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87–974 PDF 2014

MEDICARE ADVANTAGE: WHAT BENEFICIARIES 

SHOULD EXPECT UNDER THE PRESIDENT’S 

HEALTHCARE PLAN 

HEARING 

BEFORE THE

SUBCOMMITTEE ON HEALTH 

OF THE

COMMITTEE ON ENERGY AND 

COMMERCE 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED THIRTEENTH CONGRESS 

FIRST SESSION 

DECEMBER 4, 2013 

Serial No. 113–105 

( 

Printed for the use of the Committee on Energy and Commerce 

energycommerce.house.gov 

COMMITTEE ON ENERGY AND COMMERCE 

FRED UPTON, Michigan 

Chairman 

RALPH M. HALL, Texas 

JOE BARTON, Texas 

Chairman Emeritus 

ED WHITFIELD, Kentucky 

JOHN SHIMKUS, Illinois 

JOSEPH R. PITTS, Pennsylvania 

GREG WALDEN, Oregon 

LEE TERRY, Nebraska 

MIKE ROGERS, Michigan 

TIM MURPHY, Pennsylvania 

MICHAEL C. BURGESS, Texas 

MARSHA BLACKBURN, Tennessee 

Vice Chairman 

PHIL GINGREY, Georgia 

STEVE SCALISE, Louisiana 

ROBERT E. LATTA, Ohio 

CATHY MCMORRIS RODGERS, Washington 

GREGG HARPER, Mississippi 

LEONARD LANCE, New Jersey 

BILL CASSIDY, Louisiana 

BRETT GUTHRIE, Kentucky 

PETE OLSON, Texas 

DAVID B. MCKINLEY, West Virginia 

CORY GARDNER, Colorado 

MIKE POMPEO, Kansas 

ADAM KINZINGER, Illinois 

H. MORGAN GRIFFITH, Virginia 

GUS M. BILIRAKIS, Florida 

BILL JOHNSON, Ohio 

BILLY LONG, Missouri 

RENEE L. ELLMERS, North Carolina 

HENRY A. WAXMAN, California 

Ranking Member 

JOHN D. DINGELL, Michigan 

FRANK PALLONE, JR., New Jersey 

BOBBY L. RUSH, Illinois 

ANNA G. ESHOO, California 

ELIOT L. ENGEL, New York 

GENE GREEN, Texas 

DIANA DEGETTE, Colorado 

LOIS CAPPS, California 

MICHAEL F. DOYLE, Pennsylvania 

JANICE D. SCHAKOWSKY, Illinois 

JIM MATHESON, Utah 

G.K. BUTTERFIELD, North Carolina 

JOHN BARROW, Georgia 

DORIS O. MATSUI, California 

DONNA M. CHRISTENSEN, Virgin Islands 

KATHY CASTOR, Florida 

JOHN P. SARBANES, Maryland 

JERRY MCNERNEY, California 

BRUCE L. BRALEY, Iowa 

PETER WELCH, Vermont 

BEN RAY LUJAN, New Mexico 

PAUL TONKO, New York 

JOHN A. YARMUTH, Kentucky 

SUBCOMMITTEE ON HEALTH

JOSEPH R. PITTS, Pennsylvania 

Chairman 

MICHAEL C. BURGESS, Texas 

Vice Chairman 

ED WHITFIELD, Kentucky 

JOHN SHIMKUS, Illinois 

MIKE ROGERS, Michigan 

TIM MURPHY, Pennsylvania 

MARSHA BLACKBURN, Tennessee 

PHIL GINGREY, Georgia 

CATHY MCMORRIS RODGERS, Washington 

LEONARD LANCE, New Jersey 

BILL CASSIDY, Louisiana 

BRETT GUTHRIE, Kentucky 

H. MORGAN GRIFFITH, Virginia 

GUS M. BILIRAKIS, Florida 

RENEE L. ELLMERS, North Carolina 

JOE BARTON, Texas 

FRED UPTON, Michigan (ex officio) 

FRANK PALLONE, JR., New Jersey 

Ranking Member 

JOHN D. DINGELL, Michigan 

ELIOT L. ENGEL, New York 

LOIS CAPPS, California 

JANICE D. SCHAKOWSKY, Illinois 

JIM MATHESON, Utah 

GENE GREEN, Texas 

G.K. BUTTERFIELD, North Carolina 

JOHN BARROW, Georgia 

DONNA M. CHRISTENSEN, Virgin Islands 

KATHY CASTOR, Florida 

JOHN P. SARBANES, Maryland 

HENRY A. WAXMAN, California (ex officio) 

(II) 

(III) 

C O N T E N T S 

Page 

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

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

Prepared statement .......................................................................................... 2 

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

Texas, opening statement .................................................................................... 3 

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

New Jersey, opening statement .......................................................................... 7 

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

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

Prepared statement .......................................................................................... 9 

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

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

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

opening statement ................................................................................................ 10 

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

California, prepared statement ........................................................................... 142 

WITNESSES

Douglas Holtz-Eakin, President, American Action Forum ................................... 11 

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

Joe Baker, President, Medicare Rights Center ..................................................... 18 

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

Robert Margolis, Chief Executive Officer, HealthCare Partners Holdings, 

LLC, and Co-Chairman, Davita HealthCare Partners, Inc. ............................. 39 

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

Marsha R. Gold, Senior Fellow, Mathematica Policy Research ........................... 59 

Prepared statement .......................................................................................... 61 

Jon Kaplan, Senior Partner and Managing Director, The Boston Consulting 

Group .................................................................................................................... 76 

Prepared statement .......................................................................................... 78 

SUBMITTED MATERIAL

Article, dated June 6, 2012, ‘‘Burgess: Medicare-less,’’ by Rep. Michael C. 

Burgess, Washington Times, submitted by Mr. Burgess .................................. 5 

Letter of December 3, 2013, from James L. Martin, Chairman, The 60 Plus 

Association, to Mr. Pitts, et al., submitted by Mr. Pitts ................................... 106 

(1) 

MEDICARE ADVANTAGE: WHAT BENEFICIARIES SHOULD EXPECT UNDER THE 

PRESIDENT’S HEALTHCARE PLAN 

WEDNESDAY, DECEMBER 4, 2013 

HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON HEALTH, 

COMMITTEE ON ENERGY AND COMMERCE, 

Washington, DC. 

The subcommittee met, pursuant to call, at 10:00 a.m., in room 

2123 of the Rayburn House Office Building, Hon. Joe Pitts (chairman of the subcommittee) presiding. 

Members present: Representatives Pitts, Burgess, Shimkus, Murphy, Blackburn, Gingrey, Lance, Cassidy, Guthrie, Griffith, Bilirakis, Ellmers, Barton, Upton (ex officio), Pallone, Dingell, Engel, 

Schakowsky, Matheson, Green, Barrow, Christensen, Castor, Sarbanes, and Waxman (ex officio). 

Staff present: Sean Bonyun, Communications Director; Noelle 

Clemente, Press Secretary; Sydne Harwick, Legislative Clerk; Robert Horne, Professional Staff Member, Health; Katie Novaria, Professional Staff Member, Health; Monica Popp, Professional Staff 

Member, Health; Chris Sarley, Policy Coordinator, Environment 

and the Economy; Heidi Stirrup, Policy Coordinator, Health; Tom 

Wilbur, Digital Media Advisor; Ziky Ababiya, Democratic Staff Assistant; Phil Barnett, Democratic Staff Director; Amy Hall, Democratic Senior Professional Staff Member; Elizabeth Letter, Democratic Assistant Press Secretary; Karen Nelson, Democratic Deputy 

Staff Director, Health; and Rachel Sher, Democratic Senior Counsel. 

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

recognize himself for an opening statement. 

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

OF PENNSYLVANIA 

The Medicare Advantage—MA—program, an alternative to the 

original Medicare fee-for-service—FFS—program, provides 

healthcare coverage to Medicare beneficiaries through private 

health plans offered by organizations under contract with the Centers for Medicare and Medicaid Services—CMS. MA plans may 

offer additional benefits not provided under Medicare FFS, such as 

reduced cost sharing, or vision and dental coverage. They also generally have a high rate of satisfaction, and approximately 28 perVerDate Aug 31 2005 11:11 May 23, 2014 Jkt 037690 PO 00000 Frm 00005 Fmt 6633 Sfmt 6633 F:\1123CA~1\113-10~1 WAYNE
2 

cent of Medicare beneficiaries have chosen to participate in Medicare Advantage. 

The Affordable Care Act—ACA—as noted in a July 24, 2012, Congressional Budget Office—CBO—report, cut $716 billion from 

Medicare, including $308 billion from Medicare Advantage alone. 

In April of 2010, the Medicare Actuary projected that these payment cuts would result in an enrollment decrease in the MA program of as much as 50 percent. 

The ACA also required CMS, effective January 1, 2012, to provide quality bonus payments to MA plans that achieve four, four 

and half, and five stars on a five-star quality rating system developed by CMS. Rather than implement the bonus structure laid out 

in the law, which would have led to these cuts going into effect in 

2012, CMS announced in November 2010 that it would conduct a 

nationwide demonstration—the MA Quality Bonus Payment Demonstration—from 2012 through 2014 to test an alternative method 

for calculating and awarding bonuses. 

The Government Accountability Office—the GAO—in response to 

a request by Senator Orrin Hatch, noted that the demonstration 

project’s design made ‘‘it unlikely that the demonstration will 

produce meaningful results’’ and recommended that HHS cancel 

the demonstration. GAO also stated: ‘‘We remain concerned about 

the agency’s legal authority to undertake the demonstration.’’ With a price tag of $8.35 billion over 10 years, the Medicare Actuary noted that this demonstration would offset more than onethird of the reduction in MA payments projected to occur under 

ACA from 2012 to 2014, effectively masking the first wave of ACAmandated cuts until next year. 

A recent report by the Kaiser Family Foundation warned that 

more than half a million beneficiaries may have to switch to another MA plan or return to fee-for-service Medicare in 2014 as a 

result of the ACA. 

In addition to plan availability, questions are now being raised 

about the possibility of rising costs and limited provider networks 

in the future as more ACA-mandated cuts go into effect. 

I would like to thank our witnesses for being here today, and I 

look forward to their testimony regarding how the ACA will impact 

the Medicare Advantage program. 

[The prepared statement of Mr. Pitts follows:] 

PREPARED STATEMENT OF HON. JOSEPH R. PITTS

The Medicare Advantage (MA) program, an alternative to the original Medicare 

fee-for-service (FFS) program, provides healthcare coverage to Medicare beneficiaries through private health plans offered by organizations under contract with 

the Centers for Medicare and Medicaid Services (CMS). 

MA plans may offer additional benefits not provided under Medicare FFS, such 

as reduced cost sharing or vision and dental coverage. 

They also generally have a high rate of satisfaction, and approximately 28% of 

Medicare beneficiaries have chosen to participate in Medicare Advantage. 

The Affordable Care Act (ACA), as noted in a July 24, 2012 Congressional Budget 

Office (CBO) report, cut $716 billion from Medicare, including $308 billion from 

Medicare Advantage alone. 

In April 2010, the Medicare actuary projected that these payment cuts would result in an enrollment decrease in the MA program of as much as 50%. 

The ACA also required CMS, effective January 1, 2012, to provide quality bonus 

payments to MA plans that achieve 4, 4.5, or 5 stars on a 5-star quality rating system developed by CMS. 

3 

Rather than implement the bonus structure laid out in the law, which would have 

led to these cuts going into effect in 2012, CMS announced in November 2010 that 

it would conduct a nationwide demonstration—the MA Quality Bonus Payment 

Demonstration—from 2012 through 2014 to test an alternative method for calculating and awarding bonuses. 

The Government Accountability Office (GAO), in response to a request by Senator 

Orrin Hatch, noted that the demonstration project’s design made ‘‘it unlikely that 

the demonstration will produce meaningful results’’ and recommended that ‘‘HHS 

cancel the demonstration.’’ 

GAO also stated: ‘‘we remain concerned about the agency’s legal authority to undertake the demonstration.’’ 

With a price tag of $8.35 billion over 10 years, the Medicare actuary noted that 

this demonstration would offset more than one-third of the reduction in MA payments projected to occur under ACA from 2012 to 2014, effectively masking the first 

wave of ACA-mandated cuts until next year. 

A recent report by the Kaiser Family Foundation warned that more than half a 

million beneficiaries may have to switch to another MA plan or return to feeforservice Medicare in 2014, as a result of ACA. 

In addition to plan availability, questions are now being raised about the possibility of rising costs and limited provider networks in the future as more ACA-mandated cuts go into effect. 

I would like to thank our witnesses for being here today, and I look forward to 

their testimony regarding how the ACA will impact the Medicare Advantage program. 

Mr. PITTS. Thank you, and I yield the remainder of my time to 

Representative Burgess. 

OPENING STATEMENT OF HON. MICHAEL C. BURGESS, A 

REPRESENTATIVE IN CONGRESS FROM THE STATE OF TEXAS 

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

want to thank the chairman for calling the hearing this morning. 

You know, we see the headlines and we see everything that is 

going wrong in health care, but sometimes we forget that there are 

some things that actually are going OK and there are things that 

this committee and previous Congresses have worked on to fix, and 

that is one of the things we are going to be discussing this morning, but sometimes we are so busy triaging, we don’t allow ourselves the luxury of examining those things that are actually working as intended. 

In my opinion, Medicare Advantage is working, and it is important to hold hearings like this to learn from those successes and 

see where we can build upon those successes and where the potential threats that are undermining the benefits and services that 

now over 25 percent of seniors are experiencing and how those 

maybe threatened. 

Medicare Advantage allows integrated care coordination that this 

committee has sought to bring into fee-for-service Medicare. Medicaid Advantage plans in Texas are lowering costs. They are bringing greater disease management and care coordination to patients’ 

lives. They are encouraging wellness activities and actually using 

physicians to the maximum ability of their license rather than always referring to a specialist. There are those conditions that can 

be satisfactorily managed by a general internist or family practice 

physician, and we ought to encourage that and not punish it. But 

as money is taking out of the system and plans have been forced 

to restrain networks and eliminate services that made them such 

a good deal for seniors, we have to keep a watchful eye. 

4 

We are all hearing about people wanting to be able to keep their 

doctors. Well, the cuts in the Affordable Care Act pose a real danger to seniors keeping their doctors and the benefits that they now 

have in Medicare Advantage. The harm of these cuts is compounded when the money is not reinvested in the Medicare program. We have heard that before. You can’t doubly count the 

money that you take out of Medicare and then count that again as 

a savings when you are not reinvesting the money in Part A or 

Part B. 

One small change that has been bipartisan, Mr. Gonzalez, who 

used to be part of this committee, when he was on the committee 

offered a bill that would allow seniors to switch plans between MA 

plans in the first three months of the year right after the open enrollment period. That was a reasonable suggestion of his at the 

time, and one that I think the committee could support. 

Mr. Chairman, I had some time to go through the archives, and 

I encountered a very brilliant and insightful opinion piece that was 

printed in the Washington Times June 16, 2012, and I would like 

to offer it for the record. 

Mr. PITTS. Without objection, so ordered. 

[The information follows:] 

5 


87974.001
6 


87974.002
7 

Mr. PITTS. The gentleman yields back, and now the Chair recognizes the ranking member of the Health Subcommittee, Mr. 

Pallone, 5 minutes for an opening statement. 

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

Mr. PALLONE. Thank you, Chairman Pitts, and thank you to our 

witnesses for being here to share your expertise. 

Today I am pleased we have the opportunity to talk about Medicare and the positive reforms introduced by the Affordable Care 

Act to Medicare Advantage. While the majority of Medicare’s 52 

million beneficiaries are in the traditional Federally administered 

Medicare program, Medicare Advantage, or MA, offers beneficiaries 

an alternative option to receive their Medicare benefits through 

private health plans. Fifteen million people, or 29 percent of all 

Medicare beneficiaries, are enrolled in MA plans as of September 

2013, an increase of 30 percent since 2010. 

The ACA included reforms to Medicare Advantage payment policies and added a number of benefits and protections for beneficiaries both through MA and traditional Medicare. For example, 

Medicare must cover wellness visits and preventative services with 

no copayments or coinsurance. The ACA also ensures that MA 

plans beginning in 2014 spend at least 85 cents of every dollar received in premiums on actual care. Beneficiaries will also receive 

discounts through the ACA on their medications when they reach 

the coverage gap, or donut hole, in Medicare Part D, and these discounts will grow over the next several years until the gap is closed. 

In addition, the ACA aims to improve the quality of MA plans 

by rewarding plans that deliver high-quality care with bonus payments. Incentivizing quality patient care over quantity of services 

provided is key to improving healthcare outcomes and reducing 

waste and the rising cost of health care. 

The ACA will also bring MA payments more in line with traditional Medicare payments. On average, Medicare has been paying 

more per enrollee to these private MA plans than the cost of care 

for those on traditional Medicare. By reducing MA payments over 

time, there will be greater parity between MA and traditional 

Medicare payments, resulting in savings that will benefit enrollees 

and help secure the solvency of the Medicare Trust Fund for a 

longer period of time. 

Now, critics of these payments reforms predicted that MA costs 

to enrollees would rise, that the provider networks and plan choices 

would decrease, and MA enrollment would drop. Changes in provider participation, pricing and coverage occur every year as an inherent part of insurers’ business decision-making including long before the passage of the ACA, and that is why we have provided 

tools to CMS to ensure that seniors are protected from potential 

changes that private plans may make. 

In addition, seniors continue to have the choice that best suits 

their individual health needs, and every year continue to maintain 

the ability to pick a new plan or traditional Medicare. 

So I look forward to hearing more from our witnesses on recent 

trends in Medicare Advantage. I think we can all agree that our 

8 

work as a committee needs to continue beyond the improvements 

we made in the ACA. So your guidance today on ways we can continue to strengthen the program for our seniors is critical. We can’t 

return to the ways before the Affordable Care Act. We must move 

our healthcare system to one of quality and efficiency in all of 

Medicare. 

So thank you again, Mr. Chairman, and I yield back the balance 

of my time. 

Mr. PITTS. The Chair thanks the gentleman, and now recognizes 

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. Well, thank you, Mr. Chairman. 

You know, every day we are hearing from folks and families 

across the country about how the President’s healthcare bill has 

wreaked havoc on their own healthcare coverage, with millions receiving cancellation notices, millions more facing premium rate 

shock, and others still left to wonder if their applications on 

HealthCare.gov were even successful. 

This morning, we are going to focus on how the health care of 

our Nation’s seniors and disabled could be affected by the changes 

in the President’s healthcare plan. 

The President’s healthcare law cut over $700 billion from the already struggling Medicare program to help fund the flawed new entitlement. Included in these cuts were over $300 billion in direct 

and indirect reductions to the Medicare Advantage program, and 

many of these cuts will start in 2014. 

Medicare’s managed care program, also known as Medicare Advantage, currently provides coverage for more than 14 million 

Americans, over a quarter of all Medicare beneficiaries, and these 

patients choose Medicare Advantage plans over traditional Medicare for a variety of reasons including improved cost sharing, enhanced benefits, better care coordination, and in fact, higher quality of care. For millions of Americans, especially those with lower 

incomes, Medicare Advantage is a better option for delivering their 

care, and frankly, their choice. 

While Medicare Advantage continues to grow, the cuts made in 

the healthcare law threaten the future of the program and could 

put coverage at risk for thousands of beneficiaries in 2014 and 

many more in the future. 

According to a report by the Kaiser Family Foundation, more 

than half a million beneficiaries may lose their existing Medicare 

Advantage plan next year, which would then force those seniors 

and disabled Americans to switch their current plan or return to 

a traditional fee-for-service plan. More than 100,000 beneficiaries 

enrolled in a Medicare Advantage plan in 2013 will not be able to 

enroll in a Medicare Advantage plan at all in 2014. 

Likewise, for thousands of America’s most vulnerable, ‘‘if you like 

your doctor, you will be able to keep your doctor’’ is sadly another 

broken promise. Reports confirm that many Medicare Advantage 

enrollees will see a change in their provider networks next year as 

a result of the new law. So empty promises may be of little concern 

9 

for some but they have real consequences for the Americans who 

expect us to do no harm. Americans deserve to know why their existing coverage is changing when they were promised otherwise, 

and this morning’s hearing will be an important opportunity to get 

some answers from a number of good experts, and we appreciate 

you being here, and I yield to Dr. Cassidy. 

[The prepared statement of Mr. Upton follows:] 

PREPARED STATEMENT OF HON. FRED UPTON

Every day we hear from individuals and families across the country about how 

Obamacare has wreaked havoc on their healthcare coverage, with millions receiving 

cancellation notices, millions more facing premium rate shock, and others still left 

to wonder if their applications on HealthCare.gov were even successful. This morning, we will focus on how the health care of our Nation’s seniors and disabled could 

be affected by the changes in the president’s healthcare plan. The president’s healthcare law cut over $700 billion from the already struggling 

Medicare program to help fund the flawed new entitlement. Included in these cuts 

were over $300 billion in direct and indirect reductions to the Medicare Advantage 

program. Many of these cuts will begin in 2014. 

Medicare’s managed care program, also known as Medicare Advantage, currently 

provides coverage for more than 14 million Americans, over a quarter of all Medicare beneficiaries. These patients choose Medicare Advantage plans over traditional 

Medicare for a variety of reasons including improved cost-sharing, enhanced benefits, better care coordination, and higher quality of care. For millions of Americans, 

especially those with lower-incomes, Medicare Advantage is a better option for delivering their care. 

While Medicare Advantage continues to grow, the cuts made in the healthcare law 

threaten the future of the program and could put coverage at risk for thousands of 

beneficiaries in 2014 and many more in the future. 

According to a report by the Kaiser Family Foundation, more than half a million 

beneficiaries may lose their existing Medicare Advantage plan next year, which 

would force these seniors and disabled Americans to switch their current plan or 

return to a traditional fee-for-service plan. More than 105,000 beneficiaries enrolled 

in a Medicare Advantage plan in 2013 will not be able to enroll in a Medicare Advantage plan at all in 2014. 

Likewise, for thousands of America’s most vulnerable, ‘‘if you like your doctor, you 

will be able to keep your doctor’’ is sadly another broken promise. Reports confirm 

that many Medicare Advantage enrollees will see a change in their provider networks next year as a result of the new law. 

Empty promises may be of little concern to this administration, but they have real 

consequences for the Americans who expect Washington to do no harm. Americans 

deserve to know why their existing coverage is changing when they were promised 

otherwise, and this morning’s hearing will be an important opportunity to get some 

answers from a panel of expert witnesses. 

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

Mr. CASSIDY. Thank you, Mr. Chairman. 

Over 37,000 of my constituents in Louisiana are enrolled in 

Medicare Advantage programs. MA plans offer higher quality care 

and additional benefits, more so than offered in traditional Medicare, and yet despite MA’s popularity, MA has challenges. 

The President’s healthcare law cuts Medicare Advantage by over 

$200 billion. Now, I am a doc. When I see that the people who 

would come to me are having this many cuts in the programs that 

cover them, intuitively, common sense tells you that they will have 

increased problems finding a doctor, they will have higher premiums, higher copays, fewer benefits and plan choices. Even now 

with only 20 percent of these cuts implemented, there are reports 

of these problems already. 

10 

I along with Congressman Barrow and 60 other Members of Congress have signed a letter opposing other cuts to the MA program. 

I urge my colleagues on the committee to make the same commitment to their constituents who have come to rely upon Medicare 

Advantage. 

With that, I yield—— 

Mr. SHIMKUS. Dr. Cassidy, will you yield me back the balance? 

Mr. CASSIDY. I yield my time back to the chairman. 

Mr. UPTON. Yield to Mr. Shimkus. 

Mr. GINGREY. Mr. Chairman, did you yield to me? 

I thank the chairman for yielding. 

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

Look, Medicare Advantage has been around since, what, the late 

1980s? It was Medicare Plus Choice, then it was Medicare Advantage, but the word ‘‘advantage’’ just means exactly what it says. It 

is an advantage. 

You know, it is kind of interesting that the Democrats in creating this Affordable Care Act demanded that policies have minimum coverage requirements, and that this why the cost of so 

many of those policies has gone up and people have been notified 

that they are not going to be able to keep those policies January 

1, 2014, because they are demanded to include so many additional 

things. Well, why would Medicare Advantage not cost more because 

they are more things in it, more provisions, preventive care, annual 

physical examinations, a nurse checking up, making sure that the 

patient got the medications filled, that they return for their appointment and timely follow up? So to gut that program—and that 

is what this is all about. 

I am really looking forward to what the witnesses have to say 

about it but it made no sense to cut $300 billion out of a program 

that 29 percent of Medicare beneficiaries had chosen, and it has 

gone up over the years each and every year, and I yield back. 

Mr. PITTS. The gentleman’s time has expired. The Chair now recognize the ranking member emeritus, Mr. Dingell, 5 minutes for 

opening statement. 

Mr. DINGELL. I don’t have an opening statement. I am going to 

have some fun with my questions. Thank you, Mr. Chairman. 

Mr. PITTS. The opening statements have been made by the members. I will now introduce our panel of five witnesses. 

The first is Mr. Douglas Holtz-Eakin, President, the American 

Action Forum; Mr. Joe Baker, President, Medicare Rights Center; 

Dr. Bob Margolis, CEO, HealthCare Partners, and Co-Chairman of 

DaVita HealthCare Partners; Ms. Marsha Gold, Senior Fellow, 

Mathematica Policy Research; and Mr. Jon Kaplan, Senior Partner 

and Managing Director of the Boston Consulting Group. 

Your written testimony will be made part of the record. You will 

have 5 minutes to summarize your testimony, and at this time, the 

Chair recognizes Mr. Holtz-Eakin for 5 minutes for opening statement. 

11 

STATEMENTS OF DOUGLAS HOLTZ––EAKIN, PRESIDENT, 

AMERICAN ACTION FORUM; JOE BAKER, PRESIDENT, MEDICARE RIGHTS CENTER; ROBERT MARGOLIS, CHIEF EXECUTIVE OFFICER, HEALTHCARE PARTNERS HOLDINGS, LLC, 

AND CO–CHAIRMAN, DAVITA HEALTHCARE PARTNERS, INC.; 

MARSHA R. GOLD, SENIOR FELLOW, MATHEMATICA POLICY 

RESEARCH; AND JON KAPLAN, SENIOR PARTNER AND MANAGING DIRECTOR, THE BOSTON CONSULTING GROUP 

STATEMENT OF DOUGLAS HOLTZ––EAKIN 

Mr. HOLTZ-EAKIN. Thank you, Chairman Pitts, Ranking Member 

Pallone and members of the committee for the privilege of appearing today. 

Let me take this opportunity to emphasize a few points that I 

made in my written statement. 

The first, as has been pointed out by the chairman and others 

in their opening statements, is that Medicare Advantage is a valuable and popular part of Medicare with nearly 30 percent of beneficiaries voluntarily enrolled in it, increasing enrollments each 

year, and it does provide extra services and innovative approaches 

to health care in the Medicare program. It disproportionately 

serves lower-income beneficiaries and minorities, and has been the 

program of choice for them, but most importantly, Medicare Advantage is not fee-for-service medicine and thus it represents an important opportunity to move away from the practice of medicine 

that has proven costly and that rewards volume over quality in the 

American healthcare system. 

Unfortunately, Medicare Advantage is under a four-fold funding 

reduction due to provisions in the Affordable Care Act and then 

others more recently. The first stems from reductions in fee-forservice spending per se; the second, the modification of the Medicare Advantage bench marks relative to fee-for-service spending in 

each county; the third, the implications of a health insurance tax 

that will come online in 2014, which will affect many MA plans and 

further act as a pressure on the ability to provide benefits; and the 

fourth, the recent requirement that CMS provide changes in the 

coding intensity for Medicare Advantage plans. 

The results of these changes are inevitable. The first will be 

fewer plans. Estimates range from 60 to 140 fewer plans in 2014. 

There are reports of 10,000 cancellation notices in Ohio, 50,000 in 

the State of New Jersey, and these all represent further violations 

of the pledge that if you like your health insurance, you can keep 

it under the Affordable Care Act. 

In addition, there will be fewer enrollees. Projections are that 

there will be up to 5 million fewer enrollments by 2019 when the 

ACA cuts are fully implemented, and these reductions are disproportionately borne by lower-income Americans. Our estimates 

are that about 75 percent of the impacts hit those making less than 

$34,200. 

The next step for those plans that do survive is to pass along 

these reductions in the form of either higher cost sharing or reduced benefits or more limited networks that provide beneficiaries 

with fewer choices. These are not the voluntary decisions of insurVerDate Aug 31 2005 11:11 May 23, 2014 Jkt 037690 PO 00000 Frm 00015 Fmt 6633 Sfmt 6633 F:\1123CA~1\113-10~1 WAYNE
12 

ers; these are the natural consequences of the law which limits 

their ability to provide options to beneficiaries. 

Going forward, I would emphasize that it is very important to 

preserve this steppingstone to coordinated care and the better practice of medicine in Medicare and that it would be extremely undesirable for Congress to repeat the practice of using Medicare Advantage as a funding source for further expansions of other program initiatives. This is a valuable program that has proven on the 

ground to provide high-quality care, innovative approaches to medicine, and is the popular choice of many of the least well-off beneficiaries. Further reductions in its availability are an undesirable 

policy step. 

I thank you, and I look forward to answering your questions. 

[The prepared statement of Mr. Holtz-Eakin follows:] 

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

Mr. Baker 5 minutes for summary of his opening statement. 

STATEMENT OF JOE BAKER 

Mr. BAKER. Thank you, Chairman Pitts and Ranking Member 

Pallone and distinguished members of the subcommittee. 

Medicare Rights is a national nonprofit organization that works 

to ensure access to affordable care for older adults and people with 

disabilities, and we thank you for this opportunity to testify on the 

Medicare Advantage program. 

Each year we counsel thousands of people with Medicare Advantage about topics ranging from enrolling in a plan to appealing a 

denied claim. We find that Medicare Advantage plans are a good 

option for some but not all people with Medicare. Many of our callers are satisfied with their plan and their inquiries are easily resolved. Others find navigating a Medicare Advantage plan challenging. These callers may struggle to resolve billing issues, cope 

with coverage denials, compare plan details and other issues. 

In particular, we observe that people find choosing among Medicare Advantage plans sometimes a dizzying experience. We urge 

people every year to revisit their plan’s coverage as annual changes 

to plan benefits, cost sharing, provider networks and other coverage rules are commonplace each year. Yet research suggests that 

inertia is widespread. Put simply, there are too many plans, too 

many variables to compare and too few meaningful choices among 

plans. 

The Affordable Care Act offers a blueprint for constructing a 

high-value healthcare system where insurance plans, physicians, 

hospitals and other providers are paid according to the quality of 

care that they provide. Medicare is the incubator for many of these 

reforms. As such, the ACA includes a set of policies designed to 

make the Medicare Advantage system more efficient and to enhance plan quality. Alongside physicians, hospitals and other 

healthcare providers, Medicare Advantage plans have been and 

should be playing an important role in this transformation. 

Medicare Advantage provisions included in the ACA are ultimately intended to secure higher-volume care; in other words, better quality at a lower price. Recent changes to MA by the ACA 

have strengthened the program. In addition to improving Medicare’s overall financial outlook, the ACA enhanced Medicare Advantage through added benefits, fairer cost sharing and improved 

plan quality. For instance, the ACA expands coverage for preventive services, prohibits Medicare Advantage plans from charging 

higher cost sharing than original Medicare for renal dialysis, chemotherapy and skilled nursing facility stays and requires that plans 

spend 85 percent of beneficiary premiums and Federal payments 

on patient care. These and other changes that the ACA has 

brought to Medicare Advantage should be preserved. 

It is important to note that ACA savings secured largely from 

Medicare Advantage payment adjustments are producing positive 

returns for the Medicare program benefiting both current and future beneficiaries. Improving cost efficiency in Medicare translates 

into real progress for older adults and people with Medicare and 

19 

people with disability. For example, in 2014, the Part B premium 

remains at its 2013 level, amounting to $104.90 per month. 

While many predicted that ACA changes to Medicare Advantage 

would lead to widespread disruption of the plan landscape, we have 

not seen that among our clients that we serve generally. The premiums, benefit levels and availability of plans remain relatively 

stable. In fact, the Medicare Advantage market is now better and 

more robust for consumers, and enrollment continues to be on the 

rise in this year. 

While there appears to be an increased incidence of slimming of 

Medicare Advantage provider networks this year, we must stress 

that we see this every year. Changing provider networks are an inherent risk of any managed care system. Our advice to Medicare 

beneficiaries remains the same: people can switch to another Medicare Advantage plan or back to original Medicare or traditional 

Medicare during the fall open enrollment period, which is occurring 

right now, in any situation where a current Medicare Advantage 

plan does not meet their needs. 

In closing, we believe that Congress should do more to simplify 

plan selection and coverage rules for people with Medicare Advantage. We recommend improving beneficiary notice regarding annual 

plan changes including changes in plan networks and further 

streamlining and standardizing plans, improving the appeals system, and adequately funding independent counseling resources like 

the SHIP program. We also urge Congress to expand the range of 

supplemental coverage options available to people with original 

Medicare for those cases where a Medicare Advantage plan is not 

the best fit for beneficiaries’ needs and also to allow people to go 

back and forth between the Medicare Advantage plan and the original Medicare program with more facility. 

We really thank you for the opportunity to testify today. 

[The prepared statement of Mr. Baker follows:] 

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

Dr. Margolis 5 minutes for summary of his opening statement. 

STATEMENT OF ROBERT MARGOLIS 

Mr. MARGOLIS. Thank you, Chairman Pitts and Ranking Member 

Pallone and esteemed committee members for the invitation to address you today. I come to address the merits of Medicare Advantage, having had many years of experience in the program, and can 

tell you without any hesitation, it is the most effective Federal program moving seniors to higher-quality care through coordination 

and measurement of quality and outcomes. 

I come wearing multiple hats as my 40 years in health care and 

healthcare policy has taken me in many directions: the California 

Association of Physician Groups, which I chaired and which represents over 90 percent of all coordinated care patients in California, my board representation and chairmanship at NCQA, which 

has proven through extensive measurement and transparency that 

the quality and measurement that occurs in Medicare Advantage 

is superior to the fee-for-service original alternative; as you mentioned, my role as CEO of HCP, HealthCare Partners, but mostly 

as a doctor at a practice for over 20 years in an urban inner-city 

hospital in Los Angeles serving primarily seniors and other disadvantaged patients where I saw that without equivocation, the 

fee-for-service mentality of the original Medicare, or as we like to 

refer to it, fee for volume, is not coordinating care for seniors. 

Seniors who have multiple chronic diseases, who are vulnerable 

and especially those that are poor and with less than fewer resources, need an ideal system, a system that helps with great information and a physician advisor to help them navigate through a 

very difficult and complex healthcare system and manage them 

longitudinally across time. As a physician, I can tell you that every 

physician I know manages his or her patients with great desire to 

do the best outcome but does not have the infrastructure, the coordination and the resources to follow that patient longitudinally 

through their healthcare needs, and that is the one major advantage of coordinated care, population health, managed care, however 

you choose to name it. Population health, for those that perhaps 

are unfamiliar with that term, really is having patients select a 

doctor through a network, through a health plan, and then having 

that physician organization take responsibility through a per-member per-month or capitation for the total are of that patient. It totally changes the incentives, and incentives drive behaviors. The 

behaviors within a coordinated care program are one of health promotion, defer and delay chronic disease through much more intervention, disease management, pharmacy management, making 

sure that patients get to their specialist, get to their visits, have 

home care programs. 

So let me explain a little bit about how that works within our 

organization, which is relatively large. We care for now over 

250,000 Medicare Advantage patients through our 11,000 affiliated 

and employed physicians in five different States, and the way that 

works is through great information technology, which is a big investment but an important investment that allows us now to segment the patient population into areas of need and design proVerDate Aug 31 2005 11:11 May 23, 2014 Jkt 037690 PO 00000 Frm 00043 Fmt 6633 Sfmt 6633 F:\1123CA~1\113-10~1 WAYNE
40 

grams specifically to those areas of need. So for instance, there are 

home care programs for those most vulnerable that have trouble 

getting into the doctor’s office and avoids 911 calls and trips to the 

emergency room. There are comprehensive care clinics for those 

folks that have very complex diseases where there is individual 

care plans monitored by a team, and I have to say without equivocation, health care best delivered is a team sport. It is great to 

have a physician in the center of that team, but having care managers, having disease management, having social workers, having 

dieticians, having home care capabilities is a key component of 

making it an effective system, so I ask you without any equivocation, please continue to support MA, strengthen it, help it grow, 

support special needs program, support moving the duals into 

Medicare Advantage in a coordinated way with the States. It is a 

very vulnerable population that could use Congress’s support with 

CMS to make that effective. 

And with that, I will yield the last 6 seconds back to you. 

[The prepared statement of Mr. Margolis follows:] 

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Mr. PITTS. The Chair thanks the gentleman, and now recognizes 

Ms. Gold 5 minutes for summary of her opening statement. 

STATEMENT OF MARSHA R. GOLD 

Ms. GOLD. Hello. Thank you, Chairman Pitts, Ranking Member 

Pallone and members of the subcommittee to talk to you about 

Medicare Advantage. 

As a Senior Fellow at Mathematica for the past 20-plus years, I 

have been examining Medicare Advantage for a long time, analyzing trends and plan participation, enrollment and benefits, looking at market dynamics and studying the implications for beneficiaries, working with the Kaiser Family Foundation and others. 

My testimony today makes three points that I hope will inform 

the Congressional debate on the Medicare Advantage program 

today. My independent findings, I should say, in general are closely 

aligned with the positions and opinions expressed by MedPAC. 

First and foremost, and we have heard this in a few other places 

here today, the MA program is strong with rising enrollment and 

widespread plan availability that is expected to continue through 

2014, despite the concerns that the cutbacks in payment would discourage plan participation or make plans less attractive. There is 

15 million people in the program, 29 percent of all benefits an alltime high, although it varies a lot across the country, and I think 

it is important to recognize that health care is local and the circumstances are different. The kind of care Dr. Margolis mentions 

happens in some places and not others. 

Second, despite concerns over plan terminations in 2014, there 

are almost as many new plans entering in 2014 as terminating, 

and since the ACA was enacted, average in premiums to enrollees 

have declined, and they will still be lower in 2014 than they were 

in 2010. Exit and entry are essential characteristics of a competitive market. Medicare beneficiaries today have an average of 18 

Medicare Advantage choices as well as the option to stay in the 

traditional Medicare program and with or without a supplement. 

Medicare beneficiaries can keep their plan. It is called Medicare, 

whether you are in Medicare Advantage or Medicare traditional. 

It is difficult to see the rationale on a national basis for paying 

private plans more than Medicare currently spends on the traditional program, particularly when there is so much concern with 

the deficit and debt. Medicare has historically aimed to set payments to MA plans below or equal to what Medicare would expect 

to pay in the traditional program for beneficiaries who enroll in the 

plans. This changed in 2003, and by 2009, payments were considerably higher than Medicare would have paid for the same beneficiaries if they were in the traditional program. This costs every 

beneficiary more in added Part B premiums and it provides little 

incentive for MA plans to become more efficient. When I examined 

the 2009 plan bid data, I found wide variation in MA plans’ costs 

relative to traditional Medicare spending, even controlling for plan 

types and payment levels. That suggests there was room for a lot 

more efficiency in the program variable across plans, and the policy 

changes that were in the ACA reflect recommendations that 

Congress’s own Medicare Payment Advisory Commission has advocated for years. 

60 

Third, many of the concerns raised about 2014 offerings from 

what I have looked at are not consistent with evidence or inherent 

part of the way competitive markets work, and they are already addressed by protections in place in the program. Only 5 percent of 

enrollees in 2013 will have to shift plans. Most will be able to stay 

in the same type of plan. The average premium was down 21 percent from between 2010 and 2013 for a beneficiary, and premiums 

were stable in 2014. Some beneficiaries will see their premiums 

rise in 2014 but they will still be paying less than 2010, and if historical patterns hold, some of the beneficiaries will switch around 

so that they can get a better deal. 

Clearly, payment reductions can discourage plans from participating in Medicare Advantage but this doesn’t yet appear to be an 

issue, and Medicare has a number of protections for this such as 

network adequacy and quality standards, required notice of change 

in plans and provider networks and other means. Because MA 

choice is voluntary, there is also the option to return to traditional 

Medicare. 

In its March 2013 report to Congress, MedPAC concluded that 

the payment changes under the Affordable Care Act have improved 

the efficiency of the program and may have encouraged plans to respond by enhancing quality, all the while continuing to increase 

MA enrollment through plans and benefit packages that beneficiaries find attractive. I believe my analysis and testimony is consistent with MedPAC’s conclusion. 

Thank you for your time, and I look forward to any questions. 

[The prepared statement of Ms. Gold follows:] 

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Mr. PITTS. The Chair thanks the gentlelady and now recognizes 

Mr. Kaplan 5 minutes for summary of his opening statement. 

STATEMENT OF JON KAPLAN 

Mr. KAPLAN. Chairman Pitts, Ranking Member Pallone and 

members of the subcommittee, thank you for the opportunity to testify today. 

My name is Jon Kaplan, and I am a Senior Partner of the Boston 

Consulting Group. I have a healthcare background that is over 25 

years, working closely with both nonprofit and for-profit healthcare 

entities throughout the entire healthcare industry. 

Earlier this year, I led a BCG team that analyzed the differences 

in health outcomes between patients enrolled in traditional Medicare and those enrolled in private Medicare Advantage health 

plans. We found that patients enrolled in the Medicare Advantage 

plans had better health outcomes than those participating in traditional Medicare. 

There are three key findings from our research. First, the MA 

patients in our sample received higher levels of recommended preventive care and had fewer disease-specific complications. Second, 

during acute episodes requiring hospitalization, the patients in the 

MA plans spent almost 20 percent less time in the hospital than 

those in traditional Medicare. In addition, they had less readmissions into the hospital. Finally, the percentage of people who died 

in the year we studied was substantially higher in the traditional 

Medicare sample than those in the Medicare Advantage sample. 

This is a striking finding and one that we hope to explore further 

in a longitudinal, multiyear study. 

Our study did not directly address the causes of these differences. In my experience, however, the key factor is MA itself and 

how the plans are organized and managed. First, these plans align 

financial incentives with clinical best practice. Second, they recruit 

the most effective providers and include only those who practice 

high-quality medicine. Third, they put a strong emphasis on active 

care management and invest resources in prevention to keep patients healthy, stable and out of the hospital. 

There are many indications in our study that these three mechanisms are responsible for the better health outcomes of the MA patients. Take the example of diabetes. Two clinical standards for diabetes care are frequent HbA1c testing and regular screenings for 

kidney disease. Our data show that the MA sample had substantially higher number on both tests than in the traditional Medicare 

sample. This stronger focus on prevention helps keep patients 

healthy and avoids the need for highly disruptive and expensive 

acute care interventions. For example, we found that diabetic patients in MA had dramatically fewer foot ulcers and amputations 

than those patients in traditional Medicare. 

Aligned incentives and active care management also helps explain lower utilization rates. Take the example of emergency room 

visits. In our traditional Medicare matched sample, about four out 

of ten of the patients visited the emergency room at least once per 

year. For many portions of Medicare Advantage, however, this figure drops to around two out of ten. 

77 

One last finding to share: Among the three types of MA plans 

that we studied, the very best health outcomes were for those patients in the capitated MA plan. The findings suggest that capitation is extremely effective at supporting provider investment and 

preventive medicine and active care coordination. 

Let me conclude by suggesting some implications of our study for 

health policy. In my opinion, Medicare Advantage plans are an example of a successful public-private partnership. These plans represent an integrated care delivery model that uses effective provider incentives, real-time clinical information and care coordination capabilities to improve quality and lower cost. In my opinion, 

Federal policy should be supporting and not discouraging more 

Medicare patients to enroll in MA. Their health outcomes and the 

entire U.S. healthcare system are likely to be better as a result. 

Thank you for inviting me to speak, and I look forward to answering your questions. 

[The prepared statement of Mr. Kaplan follows:] 

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

summaries. 

Before we go to questioning, I’d like to seek unanimous consent 

to submit for the record a letter from the 60 Plus organization. 

Without objection, so ordered. 

[The information follows:] 

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Mr. PITTS. I will now begin the questioning and recognize myself 

for 5 minutes for that purpose. 

Mr. Holtz-Eakin, since passage of the President’s healthcare 

plan, millions of Americans and their families have received insurance cancellation notices. Do you think Medicare Advantage may 

be Obamacare’s next victim, and if so, what might beneficiaries in 

Pennsylvania expect over the coming years in terms of plan 

choices, cost, foregone benefit offerings and provider networks? 

Mr. HOLTZ-EAKIN. Thank you, Mr. Chairman. Indeed, I am concerned about the future of Medicare Advantage, as I said in my 

opening statement. The work we have done on the implications of 

ACA cuts, for example, in Pennsylvania, would suggest that in 

2014, there would be an average loss of benefits per beneficiary of 

about $2,200, that this is about a 19 percent reduction in those 

benefits, and that we would see a decline in the activity of Medicare Advantage to about 113,000 Pennsylvanians, and those numbers for 2014 are of concern but I am more troubled by the trajectory over the succeeding 5 years and the full cuts under the Affordable Care Act as to whether Medicare Advantage will remain a viable option within the Medicare program and deliver the comprehensive benefits. 

And I just want to echo the statements that we heard in many 

of the opening remarks. The Medicare population is so different 

than when Medicare was originated. It is now a population that 

has multiple chronic conditions and comorbidities. It requires a coordinated approach to care. That is the route to both better health 

and financial future for Medicare as a whole. Medicare Advantage, 

I think, is an important steppingstone to that future. 

Mr. PITTS. Thank you. 

Dr. Margolis, as you know, this committee has been committed 

in a bipartisan form to address access concerns in part by improving the flawed physician patient formula for participating Medicare 

doctors. However, I believe Medicare Advantage plays a key role in 

ensuring the physician-patient relationship for seniors and the disabled. What impact, in your opinion, will the permanent solution 

to the flawed SGR formula have on the viability of the Medicare 

Advantage program? 

Mr. MARGOLIS. Thank you, Mr. Pitts. There is no question that 

the cuts that are proposed are coming down on Medicare Advantage, and I would specifically stress the rescaling of the risk adjustment factor, which really was a key component in what I believe 

is making it a positive incentive to care for the sick and fragile patient was to be paid based on the acuity of the patient, and so the 

potential of reducing significantly the payments relative to the 

most expensive patients starts to flip back to that possibility that 

the people will not be able to gain care if they are really sick, and 

that is a potential serious problem. 

And I would also like to just say that Medicare Advantage should 

not, in our opinion, be the pay-for for an SGR fix. I think that as 

you have heard from all these other witnesses that it is extremely 

important for the seniors of our country, 10,000 more of which are 

entering Medicare every day, to be able to access good coordinated 

care and especially for that 5 percent of patients that are eating 

up 52 percent of all healthcare dollars, those sickest and most fragVerDate Aug 31 2005 11:11 May 23, 2014 Jkt 037690 PO 00000 Frm 00113 Fmt 6633 Sfmt 6633 F:\1123CA~1\113-10~1 WAYNE
110 

ile patients, to be able to access the doctors of their choice and get 

the care they need. 

Mr. PITTS. Thank you. Here is a question for the panel. Medicare 

Advantage has a proven record of success and is popular with seniors because it provides better services, a higher quality of care and 

increased care coordination. To ensure the program’s viability, I believe there are several existing reform proposals for Medicare Advantage that merit further discussion and feedback, concepts like 

overlaying a value-based insurance design over the existing Medicare Advantage program to address a substantial variation in value 

across healthcare services and providers, bipartisan policies such 

as those introduced by Representative Keith Rothfus of Pennsylvania that would restore choices for Medicare Advantage beneficiaries and not limit their options to traditional FFS or their existing plans, improvement to the program’s special needs plans and 

improvements to the program’s risk adjustment framework that 

would improve accuracy of payments and account for chronic conditions. 

What, if any, short-term reforms could we consider that would 

ensure the viability of the program in promoting maximum value 

and high-quality coordinated care for Medicare beneficiaries? We 

will start with you, Mr. Kaplan. 

Mr. KAPLAN. First of all, thank you, Mr. Chairman. The best way 

I would answer that question is, is that there are a lot of successes 

that are already in place in Medicare Advantage. I think everybody 

on the panel today has said that Medicare Advantage is a program 

to look at with some very positive reactions. 

What I think happens fundamentally in the Medicare Advantage 

program is that it allows for more of a freedom of choice among the 

different competitors in there being the insurance companies that 

are offering those programs and allows for the members who 

choose to go into those programs to navigate themselves around to 

different programs, to make a choice and to find what best meets 

their needs. That sort of freedom of choice has allowed for the programs to prosper based on what they offer to the members who 

sign up for their programs as opposed to mandating things in different ways. 

So the competitive model amongst the different insurance companies who are offering different programs in different States, I think 

that strong model has allowed for the growth of the program to be 

so successful and effective at practicing the medical care that we 

all are talking about that we want to do for the senior population. 

Mr. PITTS. Thank you. My time is expired. I will give you this 

question and I will submit it in writing and you can respond for 

the record. 

The Chair now recognizes the ranking member, Mr. Pallone, 5 

minutes for questions. 

Mr. PALLONE. Thank you, Mr. Chairman. 

I am going to ask my questions of Mr. Baker because you seem 

to be able to clear up a lot of the myths that I am hearing from 

the Republican side. 

As you heard, opponents of the ACA say that the Medicare Advantage program will be obsolete because of cuts in the Affordable 

111 

Care Act. The Republicans basically think the Affordable Care Act 

is the end of the world. I mean, you understand all that. 

Mr. Baker, do you feel that the Medicare Advantage program is 

stronger now and more secure for beneficiaries than before the Affordable Care Act? If you could just answer that? 

Mr. BAKER. Sure. I think there are a couple components to that. 

One is that this equalization of payments between the Medicare 

Advantage program and the traditional or original Medicare program, I think once again there is an equity there that has been established as well as the fact that Part B premiums have come 

down or stabilized for everyone in the Medicare program. I think 

the other piece is that consumers are better protected in Medicare 

Advantage. Some plans had increased cost sharing for services like 

chemotherapy, higher cost sharing than is allowed in the traditional Medicare program. The Affordable Care Act has equalized 

once again cost sharing so that sicker beneficiaries aren’t discriminated against—the 85 percent Medical Loss Ratio that is required 

in Medicare Advantage now, making sure that 85 percent of those 

premium dollars, both from consumers as well as from the government, are going towards medical costs, not other administrative 

costs. The star ratings—we now have a rating program where 

plans have one to five stars based upon their quality and plan performance. This has been an important tool for consumers to choose 

between plans and also that quality information has been getting 

out to consumers and I think more can be done in that regard but 

I think is very good. 

The other thing is the out-of-pocket maximums that were introduced over the course of the last few years and have provided important protections for consumers so that these Medicare Advantage protections not only make the program more equal, if you will, 

between the traditional or original Medicare program but also ensure that consumers are better protected with consumer rights and 

consumer protections once they are in the plan. 

Mr. PALLONE. So obviously you feel that Medicare Advantage is 

stronger now and more secure because of the ACA? 

Mr. BAKER. Yes, I do, and I think consumers are better protected 

within the Medicare Advantage program because of the ACA. 

Mr. PALLONE. Do you think that the changes pursuant to the 

ACA give beneficiaries more confidence in the program, might even 

make them more comfortable in choosing a Medicare Advantage 

plan? 

Mr. BAKER. I think it does. I think the ACA with the star ratings 

program, with other quality initiatives in the Medicare Advantage 

plan have made consumers more confident. We find that folks are 

looking at these star ratings or looking at these other quality 

metrics that are now available under the ACA. I think they also 

are—many of the consumers that we talk to appreciate that they 

have a choice between Medicare Advantage and original Medicare. 

So I think it is also important that the original Medicare program, 

which is the base of all of this, be kept strong and be kept as a 

very viable option for folks that Medicare Advantage either hasn’t 

worked for or it won’t work for in the future. 

112 

Mr. PALLONE. All right. And can you tell me how robust the 

choices are for seniors in the MA program? How many choices do 

they have? 

Mr. BAKER. Right. I think on average, consumers continue to 

have about 18 plan choices, and I think Ms. Gold went through 

some of those metrics in her testimony. We find for the most part, 

and this is both true in the Medicare Advantage program as well 

as in the Part D prescription drug program, that consumers are 

really—the biggest question we have from consumers is, they have 

too many choices and they are too confused by the variety of plans. 

So over the last few years, the Centers for Medicare and Medicaid 

Services has made some headway in tamping down the number of 

choices that aren’t meaningful. By that, I mean there might be one 

little tweak to a plan to make it somewhat different than another 

plan that a company is offering and, you know, folks get confused 

by those tweaks that don’t have a real substantive component to 

them. And so narrowing choices in that way has helped people actually make better choices. 

Mr. PALLONE. And you don’t feel that—I mean, again, you don’t 

buy the naysayers who say that the ACA is going to narrow choices 

for seniors in the MA program? 

Mr. BAKER. It has not at this point, not substantively. We see 

plenty of plan choices out there in the markets where we are seeing 

clients. Once again, our problem in counseling most of our consumers, really all of our consumers, isn’t that they don’t have a 

choice, it is that they have too many choices of Medicare Advantage 

plans before passage of the ACA and after passage of the ACA. 

Mr. PALLONE. Thank you very much. 

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

the vice chairman of the full committee, Ms. Blackburn, 5 minutes 

for questions. 

Mrs. BLACKBURN. Thank you, Mr. Chairman, and thank you all 

for being here. 

Dr. Margolis, I want to come to you. You talked a bit about the 

fragile and vulnerable populations, and I want to go back to that— 

end-stage renal disease. I recently found out that those Medicare 

Advantage enrollees that have end-stage renal disease have access 

to a coordination of care that is not available to others. It is not 

an option for those that are in standard Medicare. So why should 

Medicare Advantage not be an option for all Medicare enrollees? 

Mr. MARGOLIS. Thank you, Mrs. Blackburn. I support that. I believe that coordination of care is ideal for sick and fragile patients 

especially. ESRD, I know they are pilots now at CMS to try to incorporate population health for ESRD. I would encourage them to 

be strengthened. I think it is an artifact of the way the law was 

originally written that ESRD patients were not allowed to enroll in 

Medicare Advantage. That could and should be changed, in my 

view. The way that works is that if a patient has chronic renal disease and enrolls in Medicare Advantage and becomes an end-stage 

patient, they can stay in Medicare Advantage, but if they have already been diagnosed as end-stage renal disease, they are not allowed to enroll in Medicare Advantage. 

Mrs. BLACKBURN. It would be an element of fairness into the system that would allow—— 

113 

Mr. MARGOLIS. I believe that would be an improvement, yes, 

ma’am. 

Mrs. BLACKBURN. All right. 

Mr. Kaplan, I want to come to you for a minute. I loved listening 

to your testimony today. I have to tell you, in my district, seniors 

love their Medicare Advantage. We have got a program called Silver Sneakers in our district, and people come to town hall meetings, they talk to me about Silver Sneakers and how they are 

doing, and I have looked at some of the work that they have done 

and the surveys, better outcomes for physical and emotional health, 

more activity. It has just been a great program. 

So as I have listened to you all today, talk to me for a minute. 

We talk about stabilizing Medicare, giving seniors more choices, 

giving them more options. Should Medicare Advantage not be the 

platform for Medicare reforms and give seniors more choice and options, not less? 

Mr. KAPLAN. Well, first of all, thank you for the nice comments. 

I am a huge fan of Medicare Advantage for exactly the reasons 

you say. It aligns the incentives so that the providers and the payers work together to try to figure out what is the best way to take 

care of their members and their patients, and when they align the 

incentives, they start to work on things, and they say one of the 

most important things is to coordinate care, as Dr. Margolis talked 

about, which is, let us coordinate the care for especially these complex members and so forth, let us find things that can help them 

to prevent having the diseases either progress or even begin. All 

these things are aligned. All these things are the idea of aligning 

incentives, coordinating care, and it is all for the benefit of the 

member. And so therefore I do believe, as you said, that Medicare 

Advantage is a wonderful pilot for us as a society, because what 

it does is, it shows that we can find a way to curb the growth of 

healthcare costs, we can find a way to improve—— 

Mrs. BLACKBURN. So curb the cost, give greater access and provide better outcomes? 

Mr. KAPLAN. Correct. 

Mrs. BLACKBURN. Mr. Holtz-Eakin, do you want to weigh in? 

Mr. HOLTZ-EAKIN. I would just echo the fairness issue, which I 

think is important, and we know that Medicare as a whole is facing 

a very, very problematic financial future. If we can find ways to 

control those costs and provide better care, we should, and this is 

a route to that. 

Mrs. BLACKBURN. Let me ask you this. When you look at the implementation of the ACA and the cuts that are being made, who 

is most impacted by the MA cuts that are there? Is it seniors? Is 

it physicians? Is it the support system for seniors? What in your 

research do you see? Yes, sir? 

Mr. HOLTZ-EAKIN. This is impact directly to the seniors whose 

choices will be restricted, whose benefits will be reduced, and I am 

deeply concerned about the long implications. I understand the testimony of Mr. Baker about consumer protections and confidence in 

the program but that is at odds with the fact that the CBO, for example, projects that there will be 5 million fewer enrollees in Medicare Advantage in 2019, if they felt more confident, we got 10,000 

new seniors every day, you would expect the number to rise, not 

114 

fall, and I think that is stark testimony to the financial 

underpinnings being not strong enough and then that will limit the 

benefits and the choices of seniors. 

Mrs. BLACKBURN. Yield back. 

Mr. PITTS. The Chair thanks the gentlelady and now recognizes 

the ranking member emeritus, Mr. Dingell, 5 minutes for questions. 

Mr. DINGELL. Mr. Chairman, I thank you for your courtesy and 

for your kindness. 

This is an important moment, and the American people are 

counting on us. I am concerned that the committee might be holding another hearing to try to scare people about the Affordable 

Care Act and its impact on Medicare Advantage when the facts do 

not support those claims. The questions I have today will focus on 

how ACA impacts Medicare Advantage as well as traditional Medicare. I would point out that when we adopted the idea of Medicare 

Advantage, we were told that they were going to give us a lot more 

insurance and a lot less cost to senior citizens, and I have heard 

constant whining ever since that we have not done that. 

In any event, we have a problem here because that program is 

costing taxpayers significantly more than traditional Medicare 

while providing only similar services. 

So Mr. Baker, yes or no, is it correct that in 2009 before passage 

of ACA, CMS paid Medicare Advantage plans $14 billion more than 

if the same care had been provided under traditional Medicare? 

Yes or no. 

Mr. BAKER. Yes. 

Mr. DINGELL. And this averages out to about $1,000 per beneficiary? Yes or no. 

Mr. BAKER. Yes. 

Mr. DINGELL. Now, additionally, Ms. Gold, a 2009 MedPAC report found that Medicare Advantage payment benchmark was 118 

percent of what Medicare would spend. Is that correct? 

Ms. GOLD. Yes. 

Mr. DINGELL. Now, Mr. Baker and Ms. Gold, is it fair to say that 

the reforms made by ACA were intended to align Medicare Advantage payments with traditional Medicare payments? Yes or no. 

Ms. GOLD. Yes. 

Mr. BAKER. Yes. 

Mr. DINGELL. Now, despite claims made by some of my colleagues, these reforms have not ruined Medicare Advantage. In 

fact, the program is strong and growing. Earnings are doing fine. 

Salaries, dividends, bonuses and all those other good things to the 

companies and their officers who are participating are growing. 

Now, Mr. Baker, how many people are enrolled in Medicare Advantage today? I believe the number is 15 million. Is that right? 

Mr. BAKER. Correct. Yes. 

Mr. DINGELL. Now, Mr. Baker, is it correct that Medicare Advantage enrollment has increased 30 percent from 2010 to 2013? Yes 

or no. 

Mr. BAKER. Yes, it is. 

Mr. DINGELL. It seems like they are doing pretty well, doesn’t it? 

Mr. BAKER. Yes, it does. 

115 

Mr. DINGELL. Now, Mr. Baker, is it correct that the average 

Medicare beneficiary will have a choice between 18 plans available 

to them in 2014? Yes or no. 

Mr. BAKER. Yes, it is. 

Mr. DINGELL. So Mr. Baker and Ms. Gold, the Affordable Care 

Act has not resulted in a drastic decrease in the number of plans 

available to seniors who choose to participate in Medicare Advantage nor has it decreased the number of people participating in the 

program? Is that correct? Yes or no. 

Ms. GOLD. Yes. 

Mr. BAKER. Yes. 

Mr. DINGELL. Thank you. Now, in fact, I note that ACA has provided many benefits to this population and will continue to do so. 

Most importantly, the ACA has improved the solvency of the entire 

Medicare program, something which is not properly addressed by 

people who are critical of ACA. 

Now, Mr. Baker, is it correct that Medicare hospital insurance 

trust fund is now solvent through 2026? That is 10 years longer 

than prior to the passage of ACA. Yes or no. 

Mr. BAKER. Yes. 

Mr. DINGELL. That tends to show that this was quite helpful to 

the Medicare trust fund, right? 

Mr. BAKER. Yes, it does. 

Mr. DINGELL. Now, in 2012, 34.1 million Medicare beneficiaries 

were able to access preventive services such as mammograms and 

colonoscopies with limited cost sharing. Is that correct? Yes or no. 

Mr. BAKER. Yes. 

Mr. DINGELL. Now, some 7.9 million seniors have saved over $8.9 

billion since the passage of ACA, and that is thanks to the donut 

hole being closed. Is that right? 

Mr. BAKER. Yes. 

Mr. DINGELL. And the donut hole is going to be closed completely 

by sometime around 2020. Is that right? 

Mr. BAKER. That is correct, yes. 

Mr. DINGELL. So thank you, gentlemen and ladies. This committee has a great tradition of working together to solve the pressing issues of the day. I hope we can resume this tradition with 

vigor and focus on the facts rather than continuing to try to scare 

people about the Affordable Care Act. Let us give it a chance. Let 

us work together. Let us see that it has a chance to provide the 

benefits to the society and the practice of medicine and to the sick, 

ill and ailing in this country that we want to have. 

Mr. Chairman, I thank you for your courtesy. 

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

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

questions. 

Mr. BURGESS. Thank you, Mr. Chairman. 

Dr. Holtz-Eakin, you were kind of left out of that last exchange. 

Do you have quick thoughts on the $14 billion excess cost for Medicare Advantage that Chairman Dingell referenced? 

Mr. HOLTZ-EAKIN. The reimbursements should be aligned with 

quality, and I think the most important issue is the quality of care 

that seniors receive under Medicare Advantage as opposed to feefor-service medicine. 

116 

Mr. BURGESS. Let me switch gears a little bit. You know, the Affordable Care Act, and I was here through the entirety of how it 

came through the committee and how it came through Congress, 

and it becoming pretty obvious today that there were some assumptions and some promises that were made in the Affordable 

Care Act that have now turned out to not be true, and I would submit that those weren’t just errors in projections, those were actually active and purposeful deceptions. If the administration had 

been honest with Americans about this bill, it very likely never 

would have passed. 

So the Affordable Care Act does take $716 billion out of the 

Medicare program. Is that correct? 

Mr. HOLTZ-EAKIN. That is correct. 

Mr. BURGESS. And the portion that is taken from Medicare Advantage is about $150 billion. Is that correct/ 

Mr. HOLTZ-EAKIN. Yes. 

Mr. BURGESS. So that is taken away from our seniors, the Medicare Advantage plans. I mean, I can remember distinctly speeches 

given, particularly during the Democratic Convention in 2012, that 

these are merely overpayments to doctors and hospitals; this is not 

a real cut. It is just taking away money that shouldn’t have been 

paid in the first place. Do you recall those speeches? 

Mr. HOLTZ-EAKIN. Not specifically but I remember the claims. 

Mr. BURGESS. So do you agree with the administration, with the 

American Association of Retired Persons, Congressional Democrats 

that these cuts were merely ridding the plans of inefficient payments? 

Mr. HOLTZ-EAKIN. I don’t agree with that. They are part of an 

historic strategy of provider cuts that has always backfired. The 

SGR is the leading example. It limits access to seniors in the end. 

It doesn’t take out excess costs. And a continued reliance on this 

strategy is going to damage Medicare and not save its financial future. We need to change strategies. 

Mr. BURGESS. I agree with you. 

You know, there was an article in the paper recently that United 

Health Care was forced to limit access to some doctors because of 

reductions in Medicare Advantage. There was an article in USA 

Today that talks about a story about a patient named Dorothy 

Sanay that her doctor had some bad news after her last checkup 

but it wasn’t about her diagnosis. Her Medicare Advantage plan 

from United was terminating her doctor’s contract after February 

1st, and she also found out she was losing her oncologist at the 

prestigious Yale Medical Group. She is 71 years old and on Medicare. 

So it kind of seems like this is a direct consequence of cutting 

the Medicare Advantage plans by $150 billion. Would I be correct 

in characterizing that as such? 

Mr. HOLTZ-EAKIN. The insurers will be increasingly caught in the 

middle. They have obligations to limit cost sharing. They have obligations to provide benefits. There will be less money coming to 

them. Their only recourse will be to restrict whatever access to 

benefits they already had and limit the network so as to control 

costs. 

117 

Mr. BURGESS. So this is a story we are likely to hear repeated 

over time? 

Mr. HOLTZ-EAKIN. Yes. I think what we have heard so far is just 

the leading edge of what will be a bigger problem. 

Mr. BURGESS. So the American Association of Retired Persons 

has on its Web site myths about Medicare Advantage cuts, and one 

of the myths is that Medicare Advantage cuts would hurt seniors’ 

ability to see their doctor. To quote the Web site: ‘‘If your current 

plan allows you to see a physician in the plan, nothing will 

change.’’ Well, in light of this information, do you think that that 

is an accurate statement? 

Mr. HOLTZ-EAKIN. No, I don’t, and I think it will be increasingly 

inaccurate over time. To judge it by 2013 or 2014 is a mistake. It 

is the trajectory over the foreseeable future that concerns me the 

most. 

Mr. BURGESS. So, you know, again, I just can’t escape the notion 

that the entirety of the Affordable Care Act was sold to the American people on deception. The consequences of that deception are 

not becoming more evident every day. As a physician, I am particularly sensitive to the fact that patients are going to be excluded 

from their doctors. I wish the administration had been more honest 

about this, and again, I can’t help but feel it was an active and purposeful deception. 

Let me just ask you a question following up on some of the stuff 

that Chairman Dingell was asking. The cuts in Medicare Advantage, those cuts were taken out of Part A and Part B but not reinvested in Part A and Part B. Is that correct? 

Mr. HOLTZ-EAKIN. No, those cuts will be used to pay for Medicaid 

expansions and insurance subsidies in the exchanges, and those 

monies will be gone at the moment they are spent. They will not 

be there for Medicare. 

Mr. BURGESS. So I am not an economist. I am just a simple country doctor. But you are an economist, so how do you reconcile the 

fact that they are claiming that that is a savings that is increasing 

the solvency and longevity of Part A and Part B when the money 

was taken and then spent for some other activity? 

Mr. HOLTZ-EAKIN. As the current CBO Director, Doug Elmendorf, has testified, and as any CBO Director would testify, that is 

an accounting fiction. There are no real resources in those trust 

funds to pay real bills from real providers for real patients. 

Mr. BURGESS. I thank the Chair. I will yield back my time. 

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

the gentlelady from Florida, Ms. Castor, 5 minutes for questions. 

Ms. CASTOR. Well, good morning, and welcome to the panel, and 

I would like to thank the chairman and ranking member for holding this hearing on how the Affordable Care Act is improving and 

strengthening Medicare and Medicare Advantage. 

According to a study that was done a couple of months ago, in 

my area of Florida, where we have a large percentage of our grandparents and parents who rely on Medicare, a number of statistics 

jumped out on the improved benefits in Medicare. One was what 

Mr. Dingell mentioned, the closing of the donut hole and the new 

discounts for prescription drugs. In the greater Tampa Bay area, 

over 77,000 of my neighbors now have major savings in their drug 

118 

costs under Medicare Part D due to the drug discounts. They have 

been worth over $100 million to the Medicare beneficiaries in the 

greater Tampa Bay area. That is very substantial, and that is due 

to the Affordable Care Act. 

Also due to the Affordable Care Act, just in the greater Tampa 

Bay area, over 1 million seniors now have Medicare coverage that 

includes preventive services. They can go get the mammograms, 

the colonoscopies without copays or deductibles. That is a very important improvement to Medicare. 

And Mr. Baker, I think you testified that these improvements 

apply in traditional Medicare and in Medicare Advantage. Is that 

correct? 

Mr. BAKER. Yes, that is true. Yes, some Medicare Advantage 

plans did offer those preventive benefits, others did not. So what 

the ACA did—and of course traditional Medicare did not. So what 

the ACA did was make sure that those preventive benefits applied 

across the board in both traditional Medicare and in all Medicare 

Advantage plans as well. 

Ms. CASTOR. Well, and I would like to take a page of how Mr. 

Dingell asks questions sometimes because my time is limited and 

I would like to get a yes or no answer. 

Earlier this year, Republicans here in the House adopted a budget that proposed drastic changes to Medicare. The budget that was 

adopted would end traditional Medicare and Medicare Advantage 

and put in place a new system beginning in 2024. So if you are 55 

or younger, this would really impact your future in Medicare. Rather than enroll in traditional Medicare or Medicare Advantage 

under the Republican budget, instead beneficiaries would receive a 

voucher. It would privatize Medicare. You would get a voucher, a 

coupon, and most analysts raised grave concerns that this would in 

essence very shift costs to our parents and grandparents that rely 

on Medicare. It really appears to break the promise that you will 

be able to live your retirement years in dignity and be safe from 

a catastrophic diagnosis. 

I would like to know just yes or no from each of you, do you support that kind of drastic change to Medicare and Medicare Advantage? Yes or no. 

Mr. HOLTZ-EAKIN. I do support that change, and the reason I do 

is, the CBO’s report that came out this summer indicated it would 

save costs for beneficiaries and for the government, indicating it 

had broken the increase in cost. 

Ms. CASTOR. So, yes, you support turning Medicare into a voucher? 

Mr. HOLTZ-EAKIN. It bent the cost curve, and that is important. 

Ms. CASTOR. And Mr. Baker? 

Mr. BAKER. I do not support that proposal, and our organization 

does not support the proposal for the reasons that you indicated, 

that it would not, the value of that voucher would not keep up with 

healthcare costs and so more would come out of pocket of seniors 

and they would lose the health security that they currently have. 

Ms. CASTOR. OK. Doctor? 

Mr. MARGOLIS. I believe it is important for Congress to assure 

health security for seniors. My apolitical answer, which is very 

119 

hard to do here in Washington, I am sure, is to say this is about 

patients and patient care and that you should—— 

Ms. CASTOR. So yes or no? Turn Medicare into a voucher under 

the Republican budget? 

Mr. MARGOLIS [continuing]. Support integrated care and coordinated care system development whether it is though that program 

or not. 

Ms. CASTOR. Did you review the Republican budget proposal that 

privatizes—— 

Mr. MARGOLIS. No, ma’am, I did not review it. 

Ms. CASTOR. OK. Ms. Gold? 

Ms. GOLD. We don’t generally take positions on legislation. We 

let you guys do that. But there are a number of technical questions 

and issues that have been raised about those plans, about the cost 

shifting that would happen to Medicare beneficiaries that are important questions to answer before any change to a very popular 

program were made. 

Ms. CASTOR. OK. Mr. Kaplan, yes or no? 

Mr. KAPLAN. I believe that the idea of using a voucher-type system, which is very akin to what is being done in the Medicare Advantage space already, is a good idea. 

Ms. CASTOR. OK. That Republican Paul Ryan budget also included provisions to repeal the Affordable Care Act including the 

important reforms to Medicare—the closing of Medicare Part D 

coverage gap, known as the donut hole, the preventive services that 

we talked about earlier that are such a great benefit to many of 

my neighbors, those annual wellness exams, and important Medicare fraud prevention provisions. 

Do you support the repeal of those provisions that have improved 

Medicare? We will start on this side. Mr. Kaplan, yes or no, because my time has run out. 

Mr. KAPLAN. I can’t give a wholesale answer. 

Ms. CASTOR. Just yes or no real quick, because my time has run 

out. 

Mr. KAPLAN. Yes or no. The answer—— 

Ms. CASTOR. You support repeal of those important reforms in 

Medicare that are included in the Republican budget, or not? 

Mr. KAPLAN. I believe that are parts of ACA that should be repealed. 

Ms. CASTOR. Ms. Gold? 

Ms. GOLD. I think beneficiaries would be pretty upset if they 

were repealed. 

Ms. CASTOR. Doctor? 

Mr. MARGOLIS. I think protections for seniors are important. 

Ms. CASTOR. Mr. Baker? 

Mr. BAKER. Those protections need to be continued and be in 

place. 

Mr. HOLTZ-EAKIN. I would answer differently, depending on the 

provision. 

Ms. CASTOR. Thank you all very much. 

Mr. PITTS. The Chair thanks the gentlelady. The Chair recognizes the gentleman, the chair emeritus from Texas, Mr. Barton, 

for 5 minutes for questions. 

120 

Mr. BARTON. Mr. Chairman, I arrived late and didn’t get to hear 

their testimony, so I don’t have questions. I appreciate the opportunity, though. 

Mr. PITTS. The Chair now recognizes the gentlelady form Illinois, 

Ms. Schakowsky, 5 minutes for questions. 

Ms. SCHAKOWSKY. I just wanted to make the point that I think 

Representative Castor was getting at too, just to remind my colleagues who are now complaining about cuts to Medicare in the Affordable Care Act, these were the same cuts that were included in 

the Ryan budget, but instead of strengthening Medicare, the Republicans wanted to give tax breaks to millionaires. 

A couple of questions. The implication by my colleague, Dr. Burgess, was that changes that would eliminate and narrow networks 

are caused by the Affordable Care Act, and I am just wondering, 

Mr. Baker or Ms. Gold, in your research, I know with Part D it is 

important to check every year to make sure that the formulary is 

the same. With Medicare Advantage, aren’t changes likely in the 

network or something prior to the Affordable Care Act as well? 

Mr. BAKER. Yes. I think there is a lot of volatility in this private 

marketplace, in this private Medicare Advantage marketplace, as 

well as in the Part D marketplace. So every year we are very clear 

with beneficiaries that if they are in the Medicare Advantage plan, 

if they have a Part D plan, they need to check that coverage because the formularies, which are the list of covered drugs, change 

every year and provider networks change every year, and it is not 

just the plan that drives changes in provider networks; providers 

also decide to leave the network or to no longer be involved—— 

Ms. SCHAKOWSKY. So this is not new to—— 

Mr. BAKER. No, this is an inherent part of the Medicare Advantage plan that has been around since the Medicare Plus Choice 

program in the mid-1980s and even before. So this is an ongoing 

issue. This kind of instability, if you will, is inherent and it is a 

part of the risks of the Medicare Advantage plan that go along with 

some of the benefits that we have talked about as well. 

Ms. SCHAKOWSKY. Thank you. 

Also, Ms. Gold, Mr. Holtz-Eakin said something about sort of the 

precarious future of Medicare and funding problems. I wonder if 

you could talk about the effect on solvency that the Affordable Care 

Act has had on Medicare. Do you have that? 

Ms. GOLD. I can try. 

Ms. SCHAKOWSKY. OK. Or maybe Mr. Baker would have 

more—— 

Ms. GOLD. Yes, maybe. Go ahead. 

Mr. BAKER. I think we noted earlier that two effects have occurred. One is that, as I was responding to Mr. Dingell’s comment, 

that there is a longer period of solvency of the Part A trust fund, 

and to the extent that that has been looked at through the years 

as a bellwether for the health of the Medicare program, we are in 

one of the best places we have ever been. And secondly, something 

that has inured to the benefit of all people with Medicare is a stable Part B premium. Medicare costs are at historically low growth 

rates right now. 

Ms. SCHAKOWSKY. And that is what you had said too, Ms. Gold, 

right, that rates are down? 

121 

Mr. BAKER. Right, and so everyone, all of the people with Medicare are seeing the benefits of that cost containment in the ACA 

and other cost containment efforts that have occurred both in private plans as well as in the government-run Medicare program. 

Ms. SCHAKOWSKY. I also wanted to talk about low-income seniors. Medicare provides cost-sharing protections for low-income seniors through the Medicare Savings Program, or the MSP. I am 

wondering, if we are truly concerned about protections for low-income beneficiaries rather than paying more than Medicare to the 

Medicare Advantage plans, wouldn’t it be better to invest additional resources in the Medicare Savings Program, improving outreach, enrollment and coverage, etc.? 

Mr. BAKER. The short answer to that is yes. I mean, we are very 

concerned. Our biggest problem on our help line is folks that can’t 

afford their coverage, whether they are in the original Medicare 

program or in the Medicare Advantage program, and Medicare savings programs, as you say, are programs that help lower income 

above Medicaid income levels but lower-income folks. Fifty percent 

of people with Medicare have incomes under $22,500 a year, and 

many of them are struggling to afford coverage as well as dental 

work and other things that aren’t covered by Medicare. So it is 

strengthening those Medicare savings programs or subsidy programs, particularly if we are looking at the SGR and doing that simultaneously. 

Ms. SCHAKOWSKY. Well, that I wanted to ask you about. We are 

certainly looking at the SGR. We would like to permanently repeal 

it, etc. But the qualified individual program which pays beneficiary 

Part B premiums is set to expire at the end of the year. So don’t 

you think at the same time as we deal with the SGR, we ought to 

deal with that? 

Mr. BAKER. I think it is imperative that that program be continued and it be continued to be dealt with with the SGR and continued and reauthorized, yes. 

Ms. SCHAKOWSKY. Thank you very much. I yield back. 

Mr. PITTS. The Chair thanks the gentlelady and now recognizes 

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

Mr. SHIMKUS. Thank you, Mr. Chairman. 

Thanks for being here. Sorry I had to excuse myself during your 

testimony. 

A couple points. One is, I, like myself, another member, a handful of staffers went down to make sure we were enrolled in our new 

healthcare plan because we couldn’t get confirmation. Fortunately, 

I got confirmation but I am finding out like everybody else is, I 

have less coverage at higher cost, and the real concern is, and exhibited by my constituents on Medicare Advantage, we are going 

to see the same thing occur in Medicare Advantage. And so I think 

this is really a timely hearing because it is just like everything else 

in this new movement of health care is, everybody is going to get 

less coverage and higher costs no matter who you are or where you 

are in this country because of these reforms. 

I was here in committee when Secretary Sebelius I guess 2 years 

ago affirmed the fact that they double-counted the $500 billion. You 

can just check the transcript. You can check her testimony. It took 

me 5 minutes to get it out of her. But in the end, she said we have 

122 

double-counted because we have this $500 billion of savings out of 

Medicare is going to go to Obamacare and of course, we are also 

strengthening Medicare by $500 billion. Having that as part of the 

record, how can we say Medicare is strengthened? Doug, can we 

make this argument that Medicare is now stronger than it ever has 

been? 

Mr. HOLTZ-EAKIN. I don’t believe that the Part A trust fund reveals anything about the futures solvency of Medicare. The plain 

facts on the ground are that in recent years, the gap between premiums and payroll taxes going in and spending going out for the 

Medicare program as a whole is $300 billion. That is a gaping cash 

flow deficit. We get 10,000 new beneficiaries every day. In the absence of genuine reforms that allow people to continue to get the 

care they need and deserve and do it at a slower cost growth, this 

program will fall under its own financial weight. 

Mr. SHIMKUS. You know, my point is, numbers really matter, and 

again, for the Secretary to affirm $500 billion that is really not 

chump change in the big picture of healthcare costs, I am getting 

comments from constituents in my district who Medicare Advantage folks now their benefits are being reduced, they are losing access to their preferred physicians. This is under the current system 

right now. Again, back to Doug, my question is, how much worse 

can this get for my seniors who opt for Medicare Advantage? 

Mr. HOLTZ-EAKIN. Again, if the strategy for controlling costs is 

this traditional one of just cutting provider reimbursements, 

whether it is doctors, hospitals, MA plans, it will backfire. We have 

seen again and again that that approach without reforms, without 

an approach that gives you the prevention, the coordination and 

the better care, Congress ends up having to put the money back 

in because you haven’t solved the problem, and to not put the 

money back in is to deny seniors care. That is your choice. 

Mr. SHIMKUS. And Bob, a lot of my seniors through Medicare Advantage have access to dialysis and the like, and I know you have 

a special focus in that arena. As networks shrink, especially in 

rural America, what happens to our options? What could happen 

to our options? 

Mr. MARGOLIS. Well, I think you have heard that the cuts are 

not advisable in the future. I must say with all due respect to the 

committee, I think that the parity adjustment to get Medicare Advantage back to fee-for-service, which was enacted, is not the issue 

that should be focused on. What should be focused on, in my view, 

is that we are potentially reducing the payment for acuity of the 

sickest patients, which will incent insurers and others to avoid 

managing sick patients. Those are the ones that need coordination, 

that need population health, that need the access to good care, and 

that that is the issue that I would hope the committee will take 

a serious look at, because without that, while we may or may not 

have shrinking networks, and I think we will because even today 

we see news reports of United and others canceling thousands of 

doctors from the MA program, the real issue in my view as a physician and as someone who cares about seniors is that the sickest 

and most fragile patients that eat up all of the costs in health care 

are the ones that ought to be protected, and they ought to be protected by having appropriate acuity-adjusted payments to insurers 

123 

or directly to the physician groups that are managing them in a 

way that supports better outcomes, transparency, performance 

measurement, all of the star measures are positive. Let us support 

quality, performance and outcomes, and pay accordingly based on 

managing our sickest seniors. 

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

the gentleman from Texas, Mr. Green, 5 minutes for questions. 

Mr. GREEN. Thank you, Chairman Pitts and Ranking Member 

Pallone for having this today, and our witnesses for taking the time 

to testify. 

Medicare is critical to the well-being of our Nation’s seniors and 

people with disabilities, many of whom have low to moderate incomes and complex healthcare needs. 

My first question is, the Affordable Care Act did extend the life 

of Medicare by putting more money into Medicare, and I would like 

a yes or no answer to that. Did it actually extend the life of Medicare? And we will start with Mr. Holtz-Eakin. 

Mr. HOLTZ-EAKIN. No. 

Mr. GREEN. It didn’t? 

Mr. HOLTZ-EAKIN. No. 

Mr. BAKER. Yes. 

Mr. MARGOLIS. I have no knowledge of the facts. 

Mr. GREEN. Thank you. 

Ms. GOLD. I don’t study the trust fund. 

Mr. GREEN. OK. 

Mr. KAPLAN. Same for me. I have not studied the trust fund. 

Mr. GREEN. OK. Well, I think that we have many a difference 

of opinion but I think that is acknowledged, that it did extend the 

life of Medicare with the Affordable Care Act. 

Mr. Baker, in your testimony you discussed changes to Medicare 

Advantage under the Affordable Care Act. The ACA included policies designed to make the Medicare Advantage system more efficient, reduce overpayments to bring plans more in line with traditional Medicare and enhance plan quality. Can you elaborate on 

some of these improvements in managed care under the Affordable 

Care Act? 

Mr. BAKER. Well, as I said earlier, one of the improvements was 

making sure across the board that Medicare Advantage plans are 

covering preventive services as well as original Medicare. Another 

is the 85 percent Medical Loss Ratio so ensuring that 85 percent 

of every dollar, whether it is a consumer dollar or a government 

dollar, to these plans is going towards medical costs. Once again, 

the star ratings program and the out-of-pocket maximum, which I 

think have provided important financial protection to folks within 

the Medicare Advantage program, and the star ratings have made 

it easier, I think, for consumers to choose among plans. They do 

have, as I said, many choices in most markets, and the problem we 

frequently see is folks not being able to choose among plans so the 

star ratings have helped that a bit. 

Mr. GREEN. Well, and I know from my area, we have a really 

great Medicare Advantage plan with Casey Seabolt in Houston 

that actually quit taking general Medicare because they wanted all 

their patients to go in. Of course, they are a great facility. 

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What recommendations would you have to further improve Medicare Advantage? 

Mr. BAKER. Well, I think that once again we are very supportive 

of some of the good things that have come out of Medicare Advantage. We want to make sure that there are meaningful choices 

amongst plans, so really kind of standardizing plans to the extent 

that that is appropriate and possible. We would love to have more 

data on appeals within plans to see where there might be problems 

with a particular plan. We would like to make sure that there are 

better notices, so this issue that we have been talking about with 

regard to the slimming down of some of these networks, we do 

think that there could be more pinpointed notices sent to consumers in the fall. Many consumers find out about this from their 

doctor. It would be nice if they found out about it from their plan 

in September when they get their annual notice of change so that 

they can be ready in the open enrollment period, which begins on 

October 15th. 

And finally, I think we need to make sure that the original Medicare program continues to be a strong program and kind of a base 

program for folks, and by that, we could help by increasing the 

availability of Medi-gap policies and open enrolled Medi-gap policies so people can switch back and forth between the programs as 

necessary. 

Mr. GREEN. We have heard that Medicare Advantage would lead 

to wide changes in ACA and Medicare Advantage would lead to 

widespread of the Medicare Advantage market. From your perspective, has this been the case? 

Mr. BAKER. We do not see widespread disruption at this point. 

We have seen some of these provider issues with providers leaving 

networks. Two things there: most of the consumers that have counseled have either chosen other plans that continue to have those 

providers in their network or have reverted to the original Medicare program where those providers are available to them. 

Mr. GREEN. Ms. Gold, you have researched and written extensively about Medicare and scientific studies must meet certain established standards for the findings to be accepted including transparency of data methods, peer review and confidence levels to establish the validity of the findings. As a professional researcher, I 

am interested to hear your thoughts on Mr. Kaplan’s study which 

lacked, in my opinion, the standards. I believe there are many 

questions that we need to have answered before we can definitely 

say that his results have great meaning. 

Ms. Gold, would you agree that these are some of the questions 

that one would want to have answered before accepting the validity 

of the conclusions and the results of Mr. Kaplan’s study? 

Ms. GOLD. I do think, you know, usually when you have a study, 

they under peer review, the methods are laid out and you can look 

at it. I didn’t have time to do a thorough review of the study but 

both I and a colleague looked at it quickly, and some of those details that you would want to see and which would ordinarily be 

there in a peer review paper were not there. 

I think the most major part of the study that wasn’t really talked 

about in the testimony was the sort of finding that over 1 year, so 

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one really, whether they are pro or con MA or anything else, expects that that is a plausible finding. So I think there is some real 

questions about the risk adjustment and the selection of facts that 

are in that study. So, you know, I think there are some questions. 

Mr. GREEN. I know I am out of time. Thank you, Mr. Chairman. 

Mr. PITTS. Mr. Kaplan, do you want to take a moment to make 

a comment? 

Mr. KAPLAN. Yes. So I appreciate the comments, and thank you 

for the question. We did have our studies reviewed. We actually 

were surprised by the findings, and that really caused us to pause 

because we were so shocked by some of the data that the data 

showed. We didn’t have an agenda walking into this. We wanted 

to figure out what it would show. 

So we did have it reviewed by a number of organizations, leading 

academic medical centers, because we wanted to challenge what we 

were saying. I understand that Ms. Gold did not review it or didn’t 

have the time, and I respect that she didn’t have the time to review 

it to be thorough, but we went through substantial reviews. What 

we said in this is that that one finding about mortality was the one 

that had greatest concern. That is why we wanted to go forward 

and do a longitudinal prospective study as opposed to just looking 

at it retrospectively. 

But I would not throw out all the findings here. Again, we recognize that mortality was the one that is most concerning and no one 

wants to publish the fact that if you sign up for Medicare Advantage, you have a higher probability of living than if you sign up for 

Medicare fee-for-service. We did not want to publish that, but it 

was a finding we found. 

Ms. GOLD. It wouldn’t have been accepted in a journal because 

your detail wasn’t there. I mean, I am not saying there may not 

be questions, but the detail was not in the report to know whether 

in fact that was legitimate or not, and it wouldn’t have gotten 

through peer review. 

Mr. KAPLAN. As I said, we did have it reviewed. We had it reviewed by leading academic medical centers. We did not submit it 

for peer review because we wanted to get it out to the market as 

quickly as possible. 

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

Dr. Gingrey 5 minutes for questions. 

Mr. GINGREY. Mr. Chairman, thank you very much. 

I will have to say that Mathematica Policy Research might sound 

a little more highbrow than Boston Consulting Group, but if any 

of you know anything about Boston Consulting Group, you know it 

is one of the most outstanding companies in this country, and I do 

know a little bit about that. 

Ms. Gold, in your testimony, you suggested—I am paraphrasing 

a little bit, but you suggested that the President fulfilled his promise to our seniors when he said if you like your healthcare plan, 

you can keep it, if you like your doctor, you can keep her. And you 

said it is called Medicare, suggesting, implying that if you got a notice from a Medicare Advantage plan that you had selected that 

you were no longer going to able to remain on the plan or they are 

going to have to get out of the business because of the $14 billion 

cut, 14 percent cut per year over 10 years, something like $300 bilVerDate Aug 31 2005 11:11 May 23, 2014 Jkt 037690 PO 00000 Frm 00129 Fmt 6633 Sfmt 6633 F:\1123CA~1\113-10~1 WAYNE
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lion, it was OK because you still had Medicare. You just diverted 

back into Medicare fee-for-service. I would suggest to you that that 

is pretty disingenuous to say if you like your plan, you can keep 

it, because you get kicked out of Medicare Advantage and you can 

go to Medicare fee-for-service if you can find a doctor. 

It is clear that the Medicare Advantage program is under attack 

and that these beneficiaries are beginning to feel the effects of the 

over $300 billion in direct and indirect cuts included in Obamacare, 

and with plan cancellation notices already sent to, what, tens of 

thousands of our country’s seniors, some of the most vulnerable 

citizens are faced with this uncertainty that I just talked about. Individuals are losing coverage that they are happy with and the doctors with which they are comfortable, and this is a tragedy. It is 

a tragedy of the law, a bill that was rushed through Congress without any serious debate, strictly partisan vote, is now directly impacting people’s lives and their personal healthcare decisions. 

Mr. Holtz-Eakin, let me ask you, would you please explain to the 

committee the reality for those potentially millions of people, seniors who lose coverage over the next few years, especially when it 

comes to a reduction in financial security and benefits? 

Mr. HOLTZ-EAKIN. I think this is a very real possibility and 

something I am deeply concerned about, as you know. It is one 

thing to mandate that a Medicare Advantage plan cover certain 

benefits and offer those to seniors. It is another thing for that plan 

to be in existence so they can take advantage of it. And in the absence of a financial foundation, money trumps mandates. They 

won’t have those choices, they won’t have that care, and indeed, 

those who already have it, who made that choice, will see their 

plans taken away from them in violation of the promise. 

Mr. GINGREY. Well, you know, the distinguished chairman emeritus Mr. Dingell—he is not still here, had to leave—but, you know, 

he made that statement in talking with Mr. Baker about the $14 

billion that was saved out of the Medicare Advantage program, but 

of course, that $14 billion was not kept in Medicare, and really, he 

was only presenting one side of the balance sheet. Yes, $14 billion 

may have been spent on Medicare Advantage. Whether that was a 

little too much is open to question. But the savings that occurred 

to Medicare and we the taxpayer because of this Medicare Advantage program that has preventive care and all these features that 

traditional Medicare fee-for-service does not have, certainly not 

care coordination. 

This benefit is used by seniors from all walks of life. It is especially prevalent for the seniors, and I think you said this earlier, 

Mr. Holtz-Eakin, with lower incomes. These cuts to benefits and 

coverage will affect lower-income seniors more directly than others. 

Is that correct? 

Mr. HOLTZ-EAKIN. Yes, about 75 percent will be experienced by 

those making less than $32,000, ballpark. 

Mr. GINGREY. And what will the loss of predictable annual cost 

mean to these populations? 

Mr. HOLTZ-EAKIN. These are the most vulnerable of the seniors, 

and this has been a program that has given them not just the services in traditional fee-for-service but additional services and done 

it in a fashion of coordinated care and high-quality outcomes. It is 

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a loss of their personal choice but it is a loss from the perspective 

of having a viable Medicare program for the future. 

Mr. GINGREY. Thank you, Mr. Holtz-Eakin. I appreciate your 

leadership on this issue. 

Seniors are just now learning that the upheaval of our health 

care is not limited to the individual insurance market. That is the 

purpose of this hearing today. They now know that it will affect 

them as well, and seniors may lose benefits. We have heard testimony from Mr. Holtz-Eakin, from Dr. Margolis, from Mr. Kaplan, 

seniors may lose benefits, they may lose access to doctors, and be 

forced to pay more for their coverage, plain and simple. And I yield 

back, Mr. Chairman. 

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

the gentlelady from Virgin Islands, Dr. Christensen, 5 minutes for 

questions. 

Mrs. CHRISTENSEN. Thank you, Mr. Chairman, and welcome to 

our panelists this morning. 

From what I have read overall, Medicare beneficiaries should expect, in response to the question that we are answering today, and 

are already experiencing improvements from the Affordable Care 

Act, which have been enumerated by Chairman Dingell, my colleague, Ms. Castor, and others, and in part, those improvements, 

I think, have been made possible by the savings that came from 

equalizing the reimbursements of Medicare Advantage to those of 

traditional Medicare, and as a family physician and an old fee-forservice doc, I especially think that with the ACA reforms that the 

outcomes from both can be equally beneficial to the beneficiaries. 

But I represent a territory, the U.S. Virgin Islands, and sometimes we have unique circumstances and suffer unintended consequences. So I want to ask a question on behalf of my colleague 

from Puerto Rico, and the question is to Bob Margolis. With the revised methodology under the ACA for paying Medicare Advantage 

plans using benchmarks based on fee-for-service data, should CMS 

coordinate the timing of the Medicare Advantage and fee-for-service processes? For example, in August of this year, CMS put out 

the 2014 fee-for-service inpatient rates that changed the Medicare 

disproportionate share payments to hospitals, but this was after 

the Medicare Advantage process for 2014 had closed in June, preventing the Medicare Advantage plans in Puerto Rico from recovering the substantially increased DSH payments they must now 

make to hospitals. Shouldn’t CMS address this lack of internal coordination for 2014 and its harm to Puerto Rico’s Medicare Advantage plans and their beneficiaries? 

Mr. MARGOLIS. Thank you, Dr. Christensen. Clearly, I am not an 

expert on the rate setting but I would say that my understanding 

is that Medicare Advantage base rates are set based on the fee-forservice equivalency and that it makes very logical sense to me that 

we should have all of the built-in fee-for-service costs in the base 

rate when the Medicare Advantage rates are set. So I believe that 

would answer or direct an answer, and I think it is well known 

that CMS has for years not calculated the fact that SGR would 

probably be pushed out further so that they have not given credit 

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vantage. So there are a variety of administrative issues I think related to how Medicare base rates are set. 

Mrs. CHRISTENSEN. Thank you. I hope that answers Mr. 

Pierluisi’s question. 

Ms. Gold, I want to ask a question. We have heard a lot about 

the ACA causing spikes in premiums. While some plans have increased costs on beneficiaries, isn’t it true that overall average premiums paid by enrollees have declined since the Affordable Care 

Act was enacted? And could you elaborate a little more on the premium changes? Premiums are not the same across all plans. So 

what factors contribute to differences in premiums among plans? 

So let me just add another part of this question because of time. 

Isn’t it true that the more than 70 percent of beneficiaries who are 

in traditional Medicare are the ones subsidizing lower premiums 

for the people in Medicare Administrative? 

Ms. GOLD. Taking your second question first, yes, it is true that 

all beneficiaries subsidize it, plus the taxpayers, I might add, because that covers it too. 

In terms of premiums, there is a lot of reasons. Costs vary a lot 

across the country, and some areas of the country are more efficient than others and some providers are more efficient than others. Premiums have often differed because fee-for-service payments 

are different. In some areas of the country, providers are stronger 

and they are able to negotiate higher rates. So there is less money 

available for extra benefits. In some areas of the country, some 

plans decide to give it back in less cost sharing at point of service 

rather than lower the premiums. So there is a lot of reasons things 

differ. 

And I should add, you know, this fight between doctors and 

health plans has a long history that goes back years, and it is attention. You are trying to get the most you can out of the system, 

and the best thing the policymakers can do, I think, and Congress 

is to set good standards and say we want to buy quality, we want 

to buy value, and to reinforce that. I think the stars do start to do 

that, and getting those rights and figuring out across both programs, both Medicare Advantage and Fred Fox, how to make care 

better for beneficiaries because I don’t think that care is as good 

as it could be for Medicare beneficiaries no matter what you are 

in, and there is a lot of variation across plans in what they are 

doing, which is not even all their fault. A lot of it has to do with 

the providers in different areas and how willing they are to get together and how fragmented they are, and especially for beneficiaries who have chronic illness, they need providers who talk to 

each other, and that is hard to change, and the plans are dealing 

with that and we are dealing with that because otherwise the beneficiary gets caught with the bill and the costs go up. 

Mr. PITTS. The Chair thanks the gentlelady and now recognizes 

the gentleman from Louisiana, Dr. Cassidy, 5 minutes for questioning. 

Mr. CASSIDY. Yes. Thank you. I thought I was a ways after. 

Ms. Gold, you sound like an advocate for MA plans because you 

are the one who is saying that there should be greater coordination 

of care. 

129 

And I am going to go to you, Dr. Margolis, because as a doc 

speaking to a doc, I thought your testimony was most kind of about 

what the patient’s experience is as opposed to what the economists 

might say. 

But Ms. Gold, just to point out, when you say that premiums will 

be lower in 2014 relative to 2010, that is because the market is actually offering lower-cost premiums with higher deductibles or allowing people to take their choice and therefore they are choosing 

a lower cost. It is not a function of the—that is what it is a function 

of. 

Ms. GOLD. No, I don’t believe so. Partly, we don’t have good data 

on the other kinds of cost sharing but I don’t believe that there is 

evidence yet that that is why that has happened. 

Mr. CASSIDY. Common sense would suggest that. I will just say 

that. Because when people are voting with their pocketbook, they 

typically vote for a lower-cost plan. 

Ms. GOLD. Well—— 

Mr. CASSIDY. And I am sorry, I have limited time. 

Dr. Margolis, we have a controversy here. We have a controversy 

between Mr. Kaplan and Ms. Gold that says that they are not sure 

that there is improved quality data with MA plans. Your testimony 

is excellent. My gosh, when you show that graph of MA plans 

versus fee-for-service and the readmission rate is so much lower, 

number of hospital days, etc., that is just proof of what you are describing as an increased model of coordinated care. Fair statement? 

Mr. MARGOLIS. Well, thank you for that compliment, sir. I think 

that there are within the written testimony things that are very 

evident. First of all, I am a high promoter of transparency of quality results and payment related to quality, so I recognize the star 

program as a very good step forward. 

I wish there was a similar program in fee-for-service Medicare so 

we would have some evidence of whether Medicare fee-for-service 

is creating—— 

Mr. CASSIDY. So let me emphasize, though, because I am a liver 

doctor, I take care of special needs patients like cirrhotics. You 

mentioned end-stage renal disease. That is where coordinated care 

is most important, and yet you describe the cuts that go to the special needs program, correct? 

Mr. MARGOLIS. Yes, I think I have said several times, I think the 

greatest threat at the moment is if we cut through this risk adjustment rescaling the benefit of adjusting payment based on acuity, 

we unfortunately then start to incentivize what used to be called 

cherry picking, which is avoiding high-cost patients. That is a disaster for seniors, and as you can see in the written testimony, if 

you really manage the high-cost seniors with comprehensive care, 

with palliative care, with end-of-life care with all those kinds of integrated programs, you can make a dramatic reduction in utilization. 

Mr. CASSIDY. Dr. Margolis, I am going to cut you off a second because you have made your point, and I believe it. I have been 

struck that Ms. Gold and Mr. Baker continue to say they have not 

yet seen the problems that we are predicting and yet this wonderful graph in your testimony shows that we are just on the leading 

edge of these cuts and that there is compounding cuts that go 

130 

through what you have in 2019 where there are dramatic cuts ultimately to MA plans will receive. Do I characterize your graph correctly? 

Mr. MARGOLIS. Yes, sir. It is why I have said that unfortunately—— 

Mr. CASSIDY. Now, I am sorry, I just got a minute 30 left. 

Now, you have been describing the dire things that could happen 

to these important programs like special needs plans based upon 

2015, but if we just extrapolate that out, if we have Mr. Baker and 

Ms. Gold come back in 2019, at that point is it fair to say that 

more likely than not they will be able to say at this point we have 

seen a negative impact of the cumulative effect of these cuts upon 

patient care? 

Mr. MARGOLIS. I believe that is an accurate statement. 

Mr. CASSIDY. Yes, so do I. Just as a doc who is going to go home 

and talk to a woman who is losing her MA plan and she is a diabetic, and she has had this wraparound service that has been able 

to help her so tremendously. 

Mr. Holtz-Eakin, can you just lay to rest this myth that the ACA 

actually prolonged the life of the Medicare trust fund? 

Mr. HOLTZ-EAKIN. As I said, there are no real resources in that 

trust fund. There is no way to pay a Medicare doctor’s bill out of 

that trust fund. All the money that flows into it flows right out. 

The Treasury has spent every dime of it, and it is gone. 

Mr. CASSIDY. And so when Mr. Dingell or Mr. Green suggest that 

we have actually prolonged the life through the ACA and you flatly 

say no, with your credentials, you just totally dispute that? 

Mr. HOLTZ-EAKIN. I have testified numerous times as CBO Director and in the years since about the fiction of government trust 

funds actually being able to pay any bills, and it is just a fiction. 

Mr. CASSIDY. I yield back. Thank you. 

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

the gentleman, Mr. Sarbanes, for 5 minutes for questions. 

Mr. SARBANES. Thank you, Mr. Chairman. I appreciate the testimony of the panel. 

Congressman Gingrey said something earlier, which I wanted to 

respond to. He said that seniors are now learning that the ACA is 

going to cause them harm. I don’t think seniors are learning that. 

I think seniors are being told that by fear-mongering members of 

the other party who don’t like the ACA, and I think that if seniors 

look carefully at their experience over the last couple of years, a 

period in which the positive impact of the ACA has begun to be 

felt, they will conclude that in fact the ACA is benefiting them. You 

look at the closing of the donut hole, you look at the new coverage 

of certain kinds of preventive care services, screening and other 

care services, annual wellness visits where copayments have been 

eliminated, you look at the incentive structures that have been put 

in place to help improve management of care and chronic conditions in a more sensible way within the traditional Medicare feefor-service context as well as obviously within the MA context, 

there is just item after item of improvements which are there because of the Affordable Care Act, which are making the Medicare 

plan and Medicare coverage more robust for our seniors. So it is 

131 

just wrong to suggest that this is going to be harmful to the senior 

population. 

In a sense, this hearing is titled ‘‘What beneficiaries should expect under the President’s healthcare plan, Medicare Advantage,’’ 

and I think they can expect good things. Everybody here generally 

is saying good things about the Medicare Advantage program. That 

is not the dispute we have. It is whether the Affordable Care Act 

is having a negative impact on what 29 percent of Medicare beneficiaries have access to or a positive impact. So when Mr. Baker 

and Ms. Gold say good things about the Medicare Advantage program, which they have, that is not somehow a contradiction on the 

other statements and testimony they are offering here. I think it 

is very consistent. It is just that you believe, in contrast to the 

other witnesses here, that the Affordable Care Act is actually 

strengthening and improving Medicare Advantage. 

My understanding, Mr. Baker, is that the premium that was offered initially to Medicare Advantage plans, which is, I think, 114 

percent against what the fee-for-service rate is, was done because 

the government wanted to incentivize the market and the private 

health insurance industry to come in and innovate and was successful in doing that. If you have 29 percent of beneficiaries that 

are now in those plans, it shows that that has happened. But along 

the way, because of good, rigorous analysis, we discovered that that 

premium was no longer justified, and in fact was going to some 

things that really ended up being a waste from the standpoint of 

the Medicare program. Can you just speak—I have used up most 

of my time here—but can you just talk again about two or three 

of the things that you think the Affordable Care Act has done to 

improve the Medicare Advantage program, which I think all of us 

want to see remain strong? 

Mr. BAKER. I think, you know, three main things. One is the 

Medical Loss Ratio making sure most of the money that goes to— 

85 percent goes to medical care. I think, two, closure of the donut 

hole and the addition of preventive care services. I would also add, 

and I haven’t talked about this before, but the Affordable Care Act 

does set up a program to enhance coordinated care in the fee-forservice traditional Medicare program through accountable care organizations and through other mechanisms as well as, I think, 

strengthen Medicare Advantage-like programs in many States that 

are partnering with the Federal Government with regard to coordinated care for dual eligibles, people eligible for both Medicaid and 

Medicare, and that is an ACA-generated program that does have 

some promise. It needs to be monitored but it looks like it has some 

promise. 

Mr. SARBANES. Thank you. 

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

the gentleman from Virginia, Mr. Griffith, 5 minutes for questions. 

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

I want to highlight a real-life example. My 83-year-old mother reports that her rates have risen for Medicare Advantage plan. In 

order for her to keep the policy that she has and likes, she is now 

paying higher rates. When Secretary Sebelius was here in April, 

she claimed Medicare Advantage rates were decreasing nationwide. 

So I did a survey in my district, and we found that more had rates 

132 

going up, not a huge amount. As Mr. Baker testified, the biggest 

group, or a bigger group, was those who stayed about the same. 

There were a couple of folks who reported that their rates had gone 

down. 

I am just wondering, Mr. Holtz-Eakin, is this the case from your 

perspective nationwide that the Medicare Advantage rates are 

going down, as Secretary Sebelius testified earlier this year? 

Mr. HOLTZ-EAKIN. We can get back to you with the data but I 

don’t think those are the facts, but I would emphasize that there 

are big differences across counties, regions, States in the United 

States. 

Mr. GRIFFITH. And let me go to that point because I had some 

curiosity as to whether that was one of the reasons was that I represent a very rural district where it takes hours sometimes to get 

to the nearest hospital, depending on where you are located, particularly since as a result of Obamacare and the cuts to Medicare 

we lost a hospital in one of my most rural counties a few months 

back. That was two of their top three reasons for why they were 

closing the hospital. Do you find that that is more likely to be a 

problem in rural areas where the rates are going up as opposed to 

more urban areas? 

Mr. HOLTZ-EAKIN. Well, it is much harder to, you know, narrow 

networks, which is one of the ways to control costs in a rural setting because you don’t have many choices, so they don’t have the 

option to do that. 

Mr. GRIFFITH. Yes, and in that particular county, they had one 

choice and now they have to drive a fairly—depending on what 

part of the county you live in, a fairly good distance to get to the 

next choice where they also only have one choice depending on 

what direction they go in. I do appreciate that. 

Dr. Margolis, I ask you a rural question to in that you were talking about the health care and Dr. Cassidy, who I respect very 

much, showed the chart from your testimony and how the cuts are 

coming, and you indicated earlier in your testimony that is going 

to limit access for some folks. Is that going to be far more worse 

in the rural districts like mine? 

Mr. MARGOLIS. I think that it is predictable that cuts will affect 

rural areas where there are fewer choices rather than the urban 

areas where there is more competition but I can’t say that I have 

evidence to support that. 

Mr. GRIFFITH. But common sense would lead us to that conclusion, would it not? 

Mr. MARGOLIS. Yes. 

Mr. GRIFFITH. Ms. Gold, do you want to disagree? 

Ms. GOLD. Yes, because the ACA has the lowest payment counties actually benefiting. In some of the rural counties, they are 

going to continue to have 115 percent of fee-for-service. So I don’t 

think it is payment in rural areas. I agree, there is a lot of problems in rural areas with managed care and getting it set up but 

I don’t think it is the payment changes per se that are causing the 

problem. 

Mr. GRIFFITH. So you would disagree with the folks who just had 

to close the hospital in Lee County, Virginia, and you would tell 

them that were mistaken in looking at their numbers? 

133 

Ms. GOLD. No, I can say that they have a real problem but it is 

not the ACA. 

Mr. GRIFFITH. Well, unfortunately, those were two of the three 

things that they listed as the problem. The other one was the war 

on coal, in essence, the downgrading of the economy in our region 

also responsible to this administration. 

But the other two things they listed were the ACA and the cuts 

to Medicare, so two out of the top three have hurt my people, and 

obviously I am very concerned about it and now I think it is going 

to affect perhaps the elderly also disproportionately represented in 

the rural areas of my district. 

Mr. Holtz-Eakin, in that regard, you indicated that we shouldn’t 

be looking at these Medicare Advantage rates based on 2013 but 

we should be looking to the future. Can you explain that more 

fully? 

Mr. HOLTZ-EAKIN. Well, I am concerned that the current experience has been amassed, as the Chair mentioned at the outset, by 

the demonstration program, the Medicare stars demonstration program, which I will just take this opportunity to say not all MA 

plans are uniformly wonderful. It is a good idea to have a stars 

program to rate them. The demonstration program is not a good 

program. It does not reward good performance, and it needs to be 

reformed so that it actually does. But they plowed $8 billion in and 

disguised the genuine financial future of Medicare Advantage for 

the near term. 

Mr. GRIFFITH. And I appreciate that. 

And Mr. Chairman, with that, I yield back. 

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

the gentleman from New York, Mr. Engel, 5 minutes for questions. 

Mr. ENGEL. Thank you, Mr. Chairman, and thank you, Mr. 

Pallone, for having this hearing today. 

You know, I have been listening to my Republican colleagues lamenting the fact that healthcare costs, they say, are going up. They 

claim that the ACA is causing this to happen, although it is not 

true, and yet when we identify savings and cost, then they conversely say how terrible it. Well, you really just can’t have it both 

ways. 

In 2009, prior to the passage of the ACA, the rates paid to Medicare Advantage plans exceeded that of traditional Medicare by 

about 18 percent and the ACA required changes to Medicare Advantage payment rates to better align them with the costs associated with traditional Medicare, and these changes were estimated 

by the Congressional Budget office to save over $135 billion over 

10 years. So you just really can’t have it both ways. Every time we 

identify a way to save money, my colleagues on the other side of 

the aisle say look, this is so terrible, this is being cut, that is being 

cut, and then they claim that the ACA is causing costs to rise. I 

mean, you just can’t have it both ways. 

According to the 2010 Medicare Payment Advisory Commission report to Congress that in 2009 Medicare spent about $14 billion 

more to beneficiaries enrolled in the Medicare Advantage plans 

than it would have spent if they had stayed in traditional Medicare. So I want to go along the lines of the questions that Mr. Sarbanes did, and ask Ms. Gold, how did we get to the point where 

134 

we were paying so much for private insurers through Medicare Advantage to provide Medicare benefits and isn’t it accurate that reforms in the ACA will help correct the overpayment problem with 

Medicare Advantage plans and play a role in extending Medicare 

solvency for all beneficiaries? 

Ms. GOLD. Yes, I think it will have that effect. 

Mr. ENGEL. I think it is also worth noting that all of the cuts to 

Medicare that were included in the ACA were also included in each 

of the Republican budget proposals for the last 3 years. So under 

Republican proposals, these cuts to Medicare Advantage will continue too. 

On trust fund solvency, I want to mention the way we measure 

this solvency is by the Medicare trustees’ report, and the trustees’ 

report shows post-ACA solvency of Medicare is extended, and I 

think that is important to state as well. 

Mr. Baker, I know that in the past there have been concerns 

about Medicare Advantage plans cherry picking and seeking to enroll the healthiest of seniors, leaving sicker beneficiaries enrolled 

in traditional Medicare. Have you seen evidence of this practice 

continuing, or what steps did the ACA take to try to stop this practice? 

Mr. BAKER. Well, once again, I think the provisions in the ACA 

that require Medicare Advantage plans to have similar cost sharing 

for benefits that are typically used by sicker beneficiaries, and by 

that I mean renal dialysis, skilled nursing facility care and chemotherapy is one of the ways that those plans have become more attractive to those sicker beneficiaries and are something the plans 

can’t use to kind of cherry-pick healthier beneficiaries over sicker 

beneficiaries. 

I think what we see anecdotally, and it is borne out by some of 

the research, is that folks typically do join Medicare Advantage at 

a relatively younger and healthier age. As they age and become 

more chronically or severely ill, some do disenroll and enroll in traditional Medicare thinking that certain treatments, certain providers are more available in the original Medicare program. And so 

we do see that pattern emerge anecdotally in our work. 

Mr. ENGEL. Thank you, Mr. Baker. Let me ask you this question 

on a different subject. In New York, we have about 2,100 physicians eliminated from United Health’s Medicare Advantage provider network and is expected to impact about 8,000 of New York 

seniors. This was a business decision made by a private company 

and CMS is prohibited by law—I think it is important to say that— 

from interfering in the payment arrangements between private 

health insurance plans and healthcare providers. But I do hope 

that CMS will use the authority it has to ensure adequate provider 

networks are in place for all Medicare Advantage plans to help ensure beneficiaries have access to healthcare services. 

So let me ask you, for seniors whose physicians are no longer a 

part of a specific Medicare Advantage network, what suggestions 

would you offer them? My understanding is that more than 90 percent of physicians in America are willing to accept new patients 

under the traditional Medicare program so is moving to traditional 

Medicare an option for them right now? 

135 

Mr. BAKER. Moving back to the original Medicare is an option for 

them right now or moving to another Medicare Advantage plan. It 

is our understanding that most of those physicians and most of the 

hospitals or other providers that have been dropped from United or 

other Medicare Advantage networks are in other Medicare Advantage networks or are, as you said, in the original Medicare program. So this happens every year to some extent and so our advice 

is consistently the same this year: look for another plan that has 

your provider in it or return to the original Medicare program if 

that is a better program for you overall and your provider is also 

involved in that program. 

Mr. ENGEL. Thank you. Thank you, 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, and thank you for 

holding this very important hearing. I thank the panel for your testimony as well. 

Mr. Kaplan, I was reviewing your report about how Medicare Advantage provides better outcomes and greater savings than traditional Medicare. Why does capitated MA produce such dramatically 

better results? 

Mr. KAPLAN. I think there are probably two or maybe three 

things to take away that I think drive that, so one is the alignment 

of incentives, so in a capitated world, I think we all understand 

that the incentives are aligned between those who pay for the 

health care and those who provide the health care. So with that 

alignment, things tend to be more productive in how they perform. 

The second point is that because of that alignment, what happens is that there is a huge investment in preventive care, so when 

they have the same goals and they are working towards the same, 

they are going to try to avoid these acute interventions to fix something that has gone dramatically wrong so they work with the 

member or the patient to try to manage them through it. 

And the third point I really want to emphasize, which is what 

Dr. Margolis said, which is the issue around many of these members become very sick with time, age as well as where they are 

socioeconomically, and when they are, of the sickest portion or the 

5 percent that drives 52 percent of the costs that require even 

greater intervention and greater coordination and so when these 

ideas of coordinating care and aligning incentives are very important, in all aspects of health care, it is extremely important towards the more chronically sick individuals. 

Mr. BILIRAKIS. Thank you very much. 

Mr. Holtz-Eakin, in the last Congress, about 40 percent of the 

seniors in my district had Medicare Advantage plans. So they love 

their plans, and it is very popular in my area. Of course, again, 

they like their plans. Back in 2010, CMS’s Chief Actuary did a report on the impact of Obamacare to Medicare Advantage. He wrote, 

and I quote, ‘‘We estimate that in 2017’’—I know you touched on 

this, but elaborate, please—‘‘We estimate that in 2017 when the 

MA provisions will be fully phased in, enrollment in Medicare Advantage plans will be lower by about 50 percent.’’ Does this track 

with your own analysis of these cuts? 

136 

Mr. HOLTZ-EAKIN. Absolutely. As you have heard today, Medicare Advantage is a high-quality program. It is very popular. In 

your district, it is even more popular than nationwide. The senior 

population is rising, 10,000 new beneficiaries every day. One would 

expect that if nothing else changed, you would see more enrollment, a lot more enrollment; we are going to see less. What has 

changed is the financial foundation. The cuts under MA are going 

to make it impossible for plans to survive, and those that survive 

will have to change their networks and their benefits and their cost 

sharing in ways that seniors will find undesirable. The net result 

is going to be less availability of Medicare Advantage. 

Mr. BILIRAKIS. Thank you. Next question for you, sir. Some 

Democrats have been pushing the Accountable Care Organizations—ACOs—as a model for better care coordination and better 

cost savings. Doesn’t Medicare Advantage promote the same concept with a proven track record of better outcomes and cost containment? 

Mr. HOLTZ-EAKIN. MA has a track record, and it is by and large 

a high-quality track record, as I said earlier. Not every MA plan 

is created equal but it has a track record. ACOs are a concept at 

this point and unproven, and there is one big difference: seniors 

choose their MA plan, seniors are assigned to their ACO, and they 

have no choice, and that is the significant difference in the two concepts. 

Mr. BILIRAKIS. Thank you very much. I yield back, Mr. Chairman. 

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

the gentlelady from North Carolina, Mrs. Ellmers, 5 minutes for 

questions. 

Mrs. ELLMERS. Thank you, Mr. Chairman, and thank you to our 

panel for being here on this issue. 

Surveying the 2nd District of North Carolina, I have been hearing since the rollout of Obamacare that my constituents who are 

losing their Medicare Advantage are very, very concerned about 

this issue, as you can imagine, and it is showing in North Carolina 

that the cuts to benefits for seniors in Medicare Advantage are over 

$2,000 per beneficiary. Now that we are seeing this play out, the 

things that I am hearing from my constituents are that they are 

losing their access to care to their physicians, the cost is going up, 

and again, as you can imagine, they are very, very concerned about 

this issue. 

To Mr. Holtz-Eakin, who is going to be most affected by these 

Medicare Advantage cuts? Which sector of population of our seniors? Because I keep hearing over and over again that it is helping 

our chronically ill patients who have this coverage and this is a 

better plan for them. Is that not who we are harming? 

Mr. HOLTZ-EAKIN. This is a better plan for those with multiple 

chronic diseases in particular that need carefully coordinated care. 

They are typically lower income. There are typically more minority 

participants in MA. That is the population that will be affected, no 

question about it. 

Mrs. ELLMERS. Now, can you identify some of the actual tangible 

benefits? I know you talked about coordination of care and items 

137 

like that. Are there any more specifics that we can hear so that we 

all have a better understanding of what we are actually losing? 

Mr. HOLTZ-EAKIN. I will cede to the greater wisdom of Mr. 

Margolis and let him go first. 

Mrs. ELLMERS. Dr. Margolis, would you—and I actually have another question for you, Dr. Margolis, on that issue. You know, you 

had identified quite correctly that we really need to be talking 

about taking care of those patients who are at the end of life, the 

ones who—we know those are where the dollars are really being 

spent. How do you feel about the IPAP, Independent Payment Advisory Board? That is going to come into play there, don’t you believe? 

Mr. MARGOLIS. Yes, ma’am, I certainly do not think that organizations like that should make decisions about individual patient 

care, on the one hand. And let me just say relative to that very 

sensitive topic: almost nobody wants to die in a hospital—— 

Mrs. ELLMERS. Thank you. 

Mr. MARGOLIS [continuing]. If they have support at home, and 

with coordinated care, integrated programs, spiritual counseling, 

palliative care, pain management and 24-hour access to caregivers, 

you can avoid almost everybody having that unfortunate event in 

their family. That is a big opportunity, and let us support special 

needs programs, the dually eligible, and move towards Medicare 

Advantage much more aggressively. 

Mrs. ELLMERS. I appreciate those comments, and that is exactly 

why I am as concerned about this issue as you are. 

And Ms. Gold, I just have to ask you, yes or no, isn’t that what 

you identified a few moments ago when you said that you thought 

coordination of care could be better served under another plan and 

under Affordable Care Act that that actually happens? 

Ms. GOLD. I think there is a lot of problems with getting coordinated care. 

Mrs. ELLMERS. But doesn’t Medicare Advantage actually do that? 

Ms. GOLD. No, only some plans do it. It has the potential—— 

Mrs. ELLMERS. No, I didn’t—— 

Ms. GOLD [continuing]. But it doesn’t have the reality—— 

Mrs. ELLMERS. Clarification here. I did not say that every Medicare Advantage plan, but I did say that Medicare Advantage plans 

offer these benefits. Is that yes or no? 

Ms. GOLD. Yes. 

Mrs. ELLMERS. Thank you. And just to finish out, we have got 

about a minute, and this question is actually to Mr. Holtz-Eakin 

and to Mr. Kaplan. 

We have heard the bipartisan concerns here, and we want to 

make sure that we take care of our seniors, but we can see over 

and over again the Affordable Care Act is so negatively affecting 

our seniors with their Medicare Advantage plans. Just coming from 

a completely bipartisan perspective, what can we do now moving 

forward? What would you like to see in Medicare Advantage that 

we can move to that we can actually make a difference? Because 

we are going to have to make changes in Medicare, yes, and I 

would like to know from both of you what your thoughts are on 

what we need to do in Medicare so that we can make it better for 

our seniors. 

138 

Mr. HOLTZ-EAKIN. Well, I think it is very important that we have 

a sustainable social safety net for our seniors. Medicare needs to 

be a different program in the future both financially and because 

the care that seniors need is different than when Medicare was 

founded. Medicare Advantage is a great steppingstone to that future. It is not the end but it is a great steppingstone. It needs to 

be preserved, not wither on the vine in the next 5 years. 

Mrs. ELLMERS. But we need that financial backing. 

Mr. HOLTZ-EAKIN. And the near-term thing would be this risk 

adjustment issue that Dr. Margolis has mentioned. That is a very 

serious concern in terms of the funding. 

Mrs. ELLMERS. Wonderful. And Mr. Kaplan, very quickly, if you 

can add to that. 

Mr. KAPLAN. My simple answer is that this public-private partnership has been very successful and therefore, in my mind, we 

should invest in that and make that better as opposed to cutting 

it back. 

Mrs. ELLMERS. Thank you so much. Thank you to all of you, and 

thank you to the chairman. I went over my time, so thank you for 

allowing me to do so. 

Mr. PITTS. The Chair thanks the gentlelady. That concludes our 

first round of questions. We will go to one follow-up per side, and 

Dr. Burgess will begin with 5 minutes of follow-up. 

Mr. BURGESS. Dr. Holtz-Eakin, I just want to follow up on some 

stuff we were talking about earlier in the first round. It appears 

in Washington today there is a crisis in confidence. The President 

has sold the Affordable Care Act on just a raft of false promises. 

You can keep your plan—false. You can keep your doctor—false. 

These are broken promises and these in fact are the opportunity 

costs that Americans are paying for the Affordable Care Act. 

There was a promise made to seniors as well. The promise was 

that we are going to use your Medicare dollars as a piggy bank to 

fund the Affordable Care Act, and in doing that, we will improve 

Medicare and allow seniors to keep their doctors if they liked. So 

do you have an opinion as to whether or not this is yet another broken promise? 

Mr. HOLTZ-EAKIN. It is. 

Mr. BURGESS. And is it fixable? 

Mr. HOLTZ-EAKIN. It is fixable in Medicare Advantage. I don’t believe fee-for-service Medicare is fixable, it is the problem, so the 

focus should be on fixing Medicare Advantage in the ways that we 

described earlier, and—— 

Mr. BURGESS. But—— 

Mr. HOLTZ-EAKIN [continuing]. Promises are just that: they are 

promises. They are, you know, if you like your individual policy, 

you can keep it, but the regulations and the funding are at odds 

with the promise. The promise can’t be held true. 

Mr. BURGESS. So fixing it would involve alteration in the funding? 

Mr. HOLTZ-EAKIN. Absolutely. 

Mr. BURGESS. And at present, do you see any way or any mechanism by which that could happen? Is there anything to give you optimism that that funding in fact could be restored? 

139 

Mr. HOLTZ-EAKIN. Under current law, it won’t happen. We need 

to change. 

Mr. BURGESS. Let me ask you this. I wasn’t here in 1988 and 

1989. I don’t know if you were involved. 

Mr. HOLTZ-EAKIN. I am old, yes. 

Mr. BURGESS. But there was a—Dan Rostenkowski, the Democrat chairman of the Ways and Mean Committee, put forward a 

catastrophic care program. He was very proud of it. It passed the 

Congress, a bipartisan vote, as I recall. They went home all very 

satisfied with what they had done. And then something odd happened. People rejected the law that was passed, and they rejected 

it largely because in a similar way, it sort of moving funding 

around in a way that seniors thought would be deleterious to their 

well-being. So then do you remember what happened the spring 

after that? 

Mr. HOLTZ-EAKIN. After they got the bill and after they chased 

him with the umbrellas, they repealed the law. 

Mr. BURGESS. So there is a mechanism by which this problem 

could be fixed also if we follow the 1989 repeal as precedent? 

Mr. HOLTZ-EAKIN. There is no question this is fixable. It requires 

the Congress to act and the President to sign. 

Mr. BURGESS. And it may require the people with umbrellas 

chasing the chairman of the Ways and Means Committee down the 

street. 

Mr. HOLTZ-EAKIN. No comment. 

Mr. BURGESS. No comment. 

You know, I do have to just address the issue or ask, I mean, 

here we have all these experts in front of us. We get reports that 

the cost in Medicare has come down. In fact, we are going to get 

by the end of this week, I think the Congressional Budget Office 

is going to give us a projection on the proposed cut in the Sustainable Growth Rate formula, which is likely to be less than what everyone was anticipating. So that is good news. It may improve the 

score for repealing it. 

A lot of opinions out there as to why this cost reduction is occurring. Of course, the administration in USA Today 2 weeks ago 

wanted to take credit for it and say it is all the Affordable Care 

Act. I don’t know that is has really had time. Certainly the recession is playing a role but I don’t know if that is the entirety of it. 

We are here just literally just 10 years passed the signing of the 

Medicare Modernization Act with the provision of Medicare Advantage and the Medicare prescription drug benefit, and if we really 

do believe that it is better to a stitch in time saves nine and it is 

better to treat early before a disease gets well established, perhaps 

we are seeing some benefit from passing the Medicare Modernization Act. Do any of you have an opinion as to whether or not that 

may be playing a role in these lowered costs? Yes, sir. 

Mr. HOLTZ-EAKIN. I don’t know how much of the current slowdown in health spending growth we can attribute to prescription 

drug therapies but we know the CBO and others have found that 

the Part D program has reduced costs elsewhere in Medicare, and 

that has been an important part of the change in the cost structure 

of Medicare. It has also been an important part of the structure of 

the entitlement. The Part D program which will have its 10th anniVerDate Aug 31 2005 11:11 May 23, 2014 Jkt 037690 PO 00000 Frm 00143 Fmt 6633 Sfmt 6633 F:\1123CA~1\113-10~1 WAYNE
140 

versary on Sunday is probably our most successful entitlement, and 

we should try to model every reform we can as closely to that as 

possible. 

Mr. BURGESS. And that was actually constructed to be more like 

insurance and less like entitlement, if I recall those discussions 

back in the midst of time 10 years ago. 

I thank everyone on the panel. It has been very informative. I 

know it has been a long morning, and Mr. Chairman, I will yield 

back. 

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

the ranking member, Mr. Pallone, 5 minutes for follow-up. 

Mr. PALLONE. Thank you, Mr. Chairman. 

I just wanted to say—I am going to ask my question of Mr. 

Baker but I just wanted to say with regard to Mr. Holtz-Eakin’s 

testimony with regard to ACOs, I just disagree. You know, with 

ACOs and traditional Medicare, seniors have the ultimate choice. 

I mean, they can see any provider they want. They are not locked 

in for a year like they are with an MA plan. That is just my opinion. When I heard you talk about ACOs, I just wanted to express 

my view, which is that they are not locked in. They can choose 

whoever they want with ACOs in a traditional Medicare plan. 

Mr. Baker, I just wanted to ask you about how Medicare Advantage can be improved. I think all of us here today agree that the 

Medicare Advantage program is a crucial alternative to traditional 

Medicare, especially for individuals with complex healthcare needs. 

But in your opinion, based on your organization’s work over the 

years in assisting Medicare beneficiaries, what recommendations 

do you have for how the Medicare Advantage program could be improved for beneficiaries? 

Mr. BAKER. Of course. I mean, I think the promise of managed 

care when it was initially put forward in the 1980s and then mid1990s, a big push was that it would actually save the Federal Government money and provide coordinated care and additional benefits to people with Medicare. I think we have talked a lot about the 

advantages of Medicare Advantage but some of that promise hasn’t 

been met. As we have talked, some of the plans are better than 

others but overall the level of coordinated care does vary widely 

amongst plans. And so we think, you know, better monitoring and 

oversight by the Centers for Medicare and Medicaid Services to 

make sure that those promises are kept, once again, better information about appeals within those programs. We oversample for 

the complainers in my organization. People call us when they have 

problems, and consistently what we see in the Medicare Advantage 

plans are problems with access to care, with utilization management or other barriers put to a variety of care, and we work with 

physicians and the plans to ease those barriers for people with 

Medicare and Medicare Advantage. 

So having that information publicly available about which plans 

and how they are really kind of setting up maybe unnecessary barriers to care would be helpful and enable people to not only compare benefits but also to compare how those benefits are administered by particular plans and making sure that people are choosing 

those plans that actually are fulfilling the promise that a lot of us 

have talked about with regard to coordinated care, and I think, you 

141 

know, once again, this idea of custom tailoring stars, if you will, 

the stars program, while it is good, needs to be better and that people really want to know when you are looking at your two cars in 

Consumer Reports, there is not only stars on the cars overall but 

also on engine performance and on brake performance and other 

kinds of performance measures. So we will get to a place where I 

think we can customize those stars even more, and that will also 

help folks choose between the programs. 

I want to reiterate that I think the original Medicare program or 

the traditional Medicare, which we have had since 1965, is the bedrock. It is something that people continually know is there and go 

back to, and it has, you know, regardless of a lot of what we have 

said, if you look at over the last 30 years, Medicare, the traditional 

Medicare program, and private insurance have done about the 

same job curtailing costs, good or bad. And so I think there is a 

lot of improvement that can be made in the original Medicare but 

there is also a lot of improvement that could be made in Medicare 

Advantage as well. 

Mr. PALLONE. I only have a minute left, but some people including you have suggested we should consider establishing a so-called 

Medicare Part E, which would supplement original Medicare without beneficiaries having to pay for the overhead and profits of private insurance plans, and it intrigues me. Could you just elaborate 

a little on how you would envision that would be structured or how 

it would be an improvement to the current Medicare structure? 

You have a minute. 

Mr. BAKER. In a whole minute? I think the Commonwealth Fund 

and others have put together a more comprehensive proposal on 

what is called Part E Medicare, and basically what it would do is 

combine Part A, Part B, Part D, prescription drug and Medi-gap, 

Medicare supplemental, in a government-run program, and this 

would go toe to toe with Medicare Advantage and with the original 

Medicare program as it exists now. Once again, it is an alternative. 

It is something that would exist alongside, and it would allow more 

choice for consumers and could have a lot of these coordinated benefits and coordinated coverage that we have been talking about 

today. 

So I think that it is something that I think would put together 

in one place government-run program that has all of these components that people with Medicare value and need and could save 

money. 

Mr. PALLONE. Thank you so much. Thank you, Mr. Chairman. 

Mr. PITTS. The Chair thanks the gentleman. The Chair thanks 

all the witnesses for your testimony. This has been an excellent 

hearing, very informational. 

The members may have follow-up questions. We will submit 

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, so they should submit their questions by the 

close of business on Wednesday, December 18. 

Without objection, the subcommittee is adjourned. 

[Whereupon, at 12:26 p.m., the subcommittee was adjourned.] 

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