U.S. GOVERNMENT PUBLISHING OFFICE

WASHINGTON : 

For sale by the Superintendent of Documents, U.S. Government Publishing Office

Internet: bookstore.gpo.gov Phone: toll free (866) 512–1800; DC area (202) 512–1800

Fax: (202) 512–2104 Mail: Stop IDCC, Washington, DC 20402–0001

97–732 PDF 2015

EXAMINING THE ADMINISTRATION’S APPROVAL 

OF MEDICAID DEMONSTRATION PROJECTS 

HEARING 

BEFORE THE

SUBCOMMITTEE ON HEALTH 

OF THE

COMMITTEE ON ENERGY AND 

COMMERCE 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED FOURTEENTH CONGRESS 

FIRST SESSION 

JUNE 24, 2015 

Serial No. 114–59 

( 

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 

ED WHITFIELD, Kentucky 

JOHN SHIMKUS, Illinois 

JOSEPH R. PITTS, Pennsylvania 

GREG WALDEN, Oregon 

TIM MURPHY, Pennsylvania 

MICHAEL C. BURGESS, Texas 

MARSHA BLACKBURN, Tennessee 

Vice Chairman 

STEVE SCALISE, Louisiana 

ROBERT E. LATTA, Ohio 

CATHY MCMORRIS RODGERS, Washington 

GREGG HARPER, Mississippi 

LEONARD LANCE, New Jersey 

BRETT GUTHRIE, Kentucky 

PETE OLSON, Texas 

DAVID B. MCKINLEY, West Virginia 

MIKE POMPEO, Kansas 

ADAM KINZINGER, Illinois 

H. MORGAN GRIFFITH, Virginia 

GUS M. BILIRAKIS, Florida 

BILL JOHNSON, Ohio 

BILLY LONG, Missouri 

RENEE L. ELLMERS, North Carolina 

LARRY BUCSHON, Indiana 

BILL FLORES, Texas 

SUSAN W. BROOKS, Indiana 

MARKWAYNE MULLIN, Oklahoma 

RICHARD HUDSON, North Carolina 

CHRIS COLLINS, New York 

KEVIN CRAMER, North Dakota 

FRANK PALLONE, JR., New Jersey 

Ranking Member 

BOBBY L. RUSH, Illinois 

ANNA G. ESHOO, California 

ELIOT L. ENGEL, New York 

GENE GREEN, Texas 

DIANA DEGETTE, Colorado 

LOIS CAPPS, California 

MICHAEL F. DOYLE, Pennsylvania 

JANICE D. SCHAKOWSKY, Illinois 

G.K. BUTTERFIELD, North Carolina 

DORIS O. MATSUI, California 

KATHY CASTOR, Florida 

JOHN P. SARBANES, Maryland 

JERRY MCNERNEY, California 

PETER WELCH, Vermont 

BEN RAY LUJA ́ N, New Mexico 

PAUL TONKO, New York 

JOHN A. YARMUTH, Kentucky 

YVETTE D. CLARKE, New York 

DAVID LOEBSACK, Iowa 

KURT SCHRADER, Oregon 

JOSEPH P. KENNEDY, III, Massachusetts 

TONY CA ́ RDENAS, California7 

SUBCOMMITTEE ON HEALTH

JOSEPH R. PITTS, Pennsylvania 

Chairman 

BRETT GUTHRIE, Kentucky 

Vice Chairman 

ED WHITFIELD, Kentucky 

JOHN SHIMKUS, Illinois 

TIM MURPHY, Pennsylvania 

MICHAEL C. BURGESS, Texas 

MARSHA BLACKBURN, Tennessee 

CATHY MCMORRIS RODGERS, Washington 

LEONARD LANCE, New Jersey 

H. MORGAN GRIFFITH, Virginia 

GUS M. BILIRAKIS, Florida 

BILLY LONG, Missouri 

RENEE L. ELLMERS, North Carolina 

LARRY BUCSHON, Indiana 

SUSAN W. BROOKS, Indiana 

CHRIS COLLINS, New York 

JOE BARTON, Texas 

FRED UPTON, Michigan (ex officio) 

GENE GREEN, Texas 

Ranking Member 

ELIOT L. ENGEL, New York 

LOIS CAPPS, California 

JANICE D. SCHAKOWSKY, Illinois 

G.K. BUTTERFIELD, North Carolina 

KATHY CASTOR, Florida 

JOHN P. SARBANES, Maryland 

DORIS O. MATSUI, California 

BEN RAY LUJA ́ N, New Mexico 

KURT SCHRADER, Oregon 

JOSEPH P. KENNEDY, III, Massachusetts 

TONY CA ́ RDENAS, California 

FRANK PALLONE, JR., New Jersey (ex 

officio) 

(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 .......................................................................................... 2 

Hon. Gene Green, a Representative in Congress from the State of Texas, 

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

Prepared statement .......................................................................................... 5 

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

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

Prepared statement .......................................................................................... 7 

Hon. Kathy Castor, a Representative in Congress from the State of Florida, 

opening statement ................................................................................................ 9 

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

New Jersey, prepared statement ........................................................................ 113 

WITNESSES

Katherine M. Iritani, Director, Health Care, Government Accountability Office ......................................................................................................................... 10 

Prepared statement .......................................................................................... 13 

Answers to submitted questions ...................................................................... 118 

Haley Barbour, Former Governor of Mississippi and Founding Partner, BGR 

Group .................................................................................................................... 65 

Prepared statement .......................................................................................... 68 

Answers to submitted questions ...................................................................... 127 

Matt Salo, Executive Director, National Association of Medicaid Directors ...... 77 

Prepared statement .......................................................................................... 79 

Answers to submitted questions ...................................................................... 129 

Joan C. Alker, Executive Director, Georgetown University Center for Children 

and Families ......................................................................................................... 89 

Prepared statement .......................................................................................... 91 

Answers to submitted questions ...................................................................... 135 

SUBMITTED MATERIAL

Letter of June 23, 2015, from Ken Paxton, Attorney General of Texas, et 

al., to Mr. Upton, submitted by Mr. Burgess ..................................................... 115 

(1) 

EXAMINING THE ADMINISTRATION’S APPROVAL OF MEDICAID DEMONSTRATION 

PROJECTS 

WEDNESDAY, JUNE 24, 2015 

HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON HEALTH, 

COMMITTEE ON ENERGY AND COMMERCE, 

Washington, DC. 

The subcommittee met, pursuant to call, at 10:02 a.m., in room 

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

(chairman of the subcommittee) presiding. 

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

Bucshon, Brooks, Collins, Upton (ex officio), Green, Capps, 

Schakowsky, Butterfield, Castor, Schrader, Kennedy, Ca ́ rdenas, 

and Pallone (ex officio). 

Staff present: Clay Alspach, Chief Counsel, Health; Leighton 

Brown, Press Assistant; Noelle Clemente, Press Secretary; Graham 

Pittman, Legislative Clerk; Michelle Rosenberg, GAO Detailee, 

Health; Chris Sarley, Policy Coordinator, Environment and the 

Economy; Traci Vitek, Detailee, Health; Dylan Vorbach, Staff Assistant; Gregory Watson, Staff Assistant; Tiffany Guarascio, Democratic Deputy Staff Director and Chief Health Advisor; Rachel 

Pryor, Democratic Health Policy Advisor; Samantha Satchell, 

Democratic Policy Analyst; and Arielle Woronoff, Democratic 

Health Counsel. 

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

will recognize himself for an opening statement. 

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

OF PENNSYLVANIA 

Medicaid is a lifeline for some of our Nation’s most vulnerable 

patients. The administration and Congress have a duty to ensure 

that taxpayer dollars used for Medicaid are spent in a manner that 

promotes its core objectives and helps our neediest citizens. Unfortunately, a recent report from the nonpartisan Government watchdog agency, the Government Accountability Office (GAO), again 

raises serious concerns about the administration’s management 

and oversight of Medicaid funds. 

Under Section 1115 of the Social Security Act, the Secretary has 

the authority to approve Medicaid demonstration projects that are 

likely to promote program objectives. However, the GAO found that 

2 

CMS did not have explicit criteria for determining whether, and 

did not clearly articulate how, demonstration projects met the statutory requirement to promote Medicaid objectives. GAO also reported that several State programs approved for Federal Medicaid 

funds appeared, on their face, to be only tangentially related to improving health coverage for low-income individuals. 

This committee has a duty to ensure that taxpayer dollars used 

for Medicaid are spent in a manner that promotes its core objectives and helps the most vulnerable patients. Yet, GAO’s findings 

raise significant questions about the degree to which the administration is consistently complying with its own criteria. These criteria were not even articulated by CMS until GAO asked. And 

these criteria do not exist anywhere in CMS’ regulations. They are 

not even listed on their Web site. 

When CMS has a process that is not transparent nor predictable, 

a process in which CMS often approves a demonstration for one 

State but denies a similar demo for another State, that process is, 

understandably, perceived by States and other stakeholders as inconsistent, unfair, and unaccountable. It is unfortunate that CMS 

declined to participate in this important hearing, despite our best 

efforts. We gave the agency 2 weeks’ notice, offered 2 different potential hearing dates. Nevertheless, despite all the people that 

work at CMS, the administration declined to make anyone available to testify. 

CMS’ refusal to come today would be unfortunate under any circumstance, but it is particularly concerning since roughly one in 

three Medicaid dollars, nearly $150 billion in fiscal year 2014, are 

spent on 1115 demonstrations. CMS has a responsibility to Medicaid patients, to States, to taxpayers, to be transparent with their 

criteria for approving or disapproving State demonstrations. And 

yet, they declined to come before a committee of jurisdiction to explain their criteria or their process. The agency’s absence from this 

hearing is really striking. Accordingly, yesterday, we extended another invitation to CMS to testify before this committee on Medicaid on July the 8th, and we look forward to their participation. 

[The prepared statement of Mr. Pitts follows:] 

PREPARED STATEMENT OF HON. JOSEPH R. PITTS

Medicaid is a lifeline for some of our Nation’s most vulnerable patients. The administration and Congress have a duty to ensure that taxpayer dollars used for 

Medicaid are spent in a manner that promotes its core objectives and helps our 

neediest citizens. 

Unfortunately, a recent report from the nonpartisan Government watchdog agency, the Government Accountability Office (GAO), again raises serious concerns about 

the administration’s management and oversight of Medicaid funds. Under Section 

1115 of the Social Security Act, the Secretary has the authority to approve Medicaid 

demonstration projects that are likely to promote program objectives. 

However, the GAO found that CMS did not have explicit criteria for determining 

whether, and did not clearly articulate how, demonstration projects met the statutory requirement to promote Medicaid objectives. GAO also reported that several 

State programs approved for Federal Medicaid funds appeared, on their face, to be 

only tangentially related to improving health coverage for low-income individuals. 

This committee has a duty to ensure that taxpayer dollars used for Medicaid are 

spent in a manner that promotes its core objectives and helps the most vulnerable 

patients. Yet, GAO’s findings raise significant questions about the degree to which 

the administration is consistently complying with its own criteria. These criteria 

3 

were not even articulated by CMS until GAO asked. And these criteria do not exist 

anywhere in CMS’ regulations—they are not even listed on their Web site. 

When CMS has a process that is not transparent nor predictable, a process in 

which CMS often approves a demonstration for one State but denies a similar demo 

for another State-that process is, understandably, perceived by States and other 

stakeholders as inconsistent, unfair, and unaccountable. 

It is unfortunate that CMS declined to participate in this important hearing despite our best efforts. We gave the agency two weeks’ notice and offered two different potential hearing dates. Nevertheless, despite all the people that work at 

CMS, the administration declined to make anyone available to testify. 

CMS’ refusal to come today would be unfortunate under any circumstance, but it is particularly concerning since roughly one in three Medicaid dollars—nearly $150 

billion in fiscal year 2014—are spent on 1115 demonstrations. CMS has a responsibility to Medicaid patients, to States, and to taxpayers, to be transparent with their 

criteria for approving or disapproving State demonstrations. 

And yet, they declined to come before a committee of jurisdiction to explain their 

criteria or their process. The agency’s absence from this hearing is really striking. 

Accordingly, yesterday we extended another invitation to CMS to testify before this 

committee on Medicaid on July 8th—and we look forward to their participation. 

With that, I would like to welcome all of our witnesses for being here today. I 

look forward to your testimony. I yield the remainder of my time to the distinguished gentleman from Indiana, Dr. Buchson. 

Mr. PITTS. With that, I would like to welcome all of our witnesses 

for being here today. I look forward to your testimony, and I yield 

the remainder of my time to the distinguished gentleman from Indiana, Dr. Bucshon. 

Mr. BUCSHON. Thank you, Mr. Chairman. 

I wanted to briefly highly that the State of Indiana recently received an 1115 waiver for the Medicaid to implement to help the 

Indiana Plan 2.0. As many of you know, the Healthy Indiana Plan 

was a very successful program implemented under former Governor Mitch Daniels, and rather than expand traditional Medicaid, 

Governor Pence created HIP 2.0 to cover our State’s most vulnerable population, but not require that they go on traditional Medicaid. 

There are over 283,000 Hoosiers to this point enrolled in the program, and actually 71 percent of those opt to pay in and pay more 

to get dental and vision coverage. This program can be a model 

used across the country on how to provide coverage to our most 

vulnerable population. 

However, this waiver almost didn’t happen. We are going to hear 

from our witnesses about how complicated this process can be. It 

took the State of Indiana 2 years; that is one congressional term, 

to get the waiver. This was not a new program; this was an extension of an already successful program. Not only did it take 2 years, 

but it took Governor Pence directly reaching out to President 

Obama several times to get an answer. We received the waiver for 

3 years. Let me repeat again, it took 2 years and several conversations directly with the President to get the waiver in place. Something needs to change in this process. 

I hope that going forward, CMS is going to learn from the hoops 

that they made Indiana jump through, and make it easier for 

States like Indiana to do what is already working. I look forward 

to ensuring Indiana can continue HIP 2.0 when this waiver expires, and to hearing—I look forward to hearing the testimony 

today. 

I yield back. 

Mr. PITTS. The Chair thanks the gentleman. 

4 

Now recognize the ranking member of the subcommittee, Mr. 

Green, 5 minutes for an opening statement. 

OPENING STATEMENT OF HON. GENE GREEN, A 

REPRESENTATIVE IN CONGRESS FROM THE STATE OF TEXAS 

Mr. GREEN. Thank you, Mr. Chairman. Good morning and thank 

our witnesses for being here today. I would like to thank the Chair 

for having this hearing on the topic of Medicaid demonstration 

waivers, and I look forward to today’s discussion. 

Medicaid provides healthcare coverage for more than 70 million 

Americans. It is our Nation’s most vital healthcare safety net program. Today, it covers more than one in three children, and is a 

critical component of care for seniors. One out of every seven Medicare beneficiaries is also a Medicaid beneficiary. For millions of 

American families, the Medicaid Program is the only way they can 

gain access to coverage for appropriate healthcare services. It is a 

simple truth; our State and Federal Government save money by investing in health care, and Medicaid coverage is a key component 

of such investment. 

The joint State-Federal nature of Medicaid structure is the defining feature of the program. Since its creation, States have had the 

flexibility to design their own version of Medicaid within the basic 

framework of broad Federal rules, in order to receive matching 

funds. If a State wishes to change its Medicaid Program in ways 

that depart from some Federal requirements, it may seek to do so 

under the authority of approved demonstration or a waiver. Section 

1115 waivers are a very broad type of Medicaid waiver. 

In recent years, these waivers have become increasingly utilized 

by the States. In fiscal year 2014, Section 1115 demonstration 

waivers accounted for almost 1⁄3 of all Medicaid spending. While 

each 1115 waiver is different in scope and focus, they all must promote the objectives of the Medicaid Program and be budget-neutral 

for the Federal Government. 

Over the last 2 decades, the Government Accounting Office, the 

GAO, has raised concerns about Medicaid waiver policy. Many of 

the GAO’s longstanding recommendations were included in the Affordable Care Act, and I want to thank CMS for the agency’s commitment to improving transparency throughout the approval process. Per a requirement of the Affordable Care Act, CMS has issued 

a final rule to ensure meaningful public input in the waiver process, and enhanced transparency. Today, we will hear from GAO 

about its body of work on Medicaid waivers and additional improvements that can be made. 

While the Supreme Court made Medicaid expansion voluntary 

for each State, expansion authority provides an explicit, almost entirely federally funded pathway for States to offer coverage for all 

nonelderly adults living below 138 percent of the poverty line. Because of this, States have a clear option and do not need to use 

1115 waivers to expand eligibility for this population. Waivers are 

still being used to make other programmatic changes, especially as 

States continue to consider expanding Medicaid. Some of these proposals have sought to impose premiums, cost-sharing charges, and 

work requirements on beneficiaries. Robust research does not support the arguments for such provisions. Premiums have been 

5 

shown to deter participation in coverage, and lead to high administrative costs. Work requirements have no place in a safety net 

healthcare program, and ignore the fact that the vast majority of 

new eligible adults—beneficiaries already work but do not have access to affordable care through their employer. States have flexibility—considerable flexibility under existing Medicaid authority. 

Enacting punitive, unsubstantiated policies like work requirements 

under the guise of flexibility does not advance the conversation 

about improved transparency and innovative care models. When 

people have access to regular health examinations, immunizations, 

and preventative care, they are dramatically more likely to be 

healthy and productive adults. Coverage rather than uncompensated care pools is the best way to promote the health of the American people, and the viability of our healthcare system at large. 

CMS has maintained that this will be one of the three guiding 

principles moving forward. 

That said, 1115 waivers retain the vital purpose of affording 

States with a way to pursue innovative delivery programs, expand 

eligibility to individuals not otherwise eligible for Medicaid and 

CHIP, and pilot initiatives that supports the objections of the Medicaid Program. Medicaid is a safety net for everyone because we are 

all one medical crisis away from financial ruin, and more people 

who have coverage and access to necessary care, the better the system works. 

I look forward to hearing today’s panelists about the important 

topic, and working with my colleagues on the committee. We have 

a great opportunity to build on success, and continue to strengthen 

the Medicaid Program for current and future beneficiaries. 

And I yield back my time. 

[The prepared statement of Mr. Green follows:] 

PREPARED STATEMENT OF HON. GENE GREEN

Good morning, and thank you for being here today. I thank the chairman for having this hearing on the topic of Medicaid demonstration waivers, and look forward 

to today’s discussion. 

Medicaid provides health care coverage for more than 70 million Americans. It is 

our Nation’s most vital health care safety net program. 

Today, it covers more than 1 in 3 children, and is a critical component of care 

for seniors. One out of every 7 Medicare beneficiaries is also a Medicaid beneficiary. 

For millions of American families, the Medicaid program is the only way they can 

gain access to coverage for appropriate health care services. 

It is a simple truth: our Federal and State Governments save money by investing 

in health care, and Medicaid coverage is a key component of such investment. 

The joint State-Federal nature of the Medicaid structure is a defining feature of 

the program. Since its creation, States have had flexibility to design their own 

version of Medicaid, within the basic framework of broad Federal rules in order to 

receive matching funds. 

If a State wishes to change its Medicaid program in ways that departs from certain Federal requirements, it may seek to do so under the authority of an approved 

demonstration or ‘‘waiver.’’ Section 1115 waivers are a very broad type of Medicaid 

waiver. 

In recent years, these waivers have become increasingly utilized by the States. In 

fiscal year 2014, Section 1115 demonstration waivers accounted for almost one-third 

of all Medicaid spending. 

While each 1115 waiver is different in scope and focus, they all must promote the 

objectives of the Medicaid program and be budget neutral for the Federal Government. 

Over the last two decades, the Government and Accountability Office (GAO) has 

raised concerns about Medicaid waiver policy. Many of GAO’s longstanding recVerDate Mar 15 2010 09:39 Dec 14, 2015 Jkt 037690 PO 00000 Frm 00009 Fmt 6633 Sfmt 6633 F:\114THCONGRESS\114X59MEDICAIDDEMOSASKOK120415\114X59MEDICAIDDEMOS
6 

ommendations were included in the Affordable Care Act, and I want to thank CMS 

for the agency’s commitment to improved transparency throughout the approval 

process. 

Per a requirement of the Affordable Care Act, CMS has issued a final rule to ensure meaningful public input in the waiver process and enhanced transparency. 

Today, we will hear from GAO about their body of work on Medicaid waivers and 

additional improvements that can be made. 

While the Supreme Court made Medicaid expansion voluntary for each State, expansion authority provides an explicit—almost entirely Federal-funded—pathway 

for States to offer coverage for all non-elderly adults living below 138 percent of the 

poverty line. Because of this, States have a clear option and do not need to use 1115 

waivers to expand eligibility for this population. 

Waivers are still being used to make other programmatic changes, especially as 

States continue to consider expanding Medicaid. Some of these proposals have 

sought to impose premiums, cost-sharing charges, and work requirements on beneficiaries. Robust research does not support the arguments for such provisions. 

Premiums have been shown to deter participation in coverage and lead to high 

administrative costs. Work requirements have no place in a safety net health care 

program, and ignore the fact that the vast majority of newly eligible adult beneficiaries already work, but do not have access to affordable coverage through their 

employer. 

States have considerable flexibility under existing Medicaid authority. Enacting 

punitive, unsubstantiated policies like work requirements under the guise of ‘‘flexibility’’ does not advance the conversation around improved transparency and innovative care models. 

When people have access to regular health examinations, immunizations, and preventative care, they are dramatically more likely to be healthy, productive adults. 

Coverage, rather than uncompensated care pools, is the best way to promote the 

health of the American people and the viability of our health care system at large. 

CMS has maintained that this will be one of three guiding principles moving forward. 

That said, Section 1115 waivers retain their vital purpose of affording States with 

a way to pursue innovative delivery systems, expand eligibility to individuals not 

otherwise eligible for Medicaid and CHIP, and pilot initiatives that support the objectives of the Medicaid program. 

Medicaid is a safety net for everyone, because we are all one medical crisis away 

from financial ruin, and the more people who have coverage and access to necessary 

care, the better the system works for us all. 

I look forward to hearing from today’s panelists about this important topic, and 

to working with my colleagues on the committee. 

We have a great opportunity to build on past successes and continue to strengthen the Medicaid program for current and future beneficiaries. 

Thank you, and I yield back. 

Mr. PITTS. The Chair thanks the gentleman. 

Now recognize the chairman of the full committee, Mr. Upton, 5 

minutes for an opening statement. 

OPENING STATEMENT OF HON. FRED UPTON, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF MICHIGAN 

Mr. UPTON. Thank you, Mr. Chairman. 

This year, the Medicaid Program turns 50. Over that half a century, Medicaid has provided critical health coverage for some of our 

Nation’s most vulnerable populations. Medicaid is the world’s largest health insurance program, with as many as 72 million people 

being covered by the program for at least some period of the current year. And in the next fiscal year, 344 billion Federal dollars 

will be spent on Medicaid, and by 2024, Federal-State spending on 

Medicaid is expected to top $1 trillion. 

Today, roughly one in three Medicaid dollars is spent through an 

1115 waiver approved by the Secretary of HHS. Section 1115 of the 

Social Security Act authorizes the HHS Secretary to waive certain 

Federal Medicaid requirements and allow costs that would not othVerDate Mar 15 2010 09:39 Dec 14, 2015 Jkt 037690 PO 00000 Frm 00010 Fmt 6633 Sfmt 6633 F:\114THCONGRESS\114X59MEDICAIDDEMOSASKOK120415\114X59MEDICAIDDEMOS
7 

erwise be eligible for Federal matching funds for demonstration 

projects that are likely to assist in promoting Medicaid objectives. 

These are critical tools for States to experiment and evolve their 

Medicaid Programs as they seek to modernize and improve them 

to better serve patients. For example, Michigan has used a waiver 

to successfully provide HSA-like health accounts to encourage participants to become more active health care consumers. Yet today 

we will hear from the nonpartisan Government watchdog, GAO, 

which has repeatedly raised questions about CMS’ approval process 

for those waivers. 

Whether it is GAO’s concerns about budget neutrality, approval 

criteria, or the process for approvals and renewals, these are indeed important and fair questions to ask. We need a better understanding about how the billions of dollars CMS is approving promote Medicaid’s core objectives. 

I want to thank the second panel, in particular, former Governor 

Barbour, for being here to share his ideas about how to improve 

CMS’ management of the funds. I know that nearly every member 

of this subcommittee has heard frustrations from State officials at 

one point about the uncertainty and timeframes surrounding the 

approval or renewal of an 1115 waiver. While State leaders are trying to balance their budgets, pass legislation, it is essential that 

CMS’ process is transparent and certainly predictable. 

Recent analysis and media coverage has raised questions over 

the degree to which CMS is effectively picking winners and losers 

in the waiver review process. CMS has a duty, both to patients and 

taxpayers, to States, all stakeholders, to do more to increase the 

transparency, accountability, and consistency of their approval 

process. In fact, if CMS is doing a decent job, increased oversight 

and scrutiny will only bring their good efforts into the light. However, if there are shortcomings, this subcommittee will play its role 

in making the process more transparent, accountable, and fair for 

all involved. At the end of the day, it is about ensuring our most 

vulnerable receive the care that they deserve. 

[The prepared statement of Mr. Upton follows:] 

PREPARED STATEMENT OF HON. FRED UPTON

This year, the Medicaid program turns 50 years old. Over that half a century, 

Medicaid has provided critical health care coverage for some of our Nation’s most 

vulnerable populations. 

Medicaid is currently the world’s largest health insurance program, with as many 

as 72 million people being covered by the program for at least some period of the 

current year. In the next fiscal year, 344.4 billion Federal dollars will be spent on 

the Medicaid program. And by 2024, Federal-State spending on Medicaid is expected 

to top $1 trillion annually. 

Today, roughly one in three Medicaid dollars is spent through an 1115 waiver approved by the Secretary of Health and Human Services. Section 1115 of the Social 

Security Act authorizes the HHS Secretary to waive certain Federal Medicaid requirements and allow costs that would not otherwise be eligible for Federal matching funds for demonstration projects that are likely to assist in promoting Medicaid 

objectives. 

These are critical tools for States to experiment and evolve their Medicaid programs as they seek to modernize and improve them to better serve patients. For 

example, Michigan has used a waiver to successfully provide HSA-like Health Accounts to encourage participants to become more active health care consumers. 

Yet today we will hear from the nonpartisan Government watchdog, the Government Accountability Office, which has repeatedly raised serious questions about 

CMS’ approval process for these waivers. 

8 

Whether it is GAO’s concerns about budget neutrality, approval criteria, or the 

process for approvals and renewals, these are important and fair questions. Congress needs a better understanding about how the billions of dollars CMS is approving promote Medicaid’s core objectives. 

I also want to thank the second panel, in particular former Governor Barbour, for 

being here to share their ideas about how to improve CMS’ management of these 

funds. I am confident that nearly every member of this subcommittee has heard 

frustrations from State officials at one point about the uncertainty and timeframes 

surrounding the approval or renewal of an 1115 waiver. While State leaders are trying to balance their budgets and pass legislation, it is essential that CMS’ process 

is transparent and predictable. 

Recent analysis and media coverage has raised questions over the degree to which 

CMS is effectively picking winners and losers in the waiver review process. CMS 

has a duty—to patients, to taxpayers, to States, to all stakeholders—to do more to 

increase the transparency, accountability, and consistency of their approval process. 

In fact, if CMS is doing a decent job, increased oversight and scrutiny will only 

bring their good efforts into the light. However, if there are shortcomings, this subcommittee will play its role in making the process more transparent, accountable, 

and fair for all involved. At the end of the day—it’s about ensuring our most vulnerable receive the care they deserve. 

I yield 1 minute to Dr. Burgess. 

Mr. UPTON. I yield the balance of my time to Dr. Burgess. 

Mr. BURGESS. I thank the chairman for yielding. And I just want 

to underscore what he said. And, Governor Barbour, it is going to 

be good to have you before our panel again. I know you have been 

here before. And I think one of the failings when we initiate discussions on healthcare policy is our failure to include the Governors 

in the discussion because, after all, our Governors are the ones who 

have the principle role in a shared Federal-State program, like 

Medicaid. Our Governors are the ones who actually have the responsibility of the deliverable for their citizens, as well as they 

have to administer their own healthcare programs for their State 

employees, and they have great expertise in this area, and too 

often, we overlook that expertise. So I am grateful you are here 

with us today. 

The topic itself is one that holds a great deal of interest for me, 

and I am, therefore, glad, Chairman Pitts, that we are holding this 

hearing. Back home in Texas, we do have an 1115 waiver, had it 

for a number of years, and it has allowed a positive transformation 

in care delivery. 

Conserving State flexibility within Medicaid allows States to 

structure their programs in a way that best meets their population’s needs. Every administration uses the 1115 negotiations to 

further their particular objectives, and thus, maybe a discussion on 

more transparency is warranted. But for this administration, Medicaid expansion has been the leading factor, the number one factor, 

in negotiations. It has been publicly noticed that even though the 

Supreme Court has ruled that the administration may not coerce 

a State into expanding its Medicaid under the ACA, that maybe, 

in fact, what is happening when the State comes to talk about an 

1115 waiver. 

In April, the Center for Medicare and Medicaid Services explicitly linked funding for Florida’s low-income pool to Medicaid funding, although progress has been made recently. Expansion is not a 

viable option in Texas, where it was previously estimated that it 

would cost the State as much as $27 billion over a decade. 

9 

Mr. Chairman, I am grateful we are holding the hearing today, 

and look forward to the testimony of our witnesses and their answering our questions. 

I yield back. 

Mr. PITTS. The Chair thanks the gentleman. 

The ranking member of the full committee, Mr. Pallone, has sent 

me a message. He said he would be late to get to the hearing, 

would miss opening statements. He has asked to designate Ms. 

Castor to have his opening statement time. So without objection, 

Ms. Castor, you are recognized for 5 minutes for your opening 

statement. 

OPENING STATEMENT OF HON. KATHY CASTOR, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF FLORIDA 

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

Member Green, and thank you for calling this important hearing 

on the Medicaid demonstration projects. 

It was the Congress, through amendments to the Social Security 

Act and laws relating to Medicaid, that granted States new and 

broad flexibility to test what works. All States are different. 

Through what are called the Section 1115 waivers, or demonstration projects, States have great flexibility to deliver care in more 

efficient ways. But each waiver has a time limit, because demonstration projects are intended to be analyzed to ensure they are 

working, and that they are using taxpayer dollars wisely. And 

there are a couple of important parameters. These are typically 5- 

year demonstration projects with certain extensions, 3-year extensions. You negotiate with CMS. And we say that the States, and 

these are some of the principles, States and the Federal Government cannot spend more than they would have spent without the 

waiver. And that is an important safeguard on taxpayer dollars. 

So I appreciate the GAO and your thoughtful analysis of these 

waivers. It is very opaque to the average person. You have advocated for more transparency and accountability. Congress responded in the Affordable Care Act, and CMS has followed through 

with that direction, but I think we can all agree we still have more 

to do. So I will look forward to your testimony today on how we 

can continue to work to make these demonstration projects and 

waivers more transparent. 

Now, many States have experimented with low-income pools, 

these uncompensated pools of cash, where the local governments, 

State Governments, Federal Government, pools money to pay for 

uncompensated care. Now, the uncompensated care pools are intended to support healthcare providers that provide uncompensated 

care to uninsured and underinsured State residents. They are not 

healthcare programs. They don’t allow people to get primary and 

preventative care, and they don’t protect people from financial 

harm resulting from medical debt, and that is why they have come 

under great scrutiny. They were very important before the adoption 

of the Affordable Care Act because the uninsured levels across 

America were so high. Hospitals, doctors, community health centers simply couldn’t cover the costs of uncompensated care without 

the help of the low-income pool dollars. And these were especially 

vital to the State of Florida as we transition from traditional MedVerDate Mar 15 2010 09:39 Dec 14, 2015 Jkt 037690 PO 00000 Frm 00013 Fmt 6633 Sfmt 6633 F:\114THCONGRESS\114X59MEDICAIDDEMOSASKOK120415\114X59MEDICAIDDEMOS
10 

icaid to Medicaid managed care. And I was an advocate in past 

years for very healthy, uncompensated care pools. 

But now we are in a whole different world. With the broad expansion of coverage under the Affordable Care Act, these billions 

of dollars in pools of cash don’t make financial sense anymore. So 

CMS put States on notice some years ago. They put Florida on notice in 2011 that the low-income pool would not survive in its current form, because it doesn’t make sense to simply write a check 

to a hospital or a State that isn’t as financially responsible as providing coverage to your citizens. After being on notice since 2011, 

Florida got a 1-year extension of LIP until June 30, 2015, with the 

understanding that it would conduct an independent review of its 

payment system intended to allow for the development of a sustainable, accountable, actuarially sound Medicaid payment system, 

and that LIP would be different. Florida knew that it was expected 

to change the way it pays providers, and provides health services 

to its low-income residents. They got into trouble this spring because the Governor, even though he was on notice, included the full 

LIP uncompensated care pool number in his budget, and the Republican-led State senate wanted a coverage model, so they went 

into a budget impasse. And fortunately, they have resolved it. Unfortunately, they did not adopt a coverage model, and we are on notice that the LIP funds are going to diminish over time. This will 

be an important lesson for other States across the country. And we 

need to be—we need to focus on coverage that is more financially 

secure for States, the Federal Government, and eliminate this risk 

of unnecessary expenditure of taxpayer dollars. So I will look forward to the discussion on that today as well. 

Thank you very much. I yield back my time. 

Mr. PITTS. The Chair thanks the gentlelady. 

That concludes the opening statements. As usual, the written 

opening statements of the members will be included in the record. 

We have two panels today. And on our first panel we have Ms. 

Katherine Iritani, Director of Health Care, the Government Accountability Office. Thank you very much for coming. Your written 

will be made a part of the record. You will have 5 minutes to summarize your testimony before questions. And so at this point, you 

are recognized for 5 minutes for your opening statement. 

STATEMENT OF KATHERINE M. IRITANI, DIRECTOR, HEALTH 

CARE, GOVERNMENT ACCOUNTABILITY OFFICE 

Ms. IRITANI. Chairman Pitts, Ranking Member Green, and members of the subcommittee, I am pleased to be here to discuss GAO’s 

work on Medicaid demonstration spending. Demonstrations comprise a significant and fast-growing component of the over-$500 billion Medicaid Program. With the broad waiver and spending authority conferred upon the Secretary of HHS under Section 1115 

comes responsibility for ensuring that demonstrations further Medicaid objective and do not increase Medicaid costs. 

My testimony today is based on GAO’s April report examining 

HHS’ approvals of new costs approved for 25 States’ demonstrations. I will also discuss a body of work from 2002 to 2014, examining HHS’ review process for ensuring that demonstrations do not 

raise Federal costs. 

11 

Based on this work, we have three main concerns with HHS approvals. First, with transparency. HHS’ bases for approvals of new 

costs not otherwise eligible for Medicaid were not always apparent 

in recent approvals. Nor have been the bases for approved spending 

limits for the demonstrations which govern total allowed spending. 

Second, accountability. HHS has not issued specific criteria for how 

it determines that approved spending is furthering Medicaid objectives, nor has HHS issued specific criteria for how it reviews and 

approves demonstration spending limits. Without criteria, stakeholders and overseers may not share a common understanding of 

how major decisions occur. The third concern, fiscal impact. Based 

on our reviews and multiple demonstrations approvals, we have 

longstanding concerns that the Secretaries approve spending limits 

that could potentially increase Federal Medicaid costs by tens of 

billions of dollars. 

I will turn now to our report findings. In April, we reported that 

HHS has approved States to obtain Federal Medicaid funds for a 

broad range of purposes. Two prominent types of new costs not otherwise eligible for Medicaid were approved. The first was for Stateoperated programs. HHS allowed five States to spend up to $9.5 

billion for more than 150 State-operated programs that, prior to the 

demonstration, were funded by the State and potentially other Federal sources. The programs were wide-ranging in nature. They included workforce education and training, insurance subsidy, housing, licensing, loan repayment, and a broad array of public health 

programs. The Federal Medicaid funds the States received could replace some of the States’ expenditures for the programs, and freeup State funding for other purposes. HHS’ approval documents 

were not always clear about what the State programs were for or 

how they related to Medicaid. Further, approvals did not always 

provide assurances that new Medicaid funds for these programs 

would be coordinated with other funding streams. 

The second prominent type of spending approved was funding 

pools to make new payments to hospitals and other providers for 

broad purposes. HHS approved six States to spend up to $7.6 billion for funding pools for uncompensated care costs. Five States 

were allowed to spend up to $18.8 billion for incentive payments 

to providers to improve health care delivery and infrastructure. 

Again, approval documents were not always clear regarding how 

the spending would further Medicaid objectives, and not duplicate 

other Federal funding streams. 

Now let me to turn to our work on budget neutrality, which examined the extent HHS has ensured that demonstrations will not 

raise Federal costs. Our longstanding body of work examining over 

20 demonstrations found that HHS allowed most States to use 

questionable assumptions and methods to project how much their 

Medicaid program would cost without the demonstration. Such projections, once approved, become the basis for total spending allowed 

under the demonstration. In our most recent reports in 2013 and 

’14, we estimated that HHS approved spending for five States’ 

demonstrations that was about $33 billion higher than what the 

documentation supported. 

In conclusion, Medicaid demonstrations provide HHS and States 

a powerful tool for testing and evaluating new approaches for imVerDate Mar 15 2010 09:39 Dec 14, 2015 Jkt 037690 PO 00000 Frm 00015 Fmt 6633 Sfmt 6633 F:\114THCONGRESS\114X59MEDICAIDDEMOSASKOK120415\114X59MEDICAIDDEMOS
12 

proving the delivery of services to beneficiaries. Medicaid demonstrations can also set precedents that are adopted by other 

States, and raise potential for overlap with other funding streams. 

Given the fast-growing and significant amount of Federal spending 

governed by these demonstrations, we believe there is an urgent 

need for improved accountability and transparency in HHS’ review 

and approval process. 

Mr. Chairman, this concludes my statement, and I am happy to 

answer any questions. 

[The prepared statement of Ms. Iritani follows:] 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

29 

30 

31 

32 

33 

34 

35 

36 

37 

38 

39 

Mr. PITTS. The Chair thanks the gentlelady. I will begin the 

questioning and recognize myself 5 minutes for that purpose. 

Ms. Iritani, in your testimony you indicated that CMS has four 

general criteria against which it reviews Section 1115 demonstrations to determine whether the Medicaid Program’s objectives are 

met. However, did anyone outside of CMS know about these criteria until the GAO did its report? 

Ms. IRITANI. No. The first time we saw those criteria was when 

CMS and HHS responded to a draft of our report. 

Mr. PITTS. So to be clear, these criteria are not even in regulation? 

Ms. IRITANI. Correct. 

Mr. PITTS. So did CMS create them out of thin air, or where did 

they come from? 

Ms. IRITANI. We asked for CMS’ criteria during the course of our 

review, and that criteria were not provided until they reviewed a 

copy of the report. 

Mr. PITTS. Now, you raised concerns that the criteria that CMS 

enumerated for its review of the demonstration programs are far 

too general. Can you please elaborate on these concerns, explain 

the risk associated with the lack of more specific and transparent 

criteria? 

Ms. IRITANI. The general criteria that CMS said that they used 

included things like increasing and strengthening coverage for low 

income and Medicaid, increasing access to and stabilizing providers 

and provider networks available to Medicaid and low income, improving health outcomes for Medicaid and low income, increasing 

efficiency and quality care. We did not believe that these criteria 

were sufficiently articulated in terms of the link to Medicaid, and 

the documentation that we reviewed regarding the approvals was 

not clear as to how they made their decisions about what to approve. 

Mr. PITTS. Now, the part of the Federal statute on 1115 waivers 

is very short; just four pages. So the Secretary of HHS has tremendous latitude under the law to fund some demonstration projects, 

while denying others. Are there any statutory criteria requiring the 

Secretary to be consistent? 

Ms. IRITANI. There are not. The statute is quite broad with regard to the Secretary’s authority for approving purposes that, in 

her or his judgment, further Medicaid objectives. 

Mr. PITTS. What is to stop the agency from playing favorites; 

picking winners and losers, via the waiver process? 

Ms. IRITANI. Well, we believe that more transparent criteria and 

standards for approvals are needed, and more oversight. 

Mr. PITTS. Now, one of the worries that I and many of my colleagues have is that the Medicaid Program too often promises coverage, but effectively denies care. An NPR story this week entitled, 

California’s Medicaid Program Fails to Ensure Access to Doctors, 

told the story of Terry Anderson. She signed up for California’s 

Medicaid Program earlier this year, hoping she would finally get 

treatment for her high blood pressure, but she faced challenges accessing care in a timely manner. Would it make more sense for 

CMS to stop spending money on the low-priority items, and freeVerDate Mar 15 2010 09:39 Dec 14, 2015 Jkt 037690 PO 00000 Frm 00043 Fmt 6633 Sfmt 6633 F:\114THCONGRESS\114X59MEDICAIDDEMOSASKOK120415\114X59MEDICAIDDEMOS
40 

up more Federal dollars for better oversight and direct care for patients? 

Ms. IRITANI. We would agree that Medicaid funds should be 

spent for Medicaid purposes. And the approval documentation that 

we reviewed for the demonstrations did not articulate how many 

of the approved expenditures were furthering Medicaid objectives, 

which is why we have recommended that the Secretary issue criteria as to how he or she assesses whether or not approved spending is furthering Medicaid purposes. 

Mr. PITTS. The Chair thanks the gentlelady. My time has expired. 

The Chair recognizes the ranking member of the subcommittee, 

Mr. Green, 5 minutes for questions. 

Mr. GREEN. Thank you, Mr. Chairman. 

Thank you again for your testimony. We hear a lot of criticism 

of the lack of flexibility of CMS for waivers, but what I heard in 

your testimony and seen in multiple reports going back decades is 

that many actually—maybe actually too much flexibility in how the 

budget neutrality and other features of waivers have been administered. My question is, GAO is asking for clearer standards and 

more transparency, just like CMS has recently taken steps to provide in its approach to Florida and other States with uncompensated care pools. Is that correct? 

Ms. IRITANI. That is correct. 

Mr. GREEN. In reviewing the GAO’s recommendation over the 

last—recommendations over the last 20 years, it appears as though 

your recommendations have remained the same until only recently. 

Isn’t it true that the majority of these recommendations were not 

acted upon up until the Obama administration and the Affordable 

Care Act, which placed many of your recommendations into action? 

Ms. IRITANI. That is correct. 

Mr. GREEN. OK. Given the large amount of Federal dollars at 

stake in waivers, would you agree that it is important for CMS to 

make it—to take its time in evaluating the proposals and getting 

additional information from the States to ensure that each State’s 

proposal is for a project that is in line with the objections—objectives of the statute? 

Ms. IRITANI. We would agree that there is more need for transparency for criteria around how they make their decisions, around 

better methods allowed for predicting how much the Medicaid Program would cost without the demonstration, which becomes the 

basis for the spending limits allowed. 

Mr. GREEN. Well, and I don’t think any up here would disagree 

with we need more transparency in dealing from CMS 

I want to clarify a point in your testimony that may be misleading to some of my colleagues. GAO mentions that some of the 

funds that go to the designated State health programs has been 

supported by both political parties for more than a decade, could 

have received funding from other Federal sources—could that—the 

designated State health programs receive funding from other Federal sources. As you may know or may not know, it is very common 

for small programs to leverage multiple funding streams to provide 

services. However, that is concern—what is concerning is in this 

case, from my understanding, the lack of documentations and poVerDate Mar 15 2010 09:39 Dec 14, 2015 Jkt 037690 PO 00000 Frm 00044 Fmt 6633 Sfmt 6633 F:\114THCONGRESS\114X59MEDICAIDDEMOSASKOK120415\114X59MEDICAIDDEMOS
41 

tential, therefore, for Medicaid Federal matching dollars to be 

given based on other Federal funding not as a match for the State 

dollars as is appropriate under the Medicaid Program. That duplication of funds is the issue that GAO is concerned about. Is that 

correct, Ms.—— 

Ms. IRITANI. That is correct. 

Mr. GREEN. OK. The GAO is not determining what is or is not 

appropriate for Medicaid objective because that determination lies 

with the Secretary of HHS. And our States—rather, the GAO is 

recommending that better documentation reflect the tide of Medicaid objectives for these funds, and that CMS ensure that States 

are not drawing down Federal matching funds based on the input 

of other sources of Federal funds. Is that pretty accurate? 

Ms. IRITANI. Yes, that is correct. I think our concern with the approval documentation around potential duplication was that there 

was variation in the level of protections in the approval documentation with regard to assuring that if programs were receiving Federal funds from other sources, that they were offsetting those 

against the Medicaid funds that they received. 

Mr. GREEN. OK. Thank you, Mr. Chairman. I yield back my time. 

Mr. PITTS. The Chair thanks the gentleman. 

Now recognize the gentleman from Illinois, Mr. Shimkus, 5 minutes for questions. 

Mr. SHIMKUS. Thank you very much, Mr. Chairman. Ms. Iritani, 

it is great to have you here. 

And I have been focused on this budget waiver neutrality debate, 

to the chagrin of some of some of my friends, and actually I think 

my own State, because the concern has been, since there is no 

transparency or clear answer, the premise is, which I agree, properly done, that give States their authority to meld their own program, you also get better outcomes and you will get a savings. I 

mean that is what we are always told. And if not a savings, there 

is an implied aspect in 1115 that says at least it should be neutral, 

but for the past 10 years you all have looked at this, and what 

have you found? 

Ms. IRITANI. Yes, we have found that the documentation did not 

support that spending limits were budget neutral. We found that 

it is likely that Federal Medicaid costs could be increased significantly for Medicaid based on these demonstration approvals. 

Mr. SHIMKUS. So just using the facts of dollars, the claims, they 

are not being substantiated by the facts. The facts don’t substantiate the claims that States have made that we can build a better 

mousetrap, provide better care, and actually have a savings to the 

Medicaid system. 

Ms. IRITANI. Yes. 

Mr. SHIMKUS. So—and again, to the chagrin of even my State, 

because as—the State of Illinois, we are almost a failed State these 

days. Our pension obligations far outstrip per capita any in the 

union. Medicaid is also a big driver. So there is sometimes an intent, I—so I am not being encouraged, let me put it this way, to 

ask these questions on budget neutrality because of, I think, a desire for the States to be able to gain the system a little bit, based 

upon the vagueness of what CMS is doing. And I hate to kind of 

42 

tell—weave the story this way, but it is—I think it is just a—it is 

a fact, based upon the numbers. 

So we have dropped a bill, H.R. 2119, I don’t know if you are familiar with it, and I know your position of not commenting on legislation, but the intent of the bill is to do at least an analysis and 

have the chief actuary of the CMS certify that the proposed budget 

neutrality or implied savings is actually there. I mean it is a guess, 

but at least it has actuaries doing the number crunching to say, 

yes, we believe the State, we think there is going to be a savings, 

at a minimum there is going to be budget neutrality. If we brought 

in and had that actuary analysis before a decision was rendered, 

do you think that would be helpful? 

Ms. IRITANI. Yes, I think that what I can say is that, in a recent—we have noted that the actuary isn’t involved in the process 

typically. In our most recent report in 2014, the—which was looking at the budget neutrality of one State’s approval, we did note 

that the actuary was asked to review the State’s proposal, including the proposed spending limits and the basis for it, and had 

raised questions with it, but was—but—and asked for further documentation that was not provided by the State. And the spending 

limit was approved, and we found that it was likely going to raise 

Federal costs. 

Mr. SHIMKUS. So, you know, that story kind of just supports our 

concern and the reason why we dropped the bill, and it is a very— 

it is very short. But what we require then is a certification process 

by the actuaries which would then, I think, empower them to make 

sure they get all the information they need to be able to make a— 

to certify based upon the best available information that this is 

going to be budget neutral or, in essence, an implied savings. 

So I appreciate you being here. It is a tough issue. Money is always what you fight about. So thanks for coming. 

I yield back my time. 

Mr. PITTS. The Chair thanks the gentleman. 

Now recognize the gentlelady from California, Mrs. Capps, 5 

minutes for questions. 

Mrs. CAPPS. Thank you, Mr. Chairman, for holding this hearing, 

and to our witness for your testimony. I am happy we have this 

opportunity to come together to talk about these important Medicaid waivers; something that has really, truly helped my State respond creatively to its challenges and provide healthcare coverage 

to many more than before. 

Our Nation faces a significant challenge of caring for our growing 

patient population with limited resources, and as was mentioned, 

the challenge even with the number of providers available to meet 

the needs. We must ensure that the Medicaid Program has the 

flexibility through these waivers to address these needs. As has 

been said, these waivers are negotiated between the State and 

CMS, but especially as we have seen in California, the agreement 

affects many more stakeholders once it is in place. Recognizing this 

fact, the ACA included an important provision to encourage broader stakeholder input during the waiver process. Now there is a formulized process for the broader coalition of stakeholders to contribute, and I think that range of perspectives has created better 

43 

and more effective waiver programs. I think both sides of the aisle 

agree that this aspect of transparency is so vitally important. 

Ms. Iritani, can you talk more about how public comments have 

helped and will help to increase transparency throughout the Medicaid waiver process? 

Ms. IRITANI. Certainly. Yes, we raised concerns with the lack of 

transparency in the approval process, dating back to the early 

2000s. In a report in 2002, we talked to a number of different 

States and advocacy groups and others about demonstrations that 

had been recently approved that significantly affected beneficiaries, 

and found that there are great concerns about groups even being 

able to see a copy of the proposal prior to the approval. In some 

cases, I think that there were FOIAs involved to try to get transparency over what was being approved. And the Patient Protection 

Affordable Care Act did require a public input process at the Federal level, which we think greatly enhances transparency of what 

is being proposed, and provides for input to the process prior to the 

approval. So we would agree that that is an important reform. 

Mrs. CAPPS. And so you have seen progress since this has been 

initiated? 

Ms. IRITANI. We have not looked at public—— 

Mrs. CAPPS. You are not—— 

Ms. IRITANI [continuing]. Input since—— 

Mrs. CAPPS [continuing]. Measuring it. 

Ms. IRITANI [continuing]. Since the law was passed. But—— 

Mrs. CAPPS. OK. 

Ms. IRITANI. But we—— 

Mrs. CAPPS. Do you intend to? 

Ms. IRITANI [continuing]. We agree that it has increased transparency. 

Mrs. CAPPS. I mean, how are States responding to these kind of 

comments? 

Ms. IRITANI. We have looked at that. In terms of how are States 

responding to the proposals? 

Mrs. CAPPS. The proposals and the process of the whole transparency issues. 

Ms. IRITANI. We have not looked at that, at how States are responding to the process. 

Mrs. CAPPS. Do you see this as part of your overall objective, or 

is it up to somebody else to do this piece of it? 

Ms. IRITANI. Well, we would be happy to look at that. The work 

that we have been requested to do in recent years has focused on 

budget neutrality and the new costs that were approved in the 

demonstrations. 

Mrs. CAPPS. Which is a lot to be assigned to and be—— 

Ms. IRITANI. Yes. 

Mrs. CAPPS [continuing]. Grappling with in light especially, in 

my view, of the total, I won’t say overwhelm, but increase in volume. I mean there has really been a sea change. You want to explain—I have a few more seconds left, and what are some of the 

issues that you have faced, or how has this process been received? 

Ms. IRITANI. The public input process? 

Mrs. CAPPS. Right. 

44 

Ms. IRITANI. Well, you know, as I say, we haven’t looked at it 

since it was implemented, but we did look at the regulations that 

implemented it and agree that it was responsive to our recommendations that they provide for a Federal input process. 

Mrs. CAPPS. Um-hum. So we are on the path, but it is early yet 

to interpret any results, is that what I am hearing you say? 

Ms. IRITANI. I would say it is an important step to improving 

transparency, yes. 

Mrs. CAPPS. Right, but we need to keep checking back and—do 

you have the means by which you can accomplish some of these 

goals? 

Ms. IRITANI. I would be happy to work with the subcommittee on 

work—— 

Mrs. CAPPS. Thank you. 

Ms. IRITANI [continuing]. Looking at that. 

Mrs. CAPPS. I thank you for the time. I yield back. 

Mr. PITTS. The Chair thanks the gentlelady. 

Now recognize the gentleman from Pennsylvania, Dr. Murphy, 5 

minutes for questions. 

Mr. MURPHY. Thank you. I am over. Good morning. It is good to 

be with you, and thank you for your work. 

I want to ask about one demonstration project that was authorized in the Affordable Care Act that relates to the Institution for 

Mental Disease exclusion, IMD exclusions, for emergency care for 

people with psychiatric conditions. As part of comprehensive mental health reform, this committee will be deciding and considering 

modifications in these IMD exclusions to increase access to timely 

and cost-effect short-term psychiatric care as opposed to boarding 

in emergency rooms, and that is what I understand is the demonstration report that is—was worked on for that study. 

Can you tell the committee, if you are aware of this, what CMS 

has learned from current Medicaid emergency psychiatric demonstrations, and which created an exception for this IMD exclusion 

for adult Medicaid enrollees who have been determined to have 

emergency psychiatric conditions? Are you aware of any of this? 

Ms. IRITANI. I am not. That demonstration was not within the 

scope of our work. 

Mr. MURPHY. Is that something that you would be able to look 

at, because it is—was one of the demonstration programs? Is it totally excluded from your work to review that? 

Ms. IRITANI. I believe that that is a separately authorized—not 

under the 1115—— 

Mr. MURPHY. Well, let me ask a little bit more about this because I mean I value your input on this—— 

Ms. IRITANI. Um-hum. 

Mr. MURPHY [continuing]. But I understand the final evaluation 

though for the demonstration will be completed in the fall of 2016, 

so it is still ongoing. Do you have any advice or suggestions you 

could make to this committee to help us shape how we review these 

to make the most effective policies, for example, on these IMD exclusions? Is that something you would be able to advise us on? 

Ms. IRITANI. Well, I need to see more specific information, but 

yes, we would be happy to talk to the subcommittee about new 

work on this—— 

45 

Mr. MURPHY. Thank you. 

Ms. IRITANI [continuing]. Issue. 

Mr. MURPHY. And also with CMS support, extending the current 

Medicaid emergency psychiatric demonstration until at least the 

final evaluation is available. The—because we have an initial 2013 

report, but we don’t have—I mean the rest is going to take some 

more time. And what we see is in the States involved, because we 

limit hospitals to have less than 17 beds because it seems to only 

cover people who are suicide or the most severe cases, it still leaves 

us in a position where we are having problems putting these pieces 

together. We want to provide effective care for people, we want to 

do it in the most cost-effective way, but also recognizing that you 

can be cost-effective—you can do cost care without providing anything. We don’t want to do that. We want to make sure we are providing effective services. And believe that the Government Accountability Office is a record of really helping us look at and analyze 

those numbers, so I would be grateful if that is something you 

could help us with. It is a key issue that this committee has got 

to deal with, because otherwise what happens with Medicaid, for 

people ages 22 to 64, is they have nowhere to go. We had a recent 

hearing in this subcommittee where Senator Creigh Deeds of Virginia was here. His case was one where he took his son to a hospital in Virginia, and the hospital said we don’t have any beds. And 

what happens so often is these men and women are—they may be 

boarded in an emergency room, they may be tied to a bed, if they 

are assaultive they may be given chemical sedatives, and they say 

there is just no room, and it is this Medicaid rule which was based 

upon closing down those old institutions and hopefully having some 

other support services. If we close the institutions down, we don’t 

have enough hospitals because Medicaid has said you can’t have 

them. And so in his case, he took his son home. His son took a 

knife and tried to kill his father. Slashed him up pretty bad. Father escaped. Luckily, some driver picked him up as he was running up, but unfortunately, his son killed himself. 

Now, I know that these aren’t the cost-effective measures that 

GAO looks at, but it is something we all care deeply about. How 

do you put a number on that? How does he put a number on his 

son’s life? And given the 40,000 suicides that occurred in this country last year, given the 43,000 drug overdose deaths that occurred 

in this country last year, those numbers are staggering and they 

are getting worse every year, so we have to effect this. 

So your input, GAO’s input, I would value greatly as we help address this to find—to look at these numbers and costs and saying 

this is not acceptable to this committee, it is not acceptable to this 

country. Quite frankly, it is not acceptable to the human race that 

we have done this, and the outcomes too often are death. 

I yield back. 

Mr. PITTS. The Chair thanks the gentleman. 

And now recognize the gentleman from Oregon, Mr. Schrader, 5 

minutes for questions. 

Mr. SCHRADER. Thank you, Mr. Chairman. 

Ms. Iritani, what is the rate of Medicaid reimbursement compared to private insurance coverage in general? 

46 

Ms. IRITANI. That is going to vary by service and State. Oftentimes, fee-for-service Medicaid rates may be lower, but again, it is 

going to vary. 

Mr. SCHRADER. They are pretty—they are always lower, and significantly lower. I know in my State it is very dramatic. It is hard 

to get providers sometimes to see Medicaid patients unless they are 

a mix because the rate is, you know, almost 1⁄2, and sometimes not 

even covering the cost of these services. 

What is the rate of—well, is there a general rate of medical inflation that GAO uses to estimate savings when they are evaluating 

these different programs and—— 

Ms. IRITANI. We apply HHS’ own criteria for how States should 

develop spending limits, and that criteria is that States should 

project what Medicaid will cost, which becomes the basis for the 

spending limit, based on the lower of either the State’s historical 

spending trends in recent years, or the President’s budget projections of Medicaid growth for the Nation as used in the President’s 

budget. 

Mr. SCHRADER. But wouldn’t you say it is always more than the 

general rate of inflation? 

Ms. IRITANI. I—— 

Mr. SCHRADER. Medical inflation is generally higher than regular 

inflation. 

Ms. IRITANI. I cannot—— 

Mr. SCHRADER. Well, the answer is yes. 

Ms. IRITANI. OK. 

Mr. SCHRADER. I mean there is not a State in this country 

that—— 

Ms. IRITANI. Um-hum. 

Mr. SCHRADER [continuing]. Doesn’t budget for a higher rate of 

medical inflation for its healthcare programs compared to services 

and supplies—— 

Ms. IRITANI. Uh-huh. 

Mr. SCHRADER [continuing]. You know. My State was easily 3, 4, 

or sometimes 5 times, historically—— 

Ms. IRITANI. Um-hum. 

Mr. SCHRADER [continuing]. Prior to the advent of the ACA, 

which has now driven down healthcare expenditure increases dramatically. A little shocked that GAO doesn’t have this information, 

actually. 

Isn’t it correct that, for these designated State health programs, 

that these have been around a long time? Not recent—— 

Ms. IRITANI. Some of the approvals—— 

Mr. SCHRADER [continuing]. Figment of this— 

Ms. IRITANI. Some of the original approvals of the demonstrations we reported on in our recent report had been approved years 

ago, yes. 

Mr. SCHRADER. So prior to this administration? 

Ms. IRITANI. Yes. 

Mr. SCHRADER. OK. Good. Good. And isn’t it accurate that CMS, 

with your latest report, has agreed with most all of your recommendations and is inclined to supposedly work to improve them? 

Ms. IRITANI. Yes, we had three recommendations around issuing 

criteria about how to further Medicaid demonstration objectives 

47 

around improving the documentation about how they apply that 

criteria, and about making sure that they consistently provided assurances and approvals that there wouldn’t be duplication of funding. 

Mr. SCHRADER. Good. 

Ms. IRITANI. And they agreed with two of those, documentationrelated recommendations. They partially agreed with the first one, 

indicating that they had general criteria that they used. They did 

not commit to issuing criteria. 

Mr. SCHRADER. And I guess I have a concern as I listened to your 

testimony and some of the queries by some of my colleagues. I am 

a little concerned we are—you are encouraging CMS to actually get 

into the micromanagement of these State waivers, and I think that 

is a big concern. Criteria defining how States have to have, or have 

to have certain procedures in place, and—shouldn’t we be outcomebased, shouldn’t we be outcome-focused, don’t we just want to see 

more coverage for more people, better healthcare outcomes? I mean 

that is something that my colleagues and I can evaluate. Some of 

my medical physician colleagues, they perhaps have the greater degree of understanding, but for those of us in the lay field, I feel 

more comfortable evaluating the outcomes, not defining criteria by 

which these States, who we are trying to give more flexibility to 

give better coverage to more people over the long-haul. That really 

should be the goal. I am concerned that CMS may interpret, or my 

colleagues may interpret, your queries as to wanting to micromanage these States, and I think that is the wrong way to go. I 

think that is really the wrong way to go. Don’t you feel that outcomes are the most important criteria by which we should judge 

success in these programs? 

Ms. IRITANI. I would agree that improved outcomes for Federal 

spending is important. Healthcare costs are increasing and we are 

concerned about the long-term sustainability of the Medicaid Program. The—our work has really focused on the spending aspect 

and the approvals of the spending. And certainly, I think the goal 

of many demonstrations is to improve outcomes, but given the longstanding policy that they not raise Federal costs, I think that has 

been the focus of our work, and that is where we think reforms are 

needed because it is the long-term sustainability of the program 

that is—could be at risk. 

Mr. SCHRADER. I yield back. Thank you, Mr. Chairman. 

Mr. PITTS. The Chair thanks the gentleman. 

Now recognizes Dr. Burgess 5 minutes for questions. 

Mr. BURGESS. Thank you, Mr. Chairman. 

And just picking up on Representative Schrader’s questions, and 

the observation of outcomes versus micromanagement at CMS, we 

as physicians are always held to the standard we are going to pay 

for performance, and we are going to pay for value not volume. Do 

you ever provide or look to a pay-for-performance standard for 

CMS when evaluating these programs? 

Ms. IRITANI. We have not looked at that, but I know some of the 

demonstrations I think are evaluating that. 

Mr. BURGESS. Well, it just seems like, again, we are all too willing to burden every physician across the land with new requireVerDate Mar 15 2010 09:39 Dec 14, 2015 Jkt 037690 PO 00000 Frm 00051 Fmt 6633 Sfmt 6633 F:\114THCONGRESS\114X59MEDICAIDDEMOSASKOK120415\114X59MEDICAIDDEMOS
48 

ments, and yet never ask the same of the bureaucracy, and really, 

we ought to be for patients before we are for the bureaucracy. 

I do have a question, it may require an answer in writing, but 

let me pose it to you. And I will get it to you in writing because 

the answer may be longer than time will permit us to do here. But 

we have heard several times this morning that applying for one of 

these waivers, an 1115 waiver, can be burdensome, time-consuming. I know it happened in Texas. Mr. Bucshon referenced Indiana. Can you discuss ways in which the Department of Health and 

Human Services could streamline the approval process for the 1115 

waiver? 

Ms. IRITANI. Our work is really focused on the approval processes 

for the spending, and we have examined the approval times, which 

vary greatly among demonstrations. There are many factors that 

we have been told contribute to that. 

Mr. BURGESS. Well—but I would like, if you would, and I apologize for interrupting because—but time is short, I would like your 

evaluation of why that variability exists. Again, we in health care, 

if we had that degree, or when we have that degree of variability, 

people are always willing to ask questions and point fingers at us, 

just like that same standard applied to CMS when issuing these 

waivers. Just very briefly, according to your report, the Department of Health and Human Services actually did not have specific 

criteria for these 1115 waivers. Now they do, but do you have a 

sense of what the criteria was before you issued your report? 

Ms. IRITANI. They did not have any written criteria regarding 

how they made these approvals. 

Mr. BURGESS. So it was flip a coin, draw straws, just how I feel 

that morning when I get up? No criteria at all? 

Ms. IRITANI. Officials told us that it wasn’t within the Secretary’s 

interests to specify criteria. 

Mr. BURGESS. Well, that brings up the point, because we kind of 

watched what is happening down in Florida, and now that expansion of Medicaid is the number 1 issue for the Obama administration going forward, this is the sine qua non of President Obama’s 

legacy is the expansion of Medicaid. It really does seem like that 

power is being brought to bear on a State that had a functional 

1115 waiver for their low-income pool, now it needs to be re-upped 

but the pressure is coming that you have to do something different 

that you haven’t been doing before. Am I wrong to get that impression? 

Ms. IRITANI. Well, we would agree that transparency is needed 

in the approvals and approval process, and the criteria that is 

used, and our concerns have been longstanding based on reviews 

of many, many States’ demonstrations. 

Mr. BURGESS. Well, the good news for both of us is that this is 

the most transparent administration in the history of the country, 

so we, I guess, can take some degree of solace on that. 

The question about the neutrality, and you brought that up a 

couple of times, when approaching and approving these 1115 waivers, but GAO has had some concerns about this, actually going 

back into 2008, into the Bush administration. Center for Medicare 

and Medicaid Services has consistently asserted the policies are 

adequate and applied consistently, but really, to me, they are not. 

49 

Could you share with us, and again, this may be an answer in writing because of time, but can you share with us ways that you think 

Congress could use to remedy this issue? 

Ms. IRITANI. Yes, we believe congressional intervention would be 

helpful in this case. As I mentioned in my statement, our concerns 

about the approvals are longstanding. I think we have a report dating back to the mid-’90s on the budget neutrality process raising 

concerns, and the Secretary has consistently disagreed with our 

recommendations to reform the criteria and process around approving the spending limits. So we have elevated the recommendations 

that we made to the Secretary about improving the process as a 

matter for congressional consideration. 

Mr. BURGESS. Well, I thank the gentlelady for her testimony. I 

will submit those questions in writing. 

And, Mr. Chairman, if I could, if you would yield to me for a 

unanimous consent request? 

Mr. PITTS. The gentleman may proceed. 

Mr. BURGESS. Chairman, I request unanimous consent to enter 

into the record a letter by my attorney general in Texas, Ken 

Paxton, several other attorneys general, about the issue of the 1115 

waivers. And I would ask—— 

Ms. CASTOR. And, Mr. Chairman—— 

Mr. BURGESS [continuing]. For its inclusion in the record. 

Ms. CASTOR [continuing]. I reserve the right to object. 

Mr. PITTS. All right. The—— 

Mr. BURGESS. Again, I make the unanimous consent request—— 

Mr. PITTS. He has made—— 

Mr. BURGESS [continuing]. As a matter of—— 

Mr. PITTS [continuing]. The unanimous consent request. Do you 

object? 

Ms. CASTOR. I would just like to make a short statement, and 

then I would—— 

Mr. PITTS. All right, the Chair recognizes the gentlelady. 

Ms. CASTOR. I just want to point out that part of that letter is 

inaccurate when it comes to the State of Florida and what transpired there, since the State of Florida was on notice since 2011 

that it was unlikely that the low-income pool was likely to survive 

in its current form, and due to the fact that CMS and the State 

of Florida have, in fact, negotiated the matter. The State did not 

expand Medicaid, and the LIP does survive. This simply points to 

the fact that we have all got to work harder to make sure we are 

working on behalf of the taxpayers. GAO has been critical of not 

allowing Federal waivers to spend extra money, and we have all 

got to be mindful of that. And if we take this tact that States have 

coverage, but they get these uncompensated care pools that don’t 

have much accountability and transparency, that is not going to 

serve Medicaid patients very well, and the congressional intent to 

be strict and wise with taxpayer dollars. 

But at this time, I will remove my objection. Thank you. 

Mr. PITTS. Thank you. 

Without objection, the letter is entered into the record. 

[The information appears at the conclusion of the hearing.] 

Mr. PITTS. The Chair thanks the gentleman. 

50 

Now recognizes the gentlelady, Ms. Castor, 5 minutes for her 

questions. 

Ms. CASTOR. Yes, I just have a quick question. The transparency 

regulations also require States to be more transparent; have hearings, have comment periods, but this is so difficult for folks who 

rely on Medicaid services back home, because remember, Medicaid 

really it serves primarily children, the disabled population, elderly 

in nursing homes, especially for States that have an expanded 

Medicaid. They have transitioned now, many States, to Medicaid 

managed care. And what I hear from folks at home is it is very difficult to have any real idea on where accountability lies, where 

they can go for recourse when they have an issue. For example, I 

had a woman in my office from Florida last week who has a severely autistic son, and she—under managed care, they have 

changed providers and she hasn’t had the ability to weigh-in with 

policymakers on how care is going to be delivered to her son and 

other families. 

Here is another example, doctors are extremely frustrated. I had 

a pediatric dentist in my office just a few weeks ago from Florida. 

He does the Lord’s work in taking care of hundreds and hundreds 

of children across my State and their dental health care needs. And 

that is smart because you take care of dental health needs and you 

save the State and Federal Government money down the road. But 

they do not have any recourse into inquiring at the State level 

what is happening with changes in demonstration projects and 

waivers. Can the GAO take a closer look at how States can do a 

better job? Have you done that and what recommendations do you 

have to help these families, patients and providers, have more access to what is happening? 

Ms. IRITANI. We haven’t looked at the public input process since 

the year 2000s. We haven’t been asked to, but we would be happy 

to work with your staff regarding re-examining how things are 

working. 

As I said earlier, we thought that the Federal input process that 

was provided for in recent legislation was a very good step because, 

before, it was really just up to the States to get input, and that was 

often difficult for beneficiaries and others to weigh-in. 

Ms. CASTOR. I will look forward to doing that with you. 

Thank you. I yield back my time. 

Mr. PITTS. The Chair thanks the gentlelady. 

Now recognize the gentlelady from North Carolina, Mrs. Ellmers, 

5 minutes for questions. 

Mrs. ELLMERS. Thank you, Mr. Chairman. And thank you, Ms. 

Iritani, for being here today with us. 

You know, based on your testimony and some of the questions 

and discussion today, it looks like CMS is creating overlap and duplication through its funding of State health programs. Under Section 1115, basically CMS is authorizing Federal matching funds for 

State programs, despite the fact that other Federal agencies already provide funding for these causes. It would seem that we are 

duplicating billions of dollars. 

With that, could you discuss the steps that CMS is taking to ensure that the funding of these State-based programs does not result 

in overlap of duplication of Federal funding? 

51 

Ms. IRITANI. We found really mixed results in what CMS was 

doing in the documentation around—providing for assurances that 

the new spending that they were approving for the demonstrations 

would not duplicate other Federal funding sources. There were 

some States where the documentation would actually provide for a 

specific weighing-out of the different funding streams—— 

Mrs. ELLMERS. Um-hum. 

Ms. IRITANI [continuing]. And requirements on how to offset—— 

Mrs. ELLMERS. Um-hum. 

Ms. IRITANI [continuing]. The Medicaid funds with other Federal 

funding streams, but in many cases, there wasn’t such a requirement, which raised concerns to us. 

Mrs. ELLMERS. In your report, it lists 150 State programs for 

which CMS authorized Federal Medicaid funding, and many of the 

programs, based on their name, appear to be worthwhile and for 

good causes. I would like you to expand on how some of these programs promote Medicaid’s objectives. And I want to give you three 

examples, and if you can just help us understand how this fits into 

the Medicaid space and should be approved for funding. How about 

licensing fees in Oregon? 

Ms. IRITANI. Yes, you know, the point of our report is that we 

could not tell how that and other examples of the State programs 

that were approved actually related to Medicaid objectives. 

Mrs. ELLMERS. So the other two now: one example I have, 

healthcare workforce retaining in New York. Now, certainly, we 

need a good, strong health workforce. Do you feel that that fits into 

the Medicaid space as well? 

Ms. IRITANI. We felt like many of the approvals that CMS had 

approved were on their face only tangentially related to Medicaid. 

Mrs. ELLMERS. Um-hum. Um-hum. 

Ms. IRITANI. And without any criteria about how the Secretary 

was making these decisions—— 

Mrs. ELLMERS. Um-hum. 

Ms. IRITANI [continuing]. We could not—— 

Mrs. ELLMERS. Determine. 

Ms. IRITANI [continuing]. Make an assessment. 

Mrs. ELLMERS. Yes. And then the last one I have is Fisherman’s 

Partnership in Massachusetts. I am like you, I am just going to assume that you are going to say that also fits into that same characterization. 

Ms. IRITANI. Yes. 

Mrs. ELLMERS. And lastly, I just want to ask a little bit about 

the broad authority of the 1115 statute. What are the outer boundaries that the Secretary has to approve Medicaid funding? 

Ms. IRITANI. The 1115 authority is very broad, and gives the Secretary discretion to waive certain Medicaid requirements in 1902, 

i.e., the Social Security Act, and approve new costs that are not 

otherwise eligible for Medicaid that, in the Secretary’s judgment, 

are likely to promote Medicaid objectives. It is a broad authority. 

Mrs. ELLMERS. I think that probably is about the best characterization. It is quite a broad authority, and gives quite an incredible 

amount of discretion. 

Well, thank you, Ms. Iritani. 

52 

That is all I have, Mr. Chairman. Thank you. I yield back the 

remainder of my time. 

Mr. PITTS. The Chair thanks the gentlelady. 

Now recognize the gentleman from California, Mr. Ca ́ rdenas, for 

5 minutes for questions. 

Mr. CA ́ RDENAS. Thank you very much, Mr. Chairman. Appreciate 

this opportunity to go through these issues, Ms. Iritani. 

I hear of some of the concerns about budget neutrality, but I also 

understand that CMS has taken new steps to make their approach 

to budget neutrality more transparent and enhance understanding 

between CMS and the States. On October 5, 2012, the released a 

Section 1115 template for States to use in order to clarify the requirements and simplify the application process. This template includes instructions and an accompanying budget worksheet that 

provides guidance on some of the most commonly used data elements for demonstrating budget neutrality. 

That being the case, is this a step in the right direction? 

Ms. IRITANI. We would still maintain that much more is needed. 

That template that was issued provides guidance, but it is a voluntary—States do not need to use it. And CMS’ written policy is 

quite outdated in terms of their typical practices for what they review and how they review things and what data they require, and 

we believe that more reforms to those things are needed to ensure 

that there is more consistency and approvals. 

Mr. CA ́ RDENAS. Is it the case that, prior to October 2012, that 

HHS had not issued anything like this? 

Ms. IRITANI. As far as I know, yes. 

Mr. CA ́ RDENAS. OK. Well—so hopefully, what that means is HHS 

recognizes the—that they need to have a better transparency and 

understanding, and—with everybody involved when it comes to 

their responsibilities in giving the States this flexibility, correct? 

Ms. IRITANI. I—the Secretary has consistently disagreed with our 

recommendations that any sort of reforms to their process for reviewing are needed, and this dates back to the early 2000s when 

we first made recommendations to the Secretary around transparency. And we have multiple reports, there is a list attached to 

my testimony statement, dating back to the mid-’90s. And regarding our recommendations to the Secretary on transparency and accountability in the review and approval of spending limits, the Secretary has consistently disagreed that anything is needed. 

Mr. CA ́ RDENAS. Can you give us an example of one of those statements of disagreement, based on your reports? 

Ms. IRITANI. We have recommended that the Secretary issue criteria for how they review and approve the spending limits, and provide for better documentation regarding the basis for approvals of 

the spending limits and make that publicly available, as well as ensure that States are required to use appropriate methods for projecting Medicaid costs. 

Mr. CA ́ RDENAS. Um-hum. 

Ms. IRITANI. And the Secretary has indicated that—generally has 

disagreed with—that any of those reforms are needed to the process. And that is why we have elevated our recommendations to the 

Congress as a matter for consideration to require the Secretary to 

do these things. 

53 

Mr. CA ́ RDENAS. So those objections on behalf of the Secretary 

based on those recommendations, are—was there any indication 

that it is something that they couldn’t do, or just something that 

they disagree with? Because one of the problems that I have experienced being a policymaker for 18-plus years now is that it is one 

thing to make recommendations to a department or a Government 

entity, and it is another thing for them to admit that if we had the 

resources, maybe we would do so, but we don’t have the people 

power or the resources to actually implement those recommendations. Is there any indication whatsoever that resources are an 

issue as well, on behalf of the department? 

Ms. IRITANI. That has not been something that the Secretary has 

said. I think that their response has generally been that they are— 

they use consistent criteria, and that they have treated States consistently, and that they believe that their current policy and practices do not need reform. 

Mr. CA ́ RDENAS. And overall, are you aware of States overall on 

balance not appreciating that flexibility, or that they do, in fact, 

want to continue that flexibility relationship with HHS and the individual States? 

Ms. IRITANI. We have not, you know, discussed with States the 

spending limit process particularly but, you know, given that the 

Secretary has authority to approve new costs not otherwise matchable, and to approve spending limits that may be much higher than 

what, you know, the State has justified, I would think States would 

actually embrace it. But our concern, again, is with the long-term 

fiscal sustainability of Medicaid and, you know, how this affects the 

Federal budget and Federal taxpayers. 

Mr. CA ́ RDENAS. Thank you. I yield back the balance of my time. 

Mr. PITTS. The Chair thanks the gentleman. 

Now recognize the gentleman from Indiana, Dr. Bucshon, 5 minutes for questions. 

Mr. BUCSHON. Thank you, Mr. Chairman. 

As a physician who has taken care of Medicaid patients for, you 

know, a couple of decades, this hearing is very valuable to me 

today. I want to point out that, you know, Medicaid is a critical 

program that we need to—that our citizens need and—but clearly, 

we need more oversight. I do want to point out that, in my view 

though, the traditional Medicaid is not good insurance coverage, 

and that has been shown already with the Medicaid expansion, 

under the Affordable Care Act where emergency room visits are actually up, not down, across the country. That is not my opinion, 

that is factual. And when I was a practicing physician, when I first 

came to Evansville, Indiana, there wasn’t a single fellowship 

trained OB/GYN that would take a Medicaid patient in our community. Now, that has changed some now that physicians have been 

essentially kind of forced into being employed by hospitals, especially in that area. In one of the surrounding States surrounding 

Indiana, some of the anesthesiologists in my hospital didn’t even 

both to bill Medicaid for the care that they provided for those patients because the State ran out of money before the end of the 

year, and the reimbursement was so low it didn’t even make sense 

to spend the administrative costs to bill them. 

54 

So that said, some of the things you pointed out about where 

waivers are using—it appears to be given with no specific approval 

criteria. It is not in a rule, it is not in a statute, it is not in a law, 

and that has resulted in some money, billions of dollars, being 

spent on non-Medicaid really type spending that should be associated with that program. Further, spending money that could be 

used for direct patient care, as has been pointed out by a number 

of members. So it seems to me that specifically legislation likely is 

needed. Would you agree or disagree with that? 

Ms. IRITANI. Well, we would agree that congressional intervention would—and oversight is—would be important to addressing 

these issues. 

Mr. BUCSHON. Yes. And some States, as you probably know, have 

been operating under an 1115 waiver for decades, and some have 

suggested that as part of that process, Congress create a process 

where longstanding core elements of an 1115 waiver can effective 

be grandfathered into the State’s State plan amendment, which directs the operation of the program. Do you have any thoughts on 

that? 

Ms. IRITANI. I do not have a comment. Our work has not looked 

at that kind of process. 

Mr. BUCSHON. Because it seems to me, I mean if you have a program in your State that is working, and you have been getting 

waivers for decades sometimes, that—during the, you know, how 

we utilize the Medicaid Program, we should just change it so that 

we don’t have to continue to ask for these waivers. And, you know, 

Healthy Indian Plan 2.0, which was put into place after the original Healthy Indiana Plan was successful, and has data to prove so, 

you know, we had to fight for 2 years to get a waiver for something 

that has been shown to be effective, and also that the patients, 

over 90 percent, approve of. And it actually saved probably 2 or 3 

percent in our Medicaid budget in our State, and has allowed us 

to cover individuals with a—low-income individuals with a program 

not—that is not traditional Medicaid, that actually reimburses providers at a level that they can accept. And so it actually is increasing access to patient care. 

So I don’t have a specific question, other than those comments. 

I think that many of the questions I have asked—I were—was 

going to ask have been answered, but just to say that, you know, 

it really is hard to believe that after decades of recommendations 

from you all, that we are still wasting money in the—it seems, in 

the Medicaid Program, at the same time where the reimbursement 

rates to providers is limiting access to direct care for patient. And 

it seems to me, Mr. Chairman, that we are going to need legislative 

action. 

I yield back. 

Mr. PITTS. The Chair thanks the gentleman. 

Now recognize the gentleman from Virginia, Mr. Griffith, 5 minutes for questions. 

Mr. GRIFFITH. Thank you, Mr. Chairman. Thank you for being 

here this morning. 

Despite the fact that CBO has indicated that under ObamaCare, 

ACA’s Medicaid expansion would, on balance, reduce incentives to 

work, and that a work requirement component for the able-bodied 

55 

would increase available resources for Americans. To date, CMS 

has refused to approve work requirements as a part of Republican 

State demonstration waivers. Is there anything in the Section 1115 

statute that would prevent CMS from approving work-related requirements? 

Ms. IRITANI. We have not encountered that kind of proposal in 

the work that we have done, so I can’t comment on the Secretary’s 

authority in that case. But as I mentioned, the 1115 does provide 

the Secretary with quite broad authority. 

Mr. GRIFFITH. So a cursory view would not be unreasonable for 

some of us to think that that broad authority would not preclude 

a work component requirement for the able-bodied? 

Ms. IRITANI. As I said, we haven’t encountered that kind of requirement in our work, so I can’t comment on that. 

Mr. GRIFFITH. I appreciate that. 

Since 1115 demonstration programs are intended to be experimental or pilot projects to test new ways of providing services, it 

is my understanding that each demonstration is to be evaluated. 

Has GAO reviewed the evaluations of demonstration programs, and 

if so, what have those evaluations taught about the ways to reform 

the Medicaid Program to provide better access and services to 

beneficiaries? 

Ms. IRITANI. We have not been asked to look at that component 

of the demonstration, but you are correct, these demonstrations are 

supposed to be evaluations and have an evaluation component. We 

did, in the mid-’90s, in a report, discuss the major impact that 

some of these demonstrations had on beneficiaries and other 

things, and looked at the progress reports that States were submitting to CMS and also the planning for the evaluations, and found 

both were lacking. We made recommendations to the Secretary to 

improve both those things, and we have not since been asked to 

look at that. 

Mr. GRIFFITH. Did they ever get back to you and say that they 

had implemented your recommendations that you made back in the 

mid-’90s? 

Ms. IRITANI. They agreed with the recommendations at the time, 

and then at some point, and this is years ago, I think they said 

they were no longer—reform was no longer needed. 

Mr. GRIFFITH. Thank you. I know that as a part of waiver renewal, some States send CMS evaluation reports that may be posted on the CMS Web site. Do you know if CMS also conducts its 

own analysis? 

Ms. IRITANI. We haven’t look at evaluations for years, so I can’t 

comment on that. 

Mr. GRIFFITH. All right. So you don’t know if they are doing their 

own evaluations—— 

Ms. IRITANI. Well, what I do—— 

Mr. GRIFFITH [continuing]. Because of what the State says? 

Ms. IRITANI. What I do know from our work from the—— 

Mr. GRIFFITH. Yes, ma’am. 

Ms. IRITANI [continuing]. Mid-2000s is that, you know, the demonstration terms are typically 5 years, but they can be less, and 

that, you know, CMS required at the time that the State plan an 

evaluation and that they also, because they wanted to understand 

56 

how the demonstrations were working and if information was being 

collected to actually do the evaluation, they required progress reports. But, you know, that is, again, where we found that the 

progress reports weren’t always, you know, complete or being 

turned in timely, et cetera. So we feel like the evaluation component of the, you know, the demonstration is—already is an important one. 

Mr. GRIFFITH. And, of course, if CMS doesn’t do their own evaluation of those demonstrations, it is kind of hard for them to really 

assess it if they are just relying on the States. 

I do appreciate you being here today. Appreciate your testimony. 

Thank you so much for answering my questions. 

And, Mr. Chairman, I yield back. 

Mr. PITTS. The Chair thanks the gentleman. 

Now recognize the vice chairman of the subcommittee, Mr. Guthrie, 5 minutes for questions. 

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

for yielding. And thank you for being here today and answering the 

questions. 

I want to talk about the budget neutrality policy. In your testimony, you indicated that one of the problems with CMS’ implementation of its budget neutrality is that it allowed some States to include hypothetical costs. Can you provide—define hypothetical 

costs that CMS has implemented and some examples of that? 

Ms. IRITANI. Sure. There are two main components to basically 

the budget neutrality process and projecting the cost of Medicaid 

without the demonstration, which becomes a basis for the spending 

limit that would be allowed. One is a spending base, which is by 

the policy supposed to be based on actual historical expenditures 

for Medicaid in the State for the recent year. The other is the 

growth rates that project costs over the course of the demonstration. 

CMS has, since we first started looking at this issue in the mid- 

’90s, allowed hypothetical costs that is in the spending base, so 

they would allow States to project or use baselines based on not 

what they were actually covering, historical costs, in their Medicaid 

Program, but what they could potentially cover, for example, populations, hypothetical populations that they could cover under the 

flexibility under the Medicaid Program, but were not covering, or 

payment rates. In more recent demonstrations we found that CMS 

has allowed States to assume that they would be paying providers 

more than they were actually paying, as part of their baseline for 

developing the spending limits. 

Mr. GUTHRIE. And then so is there anything that stops CMS 

from applying budget neutrality to one State but not another 

State? Could they favor one State over another in the way they 

apply budget neutrality? Anything to stop them from doing that? 

And could this cost—you know, this seems to cost—could cost billions by allowing hypothetical costs. 

Ms. IRITANI. There are tens of billions of dollars being approved 

in these demonstrations, and a lack of transparency over the basis. 

Mr. GUTHRIE. So they could favor one State over—there is nothing to prevent them from favoring one State over another in that— 

57 

they make the decision on a State-by-State basis I guess is—and 

so they could—— 

Ms. IRITANI. I think oversight—— 

Mr. GUTHRIE. Needs to be—— 

Ms. IRITANI. Oversight. 

Mr. GUTHRIE. OK. So what would GAO say to the charge that 

some have made that budget neutrality would prevent CMS from 

making an important investment in State innovations? 

Ms. IRITANI. Could you repeat the question? 

Mr. GUTHRIE. So what would GAO say to the charge that some 

have made that budget neutrality prevents CMS from making important investments in some State innovations? 

Ms. IRITANI. Well, the whole concept of budget neutrality is that 

States would figure out how to innovate and get flexibility from 

traditional Medicaid rules, but within their current constraints of 

what they have been spending for Medicaid. I think it is one thing 

to innovate when you are getting a lot more money to do so. 

Mr. GUTHRIE. Um-hum. 

Ms. IRITANI. It is another thing to innovate with, you know, with 

flexibility around Medicaid’s traditional requirements, but creating 

efficiencies in doing so and not raising costs for the program. And 

we think that is a very important concept again—— 

Mr. GUTHRIE. Um-hum. 

Ms. IRITANI [continuing]. Getting back to the long-term sustainability of the program. 

Mr. GUTHRIE. But if one State is receiving X amount of dollars 

and they want to innovate, and they say you can innovate within 

that X amount of dollars, but if one State is receiving X amount 

of dollars and CMS says you get X amount of dollars plus hypothetical cost dollars, that could be applied on a State-by-State and 

not consistent, correct? So that essentially, a State is getting more 

money to innovate, is that—am I reading that wrong—— 

Ms. IRITANI. Well—— 

Mr. GUTHRIE [continuing]. Or understanding that wrong? 

Ms. IRITANI. Yes, different States ask—develop their spending 

limits different ways. 

Mr. GUTHRIE. Well, thank you. 

I yield back, Mr. Chairman. 

Mr. PITTS. The Chair thanks the gentleman. 

And now recognizes the gentleman from Florida, Mr. Bilirakis, 5 

minutes for questions. 

Mr. BILIRAKIS. Thank you, Mr. Chairman. Appreciate it very 

much. Thank you for your testimony. 

In Florida, we recently finished getting an 1115 waiver with 

CMS. I am sure you are aware. It was a long hard process that included a State lawsuit against the Federal Government over the 

process. Florida has had an uncompensated care fund which we 

call the LIP, the Low-Income Pool, for our Medicaid Program for 

almost a decade now. What should have been a simple process, in 

my opinion, to renew that fund turned into a long, drawn-out affair 

by CMS who decided to change the rules this year. 

Ms. Iritani, when HHS reviews and issues 1115 waivers, do they 

follow precedent established with other approvals, or is every application reviewed from the beginning? 

58 

Ms. IRITANI. If I understand the question, is it when HHS approves a demonstration, does that set precedent for others? 

Mr. BILIRAKIS. Yes, for others and maybe previous applications 

for that particular State as well. Or is that—do we have to start 

from the beginning? 

Ms. IRITANI. Well, we have—— 

Mr. BILIRAKIS. First with others. Yes. 

Ms. IRITANI. Well, we haven’t look at differences in, you know, 

how HHS approves new approvals versus extensions versus amendments, which are all different ways that HHS can approve things. 

That said, you know, I think HHS, with every new approval, does 

set precedents for other States to follow. And there are many demonstrations that have been operating for many years—— 

Mr. BILIRAKIS. Right. 

Ms. IRITANI [continuing]. As someone mentioned. 

Mr. BILIRAKIS. OK, next question. HHS provides GAO with four 

general criteria—you stated that—that State programs must meet 

to receive the funding through the 1115 Medicaid waiver. However, 

the criteria are so broad that they can be interpreted in many different ways. The question: Is such activity fair to States and stakeholders, and does GAO think that HHS needs to issue regulatory 

guidance explaining these criteria? 

Ms. IRITANI. Well, we believe that more specific criteria—written 

criteria are needed and—otherwise we believe that many questions 

about the basis for the decisions, as well as the consistency of approvals, will continue to rise. 

Mr. BILIRAKIS. And I understand that GAO was not even aware 

of these criteria, is that correct? 

Ms. IRITANI. Yes, correct. 

Mr. BILIRAKIS. OK, next question. GAO’s work suggests that 

there is likely significant duplicative Federal funding streams for 

State programs and the waivers and other HHS programs. Do we 

know if HHS reviews for duplicative payments prior to or after approval? If not, is there a mechanism for HHS to prevent duplication 

or at a minimum recoup duplicative funding, save billions of dollars 

for us? 

Ms. IRITANI. We have not looked at how HHS monitors spending 

post-approval. We have looked at, you know, what protections they 

provided in the terms and—of the demonstrations regarding preventing duplication and found variation and, in some cases, no assurances that the new spending for Medicaid would not duplicate 

other purposes. 

Mr. BILIRAKIS. OK, next question. In my estimation, there is a 

clear lack of uniformity in CMS decision-making. I think it is pretty obvious from the testimony. Are there criteria that could explain 

why 2 States of a similar nature get uncompensated care pools approved for different lengths of time? And I know my friend, Mr. 

Guthrie, touched on this as well. 

Ms. IRITANI. There are no criteria that would explain that, and 

that is part of why we are recommending that there be criteria. We 

feel like that is important for transparency and for a common understanding of why the Secretary is making certain approvals. 

Mr. BILIRAKIS. Thank you. One last question, if you don’t mind. 

I have a few more seconds. Have you ever encountered an instance 

59 

when CMS would force a State to take an action that their Governor and the legislature did not want to take in order to renew 

the 1115 waiver that was already in existence? 

Ms. IRITANI. I am not aware of that kind of circumstance, but we 

typically haven’t—have looked really at the approvals at the Federal level. 

Mr. BILIRAKIS. All right, very good. I yield back. Thank you, Mr. 

Chairman. 

Mr. PITTS. The Chair thanks the gentleman. 

Now recognize the gentleman from Missouri, Mr. Long, 5 minutes for questions. 

Mr. LONG. Thank you, Mr. Chairman. 

Doctor, we—if we are facing serious budgetary challenges, 

wouldn’t it be better for us to prioritize medical care for patients 

in Medicaid rather than some of the questionable projects being approved for Federal spending in these 1115 waivers? 

Ms. IRITANI. We would agree that many of the approved new 

costs in the recent demonstrations, that documentation was lacking 

as to how they related to Medicaid purposes. And our position has 

always been that Medicaid funds should be for, ideally, covered 

Medicaid services for Medicaid beneficiaries. You know, the demonstrations give authority to the Secretary to approve new costs for 

purposes of the demonstration, but they should be furthering Medicaid objectives, and that is why we think there needs to be more 

articulation on the Secretary’s part of how she makes the decisions. 

Mr. LONG. So you do agree that it would be better to prioritize 

medical care for patients in Medicaid? 

Ms. IRITANI. We would agree that, yes, Medicaid objectives 

should be the driving—is within—the 1115 is—should be the driving factor for decisions, and it is just not clear how the Secretary 

defines those. 

Mr. LONG. OK. One of my big concerns about the growth of the 

Medicaid Program is there is the temptation to just cover more 

people. Everybody always wants to be philanthropic and, oh, let’s 

cover more, cover more people, without ensuring that the access is 

timely and meaningful for these patients that they are wanting to 

cover. But from what I understand of GAO’s work, CMS said they 

define low-income patients as 250 percent of the Federal poverty 

level. 250 percent, that is a fairly decent income in several districts 

around the country. And do you think it is appropriate for CMS to 

approve spending Medicaid dollars on what would be middle-class 

income in a lot of areas? 

Ms. IRITANI. One of the things we were looking for when we 

looked at what new costs that CMS was approving was whether or 

not those costs, for example, with the State programs in the lowincome pools, were for providers that were serving low income and 

Medicaid individuals. And didn’t—found that some of the programs 

were for the general public and—or not clearly linked to low-income populations, and we find that questionable. 

Mr. LONG. But do you think—so you do find it questionable, the 

250 percent mark? 

Ms. IRITANI. We have—you know, States have great flexibility to 

define how they define low income. You know, the poverty level— 

levels that they cover under Medicaid vary greatly. So we don’t— 

60 

we feel like it is the Secretary’s decision and discretion to define 

what she considers to be Medicaid purposes—— 

Mr. LONG. Which apparently—— 

Ms. IRITANI [continuing]. We just don’t know what they are. 

Mr. LONG. —is 250 percent. 

Ms. IRITANI. It is, you know, within the authority of the Secretary to define how she defines low income and Medicaid—— 

Mr. LONG. OK, I have about a minute left here. So 1115 waivers 

are supposed to further Medicaid’s objectives. Medicaid is a program which exists to provide access to medical care for vulnerable 

populations, so how does the administration get away with justifying some of these spending approvals? 

Ms. IRITANI. The Secretary—and it is—and the response to our 

draft report, said that they had general criteria that we discussed 

earlier that they applied, and that they apply criteria consistently 

and treat States consistently. And that is the general response they 

had. 

Mr. LONG. OK, thank you, Dr. Iritani. 

And I yield back, Mr. Chairman. 

Mr. PITTS. The Chair thanks the gentleman. 

Now recognize the gentlelady from Indiana, Mrs. Brooks, 5 minutes for questions. 

Mrs. BROOKS. Thank you, Mr. Chairman. 

I think you have already heard a little bit about the Healthy Indiana Plan, and at the beginning of 2015, Indiana was fortunate 

enough to have its demonstration approved by CMS. Now, the 

Healthy Indiana Plan 2.0, or what we call HIP 2.0 as we call it, 

is really an extension, an expansion, and some changes made to a 

very successful Healthy Indiana Plan. Started under Governor 

Daniels, and then expanded and changed slightly under Governor 

Pence. It provides 350,000 uninsured Hoosiers with access to 

healthcare services, but what was very different about it, and I 

thought what was really so effective, started under the first HIP 

plan, was that individuals would pay small contributions, and this 

was a huge sticking point for CMS, ranging from $1 up to $27 a 

month based on their income level, into power accounts. And 

POWER accounts stand for personal wellness and responsibility— 

responsible accounts. Now, this allows people to create a sense of 

personal responsibility for their own health care, put in $1 a 

month, up to $27. And it took our State years, as the gentleman 

from my delegation has already stated, to get this type of plan approved. And it has had—demonstrated tremendous success. So 

after it was finally approved, after our Governor had to speak with 

the President personally about a very successful program in order 

to get it approved, the Governor sent—Governor Pence sent out entire delegation a letter suggesting that the manner—celebrating 

the success of finally getting it approved, but also the delay in the 

approval process itself caused so much stress and anxiety among 

the Hoosiers who were on the plan that it is just completely unnecessary. And it was all about the timing, quite frankly, that I am 

complaining about, and the manner in which the approval process 

took place. 

It is my understanding CMS has no set time period, is that right, 

Ms. Iritani, about how to approve these requests for waivers. Is 

61 

that true that there is no time period in which the CMS director 

has to provide their decision on these requests, even of programs 

that are already in place? 

Ms. IRITANI. I believe there is a time limit on extensions, but otherwise, no. 

Mrs. BROOKS. And so if any changes or improvements want to be 

made to—really speaking of the fact that we haven’t evaluated or 

delved into the evaluations, the evaluations, as I understand, of our 

HIP program were outstanding—— 

Ms. IRITANI. Um-hum. 

Mrs. BROOKS [continuing]. And that is why we chose to expand 

it for more Hoosiers, and to change it to try to bring more Hoosiers 

into the program. The Upton-Hatch, Making Medicaid Work Blueprint included a proposal for a waiver clock. Would it make sense 

for a timeframe to be implemented related to these Section 1115 

waivers, and what kind of guidance should we have from you and 

from your study of the waiver process, what should Congress be 

taking into consideration as we try and tighten the timeframe for 

these waivers for CMS to approve or to not approve these programs, because they keep our State legislators in knots, those who 

are receiving the benefits of these programs, what kind of factors 

should we consider in trying to put a timeframe around these decisions? 

Ms. IRITANI. Yes, other than the 2013 report that I mentioned 

where we looked at the variation in the timeframes and the factors 

that CMS told us contributed, including the complexity and comprehensiveness of the proposals, we haven’t addressed timeframes 

in our work. We have really focused on the spending limits and 

new spending approved, that has been the scope of our work. 

Mrs. BROOKS. Do you agree though that the timeframe issue is 

a significant issue for the States? 

Ms. IRITANI. Some of the factors that CMS said contributed to 

the more lengthy approval times included things like how comprehensive the proposal was. You know, some States operate their 

entire Medicaid demonstrations—or Medicaid Programs under the 

demonstrations, so it effectively changes the entire program. It 

could be the States need to go back to the legislatures to get new 

legislation, and when they do, then there may be changes to the 

proposal that CMS has to review. It is very complicated to sort out 

why things take so long. 

Mrs. BROOKS. Thank you. Thank you for your work. 

I yield back. 

Mr. PITTS. The Chair thanks the gentlelady. 

Now recognize the gentleman from New York, Mr. Collins, 5 minutes for questions. 

Mr. COLLINS. Thank you, Mr. Chairman. And thank you, Ms. 

Iritani. Is that correct? 

Ms. IRITANI. Yes. 

Mr. COLLINS. Yes. 

Ms. IRITANI. Thank you. 

Mr. COLLINS. For all your testimony. This is an area, I guess you 

could say, of overall concern when, as I understand it, the CBO recently issued their 2015 long-term budget outlook, and in that, said 

that in just a little more than a decade our entitlement spending 

62 

will consume, along with service on our debt, 100 percent of the inflow of monies into the U.S. Government. If we look back 40-someodd years ago, it was $1 in $3; today, these same programs are $2 

in $3, and it is truly a major concern when it would hit $3 in $3. 

So something is going to have to give, and unfortunately in Congress, all too long the kick-the-can mindset of let me get past my 

next election is very much alive. And so here we have the CBO 

which should be—send a chilling effect to all of us that we have 

to make some changes. And Medicaid is certainly a major contributor on the expense side of those entitlement programs. 

So my question really comes down to maybe asking you do you 

have some suggestions for Congress, and as we are looking at these 

1115 waivers, and in particular I think your testimony indicated 

that some of these waivers really didn’t go to the core proposition 

of what Medicaid is there for, but very tangentially associated with 

it, and it is even hard to get your arms around how some of these 

waivers are benefitting or could benefit us in the long-term. Do you 

have any idea how much—how many dollars are in that kind of 

bucket, and do you have any recommendations for anything Congress could do, however small that might be, to at least try to stem 

some of these expenses that we wouldn’t have to have? 

Ms. IRITANI. Yes, we share your concerns about the impact of 

these waivers. The spending trends of the funds that are governed 

by the terms of demonstrations are rising significantly. In 2011, we 

reported that about 1⁄5 of Medicaid spending was governed by the 

terms and conditions of demonstrations. In 2013, we said it was 

about 1⁄4. In our most recent report it is almost 1⁄3 of Medicaid 

spending, the—over $500 billion program. So we believe that, given 

that the Secretary has disagreed with the need for reforms, that 

the Congress should consider requiring the Secretary to take certain steps to reform the process. 

Mr. COLLINS. Well, I think we agree, and I certainly appreciate 

you being very forthright in that observation, and I really do thank 

you for your testimony. 

And with that, Mr. Chairman, I yield back. 

Mr. PITTS. The Chair thanks the gentleman. 

Now recognize the vice chair of the full committee, Mrs. 

Blackburn, 5 minutes for questions. 

Mrs. BLACKBURN. Thank you, Mr. Chairman. And in the spirit of 

the College World Series, I am here to bat cleanup, and I am going 

to be fast so we can move to our second panel. I am going to pick right up where Mr. Collins left off. $344 billion program, and 1⁄3 of that is now in the 1115 waivers, correct? 

Ms. IRITANI. Well, total spending including Federal and State, is 

actually over $500 billion. 

Mrs. BLACKBURN. So in total, over $500 billion, with that once 

they do the State match to the Federal. 

Ms. IRITANI. Yes, $304 billion—— 

Mrs. BLACKBURN. OK. 

Ms. IRITANI [continuing]. Federal, correct. 

Mrs. BLACKBURN. All right. And one of the things that we are 

looking at with this, if I have my notes right, and I want to be sure 

that we have it right for the record, is that you have a lot of gray 

area here on how decisions are being made—— 

63 

Ms. IRITANI. Um-hum. 

Mrs. BLACKBURN [continuing]. That meeting the objectives has 

become very subjective, and that you have not gone in, if I understood your response to Mr. Bilirakis, you said that you all have not 

looked at spending post-approval, or looked at the outcomes, you 

have just looked at that process of pushing the money forward. Am 

I correct on that? 

Ms. IRITANI. Yes. 

Mrs. BLACKBURN. OK. 

Ms. IRITANI. We have only looked at the approvals of the spending limits and the basis for them. 

Mrs. BLACKBURN. OK. 

Ms. IRITANI. And—— 

Mrs. BLACKBURN. But not the outcomes—— 

Ms. IRITANI. Correct. 

Mrs. BLACKBURN [continuing]. Of the delivery. All right, and so 

that is something that we definitely need to circle back and do 

some oversight on. Let me go back to Ms. Castor’s question. Did I 

understand you to say you have looked and reviewed the Federal 

end, but you have not looked at the public input process—— 

Ms. IRITANI. Not—— 

Mrs. BLACKBURN [continuing]. On the 1115 waivers? 

Ms. IRITANI. Not since the mid-2000s. 

Mrs. BLACKBURN. OK. 

Ms. IRITANI.. That is when we raised concerns about the lack of 

a Federal public input process that was then addressed in the recent House reform legislation. 

Mrs. BLACKBURN. OK, and I think that gets to part of Mrs. 

Brooks’ question also. There have been mixed results, and you have 

mentioned that. You have States as diverse as what Indiana has 

done, you have Arizona which was one of your first 1115s. I am 

from Tennessee. We have a very mixed result history, if you will, 

with the 1115 waiver process. So I—it concerns me that you all 

have not done a deep dive, if you will, on looking at the outcomes, 

reviewing these results, looking at that public input process, going 

through that, because if I am following what you are saying, a conclusion would be that when you set up a demonstration project, 

and there are four criteria that have to be met for this to move forward, and with the subjective nature of the decisionmaking process, a State can meet one of four criteria and be approved and be 

considered a success. Is that correct? 

Ms. IRITANI. I believe so. That is the—— 

Mrs. BLACKBURN. So they could have a failing grade, if you will. 

If you are on a grading scale of 100, and you meet one of four criteria, you are at 25 percent effectiveness, but CMS would consider 

that a success. 

Ms. IRITANI. The criteria—the first time we saw them again was 

just in CMS’ response to our report. They were not issued, you 

know, in any written guidance. And we have not since circled back 

to CMS to see how they apply it, but the way that they stated it 

in their response was that, basically, one of these criteria is—— 

Mrs. BLACKBURN. OK, and—— 

Ms. IRITANI [continuing]. You know, basically what we apply. 

64 

Mrs. BLACKBURN. And then setting the spending limits, they 

pretty much make it up as they go along, and are subjective in that 

approach, if I understood you correct in your response to Mr. 

Bucshon. 

Ms. IRITANI. There is a lack of transparency, definitely—— 

Mrs. BLACKBURN. OK. 

Ms. IRITANI [continuing]. How they are set. 

Mrs. BLACKBURN. With that, Mr. Chairman, I yield back. And I 

thank you, Madam Director, for your time today. 

Ms. IRITANI. Thank you. 

Mr. PITTS. The Chair thanks the gentlelady. 

And now recognize the ranking member of the full committee, 

Mr. Pallone, to bat cleanup, 5 minutes for questions. 

Mr. PALLONE. Thank you, Mr. Chairman. And I apologize that I 

wasn’t able to be here until now. 

And, you know, I may be repeating some things that already 

have been said or have been asked, and so, you know, forgive me 

for that. I just wanted to say that after close to 20 years of recommendations for more transparency into the Medicaid waiver 

process, the Affordable Care Act included a bipartisan provision to 

improve the transparency of Medicaid waivers in line with longstanding recommendations from GAO. Today, because of this provision, the public has meaningful opportunities to provide input into 

the waiver process of both the State and Federal level, and waivers 

are now evaluated on a periodic basis, and States submit reports 

on implementation, and this is a huge step in the right direction, 

in my opinion. 

I am further encouraged by CMS’ concurrence with GAO recommendations, specifically in their April 2015 report for better ongoing and transparent documentation of how States spend Medicaid dollars. This is a recommendation that prior administrations 

had refused to correct, and I continue to believe it is the right thing 

to do, ensure dollars are following our Medicaid beneficiaries. 

But let me ask a couple of questions, if I can. In reviewing the 

GAO recommendations over the last 20 years, it appears as though 

your recommendations have remained the same until only recently. 

Isn’t it true that the majority of these recommendations were not 

acted upon until Obama administration initiatives and the Affordable Care Act, which placed many of your recommendations into 

action? 

Ms. IRITANI. Well, we have made many—over a dozen recommendations over the course of this time, and only a couple have 

been implemented, including the public input process that you 

mentioned that was implemented in 2012. 

Mr. PALLONE. OK. And, of course, that was under the—under 

President Obama, 2012. Based on the GAO reports, it appears that 

GAO recommendations on the budget neutrality accounting principles have remained unchanged since as far back as the 1990s. So 

is it true to say that this fundamental disagreement between HHS 

and GAO has remained the same, regardless of which political 

party has controlled the presidency? 

Ms. IRITANI. Yes. 

Mr. PALLONE. OK. And then the last thing I wanted to ask, and 

to follow up on that, isn’t it true that GAO went so far as to issue 

65 

a letter to HHS from GAO’s chief legal counsel regarding budget 

neutrality issues in the prior administration—I mean under the 

last President Bush? 

Ms. IRITANI. It is true in 2007, our legal counsel did issue a letter 

to the Secretary at the time, raising concerns with two States’ approvals, yes. 

Mr. PALLONE. And have you had to take such action under the 

current administration, under the Obama administration? 

Ms. IRITANI. We have not. 

Mr. PALLONE. OK. All right, thanks a lot. 

Again, Mr. Chairman, I am not going to take up too much time 

because I came in at the end here, but thank you for the opportunity here. 

Mr. PITTS. The Chair thanks the gentleman. 

That concludes the questions of members present. We will have 

follow-up questions in writing. I know some of the members not 

here have questions. We will send those to you in writing. We ask 

that you please respond promptly. Thank you very much—— 

Ms. IRITANI. Thank you. 

Mr. PITTS [continuing]. For your testimony this morning. 

Now, as our staff sets up the table for the second panel, we will 

take a 3-minute recess. 

The committee stands in recess. 

[Recess.] 

Mr. PITTS. OK, the time for recess having expired, we will reconvene the subcommittee. And I will introduce our second panel in 

the order of their presentations. 

We are delighted to have today the Honorable Haley Barbour, 

former Governor of Mississippi, and Founding Partner of BGR 

Group, with us this morning. Mr. Matt Salo, Executive Director, 

National Association of Medicaid Directors. And Ms. Joan Alker, 

Executive Director, Georgetown University Center for Children and 

Families. Thank you each for coming today. Your written testimony 

will be made a part of the record. You will each be given 5 minutes 

to summarize your testimony. There is a series of lights on—so 

when the yellow light goes on, that is 1 minute left, and red light 

means you can wrap up at your convenience. 

And at this point, the Chair recognizes Governor Barbour, 5 minutes for your summary. 

STATEMENTS OF HALEY BARBOUR, FORMER GOVERNOR OF 

MISSISSIPPI AND FOUNDING PARTNER, BGR GROUP; MATT 

SALO, EXECUTIVE DIRECTOR, NATIONAL ASSOCIATION OF 

MEDICAID DIRECTORS; AND JOAN C. ALKER, EXECUTIVE DIRECTOR, GEORGETOWN UNIVERSITY CENTER FOR CHILDREN AND FAMILIES 

STATEMENT OF HALEY BARBOUR 

Mr. BARBOUR. Thank you, Mr. Chairman. When I last testified 

before the committee, I was actually Governor. I want to make 

plain that I am not Governor anymore. I don’t speak for the Governors or the Republican Governors, or even the Governor of Mississippi. This is what I think. 

66 

You know, States are trying to juggle demands of increasing 

health care costs while trying to balance their budget. Most of our 

States actually literally balance the budget every year, and this is 

a huge part of it. In 2014, the Federal Government spent $300 billion on Medicaid; $344 billion this year as I understand it, but also 

the States spend a ton of money on Medicaid. Medicaid expects in 

the next 10 years that that budget for the Federal Government is 

going to go to $575 billion. And when you put in what the States 

do, it will be about $1 trillion. About $1 trillion. So this is a big 

burden on the States’ budgets and on the Federal budget. I think 

we all ought to remember that about 2⁄3 of all Federal spending is 

mandated for entitlements or payments on the national debt. That 

is—and that percentage is growing. Any discussion of Medicaid and 

our healthcare programs must include some mention of our ability 

to pay the bills that we are accumulating, because what we do 

today affects future generations’ ability to pay the debt that we 

burden them with, and affects their chance to experience the American dream that we have been blessed to experience. 

Since January of 2009, the Federal debt has gone up 73 percent, 

and that can’t continue. We have to provide quality health care for 

the truly needy in a cost-effective manner, and one way to help do 

that is to give each State the flexibility to run its Medicaid Program in the manner that best meets the needs of its population. 

I personally believe Congress should give States authority to adjust 

their programs without any CMS waiver, as long as it is within the 

law. But at a minimum, the waiver process needs to be improved. 

For instance, should States be able to ask some nondisabled 

adults if they prefer to pay a small copay if it better ensured their 

being able to see a doctor. Not really a problem in Mississippi. 

Eighty-three percent of our doctors take new Medicaid patients. 

But you all have already cited a story in California where somebody got on Medicaid and then couldn’t see a doctor. In New Jersey, about 38 percent of doctors take new Medicaid patients. 

Wouldn’t our patients be better off if they really did have a way 

to get care, even if it meant paying voluntarily, on their own 

choice, a small copay? I believe copays really help make the system 

work. When people miss an appointment, there ought to be a copay 

because they have cost somebody else an appointment, they have 

cost another Medicaid person or some other patient. I believe 

States should be allowed to do work requirements, or job training 

and retraining, for able-bodied adults who are on Medicaid. CMS 

is standing in the way of a lot of State innovation by not approving 

commonsense waivers, and taking long, long periods of time to improve—to approve the ones they do. 

It has been talked about already about the opacity that this is 

not transparent, inconsistent standards, and the concerns about favoritism or about using waivers as a way to coerce States. CMS has 

reached an agreement principle with Florida on the Florida LIP 

program. The bottom line though is Massachusetts got theirs last 

year in October, about the same time that Florida was applying. 

The Medicaid Program in Florida asked CMS in the fall, and just 

now there is an agreement in principle. By the way, that agreement in principle cuts the contribution to the program by more 

67 

than 1⁄2 in the first year, and by 2⁄3 in the second year for what 

Florida will receive. 

We do need transparency so that the States understand the process, how to get things approved, and I would say to you, not only 

should there not be different rules for different States, I believe 

when a State like Indiana institutes a program and it works well, 

and we test whether it is working well and find that the results 

are good, it ought to be an easier process for another State to adopt 

that. Things that work, we ought to encourage. If Oregon has 

something that works and we think it fits Mississippi, it ought to 

be easier to get a waiver for that than starting at scratch. So I 

would encourage the committee to go to block grants, but I would 

certainly encourage you to adopt a waiver clock, to adopt some 

rules about transparency, and remember, a successful program 

under a 1115 also ought to be allowed to become permanent if we 

see that the results are such, why should they have to go back 

every couple of years? 

Sorry, I ran 14 seconds over. Pretty good with my accent. 

[The prepared statement of Mr. Barbour follows:] 

68 

69 

70 

71 

72 

73 

74 

75 

76 

77 

Mr. PITTS. You are pretty good. Thank you. 

The Chair recognizes Mr. Salo, 5 minutes for your summary. 

STATEMENT OF MATT SALO 

Mr. SALO. All right, thank you, Mr. Chairman, Ranking Member 

Green, members of the committee. 

I represent the 56 State and territorial Medicaid agency directors. We have talked a lot about how big Medicaid is. I don’t want 

to belabor that, but I do want to underscore how complex it is, and 

I think a lot of people don’t fully appreciate that. 

We cover, yes, a lot of children, lot of pregnant women, lot of lowincome families, but we also cover a lot of individuals with disabilities; intellectual, developmental, physical, as well as a lot of people 

who need long-term services and supports. In fact, we are the largest payer in the healthcare system of long-term care, of mental 

health, of HIV/AIDS care, et cetera. It is a complex, it is a difficult 

program. 

Our members are responsible and accountable for the program. 

They are striving to provide the best possible health care to the 

citizens we serve, and also be wise stewards of the taxpayer dollar. 

They are also hard at work actively driving program reform. 

Now, less people think that driving program reform means that 

the underlying program is broken. I would say unequivocally, no. 

And, in fact, I would posit to you the challenges of the broader U.S. 

healthcare system, which is failing us. Take a look at this. Costs— 

health care cost inflation has exceeded CPI for decades. Health 

care is now 18 percent of the Nation’s GDP. We have suboptimal 

outcomes to show for that. We also have profound political division 

about what the future is—of health care is. But I think an important piece here is that we have also had decades of either proactive 

or passive policies in this country of either ignoring or actively 

shifting responsibility for many of these difficult populations directly to Medicaid, and that is why we are the largest payer for the 

most complex, the most expensive, and the most difficult to serve 

populations in this country. 

So what are we doing about it? We are actively trying to reform 

a healthcare system, a fee-for-service system that does not serve 

these populations well. As Dennis Smith once said, fee-for-service, 

FFS, ought to stand for fend for self, because that is what we are 

requiring of the sickest, the frailest, and the most complex patients. 

This—but this is hard, and part of the challenge is that the statute at 50 does not allow us to do what we need to do, so we rely 

on waivers. And we have been relying on waivers for decades to 

drive program improvement. In Arizona in 1982, in a number of 

States in the mid-’90s, with the private option in Arkansas and 

other States who have done the expansion recently. With Indiana, 

as we have heard, and with many other States that are doing 

DSRIP or other types of programs. We have a long history of success with this, and accountability does exist. There are evaluations, 

there is reporting, and even though GAO may not particularly like 

it, there are budget neutrality calculations. And finally, there is 

significant public input. 

78 

Which is not to say we think the system is working perfectly. We 

think there are a number of changes that can and should be made. 

We have been fairly vocal in what these kinds of things should be. 

Our short—is the system should be more of an HOV program, and 

the HOV for us stands for healthy patients, outcomes, and value 

to the taxpayer and value to the healthcare system. These principles ought to drive what we are doing and how we are able to 

do it. 

We have a number of ideas that we—I am more than happy to 

talk about; ways that we can get there. Some are incremental, 

some are bigger, some of them will require congressional input. 

One of those, as Governor Barbour referenced, is sort of a pathway 

to permanency, and we can talk more about how that might play 

out. But I do also think there is a—we need more—we do need 

more timely approvals and renewals. We can talk about what that 

might look like, but I think a big challenge, in all honesty, is capacity; capacity at CMS to be able to do the reviews in a timely manner. And I think we need to keep in mind that there needs to be 

a balance between transparency and flexibility. The flexibility—we 

do need transparency, but we do need the flexibility to innovate, 

and I think we need to be careful about proscribed definitive checklists of what can or what cannot be done because that sets a ceiling 

for what can be innovated, not a floor. And I think we need to be 

very mindful about how do we spread the innovation once we know 

that it works. 

So let me close on this and just say that I think a lot of States 

spend a lot of time, energy, resources, on chasing paper trails, on 

trying to, you know, prove to everyone’s satisfaction budget neutrality or other types of process requirements, too much time arguing about the cost per unit of widgets that do not contribute to the 

overall value of the healthcare experience, and that we need to 

start investing more in State capacity to actually drive the changes 

that we seek. And I would be happy to talk about some solutions 

to that as well. Thank you. 

[The prepared statement of Mr. Salo follows:] 

79 

80 

81 

82 

83 

84 

85 

86 

87 

88 

89 

Mr. PITTS. The Chair thanks the gentleman. 

Now recognizes Ms. Alker, 5 minutes for her opening statement. 

STATEMENT OF JOAN C. ALKER 

Ms. ALKER. Thank you so much, Chairman Pitts, Ranking Member Green, and members of the committee. 

I really appreciate the opportunity to be here today because I 

have been studying Medicaid waiver policy for many, many years 

now, and while I find it fascinating, many think it is sort of boring. 

So I am thrilled that you are interested in this issue. 

I would also like to commend the GAO for their long history of 

excellent work on this issue. It has been 20 years now that GAO 

has been writing reports that I have been reading, raising questions and concerns about Medicaid waiver policy, and these issues 

have arisen regardless of which party; Democrats or Republicans, 

have controlled the Executive Branch. 

And today, I am going to focus on two areas of concern raised by 

the GAO; the need for transparency and robust public input, as 

well as the question of budget neutrality. And the good news from 

my perspective is that after 20 years of scrutiny by GAO and others on these issues, I think we are finally making significant 

progress on both of these issues, but there is still some work that 

needs to be done. 

So first on the issue of transparency, I do believe it is vitally important to have a very strong and robust process for public comment at both the State and the Federal levels. This is an idea that 

has long bipartisan support. Senators Grassley and Baucus worked 

on this on the Senate side. And language was included, as you 

heard, in the Affordable Care Act, and that was implemented 

through regulations in 2012 by the Obama administration. 

So these changes have led to dramatic improvements in the public comment process, but I would like to make a few suggestions 

to the committee for you to consider that might lead to greater 

transparency and better public input in the waiver process. 

The first suggestion is that current public input requirements 

only apply to new Section 1115 applications or renewals, but not 

to amendments to existing Section 1115 waivers. Since so many 

States already have Section 1115 waivers, there are many important changes that occur through the amendment process. So I believe it would be a valuable amendment to the law to ensure that 

amendments were also subject to the public input requirements. 

Second, while significant progress has been made with respect to 

having waiver applications and approvals online at Medicaid.gov, 

there is more work to be done here. Many important documents 

such as operational protocols, quarterly and annual reports, and 

other significant deliverables often required in terms and conditions that come with Section 1115 waivers are not always publicly 

available on Medicaid.gov, and I would urge you to urge CMS to 

make sure those are publicly available as soon as possible. 

And then finally I will just say, I think the suggestion came up 

from a number of committee members earlier in the day, I think 

it would be terrific to have GAO do a report that looks specifically 

at how the public comment process is working, particularly at the 

State level. 

90 

Now, let’s turn to budget neutrality. Again, GAO has found that 

administrations of both parties have approved budget neutrality, 

Section 1115 agreements, which in GAO’s judgment were not adequately supported by sound documentation and adequate methodology. 

So budget neutrality is very complex and, of course, when the 

Secretary makes decisions about what State programs to include or 

how to assess budget neutrality, the Secretary is responding to 

State requests. CMS is not just making these things up; CMS is 

always responding to a State’s request. And so by definition, every 

State’s request is different. But I think in the past few months we 

have seen some encouraging signs from the Obama administration 

with respect to how Secretary Burwell plans to approach budget 

neutrality agreements going forward. In particular, on April 14, 

2015, CMS Director, Vikki Wachino, sent a letter to the State of 

Florida indicating three principles by which they would approach 

their review of Florida’s low-income pool, which has been discussed 

here today. In addition to sending this letter to Florida, press reports indicated that CMS also made calls to eight other States that 

currently have some kind of uncompensated care pool through a 

Section 1115 waiver agreement. These were both States that have 

done Medicaid expansion and States that have not done Medicaid 

expansion, and they have shared the same principles to signal their 

intent to apply these criteria across States. Even more recently, I 

understand CMS has started including specific ways in which expenditures authority, and I believe this is part of the Oregon 

health plan extension that was just approved, where they tie, in 

the Secretary’s judgment, how those expenditure authorities are 

linked to the objectives of these programs. 

So both of these actions that I have just described, something 

that I have never seen before in the last 20 years, so that is encouraging to me, but I do think we will need to continue to monitor 

this issue very closely. 

So thank you very much for the opportunity to testify. 

[The prepared statement of Ms. Alker follows:] 

91 

92 

93 

94 

95 

96 

97 

98 

99 

Mr. PITTS. The Chair thanks the gentlelady, and thanks all of 

you for your testimony. 

We will begin questioning now. I will recognize myself 5 minutes 

for that purpose. 

Governor Barbour, yesterday, 10 Republican attorneys general 

wrote Chairman Upton expressing their concern over CMS’ coercion to try and get Florida to expand Medicaid under the Affordable Care Act. As you know well, the Supreme Court’s NFIB v. 

Sebelius ruling made such an expansion voluntary for States. Do 

you believe the administration’s actions here are legally problematic? 

Mr. BARBOUR. I do. These attorneys general are there because of 

something we have been talking about; the lack of transparency, 

the lack of real hard rules so you don’t—you have so much discretion. And certainly, States see it as coercion because they did not 

choose to expand Medicaid under the ACA. So that appears to be 

the case. We will see what the court decides. But I will say this, 

for a lot of States, this idea of 1115 waivers would affect them tremendously, and they think they are not getting their waivers treated the same, and there is some evidence of that. If you look at the 

low-income pool program in Massachusetts and the one in Florida, 

both of them have been in effect for a long time, yet Massachusetts 

was approved last year, well before the time needed so that they 

could plan for their budget. Florida got really hung up, ended up 

going through a special session because they didn’t get approved 

the same time as Massachusetts. So I think that is why these people are thinking that. 

Mr. PITTS. Thank you, Governor. And I will let each of the others 

also respond to this. It is my understanding that CMS has no set 

period of time for reviewing and responding to a request for an 

1115 waiver, but CMS has to review and respond to other waivers 

for managed care and home and committee-based services within 

a certain timeframe. So my question is, would it make sense for a 

timeframe to be implemented related to the Section 1115 waivers? 

Mr. BARBOUR. Yes, sir. 

Mr. PITTS. Mr. Salo? 

Mr. SALE. I think conceptually that makes sense because I do 

think the challenge is that you are correct, there is a lot of frustration that sometimes approvals and—or renewals can take a very 

long time to get. I would caution though that in practice, I would 

worry that a definitive clock might just—if we don’t have the rules 

in—if we don’t have the structure in place to ensure that CMS has 

the capacity to look through these, that a short clock might just get 

them to know faster—— 

Mr. PITTS. Ms. Alker? 

Mr. SALO [continuing]. Which is not what we want. We want to 

be able to get to yes faster, and I think we need to focus on that. 

But certainly, to speed the process up. 

Mr. PITTS. Ms. Alker? 

Ms. ALKER. So I would say a few things. First of all, I think 

many of the recent substantial waiver approvals, like Arkansas 

and Iowa, happened pretty darned quickly. And we have to balance 

the committee’s interest and the need for transparency and public 

input with this desire to have quick approvals, and I think we have 

100 

to find kind of the sweet spot where you allow sufficient time for 

public input and comment with adequate time for CMS to review 

this very complex policy and make decisions. And I will just give 

one example. The GAO in, I believe, 2007 did a report criticizing 

approvals at that time by the Bush administration of the Florida 

waiver and the Vermont waivers, and underscored the lack of public input. And I believe the world record approval for Section 1115 

went from Governor Bush to President Bush, and it was 8 business 

days. So that wasn’t great because, clearly, a lot of that was sort 

of wired out of the public eye. So again, I think we need to balance 

the need for timely and efficient Government action with the need 

for appropriate public comment and oversight by yourselves, as 

well as the public. 

Mr. PITTS. Mr. Salo, you mentioned in your testimony the length 

of waiver process. You indicate it took nearly a year on average 

from the time a waiver application is submitted until it is approved. My understanding is that there are often months of negotiations that occur even before the application is submitted. Can 

you please discuss a little bit more the difficulty that such a 

lengthy process, nearly 1⁄4 of a Governor’s term, nearly 1⁄2 of a term 

of a Member of the House, like myself, creates for States and for 

Medicaid Program beneficiaries? 

Mr. SALO. Sure. And I think, you know, I do want to be careful 

to acknowledge the—and respect the dialogue that has to go on between the States and their Federal partners on this. That dialogue 

is important. And, you know, and there is a certain amount of deference that we should allow the administration, any administration, as the payers of 1⁄2 this program. But as you pointed out, 

when you drag out these negotiations, oftentimes what you will 

have is amendments that need to follow, and other things that are 

related get backed up, and that can bring the effective, you know, 

functioning of good Government to a slow crawl. And that is not 

going to be in the best interests of the patients, it is not going to 

be in the best interests of the healthcare system. 

Mr. PITTS. The Chair thanks the gentleman. 

And now recognize the ranking member, Mr. Green, 5 minutes 

for questions. 

Mr. GREEN. Thank you, Mr. Chairman. 

Ms. Alker, my home State of Texas is next in line for renewal 

of their waiver, and I want to be clear I am proud of what my State 

has accomplished through the delivery system, reform efforts have 

dramatically improved the quality of care for the Medicaid beneficiaries, and look forward to working with CMS and Texas to start 

the process. But I also want to make sure that, as a former State 

legislator, I think it is almost medical malpractice not to expand 

Medicaid in—for the States based purely on politics, which is what 

we are doing. And in Texas, I know every hospital executive I know 

has asked the legislature expanded, just like they have in other 

States, because people are not being served. And so—but that is, 

again, the States’ decision by the Supreme Court. 

And I want to correct the record here because there is a lot of 

misinformation flying around about Texas is just like Florida. Isn’t 

it true that some undeniable similarities that both of our States 

have so-called uncompensated care pools, but that part of their reVerDate Mar 15 2010 09:39 Dec 14, 2015 Jkt 037690 PO 00000 Frm 00104 Fmt 6633 Sfmt 6633 F:\114THCONGRESS\114X59MEDICAIDDEMOSASKOK120415\114X59MEDICAIDDEMOS
101 

spective Medicaid waivers and that Florida seems to have a tough 

time with. Ms. Alker, isn’t it true that no one State has the same 

type of so-called uncompensated care pool? 

Ms. ALKER. That is definitely true, and Texas’ waiver, I would 

say, is a lot more complicated than Florida’s. 

Mr. GREEN. OK. And wasn’t there a fact that the longer term 

issues at play with the structure of Florida’s pool? 

Ms. ALKER. Yes, in 2008 actually, GAO issued a report that criticized the budget neutrality assumptions underlying Florida’s lowincome pool. 

Mr. GREEN. Is it true that Florida actually would have been able 

to get more Federal dollars from the expansion plan that was 

under—than that that was under consideration by the legislature? 

Ms. ALKER. That is definitely true, and of course, those matching 

dollars would come in at 100 percent match currently, as opposed 

to their regular match rate which is about 60/40, so they would get 

a lot better return on investments by taking up the expansion dollars. 

Mr. GREEN. Ms. Alker, Governor Barbour’s written testimony is 

very critical in that—cost sharing in Medicaid, however, in 2013, 

CMS issued a final rule that revised Medicaid’s cost sharing policies. The rule increased in the maximum allowable cost sharing 

amounts that the States can impose on Medicare beneficiaries, including individuals below the poverty line without a waiver. Ms. 

Alker, would you say that States have considerable flexibility to 

whether we agree or not with it—not here today implement costsharing policies for Medicaid? 

Ms. ALKER. That is true, and I think one of the common misconceptions about Medicaid is that you have to get a waiver to do 

any—everything, and that is just not true. We see that time and 

time again. As you mentioned, States are allowed to impose nominal copays on the adult population, and they don’t need a waiver 

to do so. 

Mr. GREEN. OK. And again, in Governor Barbour’s written testimony he noted that Medicaid providers should be able to charge 

beneficiaries a fine if they miss their appointments without notifying their doctors. And I am concerned that we are pushing ineffective policy we know don’t work because, while CMS actually approved Arizona’s request to impose a $3 missed provider fine back 

in 2011, the State ultimately let the authority expire because there 

was so little provider participation. Is that correct? 

Ms. ALKER. Yes, I think that speaks to the issue that came up 

earlier, that we need really robust evaluations of waiver demonstrations that have happened in the past, some of which we already know that are not—simply not good policy. 

Mr. GREEN. One of the issues I know with Arizona findings, but 

also like Georgia’s emergency room demonstration, goes unnoticed. 

Do you think it is—or it might be worthwhile to explore how we 

can evaluate and make publicly available the results of these demonstrations so that we might learn what strategies work to actually 

improve care and lower cost? 

Ms. ALKER. Absolutely. I am certain, obviously, as a public policy 

professor, very much a fan of evidence and research base to inform 

our public policy decisions. I would say a couple of things about the 

102 

evaluation process. I do believe that it would be a great question 

to ask CMS that they have commissioned an overall evaluation of 

some of these new Section 1115 waiver approvals—recent approvals, that that is in process. It would be great to learn more about 

that, because one thing I have observed is that sometimes in the 

evaluation process, particularly at the State level, that if you have 

the State paying the evaluator, that the researchers may not always be objective. So we need to ensure that we have independent 

evaluations to assess these policy choices going forward. 

Mr. GREEN. OK. Mr. Salo, in balancing transparent flexibility, 

you noted that you fear strict guidelines for wavier approval might 

quickly become obsolete as our medical system advances. Would 

you agree that a set of broad principles should be—such as those 

put forth by the administration is, in fact, the best balance to 

achieve these program goals? 

Mr. SALO. In short, I would say yes. I think it is more important 

to have broad guidelines than clearly delineated checklists because, 

let’s face it, what is approvable today would not have been conceived of or approvable 15 years ago. 

Mr. GREEN. Yes. 

Mr. SALO. And it is in all likelihood the innovations that are 

going to be driving real healthcare system improvement 10 years 

from now, many of which we probably haven’t thought of today. So 

we are going to need the ability to think about things very different. This is an iterative process. Innovation is a dynamic and 

fluid process. 

Mr. GREEN. Thank you, Mr. Chairman. 

Mr. PITTS. The Chair thanks the gentleman. 

Now recognize the gentleman from Indiana, Dr. Bucshon, 5 minutes for questions. 

Mr. BUCSHON. Thank you, Mr. Chairman. I think, again, it just 

strikes me the mere fact that we are talking about waivers shows 

you that maybe the program itself needs to be changed so we don’t 

have to have so many waivers. Same thing is probably true in education with No Child Left Behind, it needs reauthorized in a different way. We are giving waivers to States because of poor policy 

that needs to be changed by Congress, and it seems like this may 

be an area that needs to be addressed. We are continuing to address today, and as a healthcare provider, I can say it is, you know, 

coverage and not really delving into cost. And I think some of you 

in your testimony have pointed out that, you know, the rising cost 

of health care and the inflation in health care is something that 

has to be addressed. I mean we are not going to keep up with the 

cost of the system going up, like the Governor pointed out, if you 

don’t start to address that as an issue and not just address coverage. 

And if you are going to address coverage, you should address 

good coverage. And as I pointed out in the previous panel, I can 

tell you from experience that the Medicaid Program, although critical, is financially strapped and doesn’t necessarily guarantee access to physicians. Again, Governor Barbour pointed out that in 

New Jersey, only 38 percent of physicians are taking new Medicaid 

patients. 

103 

So that said, and the other thing I—someone mentioned earlier 

that hospitals in certain States are asking for Medicaid expansion. 

I would too because it means a huge financial gain for the hospitals, and the implication that that means that it is, you know, 

for all truism of covering people is not necessarily the case. And I 

just wanted to point that out. 

So with that, Mr. Salo, some have mentioned today that in recent 

years there has been greater transparency in the waiver process, 

such as through the adoption of requirements for public input both 

at the State and Federal level. The ability for the public to provide 

input on proposed Section 1115 waivers is very important, of 

course, but it sounds like there has been still a lack of transparency and consistency regarding CMS’ criteria for assessing 1115 

demonstration applications. How does this lack of transparency affect State Medicaid Programs, and what recommendations do you 

have for improving the demonstration application and approval 

process? 

Mr. SALO. So I think a couple of things probably need to be done. 

Again, we—several of us have referred to this pathway to permanency. Because, as we have heard from GAO, 1⁄3 of all program 

spending is now incorporated into an 1115 waiver, pretty much— 

pretty soon that is going to become the norm, rather than the— 

than a different example. So—and a lot of the things that we have 

been doing, Arizona has been doing this for 30 years. Tennessee 

and other States have been doing it for decades. There are certain 

things we just shouldn’t need to get a waiver for anymore, you 

know. Thoughtful managed care, coordinated care is one of them. 

Home and community-based alternatives to nursing home care is 

another example. If we can make the waiver process less necessary, 

if we can build some of those commonsense developments into the 

underlying program, we can free-up resources that can really be focused on real innovation, but I think it does still need to exist because as we are seeing with States like Massachusetts and New 

York and Texas and others where the delivery system incentive 

payments are being implemented, there are different things we 

need to try, and the system has to be accommodating to thinking 

outside of the box. And so I would say let’s make the 1115 waiver 

process less necessary, but still nimble and fluid enough to be able 

to accommodate the innovations that need to happen, not just 

today, but tomorrow. 

Mr. BUCSHON. Governor Barbour, you have some comments on 

that? 

Mr. BARBOUR. Yes, Doctor, I agree with that. That is very in line 

with what I have said earlier. I would think for many things there 

shouldn’t be any necessity for coming and seeking a waiver, particularly something that has already been proven to work well in 

other States. But one of the things that strikes me is, we ought to 

base this on results, and yet GAO’s witness here told us that CMS 

doesn’t even test the results, that they don’t look at the outcomes, 

and that is news to me. I hope it is really—that that is not quite 

accurate. But certainly, that ought to be part of the test. Did it 

achieve what you said it was going to achieve, and budget neutrality wasn’t within the money. I testified, Mr. Chairman, 4 years 

ago that if you would give us a block grant, we would take 1⁄2 the 

104 

annual increase in Medicaid that our State would be entitled to because I thought we could save way, way more than that. I think 

if you have a budget—if you have a waiver, and you don’t meet 

budget neutrality, the State ought to have to pay it. You will get 

very good programs if the State knows they are on the line. And 

most States, I believe, most States wouldn’t prefer that, but if that 

was the difference, they would take it. 

Mr. BUCSHON. I yield back. 

Mr. PITTS. The Chair thanks the gentleman. 

Now recognizes the gentleman from Oregon, Mr. Schrader, 5 

minutes for questions. 

Mr. SCHRADER. Thank you, Mr. Chairman. 

A couple of comments, I guess. The course of the hearing, I find 

it astonishing that some States, some Governors find it a burden 

to take care of the most disadvantaged people in our society, that 

Medicaid is not something—especially when the Federal Government is kicking in 90 percent of the cost. I mean, I am a little 

budgeteer from Oregon, a small business person, if someone is 

going to pay 90 percent of the cost of something, I am going to find 

10 percent of the money to get it done, especially for this population. And who are these people? Who are these shiftless people 

on Medicaid? They are children, they are seniors, they are disabled 

people. Eighty percent of the Medicaid population is that group. I 

don’t consider that shiftless. Seventy percent of the people that are 

able to actually work, they are all on Medicaid, that little 20—70 

percent of them working, and they can’t afford health care. I mean 

Medicaid, 138 percent of poverty level, that is like, what, 14, 

$15,000 a year? I challenge any of us to try and live on something 

like that. Afford health care? You can’t do that. Oregon had a small 

demonstration project that at the time I thought was very good. 

Yes, everyone should pay something for their health care. Let’s see, 

we sort of do that under the ACA that is being demagogued on a 

regular basis. Yes, people that are lower income but can afford 

some—yes, we make them pay on a graduated basis, based on their 

income and their socioeconomic level, but somehow what we are 

hearing today, you know, we don’t like that because it is Medicaid? 

Medicaid is tougher though. We had this demonstration project in 

our State and we found that those people that are on Medicaid, 

they have lots of issues, they have multiple risk factors, folks. It 

is not like you and I that just decide not to work. There may be 

a few of those but most have multiple issues. And, frankly, they 

are not going to pay $5, you know. And enlightened self-interest 

ought to dictate to every one of us, even if we don’t care about children, seniors, disabled, or the people that have multiple risk factors, that if we don’t take care of these folks, their diabetes cost 

is going to go into our health insurance premium. And that has 

been proven. That is one of the predicates over healthcare reform. 

Whether you like the ACA or not, that is one of the predicates of 

why healthcare reform is so important; to get the costs aligned like 

they should. 

And there are some good projects out there though. I agree with 

the general sense of this panel that the whole waiver system, the 

whole Medicaid system itself seems to be antiquated, and we 

should update it to be, I believe, outcome and results-based. I agree 

105 

with that 100 percent. That is the future; not micromanaging. Very 

concerned when I heard GAO talking about, well, we have more 

criteria here and a little more definition there, and count more 

waits that are being processed on—that is not the goal. The goal 

is to have higher quality health care at, frankly, less cost. And the 

way to do that, and it is in the ACA, and like it or not, even without the ACA, it is coordinated care. Aligning things so you don’t 

have the duplication that GAO talks about. 

Oregon has a great demonstration project that they are doing 

right now that I think is very accountable. It is pretty gutsy. They 

say they got a bunch of money from CMS to develop this coordinated care organizations for Medicaid patients. That means that 

there are primary care docs, specialists, dentists, mental health 

professionals, coordinating the care for Medicaid patients so that 

they will know what each other is doing, they will have an accountability in there, and they get—they are—in return for this money, 

the goal was to keep—not only get better outcomes, but get better 

value, not just for the individual but for the taxpayer. Limit 

healthcare inflation to 2 percent through the duration of it. 

And I—you know, as a health care—well, as a budget guy, I 

got—ran—helped run the budget back in Oregon back in the day. 

You know, healthcare costs for healthcare inflation, 6, 7, 8, 9 percent annually. It was a big deal. We always budgeted more than 

annual inflation on a regular basis, which was anywhere from, you 

know, 1 1⁄2 to 2 1⁄2 percent. So Oregon is going to keep it at 2 percent. That is impossible. Well, the results so far are pretty amazing. We are under 2 percent. Under 2 percent inflation because of 

the coordinated care system. Emergency visits, I don’t know about 

other States, emergency visits are down 21 percent from a couple 

of years ago. That is substantial. Complications from diabetes down 

10 percent already. This is the early stages of coordinated care. 

And chronic obstructive pulmonary diseases, you know, hospital 

stays, down 50 percent. That is what we are talking about. That 

should be the outcome-based type of information that every waiver 

should be judged by, and hopefully, ultimately, Medicaid reimbursement in general. 

I yield back. 

Mr. PITTS. The Chair thanks the gentleman. 

Now recognize the gentleman from Florida, Mr. Bilirakis, 5 minutes for questions. 

Mr. BILIRAKIS. Thank you very much, Mr. Chairman, I appreciate it. 

And good to see you, Governor. 

Mr. BARBOUR. I remember your dad, Congressman. 

Mr. BILIRAKIS. Good. Yes, thank you. Governor, some States have 

been operating under an 1115 waiver. You mentioned Arizona has 

been operating, I believe, since 1982, well, at least 30 years. Some 

have suggested Congress create a process where longstanding core 

elements of an 1115 waiver can be effectively grandfathered into 

the State Plan Amendment. Do you have any thoughts on that? 

And I know that the Doctor had mentioned that too. I am just following up on his question. 

Mr. BARBOUR. Yes, sir. I think that is absolutely a step in the 

right direction. If you have a demonstration project that has demVerDate Mar 15 2010 09:39 Dec 14, 2015 Jkt 037690 PO 00000 Frm 00109 Fmt 6633 Sfmt 6633 F:\114THCONGRESS\114X59MEDICAIDDEMOSASKOK120415\114X59MEDICAIDDEMOS
106 

onstrated that it works, that you are able to do it in a budget neutral or better way, and that the outcomes are what you were expecting and what you told was going to happen, if that is the case, 

at some point—it shouldn’t be years and years and years later, at 

some point, you ought to just be able to make that permanent. And 

I think importantly to your sister States, if we are the laboratories 

of democracy, and if Florida has got something that really works, 

it ought to be easier for us to go adopt what Florida is doing, make 

it—make some adjustments for us, but generally adopt what is 

proven to work in another State if we choose to, and not have to 

go through a big long process that takes 337 days. 

Mr. BILIRAKIS. Sounds good. Thank you. 

Mr. Salo, one of the things that the many Republican Governors 

have been interested in, they are interested in using 1115 waivers 

to test consumer-directed accounts with modest copay structures to 

encourage health literacy and individuals participating in their 

own health care. I agree with that. CMS has approved a few demonstration programs for this but they have been stringent on the 

copays under the waiver program, I understand. How do you think 

that fact squares with the reality that consumers who make a few 

dollars more are suddenly expected to be shoppers on the exchanges, for example, at 133 percent of the Federal poverty level 

you could be on Medicaid with no copay, but at 134 percent of the 

Federal poverty level, you would be on the exchange with no 

copays? 

Mr. SALO. Yes, I think the issue there is—and again with deference to the administration’s priorities, every administration is 

going to have priorities about what it wants to see done with its 

share of the Medicaid dollars. The current administration is not a 

huge fan of copays in the Medicaid Program, but I think it is clear 

that a key point of what we need to do in the overall system to 

make health care better for people is that we have to have greater 

accountability, but for everyone. Yes, we need better consumer engagement, but we need to give—we need to make sure that consumers have the tools to be able to do that effectively. And we need 

to also make sure that providers; primary care physicians or what 

have you, are accountable. We have to give them the tools to be 

able to do that. And ultimately, whether it is a health plan or 

whether it is the State, we have to have the tools to create an environment where all of those other pieces can succeed. You know, we 

don’t want to just leave anyone out there with, you know, ‘‘Here 

is a ticket, good luck out there.’’ We have to create, you know, 

with—it is not the Peter Principle, it is the Peter Parker Principle: 

With great power comes great responsibility. We have a responsibility to be able to ensure that everybody within the system is 

going to succeed as we change it from a dysfunctional fee-for-service model to a better integrated, coordinated managed care model. 

And that is going to involve consumer engagement, provider engagement, and State engagement as well. 

Mr. BILIRAKIS. Thank you. Last question. Governor, CBO has indicated Obamacare’s Medicaid expansion would, on balance, reduce 

incentives to work, yet CMS has refused to approve work requirements as part of the Republican Governors’ State demonstration 

107 

waivers. Are you aware of anything in Section 1115 that would prevent CMS from approving work-related requirements? 

Mr. BARBOUR. No, sir, I am not. And clearly, having a plan 

where more people work in our economy—today, only 48 1⁄2 percent 

of adult Americans have a full-time job. The labor participation 

rates are about 62.9 percent; the lowest since the ’70s, before 

women had really come into the workforce in the numbers that 

they have in the last 40-some years. So yes, it is absolutely—now 

that we allow able-bodied childless people to be on Medicaid, there 

is absolutely no reason we shouldn’t look back at Bill Clinton’s welfare reform law, which had work or retraining requirements. 

Mr. BILIRAKIS. Thank you very much. 

I yield back, Mr. Chairman. 

Mr. PITTS. The Chair thanks the gentleman. 

Now recognize the gentlelady from Florida, Ms. Castor, 5 minutes for questions. 

Ms. CASTOR. Thank you, Mr. Chairman. And welcome, panel. 

I would like to read from a Miami Herald article from about 6 

months ago relating to Florida’s Medicaid Program. It says, in a 

sweeping decision, the judge says Florida systematically has shortchanged poor and disabled children by providing inadequate money 

for their health care. A Federal judge Wednesday declared Florida’s 

healthcare system for needy and disabled children to be in violation 

of several Federal laws, handing a stunning victory to doctors and 

children’s advocates who have fought for almost a decade to force 

the State to pay pediatricians enough money to ensure impoverished children can receive adequate care. In his 153-page ruling, 

U.S. Circuit Judge Adalberto Jordan said lawmakers had for years 

set the State’s Medicaid budget at an all—artificially low level, 

causing pediatricians and other specialists for children to opt out 

of the insurance program for the needy. In some areas of the State, 

parents had to travel long distances to see specialists. The low 

spending plans which forced Medicaid providers for needy children 

to be paid far below what private insurers would spend, and well 

below what doctors were paid in the Medicare Program for a more 

powerful group; elders, amounted to rationing of care, the order 

said. And here are a few examples of what the judge found. Almost 

80 percent of children enrolled in the Medicaid Program are getting 

no dental services at all. By squeezing doctor payments, Florida 

health regulators left 1⁄3 of the State’s children on Medicaid with 

no preventative medical care, despite the Federal legal requirements. And this was true for both children paying fee-for-service or 

under managed care. In addition, the judge wrote, an unacceptable 

percentage of infants do not received a single well child visit in the 

first 18 months of their lives. Florida health regulators sometimes 

switch needy children from one Medicaid provider to another without their parents’ knowledge or consent. So these sweeping violations of Federal law within a demonstration project, and Medicare—Medicaid waiver raised a lot of questions. 

And, Governor, I heard you said, well, for Florida—for all States, 

if it is working, maybe we should keep it. But clearly here, if something is not working, they need to take a look at it. I think everyone would agree. 

108 

So, Ms. Alker, you are fairly familiar with what has been happening in Florida. This is part of the reason that the low-income 

pool and these multibillion-dollar—in Florida, these large uncompensated care pools have gotten a lot of attention over past years. 

A lack of transparency in the way the funds are distributed by the 

State. They are distributed not by—they don’t follow beneficiaries, 

they go—depending on—the pool of money goes to—depending on 

what counties have contributed. And they have raised serious questions about provider rates that have been cut over the years. What 

is to be done in a waiver situation when you have these uncompensated care pools, and yet providers, doctors are not being paid adequately, and children aren’t getting the care they need? 

Ms. ALKER. So I think you raised a number of issues, and one 

of the really important questions is having, I think, strong oversight of Medicaid managed care, particularly in Florida; there has 

been serious problems over the years with your managed care companies. And so part of what, you know, if you build it into the waiver process or through the new Medicaid managed care regs that 

CMS has just issued, that we really are going to need accountability for the taxpayer dollar with respect to these managed care 

companies. And I worry because I think that States have lost personnel, their departments are often underfunded, and they don’t 

have the ability to oversee these managed care companies, ensure 

that we really are paying for care for very vulnerable children and 

others. 

And I guess with respect to the uncompensated care pool, I think 

it is also important to emphasize, as you mentioned earlier, Representative Castor, that the low-income pool in Florida doesn’t 

cover a single person, and uncompensated care pools don’t cover 

people. They came out of a time when particularly States had very 

high uninsured rates, but coverage is really a better way to approach the healthcare needs of citizens of your State and others, 

because the low-income pool doesn’t protect families from bankruptcy, it doesn’t ensure that folks get primary and preventative 

care, and to my mind, it is a smarter use of taxpayer dollars to 

make sure that people get coverage so they get the primary and 

preventative care they need so they don’t get sicker and have to 

wind up taking uncompensated care from your State’s hospitals. 

Ms. CASTOR. Thank you. I yield back. 

Mr. PITTS. The Chair thanks the gentlelady. 

And now recognizes the gentleman from New York, Mr. Collins, 

5 minutes for questions. 

Mr. COLLINS. Thank you, Mr. Chairman. And I want to thank all 

of the witnesses today for your testimony on what we know is a 

major concern for all of us. And I may direct this to Governor 

Barbour. As the CEO of Mississippi, I can just tell you, in my past 

life, I was the county executive of the largest upstate county in 

New York, where Medicaid actually was 115 percent of our budget, 

of our property taxes. So every single dollar that we collected in 

property taxes, every single dollar we collected was not enough to 

cover our Medicaid burden, because in New York, the counties pay 

a portion of the fee. That is not true in a lot of States. I don’t know 

what it was in Mississippi, but in New York our Medicaid costs are 

so outrageous that we pass a—you know, a big chunk of it down 

109 

to the 62 counties, to the point in Erie County, one of the poorest 

counties in the State of New York, home to Buffalo, it was 115 percent of our property tax levy. So we lived on only sales tax. The 

entire—everything we did with highways and roads and supports 

of our culturals, our prisons, our holding center, 100 percent of everything we did outside of Medicaid was sales tax revenue, which 

is not a predictable source. 

So I will get back to commonsense. When commonsense meets 

good Government, I think that is a good day for all of us. And I 

want to talk about how nominal copays can make a big difference. 

I mean we teach our kids, you know, you raise 50 cents, I will give 

you 50 cents. You want a new bike, you go raise this, I will do that. 

A fundamental part of America is teaching people at a young age 

the value of $1, but in Medicaid, when there is no copay—let me 

tell you another story. I mean I can get pretty animated on this. 

We had in Erie County what we called the frequent fliers that use 

ambulances as a taxi service. They call 911, they climb in an ambulance, it takes them to the Erie County Medical Center, they get 

out and they start walking somewhere else. It was an—a free taxi 

cab, that is what it was, because we don’t have a copay. I suggested 

why not a $50 copay. Fifty dollars to get into an ambulance and 

take you to the hospital, and we would even have a way to potentially, for some of those, waive that, but that would be more expensive than a taxi cab. So if you are looking for a taxi ride, call a taxi, 

don’t call an ambulance. And I was told absolutely not, this isn’t 

going to go that way. I chaired a commission, County Executives 

for Medicaid Reform, asking that we would have the ability at the 

county level to set up our own programs, and I was turned down 

on that one. So I just have a fundamental belief that having some 

level of pay, however little it is, invests a person in what it is they 

are getting, and that nothing in life should be free. 

So, you know, do you have any comments, Governor? 

Mr. BARBOUR. We try very hard to get CMS to agree to let us 

make copayments enforceable, and could not—we were not allowed 

to do that. Governor Daniels is quoted in some of the material, 

when they started the HIP program he—you know, everybody is 

going to have to pay something, and I think the lady from Indiana 

said it starts at $1 a month, but I remember him saying if you can 

afford a Big Mac you can afford the copayment. And for people to 

be—for patients to be participating in their health care, making decisions because of copays, the decision may be generic versus brand 

name, the decision may be something else, but as an old ScotchIrish descendent, if it is a cash bar or a free bar, I know who 

drinks more. And if you—if it costs you something, if you have to 

be part of it, you are going to be a better healthcare receiver because you are going to be conscious about that. And the copays 

don’t have to be very large, as you say, or as Governor Daniels 

says, where they have $1, a $1 copay. There is not anybody that 

can’t afford $1 a month. 

But anyway, I agree with you. My legislature we had Democratic 

majorities in both the House and Senate when I was Governor. 

They were for copays and enforceable copays. It is just commonsense. 

110 

Mr. COLLINS. Well, and that is what I would say. It is commonsense meets Government. We should do something like this. In 

fact, to me, it should be part of the basic Medicaid Program because if we teach our 6-year-old kids the value of $1, and let’s go 

out and do some work in the garage and clean up the house, and 

then you earn—and I will buy the—pay the rest of your bicycle, we 

fundamentally know that anything that is free has less value than 

something you even pay a nominal part for. So certainly within the 

1115 program there should, in my opinion, definitely be a place for 

something for very small copays, and anyone who would debate 

otherwise I think is kind of leaving commonsense at the door, unfortunately. 

Well, thank you again for your testimony. My time has expired. 

I yield back, Mr. Chairman. 

Mr. PITTS. The Chair thanks the gentleman. 

Now recognize the gentleman from Massachusetts, Mr. Kennedy, 

5 minutes for questions. 

Mr. KENNEDY. Thank you, Mr. Chairman. I want to thank the 

witnesses for coming today, and for your testimony on an extraordinarily important topic. 

I apologize, I was bouncing around a little bit and so I think I 

missed some comments earlier about the Massachusetts low-income 

pool. So, Ms. Alker, I was hoping you might be able to clarify—I 

know my colleague, Ms. Castor, brought up the Florida low-income 

pool, and I think there were some comparisons that were made earlier. In your assessment, ma’am, are there any noticeable differences between the way that the—Massachusetts has set up its 

low-income pool and that of Florida? 

Ms. ALKER. I think there are. I am not as familiar with Massachusetts. I think though when you look at the nine States that 

CMS has identified with these kinds of uncompensated care pools, 

they are all different from each other. And as I mentioned before, 

one important step forward is that CMS, earlier this year, sent a 

letter to Florida about the principles they are going to use to apply 

to all States, excuse me, going forward as they consider their uncompensated care pool, and they are applying those principles both 

to States who have expanded Medicaid, like Massachusetts, and 

States who have not, like Florida. 

Mr. KENNEDY. Excuse me. Right. So thank you for pointing out 

at least one important distinction. I also wanted to talk about—this 

has come up a couple of times today, but the work requirements, 

and with regards specifically to an issue that has come up also a 

couple of times today, mental health. One group that is particularly 

hit hard by unemployment are individuals that are suffering with 

mental illness. Committee had a hearing just a couple of days ago 

on improving our mental healthcare system in this country, and it 

is an issue that I know a lot of us care an awful lot about. 

In 2012, 17.8 percent of the seriously mentally ill were unemployed. This group of individuals could succeed at work if given the 

right opportunity for—excuse me, the right employment supports, 

which is why Medicaid coverage is so important. Medicaid—States 

to provide supportive improvements like skills assessments, assistance with job search, and completing job applications, job development and placement, job training, negotiations with prospective 

111 

employers. And Medicaid dollars can be leveraged to support State 

training programs for mental health providers who, in turn, serve 

low-income beneficiaries. In fact, Mississippi and Massachusetts 

have something in common. Both States are taking advantage of 

these types of opportunities. Mississippi is, I think, a great example of using Medicaid support to help State health programs. And, 

Governor, your State goes so far as to provide services to help individuals start their own businesses, such as helping the with a business plan, finding potential financing, and ongoing guidance once 

the business has been launched. Massachusetts is doing some pretty outstanding work as well when it comes to treating mental illness and substance abuse. Flexibility in that waiver process allows 

Massachusetts to leverage State dollars to conduct community support programs, psychiatric day treatment, and acute treatment for 

children and adolescents. 

So, Ms. Alker, to start with you, do you agree that flexibility the 

States have today leverages Medicaid dollars to serve communities 

through the designated State health programs, and the—it is a 

hallmark of the Medicaid Program that should be protected? 

Ms. ALKER. Well, so let me say two things, and then if it is oK, 

I would like to go back to the work requirement issue as well. 

So the kinds of programs that you are mentioning, I mean this 

has been a hallmark of Section 1115 waivers for many decades 

now. This is not something new that the Obama administration 

has started doing, and also it is not something which the Obama 

administration just simply says we are going to give you money for. 

The States come to them with ideas and, you know, I think we 

would all agree, if it is a good idea that supports the objectives of 

the Medicaid Program, that then that is the kind of thing exactly 

the Section 1115 waiver should test. And so I think again, if we 

look at it from that long-term perspective, it is exactly what Mr. 

Salo was saying is that, over time, there are more innovative ideas 

that emanate from States, and that is a hallmark of Section 1115 

waivers. 

With respect to the work requirement question, because I think 

there is an intersection between the mental health issue and the 

work requirement that I would like to point out, work requirements strike me as a bad idea both from a policy perspective and 

they are possibly outside the purview of the Secretary’s legal authority to approve, although I am not a lawyer so I am going to 

leave that to others to comment on it, but I think they are a bad 

idea for the following reasons. I think we all share the same objective here, which is we would like to see people work. We would like 

to maximize employment. But it seems to me that imposing the arbitrary work requirement may, in fact, have the precise opposite effect because you have folks perhaps who have a mental health condition that needs to be treated, and the health care—providing 

them with the health care will allow them to work in greater— 

there will be a greater chance of them becoming employed. So I 

worry very much that a work requirement would have precisely the 

opposite effect of what is intended. 

Mr. KENNEDY. Thank you. And I am, unfortunately, over time, 

so I yield back 5 seconds. 

Mr. PITTS. The Chair thanks the gentleman. 

112 

Now recognize the vice chair of the full committee, Mrs. 

Blackburn, 5 minutes for questions. 

Mrs. BLACKBURN. Thank you, Mr. Chairman. And I want to 

thank each of you for your patience as we worked through the first 

panel, and then for staying with us. This makes for a long morning, we understand that, but as we look at the demonstration 

projects, we do want to come back in and review this, and maybe 

as the director said earlier in the first panel, be able to put some 

guidelines in place, and some more components for oversight and 

also for conduct, put these in the statute. So today is important for 

us. 

Mr. Salo, I want to come with—to you. In your testimony, you 

had said that simple accounting for Medicaid is extremely difficult, 

if not impossible. And we are talking about a program that is probably the world’s largest health insurance program, and the spending is pretty much on autopilot at the Federal level. Lot of problems with how this is playing out. And as a former State senator 

in Tennessee, and the experiment we had with TennCare, I fully 

understand the challenging nature of Medicaid and of working 

through these waivers in the 1115 program, but I want to give you 

a chance to explain this because surely, you are not suggesting that 

benefits cannot be quantified, and that dollars cannot be tracked 

effectively, or that accountability is not needed. So would you like 

to respond to that? 

Mr. SALO. I would love to, thank you. 

Mrs. BLACKBURN. Good. 

Mr. SALO. So I guess what I am saying is I think what the GAO 

is searching for here is akin to—there is an old joke where there 

is a policeman walking down the street and he sees a guy on his 

hands and knees, looking for something in the street under the 

streetlight, and it is dark. And policeman comes over, says, you 

know, what are you doing? He says, I am looking for my keys. I 

lost my keys. So the policeman helps him. And he is there for like 

5 or 10 minutes. He says, I can’t find them, are you sure you 

dropped them here? He says, oh, no, I dropped them down the 

block, just the light is better over here. I think that is what is 

going on. I think the GAO is struggling for something that is really 

simple and really easy, that for the green eyeshade approach of, 

well, I can put this in a checklist, this is simple, this is simple, 

check, check, check. And I am here to argue that Medicaid is much 

more complex than that. I am not saying it doesn’t need accountability. It does. It has. And I am not saying that we cannot—we 

should not track the dollars, track the benefits. You should, and we 

do. What I am saying is, I think what the GAO is pushing for may 

not actually be good for the ultimate value and health care—health 

of the program itself. That as we start getting into very narrow 

definitions—— 

Mrs. BLACKBURN. Well, sir, I am—— 

Mr. SALO [continuing]. Of what budget neutrality is—— 

Mrs. BLACKBURN [continuing]. Going to interrupt you right there. 

If the program is too expensive to afford, it is not good for anybody. 

And what we need to make certain is that we are looking at this 

from access to affordable health care, and to approach it from a 

viewpoint that, well, this is too challenging, the problem is too big 

113 

to solve so let’s leave it on autopilot, that is not a responsible 

course of action, and that is something that we ought not to do, 

and it is exactly the reason we need to pull this back in and look 

at these 1115 waiver situations, and look at the subjectivity with 

which these waivers are being given. 

Governor Barbour, I want to come to you. Talking about the subjective nature of this, and looking back through these uncompensated care pools, and you look at what happened with Massachusetts and Hawaii, and they are being given a much longer period 

of time for their extension on their pool as opposed to Florida, and 

I—what I don’t like where this—you look at how this is playing 

out, and it seems like you have CMS treating States differently if 

they are friendly to the administration as opposed to those that are 

not friendly to the administration. And that is troubling to me. I 

think it is troubling to a lot of people that are looking at Medicaid 

and Medicaid delivery. 

Mr. BARBOUR. Certainly, that is the contention of the attorneys 

general law suit, that because their States did not expand Medicaid, they are being coerced or they are being punished in doing 

this. GAO did not say different States get different treatment, but 

they did publish a list of who got their waivers redone, and it is 

pretty politically consistent. If you look down the list, they all voted 

for the same candidate for President. They got two senators in the 

same party. They all expanded Medicaid. Now, I can’t look into 

anybody’s heart and say they are—that is why they made the decision, but that is why we need more transparency, not just in a 

Democratic administrations, but in Republican administrations, of 

why did the decision get made. 

Mrs. BLACKBURN. Thank you. Mr. Chairman, I have one other 

question for Governor Barbour. I will submit it—it has to do with 

eligibility— get an answer from him relative to that. 

I yield back. 

Mr. PITTS. The Chair thanks the gentlelady. 

That concludes the questions of the members present. We will 

have follow-up questions. We will send those to you in writing. We 

ask that you please respond promptly. 

I remind members that they have 10 business days to submit 

questions for the record. Members should submit their questions by 

the close of business on Wednesday, July the 8th. 

Another very important, interesting hearing. A critical program 

needs attention of Congress. This has been very informative. We 

thank you for coming. 

And without objection, the subcommittee stands adjourned. 

[Whereupon, at 1:11 p.m., the subcommittee was adjourned.] 

[Material submitted for inclusion in the record follows:] 

PREPARED STATEMENT OF HON. FRANK PALLONE, JR. 

Mr. Chairman, thank you for calling today’s hearing on Medicaid demonstration 

projects, and thank you to all of our witnesses for coming to testify. 

Section 1115 waivers were established for the express purpose of allowing States 

to dream big in their Medicaid programs-to design and pilot new ways of delivering 

care that support the overarching objectives of the Medicaid program: to strengthen 

coverage, expand access to providers, improve health outcomes, and increase the 

quality of care for beneficiaries. 

114 

States already have extremely broad flexibility under an 1115 waiver, and that 

flexibility is a good thing. But in exchange, it’s important that there remains strong 

public transparency and evaluation. 

That’s why I am pleased that after close to 20 years of recommendations for more 

transparency into the Medicaid waiver process, the Affordable Care Act included a 

bipartisan provision to improve the transparency of Medicaid waivers, in line with 

longstanding recommendations from GAO. Today, because of this provision, the public has meaningful opportunities to provide input into the waiver process at both 

the State and Federal level, waivers are now evaluated on a periodic basis, and 

States submit reports on implementation. This was a huge step in the right direction. 

I am further encouraged by CMS’ concurrence with GAO recommendations specifically in their April 2015 report for better ongoing and transparent documentation 

of how States spend Medicaid dollars. This is a recommendation that prior administrations had refused to correct, and I continue to believe it is the right thing to do 

to ensure dollars are following our Medicaid beneficiaries. 

I was also encouraged by the administration’s clear and public articulation over 

the past year with States regarding the specific criteria that it would use for approval of waivers for States with so-called ‘‘uncompensated care pools.’’ In many 

past reports, GAO has expressed concerns with the structure and distribution mechanisms for uncompensated-care dollars that some States have used. This is another 

step in the right direction. 

Despite these advancements, I believe there is still more to be done. A real conversation about improving transparency of Medicaid waivers, while carefully balancing the need to preserve State flexibility, is a conversation worth having. 

To be clear, however, States already have broad flexibility. Disguising punitive, 

ideological philosophies like work requirements and increased cost-sharing as vital 

‘‘flexibility’’ needed by States has no place in this conversation. Those are policies 

that undermine the foundation of our safety net. 

There is a real opportunity today to evaluate and learn how to improve the Medicaid waiver process so we can provide better care to millions of people that count 

on Medicaid. I look forward to that discussion. 

115 

116 

117 

118 

119 

120 

121 

122 

123 

124 

125 

126 

127 

128 

129 

130 

131 

132 

133 

134 

135 

136 

137 

Æ