[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]
STRENGTHENING MEDICARE FOR SENIORS:
UNDERSTANDING THE CHALLENGES OF
TRADITIONAL MEDICARE'S BENEFIT DESIGN
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON HEALTH
OF THE
COMMITTEE ON ENERGY AND COMMERCE
HOUSE OF REPRESENTATIVES
ONE HUNDRED THIRTEENTH CONGRESS
FIRST SESSION
__________
APRIL 11, 2013
__________
Serial No. 113-28
Printed for the use of the Committee on Energy and Commerce
energycommerce.house.gov
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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............................... 6
Witnesses
Glenn Hackbarth, J.D., Chairman, Medicare Payment Advisory
Commission..................................................... 7
Prepared statement........................................... 10
Submitted Material
Document entitled, ``Ideas for Reforming the Medicare Benefit
Design: A Historical Year Review of Bipartisan Support,''
submitted by Mrs. Ellmers...................................... 54
Statements for the record, submitted by Mr. Pallone
USW.......................................................... 56
CHA, CMA, and MRC............................................ 62
UAW.......................................................... 72
NAHCH........................................................ 75
NCPSSM....................................................... 86
STRENGTHENING MEDICARE FOR SENIORS: UNDERSTANDING THE CHALLENGES OF
TRADITIONAL MEDICARE'S BENEFIT DESIGN
----------
THURSDAY, APRIL 11, 2013
House of Representatives,
Subcommittee on Health,
Committee on Energy and Commerce,
Washington, DC.
The subcommittee met, pursuant to call, at 10:01 a.m., in
room 2322 of the Rayburn House Office Building, Hon. Joe Pitts
(chairman of the subcommittee) presiding.
Present: Representatives Pitts, Burgess, Blackburn,
Gingrey, Cassidy, Guthrie, Griffith, Bilirakis, Ellmers,
Pallone, Dingell, Matheson, Green, Christensen, Sarbanes, and
Waxman (ex officio).
Staff present: Matt Bravo, Professional Staff Member; Steve
Ferrara, Health Fellow; Julie Goon, Health Policy Advisor; Brad
Gantz, Policy Coordinator, Oversight and Investigations; Sydne
Harwick, Legislative Clerk; Robert Horne, Professional Staff
Member, Health; Katie Novaria, Professional Staff Member,
Health; John O'Shea, Professional Staff Member, Health; Monica
Popp, Professional Staff Member, Health; Andrew Powaleny,
Deputy Press Secretary; Heidi Stirrup, Health Policy
Coordinator; Phil Barnett, Democratic Staff Director; Alli
Corr, Democratic Policy Analyst; Amy Hall, Democratic Senior
Professional Staff Member; Elizabeth Letter, Democratic
Assistant Press Secretary; Karen Lightfoot, Democratic
Communications Director and Senior Policy Advisor; and Karen
Nelson, Democratic Deputy Committee Staff Director for Health.
OPENING STATEMENT OF HON. JOSEPH R. PITTS, A REPRESENTATIVE IN
CONGRESS FROM THE COMMONWEALTH OF PENNSYLVANIA
Mr. Pitts. The time of 10 o'clock having arrived, the
subcommittee will come to order. The Chair will recognize
himself for an opening statement.
Nearly 50 million seniors rely on the Medicare program for
their health care. It is important for us to understand
Medicare's current benefit structure and look at ways to
modernize it to better serve beneficiaries and protect them
from catastrophic costs.
When it was created in 1965, Medicare's benefit design was
modeled on private insurance products available at the time.
However, while the private insurance market has undergone
dramatic changes in the last half century, Medicare's
traditional benefit structure has remained essentially
unchanged.
Unlike most private insurance today, which has a single
deductible for all medical services, Medicare has separate
deductibles for Part A, hospital services, and Part B,
physician and outpatient services. While the Part A deductible
is rather high--$1,156 in 2012--the Part B deductible is
relatively low--$140 in 2012.
Medicare fee-for-service also has a complex and sometimes
confusing copayment structure. In addition to the Part A
deductible, beneficiaries also pay daily copayments for stays
at hospitals and skilled nursing facilities. Depending on how
many hospital stays a senior incurs in a year, he or she may
owe more than one hospital deductible for a year. In addition
to the Part B deductible, beneficiaries also pay a monthly Part
B premium, and generally pay 20 percent of most charges for
outpatient and physician services.
As Medicare's current benefit structure has no cap on how
much out-of-pocket spending a beneficiary can incur, seniors
are left open to considerable financial risk and uncertainty.
They don't know what they will have to pay when they go in for
a procedure or test, and ultimately this uncertainty threatens
every senior with the potential of medical bankruptcy. Due to
this financial uncertainty, and the lack of comprehensive
coverage in fee-for-service, almost 90 percent of beneficiaries
purchase or receive supplemental insurance.
Everything about our health care system has changed
dramatically since the 1960s as health care has become more and
more complex. The models and standards of care, tests,
treatments, drugs, and medical breakthroughs that we enjoy
today were unknown when Medicare was enacted. In 1965,
insurance protected us against hospital costs from conditions
that were most likely fatal--heart disease, cancer, and stroke.
Today, we use insurance to help manage chronic illnesses and
treat diseases, allowing beneficiaries to live for decades and
to stay in home and community settings for much longer.
The only part of our health care system that has not
evolved since Medicare's inception is Medicare's fee-for-
service benefit design itself. We don't give our seniors 1960s
medical care--in many cases that would be considered
malpractice today--so why do we continue to give them a 1960s
insurance product?
We have an obligation to modernize Medicare and standardize
its cost-sharing structure. We should have a single deductible
for Parts A and B, and we should streamline benefits so that
fewer seniors will have to purchase supplemental coverage with
money from their own pocket. We should institute a catastrophic
cap on out-of-pocket spending to protect seniors from the
threat of medical bankruptcy. And with Medicare's unsustainable
financial footing--according to its trustees, Medicare will be
insolvent by 2024, and as soon as 2017--we need to expand means
testing for higher-income beneficiaries, in order to protect
the most vulnerable seniors. Let us bring Medicare into the
21st century.
I would like to thank MedPAC Chairman Glenn Hackbarth for
agreeing to testify today. In recent years, MedPAC has made
many recommendations on how to improve the Medicare program,
and we are eager to hear about some of them.
[The prepared statement of Mr. Pitts follows:]
Prepared statement of Hon. Joseph R. Pitts
The Subcommittee will come to order.
The Chair will recognize himself for an opening
statement.Nearly 50 million seniors rely on the Medicare
program for their health care. It is important for us to
understand Medicare's current benefit structure and look at
ways to modernize it to better serve beneficiaries and protect
them from catastrophic costs.
When it was created in 1965, Medicare's benefit design was
modeled on private insurance products available at the time.
However, while the private insurance market has undergone
dramatic changes in the last half century, Medicare's
traditional benefit structure has remained essentially
unchanged.
Unlike most private insurance today, which has a single
deductible for all medical services, Medicare has separate
deductibles for Part A, hospital services, and Part B,
physician and outpatient services.
While the Part A deductible is rather high--$1,156 in 2012,
the Part B deductible is relatively low--$140 in 2012.
Medicare fee-for-service (FFS) also has a complex and
sometimes confusing copayment structure.
In addition to the Part A deductible, beneficiaries also
pay daily copayments for stays at hospitals and skilled nursing
facilities. Depending on how many hospital stays a senior
incurs in a year, he or she may owe more than one hospital
deductible for a year.
In addition to the Part B deductible, beneficiaries also
pay a monthly Part B premium, and generally pay 20% of most
charges for outpatient and physician services.
As Medicare's current benefit structure has no cap on how
much out-of-pocket spending a beneficiary can incur, seniors
are left open to considerable financial risk and uncertainty.
They don't know what they will have to pay when they go in for
a procedure or test, and ultimately this uncertainty threatens
every senior with the potential of medical bankruptcy.
Due to this financial uncertainty--and the lack of
comprehensive coverage in FFS--almost 90% of beneficiaries
purchase or receive supplemental insurance.
Everything about our health care system has changed
dramatically since the 1960s as health care has become more and
more complex.
The models and standards of care, tests, treatments, drugs,
and medical breakthroughs that we enjoy today were unknown when
Medicare was enacted.
In 1965, insurance protected us against hospital costs from
conditions that were most likely fatal--heart disease, cancer,
and stroke. Today, we use insurance to help manage chronic
illnesses and treat diseases, allowing beneficiaries to live
for decades, and to stay in home and community settings for
much longer.
The only part of our health care system that has not
evolved since Medicare's inception is Medicare's fee-for-
service benefit design itself.
We don't give our seniors 1960s medical care--in many cases
that would be considered malpractice today--so why do we
continue to give them a 1960s insurance product?
We have an obligation to modernize Medicare and standardize
its cost-sharing structure. We should have a single deductible
for Parts A and B, and we should streamline benefits so that
fewer seniors will have to purchase supplemental coverage with
money from their own pocket.
We should institute a catastrophic cap on out-of-pocket
spending to protect seniors from the threat of medical
bankruptcy.And with Medicare's unsustainable financial
footing--according to its Trustees, Medicare will be insolvent
by 2024, and as soon as 2017--we need to expand means-testing
for higher-income beneficiaries, in order to protect the most
vulnerable seniors.
Let's bring Medicare into the 21st century.
I'd like to thank MedPAC's chairman, Glenn Hackbarth, for
agreeing to testify today. In recent years, MedPAC has made
many recommendations on how to improve the Medicare program,
and we are eager to hear about some of them.
Thank you, and I yield the remainder of my time to Rep. --
--------------------------------.
Mr. Pitts. At this point I will recognize the ranking
member, Mr. Pallone, for 5 minutes for opening statement.
OPENING STATEMENT OF HON. FRANK PALLONE JR, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF NEW JERSEY
Mr. Pallone. Thank you, Chairman Pitts, and I am very
pleased that you have decided to consider today's topic.
Improving and strengthening Medicare for generations to come is
a primary goal of mine. In fact, I have dedicated time to
ensure seniors have access to affordable health care options
and the safety nets that they need to age with dignity and
respect.
It is no exaggeration to say that Medicare alone is the
most successful health care and anti-poverty program ever, and
this is why Medicare should be protected and improved, not left
vulnerable to cuts in the years to come.
The Affordable Care Act begins those improvements. It
reduces Medicare spending, extends solvency, and brings growth
in per-patient costs to record lows. In addition, preventive
services are now free of charge to beneficiaries, and we
finally have laid the groundwork to reward treatment value over
volume.
I believe more can be done, however. The fact is, we are
faced with an inevitable reality that our Nation's baby boomers
are aging into the program at very high rates, higher rates
than we have seen in the past. In fact, 11,000 new seniors
become eligible for Medicare every day. So I think we need to
explore the option of modernizing the Medicare benefit design.
Right now, some beneficiaries already pay too much out of
pocket, and for years, my colleagues and I have explored the
need for some type of catastrophic cap for seniors, in addition
to the fact that Part A and Part B have such divergent cost
sharing and deductibles might seem arbitrary and confusing. Why
shouldn't Medicare be more seamless and simple?
Given that the average beneficiary makes only $22,500
annually and already spends disproportionately more on health
care than a younger person makes this very challenging
territory. When you change one side of the ledger, it has an
impact on the other side, and any reform must be done without
significant cost shifts to seniors.
But what Republicans want to do when they talk about reform
is to cut the structural foundation of Medicare, turn the whole
thing over to insurance companies, and I can tell you right now
that that option is simply a nonstarter. In addition, any
proposals must be carefully examined not by how they might save
money but how they will benefit beneficiaries, providers and
the system as a whole. We can't restructure the program for the
sake of generating savings, whether that is in the name of
deficit reduction or to help pay for the SGR fix, because that
is bad policy. We must modernize the program because it is good
for the very real people that it serves and will serve for
generations to come. We have to modernize because we recognize
that perhaps it is not designed the most efficient or
affordable way, and I stand ready to explore those options, but
I will not stand by while others lose sight of the importance
of Medicare to our Nation's seniors, and I yield back the
balance of my time. I don't know if any of my colleagues want
time. Then I will yield back the balance of my time.
Mr. Pitts. The Chair thanks the gentleman and now
recognizes the vice chairman of the subcommittee, Dr. Burgess,
for 5 minutes for a 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 heard it several times this morning already. The
12,000 new beneficiaries added to Medicare every day put
pressure on the system and does move it closer towards
insolvency. In its current form, Medicare will not be able to
meet the promise it has made in a few short years. It is not a
surprise. We expect a program designed in 1965 to adapt to the
needs and usage pattern of beneficiaries in the 21st century.
Medicare's current benefit design needs to be reformed in a way
that more adequately reflects the needs and expectations of
today's seniors.
The first step in moving toward a higher-performing
Medicare program must be the elimination of the flawed
Sustainable Growth Rate formula. Last-minute fixes to the
formula certainly have burdened this committee, but it has been
devastating to beneficiaries and providers, producing an
unpredictable payment environment and has risked beneficiaries'
access to care. Last week, the majority along with the Ways and
Means Committee released the second draft of a proposal to
repeal or replace the broken Sustainable Growth Rate formula.
The proposal realizes that the key to reforming the system is
to enable providers to have flexibility to participate in
payment and delivery models that best fit their practice.
There will always be areas where providers choose or need
to practice in a fee-for-service model. We must also continue
to seek out innovative models that can adapt to changes in
clinical guidelines and best practices, but the heart of the
issue remains the beneficiary--the patient. As cost pressures
increase, we risk the ability to provide access to services for
our patients. We must seek reforms that provide patients with
greater control of their health care. If we ask a beneficiary
to participate in their health care through cost sharing, we
are obligated to provide them with transparent cost information
so that they can plan for their future needs. It is hard to
plan for what 20 percent coinsurance means when you don't know
what 20 percent is part of. Enabling patients to be more
involved in their care not only allows them greater control of
their health care spending but provides greater protections for
patients and moves an outdated program into the future.
We have neglected these problems for far too long. We know
the structural and fiscal problems in the health care system.
The only question now is how long will Americans tolerate
Congress staring at these problems without actually fixing them
for future generations.
I am very grateful to see Mr. Hackbarth back with us this
morning. He has been before our committee several times. MedPAC
has recommended a range of different policies over the years to
reform Medicare's benefit structure. I certainly look forward
to hearing more of these ideas in Mr. Hackbarth's testimony,
and I would now like to yield to the gentleman from Georgia,
Dr. Gingrey.
Mr. Gingrey. Mr. Chairman, I thank the vice chairman for
yielding to me.
As a physician for over 30 years, it was my job to engage
with patients and offer them a straight answer no matter the
seriousness of the prognosis, and I think at this point it is
incredibly important for Congress to do the same thing, to
engage seniors on the urgency of Medicare's fiscal situation
and work to explain how changes to the current Medicare benefit
can decrease personal risk and increase the solvency of the
program.
I don't think that anyone here would disagree that the
Medicare program of today is in trouble. The hospital trust
fund is to set to run out somewhere between 2017 and 2024,
whoever you believe, but clearly it is coming. What will happen
once this point occurs is anybody's guess. The looming fiscal
disaster must certainly be addressed before the fund is
exhausted lest we leave beneficiaries with unacceptable costs
or lack of access to care, or both.
Mr. Chairman, we must look for ways to improve the Medicare
benefit not only for our current seniors but to ensure those
benefits are there for future generations. We have a system
that was created in the 1960s, as Dr. Burgess was just
mentioning, very few adjustments since then. The way we
practice medicine today has changed, and it is time for the way
we pay for medicine to reflect that, and I thank you, Mr.
Chairman, for calling this hearing. I look forward, as I know
my colleagues do, to hearing from Mr. Hackbarth. He has been
with us, as has been said, a number of times, and his
suggestions for restructuring the benefits and incentives to
improve Medicare for this country's beneficiaries are welcome.
So I thank Dr. Burgess, and I will yield back.
Mr. Pitts. The Chair thanks the gentleman and now
recognizes the ranking member of the full committee, Mr.
Waxman, 5 minutes for opening statement.
OPENING STATEMENT OF HON. HENRY A. WAXMAN, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF CALIFORNIA
Mr. Waxman. Thank you, Mr. Chairman.
For more than four decades, Medicare has been a critical
program for ensuring the health and the financial well being
for senior and disabled people. I appreciate the opportunity to
talk about ways we can continue to improve the program by
broadening the protections for beneficiaries and improving the
value of the program for both beneficiaries and taxpayers.
I welcome our witness from MedPAC, Mr. Hackbarth. I
appreciate your coming back to our committee. The recognition
by MedPAC that we should improve beneficiary benefits by
putting a limit on out-of-pocket catastrophic spending,
rationalizing deductibles, and making coinsurance and
copayments more predictable makes sense, but with any policy,
the devil is in the details.
The median income for Medicare beneficiaries is only
$22,500 a year. A lot of people think that the elderly are the
wealthiest, and there are wealthy elderly but the median income
is $22,500. Medicare beneficiaries already pay more out of
pocket for health care than individuals under 65. So any
proposal to redesign Medicare that leaves beneficiaries holding
the bag is not one that I could endorse.
That is why I am glad to see that a key element of MedPAC's
proposal is that it is ``beneficiary liability neutral''. That
is, on average, beneficiary out-of-pocket payment should not
increase, and at the same time, we need to keep in mind that
there will inevitably be winners and losers within the Medicare
population.
There are other elements of MedPAC's redesign option that I
believe need more careful scrutiny. MedPAC also recommends
adding a charge for supplemental insurance policies, whether
provided by employers or purchased by individuals, to offset
the financial impact to Medicare of first-dollar coverage. I
think there are two important points to be made here, one, that
these are not separate proposals. The proposal to reform
supplemental coverage is linked and not severable from
improving beneficiary benefits. This is important because I
would hate to see some of my colleagues who are more concerned
with cutting costs than securing benefits try to do one without
the other. We also need to carefully assess the impact this
could have on the near poor, who do not qualify for Medicare
extra help for their out-of-pocket costs and may not have the
means to afford any additional costs.
My second point has to do with the unintended consequences
that eliminating first-dollar coverage could have on necessary
utilization. The problem is that the relationship between cost
sharing and service utilization is not the same in low-income
and elderly populations, especially sick, elderly populations,
as it is in younger, healthier populations. The Medicare
population is older, poorer, with 50 percent of beneficiaries
at or below 200 percent of the federal poverty level, and
sicker, with 40% having three or more chronic conditions, than
the general population. As a result, if we make supplemental
insurance less affordable or reduce the level of coverage,
Medicare beneficiaries are at greater risk of deferring not
only unnecessary care, but necessary care, negatively impacting
their health.
As we think about opportunities to improve the benefit
package in Medicare, we must add protections for beneficiaries
and at the same time be careful not to generate both
predictable and unintended consequences. We must continue to
protect our most vulnerable seniors. Finally, we must make sure
that we are not using program redesign as a pretext for
reducing spending by shifting costs onto those beneficiaries.
Thank you, Mr. Chairman. I yield back the time.
Mr. Pitts. The Chair thanks the gentleman. That concludes
the opening statements of the members.
We have one witness today, and our panel today we have Mr.
Glenn Hackbarth, Chairman of the Medicare Payment Advisory
Commission. Thank you for coming. You will have 5 minutes to
summarize your testimony, and your full written testimony will
be placed in the record. At this point you are recognized for 5
minutes.
STATEMENT OF GLENN HACKBARTH, J.D., CHAIRMAN, MEDICARE PAYMENT
ADVISORY COMMISSION
Mr. Hackbarth. Thank you, Chairman Pitts and Ranking Member
Pallone and Vice Chairman Burgess and Ranking Member Waxman. I
appreciate the opportunity to talk about MedPAC's
recommendations on redesigning the Medicare benefit package.
In our view, the current Medicare benefit package is both
inadequate and confusing. It is inadequate in the sense that it
lacks catastrophic coverage, that is, a limit on the maximum
out-of-pocket costs that can be incurred by a patient. It is
confusing with its bifurcated Part A and B structure and a
complex system of patient cost sharing, a mixture of copayments
and percentage coinsurance. In our view, the status quo, the
current benefit package, is not good for Medicare beneficiaries
nor for taxpayers.
Because of the inadequate and confusing nature of the
Medicare benefit package, many beneficiaries are induced to buy
supplemental coverage, often at a very high price. Taxpayers in
turn must pay for the increased costs resulting from
supplemental coverage that often covers even the first dollar
of out-of-pocket expense. In our view, the principal winners
from the status quo are the insurance companies that sell
supplemental coverage. It is a lose-lose proposition for
Medicare beneficiaries and for taxpayers.
With these inadequacies in mind, MedPAC has recommended
redesigning the Medicare benefit package consistent with five
principles. First, there should be no increase the average
Medicare beneficiary liability for out-of-pocket costs. In
other words, the benefit package should not be reduced in its
actuarial value. We don't believe that Medicare currently is
too rich a benefit package. If anything, it is too lean, given
the population served. Second, we believe that a redesigned
Medicare benefit package should include an out-of-pocket limit,
that is catastrophic coverage. Third, we believe that wherever
possible, the Medicare benefit package should be simplified,
for example, by substituting fixed dollar copays for percentage
coinsurance. Our research with beneficiaries shows that fixed
dollar copays are much more readily understood and provide some
comfort to beneficiaries about what their costs will be for
particular services. Fourth, we believe that Congress should
give the Secretary of HHS the authority to modify the Medicare
benefit package consistent with the principles of value-based
insurance design. That means that the Secretary should have the
authority to reduce out-of-pocket payments for beneficiaries
for services that are established by scientific evidence to be
of high value to patients. Conversely, the Secretary should be
able to increase copayments for services that evidence shows
are of low value to patients. Finally, we recommend that
Congress institute a charge on supplemental coverage. The
purpose of the charge would be to ensure that beneficiaries who
elect to buy supplemental coverage share at least a portion of
the additional costs that that private decision results in for
the taxpayers and the Medicare program. The premium that a
beneficiary pays for supplemental coverage only covers a
fraction of the additional costs that the program incurs as a
result of supplemental coverage.
Let me conclude with three points that I think bear
particular emphasis. One is that patient cost sharing is an
imperfect method of controlling costs, albeit a necessary one
in the context of a free choice of provider, largely fee-for-
service insurance program. We don't believe that patient cost
sharing should be the only or even the principal method of
trying to control costs. Indeed, most of MedPAC's work focuses
on changing how we pay providers, providing better incentives
for high-value care.
The second point I would like to emphasize is that by
giving the Secretary the authority to institute value-based
insurance design, we can improve the targeting of cost sharing,
making it less likely that cost sharing will have an adverse
effect on quality and outcomes.
Finally, I would like to emphasize that we would not
prohibit Medicare beneficiaries from buying supplemental
coverage, even first-dollar coverage, if they so desire. We
only think that Medicare beneficiaries should face some of the
additional costs that decision imposes on the Medicare program
and the taxpayers. I should also emphasize that the
supplemental charge we would envision only as part of an
overall package. All of these recommendations we see as an
integrated package, not isolated recommendations.
With that, Mr. Chairman, I welcome your questions.
[The prepared statement of Mr. Hackbarth follows:]
[GRAPHIC] [TIFF OMITTED]
Mr. Pitts. Thank you, Mr. Hackbarth. The Chair recognizes
himself for 5 minutes for questioning.
Mr. Hackbarth, many experts have noted that traditional
Medicare is an outdated form of health insurance coverage and
needs to be modernized. In 1999, AARP's Public Policy Institute
published a paper entitled ``The Effects of Merging Part A and
B of Medicare.'' They said, ``Medicare's two-part system
continues to mirror the structure of private insurance at the
time of Medicare's inception in 1965, a structure that often
included separate insurance for hospital and physician care.''
Do you agree with the AARP that Medicare's separate hospital
and physician benefits closely resemble the type of insurance
available to consumers in the 1960s?
Mr. Hackbarth. Yes.
Mr. Pitts. Medicare Advantage, a more modern type of
coverage signed into law in the late 1990s, is also modeled
closely after the types of insurance available to consumers at
the time. Do Medicare Advantage plans use separate insurance
for hospital and physician care?
Mr. Hackbarth. No, not to my knowledge, sir.
Mr. Pitts. Medicare drug plans are even more modern, having
been passed into law by Congress in 2003. Do Medicare drug
plans have catastrophic coverage caps?
Mr. Hackbarth. Yes.
Mr. Pitts. Is the traditional Medicare benefit the only
type of comprehensive coverage in Medicare that does not have a
catastrophic coverage cap?
Mr. Hackbarth. Yes.
Mr. Pitts. And for the record, is it MedPAC's position that
Congress should update traditional Medicare fee-for-service to
include a catastrophic coverage cap, among other reforms,
because these reforms would benefit seniors.
Mr. Hackbarth. Yes.
Mr. Pitts. Thank you. Nearly 50 years have passed, and
Medicare's model has become outdated. Seniors deserve a modern
product that meets their needs and helps them control cost. I
think it is time for Congress to strengthen and save Medicare,
making sure that current beneficiaries get what they need and
also that future retirees can count on the program being there
for them one day.
Now, AARP's Public Policy Institute paper also states that
``A third criticism of two systems of financing for Part A and
Part B has hindered management of the original fee-for-service
Medicare. Integrating all of Medicare's funding sources into
one pool of money would enhance management of health resources
and improve accountability for health spending in FFS
Medicare.'' Can you tell us your thoughts on what impact this
antiquated two-tiered financing system within traditional
Medicare has on CMS's ability to manage health spending
appropriately, and do you believe it is possible that the
antiquated manner in which traditional Medicare fee-for-service
is financed might be contributing to the amount of waste, fraud
and abuse lost each year?
Mr. Hackbarth. So you are asking about the financing,
separate financing of A and B with payroll tax used to finance
Part B and premiums and general revenues for Part B?
Mr. Pitts. Yes.
Mr. Hackbarth. We have not specifically looked, Chairman
Pitts, at the financing mechanisms and what the implications
would be for fraud and abuse. We have focused on the benefit
design and payment methods for providers primarily.
Mr. Pitts. Now, you state in your testimony one key purpose
of insurance is to reduce the financial risk posed by
catastrophic medical expenses. To avoid such risk, individuals
should be willing to pay a higher premium than the average cost
of care they might face. Can you expand on that idea for us?
Mr. Hackbarth. Well, probably the single most important
feature of any insurance program is a limit someone can incur.
Now, the medical expense is that most of it is unpredictable.
So any given beneficiary in any given year might pay a premium
but not use the insurance, may not use the catastrophic cost
yet you pay the premium against the risk that it might be your
year to have a very serious illness and incur high bills. That
is the nature of insurance. A lot of people pay an amount,
don't use the full amount, they pay premiums higher than their
actual incurred expenses so that when their day comes and
unfortunately they suffer a severe illness, the protection is
there for them.
Mr. Pitts. My time is expired. Thank you. The Chair
recognizes the ranking member of the subcommittee, Mr. Pallone,
for 5 minutes for questions.
Mr. Pallone. Thank you, Mr. Chairman.
Mr. Hackbarth, I am just following up to some extent on
what the chairman just said. While MedPAC included a unified
deductible combining the Part A and B deductible into one
unified deductible, in your illustrative scenario you did not
actually recommend a unified deductible. So why is that? Can
you talk about the pros and cons of a unified deductible?
Mr. Hackbarth. You are correct, Mr. Pallone. We did not
specifically recommend a unified deductible. We felt that the
precise structure of the cost sharing is a decision that ought
to be delegated to the Secretary in keeping with the principles
of value-based insurance design. The argument for a combined
deductible is that it is simpler and that it is more in keeping
with the basic principles of insurance where you want to
provide the most protection to patients that have the highest
cost. The current structure, as you well know, has a relatively
low deductible on Part B and a significantly higher----
Mr. Pallone. So what is the downside then?
Mr. Hackbarth. The downside of moving to a combined
deductible is the impact on beneficiaries who use only Part B
services in any given year. They would have a higher deductible
than the current $147 that they have in Part B deductible.
Mr. Pallone. All right. Let me ask about SGR reform. I
appreciate the fact that MedPAC continues to lead and support
SGR reform and I share the sentiment of the commissions that it
is past time to take action. I also appreciate the recognition
that we need to move delivery systems and payment systems
reform to more value-based systems that were included in the
ACA like the medical homes and accountable care organizations.
But with regard to SGR reform, is my understanding correct that
MedPAC is not recommending that costs be shifted to
beneficiaries?
Mr. Hackbarth. Well, we have recommended in benefit design,
as I said in my opening comment, that the average liability for
beneficiaries not be increased.
Mr. Pallone. OK. So just to clarify further, MedPAC has not
recommended that an SGR fix be offset within Medicare. Is that
accurate?
Mr. Hackbarth. We did not recommend that. We believe that
is Congress's decision to make. What we have tried to do is
offer options for offsetting the cost within Medicare if
Congress elects to fully offset SGR within Medicare.
Mr. Pallone. But you are not recommending that be offset
within Medicare?
Mr. Hackbarth. We have not.
Mr. Pallone. Now, I am concerned that some people are
eyeing this idea of Medicare benefit redesign as a way to
simply get budgetary savings by shifting more costs onto the
backs of beneficiaries. However, in looking at your redesign
recommendations, I notice that you recommend beneficiary
liability remains neutral, that overall beneficiary cost-
sharing levels stay the same in aggregate. So even though some
beneficiaries will see their costs go up and some will see
their costs will go down, the overall out-of-pocket costs for
the average beneficiary will stay the same. So am I reading
that correctly, that MedPAC doesn't envision or propose any
savings from benefit redesign itself?
Mr. Hackbarth. From the redesign itself, no, sir.
Mr. Pallone. So in your proposal, isn't it true that the
savings come from the tax on first-dollar supplemental
coverage?
Mr. Hackbarth. That is correct.
Mr. Pallone. And was keeping beneficiary liability neutral
an important principle for the commission? Did you want to
comment on that?
Mr. Hackbarth. Yes, it is a very important principle from
our perspective. As I said in my opening comment, we don't
think the current benefit package is too rich. If anything, it
is too lean. Our principal concerns about it are its
inappropriate structure. It is not well designed for the needs
of the Medicare population, and we think it should be
restructured.
Mr. Pallone. Can you share with us why not cost shifting to
beneficiaries was felt to be so important? Do you want to
comment on that as well? I know you have to some extent.
Mr. Hackbarth. Well, as I say, we think for the population
served, which is an older obviously somewhat higher-risk
population, this is not a rich benefit package compared to what
employment-based coverage offers, for example, and so rather
than try to achieve savings by cutting benefits, we thought it
was better to redesign them. Now, it is possible that if we
have a simpler design and one that includes catastrophic
coverage that some beneficiaries will choose to forego
supplemental insurance over time, and if that happens, we would
expect that that might result in lower utilization because
there would be most cost sharing at the point of service but it
would be the beneficiary's choice to do that.
Mr. Pallone. All right. Thank you so much. Thank you, Mr.
Chairman.
Mr. Pitts. The Chair thanks the gentleman and now
recognizes the vice chairman of the subcommittee, Dr. Burgess,
for 5 minutes for questions.
Mr. Burgess. Thank you, Mr. Chairman.
Mr. Hackbarth, let me just ask you, in a Medicare Advantage
system, would a patient buy supplemental insurance for Medicare
Advantage?
Mr. Hackbarth. Typically, they would not. Medicare
advantage is offering a different set of tradeoffs, so
typically patients have lower cost sharing at the point of
service in exchange for agreeing to perhaps network limitations
that they are steered to particular providers by the insurer or
their benefits are subject to utilization management, you know,
prior authorization or other management controls, so that is
the tradeoff: lower cost sharing, more management.
Mr. Burgess. I guess I am having a hard time understanding.
It seems like if someone buys a supplemental insurance policy
as they enter into Medicare, they are doing the responsible
thing by putting some of their own dollars into their future
health care by covering against what would be excessive out-of-
pocket costs if they get sick. So they are--it looks to me from
a physician's standpoint, they are doing the prudent thing.
Now, I honestly can't tell you that I ever got a reimbursement
check from a Medigap policy, so I don't know. Maybe those
dollars never go where they are supposed to. But it looks like
the patient is doing the prudent thing with doing that, but you
seem to articulate a different opinion.
Mr. Hackbarth. Well, our view is not for or against the
purchase of supplemental insurance. We believe that
beneficiaries should have the option of buying supplemental
insurance, even first-dollar supplemental coverage, if that is
what they wish. We do think that they ought to see more of the
costs that result from that private decision. The premium that
they pay for supplemental insurance reflects only a fraction of
the additional costs that result from that decision.
Mr. Burgess. But ultimately that is why someone buys
insurance, correct, so they are not hit with the entire cost of
whatever the event might be that they are insured against.
Mr. Hackbarth. Yes, but even insuring against this event,
they are underpaying for that cost. The right price for
insurance should reflect the full cost of the purchasing
decision. In the case of supplemental insurance, it does not.
It reflects only a fraction of the cost.
Mr. Burgess. Let me interrupt you because my time is going
to run. I don't want to say whose fault is that, but why
penalize the poor person who is trying to do the right thing
and buying supplemental coverage with their own hard-earned
dollars? It doesn't make sense to me to penalize or tax that
person additionally if you want them to be bringing some of
their own dollars to the system to keep the system solvent.
Mr. Hackbarth. But we only want for beneficiaries to see
more of the cost of the decision that they make.
Mr. Burgess. I don't disagree with you. I mean, I think we
have anesthetized people as to what health care really costs,
and that is the argument for the entire health savings account
third-party payment mechanism that is ubiquitous in health
care, and perhaps we can talk about that at another time.
When President Obama was doing his charm offensive up here
a couple of weeks ago and met with House Republicans down in
the basement, I have got to tell you, several years ago in one
of the SGR fixes that I have introduced since coming to
Congress, and there have been several, but one of them actually
did away with Part A and Part B and melded them together. I got
a lot of pushback when I introduced that. So I was surprised to
hear the president say sort of one of the throwaway lines in
answer to a question was, we could combine Part B and Part B. I
guess as I further understand it, that was combining the
deductibles. But is that a rational approach to dealing with
some of these difficulties?
Mr. Hackbarth. Well, again, we in our recommendation did
not specifically recommend a combined deductible. We did
recommend catastrophic covers both A and B. On the issue of the
combined deductible, we think that actually that is a decision
that ought to be part of an overall redesign of the cost
sharing in keeping with the principles of value-based insurance
design.
Mr. Burgess. We do of course end up with some people who
don't participate in Part B. They have their Part A coverage
because of the payroll deduction that they have contributed
throughout their working lives. So it is not a completely
universal population.
Let me just ask you another question. Cardiologists in this
country 4 to 5 years underwent a practice upheaval, and largely
because of the administrative pricing brought to them by
Medicare. In other words, to do an echo or a treadmill test in
the office suddenly was undervalued and it was overvalued, in
my opinion, to do that in the hospital, and as a consequence
you have seen cardiologists leave their individual practices
and be hired by hospitals and insurance companies so that the
private practice, solo practice of cardiology has gone away and
yet the technology is changing such that, I don't know, NBC has
a special on the other night where Dr. Snyderman interviewed
Dr. Topol out of San Diego, and with a smartphone and a couple
of little adapters, he was able to do an EKG, an echocardiogram
and a continuous transcutaneous glucose monitoring. He was
providing a lot of care at a very low cost in an office setting
but we have kind of actually priced him out of business, have
we not, with our administrative pricing in Medicare?
Mr. Hackbarth. Well, as you know, Dr. Burgess, one of the
issues that we are working on currently is synchronizing the
payment systems between the hospital outpatient departments and
physician offices. So historically, there have been
dramatically different prices paid for the same service based
on the location, physician office versus outpatient department.
That is the problem, and that is skewing incentives, and we
think contributing to the migration of physician practices
including cardiology practices from outpatient privately owned
offices into hospital outpatient departments.
Mr. Burgess. But I think Medicare was the cause of that
rather than the effect, your reimbursement.
I realize my time is up, Mr. Chairman. I will yield back.
Mr. Pitts. The Chair thanks the gentleman and now
recognizes the ranking member emeritus, Mr. Dingell, for 5
minutes for questions.
Mr. Dingell. Mr. Chairman, thank you for holding this
hearing and thank you for the recognition, and to our witness,
thank you. You have given us very excellent testimony this
morning.
As you will recall, it is my practice to ask for yes or no
answers. I invite you, if you can, to give us supplemental
information as you might deem to be appropriate.
Mr. Hackbarth. I will try, Mr. Dingell.
Mr. Dingell. We very much appreciate that.
My old friend Hubert Humphrey once said the moral test of a
government is how the government treats those who are in the
dawn in life, in the twilight of life and in the shadows of
life. Medicare helps our country meet that moral test by
ensuring that our sick and elderly have access to care in the
time of need. My old dad was one of the architects of Medicare,
and it has endured as one of the great and significant pieces
of legislation.
Now, Mr. Hackbarth, I want to again express my appreciate
for your fine testimony this morning. You note in your
testimony that the cost-sharing structure of fee-for-service
benefit has remained unchanged since 1965. Is that correct?
Mr. Hackbarth. Literally, no, it has not. There have been
some changes.
Mr. Dingell. Have there been any really significant
changes?
Mr. Hackbarth. No.
Mr. Dingell. All right. Would you submit that for the
record?
The current fee-for-service benefit has significant cost-
sharing requirements for beneficiaries. Is that correct?
Mr. Hackbarth. Yes.
Mr. Dingell. Almost 90 percent of fee-for-service
beneficiaries have supplemental coverage. Is that correct?
Mr. Hackbarth. Yes.
Mr. Dingell. Do you agree that the beneficiaries may choose
to have supplemental coverage due to cost-sharing requirements
in the current fee-for-service system?
Mr. Hackbarth. Yes.
Mr. Dingell. MedPAC has proposed an additional charge on
supplemental coverage on Medigap and employer-sponsored retiree
plans. Is that correct?
Mr. Hackbarth. Yes.
Mr. Dingell. And you have proposed this charge because the
commission believes that supplemental coverage leads to
increased utilization and spending. Is that correct?
Mr. Hackbarth. Yes.
Mr. Dingell. And it would also be fair to say, as you have
observed earlier, that it is necessary for us to recoup some of
the additional burdens that that imposes on the Medicare trust
fund. Is that right?
Mr. Hackbarth. Yes.
Mr. Dingell. Do you think that an appropriate charge would
be--what do you think would be an appropriate charge on
supplemental coverage?
Mr. Hackbarth. Can I----
Mr. Dingell. That is not a yes or no answer.
Mr. Hackbarth. Good. We modeled 20 percent, a 20 percent
charge, but we did not recommend a specific number.
Mr. Dingell. I would appreciate if you would make some
additional submissions to us on that point because it is a very
important question.
Who would be required to pay this charge? Now, we have some
potentials here. Would it be individual policies?
Mr. Hackbarth. We would impose it on the insurance company,
and then it could be passed through in the premium, depending
on how the market sorts it out.
Mr. Dingell. Would it be on employer-sponsored retiree
plans?
Mr. Hackbarth. Yes.
Mr. Dingell. And would it be applied only to new
beneficiaries?
Mr. Hackbarth. No.
Mr. Dingell. Would it be applied to everybody?
Mr. Hackbarth. Yes.
Mr. Dingell. I know the Administration seems to be saying
that these charges will be applied only to new beneficiaries
after 2017.
Mr. Hackbarth. Yes.
Mr. Dingell. Do you agree that the supplemental charge
would cause Medicare beneficiaries to face additional cost
sharing? Now, you have some comments on that. Do you want to
amplify on that?
Mr. Hackbarth. Could you just repeat it again?
Mr. Dingell. OK. Do you agree that the supplemental charge
would cause Medicare beneficiaries to face additional cost
sharing?
Mr. Hackbarth. Well, certainly the supplemental charge
itself would be an additional cost. How beneficiaries would
respond to that is difficult to predict. What we think would
happen is, the current beneficiaries may not change their
choice of policies as significantly as new beneficiaries coming
into the program over time.
Mr. Dingell. Now, you have indicated that you don't intend
to increase the burden on the population of beneficiaries
generally. Am I correct in that?
Mr. Hackbarth. In our benefit redesign?
Mr. Dingell. Yes.
Mr. Hackbarth. No. We went to hold that constant.
Mr. Dingell. Now, do you agree that the supplemental charge
could cause some beneficiaries to drop or reduce their
supplemental coverage due to the additional charge?
Mr. Hackbarth. We that it may cause some beneficiaries to
change their choices. As you well know, there are a wide range
of supplemental plans. Some have front-end cost sharing; some
do not. So there might be a move from first-dollar supplemental
coverage to policies that have some cost sharing at the point
of service.
Mr. Dingell. Now, I have to think that a charge on
supplemental coverage could result in Medicare beneficiaries
not seeking out the services and care they need or delaying
treatment or care until it is too late. I think that is a
potential risk but first, is it a risk, and second, what do we
do about it?
Mr. Hackbarth. It is a risk, and this is why we think it is
very important to give the Secretary to the authority to adjust
cost sharing based on the principles of value-based insurance
design. In other words, reduce cost sharing for services of
proven high value to patients and perhaps increase cost sharing
for low-value services.
Mr. Dingell. So you are suggesting the Secretary should
have authority to adjust those charges but that should be
subject again to requirements in law that would say he can't
necessarily change the overall structure to create a
disadvantage to the population. Is that right?
Mr. Hackbarth. Exactly.
Mr. Dingell. Mr. Chairman, I have gone over time.
Mr. Pitts. The Chair thanks the gentleman and now
recognizes the gentleman from Virginia, Mr. Griffith, 5 minutes
for questions.
Mr. Griffith. Thank you, Mr. Chairman.
I was intrigued with your testimony in regard to
secretarial authority to alter or eliminate cost sharing based
on the evidence of the value of services, and I was wondering
if you could expand on that because one of my concerns would
be, I understand if something has a high benefit, lowering that
cost pay, but you could theoretically raise the copay so high
that people couldn't afford it, even if they really wanted to
do that, and I am concerned that for a particular patient and a
particular doctor, they may make a decision that perhaps
universally might not have great benefit but could to that
patient. I was wondering if you could expand on that. My
thought was, maybe put caps on the high end.
Mr. Hackbarth. So as you know, a number of private insurers
and employers have been moving towards the idea of value-based
insurance design. Typically, the focus has been on reducing
patient copays for services of high proven value. An example
would be having low copays for services provided to diabetics
or patients with multiple chronic illnesses to make sure that
they get the care they need to prevent worsening of their
health and potentially higher bills as a result of that. There
has been less done in terms of increasing copays for low-value
services, probably for the obvious reason that there is more
controversial than reductions are. So I would anticipate that
at least initially most of what the Secretary might do with
this authority is lower copays. That said, there are services
that sometimes can be quite expensive but are of low value to
patients, and rather than prohibit access to those services and
say oh, you are a Medicare beneficiary, you can't have that
service at all, the idea would be to say oK, you can have it
but you are going to pay a bit more of the cost of that service
if it is a proven low-value service.
Mr. Griffith. And I don't come from a medical background.
Can you give me an example of one of those that across the
country would have low benefit and might need to have the fee
raised?
Mr. Hackbarth. Since I am not a physician either, I would
be reluctant to do that. What I would say is that, you know,
this should be done thoughtfully and will be done as part of a
notice and comment rulemaking process so the Secretary would
have to publish the evidence to support this low-value
assessment, and all relevant parties would have the opportunity
to contest that evidence and respond to it, and I think that is
the way it ought to be decided by experts, not by people like
me.
Mr. Griffith. As a representative of the public, and while
I generally think experts do a pretty good job, sometimes I
have big disagreements with them and I would just have to say
that while I kind of like the idea, Mr. Chairman, I would want
to see--if we were to authorize the Secretary to do that, I
would want to see some kind of a cap on the top of the--as a
top number so that you wouldn't be in a position where suddenly
a procedure is completely voided because the cost is just so
horrendous that nobody can justify it except for the extremely
rich. So I do appreciate that.
With that, Mr. Chairman, I will yield back my time.
Mr. Pitts. The Chair thanks the gentleman and now
recognizes the gentleman from Utah, Mr. Matheson, 5 minutes for
questions.
Mr. Matheson. Thank you, Mr. Chairman, and thank you, Mr.
Hackbarth, for being here today.
It seems to me that one of the outcomes of your suggested
change in this benefit design has something to do with
overutilization and trying to address that issue in terms of
having the individual patient have a little more of a consumer
orientation. Is that a fair assumption?
Mr. Hackbarth. That is part of it, Mr. Matheson, but the
most important part from our perspective is to improve the
benefit package for beneficiaries including catastrophic
coverage.
Mr. Matheson. I wanted to talk a little bit about a
particular component of overutilization. I may be getting a
little off the specific benefit design topic of this hearing,
but I know in your MedPAC March report you identified some
specific geographic areas where there is a strong reason to
believe that certain inappropriate billing practices are at
play in the home health care industry, and I have seen some
data that is pretty phenomenal in my mind. I compare my State
to Miami-Dade County. I got 190,000 Medicare beneficiaries in
Utah. There are about that many in Miami-Dade County. However,
there is 700 home health care providers in Miami-Dade County
and about 100 in Utah. Home health services in Utah cost
Medicare a lot less than the services performed in Miami-Dade.
The average cost per enrollee in Utah is $560. The average cost
in Miami-Dade County per enrollee is over six times that amount
of $3,500. It strikes me that the vast majority of providers in
the home health care industry in Utah are doing the right
thing, and it strikes something is going on in Miami-Dade
County that doesn't pass the smell test, and it seems to me
that it is an important issue for us to look at in how we try
to seek out these pockets of geographic areas where there is
this huge overutilization going on and instead of doing a
policy that may affect all providers including those that are
doing the right thing that we target those who aren't. So in
the instance of home health care, I was wondering, would it be
better for Medicare in terms of saving money and decreasing
overutilization to scrutinize the issue of new provider numbers
or to look at reasonable limits on episodes of care in these
high utilization areas like Miami-Dade County?
Mr. Hackbarth. There are two types of problems in home
health care as we see it, but before I focus on the problems,
let me emphasize that we think that good home health care is an
essential part of good quality care for Medicare beneficiaries.
Mr. Matheson. And I agree.
Mr. Hackbarth. So in no sense are we against home health
care, but there is, as you say, evidence that in some parts of
the country we have extraordinary levels of use and
extraordinary number of home health agencies and we think
indications of fraud and abuse, and we have made
recommendations for targeted efforts to deal with those
problems including limits on the number of new agencies in
those problem areas, so we think that is an important thing to
do.
Having said that, though, across the country, we believe,
even in the low-use States we are paying too much for each
episode of home health care. So even where there isn't that
fraud and abuse, we believe the rates are too high relative to
the costs incurred.
Mr. Matheson. In terms of this situation where you have got
some certain geographic locations where there appears to be
extremely high overutilization compared to a peer comparison
elsewhere, is it reasonable to assume that this situation is
occurring in other aspects of Medicare services in this country
outside of home health care?
Mr. Hackbarth. Well, quite possibly, yes. Another area
where we see extreme variation is durable medical equipment. So
post acute care in general which includes home health care and
DME account for a significant portion of the geographic
variation that is the focus of so much attention in Medicare.
Mr. Matheson. We feel like in our State, we practice
medicine in a way that if the rest of the country did it, we
would be saving a lot of money with outcomes just as good, and
so I think this is something, Mr. Chairman, I know it is a
little outside of the benefit structure of this hearing today
but this issue of disparate discrepancies in utilization across
different geographic areas is something I think is worthwhile
for us all to take a look at and provide some real opportunity
for some savings. With that, I will yield back.
Mr. Pitts. The Chair thanks the gentleman and now
recognizes the gentleman from Kentucky, Mr. Guthrie, 5 minutes
for questions.
Mr. Guthrie. Thank you, Mr. Chairman, and I would like to
follow up a little bit on what my friend from Utah was talking
about, because you have talked about and you mentioned again
the high margins in home health, and I know home health, in my
understanding, has been cut, what, 21 percent since 2010 and
for publicly traded home health--that is the information I was
able to get--before tax margins in 2009 were 13.4 percent, in
2012, 3.9 percent. I think there is four publicly traded. And
after tax margin in 2012 was 2.5 percent. So it seems like if
you had more in Miami, you would get better competition, so it
is kind of counterintuitive how that works.
And I guess my question is, you have a report that had the
margins. What was your methodology in that report?
Mr. Hackbarth. We used Medicare cost reports, so in
contrast to the publicly traded companies, what we are looking
at is Medicare-specific profit margins whereas for a publicly
traded company, we would be getting a combination of Medicare
margins and margins on private insurance as well.
Mr. Guthrie. OK.
Mr. Hackbarth. So it is an apples-to-oranges comparison.
Mr. Guthrie. Well, thanks for that. On the supplementals,
so you were saying the number you have suggested--I know you
didn't recommend it--is 20 percent, or looked at 20 percent
should be actually added to the--you said charge to the insurer
but the premium should be 20 percent higher to reflect the true
cost to the taxpayer for buying supplemental----
Mr. Hackbarth. Yes, so the example that we modeled was a 20
percent charge that would be imposed on the insurance. How that
would affect the premiums would depend on, you know, market
competition and different markets. In some cases, it might be
all passed on. In other words, it might not be.
Mr. Guthrie. So the additional cost that you are trying to
capture is what the supplemental policy does in terms of
utilization?
Mr. Hackbarth. Increased utilization, so our analysis shows
that beneficiaries that have supplemental coverage use about
one-third more services after adjusting for differences in age
and risk, etc.
Mr. Guthrie. Because the more likely you are to use the
system, the more you--so the sicker you are, the more likely
you are to buy a supplemental policy?
Mr. Hackbarth. But in our analysis, we adjust for risk.
Mr. Guthrie. Well, thanks. I yield back my time.
Mr. Pitts. The Chair thanks the gentleman and now
recognizes the gentleman from Texas, Mr. Green, for 5 minutes.
Mr. Green. Thank you, Mr. Chairman.
Mr. Hackbarth, thank you for appearing today, and again,
thank you for a lot of the information we worked on for many
years. MedPAC's proposal for benefit redesign is careful to
point out that aggregate beneficiary cost sharing would be kept
the same. You point out in your testimony that the reason for
this is the commissioners' judgment that traditional Medicare's
benefit structure is not too rich, especially for the
population covered. One of your goals is to protect the
beneficiaries against high out-of-pocket spending while not
reducing the actuarial value of the benefit package. Can you
explain what you mean by the benefit package not being too
rich?
Mr. Hackbarth. Right. So a way to judge the richness of a
benefit package is, what percentage of a patient's costs are
paid through insurance as opposed to out of pocket. Using that
as the standard, we don't think that the percentage paid by
Medicare of total beneficiary costs is too high. In fact, if
anything, it may be too low. So we accepted as a starting point
that we ought not be cutting the amount paid by Medicare that
would put too much of a burden on beneficiaries. We felt like
there were a lot of things we could do to make the package
better including providing catastrophic coverage and making it
simpler. We thought that those changes in turn might cause some
beneficiaries to say, you know, I don't need to pay $175 or
$200 a month for supplemental insurance, which is a big burden
on many beneficiaries as well.
Mr. Green. Frankly, in our area, $175 or $200 a month is
pretty small. I have seen some quotes for that.
Now, switching gears. A lot of attention has been given to
supplemental insurance plans like you just mentioned in
Medicare, particularly those provided by employers or Medigap
plans purchased by individuals. There is a lot of concern about
Medicare patients not having enough skin the game, so to speak,
because their supplemental policies often pick up deductibles,
copays and coinsurance. As I understand your proposal, charging
or paying a premium for this first-dollar supplemental
insurance is intended to offset the cost of some of the other
benefit design changes?
Mr. Hackbarth. Well, the overall package that we modeled
including the catastrophic coverage and the new structure of
copays would have resulted in a modest increase in Medicare
expenditures, about 1 percent, and so in our package we
combined that modest increase with this 20 percent charge on
supplemental insurance and the net result of those two things
would be a modest reduction in total Medicare expenditures of
about one-half of 1 percent.
Mr. Green. I understand that correctly. Is it true that
cost sharing reduces both necessary and unnecessary care?
Mr. Hackbarth. Yes. That is what the evidence shows, and
that is why we think that giving the Secretary the authority to
do smarter cost sharing, not just across the board but targeted
based on value is so important.
Mr. Green. And I understand that we want patients more
active in their decisions on their care but that may work for
some of us that are younger elderly patients but a lot of our
older patients how are sicker, they just may take a more
passive role in their care and their decision making, and Mr.
Chairman, I remember I was a State legislator in the 1980s and
we had a Senator from Texas, Lloyd Bentsen, who worked on
trying to do catastrophic and reform Medicare, and somehow the
seniors got Congress's attention, and I remember talking to
Senator Bentsen at that time and he said we just went too far
for what our seniors would accept, and it was, you know, a
revolution by those under Medicare almost in the late 1980s.
Mr. Hackbarth. In fact, I worked in what was then HCFA, the
Health Care Financing Administration, during that period, so I
remember it well.
Mr. Green. And I understand, Mr. Chairman, there are some
good parts of this but we need to look at it because a lot of
seniors would like not to have to have that high monthly
premium for their Medigap coverage, if we could somehow equal
it out.
Mr. Hackbarth. And unfortunately, I think the current
structure without catastrophic coverage almost compels seniors
to pay that high monthly premium for supplemental insurance
because the Medicare package does not offer them the most basic
feature of a good insurance plan, an out-of-pocket limit.
Mr. Green. Thank you, Mr. Chairman.
Mr. Pitts. The Chair thanks the gentleman and now
recognizes the gentlelady from North Carolina, Ms. Ellmers, 5
minutes for questions.
Mrs. Ellmers. Thank you, Mr. Chairman.
Mr. Hackbarth, I have a document here which is basically a
list of bipartisan quotes from both conservative and
progressive authors relevant to the proposals, many of which
you are proposing today, and I will just say that drawing from
it, President Obama's National Commission on Fiscal
Responsibility and Reform released in 2010 quoted--this is a
quote taken from that bit of information: ``Currently, Medicare
beneficiaries must navigate a hodgepodge of premiums,
deductibles and copays that offer neither spending
predictability nor protection from catastrophic financial risk.
The ability of Medicare cost sharing to control costs either
under current law or as proposed above is limited. Do you
believe--and I think you can probably just give a yes or no
answer to this. Do you believe that MedPAC's reforms ad they
encourage more predictable out-of-pocket costs and limit on
catastrophic costs may allow seniors to better plan for balance
in their future health care and financial needs?
Mr. Hackbarth. Yes.
Mrs. Ellmers. Thank you. In 1995, Henry Aaron of the
Brookings Institute and Robert Reischauer of the Urban
Institute had this to say about combining Medicare Part A and
Part B: ``Whatever rationale may once have existed for the
distinction between services and Part A and Part B medical
technology, the development of new reforms and service delivery
and new patient structures have rendered it obsolete.'' I raise
this point because we think it is important as part of the
conversation today that we all understand that Medicare
traditional benefits are obviously outdated and cause
unnecessary harm for our seniors as a result. There again, in
your opinion, yes or no, do you believe the concept of
combining Part A and Part B is a good Medicare idea?
Mr. Hackbarth. Yes. As I said earlier, our recommendation
is for a combined A and B catastrophic limit. We have not
specifically recommended an A and B combined part.
Mrs. Ellmers. And do you believe that the concept of this
can be characterized as a Republican idea?
Mr. Hackbarth. Well, this package that I have described
today was unanimously recommended by the members of MedPAC, 17
members of various political persuasion.
Mrs. Ellmers. So basically you would have to say no then?
Mr. Hackbarth. We are a nonpartisan agency and we really
try to live up to that billing.
Mrs. Ellmers. To be bipartisan. OK. The AARP's Public
Policy Institute had this to say about the traditional Medicare
benefit designed in 1999: ``Medicare, widely considered to have
been successful in improving access to care and lessening the
financial burdens of health care for older Americans, is also
viewed as a program in need of a more updated management
structure. The two-part system that drives many of its payments
and revenue policies almost certainly would not be adopted if
the program were being designed today. The current design
reflects some factors that while relevant when Medicare was
initiated in 1965 are not now pertinent.'' In your opinion, do
you believe that the current design of Medicare traditional
benefits reflects some factors that may have been more relevant
in 1965 as opposed to now, 2013?
Mr. Hackbarth. Yes.
Mrs. Ellmers. Wonderful. I have a couple minutes. We are
going to be taking part--Congresswoman Marsha Blackburn and I
are going to be taking part in a committee idea lab, basically
just bouncing some ideas and thoughts, after this hearing. Some
of the proposals outlined by MedPAC will be included in our
proposal and some of the questions we are going to be taking. I
look forward to working with this committee over the next
months to explore these ideas and push forward meaningful
Medicare reforms that serve the best interest of Medicare
seniors, and at this time I would like to ask unanimous consent
to insert into the record this piece of information that we
have here, this review of bipartisan support.
Mr. Pitts. Without objection, so ordered.
[The information appears at the conclusion of the hearing.]
Mrs. Ellmers. Thank you, Mr. Chairman, and I yield back the
remainder of my time.
Mr. Pitts. The Chair thanks the gentlelady and now
recognizes the gentlelady from Virgin Islands, Dr. Christensen,
for 5 minutes for questions.
Mrs. Christensen. Thank you, Mr. Chairman, and thank you,
Dr. Hackbarth, for coming back to the committee. I appreciate
MedPAC's recognition of the need for added protections,
particularly with regard to the out-of-pocket spending caps in
your benefit design proposal, and I think I understand but
don't necessarily agree with some of the ideas behind the
proposed reform of supplemental or Medigap coverage, but I am
very concerned with the level of support and protections for
low-income seniors and that analyses done on the impact of
seniors as a group may not adequate capture the impact on those
that are most vulnerable. Every study that I have reviewed
looking at the impact of the cost sharing on patients and
patient behaviors concludes the same thing, that patients use
less services but do not differentiate between necessary and
unnecessary and that those that are poorer and sicker are the
most cost-sensitive and would be the ones that would reduce the
use of services the most.
So as you know, the Medicare beneficiaries are poorer and
sicker than the population at large. Twenty-three percent have
a cognitive or mental impairment. Forty percent have three or
more chronic medical problems. About half of the beneficiaries
have annual incomes below 200 percent of poverty level, and
one-quarter have incomes less than $14,000 per year. So these
beneficiaries are very much the patient population that is at
greatest risk for reducing the use of necessary medical
services or deferring important care that results in a
preventable hospitalization, and I know you have thought about
these issues because your proposal builds in protections for
those currently covered by Medicaid. What about the other low-
income seniors and the ones, the 40 percent with multiple
chronic diseases for whom we don't really want to create
additional barriers to care.
Mr. Hackbarth. So Dr. Christensen, I agree basically with
your summary of what the evidence shows about cost sharing, and
so I want to emphasize again, our goal is not to increase the
average level of cost sharing but redesign the benefit to make
it better for Medicare patients and perhaps reduce the need for
them to buy supplemental coverage. We think that using value-
based insurance design is very important to get at some of the
issues you have identified. We don't want to increase cost
sharing on really high-value services, for example, for
chronically ill patients. In fact, we may want to reduce cost
sharing on those.
With regard to the impact on low-income people, we think
that there are targeted approaches to dealing with that issue
that are better than what we now have. Right now, what we have
is a system whereby in effect the taxpayers are providing an
implicit subsidy for the purchase of supplemental coverage
because the taxpayers pick up most of the bill for the added
cost. That subsidy goes to all beneficiaries rich and poor
alike. If the particular concern is low-income beneficiaries as
well at might be, a more targeted way to deal with that issue
would be to expand eligibility for the Medicare savings
programs. So right now Medicare beneficiaries that have incomes
less than 100 percent of poverty qualify to get their Part B
premiums and cost sharing paid under Medicaid, but above that
level, there is no contribution for offsetting cost sharing. Up
to 135 percent of poverty, there are subsidies for the Part B
premium but you still have to pay the cost sharing. So if
Congress is concerned about low-income people and the impact of
this on low-income people, a much more targeted approach would
be to change eligibility for the Medicare savings programs, and
I would note that the low-income subsidy under Part D has
higher income thresholds for eligibility than we have in the
Medicare savings programs for Part A and B, so there is already
a precedent, if you will, for higher levels of eligibility.
Mrs. Christensen. Thank you for that. That gives us some
idea of where to go.
You talk a lot about giving the Secretary flexibility to
set copays for high value versus low value, and I have been
following the Patient-Centered Outcome Research we created in
the Affordable Care Act, and I am wondering, do you see that as
being helpful, their work as being helpful to identify high
volume, low value in that process?
Mr. Hackbarth. Yes. A number of years ago, before the
Patient-Centered Outcome Research Institute was created, we
recommended to Congress that such an organization be created
and that the federal government support the development of
better information for physicians and patients about what
works, and so to the extent that PCORI can increase the
knowledge base that we have, that is information that could be
used in value-based insurance design.
Mrs. Christensen. Thank you. Thank you, Mr. Chairman. I
yield back.
Mr. Pitts. The Chair thanks the gentlelady and recognizes
the gentlelady from Tennessee, Ms. Blackburn, 5 minutes for
questions.
Mrs. Blackburn. Thank you so much. We appreciate that you
are taking the time to be here, and as Ms. Ellmers said, we are
going to be spending some time looking at how you do help with
the solvency, and I want to ask you just one thing. My class,
when we came into Congress, we were focused on waste, fraud and
abuse. We did an entire project, Wasteful Washington Spending,
and of course, Medicare spending continued to come into that
picture, and we had example after example of wasteful and
fraudulent spending and the abuse of just millions of dollars.
So do you think, in your opinion, do you think that the
antiquated method, the fee-for-service method, is something
that continues to make it possible for this continuation of
waste, fraud and abuse every year and difficulty in running the
traps on this and rooting it out?
Mr. Hackbarth. Yes. We think that waste, fraud and abuse is
a significant problem, particularly in some areas of the
program. Earlier we were talking about home health care is an
area where there is a lot, and where Medicare payments are
really generous, and we think they are generous for home health
care, that is almost an invitation to people who want to make a
quick buck on Medicare.
Mrs. Blackburn. A lot of quick bucks, it seems like.
Mr. Hackbarth. A lot of quick bucks, and durable medical
equipment is another area where we think there has been a fair
amount of waste, fraud and abuse, and in part that is triggered
by very attractive payment rates that bring in people who are
more focused on making money than serving patients.
Mrs. Blackburn. What would you say is the percent of
expenditures that are going out the door, those payments going
out the door? What percent do you think are fraudulent
payments?
Mr. Hackbarth. We really haven't looked at that issue. I
think the Government Accountability Office has made estimates
that----
Ms. Blackburn. Right. They have. I just didn't know if you
kind of lined up with them or if you had another opinion of
that.
Let me ask you, looking at that same thought and thinking
about the solvency and the financing mechanisms, AARP has done
reports going back 1998, 1999 looking at merging A and B and
then looking at the financing end of that. Where do you stand
with those knowing that people are concerned? We hear about it
every day--tell me what you know is going to happen with
Medicare, are we really in danger of going bankrupt. And so as
you put your reforms forward today, what do you think they will
do in helping with the solvency? If we did your reforms, how
long would it encourage the solvency of Medicare? How many more
years would we get out of this?
Mr. Hackbarth. Well, that is a question better directed to
the Medicare actuaries. What we have outlined is a package that
would have a modest net reduction in Medicare spending on the
order of about one-half of 1 percent so that, you know, $2.5 or
$3 billion a year, $25 or $30 billion over 10 years. Now, what
that assumes is a 20 percent charge on supplemental insurance
and that nobody modifies their decisions, beneficiaries don't
change their decisions about purchasing supplemental insurance.
If in fact beneficiaries start to say, oh, this new redesigned
benefit means I don't have to buy supplemental insurance or
they buy one that doesn't have first-dollar coverage, then
those savings may increase and you might go from $2.5 to $3
billion a year to $5 or $6 billion a year.
Ms. Blackburn. Well, yes, and that is always kind of the
discussion we get into with whether we are using the static or
the dynamic scoring ad the basis that people make their
decisions on.
I have one other question, but in the interests of time,
Mr. Chairman, I will yield back my time and submit my third
question.
Mr. Pitts. The Chair thanks the gentlelady and now
recognizes the gentleman from Maryland, Mr. Sarbanes, for 5
minutes for questions.
Mr. Sarbanes. Thank you, Mr. Chairman. Thank you, Mr.
Hackbarth.
Could you just talk a little bit about the relationship
between the proposed benefit design change that would impose a
higher cost-sharing impact on a patient for a lower-value
service and a lower cost share for a higher-value service, the
relationship of that proposal to the change in reimbursement
methodology vis-`-vis the providers of care, which is another
place where we are looking at this high-value, low-value
dynamic? In other words, you have services now that a primary
care physician might be prepared to offer but there is really
no meaningful reimbursement for it so there is no incentive to
do it so you can envision a situation where there is a service
that is not getting covered at all by Medicare and maybe want
to re-look at that but then at the same time we want to examine
then what the cost sharing with Medicare's new obligation would
be. It seems to me those have got to be interrelated to some
degree.
Mr. Hackbarth. So we think there are issues on both the
patient cost-sharing side and the provider payment side, and I
think at the SGR hearing a few weeks ago, the two of us talked
about primary care services, which we think are high-value
services that are often are underpaid under the existing
Medicare fee schedule. So in the case of a primary care who has
taken responsibility, for example, under a medical home to
manage patients with multiple chronic illnesses, you know,
ideally what you might have is lower cost sharing for really
high-value services for the patient and richer payment for the
physician for taking on this very important task of managing
complicated patients. Right now, Medicare has fallen short on
both the provider and the beneficiary side.
Mr. Sarbanes. In that sense, it is kind of a double
investment in redirecting or transitioning the emphasis of
where the care happens and has to be premised on the idea that
even that increased investment, which is a combination of
higher reimbursement to the physician and lower cost sharing on
the part of the patient, that we are going to see, it is going
to yield savings down the road that justifies both of those
investments we are making.
Mr. Hackbarth. Yes. Ideally, we are working both sides, the
provider payment and the beneficiary benefit structure, and
doing it in a synchronized way. That is how we get the maximum
impact.
Mr. Sarbanes. Thank you.
Mr. Pitts. The Chair thanks the gentleman and now
recognizes the gentleman from Louisiana, Dr. Cassidy, 5 minutes
for questions.
Mr. Cassidy. Hi, Mr. Hackbarth. I will kind of scoot over
so we can see each other.
I always enjoy your testimony. I always consider it very
thoughtful.
Now, there does seem to be, though--I always make the point
that people in Washington have kind of a centrally planned
economy view of how we do things, and if you will, as great as
your work is, it truly is trying to anticipate lots of very
unique situations coming up for rules that with that
anticipation work to very unique situations. The very premise
seems untenable. Do you see my point?
Mr. Hackbarth. Well, yes and no. On the one hand, I do
believe, and I think we have talked about this in the past,
that giving Medicare beneficiaries options, for example, to
enroll in a Medicare Advantage plan, a private health plan, is
a very important thing to do, and I think you agree with that
as well. On the other hand, I must confess, when I hear people
criticize Medicare for its administered price system, it sets
me a little bit on edge because I know better than most people
the problems with administered prices. I have spent many, some
would say too many hours working on these issues in my career.
But when I look at Medicare pricing compared to pricing in the
private sector, our system looks pretty good.
Mr. Cassidy.No, believe me, I am not defending the private
sector, and I actually like your proposal that if you put these
physicians at two-sided risk with some sort of accountability
as to outcomes and have the quote, unquote, activated patient,
that is the better way to go. My concern is that if there is an
innovation which is disruptive, it gives you a better outcome
at a lower cost. It will be 3 years later before that may be
priced accordingly or even given a code.
Mr. Hackbarth. And, you know, overall, my goal is to
decentralize decisions, put as many decisions as possible in
the hands of physicians and patients, provided that there is
accountability for the results, both quality and cost.
Mr. Cassidy.Now, a conversation just to revisit we have
probably had before, the ACO, I think you rightly put the
physician-patient relationship at the center of our ability to
improve outcomes and control costs. But I see a lot of what we
are proposing are actually on the suprastructure, if you will.
Here is the patient, physician, but here is the administrative
cost and here is the ACO, etc., and that actually seems to be
insulating or denying responsibility for this integral
relationship. Any thoughts on that?
Mr. Hackbarth. Well, so let us use ACOs as a potential
framework for decentralizing decisions to physicians and
patients, and as you know, from prior conversations, I believe
in that. You know, right now we have got an ACO structure which
I think is a step in the right direction but has some problems
with it, and one that I would highlight in this context is,
Medicare beneficiaries don't share in any of the savings from
an ACO. All of the talk is about how the physicians, the
hospitals and the government share in the savings but there are
no real rewards for Medicare beneficiaries. We think across the
board we need to work on improving provider payment and
bringing Medicare beneficiaries appropriately into those
discussions and allowing them to share in savings when they go
to high-value providers.
Mr. Cassidy.And we are totally in agreement on that. I
think one thing I would also point out is that if we are going
to bring this down to the smaller practice, I am not quite sure
how an ACO would work for a four-person practice in a rural
area, if only because you are only going to get settled up on
the positive things you have done 2 years after you have done
it. If you are in a cash-flow-dependent practice, you probably
don't have the wherewithal to wait 2 years to have a settling
up.
Mr. Hackbarth. Although one of the ACO models does involve
an advanced payment for just that reason, the physician-
sponsored ACOs. You know, I think it is too early to predict
exactly how ACOs will develop, especially in sparsely populated
areas like rural areas, but about half of the current ACOs
involve either Critical Access Hospitals or Community Health
Centers and deal with relatively challenging care delivery
systems.
Mr. Cassidy.I accept that, but we are going so far down the
road in terms of planning and implementing political and
bureaucrat capital in putting these in place. Not knowing where
they are going to go and seeing that there are flaws inherent
in them makes me troubled. I mean, is that unique relationship
going to be preserved when, again, we just don't know where it
is going.
Mr. Hackbarth. Well, we certainly believe that preserving
that relationship is really important, vital, essential, and I
may be a little bit more optimistic than you are that in fact
the movement is in the right direction, but I think we have to
be vigilant about it.
Mr. Cassidy.I am out of time. I yield back. Thank you.
Mr. Pitts. The Chair thanks the gentleman and now
recognizes the gentleman from Florida, Mr. Bilirakis, 5 minutes
for questions.
Mr. Bilirakis. Thank you, Mr. Chairman. I appreciate it
very much.
Mr. Hackbarth, your testimony really touches on the
importance of transparency and predictability in pricing and
out-of-pocket expenses for seniors in the Medicare program. No
other industry I know of would facilitate customers not knowing
the cost of service until after it has been performed. Can you
explain your thoughts on the importance of out-of-pocket
predictability as it relates to the reforms you have presented
here today or even for future reforms to the program?
Mr. Hackbarth. Well, Mr. Bilirakis, the most important
thing is that we know from focus groups with beneficiaries that
they find the current benefit structure confusing and more than
a little bit frightening because they don't feel like they can
predict what is going to happen, what the bill is going to be
if they get sick or even when they go to a physician office
because, as Dr. Burgess said, it is 20 percent of what. We
don't know. And so what we have advocated is a focus on
simplification and protection against overall costs, and we
think that that will be very reassuring to Medicare
beneficiaries and perhaps over time will influence their
decisions about whether they need supplemental insurance and,
if so, what kind they buy, and that would be a good thing for
Medicare.
Mr. Bilirakis. And you of course agree that seniors should
be more active participants?
Mr. Hackbarth. Absolutely.
Mr. Bilirakis. Thank you. You reference in your testimony,
and I think the gentlelady from the Virgin Islands referred to
this, but your testimony, the suggestion that Congress should
consider giving the power to the Secretary to reduce cost
sharing on services if evidence indicates that doing so would
reduce Medicare spending or lead to better health care
outcomes, and vice versa. Can you elaborate on that?
Mr. Hackbarth. Well, I am not sure I have a whole lot new
to say on that, but we do think that services are of different
value to patients. Certainly we know that some services are
really important for beneficiaries with chronic illness, and we
don't want cost sharing at the point of service to be a barrier
to that care because patients will be worse off with worse
health outcomes, and Medicare will incur higher long-run costs.
And so as opposed to a crude approach to cost sharing which
just says same rate for everything, you know, 20 percent across
the board, we think we can do better than that and be smarter
about it and have better results for patients.
Mr. Bilirakis. Thank you very much. I yield back, Mr.
Chairman.
Mr. Pitts. The Chair thanks the gentleman and now
recognizes the gentleman from New Jersey, Mr. Lance, 5 minutes
for questions.
Mr. Lance. Thank you, Mr. Chairman. I would be happy to
yield my time to Dr. Burgess.
Mr. Burgess. I thank the gentleman for yielding.
Mr. Hackbarth, just a couple of follow-up things, and thank
you for mentioning HCFA. It brought back memories of when I
thought HCFA was a four-letter word when I was in practice.
Back in the 1990s with the passage of the Kennedy-Castelbaum
bill, that behemoth that gave us HIPAA, but it also allowed for
the first time the sale in this country of medical savings
accounts, but if I recall correctly, they were very careful to
keep that type of insurance out of the Medicare system. Is that
correct?
Mr. Hackbarth. Yes, I think that is correct.
Mr. Burgess. Well, here is my question, and I still have a
problem with the concept that--and let me very honest with you
here. I have got someone in my household who is going to turn
65 this year, and we are just deluged with stuff from people
wanting to sell a supplemental policy. So I can certainly
sympathize with the person who looks at all of this
information, and oh, my god, I want to do the right thing, I
want to be prepared for bad things that could happen so I will
make this investment. It is hard for me to believe that that is
an erroneous activity for that person for them to be engaged in
that. You kind of indicate in your testimony that a lot of
times what they are paying in for that supplemental is far in
excess of anything they would get from a benefit from the
supplemental payment. Why don't we make it easy to put
additional dollars away for their health care in a Medicare
health savings account that would be available them to draw on
and need if there were costs over and above what the Medicare
benefit would provide them?
Mr. Hackbarth. Dr. Burgess, we haven't looked specifically
at the issue of medical savings accounts for Medicare
beneficiaries, so I don't have a MedPAC view on that.
Mr. Burgess. Let me just offer you an observation. We talk
about 10,000, 12,000 people a day entering Medicare. There are
going to be more and more people who enter Medicare with a
health savings account that actually has cash in it that was
not used prior to the time of entering into Medicare. Are you
looking over the horizon at all and trying to figure out how do
you deal with--Bill Cassidy called them the activated patient.
That is exactly right. Governor Mitchell Daniels when he
provided his Healthy Indiana program to State employees
essentially was a high-deductible health plan coupled with a
health savings account, he made the observation that something
magic happens when people spend their own money for health
care, even if it wasn't their own money in the first place. But
you have got these people arriving into Medicare, aging into
the Medicare system with a large health savings account that
they are holding. Why not allow them to participate in their
care?
Mr. Hackbarth. Well, this is an issue of personal interest
since I am going to be 62 and actually my wife and I have a
health savings account. We have been insured under a high-
deductible plan for quite some time now. So it is an important
issue. It is not one that we have looked at at this point.
Mr. Burgess. Let me just make another observation. I mean,
I know fee-for-service gets a bad name and a bad rap in a lot
of ways, and Dr. Cassidy referenced the small practice in rural
setting. I always allude to the solo practitioner in Muleshoe,
Texas, who really can't participate in an ACO. Yes, they can be
acquired by a network. But, you know, every time I think of
accountable care organizations, I have to ask myself,
accountable to whom, because as Dr. Cassidy correctly pointed
out, there are significant--because of the risk factor, there
is a significant cash amount that needs to be available that is
generally not available to the small and individual practice so
that there is someone else who is going to have to be, if you
will, a financial or fiscal partner in that endeavor. So it
just begs the question, accountable to whom? Is it accountable
to the hospital? If the doctor is accountable to an accountable
care organization, is that really accountable to the hospital
or to the government or to a health plan? It kind of begs the
question, are they still accountable to the patient, and just
speaking from a professional standpoint, I am worried about the
direction in which that is going.
Mr. Hackbarth. Well, there are to be sure lots of
complicated issues that need to be examined and resolved around
the development of ACOs. I think it is a step in the proper
direction. I say that because I really am looking for
structures that decentralize decisions so that clinicians and
patients can make them together subject to accountability on
quality and cost. Now, exactly how you set the cost and all the
issues about the flow of the money, those are really important
things, and I don't mean to diminish their importance, but if
the goal is getting the federal government out of intrusion
into medical practice, structures like this I think need to be
part of the solution so let us focus on making them better as
opposed to undermining them.
Mr. Burgess. Thank you, Mr. Chairman. I will yield back,
and I thank the gentleman from New Jersey for yielding the
time.
Mr. Pitts. The Chair thanks the gentleman. We have a
unanimous-consent request.
Mr. Pallone. Mr. Chairman, I ask unanimous consent to
submit for the record various statements from the United Steel
Workers, California Health Advocates, testimony on behalf of
the UAW, a statement from the National Association of Home Care
and Hospice, and a statement from the National Committee to
Preserve Social Security and Medicare, and I believe you have
all these.
Mr. Pitts. Yes. Without objection, so ordered.
[The information appears at the conclusion of the hearing.]
Mr. Pitts. That concludes the round of questioning. We have
some members who have additional questions. I remind members
they have 10 business days to submit any additional questions
for the record, and I ask the witness to please respond to the
questions promptly.
Thank you very much for your time, your testimony this
morning. And members should submit their questions by the close
of business on Thursday, April 25.
Thank you, and without objection, the subcommittee is
adjourned.
[Whereupon, at 11:39 a.m., the subcommittee was adjourned.]
[Material submitted for inclusion in the record follows:]
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