U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON : 

For sale by the Superintendent of Documents, U.S. Government Printing Office

Internet: bookstore.gpo.gov Phone: toll free (866) 512–1800; DC area (202) 512–1800

Fax: (202) 512–2104 Mail: Stop IDCC, Washington, DC 20402–0001

70–871 2011

HEALTH CARE LAW’S IMPACT ON THE MEDICARE 

PROGRAM AND ITS BENEFICIARIES 

HEARING 

BEFORE THE

COMMITTEE ON WAYS AND MEANS 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED TWELFTH CONGRESS 

FIRST SESSION 

FEBRUARY 10, 2011 

Serial No. 112–05 

Printed for the use of the Committee on Ways and Means 

( 


ccoleman on DSK8P6SHH1PROD with HEARING
ii 

COMMITTEE ON WAYS AND MEANS 

DAVE CAMP, Michigan, Chairman 

WALLY HERGER, California 

SAM JOHNSON, Texas 

KEVIN BRADY, Texas 

PAUL RYAN, Wisconsin 

DEVIN NUNES, California 

PATRICK J. TIBERI, Ohio 

GEOFF DAVIS, Kentucky 

DAVID G. REICHERT, Washington 

CHARLES W. BOUSTANY, JR., Louisiana 

DEAN HELLER, Nevada 

PETER J. ROSKAM, Illinois 

JIM GERLACH, Pennsylvania 

TOM PRICE, Georgia 

VERN BUCHANAN, Florida 

ADRIAN SMITH, Nebraska 

AARON SCHOCK, Illinois 

CHRISTOPHER LEE, New York 

LYNN JENKINS, Kansas 

ERIK PAULSEN, Minnesota 

RICK BERG, North Dakota 

DIANE BLACK, Tennessee 

SANDER M. LEVIN, Michigan 

CHARLES B. RANGEL, New York 

FORTNEY PETE STARK, California 

JIM MCDERMOTT, Washington 

JOHN LEWIS, Georgia 

RICHARD E. NEAL, Massachusetts 

XAVIER BECERRA, California 

LLOYD DOGGETT, Texas 

JOHN B. LARSON, Connecticut 

MIKE THOMPSON, California 

EARL BLUMENAUER, Oregon 

RON KIND, Wisconsin 

BILL PASCRELL, JR., New Jersey 

SHELLEY BERKLEY, Nevada 

JOSEPH CROWLEY, New York 

JON TRAUB, Staff Director 

JANICE MAYS, Minority Staff Director 


ccoleman on DSK8P6SHH1PROD with HEARING
iii 

C O N T E N T S 

Page 

Advisory of February 3, 2011 announcing the hearing ........................................ 2 

WITNESSES 

Donald M. Berwick M.D., Administrator, Centers for Medicare and Medicaid 

Services ................................................................................................................. 6 

Richard S. Foster, Chief Actuary, Centers for Medicare and Medicaid Services ......................................................................................................................... 70 

SUBMISSIONS FOR THE RECORD 

Mr. Rangel ................................................................................................................ 115 

Families USA ........................................................................................................... 116 

American College of Physicians .............................................................................. 120 

America’s Health Insurance Plans ......................................................................... 126 

Alliance for Retired Americans ............................................................................... 132 

Campaign for Better Care ....................................................................................... 133 

Center for Medicare Advocacy ................................................................................ 135 

Health Industry Distributors Association .............................................................. 139 

LeadingAge ............................................................................................................... 141 

Medicare Rights Center .......................................................................................... 142 

National Partnership for Women Families ............................................................ 144 

National Senior Citizens Law Center .................................................................... 147 

Roundtable on Critical Care Policy ........................................................................ 148 

MATERIAL SUBMITTED FOR THE RECORD 

Questions for the Record: 

Mr. Berwick ................................................................................................... 150 

Mr. Berwick—Tiberi DME Data Request ................................................... 166 


ccoleman on DSK8P6SHH1PROD with HEARING

ccoleman on DSK8P6SHH1PROD with HEARING
(1) 

HEALTH CARE LAW’S IMPACT ON THE 

MEDICARE PROGRAM AND ITS 

BENEFICIARIES 

THURSDAY, FEBRUARY 10, 2011 

U.S. HOUSE OF REPRESENTATIVES, COMMITTEE ON WAYS AND MEANS, Washington, DC. 

The committee met, pursuant to call, at 10:00 a.m., in Room 

1100, Longworth House Office Building, the Honorable Dave Camp 

[chairman of the committee] presiding. 

[The advisory of the hearing follows:] 


ccoleman on DSK8P6SHH1PROD with HEARING
2 

HEARING ADVISORY 

Chairman Camp Announces Hearing on the 

Health Care Law’s Impact on the Medicare Program and its Beneficiaries 

Thursday, February 3, 2011 

House Ways and Means Committee Chairman Dave Camp (R–MI) today announced that the Committee on Ways and Means will hold a hearing to examine 

what impact the health care overhaul will have on Medicare and Medicare beneficiaries. The hearing will take place on Thursday, February 10, 2011, in 

1100 Longworth House Office Building, beginning at 10:00 A.M. 

In view of the limited time available to hear the witness, oral testimony at this 

hearing will be from the invited witness only. However, any individual or organization not scheduled for an oral appearance may submit a written statement for consideration by the Committee and for inclusion in the printed record of the hearing. 

A list of invited witnesses will follow. 

BACKGROUND 

The health care overhaul enacted last year included one-half trillion dollars in 

Medicare program savings from 2009–2019. As a result of these policies, the actuaries at the Centers for Medicare and Medicaid Services (CMS) have warned that 

beneficiaries’ access to care could be jeopardized, nearly 9 in 10 seniors could lose 

their retiree prescription drug coverage, and millions of seniors are expected to lose 

their Medicare health plans. 

In announcing this hearing, Chairman Camp said, ‘‘It is the Committee’s responsibility to oversee the Medicare program and to fully understand the 

impact the recently enacted health law will have on the seniors and disabled Americans who rely on it. This hearing will allow the Committee to 

better understand the challenges created by the Democrats’ health care 

overhaul so that we can assess what actions may be necessary to ensure 

that Medicare beneficiaries have continued access to needed health care 

services.’’ 

FOCUS OF THE HEARING: 

The hearing will examine the impact of the enactment and implementation of the 

‘‘Patient Protection and Affordable Care Act’’ (P.L. 111–148) and the ‘‘Health Care 

and Education Reconciliation Act of 2010’’ (P.L. 111–152) will have on the Medicare 

program and its beneficiaries. 

DETAILS FOR SUBMISSION OF WRITTEN COMMENTS: 

Please Note: Any person(s) and/or organization(s) wishing to submit for the hearing record must follow the appropriate link on the hearing page of the Committee 

website and complete the informational forms. From the Committee homepage, 

http://waysandmeans.house.gov, select ‘‘Hearings.’’ Select the hearing for which you 

would like to submit, and click on the link entitled, ‘‘Click here to provide a submission for the record.’’ Once you have followed the online instructions, submit all requested information. ATTACH your submission as a Word document, in compliance 

with the formatting requirements listed below, by the close of business on 

Thursday, February 24, 2011. Finally, please note that due to the change in 

House mail policy, the U.S. Capitol Police will refuse sealed-package deliveries to 

all House Office Buildings. For questions, or if you encounter technical problems, 

please call (202) 225–1721 or (202) 225–3625. 


ccoleman on DSK8P6SHH1PROD with HEARING
3 

FORMATTING REQUIREMENTS: 

The Committee relies on electronic submissions for printing the official hearing record. As always, submissions will be included in the record according to the discretion of the Committee. 

The Committee will not alter the content of your submission, but we reserve the right to format 

it according to our guidelines. Any submission provided to the Committee by a witness, any supplementary materials submitted for the printed record, and any written comments in response 

to a request for written comments must conform to the guidelines listed below. Any submission 

or supplementary item not in compliance with these guidelines will not be printed, but will be 

maintained in the Committee files for review and use by the Committee. 

1. All submissions and supplementary materials must be provided in Word format and MUST 

NOT exceed a total of 10 pages, including attachments. Witnesses and submitters are advised 

that the Committee relies on electronic submissions for printing the official hearing record. 

2. Copies of whole documents submitted as exhibit material will not be accepted for printing. 

Instead, exhibit material should be referenced and quoted or paraphrased. All exhibit material 

not meeting these specifications will be maintained in the Committee files for review and use 

by the Committee. 

3. All submissions must include a list of all clients, persons and/or organizations on whose 

behalf the witness appears. A supplemental sheet must accompany each submission listing the 

name, company, address, telephone, and fax numbers of each witness. 

The Committee seeks to make its facilities accessible to persons with disabilities. 

If you are in need of special accommodations, please call 202–225–1721 or 202–226– 

3411 TTD/TTY in advance of the event (four business days notice is requested). 

Questions with regard to special accommodation needs in general (including availability of Committee materials in alternative formats) may be directed to the Committee as noted above. 

Note: All Committee advisories and news releases are available on the World 

Wide Web at http://www.waysandmeans.house.gov/. 

f 

Chairman CAMP. The committee will come to order. 

Good morning. I want to welcome everyone here and also extend 

a special welcome to our guests, Donald Berwick, the Administrator at the Centers for Medicare & Medicaid Services, and Richard Foster, Chief Actuary for the Centers for Medicare & Medicaid 

Services. 

Dr. Berwick, despite three separate requests from the Republicans on the committee to our Democrat counterparts in the last 

Congress, this is the first time you have actually been invited and 

appeared before this committee—or any House committee, for that 

matter—so we have been especially looking forward to having you 

here for what I hope will be an informative and spirited discussion 

about the impact the Democrats’ new health care law will have on 

Medicare, our seniors, and other beneficiaries who depend on the 

program to meet their health care needs. 

I would note that the spending that runs through your agency 

is greater than what is spent by the Department of Defense. So not 

only do we have a constitutional responsibility to conduct this oversight, we have a clear fiscal responsibility to the American people, 

given the amount of tax dollars that you control. 

And if I were going to pick a subtitle for this hearing, I might 

well borrow a line from Charles Dickens, ‘‘It was the best of times, 

it was the worst of times,’’ because, to be honest, as I read through 

the testimony of our two witnesses and looked back through the information we have seen from CMS, I see two very contrasting perspectives appearing from the same agency. 

On the one hand, we have Dr. Berwick, who has repeatedly touted the benefits of the health care law. In testimony before the SenVerDate Mar 15 2010 00:37 Dec 21, 2011 Jkt 070871 PO 00000 Frm 00007 Fmt 6633 Sfmt 6602 I:\WAYS\OUT\70871.XXX GPO1 PsN: 70871

ccoleman on DSK8P6SHH1PROD with HEARING
4 

ate Finance Committee last November, Dr. Berwick stated that 

‘‘Medicare’s long-term sustainability is stronger than ever as a result of the new efficiencies, new tools, and resources to reduce 

waste and fraud and slow growth in Medicare costs.’’ 

On the other side, you have Mr. Foster and his team in the CMS 

Office of the Actuary, who has a 180 degree perspective on the new 

health care law. In report after report, the Office of the Actuary 

has provided a bleak outlook about the future of Medicare resulting 

from the new health care law. This is due in large part to the fact 

that there are more than one half million dollars in cuts to Medicare that have been made in an effort to finance the law. Those 

changes include massive cuts to hospitals, cuts to home health 

agencies, cuts to skilled nursing facilities, and cuts to hospice providers. 

The concern of many on the committee is the impact of this law 

and the potential to either lose access to health care services or be 

forced to pay more for the services they need. Sadly, that is already 

happening, from those who depend on local hospitals, to folks who 

depend on Medicare Advantage plans, to retirees receiving retiree 

drug coverage, to seniors who will pay higher prices. 

For example, the Medicare actuaries predict that because of the 

cuts in the Democrats’ health care laws, 725 hospitals, 2,352 nursing homes, and 1,587 home health agencies will become unprofitable. It is no wonder they warn that seniors’ access to care could 

be jeopardized. Three Pennsylvania hospitals have been put up for 

sale, and drastic changes in the new health care law were cited as 

a factor in that decision. 

CBO has predicted that beneficiaries who remain in the Medicare Advantage plan will see their annual out-of-pocket costs increase by an average of $816 by 2019. The Medicare Trustees predict that 5.8 million seniors will lose their current retiree drug plan 

provided by their former employer because of the Democrats’ 

health care law, and another 1.7 million seniors who would have 

otherwise received an offer of retiree prescription drug coverage in 

the future will no longer have this option. 

And, finally, despite the claims that Medicare donut hole changes 

will solve the costs facing seniors, the reality is that CBO has predicted that Part D premiums will increase by 4 percent this year 

and 9 percent for all seniors by 2019 as a result of the Democrats’ 

health care law. 

These are just a few concerns, and I am sure there are more concerns that will be identified today, including the very fuzzy Washington math that has led some to characterize the financing of the 

law as a Ponzi scheme. 

Given the impact the new health care law will have on Medicare 

and the Nation’s seniors, it is my hope that in today’s hearing we 

can have an honest and open airing about how CMS plans to institute these cuts while still meeting the long-term needs of our Nation’s seniors and Medicare beneficiaries. 

I now yield to Ranking Member Levin to make an opening statement. 

Mr. LEVIN. Thank you, Mr. Chairman; and we welcome our two 

witnesses. I think this will be an opportunity to shatter many of 

the myths that have been spread about health care reform. 


ccoleman on DSK8P6SHH1PROD with HEARING
5 

For more than 45 years, Medicare has offered important health 

benefits for senior citizens and people with disabilities and has 

safeguarded financial stability for them and their families. The Affordable Care Act builds on the program’s strengths and I emphasize that by investing in Medicare’s future, improving benefits, reducing costs for beneficiaries, and getting a better deal for taxpayers. 

During the health reform debate and in the time since its enactment, health reform opponents have relied on myths and scare tactics to create fear and uncertainty among Medicare beneficiaries. 

What is really most scary is the plan from Republicans to privatize 

Medicare through a voucher system. So let’s set the record straight, 

and we will have more of that today on health care reform and its 

impact on Medicare. 

The Act strengthens Medicare’s future, improves benefits for senior citizens and people with disabilities, and saves money for taxpayers. 

Fact one: The Act lowers cost to Medicare beneficiaries in improved benefits. Thanks to Medicare payment reforms and efforts 

to eliminate waste and fraud, beneficiaries will save on average almost $200 on their Part B premiums by 2019, and cost sharing also 

will go down by more than $200. 

Fixing the donut hole created by the Republican plan was a key 

improvement of the Act. We offered immediate assistance with 

drug costs by providing $250 to over 3 million people. This year, 

seniors who hit the donut hole will save an average of $500. By 

2020, the donut hole will close completely. Finally, seniors will reap 

benefits due to this elimination of cost sharing for most preventive 

services and the creation of a new annual physical benefit. 

Fact two: The Act significantly strengthens Medicare’s financial 

footing. The Act extends solvency of the trust fund by 12 years. 

Fact three: The Act modernizes the Medicare program. It contains an array of delivery reform systems to ensure that the program rewards value over volume. In fact, health care experts, including more than 270 leading economists, agree that the Act creates a more disciplined and effective health care system. 

Fact four: The Act includes tough new fraud-fighting tools that 

are projected to save taxpayers approximately $5 billion. The law 

empowers CMS to stop fraud before it happens. 

But there is one more point that needs to be stressed, and it is 

the Republican agenda to repeal reform. The repeal agenda would 

reverse the progress we have made. It would raise beneficiary costs 

and substantially shorten Medicare solvency. It would end delivery 

innovations and stop important new fraud-fighting powers in their 

tracks. 

My Republican colleagues focus on repealing health care reform 

and privatizing it by turning it into a voucher system. The repeal 

agenda shifts medical expenses back onto seniors and their families. When we passed Medicare, it was to fix these very problems 

to ensure that seniors would no longer have to spend their retirement in poverty or in fear of the next illness. Repeal would do more 

than turn back the clock, it would rip off its hands. That is a fact 

we cannot ignore and a possibility we will not accept. 

Chairman CAMP. Well, thank you. 


ccoleman on DSK8P6SHH1PROD with HEARING
6 

Dr. Donald Berwick is the Administrator for the Centers for 

Medicare & Medicaid Services. As Administrator, Dr. Berwick oversees the Medicare, Medicaid, and the Children’s Health Insurance 

Program. Together, these programs provide care to nearly one in 

three Americans. 

Before assuming the leadership of CMS, Dr. Berwick was President and Chief Executive Officer of the Institute for Health Improvement, Clinical Professor of Pediatrics and Health Care Policy 

at the Harvard Medical School, and Professor of Health Policy and 

Management at the Harvard School of Public Health. He is also a 

pediatrician, adjunct staff in the Department of Medicine at Boston’s Children’s Hospital, and a consultant in pediatrics at Massachusetts General Hospital. 

Dr. Berwick, your full written statement will be made part of the 

record. You have 5 minutes to address the committee, whereupon 

the members will question you for 5 minutes each. 

So, Dr. Berwick, welcome to the committee, and you have 5 minutes. 

STATEMENT OF DONALD M. BERWICK, M.D., M.P.P., ADMINISTRATOR, CENTERS FOR MEDICARE & MEDICAID SERVICES 

Dr. BERWICK. Thank you, Mr. Chairman. I appreciate the 

chance to appear here. It is a privilege and an honor to serve as 

the Administrator and also to get a chance to be in dialogue with 

you now and in the future. 

I am a physician, I am a pediatrician, I am the son of a physician, and I am the father of a newly minted physician. Almost 

three-quarters of a century span the time between when my father 

first hung out his shingle in a small town in Connecticut where I 

grew up and when my daughter Jessica showed up last year for her 

first day as a primary care resident. 

My own career is sort of a bridge also between them, from the 

typewriters that my father used to the computers that Jessica uses, 

from ignorance about how genes worked to the decoding of the 

human genome, from helplessness in the face of almost all cancers 

to cures for many cancers, from the time before Medicare when 

seniors lived in fear of medical bankruptcy to now when they do 

not. 

The Affordable Care Act is a bridge, too. It is our Nation’s answer to many of the problems that modern health care brings, 

along with its successes. It is our answers to the questions about 

health care coverage. 

Will we make sure that our neighbors don’t need to be afraid 

that they are going to lose health insurance when they get sick or 

not be able to get it in the first place? The answer is yes. People 

with preexisting conditions will be able to get insurance and insurance companies will not be allowed to withdraw coverage from 

those who become ill. Yes, children under 26 can be covered under 

their parents’ insurance policies. 

Will Medicare beneficiaries get the drugs that they need at the 

prices they can afford? The answer is yes now. We have sent over 

3 million tax-free rebate checks to seniors to get them through the 

donut hole. We have discounts now of 50 percent for covered preVerDate Mar 15 2010 00:37 Dec 21, 2011 Jkt 070871 PO 00000 Frm 00010 Fmt 6633 Sfmt 6602 I:\WAYS\OUT\70871.XXX GPO1 PsN: 70871

ccoleman on DSK8P6SHH1PROD with HEARING
7 

scription drugs for people in the donut hole. By 2020, we will close 

the donut hole completely. 

Will we invest in prevention for seniors, not just treat them for 

the heart attacks and strokes and cancers they could have avoided? 

The answer is yes. We will add annual wellness checks and costfree screening tests like mammography and colonoscopy to Medicare benefits. 

In some ways, though, the biggest question of all I know is one 

that concerns you, which is, can we afford to do that? Is getting the 

care that we want and that we need—care for everybody—sustainable? The answer to that also is yes. 

Not only does the Affordable Care Act make Medicare fiscally 

stronger, it also provides us with the tools to make health care better. And as in the rest of what we do, doing things right is less 

costly than doing things wrong. 

Can we afford to meet the needs of patients and families? Yes. 

We cannot afford not to. When a patient gets an avoidable surgical 

infection or when two different doctors who don’t have a way to coordinate their care mistakenly prescribe two drugs for Mr. Green 

that ought not to be taken together, the patient, the family, and 

society all bear the higher costs of the complications. When Mrs. 

Miller stops taking her medicines because she can’t afford them, 

she will suffer the stroke that will become her greater burden and 

ours. The diabetes that we fail to prevent or to detect early will become the heart attack or the amputation or the kidney failure that 

will cost far more in suffering and in dollars to treat later. 

It is a terrible mistake, in my opinion, to think that the route 

to affordable health care is to deny people insurance, care, and 

treatment. That is a very bad plan. Instead, the proactive, patientcentered investments that the Affordable Care Act and Medicare 

and Medicaid themselves represent are our Nation’s best hope for 

the sustainable excellent health care to which we aspire. Better 

care, better health, and lower costs through improvement of care, 

they come together. They are a package deal. 

Let me focus on one particular case, the Medicare Advantage 

program, which I know you have concerns about. You are concerned about the strength of the program. We actually have some 

quite exciting new data just now on enrollments and premiums. 

Despite earlier projections of enrollment declines and premium 

increases, the actual data we now have in 2011 shows that enrollment in Medicare Advantage increased 6 percent, to more than 12 

million beneficiaries. On average, beneficiaries have seen a 6 percent reduction in their premiums, and there is a 5 percent increase 

in the number of beneficiaries who are now in four- and five-star 

Medicare Advantage contracts this year versus last year. That 

translates into more beneficiaries being in lower-cost and higherquality plans. 

Higher-quality care is what I want for all patients. When I practiced pediatrics, I did everything I possibly could to make sure that 

my patients had the best medical care possible. I fought for a bone 

marrow transplant for a young boy for whom that was the last possible chance for success. He got the transplant, and he lived. I 

made sure that kids with asthma got the most modern treatment 

we had and that their mothers and their fathers and their schoolVerDate Mar 15 2010 00:37 Dec 21, 2011 Jkt 070871 PO 00000 Frm 00011 Fmt 6633 Sfmt 6602 I:\WAYS\OUT\70871.XXX GPO1 PsN: 70871

ccoleman on DSK8P6SHH1PROD with HEARING
8 

teachers understood how to help them. I made sure that immunizations were up to date, that obese kids knew that they had options, 

because you can never underestimate the value of prevention. 

And now, at CMS, I get to do the same for Medicare and Medicaid and CHIP beneficiaries and for the millions more who will 

benefit from a healthier private insurance market. It is the same 

plan. Quality pays. If you want to thrive, don’t run away from a 

problem. Do things right. Better care, better health, and lower 

costs through improvement. That was my father’s plan, that is my 

daughter’s plan, and every day at CMS it is our plan. 

Thank you. 

[The prepared statement of Donald M. Berwick, M.D., follows:] 


ccoleman on DSK8P6SHH1PROD with HEARINGInsert offset folio 17 here 70871.017
9 


ccoleman on DSK8P6SHH1PROD with HEARINGInsert offset folio 18 here 70871.018
10 


ccoleman on DSK8P6SHH1PROD with HEARINGInsert offset folio 19 here 70871.019
11 


ccoleman on DSK8P6SHH1PROD with HEARINGInsert offset folio 20 here 70871.020
12 


ccoleman on DSK8P6SHH1PROD with HEARINGInsert offset folio 21 here 70871.021
13 


ccoleman on DSK8P6SHH1PROD with HEARINGInsert offset folio 22 here 70871.022
14 


ccoleman on DSK8P6SHH1PROD with HEARINGInsert offset folio 23 here 70871.023
15 


ccoleman on DSK8P6SHH1PROD with HEARINGInsert offset folio 24 here 70871.024
16 


ccoleman on DSK8P6SHH1PROD with HEARINGInsert offset folio 25 here 70871.025
17 


ccoleman on DSK8P6SHH1PROD with HEARINGInsert offset folio 26 here 70871.026
18 


ccoleman on DSK8P6SHH1PROD with HEARINGInsert offset folio 27 here 70871.027
19 


ccoleman on DSK8P6SHH1PROD with HEARINGInsert offset folio 28 here 70871.028
20 


ccoleman on DSK8P6SHH1PROD with HEARINGInsert offset folio 29 here 70871.029
21 


ccoleman on DSK8P6SHH1PROD with HEARINGInsert offset folio 30 here 70871.030
22 


ccoleman on DSK8P6SHH1PROD with HEARINGInsert offset folio 31 here 70871.031
23 


ccoleman on DSK8P6SHH1PROD with HEARINGInsert offset folio 32 here 70871.032
24 


ccoleman on DSK8P6SHH1PROD with HEARINGInsert offset folio 33 here 70871.033
25 


ccoleman on DSK8P6SHH1PROD with HEARINGInsert offset folio 34 here 70871.034
26 

f 

Chairman CAMP. Thank you, Dr. Berwick. Your time has expired, but your full statement will be made part of the record. 

Dr. Berwick, is the British health care system, the National 

Health Service, a good model for us to follow here in the United 

States? 

Dr. BERWICK. Mr. Chairman, I have seen and worked in many 

countries. Every country finds its own solution to its own problems. 

America needs an American solution to the American health care 

problem, and the Affordable Care Act is certainly that—or the beginning of that. It is a system that balances public and private payment. It depends heavily on the private health care sector. It is a 


ccoleman on DSK8P6SHH1PROD with HEARINGInsert offset folio 35 here 70871.035
27 

good partnership between the Federal Government and States. It 

is the American way to an American health care system that is 

sustainable. 

Chairman CAMP. Well, regarding the British National Health 

Service, you made a statement—and that is a service that is notoriously known for rationing care—you said, ‘‘I fell in love with the 

NHS. To an American observer, the NHS is such a seductress.’’ 

Are you still in love with the NHS? Is this still a view you subscribe to? 

Dr. BERWICK. There are strengths and weaknesses for every 

health care system around the world. We have a lot to learn from 

each other. But I say again, the American health care system needs 

an American solution. That is what excites me about the Affordable 

Care Act. It puts a stake in the ground about the kind of system 

we can have based on the heritage of our system, the assets we 

have, our investment in our own public trust, and this extraordinary partnership between public and private care. We are on the 

route to a solution that fits our country, and that is what really 

counts. 

Chairman CAMP. Would that be a yes or a no? 

Dr. BERWICK. I am saying that every country finds its own solution. There are strengths in the British health care system. There 

are strengths in every health care system I have seen and enormous weaknesses in all of them. We are all struggling with the 

same issues. 

Chairman CAMP. You also wrote, ‘‘I admit to my own devotion 

to a single-payer mechanism as the only sensible approach to 

health care finance I can think of.’’ Do you still feel that a government-run, single-payer health care system is the only sensible approach? 

Dr. BERWICK. I am really excited by the promise the Affordable 

Care Act offers, Mr. Chairman, to American health care. I think we 

have found our way to a really open door here now to a solution 

to the American health care problem. It is an investment in better 

care, better health, and lower costs through the improvement of 

care. And as I understand that law more and more, I see more and 

more tools that our country now has to make care exactly what it 

should be for every single person. 

Chairman CAMP. Is that a yes or a no to my question? I am having trouble understanding whether you still believe that the singlepayer system is the only sensible approach. 

Dr. BERWICK. I think the Affordable Care Act is a sensible approach for America, and we are seeing progress already. I think we 

will see immense progress if we stick with this law. I can see the 

potential for helping our country actually use innovation, an improvement of quality of care, transparency, putting control in the 

hands of patients. We are going to find our way to a better health 

care system, and this is an exciting opportunity. 

Chairman CAMP. If I could have a simple yes or no answer. You 

said one time that ‘‘competition, in short, will hurt you, not help 

you.’’ Now that you will be in charge of setting up exchanges, determining what health benefit plans will look like, analyzing premiums, do you still feel that competition in health care is a bad 


ccoleman on DSK8P6SHH1PROD with HEARING
28 

thing? And I think we need some clarity from you. Is this a yes or 

a no? 

Dr. BERWICK. Competition certainly has a place in our health 

care system. It is the American way to excellence in many forums. 

There are other areas in which providing public support to people 

through a publicly financed system helps, too. There is not a simple 

yes or no answer to your question, Mr. Chairman; and I think the 

Affordable Care Act strikes a superb balance between public and 

private sector investment and better care. 

Chairman CAMP. You have also said that any health care funding plan that is just, equitable, civilized, and humane must redistrict wealth from the richer among us to the poor and less fortunate. Is this a view you still subscribe to? 

Dr. BERWICK. Statement of fact, Mr. Chairman, sick people 

tend to be poorer and poor people tend to be sicker; and if we are 

investing in the health of our neighbors and our Nation, we are 

going to have to take care of the sicker and poorer in our country. 

And we have done that. That is why Medicare and Medicaid are 

there in the first place. 

Chairman CAMP. And you think wealth redistribution is the way 

to go about achieving that goal? 

Dr. BERWICK. Poor people tend to be sicker, and sicker people 

tend to be poor. And if we really want to help each other we are 

going to have to understand that and address it, and we have in 

our public policy. That is where Medicaid came from in the first 

place, Mr. Chairman. 

Chairman CAMP. We have heard that this legislation will mean 

that most preventative care will now be free because of this new 

health care law. And you once wrote that one over-demanded service is prevention—annual physicals, screening tests, and other 

measures that supposedly help catch diseases early. Do you still 

feel that preventative care isn’t too high of a demand? 

Dr. BERWICK. Mr. Chairman, I am a pediatrician. I have spent 

my life in preventive services. The whole idea in taking care of children is to give them effective prevention so they don’t get the diseases that we will later pay the price for. There is effective prevention and ineffective prevention. The Affordable Care Act is a tremendous investment in getting people effective preventive services. 

That is why they cover mammography and colonoscopy now at no 

copayment for the patient. That is why we introduced the annual 

wellness physical. Effective prevention is the best investment we 

can make in higher quality, better life, and lower cost. 

Chairman CAMP. Well, I would take it that is a ‘‘no’’ then. I 

would take it that you do not feel that preventative care is in too 

high of a demand. 

Dr. BERWICK. I am sorry, Mr. Chairman, I don’t understand. 

Chairman CAMP. The question I asked you was, after reading 

your quote, do you still feel that preventative care is in too high 

demand? And I guess from our answer you do not feel that preventative care is in too high demand. 

Dr. BERWICK. I must say, Mr. Chairman, I don’t recognize your 

quote. I am telling you what I think, which is that effective prevention—— 


ccoleman on DSK8P6SHH1PROD with HEARING
29 

Chairman CAMP. You wrote it once. It was in your writings. I 

am quoting your writings. I am reading it from ‘‘We can cut costs 

and improve care at the same time,’’ by Donald Berwick, Medical 

Economics Office, August 12, 1996, page 186. 

Dr. BERWICK. I believe we can cut costs and improve care at 

the same time by investing in effective care, and that certainly includes investing in effective preventative services, which is what 

the Affordable Care Act at last allows us to do for seniors who now 

can be protected from strokes and heart attacks and complications 

of diabetes as never before. 

Chairman CAMP. So the answer is, no, you don’t feel that preventative care is in too high demand. 

Dr. BERWICK. Is in too high demand? 

Chairman CAMP. That is what I am asking. 

Dr. BERWICK. I believe that offering effective preventive services is a terrific investment for our Nation, and that is what the 

Affordable Care Act does. 

Chairman CAMP. All right. Mr. Levin may inquire. 

Mr. LEVIN. I was going to say, that I think it is important that 

everybody hear your answers. 

Dr. BERWICK. Thank you. 

Mr. LEVIN. And so the mic will be clear. And I am glad that the 

chairman asked you these questions so that the air can be cleared 

when it is often, I think, misrepresented and so we can move on 

and you can provide the services that you have been trained to provide. I am glad those questions were asked. I don’t think you were 

surprised. 

Let me just ask you, in terms of separating fact from myth, Mr. 

Camp, in his opening statement, talked about more than one half 

trillion dollars in cuts to Medicare. Would you comment on that? 

Dr. BERWICK. We have an unsustainable health care system 

now. That is the problem we are struggling with no matter which 

side of the aisle you are on. We have a system that our country 

is having trouble affording, and it is failing to meet the needs of 

many of its citizens, and we are trying to navigate our way to a 

solution. 

I think the Affordable Care Act offers an opportunity to offer 

every American better care, not just those in Medicare and Medicaid, but everyone a better system, safer, more effective, more patient-centered. There are investments in innovation. There are investments in continuity of care so that patients with chronic illness 

who need to be handed off well from hospital to home or from doctor to doctor can get that kind of support. These all improve the 

quality of care, And through that we are going to see costs fall over 

time. 

The Affordable Care Act has many potential elements in it that 

will, I think, in the long run result in savings for our country and 

for beneficiaries themselves. 

Mr. LEVIN. So when there is a reference to a half trillion dollar 

cuts in Medicare, these so-called ‘‘cuts’’ relate in most cases to the 

rate of increase in reimbursements and payments to providers; isn’t 

that true? 

Dr. BERWICK. We are on an unsustainable trajectory, and we 

need to find a way to lower costs. The Affordable Care Act is linkVerDate Mar 15 2010 00:37 Dec 21, 2011 Jkt 070871 PO 00000 Frm 00033 Fmt 6633 Sfmt 6602 I:\WAYS\OUT\70871.XXX GPO1 PsN: 70871

ccoleman on DSK8P6SHH1PROD with HEARING
30 

ing reimbursement to providers more and more to the quality of 

what they do. Instead of paying for care in fragments or pieces or 

high volume care alone, we are orienting more and more payment 

in this country, on the public and private side both, to paying providers for excellence, for producing the care that we want and need. 

An example would be infections in hospitals. There are hospitals 

all over this country that now have reduced many forms of infection to zero. I have visited those hospitals. I have seen them. The 

question now is, if it can be done there, can it be done everywhere? 

The answer is, yes, if we invest in it. The Affordable Care Act invests in innovations that would allow things like infection control 

to be spread all over the country now. Every single hospital offering excellence at the level that the best currently do, that lowers 

costs and improves quality at the same time. And that is a plan 

that will get us to a more sustainable health care system and in 

the end a more sustainable Medicare Trust Fund, Medicaid system, 

and health care as a whole. 

Mr. LEVIN. Do you want to comment on this claim that 5.8 million seniors will lose their current retiree drug plan provided by 

their former employer, also in the statement of our chairman? 

Dr. BERWICK. We are in a transitional mode in American 

health care. The Affordable Care Act helps the retiree drug programs with a retiree drug subsidy. Businesses will make their decisions about continuing or not continuing their retiree drug plans, 

and the beneficiaries will choose among the things available to 

them. And I am sure there will be some shifts. 

You know, the Part D program, the alternative to the retiree 

drug program, in many cases has been strengthened immensely 

over the past year or two now. We have strong evidence of a much 

better supply in the Part D program. And we have the 50 percent 

drug discount for brand name drugs so that some retiree drug 

beneficiaries will choose to move over to Part D because it is a better plan for them. 

Mr. LEVIN. Thank you. 

Chairman CAMP. Thank you. 

The Chairman of the Health Subcommittee, Mr. Herger, may inquire. 

Mr. HERGER. Thank you, Mr. Chairman; and, Dr. Berwick, I 

want to thank you for being here this morning. I appreciate your 

dedication to creating a high-quality health care system, but I 

think we have some very fundamental disagreements about how to 

achieve that goal. 

Chairman Camp highlighted your past support for a single-payer 

system and your comment that ‘‘competition, in short, will hurt 

you, not help you.’’ Dr. Berwick, do you believe competition and 

market forces are good or bad for health care in light of your 

quote? 

Dr. BERWICK. On the whole, good, Congressman Herger. We 

can see that in the durable medical equipment bidding system, for 

example, in which we are using market forces to enhance the benefits to beneficiaries, reduce their costs of durable medical equipment, at the same time assuring a supply of excellent DME. That 

program alone has reduced the spend for the nine areas that the 

DME program was tried in by 32 percent. Extrapolating to the 


ccoleman on DSK8P6SHH1PROD with HEARING
31 

country as a whole, that would be a saving over the next 10 years 

of $27 or $28 billion, of which $17 billion gets returned to the 

Medicare Trust Fund and $11 billion to the beneficiaries. That is 

constructive use of competition in a very important arena, increasing excellence, increasing transparency, decreasing costs, and increasing the well-being of the people who use those products and 

services. 

Mr. HERGER. So, in other words, you don’t agree with your 

statement where you said ‘‘competition, in short, will hurt you, not 

help you?’’ 

Dr. BERWICK. There are instances where competition is very 

helpful, and I have just cited one. There are instances where it is 

probably less useful. But in a rural setting where there is only a 

single hospital, critical access hospital, and that is the only supply 

in town, we can’t use competition as the major lever for improvement in that. We have to reach out and help that setting and make 

sure that it can supply the goods and services and excellence that 

that community needs. Sometimes it helps; sometimes it doesn’t. 

But the answer to your question before, do I think competition 

can help? The answer is, yes, in many cases absolutely. 

Mr. HERGER. Which is directly opposite of what your quote was. 

But the reason that I and many others find your past statements 

troubling is because America was built on the free enterprise system. Going back to our Founding Fathers, Americans have always 

believed that free people working in free markets make better decisions than any king or dictator or government bureaucrat could 

ever make for them, and that is what this health care debate is 

fundamentally about. Are we going to stick with the free enterprise 

system that has brought about the greatest prosperity in the history of the world or are we going to hand over the keys to the government? Will we trust patients’ own doctors to determine the best 

course of medical treatment or will we leave that decision up to a 

district bureaucrat who has never met the patient? 

You are now overseeing an agency that provides health care benefits to more than 11 million beneficiaries in Medicare Advantage 

and 19 million in Medicare prescription drug plans. Congress designed Medicare Advantage and Medicare Part D to give senior 

citizens a choice of plans so they can pick the plan that works best 

for them instead of being forced into a one-size-fits-all government 

plan. 

Given your repeated statements expressing skepticism about the 

private health care market and competition, how will you reconcile 

your personal beliefs with your responsibility to administer these 

programs that are built on the principles of competition and consumer choice? 

Dr. BERWICK. Congressman, I can’t think of a better example 

of American-style competition benefiting everyone than, say, with 

the evolution right now of the Medicare Part C program, the Medicare Advantage program. Look at what is happening: more transparency, more negotiation, more visible understanding by beneficiaries of the quality of the plans they can choose from, an open 

market in the Medicare and You handbook and on the Web where 

they can search for the plan they want and then they buy it. And 

what happens? Quality goes up and costs go down. That is the free 


ccoleman on DSK8P6SHH1PROD with HEARING
32 

market at work with the support of Medicare to make this a transparent environment in which the beneficiary can make choices. We 

are interested in more choice, not less, and it is working. 

Mr. HERGER. And I couldn’t agree with you more. But I hope 

you recognize that what you have just said in your statements and 

answers to Chairman Camp are very different, very different than 

these quotes that you have made in the past, but thank you very 

much. 

Chairman CAMP. Thank you. The gentleman’s time has expired. 

Mr. Johnson is recognized. 

Mr. JOHNSON. Thank you, Mr. Chairman, and Doctor. 

You know, the administration and Democrats here in Congress 

made promises to seniors about their health care and unfortunately 

didn’t live up to them. In many cases, the law’s provisions are 

going to harm, not help, Americans primarily by raising premiums 

and reducing access. I mean, the Medicare actuaries warn that the 

one-half trillion dollars in Medicare cuts in the Democrat health 

care law are so drastic that providers might end their participation 

in the program, probably jeopardizing access to care for beneficiaries. 

You know as well as I do there are docs that are getting out of 

Medicare now because they can’t deal with it. And I don’t know if 

you have a private office or not, but most of the docs I know have 

to hire two or three extra people just to track the administrative 

work that goes along with that Medicare junk. 

The Congressional Budget Office also expressed concern that it 

is unclear if the law’s Medicare cuts can be sustained and whether 

this slower rate of growth will be accomplished through greater efficiency or instead reduce access to care or diminish the quality of 

care for Medicare beneficiaries. 

In Texas, more than 300 doctors have dropped the Medicare program in the last 2 years—you are aware of that, I am sure—including 50 in the first 3 months of 2010. Some docs feel the only way 

they can have control over their practice is to stop taking Medicare 

patients. Of course, not all docs drop out of the program. Some doctors are choosing to increase fees, reduce staff wages and benefits 

and reduce charity care. Those alternatives don’t sound good to me. 

As a CMS administrator, how do you plan to prevent seniors 

from being denied access to care as a result of the massive Medicare cuts in the program? 

Dr. BERWICK. It is tough times for all. Everyone is tightening 

their belt in this economy. I know that. But let me say that I have 

never been more optimistic about the future of the health care system in our country with the Affordable Care Act in our hands. I 

am told now that the participation in the Medicare system is the 

highest this year than it has ever been in history among physicians. The Affordable Care Act was supported by the American 

Medical Association, the American Hospital Association, professional societies, and trade associations. I don’t think they would be 

supporting an Act that they think spells doom for them. 

Mr. JOHNSON. Well, how do you account for 300 doctors dropping it in Texas? 

Dr. BERWICK. Not everyone agrees with the Affordable Care 

Act, of course, but the associations, whose job is to make sure that 


ccoleman on DSK8P6SHH1PROD with HEARING
33 

the wellbeing of their part of the industry proceeds well, are supporting this act. They know that the future lies in better care, better health, and lower cost; and I think they are interested in engaging with us—with us on the public and private side both—in making health care better. That is what they say to me when they meet 

with me. 

I have been going all over the country meeting with hospital 

leaders and professional leaders, and I think everybody that I am 

speaking with knows we have got to navigate our way to a better 

health care system together in public and private partnership, and 

I think we are headed in that direction. 

Mr. JOHNSON. I don’t know how you plan to prevent seniors 

from being denied access. What kind of steps are you going to put 

in place so you can identify a problem before it becomes a crisis? 

Dr. BERWICK. More transparency, more knowledge about what 

is going on, more linkage of quality to payment. 

Mr. JOHNSON. And how do you do that if the docs refuse to be 

part of Medicare anymore? 

Dr. BERWICK. Ninety-six percent of the docs are participating 

in Medicare, and they are more than willing to work with us, the 

ones that I have met with. They know that in the long run better 

care is the answer for them, for their patients, and for the sustainability of the country. And we are going to work hard with the providers of care all over this country to make that care better. They 

know in the long run that that is how they will do the best for 

their patients, and that is what counts. 

The hospitals want to be safer, they want to be higher quality, 

and we will work with them to get them in that direction. In the 

end, extra readmission that shouldn’t have happened because we 

dropped the ball helps no one. Hospitals know that, doctors know 

that, and we are going to work for better care. That will be why 

people came into health care in the first place and why they will 

want to stay there. 

Mr. JOHNSON. Well, I don’t know how you are going to get to 

the docs that quit the system because they can’t stand it. 

Thank you, Mr. Chairman. 

Chairman CAMP. Thank you. 

Mr. Rangel is recognized. 

Mr. RANGEL. Thank you so much, Mr. Chairman; and, Doctor, 

thank you so much for sharing with us the knowledge that you 

have so that our government can do a better job which you and 

your family have dedicated your life to. 

I just want to correct the record, because the chairman had indicated in his opening statement that three Catholic Universities in 

Pennsylvania were closed because of the Affordable Care Act. They 

rushed to make certain that some of us knew that the Affordable 

Care Act had nothing to do at all with the sale and that they had 

indicated that they wanted to do this long before the Act. The 

president is a Roman Catholic nun, and she is the one that wanted 

to clarify the record and her support for the Act. 

Having said that, it just amazes me as to the opposition to this 

revolutionary concept of broad national coverage. What is your 

guesstimate of the number of Americans that have health insurance coverage? 


ccoleman on DSK8P6SHH1PROD with HEARING
34 

Dr. BERWICK. The number that have health insurance coverage? 

Mr. RANGEL. That have health coverage of some kind. 

Dr. BERWICK. I don’t know the exact number. I know that we 

have closed the gap a lot with the Affordable Care Act that now 

have access to—— 

Mr. RANGEL. I heard it is about 30 percent that don’t have coverage. 

Dr. BERWICK. As the Affordable Care Act gets into play, we are 

going to be closing that by over 30 million Americans that will have 

coverage. 

Mr. RANGEL. But these people somehow manage to get health 

care even though they are not covered by insurance; is that true? 

Dr. BERWICK. That is true. 

Mr. RANGEL. And normally—not normally, but many of them go 

to emergency clinics in order to get this health care, and it is my 

understanding that this is a very expensive way to get health care 

treatment. 

Dr. BERWICK. You are absolutely right, Congressman. It is you 

pay me now or you pay me later. When the patient comes in and 

you detect their diabetes early, they don’t get kidney failure later. 

If they don’t have access to care, complications will occur and they 

will show up later in the emergency room or the safety system and 

they will be expensive in a different way, right out of our public 

treasury, often. 

Mr. RANGEL. When I was a kid, things were that you never 

went to see a doctor unless you were sick, but now I think it is 

abundantly clear that you can prevent so many serious illnesses, 

as you said in your testimony, by being able to go without having 

enormous cost to prevent these things from happening. 

Dr. BERWICK. Absolutely right. We know the Director of the 

Centers for Disease Control, Dr. Frieden, has pointed out that with 

three or four simple, preventive steps we could reduce hundreds of 

thousands of heart attacks and strokes and other cardiovascular 

diseases in our country. 

Mr. RANGEL. Now if you already have coverage and you are 

paying your premiums, are not included in the premiums the costs 

for the people who don’t have coverage? 

Dr. BERWICK. Eventually, it comes around. Somebody has to 

pay. 

Mr. RANGEL. So if those who have premiums can find some way 

to reduce the costs of those who are not insured, does that not 

mean that your premium should be expected to be lowered? 

Dr. BERWICK. Your premiums can be lowered. And in the long 

run the savings will be there because somewhere in the tax system 

and wages and in premiums that money will be saved and will 

come back into the American economy instead of being wasted in 

ill health that we could have avoided. 

Mr. RANGEL. And so if we could develop a plan where most all 

people one way or the other would be able to get preventive care, 

would be able to get some type of care to prevent them from being 

hospitalized or prevent their illnesses from becoming chronic, then 

everybody not only gets the better quality of care but the cost per 

capita is dramatically lower. 


ccoleman on DSK8P6SHH1PROD with HEARING
35 

Dr. BERWICK. Exactly, Congressman. 

Mr. RANGEL. Now if that is true—I guess coming from Lenox 

Avenue in Harlem, New York—that those who have coverage probably take the attitude, I got mine, Jack, it is up to you to get yours. 

Because I think we have done a terrible job. And I want to thank 

the Republican majority for giving us a second chance of really 

showing the benefits of the program. Because the law is complicated. 

But if you have a child with a precondition, you can better appreciate it today. If you have a kid that is under 26 and you couldn’t 

get coverage, if you have high costs for prescription drugs, all of 

these things, the public is beginning to understand what is in the 

bill. 

So I would like to take this opportunity to thank the Republican 

majority for giving us an opportunity not only to defend the bill 

that this committee majority was so proud of playing a major part 

in and giving us an opportunity not just to defend but to point out 

that, in the short and long run, this is best for our Nation; and I 

appreciate your patience with us. 

And, Mr. Chairman, these hospitals that you referred to have 

sent out a release that I would like unanimous consent to be included in the record in saying sale it was, but it had nothing to do 

with the law that is before the committee. 

Chairman CAMP. Without objection. 

Chairman CAMP. The gentleman’s gratitude to the majority is 

duly noted. His time has expired, and Mr. Brady is recognized. 

Mr. BRADY. I, too, am grateful. Republicans oppose this health 

care plan because it won’t lower prices for Americans, it will drive 

people out of plans they prefer, we can never hope to afford it, and 

a lot of companies that provide health care today are going to drop 

them, none of which we think is the right solution for health care 

reform in America. 

So let’s get specific. How many seniors have lost their Medicare 

Advantage plan since President Obama’s plan was put in place? 

Dr. BERWICK. Congressman, there is always turnover in Medicare Advantage. I don’t know the exact the number that have 

changed—— 

Mr. BRADY. No, these aren’t turnovers. How many have been 

forced out of their preferred Medicare Advantage plan? Your agency says 700,000. Are they right? 

Dr. BERWICK. That is a turnover number. They can choose to 

be in Medicare Advantage or not. It is a system in which people 

can choose—— 

Mr. BRADY. No. Your actuaries said 700,000 seniors have already been forced out of their preferred Medicare Advantage plan. 

Is your agency correct? 

Dr. BERWICK. Medicare Advantage plans are a market system 

in which beneficiaries can choose, and they—— 

Mr. BRADY. Is your actuary, their report accurate? 

Dr. BERWICK. What I know right now, sir, is enrollment in 

Medicare advantage plans is up 6 percent this year. People are exercising their choices, and they have choices. 

Mr. BRADY. Is that a little misleading since the cuts on Medicare Advantage haven’t taken place yet? 


ccoleman on DSK8P6SHH1PROD with HEARING
36 

Dr. BERWICK. Well, we are seeing heavy marketing by Medicare Advantage, by Medicare Advantage plans. There is growth in 

those plans. There are reductions in premiums—— 

Mr. BRADY. If you could send back to us how many seniors have 

lost their Medicare Advantage plan, been forced out of their preferred plan, by State, I would appreciate it. 

How many seniors will lose their preferred Medicare Advantage 

plan under the President’s new national health care plan? 

Dr. BERWICK. Medicare Advantage options are robust for Medicare Advantage beneficiaries, and they choose the plan that meets 

their needs—— 

Mr. BRADY. Your actuaries say 7.4 million. Are your people correct? 

Dr. BERWICK. We are seeing an increase, sir, in the enrollment 

in Medicare Advantage—— 

Mr. BRADY. Because the cuts haven’t taken place. 

Dr. BERWICK. We are seeing investments in Medicare Advantage plans—— 

Mr. BRADY. If you could get me that answer. I am not trying 

to interrupt, but since you already have these numbers, it would 

be great to refer to them. 

Dr. BERWICK. We will be happy to—— 

Mr. BRADY. How many of those—in the Part D prescription plan 

for seniors, how many of those have lost their preferred plan since 

the President’s plan took place? 

Dr. BERWICK. Sir, the number of sound options, meaningful 

choices for Medicare beneficiaries in both C and D are increasing; 

and beneficiaries are taking advantage of those higher rates. 

Mr. BRADY. Your agency says 3 million this past year have already been forced out of their plan. Are your actuaries right? 

Dr. BERWICK. We are seeing turnover in Medicare Part D and 

C, as we always do. Some plans, when you are leaving the market—— 

Mr. BRADY. How many seniors in Part D have been automatically enrolled in a Medicare Part D plan that costs them more? 

Dr. BERWICK. I don’t know the answer to that, sir. 

Mr. BRADY. Your folks say 1.5 million. Can you provide both for 

Part D and those forced into a higher cost plan, can you provide 

that to us by State? 

Dr. BERWICK. Happily. 

Mr. BRADY. The donut hole, the way that was closed is highly 

flawed, creates cost shifting within it. For the 90 percent of seniors 

who do not reach the donut hole, can you guarantee that they will 

not see higher premiums as a result of closing the donut hole for 

those who are not in it and not touched by it? 

Dr. BERWICK. As a result of closing the donut hole? 

Mr. BRADY. Yes. 

Dr. BERWICK. Part D premiums rose slightly this year from I 

think $29 or $30, on average. I am not quite sure I understand 

what you mean that their premiums will rise as a consequence of 

closing the donut hole. 

Mr. BRADY. Yes. Because you are cost shifting within the donut 

hole. You are taking the 90 percent who do not reach it and taking 


ccoleman on DSK8P6SHH1PROD with HEARING
37 

the cost of closing it and applying it to them. Your actuaries say 

their premiums will go up. 

Dr. BERWICK. Congressman, what I know is that a patient that 

gets to the donut hole and needs their medications to preserve 

their life and their health and their function, if they can’t afford 

them, they get sicker, and we end up paying and their families—— 

Mr. BRADY. So can you guarantee for seniors who are not in the 

donut hole that their premiums won’t go up? 

Dr. BERWICK. It is so important to provide people medications 

when they reach that donut hole, and I think that we are seeing 

much more confidence on the part of seniors that they can get the 

medications they can’t afford. 

Mr. BRADY. Does the Deceptive Trade Practices Act apply to 

ObamaCare? 

Dr. BERWICK. Does the Deceptive Trade Practices Act apply to 

ObamaCare? Is that your question? 

Mr. BRADY. I am being only halfway factitious. It seems to me 

none of the promises made to our seniors under the President’s national health care plan will come true. Many are forced out of their 

plans, will see higher premiums. That is why Republicans are serious about coming back with better solutions for seniors. 

Dr. BERWICK. Congressman—— 

Chairman CAMP. The gentleman’s time has expired. If you 

would like to submit a response in writing, you are certainly welcome to do that. 

Dr. BERWICK. Thank you. 

Chairman CAMP. Mr. Tiberi is recognized for 5 minutes. 

Mr. TIBERI. Thank you, Mr. Chairman, for having this hearing 

today. And kind of dovetailing on Chairman Brady’s comments 

about Republicans wanting to have better solutions for seniors kind 

of goes along with my line of questioning. 

It was disappointing to hear the ranking member express concern in the rhetorical fashion that he did with respect to this hearing and what Republicans believe. Why Republicans voted to repeal 

this bill is because we do care about the impact of this bill to real 

people, and having $500 billion taken out of the system is a good 

reason to have this hearing today and get information from Dr. 

Berwick and Mr. Foster and continuing the discussion. Because, 

Dr. Berwick, thank you for doing what you are doing and being 

here today, but we represent a lot of people in a lot of different 

parts in this country. 

In my district in central Ohio—and Mr. Levin has been to my 

district, not on my behalf, but he has been to my district—there 

are doctors, there are seniors, there are hospital administrators, 

there is the largest—Dr. Berwick, the largest Medicare Advantage 

provider in my district is a nonprofit Catholic hospital. And they 

are all very, very concerned about the impact that this bill, this law 

has with seniors. Not insurance companies, not wealthy seniors, I 

am talking about real people. 

My dad has a sixth-grade education. My mom has an eighthgrade education. They are on Medicare. My physician—Dr. Randy 

I will call him—a primary care physician, his father-in-law lost his 

primary care physician because he no longer was going to take 

Medicare patients. So my physician, Dr. Randy, said, Dad, I will 


ccoleman on DSK8P6SHH1PROD with HEARING
38 

find you a doc. I know a lot of doctors out there. Columbus, Ohio, 

is the 15th largest city in America. This doctor friend of mine could 

not find a doctor for his father-in-law because nobody would take 

new Medicare patients based upon the new law. So he is now taking his father-in-law as a new patient, which he said he would 

never do. 

A lady in my district, Joan, came to me teary eyed because her 

mother, a Medicare patient, first lost her Medicare Advantage program, so she had to go into Medicare fee-for-service—and I just 

give you this as examples—and then lost her doctor, who said I am 

done with Medicare. 

We have a large city. We have four healthy hospitals, three of 

which are very concerned about the new law. We have a doctor’s 

association—unlike the American Medical Association—the Ohio 

State Medical Association, who oppose the bill, who support repeal. 

They want reform. Don’t get me wrong. They want reform, but they 

are very concerned about what this legislation does. 

Mr. TIBERI. And so I understand what the minority has said. I 

appreciate your testimony. But the reality on the ground that I see, 

as a son of seniors, as someone who wants to improve our health 

care system, who wants better access, who wants lower cost, who 

really wants people to keep what they have, which is one of the 

President’s goals, a wonderful goal by the way, Dr. Berwick, I 

thought the President was spot-on on that, but the reality on the 

ground, at least in central Ohio, is people are not being able to 

keep what they have. Seniors are frightened that they are losing 

coverage in reality that they had and they liked, that they chose. 

Seniors are frightened that they are losing doctors. 

My mom lost her doctor. And when you are 70 years old and you 

have had a doctor for a long time and you build a really good relationship with that doctor, you are frightened to face a situation 

where now you have to go on to another doctor that you don’t know 

who that is going to be, but you are talking with other seniors. My 

mom and dad walk every morning at a local mall, a senior’s club, 

and we know what they are talking about. Are there going to be 

any doctors left that take senior citizens? And this is a year after 

this bill went into effect. 

And Dr. Berwick, you are a physician. These physicians talk to 

their patients and they express concern about the new health care 

bill, many of whom supported it when it first was talked about, but 

opposed it in the end. 

So my question to you is let’s not talk about the statistics, let’s 

talk about what I say, what you say, what the chairman says, to 

constituents who on the ground, are seeing a reality that is much 

different than the rhetoric of when this bill passed and what the 

goals were. People are losing the coverage they had, and they are 

losing their doctors, and their doctors are blaming the bill. 

Dr. BERWICK. And your question, Congressman. 

Chairman CAMP. If you want to respond briefly, the gentleman’s 

time just expired; I will give you a few seconds to answer and then 

you can supplement it in writing. 

Dr. BERWICK. I am meeting all the time, Congressman, with 

doctors and I have the same objective you do. We need a robust 

medical profession, a strong support to that profession. And we are 


ccoleman on DSK8P6SHH1PROD with HEARING
39 

committed to that, you and I both are. I am hearing a different 

story. The physicians I meet with want to participate in the change 

of health care that the Affordable Care Act offers. They are actively 

engaging in issues related to changing the form of care to make it 

sustainable, better for them and their patients. And I think we can 

get there and apparently, unlike you, I think the Affordable Care 

Act provides a very strong foundation for that progress, for the professions as well as for the beneficiaries. 

Mr. TIBERI. Thank you. 

Chairman CAMP. Thank you. Mr. Stark is recognized. 

Mr. STARK. Thank you, Mr. Chairman. Thank you for holding 

this hearing and thank you, Dr. Berwick, for being here to enlighten us. 

The Affordable Care Act has a variety of initiatives to modernize 

the Medicare program and make sure that we are, I hope, recognizing value more than volume. 

What has your value as you move among the provider community across the country, and what is the reaction you are hearing? 

Dr. BERWICK. To the modernization of health care, it is excitement, it is excitement everywhere. We are seeing it first in some 

of the information technology work that is going on now. We are 

finally at the threshold of really modernizing information technology for the providers of care and the beneficiaries of this care 

in this country. It is going to make a tremendous difference. 

Beyond that, physicians today can be very frustrated by the fragmentation in the health care system. People move from place to 

place and get dropped. The Affordable Care Act has in it the opportunity now to reward and support continuous seamless care. So the 

patient with diabetes that is seeing three or four different doctors 

knows that her journey is being crafted. We will be able to build 

accountable care organizations, move payment toward bundled payment, link payment to quality of care for both health plans and 

hospitals, so that continuity gets established. 

Doctors all over this country and providers of care are quite excited about this progress into a better care system. And Congress 

in its wisdom has given us these gifts of the Innovation Center in 

the Affordable Care Act and the Federal Coordinated Health Care 

Office for dual eligibles. I can’t tell you how important these are. 

The Innovation Center is going to liberate all of the imagination 

around the country, place by place, community by community, to 

find better ways to deliver care. 

And when a hospital in Nebraska or Maine develops a better way 

to make patients safer or to take better care of someone with multiple sclerosis, we can learn about that and spread that news all 

over the country. We are on the threshold of a tremendous boost 

in innovation, creativity and spread of better care around this 

country. And the doctors know that. That is what they are talking 

to me about. 

Mr. STARK. Would it be your understanding that—I guess this 

isn’t a yes or no, but that there is a positive role for government 

to play in the delivery of medical care in this country, and that 

that could be led by the Members of Congress if they decided to 

work together and do it? 


ccoleman on DSK8P6SHH1PROD with HEARING
40 

Dr. BERWICK. We are already doing it. I mean it is a catalytic 

role. You have set the stage for the health care system to do what 

it wants to do for doctors to thrive and commit themselves to patients. You do that as you provide the resources to help them make 

care more continuous, safer, to invest in prevention like the Affordable Care Act does. 

But let’s make no mistake about it. Government has no role at 

all in the encounter between the doctor and patient. Honoring the 

sanctity of that consulting room is really, really key. I am totally 

committed to that. But we set the stage for those two people to 

meet each other and work together when things are done right. So 

it is a combination of government support, encouragement, reward, 

and the confidence and the commitment that professionals have 

when they encounter patients, and the patients have when they are 

confident in the professional. It is a balance. 

Mr. STARK. Thank you very much for what you are doing. And 

I look forward to, as I know members of our committee do, to working with you over the next couple of years to see that we can improve the system and with your cooperation. Appreciate it very 

much. Thank you. 

Dr. BERWICK. Thank you, Mr. Stark. Thank you for your leadership. 

Chairman CAMP. Thank you. Mr. Davis is recognized. 

Mr. DAVIS. Thank you, Mr. Chairman. Your comment on health 

care being liberated, the private sector has been innovating for decades and sharing common information among the professions. I 

just find it hard to believe, to talk about innovation in the context 

that we have, in a variety of issues from programmatic perspectives to the issue just recently discussed. 

I didn’t go to Harvard, I went to West Point. And the one thing 

I would have to say at the beginning of this, listening to this hearing, having watched my mother navigate through the system that 

was managed by your agency, and we talk about affordability and 

innovation, in the world where I grew up, both academically and 

professionally, these answers would be called equivocation. There 

are straight yes-and-no answers about cuts on issues. And I think 

it is very important to share the truth of this and avoid the posturing for the lives to save that we want to save. 

Successful physicians that I know are known for their candor as 

well as their bedside manner in sharing factually what is before 

people. I have not heard one doctor, save one who is in a very different place politically than the rest of the entire Kentucky Medical 

Association, whose head I met with yesterday, who has not said 

this is going to limit their capacity, increase their overhead, increase their cost and is going to cause a very serious problem for 

senior citizens. 

When you talked about competitive bidding being a good thing, 

it is not pay me now or pay me later. It is pay me now and pay 

me later. Directly, I have a long term DME provider that is well 

established in my community, lost their ability to bid. A California 

company won. And coming on the back side of this, because they 

had no local capacity to deliver, guess who they turned around to 

subcontract with? The company that had been doing the business 

at a lower cost before. 


ccoleman on DSK8P6SHH1PROD with HEARING
41 

The, let’s say, counter-intuitive answers are not here. And admittedly I am not a doctor. One of my opponents once played one on 

television, but I will have to say that I am most disappointed in 

the lack of candid answers on these issues, because we want to 

help you improve this system. It has been made more complicated 

by the bill. And in my other life it would be ‘‘read the problem.’’ 

If you read the bill, it does not connect the dots by creating 162 

new agencies, commissions, and boards. Cutting direct benefit and 

increasing taxes is not a recipe for improved capacity. I want increased access. 

In coming to that, many of my constituents are on Medicare Advantage. Do you know how many people are actually in the program, Dr. Berwick? 

Dr. BERWICK. About 12 million, I believe. 

Mr. DAVIS. That is correct. It is about 12 million people. Do you 

know how many people were in the program in 2005? 

Dr. BERWICK. I don’t, sir. 

Mr. DAVIS. It is about 5.3 million, less than half of what it is 

today. So the market working competitively, seniors were moving 

to this as a preferred program of choice. And I think the numbers 

say something about the popularity, don’t you? 

Dr. BERWICK. Yes. I think Medicare Advantage has tremendous 

opportunities embedded in it as well as significant problems. 

Mr. DAVIS. Well, I would say that the customers tend to vote 

with their feet, no different than the doctors who are pulling out 

of Medicare in droves. I am seeing the same thing happening in the 

Ohio Valley. I am in the same vicinity as Mr. Tiberi here. We are 

seeing that happen in the medical profession. 

It is getting to a point because of this bill—I have a daughter 

who wants to go to medical school, has been told by seven different 

physicians not to go because of the truncation and the complication 

in the health care system that is going to be placed upon future 

physicians. 

But coming back to Medicare Advantage, your own actuaries said 

last year, as Mr. Brady pointed out, that 7.4 million seniors would 

lose their coverage in Medicare Advantage. Is your actuary correct? 

Dr. BERWICK. The actuary is making predictions of the future, 

sir. What I have is the evidence before us today. We have—— 

Mr. DAVIS. I didn’t ask you that question. I asked you, is your 

actuary correct in his calculations? 

Dr. BERWICK. The actuary is making a prediction. I can’t judge 

whether he is correct or not. What I can tell you are the facts now, 

sir—— 

Mr. DAVIS. I will go back to our academic education. The commander is responsible for what the unit does or fails to do. I am 

not interested in an academic salon answer. 

Is your actuary correct in the assumptions that your department 

submitted to this committee? 

Dr. BERWICK. Sir, I am not a commander. 

Mr. DAVIS. You are the leader of—you lead a budget larger than 

the Defense Department, sir. Please answer the question. 

Dr. BERWICK. I lead an agency in which the growth rate of 

Medicare Advantage this year is 6 percent and the actuary preVerDate Mar 15 2010 00:37 Dec 21, 2011 Jkt 070871 PO 00000 Frm 00045 Fmt 6633 Sfmt 6602 I:\WAYS\OUT\70871.XXX GPO1 PsN: 70871

ccoleman on DSK8P6SHH1PROD with HEARING
42 

dicted a decrease. So the actuary’s prediction was incorrect. Our 

Medicare Advantage is healthier now than it ever was before. 

Mr. DAVIS. So if the Medicare Advantage is a good program, 

then why would he say that the people are going to be cut out of 

the program by the very legislation that you are advocating? 

Dr. BERWICK. What I am saying is that I have the facts on the 

ground before me now, and the facts are that Medicare Advantage 

is looking stronger and stronger. We are seeing plans invest in expansion of Medicare Advantage. We are seeing robust choices for 

beneficiaries, 26 choices per county on average in this country, average premiums going down 6 percent, enrollment going up 6 percent. That looks like a very robust program. And these are smart 

businessmen out there. People who run the Medicare Advantage 

plans are investing in a future that looks pretty bright to them, or 

I don’t think they would be investing in the way we are seeing 

them invest right now. Medicare Advantage looks healthy. 

Mr. CAMP. Thank you. The gentleman’s time has expired. 

Mr. Reichert is recognized. 

Mr. REICHERT. Thank you, Mr. Chairman. 

Doctor, thank you for being here today. I am not a doctor either, 

but I have been a patient many times. So I am looking at the system as most Americans would, from that side of the issue. I am disappointed too, as Mr. Davis has stated, in the way that you are answering or not answering some of the questions. So I hope that you 

understand our frustration here with some of your responses. 

Most Americans are just trying to figure this thing out. They 

need your help to do that. A lot of people are listening today. This 

is streamed live C–SPAN, so there will be a lot of Americans listening to your words. 

You obviously support the Affordable Care Act. We had a witness 

in a couple of weeks ago whose name is Austan Goolsbee. Do you 

know him? 

Dr. BERWICK. Yes. 

Mr. REICHERT. Chairman of the Council of Economic Advisory. 

He said that the health care bill would increase access, decrease 

costs, increase benefits, reduce the deficit, and people would be allowed to keep their health care if they wanted to. Do you agree 

with those statements? Does the bill accomplish those things? 

Dr. BERWICK. It appears to be, yes. 

Mr. REICHERT. It that a yes? 

Dr. BERWICK. Yes. 

Mr. REICHERT. Is there anything at all in the bill that you 

would change? 

Dr. BERWICK. We are going to learn over time. That is a complex question. 

Mr. REICHERT. But you have had some time to read the bill 

and look at the bill. Is there anything that stands out in your mind 

that you would change? 

What don’t you like about the bill? Or is it all good. 

Dr. BERWICK. It is a very complicated bill, sir. 

Mr. REICHERT. Is there anything about the bill you don’t like? 

Dr. BERWICK. Right now I am implementing the bill—— 


ccoleman on DSK8P6SHH1PROD with HEARING
43 

Mr. REICHERT. Yes or no, I guess, because I am not going to 

get a straight answer. Is there anything about the bill that you 

would change? Yes? No? 

Dr. BERWICK. Over time, we are going to learn about this bill, 

sir, and I can tell you—— 

Mr. REICHERT. From what you know today. From what you 

know today, sir, is there anything that you would change? 

Dr. BERWICK. In the whole—— 

Mr. REICHERT. Can you tell me when the $206 billion cuts to 

Medicare Advantage begin? 

Dr. BERWICK. Well, right now the payments are stabilized. 

Mr. REICHERT. When do the $206 billion cuts begin? What is 

the target date, the set date? What year? 

Dr. BERWICK. The cuts are phased in over time. It depends on 

the plan. 

Mr. REICHERT. When do they begin? 

Dr. BERWICK. It depends on the plan—— 

Mr. REICHERT. What year do the cuts begin? Can you give me 

a year? 

Dr. BERWICK. It is variable depending on the plan and the 

area, sir. 

Mr. REICHERT. In 2017, $206 billion in cuts will begin to take 

place. Your actuaries say, as Mr. Davis has asked you, that there 

would be 7.4 million seniors then leaving that system, losing their 

health care. So the statement that you agreed with earlier that Mr. 

Goolsbee also agreed with—you can keep your health care if you 

want to—isn’t a true statement. Even the President of the United 

States has said in a public forum, which I was present at, he said 

there may have been some—in regard to this statement that you 

can keep your health care plan if you like it, he said there may 

have been some language snuck into the bill that runs contrary to 

that premise. 

Now, if there is language in the bill that runs contrary to this 

premise, and according to the President it does, would you change 

that language? 

Dr. BERWICK. Sir, Medicare Advantage—— 

Mr. REICHERT. Would you change the language if there is language in the bill, as the President says there is, that got snuck into 

the bill, would you change the language that prohibits people from 

keeping the health care they like? Would you change the language, 

sir? 

Dr. BERWICK. People on Medicare Advantage—— 

Mr. REICHERT. Would you change the language, sir, if there is 

language in the bill? That is a yes-or-no question. If there is language in the bill, yes or no? 

Dr. BERWICK. I would love to be able to answer your question 

yes or no. I cannot, sir. 

Mr. REICHERT. Why can’t you answer the question? It is a simple question. If there is language in the bill that says, as the President has said, that runs contrary to the promise that you can keep 

your health care if you like it, why would you not say ‘‘yes’’ to that 

question, that I will change that language because we believe and 

we have said over and over again, if you like your health care plan, 

you can keep it. Why would you not change that language? 


ccoleman on DSK8P6SHH1PROD with HEARING
44 

Dr. BERWICK. Congressman, to me—— 

Mr. REICHERT. Why would you not change that language, sir? 

Answer the question. 

Dr. BERWICK. Sir, you are asking a hypothetical question, sir. 

What I can tell you is our job—— 

Mr. REICHERT. No, sir, I am not. The President of the United 

States has made this statement. There is language in the bill—— 

Mr. LEVIN. Mr. Chairman, I need to object. 

Mr. REICHERT. Well, it is my time, Mr. Camp. 

Chairman CAMP. If the gentleman from Washington State 

would suspend. Mr. Levin. 

Mr. LEVIN. I will find a way to object. I think we have to let 

witnesses answer questions, sir. This is not the Star Chamber. 

Chairman CAMP. Back to regular order. The gentleman from 

Washington’s time is about to expire, so you have about 2 or 3 seconds left, and then we will leave a few seconds for Mr. Berwick to 

answer the question. 

The gentleman is entitled to an answer to his question. 

Mr. REICHERT. Mr. Chairman, I would just ask for a straight 

answer from the witness. Thank you, and I yield back. 

Chairman CAMP. Mr. Berwick, you have a few seconds, as I 

have done to the minority, to respond to the question. 

Dr. BERWICK. Mr. Chairman, I am not aware of any such language in the bill, and the question to me sounds hypothetical. 

Chairman CAMP. Thank you. 

Mr. McDermott is recognized. 

Mr. MCDERMOTT. Thank you, Mr. Chairman. 

Dr. Berwick, you have given a bravura performance in political 

theater. You have been brought to a stage today and put into a 

play that you really don’t want to be in; you want to be doing your 

job. This is a stage being set to get rid of Medicare. The Republicans have never liked Medicare. When Harry Truman proposed it 

in 1946, the Republicans started talking of socialized medicine, 

playing on the fears of what was going on in the Soviet Union. 

They have used these fear and misinformation tactics then, and 

they are using them again here today. 

Now, when Medicare passed in 1965, most Republicans voted no. 

And what we are really doing here today is trying to poke holes 

in the bill. But we have been here 100 days, and the committee has 

laid no proposal on the table to make it better. Everybody is talking about what is wrong with it. Bill Frist said, don’t repeal, make 

it better. 

So all we have in front of us is one plan that is on the table, Paul 

Ryan’s road map. He wants to give a voucher to every senior citizen in this country. Now, let’s be serious. The point of that is that 

the Republicans believe that seniors need to put more skin in the 

game. And I want to be crystal clear here. Seniors already spend 

one third of their income on health care. They can’t afford any 

more skin in the game. 

So whatever I hear here is really about the Paul Ryan plan. And 

I would like you to take the time to tell us what you think will happen when they repeal or begin to undercut and destroy this and 

work toward putting a voucher plan, because that is the only thing 

they have put on the table, and I believe that all the Republicans 


ccoleman on DSK8P6SHH1PROD with HEARING
45 

are for it, because none of them have stood up and said, we don’t 

want a voucher system, we want to make this system better, we 

hate ObamaCare. We want to get rid of it and put in the voucher 

system. So tell us what a voucher system would do to seniors in 

this country. 

Dr. BERWICK. It would put them at risk. People, they already 

have skin in the game. Their bodies are in the game. The whole 

idea here is to give seniors security so they don’t have to wake up 

in the morning wondering whether they can get to the care that 

they need and that will help them preserve long and fruitful lives. 

Mr. MCDERMOTT. Do you think seniors could take a 6- or $7,000 dollar voucher out at age 75 and get a health care plan? 

Dr. BERWICK. Not a senior whose actuarial risks are 11- or 

$12,000—or worse if they get something—a worse disease than 

that. We are putting them at risk. We are partners with the seniors in Medicare. We have got their backs. I wake up every day 

thinking about how to help these beneficiaries make sure they can 

get the care they want and they need. I think that is an important 

role to fill. And my colleagues in CMS have the same commitment. 

Sending them out on their own to go navigate this very difficult 

system, which isn’t always friendly to their needs, is not the right 

answer. And taking the law down strikes me as a terrible answer. 

It means taking away the wellness visits we have just added, removing access, first-dollar access to preventive coverage. It means 

putting the people in the doughnut hole back at risk now, so the 

lady I met in Atlanta, who can’t afford her medications right now, 

is going to have her blood pressure rise and get a stroke as a result 

of that. 

It means, by the way, that we decrease our focus on quality because this law has in it unparalleled tools for transparency and improvement of care through measurement, support to quality, and 

rewarding quality. In this bill, we now can reward hospitals for 

making their care safer. We couldn’t do that before. Because of this 

bill, we can reward Medicare Advantage plans that reach 3- or 4- 

or 5-star levels with more and more reward. That is going to focus 

the whole industry on doing better for the beneficiary. When the 

bill goes away, that goes away. 

This bill gives us tools to fight fraud and abuse at a level never 

possible before. Do we want to let the criminals get away now? Just 

let them out scot-free, by taking the law away; it makes no sense 

to me. The bill is going to invest in a transparency of beneficiaries 

and the public at large and providers can find out much more because of this bill about their own performance. 

Mr. MCDERMOTT. Do you think that if seniors understood what 

a voucher plan really meant, they would be in favor of it, as opposed to the Medicare plan that we have and we are trying to 

amend and make better? 

Dr. BERWICK. I don’t think; I know. I have been out talking to 

seniors. And when I go to senior centers and I explain this bill and 

I tell them where we are, they applaud. They want this. They understand how this bill works in their interests and how when I go 

to work every morning I have their interest in mind. A voucher 

system says go out on your own, God bless you, I hope you do okay. 

Mr. MCDERMOTT. Can I clarify one other thing? 


ccoleman on DSK8P6SHH1PROD with HEARING
46 

Chairman CAMP. The gentleman’s time has expired. 

I do think it is important to note for the record that the Republican plan on health care that was introduced in the Congress was 

the only plan that was scored by the Congressional Budget Office 

that reduced premiums across the board, did not cut Medicare, and 

did not increase taxes. 

And with that, I would recognize the gentleman from Louisiana. 

Mr. BECERRA. Mr. Chairman, I hope that if we are going to be 

allowed to comment in between, outside of regular order—— 

Chairman CAMP. When you are the chair, you will be allowed 

to comment. 

Mr. BECERRA. We will ask for regular order as often as we can. 

Chairman CAMP. Dr. Boustany has the time. 

Mr. BOUSTANY. Dr. Berwick, I too come from a family line of 

physicians. I am a cardiac surgeon and know of the importance of 

the doctor-patient relationship as you do. 

How do you reconcile your views on provider oversupply? You 

have made multiple statements with regard to oversupply in markets and so forth, your actuary’s concerns about shortages, which 

are real, and the prospect of those shortages getting worse with the 

current reimbursement rates that inevitably will be cut. We are 

seeing reimbursement pressures on physician practices. We already 

have shortages. Would you agree that we have a shortage in primary care physicians in this country? 

Dr. BERWICK. We have a shortage of primary care in this country, yes. 

Mr. BOUSTANY. Physicians? 

Dr. BERWICK. Physicians and nurses. Yes. 

Mr. BOUSTANY. Do you agree that we have a shortage of general surgeons in this country? 

Dr. BERWICK. In some areas we do, sir. 

Mr. BOUSTANY. What about rural areas? 

Dr. BERWICK. Some rural areas are having trouble with access 

to general surgery, I know that. 

Mr. BOUSTANY. I think it is more widespread than you seem 

to be suggesting, sir. How do you reconcile your view with this? Because your statements seem contrary to what your actuaries are 

saying. 

Dr. BERWICK. Sir, please explain to me what contradiction you 

see. I will be happy to address it. 

Mr. BOUSTANY. Well, the contradiction is we are going to see 

shortages—— 

Dr. BERWICK. Yes. 

Mr. BOUSTANY. And worsening shortages, which will hurt access to care for seniors and particularly folks who live in rural communities. 

Dr. BERWICK. Yeah. Well, again, the actuary is making a prediction here. What I see in the Affordable Care Act is an investment in expansion of primary care and primary care services. I 

think over time it will have that effect, investments in health centers, teaching—— 

Mr. BOUSTANY. Reclaiming my time, sir. Without fixing the reimbursement system, we are going to see more and more physiVerDate Mar 15 2010 00:37 Dec 21, 2011 Jkt 070871 PO 00000 Frm 00050 Fmt 6633 Sfmt 6602 I:\WAYS\OUT\70871.XXX GPO1 PsN: 70871

ccoleman on DSK8P6SHH1PROD with HEARING
47 

cians either opting out for early retirement, we are seeing fewer 

people going into medicine. How do you reconcile this? 

Dr. BERWICK. I agree with that. The President has committed 

to fixing the SGR problem, which we are absolutely committed to 

working with you and your colleagues on, in trying to get past that. 

That is a serious looming problem in the health care system for 

sure. And as—— 

Mr. BOUSTANY. That leads me to my next question, because 

you have talked often about rewarding quality versus quantity, and 

yet in your testimony I see nothing but platitudes and nothing specific to suggest the path you are going to take on this. And I suggest that there is going to be a lot of work that this committee is 

going to have to do, to dig down working with you on this issue. 

Dr. BERWICK. I will be happy to work with you, sir. Within the 

work outlined for us in the Affordable Care Act and other legislation, there are very specific ways in which quality will be linked 

to payment, hospital-based, value-based purchasing, physician 

modifiers—— 

Mr. BOUSTANY. But we have seen those specifics. Those are 

platitudes. I understand what needs to be done in terms of quality. 

I have done that in hospitals. I took a community hospital from 

being sort of average to the top 100 hospital in cardiac surgery. I 

understand those things. But we have to get beyond the platitudes 

on changing this reimbursement system, because it is at the heart 

of access problems for seniors and particularly for rural families, 

because we are going to see access problems. This reimbursement 

issue is causing physician shortages. 

Dr. BERWICK. Sure. Congressman, I assure you the specifics are 

there, they are out there, and I would be happy to work with you 

at any point afterward to explain what those specifics are. And I 

welcome your comments and improvements in those specifics. 

Mr. BOUSTANY. Thank you. Now, with regard to technology, 

you have made a number of statements that seem to be of concern 

to me, obviously, about downplaying the importance of new technology innovation in health care. We have an innovation tax in this 

bill that is going to hurt innovation, I believe, in the long run. But 

you have made statements—I will quote one. ‘‘One of the drivers 

of low value in health care today is the continuous entrance of new 

technologies, devices, and drugs that add no value to care.’’ 

Can you explain that. 

Dr. BERWICK. Of course, yes. Some new devices, drugs, are miracles. They save lives and they add tremendous value to care. Others do not. 

Mr. BOUSTANY. So who should decide? 

Dr. BERWICK. Professions, the scientific community—— 

Mr. BOUSTANY. So when you suggest there should be a national policy, who is going to make those decisions? 

Dr. BERWICK. A national policy. 

Mr. BOUSTANY. National policy, that is what I am referring to. 

You referred to a national policy. In fact your quote is, ‘‘If we had 

a national policy, it would allow us to know the difference.’’ 

Dr. BERWICK. Investments in supports to the scientific community to allow us to understand more and more about what works 

and what works better than other things is very important—— 


ccoleman on DSK8P6SHH1PROD with HEARING
48 

Mr. BOUSTANY. So let me ask you this. Back in the 1950s when 

a surgeon saw a patient die from a pulmonary embolus, he put his 

mind to work on this and he actually came up with an idea. And 

working in his garage, he put together the first heart-lung machine. Would that have fit into national policy? What impediments 

would there have there been? 

Chairman CAMP. The gentleman’s time is expired. If you want 

to respond quickly to that. 

Dr. BERWICK. I am very excited by the Innovation Center and 

what it can offer for people exactly like that all over the country. 

We have a good idea. We now have the ability to help him invest 

further in that idea and grow as a country as a whole. 

Chairman CAMP. The gentleman’s time has expired. Mr. Heller 

is recognized. 

Mr. HELLER. Thank you, Mr. Chairman. 

Dr. Berwick, I appreciate you being here today. I am going 

through some of your quotes and I know we have heard some of 

them already today, but frankly I think they are worth repeating, 

quotes like ‘‘The NHS is not a national treasure, it is a global 

treasure.’’ ‘‘The decision is not whether or not we will ration care, 

the decision is whether we will ration care with our eyes open.’’ 

Quotes like ‘‘Competition in short will hurt you, not help you.’’ Another one, ‘‘I admit to my devotion to a single payer mechanism as 

the only sensible approach to the health care finance I can think 

of.’’ And finally, ‘‘Any health care funding plan must redistribute 

wealth from the richer among us to the poor.’’ 

Sometimes reading your quotes, Dr. Berwick, I wonder what 

country we live in. 

Having said that, I have a significantly large district and, as you 

know, this health care bill significantly reduces the funding for the 

Medicare Advantage program. Nearly one-third of all Medicare 

beneficiaries in my district are enrolled in the Medicare Advantage, 

and that is more than 100,000 seniors in my largely rural district. 

You just made a comment that you go to these senior centers and 

you talk to them and they applaud you on what this new program, 

this new care provided for them. I go to senior centers in my district and try to explain the new health care system to them, and 

I assure you, I don’t get a round of applause. 

You just said that it is a good model. I guess my question is how 

you, in your mind, say that this is a good deal for seniors if the 

net Medicare savings is $575 billion in this piece of legislation, and 

yet the amount reinvested in the Medicare benefits is $24 billion? 

If you are going to take $575 billion out of the Medicare system, 

what benefits do seniors have with only $24 billion put back in? 

Dr. BERWICK. The projections, as you heard earlier, say that copayments in Parts A and B are going to go down by $200 a year 

by 2019; fee-for-service premiums will be down by $200; the doughnut hole will have closed and seniors will no longer be afraid of losing their drug benefits; and out-of-pocket costs in American health 

care are projected to go down $237 billion. This is a very good deal 

for seniors and a very good deal for America. 

Mr. HELLER. So do you believe protecting the patient-doctor relationship is a goal of this health care bill? 

Dr. BERWICK. Definitely. 


ccoleman on DSK8P6SHH1PROD with HEARING
49 

Mr. HELLER. Do you believe that patients, their families, their 

doctors, should be the ultimate authority for the individual health 

decisions? 

Dr. BERWICK. I believe—yes, I do. 

Mr. HELLER. Do you believe one of the goals of the health care 

bill is streamlining the system so patients can navigate it more 

easily? 

Dr. BERWICK. Yes, I do. 

Mr. HELLER. If that is the goal of the health care bill, wouldn’t 

a reasonable person think that 100 new boards, agencies, and programs would violate all three of those questions? 

Dr. BERWICK. I think the health care bill will accomplish all of 

the goals you just articulated: a smoother, more seamless care. I 

can name the parts of the bill that will help us do that as a Nation 

in partnership between the public and the private sector. We can 

see how quality will be improved as a result of this bill and costs 

will fall as a result of the improvement of quality. People will be 

better off because of this bill, I am sure of it. 

Mr. HELLER. Maybe in another country. Thank you. Thank you, 

Mr. Chairman. 

Chairman CAMP. All right, thank you. Mr. Lewis is recognized. 

Mr. LEWIS. Thank you very much, Doctor, for being here. Thank 

you for your service. As one member, I must tell you that I love 

your testimony, not just like it but I loved it. And I love your response, your answers to the questions. This is my beginning of my 

25th year here, and you have been one of the better witnesses. And 

I just want to thank you. Thank you and your family for your great 

service. 

Dr. BERWICK. I can’t help saying, Congressman, what an honor 

it is to be in the same room as you. 

Mr. LEWIS. Thank you, sir. 

Doctor, what would happen to cost sharing for Medicare beneficiaries if reform was repealed? 

Dr. BERWICK. Costs would go up for beneficiaries if reform is 

repealed, beginning just with the drug coverage issue. Seniors are 

very, very dependent on access to medications. It preserves their 

health and their life and their vitality, and they know it. If this bill 

were repealed, more and more seniors will lack access to the drugs 

that they really need. If this bill is repealed, they won’t be able to 

get as easily the preventive services they need that will keep them 

healthy over time. A little bit less directly, because this bill so 

much invests in delivery system reform, making care better, 

smoother. Ask a senior who is seeing four or five different doctors, 

taking three or four medications, what her life is like in a fragmented health care system. It is a nightmare. She can’t be sure 

that two doctors are prescribing drugs that are not incompatible 

with each other. She can’t be sure that her lab test report will go 

to the right place. 

Delivery system reform, improvement of care is what is behind 

this bill. That is where we will end up, a better care system to be 

a doctor in, to be a nurse in, to be a patient in. We can make care 

safer. If this bill goes away, we don’t have a plan anymore then for 

crafting the kind of journeys our patients and our families and our 

communities really want. Costs will go up. Health care quality will 


ccoleman on DSK8P6SHH1PROD with HEARING
50 

go down. The bill is an open door to the new American health care 

system that we really want and all need and can afford. 

Mr. LEWIS. Doctor, if the Affordable Care Act was repealed, would those 3 million seniors who receive $250 from the government have to pay that money back? 

Dr. BERWICK. We are looking at that now. I hope we don’t ever 

have to face that question for real. 

Mr. LEWIS. Doctor, like Mr. Rangel and others, when I was 

growing up in rural Alabama as a young child, I never saw a doctor, never went to a doctor. Tell me what is in this bill that would 

help children growing up, poor people in rural America, black, 

white, Latinos, Asian American, Native American, or growing up 

and just happen to be poor, family can’t afford a doctor. Do you 

think this is a major step toward providing health care for all of 

our people and especially young people? 

Dr. BERWICK. Yes. High-quality health care, which is what we 

all want, begins with health care. You have to be able to get to it. 

And this bill assures the old and the young and millions of people 

that they can get access to the care that then can be made great 

for them. If they can’t get in, they can’t get help. 

If this bill goes away, people will wake up in the morning, tens 

of millions of Americans will wake up wondering whether they are 

going to lose their health care coverage and not be able to get it. 

Children and adults. We are talking about a bill that has in it now 

a guaranteed issue of insurance to children despite preexisting conditions. That is a major step forward. That means a kid who has 

asthma, who happens to be in transition, their parents between 

jobs, cannot be denied access to health care insurance as a result 

of this bill. Take that away, you hurt that child. 

Mr. LEWIS. Thank you very much, Doctor. 

Mr. CAMP. Thank you. Mr. Gerlach is recognized. 

Mr. GERLACH. Thank you, Mr. Chairman. 

Doctor, thank you for testifying today. To switch gears just a bit, 

one of the gaping holes, in my opinion, in the health care enactment last year was the lack of medical liability reform legislation. 

And it was interesting to hear the President in the State of the 

Union indicate his support for medical liability reform. 

Do you support medical liability reform legislation? 

Dr. BERWICK. Yes, I do, Mr. Gerlach. 

Mr. GERLACH. Do you support a cap on noneconomic losses? 

Dr. BERWICK. I support an exploration now in the country as 

to what forms of improvement in the medical liability system would 

actually work to the benefit of patients and the quality of the system. I don’t know exactly what those will be, but I think we have 

got to start on that process. 

Mr. GERLACH. Are you aware of the State statutes in California 

and Texas that do have cap on noneconomic losses? 

Dr. BERWICK. It is not my area of specialty and it is not CMS’ 

direct area; but, yes, I am aware of them. 

Mr. GERLACH. So you are open to Federal legislation that 

would include languages that supports caps on noneconomic loss? 

Dr. BERWICK. Sir, I am not in a position to commit myself right 

now to what I think about any particular set of solutions, but I 

think we need to begin the national exploration for solutions. InVerDate Mar 15 2010 00:37 Dec 21, 2011 Jkt 070871 PO 00000 Frm 00054 Fmt 6633 Sfmt 6602 I:\WAYS\OUT\70871.XXX GPO1 PsN: 70871

ccoleman on DSK8P6SHH1PROD with HEARING
51 

deed we are, the Agency of Health Care Research and Quality has 

demonstration projects underway now, but we need more. And I 

was happy to see that in the President’s language. 

Mr. GERLACH. In your testimony, you have the sentence, ‘‘CMS 

has new tools to fight fraud that will return money to the trust 

funds and the Treasury.’’ 

What new tools does the agency have to really ferret out the 

waste, fraud, and abuse that is contained in the system? 

Dr. BERWICK. Two big kinds of tools, I would call them detection tools, which will allow us to identity patterns of abuses; abuse 

of the public trust and actually criminal behaviors. And working 

very closely with the Department of Justice and the FBI and others, we are engaging in more and more enforcement with quite a 

bit of return. I think the return on investment calculation shows 

something like 6.8 to 1 for the dollars we are putting into that. 

That is the pay-and-chase part of enforcement. 

The other part, very exciting for me, is prevention. Why do these 

people get into the system in the first place? So we now have rules 

out there that will eventually allow us to prequalify Medicare providers at different tiers of risk by screening them in advance, in 

some cases in the riskiest levels, with actual criminal background 

checks that will keep the criminals out of the system in the first 

place. 

Mr. GERLACH. Last fall I had a constituent that came to me. 

He sought medical care for a knee problem. The doctor prescribed 

a knee brace for him. A knee brace was then provided, and under 

the reimbursement schedule of Medicare, the provider was provided $686 for a knee brace. My constituent then went online and 

found online that same knee brace for the cost of $194. 

So how is it that Medicare, if you are searching for opportunities to find where the waste is, why is it reimbursing a $194 knee brace 

for $686? 

Dr. BERWICK. Congressman, I would love to look into that particular case with you afterwards if you are willing to do that with 

me. 

Mr. GERLACH. I will submit all the documentation with you, 

and I have been corresponding back and forth with your branch on 

this, but keep getting a bureaucratic answer as to why the schedule is the way it is. And I would like to have a more specific answer to why we are paying $686 for a $194 knee brace. 

Dr. BERWICK. I am delighted to pursue that with you. I will 

note that the DME competitive bidding system will more and more 

allow us to get much better deals for our beneficiaries and for the 

Congress as my board. I think it is really important for us to be 

acting in a market system on behalf of beneficiaries to find the best 

deals for them. 

Mr. GERLACH. Thank you, Doctor. Thank you, Chairman. 

Chairman CAMP. Dr. Price is recognized. 

Mr. PRICE. Thank you, Mr. Chairman. 

Welcome, Dr. Berwick. I too am a third generation physician. My 

father and my grandfather were docs, as you are a family of three 

generations of physicians. But I really think you missed your calling. I think you would have made a great lawyer for all of the reasons that we can imagine. 


ccoleman on DSK8P6SHH1PROD with HEARING
52 

The issue here isn’t between Democrats and Republicans, isn’t 

whether or not Americans have access to the highest quality of 

care. The issue is whether or not patients and families are going 

to be in charge of that care, or government is going to be in charge 

of that care. And by and large, our friends on the other side of the 

aisle believe that government can make better decisions about this 

than people. 

You in your answers have confirmed that you basically believe 

the same thing as well, that government needs to be in place to be 

able to make these decisions for people because clearly they 

wouldn’t be able to make them themselves. So it gets down to who 

decides. Who is going to decide these fundamental questions about 

health care? 

In the sale of this bill, as has been cited, the President said, and 

many of our friends on the other side said, Don’t worry; if you like 

the kind of health care coverage that you have you can keep it. Is 

that true? 

Dr. BERWICK. That the President said that. 

Mr. PRICE. No. Is it true that if you like what you have, you can 

keep it? 

Dr. BERWICK. I don’t understand your question, Congressman. 

Mr. PRICE. Are there any Americans that have lost coverage 

that they liked? 

Dr. BERWICK. There is always turnover in the supply—— 

Mr. PRICE. That is not the question. The question is, because of 

this bill, there are Americans that have lost the coverage that they 

want and in fact can’t have the coverage that they like. 

Dr. BERWICK. Dr. Price, my answer is that there is turnover always in what is available to beneficiaries—— 

Mr. PRICE. Dr. Berwick, that is not responsive to the question, 

which is why you see the frustration up here. 

Dr. BERWICK. Yes, I know it. 

Mr. PRICE. The fact of the matter is, there are millions of Americans who have health care coverage, have had health care coverage, and that coverage is going away because of this law. And 

that is what they are concerned about. Many of them were out on 

the lawn of the Capitol over the past 2 years, expressing this frustration. Were they wrong? 

Dr. BERWICK. What I am hearing from the beneficiaries is that 

they have more choices, more options, they are able to find the 

care—— 

Mr. PRICE. Dr. Berwick, with all due respect, you are hearing 

from beneficiaries who are selected by individuals to come and give 

you a story that is not reflective of the real world. The real word 

is reflected by the individuals right here who are going home and 

hearing from their constituents, patients that you and I used to 

care for, that they are no longer able to get the coverage and the 

treatment that they desire. 

I want to move to quality. Quality is the pivotal issue in this. 

Dr. BERWICK. Yes. 

Mr. PRICE. And the question is, who is going to decide what 

quality health care is? Because as you know, treating thousands of 

patients, what is the right treatment for one patient, even with the 

same diagnosis, isn’t necessarily what is right for another patient, 


ccoleman on DSK8P6SHH1PROD with HEARING
53 

because patients are unique and it takes those patients and families and doctors together making those decisions. 

Do you believe that that is the case? 

Dr. BERWICK. Yes, I do sir. The importance of addressing the 

needs of every single individual patient is at the heart of my—— 

Mr. PRICE. Who ought to make that final decision about what 

treatment that patients receives? 

Dr. BERWICK. The doctor and the patient. 

Mr. PRICE. The doctor and the patient. If I were to tell you that 

this law violates that principle and that your agency has the power 

to negate a decision made by a patient and the doctor, would you 

agree with me? 

Dr. BERWICK. No, I would not. 

Mr. PRICE. So if we can demonstrate that in fact that is the 

case, then you will be supportive of us changing this law to make 

it so that doctors and families and patients are in fact given the 

right to make that clinical decision; is that correct? 

Dr. BERWICK. Dr. Price, I honor the encounter between the doctor and the patient. I also think this law gives us as a country tremendous tools for turning the lights on to understanding the quality of the care that is going on—— 

Mr. PRICE. Dr. Berwick, I will show you line and verse of this 

law that I believe removes that, through the Independent Payment 

Advisory Board, through the Comparative Effectiveness Research 

Council. There are many who believe that you support rationing 

and have said that. Do you support rationing of care? 

Dr. BERWICK. I abhor rationing. My entire life has been spent 

fighting rationing. There is no substance whatsoever to the concept 

that I support rationing. 

Mr. PRICE. I appreciate that, because we are going to be able 

to demonstrate for you how this bill—this bill—provides for rationing of care in this Nation. And I welcome your participation in 

making certain that it is overturned. 

In my brief time left, I want to make certain I get to the physicians who are trying their hardest to take care of patients in this 

country. Many are concerned about the likelihood that they see 

coming down the pike that their licensure will be tied to participation in this plan. 

Can you state unequivocally that you believe that physicians’ licensure in a State to practice medicine ought not be tied to participation in any health care plan? 

Dr. BERWICK. Dr. Price, I am not aware of the issue that your 

question refers to. If you are willing to talk with me afterwards 

about it, I would be happy to—— 

Mr. PRICE. Do you believe that physician licensure ought to be 

tied to physician participation in any plan? 

Dr. BERWICK. I don’t understand your question, sir, and I 

apologize for that. I would be happy to talk with you about it afterwards and you can explain it to me. 

Mr. PRICE. I look forward to that. Thank you. 

Dr. BERWICK. Thank you, Dr. Price. 

Chairman CAMP. The gentleman’s time has expired. And I will 

say that, Doctor, you are able to answer in writing at a later time 

if you so choose to do that. 


ccoleman on DSK8P6SHH1PROD with HEARING
54 

Chairman CAMP. Mr. Neal is recognized for 5 minutes. 

Mr. NEAL. Thank you, very much Mr. Chairman. 

Dr. Berwick, first of all, a word of thanks. Your medical DNA is 

in Massachusetts. 

Dr. BERWICK. It is. 

Mr. NEAL. What arguably is the Mecca of health care delivery 

in the country. I think that any State would be envious of the firstclass hospitals that we have, including the teaching hospitals 

which are evenly distributed across the entire Commonwealth. The 

law that is under assault here this morning has high customer satisfaction across the State. North of 77 or 78 percent of the people 

are satisfied with the delivery that they have witnessed. 

Now the term ‘‘actuary’’ has been thrown around here frequently. 

Could you succinctly tell us what an actuary does Doctor? 

Dr. BERWICK. I regard our actuary as a kind of consultant. He 

looks at the financial situation of the agency and of the trust funds, 

and he advises us on what he thinks about them and their future. 

Mr. NEAL. Thank you. And let me bring you to the next point. 

At rotary clubs and chamber of commerce get-togethers and neighborhood events, our friends on the other side are going to be routinely asked, Do you favor a ban on preexisting condition? And I 

can tell you, the chorus from them is going to be yes. Do you favor 

a cap on out-of-pocket expenses? Yes. Do you favor keeping children on their parents’ health care until they are 26? The answer 

is going to be yes. Do you offer and support more preventive care? 

Yes. How about more women’s health care? Yes. 

Do you favor, based upon the actuarial references they have 

made today, getting there through the mandate which the insurance industry would say it is the only way that it can be done? 

How might you respond to that? 

Dr. BERWICK. Well, I agree with all of the above. The not having preexisting conditions keep you from getting insurance seems 

to be only logical. Why would we have a system in which if you 

need the care, you cannot get the care? That makes no sense at all. 

So we want a system in which people can be guaranteed they can 

get care, even if they don’t need it, which is the idea behind this 

law. You have to have an individual mandate of some form; otherwise the whole thing unravels, because then people who don’t need 

insurance won’t buy it until they do need it, and the whole actuarial calculation falls apart. It is simply logic. It is mathematically 

true. I didn’t invent that. 

Mr. NEAL. Something that an actuary might assert? 

Dr. BERWICK. Absolutely. 

Mr. NEAL. Dr. Berwick, would you talk a little bit just in the 

closing minutes that I have to give you kind of a forum here, would 

you tell me what you intend to with waste, fraud, and abuse and 

the cost-saving mechanisms you are putting in place with Medicare 

in particular? 

Dr. BERWICK. Yes. There are actually two parts to that. I have 

learned a lot since I have arrived. There is more fraud and abuse 

than I thought. I now can see the data. I also know that we can 

root it out and find it, and with the tools given us in the Affordable 

Care Act now and the support of Congress, we will stop the criminals and we will stop the abuse and we will stop the waste. We 


ccoleman on DSK8P6SHH1PROD with HEARING
55 

are diligent about that. My deputy, Peter Budetti, is doing a great 

job and the Administration is fully committed to it. And I now understand how important and possible that is. 

There is the other area of error which is not the same as waste, 

fraud, and abuse. There are honest errors. There are errors that 

get in because of billing and coding systems. We have to work on 

those also. The President has set a goal of by 2012 reducing the 

Medicare error rate by half. We are on track. We will do that. And 

that also will help us have a much more—better stewardship of the 

public trust in support of a better health care system. 

Mr. NEAL. So that number that we have seen of $50 billion annually could be attributed to fraud; is that an accurate number in 

your estimate? 

Dr. BERWICK. It is sometimes misinterpreted to be the number 

that applies to Medicare. That is not true. That number is a rough 

estimate of fraud and abuse costs for the American health care system as a whole, which of course affects the private payers and providers as well as the public side of payment. But that is a large 

number and it seems to be there. 

Mr. NEAL. Thank you very much, Doctor. 

Chairman CAMP. Thank you. Mr. Buchanan is recognized. 

Mr. BUCHANAN. Thank you, Mr. Chairman, for the opportunity 

for this hearing today. It is very important. 

Dr. Berwick, I represent a part of Florida. We have probably 

more seniors than any other district in the country. We have 

155,000 that are on Medicare. I do a lot of town halls. I have got 

one this Saturday. What comes up with a lot of them is the whole 

thing on Medicare Advantage. We have 30,000 that have been on 

Medicare Advantage. I don’t know what that number is today. But 

the general perception in all these places is that they are going to 

lose their Medicare Advantage. 

And you are saying, yet that it is ticking up. I don’t see it. I don’t 

hear it. And it is something you have to deal with. You have a heck 

of a PR problem if you are saying that it is moving the other way. 

Dr. BERWICK. Congressman, I agree with you. We have a communication problem. I can tell it from the questions I am getting. 

People have a lot of misconceptions about Medicare Advantage. It 

is stronger now than it was before. There are quality measurements now that apply to it. There are bonuses that will be awarded 

to stronger and more effective Medicare Advantage plans. Enrollment is going up. And I think that the Medicare Advantage plans 

are seeing the business opportunities and the growth—— 

Mr. BUCHANAN. I have a couple of other questions. 

So you would disagree with Richard Foster, his assessment that 

millions of Medicare Advantage recipients will lose their coverage? 

That was something that he said. 

Dr. BERWICK. He is making a prediction, sir, and it is his job. 

What I can see is the facts on the ground. Now, he predicted a decrease in Medicare Advantage this year. It is not going down; it is 

going up. We are seeing decreases in premiums, a healthier system. So he is doing his best at prediction. But I can see the facts, 

and the facts are that the system looks stronger every day, and the 

plans are behaving as if this is a good area to be in because—— 


ccoleman on DSK8P6SHH1PROD with HEARING
56 

Mr. BUCHANAN. Well, give me the facts of how many people 

have dropped off, how many are adding? Because I would like to 

see that so I can communicate that back to our district. 

He also mentioned two-thirds of hospitals are already losing 

money under terms of Medicare patients, and the ObamaCare is 

going to make it much worse, and they are talking about hospitals 

having to shut down. What is your response to that? 

Dr. BERWICK. My response is I meet with the hospital industry 

all the time now. I regard them as key partners, and we have been 

working together. They know and I know that the solution for them 

and for Medicare and for the country is better care, to move the 

forms of care delivery toward higher and higher quality. That reduces costs. It improves care and it makes them more robust. 

I got an e-mail yesterday from Denver Health where they now 

have documented, through improvement of processes in that hospital, $100 million of savings while making—— 

Mr. BUCHANAN. Let me get to this last key point. You call the 

law the Affordable Care Act. But let me just mention to you that 

I met with a large company in our area, one of the largest employers. His health care cost went up this year, same employees, went 

up $1.5 million. 

Another pharmacist—we went there to talk about issues for 

small pharmacists and then he hands me on the way—he said Congressman, I just got my bill, it went up 22 percent. I was chairman 

of the Florida chamber and chairman of our local chambers, I can 

tell you with small businesses throughout Florida, throughout our 

region, it is going up 20 percent a year. They are saying, what is 

this health care bill going to do? 

Are you out talking to any people that are in business or create 

15, 20 jobs? Everybody is very, very concerned. They don’t see the 

savings. It is, across the board, substantial increases. How do you 

respond to that? 

Dr. BERWICK. All the time I see it, Mr. Buchanan, and that is 

sort of the point I want to make. It is not the law that is doing 

that, it is the state of American health care. It is fragmented, it 

is not paid for correctly. It is a heritage of a system with high levels of lack of coordination, safety problems, infections, injuries to 

patients—— 

Mr. BUCHANAN. People see this as just another big entitlement 

program. They are not seeing where, for a family of four, and a 

small businesses is going to pay half or 25, they are not seeing any 

reductions. They don’t see anything coming down the road. Is this 

just another big entitlement program? Is that what we are talking 

about here? 

Dr. BERWICK. I would be happy to meet with them and with 

you, sir, because the answer lies in the Affordable Care Act—— 

Mr. BUCHANAN. By the way, I would love to have you come 

down. It is real nice in February in Sarasota. Come down, meet 

with our business people and talk to them. 

Dr. BERWICK. What I would explain to them is that their interests and the interests of our patients in our Nation lie in making 

better care, making care get better, and then I can show them, and 

be happy to talk with you, about the elements of the bill that will 


ccoleman on DSK8P6SHH1PROD with HEARING
57 

allow us to move the country toward better and better care, safer, 

more reliable, more streamlined—— 

Mr. BUCHANAN. One other point. Our cardiologists wrote you 

a letter. They would love to meet with you. Many of them are concerned about being able to stay in business because of the substantial cuts on Medicare. I am sure you have got a lot of this feedback. 

What are you doing about it? 

Dr. BERWICK. I am meeting regularly with specialty societies 

and talking with physicians. They, like I, know that if they can 

work together with us and with the private sector to make health 

care better, smoother, more streamlined, safer, costs will go down. 

That makes the system more sustainable and in the end will be the 

foundation for their incomes to remain where they want them to 

be. 

Chairman CAMP. The gentleman’s time has expired. Mr. Smith 

is recognized. 

Mr. SMITH. Thank you, Mr. Chairman. Thank you, Dr. Berwick 

for being here today. 

I do want to touch on an issue. My concerns are that the complexity of health care is compounded with this new legislation, and 

therefore making it—especially in rural areas, the job of medical 

professionals even more difficult. The last two annual OPPS rules 

have included provisions requiring a physician be onsite and available whenever an outpatient procedure is being performed, regardless of its simplicity. I understand CMS takes the position this 

change is a clarification of existing policy and not a new rule. I also 

appreciate CMS taking action to suspend its enforcement for the 

critical access hospitals most impacted by it. 

However, the fact is the rule wasn’t impacting hospitals until it 

was restated in 2010, and many of the small towns and hospitals 

affected don’t have enough practitioners to meet the letter of this 

rule. And actually the people who will suffer, the patients in small 

community hospitals, but certainly the distance between facilities 

is very great but this would further compound it. 

I will ask in writing, for the record, questions relating to that so 

we can get some specific responses. 

But when you look at this new legislation that is now law, I am 

concerned that the addition of over 100 new agencies adds to the 

complexity. Do you see any mechanism in the law that does not actually centralize discretionary authority in these agencies rather 

than out among the health care professionals across our country? 

Dr. BERWICK. Let me go back to your point about the rural hospitals, because they are related. I think it is very important for us 

to remain mindful of what it is like to give care in every setting 

around the country and to make that more feasible. That is one of 

the reasons why we delayed implementation of the physician direct 

supervision rule while we reconsider those requirements for rural 

and critical access hospitals. We also included rural hospitals 

under 100 beds, as you know, as well as critical access hospitals. 

So I am very sensitive to the issue you are raising. 

The more general issue of complexity is of serious concern, and 

we need to make sure that every step we take in implementing this 

law is value added, that it makes things easier for patients and 

beneficiaries—— 


ccoleman on DSK8P6SHH1PROD with HEARING
58 

Mr. SMITH. I mean, of the over 100 new agencies, do they not 

have some discretionary authority that did not previously exist? 

Dr. BERWICK. I am committed to simplification, sir. What I 

want to have is, no matter how many agencies are involved, I want 

to make sure that the beneficiaries’ needs are addressed and that 

the doctors and hospitals that you are concerned about are feeling 

that when Medicare takes an action, it is something that they understand and it is value added and not just bureaucracy. I am thoroughly committed to that. You saw the President’s executive order 

just 2 weeks ago talking about simplifications of regulations and 

procedures. Medicare is going to be very much a part of that direction of work. 

Mr. SMITH. I just want to bring the message that many health 

care professionals, almost all of them that I talk to, are very nervous about this, about the power of the government increasing and 

telling them what to do, when to do it, how to do it, not to do it, 

whatever the case might be. 

And I just had a very positive experience at my local hospital relating to a family member in the last few months, where I stood 

amazed at how great our current system is, and certainly I do not 

want to jeopardize that. 

And I yield back. 

Dr. BERWICK. We share that in common, Congressman. Thank 

you. 

Chairman CAMP. Mr. Becerra is recognized. 

Mr. BECERRA. Thank you, Mr. Chairman. Dr. Berwick, thank 

you very much for being here and for all your testimony. 

I wouldn’t be surprised if anyone is watching, this is somewhat 

confused. A lot of consumers aren’t quite sure they are beginning 

to reap the benefits of—as my colleague Mr. Neal pointed out, that 

no longer can an insurance company discriminate against them because of a preexisting condition. All of a sudden they are finding 

that their recent graduate child from some college, who can’t yet 

find a job, is still able to stay on the health insurance coverage of 

that parent. So they are beginning to see the benefits, but I don’t 

doubt that some of them are confused, because they hear all of 

these anecdotal stories or they hear about these projections or they 

hear about these scare tactics, death panels and all the rest. 

But I think you started off your testimony by saying, where we 

are being told that seniors should be very scared when it comes to 

HMO Medicare that they are going to lose their insurance coverage, that it is just the opposite. 

Can you repeat what the actual numbers show, not the projections or the speculation is? 

Dr. BERWICK. The projections were of a decrease in enrollment 

to Medicare Advantage. This year we are seeing a 6 percent increase in enrollment. There are now, on average, 26 Medicare Advantage plans available in every county in this country on the average. We have made those choices more meaningful. A lot of them 

need two plans. The nonsense that was there, that there really 

wasn’t any difference, they are gone now. And when a beneficiary 

looks at their options, they are meaningful options. They can scan 

down a list of Medicare Advantage plans and pick out and say that 


ccoleman on DSK8P6SHH1PROD with HEARING
59 

is the one I want, that is the one that meets my needs. Equal 

choices being exercised, and lower cost. 

Mr. BECERRA. I was about to go there. The other scare tactic 

is seniors in America, be afraid because your costs are going to 

rise. And those are the scare tactics and the projections. What is 

the actual result on paper? 

Dr. BERWICK. On average, the Medicare Advantage premiums 

are down 6 percent this year. Now, that is not for every single person. Some people will choose a Medicare Advantage plan where the 

premium goes up because it has a different benefit structure that 

they prefer. But the average premium went down this year not up. 

Mr. BECERRA. Let me make sure I understand this. Some 3 

million beneficiaries under Medicare, close to 3 million seniors, got 

a $250 tax-free check to help them pay for their prescription drugs 

if they fell into this doughnut hole. 

Dr. BERWICK. Over 3 million if they fell in the doughnut hole 

in 2010. This year, if they are in the doughnut hole, they will see 

a 50 percent reduction in the prices, in the cost they are paying for 

many brand-name drugs. 

Mr. BECERRA. Hopefully we will be able to continue to have you 

come and others testify about what actually is in the bill, not what 

might be or is projected to be in the bill. 

The other thing I wanted to get into—let me make sure I understand this—you are within the Federal Government, as I am, as 

every one of my colleagues is, so you qualify for the Federal Employee Health Benefit program for your health care. 

Dr. BERWICK. I do. 

Mr. BECERRA. And everything that I understand from the bill, 

and having helped push that through and get it enacted and knowing how we are going to try to reduce the costs, one of the things 

we try to do is give people choices. And as we, you and I, and every 

one of my colleagues has a choice of plans through the Federal 

Health Employee Benefit plan, this new law, historic new law, will 

give a lot of Americans a choice in what plan they decide to select; 

is that correct? 

Dr. BERWICK. Many choices, more meaningful choices. 

Mr. BECERRA. And just as Members of Congress and you and 

other members of the Federal Government receive government support, public support to help pay for the cost of your health care 

plan, of each of our health care plan, so under this new historic law 

will Americans get some support, public support—some would say 

government support—for the cost or the paying of those health care 

plans. 

Dr. BERWICK. That is correct. 

Mr. BECERRA. Now, some would say that is a government takeover. And I think I did a quick survey. I think that plan, which is 

now law as a result of the historic passage of health care reform 

last year, which now gives Americans those same choices through 

these options, this marketplace and exchange of options that will 

be available, and with some Federal subsidies, taxpayer-subsidized 

assistance, is very similar to what we get, each and every one of 

the members of this committee get for health care as well. In fact 

my recollection is the subsidy that Members of Congress, Republican and Democrat, get for their health care under the Federal 


ccoleman on DSK8P6SHH1PROD with HEARING
60 

Employee Health Care Benefit plan is actually greater than the 

taxpayer support that will be provided in subsidies for the new law; 

is that correct? 

Dr. BERWICK. I believe so. 

Mr. BECERRA. So every time we hear folks talk about government takeover of health care, it is interesting, it is not good enough 

for the American consumer, but it is okay for Members of Congress 

to continue to get government-sponsored health care, and it is okay 

to have the choices there; but to give that to the American people 

seems like we are not quite hearing the full story. So I hope we 

will have a chance to hear you more often and talk to us more 

about the implementation of the legislation. And I thank you for 

your testimony. 

Dr. BERWICK. Thank you, Congressman. 

Chairman CAMP. Thank you. Mr. Schock is recognized. 

Mr. SCHOCK. Thank you, Mr. Chairman. 

Thank you, Dr. Berwick, for being here. I had a real-life story 

myself this week. I was back on my district work period and I had 

some time with my father, which is sometimes rare. He is a family 

physician. And he is a young man. He is 62 and he informed me 

that he is calling it quits, much to my surprise. Six kids in his family, five of them are doctors, and not a single one of them is convinced this is going to be good for their profession. 

And so I guess I challenge you when you suggest that this association or that association or this group or that group supports it. 

When I go home every weekend, I go home during these district 

work periods and I run into doctor after doctor after doctor who 

tells me this is going to be bad for their profession. 

Mr. SCHOCK. So I just put that out there as not some statistical 

fact but a reality check, for me at least, in my district and specifically in my family. 

Would you agree that most Americans get their health insurance 

from their employer—private health insurance, but those who have 

private health insurance get it from their employer at this point? 

Dr. BERWICK. I think it is about 160 million people, yes. 

Mr. SCHOCK. Is that most Americans who have private health 

insurance? 

Dr. BERWICK. It is the majority, I think. 

Mr. SCHOCK. Okay. Are you aware last year, when this bill first 

passed, that publicly held companies—specifically, again, coming 

back home to my home area, Caterpillar Tractor Company, which 

is in Peoria, other companies like Verizon, John Deere, had to submit to the SEC what one provision would do to their bottom line, 

specifically the change to the Medicare Part D reimbursements; 

and for Caterpillar it was a $100 million hit to their bottom line. 

Are you aware of that? 

Dr. BERWICK. I was not, but please go ahead. 

Mr. SCHOCK. You were not aware of that. 

Dr. BERWICK. No. 

Mr. SCHOCK. Well, let me back up. Your assumption is that the 

bill as it stands, as it has been passed, will lower health care costs 

for employers in the long term. 


ccoleman on DSK8P6SHH1PROD with HEARING
61 

Dr. BERWICK. I believe that by improving care in America, 

which this bill takes a long step toward, care will become more affordable for everybody, not just Medicare, and better. 

Mr. SCHOCK. But specifically my question is, since most Americans get their health care coverage from their employer, my constituents are specifically interested, do you believe that the employers’ health care that they are paying for will become less expensive? 

Dr. BERWICK. The route to that goal, which is my goal, is the 

improvement of care. And so the improvement of care affects all. 

We are not going to make a better American health care system— 

doctors, nurses, hospitals, all of us together—only for Medicare and 

Medicaid beneficiaries. That would be impossible. So the agenda of 

making care better, safer, more reliable, smoother, more seamless, 

that is a benefit to all. And yes, indeed, if successfully executed— 

and I think that is what our country is headed for now—- altogether, public and private, it will benefit the private side as well 

as the public side of payment. 

Mr. SCHOCK. Well, I find that interesting, because I have heard 

that a lot when I am in Washington, D.C. But are you aware of 

any publicly traded company who has to put out for the public 

their books and for their investors their projections on cost, any 

publicly traded company who is predicting their health care costs 

going down over the next 5 years? 

Dr. BERWICK. I wouldn’t know that, Congressman. What I 

know is that it is possible to get there, and we are going to be 

changing that way of thinking over time by making care better. I 

want to work with the private sector, employers, hospitals, professional societies, those who give care, and health plans altogether, 

to make care better. 

Have you ever seen a patient with a post-operative infection that 

they didn’t need to get? Do you understand what that costs in time 

and morbidity? Well, that could be a private-paid patient or a public-paid patient. It is still costing money. 

So I want to change the game in American health care with my 

colleagues in the private sector to make that care safer and better. 

And when we do that, the care will get more affordable. And I am 

not an accountant or a stockbroker, but I bet you will see companies around this country understand that their health lies in a 

healthier health care system, which is what we are headed for. 

Mr. SCHOCK. Again, at the end of the day I think we are interested in the realities, with all due respect. And the realities are 

most major companies—and, again, I am not aware of any, you 

don’t seem to be aware of any major employers who are providing 

health care coverage health insurance premiums going down, nor 

are there predictions that their health care coverage will be going 

down. 

I have one final question since my time is about to expire. And 

it is with regard to, you are aware of the two Federal courts that 

have now ruled that individual mandate portion of the health law 

unconstitutional. 

Dr. BERWICK. Two have held one way, two the other. 


ccoleman on DSK8P6SHH1PROD with HEARING
62 

Mr. SCHOCK. Okay. I am curious, if the administration is required by the justice system to stop implementing this law, how 

you plan to comply with that. 

Dr. BERWICK. You will have to speak with my colleagues in the 

Department of Justice and others more qualified than I to answer 

that question. Right now, my job is to forge ahead and try to make 

American health care improve, protect the beneficiaries, and implement the provisions of the law unless and until I am told otherwise. 

Mr. SCHOCK. Have there been any discussions in the Department relative to that? 

Chairman CAMP. The gentleman’s time has expired. 

Mr. Doggett is recognized. Time is very short, and we are trying 

to get everybody in. 

Mr. DOGGETT. Thank you, Mr. Chairman. 

Dr. Berwick, thank you for your distinguished service and your 

candor this morning. 

We know that an earlier generation of Republicans fought Lyndon Johnson in getting Medicare created in the first place with the 

same fervor that our Republican colleagues are fighting health insurance reform today. We know that Newt Gingrich was determined to let Medicare wither on the vine and had the support of 

some of the Republicans who continue to serve on this committee. 

And now they have laid out a roadmap—you have discussed it with 

Dr. McDermott—where their ultimate goal is to move seniors to 

the uncertainty of vouchers, away from the guarantees that Lyndon 

Johnson signed into law in Medicare, and to shift responsibility to 

seniors to meet their health care needs, to fend for themselves with 

private insurance companies to provide for their needs. 

That is the longer-term goal. But in the short-term goal, it has 

become increasingly apparent when you cut through all of their repeal rhetoric that what they are really presenting to seniors and 

individuals with disabilities is a plan to increase the cost of their 

health care. 

I would like to go through and itemize how this Republican plan 

will increase the cost of health care for seniors and individuals 

with disabilities who rely on Medicare. 

Under existing law that you administer today, if a senior needs 

a mammogram, colorectal cancer screening, bone mass measurement, will they have to make any copay? 

Dr. BERWICK. Not as we implement the law. 

Mr. DOGGETT. And so if we repeal that guarantee of no copayment, seniors will have to pay more for those services. Their health 

care costs under the Republican plan will increase, will they not? 

Dr. BERWICK. For those services, yes. 

Mr. DOGGETT. Let’s discuss the effect of seniors and the increased costs that Republicans want to impose on them right now 

with the bill that they have already passed with reference to prescription drugs. The best estimate I have seen through the Assistant Secretary for Planning and Valuation—and I would ask you 

about this—is that the average individual who would reach this 

donut hole gap in coverage—a gap in coverage created by the Republicans with their prescription drug plan a few years back— 

when they reach that gap today in 2011, each of those people on 


ccoleman on DSK8P6SHH1PROD with HEARING
63 

average will get a little over $500 in benefits under existing law, 

total benefits to Medicare beneficiaries of about $2 billion in savings this year under the law. Does that sound about right? 

Dr. BERWICK. That is correct. And when we get to 2019 or 

2020—— 

Mr. DOGGETT. And so what the Republicans are proposing in 

repealing that law is to hike the cost for prescription drugs to seniors in America this year by over $2 billion, over $500 apiece for 

those who enter the prescription drug gap. 

You have discussed this with Mr. Lewis, but do you have a mechanism under their increased health care bill to demand of seniors 

that they give back the $250 that we gave them through this bill 

last year for prescription drugs—about 3 million people you said. 

Dr. BERWICK. Yes, over 3 million. I hope we don’t have to—— 

Mr. DOGGETT. Is there any mechanism there? Because I assume under their repeal bill we are going to be asking seniors not 

only to pay more this year but to give back the $250 that they received if they reached that gap last year. 

Now what about on the issue of the Part B premium that we 

asked seniors and individuals with disabilities to pay? Under existing law, according to all the estimates you have seen, won’t those 

premiums be lower than if we adopt the Republican higher senior 

cost bill? Won’t those seniors have to pay more for the Part B premium if Republicans are successful in their attack on Medicare? 

Dr. BERWICK. Yes, I believe they would. 

Mr. DOGGETT. And with reference to Mr. Camp’s assertion that 

some Part D premiums could go up for seniors, that is true only 

to the extent that they get more coverage under this bill; isn’t that 

true? 

Dr. BERWICK. Yes, they have a selection. 

Mr. DOGGETT. And any increase is really fairly modest. 

And finally, with reference to the ‘‘Medi-scare’’ argument, that 

seniors are going to lose the ability to select their own doctor, there 

are actually incentives under the law that they want to repeal to 

pay your primary care doctors more under Medicare than they 

have received at any time in the history of Medicare, isn’t that 

right? 

Dr. BERWICK. That is correct. 

Mr. DOGGETT. And that ought to give seniors not only lower 

health care costs but more choice than they have ever enjoyed in 

the history of Medicare, don’t you agree? 

Dr. BERWICK. I agree. 

Mr. DOGGETT. Thank you very much for your service and for 

your candid answers. I hope that we can work together to ensure 

that this Republican plan to eventually privatize Medicare through 

a voucher system, but in the meantime, this year, the hike cost to 

every senior and individual with disabilities who relies on the 

Medicare system, that that plan—they can call it repeal, they can 

call it an attack on President Obama, whatever they want to, but 

we have to stop this Republican plan to increase seniors’ cost. 

Thank you. 

Chairman CAMP. Thank you. 

Ms. Jenkins is recognized. 


ccoleman on DSK8P6SHH1PROD with HEARING
64 

Ms. JENKINS. Thank you, Mr. Chairman; and thank you, Dr. 

Berwick, for being here. 

As you all know, the Independent Payment Advisory Board, the 

IPAB, created under the new health care law is charged to determine whether Medicare is spending more than is budgeted and, if 

so, to offer fixes to cut back on Medicare spending that are then 

fast tracked with very little opportunity for congressional input. 

While I have numerous concerns with this board—including the 15 

unelected bureaucrats who will serve on it and the lack of congressional oversight and approval of their recommendations—I am also 

concerned as to whether rural issues will be addressed and protected by it. 

Currently, most hospitals were granted a 10-year exemption from 

any changes proposed by this board, but critical-access hospitals 

were not included in that exemption. Kansas has one of the largest 

number of critical-access hospitals in the country, and any further 

cuts or payments could determine whether they keep their doors 

open. 

Can you please just speak to us on this issue and further challenges that rural Medicare patients have accessing care and whether or not they will be protected by this board? 

Dr. BERWICK. Well, the board, as you know, does not lie within 

CMS. It is independent. The President supports the Independent 

Payment Advisory Board, and I support the Administration. 

With respect to rural health care, my commitment could not be 

stronger, Congresswoman. I care deeply about that sector. It is crucial to Americans. It is crucial to the health of our system as a 

whole. Indeed, some of the best care I have ever seen in the country emerges in the rural sectors, and I think that gives us an opportunity to learn from them and spread ideas elsewhere. 

That is one of the reasons why I did suspend enforcement of the 

physician supervision rule in the critical access and rural hospitals 

that I was asked about before. I want to make sure that we don’t 

do anything that impedes not just good care but fabulous care in 

the rural settings. I am committed to that. 

The Affordable Care Act gives us a chance to understand more 

about the input costs in rural hospitals. We will be looking carefully at that. But it is a sector I care a lot about, and I look forward 

to working with you to make it a healthier and healthier part of 

our health care system. 

Ms. JENKINS. Are you willing to work with the administration 

to give the critical-access hospitals the same exemption? 

Dr. BERWICK. I am happy to talk with you further about that, 

Congresswoman. It is not an issue that I know in any detail. 

Ms. JENKINS. Okay. And I just wanted to follow up on my colleague from Illinois and his discussion about what the Supreme 

Court could be asked to do. 

I visited with many small businesses and large businesses in my 

district in Kansas, and many of them are investing a tremendous 

amount of money in implementing a law which one of the cornerstones is the individual mandate. And I am just curious, do you 

think it really is in the best interest of the American people for us 

to continue to implement this law, spending a whole lot of taxpayer 

dollars before we have a final judgment? 


ccoleman on DSK8P6SHH1PROD with HEARING
65 

Dr. BERWICK. Congresswoman, I am not a lawyer. I can’t deal 

with the legal aspects of that. I will take counsel from the members 

of the administration that are there to help me understand what 

to do. 

I think the Affordable Care Act is good for America, and my job 

right now is to make sure that that goes as well as it possibly can. 

That is what I am committed to do every single day, make care better for our beneficiaries, and I will continue to do that. 

Ms. JENKINS. Do you have any idea what the price tag is that 

business is having to spend that will be lost should the individual 

mandate be overturned? 

Dr. BERWICK. Business is a key stakeholder in the American 

health care system, and those costs are not sustainable now. Businessmen can tell you that as well as our beneficiaries can. We have 

to solve that problem. The Affordable Care Act gives us a chance 

to build an American health care system that will thrive, that is 

sustainable, that is higher quality and lower cost. That is where 

the interests of our public investment in health care law is, and 

that is where the interests of businesses lie. That is what I am 

keeping my eye on right now, better care for everyone and lower 

cost through improvement. 

Ms. JENKINS. So you have no idea how much will be lost in the 

economy because of businesses—— 

Dr. BERWICK. I have a better idea of what will be lost in our 

economy if we don’t get American health care on track. It ought to 

be going toward better care through care redesign and better services to patients, safer care, better care. 

Ms. JENKINS. Do you have any idea what the cost to CMS will 

be? How much will be spent that will be lost should the individual 

mandate be found unconstitutional? 

Dr. BERWICK. I don’t have a particular number there, no, Congresswoman. 

Ms. JENKINS. No. Okay. 

How do you suggest that we might recoup any of the loss that 

you do incur should that happen? 

Dr. BERWICK. Why don’t we address that downstream? I hope 

this law survives. It is a great law, and I look forward to being able 

to continue to implement it. 

Ms. JENKINS. So you don’t have any plan to recoup the costs? 

Dr. BERWICK. I go to work to try to make care better for beneficiaries, Congresswoman. That is my job, and that is what I am 

doing right now. 

Chairman CAMP. Time has expired. 

Mr. Thompson is recognized. 

Mr. THOMPSON. Thank you, Mr. Chairman. 

Dr. Berwick, thank you very much for being here and for your 

excellent testimony. 

I agree with one of the previous speakers who said anyone 

watching this is probably wondering what in the world could possibly be going on; and some probably even think it is Democrats 

versus Republicans, a partisan deal here. So I would like to just 

add in a couple of comments that I have that have been made by 

advocacy groups for seniors. 


ccoleman on DSK8P6SHH1PROD with HEARING
66 

This committee hearing is on Medicare and the effect on seniors, 

and the same groups that work hard to make sure seniors have access to good quality health care have spoken out on this. 

Families USA said Medicare’s benefits are improved under the 

Affordable Care Act. 

The Center for Medicare Advocacy said Medicare reforms included in the Affordable Care Act do not reduce Medicare’s guaranteed benefits, they improve Medicare and help safeguard the Medicare Trust Fund. 

The Alliance for Retired Americans says that this measure 

strengthens the Medicare program, provides protections to millions 

of Americans against insurance company abuses, makes prescription drugs more affordable, and provides prevention and wellness 

screenings as well, which will enhance the quality of life for our 

Nation’s seniors. 

The Leadership Council of Aging Organizations said that millions of Americans have already benefited because of this bill and 

that the economic and physical health of seniors and their families 

will continue to benefit as the law is implemented further. 

Do you agree with that, Dr. Berwick? 

Dr. BERWICK. I agree with all of those, yes. 

Mr. THOMPSON. Let me ask you, in my little district in northern California, what would happen to the 10,300 seniors in my district who hit Part D donut hole if my Republican friends are successful in repealing this health care legislation? 

Dr. BERWICK. I assume many of them would have to choose between medicines and other things that they want in their lives. I 

have seen seniors that have to choose between medicine and food. 

I have met seniors who can’t afford their medicine, stop taking it, 

and face the consequences of doing that, stopping their 

anticoagulants, stopping their blood pressure medicine, having 

their diabetes get worse because they can’t afford to control it; and 

they are scared. 

Mr. THOMPSON. And you may have answered this question before. I apologize. I had competing hearings this morning. But those 

same seniors, what would happen with the $250 check that they 

received to help pay for their medicines during the time they are 

in the donut hole? Would they have to send that $250 back? 

Dr. BERWICK. I believe we are looking at that issue right now 

just to make sure we understand what would have to happen, and 

I do not have an answer yet. I fear that might be the case. I don’t 

even want to think about it if I don’t have to. 

Mr. THOMPSON. Mr. Doggett mentioned that primary care doctors get an incentive to be able to provide the health care that we 

all know has been lacking and helped lead to the situation where 

health care in our country was unsustainable. I think it is also important to note that rural doctors also get an increase in their reimbursement rates. In my area, and in any rural area in the country, this is a huge, huge issue as to how we attract doctors to provide health care for the many, many seniors that live in rural 

areas. 

And I just can’t emphasize enough how important preventive 

health care is. Not only is it good for individuals who receive it, but 

it saves so much money, so many health care dollars when you can 


ccoleman on DSK8P6SHH1PROD with HEARING
67 

detect a problem early on and fix it. What would happen to the 

110,000 Medicare beneficiaries in my district who right now, today, 

under the law that we passed, receive free preventive services and 

free annual wellness exams? Would they lose this under the Republicans bill? 

Dr. BERWICK. They would have higher copayments if they want 

it, and some of them would avoid it. We now know, due to good 

science and research, that a colonoscopy allows detection of colon 

cancer at early stages. It saves lives. It keeps you from dying of 

colon cancer because we find the colon cancer earlier. So there are 

beneficiaries in your district who wouldn’t have a colonoscopy because they couldn’t afford it if this law is withdrawn, their cancers 

will advance, they will die of colon cancer, and their lives would 

otherwise have been saved. 

Mr. THOMPSON. Thank you. 

And one final question, Doctor. If our Republican friends are successful in repealing this legislation and passing their bill, what 

would happen to the solvency of the Medicare program? 

Dr. BERWICK. According to the Medicare Trustees Report from 

the Actuary, the Medicare Trust Fund life is extended from 2017 

to 2029, 12 years of extension of Medicare. 

Mr. THOMPSON. So Medicare would be shortened. 

Chairman CAMP. Thank you. The gentleman’s time has expired. 

I appreciate Dr. Berwick for extending in time here. We will have 

one more person, questions, and then what we will do is recess for 

5 minutes, and then we will reconvene for a second panel. 

So Mr. Paulson is recognized for 5 minutes. 

Mr. PAULSEN. Thank you, Mr. Chairman and Dr. Berwick. 

The issue of geographic disparities in Medicare payment is a 

long-standing problem that has resulted in unfair low payments to 

health care providers in Minnesota and other high-quality, low-cost 

States. In fact, well-documented studies show that a variation of 

Medicare payments are not tied to quality and efficiency. But, for 

example, the Dartmouth Atlas of Health Care puts Minnesota in 

the bottom quintile of per-enrollee Medicare payments, yet on 

measures that indicate high quality of care, like avoiding hospitalizations for conditions that can be treated and handled in a 

different setting that is more appropriate for care for patients with 

chronic conditions, et cetera, Minnesota ranks really highly. 

How will this new health care law ensure that the Medicare 

beneficiaries in my district or in Minnesota, these high-quality, 

low-cost States, are going to have the same access to services as 

those in other parts of the country? 

Dr. BERWICK. Congressman, I know this issue very well, and 

it is a very important one to make sure that payment is fair and 

adequate and that geographic variation and costs are well respected in the payment system. 

Under the Affordable Care Act, there are actually three different 

processes under way right now. An Institute of Medicine study on 

input costs for geographic areas that will be due back to us in May 

or June—and probably in enough time to map that into payment 

rules for 2012. The Secretary has been required by the law to have 

a study of geographic variation and costs for hospitals that will be 

due at the end of the year, also available for use in 2012. And there 


ccoleman on DSK8P6SHH1PROD with HEARING
68 

is a really important longer term Institute of Medicine study underway now on geographic variation in Medicare as a whole, cost 

and quality variation. Based on this information, I think we will 

be able to craft much more rational regulation and policy to help 

make sure that payment is fair and equitable and respects the variation in costs and outcomes in different areas. 

Mr. PAULSEN. And, Dr. Berwick, I think this is essential to actually get to the crux of the problem. This has been an ongoing 

issue, and my physician community has certainly talked about it 

for a long period of time. 

Let me ask this, too. One of the fundamental shortcomings I believe of the health care law as well is the failure to recognize that 

in some States like Minnesota we have a pretty low uninsured rate 

and a well-functioning marketplace, that costs could rise in the 

presence of unnecessary and unwarranted regulation from now the 

Federal Government. For example, the new State exchanges are 

likely to require new levels of certification of health plans, essential 

benefit offerings, and even network adequacy standards. These activities are now currently overseen by our Department of Commerce. Why do we need Washington or the Federal Government to 

ensure that Minnesota’s Department of Commerce is acting appropriately right now? 

Dr. BERWICK. I would be happy to talk with you afterwards, 

Congressman, about the various kinds of administrative costs you 

are talking about. We do, under the law, have the opportunity now 

to help States set up enrollment systems which are new and crafted for the enrollment processes that appear under the law through 

exchanges, integrating exchange and Medicaid enrollment, for example. You know, there is a 90–10 Federal match for that, 90 cents 

out of every dollar that States have put into that kind of administrative process will come from the Federal Government. So I would 

be happy to talk with you further if you would like about the concerns you have about those administrative procedures. 

Mr. PAULSEN. And I actually would be interested in that because I want to make sure that the new law does not provide any 

additional layers of regulation that would stifle, I guess, innovation 

and raise costs. 

And I will give you another example, too. I have heard that there 

is something like 250,000 pages of additional regulations that are 

going to come out of this law. That is certainly going to be a challenge if it is a heavily bureaucratic load that is put from a topdown perspective down on our providers in an already very tangled 

and unwieldy behemoth of health care regulation that is out there 

right now, and I hear that from my providers on a regular basis. 

Dr. BERWICK. Yes, sir. I would be concerned as you are. 

Let me make it clear. My attitude, from my view as administrator, is a partnership with providers and States; and making 

things harder for them isn’t a good idea. I am interested in my job 

of making sure the Federal Treasury Funds are protected and 

beneficiaries are protected, but I think we can do that in partnership. And if you are concerned about regulatory burden, I am, too; 

and we should talk about it. 

Mr. PAULSEN. Thank you, Dr. Berwick. 


ccoleman on DSK8P6SHH1PROD with HEARING
69 

I just want to follow up one more time on this Medicare Advantage issue because it has been forecasted that about $200 billion 

out of the Medicare Advantage program is going to be cut or overhauled; and that is going to be, according to our next witness, Mr. 

Foster, who is coming forward, about a 50 percent reduction in enrollment. 

When I travel around my district and around Minnesota, it is 

very clear that seniors enrolled in Medicare Advantage are worried 

about losing benefits or the Medicare Advantage options altogether. 

For the past year, the administration has been trying to reassure 

seniors that nothing is going to change, but I don’t believe that is 

the case. You talked about the 6 percent rise in Medicare Advantage for 2011. Obviously, a lot of provisions of the law have not 

been phased in, but let me just ask you this: I am worried we are 

going to go back to the days when seniors in Minnesota, for instance, don’t have the same options as seniors in Miami or in New 

York City. Do you agree that Minnesota seniors should have the 

same Medicare options as seniors in Miami or in New York City 

or around the country? 

Dr. BERWICK. I think they should have robust options, as beneficiaries all over the country should; and I think they are getting 

them with the improvements that we are seeing in the Medicare 

Advantage system right now. I don’t want your seniors to be worried. The Medicare Advantage program is stronger for them, it is 

more available to them, and the choices are more meaningful now, 

and they need to know that. And, yes, I am committed to their options. 

Mr. PAULSEN. Thank you. 

Chairman CAMP. Thank you. The gentleman’s time has expired. 

Thank you, Dr. Berwick, for being here today and for your testimony. Thank you for extending the time before the committee and 

accommodating as many members as possible. You can see by the 

member participation that the issues before your department are 

of great importance to the people we represent and to America’s 

seniors. So thank you for your testimony about the effects of implementation of this health care law. 

If members would like to, they can submit in writing to you any 

questions and you can be happy to respond. 

Yes, the gentlewoman from Nevada. 

Ms. BERKLEY. Thank you for recognizing me. 

Do you think in the future we might be able to make this a little 

more equitable? Perhaps if those sitting in the more expensive 

seats had 4 minutes to question, those of us in the cheap seats 

might have had an opportunity to question the witness. I was very 

patient and very anxious to do that. 

Chairman CAMP. What we will do is, on the second panel, we 

will start with where we left off. Dr. Berwick had limited time. 

Many times our witnesses come without time limit. Dr. Berwick 

had a time limit, as does happen on occasion. 

Ms. BERKLEY. This has happened a few times; and, frankly, it 

was Mr. Berwick that I wanted to question. 

Chairman CAMP. All right. Thank you. 

Yes, Doctor. 


ccoleman on DSK8P6SHH1PROD with HEARING
70 

Dr. BERWICK. Mr. Chairman, first, I want to thank you for having me here. I enjoyed it, and I really welcome a chance to join you 

any time. And with respect to any members who would like to meet 

with me personally, that is an open door. I will be happy to do that 

at any point. 

Chairman CAMP. Maybe that is something that can be arranged. 

Thank you. 

The committee will stand in recess until 12:30. 

[Recess.] 

Chairman CAMP. The committee will reconvene for our second 

panel; and I want to welcome Richard S. Foster, the Chief Actuary 

for the Centers for Medicare & Medicaid Services. 

Since 1995, Mr. Foster has been Chief Actuary for the Centers 

for Medicare & Medicaid Services. He is responsible for all the actuarial and other financial analyses for the Medicare and Medicaid 

programs. 

Previously, he served as Deputy Chief Actuary for the Social Security Administration for 13 years. He is a fellow of the Society of 

Actuaries and a member of the American Academy of Actuaries, 

American Statistical Association, American Economic Association, 

National Academy of Social Insurance, and Senior Executives Association. Welcome to the committee. 

Mr. Foster, you will have 5 minutes to give us your testimony. 

Your full written statement will be made part of the record. Welcome to the Ways and Means Committee. You have 5 minutes. 

STATEMENT OF RICHARD S. FOSTER, CHIEF ACTUARY, 

CENTERS FOR MEDICARE & MEDICAID SERVICES 

Mr. FOSTER. Thank you, Chairman Camp, Representative 

Levin, and distinguished Members of the Committee. Thank you 

for inviting me to testify today about the impact of the Affordable 

Care Act on the Medicare program and its beneficiaries. 

The Office of the Actuary and CMS provides actuarial, economic, 

and other technical assistance to policymakers in both the administration and in Congress; and we do so on an independent, objective, 

and nonpartisan basis. We have performed this role throughout the 

last 45 years, since enactment of Medicare and Medicaid. 

I am accompanied today by Suzanne Codespote, ASA, who is the 

Deputy Director of our Medicare and Medicaid Cost Estimates 

Group, and also by my special assistant, Cathy Curtis, Ph.D. My 

statements are my own and do not necessarily represent an official 

position of the Department of Health and Human Services. 

Considerably more information about the financial status of 

Medicare and the impact of the Affordable Care Act on the program is available in my written testimony, in my April 22 memorandum on the Affordable Care Act, and of course in the 2010 

Medicare Trustees Report. 

The Affordable Care Act has numerous provisions affecting Medicare and its financial operations. We estimate in the first 10 years, 

2010 through 2019, that the Act would result in Medicare savings 

that total $575 billion over this period. Most of that is in the form 

of lower expenditures, about $486 billion. Those lower expenditures, as of 2019, represent a reduction of 11 percent in expendiVerDate Mar 15 2010 00:37 Dec 21, 2011 Jkt 070871 PO 00000 Frm 00074 Fmt 6633 Sfmt 6602 I:\WAYS\OUT\70871.XXX GPO1 PsN: 70871

ccoleman on DSK8P6SHH1PROD with HEARING
71 

tures for Medicare compared to what would have happened under 

the old law. 

Now the magnitude of the reduction continues to increase over 

time. We estimate by 2030 that the reduction in expenditures will 

be 20 percent; in 2050, 32 percent; and in 2080, 43 percent. The 

Act is estimated to reduce the long-range Hospital Insurance Actuarial Deficit by four-fifths. It is also estimated, as we have heard, 

to postpone the exhaustion of the HI trust fund by 12 years, using 

the 2010 Trustee’s report baseline. 

I note that the HI savings under the Affordable Care Act cannot 

directly be used to both offset the cost of the coverage expansions 

in the health reform act and at the same time to pay for future HI 

benefits. There are budget and trust fund accounting conventions 

that result in both these conclusions, and we can discuss this issue 

further if it would be helpful. 

As most of you know, I have had some concerns about one particular provision of the Affordable Care Act which has to do with 

reducing the payment updates, the annual payment updates for 

most categories of Medicare providers, other than physicians, by 

the increase in economy-wide productivity. Now these lower payment updates will provide a strong incentive for hospitals and 

other providers to be as efficient as possible, but it is doubtful that 

many providers, other than physicians, can improve productivity to 

match economy-wide levels. Possible consequences are that the 

payment rates for the affected providers will grow at about 1.1 percent slower than the increase in those providers’ input prices, in 

other words, the input prices they have to pay for wages, office 

space, energy supplies, things like that. So unless providers can improve their productivity or make efficiency gains otherwise, over 

time the payment rates will become inadequate to cover input 

costs. If that happens, and absent legislation to do anything about 

it, then providers might have to end participation in Medicare, and 

that leads to possible issues with access to care for Medicare beneficiaries. 

Now, more likely, Congress would act to override the productivity 

adjustments if this occurs, as you had to do many times with the 

physician payment system under current law; and, if so, then that 

implies that the actual future costs for Medicare would be quite a 

bit higher than we have projected under current law. 

To help illustrate the possible understatement of the current law 

cost projections, the trustees use an illustrative alternative to current law and show a projection based on that. 

[The statement of Richard S. Foster follows:] 


ccoleman on DSK8P6SHH1PROD with HEARING
72 


ccoleman on DSK8P6SHH1PROD with HEARINGInsert offset folio 1 here 70871.001
73 


ccoleman on DSK8P6SHH1PROD with HEARINGInsert offset folio 2 here 70871.002
74 


ccoleman on DSK8P6SHH1PROD with HEARINGInsert offset folio 3 here 70871.003
75 


ccoleman on DSK8P6SHH1PROD with HEARINGInsert offset folio 4 here 70871.004
76 


ccoleman on DSK8P6SHH1PROD with HEARINGInsert offset folio 5 here 70871.005
77 


ccoleman on DSK8P6SHH1PROD with HEARINGInsert offset folio 6 here 70871.006
78 


ccoleman on DSK8P6SHH1PROD with HEARINGInsert offset folio 7 here 70871.007
79 


ccoleman on DSK8P6SHH1PROD with HEARINGInsert offset folio 8 here 70871.008
80 


ccoleman on DSK8P6SHH1PROD with HEARINGInsert offset folio 9 here 70871.009
81 


ccoleman on DSK8P6SHH1PROD with HEARINGInsert offset folio 10 here 70871.010
82 


ccoleman on DSK8P6SHH1PROD with HEARINGInsert offset folio 11 here 70871.011
83 


ccoleman on DSK8P6SHH1PROD with HEARINGInsert offset folio 12 here 70871.012
84 


ccoleman on DSK8P6SHH1PROD with HEARINGInsert offset folio 13 here 70871.013
85 


ccoleman on DSK8P6SHH1PROD with HEARINGInsert offset folio 14 here 70871.014
86 


ccoleman on DSK8P6SHH1PROD with HEARINGInsert offset folio 15 here 70871.015
87 

f 

Chairman CAMP. Mr. Foster, your time has expired, but we will 

make your full statement a part of the record. 

Mr. BLUMENAUER. is recognized for 5 minutes. 

Mr. BLUMENAUER. Thank you very much, Mr. Chairman. 

Mr. Foster, good to see you again. 

I am interested in exploring three points with you. You were 

here, I thought I saw, for much if not all of the previous discussion. 

You heard one of my colleagues describe with dismay, I believe it 

was my friend from Pennsylvania, who talked about somebody with 

a knee brace that under the existing schedule was $686 versus 

$194 that could be obtained just going on the Internet. 


ccoleman on DSK8P6SHH1PROD with HEARINGInsert offset folio 16 here 70871.016
88 

Have you examined the current system’s trend lines in terms of 

its sustainability? You are talking about problems under the Affordable Care Act. Absent the Affordable Care Act, have you done 

a projection of what America’s health care looks like in terms of deterioration of quality, of people being shed by plans, other plans 

being shut down? Do you have a report on that? Have you examined it? 

Mr. FOSTER. We don’t have a formal report. We try to keep up 

with these various kinds of issues, yes. 

Mr. BLUMENAUER. Would you say that it is safe to assume 

that if we don’t do something that the trend lines are actually 

worse in terms of people losing care, costs exploding, inefficiencies 

in the system? 

Mr. FOSTER. Without question, something needs to be done. Because historically, for a variety of reasons, health care costs have 

grown faster than people’s wages or the economy at large, and that 

can’t be sustainable indefinitely over time. 

Mr. BLUMENAUER. I take that to say that you acknowledge 

that it is actually worse if we don’t do something, that people are 

going to lose care, that quality is going to go down, that the budget 

is going to be broken if we don’t something. 

Mr. FOSTER. I don’t know about worse or better. That is something I would have to think about. 

Mr. BLUMENAUER. I would appreciate it if you would, because 

you have thought about it here. You have made the decision that 

actuarially, and your assumptions, your hunches, being around 

here for a long time, that you think some of this isn’t going to happen. I would appreciate if you would add your intellect to what the 

consequences are for the current system absent doing something, 

whether it is going to be better or worse. 

My second point, I wonder if you had a chance to look at the Republican roadmap that my good friend and colleague Paul Ryan 

has advanced that actually posits greater reductions in Medicare 

spending over time. And I would ask if you think that is greater 

or less likely that Congress would stand by and allow greater reductions. If you think there are problems under the existing Act, 

would there be greater or lesser reductions under my friend Paul 

Ryan’s approach? 

Mr. FOSTER. My office looked at Mr. Ryan’s plan several years 

ago when he first developed it. We discussed with him at the 

time—and it continues to be the case—that if you have a voucher 

program for Medicare and Medicaid and the voucher payments increase at a slower rate than health care costs are increasing, then 

over time people cannot buy as comprehensive an insurance coverage as they started out, and at some point that can become quite 

an issue. So there are risks to either approach. They are different 

in nature, but they both exist. 

Mr. BLUMENAUER. I don’t want to catch you unawares, but I 

would respectfully request that you think about that, maybe look 

at them and if you have an opinion about which is the greater risk 

of Congress caving, those draconian cuts or the things that are imposed under the Affordable Care Act, at some point. 

I would like to turn to Medicare Advantage, because this is one 

of the areas that you think there is instability. You were here when 


ccoleman on DSK8P6SHH1PROD with HEARING
89 

Dr. Berwick testified that current Medicare Advantage enrollment 

increased 6 percent to more than 12 million beneficiaries. You 

heard that, on average, beneficiaries have seen a 6 percent reduction in their premiums. And you heard, most important, there is 

a 5 percent increase in the people who are investing in the better, 

higher-quality programs. I mean, there are some that give health 

club memberships that aren’t very good programs, and we don’t 

want to subsidize ones that aren’t doing a very good job. I note in 

my community you get about $586 on average, and we have the 

highest percentage of Medicare Advantage in the country. In Louisiana, there is one that is over $1,300 a month. 

Chairman CAMP. The gentleman’s time has expired. 

Mrs. BLACK. is recognized for 5 minutes. 

Mrs. BLACK. Thank you, Mr. Chairman; and thank you, Mr. 

Foster, for being here. 

As part of the Democrats’ health care law, employers who provide retiree drug coverage can no longer deduct that subsidy, the 

so called ‘‘RDS,’’ and we have seen companies take huge write-offs 

as a result of this tax increase. And an example of that has already 

been talked about in the last session with AT&T with $1 billion 

and Deere and Company with $150 million. These are big numbers, 

and it means that less money will be available for investment and 

creating jobs. 

But my question relates to the impact on seniors. The President 

reiterated on Sunday, ‘‘If you have health care that you like, you 

keep it.’’ In your opinion, does the Democrats’ health care law provide further incentive for these companies to drop the retiree drug 

coverage plan, resulting in seniors losing their coverage? 

Mr. FOSTER. Yes to the first part, probably not to the second 

part. In other words, without the tax deductibility, that changes 

the financial balance, so we expect that many employers will drop 

their retiree drug coverage because of these changes. We also expect that most of them—not all—most of them will help get their 

retirees into regular Part D prescription drug plans. 

Mrs. BLACK. As a follow-up to that, how is this going to affect 

the regular Part D moving forward? 

Mr. FOSTER. It won’t make a lot of difference. Instead of Medicare paying a Federal subsidy for these same people within the retiree plans, will pay a Federal subsidy for them within the Part D 

plan. 

Mrs. BLACK. I see. 

Mr. FOSTER. It will slightly decrease the premiums. Because 

these tend to be lower-cost people. They have had full employment 

histories, so it will help bring down the overall cost within the Part 

D plan world but not by very much. 

Mrs. BLACK. I want to go in another direction that really hasn’t 

been mentioned much here. There was some talk in the last section 

about how these senior groups have promoted the recent reform, 

and AARP was certainly a part of that. However, as a part of the 

new law, insurance companies are required to spend 80 to 85 percent of the premium on government-approved spending services 

and this is called that medical loss ratio. However, Medigap policies that seniors purchase to supplement traditional Medicare are 

only required to meet a medical loss ratio of 65 percent. And AARP 


ccoleman on DSK8P6SHH1PROD with HEARING
90 

and United are a part of this. And while I am not in support of 

government mandating how private industry operates, do you think 

that the MLR policy should be applied equitably across the line? 

Mr. FOSTER. Well, I confess that is not an issue that I have 

thought much about, and I don’t get into policy issues, but you 

could probably make a good case that if it makes sense in general 

then it would make sense for the broader spectrum, including 

Medigap policies. 

Mrs. BLACK. Well, I would think that most people would agree 

that if we are going to do something we should do it equally and 

that if we have one particular company that is advocating for a policy and then gets the break to be less, that does not seem to be 

very fair. 

Mr. FOSTER. There is one other difference that I would mention, 

which is, when you think of a normal health insurance policy like 

a private insurance policy that covers the whole gamut of health 

care services, there is sort of a lot of money to work with. If you 

think about a Medigap policy, which wraps around Medicare, it is 

a much lower dollar value policy. So to the extent that you have 

given administrative costs, they are going to tend to represent a 

greater share for a small dollar policy. So you might not be able 

to do 80 or 85 percent, but, on the other hand, you could certainly 

specify a loss ratio standard that is perhaps somewhat higher than 

the existing one. 

Mrs. BLACK. Thank you. 

I yield back my time, Mr. Chairman. 

Chairman CAMP. Thank you. 

Mr. PASCRELL. is recognized. 

Mr. PASCRELL. Thank you, Mr. Chairman. 

Mr. Foster, it is good to see you again. 

At many town hall meetings that I have attended, Mr. Foster, it 

has been my goal to dispel some of the myths that we have heard 

discussed today and other days. Seniors have been grateful as they 

have begun benefiting from health care reform, for example, in getting a $250 check—which doesn’t seem much to you or me but 

means a lot to a lot of seniors—to help them pay for prescription 

drugs under Medicare. I don’t have any trick questions about that, 

but I just wanted to lay the facts out. 

Mr. FOSTER. I appreciate that. 

Mr. PASCRELL. Well, I am not finished yet, though. 

I also learned something this morning. It seems like both sides 

are convinced that we finally laid it out, chapter and verse—and 

would you confirm this—that there are no cuts in guaranteed benefits under the Medicare program? Could you verify that? Except we 

are not talking about the private plans, we are not talking about 

doing away with gym privileges, we are talking about substance, 

and you know what I am talking about. 

Mr. FOSTER. Yes, sir. There are no cuts in what is referred to 

as guaranteed benefits, in other words, the standard Medicare benefit package. In fact, that has been expanded. 

Mr. PASCRELL. Thank you very much for your conciseness. I 

hope people will choose to go back and read the bill, which we were 

accused of not doing, but that is a fact of life. 


ccoleman on DSK8P6SHH1PROD with HEARING
91 

Now I want to ask you something which I would ask you to be 

as precise as you can be. I want to talk a little bit about how 

health care reform creates what I would consider to be positive incentives for providers to focus on the quality of their care, thereby 

benefiting seniors. 

I understand that your office did not score innovative ideas such 

as hospital value-based purchasing or the Independence at Home 

Demonstration program as part of your analysis. In fact, I look at 

the sheet from the estimated Medicare costs, and Section 3003, the 

expansion of the Physician Feedback Program, sections 3006, 3007, 

value-based purchasing, which I know you believe in, but you did 

not score. I am not criticizing. I am going to ask you a question. 

CMS Innovation Centers, the Medicare Shared Savings program, 

National Program on Payment Bundling—I have seen a lot written 

about that in the last 3 or 4 years—Hospital Readmissions Reduction Program. Let me ask you this question: Don’t any of these specific areas—I could name five more—have any potential for savings? And why specifically were they not scored? Because you did 

score some other things. 

Mr. FOSTER. Sure. In a number of cases, we actually did estimate savings. For example, for the lower payments for readmissions, unnecessary readmissions, the hospital-acquired conditions, 

what it really depends on, sir, is when you have enough information about how the proposal will actually work. On some of these, 

for example, at the time of enactment the Medicare Shared Savings 

program was not adequately specified for us to be able to estimate 

what the impact would be. 

Mr. PASCRELL. So it wasn’t a question that you thought that 

they would not work, it was a question—and correct me—it was a 

question of gathering enough information to say that they definitely would work. Am I putting words in your mouth? 

Mr. FOSTER. Only slightly. It is a question of having enough information to determine that they work well, they don’t work so 

well, as the case may be. 

Mr. PASCRELL. So you are not questioning whether these 

things would work. 

Mr. FOSTER. I am saying we don’t always have an opportunity 

or enough information to try and figure that out. 

Mr. PASCRELL. Well, let’s take the five things that I mentioned. 

You would think, from what I have read and what I have looked 

into—to my amateur abilities—that we could possibly save a heck 

of a lot of money if these things work as well as they are expected 

to work. 

Mr. FOSTER. There is the potential in almost all of these. But 

if I may give you one example. 

Mr. PASCRELL. Sure. 

Mr. FOSTER. The Medicaid Shared Savings program, as you 

know, the regulation is due out within another couple of weeks. We 

have been working closely with the folks on that. The original design of the regulation we estimated would actually increase costs. 

The design was modified somewhat to lower the cost, and the current version now achieves some degree of savings overall. 

Chairman CAMP. Thank you. 


ccoleman on DSK8P6SHH1PROD with HEARING
92 

Mr. PASCRELL. This is quite a bit of money we are talking 

about here now. 

Chairman CAMP. The gentleman’s time has expired. 

Mr. PASCRELL. Thank you. 

Chairman CAMP. Mr. Crowley is recognized. 

Mr. CROWLEY. It is unusual, two for the road here. 

Chairman CAMP. We are playing catch-up. 

Mr. CROWLEY. Thank you, Mr. Chairman. 

I want to just follow up on the line of questioning of Mrs. Black 

as it pertains to the corporate tax advantage that she mentions will 

be phased out in 2013, what is, in effect, a case of, in my opinion— 

and I think many—double dipping. Now I would hope that my Republican colleagues aren’t defending double dipping, but that is 

what it sounded like to me. 

The loophole that will expire in 2013 pertains to a law that allows businesses to deduct the value of that subsidy twice. They can 

exclude the 28 percent from their income and at the same time deduct 28 percent from their income for tax purposes. If that is not 

double dipping, I don’t know what is. The health care reform legislation closes that loophole by allowing businesses to deduct this 

money once rather than getting a double deduction on taxpayer 

dollars. These businesses will still get a generous subsidy to help 

them cover retiree prescription drug costs, and they still get to exclude that benefit from their income. They just don’t get to do it 

twice and double the deduction on the backs of taxpayer dollars. 

But, Mr. Foster, what I want to do is follow up on the questioning of my colleague from New Jersey just a bit more. One of 

the Affordable Care Act’s greatest tangible benefits was the assistance it provided to our seniors with high prescription drug costs, 

particularly those who got caught in what is known as the Medicare Part D donut hole or coverage gap. The law gave every senior 

who was hit in that coverage gap in 2010 a check for $250; is that 

correct? 

Mr. FOSTER. Yes, the ones who made it to the coverage gap. 

Mr. CROWLEY. That is the equivalent of 7,300 seniors in my 

district alone and over 3 million seniors nationwide. These are 

checks that seniors have already received that they are already 

using to help them to pay for the high cost of prescription drugs. 

Is it true that the Republicans’ efforts to repeal the Affordable Care 

Act, which each of my colleagues on the other side of the aisle 

voted for, as if it had not been enacted would force seniors to return that $250 check that they received to help them with the cost 

of prescription drugs? Would that be the case? 

Mr. FOSTER. If the legislation were repealed entirely and retroactively, including provisions that have already taken effect, then, 

yes, in theory you would have to pay back those rebate checks. 

Mr. CROWLEY. Let me ask you this question: If that were the 

case, if they had to pay back those checks—and that would amount 

to over $650 million that has been paid out—is it possible that 

when seniors are forced to return those $250 checks that they got 

that they would have to pay interest on those $250 checks as well? 

It is $650 million. I assume that had that stayed in the Treasury 

that it would have accumulated some interest. Would they have to 

pay the interest back on those checks as well? 


ccoleman on DSK8P6SHH1PROD with HEARING
93 

Mr. FOSTER. I am not aware of any situation, if there is a benefit or an overpayment and a recovery, that interest is involved. 

Mr. CROWLEY. But it is quite possible they may have to pay interest on it. 

Mr. FOSTER. I have not seen it before. 

Mr. CROWLEY. So then it would be a loss to the Treasury, the 

interest that would have otherwise been gone had it remained 

where it was. 

Mr. FOSTER. In effect—— 

Mr. CROWLEY. It is quite possible. 

Mr. FOSTER. Right. 

Mr. CROWLEY. Thank you. 

My Republican colleagues have said that they want to completely 

take away all funding for the Affordable Care Act, and they have 

made it clear that they will use the continuing resolution to cut off 

any funds for the implementation of this law. Will this mean that 

the remaining seniors who hit the prescription drug coverage gap 

towards the end of 2010, just like their neighbors, and are waiting 

desperately for the help will now be denied the check that is rightfully theirs if funding for this were to be cut off? 

Mr. FOSTER. Again, if it is repealed in its entirely and retroactively. 

Mr. CROWLEY. Thank you. 

Mr. Foster, the Department of Health and Human Services estimated that under the Affordable Care Act Medicare beneficiaries— 

seniors—who have hit the prescription drug coverage gap will each 

save $526 this year alone as a result of further closing the coverage 

gap. By 2020, when the gap is fully closed, each beneficiary will 

save $1,540. This means a total savings of $8.8 billion in savings 

to a projected 5.7 million beneficiaries. 

If the Affordable Care Act were repealed, Medicaid beneficiaries 

would effectively see an $8.8 billion cut just from this particular 

provision being repealed; is that true? 

Mr. FOSTER. I would have to look up the figures, but those are 

in the right ballpark. 

Mr. CROWLEY. Thank you. I thank you for your honesty and 

your candor, and I thank the chairman. 

Chairman CAMP. Mr. Foster, would you agree that health care 

spending and rising health care costs are the most significant drag 

on our Nation’s fiscal health? 

Mr. FOSTER. Oh, I don’t know about that. They certainly represent—— 

Chairman CAMP. Or a significant drag on our Nation’s fiscal 

health? 

Mr. FOSTER. Well, certainly, yes. 

Chairman CAMP. And one of the claims that is often made is 

that this health care law will ‘‘bend the curve’’ of health care 

spending. In your expert analysis, would you say that their law increases or decreases national health expenditures? 

Mr. FOSTER. We have estimated that overall national health expenditures would increase under the health reform act. 

Chairman CAMP. So a significant drag on our economy is actually made worse under this law. 


ccoleman on DSK8P6SHH1PROD with HEARING
94 

My second question is, the nonpartisan Congressional Budget Office has made clear that the Medicare ‘‘savings’’ as a result of the 

health care law can’t be counted twice, first to shore up the solvency of the Medicare program and then also pay for a new health 

care entitlement. Your office’s April 22, 2010, report on the effects 

of the law on the Medicare Trust Fund pointed out, ‘‘In practice, 

the improved Part A financing cannot be simultaneously used to finance other Federal outlays, such as the coverage expansions 

under the PPACA, and to extend the trust fund, despite the appearance of this result from the respective accounting conventions.’’ 

Can you sort of settle for this committee with a yes or no answer 

if the funds that are designated to finance a new entitlement under 

the health care reform law, can they be simultaneously used to 

make the Medicare trust fund more solvent? 

Mr. FOSTER. Not directly, no. 

Chairman CAMP. So what is the implication of that truth about 

the solvency of the Medicare program and on the alleged deficit reduction in the Democrats’ health care law? 

Mr. FOSTER. Well, what I would like to do would be to explain 

it as follows: Clearly, there are very large Medicare savings under 

the health reform act. Those savings, the actual cash that shows 

up in higher payments, higher taxes, whatever, that is loaned to 

the rest of government. The Medicare trust funds get Treasury 

bonds, IOUs. 

Mr. FOSTER. The money is immediately spent. Whether for the 

purpose of offsetting the cost of the coverage expansions or building 

roads or whatever, it is spent. In a few years when we need the 

money, we can cash in those Treasury bonds and it has to be repaid with interest. But the original money we are talking about, if 

it was $100 in higher taxes, the $100 is spent. It is gone. We now 

need the $100. We will get it back, but Treasury will have to come 

up with a new $100 to pay it back for us. So to spend $100 for the 

ACA and $100 for Medicare takes $200, and the original $100 can 

only be used once. 

Chairman CAMP. So the costs of the bill are understated. 

Mr. FOSTER. I think that is a different issue. 

Chairman CAMP. I wanted to just touch on something else. 

Health and Human Services, HHS, spent about $20 million to convince seniors that the health care law was good for Medicare. And 

one of the first attempts to do that was the caller mailing that was 

glossy, that went out to seniors to inform them of a number of new 

government programs, even though they were ineligible for many 

of those programs. 

Was your office asked to review the Medicare mailer that went 

to seniors or to review the scripts that appeared in the media that 

were aimed at seniors? Did your office review those? 

Mr. FOSTER. No, we were not asked and we did not look at 

them. 

Chairman CAMP. I would like you to comment on two statements included in the Medicare mailer and to just give your comments on whether those were accurate, inaccurate, or misleading. 

One was it keeps Medicare strong and solvent. Is that inaccurate 

or misleading, given that the Medicare cuts are unsustainable and 

that the, quote, savings are double-counted as you mentioned earVerDate Mar 15 2010 00:37 Dec 21, 2011 Jkt 070871 PO 00000 Frm 00098 Fmt 6633 Sfmt 6602 I:\WAYS\OUT\70871.XXX GPO1 PsN: 70871

ccoleman on DSK8P6SHH1PROD with HEARING
95 

lier in your testimony, double-counted as both trying to extend the 

Medicare solvency and also pay for a new entitlement? 

Mr. FOSTER. Technically and in an important way, the savings 

for Medicare under the Affordable Care Act do extend solvency. 

Now we lend the money out, we get it back, we can continue paying benefits longer than before. Now, there is the appearance and 

good bit of reality of the double-counting so that is an issue. But 

technically it does help in that regard. 

Chairman CAMP. The quote that Medicare benefits won’t change 

whether you get them through original Medicare or Medicare Advantage plan, is that an accurate statement? 

Mr. FOSTER. I will be quite honest. I have been troubled with 

that statement. We had the question earlier about the guaranteed 

benefits. It is true enough that the, quote, guaranteed benefits 

which are the original fee-for-service package, nobody is reducing 

that. That actually expands a little bit. It is also true that for 

Medicare Advantage enrollees, their extra benefits, their lower 

cost-sharing, their lower premiums will be reduced under the Affordable Care Act. 

Chairman CAMP. And when you reviewed whether this legislation, quote, bent the cost curve or not, did it include any analysis 

of the physician payment formula or any extension of that or a, 

quote, doctor fix, as it is often called here? 

Mr. FOSTER. No, not directly. Other than the original Ways and 

Means Committee bill, the legislation did not have a doctor fix it 

in it. 

Chairman CAMP. So that is a fairly significant cost to Medicare 

that has not been accounted for or included in this legislation? 

Mr. FOSTER. Yes. It has been treated as a separate issue. 

Chairman CAMP. So in response to my question about increasing 

or decreasing health care spending, even your analysis would be 

pretty significantly understated if this were included. 

Mr. FOSTER. The cost of a permanent fix for the SGR system over 10 years is about $300 billion. That provision was not in the 

Affordable Care Act. It is a continuing issue, as you know, but that 

is roughly the cost. 

Chairman CAMP. So that would mean health care expenditures 

would increase by that additional amount over that period? 

Mr. FOSTER. That is correct. 

Chairman CAMP. Thank you. Mr. Levin may inquire. 

Mr. LEVIN. Mr. Foster, welcome. And I think this may give us 

an opportunity for further reference to the facts. 

You answered the question of the chairman about benefits. The 

guaranteed benefits are different than the extra benefits under the 

Advantage programs; isn’t that true. 

Mr. FOSTER. Yes, sir, that is correct. 

Mr. LEVIN. See, there tends to be always confusion or an attempt to confuse. For example, there were references done earlier 

today, cuts in the payments. So let me just quickly review your testimony because I think it is important to get to the facts. On page 

3, you say that it is estimated that the number of uninsured persons in the U.S. would reduce it by 34 million. You don’t challenge 

that, do you? 

Mr. FOSTER. No, sir, that is our best estimate. 


ccoleman on DSK8P6SHH1PROD with HEARING
96 

Mr. LEVIN. Good. You then, going to page 5, say that expenditures are expected to increase by about 200 billion due to the substantial expansions of coverage under the Affordable Care Act. So 

if 34 more million are insured, it is likely the costs will go up overall, no? 

Mr. FOSTER. Yes, that is correct. 

Mr. LEVIN. So let me just go on to page 5, and you talk about 

the Medicare savings. There have been references here to cuts in 

Medicare payments. Isn’t it more accurate to say that these cuts 

will come from a reduction in the increase in Medicare payments? 

Mr. FOSTER. There are a lot of each. Certainly for the productivity adjustments that I mentioned, that is a slower growth in 

payment updates. If you think of the disproportionate share of hospital payments, that is a flat-out reduction in the level. So there 

are examples of each. 

Mr. LEVIN. So to simply talk about cuts, as has been done in 

many of the statements, including advertisements, whatever, about 

over $500 billion, half trillion in cuts in Medicare payments, much 

of that is in the reduction of the increase in Medicare payments; 

isn’t that correct? 

Mr. FOSTER. Yes. A significant part of it is in that form. 

Mr. LEVIN. Also, bending the curve; when we talk about bending the curve, we are talking about bending the curve in terms of 

the rate of increase in bending the curve in the rate of payments 

to providers, are we not? 

Mr. FOSTER. Bending the curve generally refers to slowing the 

overall rate of health care costs growth, not necessarily how it 

might be done. 

Mr. LEVIN. But it also, when we talk about bending the curve, 

there is an effort, it indicates an effort to try to bring down the cost 

of the payments to those who provide care, no? 

Mr. FOSTER. Well, clearly that is one way that the Affordable 

Care Act works to try to slow the growth of health care costs. 

Mr. LEVIN. And it really does try to do that, does it not? 

Mr. FOSTER. Yes, sir, primarily through the Medicare productivity adjustments. 

Mr. LEVIN. Now, I just want to finish by referring to that, because there is a statement to take. There is an indication, an effort 

often, to take somewhat qualified statements of yours and to indicate that essentially it is sure to happen. And I think that we need 

to look at your testimony, because you say on page 8, Although this 

policy could be monitored over time to avoid such outcome, changes 

would likely result in smaller actionable savings than described for 

these provisions. 

Essentially what you are doing is projecting. For example, you 

did as to the Advantage programs, and so far this year it has 

turned out your projections are wrong. Right? 

Mr. FOSTER. I would stop short of calling them wrong without 

appearing to be defensive. The real issue is 2011 is not much affected by the Affordable Care Act. 2012 through 2017, there will be 

big effects. There are factors unrelated to our estimate of the Affordable Care Act that have resulted in 2011 Medicare Advantage 

enrollment increasing by more than we thought it would. 

Chairman CAMP. All right, thank you. Mr. Herger is recognized. 


ccoleman on DSK8P6SHH1PROD with HEARING
97 

Mr. HERGER. Thank you, Mr. Chairman. 

Mr. Foster, the President and his administration have repeatedly 

said that we must pass their health care overhaul because controlling health care costs would help the economy. 

On June 2, 2009, the Council of Economic Advisers said, quote, 

we estimate that slowing the annual growth rate of health care 

costs by 1.5 percentage points would increase real growth domestic 

product relative to the no-reform baseline by over 2 percent in 

2020, closed quote. 

The President’s economic advisers also stated that slowing cost 

growth would lower the unemployment rate. The President’s economists also argue that slowing the growth rate of health care costs 

raises standards of living by freeing up resources that can be used 

to produce other desired goods and services, closed quote. 

Based on your analysis, will the Democrats’ health care law slow 

the rate of health care costs so we can get these outcomes like more 

growth and more jobs? 

Mr. FOSTER. Overall, the Affordable Care Act increases total 

health spending and it increases Federal spending on health care. 

There are some factors in there that would help slow the growth 

rate further out in the projection period. One of the largest of those 

factors is the one that I question the long-range viability of. 

Mr. HERGER. And Mr. Foster, in an auxiliary report to the 

Medicare Trustees 2010 Report, CMS actuaries predicted that 

under the new health care law by 2019, Medicare payment rates 

will be lower than current Medicaid rates. In your recent testimony 

before the House Budget Committee, you confirmed that the bestcase scenario under current law is that Medicare rates will be 

equal to Medicaid rates in 10 years. 

What impact would these rates have on beneficiaries’ access to 

care? 

Mr. FOSTER. If Medicare payment rates become lower than the 

current level for Medicaid, which in fact would happen over time 

under the Affordable Care Act, then it raises questions about the 

ability of beneficiaries to have access to care. Within the Medicaid 

program, as I am sure you know, there are a number of studies 

that suggest access has been something of a problem and getting 

worse. So you basically have to provide a reasonable payment rate 

for physicians and hospitals and anybody else in order to enable 

them to provide health care services to Medicare beneficiaries or 

anybody else. 

Mr. HERGER. That would be a major problem, wouldn’t it? I 

mean, we are already seeing a problem of doctors not taking new 

patients. And to think that that would be more dramatically affected, does that concern you? 

Mr. FOSTER. It concerns me primarily because I think this 

would tend to happen over time, and whether it is 10 years or 20 

years or somewhat longer is a little bit hard to say, but I believe 

it will happen. I believe you folks, Congress at large, would have 

to respond to it because it makes no sense to have a Medicare program where Medicare beneficiaries cannot get access to care. 

So I believe you would have to override the provisions and that 

would result in a higher cost than we now project under current 

law. That is my primary concern. 


ccoleman on DSK8P6SHH1PROD with HEARING
98 

Mr. HERGER. Thank you Mr. Foster. 

Chairman CAMP. All right. Mr. Rangel is recognized. 

Mr. RANGEL. Thank you, Mr. Chairman. And welcome back, 

Mr. Foster. 

I would want you to clarify your status as an independent analysis. I gather it is not your job to evaluate whether or not you 

think this program is good, bad, whether it is going to work or 

whether it is not going to work. But one thing you did say is that 

it would increase medical costs. And I wonder whether your job 

title and responsibility would say that while it would initially increase the amount of money the Federal Government is paying, 

that in terms of prevention and the fact that everyone will have access to health care, does it come within your protocol to determine 

whether or not in the long run medical costs would be reduced as 

a national expenditure? 

Mr. FOSTER. The which part of medical costs, sir. 

Mr. RANGEL. Overall medical costs. In other words, many of us 

lay people believe that if indeed people who now have no coverage, 

that we are paying for their very high emergency costs and we are 

paying for it through the Federal Government, we are paying for 

it with increased premiums, actually the Federal Government initially would be paying more money for health care. But would you 

evaluate what is preventing from happening that would also cost 

money? Is that a part of your responsibility? 

Mr. FOSTER. Yes, sir. You correctly stated that we don’t evaluate whether a proposed policy is a good idea or a bad idea. Our role 

is to help policymakers understand the technical aspects. Will 

something work the way they intend? Will something have a savings or a cost? And we try very hard to do that. Evaluating the policy implications, of course, that is your job and we don’t step on 

your toes in that regard. 

Now, in terms of your specific question, we do try to estimate the 

impact of the Affordable Care Act on total national health expenditures, taking all the factors you mentioned into account, either directly or implicitly. 

Mr. RANGEL. How long have you been doing this? 

Mr. FOSTER. Today it seems like quite a while, sir. 

Mr. RANGEL. I know the feeling. 

Mr. FOSTER. I don’t mean to be a wise guy. I have been working 

as an actuary for 38 years now, 16 years as chief actuary of CMS. 

Mr. RANGEL. And how many of those years have you advised 

the Federal Government? 

Mr. FOSTER. All of them. 

Mr. RANGEL. And I assume if indeed you deviated in terms of 

being political, you would never have survived all of these different 

administrations for 38 years? 

Mr. FOSTER. If anybody thought I was taking a political role or 

allowing political beliefs or preferences to affect my work and my 

office’s work, my own staff would be the first ones to throw me out 

of the office. 

Mr. RANGEL. And I think my recollection is correct that you 

have taken on quite a few administrations in terms of what they 

wanted and what your reports indicated. 


ccoleman on DSK8P6SHH1PROD with HEARING
99 

Mr. FOSTER. I would like to think that we have offered sound, 

objective, technical advice to many administrations, some of the 

time for which it was appreciated. 

Mr. RANGEL. Very wisely put. 

Could you evaluate what would happen in terms of health costs 

if indeed we were using a voucher system instead of the one that 

is outlined in this bill, and the health costs for the potential patient 

would be higher than the voucher? What would happen fiscally as 

relates to overall health costs? 

Mr. FOSTER. There is certainly a possibility that if the voucher 

payments don’t increase fast enough, people might have very limited insurance options, very low-value insurance, or perhaps no options at all. 

The hope, I believe, and I am sure Representative Ryan could explain this better, is that it would change the underlying nature of 

health care cost increases. That is a worthy goal for everybody. But 

it involves risks that if you try to do it through a voucher program 

or you try to do it through lower and lower relative payments 

under Medicare for providers, that either the vouchers are inadequate or the payments are inadequate, and you can’t buy what 

you would like to buy. That is the risk. 

Mr. RANGEL. So the risk would not be just the Treasury in 

terms of costs, but it would be the potential patient. I mean, I 

think also I would like to ask if they raise the age of Medicare in 

order to be eligible, what impact would that have fiscally? Well, 

you could—I would like to follow through on the chairman’s suggestion that we send you questions, and I appreciate your services to 

this committee and to our country. 

Chairman CAMP. Thank you. Mr. Johnson is recognized. 

Mr. JOHNSON. Thank you, Mr. Chairman. Thank you for being 

here, Mr. Foster. The health care law cuts Medicare payments to 

hospitals by more than $150 billion according to our estimates, and 

that estimate includes the impact of several provisions, the market 

basket reduction and the permanent loss of their annual productivity adjustment. 

MedPAC’s latest data estimates the inpatient hospitals will have 

Medicare margins of a negative 5 percent in 2009. And is it possible that some hospitals might be forced to cut back their staffs 

to survive the cuts and may be reducing the quality of care provided to seniors and other patients? 

Mr. FOSTER. That is a conceivable outcome. I would like to 

think that MedPAC and my office and others would continue to 

monitor the situation and advise you all, and if something like that 

happened, you would step in and say that we want to change the 

law to avoid that outcome. 

Mr. JOHNSON. Well, how would we change the law? We are cutting the amount that we are paying them, so what would you have 

to do, increase the pay? 

Mr. FOSTER. Basically yes, sir. If you passed a law that said I 

personally get paid, say, half of what I am getting paid now, I 

would probably quit. And if you came back and said, okay, we will 

pay you what you used to get, I would probably come back. 

Mr. JOHNSON. That is what is happening in our hospitals, at 

least in the Texas arena. You know nurses, docs, and practitioners 


ccoleman on DSK8P6SHH1PROD with HEARING
100 

are laying off. They have to pay salaries and rent, and those are 

still going up, as you know. They will be paid less than cost of 

goods. And do you think that is sustainable in the long term? 

Mr. FOSTER. It is possible if they can improve their productivity 

at much better rates than they ever have historically, which is perhaps not likely, or if they can get rid of the admittedly significant 

level of inefficiency that exists, if they can take other steps through 

innovations and joining in provider organizations, ACOs and so 

forth, then all of that is possible. Now, what I am afraid of is it 

may not be probable. 

Mr. JOHNSON. I agree with you totally, and thank you for your 

testimony. Mr. Chairman, I yield back. 

Chairman CAMP. Thank you. Mr. Brady is recognized. 

Mr. BRADY. Thank you, Chairman, and thank you, Mr. Foster, 

for joining us. I am concerned about the damage that will be done 

for our seniors as a result of this new health care law. 

Dr. Berwick wasn’t able to answer a number of my questions on 

the impact, so I went to your report to get the answers and I want 

to confirm them. I am concerned that many seniors that get prescription drug benefits under Medicare will have higher Part D 

costs because of the flawed way in which the doughnut hole is supposedly closed. 

On page 13 of your report, you say, ‘‘Providing additional coverage for prescription drugs dispensed in the coverage gap, the 

doughnut hole, will cause an increase in costs for the prescription 

drug plans and therefore an increase in the average Part D premium rate.’’ 

In plain English, are you saying that prescription Part D premiums will increase for seniors who are not in the doughnut hole? 

Mr. FOSTER. They would increase for all Part D enrollees who 

pay premiums. In other words—— 

Mr. BRADY. Including those who are not in the doughnut hole? 

Mr. FOSTER. Their premiums would increase, on average, not 

by very much. The amount is shown in the table on page 12. Now, 

for people who make it to the coverage gap, where the coverage 

gap—— 

Mr. BRADY. That I understand. I have some more questions. 

The second point you make on Medicare Advantage, the new provisions will reduce Medicare Advantage rebates to plans and thereby result in less generous benefit packages, an estimated $1,500 a 

year over time. In plain English, is that saying that seniors within 

Medicare Advantage will have less benefits under the new health 

care bill? 

Mr. FOSTER. Yes, sir. 

Mr. BRADY. On the same page, ‘‘The reduction in Medicare Advantage rebates will cause a large increase in the out-of-pocket 

costs incurred by Medicare Advantage enrollees, estimated $873 

more a year over time.’’ In plain English, does that mean seniors 

in Medicare Advantage will have to pay more as a result of this 

new health care law? 

Mr. FOSTER. If the Medicare Advantage plan benefit package, 

in other words the supplemental benefit package, stays the 

same—— 


ccoleman on DSK8P6SHH1PROD with HEARING
101 

Mr. BRADY. They will have to make up the difference out of 

their pocket. 

Mr. FOSTER. Enrollees will have to make up the difference. 

Mr. BRADY. That is my fear. 

Final point. There is concern that the way this new health care 

plan was structured, it punishes seniors who are getting their retirement plan through their business that they retire from, versus 

those perhaps of State, Federal Government workers. Removing 

the tax deductibility of their assistance for their medicines is going 

to have an impact. 

You say here, that you have, quote, the anticipated movement of 

many of the Medicare beneficiaries currently enrolled through the 

retiree drug subsidy program of Part D plans. 

Does that mean that you anticipate seniors who are currently 

getting medicine help through their retirement plan from their 

business will be either forced or will move to the Medicare plan, 

as a result of the cut in their health—under this health care plan. 

Mr. FOSTER. Yes, sir. As a result of the change in the tax status 

of the subsidy payments to employers. 

Mr. BRADY. They left in place that subsidy help in its entirety 

for those government workers on retirement plans. Do you anticipate government workers being forced off or leaving their plan for 

Medicare? 

Mr. FOSTER. I don’t have any idea. I think it is a somewhat different issue. 

Mr. BRADY. Well, it is the impact of removing the subsidy. 

When it was put in place they were equal. Workers in a government retirement plan and workers in a business plan were treated 

equally. That parity is now gone with removal of the tax deductibility that was done to make them whole. So at this point at least, 

you didn’t at least estimate that, unlike private sector workers, 

government workers will not be leaving their plan? 

Mr. FOSTER. No. Again, it is a little bit different, sir. For the 

retiree drug subsidy within Medicare, you had an employer who 

was paying the drug cost for drug insurance for his or her retired 

workers. The employer could deduct that full amount. 

Mr. BRADY. I know how it works. 

Mr. FOSTER. And the Medicare payment through the retiree 

drug subsidy to the employer was not counted as income and did 

not reduce the amount that the employer could deduct. 

Mr. BRADY. At some point we need to continue this discussion, 

because I think there is a direct correlation there. So thank you, 

Mr. Chairman. 

Ranking Member Levin. Thank you. The gentleman’s time has 

expired. 

Mr. STARK. is recognized. 

Mr. STARK. Thank you, Mr. Chairman. Thank you for having 

this hearing and welcome back, Mr. Foster. 

In Medicare Advantage, under the ACA, would Medicare benefits 

be reduced? 

Mr. FOSTER. The traditional Medicare benefit package would 

not be affected. The extra benefits that most plans offer would definitely be reduced over time. 


ccoleman on DSK8P6SHH1PROD with HEARING
102 

Mr. STARK. The ACA extends solvency by about 12 years, correct? 

Mr. FOSTER. Yes, sir, based on the 2010 trustee’s report baseline. 

Mr. STARK. And ACA lowers cost-sharing under Part B saving 

beneficiaries at the doctors’ offices; is that correct? 

Mr. FOSTER. Yes, sir, for fee-for-service beneficiaries. 

Mr. STARK. And it reduces out-of-pocket spending for prescription drugs, does it not? 

Mr. FOSTER. Yes, sir, by closing the coverage gap. 

Mr. STARK. And the ACA leaves Part B premiums which are 

presently made up of Social Security deductions the same; is that 

correct? 

Mr. FOSTER. It would actually for fee-for-service beneficiaries, 

actually all beneficiaries, it would lower the Part B premiums. 

Mr. STARK. And would repeal raise costs for beneficiaries and 

reduce solvency? 

Mr. FOSTER. It would essentially do the opposite of everything 

that the ACA did; in other words, putting it back where it had 

been. 

Mr. STARK. Can I go back just very quickly to the Medicare Advantage benefits? It has always been a concern of mine that the 

benefits offered in Medicare Advantage are far different from those 

that are actually used. In other words, a Medicare Advantage plan 

may offer trips to China and all kinds of things that the members 

of the Medicare Advantage plan would have no possible chance to 

use. Do you have any figures that relate to the benefits ‘‘offered,’’ 

and as opposed to those that are actually used? 

Mr. FOSTER. Directly, no. Indirectly, yes. In other words, when 

a plan submits a bid for Medicare Advantage, and they have to 

specify the per-member-per-month cost of the various supplemental 

coverages that they offer, they have to justify that cost based on 

the past experience of the cost for those provisions. 

Mr. STARK. How much they actually paid out? 

Mr. FOSTER. Yes. So you can’t have too much of a difference 

there without our challenging it and asking for a justification for 

the difference. 

Mr. STARK. So it would be difficult for those plans to offer spurious benefits that are just there in name only but aren’t really 

very attractive to the members; is that fair? 

Mr. FOSTER. I am sure it happens to some degree in some 

cases, the gym club memberships perhaps, that kind of thing. 

Mr. STARK. For me, they don’t do me much good. Thank you 

very much. 

Thank you, Mr. Chairman. 

Chairman CAMP. Thank you. Mr. Tiberi is recognized. 

Mr. TIBERI. Thank you, Mr. Chairman. Thank you for being 

here, sir. Medicare Advantage is voluntary; right, sir? 

Mr. FOSTER. Yes, sir. 

Mr. TIBERI. So you can sign up or you can drop off. 

Mr. FOSTER. That is right. 

Mr. TIBERI. Every senior I have talked to who is on Medicare 

Advantage said that they liked the Medicare Advantage plan they 


ccoleman on DSK8P6SHH1PROD with HEARING
103 

are on because it offers them a comprehensive health care package 

whereas Medicare fee-for-service does not. 

Do you know off the top of your head how many, what percentage of seniors who are on Medicare, traditional Medicare fee-forservice, are in another additional plan, whether it be Medicaid, 

Medigap, retiree coverage? 

Mr. FOSTER. It is a fairly high percentage. 

Mr. TIBERI. Like maybe 90? 

Mr. FOSTER. Probably not quite that high, but 75 perhaps. I 

could look those up for you. 

Mr. TIBERI. I would love that number. Thank you sir. 

[The information follows: Did not receive] 

Mr. TIBERI. So is it fair to say that under the current system, 

Medicare fee-for-service is not meeting the needs of most seniors 

because they are choosing other forms of coverage? 

Mr. FOSTER. I would put it it slightly differently. I would agree 

generally, but I would put it slightly differently. The Medicare benefit package, the fee-for-service package is not exceptionally generous. It has significant cost-sharing requirements and it doesn’t 

have catastrophic coverage protection. So most Medicare beneficiaries who are able to seek additional coverage, either through 

Medigap or they have it through their employer plans, or if you are 

low income you have it through Medicaid just in order to avoid the 

risk of financial catastrophe. 

Mr. TIBERI. And most Medicare Advantage beneficiaries do not 

seek that additional coverage, correct? 

Mr. FOSTER. Generally not. Many plans have catastrophic coverage but not all. 

Mr. TIBERI. So if you reduced the number of enrollees on Medicare Advantage and they go in Medicare fee-for-service, then they 

will have an additional out-of-pocket expense, potentially a new 

Medigap, that they would have to pay for. 

Mr. FOSTER. Typically. 

Mr. TIBERI. Do you know who the largest Medigap provider is 

in America? 

Mr. FOSTER. United Health Care. 

Mr. TIBERI. Is it affiliated with any other organization? 

Mr. FOSTER. Like AARP. 

Mr. TIBERI. Are they the largest? 

Mr. FOSTER. I don’t know. 

Mr. TIBERI. Could you get that information? Could CMS provide 

that? 

Mr. FOSTER. I could try to find out. 

[The information follows: Did not receive] 

Mr. TIBERI. So is it safe, then, to say that if you are in a position to gain market share, you would be opposed to the Medicare 

Advantage program to continue to exist if you were a provider of 

an additional product? 

Mr. FOSTER. I am sorry, I didn’t quite understand. 

Mr. TIBERI. If you were in the business of providing coverage 

for seniors and you are providing that holistic coverage as an addition to Medicare fee-for-service, the more Medicare fee-for-service 

beneficiaries there are, the better it is potentially for you to supplement your business by offering more coverage to supplement MedVerDate Mar 15 2010 00:37 Dec 21, 2011 Jkt 070871 PO 00000 Frm 00107 Fmt 6633 Sfmt 6602 I:\WAYS\OUT\70871.XXX GPO1 PsN: 70871

ccoleman on DSK8P6SHH1PROD with HEARING
104 

icaid fee-for-service. Meaning if there are fewer Medicare Advantage beneficiaries, they have to go back in the Medicare fee-forservice, so you would be potentially benefited. 

Mr. FOSTER. Yes, you would have a broader market opportunity. 

Mr. TIBERI. Because the odds are that if you are no longer on 

Medicare Advantage, you would need something other than just 

Medicare fee-for-service based upon what we already know, right? 

Mr. FOSTER. Yes, sir. 

Mr. TIBERI. So is it fair to say that what Mr. Ryan is trying to 

do, what he has been criticized for trying to do, doesn’t acknowledge the fact that most Medicare—most, the majority, you said 75 

percent, look forward to the number—but most Medicare fee-forservice individuals today don’t believe that they have enough coverage, therefore are either supplementing their coverage. So it is 

not fair because we are not, to be critical, we are not comparing 

apples to apples. Is that fair? 

Mr. FOSTER. Well, fee-for-service Medicare by itself is a basic 

package without catastrophic protection or some other features. 

Mr. TIBERI. And what Mr. Ryan is also providing is a basic 

package that is for the senior. 

Mr. FOSTER. That is correct. 

Mr. TIBERI. Thank you. I appreciate that. I yield back. 

Chairman CAMP. Thank you. Mr. Davis is recognized. 

Mr. DAVIS. Thank you, Mr. Chairman. 

Mr. Foster, I appreciate the work that you have done to try to 

make sense of the health care law and the impact it will have on 

seniors’ coverage under Medicare. You do an important job. I thank 

you for your service. Surviving 38 years in the mosh pit of politics 

is a credit to a Job-like stability of mind to be able to keep focus. 

Mr. FOSTER. Or limited mental faculties. 

Mr. DAVIS. I think that is over in the United States Senate, 

probably, where we would find that. 

But earlier this morning, many of us would asked Dr. Berwick 

his thoughts about the numbers that your office has put out. I 

come from an operations and planning background where the 

metrics are everything and the assumptions behind the metrics are 

really how you can formulate effective policy decisions, make business decisions, and have some adequate degree of predictability 

about the way trends are going. 

I understand that there is no actuarial formula that is is perfect, 

unless you had the ability to see into the future. And I am sure 

you would not be working here if that were the case. You would 

have clients in other places. But the projections are hypothetical, 

but they are very critical to understand how these assumptions 

would play out for policy. 

And I think that I felt rather uncomfortable this morning asking 

specific questions that are based on data and not getting an answer. 

But I was wondering, technically speaking, if you can take a moment to explain for us the role of your office and how you do what 

you do. If you could give us kind of a sound-bite version of that, 

outside of it being perceived by many non-numerically-oriented 

folks as kind of a black art to come up with things that can get 


ccoleman on DSK8P6SHH1PROD with HEARING
105 

batted around. I would like to hear your perspective on how you 

come to your conclusions. 

Mr. FOSTER. Sure. There are many techniques for estimation, 

cost projection, that actuaries use both in government and in the 

private sector. The better the data, the better job we can do. It is 

hard, of course, when you have something new, not tried before, 

where it is hard to predict people’s behavioral response, people, employers, whatever. 

We have a staff of about 90 percent people in the Office of the 

Actuary at CMS. They are all sharp, above average, handsome and 

beautiful respectively, and they work very hard to try to estimate 

the financial and other impacts of any proposal that is asked of us. 

Mr. DAVIS. Well, following on that, the nonpartisan Congressional Budget Office has made clear that Medicare savings as a result of the health care law can’t be counted twice; first, to shore 

up solvency of the Medicare program while also paying for a new 

health care entitlement program. Further, your office’s April 22, 

2010, report on the effects of the Democrats’ health care law, and 

the Medicare Trust Fund pointed out—and I am quoting—In practice, the improved party financing cannot be simultaneously used 

to finance other Federal outlays, such as the coverage expansions 

under the PPACA, and to extend the trust fund, despite the appearance of this resolve from respective accounting conventions. 

I was wondering if you could tell us about this double-counting 

issue, maybe elaborate for us a little bit. 

Mr. FOSTER. I would be glad to. It is nothing new, but it is relevant and important. I will go back to the example that I used a 

bit ago, where suppose under the Affordable Care Act a given 

worker has to pay $100 higher hospital insurance payroll tax. So 

that hundred dollars, the true cash, the hundred dollars is sent to 

the Treasury. The Treasury credits the Hospital Insurance Trust 

Fund with $100 Treasury security, and then the money goes into 

the general fund, and from there it is spent pretty much immediately, whether it is to offset the cost of the coverage expansions 

under the Affordable Care Act or for SSI benefits or anything else. 

But the money is spent. 

Now, later on, a couple years down the road, we need our hundred dollars so we cash in our Treasury security, we get the $100 

back with some interest. Obviously, it is not the same $100. That 

money is already spent. We need to spend $100, so Treasury has 

to come up with $100, say, by borrowing that much to then give 

to us. So the original $100 can’t both spend $100 over here for coverage expansions and $100 over here for HI. On the other hand, 

because of the way the trust funds are set up, we do get the help 

when we need it in the future. I don’t know if that helps or not. 

Mr. DAVIS. That helps very much. I think a few of my colleagues’ assumptions on the other side of the aisle remind me of 

a production manager once who quipped they were losing money on 

every product, but they would make it up on volume. And we certainly want to avoid that. Thank you very much for your service. 

I yield back. 

Chairman CAMP. Thank you. 

Mr. MCDERMOTT. is recognized. 

Mr. MCDERMOTT. Thank you, Mr. Chairman. 


ccoleman on DSK8P6SHH1PROD with HEARING
106 

It is good to see you, Mr. Foster. We haven’t seen you for a while. 

You have been around as long as I have been here, so I have got 

to see you on a number of occasions and I liked what you said earlier: You like to know how it actually works. 

And as I look at Medicare, Medicare’s administrative cost is 3 

percent. That is the generally accepted figure. Do you accept that 

figure? 

Mr. FOSTER. The way it is normally calculated it is actually 

quite a bit lower. If you look at all the Federal and related administrative costs for Medicare, it represents about 1.3 percent of total 

expenditures. 

Mr. MCDERMOTT. 1.3 percent. 

Mr. FOSTER. Yes, sir. 

Mr. MCDERMOTT. Now, insurance companies’ administrative 

costs are estimated on average about 14 percent, sometimes as 

high as 40 in the individual market; is that correct? 

Mr. FOSTER. Yes, sir. That is in the ballpark, depending on the 

nature of the insurance. 

Mr. MCDERMOTT. So if Mr. Ryan and the Republicans succeed 

in moving to a voucher system—that is, we hand 5,700 or 6,300 or 

whatever amount to seniors every month—how will that administrative cost on the insurance companies, will that be an added cost 

on top of what they are getting already? I don’t understand where 

that administrative cost goes. 

Mr. FOSTER. Well, any insurance premium that you see, just 

about any will normally include amounts to cover the medical expenses and also the administrative costs and whatever profit margin is built in. So under Mr. Ryan’s plan, a voucher pavement 

would help a beneficiary purchase some level of coverage that 

would include the cost of administering the program. 

Mr. MCDERMOTT. And when you look at it from the two standpoints of the government and the senior citizen, the government 

cost would go down if we had a voucher system; is that correct? 

Mr. FOSTER. Yes, sir. 

Mr. MCDERMOTT. And what would happen to the costs to the 

senior citizen, above the voucher? Would that pay for their cost, do 

you think? 

Mr. FOSTER. It would depend on how the voucher amount is escalated each year. If it grows at a slower rate than health care 

costs—— 

Mr. MCDERMOTT. That is what Mr. Ryan is talking about, less 

than the medical inflation rate. 

Mr. FOSTER. In his original proposal, that is correct. I believe 

it is—the modified version with Dr. Alice Rivlin, it would grow at 

a faster rate. But if you assume that the voucher payment increases more slowly than health care costs, then over time people 

would initially have to buy less comprehensive coverage. Now, that 

might help them purchase health care more prudently because they 

have more of a direct financial stake in it. 

Mr. MCDERMOTT. You mean as they are getting older, they 

would be buying less health care coverage. Is that what you are 

saying? 

Mr. FOSTER. Yes. Whether it is an individual who is getting 

older or a new person who comes along and qualifies for Medicare, 


ccoleman on DSK8P6SHH1PROD with HEARING
107 

they might buy a catastrophic coverage instead of more comprehensive one. What I am saying is that can feed back into how much 

they spend. 

Mr. MCDERMOTT. Does that make sense, that as you get older 

you need less health care coverage? 

Mr. FOSTER. No. Of course, obviously, as people age, they typically run into higher health care costs. The issue here would be, 

how is the voucher handled? Is it adjusted for age? Is it one 

amount for all, and the insurance companies have to provide guaranteed issue regardless of age. Those are details to be worked out. 

Mr. MCDERMOTT. So it would be—you would have to have 

some kind of regulatory system to make sure that insurance companies would sell a policy to an 85-year-old who had had several 

cancers. 

Mr. FOSTER. Yes, I think that would be required. 

Mr. MCDERMOTT. You couldn’t get away without regulation; 

you would need the Federal Government involved in it? 

Mr. FOSTER. I would tend to think so. In fact, I think Mr. 

Ryan’s plan has that sort of thing involved. But as I said before, 

it has been a couple of years since I looked at it. 

Mr. MCDERMOTT. Would his be called a government takeover 

of health care? 

Mr. FOSTER. You would probably have to ask him that question, 

sir. 

Mr. MCDERMOTT. Do you see any way that you can make the 

system that we put in last year in law better? 

Mr. FOSTER. Sure. 

Mr. MCDERMOTT. Give me a couple of suggestions. 

Mr. FOSTER. Okay. If you think about Medicaid for a minute, 

the expansion of Medicaid eligibility applies to people under 65. So 

picture somebody who is 63 or 64 and qualifies for the Medicaid 

coverage. They turn 65, and of course they qualify for Medicare, 

and they then would no longer qualify for Medicaid. So that is, I 

hate to use the word ‘‘notch’’ for reasons you all remember, but I 

think that would represent a notch in benefit coverage. So that is 

a limitation that I think will need to be addressed. 

Let me give you one other example, if I may—— 

Chairman CAMP. Your time has expired. If you want to complete 

that in writing that would certainly be welcome. 

Mr. MCDERMOTT. Thank you. 

[The information follows: Did not receive] 

Chairman LEVIN. Mr. Reichert is recognized. 

Mr. REICHERT. Thank you, Mr. Chairman. Welcome, and I am 

pleased to hear your answers to the questions that my colleague, 

Mr. McDermott, asked. I asked a similar question of the previous 

witness and didn’t get an answer as to what he might change or 

improve in the health care law, so thank you for those answers. 

I want to sort of stick to the theme that I was with earlier this 

morning, and that is if you like your health care plan you can keep 

it, and specifically for seniors. So as I understand the health care 

current law, there are substantial cuts to Medicare in the area of 

$200 billion. And according to your figures, by 2017 you are predicting that maybe 50 percent of the seniors who would otherwise 


ccoleman on DSK8P6SHH1PROD with HEARING
108 

enroll in Medicare will probably not enroll in Medicare. Is that an 

accurate statement? 

Mr. FOSTER. Yes, sir. We have estimated that about 50 percent 

of the people who would have been enrolled in Medicare Advantage 

plans would no longer be enrolled under the Affordable Care Act. 

A slightly better updated estimate is closer to 40 percent. 

Mr. REICHERT. So if that happens, would it be fair to assume 

that there could be a large reduction in enrollment; in this large 

reduction in enrollment, there could be fewer choices in plans offered? 

Mr. FOSTER. Yes. We have not modeled the number of plans 

that could be offered, but the private plans like to offer a certain 

kind of benefit package consistent with HMO’s or PPO practice. If 

they can no longer offer that package because of the reduced Medicare rebates that are payable, then they might choose to exit the 

market. 

Mr. REICHERT. So those seniors that are in those plans, because of the reduction of the choices that might be made available, 

would no longer be able to keep the health care plan that they like? 

Mr. FOSTER. I anticipate that is what will happen. 

I might add that that is not going to happen in 2011. It is going 

to happen gradually, between 2012 and 2017. 

Mr. REICHERT. So while your report doesn’t speak to the contraction of plans, can you give me your opinion on which plans 

would most likely survive in that sort of scenario? 

Mr. FOSTER. We anticipate that it would vary geographically. 

The payment rates will be directly tied to Medicare fee-for-service 

costs in the area in question. In some parts of the country, fee-forservice expenditures are very, very high. South Florida comes to 

mind, obviously. In areas like that, the Medicare Advantage plans 

can comfortably have a cost under the fee-for-service level and they 

should be able to continue and do pretty well. 

Mr. REICHERT. So would it be fair to say, too, that plans with 

a larger market share might be those that survive? 

Mr. FOSTER. I would have to think about that. They get an 

economy of scale, so that would probably help. But that is not the 

biggest factor, I don’t think. 

Mr. REICHERT. So what about the Medigap insurance? Would 

that be one of those you think that would still be around as plans 

are reduced through Medicare Advantage cuts? 

Mr. FOSTER. Yes. There is a distinction. The Medicare Advantage plans have different payment rules and they are governed by 

Medicare. The Medigap plans are overseen by the States, but that 

is a voluntary program that individuals decide to do on their own 

or not. It is unrelated to Medicare Advantage. 

Mr. REICHERT. But as Medicare Advantage plans go away, seniors are going to have to make a choice to go someplace, as Mr. 

Nunes said, or Mr. Tiberi said, they are going to have to go somewhere, and Medigap would be one of those. 

I just find it interesting that, I don’t know if you are aware or 

not, but Mr. Herger and I have been investigating AARP’s strong 

financial public support of this health care bill and their interest 

in the Medigap insurance plans. And as Medicare Advantage disVerDate Mar 15 2010 00:37 Dec 21, 2011 Jkt 070871 PO 00000 Frm 00112 Fmt 6633 Sfmt 6602 I:\WAYS\OUT\70871.XXX GPO1 PsN: 70871

ccoleman on DSK8P6SHH1PROD with HEARING
109 

appears, Medigap insurance, United, for example, stand to gain a 

lot in my opinion. Would you agree with that statement? 

Mr. FOSTER. Well, I think that if our projection ends up being 

correct, as I have every reason to expect, and something like 6 to 

7 million people, beneficiaries, leave Medicare Advantage plans, 

many of them, perhaps most of them, will want auxiliary coverage 

and Medigap will be the most straightforward way to get it. 

Mr. REICHERT. I yield back, Mr. Chairman. Thank you. 

Chairman CAMP. Thank you. Dr. Boustany is recognized. 

Mr. BOUSTANY. Thank you, Mr. Chairman. And, Mr. Foster, 

thank you for appearing before the committee today. 

Mr. Foster, it is my understanding that the insurance experts, 

many insurance experts outside of government, all conclude that 

the long-term care program in this law, the so-called CLASS act, 

is likely to suffer from severe adverse selection, and the program 

will primarily appeal to less healthy enrollees and this will drive 

up premiums. 

This month, a report by the Center for Retirement Research concluded that without adjustments, adverse selection will create a 

death spiral of rising premiums and declining participation. It 

noted that even with regulatory changes by the administration, 

premiums may never reach an affordable level for middle-class 

households. 

So, considering your prior warnings, written warnings to Congress in April of 2010, do you agree with the conclusion that 

CLASS, as structured by the new health law, is likely to suffer 

from severe adverse selection in a death spiral of unaffordable premiums? 

Mr. FOSTER. I certainly agree that, as written, the CLASS program would be subject to various severe adverse selection which 

could cause the so-called death spiral or assessment spiral. It may 

be possible administratively to adjust the program enough to make 

it viable, and I know people are working to that end. 

Mr. BOUSTANY. But if indeed these premiums were to go up, 

clearly folks that are on Medicare, who have looked for some way 

to provide for their long-term care needs, will suffer. Is that true? 

Mr. FOSTER. Well, the CLASS program I think was designed to 

try and meet two different sets of needs. One is as a form of Federal long-term care insurance for younger people, who over a long 

period would participate and then qualify for benefits—— 

Mr. BOUSTANY. Right. But the Medicare program today doesn’t 

cover long-term care so it is really targeted for that population. 

Prior planning, obviously. 

Mr. FOSTER. Well, the other thing it tried to accomplish was for 

people who were in not so good health or who are older, to give 

them an opportunity to acquire long-term care insurance. 

Mr. BOUSTANY. So you have real concerns about the solvency 

of this program as it is constructed today. 

Mr. FOSTER. Yes, sir, I do. 

Mr. BOUSTANY. Thank you. 

I want to change tracks now and just pursue a line of questioning I had with the previous witness with regard to physician 

shortages reimbursement linkage that is there. And in your testimony you describe unless providers could reduce their cost per 


ccoleman on DSK8P6SHH1PROD with HEARING
110 

service correspondingly through productivity improvements or 

other steps, they would eventually become unwilling or unable to 

treat Medicare beneficiaries, and that is because of declining reimbursements that are built into the system. Is that correct? 

Mr. FOSTER. Yes, sir, for affected providers like hospitals and 

skilled nursing facilities, et cetera. 

Mr. BOUSTANY. Right. So if that is the case, that is clearly 

going to hurt access for Medicare patients and most likely be very 

acute in rural areas where there is obviously less opportunities for 

these institutions in rural communities to make appropriate adjustments. 

Mr. FOSTER. Yes, sir. If over some period of time, the reimbursement rates become inadequate and you don’t do anything 

about it, then I think access would be a significant issue. 

Mr. BOUSTANY. And we heard some platitudes about innovations in reimbursement, but no specific detail. And further down in 

your testimony, you talk about some of these payment system reforms and delivery system reforms facilitated through the research 

programs that are described in the bill. But you say that these outcomes are far from certain, and many experts doubt the feasibility 

of such sustained improvements, and anticipate that over time 

Medicare price constraints would become unworkable and that 

Congress would likely override them, much as they have done to 

prevent reductions in physician payment rates, otherwise required 

by the sustainable 

Mr. BOUSTANY. So I take that to mean that Congress will 

make adjustments to prevent these kinds of draconian cuts which 

were built into the original assumptions on cost savings for the bill, 

and so we won’t achieve some of those cost savings and in fact we 

are perpetuating the same problem. Is that a fair statement? 

Mr. FOSTER. Yes. That is a reasonable summary of my concern. 

Mr. BOUSTANY. Thank you. And I sense that you don’t have a 

lot of confidence in these prospective delivery system and reimbursement reforms that are being talked about. I mean, we have 

created a bureaucratic entity, but we don’t really know what is 

going to materialize there. 

Mr. FOSTER. I have a lot of optimism, but it remains to be seen 

whether it can be fulfilled. 

Mr. BOUSTANY. Thank you. 

Thank you, Mr. Chairman. 

Mr. JOHNSON. Thank you. 

Mr. Lewis is recognized. 

Mr. LEWIS. Thank you very much, Mr. Johnson. 

I thank you, Dr. Foster—Mr. Foster. 

Mr. FOSTER. Mr. Foster. Dr. Foster is my father. 

Mr. LEWIS. Okay. Well, thank you, Mr. Foster, for being here. 

Thank you for your service for many, many years. 

Let me just ask you, Mr. Foster, is it true that for the first two 

decades all of the plan paid by 95 percent? 

Mr. FOSTER. Are you asking whether the Medicare Advantage 

plan started off being paid 95 percent of the traditional level of 

cost? 

Mr. LEWIS. Yes. 

Mr. FOSTER. Yes, sir, that is correct. 


ccoleman on DSK8P6SHH1PROD with HEARING
111 

Mr. LEWIS. Prior to health reform, did Medicare overpay Medicare Advantage plan? 

Mr. FOSTER. Subsequent to the Medicare Modernization Act, 

the benchmarks for payments to private plans and the payment 

levels were clearly such that for a given beneficiary Medicare tended to pay roughly 12 to 15 percent more than if that person had 

been in fee-for-service. 

Mr. LEWIS. What percentage of beneficiaries are enrolled in private plans? 

Mr. FOSTER. Currently, it is about 27 percent. 

Mr. LEWIS. Let me ask you another question: Do fee-for-service 

beneficiaries pay higher Part B premiums to cover these overpayments? 

Mr. FOSTER. Yes, sir. The fact that the Medicare Advantage enrollees to date have a higher per-person cost for Medicare, that 

higher cost feeds through to Part B and affects the Part B premium, which is paid by all Part B enrollees. Now that difference 

will shrink over time under the Affordable Care Act. 

Mr. LEWIS. Many of my colleagues keep asserting that benefits 

will be reduced, but I want to clarify that there will not be a reduction of Medicare benefits even for those in private plans. Is that 

right? Am I right? 

Mr. FOSTER. Not in this case, sir. For the people who are in the 

private plans, they will actually see an outright reduction in their 

total—— 

Mr. LEWIS. But will those in Medicare benefits? 

Mr. FOSTER. If you are referring to the traditional Medicare. 

Mr. LEWIS. No, the guaranteed benefits. 

Mr. FOSTER. Yes, there is no change in those, other than to expand them a little bit. 

Mr. LEWIS. Thank you very much. 

Mr. JOHNSON. Thank you. 

Mr. Paulsen, do you wish to question? 

Mr. PAULSEN. Thank you, Mr. Chairman. I would like to ask 

maybe one or two questions. Thank you, Mr. Foster. 

I was just going to ask your perspective. The health care law includes now multiple potential Medicare payment reductions for all 

health care providers, and in addition there will be significant pressure and requirements to improve quality outcomes at the same or 

reduced costs. So layering on top of that now we have this new 

medical device tax in the new law that will make the tools these 

providers need to achieve their quality outcomes much more expensive because that tax is likely to begin to be passed on to health 

care providers and consumers as well. Do you see how the medical 

device tax is in conflict or direct conflict with the goals to improve 

patient care and reduce costs within our health care system? 

Mr. FOSTER. The tax on the medical devices, I agree with your 

assessment that that tax is likely to be passed on through a higher 

price for the devices, which would, other things being equal, raise 

health care expenditures. 

Mr. PAULSEN. Thank you, Mr. Chairman. 

I will have one other question. 

I think one of the elements of the accountable care organization 

oversight model that is included as a part of this shared savings, 


ccoleman on DSK8P6SHH1PROD with HEARING
112 

this means if an ACO, as its known, succeeds in reducing costs by 

a certain amount and also meets selected quality measures, the 

hospitals and the physicians that are in the ACO will each receive 

a share of the savings that were generated. So this type of arrangement in which providers essentially have a financial interest to reduce care has been part of the several gain-sharing demonstration 

programs that are currently under way. 

Independent monitoring of each ACO or shared savings program 

site must be an essential part of the ACO program to ensure that 

these financial incentives are appropriate and do not induce providers to limit a patient’s treatment options and negatively affect 

quality of care. Can you comment regarding independent monitoring of ACOs, just independent monitoring of these accountable 

care organizations? 

Mr. FOSTER. Well, I think what I would say is, obviously, you 

do have to monitor the quality that is part of the program, that you 

don’t want providers to stint on care or avoid services that are really necessary. If they can avoid unnecessary services, that is great 

for everybody, but you do have to make sure, because of the financial incentive, that it doesn’t go too far. 

Mr. PAULSEN. Thank you, Mr. Foster. 

Mr. Chairman, I yield back. 

Mr. JOHNSON. Thank you. 

Mr. Berg, do you care to question? 

Mr. BERG. Mr. Foster, your office authorized an appendix to the 

Medicare Trustees 2010 report in which you question the Trustees’ 

projections that Medicare party solvency would be extended. And 

you stated that their estimates do not represent the best estimate 

of actual future Medicare expenditures. I understand your office 

does not typically issue an ancillary report to the annual Medicare 

Trustee’s Report giving an alternative projection. What were the 

key concerns that you had with the Trustees’ report that compelled 

you to issue this ancillary report? 

Mr. FOSTER. Well, there are two factors there, sir. One is, by 

law, I am required to certify that the assumptions and methods 

used in the Trustees’ report are reasonable. In my comment in that 

certification I said that the current law projection is probably not 

a reasonable projection, given that the current law itself may not 

be viable, some of the provisions may not be viable. 

Now, in addition to that, we issued an auxiliary memorandum 

with the illustrative alternative projection that showed, under a 

different version of the law, if the parts that we worried about the 

viability—the physician payments and the productivity adjustments—if those are assumed to go away, to be overridden, then 

what would the cost look like? 

Now we had done that in the past just for the physician SGR 

issue, and the Trustees have asked us to do this. So I wouldn’t say 

I am at major odds with the Trustees in any respect. We all recognize the concerns and want to make sure the public understands 

and you understand the concerns. 

Mr. BERG. One additional question. As you know, the health 

care law cuts Medicare Advantage by $206 billion, according to the 

CBO. Can you elaborate on how these cuts will impact enrollee 

benefits and premiums and plan availability? 


ccoleman on DSK8P6SHH1PROD with HEARING
113 

Mr. FOSTER. Under the current law, if a plan’s cost is lower 

than the so-called ‘‘benchmark’’ level, then the difference, a portion 

of the difference—and to date it has been 75 percent—it is paid to 

the plans in the form of a rebate. They have to use the rebate 

amounts to either reduce cautionary requirements or add extra 

benefits, like dental or vision coverage, or reduce Part B or Part 

D premiums. 

Now under the Affordable Care Act, the benchmarks will be reduced significantly and the percentage, what used to be 75 of this 

difference, benchmark versus bid, that will be reduced to 50 percent, although it can be increased for quality bonuses. But the bottom line is the rebate amounts are going to be reduced substantially. And in the written testimony, we estimate about $1,500 on 

average by 2019. So that will cut back to the tune of $1,500 the 

extra benefits that can be offered. 

Now the MA beneficiaries will also benefit from the fee-for-service effects. They will have to pay a lower Part B premium and 

other changes. So they gain from that but not as much as they lose 

from the lower benchmarks. 

Mr. BERG. Thank you. I will yield back my time. 

Mr. JOHNSON. Thank you. 

Mr. Levin, Do you have one more comment? 

Mr. LEVIN. Well, just as a follow up to that last question about 

Medicare Advantage programs. 

Mr. Foster, I think if your testimony is taken as a whole and not 

taken apart just for some advantage, talking about Medicare Advantage, it is clear that essentially a lot of Medicare beneficiaries 

were subsidizing extra benefits for others and that subsidization 

essentially led to an advantage for Medicare Advantage plans. Now 

that advantage is being reduced and, as a result, a large number, 

the larger percentage of people covered by Medicare won’t be subsidizing advantages for others. 

As that advantage is reduced, I think you would agree that there 

are other ways for carriers to make up the difference. They can become more efficient, no? The insurance carrier can become more efficient? 

Mr. FOSTER. Yes, sir, there is potential for that. 

Mr. LEVIN. Indeed, I think there is a recent report from one of 

them that have reduced premiums because of the more efficient 

way that care is being delivered. And one can very readily argue 

that the reduction in that subsidy will lead to more carefully and 

effectively delivered health care. 

Mr. FOSTER. At the margin, I think you are probably correct. 

In the big picture, I don’t think that is enough to counteract the 

changes of the benchmarks. 

Now I might add, because I don’t want anybody to misunderstand me, I have no position on the policy issue of whether it 

makes sense or does not make sense for one group of Medicare 

beneficiaries to get an advantage and another group not to get it. 

That is a policy issue. That has been the case for the Medicare Advantage enrollees, benefit from the nature or the design of the formula for payment. That has been very valuable and has been very 

popular. To the extent that the Affordable Care Act removes most 

of that advantage, is that good policy? That is for you all to decide. 


ccoleman on DSK8P6SHH1PROD with HEARING
114 

Mr. LEVIN. I think you described it accurately. A lot paid for an 

advantage for a minority, and we are now reducing that advantage. 

Hopefully, reducing a subsidy paid for by the majority can lead to 

more effective delivery of care. 

Thank you very much. 

Mr. JOHNSON. Thank you, Mr. Levin. 

And I want to thank you, Mr. Foster. I appreciate your lengthy 

stay with us this morning, and I would ask that if any members 

want to submit questions that you be allowed to provide written responses for the record, if you would. 

With that, this hearing is adjourned. 

[Whereupon, at 2:15 p.m., the committee was adjourned.] 


ccoleman on DSK8P6SHH1PROD with HEARING
(115) 

[Submissions for the Record follow:] 

Prepared Statement of Mr. RANGEL 

Bad Rap? Health Care Law Blamed for Sale of Catholic Hospitals 

October 18, 2010 

by Lori Robertson 

Republicans are claiming the new health care law is a ‘‘main reason’’ for the sale 

of three Catholic hospitals in Pennsylvania. And a conservative Catholic group is 

running a radio ad saying it is ‘‘the’’ reason. But the hospitals’ CEO says his words 

are being twisted and the new law isn’t the ‘‘precipitating factor’’ behind the sale. 

The hospital group says in a news release that ‘‘[t]he rationale for our initiative 

has been mischaracterized by certain politicized media outlets and severely distorted by some special interest groups.’’ Here’s what that refers to: 

• A press release from the Republican staff of the House Ways and Means Committee claims: ‘‘Three Catholic hospitals in Pennsylvania have been put up for 

sale, with ObamaCare cited as a main reason for the decision.’’ • And a radio ad from a group called CatholicVote.org says the hospitals ‘‘are 

calling it quits. . . . The reason? Obamacare.’’ The ad calls for the defeat of 

Democratic Reps. Paul Kanjorski and Chris Carney—both of whom are Catholic and voted for the health care law. 

The origin of these claims is an interview given to a local television station by 

Kevin Cook, CEO of Mercy Health Partners in Scranton, Pa., regarding the decision 

to sell three hospitals. Cook told WNEP–TV in an October 6 segment that the three 

hospitals in the Scranton area were ‘‘doing well’’ and were ‘‘ahead of budget for the 

year.’’ But, he said, ‘‘it’s more a decision when we look out over the landscape of 

health care over the next five years . . . we understand that a different level of investment may be required than what we can facilitate on our own.’’ The reporter 

then says that ‘‘much of that required investment’’ was a result of the new health 

care law. Cook is shown saying: ‘‘Health care reform is absolutely playing a role. 

But was it the precipitating factor in this decision? No. But was it a factor in our 

planning over the next five years? Absolutely.’’ 

Those sound bites quickly evolved as the story was picked up by blogs and the 

conservative press, and by the GOP, which issued its release two days later, on Oct. 

8. That same day, however, the Catholic Health Association issued a statement calling the reports ‘‘alarmist’’ and ‘‘false.’’ 

CHA President Carol Keehan, Oct. 8: Reports that health reform is the primary 

motive behind the sale are completely false, misleading and politically motivated. 

Deliberations to sell the facilities began well before the Affordable Care Act became 

law and did not hinge on enactment of the legislation. 

Here it should be noted that Sister Keehan is a Roman Catholic nun with long 

experience running Catholic hospitals and with Medicare regulations, but she also 

advocated strongly for passage of the new health care law. President Obama awarded her one of the 21 pens he used at the signing ceremony. So she’s not a neutral 

source. On the same day, however, Cook himself posted a similar disclaimer on the hospitals’ website: 

Mercy Health Partners’ CEO Cook, Oct. 8: The rationale for our initiative has 

been mischaracterized by certain politicized media outlets and severely distorted by 

some special interest groups. 

Discussions about mergers, acquisitions and strategic partnerships have been conducted in our health care community for years–long before the passage of the Affordable Care Act. Our decision announced last week was due to many factors. 

None of this stopped CatholicVote.org from airing its radio ad, which it first posted to its YouTube site on Oct. 11. The ad targets Democratic Reps. Kanjorski and 

Carney, both of whom are in toss-up races, according to the Cook Political Report. 

The group, a 501(c)(4) advocacy organization, is running the ad primarily on talk 

radio. It says: ‘‘Mercy Hospital CEO Kevin Cook said that President Obama’s health 

care law is absolutely playing a role in their decision to close their doors. Paul KanVerDate Mar 15 2010 00:37 Dec 21, 2011 Jkt 070871 PO 00000 Frm 00119 Fmt 6604 Sfmt 6621 I:\WAYS\OUT\70871.XXX GPO1 PsN: 70871

ccoleman on DSK8P6SHH1PROD with HEARING
116 

jorski and Chris Carney are both Catholic and each claim to represent us in Washington.’’ The ad says both voted for the health care law and urges voters to ‘‘say 

goodbye to Paul Kanjorski and Chris Carney.’’ 

The following day, Mercy’s CEO went back on the air, saying in another TV interview that his words were being twisted. In the follow-up story, a WNEP reporter 

says that Cook ‘‘claims opponents of health care reform are twisting his words out 

of context’’ and that ‘‘Cook says health care reform is a small factor, but a factor, 

because its cost and impact is unclear.’’ Cook himself stresses that the hospitals are 

‘‘not closing,’’ as the radio ad claims. And Cook says it’s ‘‘disappointing that a decision that we made that was in the best interest of this community has been politicized in the way it has.’’ 

In fact, the hospitals’ original Oct. 6 press release announcing the sale cited longterm issues, and didn’t mention the new law: ‘‘For more than two decades area hospitals have endured lower than average reimbursements for care and a static population base. This has, at times, resulted in empty hospital beds and the duplication 

of services.’’ An editorial in the Scranton Times Tribune echoed that assessment, 

saying: ‘‘Just about everyone in the regional health care industry has known for 

some time that Scranton no longer can sustain three independent full-service community hospitals. Mercy and Moses Taylor hospitals and Community Medical Center all have considered sales or mergers while vigorously shedding services and 

staff.’’ 

Even in Cook’s initial TV interview, he said the law wasn’t ‘‘the precipitating factor.’’ So how does CatholicVote.org justify its claim that ‘‘the’’ reason to ‘‘close’’ the 

hospitals is ‘‘Obamacare’’? We asked the group’s president, Brian Burch. He said 

that how big a role the law played could be debated, but ‘‘the fact of the matter 

is, it was a factor.’’ He says the ad uses Cook’s exact words, saying the law is ‘‘absolutely playing a role.’’ As for the CEO’s subsequent statements, Burch said: ‘‘I think 

he’s trying to backtrack on his statement.’’ 

Gladys Bernet, a spokeswoman for Mercy Health Partners, told us that Cook 

didn’t bring up the health care law as a factor in the original TV interview, but he 

was responding to the reporter’s question. She says the ‘‘mistake’’ was that his ‘‘response was too nuanced.’’ If you listen to his comments carefully, she says, Cook 

says that the health care law was a factor in long-term planning. But, ‘‘was it the 

precipitating factor in this particular decision? No.’’ Says Bernet: ‘‘That’s a very 

nuanced answer.’’ 

Nuance, however, rarely makes it into political messages. 

Correction, Oct. 18: We originally wrote that Sister Keehan was present at the 

White House signing ceremony for the health care law. That’s incorrect. She was 

traveling and could not attend the ceremony, according to the Catholic Health Association. 

f 

Families USA, Statement 

Families USA is a national nonprofit, nonpartisan organization for health care 

consumers. Our mission is to ensure that all Americans have access to high-quality, 

affordable health care. Families USA has a strong interest in the protection of Medicare beneficiaries. We submit these comments to the House Committee on Ways and 

Means with regard to the Hearing on the Health Care Law’s Impact on the Medicare Program and Its Beneficiaries. 

For more than a year, opponents of the Patient Protection and Affordable Care 

Act (Affordable Care Act) have erroneously charged that health reform was enacted 

at the expense of Medicare and its beneficiaries. This is simply not true. Medicare’s 

benefits are improved under the Affordable Care Act. And although Medicare’s future spending is lower under the health law than it was projected to be prior to enactment, this reduction is not the result of across-the-board reductions in payments 

or from reductions in benefits. The savings come from making Medicare work better 

by improving the way health care providers deliver care; modernizing how Medicare 

pays for services; and eliminating waste, fraud, and abuse. 

Improving Medicare Benefits 

Closing the Doughnut Hole 

When the Medicare Part D prescription drug program was created in 2003, it included a gap in coverage known as the doughnut hole. When in the coverage gap, 

a beneficiary had to pay 100 percent of the cost of the prescription drugs purchased. 


ccoleman on DSK8P6SHH1PROD with HEARING
117 

1 Centers for Medicare and Medicaid Services, Affordable Care Act Update: Implementing 

Medicare Cost Savings, (Washington: August 2010), available online at http://www.cms.gov/ 

apps/docs/ACA-Update-Implementing-Medicare-Costs-Savings.pdf. 2Kaiser Family Foundation, Medicare Spending and Financing Fact Sheet (Washington: August 2010), available online at http://www.kff.org/Medicare/upload/7305-05.pdf. 

In 2010, the coverage gap began once the beneficiary paid $2,830 for prescription 

drugs and ended once prescription drug costs reached $6,440. This meant that a 

beneficiary with significant prescription drug needs was responsible for $3,610 in 

out-of-pocket costs before catastrophic coverage started. 

The Affordable Care Act closes that gap, saving beneficiaries money and improving access to needed medications. In 2010, any beneficiary who fell into the coverage 

gap received $250 to help defray the cost of medications. In 2011, once a beneficiary 

spends $2,840, he or she reaches the doughnut hole. However, beneficiaries will no 

longer pay 100 percent of the cost of drugs. Now, beneficiaries will pay 50 percent 

of the cost of brand-name prescription drugs and 93 percent of the cost for generic 

drugs. Each year until 2020, the discount provided will increase, until the coverage 

gap is closed. 

Improving Access to Preventive Services 

Prior to the Affordable Care Act, Medicare beneficiaries were liable for deductibles 

and co-insurance for some preventive services, even if those services were covered 

by Medicare. If Medicare did not cover the service, such as an annual physical 

exam, the beneficiary had to pay the full cost of the service. Since these costs could 

be unaffordable for Medicare beneficiaries, they may have foregone these services. 

The Affordable Care Act recognizes the importance of preventive health care, both 

in terms of how it can improve people’s health and in terms of the savings it can 

create for the health care system. That’s why, for the first time in the history of 

the Medicare Program, as of January 1, 2011, beneficiaries will no longer have to 

pay out of their own pockets for preventive services like cancer screenings or mammograms. Medicare will also be able to add coverage in the future for new preventive services that are found to be effective. 

The Act also gives beneficiaries the option to spend more time with their doctor 

at their annual physical (or wellness visit) to develop a personalized prevention plan 

together. These plans include information about the beneficiary’s current health status and a schedule for preventive services that the beneficiary should get over the 

next five to 10 years. These changes mark an important shift in Medicare’s approach toward helping beneficiaries stay well, rather than only treating them when 

they are sick. 

Moderating Premiums 

Most Medicare beneficiaries will see slower growth in their Medicare Part B premiums than they would have seen if the Affordable Care Act had not passed. By 

2018, Medicare Part B premiums for most beneficiaries are estimated to be $200 

less per year than they otherwise would have been. 

Improving Medicare’s Financial Outlook 

Technological advances in health care services have caused care to become more 

expensive, and as a result, Medicare spending continues to increase. To ensure the 

sustainability of the program, it is necessary to make changes that improve and 

modernize the way services are paid for. In 2009, the Medicare trustees estimated 

that the Medicare trust fund would be insolvent by 2017, meaning that, after that 

date, the trust fund wouldn’t have sufficient money to cover all of Medicare’s estimated costs. In order to extend the life of the trust fund and to improve benefits 

for people with Medicare, the Affordable Care Act makes carefully targeted changes 

to the program to achieve $418 billion in savings between now and 2019.1 These 

changes extend the life of the Medicare trust fund by 12 years to 2029. 

While $418 billion over 10 years is a considerable spending reduction, it is important to understand that the savings are only a small amount compared to the total 

spending that will occur in the program over the same period of time. Over the next 

10 years, Medicare will still spend about $6.7 trillion (down from a projected $7.1 

trillion before the law was passed).2 While the annual growth in spending will decrease from 6.8 percent to 5.5 percent, the program’s spending will still grow by 

more than 5 percent per year over the next 10 years. In other words, the Medicare 

Program will spend more in 10 years than it does now (the rate of growth will just 


ccoleman on DSK8P6SHH1PROD with HEARING
118 

3 Jennifer O’Sullivan, Medicare: History of Part A Trust Fund Insolvency Projections (Washington: Congressional Research Service, March 28, 2008), available online at http:// 

aging.senate.gov/crs/Medicare14.pdf. 4Kaiser Family Foundation, Medicare Savings in Perspective: A Comparison of 2009 Health 

Reform Legislation and Other Laws in the Last 15 Years (Washington: December 2009), available online at http://www.kff.org/healthreform/upload/7983-02.pdf. 

be slower), meaning that it will continue to be able to meet the needs of beneficiaries today and in the future. 

Historically, spending reductions are not unusual, and compared to other legislation, the reductions in the Affordable Care Act are modest.3 For example, in 1997, 

faced with a forecast that the Medicare trust fund would become insolvent by 2001, 

Congress enacted substantial changes to the Medicare Program, which were estimated to reduce future Medicare spending by 12 percent over 10 years.4 By contrast, the Affordable Care Act is projected to reduce Medicare spending by about 5 

to 7 percent over 10 years. 

Achieving Cost Savings 

So how are these cost savings in Medicare achieved? The savings are achieved by 

giving health care providers incentives to work together to provide high-quality, efficient care and by eliminating waste, fraud, and abuse. These measures not only 

save money, but they also improve care for beneficiaries. 

Encouraging Coordination among Health Care Providers 

Under Medicare’s current fee-for-service payment system, health care providers 

are paid for each individual service they provide to a patient. This means that the 

more services they provide, the more money they are paid. This incentive to provide 

more care is a major contributor to increasing health care costs. The Affordable 

Care Act begins the process of moving away from the fee-for-service payment system 

and toward a value-based system, where health care providers are paid based on 

the value of the care they provide. 

All providers can lower costs and improve the quality of care, thereby improving 

the value of that care, by working together to coordinate patient care. One of the 

new payment mechanisms created by the Affordable Care Act allows doctors, hospitals, and other health care providers to join together to form accountable care organizations (ACOs). Providers in an accountable care organization will take responsibility for the cost and quality of the health care delivered. If the accountable care 

organization delivers high-quality care at lower costs, the providers in the accountable care organization can share in the savings they generate. For example, by 

working together, health care providers can avoid duplicating tests and can monitor 

a patient’s prescription drugs to make sure the patient is not taking medications 

that interact poorly, among other things. This new payment approach will create an 

estimated $5 billion in savings for the Medicare Program. Just as importantly, it 

will improve the quality of the care that beneficiaries receive and lay the groundwork for more substantial savings and improvements in the future. 

Eliminating Waste, Fraud, and Abuse 

The Affordable Care Act takes significant steps to protect Medicare by cracking 

down on waste, fraud, and abuse. The law provides relevant agencies with an additional $350 million over the next decade to hire more investigative personnel to aggressively monitor and prevent waste, fraud, and abuse in the system. 

The health reform law will require Medicare providers to go through stricter 

screenings, such as background checks and site visits, to ensure that fraudsters, 

such as a doctor who bills for services he or she never provided, never enter the 

program to begin with. In addition, the Affordable Care Act imposes harsher fines 

and penalties on Medicare participants who submit false information on applications 

and claims. With stronger penalties, ‘‘bad actors’’ should be deterred from committing fraud and abusing the system. 

The nonpartisan Congressional Budget Office (CBO) estimates that every $1 that 

is invested to fight fraud results in $1.75 in savings. The provisions in the law to 

fight waste, fraud, and abuse are expected to save the Medicare program about $5 

billion over the next 10 years. 


ccoleman on DSK8P6SHH1PROD with HEARING
119 

5The Medicare Payment Advisory Commission (MedPAC), in its 2007 report to Congress, estimated that about 18 percent of patients were readmitted to the hospital within 30 days of being 

discharged, and of that, about 13 percent were potentially avoidable. MedPAC estimated the 

cost to Medicare for potentially avoidable readmissions within 30 days of discharge was $12 billion. Available online at http://www.medpac.gov/chapters/Jun07_Ch05.pdf. 6 Ceci Connolly and Michael Shear, Hospitals Reach Deal with Administration, The Washington Post, July 7, 2009, available online at http://www.washingtonpost.com/wp-dyn/content/ 

article/2009/07/06/AR2009070604053.html. 

Paying for High-Quality Care 

Among the ways that the health reform law begins to rein in unnecessary spending while also improving the care beneficiaries receive is by encouraging hospitals 

to prevent avoidable readmissions and hospital-acquired conditions. Once these 

changes are fully implemented, they will save the Medicare Program more than $11 

billion. 

Sometimes it is necessary for a patient to be readmitted to the hospital shortly 

after being discharged—for example, if the patient must have multiple surgeries to 

treat his or her condition. But sometimes, a patient must be readmitted for a reason 

that could have been avoided, such as complications from not taking medication 

properly because no one explained how the medication would need to be taken.5

Hospitals can decrease the number of avoidable readmissions by providing better 

care when the patient is in the hospital and by improving communication with patients (and their care givers) and other health care providers who care for the patient. That way, patients know how to care for themselves when they leave the hospital and their doctors know, for example, what tests were performed while the patient was in the hospital and the medications the patient is taking. 

Beginning in 2013, hospitals that have high rates of readmissions for certain 

health conditions will see their Medicare payment rates reduced. To avoid a reduction in their payments, hospitals will need to implement programs to improve the 

quality of care that patients receive while in the hospital and ensure that patients, 

care givers, and health care providers receive proper information when patients are 

discharged from the hospital. 

The Affordable Care Act also builds on existing efforts to improve care and save 

money when patients are still in the hospital. Since October 2008, Medicare has imposed a financial penalty on hospitals each time a patient experiences certain hospital-acquired conditions, such as an injury from falling, bedsores, or an object being 

left in a patient during surgery. The Affordable Care Act takes this a step further. 

Starting in 2014, each hospital’s record for hospital-acquired conditions will be posted online publicly at www.hospitalcompare.hhs.gov. In addition, if a hospital has a 

high rate of certain hospital-acquired conditions, its total Medicare payment will be 

reduced by 1 percent. 

Modernizing Medicare’s Payment System 

The majority of Medicare savings under the Affordable Care Act come from altering the way hospitals, nursing homes, and other health care facilities are paid. Traditionally, Medicare increases payments to hospitals and other health care facilities 

each year using a complicated formula. Each hospital gets this increase regardless 

of whether it is providing good-quality, efficient care. The health reform law changes 

this. 

The Affordable Care Act reduces these annual adjustments over the next 10 years. 

The purpose of this change is to encourage hospitals and other health care facilities 

to improve their productivity through increased efficiency. Each year, other industries increase their productivity by improving their efficiency so that they provide 

more for less, which lowers costs for consumers. The health reform law applies this 

same principle to the health care industry, which will save the Medicare Program 

$205 billion over 10 years. 

Some people have questioned whether hospitals will be able to continue to operate 

after these payment reductions take effect. But the hospital industry agreed to these 

payment reductions, acknowledging that they will gain from the millions of newly 

insured people and that savings can be achieved through improved efficiencies, such 

as preventing duplications of tests by using electronic health records to monitor the 

care that a patient has already received.6 Also, hospitals will be able to avoid some 

of the payment reductions by providing high-quality care. Beginning in 2012, hospitals that meet certain performance levels will receive higher Medicare payments. 


ccoleman on DSK8P6SHH1PROD with HEARING
120 

7Marsha Gold, Gretchen Jacobson, Anthony Damico, and Tricia Neuman, Medicare Advantage 

2011 Data Spotlight: Plan Availability and Premiums (Washington: Kaiser Family Foundation, 

October 2010), available at http://www.kff.org/Medicare/upload/8117.pdf. 8 Centers for Medicare and Medicaid Services, Medicare Advantage Premiums Fall, Enrollment Rises, Benefits Similar Compared to 2010 (Washington: September!, 10), Aavailable 

online at http://www.cms.gov/apps/media/press/release.asp?Counter=3839&intNumPerPage= 

10&checkDate=&checkKey=&srchType=1&numDays=3500&srchOpt= 

0&srchData=&keywordType=All&chkNewsType=1%2C+- 

2%2C+3%2C+4%2C+5&intPage=&showAll=&pYear=&year 

=&desc=&cboOrder=date. 9 Humana Inc. President and chief executive officer Michael B. McCallister ‘‘told industry analysts during a conference call to discuss quarterly earnings that Medicare Advantage remains 

a tremendous opportunity and acknowledged that he’s been surprised that more competitors 

haven’t ventured into the market.’’ ‘‘On the Call: Humana CEO Michael McCallister,’’ Associated 

Press/BloombergBusinessWeek, August 2, 2010, available online at http:// 

www.businessweek.com/ap/financialnews/D9HBFU5G0.htm. 

Leveling the Playing Field between Original Medicare and Medicare Advantage 

In recent years, overpayments to Medicare Advantage plans have been identified 

as a substantial source of waste within the Medicare system. These plans were established in the eighties with the expectation that they would lower Medicare costs 

by providing coverage more efficiently. Instead, Medicare Advantage plans have 

been paid an average of 14 percent more than it would have cost to treat the same 

beneficiaries in original Medicare. In 2009, that was equal to about $1,138 per beneficiary, for a total of $11.4 billion in overpayments. As a result of this increased cost, 

Medicare Part B premiums are about $3.00 more per month than they otherwise 

would be for all Medicare beneficiaries, not just those in these private plans. While 

these overpayments generated considerable profits for the private insurance companies, they did not benefit the Medicare trust fund. Instead, they moved up the insolvency of the trust fund by 18 months. 

In 2011, under the Affordable Care Act, payment rates for Medicare Advantage 

plans are frozen at 2010 levels. Despite this freeze in payments, analysis of the 

Medicare Advantage market for 2011 shows that Medicare beneficiaries were able 

to choose among, on average, 24 Medicare Advantage plans by county. Premiums 

remained essentially stable from 2010 to 2011, which is a significant difference from 

2009 to 2010, when premiums increased by 22 percent.7 In addition, estimates show 

that Medicare Advantage will experience a 5 percent increase in enrollment in 

2011.8 Beginning in 2012, rates will be reduced over a 3- to 7-year period so that 

costs are closer to those of original Medicare. High-quality plans will receive bonus 

payments of 5 to 10 percent. These changes will save the Medicare Program $145 

billion. 

Opponents of health reform claimed that these changes would result in beneficiaries who are enrolled in Medicare Advantage plans losing their coverage. In 

fact, Medicare beneficiaries will not lose coverage for Medicare’s guaranteed benefits, which include hospital inpatient coverage and doctor visits, among other things. 

Each private plan will have to make a business decision about how it wants to operate under the new payment system. Plans that are not able to provide health coverage efficiently may reduce coverage or withdraw from Medicare. But high-quality, 

efficient plans will continue to offer coverage, and the new quality bonuses may 

make these plans more attractive.9 Furthermore, everyone with Medicare will always have the option of getting coverage through original Medicare if they no longer 

like their Medicare Advantage plan. 

Conclusion 

As the health care system advances and new, more expensive treatments become 

available, the Medicare Program must also adjust to meet the changing needs of 

beneficiaries. It must ensure that it can continue to offer the coverage that millions 

of seniors and people with disabilities have come to rely on. The Affordable Care 

Act takes important steps to ensure that Medicare is there for Americans in the future, while improving benefits for tens of millions of beneficiaries, improving their 

access to care while lowering their out of pocket costs. 

f 

American College of Physicians, Statement 

The American College of Physicians (ACP) is pleased to submit the following 

statement for the record of the above referenced hearing. ACP is the largest medical 


ccoleman on DSK8P6SHH1PROD with HEARING
121 

specialty organization and the second-largest physician group in the United States. 

ACP members include 130,000 internal medicine specialists (internists), related subspecialists, and medical students. Internists specialize in the prevention, detection, 

and treatment of illness in adults. Our membership includes physicians who provide 

comprehensive primary and subspecialty care to tens of millions of patients, including taking care of more Medicare patients than any other physician specialty. 

ACP appreciates the Committee’s interest in the effect of the Affordable Care Act 

(ACA) on the Medicare Program and its beneficiaries. The College believes that this 

legislation contains important and essential provisions to begin to address America’s 

severe shortage of primary care physicians for adult patients, improve benefits for 

preventive services, empower patients and physicians to make patient care decisions 

based on the best evidence of clinical effectiveness, and extend the solvency of the 

Medicare Part A Trust Fund. We also recognize that the legislation can and should 

be improved, and we urge the Committee to seek bipartisan common ground on a 

plan to permanently repeal the Sustainable Growth Rate (SGR) formula, to further 

support the value of primary care in Medicare payments, and to initiate reforms to 

make the costs and financing of the program sustainable over both the short- and 

long-term while reducing the federal budget deficit. 

Our statement will particularly focus on the continued need for payment and delivery system reforms to support the value of care provided by primary care physicians. The ACA supports this goal by beginning to reform payment and delivery systems. Other provisions of the law, not under the jurisdiction of this committee, will 

fund training programs that have a proven record of producing more primary care 

physicians who practice in areas of the country with the greatest need. Given the 

major role played by the Medicare program in financing care for America’s senior 

and disabled citizens and the fact that so many other payers follow Medicare’s lead, 

the Medicare payment reforms initiated by the ACA are of particular significance 

to the program and its beneficiaries. 

Why Is It So Important to Address the Shortage in the Delivery of Primary 

Care? 

Investment in primary care is essential to achieving a high performing, efficient 

and effective health care system. An ACP analysis of over 100 annotated research 

studies shows that the availability of primary care physicians in a community is 

positively associated with better outcomes and lower costs of care. 

Yet the United States is facing a growing shortage of physicians in key specialties, 

most notably in general internal medicine and family medicine—the specialties that 

provide primary care to most adult and adolescent patients. A recent peer-reviewed 

study projects that there will be a shortage of up to 44,000 primary care physicians 

for adults, even before the increased demand for health care services that will result 

from near universal coverage is taken into account. A case in point is the Commonwealth of Massachusetts. While the state has been able to achieve coverage for nearly all of its residents, shortages of primary care physicians have led to long waits 

for appointments. 

The looming primary care physician shortage stems from the fact that the demand for primary care in the United States is expected to grow at a rapid rate while 

the nation’s supply of primary care physicians for adults is dwindling and interest 

by U.S. medical school graduates in pursuing careers in primary care specialties is 

steadily declining. Primary care physicians provide 52% of all ambulatory care visits, 80% of patient visits for hypertension, and 69% of visits for both chronic obstructive pulmonary disease and diabetes, yet they comprise only one-third of the U.S. 

physician workforce, and if current trends continue, fewer than one out of five physicians will be in an adult primary care specialty. 

With the aging of the U.S. population, a greater proportion of our citizens are enrolled in the Medicare program. Older Americans—with increasing incidences of 

chronic diseases—are especially disadvantaged by the shortage of primary care physicians to care for them. 

Even with the ACA’s policies that are beginning to address the crisis in primary 

care, the United States will likely continue to face a shortage of primary care physicians for adults, as well as shortages in other critical physician specialties, but this 

shortage will be much more severe if the ACA’s policies to reform payment and delivery systems and to ensure adequate workforce capacity are under-funded or repealed. 

The following ACA provisions help address this crisis in primary care and further 

contribute to the delivery of higher quality, more effective and efficient care to our 

Medicare and, in some cases, Medicaid beneficiaries and enrollees in private insurVerDate Mar 15 2010 00:37 Dec 21, 2011 Jkt 070871 PO 00000 Frm 00125 Fmt 6604 Sfmt 6621 I:\WAYS\OUT\70871.XXX GPO1 PsN: 70871

ccoleman on DSK8P6SHH1PROD with HEARING
122 

ance plans. The College strongly supports the continued implementation and funding of these provisions. 

I. Payment and Delivery System Reforms 

Primary Care Incentive Program 

This program begins to address inequities in payments for primary care by providing a 10 percent bonus payment, in addition to the usual Medicare fee schedule 

amount, for designated primary care services provided by internists, family physicians, geriatricians and pediatricians. In order to qualify for the bonus, at least 60 

percent of Medicare allowed charges of these physicians must consist of the designated primary care services: office, nursing facility, domiciliary, and home services. The bonus program took effect on January 1, 2011 and will continue through 

2015. 

This important ACA provision begins to address disparities in payments that are 

major barriers to physicians entering and remaining in primary care specialties. A 

new report by the Council on Graduate Medical Education recommends that compensation to primary care physicians be increased to 70 percent of the average payment for other physician specialties in order to train and retain a sufficient supply 

of primary care physicians. While the Primary Care Incentive Program falls considerably short of COGME’s recommendation, it will result in the largest sustained increase in payments to primary care physicians in decades. Congress should sustain 

this critically important program, while enacting further reforms to support the 

value of primary care. 

Center for Medicare and Medicaid Innovation 

There is substantial agreement that the current Medicare resource-based fee-forservice (FFS) payment system for physicians directly contributes to unnecessary expenditures and undervalues the value of care provided by internal medicine specialists and other primary care physician specialties. It provides an incentive for physicians and other healthcare professionals to deliver services of marginal or uncertain 

value. The ACA accelerates the adoption and dissemination of alternatives to conventional fee-for-service by establishing a new Center for Medicare & Medicaid Innovation (CMMI). The CMMI will allow the Centers for Medicare and Medicaid 

Services (CMS) to test models that promote broad payment and practice reform 

within Medicare (as well as Medicaid and the Children’s Health Insurance Program) 

with a particular focus on reforming primary care payments while preserving or enhancing the quality of care. 

Importantly, the ACA provision authorizing the CMMI requires that it consider 

models to promote broad payment and practice reform in primary care, including 

patient-centered medical home (PCMH) models for high-need individuals, and models that transition primary care practices away from fee-for-service based reimbursement. The PCMH is a care model that has received substantial support from a variety of physician organizations, businesses, health plans, and patient advocacy 

groups. It is typically delivered by a team of healthcare professionals within a physician-led primary care practice and it requires delivery of care that centers on the 

needs and preferences of the patient. It expands care access, it promotes improved 

care coordination/integration, it promotes care management and education toward 

care self-management where appropriate, and it is based on the development of 

processes to ensure continuous quality improvement. The model also recognizes the 

importance of integrating into patient care members of the medical neighborhood, 

including specialty and subspecialty practices, hospitals and other related care providers, including compensating non-primary care specialists for their essential contributions to coordinating care with a patient in a PCMH. A recent review of early 

results of PCMH demonstration projects reflects its potential to improve care quality, patient access and lower costs. 

The concept of encouraging adoption by Medicare of the PCMH model has a long 

legacy of bipartisan support. When Republicans were in control of the 109th Congress, legislation was enacted to require that Medicare initiate a demonstration 

project to enroll Medicare patients in Patient-Centered Medical Homes, and Republicans and Democrats alike have continued to recognize the importance of encouraging broad adoption of PCMHs in Medicare and other programs. 

Also of significance is the provision allowing for the rapid testing and implementation into the federal healthcare system of those payment changes found to be effective. The Secretary has authority to broadly implement into the Medicare program 

aspects of projects that have been found to be successful without the necessity of 


ccoleman on DSK8P6SHH1PROD with HEARING
123 

further legislative approval. Through the CMMI, the ACA will encourage innovation 

and adoption of delivery system and payment reforms to allow Medicare patients 

to receive services of high quality and effectiveness, while helping to ensure the efficient use of limited federal resources. 

Medicare Shared Savings Through Accountable Care Organizations 

The ACA instructs the Secretary to implement, no later than January 1, 2012, a voluntary shared savings program that promotes accountability for services delivered to a defined Medicare fee-for-service (FFS) patient population with the goals 

of increasing the quality and efficiency of services delivered. The College supports 

the implementation and evaluation of this program. It directly provides an incentive 

for physicians and other healthcare professionals to improve care integration and efficiency while, at the same time, helping to ensure improved quality of delivered 

care. It also correctly recognizes the importance of primary care as a foundation of 

these Accountable Care Organization efforts. Finally, it is structured, at least legislatively, to allow entrance into the program of a variety of different types collaborating practices. This flexibility serves to promote innovation that will help better 

serve our Medicare beneficiaries. The College will monitor the rule making process 

very closely to ensure that this flexibility is maintained upon implementation—particularly the ability of small practices that provide the majority of care under Medicare to participate effectively within this program. This integrated model of payment appears quite promising. CMS should have the resources to implement and 

evaluate it effectively as an alternative payment model under Medicare. 

Identifying and Correcting Mis-Valued Services Paid Under the Medicare 

Physician Fee Schedule 

The ACA contains a provision, which took effect in March, 2010, which promotes 

identification and correction of mis-valued physician fee schedule services. The physician fee schedule drives approximately $80 billion in annual Medicare payments 

for physician services and substantially affects payments made by other payers. 

Congress included the provision on the belief that too little attention is devoted to 

monitoring whether services have become overvalued or mis-valued. Mis-valued 

services distort incentives and can contribute to the overuse or underuse of specific 

services on the basis of financial, as opposed to clinical, reasons. In addition, inappropriate valuation of services affects physicians’ decisions to enter or remain in 

specialty fields that perform undervalued services. Payments to primary care physicians, and other physician specialties that primarily provide undervalued evaluation 

and management services, have been significantly adversely affected by these misvalued service codes. 

The provision contains two main parts: providing direction to the Secretary of the 

Department of Health and Human Services (HHS) largely for identifying and correcting mis-valued services; and requiring the Secretary of HHS to establish a process to validate relative value units for physician fee schedule services. The College 

continues to support and participate in the current process in which the American 

Medical Association’s Relative Value Update Committee (RUC) provides recommendations to CMS regarding changes in the value of physician services. At the 

same time, we believe that the Secretary needs to have the capability and responsibility to better confirm and validate these recommendations, and expand on the recommendations provided by the RUC—particularly regarding over-valued services. 

Until new payment models that more effectively promote high quality and efficient care are designed and implemented on a widespread basis, ensuring adequate 

resources within CMS to refine the current Medicare physician fee schedule remains 

crucial. This helps to ensure that services are delivered for appropriate clinical, not 

financial, reasons and it helps increase the entrance of qualified physicians and 

other healthcare professionals into primary care and other fields that are adversely 

affected by the undervaluation of their services. 

II. Improved Benefits in the Traditional Medicare Program 

Coverage of Preventive Services 

The ACA provides incentives for Medicare beneficiaries to obtain preventive services which will lead to the prevention and treatment of health problems. (Incentives 

are also provided for Medicaid recipients and the privately insured.) Beginning in 

2011, the Act eliminates coinsurance, deductibles and copayments for approved preventive services and tests. These include blood-pressure and cancer screenings, 

mammograms, Pap tests, and immunizations. Also beginning in 2011, Medicare 


ccoleman on DSK8P6SHH1PROD with HEARING
124 

beneficiaries became eligible for a new benefit, an annual wellness exam that includes a wellness check-up and personalized prevention plan at no cost to the patient. 

Depending on the results of the wellness exam, patients will be provided with a 

5–10 year plan for screenings and other preventive services as well as advice and 

referrals for educational services covering weight loss, physical activity, smoking 

cessation and nutrition. 

The prevention of disease is an important aspect of care delivered by internal 

medicine specialists. As a result of the ACA, 50 million Medicare patients are now 

able to take advantage of these positive incentives for improved health status 

through preventive services. 

Phase Out of the ‘‘Doughnut Hole’’ 

The ACA provides subsidies to reduce and eventually eliminate the ‘‘doughnut 

hole,’’ the gap in coverage in which the enrollee is responsible for the full cost of 

prescription drugs once an initial period of coverage is exceeded. Prior to enactment 

of the ACA, once in the doughnut hole, beneficiaries were required to bear all of 

the cost of prescription medication until a catastrophic threshold was reached. 

Beginning in 2011, the ACA requires that drug manufacturers provide a 50 percent discount on brand name prescriptions while the beneficiary is in the doughnut 

hole. In addition, Medicare total cost calculations will include the non-discount price 

of the drugs. Thus beneficiaries will be able to reach the catastrophic threshold 

more quickly while benefiting from decreased out-of-pocket spending. 

Beginning in 2011, a federal subsidy is phased in for generic drugs so that the 

coinsurance is reduced from 100 percent to 25 percent by 2020 for beneficiaries 

within the doughnut hole. 

As it is estimated that about 25 percent of beneficiaries fall into the doughnut 

hole in a given year, these ACA provisions provide a valuable benefit to millions 

of America’s seniors. 

III. Empowering Patients and Physicians to Make Informed Decisions 

Funding for Comparative Effectiveness Research to Inform Clinical Decision-making 

From the perspective of practicing physicians and their Medicare (and other) patients, the insufficient availability of data about what works best for whom creates 

critically important limitations for the clinical decision-making process. Each day, 

in the privacy of the examination room, patients are treated for conditions for which 

there are numerous treatment options. This includes treatment for common conditions, such as intermittent heartburn, more serious chronic conditions, such as high 

blood pressure or diabetes, and immediate life-and-death issues, such as choosing 

the best approach for the treatment of acute coronary syndrome or an aortic dissection. The limited availability of valid data to supplement the physician’s clinical experience and professional knowledge—data that compare the clinical effectiveness of 

different treatments for the same condition—makes it difficult to ensure that an effective treatment choice is made, one that meets the unique needs and preferences 

of the patient. 

The ACA helps to address this issue by establishing an independent, non-profit, 

tax exempt corporation, known as the ‘‘Patient-Centered Outcomes Research Institute’’ (PCORI) to provide comparative effectiveness information to clinicians and patients. The law also funds the development of shared decision making tools to translate the results of the research into information that is understandable by patients 

and that can be the basis of shared decision-making with their personal physicians. 

In this way, Medicare patients and their physicians will be empowered to make informed, and therefore improved, health decisions based on the best and most recent 

evidence of clinical effectiveness. 

IV. Additional Needed Legislation 

ACP believes that Congress should enact additional legislation to facilitate further 

payment and delivery system reforms that recognize and support the value of care 

provided by internists and other primary care physicians. 

Repeal of the SGR Formula 

It is essential that the Medicare Sustainable Growth Rate (SGR) formula be repealed and replaced with a new framework that provides predictable, positive and 


ccoleman on DSK8P6SHH1PROD with HEARING
125 

stable updates for all physician services and protects primary care from experiencing cuts in payments due to increases in utilization in other physician services. 

This could be accomplished by one or more of the following options, potentially in 

combination with each other: (1) setting a floor, e.g., at no less than the percentage 

annual increases in the cost of delivering services, on payment updates for primary 

care services, (2) providing higher spending targets for primary care than for other 

categories of services, should Congress decide to replace the SGR with separate 

spending targets for distinct categories of services, (3) exempting practices that are 

organized as a PCMH, and that are recognized as such by a process established by 

HHS, from payment reductions in any given calendar year and (4) exempting primary care services from budget neutrality adjustments resulting from changes in 

relative values and behavioral offset assumptions. 

More Effective Medical Liability Reforms 

ACP is one of more than 100 physician membership organizations that have endorsed H.R. 5, the ‘‘Help Efficient, Accessible, Low-cost, Timely Healthcare 

(HEALTH) Act of 2011.’’ Introduced by Representative Phil Gingrey, MD, this bill 

would enact proven reforms to reduce the costs of defensive medicine, including caps 

on non-economic damages. We also are encouraged that President Obama said in 

his State of the Union address that he is willing to ‘‘look at other ideas to bring 

down costs, including one that Republicans suggested last year—medical malpractice reform to rein in frivolous lawsuits.’’ Realizing that this issue is outside the 

jurisdiction of the Ways and Means Committee, ACP agrees that there is an opportunity now for Congress to work with the president on a bipartisan basis to address 

the enormous costs of defensive medicine, which contribute to higher spending by 

the Medicare program. 

The ACA authorizes grants for state programs to improve patient safety and test 

alternatives to the traditional medical liability tort system. Although such grants 

may help identify effective ways to improve patient safety and reduce the costs of 

defensive medicine, the ACA did not do enough to address the costs of defensive 

medicine and to ensure that patients who are truly injured by medical negligence 

get the compensation they need for their injuries. 

Although estimates of the cost of defensive medicine vary, one recent study estimates the cost at $55.6 billion annually—more than half of the estimated annual 

federal spending under the ACA. Other experts believe that the cost of defensive 

medicine is much higher. The cost of defensive medicine leads to higher Medicare 

spending because the program ends up paying for unnecessary services, services 

that are billed to the program because physicians fear being sued if they don’t order 

every extra marginal test and treatment available. Such excess Medicare spending 

leads to higher out-of-pocket costs to Medicare enrollees, contributes to the growing 

federal deficit, and undermines the long-term financing of the program. The tens of 

billions of dollars wasted each year on defensive medicine could free up funding to 

provide coverage to many millions of Americans, to fund other needed programs, 

and/or to reduce the federal budget deficit. 

Tort reform and changes in legal standards concerning professional liability are 

needed to remove a major impediment that inhibits physicians from responsibly ordering tests and procedures based primarily on clinical and cost-effectiveness in accord with practice guidelines. 

In addition to the proven reforms in H.R. 5, ACP believes that health courts offer 

a promising approach that should be broadly tested nationwide. Under today’s judicial system, judges and juries with little or no medical training decide medical malpractice cases. The majority of medical malpractice cases involve very complicated 

issues of fact, and these untrained individuals must subjectively decide whether a 

particular provider deviated from the appropriate standard of care. Therefore, it is 

not at all surprising that juries often decide similar cases resulting in very different 

outcomes. 

The concept of health courts (also called ‘‘medical courts’’) is a specialized administrative process where judges, without juries, experienced in medicine would be guided by independent experts to determine contested cases of medical negligence. The 

health court model is predicated on a ‘‘no-fault’’ system, which is a term used to describe compensation programs that do not rely on negligence determinations. The 

central premise behind a no-fault system is that patients need not prove negligence 

to access compensation. Instead, they must only prove that they have suffered an 

injury, that it was caused by medical care, and that it meets whatever severity criteria applies; it is not necessary to show that the third party acted in a negligent 

fashion. 


ccoleman on DSK8P6SHH1PROD with HEARING
126 

1 CBO, Selected CBO Publications Related to Health Care Legislation (2009–2010), December 

2010, pages 29–34. 

Conclusion 

While ACP acknowledges the strong disagreements between Republicans and 

Democrats on many aspects of the ACA, the legislation contains provisions that 

have enjoyed the support of both parties. To be clear, ACP does not believe that the 

ACA should be repealed, but we do believe that Congress should seek common 

ground on building and improving upon the law, particularly as it relates to payment and delivery system reforms. 

Both parties have long supported the need to improve and reform payment policies to support the value of primary care, to fund primary care training programs, 

and to improve the quality of services delivered. These are not Democratic or Republican issues, but the right thing to do for Medicare and other patients and constituents. The College is hopeful that such programs will continue to find bipartisan support in the 112th Congress. ACP stands ready to assist in bringing the two parties 

together on these important issues. Together we can achieve the very best health 

care system possible for America’s seniors and all of its citizens. 

f 

America’s Health Insurance Plans, Statement 

I. Introduction 

America’s Health Insurance Plans (AHIP) is the national association representing 

approximately 1,300 health insurance plans that provide coverage to more than 200 

million Americans. Our membership includes sponsors of Medicare Advantage 

health plans and Medicare Part D prescription drug plans who have a long history 

of providing high quality coverage to Medicare beneficiaries and a strong commitment to the long-term success of the Medicare program. Our members also participate in other public programs and offer a broad range of health insurance products 

in the commercial marketplace. 

We appreciate the committee’s interest in examining the impact of the Affordable 

Care Act (ACA) on the Medicare program and the 48 million Americans it serves. 

The provisions of the new law—most notably, the deep funding cuts—have farreaching implications for the quality of care, benefits, and choices available to Medicare beneficiaries. The law’s impact will be particularly severe for the 11 million 

seniors who have chosen to enroll in Medicare Advantage plans because they value 

the improved quality of care, additional benefits, and innovative services these plans 

provide. 

Our statement focuses on two areas: 

• We review data and research findings demonstrating the impact the ACA will 

have on beneficiaries who rely on the Medicare Advantage program to meet 

their health care needs. 

• We review the success Medicare Advantage plans have achieved in improving 

health care quality and patient care for beneficiaries, and the importance of 

preserving private health plan choices to achieve greater value and efficiency 

throughout the entire Medicare program. 

II. The Impact of the ACA on Medicare Advantage Enrollees 

According to the Congressional Budget Office (CBO),1 the ACA will directly reduce 

funding for the Medicare Advantage program by an estimated $136 billion over ten 

years (2010–2019). CBO further estimates that, because of the linkage between 

Medicare Advantage payment benchmarks and Medicare fee-for-service (FFS) 

spending, the ACA’s Medicare FFS reimbursement changes will indirectly reduce 

funding for Medicare Advantage by an additional $70 billion over ten years. These 

deep funding cuts—combined with the new premium tax that begins in 2014—pose 

a serious threat to the health benefits and choices of the nation’s 11 million Medicare Advantage enrollees. 

Under the ACA, Medicare Advantage payment benchmarks for 2011 are frozen at 

2010 levels—meaning that plans did not receive rate increases this year to account 

for recent health care cost growth. Despite this rate freeze, Medicare Advantage 

plans are continuing to offer affordable plans to Medicare beneficiaries, with most 

plans making little change in premiums from 2010 while continuing to offer robust 

benefits. These offerings demonstrate that Medicare Advantage plans are working 


ccoleman on DSK8P6SHH1PROD with HEARING
127 

2 CBO, Selected CBO Publications Related to Health Care Legislation (2009–2010), December 

2010, pages 29–34. 3 CMS Chief Actuary, Estimated Financial Effects of the ‘‘Patient Protection and Affordable 

Care Act,’’ as Amended, April 22, 2010. 4 CMS Chief Actuary, Letter to Senator Charles Grassley, October 8, 2010. 

5 Heritage Foundation, Reductions in Medicare Advantage Payments: The Impact on Seniors 

by Region, September 14, 2010. 

hard to continue to provide value to Medicare beneficiaries in light of the ACA funding cuts. 

In future years, however, beneficiaries likely will begin to see the impact of the 

ACA funding cuts, since the cuts become increasingly larger with each passing year. 

CBO’s estimates show that the Medicare Advantage cuts for 2012 ($6 billion), 2013 

($9.4 billion), and 2014 ($13.1 billion) are many times larger than the cuts for 2011 

($1.8 billion). As the cuts become deeper in 2012 and beyond, plan sponsors will be 

challenged in their efforts to cushion the blow for beneficiaries. 

The magnitude of this challenge is highlighted by projections that have been released by CBO, the Office of the Actuary of the Centers for Medicare & Medicaid 

Services (CMS), and the Heritage Foundation. These projections clearly demonstrate 

that the ACA will adversely impact enrollment in the Medicare Advantage program, 

reduce benefits, and increase out-of-pocket costs for enrollees. 

Lower Enrollment 

Both CBO and the CMS Chief Actuary have projected major declines in Medicare 

Advantage enrollment as a direct result of the funding cuts in the ACA. 

According to CBO,2 the ACA will cause enrollment in Medicare Advantage plans 

in 2019 to be 4.8 million lower—dropping from 13.9 million to 9.1 million—than was 

projected prior to the law’s enactment. This represents a 35 percent decline in enrollment by 2019. 

The CMS Chief Actuary 3 projects an even larger decline, stating: ‘‘We estimate 

that in 2017, when the MA provisions will be fully phased in, enrollment in MA 

plans will be lower by about 50 percent (from its projected level of 14.8 million 

under the prior law to 7.4 million under the new law).’’ 

The departure of millions of Medicare beneficiaries from the Medicare Advantage 

program, as anticipated by both CBO and the CMS Chief Actuary, will translate 

into lower health care quality and reduced value for the affected beneficiaries and 

an overreliance on the fragmented Medicare FFS program. We discuss these issues 

in greater detail beginning on page 6 below. 

Additional Benefits Reduced and Out-of-Pocket Costs Increased 

For Medicare Advantage enrollees who are able to stay in the program, the ACA’s 

funding cuts will have a significant impact on the benefits they receive and the outof-pocket costs they pay. Historically, Medicare Advantage plans have provided enrollees additional benefits beyond those offered in the Medicare FFS program, including vision, hearing, dental, and health and wellness programs. The ability of 

plans to continue to offer these extra benefits will be severely compromised as deeper funding cuts are implemented in the coming years. 

CBO projects that the average value of additional benefits provided by Medicare 

Advantage plans in 2019 will be $67 per month under the ACA; this represents a 

50 percent cut from the $135 per month amount that was projected prior to enactment of the new law. 

Similarly, the CMS Chief Actuary states that the ACA will ‘‘result in less generous benefit packages’’ for Medicare Advantage enrollees. Noting that plan sponsors use rebates to provide extra benefits and reduce cost-sharing for enrollees, the 

CMS Chief Actuary indicates 4 that the average rebate per enrollee dropped sharply 

from $1,093 in 2010 to $684 in 2011, and will decline further to $43 by 2019. (Under 

the Medicare Advantage payment formula, rebates are based on how a plan’s bid 

compares to the benchmark.) The CMS Chief Actuary also has estimated that, taking into account both the Medicare Advantage and Medicare FFS provisions of the 

new law, beneficiaries will face higher out-of-pocket costs of $473 per enrollee in 

2012, $812 per enrollee in 2015, and $923 per enrollee in 2017. 

These findings are reinforced by research the Heritage Foundation 5 has conducted on the ACA’s impact on benefits for Medicare Advantage enrollees. This 

study reached the following conclusions: 

• By 2017, individuals who would have been enrolled in Medicare Advantage 

plans under prior law will lose an average of $1,841 in benefits due to the 


ccoleman on DSK8P6SHH1PROD with HEARING
128 

6 AHIP Center for Policy and Research, Low-Income & Minority Beneficiaries in Medicare Advantage Plans, December 2010. 

Medicare Advantage funding cuts alone. Such beneficiaries will lose a total 

of $3,714 when the effects of the entire bill, including Medicare FFS cuts, are 

considered. This latter figure represents a 27 percent reduction in benefits 

relative to what would have been provided under prior law. The aggregate 

loss for all beneficiaries nationwide is estimated to be $55 billion annually by 

2017. • The loss of benefits will vary widely across the nation, with beneficiaries in 

the hardest-hit counties facing cuts almost five times as large as cuts for 

those in the least-hit counties. Even in counties where the impact is least severe, the average beneficiary will lose at least 15 percent of his or her benefits by 2017. • Beneficiaries in the following states will face the largest benefit losses in 2017 

as a result of the ACA’s Medicare Advantage funding cuts: Louisiana ($5,092 

per beneficiary), Texas ($4,732), Hawaii ($4,693), New York ($4,512), and 

New Mexico ($4,177). 

Impact on Low-Income and Minority Beneficiaries 

In evaluating the impact of the ACA’s funding cuts, it is important to recognize 

the crucial role the Medicare Advantage program plays as a health care safety net 

for many low-income and minority Medicare beneficiaries. 

In December 2010, AHIP published a study 6 showing that Medicare Advantage 

plans are a valuable choice for low-income and minority beneficiaries, particularly 

those who are not eligible for Medicaid and do not have employer-sponsored retiree 

benefits. For many of these individuals, Medicare Advantage may be their only option for comprehensive, affordable coverage. 

Key findings of this AHIP study include the following: 

• Among Medicare beneficiaries who were not enrolled in Medicaid or employerbased supplemental coverage and who had annual incomes between $10,000 

and $20,000 in 2008, 37 percent chose Medicare Advantage plans, 30 percent 

purchased Medigap supplemental policies, and 33 percent were covered by the 

Medicare FFS program alone. 

• Nationwide, 25 percent of African-American Medicare beneficiaries and 29 

percent of Hispanic beneficiaries were enrolled in Medicare Advantage plans. 

By comparison, 21 percent of all Medicare beneficiaries were enrolled in 

Medicare Advantage plans. 

• Sixty-nine percent of all minority beneficiaries enrolled in Medicare Advantage in 2008 had incomes below $20,000. By comparison, 37 percent of White 

Medicare Advantage enrollees had incomes below $20,000. 

These findings demonstrate that Medicare Advantage plans are important to 

many minority beneficiaries and many low-income beneficiaries who cannot afford 

the high out-of-pocket costs they would incur under the Medicare FFS program. 

These vulnerable beneficiaries will pay a heavy price if the ACA’s Medicare Advantage funding cuts are fully implemented. 

The previously-cited study by the Heritage Foundation also addresses this concern, estimating that 70 percent of the ACA’s cuts to the Medicare Advantage program will be imposed on beneficiaries with annual incomes below $32,400 in today’s 

dollars. This study also estimates that these cuts will cause Hispanics to lose $2.3 

billion in benefits and African-Americans to lose more than $6.4 billion in benefits, 

while also causing nearly 300,000 Hispanics and more than 800,000 African-Americans to lose access to Medicare Advantage plans. The study describes the Medicare 

Advantage cuts as ‘‘a regressive tax that disproportionately punishes low-income 

and minority seniors.’’ 

Lessons From Balanced Budget Act of 1997 

We urge the committee to consider the lessons learned following the deep funding 

cuts that the Balanced Budget Act of 1997 (BBA) imposed on the Medicare health 

plan program, known at that time as ‘‘Medicare+Choice.’’ Following the enactment 

of this law, Medicare health plan enrollment initially remained stable, but eventually Medicare beneficiaries saw their health plan choices diminish as many health 

plans were forced to withdraw from the program or limit their service areas due to 

inadequate funding and excessive regulatory burdens. Over the next several years, 

from 1999–2003, nearly 2.4 million Medicare beneficiaries were forced to change 


ccoleman on DSK8P6SHH1PROD with HEARING
129 

7 AHIP Center for Policy and Research, Working Paper: Comparisons of Utilization in Two 

Large Multi-State Medicare Advantage HMOs and Medicare Fee-for-Service in the Same Service 

Areas, December 2009. 8 AHIP Center for Policy and Research, Working Paper: Using State Hospital Discharge Data 

to Compare Readmission Rates in Medicare Advantage and Medicare’s Traditional Fee-for-Service Program, May 2010. 9 AHIP Center for Policy and Research, Using AHRQ’s ‘Revisit’ Data to Estimate 30–Day Readmission Rates in Medicare Advantage and the Traditional Fee-for-Service Program, October 

2010. 

plans or return to the Medicare FFS program due to the unintended consequences 

of the BBA. If the ACA’s Medicare Advantage funding cuts are fully implemented, 

another generation of Medicare beneficiaries will likely experience similar disruptions in their health coverage. 

III. The Value Provided by Medicare Advantage Plans 

Medicare Advantage plans have a strong track record of pioneering new innovations and strategies for improving health care quality, promoting the efficient delivery of health care services, and advancing an evidence-based health care system. As 

a result, the Medicare Advantage program offers a solid foundation for modernizing 

the broader Medicare program to meet the health care needs of current and future 

generations of beneficiaries. 

Evidence of Quality Improvement 

Over the past 18 months, AHIP’s Center for Policy and Research has conducted 

a series of increasingly expansive studies comparing certain utilization measures, 

including hospital readmission rates, for enrollees in the Medicare Advantage program and the Medicare FFS program. Recognizing that reducing preventable hospital admissions has become an important national priority, and a goal of the ACA, 

for achieving both quality improvement and cost control, health plans have developed a variety of innovative programs that are revitalizing primary care, improving 

care transitions, and helping patients achieve better health outcomes. 

Our research findings demonstrate that these strategies are succeeding in helping 

to keep patients out of the hospital and avoid potentially harmful complications. The 

most recent AHIP studies on hospital readmissions include the following findings: 

• Based on a risk-adjusted comparison of patterns of care among patients enrolled in two large, multi-state Medicare Advantage HMO plans and in the 

Medicare FFS program, we found that the Medicare Advantage plans improved health care for their enrollees by reducing emergency room visits by 

24 percent, reducing hospital readmissions by 39 percent, reducing certain potentially avoidable hospital admissions by 10 percent, and reducing inpatient 

hospital days by 20 percent.7

• Based on an analysis of hospital discharge datasets in nine states, we found 

that risk-adjusted hospital readmission rates were about 27–29 percent lower 

in Medicare Advantage than in Medicare FFS for each enrollee, 16–18 percent 

lower for each person with an admission, and 14–17 percent lower for each 

hospitalization.8

• Based on an analysis of data on gaps in time between hospital admissions 

and discharges in five states, we found that risk-adjusted 30-day readmission 

rates per hospitalization were about 12–18 percent lower in Medicare Advantage than in Medicare FFS, that risk-adjusted 30-day readmissions per patient with an admission were 12–27 percent lower in Medicare Advantage 

among patients with at least one admission, and that 30-day readmissions 

per enrollee (including enrollees not hospitalized in a year) were 22–43 percent lower in Medicare Advantage.9

All of these studies consistently show that Medicare Advantage plans are reducing 

the need for preventable hospitalizations. As a result of this success, health insurance plans not only are improving the health and well-being of their enrollees, but 

also achieving greater efficiencies and cost savings for the Medicare program and 

for taxpayers. 


ccoleman on DSK8P6SHH1PROD with HEARING
130 

10 AHIP Center for Policy and Research, Innovations in Reducing Preventable Hospital Admissions, Readmissions, and Emergency Room Use, June 2010. 11 American Enterprise Institute for Public Policy Research, Addressing Geographic Variation 

and Health Care Efficiency: Lessons for Medicare from Private Health Insurers, July 2010. 12 AHIP Center for Policy and Research, Insurers’ Efforts to Prevent Health Care Fraud, January 2011. 

Innovative Programs and Tools 

A recent AHIP publication 10 provides plan-specific examples of the types of programs and services that health plans have implemented to reduce preventable hospital readmissions and emergency room visits. Examples of these programs include 

the following: 

• Expanding patient access to urgent care centers, after-hours care, and nurse 

help lines to give patients safe alternatives to emergency rooms for non-emergency care; • Arranging for phone calls and, in some cases, in-home visits by nurses and 

other professionals to ensure that follow-up appointments are kept, medications are being taken safely, care plans are being followed, medical equipment 

is delivered, and home health care is being received; • Offering intensive case management to help patients at high risk of hospitalization access the medical, behavioral health, and social services they 

need; • Arranging for home visits by multidisciplinary teams of clinicians who provide comprehensive care, teach patients and their caregivers how to take 

medications correctly, and link families with needed community resources; 

and • Revamping physician payment incentives to promote care coordination and 

improved health outcomes. 

Health plans have developed a wide range of tools and strategies to improve quality and efficiency, and build an evidence-based health care system. The value of 

these health plan initiatives was recognized by a July 2010 study 11 published by 

the American Enterprise Institute for Public Policy Research. This study focused on 

geographic variations in both Medicare spending and utilization of services, noting 

that variation in the public sector exceeds variation in the private sector by about 

2.8 times for outpatient visits and 3.9 times for hospital days. 

In explaining this finding, the study notes that private payers have multiple tools 

for directing health care resources, including directing patients ‘‘toward preferred 

providers who deliver more efficient care using benefits management or through 

preferred networks.’’ The authors conclude, ‘‘To reduce spending and more appropriately limit geographic variation in utilization among Medicare beneficiaries, the 

program should consider the utilization-management techniques employed in the 

private sector as a model.’’ 

The ACA attempts to introduce a number of these initiatives to the Medicare FFS 

program. However, we are skeptical that these efforts will be as effective as ongoing 

health plan programs. Health plans routinely offer health risk assessments to help 

identify high risk populations in need of specific services. These assessments, combined with the use of a patient’s information on frequency and usage of health care 

services, enables the health plan to provide care management models, disease management programs, prescription drug support, home care, and tailored outreach to 

Medicare Advantage enrollees to meet their specific needs. While health plans have 

been highly successful in using this information to improve patient care, the Medicare FFS program lacks the infrastructure and coordination that are needed across 

providers to address the specific needs of each individual patient. 

Fraud Prevention Initiatives 

Preventing health care fraud is another essential ingredient of any strategy for 

achieving quality improvement. Health plans devote substantial resources to fraud 

prevention programs that identify individuals who provide care under false credentials, deliver medically unnecessary services, or make treatment decisions based on 

illegal referral relationships. These investments play a key role in improving patient 

care. AHIP recently released a report 12 highlighting efforts by health plans to prevent 

and detect health care fraud. This report outlines survey findings on the cost savings achieved from these initiatives, the types of programs health plans have implemented, and the future of fraud detection and prevention programs. 

Survey respondents included a cross-section of health plans ranging from small, 

regional companies to large, multi-state commercial carriers. Among the large comVerDate Mar 15 2010 00:37 Dec 21, 2011 Jkt 070871 PO 00000 Frm 00134 Fmt 6604 Sfmt 6621 I:\WAYS\OUT\70871.XXX GPO1 PsN: 70871

ccoleman on DSK8P6SHH1PROD with HEARING
131 

panies in the survey, estimated net savings from anti-fraud operations (savings less 

costs) exceeded $3 per enrollee, resulting in an estimated total net savings of nearly 

$300 million in 2008. For the medium-sized companies reporting, estimated net savings were about $1 per enrollee and 2008 total net savings were about $10 million. 

For smaller companies, estimated net savings were about $2.70 per enrollee, and 

total net savings reported were approximately $5 million in 2008. 

Survey respondents were asked to estimate only the costs and savings directly attributable to their anti-fraud efforts. These estimates do not include the impact of 

deterrence, which is likely the largest associated savings from insurers’ anti-fraud 

programs. The knowledge that health plans have robust anti-fraud measures and 

controls likely prevents inappropriate billings or claims from occurring in the first 

place. 

Patient Safety Initiatives 

On another front, health plans regard patient safety as a top priority under their 

quality improvement initiatives. Plans have developed and implemented several approaches to improve patient safety and increase awareness of safety-related issues, 

including efforts to reduce healthcare-acquired infections and prevent ‘‘never events’’ 

(i.e., serious reportable events that should never occur in a health care setting and 

are associated with patient death or serious disability). 

Specific patient safety strategies used by health plans include using evidencebased care and national benchmarks to prevent infections and improve surgical 

safety. This includes, for example, providing physicians with tool kits based on a 

standardized set of procedures and instructions to create a consistent approach to 

infection prevention. Other examples include training providers and hospitals on 

error reduction techniques, and pre- and post-surgical team briefings in order to 

maintain consistency of safe practices across providers. 

Health plans also have developed innovative payment models to incentivize hospitals to reduce hospital-acquired conditions and infections. Such models reward 

providers that meet performance targets and include additional per-patient permonth quality payments. The structure of these programs include root-cause analysis of never events, communication with patients/families when never events or serious reportable events occur, and forums to discuss best practices and lessons 

learned. 

Other priorities include tracking and reporting infection rates at the hospital and 

physician level and reporting them internally and publicly (where state requirements exist). Some health plans have enhanced their quality improvement and monitoring programs by requiring providers or hospitals to identify gaps in care and recommend changes to improve patient care safety systems. Others require reporting 

of adverse events to designated patient safety organizations. 

Health plans use nationally-recognized measures of patient safety for never 

events, serious reportable events, surgical safety indicators, and preventable medical errors, specifically from CMS, the National Quality Forum, Leapfrog, the Joint 

Commission, and others. Health plans have informed us that by working in collaboration with network hospitals, they have helped achieve the following measureable 

improvements in patient safety: 

• Health plan network hospitals participating in such improvement programs 

have reduced the rate of central line bloodstream infections well below the 

national average. For example, one health plan measured its 2010 rate for 

central-line infections at 0.96, compared to the national rate of 1.96, as reported by the Centers for Disease Control and Prevention (CDC). 

• Health plan network hospitals also reduced cases of ventilator-associated 

pneumonia by 70 percent, to less than 1.5 per 1,000 ventilator days in over 

two years (2008–2010). 

• Over an eight year period (2002-present), one health system succeeded in reducing the number of ventilator-associated pneumonia cases by 97 percent 

and the number of central bloodstream infections by 91 percent. 

Preserving Medicare Health Plan Choices 

Looking forward, it is important to maintain a stable Medicare Advantage program and preserve private health plan choices to achieve greater value and efficiency throughout the entire Medicare program. 

If the ACA funding cuts are fully implemented, millions of Medicare beneficiaries 

will be forced into the inefficient Medicare FFS program. This, in turn, will undermine the broader health reform goals of enhancing quality and patient safety, improving efficiency and value, and containing costs. Expanding enrollment in the outVerDate Mar 15 2010 00:37 Dec 21, 2011 Jkt 070871 PO 00000 Frm 00135 Fmt 6604 Sfmt 6621 I:\WAYS\OUT\70871.XXX GPO1 PsN: 70871

ccoleman on DSK8P6SHH1PROD with HEARING
132 

dated Medicare FFS program will result in more beneficiaries receiving fragmented 

care that is poorly coordinated under a system that prioritizes volume over quality. 

Meanwhile, reducing enrollment in Medicare Advantage will result in fewer beneficiaries receiving coordinated care and benefiting from the innovations that private 

sector health plans have pioneered. 

We urge Congress and the Administration to reconsider the ACA funding cuts to 

ensure that Medicare Advantage remains viable and can serve as a foundation for 

building a modernized Medicare program that provides access to high quality health 

care. 

IV. Conclusion 

Thank you for considering our perspectives on the ACA and its impact on the 

Medicare program. We stand ready to work with the committee to strengthen health 

care choices and benefits for our nation’s Medicare beneficiaries. 

f 

Alliance for Retired Americans, Statement 

The Alliance for Retired Americans would like to thank the Committee on Ways 

and Means for holding this hearing on the impact of the Patient Protection and Affordable Care Act on the Medicare program and Medicare beneficiaries. The Alliance 

appreciates the opportunity to reiterate its support for the health care law and provide examples from our members who are benefiting from its provisions. 

Founded in 2001, the Alliance is a grassroots organization representing more than 

4 million retirees and seniors nationwide. Headquartered in Washington, D.C., the 

Alliance and its 30 state chapters work to advance public policy that strengthens 

the health and economic security of older Americans by teaching seniors how to 

make a difference through activism. 

The health law is particularly important for seniors, who spend a larger share of 

their retirement income on medical care. The law makes improvements to the Medicare program by providing added benefits, enhancing health care quality and extending the solvency of the program by 12 years. Seniors have already begun to reap 

the benefits of the law. In 2010, 3.4 million seniors who fell in the Part D doughnut 

hole coverage gap received a $250 payment to help with the costs of their medications. Beginning this year, seniors are eligible to receive free annual check ups. In 

addition, they will no longer have to pay any cost-sharing for life-saving preventive 

screenings for diseases such as diabetes and cancer. Seniors who fall in the doughnut hole will get a 50% discount for brand name drugs and a government subsidy 

toward the costs of their generic medications. These are the first steps towards closing the entire doughnut hole, which will occur in 2020. 

The Affordable Care Act restructures government payments to Medicare Advantage (MA) plans to keep them more in line with that of traditional Medicare. The 

law reduces the overpayments to MA plans and prohibits the MA plans from charging higher co-payments than traditional Medicare. By 2014, MA plans must spend 

85% of enrollee premiums on health care, rather than on administrative costs, executive pay or insurance company profits. MA plans that provide good quality care 

will receive bonuses. These changes emphasize quality and efficiency and will reduce costs for the government as well as Medicare beneficiaries. 

In the future, seniors can expect improved medical care, because the Medicare 

program begins to reform the health care delivery system by implementing pilot programs such as bundling, patient-centered medical home, value-based purchasing 

and Accountable Care Organizations. These programs encourage providers to promote efficiency and coordinate care, which will ultimately lead to better quality care 

for seniors. 

Already, we have heard from Alliance members how the added benefits have improved their lives. One such individual is Bob Meeks from Tampa, Florida who has 

astronomical medical costs due to several medical conditions. He pays $265 a month 

for Advair and $175 for Nexium. His out-of-pocket costs are $4,000 a year, and that 

does not include his wife’s out-of-pocket costs. While he has tried to substitute with 

generic or comparable drugs, oftentimes the medications are not available in a generic or the comparable drugs are not as effective. In 2010, he received the $250 

check providing him needed assistance toward his medications. Another individual 

is Mary Ellen Wlaysewski from Glenndale, New York who fell in the doughnut hole 

in September of last year. Ms. Wlaysewski was diagnosed with breast cancer and 

has to take Arimidex, which costs $1,066.84 for a 3 month supply through a mail 

order pharmacy. She is expecting her check soon. 


ccoleman on DSK8P6SHH1PROD with HEARING
133 

Then there is James Cassidy of Easton, Pennsylvania who has such high medical 

bills that he fell in the doughnut hole in March of last year and stayed in the doughnut hole for the rest of the year. James has diabetes and his insulin alone costs 

$300 a month. He also suffers from heart disease and his heart medications costs 

about $250 a month. He said that the $250 check helped him because it allowed 

him to buy a month’s supply of his heart medication. James says that sometimes 

he has cut his pills in half and other times he has gone without, because the drugs 

were unaffordable. This year, James will receive a 50% discount on brand name 

medications and a 7% discount on generic drugs when he falls in the doughnut hole. 

The provisions of the Affordable Care Act will help him better afford his medications. 

Then there is Demmi Murphy of Jacksonville, Florida who is in her forties and 

is disabled. She receives Social Security Disability and is covered under Medicare. 

She hit the doughnut hole in June 2010. One of her medications costs $1,283 a 

month and the others are anywhere between $300 and $400 a month. The doughnut 

hole check did help her, and she looks forward to the drug discounts this year. 

Finally, there is Olivia Babis, a 35 year old woman from Polk County, Florida, 

who suffers from an autoimmune disease. While her husband does have health insurance through his job, there is a one-year exclusion for pre-existing conditions. 

There is also an annual cap, which she would exceed within 6 months. Olivia is currently on Medicaid. Although both she and her husband have college degrees, he 

had to get a job that pays $9 an hour, so that she could qualify for Medicaid. She 

is grateful that the new health law has a provision prohibiting insurers from excluding individuals with pre-existing conditions and establishing annual limits. While 

these provisions do not go into full effect until 2014, she is hopeful it will cover her 

in the near future. If the law is repealed, she will have to continue to rely on Medicaid. 

Millions of seniors are counting on the drug discounts in the Affordable Care Act 

to help them afford their medications this year and in the future. They are glad the 

days of having to choose between food or medicine or having to cut their pills in 

half are mostly behind them. An additional 32 million Americans have either begun 

getting coverage through the dependant care provision, the early retiree coverage, 

or the high risk pools or are anxiously awaiting 2014 to purchase insurance through 

the exchanges. If the health care law is repealed, these individuals will be thrown 

back to the mercy of insurance or pharmaceutical companies. 

In addition to improvements under Medicare, the new law enacts several new initiatives to address the long-term care needs of older and disabled Americans, including the Community First Choice Option, which creates a new state plan option 

under Medicaid to provide community based attendant supports and services to individuals with disabilities who are Medicaid eligible and who require institutional 

level of care. The law also creates the Community Living Assistance Services Support Act (CLASS), which creates a national long-term care insurance program financed through voluntary payroll deductions that will provide benefits to enrollees 

unable to perform two or three activities of daily living. These are extremely important provisions for current and future retirees. 

The Alliance for Retired Americans strongly supports the Affordable Care Act, because of the numerous provisions that are helping retirees afford health care both 

now and in the future. Repealing it would negatively affect millions of older and retired Americans. The law strengthens the Medicare program, provides protections 

to millions of Americans against insurance company abuses, makes prescription 

drugs more affordable, and provides prevention and wellness screenings, all of 

which enhance the quality of life for our nation’s seniors. We thank the Committee 

for the opportunity to submit this testimony. 

f 

Campaign for Better Care, Statement 

The Campaign for Better Care appreciates the opportunity to submit a statement 

for the record on the Impact of the Affordable Care Act on Medicare beneficiaries. 

The Campaign for Better Care (www.campaignforbettercare.org) is a broad-based 

coalition of consumer organizations with a direct stake in improving the health and 

quality of life for older adults with multiple health conditions and their family caregivers. We are committed to ensuring that new models of care delivery and payment, including Accountable Care Organizations (ACOs) and Patient Centered Medical Homes (PCMH), provide the comprehensive, coordinated, patient- and familycentered care that individuals want and need. 


ccoleman on DSK8P6SHH1PROD with HEARING
134 

iMachlin, S., Cohen, J., & Beauregard, K. (2008). Agency for Healthcare Research and Quality. Health Care Expenses for Adults with Chronic Conditions, 2005. (Statistical Brief #203). Retrieved July 22, 2009, from http://www.meps.ahrq.gov/mepsweb/data_files/publications/st203/ 

stat203.pdf. 

Changing the way health services are delivered and paid for is key to fulfilling 

the promise of high quality, patient- and family-centered care for millions of Americans. Our fragmented delivery system has failed those who rely on it the most. 

Hardest hit are vulnerable populations, including older adults with multiple chronic 

conditions, and their family caregivers, who struggle to navigate an impossibly complex health care system without the help they need. This population uses the most 

health care services, at the highest cost. Because no one is helping them coordinate 

their care, they suffer the poorest health outcomes. 

The ACA can help address these problems. In addition to improving health care 

coverage and affordability, the law makes significant advances in improving the way 

health care services are delivered and paid for, moving us toward a health system 

that rewards value over volume, promotes better coordinated care, and is oriented 

around the needs of patients and families. 

Changing How Care is Delivered 

Nine out of ten older Americans (age 65 and older) have at least one chronic 

health condition and 77 percent have multiple chronic conditions.i These are the 

people who could most benefit from better coordination of care. Yet, to date, our 

health care system—including Medicare—has not risen to the challenge. 

The ACA promotes innovative new ways to deliver health care that will promote 

higher quality, better coordinated, more efficient care. These new approaches should 

foster better communication and coordination among health care providers, patients 

and family caregivers, and help prevent problems like harmful drug interactions, 

unnecessary hospitalizations, conflicting diagnoses, and failure to connect people 

with community based services that can help them manage their health. 

Improving Medicare 

Medicare is a lifeline that offers older Americans secure health coverage. But 

there are notable gaps in Medicare’s coverage that cost beneficiaries millions of dollars out of pocket and often prevent older persons—particularly those with numerous chronic conditions—from getting the care they need. 

The ACA fills in some of these gaps—making Medicare more affordable for millions of older Americans. Because of the ACA, Medicare beneficiaries can now get 

an annual physical and access to a number of preventive services, such as mammograms and colorectal screenings, without expensive out of pocket costs. And the 

ACA’s changes to the donut hole will save these beneficiaries thousands of dollars. 

Last year, beneficiaries who fell in the ‘‘donut hole’’ received a $250 rebate. This 

year, they will benefit from 50 percent off brand name drugs in the donut hole. By 

2020, the donut hole will be closed. 

The newly established Federal Coordinated Health Care Office will work to improve coordination between Medicare and Medicaid for dually eligible beneficiaries 

and help to ensure that care for this population is more efficient. 

Changing How We Pay for Care 

The current health care system pays for care based on volume not value. The ACA 

begins to link payment to provider performance and quality of care, providing muchneeded incentives for quality improvement. Increasing Medicare and Medicaid payment for primary care providers will help to ensure that patients have ready access 

to good primary care, which is particularly important for older adults struggling 

with multiple chronic conditions, who need a higher level of care coordination and 

care management. 

Improving the Quality of Care 

The new law includes policies that will help us move away from a system that 

values quantity over quality—and toward a system that prioritizes effective delivery 

of the right care, at the right time, for the right patients. New policies will link payment to quality and provider performance, creating much needed incentives for 

quality improvement by hospitals, physicians, nursing homes, home health providers and others. 


ccoleman on DSK8P6SHH1PROD with HEARING
135 

1Pub. L.111–148, the Patient Protection and Affordability Care Act of 2010 (PPACA or ACA), 

on March 23, 2010, and Pub. L. 111–152, the Health Care and Education Reconciliation Act of 

2010 (HCERA), on March 30, 2010. 2 2010 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal 

Supplementary Medical Insurance Trust Funds, August 5, 2010, http://www.cms.hhs.gov/ 

ReportsTrustFunds/downloads/tr2010.pdf. 3Paul N. Van der Water, 2010 Medicare Trustee Report Shows Benefits of Health Reform and 

Need for Its Successful Implementation (Center On Budget and Policy Priorities, August 16, 

2010) http://www.cbpp.org/cms/index.cfm?fa=view&id=3265. 

Changing the Health Care Workforce 

The ACA also makes strengthening and expanding the health care workforce a 

priority. It supports programs aimed at increasing the supply of qualified primary 

care providers, and training our health care workforce so it better meets the complex health needs of older patients. 

Conclusion 

The ACA offers us an opportunity to make our health care system more efficient 

and more patient- and family-centered, which is critically important for older patients with multiple health problems and their family caregivers. As a nation, we 

simply cannot afford to delay implementing the new law. The health and well-being 

of millions of Americans—including older and chronically ill persons—depends on it. 

f 

Center for Medicare Advocacy, Statement 

The Center for Medicare Advocacy, Inc. is a national, non-profit organization that 

works on behalf of older people and people with disabilities to ensure fair access to 

affordable and comprehensive health care. We submit this statement for the record 

of the Hearing on the Health Care Law’s Impact on the Medicare Program and its 

Beneficiaries, held before the House Ways & Means Committee on February 10, 

2012. 

Last year Congress passed two statutes, collectively referred to as the Affordable 

Care Act,1 to extend health insurance to millions of Americans who are uninsured, 

to improve quality of care for all Americans, to reduce spiraling increases in health 

care costs, and to reduce the deficit. Some misstated reports about changes made 

by health care reform to Medicare have resulted in public fear of cuts to Medicare 

benefits. 

The Center for Medicare Advocacy wants to be very clear for the record: 

Medicare reforms included in the Affordable Care Act do not reduce Medicare’s guaranteed benefits; they improve Medicare and help safeguard the 

Medicare Trust Fund. 

THE AFFORDABLE CARE ACT STRENGTHENS THE MEDICARE PROGRAM AND RETAINS ITS GUARANTEED BENEFITS 

The health care reform law expands Medicare coverage, by eliminating cost-sharing for preventive services, adding a yearly wellness visit, limiting some cost-sharing in private Medicare plans, closing the Part D ‘‘Donut Hole,’’ and creating opportunities for exciting new delivery systems to promote coordination of care. 

Further, perhaps of most significance, the changes made to Medicare by the Affordable Care Act extend the solvency of the Medicare Part A (hospital insurance) 

trust fund. The Medicare Trustees now project that the Trust Fund will remain solvent through 2029, rather than through 2017, or an extension of 12 

years.2 According to the Center on Budget and Policy Priorities, the most 

recent projection by the Trustees is among the most favorable projections 

made by the Medicare Trustees in the last 21years.3

The AffordableCareActC:/Users/nuehlecke/AppData/Local/Microsoft/Windows/ 

users/WeeklyAlerts/Website/www.medicareadvocacy.org/InfoByTopic/Reform/ 

10_10.28.ReformDoesntCutBenefits.htm_edn1#ledn1 achieves savings in the 

Medicare program through a series of payment reforms, service delivery 

innovations, and increased efforts to reduce fraud, waste, and abuse. The 

actual projected reduction in Medicare spending is $428 billion over 10 

years, after $105 billion in new Medicare spending is taken into considerVerDate Mar 15 2010 00:37 Dec 21, 2011 Jkt 070871 PO 00000 Frm 00139 Fmt 6604 Sfmt 6621 I:\WAYS\OUT\70871.XXX GPO1 PsN: 70871

ccoleman on DSK8P6SHH1PROD with HEARING
136 

4 CBO March 20, 2010; Joint Committee on Taxation Revenue Estimates, JCX–17–10 (March 

20, 2010). 5PPACA (Pub. L. 111–148), § 3602. 

6 CBO March 20, 2010; Joint Committee on Taxation Revenue Estimates, JCX–17–10 (March 

20, 2010) http://www.jct.gov/publications.html?func=startdown&id=3673. 7Medicare Advantage Fact Sheet (Kaiser Family Foundation Sept. 2010), http://www.kff.org/ 

medicare/upload/2052–14.pdf. 8 Report to Congress, Medicare Payment Policy (March 2010); www.medpac.gov/documents/ 

Mar_10Ch04.pdf. 9 B.Biles, G. Arnold, Medicare Advantage Payment Provisions (G.W.U. March 2010), available 

at http://www.gwumc.edu/sphhs/departments/healthpolicy/dhp_publications/pub_uploads/ 

dhpPublication_8C515659–5056–9D20–3D3985C6A1BBC2A5.pdf. 10 HCERA § 1102. 11 ‘‘Medicare Advantage Premiums Fall, Enrollment Rises, Benefits Similar Compared To 2010 

Wide Range Of Medicare Health And Drug Plan Options Continues In 2011’’ (CMS Sept. 21, 

2010); http://www.cms.gov/apps/media/press/ 

release.asp?- 

Counter=3839&intNumPerPage=10&checkDate=&checkKey=&srchType=1&numDays- 

=3500&srchOpt=0&srchData=&keywordType=All&chkNewsType=1%2C+2%2C+3%2 

C+4%2C+5&intPage=&showAll=&pYear=&year=&desc=&cboOrder=date. 

ation.4 It is important to stress again that none of the payment reforms affect Medicare’s guaranteed benefit packages. In fact, the law specifically states that the guaranteed benefits in Medicare Part A and Part B will not be reduced or eliminated 

as a result of changes to the Medicare program.5

MOST MEDICARE CUTS ARE TO PRIVATE INSURANCE PLANS 

The greatest amount of savings in Medicare, about $130 billion over 10 years, will 

be achieved by reducing overpayments to private Medicare Advantage (MA) plans 6

that serve only 24% of all Medicare beneficiaries.7 These are the insurance plans 

that contract with the Centers for Medicare & Medicaid Services (CMS) under Medicare Part C to provide benefits to those who voluntarily enroll. MA plans must provide all of the guaranteed benefits under Part A and Part B; they may provide additional benefits with moneys they receive in excess of the cost of providing the guaranteed benefits. 

Under the funding mechanism in effect before enactment of the Affordable Care Act, MA plans were paid, on average, 9%—13% more than the traditional Medicare program to provide the same coverage. These extra payments resulted in Medicare Part B premiums being $3.35 higher per month for all 

beneficiaries in 2009, and resulted in the Federal Government (and taxpayers) 

spending $14 billion more than it would have paid had Medicare Advantage plan 

enrollees remained in the traditional Medicare program. The Medicare Payment Advisory Commission (MedPAC) had recommended to Congress for years that the 

benchmarks used to evaluate MA plan bids should be set at 100% of traditional 

Medicare costs, to achieve financial neutrality between payment rates for traditional 

Medicare and private plans.8 Instead, billions of dollars were wasted ¥ jeopardizing 

the solvency of the Medicare Trust Fund, and increasing costs for all Medicare beneficiaries and for taxpayers. 

The Affordable Care Act phases in changes to the MA overpayments in order to 

curtail this waste, starting with a freeze in Medicare payments to MA plans for 

2011. These changes are not as extensive as those recommended by MedPAC, however, and the new payment mechanism will not achieve the financial neutrality recommended by MedPAC. As a result of the new payment formula, plans in 

some lower-paid counties, generally rural and suburban areas, will continue to receive payments that exceed the traditional Medicare amount.9

The new payment structure also provides for an increase in payments by up to 5% 

for plans that receive four or more stars on the CMS star rating system.10 In other 

words, the Affordable Care Act protects beneficiaries and strengthens the Medicare 

Advantage program by rewarding MA plans that provide higher quality care and 

reducing wasteful payments to those that do not provide additional value. 

MEDICARE ADVANTAGE OPTIONS REMAIN ROBUST FOR 2011 

Many people in the health care industry predicted that the change in MA payments would result in fewer MA plans contracting with CMS, higher premiums, and 

reduced benefit packages. CMS announced at the end of September 2010, however, 

that these predictions were not accurate. According to CMS, MA plan premiums for 

2011 are, on average, $1 less than in 2010, and most beneficiaries continue to have 

numerous choices of Medicare Advantage plans.11


ccoleman on DSK8P6SHH1PROD with HEARING
137 

12Section 162 of the Medicare Improvements for Patients and Providers Act of 2008, Pub. L. 

110–225 required private fee for service Medicare Advantage plans to have provider networks 

in most areas of the country, effective January 1, 2011. 13PPACA § 33203. 14 HCERA § 1103. A plan’s contract must be terminated if the plan fails to have a Medical 

Loss Ratio of 85% for 5 consecutive years. 15PPACA § 3008. 16PPACA § 3025. 17 CBO March 20, 2010; Joint Committee on Taxation Revenue Estimates, JCX–17–10 (March 

20, 2010). 18PPACA § 3403(c), adding Section 1899 of the Social Security Act. 19 In 2011, the Part B deductible is $162, and the Part A deductible is $1,132 per spell of ill- ness. 20http://www.roadmap.republicans.budget.house.gov/Issues/Issue/?IssueID=8520. 

Many MA plans that chose to leave the Medicare market in 2011 did so 

as a result of changes made by the Medicare Improvement for Patients and 

Providers Act of 2008 (MIPPA),12 not the Affordable Care Act. Those who point to the cuts in the overpayments to MA plans as proof that Medicare benefits were reduced by health care reform legislation fail to acknowledge that 

the Affordable Care Act improves benefits offered by MA plans. For example, 

the new law sets limits on the amount of cost-sharing plans can charge for chemotherapy administration services, renal dialysis services, and skilled nursing care 

services.13 Further, starting in 2014, 85% of MA plan revenues must go towards 

benefits, not profits, or plans may be subject to sanctions.14

HEALTH CARE REFORM LINKS PAYMENT TO QUALITY OUTCOMES 

The Affordable Care Act moves towards linking payment to quality outcomes for 

entities that provide services to Medicare beneficiaries. Health care reform emphasizes efforts to measure quality and to provide payment for only those services and 

procedures that meet certain quality of care standards. As stated above, Medicare 

Advantage plans may be entitled to bonus payments if they score highly on quality 

measures. In addition, hospitals will be given incentives to reduce hospital acquired 

conditions with respect to hospital discharges starting in 2015.15

Medicare payments also may be reduced for certain providers in the future if they 

do not provide high quality health care. For example, beginning in 2012, hospital 

payments may be reduced if a hospital is determined to have excessive readmissions 

for identified conditions or procedures that are high volume or high cost and for 

which the readmission rate is high. A readmission is defined as a return to the same 

or a different hospital for the same condition within a time frame to be specified 

by the Secretary of Health and Human Services (HHS).16

INDEPENDENT PAYMENT ADVISORY BOARD (IPAB) PROTECTS MEDICARE BENEFITS 

It is anticipated that another $15.5 billion in savings to the Medicare program 

will be achieved from 2014–2019 through the workings of the Independent Payment 

Advisory Board (IPAB), a new quasi-governmental body which will take over from 

Congress the function of establishing Medicare payment policies, will be able to 

achieve.17 The Affordable Care Act includes strict parameters for IPAB activity. It 

must submit proposals to Congress to reduce Medicare spending if statutorily-defined parameters are met. These proposals will go into effect if Congress does not 

act. Most importantly, the Affordable Care Act prohibits the IPAB from changing 

eligibility or benefits, reducing the Part D low-income subsidy, or rationing care.18

The beneficiary protections built in to the IPAB by the Affordable Care Act are in stark contrast to other recommendations currently under discussion to control increased Medicare and other health care costs and to reduce the deficit. For example, 

the National Commission on Fiscal Policy and Reform (Fiscal Commission) recommended changing current Medicare cost-sharing by creating a single annual deductible of $550 for Part A and Part B services.19 Further, Congressman Paul Ryan, 

Chair of the Committee on the Budget, would change the benefit and cost-sharing 

structure of the current Medicare program. His Roadmap for America’s Future 

would eliminate the guaranteed benefits available to all beneficiaries under Medicare and that are protected by the Affordable Care Act. Instead, he would offer older 

people and people with disabilities $11,000 to purchase a private insurance plan,20

essentially changing Medicare into a capped dollar voucher program. 

In addition to changing Medicare from a uniform, defined benefit health insurance 

program to a defined contribution plan, Congresman Ryan’s proposal does not take 

into account that Medicare was enacted in 1965 because private insurance compaVerDate Mar 15 2010 00:37 Dec 21, 2011 Jkt 070871 PO 00000 Frm 00141 Fmt 6604 Sfmt 6621 I:\WAYS\OUT\70871.XXX GPO1 PsN: 70871

ccoleman on DSK8P6SHH1PROD with HEARING
138 

nies did not want to offer insurance to older people and people with disabilities. 

There is no guarantee that these same insurance companies would want to offer insurance to this population again, particularly if the Affordable Care Act’s prohibition 

of discrimination against people with pre-existing conditions is eliminated. 

MILLIONS OF PEOPLE ARE ALREADY BENEFITING FROM THE AFFORDABLE CARE ACT 

The Center for Medicare Advocacy provides direct assistance to thousands of 

Medicare beneficiaries in Connecticut each year, and assists beneficiaries, their families and their advocates who live in the other 49 states and the District of Columbia 

through phone calls, electronic inquiries, and educational efforts. The following examples explain how the beneficiaries we assist have already been helped by the Affordable Care Act, or will be helped by health reform in the future: 

• Ms. M in Arizona and Mr. B in New York are Medicare beneficiaries with different health care statuses. Like millions of other Medicare beneficiaries, both 

are eligible for health care reform’s a new Annual Wellness Visit wellness 

visit that will include a health risk assessment to establish or update their 

medical and family history, create a list of current providers and suppliers 

involved in providing medical care—including a list of prescriptions, take 

measurements of height, weight, body mass index, blood pressure and other 

routine measurements, and detect cognitive impairments. They will pay no 

cost-sharing for the visit or for the preventive services that are recommended 

to each of them during the visit. 

• Mr. G. in Florida and Ms. K. in Connecticut are two of the millions of Medicare beneficiaries with high prescription drug costs. When they enter the Part 

D ‘‘doughnut hole’’ in 2011, as they did in 2010, they will no longer have to 

pay the full cost of their medicine, but will pay only 50% of the cost of brand 

name drugs and 93% of the cost of generic drugs. 

• Mr. W., a Virginia beneficiary with multiple chronic conditions, including diabetes, joined a Medicare Advantage plan when he first became eligible for 

Medicare. Changes to the Medicare Advantage program limit the likelihood 

that he will pay more than people in traditional Medicare for high cost services and add an out-of-pocket limit to his health care costs. The Medicare Advantage plan in which he is enrolled rates highly on the quality rating scale, 

meaning that his health plan will be eligible for quality bonus payments. Mr. 

W. also enters the Part D doughnut hole each year and anticipates spending 

substantially less for his prescriptions starting in 2011. 

• Ms. C in Texas has Alzheimer’s disease and resides in a long-term care facility. In 2010, she spent approximately three (3) months in a Long-Term Care 

Hospital (LTCH) as a result of poor quality care in a number of settings. Ms. 

C was originally sent to an acute care hospital from the long-term care facility to have a wound (bed sore) on her toe treated. She went to the LTCH for 

an acquired illness (MSRA), either from the acute hospital or at the long-term 

care facility. While in the hospital, she experienced multiple hospital acquired 

infections before she finally returned to the long-term care facility. The Affordable Care Act creates quality and payment incentives to ensure that Ms. 

C and other beneficiaries like her receive the highest quality of care and are 

not hospitalized as a result of avoidable health care incidents. 

• Ms. J. in Massachusetts has multiple chronic conditions that need monitoring 

and coordination. She will benefit from new delivery systems such as Accountable Care Organizations and Medicaid Homes designed to improve coordination and quality of care for people like her. 

• Ms. S. in California is eligible for the Part D Low-Income Subsidy that pays 

her drug plan premium, eliminated the Donut Hole, and reduces her costsharing for drugs. Changes to how CMS determines which Medicare Prescription Drug Plans qualify as Low-Income Subsidy plans provide her more stability and continuity in drug plan coverage, and mean that she is less likely 

to have to change drug plans in order to receive the full subsidy. 

• Ms. G. in Pennsylvania was a plaintiff in a law suit challenging how people 

who are dually eligible for Medicare and Medicaid receive assistance with 

their Medicare premiums and cost-sharing. The new Federal Coordinated 

Health Care Office, created by the Affordable Care Act, will help ensure that 

the most vulnerable Medicare beneficiaries, those who are eligible for both 

Medicare and Medicaid, will not encounter barriers that prevent them from 

receiving the full array of benefits and services for which they are eligible. 


ccoleman on DSK8P6SHH1PROD with HEARING
139 

CONCLUSION 

The Affordable Care Act slows the growth in future Medicare spending by reducing wasteful overpayments to private Medicare Advantage plans, by restructuring 

up-dates in payments to many providers, and by tying payments to improved quality 

of care. In addition, the Affordable Care Act helps beneficiaries by reducing out-ofpocket costs, adding new benefits and promoting quality care. Health care reform 

does not reduce Medicare benefits, it adds to them. It does not endanger 

Medicare’s financial future, it saves billions of dollars for the Trust Fund, 

extends the projected solvency of the program by over a decade, and cuts 

billions of dollars in wasteful spending. The Affordable Care Act creates a 

stronger Medicare program for the 47 million older people and people with 

disabilities who rely on Medicare for their health care coverage today, and 

for the millions who will follow tomorrow. 

Respectfully submitted, 

Judith A. Stein, Esq. Vicki Gottlich 

Executive Director Senior Policy Attorney 

f 

Health Industry Distributors Association, Statement 

The Health Industry Distributors Association (HIDA) is the professional trade association that represents the interests of over 600 medical-surgical products distributor companies operating throughout the United States. Our members deliver 

life-saving healthcare products to more than 220,000 points of care including over 

195,000 physician offices, 5,700 hospitals and 16,000 nursing home and extended 

care facilities in the nation and are committed to promoting safety and savings 

throughout the healthcare supply chain. 

Medical products distributors offer the nation’s providers on-demand access to 

over 200,000 medical products essential for patient care. Providers value this ‘‘onestop shopping’’ resource, as it helps them manage supply costs and focus time and 

resources on patient care. All products sold by a medical products distributor are 

sold to a healthcare provider. As such, virtually every patient procedure is supported in some way by products supplied by a distributor. 

The majority of distributors are small businesses. Over a quarter of the industry 

earns annual revenues under $1 million dollars. The healthcare distribution sector 

employs 65,000 people nationwide. Distributors’ average 1.3% annual profit margin 

is among the lowest in healthcare, requiring distributors to operate at extremely 

high levels of efficiency. 

On behalf of HIDA, we applaud your efforts to ensure that Medicare beneficiaries 

continue to have uninterrupted access to life-saving medical products. As such, we 

appreciate the opportunity to provide comments on provisions within the Patient 

Protection and Affordable Care Act (P.L. 111–148) and the Health Care and Education Reconciliation Act of 2010 (P.L. 111–152) that are poised to negatively impact 

the delivery of healthcare. Further implementation of the following provisions could 

hinder our members’ ability to continue delivering these critical services in a 

streamlined manner. Specifically, HIDA would like to provide comments on the following provisions: 

• Section 6410 of P.L. 111–148, Adjustments to the Metropolitan Statistical 

Areas (MSAs) for Medicare Durable Medical Equipment, Prosthetics, 

Orthotics, and Supplies (DMEPOS) Competitive Acquisition Program; and 

• Section 9006 of P.L. 111–148, Expansion of Information Reporting Requirements. 

Comments on Adjustments to the Metropolitan Statistical Areas for Medicare Durable Medical Equipment, Prosthetics, Orthotics, and Supplies 

Competitive Acquisition Program, Section 6410, Patient Protection and 

Affordable Care Act (P.L. 111–148) 

HIDA supports competition in healthcare. As currently devised, Medicare’s ‘‘competitive bidding’’ system is anything but competitive. It empowers the Federal Government to choose ‘‘winners and losers,’’ reduces competition, limits patient and provider access to critical healthcare products, and adds layers of bureaucracy and cost 


ccoleman on DSK8P6SHH1PROD with HEARING
140 

to the system. Section 6410 further expands Round Two of Medicare’s competitive 

bidding program for DMEPOS to 91 MSAs from the current nine, a nine-fold increase. Expanding Round Two of the program by 91 MSAs prior to evaluating the 

impact of Round One on beneficiaries, providers and suppliers seems imprudent. As 

such, HIDA has several suggestions for improving the program, these include: 

• Expanding the parameters of the current Government Accountability Office 

(GAO) program report mandate to include the impact of the competitive bidding program on Skilled Nursing Facilities, Nursing Facilities and Intermediate Care Facilities (Medical Place of Service Codes 31, 32, and 54) in 

each Round One MSA, and delaying further expansion of the DMEPOS competitive bidding program until the effects of Round One can be fully assessed; 

and • Exempting the enteral product category (e.g., intravenous nutrients) from 

competitive bidding or including an ‘‘any willing provider’’ provision to ensure 

that all licensed, accredited and bonded suppliers are able to participate. 

The competitive bidding program, in its current form, is positioned to reduce competition and patient choice, and eliminate jobs at a time when the Federal Government is trying to preserve and create them. Competitive bidding changes Medicare’s 

basic premise from beneficiaries having access to ‘‘any willing provider,’’ to a selection process that over time will significantly reduce the number of entities to which 

Medicare beneficiaries will have access. During the rebid of Round One, approximately 1,011 licensed, accredited and bonded suppliers submitted bids in hopes of 

participating in the new program. Of those 1,011 suppliers only 356 companies were 

offered contracts by the Centers for Medicare and Medicaid Services (CMS). Those 

not offered a bid are barred from participating in the program for three years (i.e., 

contracts are required to be rebid once every three years). Many of these smaller, 

regional supplier companies do not have the overhead to sustain their businesses 

without revenue from Medicare Part B. If a significant number of suppliers are 

eliminated, market competition will diminish, prices will increase, quality will 

erode, and patient choice will be limited. 

Furthermore, Medicaid and many private insurance companies tend to replicate 

Medicare reimbursement policies, further intensifying the negative impact on small 

businesses. Similar proposals are already under consideration by state Medicaid 

programs (e.g., KS, CA, OH, TX) as a way to rein in costs. 

In addition to the program’s negative impact on small businesses, competitive bidding is poised to jeopardize quality of care for millions of Medicare beneficiaries in 

skilled nursing facilities (SNFs). The competitive bidding program is designed for 

patients who live within their homes and the program does not account for the highly specialized, exacting care required of SNF patients. Patients in a SNF are among 

the population’s most ill and frail. They require 24/7 direct clinical coordination and 

care by their nurses, doctors, and other healthcare professionals. The acuity level 

of the SNF patient population is such that they require institutional care. In contrast, a typical homecare patient does not require this level of care. 

Life-sustaining enteral nutrients, equipment and supplies—one of the nine product categories included in Round One are not well suited for the competitive bidding 

program. CMS indicated in its 2004 report to Congress on the demonstration programs in Polk County, Florida and San Antonio, Texas that most enteral nutrients 

are supplied to SNF residents. The report further states that enterals were not compatible with the demonstration program specifically due to complex issues involving 

SNFs. HIDA understands first-hand the various complexities involved in the distribution of products into SNFs (e.g., the level of clinical management and services 

required in institutionalized settings compared to that for non-institutionalized 

beneficiaries), as our members are uniquely impacted by the competitive program 

as suppliers of enteral nutrients, equipment and supplies. 

Moving to a national competitive bidding program for DMEPOS raises many serious questions related to cost, access, beneficiary protections, and market-based competition. Taking these factors into consideration, HIDA feels that CMS should not 

move forward with further implementation of Round Two of program until the impact of Round One on Medicare beneficiaries within SNFs, suppliers and providers 

is fully evaluated and understood. 

Comments on the Expansion of Information Reporting Requirements, Section 9006, Patient Protection and Affordable Care Act (P.L. 111–148) 

The new IRS 1099 reporting requirements on businesses that purchase goods and 

services in the amount of $600 or more from corporations or individuals are quite 

onerous and will result in a considerable amount of additional paperwork for smallVerDate Mar 15 2010 00:37 Dec 21, 2011 Jkt 070871 PO 00000 Frm 00144 Fmt 6604 Sfmt 6621 I:\WAYS\OUT\70871.XXX GPO1 PsN: 70871

ccoleman on DSK8P6SHH1PROD with HEARING
141 

er, regional medical products distributors. HIDA supports the recent bipartisan calls 

for repeal of the new reporting requirements which will allow distributors to focus 

on growing their businesses, creating jobs and delivering life-saving medical products to healthcare providers. 

Thank you for reviewing our concerns and considering our comments. We appreciate the opportunity to suggest important modifications to the healthcare reform 

legislation that should be implemented to ensure that patients and providers continue to have uninterrupted access to life-sustaining medical products. 

Please contact HIDA’s Vice President of Government Affairs, Linda Rouse O’Neill 

at rouse@hida.org, or (703) 838–6125 with any questions. 

f 

LeadingAge, Statement 

LeadingAge commends the Ways and Means Committee for holding this hearing 

on the impact of the Affordable Care Act on seniors. We believe the new law has 

had a number of positive and significant effects on the delivery of health care and 

long-term services and supports to seniors, and we continue to support its implementation. 

LeadingAge is an association of 5,500 not-for-profit organizations dedicated to expanding the world of possibilities for aging. We advance policies, promote practices 

and conduct research that supports, enables and empowers people to live fully as 

they age. 

One of the most important aspects of the Affordable Care Act for seniors was the 

reduction in the growth of Medicare spending, which will help to preserve the life 

of the Medicare trust fund. In 2009, before the enactment of healthcare reform, the 

Medicare trustees predicted that the trust fund would be exhausted by 2017. The 

trustees pointed to both the increase in the number of individuals eligible for Medicare and to accelerating health care costs as the factors endangering the financial 

stability of the Medicare trust fund. 

In developing the Affordable Care Act, Congress made some hard choices, imposing spending restrictions on the program that the Congressional Budget Office 

projects will total $500 billion over ten years. As a result, the Medicare trustees subsequently estimated that the trust fund can continue to finance the Medicare program for many more years. In view of widespread concern over the size of the federal budget deficit and the growth of entitlement spending, we hope the committee 

will take into account the Medicare savings already achieved under the Affordable 

Care Act. 

The healthcare reform law increases consumer long-term services and supports 

options while also improving transitions between levels of care. Medicare and other 

insurance programs currently finance services provided primarily in hospitals, 

skilled nursing facilities and physician offices; services at home and in the community get relatively little coverage. As a result, individuals released from a hospital 

frequently have to be re-hospitalized, at significant expense to Medicare and other 

insurance plans, because they have not received the services they needed to get 

well. 

The expansion of home- and community-based options under the Affordable Care 

Act, including Money Follows the Person, Independence at Home and Community 

First Choice, will help consumers obtain long-term services and supports in the 

least restrictive and most cost-effective setting. Several demonstration programs for 

which the ACA provides—transitional care, prevention of hospital readmissions, patient-centered medical homes, and accountable care organizations are just a few examples—show great promise for better integrating health and long-term services 

and supports. Ultimately these demonstrations could point the way toward real reform of our health care delivery system, improving care and services as well as reducing health care costs. 

Healthcare workforce needs also are addressed under the Affordable Care Act. We 

already face a severe shortage of nurses and direct care workers who provide the 

bulk of paid long-term services and supports. This problem will only worsen as increasing numbers of elders come to need long-term services and supports at the 

same time that nurses and direct care workers in the baby boomer generation reach 

retirement age. In addition, the vast majority of those providing long-term services 

and supports are family caregivers. They serve on an unpaid basis, frequently with 

little or no training or other help with care that can become quite complex. 

The Affordable Care Act contains several provisions to meet these needs. The new 

law increases loan amounts in the existing federal nursing student loan program. 

It authorizes new training opportunities for direct care workers, a crucial provision 


ccoleman on DSK8P6SHH1PROD with HEARING
142 

that will help to improve the quality of long-term services and supports. The law 

would fund geriatric care centers to provide training in geriatrics, chronic care management and long-term care for faculty in health professions schools and for family 

caregivers. The law also would expand geriatric care awards to advanced practice 

nurses, clinical social workers, pharmacists and psychologists, increasing the number of health care professionals knowledgeable about the special needs of older people, the age group that makes the most use of the nation’s health care system. 

The Affordable Care Act addresses a long-neglected issue by establishing the 

Community Living Assistance Services and Supports (CLASS) program. CLASS creates a consumer-financed, premium-based, voluntary insurance plan to help people 

needing long term services and supports remain in their homes and communities. 

The enactment of CLASS followed decades of discussion over how the nation might 

better address appropriate financing for these critical services and more than five 

years of legislative development, debate, and hearings. The program gained the support of over 250 consumer, provider, and faith-based organizations from AARP and 

the Alzheimer’s Association to Easter Seals and the Paralyzed Veterans of America. 

Ten million Americans today need long term services and supports—including 4 

million under age 65. As the baby boomers age into retirement, these numbers will 

more than double. Without CLASS, Medicaid would remain the nation’s default insurance plan for long-term services and supports. Medicaid is an open-ended, taxpayer-funded entitlement program that already is straining federal and state budgets. This system fails to provide realistic opportunities for personal planning, requires people to spend-down into poverty before receiving the help they need, fails 

to support family caregivers adequately, leads to higher acute care costs and is fiscally unsustainable, given the baby boomers’ coming explosive needs. 

While private long-term care insurance policies and tax incentives for their purchase have been available for approximately thirty years, fewer than ten percent of 

seniors have this coverage. Even fewer people under age 65 have long-term care insurance policies. This kind of coverage will continue to be an important source of 

financing for long-term services and supports. However, even if the rate of long-term 

care insurance policy purchases accelerates beyond current projections, private insurance will not provide enough of an alternative to Medicaid funding of long-term 

services and supports in the coming decades. 

The CLASS plan promotes personal responsibility, puts choice in the hands of 

consumers, saves Medicaid money, and doesn’t rely on taxpayer funds. CLASS is totally voluntary. Its cash benefit approach allows consumers to choose the type of 

help they want. It saves Medicaid money, according to the Congressional Budget Office. It is not a government entitlement program and stands on its own financial 

feet. The ACA prohibits the use of taxpayer funds to pay for benefits under CLASS. 

The program was strengthened by the Gregg amendment, which requires premiums 

to be set at levels that will keep the program solvent over a 75-year period based 

on actuarial analysis. 

Because of the numerous ways in which the Affordable Care Act benefits seniors, 

LeadingAge continues to support the new law. We look forward to continuing to 

work with Congress on its effective implementation. 

William L. Minnix, Jr. 

President and CEO 

LeadingAge (formerly American Association of Homes and Services for the Aging) 

f 

Medicare Rights Center, Statement 

The Medicare Rights Center is a national, independent nonprofit consumer service 

organization that works to ensure access to affordable health care for older adults 

and people with disabilities through individual counseling and advocacy, educational 

programs and public policy initiatives. We provide services through six different hotlines to individuals, caregivers and professionals who need answers to Medicare 

questions or help securing coverage and getting the health care they need. Our work 

directly representing people with Medicare gives us a unique perspective on the Affordable Care Act (ACA). 

The ACA includes several important improvements to Medicare that will give 

older adults and people with disabilities access to more affordable and higher quality health care. Such improvements include: 

• Increased prescription drug coverage by closing the Medicare Part D coverage 

gap, known as the ‘‘doughnut hole’’ 

• Expanded access to affordable preventive care services 


ccoleman on DSK8P6SHH1PROD with HEARING
143 

• Investment in delivery system reforms that will better coordinate the care 

people with Medicare receive 

• Better coverage for people with pre-existing conditions and disabilities 

First, the ACA closes the coverage gap, or doughnut hole, in the Medicare prescription drug benefit. Over 3 million individuals fall into the doughnut hole each 

year, and many of these individuals have multiple chronic conditions, some of them 

life threatening. Since the advent of the Part D drug benefit in 2006, the Medicare 

Rights Center has handled hundreds of calls from clients who have entered the 

doughnut hole, and their stories spotlight the issue. Stories include individuals who 

must skip doses, split their pills or forgo medications altogether because of the high 

out-of-pocket costs of prescription drugs when they are in the doughnut hole. 

Ms. G, a client from Arizona, called Medicare Rights Center because she is in the 

doughnut hole and cannot afford her medications. She has diabetes, a heart condition and high blood pressure, and is currently on 16 medications. She also has very 

high hospital bills. Ms. C’s income is $2,400 per month, so she does not qualify for 

a program that would help her pay for the cost of her medical bills or drugs. The 

closure of the coverage gap will help Ms. C afford her medically necessary prescriptions that help prevent her serious health conditions from getting worse. 

Ms. C, a client from New York, takes several medications, including a very expensive anti-cancer medication to keep her cancer at bay. She called the Medicare Rights 

Center when she learned from her pharmacist that she was approaching the doughnut hole. She said that she would be able to avoid the doughnut hole if she did not 

take her anti-cancer medication, but wanted to know if there was any assistance she 

could receive that would allow her to afford and take this medication. Due to her 

income, Ms. C had limited options. Medicare Rights advised her that a far too common option was to ask doctors for free samples of medications in order to sustain 

treatment if no other assistance was available. Without closure of the doughnut hole, 

Ms. C will face unaffordable drug costs. If she is unable to access her medication, 

the chances of her cancer recurring are increased. 

The ACA will improve the experience of Ms. G, Ms. C and others who in the past 

have faced similar financial hurdles to accessing their medications. In 2010, individuals in the doughnut hole were eligible to receive a $250 rebate on drug costs. This 

year, pursuant to the ACA, they will receive a 50 percent discount on brand-name 

drugs, and by 2020 the doughnut hole phase-out will be complete, which means individuals will pay the standard 25 percent cost-sharing for their medications. 

Also, the ACA aims to transform the way that all Americans, including people 

with Medicare, think about their care and engage the health system. The law emphasizes prevention and allows for the provision of new or expanded preventive 

services under Medicare. In addition to providing annual wellness exams and prevention plans to people with Medicare, the ACA eliminates consumer cost-sharing 

for many Medicare-covered services recommended by the United States Preventive 

Services Task Force, such as mammographies and screenings for heart disease and 

osteoporosis. This increased access to affordable preventive services will improve 

Americans’ health and could reduce long-term costs to the health care system. By 

eliminating barriers to preventive services, the law encourages healthy behaviors 

and allows consumers to personally invest in their care. 

Ms. C, a client from Oklahoma, called Medicare Rights Center because she wanted 

to quit smoking. Her doctor prescribed a medication to assist her in her efforts, but 

her drug plan would only cover the drug if she agreed to attend smoking cessation 

counseling sessions, which Medicare covered, but with cost-sharing. Now, as a result 

of health reform, Ms. C, and those in similar situations, will be able to go to smoking 

cessation counseling sessions free of charge. 

Ms. C, like many others, wanted to take steps to become healthier and improve 

her quality of life. The ACA helps people with Medicare be able to take these initial 

steps. 

But the ACA’s effort to empower patients to be more involved in their own care 

goes beyond the elimination of cost-sharing for preventive benefits. The law invests 

in delivery system reforms that aspire to emphasize patient-centered models of care 

and to better coordinate the care patients receive. These reforms will hopefully create greater efficiency in the program that will bolster Medicare’s financial outlook 

without sacrificing consumers’ quality of and access to care. For example, the ACA 

increases reimbursements to doctors who provide primary care, thereby offering 

them incentives to enter this practice area. The bill also provides incentives to doctors or groups of doctors to create ‘‘medical homes’’ and ‘‘Accountable Care Organizations,’’ wherein they coordinate the care that patients receive from a variety of providers. According to a 2006 MedPAC report, the average person with Medicare sees 

five doctors. However, there is no incentive in the current Medicare system for docVerDate Mar 15 2010 00:37 Dec 21, 2011 Jkt 070871 PO 00000 Frm 00147 Fmt 6604 Sfmt 6621 I:\WAYS\OUT\70871.XXX GPO1 PsN: 70871

ccoleman on DSK8P6SHH1PROD with HEARING
144 

1 Anderson, G. (2007). Chartbook, Chronic Conditions: Making the Case for Ongoing Care. 

Johns Hopkins University. Retrieved October 1, 2009, from http://www.fightchronicdisease.com/ 

news/pfcd/documents/ChronicCareChartbook_FINAL.pdf. 2 U.S. Census Bureau, Current Population Survey, 2009 Annual Social and Economic Supplement, Table PINC–05: Work Experience in 2008—People 15 Years Old and Over by Total Money 

Earnings in 2008, Age, Race, Hispanic Origin, and Sex, online at http://www.census.gov/hhes/ 

www/cpstables/032009/perinc/toc.htm. 3 National Alliance for Caregiving and AARP. (2009). Caregiving in the U.S. 2009, 14; 59. 

tors or other care providers to talk with each other. In fact, the Medicare Rights 

Center often must facilitate these conversations and the exchange of information 

across care settings through our casework, or our clients must do so for themselves, 

which can be difficult, especially in times of acute illness. 

While we all have many questions about how these new models and reforms will 

work and are currently engaged with other stakeholders to ensure that consumer 

protections remain central to reforms, all parties must ensure that we are getting 

the highest value for our healthcare dollars. The ACA aims to address this issue 

in a responsible way that does not just pass higher costs on to Medicare consumers. 

In addition to these improvements, health reform improves coverage for people 

with pre-existing conditions and those with disabilities who do not yet qualify for 

Medicare. Americans under 65 with Social Security Disability Insurance have to 

wait two years before they are eligible for Medicare coverage. In many cases, these 

individuals and other individuals who are uninsured and have a pre-existing condition can now join states’ high-risk pools, which were created by the ACA, and receive insurance coverage while they wait for Medicare. Most important, in 2014, 

they will have access to even more insurance options in the form of plans offered 

on state-based health exchanges and expanded Medicaid. This means that people in 

the two-year waiting period, one of the populations most in need of affordable, highquality care, will now be better able to access affordable coverage. Allowing people 

better access to care before they enroll in Medicare should also mean that they require less care once they become Medicare eligible. No longer will people have to 

play the waiting game as their condition worsens and require more acute and potentially more expensive care before Medicare becomes available to them. 

The ACA takes positive steps this year, as noted above, to provide significant benefits to people with Medicare and planned delivery system reforms will help to ensure that people with Medicare have continued access to high-quality, affordable 

care. 

Submitted by Joseph Baker, 

President, Medicare Rights Center 

f 

National Partnership for Women & Families, Statement 

The National Partnership for Women & Families submits this written statement 

on the impact of the Affordable Care Act (ACA) on older women. The National Partnership is a non-profit, non-partisan consumer organization with 40 years of experience working to make life better for women and families by promoting access to 

quality health care, fairness in the workplace, and policies that help women and 

men meet the dual demands of work and family. 

Access to affordable, quality health care is central to the well-being of women and 

families. It is a key determinant of their quality of life, their economic security, and 

their ability to thrive, prosper and participate fully in our society. This is especially 

true for older women. 

Women 65 and older make up more than half the nation’s Medicare beneficiaries 

and comprise 70 percent of the oldest beneficiaries (ages 85 and older). They are 

the primary consumers of health care—using more health care services as they age. 

And because women tend to live longer than men, older women are more likely to 

have chronic conditions, many of which can be costly to treat and can affect all aspects of their lives.1

As caregivers and patients, women bear the brunt of poor care coordination in our 

current health care system—often having to navigate the system alone. Worse too, 

older women are more vulnerable than men to increasing health care costs—having 

earned less during their working years 2 and often having scaled back their careers 

and compromised their economic security to meet family caregiving responsibilities.3

But the Affordable Care Act lays the groundwork for improving quality and care 

coordination so that older women and caregivers are better protected. Our written 

statement highlights some of the ways the ACA helps older women. 


ccoleman on DSK8P6SHH1PROD with HEARING
145 

4The reinsurance program will reimburse employers for 80 percent of the costs of retiree health benefit claims between $15,000 and $90,000. 5 Jencks SF, Williams MV, Coleman EA, Rehospitalizations among patients in the Medicare 

fee-for-service program, New Engl J Med, 2009;360(14):1418–1428. 6 National Healthcare Quality Report, 2009. P. 108. 

7Parry, C., E. A. Coleman, J. D. Smith, J. Frank, and A. M. Kramer. 2003. The care transitions intervention: A patient-centered approach to ensuring effective transfers between sites of 

geriatric care. Home Health Care Services Quarterly 22(3):1–17. 8 Berenson, R. & Horvath, J. (2002). The Clinical Characteristics of Medicare Beneficiaries and 

Implications for Medicare Reform. Prepared for: The Center for Medicare Advocacy Conference 

on Medicare Coordinated Care, Washington, DC. Available at: www.partnershipforsolutions.org. 9Machlin, S., Cohen, J., & Beauregard, K., op. cit., pg. 5, Figure 1. 

Lower Costs, Immediately 

Medicare is a critical program that offers older women secure, essential health 

coverage. It protects millions of older women who otherwise could not purchase coverage in the private market, which historically has been plagued by gender rating 

and other forms of discrimination. However, prior to enactment of the Affordable 

Care Act, there were some notable gaps in traditional Medicare coverage. In particular, annual wellness visits were not covered, leaving beneficiaries to pay out of 

pocket for critical preventive services. Beneficiaries also had to cover the full cost 

of prescription drugs once they reached the ‘‘donut hole’’—leaving them on the hook 

for nearly $3500 out of pocket. 

As of January 1st, older women on Medicare are able to get a free annual physical. This will include time for their health care providers to conduct a comprehensive health risk assessment and create a personalized prevention plan. And older 

women—whether they are Medicare beneficiaries or continue to purchase private 

health insurance—will be able to access a number of preventive services, such as 

mammograms and colorectal screenings, without expensive copays. 

Older women are also benefitting from more affordable drug coverage—saving 

thousands of dollars over the next ten years—as the ACA closes the ‘‘donut hole.’’ 

Last year, beneficiaries who fell in the ‘‘donut hole’’ received a $250 rebate. This 

year, they will benefit from 50 percent off brand name drugs in the ‘‘donut hole.’’ 

By 2020, the ‘‘donut hole’’ will be closed. 

Retired women over age 55 who are not eligible for Medicare will also benefit from 

the new temporary reinsurance program provided for in the ACA. It lowers retiree 

health costs and encourages employers to continue to offer coverage.4

Safer Care 

A goal of our reformed health care system is to get and keep patients healthy. 

This would seem self-evident but, in the past, too often interaction with the health 

care system has actually harmed patients. For instance, nearly one in every five 

Medicare patients discharged from the hospital is readmitted within 30 days,5 and 

each year, about 1.7 million health care associated infections occur in hospitals, resulting in about 100,000 deaths.6

The Affordable Care Act prioritizes and invests in efforts to improve patient safety. More attention and resources will go toward making sure older women are safe 

when they transition from a hospital to home or another facility—the most dangerous point in the continuum of care for vulnerable patients.7 In addition, starting 

in 2015, Medicare will begin to reduce payments to hospitals that have the highest 

rates of hospital-acquired conditions, like falls, pressure ulcers and infections. 

Women with multiple chronic illnesses, who in some cases take more than 50 separate prescriptions each year,8 will benefit from new medication management services. Pharmacists will perform comprehensive medication reviews to identify, resolve, and prevent medication-related problems, and/or educate and train patients 

and caregivers about their medications to help reduce dangerous medication interactions and medical errors. 

Better Care 

Millions of Americans have suffered needlessly because our health care system is 

not providing comprehensive, coordinated, quality care to those who need it most. 

Nine in 10 older Americans (age 65 and older) have at least one chronic health condition and 77 percent have multiple chronic conditions.9 Yet our system is not 

equipped to provide the help these patients need. Large numbers of older adults 

with multiple chronic health conditions are left on their own to navigate often-conflicting diagnoses and instructions from multiple specialists. They report duplicate 

tests and procedures, conflicting diagnoses for the same set of symptoms, and conVerDate Mar 15 2010 00:37 Dec 21, 2011 Jkt 070871 PO 00000 Frm 00149 Fmt 6604 Sfmt 6621 I:\WAYS\OUT\70871.XXX GPO1 PsN: 70871

ccoleman on DSK8P6SHH1PROD with HEARING
146 

10 Anderson, G. (2007). Chartbook, Chronic Conditions: Making the Case for Ongoing Care. 

Johns Hopkins University. Retrieved October 1, 2009, from http://www.fightchronicdisease.org/ 

news/pfcd/documents/ChronicCareChartbook_FINAL.pdf. 

tradictory medical information.10 This lack of coordination and communications puts 

their health at grave risk. 

The Affordable Care Act is a significant—indeed, unprecedented—advance in 

changing the way we pay for and deliver health care so that patients can receive 

high quality care. The ACA created the Center for Medicare and Medicaid Innovation to test, evaluate and rapidly expand new care delivery models that improve 

quality and care coordination. And, if evidence shows that these new care delivery 

models foster patient-centered care, improve the quality of care patients receive, and 

reduce costs, the Innovation Center will be able to expand the model broadly across 

the Medicare and Medicaid programs. 

One of the models that the Innovation Center has begun to test is the patientcentered medical home. This new model pays primary care practices to better coordinate and manage the care of patients, ensuring that they have someone in the 

health care system who looks out for their interests and is available when they need 

help. Eight states have been selected to take part in the Multi-Payer Advanced Primary Care Practice Demonstration, where Medicare will join ongoing multi-payer 

demonstrations to provide one million beneficiaries with medical homes. In addition, 

up to 500 Federal Qualified Health Centers will have the opportunity to participate 

in an Advanced Primary Care Practice Demonstration and provide patient-centered, 

coordinated care to nearly 200,000 low-income Medicare beneficiaries. 

To ensure older women understand their health care options and receive the care 

they want, the ACA also calls for the development and use of shared decision making tools which help patients and their caregivers understand the risks and benefits 

of treatment options and make informed decisions about their care. 

Long Term Savings 

There is little dispute that our skyrocketing health care costs are unsustainable 

and disastrous, for the country, for individuals and for families. In particular, costs 

related to treating chronic conditions could soon overwhelm patients, families and 

caregivers and are already straining the system badly. 

As the new law begins to bend the cost curve, older women are likely to see decreasing health care costs. The traditional payment system undermines quality 

through perverse incentives for quantity of service regardless of quality, value or appropriateness. For example, doctors are paid for the number of tests they run—not 

for the time it takes to talk patients about their preferences and values, nor whether what they prescribe actually makes their patients healthier. 

The Affordable Care Act takes critical steps to begin to change the way we pay 

for care. The new law opens the door for important payment reforms that will move 

us away from a system that pays for volume of services to one that pays for value 

by supporting primary care and rewarding better quality, coordination and communication among providers, patients and family caregivers. This will lead to more affordable care for older women and help ensure the Medicare program is around for 

the long haul. 

Stronger Health Care Workforce 

Low reimbursement rates and a lack of training and support have led to a shortage of health care practitioners trained in primary care and geriatrics. To ensure 

that we have a health care workforce capable of delivering the care older women 

need, the reform law will increase payments for primary care services under Medicare and Medicaid and provide enhanced training and support for nurses and other 

primary care providers. 

Family caregivers—who are mostly wives and adult daughters—will benefit from 

new supports that help them care for their loved ones while also taking care of 

themselves. For example, the Affordable Care Act establishes Geriatric Education 

Centers (GECs) to support training in geriatrics, chronic care management, and 

long term care issues for family caregivers, as well as health professionals and direct care workers. The GECs are required to train family caregivers at minimal or 

no charge and to incorporate mental health and dementia best care practices into 

their curricula. 


ccoleman on DSK8P6SHH1PROD with HEARING
147 

Conclusion 

The Affordable Care Act is helping millions of older women. Repeal of the law 

would be a painful and unnecessary step backward for women and the loved ones 

they care for. We need to move forward to implement the Affordable Care Act to 

ensure older women can benefit from the high quality, patient- and family-centered 

health care system they urgently need. 

Submitted by, Debra L. Ness, President 

f 

National Senior Citizens Law Center, Statement 

HEALTH REFORM LAW BENEFITS 

LOW INCOME OLDER ADULTS 

The National Senior Citizens Law Center continues to support full enactment of 

the Affordable Care Act based on what the law does to make health care for low 

income older adults more accessible, affordable and of higher quality. 

We remain focused on ensuring effective implementation, especially in areas 

where low-income older adults are affected. 

In addition, NSCLC has long opposed judicial activism and remains committed to 

fighting legal challenges to the health reform law in the courts. 

How Health Reform Helps Low Income Older Adults 

The ACA contains key elements that will benefit all seniors and several that are 

targeted to helping low income older adults in particular. Here are some examples: 

• Medicaid funding begins this year for providing more long term care 

at home versus in a nursing home. A recent NSCLC report on the impact 

of the Supreme Court’s 1999 Olmstead Ruling, NSCLC called on states to 

take full advantage of expanded home and community based options that are 

built into the new law. In poll after poll, seniors and their families consistently have favored care at home to institutionalization. 

• Better quality of care for close to nine million seniors and persons 

with disabilities who are eligible for both Medicare and Medicaid 

(dual eligibles). The law creates an ‘‘Office of Dual Eligibles’’ that is already 

working to improve the delivery of care to dual eligible seniors currently 

struggling to navigate systems that are far too complex and confusing. 

The country’s low income older adults will also benefit from closing of the donut 

hole in Medicare prescription drug coverage, the addition of an annual wellness visit 

to Medicare, and of course the ending of insurance industry practices such as denying coverage because of age, gender or pre-existing conditions. Poor elders are often 

the target of abusers and the law contains funding for far greater efforts to prevent 

elder abuse. 

Why Court Challenges Matter 

The cases brought by several states focus on doing away with the individual mandate, but NSCLC argues that doing so would jeopardize the balance the law 

achieves between requiring people to have health insurance and forcing insurance 

companies to cover those who are already sick, too old or happen to be women. 

For older adults without health insurance and a pre-existing condition, a court decision that finds the individual’s responsibility to have health insurance unconstitutional could be particularly problematic. The result would be the denial of health 

coverage to nearly half of all older adults between age 55 and 64. Recent studies 

show the percentage could be even higher. 

The states in question, led by Republican governors and attorneys general, have 

launched an attack on Congressional power to enact social legislation. NSCLC is 

confident that the Supreme Court, when and if asked to rule on one of these cases, 

will ultimately find the requirement by Congress that individuals have minimum 

health coverage constitutional. 

The National Senior Citizens Law Center is a non-profit organization whose principal mission is to protect the rights of low-income older adults. Through advocacy, 

litigation, and the education and counseling of local advocates, we seek to ensure the 


ccoleman on DSK8P6SHH1PROD with HEARING
148 

1Society of Critical Care Medicine. Critical care statistics in the United States. http:// 

www.sccm.org/AboutSCCM/Public%20Relations/Pages/Statistics.aspx. 2 Halpern Na, Pastores SM. ‘‘Critical Care Medicine in the United States 2000–2005: An analysis of bed number, occupancy rates, payer mix and costs,’’ Critical Care Medicine 37 no. 1 

(2010). 3 Angus DC, Barnato AE, Linde-Zwirble WT, et al. ‘‘Use of Intensive care at the end of life 

in the United States: an epidemiologic study’’ Critical Care Medicine 32 (2004). 4 Health Resources and Services Administration Report to Congress: The Critical Care Workforce: A Study of the Supply and Demand for Critical Care Physicians. Requested by: Senate 

Report 108–81. Available at: http://bhpr.hrsa.gov/healthworkforce/reports/criticalcare/default.htm. Accessed November 2010. 5The Leapfrog Group. Fact Sheet. http://www.leapfroggroup.org/about_us/leapfrog-factsheet. 

health and economic security of those with limited income and resources, and access 

to the courts for all. For more information, visit our Web site at www.NSCLC.org. 

For more information contact: 

Kevin Prindiville 

Deputy Director 

f 

Roundtable on Critical Care Policy, Statement 

Chairman Camp and Ranking Member Levin and other Members of the Committee, we thank you for holding this important hearing to examine the Patient Protection and Affordable Care Act’s (PPACA) impact on the Medicare program and its 

beneficiaries. The Roundtable on Critical Care Policy supports the Committee’s commitment to ensuring that the reforms authorized by PPACA will be implemented 

in a way that improves the efficiency and effectiveness of our health care system 

by transforming the way health care is delivered in this country. 

Established in 2009, the Roundtable on Critical Care Policy is a nonprofit organization that provides a forum for leaders in critical care and public health to advance 

a common federal policy agenda designed to improve the quality, delivery and efficiency of critical care in the United States. The Roundtable brings together a broad 

cross-section of stakeholders, including the nation’s leading medical professionals 

with specialized training in critical care, patient groups, academia, public health advocacy and industry. 

The Roundtable is supportive of Acting Administrator for the Centers for Medicare and Medicaid Don Berwick’s simultaneous pursuit of the ‘‘Triple Aim’’: improving the experience of care, improving the health of populations, and reducing per 

capita costs of health care. However, as the Committee moves forward with overseeing the implementation of these goals and develops additional policies to 

strengthen and modernize Medicare, the Roundtable encourages the Committee to 

consider proposals focused on improving the care for those beneficiaries who are 

critically ill and injured. 

Each year, over five million Americans are admitted into traditional, surgical, pediatric, or neo-natal intensive care units (ICUs).1 The ICU is one of the most costly 

areas in the hospital, representing 13% of all hospital costs, with the total costs of 

critical care services in the U.S. exceeding $80 billion annually.2 Providers of critical 

care require specialized training, the care delivered in the ICU is technology-intensive, treatment is unusually complex due to what may be a patient’s system—or 

multiple system—challenges or failures, and outcomes have life or death consequences. Approximately 540,000 individuals die each year after admission to the 

ICU, and almost 20% of all deaths in the U.S. occur during a hospitalization that 

involves care in the ICU.3

Despite the significant role critical care medicine plays in providing high-quality 

health care, the PPACA did little to address the challenges that plague the critical 

care delivery system. A failure to address these challenges could jeopardize patient 

safety and do little to bend the curve on rising health care costs. 

Multiple studies have documented that the demands on the critical care workforce—including doctors, nurses, and respiratory therapists—are outpacing the supply of qualified critical care practitioners. A 2006 study by the Health Resources & 

Services Administration found that the current demand for intensivists—physicians 

with special training in critical care—will continue to exceed the available supply 

due largely to the growing elderly population, as individuals over the age of 65 consume a large percentage of critical care services.4 Studies by patient safety organizations, such as the Leapfrog Group, have found that intensivist-led ICU teams 

have been ‘‘shown to reduce the risk of patients dying in the ICU by 40%’’ 5 The 


ccoleman on DSK8P6SHH1PROD with HEARING
149 

6 Agency for Health Care Research and Quality, ‘‘Landmark Initiative to Reduce HealthcareAssociated Infections Cuts Death Among Medicare Patients in Michigan Intensive Care Units,’’ 

January 31, 2011 http://www.ahrq.gov/news/press/pr2011/haimiicupr.htm. 7The Dartmouth Institute For Health Policy & Clinical Practice, ‘‘Nearly One Third of Medicare Patients with Advanced Cancer Die in Hospitals and ICUs; About Half Get Hospice Care’’ 

Press Release November 16, 2010. 

current and projected critical care workforce shortages pose significant patient safety concerns. 

While PPACA included several initiatives to expand the health care workforce, 

they were largely focused on expanding primary care. However, a solution cannot 

be reached solely by adding to the workforce; we must also find ways to improve 

the efficiency of the existing workforce. That is why the Roundtable enthusiastically 

supports a provision included in PPACA that prioritizes within the newly established Centers for Medicare and Medicaid Innovation (CMMI) the testing of models 

that make use of electronic monitoring—specifically by intensivists and critical care 

specialists—to improve inpatient care. 

The Roundtable strongly urges the Committee to ensure that, as the Administration moves forward with new payment and delivery reforms, initiatives aimed at improving the quality of care delivered to the critically ill and injured are made a priority. Earlier this year, researchers at the Johns Hopkins Bloomberg School of Public Health found that hospitals in Michigan that implemented the Keystone Project, 

an ICU quality improvement initiative funded by the Agency for Healthcare Research and Quality, decreased an elderly person’s likelihood of dying while hospitalized by 24 percent.’’ 6 The Administration and Congress needs to support similar initiatives to ensure we continue to make progress in improving health outcomes for 

our critically ill and injured beneficiaries. 

The Roundtable also believes that policy changes are necessary to meet the needs 

of our most vulnerable patients during advanced illness. A recent study by the Dartmouth Institute for Health Policy and Clinical Practice found that ‘‘one in three 

Medicare cancer patients spend their last days in hospitals and intensive care 

units,’’ and that ‘‘clinical teams aggressively treat patients with curative attempts 

they may not want, at the expense of improving the quality of their life in the last 

weeks and months.’’ 7 The Roundtable encourages the Committee and the Administration to find ways to work together on this issue. 

And lastly, another challenge facing critical care medicine is the notable absence 

of research on the availability, appropriateness, and effectiveness of a wide array 

of medical treatments and modalities for the critically ill or injured. At present, 

many of the current, high-cost treatments delivered in the ICU lack comparative effectiveness data. Yet in 2009 when the Institute of Medicine released its mandated 

report recommending 100 topics to be given priority for comparative effectiveness 

research funding, few of these topics related to critical care. Moreover, current federal research efforts are partitioned and scattered across the government and 

throughout the National Institutes of Health’s (NIH) 27 institutes, making it difficult to coordinate existing research and identify gaps. 

As Members look to address these issues in the future, we hope that you will consider some of the reforms included in the ‘‘Critical Care Assessment and Improvement Act’’ that was introduced late last year by Congresswoman Tammy Baldwin 

and will be re-introduced this year. The legislation would authorize a much needed 

assessment of the current state of the critical care delivery system, including its capacity, capabilities, and economic impact. In addition, the bill would establish a 

Critical Care Coordinating Council within the NIH to coordinate the collection and 

analysis of information on current critical care research, identify gaps in such research, and strengthen partnerships. Lastly, the bill authorizes a number of initiatives to bolster federal disaster preparedness efforts to care for the critically ill or 

injured. 

The Roundtable on Critical Care Policy appreciates the opportunity to submit a 

statement for the record and looks forward to working with the Committee to 

strengthen our health care delivery system. 

Submitted by: Executive Director Stephanie Silverman 

f 


ccoleman on DSK8P6SHH1PROD with HEARING
150 

MATERIAL SUBMITTED FOR THE RECORD 

Questions for the Record: 


ccoleman on DSK8P6SHH1PROD with HEARINGInsert offset folio 36 here 70871.036
151 


ccoleman on DSK8P6SHH1PROD with HEARINGInsert offset folio 37 here 70871.037
152 


ccoleman on DSK8P6SHH1PROD with HEARINGInsert offset folio 38 here 70871.038
153 


ccoleman on DSK8P6SHH1PROD with HEARINGInsert offset folio 39 here 70871.039
154 


ccoleman on DSK8P6SHH1PROD with HEARINGInsert offset folio 40 here 70871.040
155 


ccoleman on DSK8P6SHH1PROD with HEARINGInsert offset folio 41 here 70871.041
156 


ccoleman on DSK8P6SHH1PROD with HEARINGInsert offset folio 42 here 70871.042
157 


ccoleman on DSK8P6SHH1PROD with HEARINGInsert offset folio 43 here 70871.043
158 


ccoleman on DSK8P6SHH1PROD with HEARINGInsert offset folio 44 here 70871.044
159 


ccoleman on DSK8P6SHH1PROD with HEARINGInsert offset folio 45 here 70871.045
160 


ccoleman on DSK8P6SHH1PROD with HEARINGInsert offset folio 46 here 70871.046
161 


ccoleman on DSK8P6SHH1PROD with HEARINGInsert offset folio 47 here 70871.047
162 


ccoleman on DSK8P6SHH1PROD with HEARINGInsert offset folio 48 here 70871.048
163 


ccoleman on DSK8P6SHH1PROD with HEARINGInsert offset folio 49 here 70871.049
164 


ccoleman on DSK8P6SHH1PROD with HEARINGInsert offset folio 50 here 70871.050
165 

f 


ccoleman on DSK8P6SHH1PROD with HEARINGInsert offset folio 51 here 70871.051
166 

MR. BERWICK—TIBERI DME DATA REQUEST


ccoleman on DSK8P6SHH1PROD with HEARINGInsert offset folio 52 here 70871.052 Insert offset folio 53 here 70871.053
167 

Æ 


ccoleman on DSK8P6SHH1PROD with HEARINGInsert offset folio 54 here 70871.054 Insert offset folio 55 here 70871.055