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76–160 PDF 2012

S. HRG. 112–579 

EXAMINING MEDICARE AND MEDICAID 

COORDINATION FOR DUAL-ELIGIBLES 

HEARING 

BEFORE THE

SPECIAL COMMITTEE ON AGING 

UNITED STATES SENATE 

ONE HUNDRED TWELFTH CONGRESS 

SECOND SESSION 

WASHINGTON, DC 

JULY 18, 2012 

Serial No. 112–20 

Printed for the use of the Special Committee on Aging 

( 

Available via the World Wide Web: http://www.fdsys.gov 
(II) 

SPECIAL COMMITTEE ON AGING 

HERB KOHL, Wisconsin, Chairman 

RON WYDEN, Oregon 

BILL NELSON, Florida 

BOB CASEY, Pennsylvania 

CLAIRE MCCASKILL, Missouri 

SHELDON WHITEHOUSE, Rhode Island 

MARK UDALL, Colorado 

MICHAEL BENNET, Colorado 

KIRSTEN GILLIBRAND, New York 

JOE MANCHIN III, West Virginia 

RICHARD BLUMENTHAL, Connecticut 

BOB CORKER, Tennessee 

SUSAN COLLINS, Maine 

ORRIN HATCH, Utah 

MARK KIRK III, Illinois 

DEAN HELLER, Nevada 

JERRY MORAN, Kansas 

RONALD H. JOHNSON, Wisconsin 

RICHARD SHELBY, Alabama 

LINDSEY GRAHAM, South Carolina 

SAXBY CHAMBLISS, Georgia 

CHAD METZLER, Majority Staff Director 

MICHAEL BASSETT, Ranking Member Staff Director 
(III) 

CONTENTS 

Page 

Opening Statement of Senator Herb Kohl ............................................................. 1 

Statement of Senator Bob Corker .......................................................................... 2 

PANEL OF WITNESSES 

Melanie Bella, Director, Medicare-Medicaid Coordination Office, Center for 

Medicare and Medicaid Services, U.S. Department of Health and Human 

Services, Baltimore, MD ...................................................................................... 3 

Jason Helgerson, Medicaid Director and Deputy Commissioner, Office of 

Health Insurance Programs, New York State Department of Health, Albany, NY ............................................................................................................... 16 

Robert Berenson, M.D., Institute Fellow, Urban Institute, Washington, DC .... 18 

Shawn Morris, President, Healthspring, Nashville, TN ....................................... 19 

Tom Betlach, Director, Arizona Health Care Cost Containment System, Phoenix, AZ ................................................................................................................... 21 

Dory Funk, M.D., Medical Director, Senior Community Care, Eckert, CO ........ 24 

APPENDIX 

WITNESS STATEMENTS FOR THE RECORD

Melanie Bella, Director of the Medicare-Medicaid Coordination Office, Center 

for Medicare and Medicaid Services, Baltimore, MD ........................................ 38 

Jason Helgerson, Medicaid Director and Deputy Commissioner of the Office 

of Health Insurance Programs, New York State Department of Health, 

Albany, NY ........................................................................................................... 55 

Robert Berenson, Institute Fellow, Urban Institute, Washington, DC ............... 57 

Shawn Morris, President, HealthSpring, Nashville, TN ...................................... 68 

Tom Betlach, Director, Arizona Health Care Cost Containment System, Phoenix, AZ ................................................................................................................... 72 

Dory Funk, Medical Director, Senior Community Care, Eckert, CO .................. 79 

RESPONSES TO ADDITIONAL QUESTIONS SUBMITTED FOR THE RECORD

Melanie Bella, Director of the Medicare-Medicaid Coordination Office, Center 

for Medicare and Medicaid Services, Baltimore, MD ........................................ 90 

Shawn Morris, President, HealthSpring, Nashville, TN ...................................... 92 

ADDITIONAL STATEMENTS SUBMITTED FOR THE RECORD

Aetna, Hartford, CT ................................................................................................ 95 

Federation of American Hospitals, Washington, DC ............................................ 99 

Medicaid Health Plans of America, Washington, DC ........................................... 104 

Medicare Rights Center, Washington, DC ............................................................. 110 

National Association of Nutrition and Aging Services Programs, Washington, 

DC .......................................................................................................................... 114 

National Committee to Preserve Social Security and Medicare and National 

Senior Citizens Law Center, Washington, DC ................................................... 116 

(1) 

EXAMINING MEDICARE AND MEDICAID 

COORDINATION FOR DUAL-ELIGIBLES 

WEDNESDAY, JULY 18, 2012 

U.S. SENATE, 

SPECIAL COMMITTEE ON AGING, 

Washington, DC. 

The Committee met, pursuant to notice, at 2:05 p.m. in Room 

SH–216, Hart Senate Office Building, Hon. Herb Kohl, chairman of 

the committee, presiding. 

Present: Senators Kohl [presiding], Wyden, Whitehouse, Bennet, 

Blumenthal, Corker, and Johnson. 

OPENING STATEMENT OF SENATOR HERB KOHL, CHAIRMAN 

The CHAIRMAN. Good afternoon. We welcome our witnesses and 

all of you who are here today. 

I commend Senator Corker for putting together and chairing this 

hearing on meeting the challenges of integrating care for beneficiaries who qualify for both Medicare and Medicaid. These socalled dual eligibles tend to have chronic conditions that must be 

carefully managed, such as diabetes and heart disease. They need 

high-quality, consistent Medicare services, and many depend on 

Medicaid for long-term services and supports. 

Historically, the coordination of care for dual-eligible beneficiaries has been fragmented and resulted in higher costs and 

poorer health outcomes. This is not acceptable. Not only have these 

people earned benefits that should protect them when they need it, 

but the high cost is not sustainable in the current environment. 

In our health care system today, dual eligibles are the most vulnerable of the vulnerable. The challenge for all of us is to figure 

out how to deliver care to them in a way that meets their needs 

but does not cost our health care system a fortune. Today, at a cost of about $300 billion, these 9 million dual eligibles account for a disproportionate amount of spending. They represent 16 percent of Medicare beneficiaries but consume 27 percent 

of the program’s spending. In the Medicaid program, dual eligibles 

make up 15 percent of beneficiaries but account for 39 percent of 

total costs. 

Fortunately, efforts are now underway to try to eliminate costly 

duplication of services. The new Federal Coordinated Health Care 

Office, or the Duals Office, at the Centers for Medicare and Medicaid Services, is working with states to implement sound strategies for testing expanded models of coordinated care that we hope 

will lower costs. 
2 

While the national demonstration for dual eligibles is just beginning, we hope that this hearing will shed light on what gains we 

can expect to see as this national demonstration of unprecedented 

size and scope prepares to launch. 

Some states, such as Arizona and New York, show great potential, and we look forward to hearing about the successes of those 

models. We’ll also hear from Medicare-based plans, a national expert who understands the intricacies of the Medicare program, and 

also from the PACE program, which has a long history of participating in both Medicare and Medicaid. 

As we go forward, it’s important to consider whether there is sufficient oversight in place for the national duals demonstration 

which will include 26 states, including my own State of Wisconsin. 

Concerns have been raised as to whether beneficiaries will be able 

to choose the best form of care and how, if they wish to make a 

change, they can switch from one plan to another or return to traditional Medicare. 

The issue of passive enrollment or enrolling Medicare beneficiaries in a program without their consent is a fundamental question of beneficiary choice which we cannot simply sweep under the 

rug. 

There are also important questions about what kind of data we 

need and expect to see on an ongoing basis that will clearly show 

what quality of services are being delivered and the amount of actual cost savings that accrue from each and every participating provider and state. 

We look forward to hearing from Ms. Bella and all of our witnesses. 

I’d like to turn now to Senator Corker, who will chair this hearing. 

Senator Corker. 

STATEMENT OF SENATOR BOB CORKER 

Senator CORKER [presiding]. Thank you, Mr. Chairman. I certainly appreciate all of the testaments. I thank you for allowing us 

to have this hearing, and I want to thank all who are participating 

in this hearing to get an update on care for seniors known as dual 

eligibles who receive both Medicare and Medicaid benefits. 

Seniors in this vulnerable population usually suffer from poor 

health status and lack of financial resources to supplement their 

treatment. As a result, their care can be very complicated and costly, particularly because of Medicare and Medicaid’s competing rules 

which create inefficiencies for the patients, providers, and payers. 

There are about 9 million dual eligibles, and some recent estimates place their annual cost of care to be about $300 billion by 

Federal and state governments. According to the Centers for Medicare and Medicaid Services, dual eligibles represent 20 percent of 

Medicare enrollment but 32 percent of total Medicare spending. In 

Medicaid, they make up just 15 percent of enrollment but 35 percent of the program cost. 

With the Medicare Trust Fund on track to be insolvent by 2024, 

and state and Federal budgets in dire financial predicaments, we 

must make sure that Medicare and Medicaid are working together 

to serve dual eligibles efficiently and cost effectively. 
3 

There have been some innovative solutions to fully integrate financial incentives and coordinate patient care. Existing models like 

Programs for All-Inclusive Care for the Elderly, known as PACE, 

and some Medicare Advantage special-needs plans are successfully 

navigating complicated rules to implement patient-centered care, 

but very few individuals are enrolled in these programs. There is 

much more that we can do so that dual eligibles get quality care 

at lower cost. 

CMS is in the process of implementing state demonstration 

projects with the goal of achieving financial alignment between 

Medicare and Medicaid for the treatment of dual eligibles. Twentysix states, including Tennessee, have applied under this demonstration program which allows states to have the flexibility to be 

laboratories of innovation and could expand integrated, coordinated 

care for dual eligibles from about 120,000 to as many as 3 million. 

With any program of this size affecting the care of so many patients, there must be appropriate congressional oversight. Given a 

recent Congressional Budget Office report demonstrating how previous coordinated care demonstrations have not achieved sufficient 

savings, there is a lot riding on whether or not coordination and 

financial alignment can work to truly improve the quality and contain the cost of care for dual eligibles. 

I look forward to hearing from our witnesses today on how we 

can currently serve dual eligibles and what more we can do. These 

issues are critical to protecting the retirement security of current 

and future seniors. And again, thank you for participating. Thank 

you for letting us have this hearing today. 

We have two panels today. In the first of our panels, we look forward to hearing from Melanie Bella. Melanie is the Director of the 

Medicare-Medicaid Coordination Office at the Centers for MMS. 

According to CMS, Ms. Bella is the Senior Vice President for Policy 

and Operations at the Center for Health Care Strategies, focusing 

on integrating care for complex populations. 

So, Ms. Bella, we thank you very much for being here and look 

forward to your testimony. 

STATEMENT OF MELANIE BELLA, DIRECTOR, MEDICARE-MEDICAID COORDINATION OFFICE, CENTER FOR MEDICARE AND 

MEDICAID SERVICES, U.S. DEPARTMENT OF HEALTH AND 

HUMAN SERVICES, BALTIMORE, MD 

Ms. BELLA. Good afternoon, Chairman Kohl, Senator Corker. 

Thank you for the opportunity to be here today. My name is 

Melanie Bella. I’m the Director of the Medicare-Medicaid Coordination Office at the Centers for Medicare & Medicaid Services. We 

appreciate the opportunity to share our current efforts to provide 

high-quality, well-coordinated care for Medicare and Medicaid enrollees. 

Today, there are over 9 million Medicare-Medicaid enrollees, and 

these low-income persons, seniors and persons with disabilities, receive care in a fragmented system that is neither easy to navigate 

nor designed to provide the best care possible. 

For decades, there has been much discussion about providing 

better care to this population, and thankfully, through the Afford-
4 

able Care Act, Congress has now given us tools to take action, and 

that’s what we want to talk to you about today. 

Simply put, the status quo is not working. Medicare and Medicaid enrollees are forced to navigate a myriad of rules and requirements and manage multiple identification cards, benefits and providers. These are real people stuck in broken systems. 

Consider Jamie. Jamie is a 29-year-old with quadriplegia. He is 

a new Medicare and Medicaid enrollee. Among his many needs, he 

requires both a wheelchair and a shower chair. When Jamie became eligible for the second program, there was confusion about 

how to continue access to the medical benefits that he needed. As 

a result, Jamie did not get the services that he needed. 

When things like this happen, and they happen every day, beneficiaries suffer, and we end up with institutional placements or admissions that could and should be prevented. 

Now consider Ms. R. Ms. R. is an 80-year-old widow who lives 

with her daughter. Her daughter has recently taken a second job 

so that she can help provide care for her mother. Among her many 

health conditions, Ms. R. has heart failure, diabetes, dementia. She 

has advanced hip and knee osteoarthritis. She sees multiple specialists and rarely sees the same primary care provider twice. Her 

daughter, who is feeling overwhelmed, is considering nursing home 

placement. 

Instead, the family was made aware of an integrated care program that was available for Ms. R. After six months in the program she has had no hospitalizations, her medication costs were 

cut in half, and she’s had no ER visits. In addition, her daughter 

has had fewer work absences. 

Care like Ms. R. receives should be the rule and not the exception. With that as our driving principle, the Medicare-Medicaid Coordination Office is focused on three areas. The first is program 

alignment, the second is data and analytics, and the third is models and demonstrations. Collectively, these areas form a platform 

for developing and advancing more integrated, person-centered systems of care for people like Jamie and the millions of beneficiaries 

across the country who are eligible for both Medicare and Medicaid 

but find themselves stuck in a broken system today. 

Better coordination begins with program alignment. To address 

program barriers and inefficiencies, we launched what’s called a 

program alignment initiative, which has served as our guide for 

streamlining Medicare and Medicaid rules, requirements and policies. The alignment initiative has provided an important forum for 

the public to comment on our work, and it’s a guide to help us identify opportunities for program alignment that we can either address directly or we can address through current or future demonstrations. 

Next is data. A critical aspect to everything we do is having a 

thorough and comprehensive understanding of this population. 

Last year, we initiated a new process to support States in their efforts to provide safer, better, and more cost-effective care through 

sharing data, Medicare Parts A, B and D data with States for care 

coordination. 

Earlier this year, we released State-specific profiles that provide 

a snapshot of basic demographic information, utilization profiles, 
5 

cost patterns for the population that we’re talking about, by State. 

We hope these tools will help serve ourselves and other policymakers better to address the needs of this population. 

Complementing these efforts are models and demonstrations 

which further our work to better coordinate care. Through the financial alignment initiative, we have fostered a Federal and State 

partnership through demonstrations, one a managed fee-for-service 

model and one a capitated model, intended to test the alignment 

of service delivery and financing of the two programs. The demonstrations are designed to leverage the strengths of the State and 

Federal governments and to take the best aspects of both programs 

and put them forward in a way that meets the needs of beneficiaries, their caregivers and providers. 

In addition to the financial alignment initiative, we are excited 

about a new initiative aimed at reducing avoidable hospitalizations 

among nursing facility residents. We are committed to openness 

and transparency and have made it an integral part of this process. 

We take public feedback very seriously and are continually working 

to address comments and recommendations. 

This testimony reflects just some of the ways we are working to 

improve the overall beneficiary experience of care, strengthen the 

partnership between the States and the Federal Government, protect the integrity of the Medicare Trust Fund and taxpayer dollars, 

and promote more integrated and accountable systems of care. 

While there may be differences in views on how we get there, 

there can be no question that we can provide better care for this 

population. Our job is not simply about numbers and charts and 

dollars and savings. It’s about people, and we will continue to do 

our part and look forward to working with you and your support 

to do better for this population. Thank you very much. 

Senator CORKER. Mr. Chairman, why don’t you go first with 

questions? 

The CHAIRMAN. Thank you. I will not be over long. 

While state by state evaluations are required under the national 

demonstration, what kind of nationwide evaluation of the 26 states 

will CMS undertake? For example, have you identified ways to 

measure quality of care for dual eligibles that all states will be required to collect? And if so, will the results from each state be part 

of a national evaluation? 

Ms. BELLA. I’m glad you asked that question. Evaluation is critical to these demonstrations. We brought an external evaluator, 

RTI, on board several months ago to begin working with us, knowing that we were going to want to have a very comprehensive evaluation. We will have, as you state, State-specific evaluation designs, and also a national evaluation. We will have core measures 

across all of the demonstrations, and then we will have variations 

within each demonstration to reflect, for example, the different 

models of care, the different target populations. 

But the answer to your question, the answer to all your questions is yes. We will have a core set of measures, we will have 

State-specific designs, and we will have a national design that will 

look in aggregate across the demonstrations for both the managed 

fee-for-service and the capitated model. 
6 

The CHAIRMAN. Good. The Medicare Payment Advisory Commission, MedPAC, and others have expressed concerns that the demonstration is too expansive. At the same time, not all states are 

participating in a demonstration, and among the 26 that are, some 

are choosing to focus on a limited population. Still, it’s clear that 

some states involved have an interest in quickly expanding their 

model. 

What is CMS doing to balance the pressure to expand with the 

need to make sure the new models actually work? And how will the 

agency respond if some states do not do a good job and beneficiaries fail to get high-quality care? 

Ms. BELLA. Well, a couple of points in response. The first is I 

think it’s important to make sure that everyone realizes we have 

not approved any demonstrations yet, and we have not made any 

claims that we will approve demonstrations unless they meet the 

standards and conditions and the high bars that we’ve set for the 

demonstrations. 

So there certainly is a lot of interest in the proposals that have 

all been publicly posted. The numbers are higher than we intend 

to approve through these demonstrations, and we have many 

checks and balances along the way where we can ensure that the 

beneficiary protections are in place, the financial safeguards are in 

place before we allow the demonstrations to unfold. 

So, we have a group of States that’s interested in implementing 

in 2013 and a group that’s interested in 2014, and within each of 

those groups, they all want to phase differently. In order for us to 

continue with anything that we approve, again, we will have milestones to make sure those are met before we automatically allow 

enrollment of beneficiaries into these programs. 

But, I think the first and foremost thing to emphasize is that 

nothing has been approved yet, and some things in State proposals—this will not shock anyone—are outside the boundaries of 

what CMS has indicated it would be willing to accept. So, there’s 

going to be a lot of give and take between now and the time that 

we assess all the proposals. 

The CHAIRMAN. Finally, the concept of passive enrollment for dually eligible beneficiaries is one that has not been tried in Medicare 

before, as you know. Is CMS concerned about setting a precedent 

that could be difficult to un-do? 

Ms. BELLA. We look at these demonstrations as an opportunity 

to test new enrollment methodologies and to test new ways of communicating with beneficiaries to make sure they understand their 

choices and their options. So, we will be using enrollment brokers, 

choice counselors, leveraging ADRCs and SHPs out in the community, and that’s something we haven’t done in the past, quite honestly. 

We had a limited run with passive enrollment when Part D 

started, and I think we’ve learned from that experience, and we’re 

really trying to wrap around the beneficiary and make sure there 

is a strong network of information in accessible formats to help 

beneficiaries understand these choices, and we see that this demonstration is an excellent opportunity to test the passive enrollment model. 

The CHAIRMAN. Thank you. 
7 

Senator Corker. 

Senator CORKER. Thank you, Mr. Chairman. 

As you can tell by the large number of people here, there’s been 

a lot of input as it relates to this demonstration program, and I 

want to applaud you for trying to figure out a better way of dealing 

with dual eligibles, I really do. I know a lot of people here are interested in making sure that it works in an appropriate way. 

There’s been a lot of discussion about the size of this program. 

It’s a pretty large demonstration program when you have potentially 9 million folks overall and 3 million have been projected to 

be a part of this program. I know that you may have a sense of 

what you think the real uptake is going to be in this program. I 

wonder if you might share with us how many people you think 

really will be a part of this demonstration project. 

Ms. BELLA. Sure. Certainly, size has generated a lot of interest, 

as you know. 

Senator CORKER. A lot of enrollees, a lot of dollars. 

Ms. BELLA. We said last year when we announced the demonstrations that we had a target of up to 2 million beneficiaries. 

I think we feel that that is a reasonable target both to balance not 

putting too many people in, but also to allow us to test variation 

across the Nation in different delivery systems, different States, 

with different beneficiary populations. 

So, we believe that is a size that’s necessary for us to be able to 

provide information to Congress and others about how to better 

promote integrated care for these populations. We believe we’re 

doing it with strong evaluation and oversight that will ensure that 

we’re protecting the beneficiary interest because we have milestones along the way to do this, and again our target is 2 million. 

That doesn’t mean that we will approve up to 2 million, but—— 

Senator CORKER. But your sense is there might be 2 million in 

participation. 

Ms. BELLA. Certainly, there’s been widespread interest from the 

States, and I would say we have had a small test of this in the 

past. We’ve seen other integrated programs, but they’ve been very 

small. So this is, in part, a way for us to test scale for a population 

that, I think in our view, is long overdue. 

Senator CORKER. And how does the size of this compare to other 

demonstration programs that we might have carried out in Medicare in the past? 

Ms. BELLA. Certainly by Medicare’s definition, it’s very large. But 

then there also have been, I think, observations about Medicare 

demonstrations in the past that they haven’t been large enough for 

us to get an understanding of how we would scale those demonstrations and/or that they haven’t moved quickly enough. 

So again, we’re trying to strike that balance. Certainly, when we 

test things in the Medicaid world, they’re on a larger scale. So 

when we’re trying to bring those two worlds together, we’re trying 

to strike that balance, and we feel that up to 2 million is a reasonable balance. 

Senator CORKER. So you think that’s appropriate and feel comfortable with that? Again, I’m sure you’re going to have a lot of 

input regarding that as it moves ahead. 
8 

I know that Senate Finance Republicans and MedPAC and others have been a little bit concerned about the effect that this is 

going to have on Medicare Part D and the competitive program 

that exists there, and I wonder if you might give any comments 

that you might have regarding keeping that competitive process in 

place and any negative impacts that you think this program could 

have on that. 

Ms. BELLA. Well, as you can imagine, we worked closely with our 

Office of the Actuary as we structured this demonstration to ensure 

that we were putting the pieces together in a way that would not 

have a negative impact on Part D. We feel the way we’ve structured Part D as part of this demonstration will not have an impact 

on the Part D bids, and we will be closely monitoring and evaluating that over the course of the demonstration to ensure that, indeed, we’re not having any unintended result. 

Senator CORKER. And do you plan to allow states to substitute 

their Medicaid formulary for Part D? 

Ms. BELLA. So we’ve been pretty strong in our policy that Part 

D stays intact. We’re pleased with Part D. We believe that the beneficiary protections it affords and the protected classes are things 

that need to remain the same in the demonstration, and that’s the 

policy that we’ve issued. 

Senator CORKER. So based on that statement, do you think there 

will be much impact on the savings that we’re seeing from Medicare Part D now? 

Ms. BELLA. Again, based on our consultation with our Office of 

the Actuary, we don’t believe that it’s going to have any negative 

impact on the Part D program. 

Senator CORKER. And as you can imagine, advocates, especially 

for people who have really complex situations, HIV, mental health, 

those kinds of things, are concerned, end-stage renal disease, all 

kinds of chronic issues. You feel certain that you’re going to be able 

to put in place robust networks to care appropriately for individuals who have conditions like this? 

Ms. BELLA. We certainly expect that the demonstration proposals 

that the States have put forward, and we approve are sensitive and 

reflective of the subpopulations through the requirements that they 

have on the health plans, for the care plans and the interdisciplinary teams and all of those things. Through our network adequacy 

and readiness reviews, that will be a strong component, we’ll be 

looking to be sure that by subpopulation, the plan has an adequate 

network in place to provide care. We will be monitoring the care 

plans, the models of care, all of those things, not in a one-size-fitsall approach but sensitive to the different needs of the various subpopulations that you mentioned. 

Senator CORKER. And you’ve talked a lot about the complexity, 

and you gave two great examples on the front end, and aligning incentives and all of that. You’re projecting 26 states, I guess, participating in this. Tell me where you think the savings is actually 

going to come from and how will the savings be attributed between 

Medicaid and Medicare as you go forward. 

Ms. BELLA. Sure. 

Senator CORKER. And will that differ, by the way, per each state? 
9 

Ms. BELLA. So the first question is where do we think the savings will come from. Generally in three areas: one, improved coordination of care because we actually have now a coordinated system 

with an accountable entity. The second is reduction of duplicative 

or unnecessary care, which we know is happening today. And third 

is administrative efficiencies, by having entities that don’t have to 

navigate both programs and do two sets of reporting requirements 

and two of everything essentially. So we believe that that will provide savings. 

We anticipate that—we have not released a national savings target for the very reason that the savings opportunities will be different in each State. It will depend on what the intervention is, 

what the target population is, what the State’s current mix of institutional and community-based placement is. All of those things, 

among others, will influence what the savings opportunity is in 

each State. So we do expect that it will vary, yes. 

Senator CORKER. And how will you attribute those savings 

again? I’m not sure—— 

Ms. BELLA. Oh, I’m sorry, that was the third part of your question. The way this is designed, and it’s designed to bring the two 

payers together in a way that aligns incentives, we would expect 

that the savings would be applied proportional to the contribution 

of each payer to the rate that gets paid for an individual. So Medicaid will not be grabbing all the Medicare money, and vice-versa. 

It will be a reflection of the way the payers contribute today to the 

care. 

Senator CORKER. Some of the states have found some unmet 

needs for home and community-based services when they looked at 

newly enrolled beneficiaries. I’m just wondering how this is being 

factored into your projections. 

Ms. BELLA. Particularly, it’s something that we expect to see in 

some States, particularly those that are less rebalanced, if you will. 

The way the model is designed to work, and this is in the capitated 

model I assume we’re talking about, we expect to see shorter-term 

savings in the Medicare arena, in the hospitalizations and readmissions and better pharmacy management. Those shorter-term savings can help offset some cost increases in the community-based 

services side. 

When the shorter-term savings run out, that’s when we expect 

to see some of the savings from Medicaid start to materialize. So 

the beauty of this model is when you put them together, one comes 

in sooner, the other comes in later, but by blending the two, they 

both share across the life of the demonstration. And so we believe 

some of the unmet need will be able to be funded through some of 

the opportunities that come through reduced hospitalizations and 

better pharmacy management. 

Senator CORKER. I think, again, when you look at the interest 

that we’ve had in this hearing, the people that are here, you find 

this anytime there are changes in the Federal Government, people 

that have been serving a population in a certain way become concerned. So there have been a lot of process questions. Can you describe for the audience here today and those who care about this, 

obviously us here, what kind of process are you going to work 

through to refine these proposals with state governments, and 
10 

what kind of transparency and input are you going to be receiving 

all along the way? 

Ms. BELLA. The transparency and stakeholder engagement has 

been a core part of this process from day one. All of the States in 

the development of their proposals, one of our major requirements 

was that they have a very robust and meaningful stakeholder engagement process all along the way while they were developing 

their proposal. Before they submitted their proposal to us, we required that they posted it publicly for comment for a 30-day period. 

Then we required that they incorporated those comments or that 

they showed us what they did and did not incorporate into their 

proposal. 

Upon that part of the process, they were able to submit a proposal to CMS. We then posted that proposal for public comment for 

30 days and gathered public comment directly to CMS. We are actively going through all of those comments. Some States have more 

than others, as you can imagine. But then that also guides our 

interaction with the States to go back and understand why they 

are or are not changing certain things that may have come in during the public comment period. 

What that’s all leading up to is the development of a memorandum of understanding. The memorandum of understanding is 

what memorializes the demonstration between CMS and a particular State. But there is no guarantee that the point of proposal 

will result in a memorandum of understanding because there’s 

much that has to be worked out along the way. 

CMS issued guidance in both January and March that laid out 

standards for these demonstrations, a heavier focus on the Medicare side, but clearly said these are the parameters and these are 

our standards for things like grievances and appeals and marketing and provider credentialing and licensure insolvency, all 

those types of things. So that’s been out in the public domain. It’s 

been very public. 

In addition, I mentioned the memorandum of understanding. The 

template for the MOU was made public last year when we announced these demonstration opportunities, so we’ve tried to get information out in the public to make people aware of the types of 

things that would be part of these demonstrations. We’ve made a 

commitment that all those memoranda of understanding will be 

made public. So we really do want to encourage—not encourage, 

but live up to transparency along the way in the process. We meet 

with stakeholder groups frequently and oftentimes without the 

State, just upon request. So we are trying to make this, again, a 

very open process. 

Senator CORKER. Thank you. I know we have two other senators 

that have just come in. I’ll ask one more question, then have a few 

more for the record, if that’s okay. 

What do you see as a future of special needs plans, managed 

long-term care, PACE programs, outside of this demonstration? 

And are you thinking that there needs to be more than one model, 

if you will, as you go forward? I’m just wondering what you think 

the impact on these other programs will be as you move ahead. 

Ms. BELLA. The ultimate goal for us is to have seamless coordinated systems of care for beneficiaries. So there is not a one-size- 
11 

fits-all approach. There’s a very important place for the PACE program, and we are trying to work with our demonstration States to 

ensure that there continues to be a viable option for PACE. Special 

needs plans are important in that they focus on this population. 

We’d like to see those be more integrated. 

But in answer to your question, there is not a one-size-fits-all approach, and we have variations of the two models that we have out 

there today, and we expect that we will learn from those things 

and we’ll make adaptations. Again, the goal is not to have one prescribed model, but the goal is to have people in seamless, accountable systems of care. 

Senator CORKER. Well, thank you very much. And with that—— 

The CHAIRMAN. I have one question. 

Senator CORKER. Okay. Go ahead. 

The CHAIRMAN. Ms. Bella, many of the state proposals for national demonstrations project that, over time, savings will come as 

a result of reduced hospitalization rates, emergency room visits, 

and long-stay nursing home admissions. From CMS’ vantage point, 

what kinds of changes will be needed to produce significant savings 

in these areas, and realistically how quickly can they be realized? 

Ms. BELLA. Well, unfortunately, there’s no silver bullet, and 

nothing happens quickly. I mean, these things take time to show 

results. So I think we all have to have that expectation in mind. 

Having said that; there are certainly opportunities in the areas 

that you mentioned. But one of the fundamental things that we 

have to overcome is this financial misalignment between the two 

programs, because right now the incentives are not aligned for 

many of the outcomes that you speak of. So part of what we’re trying to do, where we have a lever at CMS is in these demonstrations 

and trying to change payment policy, and trying to change the benefit structure in a way to put accountability in the system that rewards improved quality and outcomes and aligns incentives to 

allow us to see the types of improved health outcomes that you 

speak of. 

The CHAIRMAN. Thank you. 

Senator CORKER. Thank you, Mr. Chairman. 

Senator Johnson. 

Senator JOHNSON. Thank you, Senator Corker. Sorry I was late. 

So if I ask some questions that have been covered, I apologize. 

Just in reading the briefing materials here, one of the problems 

it seems like in the demonstration projects is states are moving 

way more individuals into these projects than was anticipated. Isn’t 

there a relatively easy fix to that? Does that require some legislation, or am I overstating the problem? 

Ms. BELLA. Certainly there’s been a lot of attention on the numbers, and the numbers that are floating around in the public are 

higher. They’re inflated based on what CMS intends to move forward with, and we believe that the number that we—we control 

whether we approve these or not. So I think you’re right, it’s not 

a complicated issue. There are differences in opinion on how large 

the size should be. We feel comfortable moving forward with the 

target that we set, and we do have mechanisms in place to ensure 

that we will only move forward with State proposals that are appropriate and have the necessary beneficiary protections. 
12 

Senator JOHNSON. In terms of trying to limit the increase in 

costs, and I think that’s about all you can really do in health care, 

unfortunately. It’s very difficult to actually reduce cost. But in 

terms of limiting the increase of cost, certainly from my standpoint, 

introducing free market principles into health care would be one of 

those things. Is there anything in this demonstration project that 

would start moving us in the direction of bringing some free market disciplines? In other words, putting patients more in charge of 

some of the payments? 

Ms. BELLA. At this stage, we’re not injecting any type of beneficiary payments for this population. We certainly are trying to encourage beneficiaries to be in more efficient systems of care, those 

that can give them additional benefits than they are receiving 

today in the sort of fragmented fee-for-service world. So I think 

that’s the first step toward getting folks more engaged in their 

care. 

Senator JOHNSON. So would you say the cost savings you expect 

really come more from that coordination of care versus just a 

capitated type of payment system? Is there any capitation involved 

in this at all? 

Ms. BELLA. Yes. There are two demonstration models. One is a 

capitated model and one is a managed fee-for-service model, more 

like an accountable care organization model. But we think there 

are cost savings from improved care coordination, from reduction of 

duplicative and unnecessary spending, which happens quite a bit 

in this population, and from administrative efficiencies, by not having to deal with two sets of program rules and requirements that 

are completely different. 

Senator JOHNSON. Are you running those two experiments side 

by side to determine which is best? 

Ms. BELLA. We’re not—each State has indicated which model it’s 

interested in testing. We have two States actually that are interested in testing both models, but they will be in different areas of 

the State. So we will have common measures across both models 

that will help inform the strengths, I guess, and the impact on 

quality of cost of one model over the other. 

Senator JOHNSON. If you were to guess, which model do you 

think would be superior? 

Ms. BELLA. We have more stability and predictability in the 

capitated model, and more accountability, because one entity is receiving both funding sources to arrange for the care. I think, 

though, that’s a more tested model, and the managed fee-for-service model offers us a great opportunity to learn through aligning 

incentives in a different delivery system setup. So I think that both 

have tremendous promise, and honestly a lot of it just depends on 

the State and what the state’s current delivery system environment 

is. So I think that they both hold great promise. 

Senator JOHNSON. In an earlier response to a question, you were 

talking about the financial incentives just weren’t aligned properly 

between the two systems. Can you just dwell on that a little bit 

more, try to get me to understand exactly what you’re talking 

about there? 

Ms. BELLA. Sure. A couple of examples: One is Medicaid programs typically have care management programs for high-risk, 
13 

high-cost folks, and those care management programs are intended 

to reduce hospitalizations or readmissions or improve medication 

management and those things. 

For a dual eligible, if Medicaid pays a care management fee—say 

it’s me, and they pay a care management fee for me but I’m a dual 

eligible, so if I have reduced hospitalizations or better drug costs, 

Medicare gets that money. So Medicaid doesn’t want to make an 

investment if it has no ability to share in any returns on that investment. So that’s one example. 

Is that helpful? Today the Medicaid programs are excluding the 

dual eligibles for these programs, by and large, because of this financial disincentive. So neither program benefits, nor does the beneficiary. 

Another example is between hospitals and nursing homes. So 

Medicare pays for hospitals, Medicaid pays for custodial nursing 

home stays. You see this incredible churn between the two payers 

largely driven by the misaligned financial incentives, and what 

happens is the beneficiary gets in the middle and we have all these 

unnecessary placements between the two settings, again in large 

part because each is paid for by a different payer. 

Senator JOHNSON. How much does the different reimbursement 

rates enter into that equation in terms of misalignment of the financial incentives? I mean, are providers pushing more Medicare 

versus Medicaid because of reimbursement differentials? 

Ms. BELLA. It happens for some services. Most of the services, it’s 

pretty clear who is the primary payer, and so there’s not as much 

of that. But certainly Medicare is a better payer than Medicaid, 

and particularly when it comes to skilled nursing care, nursing facility care. I think there is a greater interest in having Medicare 

be the payer than Medicaid in those settings. 

Senator JOHNSON. Okay. Well, thank you. I’m out of time. 

Senator CORKER. Senator Wyden. 

Senator WYDEN. Thank you very much, Mr. Chairman. I want to 

commend you and Senator Kohl because I think this is an extremely important topic. I wish I had a nickel for every time I 

heard about how health care was going to be better coordinated, 

because I think we would all be in very solid financial shape if that 

was the case. 

Ms. Bella, I want to touch on some of the issues that you and 

I have talked about in the past, and start with the proposition that 

coordination of dollars is not the same thing as coordination of 

care. My sense is that this room is probably filled today because 

most folks are interested in the former. They want to know where 

the dollars are going to go, and that’s understandable, and I just 

want to make sure that the dollars actually go for the programs 

that do coordinated care for these very vulnerable people and deliver the highest possible quality. 

Now, my view is—and we’ve talked about this in the past, and 

I’d just like to get this on the record—that the Independence at 

Home model is just about the best way to make sure that you coordinate care for these very vulnerable people. Would you largely 

share that view? 

Ms. BELLA. I think Independence at Home is a great program for 

a segment of this population, yes. 
14 

Senator WYDEN. Well, I appreciate that because, as you know, I 

pushed very hard to get that into the Affordable Care Act. We were 

able to get that in. We’ve been able to make a modest start. We 

have this demonstration program underway. We saw in Portland 

that House Call Providers was chosen as one of the 16 groups to 

participate. I very much appreciate that. It’s our desire to build on 

the extraordinary accomplishments of the VA program that has 

taken a population that’s even sicker, with more of what you professionals would call co-morbidities, and produced astounding results. At the VA, the costs have been reduced by 24 percent, hospital days have been reduced by 62 percent, nursing home days by 

88 percent. So the VA is coordinating care and saving money. 

The question I had for you is we’ve been reviewing all the materials that you all have been getting out to the states, and you’ve 

told me again today that you think Independence at Home is a very 

good model. But as far as I can tell in terms of the information 

going out to the states, Independence at Home doesn’t seem to get 

much attention at all, if any, as a delivery model for the states. 

So can you tell me what is going on with respect to your efforts 

to make sure that states are aware of this? Perhaps we just haven’t 

seen all the material that you all have sent out. But if you could 

tell me what the situation is in terms of your relationship with the 

states, that would be very helpful. 

Ms. BELLA. Certainly, and the Independence at Home program, 

as you know, is led through our Center for Innovation. So I can go 

back and consult with our colleagues there to find out more about 

what outreach is going on to the States. 

For our particular interaction with States on Independence at 

Home, we’re particularly keying to States where there is an Independence at Home demonstration and who want to do one of our 

demonstrations to make sure that we are coordinating appropriately and make sure that there is the best situation for the 

beneficiaries. So most of our interaction around that program is 

specific to states where there might be potential overlap. 

Senator WYDEN. Why don’t you get back to me, if you would, on 

that point? Because I think it’s been a concern in our office and 

among a number of the States. CMS has said that Independence 

at Home is a good model, it makes sense for the dual eligibles, but 

it has not gotten much mention, if any, in terms of what you all 

are doing to communicate with the States. 

The second question touches on what’s going on with the dual eligibles, but particularly in states like mine that have high Medicare 

Advantage penetration. As you know, Oregon has the highest percentage of seniors participating in Medicare Advantage in the country. It’s about 42 percent. In fact, in the metropolitan Portland 

area, it’s well over half of the seniors in Multnomah, Washington 

and Clackamas Counties are participating in Medicare Advantage 

programs. As you know, you see this all the way through the Pacific Northwest where Group Health is extraordinarily popular up 

in the Seattle area. 

Now, Oregon would like to move forward with this kind of coordination for dual eligibles, but we’re concerned about being disadvantaged because of how CMS proposes setting care reimbursement 

rates for this population. We’re already getting hammered under 
15 

today’s reimbursement rates. We’re very appreciative of the work 

that you all have been doing with our governor’s office, by the way, 

on this point. But it just seems to me that if we don’t get this resolved, we could actually be moving backwards, particularly in 

states like mine that have high Medicare Advantage participation. 

So on behalf of the governor and our state folks, we would like 

to have a commitment that you all will work to ensure that Medicare Advantage plans are not disadvantaged by integrating care for 

the dual eligibles. Is that something that you can offer up here 

today that I can take back to our State folks? 

Ms. BELLA. We work very closely with your State folks and appreciate all of their dedication to this project. The goal of these 

demonstrations is not to hurt anyone. I think there is obviously a 

legitimate concern on the rate setting for States like Oregon, and 

other States as well, and our commitment is to work with the 

States to ensure that we can create a rate that is appropriate to 

allow plans to provide the services that beneficiaries need. 

Senator WYDEN. Well, that’s appreciated, and Oregonians do find 

ourselves working with you all a lot, and we appreciate that. We’re 

trailblazers in many respects, and certainly on health care kinds of 

issues. As I’ve told you before, and I think Chairman Kohl and I 

have talked a little bit about this, I want to make sure that 10 

years from now, 15 years from now, we have dramatically increased the number of folks, particularly the dual eligibles, that are 

treated at home. 

Very often I come to hearings now on this committee and on the 

Finance Committee and I walk out saying the discussion isn’t very 

different than the kind of discussion I participated in when I was 

co-director of the Oregon Gray Panthers years ago, and I point out 

to my staff I had a full head of hair and rugged good looks. We 

were talking then about demonstration projects, then, and here we 

are 30 years later still, day in and day out, seeing vulnerable seniors, dual eligibles, those who have chronic diseases, heart, stroke, 

cancer, diabetes, going off to hospital emergency rooms in the middle of the night, going to institutional services, when I know we 

can get more of those seniors care where they want to be, which 

is at home, at less cost to taxpayers. 

We’ve talked about this before. I know this conversation will be 

continued. We appreciate what you’re trying to do with Oregon, 

where we have the special concern because we’re already discriminated against with respect to reimbursement rates, and then if you 

could follow up on the first point to make sure that the states fully 

understand the value of the Independence at Home model for treating dual eligibles, that would be most appreciated, and I look forward to talking to you in the future about these topics and working 

with you. 

Chairman Corker, Chairman Kohl, thank you very much. 

Senator CORKER. So, thank you very much. I want to say that 

I know a lot of folks are here and a lot of folks are interested for 

a lot of reasons, and certainly there’s a lot of finance at stake with 

all of this. But I am very pleasantly surprised that the Administration is taking this on in the way that it is. You seem to be very 

knowledgeable and on top of this. I know you’re going to be getting 

a lot of input from this panel coming after this, and I hope you will 
16 

at least understand when it’s over what they have said and pay attention to that. 

But I want to thank you for taking on a really tough issue that 

our country has been wrestling with for many, many years. I think 

with input from stakeholders who care deeply about the lives of 

these dual eligibles, and with oversight from Congress, I think we 

can have a very good outcome, and I thank you for taking those 

steps towards that end. So thank you for being here. 

We’ll have the next panel up, if that’s okay. 

So I’ll go ahead and be introducing the panel as you’re getting 

seated. Panel 2 consists of Jason Helgerson, Medicaid Director and 

Deputy Commissioner of the Office of Health Insurance Programs 

from New York State Department of Health in Albany; Dr. Bob 

Berenson, Institute Fellow, Urban Institute, Washington, DC; 

Shawn Morris, President of HealthSpring, a Nashville-based entity, 

Nashville, Tennessee, I might say; Tom Betlach, Director of the Arizona Health Care Cost Containment System, from Phoenix; and 

Dr. Dory Funk, Medical Director, Senior Community Care, Eckert, 

Colorado. 

We thank all of you for being here and look forward to your 

input. I know there’s a lot of interest in this, and we certainly, I 

know, will learn a lot from your testimony. If you can go ahead and 

give your opening comments in 5 minutes or so, we’d appreciate it, 

and we’ll have some questions. 

STATEMENT OF JASON HELGERSON, MEDICAID DIRECTOR 

AND DEPUTY COMMISSIONER, OFFICE OF HEALTH INSURANCE PROGRAMS, NEW YORK STATE DEPARTMENT OF 

HEALTH, ALBANY, NY 

Mr. HELGERSON. Thank you, Senator, and thank you very much 

for the opportunity to be here today to testify before this committee 

on this very important topic. On behalf of Governor Andrew 

Cuomo, it’s a tremendous honor to be here testifying and talking 

about New York’s efforts to redesign its Medicaid program, and in 

particular the state’s efforts to transform the health care delivery 

system for New Yorkers who are enrolled in both Medicaid and 

Medicare. 

Currently, New York State spends more than twice the national 

average on Medicaid on a per capita basis, and yet at the same 

time New York ranks 31st in overall health system quality, and it 

ranks last for avoidable hospital utilization. 

Upon taking office, Governor Cuomo issued an executive order 

which established the Medicaid Redesign Team. The MRT brought 

together stakeholders in a unique way from across the state to 

work together to reform the system, reduce costs and improve quality. 

This team worked in two phases. The first phase was asked to 

identify $4 billion in immediate Medicaid savings. To do this, the 

MRT held hearings, established an interactive website, harnessed 

the social media, and collected feedback from citizens and stakeholders alike. In less than two months, these efforts generated over 

4,000 ideas. 

On February 24th, 2011, the MRT submitted its first report with 

79 recommendations to the governor. This package achieved the 
17 

governor’s Medicaid savings target, and subsequently the governor 

accepted those recommendations and forwarded them to the legislature. In somewhat unheard of standards in New York State government, the legislature actually adopted virtually all of these recommendations. 

The MRT Phase 1 package introduced structural reforms that 

have significantly bent the Medicaid cost curve and improved outcomes for Medicaid members. Importantly, the savings were 

achieved without any cuts in eligibility, nor did the plan eliminate 

any optional benefits. New York State implemented all Phase 1 initiatives on time and within savings targets. These efforts generated 

not only substantial savings for New York taxpayers but for the 

Nation as a whole. Over the next five years, the MRT initiatives 

will reduce Federal Medicaid spending by $17.1 billion. 

In Phase 2, the MRT broke up into 10 workgroups and focused 

on developing a multi-year action plan to really fundamentally reform the state’s Medicaid program. The MRT completed its work 

earlier this year and the state now has a 5-year plan for transforming Medicaid. The major elements of that reform plan include 

the enactment of the first of its kind in the Nation Medicaid global 

spending cap that brings much needed fiscal discipline and transparency to the program. Also, care management for all, a proposal 

to over several years phase out the fee-for-service Medicaid program and replace it with a system of high-quality care management that rewards quality over volume. 

1.8 million New Yorkers now have access to patient-centered 

medical homes that are nationally certified. And also, funding was 

provided to create Health Homes all across the state, an innovative 

new model which promises to provide high-quality care management and care coordination for Medicaid’s highest needs patients. 

And lastly, the plan included a major new partnership between 

the state and the Federal Government to integrate care between 

Medicare and Medicaid for the dually eligible individuals. New 

York is well positioned to partner with the Federal Government 

around duals integration. Duals are among the most fragile people 

living in New York, and the fact that Medicare and Medicaid have 

not worked together well has meant poor outcomes and high cost. 

New York’s approach to dual integration is multifaceted. First, 

the state will utilize Health Homes to provide care management for 

duals who do not require long-term care services. This initiative 

will be deployed in January of 2013 and will benefit 126,000 Medicaid members. 

Next, the state will expand on its highly successful managed 

long-term care program, which manages the long-term care needs 

of roughly 50,000 duals today. This program, which has been 

around for over a decade, is now moving into mandatory status and 

will grow to more than 120,000 people by January of 2014. In that 

same year, the state will add Medicare services in coordination 

with the Federal Government to the existing plan benefit package 

so as to convert in place these duals into a fully integrated managed care product. 

New York will also be working to expand its successful model to 

10,000 duals with developmental disabilities. 
18 

Duals will have the option, of course, to opt out of Medicare managed care. However, we are confident that they will actually stay 

in the fully integrated option since they are already enrolled in and 

familiar with their plan. It’s important to note that PACE will also 

be an option, and New York operates some of the largest PACE 

programs in the country. 

Thanks to Governor Cuomo’s leadership and the hard work of 

the MRT, New York is now in a position and is excited that we 

have a plan to fundamentally redesign the Medicaid program. 

Thanks to this effort and the efforts of our friends at the Duals Office, we now are on the path for a new partnership between the 

state and the Federal Government when it comes to integrating 

care for some of our most fragile New Yorkers. 

Thank you very much for the opportunity to testify. 

Senator CORKER. Thank you very much. 

Dr. Berenson. 

STATEMENT OF ROBERT BERENSON, MD, INSTITUTE FELLOW, 

URBAN INSTITUTE, WASHINGTON, DC 

Dr. BERENSON. Thank you, Senator Corker, Senator Johnson. I 

appreciate the opportunity to testify on the CMS initiative for dual 

eligible beneficiaries. My orientation is to Medicare based on my 

experience as a practicing internist for 20 years, a senior official in 

the Clinton Administration responsible for Medicare payment policy and managed care contracting, and as vice chair of MedPAC 

until this past May. There is broad agreement on the need to do 

a better job on care for the duals. I long have supported a move 

from fee-for-service, which is proving increasingly dysfunctional, to 

capitation, so I endorse testing the general approach in the dominant integrated payment model in the CMS financial alignment 

initiative. 

Because of the challenges of scaling and generalizing from impressive local initiatives, reports of successful Medicaid managed 

care programs and innovative Medicare Advantage special needs 

plans should lead to real demonstrations, accompanied by strong 

evaluations to produce the needed evidence on which to base policy. 

There are many examples of initiatives that proponents knew 

‘‘worked’’ that proved not to work when scaled and subjected to 

evaluation. 

CMS has indicated it wants to include 2 million or more in these 

state-initiated programs. Instead, my view is that CMS should 

scale down this demonstration to one that might involve as many 

as 500,000 dual eligibles in perhaps 8 to 10 states. Such a demonstration program would still constitute one of the largest demonstrations Medicare has ever mounted. 

Reasons for this shift include, one, experience with mostly 

healthy adults and children does not qualify a managed care organization to serve duals who may have severe mental illness, developmental and other physical disabilities, HIV/AIDS, end-stage 

renal disease, dementia, multiple chronic conditions. Medicaid 

managed care plans currently serve only about 120,000 duals nationally. 

SNPs do target duals care and serve about 10 times that many. 

Yet even with SNPs, there is little evidence that permits policy-
19 

makers to presume, for example, that passive enrollment is in the 

beneficiary’s best interest, a central premise in this initiative. 

Two, Medicaid managed care plans lack capacity to accommodate 

the kinds of numbers that have been proposed by the states. 

Three, the financial alignment initiative should require proof of 

concept before broad application. In fact, prior demonstrations and 

experience with SNPs do not demonstrate that these integrated 

programs actually produce savings. Further, a central purpose of 

demonstrations is to work out a myriad of operational issues before 

broad adoption. 

Four, proper evaluation is essential to fulfilling the ACA requirement that the CMS chief actuary certify that a demonstration has 

reduced spending with no reduction in quality, improved quality 

with no greater spending, or both. The current size and scope of 

the demonstrations would make such evaluations problematic. 

Most states have proposed including all duals or entire subpopulations in their programs. Given all the effort that would go 

into producing an acceptable program, it is unlikely that if the 

evaluation proved negative, a future CMS administrator would be 

able to tell a state to shut down the demo and return to the status 

quo ante. In the current parlance, they are too big to fail. 

CMS has proposed a financing model that assumes up-front savings for Medicare, unlike the approach used in other important initiatives such as shared savings program for ACOs. The immediate 

response of financially pressured managed care plans could be to 

limit rather than expand long-term services and supports, and to 

cut provider payment levels from Medicare levels, threatening access to care. The initiative has been silent on the extent to which 

health plans can achieve savings through reduced payment rates to 

providers. 

Of the $320 billion Medicare and Medicaid dollars estimated as 

spent on duals in 2011, 80 percent represent Federal dollars, more 

than two-thirds of which flowed through Medicare. Potential savings in this demonstration would come primarily from better management of Medicare-financed, acute care services. In recent years, 

there has been a marked ramp-up of Medicare programs and demonstrations for beneficiaries with serious, chronic health conditions, 

many of whom are duals. They include ACOs, the Independence at 

Home demonstration that Senator Wyden talked about, bundled 

payment, hospital readmission penalties, and increased Medicare 

Advantage enrollment. 

As Senator Rockefeller suggested in his recent letter to the Secretary, instead of relying solely on a model that relies on multiple 

state efforts, CMS should also test models that bring care for duals 

under the Federal umbrella. 

Thank you very much. 

Senator CORKER. Thank you. 

Mr. Morris, welcome. 

STATEMENT OF SHAWN MORRIS, PRESIDENT, HEALTHSPRING, 

NASHVILLE, TN 

Mr. MORRIS. Thank you. Senator Corker, I want to thank you 

and Chairman Kohl for the opportunity to appear today before the 
20 

U.S. Senate Special Committee on Aging to discuss improving care 

for dual eligibles. 

My name is Shawn Morris, and I’m the President of Development and Innovation at HealthSpring, a Cigna Company. 

HealthSpring is one of the largest Medicare Advantage coordinated 

care plans in the United States, with over 400,000 Medicare Advantage and 1.2 million Prescription Drug Plan members. More 

than 122,000 of these Medicare Advantage members are dual-eligible beneficiaries. 

Cigna and HealthSpring have been serving Medicare beneficiaries for 20 years, and our concentration on the big picture of 

improving beneficiaries’ overall health and quality of life has allowed us to develop a unique approach to health care coverage. 

This approach is particularly beneficial to the vulnerable dual-eligible beneficiaries with complex health care needs. 

At HealthSpring, we developed a partnership that provides what 

our members want, more access to higher quality preventive care, 

while giving physicians the tools and incentives they need to deliver that care. Specifically, HealthSpring develops: focused, datadriven networks; pays physicians for quality over quantity, and 

provides our physicians the resources they need so they can devote 

more time and attention to their patients. The result of this approach is engaged physicians and healthier members with lower 

medical costs. It’s a common-sense model, but an uncommon practice. 

Through long-term initiatives like our Living Well Health Centers and Partnership for Quality program, we are able to focus on 

our members’ overall health by improving their experience of care 

and quality of life. HealthSpring’s Living Well Health Centers provide an additional clinical support by adding health plan coordinators, nurse practitioners, pharmacists and behavioral health specialists at the point of care. This interdisciplinary care team increases patient satisfaction and improves adherence to evidencebased treatment plans. 

Our Partnership for Quality program is also a clear win-win-win. 

Beneficiaries receive better care and stay healthier; empowered, engaged physicians earn more through quality bonuses; and 

HealthSpring spends less overall on delivering care. For example, 

members enrolled over a four-year period with Partnership for 

Quality physicians saw an 8 percent reduction in hospital admissions, and significant increases in preventive health services, such 

as a 73 percent increase in breast cancer screenings and 83 percent 

increase in colorectal screenings. Partnership for Quality turns the 

inefficient, volume-driven model of health care on its head, and everyone benefits. 

The HealthSpring members that often benefit the most from our 

dedication to comprehensive care coordination and higher quality 

are our 122,000 dual-eligible members. That is why we strongly 

support CMS’ recent efforts to improve care for this vulnerable population. The new Capitated Financial Alignment Model demonstration program offers a real opportunity to improve the quality of 

care for these long underserved beneficiaries and as a fortunate byproduct, generates considerable budgetary savings. 
21 

We believe that in order for these demonstrations to succeed in 

identifying the best, long-term solutions for these patients, great 

care needs to be taken when selecting the participating plans. As 

MedPAC noted in its June 2012 report, ‘‘plan participation standards should be transparent and should at least consider quality 

rankings, provider network adequacy, plan capacity, and experience with Medicare and Medicaid services for dual-eligible enrollees.’’ 

We completely agree. We believe all plans that meet CMS designated quality and access standards, including Medicaid managed 

care plans as well as Medicare Advantage plans, ought to be eligible to participate in these demos. Frail, dual-eligible beneficiaries 

deserve nothing less. 

That said, it’s also important to recognize that when Congress 

created Medicare and Medicaid nearly a half-century ago, it established Medicare as the primary source of financing of medical care 

for seniors regardless of their eligibility for Medicaid. Indigent seniors should have the same Medicare coverage and the same broad 

access to physicians as more affluent ones. 

In carrying out the Capitated Financial Alignment Model, we 

should not overturn this structure by preventing Medicare Advantage plans from participating or by requiring beneficiaries to relinquish the current coverage that they have actively chosen. Requiring dual eligibles to abandon their chosen plan and trusted physicians, that have experience in coordinating their care and forcing 

these beneficiaries into a plan with a less specialized care coordination model could undermine the intent of the demonstrations. 

Lastly, by maintaining Medicare as the primary source of care 

for vulnerable dual eligibles, we’ll ensure that they’re able to benefit from the variety of new delivery system reforms that the dualeligible population so desperately needs. Dual-eligible beneficiaries 

have the greatest need and the best opportunity for improving 

quality and lowering cost. 

We strongly support these goals and look forward to working 

with this committee and other Federal policymakers to achieve 

these results. Thank you again for this opportunity to testify, and 

I welcome any questions you may have. 

Senator CORKER. Thank you. 

Mr. Betlach. 

STATEMENT OF TOM BETLACH, DIRECTOR, ARIZONA HEALTH 

CARE COST CONTAINMENT SYSTEM, PHOENIX, AZ 

Mr. BETLACH. Thank you for the invitation to discuss Arizona’s 

use of managed care to improve the lives of individuals enrolled in 

both the Medicare and Medicaid programs. Arizona has maintained 

a system of managed care for its entire membership, including 

dual-eligible members, since the state joined Medicaid in 1982. Arizona built its Medicaid program on the principles of member protection, competition, choice, and accountability. Arizona also offers 

the unique perspective of a state that has one-third of our dual-eligible members in the same health plan for both Medicare and Medicaid. 

The vision underlying Arizona’s program is to place accountability for management, oversight, and care delivery with one enti-
22 

ty, the health plan. Arizona’s model works through private health 

plans that engage in a competitive bidding process and are financially at risk to coordinate care for their members. Members have 

their choice of health plan and doctor. Health plans establish their 

own provider networks, which we monitor to ensure access to care. 

Thirty years of experience have shown it is precisely our frailest 

members who are most in need of the care coordination managed 

care offers. Recently we have seen a great deal of confusion and 

misinformation surrounding the use of Medicaid managed care for 

dual eligibles. My message to the committee today is simple: Medicaid managed care for dual-eligible members is not an experiment 

but instead, has proven to be a success in Arizona. 

In Arizona, 82 percent of our elderly and physically disabled population that is at risk of institutionalization is dually eligible. The 

model of care for this population in many states is nursing home 

placement. Over the past decade AHCCS, through the work of our 

health plans has progressed from 40 percent of its elderly and 

physically disabled members in home and community to 72 percent, saving $300 million this past year. For members at risk of institutionalization with a developmental disability, 98 percent live 

at home or in the community, contributing to Arizona’s number 1 

ranking by United Cerebral Palsy. 

More importantly, keeping people out of institutions increases 

member satisfaction and offers higher quality of life. Providing the 

right kinds of care coordination to keep people at home is a Medicaid skill set. 

These care management successes also extend to prescription drugs. Arizona’s drug costs for dual eligibles were $166 per member per month, compared to a national average of $266 when Part 

D was created. A study conducted by the Lewin Group showed 

AHCCCS health plans were not withholding care but rather effectively using generic and lower cost drugs. Without this effort, Arizona would have spent $90 million more per year on dual-eligible 

drug coverage. 

Avalere Health recently completed an analysis of the health outcomes for dual-eligible members enrolled in Mercy Care Plan, an 

access contractor that is also a Medicare Advantage special needs 

plan, or D–SNP. Avalere compared 16,000 integrated dual members enrolled in Mercy Care Plan to national Medicare fee-for-service dual-eligible data. To ensure a fair comparison, Avalere created 

a risk-adjusted model. The results showed Mercy Care Plan performed considerably better than fee-for-service. Mercy Care Plan 

members exhibited a 31 percent lower rate of hospitalization, 43 

percent lower rate of days spent in a hospital, nine percent lower 

emergency department use, and 21 percent lower readmission 

rates. 

Arizona also has proven that passive enrollment works. When 

Medicare Part D was created, Arizona actively encouraged existing 

Medicaid plans to become D–SNPs. On January 1st, 2006, approximately 39,000 members were passively enrolled with their Medicaid plan for Medicare in order to provide better continuity of care 

for Part D implementation. Arizona’s strong transition planning 

and protocols ensured member protections and minimal disruption 

during this enrollment process. 
23 

Overall, Arizona’s Medicaid members are satisfied with their 

health plans. In fact, only three percent of more than 1.2 million 

total AHCCCS members change their health plan each year. I’ve 

been fortunate to be associated with the AHCCCS system for 20 

years. For the past 10 years, I have served as the Deputy Director 

and now Director. Prior to that, I served in the governor’s office for 

10 years. I know the AHCCCS program is not an experiment. It is 

a proven model with documented success. So, for me, it is frustrating to hear others dismiss Medicaid managed care as an option 

for duals and suggest that states are either ill-intentioned or incapable of achieving success for this population. 

This is not about achieving a budget target. States like Arizona 

want to move the system forward, improve care for our citizens, 

and be responsible with the taxpayers’ dollars. To think, as I have 

seen some suggest, that Medicare can be the sole answer for dual 

members is simply wrong. Medicare has very limited knowledge 

and experience in home and community-based services, community 

supports, or behavioral health. States have managed these issues 

for duals, and it is the states that understand their local communities the best. 

Equally disconcerting is this notion that states are moving too 

fast and the demonstrations are too big. We’ve had 45 years of 

fragmentation. We have decades of comparison data that show the 

shortcomings of the existing system. We don’t need control groups 

in these dual demonstrations. We know what is not working for the 

people we serve and the taxpayers who are footing the bill. The 

current system is indefensible and unsustainable. We should not 

wait any longer to build upon a proven model. 

We hope Arizona’s example will dispel the myths around managed care and assuage the anxiety some feel about using this 

model for dual eligibles. 

Thank you again for the opportunity to briefly share our experiences in Arizona with the committee. 

Senator CORKER. Dr. Funk, your summary. 

Senator Bennet has arrived. 

Senator BENNET. I thank the Ranking Member for your leadership, and for you and the Chairman for holding this hearing, and 

I am looking forward to reading everybody’s testimony. I apologize 

because I have another engagement, but I wanted to come and welcome Dr. Funk here. 

Thank you very much for what you do in Colorado, and thanks 

for coming all this way to share your views. 

In the end, we’ve got some hard decisions to make here, but I 

think if we approach this in the spirit of goodwill that Senator 

Corker, among others, have shown, we’re going to be able to get 

this done with a view toward how it’s actually going to affect the 

people that live in our states rather than the battle that’s going on 

back here. So, thank you. 

Senator CORKER. And thank you for your great service. 

Senator BENNET. Thank you. 
24 

STATEMENT OF DORY FUNK, M.D., MEDICAL DIRECTOR, 

SENIOR COMMUNITY CARE, ECKERT, CO 

Dr. FUNK. Thank you, Senators, for inviting me out for my first 

trip to Washington. My name is Dr. Dory Funk. 

Senator CORKER. We have found that it has a negative effect on 

folks. 

Dr. FUNK. Is that right? 

[Laughter.] 

Senator CORKER. I would not stay long. 

[Laughter.] 

Go ahead. Sorry to disconcert you. 

Dr. FUNK. That’s fine. I’m a medical director for a PACE program 

in rural Western Colorado run by Volunteers of America. It’s a successful PACE program, and I’m here to tell you about three particular operational flexibilities that we’ve been granted by the State 

of Colorado by waiver that I think directly attributes to some of our 

success. The National PACE Association, or NPA, wants to see 

those applied more broadly to PACE organizations across the country. 

PACE stands for Program for All-Inclusive Care of the Elderly. 

It’s designed around an interdisciplinary team to meet the needs 

of frail, elderly, low-income people with chronic care and long-term 

needs in order to keep them in their homes and out of nursing 

homes. Participants in the PACE program must meet state-determined criteria for level of nursing home care. There are 86 programs in 29 states that currently cover 25,000 participants, 90 percent of which are dual-eligible Medicare and Medicaid beneficiaries. 

Ours is a little bit different. In a traditional PACE program, one 

or two physicians are hired to care for all the participants. Therefore, upon enrollment, a participant has to leave their own physician, who they may have had for a decade or two. Under the traditional model, nurse practitioners have a role limited to acute care 

only, and the majority of the care provided to participants in the 

traditional model is delivered in a full-service PACE day center. 

The contrasts in our program are as follows. At Senior Community we have a waiver to contract with community-based physicians 

so the participants get to keep their own physician. We then train 

the physician and incentivize him to provide care and medical practice within our PACE philosophies of care. 

In Colorado, nurse practitioners have unrestricted license to provide primary care given the rural nature of our state. The waiver 

we obtained allows a broadening of the scope of care of our nurse 

practitioners. They can now provide basically attending care they 

do, require periodic assessments, participate more fully in care 

planning, and play a larger role in supporting the community physicians. 

Finally, we also have a waiver to develop an alternative delivery 

site in a tiny community 30 miles from the nearest PACE delivery 

site where we have 25 participants. As you can imagine, if you’re 

frail, elderly, multiple medical issues, 30 miles in a van can be a 

long ride, especially in the winter. 

Owing in part to these operational flexibilities and the innovative 

leadership provided by Volunteers of America, we’ve achieved success in several quality measures. 
25 

First of all, we have a remarkable market penetration. Twentythree percent of the PACE-eligible population in our area is enrolled in Senior CommUnity care. Typically, PACE programs 

achieve a market penetration of approximately 6 to 8 percent. 

Secondly, our clinical costs are in line or meet NPA benchmarks. We spend $711 per member per month on doctors, lab tests, diagnostic studies and hospitals, while the NPA benchmark is $940 per 

member per month. 

Thirdly, our total hospital days and our 30-day hospital readmission rates are outstanding. In fact, we have the lowest 30-day hospital readmission rate of all 86 PACE programs. It’s 6.8 percent. 

Nationally, for the dual-eligible population, it’s 21.7 percent. Our 

hospital days per 1,000 members is 2,900. For duals enrolled in 

nursing facilities, it’s 5,000. For duals receiving home and community-based services in the community, it’s 6,400 days per thousand. 

So we also talked about in our hearing so far outlined incentives. 

As with any good idea where multiple parties are involved, our program has incentives aligned among community physicians, community hospitals, community ERs, and the PACE participant, all within a blended Medicare and Medicaid capitated payment system. 

Our physicians see their patients do well, they get to practice with 

guidelines of care that make clinical sense, and they get rewarded 

financially. Hospitals are seeing lower lengths of stays and lower 

readmission rates. Our emergency rooms get disposition help with 

our difficult patients that wind up in the ER. Finally, the patients 

get to stay in their homes, and the families get the support to do 

so. 

PACE has been a proven leader in providing care to the particularly frail and elderly part of the dual-eligible population for 25 

years. NPA would like to extend these operational flexibilities to 

other PACE programs across the country, as well as expanding 

PACE eligibility to include individuals under the age of 55 who 

meet their state’s criteria for nursing home level of care, and to 

high-need, high-cost beneficiaries who may not yet meet nursing 

home criteria for care but currently are not well served. 

NPA will be hoping for your support in their pursuit of legislative and regulatory solutions in order to achieve those goals. 

Senator CORKER. Thank you for your pleasant testimony. 

Just so no one is caught off guard, I’ll call on Senator Johnson, 

and then Senator Blumenthal, and then Senator Whitehouse, and 

then I’ll go last. I just want to make sure you all will be ready. I’ll 

give you time to settle in here for just one moment. We welcome 

you. 

Senator Johnson. 

Senator JOHNSON. Thank you, Mr. Chairman. 

Mr. Morris, can you just tell me, why did HealthSpring pursue 

this initiative, which I guess I would kind of consider is capitated 

coordinated care. Would that be an accurate description? 

Mr. MORRIS. That would be correct. The initiative from the demonstration project? Just to clarify. 

Yes. HealthSpring is a Medicare Advantage plan. We accept payments from Medicare A and B, and D. So we approach all of what 

we do in coordinating for any member, Medicare or dual eligible, 

in a capitated way. 
26 

So in that approach, the first thing we’re going to do is align incentives for the providers downstream. We want to be innovative. 

We want to create programs such as the Partnership for Quality 

I spoke of in my testimony as well as the Living Well Health Centers, and so forth. 

We are very interested in these demonstration projects, and we 

feel it aligns the incentives from a payer perspective, be that Medicare or Medicaid. But at the same time, we think that the people 

and the payers that can qualify, such as the different payers that 

have been represented here today, Medicaid, PACE and Medicare 

Advantage, not be, put at a non-competitive advantage to demonstrate what they can do in an innovative way. 

Senator JOHNSON. This was something done on your own company’s initiative, or is this something that was part of this particular government program? 

Mr. MORRIS. This decision to participate in the demonstration 

project is on our own company’s initiative. 

Senator JOHNSON. Okay. The private sector did it. Okay. 

Dr. Berenson, are you familiar with your Urban Institute study 

that compares the long-term contribution of retiring couples into 

Medicare versus what the expected benefit is? I don’t want to be 

springing that on you if you’re not familiar with it. 

Dr. BERENSON. Well, that was done by a different branch. Gene 

Steuerle’s work? 

Senator JOHNSON. Right. 

Dr. BERENSON. Yes, I’m aware of it. I don’t know a lot of the details, but I am aware of it. 

Senator JOHNSON. Roughly, I think he found, for a couple retiring today, basically a two average earner couple, that they would 

have paid in roughly about $116,000 into Medicare, with an expected benefit—and all these things are time-value-adjusted—of 

about $350,000, which kind of shows the mismatch of the funding 

mechanism. 

The reason I raise that issue is when I take a look at the health 

care law, it was supposedly funded for 10 years by about half a trillion dollars in taxes, fees and penalties, and about a half a trillion 

dollars, $500 billion, in reductions to Medicare and Medicaid, Medicare Advantage. Is that roughly correct? 

Dr. BERENSON. Medicare, Medicare Advantage, and provider payments, not Medicaid as far as I know. Largely Medicare cuts, yes. 

Senator JOHNSON. To my knowledge, we really haven’t even enacted the SGR doc fix, which is about $280 billion. I’m not quite 

sure. Are you aware that we’re actually initiating those savings 

from Medicare over this 10-year period? 

Dr. BERENSON. I believe the actuary has two estimates, one 

which is current law which assumes the SGR occurs, and then sort 

of a real-world picture in which it assumes that Congress does 

what it’s done for the last 10 years and does not allow those cuts 

to go into place. 

Senator JOHNSON. Here’s my question and my concern. And 

again, I appreciate the fact that we’re looking for efficiencies within 

the system, but I’m afraid the system is going to be horribly broken 

because if we roll the budgetary window forward to when the 

health care law actually gets fully kicked in, about 2016 with full 
27 

spending, the total cost of the health care law will be about $2.5 

trillion over 10 years. The taxes, fees and penalties, currently 

about $500 billion, maybe those will grow, maybe they won’t. That 

leaves about a $2 trillion deficit gap or money that’s going to have 

to come from I guess Medicare or Medicaid, or something else. 

Does that concern any of you in terms of what you’re trying to 

do, working with either Medicare or Medicaid? And are you aware 

of that type of funding gap with the health care law? 

I’ll go to Dr. Berenson. 

Dr. BERENSON. We could go in any number of directions on this. 

I also would, I guess, cite data that suggests that both CBO and 

the actuaries have projected that per-capita spending in Medicare 

for the next 10 years is projected to increase at about 1 percent 

above inflation or at about GDP. It’s the best it’s been since the 

founding of the program. Whether that’s sustainable or not is up 

for debate. But it’s clear that, at least in the 25-year projections, 

that the real pressure on Medicare funding, and it’s significant, is 

from a near doubling of the beneficiary population who will be in 

Medicare. So we clearly have a serious problem. The question is 

whether per-capita spending reductions of the kind I think that 

these programs would lead to by itself can solve the problem. 

Senator JOHNSON. So I guess my point being is we have a huge 

problem with Medicare. As it is, the health care law starting in 

2016 adds about a $2 trillion problem to that figure. 

So, thank you, Mr. Chairman. 

Senator CORKER. Thank you. 

Senator Blumenthal. 

Senator BLUMENTHAL. Thank you, Mr. Chairman. Thank you for 

holding this hearing on this critically important topic. 

The additional costs to the Medicare program that you were describing result from the increase in the number of beneficiaries, 

does it not? 

Dr. BERENSON. The data that I’m aware of suggest that about 

half of the increase over 25 years is from the increase in the population, and about half is from per-capita spending increases. But at 

this point in time, it’s largely just inflation. It’s the cost of doing 

business, plus a slight bit more. 

Senator BLUMENTHAL. And let me ask you and Mr. Morris, if I 

may, because, Mr. Morris, you mentioned the preventive care element and the opportunities there for not only improving quality 

but reducing costs, and you say that Medicare should remain the 

primary source of care for the dual eligibles. What specific opportunities do you think there are in emphasizing preventive care for 

this population that will account for such a huge increase in costs? 

Mr. MORRIS. We began the program I spoke of, Partnership for 

Quality, in 2006 with a local physician group in Gallatin, Tennessee; it was designed with the physicians. And at that time, 

when we looked at their adherence to the standards that that 

group came up with; along with us, and these are typical quality 

standards such as women over the age of 40 getting 

mammographies, and individuals over 50 years of age getting 

colonoscopies, just general things, their adherence to the agreed up 

quality standards was around 37, 38 percent. 
28 

Since then, that particular group today is up over 90 percent adherence to the standards. We have grown the Partnership for Quality program over a six-year period to include physicians that take 

care of 120,000 members or so, and the average of that is in the 

high 70s. This particular group, not being an outlier, is representative of what most physicians are when we audit adherence to those 

same standards. 

I think the answer to your question ‘‘Can you do this’’, I think 

we can. I think you have to have consistent quality standards that 

you need to compare these demos to, I also think there needs to 

be benchmarks and there needs to be participation from the groups 

that you are going to be holding accountable; we’ve had a lot of success doing that. 

Senator BLUMENTHAL. And I read about the Partnership for Patients program, and I’ve been very impressed by its potential and 

its accomplishments so far. But when you say in your testimony 

that physicians are empowered to devote themselves to their patients and our members receive better care and stay healthier, for 

the non-health care professional, what does that mean in practice? 

Mr. MORRIS. In this program, I’ll compare it to fee-for-service 

Medicare. For a physician in fee-for-service Medicare to invest the 

capital from a primary care physician’s standpoint, to provide this 

level of service, they would not be reimbursed for such within the 

fee-for-service system. We all know the primary care physicians are 

busy. They’re seeing 40 to 50 people a day, on average. So you can 

do that math. That’s just a few minutes a day per patient. 

To the average physician in the community, we embed in their 

practice an employee of HealthSpring, a clinical person to run a 

Web-based tool to extract data on their entire population of who 

are not meeting these established quality guidelines. It’s not the 

people who come into the office where you see the majority of gaps. 

Most physicians do a pretty good job with these patients. It’s the 

population of patients that do not come into the office and having 

processes in place to get those patients in, is where you can make 

more significant improvement. 

Senator BLUMENTHAL. And I think that’s a critical point. How do 

you get that population into the office, and how do you not just get 

them into the office physically but get them there a second and 

third time for the follow-up that’s necessary to provide preventive 

care? 

Mr. MORRIS. Well, by having a HealthSpring employee in that 

physician’s or that group’s office that is embedded there. So the patient feels that that employee is a part of that practice, and it’s a 

different model than an insurance company calling from an insurance office to get that patient in. They react because they’ve met 

that employee, they’ve seen them at their doctor’s office. 

Is it easy? It’s not easy. It takes a lot of work, especially in the 

population we’re speaking to, in dual eligibles. These people tend 

to move around, they have multiple caregivers, and it takes creative, innovative processes of getting multiple cell phone numbers 

and multiple siblings’ home numbers to reach them and get them 

in. 

Senator BLUMENTHAL. Thank you. 
29 

Mr. Chairman, my time has expired. I want to thank you again, 

and I will be submitting for the record a statement, an opening 

statement, but I won’t take the committee’s time with it. 

Senator CORKER. Well, thanks for being here. I will say, I’ve visited the operation that Mr. Morris has. It’s phenomenal to see what 

happens there, and it really is a model of how health care can and 

should work in our country. So I do hope you’ll spend a little more 

time with it because it’s an incredible thing to witness and to see 

patients coming in, and to see the way they’re treated, and to see 

the familiarity they have with the caregivers. 

So thank you for your question. 

Senator BLUMENTHAL. Thank you. I’d be interested in learning 

more about that. 

Mr. MORRIS. Oh, we’d welcome any of you there. Love to have 

you. 

Senator BLUMENTHAL. Thank you. 

Senator CORKER. Thank you. 

Senator. 

Senator WHITEHOUSE. Thank you, Chairman. 

I thank all the witnesses for being here. 

I’d like to sort of give what appears to be a general perspective 

and see if you all agree with it, and then ask a very specific question. 

The general perspective is that we have an enormously expensive 

health care system for the results that it produces. We burn 18 percent of our gross domestic product every year on health care, and 

I think the most inefficient other industrialized country in the 

world is at 12 percent. So we’re 50 percent more inefficient than 

the least efficient of our industrialized competitors, which isn’t a 

great place to be, and you can draw some conclusions about what 

savings are possible by simply becoming more efficient, by delivering health care better. 

Some pretty responsible people have actually done that. The 

President’s Council on Economic Advisors I think has pegged the 

number at about $700 billion every single year. The Health Care 

Institute I think puts it at about $850 billion every single year. The 

Institutes of Medicine just came out with a report that put it at 

$760 billion every single year. The Lewin Group and President 

Bush’s Treasury Secretary O’Neill, who knows a lot about this from 

the Pittsburgh Regional Health Initiative, those two have pegged 

it at $1 trillion a year. 

So I start from the proposition that there are enormous efficiency 

gains to be achieved in the health care system without compromising the quality of care, and that when you’re in a discussion of 

let’s leave the system in place and just cut people’s benefits, you’re 

in a horrible discussion and a wrong discussion. If you’re in a ‘‘let’s 

try to protect those benefits at all costs but let’s see how we can 

deliver that benefit of health care more efficiently,’’ you’re in the 

right place. 

I see a lot of heads nodding. So the second piece of that is that 

we’re actually beginning to kind of sort out what the mechanism 

is for achieving that goal, and it’s a combination of quality improvements so you don’t have hospital-acquired infections and errors all 

over the place. It’s payment reforms so that people are getting paid 
30 

to deliver better health care and better health outcomes rather 

than just more procedures. It’s an emphasis on prevention and on 

primary care in places where those things can be demonstrated to 

actually save money by addressing problems early or preventing 

them in the first place. 

The whole thing has to be supported by a health information infrastructure that is more robust and helpful, and we can do something about the kind of grotesque administrative costs that are associated with a lot of health care. 

So I view this as a real time of opportunity, and from what I understand, I mean, there are folks like the Vanderbilt Medical Center in Tennessee just won an innovation grant. They’re going down 

this path. Gundersen Lutheran, Senator Johnson, I’ve talked about 

before. They’re one of the five or six real national leaders in improving this delivery. 

Have I kind of correctly described the sweet spot that you all are 

aiming for with the Medicaid and Medicare delivery system reforms? I’ll start with Mr. Helgerson, who is nodding most vigorously. 

Mr. HELGERSON. Yes. 

Senator WHITEHOUSE. He and Mr. Morris are tied for nodding 

among the five nodding heads. 

Mr. HELGERSON. Yes, Senator, I agree 100 percent. I think it’s 

a tremendous opportunity. In New York two years ago there was 

a study done by the Lewin Group that specifically looked at dual 

eligibles in New York State. There are 700,000 of those individuals, 

roughly about 48 percent of total Medicaid expenditures on that 

population, about 41 percent of total Medicare expenditures. They 

found in their analysis that if we moved to fully integrated managed care and that managed care was effective, as we would all 

hope, we could save up to $1 billion a year in Medicare and Medicaid savings. So there are absolutely substantial opportunities. 

There are a lot of inefficiencies in the system. 

And in addition to that, I think also what we’re excited about is 

that not only are there inefficiencies, but there are also just really 

poor patient outcomes, and the lack of the ability of the programs 

to work together and really have patient-centered care, as it’s been 

described, that really leads to individuals who are clearly worse off. 

We believe that one of the reasons why New York ranks 50th in 

the Nation in inappropriate hospitalizations is because for duals, 

the system has simply not worked, and these new duals initiatives 

really are an opportunity to get the system working for those individuals. 

Senator WHITEHOUSE. How many of your duals tend to be in 

nursing homes? 

Mr. HELGERSON. We have roughly—and it’s an interesting comparison between Arizona and New York—roughly about 50 percent 

of our spent in long-term care is in nursing homes institutional 

level of care. Traditionally, that’s been a spent that’s been fee-forservice. It’s now being moved into capitation. In Arizona, I think 

it’s like 80/20, meaning roughly 80 percent is in the community. So 

I think that shows you, in a state that was entirely managed care 

from its beginning, that I think not only can it mean better outcomes, but I think we’ll get closer to the Olmstead decision, which 
31 

is trying to keep people in the community as long as possible, and 

I think if we align the incentives more effectively, we can do that. 

Senator WHITEHOUSE. Let me make one last point. I know my 

time has run out here. I’d love to work with any and all of you on 

trying to expand the definition of ‘‘meaningful use’’ for health information technology purposes, at least on a pilot basis to include 

nursing homes, at least for the dual-eligible population, because it 

really makes very little sense when you have patients who are cycling back and forth between a nursing home and a hospital very 

often, and creating an enormous amount of cost as they cycle, to 

have our system support the development of health information 

technology in the hospital but not in the nursing home. I think if 

you kicked it all the way open, it’s too big of a bite and there’s too 

much. But on a pilot basis, and particularly for these dual eligibles, 

we really ought to be able to try to find a way to push that aperture a little wider. 

There’s a similar problem with respect to behavioral health, 

somebody who has a behavioral health issue. Their behavioral 

health provider is likely to be their medical home because that’s 

the one place where their doctor really understands not only their 

health problem but their limitations in grappling with the rest of 

the health care system, and yet we carve out behavioral health providers. 

So if you’re interested in that, hunt me down and come to my office, call my office. I think this is a simple correction that I hope 

the Administration could actually make on its own within the existing definitions of ‘‘meaningful use,’’ and I’m putting pressure on 

them in every way I can to try to do that, again, at least on a pilot 

basis. 

I’ll close out. I was introduced by George Halvorson, who is the 

CEO of Kaiser Permanente. He’s a pretty serious guy in health 

care in this country. In the course of introducing me he said, 

‘‘There are people right now who want to cut benefits and ration 

care and have that be the avenue to cost reduction in this country, 

and that’s wrong,’’ he said. ‘‘It’s so wrong, it’s almost criminal,’’ he 

said. ‘‘It’s an inept way of thinking about health care.’’ 

So I applaud all of you for thinking in a non-inept way about 

health care and really trying to get after the improvements we can 

do in the delivery system. I know, Mr. Morris, you in particular 

have a great private-sector example. But in Arizona, New York and 

elsewhere, thank you very much for this. There’s a road we must 

travel, and it’s a road with immense rewards. 

I thank the chairman for holding this hearing. 

Senator CORKER. Thank you. Thanks for being here. 

So, first of all, Dr. Berenson, when I said that being in Washington sometimes can have a negative effect, I wasn’t referring to 

your testimony. I realize you’re from Washington. 

[Laughter.] 

As I listened to sort of the summation of the first four witnesses’ 

testimony, Mr. Helgerson, you all are in New York State, and you 

all are just robustly pursuing managed care, which is also sort of 

a pleasant surprise from that state, and it sounds like you’re pretty 

robust, pretty excited about the changes that that will have for the 

people that you serve. 
32 

Dr. Berenson, if I summarize your testimony, it’s that you think 

the demonstration project is too large and you worry about people 

being reimbursed at rates that are lower than Medicare. Those are 

two of the concerns that you seem to express most during your testimony. 

Mr. Morris, it seemed to me your concern was that if people have 

the ability to be a part of the Medicare program now, you don’t 

want to see that change so that they end up being administered 

through Medicaid. 

Mr. Betlach, you have exactly the opposite view and think we 

ought to robustly pursue the states’ ability through Medicaid to 

manage these dual eligibles. 

But do you think there’s any way, as we move ahead with this 

demonstration program, do you think there’s a way to—especially, 

I guess, Dr. Berenson, Mr. Morris and Mr. Betlach—to reconcile 

the concerns that the three of you all have, which are very different 

in nature? 

Mr. MORRIS. I think there should be flexibility. I think it goes 

back to consistency of the plan’s ranking and which plans are going 

to participate in the demos, then making sure those health plans 

will engage quality standards and network adequate standards. 

We’re a Medicare Advantage plan. We’re used to working with 

Medicare, and we have years of experience in what an adequate 

network should be. They’re stringent. There’s give and take in 

what that looks like at the end of the day when you’re expanding 

a network. 

So Medicare Advantage is used to such a process. I don’t know 

that it’s a state versus Federal issue. It’s really, for us, why would 

you preclude in a demonstration, innovative companies that have 

proven their ability to take care of dual eligibles for such a long 

period of time, and do that in a way that the beneficiaries have 

chosen you in an open market? So why would CMS and the State 

on the front end preclude innovative companies, no matter if 

they’re Medicaid or Medicare? So have that open and allow plans 

that meet the standards over a three-year period. Make sure we 

have consistency in order to demonstrate that the demonstration 

projects are successful. 

Senator CORKER. And at present, you think you will be precluded 

as it’s taking off? 

Mr. MORRIS. Some states have an open RFP process, and some 

states are moving members to Medicaid. There’s a variety of things 

out there. As Ms. Bella said, they’ve made no decisions, but we 

think just in general, if it’s a demonstration by nature, you want 

organizations that can qualify, be they for-profit, not-for-profit, 

whatever, in order to improve the ability for the demonstration at 

the end of the period to be successful. 

Senator CORKER. Do you think your dialogue with CMS and others throughout the process will reconcile that in a way that will be 

acceptable based on things as they’re moving ahead right now? 

Mr. MORRIS. We are hopeful of that. 

Senator CORKER. Okay, good. 

Dr. Berenson. 

Dr. BERENSON. Yes, I’d make a couple of comments, one on that 

point. One of my concerns is that, as I understand it, the sort of 
33 

priority for beneficiaries will be their passive enrollment into a 

managed care plan. There are some very important programs now 

that have started in Medicare. The most important in my view is 

accountable care organizations. CMS recently announced 2.4 million beneficiaries will be in the combination of the shared savings 

ACOs and the pioneer ACOs. And yet, as I understand it, people 

will be placed in a separate organization under the state proposal 

and then have to opt out. 

I’ve talked to clinicians at Ann Arbor, at the University of Michigan, which has one of these that says, ‘‘yes, we’re all worried about 

this because we’re now going to have to work with all of our enrollees to get them to opt out.’’ Well, in ACOs they are not enrollees. 

They’re assigned. But actually, they are in a program which is 

dedicated to trying to improve efficiency in what hopefully will be 

a capitated way in the future. So I think the demo causes some dislocation there. 

CMS is trying to work on a lack of overlap and duplication of 

demos. I think this is one area where they should do that. 

I did want to make one or two comments about Mr. Betlach’s 

presentation. I don’t think Arizona is typical of many of the states. 

Really, they have a lot of experience in this area. Some of the other 

states don’t, and the numbers that I’ve never seen contested is that 

nationally there are about 100,000 or slightly more dual beneficiaries who are in integrated managed care programs. So some of 

the other states are doing this sort of ‘‘on the come’’. Arizona has 

the experience. If we actually had an attitude that, ‘‘we’re proving 

the concept—that this works’’, then I would assume CMS would select Arizona as one of the models that they would want to have in 

the program. 

I would still have a problem with the idea that all of the duals 

or all of the disabled duals would be in it. I do think we want to 

have a control group, not a randomized group but a control group, 

and then prove the concept, not just to Avalere but to CMS’ evaluators, and that establishes a much better basis for going forward. 

Senator CORKER. And it sounds like the concern that you have 

fundamentally really probably won’t get addressed. Is that correct? 

I mean the size of the program as announced is the size of the program, and so the concept you just put out there at the end is probably not going to happen. 

Dr. BERENSON. Well, I guess. I don’t know what CMS will do. My 

concern is less, frankly, with 2 million than it is with the idea that 

states would enroll all of their duals or all of their disabled under 

65, as Massachusetts is proposing. That, in my view, means you 

can’t go back. I mean, I don’t think you enroll—in California we’re 

talking about 800,000 to 1 million dual eligibles. That’s in their 

proposal. I don’t think, as I said, in three years the administrator 

calls the governor and says, ‘‘You failed, undo all of that.’’ I think 

you want to be able to do a demonstration that is not a fait 

accompli, that you’ve basically done a Medicaid waiver. I think we 

want to keep these as demonstrations. 

Senator CORKER. Thank you. 

Mr. Betlach. 

Mr. BETLACH. Thank you. 

Senator CORKER. He’s highly complimentary of you. 
34 

Mr. BETLACH. Thank you. In Arizona, we welcome all plans in 

terms of the competition. I mentioned that in terms of one of our 

principles. If a Medicare Advantage plan is interested in participating in the program, it can come and compete with other plans. 

That’s been one of our guiding principles all along. 

Arizona has had a lot of experience with this population, particularly since 2006, in terms of the passive enrollment that was done 

to support integration. We’ve shared a lot of our experiences with 

other states, with CMS, with others in terms of the type of oversight that we’ve done on plans, trying to build the strength within 

the entire system and not just relying on what Arizona has learned 

by going through this over a number of years. 

Again, to summarize our testimony, it’s simply to show the types 

of impact this integration can have and that the model can work. 

Therefore, we should be looking at moving that forward because 

we’ve had this fragmentation for so long, and we’ve talked a lot 

about the challenges and the outcomes. I think that when you look 

at the types of accomplishments we’ve been able to achieve, you 

will want to move forward in this endeavor. 

Senator CORKER. Would everybody here, just on that note, would 

all the witnesses agree that we do, whether it’s a 2 million or a 3 

million person program or some other program, we do need to work 

towards alleviating the fragmentation that exists in dual eligibles? 

Is that a fair statement that everybody would agree with? 

Mr. HELGERSON. Yes. 

Dr. BERENSON. Yes. 

Mr. MORRIS. Yes. 

Mr. BETLACH. Yes. 

Senator CORKER. And before we close out the hearing—and we 

thank you all for your testimony—are there any things you want 

to say in closing that might be, you think, a misimpression that 

might have been left here with any of the questions or something 

that one of the other witnesses might have said that you’d like to 

clarify? 

[No response.] 

Senator Johnson. 

Senator JOHNSON. I’ll just try to wrap up what I was trying to 

achieve with my questioning, first starting out with the question 

about the private sector, where you’ve actually come in the private 

sector and worked toward these solutions. This may be an unfortunate metaphor, but I think we’re really whistling past the graveyard here, and that’s the other point I was trying to make. 

Again, I commend all of you in terms of your efforts in trying to, 

as Senator Whitehouse was talking about, trying to achieve those 

types of savings. But, Dr. Berenson, you alluded to this, under-reimbursing providers. My concern with what we’ve just passed here, 

what the Supreme Court just basically ratified, is we have a whole 

new entitlement now, and to encapsulate what it’s going to do, it’s 

going to increase the demand for health care while it decreases the 

supply, and it supposedly is going to be paid for by reductions in 

reimbursements to providers, reductions to programs that are also 

simply unsustainable. 

I mean, this is great trying to figure out some way, shape or form 

through government to try to reform these programs, but I haven’t 
35 

seen government do it. I think we need to look to the private sector, and we need to be very concerned about what’s going to happen 

from the standpoint of debt, deficit, and those types of pressures 

on our medical system. I just don’t think government is the solution to it. That was really what I was trying to get through with 

my questioning. 

Senator CORKER. Thank you. 

To each of you, I think we’re at an interesting time, and Medicare reform is certainly—not necessarily the dual-eligible component but probably that, too—is going to be a topic that I think we 

may actually take up over the next six months to a year-and-a-half 

as part of fiscal reforms, and I think people like you that have had 

such a deep experience and broad experience in it, people like you 

are very helpful. 

I will just tell you that I would welcome input in our office regarding this program as it develops and other concepts that you see 

that might improve the delivery of care there. 

We thank you all for being here. We thank you for the roles you 

play in your respective states and here in Washington, and I hope 

if there’s any additional input after this, you’ll give it. 

I do have a number of questions that I don’t want to keep everybody here asking that we will ask in written form, if that’s okay, 

and other members may have the same. If you could try to respond 

in the next week or so with those, I’d greatly appreciate it. 

But thanks for your participation. Thank you. 

[Whereupon, at 3:53 p.m., the hearing was adjourned.] 

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