of a board 

which has limited ability to save money except by cutting payments 

to providers—— 

Ms. SEBELIUS. Well, that is not accurate, sir. 

Mr. CASSIDY. OK. So it can also do Medicare Part A and it can 

also do pharmacy coverage for dual eligibles. But clearly, a significant portion of it is cutting payments to providers. Now, again, 

under current law Medicare will be paying providers less than 

Medicaid per Richard Foster as well documented Medicaid patients 

have trouble gaining access. So where do we part in our analysis? 

Ms. SEBELIUS. Well, again, I think that there are lots of opportunities in the delivery system where we are paying or overpaying for 

care that probably should never have been—— 

Mr. CASSIDY. So if I may summarize, you are saying that there 

will be savings that will keep this mechanism from being—I gather—keep this mechanism, this IPAB, this denial-of-care board from 

having to act. I will say parenthetically that the New England 

Journal of Medicine article which I am sure you are aware of 

shows that Accountable Care Organizations have not saved money 

under the more favorable rules in which the pilot studies have been 

done. 

But going back to my point—— 

Ms. SEBELIUS. Some of them did, some didn’t. 

Mr. CASSIDY. Three out of ten did, seven didn’t. So coming back 

to the current law—— 

Ms. SEBELIUS. So we learn from them and go on. 

Mr. CASSIDY. Coming back to current law because we really can’t 

say oh, don’t worry. If this works out, this would never happen. Let 

us just assume that it does happen. Again, if we decrease payment 

to providers and we know from experience that that will decrease 

access, does that not trouble you? 

Ms. SEBELIUS. It does, which is why I think Congress carefully 

wrote also into the parameters for the Independent Payment Advisory Board that at every step along the way, provider access had 

to be part of their overall recommendations. 

Mr. CASSIDY. It has to be part of the overall—— 

Ms. SEBELIUS. They make recommendations to Congress. 

Mr. CASSIDY. Clearly, Medicaid by law has to provide access for 

pregnant women and pediatrics. By law they are supposed to pay 

adequately to give that access. And yet there is a recent New England Journal of Medicine study that shows that those with Medicaid or CHIP actually are more likely to be denied access to an appointment. In fact, 2/3 of the time they are denied such access. 

Doesn’t that give us pause that despite that law that they are 

guaranteed access, for the privately insured it is only 11 percent 

that you can’t get an appointment? For the publicly insured it is 

2/3. I mean do you not see a danger that this would be the case 

with this IPAB board? 

Ms. SEBELIUS. Well, again, IPAB has no authority to cut anything. They make recommendations and—— 

69 

Mr. CASSIDY. And 4/5 of Congress will return. 

Ms. SEBELIUS [continuing]. Secondly, as you know, sir, that governors of various States set provider rates in their Medicaid programs. They are vastly different in Louisiana than they are in—— 

Mr. CASSIDY. This is on average and I think New York Times has 

well documented that in States as desperate as Louisiana and 

Michigan that is the case. It is disingenuous to think otherwise. 

But that is OK. I am out of time and I yield back. 

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

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

Ms. SCHAKOWSKY. I think this discussion is just really ironic, this 

attack on IPAB given the fact that the Republican plan would instead turn over the Medicare program to private insurance who 

would have no constraints whatsoever in raising their rates and 

doubling of out-of-pocket costs for beneficiaries. And this semantic 

debate whether it is vouchers or premium supports, the only difference is where the check is sent to, where the inadequate check 

is sent to. And if we want to have a semantic debate, we ought to 

change the—because what they are proposing is not Medicare. We 

could call it Sortacare or Maybecare or Idon’tcare. But it is not 

Medicare anymore according to what my understanding of Medicare, which, as you pointed out, Madam Secretary, is a guaranteed 

benefit plan. That is the essence of Medicare. 

The other thing is I don’t know for sure if you know the answer 

to this, but my understanding is that the Republican budget includes all of the Medicare savings provisions that you so wisely 

helped to navigate and talked about from the Affordable Care Act 

with the exception of IPAB. Isn’t that true? 

Ms. SEBELIUS. That is my understanding. 

Ms. SCHAKOWSKY. And those include those kinds of changes that 

have been made that they accuse the Democrats of, you know, cutting Medicare and, you know, these are reasonable savings. Is it 

also true that there was a May 26, 2011, letter to Representative 

Waxman from the CBO projecting the Medicare will not exceed the 

specified targets during the 2012 to 2021 period, and therefore, 

that IPAB will not be triggered during that period? I know you said 

that. I would like for you to restate that expectation. 

Ms. SEBELIUS. Well, I think thanks to the impact already of some 

of the strategies in the Affordable Care Act and some really unprecedented new tools not only in fraud and abuse but in delivery 

system ability to align payments with high-quality, lower-cost care, 

we are already seeing a cost trend that is diminishing. And the actuary has projected that at no time—there is a slight possibility 

that in 2018 there would be a brief recommendation period, but he 

basically says that for that 10-year period, it is very unlikely that 

IPAB ever have—they will be meeting and making recommendations but in terms of having to meet a spending target will not 

occur. 

Ms. SCHAKOWSKY. Once again, I frankly was really a bit surprised and happy to see that there is this new study that says that 

93 percent of physicians are taking new Medicare patients but only 

88 percent of physicians are taking new private patient plans, new 

private plans. The issue of access I think, you know, is on everyVerDate Aug 31 2005 10:40 May 24, 2012 Jkt 037690 PO 00000 Frm 00075 Fmt 6633 Sfmt 6633 F:\112-00~1\112-07~3\112-73~1 WAYNE
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one’s mind, and clearly we do not want to see doctors refusing to 

take Medicare patients. So let me ask you to—again, I think it is 

once again, but address this issue of access to care with IPAB. 

Ms. SEBELIUS. Well, again, I think that the goal is to make sure 

that Medicare is solvent not only for the next number of years— 

and as you know, the Affordable Care Act has already extended the 

solvency projections—but on into the future. And so the strategies 

really are aimed at trying to make sure that we not only have patients’ ability to choose his or her own doctor, a fundamental tenet 

of the current Medicare plan, very different than if you are in a private insurance plan where that physician, that hospital system, 

that pharmacy, that set of benefits is pre-chosen for you. So access 

to your own doctor, having, you know, patient-driven strategies and 

making sure that as recommendations are made about any kind of 

cost reduction on into the future that we pay close attention to patient access to providers. That is part of the framework of the Independent Payment Advisory Board, and it is one that I think the 

board would follow very seriously. Certainly, we would at the Department of Health and Human Services pay very careful attention 

to anything that jeopardized care delivery and certainly having access to a physician jeopardizes care delivery. 

Ms. SCHAKOWSKY. Thank you. And let me just say that I want 

to thank you so much for your leadership in making sure that we 

can finally reach a time when all Americans have access to quality 

healthcare. Thank you. 

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

gentleman from New Jersey, Mr. Lance for 5 minutes. 

Mr. LANCE. Thank you very much, Mr. Chairman. And good 

morning to you, Madam Secretary. 

Ms. SEBELIUS. Good morning. 

Mr. LANCE. I am interested in the process regarding the IPAB 

because in my judgment oftentimes process relates fundamentally 

to policy. And you have indicated, Madam Secretary, that the 

President has not yet chosen to appoint any members of IPAB. 

Might you give the committee a time frame when in your opinion 

the President might begin to appoint members to the board? 

Ms. SEBELIUS. Sir, I don’t know about a specific timetable. I 

know it is absolutely the President’s intention that by the time the 

IPAB provision would begin to operate there will be members of 

the board. As you know, the independent actuary doesn’t make a 

target recommendation until 2013—— 

Mr. LANCE. 2013. 

Ms. SEBELIUS [continuing]. Comes to Congress in 2014. 

Mr. LANCE. But it is your best judgment that President Obama 

intends to make appointments in his term of office, the term of office ending in the end of 2012. 

Ms. SEBELIUS. I think President Obama intends to make appointments so that the IPAB can be operational at the time that it is 

operational. 

Mr. LANCE. Thank you. The law suggests that he makes several 

of the appointments in consultation with the leaders, Speaker 

Boehner, Leader Pelosi, Leader Reid, and Leader McConnell. Is 

that accurate? 

Ms. SEBELIUS. Yes, sir. 

71 

Mr. LANCE. And is he required to appoint those whom the leaders have suggested or is it merely consultative? 

Ms. SEBELIUS. It is consultative. 

Mr. LANCE. So, for example, he would not be required to follow 

through on the suggestions of any of the four leaders? 

Ms. SEBELIUS. That is correct, although the Senate has a confirmation ability and I would feel that their consultation might be 

fundamental in getting folks confirmed. 

Mr. LANCE. Perhaps that is so. That is obviously for the other 

House of Congress. Now, regarding how we in the legislative 

branch can discontinue the automatic implementation process for 

recommendations of IPAB—and this is down the road, for example, 

in 2017—as I understand it, a joint resolution discontinuing the 

process must meet several conditions, including the fact that it 

would require approval by a super majority of 3/5 of the Members 

of the Senate. Is that accurate? 

Ms. SEBELIUS. No, sir. The recommendations to be changed by 

Congress operate in the normal rules of the congressional structure. Now, the Senate seems to do everything by a vote of 60, but 

there is certainly no requirement that IPAB be rejected and substitute recommendations be made by a super majority. I think it 

is only to repeal IPAB itself, to get rid of the board. It is my understanding that that is a super majority written into the law, but not 

to accept or reject the recommendations. 

Mr. LANCE. So to follow through on your expertise and you are 

obviously expert on this. To get rid of IPAB, the underlying PPACA 

law requires a super majority in the Senate? 

Ms. SEBELIUS. Well, in the repeal of the Affordable Care Act—— 

Mr. LANCE. Yes. 

Ms. SEBELIUS [continuing]. The House has taken action to repeal 

the Independent Payment Advisory Board—— 

Mr. LANCE. Yes. 

Ms. SEBELIUS [continuing]. And again, I apologize. I don’t want 

to misspeak. It is my understanding that if that were done independently, that that would require some kind of super majority. 

Just in 2017. I am sorry. 

Mr. LANCE. Yes, in 2017. 

Ms. SEBELIUS. Just that 1 year—— 

Mr. LANCE. Yes. 

Ms. SEBELIUS [continuing]. It would require super majority. 

Mr. LANCE. Well, in my judgment that is unconstitutional and I 

am wondering whether the lawyers at your department opined on 

whether that provision is constitution or unconstitutional, recognizing that we all rely on the advice of those who serve us in legal 

capacities? 

Ms. SEBELIUS. I have been advised, Congressman, that our lawyers feel that the structure and the operation as described by law 

of IPAB is constitutional. I would be happy to go back and get a 

very specific answer for that question. 

Mr. LANCE. Thank you. My time is up. It is my judgment that 

that provision at the very least is unconstitutional and not in accordance with the current provisions of the American Constitution. 

Thank you, Mr. Chairman. 

72 

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

gentleman from Texas, Mr. Gonzalez, for 5 minutes for questions. 

Mr. GONZALEZ. Thank you very much, Mr. Chairman. Welcome, 

Madam Secretary. 

This is a quote and since this is a discussion now about the benefits and such of competing plans, the Affordable Care Act has already been repealed in the House of Representatives. This is the 

quote. ‘‘First, I fear that as health inflation rises, the cost of private 

plans will outgrow the government premium support. The elderly 

will be forced to pay even higher deductibles and co-pays. Protecting those who have been counting on the current system their 

entire lives should be the key principle of reform.’’ Would you agree 

with that statement? 

Ms. SEBELIUS. From what I could hear of it, I do agree. 

Mr. GONZALEZ. Well, you just agreed with a Republican Senator 

Scott Brown. I just thought I would throw out a Republican out 

there that agrees with the position that we have been taking as to 

the competing plans. And so to give some things some context as 

I lead to my second question would be that 1/2 of Medicare beneficiaries have incomes of less than $21,000, 1/2 have less than 

$2,095 in retirement assets, 1/2 have less than 30,000 in financial 

assets, 1 in every 4 Medicare Part D beneficiaries reaches the 

donut hole. So we have had the Affordable Care Act, and something that I believe has gone unnoticed—and you may have covered 

it in your statement and I apologize, I got here late—what went 

into effect this year that will result and has already resulted I believe in about $260 million in savings to Part D beneficiaries when 

it comes to name-brand pharmaceuticals and generics? 

Ms. SEBELIUS. A 50 percent discount did begin in 2010 for those 

4 million approximately beneficiaries who will see a 50 percent decrease in the brand-name drugs that they purchase once they hit 

the donut hole gap. 

Mr. GONZALEZ. That is already in place? 

Ms. SEBELIUS. It is. 

Mr. GONZALEZ. Can you contrast what we presently have in the 

way of Medicare Part D and within the Affordable Care Act but 

what we have had in place as opposed to what is being proposed 

by the Republicans and of course what we refer to as the Ryan 

budget, the Ryan plan, RyanCare, whatever you want to call it? Is 

there a significant difference in the very nature of the benefit that 

is being provided? 

Ms. SEBELIUS. Well, I certainly think that the repeal of the Affordable Care Act would eliminate the donut hole closing, the gap 

coverage that now anticipates being closed. But beyond that, it is 

my understanding, Congressman, that there would be a significant 

change in the poorest seniors who now qualify for both Medicare 

and Medicaid benefits. With the Republican budget as it deals with 

Medicaid, as you know right now, there is help and support for another approximately 4 million seniors who actually are income-eligible. They don’t ever hit the so-called donut hole and pay out-ofpocket costs because their costs are supported by the Federal Government. 

And there would be a major shift in the kinds of support for the 

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thing from nursing home care to prescription drug care and shift 

to a fixed income, a fixed amount of money in a medical savings 

account that those seniors could try to use to navigate what are 

often very substantial healthcare costs. So I think in terms of the 

drug plan, there are about 4 million seniors right now who are actually supported with wraparound care. And that would cease to 

exist also. 

Mr. GONZALEZ. The way it has been explained to me—and I am 

surely not the expert in the area—and I am just going to go ahead 

and read basically. ‘‘Part D is a defined benefit, so services are 

specified in law and covered by plans. The Republican plan would 

leave benefits up to the beneficiaries’ negotiation with the insurers. 

Part D’s federal contribution keeps pace with drug costs, so beneficiaries and the government split the growth in health cost, and 

the Republican budget beneficiaries would bear all of the burden.’’ 

Is that an accurate description of the situation and the contrast between what we have, what the Democrats have been proposing and 

supporting, and then the latest proposal from the Republicans? 

Ms. SEBELIUS. I think so, sir. 

Mr. GONZALEZ. Thank you very much. I yield back. 

Mr. PITTS. The chair thanks the gentleman. Before I yield to Mr. 

Guthrie, you mentioned there would be a judicial review for the implementation of IPAB recommendations. Before I yield to Mr. 

Guthrie, I would like the record to show on page 420 of the act, 

Section 3403(e)(5) states there should be ‘‘no administrative or judicial review under Sections 1869, Section 1978, or otherwise of the 

implementation by the Secretary.’’ That means there is no judicial 

review of IPAB’s recommendations. 

Ms. SEBELIUS. Mr. Chairman, the question that was posited to 

me was a question that assumed that IPAB operated outside the 

scope of their authority, outside the scope of the law. In that case, 

our general counsel feels very strongly that there absolutely is a judicial review right. So in the implementation that falls within the 

scope of the law, that is the case that you—— 

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

Guthrie for 5 minutes. 

Mr. GUTHRIE. Thanks, Madam Secretary, for coming. I appreciate you being here. The question first you seem well versed in the 

Republican budget. How many people that are 65 years old today 

and older are affected by that budget? How many people will be affected that are elderly on Medicare today? 

Ms. SEBELIUS. Well, I think the Republican budget would dramatically affect the poorest seniors in its impact on—— 

Mr. GUTHRIE. What will Medicare—— 

Ms. SEBELIUS [continuing]. The dual eligible seniors who are over 

65 today will immediately see a cut in their benefits and in their 

payments going forward. 

Mr. GUTHRIE. People would see the Medicare they wouldn’t be affected—— 

Ms. SEBELIUS. Well, those seniors are on Medicare today. The 

poorest seniors in this country would be immediately affected by 

the Republican budget. 

Mr. GUTHRIE. But on that the President today is talking about 

raising taxes on people making 200,000, $250,000 or more and supVerDate Aug 31 2005 10:40 May 24, 2012 Jkt 037690 PO 00000 Frm 00079 Fmt 6633 Sfmt 6633 F:\112-00~1\112-07~3\112-73~1 WAYNE
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ports that. The administration supports that. If somebody is 54 

years old today, when they are 65 if their income is $250,000 or 

more, why should they not pay more for their healthcare? We want 

them to pay more taxes or the administration does; why shouldn’t 

they be more responsible for their healthcare? Why should they be 

treated the same as the dual eligibles? Why should they have the 

same payment as that? 

Ms. SEBELIUS. Well, I think the President’s concept of shared 

sacrifice is that people contribute a fair share. 

Mr. GUTHRIE. But not in healthcare? Not in terms of their Medicare? 

Ms. SEBELIUS. In terms of Medicaid, no one qualifies for Medicaid who is making $250,000 a year. 

Mr. GUTHRIE. But if somebody is 65 years old they qualify for 

Medicare regardless of income. If somebody is 65 years old—— 

Ms. SEBELIUS. Everyone who reaches the age of 65 in America 

qualifies for Medicare, correct. 

Mr. GUTHRIE. So my question is why shouldn’t somebody that is 

54 today, 11 years from now when our budget would go into effect 

not be required to pay more for their healthcare if you talk about 

shared sacrifice? 

Ms. SEBELIUS. Well, the current Medicare structure has incomerelated premiums in a variety of the programs. That is part of the 

program right now. 

Mr. GUTHRIE. But right now currently there is a study out of the 

Urban Institute. I think you have seen it. It is about 1 to 3 what 

people pay into Medicare, what they take out. The average of the 

Urban Institute said I think it is $109,000 the average couple pays 

into Medicare and takes out or will expend $343,000 in healthcare 

costs over the course of their lifetime. And I don’t think it should 

be 1 for 1, $1 you get in, $1 you get out. But given that the baby 

boomers are retiring, 1946 they turn 65 this year. I am 1964, the 

end of it. Just demographically, these kinds of costs just can’t be 

withstood in this system. And the system as it is, if you are saying 

we are going to leave the system as it is and try to make it up in 

efficiencies or provider reimbursements, I don’t see when we get to 

2024, which is the point where it—how it becomes sustainable 

without reforming and changing the program, not just trying to 

make it on pure efficiencies. I don’t see where you can make that 

kind of difference. 

Ms. SEBELIUS. Well, I would agree that I think we certainly understand that Medicare as it is right now as a fee-for-service, payfor-volume program is unsustainable and certainly unsustainable 

at the point as you suggest that we have a looming influx of baby 

boomers. 

Mr. GUTHRIE. Um-hum. 

Ms. SEBELIUS. I think there is a very dramatic difference of approaches between the Republican plan, which shifts those costs 

onto seniors. It doesn’t really lower costs. It just says you will pay 

61 percent of your own healthcare up to 70 percent. A direct opposition—— 

Mr. GUTHRIE. Well, I would argue that implementing the system 

would lower costs and kind of—the proof in the pudding that was 

Medicare Part D. It is one of the programs I think it is 40 percent 

75 

under estimates performing because of competition within health 

plans for people’s business. So I would argue it does lower cost. But 

go ahead. 

Ms. SEBELIUS. Well, I just wanted to say that is one vision of the 

system that you shift those costs to private insurers and somehow 

achieve something along the way. 

Mr. GUTHRIE. The differences are so great. Matter of fact, in 30 

years, the entire federal budget is going to be Medicare, Medicaid, 

and Social Security. 

Ms. SEBELIUS. If nothing changes. 

Mr. GUTHRIE. So the differences are so great and so just saying 

we are going to cut back our reimbursements or create efficiencies, 

I don’t see where you make that difference. That is my question. 

Ms. SEBELIUS. Well, I think that again—— 

Mr. GUTHRIE. Without completely reforming the system. 

Ms. SEBELIUS. I think we do need a complete reform of the system, and I think the Republican budget chooses to do that with 

beneficiaries and just shift costs of who pays what—— 

Mr. GUTHRIE. Instead of shifting it to my 17-year-old—— 

Ms. SEBELIUS [continuing]. And the Affordable Care Act says—— 

Mr. GUTHRIE [continuing]. To pay it for the rest of their life. 

Ms. SEBELIUS [continuing]. We need to look at the underlying 

healthcare costs not just for Medicare but if affects every private 

employer, it affects everybody who goes to the hospital, it affects 

every doctor, and the kinds of underlying healthcare shifts—and let 

me give you another example, Congressman, if I may. We have finally started down the road of competitive bidding, a market strategy, for durable medical equipment. It was started in 2003, pulled 

back in 2008, restarted this year in the test market where it is implemented. There is a 34 percent decrease in durable medical 

equipment without any jeopardizing of benefits. 

Mr. GUTHRIE. I lost my time but with that level of savings required to make it work unsustainable can just come from efficiencies alone. 

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

gentlelady from Tennessee, Ms. Blackburn, for 5 minutes. 

Mrs. BLACKBURN. Thank you, Madam Secretary, for your patience. And three of us are going to try to share the balance of your 

time and get our questions in. 

I would remind my colleagues, one of my colleagues from Illinois 

was making comments about what Medicare would be called going 

forward. I would remind my colleagues it was Obamacare or 

PPACA, whatever we want to call it, that cut $575 billion out of 

Medicare. It was a conscious decision to make those cuts. I would 

also remind my colleagues that Medicare is a trust fund, and the 

Federal Government has had first right of refusal on the paychecks 

of the workers of this country. And so therefore, making that kind 

of cut I think is a breach of what has been promised to those enrollees. 

Madam Secretary, I looked at some of your comments from the 

budget committee yesterday and I feel like we are kind of doing a 

session of kick the can. And you know as well as I do that as we 

have been with you time and again on these hearings, we have 

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nitions from you, and IPAB is one of those that we are very concerned about how it is going to restrict or affect access to 

healthcare and what IPAB is going to end up doing. We know that 

supposedly some of the 15 experts coming to IPAB are supposed to 

be pharmaca, economics, health economists, insurers, and actuaries. We know that the President, he has an initiative to achieve 

savings. So if they are not there to achieve savings, what are they 

there for? 

Ms. SEBELIUS. They are there, Congresswoman, to recommend to 

Congress ways that Medicare can be solvent on into the future. 

Mrs. BLACKBURN. So you see it strictly as a solvency issue? 

Ms. SEBELIUS. That is their direction, yes. 

Mrs. BLACKBURN. That is their direction. OK. 

Ms. SEBELIUS. They are only triggered when the independent actuary—— 

Mrs. BLACKBURN. Let me ask you another question, then, because we know the GAO is supposed to do a study by January 1, 

2015, on access, affordability, and quality. This is of IPAB. And 

then Kaiser Foundation recently noted that, ‘‘IPAB would be required to continue to make annual recommendations to further 

constrain payments if the CMS actuary determine that Medicare 

spending exceeded targets, even if evidence of access or quality concerns surface.’’ And I am quoting Kaiser Foundation. So how do 

you reconcile the statements made by the administration that 

IPAB will not impact access, affordability, and quality with the 

statements made by the Kaiser Family Foundation that IPAB is required to continue cutting even if evidence of quality-of-access problems arise? 

Ms. SEBELIUS. Congresswoman, I am not familiar with that Kaiser quote, but as you know—— 

Mrs. BLACKBURN. Well, in the interest of time, then, if you are 

not familiar with it, would you—— 

Ms. SEBELIUS. I am not familiar with what Kaiser said. I am familiar with the law and I am familiar with the way it works and 

I am familiar with the fact that what they are directed to do is 

when the independent actuary, on a yearly basis—which he does 

year in and year out—recommends a target goal for spending, assuming that Congress ignores that, doesn’t act, they are directed 

to recommend ways to meet that spending target to Congress. 

Again, if Congress does not act, chooses to ignore, chooses not to 

change it, then those cuts go into—— 

Mrs. BLACKBURN. OK. Well, let me reclaim my time so that I can 

yield to Mr. Shimkus, but I would also like to highlight that I am 

still waiting for a response from you on addressing waste, fraud, 

and abuse from the last hearing. And with that, I yield to Mr. 

Shimkus. 

Mr. SHIMKUS. Thank you. Thank you, Madam Secretary. Welcome. And we are going to try to get you out of here. This is our 

last couple of questions. We are not going to match our greatest 

hits of the last time so I am not intent to do that. 

But our 2024 time frame for the expansion of the solvency of 

Medicare, is that based upon the—— 

Ms. SEBELIUS. 2024—— 

77 

Mr. SHIMKUS. The 2024 expansion of the Medicare Trust Fund 

is based upon the—— 

Ms. SEBELIUS. Expansion or—— 

Mr. SHIMKUS. The solvency. 

Ms. SEBELIUS. The solvency, yes. 

Mr. SHIMKUS. The solvency is based upon the $575 billion cut in 

Medicare, is that correct, for the most part? 

Ms. SEBELIUS. It is based on projecting what the trends are right 

now on into—— 

Mr. SHIMKUS. And based upon the double counting that we 

talked about last time. And I would just ask your individual health 

insurance policy, do you have under the Federal Employees’ Health 

Benefit plan? 

Ms. SEBELIUS. I do. 

Mr. SHIMKUS. And in the D.C. area there is probably around 42 

difference choices for health insurance policies? I mean in St. Louis 

area is 21. I think D.C. is almost double that amount. It is operated by OPM. They negotiate it. We have a premium support plan 

that you are participant of and that I am a participant of. 

Ms. SEBELIUS. And the Federal Government pays about 70 percent of the cost—— 

Mr. SHIMKUS. All that premium support is a—— 

Ms. SEBELIUS. And it rises—— 

Mr. SHIMKUS [continuing]. Negotiated contractual relationship 

with private insurance to provide insurance just like you receive 

and just like we receive. So it is the same plan so any—— 

Ms. SEBELIUS. Well, it is—— 

Mr. SHIMKUS. The voucher debate is not correct. 

Ms. SEBELIUS. Well—— 

Mr. SHIMKUS. It is the same plan that you have. And I yield my 

time to Dr. Murphy. 

Mr. MURPHY. Thank you. I am just trying to find out some answers here. And if you don’t have the information, could you please 

get back to me. 

What is an estimate of how much you think working on fraud 

issues will save Medicare overall, again, 1 or 5 or 10 years? 

Two, is you are working on a number of issues about quality improvement. You did mention the issue about infections. There has 

been bills we have moved through this committee, a bill that I 

wrote to ask for transparency on infection reporting. I understand 

from speaking with the head of Center for Disease Management 

that it has been about 27,000 lives have been saved by having the 

transparency. And I appreciate everybody who worked on that. If 

you could get us some accurate numbers of how much money that 

will save, too, over time, I would appreciate that, too. 

So yes, fraud, improvement of quality, and there is a number of 

issues there. Another option, too, to reduce Medicare costs is the 

ongoing issue we have of reducing payments, which is the SGR, et 

cetera, and also means testing has been kicked around, too. But I 

do want to ask this and tie in with some other issues. Medicare 

Part D, the actual part that is a donut hole—and, again, I don’t 

expect you to know these numbers—but there is a percentage of 

seniors that never got to that level because they never needed that 

much prescriptions. Do you have information on what percentage 

78 

of seniors that was or how many that was who, you know, spending 

for prescription drugs never got there? 

Ms. SEBELIUS. I know that about 8 million hit it. I don’t know 

how many enrollees we have. 

Mr. MURPHY. Um-hum. 

Ms. SEBELIUS. I don’t know how many are enrolled but I can get 

you that number. 

Mr. MURPHY. Let me lay out because I don’t want to play games 

and I am sure you don’t like them either. I am just trying to find 

this out. In terms of the number of seniors who actually had a 

donut hole problem, some never purchased a plan but never hit 

that level. Some did purchase a donut hole coverage plan and 

helped them through that next level. And some did not have coverage and those are the ones we all share a concern about. So what 

I am trying to find out as we are looking at honest numbers on this 

is what was the difference in impact upon cost and quality of care? 

You are probably familiar with the study that came out that said 

about 50 to 75 percent of people who were prescribed medication 

do not take it correctly. Either they never fill the prescription, they 

don’t take it, they mix it with other drugs, and that leads to returns to physicians’ offices, re-hospitalizations, extended hospital 

visits, and emergency room visits. 

In the context of this, as we really try and look at honest quality—and I get real tired of this Republican-Democrat battle. I just 

want to talk about patients here. The issue is if we get down to 

the concrete levels of this, what does it really save if we focus on 

how we can do such things as disease management and care management, because you know right now that is not paid for. And 

that is a big frustration for me that someone who may have a 

chronic illness such as diabetes or cancer or heart disease, if they 

are not helped through this and physicians aren’t paid for this, so 

we don’t pay a nurse to make the call and monitor this, it is a serious cost problem. And I hope that is something as we get through 

this you can help us with some real numbers. I don’t know if the 

IPAB board is authorized to work on these things. I tend to not 

think so but correct me if I am wrong. I would deeply appreciate 

further discussions with you on this outside of this artificial setting 

here and to work further on this. 

Ms. SEBELIUS. Well, I would very much appreciate that. We can 

get you some numbers. I am not sure—since Medigap plans are 

sold at the state level and some cover additional prescription drugs 

but a lot don’t—how accurate I can—but we will get you the donut 

hole numbers as much as we can. And we would love to work with 

you on coordinated care strategies, particularly for the chronically 

ill. I think that is an enormous opportunity for better care delivery 

at significantly lower costs. 

Mr. MURPHY. Thank you. And I might add my closing part here 

is that I know that a lot of private plans end up paying these out 

of pocket now where they will cover heart disease and diabetes, 

and I want to make sure we don’t leave this hearing saying that 

everything the government does is bad and everything private insurance does is bad. I think there is a lot mistakes on both, but 

I would hope we would not get into that finger-pointing and blame 

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79 

agement. And I want to hear how this is going to be done better. 

Thank you. I yield back. 

Ms. SEBELIUS. Thank you. 

Mr. PITTS. The chair thanks the gentleman. Madam Secretary, 

we will submit questions for the record and ask that you please respond promptly to those. You have been very generous with your 

time. Thank you for your testimony. We will take a 5-minute break 

as we set up the third panel. 

[Recess.] 

Mr. PITTS. The subcommittee will come to order. I will ask our 

guests to please take their seats. The chairman has a unanimous 

consent request that the following documents be entered into the 

record: statement of Burke Balch, Director of the Robert Powell 

Center for Medical Ethics of the National Right to Life Committee; 

second, a letter from Sandra Schneider, President of American College of Emergency Physicians to Chairman Pitts and Ranking 

Member Pallone; thirdly, statement of Thair Phillips, President of 

RetireSafe; fourth, a letter from 283 healthcare organizations opposing the Independent Payment Advisory Board; fifth, statement 

of Karen Zinka, Health Educator for Men’s Health Network; sixth, 

a statement of Richard Waldman, President of American College of 

Obstetricians and Gynecologists; seventh, a letter from Tim Laing, 

Chair of the Government Affairs Committee, American College of 

Rheumatology; eighth, statement of the American College of Radiology; ninth, a letter from Cecil Wilson, past president of the American Medical Association; tenth, testimony from Bob Blancato, National Association of Nutrition and Aging Services Programs. I 

think you have all copies of these. Without objection, so ordered. 

[The information follows:] 

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Mr. PITTS. I will introduce our third panel at this time. Testifying in our third panel are Christopher Davis, who is an analyst 

on Congress and the legislative process for the Congressional Research Service; David Newman is a specialist in healthcare financing at the Congressional Research Service; Avik Roy is a 

healthcare analyst with the firm Monness, Crespi, Hardt, and 

Company in New York City; Stuart Guterman is vice president for 

Payment and System Reform, executive director for the Commission on High Performance Health System at the Commonwealth 

Fund; Judy Feder is professor public policy at Georgetown University; and Dr. Scott Gottlieb is a practicing physician and is currently a resident fellow in health policy at the American Enterprise 

Institute. 

Mr. Davis, you may begin your testimony. 

STATEMENTS OF CHRISTOPHER M. DAVIS, ANALYST ON CONGRESS AND THE LEGISLATIVE PROCESS, CONGRESSIONAL 

RESEARCH SERVICE, ACCOMPANIED BY DAVID NEWMAN, 

SPECIALIST IN HEALTH CARE FINANCING, CONGRESSIONAL 

RESEARCH SERVICE; DIANE COHEN, SENIOR ATTORNEY, 

SCHARF–NORTON CENTER FOR CONSTITUTIONAL LITIGATION, GOLDWATER INSTITUTE; JUDITH FEDER, PROFESSOR 

AND FORMER DEAN, GEORGETOWN PUBLIC POLICY INSTITUTE; AVIK S. ROY, HEALTHCARE ANALYST, MONNESS, 

CRESPI, HARDT AND CO.; STUART GUTERMAN, SENIOR PROGRAM DIRECTOR, PROGRAM ON MEDICARE’S FUTURE, THE 

COMMONWEALTH FUND; AND SCOTT GOTTLIEB, RESIDENT 

FELLOW, AMERICAN ENTERPRISE INSTITUTE 

STATEMENT OF CHRISTOPHER M. DAVIS 

Mr. DAVIS. Thank you, Mr. Chairman. Chairman Pitts, Ranking 

Member Pallone, and members of the subcommittee, on behalf of 

the Congressional Research Service I appreciate the opportunity to 

testify about the ‘‘fast-track’’ parliamentary procedures relating to 

the Independent Payment Advisory Board. 

I am accompanied today by my CRS colleague, David Newman, 

who is a specialist in healthcare financing. While I will limit my 

testimony to the parliamentary aspects of the IPAB, at the request 

of the subcommittee, David is available to answer questions if desired on the healthcare policy aspects of the board. 

Expedited or ‘‘fast-track’’ procedures are special parliamentary 

procedures Congress sometimes adopts to promote timely action on 

legislation. As the name implies, fast-track procedures differ from 

the usual procedures of the House and Senate because they generally allow the legislation in question to be considered more quickly and to avoid some of the parliamentary hurdles which face most 

bills. 

The Patient Protection and Affordable Care Act established two 

fast-track procedures related to the IPAB. The first governs consideration of a bill implementing the recommendations of the IPAB related to future rates of Medicare spending. The second procedure 

governs consideration of a joint resolution discontinuing the automatic implementation of the IPAB’s recommendations. I will briefly 

describe both procedures. 

107 

As others have testified, under PPACA the IPAB will, under certain circumstances, propose an implementing bill containing recommendations designed to reduce the rate of Medicare spending 

growth. The Secretary is to automatically implement these recommendations on August 15 unless legislation is enacted before 

then which supersedes the IPAB proposals. 

The procedures established by PPACA permit Congress to amend 

the IPAB-implementing legislation but only in a manner that 

achieves at least the same level of targeted reductions in spending 

growth as the IPAB plan. The act bars Congress from changing the 

IPAB fiscal targets in any other legislation it considers as well and 

creates a super majority vote in the Senate to wave this requirement. 

PPACA establishes special fast-track procedures governing 

House and Senate committee consideration and Senate Floor consideration of an IPAB-implementing bill. Under these procedures, 

the bill is automatically introduced and referred to the House Committees on Energy and Commerce and Ways and Means and to the 

Senate Committee on Finance. Not later than April 1, each committee may report the bill with committee amendments related to 

the Medicare program. If a committee has not reported by April 1, 

it is discharged. 

PPACA does not establish special procedures for Floor consideration of an IPAB-implementing bill in the House. It does for the 

Senate. PPACA creates an environment for Senate Floor consideration of an IPAB-implementing bill which is similar to that which 

exists after the Senate has invoked cloture. There is a maximum 

of 30 hours of consideration and all amendments must be germane. 

A final vote on the bill is assured. 

PPACA establishes a second fast-track procedure governing consideration of a joint resolution discontinuing the automatic implementation process of the IPAB recommendations. Such a joint resolution is in order only in the year 2017 and its consideration is also 

expedited in committee and on the Senate Floor. Passage of a joint 

resolution discontinuing the automatic IPAB process requires a 3/ 

5 vote of Members of both the House and the Senate. Both the 

IPAB-implementing bill and the joint resolution I have described 

must be signed by the President to become law. should either 

measure be vetoed, overriding the veto would require a 2/3 vote in 

both chambers. The arguable effect of these provisions is to favor 

the continuation of the IPAB and its recommendations possibly 

even in the face of congressional majority supporting a different 

policy approach. 

While the fast-track parliamentary procedures governing consideration of an IPAB-implementing bill are expedited, they do not in 

themselves guarantee that Congress will agree on a bill and 

present it to the President. Because it is not possible to force the 

House and Senate to agree on the same bill text, whether Congress 

can pass an implementing bill which will supersede the recommendations of the IPAB is subject to the deliberative process. 

Finally, as I detail in my written testimony, questions about certain mechanics of these two fast-track procedures, such as how certain points of order under the act will be enforced will likely reVerDate Aug 31 2005 10:40 May 24, 2012 Jkt 037690 PO 00000 Frm 00113 Fmt 6633 Sfmt 6633 F:\112-00~1\112-07~3\112-73~1 WAYNE
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quire clarification by the House and Senate in close consultation 

with each chamber’s parliamentarian. 

The Congressional Research Service appreciates the opportunity 

to assist the subcommittee as it examines these matters. My colleague and I are happy to answer any questions you may have. 

[The prepared statement of Mr. Davis follows:] 

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Mr. PITTS. The chair thanks the gentleman. 

Mr. Newman, you are recognized for 5 minutes for an opening 

statement. 

Mr. NEWMAN. I have no independent testimony. 

Mr. PITTS. Ms. Cohen, I apologize to you. I failed to introduce you 

in the introduction. Diane Cohen, Senior Attorney for Goldwater 

Institute. You are recognized for 5 minutes. 

STATEMENT OF DIANE COHEN 

Ms. COHEN. Thank you, Chairman, and thank you, Ranking 

Member Pallone. I really appreciate the opportunity to come here 

all the way from Arizona and to discuss with you the unprecedented constitutional issues raised by Congress’ establishment of 

the Independent Payment Advisory Board and the real-world consequences that this unprecedented independent agency will have 

on the lives of citizens and especially seniors. 

The Goldwater Institute’s legal challenge to the Patient Protection and Affordable Care Act is unique among the lawsuits challenging the act because ours is the only one that challenges the 

constitutionality of IPAB. We believe the creation of IPAB represents the most sweeping delegation of Congressional authority in 

history, a delegation that is anathema to our constitutional system 

of separation of powers and to responsible, accountable, and democratic lawmaking. IPAB is insulated from congressional, presidential, and judicial accountability to a degree never before seen. 

It is the totality of these factors that insulate IPAB from our Nation’s system of checks and balances that renders it constitutionally 

objectionable. 

Specifically, IPAB is an unelected board of bureaucrats whose 

proposals can become law without the approval of Congress, without the approval of the President, and they are insulated from rulemaking, administrative and judicial review, and any meaningful 

congressional oversight. Far from representing Medicare reform, 

IPAB is an abdication of what has been historically a congressional 

responsibility. Indeed, it is an unconstitutional delegation of Congress’ legislative duties and is unaccountable to the electorate and 

immune from checks and balances. 

And I just want to follow up on what the Secretary testified 

about earlier this morning. Let us be clear, Section (e)(5), the act 

specifically prohibits judicial review. And what that means is that 

the act prohibits judicial review. If the Secretary acts outside the 

law, there is no judicial review. There is no accountability for her 

actions. Secondly, these are not mere proposals or recommendations. These are legislative proposals that can become law. 

We also heard talk about while one provision says there is no judicial review but we are not supposed to believe that, another provision says a joint resolution is required to dissolve the board, but 

we are not supposed to believe that, and then another provision 

prohibits rationing, but we are supposed to believe that. 

IPAB is independent in the worst sense of the word. It is independent of Congress, independent of the President, independent of 

the judiciary, and independent of the will of the American people. 

Thank you, Mr. Chairman. 

[The prepared statement of Ms. Cohen follows:] 

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

Feder for 5 minutes. 

STATEMENT OF JUDITH FEDER 

Ms. FEDER. Thank you, Chairman Pitts, Ranking Member 

Pallone, members of the committee. 

Mr. PITTS. Pull your mike—or push it on. Yes. 

Ms. FEDER. OK? 

Mr. PITTS. That is better. 

Ms. FEDER. I will start again. Chairman Pitts, Ranking Member 

Pallone, members of the committee, I am glad to be with you this 

morning as you consider the role of the Independent Payment Advisory Board established by the Affordable Care Act. 

I would like to start in thinking about how to approach that by 

calling your attention to the fact that Medicare is an enormously 

successful program, more successful than private health insurance 

in pooling risk and controlling costs. Medicare has historically 

achieved slower spending growth than private insurance, and the 

ACA extends its relative advantage. Action taken in the Affordable 

Care Act achieves an average annual growth rate of 2.8 percent per 

Medicare beneficiary for 2010 to 2021, 3 percentage points slower 

than per capital national health spending. National health spending is projected to grow faster than GDP growth per capital by 

close to 2 percentage points, but Medicare’s projected per beneficiary spending growth will be a full percentage point below 

growth in per capital GDP. 

Growing slower than the private sector is good but not good 

enough since both public and private insurers pay too much for too 

many services and fail to assure sufficiently delivered quality care. 

That is why the Affordable Care Act goes beyond tightening fee-forservice payments to pursue a strategy of payment and delivery reform and creates the IPAB to assure effective results. The strategy 

includes payment reductions for overpriced or undesirable behavior 

and bonuses or rewards for good behavior, most especially for payment arrangements that reward providers for coordinated integrated care efficiently delivered. 

These reforms have the potential to transform both Medicare 

and, by partnership and example, the Nation’s healthcare delivery 

system to provide better quality care at lower cost. But their 

achievement in implementation cannot be assumed. That is why 

the IPAB exists, to recommend ways to achieve specified reductions 

in Medicare spending by changing payments to healthcare providers. In essence, IPAB serves to inform and assure congressional 

action to keep Medicare spending under control. 

Some legislators have proposed to repeal the IPAB, but along 

with about 100 health policy experts who recently wrote congressional leaders in support of IPAB, I see that effort as sorely misguided. As we wrote, the IPAB enables Congress to mobilize the expertise of professionals to assemble evidence and assure that the 

Medicare program acts on the lessons of the payments and delivery 

innovations the Affordable Care Act seeks to promote. 

I contrast the ACA strategy to strengthen Medicare with the inclusion of IPAB with the alternative strategy not only to repeal 

IPAB but also to eliminate Medicare for future beneficiaries, reVerDate Aug 31 2005 10:40 May 24, 2012 Jkt 037690 PO 00000 Frm 00157 Fmt 6633 Sfmt 6633 F:\112-00~1\112-07~3\112-73~1 WAYNE
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placing it with vouchers for the purchase of private insurers, 

vouchers that take advantage of all Medicare payment reductions 

included in the Affordable Care Act. The Congressional Budget Office analysis shows that such action would not slow healthcare cost 

growth. Rather, it would increase insurance costs and shift responsibility for paying most of them onto seniors, doubling out-of-pocket 

costs for the typical 65-year-old from about 6 to $12,000 in 2022 

with out-of-pocket spending for beneficiaries growing even further 

in the future as the gap between Medicare—slower cost growth— 

and private insurance—more faster cost growth—would increase. 

Given Medicare’s track record relative to private insurance in delivering benefits and controlling costs, morphing Medicare into a 

private insurance market simply makes no sense. Medicare is 

clearly doing its part to control spending and to bring the rate of 

spending growth under control. But healthcare spending growth is 

not fundamentally a Medicare problem. It is a health system problem. Medicare can only go so far on its own to promote efficiencies 

without partnership with the private sector. Effective payment and 

delivery reform requires an all-payer partnership to assure that 

providers actually change their behavior rather than looking to 

favor some patients over others or to pit one pair against another. 

Rather than moving to abandon IPAB which supports Medicare’s 

continued and improved efficiency, Congress should therefore modify IPAB’s current spending target to apply not just to Medicare 

but to private insurance, indeed, to all healthcare spending and extend its authorities to trigger recommendations for all payer payment reform if the target is breached. Only payment efficiencies 

that apply to all payers can assure Medicare and all Americans the 

affordable quality care we deserve. 

Thank you, Mr. Chairman. 

[The prepared statement of Ms. Feder follows:] 

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

gentleman, Mr. Roy, for 5 minutes. 

STATEMENT OF AVIK S. ROY 

Mr. ROY. Chairman Pitts, Ranking Member Pallone, and members of the Health Subcommittee—— 

Mr. PITTS. Is your mike on? 

Mr. ROY. Chairman Pitts—there we go—Ranking Member 

Pallone, members of the Health Subcommittee, thanks for inviting 

me to speak with you today about IPAB. 

My name is Avik Roy and I am a healthcare analyst at Monness, 

Crespi, Hardt, and Company, a securities firm in New York. In 

that capacity, I recommend healthcare investments to our clients 

who represent the largest investment firms in the world. In addition, I am a senior fellow in healthcare at the Heartland Institute 

in which capacity I conduct research on health policy with an emphasis on entitlement reform. 

In my remarks today I will focus on four questions: first, why is 

Medicare so expensive? Second, what is the best way to adjust the 

growth of Medicare spending while preserving high-quality care for 

seniors? Third, is IPAB likely to aid these goals? Fourth, is IPAB 

perfect as it is? Is it possible to reform or improve IPAB or should 

Congress scratch the whole thing and try something else? 

Why has Medicare spending gone through the roof? Many trees 

have been killed in search of answers to the questions. Well, while 

there are many plausible drivers of Medicare spending growth, the 

single-biggest problem is this: it is easy to waste other people’s 

money. It is like the difference between a cash bar and an open 

bar. At a cash bar, I might order a beer or a house wine, but at 

the open bar, I would probably ask for a fine Kentucky bourbon, 

especially if Congressman Guthrie and Whitfield come back. Price 

becomes no object in such a system. And Medicare is more like that 

open bar. As a result, seniors tend to be entirely unaware of how 

expensive their treatments are and have no incentive to avoid unnecessary or overpriced care. Studies show that spending has increased most rapidly in those areas of healthcare where individuals 

bear the least responsibility for their own expenses. 

So what should Congress do? There are three ways to deal with 

the Medicare cost problem. The first, which is what we do now, is 

to avoid hard choices by promising that we will cover nearly every 

treatment but underpay doctors and hospitals in compensation. 

The second approach, which we call rationing, is for Medicare to 

determine either by congressional order or an expert panel that 

certain treatments aren’t cost-effective and deny them to seniors 

who seek them out. The third option would be to let seniors decide 

by granting them more control over their own health dollars either 

by increased cost-sharing and/or by allowing them to choose between different insurance plans with different benefit packages. 

Our current approach, underpaying doctors and hospitals, is 

leading more and more doctors to drop out of Medicare. We already 

see this problem in Medicaid where internists are almost nine 

times as likely to reject all Medicaid patients for new appointments 

than those with private insurance. According to Medicare Actuary 

Richard Foster, Medicare reimbursement rates will become worse 

159 

than those of Medicaid within the next 9 years. And studies show 

that health outcomes for many Medicaid patients are worse than 

those who have no insurance at all. 

As you know, after objections at rationing care through IPAB 

would resemble a death panel, Congress severely constrained 

IPAB’s authority preventing the board from including any recommendation to ration care, raise premiums, increase cost-sharing, 

restrict benefits, or alter eligibility requirements. I know that you 

are all very familiar with the endless tussle over the Medicare sustainable growth rate, or SGR, which has caused significant fiscal 

headaches because Congress routinely overrides the SGR’s requirements for reduced payments to doctors and hospitals. But IPAB, as 

it is currently designed, is similar to SGR in that its primary approach to cost control involves reducing payments to physicians. 

These global reimbursement cuts haven’t worked in the past and 

they won’t work in the future. Hence, we should be seriously concerned that IPAB as it is currently designed will reduce seniors’ access to doctors and healthcare services, thereby worsening the 

quality and outcome of their care. 

So the question we must then ponder is can IPAB be fixed or 

should Congress wholly repeal it? It is conceivable that a differently designed IPAB could help Medicare spending more efficient. For example, an IPAB that was empowered to make changes 

to Medicare premiums, cost-sharing provisions, and eligibility requirements could assist Congress in enacted much-needed reforms 

to the program. 

I know that both IPAB’s proponents and its opponents see the 

board as a foot in the door for government rationing. But let us remember that for 45 years we have misled the public into thinking 

that we could provide seniors with unlimited taxpayer-funded 

healthcare with no constraints. IPAB, to its credit, is an attempt 

at intellectual honesty because government rationing is a logical 

and necessary consequence of single-payer systems like Medicare. 

Between IPAB and the 2012 House budget, Congress can now 

have an honest debate. Should we move to a more British-style system of rationing under single-payer healthcare or should we move 

to a more Swiss-style system of individual choice and diverse options? In the diversity-and-choice approach, if you don’t like how 

your health plan restraints costs, you can switch to another plan 

or spend your own money on a more generous plan. In the government-driven approach, you have to accept what the government 

tells you to accept or pay onerous economic penalties. 

It is certainly my view that diversity and choice is more appealing and also more likely to work. 

Thanks again for having me. As an addendum to my written testimony, I am including an article from the latest issue of National 

Affairs in which I further expand on these issues. I look forward 

to your questions. 

[The prepared statement of Mr. Roy follows:] 

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

Guterman for 5 minutes. 

STATEMENT OF STUART GUTERMAN 

Mr. GUTERMAN. Thank you, Chairman Pitts, Vice Chairman Burgess, Ranking Member Pallone, and members of the subcommittee, 

for this invitation to testify on the Independent Payment Advisory 

Board. 

I am Stuart Guterman, Vice President for Payment and System 

Reform with the Commonwealth Fund, which is a private foundation that aims to promote a high-performance health system that 

achieves better access, improved quality, and greater efficiency, 

particularly for society’s most vulnerable members, including those 

with low incomes, the uninsured, young children, and elderly 

adults. I am particularly glad to be able to speak to you on this 

topic because I have been working on Medicare issues, particularly 

payment policy, for a long time at CMS, MedPAC and CBO. 

I have seen the problems faced by the program persist over time 

despite continuous efforts to address and remediate them. I believe 

we have an unprecedented opportunity and an historic imperative 

now to address these problems in a comprehensive way, which is 

the only way they can be solved. The Congress faces a challenging 

dilemma in addressing the growth of Medicare spending. Achieving 

an appropriate balance between controlling costs and continuing to 

achieve the objectives of the program is a difficult task but one that 

is of the utmost importance. 

An important factor to considering policies to control Medicare 

and other federal health spending is the fact that it is largely driven by factors that apply across the healthcare system, putting pressure not only on the public sector, including both the Federal Government and state and local governments but the private sector as 

well, including both large and small businesses, workers and their 

families, and others who need or may need healthcare. Treating 

healthcare cost growth only as a Medicare issue can lead to inappropriate policies that fail to address the underlying cause of the 

problem and lead to increasing pressure not only on Medicare and 

its beneficiaries but on the rest of the health system and the people 

it serves. In other words, I guess I would say that the open bar extends not only to Medicare beneficiaries but to all patients who 

make choices about how much healthcare to use—and their providers. 

The IPAB, if used appropriately, can serve as a helpful tool in 

attempting to address these issues. It should be viewed as an opportunity to focus the attention of policymakers both in the executive branch and the legislative branch and in fact if stakeholders 

and state and local governments in the private sector as well, an 

action that in the end needs to be taken to avoid an alternative 

that everybody should agree will be unpalatable. 

I have described some of these actions in my written testimony, 

which I won’t go into detail here, but suffice it to say, this will require a broader view of the role of IPAB and all other available 

mechanisms as well. It is not a question of whether Congress or 

the IPAB should be trusted to solve this problem but the issue that 

200 

it will take, collaboration among Congress, the administration, and 

all parties involved in the healthcare system to solve it. 

While the board is currently charged with identifying areas of 

overpayment in Medicare, its scope of authority also includes 

issuing recommendations for Medicaid and private insurer payment policies. And the combined leverage of multiple payers could 

in fact yield prices closer to competitive market prices, as well as 

greatly reduce administrative burdens on physician practices and 

hospitals, all while stimulating delivery system improvement and 

innovation. To be sure, how much we pay for healthcare is very important, but how we pay and what we pay for is even more important. The IPAB should be looked at as a tool to be used to improve 

health system performance in this way. 

An array of payment approaches can be designed to encourage 

providers to become more accountable for the quality and cost of 

care beneficiaries receive and reward them rather than punishing 

them as the current system often does for providing that type of 

care. In this regard, the IPAB can and should work closely with the 

new CMS Innovation Center. These innovations should be developed both from the top down with the Federal Government leading 

the way, as well as from the bottom up with Federal Government 

joining in initiatives developed and implemented by local stakeholders. 

The Affordable Care Act provides for testing innovative payment 

strategies, including broad authority for the Innovation Center to 

pilot test a broad array of payment and delivery system reforms. 

The IPAB should have the flexibility to work with the Innovation 

Center to quickly adopt and spread successful innovations throughout the Medicare and Medicaid programs and work to encourage 

their spread and align improvement efforts throughout the 

healthcare system. 

Finally, and perhaps most importantly, the scope of the IPAB 

should include working with private sector payers on ways to foster 

collaboration between the public and private initiatives to improve 

organization and delivery of healthcare and slow cost growth. 

Given the CBO’s finding of 55 percent of projected increase in federal health spending over the next 25 years can be attributed to 

excess growth in healthcare costs throughout the healthcare sector. 

This problem plagues businesses, households, federal, state, and 

local government alike. And it seems clear the only way to reduce 

growth in federal health spending is to address the growth of total 

health spending. 

Summing up, the emphasis of IPAB as part of a broader process 

should be on total healthcare costs rather than only federal spending, enhancing access and quality, being sensitive to distributional 

impact, including protecting the most vulnerable, emphasizing the 

need the improve performance, encouraging coherence and alignment of incentives across the entire healthcare system. Again, the 

IPAB can be useful as a vehicle for focusing attention on these 

most critical issues if all the public and private sector stakeholders 

can work together to make it so. 

Thanks for inviting me to participate in this hearing, and I am 

honored to be here before the subcommittee and with these distinguished panels and look forward to the rest of the discussion. 

201 

[The prepared statement of Mr. Guterman follows:] 

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

Gottlieb for 5 minutes. 

STATEMENT OF SCOTT GOTTLIEB 

Mr. GOTTLIEB. Mr. Chairman, Ranking Member, thank you for 

the opportunity to testify before the committee. 

IPAB was created based on a premise that decisions about the 

pricing of Medicare’s benefits are simply too contentious to be handled by a political process. But changes to the way Medicare pays 

for medical services affect too many people in significant ways to 

be made behind closed doors. How Medicare prices medical products and services has sweeping implications across the entire private market. They are some of the most important policy choices 

that we make in healthcare. To these ends, there are some considerable shortcomings with the way that IPAB is structured and how 

it will operate. 

Among these problems, IPAB has no obligation to engage in public notice and comment that is customary to regulatory agencies 

whose decisions have similarly broad implications. IPAB’s decisions 

are restricted from judicial review. In creating IPAB, Congress provided affected patients, providers, and product developers with no 

mechanism for appealing the board’s decisions. IPAB’s recommendations will be fast-tracked through Congress in way that 

provides for only a veneer of congressional review and consent. The 

cumulative effect of the rules for appointing members to IPAB will 

almost guarantee that most of its outside members hail from the 

insular ranks of academia. But most significantly, IPAB is unlikely 

to take steps that actually improve the quality of medical care and 

the delivery of services under Medicare. That is because IPAB does 

not have any practical alternative to simply squeezing prices in the 

Medicare program. 

The problem we have in Medicare is a problem with the existing 

price controls that erode healthcare productivity and Medicare’s 

outdated fee-for-service payment system. This leads to inefficient 

medical care. There is too little support for better, more innovative 

ways of delivering healthcare. 

So what is IPAB likely to do besides simply squeeze prices? They 

will also try to confer CMS with new authorities to enable the 

agency to make more granular decisions about what products and 

services CMS chooses to cover. IPAB could well confer CMS with 

constructs such as Least Costly Alternative authority or the authority to consolidate drugs, devices, equipment, or services under 

the same payment code. The combined effect of these new powers 

would effectively give CMS the ability to engage in tacit forms of 

reference pricing. 

The problem is that CMS has no tradition of making these kinds 

of decisions. As a consequence, it has little capacity to make the required clinical judgments. I believe many in Congress realize this 

and I know many stakeholders recognize it. This isn’t just a question of expertise. It is also a question of whether these kinds of personal medical choices should be made in the first place by a remote 

agency that is far removed from the circumstances that influence 

clinical decision-making. This will have implications for patients 

and providers. It will also have implications for those developing 

226 

new medical technologies making that process more uncertain, 

more costly, and less attractive to new investment. 

Medicare must continue to implement reforms to align its coverage and payment policies with the value delivered to beneficiaries. Congress needs to focus on real ways to get longer-term 

savings like premium support, modernizing benefits in tradition 

Medicare, and paying for better outcomes. IPAB makes it even 

harder to do all these things. 

In closing, if Congress believes that the political process is incapable of making enduring decisions about the payment of medical 

benefits, then all of this is an argument for getting the government 

out of making these kinds of judgments in the first place. It is not 

an argument for creating an insular panel that is removed from the 

usual scrutiny to take decisions that other federal entities have 

failed to adequately discharge precisely because those decisions 

could not survive public examination. 

Thank you. 

[The prepared statement of Mr. Gottlieb follows:] 

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Mr. PITTS. The chair thanks the gentleman. I will now begin the 

questioning and recognize myself for 5 minutes for that purpose. 

Mr. Roy, changes that reduce cost by improving the healthcare 

delivery system and health outcomes often require several years 

before savings may occur and the board may have to find immediate savings. Therefore, isn’t there a real concern that board proposals may skew towards changes in payments, which are likely to 

result in de facto rationing of care and ignore the more important 

aspects of long-term reform? 

Mr. ROY. In fact, it appears that that is almost certain to be the 

likely consequence of IPAB’s decisions. 

Mr. PITTS. Thank you. 

Ms. Cohen, can you expand on how difficult it would be for Congress to stop or override the decisions made by the 15 experts on 

this board once the process is put into motion? 

Ms. COHEN. Certainly. Well, first of all, it is not a matter of Congress being able to come up with an alternative. The alternative 

would actually have to be exactly what IPAB would have already 

done. They have to make the same cuts or an alternative couldn’t 

even be viable pursuant to the statute. There can be no amendments to IPAB’s proposal, again, unless it meets the very strict requirements of IPAB’s statute. So basically, Congress can do nothing 

but do more than what IPAB has done. It certainly couldn’t do less. 

But more than that, we have talked about the spending targets, 

but IPAB’s power is much broader than that. IPAB also has powers 

that could affect the private market, and it is very unclear about 

if a proposal came by that came from IPAB that included recommendations for the private market—or legislative proposals, as 

they are called in the act—whether Congress could actually override that. And then, of course, there is the super majority voting 

requirement in the Senate. And that, of course, is a very difficult 

hurdle. 

Mr. PITTS. Thank you. Anyone can respond to this question. Savings attributable to the IPAB have varied considerably. The CBO’s 

scoring for the IPAB has changed several times. Initially, the CBO 

estimated that savings attributable to the board would be $15.5 billion over the 5-year period from 2015 to 2019. In March 2011, realizing that under current law the IPAB mechanism will not affect 

Medicare spending during the 2011–2021 period, CBO scored repeal of the IPAB at zero. In April, using an obscure statistical 

methodology called the one-sided bet, the CBO revised this estimate again and now says that full repeal of the IPAB would cost 

$2.4 billion. Can anyone explain why this has been so difficult to 

score? Mr. Davis, do you want to try? 

Mr. DAVIS. Mr. Chairman, I would like to, if I can, defer to my 

colleague, Mr. Newman. 

Mr. PITTS. All right. Mr. Newman? 

Mr. NEWMAN. I think basically we have got a varying set of assumptions going forward in that these estimates are likely to 

change in future years, too. If Congress fixes the SGR, the baseline 

estimate with respect to what program expenditures are going to 

be will change, and once that changes, the targets will change and 

the potential savings resulting from board recommendations will 

235 

change, too. I think what you are doing is looking at snapshots at 

these estimates over time. 

Mr. PITTS. All right. Thank you. 

Dr. Guterman, regarding the IPAB, the CBO stated that the 

board is likely to focus its recommendations on changes to payment 

rates or methodologies for services in the fee-for-service sector by 

nonexempt providers. And the Kaiser Family Foundation recently 

stated in an issue brief that the 1-year scorable savings mandate 

may discourage the type of longer-term policy change that could be 

most important for Medicare, and the underlying growth in 

healthcare cost, including delivery system reforms that MedPAC 

and others have recommended, which are included in the ACA and 

which generally require several years to achieve savings. Would 

you agree with this assessment from both the CBO and the Kaiser 

Foundation? 

Mr. GUTERMAN. I would suggest that the IPAB, since it doesn’t 

exist yet, what it focuses on will depend a lot on the environment 

in which it operates. And I would envision IPAB as working closely 

with the Innovation Center to incorporate some of the best policies 

that were enacted in the Affordable Care Act and other policy ideas 

as well. So I would hope that IPAB wouldn’t be an either-or proposition, that you would either take IPAB or the Congress or some 

other party but that it would be people working together to try to 

find the best policies available to accomplish the goals that IPAB 

was established for, which is to slow Medicare spending and more 

broadly to slow healthcare spending. 

Mr. PITTS. The chair thanks the gentleman. My time has expired. 

The chair recognizes Ms. Schakowsky for 5 minutes for questions. 

Ms. SCHAKOWSKY. I thank you, Mr. Chairman and Mr. Pallone, 

for letting me go out of order. 

Mr. Roy, I have to say that I am deeply offended by your openbar analogy. It is like saying oh, honey, now that we are 65, I can 

get breast cancer and you can have that heart attack. And we are 

now able to get—I can now get a PET scan and an MRI and a CAT 

scan as if older Americans are making those kinds of decisions or— 

as I think Dr. Guterman pointed out—as if they are making those 

decisions differently from people who have insurance who also, you 

know, go about their business knowing that they are insured and 

get the healthcare. I mean, really. And also that Medicare has exploded. It has not, in fact, exploded more than healthcare costs in 

the private sector. Is that true, Dr. Feder? 

Ms. FEDER. That is true, Congresswoman, that Medicare spending per capita grows more slowly than in the private sector. 

Ms. SCHAKOWSKY. More slowly. The other thing is you must not 

have seen the recent Medicaid study, a scientific study done out of 

Oregon that absolutely showed—the first actual scientific study 

that was able to take 10,000 people who got Medicaid, 10,000 who 

did not and had profound improvements in the healthcare of people—you ought to check it out. It is a very important study. 

So I think it is insulting to older Americans to say that now they 

are just spending their days just having a great time at the doctor. 

You know, mostly I think people are trying to figure out, you know, 

perhaps have a little vacation or something or pay for their medications is more likely. 

236 

So Dr. Feder, what you are saying in your testimony is that because the problem is system-wide that this will—and you mentioned how consumers should have choices and mentioned Switzerland, you know, Switzerland says in the basic package, insurance 

companies can’t make any profit. Did you know that? 

Mr. ROY. Yes, they are nonprofit companies. 

Ms. SCHAKOWSKY. They are nonprofit companies. That makes a 

rather big difference between the U.S. system that anyone has proposed and the Swiss system, which I think was sort of glossed over 

in your saying that, you know, we should have more—I think it 

is—I would like that. That would be just fine. 

But Dr. Feder, I want to get back to you and say so how exactly 

would that work if we were to bring everyone under this system? 

Ms. FEDER. Ms. Schakowsky, as you know, the Independent Payment Advisory Board is now authorized to make recommendations 

for the private sector but they are not binding. There is not an 

overall target. There is a target on Medicare alone. And since, as 

you say and I agree, the problem is system-wide. We could modify 

that is a target that authorization to apply to all of healthcare 

spending because Medicare and private spending are driven by the 

same factors and can be most effective if their payment mechanisms are aligned. And a way to do that is as the IPAB examines 

the evidence, as Dr. Guterman said, works with the Innovation 

Center and looks for ways to improve payments in both the public 

and private sector, adoption of those improved payment mechanisms could be applied, recommended to the Congress for application not only to Medicare but as conditions we could say for favorable tax preferences under current law. So we have the capacity to 

apply these mechanisms across the board. 

Ms. SCHAKOWSKY. And there could be some carrots you put out, 

as well as sticks. 

Ms. FEDER. I beg your pardon? There could be? 

Ms. SCHAKOWSKY. The carrots as well as sticks. 

Ms. FEDER. Absolutely. I think the goal is to actually change the 

way in which we pay consistent with—I believe it was Mr. Murphy 

was asking the Secretary about coordinating care. The goal is to 

move away from rewarding providers for delivering ever more and 

expensive service and more expensive services toward delivering 

good care, efficient higher-quality care, coordinated and efficiently 

delivered and rewarding providers accordingly. 

Ms. SCHAKOWSKY. OK. Would anybody want to comment on the 

issue of access to care? Is it really a concern that we—and I will 

leave that to—that if Medicare reimbursements are too low as a result of a decision by IPAB that doctors simply won’t take Medicare 

patients. 

Mr. ROY. That is already happening. So if you look at consistent 

surveys, the rate of the difficulty for Medicare beneficiaries gaining 

access to care is higher than it is for people in private insurance. 

Ms. SCHAKOWSKY. Actually, I saw an opposite study. Maybe you 

haven’t seen a more recent study that has 93 percent of Medicare 

patients were able to access care as opposed to 88 percent of people 

who had private insurance. 

237 

Mr. ROY. The consistent consensus of all the data is access to 

care for Medicare beneficiaries is worse, and I recommend that you 

talk to the physicians in your district and I think they will agree. 

Ms. FEDER. Actually, I have to take issue with that. It is not consistent. The MedPAC finds through the surveys that they do that 

the access that Medicare beneficiaries have access in the vast majority of communities around the country. There are variations and 

that in many respects if not most or if not all it is that the access 

is superior to those for private insurers. 

Ms. SCHAKOWSKY. Thank you. My time has actually run out. I 

don’t know, Mr. Chairman, if Dr. Guterman—— 

Mr. GUTERMAN. If I can add one more comment. Any issues there 

are with current or future access problems for Medicare beneficiaries is probably attributable to the sustainable growth rate 

mechanism, which is kind of a separate issue from the IPAB. And 

I would also point out that CBO’s estimate of the impact of the 

whole Affordable Care Act on Medicare spending was that the projected increase pre the ACA of 94 percent over the next 10 years 

would be reduced to an increase of 71 percent over the next 10 

years in Medicare spending. I think that could hardly be described 

as rationing care or starving providers. 

Mr. PITTS. OK. 

Ms. SCHAKOWSKY. Thank you. 

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

Burgess for 5 minutes for questions. 

Mr. BURGESS. Thank you, Mr. Chairman. 

Let me just say on the issue of access to care, Mr. Roy, I have 

talked to the doctors in Ms. Schakowsky’s district and they tell me 

to a man and a woman that they are in deep trouble because they 

cannot afford the cost of delivering their care. Now, true enough 

MedPAC came to this panel, I think it was the last Congress, testified to us that there were not access issues that they had identified 

and then Glenn Hackbarth has visited with me since then saying 

he is becoming concerned about people, particularly seniors who 

move, and when does that happen? I want to be closer to the 

grandkids, so they move to a new city or location and there they 

find the door is closed. And if this Congress continues to bury its 

head in the sand about that, we are going to find that the world 

becomes very, very hostile. 

Now, Mr. Roy, let me just tell you I was not offended by your 

open-bar analogy. 

Mr. ROY. Thank you. 

Mr. BURGESS. I do not drink myself but I thought it was apropos. 

And, you know, the President of the United States, when he had 

the Republicans down 3 or 4 or 5 weeks ago to the White House, 

big reception in the East Room, and he wanted to drive a point 

home with us. And I think the point he wanted to make was that 

drugs cost too much. 

But the point he made was that during the—and it is not a 

HIPAA violation because he told us in an open forum—in the election he developed a rash on his back and he was concerned about 

it. So he went to a doctor who prescribed some goop to put on it. 

And he put the goop—he didn’t use the word goop; I made that 

up—but he put this cream on it for the prescribed time and it 

238 

might have helped a little bit but not so much so he had it refilled. 

He had a little prescription card and it cost him 5 bucks to get it 

refilled. So he went down and had it refilled. 

And then he was on the campaign trail and he ran out. So what 

to do? He went to a pharmacist, explained to the pharmacist his 

dilemma, got the prescription transferred via the miracle of electronic records and the pharmacist bagged it up for him and said 

that will be $400. And the President looked at the pharmacist and 

said, you know, this rash is not that bad. And at that point, the 

President became an informed consumer and was spending his 

healthcare dollars wisely. Now, people do argue that well, wait a 

minute. You go into that sort of system and people will not get 

healthcare when they need it. 

He also pointed out to us, and I did not know this, but apparently one of his daughters was gravely ill when she was very young 

and he went to the emergency room with her and the doctor explained the diagnoses and what would have to be done and what 

he proposed and the President—then not the President—he said do 

whatever it takes. And of course he did. He behaved in a rational 

fashion that you would expect a father to do when their child is 

gravely ill. He did not question cost. 

So I guess the point I am trying to make is the President actually articulated a strategy for consumer-directed healthcare that I 

thought was phenomenal for him to admit. Now, we had some 

hearings leading up to the Affordable Care Act. We didn’t have 

hearings that I thought really would have gotten to the issue of the 

cost of delivering care. If we were serious about that, we should 

have invited Mitch Daniels in here and said how did you do it with 

your Healthy Indiana plan? Now, Dr. Feder is saying that the cost 

of Medicare grows more slowly than other areas. I don’t think that 

is accurate and I would like to hear Dr. Gottlieb, perhaps Ms. 

Cohen weigh in on that, and you, too, Mr. Roy, but we never heard 

from someone who is actually making it happen on the ground. 

Healthy Indiana program costs went down by 11 percent over 2 

years. So even if we accept the figures that I believe are wrong that 

Dr. Feder is talking about, why wouldn’t we do something that is 

even better than that, which was look into consumer-directed 

healthcare? Because as the President so correctly articulated, 

something magic happens when people spend their own money. 

Now, we are left with this Independent Payment Advisory Board 

that is going to tell us how to magically spend less money, and it 

just takes me back to a speech that Ronald Reagan gave in 1964, 

and he talked then about some of the issues that were ahead and 

whether or not this country still believes in this capacity for selfgovernment or whether we abandon the American Revolution and 

confess that it is a little intellectual elite in a far-distant Capitol 

that can plan our lives for us better than we can plan them ourselves. Ronald Reagan was describing the Independent Payment 

Advisory Board. 

I have gone on too long, but Dr. Gottlieb, do you have an impression as to whether or not the cost of delivering care is rising more 

slowly in Medicare than in other areas? 

239 

Mr. GOTTLIEB. I would defer to Mr. Roy on an analysis of numbers. I haven’t seen any apples-to-apples comparisons on senior 

care because everyone is in Medicare. 

Mr. ROY. That is correct so you can’t really analyze the numbers 

directly because seniors, of course, are almost all on Medicare. Not 

all of them but—and they are also over 65 so they have higher 

medical expenditures. 

Mr. BURGESS. Well, let me ask you a question. Regardless of 

whether you are for-profit or not-for-profit insurance company, you 

need to have access to capital, so the cost of that capital is the cost 

of what the cost of the capital is on the open market, but does 

Medicare have a cost of capital that they have to put on their balance sheet? 

Mr. ROY. No, in fact there are a number—— 

Mr. BURGESS. Do they have a cost for advertising they need to 

put on their balance sheet? 

Mr. ROY. There are a number of different aspects of Medicare administrative costs that are off the HHS or Medicare—— 

Mr. BURGESS. And on that general administrative side to the balance sheet, what about all the administration that goes on in the 

Department of Health and Human Services that is appropriated 

through a discretionary appropriation, which is the largest appropriation that occurs every year that the Congress deigns to do appropriations bills? 

Mr. GOTTLIEB. I would just add, you know, the most significant 

cost to Medicare is the cost of compliance with the Medicare program, which is a cost that isn’t estimated. If you look at what goes 

on in medical practice, a good percentage of the expenditures in 

any medical practice or in the hospital is on trying to comply with 

the Medicare program because of the threat of, you know, a Justice 

Department audit or a Medicare audit. Hospitals, medical practices 

overspend on that. That doesn’t get calculated in the cost of the 

overall program, if you will. Private healthcare plans have to actually hire staff to do that kind of work. Medicare can just foist rules 

on the private sector and back it up with the threat of litigation 

or criminal penalty, and those costs don’t get estimated in the cost 

of the program. 

Mr. BURGESS. Very well. Thank you. 

Mr. ROY. Roughly speaking, the administrative costs are double 

when you count all the off-budget expenditures of Medicare, and 

that doesn’t also include the cost of fraud, which is very significant 

in the Medicare program relative to that for private insurers. If you 

add all that up, the administrative cost per beneficiary for Medicare between fraud and the actual administrative costs is arguably 

double to three times that of private insurers. If you leave fraud 

out, it is about 20 percent higher. 

Mr. BURGESS. Thank you. Thank you all for being on the panel 

today. 

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

gentleman, Mr. Pallone, for 5 minutes for questions. 

Mr. PALLONE. Thank you, Mr. Chairman. I am going to try to divide my time between asking Dr. Guterman about the Affordable 

Care Act and asking Mr. Davis about IPAB. So just bear that in 

mind if I cut you off. 

240 

You heard me in the beginning that I am against IPAB. I think 

it is a usurpation of, you know, congressional authority and, you 

know, I have never been in favor. I spent a lot of time trying to 

make sure it wasn’t in the House bill, which it wasn’t. But a lot 

of my concern is that it is very much like the BRAC, which I think 

is a disaster. And the concern about the BRAC is that it is totally 

stacked against Congress. I mean I don’t like the idea to begin with 

because it takes away congressional authority and gives it to the 

executive or independent commission, but I also think it is stacked. 

There is no way we are ever going to overturn a BRAC decision. 

We have had three BRACs since I have been here. Every time we 

try to overturn it we fail, and that is it. There is no congressional 

input. 

What I wanted to ask Mr. Davis quickly is to what extent is 

IPAB the same? In other words, we have been operating with 

MedPAC, they make recommendations, we usually adopt them. I 

think we have been very effective. I don’t see any need to change 

MedPAC. With BRAC, you know, it is one deal. You either vote it 

up or down. You need a super majority, which we never get. Is the 

process similar and stacked in a way that it is going to be virtually 

impossible as it is with the BRAC to overturn? 

Mr. DAVIS. Thank you, Mr. Pallone. 

Mr. PALLONE. And I am asking him as opposed to the D or R witnesses because I am trying to be—not that you are biased but I am 

trying to get an unbiased opinion. Go ahead. 

Mr. DAVIS. Yes, Mr. Pallone. As you said in your opening comments, there are very many similarities between the IPAB model 

and the base-closure commission. Principally is, as you indicated, 

that this is a commission that makes recommendations that go into 

force unless Congress stops them. That is also, of course, the case 

with IPAB. And whether under this procedure there are certain 

super majorities that are required to overturn IPAB and some of 

them, frankly, are de facto super majorities as they are with 

BRAC, the idea that if Congress were to put forward something different it would be vetoed and require a 2/3 override in both chambers. So in that way it is similar to the base closure process. 

There are two differences I would highlight, though. The first is 

is that Congress, unlike under BRAC, can change the procedures— 

or rather change the recommendations of IPAB as long as they fit 

within the same fiscal targets. That, as you know, is not the case 

with BRAC where it is simply an up-or-down vote. Others have 

pointed out another difference, frankly, with BRAC in simply that 

it is related only to facilities while, of course, very important, can 

be thought of as very different to a sweeping policy area such as 

Medicare or healthcare reform. So I think in sum there is similarities and differences. 

Mr. PALLONE. All right. Thank you. I appreciate that. 

Now, let me ask Dr. Guterman, I don’t know if I was going to 

ask Judy Feder to jump in, too, but I don’t know if we have time. 

I believe very strongly—I am opposed to IPAB, but one of the reasons I also was opposed to it was because I thought that in the Affordable Care Act that we did a very good job about keeping costs 

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241 

eration with all the things that we did and we don’t need IPAB, 

not necessary. 

So what I wanted to ask you is if you could outline how the Affordable Care Act’s approach to reducing health costs is affective. 

You know, don’t get into IPAB. I mean to what extent did we set 

up a sustainable Medicare program here and get towards the cost 

without IPAB, with the other things. In 1 minute or so. 

Mr. DAVIS. The Affordable Care Act laid out a number of tools 

that one could use to build a better healthcare system, and that is 

really the answer. It is not a matter of how much we pay so much 

as how we pay and what we pay for in healthcare and how 

healthcare is organized and delivered that needs to be addressed. 

And the Affordable Care Act, through the Innovation Center, 

through the Medicare/Medicaid Coordination Office. Those are two 

big steps because the Innovation Center is supposed to develop in 

collaboration with outside parties innovations that help improve 

the delivery of care and save money in Medicare and Medicaid and 

across the healthcare sector. 

And they have already begun to initiate projects that involve 

States in broader initiatives. They are working with private payers. 

The ACO model that they are working on is one that has been 

picked up by the private sector, and in fact there are a number of 

private sector initiatives that are ongoing to try to achieve the Accountable Care Organization model that has been put forward in 

the ACA. 

And also having Medicare and Medicaid work together for a 

change, there are 9 million beneficiaries who are eligible for both 

programs, and right now the two programs just aren’t well aligned 

to serve those beneficiaries’ needs or to make sure that the money 

that is spent is well spent for those beneficiaries. 

Mr. PALLONE. Thank you. Thank you, Mr. Chairman. 

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

gentleman from Georgia, Dr. Gingrey, for 5 minutes for questions. 

Mr. GINGREY. Mr. Chairman, thank you very much and I thank 

the panel. I am sorry I had to step out to give a little quick speech 

and I missed all of your testimony but I certainly intend to read 

it all because what I heard was extremely interesting, a little bit 

diverse, which is to be expected. 

Before I go into questions, I want to raise one very important 

point today. In the press, Secretary Sebelius has often chided opponents of IPAB for suggesting that it has the power to restrict access to physicians’ services or life-saving drugs and treatments, 

otherwise known as rationing. And yet under oath here today she 

has admitted that IPAB is charged with reducing excessive growth 

areas of Medicare spending when President Obama’s own OMB director states that excessive growth in Medicare spending is due to 

the availability and adoption of new, high-cost drugs and treatments. 

Finally, nowhere in Obamacare are the words rationing or excessive growth areas defined in statute, which means it is up to the 

Secretary and the IPAB board to ultimately decide what is rationing and what cutting excessive growth areas means. It is up to 

them. And if the American public disagrees with how the Secretary 

242 

or IPAB define rationing, they are, as I got from her testimony, 

prohibited from suing in court to stop it. 

So my concern here is simple. What one person considers rationing, another might refer to as reducing excessive growth areas of 

Medicare, known here as new treatments or drugs. And I believe 

the Secretary of Health and Human Services owes this committee 

and owes the American people a lot more clarity on this issue. 

Now, let me in the remaining time get to my questions and I will 

go to Dr. Gottlieb, yes, and Mr. Roy. I am interested in your 

thoughts on the lack of clarity in the law with regards to, one, rationing and reductions in excessive growth areas, along with the 

lack of judicial review, as I mentioned, for patients who feel the 

board is in fact denying them the benefits that they need to survive. 

Mr. GOTTLIEB. Well, I think the issue of rationing versus squeezing payments is a distinction without a difference because we have 

seen it already that when you squeeze payments, it effectively 

closes off access to care, and there is some debate about what is 

happening in the Medicare program, and I would submit there has 

been some recent studies, one out of Massachusetts that shows that 

Medicare beneficiaries are having a hard time getting access to 

providers up there. There is certainly no debate around Medicaid 

and whether or not patients under the Medicaid program have a 

difficult time getting access to medical care because of how low 

rates have been squeezed in that program. So, so long as IPAB is 

going to squeeze down payments, it is going to ration care, and I 

think, you know, the distinction is just semantics. 

What was the second question, Congressman? I am sorry. 

Mr. GINGREY. Well, let me do this, Dr. Gottlieb. Thank you. And 

I would like to get Mr. Roy’s opinion on that same thing if he can. 

Mr. ROY. I think that I would echo Dr. Gottlieb’s comments. I 

think that the importance of access to a physician cannot be understated. It is the most important thing. If you have a problem and 

you can’t see a doctor for that problem and that problem festers, 

you could have a much more serious medical condition. Children 

die of toothaches on Medicaid because they can’t see a dentist and 

have their abscesses removed. There are serious, serious medical 

problems of healthcare that if you can’t have access to a physician, 

you can’t do anything. So the fact that the IPAB is explicitly restricted from changing the mix of benefits really doesn’t matter if 

somebody can’t actually see a doctor in the first place. 

Mr. GINGREY. Right. Right. Well, I thank you both for that answer to that question. And I have got one more, Mr. Chairman. 

Secretary Sebelius in her statements today said that the administration has begun outreach efforts to fill these 15 seats on the 

Independent Payment Advisory Board. I would just be curious to 

know among this distinguished panel whether or not any of you 

have been contacted, and I very specifically ask Ms. Cohen. Has 

anyone from the administration contacted you about serving on our 

IPAB? 

Ms. COHEN. No, probably because I am suing them. 

Mr. GINGREY. Ms. Feder, Judy Feder, has anyone from the administration asked you—contacted you about this? 

243 

Ms. FEDER. I have actually had lots of discussions about various 

aspects of the Affordable Care Act with the administration and indicated that I would be proud to serve on the Independent Payment Advisory Board. 

Mr. GINGREY. So the answer is yes? That sounds like a yes to 

me. 

Ms. FEDER. Asked would be grossly overstating. 

Mr. GINGREY. Yes. I take that as a yes. Mr. Roy, how about yourself? Have you been asked? 

Mr. ROY. I am afraid not. I like my current job, so I am OK. 

Mr. GINGREY. Dr. Gottlieb? 

Mr. GOTTLIEB. I have been asked by some Senate staff and I indicated that I would be interested in being nominated but I 

wouldn’t want to serve. My only reason for being nominated is I 

want to write an op ed. outlining why the President shouldn’t pick 

me to serve on the board. 

Mr. GINGREY. So the response, Mr. Chairman, is that two of our 

panelists have been at least approached and one is enthusiastic 

about the possibility of serving and the other one is not. I thank 

you all very much for your response and I yield back my time. 

Ms. FEDER. If I might just clarify, the approach was mine I just 

want to say. 

Mr. GINGREY. Mr. Chairman, would you yield me another 15 seconds? 

Mr. PITTS. Go ahead. 

Mr. GINGREY. Did I not ask Dr. Guterman? 

Mr. GUTERMAN. No, you didn’t. 

Mr. GINGREY. I apologize, Dr. Guterman. Have you been approached? 

Mr. GUTERMAN. You don’t need 15 seconds. No, I have not. 

Mr. GINGREY. You have not. OK. Thank you. And I yield back. 

Mr. PITTS. All right. The chair thanks the gentleman and recognizes the gentlelady from California, Mrs. Capps, for 5 minutes for 

questioning. 

Mrs. CAPPS. Thank you, Mr. Chairman. 

Well, welcome to all of you and thank you. This is a big panel 

and thank you to each of you for your testimony. I am in and out 

today but my computer and my television set are all locked in so 

I could watch and listen. 

Dr. Feder, the Republican plan for Medicare is to end it in 2022 

and replace it with a limited voucher, whatever it needs to be 

called, with which to purchase coverage on their own. Each senior, 

then, would have this opportunity or responsibility. It would solve 

the Federal Government’s healthcare cost problems by asking seniors and those with disabilities to make sure that all the costs were 

covered and using their voucher or subsidy or premium support to 

help them do this. The Congressional Budget Office estimates that 

the Republican budget would double annual costs. Despite this 

cost-saving or cost-shifting in the Ryan budget plan, the Republican budget would actually double the annual cost for Medicare by 

2022 and nearly triple them by 2030. But this isn’t just a problem 

for the future. Costs that large cannot be covered by our future 

seniors overnight. 

244 

The Center for Economic and Policy Research looked into what 

these changes would mean for the retirement planning of people 

who are 54 or under today, which will be the first cohort of people 

who will live under—should the Ryan plan become actualized. They 

found that this plan would require that each senior would have to 

save about $182,000 for retirement over whatever they would be 

currently planning to save. Does this lead you to question the claim 

that the Republican budget doesn’t hurt people today, only in the 

future? 

Ms. FEDER. It does, indeed, Ms. Capps, and I appreciate your 

drawing attention to the fact that it is not just about the future. 

It is about the current period. And I would add to it the concern 

that you have raised about people becoming uncertain as to what 

they would have to pay for insurance. And at the time when they 

are struggling to put aside pensions for the future, as well as take 

care of their kids, get them started and educated, that they would 

have to be putting money away to deal with future insurance costs 

seems to me an outrage. 

In addition to that, those who were talking about the repeal of 

the IPAB are also talking about the repeal of the Affordable Care 

Act. And so the protections that have been added for prescription 

drug costs, for preventive benefits, and other advantages that are 

available to current seniors, current beneficiaries would also disappear. 

In addition, there would be an enormous—as this proposal has 

set up—there would be a huge cliff that occurs at that year when 

that goes into effect. And that seems an enormous burden to put 

on people into the future. 

Mrs. CAPPS. I would like to shift to a topic of Medicaid in just 

a minute, but I want you to respond briefly to many concerns that 

current seniors—today’s Medicare recipients are the ones who are 

voicing their concerns about this change in plan, even though they 

have been reassured that nothing will happen to them. There is a 

concern, and I haven’t been able to address it—I wondered if you 

could—about what is to stop, you know, the majority from pushing 

forward this time. I mean if it is going to be that kind of cost shift 

to start, you know, for those who are 54 now, what is there sacred 

about this contract that the current seniors now have with their 

government? 

Ms. FEDER. The people that would be affected in 2022 are paying 

into Medicare for Medicare benefits as we speak and they are expecting them. If the Congress changes that contract, there is nothing to say that they couldn’t change the contract for those currently 

on Medicare. 

Mrs. CAPPS. Now, similarly, the Republican plan for Medicaid 

would also slash payments to States starting in just 2 years. It 

would be sort of a block-grant approach to Medicaid—the match 

that is now guaranteed, the federal portion of it would no longer 

be in the same way. I am from California, and boy, there is tremendous concern about this because our State has terrific economic 

challenges. We have lots of people receiving Medicaid benefits, and 

to have this double whammy to the State of having to pick up more 

of the piece, which is apparently what is intended. Maybe you will 

245 

explain what the cuts to Medicaid would have any effect on Medicare beneficiaries, some of them being dually eligible. 

Ms. FEDER. The Republican budget calls for a cut in federal funding to the States for Medicaid of about 3/4 of a trillion dollars. It 

is a huge cut in the resources going to States to support a population which, as we all know and are discussing with respect to 

Medicare is aging and then becoming increasingly in need of care. 

About a third of Medicaid spending is for long-term care services, 

long-term services and support, some in nursing homes, some outside nursing homes. The elderly along with younger people with 

disabilities but the elderly are primary beneficiaries. They are also 

beneficiaries of Medicare. 

We have improved services in recent years to try to get people 

who need long-term care services at home and in the community 

where they want to stay and not go into nursing homes, those as 

well as a host of other services who are dual eligibles. Medicare 

beneficiaries who are also dependent on Medicaid would be tremendously at risk as we know from what States are already considering as cuts in benefits. 

Mrs. CAPPS. Thank you, Dr. Feder. 

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

gentleman from Kentucky, Mr. Guthrie, for 5 minutes. 

Mr. GUTHRIE. Thank you, Mr. Chairman. Thank you for coming. 

I talked with the Secretary earlier today and here is my concern. 

And people have paid into Medicare and it is not a dollar in, you 

get a dollar out. I understand that. But we have a study from the 

Urban Institute says people average about 100,000 or a little more 

into Medicare and take out about 300,000. And people might say 

that is not a correct study or not. I know. And I have seen other 

studies about three to one what you pay and what you receive. And 

I am 1964 into the baby boomer. Beginning of the baby boomer is 

1946. We are all retiring starts now. It starts now. We know in 

2024 I think the President even said Medicare is unsustainable. 

Now, they say during the Obama healthcare plan, President 

Obama’s healthcare plan they preserve Medicare, but he even said 

yesterday that it is unsustainable the path that it is on. And what 

we are trying to do is offer a solution, a reform that preserves it 

for those who have it and to have it for people that are—I am 47. 

I am affected by it—to move forward. And to say that we paid into 

Medicare and it is not going to be there. That is just incorrect. 

That is absolutely incorrect because it is a government-sponsored 

program that we are offering that uses Medicare dollars to move 

forward. 

So my question is—and Dr. Feder, with the vast of baby boomers 

moving—taking out $3 for every $1 we put in, how do you keep the 

system as it is for people in the future? You can’t just—you know, 

they talked about DME medical equipment. If you stopped people 

from buying the scooters—the free advertising, I will get you a 

scooter on television—you can’t save enough money to make up for 

the demographic move, the wave that is coming of baby boomers. 

And it starts today. It has started today. 

Ms. FEDER. Mr. Guthrie, I am an earlier baby boomer. I will be 

65 next year, so I am at the point of the pressure here. And there 

is no question that it is growth in population that is what is drivVerDate Aug 31 2005 10:40 May 24, 2012 Jkt 037690 PO 00000 Frm 00251 Fmt 6633 Sfmt 6633 F:\112-00~1\112-07~3\112-73~1 WAYNE
246 

ing Medicare spending, total spending much more than any other 

period in the history of the program as the enrollment grows because the per capital spending growth, remember, for Medicare is 

much slower than private sector growth, but what is now come to 

drive along with that spending growth, cost per beneficiary, is the 

number of beneficiaries. 

Mr. GUTHRIE. Right. 

Ms. FEDER. And it is true for all of us that we don’t want 1965 

healthcare or in 1985 or in 2020. We want the healthcare that is 

available today. 

Mr. GUTHRIE. Right. So how do you have the fee-for-services as 

it exists today with the vast baby boomers retiring and not—talk 

about cost-shifting. I have a 17-year-old daughter who in 30 years 

will be 47 years old, which is my age. And in 40 years, according 

to the CBO, 100 percent—if you have 18 percent of revenue GDP— 

coming to the Federal Government will be for Medicare, Medicaid, 

and Social Security. So the greatest generation who provided the 

interstate highways, fought World War II, did everything to give 

my generation the opportunities, my generation, if we don’t address 

it—I know everybody is here criticizing everything we are doing— 

but if we do not address it, my child will go to work when she is 

my age for me to be retired, solely for me to be retired. 

Ms. FEDER. Well, I understand your concern and I share it. I 

have 4-year-old twin granddaughters, and I am doing my best to 

guarantee affordable healthcare for them well into the future when 

they are my age and older. And what we are all concerned about 

here is how to do that. And the way to do that is to change the 

overall healthcare system. The Affordable Care Act gave Medicare 

the lead in changing the way we pay for healthcare and making 

the whole system more efficient. And that is what we need to do 

because an alternative is simply to deny care to those who don’t 

have the resources to pay a cost that is going up. 

Mr. GUTHRIE. The Republican plan doesn’t deny care. And just 

like Medicare Part D, it is 40 percent under estimate because 

health plans have to compete. Anybody can answer what I just— 

I am just not asking the one question—— 

Ms. FEDER. Well, if I may stay with you, I don’t think Medicare 

Part D offers you the answer there, sir, and the cost of prescription 

drugs are rising as well. We need to make the system more efficient—— 

Mr. GUTHRIE. Well, let me ask—Mr. Roy, I am about out of time. 

I am sorry to cut you off but I only have 40 seconds left. 

Mr. ROY. No, I think that one of the things that we see with the 

CBO projections is the CBO consistently underestimates the importance of cost-shifting in medical expenditures, so Medicare Part D 

has a significant cost-sharing component, which is the so-called 

donut hole, which is now going away. But that donut hole is a big 

part of the reason, along with the choice and plans, that Medicare 

Part D is coming 40 percent under budget, whereas with the conventional, traditional parts of the program, expenditures have skyrocketed out of control because there has been minimal cost-sharing. 

Mr. GUTHRIE. And the administration wants people making 

$250,000 or more to pay more taxes but they don’t want them to 

247 

pay more for their healthcare. And what our plan does is if you are 

at the lower end, you still get covered, and at the higher end you 

would pay more. And so instead of a $250,000-a-year person at 65 

years old paying more for their healthcare, they are going to send 

the bill to my 17-year-old daughter and my 16-year-old son and my 

13-year-old daughter. 

Mr. ROY. I would make a point about that which is that because 

medical expenditures grow at faster than the rate of GDP, you can 

never raise taxes fast enough to compensate for the rise in 

healthcare spending. So it is always much more efficient if you 

want a means test to means test on a spending side rather than 

on the taxation side. 

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

gentleman from Texas, Mr. Gonzalez, for 5 minutes. 

Mr. GONZALEZ. Well, thank you very much, Mr. Chairman. And 

I really appreciate the testimony of all the witnesses. I may not 

agree with a few of you but I do think that IPAB is actually one 

of the best approaches as trying to get a handle on what are exploding healthcare costs. And I think we all acknowledge that 

healthcare costs consume too much of our GDP, that employers are 

no longer providing it to the degree that they used to provide it to 

their employees, that individuals in this country very likely cannot 

afford healthcare. It is that simple. That 50 cents out of every dollar spent on healthcare comes from some entity of government. 

And I do—I share some of the real concerns of my colleagues on 

the other side of the aisle about where we are going to be and such. 

A generation that may have provided great opportunity for us, the 

interstate highway system, but I remind everybody that what Eisenhower and others did in the ’50s to give us that interstate highway system was to, in essence, raise the gasoline tax what would 

be the equivalent of 96 cents a gallon today. There is not one of 

my colleagues—and I hate to say it—I don’t think I would vote on 

that myself today. So there is a difference that is going on out 

there as to what people are willing to pay for in this country and 

still expect to receive the benefit. 

I am concerned about something you said, Mr. Roy, and because 

in the United States either the government is subsidizing the payment for healthcare or the private sector is. But the individual consumer—and there is no other product or service that has that kind 

of status in this country that I am aware of. But I am somewhat 

disturbed by the fact that it must be all of the patient’s fault. 

And I am concerned about some aspects of IPAB. I share the concerns of my physicians in my district that are saying where will 

our input—how are we guaranteed that we have something to say 

as far as the information that is going to be considered by the 

members of this board? I am really worried about that. But where 

does the responsibility lie? I will tell you right now, if I go into my 

doctors—and I have been going to them for a number of years— 

and if they tell me I need a certain procedure or certain test, I really don’t question it. 

Now, let us just say I didn’t have Blue Cross/Blue Shield because 

it is employer-sponsored. I am a Member of Congress. But I was 

going to pay that out of my own pocket. I am still not real sure— 

your premise is that I am going to shop around and I am going to 

248 

go around and say well, I am not sure that I really need that test. 

I think I will go and see another doctor and get another opinion, 

which is going to cost me money and such. So where does the responsibility lie? Do you believe that maybe the physicians have a 

responsibility only to provide that service which is absolutely necessary? I am not going to get into the argument of unnecessary 

testing and everything else because I have got the gold standard 

in the State of Texas, and it has not brought down the cost of 

healthcare in the State of Texas. It has brought down the cost of 

insurance policies for certain specialties. So where is this shared 

responsibility? How do we get a handle on this? And isn’t IPAB 

maybe a method of achieving that goal? 

Mr. ROY. If one looks at a number of studies around the behavior 

of patients and physicians with high deductible health plans and 

health savings accounts where there is more consumerism, where 

there is more ability to shop for procedures and tests and office visits, you see a lot more intelligent consumption. 

I think in Washington we have an excessively pessimistic view 

of the ability of individuals to make intelligent decisions about 

their own care. Especially in the days of the internet, people do a 

lot of research; people have a lot of knowledge. If we had a system 

where consistently across the system for everyone there were more 

and more people who could shop for care, who bought insurance for 

themselves instead of having it provided by someone else, you have 

more of the ability to start thinking in the way that people need 

to think about well, do I really need that test? And if a doctor says, 

yes, I really do think you need that test even though it costs 

$2,000, the patient might say yes. But maybe the doctor will say 

you know what? That test is $2,000. I think it might benefit you 

a little bit but maybe it is not worth paying for for you right now 

because it is $2,000 and you are very unlikely to benefit from it. 

Mr. GONZALEZ. Don’t you think the determining factor, though, 

really in most tests—and I know this is going to be controversial— 

is whether it is covered or not? 

Mr. ROY. Could you repeat the question? 

Mr. GONZALEZ. What I am saying is whether you have access to 

a number of tests or not is whether that test is going to be paid 

for through some subsidy, either through private insurance or government. Isn’t that the truth? 

Mr. ROY. Not necessarily because, again, if you have co-pays, 

deductibles, health savings accounts, and other mechanisms by 

where the patient shares in the expenditure, the patient has more 

of an incentive to monitor those expenditures and make sure they 

are being executed intelligently. 

Mr. GONZALEZ. And Mr. Chairman, I am going to ask your indulgence just to give Dr. Guterman a couple of minutes to respond to 

some of the comments. 

Mr. PITTS. Dr. Guterman? 

Mr. GUTERMAN. I promise this will be brief. I wanted to point out 

that in my written testimony, I point out that 58 percent of total 

Medicare spending is accounting for by 10 percent of Medicare 

beneficiaries, who account for an average of $48,000 in Medicare 

costs. These are people who are very sick. It is not that they are 

incurring those costs because they are bad shoppers. The other 

249 

thing I would point out is that there was a large-scale experiment 

on the impact of out-of-pocket costs on the utilization of healthcare 

and what it found was that, indeed, higher out-of-pocket costs reduced the utilization of healthcare both desirable and undesirable 

healthcare. So putting the onus on the back of Medicare beneficiaries, especially ones who are sick who are the ones who are 

spending the money is kind of a difficult way to make sure that the 

system runs efficiently. 

Mr. PITTS. The chair thanks the gentleman. That completes this 

round of questioning. We will have one follow-up for each side. Dr. 

Burgess? 

Mr. BURGESS. Thank you, Mr. Chairman. 

Dr. Guterman, I recognize one size fits all doesn’t work and that 

is one of the reasons I have got some concerns about what we have 

done, what Congress has done with the Affordable Care Act. But 

I am a big believer and letting people spend their own money for 

healthcare, but I also recognize that there are populations out 

there where this would not be the wisest course of action. 

Now, when I practice medicine, I kind of considered myself to 

be—well, what I have learned now—we call it a medical home—but 

I mean I was always the one that arranged things for my patient. 

I always went the extra mile to do things that were not necessarily 

reimbursed but were required as part of giving good care. And I 

don’t remember if you were there at the Commonwealth meeting 

in January but it came up during the course of that meeting that 

one of the Members of Congress who was there said that 

healthcare is so complicated I have to use a concierge doctor to sort 

of sort things out for me. And this was not a Republican Member 

who said it. So it was kind of a shock to hear this come from a 

Member of Congress. And I asked Don Berwick. Dr. Berwick was 

there and he was on that panel, and I said, so Don, you just complained about 20 percent of your patients consuming 80 percent of 

your resources. Why don’t you buy these folks a concierge doctor? 

Or why don’t you directly contract with a physician to be responsible for a pool or panel of patients in the dual eligible world. And 

we all know who those patients are. They are readily identifiable. 

They don’t move around a lot. They stay in one place. So wouldn’t 

that be a population that would be amenable to a different type of 

practice model? You talk about wanting to change the payment 

structure for everyone and maybe that is not necessary. 

Maybe we could look at this defined population and say we want 

to do a better job for these patients. And we know that they are 

not served by having to go from doctor to doctor to doctor to doctor. 

Why don’t we put one person in charge? We used to have a saying 

when I was in practice too many doctors means no doctor and that 

is exactly true. So if you had one person who was directly accountable to that arguably very complicated and very ill and multiplemedical-conditions patient, if you have one doctor, don’t you think 

you would get a better return on investment for that money that 

you spend? 

Mr. GUTERMAN. Dr. Burgess, I agree with everything you said, 

and I think that is the underlying philosophy of the medical home 

model. I think it is the underlying philosophy of the Accountable 

Care Organization. And I think, you know, what this represents is 

250 

that I think we all agree that the healthcare system needs to work 

better to provide care, especially for those with multiple chronic illnesses and the people who are sickest. And I think whatever approach you take, whether it is a—— 

Mr. BURGESS. But, sir, that is not new information. You said you 

have been working on this for 30 years. Where is the beef? 

Mr. GUTERMAN. The medical home model has been one that has 

been talked about and tried in limited, you know, scale, but—— 

Mr. BURGESS. And yet, I am the kind of doctor who was providing that type of care and you basically ran me out of business—— 

Mr. GUTERMAN. Right. 

Mr. BURGESS [continuing]. By not paying the freight, by not paying for these activities. 

Mr. GUTERMAN. The problem is that in our current fee-for-service 

system, people get punished for doing the kind of care that you 

would like to provide. And, you know, we hear people from various 

systems around the country, you know, that can enumerate the 

way they get punished for doing good things for their patients, but 

under the current payment system, those good things are rewarded 

with lower payment, so in a sense they are punished for doing 

what they would like to do for their patients. So I think we can 

agree—and maybe this is a platform for kind of collaboration, you 

know, across the aisle that we agree, I think, on the kind of care 

we would like to see and we agree that getting to that kind of care 

is what we really need to solve the problems that we are all concerned with. 

Mr. BURGESS. And I would just submit the obstacle so far has 

been CMS. They haven’t been a facilitator; they have been an obstacle. But I welcome the opportunity to work with you on this. Obviously, I have got some discussions going on with other people and 

I would welcome the Commonwealth Fund being part of that discussion as well. 

Thank you, Mr. Chairman. I will yield back. 

Mr. PITTS. The chair thanks the gentleman. Mr. Pallone for a follow-up? 

Mr. PALLONE. Thank you, Mr. Chairman. I am going to ask Dr. 

Guterman. You know, before I was asking you questions about how 

the Affordable Care Act would save money even without IPAB, and 

I believe very strongly that it saves money, particularly for not only 

the government but also for beneficiaries as opposed to the Republican budget, which I think is going to cost, you know, Medicare 

beneficiaries a lot more. So I just want to ask you to compare and 

contrast the Affordable Care Act’s approach to saving money and 

that of the Republican budget, particularly as beneficiaries are affected if you would. 

Mr. GUTERMAN. Let me start by adding something I omitted in 

my answer to your previous question and that is the Patient-Centered Outcomes Research Institute, which is a public-private organization that is charged with producing evidence to help make better clinical decisions in the healthcare sector, which I think can 

only help. It is not like those decisions aren’t being made every day 

millions of times. It is just they are being made with too little information. But I guess rather than contrast the two approaches, I 

251 

would say that under both approaches the problem is not solved 

unless we change the way healthcare is delivered and paid for because in the end you need to control the cost of healthcare and you 

need to control the way healthcare is delivered and the way it is 

targeted at the people who need it most and providing the services 

that benefit people most. 

And if you provide people with premium support, if the cost of 

healthcare isn’t controlled, they are going to find themselves more 

and more left out of the market for health insurance. If you just 

rely on cutting payments alone, you are going to make access more 

difficult for Medicare beneficiaries. If you address broader issues either through the IPAB or other mechanisms that are already in 

place with the Affordable Care Act, then I think you achieve what 

you want to achieve and then, you know, even perhaps make the 

Independent Payment Advisory Board unnecessary because you 

have controlled costs already and met their targets. 

Mr. PALLONE. Thank you. 

Mr. PITTS. Dr. Cassidy, you came in and missed the first round. 

Do you have questions? 

Mr. CASSIDY. Yes. 

Mr. PITTS. You are recognized for 5 minutes. 

Mr. CASSIDY. I apologize for having to leave. 

Dr. Guterman, I kind of had a schizophrenic approach to your 

testimony. Part of it I liked and part of it I am thinking what is 

the guy thinking? So the part that I liked is where you mention 

that we have to take a global view. History clearly shows that 

Medicare and Medicaid will do a downward pressure upon their 

cost and shift that to the private sector. I mean there is no mystery 

about that. I could almost stipulate that. There is a good article by 

one of the—maybe McKinsey, maybe somebody else about the hydraulic effect. The more Medicare, the more Medicaid you have in 

your book of business, the greater the upward impact upon costs 

for small businesses and the private health insurance market. 

So what gives you kind of encouragement that IPAB—which is 

really just looking after the Medicare book of business—will not 

succumb to that same temptation that Medicare always has and 

Medicaid specifically really has to shift cost to the private sector? 

Mr. GUTERMAN. Let me first—the term cost-shifting is often misunderstood partly because it assumes that the cost of healthcare is 

somehow immutable and can’t be reduced by better examination of 

what is appropriate to—— 

Mr. CASSIDY. I will give you that we can do a better job with 

what we have, but if Medicaid pays 60 percent of cost, then clearly 

there has to be a makeup someplace. 

Mr. GUTERMAN. Well, but that depends on whether you think 

costs are right. But beyond that, what I think is important to think 

of IPAB in the context of is the broader set of tools that are available to us, that I think there is more really unprecedented push to 

use to address the problems that we are facing now. And I think, 

you know, looking at IPAB alone—IPAB alone is not going to solve 

the problem. But IPAB is in the context of a broad array of policies 

that are on the table that may in fact be able to solve the problem. 

And it is also part of a process that I think the Congress has to 

be involved in. You know, sometimes—— 

252 

Mr. CASSIDY. Let me pause you there because I have limited 

time. 

Mr. Roy, what would you—I think we know where Dr. Guterman 

is going. What would be your thoughts? 

Mr. ROY. Yes, so I think you actually, Dr. Cassidy, bring up the 

most important point around this faulty idea that somehow Medicare expenditures are growing more slowly than private sector because what happened is Medicare shifts costs to private insurers, 

so if I have two Chevys that I paid $10,000 each for and the government comes to me and says I am buying that one Chevy from 

you for $5,000 and I lose 5,000 on that, maybe I charge the other 

guy 15,000 to make it up. And that is effectively what cost sharing 

is. It is more complicated than that in reality, but that is basically 

what Medicare does. Medicare cheats by underpaying for care and 

restricting access. And these are the problems that, unfortunately, 

have a significant—what IPAB is all about. 

Mr. CASSIDY. Dr. Gottlieb, your thoughts, please? 

Mr. GOTTLIEB. I think IPAB has no alternative but to try to 

squeeze payments in the short term because anything it could do 

to try to fundamentally reform payment systems or the way care 

is delivered isn’t going to score well at CBO. They are going to 

have to achieve immediate savings. 

I think one of the larger problems here is that a lot of the reforms in the Accountable Care Act and a lot of things we are talking about here today are predicated on changing the delivery 

model, getting better coordination of care. Those require investments in innovation and how care is delivered, and the only that 

providers, hospitals, doctors are going to invest money to better coordinate care is if they can earn an above-market rate of return for 

a sustainable period of time on their invested capital. And the 

problem is that the administration’s legislation, the regulations 

don’t allow for that. And that is why is you are seeing the adverse 

reaction to the regulations on the Accountable Care Organizations. 

I could tell you I have seen a lot of business plans floated with 

venture capitalists on creating new Accountable Care Organizations or services that would provide services to the Accountable 

Care Organizations. I haven’t seen a single one yet funded for that 

precise reason that the presumption out there is that you are not 

going to be able to earn a return on capital. If you do earn an 

above-market rate of return on capital for any length of time, it is 

going to be regulated. If you continue to earn an above-market rate 

of return, it is going to be taxed. And if you continue to earn it 

after it is taxed, you are going to be criminalized. 

Mr. CASSIDY. But on the other hand, if you don’t, you will be subsidized. 

Mr. GOTTLIEB. And when it is gone, you subsidize it. 

Mr. CASSIDY. And that is without saying that, again, as I mentioned earlier, the New England Journal of Medicine article that 

reflected upon the 10 Accountable Care Organization pilot studies, 

places specifically chosen so that they would be more likely to succeed did not. 

Now, Dr. Guterman, you must have some thoughts about that. 

Mr. GUTERMAN. In fact, as I was saying when we started up 

those demonstrations, and in fact I would describe that demonstraVerDate Aug 31 2005 10:40 May 24, 2012 Jkt 037690 PO 00000 Frm 00258 Fmt 6633 Sfmt 6633 F:\112-00~1\112-07~3\112-73~1 WAYNE
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tion as a rousing success for several reasons. One is that half of 

those 10 sites were able to achieve measurable savings according 

to the rules of the demonstration and received bonus payments for 

saving Medicare millions of dollars compared to the targets that 

they were working under. 

Mr. CASSIDY. Now, in fairness, it was a 3-year demonstration 

project and I think 3 did and it was not every year and several did 

not. 

Mr. GUTERMAN. But in the last 3 years there were 5 of them. 

And all of the sites achieved noticeable increases in the quality of 

care, which perhaps was even more important, certainly without 

spending more money. And there were some—as there will be—and 

I think something that the IPAB or any other mechanism is going 

to have to deal with is compared to what? And how you deal with 

getting either CBO scoring or the Office of the Actuary in CMS to 

agree that a particular project is going to save money. But that is 

going to have to be dealt with. That is a methodological issue that 

I think needs to be dealt with. 

Mr. CASSIDY. I am out of time. I yield back. Thank you all. 

Mr. PITTS. The chair thanks the gentleman. Did you—— 

Mr. BURGESS. But Mr. Chairman? 

Mr. PITTS. Go ahead. 

Mr. BURGESS. Did you rule on my unanimous consent request for 

Senator Cornyn’s letters from Scott & White? 

Mr. PITTS. Without objection, so ordered. 

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Mr. BURGESS. Thank you. 

Mr. PITTS. Thank you and thank you to the panel. Very informative. I appreciate your patience. 

We will now change panels to a fourth panel, and I will introduce 

the fourth panel as they come to the table. 

Joining us on our fourth panel is Dr. Alex Valadka, a neurosurgeon. He is the chief executive officer at the Seton Brain and 

Spine Institute, Austin, Texas. He represents the Alliance for Specialty Medicine. Secondly, we have Mary Grealy, who is the president of the Healthcare Leadership Council in Washington, D.C. 

Then we have Dr. Jack Lewin, Chief Executive Officer of the American College of Cardiology. And fourthly, we have Teresa Morrow, 

who is the cofounder and president of Women Against Prostate 

Cancer. 

Your written testimony will be entered into the record. We ask 

that you summarize your opening statements in 5 minutes each. 

Dr. Valadka, you may begin your opening statement. 

STATEMENTS OF ALEX B. VALADKA, REPRESENTING THE ALLIANCE OF SPECIALTY MEDICINE; MARY R. GREALY, PRESIDENT, HEALTHCARE LEADERSHIP COUNCIL; JACK LEWIN, 

CHIEF EXECUTIVE OFFICER, AMERICAN COLLEGE OF CARDIOLOGY; AND TERESA MORROW, COFOUNDER AND PRESIDENT, WOMEN AGAINST PROSTATE CANCER 

STATEMENT OF ALEX B. VALADKA 

Mr. VALADKA. Thank you, Chairman Pitts, Ranking Member 

Pallone, members of the subcommittee, for allowing me to testify 

about the Independent Payment Advisory Board. My name is Alex 

Valadka. I am a practicing neurosurgeon from Austin, Texas, and 

as far as I can tell, I am the only practicing physician who has the 

privilege of testifying before you here today. 

I am pleased to be here today on behalf of the Alliance of Specialty Medicine which was founded in 2001 with the mission to develop sound federal healthcare policy that fosters patient access to 

the highest quality specialty care and improves timely access to 

high-quality medical care for all Americans. As advocates for patients and physicians, the alliance and its members welcome the 

opportunity to contribute to the ongoing debate regarding IPAB, or 

as we think about it, the Impacts Patients Adversely Board. 

We are deeply concerned about the unintended consequences 

that will result from the establishment of IPAB. We oppose its creation and we are now urging Congress to immediately act to repeal 

IPAB. Now, I realize that by this time in our IPAB-athon here 

today, you have had an earful and I don’t to be overly repetitive, 

but I do want to make you aware that America’s specialty physicians have numerous concerns at both the concept of IPAB and its 

structure. 

First and foremost, the alliance believes that under the IPAB, access to specialty care will be severely limited due in part to the additional payment cuts that it will impose on physicians. Medicare 

physician payments are already well below market rates, as you 

heard earlier today, and they continue to be subject to deep cuts 

as a result of the flawed SGR formula. Cuts to physician reimVerDate Aug 31 2005 10:40 May 24, 2012 Jkt 037690 PO 00000 Frm 00261 Fmt 6633 Sfmt 6633 F:\112-00~1\112-07~3\112-73~1 WAYNE
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bursement under IPAB will only exacerbate those already imposed 

on physicians as a result of SGR cuts and other cuts that are going 

to occur each year as part of the Medicare physician fee schedule 

for things like problems with the electronic health record, value of 

base quality modifiers, meaningful use requirements, and things of 

that type. 

Our physician survey data demonstrates that these cuts, including those imposed by IPAB, may ultimately force specialists out of 

the Medicare program severely threatening Medicare access to its 

beneficiaries to innovative therapies and quality of care. And to 

echo something that was said earlier today, participation in Medicare is not on or off. Many physicians still continue to participate 

but they have to limit the number of Medicare patients they can 

see in their offices or otherwise provide access to. 

Our second concern is that IPAB lacks accountability and sets a 

dangerous precedent for overriding the normal legislative process. 

As drafted, the IPAB has little if any accountability to the Medicare beneficiaries whose healthcare will be affected by its decisions. 

And yet its recommendations will have the force of law if Congress 

fails or chooses not to act. The alliance maintains that Congress 

should be the entity to legislate healthcare policy, not an independent board. 

An additional concern is that the limited transparency of IPAB 

proceedings severely limits congressional oversight of the Medicare 

program and replaces the transparency of hearings like this one 

with the less transparent process overseen by the executive branch, 

not the legislative branch. 

The IPAB statute also provides fast-track procedures for IPAB 

proposals, which will automatically become law unless Congress 

can act very quickly to amend the proposal. Congress already faces 

significant challenges in moving legislation through the regular 

legislative process and we seriously doubt its ability to jump 

through all the procedural hoops within the required 7 months to 

override IPAB recommendations. 

Although its proponents argue that the IPAB is critical to holding down the growth in healthcare spending, providers representing nearly 40 percent of Medicare expenditures, including 

hospitals and nursing homes, are exempt from the reach of IPAB 

for several years. We agree with the CBO that this would place 

greater pressures to achieve saving on physicians which, as I previously noted, will ultimately curtail seniors’ timely access to specialty care. 

Finally—and again as discussed earlier today—the process for 

making appointments to the IPAB isn’t balanced because appointments are made solely by the President. This structure also ensures that the board will have inadequate expertise since it fails 

to include practicing clinicians like me who can draw from firsthand experience when considering how proposed recommendations 

could impact the delivery of healthcare for both the patient and 

provider perspective. 

Although the alliance recognizes the need to hold down the 

growth of Medicare costs, the IPAB is simply the wrong way to go. 

But the more than 100,000 physicians represented by the alliance 

reiterate our pledge to work with Congress to identify more approVerDate Aug 31 2005 10:40 May 24, 2012 Jkt 037690 PO 00000 Frm 00262 Fmt 6633 Sfmt 6633 F:\112-00~1\112-07~3\112-73~1 WAYNE
257 

priate ways to achieve this goal. I ask that you make the same 

commitment and work with the medical community to meet the 

challenges facing our healthcare system and not leave these very 

important decisions to a group of 15 unelected and largely unaccountable individuals. 

Mr. Chairman, thank you again for allowing the alliance to testify, and I would be happy to answer any questions. 

[The prepared statement of Mr. Valadka follows:] 

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

Grealy for 5 minutes for an opening statement. 

STATEMENT OF MARY R. GREALY 

Ms. GREALY. Chairman Pitts, Ranking Member Pallone, members of the subcommittee, on behalf of the members of the 

Healthcare Leadership Council, I want to thank you for the opportunity to testify on the ramifications of the Independent Payment 

Advisory Board, or IPAB, for patients and the U.S. healthcare system. 

Now, already today you have heard a number of perspectives on 

IPAB. While I request to submit my full testimony for the record, 

I would like to briefly share the point of view of HLC members who 

are chief executives of the Nation’s leading healthcare companies 

and organizations. The views I express today reflect the conclusions 

of hospitals, academic health centers, insurers, pharmaceutical and 

medical device innovators, distributors, pharmacies, and other sectors within our healthcare system. 

Mr. Chairman, we fully agree that it is imperative to make Medicare a more cost-efficient program, that its current spending 

growth rates are unsustainable. The question is how to address 

this challenge in a way that strengthens and does not undermine 

the accessibility, the affordability, and quality of healthcare for 

Medicare beneficiaries and for all Americans. 

Now, there are different approaches available to Congress in pursuing this objective. On one hand, you have the direction embodied 

in IPAB to simply slash expenditures whenever spending exceeds 

a certain arbitrary level. Now, we can talk all we want about the 

expertise of those who conceivably would be serving on IPAB, but 

those credentials are largely irrelevant. IPAB isn’t designed to develop meaningful long-term reforms to strengthen the value of the 

Medicare program. Rather, its mandate is to achieve immediate 

scorable savings. 

Now, according to analysis from the Congressional Budget Office 

and the Kaiser Family Foundation, this imperative to make immediate reductions means that IPAB’s course of action will likely 

focus on reducing payments to providers. The impact of this action 

is easy to predict. Today, as we have heard, an increasing number 

of physicians are restricting the number of Medicare patients that 

they see in their practice because of low payment rates. According 

to a survey of the American Medical Association’s members, that 

number includes one of every three primary care physicians. 

Now, if IPAB is expected to cut the payment rates to even lower 

levels, then we will almost certainly see more physicians unable to 

treat Medicare beneficiaries and access will become a more critical 

issue. With those 80 million baby boomers entering the Medicare 

program at an average of 9,000 per day and the projected physician 

shortages already on the horizon, we could find ourselves on the 

verge of a healthcare access perfect storm that will hit seniors the 

hardest. 

These payment cuts also will likely result in greater cost-shifting 

to private payers and their beneficiaries. It should also be noted 

that IPAB will function much as that deadly robot in the ‘‘Terminator’’ movies. It will have a single-minded, relentless focus on 

268 

achieving its cost-cutting function. There is no statutory latitude to 

take into consideration unforeseen public health concerns that 

may, in the short term, necessitate more, not less, healthcare 

spending. It does not take into consideration the potential of new 

medicines and devices that may have high upfront cost but that 

will reduce Medicare spending in the long run. 

Now, there is no question that Congress has more flexibility than 

the IPAB in being responsive to healthcare’s circumstances, capabilities, and needs and will certainly be more responsive to public 

concerns than an unelected board ever will be. There are far more 

preferable approaches to making Medicare more cost-efficient. 

There are multiple provisions, for example, as we have heard 

today, within the Patient Protection and Affordable Care Act that 

are focused on moving away from the fee-for-service model and 

aligning incentives to reward providers for high-quality cost-effective care. We should give these reforms an opportunity to work before we think of turning to an approach as extreme as the IPAB. 

Also, throughout the country, private-sector healthcare providers 

are demonstrating innovative ways to generate better health outcomes with less cost. We have documented many of these successes 

in our HLC value compendium, which we provided to CMS and I 

would like to submit for the record. 

Mr. Chairman, thank you again for this opportunity to present 

our views. 

In summary, the members of the Healthcare Leadership Council 

believe that the IPAB mandate and inherent inflexibility will inevitably result in reduced healthcare access for seniors. We need, instead, to turn to payment and delivery reforms that will actually 

improve care while reducing costs. 

Thank you, and I will be happy to answer any questions. 

[The prepared statement of Ms. Grealy follows:] 

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

Lewin for 5 minutes. 

STATEMENT OF JACK LEWIN 

Mr. LEWIN. Thank you very much, Chairman Pitts, Ranking 

Member Pallone, and Vice Chair Dr. Burgess. It is a pleasure to 

be here today representing the American College of Cardiology, all 

of America’s cardiologists, and the many cardiovascular nurses and 

researchers. 

Cardiovascular medicine represents 43 percent of Medicare costs 

today, still, unfortunately the number one killer in America, yet we 

have made some real progress. In the last decade, morbidity and 

mortality for cardiovascular disease has gone down by 30 percent 

in the United States, and that is because of new imaging techniques, new procedures, new therapeutics, new approaches to prevention, but also because for the last decade we have been able to 

take electronic tools, guidelines, performance measures, appropriate-use criteria and apply them closer and closer to the point of 

care to measure best evidence and get the best results reducing unnecessary spending and activities. 

The Door-to-Balloon Campaign is one approach where we have 

been able to speed the treatment of heart attacks in hospitals 

through system improvement using the data we collect in the registries we have in 2,500 U.S. hospitals. We have reduced the variation for heart attack treatment by a factor of 3, the length of stay 

from 5 to 3 days, the costs by 30 percent across the United States 

just in the last 3 to 4 years. Unbelievable. 

But here is the thing. We got no reward for that, no incentives 

for that. It happened because we believe in it. The IPAB, as proposed, is going to fail. Its price controls won’t work. It is a mechanism that represents the past, not the future. And we are very concerned about that. In fact, you know, we probably ought to get rid 

of the existing flawed price-control mechanism, the SGR that you 

have on the books right now. It hasn’t worked very well, has it? 

We get rid of that one before we launch the next one, please. 

We need an immediate and different approach or a very different 

IPAB to bend the cost curve. In the last 40 years, amazingly 

enough, the healthcare costs have gone up, you know, multiples of 

the GDP 40 years in a row. This is really amazing. If we got the 

GDP—if healthcare costs were GDP plus 1 percent, the U.S. national deficit would go away in 20 years. So, you know, it is a patriotic kind of thing calling for me at least for the profession of medicine, physicians, hospitals, and others to get on this. We really 

have to bend the cost curve. And can we do it? Yes, we can. If we 

get the unnecessary spending out of the system, we can get this 

done. 

Now, I think to do that we have got to go back to using those 

tools at the point of care, the guidelines, the appropriate-use criteria. These measure not only quality but for appropriate use, effectiveness in terms of efficiency and spending, getting the right test 

the first time, getting the right procedure the first time, et cetera. 

We can now measure comparative outcomes. We couldn’t do that 

10 years ago. We didn’t have the electronic means to do that. We 

couldn’t tell doctors and hospitals how they are doing as to whether 

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they are spending the money efficiently, providing patients with 

the best care. Now, we can. 

So let us provide the incentives for consistent best evidence at 

the point of care, let us systematically reduce variation, get rid of 

the unnecessary tests and procedures, unnecessary admissions and 

costs. Let us use that kind of a price-control approach. That is not 

the IPAB, folks. If we want to IPAB to work, it is going to have 

to be so radically modified to do the following: it has got to develop 

incentives for doctors and hospitals to reward quality and not volume. Setting price controls on volume is not going to solve our 

problem. We already know that. It needs to apply to healthcare sectors, not just the doctors, and wait a few years and add the hospitals later. It needs to be flexible to attract people who really understand the healthcare system and are in it and see it from various perspectives. And it is currently designed so that it can’t do 

that in terms of the 15 members it is going to attract to be fulltime parties as it is designed now. 

So, you know, we are committed to the cause of the IPAB. We 

think its purpose is absolutely right on. We believe in that purpose. 

We see it as, in fact, a national kind of patriotism. Let us compete 

in a global economy and get healthcare costs down without destroying innovation in healthcare and without destroying patient care 

itself. 

So let us rethink the IPAB or amend it so that it can achieve the 

kinds of targets that will provide viable Medicare—well, the targets 

for Medicare spending that will keep the healthcare system viable 

but that won’t stifle innovation and won’t harm patient care. 

Thank you very much. 

[The prepared statement of Mr. Lewin follows:] 

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

Morrow for 5 minutes. 

STATEMENT OF TERESA MORROW 

Ms. MORROW. Thank you. I would like to thank Chairman Pitts 

and Ranking Member Pallone and the committee for holding this 

important hearing today and I appreciate the opportunity to submit my testimony on a topic that will definitely have significant 

implications on the lives of thousands of men, women, and families. 

My name is Teresa Morrow, and I am cofounder and president 

of Women Against Prostate Cancer. Our mission is to unite the 

voices and provide support for the millions of women affected by 

prostate cancer. As healthcare leaders of the household, the role 

that women play in all phases of prostate cancer from preventative 

screenings to treatment and follow-up care is critical. 

As you know, prostate cancer, as with any cancer, impacts the 

entire family. Our own cofounder, Betty Gallo, experienced the impact of this firsthand when her husband and your former colleague, 

Representative Dean Gallo, was diagnosed with prostate cancer in 

1992 and subsequently died from the disease in 1994. Since his 

passing, many advancements in treatment and access to screenings 

and quality healthcare have saved the lives of thousands of men diagnosed with prostate cancer and fewer families have to suffer the 

loss of their loved ones as the Gallo family did. 

We are here today because we are concerned about the effect 

that implementation of the Independent Payment Advisory Board 

will have on Medicare patients and families, including the large 

number of seniors that are diagnosed with prostate cancer each 

year. We share your concerns for more sustainable healthcare costs 

but do not believe that IPAB is the best way to achieve this goal. 

We believe that IPAB will have a negative impact on patient access to quality care. IPAB’s power to dramatically cut payments to 

healthcare providers and physicians who provide services to beneficiaries will likely result in fewer providers being willing to accept 

new Medicare patients and limiting senior’s access to quality providers. We are concerned that IPAB could ultimately limit access 

to certain treatments or medications. While IPAB may be specifically prohibited from rationing care, reduced payments for certain 

medical services and providers could lead to the unintended consequence that beneficiaries should have access to certain treatments and therapies but not to others. 

As a prostate cancer organization, we are particularly concerned 

that patients may not have access to new and innovative therapies 

to treat cancer that can ultimately improve and save lives. Treatment decisions should be made between a healthcare provider and 

a patient and his or her family and not be limited by an unelected 

board. 

I recently spoke with a prostate cancer patient named Doug 

Magill from Northeast Ohio, and when he was diagnosed with prostate cancer, he began his quest to determine which treatment to 

pursue. He did all the things an informed patient would do—got a 

second opinion, spoke with other patients, family and friends, and 

he did a lot of research. Ultimately, he chose to travel across the 

country to Loma Linda University Medical Center to receive proton 

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radiation therapy. He chose proton therapy because of his fear of 

the side effects such as impotence and incontinence that other 

treatments may cause. 

Doug expressed his concern to me that an entity like IPAB may 

have restricted his right to choose his treatment. By limiting his 

access to certain providers, he may have been forced to choose surgery instead of proton therapy and possibly left incontinent and impotent for the rest of his life. 

Like Doug, each prostate cancer patient is unique and that 

should come into play when determining a treatment path. Patients and providers should have the right to choose what is best 

for them. 

Another negative impact to seniors will be IPAB’s requirement to 

achieve savings in 1-year periods. This means that the focus will 

largely be on cutting payments and other short-term savings rather 

than on long-term savings and reforms that could save money or 

help patients avoid unnecessary care in the future. 

More emphasis should be placed on prevention. Catching health 

problems in their early stages while they are still treatable and 

preventable is the best way to ensure that seniors stay healthy and 

incur less expense to Medicare in the long run. More emphasis 

should be placed on participation in benefits like the Welcome to 

Medicare physical. Currently, less than 10 percent of those eligible 

to participate in this screening do so even though it can serve to 

provide guidance for seniors’ health maintenance as they age. 

Finally, we are concerned about the lack of oversight of IPAB. 

The board has the power to change laws previously enacted by 

Congress without actually needing congressional approval. Furthermore, the Secretary’s implementation of IPAB’s recommendations 

is exempt from judicial and administrative review. 

We are also troubled that there is no patient representation on 

the board and that IPAB is not required to hold public meetings 

where the voices of patients, caregivers, and families can be heard. 

Important healthcare decisions that can dramatically impact patients will be made by an unelected board without accountability 

to the public. 

In conclusion, I would like to thank the committee and just reiterate that while we agree that healthcare costs do need to be 

reigned in, we do not believe that IPAB is the right way to do so. 

Thank you. 

[The prepared statement of Ms. Morrow follows:] 

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Mr. PITTS. The chair thanks the gentlelady and thanks the panel 

for your testimony. We will now begin questioning and I will recognize myself for 5 minutes for that purpose. 

Dr. Valadka, you state that the IPAB as it has been described 

in statute will simply ratchet down costs in the absence of adequate clinical expertise or the research capacity to examine the national and regional effects of proposed recommendations to ensure 

patients are not unduly impacted. Are you concerned that the 

IPAB’s mandate to cut spending in the short-term will undermine 

longer-term improvements to Medicare and the healthcare system 

in general? Would you elaborate? 

Mr. VALADKA. Yes, thank you for the question. 

One aspect of this which has not been addressed much this 

morning is the fact that Medicare not only funds a lot of practitioners in the private sector but also is a huge contributor to medical schools and other places that do research. And that margin is 

getting thinner and thinner. As someone who spent over 12 years 

as a medical school faculty member, I can attest to that firsthand. 

So if Medicare reimbursements to all the physicians participating 

in medical schools are going down, that leaves very little excess 

room for research to develop new treatments, as well as for education of medical students and residents who are going to be the 

next generation of practitioners. And those are the most fertile 

source for new innovations, ideas coming forward for the several 

decades following their training. 

And moving to people who are already in practice, there is a lot 

of very clever people practicing out there who come up with better 

ways to do a procedure or treat a patient or to treat a disease. But 

again, if there is less excess capital flowing into their practices, 

they are not going to have the luxury of that time to develop new 

and better treatments. 

Mr. PITTS. Thank you. 

Ms. Grealy, many if not most healthcare analysts think that 

meaningful health reform will occur over a number of years. Are 

the short-term scorable proposals that the board is likely to have 

to make consistent with meaningful health reform in your opinion? 

Ms. GREALY. Well, actually, I think it could be a barrier to that 

long-term meaningful reform. I think as you have heard among 

this panel that things that could save Medicare money in the long 

run may require a capital investment up front. We look at the current development of Accountable Care Organizations. It requires 

investment. As Dr. Lewin has pointed out, we need to have health 

information technology as an important tool. Again, these are 

things that in the short-term could increase spending, and this idea 

of having a year-by-year, 1-year budget reduction requirement I 

think really could impede some of those longer-term savings that 

would improve quality as well as reduce the cost of care. 

Mr. PITTS. Thank you. 

Dr. Lewin, in your testimony you state that ‘‘until the SGR is replaced, you cannot support implementation of the IPAB.’’ Does that 

mean that if the SGR is replaced, you would then support the 

IPAB? 

Mr. LEWIN. Thank you for the question, Mr. Chairman. 

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No, I think the SGR needs to be replaced and that is going to 

be exceedingly difficult as you well know because of the accumulated debt that it has accrued. 

I think that we need something different from the IPAB and the 

SGR, something that is not a price-control approach. In fact, let us 

move away from the past and really innovate in health system reform to a new future where we start rewarding for better quality, 

more efficient care rather than the volume of care. And so, you 

know, we need to get on this now. We may not get the SGR fixed 

for years as far as I know. So we need to develop a new mechanism. 

And sir, the IPAB, while the goal is right, the method is wrong. 

And so we will work with you to develop something that really will 

bend the cost curve, really will achieve those spending targets but 

to do so in a fashion that could actually work. 

Mr. PITTS. Thank you. 

Ms. Morrow, how could the IPAB affect the development of 

newer treatment modalities for prostate cancer as they are developed in the future? Does the IPAB have the potential to limit care 

for future patients as well as current patients in your opinion? 

Ms. MORROW. Yes, we do believe that, you know, IPAB is 

charged to reduce excessive growth rates and Medicare spending 

and, you know, that could be defined as reducing payments for 

new, high-priced drugs and yes, we are very concerned about that 

taking prostate cancer. 

Mr. PITTS. Thank you. The chair yields to Mr. Pallone for 5 minutes for questions. 

Mr. PALLONE. Thank you, Mr. Chairman. 

I wanted to ask Dr. Lewin one of the many ideas put into place 

by the Affordable Care Act was the Center for Medicare and Medicaid Innovation. It is a new effort by CMS to research and develop 

ideas to save money and improve quality in Medicare and Medicaid 

more quickly than before. Last week, the Innovations Center announced projects to improve the coordination of care for dual eligibles—for instance, in cooperation with the States. Do you believe 

that the Innovations Center is a good idea? Would you just comment on it and why you might think that it is a good idea? 

Mr. LEWIN. We heartily applaud the Innovation Center idea. We 

think that this is exactly what we need, a part of the CMS agency 

that really starts rewarding and funding innovation and new idea. 

I mean, we want to continue to have the best healthcare for all 

people in this country, including those who don’t have access right 

now, and we want to continue innovating. But we are going to have 

to cut spending. Fortunately, you know, we can do this because 

there is so much waste in the current healthcare system. 

The Innovation Center moving toward the triple aim—things 

that improve health, improve healthcare, and lower costs at the 

same time are possible. The Door-to-Balloon, the speeding up of 

heart attack treatment is an example. And I could give you numerous more that we are working on in cardiology. So if we could start 

funding models and show people out there what best practices are 

and then diffuse those across the healthcare system with a new 

kind of payment incentive process, I think we can solve this probVerDate Aug 31 2005 10:40 May 24, 2012 Jkt 037690 PO 00000 Frm 00300 Fmt 6633 Sfmt 6633 F:\112-00~1\112-07~3\112-73~1 WAYNE
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lem, have the best healthcare system in the world, and do it at 

GDP plus 1 percent. 

Mr. PALLONE. Thank you. 

Did you want to comment, Ms. Grealy, on the Innovation Center 

as well? 

Ms. GREALY. Yes, I think this is a real opportunity for a publicprivate partnership. I think Jack has given some great models of 

what is being done in the private sector now against the financial 

incentives in the current Medicare program. They are doing the 

right thing despite not really getting rewarded for it. The value 

compendium that we have submitted will show you other examples 

of that. So I think it is an opportunity for the Medicare and Medicaid programs to learn from the private sector and to test pilot 

these things as opposed to this board of 15 people coming up with 

a number, making some recommendations that perhaps haven’t 

even been test piloted. And I think that is the real advantage of 

having the Center for Innovation. 

Mr. PALLONE. Thank you. I was going to ask you also, Ms. 

Grealy, this is a quote from the CBO analysis of the Republican 

plan for Medicare and Medicaid in their budget. It says, ‘‘Under the 

Republican budget proposal, the gradually increasing number of 

Medicare beneficiaries participating in the new premium-support 

program would bear a much larger share of their healthcare costs 

than they would under the traditional program, and that greater 

burden would require them to reduce their use of healthcare services, spend less on other goods and services, or save more in advance of retirement than they would under current law.’’ 

Now, in your testimony, you said that ‘‘IPAB has the potential 

to cause serious harm to Medicare beneficiaries’’ but, you know, I 

would like to know what your views would be of the Republican 

budget plan and its effect on beneficiaries. Do you agree with the 

CBO’s characterization of the Republican plan? 

Ms. GREALY. The Healthcare Leadership Council for over a decade has supported the concept of moving to a premium-support 

model for the Medicare program to give seniors more choice, to 

have those private plans competing, much as they do in the Medicare Part D program. I think what we need to do is to look at the 

premium-support model. There are many components to it. We 

probably would recommend using a different inflation factor. Much 

like Alice Rivlin, we would probably recommend maintaining for a 

period of time the traditional Medicare program. So I think there 

is a lot of merit to the concept. I think there are some modifications 

that we would make to the proposal that was put forward. 

Mr. PALLONE. Thank you. 

Let me ask—I guess I have another 50 seconds here. I wanted 

to ask Ms. Morrow, you know, again you made your concerns about 

IPAB clear but as you know, this was developed as a backstop 

mechanism to address to growing costs of healthcare. In the Republican approach in the budget is very different. They would simply 

slash existing programs. They would end Medicare as we know it, 

and they would slash medical research. And I am concerned about 

the impact on medical research of the Republican budget. The NIH 

budget was actually cut under the continuing resolution for this 

year, and for 2012 it doesn’t look any better. If you would just comVerDate Aug 31 2005 10:40 May 24, 2012 Jkt 037690 PO 00000 Frm 00301 Fmt 6633 Sfmt 6633 F:\112-00~1\112-07~3\112-73~1 WAYNE
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ment on it. I mean I am just concerned where are we going with 

research with what happened with the CR and what is in the Republican budget for the future? 

Ms. MORROW. Yes, continuing research in cancer is extremely important to us and we do advocate for increased funding for research. And I am not familiar with everything that is in the Republican plan but, I mean, we will continue to support more increased 

funding for research. 

Mr. PALLONE. OK. Thank you very much. Thank you, Mr. Chairman. 

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

vice chairman of the subcommittee, Dr. Burgess, for 5 minutes. 

Mr. BURGESS. Well, thank you, Mr. Chairman. And I thank you 

all for being here. This has been an interesting—although, Dr. 

Valadka, you are correct that this was—what did you call it? The 

IPAB-alooza of—IPAB-ulous? 

Mr. VALADKA. IPAB-athon, but IPAB-alooza applies as well. 

Mr. BURGESS. I do so welcome the comments of all of you. I think 

they have been very helpful. 

Ms. Grealy, I hope that you will take some time and take the 

Secretary of Health and Human Services perhaps to lunch and explain to her what premium support actually is. You might even 

want to include Ranking Member Waxman in that discussion because he seems to have some difficulty and even the President of 

the United States required a little remedial education of the difference between a voucher and a premium-support system. 

Dr. Valadka, let me just ask you, we hear a lot about the IPAB. 

We have heard a lot about it today, but I get the general impression that doctors and patients and patient-advocacy groups do not 

support the IPAB. Is that a fair assessment, and if that is fair, why 

do you suppose that is? 

Mr. VALADKA. To borrow a line from a high-ranking member of 

this body, when the healthcare debate was going on a couple of 

years ago, you have to pass the bill to find out what is in it. 

Mr. BURGESS. Now, we know. 

Mr. VALADKA. I have had that same conversation with many of 

my colleagues in the operating room and the ICU in the hallways 

where they don’t really quite know what IPAB is. And the more 

you talk to them and educate them, I don’t think anyone thinks it 

is a good idea. And I think it has been gratifying to see this started 

as a very obscure issue that only policy wonks knew about, and 

now I understand they get discussed in the New York Times, Wall 

Street Journal, CNN, mainstream media outlets like that. So I do 

think that the more people learn about it, the less they are going 

to support it. 

Mr. BURGESS. And I think that is in general true. 

Now, Dr. Lewin, you talked about repeal the SGR before you do 

the IPAB. I got to believe that really you are the membership of 

the American College of Cardiology would not support either of 

those control mechanisms. Is that correct? Now, the AMA did—you 

know, unlike Mr. Pallone, who voted for that bill, I voted against 

it. I thought the AMA was wrong to support it. What does your 

membership say? 

297 

Mr. LEWIN. Well, we certainly don’t have any affinity for the 

SGR. It clearly doesn’t work and it is too bad we didn’t deal with 

it 10 years ago, right? We all wish we had. But that said, I think 

the IPAB as it is currently designed we don’t believe will be effective in any way, shape, or form. It is going to be another price-control mechanism. So we would like to get on with the challenge that 

we have as a Nation of, you know, creating the healthcare system 

of the future that provides access to everybody, that continues to 

reward innovation and improve quality. And we think we need a 

different approach than the IPAB. 

Mr. BURGESS. Well, let me tell you the problem, though, because 

you reference the SGR and your pessimism of the SGR that anything meaningful will happen, and I actually—this here I am more 

optimistic that something can happen to the SGR than any time 

previous in my 9 years here. 

But here is the deal. You are exactly right. What if in 1998 someone had had the courage to say oh, this SGR thing is going to be 

a disaster in 10 years’ time and I want to fix it. We have that opportunity with the IPAB now. Once the IPAB begins that cumulative effect of, you know, this specious thing of a dollar saved, 

then there is going to be a CBO-directed cost associated with its 

repeal. And it won’t be too terribly long before that cost becomes 

a mountain too tall to climb just as the SGR is today. 

So yes, we got to kill one that is mature, which is the SGR, but 

the other one, we do need to get a handle on it before it ever gets 

out of the box. And I would say the time is now to repeal the Independent Payment Advisory Board, and I would encourage Mr. 

Pallone to join with us on that because once this thing gets away 

from you, it is Katy bar the door. It would be impossible to undo 

it. 

And I think honestly that is what the administration is banking 

on. They want to get this thing up and running and it is another 

method—but let us be honest, this thing was not about healthcare, 

never was. It is a tax bill, but bottom line, it is about control. They 

want to control you. They want to control Dr. Valadka. They want 

to control what you do. They want you to do only what they tell 

you you can do and they want to be able to tell you when to stop, 

don’t do anymore. That patient has had enough. That is where this 

thing is going. 

Ms. Morrow, let me just thank you for being here. I don’t have 

a question for you as relates to the IPAB on prostate cancer, but 

I do remember in the discussion of healthcare reform as it was 

going through, I read somewhere where some healthcare thinker 

said we will be able to tell if Congress was serious about reforming 

healthcare as to what they do with prostate cancer because the implication was we over-treat prostate cancer in the United States of 

America. However, recent studies comparing survival rates for 

prostate cancer in the United States versus Europe, it is like 99 

versus 77 percent. I would rather be here with all our faults than 

anywhere else in the world. Do you have any comments on that? 

Ms. MORROW. I have seen those same statistics and, you know, 

as far overtreatment, we strongly disagree with that term. You 

know, it is up to the patient. The doctor and the patient can have 

an informed discussion about the person’s prostate cancer and 

298 

whether it is going to grow and affect them in their lifetime, but 

the decision should be between the patient and the provider. 

Mr. BURGESS. And not the IPAB and the provider. 

Ms. MORROW. Exactly. 

Mr. BURGESS. Thank you. 

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

Cassidy for 5 minutes. 

Mr. CASSIDY. Dr. Valadka, a friend emailed me and said how 

come you don’t have a practicing physician on the panels, one passionate about our practices? And so I will have to email her back 

and say although I didn’t pick it, we have one. 

My question for you is that when you look at the CBO score that 

Mr. Pallone referenced, it says the reason that traditional Medicare 

scores less than a private insurance plan is that traditional Medicare pays physicians less. Indeed, the way CBO scored it is although they don’t assume the SGR cuts go through, they also have 

no inflation adjustment. Now, that has been the case since 2002, 

and effectively, Medicare is paying physicians significantly less now 

than they were in 2002, so much so that Richard Foster says that 

within 9 years Medicare will pay less on average than Medicaid. 

You are a practicing physician. Secretary Sebelius avoided answering this question every which way. But if Medicare is now paying 

less than Texas Medicaid, what will that do for access to services 

for those who have Medicare? 

Mr. VALADKA. In one word, cost-shifting. As we discussed here 

earlier today—— 

Mr. CASSIDY. Now, let me say this. You are saying that as a specialist who sees people coming through the ER and almost have no 

choice but to see the patient. So speak first as a specialist and then 

imagine what it would do for access to primary care. 

Mr. VALADKA. Well, as you well know, when patients come 

through the emergency room, we take care of them first and oftentimes we don’t even know their name. You know, they are in the 

computer as unknown, number something, we operate and take 

care of them and then later figure out who they are, who the family 

is, you know, if they have any resources. That is a hospital administration issue. But that is time that takes away from your practice. And as you know, time is a very precious thing. So you are 

going to have to make up the gap in other ways because you are 

going to have pay your secretary, your nurses, your—— 

Mr. CASSIDY. You have a fixed overhead? 

Mr. VALADKA. Absolutely. 

Mr. CASSIDY. Now, I know you are not primary care, but if you 

are primary care and you are spending 50 percent of your receipts 

on fixed overhead and you got a choice of which patients that you 

can afford to take—New York Times documented this very well 

with an oncologist in Michigan getting paid below cost by Michigan 

Medicaid at some point could no longer afford to take more Michigan Medicaid patients, would you accept that it is going to hurt access to primary care? 

Mr. VALADKA. Well, I think you used the word choice as to what 

patients are going to have to take, and I would quibble with you 

a little bit. You don’t have a choice. You have to take more patients 

with commercial insurance just to subsidize all of the activity you 

299 

are spending taking care of the patients with no insurance or Medicaid. 

Mr. CASSIDY. Or limit what you—now, in this case, if Medicare 

is paying less than Medicaid, you would now put the Medicare patient in the same boat if you will as that Michigan Medicaid cancer 

patient who could not find a provider? 

Mr. VALADKA. That is exactly right. 

Mr. CASSIDY. Yes. And again, in 9 years under the provision that 

CBO describes is saving money for traditional fee-for-service Medicare, we and Medicare as we know it because seniors will not be 

able to access care, that is a little—and you raised something, just 

kind of—I thought about it but the way you phrase it kind of ticked 

my mind a little bit. So IPAB can only cut among providers, physicians. 

Mr. VALADKA. Yes. 

Mr. CASSIDY. So really we could have a hole in the bucket for 

hospitals. There could be a hole in the bucket for hospitals with 

just an inordinate amount of cost going there, but physicians would 

have to make up the difference, correct? 

Mr. VALADKA. As it is now, yes, because hospitals have I think 

until 2018 or 2019. Yes. They are out of the loop. They kind of negotiated themselves out. I just can’t stress it enough—it is like a 

broken record—we have to do something different than this. We 

need to deal with the rising costs of Medicare. We can but we need 

help from Congress to do that with a different approach than this 

design. This isn’t going to work and if this is health reform, then 

let us start off and do something the right way and reward incentives for quality and efficiency and improved care. That we can do. 

We now have the tools to do that. We couldn’t have done that in 

the ’90s when health reform was proposed. We can do that now. 

And physicians want to do this. We still want—clinical judgments 

are still going to be important and we want to protect the patientphysician relationship in this process. 

Mr. CASSIDY. I like the way you emphasize the practicing physician’s role in controlling healthcare costs. I note in IPAB I don’t 

think you are allowed to continue to practice and still serve on the 

board, which gives me kind of pause. Wait a second. If the person 

who is in the mix, if she is the one who knows best how to do it 

but she is the one who, by statute, is not allowed to serve, it seems 

kind of odd. 

Mr. VALADKA. Certainly. And especially a full-time occupation to 

be on the board. We are going to attract people that are going to 

be retired people. So this is not the design for a system that is really going to innovatively improve Medicare. 

Mr. CASSIDY. There is a system designed by staffers, not by people involved in healthcare. 

I am out of time. I yield back. I thank you all. 

Mr. VALADKA. Thank you. 

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

first round. We will have one follow-up on each side. Dr. Burgess? 

Mr. BURGESS. Dr. Lewin, you referenced that setting price controls on volume doesn’t work, and I think we have seen that with 

the SGR rather eloquently. You reduce the amount you pay and 

you drive up volume because, as Dr. Cassidy pointed out, overhead 

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costs are fixed so you have got to do more if you are going to keep 

those overhead costs met and continue to earn a salary if you are 

at an individual or a small-group practice, which I was. 

Now, fee-for-service medicine gets a bad rap in all of this and we 

are told by all the great thinkers in healthcare that the fee-forservice system is the culprit. But really the culprit is the administrative pricing brought to us by the Center for Medicare and Medicaid Services and your specialty in particular. I mean, I have had 

deans of medical schools who are cardiologists come to me and say 

the big problem is the overutilization of our specialty, you know, 

Door-to-Balloon time studies that you have done, that is great and 

a great metric, but if these guys are accurate and more balloons 

are being done than are necessary, then it doesn’t matter that you 

do them quickly. It is still going to be a cost driver. And yet because of administrative pricing, we have favored that type of activity in the Medicare system. 

You know, you would ask yourself the big problem that everyone 

talks about is childhood obesity. You have got the First Lady working on that is her main cause. You would think that with childhood 

obesity under the raft of childhood diabetes that will follow that we 

will be churning up pediatric endocrinologists right, left, and center. And yet we turn them out a handful a year. And cardiologists 

know we turn out a lot. So as the leader of your professional organization, how are you proposing to deal with this? Forget SGR and 

IPAB for a moment. You guys have a responsibility here. 

Mr. LEWIN. Yes, you know, just as a quick aside with the tsunami of obesity and diabetes, you know, we won’t have enough cardiologists to deal with what is coming up in the future. But, you 

know, we really have the tools now to make sure that people who 

have chronic stable angina who are approaching the system for 

care don’t get a stent when it really wasn’t needed or don’t get bypass surgery where a stent would have been better or get to optimal medical therapy when the data shows the results will be better 

and they will have no risk of complications in the meantime. We 

have these tools, we have the science, but there are no incentives 

to apply them in hospitals across the country. 

We have incentives to reduce the use of implantable defibrillators 

for people for whom the science says shouldn’t have gotten them. 

We published it. We published our data. We have 100 percent— 

thanks to—Medicare requires the use of our registry. We have 100 

percent of the implantable defibrillator data in the United States. 

We pointed out 23 percent of them apparently were placed without 

the best guideline evidence being present. And we want to go 

around and educate everybody, but the incentives are not there to 

say to the hospitals and the doctors we are going to reward those 

who start to reduce that variation, not pay for the volume. 

Mr. BURGESS. Well, how will IPAB reduce that variation? 

Mr. LEWIN. It won’t. It will not. IPAB just has no way to do that. 

We need a different mechanism and that is payment incentives for 

improved quality and outcomes and efficiency. And you have to 

measure to manage. So you have got to have systems out there to 

give doctors and hospitals feedback, dashboards of feedback on how 

they are doing as compared to all their peers. When they have that 

information, they will change. 

301 

Mr. BURGESS. And Dr. Valadka, let me just ask you to, you 

know, you are the only practicing physician we have heard from all 

day. What about how does medical liability reform factor into what 

Dr. Lewin was just talking about? 

Mr. VALADKA. I think liability reform is a huge way to try to 

bring down costs in the healthcare system. Now, that is not part 

of IPAB. Of course, we would beginning far afield. But you are a 

Texan. You have heard about the Texas miracle following tort reform there in 2003. It did everything that its proponents said it 

would. It lowered the cost of professional liability insurance. It 

brought more PLI carriers into the State, and most importantly, it 

brought a lot more physicians into the State. And those guys are 

going to the rural and underserved areas just as much as going to 

the major metropolitan centers. The only downside has been the 

flood of applications to the Texas Medical Board because—— 

Mr. BURGESS. Yes, the Texas Medical Board is in trouble. But 

Dr. Lewin referenced, you know, the fact that sometimes a stent 

might do instead of a bypass or maybe maximum medical therapy. 

But it could be tough if you are the doctor on the frontline who is 

worried about the appearance of did I do everything possible if this 

patient walks out of the office and crashes and burns in my parking lot, did I do everything possible to prevent that from happening? And that is a burden with which we live as practicing physicians every day, is it not? 

Mr. VALADKA. Well, that is absolutely true. And again, to put 

that in perspective, that is going to happen a certain percentage of 

the time even if you do everything right. So now you are thinking, 

OK, did I do everything right? Someone is going to be looking over 

my shoulder in 6 months or 12 months if there is a bad outcome. 

And again, you know, Abraham Lincoln said even if you did everything right and events prove you wrong, a thousand angels swearing you were right won’t make a difference. So that is a huge concern for all practicing physicians. 

Mr. BURGESS. Thank you for being here today, all of you. Thank 

you. 

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

gentleman from Michigan, the ranking member emeritus, Mr. Dingell, for 5 minutes of questions. 

Mr. DINGELL. Mr. Chairman, you are most courteous. Thank you. 

Dr. Lewin, welcome to today’s hearing. I would like to begin to 

discuss your recommended improvements to IPAB. You mentioned 

in your testimony that flexibility should be provided to help recruit 

high-quality board candidates. Do you believe, then, that under the 

current statute the board will be unable or will be able to recruit 

high candidates? 

Mr. LEWIN. Congressman Dingell, thank you for the question. I 

don’t believe the way it is currently constructed the IPAB will recruit the kind of people that we want. First of all, the IPAB membership is a full-time, if you will, occupation. It means that we can’t 

bring in the best and the brightest from throughout the health sector with various perspectives to help guide this process. We are almost destined with that approach to bring in retired people. 

Mr. DINGELL. My next question, you have gotten a bit ahead, but 

one, what will be the barriers to recruiting candidates; and two, 

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what should we do to eliminate those barriers to enable us to recruit the strongest candidates? 

Mr. LEWIN. My guess is that the importance of this process is 

that some excellent candidates may come to serve just with their 

expenses covered, but I think this shouldn’t have to be a full-time 

commitment on the part of those individuals. We need people who 

are the best and the brightest in the healthcare sector who understand the economics as well as the clinical realities of this and the 

patient perspective part of this to be sitting around this table. So 

I think that the way that it is designed in terms of the pay and 

the requirement that it be a full-time occupation will make it very 

untenable. 

Mr. DINGELL. OK. Now, Doctor, IPAB establishes a Consumer 

Advisory Council to advise the board on how payment policies impact consumers. However, this is an advisory capacity only and 

does not include patient representation. Now, as a physician, how 

would you recommend addressing this problem and encouraging 

patients’ participation to help in decision-making necessary for the 

board to issue the best recommendations? 

Mr. LEWIN. Well, I think the IPAB ought to have patient representation sitting right there on the board itself if it was to exist. 

Patient representation should have been part of the process of the 

IPAB. But I would say, Congressman Dingell, that I think we have 

to reconstruct what we consider this IPAB model if we want it to 

actually achieve cost containment over time by systematic improving quality of care. I think the way it is designed isn’t going to 

work so I am not so concerned about how we get the members on 

it right now. I would like to see a design of a system that might 

actually reduce costs and improve quality. 

Mr. DINGELL. I notice you, Dr. Valadka, were nodding yes? 

Mr. VALADKA. Yes, I agree completely. It seems like we have gotten a little bit ahead of the conversation when we are talking about 

how to structure IPAB and how it should be set up in advisory 

committees, but I think a more fundamental question is really will 

it achieve the aims it sets out to do without creating too many adverse events like limiting access to care for our seniors. 

Mr. DINGELL. Thank you. 

Now, again, coming back to our first witness here. Your testimony suggests the use of data registries as one way to ensure highquality care while identifying areas to reduce spending. In particular, Doctor, you mentioned the ACC’s Pinnacle outpatient registry. I happen to believe that the technology advances like electronic health records and registries can create savings but also 

know that there could be a resistance to implementing such technologies. How many providers participate in this registry currently, 

Dr. Lewin? 

Mr. LEWIN. Thank you for that question, Congressman Dingell. 

Nearly all the major hospitals in the United States participate in 

the registries and they pay us for the data, and that allows us to 

actually keep this very expensive operation going. In the physician 

outpatient setting, it is really hard to ask the doctors to pay us for 

collection of data at this time, but a thousand practices have signed 

up. We have two million patient records already with this relatively new system. And we can see measured improvement in 

303 

quality across the entire Pinnacle network. I might add that 100 

percent of the Pinnacle participants received the full PQRS reward 

and the e-prescribing reward, and we were able to file for them. So 

there is some small reward. But if we were to use payment reform 

to provide real incentives for improved outcomes and quality, this 

would go rapidly across the entire environment. It needs to reach 

to internal medicine and family practice and others who share in 

the care of cardiology patients with us in the outpatient setting. 

Mr. DINGELL. My time is up, Doctor, but with the patience of the 

chair, I am going to ask you can you give me an example of how 

a member of ACC has used the registry to bring down the costs of 

their practice? 

Mr. LEWIN. Absolutely. The one thing I can give you is that they 

got an average of 8 to $10,000 back from the rather pitifully small 

reward program called PQRS that Medicare uses today by just by 

participating in the registry. They got the rewards from Bridges to 

Excellence and from other employer-based private insurance approaches. And some of them are now going to receive a bypass of 

having to go through, you know, call a nurse to get permission for 

a procedure because they can demonstrate to the insurance company that they are making the right decisions using the clinical decision support tools embedded in the registry. So it is a hassle factor improvement for the doctor, and time is worth money. So even 

though the payment incentives aren’t really aligned yet to improve 

quality, even now, this Pinnacle registry is offering some benefits 

to people in the current environment. 

Mr. DINGELL. Thank you, Doctor. 

Thank you, Mr. Chairman. 

Mr. PITTS. The chair thanks the gentleman. We are voting on the 

floor. We have 11 minutes to go. We have time for follow-up from 

Mr. Pallone. 

Mr. PALLONE. I will be quick. I know that both Dr. Burgess and 

you, Dr. Lewin, brought up the SGR and I do think that certainly 

when I hear from the doctors, you know, they see the SGR and, 

again, the cliff we faced in January as the biggest threat to Medicare, more so than IPAB. And you know, I am opposed to IPAB but 

I just wanted you to comment on that. I mean, isn’t this SGR a 

major threat, more so than IPAB and what are the doctors telling 

you about it? 

Mr. LEWIN. We would have to think that it is a major threat. It 

is certainly a threat to access. If more doctors can’t afford to accept 

Medicare patients, clearly it is going to pose a nightmare for our 

healthcare system, for emergency rooms and for the entire system. 

So we are very, very worried about it and particularly because it 

is a big, big price tag to try to fix it. 

Mr. PALLONE. The cut. 

Mr. LEWIN. And I honestly don’t know how it is going to happen 

given the conversation on, you know, the debt ceiling and the deficit. So, you know, I assume we might end up kicking that can 

down the road again, and I am very, very worried about that, much 

more worried than I am about the IPAB. 

Mr. PALLONE. Well, I just wanted to say I know that Dr. Burgess 

mentioned that, you know, he hopes that we can get to it and do 

a long-term fix this year. And I am very much supportive of that. 

304 

I always kid him because he was I think the only Republican who 

voted for the Democrat long-term fix that we passed a couple years 

ago. So I have to commend him for that although maybe he doesn’t 

like to be commended for that. 

But I would just ask, Mr. Chairman, that I know that we have 

already had a hearing on it, but I would urge that we do try to address it and not wait until the last minute and kick the can down 

the road. 

Thank you, Mr. Chairman. 

Mr. PITTS. The chair thanks the gentleman and for the information of the panel. We are going to deal with the SGR this year. We 

intend to do a long-term fix. We are in the process. We have collected information from all the doctor groups. We have had meetings, many meetings, and we are in the process of developing a vehicle, but it will probably be after the break in the fall before we 

get to it. But we intend to deal with it on a permanent basis before 

the end of the year. 

This has been an excellent panel. Thank you for the information 

you have shared. 

That concludes today’s hearing. I remind members that they 

have 10 business days to submit questions for the record, and I ask 

the witnesses to please agree to respond promptly to these questions. With that, this subcommittee is adjourned. 

[Whereupon, at 2:06 p.m., the subcommittee was adjourned.] 

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