[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]
A 21ST CENTURY MEDICARE: BIPARTISAN
PROPOSALS TO REDESIGN THE PROGRAM'S
OUTDATED BENEFIT STRUCTURE
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON HEALTH
OF THE
COMMITTEE ON ENERGY AND COMMERCE
HOUSE OF REPRESENTATIVES
ONE HUNDRED THIRTEENTH CONGRESS
FIRST SESSION
__________
JUNE 26, 2013
__________
Serial No. 113-59
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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........................................... 2
Hon. Frank Pallone, Jr., a Representative in Congress from the
State of New Jersey, opening statement......................... 4
Hon. Henry A. Waxman, a Representative in Congress from the State
of California, opening statement............................... 5
Witnesses
Katherine Baicker, Professor, Health Economics, Department of
Health Policy and Management, Harvard School of Public Health.. 6
Prepared statement........................................... 9
Answers to submitted questions............................... 113
Patricia Neuman, Senior Vice President, The Henry J. Kaiser
Family Foundation.............................................. 15
Prepared statement........................................... 17
Answers to submitted questions............................... 116
Thomas Miller, J.D., Resident Fellow, The American Enterprise
Institute...................................................... 34
Prepared statement........................................... 36
Answers to submitted questions............................... 118
Submitted Material
Statement of American Federation of State, County and Municipal
Employees, submitted by Mr. Pallone............................ 84
Statement of California Health Advocates, Center for Medicare
Advocacy, and Medicare Rights Center, submitted by............. 88
Statement of National Association for Home Care & Hospice,
submitted by Mr. Pallone....................................... 99
Statement of American Association of Retired Persons, submitted
by Mrs. Christensen............................................ 110
A 21ST CENTURY MEDICARE: BIPARTISAN PROPOSALS TO REDESIGN THE PROGRAM'S
OUTDATED BENEFIT STRUCTURE
----------
WEDNESDAY, JUNE 26, 2013
House of Representatives,
Subcommittee on Health,
Committee on Energy and Commerce,
Washington, DC.
The subcommittee met, pursuant to call, at 9:59 a.m., in
room 2322 of the Rayburn House Office Building, Hon. Joe Pitts
(chairman of the subcommittee) presiding.
Present: Representatives Pitts, Burgess, Shimkus,
Blackburn, Lance, Cassidy, Guthrie, Bilirakis, Barton, Pallone,
Dingell, Engel, Green, Barrow, Christensen, Castor, and Waxman
(ex officio).
Staff present: Clay Alspach, Chief Counsel, Health; Sean
Bonyun, Communications Director; Matt Bravo, Professional Staff
Member; Paul Edattel, Professional Staff Member, Health; Julie
Goon, Health Policy Advisor; Sydne Harwick, Legislative Clerk;
Katie Novaria, Professional Staff Member, Health; Monica Popp,
Professional Staff Member, Health; Andrew Powaleny, Deputy
Press Secretary; Chris Sarley, Policy Coordinator, Environment
and Economy; Heidi Stirrup, Health Policy Coordinator; Alli
Corr, Democratic Policy Analyst; Amy Hall, Democratic Senior
Professional Staff Member; 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. This subcommittee will come to order. The chair
recognizes himself for 5 minutes for an opening statement.
Nearly 50 million seniors rely on the Medicare program for
their health care, and that number may grow to 63 million
Americans by 2020 and 81 million by 2030. Medicare's
traditional benefit design mirrored the private insurance
products, namely Blue Cross Blue Shield plans, available in the
mid-1960s. While the private insurance market has undergone
significant changes in the last 50 years, Medicare's
traditional benefit structure has remained fundamentally the
same.
Unlike most private insurance today, which has a single
deductible for all medical services, traditional Medicare has
separate deductibles and copayments for Part A, hospital
services, and Part B, physician and outpatient services. The
program also charges separate copayments for Part A and Part B
services.
Today, seniors face great uncertainty about what their out-
of-pocket costs will be. Generally, Medicare requires a 20
percent copayment, but without knowing the total cost of a
doctor's visit, a hospitalization, or a procedure or test,
seniors don't know what that 20 percent means in dollars until
after a service is delivered. With no cap on out-of-pocket
spending a beneficiary can incur, and confusion about the lack
of coordination between Parts A and B, nine out of ten Medicare
beneficiaries purchase supplemental insurance.
On April 11, 2013, the subcommittee held a hearing titled
``Strengthening Medicare for Seniors: Understanding the
Challenges of Traditional Medicare's Benefit Design,'' at which
MedPAC Chairman Glenn Hackbarth discussed ways to modernize and
improve Medicare's traditional benefit design. As I said at
that hearing, everything about our health care system has
changed dramatically since 1965. Today's standards of care, and
the tests, treatments, and drugs we have access to were not
even dreamed of when the program was created.
Our expectations have changed as well. Fifty years ago,
insurance protected us from catastrophic hospital costs
incurred as a result of diseases, which were most likely fatal.
With the medical breakthroughs we have experienced in the
ensuing decades, many of those diseases have become chronic
conditions and we expect our insurance to help us manage them
accordingly. Seniors deserve an insurance product that reflects
the current health care system, not that of the last century.
Today's hearing builds on MedPAC's recommendations, by
bringing in policy experts to further explore how we can make
the program work better for our seniors.
I would like to thank our witnesses for being here today. I
look forward to their comments on some of the reforms we
discussed at the previous hearing, such as combining Parts A
and B under a unified cost-sharing structure, instituting a cap
on out-of-pocket spending to protect beneficiaries from the
threat of medical bankruptcy, incentivizing high-value care,
and others.
Thank you, and I yield the remainder of my time to
Representative Burgess.
[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, and that number may grow to 63 million
Americans by 2020 and 81 million by 2030.
Medicare's traditional benefit design mirrored the private
insurance products, namely Blue Cross Blue Shield plans,
available in the mid-1960s. While the private insurance market
has undergone significant changes in the last fifty years,
Medicare's traditional benefit structure has remained
fundamentally the same.
Unlike most private insurance today, which has a single
deductible for all medical services, traditional Medicare has
separate deductibles and copayments for Part A, hospital
services, and Part B, physician and outpatient services. The
program also charges separate copayments for Part A and Part B
services.
Today, seniors face great uncertainty about what their out-
of-pocket costs will be. Generally, Medicare requires a 20%
copayment--but without knowing the total cost for a doctor's
visit, a hospitalization, or a procedure or test, seniors don't
know what that 20% means in dollars until after a service is
delivered.
With no cap on out-of-pocket spending a beneficiary can
incur, and confusion about the lack of coordination between
Parts A and B, nine out of ten Medicare beneficiaries purchase
supplemental insurance.
On April 11, 2013, the Subcommittee held a hearing entitled
``Strengthening Medicare for Seniors: Understanding the
Challenges of Traditional Medicare's Benefit Design,'' at which
MedPAC Chairman Glenn Hackbarth discussed ways to modernize and
improve Medicare's traditional benefit design.
As I said at that hearing, everything about our health care
system has changed dramatically since 1965. Today's standards
of care, and the tests, treatments, and drugs we have access to
were not even dreamed of when the program was created.
Our expectations have changed, as well. Fifty years ago,
insurance protected us from catastrophic hospital costs
incurred as a result of diseases which were most likely fatal.
With the medical breakthroughs we've experienced in the ensuing
decades, many of those diseases have become chronic conditions,
and we expect our insurance to help us manage them accordingly.
Seniors deserve an insurance product that reflects the
current health care system, not that of the last century.
Today's hearing builds on MedPAC's recommendations, by
bringing in policy experts to further explore how we can make
the program work better for our seniors.
I'd like to thank our witnesses for being here today. I
look forward to their comments on some of the reforms we
discussed at the previous hearing, such as combining Parts A
and B under a unified cost-sharing structure, instituting a cap
on out-of-pocket spending to protect beneficiaries from the
threat of medical bankruptcy, incentivizing high-value care,
and others.
Thank you, and I yield the remainder of my time to Rep. --
--------------------------------.
Mr. Burgess. I thank the chairman for yielding. I thank you
for having the hearing, and I thank our witnesses for being
here today.
In its current form, Medicare has made some promises that
may be very difficult to keep in just a few short years. It
shouldn't be a surprise, since we expect the program designed
in 1965 to adapt to the needs and usage patterns of
beneficiaries in the 21st century.
Enrollment in Medicare could reach well over 60 million
people by 2020. In 2013, Medicare costs are estimated to be a
little over 3 \1/2\ percent of GDP. That will be almost 6
percent in 2035, so certainly a substantial increase. The
primary reason for the increase is the demographic shift--there
are more people in the program, baby boomers leave the
workforce and join the rolls of retirees. We should undertake
an open-minded review of the current benefit design in Medicare
and ways to reform it in a way that reflects the needs and
expectations of today's seniors. We also must adapt to the
needs of future beneficiaries. So let us have that conversation
about innovative payment and care programs. Let us empower
patients and providers by promoting quality measures that are
meaningful to consumers that they can understand. Let us offer
incentives in the program to promote better organized,
coordinated health care delivery and payment systems.
Many of these are tenets guiding our discussions around
replacing the Sustainable Growth Rate formula, and that is a
good thing, but we must move toward a system that allows all
beneficiaries a choice between improved fee-for-service,
Medicare Advantage, alternative payment models such as ACOs
bundling. Just as each provider should be able to flourish, we
must allow patients a choice, a meaningful choice, in how they
receive their care.
I thank the chairman for the recognition and I will yield
back the time.
Mr. Pitts. The chair thanks the gentleman and now
recognizes the ranking member of the subcommittee, Mr. Pallone,
5 minutes for an opening statement.
OPENING STATEMENT OF HON. FRANK PALLONE JR, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF NEW JERSEY
Mr. Pallone. Thank you, Chairman Pitts, and thank you for
holding this hearing today.
Improving and strengthening Medicare so that the program
can serve as a reliable resource for seniors and the disabled
for years to come is critically important. We must continue to
examine ways to keep the program solvent as the number of
beneficiaries grows from an aging baby boomer population, and
we have already made important progress in this area with the
delivery-system reforms in the Affordable Care Act.
According to the annual Medicare's trustee's report,
Medicare spending growth is down and is projected to continue
to have slower growth than the overall economy for the next
several years, and I am committed to exploring ways to continue
moving in this direction and modernizing Medicare so that
beneficiaries today and in the future receive the care they
need in an efficient and affordable manner.
Seniors and individuals with disabilities rely on Medicare
to access needed health services. These individuals are some of
the country's poorest and sickest. Medicare beneficiaries, half
of whom have an annual income under $22,500, spend
disproportionately more on health care than the general
population. As we consider Medicare benefit redesign, we must
protect and improve this population's access to quality,
accordable health care.
Now, reform should provide greater predictability and
security for beneficiaries. For years, my colleagues and I have
explored the idea of establishing out-of-pocket limits to
protect seniors and individuals with disabilities from
catastrophic medical expenses. This is also an opportunity to
improve the Medicare benefit design, making it less
complicated. The fact that Part A and Part B have such
divergent cost sharing and deductibles can seem arbitrary and
confusing to beneficiaries. We should examine ways to move away
from this model towards one that is more streamlined. Yet we
must ensure that any changes that we make to restructure
Medicare do not come at the expense of beneficiaries' health or
financial security. Any reform, particularly proposals that
include changes in beneficiary cost sharing, must take into
consideration how the changes will impact a vulnerable
beneficiary population. For example, while reducing utilization
of unnecessary health services that welcome change, Medicare
beneficiaries are not always able to distinguish between
unnecessary and necessary care. When faced with higher costs,
some beneficiaries will simply reduce their use of services
across the board. Older, sicker seniors in particular are more
likely to be passive in their care decision-making than the
general population and rely on their providers to steer them
toward recommended use. That is why we must continue to support
comprehensive approaches that help move our health care system
to a more value-based system including provider payment models
that support value over volume, and the Affordable Care Act
laid the groundwork for this, and we must continue down that
path.
So I look forward to hearing from our witnesses today about
their ideas to improve Medicare's benefit structure and look
forward to working with my colleagues towards a system that
incentivizes high-quality and high-value care while building in
protections for low-income and vulnerable populations. Thank
you, Mr. Chairman.
Mr. Pitts. The chair----
Mr. Pallone. Mr. Chairman, I have three statements for the
record that if I could submit--I ask unanimous consent to enter
into the record a statement from the American Federation of
State, County and Municipal Employees, AFSCME, second, a joint
statement from the California Health Advocate Center for
Medicare Advocacy and Medicare Rights Center, and lastly, the
National Association for Home Care and Hospice.
Mr. Pitts. Without objection, so ordered.
Mr. Pallone. Thank you.
[The information appears at the conclusion of the hearing.]
Mr. Pitts. We have more than one subcommittee going at the
same time, so members will be in and out today. I apologize for
that.
At this time the chair recognizes the ranking member of 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. I appreciate your
holding this hearing.
The Medicare program been critical to ensuring the health
and financial security of seniors and disabled Americans since
its inception, and while I know we agree that there are a
number of ways we can improve quality and efficiency in
Medicare, we should also work on broader health care delivery
system reform. I hope we also agree that we must preserve the
strengths of the program and its protections for the vulnerable
populations that depend on it.
It is critical, as we explore this topic, that we are
mindful of who the Medicare beneficiaries are. Two recent
reports looking at the supplemental poverty measure-one by
Kaiser Family Foundation and the other by the Economic Policy
Institute-remind us of the financial vulnerability of seniors
across the country. Nationally, nearly half of all seniors live
with incomes below twice the poverty threshold. In my home
State of California, the number is 56 percent, with 20 percent,
or one in five seniors, living in poverty. Any proposal to
redesign Medicare that doesn't protect these vulnerable seniors
or looks to achieve program savings by shifting costs to
beneficiaries is not one that I can endorse.
I am glad to see that a key element of the models proposed
by both Kaiser and MedPAC is that they are cost-neutral to
beneficiaries overall. At the same time, I understand that
there will inevitably be winners and losers within the Medicare
population.
I can't emphasize enough the critical importance of
ensuring that the full impact, both economically and in health
term, is considered across the population of beneficiaries. In
our health care system today, among both private and public
payers, there is a lack of alignment between cost sharing and
value. As Dr. Baicker has indicated in some of her work, cost
sharing is a blunt tool that doesn't help beneficiaries
distinguish between high-value and low-value services. In the
same way that the Affordable Care Act removed cost sharing for
age-appropriate preventive services, we know from the private
market that reducing cost sharing for prescriptions and follow-
up care for people with chronic medical problems improves
adherence and health outcomes.
There is a lot of interest in eliminating first-dollar
coverage as a strategy to reduce unnecessary utilization. Yet
we know that in poorer, sicker populations, like those in
Medicare, this kind of cost sharing reduces both necessary and
unnecessary care. Reducing necessary care and having patients
defer appropriate outpatient care and end up in emergency
departments or admitted to the hospital is not the outcome we
are looking to achieve. More value-based benefit design must be
tailored to the beneficiaries. For Medicare, that means
building in incentives for high-value care and ensuring
protections for low-income and other vulnerable members.
In closing, I believe there are a number of ways to improve
the benefit design in Medicare that are accountable to both
beneficiaries and taxpayers. In the process, we must continue
to protect our most vulnerable seniors, and we must make sure
that we are not using program redesign as a pretext for
achieving program savings by shifting costs onto the
beneficiaries. Thank you, Mr. Chairman.
Mr. Pitts. The chair thanks the gentleman. That concludes
our opening statements.
We have one panel today. On our panel we have today Dr.
Katherine Baicker, Professor of Health Economics, Department of
Health Policy and Management, Harvard School of Public Health;
Dr. Patricia Neuman, Senior Vice President of the Henry J.
Kaiser Family Foundation; and Mr. Thomas Miller, Resident
Fellow, American Enterprise Institute.
Thank you all for coming today. Your written testimony will
be entered into the record. You will be given 5 minutes each to
summarize your testimony, and at this point we will recognize
Dr. Baicker for her opening statement.
STATEMENTS OF DR. KATHERINE BAICKER, PROFESSOR, HEALTH
ECONOMICS, DEPARTMENT OF HEALTH POLICY AND MANAGEMENT, HARVARD
SCHOOL OF PUBLIC HEALTH; DR. PATRICIA NEUMAN, SENIOR VICE
PRESIDENT, THE HENRY J. KAISER FAMILY FOUNDATION; AND THOMAS
MILLER, J.D., RESIDENT FELLOW, THE AMERICAN ENTERPRISE
INSTITUTE
STATEMENT OF KATHERINE BAICKER
Ms. Baicker. Chairman Pitts, Ranking Member Pallone,
members of the committee, I am really honored to have the
opportunity to talk with you today about this crucial topic of
improving Medicare's benefit design, and this offers the
opportunity to not only improve the benefit that current
enrollees receive but ensures fiscal stability for generations
to come.
So I wanted to spend a minute talking about balancing two
competing factors. I am an economist. I have two hands. I
always use that. That is insurance and incentives. The
fundamental goal of an insurance product is not only to get
people access to needed care but to protect them from financial
ruin. Seniors shouldn't have to spend their live savings if
they fall ill and their children shouldn't fall into financial
ruin to care for an elderly, ailing parent. So it is vital that
Medicare offer that kind of financial protection that any good
insurance product should.
But balanced against that are the incentives that any
insurance product creates. When you subsidize care, people
consume more of it. We have decades of research that shows that
even though it is not intuitive that people consume health care
that way, when the price of health care goes down, people
consume more and some of that is really valuable care but
incrementally it gets less and less valuable to the point that
it might even have negative value. So we need to balance those
two competing interests in designing a smart insurance product.
The question is, how does Medicare do on that balance, and
I fear that the answer is right now, not so well. It does not
offer vital financial protections. Seniors without supplemental
plans face potentially unlimited out-of-pocket costs, as you
mentioned, that is not a good insurance product for them. On
the other hand, if seniors get supplemental insurance coverage,
they then go from having too little insurance to potentially
too much where their care is subsidized on a first-dollar way
that encourages care of potentially questionable value. We know
that in any given year, about 15 percent of seniors if they
don't have supplemental coverage face out-of-pocket expenses of
more than $2,500 but over 10 years more than half of enrollees
in Medicare without supplemental coverage would face more than
$2,500 in expenses. The typical Social Security retiree's
income is less than $20,000, so that is a huge amount of money
for someone with Medicare. That is why 90 percent of them, as
you noted, are likely to purchase that supplemental coverage.
The challenge is that the extra care that the supplemental
coverage creates really falls on the shoulders of the Medicare
program. The supplemental coverage only pays for part of it. If
an enrollee goes to the hospital one more time than is
necessary for good care, that is not good for the enrollee who
does not want to be in the hospital but it is also bad for the
Medicare program because the program is shouldering most of
those costs. So an ideal system would provide beneficiaries
with the kind of protection they needed through the Medicare
program and then they wouldn't need to purchase the
supplemental coverage that raises the cost of the Medicare
program and threatens its financial viability for future
generations.
So how do we improve the benefit design? As Representative
Waxman noted, crude cost sharing can do as much harm as good.
Nuanced cost sharing, I think, has the potential to improve the
quality and value of care that seniors get while reducing
unnecessary or low-value care that burdens the current system,
and that means that cost sharing for different services should
be different. It should be value-based cost sharing where care
that is of high value should come with little or no cost
sharing at all, and cost sharing should be ratcheted up
depending on how the value of care diminishes. Care that has
very little health benefit for seniors should come with a
substantial copayment. It is important to protect low-income
seniors from financial risk exposure. Again, it is an insurance
product. You can't expose people to financial ruin, but that
cost sharing could be based on income as well.
The last point I would like to leave you with is that
looking across silos would very much improve the balance
between insurance and affordability for the Medicare program,
and by that I mean, care consumed in one setting--
pharmaceuticals, doctor's office visits--has implications for
care consumed in other settings--hospitalizations, emergency
department visits. Patients need to have the right incentives
to consume care in the setting that produces the best health
value for them. Providers need to think across silos.
Physicians should be thinking what are the downstream
consequences for emergency department visits, and insurance
products need to look across silos. If subsidizing a
physician's office visit keeps a patient out of the emergency
room, the insurer should be working in a system that encourages
that because that is good for the patient and it is good for
costs. So improving the program in this way would have far-
ranging implications. It would improve the value for
beneficiaries, it would improve the fiscal stability of the
system. It also has the potential to improve the care consumed
by all patients in the Medicare system and privately insured
patients. There are spillover effects. If physicians and
hospitals do a better job for our Medicare beneficiaries, all
patients will benefit from that higher standard of care.
Thank you for this opportunity, and I look forward to
answering your questions.
[The prepared statement of Ms. Baicker follows:]
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Mr. Pitts. The chair thanks the gentlelady.
Dr. Neuman, you are recognized for 5 minutes for an opening
statement.
STATEMENT OF PATRICIA NEUMAN
Ms. Neuman. Thank you, Chairman Pitts and Ranking Member
Pallone and distinguished subcommittee members. I appreciate
the opportunity to be here with you this morning to talk about
restructuring the Medicare benefit design.
Medicare provides highly valued health insurance for more
than 50 million elderly and disabled Americans, many of whom
have significant medical needs and modest incomes. Four in 10
have three chronic conditions, one in four has a mental or
cognitive impairment such as Alzheimer's disease, and half live
on an income of less than $23,000. Medicare, as we have heard,
has a very complex benefit design with multiple deductibles,
variable coinsurance per service, and no limit on out-of-pocket
spending.
To ease concerns about unpredictable and unaffordable
medical bills, most have some form of supplemental insurance.
Nonetheless, elderly and disabled people in Medicare tend to
have relatively high out-of-pocket health care expenses. Health
expenses including premiums consume three times the share of
Medicare household budgets as it does for non-Medicare
household budgets, 15 percent versus 5 percent. Half of all
Medicare beneficiaries with incomes below $20,000 spend at
least 20 percent of their income on health-related expenses.
The idea of simplifying Medicare benefits and strengthening
protections for seniors with catastrophic expenses has been one
that has been under discussion for years, for decades, and has
emerged more recently in the context of deficit reduction
discussions. Modifications to the Medicare benefit structure
could be designed to achieve any number of goals. Reforms could
be designed to generate Medicare savings, to streamline
benefits, to add catastrophic protections, to maintain the
overall value of the Medicare benefit package while making
improvements. They could also be designed to add greatly
predictability for beneficiaries, to make Medicare more
affordable for people with limited incomes, to reduce the need
for supplemental coverage, and to nudge beneficiaries toward
high-value services. But achieving all of these important goals
at the same time is a very high bar.
To understand the potential implications of such proposals
for beneficiaries and program spending, the Kaiser Family
Foundation with Actuarial Research Corporation examined an
approach specified by the Congressional Budget Office in 2011
that included a combined Part A and B deductible at $550,
uniform coinsurance at 20 percent, and a new $5,500 cost-
sharing limit. This was not a Kaiser Family Foundation
proposal; it was the CBO budget option that we analyzed. This
option, if fully implemented in 2013, would be expected to
reduce out-of-pocket spending for a small share of the Medicare
population, generally those who are quite sick, but 71 percent
would be expected to face higher costs than they would under
the current benefit design in this year. Seniors in relatively
good health without an inpatient stay would see their
deductible more than triple from $147 under current law to $550
if it were the combined deductible. Yet 5 percent of
beneficiaries would be expected to have lower costs than they
would. Again, these are sick beneficiaries, people who have
inpatient stays, post-acute care, the people who would greatly
benefit from a limit on out-of-pocket spending, and over a
longer term, a larger share of the Medicare population would
benefit from a limit on out-of-pocket spending. MedPAC and the
Kaiser Family Foundation recently released an analysis that
shows 32 percent of beneficiaries in traditional Medicare would
have cost-sharing liabilities that reach or exceed $5,000 over
a 10-year period.
Benefit redesign proposals can be modified to achieve
different objectives, resulting in tradeoffs for beneficiaries
for program spending and for other payers. Lowering the cost-
sharing limit, for example, from, say, $5,500 to $4,000 would
help a larger share of the Medicare population but also reduce
the Medicare savings. The reverse would also be true. Raising
cost sharing for specific services such as home health care
would increase Medicare savings but also shift costs onto
seniors and increase the risk that at least some would go
without necessary care.
Strengthening financial protections for low-income
beneficiaries would make the redesign more affordable for
seniors with modest incomes but could also erode the Medicare
savings unless costs are offset in some fashion. An example of
a benefit design that does introduce low-income protections was
included in the bipartisan Policy Center initiative that was
released earlier this year.
Some of the recent benefit design proposals also recommend
restrictions or penalties for supplemental coverage, Medigap or
employer-sponsored retiree health plans. Adding restrictions to
first-dollar Medigap would greatly increase Medicare savings
according to CBO, possibly because Medigap enrollees would use
fewer services when confronted with higher cost sharing. A
premium surcharge would increase savings by raising revenues
from seniors who choose to pay the fee in their Medigap or
retiree plans but also by reducing utilization among those who
respond to the new fee by dropping their coverage, and
presumably that would be more likely to be people with more
modest incomes.
In sum, restructuring Medicare benefit design presents a
really important opportunity to addressing longstanding
concerns. However, simultaneously achieving the multiple goals
of various benefit design proposals is a challenge. Protections
for middle- and low-income seniors could be incorporated into a
benefit design proposal but may come at a cost and could be
compromised if savings are a high priority.
I thank you, Mr. Chairman, and I look forward to your
questions.
[The prepared statement of Ms. Neuman follows:]
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Mr. Pitts. The chair thanks the gentlelady and now
recognizes the gentleman, Mr. Miller, 5 minutes for an opening
statement.
STATEMENT OF THOMAS MILLER
Mr. Miller. Thank you, Chairman Pitts, Ranking Member
Pallone and members of the subcommittee for the opportunity to
speak this morning on redesign of Medicare's outdated benefit
structure.
Restructuring the splintered cost-sharing requirements of
the traditional Medicare fee-for-service program, separate
silos for Part A and B if not D, provides a potential policy
reform tool that could achieve the twin goals of saving
taxpayer dollars while improving the most essential risk
protection benefits for elderly beneficiaries.
By increasing Medicare enrollees' cost consciousness
regarding more disciplinary initial dollar health care choices,
a coordinated set of changes in traditional Medicare's
deductible and coinsurance provisions could help reduce current
and future levels of Medicare spending. Some of those savings
from increased cost sharing at the front end of Medicare
coverage then could be used to provide better stop-loss
protection against larger catastrophic risks as well as to
substantially limit if not eliminate the need and demand for
supplemental insurance that imposes excess costs on basic
Medicare coverage.
However, these fiscal and risk protection benefits must
compete with and can complement other policy considerations.
They include improved integration of health care delivery,
realigned incentives to improve value-based health care, more
effective competition between traditional Medicare and private
Medicare Advantage plans, and continued protection of the most
vulnerable low-income beneficiaries, and this complex balancing
act, hard enough in theory, must remain administratively
feasible in practice.
A number of cost-sharing reform proposals in recent years
hit one or more of those target objectives to varying degrees.
My written testimony suggests some different ways to set clear
policy priorities, accommodate necessary exceptions, and still
maneuver through the complexities of implementation and
administration.
To summarize, traditional Medicare remains a largely
unmanaged fee-for-service program that needs to rely on
increased but more coherent cost sharing as an important tool
though not the only one to help control its excess costs.
Hence, overcoming the political cross-pressures that resist any
such changes must be worth the trouble by producing significant
net budget savings rather than a budget-neutral rearrangement
of the chairs on the spending deck.
The highest priority should be to protect all seniors
against health-related financial risks that they cannot bear on
their own. That is not equivalent to hiding from them as many
health care costs as possible through third-party payments.
Such stop-loss protection, predominant in private insurance
plans for decades, is long overdue for traditional Medicare,
but in this case, it should be income related rather than set
as the same dollar amount for every beneficiary. This major
risk approach to Medicare cost sharing should consider the
alternative of relying more on a higher rate of coinsurance
across a wider range of initial health spending and less on
deductibles and lump-sum amounts. This would extend the
corridor of cost sensitivity and engage more Medicare
beneficiaries in monitoring the real costs of their subsidized
care yet temper the full impact of cost sharing in deciding
whether to seek any care at all. Amounts of coinsurance-based
cost sharing also reset automatically as health care costs
rise, and hopefully fall someday.
The cleaner and less complicated way to deal with the
distortions of supplemental insurance for traditional Medicare
enrollees is to improve that program's basic risk protection
directly and then set regulatory boundaries on what either
individual Medigap plans or employer-sponsored retiree plans
can cover. We don't need another new tax on those plans piled
on top of the existing debris of dead-weight distortions
throughout the tax code. Let us subsidize non-poor seniors less
instead of taxing them more.
Of course, the poorest seniors must continue to receive
special protection against health care cost burdens.
Supplemental Medicaid coverage for dual-eligibles would remain
in place. More attention should be paid to restructuring
current Medicare savings programs for other low-income seniors
in a better integrated manger, and in some cases, supplementing
them, particularly for those facing high cost conditions.
Evidence-based preventive health benefits also should be
exempted from expanded cost sharing. Efforts to improve health
information and navigational assistance for all beneficiaries
but particularly those with cognitive impairments need much
more attention and budget support.
The particular parameters for restructured cost sharing
suggested in my written testimony are merely suggestive
starting points but they can help lead us to a reformed
Medicare program that relies more on income-related cost-
consciousness, enhances true insurance protection against
catastrophic risks, and reduces the likelihood of rising
premiums, steeper taxes and hidden benefit cuts.
Thank you. I look forward to your questions.
[The prepared statement of Mr. Miller follows:]
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Mr. Pitts. The chair thanks the gentleman, and we will now
begin questioning. I will recognize myself for 5 minutes for
that purpose.
The first series of questions are yes or no, and I will ask
all of you these questions. So Dr. Baicker, I will start with
you. Is it fair to say that you all agree the traditional
Medicare fee-for-service benefit design may be outdated and
overly complex for beneficiaries? Yes or no.
Ms. Baicker. I agree.
Mr. Pitts. Dr. Neuman?
Ms. Neuman. Yes.
Mr. Pitts. Mr. Miller?
Mr. Miller. Yes.
Mr. Pitts. All right. Second question. Is it also fair to
say that the program is need of reform to ensure catastrophic
protection for beneficiaries, increased incentives for
beneficiaries to seek value-based providers and services and
streamline benefits to reflect a modernized benefit structure?
Yes or no.
Ms. Baicker. Yes.
Mr. Pitts. Dr. Neuman?
Ms. Neuman. Yes, depending on how it is done.
Mr. Pitts. Mr. Miller?
Mr. Miller. Yes, in general.
Mr. Pitts. All right. Is it also fair to say that reforms
on such a topic have been discussed for decades by policy
experts from both sides of the aisle and political spectrum?
Yes or no.
Ms. Baicker. Yes.
Mr. Pitts. Dr. Neuman?
Ms. Neuman. Yes.
Mr. Miller. We have problems with political markets
clearing on them. Yes.
Mr. Pitts. All right. Finally, is it also fair to say that
given a Medicare solvency crisis, approaches gradually but
inevitably pressure to restructure the program's traditional
benefit design will only increase? Yes or no.
Ms. Baicker. Yes.
Mr. Pitts. Dr. Neuman?
Ms. Neuman. Yes.
Mr. Pitts. Mr. Miller?
Mr. Miller. Yes. As the pressures increase, we have to
think about how we want to respond to them.
Mr. Pitts. All right. Dr. Baicker, given that today
approximately 70 percent of Medicare beneficiaries are enrolled
in the traditional fee-for-service benefit with the remaining
beneficiaries finding greater value in the Medicare Advantage
program, wouldn't a modernization of the traditional benefit
design ultimately help the majority of current Medicare
beneficiaries navigate a very complex cost-sharing structure
and effectively avoid the implications of catastrophic illness
cost?
Ms. Baicker. Yes. I think modernizing the design would
allow beneficiaries to consume the care that was right for them
in the right setting and from the right provider, and that
added flexibility could drive towards higher-value care for all
beneficiaries. I think they should have choices about these
things.
Mr. Pitts. Mr. Miller, do you want to comment?
Mr. Miller. Cleaner, clearer signals are important. We may
in trying to adjust for everything make the system even more
complex.
Mr. Pitts. All right. Dr. Baicker, you note in your
testimony that cost sharing should be modeled on a value-based
framework whereby cost sharing is lowest for services that are
most effective at improving health care outcomes. Could you
please elaborate? Explain from your experience in looking at
private-market options where cost sharing has worked most
effectively.
Ms. Baicker. Let me give an example from the care of
diabetic enrollees who have really high risk of downstream
adverse cardiovascular events, and getting them to adhere to
their medications, getting them to meet with their physician
regularly can improve their health dramatically and reduce
downstream costs. There are a lot of innovative ways you can
try to get diabetics to be more adherent to best practices, and
in the absence of innovation in different types of
interventions, we see remarkably low adherence rates to
lifesaving treatments that patients just have trouble on their
own enforcing, so innovative cost structures where maybe
patients even get subsidized to take their medications or where
they don't meet with a physician all the time, they sometimes
meet with a community care person who coordinates across
different patients to provide support for them to take their
medications. I think we have seen that the crude tools are
insufficient, even for a population where there is effective
care available and the downstream consequences are potentially
catastrophic for their health, and we see that kind of
innovation in the private sector and it is very hard for the
current Medicare fee-for-service structure to mimic that kind
of innovation.
Mr. Pitts. Dr. Neuman, do you want to comment on that
question?
Ms. Neuman. I would agree with everything. I think the
challenge is, who determines what is high value and what is low
value, and that is really a major issue in terms of figuring
out who would make these determinations. An easy example to
think about in terms of value might be generic versus brand for
equivalent products, but when you get to the more complex
questions involving medical care, these decisions are a little
bit trickier to resolve. So I think that is a particularly good
example. I know that in the MedPAC recommendation, they talked
about delegating this authority, I believe to the Secretary,
because they were not prepared to specify when they made their
recommendation what exactly is high value and what is not.
Mr. Pitts. Mr. Miller?
Mr. Miller. This is a perpetual struggle in trying to get
the benefits of what we point to in private-sector private
insurance innovation and trying to do that through a
comprehensive public program which has a lot of difficulties in
making those types of fine-tuned adjustments and being
accountable for it. We have got a one-time shot to get the
basic shell of a structure for Medicare benefits better, but I
think we can't legislate every single particular in that
regard. I would suggest that although most of these proposals
say well, we will just give the Secretary some discretion, it
will all work out, there will be some rulemaking, you need to
have some evidentiary boundaries as to exactly how far that is
going to go. Most of the examples of value-based insurance
design tend to be one-sided. We know how to add benefits that
make everybody happy and feel better. We have a lot more
problems in taking them away. So you could impose somewhat of a
budget neutrality constraint saying for everything you need to
put on, if it is going to pay off, something else has to not
pay off as well, and that is one way to get it a little more
even-handed rather than a one-sided approach.
Mr. Pitts. The chair thanks the gentleman and now
recognizes the ranking member, Mr. Pallone, 5 minutes for
questioning.
Mr. Pallone. Thank you, Mr. Chairman.
I wanted to ask Dr. Neuman, many of the proposals for
redesigning Medicare's benefit package attempt to balance
program simplification through combined deductibles and more
predictable out-of-pocket expenses with efforts to improve the
program value and efficiency. Many of us would agree that there
is a need to simplify the structure of Medicare benefits in
ways that make it more understandable and user friendly for
beneficiaries and provide them with better protections by
providing out-of-pocket spending caps like private insurance
plans.
Your analysis clearly shows that while a small number of
beneficiaries would benefit from their restructured design, a
much larger number would see increased out-of-pocket expenses.
Can you talk about how with any of these plans there will be
inevitably winners and losers?
Ms. Neuman. Well, there are 50 million people on Medicare,
and everybody has a different set of health care experiences
and health care needs and supplemental insurance, which varies
across people, and when you change the benefit design,
depending on what services people use in a given year, their
out-of-pocket costs are going to differ than what they would
have been under current law. So in sort of the prototype policy
that we looked at, the high out-of-pocket expense of course
protects a small share of people. The high out-of-pocket limit
protects a very small share of the Medicare population with
high spending. That costs. When you add a benefit to Medicare,
that increases Medicare spending, and part of the new costs are
offset by the higher deductible that so many more people on
Medicare will pay because 80 percent of people don't go to the
hospital, so 80 percent of people don't incur an inpatient
deductible. So for the majority of people who don't go to the
hospital, they would pay a higher deductible and so they would
see their deductibles increase if this were to be imposed, for
example, this year.
Mr. Pallone. OK. Now, how can we design a plan that is
mindful of the financial insecurity of the large number of
Medicare beneficiaries and builds in adequate protections?
Ms. Neuman. Well, I think it is tricky if the goal is to
produce savings, so in an environment where the overall
objective is to produce Medicare savings, it could be quite
challenging to build in protections and to lower cost-sharing
risk for people with modest incomes. To protect people with
modest incomes, one might think about, for example, the
Bipartisan Policy Center's initiative which federalizes cost-
sharing assistance for people with incomes between 100 and 150
percent of poverty. This is building on the Part D model for
low-income subsidies, but adding protections also adds to cost,
so to do this, one would need to find a way to offset those
costs in some fashion.
Mr. Pallone. OK. Dr. Baicker, I know your research has
looked at a lot at value-based insurance design, and one of the
points you make is that cost sharing as it currently is used in
the insurance industry is a blunt tool. It reduces health care
spending but in a way that doesn't differentiate between high-
and low-value care. It also doesn't take into account the
diversity of the beneficiary population who based on their
financial and health status are likely to respond differently.
So unfortunately, the notion of creating incentives for
beneficiaries to make better decisions is often looked at only
through the narrow lens of increased cost sharing. Can you talk
about ways other than increased cost sharing that benefits can
be structured to encourage use of appropriate high-value
services and discourage the use of unnecessary services and how
important is it to ensure there are not barriers to high-value
care?
Ms. Baicker. I think you raise a really important point,
that cost sharing on the patient side has some potential for
harms, especially if it is implemented for all patients in the
same way, and on the patient side, the ideal cost sharing might
depend not just on the service or the medication or the setting
but also on the particular patient. So a cholesterol-lowering
drug for a diabetic patient is higher value than that
cholesterol-lowering drug for a different patient, and it is
very hard to write down a set of rules for specific procedures
or specific medications and call them high value and others not
when it really varies patient to patient. So it would have to
be a much more flexible design on the patient side, which we
have seen some experimentation with in the private sector but
we are nowhere near achieving the possibilities.
On the provider side, I think one could also approach
promoting higher-value care by making payments look across
silos, and that means not paying more for care in one setting
than another setting when the patient might be better off
individually in the setting that is less well reimbursed. The
reimbursement should really be neutral about where the patient
gets the care, so the patient could choose based on what is
best for that particular set of circumstances. There could also
be payments on the provider side that bundle care across silos
and over time. Those bundles have to be big to incorporate,
from the physician's office to the hospital to the post-acute
care where there is a huge amount of variation in spending in
post-acute care, and somebody has to be responsible for that in
the provider system so that patients get high-value care after
a hospitalization that not only improves their health but keeps
them out of the hospital again. So I think we have to approach
it both from the patient side but, as you note, from outside
the patient side from the provider side as well.
Mr. Pallone. All right. Thank you. Thank you, Mr. Chairman.
Mr. Pitts. The chair thanks the gentleman and now
recognizes the gentleman from Illinois, Mr. Shimkus, 5 minutes
for questions.
Mr. Shimkus. Thank you, Mr. Chairman. It is great to have
you here--an issue that has befuddled the national government,
probably since the inception of Medicare in 1965. Those of us
that have been around for a long time, I can't think of a time
when I haven't talked about the structural deficiency and our
promise to pay future generations based upon the formula that
we have today. And so thanks for this.
I am kind of going to go to--my question is going to be
first, if people can shop around for homeowner's insurance and
automobile insurance, do you think it is too much to ask for
individuals to shop around for health insurance? Why don't we
go left to right?
Ms. Baicker. I think individuals should have choices among
health insurance plans and I think that that would foster
innovation in insurance design as well as competition on prices
but insurers should be experimenting with the best way to
manage diabetic enrollees, for example, and then they should be
able to attract more of them by providing higher-value care.
Mr. Shimkus. And Dr. Neuman?
Ms. Neuman. I think people on Medicare should have choices,
and people on Medicare, for example, do have the ability to
shop within the Medicare Advantage program today. I think as
people get older and have more impairments and cognitive
impairments, then the shopping process gets more difficult
because it is--I think we have all experienced looking at
health insurance and it is a fairly complex enterprise.
Mr. Shimkus. It is. I guess the other issue too is if--and
I can really understand the debate on seniors at a certain age
but it is still seniors at a certain age that are still buying
automobile insurance and they are still paying home insurance,
and there is a training process too. You can't expect seniors
today, a lot of seniors today who are on fee-for-service to
automatically move into a competitive-market model and shop
around. I think that is really in essence way too much to ask.
But you all get the drift I am going. Mr. Miller?
Mr. Miller. We can certainly improve the shopping process
for insurance but we sometimes overinvest in it too much. Kate
was talking before about getting into broader bundles. What we
really want to have is measures of outcomes for all of the
players who are providing our care, and that goes beyond just
the insurer you select. So we need to think about how seniors
can shop more effectively for the team of care they are going
to receive or the various folks they go to first further on
down the stream, particularly in Medicare fee-for-service where
you are not buying as much of an orchestrated, integrated
product. So as much as we want to enhance the shopping
experience for that front-end idea of what are my benefits,
what are my cost sharing, we need to know what actually what is
the value of that total experience.
Mr. Shimkus. Even in the much maligned or supported
ObamaCare or Affordable Care Act, the premise is getting people
into markets, State exchanges, where they can shop around, and
so this really is a segue to that whole issue. If you can then
move the public at large either by their employer or the
individual citizen, in essence forcing them to shop around in
an individual exchange, why isn't the segue then into future
generations move these people then into a market-based system
of health insurance providers for Medicare and Medicaid? And
that might even also address the payment disparities that you
see from these two programs, which the majority would much
rather pay the Medicare rate than they are going to receive on
a Medicaid reimbursement, which really distorts this whole
funding scheme. Does anyone disagree with that, or anything to
add?
Ms. Baicker. I think making it easy for people is key.
Competition doesn't work if people aren't able to evaluate the
options in front of them and aren't able to move, and that is
about making information transparent, and it is also about sort
of smoothing pathways. We know that it is hard for people when
they have so many different choices and the information is
varied to make wise decisions.
Mr. Shimkus. Let me just jump in because my time is short,
but Dr. Neuman, you kind of mentioned it, and you were kind of
leading up, I was kind of building momentum here for this
thing, does Medicare Advantage strike this balance to some
extent of allowing people choices and systems and a way to shop
around that could be in essence kind of rolled up writ large, I
think?
Ms. Neuman. You know, it could. People have the choice of
traditional Medicare and Medicaid Advantage plans, and then if
they choose Medicare Advantage plans, they can choose among
them. We don't really know very much actually about how people
are choosing plans and whether they are choosing the best plans
for them. We know in the Part D marketplace that people are
actually not making choices in terms of which plan would reduce
their cost the most. So we still are pretty early on in this
experiment in terms of understanding how seniors behave in the
marketplace.
Mr. Shimkus. But Part D, I don't know the recent approval
ratings or the like but it is still well received.
Ms. Neuman. Oh, yes.
Mr. Shimkus. And approval ratings are higher than any
health care thing we passed ever in this chamber. So it is a
very successful model.
I yield back my time.
Mr. Pitts. The chair thanks the gentleman and now
recognizes the distinguished ranking member of the full
committee, Mr. Dingell, for 5 minutes for questions.
Mr. Dingell. Mr. Chairman, I thank you for your courtesy,
and I thank you for holding this hearing today. It is very
important.
As most people know, my dad was the originator of Medicare,
and I was proud to cosponsor the legislation and to provide
over the House of Representatives during its passage. The
program has endured as one of the most significant pieces of
legislation in our Nation's history and is it of enormous
importance to our senior citizens and to a lot of other people.
I recognize that it is time for review on a continuing basis of
this great program, and I believe that we can do so without
limiting or decreasing benefits that are available to our
seniors today as we look to see to it that it is conducted in
the most efficient way from the standpoint of costs and other
things.
Now, the testimony focuses today on a number of proposals
on how to reform Medicare. I want to focus my questions on the
impact these programs and reforms would have on seniors. Dr.
Neuman, these questions are directed to you as spokesman for
the Kaiser Health Foundation, and I want to thank you and the
other members of the panel for being here. Your assistance is
much appreciated.
Doctor, is it correct that nearly one in four of Medicare
beneficiaries are only in fair or poor health?
Ms. Neuman. Yes, sir.
Mr. Dingell. Doctor, is it also correct that 40 percent of
Medicare beneficiaries live with three or more chronic
conditions?
Ms. Neuman. Yes.
Mr. Dingell. Doctor, do more than half of Medicare
beneficiaries live on incomes of less than $22,500 a year?
Ms. Neuman. Yes.
Mr. Dingell. Dr. Neuman, does Medicare have a limit on out-
of-pocket expenses for beneficiaries?
Ms. Neuman. No.
Mr. Dingell. Dr. Neuman, is it correct that Medicare
beneficiaries with incomes below $20,000 per year spent
something like 20 percent of their income on health-related
expenses?
Ms. Neuman. Yes.
Mr. Dingell. Now, Doctor, thank you. It is clear that we
have many beneficiaries for Medicare who have serious health
needs and very limited resources to pay for their care. Placing
cost-sharing requirements on this population is going to have
to be done very carefully or it will have an appalling negative
impact on their health and financial security.
Now, the Kaiser Family Foundation recently commissioned a
study, which has been discussed this morning, on the impact of
three reforms that have been proposed by many different groups:
a unified copayment for Parts A and B, a 20 percent coinsurance
for Medicare services, and a $5,000 annual limit on out-of-
pocket spending. Dr. Neuman, did this study find that 71
percent of the beneficiaries would see an increase in out-of-
pocket costs to them if this plan was implemented this year?
Ms. Neuman. Yes.
Mr. Dingell. Now, Doctor, did this study also find that
aggregate spending among Medicare beneficiaries would increase
over $2 billion?
Ms. Neuman. Yes, sir.
Mr. Dingell. And Doctor, I hope you understand, I am doing
this so we can get an awful lot into the record as opposed to
putting you in any kind of a difficult place.
Doctor, do you believe that these proposed reforms would
also lead to increased costs for beneficiaries if not
structured properly?
Ms. Neuman. Yes, I think there is a risk that that could
happen.
Mr. Dingell. And I believe you are suggesting that if we do
this, it should be done with all the facts and with a great
deal of care.
Ms. Neuman. That is correct.
Mr. Dingell. Now, I think we need to take a good, hard look
at the ways that Medicare can be reformed so that the program
continues to provide security for our future generations.
However, we must ensure that such reforms are not simply
shifting costs from the federal government to senior citizens
who are incapable of properly meeting those demands. Medicare
is a promise to our senior citizens, and we need to keep our
word to them. I am confident that we can improve the program
while protecting access to care if we work carefully together
in a bipartisan manner.
Mr. Chairman, I want to thank you for recognizing me. I
want to commend and thank our panel, especially you, Dr.
Neuman, and I hope that as we proceed forward, we will do so
with exquisite care. We have a program of vital importance to
our senior citizens, one which must be protected and one which
with unwise tinkering can cause no end of problems. I also note
that if properly done, it is a program which could continue to
persist in its service of our people for a long time into the
future and that the corrections are not disastrous if properly
done. Thank you, Mr. Chairman. I yield back 1 second.
Mr. Pitts. The chair thanks the gentleman and now
recognizes the gentleman from Louisiana, Dr. Cassidy, 5 minutes
for questions.
Mr. Cassidy. Hello. Thank you all. I enjoyed your testimony
and your written testimony. Mr. Miller, I think I may end up
quoting some of yours but I won't quote it here.
Mr. Miller. It is there for your use.
Mr. Cassidy. Dr. Baicker, I think it may have been your
testimony where you hint at, indeed, it may not only be
expensive to have overutilization of services but also harmful
to the patient's health. I see both of you nodding your head. I
agree with that totally. So let us be clear: When we speak
about using services more widely, it is not only monetary but
most importantly it is about making sure that patients' health
is not harmed. Yes?
Ms. Baicker. I agree that not harming health is clearly
first and foremost, and then there is also care that is of
potentially zero benefit or very small benefit that is really
expensive.
Mr. Cassidy. OK. Now, one thing that you read about is the
activated patient, the activated patient whose expenses are 8
to 21 percent lower than the person--and I gather there may be
even some empiric evidence that the activated patient is a
healthier patient. Just for those listening who may not know,
an activated patient fully participates in their care both
physically and financially.
Now, have any of you all--and try to keep your answers
brief, please--do any of you have specific suggestions or the
things that you suggested do you feel as if they would create
the so-called activated patient, the one participating both in
their health decisions as well as their financial decisions.
For example, Mr. Miller, you speak of value-based purchasing as
do maybe all three of you. I don't really think of that as
creating an activated patient. That is actually just saying we
are going to pay for this and not pay for that.
Mr. Miller. The decisions are made before the patient is
asked about it, and we are steering them in that particular
direction. Now, we can do that in some areas. Certainly the
best evidence tends to be in the prescription drug area. That
is largely accommodated through Part D already in Medicare. So
I think we can move that mostly off the table.
Mr. Cassidy. So by incentivizing patients to go to generics
and allowing them to save money, you create an activated
patient who is both looking at the cost but also doing so
improving----
Mr. Miller. Looking at the cost opens the door to thinking
about the value. Cost is only the opening consideration, but if
you haven't gotten someone's attention with the cost, they may
not think about how that balances out against the qualitative
tradeoffs.
Mr. Cassidy. Now, Mr. Miller, I like your kind of
testimony, if you went to a higher coinsurance but you still
had the same limit on out-of-pocket, you may achieve both,
maybe more upfront costs but----
Mr. Miller. You are trying to expose more patients across a
wider range of decisions to thinking about the care they
receive.
Mr. Cassidy. Now, let me ask you this, and this is
something I haven't completely worked through, so if I totally
fumble, please forgive me. As some hospitals are purchasing
physicians' practices, typically procedurally based, and they
are beginning to bill under Medicare Part A as opposed to Part
B, effectively we are having what you are describing in which
the deductible for that Part A service is often greater than it
would be for the equivalent Part B. We are seeing a downward
trend in Medicare spending. I tried to learn if that is
attributable to this phenomenon. That is more difficult than
its seems like it should be. I have not yet been able to
determine that. But it seems to me that we may be seeing
examples of what you are describing, bringing it into Part A,
increasing the upfront deductible and coinsurance costs, and
yet there has been no decrease in health quality and there has
been a decrease in spending. Any thoughts on that?
Mr. Miller. Well, I have not looked at that data. I mean,
we have got a different type of thing going on where hospital
outpatients, because it is reimbursed more generously than
other outpatient----
Mr. Cassidy. But that costs the patient more.
Mr. Miller. Which is the problem of all these type of
siloed payments. Other private parties will find ways to
maneuver around them.
Mr. Cassidy. Oh, I accept that as a different thing, but
just my general point, that we have effectively increased the
amount that is out of pocket for patients and we have actually
seen a decrease in spending in the Medicare program, in the
Part B program.
Mr. Miller. Right.
Mr. Cassidy. Any thoughts on that, Dr. Baicker or Dr.
Neuman?
Ms. Baicker. I think you hit on a key point that innovative
insurance companies can drive patients to be more engaged in
their own care, and that innovation could come in the form of
cost sharing or it could come in other ways that insurers think
of to get the patients engaged and having them have that
flexibility would open a wider set of----
Mr. Cassidy. What are some other examples of how they could
be engaged besides cost sharing? Because clearly we need
patient engagement.
Ms. Baicker. I think there are examples of getting patients
to interact with a wider set of patients who have conditions
like them, of getting text messages to remind them of things,
of getting----
Mr. Cassidy. I have heard about that. Has that actually
been shown in some sort of peer-reviewed double-blind way to
actually work?
Ms. Baicker. I think text messages do increase adherence to
medications, that part of not taking your meds is not about the
copay, because you already have the drugs, but taking them
regularly, it is a skill, it is a habit, and there has to be
skill building that if you don't have the right incentives,
insurers don't engage and providers don't engage in patient----
Mr. Cassidy. So if you, though, that is not the insurance
product per se but rather the administration or patient care
aspect of it, correct?
Ms. Baicker. But if the insurers and the providers have the
right incentives, then they can innovate in that dimension that
benefits patients by getting them more engaged, and you need a
system that incentivizes upstream for that to happen
downstream.
Mr. Cassidy. Thank you all. I yield back.
Mr. Pitts. The chair thanks the gentleman and now
recognizes the gentlelady from Florida, Ms. Castor, 5 minutes
for questions.
Ms. Castor. Well, thank you, Mr. Chairman, and thank you
all for your expert advice provided to the committee.
I want to start off by saying thank goodness for Medicare
when you look back over the past decades what security that has
brought to our families all across America, our parents and
grandparents. We don't have to worry about our older neighbors
falling into poverty because of their health issues as they get
older.
And now with the Affordable Care Act, Medicare is even
stronger. We have already adopted very important reforms moving
benefit. The benefits for Medicare beneficiaries are better.
The life of the trust fund has been extended. It is not great,
though, and I worry because I see this huge population of the
baby boomers now coming into Medicare as they turn 65, and I
think this is the right time to look at reforms.
One recent proposal was called the Medicare Essential
proposal by Karen Davis and others in the Commonwealth Fund.
They propose to combine Parts A, B, and D with a single
deductible, copayments, and a ceiling on out-of-pocket costs.
In addition, it would build incentives for beneficiaries to
choose the high-value care we have talked about this morning
including having them join those primary care practices that
quality as patient-centered medical homes and using providers
participating in alternative payments like ACOs. I have seen
some of these in Florida where they are very intensive. The
nurses are on the line constantly with their patients talking
about smoking cessation, taking their medications, but it is
still very difficult. And the inherent part of that proposal is
the assurance of equitable access for low-income beneficiaries.
Dr. Neuman, what is your view of that proposal? Do you have
any criticisms or do you want to highlight the good parts of
it?
Ms. Neuman. Well, I think it is a proposal--you are looking
at a lot of proposals that are trying to achieve similar goals.
This proposal is certainly worth looking at, and particularly
the features that would provide the catastrophic protection and
to encourage people on Medicare to move toward systems where
there are incentives to improve the delivery of care, and I
think there is a lot of interest in giving beneficiaries access
to the kinds of care coordinators, nurse practitioners, the
kind of services that you were talking about that you have
seen, and that would be encouraged under this proposal. It has
a relatively low limit on out-of-pocket spending. It has a
fairly low deductible. So I think it recognizes the needs of
people with modest incomes, so I would encourage you to take a
look at that.
Ms. Castor. OK. Doctor, do you want to comment on that?
Ms. Neuman. Yes, I do think that there are a lot of common
threads in these proposals where there is a consensus emerging
that the protections that Medicare affords are vital and have
to be preserved but that moving patients towards programs that
foster whole health, that look across silos are really engaged
with patients to activate them and to ensure that they are
consuming the care is actually going to produce help for them
with the highest value. There are a lot of common threads.
Optimistic? I don't know if that is reasonable that we do it
that way.
Ms. Castor. Mr. Miller?
Mr. Miller. Well, I looked at the Part E proposal, which is
somewhat of an update of an older one a couple of months ago. I
appreciate the creative use of the Medicare alphabet but I
think it is really aiming for Medicare Part U, universal, which
trying to squeeze out private competition, if you look at the
actual underpinnings of it, and there are a number of----
Ms. Castor. Well, that raises another point, because I
think the Medigap policies, the supplementals, I get your point
about are they encouraging overutilization, and they seem to be
ripe for reform and cost savings too. When you look at
traditional Medicare, the administrative costs are only 2
percent. You look at those Medigap policies, and administrative
costs are 20 percent. That is awfully high.
Dr. Neuman, where should we be headed in reform of those
supplemental policies?
Ms. Neuman. Well, the loss ratio requirements haven't been
looked at for some time, so that might be something you might
want to look at with Medigap policies. I think the issue with
Medigap is, it may drive up utilization and spending and
Medicare services but people really rely on Medigap for the
security that it provides. People seem to want protection. They
don't seem to want to have an unpredictable, unaffordable
medical expense occur throughout the year. There are kind of
two sets of proposals out there on supplemental insurance. One
would prohibit first-dollar coverage for Medigap. The other is
a surcharge approach or a tax approach which would tax both
Medigap and employer-sponsored plans, and they would have very
different effects, depending on how they are implemented.
Ms. Castor. Thank you very much. I have run out of time.
Mr. Pitts. The chair thanks the gentlelady and now
recognizes the gentleman from Kentucky, Mr. Guthrie, 5 minutes
for questions.
Mr. Guthrie. A perfect trend. My friend from Florida led
right into my questions. I was going to talk about Medigap.
A lot of times we talk about transparency in pricing and
you can't find the pricing in health care, and if you go to the
Houchins IGA grocery store in Bowling Green, Kentucky, there is
a price on everything, because if they didn't have a price on
anything, nobody would buy anything because it is out of their
pocket. They have got a sign tall enough you can see what their
gallon of gas costs going down I-65 at 70 miles an hour. So
that is just a problem. But I will tell you this: if I paid
$100 a month to Houchins IGA and they allowed me to come in and
buy anything that I wanted to because I paid $100 a month, not
only would prices go away, I probably wouldn't make too
intelligent of at least value based. I would buy the T-bone
steak every time I went in.
And so there was a 2009 MedPAC study--I think we just
started getting into it--about beneficiaries with first-dollar
coverage and they use the system about a third, or they have a
third higher medical costs than those with no supplemental, and
the first-dollar coverage regardless of type of plan results in
higher Medicare spending. And in the June study, MedPAC made
some recommendations to address this. I think we talked about
one is a copay, a fixed-dollar copay, and the excise tax that
you talked about. I have some concerns with it. One is that if,
say I pay $100 a month for it and all of a sudden they say you
are going to have to pay a tax so you have to pay $110, well,
that $10 will go into the trust fund, I get it, to help offset
my cost. That doesn't change my behavior at all. So that just
doesn't seem to--other than putting money in the system, it
doesn't seem to have any change in me using a third more.
Ms. Neuman. I think it might have an effect. The effect
might be different for people with lower incomes. So for people
who can afford the extra $10 in your example, they pay the $10
and they keep their coverage and life goes on and they use
services as they did. For people who can't afford the $10, they
would probably give up their supplemental coverage or they may
give up their supplemental coverage and then they would face
the true costs of whatever services they used and----
Mr. Guthrie. But that would have a negative impact on the
poor and the excise tax would have a negative impact on the
poor recipient. So it could price people out of the market is
what you are saying?
Ms. Neuman. That is right.
Mr. Guthrie. But I guess I would like to talk just--I have
got 2 \1/2\ minutes--of this whole first-dollar coverage and
what you think should change that. I think Mr. Miller is about
to start.
Mr. Miller. I was just going to add, in the Medigap area we
already have plenty of evidence that people buy plans that cost
more than $1 for a $1 in benefits. So we can go through the,
you know, approach of taxing them a little bit more and making
it even less of a good deal. I suspect we will still have some
people buying it. But the 2009 study was very well crafted,
because there has been a lot of older evidence on the extra
costs that are thrown off by supplemental coverage. I think it
dealt with some of the criticism of the earlier work and made
it quite clear that more so for individual Medigap-purchased
insurance, less so for employer-sponsored insurance, but all of
them have a higher cost impact on Medicare, and that is not
covered by the Medigap premium or the employer costs; it is
passed onto every other Medicare beneficiary.
Mr. Guthrie. But it continues to add into that ``I don't
have to price my health care because it is being covered from
first-dollar coverage.'' Dr. Baicker?
Ms. Baicker. And in general, when you tax things, people
consume less of them, and the goal I think would be to reform
the basic Medicare benefit so that people have the vital
financial protections and didn't need the Medigap policies as
much, and then pricing the Medigap policies would take into
account the extra cost they impose on Medicare and other
Medicare beneficiaries and would hopefully induce people to
move towards plans that didn't have so much first-dollar
coverage because they were getting their out-of-pocket
protections from the main Medicare program. They would then
scale back the consumption of care that is of less value and
everybody's care would be a little more affordable. There are a
lot of steps in that chain, and there is a lot of uncertainty
about how big each of those steps would be but we know that
Medigap policies today are priced much lower than their true
cost and so we are subsidizing the kind of care that produces
very little health, and that doesn't seem like a great way to
continue.
Mr. Guthrie. Any further discussion? Dr. Neuman, any other
points?
Ms. Neuman. Well, we are subsidizing--some of what we are
subsidizing probably produces good health but some of it may
not, so there is a mix there.
Mr. Guthrie. But there is a desire in this. We have to
recognize that people want to insure themselves against ``I
just don't want to have to face this. I would rather pay a
little bit each month and not have to face it.''
Ms. Neuman. Many people on Medicare are living on fixed
incomes so they don't like the idea.
Mr. Guthrie. Exactly. So it is a good benefit.
Ms. Neuman. And I think the issue here is in a benefit
redesign, if the deductible is relatively high and the out-of-
pocket limit is relatively high because of budget constraints,
then it may not dampen the demand for supplemental coverage if
people still will feel exposed to a high deductible and they
can't afford to get to that limit.
Mr. Guthrie. I think I just ran out of time. I appreciate
it. I yield back.
Mr. Pitts. The chair thanks the gentleman and now
recognizes the gentlelady from Virgin Islands, Dr. Christensen,
for 5 minutes for questions.
Mrs. Christensen. Thank you, Mr. Chairman. Welcome to the
panel this morning.
Dr. Neuman, I really appreciate your testimony, especially
your focus on economic circumstances and health status of
Medicare beneficiaries and they need to be mindful of both the
intended and unintended consequences of benefit design.
Broad cost-sharing requirements have a significant impact,
as we have said, on low-income seniors. I worry that even with
an attempt to build in low-income subsidies, this could still
create barriers to necessary health care for vulnerable seniors
and worsen health disparities that already exist. Could you
comment on that further?
Ms. Neuman. You raise a good point. There are enormous
disparities in income and assets of seniors by race and
ethnicity. So people of color would be negatively affected by
an increase in cost sharing unless there were adequate
protections. That is a real issue.
Mrs. Christensen. And we have heard a lot this morning of
course because the focus is on Medicare today, but Medicaid is
also an important program for millions of seniors and benefit
design could affect that. Could you talk about the role
Medicaid plays for these low-income individuals and why it is
so important?
Ms. Neuman. Yes, Medicaid plays an enormous role in
providing financial security for people with very low incomes
and very modest assets. So today Medicaid fills in the gaps,
helps with cost sharing, helps with premiums, provides other
benefits, but not all low-income qualify and are covered by
Medicaid. So for those who are just above the Medicaid
eligibility level, they are responsible for their full cost-
sharing obligations and premiums and uncovered services are
everyone else is and may or may not be able to afford
supplemental coverage.
Mrs. Christensen. Right. I will just take off from that.
Some people have proposed limiting the amount the federal
government pays for beneficiaries, either through a cap or per-
person payments or cap on total federal spending. How might
such a proposal affect coverage for access to care for these
vulnerable populations?
Ms. Neuman. I think it would shift the risk from the
federal government or State governments to the Medicare
population and the poorest on Medicare.
Mrs. Christensen. I am just curious. As a physician who
took care of Medicare patients, a lot of comments have been
made about the increased cost when there is not significant
cost sharing. In my experience, Medicare did not pay for
unnecessary care, so is it a guarantee that just having no cost
sharing increases the cost? Because it might increase visits
but if Medicare doesn't pay for visits that are unnecessary,
tests that are unnecessary--and anyone can respond. I am just
curious, because I have had things denied reimbursement.
Ms. Baicker. So I think you are highlighting that the
black-and-white nature, necessary versus unnecessary, is much
messier in the real world. There is a continuum of value that
care produces from urgent lifesaving care to care that I do
think is unnecessary or even potentially harmful. If you look
at the example of testing for prostate cancer in older men,
Medicare pays for that, and there is an age beyond which the
test actually can do more harm than good because it is
detecting cancers that would not actually kill the person and
it subjects the patient to downstream procedures and costs that
may actually do them harm, and Medicare does pay for that. At
the same time, it makes mistakes in not paying for stuff that
is valuable. So I think there are both types of mistakes in the
current program: paying for stuff it shouldn't and not paying
for stuff it should.
Mrs. Christensen. Well, I also think on that prostate issue
that we probably need some more research done and information,
but providers can make judgments even at an older age with a
person that has a positive or a high PSA.
I am going to yield back the balance of my time, Mr.
Chairman.
Mr. Pitts. The chair thanks the gentlelady and now
recognizes the gentleman from Florida, Mr. Bilirakis, 5 minutes
for questions.
Mr. Bilirakis. Thank you, Mr. Chairman. I appreciate it
very much, and I thank you for your testimony.
The question is for Mr. Miller. First question, in your
testimony you talk about various ideas of structuring benefits
with different cost shares and deductibles. Is it worthwhile to
have multiple Medicare plans in the marketplace? First
question. We could establish an actuarial value and allow
various plans of different premiums, deductibles and cost
shares. This would allow seniors to choose a plan that fits
their lifestyle and health status rather than a one-size-fits-
all plan
Mr. Miller. It is correct that there is more than one way
to configure insurance benefits, and certainly seniors should
look forward to that. I think what you are hinting at is a
better structured version of the current competition we have
between fee-for-service Medicare and Medicare Advantage plans
and the premium support model, which could provide that type of
more vibrant competition. You have to have a starting point,
though. How is the basic benefit defined legally from which
then plans can vary in terms of how they meet an actuarial
equivalent of that or charge a supplemental premium for people
who want more coverage than what that basic one is how the bids
are determined. There is a harder question as to whether or not
we can allow the Medicare fee-for-service program to offer more
than one version. People are a little resistant to that, but if
that enhanced Medicare fee-for-service with other benefits is
not subsidized, where it is actually charging an extra premium
that people have to pay the cost of it, then that would be the
type of level playing field competition that we always talk
about in theory but never deliver in practice.
Mr. Bilirakis. Thank you. Next question for all. I know we
have touched on a lot of these issues, but I want to give you
an opportunity to elaborate a little bit. This one has to do
with transparency.
One of the great challenges of health care is the issue of
price transparency. Health care is perhaps one of the biggest
sectors of our economy where no one really knows the cost of
service. I go to the doctor, I pay a copay, I know what the
cost of that visit is before I go. I go to the doctor, I pay a
coinsurance, I don't know what the visit will cost me until
after the visit. When designing a new benefit structure, how
can we increase the level of transparency in the system so
beneficiaries can know what their costs will be before they
even visit the doctor? And that is a question for the entire
panel.
Ms. Baicker. So this is something beneficiaries complain
about rightfully a lot, that they have no idea how much a
service costs, and physicians aren't really in the business of
giving them that information either, and so one model is to go
to copayments where you know $10, $20. It is known ahead of
time. Another model is to make sure that the prices are easily
knowable to the patients beforehand so they can make informed
decisions and so their providers can help them too. If the
providers don't know how much something costs, how can they
make recommendations that are in their patient's best
interests?
Mr. Bilirakis. How do you suggest we do that?
Ms. Baicker. Well, there could be a requirement that prices
are transparent, and that is going to depend on what insurance
product the patient has and what has been negotiated between
the insurer and the provider. There could be a move towards
copayments instead of coinsurance. Either could achieve similar
ends in terms of transparency but would have different effects,
I think, on the negotiations between insurers and providers,
not in the case of fee-for-service Medicare, of course.
Mr. Bilirakis. OK. Dr. Neuman?
Ms. Neuman. Well, I would just say it is less of an issue
with fee-for-service Medicare than it is in the commercial
market for the rest of us who are out there wondering what the
price of various services are. I think copayments would be a
lot easier for people in Medicare to understand. That is what a
lot of the Medicare Advantage plans are doing now. And I think
it would just be easier to anticipate well, if I go to the
emergency room versus go to my doctor, I am going to pay this
much more so I better--I should try to wait and see my doctor.
Mr. Miller. If you want beneficiaries to know the real
costs of the care, copayments are somewhat, you know, sometimes
well, sometimes arbitrarily assigned and they tend to converge
in certain clusters. If you go to a coinsurance approach, if
you know the coinsurance rate and it tends to be uniform, you
automatically know what the full cost of the covered service
was. It just a simple matter of multiplication. So you both see
what you are paying and you know what the all-in cost was that
other people are picking up.
Mr. Bilirakis. Very good. Mr. Miller, traditional Medicare
fee-for-service operates in two different silos, Part A, of
course, and Part B, without either part talking to each other.
Medicare Advantage provides a comprehensive benefit with better
coordination between a hospital and the outpatient settings. Do
we have data evaluating Medicare Advantage against traditional
fee-for-service? Does Medicare Advantage provide lower costs
and better outcomes compared to the traditional fee-for-
service?
Mr. Miller. We have some studies which if you look at
certain areas will say they are more effective in what they do.
I don't think there is a comprehensive evaluation which can do
an apples-to-apples across-the-board evaluation of that because
the programs operate so differently. In addition, although we
have changed some of the rules for the way the bids are set up
and how they are reimbursed, we have not had them operating on
the same level playing field entirely. So for a period of time
we paid more to the Medicare Advantage plans in order to bring
in more service and more enrollees. Now that is being pulled
back. We are not exactly at a total equivalence to make an all-
in comparison.
Mr. Bilirakis. What lessons have we learned from Medicare
Advantage, the entire panel, if we redesign traditional
Medicare?
Ms. Baicker. So I think Medicare Advantage has evidence of
better coordinated care, although not uniformly lower costs. I
do think there is the potential that when Medicare Advantage
promotes best practices and higher-value care, that can have
system-level consequences because the same hospitals and the
same providers treat MA patients in traditional Medicare
patients so if they improve their efficiency for a critical
mass of patients, that can have system-level ramifications, and
we see some evidence of those spillovers.
Mr. Bilirakis. Dr. Neuman?
Ms. Neuman. In a recent review of the literature, we have
found that there is sort of mixed evidence, and the evidence is
pretty early, so there is some evidence of some positive
outcomes and indicators from Medicare Advantage plans but not
all Medicare Advantage plans are alike, and so I think it will
be important to see what constitutes an effective plan and what
produces positive outcomes, and I think we don't quite know
yet.
Mr. Bilirakis. Mr. Miller, what lessons have we learned?
Mr. Miller. We have learned that it is pretty hard to do
this, particularly through political means, and I think the
lesson we should take is perhaps if we can get it out of
Washington into the hands of doctors and patients, we might
actually begin to sort this out and find a better balance.
Mr. Bilirakis. Very good.
Mr. Pitts. The gentleman's time is expired.
Mr. Bilirakis. Thank you.
Mr. Pitts. The chair recognizes the gentleman from
Maryland, Mr. Sarbanes, for 5 minutes for questions.
Mr. Sarbanes. Thank you, Mr. Chairman.
I wanted to shift away--we have been talking about sort of
in the context of the Medigap policies and so forth--about what
you do to address over utilization of procedures and services
that may not be as necessary as others on a continuum. I wanted
to go to the other side of the spectrum and talk about how
reimbursement methodology and the benefits structures can
address underutilization of services, particularly on the
preventive side, that we would like to see patients take up
more, and we have seen some reforms have gotten a lot of
attention in the last year or two. Annual wellness visits now
are covered without a copayment, so there is no out-of-pocket
expense for the patient--certain kinds of screenings,
mammography screening, colonoscopy, and so forth. But I
wondered if you could just--all the panelists could just speak
to that end of the spectrum and some of the innovations you see
that really go to this goal of empowering patients to be full
partners in their care, which is really talking about how do
you boost up the preventive ownership that they have, and also
speak to not just the services that get provided that are
preventive services, let us say, but some of the new
technologies that are being made available that patients can
use to better manage their own care on the prevention side and
what sort of coverage and benefits do you see coming into the
picture there.
Ms. Baicker. That is a big and important topic, and I agree
with you that sure, payments can influence underutilization.
Some services are underutilized because they are
underreimbursed but there is a whole world of other behavioral
factors beyond payments that affect patient engagement and
adherence and management of their diseases, and innovation in
provision of those preventive services can range from--there
are medicine bottles that now can radio whether the bottle has
been opened or not so there can be external monitoring and
promotion of adherence. You know whether the patient has
actually taken the pill. There are visiting professionals,
nurses, other health care providers who can help coordinate
care in the home for patients who have trouble getting out of
the home or coordinate patient groups, and I think all of those
mechanisms for investment in wellness have potential long-term
really big positive implications, and the reason we see
employers getting involved is that people often have a longer-
term relationship with their employer than they do with their
insurer and they spend eight-plus hours a day in the workplace,
and that is a great site to promote that kind of investment.
Ms. Neuman. I am going to talk about prevention in a
different sense for an older, frailer population. So there are
delivery-system reforms being tested now, for example, the
Independence at Home demonstration, where a physician and teams
of professionals come into the home with the idea of engaging
the patient and family members to prevent patients from needing
to go to the emergency room or having to go to the hospital,
and they employ technology in the home that can help the
medical team and the social services support team monitor what
is going on in the home in order to provide care in the most
appropriate setting, which in this case is also the lowest cost
setting and what patients and their families prefer. So through
technology and through a tested intervention of providing team-
based care in a home setting, Medicare is exploring the idea of
providing better care to people in the most appropriate setting
using new technologies and electronic medical records to manage
patients better.
Mr. Sarbanes. I have recently run into a number of
pharmacists and they have sort of raised this issue of how
reimbursement works for the services that they assert they are
providing that are not covered at all, and that is an example
of frontline interaction with patients. It can make a huge
difference in a lot of patients who are very dependent on the
pharmacist for giving them some guidance. Can you talk about
whether there is any look at sort of what the benefit structure
and reimbursement is in that arena?
Ms. Baicker. So without speaking specifically to
pharmacists, I don't know as much about that issue as I would
like to, I think having bigger teams of caregivers from doctor
to nurse to pharmacist to home visitation would promote looking
at sort of the whole patient, that disease management is not
about any of the silos, and the siloed reimbursement that we do
that underreimburses some and overreimburses others really
discourages the team-based approach to being responsible for a
group of patients' outcomes among a group of providers that we
give some more flexibility and say, here is who would really
help this patient, it is this kind of provider. Let us put more
resources towards that and let us take resources away from this
type of patient.
Mr. Sarbanes. Thanks very much. I will yield back.
Mr. Pitts. The chair thanks the gentleman and now
recognizes the chair emeritus of the full committee, Mr.
Barton, 5 minutes for questions.
Mr. Barton. Mr. Chairman, I don't have any questions. I
will be happy to yield my time to anybody who wishes it.
Mr. Pitts. Mr. Lance?
Mr. Lance. Thank you, and good morning to you all. It is a
very interesting panel and a very important issue.
Some raise concerns about the escalating costs of new
medical treatments in the context of the Nation's growing
entitlement program costs, and we are all concerned about that
obviously. Dr. Baicker, you note in your testimony that
technological innovation raises the stakes in this debate.
There are different ideological approaches to controlling
costs, especially those associated with new treatments. Some
choose to develop a framework in the health care reform law
whereby the government would choose value rather than the
consumer or the patient by implementing the governmentally
driven model such as IPAB, and of course, IPAB is something
that I oppose and many oppose on a bipartisan basis,
particularly here in the House.
Could you speak to the value of a cost-sharing framework
where Medicare enrollees would choose services and treatments
if they were spending their own funds?
Ms. Baicker. I agree that the rise in costs raises the
stakes in that there are new treatments all the time that could
provide really valuable benefits, and there are new ways to
spend money that might not provide high health value, and if we
were to cover every possible service that might benefit every
possible beneficiary even a little bit with public funds,
because of innovation, that could be more than 100 percent of
GDP. So there has to be some way to allocate those resources,
and I would argue that the more flexible that is, the more
patients have some choices about the bundle of care that is
right for them. I think we can't afford to be subsidizing the
use of low-value care for high-income beneficiaries but it is
very hard to write down a set of rules that says this is the
type of service that is worth it and this isn't.
Mr. Lance. Thank you. Would anyone else on the panel like
to comment? Dr. Neuman?
Ms. Neuman. Well, I would just say it is so hard for
patients to make these decisions, particularly when they are
sick and they are scared. You know, you think of somebody who
has just been diagnosed with some form of cancer and they go to
their doctor and their doctor says there are three treatment
options for you, and I think you should do this one because I
am the expert, and the doctor rarely says that one is going to
be the more expensive one and it is a new technology and all
that other stuff. When you are scared, you go to the expert and
you are rarely thinking about what is the cost to me, I really
want to live and survive this disease.
Mr. Lance. Thank you. Mr. Miller.
Mr. Miller. What we are struggling about is a decision
between the locus of decision making and changing the degree to
which it currently resides. I think the better way to go is an
approach toward more delegated but informed decision making
with greater involvement, not maximum involvement, not
unrealistic at the beneficiary and consumer level. We need to
remember that seniors are allowed to manage the rest of their
budgets without Washington telling them what is high value and
low value. They have other income that they have to spend on
other things and we don't say here is what your benefit
structure is for your food, your housing, the other things you
are going to spend it on. That can be driven to unrealistic
levels, and that is why we have the protections for low-income
seniors.
The other thing to remember is that the default option
often is not to do the most high-level perfectly calibrated
value judgments in what we cover. Instead, what we do--and this
is the Affordable Care Act--we reduce reimbursement across the
board and pretend that we haven't taken away anyone's benefits
when we have actually hollowed them out by doing it through the
pass-through providers-less.
Mr. Lance. I thank you. Let me say that I hope as we move
forward, we might review some of the provisions of the
Affordable Care Act. Obviously, I did not support it, but
moving forward, I hope that we have the opportunity to review,
for example, IPAB, and I believe, based on my observation, that
there is a bipartisan consensus, particularly here in the
House, that we should revisit that issue.
Thank you, Mr. Chairman. I yield back the balance of my
time.
Mr. Pitts. The chair thanks the gentleman and now
recognizes the gentleman from Texas, Mr. Green, for 5 minutes
for questions.
Mr. Green. Thank you, Mr. Chairman, for holding the
hearing, and I thank our witnesses for appearing.
We hear a lot from my colleagues on the Republican side
that there needs to be more cost sharing in the Medicare
program. Cost sharing makes sense, making sure beneficiaries
have skin in the game and good policy. That is why we already
do it. Seniors spend a lifetime of working to pay into the
system. Once beneficiaries are eligible, they rack up thousands
of dollars in bills due to cost sharing. If we continue to
decrease the portion paid by the government, more and more
future retirees will be unable to pay their bills. With the
system remaining solvent until 2026, we have the time to make
sure we can do it right. Benefit redesign and more cost
shifting to beneficiaries become necessary but the devil is in
the details. For instance, we should look at a value-based
system and a system where higher-value procedures the
government should be willing to pay more for lower-value
procedures but beneficiaries should pay more. At the same time,
we should focus on strengthening preventive care and improving
quality outcomes, which save money now and later. Cost sharing
and benefit redesign cannot happen alone, and it must be done
carefully, and out-of-pocket expenses must be predictable and
necessary health care must be high quality and low cost.
Dr. Neuman, is it necessary to approach cost sharing and
benefit redesign with nuance, and can you explain in your
testimony about the incentivizing adoption of high-value care
and what kind of care would be high value?
Ms. Neuman. For reasons which you just described, I think
it is very important to approach this with nuance. I think we
have all three of us talked about the importance of maintaining
and improving protections for people with low and modest
incomes, and trying to make--adding catastrophic protection but
moving together the pieces in between is complicated without
shifting costs onto certain people. There seems to be a great
deal of interest in moving people toward high-value care but
deciding what is high value remains a challenge. So I think I
would imagine we would all agree that there are a lot of points
of agreement including we should move very carefully given the
importance of this program and the protections it provides.
Mr. Green. And I do think that even the private sector is
moving to that. There was an article just recently about
companies, employers coming together and saying in California
this is--these are the standard prices and this is what we will
pay; now, if you want a higher value, you are on your own, it
is out of network so to speak. So maybe the market is actually
doing that but it would help the market if we used Medicare
because that is our national health care to be able to talk
about it.
Ms. Baicker. Well, I think it can go both ways. There are
times when the market follows Medicare, and this could be a
time where Medicare follows the market and learns from the best
practices that are already taking place.
Mr. Miller. We find that private plans and private markets,
because they have to meet a bottom line, they have to satisfy
their enrollees, they are in business every day competing with
other people, they have to find that high value. They are
motivated to do it. It is a lot harder in our system to do this
politically. The idea that you are going to be voting every
year in Congress on, well, what is the latest set of high-value
calculations is not realistic in the same way delegating it
to--well, somewhere in HHS and CMS they will figure it out and
we will all be happy about that. Again, kind of transcends the
bounds of what we have normally seen in the past.
Mr. Green. And I agree, and we know when we--a lot of have
a change in how medicine is practiced is something we have
already--everybody says oh, that is not the way it should be
and we are always second-guessing.
Dr. Neuman, how has the Affordable Care Act added value to
Medicare?
Ms. Neuman. Well, in a number of ways. I think one of the
clearest ways it has helped is to slow the growth in Medicare
spending so it will keep Medicare around for future
generations. It will help to sustain the program for longer,
and that is probably not something that has gotten a whole of
attention. I think also it is putting in place delivery-system
reforms to be tested which could have fundamental effect on the
future of the delivery of care for maybe current generations
but the future generations of Medicare beneficiaries. There are
maybe dozens of delivery-system reforms that are being tested.
Maybe all of them will not work. But to the extent that any of
them are going to improve care and better coordinate care, that
will make a fundamental shift.
Mr. Green. Well, I know I have only 29 seconds, but the
medical-home issue----
Ms. Neuman. Medical home is a good example. There are a
number of them.
Mr. Green. And also looking at the preventive care, and it
just makes so much sense that if you are diabetic to have these
annual Medicare exams to make sure. We know also that the lower
your income, the less you are likely to go if it costs you
money.
Ms. Neuman. Exactly, and of course, there is the infamous
donut hole which creates enormous problems for people if they
have those high expenses, which will now be closed as a result
of the Affordable Care Act.
Mr. Green. It is closing slower than I would like but it is
closing. I yield back my time.
Mr. Pitts. The chair thanks the gentleman and now
recognizes the gentleman from New York, Mr. Engel, 5 minutes
for questions.
Mr. Engel. Thank you very much, Mr. Chairman. Let me first
say that I would like to see a Medicare benefit structure that
protects beneficiaries from catastrophic expenses, encourages
the use of high-value services, and strengthens the financial
protection for low-income beneficiaries, and having voted
against the Ryan budget for the last 3 years, I will not
support proposals that seek to cut Medicare benefits or
dramatically increase vulnerable beneficiaries' out-of-pocket
costs for vital health care services. As we try to transform
the health care system into one that promotes prevention and
early intervention, I worry, very much worry that proposals
that include higher deductible and copayments could be a
hindrance to this effort.
So Dr. Baicker, I like the example you gave earlier with
diabetics. I fear both the human and cost implications if
higher cost sharing for doctor's office visits resulted in, for
example, a diabetic foregoing regular blood sugar monitoring
and that eventually resulted in an expensive hospitalization
and debilitating health care requirements. So let me ask you,
Dr. Baicker, and also Dr. Neuman, can you elaborate on how
increased cost sharing might have a negative impact on
treatment adherence?
Ms. Baicker. Yes. I think it is important that cost sharing
be nuanced, as we all have said, and not crude, and just
increasing cost sharing could drive people to forego care that
has long-run payoffs, and we want to avoid that. That said,
there is a lot of care that has really questionable health
benefit that I think our system can't afford to subsidize. So
the question is, can we lower the subsidies or increase the
cost sharing or prices for care that doesn't produce that
downstream benefit and use those resources to shore up services
that have really high value, particularly for low-income
beneficiaries, and I think it is hard to write down a set of
rules that says this yes, this no, but I very much agree with
your question that we need to subsidize that kind of care so
that people don't forego things that would improve their
health.
Mr. Engel. Thank you. Dr. Neuman, do you agree?
Ms. Neuman. Yes, I do agree. I mean, a very good example is
the home health copay or coinsurance, which people have talked
about, because Medicare does not apply copayment or coinsurance
to these services. So who uses home health services? This is
older, frailer women. Many have been to the hospital and are
out. So a coinsurance would affect people who have many, many
visits and it would probably discourage a lot of visits. Some
of them may or may not be necessary but they are visits that
have been ordered by a medical professional. So it would
clearly either shift costs onto the oldest and frailest and/or
reduce utilization, and some people think that is a good idea,
but there are risks to doing something like that. The
alternative approach is to think about ways of creating
incentives for the providers of care to provide appropriate
care so that people don't get too much of what they don't need
but they get what they do.
Mr. Engel. Thank you. I know that studies have looked at
the impact of younger populations but I want to ask both of
you, do either of you know of studies that have specifically
looked at the impact increased cost sharing might have on rates
of hospitalization with older and sicker populations like those
served by Medicare?
Ms. Baicker. There is one study that comes to mind
immediately that looked at increasing the cost sharing for
pharmaceuticals for a Medicare population that had wraparound
coverage in California, and when you increase their copayments
for drugs, they took fewer of them, but that was partially then
offset by increased hospitalizations downstream and that
increase in hospitalizations was concentrated among people who
had multiple chronic conditions. It didn't completely offset
the cost savings for the reduction in pharmaceutical use but
those benefits accrued to different people because there were
different insurers involved, so it is a great example of
spillovers across silos and the importance of unifying
insurance and care.
Ms. Engel. Thank you. Dr. Neuman, I agree with your written
testimony, the statement in your written testimony that
Medicare's current benefit designs are complicated, and for
seniors lived on fixed incomes, it can be really difficult for
them to accurately budget for health care costs given the
various deductibles, premiums, copayments and coinsurance rates
in Medicare. In May 2013, just a couple months ago, analysis by
your organization, the Kaiser Family Foundation, found that 18
percent of seniors in my home State of New York are living in
poverty under the supplemental poverty measure and they just
simply cannot afford to pay more. So as we look at benefit
redesign, can you elaborate on the benefit you seek to
replacing coinsurance rates with copayments?
Ms. Neuman. Sure. The supplemental insurance measures
higher because it takes into account health expenses, and so
that is what people are incurring, which produces larger
estimates of seniors in poverty. Copayments can be structured
so that they are less onerous, so a great example is back to
the home health care we just gave. Coinsurance could be an
insurance on every visit which would build up and up and up
over time. An alternative would be a copayment on an episode of
care which would be fixed, more predictable and wouldn't
penalize those who have extensive need for home health
services.
Mr. Engel. And let me ask you a final question, either one.
MedPAC's 2012 recommendations on benefit redesign included the
recommendation that the Secretary of Health and Human Services
have the authority to make value-based changes to Medicare's
benefit design. So can you describe what this might look like
with a real-world example, and why this would be of value in
our rapidly changing health care system?
Ms. Baicker. Sure. So home health, I think, is an
interesting example because it is a really important benefit
for millions of people but it has been subject to some fairly
well publicized overuse, potentially even abuse, of extreme
rates of utilization for populations where it might not have
such a high benefit. If there were more careful delineation of
the cases in which it actually benefited people and they were
protected from copayments or had reduced copayments for those
cases versus patients where there are lots of alternatives that
might do just as well for them and where the utilization is
less warranted, you could then ensure that this vital benefit
for some is protected by cutting back on overuse in other
circumstances.
Mr. Engel. Thank you. Thank you, Mr. Chairman.
Mr. Pitts. The chair thanks the gentleman. That concludes
the questions of the members who are present. I am sure there
will be more questions from members who are not here, and we
will ask them to submit those. We will submit those to you in
writing, and we ask the witnesses to please respond promptly. I
remind the members that they have 10 business days to submit
questions for the record, so they should submit their questions
by the close of business on Friday, July 12. We have a
unanimous consent request.
Mrs. Christensen. Thank you, Mr. Chairman. I ask unanimous
consent to include in the record the AARP testimony that was
given at Ways and Means on the issue of benefit restructuring.
Mr. Pitts. Without objection, so ordered.
[The information appears at the conclusion of the hearing.]
Mr. Pitts. Very, very informational. Thank you very much
for your testimony today. And without objection, the
subcommittee is adjourned.
[Whereupon, at 11:50 a.m., the subcommittee was adjourned.]
[Material submitted for inclusion in the record follows:]
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