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66–725—PDF 2010

S. HRG. 111–994 

PRESIDENT’S FISCAL YEAR 2011 

HEALTH CARE PROPOSALS 

HEARING 

BEFORE THE

COMMITTEE ON FINANCE 

UNITED STATES SENATE 

ONE HUNDRED ELEVENTH CONGRESS 

SECOND SESSION 

FEBRUARY 3, 2010 

( 

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 

BILL NELSON, Florida 

ROBERT MENENDEZ, New Jersey 

THOMAS R. CARPER, Delaware 

CHUCK GRASSLEY, Iowa 

ORRIN G. HATCH, Utah 

OLYMPIA J. SNOWE, Maine 

JON KYL, Arizona 

JIM BUNNING, Kentucky 

MIKE CRAPO, Idaho 

PAT ROBERTS, Kansas 

JOHN ENSIGN, Nevada 

MICHAEL B. ENZI, Wyoming 

JOHN CORNYN, Texas 

RUSSELL SULLIVAN, Staff Director 

KOLAN DAVIS, Republican Staff Director and Chief Counsel 

(II) 

C O N T E N T S 

OPENING STATEMENTS 

Page 

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

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

Grassley, Hon. Chuck, a U.S. Senator from Iowa ................................................. 3 

ADMINISTRATION WITNESS 

Sebelius, Hon. Kathleen G., Secretary, Department of Health and Human 

Services, Washington, DC ................................................................................... 5 

ALPHABETICAL LISTING AND APPENDIX MATERIAL 

Baucus, Hon. Max: 

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

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

Enzi, Hon. Michael B.: 

Prepared statement .......................................................................................... 38 

Grassley, Hon. Chuck: 

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

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

‘‘Improper Medicare FFS Payments: Summary of Findings,’’ Centers for 

Medicare and Medicaid Services, slide show, November 16, 2009 ........... 42 

Sebelius, Hon. Kathleen G.: 

Testimony .......................................................................................................... 5 

Prepared statement .......................................................................................... 59 

Responses to questions from committee members ......................................... 70 

(III) 

(1) 

PRESIDENT’S FISCAL YEAR 2011 

HEALTH CARE PROPOSALS 

WEDNESDAY, FEBRUARY 3, 2010 

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

The hearing was convened, pursuant to notice, at 3:30 p.m., in 

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

(chairman of the committee) presiding. 

Present: Senators Rockefeller, Lincoln, Wyden, Stabenow, Carper, Grassley, Hatch, Snowe, Kyl, Enzi, and Cornyn. 

Also present: Democratic Staff: Bill Dauster, Deputy Staff Director and General Counsel; Elizabeth Fowler, Senior Counsel to the 

Chairman and Chief Health Counsel; David Schwartz, Health 

Counsel; Alan Cohen, Senior Budget Analyst; Deidra Henry-Spires, 

Professional Staff; and Tony Clapsis, Professional Staff. Republican 

Staff: Kolan Davis, Staff Director and Chief Counsel; Mark Hayes, 

Health Policy Director and Chief Health Counsel; Emilia DiSanto, 

Special Counsel and Chief Investigative Counsel; Rodney Whitlock, 

Health Policy Advisor; Michael Park, Health Policy Counsel; and 

Christopher Armstrong, Investigator. 

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

FROM MONTANA, CHAIRMAN, COMMITTEE ON FINANCE 

The CHAIRMAN. The committee will come to order. 

Mahatma Gandhi said, ‘‘Every worthwhile accomplishment has 

its stages of drudgery and triumph; a beginning, a struggle, and a 

victory.’’ The effort to enact comprehensive health care reform has 

certainly seen its struggle, and even its stages of drudgery. 

As we look back at the progress that we have made and look 

ahead at the short distance that we have yet to go, I remain confident that we will soon move to the stages of triumph and victory. 

We are on the brink of accomplishing real health care reform. We 

are on the brink of reform that will help millions of Americans to 

afford health care coverage. We are on the brink of reform that will 

improve the quality and efficiency of health care delivery for all. 

Every day reminds us of the need for reform. The latest report 

by the nonpartisan Congressional Budget Office warns once again 

that the growth of Federal health care spending represents the 

‘‘single greatest threat to budget stability.’’ That is because health 

care costs continue to rise faster than the growth in the economy 

and faster than the growth in wages of American families. 

In the last 8 years, average wages have increased just 20 percent, but the average cost of employer-sponsored health care covVerDate Nov 24 2008 21:32 Jun 16, 2011 Jkt 000000 PO 00000 Frm 00005 Fmt 6633 Sfmt 6633 R:\DOCS\66725.000 TIMD
2 

erage has doubled more than 5 times, and health insurance premiums have tripled. The high cost of health care means that 1 in 

4 Americans lives in a family that has spent more than 10 percent 

of its income on health care in 2009, and 4 out of 5 of these families have health insurance. 

The high cost of health care also diminishes the ability of American companies to compete, and the high cost of health care makes 

it hard for small businesses that provide health coverage to hire 

new workers or stay afloat. America spends nearly twice what the 

next highest spending country spends on health care, but U.S. 

health care far too often produces uneven quality and poor outcomes. 

More than 46 million Americans lack any form of health coverage. Another 23 million are under-insured. According to the CBO, 

within a decade, 54 million Americans will be uninsured. The CMS 

Actuary’s Office thinks that that number will go even higher, 

reaching 57 million by the year 2019. 

We have tried incremental reform. We created rights and protections in 1996 for people who purchased group health coverage, and 

we covered millions of uninsured children with the 1997 enactment 

of the Children’s Health Insurance Program. But we have reached 

a point where it is increasingly difficult to fix this system one step 

at a time. We cannot add 46 million uninsured people to a broken 

health system, and we cannot meaningfully control the growth of 

health spending without covering the uninsured. 

Over the past year we have learned how hard it is to reform the 

health care system, but just because it is hard does not mean that 

the task is any less necessary. Just because it is hard does not 

mean that we should look the other way, and just because it is 

hard does not mean that we have to compromise so much that we 

fail to address the problems at hand. 

Madam Secretary, thank you for all of your hard work over the 

past year and the work of your department in helping us to craft 

health care reform. Thanks to your guidance and leadership, we 

know that we can start covering the uninsured with preexisting 

conditions this year through a high-risk pool. We know that we can 

provide immediate assistance to bridge the Medicare drug coverage 

gap, the so-called donut hole. We know that we can jump-start 

quality improvement policies in Medicare and Medicaid, and we 

know that we can make immediate progress on insurance market 

reform. 

I am pleased to see that the President’s budget assumes enactment of health reform. The budget accurately reflects that health 

reform has the potential to reduce the budget deficit by $150 billion 

over the next decade. As the President said in the State of the 

Union address, reform also has the potential to reduce the deficit 

by $1 trillion over the second 10 years. 

This year the Finance Committee faces a full agenda: we will 

work on creating jobs, growing the economy, and reducing the deficit. But given the daunting long-run fiscal challenges that we face, 

we cannot give up on the quest for health reform that addresses 

the interconnected problems of cost, quality, and access. 

3 

I urge my colleagues on both sides of the aisle, both sides of the 

Capitol, and both ends of Pennsylvania Avenue to not give up. We 

can—we must—succeed in reforming our health system. 

Of course, we face other daunting challenges. The Medicare physician payment formula needs reform. HHS took an important step 

by removing drugs from the formula. Just last week, the Senate 

recognized that a long-term solution will require a short-term investment by exempting part of SGR, or Sustainable Growth Rate, 

from the new statutory pay-go rules. I hope that this push will aid 

us in finding a permanent solution for the sake of our seniors who 

need continued access to medical care. 

Beyond health care reform, Congress must reauthorize the Temporary Assistance to Needy Families, otherwise known as TANF, 

this year. We have more work to do to improve our child welfare 

program. The President’s budget did not assume a 5-year reauthorization, so we must use this year to lay the groundwork for reauthorization. 

Let me conclude where I began. I agree with President Obama: 

we cannot give up on enacting comprehensive health care reform 

this year. We have gone well past this effort’s beginning. We have 

endured our share of struggle. Now let us, at long last, bring this 

bill to victory. With your help, Madam Secretary, and certainly 

with the help of the President, I feel quite confident that we will 

accomplish that objective. 

Senator Grassley? 

OPENING STATEMENT OF HON. CHUCK GRASSLEY, 

A U.S. SENATOR FROM IOWA 

Senator GRASSLEY. Yes. Thank you, Mr. Chairman. Thank you, 

Secretary Sebelius, for being with us today, particularly in these 

very extraordinary times. 

Our Nation is beginning a slow recovery from one of our worst 

economic downturns. Now, maybe more than any time in history, 

people are focused on our Nation’s economic challenges, and they 

are worried. Words that come out of my town meetings, people say 

to me, ‘‘I’m scared.’’ They have watched unemployment soar, the 

auto industry go into bankruptcy, banks shutting their doors, and 

families struggling to make ends meet. 

As our constituents have tightened their belts and tried to reign 

in their own household spending, they have seen some in Washington support spending increase after spending increase. They 

have watched as the Federal debt has increased by $1.5 trillion 

since President Obama took office. On the heels of that, they have 

just seen the debt ceiling raised by another $1.9 trillion to make 

way for even more deficit spending. 

So as I travel around Iowa, my constituents know these facts, 

and they know the figures affecting our economy, as well as the 

debt. They know it more than many Washington insiders. They 

also know that this budget only takes minor steps towards a very 

major problem. They know that under this budget the amount of 

debt held in 2008 will double to $12.3 trillion by 2013, and then 

triple to $17.5 trillion by 2019. 

The question they keep asking is, when will Washington come to 

its senses and realize that we cannot afford all of this, all of the 

4 

bail-outs, all of the stimulus, all of the new spending that is paid 

for with our constituents’ hard-earned dollars? They seem to express concern about it, and they want to know what we are going 

to do about it. They fail to see the return on investment that some 

have promised, and as a result they have lost faith in government 

spending. 

As we consider the 2011 budget with you, we need to be thinking 

about how we can restore that trust. That trust begins, I believe, 

with transparency and accountability. In my years serving the U.S. 

Congress, I have made it my mission to ensure that transparency 

and accountability are more than just buzz words. They have to be 

meaningful. 

I have held both Republican and Democratic administrations to 

the same standard. When President Obama was running for office, 

he pledged to make government ‘‘open and transparent.’’ He also 

promised ‘‘to provide a window for all Americans into the business 

of government.’’ 

Actions speak louder than words, and unfortunately, a year into 

this administration, we have seen that this principle is not always 

put into practice the way it was talked about in the campaign. 

Transparency and accountability require an open and frank dialogue between people’s representatives in Congress and those in 

the administration. 

At this time, I have over 10 responses overdue from the Department of Health and Human Services on matters ranging from 

health care fraud to public safety, and those are listed up there and 

the number of days that we have been waiting for answers. I think 

my oversight efforts are often resisted, held up, frustrated, and impeded, impeded by bureaucrats who seem more interested in covering up than in opening up. 

While this lack of transparency and accountability is nothing 

new in Washington, the American public was led to believe that 

more could be expected when they voted for the President who 

wanted change. Promises were made. Principles based on transparency and accountability were repeated over and over again, and 

obviously the vast majority of Americans believed. 

Well, I want to continue to work on the American people’s behalf 

to hold government accountable for its actions and ensure that the 

administration conducts its business in the open and transparent 

manner that was suggested. 

While these accountability and transparency problems persist, I 

am pleased at least to see that addressing fraud, waste, and abuse 

in Medicare, Medicaid, and CHIP has a prominent role in this 

year’s budget proposal, as it should. If we learned anything during 

the health care reform debate, it was that fighting health care 

fraud, waste, and abuse is really a bipartisan priority. 

We all have seen the staggering estimates of around $60 billion 

of taxpayers’ money being lost. This seems to be a conservative estimate. So I look forward to hearing from you, Madam Secretary, 

today on the proposals to strengthen fraud, waste, and abuse prevention, detection, and enforcement. But before Congress can weigh 

the merits of your legislative proposals, as well as your requests for 

increased funding, we need to know what and how you are doing 

with what you all currently have. 

5 

I mentioned earlier, Congress has the duty of government oversight. This includes reviewing annual reports that you are required 

to produce. One of these annual reports is on payment error rates. 

The latest one was due last November, but Congress has yet to see 

payment error rates for specific types of providers. 

Obviously this seriously impedes our ability to conduct oversight, 

and it limits our ability to evaluate how the Federal Government 

is addressing fraud, waste, and abuse, so I look forward to hearing 

from you today on the status of that report. 

Mr. Chairman, in regard to that, I ask unanimous consent that 

the slides on payment error rates from CMS be entered into the 

record. 

The CHAIRMAN. Without objection. 

Senator GRASSLEY. Thank you. 

[The information appears in the appendix on p. 42.] 

Senator GRASSLEY. In addition to fraud, waste, and abuse proposals, the budget also assumes a 6-month FMAP extension to 

States. While I do agree the States still need assistance to make 

ends meet, I think it is time for Congress to cut the strings attached to the aid that we are sending them. 

As States struggle to balance their budgets, having the Federal 

Government provide them assistance that prevents them from 

touching Medicaid does not make much sense. We should give 

States control of their budgets so that they can be more innovative 

and efficient with how they provide access to care. And, of course, 

you are a former Governor, so I hope you would agree with that, 

that flexibility is very important to being a good Governor or State 

legislator. I look forward to discussing this, and other issues with 

you. 

Thank you. 

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

I would like to welcome our witness, the former Governor of Kansas, now HHS Secretary. We are honored to have you here, Madam 

Secretary. 

As you know, your full statement will be included in the record. 

I just urge you to summarize it. We usually have a 5-minute rule 

here, but we will give you a few more than 5 minutes. 

So, why don’t you proceed? 

STATEMENT OF HON. KATHLEEN G. SEBELIUS, SECRETARY, 

DEPARTMENT OF HEALTH AND HUMAN SERVICES, WASHINGTON, DC 

Secretary SEBELIUS. Thank you, Senator Baucus, Ranking Member Grassley, and committee members. I am glad to be here today 

to discuss the President’s 2011 budget as it regards the Department of Health and Human Services. 

I think you will find the budget builds on some themes the President laid out in his State of the Union: strengthening security and 

opportunity for America’s working families, investing to build a 

foundation for future growth, and bringing a new level of accountability and transparency to government. It abides by the President’s pledge to try to identify programs that are redundant, obsolete, or ineffective. 

6 

As you know, Health and Human Services provides the health 

services that Americans depend on, and delivers human services to 

many of our most vulnerable populations. We think that it is important to make some of the investments our country has been putting off for years, including investments in fighting health care 

fraud, strengthening our public health infrastructure, and getting 

more focused on prevention and wellness. 

So I would like to give a brief overview of Department priorities, 

focusing specifically on areas of Medicare, Medicaid, and CHIP. I 

know that we will have a chance to deal with some questions and 

look forward to working with all of you as we move this forward. 

I will start with fraud and abuse. As Ranking Member Grassley 

has already noted, taking this seriously is something that is long 

overdue. It is something that the President feels very strongly 

about, which is why he asked the Attorney General and me to work 

together in the creation of a new anti-fraud focus, which is known 

as the Health Care Fraud Prevention and Enforcement Action 

Team, better known as HEAT. 

We have already had some unprecedented success with, now, 

seven strike forces in cities around this country, with a new data 

sharing system, where we can monitor and observe changing patterns of billing practices, and a whole host of new prevention tools, 

which we anticipate will be enormously effective. So the President 

has included resources for new systems and new personnel to focus 

on this effort, and this is one of the efforts that we know actually 

returns significantly more than any investment we make. 

Tomorrow will be a year from the date that the Children’s 

Health Insurance Program was expanded. We know that in 2009, 

more than 2.5 million children who were previously uninsured got 

coverage from Medicaid and CHIP. One of the efforts that our department takes very seriously is the outreach effort provided by 

congressional funding, and we intend to work with State and Federal partners to identify and enroll the estimated 4 to 5 million 

children who are eligible right now but still not enrolled. The budget does extend the FMAP enhanced match that Congress applied 

in the Recovery Act. 

As a former Governor, I can tell you, this is one universally welcomed relief for States who still have not seen their budgets recover. Since Medicaid is one of the most significant expenditures 

that any State in the country makes in terms of the percentage of 

the budget spent on health care, having an enhanced Federal 

match is something that is supported, I think, by Republican and 

Democratic Governors. 

We ensure access to up-to-date health care for seniors and people 

with disabilities who depend on Medicare with new operations in 

CMS that will help us change from a relatively antiquated claims 

processing system into an actively purchasing quality care system, 

seeking the next generation in health care technology to help providers raise the quality of care for all Americans. 

We continue to fund patient-centered research projects, which 

empower providers and patients to get the most up-to-date information about strategies and protocols that work well. 

Chairman Baucus referenced the physician payment rate. The 

budget assumes a zero-percent update for physician payments, reVerDate Nov 24 2008 21:32 Jun 16, 2011 Jkt 000000 PO 00000 Frm 00010 Fmt 6633 Sfmt 6633 R:\DOCS\66725.000 TIMD
7 

flecting the last number of years that Congress has taken care to 

make sure that seniors did not see a dramatic decrease in the provider rates for their doctors. We support the longer-term strategy 

and look forward to working with Congress to that end so this does 

not continue to be a yearly debate. 

There is a continued investment in neighborhood community 

health centers, following up on the Recovery Act investment, but 

an additional investment that will provide 25 new sites and will 

eventually provide care for about 20 million people a year, 3 million 

more than were served in 2008, with high-quality, low-cost preventive care. 

There is a continued investment in our health care workforce, 

recognizing that health care delivery falls short unless you have 

the providers who actually deliver that care. The Indian Health 

Service continues to be a presidential priority, trying to live up to 

the commitments made generations ago to American Indians and 

Alaska Natives, and trying to reduce the woeful health disparities 

that we continue to find. 

Our budget includes new funding for a 21st-century food safety 

system through the Food and Drug Administration. We, right now, 

live in a global food marketplace. Just for example, half of our fruit 

and nearly two-thirds of our seafood comes from overseas, yet we 

have a 20th-century inspection operation. So, redesigning a food 

safety system which gives American consumers the confidence that 

the food that they serve to their children is safe is something that 

we, again, take very seriously. 

Following the signing last year of the tobacco legislation, the 

budget makes a serious investment in the battle against smoking. 

We saw dramatic decreases in smoking rates for years in America, 

but they now are holding steady at 20 percent, and frankly that is 

way too high. So, additional focus on better ways to stop smoking, 

new research, and community-based projects, is part of this ongoing effort to try to lower the dramatic costs that are underlying a 

lot of the chronic health conditions and are directly related to 

smoking. 

Public health security continues to be a focus. We know that we 

need to be better prepared for our public health emergencies, 

whether it is caused by natural disaster or by attacks by our fellow 

man. We know that medical countermeasures stand at the front of 

those readiness efforts, the vaccines, treatments, and respirators 

that help reduce the spread of infections. This flu season we have 

all had a bit of a wake-up call, responding to the first pandemic 

in 40 years, having an opportunity to look at where our system 

worked well and where there were gaps. 

So we continue to believe that funding new strategies, new technologies, new research through NIH, work at the FDA on scientific 

breakthroughs, but also looking at a whole host of medical countermeasures, is more important now than ever. I have asked my Assistant Secretary for Preparedness and Response to actually use 

the 2009 H1N1 experience as a template to look at where the gaps 

in our responsiveness system are and what kinds of strategies on 

a multi-year basis we need going ahead and to provide me a report 

by the end of the first quarter of this year. I look forward to sharVerDate Nov 24 2008 21:32 Jun 16, 2011 Jkt 000000 PO 00000 Frm 00011 Fmt 6633 Sfmt 6633 R:\DOCS\66725.000 TIMD
8 

ing the report with you, Mr. Chairman, and members of your committee. 

Finally, Mr. Chairman, I wanted to mention some of our critical 

programs that do not deal directly with health care but deal with 

the human service side of our budget. We know that investments 

in children, particularly at-risk children, continue to be a terribly 

critical factor in how well and prosperous they may be in later life. 

So, this budget focuses on Early Head Start and Head Start, providing enough resources to serve about 66,000 more young children 

than just 2 years ago. 

But what we know is that middle-class families are not just taking care of their kids these days; often they are also dealing with 

aging parents. So, there is a new family caregiver program, recognizing the fact that about 80 percent of long-term care services are 

provided by family members. Often that is great news for the elderly family member who gets to be cared for by loved ones, but it can 

be financially and physically exhausting for the caregiver. 

So, this provides, through our Administration on Aging, additional support for everything from counseling for caregivers, assistance, and adult daycare centers for periodic stays, to respite care 

and transportation help to assist families who are trying their best 

to balance these caregiving roles. 

States and communities are also part of the focus on some additional relief under the TANF program for some of the essential 

services that they are providing. 

So, Mr. Chairman, those are some brief highlights of the Health 

and Human Services budget, focusing on the health and well-being 

of Americans and delivering essential human services. I think that 

we continue to work to improve the everyday lives of Americans. 

I look forward to working with you to advance the health, safety, 

and well-being of the American people, and having an opportunity 

to answer some questions about this budget. 

The CHAIRMAN. Thank you, Madam Secretary. 

[The prepared statement of Secretary Sebelius appears in the appendix.] 

The CHAIRMAN. I would like you to explain to all of us why 

health care reform creates jobs and how it saves jobs. Certainly the 

President went to New Hampshire and other States to help encourage more job promotion in our country. We in the Senate will soon 

pass a jobs bill. Clearly, to get the economy moving again, we have 

to do all we can to create new jobs. 

Because health care costs are rising so much higher than wages, 

5 times faster in the last 8 years, and premiums are rising 3 times 

faster than wages, it just seems quite clear that there is a tradeoff there. For an employer who is providing health insurance, who 

has to pay for health insurance, their costs are going up so much. 

That is lost wages. The more we can get health care reform passed 

here to lower the rate of increase in health care costs, the more 

that that’s going to help the employee get higher wages. 

If you could just expound on that a little bit, Madam Secretary, 

just to help explain to all of us, and to the country, basically why 

health care reform really is a job creator and it helps businesses 

and employees keep jobs? 

9 

Secretary SEBELIUS. Mr. Chairman, not only is the health care 

sector a huge part of our overall economic picture—it represents 

about one-sixth of the overall Gross Domestic Product in America, 

in and of itself—doctors, nurses, health care providers, health IT 

workers, a whole host of workers in the system are certainly part 

of our economy. 

But just focusing on small business owners who are often regarded as the critical engine of the American economy and produce 

more jobs in the long term, I hear over and over again as I travel 

around the country about the crushing costs of health care for employees. Small business employers are often in a Catch-22 situation: if they do not provide coverage for their employees, they lose 

good employees. They cannot retain the best and the brightest, who 

follow health care to the bigger company or the bigger market. 

The CHAIRMAN. And there are incentives in this bill to help small 

business too, is that not correct? 

Secretary SEBELIUS. There is absolutely a major incentive. In 

fact, it would go into effect in 2010. It is one of the early deliverables in health reform, to assist small business owners to essentially stay in the health care market, or come into the market. 

Eventually there would be not only that assistance, but an opportunity for lower-income workers to have coverage. You not only 

would have more productive companies, but we would be more 

globally competitive. We would be able to, by reducing overall 

health care costs and not shifting them from industry to industry, 

have an opportunity in this global marketplace to compete more effectively, whether it is selling cars or widgets, with competitors 

around the world. 

I think the third aspect that is a jobs aspect is really about having a more productive workforce. Health and wellness, prevention 

of illness, prevention of long-term chronic illness, keeping employees in the workforce, and reducing sick days all have a direct positive impact on our workforce. We have poorer health results than 

many countries around the world. We have employees who live 

sicker and die younger than many places, so having those kind of 

investments from health reform and a more productive workforce, 

I think, in the long run makes America more prosperous. 

The CHAIRMAN. But is health care reform not necessary for the 

administration and HHS to start implementing some new ways to 

reimburse providers, to get at reimbursement based more on quality as opposed to quantity? That is, limiting excessive readmissions 

from hospitals, value-based purchasing for hospitals, and accountable care organizations. Do you not need legislation in order to 

begin to enact a lot of these reforms, which will clearly begin to reduce the rate of growth of health care costs, and at the same time 

improve quality? 

Secretary SEBELIUS. In both the House and Senate bills there is 

a major directive to begin shifting a payment system to quality outcomes through prevention and wellness incentives. Both bills include elimination of what Americans now pay in co-pays for preventive care. This will encourage screenings and early detection, 

which will save lives from cancer and other chronic illnesses that 

can be identified early. 

10 

Also, hospital-based infections are a serious concern. We have 

100,000 Americans each and every year dying, not because of what 

brought them to the hospital, but what happens to them in the hospital. Our focus on hospital-based infections directs our payment 

system to first provide incentives for hospitals that do very well, 

but eventually stop paying for care that is poorly delivered or 

makes people sicker. 

The CHAIRMAN. Thank you very much. My time has expired, but 

I appreciate all that. Thank you, Madam Secretary. 

Senator Grassley? 

Senator GRASSLEY. Last week, I wrote to express my frustration 

with the lack of responsiveness to my requests from HHS and its 

subordinate agencies. I am still waiting for responses to more than 

a dozen letters that I sent last year to HHS, FDA, CMS, and CDC. 

In my letter last week, I asked you to get back to me by January 

29th, but I have not received a response from you. So I would, 

please, like to have you let me know when I will be getting a complete response to all of my outstanding requests. 

Secretary SEBELIUS. Senator, I share your interest in transparency and openness. I know that we are now on a regular briefing schedule with your staff members. We are attempting to respond as quickly as possible and as thoroughly as possible to the 

information you requested. It is my information that we have given 

you complete responses to a number of the requests, a majority of 

the requests. Some, we are still working on. 

What I can assure you is that, as quickly as we get the information together, we will get it to you. I know that the staff correspondence often is ongoing and conversations are ongoing to try 

to clarify and make sure we are getting you exactly what you want. 

Senator GRASSLEY. Well, it seems to me that one of the problems 

is expediting the clearing process within the Department and its 

agencies so that letters from Congress are answered thoroughly 

and delivered in a timely fashion. 

What are your plans to expedite that clearance process? I mean, 

the letters are written. They are sitting on somebody’s desk for approval. 

Secretary SEBELIUS. Well, Senator, as you know, we have a large 

agency, which is not an excuse for untimely responses. I have met 

on a regular basis with our executive secretariat, and actually now 

receive at my request a weekly report on the status of correspondence, where it is, who has it, and following it through the pipeline. 

So I am taking this very seriously and very personally. 

Senator GRASSLEY. All right. Well, you can see up here—— 

Secretary SEBELIUS. Actually, I cannot. [Laughter.] 

Senator GRASSLEY [continuing]. How many have not been responded to and how many days it has been we have been waiting 

for responses. It seems to me like the list keeps getting longer and 

longer. If we answered our letters as Senators like that, we would 

not get reelected. 

Let us go on to another issue. As I mentioned in my opening 

statement, I am a strong supporter of transparency and accountability. As President Obama mentioned the other day, he is disappointed that there has not been more transparency in the health 

care debate. The budget assumes comprehensive health care will be 

11 

enacted. In order for that to occur, I am assuming negotiations between Congress, the White House, and stakeholders are continuing 

to take place. 

Could you commit to me today that, going forward, any negotiations involving any of your senior staff, in an effort to pass comprehensive health reform, will be done in an open and transparent 

manner? 

Secretary SEBELIUS. Well, Senator, I do not know what conversations with senior staff you are talking about. Our staff is available 

to you and your members, and they meet with them regularly. 

They are available to other members. I do not control the negotiations that go on between the House and the Senate, or the conversations. Our staff provides technical support across the board. 

Senator GRASSLEY. So you are saying that your staff is not there 

for anything more than just technical support? They are not involved in any negotiations representing the White House, or anything like that? 

Secretary SEBELIUS. Sir, I have conversations on a regular basis 

with Republicans and Democrats, but I do not convene the House 

and the Senate, and I am not a principal in the negotiations, nor 

are my staff. 

Senator GRASSLEY. All right. 

I wrote to you in December asking you to explain why Congress 

did not receive the fiscal year 2009 Comprehensive Error Rate 

Testing report, or CERT, as it is called. That report was supposed 

to be out in November. The annual report shows national payment 

error rates for Medicare fee-for-service programs. This report shows 

improper payment rates for each type of provider, like hospitals or 

durable medical equipment suppliers. Congress relies on this report 

to evaluate how well or how not-so-well Medicare is doing when 

making payments. 

I also asked you to tell me when I can expect the final report. 

You have not responded to that letter. I have before me, as I already showed the chairman for putting in the record, CMS’s November presentation to committee staff on fiscal year 2009 Medicare improper payment rates. Each member here at the dais has 

copies. 

Everyone, I hope, would turn to page 8 of the slides. You will see 

that in November of 2008, the error rate for durable medical equipment was 7.3 percent; in November of 2009, that number jumped 

to 51.9 percent, a very significant jump. If you go to page 10, that 

number goes up even higher, to 73 percent. Seventy-three percent 

is the rate that CMS got when it used the ‘‘most stringent’’ criteria 

for calculating the error rate, the criteria that it is supposed to be 

using. 

So, question number one: how do you explain sitting on these 

numbers, especially when this country is in the midst of health 

care reform discussions regarding legislation that would delegate 

more authority to the Department on a broad range of financing 

and delivery system changes and new payment models? 

Secretary SEBELIUS. Well, Senator, I think, a couple of things. 

First of all, I think that we took very seriously the previous criticisms by the Inspector General that the previous administration, 

under HHS, was not being accurate about its payment rates. 

12 

Senator GRASSLEY. I agree with you. 

Secretary SEBELIUS. I am pleased to hear that. So the result of 

the change this year, using the criteria that we agree should have 

been used for years, was a new system. I would like to also point 

out—I know you are well aware of this since you follow this closely, 

but just to make this clear to other committee members—that an 

error rate is not a fraud rate. They are different issues. It could 

be as little as the doctor’s signature not being legible, or something 

in the wrong column. But again, we think it should be accurate. 

We are working diligently under this new system. We put out the 

global numbers in November at the time the report was due. We 

hope, by the end of this week, to have the underlying numbers, but 

the shift has not been one that has been necessarily very quick, because it has been a change from a traditional system and we needed to recalculate every single error rate. We wanted to get it right. 

We wanted to abide by what the Inspector General said we should 

have been doing all along. I promise it will be hand-delivered to 

you, but I have been told by the end of this week we should have 

all the underlying numbers ready to go. 

Senator GRASSLEY. Thank you. And I hope you realize, 73 percent is still a very, very high rate of error. 

Secretary SEBELIUS. No, I understand. 

Senator GRASSLEY. Senator Rockefeller, it is your turn. 

Senator ROCKEFELLER. Thank you, Senator Grassley. 

Secretary Sebelius, I am glad to see you. A couple of points I 

would like to make. One, with respect to what Senator Grassley, 

who is my dear friend about whom I have said some very good 

things in his election years in the Omaha—what paper? 

Secretary SEBELIUS. It would not be Omaha. Des Moines, maybe. 

Senator GRASSLEY. I was concerned about something else. I did 

not give you the proper respect. Would you please repeat it? 

Senator ROCKEFELLER. No. [Laughter.] 

I got the wrong state. 

Secretary SEBELIUS. The Des Moines Register. 

Senator ROCKEFELLER. The Des Moines Register. That was the 

point. That was the point. 

I was just saying that he and I have a good relationship. 

Senator GRASSLEY. We do have a very good relationship. 

Senator ROCKEFELLER. We do. But it also occurs to me that 

sometimes in this question of—I think you have 70,000 employees. 

You have responsibility over an enormous array of things; I do not 

know how many letters I write you. But I often find that it is a 

good thing, and so does my staff, sometimes just simply to call either you, in my case, or in their case, some of your staff people. 

Letters can actually be very inefficient. Number one, they take 

a much longer time to get over to you and then get back to us, and 

they have to go through a process and sometimes they are put in 

general language. Sometimes just a phone call, and as you indicated, staffs being in touch with staffs is, what I have found, the 

best way to try to work problems out. I am just saying that, for 

whatever it is worth. 

Is it not true that health care is, at this particular point, the single greatest economic engine in the United States’ economy, that 

is, in terms of rapidity of growth of jobs? 

13 

Secretary SEBELIUS. I think that is an accurate statement, Senator. 

Senator ROCKEFELLER. My understanding is that over the past 2 

years there have been 631,000 new jobs simply in something called 

the health care sector, and that there have been, just the last 

month, 22,000 new jobs, which is interesting, because the economy 

is not doing very well, as it has been explained, and people are 

frustrated by that. 

We are all trying to work on, how can we create more jobs? Well, 

if we can just do health care reform, get it done, we will have contributed enormously to that, and it is already producing an enormous number of jobs. So to me, it is one of the best—and I think 

that is according to the Bureau of Labor Statistics, so I am not 

doubting what they say. 

Let me shift just a bit. There are over 100 community health centers that applied for the American Recovery Act funding and received—in my own State, the applications that we had, they received about a 90-percent score on their proposals for the Facilities 

Investment Program, but they were left unfunded due to funding 

limitations. 

Now, you talk about the important link between health care investments and economic growth. Do you not think it is also possible 

that we come back with a jobs program—I mean, these are very 

important. It is like Health Service Corps people. If you do not 

have them, you suffer. If you do have them, your people, particularly in rural areas, which Iowa and West Virginia have a great 

number of, gain enormously. 

If there are shovel-ready projects—and I am thinking right now 

again of community health centers—if we get some more money for 

that, it would be possible to do more with that, particularly with 

people who score 90 percent or over on your own criteria. 

Secretary SEBELIUS. As you know, Senator, the American Recovery Act provided a major investment in community health centers, 

and they were wildly overwhelmed by beneficial projects that just 

were not able to be funded based on the amount of money available. But no question, having a health center produces workers in 

that area, and they operate as a community center, often, and have 

a huge beneficial effect on neighborhood well-being, on workers, 

and on jobs. 

It is a construction project, and then a long-term service project. 

So we appreciate the continued investment in the FY 2011 budget. 

I think it is definitely a jobs program that also yields better health 

results for the communities in which they are located. Twenty million Americans have low-cost preventive health care for themselves 

and their families based on these community health centers. Often, 

the strain on hospitals and community hospitals is reduced as a result because people are accessing health providers more appropriately, not going through an emergency room door, but actually 

getting help through a health center. So, I think it has lots of beneficial ramifications. 

Senator ROCKEFELLER. Good. My time is up for the moment. 

Senator GRASSLEY. Thank you, Senator Rockefeller. 

Senator Wyden is next, then Senator Enzi, then Senator Cornyn, 

then Senator Hatch. 

14 

Senator WYDEN. Thank you, Senator Grassley, and welcome, Secretary Sebelius. 

Secretary Sebelius, we are obviously all paying attention today 

to the fact that the budget assumes that comprehensive health reform is enacted and there would be savings of about $150 billion 

over the next decade. Now, the President has said that an essential 

part of comprehensive health reform is expanding consumer choice 

and competition, and I share the President’s view. One way the 

President seeks to promote choice and competition is by creating a 

working marketplace, in effect a set of exchanges, kind of like 

farmer’s markets where people could compare the various products. 

How would, in your view, creating these health insurance exchanges contribute to the savings that are envisioned in the budget 

by enacting comprehensive health reform? 

Secretary SEBELIUS. Senator, I think that having a new marketplace, as you say, with competing private sector plans, which is 

what is envisioned, not only has a beneficial effect for individual 

purchasers, but small business owners, self-employed Americans, 

and others who often struggle with the high cost of care right now, 

would also have some choices, would have some options. 

In addition, I think in the long term, competition holds down 

costs. It is a great market strategy, that if you have competition 

versus a monopoly, you really have an opportunity for the market 

to work. So, my experience running a State employee health plan 

in Kansas was that we made sure that employees had at least one 

other choice, at least two choices, wherever they lived in the State. 

Some were actually created by the State system to provide competition. 

What we found is, that got us the best prices at the lowest cost. 

People wanted access to that pool of workers. In Kansas, we had 

the largest health pool in the State, 90,000 covered lives. People 

wanted access to that. They ended up being very competitive in 

terms of the prices and services that they offered. That would operate within States and in multi-State areas, and I think give folks 

choices right now that they do not have right now. 

Senator WYDEN. I want to continue to work with you and the 

President on this, as you know. My concern has been that most 

Americans do not have choices today. Of course, a member of Congress can fire their insurance company. They can say, in 2009, if 

you are not treating me well I can go somewhere else in 2010. So, 

I intend to work very closely with you, the President, and Chairman Baucus and Senator Grassley on this, because there is not a 

marketplace today, and we need one. 

Secretary SEBELIUS. That is right. 

Senator WYDEN. Let me ask you, if I might, about another area 

that I know we share similar views on. That is the treatment of 

those who are chronically ill. The evidence shows that somewhere 

in the vicinity of 75 percent of the health care budget goes for a 

relatively small percentage of the population, maybe 10 percent. 

There are bipartisan bills here in the Senate—Senator Burr and I, 

for example, have one here—and also in the House—Ed Markey 

and Chris Smith—to promote what is called independence at home. 

There, you would have, in effect, a coordinated team of practitioners who have, in effect, agreed to take lower payments, so that 

15 

does not add to the deficit in order to give better care for people 

at home. You all do not have that in the budget, and I would just 

like to hear your thoughts about what kind of priority the independence at home effort would be for you and the Department in 

the years ahead. 

Secretary SEBELIUS. Senator, I think that concept would be embodied in one of the health reform components, in the Centers for 

Innovation. It is certainly one of the strategies that is operational 

in some areas. In fact, in the northeast corner of the country we 

just added Medicare to a provider coordinated care strategy that is 

under way in Vermont and northern Massachusetts, which operates very much along that way. I think it is a huge priority. 

Back to the State issue: as a former Governor, the dual-eligible 

population, those who are poor enough to qualify for Medicaid and 

those who are old enough to qualify for Medicare, are again the 

fastest-rising cost in the Medicaid budget of any State operation 

and often are chronically ill, often have multiple issues. States are 

way out ahead of the Federal Government right now in looking at 

ways to deliver better care at a much lower cost, and certainly the 

independence at home is one of those strategies. It has been a huge 

priority for me. 

Senator WYDEN. Thank you. 

The CHAIRMAN. Senator Enzi? Thank you. Thank you, Senator. 

Senator Enzi? 

Senator ENZI. Thank you, Mr. Chairman. I would ask consent 

that my statement be made a part of the record. 

The CHAIRMAN. Without objection. 

Senator ENZI. Thank you. 

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

Senator ENZI. Madam Secretary, under the President’s budget, community health centers receive an increase of $290 million for 

the 2010 budget, which is on top of the $2 billion they received in 

the stimulus package. In addition, as Senator Wyden noted, the 

budget assumes that the health reform is passed, and that would 

provide mandatory and unlimited funding for community health 

centers. 

In the President’s State of the Union address he said, ‘‘Families 

across America are tightening their belts and making tough decisions. The Federal Government should do the same.’’ How is mandatory and unlimited deficit spending for community health centers, with an additional increase of $290 million, plus on top of the 

$2 billion provided in the stimulus package, representative of those 

comments? 

Secretary SEBELIUS. Senator, I think that the experience of 

health providers, of patients, of community leaders across America 

is that the investment in community health centers has been a 

great way to lower health care delivery costs. Regardless of where 

they are in the country, the delivery of highly effective preventive 

care at a significantly lower cost than the sort of competing systems has been proven. The ability to reach out, in this case, to lots 

of Americans who either do not have insurance coverage at all or 

who have very modest coverage, again, has been very effective in 

terms of preventive care delivery. 

16 

So I think that the increased footprint of community health centers, working in tandem, which they do in many parts of the country, with the primary delivery system, with community hospitals, 

with provider groups, has been a wonderful way, whether people 

have insurance or not, to deliver health care using a very costeffective strategy. 

Senator ENZI. I have been a supporter of the community health 

centers, but this seems to go quite a ways. I know that some private entities have sprung up in the meantime, like some MinuteClinics at CVS that are supplementing this. Then this seems to me 

to be quite a huge increase. 

But to move on to a little different subject, since we have limited 

time, I think your Chief Actuary, Richard Foster, said that the 

Medicare payment cuts in the Senate bill could lead to as many as 

20 percent of all hospitals, nursing homes, and other Medicare providers to have to operate at a loss. How many jobs would be lost 

if one out of every five health providers is losing money, and therefore goes out of business? Do you think that Mr. Foster’s analysis 

is correct, that the level of Medicare cuts in the Senate bill may 

be unsustainable? 

Secretary SEBELIUS. Senator, as you know, there have been lots 

of different analyses of the various strategies regarding Medicare. 

I think the most obvious point about Medicare right now is that it 

is unsustainable on its current course. It is scheduled, with the current situation, to be totally out of funds within 9 years, and those 

numbers change every year, so it is clear that doing something is 

necessary. 

One of the things that I think our department took very seriously 

was looking at strategies for areas where we are over-paying for 

various services and goods, over-subsidizing private insurance companies for various kinds of Medicare Advantage programs, not taking fraud and abuse seriously, which again returns money. We 

have already, in the less than 1 year I have been at the head of 

HHS, had over $4 billion returned to the Medicare trust fund based 

on various kinds of settlements and fraudulent activities that we 

have shut down. So we are taking all of that very seriously. 

I think that, clearly, if you had some significant reduction in providers within the Medicare system, there would certainly be a job 

loss. But again, the most imminent loss of jobs is a 21-percent pay 

cut that is facing Medicare providers if Congress does not fix the 

SGR rate. That would be a dramatic job loss, I think, that would 

impact the seniors around this country. 

Senator ENZI. I know that Medicare needs more funds. I know 

that the half-trillion dollars that we were talking about could go to 

Medicare to fix some of those things, and I am hoping that we will 

take a look at that. 

I also have additional questions I would like to ask on the health 

IT. Of course, I am looking forward to my report on Dr. Gruber, 

who represented himself as an independent academic expert while 

he was making $400,000 from the Department, and that that did 

not show up on the list that I got earlier in the year when I had 

requested it. So, I am looking forward to that. Thank you. 

The CHAIRMAN. Senator Cornyn? 

Senator CORNYN. Thank you, Mr. Chairman. 

17 

Madam Secretary, let me ask you about improper payment rates 

in Medicaid. You talked to Senator Grassley about that. Under the 

President’s budget, an additional $26 billion would be spent on the 

Medicaid program, but, according to some figures I have seen, as 

much as 10 percent of Medicaid payments are improper payments, 

which cost taxpayers $3.6 trillion over 10 years. Of course, as you 

know, since this is a shared expense program, the State and the 

Federal Government share in that expense. 

I have been trying, my staff has been trying, to get from your 

staff, since July, a detailed statement about improper payment 

rates. So far, we have been refused that information. You may not 

be aware of that, so I wanted to bring that to your attention. I 

would like to ask you, would you see that that information is provided to us so we can make a better-informed decision about your 

proposal to spend an additional $26 billion on the Medicaid program? 

Secretary SEBELIUS. Yes, Senator, I would. I am not specifically 

aware of your request. I assure you, I will check into it. As you 

know, though, our department does not pay the Medicaid providers 

directly. That really is done at the State level. The contracts are 

let at the State level. Each State has a different kind of arrangement. The Kansas Medicaid program did not look like Iowa’s, or 

Nebraska’s; our providers were different. 

So, one of the difficulties, Senator, may be that collecting that 

data from 50 States around the country, updating it, and making 

sure it is accurate may be one of the challenges, because we do not 

hold that data in the Department of Health and Human Services. 

Senator CORNYN. Well, of course, about 60 percent, roughly, of 

those are Federal tax dollars in my State. 

Secretary SEBELIUS. We pay a match, but we do not have direct 

contact with the providers. 

Senator CORNYN. I understand. Well, I would think that your department would have an interest—— 

Secretary SEBELIUS. Absolutely. 

Senator CORNYN [continuing]. In whether Federal tax dollars, as 

well as State dollars, are being squandered. 

Secretary SEBELIUS. Senator, that is one of the efforts in the 

fraud and abuse area. We have a whole series of new initiatives 

that will be worked out with our State partners to look at fraud 

and abuse and waste and error rates in the Medicaid program. 

Senator CORNYN. I heard you say that earlier, and I would like 

to get to that in a second. But that is why we need State-by-State 

numbers, which is what we requested from your agency. We would 

like to know whether those improper payment rates are provider 

payment errors or errors in determining eligibility. That is simply 

why we want to get information. We are not reaching any judgment yet, we would like to get the information. I appreciate your 

commitment to work with us to get that information promptly. 

But I would like to talk to you just a second about fraud and 

abuse. As a former State Attorney General, I can tell you that neither the Federal Government nor State governments have enough 

resources to chase the fraudsters and the people who are trying to 

cheat the taxpayer after the fact, and we need to do a better job, 

18 

I think, on the front end of certifying providers and stopping it on 

the front end. 

I would just ask you to look at one piece of legislation that I have 

introduced, along with other Senators, called the Seniors and Taxpayers Obligation Protection Act—you may be familiar with it— 

which does exactly that, tries to stop it on the front end as opposed 

to chasing it on the back end. I am not being critical of the improved enforcement efforts, that is important, but I do not think 

you will ever have enough resources, either at the State or Federal 

level, to chase all the fraudsters down. I think that is why we need 

to start on the front end. 

Secretary SEBELIUS. And Senator, I absolutely agree with that. 

I will definitely take a look at your legislation. We have begun 

some new certification practices. Durable medical equipment was 

one that we had a huge increase in some erratic billing, so we have 

instituted third-party verifications, more provider numbers. But I 

agree, every scheme we come after at the back end, there will be 

a new scheme at the front end. So, I look forward to looking at your 

legislation. 

Senator CORNYN. Well, thank you very much for that. I appreciate it. 

Secretary SEBELIUS. Sure. 

Senator CORNYN. You talked about the fact that Medicare will 

become insolvent in less than a decade. Of course, that has been 

the subject of a lot of concern by the American people as they see 

us spending more on programs, our failure to meet our responsibilities to deal with current unfunded liabilities. 

While we have heard that health care reform is entitlement reform, we know from Dr. Elmendorf in the Congressional Budget Office that the health care bills, reform bills, cannot be used to both 

pay for health reform and address the solvency of the Medicare 

program. 

He said the key point is, the savings to the Hospital Insurance 

Trust Fund under health reform would be received by the government only once, so they cannot be set aside to pay for future Medicare spending and at the same time pay for current spending on 

other parts of the legislation or on other programs. 

Since, at least under Dr. Elmendorf’s opinion, you cannot doublespend that money, can you talk to us about your proposals or the 

administration’s proposals to deal with these $38 trillion in unfunded liabilities for Medicare? 

Secretary SEBELIUS. Senator, I think that health reform actually 

does include a number of proposals which would certainly slow the 

growth rate of the Medicare trust fund spending without violating 

any of the benefits that are currently relied upon by not only seniors, but some of our most disabled citizens. 

They not only look to save money in the overall purchase of prescription drugs, they look to make sure that we are not paying for, 

or over-paying for, services and procedures that are not costeffective. They slow the growth rate by having competitive bidding 

in areas like durable medical equipment, getting a better bang for 

our buck while still delivering the services to beneficiaries. 

But also I think there is an enormous amount in health reform 

that anticipates prevention and wellness and having a different 

19 

kind of strategy so that you do not wait until a senior enters Medicare and is paying for acute services, but hopefully lowering the 

underlying conditions for chronic diseases. 

The CHAIRMAN. Senator Snowe? Thank you very much, Senator. 

You are next. Thank you, Senator. 

Senator SNOWE. Thank you, Mr. Chairman. 

Madam Secretary, welcome. One of the first questions I wanted 

to ask you is regarding low-income fuel assistance, which is a critical program for my region, and throughout the country, depending 

on the severe circumstances of the weather. 

Senator Reed of Rhode Island and I sent a letter, along with 46 

other Senators, concerning the methodology that was used to distribute the low-income fuel assistance funding, the release of the 

emergency funding, for example. Forty million of the 490 that was 

released was set aside for heating degree days, and our State received 80 percent less, and Rhode Island received 50 percent less, 

for example. 

On the heating degree funding, States like Florida—and I under- stand it was unusually cold in Florida this year—received $3.9 million emergency assistance; Texas received $10.8 million; Alaska, 

Minnesota, and Maine received nothing because of the calculation 

of these heating degree days. So, while Florida would have 30 heating degree days, last December, Caribou, ME would have had 1,376 

heating degree days, 44 times the energy required. 

So I am trying to make sense of, what was the methodology used 

in this distribution? I am not arguing that Florida and Texas 

should not have received any funding, I am arguing the point about 

why there was such a radical difference in the amount of funding 

that cold weather States—severe cold weather States—received in 

the release of this emergency funding. Last year, Maine received $29 million, this year it is $4 million. 

Rhode Island lost more than 50 percent of its funding. If you use 

unemployment as a calculation, Rhode Island has the second highest in the country. So we submitted a letter to you, and I would 

appreciate if you have a response here today, to understand better 

why the money was distributed in this fashion. 

Secretary SEBELIUS. Certainly, Senator. We will get the detailed 

formula to you, but there were several factors this year that were 

looked at. One is that the cost of heating oil is significantly lower 

this year than last, which affected some of the costs in the northeast States which rely heavily on heating oil. I think it was over 

$100 last year and it was down below $80 this year, so there was 

a significant wave. 

As you have already said, some of the southern States had 

particularly cold snaps, which again was not a factor a year ago, 

and needed to be calculated in. Third, the formula not only included the overall look at the heating issues, but also unemployment numbers. So, those three factors were the formula used 

this year to redistribute the funds. Detailed information on how 

the funds were distributed is now available on ACF’s website: 

http://www.acf.hhs.gov / programs / ocs / liheap / funding / fy2010 

lcontingencylinformation.html. 

Senator SNOWE. Well, I think you would agree that that is a dramatic change, given the enormous cost in heating oil that could be 

20 

$60, $70, $80 a barrel, as it has been this winter. It is more than 

$2,000 for a season in a State that has very low wages. So, I think 

that is true for a number of the States that have signed this letter 

as well, from the Senators who represent those States. I hope that 

we can have further discussion in the future concerning it. 

Secretary SEBELIUS. Absolutely. 

Senator SNOWE. I understand the exigencies that occurred in 

these other States, and I am not denying that they should have 

had funds. I do not want to create a regional fight here, because 

that is not what this is all about. I just want to make sure that 

we have a fair and equitable consideration, especially during these 

very difficult times. The fact is that home heating oil is a very expensive proposition in our State, where 80 percent depend on it, 

frankly. 

On the issue of health care reform, we talk about jobs. The reverse is true as well. That is what I am hearing in my State among 

small business owners, who are very concerned about the calculation of the potential costs that could arise from the assumptions 

made with health care reform. 

It was one of the big issues that I had with a number of reforms 

in Maine that was cited repeatedly, the potential for raising the 

cost of doing business, where they would hesitate to invest in future capital equipment or add any jobs. I heard that repeatedly. 

Particularly when we talk about Medicare tax, there is a 62- 

percent increase that was included in the legislation, an employer 

mandate. 

So there are a number of issues that could potentially raise the 

cost of doing business. I have a deep concern that that is going to 

depress the ability of small businesses, especially, to turn around 

the economy. We talk about those tax credits, and they are important, but it also requires small businesses to pay up front. They are 

going to have to lay down some money in order to get the benefit 

of that tax credit. They might not even be in that position. 

So I think that we have to look at the overall calculation in all 

of this. There are some things that we could do short of this comprehensive reform immediately. There is legislation that Senator 

Lincoln and I have introduced on small business exchanges, along 

with Senator Durbin, on a bipartisan basis. It would help to open 

the doors to small businesses, at the very least. That should have 

been done long ago. But I also think we have to calculate the impact of health care reform as it has already been designed on small 

businesses and the potential to lose jobs as well. 

The CHAIRMAN. Senator Lincoln? 

Madam Secretary, did you wish to respond? Senator Snowe’s 

time has expired, but I just want to be fair and courteous and give 

you an opportunity to briefly respond. 

Secretary SEBELIUS. No. I think the jobs calculation for small 

business owners is huge. As you know, I did a couple of forums in 

Maine, heard from some of your constituents directly. I do think 

that the look, the lens—the small business tax credits in both the 

Senate and House bills would kick in in 2010. There would be then 

a more affordable market down the road. There would be fixes in 

the system along the way. 

21 

So at least, while I think it is always important to look at the 

impact, I think there is no question that the group being squeezed 

in the current health care marketplace is often self-employed and 

small business owners who have no choices, higher prices, and 

fewer options and often lose employees based on the fact that they 

cannot keep them. 

The CHAIRMAN. Thank you very much, Senator. 

Senator Lincoln? 

Senator LINCOLN. Thank you, Mr. Chairman. 

I want to thank my colleague from Maine for bringing that issue 

up, because I do believe that the largest percentage of the uninsured do fall into that category of small businesses, working for 

small businesses, self-employed, independent contractors. I think it 

is a great step forward in terms of what we could do that would 

be meaningful in this overall health care debate. I certainly enjoy 

working with her; she does a great job. I am pleased with what she 

does. 

Just a couple of questions I would like to throw out, and maybe 

you could answer them. I think I have about four here. I just want 

to touch on the technological divide between rural and urban 

America. In your original Federal Register notice on health IT, you 

were going to preferentially fund rural States, those with underserved areas and those that needed to catch up. 

Unfortunately, in your funding for health information exchanges 

and other grants like the Beacon Community Grants, it appears 

that the funding is on a per-person ratio or funding communities 

that are more advanced in their implementation. The problem with 

that is that we never get started in rural America. 

So, I just would like to see some assurance that the health information technology is going to be available to all Americans, particularly rural citizens like those in my State, and make sure that 

this digital divide does not contribute to the increasing health disparities that exist in rural America between rural and urban citizens. So I hope that you all will focus on that and help us in terms 

of making sure that everyone is going to have a fair shot at that 

health IT. 

The Older Americans Act. The nutrition programs were provided 

with an urgently needed $100 million under the Recovery Act. 

However, the fiscal year 2011 budget only totals about $8 million. 

My concern is that the recovery funds are going to be expended, 

and I am hoping, or really questioning why the elderly nutrition 

programs are not included in the recovery extensions in the President’s budget. I think that is something important to focus on. The 

elderly are one of our most vulnerable groups. 

I was pleased to hear Senator Wyden bring up coordination of 

care and all of those different efforts. I am hoping that you can 

elaborate a little bit on the coordination of care demonstrations. I 

have been working very, very diligently on those over the past several years and understand the importance that that plays in us 

getting the biggest bang for our buck, but also getting better outcomes, particularly in Medicare. 

One other thing was that the Department released a draft of the 

Healthy People 2020 Report. In its 216 pages, it contained 556 objectives, which is great. We are glad we are focusing on so many 

22 

things. But I was a little bit concerned, or disappointed, I suppose, 

that the words ‘‘Alzheimer’s’’ or ‘‘dementia’’ were never mentioned. 

Of the top 10 causes of death in the United States, Alzheimer’s 

disease is only one of the 10 without its own topic area in the draft 

report. Noting that it affects about 5.3 million Americans, with the 

number expected to rise by mid-century to as many as 16 million 

Americans, it is certainly a growing public health crisis. 

I hope that you can look at the possibilities of perhaps, before the 

publication’s final report, looking at additions that could at least 

include a separate topic area, perhaps, on Alzheimer’s disease, just 

as the other top 10 causes have, in that report. I think it would 

be a very strong message, that we are focused on that in this country. 

Then the last would be the Medicare extenders. I want to compliment the chairman for working with us on the Medicare extenders and these different issues that obviously we feel are going to 

fall off the edge of the cliff, whether it is therapy caps, physical 

therapy, speech, language, and occupational therapy, the pathologists also, the ambulances, rural hospitals, and others. 

I know that you and I visited on the phone about that, and I understand your position. But if the administration does not have the 

legal authority to extend those policies, what do you believe you 

can do to be helpful to us if in fact we cannot get those moved 

down the road? How can we be helpful to those providers? That is 

a lot, but I just wanted to get it all out there. Any of that you can 

jump on would be great. 

Secretary SEBELIUS. Let me assure you that health IT has a variety of strategies looking at different areas. But the health extension offices which will be established throughout the country are 

very much focused on under-served areas, are very much focused 

on assets that need to be brought in. That really is one of their primary objectives, to make sure that there are not sort of forgotten 

areas of the country, forgotten providers, smaller hospitals, smaller 

provider groups, so that footprint is very much aimed at that. 

I know that there is some concern that the nutrition aid for older 

Americans is not enhanced along with some others. I would say 

that there are a variety of new strategies for older Americans, including the caregiver strategy and some others, which have new 

funding in the budget. But I hear your concerns at this tough time, 

that we need to keep seniors who rely on those programs in our 

sights. 

In terms of 2020, what I would love to do, I am going to carry 

that suggestion to Dr. Howard Koh and have him follow up with 

you about that. 

Senator LINCOLN. That is great. 

Secretary SEBELIUS. I think that is one that is very appropriate. 

He is much more intimately involved with those 500 recommendations than I am, and I think this is a great time to provide that 

input. 

The Medicare extenders. As I have suggested, Senator, we do not 

feel we have the administrative flexibility to merely push them 

down the line. As we talked about, there are strategies about holding bills, but that can only be done for a period of time. I assume 

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23 

active repayment. But at this point our general counsel has looked 

at this very carefully and feels that we really would be in violation 

of the law if we just ignore what the deadlines are for those. 

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

might say, Senator, we are thinking of putting therapy caps in the 

extenders package, in the jobs bill. 

Secretary SEBELIUS. Yes. 

Senator LINCOLN. Certainly. That is why I said, you have done 

great. You have been wonderful to work with. 

Secretary SEBELIUS. That is what I understand. Whatever vehicle is there. 

The CHAIRMAN. I think it will be in that legislation. Thank you. 

Senator Stabenow? 

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

Welcome, Madam Secretary. 

Secretary SEBELIUS. Thank you. 

Senator STABENOW. Thank you for your leadership on health care 

and health insurance reform. 

First, just a comment. Thank you to the chairman for working 

hard on helping to change the way we pay physicians through what 

has been dubbed the SGR. I know we are going to be doing something there, which is very important. 

I want to just urge you, Madam Secretary, this payment system 

does not work. I was pleased to author the legislation to repeal it. 

I still believe we need to do that, and I hope the administration 

will work with us, long-term, to do that. I appreciate your efforts 

to take the cost of prescription drugs out of that formula, which 

was a very important first step, but I am hopeful that you will, as 

well, look for other ways in which you can fundamentally change 

that. We changed the incentives in health reform. If we are able 

to move that forward, I think that is one of the positive things in 

there, but I would just urge you to continue to work with us. 

Secretary SEBELIUS. I look forward to it. As you know better 

than many, given your long efforts in this area, the uncertainty for 

providers and for patients about the future of their medical care 

really undermines the confidence in a great health care system. I 

really look forward to a long-term fix to making sure that we can 

live up to the trust that we have committed to beneficiaries, that 

they will have a provider, they will have services delivered. 

Senator STABENOW. Right. Thank you. We need to get that done. 

I wanted to speak about and ask you about graduate medical 

education, which we know is so important. We need to get more 

students, more physicians into primary care. Of course, again, that 

is another focus of what we have been working on with health care 

reform. We know that there is a broad primary care crisis. 

But I do want to note that we have hospitals that want to train 

more physicians in Michigan, in my State, and I know in Maine, 

Florida, and in other places. But they have been frustrated by the 

CMS regulation on new residency programs and Medicare’s graduate medical education program. 

Unfortunately, the process was changed. I am sure you are 

aware of this, but originally in the Balanced Budget Act of 1997 

there was concern expressed about flexibility and hospitals moving 

forward. They were going to expand their residency programs. CMS 

24 

initially allowed hospitals to qualify for residency slots under a cap 

when they created new programs, and they defined the programs 

that would receive initial accreditation. It was a very straightforward process, and hospitals moved forward, and so on. 

Then in August of 2008, there was a new regulation that penalized programs that received the initial accreditation. Unfortunately, this has resulted in revoking funding for programs that 

today are ready, willing, and able to go forward to be able to train 

our primary care physicians. 

In fact, we have programs in Michigan that may close as a result 

of the lack of funding. So, given the fact that we need more physicians, we need more primary care physicians, as we know, I am 

asking if you would work with us to address this change that was 

made over a year ago and be able to allow hospitals to proceed to 

do what they have been authorized to do. 

Secretary SEBELIUS. Well, Senator, I would look forward to—August 2008 was a bit before my time and the new team’s time. 

Senator STABENOW. I am aware. 

Secretary SEBELIUS. But I would be glad to go back and revisit 

that and actually take a look at that with your staff. Absolutely. 

Senator STABENOW. Thank you. 

And then finally I would just briefly urge and ask about your 

focus on mental health services. I have felt that one of the positive 

things that we have done in crafting our health reform initiatives 

was to include mental health—— 

Secretary SEBELIUS. You bet. 

Senator STABENOW [continuing]. And substance abuse services, 

both in definitions on chronic care, as well as prevention, and so 

on. Yet, we are seeing States making drastic cuts in mental health 

services. 

So I am wondering, what areas of the President’s budget would 

improve or expand on these critical health care services? 

Secretary SEBELIUS. Actually, the new regulations for the Paul 

Wellstone and Pete Domenici Mental Health Parity and Addiction 

Equity Act of 2008 are now out, and we look forward to making 

sure that they are enforced around the country, and that certainly 

is as a result of lots of good effort. We have a wonderful new administrator with the Substance Abuse and Mental Health Services 

Administration (SAMHSA), Pam Hyde, who comes with private 

sector and public sector experience in various parts of the country 

and is already engaged in a lot of across-government efforts. 

We are working with the Department of Defense on homelessness for veterans, and we are working with the Department of 

Housing and Urban Development on chronically homeless individuals. We are looking at substance abuse services as critical. In prevention, there are some exciting new studies about the ability to 

actually prevent mental illness and work on this, and preventive 

care. 

So there are actually investments in the 2011 budget which add 

behavioral health services to a number of community health clinics, 

which had no mental health services in the past but now will have 

an infusion of investment to make sure that, along with primary 

care, there will be behavioral health services available, and more 

mental health professionals. 

25 

So we are looking at areas across our agency and across the government where we can actually make sure that mental health is 

not a silo off to the side, but is part of the whole look at health 

care moving forward in a much more holistic approach. 

We have a significant dialogue under way with the Administration for Children and Families, knowing that a lot of the prevention of substance abuse really starts at a very young age, making 

sure that we have those services available, and Head Start and 

Early Head Start programs also. 

Senator STABENOW. Thank you. 

Thank you, Mr. Chairman. 

The CHAIRMAN. Thank you. 

Madam Secretary, there is a lot of concern about fraud in Medicare and Medicaid, and other programs administered by HHS. I 

think you would agree, our intuitive sense is that a lot of those allegations are probably true. That is, there is a lot of waste, under 

the headline of fraud, that we just do not stop. 

Senator LeMieux came to me a couple of days ago with an interesting idea. He is pretty concerned about waste and fraud in Florida, and in the country generally. I remember a couple, maybe 3 

months ago, we were looking at home health care outlier payments, 

and the percentage in Florida and some of these counties is way, 

way, way above the per capita incidence of seniors in those same 

counties. 

Secretary SEBELIUS. Right. 

The CHAIRMAN. But his idea is this. Maybe we can take a page 

from the credit card companies. As we know, the credit card companies have put together these very sophisticated mathematical algorithms about their credit card holders, just like Google does. 

Google knows what books you buy, and they want you to buy similar books based upon your purchasing pattern. But the thought 

Senator LeMieux had is this: just as a credit card company will notify you as a credit card holder if there is some charge that is an 

outlier—say some charge is made down in Brazil and you have not 

been in Brazil. 

Secretary SEBELIUS. And I was here. 

The CHAIRMAN. And you were here. But they call you up and say, 

did you make this charge? Is this something that you bought? They 

ask you first. You can either authorize or not authorize it. But they 

know because they have pretty sophisticated computer systems. 

So the thought is, maybe we can do some of this in Medicare and 

Medicaid and some other Federal programs. Now, that gets into 

prompt payment, and how long does it take for a provider to be reimbursed, and so forth. But on the surface, I think it has some appeal. Senator LeMieux told me that he called a credit card company and talked to the people in charge, and was trying to see to 

what degree their system might work here. Often, it is the private 

sector that comes up with pretty efficient ways of doing things. 

Secretary SEBELIUS. Right. 

The CHAIRMAN. After all, they have the bottom line to worry 

about, and they have to compete with, say, another credit card 

company, for example. So I doubt that you have given a lot of 

thought to that; maybe you have. But anyway, I was kind of intrigued with his idea. Any comments? 

26 

Secretary SEBELIUS. I had a conversation with Senator LeMieux 

about this notion recently because, as you know, we have set up 

our second strike force in Florida, and it is a hotbed of activities. 

But I think it has some real interest. I have asked our folks—he 

has a piece of legislation—to have some conversations with him, 

but I think the kind of real-time data sharing that he is talking 

about, looking at aberrant patterns, the way they identify some of 

these things in a credit card; if 90 percent of my charges are from 

Washington, DC and suddenly something shows up, or I have 

never been abroad and something shows up and they flag it, that 

is exactly what we are trying to do with sharing data with the Justice Department, watching billing patterns. 

In Florida, Senator, just for instance, 10 percent of the patients 

getting home health care live in the State of Florida; 95 percent of 

the patients who have $100,000 or more in billing of home health 

care live in Florida. So we matched those quickly and kind of went 

after it, but that is exactly the kind of—but I hope to learn what 

the credit cards are doing. 

The CHAIRMAN. I encourage you to pursue this aggressively. 

Secretary SEBELIUS. Yes. Absolutely. 

The CHAIRMAN. I do not want to be corny about this, but we are 

talking about the taxpayers’ money here. 

Secretary SEBELIUS. You bet. You bet. 

The CHAIRMAN. If we can stop a lot of this, it is going to enhance 

the credibility of the program. 

Secretary SEBELIUS. And getting out in front of it is absolutely 

right. 

The CHAIRMAN. Yes, that is right, rather than at the back end, 

as you have said several times. 

Secretary SEBELIUS. You bet. Yes. 

The CHAIRMAN. I appreciate that. 

Secretary SEBELIUS. Pay and chase is not as effective as trying 

to stop it in the first place. 

The CHAIRMAN. That does not work. That does not work. They 

are pretty clever. They find new ways to cut and run. 

Secretary SEBELIUS. Right. Right. 

The CHAIRMAN. Could you kind of outline for us, remind us of 

what some of the early deliverables would be of health care reform? 

Some people say, gee, it is not going to go into effect, once it is 

passed, for several years. Would you outline for us some of the, 

fancy term, ‘‘early deliverables’’? 

Secretary SEBELIUS. Assuming the passage of health reform soon, 

in the year 2010 it is anticipated that we would have States put 

together high-risk pools to provide affordable coverage for the uninsured, chronically ill folks. A number of the significant insurance 

reforms would occur, so people would no longer be able to eliminate 

insurance coverage for children with preexisting conditions. They 

would have to be covered. 

You would have to remove the payment caps that currently interrupt cancer treatments and chronically ill services for people who 

have insurance coverage. Children could stay on their parents’ policies, the twenty-somethings. I have to tell you, as a mom of a 25- 

year-old, that is really important to me. But until 26 to 27, you 

could be covered as a dependent under your parents’ coverage. 

27 

We would begin to institute medical loss ratios for insurance 

companies so you would know how much money they are spending 

on benefits for patients and how much is going to overhead and 

CEO profits, which right now is unable to be determined. Also, preventive care would cease having co-pays right away in 2010. 

The CHAIRMAN. So there are significant early deliverables here? 

Secretary SEBELIUS. Absolutely. 

The CHAIRMAN. Right away. Right away. 

Secretary SEBELIUS. And the fraud and abuse prevention would 

start right away, to really crack down on the system. 

The CHAIRMAN. Thank you. Thank you very much. 

Senator Carper? 

Senator CARPER. Thanks. 

The CHAIRMAN. Welcome to the committee. 

Senator CARPER. Thank you. It is good to be here. I apologize for 

arriving late. 

The CHAIRMAN. No, I love to have you here. 

Senator CARPER. I had the pleasure of welcoming to Delaware, 

on Monday, a number of high school students, exchange students 

from countries all over the world. I was struck—we basically had 

a Q&A session in the Senate, the State Senate, our legislature, 

general assembly legislative hall in Dover. 

They asked a lot of questions, and one of the questions we got 

into, and issues we got into, was health care. They were curious 

about health care and health care reform, and were curious as to 

why we spend so much more money than any other country. They 

are curious as to why we do not get better results. There were 

three students there from Japan, a couple from Okinawa, and they 

basically said, we spend half as much as you do. 

I think we spend about 16 percent of GDP, they spend, in Japan, 

about 8 percent. According to different kinds of measurements that 

we have for wellness, healthiness, life expectancy, infant mortality 

and so forth, they actually beat us hands down. They spend half 

as much, and they cover everybody. They do not do it through a 

socialist system. I think they have private insurance companies. I 

believe they have private providers. But I was struck by that conversation. 

Today, when I came down to Washington on the train, as I do 

almost every morning of the week, the train goes by in Newark, 

DE, just almost before you hit the Maryland line, there is a big 

Chrysler plant. Well, it used to be a Chrysler plant, and it is 

closed, where 4,000 people used to work every day. Today, nobody 

works there. 

Today, in a time in which we are really concerned about trying 

to make sure that people have jobs—again, the loss of manufacturing jobs, the exodus of manufacturing jobs from this country— 

can you help us—and you may have already done this, but I am 

going to ask you to do it again—just connect the dots for us here. 

Affordable health care, quality health care. How does it connect 

with the need to create jobs and maintain and create a nurturing 

environment for job creation and preservation? 

Secretary SEBELIUS. Senator, I think that there is no question we 

spend almost twice as much and get worse health results than any 

other developed nation. Part of it is that we continue to pay more 

28 

than anybody in the world for health issues that really do not result in people being healthier, so we over-pay for products and 

services, we pay for procedures and not for quality outcome, which 

encourages, I think, more testing, more protocol, and sometimes 

people would suggest even more hospitalizations, but not necessarily keeping people well in the first place. 

We have not invested, as many people have, in health and 

wellness. A large part of that health and wellness is a huge gap 

in who has access to preventive health services, follow-up home 

health care. So when we have 46 million Americans without health 

insurance at all, they enter the health system in more serious 

shape, with more chronic conditions, and use emergency rooms 

more often, which is the least effective, most expensive way to get 

health care treatment. Some of it clearly has to do with diet. We 

do not eat nearly as much tuna as the Japanese, and that would 

probably make all of us a little healthier. 

But the jobs, I think, are directly related, because our manufacturing sector has been the first to be absolutely uncompetitive in 

a global marketplace, when Chrysler was competing with companies around the world who were not layering on $3,000 in health 

care costs on every car that was sold, or not trying to compete. 

So we have to get to a strategy where we have a healthier Nation 

and a more equitable share of health expenses, paying for outcomes 

and quality, and finding ways to lower the deficit in the long run, 

which will make us not only healthier and more prosperous, but 

certainly more competitive. 

Senator CARPER. Thank you. I think I have shared this with you 

before. I held, back in the August-September time frame, a number 

of town hall meetings, different than any I have ever held before. 

We did telephone town hall meetings. In the first one, we had 

4,000 people on the call, the second one, we had 6,000 people on 

the call. I was just struck by the hunger of the people in my State 

about what was really going on, what we were really doing. 

One of the aspects of the legislation that we are passing is something that is designed to help better ensure that we go after fraud, 

particularly with respect to Medicare and to Medicaid. There is a 

provision in our bill, supported certainly by Senator Baucus, by 

Senator Wyden, all my colleagues, that says we need to incentivize 

the States. 

Previously, the States had 60 days to identify fraud, to go out 

and collect the money and be able to turn half of it over to the Federal Government. As a result, they did almost none of it. If they 

could not do all that in 60 days, and few of them could, they just 

let it go. What we are doing, we do under the legislation, is change 

it to say you have a year to identify it, go after the money, go after 

the fraudsters, get the money, get it back, and then split it with 

the Federal Government. That is in our legislation that the Senate 

passed. 

You, I think, have in the administration’s budget about a $250- 

million increase in additional resources to fight waste and abuse in 

Medicare and in Medicaid. Would you talk about that a little bit? 

Because we all know it is huge out there. I think we are using private contractors to go out and recover, at least in three States, in 

the last couple of years, money fraudulently taken out of Medicare. 

29 

We recovered, I am told, $700 million last year alone. I think we 

are taking that to all 50 States. 

Could you talk about that, and how these resources and the partnership with the private sector will help us get back more money? 

Secretary SEBELIUS. Senator, the President takes very seriously 

that we be good stewards of taxpayer dollars. Certainly anyone 

stealing out of Medicare or stealing from the State partnership 

with Medicaid is stealing taxpayer dollars and jeopardizing the 

trust we have with seniors. So this budget has an 80-percent increase in resources, new data systems, new sharing with the Justice Department. 

The Attorney General and I, at the President’s request, are now 

leading a joint Justice-HHS effort where we now have strike forces 

in seven different cities to try to not only send a very strong signal 

that we take this very seriously, but have been enormously effective so far. This will give us a much bigger footprint around the 

country. 

As I was sharing with Chairman Baucus, we can share data realtime, watching aberrant billing practices and go after them. We are 

going to invest in State partnerships at the Medicaid level, knowing that having those footprints on the ground, having U.S. Attorneys, as well as the States’ Attorneys General who can be very aggressive partners in pursuing fraud, is all to the good. 

We know that there is a huge return. It is estimated to be any- where from $2 back for every dollar we spend to $4 back, which 

is what the Attorney General says, to every dollar we spend. So, 

this is money that not only makes sure Medicare and Medicaid will 

be there long-term, but also allows us to prosecute the criminals 

and prevent fraud in the first place. 

Senator CARPER. One of the things I have always been fascinated 

with, and my colleagues have heard me say this before, is how do 

we harness economic forces? How do we harness market forces to 

drive good public qualities and behavior? A good example of that 

is the Medicaid deal. Before now, or really even now under current 

law—because we have not passed the Senate-passed bill, it has not 

been signed into law—the States are not really incentivized to go 

after Medicaid fraud. 

The CHAIRMAN. I want to give Senator Wyden a chance here, too. 

Senator CARPER. Oh, I am sorry. I am sorry. Can I just close 

with one quick comment? 

The CHAIRMAN. Senator Wyden has been very gracious. He is letting you proceed. 

Senator CARPER. Yes. If I may. 

There is, I think, a provision under current law that says that 

private citizens, health care providers, are encouraged to report 

fraud if they see it in Medicare. They are encouraged to report it. 

They do not have to, they are encouraged to. 

One thing I would like for us to think about, again, is incentivizing behavior. Rather than just saying we encourage you to report it, why do we not say we want you to report it, you are expected to, or required to report it? But also say, if you do, just like 

we do with whistle-blowers now, we actually incentivize whistleblowers because we allow them to keep some percentage of what 

was recovered. We may want to do that in terms of people who 

30 

blow the whistle in Medicare fraud and make sure that we 

incentivize them, not just to do the right thing, but if they do, they 

will also benefit from that financially. 

Secretary SEBELIUS. Actually, Senator, I think that is a great 

idea, and we will take a look at it. We have a great sort of ‘‘seniors’ 

army’’ that trains volunteers, who go then to their friends at meal 

sites and neighborhoods, and they have become a tremendous sort 

of strike force. We figure we have 20 million undercover cops on 

the ground. 

If there is anybody who takes stealing from Medicare seriously, 

it is those Medicare beneficiaries who are very aggressive in their 

efforts. That has been a huge help to tipping us off to bad billing 

practices, to fraudulent activities, to people who would steal IDs, 

a whole host of issues. 

Senator CARPER. Good. Keep it up. 

Mr. Chairman, thank you. Senator Wyden, thanks for your patience with me. Thanks. 

The CHAIRMAN. Senator Wyden? 

Senator WYDEN. Thank you, Mr. Chairman. It has been a very 

good hearing. We have gotten a lot out of it, and I thank you for 

having it. 

The CHAIRMAN. We are going to do more. 

Senator WYDEN. Absolutely. And I will be here with you. 

The CHAIRMAN. Good. 

Senator WYDEN. Thank you. 

Madam Secretary, I want to ask you about one other area, and 

that is that an enormous amount of expense and frustration for the 

millions of people who use our health care system, especially the 

providers and the patients, is the staggering array of different billing systems that we have for American health care. 

As you know, getting a standardized billing system has almost 

been the longest-running battle since the Trojan War. I was actually reading some history on this recently. One of your predecessors, Lou Sullivan, made this a top priority. This is what Lou 

Sullivan, a wonderful physician, wanted to get done. Here we are, 

practically eons later, and we are still wrestling with this. 

I think it would be very helpful if you would do two things. One, 

give us an update on where we are at this point in getting a standardized billing process. Second, I am curious whether you all and 

your staff are taking a look at some of the efforts around the country that look like they are bearing fruit. 

The one that I have been interested in is Minnesota. Minnesota 

seems to have come up with a standardized billing process, and 

then it limits the insurance companies from coming up with sort 

of exceptions, which invariably jack up the rates and make things 

more complicated. 

But start, if you would, by giving us almost a state of where we 

are, 2010, on getting a standardized billing process so that we end 

this bureaucratic water torture for the providers and the patients, 

who constantly tell us about all these forms and different papers, 

and the like. Where are we today? 

Secretary SEBELIUS. Senator, I think the good news is that there 

are administrative simplification mandates in both the House and 

Senate health reform bills, which I would suggest will greatly acVerDate Nov 24 2008 21:32 Jun 16, 2011 Jkt 000000 PO 00000 Frm 00034 Fmt 6633 Sfmt 6633 R:\DOCS\66725.000 TIMD
31 

celerate progress in this area. Absent some kind of a lever, it is a 

difficult task. It is one that I know personally well because I 

worked on it in Kansas, and I think I am safe in saying that Kansas now, like Minnesota, is about to have a uniform billing system. 

But it is not easy. Everybody is fine with doing it and wants to 

come to the table to talk about it, as long as you use their system. 

As soon as you begin to deviate a little bit—I am convinced that 

it is a huge cost saver and a huge, as you say, torture saver for 

providers and patients, and one that we have been anticipating implementing through the health reform strategy, because I think 

that that gives leverage to then have a congressional mandate and 

follow-ups and make sure that we can get the providers. You need 

the providers and the payers all at the table simultaneously to figure out the strategy of time tables that work, but it is something 

that I take very seriously and really look forward to working with 

you to implement. 

Senator WYDEN. I think the provisions in the legislation, both 

the bills, are good. What concerns me is that absent the kind of 

leadership you are talking about, we will take another 8, 10 years 

just working through those models, and somebody else will be in 

your seat and we will ask almost the same questions. 

Secretary SEBELIUS. We do not intend to take nearly that long, 

Senator. 

Senator WYDEN. I like that part. 

Secretary SEBELIUS. And States are well ahead. 

Senator WYDEN. I like that part. 

Thank you, Mr. Chairman. 

The CHAIRMAN. Thank you, Senator. 

It is true, we hear it all the time, as do you, that all the paperwork, all the forms, it is a mess. I remember in the early 1990s, 

1993 or 1994, during the last health care reform era, I just happened to go to a Montana hospital. One floor was filled with people 

doing paperwork. I went up to Canada to poke around. I was up 

at Edmundston, Hospital. There are three people in the whole hospital, much larger than any Montana hospital, doing paperwork. 

Three people. That is all there was. We all know about the administrative costs in the American system, how much higher it is than 

in other countries. 

I urge you to solve this thing. We have to, once and for all, so 

we are not talking about this all the time. You said States are 

doing much better. Well, you can find the State that is doing the 

best job, and really do it. Clearly, we have to pass health care reform to help make this happen. Once health care reform is passed, 

it is going to force more simplification because more insurance companies are going to be forced to simplify—have fewer different alternatives, options, and co-pays and deductibles, pre-existing conditions, all that stuff, frankly. 

So, I really urge you to just light a fire under people to get this 

done. We know how bad it is. We know the American people are 

fed up with it, and rightly so. It is basically the question that Senator Wyden just asked. So I am just urging you, in the strongest 

terms possible, just to get this done. We want to work with you. 

This is a shared effort. 

Secretary SEBELIUS. I appreciate that. 

32 

The CHAIRMAN. This is a shared effort here, but we need to, together, get it done. 

Secretary SEBELIUS. You bet. Yes. 

The CHAIRMAN. Get it done. So you need to tell us what you 

need, whether it is legislation, whatever it is. I just strongly urge 

you to do that. 

Now, I think we are going to get health care reform passed. I am 

very confident we are going to pass health care reform this year. 

But I am going to ask you this. If you could, say on a biannual 

basis, just give us a progress report on standardizing forms and 

getting rid of a lot of this paperwork, it would make a huge difference. The point is not to put you on the spot, the point is to let 

us know what the progress is so that, together, jointly, we can 

solve this. 

Secretary SEBELIUS. Sure. And Senator, I think you took a big 

step. I mean, one is paperwork and one is the numerous forms. 

The CHAIRMAN. Right. 

Secretary SEBELIUS. So electronic health records and standardization, as you launched in the Recovery Act, will go a huge way 

down to eliminating a lot of the paperwork and standardizing operations and driving protocol. But that does not get rid of the 15 different forms, so if you fill them out electronically it still drives providers crazy. 

The CHAIRMAN. Right. Right. 

Secretary SEBELIUS. So we have to do both simultaneously. 

The CHAIRMAN. Right. But I personally want you to quantify it. 

One of the major drivers in getting results is quantifying. 

Secretary SEBELIUS. All right. 

The CHAIRMAN. Benchmarks, standards. Quantifying. Numbers. 

Secretary SEBELIUS. All right. 

The CHAIRMAN. How many forms? How many lines? All that kind 

of thing. 

Secretary SEBELIUS. A lot. 

The CHAIRMAN. I know. 

Secretary SEBELIUS. Thirty cents out of every dollar, we figure, 

is for overhead costs. 

The CHAIRMAN. I am just urging you, on a biennial basis, to get 

back to us. 

Secretary SEBELIUS. Yes. All right. 

The CHAIRMAN. Let us know what your plan is, the benchmarks 

you are setting out for yourself, and the progress you are making 

or not making, because it is something we just need to do. 

Secretary SEBELIUS. Yes, sir. 

The CHAIRMAN. Thank you. 

Second, the same with waste, fraud, and abuse. A lot of questions 

here have been about waste, about fraud, about abuse. So I would 

like you to, again, on a biennial basis, just quantify what you 

think, your best guess as to what the waste is in all the programs 

under your jurisdiction, what the fraud is and how you quantify 

abuse. You have to quantify the number of dollars. Again, we have 

to work together so we get improvement. I would like you also to 

just give us a goal. Zero is unattainable. 

Secretary SEBELIUS. Sure. 

33 

The CHAIRMAN. But if you could give us a goal, like what percent 

by what date, give us some benchmarks. That is how we are going 

to get results around here. It is one thing to talk about things. 

Secretary SEBELIUS. Right. 

The CHAIRMAN [continuing]. But it is something else to quantify 

it with numbers. People understand numbers. We are working together, on a 6-month basis. You will be back here again, I am sure, 

sometime in the next couple, 3 months, and we will have a chance 

to talk about this. 

Secretary SEBELIUS. Sounds good. 

The CHAIRMAN. But again, we want to work with you. This is not 

to put you on the spot, this is just to work together. 

Secretary SEBELIUS. That is great. I look forward to it. 

The CHAIRMAN. Good. 

Senator Carper? 

Senator CARPER. Could I have a last point? I just want to come 

back to that point. We have a lot of Federal property that we do 

not use in our inventory. Senator Baucus knows, we are trying to 

confirm an administrator for GSA, the General Services Administration, which manages thousands of Federal properties across the 

country. But we have a lot of them that are vacant, or not used, 

or under-utilized. We pay the utilities, we pay the security, all 

kinds of other costs that relate to the facilities. 

Agencies, even if they want to sell them, they might need to 

spruce them up or fix them up or something in getting ready to 

market them. Then the property is sold and the agency does not 

get any money back. They do not get any money to pay their costs, 

their fix-up costs. They do not get any money back to help underwrite the costs of some of their programs, so as a result we end up 

just carrying on our books not just hundreds, but thousands of 

properties which are really a drain on our treasury. 

At least one agency has figured out how to use, and has been 

given permission to use, market forces. We incentivize the Veterans 

Administration. We allow them to keep 20 percent of the proceeds 

from the properties that they sell. They use that money to help pay 

for the fix-up costs, they use that money to also go into their programs to help supplement the appropriated funds. That is the kind 

of thing I think we need to be doing more of. I think I learned all 

that stuff in new Governors’ school, and you probably did, too. We 

need to put more of those kinds of lessons to work. 

Secretary SEBELIUS. Entrepreneurial spirit. 

Senator CARPER. There you go. There you go. 

Thanks very much. 

The CHAIRMAN. You bet. 

I also encourage you to break it out according to major categories, such as departments and so forth, so it is not just a gross 

number. 

Secretary SEBELIUS. All right. 

The CHAIRMAN. The tyranny of averages sometimes prevents effectiveness. And do not go across all these departments and all 

your stuff. I do not want you to overdo it, but figure out some reasonable way to segment each, how much, which department has X 

fraud and which departments have Y waste, and so forth. Just kind 

of break it down a little bit in some manageable way. 

34 

Thank you. 

Secretary SEBELIUS. It sounds reasonable. Thank you, sir. 

The CHAIRMAN. This is a great hearing. I deeply appreciate you 

taking the time to come and talk to us. 

Secretary SEBELIUS. I look forward to working with you. 

The CHAIRMAN. We have a lot of things we have to do. 

Secretary SEBELIUS. Absolutely. 

The CHAIRMAN. All right. Thank you very much. 

Secretary SEBELIUS. Thank you. 

The CHAIRMAN. The hearing is adjourned. 

[Whereupon, at 5:27 p.m., the hearing was concluded.] 

(35) 

A P P E N D I X 

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