[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]
AN OVERDUE CHECKUP PART II: EXAMINING THE ACA'S STATE INSURANCE
MARKETPLACES
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS
OF THE
COMMITTEE ON ENERGY AND COMMERCE
HOUSE OF REPRESENTATIVES
ONE HUNDRED FOURTEENTH CONGRESS
FIRST SESSION
__________
DECEMBER 8, 2015
__________
Serial No. 114-107
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Printed for the use of the Committee on Energy and Commerce
energycommerce.house.gov
_____________
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COMMITTEE ON ENERGY AND COMMERCE
FRED UPTON, Michigan
Chairman
JOE BARTON, Texas FRANK PALLONE, Jr., New Jersey
Chairman Emeritus Ranking Member
ED WHITFIELD, Kentucky BOBBY L. RUSH, Illinois
JOHN SHIMKUS, Illinois ANNA G. ESHOO, California
JOSEPH R. PITTS, Pennsylvania ELIOT L. ENGEL, New York
GREG WALDEN, Oregon GENE GREEN, Texas
TIM MURPHY, Pennsylvania DIANA DeGETTE, Colorado
MICHAEL C. BURGESS, Texas LOIS CAPPS, California
MARSHA BLACKBURN, Tennessee MICHAEL F. DOYLE, Pennsylvania
Vice Chairman JANICE D. SCHAKOWSKY, Illinois
STEVE SCALISE, Louisiana G.K. BUTTERFIELD, North Carolina
ROBERT E. LATTA, Ohio DORIS O. MATSUI, California
CATHY McMORRIS RODGERS, Washington KATHY CASTOR, Florida
GREGG HARPER, Mississippi JOHN P. SARBANES, Maryland
LEONARD LANCE, New Jersey JERRY McNERNEY, California
BRETT GUTHRIE, Kentucky PETER WELCH, Vermont
PETE OLSON, Texas BEN RAY LUJAN, New Mexico
DAVID B. McKINLEY, West Virginia PAUL TONKO, New York
MIKE POMPEO, Kansas JOHN A. YARMUTH, Kentucky
ADAM KINZINGER, Illinois YVETTE D. CLARKE, New York
H. MORGAN GRIFFITH, Virginia DAVID LOEBSACK, Iowa
GUS M. BILIRAKIS, Florida KURT SCHRADER, Oregon
BILL JOHNSON, Ohio JOSEPH P. KENNEDY, III,
BILLY LONG, Missouri Massachusetts
RENEE L. ELLMERS, North Carolina TONY CARDENAS, California
LARRY BUCSHON, Indiana
BILL FLORES, Texas
SUSAN W. BROOKS, Indiana
MARKWAYNE MULLIN, Oklahoma
RICHARD HUDSON, North Carolina
CHRIS COLLINS, New York
KEVIN CRAMER, North Dakota
7_____
Subcommittee on Oversight and Investigations
TIM MURPHY, Pennsylvania
Chairman
DAVID B. McKINLEY, West Virginia DIANA DeGETTE, Colorado
Vice Chairman Ranking Member
MICHAEL C. BURGESS, Texas JANICE D. SCHAKOWSKY, Illinois
MARSHA BLACKBURN, Tennessee KATHY CASTOR, Florida
H. MORGAN GRIFFITH, Virginia PAUL TONKO, New York
LARRY BUCSHON, Indiana JOHN A. YARMUTH, Kentucky
BILL FLORES, Texas YVETTE D. CLARKE, New York
SUSAN W. BROOKS, Indiana JOSEPH P. KENNEDY, III,
MARKWAYNE MULLIN, Oklahoma Massachusetts
RICHARD HUDSON, North Carolina GENE GREEN, Texas
CHRIS COLLINS, New York PETER WELCH, Vermont
KEVIN CRAMER, North Dakota FRANK PALLONE, Jr., New Jersey (ex
JOE BARTON, Texas officio)
FRED UPTON, Michigan (ex officio)
(ii)
C O N T E N T S
----------
Page
Hon. Tim Murphy, a Representative in Congress from the
Commonwealth of Pennsylvania, opening statement................ 1
Prepared statement........................................... 3
Hon. Diana DeGette, a Representative in Congress from the State
of Colorado, opening statement................................. 5
Hon. Fred Upton, a Representative in Congress from the State of
Michigan, opening statement.................................... 7
Prepared statement........................................... 7
Hon. Frank Pallone, Jr., a Representative in Congress from the
State of New Jersey, opening statement......................... 9
Prepared statement........................................... 10
Witness
Andy Slavitt, Acting Administrator, Centers for Medicare &
Medicaid Services, Department of Health and Human Services..... 11
Prepared statement........................................... 14
Answers to submitted questions............................... 60
Submitted Material
Subcommittee memorandum.......................................... 52
Article of November 24, 2015, ``Rise in Early Cervical Cancer
Detection Is Linked to Affordable Care Act,'' by Sabrina
Tavernise, The New York Times, submitted by Ms. DeGette........ 58
Report by the Government Accountability Office, ``State Health
Insurance Marketplaces: CMS Should Improve Oversight of State
Information Technology Projects,'' September 2015, \1\
submitted by Ms. DeGette
----------
\1\ The information has been retained in committee files and also
is available at http://docs.house.gov/meetings/IF/IF02/
20151208/104256/HHRG-114-IF02-20151208-SD003.pdf.
AN OVERDUE CHECKUP PART II: EXAMINING THE ACA'S STATE INSURANCE
MARKETPLACES
----------
TUESDAY, DECEMBER 8, 2015
House of Representatives,
Subcommittee on Oversight and Investigations,
Committee on Energy and Commerce,
Washington, DC.
The subcommittee met, pursuant to call, at 10:02 a.m., in
room 2322, Rayburn House Office Building, Hon. Tim Murphy
(chairman of the subcommittee) presiding.
Members present: Representatives Murphy, McKinley, Burgess,
Blackburn, Griffith, Bucshon, Flores, Brooks, Mullin, Collins,
Cramer, Upton (ex officio), DeGette, Castor, Tonko, Yarmuth,
Clarke, Kennedy, Green, Welch, and Pallone (ex officio).
Staff present: Jessica Donlon, Counsel, Oversight and
Investigations; Emily Felder, Counsel, Oversight and
Investigations; Brittany Havens, Legislative Associate,
Oversight; Charles Ingebretson, Chief Counsel, Oversight and
Investigations; Chris Santini, Policy Coordinator, Oversight
and Investigations; Dylan Vorbach, Legislative Clerk; Christine
Brennan, Democratic Press Secretary; Jeff Carroll, Democratic
Staff Director; Ryan Gottschall, Democratic GAO Detailee;
Christopher Knauer, Democratic Oversight Staff Director; Una
Lee, Democratic Chief Oversight Counsel; and Elizabeth Letter,
Democratic Professional Staff Member.
OPENING STATEMENT OF HON. TIM MURPHY, A REPRESENTATIVE IN
CONGRESS FROM THE COMMONWEALTH OF PENNSYLVANIA
Mr. Murphy. Good morning. This subcommittee will now
convene, the Oversight and Investigations Subcommittee of
Energy and Commerce. And this hearing today is to continue
examination of the State health insurance marketplace
established under the Affordable Care Act, the ACA.
On September 29 the committee heard from a panel of
witnesses representing six State exchanges. While attempting to
paint a rosy picture, it is claimed that there are serious
short-term and long-term problems with State exchanges. One of
our main concerns we will address today is how Centers for
Medicare and Medicaid Services, or CMS, is conducting oversight
over the billions of taxpayer dollars invested in establishing
the State exchanges. Today, we expect direct and honest answers
from CMS Acting Administrator Andy Slavitt. And welcome back,
sir.
Today, CMS has handed up $5.51 billion to the States to
help them establish insurance exchanges. Despite this whopping
investment of taxpayer dollars, four States' exchanges have
been turned entirely over to the Federal exchange, while
countless others are struggling to become self-sustaining. As
the Federal dollars run dry and enrollment numbers appear far
below administration projections, all State exchanges face
significant budget shortfalls.
By law, State exchanges were supposed to be self-sustaining
by January 1 of 2015, at which point Federal establishment
grant money could not be used to operate the exchanges, not be
used. Yet, CMS has been issuing no-cost extensions to State
exchanges, allowing them to use the remainder of their Federal
grants through 2015 and in some cases 2016 against intent and
letter of the law. Federal funds still cannot be used for
operational costs, but because of lax oversight and weak
guidance, we don't know whether or not State exchanges have
actually spent this Federal money appropriately. We intend to
get clear answers today.
In the over 5 years since the ACA was enacted, CMS has
issued only two guidance documents to inform State exchanges on
the permissible ways to spend Federal establishment funds. The
first guidance, issued in March 2014, was less than a page. The
second guidance came only after the HHS Office of Inspector
General issued an alert to Acting Administrator Andy Slavitt
highlighting with urgency that State exchanges maybe using
grant funds for operational expenses, which is not allowed. In
fact, the OIG had discovered, based on budget documents, the
Washington Health Benefit Exchange might have used $10 million
in the establishment grant funds to support operations such as
printing, postage, and bank fees, again, not allowed.
HHS OIG urged Acting Administrator Slavitt to develop and
issue clear guidance to the State exchanges on the appropriate
use of establishment grant funds. What followed was a vague 2-
page guidance document bereft of concrete examples. Based on
these ``guidances,'' one wonders if CMS is encouraging the
State exchanges to spend Federal dollars in any way possible
against the stated purposes of the law to keep these State
exchanges limping along.
Through the committee's investigation, we have learned of
instances where State exchanges may have used establishment
grant dollars to cover operational costs or even transition
costs when a State exchange shuts down and moves to the Federal
platform. It hasn't been always easy to discern, however,
because these funds have been co-mingled, and expenses and
costs have been redefined. For example, rent, which is an
operational cost by any definition, suddenly becomes business
development costs. The system seems to be convoluted by design.
In spite of, or perhaps because of, CMS's hands-off
approach, the State exchanges are struggling to become self-
sustaining. They continue to face IT problems, lower-than-
expected enrollment numbers, and growing maintenance costs. And
as the HHS OIG pointed out in its alert, State exchanges are
facing uncertainties in revenue. Four State exchanges--Hawaii,
Nevada, New Mexico, and Oregon--have already shut down their
State exchanges, and these four States alone receive $733
million in Federal establishment grants. The taxpayers' return
on investment appears minimal at best.
Further, there was little indication that CMS has attempted
to recoup any of this money. It is our hope that Acting
Administrator Slavitt commits to and lays out a blueprint for
recouping these lost Federal dollars so that the American
people are not footing the tab for yet another ACA failure.
To better understand the challenges these State exchanges
face to ensure more tax dollars aren't wasted, this committee
has a number of questions. Why are State exchanges struggling
to become self-sustaining, especially given the extraordinary
taxpayer investment? Is it lack of CMS accountability or
oversight? Is CMS encouraging fiscal restraint or instead
taking a hands-off approach, which has allowed money to be
spent uncontrollably, unwisely, and maybe even impermissibly?
And where in exchange has decided to shut down has CMS sought
to recoup any of the Federal grant dollars? Lastly, are the
exchanges doomed to fail?
In my estimation, CMS oversight has been woefully sloppy at
best and willfully ignorant at worst, but with obvious spending
abuses, costing taxpayers millions and counting from the
States. We hope that CMS will be forthright in answering the
committee's many outstanding questions on its failure in
overseeing the ACA State exchanges, as well as provide Members
a blueprint on how the administration will recoup lost taxpayer
dollars moving forward. Right now, the situation is a mess, and
taxpayers are on the losing side, and that is simply
unacceptable.
This hearing comes at a time when premiums for low-cost
plans are on the rise, major insurers are publicly questioning
their decisions to join the exchanges, co-ops are failing at an
alarming rate, and State exchanges are expressing doubts about
their ability to exist long term. Mounting evidence suggests
that the ACA faces insurmountable problems in 2016, and today,
we have an opportunity to ask CMS top official if and when the
administration will finally address these concerns in a
meaningful way.
So I thank Acting Administrator Andy Slavitt for testifying
today and look forward to hearing answers to our questions, not
more questions.
[The prepared statement of Mr. Murphy follows:]
Prepared statement of Hon. Tim Murphy
On September 29th, the committee heard from a panel of
witnesses representing six State exchanges. While attempting to
paint a rosy picture, it is clear there are serious short-term
and long-term problems with State exchanges. One of our main
concerns we will address today is how Centers for Medicare and
Medicaid Services (CMS) is conducting oversight over the
billions of taxpayer dollars invested in establishing the State
exchanges. Today, we expect direct and honest answers from CMS
Acting Administrator Andy Slavitt.
To date, CMS has handed out $5.51 billion to the States to
help them establish insurance exchanges. Despite this whopping
investment of taxpayer dollars, four States exchanges have been
turned entirely over to the Federal exchange while countless
others are struggling to become self-sustaining. As the Federal
dollars run dry and enrollment numbers appear far below
administration projections, all State exchanges face
significant budget shortfalls. By law, State exchanges were
supposed to be self-sustaining by January 1, 2015, at which
point, Federal establishment grant money could not be used to
operate the exchanges. Yet CMS has been issuing No Cost
Extensions to State exchanges, allowing them to use the
remainder of their Federal grants through 2015 and, in some
cases, 2016 against intent and letter of the law. Federal funds
still cannot be used for operational costs. But because of lax
oversight and weak guidance, we don't know whether or not State
exchanges have actually spent this Federal money appropriately.
We intend to get clear answers today.
In the over 5 years since the ACA was enacted, CMS has
issued only two guidance documents to inform State exchanges on
permissible ways to spend Federal establishment funds. The
first guidance, issued in March 2014, was less than a page. The
second guidance came only after the HHS Office of Inspector
General issued an alert to Acting Administrator Andy Slavitt
highlighting with urgency that State exchanges may be using
grant funds for operational expenses, which is not allowed. In
fact, the OIG had discovered, based on budget documents, the
Washington Health Benefit Exchange might have used $10 million
in establishment grant funds to support operations, such as
printing, postage, and bank fees. Again, not allowed. HHS OIG
urged Acting Administrator Slavitt to develop and issue clear
guidance to the State exchanges on the appropriate use of
establishment grant funds. What followed was a vague two-page
guidance document, bereft of concrete examples. Based on these
``guidances'' one wonders if CMS is encouraging the State
exchanges to spend Federal dollars in any way possible against
the stated purposes of the law to keep these State exchanges
limping along.
Through the committee's investigation, we have learned of
instances where State exchanges may have used establishment
grant dollars to cover operational costs or even transition
costs when a State exchange shuts down and moves to the Federal
platform. It hasn't been always easy to discern, however,
because these funds have been co-mingled and expenses and costs
have been redefined. For example, rent--which is an operational
cost by any definition--suddenly becomes ``business development
costs.'' The system seems to be convoluted by design.
In spite of--or perhaps because of--CMS' hands-off
approach, the State exchanges are struggling to become self-
sustaining. They continue to face IT problems, lower than
expected enrollment numbers, and growing maintenance costs. And
as the HHS OIG pointed out in its alert, State exchanges are
facing uncertainties in revenue. Four State exchanges--Hawaii,
Nevada, New Mexico, and Oregon--have already shut down their
State exchanges. These four states alone received $733 million
in Federal establishment grants. The taxpayer's return on
investment appears minimal at best. Further, there is little
indication that CMS has attempted to recoup any of this money.
It is our hope that Acting Administrator Slavitt commits to,
and lays out, a blueprint for recouping these lost Federal
dollars so that the American people are not footing the tab for
yet another ACA failure.
To better understand the challenges these State exchanges
face and to ensure more tax dollars aren't wasted, this
committee has a number of questions: Why are State exchanges
struggling to become self-sustaining, especially given the
extraordinary taxpayer investment? Is it a lack of CMS
accountability or oversight? Is CMS encouraging fiscal
restraint, or instead, taking a hands-off approach, which has
allowed money to be spent uncontrollably, unwisely and maybe
even impermissibly? And where an exchange has decided to shut
down, has CMS sought to recoup any of the Federal grant
dollars? Lastly, are the exchanges doomed to fail?
In my estimation, CMS oversight has been woefully sloppy at
best and willfully ignorant at worst with obvious spending
abuses costing taxpayers billions and counting. We hope that
CMS will be forthright in answering the committee's many
outstanding questions on its failure in overseeing the ACA
State exchanges as well as provide members a blueprint on how
the administration will recoup lost taxpayer dollars moving
forward. Right now, the situation is a mess and taxpayers are
on the losing side and that is simply unacceptable.
This hearing comes at a time when premiums for low-cost
plans are on the rise, major insurers are publicly questioning
their decisions to join the exchanges, CO-OPs are failing at an
alarming rate, and State exchanges are expressing doubts about
their ability to exist long-term.
Mounting evidence suggests the ACA faces insurmountable
problems in 2016. Today we have an opportunity to ask CMS's top
official if and when the administration will finally address
these concerns in a meaningful way.
Mr. Murphy. I now recognize Ranking Member Ms. DeGette for
5 minutes.
OPENING STATEMENT OF HON. DIANA DEGETTE, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF COLORADO
Ms. DeGette. Thank you very much, Mr. Chairman.
While today we are having yet another hearing on the
Affordable Care Act, as usual, Mr. Chairman, I am disappointed
that here we are having another hearing focused on undermining
the law rather than focusing our efforts on trying to make the
law work better.
And I know with respect to the topic of this hearing today,
CMS is trying to implement efforts to make the law work better,
and I think that we should be using our time today to see how
we can partner to make that happen.
Since the ACA was passed over 5 years ago, this committee
has held dozens of oversight hearings on the law. Not one of
them has been focused on ways to make the law work better. Not
one of them has presented a balanced view of the law's
benefits. But despite that, we have gotten a lot of good news
out of these hearings about the number of Americans that the
law is helping and about what the agencies are trying to do to
improve coverage, despite some of the bumps in the road.
But, you know, even more disturbingly to me, though, it has
been really an uphill climb to try to implement this
legislation because some of our colleagues, both here in
Congress and around the country, have intentionally placed
roadblocks to implementation that actually make it harder for
their own constituents to access care.
Some of the Governors, when the law was passed, refused to
implement the Medicaid expansion, which would give healthcare
coverage to millions of lower-income Americans. One Republican
presidential candidate, who also happens to be a U.S. Senator,
recently bragged that he killed Obamacare by limiting risk
quarter payments.
I have got two things to say in response to that. First, I
think it is really disappointing that Members of Congress would
brag about taking health care away from vulnerable Americans.
Secondly, I think people are wrong on the facts. The Affordable
Care Act is not going anywhere. Despite countless attempts to
repeal, undermine, defund, and defame the law, the Affordable
Care Act is making comprehensive health care a reality for
American families. It is saving lives.
Since passage of the law more than 5 years ago, an
estimated 17.6 million Americans have gained health coverage
through the ACA's various provisions. According to the recent
CDC data, the uninsured rate has dropped to historic low of 9
percent down from 16 percent in 2010.
I just ran into my Colorado folks yesterday at the airport
coming out here, and they told me, despite the failure of the
Colorado co-op just a month or two ago, they are expecting,
because of the revisions and innovations they are making
Colorado, they may be up to 95 percent coverage in Colorado
pretty soon. That is extraordinary for the health care of our
constituents. And that is what we should be working to achieve.
I have got an article from the New York Times entitled
``Rise in Cervical Cancer Detection Is Linked to Affordable
Healthcare,'' Mr. Chairman. According to researchers from the
American Cancer Society, more women are receiving an early
diagnosis of cervical cancer due to an increase in health
insurance coverage under the ACA, and I would like to ask
unanimous consent to put that in the record.
Mr. Murphy. Without objection, so ordered.
[The information appears at the conclusion of the hearing.]
Ms. DeGette. Early diagnosis of cervical cancer improves
women's prospects for survival of the disease, and it also
bolsters their hope to preserve fertility during treatment. And
women with health insurance are far more likely to get a
screening that can identify cervical cancer early.
You know, I know that it is hard to make this specific
about constituents. It is hard sometimes for my colleagues on
the other side of the aisle to acknowledge that actual people
are being helped by this law. But millions of Americans are
benefitting from it, and a lot of people like me think we could
be making it even better.
The reason I am talking about this this morning is because
on the House Floor we will be likely voting this week on a
reconciliation bill to repeal key parts of the Affordable Care
Act. This would be, by our calculation, the 62nd attempted to
eliminate or repeal key provisions of the ACA. If enacted,
virtually all of the historic gains in health coverage we have
made in the last 5 years would be lost. This would be a tragedy
for the American people and a gross failure of leadership.
You know, we have done so much good this year in this
subcommittee. We did bipartisan work on pandemic flu. We did
bipartisan work on the Volkswagen investigation and many other
things. I think this could be the committee where we had these
hearings and then we sat down to think about how to improve
rather than to undermine the Affordable Care Act. I hope that
is what we will do in the next year, but frankly, I don't hold
out a lot of hope.
I yield back.
Mr. Murphy. The gentlelady yields back. Before I introduce
the next presenter, I want to welcome today--we have several
members here from the National Democratic Institute in support
of the House Democracy Partnership. This is a peer-to-peer
exchange and co-chaired by Representative Peter Roskam and
Representative David Price.
And we have guests with us from Kenya and Peru. Welcome
here. Just to let you know, this is a love fest among us. We
all like each other. So take back to your country, sometimes we
may argue, but in the end we still are in here for the same
cause, so I hope this is valuable----
Ms. DeGette. If the chairman will yield?
Mr. Murphy. Yes.
Ms. DeGette. We might disagree, but we disagree in a civil
way.
Mr. Murphy. Watch that seat.
Ms. DeGette. That is going too far.
Mr. Murphy. Thank you. I now recognize Mr. Upton for 5
minutes.
OPENING STATEMENT OF HON. FRED UPTON, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF MICHIGAN
Mr. Upton. Well, I thank the good chairman.
Today, we continue our oversight into the Obama State
health insurance marketplaces. Hard-working taxpayers invested
some $5.5 billion to establish these State exchanges, yet they
still continue to struggle, as we know. Exchanges are
struggling to sign up new customers, struggling to cover
operational costs, struggling to fix ongoing IT systems
problems, and ultimately struggling to become self-sustaining.
We welcome the CMS Acting Administrator Mr. Slavitt today,
and we appreciate his testimony on this very important issue.
As the State exchanges struggle to survive, we seek to
understand CMS' role in overseeing them. The Government's
robust investment of Federal funds into State exchanges should
be accompanied by equally robust accountability by these
stewards of taxpayer dollars. Yet the committee's oversight has
revealed that CMS took a hands-off approach to the State
exchanges. For example, CMS rubber-stamped a no-cost extension
request, issued permissive and vague guidelines, and welcomed
failed State exchanges to the Federal platform with no
questions asked. This is not acceptable.
We want to hear directly how CMS plans to improve its
oversight over the State exchanges to ensure that they are
spending all grant dollars legally and wisely.
We also must understand the long-term sustainability of the
State exchanges, especially against the backdrop of rising
premiums, failing co-ops, and insurance companies doubting
their participation in the exchanges next year. The writing is
on the wall that we very well could see yet another big
taxpayer investment spiral down the drain.
So it is critical that we all understand the short- and
long-term challenges that State exchanges are facing, as well
as what CMS is doing to help the exchanges confront the
challenges. Regardless of one's views of the President's health
law, the law and its implementation demand oversight. As we
continue to see today, billions of dollars are certainly at
stake.
[The prepared statement of Mr. Upton follows:]
Prepared statement of Hon. Fred Upton
Today we continue our oversight into the Obamacare State
health insurance marketplaces. Hard-working taxpayers invested
over $5.5 billion to establish these State exchanges, yet they
still continue to struggle. The exchanges are struggling to
sign up new customers, struggling to cover operational costs,
struggling to fix ongoing IT systems problems, and ultimately,
struggling to become self-sustaining.
We welcome the Centers for Medicare and Medicaid Services'
Acting Administrator Andy Slavitt today and appreciate his
testimony on this important issue. As the State exchanges
struggle to survive, we seek to understand CMS' role in
overseeing them. The Government's robust investment of Federal
funds into State exchanges should have been accompanied by
equally robust accountability by these stewards of taxpayer
dollars.
Yet, the committee's oversight has revealed that CMS took a
hands-off approach to the state exchanges. For example, CMS
rubber-stamped No Cost Extension requests, issued permissive
and vague guidance, and welcomed failed State exchanges to the
Federal platform with no questions asked. This is unacceptable.
We want to hear directly how CMS plans to improve its oversight
over the State exchanges, to ensure that they are spending
grant dollars legally and wisely.
We also must understand the long-term sustainability of the
State exchanges. Especially against the backdrop of rising
premiums, failing co-ops, and insurance companies doubting
their participation in the exchanges next year, the writing is
on the wall that we very well could see yet another big
taxpayer investment spiral down the drain. It is critical that
we all understand the short- and long-term challenges that
State exchanges are facing as well as what CMS is doing to help
the exchanges confront these challenges.
Regardless of one's view of the President's health law, the
law and its implementation demand oversight. As we continue to
see today, billions of dollars are at stake.
Mr. Upton. And I yield the balance of my time to Vice Chair
Blackburn.
Mrs. Blackburn. And thank you, Mr. Chairman. Mr. Slavitt,
welcome. We appreciate that you are here.
You know, shopping on the Federal exchange was supposed to
be as simple as shopping for insurance on Kayak or Esurance,
and that absolutely has not happened. And what we continue to
hear from our constituents is that this insurance, the
Obamacare insurance product, is too expensive to use once they
do get it because of the copays, the deductibles, and the
premiums that are there. It is a very expensive product.
We want to look at the GAO report from September. Today, we
want to go through this with you. As both Chairman Upton and
Chairman Murphy have said, it is very difficult for our
constituents, and basically what it appears is that this has
been a false promise that was given to people, that they would
have healthcare access because they were going to have
insurance, and that has not come about.
So we are very concerned about the dollars that have been
spent on these State exchanges. We are concerned about the
quality of the product.
And I yield the balance of my time to Dr. Burgess.
Mr. Burgess. Well, thank you for yielding.
Look, the administration has invested billions of dollars
in an experiment, the experiment that did not include the
necessary safeguards, and in fact ignored successful models in
the private market. The health benefit exchanges are one such
experiment. Billions of taxpayer dollars have been pumped into
reinventing the wheel, and millions of Americans, myself
included, have been forced to rely on exchanges to purchase
healthcare coverage.
My experience as a consumer on HealthCare.gov has been
extremely frustrating, and my experience as a Member of
Congress and a member of this committee and this subcommittee
has been just as frustrating.
I know there are those who want to accuse us of trying to
undermine the law. That in fact is not the case. The law should
work, and we as members of the subcommittee, we as members of
this full committee, we as Members of Congress have a
constitutional obligation for oversight as to how those Federal
dollars are spent. It has been extremely difficult getting
questions answered. It has been extremely difficult getting
information. That needs to change.
And I hope in this last year of the administration we
perhaps can at least now admit to each other that there are
serious problems with the law as it stands, and there are
serious actions that we could take to fix those.
Thank you, Mr. Chairman. I will yield back the time.
Mr. Murphy. Thank you. The gentleman yields back.
I now recognize the ranking member of the full committee,
the gentleman from New Jersey, Mr. Pallone, for 5 minutes.
OPENING STATEMENT OF HON. FRANK PALLONE, JR., A REPRESENTATIVE
IN CONGRESS FROM THE STATE OF NEW JERSEY
Mr. Pallone. Thank you, Mr. Chairman.
We are here today for yet another hearing to attack the
Affordable Care Act. Since the August recess, the majority of
the subcommittee's hearings have been dedicated to undermining
the law. The majority has called on the State exchanges and CMS
to criticize them, and they have burdened them with massive
document requests in the middle of the open enrollment.
I do not mean to suggest that we should not be doing
oversight of the implementation of the ACA, but what we are
seeing from my Republican colleagues is not balanced oversight
designed to improve the law. Instead, the majority's efforts
are simply designed to hamper implementation and undermine the
Affordable Care Act, regardless of the facts.
Frankly, it is incredibly frustrating to sit here time and
time again listening to my Republican colleagues lay into the
administration's witnesses, criticize the efforts of their
departments without any sense of perspective on the historic
gains in coverage that have been achieved. I would have hope
that by this point nearly 6 years after the passage of the law
we could add a balanced perspective on where implementation of
the law faces challenges, but just as importantly, where it is
helping Americans lead better lives and become more productive
citizens.
We should be talking about ideas to advance the mission of
the law to provide quality affordable care to all of our
constituents or even make key fixes where appropriate. We
should be holding hearings about ways to target the remaining
uninsured.
As CMS will testify today, the ACA is clearly making a huge
difference in the lives of millions of Americans. It is making
families stronger. It is making States stronger. It is making
America stronger. The law has faced challenges, but we have had
many more successes that you never hear about from my
colleagues on the other side of the aisle. So I am just going
to take a moment to ensure that we hear some of these successes
in today's hearing.
Because of the Affordable Care Act, 17.6 million uninsured
people have gained coverage through the law's various coverage
provisions. Since the start of this year's open enrollment
period on November 1, 2 million Americans have selected plans
through the federally facilitated exchange. More and more
States are making the right decision on Medicaid expansion,
which is benefiting the most vulnerable citizens, as well as
saving billions of dollars. Preexisting conditions can no
longer preclude individuals from gaining health insurance.
Consumers do not have to worry about losing coverage if their
employment changes. Reductions in the uninsured rate mean that
doctors and hospitals provide less uncompensated care, which
means fewer costs are being passed along to consumers and
employers who pay premiums for health coverage.
Instead of acknowledging any of these successes, my
Republican colleagues insist on holding more hearings and
debating more bills to undermine the law. And what is worse,
they are actively trying to take health insurance away from
those who now have it.
This week, the House may be voting on a reconciliation bill
to repeal key parts of the Affordable Care Act. This is the
House Republicans' 62nd attempt to repeal or undermine key
provisions of the law. The Republican bill eliminates subsidies
for individuals purchasing coverage through the exchanges and
eliminates the Medicaid expansion. According to the
Congressional Budget Office, the GOP bill would increase the
number of uninsured Americans by at least 22 million by 2018.
The Republican bill would undo many of the historic gains in
health coverage we have made in the past 5 years, while
offering nothing to help those who will lose coverage or to
make health care more affordable and available for all
Americans.
As for a viable Republican alternative to the Affordable
Care Act, which Republicans have said they would offer for
several years now, let me just say this: I will believe it when
I see it because I haven't seen it.
Let's actually work in a productive bipartisan way to make
the Affordable Care Act work better instead of taking empty,
meaningless votes to repeal it and take insurance coverage away
from our constituents.
And I yield back.
[The prepared statement of Mr. Pallone follows:]
Prepared statement of Hon. Frank Pallone, Jr.
We are here today for yet another hearing to attack the
Affordable Care Act. Since the August recess, the majority of
this subcommittee's hearings have been dedicated to undermining
the law. The majority has called in the State exchanges and CMS
to criticize them, and they have burdened them with massive
document requests in the middle of open enrollment.
I do not mean to suggest that we should not be doing
oversight of the implementation of the Affordable Care Act. But
what we are seeing from my Republican colleagues is not
balanced oversight designed to improve the law. Instead, the
majority's efforts are simply designed to hamper implementation
and undermine the Affordable Care Act regardless of the facts.
Frankly, it's incredibly frustrating to sit here time and
time again listening to my Republican colleagues lay into the
administration witnesses and criticize the efforts of their
departments without any sense of perspective on the historic
gains in coverage that have been achieved.
I would have hoped that by this point, nearly 6 years after
the passage of the law, we could add a balanced perspective on
where implementation of the law faces challenges, but just as
importantly, where it is helping Americans lead better lives
and become more productive citizens.
We should be talking about ideas to advance the mission of
the law, to provide quality, affordable care to all of our
constituents, or even make key fixes where appropriate. We
should be holding hearings about ways to target the remaining
uninsured.
As CMS will testify today, the ACA is clearly making a huge
difference in the lives of millions of Americans. It is making
families stronger. It is making States stronger. It is making
America stronger. Yes, the law has faced challenges, but we
have had many more successes that you never hear about from my
colleagues on the other side of the aisle.
So I will take a moment to ensure that we hear about some
of them in today's hearing.
Because of the Affordable Care Act, 17.6 million uninsured
people have gained coverage through the law's various coverage
provisions. Since the start of this year's open enrollment
period on November 1, two million Americans have selected plans
through the federally facilitated exchange. More and more
States are making the right decision on Medicaid expansion,
which is benefitting their most vulnerable citizens as well as
saving billions of dollars.
Pre-existing conditions can no longer preclude individuals
from gaining health insurance. Consumers do not have to worry
about losing coverage if their employment changes. Reductions
in the uninsured rate mean that doctors and hospitals provides
less uncompensated care, which means fewer costs are being
passed along to consumers and employers who pay premiums for
health coverage.
Instead of acknowledging any of these successes, my
Republican colleagues insist on holding more hearings and
debating more bills to undermine the law. And what's worse,
they are actively trying to take health insurance away from
those who now have it.
This week, the House will be voting on a reconciliation
bill to repeal key parts of the Affordable Care Act. This is
the House Republicans' 62nd attempt to repeal or undermine key
provisions of the law.
The bill eliminates subsidies for individuals purchasing
coverage through the exchanges and eliminates the Medicaid
expansion. According to the Congressional Budget Office, the
bill would increase the number of uninsured Americans by at
least 22 million by 2018.
This bill would undo many of the historic gains in health
coverage we've made in the past 5 years, while offering nothing
to help those who will lose coverage, or to make healthcare
more affordable and available for all Americans. As for a
viable Republican alternative to the Affordable Care Act, which
the Republicans have said they would offer for several years
now, let me just say this--I'll believe it when I see it.
Let us actually work in a productive, bipartisan way to
make the Affordable Care Act work better instead of taking
empty, meaningless votes to repeal it and take insurance
coverage away from our constituents.
I yield back.
Mr. Murphy. I ask unanimous consent that Members with
written opening statements be introduced into the record, and
without objection, documents will be entered in the record.
Mr. Slavitt, as you are aware, the committee is holding an
investigative hearing, and when doing so, has the practice of
taking testimony under oath. Do you have any objections to
testifying under oath?
Mr. Slavitt. I do not.
Mr. Murphy. And the Chair then advises you that under the
rules of the House and rules of the committee, you are entitled
to be advised by counsel. Do you desired to be advised by
counsel during the hearing today?
Mr. Slavitt. I do not.
Mr. Murphy. Thank you. In that case, would you please rise
and raise your right hand? I will swear you in.
[Witness sworn.]
Mr. Murphy. Thank you. Let the record show that the witness
has said yes.
You are now under oath and subject to the penalties set
forth in title 18, section 1001, of the United States Code. You
may now give a 5-minute summary of your written statement.
STATEMENT OF ANDY SLAVITT, ACTING ADMINISTRATOR, CENTERS FOR
MEDICARE & MEDICAID SERVICES, DEPARTMENT OF HEALTH AND HUMAN
SERVICES
Mr. Slavitt. Thank you. Chairman Murphy, Ranking Member
DeGette, and members of the subcommittee, thank you for the
invitation to discuss State-based health insurance
marketplaces. I'm Andy Slavitt, the Acting Administrator of the
Centers for Medicare & Medicaid Services.
CMS is working hard for the American healthcare consumer
and American taxpayer to provide access to affordable quality
healthcare coverage. Marketplaces, whether offered through
States or through Federally Facilitated Marketplaces, allow
individuals and families access to information, tools, personal
help, consumer protections, and an array of health plan options
from private sector health plans.
Setting up and managing State marketplaces is a significant
task, and I would like to talk now about how we provide
oversight and assistance to the marketplaces but also watch
over the American taxpayers' dollars.
In considering our oversight role, it is important to
understand all the responsibilities of a State-based
marketplace. States must establish the infrastructure to review
and qualify health plan offerings, develop online and call
center capabilities to provide eligibility and enrollment
services, interface with State Medicaid systems, develop
cybersecurity capabilities, outreach and education functions,
and dozens of other activities.
We've seen significant successes as States have innovated
to meet the needs of their populations and are successfully
serving their populations today, having insured millions of
people.
Every State has also had its share of challenges during the
startup phase, including five who have had more significant IT
challenges. And IT typically represents 30 to 50 percent of a
State's development budget, given their other responsibilities.
In discussing now our three key oversight priorities, I
want to focus in particular on those situations where States
have had more significant challenges. Our first priority is to
be good stewards of the Federal taxpayers' dollars. This means
returning unspent dollars to the Treasury and closing grants,
collecting improperly spent dollars, and preventing more from
going out the door. Over $200 million of the original grant
awards have already been returned to the Federal Government,
and we're now in the process of collecting and returning more.
This also means no new money to fix IT problems was given or
will be given to any of the five States or any other State that
ran into difficulties. We should not pay twice for the same
result.
Second, our job is to manage every dollar tightly. I have
always been a big believer in preventing problems so we can
spend less time recovering from them. Every State-based
marketplace has external funding sufficient to run their
operations. Federal money may not be used for regular
operations. We do a line-item review of the expenditures a
State proposes to ensure compliance with the law and conduct
audits to make sure there's a full accounting of all Federal
dollars. Important to our approach, we maintain control of the
purse strings, and 69 times this year we've denied use of
Federal funds. We also make adjustments through readiness
reviews, detailed reporting, regular audits, and site visits.
Third, and perhaps most important, we assist the State in
getting a return on their investment, as measured by the value
they provide to their State. For all the challenges they've
had, their ingenuity, their persistence, and their commitment
to State residents has paid off for millions of Americans. As
of June 30, State-based marketplaces provided coverage to
approximately 2.9 million people, and private health plans have
helped millions access Medicaid, and the uninsured rates in
these States have declined an average of 47 percent since 2013
to under 10 percent.
Now, I've worked in health care in the private sector since
the early 1990s and joined the Government only last year. Among
other things, I founded a company that assisted people who were
un- and under-insured, and we had a large-scale data and
analytics and healthcare consulting organization touching
virtually every part of the healthcare system.
I can just tell you from my perspective what a significant
advancement has been made for American families in a short time
by giving people access to care and helping alleviate the
financial worries that come from not being able to protect
one's own family. Having done it many times, I can also tell
you how difficult it is and how difficult it can be to launch
and operate any new enterprise of this scale.
In conclusion, I have the privilege of serving as Acting
Administrator while we are celebrating the 50th anniversary of
Medicare and Medicaid. The perspective this offers is that at
this early stage of the marketplace there are millions still to
educate and enroll, and State health leaders and the private
sector are continuing to find the best, most efficient ways of
meeting their needs of these populations.
CMS's oversight responsibilities are also critical in this
equation. CMS must not only be accountable for these
responsibilities, but we must take every opportunity to find
ways to improve how we do our job, including taking outside
input so we can best fulfill our dual mission of providing
access to affordable healthcare coverage for consumers and
protecting the investment by taxpayers.
We do appreciate this subcommittee's interest in this area,
and I am happy to answer your questions.
[The prepared statement of Mr. Slavitt follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Mr. Murphy. Thank you, Mr. Slavitt. I will now recognize
myself for 5 minutes of questions.
The HHS Office of Inspector General alert found that
Washington State's exchange had budgeted 10 million Federal
grant dollars for operational expenses, including printing,
postage, and bank fees from July of this year through December
31 of this year. These expenses are prohibited, but CMS had
approved them in Washington's grant application.
Now, I know you just said you screen these things, so how
did CMS miss that Washington State exchange was spending
Federal establishment dollars on operational costs?
Mr. Slavitt. So I believe if I'm correct that the early
alert stated that there was a potential that there may have
been misspent funds, but I don't think the OIG made that
conclusion. And we conducted an investigation and looked
through all their funds. There were a few adjustments made, but
we currently believe that the State of Washington, by and
large, is spending its money and categorizing it properly. We
do have one small collection that we are undertaking with the
State of Washington, but that's in process.
Mr. Murphy. But the OIG did say that that was occurring, so
you are saying there was since then an adjustment that you have
made in discussing with the OIG?
Mr. Slavitt. There's been plenty of adjustments with the
States. We have, just by background, hundreds of interactions
with the States. We review all their line items, review their
budgets monthly. So at any point in time they may have found
that they thought something may have been classified
improperly, and we take advantage of the work of the OIG and we
go conduct further investigation ourselves. I don't think we
believe that all of those 10 million were properly classified.
I think we did find there was some, however.
Mr. Murphy. Could you make sure you get us details of that,
and would you have found these if the OIG had not pointed these
out?
Mr. Slavitt. I wouldn't represent that our team finds
everything. I would say we have multiple pieces of the process,
most important being prevention because, once the dollar goes
out the door, you have to spend effort to collect it, so we
spent a lot of effort preventing things from being
misclassified.
We do, however, find things and collect them, and I think
OIG also finds things that we don't find. And when they do, we
have a period of time that extends 3 years past when the grant
periods end, which haven't even--the clock hadn't started
ticking yet. So we will make sure we collect anything that gets
uncovered.
Mr. Murphy. With that, do you then post what your findings
are in the OIG to say this is all in the inappropriate
categories and notify States if you have spent money in these
categories like you just reviewed the State of Washington so
States know that you are going to ask them to return that
money? Have you been posting that?
Mr. Slavitt. Yes. States are all quite aware.
Mr. Murphy. Would you make sure you share that with us in
writing, too? That would be helpful.
Mr. Slavitt. Yes.
Mr. Murphy. Is it appropriate for State exchanges to
transition HealthCare.gov after spending hundreds of millions
of taxpayers' dollars on their own sites? And shouldn't there
be other consequences for that? I mean they have failed but
they spent all this money and then later said, gee, sorry it
didn't work out. Does that seem appropriate?
Mr. Slavitt. Well, I think it is important for us to
recognize States have the right under the law to decide whether
they want to be a State-based exchange, a Federal exchange, or
to be a State-based exchange and use our platform. They have a
right to change their mind for a variety of reasons, including
technical or otherwise. So we think that's important.
What is also important is that if we find that any money
has either been misspent or we have granted money that we
believe the State no longer needs, we control the purse strings
and have the right to collect money back. And we've in fact
done that. We have collected money from recently the State of
Maryland in a similar situation.
Mr. Murphy. But my concern is with regard to the States
trying to get into the insurance business and it didn't work
out for many States, but there is no real consequence if they
were able to take the money, say, toss their hands up and say,
well, it turns out it didn't work out. We will just go to the
Federal exchange. And this is where my concern is, and many of
us have a concern that under those circumstances, if there were
no consequences, then that is hardly a lesson.
So this is where I want to know, do you have any plan or
intention to gather back, to recoup the Federal funds that have
been provided to States to set up their exchanges only to then
shift into HealthCare.gov?
Mr. Slavitt. So there's the five States that I think have
had the most significant IT challenges. Two of them maintained
their role as State exchanges. Three of them are now using the
Federal exchange platform but are still State-based exchanges.
And each of those cases is slightly different. In one of those
cases we have recovered money. In another case, the State is--
two of the other cases, I should say, the State is in the
process of trying to recover money, of which we will they go
after our Federal share. And in one of the other States we are
in the process of also closing down and collecting some money.
So it really varies by State, but I would think it's
important to point out that even though States had challenges,
they were by every measure able to enroll people, they had
contingency plans, and eventually were able to set up a system
that worked, which extends, as I said earlier, beyond
technology----
Mr. Murphy. I understand that, but it was after a lot of
failure and a lot of wasted money. And I would like it if you
could give something in writing of what your specific plan is
with regard to recouping these Federal lost dollars. I yield
now----
Mr. Slavitt. Happy to do that.
Mr. Murphy [continuing]. To Ms. DeGette for 5 minutes.
Thank you.
Ms. DeGette. Thank you, Mr. Chairman. Mr. Chairman, I am
assuming that you are referring to this GAO report from
September 2015 to Congress--
Mr. Murphy. Yes.
Ms. DeGette [continuing]. In these questions? I would ask
unanimous consent to make that report a part of the record as
well.
Mr. Murphy. Yes.\1\
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\1\ The information has been retained in committee files and also
is available at http://docs.house.gov/meetings/IF/IF02/20151208/
104256/HHRG-114-IF02-20151208-SD003.pdf.
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Ms. DeGette. Thank you.
So, Administrator Slavitt, I just wanted to ask you, have
you also reviewed this GAO report----
Mr. Slavitt. Yes, I have.
Ms. DeGette [continuing]. That the chairman was asking you
about? And one of the things that they said, it was their
finding that CMS had established a framework for oversight but
it wasn't always effectively executed. Did you see that
finding?
Mr. Slavitt. Yes, I did.
Ms. DeGette. And what is CMS's response to that finding?
Mr. Slavitt. Yes, I believe we concurred with that finding.
You know, from our perspective we are overseeing a lot of
grants, so engaging the OIG, which we have worked in
partnership with, as well as reports from GAO, are very helpful
to us, and we take action when we get those findings.
Ms. DeGette. And so did you take action as a result of that
concurrence?
Mr. Slavitt. Yes. Yes, we have.
Ms. DeGette. What did you do, briefly?
Mr. Slavitt. We built a tool which allows and monitors all
of the funding before it occurs, and so we were able to stop
money from going out the door that shouldn't.
Ms. DeGette. And I think this hooks onto the question the
chairman was asking you. If you could supplement your responses
by letting us know the policies that you have implemented, I
think that would be great.
Mr. Slavitt. Yes.
Ms. DeGette. Now, can you tell me about CMS's interactions
with SBM officials like weekly check-in calls and site visits?
Mr. Slavitt. Yes. I think we have dozens if not hundreds of
interactions. They relate, as you say, from weekly check-in
calls to monthly financials to site visits to audits.
[Audio malfunction in hearing room.]
Ms. DeGette. There. Administrator, what types of reporting
are required from CMS establishment grant recipients, and how
are they used by CMS?
Mr. Slavitt. So, you know, we conducted an OMB A-123
financial audit. We have a smart program audit. There's an
external security audit. The States have their own OIG and GAO
audits, many State Legislature audits. So these numbers get
pored over pretty aggressively.
Ms. DeGette. And then how do you use them?
Mr. Slavitt. Well, if we find that money's been improperly
classified either as a cost allocation or an operating expense
when it wasn't, we go collect it.
Ms. DeGette. And what types of independent assessments and
audits are required?
Mr. Slavitt. Well, there's the OMB audit, there are the OIG
and GAO audits, there are State audits. There is a large
variety of audits that follow these monies.
Ms. DeGette. And so sometimes, I think you said before,
States do misclassify or misuse the grants. So what steps does
CMS take then to bring the State back into compliance?
Mr. Slavitt. So to give you an example, we have found that,
in the case of Arkansas, roughly $1 million and we notified
them and we're in the process of collecting that. There's three
other States that have amounts of money that we thought were
misclassified. But I'd also emphasize, Congresswoman, we do a
lot more to prevent these from happening----
Ms. DeGette. Well, that was my next question, yes.
Mr. Slavitt. OK.
Ms. DeGette. Go ahead.
Mr. Slavitt. Yes. I mean, I think 69 times this year we
have caught in a request something that was to be used for
generally an operating purpose that we didn't believe was an
operating purpose. We believed for a development purpose, we
believed it was an actual operating purpose and we denied the
funding to begin with. And I think the committee----
Ms. DeGette. In reviewing the original application?
Mr. Slavitt. In reviewing the original request.
Ms. DeGette. And what types of review or evaluation does
CMS conduct on no-cost extension requests?
Mr. Slavitt. Pretty extensive requests, you know. And if
someone's going to get a no-cost extension, it really needs to
be to fulfill what's part of their work plan that they have set
up and that they just need more time to establish. I think we
all know that these things are taking a little more time to
implement than people originally thought.
Ms. DeGette. Now, I just want to shift my questioning for a
second to talk about some of the things the ACA is doing. The
most recent data from the CDC and Census Bureau found that the
uninsured rate has fallen to 9 percent from 16 percent in 2010.
I am wondering is this a new historic low in the uninsured
rate?
Mr. Slavitt. I believe it is.
Ms. DeGette. Do you believe that the Medicaid expansion has
played a significant role in these reductions?
Mr. Slavitt. It has.
Ms. DeGette. Why do you say that?
Mr. Slavitt. Because we see millions of people in the
States that have expanded Medicaid who now have access to
coverage largely for the first time in many cases.
Ms. DeGette. They didn't have insurance before?
Mr. Slavitt. Didn't have insurance before.
Ms. DeGette. And for these vulnerable citizens, can you
talk about how the Medicaid expansion has impacted them?
Mr. Slavitt. Yes, certainly. I think, very briefly,
Congresswoman, when you see families get access to health care
for the first time, it changes their participation in the
community in many profound ways, but it keeps them healthier.
And I think that also reduces costs for the long term.
Ms. DeGette. Thank you very much.
Thank you, Mr. Chairman.
Mr. Murphy. I now recognize Mrs. Blackburn for 5 minutes.
Mrs. Blackburn. Thank you, Mr. Chairman.
Mr. Slavitt, let's go to page 86 of the GAO report and take
a look at that if you don't mind.
Mr. Slavitt. I don't have it in front of me but I'm--if
someone could provide to me----
Mrs. Blackburn. OK.
Mr. Slavitt [continuing]. I'm happy to----
Mrs. Blackburn. All right. Well, on page 86 what you find
is the grants that have gone out, and the pool of money, which
was $4.5 billion, and you have sent about $1.3 billion out the
door. So what we want to know is where is the balance of money?
Where is it currently sitting?
Mr. Slavitt. Yes.
Mrs. Blackburn. Do you have a proper accounting of that?
Mr. Slavitt. Yes, we do. In fact, we can provide you with
an accounting of every dollar that's been spent, every dollar
that hasn't been spent but we still have control of, and we're
in the process in many cases of pulling that money back.
Mrs. Blackburn. OK. Then do provide us----
Mr. Slavitt. We will.
Mrs. Blackburn [continuing]. With that accounting because
we will need to see that. And, you know, if there is money that
you are--let's go to the Arkansas situation.
Mr. Slavitt. OK.
Mrs. Blackburn. I know you had said there was $1 million
there for unallowable. So tying back into what the chairman was
asking you, when you have a situation, do you give them a plan
of action and a timeline for returning that money----
Mr. Slavitt. Yes.
Mrs. Blackburn [continuing]. To the Treasury? OK.
Mr. Slavitt. Sometimes there's a little negotiation at
first, but then we do that, yes.
Mrs. Blackburn. OK. It seems interesting there would be
negotiation if they used it for something that was not allowed.
Mr. Slavitt. Well, I think really this is all a matter of
us explaining to them why we believed it was unallowable, their
reviewing it, reviewing with their lawyers. It takes--
Mrs. Blackburn. OK.
Mr. Slavitt [continuing]. A little bit of time and then----
Mrs. Blackburn. All right. How many other States have
utilized funds for unallowables?
Mr. Slavitt. For unallowables, I can think of at least
three that we're in the process of----
Mrs. Blackburn. OK.
Mr. Slavitt [continuing]. We're in the process of working--
--
Mrs. Blackburn. And you plan to get all of that money back?
Mr. Slavitt. We do.
Mrs. Blackburn. OK. Excellent. That sounds good. Also in
the GAO report one of the things that is of concern to me is
they say none, zero, nobody, not one of these exchanges are
meeting the desired operational outcomes in all functional
categories envisioned by CMS. So at this stage of the process,
doesn't this demonstrate that the systems are incomplete and
incapable of functioning properly?
Mr. Slavitt. What I can tell you today is that all of the
exchanges are functioning--serving the members in their States,
in their communities. And all of them have run into their share
of challenges. None of this was easy, some of them bigger
challenges than others, but there have been some that are very
successful, and I think the experimentation model of States
doing this on their own has had some merit.
Mrs. Blackburn. OK. Then how do you answer the GAO's
assessment that none are meeting the desired functional
outcomes?
Mr. Slavitt. I think at any given point in time there have
been challenges, been things that have been delayed, have been
contingency plans. And so these----
Mrs. Blackburn. But nobody is meeting the desired outcomes.
We continue to get complaints about these exchanges. We hear
from people that--you know, the dissatisfaction is rampant. It
costs too much, it is too expensive to use, the exchanges don't
work, and then you get a GAO report that says nobody is hitting
the metrics. So why do you continue to put money in on this if
they are not meeting the functional outcomes, the desired
outcomes? Why are you continuing to put money into this?
Mr. Slavitt. So I understand the question, and it's an
important question, of course. You know, 2.9 million people
have been covered. I think that's the primary job of these
exchanges. I think they are reaching the needs of populations
that have never been covered before, and I think they're rising
to those challenges----
Mrs. Blackburn. So we have spent 4.5--or could spend $4.5
billion to get access to 2.9 million people?
Mr. Slavitt. You know----
Mrs. Blackburn. That is what you are saying?
Mr. Slavitt. I'm saying the States have reduced their
uninsured rate, the States that have State-based marketplaces,
to under 10 percent, and they're still in the establishment
phase. It's still early on. They're still working at building.
And if we believe that there's money that's been either
improperly spent or is money that's been part of a grant is no
longer needed, we have every ability to collect that money and
we'll bring it back. And so I think my----
Mrs. Blackburn. So if you are in the private sector and you
were 5 years into a rollout and you still weren't functional,
would you give yourself an A or an F?
Mr. Slavitt. You know, I wouldn't agree with the
characterization that they're not functional at this point.
Mrs. Blackburn. Well, the GAO says they are not. So then
you are disagreeing with the GAO report?
Mr. Slavitt. I would say that at this point in time the
States are all functional. Are they perfect and----
Mrs. Blackburn. OK. So you disagree. Then if the GAO says
not any of them have hit the desired operational outcomes in
all functional categories, Mr. Slavitt, that means it isn't
working.
Mr. Slavitt. Well, let me take a look at the language they
use and let me get back to you on the representation of their
report.
Mrs. Blackburn. Well, I would think that you would have
known that answer, if you are functional or not, before you
came to us. I yield back.
Mr. Murphy. The gentlelady yields back. I now recognize Mr.
Pallone for 5 minutes.
Mr. Pallone. Thank you, Mr. Chairman.
Despite countless attempts by the Republicans to repeal and
undermine and defund the Affordable Care Act, it is making
affordable, comprehensive health coverage a reality for
American families. According to recent CDC data, the uninsured
rate has dropped to a historic low of 9 percent down from 16
percent in 2010, and for the first time, more than 90 percent
of all Americans have health insurance.
So I want to ask Administrator Slavitt, can you put this in
historic perspective? How significant is this drop in the
uninsured rate? And can you comment on how the different
coverage provisions of the ACA have operated to result in these
gains in insurance coverage?
Mr. Slavitt. Well, since at least I've been in health care
in the early 1990s there's really been very little progress up
until 2013 in seeing the uninsured rate improve. So these
strike me as fairly significant improvements. I think they've
come both from Medicaid expansion, as well as the offering of
qualified health plans through the exchange.
Mr. Pallone. And you have said, of course, that these gains
really are historic, and I want to thank you for all your
contributions to making health insurance more affordable and
available to millions of Americans.
But looking to the future, it is my understanding that this
open enrollment season that we are in and future seasons are
going to be more challenging because the most motivated
individuals have already signed up and the remaining
individuals who are eligible are harder to reach. Is that
correct?
Mr. Slavitt. I think that's a fair characterization.
Mr. Pallone. And according to some experts, many of the
remaining uninsured are actually still unaware or confused
about how Federal subsidies are available to help them purchase
insurance. So I just wanted to ask you a couple questions about
that. How is CMS recalibrating its outreach and enrollment
strategy in order to communicate with these harder-to-reach
populations?
Mr. Slavitt. You know, I think everybody in the marketplace
needs to figure out how to continue to simplify not only the
messages but also how health care works and how health
insurance works so that people can understand which doctors are
in which networks, which drugs are in which formularies, how
things like deductibles work, building tools for those things.
These are very, very important challenges and opportunities for
all of us.
Mr. Pallone. And then am I correct in stating that nearly
80 percent of the uninsured who are eligible for marketplace
coverage may be eligible for tax credits to purchase subsidized
insurance in 2016?
Mr. Slavitt. That's correct.
Mr. Pallone. So I mean these people are all--I mean, there
are obvious advantages if they are made aware. What is CMS
doing to communicate so that they understand that they may be
eligible for the subsidies? I don't know if you answered that,
but I would like to know more specifically if you could.
Mr. Slavitt. So I think, for us, it's really a function of,
exactly as you said, Congressman, making sure people are aware
that there are subsidies, that there are plenty of choices
available for under $100 and premiums for most people, under
$75 for many people, and continuing to take that message to
where people live and where they work in their communities. I
have to remind myself all the time that these are people, many
of whom have not had health insurance for a long time, and so
they're not as connected to the process as people who've been
engaged so far.
Mr. Pallone. You know, my own experience, when you began
the open enrollment I guess was, what, in the early part of
November? Is that when it began?
Mr. Slavitt. November 1.
Mr. Pallone. And we had a couple of events at, you know,
the centers that were being set up, and there was a lot of, you
know, outreach that was done not so much in the traditional
way, you know, with ads or, you know, media-type things but
more, you know, just with people going around, you know, with
flyers and, you know, knocking on doors and that type of thing.
And we did get a lot of people actually show up, you know, even
that first day.
And, you know, it is hard. I mean a lot of times you have
to, you know, figure out exactly where your placement center
is, you know, operate on weekends, you know, do things that are
not easy to be honest just to get people.
And I just think that, you know, I know that a very good
job is being done right now, you know, during this period to
try to get to the people, but it is hard. You know, even when I
talk to people one-on-one I explain to them that, you know,
they can get help with their premium, they are kind of shocked
by it, which to me, you know, is surprising 6 years after, you
know, we voted on this that, you know, people still don't
understand that they can get help with their premium. But that
is the reality.
Mr. Slavitt. And this is one of the successes of State-
based marketplaces because they understand their local
populations better than anyone could here in Washington, DC,
and I think they do a nice job of that.
Mr. Pallone. Thank you.
Mr. Murphy. I thank you and now recognize Mr. McKinley for
5 minutes.
Mr. McKinley. Thank you, Mr. Chairman. And thank you for
appearing before us, Mr. Slavitt.
Several comments, one, I think in your opening remarks you
touched on some of your mission statement of providing
oversight and assistance, but what was missing, I thought, and
maybe because of my hearing loss I might have missed something,
but I didn't hear about accountability, trying to give some
guidance to the people not only on your own staff but those
affected parties with it. And the chairman talked a little bit
about accountability. And I know coming from the private
sector, there is accountability.
Just a quick grab this morning of things here with a person
that, because he had committed fraud, he is going to spend 30
months in prison. Here was another one that paid $7 million in
restitution to NIH. Here is another individual who is going to
serve 27 months for $335,000 in fraudulent documentation. And
here is another person who is going to spend 364 days in a
county jail for $31,900 in inappropriate expenditures.
So what I am wondering about here a little bit is what are
we doing? Are we just checking the box that you are providing
guidance, or are you holding people accountable either in your
department or at the effective--like Arkansas? Is anyone going
to be held accountable?
Mr. Slavitt. We are accountable for making sure that the
Federal tax dollars are getting spent properly, and we're
accountable and have been collecting Federal tax dollars when
they have been misused or not--they're not----
Mr. McKinley. OK. Could you tell me, has anyone lost their
job?
Mr. Slavitt. In the State?
Mr. McKinley. In the State or in your own department if you
caught--they have given inappropriate advice. These people all
have gone to prison as a result of doing something wrong.
Mr. Slavitt. I can't speak to what's happening in the
States, but I would tell you that just because a State
misclassified information doesn't necessarily mean that they
did it with intent. And each case, as you know, it's case by
case.
Mr. McKinley. Well, I keep looking for a good analogy and a
quick term, and I guess you seem to be like a policeman or a
State trooper along the road trying to keep people and guide
and keep them under control, but when they speed, they are
ticketed; they are fined. I am just wondering what you are
doing----
Mr. Slavitt. All----
Mr. McKinley [continuing]. Your accountability for that. If
they abuse it, then they should be paying for it.
Mr. Slavitt. Well, we're certainly willing to make all of
these things a matter of public record, as we have.
Mr. McKinley. But you don't have anyone who has been held
accountable for anything going on?
Mr. Slavitt. I'm sure there's been people throughout
exchanges who've lost their jobs----
Mr. McKinley. Can you share that back with me, names of
any--just give me a handful of names because surely during this
process, as convoluted as it has been, that someone should be
held accountable for it.
And just in closing, you had mentioned about the
affordability. I would--with all due respect, I have a little
problem because in West Virginia we only have one exchange
representing the majority of the State, and their costs are
going to be increasing 19.7 percent if their rate is approved.
That is not affordable. What should be done? What can we do in
West Virginia, almost a 20 percent hike in premiums?
Mr. Slavitt. Yes, so I believe West Virginia has seen its
uninsured rate move from 17.6 percent down to 8.3 percent. I
think we are----
Mr. McKinley. No, that is not the question. My question is
about affordability.
Mr. Slavitt. Yes. I'll----
Mr. McKinley. That is part of the title here of this bill,
is the Affordable Care Act, but under the entitlement, they
can't afford it.
Mr. Slavitt. Sure. I'll be happy to get back with you on
specifics around the State of West Virginia. What I can tell
you is for the majority of the residents, they still have
opportunities to get covered for less than $100 a month. No
doubt we take affordability seriously and there is a lot of
work to do there, and I'm happy to visit with you about the
State specifically.
Mr. McKinley. I would love to hear it, and I just want to,
again--going to close again with just----
Mr. Slavitt. Of course.
Mr. McKinley [continuing]. I want accountability. And that
is what we started with. Who is going to be responsible for
what is happening out here all in Federal Government? That may
be just in yours right now is over this Affordable Care Act?
Who is being held accountable? I look forward to talking to
you.
Mr. Slavitt. OK.
Mr. McKinley. Thank you. I yield back my time.
Mr. Murphy. Mr. McKinley, when you referred to the
affordability, are you referring to the premiums----
Mr. McKinley. Yes.
Mr. Murphy [continuing]. Deductibles----
Mr. McKinley. Just----
Mr. Murphy [continuing]. Who pays all the----
Mr. McKinley. I am talking about the premiums themselves
were 19.7 percent increase.
Mr. Murphy. I understand, but I think there is also concern
for the deductible, so if you could also get that information,
that would be helpful.
Mr. Slavitt. OK.
Mr. Murphy. I now recognize from Florida, Ms. Castor,
recognized for 5 minutes.
Ms. Castor. Thank you, Mr. Chairman. And good morning, Mr.
Slavitt.
Mr. Slavitt. Good morning.
Ms. Castor. Survey after survey published by Government and
nongovernment sources over the past year all confirm that the
percentage of uninsured Americans has declined substantially
due to both the Affordable Care Act exchanges and marketplaces
and also due to the expansion of Medicaid in many States. In
fact, the census data from September found that the uninsured
rate dropped in each and every State, and this is a wonderful
accomplishment. It was one of the overriding goals to ensure
that our neighbors have that very basic fundamental access to
affordable health care.
Although all States saw reduction in the uninsured rate,
States that setup their own State-based marketplaces and
expanded Medicaid saw the greatest gains. For example,
according to the census data--and Mr. Yarmuth will like this--
from 2013 to 2014 Kentucky showed an over 40-percent drop in
the uninsured rate. Oregon's rate dropped 34 percent, and
Minnesota's rate dropped 28 percent. And further declines in
uninsured rates are likely to continue into the next year.
Now, Florida, my home State, doesn't have a State-based
marketplace, but we are going gangbusters on the number of my
neighbors now that have access to an affordable plan. And it
was announced just last week that, as my neighbors enroll and
renew coverage, we are approaching over half-a-million so far
just over the past 4 weeks. That is out of the 2 million all
across the country that are renewing in the Federal
marketplaces.
And if you all are looking for a holiday gift for a loved
one, for your son or daughter or niece or nephew, be sure to
get them enrolled by December 15 because then they can start
their coverage on January 1.
We are very fortunate in the Tampa Bay area the average
cost of our standard exchange insurance plan is actually
dropping this year, and so it is very helpful to have that
competition. In areas where we have that competition, the costs
of plans are actually going down.
But back to the State-based exchanges, Administrator
Slavitt, what did these declines in the uninsured rate tell us
about the State-based marketplaces? Do you think that they are
succeeding overall?
Mr. Slavitt. Yes, Congresswoman, I think they are. I think
the State-based market places are on average doing even better
than the Federal marketplace reductions in the uninsured.
Ms. Castor. And do you have a sense of how many people have
enrolled in coverage through the State-based marketplaces so
far?
Mr. Slavitt. As of June 30, I think the number was roughly
2.9 million people.
Ms. Castor. And what role have the premium support played
in that, and who receives the premium support? Who is it
available to?
Mr. Slavitt. Sure. So the cost-sharing reductions and the
tax credits that are available through the Affordable Care Act
really are allowing people to afford their coverage for the
first time in many of these places. So it's been a big impact.
Ms. Castor. And what we found in Florida is, you know, it
is kind of complicated for folks who have never had the ability
to afford health care before. The navigators are playing a very
important role because they will sit down with you and go
through all of the options and what makes sense for you or your
family. And you have seen this same thing across the country?
Mr. Slavitt. Absolutely. Absolutely. I was just at a
community center and saw the exact same thing.
Ms. Castor. And what more can we do to continue to lower
the uninsured rates even further?
Mr. Slavitt. So we are willing to work with any State that
hasn't yet expanded Medicaid that has an interest in having a
conversation about----
Ms. Castor. Yes, that is my State. Boy, we have thousands
and thousands of my neighbors, and it has just been--Governor
Scott has been so intransigent while it shows that it would
lower costs. The chamber, businesses, hospitals are behind it.
OK, you are willing to work, but what happens when you run into
this brick wall of unreasonableness and unwillingness to expand
Medicaid?
Mr. Slavitt. Exactly. Well, we're willing to work with any
State. We know the States have their own sets of local
circumstances and concerns, and we're willing to entertain them
on their terms. We are open for business for States that are
interested.
Ms. Castor. I know you are still willing to talk to
Florida. I hope we can put the coalition together again to do
it. And even though we have those challenges in certain States
on Medicaid and there are going to be glitches and audit
reports that are not so favorable in some ways, it is still
important to remember the purpose of these exchanges and the
grants that support them is to provide affordable health
coverage. And it is great to see that the Affordable Care Act
is providing that lifeline to affordable coverage and consumer
protections and the State and Federal exchanges are achieving
those goals. So thank you very much.
Mr. Murphy. The gentlelady yields back. I now recognize Dr.
Burgess for 5 minutes.
Mr. Burgess. Thank you, Mr. Chairman.
Mr. Slavitt, I am going to depart a little bit from the
stated purpose of the hearing. It is so rare that we get the
CMS Administrator in here. I think it's been 2 or 3 years, so
there are some things that I feel like I need to ask you since
I have the opportunity to do so.
But first, I just want to offer to colleagues on the other
side of the dias complaints that no one on the Republican side
is trying to improve anything in health care, I have a bill out
there, have had for some time, H.R. 1196, which would allow the
bronze- and silver-level plans to be each considered as an HSA-
compatible plan by definition.
One of the mainstays of the Affordable Care Act is you have
got high-deductible, high-cost insurance. In the old days when
I had an HSA I bought for a lower premium, I had a higher
deductible and I could put some of that money away to use for
that high deductible. We have made it very, very difficult for
people who have these high deductible policies, but again, I
encourage people on the other side of the dais to look at H.R.
1196. If you can suggest improvements to it, perhaps we have
something to talk about.
But the basis is that every bronze or silver plan would be,
by definition, HSA-compatible. You wouldn't have to look, you
wouldn't have to fight, you wouldn't have to try to find one
that was HSA-compatible. They all are or they all would be.
And then the other thing is really pretty straightforward.
Currently, I have a health savings account. I am capped at
$3,400 a year that I can contribute, but my deductible is
$6,000 on a bronze plan and the PPO, so why not make those two
amounts equal? And if the deductible is $6,000 in a bronze- or
silver-level plan, let that be the cap on the amount that could
be put away into the health savings account.
Now, as I sit here and I listen to discussion on both sides
of the dais, you know, I feel like I am stuck in a Dickens
novel. It is the best of times, it is the worst of times. So, I
mean, I think a fair observation is that the Affordable Care
Act has never had, never had even a plurality of positivity. It
is about a 52 to 53 percent negative right now when you look at
the polling numbers. You have to ask yourself you are giving
something away, why aren't people liking it more? And the
answer is because even though you are giving something away, it
is still really expensive to live under the Affordable Care
Act.
Now, my personal experience, I rejected the special deal
for a Member of Congress and I just took a bronze plan, and the
HealthCare.gov, one of the most miserable experiences that I
have ever been through with trying to get signed up for the
darn thing, but look, I have got an insurance premium that is
higher than I have ever paid in my life. I have a deductible
that, quite honestly, leaves me, at least in my consideration,
functionally uninsured. People have asked me, well, is your
doctor even on the list of providers you even go to? I don't
know because I am not going to look because I am not going to
go to the doctor. If I can't fix it myself, then, OK, that is
that, but I am not going to spend $6,000 on an office call or
an ER visit. And most people actually fall into that category.
So once again, even though you have people with insurance,
you have people who are financing a lot of their day-to-day
healthcare needs out of cash flow, which is exactly the way it
was before. The only difference was you could in fact buy an
affordable policy before. Now, you simply cannot. And oh, by
the way, we are going to fine you if you don't do that.
I also have a question about some of the implementation on
the Affordable Care Act, and I apologize for doing this to you
without warning you before, but section 1311(h), subsection
(B), which deals with--of course, this is talking about the
exchanges, (h) deals with quality improvement, enhancing
patient safety. It talks about (A) a hospital with greater than
50 beds, the next paragraph is (B) a healthcare provider. And
here, our healthcare provider can work in the exchange only if
a provider implements such mechanisms to improve healthcare
quality as the Secretary, by regulation, may require. And the
start date for that was January of this year.
So I guess my question to you is have the rules been
written on 1311(h) when my provider friends ask me where is
this in the rulemaking process? Has that in fact happened? Are
people going to be excluded from the exchanges because they
don't meet the Secretary's definition of quality? And has the
Secretary defined quality? And are those definitions likely to
change?
Mr. Slavitt. Yes. Thanks. So I think your question is
relative to how we're implementing the quality provisions in
the Affordable Care Act relative to exchanges. I could spend
more time with you either here or in another setting kind of
taking you through the quality steps. We're introducing a whole
series of quality reporting measures that are going to be
coming with the exchange shortly. If I think I understand
your----
Mr. Burgess. Have you excluded a provider based on quality?
Mr. Slavitt. Yes. I'm not sure I understand your question
correctly. I want to make sure that I study that particular
subsection. You know, we do reviews, and I think we do reviews
based on the network adequacy. I'm not sure that we've yet
excluded any provider for quality purpose at this point, but I
will get back to you.
Mr. Burgess. Thank you.
Mr. Slavitt. Thank you.
Mr. Murphy. Thank you. I now recognize Mr. Tonko for 5
minutes.
Mr. Tonko. Thank you, Mr. Chairman. Welcome, Administrator.
Administrator Slavitt, as you mentioned in your opening
testimony, we need to keep in perspective that the Affordable
Care Act is working, and it is working best in States that have
embraced the law and taken advantage of the tools that the
Affordable Care Act provides.
When States take ownership of the law and its benefits, the
residents of that State see better outcomes. Let me use as an
example my home State of New York. We expanded Medicaid. We set
up our own exchange, the New York State of Health. And this
year, we are one of the first States to utilize the basic
health plan option known in New York as the Essential Plan. The
Essential Plan will help people toward the lower end of the
income spectrum but above the Medicaid eligibility line to gain
access to quality health insurance for as little as $20 per
month.
Because New York has taken a proactive approach to
healthcare reform, the citizens in our State have reaped the
benefits. More than 2 million New Yorkers have enrolled in
coverage because of the Affordable Care Act.
Certainly, with that in mind and across the board States
have pursued the State-based marketplace models. And they are
serving as laboratories for innovation, testing new models for
enrollment, insurance market oversight, and consumer
protection. And they are tailoring the ACA to their own given
citizens.
With that in mind, Administrator, California has been a
leader in the active purchaser model. Can you explain what this
is and how this has helped cover California ensure access to
high-quality affordable health insurance coverage?
Mr. Slavitt. Yes, thank you for the question. Yes, I think
this is an example of a State innovation where California has
really been, as the description says, actively involved in
defining the benefit offerings for the residents of their
State, and I think quite successfully given--I think both the
number of people that have been covered but also the management
of the rate of costs has been, I think, quite good, and they've
done a very nice job.
Mr. Tonko. Now, are other States taking similar approaches
that you know of----
Mr. Slavitt. Yes.
Mr. Tonko [continuing]. To certify, you know, qualified
health plans?
Mr. Slavitt. I believe there are several others, yes.
Mr. Tonko. OK. Any number that you have in mind of how many
States?
Mr. Slavitt. Yes, let me get back to you on the exact
number----
Mr. Tonko. OK. Thank you. And what other steps are the SBMs
taking to improve the quality of care to transform the
healthcare delivery system?
Mr. Slavitt. So I got back from a tour of several States,
and, you know, they're each doing unique, innovative things.
Some are health fairs, some are, you know, reaching out into
communities where they've got specific needs. But again, I
think this is a benefit of the model of a State operating their
own exchanges. It gives them more control to be able to tailor
things to the needs of their population.
Mr. Tonko. And as we move forward, does CMS plan to
encourage States to set up and operate their own exchanges?
What Federal support will exist out there, will remain for our
other States to plan to continue to operate their own
exchanges?
Mr. Slavitt. Well, of course, there is no more new grant
funding, and of course the law provides every State the
flexibility to make their own decision, but we will of course
support any State that wants to set up a State-based
marketplace. And, you know, today, if a State wants to do this,
they get the benefit of all the best practices and lessons
learned that the States that originally did it didn't have
access to.
Mr. Tonko. Right. Do you hear from residents of these given
States that have not expanded Medicaid, Medicaid for example or
establish their own exchanges? Do you hear from any of the
consumers?
Mr. Slavitt. We do. We do frequently.
Mr. Tonko. And what is that dialogue like? Is it one of
concern, frustration?
Mr. Slavitt. You know, I think anybody who doesn't have
coverage has to manage their own personal family situation very
differently than the rest of us do. You know, they don't do
things typically like let their kids play a sport in school
because they might get hurt or injured. So there's a whole set
of things that, you know, in the insecurity of people's lives
that, you know, those of us that have insurance don't have to
deal with every day.
Mr. Tonko. OK. Well, I certainly appreciate the work that
you are doing. I know that it takes a lot of focus and
concerted effort to move us and to transition us to a new era
of healthcare delivery, and we thank you for the work that you
are doing at the agency.
With that, Mr. Chair, I yield back.
Mr. Murphy. The gentleman yields back.
I now recognize the gentleman from Texas, Mr. Flores, for 5
minutes.
Mr. Flores. Thank you, Mr. Chairman. I thank the witness
for joining us today.
The ACA required the State-based exchanges be self-
sustaining on or after January 1 of 2015, at which point,
according to CMS, States could no longer use grant funds to
cover maintenance and operating costs. And yes, as you heard
earlier today, according to the GAO report, the greatest
challenges that States with State-based marketplaces are 1)
inadequate staff and 2) inadequate funding.
And you answered a question earlier, and in that question
you said this: You said State-based exchanges are doing better
than Federal exchanges. So given that the GAO report says that
the State-based exchanges are having problems, that doesn't
foretell good news for the Federal exchange.
Continuing, according to the GAO, none of the State-based
exchanges were fully operational on all the required functional
categories as of February 2015. You heard that from Mrs.
Blackburn's question. Four State-based exchanges have already
transitioned to the Federally Facilitated Marketplace because
they failed to be self-sustaining. So my question is this: How
many more State exchanges do you expect to fail and make the
transition to the Federal exchange?
Mr. Slavitt. I believe what I said earlier was that States
have been even more successful at reducing the uninsured rate.
The national average has been about 45 percent. States that
have State-based exchanges have done about 47 percent. So I
think both are successful, States even more so. All the States
have----
Mr. Flores. OK. Let's go to my question.
Mr. Slavitt. OK.
Mr. Flores. So do you expect more State exchanges to fail
and make the transition to the Federal exchange?
Mr. Slavitt. So all the States have access to a source of
their own funding either through an assessment that they have
on the health insurers in their State or----
Mr. Flores. So are you saying no State exchanges are going
to fail?
Mr. Slavitt. I'm saying all States currently have sources
of funding now. Because it's a dynamic world, we do an
evaluation at least twice a year----
Mr. Flores. OK. Based on those evaluations, how many State
exchanges do you expect to be unsustainable and to fail and
move to the Federal system?
Mr. Slavitt. Well, I can't predict who's going to come into
the Federal exchange in large part because there's a lot of
factors, including----
Mr. Flores. OK.
Mr. Slavitt [continuing]. Their own decision about whether
or not they want to----
Mr. Flores. So let me continue. Given this trend, do you
think the self-sustainability is and always has been a serious
situation facing these exchanges, the State exchanges?
Mr. Slavitt. So, as I said, as of today, all of the States
are sustainable. Whether they will be in the future, I'm not
willing to predict. But----
Mr. Flores. OK.
Mr. Slavitt [continuing]. As of today they are.
Mr. Flores. Well, I don't think the--the underlying
economics of the ACA have not changed since its inception. Now,
was there any work that CMS did that could have predicted that
these State exchanges would fail? I mean, did you know in
advance that any of the State exchanges would fail because of
sustainability?
Mr. Slavitt. So a lot of this comes before my time, but I
wouldn't----
Mr. Flores. OK.
Mr. Slavitt [continuing]. Classify a challenge as a
failure. I think every State has had challenges, but every
State today is successfully enrolling individuals in their
State, and every State has sources of funds sufficient to run
their operations. So I would measure that as a success.
Mr. Flores. When CMS awarded $5.5 million in Federal
marketplace grants for States to set up State-based exchanges,
how could it have expected States like Hawaii or Nevada to
sustain their own exchanges?
Mr. Slavitt. So, again, these are decisions that were made
before my time, so I can't speak to what was being thought of
at the time. I can tell you that it's an ongoing process for
States to make that evaluation, and as I think you're aware,
the States of Nevada and Hawaii have decided it would be more
efficient for them to operate maintaining the State-based
exchange----
Mr. Flores. Well----
Mr. Slavitt [continuing]. But use our platform.
Mr. Flores. It would be more efficient because they are
broken, they couldn't afford to sustain themselves.
You have had us ask questions in the past how much has been
recovered. I would ask for granularity on that from which
States and how much each States still owes that they have not
repaid back the Federal Government.
And the last question is this: How will you ensure the
States have not used and will not use grant funds for operating
expenses after January 1 of 2015?
Mr. Slavitt. So, yes, I will provide that information that
you requested.
And we do this through several steps. Most importantly is
to prevent them from spending the money improperly in the first
place. And I think, as I said, this year, 2015, on 69 occasions
we have rejected a State's request to spend the money
improperly. Now, if it turns out that they have for some
reason, we conduct an audit and we go back and then we go
through a collection process, as I've said. The first several
States that we've begun the collection process for have begun
to refund money, and we take that very seriously.
Mr. Flores. OK. Thank you. I yield back the balance of my
time.
Mr. Murphy. The gentleman yields back. I now recognize
another gentleman from Texas, Mr. Green, for 5 minutes.
Mr. Green. Thank you, Mr. Chairman. Mr. Slavitt, thank you
for being here and thanks to CMS for working with us on
something other than the GAO report.
Blue Cross Blue Shield recently announced that they would
no longer be offering a PPO plan in the national exchange in
Texas and also the individual market. This would mean there are
no PPO plans on the individual and exchanges policies. As a
result, specialty hospitals like M.D. Anderson in Houston and
Texas Children's Hospital will be out of network on individual
plans for that. Group plans are not under the same decision, so
they will still--they have PPOs.
Blue Cross and Blue Cross Blue Shield Texas pulled the PPO
plans citing that it is no longer financially feasible, that
they cannot raise rates for PPOs without raising the rates for
all the plans. This problem is not just limited to the Texas
example because we are a national exchange and not a State
exchange but, as reported, it is an issue in other exchanges
across the country.
What can CMS do to address the issue of network adequacy
that ensure that plans with premier and specialty hospital in
network are available to consumers in the original market?
Mr. Slavitt. Thank you for the question.
So we have just released a proposed rule around network
adequacy. The National Association of Insurance Commissioners
has also done some work in this area. But let me also say that
this is an early stage of a market, and consumers are in the
process of communicating, through what plans they choose, what
things they're willing to pay for and what things they value
and what things they don't.
And the health plans, I think, are in the process of trying
to figure out how to create offerings that are affordable and
meet the needs of individuals. So I do need to recognize this
is still in year 3 of an early set of offerings, and I think if
consumers suggest that they will want certain things in their
networks, then my suspicion is that the health plans in those
States will begin to make those things available.
Mr. Green. OK. Well, the Houston market, if you don't have
Texas Children's or M.D. Anderson or a major full-purpose
hospital that is in our medical center, you know, that is going
to limit their opportunities for even using, whether it is
under the Affordable Care Act or the individual market that I
know we don't have an impact on. From your perspective, are
there any actions that Congress can take to address this issue?
Mr. Slavitt. You know, I think all of us should continue to
listen to residents and make sure that we adjust and adapt,
whatever our regulations are or however we are, you know,
viewing this in the context of making sure that people are
getting their basic sets of needs met. And we make sure that
there's sufficient network adequacy and we do a review prior to
allowing the State to go onto the exchange. And if we hear of
problems, we'd like your office to let us know of specific
instances.
Mr. Green. OK. We will be glad to.
Let me talk a little bit about the open enrollment for
2016. November 1 marked the beginning while open enrollment
continues to the end of January. I mentioned about hearing how
things are going. I realize you may not be able to speak to the
Federal marketplace in terms of early data, but how are things
going with the current open enrollment period, and how many
folks are shopping for and signing up for some of the plans?
Mr. Slavitt. So as of November 28, I think we've had 3.5
million applications this year during the open enrollment
season, and there have been about 2 million plan selections, of
which I believe 1.3 million have been to renew coverage and
700,000 have been to get new coverage. And of course we are now
just beginning what has been a very big ramp-up period between
now and December 15. People tend to be deadline-driven, and
this week we are seeing that acceleration that we expect to
continue on through the middle of December.
Mr. Green. Having done events in our district in an urban
area in Houston, both with the original sign-up and the second
time, you are right, we all procrastinate. What types of
indications are you receiving from the States on their
enrollment? Any information on how enrollment is going in
States that have their own plans?
Mr. Slavitt. I've seen some preliminary data. It looks to
be pretty close to on track to what they expected so far.
Mr. Green. OK. I understand several State-based
marketplaces, as well as HealthCare.gov, are offering enhanced
shop-and-compare tools that enable consumers to make smarter
choices regarding their coverage option. Administrator, could
you elaborate on these efforts and what type of tools are State
marketplaces offering consumers, and why are such innovations
important?
Mr. Slavitt. Sure. You know, I think this allows me to
speak to the question that was raised earlier about
deductibles, and I think one thing that's very important for
consumers to know is 80 percent of consumers--I believe is the
right number--have access to plans that offer services like
primary care visits and prescription drugs outside of the
deductible. In other words, they don't need to meet their
deductible before they hit them.
And the tools that you're describing allow people to
understand whether or not a physician is in their network,
whether or not a drug is covered in a specific plan, and of
course how to make the tradeoffs sometimes that exist between
coinsurance and premium levels, which I think is a complicated
thing for people. So State-based exchanges, as well as the
Federal exchange, all have those types of tools. And I
shouldn't say all, many of them, and certainly the Federal
marketplace, have those tools available.
Mr. Green. OK. Thank you. Thank you, Mr. Chairman.
Mr. Murphy. Thank you. I now recognize the gentleman from
Oklahoma, Mr. Mullin. You are recognized for 5 minutes.
Mr. Mullin. Thank you, Mr. Chairman. And, sir, thanks for
being here today. I know that sometimes that seat must get
uncomfortable. But there are real questions and real concerns,
and I don't want people to get caught up thinking that this is
a partisan issue because really this is about taxpayer dollars,
and what has been going on with it, and if they are being
misused.
You know, if we remember back, this was supposed to be
budget-neutral, and that hasn't taken place, and so now the
American taxpayers are on the hook for it. And what has
happened with the dollars? Where are they going? What is the
accountability process? So I kind of want to maybe go down a
different path with you. My understanding is that States
operate on the Federal exchange receive a 3.5 percent user fee
for the platform. Is that correct?
Mr. Slavitt. The health plans have a user fee, not the
States.
Mr. Mullin. The States--or the health plan does?
Mr. Slavitt. Yes.
Mr. Mullin. So what happens to the 3.5 percent user fee?
Where does that go?
Mr. Slavitt. The 3.5 percent user fee goes to fund State
exchange operations.
Mr. Mullin. So who pays that? Does the State pay that or
does the----
Mr. Slavitt. The health insurance company.
Mr. Mullin. The company does?
Mr. Slavitt. Yes.
Mr. Mullin. So the user, the insurer pays it?
Mr. Slavitt. Insurer, yes.
Mr. Mullin. All right. So it gets passed down to them. If a
State closes its marketplace and transitions into the
HealthCare.gov, is it required to charge the 3.5 percent?
Mr. Slavitt. If a State continues to operate as a State-
based marketplace----
Mr. Mullin. Right.
Mr. Slavitt [continuing]. But uses the Federal platform, we
just have a rule that was proposed last month, that's proposed
so it's still open for comment period, on what the fee would
be, and the fee that's proposed is 3 percent for the use of the
Federal----
Mr. Mullin. The States that are currently on it, though, do
they pay it? Does the insurers that participate in the fee
States such as Oklahoma----
Mr. Slavitt. It's proposed--I'm sorry, the States that
are----
Mr. Mullin. Well, we have some States that have obviously
closed down and they have gone now, if I am not mistaken here,
they have gone into the marketplace or they transition out of
the marketplace into HealthCare.gov. Are they currently having
to pay the 3.5 percent to participate in HealthCare.gov----
Mr. Slavitt. I don't----
Mr. Mullin [continuing]. Such other States that were
already in it?
Mr. Slavitt. Again, the States don't make the payments----
Mr. Mullin. OK.
Mr. Slavitt [continuing]. The plans do.
Mr. Mullin. The plans do, but they are operating inside the
State.
Mr. Slavitt. The plans that--yes. And the proposed rule is
for 2017. It would begin in January 2017.
Mr. Mullin. So Oregon, Nevada, and Hawaii that recently
came out----
Mr. Slavitt. Yes.
Mr. Mullin [continuing]. Their users inside the State, the
insurers inside the State, are they required to pay the 3.5
percent?
Mr. Slavitt. No, they make a payment to the State.
Mr. Mullin. OK. The current individuals----
Mr. Slavitt. Right.
Mr. Mullin [continuing]. The current States that are in it,
are they paying the 3.5 percent?
Mr. Slavitt. The three you just mentioned?
Mr. Mullin. No, they just came into it.
Mr. Slavitt. Right.
Mr. Mullin. The current States that are already operating
inside the HealthCare.gov.
Mr. Slavitt. Yes.
Mr. Mullin. They are paying it but the States that are
coming out aren't?
Mr. Slavitt. Yes.
Mr. Mullin. OK. Why?
Mr. Slavitt. Well, the law didn't contemplate a splitting
of duties. One of the things that----
Mr. Mullin. Well, the law didn't contemplate a lot of
things. I mean, it didn't anticipate a lot of this. We get
that. But if one State is--the users inside the State is
required to pay for it and the other one isn't, then where is
the offset coming from?
Mr. Slavitt. So the first thing we had to do is determine
how much is the appropriate amount to pay, given that the State
maintains a lot of responsibilities. Remember, IT is just 30 to
50 percent on average of all of the responsibilities relative
to a State budget. So once that's done, we are now setting the
fee for 2017, contemplating the fact that they have had that
year that you've described. So we'll set it to make sure that
we've essentially evened up the tables.
Mr. Mullin. But the first year they've been waived?
Mr. Slavitt. The first year they've been waived but the
second-year fee contemplates the fact that they didn't pay for
1 year.
Mr. Mullin. So the next year they are going to go to 7
percent?
Mr. Slavitt. No, it's not 7 percent.
Mr. Mullin. Well, so if you are making up for the loss
year, then where does it come from?
Mr. Slavitt. The States have their own--another set of
duties. So the calculation is not as simple as 3.5 percent. The
calculation is based upon what portion of the service that
they're going to get from the Federal Government----
Mr. Mullin. There are a lot of complications inside this
bill, and we understand that.
Mr. Slavitt. Yes.
Mr. Mullin. There is a lot of figuring that we can't get
to. I am literally trying to figure it out. If they are trying
to make up for--simple math is if you waived it this year and
they are trying to make up for it next year, then a 3.5 percent
and adding an additional year to make up for it would be 7
percent.
Mr. Slavitt. Tell you what, that's not how the math works
and I'm happy to go sit down with you and walk you through
how----
Mr. Mullin. Well, obviously, because I am confused in it,
too. And I am really not trying to be difficult. I am just
trying to figure out is Oklahoma making up for the lost fee? If
they are missing it, the States already on it, are we having to
pay for--the taxpayers inside Oklahoma, are they having to pay
for the poor exchanges that were already set up and the
failures of the taxpayers that they have already paid, on top
of what they have having to----
Mr. Slavitt. You know, I completely understand the
question. It's a very fair question. I'll be happy to sit down
and walk you through the math. The thing I want to just make
sure is clear is that the States that are using the Federal
exchange are still running call centers and 1095(a) collections
and many, many other activities. So it's not as simple as just
taking the whole fee and moving it.
Mr. Mullin. And I will yield back in just one second. If
you can set down with me, please put it on paper because I
would like to share it with the committee because I think all
of us need to figure this out.
Mr. Slavitt. Yes, and as I mentioned, this is part of a
proposed rule, so there are certain legal restrictions we have
in terms of this, but I'm happy to do that.
Mr. Mullin. Thank you.
Mr. Slavitt. Thank you.
Mr. Murphy. The gentleman's time is expired. I now
recognize Mr. Yarmuth of Kentucky for 5 minutes.
Mr. Yarmuth. Thank you very much, Mr. Chairman. And thanks
to you, Administrator Slavitt, for being here and your work on
this issue.
As far as I am concerned, this is a very timely hearing
because as we are sitting here, the inaugural events are
underway for our new Kentucky Governor Matt Bevin, and he and I
have very different perspectives on the Affordable Care Act in
Kentucky. He has proposed as one of his campaign priorities to
dismantle our State-based exchange, which is called Kynect.
And I am very proud to represent Louisville and proud of
the work of our outgoing Governor Steve Beshear in implementing
the Affordable Care Act. With the expansion of Medicaid in our
State and the successful launch of Kynect, we have seen more
than 500,000 Kentuckians gain access to quality, affordable
health care, and the uninsured rate in the Commonwealth has
dropped by more than half, and in my district, by 81 percent--
--
Mr. Slavitt. Wow.
Mr. Yarmuth [continuing]. Which is pretty astounding. In my
opinion, obviously, rolling back these successes would be
shortsighted. It would jeopardize the health of a half-million
Kentuckians, waste millions of taxpayer dollars, cost us jobs,
hurt us economically.
And I would like to ask you, Administrator, a few questions
about what it would mean to undermine our successful exchange
Kynect? I believe I am correct that about $280 million was
spent in setting up Kentucky's exchange. Is that correct?
Mr. Slavitt. Yes, the ballpark.
Mr. Yarmuth. Pretty substantial investment. And is it true
that if we were to dismantle Kynect and move into the Federal
exchange that Kentucky taxpayers would have to pay about $23
million?
Mr. Slavitt. I've seen secondhand a similar number, but
it's true that there'd be some expense to the State.
Mr. Yarmuth. Yes. So millions of dollars would be spent to
shut down what most healthcare policy experts consider to be a
hugely successful exchange. As a matter of fact, one Republican
State Senator Ralph Alvarado, who is also a physician, has
proposed marketing our exchange to other States because it has
been so successful. Would you, on behalf of CMS, consider
Kentucky's exchange a success?
Mr. Slavitt. I would congratulate Kentucky and the State
and everyone involved that Kentucky's been a terrific success.
Mr. Yarmuth. Now, segueing on Congressman Mullin's
questioning, we know now that the Federal exchange would be--it
would be a 3 percent roughly charge, which would be passed down
to consumers in Kentucky. It is 1 percent. That is what
insurance company plans pay in Kentucky. So clearly, if we
moved to the Federal exchange, consumers would have to pay more
for their policies, all apples and apples, is that correct?
Mr. Slavitt. I think that's correct.
Mr. Yarmuth. And would it be reasonable to assume--again
reasonable to assume that they would be passed on----
Mr. Slavitt. I think that's reasonable.
Mr. Yarmuth [continuing]. Those costs. So shutting down
Kynect will either raise health insurance premiums or drive
insurers out of the market, cost taxpayers more than $20
million, eliminating hundreds of jobs, and harming the Kentucky
economy. Administrator, is there any way that you can think of
that Kentucky consumers would benefit from shutting down the
Kynect, our State-based exchange, and moving to the Federal
exchange?
Mr. Slavitt. Well, of course, by law these are State
decisions, and we're willing to cooperate and support the State
in any way we can. But it feels like Kentucky has done such a
great job and it's been so successful that it feels like it's
going to be a good course for consumers to stay where we are.
Mr. Yarmuth. But knowing what you know about it, is there
any way which consumers would benefit from that kind of switch?
Mr. Slavitt. Not that I'm aware.
Mr. Yarmuth. Thank you for that. Just before I close, one
of the things that I think is important to recognize is that
while some premiums have still gone up, why we still have
issues with deductibles, and I am very glad that you gave that
explanation in the last session about the reality of
deductibles, that what we really need to focus on is figuring
out how to deal with the high costs of health care. And we have
seen incident after incident of pharmaceutical costs
skyrocketing by several hundred percent or even 1,000 percent,
and that's really something that Congress has not done a very
good job in addressing. Would you say that is accurate? I know
CMS tries to address much of that, but isn't that still the
biggest problem we face in health care?
Mr. Slavitt. It is one of the critical issues that we all
have to address.
Mr. Yarmuth. Right. I thank you for that and I yield back.
Mr. Murphy. Thank you. The gentleman yields back. I now
recognize Mrs. Brooks for 5 minutes.
Mrs. Brooks. Thank you, Mr. Chairman.
I have been very surprised actually that the other side of
the aisle seems to have focused on the uninsured rate, Medicaid
expansion, other things that really haven't been relevant, I
don't think, to the oversight of today's hearing. I think it is
our duty to provide that oversight because billions of dollars
have been spent and are at stake. And I am very concerned about
ensuring that our taxpayer dollars are spent effectively and
efficiently, as I know you are, Administrator Slavitt.
And I am concerned because you have indicated that the
States--in Congressman Flores' testimony you indicated that the
States have their own funding at some point, that the States
have their own source of funding, and so I am curious if you
would expand on those States with the exchanges, when the
Federal dollars run out, what is the source of funding you are
referring to?
Mr. Slavitt. Sure. Thank you for the question.
So most of the States, all but I think two, have some type
of assessment that they assess the health plans that operate in
the marketplace. In some cases it's a percentage, in some cases
it's a percentage plus a flat fee, and in some cases it's based
on how many members are enrolled. There are a few States that
fund it directly out of their State budget as well.
Mrs. Brooks. And because there are all of these different
mechanisms and different ways States have decided to fund it,
what confidence do you have that the different methods they
have all chosen will be adequate so that the States will not be
coming back to the Federal Government for more funding?
Mr. Slavitt. Well, I have enough confidence that I need to
make sure we check twice a year because things change with
State budgets, things change with the membership, things change
with enrollments, and sometimes we have to have difficult
conversations with States to say to them, look, we don't think
this looks like a very good future. Can you help explain to us
why this makes sense? And in some cases there's a little bit of
tough love, which results in some of the changes in the course
that you've seen.
Mrs. Brooks. Can you give us idea how many tough love
discussions are you having?
Mr. Slavitt. Well, an example of a tough love conversation
might be Hawaii, which has been in--and it was in the process
last year--of trying to decide what was the best course for
themselves. And we had conversations where we made up numbers
for them, and I think that made their decision to come to the
Federal exchange.
Mrs. Brooks. But how many States are you actually having
discussions with about self-sustaining going forward in the
future?
Mr. Slavitt. So we're having discussions with all of the
States. I wouldn't tell you we're concerned about all of the
States but I would tell you that, you know, as a general rule,
the smaller the State is, the greater the amount of effort we
need to focus on them to make sure that they have a plan that's
sustaining them.
Mrs. Brooks. So do you have a chart that shows how many are
you are confident they have got it, we are not going to have
any problems with them? We are concerned or we are really very,
very concerned that they are not going to make it? And how many
people are in those different buckets?
Mr. Slavitt. Ma'am, you----
Mrs. Brooks. Or States----
Mr. Slavitt. Congresswoman, you must know me well. I have
hundreds of chart. And----
Mrs. Brooks. I could tell.
Mr. Slavitt. Yes. So, you know, I think I'd say that at
this point in time we are confident that all the States are
sustainable for the period of time that they need to be
sustainable for.
Mrs. Brooks. How long is that?
Mr. Slavitt. Well, as I say, we look at least every 6
months because of budget cycles, because of membership cycles,
because of costs, because of other factors, and all I can tell
you is that at any point in time if we believe a State is
nearing the point when we think they may not be sustainable, we
talk to them.
I'll give you another example. We talked to Rhode Island,
which is obviously a smaller State, and this was last year or
earlier in the year, and told them they needed to increase
their sources of funding. And they did that. But they did that
because we had this kind of dialogue with them. So we try to
get out in front of the problem and prevent it from becoming a
problem along with the States, and the States have the same
interests.
Mrs. Brooks. Well, I appreciate that. And I am very
concerned about the sustainability, particularly if we are only
doing them in 6-month increments.
In my brief time remaining, UnitedHealth has recently
announced that it may leave the exchanges for next year. Could
you please comment upon your thoughts about this announcement,
what that might do to the exchanges and impact the
sustainability of State exchanges if UnitedHealth, which is in
my district, pulls out from all of these different exchanges
because it has been a bad--``it was a bad decision for us'' per
UnitedHealth?
Mr. Slavitt. So, tell you what, I won't comment on any one
specific health plan. I think the majority of health plans that
have made statements in the last few weeks have been very
positive about their involvement in the exchanges. I think the
vast majority of people in this country have access to at least
three plan choices. There are literally hundreds of insurers
with thousands of plans, and at any given time there's going to
be people entering the market and people exiting the market.
Some will have good strategies, some will have not-so-good
strategies. That's just how marketplaces will work as we
interact with the private sector.
Mrs. Brooks. OK. Thank you. I yield back.
Mr. Murphy. The gentlelady yields back. I now recognize the
gentleman from New York, Mr. Collins, for 5 minutes.
Mr. Collins. Thank you, Mr. Chairman.
Mr. Slavitt, in late September HHS ordered that the New
York State co-op set up by the Affordable Care Act--Health
Republic--to shut down. This past year, Health Republic insured
about 20 percent of the individuals on the New York State
health insurance exchange. So far, Health Republic's failure
has cost taxpayers over $265 million and 155,000 New Yorkers
were kicked off their current insurance plan last week.
While other insurers in the marketplace picked up the
displaced beneficiaries and honored the deductibles, there
remains heavy concerns about Health Republic's outstanding
liabilities to providers. Doctors have been calling my office
complaining that their checks from Health Republic are
bouncing. And I have seen estimates that hospitals in the State
are owed at least $160 million.
So into the questions, I understand that CMS reviewed
Health Republic's financial filings and conferred with State
regulators and co-op leaders during the setup and operation. I
am assuming that is a correct statement?
Mr. Slavitt. That's correct, Congressman.
Mr. Collins. So I am curious, can you walk me through the
decision-making process. Our concerns are why was the co-op
Health Republic, with the largest taxpayer losses in the
country, allowed to continue as long as it did, which was up
until a week ago?
Mr. Slavitt. So I would say we grew concerned about the
financial situation of the co-ops with each consecutive
financial report that they submitted, conducted our own audit,
sent up our own people, and worked very closely with the
Department of Insurance in the State.
You know, I will tell you that in situations like this the
most important thing from my perspective--and you mentioned
it--is making sure we get as smooth a transition as possible
for all of this--for all of the co-op consumers. So having a
transition on December 1 all seamlessly--plans that honor the
deductible was important and I think was great work from the
Department of Insurance and the State. And I think that was
very important.
Your other points relative to--the ultimate collection of
payments, I think, is more a matter of State policy regarding
State guarantee funds and other potential avenues and tools. We
stand ready to assist both consumers and that State in any way
we possibly can.
Mr. Collins. So, a simple question: Will the providers, for
instance, 160 million of the hospitals and many doctors where
the checks are bouncing, are they going to be paid with 100
percent assurance?
Mr. Slavitt. Again, that's a question that's better
directed at the State because that's based on State policy.
Mr. Collins. So the answer is no, they may not get paid?
Mr. Slavitt. Again, you'd have to ask the State, but we'd
be glad to cooperate in any way we can.
Mr. Collins. I guess I live in a world if the answer is not
yes, it must be no?
Mr. Slavitt. The answer is I'm not going to speak for the
State----
Mr. Collins. OK. Well----
Mr. Slavitt [continuing]. With all due respect.
Mr. Collins [continuing]. I will take the lack of an
affirmative as--if I am a doctor, I am going to start worrying
come Christmas on my bounced checks because we don't have any
assurance from you certainly at the Federal level they are
going to be paid, and I think we all know how New York State
does things.
So now, you spoke to a smooth transition and that
importance. Well, I will disagree with you on one thing. I
believe taxpayer money is more important than a smooth
transition when it comes to $265 million in losses adding to
our debt.
So it goes back to 2014, Health Republic lost $35 million.
It is inconceivable to me what then happened. They were loaned
an additional $91 million. I mean, I suppose is that like
doubling down on a stock that loses all its value so you go buy
more? I don't know other than your smooth transition how we
squandered another $91 million, didn't ask any of the right
questions, just said here is another $91 million, and sure
enough, it is flushed. So can you speak to that $91 million
after you knew they lost $35 million?
Mr. Slavitt. Sure. The way that we have set up co-ops is
the vast majority of the funding is needed to even set up the
co-op in the first place to have enough capital to write
members. And of course nobody knew how many members they were
going to write because this is the new year of open enrollment.
Mr. Collins. Sure. You know what, they were owed more than
expected. Everyone else is complaining when they write----
Mr. Slavitt. Right.
Mr. Collins [continuing]. Less than expected, oh my God, oh
my God. Health Republic signed up more than expected.
Mr. Slavitt. They did. They did. And, of course, the first
time you have an understanding of the ability to match claims
to the premiums they've collected isn't for some time because
of the way claims come in and because of the way the financials
work. So it really wasn't until the middle of 2015 that we
really started to have data that would give us reason to be
significantly concerned about the State and about their ability
to play claims given the----
Mr. Collins. My time is expired but I can tell you the
private sector we start worrying when someone says I just lost
$35 million. That is when I have them starting to report
hourly, daily, weekly----
Mr. Slavitt. Yes.
Mr. Collins [continuing]. Not just, hey, every quarter,
``How did you do this quarter?'' ``Oh, we only lost $30
million.''
Mr. Slavitt. That's not a fair characterization of how we
worked with the co-op.
Mr. Collins. Well, it sure sounds like it to me. You lost
another $91 million. I yield back.
Mr. Murphy. The gentleman yields back.
Mr. Slavitt, just a follow-up for Mrs. Brooks' question,
and you had said you had some charts or things that relate to
the State. Can you make sure you share this with this, too? I
would love to see what--not all your charts. Apparently, you
make charts of everything----
Mrs. Brooks. Just the relevant ones.
Mr. Murphy. The relevant ones to compare in the States.
That would be helpful.
Mr. Slavitt. Will do.
I now recognize the gentleman from Indiana, Dr. Bucshon,
for 5 minutes.
Mr. Bucshon. Thank you, Mr. Chairman.
I was a cardiovascular surgeon prior to coming to Congress,
and I just want to say that, you know, I want everyone in our
country to have access to quality, affordable health care.
And that said, I feel compelled to comment on the uninsured
rate and that coverage doesn't necessarily equal access. And I
think that is a point that maybe people that aren't in health
care don't necessarily get, in fairness. And I am not implying
you but others that made comments because the Medicaid program,
for example, traditional Medicaid is a program that doesn't
reimburse providers at a level that many will accept, and even
though people may have Medicaid, it doesn't necessarily access
them to anything more than the emergency room, which they had
access to when they didn't have Medicaid. And the data shows
that that is the truth.
In Indiana we are using Healthy Indiana Plan 2.0 to cover
those citizens--and this is something that I support because it
is a State-based way to manage Medicaid dollars more
effectively and efficiently in my opinion, and it is HSA-based,
which you have heard some comments about HSAs in the past,
which does encourage more proper utilization of the healthcare
system by the person who has the coverage because they actually
have some of their own financial resources at risk if they
don't.
My question will be about the plans offered under the
exchanges. I mean most of my questions have been answered about
the technical aspects of what is happening with these plans,
but, I mean, many, including yourself, have commented about
$100 premiums. What percentage of people that are on the
exchanges approximately are subsidized people? What percentage
of people--or maybe the better question is that are getting
coverage through the exchange don't get a subsidy?
Mr. Slavitt. About 20 percent.
Mr. Bucshon. So 20 percent don't get a subsidy?
Mr. Slavitt. That's about right.
Mr. Bucshon. And so the premiums for those folks, do you
know what those are? I mean, what is the level of subsidy on
average, for example, for a person on the exchange that is
getting a subsidy?
Mr. Slavitt. That's a tough question to answer. It depends
on if they're silver, gold, bronze, and so forth, and the
income levels and a variety of factors.
Mr. Bucshon. OK. Because my constituents are complaining
about the deductibles also. And again, the devil is in the
details, right? If you pay $100 for a premium and you are being
subsidized, most likely you are being subsidized thousands of
dollars for your premium or maybe hundreds of dollars. But your
deductible is $6,000 to $10,000.
I would argue that better plans than that were available
before the Affordable Care Act. You could do that on the
individual and small group marketplace almost before the
Affordable Care Act and do better with that lower deductible,
better premiums. So I just don't see where, you know, we have
created a huge advantage. The only thing we have done, as was
pointed out, is we have mandated that people buy coverage.
So the question in my view is is if someone has a
deductible--say you are a family of four and, you know, say
only one parent is working, whether that is the man or the
woman and they are a schoolteacher and they have a $10,000
deductible for their family when they have maybe an annual
income of $55,000, $60,000 a year, is that good health
coverage?
Mr. Slavitt. Well, you and I have both been in health care
a long time.
Mr. Bucshon. Yes.
Mr. Slavitt. My reflection would be prior to the Affordable
Care Act health plans had--if you could get it, meaning you
didn't have a preexisting condition and you had no regulated
out-of-pocket maximum, you had higher rates of increase, and
you could be dropped at any time. Now, you have free programs
and services----
Mr. Bucshon. Well, those are things--yes, that is true----
Mr. Slavitt [continuing]. And 80 percent of folks----
Mr. Bucshon. That is not the cost.
Mr. Slavitt [continuing]. Have coverage outside of the
deductible, and there's a whole array of options and services
today. So by my estimation and by the people that we interact
with who are getting coverage, you know, their lives are better
today, notwithstanding your points about we have an
affordability crisis in this country and we have--and not
everybody can afford all the services that they need. Those are
very legitimate concerns and we share them.
Mr. Bucshon. Fair enough. What I was trying to point out
with my deductible question is you could have gotten a policy
with these type of deductibles and these type of premiums
before the Affordable Care Act without massive subsidies from
the Federal taxpayers subsidizing the premium to keep the
premium low. And I think that is a fair statement. Of course,
you know, there are always exceptions to every rule.
But, again, the other concern I have with the exchange is--
my time is up. I will make this brief comment and then I will
yield--is what I am hearing from hospitals and providers, the
number one area of accounts receivable that they are starting
to see is from insured individuals because they can't meet
their deductibles. They can't pay that. So we have created a
different problem.
I yield back.
Mr. Murphy. Thank you. The gentleman yields back.
I now recognize the gentleman from North Dakota, Mr.
Cramer, for 5 minutes.
Mr. Cramer. Thank you, Mr. Chairman. Thank you, Mr.
Administrator, for being here and for your incredible access. I
have appreciated that, as has my staff.
And I am going to shift gears a fair bit since I have this
opportunity. And it might not surprise you that I want to ask
you about a discussion we had previously that has since
resulted in my dropping some legislation, and that is that last
March when CMS released an interim final rule that gave
authority to insurers that are offering plans on the exchange
to denying nonprofit charities the opportunity to provide
premium assistance. And since patients with rare diseases and
catastrophic illnesses are oftentimes the utilizers of this
kind of charity, this rule has really had the effect of pushing
individuals with preexisting conditions of the health plans
that they purchased in an exchange. So that really means fewer
insured Americans and more patients with complex conditions in
the Federal safety net.
Now, obviously, under the ACA the law provides Federal
subsidies for health insurance, as we are discussing. Why then
did the administration offer a rule to prevent Americans from
doing the same amount of charity that the Government does now?
And, you know, since the release of the interim final rule,
I think there is something like 30 or 31 States that have
announced a prohibition. This seems to be completely
counterproductive to the goals of the ACA. That is why I
dropped the bill. It has already gotten very broad support. I
could name names and you would go wow, that is a big swath. And
most of us are between that swath.
So can you tell me something that would give me some
encouragement that may not require the law or that you are
going to support the law change?
Mr. Slavitt. Well, we share the same goal of trying to get
everybody covered, and I appreciate your efforts in this area
as well. Because we have an interim proposed rule, I am limited
in what I can comment on the rule, but we do appreciate your
input.
Mr. Cramer. With that, I think we will just keep pushing
for cosponsors of the bill and try and make it a law because it
really is broadly supported both in Congress and certainly in
the public.
So with that, I have nothing further and would yield back.
Thank you.
Mr. Slavitt. Thank you.
Mr. Murphy. The gentleman yields back. Well, thank you.
In that case, Mr. Slavitt, I just want to note that in
November 24 the committee sent a letter to CMS regarding the
failure of 12 out of 23 co-ops or nonprofit insurers set up
through the ACA. These 23 co-ops were funded by Government-
backed loans to the tune of $2 billion. CMS's response to the
co-op letter is due today so I don't know if you have that in
your briefcase. We would love to see that letter today. And you
will be complying with that request then?
Mr. Slavitt. We are working on your letter, absolutely. We
have got a few of them to do, but we are--it is a high
priority.
Mr. Murphy. Thank you very much.
Mr. Slavitt. We'll answer all your questions.
Mr. Murphy. We appreciate it because we would like to, as
you would, get some answers to this so we need to pursue that.
And we will receive the other documents we requested. You have
already stated that, so thank you.
In conclusion, I want to thank you for coming today and the
Members who have participated in today's hearing. I remind
Members they have 10 business days to submit other questions
for the record, and I ask also, Mr. Slavitt, you agree to
respond promptly to those questions.
And with that, this subcommittee is adjourned.
[Whereupon, at 11:53 a.m., the subcommittee was adjourned.]
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