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40–313 2008

THE MEDICARE ADVANTAGE PROGRAM 

HEARING 

BEFORE THE

SUBCOMMITTEE ON HEALTH 

OF THE

COMMITTEE ON WAYS AND MEANS 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED TENTH CONGRESS 

FIRST SESSION 

MARCH 21, 2007 

Serial No. 110–27 

Printed for the use of the Committee on Ways and Means 

( 


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COMMITTEE ON WAYS AND MEANS 

CHARLES B. RANGEL, New York, Chairman 

FORTNEY PETE STARK, California 

SANDER M. LEVIN, Michigan 

JIM MCDERMOTT, Washington 

JOHN LEWIS, Georgia 

RICHARD E. NEAL, Massachusetts 

MICHAEL R. MCNULTY, New York 

JOHN S. TANNER, Tennessee 

XAVIER BECERRA, California 

LLOYD DOGGETT, Texas 

EARL POMEROY, North Dakota 

STEPHANIE TUBBS JONES, Ohio 

MIKE THOMPSON, California 

JOHN B. LARSON, Connecticut 

RAHM EMANUEL, Illinois 

EARL BLUMENAUER, Oregon 

RON KIND, Wisconsin 

BILL PASCRELL JR., New Jersey 

SHELLEY BERKLEY, Nevada 

JOSEPH CROWLEY, New York 

CHRIS VAN HOLLEN, Maryland 

KENDRICK MEEK, Florida 

ALLYSON Y. SCHWARTZ, Pennsylvania 

ARTUR DAVIS, Alabama 

JIM MCCRERY, Louisiana 

WALLY HERGER, California 

DAVE CAMP, Michigan 

JIM RAMSTAD, Minnesota 

SAM JOHNSON, Texas 

PHIL ENGLISH, Pennsylvania 

JERRY WELLER, Illinois 

KENNY HULSHOF, Missouri 

RON LEWIS, Kentucky 

KEVIN BRADY, Texas 

THOMAS M. REYNOLDS, New York 

PAUL RYAN, Wisconsin 

ERIC CANTOR, Virginia 

JOHN LINDER, Georgia 

DEVIN NUNES, California 

PAT TIBERI, Ohio 

JON PORTER, Nevada 

JANICE MAYS, Chief Counsel and Staff Director 

BRETT LOPER, Minority Staff Director 

SUBCOMMITTEE ON HEALTH 

FORTNEY PETE STARK, California, Chairman 

LLOYD DOGGETT, Texas 

MIKE THOMPSON, California 

RAHM EMANUEL, Illinois 

XAVIER BECERRA, California 

EARL POMEROY, North Dakota 

STEPHANIE TUBBS JONES, Ohio 

RON KIND, Wisconsin 

DAVE CAMP, Michigan 

SAM JOHNSON, Texas 

JIM RAMSTAD, Minnesota 

PHIL ENGLISH, Pennsylvania 

KENNY HULSHOF, Missouri 

Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public hearing records 

of the Committee on Ways and Means are also published in electronic form. The printed 

hearing record remains the official version. Because electronic submissions are used to 

prepare both printed and electronic versions of the hearing record, the process of converting 

between various electronic formats may introduce unintentional errors or omissions. Such occurrences are inherent in the current publication process and should diminish as the process 

is further refined. 


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C O N T E N T S 

Page 

Advisory of March 14, 2007, announcing the hearing .......................................... 2 

WITNESSES 

Leslie V. Norwalk, Acting Administrator, Centers for Medicare and Medicaid 

Services ................................................................................................................. 6 

Mark Miller, Ph.D., Executive Director, Medicare Payment Advisory Commission ........................................................................................................................ 45

Peter R. Orszag, Ph.D., M.Sc., Director, Congressional Budget Office ............... 60 

SUBMISSIONS FOR THE RECORD 

Center on Budget and Policy Priorities, statement .............................................. 96 

National Center for Policy Analysis, statement .................................................... 98 

Pennsylvania Health Law Project, PA, statement ................................................ 99 

SCAN Health Plan, statement ............................................................................... 101 

The Center for Medicare Advocacy, Inc., statement ............................................. 105 

Visiting Nurse Associations of America, Boston, MA, statement ........................ 107 


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(1) 

THE MEDICARE ADVANTAGE PROGRAM 

WEDNESDAY, MARCH 21, 2007 

U.S. HOUSE OF REPRESENTATIVES, 

COMMITTEE ON WAYS AND MEANS, 

SUBCOMMITTEE ON HEALTH, 

Washington, DC. 

The Subcommittee met, pursuant to notice, at 2:51 p.m., in room 

1102, Longworth House Office Building, Hon. Fortney Pete Stark 

(Chairman of the Subcommittee), presiding. 

[The advisory announcing the hearing follows:] 


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ADVISORY 

FROM THE COMMITTEE ON WAYS AND MEANS 

SUBCOMMITTEE ON HEALTH 

FOR IMMEDIATE RELEASE CONTACT: (202) 225–3943 

March 14, 2007 

HL–6 

Health Subcommittee Chairman Stark 

Announces a Hearing on Medicare Advantage 

House Ways and Means Health Subcommittee Chairman Pete Stark (D–CA) announced today that the Subcommittee on Health will hold a hearing on the Medicare Advantage Program. The hearing will take place at 2:00 p.m. on Wednesday, March 21, 2007, in Room 1100, Longworth House Office Building. 

In view of the limited time available to hear witnesses, oral testimony at this 

hearing will be from invited witnesses only. However, any individual or organization 

not scheduled for an oral appearance may submit a written statement for consideration by the Committee and for inclusion in the printed record of the hearing. 

BACKGROUND: 

Of the 43 million Medicare beneficiaries, 8.3 million (19%) are enrolled in what 

are currently known as ‘Medicare Advantage’ (MA) plans. These private health 

plans must provide benefits covered under traditional fee-for-service (FFS) Medicare 

(Parts A&B). Medicare Advantage plans often limit the network of providers that 

are available to beneficiaries, may charge an additional premium and often have different cost-sharing requirements than traditional FFS Medicare. Medicare Advantage plans can provide additional benefits that are not covered by traditional Medicare, such as eyeglasses and yearly physical exams, but often finance these benefits 

through changing the coverage structure of FFS benefits. 

The number of private plans available to Medicare beneficiaries has grown steadily since 2003, as plan payments and options have increased. There are now eight 

different types of MA plans: Health Maintenance Organizations (HMOs); Provider 

Sponsored Organizations (PSOs); Preferred Provider Organizations (PPOs); Regional 

PPOs; Private Fee For Service Plans; Cost Contract Plans; Special Needs Plans 

(SNPs); and Medical Savings Account plans. 

According to the Medicare Payment Advisory Commission (MedPAC), ‘Medicare 

Advantage’ program payments were on average 112 percent of FFS expenditure levels in 2006. To create financial neutrality between private plan and FFS payment 

rates, MedPAC has recommended setting MA benchmarks equal to 100 percent of 

FFS. 

‘‘In the past five years, the Ways and Means Health Subcommittee has 

failed to conduct oversight of the so-called ‘Medicare Advantage’ program,’’ 

said Chairman Stark in announcing the hearing. ‘‘We are long overdue for an 

analysis of this program. I look forward to discussing who is enrolled in 

these plans—and how beneficiaries are recruited to these plans. We should 

also review what benefits they do and don’t provide, and at what cost to 

America’s taxpayers. I’m pleased to offer CMS, MedPAC and CBO the opportunity to testify on the MA payment system at this first of what will be 

numerous hearings on the Medicare Advantage program.’’ 

FOCUS OF THE HEARING: 

The hearing will focus on the structure and costs of the Medicare Advantage program. 


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DETAILS FOR SUBMISSION OF WRITTEN COMMENTS: 

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

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

http://waysandmeans.house.gov, select ‘‘110th Congress’’ from the menu entitled, ‘‘Committee Hearings’’ (http://waysandmeans.house.gov/Hearings.asp?congress=18). 

Select the hearing for which you would like to submit, and click on the link entitled, 

‘‘Click here to provide a submission for the record.’’ Once you have followed the online instructions, completing all informational forms and clicking ‘‘submit’’ on the 

final page, an email will be sent to the address which you supply confirming your 

interest in providing a submission for the record. You MUST REPLY to the email 

and ATTACH your submission as a Word or WordPerfect document, in compliance 

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

April 4, 2007. Finally, please note that due to the change in House mail policy, 

the U.S. Capitol Police will refuse sealed-package deliveries to all House Office 

Buildings. For questions, or if you encounter technical problems, please call (202) 

225–1721. 

FORMATTING REQUIREMENTS: 

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

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

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

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

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

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

1. All submissions and supplementary materials must be provided in Word or WordPerfect 

format and MUST NOT exceed a total of 10 pages, including attachments. Witnesses and submitters are advised that the Committee relies on electronic submissions for printing the official 

hearing record. 

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

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

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

by the Committee. 

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

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

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

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

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

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

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

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

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

f 

Chairman STARK. If our guests would find seats, we can begin 

the hearing. Certainly begin it with an apology for the unexpected 

voting series that makes us almost an hour late. For that I, to the 

witnesses and our guests, I apologize, but it was entirely unavoidable and we will proceed. 

The Medicare Modernization Act of 2003 (MMA) (P.L. 108–173) 

made changes in how private plans are paid in Medicare and the 

types of plans that exist and it dramatically increased the number 

of plans. Now Medicare Advantage (MA) covers about 19 percent 

of the Medicare beneficiaries back to the highs that it enjoyed perhaps 8 years ago, still less than one in five Medicare beneficiaries. 


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We spent about $56 billion on these plans in 2006 and without 

any changes, were informed that the growth in enrollment and 

spending will continue to increase. 

In spite of these changes, we have as a Committee never held a 

hearing on the Medicare Advantage Program and so this is the 

first of what will be a series of hearings on the program. 

When private plans asked to join Medicare in 1982, they told us 

they could provide Medicare benefits better and cheaper than the 

Government. As we fast forward 25 years, we are now losing 

money for every person who enrolls in a private plan. The latest 

analysis by the Medicare Payment Advisory Commission (MedPAC) 

indicates that Medicare is on average overpaying Advantage plans 

by 12 percent, we are paying 112 percent of what we otherwise 

would pay. 

Now that number varies geographically and by plan. In some 

areas, plans are getting north of 140 percent. Of plan types, private 

fee-for-service plans are the highest in the outlier portion of that, 

receiving an average of 119 percent of Medicare fee-for-service 

plans—payments. We will hear more from all of our witnesses on 

these details. 

The Academy of Health Information Professionals, Blue Cross, 

Blue Shield and others have been claiming that payment reductions will reduce health care access for lower and moderate income 

seniors and decrying a goal they ascribe as wanting to get rid of 

the Medicare Advantage program. I would like to be clear on that. 

I know of no one on this Committee who has any intention of 

eliminating Medicare Advantage Program plans. However, neither 

should we allow any Medicare provider or sector to insulate itself 

from both oversight and consideration of payment changes. To do 

so would be completely irresponsible for this Committee and for 

any Member of Congress. 

We have a major task in front of us, between the physician payment issue, the need to reauthorize and improve the State Children’s Health Insurance Program (SCHIP), the need to manage 

and oversee Medicare. To do all of that, I believe that everything 

must be on the table, doctor’s payments, hospital payments, post 

acute payments, drug plan payments. Indeed, Medicare Advantage 

payments as well. 

Medicare Advantage overpayments raise the part B premiums 

for everyone and decrease the part A trust fund faster than would 

occur if payments were equalized. In an effort to improve and protect Medicare, we can’t focus on one part of the program at the expense of others. They must all work together to ensure that Medicare meets its design and that is providing health care for America’s senior citizens and people with disabilities, with quality care 

for the beneficiaries, reasonable reimbursement for the providers. 

We have experts before us representing the Centers for Medicare 

and Medicaid Services (CMS), which runs the Medicare Advantage 

Program; MedPAC which provides Members of Congress with expert, nonpartisan, empirical advice on Medicare payment policies; 

and the Congressional Budget Office (CBO), which calculates the 

costs or savings of proposals that we choose to enact. 

I look forward to today’s discussion and to collaborating with my 

colleagues to plan additional hearings to investigate all facets of 


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the Medicare Program. We need to refine the payment structures 

to ensure an equitable and efficient program that serves all the 

beneficiaries and taxpayers well. 

I again apologize to all of the witnesses and to Mr. Norwalk, who 

thought she was getting off easy by being first, going to get out of 

here by now. 

I would make, before you start with your testimony, Ms. Norwalk, I would make one admonition. It is basically for our staffs. 

Witnesses have generally been asked, where possible, to get us 

testimony and/or exhibits at least a day ahead. I can read quickly 

and I can read on my way to work. You sent yours last night, but 

for the staff, they have to stay until eight or nine o’clock at night 

to go through it. So I say this, generally to all witnesses who will 

appear before us. If you want to be friends with the staff, get the 

testimony in ahead of time. It will make their job a lot easier and 

I know your staff appreciates that as well. 

So, we look forward to your testimony. Please enlighten us in any 

manner you would like. 

I am sorry, Mr. Camp. Mr. Camp. 

Mr. CAMP. Thank you, Mr. Chairman. Thank you for holding 

this important hearing. I too wanted to thank everyone for waiting 

while we had that lengthy series of votes on the Floor. 

I think by now we are all well aware of MedPAC’s recommendations to reduce payments to Medicare Advantage plans to that of 

traditional Medicare. In doing so, according to CBO, we would save 

$65 billion over 5 years. As a result, some advocates and Members 

of Congress have indicated that this $65 billion could be an easy 

and noncontroversial way to fund a variety of health care spending 

efforts. I think we have to consider carefully who will be affected 

by these proposed payment cuts. 

History has shown that reducing payments to these types of 

plans will reduce access for seniors living in rural areas like mine. 

Beneficiaries will lose the additional benefits and care coordination 

that Medicare Advantage offers. We also know that low-income 

seniors may be negatively affected. 

Administrator Norwalk has noted that Medicare Advantage 

plans have a disproportionately greater number of lower income 

beneficiaries enrolled in their plans, which provide assistance in 

paying Medicare deductibles, copays and catastrophic costs that 

Medicare doesn’t cover. We also know that arbitrary reductions will 

fall hardest on minority seniors. Twenty-7 percent of Medicare Advantage enrollees are minorities, compared to just 20 percent in 

fee-for-service Medicare. 

That is why, just last week, national organizations representing 

minority groups like the National Association for the Advancement 

of Colored People (NAACP) and League of United Latin American 

Citizens (LULAC) voiced their opposition to cutting Medicare Advantage Programs. 

Cuts to Medicare Advantage may also affect chronically ill Medicare beneficiaries. CMS data shows that Medicare Advantage enrollees are more likely to utilize preventative care and less likely 

to delay care because of costs than those enrolled in traditional 

Medicare. These proactive steps are the keys to better managing 


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the health care needs and improving the overall health of chronically ill Medicare beneficiaries. 

I agree with those who have raised concerns about the various 

types of plans and whether they provide the same level of benefits 

and coordination to justify higher payments. We must closely examine this issue and I welcome the Chairman for this hearing to 

do that, but also we must do so carefully, lest we risk dramatically 

reducing access to quality care. 

I hope to work with the Chairman on any proposed changes to 

the Medicare Advantage program to ensure that beneficiaries continue to receive access to many of the benefits that many plans currently offer, while also ensuring taxpayer funds are being wisely 

used. I thank the Chairman again and yield back my time. 

Chairman STARK. Ms. Norwalk, please proceed. 

STATEMENT OF LESLIE V. NORWALK, ACTING ADMINISTRATOR, CENTERS FOR MEDICARE AND MEDICAID SERVICES 

Ms. NORWALK. Thank you. Chairman Stark, Representative 

Camp and distinguished Members of the Subcommittee, thank you 

for inviting me today to discuss the Medicare Advantage Program. 

As you know, this program is a valued, important option for millions of people with Medicare. 

Working closely with Congress, and this Subcommittee in particular, we have refined Medicare Advantage (MA) over the years 

to promote strong plan participation across the country. With a vibrant marketplace of plans for 2007, beneficiary enrollment is now 

at an all-time high. I am proud of these successes and stand committed to working with you in the days ahead to preserve choice 

for people with Medicare. 

I am pleased to report that this year, beneficiaries selecting a 

Medicare Advantage plan are receiving, on average, an estimated 

$86 per month in benefits, over and above what original Medicare 

provides. Such additional benefits vary by plan but can include 

lower cost-sharing, enhanced Part D prescription drug coverage, 

part B and D premium reductions, and access to items and services 

like hearing aids, routine physicals, or vision exams that original 

Medicare does not cover. 

All Medicare Advantage plans offer care coordination and disease 

management services currently not available through original 

Medicare. These added benefits yield important results. For example, MA beneficiaries are more likely than those in original Medicare to receive necessary preventative services, including pneumococcal vaccines and influenza vaccines, mammography, colorectal 

cancer screening and prostate screening. 

Seventy-three percent of Medicare Advantage enrollees receive 

immunizations to protect them against pneumonia, compared to 64 

percent of beneficiaries in the traditional Medicare program. These 

findings are corroborated by MedPAC and others. 

MedPAC’s March 2007 report to Congress stated that private 

plans have the flexibility to use care management techniques that 

fee-for-service Medicare does not encourage, and they have greater 

incentive to innovate. 


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Thanks to the hard work of this Subcommittee, CMS and many 

others, legislation has significantly impacted plan participation and 

beneficiary interest in Medicare Advantage over the years. 

Chart 1, up on the screen, demonstrates payment reforms enacted by the MMA have helped propel beneficiary enrollment in 

Medicare health plans to nearly 8.3 million people, up from a low 

of 5.3 million in 2003. 

In other words, nearly 20 percent of beneficiaries are now enrolled in a private plan, which includes Medicare Advantage and 

other plan options such as pace or cost plans. Clearly, we have 

learned from two sentinel pieces of legislation that preceded the 

MMA, the Balanced Budget Act 1997 (BBA) (P.L. 105–33) and the 

Benefits Improvement and Protection Act of 2000 (BIPA) (P.L. 106– 

554). 

The BBA increased rural payment rates, but also significantly restrained payment in areas that historically had relatively high private plan participation. Following the BBA, BIPA attempted to 

stop the decline in the program by increasing the national floor and 

creating a second, higher urban floor. Unfortunately, plan offerings 

remained compromised and enrollment continued to decline. 

Not until the MMA’s immediate payment improvements took effect in 2004, did plan participation and enrollment rates begin to 

improve. In addition, the MMA’s payment refinements have helped 

smooth over some of the geographic payment differences we see in 

original Medicare. I appreciate how important resolving such differentials is to many on this Subcommittee. 

Concurrently, both enrollment and plan participation are better 

distributed geographically than ever before. Prior to the MMA’s 

program refinements, beneficiaries in many States, and rural areas 

in particular, lacked access to a Medicare Advantage plan. 

As Chart 2 shows in red and yellow, a vast majority of the country either had no plans or just a single Medicare Advantage plan 

option in 2003. Los Angeles County and South Florida were, in 

fact, the only areas in the country with 10 or more plans. 

In contrast, today 10 or more plans are available almost nationwide as indicated by the blue area in Chart 3. A significant portion 

of the country has more than 25 plan offerings, and rural areas in 

the upper Midwest, New England, and even Alaska, have multiple 

plan offerings. 

Improved choice and plan availability lead, in turn, to strong enrollment. Chart 4 highlights the current distribution of Medicare 

Advantage enrollees across the country. As you can see, people 

with Medicare from California to the Carolinas, from Minnesota to 

Miami, in Michigan, North Dakota, Texas and Illinois all are relying on Medicare Advantage plans and the valuable benefits that 

they provide. 

For example, one plan available for no premium in California 

provides the following: a zero deductible drug benefit, including generic drug coverage in the gap; coverage for lengthy hospital stays 

with no copayment including days beyond what original Medicare 

allows; $1,000 aggregate deductible in contrast to the original 

Medicare $992 hospital deductible per illness and the $131 part B 

deductible; a $10 copayment for network physician visits rather 

than 20 percent coinsurance; and a $3,000 catastrophic limit on 


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out-of-pocket expenses for Part A and B benefits. Then finally, vision services and physical exams that are not covered by original 

Medicare. 

These benefits are not unique. Beneficiaries in North Dakota 

who, prior to the Medicare Modernization Act, had virtually no private Medicare plan option, now have access to very similar plans, 

including: a zero premium plan that features zero dollar deductible 

for prescription drugs; coverage for an unlimited number of hospital days each benefit period; a $15 copayment for primary care 

physician visits; dental, hearing, and vision benefits; and, coverage 

for preventive services. 

To further demonstrate the significance of this program, Medicare Advantage plans are also a valuable choice for low-income and 

minority beneficiaries. A higher proportion of low-income beneficiaries and minorities have chosen Medicare Advantage plans 

over traditional fee-for-service. 

We have prepared for each of you an initial packet of background 

information showing the status of Medicare Advantage in your 

State. 

In closing, I believe Medicare Advantage is a critical component 

of Medicare’s future. Beneficiaries are turning to Medicare Advantage plans at unprecedented rates for better benefits, better care 

management, and better protection against catastrophic expenses. 

I look forward to continuing this discussion with each of you to 

preserve these choices for current and future beneficiaries. 

Thank you, and I am happy to take any questions. 

[The prepared statement of Ms. Norwalk follows:] 


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Chairman STARK. Let us do some numbers. You have a real advantage over me, because I have my shoes and socks on, but you 

have several times in your testimony, and I can’t find the exact 

wording, but you have implied that there is a higher percentage of 

both minority and low-income beneficiaries in Medicare Advantage 

plans, disproportionately so. The numbers that I am looking at, 

and tell me where I am wrong, suggest that among all Medicare 

beneficiaries, approximately, for example, 11 percent are African 

American. Does that jive with your—— 

Ms. NORWALK. Sir, the number I have is almost 4.3 million out 

of 43, so just under—— 

Chairman STARK. So, somewhere around 10 percent. 

Ms. NORWALK. Right. 

Chairman STARK. Then what I am showing is that among all 

Medicare beneficiaries, less than 20,000 a year in income, we have 

about 47 percent, 20 percent less than 10, 27 percent in the 10 to 

20 range. 

Ms. NORWALK. I think that is—yes. 

Chairman STARK. Then I am showing that in the Medicare Advantage programs, which is only 20 percent or a little less than 20 

percent of the entire Medicare population, 10 percent are African 

Americans. 

Ms. NORWALK. I actually have a slightly higher number. So, I 

have 851,000 versus just under 8.3. So, actually, it is over 10 percent. 

Chairman STARK. Okay, but not very much different from the 

11 percent. So, what I would—— 

Ms. NORWALK. Slightly under fee-for-service and over—— 

Chairman STARK. What I would suggest to you is the makeup 

ethnically of Medicare Advantage plans is no different than the 

makeup of the entire Medicare Program. Would you stipulate to 

that? 

Ms. NORWALK. The proportion is slightly more in Medicare Advantage for African Americans, also for Hispanics. 

Chairman STARK, but slightly. Like 1 percent of 20 percent, 

which by my numbers is a half a percent of the entire population. 

The same thing would hold true for lower income. 

Now less than $10,000, I am reading that people under $10,000 

in income make up 16 percent of Medicare Advantage but they 

make up 20 percent of all Medicare beneficiaries. So, there are 

slightly fewer poor people. 

Ms. NORWALK. I actually think that is because of Medicaid, the 

Medicaid provisions that—— 

Chairman STARK. I would just go on to tell you that Medicaid 

in Qualified Medicare Beneficiary (QMB) and Specified-Low Income 

Medicare Beneficiary (SLMB) is a whole heck of a lot better than 

any Medicare Advantage plan. 

Ms. NORWALK. They are very important programs. 

Chairman STARK. Much more. You haven’t mentioned them, 

which I think is somewhat—I won’t call it disingenuous; somebody 

got their words taken down for that, but to ignore the fact that a 

majority of the lower income people, particularly those in the less 

than $10,000 group are dual eligibles or QMBs and SLMBs, which 

have the best possible economic—the dual eligibles pay nothing. 


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Ms. NORWALK. As they should. 

Chairman STARK. It doesn’t get much better than that. 

Ms. NORWALK. Right. 

Chairman STARK. Okay. Well, I just wanted to suggest this idea 

that there is a huge number of people—now, that is not to suggest 

that in the urban areas where there is a larger concentration by 

number of low income and, unfortunately, minority population, 

there are a large number of Medicare Advantage members and for 

many of them, their premiums are lower, but what you don’t mention is that in many of these plans, that is great if they don’t get 

sick. 

You have said, for instance, Medicare Advantage beneficiaries 

face lower hospital copayments, but I could tell you there are a lot 

of plans out there that charge more than $200 a day for the first 

10 days in the hospital. Now that, by my math, is a whole heck 

of a lot higher than the $992 the fee-for-service deductible covers. 

So, what I would further, and I wonder if you would agree, there 

is a wide difference in the efficiency and generosity of these plans. 

That they are not monolithic. Is that a fair assessment? 

Ms. NORWALK. It is a fair assessment that the benefit packages 

from plans vary greatly across either areas across the country and 

so forth. So, I can tell you generally, in terms of the extra benefits, 

that 90 percent of all plans do provide additional hospital day 

stays. All regional Preferred Provider Organization (PPO) plans are 

required by statute to provide catastrophic coverage across-theboard. 

So, other than that, I think generally they do need to provide A, 

B benefits. I know that, in the past, you have been concerned about 

discrimination and whether or not plans have set up their benefit 

packages that may be in a way that is discriminatory. 

Chairman STARK. Sure. Offering health club memberships as an 

extra benefit is not apt to appeal to a sedentary person like myself. 

If I got a discount at Thank God It’s Friday’s on the first pint, that 

might be different. 

Okay, well, I have used up more than my time and I would like 

to hear what Mr. Camp has to say. 

Mr. CAMP. Thank you very much. 

Going back to this issue of who gets served by Medicare Advantage plans, I notice in the letter that the NAACP released, they 

said 40 percent of African Americans without Medicaid or employer 

coverage rely on comprehensive benefits and lower cost-sharing in 

Medicare Advantage that they don’t find in traditional Medicare. Is 

that an accurate statement? 

Ms. NORWALK. I don’t know if I have the numbers with me— 

that focus specifically—I don’t know if I have them here, that have 

the employer plan piece taken out, but we can certainly get them 

to you. I think that is an important point. 

With all the questions that we ask today, there are often differences in everything from payments—or everything from the bids 

that plans submit and the employer community often does things 

differently than what people may have access to in the individual 

Medicare Advantage market. So, I think they are important questions to ask. 


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I don’t think we have it here today, but I will see if I can get 

it for you for the record. 

[The information follows:] 

I don’t find that figure at all surprising since Medicare Advantage offers great 

value, especially to individuals of limited means who don’t have supplemental Medicare coverage through Medicaid or a former employer. We have not done an analysis 

looking specifically at the proportion of minorities who don’t have other supplemental coverage who have joined MA plans. My written statement indicates that 

we have looked at MA enrollment of individuals from minority groups. That analysis 

showed that MA enrollees are more likely to be from minority groups than beneficiaries in FFS Medicare. Specifically, of beneficiaries in MA plans, 27 percent are 

minorities, whereas in FFS Medicare, 20 percent are minorities. 

Mr. CAMP. All right, I appreciate that. 

I guess to try to highlight some people that have argued that 

there really aren’t additional benefits in Medicare Advantage compared to those in traditional Medicare, is that criticism—there has 

been criticism of the Medicare Advantage plan to that effect. Is 

that criticism accurate and, if not, could you please describe some 

of the additional benefits that plans offer? 

Ms. NORWALK. I think that most plans offer, as they are required to by statute, some very significant additional benefits. The 

statute requires if there is a difference between their bid and the 

payment benchmark, that they return 75 percent of that difference 

to the beneficiary in the form of additional benefits. The other 25 

percent reverts back to the Treasury. 

So, what I did is, I took a look at a number of different types 

of benefits. So, as I noted earlier, 90 percent of all plans offer additional day stays in the hospital. Most plans waive the 3-day hospital stay requirement before they are admitted to a skilled nursing facility. I have a whole list here in terms of percentages. 

Seventy-seven percent provide routine hearing tests, 98 percent 

have routine physical exams and so on and so forth. 

So, there is a significant range of benefits that are provided to 

beneficiaries. Some of the most popular relate to cost-sharing, such 

as zero premiums, rebate of the part B premium, zero premium 

drug benefits, coverage in the gap, particularly for generic drugs, 

and the like. So, there are, without question, some very important 

additional benefits provided to Medicare beneficiaries. 

Mr. CAMP. Yes. I think it is important to know that that goes 

beyond just sort of optical and physicals. 

Ms. NORWALK. I actually have an example in Midland, Michigan. There is, for a $25.50 premium, a plan that has drug coverage 

with no deductible, a $3 copay for preferred drugs, no inpatient 

hospital costs at all and no copay when something is provided innetwork. For doctor visits, there is a $7 copayment for primary 

care and a $20 copayment for specialists. Not only that, they have 

got dental services, hearing services, physical exams and health 

and wellness education. So, in your county in Michigan, I think 

that beneficiaries have some pretty good options available to them. 

Mr. CAMP. Thank you very much. 

In the Balanced Budget Act, Congress reduced and cut the Medicare Advantage payment. What happened after that? 

Ms. NORWALK. I think what—if I recall my history from 10 

years ago—do you want to put up that one chart, the first chart? 

Thanks. 


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The Balanced Budget Act was really—one of the things it wanted 

to do—the first one—was to pay more to rural areas. This Committee, this Subcommittee, has discussed with me earlier in budget 

testimony the concern about the payment differentials between fee 

up front and fee-for-service. A lot of what the Balanced Budget Act 

wanted to do was recalibrate some of that to provide more choice 

in rural areas, something that you didn’t see very much of before 

1997 and, frankly, even thereafter. 

Those payment changes, one of the things that happened was it 

reduced payments in other areas. Consequently, as you can see 

from this chart, you can see that the enrollment, which is the lefthand column, peaked after the Balance Budget Act amendments 

took effect and then enrollment declined precipitously thereafter 

and started to rise after some of the BIPA changes and then the 

Medicare Modernization Act changes. So, there is no question that 

the legislation that has happened around Medicare Advantage 

makes a very big difference in enrollment and, not only that, additional benefits that are provided. 

Mr. CAMP. All right. Thank you. 

Thank you, Mr. Chairman. I see my time has expired. 

Chairman STARK. Mr. Thompson, would you like to inquire? 

Mr. THOMPSON. Thank you, Mr. Chairman. Thanks for holding 

this hearing. Ms. Norwalk, thank you for being here to testify. 

In your written statement, you note that Congress created the 

Medicare+Choice program to correct perceived flaws, including significant payment differences across geographic areas. I don’t see 

this helping. As a matter of fact, I can point to and hear a lot about 

disparity in payments between northern and southern California. 

I know on this Subcommittee, we have had discussions, the same 

issue raised by other Members. 

Why is this still such a huge issue, huge and outstanding issue, 

with the Medicare Advantage program? 

Ms. NORWALK. Well, I think what these payment changes were 

intended to do, particularly the MMA payment changes, were to increase floor payments. So, for example, in a rural area, where typically if you compare the payments, for example, Dade County is 

one of the most prosperous—or most expensive counties from a feefor-service perspective. If you compare, say, Dade County with any 

of the number of rural floors, so the rural floor this year is $692. 

That is an increase from what you would be paid in a rural county 

typically. 

Consequently, so if you are looking—if you are in many areas 

around the country, the fee-for-service differentials between fee-forservice and Medicare Advantage generally would have been even 

higher if there hadn’t been a rural floor adjustment. So, the rural 

floor is intended to—— 

Mr. THOMPSON. Let me just submit for your consideration that 

if you are in a northern California county and you are paying more 

than someone in—considerably more than someone in a southern 

California county, it is little comfort to know that you could be paying even more. There is a very glaring disparity that is hurting real 

people trying to get health care. I think we need to take a little 

different approach to this. 


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Ms. NORWALK. I actually think the floors, when the MMA was 

passed, the floors were really intended to address the fee-for-service disparities. That is why you have rural floors and urban floors 

at a set level without regard to what the fee-for-service reimbursements are there. 

So, that is not to say that there isn’t plenty of work to do generally around fee-for-service differentials, as we have discussed before. I think that there is, but in the meantime, a lot of what the 

discussion is, is going back to basically a flat fee-for-service rate for 

Medicare Advantage. My point is, that merely can perpetuate the 

differences that you would see in Dade County, Florida, for example, versus planned payments in North Dakota or—— 

Mr. THOMPSON. My point is that there are people who are 

being affected because of this disparity and it is a problem. 

You had mentioned earlier, made some comments about the 

extra benefits on the MMAs and I would just like to know that if 

CMS has data on the utilization of the extra benefits in the plans? 

It is one thing to have extra benefits. It is another thing if they 

are not being used. 

Ms. NORWALK. I will have to ask whether or not we—I will 

have to check whether or not we—what information, specifically, 

we collect on that piece. If we have it, I am more than happy to 

give it to you and otherwise figure out if we have some proxy if we 

don’t have the specifics. 

[The information follows:] 

In 2007, enrollees in MA plans are receiving, on average, additional benefits with 

a value of $86 per month. Plans provide an average of about $108 in additional benefits, primarily cost sharing and premium buydowns, as well as specific benefits 

such as routine vision and dental care. Plans charge, on average, a monthly premium of about $22 for these benefits, yielding a net average value for enrollees of 

$86 per month. 

The Centers for Medicare & Medicaid Services (CMS) monitors the care delivered 

by managed care organizations (MCOs) through the collection and analysis of standardized clinical performance measures and beneficiary satisfaction surveys. For this 

purpose CMS has been collecting MA data via Health Employer Data and Information Set (HEDIS), Consumer Assessment of Healthcare Providers and Systems (CAHPS), and Medicare Health Outcomes Survey (HOS) for nearly 10 years. 

Additionally, CMS has created the Complaints Tracking module, a tool that collects 

and tracks beneficiary complaints. CMS also collects data from MCOs in conjunction 

with the annual bidding process. 

Mr. THOMPSON. It seems to me it is something we have got to 

get because it doesn’t really matter if benefits are available if nobody is using the benefits. 

Ms. NORWALK. No, I appreciate that. We should have that for 

purposes of considering risk-adjustment and the relative health of 

beneficiaries. I am just not sure if it is exactly as you would describe it, but I will see what we can provide to get you that. 

Mr. THOMPSON. Then I was just informed that the American 

Association of Retired Persons (AARP) has come out against the 

overpayments for the Advantage plans. Do you have any comment 

on that? 

Ms. NORWALK. Well, I don’t characterize it as an overpayment. 

I characterize it as additional benefits for Medicare beneficiaries 

as—— 

Mr. THOMPSON. So, is AARP still against it, irrespective of 

what you call it? 


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Ms. NORWALK. I haven’t seen what AARP said, so I am going 

to presume that you know better than I do. 

Mr. THOMPSON. I didn’t mean to interrupt you. Go ahead. Your 

comments on that? Irrespective of what you consider it, what are 

your comments on their opposition to the overpayments? 

Ms. NORWALK. I think it is unfortunate. They have many beneficiaries—of the 8.3 million, a significant portion, of course, are 

going to be those who are members, I would imagine, of AARP and 

I think that they do receive important benefits from that. 

Moreover, the importance of the changes that the MMA did is beyond just the additional benefits. It is really to ensure that people 

in rural areas of the country have access to these sorts of plans. 

Reverting back to where we were at, the MMA may lead us to lose 

a significant amount of ability for many beneficiaries to sign up for 

Medicare Advantage plans. So, I think it really serves a dual purpose. 

So, I would have to disagree with the outcome of the AARP analysis, whatever it happens to be. 

Mr. THOMPSON. Thank you. 

Chairman STARK. Mr. Hulshof, would you like to inquire? 

Mr. HULSHOF. Thanks. Welcome back, Ms. Norwalk. 

Looking about the room, I think probably most folks here are intimately acquainted with many of the acronyms we have used. I 

think we chased off a student group who were here momentarily. 

Which is interesting, when you consider that as we move to 78 million senior citizens that will depend on Medicare when the Baby 

Boomer generation has retired, it is going to be the young folks 

who will be in the work force who will be supporting this right now 

unsustainable program down the road. So, as I do each time you 

come before us, just for the record and those that may review the 

record later, BBA of course is the Balanced Budget Act. It was 

signed into law in 1997, I believe. 

Then BIPA is the Benefits Improvement and Protection Act and 

that was the year 2000. Again, I would note parenthetically that 

each of those two bills was with a divided Government, a legislative branch of one party, executive branch of another. There was 

some give and take in the fact that these changes were made. Certainly as we move forward, I hope again that spirit of cooperation 

is there with this continued divided Government. 

I also acknowledge we have an exceptional panel coming up. One 

of the things, Ms. Norwalk, that we are allowed to do is to anticipate and read their testimony coming up. So let me mention a couple things and get a reaction from you. 

Dr. Miller, in his written testimony, will tell us that the Medicare Program needs to put some financial pressure on both fee-forservice and the Medicare Advantage programs, in addition to bringing quality initiatives in. I think the idea is to compare apples to 

apples. 

One of the things that Dr. Miller points out in his testimony is 

that Medicare Advantage, while they use bidding, and he puts that 

in quotation marks, as the means of determining plan payments 

and beneficiary premiums, the bids are against benchmarks which 

are often legislatively set. Again, I acknowledge that. As he will tell 

us later, I am sure, the commission believes that financial neuVerDate Nov 24 2008 00:50 Mar 21, 2009 Jkt 040313 PO 00000 Frm 00031 Fmt 6633 Sfmt 6602 E:\HR\OC\40313.XXX 40313

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trality is important as we consider possible changes between feefor-service and Medicare Advantage or other private plans that we 

may contemplate. 

I take that point but let me also make sure that my facts and 

figures are correct. Is it not true that CMS employs roughly 4,000 

individuals and contracts with about another 22,000 to run Medicare and Medicaid? Are those numbers roughly? 

Ms. NORWALK. 4,500 employees and I thought we had 80,000 

contractors but maybe it is less than that. 

Mr. HULSHOF. I think the information I have is at least in fiscal year 2006, CMS, Centers for Medicare and Medicaid Services, 

spent roughly 3.2 billion in operation costs. How am I on that number? 

Ms. NORWALK. That sounds right. 

Mr. HULSHOF. Okay. Medicare Advantage overhead costs are 

actually built into their plan bids, is that true? 

Ms. NORWALK. That is correct. 

Mr. HULSHOF. You mentioned a couple things of actual legislative mandates or requirements for anyone who wishes to offer a 

Medicare Advantage plan. For instance, I think you mentioned 

PPOs are required to provide catastrophic coverage. Is that also 

true? 

Ms. NORWALK. That is correct. 

Mr. HULSHOF. Are other Medicare Advantage plans required to 

provide disease management programs to enrollees? 

Ms. NORWALK. No, they are only required to provide Medicare 

part A and Medicare part B benefits. 

Mr. HULSHOF. Are there any other requirements that the Medicare Advantage plans have to factor in, however? The point of this, 

Dr. Miller, as you come up later, is we try to talk about this neutrality. There you are. Good to see you. 

What other mandates or legislative requirements are there that 

Medicare Advantage plans have to factor in, in addition to the 

overhead costs we have talked about and the catastrophic coverage? 

Ms. NORWALK. There are a number of different things. The 

first, you alluded to it earlier in terms of the quality requirements 

and quality reporting that they do and provide indications of quality metrics to their enrollees. 

In addition, of course, you are automatically in fee-for-service as 

a default, but from a Medicare Advantage plan, you need to market 

in order to get enrollment to tell people your existence and so forth. 

So, there are a fair number of costs that may be associated with 

that. You also need to do appeals and grievances and a lot of other 

things that can add additional costs if you are in a Medicare Program that would have to be included in the bid. So, call centers 

and all sorts of things to make sure that beneficiaries can have access to information, whatever it is that they need. 

Mr. HULSHOF. I guess as a final comment I would make, and 

Mr. Camp, I think, has brought out the fact that especially in rural 

areas and preventive care, and again I know I am flogging the 

same dead horse—it is not a dead horse necessarily—but the frustration that we consistently have that we aren’t able to factor in 

the inherent costs that we will save through preventive care. We 


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again touched on this many times as far as Medicare Part D picking up the costs of certain drugs. Of course, we know it is going 

to eventually save lives and have procedures that don’t have to be 

done. I think if we are truly trying to find that comparing apples 

to apples, that preventive care that is offered through Medicare Advantage, unfortunately we don’t get to count the cost savings as we 

are trying to make these comparisons. 

Ms. NORWALK. Correct. 

Mr. HULSHOF, but that is my editorial comment. I appreciate 

it, Mr. Chairman. I yield back. 

Chairman STARK. Mr. Kind, would you like to inquire? 

Mr. KIND. Thank you, Mr. Chairman. Thank you, Director Norwalk, for your testimony here today and your patience with us. 

I also appreciate the efforts you have made, and your staff, as 

far as getting together with me in the not-too-distant future to talk 

about an interest very important to the State of Wisconsin, and 

that is the survival of Senior Care, which is due to expire, the Federal waiver, at the end of June. It is an incredibly popular program 

with 103,000 seniors enrolled in it in the State. It has received bipartisan support from the creation to the existence to the extension, hopefully, with the Administration’s cooperation later this 

year. 

Just from budgetary terms, it seems like a no brainer, because 

if we extend Senior Care for another three years, as the Governor 

is proposing in his waiver application, it would save the Federal 

Government $403 million that 3 years because, per beneficiary, it 

is much cheaper to provide services under Senior Care than Part 

D. The combined State and Federal savings is close to $700 million. 

So, I am looking forward to having that meeting so we can discuss in more detail what the Administration’s vision is with Senior 

Care, what we can do working together. Hopefully we can set that 

up soon. 

As a new Member of the Committee, I haven’t had a chance to 

really wade into the weeds yet in regards to Medicare Advantage 

program, certainly not to the extent that you have, but a few 

things do jump out at me initially. 

If you take a look at the Congressional Budget Office score with 

Medicare Advantage plans, for every new enrollee that we do have 

going into Medicare Advantage, the budget baseline goes up. Do 

you accept that proposition? Is that a fact of budgetary life that we 

are facing right now? 

Ms. NORWALK. Yes. With the way the program is currently 

structured, most Medicare Advantage payments would be higher 

than fee-for-service. I might add that our actuaries may have different assumptions than the CBO and I don’t think—— 

Mr. KIND. I think we will have Mr. Orszag here a little bit later 

testify about the budgetary implications. Some call it the overpayment, you refer to it as more services, which can be a good thing, 

but I think at some point, we in Congress need to wrestle with just 

the fundamental philosophical fact and that is, what the goal ultimately is. Is it extending more coverage, providing more options 

with more services but at a higher price to seniors compared to traditional fee-for-service? Or is it, try to find savings so we can extend some coverage to all people in this country, including children, 


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the SCHIP program? We are trying to find tens of billions of dollars right now in the budget resolution and how we can maintain 

the integrity of SCHIP over the next 5 years, but also dealing with 

the 46 million uninsured. That is just a fact that we are going to 

have to come to grips with in regards to where Medicare Advantage 

is going, but including these private fee-for-service plans. 

My question for you is, how confident are you that you are getting—CMS is getting enough data in regards to the administration 

of these Medicare Advantage plans, the efficiencies of these plans, 

the administrative costs, the profit margin in order for us as policymakers to make some of these policy determinations? 

Ms. NORWALK. We do have a fair amount of information in 

terms of all the things that you listed. I think you each will have 

a handout that looks at the ratio of the Medicare Advantage plan 

bids to fee-for-service, it looks something like this. I thought this 

was important because it looks at the different types of plans, the 

local coordinated care plans, the regional PPOs, the private fee-forservice, and then segments out the individual plans versus the employer plans. 

One of the things that you see here is that local Health Management Organizations (HMOs) and PPOs submit their bids to us— 

and the bid to CMS is basically what are we bidding to pay for regular Medicare part A and part B benefits. One of the things you 

will notice is that the local coordinated care plans actually come in 

under Medicare fee-for-service. 

Now, it is the legislatively set benchmarks, as Dr. Miller will testify to later, I am sure, that change the payment rates. The regional preferred provider organizations are new. They have basically just started, so they do have some additional startup costs. 

They also have to provide the catastrophic coverage. You will see 

that their average rate for individual plans is just under 113 percent of fee-for-service. 

Private fee-for-service and regional PPOs also need to network 

across an entire—— 

Mr. KIND. Let me ask you on that in particular, because based 

on what little information I know about private fee-for-service, and 

I understand they are still in their infancy, this seems to be on the 

cusp of really exploding. Especially if companies figure out the advantages with their retirees out there under this. 

Do we have the capability of gathering enough data to make 

some judgments about these private fee-for-service plans? 

Ms. NORWALK. I think we do. I was referring to the regional 

PPOs, which are yet a separate plan option than private fee-forservice, and they have different goals in terms of the reasons why 

those plans were set up. Now, private fee-for-service, their average 

bid is just under 115 percent of regular fee-for-service, in terms of 

what they would provide the A, B benefit for. 

We do have a lot of information on each of these plans, differentiated between individual and employer. I think, looking at that 

very carefully, combined with where these plans are being offered 

and the access that is available to Medicare beneficiaries is important to consider, as we look at all the important—— 


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Mr. KIND. Can we get our hands on information with regards 

to administrative costs in administering these plans, profit margins 

that these plans are realizing? 

Ms. NORWALK. I don’t know in terms of what—typically, in 

terms of what we collect, specifically as to that, I will have to go 

back and ask. I think that what they have asked for recently has 

changed, or the past number of years has changed as the bidding 

process changed, but I will go back and find out what is available. 

[The information follows:] 

CMS has historically published aggregate payments by plan type, and CMS continues to publish the county rates used to develop plan-specific benchmarks. However, CMS does not publicly release monthly prospective payment amounts, administrative costs, or the profit margins by plan due to concerns about propriety information being distributed. 

Mr. KIND. That would be helpful. Thank you. 

Thank you, Mr. Chairman. 

Chairman STARK. Mr. Becerra, would you like to inquire? 

Mr. BECERRA. Thank you, Mr. Chairman. Ms. Norwalk, good to 

see you again. Thank you for being with us. I would like to follow 

up on Mr. Kind’s questions. 

Is there any information, any data—are there data that you 

would like to have with regard to the administration and efficacy 

of the Medicare Advantage program that you are currently not collecting or not allowed to collect? 

Ms. NORWALK. Not that I can think of. I will have to give that 

some more thought and get back to you. 

[The information follows:] 

The Medicare Advantage program would benefit greatly from being able to collect 

the HEDIS and HOS measurement sets from Private Fee for Service (PFFS) plans. 

HEDIS is the most widely used measurement set in managed care, and the HOS 

survey is the only measurement set in use that produces health outcomes measures. 

Both of these measurement sets are used by CMS for internal contractor surveillance purposes, for audit selection purposes, and for public reporting initiatives. 

Currently, all Medicare Advantage contracts except for PFFS and MSA plan contracts are contractually obligated to report these two measurement sets at their own 

expense. A provision in MMA section 722 currently excludes PFFS contracts from 

these data reporting requirements. As PFFS continues to grow, it is critical that 

CMS collect these measurement sets from these contractors for its internal contractor assessment programs and for publicly reporting quality of care information 

on the various choices available to beneficiaries. 

There is nothing that jumps to mind, jeez, if we only had that 

piece of information, it would make it much easier to make these 

determinations. So, I have a good sense of why I think we are seeing these different bidding amounts for the different types of plans. 

Medicare Advantage, particularly if you are a local HMO, typically costs you 97 percent versus 100 percent fee-for-service to provide the Medicare A and B benefits. They have been around a long 

time, so that sort of makes sense. 

Mr. BECERRA. Do we have a profile of the people who are signing up with Medicare Advantage, to get a sense how they fit the 

profile of the average senior, of the average individual that age, 

health wise, geographically, all the demographic information? 

Ms. NORWALK. We do. We do have a lot of that. 

Mr. BECERRA. What about the information about the private 

fee-for-service plans? As I understand it, there is some information 


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that is proprietary that CMS cannot review in determining how 

they—how they come up with their level of reimbursement? 

Ms. NORWALK. Yes, the rules around private fee-for-service are, 

indeed, different from the regional PPOs and the local coordinated 

care plans. 

Mr. BECERRA. Is there any information from the private 

PPOs—— 

Ms. NORWALK. I do think that you have raised a good point. 

To step back a second, so private fee-for-service, separate from the 

other Medicare Advantage plans, one of the concerns when they 

initially created—— 

Mr. BECERRA. I am going to run out of time, and I have one 

other very pressing issue. 

Might there be, if there is an area, if you can just let us know, 

identify that, maybe we can work with you to see if that is something we can move into. 

Ms. NORWALK. Absolutely. Great. 

Mr. BECERRA. I want to spend the rest of my time, and Mr. 

Chairman, I hope you will indulge me, a more pressing issue for 

me back in southern California, in Los Angeles, in the next 10 

days, King Hospital, which is a hospital that has helped a very 

modest income, a very disadvantaged community for many, many 

years, is on the verge of losing its contract with CMS to provide 

services under the Medicare provider agreement that it has with 

CMS. I know they have been waiting for a while for CMS to give 

them word. I know CMS has been working with them closely to try 

to help them in this process of radically reforming their services, 

because of the difficulties they have been having. 

I think they are doing everything they can to get to the point 

where they will be able to pass any type of test about their services 

that they are providing, but I know they are waiting for word. They 

are asking for an extension until mid-August, August the 15th. My 

understanding is that CMS has not given them word or is telling 

them perhaps 1 month. 

That won’t help them do or complete the radical transformation 

they are undergoing. It won’t help them preserve the 250 residency 

slots that they have to help teach the next generation of physicians, which also provide services to a lot of folks who have very 

modest insurance policies that they can use. 

I am wondering if you could tell me today what CMS is planning 

to do to make sure that King Hospital continues to operate, and a 

lot of folks in southern California continue to receive services that 

are critical and of quality? 

Ms. NORWALK. As you know, Martin Luther King Hospital initially had some significant quality issues. So this is really about 

the quality of care that is provided. 

Mr. BECERRA. I am there with you, if you could fast forward 

to—— 

Ms. NORWALK. I have been working closely with Bruce 

Chernof, who is the medical director of LA County. One of the 

issues, really the only issue under which we granted them the initial extension from October until March 31, was so that they could 

downsize. 

Mr. BECERRA. Yes. 


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Ms. NORWALK. Their initial assessment to us was, in fact, that 

they were on track to downsize by the end of this period. So, they 

have recently sent in new information to us saying that they need 

more time to downsize. We are reviewing that and taking a look 

at that, and that is what we will be basing our determination on. 

That is different, by the way, than giving them more time to pass 

a survey. 

So, we want to be sure that we have a full understanding of the 

facts before we make a decision. I also appreciate it is critical that 

this decision be made in short order. 

Mr. BECERRA. I think that is their point. They are doing something that most hospitals would never do, in that they are re-shifting virtually everything, their operation. What they are finding is 

that it is not as easy as you think, because they are also providing 

care at the same time. 

If for 1 day the contract expires, were let to expire, they lose all 

250 of those residency slots, because the contract is with USC—excuse me, with the county. So they cannot renew a contract if it is 

to another provider. So it is essential that we get word. Not on 

March 30, the day before it expires. They need to continue planning, because they are spending millions of dollars in preparation 

for this at the behest of CMS. 

So, I am hoping that we can get word very quickly from CMS. 

Ms. NORWALK. Absolutely. I have every intention of getting— 

there is a phone call I have already made today to figure out if we 

can resolve the issue. 

Mr. BECERRA. Thank you so much. 

I yield back, Mr. Chairman. 

Chairman STARK. Mr. Johnson, would you like to inquire? 

Mr. JOHNSON. Thank you, Mr. Chairman. 

Ms. Norwalk, do you know how many plans bid under the benchmark this past year? 

Ms. NORWALK. Well, I know the majority of the Medicare Advantage plans did, so I think it is a high—— 

Mr. JOHNSON. Those plans enjoyed extra benefits as well, did 

they not? 

Ms. NORWALK. Yes, those beneficiaries in those plans do enjoy 

significant extra benefits, that is correct. 

Mr. JOHNSON. Tell me how the benchmark changes over time. 

Ms. NORWALK. The benchmark over time has changed mainly 

because of legislative changes. So, one concern, for example, is that 

there were not a sufficient number of plans in rural counties. So 

those beneficiaries who lived in rural areas did not have the advantage of choosing a plan. So, what they did is, they put in a floor 

which would raise the payment levels to Medicare Advantage plans 

and did that above the fee-for-service rate. So, that was something 

intentional to increase the plan participation as well as enrollment 

in rural areas, and it has succeeded tremendously. We have much 

more enrollment in rural areas and far greater numbers of plans 

and choices for beneficiaries in rural areas. 

Mr. JOHNSON, but if you raise the benchmark, is it costing 

them more in rural areas to run those? 

Ms. NORWALK. It doesn’t necessarily cost beneficiaries any 

more in a rural area. In fact, rural areas often have plans with low 


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or no premiums and have all the same types of additional benefits 

that you might see in other areas. It really depends on where that 

floor payment is in terms of the amount of the additional benefits. 

Mr. JOHNSON. Would competition lower the benchmark over 

years, do you think? 

Ms. NORWALK. The benchmark is legislatively set and it really 

focuses on an update to either fee-for-service payments where Congress says the floor is X. Now, what does impact changes are the 

bids. The bids are intended to be competitive. 

Mr. JOHNSON. You think the system is okay in that regard? 

Ms. NORWALK. Well, I do think it does provide terrific extra 

value for Medicare beneficiaries. Many of them count on it, and 

particularly those who can’t afford additional supplemental benefits, many who don’t have the luxury of retiree coverage, for example. They, in particular, would miss additional benefits if there 

were plan changes, much like what happened after the Balanced 

Budget Act. 

Mr. JOHNSON. It might be helpful to have information on clinical outcomes of patients as opposed to traditional Medicare which 

pays for whatever services are needed. Are there steps to move toward capturing that information? 

Ms. NORWALK. I think we might be able to provide some of 

that. We do know a lot from a Medicare beneficiary survey we did 

a couple years ago about the ability to access providers, for example, the trouble of getting care, how easy it was to see a doctor, and 

so forth, as well as preventative services compared to fee-for-service. Uniformly across all measurements, the Medicare Advantage 

plans did a better job with their beneficiaries in making sure they 

had their preventive care, or it was easier for those beneficiaries 

to see a physician, for example, or they were more likely to have 

a regular doctor. 

Mr. JOHNSON. It just costs more to go first class, doesn’t it? 

CBO indicates there will be consequences of lowering the payment and plans will leave the areas and beneficiaries will not have 

the options that they do now. So, it seems to me that the 65 billion 

that seems to be on the table for the taking is not free. Could you 

discuss that? 

Ms. NORWALK. I do think it is an accurate assessment, if you 

look historically at what happened after the Balanced Budget Act, 

where they changed the payments, you found plans did a number 

of things before they pulled out. The first thing they did was they 

basically restricted their provider network, so fewer providers were 

available. They reduced the number of additional benefits that 

were available to plans, and then ultimately they pulled out of the 

market. 

I can assure you, having talked to a lot of Medicare beneficiaries, 

they were incredibly irate at losing their Medicare Advantage plan. 

So, I do think that we, in looking at these payment streams, do 

need to consider what the ultimate effects will be. 

Mr. JOHNSON. It probably would effect the rural areas first? 

Ms. NORWALK. It will absolutely affect the rural areas. 

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

Chairman STARK. Mr. Pomeroy, would you like to inquire? 


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Mr. POMEROY. I would, Mr. Chairman, thank you. 

I will begin by saying I don’t know much about Medicare Advantage plans, they haven’t been too prevalent in my market. Even 

though I have been a Committee on Ways and Means Member now 

for three terms, I have had very little traffic into my office to discuss Medicare Advantage plans. 

I used to be an insurance commissioner. In fact, I am the only 

former insurance commissioner in Congress, so I am surprised that 

those that are advocates of Medicare Advantage plans filling the 

room today have not been beating a path to my office to discuss 

this interesting new dynamic of health insurance reimbursements 

and this value added to Medicare. It would have been obviously advantageous to them, I think, to begin the discussion with other 

Members of the Congress and the preceding Chairman at an earlier 

date. 

That said, as I try to get a handle on what is represented in 

Medicare by the value of this extra payment, I am just not quite 

certain. We get extra benefits, some get extra benefits. Well, that 

is good. Is it equitable then across Medicare to offer a Medicare Advantage mechanism that gets some extra benefits while others 

don’t get extra benefits? 

Then other questions that will be before this Congress are, well, 

if you look at that extra payment providing these extra benefits to 

a few Medicare recipients, would that be—is there a more compelling aspect of health policy, for example coverage for children, 

where that money should be applied instead? 

So, as we sort our way through this, your comments I found very 

interesting. You are the CMS director, so I don’t suppose it is fair 

to ask you to weigh whether or not we should put the extra money 

here, plussing up a Medicare benefit for a few, or whether we 

should redirect it toward uninsured children. That really goes beyond what we pay you to do on our behalf as the CMS director. 

I would say this, though. You are in charge of administering a 

Medicare system. Why should we find it compelling to continue to 

support Medicare Advantage plans and their extra cost when those 

not in those plans don’t get those extra benefits? 

Ms. NORWALK. I think it reminds me a little bit of the discussion we had during the budget hearing. How, if I recall, you were 

very unhappy with the variation in payment rates for fee-for-service. That, particularly if you look at Dade County or Miami, Florida, the payments there are significantly higher than the fee-forservice payments that you see in North Dakota. 

Well, if you base the Medicare Advantage payment system entirely on Medicare fee-for-service, you end up perpetuating that differential. What the intention was with the MMA and having a 

rural floor was to close that gap between fee-for-service and Medicare Advantage, so that in rural areas of the country, we could provide benefits that normally you would see in very populated urban 

areas like Miami or in any number of other places across the country, where the fee-for-service rate was higher—— 

Mr. POMEROY. Actually, if I might just pursue this, I think you 

raised an interesting point. We are very concerned about this disparity in rural reimbursements. That led me to negotiate with the 

then Chairman about a $25 billion addition to rural reimburseVerDate Nov 24 2008 00:50 Mar 21, 2009 Jkt 040313 PO 00000 Frm 00039 Fmt 6633 Sfmt 6602 E:\HR\OC\40313.XXX 40313

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ments under fee-for-service. In fact then Committee Member 

Nussle and I offered an amendment which was included in the 

MMA, plussing up those rural reimbursements. I incurred some 

dissatisfaction by some of my Democrat colleagues in supporting 

the bill. 

Many of those provisions are expiring, having run their 3 years. 

It was contemplated at the time they would be reauthorized, but 

the 3 years are running out. Clearly, they have had a lot more to 

do about bringing fairness to rural reimbursements than Medicare 

Advantage. 

Do you have a position on extending the 3-year authorizations 

that are expiring that were initially put in relative to rural reimbursement rates under the MMA? 

Ms. NORWALK. Can I get back to you and get the official Administration position? I didn’t ask that question before I came 

today. Perhaps I should have, but I didn’t anticipate it. 

[The information follows:] 

The Centers for Medicare & Medicaid Services (CMS) has made a strong commitment to rural health issues and has made many significant regulatory and departmental reforms to address the needs of rural America. 

The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 

(MMA) included a number of provisions to enhance beneficiary access to quality 

health care services and improve provider payment in rural areas. The provisions 

in the MMA continued two payment policy trends that have increased rural provider 

payment rates in recent years: (1) an expansion of opportunities for rural hospitals 

to receive cost-based payments from Medicare and (2) an increase in rural PPS payment rates so that they are closer to urban payment rates. These provisions include 

the creation of a new Physician Scarcity Area bonus payment program along with 

an updated Health Professional Shortage Area bonus payment program, which reward both primary and specialist care physicians for furnishing services in the 

areas that have the fewest physicians available to serve beneficiaries; the development of a graduated adjustment/add-on payment for low-volume hospitals; the redistribution of unused resident positions, with hospitals located in rural areas receiving 

top priority for such positions; and significant improvements to the Critical Access 

Hospital program, including increased payments to 101 percent of reasonable costs 

and flexibility to use up to 25 beds for acute care. 

CMS has also been directed to conduct a number of demonstrations focused on 

the delivery of care in rural areas. For example, section 409 of the MMA established 

a demonstration to test the delivery of hospice care in rural areas; section 410A of 

the MMA established a 5-year demonstration for up to 15 hospitals to test the feasibility of establishing Rural Community Hospitals; and section 434 of the MMA authorized a new demonstration project under which Frontier Extended Stay Clinics 

in isolated rural areas are treated as providers of items and services under the 

Medicare program. 

Many of the provisions in the MMA were time limited but have been extended 

in later legislation, including the Deficit Reduction Act of 2005 (DRA) and the Tax 

Relief and Health Care Act of 2006 (TRHCA). CMS has worked expeditiously to implement all of the provisions in recent legislation, recognizing their importance to 

rural communities. Although the President’s fiscal year (FY) 2008 Budget did not 

include proposals to extend the expiring rural provisions, CMS will continue to work 

with Congress to address disparities in rural reimbursement and to improve the 

quality and value of care delivered to all Medicare beneficiaries. 

Mr. POMEROY. I would be interested. 

Ms. NORWALK. Yes, absolutely. 

Mr. POMEROY. I would like your acknowledgment. Obviously, 

that has much more to do about rural rate equity than Medicare 

Advantage; is that correct? 

Ms. NORWALK. I think both are important in terms of rate equity, but I would not disagree with you that it is a critical piece, 

vis-a`-vis—— 


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Mr. POMEROY. For example, we have 104,000 Medicare recipients. We have 4,000 on Medicare Advantage. Obviously, fixing the 

Medicare reimbursement has much more to do with rural equity. 

Ms. NORWALK. I think that is in part because the plans are 

new to North Dakota. 

Mr. POMEROY. I am not saying where the future may go or 

whatever. I am asking you a specific question. Which is the bigger 

deal? 

Ms. NORWALK. For today, that is correct. I would agree, your 

point today is correct—that it has a bigger impact today, but I 

think that over time, if the program was allowed to continue, Medicare Advantage would have a bigger impact in North Dakota because a lot of the plans that you have there today are new and 

beneficiaries haven’t learned about them. 

Mr. POMEROY. It is my understanding you are reimbursing 

agents significantly higher to enroll in the Medicare Advantage 

plans. How are companies enrolling? What are the market distribution reimbursements to get people into a Medicare Advantage plan? 

I have had insurance agents tell me it is a great deal. 

Ms. NORWALK. Well, it probably depends on the plan and the 

broker. I can’t speak to it generically, but I am more than happy 

to see if we can find some information and get back to you. 

[The information follows:] 

CMS Medicare Marketing Guidelines provide specific guidance regarding the use 

of persons employed by an organization to market a plan. Organizations that directly employ or contract with a person to market a plan must ensure through monitoring that all marketing activities comply with applicable MA and/or Part D laws 

and all other Federal healthcare laws. 

The guidelines explicitly state that compensation structures must: 

‘‘Provide reasonable compensation in line with industry standard for services provided.’’ 

CMS is aware that organizations sometimes use performance-based compensation, 

tying compensation of a person performing marketing to the volume or value of the 

person’s sales. As a result, the rate of payment may vary between an MA plan, MA– 

PD plan and a PDP. Based on a marketing representative’s reasonable measure of 

service and industry standards, rate of payment may vary among one organization’s 

plans and between competitors. 

It is important to CMS that the beneficiary chooses a plan based on the beneficiary’s needs as opposed to the financial interests of the person performing the 

marketing. Therefore, the rate of payment to a marketing representative should not 

vary based on the health status or risk-profile of a beneficiary. 

Because an organization is required to use only a State licensed, registered, or 

certified individual to market a plan, if a State has such a requirement, CMS expects an organization to comply with a reasonable request from a State which is 

investigating a person that is marketing on behalf of a organization, if the investigation is based on a complaint filed with the State. CMS also encourages an organization to report a person that markets on the plan’s behalf to the appropriate State 

entity, if an organization believes that the person is violating a State’s licensing, 

registration, certification, insurance or other law. 

Mr. POMEROY. Are those extra costs coming back into agent reimbursements? 

Ms. NORWALK. No, all additional costs, 75 percent by statute, 

need to go back to the beneficiary. The additional 25 percent goes 

back to the trust funds. 

Mr. POMEROY. Thank you. 

I yield back, Mr. Chairman. 

Chairman STARK. Ms. Tubbs Jones? 


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Ms. TUBBS JONES. Mr. Chairman, I seek unanimous consent to 

be skipped for this round if I can go up first on the next round. 

Chairman STARK. You want to rest up a little? 

Mr. Emanuel. 

Mr. EMANUEL. I have one question, Ms. Norwalk. Mike Thompson had asked about this, so I want to follow up. He had talked 

to you about the actual benefits side and the payment. It deals 

with the reporting by Medicare Advantage plans. 

We don’t actually have any record of actual benefits that individuals are receiving. The question I have for you is, yet we are making the payments with no record. We know that the benefits exist, 

a la on paper, but as an option, as a potential, do we have any way 

of getting that information so we know that we are getting what 

we are paying for? 

Ms. NORWALK. We have to know something, because we riskadjust every beneficiary. So, the healthier beneficiary, somebody 

who is 65 and joins a Medicare Advantage plan, for example—— 

Mr. EMANUEL. I am more than willing to yield to the Chairman 

of you would like. 

Chairman STARK. Yes, that isn’t responsive. The risk adjustment just deals with the beneficiaries and their health status. It 

has nothing to do with the benefits they receive or the extra benefits. That is not used in the compilation of the risk adjustment. 

Ms. NORWALK. Well, actually the point I was making, Mr. 

Chairman, is that in order for us to figure out what their health 

status is, we actually have to know something about the services 

that were provided to them. 

Mr. EMANUEL. So, you think this information—— 

Chairman STARK. No, you don’t. 

Mr. EMANUEL. I am going to take back my time from both of 

you for 1 second. 

Ms. Tubbs Jones, she can have also the first question next time 

if that works it out. 

All right. How do we get to the fact of what actually are the benefits for the payment in a very specific way? Could you help me on 

that? 

Ms. NORWALK. I will go back and check and find out exactly 

what it is that we have in-house to determine any number of 

things and just see what we could either do as a proxy, or see what 

we have specifically. 

[The information follows:] 

In 2007, enrollees in MA plans are receiving, on average, additional benefits with 

a value of $86 per month. Plans provide an average of about $108 in additional benefits, primarily cost sharing and premium buydowns, as well as specific benefits 

such as routine vision and dental care. Plans charge, on average, a monthly premium of about $22 for these benefits, yielding a net average value for enrollees of 

$86 per month. 

The Centers for Medicare & Medicaid Services (CMS) monitors the care delivered 

by managed care organizations (MCOs) through the collection and analysis of standardized clinical performance measures and beneficiary satisfaction surveys. For this 

purpose CMS has been collecting MA data via Health Employer Data and Information Set (HEDIS), Consumer Assessment of Healthcare Providers and Systems (CAHPS), and Medicare Health Outcomes Survey (HOS) for nearly 10 years. 

Additionally, CMS has created the Complaints Tracking module, a tool that collects 

and tracks beneficiary complaints. CMS also collects data from MCOs in conjunction 

with the annual bidding process. 


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Mr. EMANUEL. The only worry we would have, and I don’t 

think it is by party, I think it is more of a concern from a side point 

of being an advocate for taxpayers, we obviously don’t want to be 

paying for a service if it is not being provided and only exists on 

paper. Okay? 

Ms. NORWALK. I anticipate that one of the things that we could 

look at, for example, are appeals processes. So, if a beneficiary is 

in a plan and doesn’t have access to a service, the beneficiary 

would complain about it. 

Mr. EMANUEL. I think that is safe to assume. 

Ms. NORWALK. Yes, it is safe to assume. So, that is one of the 

things that leads me to think that these plans are actually providing benefits. 

Not only that, when we did the Medicare beneficiary survey that 

I referred to earlier, the information we have comparing Medicare 

Advantage to Medicare fee-for-service leads me to believe that they 

have a usual doctor, and so on and so forth, they have an easier 

time finding a doctor, and so forth. 

So, whatever else it is that we have in-house, I am more than 

happy to figure out a way to provide that. 

Mr. EMANUEL. Since you will look at that, just do me one favor 

as you ask other folks to look at it and get the information. The 

assumption if people aren’t complaining about it, because that assumes, the assumption you made was that they then are receiving 

it because they are not complaining, it is a double negative, basically. Don’t assume people know they have something. I couldn’t 

tell you everything that my Blue Cross plan offers me in the Federal health employee system. Now, mainly because I don’t have patience. My wife always said if we had a fourth child, we would 

name it Patience as a subtle reminder to me. I don’t sit down and 

study it. 

So, don’t assume that folks are sitting there studying that, so 

therefore if they are not complaining, therefore they are receiving 

it. That makes a presumption I am not sure I would be comfortable 

with. Okay? 

Ms. NORWALK. Fair enough. 

Mr. EMANUEL. Thank you very much. I yield back. 

Chairman STARK. Mr. McDermott, would you like to inquire? 

Mr. MCDERMOTT. Thank you, Mr. Chairman, for allowing me 

to sit in on the Committee and participate. I really come because 

when we put in the Medicare Advantage plans, we based it on feefor-service rates. I come from one of those places where fee-for-service is considerably less than other parts of the country. That is true 

of Oregon and some plans in Minnesota, perhaps some in Wisconsin. I think it is important for the Committee to understand 

that the basing on fee-for-service in the area makes for huge inequities in this program. 

So, part of what we are talking about here is not applicable to 

some areas of the United States like the Northwest. I think you 

would confirm that? 

Ms. NORWALK. Absolutely. There is no question that a lot of 

what I wanted to bring to people’s attention today is that the reason you have the legislated floors that we have, particularly in 

rural areas, was to address some of the variation that you see with 


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fee-for-service and to not carry that over into the Medicare Advantage program. So, that is correct. 

Mr. MCDERMOTT. I would also like to put in a word for the 

floor in urban areas. 

Ms. NORWALK. Likewise, the urban floor has made a very big 

difference. So, both the rural and urban floors, and I don’t mean 

to put one over the other, but both have the same concept. Legislatively, let us make sure if there are disparities on the fee-for-service side, that we don’t carry them over into Medicare Advantage. 

Mr. MCDERMOTT. Any kind of proposal that would say, let us 

take a percentage reduction as though it was one program in the 

country would only increase the problems of areas like mine where 

we are barely making it with the floor. 

Ms. NORWALK. I think that is correct. There are lots of difficult 

choices in front of this Committee. I think it is important that we 

appreciate all the different facts. We are more than happy to get 

for you, if you would like, some details about your State and all the 

specifics in terms of payments. If that would be helpful, we can 

provide that. 

Mr. MCDERMOTT. I would appreciate it if you would provide 

the Committee with some estimate of what an across-the-board cut 

would mean to Oregon and Washington and Minnesota and several 

others. 

Ms. NORWALK. We have that information by State and we are 

more than happy to give it to you. 

[The information follows:] 

Establishing an MA payment policy such that plan payment rates would not exceed 100 percent of FFS would adversely affect most counties in the United States. 

Only 5.5% of counties with about 7% of enrollment already have benchmarks established at 100% of FFS in 2007. Capitation rates in all other counties (94.5%) and 

for all other beneficiaries (92.7%) would be reduced. The counties where the impact 

would be the largest are the counties that were paid on the basis of either of the 

floors or the blend in 2004. These categories represent almost 2/3 of all counties and 

more than half of all MA enrollment. 

In terms of specific impacts on Oregon, Washington, Minnesota, and other States: 

• Preliminary estimates of the impact in Minnesota of limiting payment to 100 

percent of FFS are Ø$629 million over 5 years (FY 08–12, effective 1/1/09). 

Ninety-four percent of Minnesota counties, with 98% of Minnesota MA enrollees, would likely have benefits or plan choices reduced under a proposal that 

limits payments to 100% of FFS. 

• Preliminary estimates of the impact in Oregon of limiting payment to 100 percent of FFS are Ø$1,836 million over 5 years (FY 08–12, effective 1/1/09). 

Ninety-seven percent of Oregon counties, with 98% of Oregon MA enrollees, 

would likely have benefits or plan choices reduced under a proposal that limits 

payments to 100% of FFS. 

• Preliminary estimates of the impact in Washington of limiting payment to 100 

percent of FFS are Ø$1,275 million over 5 years (FY 08–12, effective 1/1/09). 

One hundred percent of Washington counties, with 100% of Washington MA enrollees, would likely have benefits or plan choices reduced under a proposal that 

limits payments to 100% of FFS. 

• Preliminary estimates of the impact in California of limiting payment to 100 

percent of FFS are Ø$6,001 million over 5 years (FY 08–12, effective 1/1/09). 

Ninety-eight percent of California counties, with 100% of California MA enrollees, would likely have benefits or plan choices reduced under a proposal that 

limits payments to 100% of FFS. 

• Preliminary estimates of the impact in New York of limiting payment to 100 

percent of FFS are Ø$1,812 million over 5 years (FY 08–12, effective 1/1/09). 

Ninety-four percent of New York counties, with 63% of New York MA enrollees, 

would likely have benefits or plan choices reduced under a proposal that limits 

payments to 100% of FFS. 


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Mr. MCDERMOTT. I would appreciate that. Thank you very 

much. 

Thank you, Mr. Chairman. 

Chairman STARK. Thank you. I am going to take a second round 

here if I may for a minute. 

Ms. Norwalk, one of the statements that you made was that 

beneficiaries in Medicare Advantage enjoy extra benefits. I think 

the operative word there is enjoy. Now, it would seem to me to 

enjoy it, you have to use it. You also suggested that they are doing 

a better job and implied, because of incentives, that Medicare Advantage plans are doing disease management, care coordination, 

providing—not offering—preventative services. That they have 

good clinical outcomes. 

I am going to ask you, and I would imagine half that second row 

behind you is CMS staff. 

Ms. NORWALK. Bless them. 

Chairman STARK, but it is my understanding that you have and 

receive absolutely no data on service utilization from any of the 

Medicare Advantage plans. Is that not correct? 

Ms. NORWALK. Well, that has certainly been discussed here 

today. I am going to have to go back and find out exactly—— 

Chairman STARK. No, no, no. Stop. 

Is there anybody back there in the CMS staff that can raise their 

hand and say you get any service utilization data? The fact is, you 

don’t. It has never been required. 

So, to even suggest that you know what kind of extra benefits 

are being used is fallacious. You don’t collect the data. 

Now, quit kidding us. They may put the data on their web, but 

if people aren’t using it, if they are not paying for it, if they are 

not doing disease management, if they are not doing care coordination—and you don’t know. 

Ms. NORWALK. It certainly is in their best interest to do disease 

management. 

Chairman STARK. Wait a minute. All right, look, what is in 

their best interest is profit. Let us not go down that road. 

What I am suggesting is that—and it may not be important. I 

am not suggesting it, but to suggest to me that enjoying extra benefits, I understand that many of them may have it on their list and 

in their sales promotion. Certainly if you do have that utilization 

data, we would love to see it, but I am, I think, advised that it is 

not collected. 

So, then I would like to go on one other area. That is, do you 

know, and if you don’t will you provide us within the next week, 

how many marketing complaints? I am getting back to where Mr. 

Pomeroy was. How many marketing complaints have you received 

on Medicare Advantage plans? Can you tell us whether any of 

those people have been penalized? That would be of some interest. 

I don’t care from whom, but—— 

Ms. NORWALK. I believe we responded to you in January about 

that very same issue with the full panoply of what we are doing. 

It concerns me greatly the abuse of marketing agents. 

One of the things that we are doing with the National Association of Insurance Commissioners is we’ve got an MOU that has 

been out, I think 15 States or so have signed it, so that we can do 


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better coordination to make sure that marketing agents are properly reprimanded. Of course, they are State licensed. We have also 

been working very closely with the plans and if we find out that 

there is a problem with a marketing agent—— 

Chairman STARK. Well, I guess what I am asking you is have 

you found out any? Could we have some indication of how many 

complaints there have been? We hear of episodes, but that does not 

necessarily give us any idea of if there are marketing abuses. 

Ms. NORWALK. I will update our January letter. 

[The information follows:] 

The Part C Complaints Tracking module (CTM) contained 242 complaints related 

to marketing for Medicare Advantage-Prescription Drug Plans from January 1, 2007 

through mid-April 2007. Of these 242 complaints, 78 are still considered ‘‘open,’’ 

while 164 are considered ‘‘closed.’’ 

Where appropriate, CMS takes corrective action against plans who have had marketing complaints filed against them. Since the fall of 2005, seven Medicare Advantage plans have had actions, including warning letters and corrective action plans, 

taken against them in response to marketing violations. 

Chairman STARK. I would like to know the answer. On the assumption that there is no data collected on service utilization, my 

feeling is that that should be done. I don’t think we can make any 

decisions on the value of these plans unless we know not what they 

are offering but what they are actually doing. I am more concerned 

about disease management, preventative services that are actually 

being carried out rather than just in the breach. 

I would end my second round by asking two questions, I guess. 

If, as is suggested in one of the next witness’s testimony, that 32 

million people in round numbers are paying $25 a year extra in 

their part B premium to support the overpayments, as they are referred to, to Medicare Advantage plans, I fail to see the fairness in 

that. I would lead second to suggest that if these extra benefits, 

whatever they may be, are—and you have mentioned coordination 

of care, disease management, which we don’t have in fee-for-service, but why not? If these benefits are, in fact, desirable, disease 

management, care coordination, preventative services, clinical outcomes data, then why don’t we get busy to put them into the service of the vast majority that four out of five beneficiaries are using? 

That would be doing something for the entire country and I think 

would be fair. We may not be able to afford it right out of the box, 

but we could work toward that. 

Doesn’t that seem reasonable? That if these benefits are good, 

they should be in fee-for-service? 

Ms. NORWALK. I actually have two points to that. The first is 

that all beneficiaries have the option of choosing a Medicare Advantage plan. That is one of the benefits that the MMA has done, 

it has given beneficiaries options when they didn’t have them before. 

To your second point, one of the programs that the MMA also 

added is the Medicare Health Support Program, or what was then 

called the Chronic Care Improvement Program. The intent of the 

program was to figure out how we could implement disease management and chronic care improvements and coordinated care and 

so forth in Medicare fee-for-service. Now, we have some pilot programs that are under way currently. If they end up providing some 


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positive results, I think that we would do that across the fee-forservice setting. 

Chairman STARK. I will end this, but what you are in effect saying is the Government is encouraging people if they want extra 

services to go into the higher cost programs because, on average, 

112 percent. Therefore, you are depleting the Medicare trust fund 

by encouraging people to move that way. The more that do it, the 

more financial peril you will put the Medicare Program into. That 

doesn’t wash either, I’m afraid. 

Mr. Camp, would you like a second round? 

Mr. CAMP. I would. 

Ms. Norwalk, I just wanted to say that there is a difference between—to follow up on some of the other questioning—between traditional fee-for-service Medicare and Medicare Advantage with regard to administrative expenses. The 3.2 billion in administration 

that CMS has is not factored into fee-for-service Medicare but is 

factored into Medicare Advantage plans; is that correct? 

Ms. NORWALK. Correct. Yes. 

Mr. CAMP. Also, the disease management, care coordination, 

prevention programs and others are important aspects of Medicare 

Advantage that could bring down costs in the future. Is that accurate? 

Ms. NORWALK. Absolutely. 

Mr. CAMP. The other point I would like to ask you about is that 

Medicare Advantage plans, according to your testimony, are required to collect and apply quality performance data to quality improvement and chronic care management projects; is that correct? 

Ms. NORWALK. Correct. 

Mr. CAMP. They are also required to—— 

Ms. NORWALK. Except I don’t think private fee-for-service is, 

but the rest are. 

Mr. CAMP. Medicare Advantage plans are required to collect 

quality data? 

Ms. NORWALK. Generally correct. 

Mr. CAMP. They are also required to make this information public? 

Ms. NORWALK. Correct. 

Mr. CAMP. That information can be used by beneficiaries in 

making a choice of whether or not to enroll in a traditional fee-forservice or Medicare Advantage plan? 

Ms. NORWALK. Absolutely. 

Mr. CAMP. Tell me if you could quantify the administrative expense in Medicare Advantage, what would that be? 

Ms. NORWALK. I don’t know that I have the number off the top 

of my head, but the administrative loss ratio would vary, I suspect, 

across plan types. Not only across plan types, but across individual 

plans. So, for those regional PPOs, for example, covering a wider 

area, they would have a more expensive administrative package because they need to contract with providers across a wider area. So, 

new plans have typically higher costs and those that are established would have lower costs. 

Mr. CAMP. Following up on Mr. Stark’s question, if there is 

something we need to address in fee-for-service Medicare, I would 

be interested in knowing what you think that is. 


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Ms. NORWALK. Absolutely. If I might get back to the Chairman 

for 2 seconds, if you would indulge me? 

Mr. CAMP. Yes. 

Ms. NORWALK. My crack staff pointed out that in terms of the 

additional benefits of the $86 additional on average, about $18.40 

are the additional benefits. All of the rest of the benefits relate to 

cost-sharing. So, in terms of whether or not they are used, if you 

actually get a service, most of them buy down the amount of costsharing that you have, buy down the premium amounts, savings on 

the basic drug coverage and the like. So, the—— 

Chairman STARK, but if they got the service, but if they don’t 

get the service, there is no savings in cost-sharing. 

Ms. NORWALK. Well, for premiums there would be, obviously. 

So, premium buydowns and the like. 

Thank you, Mr. Camp. 

Mr. CAMP. Thank you. 

If good value is or is not being provided for fee-for-service plans, 

what do we need to address in fee-for-service? 

Ms. NORWALK. I think there is a lot that needs to be addressed 

in fee-for-service. Quality is top among them. Making sure that we 

are paying for quality services. 

That is not to say that physicians don’t all want to provide quality services, but oftentimes what we will see is, for example, the 

number of hospital readmissions that we have in this country, of 

the hospital admits, readmissions in 30 days, half of them haven’t 

seen a doctor since they were discharged from a hospital. 

A lot of things that are happening are far less likely to happen 

in the Medicare Advantage world because they are going to do better care coordination because it is in their best interest. So, I think 

there are a lot of things that we could learn from Medicare Advantage and it would be great to apply some of those in the traditional 

Medicare fee-for-service program. So that is just one example. I 

could come up with many if I had more time. 

Mr. CAMP. All right, thank you. Thanks very much for your testimony. 

Chairman STARK. If there are not any other Members who wish 

a second chance to inquire, I would like to thank you, Ms. Norwalk, 

for your patience and again apologize for keeping you later than I 

think you ever dreamed you would be here. 

Ms. NORWALK. Thanks for having me on the first panel. 

Chairman STARK. The second panel will consist of Dr. Mark 

Miller who is the executive director of the Medicare Payment Advisory Commission, who serves as our right and left hand in advising 

us in the intricacies of the Medicare system. 

Dr. Peter Orszag, who is the director of the Congressional Budget Office. 

Welcome, gentlemen. 

Hi-tech testimony here. 

Mark, I guess you are first on the list, so we will let you lead 

off. How is that? Whenever you are settled, proceed to enlighten us 

in any manner you would like. 


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

DIRECTOR, MEDICARE PAYMENT ADVISORY COMMISSION 

Dr. MILLER. Okay, Chairman Stark, Ranking Member Camp, 

distinguished Members of the Subcommittee, MedPAC is a congressional advisory commission charged with making payment recommendations. 

Chairman STARK. Just one question. If you are as sight challenged as I am, are your slides—do I have them someplace? Okay, 

thank you. 

Go ahead. I am sorry. 

Dr. MILLER. MedPAC is a congressional advisory commission 

charged with making recommendations for both fee-for-service and 

managed care plans. When we make these recommendations, we 

try to consider three perspectives, assuring beneficiary access to 

quality of care, assuring that each tax dollar is well spent, and assuring that providers are paid fairly. When we make these recommendations, we also keep in mind that our legislative mandate 

asks us to consider what is necessary to pay an efficient provider. 

The commission has long supported managed care plans as an 

option in Medicare. We believe that plans do have the flexibility to 

use care management techniques that fee-for-service does not have. 

We believe that if paid appropriately, they have the incentive to be 

efficient. 

The commission supports a principle that Medicare payments 

should be neutral. That is, we should pay the same amount regardless of whether a Medicare beneficiary enrolls in fee-for-service or 

a managed care plan. 

The current Medicare managed care payment system is not neutral to beneficiary choice and does not encourage efficiency. This is 

because it is based on an inflated set of administratively determined benchmarks that plans bid against. On average, those 

benchmarks are 116 percent of fee-for-service payment rates. That 

is the number that is the upper right-hand corner of your slide. 

If plans bid below these benchmarks, and most plans do, they 

keep three-fourths of that payment to use for additional benefits. 

Under this system of benchmarks and bids, we estimate that on average plans are paid 112 percent of fee-for-service. That is the far 

right number in the second row of your slide. 

It is important for you to understand that this 12 percent goes 

to additional benefits, but it is also important for you to understand that these payments are financed from trust fund, general 

revenue and beneficiary premiums, premiums paid by all beneficiaries regardless of whether they are in managed care plans or 

not. We estimate that approximately $2 per month is charged each 

beneficiary in Medicare to pay for the 12 percent above fee-for-service. 

For these reasons and others, for the last several years, MedPAC 

has recommended that Medicare set the managed care benchmarks 

at 100 percent of fee-for-service. The commission recognizes that 

this proposal would create disruptions for some beneficiaries and 

plans and has pointed to the need for a transition, but at the same 

time, the commission recognizes that current enrollment trends toward the highest paid plans makes the situation more and more 

difficult to address as time goes on. 


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A second principle that the commission has embraced is that 

payments should be equal across plan types. Given the current system, we have very different payment levels across plans. For example, HMOs are paid 10 percent above fee-for-service. Whereas private fee-for-service plans are paid 19 percent above fee-for-service. 

Those are the two circled numbers on your slide. 

This is based on where plans draw their enrollment from. As you 

have heard, different counties have different payment rates. That 

results in significant variation in what we pay and in what plans 

offer. 

Furthermore, there are other differences among the plans in 

terms of administrative requirements. That gives some plans advantages over other plans. For example, regional PPOs are protected with risk corridors. Medical Services Account (MSA) plans 

do not have to return any money below the bid to the Treasury. 

Private fee-for-service plans do not have to report at the same level 

quality data and they are not required to create networks. 

The commission has made recommendations to try and level the 

payments across plans. One of those recommendations was to 

eliminate the PPO stabilization fund. Other recommendations we 

have made are in the appendix of your testimony. 

A third point that I would like to make is that there is some good 

news here. There is evidence that plans can be more efficient than 

fee-for-service. Again, you have sort of heard this. Plans that do 

submit bids to CMS that essentially say how much does it cost for 

us to provide the traditional fee-for-service benefit? Those bids vary 

from 97 percent of fee-for-service—sorry about that—97 percent of 

fee-for-service to 9 percent above fee-for-service for private fee-forservice plans. Let me say that again. 

HMOs are able to deliver this benefit on average at 97 percent 

of fee-for-service, whereas private fee-for-service plans deliver it at 

9 percent above. 

To put this differently, private fee-for-service plans are not more 

efficient than fee-for-service and all additional benefits, on average, 

that they provide are through the additional payments. 

In contrast, on average, HMOs are more efficient than fee-forservice and at least some of the additional benefits that they provide are provided through efficiency. We believe at the commission 

that it is this efficiency that we should be pursuing through our 

payment policy. 

I know I am over or just out of time. In closing, I would like to 

say that given the long run sustainability problems in Medicare, 

we think that all steps should be taken to promote efficiency in feefor-service and managed care plans. We acknowledge that there are 

efficiency losses in fee-for-service and much of the work that we do 

at the commission is designed to create policies to make fee-forservice a better operating system. 

Similarly, we believe that we should be striving for greater efficiency among managed care plans and paying them more appropriately. 

I look forward to your questions. 

[The prepared statement of Dr. Miller follows.] 


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Chairman STARK. Thank you very much. 

Dr. Orszag. 

STATEMENT OF PETER R. ORSZAG, PH.D., M.SC., DIRECTOR, 

CONGRESSIONAL BUDGET OFFICE 

Dr. ORSZAG. Thank you very much, Mr. Chairman, Congressman Camp, other Members of the Committee. 

I can be brief because many of the key points have been made, 

but let me just focus on three primary points. 

First, Medicare Advantage plans have grown rapidly both in 

terms of enrollment and in terms of Medicare spending. You can 

see that in the uptick between 2005 and 2006. CBO now projects 

that enrollment in Medicare Advantage plans will continue to increase rapidly in coming years, rising from roughly 19 percent of 

Medicare beneficiaries this year to 26 percent of beneficiaries by 

2017. 

That projected increase is driven largely by CBO’s expectation of 

very rapid growth in enrollment in private fee-for-service plans, 

which rose from 200,000 members at the end of 2005 to more than 

1.3 million members in January 2007. Almost all of the difference 

between our March 2006 projection, which you can see on the 

screen, and the March 2007 projection is because we now expect 

much more rapid growth in private fee-for-service and, as the chart 

shows, in January alone almost 500,000 beneficiaries were added 

in the private fee-for-service sector of the Medicare Advantage program. 

In terms of spending, payments to Medicare Advantage plans amounted to almost $60 billion in 2006. CBO projects that those 

payments will total $1.5 trillion over the 2007 to 2017 period, and 

that the share of Medicare spending on Medicare Advantage plans 

will increase from 17 percent last year to more than 25 percent in 

2017. 

Again, consistent with what I just said about enrollment, private 

fee-for-service plans will account for a rapidly growing share of 

Medicare Advantage spending with payments to such plans increasing from approximately $5 billion in 2006 to almost $60 billion in 2017. 

The second point which has come up repeatedly already and I 

won’t belabor it is that Medicare payments for beneficiaries enrolled in Medicare Advantage plans are higher on average than 

what the program would spend if those beneficiaries were in the 

traditional fee-for-service program and, as a result, shifts in enrollment out of the fee-for-service program and into private plans increase net Medicare spending. Our estimates are roughly consistent with the ones that have already been presented by 

MedPAC, suggesting that payments to Medicare Advantage plans 

are approximately 12 percent higher than per capita fee-for-service 

costs this year. 

Third, that cost differential underscores a number of policy options that would reduce spending in the Medicare program. I will 

mention two briefly. 

The first option would be to reduce the county level benchmarks 

under Medicare Advantage to the level of local per capita fee-forservice spending. Relative to spending under current law, CBO esVerDate Nov 24 2008 00:50 Mar 21, 2009 Jkt 040313 PO 00000 Frm 00064 Fmt 6633 Sfmt 6602 E:\HR\OC\40313.XXX 40313

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timates that this policy would save $65 billion over the next 5 

years and $160 billion over the next 10 years. 

In addition to this reduction in costs, reducing payment rates in 

this way would leave less money for health plans to offer reduced 

premiums or potential supplemental benefits. That change in turn 

would make the program less attractive to beneficiaries and lead 

some to return to the traditional fee-for-service program. Indeed, by 

CBO’s estimates, enacting this policy would reduce enrollment in 

the Medicare Advantage program by about 6.2 million beneficiaries 

in 2012, or about half of the projected enrollment in that year. 

I have also shown here the budget savings from other reductions 

that are less significant than going to 100 percent of local fee-forservice costs. One thing that I would point out is the fact that there 

are any savings at all in reducing to say 150 percent of local feefor-service or 140 percent shows that there are some counties that 

are that high, in which the benchmark is that high relative to the 

average local fee-for-service costs. 

Another option discussed in the testimony involves eliminating 

the double payments for indirect medical education. As you may 

know, under traditional fee-for-service, Medicare pays an additional amount to compensate for the costs associated with teaching 

hospitals. Those payments under the Medicare Advantage program 

are both included in the benchmark and then also paid for each 

Medicare Advantage beneficiary, so there is a double payment. 

CBO estimates that if you eliminated that by taking the Indirect 

Medical Education (IME) payments out of the benchmark in most 

counties, the reduction would be roughly $13 billion over the next 

10 years. 

I just want to conclude by noting that the primary, the central 

long-term fiscal challenge facing the Nation involves health care 

costs. There is a wide variety of evidence suggesting that health 

care cost growth can be constrained at minimal or no adverse consequences in terms of health for most Americans, and moving the 

Nation toward that possibility, which will inevitably be an iterative 

process, is essential to putting the country on a sounder long-term 

fiscal path. So, I would hope that changes to the Medicare Program 

would be evaluated with that broader perspective in mind. 

Thank you very much, Mr. Chairman. 

[The prepared statement of Dr. Orszag follows:] 


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Chairman STARK. I want to thank both of you. 

Mark, in addressing the access issue in the service of low-income 

people in urban areas, my sense is that Medicaid, QMB and SLMB 

would be a far better financial deal for those low-income people if 

all the people who were eligible in those areas put into it, but I am 

somewhat puzzled as to what we would do in rural areas. 

I am presuming that the rural areas would have at least primary 

care physician service and some hospitalization, either emergency 

rooms or available acute care, but how do you proceed to provide 

in the rural areas the advantages or perceived advantages of the 

better—and by better, I mean in terms of quality of services, preventive care and so forth—how do you cover that in the rural 

areas? 

I want to say one other thing. Don’t you have on your board— 

and I am sure they weren’t all universally agreeing. You don’t have 

to name your MedPAC trustees, but you have representatives who 

represent rural areas, rural hospitals, as well as urban centers. I 

presume that this was not a unanimous choice among your trustees 

to level the playingfield on Medicare. Maybe it was, but I presume 

it wasn’t. 

Dr. MILLER. I don’t remember the specific vote, but it was overwhelmingly—there was an overwhelming majority that voted for 

this. That is one point. 

Another point, you asked about the rural—— 

Ms. TUBBS JONES. Mr. Miller, could you put your mic down a 

little more, because we are having a hard time hearing you over 

here. I know you can hear me, because I talk loud. 

Dr. MILLER. You can’t hear me? 

Chairman STARK. That mic is a little weak, so we will let you 

squeeze in closer. 

Dr. MILLER. Now I can’t remember the question. 

The vote was—I got it—the vote was relatively unanimous on the 

payment rate. 

You said something about rural representation. We don’t try to 

and we don’t think of people of rural, urban, but there a number 

of people on the commission who have a rural background and a 

rural experience and have dealt with rural issues through their careers. We don’t try to categorize people rural, urban, but there are 

several people who have rural experience. 

Then I think your question was, how do you deal with these benefits in rural areas. A couple of things. We have made a series of 

recommendations on the fee-for-service side in order to begin to 

take the fee-for-service sector toward a more accountable and 

measurable outcome, with the hope that behind that, Medicare’s 

fee-for-service payments will also begin to reflect that. So, that if 

physicians practice conservative medicine and practice medicine 

that results in providing preventive benefits, they would be paid 

more or hospitals would be paid more. That is certainly one way 

to go at it. 

Another thing implied in your question is really, if this is a question about expanded benefits for people in rural areas or low income people or whatever the case may be, I think the question, the 

way the commission would go at the question is, what is the benefit 


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that we are getting? Who is eligible for it? How should we pay for 

it? 

If this mechanism of five different plan types, paying different 

amounts of money, providing different benefits packages, I think 

the commission’s view of that would be this is not a particularly 

targeted way of doing that. 

You mentioned these other programs like the QMB and SLMB 

programs which would be available to beneficiaries whether they 

are in urban or rural areas and arguably are more targeted. 

Chairman STARK. One more question. You do not, as I understand it, call for the benchmark of these Medicare Advantage plans 

to be immediately dropped to 100 percent? I think you have some 

different recommendations of how we could ease down over time to 

approach over time getting to parity or getting to 100 percent. Can 

you explain what you have in mind there? 

Dr. MILLER. Yes, and it is not real complex. We have started 

to have—we made this point when we made the recommendation. 

We have discussed it actually some in our last meeting, but just 

think about it logically. There are sort of three ways you could proceed, and there are all kinds of variants but just to keep it relatively straightforward, you could freeze the rates at their current 

levels and let fee-for-service catch up. That would be a very long 

transition and that might be viewed as a positive thing, but on the 

other hand, it means that the highest paid areas would remain the 

highest paid for the longest. 

A second strategy you could use is to bring all of the rates down 

at the same rate. So, if you are at a high 140 percent county, you 

come down at the same rate as, say, a 110 percent county. There 

again, that has the virtue of being equal across all of the areas, but 

probably leaves the highest cost areas alone the longest. 

The third, and you can figure this out logically where I am going, 

the third is that you come down fastest on the highest areas. So, 

you bring the 1forties, the 1thirties down faster and then you pick 

up the twenties and the 10s as you come down. That would have 

the effect of hitting the highest cost areas immediately and the 

lower cost areas later. 

Chairman STARK. Thank you. 

Mr. Camp, would you like to inquire? 

Mr. CAMP. Thank you, Mr. Chairman. 

We have had a lot of testimony about Medicare Advantage plans 

providing disease management and there have been several examples that show that those programs have reduced costs, emergency 

room visits, hospitalizations and even some procedures. Did CBO 

take into account the ability of Medicare Advantage plans to control program costs by managing chronic disease? Something that a 

traditional fee-for-service program is not able to do? 

Dr. ORSZAG. Briefly, yes, but let me make three quick points. 

The first is that CBO, in other contexts, has looked at disease management and other programs like that. The evidence is often not 

as compelling in terms of cost reduction as some reports would suggest. We are always welcoming more evidence on that. 

The second thing, actually I will just make two points. The second thing is, as I mentioned in my testimony, most of the growth 

that for example explains the difference relative to last year in our 


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projections involves private fee-for-service plans where many of the 

care coordination and disease management programs are at least 

a less salient feature of their activities. 

Mr. CAMP. Well, certainly it is going to take some time before 

you see cost savings, in that it is a long-term project. This is part 

of my problem with MedPAC’s recommendation, is that I don’t 

think that the programs are inherently comparable because they 

are different programs. Yet MedPAC continues to suggest that one 

is paid differently than the other without really taking into account, in my view, the difference in the two programs. 

So I guess I would like your comment on that, Dr. Miller. 

Dr. MILLER. I think there are a couple of things to say there. 

I think some of the thinking at the commission is that managed 

care plans, the idea behind them is that they come in using, let us 

just say for the moment, a closed network and care coordination 

techniques and should be able to underbid fee-for-service. 

When we talk about using fee-for-service as a standard, we don’t 

necessarily think it is a great, well functioning program, but why 

would you actually go and pay more for something that is not functioning as well as fee-for-service? 

So, the philosophy works like this. That if the managed care 

plans come in, and can actually underbid fee-for-service, they can 

use that money to provide additional benefits, attract beneficiaries 

to fee-for-service, and grow their enrollment. We do see them as 

very much operating different types of care, but we think that the 

payments and the ability to do the additional benefits should come 

from efficiencies. 

There is one other point that I would like to make. I think there 

is another concern on the part of the commission that you will hear 

this, that plans will say, I know you are paying a lot now but we 

will be efficient in the future and you will save money. There is a 

feeling among the commissioners that there is not a lot of incentive 

to produce efficiencies in a system where plans are being paid this 

much. 

Mr. CAMP. Dr. Orszag, which areas of the country would be affected the most by your assumption of a 100 percent benchmark as 

a percentage of fee-for-service costs? How would that affect the 

country, not only geographically but also what populations of the 

country would be affected and how? 

Dr. ORSZAG. In Table One of our testimony, we provide some 

evidence or some information about the distribution of, for example, the difference between plan bids and per capita expenditures. 

There is related information on the ratio of benchmarks to average 

fee-for-service costs, but clearly, the distribution will mimic to some 

degree what you saw with Ms. Norwalk’s charts about the distribution of where Medicare Advantage beneficiaries are. It is also important to remember that Medicare Advantage costs vary, or bids, 

I should say, vary a lot less across the country than fee-for-service 

costs do. So, in high fee-for-service cost areas, you tend to see Medicare Advantage bids that are not as high than in the lower cost 

areas. 

Mr. CAMP. So, just to summarize, which areas of the country 

would that be? 


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Dr. ORSZAG. That will often—well, it depends, but it will often 

involve many of the things that we mentioned in the testimony. It 

include rural areas and other areas where the previous floor payments are still significant. 

Mr. CAMP. I realize my time has expired, but just to finalize, 

how many seniors would lose their Medicare Advantage plans if 

the benchmark were at 100 percent? 

Dr. ORSZAG. As I mentioned in my oral testimony, by 2012, if 

you move to 100 percent of fee-for-service in each county, we 

project that Medicare Advantage enrollment would be roughly 6 

million people lower than in our baseline, and that is about a 50 

percent reduction. 

Mr. CAMP. Thank you. Thank you, Mr. Chairman. 

Chairman STARK. Ms. Tubbs Jones, who cut a deal. Forbearance last time earns her second spot. 

Ms. TUBBS JONES. It is okay, I cut a deal, Mr. Chairman. 

Thank you very much for holding to the deal. 

Dr. Miller, how are you this afternoon? 

Dr. MILLER. Okay. How about you? 

Ms. TUBBS JONES. I am blessed, thank you. 

I come from Cleveland, Ohio. In Cleveland, according to the Census statistics, 13 percent of the individuals age 65 and older are 

below the Federal poverty line, and 56 percent of the population is 

African American, 2 percent Hispanic. 

I want to make inquiries of you with regard to the impact that 

the cuts to Medicare Advantage plans will have on the delivery of 

health care services to the minority populations in my congressional district and across the country. What is your assessment of 

what impact that will have, sir? 

Dr. MILLER. I don’t have a specific impact by minority status 

or income status, but I think that your point is taken. It is correct 

that in areas that are currently paid, where the counties are currently paid well above fee-for-service, and I don’t know your area 

specifically, but there may be a floor in place there, it is likely that 

plans will have to scale back their benefit packages or, in fact, have 

to pull out. 

What I would like to say is that we have looked at the data and 

we believe, and this is a point that I was trying to make with the 

slide, there are managed care plans now and they have, on average, and they have a lot of the enrollment now, they are able to 

deliver fee-for-service benefits below what the fee-for-service program provides. That means that there would still be plans that are 

able to provide benefits and able to provide additional services. 

Ms. TUBBS JONES. Mr. Miller, were you around back in 1997 

when the Medicare Advantage plans left Ohio and left people high 

and dry with no kind of health care at all, sir? 

Dr. MILLER. I was around when the plans exited, yes. 

Ms. TUBBS JONES. You realize how many people were left out 

there, aged people, concerned about what doctor they would go to, 

who would they see, how would they be covered. 

I want to, before you go on, are you familiar with a doctor by the 

name of Kenneth Thorpe, sir? 

Dr. MILLER. Yes, I am. 

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Dr. MILLER. I know where he is. 

Ms. TUBBS JONES. Are you familiar with his research? 

Dr. MILLER. I have seen a letter that he did for Blue Cross Blue 

Shield. 

Ms. TUBBS JONES. Even though it was done for Blue Cross or 

Blue Shield doesn’t mean that his research isn’t of value, though, 

right? 

Dr. MILLER. I am just saying that is what I saw. 

Ms. TUBBS JONES. Yes, but I am just trying to make the record 

clear that just because it was done for Blue Cross or Blue Shield 

doesn’t denigrate his research at all? 

Chairman STARK. Would the gentlelady yield just on that point? 

Ms. TUBBS JONES. Yes. 

Chairman STARK. I have a letter from Mr. Thorpe here expanding on that. I would like to make it a part of the record and I will 

share it with you. 

Ms. TUBBS JONES. I thank you very much, Mr. Chairman. 

[The information follows:] 


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Ms. TUBBS JONES. I thank you very much, Mr. Chairman. 

I just want to refer to some of his research. Thanks, everybody. 

I got the letter, too. One of my eyes in my glasses is out, so if I 

don’t read it—as a matter of fact—thanks. 

I want you to go to the back of the letter. The back of the letter 

says that my 2005 research on this topic found the following, that 

Medicare Advantage disproportionately covers low-income families 

and that Medicare Advantage serves a high proportion of minority 

beneficiaries. 

Then on the front of the letter it says that if you reduce the cost 

to these Medicare Advantage programs, we are going to find ourselves in a similar situation as 1997. 

The reason that we created or that we went into this new proposal for health care coverage for seniors was it was to deliver better services to the seniors. The Medicare Advantage programs cover 

seniors who don’t fall into the—and I don’t know these acronyms— 

SLMB and QMB. So, that means they are just above the low-income level that QMB and SLMB cover. 

Meaning that if you take out Medicare Advantage programs or 

you address or deal with that funding problem, you are targeting 

a group of folks who have nowhere else to go. 

I am sure I am almost out of time, so I will give you whatever 

time I have to answer my question. 

Dr. MILLER. Okay, I think there are three things to say. We 

have not independently gone through these numbers, but you did 

hear some of the exchange at the beginning. There are a couple of 

different ways you can do this analysis and I think Ken’s analysis 

very much focuses on a specific income group and then eliminates 

people who either would be eligible for Medicaid and have employer 

coverage and then calculates his numbers. I think it is just important, because there is confusion and there are different ways that 

one can calculate this number. 

To that point, we haven’t independently done it. So I don’t—— 

Ms. TUBBS JONES. You haven’t done it. 

Dr. MILLER. That is—— 

Ms. TUBBS JONES. Let me finish. Experience says to you that 

if you close down the Medicare Advantage programs, there is a 

population of people who are without health care coverage and they 

are a population who have chronic health problems that are not 

covered by other health care plans. 

Dr. MILLER. Well, just to be clear, they are not uncovered. They 

are eligible for Medicare. For traditional Medicare, first point. The 

second point that I would like to make is that what this comes 

down to in terms of an argument is a benefit expansion for a group 

of people. 

I think if the Congress is interested in a benefit expansion for 

low-income beneficiaries, and this is part of the exchange that was 

over here, I think the question is what benefit, who is eligible and 

who pays? 

What is happening right now with these particular plans are, 

you have very different benefit packages, you are paying very different amounts of money. I think this is really important, it is not 

just available to the low income. A person of high income can also 

enroll in these plans. 


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Ms. TUBBS JONES. I am not arguing that high-income folks 

can’t enroll in the plan and high-income folks are not my worry, 

because high-income folks can buy whatever kind of health care 

they want to buy. All they have got to do is walk up to the Cleveland Clinic and say, I want to buy a heart or I want to buy whatever it is. 

The concern that we are talking about right now is the people 

who are at the lower echelon of income, who most often have access 

and need for programs like this. See, understand, I am one of those 

who support providing health care to everybody and we figure out 

how we pay for it, but in light of one of the fact that I am one of 

the few people that support that kind of process, we are stuck with 

7,000 different types of plans and it is as a result of your recommendations and others who said that this is the way we ought 

to do health care, that we ought to package it out and sort it out 

and different people get different things and pay different money. 

So, all I am saying to you, Dr. Miller, is before we go down the 

road of changing what we have right now, let us make sure we 

don’t change it on the backs of low-income and minority people who 

already receive disparate health service and access to health care. 

All the studies say that. That is all I am saying to you, Dr. Miller. 

Dr. MILLER. I understand your point. 

Ms. TUBBS JONES. I am out of time. I thank you very much 

for the opportunity. 

Dr. MILLER. I understand your point. 

Chairman STARK. Mr. Hulshof, would you like to inquire? 

Mr. HULSHOF. Thank you, Mr. Chairman. 

I would say to my friend from North Dakota that I have just 

been copied by your scheduler, and she has been inundated with 

schedule requests for you. 

Dr. Miller, just a couple of—see if you agree with these statements. I recognize the time. I will stick to my 5 minutes. 

Does MedPAC believe that Medicare beneficiaries should be able 

to choose between the traditional program and the alternative delivery systems that private plans can provide? 

Dr. MILLER. Yes. 

Mr. HULSHOF. Does MedPAC believe private plans may have 

greater flexibility in developing innovative approaches to care? 

Dr. MILLER. Yes. 

Mr. HULSHOF. Does MedPAC believe these plans can more 

readily use tools such as negotiated prices, provider networks, care 

coordination and other health care management techniques to improve the efficiency and quality of health care services? 

Dr. MILLER. They have the potential to do that, if they are paid 

in a way that drives that, yes. 

Mr. HULSHOF. No trick question. I took this exactly out of—this 

is your testimony. I just wanted for the record to underscore those 

points. 

Dr. MILLER. Right. 

Mr. HULSHOF. In the few minutes I have left, Dr. Orszag, you 

said no compelling cost reduction based upon the chronic disease 

management or preventive care. So, there are some cost reductions 

but what does not compelling mean? Or elaborate when you said 


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in your response or perhaps in your testimony there have not been 

compelling cost reductions that you have seen at CBO? 

Dr. ORSZAG. CBO has done a review of disease management, 

the literature on disease management programs. I want to emphasize, we would welcome additional evidence and additional studies. 

The cost impact as opposed to perhaps the quality impact, the 

cost impact from disease management programs has not been overwhelmingly proven. Which is why, in a lot of CBO scoring and 

other things, those programs often do not yield cost savings. 

Mr. HULSHOF. In the period of time, and perhaps we can do 

this via letter or maybe later conversation, the period of time that 

you considered would have been what period of time to determine 

cost savings? 

Dr. ORSZAG. That was a CBO report that was based on the 

available literature over varying periods of time. 

Mr. HULSHOF. Okay, I will get back with you on it, because 

what I am mindful of is that it took an act of Congress for us to 

force traditional Medicare to have preventative care like colorectal 

screenings, pap smears, mammograms and a host of other things, 

it took an act of Congress for us to put that into law. It took another act of Congress for us to have this pilot program Ms. Norwalk talked about as far as chronic disease management. That, of 

course, was just recently done. So I think the period of time that 

CBO included is important. 

This is not a criticism of you or anybody at CBO. In 1997, we 

cut the capital gains tax rate and we heard from joint tax Committee, here is what we expect the revenue impact to be, and it was 

wildly off, just as it was again in the most recent reduction of the 

capital gains rate. That is again—you are bound, as we are bound 

by you, as your official scorekeeper for us, we are bound by the limits to which human behaviors or what have you are included in 

your assumptions. 

So, again, maybe now is not the time—— 

Dr. ORSZAG. If I could just add very quickly, one of my key priorities over the next several years is to expand CBO’s health work. 

We have formed a new panel of health advisors. We are going to 

be revisiting all of the evidence on these key topics. I would again 

welcome additional evidence. I was just reporting what CBO has 

found thus far. 

Mr. HULSHOF. Very good. The last few minutes I have is to underscore again, because I had pulled out on page 15 and 16, and 

you have touched on this briefly, and that is eliminating double 

payments for IME, indirect medical education. 

Dr. ORSZAG. Yes. 

Mr. HULSHOF. Now, again, the idea was payments to teaching 

hospitals in the traditional fee-for-service sector should include this 

adjustment to account for the fact teaching hospitals often have 

greater expenses than other hospitals and often treat more complex 

conditions. Is that an accurate statement? 

Dr. ORSZAG. That is correct. 

Mr. HULSHOF. Now, one of the proposed suggestions you have 

for us as policymakers is to eliminate the double payment. Often 

the teaching hospitals, I understand it then, are getting the IME 


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amount to treat patients that are enrolled in Medicare Advantage; 

is that right? 

Dr. ORSZAG. That is correct. 

Mr. HULSHOF. All right. So, we are actually talking about reducing the IME payments to the teaching hospitals, or just the way 

that we are using the county benchmarks? 

Dr. ORSZAG. The option that I provided to you is to take the 

IME payments out of the benchmarks in the counties where the 

fee-for-service spending was the binding constraint on determining 

that benchmark in 2004, 2005, or 2007. The Administration has 

proposed, instead, doing it on the other side. That obviously could 

have different incidents and different results. 

Mr. HULSHOF. Thanks for that. I will yield back to the Chairman. 

Chairman STARK. Mr. Johnson, would you like to inquire? 

Mr. JOHNSON. Thank you, Mr. Chairman. 

Dr. Miller, in your SGR report, didn’t you say that capitated payments would help encourage more efficient health care? 

Dr. MILLER. Yes. 

Mr. JOHNSON. Medicare Advantage plans, I think, provide 

those kinds of incentives for efficiency, isn’t that true? 

Dr. MILLER. That is also what I said here. They can, given the 

way that they are structured, they definitely have the potential for 

efficiency gains if they are paid an appropriate amount. 

Mr. JOHNSON. So, if CBO is right and these plans will leave if 

we take away the extra payment, which means extra benefits, how 

can we make sure all Medicare beneficiaries are encouraged to sign 

up for anything? Plans are going to leave them and they will lose 

benefits. Is that true or not? 

Dr. MILLER. What my response to that would be, is that again, 

through our analysis, we think that there are plans currently available that can provide the benefits—can provide services that are 

more efficient than fee-for-service and still provide additional benefits on top of that. It will not be as many plans as are currently 

available, and plans will probably have to adjust their benefit packages, but there are plans that can provide additional benefits even 

under 100 percent benchmarks. 

Mr. JOHNSON. Well, are there any particular parts of the country that would be affected more than others? 

Dr. MILLER. Yes, this was touched on earlier. Any part of the 

country that has the so-called floor counties, which are counties 

where the payment rates are set very high above fee-for-service, for 

example, they can be as high as 140 percent and even more than 

that in some instances, areas like that which can be rural areas, 

but there are also urban areas, certain urban areas that have what 

is called an urban floor. Those payment rates are set well above 

fee-for-service. Those would be the areas that would probably feel 

it first. 

Mr. JOHNSON. Okay, but you can’t predict for certain what will 

happen, can you? 

Dr. MILLER. The reason that you can’t is because plans could 

respond in a number of ways. Plans could respond by running 

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cient entity. Or they could respond by leaving the program. That 

is why it is difficult to predict. 

Mr. CAMP. Will the gentleman yield for just a minute? 

Mr. JOHNSON. I yield. 

Mr. CAMP. I just want to follow up on something Mr. Johnson 

is saying which is, you say that capitation is good because it brings 

efficiencies into the system. 

Without the enhancements of additional services, why would 

anyone go into a capitated plan? That is the real problem with your 

testimony today. 

Dr. MILLER. I hear you. I think a couple of things. I just go back 

to a point that I was making. There are some plans, and I put that 

slide up, there are some plans that right now can deliver traditional fee-for-service benefits more efficiently than fee-for-service. 

For many, that was the going in proposition of managed care plans. 

In theory, they should be able to do that. If they are coordinating 

care, they should be able to be more efficient. Then, with that efficiency, provide the additional benefit to the beneficiary, bring more 

beneficiaries in and work in that way. That is the underlying assumption. 

The other side, just to try and respond to your question, I think 

the dilemma the commission sees to the way that you have constructed the question is, if you set the higher payments out and 

you bring people in through these benefits and ultimately the program can’t sustain it, it is two problems. What motivation do I 

have as a plan to be efficient if I am being paid well above fee-forservice? Two, if in the long run we can’t sustain those payments, 

then basically we have brought plans and people in and then had 

to pull the rug out from under them again. 

Mr. CAMP. I just wanted to make the point. It is Mr. Johnson’s 

time. So, I yield back. 

Mr. JOHNSON. Thank you for your comment. 

Thank you, Mr. Chairman. 

Chairman STARK. Thank you, Mr. Johnson. 

Mr. Pomeroy, would you like to wrap up for us? 

Mr. POMEROY. Thank you, Mr. Chairman. 

I think there may have been value in the Medicare system in 

terms of trying private sector ways of getting the benefit out to 

achieve greater cost savings and efficiencies, but if that was the 

case, you would expect it to save money, not cost you more money. 

If, on the other hand, the rationale for Medicare Advantage is we 

want to extend benefits, then you would think you would do it in 

more of a systemic way or systematic way than the randomness of 

just having various private sector plans right in various areas and 

you hope they get a little better benefit. 

To me, it falls short on each point of analysis. It is not saving 

us money and it is not delivering in a broad based way extra benefits. 

On the other hand, I feel badly about turning course again. For 

those people that are involved, including 4,000 in my district, and 

more than a million nationwide, they are about to see the world 

change again. This jacking around into a plan, out of a plan, into 

a plan under promises and having the promises be cut because of 

Congress’s action, that is all very regrettable. For some that are 


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getting almost a Medicare supplement type benefit now with their 

Medicare Advantage, maybe my colleague Tubbs Jones’s constituents that can’t afford a Medicare supplement, they are going to be 

hurt. Again, that is terribly regrettable, too. 

The prospects of taking maybe these extra benefits that some are 

benefiting from and trying to do it across the system would get 

quite expensive. Dr. Orszag, do you have any notions in terms of 

how increasing systemwide the payments to try and get those extra 

benefits out there to everybody, what the implications of that 

would be on a cost standpoint? 

Dr. ORSZAG. Well, I guess you could take the cost numbers that 

I gave you for moving to 100 percent of fee-for-service and then recognize that Medicare Advantage even in the out years is only projected to be slightly over a quarter of all beneficiaries and see that 

it would be many multiples of the numbers that I gave you for 

moving in another direction. 

Mr. POMEROY. Dr. Miller, do you have any? 

Dr. MILLER. I don’t have numbers, but, in terms of what that 

would cost, but it wouldn’t necessarily be, if I am following the discussion here, it is not necessarily expanding the benefit to all beneficiaries. If you are trying to target low-income beneficiaries, then, 

there is a subset of beneficiaries that you would be going after. 

Mr. POMEROY, but there are ways to target, if we make a policy 

decision to target and try and enhance the benefits for low-income 

beneficiaries that may not be able to afford Medicare supplement 

policies, we can do that in a program driven way that would be 

much more equitable across the country and probably effective at 

getting people into plans, than just slapping some money out there 

to plans and saying please go take this where you will? 

Dr. MILLER. Yes, and there are examples of these things. What 

is referred to as the Medicare savings programs, which are the 

QMBs and SLMBs. So based on a certain income level, a beneficiary’s premium and copayments are subsidized or just the premium is subsidized. There is also a low-income subsidy in the Part 

D benefit, which are much more—this is who is eligible for it, this 

is what they get, here is where the money comes from. 

Mr. POMEROY. Your testimony reveals, and I don’t know if you 

are reflecting the MedPAC board, a certain lack of enthusiasm for 

Medicare Advantage plans. Is that correct? 

Dr. MILLER. No, that is not correct. I have to say this in response to that it is very important to know that first of all, the 

commission does support managed care plans and choice. I am 

going to say this, the commissioner, republican, comes from the 

managed care industry, feels very strong that managed care plans 

have the ability to innovate and to provide good, good services. 

Even coming from that orientation, his view is that if you don’t 

pay properly, you don’t create the conditions for those plans to innovate. What he believes is that if we pay properly, the plans that 

will come to the table will have two characteristics. They will be 

efficient and able to provide additional benefits through that efficiency, and they will be there to stay because the business model 

is not built on excessive payments, it is built on efficiency. 

Mr. POMEROY. I agree. I think that is a very interesting perspective, one we ought to pursue. If we want people in managed 


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1See Medicare Payment Advisory Commission, ‘‘Report to the Congress: Medicare Payment 

Policy,’’ March 2007. 2 BNA’s Health Care Daily Report, ‘‘Growth of Managed Care Plans Threatens Program’s Finances, MedPAC Chairman Says,’’ March 2, 2007. 3Specifically, MedPAC has recommended that the benchmarks used to assess the bids that 

private plans submit, and to determine payments to the plans, be set at 100 percent of fee-forservice costs. See Congressional Budget Office, ‘‘Budget Options,’’ February 2007. 4See, for example, America’s Health Insurance Plans, ‘‘AHIP Raises Concerns about New 

MedPAC Report and its Potential Impact on Beneficiaries,’’ March 1, 2007. 5 America’s Health Insurance Plans, ‘‘Low-Income and Minority Beneficiaries in Medicare Advantage Plans,’’ February 2007. This report is similar in many respects to a prior analysis 

issued by the Blue Cross and Blue Shield Association. See Adam Atherly and Kenneth Thorpe, 

‘‘Value of Medicare Advantage to Low-Income and Minority Medicare Beneficiaries,’’ Blue Cross 

and Blue Shield Association, September 20, 2005. 6 BNA’s Health Care Daily Report, ‘‘Medicare Advantage ‘On the Table’ for Democrats Seeking 

Budget Savings,’’ March 7, 2007. 7Table 3A in AHIP, ‘‘Low-Income and Minority Beneficiaries in Medicare Advantage Plans,’’ 

op cit. Among all beneficiaries with incomes between $10,000 and $20,000, 25 percent are encare, because it is going to be cheaper, then we shouldn’t pay more 

than fee-for-service for it. That seems kind of basic to me. 

My time is up and our time is up. 

Chairman STARK. We have a minute to the vote. 

Mr. POMEROY. All right, thank you, Mr. Chairman. 

Chairman STARK. I want to take part of that minute to thank 

both of you for your help. Believe me, we will be back to you often 

in the next couple of months. Thanks, both of you, very much. The 

meeting is adjourned. 

[Whereupon, the at 5:01 p.m., the hearing was adjourned.] 

[Submissions for the Record follow:] 

Statement of Center on Budget and Policy Priorities 

According to the Medicare Payment Advisory Commission (MedPAC), Medicare 

provides excessive payments to Medicare Advantage plans. MedPAC estimates, on 

average, that private plans are paid 12 percent more than traditional fee-for-service 

for comparable beneficiaries.1

In testimony before Congress on March 1, MedPAC chairman Glenn Hackbarth 

stated that these overpayments are driving up Medicare payments and thereby 

making the task of sustaining Medicare more difficult. Hackbarth said Medicare 

faces ‘‘a very clear and imminent risk from this overpayment that will put this country in an untenable position.’’2

In fact, the Congressional Budget Office estimates that enactment of just one of 

the MedPAC recommendations related to Medicare Advantage payments to private 

plans—a proposal to ‘‘level the playing field,’’ by adjusting the payment formula so 

that private plans essentially are paid the same amounts (rather than more than) 

it would cost to treat the same patients under Medicare fee-for-service—would save 

$65 billion over five years and $160 billion over 10 years.3 Other Medicare Advantage payment changes recommended by MedPAC could save tens of billions more. 

In response, the private plans argue that curbing these overpayments will harm 

low-income and minority Medicare beneficiaries because those beneficiaries disproportionately rely on Medicare Advantage plans for help with Medicare premiums 

and cost-sharing and for other supplemental benefits not covered by traditional 

Medicare fee-for-service.4 As evidence, they cite a recent analysis issued by America’s Health Insurance Plans (AHIP) analyzing 2004 data from the Medicare Current Beneficiary Survey.5 Some members of Congress, including the ranking minority member of the House Ways and Means Committee, have also made these arguments.6

An analysis of AHIP’s own data, however, reveals the following: 

1. Medicaid, not Medicare Advantage, is the primary form of supplemental coverage for low-income and minority beneficiaries. 

• Among all Medicare beneficiaries with annual incomes below $10,000, some 48 

percent were covered by Medicaid. This is nearly five times the proportion enrolled in Medicare Advantage plans. In addition, slightly more beneficiaries 

with incomes below $10,000 rely on Medigap than on Medicare Advantage. 

• 7 Because minority Medicare beneficiaries are disproportionately low-income, 

they, too, rely heavily on Medicaid for supplemental coverage. Some 42 percent 


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rolled in Medigap plans and 22 percent are in employer-based retiree health coverage but only 

16 percent are in Medicare Advantage plans. 13 percent are in Medicaid. 8Table 1A. 

9Table 5A. 

10Table 7A. Beneficiaries with incomes between $10,000 and $20,000 constitute 27 percent of 

all Medicare beneficiaries living in areas with access to a Medicare Advantage plan. While they 

represent 33 percent of Medicare Advantage enrollees, such beneficiaries also constitute 56 percent of individuals with other forms of public coverage (like military or veteran’s health care), 

29 percent of individuals with Medigap coverage, and 28 percent of Medicaid beneficiaries. 11Table 8A. 12The Medicare Part D drug benefit includes a separate subsidy for low-income Medicare 

beneficiaries that pays for Part D premiums and/or Part D deductibles and cost-sharing. This 

low-income Part D subsidy could also be expanded to help low-income Medicare beneficiaries to 

a greater degree. 

of African-American Medicare beneficiaries, half of Hispanic beneficiaries, and 

42 percent of Asian-American beneficiaries have incomes of less than $10,000 

and therefore may be eligible for Medicaid.8 As a result, the majority of AsianAmerican Medicare beneficiaries (58 percent) and a plurality of African-American (30 percent) and Hispanics beneficiaries (34 percent) receive supplemental 

coverage through Medicaid. In comparison, much smaller percentages of minority beneficiaries—13 percent of African-Americans, 25 percent of Hispanics and 

14 percent of Asians, respectively—are enrolled in Medicare Advantage.9

2. Low-income and minority beneficiaries enroll in Medicare Advantage plans to 

a lesser, rather than a greater, degree than other Medicare beneficiaries. 

• Beneficiaries with incomes of less than $10,000 constitute 20 percent of all 

beneficiaries living in areas with access to a private plan but 16 percent of 

Medicare Advantage enrollees. (At the same time, as one would expect, they 

constitute 69 percent of Medicare beneficiaries who also receive coverage 

through Medicaid.)10

• 10 African-Americans represent 11 percent of all Medicare beneficiaries living 

in areas with access to a Medicare Advantage plan but 10 percent of all Medicare Advantage enrollees. They constitute 22 percent of Medicare enrollees who 

also receive Medicaid and 18 percent of those who rely on other forms of public 

coverage, including military or veteran’s health care. 

• Similarly, Asian-Americans constitute 2 percent of all beneficiaries with access 

to a private plan, and 1 percent of all Medicare Advantage enrollees. (AsianAmericans represent 9 percent of all dual eligibles.) Hispanics are slightly more 

likely to enroll in Medicare Advantage; they constitute 3 percent of Medicare 

beneficiaries with access to a private plan and 4 percent of Medicare Advantage 

enrollees.11

3. If Congress wishes to ensure that low-income, minority beneficiaries obtain assistance with paying their Medicare premiums and cost-sharing, and receive needed 

benefits, the best approach would be to strengthen aspects of the Medicaid program 

that assist low-income Medicare beneficiaries rather than to pay tens of billions of 

dollars in excess reimbursements to private plans so that a modest fraction of the 

excess payments trickle down to low-income and minority beneficiaries. 

• Overpaying private plans in the hope that some of the overpayments may accrue to low-income and minority Medicare beneficiaries is not an efficient approach. It also is not equitable, in that it enables beneficiaries who do not have 

access to retiree coverage, Medigap, or Medicaid to obtain some help with their 

cost-sharing or benefits only if they switch from fee-for-service to Medicare Advantage and consequently may have to accept substantial restrictions on their 

choice of providers. 

• MedPAC recommends that the overpayments to Medicare private plans be 

eliminated. MedPAC supports competition between fee-for-service and private 

plan alternatives, but calls for a level playing field where fee-for-service and 

Medicare Advantage compete fairly with each other. The overpayments skew 

the competitive landscape by allowing plans to use some lower cost-sharing and 

additional benefits to entice Medicare beneficiaries, particularly those who are 

healthier and thus less costly to treat. 

• As MedPAC chairman Glenn Hackbarth has stated, these overpayments threaten the federal government’s ability to sustain the Medicare program over time. 

As a result, these excessive overpayments are likely, if not rained in, to contribute to growing pressures to cut Medicare significantly over time. Such cuts 

could entail increased out-of-pocket costs and reduced benefits for Medicare 

beneficiaries. This could be particularly harmful for low-income and minority 


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13 Edwin Park and Robert Greenstein, ‘‘Options Exist for Offsetting the Cost of Extending 

Health Coverage to More Low-Income Children,’’ Center on Budget and Policy Priorities, March 

8, 2007. 1The Passive Enrollment of Pennsylvania’s dual eligibles was litigated in the Eastern District 

of Pennsylvania in the matter entitled Erb v. McClellan, No. 2:05-cv-6201 (E.D. Pa. filed Nov. 

30, 2005). Erb v. McClellan alleged violations of the MMA, the Medicare Act, the Administrative 

Procedure Act, and constitutional due process requirements. The subject of the litigation, which 

was favorably settled in March 2006, was the agency’s statutory authority and lack of due procbeneficiaries who can least afford to pay more of their health care costs on an 

out-of-pocket basis. • A far superior, more targeted approach would be to expand and improve the existing QMB, SLMB and QI–1 programs in Medicaid that help low-income Medicare beneficiaries pay Medicare premiums and/or cost-sharing.12 (The Qualified 

Medicare Beneficiary (QMB) program pays Medicare premiums and cost-sharing 

for poor Medicare beneficiaries, while the Specified Low-Income Medicare Beneficiary (SLMB) and Qualifying Individual (QI–1) programs together pay for 

Medicare premiums for beneficiaries with incomes up to 135 percent of the poverty line.) Such improvements could be financed by using some of the savings 

from curbing the excessive overpayments to private plans. (Congress also could 

encourage states to use existing flexibility in making full Medicaid more available to low-income Medicare beneficiaries.) • Alternatively (or in addition), because low-income and minority individuals and 

families disproportionately lack health insurance, savings from curbing the excessive payments also could be used to expand health insurance coverage more 

generally. As one immediate example, the resulting savings could be used to 

help offset the costs of legislation to reauthorize and expand the SCHIP program so that most or all low-income and minority children have coverage.13 The 

Leadership Conference on Civil Rights and a host of other civil rights and religious organizations support providing $60 billion over five years in additional 

funding for SCHIP and Medicaid as part of SCHIP reauthorization, in order to 

move a long way toward this goal. 

Those costs will need to be offset, however, if the SCHIP expansion is to become 

a reality. Savings from curbing overpayments to private plans, as MedPAC recommends, could provide some (or even all) of the offsetting savings. 

f 

Statement of National Center for Policy Analysis, Dallas, TX 

Mr. Chairman and members of the Subcommittee, I am John Goodman, President 

of the National Center for Policy Analysis, a nonprofit, nonpartisan public policy research organization dedicated to developing and promoting private alternatives to 

government regulation and control, solving problems by relying on the strength of 

the competitive, entrepreneurial private sector. I welcome the opportunity to share 

my views in writing about the current state of Medicare, specifically how the Medicare Advantage plans are contributing to provide health coverage to senior citizens. 

When Medicare began, the program copied the popular Blue Cross insurance plan. 

So for a while, seniors and non-seniors had basically the same health insurance. But 

since one plan was controlled by the marketplace and the other by politicians, the 

two plans diverged over time. Practically all of the structural problems of Medicare 

stem from this divergence. 

Seniors are the only people in our society who must buy a second health plan 

(Medigap) to fill in holes in their primary plan (Medicare). Also, millions of seniors 

are paying a third premium to a third plan (Medicare Part D) to get the drug coverage non-seniors have. Even then, many face ‘‘donut hole’’ gaps that no one else 

faces. 

Paying three premiums to three plans is extremely wasteful. In fact, two studies 

by Milliman & Robertson showed that if Medicare and Medigap funds alone were 

combined, seniors could have the same coverage non-seniors have—at least in principle. 

This is where Medicare Advantage plans come in. They offer seniors comprehensive coverage, comparable to what the rest of America has. 

In the early years, health economist Ken Thorpe found that these plans attracted 

low- and moderate-income seniors who did not have Medigap coverage. In return for 

a premium of about $250 a year or less, these enrollees got $1,034 worth of extra 

benefits, including drug coverage. A social problem solved, at minimal cost to taxpayers. 


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11Table 8A. 

With the introduction of (subsidized) Part D coverage, this trend has continued. 

Medicare administrators report that: 

• 86% of Medicare beneficiaries have the opportunity to join a Medicare Advantage plan with no premium charged for drug coverage. 

• In addition to free drug coverage, enrollees often get such extra benefits as 

hearing aids, vision and preventive care. 

• Half of Medicare Advantage enrollees have incomes below $20,000. 

• About 27% of Medicare Advantage plan members are minority enrollees. 

An AHIP study also found that these plans are especially beneficial for low-income and minority enrollees. In fact, almost 7 in 10 minority enrollees have incomes 

less than $20,000. 

There are special needs Medicare Advantage plans (for those with several chronic 

illnesses) and medical savings account plans (for those who want to manage some 

of their own healthcare dollars). Also, several studies have found that Medicare Advantage enrollees get higher quality care than those in standard Medicare. 

In all of its guises, Medicare Advantage plans take a rigid, inflexible Medicare 

benefit and use those same dollars to create more benefits better suited to senior 

citizen needs. 

Given this success, we should build on it. Let the market for senior care be wide 

open, with the government offering premium support for seniors who choose from 

a much wider range of options—including remaining in, and paying premiums to, 

a former employer’s plan. 

Thank you for your consideration. 

For CMS study: Medicare Advantage in 2007: http://www.cms.hhs.gov/ 

HillNotifications/downloads/MedicareAdvantagein2007.pdf 

For AHIP study: Low-Income and Minority Beneficiaries in Medicare Advantage 

Plans: http://www.ahip.org/content/fileviewer.aspx?docid=18974&linkid=162349 

For Consensus Group/Galen Report: http://www.galen.org/medicare.asp?DocID 

=997 

f 

Statement of Pennsylvania Health Law Project, Philadelphia, PA 

The Pennsylvania Health Law Project ‘‘PHLP’’ submits this testimony to be included in the record of the hearing on Medicare Advantage, held before the Health 

Subcommittee of the Committee on Ways and Means on Wednesday, March 21, 

2007. 

The Pennsylvania Health Law Project is a statewide, non-profit public interest 

law firm that provides free legal services, advice, information, and advocacy to 

lower-income individuals, persons with disabilities and seniors in accessing 

healthcare coverage and services through the publicly funded healthcare programs. 

Our website is www.phlp.org. 

We write on behalf of our clients who are enrolled in Medicare Advantage Special 

Needs Plans (SNPs) and who have experienced, firsthand, problems accessing their 

medically necessary healthcare as SNP enrollees. We have substantial experience 

with Medicare Advantage SNPs and grave concerns about them. In late 2005, CMS 

allowed six Medicare Advantage SNPs in Pennsylvania to ‘‘passively enroll’’ over 

110,000 of our poorest and most chronically ill individuals out of the Original Medicare benefit they had chosen and into the Medicare Advantage SNPs.1 The result 

was a wholesale disruption in the access to critically needed healthcare coverage. 

Once the chaos of the abrupt shift to managed care settled and consumers began 

actually attempting to obtain necessary healthcare coverage, the issues surrounding 

SNPs’ design and function came to the surface. 

The MMA included a five year authorization of special Medicare Advantage plans 

that exclusively or disproportionately enroll ‘‘special needs’’ populations. SNPs can 

be designed to serve people who 1) are institutionalized; 2) are entitled to state medical assistance; or 3) have a severe or disabling chronic condition. For 2007, CMS 

has approved over 470 plans to be Medicare Advantage SNPs, most of which are 

focused specifically on the dual eligible population, although a significant proportion 

of persons who are institutionalized are or will become dual eligibles and, similarly, 

many individuals with chronic conditions may also be dual eligibles. The arrival of 


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12The Medicare Part D drug benefit includes a separate subsidy for low-income Medicare 

beneficiaries that pays for Part D premiums and/or Part D deductibles and cost-sharing. This 

low-income Part D subsidy could also be expanded to help low-income Medicare beneficiaries to 

a greater degree. 13 Edwin Park and Robert Greenstein, ‘‘Options Exist for Offsetting the Cost of Extending 

Health Coverage to More Low-Income Children,’’ Center on Budget and Policy Priorities, March 

8, 2007. 

SNPs on the market since the MMA has been swift; their numbers rapidly increasing each year.2

Our clients believe that dual eligibles, persons with chronic conditions, and institutionalized individuals could potentially benefit significantly from coordinated, integrated, and managed care from a plan specially designed to meet their needs, 

since they generally have substantial and complex healthcare needs. Accordingly, 

SNPs do present the possibility or opportunity for better care through coordination, 

integration, and targeted care management. Please note, however, that although 

plans may take steps to deliver these benefits to meet the special needs of their 

members, CMS imposes no formal requirements that a SNP actually take these or 

any other steps to deliver on the promise of better care. 

We are particularly concerned that CMS has not promulgated regulations delineating either meaningful standards an MA plan must meet for initial approval as 

a SNP nor any requirements an approved SNP must follow to ensure that it coordinates the care and benefits or, in fact, meets the special needs of its enrollees. The 

failure by CMS to articulate meaningful requirements makes a difference for enrollees who are trying to access the medically necessary care they require. The MMA 

itself requires implementing regulations for SNPs.3 Yet, to date, no substantive regulations have been promulgated. 

It has quickly become clear to our clients in Pennsylvania that the Special Needs 

Plans, even those plans expressly for dual eligibles, which CMS has authorized as 

specially designed to meet their needs, are not obligated to require their providers 

to accept and bill Medicaid for any amounts unpaid by Medicare which are the responsibility of Medicaid. SNPs are not obligated to require, or even instruct, participating providers to comply with state and federal rules prohibiting them from billing Medicaid recipients for balances unpaid by Medicare. SNPs are not required to 

educate or maintain any accessible system for use by their participating providers 

to inquire whether those services that are not covered by the SNP are covered by 

Medicaid. SNPs are not obligated to inform their pharmacies of, or to require their 

pharmacies to bill, Medicaid programs for Part D excluded drugs that the state has 

elected to continue to cover under the state Medicaid plan. SNPs are not required 

to inform their enrollees that Medicaid may cover services or prescriptions not included in their SNP benefits, and they are not required to assist the enrollees in 

actually accessing these services. SNPs are not even required to insure the accuracy 

of the information they do publish about what a state Medicaid program covers or, 

in the institutional SNP realm, providers must furnish, and how the SNP coverage 

interacts with these. 

Absent minimum standards for meeting the special needs of the populations they 

serve, labeling these plans as specially designed to do so is misleading. CMS needs 

to commit to ensuring that coordinated, integrated care is delivered. Beneficiaries 

need substantive regulations that establish minimum standards for what SNPs 

must do and how SNPs must function to meet their special needs. These regulations 

must clearly set forth the expectation that SNPs will take affirmative steps to assist 

enrollees with navigating both their Medicare and Medicaid coverage to ensure that 

they receive all needed covered services regardless of whether the SNPs themselves 

are responsible for covering the service. Only then will the potential benefits of specialized managed care actually inure to beneficiaries.At a minimum, SNPs serving 

dual eligibles must be required to: 

1. Adopt minimum uniform standards for coordinating and integrating the Medicare and Medicaid benefits. These standards must be incorporated into the 

SNP contracts with CMS, and their compliance with these standards must be 

measured during site reviews and other CMS compliance evaluations. 

2. Include in SNP summary of benefits documents accurate information, as confirmed and approved by the State’s Medicaid agency, describing Medicaid’s 

coverage of services not covered by the SNP as well as Medicaid’s coverage 

of the beneficiary’s cost-sharing obligations within the SNP. 

3. Include as a SNP benefit ‘‘coordination of benefits’’ to include all services involved in coordination and integrating the enrollees’ multiple insurances (primarily Medicare and Medicaid). Failure to provide these coordination and inVerDate Nov 24 2008 00:50 Mar 21, 2009 Jkt 040313 PO 00000 Frm 00104 Fmt 6633 Sfmt 6621 E:\HR\OC\40313.XXX 40313

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tegration services should trigger beneficiary appeal rights through the Part C 

appeals process. 

4. Include in SNP marketing materials explanations of the ‘‘coordination of care’’ 

and ‘‘coordination of benefits’’ benefits, in addition to Parts C and D covered 

benefits, which dual eligibles can obtain from their SNP. 

5. Arrange for an evaluation of Medicaid coverage when a prescription is denied 

at the pharmacy, and, where applicable, direct the pharmacist to bill Medicaid. All SNPs should program their systems with medications Medicaid will 

and will not cover. 

6. Require network providers to participate in Medicaid or accept the SNP’s payment as payment in full. 

7. Instruct all network providers on applicable state and federal prohibitions 

against billing Medicaid consumers for Medicare cost sharing that should be 

covered by Medicaid. 

8. Design prescription drug or medical claims denial letters to state, ‘‘If you have 

Medicaid, note that this prescription medication or service may be covered by 

Medicaid. Please ask your provider to obtain this item through Medicaid. For 

any assistance with this, please call member services.’’ 

9. Train member services personnel regarding details of what Medicaid benefits 

are available and how to obtain them. 

10. Make available special needs units and case management services, and publicize their availability to all enrollees for obtaining assistance in accessing referrals, understanding plan policies and procedures and coordinating challenging care needs. 

11. Articulate precisely what benefits Institutional SNP enrollees get above and 

beyond what is already required by federal Nursing Home Reform and other 

laws and how benefits are limited, managed, and coordinated. 

12. Make public exactly what expertise enabled them to qualify as a SNP. 

On behalf of our clients, we thank the Committee for the opportunity to submit 

written testimony. We hope that this testimony will help inform the Committee’s 

understanding of Medicare Advantage Special Needs Plans. 

f 

Statement of SCAN Health Plan 

Overview 

SCAN Health Plan is a geriatric-focused health plan that has been participating 

in the Medicare program for over 20 years. Currently serving approximately 100,000 

beneficiaries in 7 Southern California counties, SCAN has grown to become one of 

the largest Medicare health plans in the State. 

As a non-profit health plan, SCAN is committed to providing value to its members. While SCAN ensures that members receive the health care benefits to which 

they are entitled through the Medicare program, the health plan also provides additional programs and services to promote health and independence. Examples of 

some of the ‘‘extra benefits’’ offered by SCAN that are not otherwise available under 

the fee-for-service program include: vision and hearing benefits, and transportation 

services. Because SCAN is a geriatric-focused health plan, its programs and services 

are tailored to meet the needs of older adults. For example, the health plan provides 

chronic care management programs, a nurse advice line, and comprehensive prescription drug benefits. 

Collectively, these benefits and services provide value to the Medicare program 

and to Medicare beneficiaries. In addition, they help to ensure that SCAN members 

have the resources they need to lead a healthy and independent life. 

SCAN Health Plan 

History 

SCAN was founded in 1977 as the Senior Care Action Network by a group of 

twelve seniors in Long Beach, California. In 1984, after being awarded a contract 

to operate as a Social HMO demonstration project, the Senior Care Action Network 

established SCAN Health Plan as a 501(c)(3) not-for-profit Medicare managed care 

plan. 

Since 1984, SCAN Health Plan has maintained the mission of the Senior Care Action Network—that of coordinating health and social services for frail older adults. 

SCAN aims to continue this mission by developing partnerships that allow the 

health plan to deliver the right health care, in the right setting, and at the right 

cost. 


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Today 

Over the past 20 years, SCAN has become an increasingly popular choice for seniors in Southern California. Currently, the health plan serves almost 100,000 Medicare beneficiaries in seven counties that include Los Angeles, Orange, Riverside, 

San Bernardino, Kern, Ventura, and San Diego. In addition, SCAN recently expanded into the Phoenix, Arizona area. Demonstrating the success of the health 

plan, SCAN’s membership has grown nearly 100% in the past 5 years. 

Offering Additional Benefits and Services 

To participate in the Medicare Advantage program, SCAN provides coverage for 

all of the services offered through the traditional Medicare program. This includes 

the full range of acute care benefits and Part D drugs. In addition, SCAN currently 

offers a number of health care related programs and services to meet the medical 

and functional needs of health plan members. The following is an overview of some 

of SCAN’s geriatric-focused ‘‘extra benefits’’ that are not covered by the traditional 

Medicare fee-for-service program: 

• Transportation—SCAN provides routine transportation to medical appointments. This benefit helps to ensure that frail members, such as those who are 

no longer able to drive, can access needed health care services. 

• Nurse Advice Line—With access to registered nurses (RNs) to assist with medical questions 24 hours a day / 365 days a year, SCAN members can have their 

health care concerns addressed outside of traditional physician office hours. 

• SCAN Family and Friends Program—This program gives SCAN Health Plan 

members the option of designating a friend or family member to receive nonconfidential health plan material. These individuals can then review important 

information at the same time as the member to help ensure informed decisionmaking. 

• Community Resource Centers—SCAN has built one community resource center 

in Ventura County, and is in the process of building a second resource center, 

to provide members of the health plan and the general community with healthrelated educational information and activities. 

• Health Education Programs—SCAN helps members become active and engaged 

in the management of their own health. As such, the health plan distributes 

health information through newsletters, handbooks, and the Internet. Member 

Review Board—To ensure that health plan materials are sensitive to member 

needs, a peer review process is employed by which current members review current health plan activities and information. 

• Chronic Care Management—Specially trained nurse or social worker case managers assist members from a patient-centric point of view. The health plan has 

designed programs for individuals with particular health needs such as Chronic 

obstructive pulmonary disease (COPD), Congestive heart failure (CHF), and diabetes. 

• Senior Sensitivity—Each of SCAN’s approximately 950 employees participate in 

the industry’s foremost ‘‘Senior Sensitivity’’ training to help them be more attuned to the needs and challenges of health plan members. 

• Continuing Medical Education—SCAN strongly believes that educating providers of care is a prerequisite for delivering good quality geriatric care. To this 

end, SCAN built its own continuing education capacity. The health plan offers 

geriatric education through Geriatric Symposiums as well as on—site trainings. 

• Additional Drug Benefits—SCAN offers an expanded prescription drug formulary and a fill-in of the ‘‘doughnut hole’’ or coverage gap. 

• Senior Friendly Focus—SCAN always has seniors in mind with every decision 

that the health plan makes. From the absence of automated phone systems to 

the distribution of pill holders, SCAN Health Plan promotes member health and 

well-being. In addition, SCAN’s trained member services team provides personalized one-on-one assistance. 

Serving Vulnerable Populations 

With the provision of the additional benefits and services listed above, SCAN offers a health care delivery solution that is unrivaled by the fee-for-service Medicare 

program. The health plan provides these services because of its focus on serving the 

most vulnerable and frail Medicare members. The following table provides an overview of SCAN’s membership. 


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Table 1. SCAN Health Plan 

Member Statistics 

Average Age Approximately 78 years 

Male/Female Ratio 36%/64% 

Marital Status Married—46% 

Unmarried—54% 

Highest Level of Education High school graduate or less—57% 

Some college or higher—43% 

Annual Income Less than $20,000—38% 

Medicare and Medicaid Enrollees—— Approximately 7% 

Dual Eligibles 

As illustrated in Table 1, SCAN’s members are predominately female, unmarried, 

and have an average annual income of less than $20,000 per year. In addition, the 

average age of members in the health plan is approximately 78 years. As compared 

to the general Medicare population in the State of California, SCAN’s membership 

is on average older. 


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1 As indicated in the April 2006 Health Outcomes Survey (HOS), Cohort VIII, 2005. 

SCAN vs. Other Medicare Advantage Plans 

SCAN serves a population that is more frail and chronically ill than other Medicare managed plans1 Specifically, SCAN members are: 

More likely to be female and less likely to be male. Less likely to be married and 

more likely to be widowed. More likely to be over 80 years of age. Less likely to 

have 0 chronic conditions and more likely to have four or more chronic conditions. 

More likely to report having high blood pressure, angina, CHF, AMI, stroke, Crohn’s 

disease, arthritis, and sciatica. More likely to report difficulty on each surveyed 

measure of Activities of Daily Living (ADLs) such as: bathing, dressing, eating, 

walking, using the toilet, and getting in or out of a chair. 

The following table highlights some membership statistics from a recent HOS survey. 

Table 2. SCAN Health Plan 

Member Statistics 

Members with 0 Chronic Conditions 9% 

Members with 4+ Chronic Conditions 40% 

Percentage of Members Reporting Difficulty with ADLs: Up to 44% 

Providing Extra Value 

SCAN offers considerable extra value to its enrollees by offering benefits and services, above and beyond those covered by the traditional Medicare program. Without 

this coverage, members would have to pay significantly more out-of-pocket for many 

of their health needs. This is a major reason why a significant percentage of SCAN’s 

members are lower income seniors. 

Generally, these are individuals whose incomes are not low enough to qualify for 

the Medicaid program but whose financial situation is such that they are extremely 

cost conscious. Having low out-of-pocket costs is also particularly important for 

members with considerable health needs who utilize more medical services. 

Offering High Quality 

SCAN offers multiple quality improvement activities geared to improve the health 

care delivery experience for Medicare members. These include: 

A Geriatric Advisory Board—SCAN sponsors a Geriatric Advisory Board that 

brings together a group of the nation’s foremost geriatric, clinical, and health policy 

experts to help guide the health plan in its offering of geriatric health management 

programs to seniors. 

Coordination of Care—SCAN coaches members with high intensity and high cost 

needs through care transitions, or between care settings. 

Focus on early identification of conditions, preventative services, and stratification 

of patient risks. 

Monitoring of quality measurements that are not provided to Medicare members 

in the fee-for-service Medicare program. 

Conclusion 

Because SCAN is a geriatric-focused health plan, its membership is on average 

older and more frail than the general Medicare population, and than other Medicare 

managed care plans. The numerous additional benefits and services provided by 

SCAN Health Plan, above and beyond the fee-for-service Medicare program, help to 

ensure that members have the resources they need to lead a healthy and independent life. 

Looking forward, SCAN intends on continuing to provide health care services to 

senior Medicare beneficiaries. For the past 20 years, SCAN’s almost 100,000 members, 950 employees, and thousands of contracted providers have come to depend on 

us, and us on them. With your support, we can ensure that managed care plans remain a choice for Medicare beneficiaries. 

f 


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The Center for Medicare Advocacy, Inc. 

MedPAC has argued consistently for years that private plans could serve an important role within Medicare, but payments to plans must be financially neutral 

when compared to those in the traditional Medicare program. The Center agrees 

that financial neutrality would be a more appropriate position than the current 

scheme, nevertheless the Center urges Congress to consider adjusting payments to 

MA plans to less than traditional Medicare expenditures as a means to stimulate 

competition and efficiency among the private plans. Risk-based and coordinated care 

is important but not if it comes at the expense of a social insurance program that 

has been consistently successful for over 40 years. 

Private Fee-For-Service 

HMO’s are not the only private plan options participating in Medicare. Other plan 

types include Local and Regional Preferred Provider Organizations (PPOs), Private 

Fee-for-Service plans (PFFS), and Special Needs Plans (SNPs). Insurance companies 

have continued to offer private plans in more areas and now at least one private 

plan alternative is available to every Medicare beneficiary. 

PFFS is the fastest-growing plan type, accounting for 46% of total enrollment 

growth from December 2005 to July 2006. PFFS was available to 45% of beneficiaries in 2005 and is now available to almost 100% of beneficiaries. With payments to PFFS plans averaging 119% of the per capita traditional Medicare expenditures, it is no wonder that PFFS plans are growing at such a rapid rate. 

Arguments from the Plans 

Chairman Stark and other members of Congress have begun to seize on these 

overpayments to private plans as a significant source of potential savings for Medicare. Not surprisingly, the private insurance companies are very concerned that 

they might lose billions of dollars. 

The plans have argued that cutting funding to the MA plans would disproportionately hurt low-income beneficiaries. We agree that low-income beneficiaries need 

extra help the most. For those who are most needy, the majority rely on Medicaid 

or Medigap policies, not MA plans, to cover what Medicare does not. Extra help is 

also available to low-income beneficiaries in the form of Medicare Savings Programs 

(MSPs). These programs reduce out-of-pocket expenses for individuals with incomes 

below 135% of the Federal Poverty Level ($18,482 for a couple and $27,878 for a 

family of four), but these programs could serve even more beneficiaries. The savings 

from eliminating the overpayment to MA plans could be used to provide more benefits to more low-income beneficiaries, not just those who choose to enroll in an MA 

plan. 

Private plans have also pointed out that people who enroll in an MA plan receive 

more benefits than are offered by traditional Medicare. It is obvious that beneficiaries should receive as many benefits as possible, but those benefits should be 

distributed equitably. In the current system, the vast majority of beneficiaries—who 

choose traditional Medicare in the face of a marketing barrage from the private 

plans—pay premiums that are inflated by the overpayments made to MA plans. 

Why limit extra benefits to just the beneficiaries who enroll in MA plans at the expense of those who choose not to? How significant are these additional benefits, actually? The private plans cannot answer these questions. These additional services 

should, and could with efficient spending, be available to all Medicare beneficiaries. 

The Reality of Medicare Advantage for Beneficiaries 

Because Medicare Advantage plans, and in particular PFFS plans, are paid so 

well, they are engaged in an extensive marketing campaign to encourage, and sometimes coerce beneficiaries to join their plans. Indeed, 8.3 million beneficiaries, or 

19% of the total number of beneficiaries, are currently enrolled in a Medicare Advantage plan, as compared to 7.6 million beneficiaries in 2006 [Medicare Advantage 

Fact Sheet, Kaiser Family Foundation (March 2007)]. In the Center’s experience, 

not all Medicare beneficiaries understand the benefit structure of Medicare Advantage plans, know that they are enrolling in Medicare Advantage plans, or even reap 

‘‘benefits’’ from the additional services these plans provide with the extra money 

they receive. 

Marketing Practices 

The Centers for Medicare & Medicaid Services (CMS) is supposed to monitor and 

approve all marketing materials. Nevertheless, these marketing materials often do 

not present Medicare Advantage plan structures in the most accurate light or provide all of the information a beneficiary needs to make an informed choice. A glossy, 

two-page advertisement inserted into the Montgomery County, Maryland, ‘‘WashVerDate Nov 24 2008 00:50 Mar 21, 2009 Jkt 040313 PO 00000 Frm 00109 Fmt 6633 Sfmt 6621 E:\HR\OC\40313.XXX 40313

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ington Post’’ in March 2007 provides an excellent example. The ad advised that 

someone who had chosen a Medicare plan with drug coverage still had time until 

March 31, 2007 to switch to an Aetna Medicare Advantage plan with drug coverage. 

A comparison chart showed that Medicare Parts A and B, Medicare Supplemental 

Plan, and Aetna Medicare Advantage Plan all have a ‘‘wide choice of local doctors/ 

specialists,’’ but only the Aetna Medicare Advantage Plan has preventive care with 

a $0 co-pay and an allowance for eyewear and hearing aids. 

Despite being approved by CMS, the advertisement is not accurate. The ‘‘network’’ 

of doctors and specialists for Medicare Parts A and B and most Medicare Supplemental (Medigap) plans is widest because there actually is no network; beneficiaries 

can go to any doctor in the country who accepts Medicare, this includes almost all 

physicians, indeed almost all health care providers nationwide. Aetna Plans, on the 

other hand, restrict access. According to www.medicare.gov, Aetna offers four HMOs 

in Montgomery County, all of which require an enrollee to use plan doctors. Aetna 

also offers four PPOs (two local and two regional), that allow an enrollee to use any 

doctor, but the enrollee must pay higher cost sharing to go out of network. It is also 

inaccurate to say that only Aetna Medicare Advantage Plans have a $0 co-pay for 

preventive care. Beneficiaries with Medicare Parts A and B and a supplemental 

plan may also have a $0 co-pay if the Medigap plan covers Part B cost-sharing. 

Aetna Medicare Advantage Plans may indeed provide an ‘‘allowance’’ for eyewear 

and hearing aids that is not available under traditional Medicare, but the allowance 

for eyewear under at least one of the Aetna plans is $100 every two years. That allowance does not justify the premium for the Medicare Advantage Plan or the additional Medicare payments the plan receives from the Medicare program. 

The advertisement, and most other educational information about Medicare Advantage plans, also does not adequately explain how Medicare Advantage plan costsharing may differ from the traditional Medicare cost-sharing structure, particularly 

for more costly services. For example, one of the Aetna plans available for beneficiaries who received the ‘‘Washington Post’’ ad, the Aetna Golden Choice Regional 

PPO plan, imposes a $150 yearly deductible for all out-of-network services. A beneficiary who is induced to enroll in this plan after seeing the ad and who believes 

she may use any provider will face a higher deductible than the current Part B deductible of $131. This out-of-network deductible applies to home health services, 

even though Medicare Parts A and B imposes no such cost-sharing. Beneficiaries 

who use an out-of-network hospital or skilled nursing facility must pay 20% of the 

entire hospital or skilled nursing facility stay; far in excess of the cost-sharing under 

traditional Medicare. Beneficiaries who use an in-network SNF start paying costsharing after day 7, rather than after day 20 in traditional Medicare. The plan imposes a $20 co-pay for each in-network home health visit and 20% cost-sharing for 

out-of-network care; traditional Medicare imposes no cost-sharing for home health 

services. 

Individual Testimonials 

Beneficiaries often do not learn about or understand these cost-sharing differences 

until after they have enrolled in a plan. For example, a Connecticut beneficiary required hospitalization each month to receive a blood transfusion. She paid the Part 

A deductible in January, but because she required monthly hospitalization she 

never entered a new benefit period and so paid no other cost-sharing for the rest 

of the year. The HMO she chose, like the Aetna PPO described above, imposed a 

co-pay for a Medicare-covered hospital stay that was substantially less than the 

Part A deductible. What the Connecticut woman did not understand until her second hospitalization was that the co-pay is required for each hospital stay, even if 

it falls within what would be the same benefit period under traditional Medicare. 

Thus, instead of saving money, she was required to pay substantially more for her 

hospital care than she would have paid if she was in traditional Medicare. 

A beneficiary from Jasper, Florida enrolled in a PFFS plan at the beginning of 

2007 because of his frustration with his prescription drug plan. Neither he nor the 

insurance agent understood the differences between traditional Medicare and a 

PFFS plan. The beneficiary expected only the prescription drug coverage to change. 

In February, three hours before a scheduled biopsy of a lump in his pectoral muscle, 

his doctor called to cancel the biopsy because the doctor would not accept the plan’s 

terms and conditions. He was told by his primary care physician that the doctor 

would not accept the plan because the plan had not paid on time in the past. In 

early March the beneficiary finally received a welcome packet from the plan and 

saw for the first time the fine print explaining that coverage is contingent on his 

doctors’ acceptance of the plan. He also found that the drug coverage was much 

more restrictive than under his previous Prescription Drug Plan (PDP). The beneficiary was able to get an ‘‘emergency’’ transfer back to his old PDP and original 


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Medicare, effective April 1, 2007. However, he will have gone more than a month 

without the needed biopsy and other medical services. 

Special Needs Plans 

In addition to marketing problems and cost-sharing issues, some Medicare Advantage plans may not be providing meaningful additional benefits to their enrollees. 

For example, beneficiary advocates have alerted the Center about SNPs for people 

with Medicare and Medicaid (dual eligibles) that do not contract with the largest 

Medicaid mental health provider in the community, that include in their networks 

doctors who do not accept Medicaid, that assess cost-sharing that should otherwise 

be covered by the state Medicaid program, or that do not inform their enrollees that 

the state Medicaid program will pay for some drugs such as benzodiazepines that 

are excluded from Medicare drug coverage. Some SNPs provide, as extra benefits, 

transportation and dental services that are already covered by Medicaid and thus 

provide their enrollees with no extra services for the extra payments the plans receive. 

Conculsion 

Private Medicare plans may offer some beneficiaries a useful Medicare coverage 

choice, but many beneficiaries find out that the coverage is not what they expected 

when they enrolled. The Medicare Trustees will soon issue their annual report, and 

will inevitably raise alarms that Medicare is in financial peril. The payments to 

these plans must be at least financially neutral when compared to those made for 

people in the traditional Medicare program. Eliminating overpayments to private 

plans is a clear way to save Medicare hundreds of billions of dollars while also making the program more equitable and cost-effective. Congress should prohibit overpayments and subsidies to private Medicare plans in order to ensure fair, affordable 

access to health care for older people and people with disabilities—now and in the 

future. 

f 

Statement of Visiting Nurse Associations of America, Boston, MA 

The Visiting Nurse Associations of America (VNAA) is the official national association for non-profit, community-based Visiting Nurse Agencies (VNAs) across the 

country. For over one hundred years, VNAs have shared several common goals: to 

care for the sick and the disabled, to help people recover their strength and independence, to partner with their communities in improving public health care, and 

to assure that all people, rich or poor, have access to the home care they need. 

VNAs created the profession of home care over one hundred years ago, and it is 

our hope and intention to provide high quality home care for at least the next onehundred years. We are pleased to submit this statement for the record to highlight 

some of the experiences and concerns that VNAs have about the Medicare Advantage Program. 

Medicare Advantage was implemented with the goal of providing enhanced benefits for beneficiaries, and intended to save the Medicare program money; however, 

VNAs’ experience with the program indicates that this is not always the case. 

Enrollment in the Medicare Advantage program accounts for 19% of all Medicare 

beneficiaries (8.3 million), and the Medicare Payment Advisory Commission 

(MedPAC) has shown that payments to the Medicare Advantage program are 112% 

of fee-for-service (FFS) Medicare expenditure levels, on average. Although the new 

MA programs are required to cover all benefits that are offered under FFS Medicare, and many plans offer enhanced benefits, they also impose additional cost-sharing requirements and limit beneficiaries to providers in their own networks. 

VNAs from across the country have expressed concern that co-pays and 

deductibles on home care often cause patients to self-limit the care that they get 

and as a result, go without needed health care. In other instances, beneficiaries believe that Medicare will pay the cost of the deductible and do not pay their portion 

of the claim. For example, one plan in New Jersey imposed a $35 co-pay per visit 

on beneficiaries effective this year, which could be cost-prohibitive to a beneficiary 

who requires several visits in one week. As a result of the co-pay, all the members 

of that plan who the VNA has tried to set up services for have declined home health 

services that they needed. Another agency, located in Pennsylvania, has experienced 

problems collecting beneficiary co-pays/deductibles because beneficiaries think that 

Medicare will or should pay and do not understand how their Medicare Advantage 

plan works. 

Many VNAs across the country are struggling to provide the same level of services 

to MA enrollees as enrollees ins traditional Medicare FFS receive, although VNAs 


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receive reduced payments from the MA plans that most often do not cover the cost 

of care. In some instances, there is a $1200 gap between the amount that a MA plan 

pays for care and the amount that FFS Medicare reimburses over a 60 day episode. 

In addition, quality information and processes required by traditional Medicare are 

often not valued or taken into account for reimbursement by MA plans and the 

plans impose additional administrative requirements that require increased employee resources for VNAs. One VNA in Omaha, Nebraska estimates that they could 

reduce their overhead by $45,000 a year if they did not have to use resources on 

authorization/verification of services, denial management and collections on incorrect payment, which they would prefer use to provide services. 

For these reasons, we are concerned about the inevitable erosion of the Medicare 

program. For example, if Medicare Advantage plans do not cover the cost of care, 

then it is probable that beneficiaries over time will not receive equal care under the 

MA program as they would have if they had stayed with the traditional Medicare 

program. In some cases MA enrollees will not have access to home health care as 

agencies are forced to stop accepting MA patients for financial reasons. 

To understand the difficult financial decisions that VNAs, for example, have to 

make when determining whether or not they can absorb the financial losses associated with many Medicare Advantage plans, it is important to know the average 

total operating margins of these providers. According to a 2006 data study by The 

Moran Company, 66% of VNA providers have total operating margins of less than 

5% and 39% percent of VNA providers have negative total operating margin. Much 

of the financial difficulties that VNAs are experiencing are due to the revenue losses 

that they incur under managed care, including Medicare Advantage, Medicaid, and 

the recent sharp increases in the cost of recruiting and retaining clinicians. 

Given this financial environment VNAA is concerned that increased market penetration of beneficiary enrollment into Medicare Advantage plans that do not cover 

the cost of care may financially cripple VNAs in certain geographic areas. Our greatest concern is that access to potentially the only ‘‘safety net’’ provider of home 

health services in a particular area will no longer be an option to many Medicare 

beneficiaries, which might be the outcome if those providers are forced to close or 

stop accepting MA beneficiaries. 

We would like to offer some examples of how the home health benefit under feefor-service Medicare generally differs from the home health services offered by many 

Medicare Advantage plans as well as information on some of the problems that 

VNAs have experienced with Medicare Advantage that we believe are typical for 

home health agencies nationwide. 

Home Health under fee-for-Service Medicare 

• Fee-for-service Medicare ensures continuous home health care for the entire 60- 

day episode of care and the episode is authorized and overseen by a physician. • Episodic payments allow providers to follow evidence-based best practices for 

chronic care management, medication management, etc., which is difficult to do 

when visit authorizations are unpredictable and inadequate for the patient’s 

specific diagnosis(es). Such comprehensive care management is essential to prevent hospitalizations. Medicare Home Health PPS has made it possible for providers to manage care for optimal outcomes, including avoidance of hospitalizations. • Quality data (i.e. Outcome Based Quality Improvement (OBQI) data from the 

OASIS assessment instrument) provided to the home health agencies (HHAs) 

by CMS are used by the agencies to improve their quality processes and are 

used by state surveyors to ensure that HHAs are providing quality care. 

Home Health under Medicare Advantage 

• MA plans typically authorize only 2–3 visits at a time, complicating and often 

disrupting continuous chronic care management. • Under MA, the plan’s case manager typically manages the patient’s plan of care 

and, therefore, clinical decisions are often made by MA staff whodo not have 

any clinical experience. • In addition, MA plans typically have their own administrative paperwork requirements that must be completed in addition to Medicare’s OASIS and other 

paperwork requirements even though OASIS data is often not used by MA 

plans. This over-abundance of paperwork is inefficient for Medicare, the provider, and the beneficiary. 

General problems experienced by VNAs under Medicare Advantage: 

• Administrative Requirements—MA plans require an extensive amount of 

paperwork and administrative time. The constant need to seek re-authorizations and check claim status is a drain on VNAs’ resources; the amount of time 


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it takes to gain reauthorization for more visits could prevent patients from receiving medically-necessary services. However, VNAs will always provide the 

medically-necessary services if a patient is under their care, which may lead to 

claim denials because of the ‘‘unauthorized’’ status due to time lapses on the 

MA administrative side. 

• Reimbursement—Reimbursement for Medicare Advantage plans is substantially below cost—on average about $50 less than the actual cost per visit, but 

in many cases much more. 

• Educating Beneficiaries About Their Plan—With the numerous Medicare 

Advantage plans that are offered, it is vital that beneficiaries have adequate information about the plans in order to make an informed decision about their 

care. MA plans differ widely in the amount of home health services they cover. 

Typically, the only information provided by the plans simply states that all 

medically necessary services are covered, but each plan may have it’s own definition of a ‘‘medically necessary service.’’ Therefore, it can be extremely difficult 

for beneficiaries who need home health care to determine which plan will best 

meet their needs. 

• Beneficiaries Are Unaware of Enrollment—As MA enrollment grows, there 

is an increasing need to coordinate the transition of patients from traditional 

Medicare to a MA plan. For example, with the advent of Part D, many dualeligible beneficiaries were passively (i.e. automatically) enrolled into MA plans. 

Although information informing them of such enrollment must be sent to them, 

in reality many of these beneficiaries are unaware that they have been enrolled 

into a MA plan. 

In addition, whether a beneficiary was passively enrolled into a MA plan or enrolled knowingly, he or she may not understand the implications of being enrolled. 

Consequently, beneficiaries fail to inform their home health provider of their change 

in enrollment status, either because they are not aware of their enrollment, have 

cognitive impairments, or do not realize that the MA plan is responsible for covering 

all Medicare health care services, including home health. Some beneficiaries believe 

that they signed up only for prescription drug coverage under a MA plan and don’t 

realize that they no longer have traditional Medicare coverage for all other health 

care services. 

• HHAs Not Reimbursed for Services—To avoid the enrollment problems detailed above, HHAs make every attempt to determine a patient’s Medicare eligibility status during the initial patient visit or through Medicare’s enrollment 

database, the Common Working File (CWF). If the patient believes he/she is 

still covered by traditional Medicare, and the CWF reflects traditional Medicare 

enrollment, the HHA has every reason to believe that the patient is covered by 

traditional Medicare but then later finds out this is not the case due to: 1) patient confusion about his/her coverage as mentioned above, 2) the patient’s retroactive enrollment into a MA plan, and/or 3) delay of updated information in 

the CWF. In such situations, many MA plans have refused to cover services 

that HHAs have provided in good faith because the services were not ‘‘pre-authorized’’ by the MA plan, or the HHA did not have a contract. 

VNAs across the country continue to experience problems with reimbursement 

due to delays in the information that is updated in the CWF. are refused reimbursement for services they provided in good faith. VNAs with a high census of Medicare 

Advantage patients must devote valuable staff resources to denial claims management, in addition to the staff resources who are devoted to obtaining pre-authorizations. 

The Visiting Nurse Service of New York (VNSNY) provided the following example 

to illustrate their efforts to determine beneficiary enrollment status. As you will see 

from the example, the CWF did not accurately reflect the beneficiary’s enrollment 

status, and as a result the VNSNY was denied reimbursement for the services they 

provided in good faith. 

VNSNY Example VNS ID: H4186804 

4/19/06: VNS insurance Fiscal Comments state the Medicare eligibility query 

shows the patient is enrolled in traditional Medicare. 

4/20/06: Patient admitted 

5/17/06: The Medicare batch query indicates the patient enrolled in Elderplan effective 

5/1/06: The patient was not flagged as an Elderplan enrollee on two previous 

Medicare batch eligibility reports run in May 2006. 


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Elderplan denied VNS’s request for authorization. 

Dollar Amount at Risk: $810 

Although this is just one example, this is a widespread issue for VNAs. Problems 

with reimbursement issues related to delayed updates to the CWF are the most 

common problem that VNAs experience with the Medicare Advantage program. 

Data used by MedPAC and CMS and reports released by the Congressional Joint 

Economic Committee, as well as the Annual Statistical Supplement to the Social Security Bulletin have all shown that home health is a cost-effective alternative to 

other settings of care. Treating patients in the home health setting is significantly 

less costly than other settings of treatment such as hospitals, inpatient rehabilitation facilities, and skilled nursing facilities. Furthermore, for many patients, receiving the health care and skilled services that they need in their homes is preferable 

to receiving care in other settings that require them to receive care away from their 

homes and families. We would hope that Medicare Advantage plans would see the 

advantage to ensuring that beneficiaries receive adequate and appropriate home 

health care services. VNAA believes that by appropriately utilizing home health 

care services, Medicare Advantage plans will save money by keeping beneficiaries 

out of hospitals and other costly settings of care. 

To address the issues with Medicare Advantage program that are detailed in this 

statement, VNAA offers the following recommendations, which we believe will ensure increased beneficiary access to comprehensive home health services: 

Educating Beneficiaries About Their Plan 

Recommendation: We urge Congress to require that all MA Plans provide beneficiaries 

with specific details of what home health services they cover, including the average number of home health visits authorized per patient, if home health services 

require pre-authorization, and information about beneficiary cost-sharing requirements such as co-pays. This information must be available in all marketing materials used by MA plans. In order to ensure that beneficiaries make informed decisions, it is imperative that beneficiaries have access to information on the full scope 

of covered services, and receive updated information if the plan changes the services 

that are covered. 

Home Health Agency (HHA) Reimbursement 

Recommendation: During the initial month of any person’s MA enrollment (or 

longer in the case of retroactive enrollment greater than a month), we urge Congress to require MA plans to waive the pre-authorization rule for home health services and any similar rule that would inhibit provider payment in situations where 

the HHA could not have reasonably been expected to know of the patient’s MA enrollment status or to establish a hold harmless provision that would allow HHAs 

to receive reimbursement for services that they provided in good faith when they 

have made every effort to ascertain a beneficiary’s enrollment status before providing services. 

Medicare Advantage Should Use an Episodic Care Delivery System 

Recommendation: Medicare Advantage plans should provide an episodic care 

management home health services benefit that would replace the current practice 

of authorizing and reimbursing for only a few visits at a time. The episodic payment 

plan in traditional Medicare allows VNAs to provide beneficiaries with cohesive and 

continuous care-management to achieve positive clinical outcomes, including reduced re-hospitalizations. An episodic delivery system would also ensure that beneficiaries in traditional Medicare and Medicare Advantage plans receive an equal 

home health care benefit. 

VNAA is grateful for the opportunity to submit these comments to the Ways and 

Means Subcommittee on Health, and we look forward to working with the Committee on the issues surrounding the Medicare Advantage program to ensure that 

all Medicare beneficiaries receive equal home health benefits and have access to the 

high-quality, clinically effective and cost-efficient home health care that VNAs have 

provided for over a century. 

For more information, please contact Kathy Thompson at 240–485–1856 or Ashley 

Groesbeck at 240–485–1857. 

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