S. HRG. 110–813

NOMINATIONS OF DR. TEVI TROY,

DAVID H. McCORMICK, PETER B. McCARTHY,

KERRY N. WEEMS, AND CHARLES E.F. MILLARD

HEARING

BEFORE THE

COMMITTEE ON FINANCE

UNITED STATES SENATE

ONE HUNDRED TENTH CONGRESS

FIRST SESSION

ON THE

NOMINATIONS OF

DR. TEVI TROY, TO BE DEPUTY SECRETARY OF HEALTH AND HUMAN

SERVICES; HON. DAVID H. McCORMICK, TO BE UNDER SECRETARY

FOR INTERNATIONAL AFFAIRS, U.S. DEPARTMENT OF THE TREASURY;

PETER B. McCARTHY, TO BE ASSISTANT SECRETARY FOR MANAGEMENT AND CHIEF FINANCIAL OFFICER, U.S. DEPARTMENT OF THE

TREASURY; KERRY N. WEEMS, TO BE ADMINISTRATOR, CENTERS FOR

MEDICARE AND MEDICAID SERVICES; AND CHARLES E.F. MILLARD,

TO BE DIRECTOR OF THE PENSION BENEFIT GUARANTY CORPORATION

JULY 25, 2007

(

Printed for the use of the Committee on Finance

NOMINATIONS OF DR. TEVI TROY, DAVID H. McCORMICK, PETER B. McCARTHY,

KERRY N. WEEMS, AND CHARLES E.F. MILLARD

U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON : 

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42–429—PDF 2007

S. HRG. 110–813

NOMINATIONS OF DR. TEVI TROY,

DAVID H. McCORMICK, PETER B. McCARTHY,

KERRY N. WEEMS, AND CHARLES E.F. MILLARD

HEARING

BEFORE THE

COMMITTEE ON FINANCE

UNITED STATES SENATE

ONE HUNDRED TENTH CONGRESS

FIRST SESSION

ON THE

NOMINATIONS OF

DR. TEVI TROY, TO BE DEPUTY SECRETARY OF HEALTH AND HUMAN

SERVICES; HON. DAVID H. McCORMICK, TO BE UNDER SECRETARY

FOR INTERNATIONAL AFFAIRS, U.S. DEPARTMENT OF THE TREASURY;

PETER B. McCARTHY, TO BE ASSISTANT SECRETARY FOR MANAGEMENT AND CHIEF FINANCIAL OFFICER, U.S. DEPARTMENT OF THE

TREASURY; KERRY N. WEEMS, TO BE ADMINISTRATOR, CENTERS FOR

MEDICARE AND MEDICAID SERVICES; AND CHARLES E.F. MILLARD,

TO BE DIRECTOR OF THE PENSION BENEFIT GUARANTY CORPORATION

JULY 25, 2007

(

Printed for the use of the Committee on Finance

COMMITTEE ON FINANCE

MAX BAUCUS, Montana, Chairman

JOHN D. ROCKEFELLER IV, West Virginia

KENT CONRAD, North Dakota

JEFF BINGAMAN, New Mexico

JOHN F. KERRY, Massachusetts

BLANCHE L. LINCOLN, Arkansas

RON WYDEN, Oregon

CHARLES E. SCHUMER, New York

DEBBIE STABENOW, Michigan

MARIA CANTWELL, Washington

KEN SALAZAR, Colorado

CHUCK GRASSLEY, Iowa

ORRIN G. HATCH, Utah

TRENT LOTT, Mississippi

OLYMPIA J. SNOWE, Maine

JON KYL, Arizona

GORDON SMITH, Oregon

JIM BUNNING, Kentucky

MIKE CRAPO, Idaho

PAT ROBERTS, Kansas

JOHN ENSIGN, Nevada

RUSSELL SULLIVAN, Staff Director

KOLAN DAVIS, Republican Staff Director and Chief Counsel

(II)

(III)

C O N T E N T S

OPENING STATEMENTS

Page

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

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

Bingaman, Hon. Jeff, a U.S. Senator from New Mexico ...................................... 5

Hatch, Hon. Orrin G., a U.S. Senator from Utah ................................................. 5

Roberts, Hon. Pat, a U.S. Senator from Kansas ................................................... 29

ADMINISTRATION NOMINEES

Troy, Dr. Tevi David, nominated to be Deputy Secretary of Health and

Human Services, Department of Health and Human Services, Washington,

DC .......................................................................................................................... 7

McCormick, Hon. David H., nominated to be Under Secretary for International Affairs, U.S. Department of the Treasury, Washington, DC ............. 8

McCarthy, Peter B., nominated to be Assistant Secretary for Management

and Chief Financial Officer, U.S. Department of the Treasury, Washington,

DC .......................................................................................................................... 9

Weems, Kerry N., nominated to be Administrator of the Centers for Medicare

and Medicaid Services, Washington, DC ........................................................... 11

Millard, Charles E.F., nominated to be Director of the Pension Benefit Guaranty Corporation, Washington, DC .................................................................... 13

CONGRESSIONAL WITNESS

Domenici, Hon. Pete, a U.S. Senator from New Mexico ....................................... 4

ALPHABETICAL LISTING AND APPENDIX MATERIAL

Baucus, Hon. Max:

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

Bingaman, Hon. Jeff:

Opening statement ........................................................................................... 5

Domenici, Hon. Pete:

Testimony .......................................................................................................... 4

Grassley, Hon. Chuck:

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

Hatch, Hon. Orrin G.:

Opening statement ........................................................................................... 5

Lieberman, Hon. Joseph I.:

Prepared statement .......................................................................................... 40

McCarthy, Peter B.:

Testimony .......................................................................................................... 9

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

Biographical information ................................................................................. 43

Responses to questions from committee members ......................................... 51

McCormick, Hon. David H.:

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

Prepared statement .......................................................................................... 62

Biographical information ................................................................................. 64

Responses to questions from committee members ......................................... 73

Page

IV

Millard, Charles E.F.:

Testimony .......................................................................................................... 13

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

Biographical information ................................................................................. 83

Responses to questions from committee members ......................................... 92

Roberts, Hon. Pat:

Opening statement ........................................................................................... 29

Smith, Hon. Gordon H.:

Prepared statement .......................................................................................... 104

Troy, Dr. Tevi David:

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

Prepared statement .......................................................................................... 107

Biographical information ................................................................................. 109

Responses to questions from committee members ......................................... 119

Weems, Kerry N.:

Testimony .......................................................................................................... 11

Prepared statement .......................................................................................... 132

Biographical information ................................................................................. 135

Responses to questions from committee members, with attachments ......... 143

(1)

NOMINATIONS OF DR. TEVI TROY, TO BE

DEPUTY SECRETARY OF HEALTH AND

HUMAN SERVICES; HON. DAVID H. McCORMICK, TO BE UNDER SECRETARY FOR INTERNATIONAL AFFAIRS, U.S. DEPARTMENT

OF THE TREASURY; PETER B. McCARTHY,

TO BE ASSISTANT SECRETARY FOR MANAGEMENT AND CHIEF FINANCIAL OFFICER,

U.S. DEPARTMENT OF THE TREASURY;

KERRY N. WEEMS, TO BE ADMINISTRATOR,

CENTERS FOR MEDICARE AND MEDICAID

SERVICES; AND CHARLES E.F. MILLARD, TO

BE DIRECTOR OF THE PENSION BENEFIT

GUARANTY CORPORATION

WEDNESDAY, JULY 25, 2007

U.S. SENATE,

COMMITTEE ON FINANCE,

Washington, DC.

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

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

(chairman of the committee) presiding.

Present: Senators Bingaman, Kerry, Wyden, Stabenow, Salazar,

Grassley, Hatch, Lott, Smith, Crapo, and Roberts.

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

FROM MONTANA, CHAIRMAN, COMMITTEE ON FINANCE

The CHAIRMAN. The committee will come to order.

In the book of Deuteronomy, Moses instructed the 12 tribes of

Israel on how to choose officials. Moses told them to choose people

who are ‘‘wise, understanding, and respected.’’

Today we are here to consider the nominations of five people to

become high officials in the Federal Government. We are here in

the hope that the President has chosen people who are wise, understanding, and respected.

Before us today are the nominations of Dr. Tevi Troy, to be Deputy Secretary of Health and Human Services; David McCormick, to

be Under Secretary for International Affairs at the Treasury; Kerry

Weems, to be Administrator of the Centers for Medicare and Medicaid Services; Peter McCarthy, to be Assistant Secretary for ManVerDate 11-MAY-2000 14:29 May 11, 2009 Jkt 000000 PO 00000 Frm 00009 Fmt 6633 Sfmt 6633 42429.000 SFIN1 PsN: SFIN1
2

agement and Chief Financial Officer at the Treasury; and Charles

Millard, to be Director of the Pension Benefit Guaranty Corporation.

First, the Department of Health and Human Services is the largest non-defense agency in the Federal Government. Administering

such a large organization with such a wide variety of issues is a

huge responsibility.

Dr. Tevi Troy is the nominee to be the Deputy Secretary, the

number-two man at HHS. Dr. Troy will have his hands full helping

Secretary Leavitt to run the department that is home to CMS,

FDA, the CDC, NIH, ACF, and probably a host of other three-letter

acronyms. [Laughter.]

I expect Dr. Troy to be an impartial Administrator and put politics aside. He must make the right decisions, not just the politically

popular ones. Americans will be counting on him to help keep them

healthy.

Second, the Under Secretary for International Affairs at the

Treasury is an important position, with responsibilities for many

issues under this committee’s jurisdiction. Mr. McCormick has an

impressive background, and he comes highly recommended.

Two issues are of critical importance. This committee has been

very concerned about China’s under-valued currency. We are concerned that current law may not adequately address the relationship between fundamentally misaligned exchange rates and trade

flows.

That is why I introduced landmark currency legislation with

Senators Grassley, Schumer, and Graham last month. This committee will act on that legislation soon.

The Under Secretary will also have oversight over sanctions. I

have long been frustrated by the lopsided focus of the Office of Foreign Assets Controls on Cuba. That office should have been focusing critical resources on sanctions against Iran. It should have been

rooting out funding for terrorists.

I recently introduced legislation on Cuba trade, along with Senator Crapo and six other Finance Committee members. We need to

get beyond counterproductive ideology. We need to do what is right

for America’s agriculture producers.

Third, Mr. Weems has been nominated to be Administrator of

the Centers for Medicare and Medicaid Services, known as CMS.

CMS is the agency within HHS that administers Medicare, Medicaid, and the Children’s Health Insurance Program.

That means that CMS is responsible to more than 85 million

beneficiaries who rely on the agency for their health care. The CMS

Administrator is in charge of some of the most complex programs

in our government. These programs make a huge difference in people’s lives every day.

I am counting on Mr. Weems to be fair and even-handed. I do

not believe that CMS has been putting beneficiaries’ needs first recently, and that has to change.

HHS in general, and CMS in particular, have a duty to provide

services to our country in a nonpartisan way. The programs within

HHS are not political tools to be used at the whim of the administration.

3

Fourth is the Assistant Secretary for Management at Treasury.

Mr. McCarthy is well-qualified to oversee the budget and management of all of the Treasury’s offices and bureaus. His whole career

has been devoted to managing the operations of large financial

services organizations and their components.

The Department of the Treasury includes the Internal Revenue

Service, the Office of Tax Policy, and others, and so the Assistant

Secretary for Management has responsibility for developing the

IRS budget and overseeing IRS operations.

Mr. McCarthy will, thus, have a role in taking on the $345 billion annual tax gap, and it probably is even much larger than that.

I expect Mr. McCarthy to fight to ensure that the budget provides

the IRS with the tools and resources that it needs.

I expect him to work to ensure that the IRS can provide topquality taxpayer service and fair enforcement. I expect him to be

a hands-on leader who will support a credible and comprehensive

plan to reach 90-percent voluntary compliance by 2017. I appreciate that Mr. McCarthy has agreed to take on this challenge, and

I am looking forward to hearing his ideas to improve tax administration.

Finally, Mr. Millard. Mr. Millard is the first nominee for PBGC

Director to be subject to Senate confirmation. Last year, Congress

upgraded the position to a Presidential appointment, subject to

Senate confirmation. We made it one of the few positions of government subject to confirmation by two committees, this committee

and the HELP Committee.

The position’s new status is recognition of how important we consider people’s pensions. Both committees are concerned about the

financial health of the PBGC, and the defined benefit pension system generally. I applaud Mr. Millard’s willingness to take on this

quite difficult position.

I look forward to hearing from all of you. I wish all of you good

luck, and hope that, by your actions in your jobs, you all prove to

be wise, understanding, and respected.

Senator Grassley?

Senator GRASSLEY. Mr. Chairman, I am just going to put my

statement in the record. Thank you very much for the opportunity

to be here. I have some questions that I will be asking of the witnesses.

The CHAIRMAN. Thank you, Senator.

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

The CHAIRMAN. I am going to just introduce the panel, and then

I know Senators wish to introduce certain nominees. We will do

that as soon as I generally introduce the panel.

Senator ROBERTS. Mr. Chairman, could I make a unanimous consent request?

The CHAIRMAN. Certainly.

Senator ROBERTS. I would ask unanimous consent that I be recognized last, which is not unusual on this committee for me, at any

rate, and be granted 20 minutes’ time to answer some pertinent

questions in regards to the bidding program for the durable medical equipment? And that way I would not take up the time of

4

other members, which I know is very valuable, and would try to

get through my questions just as fast as possible.

The CHAIRMAN. I think we can work that out, Senator. You will

certainly have 20 minutes. That is not going to be a problem.

Senator ROBERTS. I thank the Chairman.

The CHAIRMAN. The first witness is Dr. Tevi Troy, who has been

nominated to be Deputy Secretary of Health and Human Services

for the Department of Health and Human Services; then Hon.

David McCormick, nominated to be Under Secretary for International Affairs for the U.S. Department of Treasury; next, Mr.

Kerry Weems, nominated to be the Administrator of the Centers

for Medicare and Medicaid Services; then Mr. Peter McCarthy, who

has been nominated to be the Assistant Secretary for Management

and Chief Financial Officer of the U.S. Department of Treasury;

and then Mr. Charles Millard, who has been nominated to be the

Director of the Pension Benefit Guaranty Corporation.

As I said, several Senators have asked to introduce nominees,

and I will turn to you, Senator Bingaman, if you wish to.

Senator BINGAMAN. I think Senator Domenici was going to go

first, if that is all right, Mr. Chairman. I will follow him.

The CHAIRMAN. All right. Thank you.

Senator, welcome to the committee.

STATEMENT OF HON. PETE DOMENICI,

A U.S. SENATOR FROM NEW MEXICO

Senator DOMENICI. Thank you very much. I do not come here

very often.

The CHAIRMAN. Well, it is good to see you.

Senator DOMENICI. But when I am here, I recognize the great

austerity of this committee, and I know all the great things that

it does, and will do. I thank you for giving me just 2 or 3 minutes.

We happen to have a New Mexican appointed for a very big job,

and he agreed to take it. At the end of the presidential term, when

you take somebody who has been in public service for 35 years,

with a family, three great children—and he will introduce them, as

you usually give them that chance—and a wonderful wife, whom

he met here in the Senate—that was a match made for heaven, but

made in the Senate. [Laughter.] When I met him, my first question

was, why would you do this to yourself? This is an incredibly difficult job at this stage of your career.

And, frankly, he is the most honorable and honest person that

the President could have picked for this job. He truly believes he

can do a good job, and pledges to do that and nothing else. He has

no other motives. His background clearly justifies him for the job.

So, rather than go into any detail, I think you know me, most

of you. I would not be here telling you, if I did not mean it, that

this man is more than qualified and truly wants to take the job,

and pledges nothing but good public service and wants nothing out

of it other than to look back and say that he did the best job possible.

I do not think I can introduce a candidate who makes my job

easier than this one, and I hope that your job of approving him is

as easy as mine is in asking you to do that.

Thank you very much.

5

The CHAIRMAN. Thank you, Senator. You did not state his name.

I presume you mean Mr. Weems. [Laughter.]

Senator DOMENICI. Mr. Weems.

The CHAIRMAN. Thank you for taking time out of your very busy

day, Senator. Thank you so much for coming. We deeply appreciate

it.

Senator DOMENICI. You are welcome. Thank you.

The CHAIRMAN. You are welcome.

Senator Bingaman?

OPENING STATEMENT OF HON. JEFF BINGAMAN,

A U.S. SENATOR FROM NEW MEXICO

Senator BINGAMAN. Mr. Chairman, thank you very much for letting me also say a word of endorsement of Kerry Weems for this

important position. This is an important position. I think you

pointed out, 85 million people depend on Medicare and Medicaid,

and CMS is obviously the agency that we have a lot of interaction

with because of that. Kerry Weems is well-qualified to take over

this position.

He worked here in the Senate. When I first came to the Senate,

he had just left. He worked for my predecessor, Senator Schmitt,

here in the Senate and came from New Mexico. He grew up in Los

Cruces much of his life, and then went to the University of New

Mexico for his Master’s in Business Administration after going to

New Mexico State for his undergraduate work.

But he has worked in the Department of Health and Human

Services since 1983 and is very much a career public servant in

that regard. He worked for Republican and Democratic administrations. In 2000, he got the President’s Award from then-President

Clinton, and the Presidential Rank Award.

In 2005, he was appointed as Deputy Chief of Staff to Secretary

Leavitt and has distinguished himself in that position. So, I think

we are fortunate to have him able to take this position. It is late

in this administration.

I think we are all aware that this is a difficult job to step into

at this stage and make a constructive difference, but he is committed to doing that. So, I am glad to join Senator Domenici in urging his approval by this committee.

The CHAIRMAN. Thank you, Senator, very much.

I believe Senator Hatch would like to make an introduction.

OPENING STATEMENT OF HON. ORRIN G. HATCH,

A U.S. SENATOR FROM UTAH

Senator HATCH. Well, thank you, Mr. Chairman. I just want to

welcome all five of you here today. I have high respect for each and

every one of you, and we are hoping that your confirmations will

go very smoothly. I am aware of you and appreciate the service

that you have given and the background that you have obtained.

I would like to specifically introduce Dr. Tevi Troy to the committee this morning. He has been nominated by the President to

be the Deputy Secretary for the Department of Health and Human

Services, and he is currently the Deputy Assistant to President

Bush for Domestic Policy. In that capacity he has been one of the

6

White House’s lead domestic policy advisors, and he manages the

domestic policy processes in the White House.

Dr. Troy has also served in the White House as a Special Assistant to the President and Deputy Cabinet Secretary, and as the

White House Liaison to the Jewish Community. In that position,

he was selected as a U.S. delegate to the Organization for Security

and Cooperation in Europe Conference on Anti-Semitism in the

spring of 2004. He was also detailed to the White House from the

Department of Labor as Special Advisor to the White House Domestic Policy Counsel.

He began working in the Bush administration at the Department

of Labor, where he was the Deputy Assistant Secretary for Policy,

and earlier served as Director of the Department of Labor’s Office

of Faith-Based Initiatives.

Prior to joining the administration, Dr. Troy served as the Policy

Director for former Senator John Ashcroft. He has also served as

Senior Domestic Policy Advisor, and later Domestic Policy Director,

for the House Policy Committee, chaired by former Congressman

Christopher Cox.

He has also been the Herman Kahn Fellow at the Hudson Institute in Indianapolis and a researcher at the American Enterprise

Institute in Washington. Dr. Troy earned a B.S. in Industrial and

Labor Relations from Cornell University, and an M.A. and Ph.D. in

American Civilization from the University of Texas at Austin. He

has studied at the London School of Economics.

He is the author of ‘‘Intellectuals in the American Presidency:

Philosophers, Jesters, or Technicians?’’ I do believe I deserve an

autographed copy of that book. [Laughter.] I want to read that.

His experience and education have prepared him well to take

over as Deputy Secretary of HHS. As Deputy Secretary, Dr. Troy

will serve as the principal Deputy of Secretary Leavitt, a man I

know a great deal about, and a very, very fine Secretary. I think

we all feel that way.

But he will serve there with Secretary Leavitt in all matters affecting the Department, and perform continuing and special duties

as the Secretary may assign, including the exercise of policy direction and general supervision over operating units not placed under

other secretarial officers or other departmental officials.

Dr. Troy currently resides in Maryland with his wife Kami and

four children, who are here with us today. We welcome them as

well. We welcome the family members of all of you today.

With that, I present the nomination of Dr. Troy to the committee

for consideration, and I appreciate you, Mr. Chairman, for moving

ahead on these nominations. I do not think we could have five better people. Thank you so much.

The CHAIRMAN. All right. Thank you very much, Senator.

At this time I would like to ask Dr. Troy to begin. But before he

does, do you want to introduce your family here?

Dr. TROY. Yes. Thank you, Mr. Chairman. I would be honored to.

They are standing over here. Please rise. I have my wife, Kami, to

whom I owe so much, my son, Ezra, my daughters, Ruth and Rina,

and little baby Noah. I hope he does not cry this morning, sir.

[Laughter.]

7

The CHAIRMAN. Well, thank you very, very much. I thank all of

you. Government service is a sacrifice for everyone, not only the

person serving, but also the person’s family. We thank you all very

much for undertaking this endeavor. Thank you.

Dr. Troy, you can begin.

STATEMENT OF DR. TEVI DAVID TROY, NOMINATED TO BE

DEPUTY SECRETARY OF HEALTH AND HUMAN SERVICES,

DEPARTMENT OF HEALTH AND HUMAN SERVICES, WASHINGTON, DC

Dr. TROY. Thank you, Mr. Chairman.

The CHAIRMAN. And your full statement will be included in the

record.

Dr. TROY. Well then, thank you. I will be brief then, since I know

that that will happen. I appreciate that.

Thank you, Mr. Chairman, for this opportunity. Thank you, Senator Hatch, for that kind introduction; you will be sure to get an

autographed copy of my book. I will be proud to give you one.

The CHAIRMAN. What about the rest of the committee? [Laughter.]

Dr. TROY. Any members who so desire who would actually read

it, I would be happy to do so. [Laughter.]

Senator HATCH. I think they would all benefit from it, personally.

Dr. TROY. All right. Copies coming up.

Thank you for this opportunity. I would also like to thank President Bush and Secretary Leavitt for showing this faith in me. I

really appreciate that.

As Senator Hatch noted, I have worked in this body before as a

staffer, and I have also worked on the House side, and so I have

a great appreciation and respect for this body and really look forward to working with you in my new capacity.

I was pleased to have this opportunity to introduce my family,

who are so important to me. I am really excited for this opportunity to be here. I grew up in New York City in a time that was

a very difficult period in the late 1970s when the city was on the

verge of bankruptcy, there was graffiti, crime, urban unrest. It was

a very difficult period.

At that very early age, it instilled in me a belief that there needed to be a better way. There is a strong desire for me to enter public service to help bring about that better way.

That belief in service was bolstered by two things. First of all,

my family—both my parents are teachers in the New York city

teachers union, teachers in the New York city schools—and also my

Jewish upbringing. There is a Jewish principle of tikkun olam,

which means improving the world, or constantly improving the

world. It is a very important Jewish principle, and it has informed

my thinking.

After going to college, I went to get a Ph.D. at the University of

Texas, as Senator Hatch noted. I wrote a book on intellectuals of

the presidency, as noted. That book was about how ideas get translated into action, how they get brought into politics.

Because of my belief in service, while interested in studying it,

I also wanted to be involved. So I did move to Washington. I

worked in the House and in the Senate. I have worked for the DeVerDate 11-MAY-2000 14:29 May 11, 2009 Jkt 000000 PO 00000 Frm 00015 Fmt 6633 Sfmt 6633 42429.000 SFIN1 PsN: SFIN1
8

partment of Labor, for the executive agencies, and for the White

House. I found executive service, and government service in general, to be incredibly rewarding.

Now as I approach this new opportunity, my rabbi said to me

that moving over to HHS gives me the opportunity to practice

tikkun olam, or improving the world on a grand scale. That really

is the case at HHS, which is a very large department, as the Chairman noted, but a department that really touches the lives and

helps improve the lives of every American.

So I look forward to having this opportunity to work at HHS. I

really look forward to having the opportunity to work with Secretary Leavitt, who is a very thoughtful and smart man. I am

grateful for the faith he has shown in me, and I really hope to reward that faith while I am over at the Department.

So it is this overriding belief in service and in family that brings

me here today, and I come here comforted, knowing that in this

new capacity, should the Senate be willing to confirm me, I will go

home every day to my wife and my four children, telling them that

I have helped work to make this a better world.

Thank you for this opportunity.

The CHAIRMAN. Thank you, Dr. Troy.

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

The CHAIRMAN. Mr. McCormick, you have an opportunity here to

introduce your family, if you so choose.

Mr. MCCORMICK. Thank you, Senator. I would like to introduce

my wife, Amy Richardson, and three of my four children: Ava. Put

your hand up, Ava. Tess, the 4-year-old, and Elise.

The CHAIRMAN. Could as many as you can please stand so we

can all see you? All right. Wonderful. Thank you. That is great.

Thank you.

Mr. MCCORMICK. Thank you very much.

The CHAIRMAN. You bet. Thank you.

We wish you all very well. As Dr. Troy’s family, the McCormick

family as well.

Go ahead.

STATEMENT OF HON. DAVID H. McCORMICK, NOMINATED TO

BE UNDER SECRETARY FOR INTERNATIONAL AFFAIRS, U.S.

DEPARTMENT OF THE TREASURY, WASHINGTON, DC

Mr. MCCORMICK. Mr. Chairman, Ranking Member Grassley,

members of the Committee on Finance, thank you for the opportunity to be here today. I recognize what an important role this is,

and, if fortunate enough to be confirmed, I will do my utmost to

execute those responsibilities effectively.

I am honored that President Bush has nominated me to serve as

the Under Secretary of Treasury for International Affairs and, if

confirmed, to have the opportunity to work with Secretary Paulson,

the Treasury staff, and others in the administration.

If confirmed, I would also look forward to the opportunity to

work closely with this committee, because I know a number of the

issues in this portfolio are of significant concern and interest to

members of this committee, and I would look forward to working

with your colleagues in the House of Representatives to advance

U.S. economic interests at home and abroad.

9

My experiences as a senior member of the President’s economic

team, as a public company CEO, and as a veteran and former military officer have prepared me well for the position to which I have

been nominated.

And if fortunate enough to be confirmed, I would work very hard

on some of the most pressing issues of the day and focus on things

such as addressing growing global imbalances, accelerating China’s

stable integration into the global economy, and ensuring that development assistance from the multilateral development banks is deployed effectively around the world.

I would also focus on advancing the President’s vision for opening up foreign markets for U.S. goods and services and accelerating

the transition of many developing countries to true market-based

economies.

I would also continue to emphasize the critical importance of economic growth, good governance, and the rule of law in ensuring

that all parts of the global economy can become vibrant and prosperous, while at the same time maintaining vigilance in trying to

prevent future financial crises.

As I said, I am grateful to have the opportunity to be with you

here today, and I look forward to answering any questions you

might have. Thank you.

The CHAIRMAN. That is it?

Mr. MCCORMICK. Yes, sir.

The CHAIRMAN. All right.

[The prepared statement of Mr. McCormick appears in the appendix.]

The CHAIRMAN. All right. Mr. McCarthy, welcome to the committee.

Mr. MCCARTHY. Thank you, Mr. Chairman. My children are all

grown up and living in faraway places, but I would like to introduce to you my wife of 35 years, Mary Calvert McCarthy, who is

with me today.

The CHAIRMAN. Welcome, Mrs. McCarthy, very much. Thank

you.

Why don’t you proceed?

STATEMENT OF PETER B. McCARTHY, NOMINATED TO BE ASSISTANT SECRETARY FOR MANAGEMENT AND CHIEF FINANCIAL OFFICER, U.S. DEPARTMENT OF THE TREASURY, WASHINGTON, DC

Mr. MCCARTHY. Mr. Chairman, Ranking Member Grassley, members of the Senate Finance Committee, thank you for the opportunity to appear before you here today. I am honored that the

President has nominated me to serve as Assistant Secretary for

Management at the Treasury Department, and I am grateful to you

for taking the time to consider that nomination.

Mr. Chairman, the Assistant Secretary for Management and

Chief Financial Officer at Treasury is responsible for internal management and policy in the areas of budgeting, planning, human resources, information technology, financial management, accounting,

procurement, and administrative services.

It is incumbent upon this individual to maintain and improve the

effectiveness and efficiency of, and cooperation among, the offices

10

and bureaus of the Department. I believe that my broad management experience in large financial organizations would enable me

to successfully fulfill these responsibilities.

My career in banking and financial services spans more than 30

years and includes extensive practical experience in the financial

management of complex business entities. Eighteen of those years

were spent in expatriate assignments, primarily in the United

Kingdom and Japan.

I have held senior positions across a wide variety of banking activities, including customer relationship management, credit and

market risk management, corporate banking, capital markets product management, training, trading, Treasury operations, and administration.

I have had the opportunity to manage significant change, having

opened, grown, and right-sized banking operations around the

world to better meet customer expectations and improve efficiency

and accountability.

Mr. Chairman, I would be grateful for the opportunity to apply

the experience that I have gained and the skills that I have learned

to the vitally important work of the Treasury. I look forward to the

possibility of joining the dedicated cadre of career and appointed

professionals at the Department in the various Treasury bureaus.

If confirmed, I will work hard to support Secretary Paulson’s

commitment to efficient and effective management practices, to responsible budgeting, and to strong internal controls. I will support

the Secretary’s commitment to strengthen policy guidance and approve oversight of information technology investments.

I will be attentive and responsive to the interests of your committee and of Congress in Treasury’s performance and the administration of its programs and activities.

Mr. Chairman and members of the committee, I have never had

the privilege of serving the government of the United States. To do

so now in a management role for which I feel truly well-prepared

would be a great honor. Thank you again for the opportunity to appear before this committee and for considering my nomination.

The CHAIRMAN. Thank you, Mr. McCarthy.

[The prepared statement of Mr. McCarthy appears in the appendix.]

The CHAIRMAN. Mr. Weems?

Mr. WEEMS. Thank you, Mr. Chairman. If I might, I would like

to introduce my family, sir.

The Chairman. Absolutely.

Mr. WEEMS. They are here. First of all, my wife of 23 years,

Jean, who is a former employee of Senator Grassley’s.

Senator GRASSLEY. And a good employee. I would hire her back.

[Laughter.]

Mr. WEEMS. As Senator Domenici noted, we did meet while coming to the Senate when we were employed here.

My son, Peter, who is at James Madison University; my daughter

Claire, who is at George Mason; and finally, my daughter Anna,

who is beginning her senior year in high school.

The CHAIRMAN. Oh. Good. Congratulations, all of you. Welcome

to the committee, and good luck.

Why don’t you proceed?

11

STATEMENT OF KERRY N. WEEMS, NOMINATED TO BE ADMINISTRATOR OF THE CENTERS FOR MEDICARE AND MEDICAID

SERVICES, WASHINGTON, DC

Mr. WEEMS. Thank you, Senator. Thank you very much for holding this hearing today, and especially thanks to Senator Domenici

and Senator Bingaman for introducing me.

I have worked with many of you. You know me from both Republican and Democratic administrations. I was first hired into the

civil service in 1983. I became a manager during President George

H.W. Bush’s administration. Former HHS Secretary Donna Shalala

signed my appointment to the Senior Executive Service, and President Clinton awarded me the Presidential Rank Award.

Former Secretary Thompson promoted me to Deputy Assistant

Secretary for Budget, and from January 2003 to July 2005, I served

as Acting Assistant Secretary for Budget, Technology, and Finance

and as HHS Chief Financial Officer. More recently, I was Deputy

Chief of Staff to Secretary Leavitt.

It is a privilege to be here today to apply for the job of CMS Administrator. One of the strengths I bring to this job is the ability

to manage enormous budgets effectively. CMS spends more than $600 billion a year, more than Defense

and more than many countries in the world. CMS determines access to health care for more than 90 million beneficiaries. Its payment decisions determine the quality of health care and when and

how that care is provided. CMS’s regulatory power is enormous,

reaching into practically every aspect of health care.

Small programmatic changes have large consequences to individual providers. This is not simply a question of CMS flexing its

regulatory muscle; it is also a question of being aware of those consequences. Indeed, many on this committee have urged me to be

sensitive to CMS’s regulations on a wide range of providers.

Much more is at stake than economics or politics. Beneficiaries’

health and lives depend on these decisions. The person who steps

into the Administrator’s post also needs to have a broad, nonpartisan understanding of health care delivery and where we need

to go. Almost a quarter of a century of working at HHS has given

me a long-term perspective that I believe is critical to leading CMS.

There has been a lot of change in health care in my 24 years of

service. When I began in the Social Security Administration, then

a part of HHS, there was an ashtray on every desk and smoking

in every office. Today, CMS has a nationwide prevention campaign,

including smoking cessation counseling.

When I started at HHS, the ink was barely dry on diagnosticrelated groups. Today CMS is moving beyond DRGs, replacing

volume-based payment systems with systems that recognize a patient’s condition and the quality of their care. For example, on July

1, CMS began the Physician’s Quality Reporting Initiative to reward initiatives for reporting on quality health care.

I hope soon to be able to send to this committee a CMS plan for

value-based purchasing in the hospital setting, and Secretary

Leavitt is making great progress with standards and certification

on electronic health records.

I am aware that this committee and others have been frustrated

by the lack of resolution and consistent information regarding the

12

Medicare Part D premium withhold. Mr. Chairman and Senator

Grassley, if I am confirmed, you will have the same information

that I do, and I will make it a top priority to fix these problems.

Much attention has been devoted to the baby boom generation

and its imminent retirement. However, before they retire, the

boomers have one great task ahead of them: caring for the generation that preceded them.

My own family offers examples of the issues these generations

face. My father is on the Medicare prescription drug program and

hit the coverage gap this year; I got a phone call. He and I worked

together to get him the coverage he needs and the drugs that are

best for him.

My vision for the prescription drug program is that every beneficiary and their caregivers have the information they need to

choose the plan that is best for them and to get the care they need.

My mother may soon be faced with the need for a particular surgery. My vision for our health care system is that she, and every

patient, has the right information to choose care that is accessible,

coordinated, effective, and in the most appropriate setting.

My wife and her sister are caregivers for their mother who resides in a nursing home. Recently, my mother-in-law was injured

in the nursing home, yet my wife has not received a satisfactory

explanation from this particular facility, despite a request for a detailed incident report.

My vision for Medicare and Medicaid is one in which beneficiaries are protected, whether from unsafe nursing homes, unscrupulous insurance salesmen, fraudulent equipment providers, or

bad medicine. If confirmed, I will intensify CMS oversight, and I

expect you to hold me responsible for acting on abuses or inefficiencies discovered in the course of program oversight.

Throughout my more than 2 decades of public service at HHS,

I have witnessed tremendous talent at CMS and at HHS. Let me

tell you what I have learned in that time. I have learned to seek

out experts and all those who have equities in an issue and listen

to them. I have learned to follow the law, to weigh the evidence

and the facts, and to render a decision. My pledge to you today is

that I will pursue the facts and the law to guide my decisions and

leadership.

Let me again say that it is an honor to have received the President’s nomination, to thank you for holding this hearing, and I

humbly submit my credentials for your consideration.

Thank you.

The CHAIRMAN. Thank you, Mr. Weems.

[The prepared statement of Mr. Weems appears in the appendix.]

The CHAIRMAN. Mr. Millard?

Mr. MILLARD. Good morning, Mr. Chairman. I have a large family. I have eight children, and my wife is expecting number nine.

But they are young, and travel from New York to here was a little

difficult. But I do have my oldest son Egan here, who is spending

a few weeks with me in Washington, whom I would like to introduce.

The CHAIRMAN. Thank you very much. Good luck to you, Egan.

13

STATEMENT OF CHARLES E.F. MILLARD, NOMINATED TO BE

DIRECTOR OF THE PENSION BENEFIT GUARANTY CORPORATION, WASHINGTON, DC

Mr. MILLARD. Chairman Baucus, Ranking Member Grassley, and

members of the committee, thank you for giving me the opportunity to appear before you today.

I am honored and humbled that President Bush has nominated

me to serve as the Director of the Pension Benefit Guaranty Corporation, and I appreciate your consideration of my nomination.

Public service is a privilege which I hold dear, and I am sincerely

grateful for this opportunity to serve, if I am confirmed.

For as long as I can remember, my parents taught my siblings

and me that loving our neighbor meant taking action. My first experience of that action was marching for civil rights with my parents 40 years ago in Newark, NJ. The desire to serve has stayed

with me since that time. I certainly hope that my children experience a similar example from my wife and me.

I have had the chance to serve as a VISTA Volunteer in Crown

Heights, Brooklyn, and as a board member of the New York Urban

League. In 1985, I worked in Chile for the Vicariate of Solidarity,

a Santiago-based human rights organization.

I have served as a New York city councilman, and was then appointed by Mayor Rudolph Giuliani to be the president of the New

York city Economic Development Corporation and chairman of the

New York city IDA. I also worked as a legislative assistant in the

early 1980s here on Capitol Hill for Congresswoman Millicent

Fenwick of New Jersey.

My work in New York as head of EDC is worth noting because,

like PBGC, the Economic Development Corporation was created as

a corporation to manage governmental programs that are principally business-like in nature, produce self-sustaining revenue, involve numerous negotiated transactions, and require greater budget and other flexibility than a traditional government agency.

In addition to public service, my career in private life also helps

me bring relevant knowledge and experience to the PBGC. I have

been a practicing Wall Street attorney, representing large financial

institutions. I have been a managing director involved in investment banking, public finance, and investment management with

such firms as Lehman Brothers and Prudential Securities.

Most recently, I have been a partner in a more entrepreneurial

real estate enterprise dealing with large, individual, and institutional investors regarding their investment allocations to real estate.

This diverse background in public and private life has given me

experience in managing hundreds of people in a public environment and directing a large organization to higher achievement. I

have also come to understand how individual corporations reach financial decisions and how many large institutions and pension

funds make investment decisions.

PBGC and the defined benefit pension systems face considerable

challenges in coming years. At the end of fiscal year 2006, PBGC’s

deficit stood at $18.9 billion. The corporation controls assets worth

approximately $61 billion and faces liabilities of approximately

$80 billion on a present value basis. Also, PBGC estimates that

14

total under-funding in ongoing plans stood at $500 billion at the

end of fiscal year 2006.

The Pension Protection Act, passed last year by Congress and

signed by President Bush, has made some significant improvements in the system that will enhance the soundness of the defined

benefit system for millions of American workers. The corporation is

currently implementing the PPA, including the development of a

comprehensive set of regulations and other guidance as mandated

by Congress.

Mr. Chairman, I would like to emphasize my personal commitment to PBGC’s mission and purpose. It is PBGC’s job to promote

and maintain healthy plans, to negotiate in bankruptcy and other

proceedings, to protect workers and their benefits, and, of course,

when a plan must terminate, it is PBGC’s job to pay those benefits.

This requires constant vigilance to various corporate transactions,

securities filings, and bankruptcy court proceedings.

It requires steadfast negotiations by PBGC on behalf of workers

and their families to help avoid plan terminations, or at least to

minimize their impact, and it requires responsible and effective investment and stewardship of the assets that are used to pay benefits to the insured beneficiaries of trusteed plans.

A corporation carries a tremendous responsibility, because the

insured beneficiaries of trusteed plans that I just mentioned are actually real, individual human beings, people who have worked their

whole lives to receive the retirement benefits that they have been

promised and have earned, people who support families and who

wait for the check from PBGC so they can sit at the kitchen table

and pay their bills, people who are counting on PBGC to carry out

its mission as given to it by you.

If confirmed in this position, I would welcome the opportunity to

work with members of the Senate and the House, as well as your

staffs, to make sure that we do the best job we can for these workers. I would be happy to answer any questions you may have.

Thank you.

The CHAIRMAN. Thank you, Mr. Millard.

[The prepared statement of Mr. Millard appears in the appendix.]

The CHAIRMAN. I am now going to ask three standard questions

of each of the nominees. I will ask the first question of you, Dr.

Troy, and then I am going to ask each of the other nominees if they

also make the same commitment. Then I will go to question two,

in the interest of time, and hopefully clarity.

Dr. Troy, is there anything that you are aware of in your background that might present a conflict of interest with the duties of

office to which you have been nominated?

Dr. TROY. No, sir, Mr. Chairman.

The CHAIRMAN. Mr. McCormick?

Mr. MCCORMICK. No, sir, Mr. Chairman.

The CHAIRMAN. Thank you very much.

Mr. McCarthy?

Mr. MCCARTHY. No, Mr. Chairman.

The CHAIRMAN. Mr. Weems?

Mr. WEEMS. No, Mr. Chairman.

Mr. MILLARD. No.

15

The CHAIRMAN. Thank you.

Do you know of any reason, personal or otherwise, that would in

any way prevent you from fully and honorably discharging the responsibilities of the office to which you have been nominated?

Dr. TROY. Definitely not, sir.

Mr. MCCORMICK. No.

Mr. MCCARTHY. No, sir.

Mr. WEEMS. No, sir.

Mr. MILLARD. No, sir.

The CHAIRMAN. Thank you.

Do you agree, without reservation, to respond to any reasonable

summons to appear and testify before any duly constituted committee of Congress, if you are confirmed?

Dr. TROY. Yes, sir.

Mr. MCCORMICK. Yes, Mr. Chairman.

Mr. MCCARTHY. Yes, sir.

Mr. WEEMS. Yes, Mr. Chairman.

Mr. MILLARD. Yes, I do.

The CHAIRMAN. All right. Thank you.

I think it is not a secret that there is considerable concern that

this administration tends to put politics above policy in many different areas. It is very concerning to me, personally.

You, Dr. Troy, mentioned public service, the noble service that it

is, and I agree. All of us are really public servants. We are here

to serve the country, the people we represent. I do in my capacity,

Senator Grassley does; you do, we all do. We have a duty, almost

a fiduciary duty, to the people we serve, not a duty to ideology or

to partisan politics.

Rather, it is a duty that each of us holds, I think, especially in

the agencies in which you will be probably serving, to fully remember your constituents—in HHS’s case, beneficiaries; at Treasury, it

is taxpayers—rather than the White House, rather than political

pressure.

I expect you to be neutral, aggressive servants of the people you

are working for, all of you. You will be, in the long run, able then

to hold your head higher when you leave. You are not there permanently—none of us is. But when we all leave, we want to be very

proud of what we did when we served our people.

So in that respect, Dr. Troy, as you know, former Surgeon General Richard Carmona said that he has been stopped by the White

House from bringing certain science-based information to the public, and he said his speeches and reports were edited because they

did not fit the President’s political agenda.

What assurances can you give this committee that you will resist

political pressures and do what is right based on science? Someone

else can follow the facts and law. I assume you will follow the facts

and law, too. So what assurance can you give this committee?

Dr. TROY. Thank you for that question, Mr. Chairman, and also

for your comments about public service, which, as I said earlier, I

hold in the highest regard.

I have been a public servant in the White House, but also in the

executive agencies. The White House is part of my background, but

it is not the totality of my background. I have also worked in Congress. I have a strong reputation on both sides of the aisle.

16

I have long built friendships on both sides of the aisle. With my

Ph.D. background, I have always had a great interest in looking at

the facts, in studying, in research in making sure we come to the

right decision. I understand what the role of the agencies are in the

process, and I pledge to undertake that role.

The CHAIRMAN. I appreciate that. We do not have a lot of time

up here. Each of you has jurisdiction over an incredibly complex set

of issues, so it is very difficult for us to ask lots of individual, specific questions. So that is why I am asking generally, just your attitude and the approach that you are going to take with your job.

Mr. Weems, I have had longstanding concerns about CMS using

enormous pressures of the Office of the Administrator to advance

the White House political agenda. I expressed great displeasure

when CMS held a briefing on Medicare Advantage, basically pushing and promoting Medicare Advantage. It was an outrage.

To my surprise and dismay, a more egregious political stunt followed, even though we had a private meeting and I told you how

concerned I was about that briefing. That stunt that followed was,

the administration tried to make 5 million children disappear with

an HHS study about the number of eligible, but unenrolled, children.

CBO says the study is not accurate. It is clearly a political document. What assurance can you give this committee that you will

not indulge in such activities? In fact, if you are asked to do something like that, that you will stop it and you will be straight and

forthright with us, not be political?

Mr. WEEMS. Thank you for the question, Senator. I will be brief.

I sit before you today still as a career civil servant. I have, on

many, many occasions, resisted political pressure when the right

decision lay in front. I have no intention, if confirmed, of using the

Administrator’s office for political purposes.

The CHAIRMAN. And will you not let your office be used at all for

political purposes?

Mr. WEEMS. Not within my——

The CHAIRMAN. Remembering the beneficiaries that you are serving.

Mr. WEEMS. That is what I would be there for, if confirmed. And

within my power, I would not let my office be used for that purpose, sir.

The CHAIRMAN. Thank you. My time has expired.

Senator Grassley?

Senator GRASSLEY. Yes. My first question is about political pressure, to make sure that there is not political pressure from Congress. So, I am going to direct to Mr. McCarthy more a statement

than a question.

As you know, I have shared the administration’s strong support

for the IRS’s private debt collection program. It is a cost-effective

way, I think, to deal with the tax gap. The Chairman always emphasizes the tax gap, and I agree with him 100 percent. This has

been an effective tool in collecting taxes due and owing, and at the

same time protecting taxpayers’ rights.

It is my understanding that the current contracts are scheduled

to end early next year. Given the lead time necessary for new contracts to be let, that process needs to be moving forward very rapVerDate 11-MAY-2000 14:29 May 11, 2009 Jkt 000000 PO 00000 Frm 00024 Fmt 6633 Sfmt 6633 42429.000 SFIN1 PsN: SFIN1
17

idly. The Acting Commissioner of IRS has said that these requests

for quotes would be ‘‘out by summer.’’ Those are his words, not

mine. However, there are only a few more Sundays left in summer

and we have not heard a doggone thing.

I want your assurance that these requests for quotes will be out

before July 31. I have no interest in the details of the request for

quotes. That is the business of the IRS, and it would be inappropriate for me or any member of Congress to interfere in that process.

I would like your assurance that the IRS and Treasury are not

allowing a member of Congress, or Congress generally, or maybe

some very strong staff of appropriate committees in the Congress,

to get involved at this point in the contracting process. That would

be very irregular.

Before you respond, the law of the land is that there should be

private debt collection programs. We passed that. I expect Treasury

and the IRS to properly administer the current law and in no way

restrict the program based on speeches from politicians.

Let me be more specific. It is my understanding that there is kind of a general rule that if there is debt collection below $25,000,

that the present staff of IRS just ignores that.

So we have put in place debt collection from the private sector

to go after money that we would not otherwise go after. I do not

know how much of the $350 billion of the tax gap we talk about.

It might be this $25,000 or less. But we ought to go after it, and

we are going after it with this program. We need to have more

than two contracts out there.

So, will it get done?

Mr. MCCARTHY. Senator, thank you for that question. I know

this is a very important matter for your committee and for the

American taxpayer. The IRS has been managing, and continues to

manage, this initiative strictly within the rule of law, as laid out

by Congress in 2004.

My understanding is that the first cases were referred only last

September, so it is still a relatively new initiative. But it is being

successfully managed at this time. I believe that taxpayer surveys

have indicated that the taxpayers are satisfied with the service

that they are getting through these collection agencies, and every

taxpayer does have the right to request that his or her return be

returned to an IRS agent rather than being handled by a collection

agent, if they so choose.

Also, I understand that it is a financially successful operation, at

least so far. Sometime during fiscal year 2008, the monies that

have been collected by these agents will match the appropriations

that have been allocated.

Senator GRASSLEY. Yes. Can I ask you, are you going to put out

these requests before summer is out, according to the IRS? I just

kind of need a ‘‘yes’’ or ‘‘no’’ answer.

Mr. MCCARTHY. Sir, I am not in a position to say whether they

will be out by July 31. I could only refer that question directly to

IRS management, I think, if you wish me to.

Senator GRASSLEY. Well, if there is anybody here from congressional relations, I hope they know that the law is the law. It is

going after money that would not otherwise be collected. You

18

should not be listening to a bunch of union bosses or a bunch of

people on the other side of the Hill about whether this is a good

program or not.

The Constitution establishes a system of checks and balances—

I am leading up to Mr. Weems and Dr. Troy—that is intended to

assure that the American people have fair, honest, and transparent

government. We all know what a checks-and-balances system is.

In furtherance of our oversight responsibilities in Congress, we

often ask the GAO to evaluate CMS’s activities. In addition, we

may ask the Office of Inspector General to get involved in things

like that. This committee, however, has encountered a number of

significant undue delays in response to its requests. A number of

requests to HHS, for example, remain outstanding and the deadlines have long passed.

Mr. Weems, in your opening statement you said you will ‘‘intensify CMS oversight activities, and I expect this committee to hold

me responsible for acting on abuse or inefficiencies discovered in

the course of program oversight.’’ Your predecessors will tell you

that I am going to hold you to that. You know me for doing that,

and I appreciate that.

So, Dr. Troy and Mr. Weems, will you commit to working with

Congress, GAO, and OIG in a timely and constructive manner to

address the oversight and other needs of Congress, and will you encourage others to do so?

Dr. TROY. Yes, Mr. Chairman.

Senator GRASSLEY. Thank you.

Mr. WEEMS. Yes, sir.

Senator GRASSLEY. My time is up.

Mr. Crapo is next. I will have some further questions.

Senator CRAPO. Thank you very much.

I have questions for every member of the panel, but as you can

see, we do not have enough time to get through our questions. So

I am going to focus on you, Mr. Weems.

Mr. WEEMS. Thank you.

Senator CRAPO. I suspect you will get a lot of the questions. Actually, I have so many questions that I am going to just tell you

the categories and then probably get into what I can in the time

I have, and submit some to you in writing.

I have questions on the hospital inpatient prospective payment

system rule that I wanted to go over with you; also, on the ambulatory surgical center payment rule that was just issued; on the least

costly alternative policy that CMS is pursuing, particularly with regard to certain prostate cancer drugs; the erythropoiesis-stimulating agent issue, where CMS has proposed a national coverage

determination that I think may be too restrictive and cause some

difficulties.

Just two more. A question on specialty hospitals and the manner

in which CMS is approaching resolving those issues that we have

been working on for so long. And then finally one that you and I

have already talked about also, as well as some of these others, but

the Xoponex issue and the question of whether CMS’s decision recently to bundle multi-source and single-agent asthma and COPD

drugs in the reimbursement code is being done properly.

19

So I am going to send you in writing more detailed questions on

those six areas, but let me just focus in the time I have remaining

on the ambulatory surgical center issue.

CMS released its payment rule recently. And by the way, I

thought that the rule that was issued was a significant improvement over where we are currently, but, as I believe you know, it

did not go as far as I had been asking. I am concerned about basically two problems.

First, the 65-percent reimbursement rate, I do not believe is

going to be adequate. I would hope we would still have time to revise that proposed rule. A 75-percent reimbursement rate will be

much more effective and will allow ambulatory surgical centers to

better fulfill the medical needs that we want to see them accomplishing in our society. So, I encourage you to discuss that with me

in the time that we have here.

Then the other major concern I have is that, although the proposed rule adds a number of new procedures that are authorized,

instead of moving to the exclusionary list, which was to authorize

all procedures except those specifically determined not to be proper

for those types of facilities, instead the agency still seems to be

wanting to go through and outline every procedure that can be authorized rather than approaching it from the exclusionary point of

view.

I do want you to respond in the few minutes that we have left

on those two issues, please.

Mr. WEEMS. Thank you. And for the others, I would be happy to

respond in writing.

Ambulatory surgical centers are an essential part of our health

care system. They offer alternative settings and perform what we

believe is high-quality work. The reimbursement rate that we were

led to in that rule, like many things we do in rules, is based on

the evidence that is available.

Frankly, in cases like this, and also something that I am sure

other members of the committee will want to discuss, the inpatient

rule, we are led by the evidence presented by our Office of the

Independent Actuary who makes these estimates.

We follow that. We attempt to follow the facts, but like most

things we will keep an eye on the transition as we go through it.

We will ensure that as we refine payments, that the reimbursement rate is correct. We certainly want to be responsive to your

concerns.

Senator CRAPO. I think the data show otherwise, and I will visit

with you about that. But in the short time we have remaining,

what about the exclusionary approach rather than listing every authorized procedure?

Mr. WEEMS. On August 23, 2006, CMS proposed in the Federal

Register (71 FR 49635) a revised payment system for ambulatory

surgical centers (ASCs) to be implemented effective January 1,

2008, in accordance with section 626(b) of the Medicare Prescription Drug Improvement and Modernization Act of 2003 (MMA).

Among many other things, the rule proposed a new ‘‘exclusionary’’

approach for revising the ASC list of covered surgical procedures

beginning CY 2008. CMS proposed to evaluate surgical procedures

to identify those that could pose a significant safety risk or that

20

would be expected to require an overnight stay when performed in

ASCs, and that would, therefore, be excluded from Medicare payment under the revised ASC paymeny system. Using that exclusionary method, CMS developed a list of surgical procedures

viewed to be safe for Medicare beneficiaries in ACSs and appropriate for Medicare payment.

CMS noted in the August 2006 proposed rule that they had given

careful consideration to recommendations made by the Medicare

Payment Advisory Commission (MedPAC) in its March 2004 Report

to Congress, which suggested that the current ‘‘inclusive’’ list of

procedures be replaced with an ‘‘exclusionary list.’’ CMS also noted

considerable consultation and discussion with members of ASC

trade associations and physicians regarding the criteria that would

be used to identify procedures for payment under the revised ASC

payment system. CMS agreed that adoption of a policy similar to

that recommended by MedPAC would serve both to protect beneficiary safety and increase beneficiary access to procedures in appropriate clinical settings, recognizing the ASC industry’s interest

in obtaining Medicare payment for a much wider spectrum of services than is now allowed. Therefore, in the August 2006 proposed

rule, CMS proposed that, under the revised ASC payment system

for services furnished on or after January 1, 2008, Medicare would

allow payment to ASCs for any surgical procedures performed in

an ASC, except those surgical procedures that we determine are

not payable under the ASC benefit.

CMS has not yet issued the final rule implementing these regulations, but has received and reviewed thousands of comments in

preparation for final policy decisions and publication of the final

rule.

Senator CRAPO. All right. I appreciate that. Thank you very

much. We ended up with a few seconds left over.

The CHAIRMAN. Thank you.

Next is Senator Roberts, but I think Senator Roberts wants to

reserve all of his time for a little later on.

Next on the list is Senator Wyden.

Senator WYDEN. Thank you, Mr. Chairman.

My thanks to all of you. Dr. Troy, I always like to hear somebody

talking about being in the tikkun olam business and perfecting the

world.

My questions as well are primarily for you, Mr. Weems. Let me

start with something you and I talked about in my office. Under

the Healthy Americans Act that Senator Bennett and I have proposed, we would like to start a revolution in health care. That is

to move away from sick care and put a much stronger focus on

health care and prevention.

Towards that end, we are advocating a legislative change that

would allow your Department, for the first time, to reduce premiums for seniors, the outpatient premiums, when they stop smoking, lower their blood pressure, engage in the preventive kind of

practices.

You gave me a good answer to this question in my office, and I

would like to hear you on the record: would you support a change

like that that we are advocating in our bipartisan bill to reward

prevention?

21

Mr. WEEMS. Senator, you have my personal support on that. I

have been an advocate for that inside our own councils in HHS. I

believe that good evidence-based preventive measures should be rewarded. In fact, there is a friend of mine who is here today whose

own private insurance requires him to go through a physical. He

has to manage his blood pressure and all that to get a lower premium.

I believe it makes good business sense, but moreover I think it

will improve the health of our beneficiaries by moving the incentives in the right direction for the beneficiaries, but also for the

health care system.

Senator WYDEN. It is going to help transform American health

care, and I appreciate your answer and I appreciate your advocacy.

The second question I want to ask you about deals with private

sector health care. I note Senator Lott, Senator Roberts, a number

of us are talking about the future of American health care, and we

really want to ensure that our citizens have private sector choices.

That is what the Healthy Americans Act is built around. But I

am very concerned about a new area that has come up where it

seems that there are some abusive practices. That is this question

of the private fee-for-service option under Medicare Advantage.

And as you know, there have been some pretty well-documented

marketing abuses. What concerns me is, seniors are getting ripped

off, and also this is giving a bad name to private sector health care.

What steps, if any, would you take to reign in these abuses in

private fee-for-service plans that we have seen come out in the last

6 months?

Mr. WEEMS. Senator, as I said in my opening statement, it is my

intent to intensify oversight. We are going to take a close look at

the CMS organization, at how that happens. Right now, much of

the oversight happens in the regions.

I need to either, if confirmed, be in a position to hold my regional

directors responsible for that or to centralize that and to have that

brought back as a normal part of business in the Administrator’s

life of, what are we doing about oversight today? That is my promise to you.

Specifically on private fee-for-service, we need to really dig in on

the way that marketing happens. We need to have secret shoppers

out there. I also think that we need to breathe life into the Memorandum of Understanding that we have with many States on how

agents and brokers conduct themselves in the marketplace.

Senator WYDEN. We will work closely with you on that, because

seniors clearly have been exploited. Those of us who believe in private sector health care and believe there are good private sector options especially want to have this corrected because it is going to

be a key part of any bipartisan reform effort.

The third area I want to ask you about is, absent legislative action, physicians are looking at the prospect of a 10-percent cut in

Medicare reimbursement. This is an enormous issue with respect

to access to health care for seniors, particularly in rural areas—and

in urban areas.

You all will have a lot of discretion and a lot of opportunities to

advocate policies in this area. What changes are you looking at

with respect to dealing with what could be a huge crisis, an exVerDate 11-MAY-2000 14:29 May 11, 2009 Jkt 000000 PO 00000 Frm 00029 Fmt 6633 Sfmt 6633 42429.000 SFIN1 PsN: SFIN1
22

panded set of problems for seniors getting access if physician reimbursement is cut again?

Mr. WEEMS. Senator, thank you for the question. I think that

what many refer to as the ‘‘doc fix’’ or the ‘‘SGR fix’’ really gives

us a remarkable opportunity to work together on some of the

things that need to begin to happen in the reimbursement system.

We need to find a way to pay for quality, not just to pay for more.

That, I believe, is one of the things that we need to work into the

SGR fix.

I also believe it represents an opportunity for us to think clearly

about, what is the role of electronic health records? Should that be

a part of what we do? In the end, I look at it as an opportunity

to work with this committee to in some way summon forth the future of health care in the physician’s office.

Senator WYDEN. My time has expired, but I am planning to support the nominee. I look forward to working with all of you.

Thank you, Mr. Chairman.

The CHAIRMAN. Thank you, Senator.

Senator Smith?

Senator SMITH. Thank you, Mr. Chairman.

Sorry you are being picked on, Mr. Weems. You and I also met

and we discussed the ‘‘all or substantially all’’ policy related to

Medicare Part D. I asked you what CMS was going to do about ensuring that plans cover these six protected classes.

I am still not clear what steps CMS is going to take or is taking

to ensure that the plans actually follow the guidance that you provide. I consistently hear reports that plans do not cover all or substantially all of these protected classes and that beneficiaries have

to go through lengthy appeals processes.

Can you tell me what is happening and what CMS is going to

do?

Mr. WEEMS. Well, Senator, I share your concern in that area. I

have to say, following our meeting I went back and checked

through CMS on this. At least what I am hearing, Senator, is we

are not hearing the same things. I think we need to reach back and

find these discrete cases and bring them forward, individual cases,

look at them and see what happened. That is in the particular.

In general, as I said to this committee, we are going to intensify

oversight. That means we are going to get counts, we are going to

talk to the plans about the number of appeals, why there are appeals. If there are systematic problems, sir, we are going to find

them, and we are going to root them out.

Senator SMITH. I appreciate that.

CMS recently announced that all beneficiaries who receive extra

help with their drug costs would be able to change their prescription drug plans on a monthly basis. Senator Bingaman and I support that. We have legislation to accomplish that very thing.

However, allowing these beneficiaries to change plans monthly

will require CMS, the Social Security Administration, and prescription drug plans to update information in the enrollment system in

a timely manner. You and I talked about the tremendous lack of

communication or difficulty existing between CMS and Social Security.

23

I am wondering what steps you are doing to ensure that beneficiary enrollment information is updated in the enrollment system

so that it is timely, so that it can accommodate the new policy on

monthly plan switching.

Mr. WEEMS. Thank you for that, Senator. As I told you and I will

just tell the rest of the committee, I used to work at the Social Security Administration. The way their computers work is a lot different than the way CMS’s work. In Social Security, they like computing an annual benefit, dividing it by 12, and sending out a

check. They do not have to deal with deductibles and co-payments

and many of the things that CMS has to. So, there is just a problem with the systems talking.

Now, having said that, if confirmed, one of my first acts will be

to work on this premium withhold problem, to work with the Social

Security Administration. If we need a change in the business process of premium withhold, then let us make that change.

If we need a change in the business process of moving people

from plan to plan, then we are going to make that change. If people

also fall into the holes of premium withhold, we are going to find

a way to get them out quickly and get back either the money that

we owe them or to find some way that they can make restitution

to the government. It is a problem, I acknowledge, but it is going

to be a very high priority, as I said in my testimony, to fix this.

Senator SMITH. Mr. Chairman and Senator Grassley, this is an

issue that, frankly, has come to my attention repeatedly, that CMS

and the Social Security Administration almost speak different languages because their computers are so different. Social Security’s

computer systems are antiquated, which is a generous term to describe them.

This may be an area where we need to make an investment so

they can speak the same language, because, with all that we are

doing now with Medicare Part D and enrollment and plan switching, they just simply are not able to function together. I think it

would be appropriate for our committee to help lead a change so

that they can have similar systems that coordinate in a way that

is workable for the American people who depend on these programs.

Thank you.

The CHAIRMAN. I would say, your point is very well taken. Some

of it gets down to just budget requests in the amounts that the Appropriations Committee grants and the Congress grants. For example, I know in SSA it is a whole other problem. There are insufficient resources and administration with respect to disabilities. I

think that part of the problem is just budget requests. They are inadequate and insufficient. Congress, I think, frankly, has not been

as aggressive as they could, and should, be.

Senator SMITH. We need to be.

The CHAIRMAN. Thank you.

Senator Lott?

Senator LOTT. Thank you, Mr. Chairman.

And thank you all for being here. Congratulations on your nomination. I certainly will support your confirmations, and I wish you

the best in the job you have ahead.

24

I, too, would like to address a few questions to Mr. Weems. I

think it is obvious here that all of us, and others not here, have

problems with CMS, the way it responds to our concerns and how

it deals with critical health care issues in America.

Now, I am going to be gentle with you because you have your

family here, and it is a lovely family. We appreciate you and your

service over 24 years. I enjoy these meetings when we have a baby

crying in the crowd. It relaxes us all a little bit.

But there are clearly problems at your agency, the one you are

going to head. You know that. Now, part of the problem is us.

Quite often, you have to comply with the law, the damnable law

that we passed, which puts you in straightjackets quite often.

I also suspect that you are always under pressure by us and by

OMB to control the costs, control the costs. But some of the decisions just do not make common sense, and sometimes just getting

a decision is the problem.

I hope you will try to get a proper balance here, reign in your

bureaucracy, make a decision. Or if you need legislative assistance,

tell us. So, like the others, because of limited time—and I am not

going to go through the specific questions here, but I am going to

mention two or three of them because you will be hearing from me.

I, of course, represent Mississippi and I am from the Mississippi

Gulf Coast. We are still wrestling with the recovery from Hurricane

Katrina. A lot of people and a lot of agencies have helped us. The

government has been very good. I am not here to whine or complain.

However, I must say the distribution of the funds through

HHS—and a lot of them involve CMS, obviously—to the Mississippi

Gulf Coast, in my opinion, in the health care area have not been

fair. It is really making it difficult for us to address the financial

problems caused by Katrina with the lost opportunity in the

misallocation of critically wage-indexed relief.

I do not begrudge the other States in the region, but when you

have almost $200 million to distribute and one State gets $161 million and my State gets $23 million and the third State gets

$10 million, there is a problem here. So I just want to make sure

that you understand that we are going to expect a better allocation

of those funds or some allocation of funds to help us with this

wage-indexed relief problem we have on the Mississippi Gulf Coast.

Mr. WEEMS. Senator, not to interrupt, but that is something I

would be happy to look into. But let me say that I was in Gulfport

72 hours after the storm.

Senator LOTT. And you know what a good job Gulfport Memorial

did, which was a critical service to people who could not go anywhere else.

Mr. WEEMS. That is right. The way the people pulled together

there, literally in something that looked like the result of a war.

I mean, I remember very vividly the water tower twisted and lying

on the ground. It was just really a remarkable scene. So, I would

love to work with you on this.

Senator LOTT. I think the problem in this case was actually

HHS, your superiors. But you can have input and you can help us

in the future.

25

We have problems like, you have rules that actually seem to contradict each other. There is one particular county where Rush

Health Systems out of Meridian wants to build a hospital in an adjoining county. One rule says it cannot be within 35 miles of another critical access care facility, and another one says it cannot be

built within 15 miles of a secondary road. So they meet the criteria

of one, but not on the other one, and therefore they are denied.

So here is a case where, clearly, this would be constructive and

helpful for a lot of people to have access to health care, and they

want to do it, they feel like it makes financial sense, and they are

being denied. We have a serious problem with long-term acute care

hospitals. You are about to come down with a ruling that is going

to be devastating.

I am running out of time. I wanted to get to the PBGC too, to

inquire about the recent legislation involving American Airlines,

Continental, and the special pension provision they have. Obviously it is going to cost PBGC, or they are not going to pay about

$2 billion. I just want to express my concern about that. I plan to

work with the Chairman and the Ranking Member in dealing with

that problem.

Last but not least, Mr. Weems, in the broader sense, here is a

critical example. We are getting deluged in my offices with complaints about delays in reimbursement. CMS is constantly dragging

its feet on refunding money that has been deducted from Social Security checks for Medicare Part D. I think that is what Senator

Smith was talking about.

Additionally, when a third-party payee is involved in reimbursing folks, it can take years to get a lien released. At a very minimum, find a way to address these payments. You cannot have people go months or years where you do not have to get reimbursed.

Whatever the problem is, I cannot believe it is just a computer decision. Somebody needs to make a decision. I am getting complaints

regularly from my State offices, from the men and women who

work in this area, that there is a real problem here, a growing

problem, and I hope you will quickly address that.

Mr. WEEMS. I will, sir.

Senator LOTT. Thank you very much.

The CHAIRMAN. Thank you very much, Senator.

Senator Kerry?

Senator KERRY. Thank you very much, Mr. Chairman.

I apologize to the witnesses, but I am chairing another hearing

of the Small Business Committee and I have to go back to that.

But I did want to inquire of Mr. Weems a few questions directly

relating to Massachusetts, and a couple of others, if I may.

Mr. Weems, as you are aware, the financing of the Massachusetts health care reform program, which is unique and has been

praised by President Bush and by the Secretary and others, is dependent in large part on the Medicaid waiver.

It is very important to us, critical to the State and the future of

this program, that that waiver be renewed and strengthened before

it expires in less than a year. We have 135,000 previously uninsured citizens who now have health coverage, and the cost of a

quality health insurance plan in the Commonwealth has actually

been reduced significantly.

26

So I know the Governor has informed us that they have already

submitted the first phase of the 3-year extension application. So

could you share with me, perhaps, (1) your views on the Massachusetts initiative; (2) the waiver renewal itself; and (3) can you commit that we are going to receive adequate funding with the prompt

approval and back payment for the Certified Public Expenditures

(CPE) methodology?

Mr. WEEMS. Thank you, Senator. First of all, I believe that

health care reform in Massachusetts was a remarkable thing. It

certainly fits the norms and values of that State, and I think that

is what is particularly remarkable about it. Other States might

choose to do it differently, but I certainly applaud it.

I have heard from CMS that negotiations are going well on the

waiver, that they have received material and do expect a favorable

outcome. That always takes time. It takes negotiation.

Then, lastly, on the CPE issue, we understand that Massachusetts has submitted material that has been requested that happened in the last several days, and it is the staff’s belief that that

material would make the waiver approvable.

Senator KERRY. Would make it?

Mr. WEEMS. It would be.

Senator KERRY. Well, that is good to hear, obviously.

Do you anticipate that, under the new waiver, it is going to recognize a reasonable increase in the expenditures over the length of

the waiver period?

Mr. WEEMS. Yes, I do. I do.

Senator KERRY. And we can hold you to that, right?

Mr. WEEMS. Yes, sir.

Senator KERRY. With respect to another issue that has arisen,

the State Medicaid agencies have been implementing the citizenship documentation requirement. You may have been asked about

this, I am not sure.

But we are finding out that numerous studies were conducted

where the Medicaid agencies, private researchers, the Congressional Research Service, the GAO report, and others—the GAO report was released just yesterday—found that thousands of individuals, especially children, have had their Medicaid denied, delayed,

or terminated despite being eligible U.S. citizens.

So I would like to ask you, you are aware of this, obviously. Do

you have plans and can you guarantee to us that you are going to

take steps to make certain that these barriers to U.S. citizens getting eligible benefits will be removed?

Mr. WEEMS. Yes. And let me say, Senator, these reports are very

concerning to me. Let me reflect on my own experience. I grew up

in southern New Mexico. In my 1st grade class, all of us were

United States citizens, but actually very few of us spoke English

at home.

I grew up probably with many of the people who might be being

denied benefits today as a citizen. I find that unacceptable. The

agency needs to find a way to be responsive to the Congress, who

laid out the law, but make sure that our rules do not erect these

kinds of barriers.

I think it is going to take working State by State with the State

Medicaid directors to make sure that our guidance is clear, to make

27

sure that the documentation and evidentiary requirements are

clear, but it is achievable.

Senator KERRY. Well, that is good to hear, obviously. We really

hope you can focus on that quickly, because it is just a terrible outcome and does not speak well to any of our efforts to try to follow

through on these things.

Finally—I think, finally. Where am I on my time? Just about

running out.

The CHAIRMAN. We have more people. I am going the other direction, in fact.

Senator KERRY. I am going in the other direction. Well, can I get

it in quickly?

The CHAIRMAN. Certainly.

Senator KERRY. In the other direction. Could you just share with

me, on the changes for the home health care reimbursements

which go to 3 million Americans, we have all been pushing, trying

to reduce the cost of institutionalized care, and to keep people out

of costlier settings.

Now we are getting people into these home care situations. But

I am very concerned that the payment is going to go down automatically, 2.75 percent for each year over 3 years on the suspicion

of case mix creep.

The evidence seems to suggest that we are saving money, doing

the job we want to do, and I am not sure what that definition is

going to do. So we are very concerned about that, and I hope I am

not missing something here.

But could we count on you to correct the CMS proposal to the

degree that that may, in fact, work against the interests of what

we are trying to achieve?

Mr. WEEMS. Of course. Caring for beneficiaries in the home is,

many times, best. We do not want to erect barriers to that. I would

be happy to work with you, Senator, to make sure we get a rulemaking agreement.

The CHAIRMAN. I thank the Senator.

Senator KERRY. Is the record going to be open, Mr. Chairman?

The CHAIRMAN. Yes, it will be. In fact, I am going to ask that

witnesses answer written or oral—there may be more oral questions, but witnesses may receive written questions. In order to expedite the committee’s consideration, I ask that you reply to those

written questions as quickly as possible.

I might note that the committee will not act on the nomination

while the answers to such questions are still outstanding.

Senator KERRY. Thank you very much, Mr. Chairman.

Thank you, Mr. Weems. Appreciate it. Good luck to all of you.

The CHAIRMAN. Senator Grassley?

Senator GRASSLEY. I want to go back to Mr. Weems and Dr. Troy

on a subject dealing with legislation I got passed 20 years ago

called the False Claims Act.

These amendments resurrected the False Claims Act and provided real penalties against those who defraud the Federal Government. As a result, this act has helped the Federal Government recover over $20 billion that would otherwise be lost to fraud and

abuse, including programs in Medicare and Medicaid.

28

Just last year I continued this effort by adding a monetary incentive in the Deficit Reduction Act for our 50 States, if they want to,

to pass their own False Claims Act.

The DRA also requires that any provider receiving more than $5 million annually from Medicaid inform their employees about

the False Claims Act.

To the two of you, will you both, in your positions, commit today

to vigorously support the False Claims Act, the anti-kickback law,

the Stark law, and other Federal laws that are used to investigate,

prosecute, and suppress fraud at CMS and other HHS programs?

Mr. McCarthy? I am sorry. Dr. Troy?

Dr. TROY. Yes, sir, I do.

Senator GRASSLEY. All right.

Now, Mr. Weems?

Mr. WEEMS. Yes, Senator Grassley,

Senator GRASSLEY. Will you do your best to ensure that your Department does everything in its power to eliminate fraud and abuse

from the programs that it administers?

Dr. TROY. Yes, sir.

Mr. WEEMS. Yes, sir, I will. It is very important.

Senator GRASSLEY. Thank you.

Will you and your staffs cooperate fully with the Department of

Justice, the HHS Office of Inspector General, and whistleblowers

to investigate, prosecute, and suppress fraud?

Dr. TROY. Yes, sir, I will.

Mr. WEEMS. Yes, Senator.

Senator GRASSLEY. Thank you.

And in regard to that, can I emphasize feeling that, since you are

new, maybe you have not heard me say that we do have whistleblower protection laws. Taking into consideration that even you in

your position, as close as you are to the bureaucracy, you cannot

know every instance of fraud and mismanagement, and that you

ought to pay some attention to whistleblowers.

I emphasize that because whistleblowers tend to be viewed as

skunks at a picnic and they are not very welcome. There is a great

deal of peer pressure to go along, to get along. You folks at the

highest ranks of your agencies can either encourage that or discourage it by not just your words, but how your response might be

when somebody tells you there is something wrong.

There are too many agencies that are worried about their public

relations and they see a whistleblower as interfering with their

public relations. They want to look good, and maybe something the

whistleblower brings to you does not look good. Every time I have

seen an agency try to suppress information, it seems to me they

end up getting egg on their face.

Now, I speak mostly about FDA or mostly about FBI in regards

to that. I do not have anything against your agencies, per se, in regards to that, but it happens. So I hope you will pay some attention

to bad news when you get it.

Further, would you ensure that your Department cooperates with

State governments that prosecute False Claims Act cases for Medicaid fraud under the States’ False Claims Act, assuming a State

has passed one?

Dr. TROY. Yes, sir, I will.

29

Senator GRASSLEY. All right.

Will you work to pass clear, uniform regulations outlining the

procedures for paying States an increased share of Medicaid recoveries when they bring the False Claims Act under the qualifying

State False Claims Act? And before you probably say yes, I want

to remind you that the encouragement to States to pass it was the

bonus that they are going to get. If you do not know that, that is

what the law says. So, go back to my question.

Mr. Weems?

Mr. WEEMS. Yes, Senator.

Senator GRASSLEY. Dr. Troy?

Dr. TROY. Yes, sir.

Senator GRASSLEY. All right.

And, finally, will you agree to take no administrative initiatives

that would weaken the effectiveness of the False Claims Act or

other laws and authorities used to investigate, prosecute, and suppress fraud in your areas of jurisdiction?

Mr. Weems?

Mr. WEEMS. Yes, sir.

Senator GRASSLEY. Dr. Troy?

Dr. TROY. Yes, sir.

Senator GRASSLEY. Yes.

And I now turn to Senator Roberts for his 20 minutes. If staff

would remind members that maybe came for the first round, Senator Roberts has his 20 minutes uninterrupted, so that they understand that he has that time. A first-timer would normally have

their time after Senator Roberts.

Go ahead, Senator Roberts.

Senator ROBERTS. Thank you, Senator Grassley.

Senator GRASSLEY. You are going to have to adjourn the hearing,

because I am going to go.

Senator ROBERTS. I am going to ask unanimous consent to pass

legislation to provide a 90-day moratorium on the home health care

provider regulations. And since I will have the gavel and Mr.

Weems and I will vote ‘‘yes’’——[Laughter.]

Senator GRASSLEY. Do not forget, it takes 11 for a quorum.

[Laughter.]

Senator ROBERTS. I have counted all of the witnesses and their

families. [Laughter.]

Do not start the 20 minutes yet. Who is the timer? Where is the

timer? Right in front of me. Right now. All right, go.

OPENING STATMENT OF HON PAT ROBERTS,

A U.S. SENATOR FROM KANSAS

Senator ROBERTS. I want to thank Chairman Baucus for this

hearing. Thank you all for coming. Twenty-four years at HEW, Mr.

Weems. You come from the age of ashtrays and HCFA. I remember

serving in the House when Mr. Joe Califano, HCFA, and HEW

issued a ruling that said that three doctors had to approve all

Medicare payments every 24 hours or they would not be paid. We

have over 100 hospitals in Kansas, and 83 are critical access hospitals. We were outraged by that.

All of a sudden, I decided I would be for that because I figured

if we could get three doctors out there in rural America, we would

30

just chain them to the desk and then we would have family practitioners or some doctors out there, at any rate.

I am the chairman of the Rural Health Care Caucus, co-chaired

with Senator Harkin, ably led formerly by Craig Thomas, whom we

lost just several weeks ago, a great man. I was the first Rural

Health Care Caucus chairman in the House. This was back when

you were at HHS or HEW, or maybe here on Capitol Hill, I do not

know.

It was basically formed up by rural members who got tired of

bloodying their knuckles on the door of HEW and not being able

to get an answer, and so then we formed together in sort of a

posse, and I think it worked out pretty good.

Great nominees. Thank you all for coming. Thank you for your

time. Impressive backgrounds, very handsome families.

Mr. Weems, you met Jean up here, what, 24 years ago?

Mr. WEEMS. Yes.

Senator ROBERTS. I met my wife, Franki, about 34 years ago

here on Capitol Hill, so we have something in common. I regret the

obligation I have to ask some tough questions, but they are not personal. I want to emphasize that. If you read my bio in Congressional Quarterly, it says that I am ‘‘pleasant but irascible.’’ [Laughter.]

Mr. WEEMS. I will try to stay on one side of that.

Senator ROBERTS. We will start on that note.

Mr. Weems, I want to thank you for your courtesy call. We asked

you to come, you did. We met. We discussed several concerns that

many of us have with how CMS is implementing—or more accurately, not implementing—the competitive bidding program for

what is called the durable medical equipment currently being implemented by CMS in 10 different metropolitan areas across the

country which affect hundreds of health care providers and thousands of their employees.

You come highly recommended. You cannot be any better recommended than by Senator Domenici and Senator Bingaman, both

outstanding Senators. Senator Domenici is revered here.

So it is not really fair. Senator Domenici said, why would you

take this? You know, you are in the briar patch. It is not fair, but

there you are.

So I am going to ask you some questions. As you and my colleagues know, I am not a big fan of this program. The Kansas City

area is included in the first round of implementation, so I have

learned first-hand of serious, and in some cases really inconceivable, problems with this program.

First, we need some legislative changes to improve the program.

I was going to ask Senator Grassley and Senator Baucus for their

help in this respect, and I think they will be helping. But I think

there are some areas, sir, where CMS can make improvements

without any Congressional intervention, but you need time to accomplish this.

Now, my request to you is to take immediate action on these

changes, as the deadline for providers to submit their bid closes

this Friday, July 27. You have already extended it by 2 weeks. I

think that is a mission impossible. If they cannot get on the Help

Web, I doubt if you can either. I think a 90-day delay is very cruVerDate 11-MAY-2000 14:29 May 11, 2009 Jkt 000000 PO 00000 Frm 00038 Fmt 6633 Sfmt 6633 42429.000 SFIN1 PsN: SFIN1
31

cial and very important, and I am going to ask you that about four

times.

I know you are going to listen to our concerns, because you already have. I know you are going to commit to making these necessary improvements for your nomination to move forward. I am

extremely troubled about the potential impact that this program

will have on our home health care providers and the Medicare

beneficiaries they serve.

My fears are coming true. Some of my biggest frustrations I have

heard from our providers in Kansas center on their inability just

to submit a bid through the website or get their questions answered by the contractor.

I am going to play Butch and Sundance. Who is this guy? CBIC.

Is that Palmetto?

Mr. WEEMS. CBIC stands for the Competitive Bidding Implementation Contractor website. CMS has contracted with Palmetto GBA,

the CBIC, to conduct certain functions relating to the administration of the DMEPOS Competitive Bidding Program.

Senator ROBERTS. I have news for you. With all of these complaints that I have here, and from a 7-State organization that represents home health care providers—and they are piling up in my

office now, now that they know that they at least have one Senator

and several others on the committee—and they are coming in so

fast and furious. With these stories, I would not have that contractor. I would not have the contractor.

Many have told me they are ready to throw in the towel. Sharks

are in the waters. Basically they call it now the CMS price. The

sharks know that they are not worth what they used to be because

they will not be able to get a bid and they will not have any Medicare, and the mom-and-pop exemption does not work. Some of them

are about to give up.

So I think you have at least recognized some of these problems.

You have extended the deadline twice at the last minute. But the

Chairman and the Ranking Member did ask you again for a 90-day

delay in the bidding process as a result of the problem. So I request, I support, I second this request. I plead to you to do this.

Now, the complaints that I have here from suppliers across the

Nation who have contacted me with their problems in trying to

submit a bid through the website or simply get a question answered, these are unsolicited. I am going to give you a shortened

list. I am not going to give them all; we would be here all afternoon. You would miss lunch and your families would be upset, and

the kids would be crying, and we do not want that.

But these are personal complaints. They are also some complaints from the Midwest Association for Medical Equipment Services led by Mrs. Rose Sheffhauser, who has done an excellent job.

She has submitted a whole series of these situations.

So I am going to submit all of these complaints, literally pleas

for help, to you. I ask that you provide an immediate response to

me in this committee before Friday. I do not think you can do that.

That is why I am asking for the 90 days.

All right. A typical ‘‘what on earth is going on’’ complaint comes

from a supplier in Kansas on July 5. This company completed and

submitted their bid to CMS. Five days later, their bid was rejected

32

and returned to them because the system would not accept zeroes

on the application form. So if you type in ‘‘zeroes’’ or ‘‘none,’’ sorry,

the computer will not accept it.

The application requires that suppliers state how many products

they sold in 2006, and then how many of these products were sold

to Medicare beneficiaries in that particular Metropolitan Statistical

Area (MSA), in this particular instance, the Kansas City MSA that

has 128 home health care providers.

This supplier had not billed Medicare for any products in the

power wheelchair category in 2006, so they put down a ‘‘zero,’’

which was not accepted. That was a red flag. When this supplier

called the help desk to ask what to properly do to submit the bid,

the help desk replied, ‘‘Well, I guess you have to put down a 1, or

maybe a 2, or maybe a 3.’’

This response was confirmed by CMS on a follow-up. This means

that because of CMS’s website and the application form problems,

of which there are many, CMS is forcing and openly encouraging

suppliers to lie and manipulate their Medicare numbers.

Now, that is incredible. How on earth can you achieve accurate

cost containment with this kind of falsified information simply because the computer will not take it or it is a contractor problem?

A second sample complaint comes from the same supplier. After

she and her staff devoted countless hours in preparing their bid,

their information was somehow lost by the contractor’s website.

Now, this is not a stand-alone incident. This has happened many,

many, many, many, many times all across the country.

Frantically calling the contractor, trying to figure out what to do

next, this supplier was informed that she would have to re-do the

application that took a whole day with three people, but that she

should also make sure to reboot her computer every 15 minutes in

order for the information to be properly stored and accepted by the

website, i.e., Palmetto. Strong finger; a lot of patience, all right. So

every 15 minutes, she has to hire somebody to reboot. That is ridiculous.

It was redone. This supplier, or a member of her staff, diligently

rebooted the computer. So, doubtlessly, we have a bunch of home

health care providers trying to employ people to simply press the

‘‘reboot’’ thing.

This reminds me of the TV show—I do not watch it, my kids do—

‘‘Lost.’’ It is the TV show, ‘‘Lost,’’ where the inhabitants on the island are forced to press the button in the underground station

every 108 minutes to save the world. Well, they are going to save

their company by rebooting every 15 minutes.

Another story. A Cincinnati provider had been trying to log on

to the bid website with no success. Called the help desk. The help

desk responded, they are so backed up, there is no guarantee her

call would be handled prior to the bidding deadline on July 20. Not

a very good message.

Another story, all too commonplace. This supplier had been trying since July 6 to enter their bid on the website. As of July 12,

1 day before the original deadline, this person was unable to enter

their network or the individual supplier bid, gate closed, no entry.

The applicant had gotten no further than part A of the form,

which the website repeatedly tells them is incomplete. The appliVerDate 11-MAY-2000 14:29 May 11, 2009 Jkt 000000 PO 00000 Frm 00040 Fmt 6633 Sfmt 6633 42429.000 SFIN1 PsN: SFIN1
33

cant has entered the same information approximately 20 times a

day.

This supplier called the help line several times that week, and

the help desk would ask copious amounts of questions, but then the

caller said that the servers were down. The help desk also promised this applicant they would return their call, but they never received a return call.

When the applicant asked the help desk again, the help desk

suggested for the applicant to log on that evening sometime after

midnight when the server traffic would be lighter. After midnight!

That is like Charlie Brown waiting for the Great Pumpkin.

My next complaint is a transcript from a call between a supplier

and a CMS official. It was not secretly taped. That person knew

this, and it is all on the record so there is nothing wrong with this.

Caller:

‘‘I have a very quick question, but it is very simple: How do

I get a password straightened out for getting a bid ID? And I

know we’re past the window, but I have been on the phone

with the help desk now for the better part of last week.

‘‘Every time we input the information, it was saying our Social Security number was already in use, and we have gone up

and down the line with the help desk. As of today, they seem

to have stopped helping us and say that the window is closed

for getting the bidder IDs issued.’’

CMS Official:

‘‘Well, yes, the window is closed. The registration period

ended on the 7th.’’

Caller:

‘‘Okay. But we have gone ahead and done what we were supposed to do. There was apparently some trouble tickets written

and we’re waiting on having that resolved. So you’re saying

that because it wasn’t resolved in the time period, that’s the

end of it?’’

CMS Official:

‘‘Yeah, well, whatever. The trouble was to have been resolved

by the 7th. You had until the 7th, and that was the deadline

for actual registration.’’

Caller:

‘‘Again, so if they weren’t able to resolve it at your end, then

I’m basically out?’’

CMS Official:

‘‘Ah, yes. I don’t know what the problems were, but if you

were not successfully registered by the deadline—actually it

was extended by a week—you’re not registered.’’

Now, I could keep going with these complaint stories. That is

clearly unacceptable. The MAMES Association has here, system

problems. They have 11 of them. I am not going to read them because I am not going to take up the time. Bid instructions, lack of

details, cumbersome. They have six examples of that. Then we

have providers being cut out of the bidding process. The number

is rather astounding. Then we have the product category issue.

34

Samples being provided came from the following locations: Cincinnati, Cleveland, Dallas, Kansas City, Miami, Riverside, Orlando,

Pittsburgh, Maryland, Kentucky, industry consultant on competitive bidding, a national company submitting bids on all CBAs, regional companies submitting bids on several CBAs. I am tempted

to say, remember Jack Benny, also from Cucamonga, but I am not

going to do that.

Assuming—and I know you want to do this—you cannot change

these before Friday. Assuming you cannot, can you provide an appropriate extension of the application deadline to correct these

technical problems in order to give our providers a fair shot and

honor the request by the Chairman and the Ranking Member for

90 days?

Mr. WEEMS. Senator, thank you for that. I take issue with absolutely nothing that you have said. I have heard of——

Senator ROBERTS. Well, how about a ‘‘yes’’ or ‘‘no?’’ I have 5 minutes left and I have some real stuff coming down the road here.

Mr. WEEMS. First of all, at this juncture I am not running CMS.

Senator ROBERTS. I know that. I know that.

Mr. WEEMS. So I cannot make that commitment to you.

Senator ROBERTS. I will send it upstairs.

Mr. WEEMS. All right. I am happy to do that.

Senator ROBERTS. All right. Thank you.

Other concerns CMS must address before the program can move

forward. Patient impact. This is a big issue. A big issue. I am concerned that the program has no mechanism to review or assess patient impact with the quality of care as a result of the program.

Shouldn’t the program that will impact some of the frailest seniors

track how they fare under it?

Now, the one person that I relied on for advice for over 30 years

as a staffer and a member of the House and the Senate in Hutchinson, KS, America, sold out. I do not know the figure, but we call

it the ‘‘CMS sell-out.’’

You are going to get down to the Big Three and then see how

much money you save. And she was amazing. She would go out

into the countryside and visit virtually every one of the Medicare

beneficiaries that she served. I do not know if the person who

bought her home health care providership will do that or not.

She is now a consultant to help people through all the paperwork. She just gave up. She said, ‘‘I’m just going to give up.’’ Is

there any patient impact quality of care assessment? So that is one

that I really think we have to think about.

I have strong reservations about how this program will work, especially for patients in the rural and small MSAs. You have an

MSA in Kansas that stretches all the way past Lawrence, all the

way past other areas that should certainly qualify as a mom-andpop and a rural providership.

Hopefully you can guarantee to me that patient access, choice,

and services will be the same for the beneficiaries in the small and

rural MSAs as they currently experience.

Third, accreditation. As I mentioned, the bidding process ends on

Friday. How can the bidding process proceed while a number of potential suppliers’ applications for accreditation, which is needed to

35

participate, are still pending? That is a repeat of something I have

emphasized.

Fourth, small supplier participation. It is important for the program that small suppliers participate. Now, CMS could allow networks, have small suppliers form up a network so that they could

really keep up with all this. They would not have to have somebody

hitting the ‘‘reboot’’ button every 15 minutes.

But the formation of networks is seriously impeded by antitrust

prohibitions. So we need to issue guidance to help suppliers to

overcome these barriers, and I think the networks certainly represent a good idea.

You need to provide written explanations or remedies for providers whose applications for participation were rejected due to

technical reasons. Is there any transparency? So, if you do not get

the bid or you cannot get an application, can you at least give them

a reason why as opposed to just saying ‘‘no’’ or ‘‘your bid was not

accepted?’’ We need the transparency.

Here is a big-time issue: savings certification. Can, and will,

CMS provide any detailed data on the administrative costs of creating this new bureaucracy to implement this program? Can you

provide data showing that this program will, in fact, provide significant savings in the Medicare program?

This happened at the 11th hour and 59th minute during these

negotiations. We all know the story. We all know the member of

Congress who did this. Many of us were not aware of the implications.

Senator Lott indicated that that is our responsibility. It is. But,

if you add on the cost of the contractor and all that is going on

throughout the home health care world, I am not sure that it is

going to achieve the budget savings so much as push that cost onto

Medicaid, or just fee-for-service, in which case I am not sure that

the Medicare beneficiaries will be served.

I talked to you about the extension. You have already responded

to that. There is another issue I want to talk about. In your proposed rule for inpatient prospective payment for 2008, CMS proposed something called—and Senator Kerry has mentioned this—

a behavioral offset that would reduce payments to hospitals by

$24 billion over 5 years.

As I said, we have over 100 hospitals, 83 critical access hospitals.

This will impact my State by over $20 million in 2008. The centerpiece of this rule is something called a ‘‘behavioral offset’’ that is

clearly, I think, an overage.

Now, the troubling piece of this offset is that it is based on expectations or ‘‘suspicions’’ of hospitals’ future coding activity rather

than on real evidence. Suspicions? Are we basing cuts on suspicions

of how a hospital may act or not act? That reminds me of that

song, ‘‘Suspicious Minds’’ sung by Elvis. Maybe he came back to

HHS. Maybe he is over there somewhere singing ‘‘Suspicious

Minds’’ on hospitals.

We did not direct CMS to do this. You were told not to do this.

Senator Salazar and I led an effort in the Senate. We have 61 of

our colleagues telling CMS prospective behavioral ‘‘suspicious’’ offsets was the wrong approach. Congress should have been consulted. The Chairman and Ranking Member of this committee also

36

sent their own letter. So, I hope you can respond to this, and I hope

you can respond to it in the best way.

My final comment is this, and I am down to four seconds. Under

the banner of deficit reduction, I fear we are making some serious

mistakes for the future of our seniors and Medicare, and I simply

ask that CMS and this committee take a step back and look at the

potential patient impact before moving forward on programs to

save money in Medicare, which, in fact, are not saving money but

are endangering the rural health care delivery system.

I thank you again for your time today. I know we can work on

these issues. I do not know of anybody who is better qualified to

do this, but boy, we are in a briar patch.

I want to read one other thing from MAMES that just came in.

Oh. I have one other little item that popped up here that staff just

gave me. I am 50 seconds over time; that is pretty good for me.

CMS originally thought that you were going to receive thousands

of bids at one time. The expectation was around 9,000. I have spoken to a company in Cincinnati, OH—this comes from one of the

associations—who submitted their bid on July 16, and the number

was 706 for all 10 MSAs.

Now if that is the case and we have extended this for 2 weeks,

and you wanted 9,000 people to submit bids and we are at 706, and

I am going to guess in the next 2 weeks you have a whole bunch

more, but certainly not 9,000, I do not know what is going to happen to those other folks. We have 128 in Kansas, and I will bet you

that a third of them do not even know they are supposed to do this.

The other two-thirds who have tried to do it, I am not too sure any

of them really made it.

Then when you get to the end result, I asked somebody at CMS

in Kansas City—I cannot remember, staff did, I did not—how many

bids do you think are going to be awarded? Oh, about five. Five in

the whole metropolitan service area? That leaves 123 without any

Medicare.

What on earth do we do with patients? Not only the providers

and their employees, but the patients? That is madness. You are

not going to achieve any savings. Those people are going to go and

get pushed onto Medicaid or they are not going to even receive the

care, and then they will be put in the hospital. You know what

happens then. So, I am terribly concerned about it, as you can indicate.

Here is one last comment:

‘‘I called the CBIC Help Line. I held for 30 minutes. I was

greeted by Nancy Smith, who is probably a good person. What

should have been a simple question was rephrased 10 different

ways to me, with the same answer each time.

‘‘I requested clarification of supplier capacity units on rental

items and gave a hypothetical scenario so that I could determine if I am calculating my service capacity correctly. The answer each time, without waver, was ‘CMS allows us to say 1

unit, 1 month rental.’

‘‘I completed my bid on two product categories, I printed the

summary to verify the information on the service area section.

The question on the bidding application is completely different

from the way it is asked in the summary.

37

‘‘I managed to get clarification from CMS; however, due to

the ambiguity on the bid application, I will now have to go

back and amend my answers and attempt to re-certify all over

again. The system continues to throw me out without saving

my changes, even though I press the ‘update’ button, so it looks

like another very long night.’’

Another Charlie Brown night.

‘‘I am not sure if these are issues that you need to hear

about, but they have caused me, just today, an entire work day

of grief. I have worked diligently for months now trying to prepare, between serving my community’s DME needs. I am a

small company, six people.’’

I cannot find the second line. But she says:

‘‘You know, I think I am going to sell out.’’

That is not right.

That is the end of my statement or my rant, and I appreciate a

person of your quality and your commitment to try to fix this. Let

us get the 90 days. Let us get the legislation changed. Let us save

money and let us help the Medicare beneficiaries.

Thank you, sir.

Mr. WEEMS. Thank you, sir.

Senator ROBERTS. My time has expired.

The committee now stands adjourned. I thank all the witnesses

and the patience of their families.

[Whereupon, at 11:54 a.m., the hearing was concluded.]

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