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EXAMINING LEGISLATION TO IMPROVE MEDICARE 

AND MEDICAID 

HEARING 

BEFORE THE

SUBCOMMITTEE ON HEALTH 

OF THE

COMMITTEE ON ENERGY AND 

COMMERCE 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED FOURTEENTH CONGRESS 

FIRST SESSION 

NOVEMBER 3, 2015 

Serial No. 114–98 

( 

Printed for the use of the Committee on Energy and Commerce 

energycommerce.house.gov 

COMMITTEE ON ENERGY AND COMMERCE 

FRED UPTON, Michigan 

Chairman 

JOE BARTON, Texas 

Chairman Emeritus 

ED WHITFIELD, Kentucky 

JOHN SHIMKUS, Illinois 

JOSEPH R. PITTS, Pennsylvania 

GREG WALDEN, Oregon 

TIM MURPHY, Pennsylvania 

MICHAEL C. BURGESS, Texas 

MARSHA BLACKBURN, Tennessee 

Vice Chairman 

STEVE SCALISE, Louisiana 

ROBERT E. LATTA, Ohio 

CATHY MCMORRIS RODGERS, Washington 

GREGG HARPER, Mississippi 

LEONARD LANCE, New Jersey 

BRETT GUTHRIE, Kentucky 

PETE OLSON, Texas 

DAVID B. MCKINLEY, West Virginia 

MIKE POMPEO, Kansas 

ADAM KINZINGER, Illinois 

H. MORGAN GRIFFITH, Virginia 

GUS M. BILIRAKIS, Florida 

BILL JOHNSON, Ohio 

BILLY LONG, Missouri 

RENEE L. ELLMERS, North Carolina 

LARRY BUCSHON, Indiana 

BILL FLORES, Texas 

SUSAN W. BROOKS, Indiana 

MARKWAYNE MULLIN, Oklahoma 

RICHARD HUDSON, North Carolina 

CHRIS COLLINS, New York 

KEVIN CRAMER, North Dakota 

FRANK PALLONE, JR., New Jersey 

Ranking Member 

BOBBY L. RUSH, Illinois 

ANNA G. ESHOO, California 

ELIOT L. ENGEL, New York 

GENE GREEN, Texas 

DIANA DEGETTE, Colorado 

LOIS CAPPS, California 

MICHAEL F. DOYLE, Pennsylvania 

JANICE D. SCHAKOWSKY, Illinois 

G.K. BUTTERFIELD, North Carolina 

DORIS O. MATSUI, California 

KATHY CASTOR, Florida 

JOHN P. SARBANES, Maryland 

JERRY MCNERNEY, California 

PETER WELCH, Vermont 

BEN RAY LUJA ́ N, New Mexico 

PAUL TONKO, New York 

JOHN A. YARMUTH, Kentucky 

YVETTE D. CLARKE, New York 

DAVID LOEBSACK, Iowa 

KURT SCHRADER, Oregon 

JOSEPH P. KENNEDY, III, Massachusetts 

TONY CA ́ RDENAS, California7 

SUBCOMMITTEE ON HEALTH

JOSEPH R. PITTS, Pennsylvania 

Chairman 

BRETT GUTHRIE, Kentucky 

Vice Chairman 

ED WHITFIELD, Kentucky 

JOHN SHIMKUS, Illinois 

TIM MURPHY, Pennsylvania 

MICHAEL C. BURGESS, Texas 

MARSHA BLACKBURN, Tennessee 

CATHY MCMORRIS RODGERS, Washington 

LEONARD LANCE, New Jersey 

H. MORGAN GRIFFITH, Virginia 

GUS M. BILIRAKIS, Florida 

BILLY LONG, Missouri 

RENEE L. ELLMERS, North Carolina 

LARRY BUCSHON, Indiana 

SUSAN W. BROOKS, Indiana 

CHRIS COLLINS, New York 

JOE BARTON, Texas 

FRED UPTON, Michigan (ex officio) 

GENE GREEN, Texas 

Ranking Member 

ELIOT L. ENGEL, New York 

LOIS CAPPS, California 

JANICE D. SCHAKOWSKY, Illinois 

G.K. BUTTERFIELD, North Carolina 

KATHY CASTOR, Florida 

JOHN P. SARBANES, Maryland 

DORIS O. MATSUI, California 

BEN RAY LUJA ́ N, New Mexico 

KURT SCHRADER, Oregon 

JOSEPH P. KENNEDY, III, Massachusetts 

TONY CA ́ RDENAS, California 

FRANK PALLONE, JR., New Jersey (ex 

officio) 

(II) 

(III) 

C O N T E N T S 

Page 

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

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

Prepared statement .......................................................................................... 3 

Hon. Gene Green, a Representative in Congress from the State of Texas, 

opening statement ................................................................................................ 3 

Prepared statement .......................................................................................... 5 

Hon. Brett Guthrie, a Representative in Congress from the Commonwealth 

of Kentucky, opening statement ......................................................................... 6 

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

New Jersey, prepared statement ........................................................................ 68 

WITNESSES

Hon. Lynn Jenkins, a Representative in Congress from the State of Kansas .... 7 

Prepared statement .......................................................................................... 10 

Katherine M. Iritani, Director, Health Care, Government Accountability Office ......................................................................................................................... 12 

Prepared statement .......................................................................................... 15 

Anne L. Schwartz, Ph.D., Executive Director, Medicaid and CHIP Payment 

and Access Commission ....................................................................................... 37 

Prepared statement .......................................................................................... 39 

Answers to submitted questions ...................................................................... 105 

SUBMITTED MATERIAL

H.R. 2878, Section 1 of Public Law 113–98 Amended, submitted by Mr. 

Pitts ....................................................................................................................... 70

H.R. [1362], the Medicaid REPORTS Act, submitted by Mr. Pitts ..................... 72 

H.R. 2151, the Improving Oversight and Accountability in Medicaid NonDSH Supplemental Payments Act, submitted by Mr. Pitts ............................. 76 

H.R. [1361], Section ll Amended, submitted by Mr. Pitts ............................... 81 

Discussion Draft, H.R. lll, the Quality Care for Moms and Babies Act, 

submitted by Mr. Pitts ......................................................................................... 83 

Statement of American College of Obstetricians and Gynecologists, November 

3, 2015, submitted by Mr. Pitts .......................................................................... 104 

(1) 

EXAMINING LEGISLATION TO IMPROVE 

MEDICARE AND MEDICAID 

TUESDAY, NOVEMBER 3, 2015 

HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON HEALTH, 

COMMITTEE ON ENERGY AND COMMERCE, 

Washington, DC. 

The subcommittee met, pursuant to call, at 10:15 a.m., in room 

2322 Rayburn House Office Building, Hon. Joseph R. Pitts (chairman of the subcommittee) presiding. 

Members present: Representatives Pitts, Guthrie, Shimkus, 

Blackburn, Lance, Griffith, Bilirakis, Long, Bucshon, Brooks, Collins, Green, Castor, Sarbanes, Schrader, Kennedy, and Pallone (ex 

officio). 

Also present: Representative Loebsack. 

Staff present: Clay Alspach; Chief Counsel, Health; Rebecca 

Card, Assistant Press Secretary; Karen Christian, General Counsel; Graham Pittman, Legislative Clerk; Michelle Rosenberg, GAO 

Detailee, Health; Chris Sarley, Policy Coordinator, Environment 

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

Trent, Professional Staff Member, Health; Christine Brennan, 

Democratic Press Secretary; Jeff Carroll, Democratic Staff Director; 

Tiffany Guarascio, Democratic Deputy Staff Director and Chief 

Health Advisor; Rachel Pryor, Democratic Health Policy Advisor; 

Samantha Satchell, Democratic Policy Analyst; and Arielle 

Woronoff, Democratic Health Counsel. 

Mr. PITTS. OK. I will ask our guests to please take their seats, 

and the subcommittee will come to order. The Chair will recognize 

himself for an opening statement. 

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

OF PENNSYLVANIA 

Today’s hearing will examine five bipartisan legislative bills designed to make commonsense improvements to the Medicare and 

Medicaid programs. 

First, the committee is happy to have with us one of our own colleagues, Representative Lynn Jenkins from Kansas. Representative 

Jenkins will be testifying on our first panel about a bill she is sponsoring, H.R. 2878. 

This bill would simply prohibit Medicare contractors from enforcing supervision requirements for outpatient therapeutic services 

and critical access in small rural hospitals for another year. 

2 

The Senate companion to this bill was approved by the Senate 

Finance Committee in June, so we are pleased to be able to review 

this bill today. 

On our second panel, we will hear from representatives of the 

Government Accountability Office, GAO, and the Medicaid and 

CHIP Payment and Access Commission, MACPAC. 

GAO and MACPAC will help us in our review of four bipartisan 

bills to improve Medicaid. The first Medicaid bill is an updated 

version of H.R. 1362, the Medicaid REPORTS Act, by Vice Chairman Guthrie. 

This bill seeks to address GAO and MACPAC findings that the 

Centers for Medicare and Medicaid Services, CMS, does not collect 

accurate and complete data from all States on the various sources 

of funds to finance the non-Federal share. 

This bill requires States to submit a report at least once a year 

on sources of funds used to finance the non-Federal share of expenditures in the Medicaid program. 

This issue is important policy because State financing approaches affect Medicaid payment methodologies and payment 

amounts, which may affect enrollees’ access to services. 

The next Medicaid bill is H.R. 2151, sponsored by our colleague, 

Representative Chris Collins, the Improving Oversight and Accountability in Medicaid Non-DSH Supplemental Payments Act, 

would improve the calculation, oversight, and accountability of nonDSH supplemental payments under the Medicaid program. 

This is important because GAO founds gaps in Federal oversight 

of high-risk supplemental payments including a lack of information 

on the providers receiving them, inaccurate payment calculation 

method and a lack of assurances the payments were used for Medicaid purposes. 

In 2014, MACPAC recommended that the HHS collect, and make 

publically available, provider-label non-DSH supplemental payment 

data in a standard format that enables analysis. 

Thirdly, the updated version of H.R. 1361, Medicaid Home Improvement Act, sponsored by Representative Guthrie, would establish a Federal cap on the home equity allowance consistent with 

the current Federal default of $552,000. 

This bill would preserve existing beneficiary protections but help 

protect taxpayers by updating the limit of allowable equity interest 

a beneficiary can have in their home. This is a commonsense step 

to prevent cost shifting from the private to the public sector. 

And finally, the Quality Care for Moms and Babies Act, sponsored by Representatives Engel and Stivers, seeks to improve the 

quality, health outcomes, and value of maternity care under the 

Medicaid and CHIP programs by developing maternity care quality 

measures. 

This bill would authorize the appropriations of $16 million for 

HHS to identify and publish quality measures for maternal and infant health. 

Together, these five bills continue the commitment that this Congress has to strengthen the Medicare and Medicaid programs to 

help sustain these important safety net programs for those most relying on them. 

3 

I want to thank all of our witnesses for agreeing to testify today, 

and I yield back and now recognize the ranking member of the subcommittee, Mr. Green, 5 minutes for his opening statement. 

[The legislation appears at the conclusion of the hearing.] 

[The prepared statement of Mr. Pitts follows:] 

PREPARED STATEMENT OF HON. JOSEPH R. PITTS

The subcommittee will come to order. 

The chairman will recognize himself for an opening statement. 

Today’s hearing will examine five bipartisan legislative bills designed to make 

common-sense improvements to the Medicare and Medicaid programs. 

First, the committee is happy to have with us one of our own colleagues, Representative Lynn Jenkins from Kansas. Representative Jenkins will be testifying on 

our first panel about a bill she is sponsoring, H.R. 2878. This bill would simply prohibit Medicare contractors from enforcing supervision requirements for outpatient 

therapeutic services in critical access and small rural hospitals for another year. 

The Senate companion to this bill was approved by the Senate Finance Committee 

in June, so we are pleased to be able to review the bill today. 

For our second panel, we will hear from representatives of the Government Accountability Office (GAO) and the Medicaid and CHIP Payment and Access Commission (MACPAC). GAO and MACPAC will help us in our review of four bipartisan 

bills to improve Medicaid. 

The first Medicaid bill is an updated version of H.R. 1362, the Medicaid REPORTS Act, by Vice Chairman Guthrie. This bill seeks to address GAO and 

MACPAC findings that the Centers for Medicare and Medicaid Services (CMS) does 

not collect accurate and complete data from all States on the various sources of 

funds to finance the non-Federal share. This bill requires States to submit a report 

at least once a year on sources of funds used to finance the non-Federal share of 

expenditures in the Medicaid program. This issue is important policy because State 

financing approaches affect Medicaid payment methodologies and payment amounts, 

which may affect enrollees’ access to services. 

The next Medicaid bill is H.R. 2151, sponsored by our colleague, Rep. Chris Collins. The ‘‘Improving Oversight and Accountability in Medicaid Non-DSH Supplemental Payments Act’’ would improve the calculation, oversight, and accountability 

of non-DSH supplemental payments under the Medicaid program. This is important 

because GAO found gaps in Federal oversight of high-risk supplemental payments, 

including a lack of information on the providers receiving them, inaccurate payment 

calculation method, and a lack of assurances the payments were used for Medicaid 

purposes. In 2014, MACPAC recommended that the HHS collect and make publicly 

available provider-level non-DSH supplemental payment data in a standard format 

that enables analysis. 

Thirdly, the updated version of H.R. 1361, Medicaid HOME Improvement Act 

-sponsored by Rep. Guthrie-would establish a Federal cap on the home equity allowance consistent with the current Federal default of $552,000. This bill would preserve existing beneficiary protections, but help protect taxpayers by updating the 

limit of allowable equity interest a beneficiary can have in their home. This is a 

common-sense step to prevent cost-shifting from the private to the public sector. 

Finally, the Quality Care for Moms and Babies Act, sponsored Reps. Engel (NY) 

and Stivers (OH) seeks to improve the quality, health outcomes, and value of maternity care under the Medicaid and CHIP programs by developing maternity care 

quality measures. This bill would authorize the appropriation of $16 million for 

HHS to identify and publish quality measures for maternal and infant health. 

Together these five bills continue the commitment this Congress has to strengthen the Medicare and Medicaid programs to help sustain these important safety net 

programs for those most relying on them. 

I want to thank our witnesses for agreeing to testify today. I will yield to anyone 

on my side seeking time. 

OPENING STATEMENT OF HON. GENE GREEN, A 

REPRESENTATIVE IN CONGRESS FROM THE STATE OF TEXAS 

Mr. GREEN. Thank you, Mr. Chairman, and welcome our colleague from Kansas. Thank you for being here today. 

4 

We are here to examine five legislative proposals. One impacts 

the Medicare Part B program and the others affect the Medicaid 

program. As we know, the Medicaid program has served as a critical safety net for the American public since its creation on 1965, 

50 years ago this year. 

Today, over 70 million low-income Americans rely on Medicaid 

for comprehensive affordable health care. Medicaid covers more 

than one in three children, pays for nearly half of all births and 

accounts for more than 40 percent of the Nation’s total cost for 

long-term care. 

One in seven Medicare beneficiaries is also a Medicaid beneficiary—dual eligible. The Quality Care for Moms and Babies Act, 

the discussion and draft put forth by Reps. Engel and Stivers, will 

improve health outcomes for women and children who depend on 

Medicaid. 

This legislation will authorize funding for HHS to develop quality 

measures for maternal and infant health and award grants related 

to care quality and I support this important legislation. 

I am concerned about the other legislation we are considering, 

such as the Medicaid REPORTS Act and proposals requiring additional auditing on States that are overly burdensome, proscriptive, 

and likely intended to chip away at the Medicaid program. 

Additional transparency on Medicaid payments is a goal we all 

share. My priority is always including ensuring Medicaid beneficiaries have access to the care that they need by supporting providers that serve beneficiaries who otherwise have nowhere else to 

go for the necessary care. 

However, these bills as structured will not achieve our goal of 

fully understanding Medicaid payments and whether these payments are adequate to guarantee equal access for beneficiaries 

within the Medicaid program. 

My State of Texas uses supplemental and Medicaid DSH payments in a unique way. These sources of funding are an incredible 

and important revenue stream for hospitals and providers that 

serve a large portion of Medicaid beneficiaries and the uninsured. 

For example, in Texas supplemental payments are used for 

DSRIP and I want to make sure we maintain the flexibility so CMS 

and States can deliver each Medicaid program the best way for its 

unique patient base. 

Providers in a Medicaid program must be paid a fair rate. Given 

the complexities and the 56 distinct Medicaid programs, there is a 

nuanced way to address these issues. 

The question you need to ask is its full payment that a provider 

receives for treating a Medicaid enrollee fair and sufficient to ensure equal access. 

Unfortunately, legislation like Medicaid REPORTS Act, H.R. 

2125, won’t get us the information we need to see the full picture 

and it may actually put more burdens on the States. They are not 

in line with the actions CMS has taken to improve in the area and 

I look forward to learning more about this complex issue. 

Reforms done for the right reasons and nuance in an intelligence 

way can truly improve how CMS ensures that payments to Medicaid providers are sufficient and enforce equal access to Medicaid 

beneficiaries. 

5 

Such proposals should be a priority for our committee and I look 

forward to a comprehensive discussion on ways we can improve 

transparency, strengthen coverage and expand access to providers 

and increase the quality of health care. 

[The prepared statement of Mr. Green follows:] 

PREPARED STATEMENT OF HON. GENE GREEN

Good morning and thank you all for being here today. We are here to examine 

five legislative proposals. One impacts the Medicare Part B program and the others 

affect the Medicaid program. 

As we know, the Medicaid program has served as a critical safety net for the 

American public since its creation in 1965, 50 years ago this year. 

Today, over 70 million low-income Americans rely on Medicaid for comprehensive, 

affordable health insurance. 

It is a lifeline for millions of children, pregnant women, and people with disabilities, seniors, and low-income adults. 

Medicaid covers more than 1 in 3 children, pays for nearly half of all births, and 

accounts for more than 40 percent of the Nation’s total costs for long-term care. 

One in 7 Medicare beneficiaries is also a Medicaid beneficiary. 

The Quality Care for Moms and Babies Act, a discussion draft put forth by Representatives Eliot Engel and Steve Stivers, would improve health outcomes for the 

women and children who depend on Medicaid. 

This bipartisan legislation builds on the Pediatric Quality Measures Program, 

which is the only program targeting quality performance measurement reporting in 

the Medicaid and CHIP programs. 

Remarkably, it does not currently include a maternal and infant quality core set. 

This legislation will authorize funding for HHS to develop quality measures for 

maternal and infant health, and award grants related to care quality. I support this 

important legislation. 

I am concerned about other legislation we are considering, such as the Medicaid 

REPORTS Act and proposals requiring additional auditing on States that are overly 

burdensome, prescriptive, and likely intended to further chip away at the Medicaid 

program. 

Additional transparency on Medicaid payments is a goal we all share. 

My priorities have always included ensuring Medicaid beneficiaries have access 

to the care that they need by supporting providers that serve beneficiaries, who 

would otherwise have nowhere else to go for necessary care. 

However, the way these bills are structured will not achieve our goal of a full understanding of Medicaid payments, and whether those payments are adequate to 

guarantee equal access for beneficiaries within the Medicaid program. 

My State of Texas uses supplemental and Medicaid DSH payments in unique 

way. 

These sources of funding are an incredibly important revenue stream for hospitals 

and providers that serve a large portion of Medicaid beneficiaries and the uninsured. 

For example, in Texas, supplemental payments are used for the DISRIP (‘‘disrip’’), and I want to be sure we maintain that flexibility so CMS and States can deliver each Medicaid program in the best way for each unique patient base. 

Providers in the Medicaid program must be payed fair rate. 

Given the complexities and the 56 distinct Medicaid programs, there is a nuanced 

way to address these issues. 

The question we need to be asking is, ‘‘is the full payment that a provider receives 

for treating a Medicaid enrollee fair and sufficient to ensure equal access?’’ 

Unfortunately, legislation like the Medicaid REPORTS Act and H.R. 2125 won’t 

get us the information we need to see the full picture and may actually put more 

burdens on States. 

And, they are not in line with actions CMS has taken to improve in this area. 

I look forward to learning more about this complex issue. 

Reforms done for the right reasons, in a nuanced and intelligent way, can truly 

improve how CMS ensures that payments to Medicaid providers are sufficient and 

enforce equal access for Medicaid beneficiaries. 

Such proposals should be a priority for this committee, and I look forward to a 

comprehensive discussion on ways to improve transparency, strengthen coverage, 

expand access to providers, and increase the quality of care. 

Thank you, Mr. Chairman. 

6 

Mr. GREEN. And Mr. Chairman, I will yield the remainder of my 

time to my colleague from Iowa, Dave Loebsack. 

Mr. LOEBSACK. I thank Mr. Green for yielding. 

I also want to thank my colleague, Congresswoman Jenkins, for 

testifying here today on our bill. I am happy to be the lead Democratic cosponsor of H.R. 2878. 

It has been a pleasure to work with her on this issue. As a native 

Kansan, she truly understands the needs of rural Americans and 

I thank her for her bipartisan work on the bill. 

Basically, what 2878 would do is suspend the physician direct supervision requirement for outpatient therapeutic services furnished 

at critical access hospitals and small rural hospitals until January 

of 2016. 

I often visit critical access hospitals in my district. There are 

many, given that I represent rural Iowa, and the number-one concern I have heard about recently was this direct supervision issue. 

In 2009, CMS issued a rule that mandated direct supervision for 

all outpatient therapeutic services at these hospitals. 

In response to concerns over the implementation of this policy 

they delay the enforcement through 2013, which was extended by 

Congress to 2014. 

Direct supervision requires that a physician is immediately available when the service is provided. This is difficult in many of these 

rural settings. 

Many outpatient services such as continued chemotherapy, administration of IV fluids or drawing of blood can be safely administered under general supervision, a fact that CMS itself recognized 

in its delay of the policy. 

Further, small rural hospitals often face staffing and workforce 

shortages that make direct supervision of these services incredibly 

difficult. 

There are a lot of challenges facing our rural hospitals, as you 

know all too well, Congresswoman Jenkins. This legislation, I 

think, would go some distance to remedying at least one of those 

issues facing them and I thank you for introducing this legislation. 

I am happy to be a part of it, and I yield back. 

Thank you. 

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

vice chair of the subcommittee, Mr. Guthrie, 5 minutes for an opening statement. 

OPENING STATEMENT OF HON. BRETT GUTHRIE, A REPRESENTATIVE IN CONGRESS FROM THE COMMONWEALTH 

OF KENTUCKY 

Mr. GUTHRIE. Thank you, Mr. Chairman, and I appreciate my 

classmate from the 2008 class coming in, being here with us this 

morning, Ms. Jenkins. 

But thank you, and I appreciate you holding this hearing on the 

number of important bills. Today, the committee is examining two 

bills that I introduced—H.R. 1361, the Medicaid Home Improvement Act, and H.R. 1362, the Medicaid REPORTS Act. 

These are both good Government bills that help strengthen the 

Medicaid program and protect valuable taxpayer dollars. H.R. 

1361, the Medicaid Home Improvement Act, caps the maximum alVerDate Mar 15 2010 11:17 May 24, 2016 Jkt 037690 PO 00000 Frm 00010 Fmt 6633 Sfmt 6633 C:\USERS\WLAUFERT\DESKTOP\114X98MEDICAREMEDICAIDPENDING WAYNE
7 

lowable equity for beneficiaries to qualify for long-term care under 

Medicaid. 

Currently, in some States those with home equities—not home 

values but home equities—above $828,000 can qualify for Medicaid 

assistance. My bill reindexes the maximum threshold of $500,000, 

adjusted for inflation. 

With an average home sale in the United States at $221,000, the 

current limits allow those not truly in need to access Medicaid dollars, draining Federal and State dollars. 

H.R. 1362, the Medicaid REPORTS Act, requires States to submit an annual report that identifies the sources and amounts of 

funds used by the State to finance the non-Federal share of Medicaid. 

With the growing burden the Medicaid program is placing on the 

Federal budget and those of each of our States, it is important that 

we know how States are coming up with the dollars necessary to 

meet their Medicaid match. 

Again, Mr. Chairman, I appreciate you holding this hearing to 

examine these and other important issues and I look forward to 

talking more with our witnesses and yield back the balance of my 

time. 

Anybody seeking time? I yield back. 

Mr. PITTS. Chair thanks the gentleman. 

As usual, all written opening statements of the committee will be 

made part of the record and we will proceed to our first panel. 

On our first panel today we have the Honorable Lynn Jenkins, 

Second District of Kansas, and we thank you for coming to talk 

about your legislation. 

You may proceed. 

STATEMENT OF HON. LYNN JENKINS, A REPRESENTATIVE IN 

CONGRESS FROM THE STATE OF KANSAS 

Ms. JENKINS. Chairman Pitts, Ranking Member Green, honorable members of the committee, thank you for holding this hearing 

and inviting me to speak on H.R. 2878, a critical piece of legislation. 

The bill would delay Medicare’s physician direct supervision requirement for outpatient therapeutic services in critical access and 

small rural hospitals until 2016. 

In January of 2014, the Centers for Medicaid and Medicare Services began enforcing a requirement that physicians must supervise 

outpatient therapy at critical access hospitals and other small rural 

hospitals. 

CMS’ decision meant that routine outpatient procedures such as 

drawing blood or undergoing active therapy would have to be directly supervised by a physician. 

This decision by CMS would have put a severe strain on providers, particularly those in rural areas, while providing no quality 

improvements for the patients they serve. 

Most of these outpatient procedures are relatively simple, are 

very safe and would not benefit from a Federal mandate that that 

physician always be in the room, and as a practical matter in rural 

hospitals across Kansas such a requirement is simply not feasible. 

8 

I was proud to introduce legislation last Congress that delayed 

this Medicare direct supervision requirement through 2014 and it 

was signed into law with bipartisan support. 

It has been widely recognized as an effective tool to improve care 

in rural hospitals and keep the regulatory burden in check. 

Unfortunately, rural hospitals are once again staring down the 

threat of this Federal mandate from CMS. The existing law delayed enforcement action from CMS has expired. 

Accordingly, I have now reintroduced similar legislation this 

Congress, further delaying enforcement until 2016. It is about this 

legislation, H.R. 2878, which this committee has graciously invited 

me to speak today. 

When I think about the healthcare needs facing my district, 

there is nothing more challenging than ensuring access to quality 

and accessible rural health care. 

Rural America is struggling and the 84 critical access hospital in 

Kansas are the lifeblood of our rural communities. 

The presence of facilities such as a critical access hospital in a 

community could be the deciding factor in whether or not the next 

generations of children decide to raise their family in their home 

town or perhaps whether or not a business decides to locate there. 

Easy access to emergency care can be a life and death situation 

and we cannot threaten the existence of these facilities by piling 

on the regulatory burden from Washington. 

Earlier this year I invited the CEO of Holton Community Hospital to testify about this issue before the Ways and Means Committee’s Subcommittee on Health. 

Holton Community Hospital happens to be responsible for serving my hometown, Holton, a community of just over 3,000 Kansans. 

She explained in great detail that direct supervision would be extremely burdensome, costly and is simply unrealistic at a hospital 

serving rural America. The result of enforcing this mandate would 

be to severely limit the type of services rural healthcare hospitals 

could offer and it would threaten their financial stability at a complicated and uncertain time in our Nation’s healthcare system. 

H.R. 2878 will correct this problem. It will do so by reinstating 

the moratorium on enforcement of this unnecessary regulation. It 

has broad bipartisan support in Congress and the support of key 

stakeholders including the American Hospital Association, the National Rural Health Association and the Kansas Hospital Association. 

As a small town girl, I feel strongly that folks in rural communities deserve access to quality health care. I can’t emphasize 

enough that rural hospitals—rural communities in Kansas and 

across the country depend on access hospitals like critical access 

hospitals which are directly threatened by CMS’ action. 

I hope the Members from both parties can come together once 

again to ensure high quality and timely care is available to you no 

matter where you live in America. Companion legislation was introduced by Senators Thune, Moran and Jon Tester. 

It has passed the Senate back in September. I also want to thank 

my lead cosponsor on the legislation, Congressman Dave Loebsack 

and for all his hard work and advocacy on the issue as well. 

9 

I urge my colleagues to support the legislation and move it forward in a timely fashion. 

Thank you all for allowing me to join you today. 

[The statement of Ms. Jenkins follows:] 

10 

11 

12 

Mr. PITTS. Chair thanks the gentlelady. Really appreciate you 

taking time out of your busy schedule to come and present testimony to us today. 

As usual, we will not have any questions for our Members presenting testimony. So we will excuse the gentlelady with our 

thanks and call our second panel to the witness table. And while 

they are setting up the table I would like to submit the following 

document for UC request for the record. It is a statement from the 

American College of Obstetricians and Gynecologists. 

[The information appears at the conclusion of the hearing.] 

Without objection, so ordered. I will introduce our second panel 

in the order they will testify. First, Ms. Katherine Iritani, director 

of Health Care, Government Accountability Office, and then Ms. 

Anne Schwartz, Ph.D., executive director, Medicaid and CHIP Payment and Access Commission. 

Thank you very much for coming today. Your written testimony 

will be made a part of the record. You will each be given 5 minutes 

to summarize your testimony. 

So with that, Ms. Iritani, you are recognized for 5 minutes. 

STATEMENTS OF KATHERINE M. IRITANI, DIRECTOR, HEALTH 

CARE, GOVERNMENT ACCOUNTABILITY OFFICE, AND ANNE 

L. SCHWARTZ, PH.D., EXECUTIVE DIRECTOR, MEDICAID AND 

CHIP PAYMENT AND ACCESS COMMISSION 

STATEMENT OF KATHERINE M. IRITANI 

Ms. IRITANI. Chairman Pitts, Ranking Member Green and members of the subcommittee, thank you for this opportunity to be here 

today as you consider ways to strengthen the jointly financed Federal and State Medicaid program, now the largest healthcare program in the Nation by enrollment. 

My testimony today will cover a body of GAO work from recent 

years on two complex topics—Federal oversight of certain large 

payments States often make known as supplemental payments and 

how States finance the non-Federal share of their programs. 

Supplemental payments are above and beyond regular payment 

rates for services and States have considerable flexibility for making them. States can distribute them to only a small number of 

providers, often hospitals. 

Congress and CMS have taken important steps to enhance Medicaid program integrity through better oversight of these payments. 

We believe there are opportunities for even more improvements. 

Our recent work on certain Medicaid supplemental payments 

that States often make has shown that better Federal information 

is needed to understand and oversee them. 

The payments have been growing in size and now total over $20 

billion a year and can amount to tens or hundreds of millions a 

year to a single provider. 

CMS and others need better information to understand who 

States are paying, how much they are paying and how such payments relate to services provided to Medicaid beneficiaries. 

Many States have made supplemental payments that greatly exceed the provider’s cost of providing Medicaid care. In 2012, we 

found that 39 States had made supplemental payments to over 500 

13 

hospitals that resulted in total Medicaid payments exceeding the 

hospitals’ costs of providing Medicaid care by $2.7 billion. 

Payments are not limited to costs under Medicaid but payments 

that greatly exceed costs may not be economical and efficient as required by law. 

Now, let me turn to our work on State financing, which has concluded that better information on State sources of funds to finance 

Medicaid is also needed. States are allowed within certain limits to 

seek funds from providers and local governments to fund Medicaid 

payments. 

States can, for example, tax providers or seek intergovernmental 

fund transfers from local governments to help finance the non-Federal share. 

We have found that States are increasingly depending on local 

governments and providers for financing, which can ultimately 

shift Medicaid costs not only to providers and local governments 

but to the Federal Government. 

On the basis of our National survey of State Medicaid programs, 

in 2012 about $46 billion or 26 percent of the non-Federal share 

of Medicaid was financed with funds from providers and local governments, a 21 percent increase from 2008. 

Taxes on healthcare providers almost doubled in size during that 

time from $9.7 to $18.7 billion. Such taxes are subject to certain 

restrictions, for example, to ensure that taxes are broad based and 

uniform. 

Cost shifts to the Federal Government can occur through financing arrangements that concentrate financing of the payments on 

those providers who receive the payments. 

For example, a State can increase payments for Medicaid providers such as hospitals, impose a tax on those providers for the 

nonFederal share and draw down Federal matching funds for the 

payments. 

CMS and other stakeholders are not well positioned to assess 

payments States make to individual institutional providers. Federal data on certain supplemental payments States often make is 

not complete, reliable, uniform or accessible. 

CMS has important initiatives underway but CMS has reported 

that legislation is needed to compel States to report such payments 

uniformly and to subject them to audit. 

CMS also lacks good data on State financing sources. Such data 

are needed to ensure financing is appropriate and to understand 

how payments affect beneficiary access to care. 

In conclusion, a needed step towards strengthening the Medicaid 

program is to make payments and financing more transparent. 

For this large and growing program, CMS and others need to 

know who States are paying and in what amounts and right now 

CMS lacks sufficient data to know this. 

We have suggested that Congress consider requiring CMS to require States to report and audit these payments. We have also recommended that CMS develop a strategy for improving information 

on State sources of funds for Medicaid. 

In view of growing costs and enrollments, such transparency can 

help ensure the program is efficiency and effectively meeting the 

14 

promise of providing medical assistance to our Nation’s low-income 

populations. 

Mr. Chairman, this concludes my testimony. I am happy to answer any questions. 

[The statement of Ms. Iritani follows:] 

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

Schwartz, 5 minutes for her opening statement. 

STATEMENT OF ANNE L. SCHWARTZ 

Ms. SCHWARTZ. Good morning, Chairman Pitts, Ranking Member 

Green, and members of the Subcommittee on Health. 

I am Anne Schwartz, executive director of MACPAC, the Medicaid and CHIP Payment and Access Commission. 

As you know, MACPAC is a congressional advisory body charged 

with analyzing and reviewing Medicaid and CHIP policies and 

making recommendations to Congress, the Secretary of HHS, and 

the States on issues affecting these programs. 

Its members, led by Chair Diane Rowland and Vice Chair Marsha Gold, are appointed by GAO, and the insights I will share this 

morning reflect the consensus views of the Commission itself anchored in a body of analytic work conducted over the past 5 years. 

And we appreciate the opportunity to share our views this morning. 

My comments today will focus on reporting of provider-level data 

on non-DSH supplemental payments and contributions to the nonFederal share, the subject of two bills being considered by the subcommittee—H.R. 2151 and H.R. 1362. 

The Commission shares the objective of transparency reflected in 

these two bills. There are several compelling reasons that providers’ specific data should be reported. First, these data are necessary for assessing whether State payments and rates are consistent with Federal statute. 

While States have considerable flexibility in setting rates and 

payment methods, Section 1902(a)(30)(a) of the Social Security Act 

requires that Medicaid payments be consistent with efficiency, 

economy, quality and access and that they safeguard against unnecessary utilization. 

But information on the base Medicaid payments that providers 

receive—that is the per-case or per-diem payment associated with 

the delivery of specific services to specific Medicaid beneficiaries— 

provides only a partial picture of how much Medicaid is paying a 

given provider. 

To assess payment fully, policy makers need to know the amount 

of Medicaid payment that providers receive including both claimsbased and supplemental payments less the amount that providers 

contribute towards the non-Federal share of Medicaid expenditures. 

The level of payment can be considered the most basic measure 

of economy and is essential to an assessment of patient efficiency. 

A measure of value compares what is being spent—economy—to 

what is obtained—quality, access, use of specific services. 

Typically, an analysis of whether a healthcare payment is economical includes comparison to the cost to provide a given service 

and comparison to what other payers pay for a comparable service 

in a given geographic area. 

Other healthcare payers including Medicare commonly conduct 

such assessments. In Medicaid, however, Federal policy makers 

and program administrators do not have complete data to make 

38 

such assessments and therefore to ensure that payments are consistent with the delivery of quality necessary care to beneficiaries. 

The second reason for collecting provider-level data is that Medicaid spending for supplemental payments is substantial and growing. 

In fiscal year 2014, States reported making $24.2 billion in nonDSH supplemental payments to hospitals, more than 20 percent of 

total Medicaid fee for service payments to hospitals nationally and 

more than 50 percent in some States. 

The amount of funds raised through providers and local government contributions is also significant and increasing. 

As such, the Federal Government has a reasonable expectation 

of having complete payment and financing data that permit it to 

understand and oversee States’ use of Medicaid funds. 

In light of these concerns, in March 2014 MACPAC recommended that the Secretary of HHS collect and report data on 

non-DSH supplemental payments at the provider level and just last 

week in deliberations on a report on disproportionate share hospital payments that is due to Congress on February 1st, the Commission voted unanimously on a recommendation focused on reporting of data for both payments and the non-Federal share. 

Specifically, MACPAC recommends that the Secretary collect and 

report hospital-specific data on all types of Medicaid payments for 

all hospitals that receive them. 

In addition, the Commission recommends that the Secretary collect and report data on the sources of non-Federal share necessary 

to determine net Medicaid payment at the provider level. 

Efforts to fully understand provider payment levels are more relevant now than at any time in the program’s history. Use of supplemental payments is growing, particularly to hospitals through 

Section 1115 expenditure authority. 

In addition, interest in payment reforms that incentivize greater 

value in the delivery of health services is also growing. Even so, 

lack of solid data on net payments makes it extremely difficult to 

assess the effectiveness of these efforts. 

MACPAC shares this subcommittee’s interest in ensuring that 

taxpayer dollars are spent appropriately on delivery quality necessary care and preventing and reducing fraud, waste and abuse. 

Provider-level data on supplemental payments and contributions 

to the non-Federal share would provide greater transparency and 

facilitate Medicaid payment analysis including assessments of Medicaid payment adequacy and analysis of the relationship between 

payment and desired program objectives. 

Again, thank you for this opportunity to share MACPAC’s work 

with the subcommittee and I am happy to answer any questions. 

[The statement of Ms. Schwartz follows:] 

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Mr. PITTS. The Chair thanks the gentlelady, thanks both of the 

witnesses for your testimony. I will begin the questioning and recognize myself 5 minutes for that purpose. 

This is for both of you. We will start with you, Ms. Iritani. What 

data does CMS currently collect about the sources of the non-Federal share Medicaid funding? 

Ms. IRITANI. CMS collects some data on the sources of funds on 

a case-by-case basis. When States submit a new request for approval for a State plan, CMS asks several questions about the 

sources of funds. 

It is not very accessible—this data—and it is not in a uniform 

manner. CMS also collects some data on provider taxes. But CMS 

acknowledges that the data are unreliable and incomplete. 

Mr. PITTS. Anything to add, Ms. Schwartz? Let me ask you, what 

additional data do you think they need and how will having this 

data improve CMS’ ability to oversee States’ financing of Medicaid? 

Both of you. 

Ms. IRITANI. Additional data that CMS needs includes data on all 

sources of funds used to finance the Medicaid program. Currently, 

CMS does not collect this data. 

In order to understand net payments to providers, as Ms. 

Schwartz has discussed the need for understanding, we need to understand whether or not the financing of payments is being concentrated on certain providers that also receive payments and in 

order to understand this we need to collect complete data on how 

States finance the non-Federal share of payments. 

Mr. PITTS. Ms. Schwartz, do you want to add anything? 

Ms. SCHWARTZ. Just to add that our primary concern in conducting this analysis is to get provider-specific data on their contributions to the non-Federal share, which would allow us then to 

net those contributions out from the total payments that they are 

receiving Medicaid to get a true picture of what they are being 

paid. 

Mr. PITTS. OK. 

Now, Ms. Iritani, in your written testimony you indicate that 

HHS acknowledged that additional data was needed to ensure that 

States comply with Federal requirements regarding how much local 

governments may contribute to non-Federal share. 

But despite this, HHS has said that no further action is needed. 

Can you explain these seemingly contradictory statements, explain 

why GAO believes that additional data is necessary to properly 

oversee the program? 

Ms. IRITANI. Yes. We made a recommendation to CMS that they 

collect—develop a strategy for collecting better information and I 

think CMS disagreed because they did not believe that information 

on the sources of Medicaid financing was needed on a payment specific basis. 

They collect information in the aggregate but they don’t collect 

information that would enable us to ascertain how much individual 

providers are collecting, as Ms. Schwartz discussed a need for. 

Mr. PITTS. Now, what does the required reporting and auditing 

of DSH payments tell us about the utility of requiring similar reporting and auditing for non-DSH supplemental payments? 

50 

Ms. IRITANI. The DSH payments are subject to complete reporting of both the financing of the payments and this—the information for non-DSH payments is lacking. 

And I am sorry, could you repeat the question? 

Mr. PITTS. Yes. What does the required reporting and auditing 

of DSH payments tell us about the utility of requiring similar reporting and auditing for non-DSH supplemental payments? 

Ms. IRITANI. Right. So the required reporting and auditing of 

DSH payments has been very important for understanding who the 

payments are going to and at what levels and the non-DSH payments are currently not subject to similar requirements. 

Mr. PITTS. OK. 

Ms. IRITANI. We have suggested that non-DSH payments really 

need to be comparable to the DSH payments in terms of the extent 

of the reporting. 

Currently, one cannot tell with the non-DSH payments the net 

payments that providers are actually receiving because you cannot 

tell on a provider-specific basis what a provider is actually contributing to the financing of a particular payment. 

So the financing of a payment could be, for example, 100 percent 

concentrated on the providers who receive the payments. Therefore, 

you know, the net payments that the providers receive is actually 

much lower. 

Mr. PITTS. My time is expired. The Chair recognizes the ranking 

member of the subcommittee, Mr. Green, 5 minutes for questions. 

Mr. GREEN. Thank you, Mr. Chairman, and I would like to ask 

the panel to provide information on how Medicaid payments work. 

I think Medicaid payments are so complicated. Even as I was a 

State legislator in Texas, it was tough. 

I know that we would appreciate a little more information about 

how this actually works. Ms. Schwartz, given that the issue of rate 

setting is so complicated, explain how States set these rates and 

what types of payments are provided to providers and what is recorded to CMS. 

Ms. SCHWARTZ. Yes. Setting payment rates and methodologies is 

one of the parts of the Medicaid program that varies the most. 

States pay hospitals in very different ways. Some of them use a 

system similar to the prospective payment system in Medicare 

where they make a per-case payment at the diagnosis level for a 

number of different services that are provided in the hospital. 

Some States still pay hospitals per diem. The range is all over 

the place in both how they pay, the special adjustors they have for 

that, and the actual payment rate. We have collected some of this 

information from MACPAC, and it is a rather unwieldy spreadsheet that gives you a sense of the complexity of those payments. 

One of the things that MACPAC is most interested in is trying 

to get a sense of how payments can be used to leverage proper, appropriate, greater value care, and as part of that we need to be 

able to know both the methods and the payment rates and to be 

able to net out these additional payments. 

So it is quite complex with considerable State flexibility reflecting historical practices and the local markets. 

Mr. GREEN. OK. Ms. Iritani, my understanding is it is very hard 

to gather Medicaid data and indeed to compare Medicaid data, 

51 

given the time lag on availability of that data and how different all 

these programs are from one another. 

Is that a problem that you encounter regularly in your work at 

the GAO? 

Ms. IRITANI. Regular payment data is available to us. But the 

supplemental payments that States often make are not reported in 

the claims data that go to the CMS. 

So States really have all the data that shows who those payments are going to, and so that is part of the transparency that we 

believe is needed, is more data at the Federal level on who supplemental payments are going to and for what purposes, and in what 

amounts. 

Mr. GREEN. Ms. Schwartz, I thought your point about linking 

other sources of data to better understand a full picture of the payments was interesting. 

Can you expand on that recommendation? 

Ms. SCHWARTZ. Well, as Ms. Iritani says, claims are available 

and are reported up to the Federal level. So we know on a per-case 

or per-diem level what hospitals are making. 

Supplemental payments are not paid associated with claims and 

what is reported by the States to the Federal level is the aggregate 

amount across all institutions in a particular class and we can’t associate that big chunk of dollars that is being reported to the particular institutions that receive them. 

States, clearly, know this information because they are making 

the payments. But States also have many different data systems 

and approaches to making those payments and so you can’t just go 

out and ask every State to report this information and get the right 

answer. 

So that is the desire to have the Secretary specify a method by 

which those data would be reported so that they could be consistently reported and available to analyze both at the national level 

and across States. 

Mr. GREEN. OK. Ms. Iritani, both you and Ms. Schwartz mentioned that CMS is actually taking quite a number of steps on the 

issue and I am glad the administration is taking those steps in recent years to shed light on. 

I know there has been a GAO recommendation through administrations on both sides of the aisle. Can you talk about CMS work 

on nonsupplemental payments in recent years? 

Wasn’t that work based in part on longstanding GAO recommendations and isn’t it true that CMS hasn’t even finished rolling out the new actions on the supplemental payments? 

Ms. IRITANI. Yes. CMS has taken some significant steps, we 

would agree, to try to improve the transparency and accountability 

of supplemental payments. 

Recently, CMS has, for example, had initiatives to try to require 

States to submit reports that would provide information on the financing and payments for supplemental payments. 

This information is more than what they have had before. It is 

extensive. CMS has provided that information to a contractor to assess how they can use it to improve oversight, for example. 

52 

CMS also has a initiative known as T–MSIS, Transform Medicaid Information System reforms to try to collect better information on claims. That would include supplemental payments. 

Mr. GREEN. OK. 

Thank you, Mr. Chairman. I yield back. 

Mr. PITTS. Chair thanks the gentleman. 

I recognize the vice chair of subcommittee, Mr. Guthrie, 5 minutes for questions. 

Mr. GUTHRIE. Thank you, Mr. Chairman, and my questions to 

Ms. Iritani will be directed at you, and I know you have talked 

about some of the things I am going to ask you about but I would 

like to give you a chance to elaborate with—through the question 

I am going to move forward. 

So in your testimony you point out that States generally use general revenue funds for their Medicaid share but you point out that 

States can use other financing options, specifically that States are 

increasingly relying on providers and local governments to finance 

their Medicaid share. 

Can you discuss some of the ways States are financing their 

Medicaid share? It is not just general revenue? 

Ms. IRITANI. What we have reported on, apart from the general 

revenues, which is the majority of how States finance Medicaid, is 

the growing reliance on taxes on healthcare providers, for example, 

to help finance the non-Federal share of payments. Intergovernmental transfers, which can be used between units of Government 

to—— 

Mr. GUTHRIE. Can you give an example of one—an example? 

Ms. IRITANI. So, for example, a local government may operate a 

hospital and an intergovernmental fund transfer might be a transfer from the local government to the State that it is in to provide 

the non-Federal share of a payment that is going to the provider. 

And another method is known as certified public expenditures, 

which is basically certifying that an expenditure was made for 

Medicaid. That can also be used as a non-Federal share. 

Mr. GUTHRIE. OK. And I think every member of this committee 

wants to ensure that vulnerable beneficiaries are protected and receive the Medicaid benefits, which are eligible. 

But I know many of us also want to ensure that Federal Medicaid policy doesn’t unnecessarily crowd out private sector’s role. 

Medicaid long-term care is the largest chunk of Medicaid spending and represents one of the biggest challenges to the program’s 

sustainability over the long term. 

My bill, H.R. 1361, the Medicaid Home Improvement Act, seeks 

to address the concerns of GAO in this area and requires States to 

submit an annual report identifying the sources and amounts of 

funds used to—as the Medicaid report items are—use funds to finance their non-Federal share of Medicaid. 

Can you talk about how that will be beneficial as we move forward? 

Ms. IRITANI. Yes. Currently CMS does not collect data on the 

sources of funds that States use for Medicaid and there are several 

reasons why we believe that information is needed. 

53 

One is just to enforce Medicaid requirements on limits that are 

set on the extent that States can rely on providers and local governments. 

There is a limit that States cannot exceed. It is called the 60/40 

rule that States can only obtain a certain proportion of funds from 

local governments and providers. 

The other is just to understand net payments that providers actually receive. Without having better data on the extent that payments are being financed by the providers who receive the payments, we can’t really understand net payments to providers. 

Mr. GUTHRIE. OK. Also a bill I have today is the Medicaid Home 

Act that changes the equity requirement to $500,000 plus—I mean, 

plus inflation. 

Can you talk about if this policy were adopted how individuals 

could access the equity interest in their home through a variety of 

legal means such as reverse mortgages, home equity loan or other 

financial vehicles? 

Ms. IRITANI. I am not prepared to answer that question but I 

would be happy to get information for you—for a question for the 

record. 

Mr. GUTHRIE. OK. All right. 

And can you talk about there is an exception under current law 

which my bill does not change which allows an individual with any 

level of home equity to qualify for Medicaid if an individual spouse, 

child under 21 or child that is considered blind or disabled also live 

in the home? Are you familiar with that provision? 

Is that—maybe, Ms. Schwartz, you have a—checking in on 

that—do you have a—— 

Ms. SCHWARTZ. Yes, that is correct. 

Mr. GUTHRIE. That is correct. OK. 

And given that—there are few seconds here—given the aging of 

the Baby Boomers and the growth of long-term care, have 

MACPAC or GAO conducted any analysis about the challenges unrestrained growth in this part of the program imposes on Federal 

and State budgets? 

For example, CBO estimates that Federal spending alone on 

Medicaid long-term care will be $77 billion this year. So is GAO or 

MACPAC looking at the long-term care and ensuing Baby Boomer 

arrival, not just at retirement but also older in life so that more 

demands on long-term care? 

Ms. IRITANI. We have several engagements underway around 

long-term care and Medicaid. 

Mr. GUTHRIE. Thanks. 

Ms. SCHWARTZ. Yes, and MACPAC is engaged in a long-term 

work plan on analyzing spending trends and different aspects of 

the Medicaid program, and we are just beginning that work, and 

since long-term care is such a significant part of the program, it 

will be included as part of that area of work. 

Mr. GUTHRIE. Thank you. My time is expired and I yield back. 

Mr. PITTS. Chair thanks the gentleman. 

I now recognize the ranking member of the full committee, Mr. 

Pallone, 5 minutes for questions. 

Mr. PALLONE. Thank you, Mr. Chairman. 

54 

I want to follow up on my colleague’s discussion of long-term 

care. 

Dr. Schwartz, I would like to discuss how the proposed Medicaid 

Home Improvement Act would affect beneficiary eligibility for longterm care services. 

As you know, the Medicaid program is the backbone of our country’s long-term care system. Sadly, even with Medicaid as the safety net, the majority of Americans lack the options or resources to 

sufficiently plan for future long-term care needs. 

And, you know, my questions relate to, obviously, to the spend 

down provision, which I think is a terrible way to pay for long-term 

care—actually shameful, in my opinion. 

The last thing I want to do is to take someone’s home to pay for 

their long-term care. Could you briefly describe the purpose of the 

home equity exemption? 

Ms. SCHWARTZ. I think there are two purposes. One is to allow 

living family members to remain in the home while the beneficiary 

is in an institution and the other is to—there is the limit that exists on there to ensure that the Government is seeing a contribution of assets to their care. So that is the purpose of the act. 

Mr. PALLONE. Thank you. 

And States are allowed the option of maintaining a higher home 

equity threshold. What is the purpose of allowing States to choose 

between different equity allowances? 

I know for New Jersey, you know, in our State it is much higher. 

We have chosen the option of the higher equity. 

Ms. SCHWARTZ. Well, I am not an expert in this area and it is 

not an area where MACPAC has done any significant work. 

But in general, States exercise flexibility in definitions within the 

program to reflect local circumstances in their communities and I 

do believe New York and New Jersey are two of the States that 

have allowed a higher exemption, presumably reflecting the higher 

market value of real estate in those areas. 

Mr. PALLONE. I mean, that is absolutely the case. I mean, it is 

not unusual at all for, you know, a person of average income, you 

know, to be living in a home that is worth $800,000, which I think 

would qualify in New Jersey under the higher—because New Jersey has opted for the higher equity but I think wouldn’t qualify if 

this bill became law because they wouldn’t allow States to have a 

higher threshold. 

Would you expect the Medicaid Home Improvement Act to have 

different effects in different States because it wouldn’t allow this 

higher threshold? 

Ms. SCHWARTZ. Well, certainly, to the extent that States have a 

higher threshold now, that would affect those States more than 

those who have a threshold similar to what is in the bill. 

Mr. PALLONE. Thank you. 

I mean, my concern, Mr. Chairman, you know, I find this proposed piece of legislation to be very concerning with regard to this 

home equity threshold and not allowing States to raise the threshold. 

I mean, our country, we know, has still not implemented a 

thoughtful, comprehensive approach to long-term care, yet this bill 

would only serve to restrict eligibility to long-term services and 

55 

supports, and I would—you know, I can’t stress enough that in 

States like New Jersey where real estate—you know, you have this 

much higher ability—it costs a lot more, essentially, to have a 

home in New Jersey. And, I mean, the last thing I would want to 

see is people to have to sell their home because the threshold is reduced. 

Let me ask you, Dr. Schwartz, I understand that Medicaid and 

CHIP have experience in quality performance measures through 

the Pediatric Quality Measures Program and this program was established in 2009 with the goal of improving the quality of care delivered to our Nation’s pediatric patients. 

Could you briefly describe the Pediatric Quality Measures Program and the effect it has had in advancing pediatric care for Medicaid patients? I think you have a minute. 

Ms. SCHWARTZ. Sure. 

The core set of measures, as you mentioned, was developed in 

2009, and all States are reporting at least two of the measures. 

The median is 14 measures, and they are things like the share 

of kids between the ages of 3 and 17 with an outpatient visit to 

a primary care practitioner, the share of children up to the age of 

2 who are up to date on their vaccines, the share of births at low 

birth weight. 

These are areas that are agreed have a clinical definition as 

being meaningful for the purposes of high quality care. 

MACPAC has commented on the importance of improving the 

number of States reporting those measures, and increasing the 

number of measures, and also strengthening the capacity of CMS 

to calculate those measures for States from claims data to the extent that it is possible. 

Mr. PALLONE. Do you have any suggestions for improvement? I 

know my time is almost up but if you had to mention one or two. 

Ms. SCHWARTZ. To the extent that data from claims that States 

submit up to CMS that those data can be used and that require 

no additional data collection on the part of the States, that would 

be a really valuable way to get more information on the performance of different States in providing quality pediatric care. 

Mr. PALLONE. Thank you. 

Thank you, Mr. Chairman. 

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

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

Mr. SHIMKUS. Thank you, Mr. Chairman. And welcome back, it 

is good to see you. This question would be for both of you as I 

begin. Many of us are familiar with the Disproportionate Share 

Hospitals, or DSH, supplemental payments. However, can you 

please explain what non-DSH supplemental payments are, who 

they go to and what purpose they serve? Ms. Iritani, why don’t you 

start? 

Ms. IRITANI. Yes, the non-DSH payments are a type of supplemental payments that States often make under the upper payment 

limit that is established under Medicaid or under Medicaid demonstrations. The purposes are largely unknown, which is part of 

why we believe there is a need for more reporting so we can understand who these payments are going to and for what purposes. 

Mr. SHIMKUS. Ms. Schwartz, do you want to comment on it? 

56 

Ms. SCHWARTZ. Sure. I can just say that the non-DSH supplemental payments are calculated by a State looking across a class 

of providers—say, public hospitals, nonprofit hospitals—looking at 

the total payments under fee-for-service that are paid, and then the 

difference between that payment amount and what would have 

been paid under Medicare principles, which is generally more. So 

the difference there is the amount that the State can make in nonDSH supplemental payments, and it uses those funds presumably 

to target different types of hospitals. 

But again, as Ms. Iritani said, that is one of the reasons we 

would like to be able to get the provider-specific data to see the relationship between the specific payments and which hospitals are 

receiving them. 

Mr. SHIMKUS. So in the question previously, Ms. Iritani, you 

talked about—we were talking about general funds payment and I 

think you did raise the issues of taxes. So some States use provider 

taxes to finance the non-Federal share of Medicaid cost which has 

been used to shift cost to the Federal Government. Can you kind 

of talk through that? 

Ms. IRITANI. Yes, so to the extent that financing of large payments is concentrated on the same providers receiving those payments, there can be a cost shift. For example, when we looked at 

this issue in a recent report, we looked at certain new arrangements that States put in place where they increased provider payments but they at the same time imposed a tax on those providers, 

the same providers, to pay for the non-Federal share. 

And so then they drew down the Federal matching for those payments, and in the end the Federal Government paid much more, 

hundreds more, or tens of millions for those new payments. The 

providers who received the payments funded the non-Federal share 

and the State ended up not having to pay more for those payments. 

Mr. SHIMKUS. Ms. Schwartz, do you want to comment? No. That 

is fine. 

And last for Ms. Iritani, GAO has had longstanding recommendation for CMS to require additional reporting and auditing of nonDSH supplemental payments. Why don’t you think CMS has implemented those recommendations? 

Ms. IRITANI. CMS has agreed with our findings, but with regard 

to that particular recommendation they said that they would need 

to be required to do so; that because of the effect on States that 

they would need legislation to be ordered and to be able to do that. 

Mr. SHIMKUS. OK, very good. I yield back my time. Thank you, 

Mr. Chairman. 

Mr. PITTS. The Chair thanks the gentleman. I now recognize the 

gentle lady from Florida, Ms. Castor, 5 minutes for questions. 

Ms. CASTOR. Great. And that is where I want to pick up. So CMS 

says that they do not have the authority to go out and collect all 

of the data from States on their supplemental payments. Do you 

agree with that, that legislation is needed? 

Ms. IRITANI. We defer to CMS on that. We believe that in the 

past when CMS has tried to require States to report information 

that States didn’t necessarily want to report or want to report at 

the level that CMS needed it, CMS needed legislation. 

Ms. CASTOR. Ms. Schwartz, do you agree with that? 

57 

Ms. SCHWARTZ. CMS is collecting information from States to 

demonstrate compliance with the upper payment limit regulations. 

And for the purposes that MACPAC is interested in, the payments 

on provider-specific data on the non-DSH supplemental payments 

from those regulations might be sufficient. We don’t have any access to those data. CMS does not share a lot of details. 

We do know that they have been talking about a regulation on 

supplemental payments, so it does seem that there is activity going 

on and that as part of its oversight activity it does have the ability 

to collect the payment information. I believe an audit is another 

level in which I think it is probably fair to say that they would 

need legislation to conduct an audit as they had to do the additional—— 

Ms. CASTOR. And it certainly would give them the leverage to say 

to States we need it to be accessible and we need it to be uniform, 

because these supplemental payments go to all 50 States, correct? 

So oftentimes I imagine the data comes back in different forms. 

What impact now has Medicaid expansion in some States and not 

in others had on supplemental payments? 

Ms. SCHWARTZ. I am not sure that we have done the analysis of 

the supplemental payments of expansion versus nonexpansion 

States, and it is something we could do. In any case, it would still 

be at the aggregate State level and not give you a picture of what 

is happening to individual providers. 

Ms. CASTOR. How about with the expansion of the 1115 waivers 

and supplemental payments? Has the trend towards States having 

those Medicaid waivers changed the format of supplemental payments at all? 

Ms. SCHWARTZ. Many of those waivers have allowed States to 

continue making supplemental payments, and so we do know that 

those payments under the 1115 waivers are increasing. 

Ms. CASTOR. So, and in the Medicaid managed care rules that 

were proposed recently, did those rules propose any type of standardized reporting for supplemental payments through the waivers 

or—— 

Ms. SCHWARTZ. I am not sure if the rules specifically mention 

that, but in general supplemental payments are not permitted 

under managed care because in managed care the plan is making 

a payment to the institution, not the State. 

Ms. CASTOR. So it is more applicable to the 1115 waivers to 

States than in managed care rules for sure. 

Ms. SCHWARTZ. That is my understanding. 

Ms. CASTOR. OK. In one example, I wonder if GAO has looked 

at States that have taken supplemental payments and done things 

with them that really are outside the bounds of the intent of the 

Medicaid laws. Do you know of any cases where States have said, 

OK, we are going to provide, use supplemental payments, that revenue, and pay providers that don’t serve the Medicaid population? 

Ms. IRITANI. Years ago in prior reports, we have looked at how 

excessive supplemental payments were used by States and did find 

that the payment revenues could be used for non-Medicaid purposes. And in more recent years, we have just been looking at the 

level of the supplemental payments and how that they relate to 

costs of the providers for providing Medicaid and that is where we 

58 

have found that many States are making payments that are 

much—— 

Ms. CASTOR. In Florida we had that crop up where the State 

went in and said, here, we are going to take some of the supplemental payments and give it to some providers that were not serving the Medicaid population. And that is a real worry in my home 

county that has a half-cent sales tax that they use as an intergovernmental transfer and to bring down their Medicaid match. 

So I think this is a very good idea for us to standardize the reporting from States and get all the data so we can ensure the funds 

are being spent accordingly. Thank you, and I yield back. 

Mr. PITTS. The Chair thanks the gentle lady. I now recognize the 

gentleman from Missouri, Mr. Long, 5 minutes for questions. 

Mr. LONG. Thank you, Mr. Chairman. And Ms. Iritani, what factors prompted CMS to require audits and reporting of the DSH 

payments? 

Ms. IRITANI. CMS identified concerns with States making excessive payments over the limits, and Congress had required them to 

also establish reporting and auditing requirements. And some of 

our work also found concerns with excessive payments and also requirements on providers to return the non-Federal share to the 

State, so effectively reducing the net payments that some providers 

received. So CMS did, and now requires DSH payments, Disproportionate Share payments to be reported on a facility-specific basis 

and subject to audit. 

Mr. LONG. OK. These overpayments, were they an anomaly, or 

do you know what percentage they found, find or think are overpaid? 

Ms. IRITANI. Well, what I can say is the original, the very first 

DSH audits found that the majority of States, I believe it was 41, 

had overpaid at least one hospital. And one of our reports reported 

on the findings of the DSH audits, and 41 States had paid over 500 

hospitals $2.7 billion on the non-DSH side, but they also reported 

on significant noncompliance on the DSH side in terms of—— 

Mr. LONG. Significant. Do you have any idea what percentage 

when you said significant? 

Ms. IRITANI. So the DSH payments, payments that were in excess of the hospitals’ uncompensated care and/or not calculated 

with acceptable data and methods, 41 States made DSH payments 

that exceeded the hospitals’—— 

Mr. LONG. Yes, but that doesn’t tell me what percentage. 

Ms. IRITANI. So 24 percent of the hospitals were found to have 

received DSH payments that were noncompliant. 

Mr. LONG. Twenty-four percent across the board. 

Ms. IRITANI. Twenty-four percent of hospitals. 

Mr. LONG. OK. OK, thank you. And Dr. Schwartz, on Thursday, 

MACPAC Commissioners recommended that the Secretary of HHS 

should collect and report hospital-specific data on all types of Medicaid payments for all hospitals that receive them. In addition, they 

said the Secretary should collect and report data on the sources of 

non-Federal share necessary to determine net Medicaid payments 

at the provider level. 

As I have been told, HHS said legislation was necessary to implement reporting and auditing requirements for DSH payments and 

59 

that legislation would be needed to implement similar requirements for non-DSH supplemental payments. So why did MACPAC 

target its recommendations to the Secretary? 

Ms. SCHWARTZ. Sure. We have not asked for nor received a review from CMS of our recommendations, so I don’t know what 

CMS will say about our specific recommendation. MACPAC’s recommendation was for reporting of payment information, which—we 

know from what CMS already is asking of States in the UPL payment demonstrations that it is already asking for similar types of 

information, and that is why we believe that the Secretary had the 

authority to do this. 

Auditing is a different step, and auditing is a much more intense 

activity as seen in the DSH audits and that is not what MACPAC 

was asking for. MACPAC was asking for collecting and reporting 

payment data, and so we believe that the Secretary has the authority to do that. 

Mr. LONG. OK, thank you. With that I yield back, Mr. Chairman. 

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

the gentleman from Oregon, Mr. Schrader, 5 minutes for questions. 

Mr. SCHRADER. Thank you, Mr. Chairman. I guess for GAO, have 

you evaluated what the cost-benefit might be in changing from reporting classes of overpayments versus going to the individual providers? 

Ms. IRITANI. We have not evaluated the cost-benefit, but we 

would note that this is required on the DSH side. And non-DSH 

payments are now higher in amounts than DSH payments, but the 

non-DSH payments are not subject to reporting and auditing as 

with DSH. 

Mr. SCHRADER. Has there been any consideration of just increasing the Medicaid payments as opposed to going with the DSH and 

non-DSH supplemental payments that we have got? 

Ms. IRITANI. Well, ideally, Medicaid payments would be sufficient 

to ensure access in a local area comparable to what others outside 

of Medicaid would be receiving. 

Mr. SCHRADER. Like everyone in this committee and Congress 

fully realizes, Medicaid payments are not sufficient and as a matter 

of fact are so low that many providers can’t accept Medicaid patients. We have the same problem with Medicare. I think a lot of 

folks need to be aware that that is a very, very low reimbursement 

rate compared to the private insurance market. 

Ms. IRITANI. Yes, our work has found that Medicaid payment 

rates are lower generally for certain services than private. 

Mr. SCHRADER. Has there been any move to just fund Medicaid 

to the various States and providers based on outcomes? There has 

been a lot of talk in health care recently about outcomes, quality 

based health care. 

Ms. IRITANI. What I can say is that I think that there are some 

demonstrations that are trying to incentivize outcomes by making 

payments for that. 

Mr. SCHRADER. MACPAC have any comments on that? 

Ms. SCHWARTZ. I think there is a lot of activity at the State level 

to try and link payment to outcomes through different approaches 

such as health homes, bundling of payments, different approaches. 

We don’t know very much yet about the outcomes and whether 

60 

they have affected outcomes. That is something we would be very 

interested to know. 

And it is also very difficult to conduct that research because you 

have to be able to control for everything else that is going on in 

the health system and in the patients’ lives to be able to attribute 

the outcomes to specific actions on the part of the beneficiary and 

the provider. 

Mr. SCHRADER. Well that is interesting and that is always true 

whether it is an education bill or anything we do. But we are doing 

that right now in Medicare. We are trying to get at that in Medicare. We are doing that under the Affordable Care Act. So I don’t 

think it is impossible, and certainly there could be risk based reimbursement to accommodate the types of socioeconomic factors that 

people have. 

And I would argue respectfully that rather than us trying to 

micromanage all the States and the different providers, it would be 

a heck of a lot easier for us, particularly non-doctors, although I 

guess I am a veterinarian but I wouldn’t want to be the guy in 

charge of your healthcare, that we go to an outcome based reimbursement system where we could easily judge whether or not the 

people are staying healthier, staying out of the hospitals, getting 

that quality based healthcare. 

That should really be what we are about, then our task here 

would be pretty easy. We would just be able to have a common set 

of outcomes, and your job would be a little bit easier and we could 

see whether or not things are doing well or not. 

Another question. In the REPORTS bill why do we have the 40/ 

60 rule? Why is that significant? What is the goal of having that 

rule? 

Ms. IRITANI. I can’t speak to the legislative history around that 

rule, but I think that the concept generally is that States should 

share in the non-Federal share of the financing that—— 

Mr. SCHRADER. Well, why do we specify it can’t be more than 40 

or more than 60? What is the point of that? Who cares? Why do 

we care? I am the Federal Government. As long as someone is paying their fair share, why do I care? 

Ms. IRITANI. Well, I think that to make sure that the incentives 

are for sufficient and economical payments that the State should 

be sharing in the cost of the payment. 

Mr. SCHRADER. Yes, but who cares if it comes from the local government or a private enterprise or the State? Who cares? 

Ms. IRITANI. The concern around the reliance on providers and 

local governments for financing the non-Federal share is when the 

burden on financing Medicaid rests with, for example, the providers who are serving the beneficiaries. From the providers’ standpoint, the payment they receive from Medicaid is the net payment. 

It is not the full payment, it is the payment less the taxes or other 

contributions they might be making for the payment that they receive. 

Mr. SCHRADER. Mr. Chair, I would just respectfully suggest we 

are micromanaging and should let the States do what they do best 

and just regulate the outcomes. I think that would be a smarter 

proposal. And I yield back. Thank you, sir. 

61 

Mr. PITTS. The Chair thanks the gentleman. I now recognize the 

gentleman from Indiana, Dr. Bucshon, 5 minutes for questions. 

Mr. BUCSHON. Thank you, Mr. Chairman. I would agree with 

what you just said and I think we are micromanaging. And I can 

tell you why CMS wants to know the information, because they 

want to decrease payments to the Medicaid program. They want to 

save money. And I was a provider before I was a surgeon, and you 

can’t have access if you continue to decrease Medicaid payments. 

Because you have a program that needs fundamentally restructured in my view. You can’t have both. 

And so now, States, including Indiana with the Healthy Indiana 

Plan 2.0, which is a HSA-based way to manage the Medicaid population, now what basically your testimony is telling me that, wow, 

you guys came up with a great system but we don’t want you to 

do it because we are concerned it is going to cost the Federal Government more money and we are trying to save money here. 

So the question—I mean, I am playing a little devil’s advocate 

here. The question I have is, Why does the Federal Government 

care? I mean, for example, Healthy Indiana Plan 2.0 uses hospital 

taxes to, as you probably know, to help fund the expanded State 

share of the expansion under the Affordable Care Act. 

Why does that matter to the Federal Government? Because what 

they are doing then is they are reimbursing providers at a higher 

level than traditional Medicaid. Guess what that does? It gets the 

providers to take Medicaid patients so that we get access so lowincome people actually can see a doctor. So why does that matter 

to the Federal Government? Does that cost the Federal Government any more money than it would if they did it in a traditional 

way? 

Ms. SCHWARTZ. I think the most fundamental reason that the 

Federal Government pays is that when you look at the financing— 

Federal, non-Federal—the Federal Government is still paying on 

average 57 percent of the cost of the Medicaid program and much 

more than that in many States—— 

Mr. BUCSHON. So? 

Ms. SCHWARTZ [continuing]. Notwithstanding how —— 

Mr. BUCSHON. So what? 

Ms. SCHWARTZ. So the interest is ensuring that that amount of 

money is being used consistent with the aims of the statute. 

Mr. BUCSHON. OK, so they want to micromanage the Medicaid 

program just like Dr. Schrader said. The basic, and what I am getting is that the reason is, is because the Federal Government 

wants to micromanage the States. I mean that is my view on that 

and again I am all for reporting, and I think States should be compliant with coverage and make sure people are getting adequate 

coverage. 

But other than that, I mean the question I have is why does it 

matter to the Federal Government? That is why I support fundamental Medicaid reform that gives the States a certain amount of 

money and let them do what they need to do with it versus having 

all these strings attached. I mean, I think we are just finding today 

with this hearing why we need to fundamentally restructure the 

Medicaid program, because people are spending literally thousands 

of hours trying to figure all this stuff out. 

62 

Like I said, I don’t have a problem with needing to be reporting 

if it has an impact on patient access. I mean, if there is a concern 

that based on States using local or State funding for the non-Federal portion is having an impact on access and people are not getting the services that is one thing. If it is just because the Federal 

Government wants to say, well, look, we don’t have to pay you as 

much because you have found a way to use local money or State 

money to help yourself, then I am against that. 

And so why does it matter if a State reports, for example, in the 

aggregate versus an individual provider? Why would the Federal 

Government care? It is the same amount of money. 

Ms. IRITANI. Well, as you point out, we want to make sure that 

Medicaid payments are going for Medicaid purposes and improve 

access to Medicaid beneficiaries. 

Mr. BUCSHON. And I agree with that. 

Ms. IRITANI. Without knowing the amount that an individual 

provider is contributing to the payment that they are receiving, we 

can’t actually understand whether or not the payment is being 

used basically for fiscal relief for the State or actually serving to 

improve access for Medicaid beneficiaries. 

Mr. BUCSHON. That is fair enough. But that there what you just 

said is making the assumption that States are purposely violating 

Federal law for their own benefit. If you make—I am just saying 

that CMS needs to know this because they want to prevent States 

from purposely violating the law by using Medicaid dollars for non- 

, for example, giving payments to people who are not providing coverage to Medicaid patients. Is that true or not true? 

Ms. IRITANI. And it is not necessarily even violating the law. 

States can make payments and receive Federal matching up to the 

upper payment limit, and there is no limit on Medicaid payments 

in relation to costs. But this data is really needed to understand 

the extent that payments are going to providers who are actually 

financing the non-Federal share, therefore reducing the net payments to the providers because—— 

Mr. BUCSHON. My time is expired. So again I will just finish by 

saying who cares? Because it is the same cost to the Federal Government, who cares? I yield back. 

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

the gentleman from Maryland, Mr. Sarbanes, 5 minutes for questions. 

Mr. SARBANES. Thank you, Mr. Chairman. I had a question 

about—I am very interested in these demonstration projects to explore alternative venues or settings for long-term care and the financing of those. So I guess the obvious example of experimenting 

with this is there are some waiver and demonstration programs 

that have allowed for Medicaid reimbursement for placement in, 

say, assisted living facilities as opposed to long term in nursing 

care facilities. I don’t know that there has been, but you would 

know, I imagine, demonstration projects that are reimbursing 

through Medicaid for placement in somebody’s home where they 

are getting some home care. 

But my question is, as those kinds of alternatives are being explored are there also alternative kind of financing structures or formulas being looked at at the same time? So obviously you would 

63 

be looking at different kinds of reimbursement amounts depending 

on this setting, but is there any reason, for example, to look at 

some of these asset thresholds and other things depending on—my 

instinct would say no, but I am just wondering, has that kind of 

analysis accompanied the experimenting of just where you might 

reimburse for this kind of care? 

Ms. IRITANI. We have work planned to look at Medicaid payments for assisted living. We have not done work looking at financing of Medicaid payments necessarily directed to long-term care, if 

that is your question. 

Mr. SARBANES. OK. And are there, is it in your bailiwick to tell 

me whether there are demonstrations that are actually looking at 

Medicaid reimbursement for home care where somebody is actually 

staying in the home? 

Ms. IRITANI. There are, increasingly, States moving from a feefor-service type of payment for long-term care services to managed 

care which would be a capitated payment amount to cover all services including long-term care. 

Mr. SARBANES. So in that instance there would be a capitated 

payment for providing care along a continuum that could include 

some component of home care along with institutional care; is that 

what you are saying? 

Ms. IRITANI. Correct. 

Mr. SARBANES. OK. All right, thank you. I yield back. 

Ms. SCHWARTZ. I can just add to that that about half of payments 

for long-term services supports in Medicaid are now occurring in a 

noninstitutional setting, and this reflects a very big shift over the 

past 20 years when it was primarily in institutional settings. And 

that is primarily through 1915(c) waivers that have allowed States 

to allow folks to stay in their own homes and receive services if 

that is something that is valuable to them. 

And there have also been grants under the money follows the 

person program to help States transition people from nursing 

homes to home settings or to allow people to stay in their homes 

and not end up in a nursing facility. 

Mr. SARBANES. Thank you. 

Mr. PITTS. The gentleman yields back. The Chair now recognizes 

the gentleman from Maryland, Mr. Bilirakis, 5 minutes for questions. 

Mr. BILIRAKIS. Florida. 

Mr. PITTS. I mean Florida, sorry. 

Mr. BILIRAKIS. That is OK. No problem. Well, I have a couple 

questions here, but I wanted to say how much, with the moving the 

patient from a long-term care facility to the home, obviously quality 

of life is number one, but are we saving money at the same time? 

Ms. SCHWARTZ. Those waivers require a demonstration of savings 

and so yes. And in the managed long-term services and supports 

area, I think that is also an area to increase the predictability of 

the amount that is being spent on long-term services and supports. 

So fiscal concerns are obviously a part of both of those efforts. 

Mr. BILIRAKIS. Very good, thank you. A couple more questions, 

Ms. Iritani and Ms. Schwartz. In your testimony you talk a lot 

about non-State sources being used to fund Medicaid. Can you exVerDate Mar 15 2010 11:17 May 24, 2016 Jkt 037690 PO 00000 Frm 00067 Fmt 6633 Sfmt 6633 C:\USERS\WLAUFERT\DESKTOP\114X98MEDICAREMEDICAIDPENDING WAYNE
64 

plain what these non-State sources are such as provider taxes and 

how they fund State Medicaid programs? 

Ms. IRITANI. States are allowed to use up to certain sources of 

funds apart from State general revenues to finance Medicaid. Provider taxes are an increasing method that States use to fund Medicaid which would be a broad-based uniform tax on healthcare providers, and it could be Medicaid providers, to fund Medicaid. 

And intergovernmental transfers and certified public expenditures are other methods that are increasingly used to finance the 

non-Federal share of Medicaid. These would be methods that local 

governments or a local government provider such as county hospitals might use to, for example, in the case of certified public expenditures, to certify that they had expended a certain amount on 

Medicaid for purposes of getting Federal matching for the payment 

or the fund. 

Mr. BILIRAKIS. Do you have anything else to add, please? 

Ms. SCHWARTZ. No, I don’t have anything else to add to that. 

Mr. BILIRAKIS. OK, all right. OK, Federal law requires that provider taxes must be broad based and uniformly imposed and must 

not hold the providers harmless and cannot provide a direct or indirect guarantee those providers will receive all or part of the tax 

payment back. 

How does the use of non-State funding sources such as provider 

taxes reconcile with Federal law? 

Ms. SCHWARTZ. It is permissible under Federal law, and changes 

have been made over time to clarify the circumstances under which 

it is possible and the ones you just named are examples of that. 

But it is a permissible activity. There is no intimation that something shady is going on with these taxes and they are clearly important in many States as a source of funds to support the Medicaid program. 

Mr. BILIRAKIS. OK, next question. Ms. Iritani, in 2014 you asked 

CMS to ensure States report accurate and complete information on 

all sources of funds used to finance the non-Federal share of Medicaid. What data did you want to capture and what was CMS’ response to your recommendations? 

Ms. IRITANI. Yes, we suggested that CMS come up with a data 

strategy for obtaining complete and reliable information on sources 

of funds. Currently CMS does not collect specific sources of funding. CMS agreed that they needed better data for oversight purposes, but disagreed with our suggestion that they needed this data 

at the provider level for in particular institutional providers. 

We felt like the data is needed at the institutional level so that 

a net payment to the provider could be understood. For example, 

if a hospital is getting 200 million from CMS in a supplemental 

payment that CMS would also know that that provider was being 

asked to finance a non-Federal share, a hundred million or more, 

whatever the non-Federal share of the payment would be. 

This is important not only for understanding the trends in financing and the net impact on the provider, but whether it would 

be helpful to understand the extent the payments are actually 

going to improve access to the beneficiaries as opposed to cost shifting to the Federal Government or providing fiscal relief to the 

States. 

65 

Mr. BILIRAKIS. So one final question, if I may, Mr. Chairman. 

Mr. PITTS. You may proceed. 

Mr. BILIRAKIS. OK, thank you. Ms. Iritani, Medicaid is listed by 

GAO as a high-risk program. Can you explain why this program 

is listed as high-risk? 

Ms. IRITANI. Yes. There are multiple contributing reasons based 

on our body of work over the last years, but Medicaid is a significant program in terms of size, in terms of the number of enrollees 

now, the largest healthcare program in the country. It is a diverse 

program. The Federal-State nature of it makes it very difficult for 

oversight. Our work has identified concerns with gaps in oversight 

including the transparency of supplemental payments and many 

other types of issues that contributed to our putting Medicaid on 

our high risk list. 

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

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

the gentleman from New York, Mr. Collins, 5 minutes for questions. 

Mr. COLLINS. Thank you, Mr. Chairman. And I want to thank 

our panel for being here. I think examining Medicaid programs is 

very important and we have kind of been doing it many ways 

today. I guess I would like to start by standing with Dr. Bucshon 

in saying if we could block grant Medicaid back to the States I 

don’t even think there would be a need for today’s hearing. But unfortunately we haven’t done that so that is one of the reasons we 

are having this hearing, which I think is timely. 

And maybe to respond a little bit to Mr. Guthrie’s comments earlier, Medicaid is all over the place when it comes to how States administer them. And maybe to sum up a little bit, I am from New 

York, which New York with 20 million Americans spends as much 

on Medicaid as California and Texas combined with 60 million people. That shows you how crazy this program is. Thirty six or so 

States, as I understand it, absorb the Medicaid cost at the State 

level and there is no local share. It is about 36 out of 50. 

Well, the 14 States, of which New York is certainly one, pushed 

this back to the county level. In the case of Erie County where I 

am from, Buffalo, I was the county executive, and 100 percent of 

our property tax did not even cover our Medicaid share at the county level; 100-plus percent of our county tax covered Medicaid, 

which meant the county had to live on sales tax. 

Well, when it gets to DSH it is worse. In New York State, when 

the Federal Government makes a DSH payment the State pays 

nothing. They force 100 percent of the match for DSH payments 

down to the local level for the county. Erie County, Erie County 

Medical Center, we are talking about $40 million in a year. 

Now under the ACA, to speak to the folks on the other side that 

was, the DSH payments were supposed to be reduced dramatically 

by the expansion of Medicaid and Affordable Care. Well, it hasn’t 

happened. As I understand it now just maybe we will see a DSH 

reduction in 2018, but that may go the same way as SGR and just 

kicked down the road. And I just bring this up to put into context 

how Medicaid is all over the place through the country, and if you 

are living in Erie County, New York, it doesn’t get much worse 

when it comes to what we are having to bear for that burden. 

66 

So briefly, the bill that I have put forth, H.R. 2151, really addresses the non-DSH supplemental payments. And this came from 

the GAO’s own report on we need transparency. I have a sign in 

my office, ‘‘In God we trust, all others bring data.’’ We don’t have 

the data on the non-DSH supplemental payments. 

And so, Ms. Iritani, I am assuming the bill that I am putting 

forth, I am simply asking States, or not asking, requiring States to 

do audits and CMS to do audits on non-DSH supplemental payments as something GAO would support. 

Ms. IRITANI. Yes, we would agree that that bill is consistent with 

our recommendations. 

Mr. COLLINS. And really in learning from that I think all of us 

would support payments going where they are supposed to, but do 

you also have any data on the 50 States? I understand it is very 

inconsistent from State to State. And the crazy thing I have heard 

is I don’t think New York does as much non-DSH supplemental. Is 

that true? Do you know? 

Ms. IRITANI. I cannot speak to that right now, but be happy 

to—— 

Mr. COLLINS. Yes, if you could get back to us it would be interesting just to see as a percentage or absolute or both on the nonDSH supplemental payments, and then that would also beg the 

questions, and I think we would see, why variances from one State 

to the other? And it would beg the question, why is one State doing 

one thing and another doing something else, but without the audits 

how do we know? 

Ms. IRITANI. There are great variations among States in how 

they finance their programs and the extent of supplemental payments. 

Mr. COLLINS. And just from a commonsense standpoint it doesn’t 

make any sense to me. So I would certainly urge all my colleagues 

to support that bill, H.R. 2151, which is simply trying to gather 

data in a way that would help us all better understand State by 

State even what is going on. So again, Mr. Chairman, thank you 

for holding this hearing, and I yield back the balance of my time. 

Mr. PITTS. The Chair thanks the gentleman. Ms. Schwartz, did 

you want to add anything to that? 

Ms. SCHWARTZ. Well, I have some data here that show that nationally supplemental payments as a share of inpatient and outpatient hospital payment is about 44 percent, and in New York it 

is 36.8 percent so it is below the national average. But the figures 

go all over the place from two percent to there is several States in 

the ’80s and one or two in the ’90s. So you are slightly below the 

average, but like all things Medicaid, it varies by State. 

Mr. COLLINS. And I think again we could use some data to understand why that variation would be what it is. Thank you very 

much. 

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

Mr. Griffith for 5 minutes. 

Mr. GRIFFITH. Thank you very much, Mr. Chairman. As we have 

discussed in some of the prior testimony, the State may impose a 

broad-based healthcare tax on providers and use the revenue 

raised from that tax to pay for the Medicaid program. Virginia 

looked at that a couple of decades ago and it was rejected because 

67 

it was considered a sick tax or a bed tax and why would we want 

to put more burden on those people who are already sick by having 

a broad based tax on folks who are in the hospital? 

But because of the way the FMAP works, the Federal Medicaid 

Assistance Percentage, the effect of this is that a State can draw 

down more and more Federal spending in its Medicaid program. 

Currently these provider taxes are permissible, as we talked about 

earlier, if they are applied at a rate that produces revenues less 

than or equal to six percent of the provider’s net patient revenues. 

Now I know, Ms. Schwartz, you said that is not cheating, but 

from a Virginia perspective even though it is legal it seems a little 

bit dicey that you get more money because you charge your sick 

people more taxes, therefore you can get more money drawn down 

from the Federal Government. 

Can you talk about any work that either MACPAC or GAO has 

done to explore provider taxes to see how they are utilized by the 

States and how they drive up the spending or how provider taxes 

can create what we believe in Virginia is a perverse incentive in 

Medicaid? Either of you all want to tackle that one? 

Ms. SCHWARTZ. We have written about provider taxes and described the statute as you have, and there has been an expression 

of interest in learning more. But it is a topic that is difficult to 

study because you are having to look at the finances of the entire 

State and their tax structure. So it is not one that we have a lot 

to offer now, but I am hopeful that in the future we will have more 

information to be able to share on that. 

Mr. GRIFFITH. Well, as Mr. Bucshon said earlier, maybe we 

would be better off if we just decided what was the right amount 

for each State and sent it back to them, and then you don’t have 

all these little games being played about we are going to charge our 

people a sick tax so that we can then draw down more money. 

I have introduced a bill, the Medicaid Tax Fairness Act, which 

is co-sponsored by some of my colleagues on the committee, 

Blackburn, Bucshon and Guthrie. It doesn’t get to the whole problem, but it does reduce the current provider-tax threshold from 6 

percent to 5.5 percent which is what it was just a few years ago. 

What do you all think of that concept? And there is a follow-up 

question too. 

Ms. IRITANI. We have looked at States’ uses of provider taxes at 

a broad level, at a national level, and have found that States are 

increasingly relying on provider taxes as a source of the non-Federal share of Medicaid. And we looked in three States’ financing arrangements where indeed there was an increase in the Medicaid 

payments and some sort of contribution, for example, through provider taxes, from the same providers that were receiving payments. 

And so we would agree that there needs to be much more transparency on what is reported. And with regard to your proposal 

about reducing the provider tax threshold that I would just note 

that there have been several bodies including CMS in its budget 

that have also suggested reducing provider taxes as a way to improve the fiscal integrity of Medicaid. 

Mr. GRIFFITH. Yes, my bill is actually the first step, I think, but 

it is H.R. 1400 and then we can go forward from there. And what 

is interesting is, as folks on the other side of the aisle will recogVerDate Mar 15 2010 11:17 May 24, 2016 Jkt 037690 PO 00000 Frm 00071 Fmt 6633 Sfmt 6633 C:\USERS\WLAUFERT\DESKTOP\114X98MEDICAREMEDICAIDPENDING WAYNE
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nize, is oftentimes I am in conflict with the administration. But in 

December 2010, President Obama’s Fiscal Commission said Congress and the President should eliminate State gaming of Medicaid 

tax gimmick. They recommended restricting and eventually eliminating this practice. 

While this policy would obviously need to be phased in incrementally, does GAO or MACPAC, and I think you have already answered it in part, but do either of you have a position on that policy, and if not can you comment on benefits of reducing the use of 

the provider taxes over time? 

And you may have already answered it in your previous answer 

and I recognize that but did want to get it out there that this is 

a bipartisan thought. It is not something that we own just on the 

Republican side or just on the Democrat side. But gaming the system moves money around but it doesn’t really help the sick folk. 

Comments? Agree, disagree? 

Ms. SCHWARTZ. I would just say that from the Commission’s perspective that interest at the moment has been on transparency and 

you need those data to be able to then evaluate different policy options. The Commission as of this time has no position on that. 

Mr. GRIFFITH. And I would just say at some point, and I haven’t 

introduced a bill and maybe I should, but at some point we need 

to look at helping folks out. I had a little concept when I was in 

the State legislature in Virginia that would allow folks who needed 

medical care maybe not as intense as a nursing home, but needed 

at least two things a day that were of assistance, and we passed 

a law that—North Carolina has a similar law—that would allow a 

medical cottage to be placed, a temporary to be placed in a family 

member’s backyard, side yard, whatever, worked under the regular 

laws but it created a zoning exemption for that. 

It might be a way that we can save money for folks all the way 

around because it is cheaper than a nursing home but the person 

is still getting care and they are with their family. I appreciate it, 

Mr. Chairman. I appreciate the time, and I yield back. 

Mr. PITTS. The Chair thanks the gentleman, and that concludes 

the questions of the Members present. As usual, Members who are 

in other hearings on our committee may have questions who will 

submit those too in writing along with any follow-up questions. We 

ask that you please respond promptly. And I remind Members that 

they have 10 business days to submit questions for the record, so 

Members should submit their questions by the close of business on 

Tuesday, November 17th. 

Very interesting hearing examining various Medicaid programs, 

a very complex issue. Thank you very much for your time and testimony today. Without objection, the subcommittee is adjourned. 

[Whereupon, at 11:54 a.m., the subcommittee was adjourned.] 

[Material submitted for inclusion in the record follows:] 

PREPARED STATEMENT OF HON. FRANK PALLONE, JR. 

Good morning, thank you Mr. Chairman for holding this hearing to discuss a variety of bills related to healthcare in our Medicare and Medicaid program. 

I’m pleased that we will be discussing draft legislation today on the Quality Care 

for Moms and Babies Act. Given that Medicaid finances roughly half of all births 

in this country, it is critical that we continue to advance the quality of care our 

Medicaid beneficiaries receive. This bill not only develops quality of care metrics for 

69 

pregnancy and infancy, but would also develop maternity care quality collaboratives. 

I look forward to working in a bipartisan manner to advance this important bill. 

I do have some concerns over several of the other bills under discussion today. 

H.R. 1362 and H.R. 2151 work in tandem to increase reporting and auditing requirements on States’ Medicaid payments relating to non-DSH supplemental payments and the non-Federal share of State Medicaid spending. I agree that transparency in these areas is important to ensure that payments to providers are sufficient in Medicaid. But these bills are duplicative of ongoing CMS initiatives and add 

a burdensome layer of administrative bureaucracy. We need a more nuanced approach here, and rather than improving our ability to ensure that Medicaid dollars 

go towards Medicaid beneficiaries, I fear these bills will instead do the very opposite 

of that. 

H.R. 1361, the Medicaid HOME Improvement Act eliminates State flexibility in 

determining home equity levels for the determination of long-term care assistance. 

Unfortunately, our country has yet to provide a meaningful solution to our country’s 

long-term care crisis. Yet this bill limits State flexibility to determine the right eligibility threshold for long-term care in their own Medicaid programs. In short, the bill 

does not address the underlying issues in our long-term care system, but only serves 

to restrict access to critical services. 

Finally, H.R. 2878 provides an extension on CMS’ decision to temporarily suspend 

the enforcement of supervision requirements for outpatient health services in critical access and small rural hospitals through the end of the calendar year. While 

these hospitals certainly face different workforce staffing issues than those in urban 

areas, I hope my colleagues will work to address concerns that this bill may not adequately balance patient safety and access to care. I hope that we can work in a bipartisan fashion to address this issue. 

Thank you, Mr. Chairman, and I yield back the remainder of my time. 

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