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76–282—PDF 2011

S. HRG. 112–572 

HEALTH CARE ENTITLEMENTS: 

THE ROAD FORWARD 

HEARING 

BEFORE THE

COMMITTEE ON FINANCE 

UNITED STATES SENATE 

ONE HUNDRED TWELFTH CONGRESS 

FIRST SESSION 

JUNE 23, 2011 

( 

Printed for the use of the Committee on Finance 

COMMITTEE ON FINANCE 

MAX BAUCUS, Montana, Chairman 

JOHN D. ROCKEFELLER IV, West Virginia 

KENT CONRAD, North Dakota 

JEFF BINGAMAN, New Mexico 

JOHN F. KERRY, Massachusetts 

RON WYDEN, Oregon 

CHARLES E. SCHUMER, New York 

DEBBIE STABENOW, Michigan 

MARIA CANTWELL, Washington 

BILL NELSON, Florida 

ROBERT MENENDEZ, New Jersey 

THOMAS R. CARPER, Delaware 

BENJAMIN L. CARDIN, Maryland 

ORRIN G. HATCH, Utah 

CHUCK GRASSLEY, Iowa 

OLYMPIA J. SNOWE, Maine 

JON KYL, Arizona 

MIKE CRAPO, Idaho 

PAT ROBERTS, Kansas 

MICHAEL B. ENZI, Wyoming 

JOHN CORNYN, Texas 

TOM COBURN, Oklahoma 

JOHN THUNE, South Dakota 

RICHARD BURR, North Carolina 

RUSSELL SULLIVAN, Staff Director 

CHRIS CAMPBELL, Republican Staff Director 

(II) 

C O N T E N T S 

OPENING STATEMENTS 

Page 

Baucus, Hon. Max, a U.S. Senator from Montana, chairman, Committee 

on Finance ............................................................................................................ 1 

Hatch, Hon. Orrin G., a U.S. Senator from Utah ................................................. 3 

WITNESSES 

Patrick, Hon. Deval, Governor, Commonwealth of Massachusetts, Boston, 

MA ......................................................................................................................... 6 

Fletcher, Hon. Ernest Lee, former Governor, Commonwealth of Kentucky, 

Lexington, KY ....................................................................................................... 8 

Vladeck, Hon. Bruce, Ph.D., senior advisor, Nexera, Inc., and former Administrator, Health Care Financing Administration, New York, NY ....................... 10 

Holtz-Eakin, Douglas, Ph.D., president, American Action Forum, and former 

Director, Congressional Budget Office, Washington, DC .................................. 12 

ALPHABETICAL LISTING AND APPENDIX MATERIAL 

Baucus, Hon. Max: 

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

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

Fletcher, Hon. Ernest Lee: 

Testimony .......................................................................................................... 8 

Prepared statement .......................................................................................... 43 

Hatch, Hon. Orrin G.: 

Opening statement ........................................................................................... 3 

Prepared statement with attachments ........................................................... 49 

Holtz-Eakin, Douglas, Ph.D.: 

Testimony .......................................................................................................... 12 

Prepared statement .......................................................................................... 56 

Kerry, Hon. John F.: 

Prepared statement .......................................................................................... 64 

Patrick, Hon. Deval: 

Testimony .......................................................................................................... 6 

Prepared statement .......................................................................................... 66 

Vladeck, Hon. Bruce, Ph.D.: 

Testimony .......................................................................................................... 10 

Prepared statement .......................................................................................... 80 

COMMUNICATIONS

American Hospital Association ............................................................................... 87 

Center for Fiscal Equity .......................................................................................... 93 

Medicare Access for Patients Rx (MAPRx) ............................................................ 98 

National Association of Chain Drug Stores (NACDS) .......................................... 104 

National Association of Children’s Hospitals (NACH) .......................................... 110 

National Community Pharmacists Association (NCPA) ....................................... 113 

(III) 

(1) 

HEALTH CARE ENTITLEMENTS: 

THE ROAD FORWARD 

THURSDAY, JUNE 23, 2011 

U.S. SENATE, COMMITTEE ON FINANCE, Washington, DC. 

The hearing was convened, pursuant to notice, at 10:08 a.m., in 

room SD–215, Dirksen Senate Office Building, Hon. Max Baucus 

(chairman of the committee) presiding. 

Present: Senators Rockefeller, Bingaman, Wyden, Nelson, Carper, Cardin, Hatch, Grassley, Thune, and Burr. 

Also present: Democratic Staff: Russ Sullivan, Majority Staff Director; David Schwartz, Chief Health and Human Services Counsel; 

Tony Clapsis, Professional Staff; and Matt Kazan, Professional 

Staff. Republican Staff: Chris Campbell, Staff Director; Jay Khosla, 

Chief Health Counsel; and Stephanie Carlton, Health Policy Advisor. 

OPENING STATEMENT OF HON. MAX BAUCUS, A U.S. SENATOR 

FROM MONTANA, CHAIRMAN, COMMITTEE ON FINANCE 

The CHAIRMAN. The hearing will come to order. Eleanor Roosevelt once said, ‘‘One’s philosophy is not best expressed in words; 

it is expressed in the choices one makes . . . and the choices we 

make are ultimately our responsibility.’’ 

Today, the Finance Committee holds its fourth hearing examining the choices surrounding the budget and reducing the Federal 

deficit. This morning we focus on our health care choices, specifically, Medicare and Medicaid. 

According to the Congressional Budget Office, 20 years ago, 

Medicare and Medicaid represented nearly 12.6 percent of total 

Federal spending. By 2035, that number is expected to grow to 

about 33 percent, almost triple. 

For the continued health of Medicare and Medicaid and the 

health of our budget, we must address this growth. 

What is causing these two programs to grow so fast? The most 

significant contributor is rising health care costs. For the past several decades, health care has been inefficient. Too often, physicians 

did not coordinate care. Seniors bounced between hospitals and 

nursing homes without being properly treated. Preventive services 

were underutilized. As a result, health care costs skyrocketed. 

Another factor is our aging population. Nearly 80 million Americans are part of the baby boom. This year, they start to become eligible for Medicare. As a result, enrollment in Medicare will accelerate. In fact, 9,000 boomers turn 65 every day. 

2 

To slow the growth of Medicare and Medicaid, we have two 

choices: curb the growth of health care costs or shift the burden 

onto an aging population. Health reform represents the first of 

these two choices. The new law reins in costs and makes our health 

care system more efficient. 

Reform begins to change how Medicare pays for health care. Instead of paying based on the number of services, Medicare now rewards doctors and hospitals for health care that delivers real results for patients. It pays for quality versus quantity. And, by investing in prevention, health reform saves money and saves lives. 

Health reform laws will save us millions of taxpayer dollars by 

rooting out fraud and ending costly overpayments to private health 

insurance companies. 

Thanks to these reforms, the health reform law resulted in the 

most significant deficit reduction in more than a decade. According 

to the nonpartisan Congressional Budget Office, health reform will 

reduce the deficit by $210 billion in the next 10 years and by more 

than $1 trillion in the decade that follows. 

The House budget, on the other hand, makes the second choice. 

That budget ignores rising health care costs. Instead, it places the 

burden squarely onto the shoulders of seniors. 

First, the House budget eliminates benefits that seniors count on 

to pay for the medicine they need. It reopens the Medicare Part D 

coverage gap, known as the donut hole, which health reform finally 

closed. Eliminating this coverage will force seniors to pay more for 

the prescription medicines they need. Second, the House budget would cut more than $700 billion from 

nursing homes and other Medicaid services. States would be handed a block grant to run their programs, with zero accountability. 

There would be no guarantee of nursing home access or other care 

for those who need it the most. 

Finally, as the Wall Street Journal noted, the House budget 

would, quote, ‘‘end Medicare as we know it.’’ 

The House budget would end Medicare’s guaranteed benefits. Instead, it would provide seniors with a voucher to purchase private 

insurance. Some call it premium support, others call it a voucher, 

but the effect is the same. 

Under this system, private insurance companies would be able to 

charge more based on a person’s age, and the voucher would not 

come close to meeting seniors’ needs. 

According to the CBO, most elderly people would pay more for 

their health care than they would pay under the current Medicare 

system. 

How much more? The CBO estimates that under the House 

budget, the average 65-year-old would have to pay $12,000 a year 

out of their own pocket just to receive the same benefits that Medicare offers today. 

It is clear the health reform law and the House budget offer two 

distinct choices. Health reform makes our health care system more 

efficient. It reduces costs. The House budget shifts costs to seniors 

and the States. 

So, let us make the right choices as we work to reduce the deficit, work together to protect seniors and reduce health care costs, 

and, also, continue to improve our health care system and improve 

3 

our budget. And, to heed Eleanor Roosevelt’s advice, let us be responsible for the choices that we make. 

[The prepared statement of Chairman Baucus appears in the appendix.] 

The CHAIRMAN. Senator Hatch? 

OPENING STATEMENT OF HON. ORRIN G. HATCH, 

A U.S. SENATOR FROM UTAH 

Senator HATCH. Thank you, Mr. Chairman. 

I want to thank Senator Baucus for convening this hearing. The 

clock is ticking. Every day that passes that we do not act to rein 

in Federal spending and address our entitlement crisis leaves taxpayers exposed to unacceptable and unsustainable levels of debt. 

Simply doing nothing is not an option. 

Let me just refer to this first chart. It is just the way it is. These 

problems are fundamental, and they do not fix themselves. We owe 

it to our seniors, children, and grandchildren to get off the sideline 

and act responsibly to fix this problem. 

[The charts referred to by Senator Hatch appear in the appendix 

beginning on p. 52.] 

Senator HATCH. Our fiscal situation is dire. We have now had 3 

consecutive years with trillion-dollar deficits, and we have racked 

up $14.5 trillion of debt. For any who doubted the magnitude of 

this crisis, the CBO confirmed it again yesterday. By 2035, our 

public debt will rise to 190 percent of gross domestic product if we 

do not get spending under control. 

Now, think about that. Greece is currently, what, around 150 

percent? We cannot allow this to happen. And right now we are on 

a glide path to Greece, a path with devastating implications for the 

liberty of taxpayers and the prosperity of our Nation, and perhaps 

a whole lot of other nations as well. 

Admiral Michael Mullen has identified our current debt spiral as 

the greatest single threat to our national security. Now, it is hard 

for me to disagree with him. I do not. 

The bottom line is that the storm is gathering, and a commitment to the entitlement status quo is a commitment to senior impoverishment and national bankruptcy. 

Last year alone, total Medicare and Medicaid spending was $800 

billion. The longer we wait to address these programs’ finances, the 

harder they will be to solve. And the time for courage, it seems to 

me, is now. This year, the first baby boomer will become eligible 

for Medicare. In 2010, there were 47 million Medicare beneficiaries 

alone, and, by 2031, it is projected that 80 million people will be 

Medicare-eligible. And as these retirees come online, government 

spending is going to mushroom. Just look at the chart putting it 

in perspective. 

According to this year’s Medicare trustee’s report, Medicare is 

facing a $38-trillion unfunded liability. Now, this number is so outlandish that I need to put it in perspective, and let us refer to this 

chart here. 

The median household income is $49,777 per year. The median 

home value is $221,800, which we all know is the biggest asset 

most families will ever own. Yet, Medicare’s unfunded liability 

stands at an astonishing $353,350 per household. 

4 

So, even if an average family sold their home and gave up their 

income for an entire year, they would still not meet their share of 

this one entitlement obligation, and this is simply unacceptable. 

Today, our three major entitlement programs, Medicare, Medicaid, and Social Security, account for 44 percent of non-interest 

Federal spending. But by 2085, these three entitlement programs 

could account for more than 60 percent, or two-thirds, of the Federal budget. 

Now, we have seen this train coming down the tracks for some 

time. Yet, given the opportunity to address this fiscal imbalance in 

a responsible way, the President raided the already busted Medicare program. The Patient Protection and Affordable Care Act increased spending by $2.6 trillion, created new entitlements and expanded old ones, and attempted to pay for all this by stripping 

Medicare of $529 billion and raising taxes by over $800 billion. 

Guided by a political philosophy of never letting a crisis go to 

waste, this law has only helped to accelerate our current debt crisis. 

To get Medicare spending under control, the President is going 

to have to lead. He is going to have to put national priorities over 

presidential politics and address entitlement spending. 

Unfortunately, the President’s solution is to grant power to a 15- 

member panel of bureaucrats that will decide how to spend taxpayer dollars and to determine what care senior citizens will receive. 

Now, let me be 100-percent clear here. The Independent Payment Advisory Board, or IPAB, is not the solution to Medicare’s upcoming bankruptcy. As bad as Medicare’s financing is, it is only one 

contributor to the overall growing debt crisis. 

Medicaid is also a growing problem on the Federal and State governments. The Medicaid program has grown far beyond its original 

purpose of being a safety net for the most vulnerable in our society. 

Let me just refer to this chart here. As weak as Medicaid’s financing already was, the health care law that passed over the objection of every Senate Republican, resulted in the largest expansion of Medicaid in history. 

According to CMS, in 1966, there were only 4 million Medicaid 

enrollees, but by 2019, there will be 78 million. Almost one in four 

people in America will be on Medicaid. That ought to tell you something. 

Just this week, we learned that the new health care law, through 

an unintended glitch, will actually expand Medicaid to an additional 3 million middle-class Americans making up to $64,000 a 

year. Now, that is some glitch. 

This mission creep is bankrupting the Federal Government. 

Washington will spend $4.6 trillion on Medicaid over the next 10 

years. That is a huge driver of our national debt. 

To put it delicately, the new health care law certainly did not 

help. The Office of the Actuary at CMS estimates that the Medicaid 

expansion will cost Federal taxpayers $735 billion over the next 10 

years. That is just expansion. And cash-strapped States are also 

feeling the burden of the Medicaid entitlement. 

5 

The program consumes nearly 22 percent of the respective 

States’ budgets today, and things are about to get a whole lot 

worse. 

Let me refer to this chart number 4 to point out the Medicaid 

mandate on cash-strapped States. A Joint Congressional Committee report that I authored with Chairman Fred Upton of the 

House found that States are estimating they will have to spend another $118 billion because of this new law. 

To maintain these expansions will require cuts in other programs, like education, public safety, and health services. Many factors will continue to drive up Medicaid spending, such as the arduous maintenance of effort requirements, the administrationproposed rate regulations that set up new bureaucratic hurdles for 

States to manage their programs, and a court case before the Supreme Court this fall that could lead to a new wave of costly litigation. 

There is simply no denying the obvious. Medicaid is in need of 

major reform. And, instead of centralizing power in the Nation’s 

capitol, Congress should set broad guidelines and define budgets, 

but then empower the States to run their Medicaid programs in a 

manner consistent with the needs and the values of their own citizens. 

Entitlement reform is not about cutting providers just for the 

sake of cutting. Medicare, Medicaid, and Social Security face real 

problems that demand structural changes. 

Our citizens need these changes, and the markets are demanding 

them. Last winter, I heard a Democratic House member state that 

the Republicans won in November and, therefore, it is their job to 

fix entitlements. 

Let me be very clear. It is all of our jobs to fix entitlements, and 

history will not look kindly on those who stood on the sidelines 

during the central debate about the very future of this Nation. 

So, Senator Baucus, I want to thank you for convening this hearing today. I really do look forward to hearing from our witnesses 

and having a serious discussion about the need for meaningful reform, and I appreciate it. 

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

The CHAIRMAN. Thank you, Senator, very much. I appreciate 

that. 

Before I introduce our witnesses, I would like to say that Senator 

Kerry, a member of this committee, would like to introduce our 

first witness. He is now chairing the Foreign Relations Committee 

hearing. 

He made it very clear to me personally that he wanted to be here 

to introduce you, Governor, but he cannot, and I am going to put 

his formal statement of introduction in the record. 

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

Governor PATRICK. Thank you. 

The CHAIRMAN. Our first witness is Governor Deval Patrick, the 

very esteemed Governor of the State of Massachusetts. 

Our next witness will be the Honorable Ernest Lee Fletcher. I 

was going to tease you, Governor, and ask if you were going to 

6 

have an eventful arrival today or not. But I very much appreciate 

your coming today. 

Our third witness is Bruce Vladeck. We are very happy to have 

you here. Mr. Vladeck, you have been very good in advising us in 

many, many ways, in many capacities, and we deeply thank you. 

The same applies for our fourth witness, Douglas Holtz-Eakin. 

Doug, it is good seeing you here. Many of us have had the benefit 

of your counsel, advice, and your expertise, and we thank you for 

coming as well. 

We will begin with you, Governor. You are first. And, as you 

know, we customarily ask witnesses to put their statement in the 

record—they will all be put in the record automatically—and just 

speak for about 5 or 6 minutes. 

STATEMENT OF HON. DEVAL PATRICK, GOVERNOR, 

COMMONWEALTH OF MASSACHUSETTS, BOSTON, MA 

Governor PATRICK. Thank you, Mr. Chairman, Senator Hatch, 

members of the committee. Thank you very much for having me. 

And I will just try to summarize very briefly my more detailed 

written testimony. 

I could not agree more with the opening statements about the 

importance of reforming Medicare and Medicaid to ensure their 

long-term sustainability and, also, reducing the national debt. 

Those are priorities that I share with members of the committee, 

with many other Governors, and with the Obama administration. 

But how we reform these programs is about people, not about abstract policies. My comments come from that perspective, because 

I do my job with that perspective, as I know many of you do as 

well. 

Thanks to the global economic collapse, nearly every State has 

been facing fiscal challenges similar to those being faced by the 

Federal Government, although at a different scale. In Massachusetts, we have cut spending, we have reformed government, we 

have used reserves and stimulus funds—thank you very much for 

that—and even raised our sales tax. 

We also invested significantly in education, in health care, and 

in job creation, because we all know that educating our kids, securing people’s health care, and putting people to work is the best way 

to build a better future. 

Because we made those choices on both the spending and the 

revenue side, the Massachusetts economy today is now growing 

twice as fast as the Nation’s economy. Our unemployment rate at 

7.6 percent is well below the national average and declining. Our 

annual budgets have been responsible, balanced, and on time. And 

our bond rating has not only remained strong, but gotten stronger. 

With that experience and those results to show for it, I am here 

to offer just three points. First, you do not have to end Medicaid 

or shrink the number of people that it serves to make it a sustainable program. 

Over the last 5 years, through implementation of our own health 

care reform program in Massachusetts, we have extended reliable, 

quality health care to 98 percent of our residents, 99.8 percent of 

children. That has added about 1 percent to State spending. 

7 

Medicaid has been an important part of that strategy. And the 

flexibility exists today under the program to drive costs down 

through innovation in delivery and payment systems. Through an 

initiative on dual-eligibles, we expect to shave 2 percent off of the 

$4 billion we spend on dual-eligibles this coming fiscal year. 

And, when you consider that this population accounts for 40 percent of Medicaid costs program-wide, there are significant savings 

within reach. 

I know some of my fellow Governors advocate for block-granting 

Medicaid. Block-granting may be good for the books, but it is bad 

for people, because the States cannot sustain the level of service or 

enrollment without Federal partnership, and the Governors advocating for block-granting know that. 

Massachusetts could lose more than $23 billion over 10 years if 

Medicaid moves to a block-grant formula. There is no way that our 

commonwealth, with a balance sheet even as strong as our own, 

would be able to absorb such a cost shift without seriously curtailing critical services and shedding thousands of jobs. 

So my first point is that you should give the States the chance 

to use the flexibility under the current Medicaid program to drive 

down costs and harvest those savings. In fact, there are ways I 

think you can push us to innovate more. 

Second, the Affordable Care Act helps, not hurts, the deficit picture. The simple, proven, common-sense logic is that better coverage leads to a healthier population, which leads to lower costs 

and greater economic competitiveness. The Congressional Budget 

Office estimates, as you know, that the Act will reduce the deficit 

by $124 billion through 2019 and by more than $1 trillion in the 

subsequent decade. In fact, there is more flexibility under the Affordable Care Act than there is even under the existing program. 

Third, put revenues on the table. I know this is the point where 

most politicians run for cover, but it is time we faced up to this. 

Our Federal Government has been running two wars and a costly 

prescription drug benefit for nearly a decade using borrowed 

money. 

Meanwhile, I know mom-and-pop stores and college students who 

pay more in taxes than corporations that are earning billions of 

dollars in revenue, and so do you. 

Some of these loopholes ought to be closed. If we believe that the 

poor and disabled, the people Medicaid serves, should get adequate 

health care, it is only fair, it seems to me, to ask everyone to help 

close the gap other policy choices have created and exacerbated. 

We need growth, and cuts alone will not grow the economy. We 

need to invest as well. 

I want to work with you and with the other members of the Senate and the Congress and with the administration on ways to make 

these programs more modern, more sustainable, more effective. But 

I believe that we have to come at this from the perspective of the 

impact on people, not just on abstract policy. And in doing that, we 

keep our commitments to the American people—to seniors, to people with disabilities, to poor people—put America on a firmer fiscal 

footing, and build a better and stronger Nation for another generation to come. 

8 

Thank you very much, Mr. Chairman, for having me this morning. 

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

The CHAIRMAN. Thank you very much, Governor. 

Governor Fletcher, you are next. 

STATEMENT OF HON. ERNEST LEE FLETCHER, FORMER 

GOVERNOR, COMMONWEALTH OF KENTUCKY, LEXINGTON, KY 

Governor FLETCHER. Chairman Baucus, Ranking Member Hatch, 

and other Senators of this august body, it is a great pleasure to be 

here to share a little of my opinion with you today. 

It never fails when I come here that I have not lost the awe of 

the feeling of being in this great place, the Capital of this great Nation. 

Regardless of party affiliation, we all know that our health care 

system needs reform. The Medicaid program is a prime example. 

According to CMS, taxpayers spent over $404 billion on Medicaid 

last year, and projections have that doubling to $840 billion by 

2019. 

The States’ share of that spending will be almost $330 billion. As 

with many other Governors, when I took office, I faced an empty 

rainy day fund and a staggering budgetary shortfall. It was quite 

a transition from my days here in the House Energy and Commerce Committee. 

To solve our problems, we could not borrow from the future nor 

could we print money. Over the next 2 years, Governors face a total 

projected shortfall of $175 billion, what the Washington Post has 

termed the most severe budget crisis since the Great Depression. The $151 billion in flexible emergency funding that the American 

Recovery and Reinvestment Act provided has expired, and now governments across the country are facing deep spending cuts or tax 

increases to balance their budgets. 

New York Governor Andrew Cuomo called his State functionally 

bankrupt, and he proposed closing most of the $10-billion budget 

gap by reducing funding for education and Medicaid. 

Medicaid has grown to consume about 22 percent of State budgets and will consume $4.6 trillion of Washington’s budget over the 

next 10 years. Our national debt is mounting. In fact, if we do not 

change our course, in 6 years, we will be paying more on the national debt interest than we spend on Medicaid. 

Governors also realize that Washington’s budget situation prevents it from coming to the States’ rescue again. Our Nation is in 

no position to bail out States. But what States and the Federal 

Government need to do, among other things, is take a hard look 

at how to control Medicaid spending. 

To meet the challenges of Medicaid in Kentucky, we began the 

long waiver process. Fortunately, during that process, the Deficit 

Reduction Act passed in 2005. We were among the first States to 

take advantage of that Act. With this newfound liberty, we were 

free to focus on health care instead of navigating through the regulatory maze. 

We established Kentucky Health Choices to increase service delivery choices for adults with the most difficult and challenging 

9 

problems. We introduced proven principles, including utilization 

and intense disease management. 

Now, I am concerned that many of the flexibilities that allowed 

Governors to develop innovative win-win solutions are being taken 

away piece by piece. First, there was the maintenance of effort requirement to prohibit States from even making program integrity 

modernizations. Then there were the Medicaid expansions in the 

Patient Protection and Affordable Care Act, which put an unrealistic burden on the States. And now this administration’s proposed 

set of new regulatory hurdles for States to navigate will make it 

increasingly difficult for States to manage spending on providers. 

The Obama administration’s health care overhaul allows little 

flexibility. It looks to Washington for the solutions rather than to 

those most familiar and close to the problems. 

All of these issues make it increasingly difficult for Governors to 

focus on tailoring their Medicaid programs in ways that meet the 

needs of their citizens. 

We must admit Medicaid does not work very well in its current 

condition. Not only do waste, fraud, and abuse plague our current 

system, but the program does not serve patients well. In some research, even patients without any insurance do better than those 

on Medicaid. 

Some cancer mortality rates in Medicaid patients are 2 to 3 

times higher than those on private plans. One study revealed a 50- 

percent increase in mortality following cardiac bypass surgery. Another revealed that Medicaid heart attack patients get fewer proven interventions. And these studies represent only the treatment 

failures. They do not begin to address wellness and prevention 

shortcomings. 

It is not as though we do not have examples of successful models 

to provide better care and lower costs. For example, Northern Virginia’s CareFirst plan by Anthem, CEO Chet Burrell, with his 

team, is making a real difference. They stratified their patients and 

found that 20 percent of the population accounted for 71 percent 

of the costs. 

They hired regional care coordinators, local nurse coordinators to 

work with primary care physicians to focus on the most ill. They 

have not seen only better care, but also lower costs. 

Another example was the subject of a New Yorker Magazine article back in January entitled ‘‘The Hot Spotters.’’ It is about a primary care doctor, Dr. Jeffrey Brenner in Camden, NJ. He found 

that 1 percent of their patients accounted for 30 percent of the 

costs. And, after focusing on the 36 super-utilizers, they reduced 

hospital bills by 56 percent. 

Another model, the patient-centered medical home being piloted 

across the country, is proving to give better care and, in some 

cases, realizing savings up to 20 percent. 

As these examples illustrate, there are some proven models, but 

States currently do not have the flexibility to prioritize their limited dollars, because patient challenges vary as broadly as the hollows of Appalachia differ from inner city New York. A top-down, 

1-size-fits-all management from Washington will not work. 

10 

However, setting expectations with clear goals, guidelines, and 

measured results will motivate and inspire leaders who will rise to 

meet the variety of challenges. 

Governors are close to the challenges and the problems. Give 

them the freedom to address them, and they will find remarkable 

and fair solutions. 

Welfare to Work, developed under the leadership of Governor 

Tommy Thompson, Mike Leavitt, and several others, provided a 

proven model of State innovations, as Congress enacted bipartisan 

welfare reform with President Clinton. 

Medicaid is in dire need of reform. It is bankrupting both States 

and the Federal Government, while failing patients. I recommend 

eliminating the restrictive mandates, such as the maintenance of 

effort requirements, and granting the States the freedom to be creative and implement what works. 

More broadly, Washington should establish, again, clear goals, 

guidelines, and defined budgets, and then empower the 50 States 

to become sites of innovation across the Nation. You will be providing the most vulnerable a much better health care system and 

the American people a better value. 

Thank you for this opportunity. 

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

The CHAIRMAN. Thank you, Governor. 

Next, the honorable Bruce Vladeck. Bruce? 

STATEMENT OF HON. BRUCE VLADECK, Ph.D., SENIOR ADVISOR, NEXERA, INC., AND FORMER ADMINISTRATOR, HEALTH 

CARE FINANCING ADMINISTRATION, NEW YORK, NY 

Dr. VLADECK. Good morning. Thank you very much, Mr. Chairman, Senator Hatch, members of the committee. It is a great honor 

and a pleasure to be before you this morning. 

It has been 14 or 15 years since the last time I sat at this table, 

in a very different role, of course, at that time, but I must confess 

to a very strong sense of de ́ja` vu. 

In 1996 and 1997 and then in 1998 and 1999, when Senator 

Rockefeller and I served on the national bipartisan Commission on 

the Future of Medicare, there was a so-called crisis in Medicare 

that was considered central to any plan to reduce the Federal 

budget deficit. 

The hospital trust fund was facing looming insolvency. The projected growth rate in Medicare expenditures was forecast to crowd 

out other discretionary expenditures and make deficit reduction unattainable. The growth in Medicare expenditures was widely characterized in those days as unsustainable. 

Now, permit me to remind you what happened then in the Balanced Budget Act of 1997, as has occurred periodically throughout 

the history of the Social Security Act, since 1938—3 years after its 

enactment. By 1999, the Federal budget was in surplus. 

The expected life of the hospital insurance trust fund was extended by 12 years. In calendar year 1998, Medicare outlays were 

actually lower than they were the previous year. 

11 

There is no reason we cannot do that again. Again, these cycles 

of change in provisions of the Social Security Act have characterized its entire history. 

We do have long-term financial problems with the Medicare program. They must be addressed. But I would suggest to you that the 

current so-called crisis is, in fact, an artifact of broader problems 

with the way the Federal budget has been managed over the last 

decade and with budgetary politics, and it should not be used as 

an excuse to dismantle one of the most important things the Federal Government has done, or to reverse some of the most promising changes in health policy and health care delivery that have 

taken place during my career. 

In deference to the time, three points very quickly. The first is 

to remind you what you all know, but us health policy people tend 

to overlook all the time. When the Balanced Budget Act was first 

enacted, the Congressional Budget Office estimated that it had 

moved the insolvency date of the hospital insurance trust fund by 

10 years from 1998 to 2008. But by 2001, the estimated exhaustion 

date for the fund had been moved outward another 21 years to 

2029. 

There were no changes of any significance in Medicare policy between those consecutive CBO estimates. What happened was CBO 

corrected its terrible misestimation of the BBA itself, but much 

more importantly, the economy as a whole grew much faster than 

anyone had projected. 

When you talk about the proportion that Medicare and Medicaid 

account for in the gross domestic product, there are two parts of 

that formula. One is entitlement expenditures and the other is the 

size of the GDP. 

The most important thing we can do to solve the so-called entitlement crisis is to get the economy growing again. 

Now, I know there are differences about how to go about doing 

that, but the fact is you cannot separate out the long-term financial 

health of any of these programs from the long-term financial health 

of the economy as a whole. 

Second, there are a number of other things that have not 

changed since 1997, but a few have and need to be noted. First, 

out-of-pocket costs for Medicare beneficiaries have soared, largely 

because of soaring premiums. The proportion of working people 

with employer-guaranteed retirement health benefits has fallen 

and will essentially disappear in the next few years. 

We added a prescription drug benefit that is more expensive 

than it needs to be, without a financing mechanism. We have not 

made much progress in controlling overall health care costs, and 

we have enacted the Affordable Care Act. 

What this leads me to is to just remind you that, first, even with 

the addition of the prescription drug benefit and expanded coverage 

for certain preventive services, the Medicare benefit package is now 

wholly inadequate. Medicare beneficiaries now have a package of 

benefits that would not qualify under the bronze standard for privately insured people in the Affordable Care Act. On average, 

Medicare still pays less than half the total health care costs of its 

beneficiaries. 

12 

Second, as a result, Medicare beneficiaries, as a proportion of income, already spend 3 times as much on out-of-pocket health care 

expenses than people of working age. 

Third, there are still very significant opportunities, which I 

would be happy to discuss—they are in my statement—to reduce 

Medicare outlays. 

As the chairman said, we have essentially two choices. If Medicare beneficiaries—if older and disabled people—are going to continue to get the medical care they need, we can cap the Federal 

Government’s liabilities through something like the House-enacted 

budget resolution or a somewhat more refined, genteel version of 

premium support and shift excess cost growth onto beneficiaries, or 

we can control the rate of growth of health care costs. 

The Affordable Care Act contains many important tools for cost 

containment. Not all of them will work. We do not have to bat 

1,000 on them in order to get a handle on health care costs. If we 

hit 250 or 300, we will make major progress. 

But the only alternative we have, quite frankly, is to reduce coverage for people who can least afford it, which we know will cut 

off access to health care for many people who need it, lead to worse 

health outcomes and to the impoverishment of the next generation 

of beneficiaries. 

I am over my time already, and am happy to answer any questions. I thank you very much again for the opportunity to be here. 

[The prepared statement of Dr. Vladeck appears in the appendix.] 

The CHAIRMAN. Thank you, Dr. Vladeck, very much. 

Finally, Dr. Holtz-Eakin? 

STATEMENT OF DOUGLAS HOLTZ-EAKIN, Ph.D., PRESIDENT, 

AMERICAN ACTION FORUM, AND FORMER DIRECTOR, CONGRESSIONAL BUDGET OFFICE, WASHINGTON, DC 

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

Hatch, and members of the committee. It is a privilege to be here 

to talk about the future of the entitlement programs. 

I think, in looking at that future, the one thing we know to be 

true is that it cannot be the status quo. The status quo for Social 

Security, Medicare, and Medicaid, the Affordable Care Act, is deeply broken. In many cases, beneficiaries are not served well now and 

will be increasingly served more poorly in the future. 

In all cases, these programs are bleeding red ink and exploding 

the Federal debt, and the explosion of Federal debt literally threatens this economy, its growth, jobs, and the prosperity of the future. 

It is, in fact, as Erskine Bowles, the co-chairman of the President’s 

Commission on Fiscal Reform, said, the most predictable crisis in 

history, and one we have an obligation to avoid. 

Medicare, in particular, threatens the budget. In my written testimony, I run through some of the numbers. If you look at it in isolation, it is running a cash-flow deficit of $280 billion in 2010. By 

2020, it is going to run a cash-flow deficit of $600 billion. It is a 

program that is just feeding the need to borrow and run up the 

Federal debt. 

We did a rough calculation that suggests that, since 1996, it is 

responsible for almost a quarter of the Federal debt in the hands 

13 

of the public and that, going forward, it could be held responsible 

for as much as 35 percent of the Federal debt by 2020. It is a prime 

contributor to the crisis that will envelop this country unless we 

change course. 

It is also failing to meet the needs of beneficiaries, in part, due 

to mechanisms that have provider cuts, like the SGR. We have 

physicians now reporting that 67 percent of practices are contemplating not taking new Medicare beneficiaries. And there are other 

indicators of diminishing access to quality care within the program. 

The new cuts under the Affordable Care Act, if we take the word 

of the CMS actuary, may endanger as much as 70,000 hospital 

beds and 14 million emergency room visits. These are not indicators of a program that will both survive and serve the future seniors of America well. So we need to change course. 

Instead, with the adoption of the Independent Payment Advisory 

Board, the IPAB, we have taken a dramatic step in the wrong direction that will likely have an increased reliance on these kinds 

of provider and reimbursement cuts. 

The mechanism built into that which requires them to make 

cuts, on a 1-year basis, that are easily seen and scoreable, is a recipe for sharp provider cuts going forward and diminished access for 

seniors. It will become the primary instrument for rationing care 

for seniors in America. 

It will likely stifle innovation, because the target for a cut is 

going to be the new treatments that are often the most expensive, 

before they have been ironed out and diffused across the health 

care sector. And, if you are developing a new therapy, if you are 

developing a new biopharmaceutical, and you have an IPAB that 

could, at a moment somewhere in the future, cut the revenue 

stream associated with that, you will be far less likely to undertake 

the kind of R&D that we need. 

So I think this is the worst aspect of the new Affordable Care 

Act and something that deserves repeal immediately. It is worse 

than the SGR because it is not subject to the same checks. It is not 

an institution that is elected. It is not subject to any control by the 

Secretary of HHS, and it is not subject to administrative or judicial 

review, and the Congress has limited ability to control it. 

The only thing it can do is get a three-fifths majority in this body 

and then do something that looks roughly the same on roughly the 

same timetable. It strikes me as not a step in the right direction, 

but actually a continued diminishment of the quality of the program. 

Instead, we need to change course and undertake real reforms, 

and, in doing that, there will be spirited debates and some disagreement, I am sure. But there are two things that really cannot 

happen. We cannot grow our way out of this problem, and appeals 

for economic growth simply, while desirable, are not ever going to 

be enough to solve the problems. We cannot grow fast enough to 

keep up with the pace of 7 and 8 percent a year at which Medicare 

and Medicaid have been growing. 

And we cannot tax our way out of this problem. Any attempt to 

tax our way out of this problem—I think yesterday’s CBO report 

made very clear that would literally drive this economy under. 

14 

So we need to reform these spending programs so that they do 

not grow so rapidly and do not endanger the beneficiaries and the 

economy. And to do that, I think you need three basic rules to follow. And, while not everyone may like the House budget solution, 

it did some things. It put the health care programs on a budget. 

Premium support provides taxpayers with a known liability. 

Importantly, it provides the provider community with a known 

set of resources, and they had better use them wisely, compete 

heavily for those resources, and serve their clients well. 

The same is true in Medicaid. It caps taxpayer liability and allows the States the flexibility to use those resources wisely. We 

cannot have open-ended commitments and expect these programs 

not to cost too much. 

Second is, you have to foster choice and innovation at every 

stage. There is no substitute for the kinds of incentives and the 

kinds of market forces that have served the other 80 percent of the 

American economy so well over time. Leaving them out of health 

care is a fundamental policy error. 

Third, I think decentralizing at every opportunity, especially 

Medicaid, is something to keep on your radar screen. We have a 

vast difference across the States in the size of Medicaid populations, in the size of the uninsurance problem, in literally the cost 

problems in health care. And to attempt a 1-size-fits-all solution 

that is drawn up in this city is a mistake, and decentralization will 

serve beneficiaries well and will serve the States and ultimately 

the country well. 

I appreciate the chance to be here today, and I look forward to 

answering your questions. 

[The prepared statement of Dr. Holtz-Eakin appears in the appendix.] 

The CHAIRMAN. Thank you all very much. 

The basic question that this hearing attempts to focus on is the 

role of health care in getting our budget deficits reduced, and I laid 

out two options. One is to try to control costs, essentially through 

the Health Care Act, but there are lots of ways to control costs, and 

the other is to put cost control back onto beneficiaries, as the Ryan 

budget does. 

Health care reform is here. It has passed. The law is enacted. It 

is not going to be repealed, and we all know that. 

We have improved upon it at section 1099, for example, repealing 

that portion, as it was proper. But it is here. And we all know that 

we spend about 60 percent more per person on health care than the 

next most expensive country, and we all know the data, we all 

know the problems. They are exploding budgets—private, family, 

public budgets, et cetera—and we have to find a solution here. 

Usually, solutions of this magnitude are shared solutions. That 

is where everyone contributes. When we enacted health care reform, it was based on that premise that we are all going to contribute. Nothing is off the table. We are all going to work together 

to figure out some way to get an American solution here. 

Other countries have their own solutions. We have to find our 

uniquely American solution, and that was the attempt of health 

care reform. 

15 

So my real question of you—I do not have a lot of time—is, 

where is the balance here? Where do we find the shared solutions 

here? 

The Act attempts to reduce the rate of growth of health care 

costs. It is not perfect. Social Security was not perfect when it was 

enacted. Neither was Medicare. We improved upon it over the 

years. 

Governor Patrick, you and your State have really led health care 

reform. It has had very good results. 

I would just ask you, how do we find the balance here to get 

health care costs under control? We have to go forward here. There 

is a temptation here to always talk about the problems. There is 

a temptation to kind of blame somebody else. 

But I am asking the four of you to not indulge in either of those, 

not to blame, but to try to work to help us understand where we 

share, because this really is an American problem. We need an 

American solution. 

I will start with you, Governor Patrick. 

Governor PATRICK. Mr. Chairman, I want to agree with the 

premise of your statement; that is, that a blended approach is the 

right approach, meaning a combination of reforms in the program. 

I think in that sense, in that spirit, we all seem to agree, in addition to revenue being on the table, and economic growth, which, by 

the way, is addressed, we have found at home, by dealing with the 

broader issue of health care premium inflation. 

This is an issue that goes beyond Medicaid and Medicare. 

Seventy-five percent, 85 percent of the businesses in our commonwealth are small: 10 people, 50 or fewer. They see their commercial 

activity picking up, and then they get that premium increase for 

25 or 30 percent increases, and they say, ‘‘You know what? I cannot 

add that one or two people.’’ 

Well, if they cannot add that one or two people, we do not get 

an economic recovery. It is really as straightforward as that. 

So we have gone at the broader issue of cost containment. That 

is, for us, chapter 2 in health care reform and moving away from 

fee-for-service to more integrated payment systems that provide, in 

fact, better care, but also more cost-effective care, is a big part of 

that strategy. And I can get into more detail, if you like. I do not 

want to take all the time. 

The CHAIRMAN. Sure. Governor? 

Governor FLETCHER. Yes, thank you. I certainly think we share 

an interest in making sure that we can take better care of the patients that are in whatever program they are in. 

One of the things that is very important to realize—and I think 

Governor Patrick has already mentioned some of the innovative 

things that they are doing—is that there are some solutions out 

there. 

I may say something that sounds a bit radical, but there is no 

reason for a patient currently, a young individual, as they are 

going forward, very few reasons to have a heart attack or a stroke 

in the future with what we know in health care. 

If wellness and prevention and intervention are taken seriously, 

then we can prevent those things. Look at the costs that would prevent. 

16 

What I think is a way of approaching it is providing the guidelines from here, rather than prescribing everything specifically; to 

set up goals, establish guidelines, and, obviously, budgetary limitations that fit within what you are capable of doing and allow folks 

like the Governor next to me and the other Governors to be very 

creative in what they are doing. 

You have accountable care organizations within your bill. There 

are a number of folks around the country who have shown that 

they can do that. However, even with the regulation promulgation 

that we have currently, even those institutions—Mayo, Geisinger, 

Advocate, some others—look at those and say they are not workable, I believe, because they do not provide the right incentives, the 

right guidelines. 

But if those are instituted, and people begin to establish the programs that are proven, I think we can really improve the health 

and—— 

The CHAIRMAN. I appreciate that. My time has expired, but when 

I come back, I am going to keep pressing on this point. That is, 

where is the sharing here and, second, where do you agree, not 

where do you disagree, where do you agree on ways to get health 

care costs under control and to contribute to lowering the budget 

deficit. 

Senator Hatch? 

Senator HATCH. Thank you, Mr. Chairman. And we appreciate 

all four of you taking time to be with us to help us to work through 

some of these issues. 

Let me start with you, Dr. Vladeck. I appreciate your service in 

the past. 

CBO, in its most recent long-term budget outlook, released just 

yesterday, finds the debt held by the public will exceed 100 percent 

of GDP by 2021. That is only 10 short years from today. 

CBO concludes, ‘‘The explosive path of Federal debt underscores 

the need for large and rapid policy changes to put the Nation on 

a sustainable fiscal course.’’ 

Now, this summer, credit agencies have issued warnings about 

our level of debt and urged us to take swift action to right our fiscal ship or risk losing our strong credit standing in the world. 

And even your former boss, President Clinton, voicing his concern that Democrats would do nothing to address Medicare insolvency, said, ‘‘I completely disagree with that. We have to deal with 

these things. You cannot have health care devour the economy.’’ 

Now, with these facts for context, I am shocked and, frankly, bewildered that, in your mind, this is not a crisis, or at least the way 

I read your statement. 

Can you tell us what a budget crisis looks like to you? 

And then, Dr. Eakin, I would like you to give your impression on 

it, too. 

Dr. VLADECK. Senator, there is no question, in my mind, that 

there is a budget crisis. I do not think it is a Medicare crisis. I 

think the major source of our budget crisis—to illustrate further 

why I make a professional choice not to spend most of my time in 

Washington—the major source for our budget crisis is we are having a revenue crisis. 

17 

Federal revenues as a proportion of the gross domestic product 

are at their lowest level since prior to the beginning of the Korean 

War. We had a balanced Federal budget in 1999 and 2000, with 

Federal revenues at 19 or 20 percent of the GDP and a growing 

economy, and now we have a stagnant economy and Federal revenues at less than 15 percent of the GDP. No wonder we have a 

budget crisis. 

The second point I would make is that, one can achieve longterm solvency in the Medicare program with decisions much less 

drastic than are being proposed, again, for example, in the House 

budget resolution. 

The question really that we have to address, the choice—to paraphrase the chairman’s opening remarks about the long-term financing of these programs and the long-term financing of a stable Federal budget and a growing national economy—the choice we have 

to make is whether we are prepared to pay for the commitments 

we have undertaken over the last 50 years not only to working people and retirees and disabled people, but also our international 

commitments, or whether we are going to determine that we are 

not going to pay for them, and that is, to my mind, the source of 

the very real crisis we now have in the Federal budget and the nature of the choice that the chairman laid out in his opening remarks. 

Senator HATCH. Dr. Holtz-Eakin? 

Dr. HOLTZ-EAKIN. I fundamentally disagree. The crisis is not that we have a $1.6-trillion deficit right now and revenues as a 

fraction of GDP down at 50-year lows. Those are all true facts. 

The crisis is that, in either the CBO projections or the administration’s budget—take your pick; take the administration’s—in 

2021 revenues are back up to 19.5 percent of GDP, but the deficit 

has fallen only to $1.2 trillion. 

This is not a revenue problem. In all of these projections, revenues go above historic norms, and we still have an exploding debt 

spiral. So that is just not our problem. It is the spending and the 

growth of the spending fundamentally, and Medicare is part and 

parcel of that. 

And I would encourage the committee not to be seduced by analogies to the 1990s. This is not the late 1990s. There is no prospect 

of a peace dividend from the fall of the Soviet Union. That was an 

important part of our budgetary improvement back then. 

There is little chance that we are going to get a cessation of 

health care cost growth, which we got there, and it helped a lot. 

We certainly do not want to rely on a tech bubble to bring in the 

revenues as we had in the late 1990s. We paid for it with a big 

recession early in the 21st century. 

And most importantly, we came into the 1990s with a debt-toGDP ratio that was about 40 percent—it is now almost 70 percent—and the baby boomers were 15 years away from retirement. 

This is not the 1990s. You cannot run that playbook. 

We need deep and fundamental changes to these programs to 

serve the beneficiaries well and to serve the country well. 

Senator HATCH. Thank you. My time is up, Mr. Chairman. 

The CHAIRMAN. Thank you. 

Next, Senator Bingaman. 

18 

Senator BINGAMAN. Thank you all for being here. Let me ask 

first about a concrete proposal that would help deal with the cost 

of Medicare. This is a proposal Senator Rockefeller introduced last 

week that I cosponsored with him and with, I think, Senator 

Stabenow, maybe some others, to require that Medicaid drug rebates apply to low-income Medicare beneficiaries, dual-eligibles, socalled dual-eligibles, and low-income subsidy-eligible beneficiaries. 

I think the estimate there is that that would save something in 

excess of, I think, $112 billion over 10 years. And I would be interested, Dr. Vladeck, if you have a view on the merits of this proposal—Governor Patrick, any of the rest of you. 

Dr. VLADECK. Senator, I think it is an excellent proposal. In my 

testimony, I noted that there are a lot of areas in which Medicare 

is paying too much for what it purchases on behalf of its beneficiaries, and prescription drugs are probably the single most dramatic example of that. 

So it is remarkable to me that the Federal Government should 

have chosen to have the Medicare program, with all the concerns 

about its long-term fiscal well-being and fiscal liability, and with 

the very substantial out-of-pocket costs associated with Part D, 

should have chosen, as a matter of policy, to pay substantially 

more for the same drugs than the Medicaid program does. 

And this would remedy that failure and, in doing so, would save 

a very, very significant amount of money. So I think, frankly, to 

me, it is sort of a no-brainer, and we should have done it years ago. 

I congratulate you for supporting it. 

Senator BINGAMAN. Governor Patrick, have you focused on this 

proposed legislation by Senator Rockefeller? 

Governor PATRICK. Not with that care. I am generally familiar 

with it, and I concur with Dr. Vladeck. 

Senator BINGAMAN. Let me ask Governor Patrick another question. I am very worried about this idea that we would block-grant 

Medicaid. 

In my State of New Mexico, we have a lot of people dependent 

upon Medicaid. Of course, under the Affordable Care Act, we are 

going to have even more dependent upon Medicaid, and the State 

depends very heavily upon the Federal Government picking up a 

significant portion of that cost. 

I guess I would be interested in just knowing what kinds of actions you think block-granting of Medicaid would cause States to 

undertake, your State, as an example, or my State, as an example. 

Governor PATRICK. Well, Senator Bingaman, there is one example of a block grant out there which I think every Governor says 

is a fabulous one, and that is Rhode Island. I do not know if you 

are familiar with that. 

Senator BINGAMAN. I am not. 

Governor PATRICK. Rhode Island has a block grant where the 

block grant is, I do not know, 10 or 15 percent more than the best 

estimates of what Rhode Island thinks it would ever spend. 

If that was done for every State, we would all say, go ahead and 

block-grant. It would not save you a dime, not a dime. It would cost 

you more. 

19 

What we are dealing with with a block grant, by all the projections—and I can tell you what the impact is in Massachusetts: it 

is about a $23-billion cost to us in that cost-shifting over 10 years. 

A State with a strong balance sheet like ours cannot absorb that 

and provide the same level of benefits. So you make a decision. You 

cut benefits or you cut people, and that brings us back, I believe, 

to the fundamental question. What is it we are about? 

If we are about keeping our commitments to poor people and people with disabilities, vulnerable people, then the partnership that 

we have had with the Federal Government works. 

And there are ways through existing flexibilities and new ones 

that we have under the Affordable Care Act to squeeze those costs 

out. But that bigger issue is—and dual-eligibles are just one example; PACE, the special needs plans that some of the other States 

are using, there are a host of examples, frankly—there are just not 

enough of them. 

There are not enough States using the flexibilities that are in existing law to try to get those costs down. 

I just want to return to the larger point. The rate of premium 

increases, health care premium increases, across the country is a 

serious problem. It goes beyond Medicaid and Medicare. And we 

are trying in Massachusetts to deal with that issue, and it would 

be great to have the help of the Congress in dealing with that 

issue, as well. 

Senator BINGAMAN. My time is up, Mr. Chairman. Thank you. 

The CHAIRMAN. Thank you, Senator. 

Senator Wyden? 

Senator WYDEN. Thank you, Mr. Chairman. 

Governor Patrick, your testimony zeroes in on the need for flexibility in Medicaid. The Affordable Care Act allows the States to 

have that flexibility in 2017. 

Now, there is bipartisan legislation here in the Senate to move 

that date up to 2014, and the President has endorsed that legislation. 

Do you agree with the President on this? 

Governor PATRICK. I am fine with that, Senator. I know that you 

are the coauthor of that legislation. I would say that even if you 

were not asking me the question. 

Senator WYDEN. Very good. 

Governor PATRICK. I will tell you, honestly, Senator, I do not 

foresee our availing ourselves of a so-called waiver because we are 

so far down the path now, we are in pretty good shape to comply 

with the Affordable Care Act. 

Senator WYDEN. The second question I want to ask you, Governor Patrick, is about this question of the early retirees going on 

Medicaid. 

Governor PATRICK. Right. That is the bit that was in the news 

recently. 

Senator WYDEN. Correct. And I have tried to assess your program, because it seems to me it tracks philosophically with where 

I have been, which is to expand coverage by creating private sector 

choice and kind of a marketplace. 

Governor PATRICK. Right. 

20 

Senator WYDEN. And what it seems to me you are doing without 

a subsidy is putting those folks in Commonwealth Choice. So they 

are making, say, $64,000, no subsidy, and they get to go to Commonwealth Choice, and it seems to be working, no subsidy, and 

looks like a pretty appealing way to use the private sector to expand coverage. 

I assume you want to make sure that you can keep that, right? 

Governor PATRICK. Well, that is right, yes, and your question 

asked for a yes or no answer, but—— 

Senator WYDEN. Perfect. 

Governor PATRICK [continuing]. Can I expand just a little bit? 

Senator WYDEN. Sure. 

Governor PATRICK. I think that for us, what we have is, as you 

acknowledged, a hybrid public-private solution, and we have a 

range of public applications or subsidies, depending on the level of 

income and the ability of people to contribute. 

But the working theory has been that getting people insured, giving them access to preventive care, some of the wellness points that 

others have made, actually brings total system costs down over 

time. 

The next chapter is to make sure that those cost savings are 

passed on in the form of low premiums. 

Senator WYDEN. I think your answer is a thoughtful one. I just 

wanted to make sure that folks knew that people were trying to be 

innovative, were using the private sector without a subsidy. We 

were able to expand coverage, and, certainly, early retirees are 

very deserving, and I commend you for everything that I have 

heard. 

Governor PATRICK. Thank you. 

Senator WYDEN. One question for you, Dr. Vladeck, because of 

your experience. And I think he has left, but you may be aware 

that Senator Grassley and I have introduced a bipartisan bill to 

open up the Medicare database and make it possible for people all 

over this country to really get a sense of some of the kind of key 

information that can help us make better choices in terms of both 

quality and cost containment. 

I am sure you have not had a chance to look at all the details. 

But conceptually, based on what you went through at HCFA, would 

you be in support of what Senator Grassley and I are talking 

about? 

Dr. VLADECK. Senator, I will confess to a mild conflict of interest. 

My brother was one of the lawyers who lost the original suit with 

the AMA on the Freedom of Information Act request for that data. 

The prohibition on the sharing of that data is about as egregious 

a special interest exception to the Freedom of Information Act as 

exists anywhere, and I would certainly enthusiastically support its 

alteration by statute. 

Senator WYDEN. Very good. Thank you. 

Thank you, Mr. Chairman. 

The CHAIRMAN. Thank you, Senator. 

Senator Carper? 

Senator CARPER. Thanks, Mr. Chairman. 

To our guests, welcome. Recovering Governor, I especially welcome you here today. 

21 

I think there is at least one area that we can agree on with respect to Medicare and Medicaid. According to Federal estimates, 

more than $70 billion is lost each year to waste and fraud from 

those two programs. In Medicare alone, there is about another $50 

billion in improper payments reported by GAO, which is mostly 

over-payments, and the administration has promised to cut that 

number in half. 

But the bad news is that there are a lot of folks with criminal 

intent who want to steal money out of the Medicare trust funds 

and from States and the Federal Government through Medicaid. 

The good news is that Tom Coburn and I and a bunch of our colleagues, Democratic and Republican, just introduced yesterday legislation that attempts to go take the next step in going after some 

of those funds. 

I look at the Federal Government, and sometimes people I talk 

to at home and around the country believe we operate under what 

I call a culture of spendthrift, and they would like to see us adopt 

a culture of thrift. And what I would like to say is, we need to look 

in every nook and cranny of the Federal Government, including entitlement programs, including Medicaid and Medicare, to make 

sure that we are getting the best result that we can for the money. 

My bumper sticker these days is ‘‘better result for less money,’’ 

and for health care, better health care results for less money or at 

least for not a whole lot more money. 

About 2 months ago, among the witnesses we had before us was 

a fellow named Alan Blinder, who now teaches up at Harvard and 

used to be vice chairman of the Federal Reserve, and he was saying 

to us how health care is the 800-pound gorilla in the room. If we 

do not do something about health care costs, we are doomed in 

terms of deficit reduction, and, frankly, in our ability to compete 

as a Nation against the rest of the world. 

And I said to him, when I had Q&A, I said, ‘‘Well, Dr. Blinder, 

what should we do about these health care costs?’’ And he said, ‘‘I 

am not an expert on this stuff, but my advice to you would be to 

just do as you said, find out what works, and do more of that.’’ 

Find out what works, and do more of that. So I think one of the 

things that works is going after waste and fraud. There is a number, I would mention maybe a half-dozen or so provisions in our 

legislation, and I would ask for the Governor and former Governor, 

the recovering Governor out here, to get into some thoughts about 

what the States are trying to do on the waste and fraud side that 

we can learn from you. 

But among the provisions in our legislation, there are about 15 

or so, maybe 20, that actually are pretty good ideas that enable us 

to do a better job at going after wasteful and fraudulent spending. 

But among the provisions, one is to enact stronger penalties for 

Medicaid fraud, and another is to establish stronger fraud and 

waste prevention strategies. Among those, we have in both Medicare and Medicaid this policy of pay-and-chase—pay-and-chase. We 

pay the money, then we go out and try to recover it, sometimes 2, 

3 years after the fact, and it is just impossible, almost impossible 

to do. 

So we are going to try to get off of pay-and-chase and take a 

stronger proactive approach. We want to curb the theft of physician 

22 

identities. We have too many physicians, dead physicians who are 

prescribing. It could be equipment, it could be medicines and that 

sort of thing, in some cases, for people who do not live and some 

of the prescriptions are going for controlled substances. All too 

often, they are going to people who simply use that money to feed 

the drug trade, and we end up spending money for that, spending 

taxpayer money for that. 

We have a bunch of ideas on deploying some cost-cutting technologies to better identify and to prevent fraud. 

My question to Governor Patrick: I was just in your State last 

weekend to visit my son, Christopher, and I had a chance to revisit 

where Christopher had gone to school, and it was really nice. We 

had a beautiful weekend. 

Governor Fletcher, my sister is one of your—I asked you if you 

knew my sister Sheila, and you said, ‘‘I know several Sheilas. I do 

not know if one of them is your sister.’’ She is out there in Winchester. 

But give us some thoughts on what the States are doing, maybe 

in Massachusetts and Kentucky, what the States are doing, successful anti-waste and fraud efforts that you might share with us. 

Think of the States as laboratories of democracy. 

Governor PATRICK. Well, first of all, Senator, let me thank you 

and congratulate you and your colleagues on the bill you proposed 

and the elements you described. The pay-and-chase is the classic 

way of recovering Medicare and Medicaid fraud. 

Our attorney general, who is an independent constitutional officer, has ramped up her own recovery initiatives, and we, through 

the budget, have supported her efforts with some additional resources to do that, and she is getting pretty good results. 

But you are right. There is a lag of a couple of years while that 

money has been out and paid out before it is recovered. 

I think that this question of dual-eligibles is a great big lowhanging fruit, and I think most people agree with that. It is 40 percent of the spending in the Medicaid budget right now, because we 

have two different agencies with two different sets of regulations 

dealing with the same person, and sometimes those regulations are 

in conflict. 

I am sure that Dr. Vladeck and Dr. Holtz-Eakin could give some 

more specific examples of that. But we are trying to unpeel all 

that, and, frankly, the Affordable Care Act has given us some tools 

we did not have before. We can get right at that. 

Senator CARPER. That is the idea. Good. 

Governor Fletcher? 

Governor FLETCHER. Obviously, it is very important. When I first 

took office, Kentucky was proud of the fact that their administrative cost percentages were very low, which meant all they did was 

process and pay claims. 

What we have begun to do is invest a lot more in administrative 

aspects to start evaluating the claims. Then we started looking— 

and you can see patterns when you start looking at treatment patterns, prescribing patterns of physicians. 

We hired nurses, we hired doctors to review cases. And when you 

see waste, fraud, and abuse, usually you will see someone, in order 

to make it profitable to them, they are churning a lot of people 

23 

through, and when you examine data, you can start looking at that 

and going after it. 

The other thing I think is important is, we are paying based on 

treating illness. It may be an odd way of going after waste, fraud, 

and abuse, but, if you pay for outcomes, you cannot fraudulently 

produce outcomes. And so I think as we shift—and certainly I 

agree with that aspect of the legislation to start looking and paying 

for outcomes, and that is what I was referring to, setting goals and 

guidelines. If we start doing that, that will reduce waste, fraud, 

and abuse. 

The other way we considered and looked at—and I am not sure 

currently what they are doing in Kentucky regarding this—but insurance companies have panels of physicians who are credentialed. 

They avoid waste, fraud, and abuse by making sure that the physicians who are providing their preferred coverage are those who 

have gone through certain requirements and credentialing. 

If we partnered in a public-private partnership with them, I 

think we could probably utilize a lot of the data they have and 

make sure that the physicians whom we are using are truly doing 

what they need to do. 

Senator CARPER. All right. Thank you very much for those 

thoughtful responses. 

The CHAIRMAN. Thank you, Senator. 

Next, Senator Rockefeller. 

Senator ROCKEFELLER. Thank you, Mr. Chairman. 

It is my own view that one should never have a hearing of this 

sort, let us say, on Medicaid and Medicare and cutting their costs, 

without saying entirely fairly that that has to be accompanied by 

increases in revenues, cuts in defense budgets, things of this sort. 

In other words, we have a habit in the Congress of saying, ‘‘Well, 

we are going to cut this, we are going to cut that,’’ without taking 

the larger view, what could make it maybe less possible for us to 

cut so much. 

Secondly, I would like to say to you, Dr. Holtz-Eakin, that you 

used the word ‘‘rationing’’ in terms of Medicare, the Independent 

Payment Advisory Board—which was a Republican idea and was 

passed in the late 1990s by the Congress, it was a Republican 

idea—what it does, I think, is the largest of all the cost savers, and 

that is, it aims at not having a fee-for-service business. 

The system now is that people come up here, they work the Congress like crazy, lobbyists making millions of dollars, they each 

pick on somebody whom they have a special relationship with, 

whether it is durable medical equipment or anesthesiology or anything else, they work the Congress. 

The Congress often does not know how to say no, and the Congress has a practice of never saying no, and so costs go up. And 

that is one of the reasons that you really do not want to have Congress make those decisions, therefore, on how reimbursement patterns work. 

You want to have the Gail Wilenskys and the Stuart Altmans 

and the Bruce Vladecks, et cetera, people who have broad health 

care policy experience, making those decisions. 

24 

The Congress does not like it at all, and that is very obvious, because they do not get to do the big connection with the lobbyists 

and all the rest of it. 

But the fee-for-service system is what drives up costs. You 

present your fee for the service which you have done; it is automatically paid for. How are you going to keep costs down on a system like that? 

So you have to go for this accountability, and that is what the 

Independent Payment Advisory Board is really going to look to, 

and we will save over $500 million dollars over the next 15 or 20 

years on Medicare costs. 

But in the law, it says you cannot reduce benefits at all nor can 

you increase copayments. So it is not the patient, the Medicare patient who gets hurt. It is the system which has to adjust and, 

therefore, they have to look at accountability—how good is it, how 

would it compare to 3 years ago, what about MRSA or bathrooms 

being cleaned? 

Everybody has to participate, and what you say, this is not the 

1990s, it is the next decade or two, I agree with you. So we have 

to change the way we think. Others were talking about how premium increases are going up so fast. Well, the public option did not 

work, so we tried something called a medical loss ratio. The medical loss ratio takes effect in 2012, and that says you have to spend 

85 percent of all—you can increase your premium all you want, but 

you have to spend 85 percent of it on health care results, health 

care that actually makes people better. 

To wit, if that had been in effect since 2010, it now being almost 

2012, there would have been rebates, because that is part of the 

law—if they do not spend it on health care, they have to rebate— 

they would have had to rebate already billions of dollars in the 2 

years that it has not been in effect. So there are lots of ways of 

doing that. 

I also wanted to say to Governor Patrick that I very much appreciate and identify with who you are and what you say. I am a very, 

very passionate advocate of Medicaid recipients, and that is a hard 

thing to find around here, because they do not have lobbyists, they 

do not vote, they do not contribute, and people do not know much 

about them. 

But people think it is only for poor people. Well, that is enough 

reason to have it. You have to have a safety net. That is what 

America is. You have to protect poor children, you have to protect 

poor families. It is not their fault, in most cases. 

So the concept of doing this is not just to protect the poor, but 

also to protect the middle class, and I want you to talk about that 

a little bit from your experience in Massachusetts. 

In other words, it is moms and dads as they get older, it is disabled children. There are a lot of people who are sitting in wheelchairs, as you often see in groups out in the halls, and they are 

being protected by something called Medicaid, but we are so quick 

to sort of get rid of it. Not talk about revenues, not talk about other 

things, but just talk about, ‘‘Oh, we are going to get rid of Medicaid,’’ which is the third-largest program in the Federal Government other than Social Security and the Department of Defense. 

How does it affect middle-income folks? 

25 

The CHAIRMAN. Very briefly, because the time is expiring. 

Governor PATRICK. Sorry, Mr. Chairman. Thank you, Senator 

Rockefeller. 

Probably the biggest way in which Medicaid at home cuts across 

all income groups involves people with disabilities who utterly rely 

on Medicaid and are frequently in that dual-eligibles case, in the 

case of those over 65. 

Senator ROCKEFELLER. Nine million people. 

Governor PATRICK. Exactly, and a whole lot of costs that can be 

captured. 

Senator ROCKEFELLER. Thank you. Thank you, Mr. Chairman. 

The CHAIRMAN. Thank you, Senator. 

Next, Senator Nelson? 

Senator Burr, I am sorry. Way out there in left field—or right 

field. [Laughter.] 

Senator BURR. I am easily forgotten. Thank you, Mr. Chairman. 

The CHAIRMAN. You are solidly recognized. 

Senator BURR. Governors, welcome. Bruce, great to see you; 

Doug, as always. 

And I have to admit, Governor Patrick, I was somewhat amazed, 

because most Governors come up here and they have a laundry list 

of changes they would like to see to health care plans. Yours was 

not a laundry list. 

So it compelled me to look at the experience that Massachusetts 

has, and what I found was the Federal participation in Massachusetts for Medicaid went from $5 billion in 2005 to $7.5 billion in 

2010. 

At the same time, the State’s share was $4.9 billion in 2005 and 

dropped to $4.7 billion in 2010. I can sort of understand why you 

are an advocate of it, because the Federal Government continues 

to pick up a larger and larger share of the health care costs of the 

Medicaid population. 

Bruce, really quickly. Should means-testing become part of the 

Medicare structure? 

Dr. VLADECK. We already means-test, in effect, very significantly 

on the revenue side of Medicare. To means-test it on the benefits 

side is both an administrative nightmare and I think is a move 

away from the fundamental—— 

Senator BURR. I take that as a ‘‘no.’’ 

Dr. VLADECK [continuing]. Social insurance. 

Senator BURR. I take that as a ‘‘no.’’ Do you agree that the creation of IPAB and empowering them to make reimbursement decisions was the right move? 

Dr. VLADECK. My understanding of the logic of IPAB, Senator, 

has a lot to do with the way in which the Congressional Budget Office and other budgetary scorekeepers look at the world, and I have 

real qualms about that. 

I am very sympathetic to Senator Rockefeller’s points. On the 

other hand, I am also familiar with the history of the Interstate 

Commerce Commission and other efforts historically of the Congress to delegate responsibility for setting prices when it felt itself 

politically unable to do so. 

26 

We have, in effect—at the moment, the U.S. Congress is the 

court of last resort on payment rates under Medicare to, I think, 

an excessively detailed degree. 

This is a very difficult problem in public administration, and I 

am not sure the IPAB is the right answer, but I am very sympathetic to the notion that the Congress has not distinguished itself 

particularly in that regard in recent years either. 

So I do not know quite what the exact right answer would be. 

Senator BURR. And I think the point Dr. Holtz-Eakin was saying 

was that, if you empower a body to set reimbursements, you have 

now empowered a body to affect the scope of coverage. 

Dr. VLADECK. I do not believe that. If you look at all of the effort 

both the Congress and CMS devote to changing reimbursement levels, providers always claim if you take a nickel out of their payment rates, people are not going to be able to get service. Ninetyeight percent of the time, those claims turn out to be wildly exaggerated. 

I can cite chapter and verse, Senator, in that regard. 

Senator BURR. Under Medicare, it is believed that 40 percent of 

primary care docs will not see a Medicaid beneficiary and that 70 

percent of specialists will not see a Medicaid beneficiary. 

Does that affect their outcome of care? 

Dr. VLADECK. Absolutely. Medicaid patients have great difficulty 

in access to care, in some communities more than others, and one 

can only imagine what would happen to those problems in a block 

grant situation. 

That is why CMS has finally, belatedly, issued regulations to 

begin to figure out how to define, let alone to enforce, the access 

provisions in the statute, and that is why many of us are so unhappy with the Obama administration’s position on the lawsuits to 

which several members have referred today. 

Senator BURR. Is the decision to see Medicaid patients, either by 

a primary care physician or by a specialist, because of the low reimbursements? 

Dr. VLADECK. Absolutely. 

Senator BURR. Do you agree that 40 percent of primary care physicians and 70 percent of specialists will not see—— 

Dr. VLADECK. I am always a little skeptical about those numbers, 

but in general, that is a very—they correctly define a very real 

problem. 

Senator BURR. The analysis published in the New England Journal of Medicine last week underscores how children on Medicaid 

are having a problem with access when seeking an appointment. 

Sixty-six percent of those who mentioned Medicaid or CHIP were 

denied appointments compared to those who said they had private 

insurance. It is real. 

I mean, this is the New England Journal of Medicine. I will end, 

because my time is up, but, Governor Patrick, you said in your testimony, and I quote, ‘‘Stick with what works.’’ 

I think the whole debate that we are having is does Medicare— 

does Medicaid, as currently constructed, work? To me, it is appalling that you could have a system where 40 percent of the primary 

care docs and 70 percent of the specialists say, ‘‘I have to tell you, 

27 

I am not making enough to see these kids.’’ That is an injustice to 

the kids. 

It is a flaw in the system. It cannot be something that is working, because all the information tells us it is not. My hope is that 

we will work aggressively to change it. 

I thank the chair. 

The CHAIRMAN. Thank you, Senator. 

Senator Nelson? 

Senator NELSON. Governor Patrick, thank you again for coming 

to Florida and making your presentation. Thank you very much. 

I want to ask Dr. Vladeck, and I am picking up on the chairman’s question here earlier. We are trying to find a solution here, 

and there is not a lot of agreement in the two sides that have been 

expressed here, and it is, unfortunately, typical of what is going on 

around here these days. 

But let me propose something, and tell me whether or not you 

think this would work. When you look through Medicare now on 

what seniors pay, there is this convoluted difference on different 

services. 

In some cases, you have a deductible; in other cases, you do not. 

In some cases, you have a co-pay; in other cases, you do not. 

What would be the effect if you had a uniform deductible and a 

uniform co-pay? 

Dr. VLADECK. Senator, I think that could be a very helpful thing. 

That would make life easier for beneficiaries and probably have a 

healthy effect on constraining the costs of the program. 

We ought to address, as part of the same set of arrangements, 

some limitation or ceiling on total out-of-pocket costs for Medicare 

beneficiaries, and the critical issue is to do it in a way that does 

not increase the total costs for beneficiaries or have a disproportionate impact on those who use the most services because they are 

in the least good health. 

But I think one could design a change in the structure of benefits 

and copayments in the Medicare program that would be budgetneutral in the short term and save the government money over the 

long term, without increasing the financial risk to beneficiaries, 

and I think that would be an excellent way to move forward. 

Senator NELSON. Tell me what you think—any of you—about our 

attempts to set up accountable care organizations in the health 

care bill. Do you think that this is going to work? 

Dr. HOLTZ-EAKIN. No. 

Senator NELSON. Dr. Holtz-Eakin says no. 

Dr. HOLTZ-EAKIN. We have seen the early returns on this already. There is a 400-page rule out there, and the institutions on 

which it was modeled will not touch it. 

Senator NELSON. And it is a proposed rule, and they are getting 

a lot of feedback from a number of us at this table, and, hopefully, 

it is going to be refined to be more workable. 

Does anybody think that an accountable care organization is 

going to work? 

Governor PATRICK. We do. I do not think it is going to be the sole 

solution. 

Excuse me, Dr. Vladeck. I did not mean to jump ahead of you. 

28 

We do not think it is going to be the sole solution, but it is a part 

of the solution, and there are examples of accountable care organizations today in Massachusetts that are working and have been 

shown to contain costs. 

But it is not enough all on its own. It is just an element of a 

more comprehensive solution. 

Governor FLETCHER. Senators, regardless of philosophy, party affiliation, we have to change the way we pay for health care. Everybody agrees to that. 

Whether the current structure of ACOs is going to work—I think 

there is a lot of question as to whether, obviously, these regulations 

are going to work at all. 

But we are going to have to transition, to begin to pay for integrated delivery of care. Right now, I will tell you, the structure, because of what the current reimbursement system has created out 

there, is very ill-prepared to accept the degree of risk management 

and integrated care that the current legislation asks for. 

We are going to have to do something. There is a model, eventually we will get there. I doubt that the current approach is going 

to work, though. 

Dr. VLADECK. If I could just second Governor Fletcher’s comments. This is one of those issues in which you have to give it time, 

and you need the willingness of the political system to give things 

time. 

Eventually, ACOs could make a major contribution to improving 

quality and controlling costs, but most of the delivery system is not 

yet ready. It is going to take 5 to 10 years just to get the information technology in place, even with all the support under the Recovery Act, that is necessary to effectively manage an accountable care 

organization. 

And I think if we can just figure out, as a matter of policy, how 

to help organizations make the transition and have institutionally 

the patience to let that happen, I think there is still very great 

promise here. 

Dr. HOLTZ-EAKIN. Just to be clear, and in the spirit of the chairman’s opening question to us, this is something about which all 

sides agree that there has to be a transformation of the delivery 

system to have integrated systems and much more care coordination and monitoring and managing of those, the chronic conditions. 

I deeply doubt that the approach taken under the Affordable 

Care Act will deliver that. But that does not mean that is not what 

we need and that there are not routes to get it. 

Senator NELSON. Well, how do you do that? I mean, the whole 

thing of ACOs plus electronic records is to try to get everybody coordinating with everybody so you do not have the duplication of all 

the services. 

Dr. HOLTZ-EAKIN. We have seen ACO-like entities emerge on 

business models of their own choosing, with their own ability to 

pick the providers and develop their own reimbursement systems, 

and that was a good thing. 

This is literally a 1-size-fits-all, put the hospitals in charge disaster. It is not going to work. 

I think, in the spirit of the opening question, there is agreement 

that we need to do a couple of things. Put these programs on budgVerDate Nov 24 2008 18:55 Nov 01, 2012 Jkt 000000 PO 00000 Frm 00032 Fmt 6633 Sfmt 6633 R:\DOCS\76282.000 TIMD
29 

ets. Make the resources scarce and valuable so that people treat 

them with the accord the taxpayers deserve. 

Drive more choices and drive the delivery system to integrate 

and coordinate better, and one vision of that is in the House budget 

in premium support, which would require the private sector to 

drive that innovation. 

A second would be to take something that looks like the current 

setup and put a budget constraint on it. And I at least think if we 

put a budget constraint on Medicare, allow those both to coexist 

and let people pick, I will place my bets on that. I know where the 

fee-for-service system would end up—out of business. 

Senator NELSON. Mr. Chairman, I will second what Dr. HoltzEakin has said. There is some concern with hospitals organizing 

ACOs, in which they are buying up doctors’ practices and that becomes the ACO, that then you have a monopoly. 

Now, you let a bunch of doctors organize an ACO outside of the 

hospital, then that might be a different thing. And, as we look at 

these regs, we ought to make sure that, independent of hospitals, 

they have an opportunity to flourish as an ACO. 

The CHAIRMAN. I agree that we should find ways to make them 

work, moving toward more integrated care. This is extremely complicated stuff, but I think we should not just close our minds, but 

just bona fide work with them so they can move better toward integrated managed and coordinated care so doctors and providers are 

focusing more on patients and less on fee-for-service. But I understand the budget parameters. It is a good idea, but let us work to 

make this thing work. 

Senator Grassley? 

Senator GRASSLEY. I am going to ask one short question of the 

Governors, but after I give a background for it. I will only ask for 

the expertise of the Governors, but I also raise these issues because, when it comes to block-granting or the issue that we are discussing about block-granting Medicaid or the possibility of doing 

that, there are a lot of tough questions that particularly people on 

my side of the aisle ought to think about in the process of doing 

that. 

And, of course, the issue is giving more flexibility to the States 

to do this, with the idea that we might get more for our money. 

But I think it is quite reasonable that Congress is not just going 

to hand over hundreds of billions of dollars to the States with no 

strings attached. 

Congress is going to require that the money be spent on health 

care and that they cannot spend money on roads, highways, and 

football stadiums. Congress is going to require States to spend the 

money on low-income individuals rather than higher-income individuals. 

So even under a block grant, a State Medicaid program will cover 

health care services for low-income individuals. 

What is unclear to me is what happens to current populations 

under Medicaid. Currently, States are required to cover children, 

pregnant women, the elderly, and the disabled. It is unclear what 

requirement States will be under if there is a Medicaid block grant. 

30 

The non-elderly, non-disabled populations can generally be covered through private insurance. The elderly receive their coverage 

primarily through Medicare. 

I am most concerned about the non-elderly disabled, particularly, 

disabled children. 

So my question to the two Governors is, do you think a State 

should have the flexibility to reduce coverage to the non-elderly disabled or not cover them at all? And by the words ‘‘non-elderly disabled,’’ I am talking about most of these people probably being born 

into disability. 

Governor FLETCHER. Senator Grassley, I think your passion for 

making sure we care for those most vulnerable in our society is 

shared by, I will say, every Governor regardless of what party. 

So I do think providing more flexibility to the individuals who 

have a similar compassion for people is a good thing to do, and it 

will bring some good results. 

Without strings, I agree with you, you are not going to send 

money down to the States without having certain requirements, 

guidelines, and other things. 

I think you can establish goals. I think States can be required 

to even establish their own goals for outcomes. 

On disability, clearly, if there are folks of certain levels that you 

feel need to be cared for, then that requirement can be attached as 

a string. What you find, though, is that, if you focused care on the 

most needy, the most ill, you would have the biggest impact on improving the quality of health in populations. 

That does mean that you have to look at caring for and focusing 

most on those who need it the most. 

If you had unlimited dollars, you could, obviously, cover everyone, and we would all not be here. But I do think that when you 

look at covering the most ill, that there are savings that have been 

proven that can come from that. That can allow you to cover more 

people in a better fashion. 

Senator GRASSLEY. Governor Patrick? 

Governor PATRICK. Senator Grassley, thank you for your question 

and, also, for your sensitivity. And I want to build on what Governor Fletcher has said about the efficacy of focusing on those who 

are most ill and, also, doing it in integrated ways. 

This is back to the question of how we get better care of a higher 

quality that is more cost-effective. And the ACOs, as we have been 

trying to develop them in Massachusetts, are along those lines. 

I think that the question of flexibility sometimes strikes me, 

frankly, Senator, when I hear some of my colleagues talk about it, 

as a bit of a canard, because there is a tremendous amount of flexibility we have been offered and we have utilized, under the Obama 

administration and the Bush administration, in our own health 

care reform to try to get at some of these new ways of delivering 

service and, frankly, also, paying for that service at a—getting better value for fewer dollars. 

Senator GRASSLEY. Thank you, Mr. Chairman. 

The CHAIRMAN. Thank you. 

Senator Cardin, you are next. 

31 

Senator CARDIN. Thank you, Mr. Chairman. And let me thank 

the panelists. Sorry I could not be here for the entire hearing. Secretary Clinton was before the Foreign Relations Committee. 

But now back to the domestic realities. I know there has been 

some exchange in regards to the merits or demerits of blockgranting Medicaid. 

Governor Fletcher, I understand you mentioned CareFirst. We 

appreciate the plug for CareFirst, which is based in our State. 

Let me just tell you one of the concerns I have. I have been in 

Congress long enough to know that, whenever we move towards 

block-granting, it is a code-word for reducing the Federal Government’s participation in a program. 

In many cases, it is a glide path to the elimination of the Federal 

Government’s participation in a program. We have seen that happen frequently in different areas. 

I look at the Medicaid program, I look at its importance in my 

own State. I look at our community health centers and know that, 

without the protection that we have currently on the reimbursement levels, which use a prospective payment system that allows 

for accumulated services to be covered in our community health 

centers, we would not have that safety net of facilities in Maryland 

that provide primary care to a large number of very vulnerable 

people. 

Now, I know my State is committed to doing that, but, if the 

pressures become great on its budget, would it be able to maintain 

that type of focus? 

We all want flexibility, but, if we do not have the structure at 

the national level to preserve the Medicaid program when tough 

budget decisions have to be made, will you be able to do this without a Federal partnership that is reliable and provides the resources to continue these basic services? 

Governor? Either Governor. 

Governor PATRICK. Senator, I want to just be as plain as possible. We are, in Massachusetts, one of only three States with a 

positive fiscal outlook, according to a host of studies. 

The forecasts are that block-granting Medicaid could cost Massachusetts $23 billion over 10 years. We cannot afford that, not without taking deeper cuts than we already have, thanks to the global 

economic collapse, in other essential services. 

That partnership that we have shared and that you refer to with 

the Federal Government is how we have been able to deliver health 

insurance to 98 percent of our residents. And it does not let us off 

the hook, and we have not viewed it as letting us off the hook to 

continue to look for ways to get more value for what we spend and 

how to spend less. 

I mentioned earlier it is a very, very important initiative of ours, 

and of mine in the second term, to get at the broader question of 

health care costs, which are, I think, a threat to our economic recovery not just in Massachusetts, but in the Nation. 

And some of the solutions that we have been talking about here, 

and on which there seems to be broad consensus, around integrated 

care and moving away from fee-for-service in favor of paying for 

outcomes or the quality of care, are ways to go. 

32 

The fact is at home, though we have a hybrid solution, a publicprivate solution, the market has not solved this on its own. The 

market has required a little nudge from us, a partnership with 

State Government. 

So I want to concur with the premise of your question. The blockgranting—well, let me make it more positive. 

The partnership with the Federal Government around Medicaid 

I think is essential to our meeting our commitment to care for the 

most vulnerable in our population. 

Senator CARDIN. Medicaid was intended to give the States the 

ability to make those types of innovations in health care, to give 

you the ability to set up delivery systems that could be costeffective, so that you could gain savings. If there are ways that we 

need to modify the program to allow that to continue to occur, that 

is something I think all of us are interested in making sure is 

maintained. 

Our concerns involve eligibility and service level, that, if we do 

not have Federal parameters there, then the chances of having adequate coverage in the future are questionable. 

Governor FLETCHER. Senator, it is good to see you again after 

serving in the House with you. 

Concerns about block grants, obviously, are real, but, if you look 

at establishing guidelines and even partnerships, as you may refer 

to them, whether it is community health centers or what have you, 

I think, again, there are guidelines, structures, outcome goals, 

those sorts of things that can be established with those. 

It kind of reminds me of the couple who were getting married, 

and the counselor told them, ‘‘Now, you can occasionally tell your 

spouse what to do or you can tell him how to do it, but you can’t 

tell him both.’’ And when you get that proscriptive, you really restrict how innovative the individuals are. 

Community health centers, yes, they are good. You need to look 

at the reimbursement that you are—I mean, it is quite a bit higher 

than what you are paying other folks, in most cases. They are on 

the one side, and we have worked with some, actually, we are expanding some of the care in a community health center in Kentucky. 

Their reimbursement often is on a cost-plus basis. There are a 

lot of grants that are available to them. So they receive a lot more 

money, and I am not sure that the outcomes there are measured 

and guidelines are given as well as they could be. 

So I do not think it means we cannot partner. It is just, give us 

some flexibility, incentivize innovation. 

Senator CARDIN. I need to at least point out on the record that 

community health centers handle an awful lot of uninsured patients, which helps us keep them out of emergency rooms. They 

provide a lot of preventive care, an outcome that would not otherwise be covered under their reimbursement levels, and they are a 

very small part of the Medicaid budget, yet they produce a great 

deal of savings in our system. 

If time remains, sir. 

Dr. HOLTZ-EAKIN. If I could just make one point. Your defense 

of the programs is laudable, and I understand that, but I just want 

to make the point that, going forward, the Federal Government is 

33 

not going to be a reliable partner. Once something changes, it is 

going to be broke. 

Senator CARDIN. Well, if we do not deal with our deficit, we are 

going to have a serious problem, there is no question about it, but 

that requires a comprehensive approach, and I think all of us 

would agree on that. 

I think we can do that, and we can bring down health care costs 

in this country in a way that does not jeopardize the reimbursements that we are currently making for poor, elderly, or disabled 

Americans. 

Dr. HOLTZ-EAKIN. My point is that, if we defend every aspect of 

the status quo with the same vigor, nothing will change, and we 

have a big problem. 

Senator CARDIN. We are in total agreement there. 

The CHAIRMAN. I was reading this morning some news that Majority Leader Cantor has withdrawn from the Vice President’s 

budget negotiations over revenue; that is, he does not want any 

revenue at all to be included in any budget deficit reduction package, and I am very disappointed over that. 

I believe Senator Hatch, someone up here, mentioned Admiral 

Mullen’s statement that the biggest national security threat we 

have is our huge budget deficits, and I agree with that. 

I think revenue is needed for a whole host of reasons. And more 

importantly, I think leadership is needed. Leadership is needed on 

both sides of the aisle and at both ends of Pennsylvania Avenue. 

We all worked together to get health care reform passed, and we 

are going to have to work together here to get our budget deficit 

reduced. 

The largest deficit reduction measures in the post-World War II 

era both had significant revenue increases. About one-half of the 

total amount of deficit reduction in each bill, each tax increase, reduced deficits by almost $1 trillion over 10 years, in today’s dollars, 

in the 1993 budget agreements. 

Second, you cannot ask folks who receive Federal benefits, 

whether Federal retirees, Medicare or Medicaid recipients, or farmers, to bear the sacrifice of deficit reduction alone. There has to be 

fairness and balance in the ultimate deficit reduction agreement. 

That means revenues must be included so that everyone is participating in addressing a critical national problem. 

My recollection is, too, that, in the last 10 years, 1 percent or 

maybe one tenth of 1 percent of Americans, after tax, had received 

about a 36–37 percent increase in revenue, disproportionate to the 

middle-income Americans who, frankly, are not participating at all. 

The gap between upper-income Americans and average Americans has been widening. It is not narrowing, it is widening. 

Third, I think we can raise revenues and have a positive economic outcome. Revenue increases in the 1990s gave us 23 million 

new jobs, the longest economic expansion in U.S. history, and a 

balanced budget. 

I have worked to lower taxes. I worked with Chuck Grassley to 

cut taxes in 2001. I supported that tax cut. We had a $5-trillion 

surplus projected back then. But today we are looking at $10 trillion in additional debt over the next 10 years, and I, therefore, believe that increased revenues have to be part of the solution. 

34 

I might also point out, in 1982, President Reagan signed a tax 

bill increasing revenues by about $800 billion over 10 years, in today’s dollars. 

I am disappointed that Leader Cantor has withdrawn. I think he 

should stay at the table. I think we should keep working, as difficult as it is, and find a balance between Medicare cuts, additional 

Medicare cuts, so long as there is commensurate additional revenue. We need a balance here. 

This is not the end of this matter, clearly. We have to keep working on it. But just in my view, very strongly held, to get that balance, there is going to have to be some revenue. 

Senator Hatch? 

Senator HATCH. Well, thank you, Mr. Chairman. And I appreciate you, and I do appreciate the chairman’s recent comments. 

But let me make this very simple point. Following the passage 

of the almost $1-trillion, now over $1-trillion stimulus, which most 

will agree was a spectacular failure, our national debt increased by 

26 percent. 

Now, I do not know what one can do or what I can do to get this 

message across that we have a spending problem. There is just no 

question about it. 

But having said that, let me just ask this question of our witnesses, both Governors here today. 

This fall, the Supreme Court will hear a case called MaxwellJolly v. Independent Living Center of Southern California, which 

could have dramatic implications for the States. 

The 9th Circuit determined that, ‘‘A plaintiff may bring suit 

under the supremacy clause to enjoin implementation of a State 

law allegedly preempted by Federal statute regardless of whether 

the Federal statute at issue confers an express ‘right’ or a cause 

of action on the plaintiff.’’ 

Now, in effect, the 9th Circuit’s decision would have given a private right of action against the States, which might substantially 

increase Medicaid costs for the States. 

In its May filing with the Supreme Court, the Obama administration’s Department of Justice took the opposite position from the 

9th Circuit, saying that Federal law does not confer a private right 

to action over the—and the language in the statute is, over the 

‘‘sufficient to enlist enough providers’’ provision. 

Let me just state that in a different way, because it is a tough 

question, and I would like to have both of your inputs on this. 

This fall, the Supreme Court is going to hear the Maxwell-Jolly 

case on whether the ‘‘sufficient to enlist enough providers’’ provision confers a private right of action in Medicaid. 

Now, I am very concerned about this case, because a private 

right of action would cause a very costly new wave of litigation for 

the States. Take it from me, as a former trial lawyer. 

Governors Patrick and Fletcher, do you agree with the Obama 

administration’s Justice Department that this should not be a private right of action in Medicaid, or do you not agree with it and, 

if not, why? 

We will start with you, Governor. We are old friends, and I appreciate you coming here today. 

35 

Governor PATRICK. Thank you. You were talking to me, I hope, 

Senator. 

Senator HATCH. Yes. [Laughter.] 

I do not agree with you, but we are good old friends. 

Governor PATRICK. Well, we have worked together, and I appreciate that. 

Senator HATCH. Yes, we have. 

Governor PATRICK. Senator, I know just a little bit about the 

case. I am not as deeply informed as your question suggests, but 

I am worried about what I hear. I am worried about the idea of 

a private right of action around Medicaid rates. 

I get the point that Medicaid rates are inadequate. I think, 

maybe when you were out of the hearing room, Senator Burr was 

raising the question about the concern, which I share, that in many 

cases—in some cases—Medicaid recipients are not able to see a 

specialist because the specialists are not interested in those rates. 

I am worried about that, but I am not sure that the problem is 

going to be solved through a private right of action. 

Senator HATCH. All right. I am also friends with Governor 

Fletcher. So I would like to hear your view. 

Governor FLETCHER. I agree with the opinion of the Obama administration’s Department of Justice, that I do not think that constitutes a cause of action. 

The ramifications of that, the cost to the State, and any Governor 

knows—a lawsuit is handed on your desk very frequently—the 

legal cost of that would continue to mount. 

The other thing is, it is my understanding that, if that same 

right of action is not there for patients through the Medicare program, that would have some right of action against the Federal 

Government. 

Now, I am not an attorney, but you would think that, if you were 

going to support it for one level of government, you would support 

it for another. 

Senator HATCH. I see. If the last two could comment, if you have 

any comment? 

Dr. VLADECK. Senator, I would just point out that there was a 

private right of action for providers and beneficiaries to enforce the 

Medicaid law against the States in Federal courts until the Supreme Court’s Gonzaga decision in 2002 overturned 100 years’ 

worth of jurisprudence. 

But from 1966 through 2002, there was a private right of action 

in the Medicaid program. Costs grew no faster during that period 

than they have in recent years or in future projections for costs. 

So the notion that it would have an impact on the costs of the 

Medicaid program for either the States or the Federal Government 

that would be more than a blip relative to what is already projected, it seems to me, is inconsistent with the historical record. 

Senator HATCH. Take it from me, Dr. Vladeck, we are living in 

a different age right now, and it is an age of litigation. And I guarantee you this would be one of the biggest boondoggles for attorneys that I have ever seen in my life. And the past really is not 

relevant. 

Thanks. 

The CHAIRMAN. Thank you, Senator. 

36 

Senator Wyden? 

Senator WYDEN. Thank you, Mr. Chairman. Mr. Chairman, I also 

want to commend you. I think this has been an excellent hearing. 

We have gotten a lot of important information out, and I commend 

you for it. 

Gentlemen, we have spent 2 hours, and we have been talking 

about copayments, we have been talking about premiums, and I 

want to make my last question a question about what you all believe we ought to do on the issue that really involves where all the 

money goes. 

As you know, where all the money goes is chronic care. And 

these numbers just take your breath away. There was one analysis 

that indicates something like 10 percent of the population consumes about 60 percent of health care costs, and then there is another that says 20 percent consumes about 80 percent, and that is 

where the money goes. 

That is where the money goes for Medicare, and that is where 

the money goes for the health care system as a whole. 

Now, through particularly Chairman Baucus’s support, we took 

some baby steps in the health reform bill to start getting care for 

those chronic patients at home. We got the Independence at Home 

program, but they really are baby steps. 

So every single night in America, every night, we have folks, 

older people, going in ambulances to hospital emergency rooms who 

could be treated at home and get a higher quality of life for less 

cost. 

And what I wanted to ask the two of you is, part of this issue 

of entitlement, cost control and ensuring that there is quality, do 

you not think that Congress ought to get back in and expand dramatically, dramatically, programs like Independence at Home and 

make a much more systematic and comprehensive effort to get 

chronic care to folks at home rather than in institutions? And, unless there is an effort to focus on this now—I think I was codirector of the Oregon Gray Panthers when Chairman Rockefeller 

was trying to do more on this question of care at home. 

So this is not going to get done unless there is a bipartisan effort 

to recognize that this issue has gotten short shrift for too long and 

it is absolutely essential to containing costs and increasing quality. 

And I thought I would wrap up with the two of you, Dr. Vladeck, 

and you, Dr. Holtz-Eakin. What are your thoughts on getting this 

country serious about addressing chronic care, particularly by getting folks out of institutional services and into home care? 

Dr. Vladeck, and then you, Doctor. 

Dr. VLADECK. Senator, I agree entirely with your principle, and 

I have been very much involved in seeking to get some of the provisions that speak to this in the Affordable Care Act into practice. 

I think we need to expand the programmatic opportunities, but 

I think there is something else that needs to be done, as well, if 

I may. 

One of the major barriers to improving the system for the chronically ill in the ways you are discussing is, we have a terrible shortage of expertise and competence among our health care professionals on how to do this. 

37 

Physicians, most physicians have never made a house call, and 

they did not get training in house calls during their residencies or 

when they were medical students. 

As we have dealt with budgets over the last decades, we have 

shaved and shrunken our appropriated support for a whole variety 

of important potential activities, such as the training of physicians 

and the training of nurses and the training of other health professionals, and, if we are going to build the system that addresses 

the needs of the chronically ill more effectively and more costeffectively, we are going to need health care professionals who 

know how to do it. 

And, without some additional help from the Federal Government, 

that will not happen nearly quickly enough. 

Dr. HOLTZ-EAKIN. I want to endorse the focus. There is no question about it. That is where the money is. I want to endorse the 

notion that Medicare is the right Federal policy place to drive delivery system changes. 

And there is lots of disagreement on both sides of the aisle about 

what those policy levels should be, but I do not think there is any 

disagreement that Medicare has a tremendous capacity to change 

the way we deliver health care and, in particular, the management 

of chronic diseases, whether or not you do it within the current 

structure, where you would have to somehow engage the home 

health community in efforts to avoid inpatient stays and after discharge, readmissions. 

They have to be part of that conversation, and the programs 

have to give them incentives to do that. So, bundling across those 

sort of silos would be an improvement in the current system or 

more dramatic reforms that put the money in the hands of beneficiaries and said, ‘‘Look, coordinate my care, take care of me, keep 

me out of the hospital.’’ 

But something has to happen, and I agree it should be bipartisan, because the sad reality is, if it is not, it will not be durable, 

and we need big fixes that last. 

Senator WYDEN. That was my point. And my time is up, Mr. 

Chairman. I thank you for this extra question. 

I hope the two of you, in particular—because, if there is not a 

new effort to generate political will on this, we will be back here 

in 10 years talking about exactly the same thing that Senator 

Rockefeller was trying to get us focused on literally 3 decades ago. 

The CHAIRMAN. Senator Rockefeller? 

Senator WYDEN. Thank you. 

Senator ROCKEFELLER. Let me make three points. One, Dr. 

Holtz-Eakin, the idea that they voted to privatize Medicare, they 

have backed off from that. The 26th District of New York somehow 

had an amazing effect, and now they are not talking about it, but 

they voted for that. 

So you get this very interesting thing of where Republicans—and 

this sounds political, but I am really not feeling that. They are trying to privatize Medicare, hand it over to the whims of the private 

health insurance companies, but they are opposing IPAB. 

Now, let me explain what I mean. The average senior citizen 

makes $22,000. If Medicare was somehow privatized, they would 

38 

have to spend $6,400 more than they currently do to go out and 

buy health insurance. They cannot do that. So it will not work. 

Now, let me go to IPAB. Dr. Bruce Vladeck, I am an enormous 

fan of yours. It seems like 3 weeks ago that you were here. But I 

am going to win you over to IPAB if it is the last—if I have to 

come—where are you living? You are living in Boston? 

Dr. VLADECK. New York. 

Senator ROCKEFELLER. New York. [Laughter.] 

Well, that is good. I will be up to see you. But let me give you 

an example. What I think one of our main problems is in this 

whole discussion of not just health care, but in general, is that the 

solutions are enormous and complicated and take an enormous 

amount of time. You made that point. 

We cover 32 million people in Senator Baucus’s Affordable 

Health Care Act, but we did not do it until 2020, because we did 

not have the money. 

Well, we do not have any money now, but there is going to come 

a day when we do. Our problem is that we treat potential solutions 

in health care on, like, a short-term basis. We are going to react 

as we would to, ‘‘Oh, you are going to take away my highway, are 

you? Well, I am going to fight you.’’ 

In other words, you have to sort of stand back and say this is 

going to be a 15- to 20-year process and it is not just about Medicare or Medicaid, it is about what is going to work for the longterm. 

So my statement about IPAB: I had 30 major hospital directors 

in my office for an hour and a half as they clobbered me over the 

concept of the Independent Payment Advisory Board, which, as I 

say, was a Republican idea. 

Then all of a sudden, I used two of the people I talked to about 

it, and I said to one of them, ‘‘Well, wait a second now. You do not 

trust the Congress, but you get a lot of money from them, probably 

more than you should. We know you have to save money. You 

know that system is not a really good one. You come here and you 

meet and you have your hospital association meetings or whatever 

meetings, and you have to get a good speech from a Republican and 

get a good speech from a Democrat, then you spend the next 3 days 

going up on the Hill and trying to ratchet all the money you can 

out of every single person whom you are assigned to go see. This 

is not called a solution for lowering health care costs.’’ 

And then I said, ‘‘Well, what if IPAB, the membership, were 

made up of people like Gail Wilensky or Stuart Altman, a lot of 

this generation?’’ And, they said ‘‘Oh, that would be fine.’’ 

In other words, there is the prejudice, the hunkering down, the 

prejudice that any change in patterns and habits would lead us 

astray and would not be to their advantage as opposed to somebody 

who really, like yourself, who really knows this stuff and who can 

postulate on it and make wise decisions. 

Now, next question. There would have to be a bureaucracy. So 

they have to trade off. There is a bureaucracy to make sure that 

you are really doing the right thing on reimbursing anesthesiologists as opposed to pediatricians and all the rest of it. 

39 

Yes, there would have to be. So we need to adjust to that, because the tradeoff is, do we solve the problem for the future or do 

we simply make short-term counter-punches? 

Final point—and this is really radical. But you have all talked 

about people, doctors not wanting to serve Medicaid patients. I 

have a lot of experience, and we all do, with people trained to be 

geriatricians, but then they do it for 2 years, but they just cannot 

make any money there, because of their debts, which are huge, 

from medical education. 

So they go into some other higher-paying specialty. One thing to 

think about, and this will not happen for 15 or 20 years, at best, 

and we would have to be a very healthy economic country: if you 

want people to follow their real instincts, a lot of them want to be 

primary care doctors in very rural areas. They want to be geriatricians, but they cannot afford to be. 

So you know what you do? You pay for their education, and it only costs a couple billion dollars a year, $3 billion or $4 billion a 

year. We cannot do that now. But just think about that. That 

would solve a whole series of questions which we are not addressing and we cannot address now. 

So I will end just by saying we have to think large. I am going 

to fight for Medicaid, Governor. 

The CHAIRMAN. I am sorry. We are going to have to end this 

hearing. Speaking of thinking large, that concept is a very big one. 

Senator ROCKEFELLER. I will end on that. 

The CHAIRMAN. Good way to end this hearing. I might say, some 

countries do pay for education, medical education. Some other 

countries do. 

Thank you, Senator. The hearing is adjourned. 

[Whereupon, at 12:11 p.m., the hearing was concluded.] 

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