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	<title> - EXAMINING MEDICAID AND CHIP'S FEDERAL MEDICAL ASSISTANCE PERCENTAGE</title>
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	[House Hearing, 114 Congress]
	[From the U.S. Government Publishing Office]





	EXAMINING MEDICAID AND CHIP'S FEDERAL MEDICAL ASSISTANCE PERCENTAGE

	=======================================================================

	HEARING

	BEFORE THE

	SUBCOMMITTEE ON HEALTH

	OF THE

	COMMITTEE ON ENERGY AND COMMERCE
	HOUSE OF REPRESENTATIVES

	ONE HUNDRED FOURTEENTH CONGRESS

	SECOND SESSION

	__________

	FEBRUARY 10, 2016

	__________

	Serial No. 114-115




	[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]






	Printed for the use of the Committee on Energy and Commerce

	energycommerce.house.gov
	______

	U.S. GOVERNMENT PUBLISHING OFFICE

	20-030 WASHINGTON : 2017
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	COMMITTEE ON ENERGY AND COMMERCE

	FRED UPTON, Michigan
	Chairman
	JOE BARTON, Texas FRANK PALLONE, Jr., New Jersey
	Chairman Emeritus Ranking Member
	ED WHITFIELD, Kentucky BOBBY L. RUSH, Illinois
	JOHN SHIMKUS, Illinois ANNA G. ESHOO, California
	JOSEPH R. PITTS, Pennsylvania ELIOT L. ENGEL, New York
	GREG WALDEN, Oregon GENE GREEN, Texas
	TIM MURPHY, Pennsylvania DIANA DeGETTE, Colorado
	MICHAEL C. BURGESS, Texas LOIS CAPPS, California
	MARSHA BLACKBURN, Tennessee MICHAEL F. DOYLE, Pennsylvania
	Vice Chairman JANICE D. SCHAKOWSKY, Illinois
	STEVE SCALISE, Louisiana G.K. BUTTERFIELD, North Carolina
	ROBERT E. LATTA, Ohio DORIS O. MATSUI, California
	CATHY McMORRIS RODGERS, Washington KATHY CASTOR, Florida
	GREGG HARPER, Mississippi JOHN P. SARBANES, Maryland
	LEONARD LANCE, New Jersey JERRY McNERNEY, California
	BRETT GUTHRIE, Kentucky PETER WELCH, Vermont
	PETE OLSON, Texas BEN RAY LUJAN, New Mexico
	DAVID B. McKINLEY, West Virginia PAUL TONKO, New York
	MIKE POMPEO, Kansas JOHN A. YARMUTH, Kentucky
	ADAM KINZINGER, Illinois YVETTE D. CLARKE, New York
	H. MORGAN GRIFFITH, Virginia DAVID LOEBSACK, Iowa
	GUS M. BILIRAKIS, Florida KURT SCHRADER, Oregon
	BILL JOHNSON, Ohio JOSEPH P. KENNEDY, III,
	BILLY LONG, Missouri Massachusetts
	RENEE L. ELLMERS, North Carolina TONY CARDENAS, California
	LARRY BUCSHON, Indiana
	BILL FLORES, Texas
	SUSAN W. BROOKS, Indiana
	MARKWAYNE MULLIN, Oklahoma
	RICHARD HUDSON, North Carolina
	CHRIS COLLINS, New York
	KEVIN CRAMER, North Dakota
	Subcommittee on Health

	JOSEPH R. PITTS, Pennsylvania
	Chairman
	BRETT GUTHRIE, Kentucky GENE GREEN, Texas
	Vice Chairman Ranking Member
	ED WHITFIELD, Kentucky ELIOT L. ENGEL, New York
	JOHN SHIMKUS, Illinois LOIS CAPPS, California
	TIM MURPHY, Pennsylvania JANICE D. SCHAKOWSKY, Illinois
	MICHAEL C. BURGESS, Texas G.K. BUTTERFIELD, North Carolina
	MARSHA BLACKBURN, Tennessee KATHY CASTOR, Florida
	CATHY McMORRIS RODGERS, Washington JOHN P. SARBANES, Maryland
	LEONARD LANCE, New Jersey DORIS O. MATSUI, California
	H. MORGAN GRIFFITH, Virginia BEN RAY LUJAN, New Mexico
	GUS M. BILIRAKIS, Florida KURT SCHRADER, Oregon
	BILLY LONG, Missouri JOSEPH P. KENNEDY, III,
	RENEE L. ELLMERS, North Carolina Massachusetts
	LARRY BUCSHON, Indiana TONY CARDENAS, California
	SUSAN W. BROOKS, Indiana FRANK PALLONE, Jr., New Jersey (ex
	CHRIS COLLINS, New York officio)
	JOE BARTON, Texas
	FRED UPTON, Michigan (ex officio)





















	C O N T E N T S

	----------
	Page
	Hon. Joseph R. Pitts, a Representative in Congress from the
	Commonwealth of Pennsylvania, opening statement................ 1
	Prepared statement........................................... 3
	Hon. Marsha Blackburn, a Representative in Congress from the
	State of Tennessee, opening statement.......................... 5
	Hon. Frank Pallone, Jr., a Representative in Congress from the
	State of New Jersey, opening statement......................... 6

	Witnesses

	Alison Mitchell, Analyst in Health Care Financing, Congressional
	Research Service............................................... 8
	Prepared statement........................................... 10
	Anne Schwartz, Ph.D., Executive Director, Medicaid and CHIP
	Payment and Access Commission.................................. 13
	Prepared statement........................................... 15
	Answers to submitted questions............................... 106
	Carolyn Yocom, Director Of Health Care, Government Accountability
	Office......................................................... 33
	Prepared statement........................................... 35
	Answers to submitted questions............................... 108
	John Hagg, Director of the Medicaid Audits, Office of Inspector
	General, U.S. Department of Health and Human Services.......... 49
	Prepared statement........................................... 51
	Answers to submitted questions............................... 113

	Submitted Material

	Chart entitled, ``FY2014 Total Spending $3.5 Trillion, submitted
	by Mr. Shimkus................................................. 70
	Statement of the Illinois Health and Hospital Association,
	submitted by Ms. Schakowsky.................................... 90
	Statement of the American Academy of Pediatrics, submitted by Mr.
	Pitts.......................................................... 91


	EXAMINING MEDICAID AND CHIP'S FEDERAL MEDICAL ASSISTANCE PERCENTAGE

	----------


	WEDNESDAY, FEBRUARY 10, 2016

	House of Representatives,
	Subcommittee on Health,
	Committee on Energy and Commerce,
	Washington, DC.
	The subcommittee met, pursuant to call, at 10:00 a.m., in
	room 2123 Rayburn House Office Building, Hon. Joe Pitts
	(chairman of the subcommittee) presiding.
	Members present: Representatives Pitts, Guthrie, Shimkus,
	Murphy, Blackburn, Lance, Griffith, Bilirakis, Long, Ellmers,
	Bucshon, Brooks, Collins, Engel, Capps, Schakowsky, Castor,
	Sarbanes, Matsui, Luja AE1n, Schrader, Kennedy, Ca AE1rdenas,
	and Pallone (ex officio).
	Staff present: Rebecca Card, Assistant Press Secretary;
	Paul Edattel, Chief Counsel, Health; Tim Pataki, Member
	Services Director; Graham Pittman, Legislative Clerk, Health;
	Michelle Rosenberg, GAO Detailee, Health; Chris Santini, Policy
	Coordinator, Oversight and Investigations; Chris Sarley, Policy
	Coordinator, Environment and the Economy; Heidi Stirrup, Policy
	Coordinator, Health; Sophie Trainor, Policy Advisor, Health;
	Josh Trent, Deputy Chief Counsel, Health; Christine Brennan,
	Minority Press Secretary; Jeff Carroll, Minority Staff
	Director; Tiffany Guarascio, Minority Deputy Staff Director and
	Chief Health Advisor; Rachel Pryor, Minority Health Policy
	Advisor; Samantha Satchell, Minority Policy Analyst; and Andrew
	Souvall, Minority Director of Communications, Outreach, and
	Member Services.

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

	Mr. Pitts. The subcommittee will come to order. The
	chairman recognizes himself for an opening statement.
	Today's hearing will provide an opportunity for members to
	discuss the Federal Medical Assistance Percentage or FMAP rate.
	The FMAP is the Federal statutory financing formula that is the
	basis for determining the federal government's financial share
	of most Medicaid and Children's Health Insurance Program
	expenditures, CHIP.
	While exploring the FMAP may seem like a dense topic to
	some, today's hearing allows members to look under the cabinet
	to examine Medicaid's plumbing, how money flows throughout the
	system. It is important for members to understand how the FMAP
	works, because it impacts how an estimated $545 billion in
	program expenditures will be spent this year.
	Federal law specifies the formula for calculating Federal
	Medical Assistance Percentages and requires the Secretary of
	Health and Human Services to calculate and publish FMAP rates
	each year. The statutory formula compares the individual
	state's per capita income to the Nation's per capita income in
	order to determine the portion of Medicaid expenditures the
	federal government will finance in each state. The lower a
	state's per capita income, the greater the assistance the state
	receives from the federal government, so, the higher the
	state's FMAP.
	Federal statute specifies that the basic Medicaid matching
	rate for states will go no lower than 50 percent or higher than
	83 percent. Medicaid has used the basic FMAP formula since its
	creation, more than 50 years ago.
	Since the creation of the Medicaid program, Congress has,
	over time, created several different levels of federal
	financial participation or federal matching for different
	services, benefits, and populations. These higher levels of
	federal matching are exceptions to the general FMAP.
	For example, since the 1970s, the federal government has
	paid 100 percent for services furnished through Indian Health
	Services and tribal facilities and 90 percent for family
	planning services and supplies. These exceptions are higher
	than any state's regular FMAP and apply uniformly to all
	states. Today we will be discussing numerous other exceptions
	to the regular FMAP.
	In recent years, Congress has twice increased FMAPs across
	the board to provide temporary fiscal relief to states during
	recessions. Most recently, Congress added a new level of
	increased federal matching through the Affordable Care Act's
	expansion of the Medicaid program to non-disabled childless
	adults. For new expansion states, the Affordable Care Act
	included a matching rate of 100 percent for the expansion
	population through this calendar year, after which federal
	matching levels decline over time to reach 90 percent by 2020
	and remain at that rate, at least under current law.
	I should also point out that the FMAP also serves as the
	basis for determining the federal government's share of
	expenditures for the Children's Health Insurance Program, CHIP.
	Section 2105(b) of the Social Security Act stipulates an
	Enhanced FMAP rate for both services and administration under
	CHIP. The E-FMAP rate reduces the state's share under the
	regular FMAP rate by 30 percent. Additionally, the Affordable
	Care Act increased the E-FMAP by 23 percentage points, not to
	exceed 100 percent, for fiscal years 2016 through 2019. As a
	result, the federal government is now financing 100 percent of
	the CHIP programs in 12 states.
	Overall, I think today's hearing presents members with an
	important opportunity to better understand the FMAP rate that
	is hardwired into the heart of the program. I also hope members
	will grapple with the challenges created by the current FMAP
	formula, including the ways that the current patchwork of
	federal matching arrangements impacts the integrity of the
	federal and state cost-sharing relationship.
	Today, we have one panel of knowledgeable experts from CRS,
	MACPAC, GAO, and HHS OIG who will present their ideas and
	recommendations on these issues and answer members' questions.
	I appreciate each of the witnesses being here today.
	[The prepared statement of Mr. Pitts follows:]

	Prepared statement of Hon. Joseph R. Pitts

	The Subcommittee will come to order.
	The Chairman will recognize himself for an opening
	Statement.
	Today's hearing will provide an opportunity for members to
	discuss the ``Federal Medical Assistance Percentage'' or ``F-
	MAP'' (FMAP) rate. The FMAP is the Federal statutory financing
	formula that is the basis for determining the Federal
	government's financial share of most Medicaid and Children's
	Health Insurance Program (CHIP) expenditures.
	While exploring the FMAP may seem like a dense topic to
	some, today's hearing allows members to look under the cabinet
	to examine Medicaid's plumbing--how money flows throughout the
	system. It is important for members to understand how the FMAP
	works, because it impacts how an estimated $545 billion in
	program expenditures will be spent this year.
	Federal law specifies the formula for calculating Federal
	Medical Assistance Percentages and requires the Secretary of
	Health and Human Services to calculate and publish FMAP rates
	each year. The statutory formula compares individual State's
	per capita income to the nation's per capita income in order to
	determine the portion of Medicaid expenditures the Federal
	government will finance in each State. The lower a State's per
	capita income, the greater the assistance the State receives
	from the Federal government--so the higher the State's FMAP.
	Federal statute specifies that the basic Medicaid matching
	rate for States will go no lower than 50% or higher than 83
	percent. Medicaid has used the basic FMAP formula since its
	creation, more than 50 years ago.
	Since the creation of the Medicaid program, Congress has,
	over time, created several different levels of Federal
	financial participation, or ``federal matching'' for different
	services, benefits, and populations. These higher levels of
	federal matching are exceptions to the general FMAP.
	For example, since the 1970s, the Federal government has
	paid 100 percent for services furnished through Indian Health
	Services and tribal facilities and 90 percent for family
	planning services and supplies.
	These exceptions are higher than any State's regular FMAP
	and apply uniformly to all States. Today we will be discussing
	numerous other exceptions to the regular FMAP.
	In recent years, Congress has twice increased FMAPs across
	the board to provide temporary fiscal relief to States during
	recessions.
	Most recently, Congress added a new level of increased
	federal matching through the Affordable Care Act's expansion of
	the Medicaid program to non-disabled childless adults. For new
	expansion states, the Affordable Care Act included a matching
	rate of 100 percent for the expansion population through this
	calendar year, after which Federal matching levels decline over
	time to reach 90 percent by 2020--and remain at that rate, at
	least under current law.
	I should also point out that the FMAP also serves as the
	basis for determining the Federal government's share of
	expenditures for the Children's Health Insurance Program-CHIP.
	Section 2105(b) of the Social Security Act stipulates an
	Enhanced FMAP rate for both services and administration under
	CHIP. The E-FMAP rate reduces the State share under the regular
	FMAP rate by 30 percent.
	Additionally, the Affordable Care Act increased the E-FMAP
	by 23 percentage points (not to exceed 100 percent) for fiscal
	years 2016 through 2019. As a result, the Federal government is
	now financing 100 percent of the CHIP programs in 12 states.
	Overall, I think today's hearing presents members with an
	important opportunity to better understand the FMAP rate that
	is hardwired into the heart of the program. I also hope members
	will grapple with the challenges created by the current FMAP
	formula--including the ways that the current patchwork of
	Federal matching arrangements impact the integrity of the
	Federal and State cost-sharing relationship.
	Today we have one panel of knowledgeable experts from CRS,
	MACPAC, GAO, and HHS OIG who will present their ideas and
	recommendations on these issues and answer Members' questions.
	I appreciate each of the witnesses being here today and
	will now yield to the Vice Chairman of the full committee, Mrs.
	Blackburn.

	Mr. Pitts. And I yield back the balance of my time. I now
	recognize Mr. Schrader of Oregon for an opening statement.
	Mr. Schrader. Thank you, Mr. Chairman. I will probably
	reserve most of my comments for the question period but I
	wanted to yield some time to Mr. Luja AE1n.
	Mr. Luja AE1n. Mr. Chairman, thank you so very much and to
	our ranking member, I really appreciate the time today.
	I care deeply about these programs. As we see the impact to
	people all across America, this landmark program makes a
	difference in the lives of the poor, our seniors, people with
	disabilities, and truly provides them the peace of mind that
	they can access affordable care without fear of financial ruin.
	We have to be mindful of that.
	One in three children in our country receive coverage
	through Medicaid and the Affordable Care Act's expansion of
	this program is strengthening coverage throughout the United
	States. In my home State of New Mexico, more than 250,000
	people have benefitted from the ACA's Medicaid expansion.
	In New Mexico, we have also recently seen what happens to
	people when they can't receive the care that they need. More
	than 2 years ago, New Mexico's Behavioral Health System was
	needlessly upended by the state when they suspended Medicaid
	payments to 15 providers. This resulted in disruptions and gaps
	in patients' care.
	On Monday, just a few days ago or just 2 days ago, ten
	additional providers were cleared of fraud. In total, 13 have
	now been exonerated. This manufactured crisis which has
	impacted some of New Mexico's most vulnerable never should have
	occurred and left our Behavioral Health System in shambles.
	It takes decades to build a strong system of care in New
	Mexico's largely rural underserved areas. Where sole providers
	become vital to the fabric of our community, those
	relationships and developing that trust with patients is
	critical and we have to rebuild that system now.
	To achieve that goal, I am finalizing a bill that would
	encourage states like New Mexico to make the necessary
	investments in their Behavioral Health Systems when Congress
	ask states to update and modernize their infrastructure for
	enrollment. We provided states with an Enhanced FMAP to do just
	that. If we want states to invest in behavioral health, we
	should provide an enhanced federal matching rate to prioritize
	these investments. The United States has never supported mental
	health in this way. Especially with the expansion of Medicaid
	across the country, we must ensure that states continue to
	improve their capacity to provide mental health services.
	I look forward to the testimony and discussing how we can
	use FMAP to strengthen our Behavioral Health System.
	And with that, Mr. Chairman, I would yield back the
	balance of my time to Mr. Schrader.
	Mr. Schrader. Thank you very much. Anyone else on the
	Democratic side? Ms. Matsui.
	Ms. Matsui. Thank you very much for yielding and I thank
	the witnesses for being here today and the chairman for having
	this hearing.
	For the past 50 years, the Medicaid program has
	successfully improved the ability of lower income Americans to
	access essential health services. Today, more than 72 million
	Americans depend on Medicaid and CHIP for their health
	insurance. The vast majority of these enrollees are children,
	the disabled, or the elderly.
	In addition to improving healthcare access, Medicaid is
	notable for its program efficiency. Medicaid provides more
	comprehensive benefits than private insurance and provides
	those benefits at lower out-of-pocket costs. In addition,
	Medicaid per beneficiary costs are lower than per beneficiary
	costs for Medicare and private insurance and those costs are
	growing far more slowly than either Medicare or private
	insurance.
	The Medicaid program continues to improve its efficiency
	and its demonstration projects allow the states the flexibility
	to test new models of delivery that improve program value.
	Instead of talking about ways to reduce Medicaid, we should be
	talking about ways to strengthen Medicaid, to expand coverage,
	to improve quality of care and, in turn, improve health
	outcomes for millions of Americans. Thank you and I yield back
	to Dr. Schrader.
	Mr. Schrader. Anyone else on the Democratic side? Mr.
	Pallone.
	Mr. Pitts. You will get your full time.
	Mr. Schrader. Mr. Pallone, I will give Mr. Sarbanes an
	opportunity then you will get your full time.
	Mr. Pallone. Oh, sure.
	Mr. Schrader. Mr. Sarbanes.
	Mr. Sarbanes. I will be very quick. I am looking forward to
	the testimony.
	I had the opportunity for about 18 years as an attorney to
	work with retirement communities, nursing homes, assisted
	living facilities in the State of Maryland and saw how critical
	the resource of Medicaid is for our seniors. And so keeping
	this program strong and also exploring opportunities to
	innovate with it and figure out how the program can support
	seniors in a number of different settings, as we move forward
	and the opportunity to do that in a way that can also save some
	of the costs and be efficient I think is something we want to
	explore.
	So, it is a really important program and this particular
	formula for funding has worked overall very well. So, we look
	forward to your testimony so we can understand that more and
	think about the potential for future development of the
	program.
	I yield back.
	Mr. Schrader. I yield back our time, Mr. Chairman.
	Mr. Pitts. The chair thanks the gentleman. I now recognize
	the vice chair of the full committee, Mrs. Blackburn, for 5
	minutes for opening statement.

	OPENING STATEMENT OF HON. MARSHA BLACKBURN, A REPRESENTATIVE IN
	CONGRESS FROM THE STATE OF TENNESSEE

	Mrs. Blackburn. Thank you, Mr. Chairman. And I want to
	welcome you all and thank you for being here.
	This is an issue that we continue to look at and review and
	it is appropriate that we do. When I am at home and in my
	district, one of the things I hear about most often are the
	efficiencies and the inefficiencies of working through the
	Medicaid delivery system which, in our state is TennCare. You
	all probably know it and know the stories of TennCare well.
	What we need to do as we continue to review these funding
	formularies and the mechanisms, transparency is important,
	continued oversight is important, integrity in the program is
	something that is important. I think another thing that is a
	topic for discussion as we look at the formulary and what the
	basis ought to be is saying is it time to give Medicaid back to
	the states for the states to administer this program. That is
	another way to look at it. And we will be interested to hear
	your thoughts on that.
	Many of our governors and many of our state elected
	officials would like to see us do that. They think they could
	be more efficient and Ms. Matsui mentioned the opportunity for
	some to innovate in their states. And yes, indeed, looking at
	new flexibilities that allow innovation is something that maybe
	we need to have greater discussion about that.
	So, welcome to all of you and thank you. And Mr. Chairman,
	I will yield to Mr. Shimkus, it looks like, is seeking time.
	Yield to Mr. Shimkus.
	Mr. Shimkus. Thank you. I appreciate my colleague from
	Tennessee.
	I am just going to throw something on the table. I have got
	questions later on. But Mr. Chairman, I was visited by a
	delegation of businessmen from Puerto Rico last night and they
	have--and I just want to raise this because I think for the
	average member this financial crisis, we are now starting to at
	least know a little bit about it. But since we are on Medicaid,
	I was told that they have a $300 million cap on spending. They
	are not in the Medicaid system. They don't have FMAP. And there
	is an impending cliff coming in April of 2017 that I think is
	worthy of our attention and maybe a hearing and a discussion
	because if what I was told was true, it is an impending
	additional disaster for that part of our country that really
	doesn't have a voting member of the House of Representatives.
	So with that, I will throw that out and I will yield back
	to my colleague.
	Mrs. Blackburn. I thank the gentleman. Anyone else seeking
	time before I yield it back to the chairman?
	Mr. Chairman, I yield back.
	Mr. Pitts. The chair thanks the gentlelady and I recognize
	the ranking member of the full committee, Mr. Pallone, for 5
	minutes for an opening statement.

	OPENING STATEMENT OF HON. FRANK PALLONE, JR., A REPRESENTATIVE
	IN CONGRESS FROM THE STATE OF NEW JERSEY

	Mr. Pallone. Thank you, Mr. Chairman and thanks for holding
	the hearing for the witnesses being here today.
	I believe the government exists to help all Americans
	succeed and improving and strengthening Medicaid for
	generations to come continues to be a primary goal of mine.
	Medicaid is not a welfare program. It is a health insurance
	program that more Americans depend on than any other single
	federal health program. In fact, Medicaid provides more than
	one in three children with a chance at a healthy start in life
	and one in seven Medicare seniors are actually also Medicaid
	seniors. The truth is, the overwhelming majority of the more 71
	million Medicaid beneficiaries are children, the elderly, the
	disabled, and pregnant women, all our most vulnerable
	populations.
	Medicaid was designed at the federal level to expand and
	contract according to a state's need and that is a tenant we
	must protect and improve, not reverse. And despite the
	incredibly complex nature of its shared federal and state
	financing, Medicaid is an efficient program, its cost per
	beneficiary is substantially lower than private insurance and
	Medicare and in recent years, these costs have grown far more
	slowly.
	The facts also show that Medicaid has a lower improper
	payment rate than many of our federal health programs, all of
	which cover less people.
	Every single state Medicaid program has undertaken projects
	testing new models of care delivery that promote quality and
	value in the Medicaid program. In fact, the Medicaid program is
	often called the innovation incubator.
	So, as you know more about Medicaid's financing structure
	or FMAP today, let's think how to build on these efforts. That
	is the right way to promote a value-based Medicaid program for
	the future. FMAP may not be perfect but merely looking at
	baselines, growth factors, and state contributions ignores the
	most critical issue, which is providing care in the most
	efficient way possible to some of our most complicated
	populations, the tens of millions of low-income vulnerable
	beneficiaries that rely on Medicaid and the healthcare
	providers and plans that serve them.
	I yield back, unless someone else--I think our other
	members have all had an opportunity, Mr. Chairman, so I yield
	back.
	Mr. Pitts. The chair thanks the gentleman.
	That concludes the opening statements. As always, all
	members' written opening statements will be made a part of the
	record.
	We have one panel with us today, four witnesses. Let me
	introduce them in the order of their testimony.
	First of all, Allison Mitchell, Analyst in Health Care
	Financing, Congressional Research Service. Thank you for
	coming. Secondly, Dr. Anne Schwartz, Executive Director,
	Medicaid and CHIP Payment and Access Commission, MACPAC. Thank
	you for coming. Carolyn Yocom, Director of Health Care,
	Government Accountability Office, GAO. Thank you for coming.
	And John Hagg, is it? Hagg, Director of the Medicaid Audits,
	Office of Inspector General, U.S. Department of Health and
	Human Services.
	Thank you all for coming. You will each be given 5 minutes
	to summarize your testimony. Your written testimony will be
	made a part of the record.
	So, at this point, the chair recognizes Ms. Mitchell, for 5
	minutes for her summary.

	STATEMENTS OF ALISON MITCHELL, ANALYST IN HEALTH CARE
	FINANCING, CONGRESSIONAL RESEARCH SERVICE; ANNE SCHWARTZ,
	PH.D., EXECUTIVE DIRECTOR, MEDICAID AND CHIP PAYMENT AND ACCESS
	COMMISSION; CAROLYN YOCOM, DIRECTOR OF HEALTH CARE, GOVERNMENT
	ACCOUNTABILITY OFFICE; AND JOHN HAGG, DIRECTOR OF THE MEDICAID
	AUDITS, OFFICE OF INSPECTOR GENERAL, U.S. DEPARTMENT OF HEALTH
	AND HUMAN SERVICES

	STATEMENT OF ALISON MITCHELL

	Ms. Mitchell. Chairman Pitts, members of the subcommittee,
	thank you for the opportunity to appear before you today to
	provide an overview of the Federal Medical Assistant
	Percentage, or the FMAP, and the exceptions to the FMAP.
	Medicaid is financed by both the federal government and the
	states and the federal share of Medicaid expenditures is
	determined by the FMAP. The FMAP varies by state and it has a
	minimum of 50 percent and a statutory maximum of 83 percent.
	And for a state with a 60 percent FMAP, the state gets 60 cents
	back from the federal government for every dollar it spends on
	its Medicaid program.
	The FMAP is also used to determine the federal share of
	other federal programs, such as the Temporary Assistance for
	Needy Families contingency funds and the FMAP is also used to
	calculate the Enhanced FMAP or E-FMAP, which determines the
	federal share for the state Children Health Insurance Program
	or CHIP.
	The FMAPs are calculated annually and they vary according
	to each state's per capita income. So, states with high per
	capita income receive lower FMAP or matching rates and states
	with low per capita income receive higher matching rates.
	Currently, in fiscal year 2016, regular FMAP rates range
	from 50 percent in 13 states to 74 percent in Mississippi. And
	the E-FMAP used by CHIP is higher than the regular FMAP and it
	is determined by reducing the state share under the FMAP by 30
	percent. And for fiscal year 2016 through 2019, there is a 23
	percentage point increase in the E-FMAP. That means the current
	statutory range for the E-FMAP is 88 percent to 100 percent and
	in fiscal year 2016, 12 states are receiving that 100 percent
	E-FMAP.
	The per capita income amounts used in the FMAP formula are
	equal to the average of the three most recent calendar years of
	data from the Department of Commerce. This helps to moderate
	the fluctuations in states' FMAP rates over time. Also, the per
	capita income amounts used to calculate the FMAP rates are
	several years old by the time the FMAP goes into effect.
	The FMAP is impacted by each state's income and population
	relative to the national average. The impact of the national
	economic downturn or upturn on a particular state will be
	related to that structure of that state's economy.
	The FMAP changes from year to year for most states and
	these changes are often within one percentage point. However,
	even these small changes can have major budgetary implications.
	The exceptions to the regular FMAP have been made for
	certain states' situations, populations, providers, and
	services. There are currently more than 20 exceptions to the
	FMAP. Some of these are quite old and some of them are newer.
	For instance, since the beginning of the Medicaid program, most
	administrative services have been matched at a 50 percent for
	all states and starting in the 1970s, services provided to
	Medicaid enrollees at Indian Health Service facilities have
	been reimbursed at 100 percent.
	Also, the District of Columbia's FMAP rate is not
	determined according to the statutory formula. It is set in
	statute at 70 percent and that has been the case since 1998.
	And the Patient Protection and Affordable Care Act added a
	couple of new FMAP exceptions. The main one there is the FMAP
	for the matching rate for the newly eligible individuals under
	the ACA Medicaid expansion. For these individuals, states
	receive 100 percent matching for 2014 through 2016 and that
	phases down to 90 percent in 2020 and subsequent years.
	The federal share of Medicaid expenditures used to be about
	57 percent on average across all states in a typical year.
	However, with the exceptions to the FMAP added by the ACA, this
	has increased and in 2014, fiscal year 2014, the federal
	government paid about 60 percent of Medicaid expenditures on
	average across all the states.
	This concludes my statement and I would be happy to answer
	questions at the appropriate time.
	[The prepared statement of Alison Mitchell follows:]



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	Mr. Pitts. The chair thanks the gentlelady and now
	recognizes Dr. Schwartz, for 5 minutes for your summary.

	STATEMENT OF ANNE SCHWARTZ

	Ms. Schwartz. Good morning, Chairman Pitts and the members
	of the subcommittee on Health. As MACPAC's Executive Director,
	my testimony today reflects the consensus views of the
	commission itself anchored in a body of analytic work over the
	past 5 years and we appreciate the opportunity to share
	MACPAC's views this morning.
	At the request of the leadership of this subcommittee and
	your colleagues in the Senate, MACPAC is engaged in a long-term
	work plan focused on advising Congress about policies and
	financing reforms to ensure Medicaid sustainability. To date,
	we have focused on documenting trends in Medicaid expenditures,
	looking at the drivers of this spending and considering the
	incentives created by the current system of financing.
	As others have already described, state Medicaid programs
	received federal fund to match the funds they spend on health
	services to Medicaid beneficiaries and its financing
	arrangement goes back to the program's very beginnings 50 years
	ago.
	Today, the federal share is determined by the FMAP with
	higher matching rates to states that have lower per capita
	incomes relative to the national average and vice-versa with
	exceptions for certain populations, providers, and services.
	Spending for administration is general matched at 50 percent.
	CHIP has its own match rates, known as the Enhanced FMAP, which
	is substantially higher than those under Medicaid, in some
	cases at 100 percent.
	At various points in the program's history, congressional
	regulatory action have increased the FMAP for specific
	activities. For example, to help execute certain program
	functions, such as implementation of modernized eligibility and
	enrollment systems to create stronger incentives for states to
	provide optional benefits and to encourage states to expand
	eligibility to optional groups, such as women diagnosed with
	breast and cervical cancer.
	Enhanced match has also been used to provide fiscal relief
	to states during economic downturns or when affected by
	disasters. In addition, increasing the federal match can allow
	Congress to make policy changes without imposing additional
	costs on states, for example, as was the case with the required
	increase in payments to primary care physicians in 2013 and
	2014.
	As others on the panel will note, this system of financing
	has been criticized for providing open-ended amounts of federal
	funds and for not incentivizing states to be efficient.
	Moreover, it can encourage states to broaden Medicaid to
	include other health activities, where possible, in order to
	draw down federal funds.
	On the other hand, these incentives, while strong, are not
	absolute. States may not claim federal share unless they spend
	state dollars, raised from legal sources, on activities that
	are legally matchable. Mindful of their own budget constraints,
	as well as other political and economic factors that shape
	their health care markets and the design of their Medicaid
	programs, states respond differently at different times and in
	different circumstances.
	So, let me provide a few examples. States do make informed
	choices about the design of their programs and thus, they don't
	always take up the opportunity to draw enhanced match. Section
	2703 of the ACA provided authority for states to create health
	homes integrating care for people with chronic conditions and
	mental health conditions and it provided a 90 percent federal
	match for 2 years and fewer than half of the states have done
	so, with only 20 states and the District of Columbia adopting
	the model as of December 2015.
	Second, because states must raise state share, they do not
	always take advantage of all federal dollars that are available
	to them.
	In the case of CHIP, of the $21.1 billion in federal funds
	appropriated for fiscal year 2015, only $11.3 billion was
	provided to states in allotments based on their prior year
	spending.
	In addition to the other criticisms under the matching
	formula that will be discussed by others on the panel, I would
	add several other concerns that MACPAC has identified. First,
	the differential between the federal match for services and
	administration exerts downward pressure on states' willingness
	to invest in activities such as measuring utilization and
	quality, collecting and analyzing data, and ensuring program
	integrity. In the 37 states where health services are matched
	at greater than 50 percent, states can increase the total
	Medicaid budget by prioritizing spending for services over
	administration.
	The federal government does provide enhanced matching funds
	for some administrative activities but enhanced match is not
	available for others that could improve efficiency and promote
	value. For example, the differential between the two match
	rates creates a disincentive for states to focus on prevention
	of fraud and abuse. Such functions are matched at 50 percent,
	while the activities of the Medicaid Fraud Control Unit which
	are aimed at detecting fraud and abuse after they have occurred
	are matched at 75 percent.
	Over the next several months, MACPAC will be focusing
	intensively on program financing and design questions. Our
	analysis will consider design questions and will also consider
	the impact of these approaches on states, plans, providers and
	beneficiaries. We look forward to sharing this work in our June
	report.
	[The prepared statement of Anne Schwartz follows:]


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	Mr. Pitts. The chair thanks the gentlelady and now
	recognizes Ms. Yocom, for 5 minutes for her summary.

	STATEMENT OF CAROLYN YOCOM

	Ms. Yocom. Thank you. It is a pleasure to be here today to
	discuss the Medicaid formula, and GAO's work surrounding this
	issue.
	As we have talked about, the FMAP formula is based on a
	state's per capita income in relation to the national average.
	And it is over a 3-year period, which smooths out the
	fluctuations in the business cycle and focuses on longer-term
	trends. This is helpful to states in terms of their budgets and
	budgetary planning.
	In prior work, we have noted concerns regarding how FMAP
	formula allocates funds across the states, including during
	times of recession or economic downturn. My statement today
	focuses on the FMAP and options for more equitably allocating
	Medicaid funds across states and methods of better targeting
	increased assistance to states during an economic downturn.
	With regard to the more equitable allocation of Medicaid
	funds across states, per capita income is a poor proxy for
	states' fiscal capacity, as well as for the size and
	composition of a state's population in need of Medicaid. First,
	per capita income does not fully measure state resources. It
	includes some things, like wages, grants, and interest, but it
	does not include other resources such as corporate income.
	Second, per capita income does not take into account
	differences across the states in the health care service needs
	of low-income people, nor does it include any measure of
	geographic difference in the cost of providing such services.
	As an alternative to per capita income, GAO has identified
	three measures that could be used to allocate Medicaid funding
	more equitably. Two of these measures account for service
	demand and they also account for geographic cost differences.
	This improves equity among beneficiaries by ensuring that the
	level of services across states has the ability to offer a
	comparable level of services for each person in need. The third
	measure accounts for state resources and this improves taxpayer
	equity by ensuring that taxpayers in poorer states are not more
	heavily burdened than those in wealthier ones. These three
	measures could be combined to provide a basis for allocating
	Medicaid funds in a more equitable manner than what currently
	occurs using the FMAP.
	With regard to targeting increased assistance to states
	during recessions and other economic downturns, Congress has
	acted on multiple occasions to provide states with temporary
	increases in the FMAP. Such assistance is important, for during
	economic downturns, Medicaid enrollment often increases, while
	available state revenues decline.
	At the request of Congress, GAO was asked to consider
	methods of assisting states during economic downturns. We
	recommended that Congress consider enacting an FMAP formula
	that provides automatic timely and temporary FMAP assistance to
	states in response to an economic downturn. We developed a
	prototype formula that would automatically start and end
	assistance and it would target the amount of such assistance
	based on the extent to which each state is affected by a
	particular downturn.
	Our prototype formula uses a monthly employment to
	population ratio and it begins when a threshold number of
	states experience declines in this ratio. This automatically
	triggers the start of the FMAP assistance. And once triggered,
	the assistance is calculated based on two factors. First, on
	increases in state unemployment. This serves as a proxy for
	changes in Medicaid enrollment. And then secondly for decreases
	in wages and salaries and this serves as a proxy for declines
	in available state revenue.
	Ending the temporary FMAP would be based on the employment-
	to-population ratio but with the ability to gradually return
	states to their regular FMAPs.
	In conclusion, our work has found that alternatives to the
	current FMAP could more equitably allocate funds to states and
	provide additional support during the economic downturns.
	This concludes my prepared statement. I would be pleased to
	answer questions at the appropriate time.
	[The prepared statement of Carolyn Yocom follows:]


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	Mr. Pitts. The chair thanks the gentlelady and now
	recognizes Mr. Hagg, for 5 minutes for his opening statement.

	STATEMENT OF JOHN HAGG

	Mr. Hagg. Good morning, Chairman Pitts and other
	distinguished members of the committee. Thank you for the
	opportunity to testify about the Officer of Inspector General's
	work associated with the Federal Medical Assistance Percentage
	Matching Rates. My statement describes two vulnerabilities
	associated with the federal-state partnership that governs the
	financing of the Medicaid program.
	First, in certain areas of enhanced matching rates, OIG has
	seen states claim federal reimbursement for expenditures that
	do not qualify. Second, in some instances, we have seen states
	use financing mechanisms to shift costs to the federal
	government. I will briefly discuss each of these issues.
	Most Medicaid expenditures are eligible for federal
	reimbursement at their regular matching rate. The regular FMAP
	rate varies by state and, as said earlier today, cannot be
	lower than 50 percent or higher than 83 percent. There are
	numerous exceptions, however, that allow for the use of
	enhanced rates. For example, family planning services are
	reimbursed at a 90 percent FMAP rate. Enhanced FMAP rates
	provide states with additional federal funding for specified
	populations and services but they also create vulnerabilities
	that expenditures could be claimed incorrectly.
	The OIG has conducted audits to determine if expenditures
	were included in the correct enhanced rate categories. In
	general, we have found instances where states incorrectly
	claimed expenditures in one of the enhanced rate categories,
	instead of properly claiming the expenditures at the lower
	regular FMAP rate. As an example, we have found many cases
	where states use the 90 percent enhanced family planning rates
	for services that were Medicaid eligible but did not qualify as
	family planning. In total, we identified more than $82 million
	that states received inappropriately.
	In addition to vulnerabilities that exist with enhanced
	FMAP categories, the shared nature of Medicaid financing
	provides opportunities for states to shift cost and distort the
	federal-state cost-sharing partnership. While mechanisms such
	as provider taxes, intergovernmental transfers, and inflated
	payment rates increase state funds, they distort statutorily
	determined FMAP rates and undermine the federal-state
	partnership in financing the Medicaid program.
	In the 2014 review of health care provider taxes, we found
	that a gross receipts tax on Medicaid managed care
	organizations in one state appeared to be an impermissible
	health care related tax under federal requirements. Using this
	tax, the state obtained nearly $1 billion in federal Medicaid
	funds from 2009 to 2012. CMS issued guidance to states in July
	2014 to clarify its policy. We are currently performing work to
	determine if states are in compliance with this guidance.
	State policies that inflate federal costs for Medicaid are
	not new. In a series of reports from 2000 to 2005, we found
	numerous examples in which states used intergovernmental
	transfers to increase the amount of Medicaid expenditures the
	federal government would pay. In some cases, states transferred
	the additional federal money to their general treasury to be
	used for other purposes. Both Congress and CMS took action to
	close this loophole. While the changes dramatically improved
	the situation, they did not entirely eliminate the problem.
	Collectively, the findings of our work over a number of years
	suggest that improvements are still needed to safeguard federal
	Medicaid funds, including a definitive regulation linking
	payments for public providers to the actual cost of providing a
	service.
	In conclusion, the federal and state governments share
	responsibility for operating the Medicaid program and for the
	integrity of the dollars invested. Given projected growth in
	Medicaid, it is critical that CMS and states focus on
	strengthening program integrity. OIG is committed to providing
	effective oversights to help ensure that inappropriate payments
	are detected and that eligible beneficiaries receive the needed
	and appropriate health care services.
	I would be happy to answer your questions.
	[The prepared statement of John Hagg follows:]


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	Mr. Pitts. The chair thanks the gentleman. That concludes
	the opening statements of the witnesses. I will begin the
	questioning and recognize myself for 5 minutes for that
	purpose.
	Ms. Yocom, GAO has offered alternatives for allocating
	federal Medicaid funding in a more equitable way. Can you
	explain how GAO considers equity when thinking about the
	Medicaid funding formula? And can you explain how or why some
	states are advantaged and others are disadvantaged by the
	current FMAP formula?
	Ms. Yocom. Yes, we look at equity from two perspectives.
	The first is that of the beneficiary and making sure that the
	state has the capacity to provide the same level of service as
	across all the states. It doesn't mean that the state chooses
	to but it does mean that that capacity is there.
	And then secondly, we look from the perspective of the
	taxpayer and so that you make sure that a wealthier state is
	not paying more or less than a poorer state, that it is in
	relation to what is available for the state to fund the
	program.
	With regard to advantages and disadvantages of the formula
	itself, yes, right now the floor, as I believe Dr. Schwartz
	mentioned, the 50 percent floor of the FMAP does mean that some
	states are propped up with more assistance than other states.
	To date, no state has reached the top of the matching rate.
	There also is some research out there that shows that the
	matching formula is showing more and more compression to that
	50 percent level.
	So, it is a mixed bag for the states.
	Mr. Pitts. Thank you.
	Dr. Schwartz, almost a year ago, I, along with Chairman
	Upton and Chairman Hatch asked MACPAC to engage in developing
	policy options to ensure the sustainability of the Medicaid
	program. However, it was not until MACPAC's most recent meeting
	a few weeks ago that staff even briefed the commissions on old
	Medicaid ideas from the 1980s and 1990s. And with all due
	respect, why has this taken so long? What could be more
	important than developing solutions to strengthen Medicaid and
	CHIP?
	Ms. Schwartz. Thank for that question.
	We began our discussion of financing alternatives actually
	beginning in February of last year with this session to discuss
	a range of alternatives. And in that particular session, we
	spoke a lot about shared savings. Subsequent to that, we spent
	time at every commission meeting since then: May, September,
	October, December, and again, as you say in January, focusing
	on spending trends, helping understand the context,
	understanding the policy levers that are available to state and
	federal governments, to address concerns about spending, and to
	understand the drivers of that spending.
	So, I have a long list of activities that we have
	undertaken, some issue briefs that we have published, the work
	that is leading up for our publication in our report to
	Congress in June and I would be happy to share that with you
	and brief your staff in detail about those activities.
	Mr. Pitts. All right, thank you.
	Mr. Hagg, your testimony noted that multiple Inspector
	General audits found repeated state errors in claiming the 90
	percent Enhanced Family Planning Match and, as a result, OIG
	recommended that 19 states return more than $82 million to
	taxpayers. Was this money ever returned?
	Mr. Hagg. I believe it has been. Our reports are issued to
	the states. We make recommendations to the states. And if we
	found overpayments, we would recommend they pay that money
	back. CMS, as the action official, would work with the states
	to get that money back, assuming CMS concurs with our
	recommendations. And I think in most cases, they have.
	Mr. Pitts. Do you know why CMS didn't catch states' errors
	in claiming federal financial participation before the claims
	were paid?
	Mr. Hagg. Not definitively. CMS has different controls in
	place. They could probably more fully answer that question as
	to why they wouldn't catch errors. Based on what I know, they
	have staff located throughout the country who receive
	expenditures from the state on a quarterly basis. They are the
	front line for trying to review and identify any problems that
	might be out there. But of course, it is billions of dollars
	and they have a short amount of time to----
	Mr. Pitts. Yes, maybe part of the problem could be a lack
	of specific federal statutory and regulatory definition of what
	family planning services are.
	Ms. Mitchell, the Speaker, the President, and members of
	the House have noted the financial crisis in Puerto Rico. Mr.
	Shimkus earlier mentioned Medicaid in Puerto Rico. Can you
	briefly discuss how Puerto Rico's program compares or is
	different than an average state's Medicaid program?
	Ms. Mitchell. Sure. So, Puerto Rico and all five
	territories, the Medicaid program is financed a bit
	differently. Rather than the open-ended funding that states
	receive, the territories get caps on the funds. So, they have
	an annual cap. The ACA provided some additional funding that is
	available to the territories, and I believe that was the fiscal
	cliff that was referred to earlier is due to that funding. It
	was about $6.5 billion and the territories have through 2019 to
	spend that money but it looks like Puerto Rico is going to
	spend through that faster than that. And their matching rate
	for the territories is set at 55 percent. It does not go
	through the statutory formula for the FMAP.
	Mr. Pitts. Thank you. My time has expired.
	The chair recognizes Mr. Schrader for 5 minutes for
	questions.
	Mr. Schrader. Thank you, Mr. Chairman. I appreciate that.
	Ms. Mitchell, would you say that the rates for Medicaid
	reimbursement are primarily cost-based?
	Ms. Mitchell. Sorry, could you say that?
	Mr. Schrader. The rates that are set for Medicaid
	reimbursement are primarily cost-based?
	Ms. Mitchell. The provider rates?
	Mr. Schrader. Yes.
	Ms. Mitchell. Well, states set their own provider rates.
	They have a lot of discretion in setting their provider rates.
	Mr. Schrader. I apologize. No, I am talking about when you
	reimburse a state, it is based on the costs that are submitted
	by the state. Is that correct?
	Ms. Mitchell. Oh, yes. I am sorry. Yes, so there is a
	quarterly process where states, for every quarter, submit
	estimates on how much they are going to spend and they are
	provided an amount of money to draw down throughout the
	quarter.
	Mr. Schrader. Right.
	Ms. Mitchell. And at the end of the quarter, they have to
	submit documentation for the actual expenditures.
	Mr. Schrader. I get that.
	Ms. Schwartz, do you think that is a good way to reimburse,
	just based on cost rather than quality or what they are
	actually getting for the type of service that you are paying
	for?
	Ms. Schwartz. I guess as I noted in my testimony, that the
	FMAP, with the exception of the exceptions, is neutral on the
	type of spending. And you could certainly move to a system in
	which you valued certain services higher. It would be
	complicated but it is an area that could be tested on a smaller
	scale. I think doing that nationally would be exceedingly
	difficult across the many populations and the many services the
	Medicaid program offers.
	Mr. Schrader. I think that is why we have a number of
	waivers, so that each state can figure out what program
	probably works best for them, as long as it is officially
	audited, I think.
	Ms. Yocom, I am actually concerned about your report. Your
	report focuses on paying more for costs. And I think it is
	going to be a big additional cost to the United States
	taxpayer. The geographic diversity is purely cost-based. Where
	is the geographic diversity in your report regarding better
	quality of care in certain parts of the country versus other
	parts of the country for the dollars that are actually spent?
	That would be, I think, of great interest to the consumer, both
	the person getting the health care, as well as the taxpayer.
	Ms. Yocom. Yes. Our report does focus on geographic
	differences. And to a certain extent, state spending itself
	reflects some of those differences.
	Mr. Schrader. But that just reflects the cost. It doesn't
	reflect what you are getting for that. Is that correct?
	Ms. Yocom. That is correct.
	Mr. Schrader. OK. I think that is the problem, Mr. Chairman
	and members of the committee, that we need to be focusing on.
	Say what you will about the ACA but regardless of that, I think
	the focus of health care going forward in our country is going
	to be about getting bigger bang for the buck. The reports from
	OIG and GAO, I think try and get at that in some ways but I
	think they are a little outmoded. Nowadays for health care, we
	need to be looking at better ways to do things.
	The coordinated care model pioneered in my state and
	several other states I think is something I would like to see
	some of these reports start to focus on. It is complicated. The
	formula proposed by Ms. Yocom is also pretty complicated, if I
	look at it closely. So, I would like to look at that quality
	part of the reimbursement.
	Mr. Hagg, given some of the uses of the Medicaid dollars
	you have identified that don't seem to fit the classic category
	of Medicaid services, does seem kind of a play on what the
	chairman is talking about. Does CMS Medicaid actually have
	adequate revenues to police the program?
	Mr. Hagg. Well, that is a big job, for sure. As I said
	before, CMS could probably provide a better answer about the
	resources they have and the way they use those resources right
	now to oversee state expenditures or additional resources they
	might need.
	I know they have staff located throughout the country who
	receive the state expenditures on a quarterly basis. They are
	the front line for the first review but, again, we are talking
	about hundreds of billions of dollars in a short amount of time
	that they have to review those expenditures.
	Mr. Schrader. But it sounds like they could use a few more
	dollars.
	Out of the five or six recommendations you make, are there
	two or three you would like or think Congress should
	particularly focus on in working with CMS to review?
	Mr. Hagg. Well, specifically, if you are talking about
	trying to make sure expenditures are in the correct enhanced
	FMAP categories, bottom line, it really comes down to states
	doing a better job and taking better care and making sure that
	those expenditures are claimed appropriately. It is the state's
	job to do that. There is no way that CMS or any oversight is
	going to be able to get to every single layer that might be out
	there. So, states need to know their responsibilities and make
	sure that they claim properly.
	From CMS' standpoint, it probably would be good for CMS to
	try to reinforce with the states what the states'
	responsibilities are so the states clearly know the importance
	of properly claiming.
	Mr. Schrader. Very good. With that, I yield back, Mr.
	Chairman.
	Mr. Pitts. The chair thanks the gentleman and now
	recognizes the vice chair of the full committee, Mrs.
	Blackburn, for 5 minutes for questioning.
	Mrs. Blackburn. Thank you, Mr. Chairman.
	Ms. Yocom, I want to come to you. I thank you for being so
	persistent and consistent in coming to us.
	Let's go back to the formulary issue. In looking at the
	FMAP, I want to hear from you when you look at the per capita
	or the total taxable resources, what do you think is the better
	option and why would that option be your choice?
	Ms. Yocom. From GAO's perspective, total taxable resources
	are a much better indicator of a state's available resources to
	finance the program. I just looked at this yesterday and there
	is about a 40 percent difference between the total taxable
	revenue and per capita income. So, 40 percent more additional
	spending is included within total taxable resources. And what
	happens is you have inequities across states in terms of what
	is reflected in the per capita income. States with a lot of
	people who work in one location and live in another, those
	kinds of things don't always get counted in the correct manner.
	Corporate gains and corporate taxes and then also high-energy
	states are other areas where the allocations aren't necessarily
	consistent.
	Mrs. Blackburn. OK, thank you for that.
	Let's talk about additional assistance that is sometimes
	available during an economic downturn and how that affects a
	state and how would that affect the states' incentives and how
	should we approach that. Because you want to be helpful but you
	don't want to have a system where they are dependent on this
	and just say oh, well.
	Ms. Yocom. Right. Well, states, in the 50-year history of
	the program, have always been in a bind during an economic
	downturn. People lose their jobs and their children, at least,
	and sometimes the adults, qualify for Medicaid. So you have an
	increase in Medicaid enrollment. And then along with that, tax
	revenues go down because it is a recession or a downturn. So,
	they have more people in the program and less money to pay for
	it.
	One of the advantages of a federal-state partnership is the
	federal government offering that balancing of those
	circumstances.
	Mrs. Blackburn. Let me ask you this. States that have
	accessed those funds, once the economy recovers, how quickly do
	they go about removing those individuals from the rolls?
	Ms. Yocom. It honestly varies a great deal.
	Mrs. Blackburn. OK.
	Ms. Yocom. And probably the hardest part of any kind of
	automatic assessment, adjustment like we are talking about, is
	when to turn off the assistance. Unemployment tends to be a
	lagging economic indicator so recovery can be slow.
	Mrs. Blackburn. All right, thank you for that.
	Ms. Schwartz, MACPAC has publicly supported the extension
	of the Enhanced Federal Matching Rate for Medicaid Eligibility
	Systems. Talk to me about the criteria that MACPAC uses for
	assessing whether to support an enhanced federal matching rate,
	just if you will quickly articulate that.
	Ms. Schwartz. Sure. In our letter commenting on that role,
	the criteria that compelled the commission in that instance to
	be supportive of the continued Enhanced FMAP were that the FMAP
	rate would be tied to concrete performance standards by the
	state and that these would improve the eligibility in the
	enrollment process, both from the perspective of the
	beneficiary and from program administrators who enhance data
	collection reporting and improve administrative capacity. And I
	think this enhanced rate also recognizes that Congress already
	approves enhanced match for mechanized systems and increasingly
	enrollment in eligibility processes, which would have once been
	largely administered face-to-face are no mechanized systems as
	well. So, those are the criteria used in that respect.
	Mrs. Blackburn. OK, thank you. I yield back.
	Mr. Pitts. The chair thanks the gentlelady and now
	recognizes the gentlelady from California, Ms. Matsui, for 5
	minutes for questions.
	Ms. Matsui. Thank you, Mr. Chairman.
	Dr. Schwartz, I want to ask you about long-term and FMAP
	enhancements. The majority of seniors and people with
	disabilities want to remain at home to receive long-term
	services and supports, instead of going to a nursing home or an
	institution. Research demonstrates that this is more cost-
	effective. Yet, despite some success, many states lag behind in
	providing services at home because of Medicaid institution
	bias, where nursing home coverage is mandatory and home and
	community-based services are optional.
	Congress has passed several FMAP incentives to fix this
	problem, such as Community First Choice, the Balancing
	Incentive Program, and Money Follows the Person. Some have
	expired or will expire soon. I believe this committee should
	absolutely be having a conversation on reauthorization of these
	programs, which are overwhelmingly bipartisan.
	Dr. Schwartz, how well have those FMAP incentives worked?
	Ms. Schwartz. The Balancing Incentives Program was focused
	on targeting states that spent less than half of their long-
	term services and supports money on home and community-based
	services to help them make this shift from facilities
	community-based services. And states were invited to submit a
	budget and a plan for how they would do that.
	Of the 17 states that had participated in the first
	quarter, 11 exceeded that threshold. It is not possible for me
	to say whether it was the Enhanced FMAP that did that or some
	of the other supports that were provided as part of that
	program and states may continue to make progress toward their
	goals, even though the enhanced match has expired.
	In addition, stats have many other avenues by which they
	can shift services from a nursing facility to home and
	community-based services, both through state plan options and
	through waiver services.
	So, there are a variety of approaches that states can take
	and tailor to their specific needs and populations.
	Ms. Matsui. Can you comment on some of the organizations
	you would have to improve upon the incentives that we have to
	states to show that people can remain at home?
	Ms. Schwartz. MACPAC has not made a recommendation on
	creating a financial incentive to do that. We closely monitor
	what is going on in the long-term services and support state
	space but are encouraged by the shift to home and community-
	based services, which is both fiscally promising and also
	responsive to patient and family needs and desires.
	And one area where we are closely monitoring is the move to
	manage long-term services supports, which we are still learning
	about and we still are looking forward to some of the outcome
	measures about how that shift is going.
	Ms. Matsui. Thank you. I think you will realize how much
	interest there is in long-term care delivery, especially in a
	population that is growing and the families willing to in some
	way accede to the wishes of their parents.
	And so I think it is something where long-term delivery in
	this country, which Medicaid, the single largest payer,
	deserves a lot of our attention on this committee.
	Ms. Yocom, the committee has been very interested in GAO's
	proposal for automatic trigger. I think the idea of making FMAP
	even more responsive to states leads to a worthwhile
	discussion. I have a couple of additional questions to clarify
	this proposal.
	Why does a prototype formula focus on providing increased
	assistance during national economic downturns and not regional
	downturns?
	Ms. Yocom. Sure. The big issue with the regional downturn
	is it is not always regional. For example, if there is a
	recession that is association with energy, it can be spread
	across states, all the way across the country from Alaska to
	Texas, to Wyoming, and so on. And it is much more difficult to
	think about targeting a small group of states like that. So,
	our focus has been more on the national downturn.
	Ms. Matsui. Could we look at that a little bit more?
	Because I am thinking about our recent recession which was
	caused by the housing crisis. And there are certain areas of
	the country that were really hit harder than others. I think if
	you look on a map, you can kind of identify those areas. I am
	just saying that I think that is something to look at because I
	think if you wait to look at the national model, we will miss
	those really hard-hit regional areas.
	Ms. Yocom. Yes.
	Ms. Matsui. Something to consider with any discussion are
	the winners and losers of the policy, whether some states may
	benefit more on their policy than others. And I think, to a
	certain degree, we are talking about this when I talk about the
	regional downturn.
	So, what type of variation can be seen with the enactment
	of your emergency trigger proposal?
	Ms. Yocom. Well, there is a lot of variation. That is maybe
	the bad news from your perspective. The good news is the
	variation is very dependent on which states are affected by the
	downturn and it changes from recession to recession.
	In our work, we looked at four different downturns and the
	differing effects that happened on states. So, while one state
	may not get an additional FMAP, it would be because they didn't
	need it that particular time.
	Ms. Matsui. OK, thank you very much.
	Mr. Pitts. The chair thanks the gentlelady and now
	recognizes the vice chair of the subcommittee, Mr. Guthrie, for
	5 minutes for questions.
	Mr. Guthrie. Thank you. Thank you, Chairman, for calling
	this hearing. I know it is a very complex financing system we
	have. And I think a couple of things, one of its states it
	appears, you know what Mr. Hagg you have found is just improper
	billing. Another thing is just trying to find ways to maximize
	the way the FMAP formula works in ways that probably we didn't
	intend but it is not necessarily wrong on their point.
	But in your testimony, you did note that provider taxes,
	intergovernmental transfers and upper payment limits have the
	effect of distorting the FMAP rates and ``undermine the
	federal-state partnership in financing health care.''
	While this is a long-standing concern of OIG, can you
	comment on what degree you think this distortion may have
	increased in recent years, given the budget challenges states
	are facing?
	Mr. Hagg. Well, we haven't studied the extent of which
	those mechanisms have increased in recent years. So, I don't
	know definitively. I think it is safe to say, at least,
	generally speaking what we see specifically involving health
	care provider taxes, I think those have been on the rise in
	recent years.
	Mr. Guthrie. And Ms. Yocom, do you have any comments that
	shed light on that question?
	Ms. Yocom. I can't give you a specific number. I do know
	that our work has shown an increase in provider taxes and an
	increase in supplemental payments and these can be used to have
	an influence on the amount of federal money that is received.
	Mr. Guthrie. Thank you for that. And then Ms. Yocom, I have
	a question for you as well.
	I would be interested to learn more about the assistance
	distributed under GAO's prototype formula. Am I correct that
	this prototype formula would have been less costly than the
	assistance provided through the Recovery Act?
	Ms. Yocom. Yes, you are. We tested it over several
	recessions and it ranged from providing $9 billion in
	assistance to about $36 billion, which was under the big
	recession.
	The reality is, though, that the Recovery Act was
	attempting to do more than make Medicaid whole. They used
	Medicaid as a vehicle to provide additional state support.
	Mr. Guthrie. OK. And am I correct in understanding that if
	Congress were to implement the prototype formula compared to
	current law, not the Recovery Act but the current law, this
	change would need to be offset, since it would increase federal
	outlays during a downturn?
	Ms. Yocom. I believe so. You would really have to work with
	CBO on that. They are the experts.
	Mr. Guthrie. OK, it appears to be.
	And Dr. Schwartz, when MEDPAC presents this committee with
	recommended changes to the Medicare program, it routinely also
	provides the committee with recommended policies to adopt to
	offset the changes. Unfortunately, MACPAC does not offer ideas
	about ways to offset Medicaid or CHIP changes. If MACPAC wants
	us to be able to move forward on your recommendations, why
	doesn't MACPAC mirror MEDPAC's practice?
	Ms. Schwartz. To that point, I would first note that a
	number of our recommendations have had no budgetary impact and
	in that case, a no-saver would be needed.
	We are now engaging, as part of our work on children's
	coverage, in particular, and the work that we would be doing
	for you on financing, looking to see what kinds of saving
	options might be out there. And we do always try to work with
	CBO in understanding the fiscal effects of the recommendations.
	And that has certainly affected the commission's decision-
	making when considering different options.
	Mr. Guthrie. All right, thank you.
	And I will just close with this statement. I was in the
	state government in Kentucky and we do a biannual budget. So,
	just general revenue budget, my first one was the year 2000,
	so, for 2001 and 2002. And our biannual budget in Kentucky is
	about $13 billion. That is not exact but it is close. And since
	then, talking about the strains on state budgets, since then I
	know we have cut universities, we have had a lot of strain. And
	I think last year's biannual budget was close to $19 billion.
	So, it has gone up a third in a decade or whatever. And so it
	has been consumed, a large part, there is other things, drivers
	of the debt, but a large part of it is Medicaid. And so as
	these states are looking, I think, for opportunities to
	maximize FMAP and to make their budgets balance, it is just
	Medicaid is continuing to consume more and more of our federal
	deficit and more and more of what states do.
	So, this is helpful for us so we can get a handle on this.
	If we don't there is going to be no discretionary money for
	states to spend in educating our children and it is going to be
	difficult for us to ever get our budget balanced, if we don't
	do so.
	So, your information today has been very helpful and I
	appreciate that very much. I yield back.
	Mr. Pitts. The chairman thanks the gentleman. And now I
	will recognize the gentleman from New Mexico, Mr. Luja AE1n,
	for 5 minutes for questions.
	Mr. Luja AE1n. Mr. Chairman, thank you very much.
	As we all know, Medicaid is a lifeline to so many but as I
	noted in my opening statement, New Mexico's Behavioral Health
	System is in crisis as well. I described the upheaval that has
	resulted in the Susana Martinez administration going after so
	many of these providers. And as I said today, there were just
	on Monday ten more of those providers that had allegations
	against them of fraud were exonerated. And contractors were
	brought in from outside of the state to take over a system. The
	current infrastructure was dismantled and we need a lot of
	support there.
	But with that being said, during the New Mexico
	delegation's many conversations with CMS on the crisis and its
	impact in New Mexico, we, the delegation, asked CMS to provide
	us with data that CMS was receiving from the State of New
	Mexico that they are collecting from them. We hope that the
	data could provide us with something insightful, with a better
	look at what was happening on the ground and not happening on
	the ground. Unfortunately, after months and months of delay,
	the response that the delegation from New Mexico received from
	CMS was that CMS admitted that the stated-provided data had,
	and I quote, ``significant limitations.'' This left CMS largely
	unable to determine which, ``areas and populations may be
	experiencing decreases in utilization.''
	So, the data being collected right now, at least from the
	State of New Mexico, is not able to help anyone make any
	decisions. So, without access to meaningful data, how is it
	possible for the people of New Mexico or us here to make
	decisions and how can people hold policymakers accountable?
	Without access to meaningful data, no one can know if
	enough is being done to ensure that the most vulnerable are
	protected and without access to meaningful data, we can't
	determine how best to strengthen the program for the most
	vulnerable. That is why I am interested in determining how we
	can use FMAP to help states build out and prioritize behavioral
	health infrastructure, data, and access.
	So, Dr. Schwartz, if we want states to build and maintain
	strong behavioral health systems, are there ways we can use
	FMAP to do so?
	Ms. Schwartz. I would say first to the point of data, the
	issue of data is one that MACPAC has consistently noted and
	noted concern about the need for data for many purposes, for
	program integrity purposes, for the purposes of improving value
	and monitoring quality and improving quality. And this is an
	area where CMS has been working to change its system to
	something called the T-MSIS, the Transformed MSIS, which has
	been going much more slowly than anyone would have anticipated.
	There are many things that states could do to strengthen
	behavioral health systems. Of course, states might prefer
	Enhanced FMAP. States have many options in the types of
	benefits that they can provide in behavioral health and states
	are, there is wide variation in how they do that. They have a
	wide variation in how they structure their systems in terms of
	the providers that they have, their use of managed care for
	behavioral health. So, a whole range of strategies.
	MACPAC's work at the moment is trying to look at whether
	there are barriers and whether those barriers are in the
	practice environment, the state environment, or the federal
	environment for integration of behavioral health services with
	physical health services. Because for many of these
	populations, regular contact with a physical health provider is
	their major point of contact with the health system.
	Mr. Luja AE1n. And so you answered the next question that I
	was going to pose, which was if you could speak how Congress
	has used FMAP to incentivize states to prioritize health care
	delivery systems. And one of the areas that it seems that
	Enhanced FMAP has worked is the long-standing family planning
	enhanced match, which appears to have drastically improved
	Medicaid access to families.
	But with that being said, the bill that I am working on
	provides an Enhanced FMAP to states that prioritize investments
	and infrastructure access and data collection. I would be
	curious to hear what types of suggestions you have about the
	interventions that are important that would maybe be most
	successful to help this program.
	Ms. Schwartz. I would be happy to take a look at that for
	you and get back to you on the details of it. There may be some
	technical assistance that we can provide in that regard.
	Mr. Luja AE1n. I appreciate that Dr. Schwartz.
	And Mr. Chairman, thank you so much for this important
	hearing today and I yield back the balance of my time.
	Mr. Pitts. The chair thanks the gentleman. I know recognize
	the gentleman from Illinois, Mr. Shimkus, for 5 minutes for
	questions.
	Mr. Shimkus. Thank you, Mr. Chairman. If Graham would put
	the slide up.
	Every time I deal with a Medicaid debate, of course, Ms.
	Yocom, you know you have seen this numerous times, the red is
	what the CBO would say is the mandatory spending, the blue is
	the discretionary budget. When we have a budget fight and there
	is a threatened shutdown, it is on the blue that the fight is
	about. So, this is a simple question but it is one that we,
	here out in the district, we use that term mandatory or we use
	the word for portions of the red, not all of them, as
	entitlement spending.
	Anyone want to comment on those two words as good words or
	bad words to use? Ms. Mitchell. What should they be called? Are
	they good?
	Ms. Mitchell. I don't know. I don't know that I am
	qualified to answer that.
	Mr. Shimkus. OK.
	Ms. Mitchell. But entitlement, meaning that Medicaid is an
	entitlement, meaning that both the states are entitled to
	Medicaid funding and individuals are entitled to Medicaid
	coverage, so that means there is no cap and states cannot put
	on----
	Mr. Shimkus. And that makes it mandatory because they are
	entitled to the coverage.
	Ms. Mitchell. Yes.
	Mr. Shimkus. Dr. Schwartz?
	Ms. Schwartz. Yes, all these----
	Mr. Shimkus. These are important. It might sound like a
	goofy talk but it is really out there. People get confused. And
	if we are trying to deal with what Mr. Guthrie was talking
	about, the national debt, part of the national debt is our
	promises to pay entitled people with mandatory spending.
	Ms. Schwartz. You know the labels are all extremely value-
	laden but you point out correctly that when states spend money
	on these services that are authorized within the statute,
	populations who are entitled to those services and deemed
	eligible by those states, those funds flow through and the
	federal share is mandatory. It is not subject to an
	appropriation.
	Mr. Shimkus. Great, thank you.
	Ms. Yocom, did I fairly, accurately talk through that?
	Ms. Yocom. Yes, I think that your statement is accurate.
	Mr. Shimkus. Mr. Hagg?
	Mr. Hagg. I am not sure I would have anything new to add.
	Obviously, Medicaid is a very important program. For the people
	who receive their health insurance through it, it is a
	tremendously important program.
	Mr. Shimkus. Right but this is a 2014 pie chart of $3.5
	trillion of federal spending and then, again, the discretionary
	portion is anywhere between $1 trillion and $1.2 trillion and
	the rest is, as you have identified entitled or mandatory
	payment to meet the entitlement. So, I appreciate that.
	[Slide shown.]


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	Mr. Shimkus. We had a discussion. In fact, Mr. Lujan also
	mentioned this 90 percent enhanced family planning match that
	we discussed based upon it.
	Mr. Hagg, does the OIG have the capacity to continually
	audit all states' claimed federal matching for family planning
	services?
	Mr. Hagg. No, we don't have that capacity.
	Mr. Shimkus. Given that the Medicaid program is a shared
	federal and state responsibility and given OIG's limited
	resources, is it fair to say that states have a responsibility
	to do audits and prioritize oversight where there are known
	vulnerabilities?
	Mr. Hagg. Yes, I think that is fair to say. You know it
	starts with the states. The states have the responsibility to
	make sure that the expenditures they claim are accurate, in the
	case of family planning or other enhanced FMAP categories that
	the correct expenditures are in those categories.
	Mr. Shimkus. Great, thank you.
	And Dr. Schwartz, in your testimony, you noted one concern
	with the FMAP is that states have an incentive to broaden
	Medicaid to include other state health functions, where
	possible, in order to draw down federal funds. Can you
	elaborate and give an example of what you mean?
	Ms. Schwartz. I think when state resources are tight, there
	are incentives to look for other sources of revenue, whether it
	is for school-based services, transportation, or public health
	services.
	From MACPAC's perspective, our focus has always been on
	looking for policies to make sure that the eligibility
	decisions are made correctly, that the services are provided
	to, enrollees are medically necessary and appropriate and the
	providers meet the federal and state participation
	requirements.
	Mr. Shimkus. So, states are dipping into Medicaid dollars
	for other services that may not be appropriate, based upon the
	definition of Medicaid. They are gaming the system.
	Ms. Schwartz. That is the distinction that I want to make.
	And I am sure that the gentleman from the OIG may speak to this
	as well. From MACPAC's perspective, when states claim federal
	match, those services must be legally matchable from legal
	sources of revenue, even if they are provided in different
	settings.
	Mr. Shimkus. And that is your recommendation. Your
	recommendation is that they follow that.
	Ms. Schwartz. Yes.
	Mr. Shimkus. OK, that is it. Thank you, Mr. Chairman.
	Mr. Pitts. The chair thanks the gentleman. I know recognize
	the gentlelady from Illinois, Ms. Schakowsky, for 5 minutes for
	questions.
	Ms. Schakowsky. Thank you. Thank you, Mr. Chairman.
	The importance of Medicaid just simply can't be overstated.
	I want to start with that because just yesterday the CDC
	released new data showing that states that have expanded
	Medicaid have an uninsured rate of ten percent for adults age
	18 to 64, probably still too many, but yet compared to an
	uninsured rate of 17.3 percent for non-expansion states.
	However, many states, including my home state of Illinois,
	received FMAP rates very close to the statutory minimum of 50
	percent. In fact, Illinois receives an estimated 3.1 percent of
	annual FMAP funding that covers 4.8 percent of the nation's
	Medicaid beneficiaries.
	And I would like unanimous consent to enter into the record
	a document prepared by the Illinois Hospital Association which
	highlights the importance of Medicaid to Illinois.
	Mr. Pitts. Without objection, so ordered.
	Ms. Schakowsky. It is well-known that Medicaid payment
	rates are low, especially compared to the payment rates of
	Medicare and the private industry, private insurance. The need
	to adequate payments to Medicaid providers is incredibly
	important in providing stability in our healthcare system and
	ensuring access to providers for Medicaid beneficiaries. States
	have the flexibility of providing supplemental payments to
	providers and I believe this flexibility should be maintained.
	So, Ms. Schwartz, let me ask you. While some of the
	testimony today has focused on supplemental payments made to
	providers, I am more concerned about ensuring that providers
	receive adequate payments for services provided under Medicaid.
	Are underpayments to providers a systemic problem in the
	Medicaid program?
	Ms. Schwartz. I think that on the physician side, the
	literature has really consistently shown a relationship between
	fees and physician participation. And when fees are lower,
	physicians are less willing to participate and, therefore, the
	potential for access problems. The lower rate that Medicaid
	generally pays for a physician's services relative to Medicare
	is also well-documented and that was part of the thinking
	behind the primary care payment increase in 2013 and 2014.
	On the hospital side, it is significantly more complicated
	because states can pay hospitals through many different
	mechanisms, including their base payment rates, non-DSH
	supplemental payments, and DSH payments.
	The degree to which total payments to hospital in the
	aggregate varies considerably across states and we don't know a
	lot about hospital-specific payments. And for that reason,
	MACPAC has recommended 2 years ago and more recently in the DSH
	report that we released on February first that we need more
	data to better understand how hospitals are being paid. We
	recommended that the secretary collect and report hospital-
	specific data on all types of Medicaid payments that they
	receive and on the sources of the non-federal share so we can
	determine net Medicaid payment and we can help answer the kinds
	of questions that are you are raising.
	Ms. Schakowsky. I am sorry. What happened February first,
	did you say?
	Ms. Schwartz. On February first, MACPAC released a
	statutorily required report to look at Medicaid payments to
	Disproportionate Share Hospitals.
	Ms. Schakowsky. OK, thank you.
	States, including Illinois, use intergovernmental transfers
	or IGTs to legitimately, I believe, fund their Medicaid
	programs. Medicaid statute, since its inception, requires
	states to use state general funds to pay for 40 percent of
	their share of Medicaid funding. States are afforded
	flexibility to fund their portion and draw down the federal
	share. In addition, many states use provider assessments to
	ensure stability in their Medicaid programs. Without provider
	assessments, Illinois' Medicaid program would cover less than
	70 percent of the cost for Illinois hospitals to care for the
	state's most vulnerable population.
	So, Ms. Schwartz, is there a component of these legitimate
	payment mechanisms that--isn't it really the states and the
	providers that are willing to put up their share and shifts the
	burden really to them, a burden that they are willing to
	accept, which I see as a good thing?
	Ms. Schwartz. I guess just to build on what I said
	previously, states are allowed to use intergovernmental
	transfers. We know much less about those intergovernmental
	transfers than I think we would like to know and that is part
	of the rationale for our recommendation to collect more data on
	that. We have been relying on some work GAO did that is
	illustrative of the issue but not nearly as comprehensive that
	you would need to make a significant policy change in that
	area.
	Ms. Schakowsky. But isn't it sort of obvious that if the
	states' ability to creatively finance their Medicaid programs
	are further restricted, that it would led to cost them services
	and benefits for the beneficiaries?
	Ms. Schwartz. It is hard for me to predict how states would
	react. States may have other sources and I couldn't comment on
	the specific reaction that states would have to such a change.
	Ms. Schakowsky. And so you are looking more carefully into
	this. And when do we expect to know something?
	Ms. Schwartz. Well, I think legislation is needed for the
	Secretary to collect those data.
	Ms. Schakowsky. I yield back.
	Mr. Pitts. The chairman thanks the gentlelady.
	Ms. Schwartz. Excuse me. I am sorry, sir.
	Mr. Pitts. Yes.
	Ms. Schwartz. I just need to correct what I said. The
	Secretary doesn't need legislation but the Secretary has been
	reluctant to and, therefore, it might be wise on the part of
	the congress to actually direct the Secretary to do that.
	Mr. Pitts. The chair thanks the gentlelady. I now recognize
	the gentleman from Virginia, Mr. Griffith, for 5 minutes for
	questions.
	Mr. Griffith. Thank you very, Mr. Chairman.
	Ms. Yocom, I have tremendous appreciation for the work that
	GAO does to evaluate policies and advise the committee.
	However, I am concerned that the current that the current
	process for appointing commissioners for MACPAC may be
	fundamentally flawed.
	For example, the MACPAC statute explicitly allows for
	Medicaid directors to serve on the commission, however, there
	is not one single Medicaid director serving on the commission
	today but Medicaid is supposed to be a federal-state
	partnership. So, I ask, why hasn't GAO put someone on the
	commission who is actually running a Medicaid program today?
	Ms. Yocom. Sir, I know that the Comptroller General is
	working on a response to the committee's request and I would
	like to defer until that comes to you.
	Mr. Griffith. I appreciate that.
	And Dr. Schwartz, I have got to tell you, as an attorney, I
	am very troubled by an apparent conflict of interest from some
	of the commissioners. Having read Ms. Rosenbaum's reply to
	Chairman Upton and Pitts, I have to tell you it was
	unsatisfactory in my judgment. In my opinion, when you read
	that letter carefully, it is a clear conflict under legal
	ethical standards that the chairwoman, even though she wasn't
	chairwoman at the time, would sign onto a case adverse to the
	House of Representatives when she is a sitting MACPAC
	commissioner. It doesn't matter whether she was chair or not at
	the time.
	And when you look at her letter, not only is she an
	attorney, which is clear in the letter, but she goes on to
	state that this case that she got herself involved in is ``the
	focus of my life's work.'' It is so core to her that that is
	her number one concern. If that is not the appearance of
	impropriety or a conflict of interest in the standard legal
	definition, I, frankly, don't know what is.
	And then she goes on in her letter to say that but now that
	I am chairwoman, I am not going to do any more work on that
	case. Well, if she has a conflict now as a chairwoman which she
	feels means she shouldn't work on that case, she shouldn't have
	worked on that case in the first place.
	And the issue is not resolved on the conflict of interest
	issue but it is also not exclusively her problem. One of the
	current commissioners sits on the board of a nonprofit which is
	involved in legal advocacy and has been involved in at least
	one class action suit against a state Medicaid program. Now, I
	have got to tell you, I can't see how these are not conflicts
	of interest in the sense of I understand there is a financial
	conflict of interest people talk about. I am talking about a
	judgment conflict of interest. In the legal standards, as an
	attorney, one of them is not just that you have a direct
	conflict but that there is an appearance of impropriety. There
	is an appearance of impropriety. And I think that it ought to
	be of concern and you all ought to be disturbed at MACPAC that
	you didn't anticipate that this would be a problem for the
	public and for members of congress.
	We need, as Congress, we need objective recommendations for
	strengthening Medicaid and CHIP. Given the concerns that the
	committee leaders have raised, I hope you understand my worry
	that MACPAC recommendations will be viewed as somewhat tainted,
	that there may be some conflict in there and that we can't rely
	on that, as we ought to be able to, as credible or objective in
	all cases.
	Now you know I know folks are good people and I don't know
	Ms. Rosenbaum but when you look at her letter, this is my
	life's work. That is the sign of a good person. But in this
	case, there was a mistake made, an appearance of impropriety,
	and she shouldn't be doing both her life's work and filing
	briefs or amicus briefs in opposition to the United States
	House of Representatives.
	As members of this committee know, and as others who have
	followed me through the years know, it is not a new position
	for me to recommend that we change the way we do things and
	that perhaps these appointments ought to be made directly by
	Congress. I plan to introduce a bill that will make MACPAC
	directly appointed by both parties. It is not a partisan bill,
	in that sense. Both parties, majority and minority would get
	appointments, House and Senate would get appointments. And I
	believe that is a proper way for us to proceed going forward.
	I look forward to working with folks to try to make that
	better. If they don't like the way we have the numbers
	configured, that is obviously something that can be discussed.
	But as a legislative advisory panel, we need to know we are
	getting the right stuff and that people don't have conflicts so
	steeped in their own personality that they would write a letter
	back to us and, in defense, say, ``But this is my life's
	work.''
	I yield back.
	Mr. Pitts. The chair thanks the gentleman and recognizes
	the gentlelady from California, Mrs. Capps, for 5 minutes for
	questions.
	Mrs. Capps. Thank you, Mr. Chairman, and thank you to the
	panelists for your testimony today.
	While I always appreciate the chance to talk about the
	importance of Medicaid and CHIP. To both families and
	communities, it is critical that any proposed changes do not
	undermine the program's important role in our health care
	safety net. Unfortunately, we continue to see plans from some
	of my colleagues to cap services or to block the program, both
	ideas that would not make health care more affordable but
	would, instead, leave some of those who need the program
	without it and shift the cost to states and localities. This
	would undermine the fundamental principles of the program and I
	cannot express enough how damaging that would be to patients
	and my constituents. But we can all agree that there are ways
	to make the program more responsive on the financial end.
	Studies show that when the current federal formula for FMAP
	uses per capita income as a proxy to reflect a state's
	financial resources and Medicaid needs, it is a poor proxy for
	both. This misrepresentation sustains significant funding
	disparities among states taxed by the federal government with
	serving the health needs of their low-income residents. And
	states like California that have relatively higher financial
	resources but also relatively higher poverty rates, are
	misunderstood as having lower Medicaid cost pressures than the
	already do.
	In fact, one study undertaken by California Common Sense, a
	nonpartisan research group in my state, found that by using a
	more accurate measure of poverty and need, California should be
	receiving a 15 percent higher FMAP rate.
	Dr. Mitchell, how does the current FMAP under-reimburse
	states like California who have higher Medicaid cost pressures
	than are reflected?
	Ms. Mitchell. Well, GAO has done a lot of work in this
	area but you know with the current formula, they are only
	looking at the per capita income. So, they are not taking into
	consideration the number of poor people in the state, the
	number of people eligible for Medicaid. None of those factors
	are taken into account.
	Mrs. Capps. Without this more accurate measure that looks
	at the financial--well, maybe I should just stop and say does
	GAO want to respond.
	Ms. Yocom. Ms. Mitchell is correct. Our work has shown one
	of the ways that it plays out is you can have two states with
	the same per capita incomes and the way it translates into the
	Medicaid program has a really different effect. For example, a
	state with a high number of disabled and elderly individuals is
	going to be struggling to finance their program more than a
	state that is primarily comprised of children and families.
	Mrs. Capps. OK, thank you.
	So, without this more accurate measure that looks at the
	financial resources and Medicaid needs of the state, states
	like mine, California, have worked with their health care
	providers to maintain a stable functioning safety net health
	care system. One way they have done so is through our state's
	provider fee, that is used to help pay for the non-federal
	share of their Medicaid program.
	Federal Medicaid law requires that provider assessments be
	broad-based and uniformly imposed and federal laws and
	regulations guard against the misuse of provider assessments by
	states that seek to receive higher federal matching rates than
	statutorily allowed.
	In California, the provider community is strongly
	supportive of the fee, even non-safety net providers. The fee
	has been approved by CMS and is used right. Money that comes
	from the state health care system goes right back into it,
	targeting the providers who provide the most under and
	uncompensated care. Over the years, however, we have heard
	rumblings against the program. To be clear, cutting provider
	fees would hurt all individuals in the state, not just working
	families.
	Before the California fee went into effect, a dozen safety
	net hospitals were about to close their doors, not because they
	didn't have patients to care for but because they couldn't
	afford to stay open. The provider fee has given them new life
	so that they are there in the community for both Medicaid
	patients but also any community member who needs care.
	And with that, Mr. Chairman, I yield back the balance of my
	time.
	Mr. Pitts. The chair thanks the gentlelady and now
	recognizes the gentleman from Missouri, Mr. Long, for 5 minutes
	for questions.
	Mr. Long. Thank you, Mr. Chairman.
	Ms. Yocom, why is it that the current FMAP formula isn't
	sufficient for dealing with economic downturns?
	Ms. Yocom. A lot of it has to do with the timing and the
	fact that, as Ms. Mitchell talked about, the data that are
	represented by the FMAP calculation, in addition to not be
	complete enough, are also old. So, when you are in a steady
	economic time or a time of growth, it doesn't cause a problem.
	It is during a downturn that the real effects take place
	because the FMAP is reflecting economic circumstances that were
	several years ago.
	Mr. Long. OK, have you assessed how well the prototype
	formula would have worked in these previous downturns?
	Ms. Yocom. We have. Our first effort to create a model like
	this addressed about 90 percent of recession-related costs. And
	where we found that it was lacking was for states that were
	slow to enter a downturn and slow to recover. And so then we
	adjusted the way that we end the assistance period, based on
	states' activities and, did some slight improvement. I don't
	think we calculated the percentage of cost coverage since then
	but we believe it is a pretty strong formula.
	Mr. Long. You believe it is what?
	Ms. Yocom. It is a pretty strong formula for assessing
	states with their financial needs.
	Mr. Long. OK, my next question here is for you or Dr.
	Schwartz, whoever wants to take it first.
	What type of other policy proposals have been proposed in
	the past replacing FMAP and improving financing to the Medicaid
	program?
	Ms. Yocom. What types of policies have been proposed?
	Mr. Long. Yes, what type of policy proposals have been
	proposed in the past for replacing the FMAP and improving
	financing in the Medicaid program?
	Ms. Yocom. There was, at one point, legislation looking at
	adjusting the FMAP during a downturn. I do not know how far it
	got in the statutory path.
	Mr. Long. Dr. Schwartz.
	Ms. Schwartz. MACPAC has just conducted an historical
	review of major reform proposals and we are working on cleaning
	that up so that we can share it with the members of the
	committee and your staffs. Some of the ideas that have been
	talked about over the past 20 to 30 years include block grants,
	as have been stated earlier, per capita caps, capped
	allotments. Those are some of the proposals that we will be
	looking at going forward but we will provide you an analysis of
	some of those ideas.
	Mr. Long. And how would those options change the incentives
	and disincentives facing states?
	Ms. Schwartz. Well, they differ from each other in how they
	are designed but, in general, they change the nature of the
	relationship between the federal government and the states in
	providing more fiscal discipline in limiting the resources
	either in total or based on the number of enrollees or other
	mechanisms of that type.
	Mr. Long. OK, so there would be incentives and
	disincentives for states.
	Ms. Schwartz. Yes.
	Mr. Long. OK, thank you all. I appreciate your testimony
	here today. With that, I yield back.
	Mr. Pitts. The chair thanks the gentleman. I now recognize
	the gentleman from New York, Mr. Engel, for 5 minutes for
	questions.
	Mr. Engel. Thank you very much, Mr. Chairman.
	Mr. Hagg, I just have a couple of quick questions for you,
	based on the issues you have raised regarding my home State of
	New York. In your testimony, you noted past issues regarding
	reimbursement for developmental centers and residential
	habilitation centers. And in both of these instances, it was
	clear that both our state and CMS made administrative errors
	that resulted in overpayments for these services and, in both
	instances, all parties involved, including the State of New
	York and CMS largely agreed with OIG's findings. Is that not
	correct?
	Mr. Hagg. Yes, I think that is correct.
	Mr. Engel. Yes. It is my understanding that, following this
	report, New York and CMS worked cooperatively to both fix the
	problem in the future, as well as agreed upon a financial
	settlement to resolve the issue. That is true as well.
	Mr. Hagg. That is correct, yes. Initially it was trying to
	fix the problem moving forward and then it required some audit
	work looking backwards to figure out the scope of the problem,
	the extent of the problem. And then yes, the state and CMS
	worked closely together to reach that settlement. Yes.
	Mr. Engel. Thank you. Your testimony today also included
	the results of many investigations and my reading of these
	reports would indicate that nearly all ended with cooperation
	between the states and CMS to resolve the issues at hand. Is
	that correct?
	Mr. Hagg. Well, are you talking about the audits involving
	some of the Enhanced FMAP claiming areas?
	Mr. Engel. Yes.
	Mr. Hagg. Yes, I think, I don't have a list in front of me
	but I would think most, if not all, of those audits, CMS
	concurred with the recommendations that we made. I think in a
	lot of cases, the states agreed with our findings and
	recommendations as well. So, yes, CMS, as the action official,
	would work with the states to help implement those
	recommendations.
	Mr. Engel. OK. And finally, would you agree that most
	investigations on issues similar to New York's are addressed in
	a generally cooperative manner that improves the program
	integrity in the long-run?
	Mr. Hagg. I am sorry. Could you repeat that again?
	Mr. Engel. That the investigations on issues similar to the
	ones we have in New York, as you pointed out New York wasn't
	the only state, that those issues are generally addressed in a
	cooperative manner that improves program integrity in the long-
	run?
	Mr. Hagg. Generally speaking, yes. If CMS agrees with the
	recommendations we make in the states then, yes, there is a
	cooperative effort to try to help the program moving forward.
	Sometimes there are disagreements where states disagree with
	the findings that we have, with the recommendations that we
	make. Sometimes CMS disagrees with us. But by and large, when
	there is agreement, yes, there is a cooperative effort to help
	improve the programs moving forward.
	Mr. Engel. All right. Well, thank you. I just wanted to get
	those clarifications on the record. OIG has done very good, in
	my opinion, to ensure that reimbursements in the Medicaid
	program remain accurate and certainly, OIG has raised issues in
	the past but it is clear that these issues are solvable and
	always nearly end with both long-term program improvement and
	amicable agreement between the federal and state government.
	So, I just wanted to get that on the record.
	Thank you, Mr. Chairman. I yield the remainder of my time.
	Mr. Pitts. The chair thanks the gentleman and now
	recognizes the gentleman from Florida, Mr. Bilirakis, for 5
	minutes for questions.
	Mr. Bilirakis. Thank you, Mr. Chairman. I appreciate it
	very much. I want to thank the panel for their testimony.
	GAO has listed Medicaid as a high-risk program for more
	than a decade. I am sure that you know that. The IG's Office's
	2015 Top Management and Performance Challenge Report has
	Medicaid fraud, waste, and abuse listed in the number one spot.
	Mr. Hagg, this week the Energy and Commerce Committee sent
	a letter to the IG's office asking for additional information
	on Medicaid payments related to deceased beneficiaries and
	deceased providers. Do you know the size and scope of the
	problem, how much money is being wasted, there shouldn't be any
	money wasted as far as I am concerned, what services or
	payments are being made, and why life status cannot be
	determined in a timely or accurate way?
	And I think it should be pretty simple but if you can
	answer that question, I appreciate it.
	Mr. Hagg. Yes, I don't have an answer to the scope of the
	problem or the magnitude of the problem.
	Over the years, we have conducted various audits going back
	a number of years, where we would identify Medicaid payments
	that were made for people that were deceased. We currently have
	some ongoing work looking at a few different states, trying to
	determine the extent of the problem for those individual
	states. It wouldn't be a national look but it would for
	individual states determine the extent of which payments are
	made for people that are deceased.
	Mr. Bilirakis. Well, why wouldn't we look at all 50 states
	in this case?
	Mr. Hagg. That is a resource issue. It is a lot of data to
	crunch and review. And once you have things that look like
	errors, there is specific work that needs to be done to look
	behind to make sure that we are actually talking about someone
	who is deceased. So, it just requires a lot of resources.
	Mr. Bilirakis. Well, it is my understanding we have had
	spot checks before and it just hasn't done anything. Why not a
	comprehensive look at the problem? As far as I am concerned, it
	is a big issue.
	Mr. Hagg. Well, I don't disagree with you. And you would
	think it would be something that over time we would be able to
	get correct.
	Mr. Bilirakis. How do you engage with the states?
	Mr. Hagg. How do we engage with the states?
	Mr. Bilirakis. Yes.
	Mr. Hagg. Well, anytime----
	Mr. Bilirakis. Get the information necessary for the
	analysis.
	Mr. Hagg. Well, just like all of our work, we try to look
	at areas that we believe are high-risk areas of
	vulnerabilities, whether it is across states or in specific
	states. We decide, once we see those vulnerabilities, to
	conduct audit work that would address those specific areas,
	those vulnerabilities. If we decide to audit a specific state,
	we obviously meet with the state and talk to them about the
	audit we are going to perform, the scope that it would entail,
	and the methods that we would use. And we work with the state
	to get the data we need to make determinations to fulfill our
	objectives.
	Mr. Bilirakis. How many states have you identified so far?
	Mr. Hagg. For payments for deceased beneficiaries?
	Mr. Bilirakis. Yes, and how much money is involved?
	Mr. Hagg. Well, currently, I don't know the extent of the
	errors. We have ongoing work in two or three states, one that
	work is completed. We can talk about our findings more. Right
	now, I don't have any findings to report because the work isn't
	completed.
	Going back 10 years or more, there would be audits
	conducted by us and other groups that would find Medicaid
	payments for deceased beneficiaries. I think the amounts would
	vary from a million or two million here or there to higher
	amounts like in twenty-five million or more.
	Mr. Bilirakis. That is outrageous as far as I am concerned.
	OK, well please keep me informed----
	Mr. Hagg. We would be glad to do that.
	Mr. Bilirakis [continuing]. Because I need to follow up on
	this.
	Thank you very much. I yield back, Mr. Chairman.
	Mr. Pitts. The chair thanks the gentleman. I now recognize
	the gentleman from Indiana, Dr. Bucshon, for 5 minutes for
	questions.
	Mr. Bucshon. Thank you, Mr. Chairman.
	Medicaid is a critical program. I was a physician in my
	previous career. I am still a physician but now I am here. But
	in my view, it needs broad reform and we are talking about some
	aspects of the law today.
	In many states, having Medicaid does not guarantee access
	to health care, other than through the emergency room and that
	is true today as it has been for quite a while. As the costs
	continue to rise overall in health care, more stress will be
	put on this critical program.
	One of the failures of the ACA is addressing coverage and
	not addressing cost. And without honestly looking at some of
	the things that are driving the cost and solving those, we are
	going to continue to be talking about coverage when we are
	missing the boat because it doesn't guarantee access.
	Price transparency for the consumer in health care doesn't
	exist. Quality transparency is getting better. The combination
	of those two is the value that you get from a service.
	Looking at tort laws, antitrust and stark law reforms, and
	many other things to try to help decrease the costs in our
	health care system will be imperative to the other things that
	we look at structurally within the Medicaid program.
	And this question goes to Dr. Schwartz or Ms. Yocom. Has
	anyone looked at Medicaid recipients and their ability to find
	access to a primary care physician, other than through the
	emergency room? So, for example, you have a Medicaid
	population. Has anybody surveyed them and found out the
	percentage of them that can't find a primary care physician to
	take care of them?
	Ms. Schwartz. There are a number of different surveys that
	have been done to look at access for Medicaid beneficiaries.
	One is using the National Health Interview Survey and asking a
	number of questions about access. Unfortunately, using that
	survey, we can't get state estimates. So, some of the variables
	that would be important about how states design their programs,
	you can't tell.
	Another approach that has been taken more recently by a
	group of researchers at the University of Pennsylvania is to do
	what they call Secret Shopper and call and pose as a private
	insurance patient or Medicaid patient and to see what the
	access barriers are. And they do see some differentials. In
	that study, they were also looking at difference in fees and
	found that states that had higher fees in the Medicaid program
	did have fewer barriers to access.
	Ms. Yocom. There is another national survey. Again, we
	cannot get down at the state level, which shows that from the
	perspective of the beneficiaries Medicaid access is viewed as
	comparable to that of private insurance with regard to initial
	primary care. And the difficulties reported in obtaining care
	get higher when you are talking about specialty care or
	behavioral health services, in particular.
	Now, what we don't know is the frame of references of those
	individual respondents, if they were previously uninsured and
	being on Medicaid may make things easier.
	Mr. Bucshon. Yes, I understand the study but amongst the
	community that I represent, we hear all the time about
	difficulty finding physicians and we are hearing more about
	Medicare patients, finding access to primary care physicians
	because physician practices are closed to those populations,
	based on the low reimbursement rates.
	Mr. Hagg, when the state claim a higher federal matching
	rate than they are entitled, what is the process for the
	federal government to be made whole?
	Mr. Hagg. Well, specifically tied to the work that we
	performed, if the state agrees and CMS agrees, it could be a
	fairly quick process. And the next quarter, the state would
	return the funds.
	Mr. Bucshon. That is the question. So, the next quarter of
	the payment can be rectified?
	Mr. Hagg. If the state agrees that it is an overpayment.
	Now, if they disagree, there are certain appeal rights that
	they have that they can go through. Once those appeal rights
	are exhausted and it is still determined to be a legitimate
	overpayment, an overpayment that CMS agrees with, as the action
	official, CMS would issue a disallowance letter to the state.
	That may take several quarters to actually get the money back
	at that point, then.
	Mr. Bucshon. OK, great. And Ms. Yocom, obviously, there is
	a tradeoff between complexity and accuracy involved in
	alternative measures to determine and to allocate Medicaid
	funding to the states. Can you just briefly comment on that?
	Is there any not complex, accurate way to do this or is it
	just a balance?
	Ms. Yocom. Unfortunately, there probably isn't. There is a
	tradeoff, though, between how complex you want your formula to
	be versus how simple it is to implement.
	I think really, at the end of the day, it is a
	congressional policy decision of how important it is to be as
	equitable as possible across the states.
	Mr. Bucshon. Thank you. My time is up. I yield back.
	Mr. Pitts. The chair thanks the gentleman and now
	recognizes the gentleman from New York, Mr. Collins, for 5
	minutes for questioning.
	Mr. Collins. Thank you, Mr. Chairman.
	Let me explain, perhaps, a problem I have and then we will
	ask a little input. I am from Buffalo, New York, Erie County,
	New York, one of the poorest cities in the United States of
	America and hence, one of the poorest counties, with a very
	high percentage of Medicaid.
	So, it is my understanding that there are about 13 states
	out of 50, New York being one, that forced the counties to pick
	up a large piece of the state's share. Now in 37 out of 50
	states, the state picks up their share, the federal picks up
	their share, and that is it. And that reimbursement rate is
	dependent on the state income level, compared to the national
	average.
	In New York and I think 12 other states, though, the state
	forces a big piece, as much as half of that state share down to
	the 62 counties in New York. So, New York being considered a
	wealthy state because of New York City, Westchester County, we
	are at the lowest level. We are reimbursed 50 percent. But in a
	poor county, then, like Erie County, the largest upstate county
	in New York, that share comes back to the county. We are only
	getting 50 percent. Yes, Mississippi, which has the same
	relative income level, gets 74 percent. So, you can see where
	yes, it is a state issue, perhaps, but I believe this
	reimbursement was to protect, if you will, the taxpayers of the
	poor states. Well, think of Erie County as a state. We are a
	very poor county, yet we are only reimbursed at 50 percent
	because of that.
	So, my thought would be having a state like New York that
	is 62 counties that forces it back on the counties, we should
	have 62 different reimbursement rates that accept that Erie
	County is a very poor county.
	And to put it in perspective, the county, little county,
	well it is a big county, but our county share of Medicaid was
	give or take $120 million a year, $120 million. Our entire
	county property tax was only $110 million. One hundred percent
	of our county property tax would not even cover our Medicaid
	portion. So, we had to dip into our sales tax collections to
	cover that. And then everything else in our budget from
	highways to all other services, jails, was covered by sales
	tax.
	So, I think you can see the dilemma we have as being one of
	the states where the state is forcing substantial costs, what
	they call the state share but in New York it is state and
	county share, and that we are a poor county.
	So, I guess the question, I don't know, perhaps to Ms.
	Mitchell, I have to assume it wouldn't be that hard to have 62
	reimbursement rates, one for each county in New York. The data
	is easily available, I would presume. I know it would take a
	bill in Congress to say for those states which push it back to
	the local level, we will look at each county as a separate
	entity and recalculate that rate.
	And I know that is different than what we have now, but
	that wouldn't be that difficult to do, would it?
	Ms. Mitchell. I believe it could be possible to do that and
	unfortunately, at this point, those sort of decisions are made
	on a state level. States have a lot of discretion in how they
	design their program and how they fund their Medicaid program.
	Mr. Collins. But if a state did like New York, though, you
	could then go back to the federal government and say here is
	New York State's program so, in this case, let us recalculate
	for the 62 counties. I know it would take an act of Congress to
	do that but I think you can sense my frustration, as the county
	executive of a very poor county, being treated like we were
	from Westchester County, or Suffolk County, or Nassau County
	but we weren't, you know home to the City of Buffalo, third
	poorest city in the United States.
	So, would anyone else want to comment on that? Have you
	heard this argument from others? I mean there are 12 or 13
	other states that do likewise. A lot of people have no idea
	this even happens.
	So, with that, I guess I will yield back the balance of my
	time but my thought would be if you could get Congress to move,
	the first question would be how hard would it be? And I don't
	think it would be that hard to calculate 62 different rates for
	New York, just the press of a spreadsheet button and there you
	go.
	Thank you very much, Mr. Chairman. I yield back.
	Mr. Pitts. The chair thanks the gentleman. I now recognize
	the gentlelady from Indiana, Mrs. Brooks, for 5 minutes for
	questions.
	Mrs. Brooks. Thank you, Mr. Chairman and thank you to the
	witnesses for your testimony.
	I want to commend, actually, my home State of Indiana for
	taking the lead in developing a groundbreaking approach in what
	is known as Healthy Indiana Plan, HIP 2.0. And it is an
	innovative, consumer-drive, health insurance program, as you
	know, designed to empower members to take personal
	responsibility for the health care decisions. And just as HIP
	2.0 encourages individuals to take responsibility, FMAP should
	encourage states to take responsibility of their financial
	health of the state Medicaid program.
	I would like to just talk about, because I think this is an
	important discussion, on how we maximize the federal dollars to
	provide for the best health outcomes for our nation's most
	vulnerable populations. And Ms. Schwartz, last Congress, I
	joined a bipartisan group of colleagues from the Women's Caucus
	to urge the renewal of CHIP. And moving forward, I want to
	ensure that we continue to provide care for those roughly 8
	million children and pregnant women around the country,
	including roughly 84,000 children in Indiana.
	MACRA extended CHIP through the end of next September and
	the ACA increased CHIP's already enhanced FMAP by 23 percent.
	So, under MACRA, the federal government is paying, as you said,
	all the costs for CHIP in 12 states and paying 90 percent of
	the costs in an additional 20 states.
	So, the last time that the MACPAC commented on CHIP, there
	was a 2-year extension. And now that there is a more in-depth
	examination, I hope the commission is examining as to what
	degree a lack of a state contribution may affect the state
	incentives to ensure that Medicaid payments are appropriate and
	accurate. Can you comment on that?
	Ms. Schwartz. Certainly. The commission has a very
	aggressive work plan and is very focused and has committed to
	having a package of recommendations for Congress by the end of
	this calendar year, so that when Congress turns its attention
	again to funding for CHIP in the next Congress, that MACPAC's
	recommendations will be available. We are looking at many
	different aspects of the program, benefits, affordability,
	state administration and financing. And all of these will fold
	into those recommendations. You can see that that will be on
	the agenda, consume a considerable amount of the commission's
	time at every meeting over the course of this year.
	Mrs. Brooks. And is MACPAC evaluating incentives in CHIP's
	current program financing?
	Ms. Schwartz. Yes.
	Mrs. Brooks. And what, if any actions, has CMS taken to
	ensure the accuracy and the appropriateness of federal and
	state payments?
	Ms. Schwartz. I can't speak to what CMS' actions have been
	in this area. I can check into that and get back to you.
	Mrs. Brooks. OK, thank you.
	Mr. Hagg, the list of top management challenges for HHS
	identified protecting the Medicaid program from waste, fraud,
	and abuse as the number one challenge. When do you expect OIG
	report of the findings on this issue will be made public and
	can you talk about will your analysis review whether
	individuals whose medical services were financed at the
	enhanced matching level were actually eligible under the
	statute? And you talked a bit about that in your testimony. Can
	you expand on that?
	Mr. Hagg. Well, yes, a few different things. One, the list
	of top management challenges is really to highlight for the
	Department and others, external parties, the areas that we
	believe have large vulnerabilities. It doesn't tie to a
	specific report that we would put out to say specific problems
	have been solved or not. We have a body of work in Medicaid
	covering a lot of different areas and the results that we find
	leads us to the conclusion that Medicaid is a high-risk area.
	So, that is one thing.
	As far as some of the Enhanced FMAP rate categories, the
	one specifically you are talking about for the newly eligible
	population, we have some work ongoing. It is two different
	tracts, really. The first is some audit work that my team is
	doing. It is focused on states and the actions they are taking
	and claiming. The second tract is being done by our Office of
	Evaluations and Inspections. They are looking at CMS'
	oversights and their responsibilities and the action that CMS
	is taking.
	We anticipate that work being done sometime later this
	year. For the audit work as early as, well, probably not before
	the end of this calendar year. For the work that focuses on
	CMS, probably no earlier than maybe late summer.
	Mrs. Brooks. Is there a report that those of us who are
	working on Congressman Guthrie's Medicaid Task Force Reform
	efforts, is there a report that you can point to where we can
	dig in on the waste, fraud, and abuse recommendations that OIG
	has made?
	Mr. Hagg. Yes. Well, one, you have seen the top management
	challenges. That will lay out some of the things that we found.
	We have a semi-annual report that we put out, obviously, that
	highlights some of the areas of the bigger issues that have
	been identified.
	We have a compendium of unimplemented recommendations that
	talk about specific things that we think can still be done to
	help improve the program. And then beyond that, I would be glad
	to try to provide some of reports involving some of the bigger
	impact or higher risk areas that we have identified issues.
	Mrs. Brooks. Thank you. Thank you all for your work. I
	yield back.
	Mr. Pitts. The chair thanks the gentlelady. That concludes
	the questions of members present.
	There will be follow-up questions that we will send. We
	will send those to you in writing. We ask that you please
	respond promptly.
	Mr. Schrader.
	Mr. Schrader. Thank you, Mr. Chairman. I just briefly want
	to recognize that Medicaid basically insures almost 40 percent
	of the children in the United States of America. So, the impact
	of Medicaid on children should not be far from our minds. We
	have heard a lot of testimony today to that effect.
	So, I would like to ask unanimous consent to submit a
	statement from the American Academy of Pediatrics for the
	record, sir.
	Mr. Pitts. Without objection, so ordered.
	Mr. Schrader. Could I make just one final comment?
	Mr. Pitts. Yes, sir.
	Mr. Schrader. Just to keep the hearing in perspective, I
	appreciate the hearing. It is very timely, very important. At
	this point in time, it is pretty clear that there has been an
	uneven economic recovery. The good vice chair alluded to the
	fact that Medicare enrollments have increased over the last few
	years and I think that is indicative of the fact that a lot of
	folks are struggling to keep up, despite the fact that
	unemployment is way down and we are getting back our mojo, I
	think, as a country, but it is uneven at best.
	So, Medicaid provides I think a very important role. I
	would also like to point out that despite the complexity and
	although we have heard a lot about some of the unclear rules
	maybe from CMS in how the Medicaid money should be
	administered. And OIG and GAO have done a good job, I think, in
	pointing out some of the potential problems with
	interpretations program, no one has done anything wrong.
	So, at the end of the day, I would just like to point out
	that as far as a government program goes, Medicaid has the
	lowest improper payment rates of any federal health program.
	So, let's keep it in perspective and talk about what we need to
	be doing.
	Last comment, sir, thank you for your indulgence, is that
	the real answer to driving the cost down is, again, quality-
	based reimbursement. That is how you get the biggest bang for
	the buck without hurting the people that need the program the
	most.
	So, I am hoping that we have that opportunity to talk about
	this and some of the other ideas that come out of this hearing.
	And I really appreciate the fact that we have had this hearing.
	I yield back, Mr. Chairman.
	Mr. Pitts. The chair thanks the gentleman. Does the
	gentleman from Massachusetts seek recognition?
	Mr. Kennedy. Yes, if I may.
	Mr. Pitts. The gentleman is recognized for 5 minutes for
	questioning.
	Mr. Kennedy. Thank God. I apologize to all that were
	waiting and letting me catch my breath.
	Chairman, thank you for holding the hearing. To our
	witnesses, thank you for being here. Thank you for your
	testimony.
	Mr. Hagg, I wanted to direct the first question at you sir,
	if I may. One report that OIG has highlighted was a review of
	Medicaid claim adjustments in Massachusetts between 2008 and
	2010. I wanted to take a moment with you to discuss the report.
	The main finding, as I understand of the report was that our
	state over claimed federal revenue around the time of the
	American Recovery and Reinvestment Act.
	So, to start, the Recovery and Reinvestment Act was
	implemented in 2009. Is it true that nearly at the same time
	the Commonwealth implemented a new Medicaid management
	information system around that as well?
	Mr. Hagg. I believe that is correct.
	Mr. Kennedy. And so is it correct that after OIG's findings
	were raised that the Commonwealth agreed to address the issues,
	so long as CMS agreed with OIG's interpretation?
	Mr. Hagg. I would have to go back and look at the report.
	At this point, I am not sure I remember specifically exactly
	what the state comments were on our findings.
	Mr. Kennedy. OK. So, if I jogged the memory, and said that
	if OIG reported the Commonwealth overcharged by $106 million,
	does that strike you as----
	Mr. Hagg. Yes, those were our findings. I just don't recall
	what Massachusetts' reaction was to those findings.
	Mr. Kennedy. So my understanding, sir, is that under OIG's
	interpretation on the other end of the ARA period,
	Massachusetts would have been undercharged by $108 million.
	Does that part ring a bell?
	Mr. Hagg. Well, I don't know that our audit period looked
	through that far. I don't think it covered that much. We
	focused on a specific period of time and the adjustments the
	state made during that time period.
	If the state believed that at the end of the period, the
	opposite effect would occur, then certainly, CMS, as the action
	official, would work with the state to take that into
	consideration and correct it.
	Mr. Kennedy. I appreciate that. I think the issue was,
	looking at one time period, the state had overcharged the
	federal government $106 million but looking at another time
	period, was in fact overcharged by $108 million. And you are
	saying you don't recall it but would look.
	Mr. Hagg. Well, again, CMS is going to be the action
	official on this. I am pretty sure that CMS concurred with our
	findings and recommendations.
	Now, without looking at that specific period that you are
	talking about or the state is talking about with an under
	claim, I really don't have the answer to that, whether that is
	accurate or not.
	Mr. Kennedy. Understood.
	Mr. Hagg. It really would be up to CMS, as the action
	official, to look at the information. If they wanted to come
	back and ask us to look at it, too, we would do that. But it
	would be up to CMS to try to resolve our findings and then the
	additional information, I guess, that the state has
	Mr. Kennedy. Great. And I come at this from the perspective
	that I agree with you wholeheartedly that program integrity is
	absolutely critical.
	And to the extent that the Commonwealth of Massachusetts
	OIG and CMS are able to work together to address the issue and
	didn't, I think it is fantastic. I think it is an isolated
	issue that ended up coming from a series of concurrent changes,
	such as the new information systems launch and, at the same
	time, a one-time stimulus. Hopefully, those challenges are
	behind us.
	Ms. Mitchell, if I can ask, you noted in your report that
	the FMAP is utilized to determine the federal share of other
	programs in the government as well. I was hoping you could
	comment on this and lay out a few of them.
	Ms. Mitchell. About what?
	Mr. Kennedy. The ways that FMAP is used for other programs.
	Ms. Mitchell. Sure. The regular FMAP is used to determine
	the federal share of a number of programs. And the ones that I
	am recalling right now are the Temporary Assistance for Needy
	Families Contingency Funds and the Foster Care Title IV-E
	funding.
	Mr. Kennedy. And so, ma'am, if our committee were to adjust
	FMAP funding in any way, we would also be affecting the funding
	for those programs as well. Is that right?
	Ms. Mitchell. I think it depends on how the legislation is
	written. If it is specific to the Medicaid program and you
	maintain the FMAP for the other programs, you could do that or
	it could apply to the other programs.
	Mr. Kennedy. OK. Thank you very much. And I yield back, Mr.
	Chairman.
	Mr. Pitts. The chair thanks the gentleman. I now recognize
	the gentleman, Mr. Ca AE1rdenas, 5 minutes for questions.
	Mr. Ca AE1rdenas. Thank you very much, Mr. Chairman.
	I thank you all for joining us today. We appreciate your
	knowledge and your expertise on these matters.
	My first question is for Mr. Hagg. One report that OIG has
	highlighted was a review of federal reimbursement for family
	planning services in California, specifically in the San Diego
	area. I would like to take a moment to discuss a portion of the
	report.
	In this report, over half of the improper claims were noted
	to be for visits that included testing for sexually transmitted
	infections. Is it true that after this report, CMS released
	guidance clarifying that STI testing is classified as family
	planning services for the purpose of calculating the FMAP?
	Mr. Hagg. I am not sure that is true. I would have to look
	back at that.
	CMS put out a letter to the state Medicaid directors in
	2014. I probably would need to refer back to that letter. I
	know it clarified some previous guidance and I think it revised
	some previous positions that CMS had taken. I should look back
	at the letter but I think that would have been, sexually
	transmitted infections would have been, classified as family
	planning-related, which would be claimed at the regular FMAP
	rate, not at the enhanced family planning rate.
	Mr. Ca AE1rdenas. OK, thank you. I appreciate that, Mr.
	Hagg.
	I also think it is also worth noting that as a result of
	OIG's recommendations, we have made programmatic changes to
	maximize program integrity moving forward, such as implementing
	an ICD-based reimbursement system. OIG's oversight has, indeed,
	provided worthwhile suggestions beyond STIs, which we are
	appreciative of.
	On the whole, I am pleased that this discrepancy in
	interpretations between the states and OIG has been resolved. I
	hope that with this administrative issue resolved, we can
	continue to move past this and past the simple difference of
	opinions and towards further actions that strengthen Medicaid
	for all of our beneficiaries.
	I have another one. My next question is for Dr. Schwartz.
	Again, thank you for joining us, doctor.
	I would like to ask you a question regarding upcoming work
	you noted in your testimony. In the summary sections, you noted
	that MACPAC is now focusing intensively on financing and design
	questions associated with alternatives, such as block grants,
	per capita caps, and capped allotments. I was somewhat alarmed
	that the sentence went on to describe that it would examine
	issues related to these alternatives, specifically baselines,
	growth factors, and state contributions. Were these three items
	only made as brief examples or does MACPAC plan to examine
	other effects of financing changes as well?
	Ms. Schwartz. Yes, they are both design issues to consider,
	which are those that were mentioned in my written statement as
	well as issues of impact. And a work plan analysis will also
	look at the impact on states, plans, providers, and
	beneficiaries. And another type of impact that we intend to
	look at is how changes in financing could affect other programs
	that rely on Medicaid to finance medical care for populations
	they serve, such as child welfare and special education.
	Mr. Ca AE1rdenas. OK, so you are cognizant of what could
	occur as a result of these alternative financing mechanisms and
	how they would affect system deliveries amongst all of our
	states.
	Ms. Schwartz. Yes, that is part of our work plan.
	Mr. Ca AE1rdenas. OK. One concern that has been raised is
	that alternatives to restructure Medicaid financing are often
	intended to reduce federal Medicaid expenditures. This
	subsequently places a larger burden on states and providers. I
	am concerned this could have a negative effect on access to
	care. Will this consideration be included in the June report?
	Ms. Schwartz. Yes.
	Mr. Ca AE1rdenas. OK. When you say yes, to what effect do
	you elaborate on that? Do you give examples? Do you extrapolate
	out on previous examples where we have done cuts in the past?
	Ms. Schwartz. I think our analysis will do both. We
	certainly have the experience from what states do now, when
	facing constrained spending. We can use data to help us look at
	the impact of different assumptions and so we can do both
	qualitative and quantitative analyses to look at those
	questions.
	Mr. Ca AE1rdenas. And are there potential examples where
	cuts have had negligible to beneficial effects on local output
	of services and do we have examples that you could actually
	point to that have had negative effects in the past?
	Ms. Schwartz. The states have sort of a defined tool kit in
	which they currently use to address issues of spending growth.
	They can address enrollment. They can addresses, prices,
	payment rate. They can address covered benefits and they can
	also do innovations to change the delivery of care and all of
	those provide good examples for helping us think about future
	approaches to finance.
	Mr. Ca AE1rdenas. Thank you so much, Mr. Chairman.
	Mr. Pitts. The chair thanks the gentleman. I believe that
	concludes questioning now.
	I remind members they have 10 business days to submit
	questions for the record. So, they should submit their
	questions by the close of business on Wednesday, February 24th.
	Good hearing. Very complicated issue. Important to educate
	all the members and the public. Thank you very much for your
	testimony. Without objection, the subcommittee is adjourned.
	[Whereupon, at 12:08 p.m., the subcommittee was adjourned.]
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