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76–146—PDF 2011

S. HRG. 112–563 

PERSPECTIVES ON MEDICAID 

FROM SELECT GOVERNORS 

HEARING 

BEFORE THE

COMMITTEE ON FINANCE 

UNITED STATES SENATE 

ONE HUNDRED TWELFTH CONGRESS 

FIRST SESSION 

(SALT LAKE CITY, UT) 

JULY 14, 2011 

( 

Printed for the use of the Committee on Finance 

COMMITTEE ON FINANCE 

MAX BAUCUS, Montana, Chairman 

JOHN D. ROCKEFELLER IV, West Virginia 

KENT CONRAD, North Dakota 

JEFF BINGAMAN, New Mexico 

JOHN F. KERRY, Massachusetts 

RON WYDEN, Oregon 

CHARLES E. SCHUMER, New York 

DEBBIE STABENOW, Michigan 

MARIA CANTWELL, Washington 

BILL NELSON, Florida 

ROBERT MENENDEZ, New Jersey 

THOMAS R. CARPER, Delaware 

BENJAMIN L. CARDIN, Maryland 

ORRIN G. HATCH, Utah 

CHUCK GRASSLEY, Iowa 

OLYMPIA J. SNOWE, Maine 

JON KYL, Arizona 

MIKE CRAPO, Idaho 

PAT ROBERTS, Kansas 

MICHAEL B. ENZI, Wyoming 

JOHN CORNYN, Texas 

TOM COBURN, Oklahoma 

JOHN THUNE, South Dakota 

RICHARD BURR, North Carolina 

RUSSELL SULLIVAN, Staff Director 

CHRIS CAMPBELL, Republican Staff Director 

(II) 

C O N T E N T S 

OPENING STATEMENTS 

Page 

Hatch, Hon. Orrin G., a U.S. Senator from Utah ................................................. 1 

WITNESSES 

Herbert, Hon. Gary, Governor, State of Utah, Salt Lake City, UT ..................... 3 

Barbour, Hon. Haley, Governor, State of Mississippi, Jackson, MS ................... 7 

ALPHABETICAL LISTING AND APPENDIX MATERIAL 

Barbour, Hon. Haley: 

Testimony .......................................................................................................... 7 

Prepared statement .......................................................................................... 23 

Hatch, Hon. Orrin G.: 

Opening statement ........................................................................................... 1 

Prepared statement .......................................................................................... 33 

Herbert, Hon. Gary: 

Testimony .......................................................................................................... 3 

Prepared statement .......................................................................................... 35 

Rockefeller, Hon. John D., IV: 

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

COMMUNICATIONS

Cato Institute ........................................................................................................... 45 

Galen Institute ......................................................................................................... 49 

The Heritage Foundation ........................................................................................ 63 

Ribelin, Jim .............................................................................................................. 69 

Sibbett, Michael R. .................................................................................................. 83 

(III) 

(1) 

PERSPECTIVES ON MEDICAID 

FROM SELECT GOVERNORS 

THURSDAY, JULY 14, 2011 

U.S. SENATE, COMMITTEE ON FINANCE, Salt Lake City, UT. 

The hearing was convened, pursuant to notice, at 2 p.m., 210 

Senate Building, Utah State Capitol Complex, Salt Lake City, UT, 

Hon. Orrin G. Hatch (ranking member of the committee) presiding. 

OPENING STATEMENT OF HON. ORRIN G. HATCH, 

A U.S. SENATOR FROM UTAH 

Senator HATCH. The hearing will come to order. I want to begin 

today by thanking the chairman of this committee, my friend and 

colleague, Max Baucus, for scheduling this hearing today. 

Though Republicans and Democrats do not necessarily agree on 

the details, I think there is some agreement that the Nation’s Medicaid program as currently constituted is unsustainable. 

The opportunity to hear from the Nation’s Governors, the individuals on the ground who are responsible for administering this 

program, while also balancing their own State budgets, is an important one. 

Medicaid was originally created as a safety net program for the 

Nation’s poor. Fewer than 5 million individuals used Medicaid 

services in the program’s first year. Today, however, nearly one in 

four Americans is on Medicaid, and half of those newly covered by 

PPACA, or what some call affectionately Obamacare, will be on 

Medicaid. 

The liberal Center for American Progress tellingly wrote the 

other day that the House Budget Committee chairman, Paul 

Ryan’s, Medicaid proposal would be bad for the middle class. Get 

that. It would be bad for the middle class. Now, that says it all. 

The program, initially created to support the Nation’s destitute, 

has been transformed into a spending program for the middle class. 

From what I can see, this is not only disastrous to Federal and 

State taxpayers, but it fails the beneficiaries themselves who are 

in a failing program. 

There are four core features of Medicaid that show the need for 

significant reform. First, the impact of this program on Federal 

spending has become a genuine problem. Over just the next 10 

years, the Federal Government will spend $4.6 trillion on the Medicaid program. 

Secondly, Medicaid is now crowding out other critical needs in 

State budgets such as education and law enforcement. Medicaid 

2 

now represents 22 percent of State budgets, and the expansions of 

Medicaid in the health care law amount to an additional $118 billion burden on the States. 

Third, it is not clear that all of this spending gets us the right 

results. Study after study shows incredibly poor outcomes for Medicaid beneficiaries, especially when compared to privately covered 

patients. 

And finally, Medicaid is rife with fraud. Earlier this week, the 

Government Accountability Office, GAO, issued a report that we 

are not even able to accurately gauge the amount of fraud in Medicaid because we do not have the technological tools to track it. 

Now, there just has to be a better way. And, as the ranking 

member on the Senate Finance Committee, I am working every day 

to personally ensure that we get this program under control. 

As it currently exists, Medicaid threatens the fiscal integrity of 

the Nation and the States, and it fails to provide an adequate quality of care to those who depend on it. 

I believe that we already have an existing model for successful 

reform. In 1996, a Republican Congress and a Democratic President succeeded in one of the greatest reforms of a major entitlement program in our Nation’s history when we took up welfare reform. 

Medicaid is failing patients and is a target for waste, fraud, and 

abuse, not because the States are doing a bad job, but because 

Washington’s bureaucracy has tied States’ hands, preventing them 

from making meaningful changes and reforms that make sense at 

a local level. 

Solutions for sustainable Medicaid reform will come from the 

States, not just Washington. My goal is to empower the States to 

design and implement innovative Medicaid solutions that work for 

the States. 

In May, along with the House Energy and Commerce Committee 

chairman, Fred Upton, I wrote the Nation’s Governors asking for 

their ideas on Medicaid. The majority of the Nation’s Governors responded with a request for flexibility and transparent accountable 

budgeting. 

Today, we have two of these great Governors here today. I cannot 

be more pleased that both of you are here to give us your perspective. 

Our State’s Governor, Gary Herbert, has shown again that the 

Utah way can be a model for other States. The success of the primary care reforms in Utah shows that States can create innovative 

and efficient solutions if they are given some relief from Washington mandates. 

Hardly anybody in the State understands State and local governments as well as our Governor. And I have seen him in action for 

all these years, and I have to tell you, I have great affection and 

respect for him. 

And Governor Haley Barbour, as the Republican Governors Association Policy Chair, has been leading the effort to put energy behind Medicaid reform. Haley has led our party; he was the head 

of the Republican Governor’s Association just a year or so ago. He 

is one of the truly great people in this country. And we are just 

very grateful to have you here, Haley. 

3 

Governor BARBOUR. Thank you, senator. 

Senator HATCH. This hearing is part of a collaborative process 

with the Nation’s Governors to reform the Medicaid program. Now, 

in my role as the Republican leader on the Senate Finance Committee, with responsibility for entitlement programs, I am determined that this process will end in a comprehensive Medicaid reform law. 

Now, I want to be clear, though. For those on the ground in the 

States, this is not a Republican or a Democratic issue. Former Tennessee Governor Phil Bredesen has called Medicaid, ‘‘An obsolete 

and broken system.’’ He has been highly critical of the status quo. 

I wish that I could say that I disagree; but the more that one 

looks at this program, the more clear it is that this program cries 

out for fundamental reform. Only then can we restore fiscal integrity to the Federal and State governments, and only then can we 

deliver a higher level of care to those who depend on this system. 

Now, I look forward to the testimony of our esteemed witnesses 

here today, and I want to thank them for taking the time to share 

their experiences with us today. 

We all know our Governor, Gary Herbert, and we are going to 

turn to him at this point. 

[The prepared statement of Senator Hatch appears in the appendix.] 

STATEMENT OF HON. GARY HERBERT, 

GOVERNOR, STATE OF UTAH, SALT LAKE CITY, UT 

Governor HERBERT. Well, thank you, Senator Hatch, and welcome back to your home State. We are honored to have you here 

and thank you for holding this hearing. 

And certainly a good Utah welcome to Haley Barbour, the great 

Governor from Mississippi. We are just happy to have you here 

with us today. And, Haley, it is just an honor to be with you again 

and testifying before a congressional hearing. 

Let me just begin by making a note that Governor Barbour and 

I are here as part of, not only this testimony given at this Senate 

Finance Committee today, but we are joined by many other Governors, about 35 other Governors from around the country, for the 

summer meetings of the National Governors Association. 

We are colleagues. We are Governors who represent diverse 

States and diverse populations, all of which have their own unique 

challenges. What we share, however, is the rightful authority to advance unique solutions to our unique challenges. 

I am a firm believer in the principles of federalism, those principles embodied in the Tenth Amendment. States are not powerless 

agents of Federal authority. A balance of powers between the 

States and the Federal Government is not only right and proper, 

but essential if we are ever to find solutions to the complex problems that we face as Americans. 

To solve these problems, it is critical for the Federal Government 

to provide States with the flexibility to find better ways to conduct 

our business. 

Simply put, the citizens of this great State and others deserve 

and expect that the Utah challenges that we have here and the 

challenges that other States face will be met by, in fact, here in 

4 

Utah, a Utah solution that addresses our unique demographics and 

our unique dynamics. We would want that privilege for all the 

States. 

One of our most significant challenges, and a challenge I know 

we share with other States that are represented by their Governors 

here today, is the untenable growth of our Medicaid programs. 

Medicaid is poised to wreak havoc on the State’s budget for years 

to come, threatening our ability to fund other critical services such 

as education and transportation. 

In trying economic times such as those we have experienced over 

the past several years, families increasingly rely on programs like 

Medicaid to get them through the rough patches. In May of 2007, 

enrollment stood at 161,368 individuals in Utah. By last month, 

June of 2011, enrollment had ballooned to 244,470, an increase of 

51 percent in just 4 years. 

As you might imagine, this growth has created a tremendous 

strain on Utah’s budget. Medicaid growth rates have exceeded the 

State’s annual revenue growth rates the past 2 decades. 

Last year, the program’s share of our overall general fund was 

18 percent, which was more than double its share from the 1990s. 

And by 2020, it is estimated to exceed 30 percent of our general 

fund budget, and that is without the federally mandated expansion 

of the program. 

It is not just increased enrollment that is driving up cost; the 

cost of delivering medical care is also to blame, partly due to health 

care inflation that is rapidly outpacing overall inflation, and partly 

due to a reimbursement structure that provides financial rewards 

for overusing medical care. 

We have a plan that addresses our unique challenges and will 

fundamentally change the way Medicaid services are delivered to 

Utah citizens. Our plan is patient-focused and provides for 

healthier people. It promotes individual responsibility and consumer choice, and it saves money by providing financial incentives 

to keep people healthy, not just to perform more tests and procedures on them. 

It balances the policy demands of a growing program with looking out for those who desperately need its services. The plan is 

truly homegrown. It was crafted over the past several months by 

my administration and the legislature, along with input from Utah 

citizens, health care providers, and advocacy groups. 

In order to make this work, the Federal Government needs to 

provide Utah with the flexibility to institute the plan. Our solution 

has a number of distinct advantages over the current Medicaid 

service delivery model. 

Perhaps most importantly is that it realigns financial incentives 

for providers to deliver care in a manner that moves away from 

billable events or services and towards a focus on patient outcomes. 

In other words, when it comes to delivery of health care for Medicaid clients, we are going to stop paying for quantity and start 

paying for quality. Our proposal replaces the current Medicaid 

managed care and fee-for-service models with a Medicaid Accountable Care Organization or, as we call it, an ACO model. 

The model works by paying doctors and hospitals a lump sum to 

manage the care of a patient. This offers the provider an incentive 

5 

to work towards the best possible health outcome for each individual patient and to move away from performing and, in turn, billing for services that may be medically unnecessary. 

A centerpiece of this reform effort is the ‘‘medical home’’ concept. 

Each Medicaid client will have access to a primary care provider 

or a group of primary care providers who will not only deliver care 

but will also coordinate their patient’s care throughout the entire 

network of providers. 

This new model will incorporate something that has been missing from Medicaid for quite some time: consumer choice and individual responsibility. Not only will Medicaid clients have a choice 

to select from at least two Accountable Care Organizations, they 

will have the choice to opt out of the program altogether and, instead, receive a subsidy to purchase private insurance. 

Currently, individuals who are eligible for Medicaid do not have 

a choice to participate in the State’s premium subsidy program. 

Our proposal allows an individual who is eligible for Medicaid to 

make their own choice: enroll in the program or opt to receive a 

premium subsidy and purchase their own insurance through the 

Utah Health Insurance Exchange or through their employer. 

I am a firm believer that Medicaid recipients need to take more 

responsibility for the delivery of their health care, both in terms of 

outcomes and payments. We know that better health outcomes lead 

to reduced health care costs, and we know that better health outcomes are often achieved by patient’s cooperating and complying 

with the recommended course of treatment. 

Our plan allows Accountable Care Organizations to offer incentives to patients with chronic diseases who follow their recommended treatments. Such incentives could come in the form of limiting or waiving co-payments or granting limited cash rewards or 

gift cards. The State has nearly 20 percent of its budget, almost $1.8 billion, 

invested in this program. It is time to move away from the entitlement mentality that has gotten us into this situation by requiring 

recipients to shoulder a little more of the financial load. 

Federal Medicaid copayment limits were established at $3 back 

in the early 1980s during an initial wave of Medicaid reform. Since 

that time, copayment limits have increased by only 60 cents. You 

would be hard-pressed to find a family in our State whose private 

insurance copayments have not increased by 60 cents in the past 

year, let alone the last 30 years. 

Had the copayment adjustment been made to adjust for inflation 

throughout the years, it would be the equivalent of $11 today. 

These onerous and archaic restrictions established by the Federal 

Government have put States on a path of financial ruin. We are 

ready to change paths. 

We are suggesting a modest increase from $3 to $5 for primary 

care co-payments. And to help ensure that patients seek care in the 

appropriate settings, clients visiting an emergency room for nonemergency care will be responsible for a $25 copayment rather 

than the current $6 amount. 

We believe this will help reduce much of the unnecessary spending created by patients seeking primary care in the costly emergency room setting. 

6 

I have heard the criticisms that we are placing an undue burden 

on a population that can little afford to shoulder it, and I am not 

unsympathetic to the plight of those who truly would be unable to 

bear such a burden. Those with no income would still be exempt 

from the cost-sharing. 

Additionally, our proposal grants the Affordable Care Organizations the flexibility to waive co-payments if they find it to be in the 

best interest of their patient’s health outcomes. 

Our intent is to implement these reforms in the State’s four most 

populated counties on July 1st of 2012. This should give the Centers for Medicare and Medicaid Services (CMS) ample time to review our waiver and work through any concerns. 

The highest levels of leadership at CMS have been receptive and 

supportive of our efforts thus far. I would encourage those leaders 

to provide their staff with the flexibility they will need to make 

sure that we are successful. 

The ramifications of this reform effort extend well beyond the 

borders of our State. Not only could this model be the tipping point 

for Utah’s public insurance program, but I believe private insurance companies will soon follow suit, at least in Utah, and then I 

think across the Nation. 

This is where true health reform will rise from, from the laboratories of democracy that we call the States. In Utah, we know we 

are on the right track. Our health system reform efforts began 5 

years ago, and the lessons we have learned are already serving as 

a guide to other States as they begin their own reform efforts. 

Utah is unique in that a majority of our uninsured population is 

employed. Most work for small businesses which do not offer health 

insurance benefits. In order to reduce our uninsured population, we 

need to make insurance coverage accessible to our State’s small 

employers. 

Utah also has the youngest population in the country. Many of 

our uninsured are the so-called ‘‘young immortals,’’ persons between the ages of 18 and 34 who are generally healthy and employed, but who have deemed traditional health insurance coverage 

to be either unnecessary or too expensive. 

In Utah, we have chosen a path of business and consumeroriented health system reform that responds to Utah’s needs. One 

of the tools we are using to help reduce our uninsured population 

is the Utah Health Insurance Exchange, one of just two exchanges 

operating in the Nation. 

The exchange gives Utah small business employers more than 

100 plan choices, all of which retain the pretax and guaranteed 

issue advantages of traditional small group insurance. The Utah 

Health Insurance Exchange is now fully operational. In its first 

month alone, the Exchange helped more than 1,000 employees get 

health insurance that they have chosen. 

Each month, enrollment continues to climb. Our figures show 

that 20 percent of businesses participating in our Defined Contribution Market through the Utah Health Exchange are offering 

health benefits for the very first time. This is another example 

where we have used market principles to create a Utah solution for 

Utah challenges. 

7 

These are the types of innovations Washington should be celebrating, not stifling. If there is one thing this committee can take 

away from my testimony here today and from the testimony you 

will hear from Governor Barbour and from other Governors that 

you will hear over time, it is that the States are poised to act. 

We are ready to lead out, but we need the flexibility that only 

Washington can give to us in order for us to do so, and to find the 

solutions to the unique challenges and problems we face as States. 

I thank you for the opportunity to come and speak here, Senator 

Hatch, and we wish you the best of luck in tackling this very difficult issue. 

Senator HATCH. Thank you so much, Governor Herbert. 

[The prepared statement of Governor Herbert appears in the appendix.] 

Senator HATCH. We are very pleased to have one of the great 

leaders of all Governors in this country, Haley Barbour. And we 

will turn to you. 

STATEMENT OF HON. HALEY BARBOUR, 

GOVERNOR, STATE OF MISSISSIPPI, JACKSON, MS 

Governor BARBOUR. Senator Hatch, thank you very much for 

having me. 

Governor Herbert, I just say ‘‘amen’’ to your testimony. You will 

find so much of what I was going to say is already in your testimony. I may skip some of it, which I know the audience would appreciate. 

Let me just say it is a propitious time for us to be here. Thank 

you, Gary, for hosting the Governors. But it also is a time when 

the debt reduction/debt ceiling talks are going on. 

There is talk of a proposal by the Obama administration to reduce the amount of Federal matching funds that goes to States for 

the Federal share, to do this through what is called a blended rate. 

But it would have the effect that the Federal Government would 

pay a smaller percentage of Medicaid spending. 

At a time when the administration, through Obamacare, is going 

to add tens of billions of dollars to States’ Medicaid costs, you 

would think that Governors would all oppose any reduction in what 

the Federal Government pays of Medicaid costs today as part of 

deficit reduction. 

And let me just say to you, most Governors agree with me. We 

will take a reduction in what the Federal Government pays for 

Medicaid if, in return, we get flexibility to run the program so we 

can achieve the savings that are required to meet what the Federal 

Government is asking for. 

Unfortunately, this administration has gone in exactly the opposite direction of less flexibility. Governor Herbert has talked about 

some of the things that they are doing now. As we are strangled 

in State budgets often because of Medicaid—Senator Hatch talked 

about how 22 percent of the average State budget is Medicaid. 

For many States, it is the biggest item in the budget. In my 

State, for decade after decade, education was far and away the biggest item in the budget. And for us, it still is, but only because we 

are working hard to constrain costs. 

8 

But it is more the administration’s health care policy. Obamacare 

and Medicaid are doing more than strangling State government 

budgets. They are making it harder to have job creation and economic growth in the United States. 

How does a business make a decision to hire more people if that 

business has no idea what its costs or obligations are going to be 

for health care under the Obamacare model? It should not be surprising that only 18,000 jobs were created last month and only 

25,000 jobs were created the month before. 

We are not going to see labor market recovery or job creation as 

long as businesses are facing uncertainties like Obamacare, and 

budget talks where one side says they want as much as $2 trillion 

of new tax increases that will fall almost entirely on employers. 

Your colleague from North Dakota this week has said that President Obama’s call for a trillion dollars of tax increases is not 

enough, that they need to have $2 trillion of tax increases. Well, 

how can businesses hire more people in the face of that? 

But, as we focus more specifically on Medicaid, let me make 

some points that are bipartisan. The Governors, in a bipartisan 

way, have asked the administration and the Congress to get rid of 

the maintenance of effort requirements that came up in Obamacare 

that disallow States from taking anybody off the rolls. 

My State never did this, so this is not a big problem for us. But 

for many States with Republican and Democratic Governors, when 

times were very flush during the Bush administration and the 

economy was booming and unemployment was 6 percent and 5 percent and lower than that in some States, they said, ‘‘Well, we are 

going to go from 135 percent of Federal poverty level income to 200 

percent because we have so much extra money.’’ 

Well, now that we are at, you know, 9.2-percent unemployment, 

a lot of those States cannot afford to do that anymore. But the Federal Government is saying, ‘‘You cannot change.’’ So I ask you for 

that particularly. 

This problem is exacerbated by the fact that we do not get very 

good direction or guidance from CMS, from the Federal Government that runs Medicaid, about what Obamacare is going to require. Just this week, the Department of Health and Human Services put out guidance about exchanges. 

We think Utah has the model exchange. It is market-driven; it 

is voluntary. Yet the 340 pages of guidance that HHS has given the 

States never says whether it can be voluntary, never says whether 

it can be not subsidized, and it never tells us what benefits are 

going to be mandated, what we are going to have to require to be 

sold on our exchanges. 

And frankly, we need better information than that, particularly—and this does not apply to Mississippi, but it does to a number of other States—what will the Federal exchange look like? We 

have no information on that. And there are some States that are 

waiting to see if they think their State would be better by just letting the Federal Government run the exchange. 

Well, all of these hundreds of pages of guidance gave you no idea, 

if you were one of those States, what you can expect. We need better information, and we need to understand what the Federal Government’s own requirements are going to be as we deal with this. 

9 

Senator, let me tell you, you mentioned that you and Chairman 

Upton wrote us, all the Governors, asking for information. In a 

minute, I am going to spend my time talking about the principles 

that we advised you that we think should be the principles for 

Medicaid reform. 

But before I do, I want to say ‘‘thank you’’ for asking us. You 

know, this is a supposedly Federal-State program. Senator Hatch 

and I can both remember vividly during the Clinton administration 

when the national health reform was proposed and driven primarily by Mrs. Clinton. 

If somebody had said 18 years ago when that was going on that 

the way we were going to have health care for everybody in the 

country is we are going to expand Medicaid, most people would 

have laughed at the idea. It would have gotten even fewer votes 

in Congress than it got, because Medicaid, as you mentioned, Phil 

Bredesen, the then-Democratic Governor of Tennessee, said it is a 

broken, obsolete system. 

For us, we were stunned—and I think both Republicans and 

Democrats—that, when the White House had a Summit in February of 2010 at Blair House on health care reform, talking about 

making Medicaid the principal vehicle for expanding health care 

coverage, not one Governor was invited; not a Democratic Governor, not a Republican Governor, not one Governor invited. 

So we start off by saying ‘‘thank you’’ for realizing that you are— 

the Federal Government is—a partner in this with the States, and 

the States need to be at the table, and I do want to thank you personally for that. 

Twenty-nine Governors wrote to you and Chairman Upton and 

set out seven principles that we think should be followed. First and 

foremost—and these are going to sound mighty consistent with everything that Governor Herbert said—first and foremost, we believe the States and territories are best able to make the decisions 

about the design of their health care systems based on those 

States’ respective needs, cultures, and values. Let the States design 

what the program ought to be. 

And I give you an example: Arizona. Their Medicaid program for 

many years has been almost entirely managed care, and that 

seems to work for them, and we are glad of it. 

In Mississippi, we have virtually no managed care. This is not 

a model that makes any sense in Mississippi, which is not saying 

there is anything wrong with Arizona. It is a good model for them. 

But what works in Arizona might not work in Mississippi; what 

works in Vermont may not work in Utah. 

And for the Federal Government to start off with the idea that 

they are going to decide what every State is going to do and that, 

if you want to deviate at all from what the Federal Government 

says, you have to go hat in hand and tug your forelock and kowtow 

to HHS to get to change, it is bad policy. 

Second is something you have already mentioned. States and territories should have the opportunity to innovate by using flexible, 

accountable financing mechanisms that are transparent and hold 

States accountable for efficiency and quality care. And these could 

include a block grant, a capped allotment outside of a waiver, or 

other accountable and transparent financing approaches. 

10 

Gary has already talked about Accountable Care Organizations. 

You have talked about block grants. Rhode Island, in 2009, started 

a historic program that the Bush administration had approved 

where they capped Medicaid spending for 5 years. 

Rhode Island said, ‘‘We will take the same amount of money for 

5 years if, in return, you will give us essentially total flexibility. 

Give us a block grant.’’ They collapsed 11 waivers together, and 

they saved a hundred million dollars a year in this program in the 

first 2-year period. 

Our point is, they should never have had to go to Washington to 

ask for that. They should have the authority to do that themselves. 

And it would save the Federal Government money. 

In my State—I testified before the House Committee—we would 

like to have a block grant, and, in return, we will accept less money 

from the Federal Government than we would have received. Right 

now, Medicaid spending nationally goes up somewhere between 6 

and a half and 8 percent a year. 

I will suggest to you, that is going to increase, by the way. It is 

going to go up even faster. But let us say it does not. We in Mississippi would be willing to say to the Federal Government, ‘‘In return for a block grant with total flexibility, we will take half the 

increase. Instead of 6 and a half, we will take 3 and a quarter.’’ 

Just at that, it would be a hundred million dollars a year less 

for Mississippi in Federal money. But because we are 1 percent of 

the program, the Federal Government, if they said, ‘‘We will give 

you a block grant but you only get half the increase,’’ it would save 

the Federal Government $10 billion a year. Ten billion dollars a 

year based on today’s numbers. 

The status quo has to change. We do not like the waiver system, 

because it is unpredictable and it is slow, and we think it often has 

bad outcomes. Let me remind you of one of the programs that 

Orrin Hatch was very involved in, if I remember right, which was 

the creation of the Children’s Health Insurance Program. 

In the Children’s Health Insurance Program, the States get a 

block grant. And all the people who say, ‘‘Oh, we cannot trust the 

States to have a block grant and give them this flexibility,’’ many 

of them are the very people who brag the most about how great 

SCHIP is, the State Children’s Health Insurance Program. 

States have shown there that we use the money responsibly and 

we get the most out of it. We do not have to wait on these waivers. 

We have in Mississippi a program called the Healthier Mississippi 

Demonstration Waiver. It was approved my first year as Governor. 

It is to allow the State to buy pharmaceuticals through the Medicaid program for people who are not eligible for Medicare but 

make too much money under our rules to get Medicaid. 

This program was approved in 2004, but, because the waivers 

only last 5 years, we had to go back and ask for the waiver to be 

reinstated or re-upped. It took us 15 months. It took us 15 months 

to get a waiver renewed that was for a program where we were giving pharmaceutical benefits to people who would not be eligible 

without the waiver. 

So I suggest to you the system is broken for dealing with waivers 

and with State implementation plans. 

11 

Now, it is not just Utah and Mississippi. Florida, North Carolina, 

and Pennsylvania have been hugely innovative in the SCHIP program. I mentioned Rhode Island. But Massachusetts—Massachusetts has a very innovative program. We do not want it. We do not 

think it is the right program for Mississippi, but we think they 

have every right to have it. And as long as they can do it within 

the financial bounds that the Federal Government was going to 

make available to them anyway, more power to them. But do not 

make us have Massachusetts’s care in Mississippi under the name 

of Obamacare. 

And I will tell you, Montana, Michigan, Minnesota, New Mexico—you can pick all sorts of States—Missouri, as well as Mississippi, we do not want to have forced on us what happens to have 

worked somewhere else. 

Massachusetts, Rhode Island, Vermont, West Virginia, Florida, 

Kentucky, Tennessee, Indiana, Iowa, and Idaho have all had innovative programs, but they had to go to the Federal Government 

and beg for permission. 

Ask Tom Vilsack, President Obama’s Secretary of Agriculture 

and the former Governor of Iowa, about his ideas on basic health 

insurance coverage that they have instituted in Iowa. You mentioned Phil Bredesen. Phil Bredesen got important flexibility put in 

his program in Tennessee, which was going broke. 

And I would suggest, if you have not, read his book, Phil Bredesen, former Democratic Governor of Tennessee. Read his book, 

‘‘Fresh Medicine,’’ and you will see a Democratic Governor’s view 

of both Obamacare and Medicaid as it exists today. We have to get 

a way to move through these things and sometimes even to abide 

by the law. 

You know, of course, that home- and community-based care have 

been mandated by the Federal courts, and there is a huge move in 

America for more home- and community-based care for long-term 

care in the United States. Yet for States, we have to go to the Federal Government and ask for permission by waiver to add one person to home- and community-based care—to our home- and community-based care waiver. It is an optional program under Medicaid. 

So—and, of course, we do not ask for them one at a time. We ask 

for them a thousand at a time or 2,000 at the time. But we cannot 

go one beyond our waiver despite the fact that this is a mandated 

law. 

Third, Medicaid should focus on quality, value-based, patientcentered programs that work in concert to improve the health of 

our citizens, and drive, as Governor Herbert said, value over volume, quality over quantity, and which, at the same time, will contain costs. 

Let me say—and I do not think I mentioned this—under Obamacare, the number of people on Medicaid in my State will increase 

by two-thirds from just over 600,000 to more than 1 million in a 

State with a population of 3 million. 

This is going to cost us $1.7 billion over the first 10 years above 

what we pay now. And, by year ten when everything is fully implemented, Mississippi’s Medicaid costs under Obamacare will be $443 

million a year higher. Consider that this year our whole cost was 

only $800 million. So it is a 50-percent increase for us. 

12 

And my view is very simple. If the Federal Government wants 

to have a Federal health program, they ought to pay for it. They 

ought not to pay for it through the backdoor by sticking States for 

what CBO says will be $118 billion over the next 11 years—$118 

billion. 

Giving us the authority to run these programs and keeping them 

separate improves the quality of care. I will give you an example 

that you will, I think, find funny. We in Mississippi require every 

person on Medicaid to recertify their eligibility annually, as is the 

Federal law, but we make all those who are not homebound or in 

nursing homes, we make them do it in person. 

While they are there, we quiz them over their health and talk 

to them. We offer them a free physical. We offer them a free annual physical. One percent a year take us up on it, but CMS will 

not let us require it. Even though we pay for it and it is free, we 

are not allowed to do it. 

We believe in a year or two that that free physical would save 

everybody a lot of money, but it would greatly increase the health 

of our people. We are currently partnering with the Mississippi 

Health Care Alliance, a physician-led group that helps promote 

screenings and physical exams. We think that the Federal Government ought to let us pay for those through the Medicaid program, 

which right now we are not having to because we are doing it as 

a free partnership. 

But we cannot provide incentives to the Medicaid participants to 

encourage healthier behaviors. 

States and territories must be allowed to streamline and simplify 

the eligibility process to ensure coverage for those most in need, 

and States must be able to enforce reasonable cost-sharing. 

We have already talked about maintenance of effort, about the 

State being able to control who is eligible. We have talked about 

face-to-face redetermination. But let me give you an example of 

what we run into with beneficiaries. We, at the in-person interview, offer to enroll beneficiaries in what we call Mississippi Cool 

Kids Program, what you know as an early periodic screening, diagnosis, and treatment program. 

The State allows exceptions for this, but we think this is very 

worthwhile for what we are doing. We think it improves the quality 

of care, we think it gets more kids in better programs. At the same 

time, it has resulted in our eligibility error rate being reduced to 

.1 percent. 

The national average is 6.47 percent. Now, if you reduce the eligibility error rate, that is, if every State only had one-tenth of 1 

percent of the people on Medicaid not eligible, if everybody got 

down to where Mississippi is, that would be from 6.47 to .1. Well, 

let us say that is unrealistic. Say we only get it down to 1.47, 15 

times higher than ours. 

The savings from that would be $20 billion a year, just by getting 

your eligibility rate down to do that. Today, you have to get a waiver to do what we do. Thank goodness we did not have to do it when 

we started. 

We also endorse what Governor Herbert said about co-payments, 

and we think not only should we be able to adjust them in the 

right direction, they should be enforceable. When somebody drives 

13 

up to the pharmacy’s drive-in window to pick up their pharmaceuticals and their child is talking on the cell phone and they say 

they cannot pay the $1 copayment, by the Federal rules, we cannot 

challenge that. The pharmacist is supposed to give them the drugs 

anyway, but the pharmacist eats it. 

Well, I can assure you, even though the State does not eat it, 

that cost finds its way back to us. I promise you that. Enforceable 

co-pays are very important, and running the program right is very 

important. In Mississippi, our pharmaceutical program has grown 

more than 20 percent a year in costs since when I became Governor. 

We reduced our pharmaceutical program from $697 million a 

year to, 18 months later, $279 million a year, a 61-percent decrease. Seventy-eight percent of our pharmaceuticals now under 

Medicaid are generic. The savings, if you do that, for the Federal 

Government are gigantic. Gigantic. 

States’ and territories’ Medicaid recipients ought to get a 

choice—Governor Herbert has talked about that—the choice to get 

into something more like a private health insurance market 

through subsidized premium support or whatever. 

Let me remind you of that idea that, what the Federal Government does is the only way it works. You know, that is a Federal 

attitude: ‘‘If there is not a Federal mandate, then it is a no-good 

program.’’ 

I thought it was very clearly shown by the risk-pool program that 

is part of Obamacare. Thirty-five States already had risk pools to 

help people who were being denied coverage because of pre-existing 

illnesses. Thirty-five States. That was not good enough for this administration and Congress. They mandated a $5-billion Federal 

program for this. 

Well, it turns out that, in a State like mine where 3,600 people 

are in our risk pool and the Federal Government program came on 

board for a lower premium, today there are seventy-five—7-5, fewer 

than 100—people in the Federal risk pool. They had predicted 

200,000 people who were being denied health insurance because of 

pre-existing illnesses would be saved by this health care program. 

In these risk pools, 21,000 people have signed up nationally. And 

I am sure most States are like mine. The vast majority of the people who are in risk pools to help them get across to when their preexisting illnesses expire, so to speak, most of them are still in those 

35 State pools. 

We want to see—our sixth principle, frankly, is, we want to see 

the territories treated like States. They are citizens of the United 

States, too, and they ought to be treated that way. 

Finally, our seventh principle, States need to have greater flexibility in eligibility, financing, and service delivery for long-term 

care. We have already talked about the fact that we have to get 

waivers to move people out of long-term care in a nursing home to 

long-term care in home- and community-based care. We can only 

do it if we get a waiver. 

But it is even worse than that. I have to tell you a little story 

about Mississippi. There is a program called the Civil Money Penalty Fund where, when nursing homes have some violation, they 

14 

pay a fine into this pool of money, and we use it to improve the 

nursing homes in the State or to improve long-term care. 

Our State wanted to use Civil Money Penalty Funds as startup 

money to develop a specialty skilled nursing facility for children. 

We have a number of children in our State who are in long-term 

care who are eligible for Medicaid. Generally, they will be on a ventilator or they will eat through a tracheal tube. 

The nursing homes that serve senior citizens do not want them, 

and you cannot blame them. Their nurses and their personnel, they 

do not know how to deal with these acutely ill, often little, children. 

So we said, ‘‘Hey, we have 7 million bucks that we can use out 

of the Civil Money Penalty Funds, and we are going to build a 

small nursing home for children on the campus of the University 

of Mississippi Medical Center.’’ They would not let us. They would 

not let us. 

They said, ‘‘That is not an appropriate use of the money in the 

Civil Penalty Fund,’’ that it has to be used for long-term care. Well, 

long-term care for children is long-term care; but the point is, until 

Obamacare, we did not have to ask for permission. So States need 

to have the authority to go forward this way. 

I will remind you of one other thing that was talked about by 

Governor Herbert, that a lot of people want to have a more insurance-like health care coverage than to be in a Medicaid program. 

Nothing proves that more vividly than the fact that 25 percent of 

the people who have come on Medicare in the last 10 years chose 

Medicare Advantage. 

They chose the Medicare program that is the most like private 

health insurance, and all voluntarily. In fact, you have to jump 

through a lot of hoops to choose Medicare Advantage. Well, there 

are a lot of people who would rather have something that is more 

like private health insurance than Medicaid. 

So let me close. Those are our seven principles. So you can see, 

if the primary factors that drive Medicaid spending are eligibility, 

provider rates, and utilization services, then recent Federal actions, 

including the MOE restrictions that you cannot take people off, the 

proposed access rules that were handed down this week that say 

you cannot cut provider rates without doing a study that is approved by the Federal Government—and, frankly, that is where 

most of the States have had to make their savings—that is two out 

of three factors that you cannot change the cost of. 

So you only can deal with utilization. But as a Governor, I can 

tell you, we do not want to sacrifice health for money by cutting 

the utilization of Medicaid. We want people who need to see the 

doctor, who need to be in the hospital, we want them to have that 

need met. 

So we think that is the poorer way to try to drive down the cost. 

It is unrealistic and unfair to think that States can manage their 

Medicaid programs when the Federal Government permits the 

States no flexibility in designing, and no flexibility in administering, their programs, while continuing to push the ever-growing 

costs for the program down to the States. 

Most Governors like me accept the fact that States will receive 

less money from the Federal Government for Medicaid; but, in reVerDate Nov 24 2008 20:54 Oct 15, 2012 Jkt 000000 PO 00000 Frm 00018 Fmt 6633 Sfmt 6633 R:\DOCS\76146.000 TIMD
15 

turn, we must have more flexibility in order to meet the savings 

the Federal Government requires. 

Thank you. 

[The prepared statement of Governor Barbour appears in the appendix.] 

Senator HATCH. My gosh. I have to say, both of you Governors 

have done a tremendous job of outlining the problems and making 

honest suggestions as to how we can solve these problems and get 

our health care system working a lot better. 

I have a few questions I would like to ask. Let me ask you this 

one, Governor Barbour. The new health care law puts many mandates, such as the requirement to create a Washington micromanaged set of exchanges, and expanding requirements, such as the 

burdens from the Medicaid expansions, on the States. 

Now, I am concerned that these new dictates from Washington 

are simply unrealistic to force on the States. Now, did the Obama 

administration or the Democrats in Congress ask for your feedback 

on Obamacare as they wrote it, and do you agree that these new 

mandates from Washington are simply unrealistic? 

Governor BARBOUR. They are unrealistic. And, as I said earlier, 

when they had the summit on health care, the obvious omission 

was that they had no Governors. It is not that they did not ask 

Haley Barbour; they did not ask any Governors. 

They did not ask a Democratic Governor, Republican Governor, 

did not ask the chairman of the National Governors Association, 

yet it falls more heavily on State governments than any other institution. 

Senator HATCH. Let me ask this for both of you, and we will start 

with you, Governor Herbert. Back in the 1980s, Congress reformed 

the welfare entitlement in a highly successful and bipartisan way. 

I had a lot to do with that. The key to success was to have Washington listening to solutions outside the Washington Beltway. 

In fact, the primary reason we are here today is to begin getting 

ideas from outside Washington on how to fix Medicaid, and I would 

like to get each of your thoughts on how partnering with the 

States, just as we did with welfare reform, might possibly work as 

a model for Medicaid reform. 

I will turn to you first, Governor Herbert, and then—— 

Governor HERBERT. Well, thank you, Senator. And let me say 

‘‘amen’’ to Governor Barbour’s testimony also. He has had great experience in this arena. 

I am relatively new, but I do remember back when Governor 

Tommy Thompson took on the welfare state and said, you know, 

‘‘We can do better as States if you will just give us flexibility.’’ And 

gradually, Washington came around and embraced that, and the 

welfare system was improved in a significant way where we are 

giving better service for less money. 

I think the point we are emphasizing probably, Senator, here 

today is that States do have experience. It was, in fact, very, I 

think, eye-opening to me as a new Governor coming in and finding 

out, when we had the watercooler topic of debate of the day, which 

was health care reform, the States and the Governors were not invited to the table to give an opinion. 

16 

What you do in Washington, as you know, has a dramatic impact 

on what the States do and how they can do it. And to not ask for 

our opinion and say, ‘‘Well, how will this impact you in your 

States?’’ I think, is just to not get all the information you need to 

have to make decisions. 

There is no question, I think, that the States have opportunities. 

We have used the phrase that came from our founding fathers, 

‘‘laboratories of democracy.’’ For Heaven’s sake, the political phrase 

that we all use, and we have heard it many times, is unintended 

consequence. 

We do something that we think is right and proper and noble, 

we probably have good reason for doing it, but we end up having 

an unintended consequence. We think, ‘‘Oh, my gosh. We should 

have changed it, modified it, not maybe done it at all.’’ 

That is the problem with a one-size-fits-all approach. What is 

going to be the unintended consequence of that? It may work for 

a few, but it may not work for many. But, if every State has an 

opportunity to address the issue, it may not work in every State, 

but we do not have the whole country in turmoil because of a bad 

policy. We can learn from the successes, and we can learn from the 

failures. 

And gradually, we will evolve to a point where, with health care 

reform as the example, we will get it right. And, again, we will address the unique circumstances that we all have as States. I have 

a younger State; I have a different demographic than most other 

States. We need to address our health care issues probably from a 

different point of view. 

Again, the goal and objective, I think for all of us, is to make 

sure that we have quality health care that is affordable and takes 

care of those who are, you know, impoverished among us, those 

who are most vulnerable among us. The government has a role in 

that kind of safety net approach that Ronald Reagan talked about. 

So, by golly, if you take away anything, it is the fact that we 

ought to be partners with the Federal Government, not subservient, but coequal, and give us the flexibility, give us the charge, 

give us the opportunity, to find solutions to the problems out there. 

And we will find them. We did it with welfare reform. We— 

again, that was under President Clinton. He finally signed the bill 

that was passed, and you were a part of that, Senator Hatch. 

Again, a great step forward for this country, but it came from the 

States. 

So let us help you, and let us help you reform Medicaid, because 

we cannot continue in this way we are going in Washington. You 

know as well as anybody, Senator Hatch, this continued borrowing 

and spending is not sustainable. When you are spending 40 percent 

of your budget as borrowed money, that is not going to work. 

Medicaid and health care are a part of that challenge, and we 

can help you balance your budget and be fiscally responsible in 

doing it. 

Senator HATCH. Thanks, Governor. I surely agree with you. 

Governor? 

Governor BARBOUR. Gary touched on something very important. 

It was, welfare reform was bipartisan; you had a Republican Congress and Democratic president. And Obamacare, on the other 

17 

hand, was purely partisan. Absolutely nothing but one party— 

nothing but one party’s votes, and then there was a lot of strongarming to do that. 

But something else about welfare reform that I think made it so 

successful: it had been tried out. You learn from your mistakes. 

And you talk about Tommy Thompson in Wisconsin and John 

Engler in Michigan. There were a number of States that had tried 

some of this, some of it not successfully, by the way, and so they 

took what worked but they also gave States flexibility. 

It is a monument to the right way to do things, welfare reform. 

Senator HATCH. Yes. They worked with us on it. And I have to 

say, one of the first things that the Obama administration did was 

just completely make that another form of welfare—another entitlement program. 

Governor HERBERT. Senator, can I make another comment on 

that, again, as a new Governor, that I found interesting? 

Again, I know the politics probably in Washington, DC, in the 

Beltway, is different than what we find in the States. You know, 

the emotion back there and the lack of bipartisan effort, I think, 

is disturbing to the public. 

But the Patient Protection and Affordable Care Act was kind of 

run through in 2 or 3 days. Again, nobody had a chance to read 

it, nobody had a chance to even understand it. That is a bad principle in itself. We, as a State, had to respond. They asked us to give 

some response on a couple things, the high risk pool, for example, 

and some other things. 

And as a State, I said, ‘‘Well, answer me these questions, and 

then I will respond.’’ So we sent our request to the Secretary of 

Health and the Department of Health, thinking we will get a response to the questions. We had about 15 or 20 different questions. 

You know, weeks go by. We do not get a response. Finally we 

say, ‘‘Hey, we cannot make a decision unless we can get some answers.’’ The answer that came back was, ‘‘We do not know what the 

answer is because we have not had a chance to understand and 

study and read the bill yet.’’ 

Now, this is weeks after you guys had passed it, for Heaven’s 

sake. And we are still—I mean, you know, the famous phrase from 

the Speaker was, ‘‘We have to pass it to find out what is in it.’’ 

That is not a good way to run a railroad. We would not do that 

in the States. 

Senator HATCH. Well, I knew what was in it, and I have to tell 

you, I was totally opposed to it. 

Governor Herbert, let me ask you this question. I know you have 

worked hard to make Medicaid as efficient and responsive as possible here in Utah, but I know you have to get permission to do 

things from the bureaucrats from the Center for Medicare and 

Medicaid Services, CMS, and I bet that that often makes your job 

very difficult. 

How would you characterize your working relationship with 

Washington on Medicaid? 

Governor HERBERT. Well, it is getting better. I mean, that is the 

good news. It is getting better. And I think, again, we have been 

a State that has been at the forefront for health care reform. We 

started on this 5 years ago. 

18 

The Patient Protection and Affordable Care Act came into life 

after we were already down the road a bit. We are concerned that 

what you are going to do is, you are going to trump what we are 

already trying to do. That is that mandate aspect of it. It gives us 

some frustration at the State level. 

So we are saying, ‘‘Hey, do not upset our apple cart, because we 

are doing things pretty well here in Utah.’’ And I will give you an 

example. Governor Barbour talked about this before. We came up 

with the idea that, why don’t we go paperless? You know, we are 

kind of a high-tech society anymore, and Utah has been very hightech. 

And so our folks here with our Medicaid reform said, ‘‘Let us just 

go paperless. We will save Utah about $6.3 million. It is a voluntary program. We will have better ability to deliver services, 

have better accountability for it, and save our State $6.3 million.’’ 

I know that is not much in Washington talk, that is just chump 

change; but for Utah, that is a significant amount of money. 

Senator HATCH. Sure it is. 

Governor HERBERT. And if every State, in fact, adopted it, it 

would be closer to a billion dollars, which still is not much—you 

guys round it up to a billion. 

But, again, we were surprised at the resistance we found, because the regulations require paperless. We asked for a waiver, and 

guess what happened, Senator? We got a denial sent to us in Utah 

saying, ‘‘You cannot go paperless,’’ and the denial was sent to us 

by e-mail. [Laughter.] 

Now, there was something wrong there. 

Again, I think some at the top are okay. Maybe it is some of the 

entrenched bureaucrats inside who are afraid to do anything that 

is contrary to the written page. Again, that is why I echo 100 percent what Governor Barbour says. Just block-grant the money to 

us. 

We are smart people. We understand our challenges uniquely in 

our States; we care about our people. You give us the money, and 

let us find the ways to find the solutions to our unique problems. 

And, if you need to cut us 10 percent to do it, I would take it. Give 

me a block grant, eliminate the strings. We will provide better 

services for less money if you will give us the flexibility we need. 

Senator HATCH. And you are closer to the people to understand 

their needs, too. 

Governor Barbour, you have the experience of being a former 

chair of the Republican Governors Association and now the policy 

chair of the Republican Governors Association. Can you tell us 

about the quality of care that Medicaid provides to beneficiaries 

under the current structure? 

Now, you have outlined the seven points, but, if you care to add 

anything to that, what if any changes would you propose making 

to that Medicaid program structure today? 

Governor BARBOUR. We have to improve the quality of care that 

people are getting, and we have to improve the outcomes. 

Senator HATCH. Yes. 

Governor BARBOUR. The spending, unfortunately, is not about 

quality and outcomes, it is about the number of services provided. 

19 

Senator, in Mississippi, if you are a Medicaid beneficiary, you get 

benefits—a package of benefits that is better than a State employee. The State employee health insurance program is not as rich 

in terms of services as our Medicaid beneficiaries get. 

However, because Medicaid pays so much lower provider rates 

than health insurance does, we see a lot of doctors will not take 

but so many Medicaid patients, will not take new Medicaid patients, whatever. That is not unique. 

GAO last week reported, nationwide, physicians participating in 

Medicaid and CHIP are generally more willing to accept privately 

insured children than new patients on Medicaid or SCHIP. 

Seventy-nine percent are accepting all privately insured children, 

but only 47 percent are accepting all Medicaid-insured children, according to GAO. 

So what is the Obama administration policy going to be? They 

are going to start making the States pay higher provider fees. And 

we, in my State, we try to keep provider fees as high as we can 

afford because we know it improves access. 

But you have to save money somewhere else, and so they are 

going to put this new rule they call the Access Rule in place, and 

then they are probably going to directly force us to pay the Medicare rate or higher for providers. 

And the problem with that is it may bring some doctors back in, 

but it just makes the program that much less affordable for the 

State. We have to find the savings somewhere else. You know, gold 

does not grow on trees. We have to have balanced budgets. We 

have to live within our budget. 

I will tell you, people in my State are tired of cutting higher education spending because we need the money for Medicaid. There is 

a balance that has to be struck here. And this is very concerning, 

that you see these numbers and you know that the result is going 

to be, ‘‘Well, you States just spend more money, and we will solve 

the problem.’’ 

Senator HATCH. Yes. Well, you know, when we did SCHIP, a lot 

of people do not recognize the ‘‘S’’ in SCHIP. And I was very 

pleased that you made it clear that the ‘‘S’’ meant block grants to 

the States. 

When I designed that program, it was to have the States run it 

and have 50 State laboratories so we could pick and choose among 

the States what works and what does not work, look at other 

States, see if they have a better approach to it than we do, which 

is what both of you have been saying here today. And I made it 

very clear it was not an entitlement program either. 

And one of the first things the Obama administration did was 

make it an entitlement program, another welfare program run 

mainly by the Federal Government. I mean, it just—I had to vote 

against it, which was heartbreaking to me at the time. 

But Governor Barbour, let me just ask you this question. Washington is broke, with a $14.3-trillion national debt. If States were 

given less money—both of you have indicated this—if States were 

given less money, say under some form of a block grant, but given 

tremendous flexibility, how would that impact patient care? Could 

States do more with less if they had flexibility from Washington? 

20 

Governor BARBOUR. Absolutely. As I said in my testimony, many 

of us Governors understand the Federal Government has to save 

money. And this is a huge program, a 200-and-something billion 

dollar a year Federal program today. 

Senator HATCH. Yes. 

Governor BARBOUR. We will accept the Federal Government saving money and giving us less, but the only way we can do it is if 

we have the authority to make the reforms without Washington’s 

permission. We will—you know, I will sign up for that tomorrow. 

Senator HATCH. Fair enough. 

Governor BARBOUR. But we have to have the flexibility. 

Senator HATCH. You have also indicated, Governor Herbert, that 

you can do more with less. 

Governor HERBERT. Again, I think it is—— 

Senator HATCH. You do not want to do more with less, but you 

could if you had the authority to do it. 

Governor HERBERT. I think it is intuitive that the closer the government is to the people, the more efficient it becomes. 

Senator HATCH. That is the way I feel, too. 

Governor HERBERT. And so, giving more flexibility to us, and we, 

in turn, as States need to give more flexibility to cities and counties. That would be a much better way to deliver the system. 

And that evolves to—again, the best delivery system is the private sector. We need to empower the private sector, which is where 

we do not have as much waste, where they are incentivized, that 

they are using their own dollars. And, you know, this free market 

system has made our country pretty great. 

It will work in health care, too. We sometimes forget. We think 

this is a government mandate, so the government has to do it all. 

We need to see what we can do to get private providers more involved and the private sector competing in a free market system. 

Higher quality, lower cost. It works at Wal-Mart, it will work in 

health care. 

Senator HATCH. This has been good. I have a final question for 

both of you. I am very appreciative of both of you taking this 

amount of time and helping the Finance Committee to understand 

this better, and I am going to make sure everybody gets this 

record. 

I am concerned that Medicaid is failing patients and is a target 

for waste, fraud, and abuse. Almost everybody says it is. That is 

not because States are not doing their job. They are not doing a 

bad job; it is because Washington’s bureaucracy has tied the States’ 

hands for making meaningful changes and reforms. 

And I think it is time to fix this program. We owe it to the taxpayers and the beneficiaries. We owe it to our grandchildren to reform our entitlement programs that will saddle them with this 

huge enormous government debt if we do not have the courage to 

act now. As ranking member on the Finance Committee, I am committed to getting this done, but I need your help as we undertake 

this critical effort. 

Would both of you and others—hopefully you will talk to Democrats and Republicans, you know, as you go along. Would you commit to working with me and hammering out the details of the comVerDate Nov 24 2008 20:54 Oct 15, 2012 Jkt 000000 PO 00000 Frm 00024 Fmt 6633 Sfmt 6633 R:\DOCS\76146.000 TIMD
21 

prehensive Medicaid reform proposal? That is what I would like to 

do. 

I know the States have great ideas, and that is what we did 

originally with CHIP that turned into another welfare program. I 

learned a real lesson on that one, I will tell you. I had to vote 

against the CHIP bill that they finally distorted under the Obama 

administration, you know. 

Governor BARBOUR. Well, of course, Senator. We appreciate you 

and Chairman Upton’s willingness to work with us. 

Senator HATCH. Okay. 

Governor HERBERT. Absolutely. And, again, we are just delighted 

that you would ask. That is something that needs to be done more 

often on this issue and other issues to see what the States’ perspectives are. 

Let me just conclude by saying this, Senator Hatch, if I could. 

The key thing here today, I think, that we have emphasized over 

and over again is that the States need flexibility. We need to partner with you. We have the same goals and objectives. 

It is something we can do in a bipartisan way. We have demonstrated that in the past with welfare reform. There is no reason 

why we cannot do it with Medicaid and health care reform as we 

partner together. 

The watchword is flexibility, but what we cannot have is a flexibility that is not flexibility. It reminds me—and I have used the 

phrase before—when Henry Ford said, ‘‘You can have any color of 

car you want as long as you choose black.’’ 

And we have a challenge here because we have some in Washington who say, ‘‘No, we are going to give you flexibility as long as 

you do it our way.’’ And so we need to have true flexibility to be 

able to implement the programs in the best way we can, making 

sure the taxpayers’ dollars are spent the best way, that we get the 

best and most efficient outcome. 

If our hands are unleashed, we can do that; if our hands are tied 

or just one hand is tied behind our back, we will not be as efficient 

as we are capable of. 

Senator HATCH. Thank you, Governor. 

I want to thank both of you, both Governor Herbert and Governor Barbour. I recommend and commend each of you for your 

leadership and striving to make Medicaid work better for taxpayers 

and, of course, for patients. 

I also appreciate those who have submitted statements, written 

testimony, on Medicaid reform. I know we have testimony from the 

Heritage Foundation, the Cato Institute, and the Galen Institute as 

well—all three very, very efficient and effective organizations. 

It is time to fix the Medicaid program. We owe it to the taxpayers, we owe it to the beneficiaries, and we owe it to our grandchildren to reform our entitlement programs that will saddle them 

with enormous government debt if we do not have the courage to 

act now. 

This hearing marks only the beginning of a concentrated effort 

to accomplish Medicaid reform. That is a task I am committed to 

as the ranking member of the Senate Finance Committee, and it 

is a task I have worked on with my counterpart from the House 

of Representatives, Chairman Fred Upton, and with the Nation’s 

22 

Governors, and it is a task that I am going to continue to work on 

until it is complete. 

I intend to be chairman of this committee, and I will not be 

happy until we get this mess straightened out. Together we can 

and we must develop a comprehensive and sustainable Medicaid 

reform. 

Now, this hearing record will be held open for 2 weeks for additional statements or materials. I, again, want to thank the committee chairman, Senator Baucus, for calling this committee meeting here in Utah. It means a lot to me, and he means a lot to me, 

and we are going to work closely together. 

And with that, we will keep the record open, and, of course, we 

will end this hearing at this time and recess until further notice. 

Thanks so much to both of you. 

Governor HERBERT. Thanks. 

Governor BARBOUR. Thanks. 

[Whereupon, at 3:22 p.m., the hearing was concluded.] 

(23) 

A P P E N D I X 

ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD


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COMMUNICATIONS


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