[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]
SAVING SENIORS AND OUR MOST VULNERABLE CITIZENS FROM AN ENTITLEMENT
CRISIS
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HEARING
BEFORE THE
SUBCOMMITTEE ON HEALTH
OF THE
COMMITTEE ON ENERGY AND COMMERCE
HOUSE OF REPRESENTATIVES
ONE HUNDRED THIRTEENTH CONGRESS
FIRST SESSION
__________
MARCH 18, 2013
__________
Serial No. 113-18
Printed for the use of the Committee on Energy and Commerce
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COMMITTEE ON ENERGY AND COMMERCE
FRED UPTON, Michigan
Chairman
RALPH M. HALL, Texas HENRY A. WAXMAN, California
JOE BARTON, Texas Ranking Member
Chairman Emeritus JOHN D. DINGELL, Michigan
ED WHITFIELD, Kentucky Chairman Emeritus
JOHN SHIMKUS, Illinois EDWARD J. MARKEY, Massachusetts
JOSEPH R. PITTS, Pennsylvania FRANK PALLONE, Jr., New Jersey
GREG WALDEN, Oregon BOBBY L. RUSH, Illinois
LEE TERRY, Nebraska ANNA G. ESHOO, California
MIKE ROGERS, Michigan ELIOT L. ENGEL, New York
TIM MURPHY, Pennsylvania GENE GREEN, Texas
MICHAEL C. BURGESS, Texas DIANA DeGETTE, Colorado
MARSHA BLACKBURN, Tennessee LOIS CAPPS, California
Vice Chairman MICHAEL F. DOYLE, Pennsylvania
PHIL GINGREY, Georgia JANICE D. SCHAKOWSKY, Illinois
STEVE SCALISE, Louisiana JIM MATHESON, Utah
ROBERT E. LATTA, Ohio G.K. BUTTERFIELD, North Carolina
CATHY McMORRIS RODGERS, Washington JOHN BARROW, Georgia
GREGG HARPER, Mississippi DORIS O. MATSUI, California
LEONARD LANCE, New Jersey DONNA M. CHRISTENSEN, Virgin
BILL CASSIDY, Louisiana Islands
BRETT GUTHRIE, Kentucky KATHY CASTOR, Florida
PETE OLSON, Texas JOHN P. SARBANES, Maryland
DAVID B. McKINLEY, West Virginia JERRY McNERNEY, California
CORY GARDNER, Colorado BRUCE L. BRALEY, Iowa
MIKE POMPEO, Kansas PETER WELCH, Vermont
ADAM KINZINGER, Illinois BEN RAY LUJAN, New Mexico
H. MORGAN GRIFFITH, Virginia PAUL TONKO, New York
GUS M. BILIRAKIS, Florida
BILL JOHNSON, Missouri
BILLY LONG, Missouri
RENEE L. ELLMERS, North Carolina
Subcommittee on Health
JOSEPH R. PITTS, Pennsylvania
Chairman
MICHAEL C. BURGESS, Texas FRANK PALLONE, Jr., New Jersey
Vice Chairman Ranking Member
ED WHITFIELD, Kentucky JOHN D. DINGELL, Michigan
JOHN SHIMKUS, Illinois ELIOT L. ENGEL, New York
MIKE ROGERS, Michigan LOIS CAPPS, California
TIM MURPHY, Pennsylvania JANICE D. SCHAKOWSKY, Illinois
MARSHA BLACKBURN, Tennessee JIM MATHESON, Utah
PHIL GINGREY, Georgia GENE GREEN, Texas
CATHY McMORRIS RODGERS, Washington G.K. BUTTERFIELD, North Carolina
LEONARD LANCE, New Jersey JOHN BARROW, Georgia
BILL CASSIDY, Louisiana DONNA M. CHRISTENSEN, Virgin
BRETT GUTHRIE, Kentucky Islands
H. MORGAN GRIFFITH, Virginia KATHY CASTOR, Florida
GUS M. BILIRAKIS, Florida JOHN P. SARBANES, Maryland
RENEE L. ELLMERS, North Carolina HENRY A. WAXMAN, California (ex
JOE BARTON, Texas officio)
FRED UPTON, Michigan (ex officio)
C O N T E N T S
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Page
Hon. Joseph R. Pitts, a Representative in Congress from the
Commonwealth of Pennsylvania, opening statement................ 1
Prepared statement........................................... 3
Hon. Frank Pallone, Jr., a Representative in Congress from the
State of New Jersey, opening statement......................... 4
Hon. Michael C. Burgess, a Representative in Congress from the
State of Texas, opening statement.............................. 5
Hon. Henry A. Waxman, a Representative in Congress from the State
of California, opening statement............................... 7
Witnesses
James C. Capretta, Senior Fellow, Ethics and Public Policy Center 9
Prepared statement........................................... 11
Joshua Archambault, Director of Healthcare Policy, Program
Manager, Middle Cities Initiative, Pioneer Institute........... 20
Prepared statement........................................... 22
Judy Feder, Ph.D., Professor of Public Policy, Georgetown Public
Policy Institute............................................... 34
Prepared statement........................................... 36
Submitted Material
Statement of Paul N. Van de Water................................ 69
Statement of Families USA, submitted by Ms. Schakowsky........... 72
SAVING SENIORS AND OUR MOST VULNERABLE CITIZENS FROM AN ENTITLEMENT
CRISIS
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MONDAY, MARCH 18, 2013
House of Representatives,
Subcommittee on Health,
Committee on Energy and Commerce,
Washington, DC.
The subcommittee met, pursuant to call, at 4:00 p.m., in
room 2123, Rayburn House Office Building, Hon. Joseph R. Pitts
(chairman of the subcommittee) presiding.
Present: Representatives Pitts, Burgess, Hall, Shimkus,
Blackburn, Lance, Cassidy, Guthrie, Ellmers, Pallone,
Christensen, Sarbanes, and Waxman (ex officio).
Staff Present: Clay Alspach, Chief Counsel, Health; Sean
Bonyun, Communications Director; Matt Bravo, Professional Staff
Member; Sydne Harwick, Staff Assistant; Robert Horne,
Professional Staff Member, Health; Carly McWilliams,
Legislative Clerk; Monica Popp, Professional Staff Member,
Health; Andrew Powaleny, Deputy Press Secretary; Chris Sarley,
Policy Coordinator, Environment and Economy; Heidi Stirrup,
Health Policy Coordinator; Alli Corr, Minority Policy Analyst;
Amy Hall, Minority Senior Professional Staff Member; Elizabeth
Letter, Minority Assistant Press Secretary; Karen Nelson,
Minority Deputy Committee Staff Director for Health; and Matt
Siegler, Minority Counsel.
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 chair will recognize himself for an opening statement.
Medicare and Medicaid are critically important programs
that millions of Americans rely on. These programs are in
trouble. Doing nothing is not an option. Doing nothing is
unfair, particularly to those who can't afford any other
options. Doing nothing is irresponsible.
But in the last few years, those who have proposed
solutions have been viciously attacked by special interests and
their allies on Capitol Hill. When the House passed a budget
that charted a path to saving Medicare, many on the other side
accused us of trying to, quote, ``end Medicare as we know it,''
end quote. But they offered no solution of their own.
Let me be clear: The status quo spells doom for every
American who relies on Medicare or Medicaid for their health
care. Both parties need to work together to modernize these
programs so they can survive.
Today's hearing is designed to get an accurate picture of
the fiscal challenges facing Medicare and Medicaid so we can
preserve these programs for the populations they were designed
to serve. Without defining the problems these programs face, we
cannot assess whether they are serving current beneficiaries in
the most efficient and effective manner possible and we cannot
strengthen and save them for future generations.
The Medicare program served 49 million beneficiaries in
2012 and, as was noted in a previous hearing, has been on the
Government Accountability Office's high-risk list since the
list began in 1990. According to the latest Medicare trustees
report, Medicare will be insolvent no later than 2024 but as
soon as 2017. More recent estimates have predicted insolvency
as soon as 2016. That is 3 years from now.
Doing nothing is not an option. Slogans such as ``Hands Off
My Medicare'' and the past refusal of some on the other side of
the aisle to even discuss changes to the program will lead to
Medicare's collapse. We can begin modernizing these programs
now or we can do nothing. If we do nothing, Medicare will not
be there for our children and grandchildren. In fact, if we do
nothing, Medicare as we know it will not be there for today's
seniors in a few short years.
Nearly 60 million Americans are currently enrolled in
Medicaid. While Medicaid spending accounts for nearly one-
quarter of most State budgets, in my home State of Pennsylvania
it is approximately one-third of the entire State budget.
Should Pennsylvania choose to expand the program under the
Affordable Care Act, approximately 60 percent of the
Commonwealth's budget will go to welfare spending, including
Medicaid, unfairly crowding out funding for roads, schools, and
public safety.
Medicaid costs to the States are expected to grow by nearly
$400 million in the next fiscal year, and these costs do not
include any costs associated with an expansion. Currently, one
in six Pennsylvanians receives Medicaid benefits. If the
Governor chooses to expand Medicaid in the Commonwealth, one in
four Pennsylvanians will be on the Medicaid rolls.
And this is not just a problem for Pennsylvania. The next
10 years of Federal Medicaid spending will be twice the amount
spent in the last 45 years. This is completely unsustainable.
Medicaid was designed as a safety net for our Nation's
poorest and sickest people. States are already struggling to
serve this core population, and Washington certainly doesn't
have extra money lying around either. For a system that is
already under tremendous strain, how will adding millions of
young, able-bodied adults to Medicaid affect our ability to
care for our country's poorest and sickest citizens?
With both Medicare and Medicaid, we face a fundamental
issue of fairness. Is it fair that young people are paying into
Medicare, when, as of now, the program will not be around for
them when they retire? Increasingly, doctors simply can't
afford to treat Medicaid patients. Is it fair that the
President's healthcare law will force millions of disabled and
sick Americans to compete with able-bodied 25-year-olds for
appointments with those doctors who will still see them?
I look forward to hearing from our witnesses today not just
about the challenges we face in preserving these programs but
also their solutions to modernize and save Medicare and
Medicaid.
Thank you. That concludes my time.
The chair recognizes the ranking member of the Subcommittee
on Health, Mr. Pallone, for 5 minutes for an opening statement.
[The prepared statement of Mr. Pitts follows:]
Prepared statement of Hon. Joseph R. Pitts
Medicare and Medicaid are critically important programs
that millions of Americans rely on. These programs are in
trouble.
Doing nothing is not an option. Doing nothing is unfair,
particularly to those who can't afford any other options. Doing
nothing is irresponsible.
But in the last few years, those who have proposed
solutions have been viciously attacked by special interests and
their allies on Capitol Hill. When the House passed a budget
that charted a path to saving Medicare, many on the other side
accused us of trying to ``end Medicare as we know it.''
But they offered no solution of their own.
Let me be clear: the status quo spells doom for every
American who relies on Medicare or Medicaid for their health
care. Both parties need to work together to modernize these
programs so they can survive.
Today's hearing is designed to get an accurate picture of
the fiscal challenges facing Medicare and Medicaid so we can
preserve these programs for the populations they were designed
to serve.
Without defining the problems these programs face, we
cannot assess whether they are serving current beneficiaries in
the most efficient and effective manner possible, and we cannot
strengthen and save them for future generations.
The Medicare program served 49 million beneficiaries in
2012, and, as was noted in a previous hearing, has been on the
Government Accountability Office's ``high risk list'' since the
list began in 1990.
According to the latest Medicare Trustees report, Medicare
will be insolvent no later than 2024, and as soon as 2017. More
recent estimates have predicted insolvency as soon as 2016.
That's three years fromnow.
Doing nothing is not an option.
Slogans such as ``Hands Off My Medicare'' and the past
refusal of the other side of the aisle to even discuss changes
to the program will lead to Medicare's collapse.
We can begin modernizing these programs now, or we can do
nothing. If we do nothing, Medicare will not be there for our
children and grandchildren. In fact, if we do nothing, Medicare
as we know it will not be there for today's seniors-in a few
short years.
Nearly 60 million Americans are currently enrolled in
Medicaid. While Medicaid spending accounts for nearly one-
quarter of most state budgets, in my home state of
Pennsylvania, it is approximately one-third of the entire state
budget.
Should Pennsylvania choose to expand the program under the
Affordable Care Act, over 60 percent of the commonwealth's
budget will go to Medicaid, unfairly crowding out funding for
roads, schools, and public safety.
Medicaid costs to the state are expected to grow by nearly
$400 million in the next fiscal year, and these costs do not
include any costs associated with an expansion.
Currently one in six Pennsylvanians receives Medicaid
benefits. If the governor chooses to expand Medicaid in the
commonwealth, 1 in 4 Pennsylvanians will be on the Medicaid
rolls.
And this is not just a problem for Pennsylvania. The next
ten years of federal Medicaid spending will be twice the amount
spent in the last 45 years.
This is completely unsustainable.
Medicaid was designed as a safety net for our nation's
poorest and sickest people. States are already struggling to
serve this core population, and Washington certainly doesn't
have extra money lying around either. For a system that is
already under tremendous strain, how will adding millions of
young, ablebodied adults to Medicaid affect our ability to care
for our country's poorest and sickest citizens?
With both Medicare and Medicaid, we face a fundamental
issue of fairness. Is it fair that young people are paying into
Medicare when, as of now, the program will not be around for
them when retire?
Increasingly, doctors simply can't afford to treat Medicaid
patients. Is it fair that the president's health care law will
force millions of disabled and sick Americans to compete with
able-bodied 25-year-olds for appointments with those doctors
who will still see them?
I look forward to hearing from our witnesses today, not
just about the challenges we face in preserving these programs
but also their solutions to modernize and save Medicare and
Medicaid.
# # #
OPENING STATEMENT OF HON. FRANK PALLONE JR, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF NEW JERSEY
Mr. Pallone. Thank you, Chairman Pitts.
Today we will examine Medicare and Medicaid, the safety net
programs that afford our seniors, disabled, and low-income
Americans access to quality health care. Ensuring the long-term
fiscal stability of these programs has been and continues to be
a priority of my work in Congress.
Budgets are about more than numbers and dollars. They are
real-life expressions of priorities, of choices, and of values.
And these choices have an impact on the lives of millions of
Americans not just for the fiscal year each budget covers but
for future years and future generations.
Now, I know that growing deficits are not good for the
future either, but we cannot reduce the deficit and give tax
cuts to the wealthy on the backs of our most vulnerable
Americans. What Republicans want to do when they talk about
painful cuts in the name of fiscal responsibility is to cut the
structural foundation of our safety net programs. They want to
block-grant Medicaid under the guise of State flexibility. They
want to decrease the Medicare rolls and turn seniors' health
over to insurance companies. But these changes do nothing to
tackle healthcare costs. They simply undermine the program's
guarantee of access to care.
So let's be clear and let's use facts. We have deficits
because of two unpaid wars, years of unpaid tax cuts to the
rich, and a deep recession. Meanwhile, revenues as a percent of
GDP from 2009 to 2012 were at the lowest levels seen in 40
years.
But because Republicans made it clear that they will not
consider any further changes in revenues, not even to get rid
of egregious tax breaks for the wealthiest Americans, their
only idea for addressing our budget challenges associated with
health care is to shift costs and risk onto seniors and to the
most vulnerable Americans who depend on Medicare and Medicaid
for health security.
Now, I agree there is more that can be done to make the
healthcare system more efficient and economically sustainable.
The reality exists that an aging population means more people
will rely on Medicare and millions of the uninsured will now
have access to healthcare through Medicaid because of the
Affordable Care Act.
But there are commonsense reforms that I believe Democrats
and Republicans can agree on that would bring greater value
into our health system that don't include cost-shifting. The
Affordable Care Act includes a number of provisions designed to
both reform healthcare delivery and improve the quality and
efficiency of health care. This, I believe, was a huge
downpayment on reforming the way Medicare and Medicaid deliver
care. And we are already seeing it pay off. Over the last 3
years, Medicare costs per person have grown 1.3 percent slower
than growth in the overall economy. And that is a reversal of
decades of rising costs.
Healthcare reform was entitlement reform. The ACA decreases
the deficit and promotes efficiency and quality. So let's build
on that work. Let's have a productive and fair conversation
about how to bring more value into these programs and not
eviscerate them.
Mr. Chairman, the issue is not whether we reduce the
deficit, but how we do so. And that conversation must include a
discussion about revenues.
I would now yield whatever time I have to the gentlewoman
from the Virgin Islands, Ms. Christensen.
Mrs. Christensen. Thank you, Mr. Pallone.
I want to say a word about Medicaid. And I hope that my
good friends on the other side of the dais understand that
leaving so many Americans without any insurance coverage has
severely damaged their health as individuals and our economic
health as a Nation. The ACA makes the investment we need to
correct this. Cutting $810 billion and restructuring Medicaid
as a block grant is the absolutely wrong way to go and will
have catastrophic long-term economic and health consequences
for the Nation.
I can tell you firsthand what it is like, because we in the
territories have always had to struggle under Medicaid caps.
Benefits and services have to be limited. Eligibility for us is
well below the FPL. We can't provide long-term care to all who
need it, and we don't get DSH payments. Our governments end up
taking up the slack, and our hospitals are already in crisis. I
don't wish that on anyone, not even those who think they want
Medicaid as a block grant. Your constituents deserve better,
and your districts, States, and this country need us to do
better.
The best way to reduce Medicaid costs is by creating good
jobs and by fully implementing and funding the Affordable Care
Act, not going back to the Bush-era policies that increased
poverty and the Medicaid rolls in the first place.
I yield back the time to the ranking member.
Mr. Pitts. The chair thanks the gentleman and, at this
point, recognizes the vice chairman of the subcommittee, Dr.
Burgess, for 5 minutes for an opening statement.
OPENING STATEMENT OF HON. MICHAEL C. BURGESS, A REPRESENTATIVE
IN CONGRESS FROM THE STATE OF TEXAS
Mr. Burgess. I thank the chairman for the recognition.
We have all heard the figures. We hear them literally every
week. Ten thousand baby boomers become eligible for Medicare
every day. At the inception of Medicare, five workers supported
every beneficiary. Today there are three; by 2030, there will
be only two. The cost pressures are increasing, and we risk the
ability to provide access to services for beneficiaries.
Spending in Medicare alone is projected to double over the next
10 years. The estimates are almost $40 trillion in unfunded
liabilities, leading to insolvency by 2017.
The Medicaid program, begun in 1965, was created to serve
as a safety net for a very narrow population of 5 million very
low-income Americans. The program has grown; now it covers over
40 million Americans. Under the Affordable Care Act, it will
grow even more: 25 million new individuals, 65 million total
Americans. It is counterintuitive given the existing problems
that already serve as a barrier to accessing care.
Our country is $16\1/2\ trillion in debt. The President
came to the House of Representatives last week and explained
that he didn't think that was a pressing problem. I disagree. I
think that it is.
The issue is, no one knows when it becomes a crisis. No one
knows when the Federal Government takes $110 billion down to
the Bureau of Public Debt some Tuesday at noon to sell and no
one shows up to buy. What happens next? Likely the interest
rates rise. Do they go up a little bit, or do they go up a lot?
If they go up more than a little bit, what happens to the debt
service on the national debt, on that $16.5 trillion? You talk
about mandatory spending, that is mandatory spending--spending
that is not available for any other program. When we talk about
crowding out other programs, that is what is at stake.
And then we saw this weekend in Cyprus, where the
Government of Cyprus decided to take very radical action
because they felt the pressure from the debt crisis that they
are facing. I am not saying that is what is in store for the
United States, but you certainly understand that, given the
world's situation, that we do need to pay attention. Our debt
does matter, despite what the President disclosed to us last
week.
So $16\1/2\ trillion in debt, Medicaid costs are escalating
$400 billion a year. States, even those States that have
rejected expansion, like my home State of Texas, will be
pressured to save money by reducing benefits or further cutting
provider reimbursement.
Now, think about that for a minute, what that means. We
always talk about wanting to give patients access to high-
quality, accessible care. How is it going to be high-quality,
how is it going to be accessible if you keep cutting provider
reimbursements and reducing benefits or increasing waiting
lines to get that care?
Spending in Medicare and Medicaid is not proportional to
the distribution of beneficiaries. Over $400 billion is spent
annually on 50 million Medicare beneficiaries. More than half
of that amount is for the 10 million individuals eligible for
both Medicare and Medicaid. Nearly 1 in 10 of those so-called
dual-eligibles have 5 or more chronic conditions, and well over
half have mental or cognitive impairments. The most expensive
dual-eligible patients, almost 1\1/2\ million, comprise 70
percent of the total expenditures for that group.
So we need to address costs, but the underlying system
structure is something that needs to be looked at, as well. We
must consider reforms that address the structure of this very
critical entitlement program. Our heads have been stuck in the
sand for too long. We know that the structural and fiscal
problems exist. We know that they must be dealt with. The only
question is, how long will America and Americans tolerate
staring at these problems without fixing them for future
generations?
I thank the chairman for yielding, and I will yield back
the balance of my time.
Mr. Pitts. The chair thanks the gentleman and now
recognizes the ranking member of the full committee, Mr.
Waxman, for 5 minutes for an opening statement.
OPENING STATEMENT OF HON. HENRY A. WAXMAN, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF CALIFORNIA
Mr. Waxman. Thank you, Mr. Chairman.
Today we have a hearing on the entitlement programs and the
economy. There is an implication here that we have to choose
one or the other. Unfortunately, in the name of fiscal
responsibility and balancing the budget, we are often presented
with what I believe is a false choice between securing our
Nation's fiscal health and ensuring the health of older,
disabled, and low-income Americans.
There are different paths we can take to ensuring the long-
term fiscal health of Medicare and Medicaid. The Ryan budget
proposal that is going to be on the floor this week, what my
Republican colleagues and their witnesses propose in our
hearing today, are fundamental structural changes in the
programs which, through premium support and privatization for
Medicare and block grants for Medicaid, don't hold down the
costs but simply shift them to beneficiaries, providers, and
States. This path, as I said, doesn't lower costs; it shifts
costs in a way that undermines the programs' guarantee of
access to care.
The alternative path that we began in 2010 with passage of
the Affordable Care Act is to reform entitlement programs
through delivery system reform that improves both efficiency
and quality. The Affordable Care Act improves access to
preventive care that saves dollars and lives. It includes
incentives to reward physicians and other providers for better
coordinating care and improving health. And it also included
policies to cut waste and inefficient care.
Health reform is entitlement reform. It is this kind of
reform that builds a better healthcare system for all Americans
at the same time that it lowers costs and helps support the
long-term sustainability of our public healthcare programs.
Medicare and Medicaid aren't ballooning out of control.
These programs are amazingly efficient. Over the next 10 years,
Medicare per capita costs are expected to grow at 5 percent per
year, as opposed to 6.9 percent in private insurance. On the
Medicaid side, the Congressional Budget Office estimates
projected Medicaid spending dropping by $200 billion through
2020, and the CMS actuary predicts spending will grow no faster
per beneficiary than private insurance.
The problem is the numbers and aging of our society. In the
coming years, we will see a growth in the number of people who
need Medicare and Medicaid. For Medicare, it is because of the
retirement of the baby boomers, and many of these Medicare
beneficiaries will also rely on Medicaid. Currently, dual-
eligibles are 15 percent of the Medicaid population but account
for nearly 40 percent of expenditures.
In Medicaid, millions of Americans who were previously shut
out of having insurance, particularly the working poor, will
now have access to coverage beginning in 2014. More people
clearly means more costs. But the solution should not and
cannot be simply to shift costs to States and beneficiaries,
but to continue our efforts to improve the value we get from
our programs in a thoughtful and sensible way.
Did we know there was going to be a larger population
coming on Medicare and Medicaid? Of course we have known this.
We have known that we have had a baby boom population. But
rather than put money aside to take care of that population, we
spent it on two wars without any funding for them, we spent it
on tax breaks for the upper-income without paying for them. We
worked ourselves into a deep debt, and now the money is not
there that we anticipated to use for these programs.
The Republican budget slashes away at the programs that
families need most. The Republican budget is built on a hoax.
On the one hand, they say it balances in 10 years. On the
other, they say, ``Repeal Obamacare.'' The fact is they repeal
all of the benefits of Obamacare, including improvements to
Medicare like filling in the Medicare Part D donut hole and
adding no-cost preventive services, but then they turn around
and keep the very Medicare cuts and taxes from the Affordable
Care Act that Republicans campaigned against.
Revenues need to be on the table. I don't think most
Americans will say, Well, we know there are going to be 70
million more seniors in Medicare; we hope you can make do with
dollars that support only half that number. We need to
eliminate the tax perks for the wealthiest. It is unjust,
especially if, at the same time, we are talking about cutting
holes in the safety net for the elderly and the poor.
I yield back my time.
Mr. Pitts. The chair thanks the gentleman.
That concludes the opening statements.
The title of our hearing today is ``Saving Seniors and Our
Most Vulnerable Citizens from an Entitlement Crisis.'' The
hearing was first scheduled on March 6th. It was cancelled due
to the snowstorm. I want to thank the witnesses for rearranging
your schedules to accommodate our hearing today.
Our panel is comprised of three distinguished witnesses:
first, Mr. James Capretta, senior fellow, Ethics and Public
Policy Center; secondly, Mr. Joshua Archambault, director of
health care policy and program manager for the Middle Cities
Initiative, Pioneer Institute; and, thirdly, Dr. Judy Feder,
professor of public policy, Georgetown Public Policy Institute.
Your written statements will be made a part of the record.
We ask that you summarize your testimony in a 5-minute opening
statement.
The chair recognizes Mr. Capretta for 5 minutes for your
opening statement.
STATEMENTS OF JAMES C. CAPRETTA, SENIOR FELLOW, ETHICS AND
PUBLIC POLICY CENTER; JOSHUA ARCHAMBAULT, DIRECTOR OF
HEALTHCARE POLICY, PROGRAM MANAGER, MIDDLE CITIES INITIATIVE,
PIONEER INSTITUTE; JUDY FEDER, PH.D., PROFESSOR OF PUBLIC
POLICY, GEORGETOWN PUBLIC POLICY INSTITUTE
STATEMENT OF JAMES C. CAPRETTA
Mr. Capretta. Thank you, Mr. Chairman. It is a real
pleasure to be here. Mr. Pallone, other members of the
subcommittee. Thank you for the opportunity to testify before
you today.
The most serious threat to the Nation's long-term
prosperity is the rapid and unfinanced growth of entitlement
spending. Left unchecked, spending commitments for these
programs will push Federal deficits and debt to levels that
many economists fear will precipitate a crisis. Experience
shows that the consequences of such a crisis would be
especially disastrous for the most vulnerable segments of our
society, including those who are dependent on the programs for
their financial security and health needs.
The three largest programs are Social Security, Medicare,
and Medicaid. In 1973, spending on these programs was 4.8
percent of GDP. Four decades later, that number had jumped to
10 percent of GDP, a 5.2 percentage point jump, which is larger
than today's spending on national defense.
In its latest projections, CBO shows the combined spending
on Medicare and Medicaid, the health entitlements, growing from
about $0.8 trillion in 2012 to $1.8 trillion in 2023. That is a
$1 trillion jump in spending and represents 55 percent of all
the new resources available in 2023 compared to 2012.
Looking out into the future, the problem is even more
daunting. Both CBO and the actuaries who produced the Medicare
numbers for the annual trustees report expect healthcare cost
inflation, along with the surge in enrollment, to push Federal
entitlement spending up very rapidly in the decades ahead. CBO
estimates that the combined spending on Medicare, Medicaid, and
the health law's new premium subsidy program will rise from 5.4
percent of GDP today to 8.4 percent in 2030.
And these projections assume very deep cuts in what
Medicare pays for these services for seniors, an assumption
that is highly questionable. Under an alternative scenario that
CBO produces, the number could rise to as high as 12.4 percent
of GDP, just on the health entitlements, by 2050.
The consequences of various approaches to the problem vary
quite a bit. Our budget situation would be far worse if not for
large, offsetting budgetary cost reductions that have already
occurred. In the 1980s, average defense spending was 5.8
percent of GDP. In the last decade, it was 3.8 percent of GDP,
even with the overseas engagements of that decade. All of that
savings and more has gone to finance higher entitlement
expenses.
There is much concern today about the effects of the
sequester. It is quite plain that the reason the blunt
instrument of the sequester was enacted in 2011 is due in large
part to the unaddressed problem of rising entitlement costs.
The cuts are going to have to come from somewhere, and if there
is no consensus on entitlements, then the cuts will inevitably
fall on discretionary accounts, including education, job
training, and public health funding.
One approach to the problem would be to use the provisions
of the 2010 healthcare law. There has been much talk about
bending the cost curve through those provisions. But it is
really important to note that CBO estimated essentially no
savings from those provisions when they estimated the bill, and
there has been no evidence since then that they will produce
any savings. Instead, the 2010 law used the same formula that
has been used in the past to hit budget targets, which is
large, across-the-board, and indiscriminate cuts in the
Medicare program.
In particular, the law included an annual productivity
factor adjustment that will reduce payments into institutions
on an ongoing basis starting this year. According to the 2012
trustees report, the cuts will push revenue down so much that
about 15 percent of all hospitals will be operating in the red
by the end of the decade. That number will jump to 25 percent
in 2030 and 40 percent by 2050.
The actuaries have made it very clear they don't expect
this to happen, and so they produce an alternative set of
assumptions for the Medicare program assuming that they will be
reversed or partially reversed. When they do that, the
projections for Medicare are essentially unchanged from prior
to when the law was enacted.
Another approach to solving the problem would be to raise
taxes. The Congressional Budget Office did a study for Chairman
Ryan last year on, if you solve this problem entirely on the
tax side of the equation, what would it take, essentially. They
estimated that to close the gap between the current policy and
then what would happen with the alternative projections would
take about a 33 percent tax increase across the board on income
taxes and corporate tax rates--a very, very large tax increase.
Let me conclude by saying that the most significant risk of
all of this is for the social safety net, because in the midst
of a Federal debt crisis, abrupt changes in policies would be
required to continue borrowing at preferential rates in the
global market. That has happened to other countries, and it is
not out of the question that it could happen here.
Thank you very much.
[The prepared statement of Mr. Capretta follows:]
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Mr. Pitts. The chair thanks the gentleman and now
recognizes Mr. Archambault for 5 minutes for your opening
statement.
STATEMENT OF JOSHUA ARCHAMBAULT
Mr. Archambault. Thank you, Chairman Pitts and Ranking
Member Pallone, members of the committee. Thank you for this
opportunity to bring a local perspective to this important
issue of protecting our most vulnerable citizens from the
entitlement crisis. My name is Josh Archambault, and I serve as
the director of healthcare policy at a nonpartisan think tank,
Pioneer Institute, in Massachusetts.
This afternoon, I would like to focus on Medicaid, a
program, especially in States with historically generous
eligibility, such as Massachusetts, that may foreshadow some of
the underlying issues that are sure to be exacerbated under the
Affordable Care Act.
Medicaid outcomes that deserve a closer look include the
tremendous budget pressure in States and the crowding out of
billions of dollars of spending on other public priorities; the
reaction of State leaders to cut access to benefits and hike
taxes to fund the program; and the increasing inability of
patients to access providers, which may lead to worse health
outcomes. In my opinion, as long as the program remains in
place in its current form, these problems will persist, and we
will fail to protect the most vulnerable.
Lawmakers in all States, red or blue, have been prevented
from investing in our kids and our communities due to the
ballooning costs of Medicaid. For example, in 2012, 35 States
funded elementary and high schools at a lower level than in
2008. This translated into fewer teachers in the classroom and
less police officers on the street. Sadly, these tradeoffs fall
disproportionately hard on vulnerable communities.
Even with the Federal Government offering to pay a
significant portion of the ACA's Medicaid expansion costs, any
additional spending does not come free. The Federal portion of
the additional $638 billion will have to come either from
higher taxes, from our sluggish economy, or from cuts in the
budget.
While supporters argue that the State portion of the
additional spending will be minimal, roughly $33 billion, it
cannot be denied that many States are struggling to pay for
their current program. As a result, State leaders have cut
access to benefits and hiked taxes to fund the program. In
2010, 15 States cut benefits in Medicaid; in 2011, 18 States
did.
Putting aside the debate over the generosity of Medicaid
programs in each State for just one moment, we know the pain of
these cost-containment strategies are felt most strongly by the
beneficiaries themselves. Instead of being able to vote with
their feet and take their business elsewhere, they are stuck
with these top-down decisions that dictate their insurance
coverage, and the outcome has been poor access to providers and
worse care outcomes for those on Medicaid.
The Federal Government has placed restrictions on how
States can manage costs in the program. As a result, the prime
tool to save money is to decrease payment rates to providers.
States that have already expanded Medicare eligibility tend to
pay for it by cutting reimbursement rates to finance the
expansion. Over time, this has resulted in underpayment of
doctors and hospitals and more providers refusing to treat
those on Medicaid. This trend prevents many recipients from
gaining even basic access to specialists. As a result, when
Medicaid patients are admitted into a hospital, they are often
sicker. Lower rates also may account for more ER visits by a
Medicaid patient. This form of care is both uncoordinated and
expensive.
In 2010, at least two-thirds of States cut provider
reimbursement rates. In 2011, 39 States did. And in 2012,
almost all 50 States cut rates. Recently the administration
encouraged further cuts. As a result, access issues are likely
to get worse, making it harder for even the most vulnerable on
Medicaid to find a physician to see them.
In 2011, a GAO study documented that children on Medicaid
often have worse access to physicians than those with no
insurance coverage at all. For many years, as Massachusetts has
provided coverage to a much higher income level than in most
other States, access remains a problem. Even the commonwealth
with the highest per capita doctor ratio in the Nation still
has a problem with access.
A simple anecdote illustrates this problem well. A Boston-
area Medicaid recipient was provided a list of eligible
providers by the Medicaid office and yet failed to find one
accepting new patients after calling over 20 doctors.
Policymakers should be concerned about the string of
troubling outcomes that are appearing more often in the
academic literature, and these studies raise legitimate
questions about the quality of care being provided. If Medicaid
outcomes were presented as part of a business, it is my opinion
it would be shut down because it is not serving its consumers
well and, in some cases, may be hurting their health. Reform
requires a departure from the current mindset that having
access to a Medicaid card is the same as having access to a
doctor.
Thank you so much for your time.
[The prepared statement of Mr. Archambault follows:]
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Mr. Pitts. The chair thanks the gentleman and now
recognizes Dr. Feder for 5 minutes to summarize your opening
statement.
STATEMENT OF JUDY FEDER, PH.D.
Ms. Feder. Thank you, Chairman Pitts and Ranking Member
Pallone and members of the committee.
I am pleased to be with you today to speak on the future of
Medicare and Medicaid. Continuing to slow growth in these
invaluable programs is essential to meeting the needs of an
aging population, but these programs are neither doomed nor in
crisis. Briefly summarizing my written testimony, let me
explain why.
First, per-person costs in Medicare and Medicaid have
consistently grown more slowly than private insurance premiums
despite these programs' focus on older and disabled people with
the greatest healthcare needs. In fact, in the past 3 years,
Medicare's per-beneficiary costs have grown so slowly--
practically zero last year--that CBO has reduced its Medicare
spending projections for the next decade by more than $500
billion, on top of the $500 billion-plus in savings from
measures taken in the Affordable Care Act. CBO has also reduced
its Medicaid projections for that period, excluding ACA
coverage expansions, by more than $200 billion.
Second, what that means is that it is not growth in
spending per beneficiary but growth in the number of
beneficiaries that has become the primary driver of increased
Medicare and Medicaid spending. It is this growth in the
elderly population, as we baby boomers turn age 65, that
requires us to actively promote the payment and delivery
reforms initiated by the Affordable Care Act to make our
healthcare system more efficient. There is no status quo in our
healthcare system or in our public programs, Mr. Chairman. All
our programs are in a state of active change, aiming to improve
efficiency.
Third, as these innovations develop--and they will take
time to develop--there are additional measures we can take not
in Medicaid. Given already constrained provider payment rates
and existing opportunities for State flexibility, proposals
that would secure more than modest savings, like block grants
or per capita caps, would shift costs to States and reduce
access to care. But on Medicare, as part of a balanced deficit-
reduction package, we can refine existing payment mechanisms at
the same time we promote their reform.
My testimony includes a few examples of refinements that
reduce unnecessary overpayments and promote efficiency. These
measures and others are not, as critics claim, arbitrary or
unjustified cuts that endanger access or quality. On the
contrary, as MedPAC emphasizes, they actually enhance provider
efficiency. And if too great a gap emerges between public and
private payments, the solution is not to have Medicare pay
more; it is to revoke cost containment across the whole
healthcare system through a collaboration among public and
private payers in payment design and payment constraints.
Fourth, only so much can be expected of reducing Medicare
costs per beneficiary. A balanced deficit-reduction package
must therefore include new revenues to serve an aging
population. As the elderly population doubles over the coming
decade, it is no less necessary for the Federal Government to
invest in health care than it was for State and local
governments to invest in education, as they did, when the very
same people began entering public school 60 years ago.
An alternative course of action, changing entitlement
structures through vouchers or block grants or adopting an
overly ambitious savings target that could produce the same
result, would fail to serve the growing elderly population,
undermining some of the most vulnerable members of our society,
while shifting costs and actually increasing healthcare costs.
Such measures might save Federal dollars, but keep in mind that
half of Medicare beneficiaries have family incomes of less than
$25,000 and they already spend 15 percent of their budgets on
health care.
Such action cannot be justified on grounds of fiscal
responsibility. Stabilizing the debt in the coming decade at 73
percent of the economy would require another $1\1/2\ trillion
in deficit reduction and would give policymakers time to
identify the further steps necessary to reduce costs throughout
the healthcare system in coming years. And it will enable us to
meet our responsibilities to an aging population, rather than
abdicate those responsibilities by radically restructuring
Medicare through premium support vouchers or by restructuring
or severely cutting Medicaid or other programs that protect
low-income Americans.
Thank you.
Mr. Pitts. The chair thanks the gentlelady.
[The prepared statement of Ms. Feder follows:]
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Mr. Pitts. That concludes the opening statements. I will
begin questioning and recognize myself for 5 minutes for that
purpose.
Mr. Capretta, I read over your testimony, and I must say I
am very concerned for our most vulnerable citizens if we don't
fix these problems. Do you believe we have a healthcare access
and coverage crisis on our hands if these valuable programs for
our most vulnerable citizens are not strengthened?
Mr. Capretta. I do think that the problems in Medicaid are
becoming worse rather than better and that the coming
enrollment tidal wave as part of the healthcare law in 2014
will exacerbate the problems that are already existing in the
program.
It is quite apparent in many regions of the country that
Medicaid participants are already struggling to get the same
level of access--anywhere close to the same level of access as
mainstream insurance. And we are about to enroll 15 million
more people nationwide in the program on the sort of acute care
side of Medicaid, from providing access to primary care,
emergency care, specialist care. And every study that I have
looked at shows that that will exacerbate the problem quite
substantially because the supply of physicians willing to take
care of those patients is fairly constrained. It is not likely
to go up rapidly, even from the training of new physicians in
the coming years.
And so, yes, I have a real concern that you see in some
parts of the country--California, for instance. Emergency rooms
are crowded very heavily with people that are on the Medicaid
program. That problem will become worse in 2014 and 2015.
Mr. Pitts. You discuss in your testimony the unsustainable
Medicare cuts in Obamacare. With more than 14 million Americans
depending on the Medicare Advantage program today, what do you
think the Obamacare cuts and the even more recent proposed
Obama administration changes mean for the beneficiaries
enrolled?
Mr. Capretta. Well, the estimates are that the combined
effect of the regulatory changes they are proposing, along with
the statutory cuts, are that Medicare payments are going to go
down by 7 to 8 percent in 2014 compared to 2013.
So what we have had here is a temporary period where the
administration really tried to artificially pump up Medicare
Advantage, frankly, and put a new bonus program in that was
really outside the normal process of demonstrations, pumped a
lot of money into the program--sort of unfounded, in my
opinion--and then now they have taken that away, and they are
going to cut back on the payments quite a bit post some of the
activity last year.
And I think the effect is going to be very predictable.
There are going to be plan withdrawals. There are going to be a
lot of Medicare Advantage people pushed out of their program.
The actuaries assume the number of enrollees will go down by a
few million in the next few years.
Mr. Pitts. Dr. Archambault, you note the added cost to
States associated with the Medicaid expansion. Many States,
including my home State of Pennsylvania, have not agreed to an
overexpansion of the Medicaid program, which could cost the
State approximately $5 billion over 10 years. Yet others are
trying to sell the enhanced Federal match to States as free
money and criticize Governors for rejecting the expansion.
From your perspective, is the expansion not a risky
investment for States, one that could cost them billions in the
long run?
Mr. Archambault. Yes, it certainly is, in my opinion. I
think when you talk to State legislators, they will say
something like, Well, we face an X-million-dollar shortfall in
Medicaid this year, and it is unaffordable, and 10 percent of
that is even more unaffordable.
So I certainly think from both a State budget perspective,
it is going to put some real strain on their budgets going
forward if you enroll additional folks. And as I highlighted in
my testimony, certainly Federal dollars are not free. The
taxpayers that are constituents that pay both State and Federal
taxes will feel that pinch in the future.
Mr. Pitts. Now, from your experience and review of the
Medicaid programs undergoing past expansions, you note in your
testimony that the most vulnerable often suffer. Today the
committee released a staff report outlining major reasons for
Medicaid reform, which shows the program is already struggling
to serve the most vulnerable.
What will a dramatic expansion of the Medicaid program mean
for the program's current citizens who already struggle to
access services, like the disabled, who often have long waiting
lists for home or community-based care initiatives, when
resources will have to be diverted to cover the growing cost of
an expansion rather than to serving them?
Mr. Archambault. You know, I think you highlight a very
important point going forward, that as you add millions of
additional people into an already strained and broken system,
it is the folks that have the most difficult health needs that
maybe already struggle to find a primary care doctor or a
specialist who are going to be even more disadvantaged in
getting access to those people because there will be so many
more people in front of them in line.
We have multiple examples around the country. I know that
the Committee on Oversight and Government Reform released a
bipartisan report highlighting the billions of dollars in fraud
and waste that we have seen in the New York Medicaid program
for disabled folks. And I think it just highlights some of
those issues that already exist in this program and need to be
addressed with real, meaningful reform going forward.
Mr. Pitts. My time has expired.
The chair recognizes the ranking member of the
subcommittee, Mr. Pallone, for 5 minutes for questions.
Mr. Pallone. Thank you, Mr. Chairman.
I wanted to ask my questions of Dr. Feder.
A number of recent reports, including the National Health
Expenditure Report, and projections from the Congressional
Budget Office have highlighted the slowing in Medicare cost
growth. And the Affordable Care Act has a number of provisions
designed to both reform healthcare delivery and improve the
quality and efficiency of health care. A GAO report a couple
weeks ago raised concerns about the long-term sustainability of
some of the reforms. Estimates based on the GAO report project
that if the reforms are sustained, it could result in as much
as $13 trillion in deficit reduction over the next 75 years.
So I just wanted to ask if you could assess what impact the
ACA is having on Medicare cost growth and the sustainability of
the delivery system reforms designed to improve quality and
efficiency. Can you help us get our hands around the
sustainability issue?
And then, last, we rely on a lot of economic models to
project costs out into the future. How reasonable are these 75-
year projections that are made by GAO and others?
Ms. Feder. Well, first of all, Mr. Pallone, the GAO report
that you are referring to and the estimate of unsustainability
was a gross misrepresentation of what can be called a
projection. Those large numbers of unsustainability were based
on assumptions that came from the requester, Senator Sessions,
that ignored both the cost savings that are in the Affordable
Care Act and the revenues associated with the Affordable Care
Act. If you ignore both of those, it is not surprising that you
come up with a problem.
The GAO report, like CBO estimate after CBO estimate, shows
that, as the law is written, that the expansions are indeed
sustainable, and in coming decades--in this decade, they
actually modestly reduce the deficit; in the subsequent decade,
they significantly reduce the deficit.
Now, the actions in the Affordable Care Act that control
costs include measures that CBO does score, as shown in these
estimates, which are elimination of overpayments to providers
and to MA plans that have been recognized by experts for
sometime as excess and overpayment. But, in addition, the
Affordable Care Act has put in motion innovation in healthcare
delivery to move not only the Medicare program and the Medicaid
program but also the entire healthcare system away from a
system that rewards more and more and more expensive services
and instead rewards providers for efficiently delivering
quality care through better coordination, better involvement of
consumers in their own care, and avoidance and reduction of
hospital use.
Those innovations are just getting under way, but those
mechanisms have considerable potential for improving the
efficiency not just of the public programs but of the
healthcare system overall.
Mr. Pallone. Thank you.
Let me ask you--I know you got into this a little in your
testimony. You said the past 3 years have seen a dramatic
slowing in the rate of increase of Medicare per-beneficiary
costs. At the same time, changing demographics and aging of the
population is projected to increase the number of Medicare
beneficiaries from 50 million today to almost 90 million by
2040. So even if per capita beneficiary costs remain stable
relative to GDP, the increase in number of beneficiaries will
drive cost growth.
Just talk a little more about the relative contribution of
excess cost growth or spending per beneficiary and increasing
enrollment as drivers of Medicare cost growth. And is it
reasonable to think that controlling costs alone without
considering revenue, which I mentioned in my opening statement,
is a realistic approach to funding Medicare?
Ms. Feder. I think given the slowdown in Medicare cost
growth, that the amount of what is called excess cost growth,
which is above inflation, has diminished substantially in terms
of projecting the future cost projections of per capita costs
or of total costs.
What is happening is that the costs are being driven by the
aging of the baby boom generation. As several of you referred
to in your testimony, this is not something that is a surprise.
The baby boomers have been coming--I am at the front of them
and proud to be one--for a long time. It is the numbers of
people on Medicare who are now driving the overall cost growth.
Mr. Pallone. Well, then what about the revenue aspect?
Ms. Feder. I am glad you went right there. The revenue has
become critical in that respect.
And I mentioned in my testimony that the State and local
governments increased their spending on schools when we baby
boomers entered school by about the same percentage as we are
now looking to increase costs in Medicare. And that investment
is essential. We simply don't abandon the baby boom generation,
who were working hard and contributing. We need to support the
care that baby boomers will need through enhanced revenues, at
the very same time that we are continually improving the
efficiency of the program and getting value for the dollar.
Mr. Pallone. Thank you.
Mr. Pitts. The chair thanks the gentleman and now
recognizes the vice chairman of the committee, Dr. Burgess, for
5 minutes for questions.
Mr. Burgess. I thank the chairman for the recognition.
Mr. Archambault, let me ask you a practical question. And I
realize we are in a congressional hearing, so a practical
question isn't really fair game, but I am going to ask it
anyway.
If you have, I mean, assuming a State that is going to do
the Medicaid expansion under the Affordable Care Act, and you
have a young person who is 20 years of age--well, let's say 27
years of age, who is at 135 percent of the Federal poverty
level, their care is going to be matched, the cost of their
care is going to be paid for by the Federal Government, 100
percent match. Is that correct?
Mr. Archambault. Will we assume in that State that is doing
the expansion they also have a State-based exchange that is
open?
Mr. Burgess. Well, they will be below the statutory rate--I
mean, if there is a statutory--there is statutory language in
the Affordable Care Act that says if you are below 138 percent
of the Federal poverty level, you have to go into the Medicaid.
Mr. Archambault. Yes----
Mr. Burgess. Now, I don't know how the Supreme Court
decision actually changed that.
I guess what I am getting at is, if that same person who is
28 years of age covered at 100 percent match actually gets
pregnant during the course of that coverage year, then are they
bumped back down to the 54 percent or 57 percent match? Do they
drift in and out of that? Who keeps track of that?
Mr. Archambault. I think you are right, Representative. I
think you raise a very good question about some of the churn
concerns that we have in and out of the Medicaid program; who
has responsibility at the State level versus the Federal level
on all these eligibility terminations.
Mr. Burgess. Well, in fact, we learned during all of the
difficulties with the Deepwater Horizon--and not this
subcommittee but another subcommittee of the full committee had
a field hearing down in Louisiana. And I was somewhat startled
by the variance in earnings that people can have and that
someone might earn their entire yearly income of $50,000,
$60,000 in May and June if they happen to be a shrimper in the
Gulf Coast off Louisiana.
So who is going to be responsible for putting that person
on Medicare when times are tough and in the exchange and then
figuring out what sort of subsidy they get in the exchange when
the shrimp are coming in?
Mr. Archambault. Yes, I think there is a huge technology
lift that is being required and expected of States and the
Federal Government to be able to tell whether somebody is here
legally, how much money they make, whether they qualify for
subsidies or not. And we are very concerned about that ability
going forward.
Mr. Burgess. Well, and it is not just an esoteric or
academic question, because there was someone from HHS who is in
charge of the technology piece addressing AHIP this past week
and seemed to, in the report in the CQ HealthBeat that I read,
was significantly concerned about their ability to produce what
they are supposed to be able to produce by October 1st. Because
on October 1st people are supposed to go live and go online and
sign up for this. Is that correct?
Mr. Archambault. Yes, that is correct.
Mr. Burgess. Well, let me just also say that, you know, I
so welcome your testimony. I was privileged to be in the
Supreme Court on the second day of the oral arguments last
year. It didn't turn out the way I thought it was going to.
But I was very concerned when I heard the Solicitor General
say that people showing up in the emergency room without
insurance are what are driving the costs up for the rest of us.
And, actually, your testimony referencing the Milliman study
about the cost-shifting due to low Medicaid reimbursement rates
is really the cost driver that we ought to be concerned about.
And, in fact, it is hard for me to understand how we are
fixing that underlying problem of cost-shifting by expanding
the program that is causing the problem in the first place.
Maybe you could enlighten me as to how that is going to work.
Mr. Archambault. Representative, I think you raise----
Mr. Burgess. It is fair to say it ain't.
Mr. Archambault. Yes, it ain't. And I think you have an
even broader question, which is the cost-shift onto small
business, in particular, when you under-reimburse for Medicaid.
Mr. Burgess. Well, thank you. And I really appreciate
everyone being here today.
Mr. Capretta, let me just ask--you heard part of my opening
statement. I am concerned about the fact that the dual-
eligible--we talk about a dual-eligible population as if it is
a monolithic group, but they are not. And we all know that
there are subgroups within that group that cost a great deal
more than some of their other counterparts.
How, really, as a health policy person, how do you go about
trying to get your arms around the scope of that problem so
that it makes sense? I mean, you have people that may cost an
average of $59,000 a year for their care if they have five
chronic conditions and people who may cost a fifth of that. How
do you reconcile all of those differences within that group?
Mr. Capretta. Well, the heart of the problem is that many
of those beneficiaries are in unmanaged fee-for-service
Medicare but the Federal Government put them in or they
defaulted into an unmanaged system or were in it for a long
time, their health deteriorates, they are in an unmanaged
system, no one is really watching over the full spectrum of
care, and then they end up in a situation where they need a lot
of intensive intervention with Medicaid as well as Medicare,
and the two programs are not coordinated.
So I think, frankly, the heart of the problem is that
Medicare has too many beneficiaries in an unmanaged system and
they end up falling through the cracks.
Mr. Burgess. Thank you, Mr. Chairman. I will yield back.
Mr. Pitts. The chair thanks the gentleman and now
recognizes the gentlelady from the Virgin Islands, Dr.
Christensen, for 5 minutes for questions.
Mrs. Christensen. Thank you, Mr. Chairman.
And I just needed to point out that the Affordable Care Act
did increase the reimbursement rates of Medicaid as well as
made other improvements to that and Medicare.
Dr. Feder, while making up only 25 percent of the Medicaid
population, the elderly and people with disabilities account
for two-thirds of Medicaid spending. Many consumers and
advocates are concerned about the loss of essential services,
especially to these two vulnerable groups, in the name of
reducing the debt and balancing the budget.
I am especially concerned about how proposals that would
cap Federal Medicaid funding would affect these populations. As
you heard in my opening statement, we have firsthand experience
in the territories with capped Federal funding for Medicaid. It
hasn't made it more efficient; they haven't made people better
off. It has just shifted the burden onto the territories, the
localities, and the families. And I am sure the same would
happen here.
So can you tell me what the implications are for low-income
families, senior citizens, and persons with disabilities if the
Federal Government were to cap or otherwise limit Medicaid
funding, particularly for the frail seniors and disabled
individuals who are likely to need long-term-care services?
Ms. Feder. Dr. Christensen, you rightly recognize from your
experience that a large part of the Medicaid program does go
toward long-term care as well as health care for people with
disabilities. And any effort to cap that program so that it
doesn't grow with the demand for care and with the cost of care
will fall--the burden will fall on--or will place a burden on
beneficiaries.
We know that the people who are receiving long-term care
from Medicaid pretty much throughout the Nation are receiving--
they are not receiving excessive care. They get pretty much
less care than they need. In many States, they would like to
move more aggressively to provide home and community-based
care, but unfortunately that does not necessarily reduce costs.
It may increase them.
And the States will be, I believe, in the future sorely
pressed to keep up with the growth in the elderly population
and the demands it places. To simply put a lid on the program
spending, on the Federal contributions, is to leave the States
holding the bag for this growing elderly and disabled
population, unable to serve them and forced to make significant
choices as to who would get services and who would not.
And it is not about flexibility. The States have
flexibility. It is about who is going to get served. And
somebody is going to be in serious trouble.
Mrs. Christensen. Right. And you have already answered the
question about shifting the costs. This is not going to control
costs. It is just going to shift the beneficiaries in the
States.
Ms. Feder. That is completely correct.
Mrs. Christensen. Yes.
Can you talk about how better care coordination and other
delivery reforms can improve care in Medicaid? You have already
said--well, can you answer that for me?
Ms. Feder. Sure. The whole idea is to move away, as Jim was
referring to, from a system that does not enable people or
providers to work together to coordinate and integrate people's
care.
And so we have in the Affordable Care Act a number of
measures to achieve that goal, the coordination, whether it is
the accountable care organizations or the medical homes or the
health homes in Medicaid, a host that would start rewarding
providers for working together to coordinate care.
Mrs. Christensen. On another question, as a physician, I
was really surprised by some of the assertions in Mr.
Archambault's written testimony regarding Medicaid and the
health outcomes of people who are covered by Medicaid.
For example, he suggested Medicaid may be harmful rather
than supportive of improved health. And I know you are familiar
with the Oregon health study and others that show better self-
reported physical and mental health in Medicaid recipients
compared to those who are uninsured. And he cited the GAO
study, and his testimony says that it documented that children
on Medicaid have worse access to physicians than those with no
insurance at all. But the GAO study actually shows that 78
percent of physicians nationally were participating in
Medicaid.
So we understand that there are challenges to Medicaid, as
in all insurance, but I would like to ask you to comment on
those studies and what the evidence shows about the impact of
Medicaid on access and outcomes.
Ms. Feder. Yes, I, too, was surprised, Dr. Christensen. And
as you said, Medicaid is improving access by, in the Affordable
Care Act, increasing the payments to primary care physicians.
But the research literature quite consistently shows that
Medicaid beneficiaries look very different from the uninsured
and look quite like the privately insured population in terms
of their having a medical home, a doctor whom they see in terms
of their visits, and in terms of their health status.
So Medicaid is of enormous value. We have seen this
recently in what was a natural experiment in Oregon----
Mrs. Christensen. Yes.
Ms. Feder [continuing]. which was not contaminated by
what--we sometimes can't tell the difference whether they are
sicker or the populations look the same, which absolutely I
think astounded its own authors, as to what a difference that
Medicaid made to people's health outcomes and health services
use.
Mrs. Christensen. Thank you.
I yield back to the chairman.
Mr. Pitts. The chair thanks the gentlelady and now
recognizes the gentleman from Texas, Mr. Hall, for 5 minutes
for questions.
Mr. Hall. Thank you, Mr. Chairman. And I do thank you for
this hearing. It is certainly helpful because it is going to
give opportunity for us Members to understand the financial
challenges and everything facing our Nation and also hear from
experts as to why doing nothing to improve it is not the answer
we are listening for. And I would say this is one thrust that
Members on both sides are very interested in, Republicans,
Democrats, whatever. This is a major problem.
And I think the chairman started out with this question to
Mr. Capretta and to Mr. Archambault, and I think your answer
was that you do believe that seniors and our most vulnerable
citizens are facing an access-to-care crisis. That is a gimme,
isn't it?
Mr. Capretta. Are you directing that to me?
Mr. Hall. Yes, sir.
Mr. Capretta. Yes, I did answer in the affirmative. Yes, I
do think there are some serious access problems, particularly
in the Medicaid program.
Mr. Hall. And do you feel that Washington is ignoring this
crisis?
Mr. Capretta. The Affordable Care Act, the healthcare law,
tried to address it with a temporary Federal matching rate
increase. But it is a 2-year program, and the nature of the
problem is much, much larger than what they put on it. So I
don't think it has been addressed adequately.
Mr. Hall. Well, do you think it is--I guess I am asking--I
was in the Texas Senate from 1962 to 1972, and a Congressman
came down to Austin, Texas, to tell us they had two wonderful
new programs and that one, if we weren't careful, one could
cost around $500 million--I mean, could cost around $200
million a year; and the other, Medicaid, if we weren't just
quite careful and really watching it, it could cost maybe
almost half that much.
I regret to say that in 45 years Medicaid went from zero to
$400 billion a year and Medicare is now $600 billion a year.
Those are correct. That is in the ballpark, isn't it?
Mr. Capretta. That is correct, yes.
Mr. Hall. How fair do you think that really is to
youngsters that are 20, 21, 25, or 30? I can't imagine anybody
being that young. But how really fair is it to ask them to be
paying into a program that we can't honestly guarantee it is
going to be around the day, in any way like it is today, when
they become eligible for the program? What do you say to those
youngsters?
Mr. Capretta. That is a very good point and an excellent
question. I think you are probably in a difficult position with
them because they are facing large--if the programs are left
unreformed, they will end up paying probably three times: once
for the current generation, once for their parents' generation,
and once for their own generation. And that is really not what
was intended.
Especially in the Medicare context, the idea was it was a
contributory program where across generations you roughly paid
the same, and then you got an earned benefit in retirement for
your health needs. The way it is shaping up is there is a big
push to continually raise the tax rate financing the program so
that future generations of retirees are going to pay way, way,
way more than previous generations.
Mr. Hall. The Medicare trustees, in their 2012 report, lay
out two dates for insolvency. The first and most likely
reported suggests the Medicare trust fund will be bankrupt in
2024. And the second--and some suggest it is the more realistic
of the two--puts the date of insolvency at 2017, just 4 short
years away.
What number should we believe?
Mr. Capretta. I hate to dodge the question but probably
both, because they really tell you two different things.
The first is, the 2024 date tells you when there are simply
no more reserves in the trust fund, so any claims that come
into the Medicare program at that time will probably--the law
is a little unclear--probably be paid at basically 75 cents on
the dollar. So that is essentially what would happen after 2024
if the trust fund is allowed to go totally to zero.
2017 is when the trust fund is running a cash deficit. So,
essentially, that means the Federal Government is going to have
to borrow even more money out in the outside world to cover
Medicare's expenses. That is kind of the time when you should
start worrying about the overall finances of the Federal
Government.
Mr. Hall. I thank you.
I yield back.
Mr. Pitts. The chairs thanks the gentleman and now
recognizes the gentlelady from Illinois, Ms. Schakowsky, for 5
minutes for questions.
Ms. Schakowsky. Everyone here agrees that we have a growing
aging population. We know that. And I appreciate my colleague
from Texas saying, let's talk about practicalities. But are we
really, as a Congress, not just as Democrats or Republicans,
talking about how to practically address these problems without
causing more pain for the elderly in America? People over 65
are making a median income of $22,000 a year, a Social Security
benefit averaging $15,000 a year, out of which, let's remember,
that is where the Medicare premiums come from. So you can't
even talk about these programs separately.
Are you kidding me, that we are going to, tomorrow, see the
passage of a budget that not only repeals Obamacare, meaning a
number of the improvements to the total healthcare system, some
of the things that account for the reduction in spending on
Medicare, and that turns it into a voucher program, that cuts
Medicaid by turning it into a block grant by $810 billion over
10 years? Can't we do better than that?
I mean, this whole conversation just drives me crazy. Old
people are going to--they are going to grow in numbers. Poor
people are going to continue to grow in numbers if we do those
things.
So why don't we sit down and figure out those
practicalities? My colleague raised some issues that I think do
need to be dealt with. We can do this.
I wanted to ask Dr. Feder a couple of questions about
payment. In terms of Medicaid, the Republican budget would
block-grant Medicaid, as I said. Can you explain how block-
granting Medicaid would severely restrict Medicaid's ability to
protect those that fall on hard times, such as the economic
downturn that we are still living through?
Ms. Feder. Well, Ms. Schakowsky, it is exactly the opposite
of the attention or the serious consideration you want to get
to meeting the needs of the growing elderly population, would
be to slam a lid on the funds that States have to deal with not
only elderly and disabled people but other low-income people.
There is not enough flexibility in life to enable States to
deal more efficiently with this population, which is often
claimed. States have flexibility to manage care in their
programs. The only flexibility this would give them would be to
essentially deny care to eligible people and would cut rates
even further.
Ms. Schakowsky. Let me give an example. In Cook County, we
have already expanded the Medicaid program. And what we are
seeing are things like a woman with Stage IV cervical cancer, a
stage that community health centers rarely see at that stage,
or a man with advanced testicular cancer, again, something
rarely seen.
So my question, if they had been insured, if they had been
able to get Medicaid at an earlier point, I mean, are we really
saving money if we cut these people off from the kind of
preventative or appropriate intervention here?
Ms. Feder. Well, you are, I think, right to point out that
when people are insured, we have lots of evidence that shows
that people get care earlier, they get better care, and they
are less likely to die than people who don't have insurance. I
can't tell you that that means that we won't save anything
because, unfortunately, letting people die without care can
mean spending less money. But that is not the way this society
ought to operate and take care of its own.
I hear a lot of concerns about what are purported problems
in the Affordable Care Act from comments today, but, as I
understand it, that many of these Members are planning to
repeal the very coverage that would prevent the people from
being seen only at that last minute.
Ms. Schakowsky. Let me just end with this. What I see in
the plans that have been suggested on the Republican side is
cost-shifting. We say the Federal Government can't afford it,
but, frankly, what the American people are concerned more about
than the debt in this country is their own budgets, their own
inability to get what they need. Why would we want to
exacerbate those problems? Let's work together.
I yield back.
Mr. Pitts. The chair thanks the gentlelady and now
recognizes the gentleman from Illinois, Mr. Shimkus, for 5
minutes for questions.
Mr. Shimkus. Thank you, Mr. Chairman.
I appreciate you all being here. It is an important debate
and discussion we are having.
And I like my friend from Texas, Mr. Hall's comments on
just the solvency of these programs, the 2017 date, the 2024
debate. I also do that in discussions with Social Security,
which is 2035 I think. And the way I try to explain it to my
constituents: Absent reform--and this is a letter from the from
Social Security Administration. When you retire, you get a
letter. The fifth paragraph says, If we do nothing, you are
going to get, in essence, 75 percent of your promised benefits.
Because there is a trust fund, as I understand it, and the
money is going--as we pay money in, it pays out to
beneficiaries. But when you trip these dates, then only what
gets paid out is what is in that fund. So that is why Social
Security will be--someone who is expecting a $1,000 Social
Security check will end up getting, on that date, left
unchanged, a $750 check.
I see, Mr. Capretta, you are shaking your head.
Mr. Capretta. Yes.
Mr. Shimkus. Is that how you understand that whole system?
Mr. Capretta. That is right.
Mr. Shimkus. And you are saying that that is true for the
Medicare fund on 2017 or 2024, depending upon how we calculate
that date.
Mr. Capretta. It would be true in 2024, yes. They would
only be able to pay out claims financing at the level of
revenue coming in at that point. So if the revenue is only
covering 75 percent of the total claims that are being filed by
hospitals on behalf of patients, the law is ambiguous about how
that will be handled. It doesn't say exactly how to handle it.
The presumption is you just pay a percentage of the total
claim.
Mr. Shimkus. Because there is no provision for us right
now, under current law, to borrow money to keep the new changed
delta. I mean----
Mr. Capretta. When the trust fund is depleted of reserves,
there is no ability, under current law, for it just to run in
the red.
Mr. Shimkus. So Medicare pays, in essence, 70 percent of
private care costs. I mean, I don't know if you know that or
not. That is what I----
Mr. Capretta. It is a little bit more than that, but that
is in rough terms right.
Mr. Shimkus. So if these insolvency date hits, then they
are going to end up paying----
Mr. Capretta. Seventy percent of that.
Mr. Shimkus. A huge----
Mr. Capretta. Yes.
Mr. Shimkus. So it could be 30, 35 percent to the
providers----
Mr. Capretta. Right.
Mr. Shimkus [continuing]. Who are providing care.
Mr. Capretta. It recognizes the law has already cut the
reimbursement rates quite a bit. The main provisions of saving
money in the Medicare program that have been discussed today at
the hearing are provisions that simply apply across-the-board
reductions to every facility in the country that is providing
services to Medicare patients. It didn't distinguish amongst
any of them based on quality or anything else. It essentially
applied an across-the-board cut to every provider.
Mr. Shimkus. Now, let me ask a question, because then you
talk about revenue, right? Maybe a solution would be more
revenue. But under the Obamacare, the healthcare law, we
increase Medicare taxes by leveling the 3.8 percent tax on
unearned income, do we not?
Mr. Capretta. That is correct. For anyone above $200,000 a
year in annual income if you are an individual, $250,000 for
couples.
Mr. Shimkus. So this must help that fund, shouldn't it?
Mr. Capretta. Well, it didn't go into the Medicare trust
fund, though. This portion of that tax increase was dedicated
to financing the rest of the bill.
Mr. Shimkus. So a 3.8 tax on unearned income on the
Obamacare healthcare law did not go to help prop up these
insolvency issues on Medicare.
Mr. Capretta. Correct.
Mr. Shimkus. Well, that is unfortunate, if there is a
funding problem.
We also talked a lot during the debate, even in the
Presidential campaign--and I had Secretary Sebelius right at
the table you are at, who in essence agreed that they had
double-counted the depletion of Medicare dollars into two
directions. They double-counted, in essence, I said $500
billion, but now we know it is like $716 billion.
How did we double-count that, or how did--and we voted
against the law--how did those who support the law, how did
they double-count, how did the administration double-count
hundreds of billions of dollars?
Mr. Capretta. They cut the Medicare payment rate, as we
discussed, by about $500 billion.
Mr. Shimkus. Arguing that they are saving Medicare.
Mr. Capretta. And they are taking basically $500 billion,
reducing what Medicaid is paying to providers. That $500
billion was used under what you call the PAYGO scorecard that
is used in Congress to make sure legislation is at least
deficit-neutral or a little better. They used that $500 billion
to show a positive balance on the PAYGO scorecard. That is one
scorecard. And then they deposited it into the second
scorecard, the trust fund scorecard, to pay future Medicare
claims. So they did spend the money twice.
Mr. Shimkus. Thank you very much.
Thank you, Mr. Chairman.
Mr. Pitts. The chair thanks the gentleman and now
recognizes the ranking member of the full committee, Mr.
Waxman, for 5 minutes for questions.
Mr. Waxman. Thank you, Mr. Chairman.
Dr. Feder, the title of today's hearing is ``Saving Seniors
and Our Most Vulnerable Citizens from an Entitlement Crisis.''
It seems that the term ``entitlement'' has come to mean
different things to different people. Too often, people think
of entitlements through the narrow lens of the programs that
provide the social safety net for our seniors and the most
vulnerable in our society without considering the fiscal impact
of tax entitlements--tax deductions, exclusions, credits, and
other tax preferences--which disproportionately benefit well-
to-do Americans. One could call those entitlements.
Can you talk about entitlements, both those providing
essential services to seniors and low-income Americans and
those providing tax breaks to more affluent Americans, and the
relative role of each in the context of protecting the most
vulnerable in our society and addressing our long-term debt?
Ms. Feder. Yes, Mr. Waxman.
I think that we should start with the recognition that an
entitlement is a commitment on the part of the Federal
Government to provide benefits to as many people who qualify
for that benefit appear in a given year without a constraint
through the appropriations process. And when we apply that
definition, the benefits that come through the Tax Code are the
very same kinds of entitlements as benefits as those that come
through direct spending. And that has, I think, been recognized
by the Congressional Budget Office and others for many years.
That is why we call them tax expenditures.
There are some tax expenditures that do benefit low-income
people, like the earned income tax credit and like the
refundable tax credits in the Affordable Care Act. But the vast
majority of tax expenditures for health care, for housing, for
pensions, are disproportionately overwhelmingly benefitting the
better-off. Because the higher your income, the more you
benefit from not paying taxes on those dollars.
It can be argued that that spending is crowding out some of
the spending that we--improved spending that we need for
middle-income and lower-income populations.
Mr. Waxman. Exactly the argument we hear for spending on
entitlements.
Ms. Feder. I beg your pardon?
Mr. Waxman. That is exactly the argument we hear for
spending on Medicare and Medicaid.
Ms. Feder. That that is crowding out, not----
Mr. Waxman. Yes.
Ms. Feder. You are quite right. And what I am saying, and I
think that I am getting your point, is that by spending on the
better-off in tax entitlements, it is that that is very much a
part of the crowd-out.
Now, I would also say that I don't know that I would
eliminate all of those. I would not eliminate the tax benefit
because we need the risk-pooling that it provides. But for
high-income people, we do not need to be providing so many
benefits.
Mr. Waxman. Well, some have argued that cutting only
spending entitlements while shielding tax entitlements would
have a highly regressive impact. Is that what you are saying?
Ms. Feder. It surely would.
Mr. Waxman. OK.
My Republicans colleagues have proposed keeping tax levels
at about 18 percent of GDP. With what we know about the aging
of our population and the increasing need for health coverage
under Medicare and Medicaid, is it realistic to keep revenues
at that level?
Ms. Feder. No. It simply is not. And when you hear of
concern for State budgets and when proposals are being made to
actually shift more costs to States, whether it is health care
or if we look at long-term care, which is borne primarily by
the Medicaid program, and different rates of aging in different
States, the notion that we would deal with these kinds of
issues without generating, raising additional revenues is
really unconscionable.
Mr. Waxman. I was troubled by some of the accusations in
the testimony of Mr. Archambault, and I believe they deserve to
be fact-checked.
First, Mr. Archambault asserts that Medicaid is not serving
its customers well and, in some cases, may be hurting their
health.
Dr. Feder, isn't it true that the Medicaid program is
completely optional for States? States are not required to
provide Medicaid; isn't that correct?
Ms. Feder. Yes, sir.
Mr. Waxman. So if Governors really believed that Medicaid
was harming their residents' health, do you believe they would
continue to fund the program?
Ms. Feder. Sounds pretty peculiar to me.
Mr. Waxman. Many Governors, even Republican ones, have
already opted to participate in the Medicaid expansion offered
as a part of the Affordable Care Act because it is good for
their States and good for their citizens. Moreover, there is
empirical evidence showing that Medicaid improves health; isn't
that accurate?
Ms. Feder. Yes, sir.
Mr. Waxman. In 2008, Oregon conducted a randomized,
controlled experiment on how expanded access to Medicaid
affects health. The results are very encouraging. The group who
received coverage under Medicaid had substantively and
statistically higher utilization of preventive and primary
care, low out-of-pocket medical expenses and lower medical
debt, and better physical and mental health than the control
group.
Can you comment on the assertions in Mr. Archambault's
testimony?
Ms. Feder. We had discussed that earlier, so I can do it
briefly.
I think that the evidence you have presented is what the--
the predominant evidence on the value of Medicaid in terms of
improving people's health and enabling them to get care. There
is no question about it.
Mr. Waxman. Thank you.
Thank you, Mr. Chairman.
Mr. Shimkus [presiding]. The gentleman's time has expired.
The chair now recognizes the gentleman from New Jersey, Mr.
Lance, for 5 minutes.
Mr. Lance. Thank you very much, Mr. Chairman.
And good afternoon to the panel.
To Dr. Feder, good afternoon. You gave us a figure, and I
just didn't hear it. I gather Medicaid, at the moment, spends
roughly $400 billion a year; is that right?
Ms. Feder. I beg your pardon?
Mr. Lance. Medicaid is roughly $400 billion a year? And I
was interested in your testimony regarding long-term care. What
percentage is in long-term care?
Ms. Feder. Long-term care is about a third of total
Medicaid spending. Spending on the elderly and disabled--and
for the low-income disabled, Medicaid is providing not just
long-term care but health care--the two populations together
absorb about two-thirds of Medicaid spending.
Mr. Lance. And by ``long-term care,'' do we mean nursing
home care, by and large?
Ms. Feder. Not necessarily. We mean help with basic tasks
of daily living, which can happen in nursing homes but also
happen at home and in community daycare centers and other
places.
Mr. Lance. And, obviously, with an aging population, the
baby boomers, there are going to be more people who are going
to need----
Ms. Feder. That is correct.
Mr. Lance [continuing]. Long-term care.
Have you analyzed models that might be different from the
model that we utilize today in America? I would hope it would
be less expensive, but perhaps it would not be less expensive,
care from one's residence as opposed to care in the nursing
home?
Ms. Feder. There has been a movement over several years, as
it sounds as though you are quite familiar with, Mr. Lance, to
treat people at home where they want to stay, or help people at
home where they want to stay. And on a per-person basis, it is
cheaper than putting them a nursing home.
But we need to better serve that population. They are
underserved throughout the Nation. And that requires additional
investment.
Mr. Lance. That would impress me as an area where we might
work together in a bipartisan capacity, as undoubtedly there
are going to be more people needing long-term care given the
aging population and particularly regarding those who are baby
boomers.
Ms. Feder. I think that would be a wonderful thing, Mr.
Lance. And I would appreciate--or would offer any assistance in
that regard that I can.
Mr. Lance. Thank you.
Regarding tax expenditures--and I understand that this is a
newer debate in America, but it is a debate currently occurring
in our country. To you, Dr. Feder, or to other distinguished
members of the panel, what is the largest tax expenditure at
the moment in the country?
Ms. Feder. I think the largest tax expenditure is the
exclusion of employer-paid premiums from taxable income.
Mr. Lance. Yes.
Other members of the panel, is that the largest tax
expenditure?
Mr. Capretta. Yes, that is true.
Mr. Lance. Yes. And I have stated in my campaigns for
office that I do not favor taxation of that, and that has been
welcomed by those who elect me to office.
And I think it would be extremely difficult to tax those
healthcare policies. Does the panel believe that it is at all
realistic that Congress, whatever its configuration, would
actually do that?
Ms. Feder. Well, if I--and following up on Congressman
Waxman's questions----
Mr. Lance. Yes?
Ms. Feder [continuing]. I think that what is important to
recognize is that if the Congress is proposing to put a lid on
spending for Medicare or Medicaid programs, that to ignore the
expenditures that disproportionately go to higher-income
people----
Mr. Lance. I understand that point.
Ms. Feder. And I think that is the context in which it is
made.
The other proposal----
Mr. Lance. So do you favor taxation, Dr. Feder, of the
portion----
Ms. Feder. The proposals that I have seen that make sense
to me--and we actually are doing something very much like that
in the Affordable Care Act. I think that the proposals that I
have seen that make some kind of sense are the proposals that
would limit the tax breaks for higher-income people. But I
would not favor taxing all those benefits.
Mr. Lance. You would not favor taxing all of those
benefits.
Yes?
Mr. Capretta. It is important to recognize that the
healthcare law did, in a sense, impose a tax on those benefits
on high-cost plans.
Mr. Lance. Yes. Thank you.
Mr. Capretta. And it was not based on income. It was across
the board.
Mr. Lance. It was across the board. Thank you.
In your testimony, Dr. Feder, you do say, ``Stabilizing the
debt in the coming decade would give policymakers time to
identify the further steps that will be needed to slow the
growth of healthcare costs throughout the U.S. healthcare
system without impairing the quality of care.'' I believe I
agree with that statement.
At what level do you think it would be best, given the
current situation, to stabilize the debt?
Ms. Feder. Well, in my testimony I cited the work that has
been done at the Center on Budget and Policy Priorities
advocating that we stabilize that percentage at 73 percent of
GDP.
Mr. Lance. And what is it at the moment? It is a little
higher, isn't it?
Ms. Feder. I apologize. I don't want to misstate a figure,
so I will just provide that for you later.
Mr. Lance. Thank you very much.
Thank you, Mr. Chairman.
Mr. Shimkus. The gentleman's time has expired.
The chair recognizes the gentleman from Georgia, Mr.
Barrow, for 5 minutes.
Mr. Barrow. I thank the chairman.
Critics of the two warring tribes in Washington can find
plenty to criticize on both sides. There will be folks who
criticize Democrats for having a blind faith in the future and
sort of ignoring the long-term trends and problems here, having
some faith in our ability to solve this problem down the road.
Folks can criticize folks on the other side of the aisle for
basically saying this is so ominous, so bad, we just have to
get out of the business, we have to cost-shift, we have to get
out of the business of subsidizing the current model because it
is just way too much for the taxpayers to bear.
Both sides, it seems to me, that stereotype, seem to agree
on something. They seem to accept the current level of spending
and the current projections and the trends as being sort of--
the best of all possible worlds--some sort of a given. And I
challenge that assumption.
I happen to think that this whole approach that most folks
tend to agree on is, what are we going to do about how to pay
for this, sort of ignores the real challenge here. And that is,
what are we spending our healthcare dollars on? And what are
the things we can do that would have a big impact on what we
are spending on but would also alleviate the underlying
problems that people are facing.
I look at the scourge of Alzheimer's and the scourge of
diabetes as being a whole lot more than the public tab
associated with both of those diseases, just to take two large,
big-ticket items for example. If we could crack the Alzheimer's
code, for example, I think we would have a big impact on
Medicaid's viability and the burden that it is carrying all
over the country. If we could crack the problem, the current
trends of letting diabetes set up in the course of people's
lives during their work life and most of the bills coming due
only during Medicaid's time on the healthcare watch, we could
have a big impact on Medicaid. But, more importantly, we could
alleviate the suffering of millions that really is not
accounted for in any of the discussion that we have been having
on this committee.
So my question to you all is, if you want to attack the
problem in terms of putting the technology out in front of the
mandates, instead of figuring out how we are going to pay for
business as usual, but what can we invest in that will make for
business as unusual, that can actually affect what we are
having to spend money on in a big way?
And I am not talking about nanny-state stuff that has no
practical chance of success. I am talking about things we can
hit if we make a good investment, a solid investment, a war on
this or a war on that, that would have a big payoff not just in
terms of the public's share of the healthcare expense in this
country but also the suffering that people are experiencing in
their lives.
What are the two or three things that you all say we ought
to wage a war on to get at that would have a big impact on
Medicare's budget, Medicaid's budget, and also the bottom line
of what we are funding?
Because I regard this whole approach as sort of taking the
current state of affairs as a given. And I look at this in
terms of we are missing the challenge of trying to find those
breakthroughs, those things that would take a serious,
concerted, coordinated effort of research and development and
deployment to actually make a big impact not only on people's
lives but also in terms of our Nation's healthcare budget.
What would you suggest we go after if that is the approach
we want to take?
I want to make the bad things we are paying for obsolete,
not just be arguing about who is going to have to pay for them.
I want to make the things that are driving our budget ox into
the ditch and making people's lives miserable and make those
things obsolete, rather than just figure out who is going to
pay for them.
Who is going to take a stab at helping us understand where
we need to go in that direction?
Mr. Capretta. Well, it is a big, big question. I am
sympathetic to your point of view, actually. I think it is a
big challenge, though, to have the certainty that some kind of
public intervention is going to have enough of a payback and
certainty that you don't need to make other adjustments.
So, in other words, my first point to you----
Mr. Barrow. I recognize that if we solved a lot of problems
that are killing people off at a certain age, we would have a
little bit more in terms of pension. Maybe there would be a
shift on the reliance on the pension benefits of folks who are
living longer and healthier lives.
Mr. Capretta. No, no, what I am trying to say is that let's
assume we made a big intervention in the areas you are talking
about--and I am about to mention one that I agree with you on--
it is so uncertain that it will have the payoff we both would
like to see, that you still have to make other adjustments in
the entitlement programs, because you can't bank on that having
the 20-year effect we are both looking for.
But having said that, I do think that there are
opportunities, especially in the area of diabetes, to make some
progress. I think there are a lot of untreated and undertreated
people with that condition that are heading into their Medicare
years quite soon. And if we did a better job of coordinating
care for that population, there is an opportunity--and I was
part of a study that looked at this carefully--there is an
opportunity to bring down some of that burden with some level
of certainty associated with it.
It won't solve our budget problems, though, I am afraid to
say, unfortunately, because there are some expenditures
involved in providing better care for them too
Mr. Barrow. Dr. Feder, my time is running out. Have you got
something you want to add?
Ms. Feder. I was just going to add, I think that when Jim
talks about investing in diabetes and in prevention and primary
care, that is precisely what the changes, payment and delivery
reforms in the Affordable Care Act are aimed to promote. It is
to enhance our focus on primary care and coordinate care at
early stages when there are early difficulties in order to
prevent the use of costly services later on that actually could
be prevented.
Mr. Barrow. Just so you know, I am not interested in
something that is high-maintenance, low-impact. I want low-
maintenance, high-impact. That is what I am looking at.
Thank you.
Mr. Shimkus. The gentleman's time has expired.
Ms. Schakowsky. Mr. Chairman, I am wondering if I could
offer something to put in the record.
Mr. Shimkus. What are you----
Ms. Schakowsky. This is a statement by Ron Pollack from
Families USA.
Mr. Shimkus. OK. Without objection, we will accept the
submission.
Ms. Schakowsky. Thank you.
[The information appears at the conclusion of the hearing.]
Mr. Shimkus. That chair now recognizes the vice chairman of
the full committee, Mrs. Blackburn, for 5 minutes.
Mrs. Blackburn. Thank you, Mr. Chairman.
Just one comment I wanted to get in before I--I do have a
couple of questions. Ms. Feder mentioned earlier that there was
an increase in provider payments in Obamacare for Medicaid
providers. And I just want to note that that is actually going
to be a 2-year bump----
Ms. Feder. That is correct.
Mrs. Blackburn [continuing]. And not a full-time, long-term
payment. So basically what we are doing there is setting up
another one of these cliffs. It will be a new SGR cliff because
the money goes away after 2 years.
And what we find out and what we hear from our Governors
and one of the reasons so many of our State legislatures are
having such heartburn over the Obamacare issues is because you
put money in, then you take money out, and then what happens
with those Medicaid beneficiaries? And where are they going?
How are you going to pay for this?
And, quite frankly, I have to tell you that we all are
compassionate and want to make certain that people have access
to affordable care. But having the Federal Government put their
hand further into that healthcare pot does not solve the
problem; it makes it worse. It makes it worse.
What we want to do and what I have heard from my colleagues
across the aisle even--I am happy to hear them talk about
solving this problem and this access-to-care problem, because
the more Federal intervention you have, the worse the situation
gets, the more limited is your access to care.
And what we have found in Tennessee--and I will make Mr.
Pallone's day. He knows I can't sit here and not say
``TennCare.'' What we found through the--are you familiar with
TennCare, Ms. Feder?
Ms. Feder. I am.
Mrs. Blackburn. And you know what a miserable failure it
was and how we had a Democrat Governor that had to come remove
180,000 people from the rolls and restructure it.
And one of the lessons learned is that having access to the
queue is not the same thing as having access to the physician.
And that is something that you see--I continue to ask
everybody, show me a public option plan, show me a Federal
mandate plan that gives you greater access, greater outcomes,
and a lower cost. The truth is, Ms. Feder, there is not one on
the face of the earth, not one, that has successfully done
that.
Mr. Capretta, I have a couple of questions for you. I sit
in these hearings and I hear a lot about, every time we look at
something to save Medicare, to keep it solvent for a long
period of time, trustees have told us it is going broke. Every
time we do that, we are accused of trying to drive grandma and
grandpa off the cliff. And I find it so incredibly unfortunate,
but I think that the real crime is to sit by and do nothing and
say we are just going to be content with the status quo and not
look at how we solve this problem.
Tell me where you are with looking at these trustee
reports. What are your thoughts?
Mr. Capretta. Well, the latest CBO estimates actually are
pretty interesting. They did lower Medicare's future
expenditure rates going forward.
But the largest reduction, actually, was in the drug
benefit, believe it or not. There is a lot of talk about
Medicare and what it does and doesn't do and so on, but the
drug benefit is essentially a competitive program driven
entirely by private plans. It has been very competitive.
Mrs. Blackburn. And it works?
Mr. Capretta. And it works. The average annual growth
rate----
Mrs. Blackburn. And it is successful?
Mr. Capretta. The average annual growth rate from 2007 to
2012 is a little bit more than 2 percent a year, well below the
average for the rest of the program.
And the largest downward adjustment CBO made in their
estimates going forward was in the drug benefit, despite the
fact that the healthcare law expanded the program by closing
the donut hole.
So there is a model out there of competition and private
choice and consumer choice that is working. It has actually
driven a lot of costs out of the program.
Mrs. Blackburn. All right. I appreciate that.
I want to talk with you, also--obesity. Mr. Barrow
mentioned Alzheimer's, which is a disease I am so familiar with
because of my dad and my mother-in-law, both of whom have died
with Alzheimer's. And I share his desire to crack that code. I
think the other one is obesity.
And you have had some interesting analysis on this. And
what do you think, if we could reduce the obesity rates in
seniors, what kind of impact would that have on the Medicare
program?
Mr. Capretta. It would have a very positive impact if we
could do it. I think the challenge is the certainty of knowing
which policy levers to pull that can deliver for sure on the
outcome.
I am all for trying to address this problem, in some way,
to some degree. I think it will positively affect especially
diabetes in the program, where there is a big chunk of dollars
associated with that.
So we don't have a silver bullet, but I think some
additional public attention for people that are aging into
Medicare with that problem is worth your attention.
Mrs. Blackburn. Thank you.
I yield back.
Mr. Shimkus. The gentlelady's time has expired.
The chair now recognizes the gentleman from Virginia, Mr.
Griffith, for 5 minutes.
Mr. Griffith. Thank you, Mr. Chairman.
According to the CBO, Medicaid will cost the Federal
Government $5 trillion over the next 10 years, with as much as
$638 billion of that directly linked to the expansion of
Medicaid from PPACA. Recently, Governor McDonnell laid out the
need for vast reform to make Virginia's Medicaid program more
cost-effective before the Commonwealth can consider an
expansion of those benefits in that program.
The Governor has laid out five tenets for Medicaid reform:
one, service delivery through an efficient, market-based
system, including more managed and coordinated care; two,
reducing financial burdens to the State by getting an assurance
from the Federal Government that the expansion will not
increase the national debt; three, maximize the waivers that
currently exist to achieve administrative efficiencies through
streamlining of payment and service delivery; four, obtain buy-
in from healthcare stakeholders in the State for statewide
reform; and, five, achieve greater flexibility by changes to
Federal law, including more value-based purchasing, cost-
sharing, mandatory engagement in wellness and preventive care,
the development of high-quality provider networks, and
flexibility around essential health benefits.
The Virginia Hospital and Health Care Association has said
that they will cooperate. The reforms that Virginia is now
discussing are on a par or similar to what we have discussed
here in the Energy and Commerce Committee, at least on our side
of the aisle. And that flexibility with Medicaid programs I
think many States desire.
So, Mr. Archambault, do you agree with Governor McDonnell
that we need to have these Medicaid reforms and that not only
Virginia but other States should be exploring these types of
reforms and that we should be a partner with them? If you could
explain.
Mr. Archambault. Yes, Mr. Griffith, as I think the Governor
has laid out and put his finger on a number of the issues that
exist in the current program.
And this is a bipartisan issue. You have Governors who have
put in waiver requests that take over a year to get any
response from the administration on whether they can move
forward or not. So, certainly, I think both Republicans and
Democrats at the State level see the value of greater
flexibility. And I think anything that Congress can do to grant
that flexibility would be a move in the right direction.
Mr. Griffith. And you say that there are Democratic
Governors as well as Republican Governors who desire this
flexibility?
Mr. Archambault. That is true. I mean, we have one in Rhode
Island, in which they have been working on these issues for
years, trying to get flexibility. And they got some additional
flexibility to move forward.
Mr. Griffith. And do you think that is because they sense,
as the Founding Fathers did, that perhaps the individual States
should experiment and find what works best, and then others can
copy if they wish?
Mr. Archambault. I think that is right. I mean, we even
have an example in Connecticut with a Democratic Governor in
which they expanded recently in Medicaid, and they found that
it was more expensive than they initially anticipated; asked
for flexibility from the administration, and it was denied.
So I think there is certainly the need and a recognition on
both sides of the aisle at the State level of this issue.
Mr. Griffith. Mr. Capretta and Mr. Archambault, both, what
do you think that we can do to better serve the States as they
try to figure out ways to be more efficient?
I will start with you, Mr. Capretta, since Mr. Archambault
has had a couple minutes.
Mr. Capretta. Sure. I think this year is a historic
opportunity to move ahead with some more Medicaid flexibility
year. Here you have an administration who would like the States
to do a very large-scale expansion, which the Supreme Court
said is entirely optional at this point. Many States are
holding back, thinking about it.
I think they have a great deal of leverage and you and the
Congress have a great deal of leverage to say, Before we do
anything more to put more people into the program, let's come
to a consensus about what the basic rules are for who is
running what.
Mr. Griffith. For those who may not follow Virginia
politics closely, that is exactly what the Virginia General
Assembly did, was they said, We are going to set up a special
group to consider expansion that the President and PPACA
encourages, but we are not going to expand until we have seen
reforms that make it so that we can afford to do that
expansion.
And so you are recommending that perhaps we take that
Virginia model and see if we can't help encourage other States
to do that by giving them the flexibility.
Mr. Capretta. I think there is a real pernicious effect. I
worked in the administration, did a lot of Medicaid waivers in
my previous job in a previous administration. There is a little
bit of an unusual and pernicious effect on one-off negotiations
between an administration and a State. There ought to be rules
that apply to every State that are fair to taxpayers across the
country, and not special deals given to some States over
others.
Mr. Griffith. All right. I appreciate that.
I only have 6 seconds left. Mr. Archambault?
Mr. Archambault. I think a great example is welfare reform.
You had a lot of States figure out how to do it at the local
level first, and then there were--the same rules applied to all
States.
Mr. Griffith. And I have to go, but I would be remiss if I
didn't mention that Virginia led on that one, as well.
Thank you very much.
I yield back, Mr. Chairman.
Mr. Pitts [presiding]. The chair thanks the gentleman and
now recognizes the gentleman from Kentucky, Mr. Guthrie, for 5
minutes for questions.
Mr. Guthrie. Thank you very much, Mr. Chairman. I
appreciate being here.
We talked about 2024 as the date that Medicaid goes
insolvent. And that is if you believe a lot of the different
accounting systems in the healthcare bill and the SGR goes
away. Things like that happen even to get to 2024.
But let's assume we get to 2024 before Medicare goes
insolvent. So if somebody is 66 in 2024, we don't know how the
law is going to treat them. That is what the testimony has been
here today. Will it be 75 percent of 70 percent payments to
hospitals and doctors? We just don't know that.
I don't know if anybody would disagree with me on the
panel, but we don't know what will happen if Medicaid goes
insolvent in 2024, which is what the President's healthcare
bill that was voted on by the majority does.
So if it goes insolvent in 2024 and we don't know how 66-
year-olds are going to be treated--we do know that if we pass
the Ryan budget, someone who is 66 years old in 2024 will have
Medicare as we know it today.
And just take me; I am a baby boomer. I was born in 1964,
on the end of it. So if you are 65 today--today, if you are 65,
as we speak today you are on Medicare, do you hope to live to
be 76? With our healthcare system, I think most people do hope
to live to 76.
So what we are telling people today, we have no idea how
you are going to have Medicare when you are 76 years old,
unless we put a plan in place, which this side has put forth. A
lot of people say, In Washington nobody ever tries to solve
problems. We have known this is coming, both parties have known
this is coming for a long time. Baby boomers are just a fact;
it is a fact of the life. But we do have a plan. If you are 65
years old today, when you are 76 you will have Medicare as you
know it.
And so what are we talking about doing the difference?
Well, people will say, well, we need a balance of revenue. The
President went around the country last year saying if we just
asked the millionaires and billionaires, defined at $250,000 or
more, to pay more, nobody is going to have to make any changes.
Well, that is $80 billion. The President got $60 billion of the
$80 billion in the fiscal cliff bill. I don't know if anybody
in this room would say that is enough to solve the problem with
Medicare.
Even if you got the additional $20 billion he promised--
even though the 3.8 Medicare tax on unearned income didn't go
into the Medicare side. So asking the rich to pay more, the
fiscal cliff bill, the $60 billion didn't go to stave off
Medicare. It was spent, essentially, in the fiscal cliff bill,
most of it was spent on other projects. So when you say we just
need to raise taxes to put it back into Medicare, I mean, we
have seen what has happened twice just recently.
So what are we offering? I think--is Medicare Part D a good
program? And people think Medicare Part D--you said it is the
cost of--people are saying Medicare costs per beneficiary have
slowed, and a lot of it is due to Medicare Part D.
So what we are saying is, oK, instead of--I think we had
one panelist say, well, when baby boomers retire--they built
schools when they had baby boomers; therefore, they are just
going to have to pay more for us to be retired. So I am telling
my children--my daughter is 19. In 30 years she will be 49. One
hundred percent of all Federal revenues is supposed to go to
Social Security, Medicare, and Medicaid at that point. So I am
telling my daughter when she is my age she needs to wake up and
go to work so my generation can be retired. That is what we are
telling them. I mean, what else are they going to have? They
are not going to have anything else.
But what we are saying, if we adopt a program like Medicare
Part D for the rest of Medicare, not only can somebody that is
65 years old today have Medicare till they pass away as they
know it and as it is, our children and grandchildren can have
Medicare delivered to them in a way--did the majority change
Medicare Part D in the bill? They did change some benefit
within Medicare Part D, but they certainly didn't change the
way it is delivered.
And so I don't know why it is so radical. If it was so bad
to do the other parts of Medicare like Medicare Part D, then
why wasn't it changed during the healthcare bill? It wasn't.
And so what we can say today, we can say, Children and
grandchildren, my generation is retiring, you just owe it to
us? Or we can say, Children and grandchildren, we are going to
promise to people who are near retirement because politicians
promised them things that we had no idea how to pay for but
they organized their life around it so we are going to honor
it? That is what this budget that is coming out tomorrow does.
It honors the promise we made to people at or near retirement.
But instead of asking our younger people to pay more, let's
change the program in a way that we know works, because
Medicare Part D works, and present it, give them an opportunity
to have to not go to work every day to pay for my generation to
be retired, go to work every day so hopefully someday when they
have grandkids and they have grandkids, they can have the
America that our parents have given to us.
And I think that is what our generation owes them. They
don't owe us. We owe them. That is what the American dream has
been about.
And I yield back my time.
Mr. Pitts. The chair thanks the gentleman and now
recognizes the gentleman from Louisiana, Dr. Cassidy, for 5
minutes.
Mr. Cassidy. Hey, Mr. Capretta.
Mr. Capretta. Hello, Doctor.
Mr. Cassidy. Que pasa?
Mr. Capretta. Very well.
Mr. Cassidy. So, as I gather--and I was looking up the CBO,
Erskine Bowles--but if we do nothing, what, by 2035 or
thereabouts Medicare, Medicaid, Social Security, and interest
on the debt will consume 100 percent of Federal tax revenue?
Mr. Capretta. I think that is about right, yes.
Mr. Cassidy. It was something like that, and I somehow
wondered off where I should be.
And I also believe I know it is true that current law says
that we cannot, under current law, transfer dollars from the
general fund to the Medicare trust fund. Medicare trust fund,
by law, is supposed to be self-sufficient, correct?
Mr. Capretta. The Medicare hospital insurance trust fund is
in that circumstance, yes, that is correct.
Mr. Cassidy. So when A goes bankrupt, there is no more?
Mr. Capretta. When it runs out of reserves, there is no--
you have to change the law to put more money into it.
Mr. Cassidy. Dr. Feder, is reform worse than bankruptcy?
Because if we know, according to current law, that after, what,
2024 there is no money, that people will not have any dollars
in Medicare Part A, is reform worse than--is reform----
Ms. Feder. Mr. Cassidy, it is not----
Dr. Cassidy [continuing]. Worse than bankruptcy?
Ms. Feder [continuing]. Quite accurate to say people will
not have any dollars in Medicare Part A. As has been said, they
would not--that Medicare Part A dollars would fall short of
full expenses----
Mr. Cassidy. No, no, no, that is when it is bankrupt,
right?
Mr. Capretta. Well, bankrupt, and that is--there would
still be revenue coming in that----
Ms. Feder. There is still revenue----
Mr. Cassidy. Well, it will be pay-as-you-go.
Ms. Feder. The short story there is----
Mr. Cassidy. Yes, but----
Ms. Feder [continuing]. It is never bankrupt.
Dr. Cassidy [continuing]. It is going to be 10 percent or
it is going to be 20 percent.
Ms. Feder. No. Well, no. Wait. We said it is 70 percent.
And the other----
Mr. Cassidy. No, it is 70 percent now.
Ms. Feder. The other percent--no, I don't think so.
But the other part of the story is that we are not doing
nothing now. I have heard it said several times today that ``if
we do nothing.'' We are not doing nothing.
Mr. Cassidy. OK. Now, the accountable care organizations
have never been shown to save money relative to----
Ms. Feder. Well, of course they haven't been shown to save
money, because they are brand-new and we are piloting them.
Mr. Cassidy. No, no, no. They had demonstration projects
which were deliberately selected to be places that had
integrated health care that----
Ms. Feder. I hear your concern about the previous pilots,
and I think--but there are design features, for example, in the
pioneer ACOs, who are sharing risk as well as sharing savings,
that have greater potential, in addition to which they are not
the only demonstrations that are being----
Mr. Cassidy. Now, by the way, ACOs--I am sorry, I don't
mean to interrupt, but I just have so little time. ACOs count
upon having a capitated or a per-beneficiary payment, correct?
Ms. Feder. No, they are shared--they are paid toward a--
there is a target on their spending.
Mr. Cassidy. So their----
Ms. Feder. And they share savings or bear--or some of them
bear risk.
Mr. Cassidy. So, ultimately, there is a sense of--and IPAB,
for example, assumes a global budget for Medicare.
Ms. Feder. Well, that is a different question. An ACO is
not the same as an IPAB.
Mr. Cassidy. So is a cap inherently wrong?
Ms. Feder. Well, let me just--there is not a cap in the ACO
savings. There is a shared risk--or an ACO program--there is
shared savings.
What I think is wrong is to cap dollars and assume that we
know how to deliver the services. So you----
Mr. Cassidy. So New York State is----
Ms. Feder [continuing]. Assume a delivery mechanism. And I
also would say that an arbitrary cap that is significantly
slower than the rate of increase in healthcare spending puts
beneficiaries at risk.
Mr. Cassidy. So New York Mayor Cuomo, Governor Cuomo, I am
told, is putting a global cap on Medicaid. Is that wrong?
Ms. Feder. I do not think programs should be globally
capped. I think they----
Mr. Cassidy. So is there no limit to the exposure of the
Federal taxpayer to how much they can spend?
Ms. Feder. What I believe is that we need to adopt specific
policy measures that do generate savings without----
Mr. Cassidy. Well, we know historically----
Ms. Feder [continuing]. Shifting risk to beneficiaries. It
is shifting risk to beneficiaries----
Mr. Cassidy. I am sorry. There is limited time. There is
limited time.
We know historically that New York, for example, has really
gamed that system. So New York, which has half the population
of California, has a program which is 25 percent more
expensive. There are people in disabilities who are getting
paid by New York Medicaid $5,000 a day.
Ms. Feder. I think the way to address problems in spending
is to adopt specific policy measures to make the system more
efficient, which we know how----
Mr. Cassidy. Now, we know that----
Ms. Feder [continuing]. Some of which we know how to do.
Mr. Cassidy. We know that Medicaid is very difficult to
reform. Mr. Archambault just said that it takes a year,
sometimes longer, to get a waiver. That doesn't really seem to
be the flexibility or the agility----
Ms. Feder. Oh, I would say that Medicaid has made a lot of
changes in recent years, that we have for moms and kids an
extensive reliance on managed care plans, some of which is good
and some of which is not good. So there has been plenty of
reform in Medicaid programs, whatever----
Mr. Cassidy. But that wasn't the point. The point is that
the flexibility that would give States the ability to sometimes
shut this sort of thing down could take over a year.
Ms. Feder. What I have heard ignored and in the previous
comments is that what your budget is proposing is to take $800
billion out of the Medicare program.
Mr. Cassidy. You are kind of dodging the point, my point
being that there is no ability--or put it this way. If it takes
a year to 2 years or sometimes never to get the flexibility to
address this, it shows that our ability to address it isn't
quite agile.
Ms. Feder. I simply disagree on----
Mr. Cassidy. Mr. Archambault, is it true it takes over,
sometimes, a year or 2 years to get those waivers?
Mr. Archambault. I think there are multiple States. New
Mexico is an example. Florida is an example in which it took at
least a year, if not more. State of Oregon, Democratic
Governor, took a while to get permission for their waiver, as
well. Yes.
Mr. Cassidy. So I am almost out of time, but thank you very
much.
Ms. Feder. You are welcome.
Mr. Cassidy. I yield back.
Mr. Pitts. The chair thanks the gentleman and recognizes
the gentlelady from North Carolina, Mrs. Ellmers, for 5 minutes
for questions.
Mrs. Ellmers. Thank you, Mr. Chairman.
And thank you to our panel.
I would like to start off by saying, Dr. Feder, you had
made some comments regarding the budget and that the budget
basically repeals Obamacare and that that, in your opinion, is
not a good thing. I would say that I completely disagree with
that.
And I am very concerned about access to care for patients,
whether they be patients who are receiving Medicaid or Medicare
patients. I think that is really what is in jeopardy here, and
quality of care. Those are some of the things that we have to
be addressing and looking at. We are all talking about pay-for,
and that is very, very important, but it is really access to
care and quality of care.
So, having said that, the discussion about the States and
the Governors who have decided to or been opposed to expanding
Medicaid is an issue. In North Carolina, for instance, Pat
McCrory, Governor Pat McCrory, has not elected to expand the
Medicaid program. And his quote is, ``Our Medicaid system is
broken, and I cannot expand a brokensystem.'' Now, I understand
the Governors that have, but I also understand that is also
information that they are receiving, and good intentions are, I
think, what is happening here.
And I would just like to cite--I know there were some other
studies that were being discussed about how--and you had made
comments that someone who was put on Medicaid essentially will
receive the same health care and the same quality as someone
who was on a private healthcare insurance plan. And I would
dispute that.
In fact, the study that I most recently became familiar
with is the 2010 University of Virginia study, which released a
landmark study showing that surgical patients--and this is
surgical patients that they cite--on Medicaid have a 13 percent
higher chance of dying than an individual with no insurance at
all, keeping in mind, of course, that the death rate or the
mortality of a surgical patient with healthcare insurance is
about 1.3 percent, so that is statistically pretty small.
But 13 percent higher than someone with no insurance at all
and 97 percent higher if that person is on Medicaid. Now, that
is in stark contrast with some of your theories and, basically,
some of the studies that you have already cited.
Having said that, obviously, this study shows, yes or no,
that putting someone on Medicaid is not necessarily giving them
better health care?
Ms. Feder. No.
Mrs. Ellmers. OK. Now, were you familiar with the study?
Ms. Feder. No, I was saying my understanding of that, or of
similar studies--I would have to check that particular----
Mrs. Ellmers. Yes.
Ms. Feder [continuing]. Is that it is of considerable
importance, when you do a study, to compare costs under
different insurance programs, that you recognize the health
status or differences in the health status----
Mrs. Ellmers. And I believe this study actually does that.
So I would encourage you----
Ms. Feder. My concern is that----
Mrs. Ellmers. I would encourage you to familiarize yourself
with this particular study----
Ms. Feder. And I----
Mrs. Ellmers [continuing]. Because it breaks it down.
Ms. Feder. It runs counter to so much else----
Mrs. Ellmers. Now, how can you justify or how can you say
to an individual that would be put on Medicaid as a result of
the expansion of Obamacare, essentially, how can you say to
them that you really feel that they are going to be getting
better health care?
Ms. Feder. Because I have a host of evidence that shows
that people who get Medicaid have better access to care than
people without health insurance and that they live longer as a
result. I am very comfortable in making that judgment.
Mrs. Ellmers. So, in your opinion, putting more people on
Medicaid is really the answer, not necessarily putting forward
a budget or passing a budget that is actually a pro-growth
economy----
Ms. Feder. No, I actually think----
Mrs. Ellmers [continuing]. To get people off of Medicaid?
Ms. Feder. I actually think, Mrs. Ellmers, that that is a
very broad statement. What we are talking about is the
expansions in the Affordable Care Act, which I think will be of
huge benefit to the population, whether through Medicaid or
through exchanges. And I would hope that all States would see
the value to their populations and go along with that
expansion.
Mrs. Ellmers. Mr. Archambault, are you familiar with the
University of Virginia study?
Mr. Archambault. I am, yes.
Mrs. Ellmers. Why is it that when patients are put on
Medicaid that there is this discrepancy? Because there would be
this natural assumption that if you are put on a Medicaid plan,
that all of a sudden you are going to get better health care
and you are going to have a better outcome.
Mr. Archambault. Without specifics to that program in
Virginia and how it is treated, I think what that study
illustrates is that the history of under-reimbursing doctors
has led to some unexplainable results in the program and
inconsistent-quality care being provided. And I am not sure we
fully understand why yet. There are a lot of theories.
Mrs. Ellmers. Yes.
Mr. Archambault. But consistently in the academic
literature we are seeing more and more examples in which the
quality of care is less than those on private insurance.
Mrs. Ellmers. OK. Thank you very much. And my time has run
out. I appreciate this testimony. Thank you.
Mr. Pitts. The chair thanks the gentlelady.
That concludes the Members' questions at this point. If you
have additional questions, you may submit them to the
witnesses. I remind Members that they have 10 business days to
submit questions for the record, and I ask the witnesses to
respond to the questions promptly.
This was an excellent hearing, excellent testimony. Thank
you very much for coming today.
And Members should submit their questions by the close of
business on Monday, April 1st.
With that, the subcommittee is adjourned.
[Whereupon, at 5:57 p.m., the subcommittee was adjourned.]
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