[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]





   EXAMINING THE ADMINISTRATION'S APPROVAL OF MEDICAID DEMONSTRATION 
                                PROJECTS

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

                                HEARING

                               BEFORE THE

                         SUBCOMMITTEE ON HEALTH

                                 OF THE

                    COMMITTEE ON ENERGY AND COMMERCE
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED FOURTEENTH CONGRESS

                             FIRST SESSION

                               __________

                             JUNE 24, 2015

                               __________

                           Serial No. 114-59




[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]








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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, California7
LARRY BUCSHON, Indiana
BILL FLORES, Texas
SUSAN W. BROOKS, Indiana
MARKWAYNE MULLIN, Oklahoma
RICHARD HUDSON, North Carolina
CHRIS COLLINS, New York
KEVIN CRAMER, North Dakota

                         Subcommittee on Health

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

                                  (ii)
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                             C O N T E N T S

                              ----------                              
                                                                   Page
Hon. Joseph R. Pitts, a Representative in Congress from the 
  Commonwealth of Pennsylvania, opening statement................     1
    Prepared statement...........................................     2
Hon. Gene Green, a Representative in Congress from the State of 
  Texas, opening statement.......................................     4
    Prepared statement...........................................     5
Hon. Fred Upton, a Representative in Congress from the State of 
  Michigan, opening statement....................................     6
    Prepared statement...........................................     7
Hon. Kathy Castor, a Representative in Congress from the State of 
  Florida, opening statement.....................................     9
Hon. Frank Pallone, Jr., a Representative in Congress from the 
  State of New Jersey, prepared statement........................   113

                               Witnesses

Katherine M. Iritani, Director, Health Care, Government 
  Accountability Office..........................................    10
    Prepared statement...........................................    13
    Answers to submitted questions...............................   118
Haley Barbour, Former Governor of Mississippi and Founding 
  Partner, BGR Group.............................................    65
    Prepared statement...........................................    68
    Answers to submitted questions...............................   127
Matt Salo, Executive Director, National Association of Medicaid 
  Directors......................................................    77
    Prepared statement...........................................    79
    Answers to submitted questions...............................   129
Joan C. Alker, Executive Director, Georgetown University Center 
  for Children and Families......................................    89
    Prepared statement...........................................    91
    Answers to submitted questions...............................   135

                           Submitted Material

Letter of June 23, 2015, from Ken Paxton, Attorney General of 
  Texas, et al., to Mr. Upton, submitted by Mr. Burgess..........   115

 
   EXAMINING THE ADMINISTRATION'S APPROVAL OF MEDICAID DEMONSTRATION 
                                PROJECTS

                              ----------                              


                        WEDNESDAY, JUNE 24, 2015

                  House of Representatives,
                            Subcommittee on Health,
                          Committee on Energy and Commerce,
                                                    Washington, DC.
    The subcommittee met, pursuant to call, at 10:02 a.m., in 
room 2123 of the Rayburn House Office Building, Hon. Joseph R. 
Pitts (chairman of the subcommittee) presiding.
    Members present: Representatives Pitts, Guthrie, Shimkus, 
Murphy, Burgess, Blackburn, Lance, Griffith, Bilirakis, Long, 
Ellmers, Bucshon, Brooks, Collins, Upton (ex officio), Green, 
Capps, Schakowsky, Butterfield, Castor, Schrader, Kennedy, 
Cardenas, and Pallone (ex officio).
    Staff present: Clay Alspach, Chief Counsel, Health; 
Leighton Brown, Press Assistant; Noelle Clemente, Press 
Secretary; Graham Pittman, Legislative Clerk; Michelle 
Rosenberg, GAO Detailee, Health; Chris Sarley, Policy 
Coordinator, Environment and the Economy; Traci Vitek, 
Detailee, Health; Dylan Vorbach, Staff Assistant; Gregory 
Watson, Staff Assistant; Tiffany Guarascio, Democratic Deputy 
Staff Director and Chief Health Advisor; Rachel Pryor, 
Democratic Health Policy Advisor; Samantha Satchell, Democratic 
Policy Analyst; and Arielle Woronoff, Democratic Health 
Counsel.
    Mr. Pitts. The subcommittee will come to order. The 
chairman will recognize himself for an opening statement.

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

    Medicaid is a lifeline for some of our Nation's most 
vulnerable patients. The administration and Congress have a 
duty to ensure that taxpayer dollars used for Medicaid are 
spent in a manner that promotes its core objectives and helps 
our neediest citizens. Unfortunately, a recent report from the 
nonpartisan Government watchdog agency, the Government 
Accountability Office (GAO), again raises serious concerns 
about the administration's management and oversight of Medicaid 
funds.
    Under Section 1115 of the Social Security Act, the 
Secretary has the authority to approve Medicaid demonstration 
projects that are likely to promote program objectives. 
However, the GAO found that CMS did not have explicit criteria 
for determining whether, and did not clearly articulate how, 
demonstration projects met the statutory requirement to promote 
Medicaid objectives. GAO also reported that several State 
programs approved for Federal Medicaid funds appeared, on their 
face, to be only tangentially related to improving health 
coverage for low-income individuals.
    This committee has a duty to ensure that taxpayer dollars 
used for Medicaid are spent in a manner that promotes its core 
objectives and helps the most vulnerable patients. Yet, GAO's 
findings raise significant questions about the degree to which 
the administration is consistently complying with its own 
criteria. These criteria were not even articulated by CMS until 
GAO asked. And these criteria do not exist anywhere in CMS' 
regulations. They are not even listed on their Web site.
    When CMS has a process that is not transparent nor 
predictable, a process in which CMS often approves a 
demonstration for one State but denies a similar demo for 
another State, that process is, understandably, perceived by 
States and other stakeholders as inconsistent, unfair, and 
unaccountable. It is unfortunate that CMS declined to 
participate in this important hearing, despite our best 
efforts. We gave the agency 2 weeks' notice, offered 2 
different potential hearing dates. Nevertheless, despite all 
the people that work at CMS, the administration declined to 
make anyone available to testify.
    CMS' refusal to come today would be unfortunate under any 
circumstance, but it is particularly concerning since roughly 
one in three Medicaid dollars, nearly $150 billion in fiscal 
year 2014, are spent on 1115 demonstrations. CMS has a 
responsibility to Medicaid patients, to States, to taxpayers, 
to be transparent with their criteria for approving or 
disapproving State demonstrations. And yet, they declined to 
come before a committee of jurisdiction to explain their 
criteria or their process. The agency's absence from this 
hearing is really striking. Accordingly, yesterday, we extended 
another invitation to CMS to testify before this committee on 
Medicaid on July the 8th, and we look forward to their 
participation.
    [The prepared statement of Mr. Pitts follows:]

               Prepared statement of Hon. Joseph R. Pitts

    Medicaid is a lifeline for some of our Nation's most 
vulnerable patients. The administration and Congress have a 
duty to ensure that taxpayer dollars used for Medicaid are 
spent in a manner that promotes its core objectives and helps 
our neediest citizens.
    Unfortunately, a recent report from the nonpartisan 
Government watchdog agency, the Government Accountability 
Office (GAO), again raises serious concerns about the 
administration's management and oversight of Medicaid funds. 
Under Section 1115 of the Social Security Act, the Secretary 
has the authority to approve Medicaid demonstration projects 
that are likely to promote program objectives.
    However, the GAO found that CMS did not have explicit 
criteria for determining whether, and did not clearly 
articulate how, demonstration projects met the statutory 
requirement to promote Medicaid objectives. GAO also reported 
that several State programs approved for Federal Medicaid funds 
appeared, on their face, to be only tangentially related to 
improving health coverage for low-income individuals.
    This committee has a duty to ensure that taxpayer dollars 
used for Medicaid are spent in a manner that promotes its core 
objectives and helps the most vulnerable patients. Yet, GAO's 
findings raise significant questions about the degree to which 
the administration is consistently complying with its own 
criteria. These criteria were not even articulated by CMS until 
GAO asked. And these criteria do not exist anywhere in CMS' 
regulations--they are not even listed on their Web site.
    When CMS has a process that is not transparent nor 
predictable, a process in which CMS often approves a 
demonstration for one State but denies a similar demo for 
another State-that process is, understandably, perceived by 
States and other stakeholders as inconsistent, unfair, and 
unaccountable.
    It is unfortunate that CMS declined to participate in this 
important hearing despite our best efforts. We gave the agency 
two weeks' notice and offered two different potential hearing 
dates. Nevertheless, despite all the people that work at CMS, 
the administration declined to make anyone available to 
testify.
    CMS' refusal to come today would be unfortunate under any 
circumstance, but it is particularly concerning since roughly 
one in three Medicaid dollars--nearly $150 billion in fiscal 
year 2014--are spent on 1115 demonstrations. CMS has a 
responsibility to Medicaid patients, to States, and to 
taxpayers, to be transparent with their criteria for approving 
or disapproving State demonstrations.
    And yet, they declined to come before a committee of 
jurisdiction to explain their criteria or their process. The 
agency's absence from this hearing is really striking. 
Accordingly, yesterday we extended another invitation to CMS to 
testify before this committee on Medicaid on July 8th--and we 
look forward to their participation.
    With that, I would like to welcome all of our witnesses for 
being here today. I look forward to your testimony. I yield the 
remainder of my time to the distinguished gentleman from 
Indiana, Dr. Buchson.

    Mr. Pitts. With that, I would like to welcome all of our 
witnesses for being here today. I look forward to your 
testimony, and I yield the remainder of my time to the 
distinguished gentleman from Indiana, Dr. Bucshon.
    Mr. Bucshon. Thank you, Mr. Chairman.
    I wanted to briefly highly that the State of Indiana 
recently received an 1115 waiver for the Medicaid to implement 
to help the Indiana Plan 2.0. As many of you know, the Healthy 
Indiana Plan was a very successful program implemented under 
former Governor Mitch Daniels, and rather than expand 
traditional Medicaid, Governor Pence created HIP 2.0 to cover 
our State's most vulnerable population, but not require that 
they go on traditional Medicaid.
    There are over 283,000 Hoosiers to this point enrolled in 
the program, and actually 71 percent of those opt to pay in and 
pay more to get dental and vision coverage. This program can be 
a model used across the country on how to provide coverage to 
our most vulnerable population.
    However, this waiver almost didn't happen. We are going to 
hear from our witnesses about how complicated this process can 
be. It took the State of Indiana 2 years; that is one 
congressional term, to get the waiver. This was not a new 
program; this was an extension of an already successful 
program. Not only did it take 2 years, but it took Governor 
Pence directly reaching out to President Obama several times to 
get an answer. We received the waiver for 3 years. Let me 
repeat again, it took 2 years and several conversations 
directly with the President to get the waiver in place. 
Something needs to change in this process.
    I hope that going forward, CMS is going to learn from the 
hoops that they made Indiana jump through, and make it easier 
for States like Indiana to do what is already working. I look 
forward to ensuring Indiana can continue HIP 2.0 when this 
waiver expires, and to hearing--I look forward to hearing the 
testimony today.
    I yield back.
    Mr. Pitts. The Chair thanks the gentleman.
    Now recognize the ranking member of the subcommittee, Mr. 
Green, 5 minutes for an opening statement.

   OPENING STATEMENT OF HON. GENE GREEN, A REPRESENTATIVE IN 
                CONGRESS FROM THE STATE OF TEXAS

    Mr. Green. Thank you, Mr. Chairman. Good morning and thank 
our witnesses for being here today. I would like to thank the 
Chair for having this hearing on the topic of Medicaid 
demonstration waivers, and I look forward to today's 
discussion.
    Medicaid provides healthcare coverage for more than 70 
million Americans. It is our Nation's most vital healthcare 
safety net program. Today, it covers more than one in three 
children, and is a critical component of care for seniors. One 
out of every seven Medicare beneficiaries is also a Medicaid 
beneficiary. For millions of American families, the Medicaid 
Program is the only way they can gain access to coverage for 
appropriate healthcare services. It is a simple truth; our 
State and Federal Government save money by investing in health 
care, and Medicaid coverage is a key component of such 
investment.
    The joint State-Federal nature of Medicaid structure is the 
defining feature of the program. Since its creation, States 
have had the flexibility to design their own version of 
Medicaid within the basic framework of broad Federal rules, in 
order to receive matching funds. If a State wishes to change 
its Medicaid Program in ways that depart from some Federal 
requirements, it may seek to do so under the authority of 
approved demonstration or a waiver. Section 1115 waivers are a 
very broad type of Medicaid waiver.
    In recent years, these waivers have become increasingly 
utilized by the States. In fiscal year 2014, Section 1115 
demonstration waivers accounted for almost \1/3\ of all 
Medicaid spending. While each 1115 waiver is different in scope 
and focus, they all must promote the objectives of the Medicaid 
Program and be budget-neutral for the Federal Government.
    Over the last 2 decades, the Government Accounting Office, 
the GAO, has raised concerns about Medicaid waiver policy. Many 
of the GAO's longstanding recommendations were included in the 
Affordable Care Act, and I want to thank CMS for the agency's 
commitment to improving transparency throughout the approval 
process. Per a requirement of the Affordable Care Act, CMS has 
issued a final rule to ensure meaningful public input in the 
waiver process, and enhanced transparency. Today, we will hear 
from GAO about its body of work on Medicaid waivers and 
additional improvements that can be made.
    While the Supreme Court made Medicaid expansion voluntary 
for each State, expansion authority provides an explicit, 
almost entirely federally funded pathway for States to offer 
coverage for all nonelderly adults living below 138 percent of 
the poverty line. Because of this, States have a clear option 
and do not need to use 1115 waivers to expand eligibility for 
this population. Waivers are still being used to make other 
programmatic changes, especially as States continue to consider 
expanding Medicaid. Some of these proposals have sought to 
impose premiums, cost-sharing charges, and work requirements on 
beneficiaries. Robust research does not support the arguments 
for such provisions. Premiums have been shown to deter 
participation in coverage, and lead to high administrative 
costs. Work requirements have no place in a safety net 
healthcare program, and ignore the fact that the vast majority 
of new eligible adults--beneficiaries already work but do not 
have access to affordable care through their employer. States 
have flexibility--considerable flexibility under existing 
Medicaid authority. Enacting punitive, unsubstantiated policies 
like work requirements under the guise of flexibility does not 
advance the conversation about improved transparency and 
innovative care models. When people have access to regular 
health examinations, immunizations, and preventative care, they 
are dramatically more likely to be healthy and productive 
adults. Coverage rather than uncompensated care pools is the 
best way to promote the health of the American people, and the 
viability of our healthcare system at large. CMS has maintained 
that this will be one of the three guiding principles moving 
forward.
    That said, 1115 waivers retain the vital purpose of 
affording States with a way to pursue innovative delivery 
programs, expand eligibility to individuals not otherwise 
eligible for Medicaid and CHIP, and pilot initiatives that 
supports the objections of the Medicaid Program. Medicaid is a 
safety net for everyone because we are all one medical crisis 
away from financial ruin, and more people who have coverage and 
access to necessary care, the better the system works.
    I look forward to hearing today's panelists about the 
important topic, and working with my colleagues on the 
committee. We have a great opportunity to build on success, and 
continue to strengthen the Medicaid Program for current and 
future beneficiaries.
    And I yield back my time.
    [The prepared statement of Mr. Green follows:]

                 Prepared statement of Hon. Gene Green

    Good morning, and thank you for being here today. I thank 
the chairman for having this hearing on the topic of Medicaid 
demonstration waivers, and look forward to today's discussion.
    Medicaid provides health care coverage for more than 70 
million Americans. It is our Nation's most vital health care 
safety net program.
    Today, it covers more than 1 in 3 children, and is a 
critical component of care for seniors. One out of every 7 
Medicare beneficiaries is also a Medicaid beneficiary.
    For millions of American families, the Medicaid program is 
the only way they can gain access to coverage for appropriate 
health care services.
    It is a simple truth: our Federal and State Governments 
save money by investing in health care, and Medicaid coverage 
is a key component of such investment.
    The joint State-Federal nature of the Medicaid structure is 
a defining feature of the program. Since its creation, States 
have had flexibility to design their own version of Medicaid, 
within the basic framework of broad Federal rules in order to 
receive matching funds.
    If a State wishes to change its Medicaid program in ways 
that departs from certain Federal requirements, it may seek to 
do so under the authority of an approved demonstration or 
``waiver.'' Section 1115 waivers are a very broad type of 
Medicaid waiver.
    In recent years, these waivers have become increasingly 
utilized by the States. In fiscal year 2014, Section 1115 
demonstration waivers accounted for almost one-third of all 
Medicaid spending.
    While each 1115 waiver is different in scope and focus, 
they all must promote the objectives of the Medicaid program 
and be budget neutral for the Federal Government.
    Over the last two decades, the Government and 
Accountability Office (GAO) has raised concerns about Medicaid 
waiver policy. Many of GAO's longstanding recommendations were 
included in the Affordable Care Act, and I want to thank CMS 
for the agency's commitment to improved transparency throughout 
the approval process.
    Per a requirement of the Affordable Care Act, CMS has 
issued a final rule to ensure meaningful public input in the 
waiver process and enhanced transparency. Today, we will hear 
from GAO about their body of work on Medicaid waivers and 
additional improvements that can be made.
    While the Supreme Court made Medicaid expansion voluntary 
for each State, expansion authority provides an explicit--
almost entirely Federal-funded--pathway for States to offer 
coverage for all non-elderly adults living below 138 percent of 
the poverty line. Because of this, States have a clear option 
and do not need to use 1115 waivers to expand eligibility for 
this population.
    Waivers are still being used to make other programmatic 
changes, especially as States continue to consider expanding 
Medicaid. Some of these proposals have sought to impose 
premiums, cost-sharing charges, and work requirements on 
beneficiaries. Robust research does not support the arguments 
for such provisions.
    Premiums have been shown to deter participation in coverage 
and lead to high administrative costs. Work requirements have 
no place in a safety net health care program, and ignore the 
fact that the vast majority of newly eligible adult 
beneficiaries already work, but do not have access to 
affordable coverage through their employer.
    States have considerable flexibility under existing 
Medicaid authority. Enacting punitive, unsubstantiated policies 
like work requirements under the guise of ``flexibility'' does 
not advance the conversation around improved transparency and 
innovative care models.
    When people have access to regular health examinations, 
immunizations, and preventative care, they are dramatically 
more likely to be healthy, productive adults.
    Coverage, rather than uncompensated care pools, is the best 
way to promote the health of the American people and the 
viability of our health care system at large. CMS has 
maintained that this will be one of three guiding principles 
moving forward.
    That said, Section 1115 waivers retain their vital purpose 
of affording States with a way to pursue innovative delivery 
systems, expand eligibility to individuals not otherwise 
eligible for Medicaid and CHIP, and pilot initiatives that 
support the objectives of the Medicaid program.
    Medicaid is a safety net for everyone, because we are all 
one medical crisis away from financial ruin, and the more 
people who have coverage and access to necessary care, the 
better the system works for us all.
    I look forward to hearing from today's panelists about this 
important topic, and to working with my colleagues on the 
committee.
    We have a great opportunity to build on past successes and 
continue to strengthen the Medicaid program for current and 
future beneficiaries.
    Thank you, and I yield back.

    Mr. Pitts. The Chair thanks the gentleman.
    Now recognize the chairman of the full committee, Mr. 
Upton, 5 minutes for an opening statement.

   OPENING STATEMENT OF HON. FRED UPTON, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF MICHIGAN

    Mr. Upton. Thank you, Mr. Chairman.
    This year, the Medicaid Program turns 50. Over that half a 
century, Medicaid has provided critical health coverage for 
some of our Nation's most vulnerable populations. Medicaid is 
the world's largest health insurance program, with as many as 
72 million people being covered by the program for at least 
some period of the current year. And in the next fiscal year, 
344 billion Federal dollars will be spent on Medicaid, and by 
2024, Federal-State spending on Medicaid is expected to top $1 
trillion.
    Today, roughly one in three Medicaid dollars is spent 
through an 1115 waiver approved by the Secretary of HHS. 
Section 1115 of the Social Security Act authorizes the HHS 
Secretary to waive certain Federal Medicaid requirements and 
allow costs that would not otherwise be eligible for Federal 
matching funds for demonstration projects that are likely to 
assist in promoting Medicaid objectives. These are critical 
tools for States to experiment and evolve their Medicaid 
Programs as they seek to modernize and improve them to better 
serve patients. For example, Michigan has used a waiver to 
successfully provide HSA-like health accounts to encourage 
participants to become more active health care consumers. Yet 
today we will hear from the nonpartisan Government watchdog, 
GAO, which has repeatedly raised questions about CMS' approval 
process for those waivers.
    Whether it is GAO's concerns about budget neutrality, 
approval criteria, or the process for approvals and renewals, 
these are indeed important and fair questions to ask. We need a 
better understanding about how the billions of dollars CMS is 
approving promote Medicaid's core objectives.
    I want to thank the second panel, in particular, former 
Governor Barbour, for being here to share his ideas about how 
to improve CMS' management of the funds. I know that nearly 
every member of this subcommittee has heard frustrations from 
State officials at one point about the uncertainty and 
timeframes surrounding the approval or renewal of an 1115 
waiver. While State leaders are trying to balance their 
budgets, pass legislation, it is essential that CMS' process is 
transparent and certainly predictable.
    Recent analysis and media coverage has raised questions 
over the degree to which CMS is effectively picking winners and 
losers in the waiver review process. CMS has a duty, both to 
patients and taxpayers, to States, all stakeholders, to do more 
to increase the transparency, accountability, and consistency 
of their approval process. In fact, if CMS is doing a decent 
job, increased oversight and scrutiny will only bring their 
good efforts into the light. However, if there are 
shortcomings, this subcommittee will play its role in making 
the process more transparent, accountable, and fair for all 
involved. At the end of the day, it is about ensuring our most 
vulnerable receive the care that they deserve.
    [The prepared statement of Mr. Upton follows:]

                 Prepared statement of Hon. Fred Upton

    This year, the Medicaid program turns 50 years old. Over 
that half a century, Medicaid has provided critical health care 
coverage for some of our Nation's most vulnerable populations.
    Medicaid is currently the world's largest health insurance 
program, with as many as 72 million people being covered by the 
program for at least some period of the current year. In the 
next fiscal year, 344.4 billion Federal dollars will be spent 
on the Medicaid program. And by 2024, Federal-State spending on 
Medicaid is expected to top $1 trillion annually.
    Today, roughly one in three Medicaid dollars is spent 
through an 1115 waiver approved by the Secretary of Health and 
Human Services. Section 1115 of the Social Security Act 
authorizes the HHS Secretary to waive certain Federal Medicaid 
requirements and allow costs that would not otherwise be 
eligible for Federal matching funds for demonstration projects 
that are likely to assist in promoting Medicaid objectives.
    These are critical tools for States to experiment and 
evolve their Medicaid programs as they seek to modernize and 
improve them to better serve patients. For example, Michigan 
has used a waiver to successfully provide HSA-like Health 
Accounts to encourage participants to become more active health 
care consumers.
    Yet today we will hear from the nonpartisan Government 
watchdog, the Government Accountability Office, which has 
repeatedly raised serious questions about CMS' approval process 
for these waivers.
    Whether it is GAO's concerns about budget neutrality, 
approval criteria, or the process for approvals and renewals, 
these are important and fair questions. Congress needs a better 
understanding about how the billions of dollars CMS is 
approving promote Medicaid's core objectives.
    I also want to thank the second panel, in particular former 
Governor Barbour, for being here to share their ideas about how 
to improve CMS' management of these funds. I am confident that 
nearly every member of this subcommittee has heard frustrations 
from State officials at one point about the uncertainty and 
timeframes surrounding the approval or renewal of an 1115 
waiver. While State leaders are trying to balance their budgets 
and pass legislation, it is essential that CMS' process is 
transparent and predictable.
    Recent analysis and media coverage has raised questions 
over the degree to which CMS is effectively picking winners and 
losers in the waiver review process. CMS has a duty--to 
patients, to taxpayers, to States, to all stakeholders--to do 
more to increase the transparency, accountability, and 
consistency of their approval process. In fact, if CMS is doing 
a decent job, increased oversight and scrutiny will only bring 
their good efforts into the light. However, if there are 
shortcomings, this subcommittee will play its role in making 
the process more transparent, accountable, and fair for all 
involved. At the end of the day--it's about ensuring our most 
vulnerable receive the care they deserve.
    I yield 1 minute to Dr. Burgess.

    Mr. Upton. I yield the balance of my time to Dr. Burgess.
    Mr. Burgess. I thank the chairman for yielding. And I just 
want to underscore what he said. And, Governor Barbour, it is 
going to be good to have you before our panel again. I know you 
have been here before. And I think one of the failings when we 
initiate discussions on healthcare policy is our failure to 
include the Governors in the discussion because, after all, our 
Governors are the ones who have the principle role in a shared 
Federal-State program, like Medicaid. Our Governors are the 
ones who actually have the responsibility of the deliverable 
for their citizens, as well as they have to administer their 
own healthcare programs for their State employees, and they 
have great expertise in this area, and too often, we overlook 
that expertise. So I am grateful you are here with us today.
    The topic itself is one that holds a great deal of interest 
for me, and I am, therefore, glad, Chairman Pitts, that we are 
holding this hearing. Back home in Texas, we do have an 1115 
waiver, had it for a number of years, and it has allowed a 
positive transformation in care delivery.
    Conserving State flexibility within Medicaid allows States 
to structure their programs in a way that best meets their 
population's needs. Every administration uses the 1115 
negotiations to further their particular objectives, and thus, 
maybe a discussion on more transparency is warranted. But for 
this administration, Medicaid expansion has been the leading 
factor, the number one factor, in negotiations. It has been 
publicly noticed that even though the Supreme Court has ruled 
that the administration may not coerce a State into expanding 
its Medicaid under the ACA, that maybe, in fact, what is 
happening when the State comes to talk about an 1115 waiver.
    In April, the Center for Medicare and Medicaid Services 
explicitly linked funding for Florida's low-income pool to 
Medicaid funding, although progress has been made recently. 
Expansion is not a viable option in Texas, where it was 
previously estimated that it would cost the State as much as 
$27 billion over a decade.
    Mr. Chairman, I am grateful we are holding the hearing 
today, and look forward to the testimony of our witnesses and 
their answering our questions.
    I yield back.
    Mr. Pitts. The Chair thanks the gentleman.
    The ranking member of the full committee, Mr. Pallone, has 
sent me a message. He said he would be late to get to the 
hearing, would miss opening statements. He has asked to 
designate Ms. Castor to have his opening statement time. So 
without objection, Ms. Castor, you are recognized for 5 minutes 
for your opening statement.

  OPENING STATEMENT OF HON. KATHY CASTOR, A REPRESENTATIVE IN 
               CONGRESS FROM THE STATE OF FLORIDA

    Ms. Castor. Well, thank you, Chairman Pitts and Ranking 
Member Green, and thank you for calling this important hearing 
on the Medicaid demonstration projects.
    It was the Congress, through amendments to the Social 
Security Act and laws relating to Medicaid, that granted States 
new and broad flexibility to test what works. All States are 
different. Through what are called the Section 1115 waivers, or 
demonstration projects, States have great flexibility to 
deliver care in more efficient ways. But each waiver has a time 
limit, because demonstration projects are intended to be 
analyzed to ensure they are working, and that they are using 
taxpayer dollars wisely. And there are a couple of important 
parameters. These are typically 5-year demonstration projects 
with certain extensions, 3-year extensions. You negotiate with 
CMS. And we say that the States, and these are some of the 
principles, States and the Federal Government cannot spend more 
than they would have spent without the waiver. And that is an 
important safeguard on taxpayer dollars.
    So I appreciate the GAO and your thoughtful analysis of 
these waivers. It is very opaque to the average person. You 
have advocated for more transparency and accountability. 
Congress responded in the Affordable Care Act, and CMS has 
followed through with that direction, but I think we can all 
agree we still have more to do. So I will look forward to your 
testimony today on how we can continue to work to make these 
demonstration projects and waivers more transparent.
    Now, many States have experimented with low-income pools, 
these uncompensated pools of cash, where the local governments, 
State Governments, Federal Government, pools money to pay for 
uncompensated care. Now, the uncompensated care pools are 
intended to support healthcare providers that provide 
uncompensated care to uninsured and underinsured State 
residents. They are not healthcare programs. They don't allow 
people to get primary and preventative care, and they don't 
protect people from financial harm resulting from medical debt, 
and that is why they have come under great scrutiny. They were 
very important before the adoption of the Affordable Care Act 
because the uninsured levels across America were so high. 
Hospitals, doctors, community health centers simply couldn't 
cover the costs of uncompensated care without the help of the 
low-income pool dollars. And these were especially vital to the 
State of Florida as we transition from traditional Medicaid to 
Medicaid managed care. And I was an advocate in past years for 
very healthy, uncompensated care pools.
    But now we are in a whole different world. With the broad 
expansion of coverage under the Affordable Care Act, these 
billions of dollars in pools of cash don't make financial sense 
anymore. So CMS put States on notice some years ago. They put 
Florida on notice in 2011 that the low-income pool would not 
survive in its current form, because it doesn't make sense to 
simply write a check to a hospital or a State that isn't as 
financially responsible as providing coverage to your citizens. 
After being on notice since 2011, Florida got a 1-year 
extension of LIP until June 30, 2015, with the understanding 
that it would conduct an independent review of its payment 
system intended to allow for the development of a sustainable, 
accountable, actuarially sound Medicaid payment system, and 
that LIP would be different. Florida knew that it was expected 
to change the way it pays providers, and provides health 
services to its low-income residents. They got into trouble 
this spring because the Governor, even though he was on notice, 
included the full LIP uncompensated care pool number in his 
budget, and the Republican-led State senate wanted a coverage 
model, so they went into a budget impasse. And fortunately, 
they have resolved it. Unfortunately, they did not adopt a 
coverage model, and we are on notice that the LIP funds are 
going to diminish over time. This will be an important lesson 
for other States across the country. And we need to be--we need 
to focus on coverage that is more financially secure for 
States, the Federal Government, and eliminate this risk of 
unnecessary expenditure of taxpayer dollars. So I will look 
forward to the discussion on that today as well.
    Thank you very much. I yield back my time.
    Mr. Pitts. The Chair thanks the gentlelady.
    That concludes the opening statements. As usual, the 
written opening statements of the members will be included in 
the record.
    We have two panels today. And on our first panel we have 
Ms. Katherine Iritani, Director of Health Care, the Government 
Accountability Office. Thank you very much for coming. Your 
written will be made a part of the record. You will have 5 
minutes to summarize your testimony before questions. And so at 
this point, you are recognized for 5 minutes for your opening 
statement.

   STATEMENT OF KATHERINE M. IRITANI, DIRECTOR, HEALTH CARE, 
                GOVERNMENT ACCOUNTABILITY OFFICE

    Ms. Iritani. Chairman Pitts, Ranking Member Green, and 
members of the subcommittee, I am pleased to be here to discuss 
GAO's work on Medicaid demonstration spending. Demonstrations 
comprise a significant and fast-growing component of the over-
$500 billion Medicaid Program. With the broad waiver and 
spending authority conferred upon the Secretary of HHS under 
Section 1115 comes responsibility for ensuring that 
demonstrations further Medicaid objective and do not increase 
Medicaid costs.
    My testimony today is based on GAO's April report examining 
HHS' approvals of new costs approved for 25 States' 
demonstrations. I will also discuss a body of work from 2002 to 
2014, examining HHS' review process for ensuring that 
demonstrations do not raise Federal costs.
    Based on this work, we have three main concerns with HHS 
approvals. First, with transparency. HHS' bases for approvals 
of new costs not otherwise eligible for Medicaid were not 
always apparent in recent approvals. Nor have been the bases 
for approved spending limits for the demonstrations which 
govern total allowed spending. Second, accountability. HHS has 
not issued specific criteria for how it determines that 
approved spending is furthering Medicaid objectives, nor has 
HHS issued specific criteria for how it reviews and approves 
demonstration spending limits. Without criteria, stakeholders 
and overseers may not share a common understanding of how major 
decisions occur. The third concern, fiscal impact. Based on our 
reviews and multiple demonstrations approvals, we have 
longstanding concerns that the Secretaries approve spending 
limits that could potentially increase Federal Medicaid costs 
by tens of billions of dollars.
    I will turn now to our report findings. In April, we 
reported that HHS has approved States to obtain Federal 
Medicaid funds for a broad range of purposes. Two prominent 
types of new costs not otherwise eligible for Medicaid were 
approved. The first was for State-operated programs. HHS 
allowed five States to spend up to $9.5 billion for more than 
150 State-operated programs that, prior to the demonstration, 
were funded by the State and potentially other Federal sources. 
The programs were wide-ranging in nature. They included 
workforce education and training, insurance subsidy, housing, 
licensing, loan repayment, and a broad array of public health 
programs. The Federal Medicaid funds the States received could 
replace some of the States' expenditures for the programs, and 
free-up State funding for other purposes. HHS' approval 
documents were not always clear about what the State programs 
were for or how they related to Medicaid. Further, approvals 
did not always provide assurances that new Medicaid funds for 
these programs would be coordinated with other funding streams.
    The second prominent type of spending approved was funding 
pools to make new payments to hospitals and other providers for 
broad purposes. HHS approved six States to spend up to $7.6 
billion for funding pools for uncompensated care costs. Five 
States were allowed to spend up to $18.8 billion for incentive 
payments to providers to improve health care delivery and 
infrastructure. Again, approval documents were not always clear 
regarding how the spending would further Medicaid objectives, 
and not duplicate other Federal funding streams.
    Now let me to turn to our work on budget neutrality, which 
examined the extent HHS has ensured that demonstrations will 
not raise Federal costs. Our longstanding body of work 
examining over 20 demonstrations found that HHS allowed most 
States to use questionable assumptions and methods to project 
how much their Medicaid program would cost without the 
demonstration. Such projections, once approved, become the 
basis for total spending allowed under the demonstration. In 
our most recent reports in 2013 and '14, we estimated that HHS 
approved spending for five States' demonstrations that was 
about $33 billion higher than what the documentation supported.
    In conclusion, Medicaid demonstrations provide HHS and 
States a powerful tool for testing and evaluating new 
approaches for improving the delivery of services to 
beneficiaries. Medicaid demonstrations can also set precedents 
that are adopted by other States, and raise potential for 
overlap with other funding streams. Given the fast-growing and 
significant amount of Federal spending governed by these 
demonstrations, we believe there is an urgent need for improved 
accountability and transparency in HHS' review and approval 
process.
    Mr. Chairman, this concludes my statement, and I am happy 
to answer any questions.
    [The prepared statement of Ms. Iritani follows:]
 
 
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    Mr. Pitts. The Chair thanks the gentlelady. I will begin 
the questioning and recognize myself 5 minutes for that 
purpose.
    Ms. Iritani, in your testimony you indicated that CMS has 
four general criteria against which it reviews Section 1115 
demonstrations to determine whether the Medicaid Program's 
objectives are met. However, did anyone outside of CMS know 
about these criteria until the GAO did its report?
    Ms. Iritani. No. The first time we saw those criteria was 
when CMS and HHS responded to a draft of our report.
    Mr. Pitts. So to be clear, these criteria are not even in 
regulation?
    Ms. Iritani. Correct.
    Mr. Pitts. So did CMS create them out of thin air, or where 
did they come from?
    Ms. Iritani. We asked for CMS' criteria during the course 
of our review, and that criteria were not provided until they 
reviewed a copy of the report.
    Mr. Pitts. Now, you raised concerns that the criteria that 
CMS enumerated for its review of the demonstration programs are 
far too general. Can you please elaborate on these concerns, 
explain the risk associated with the lack of more specific and 
transparent criteria?
    Ms. Iritani. The general criteria that CMS said that they 
used included things like increasing and strengthening coverage 
for low income and Medicaid, increasing access to and 
stabilizing providers and provider networks available to 
Medicaid and low income, improving health outcomes for Medicaid 
and low income, increasing efficiency and quality care. We did 
not believe that these criteria were sufficiently articulated 
in terms of the link to Medicaid, and the documentation that we 
reviewed regarding the approvals was not clear as to how they 
made their decisions about what to approve.
    Mr. Pitts. Now, the part of the Federal statute on 1115 
waivers is very short; just four pages. So the Secretary of HHS 
has tremendous latitude under the law to fund some 
demonstration projects, while denying others. Are there any 
statutory criteria requiring the Secretary to be consistent?
    Ms. Iritani. There are not. The statute is quite broad with 
regard to the Secretary's authority for approving purposes 
that, in her or his judgment, further Medicaid objectives.
    Mr. Pitts. What is to stop the agency from playing 
favorites; picking winners and losers, via the waiver process?
    Ms. Iritani. Well, we believe that more transparent 
criteria and standards for approvals are needed, and more 
oversight.
    Mr. Pitts. Now, one of the worries that I and many of my 
colleagues have is that the Medicaid Program too often promises 
coverage, but effectively denies care. An NPR story this week 
entitled, California's Medicaid Program Fails to Ensure Access 
to Doctors, told the story of Terry Anderson. She signed up for 
California's Medicaid Program earlier this year, hoping she 
would finally get treatment for her high blood pressure, but 
she faced challenges accessing care in a timely manner. Would 
it make more sense for CMS to stop spending money on the low-
priority items, and free-up more Federal dollars for better 
oversight and direct care for patients?
    Ms. Iritani. We would agree that Medicaid funds should be 
spent for Medicaid purposes. And the approval documentation 
that we reviewed for the demonstrations did not articulate how 
many of the approved expenditures were furthering Medicaid 
objectives, which is why we have recommended that the Secretary 
issue criteria as to how he or she assesses whether or not 
approved spending is furthering Medicaid purposes.
    Mr. Pitts. The Chair thanks the gentlelady. My time has 
expired.
    The Chair recognizes the ranking member of the 
subcommittee, Mr. Green, 5 minutes for questions.
    Mr. Green. Thank you, Mr. Chairman.
    Thank you again for your testimony. We hear a lot of 
criticism of the lack of flexibility of CMS for waivers, but 
what I heard in your testimony and seen in multiple reports 
going back decades is that many actually--maybe actually too 
much flexibility in how the budget neutrality and other 
features of waivers have been administered. My question is, GAO 
is asking for clearer standards and more transparency, just 
like CMS has recently taken steps to provide in its approach to 
Florida and other States with uncompensated care pools. Is that 
correct?
    Ms. Iritani. That is correct.
    Mr. Green. In reviewing the GAO's recommendation over the 
last--recommendations over the last 20 years, it appears as 
though your recommendations have remained the same until only 
recently. Isn't it true that the majority of these 
recommendations were not acted upon up until the Obama 
administration and the Affordable Care Act, which placed many 
of your recommendations into action?
    Ms. Iritani. That is correct.
    Mr. Green. OK. Given the large amount of Federal dollars at 
stake in waivers, would you agree that it is important for CMS 
to make it--to take its time in evaluating the proposals and 
getting additional information from the States to ensure that 
each State's proposal is for a project that is in line with the 
objections--objectives of the statute?
    Ms. Iritani. We would agree that there is more need for 
transparency for criteria around how they make their decisions, 
around better methods allowed for predicting how much the 
Medicaid Program would cost without the demonstration, which 
becomes the basis for the spending limits allowed.
    Mr. Green. Well, and I don't think any up here would 
disagree with we need more transparency in dealing from CMS
    I want to clarify a point in your testimony that may be 
misleading to some of my colleagues. GAO mentions that some of 
the funds that go to the designated State health programs has 
been supported by both political parties for more than a 
decade, could have received funding from other Federal 
sources--could that--the designated State health programs 
receive funding from other Federal sources. As you may know or 
may not know, it is very common for small programs to leverage 
multiple funding streams to provide services. However, that is 
concern--what is concerning is in this case, from my 
understanding, the lack of documentations and potential, 
therefore, for Medicaid Federal matching dollars to be given 
based on other Federal funding not as a match for the State 
dollars as is appropriate under the Medicaid Program. That 
duplication of funds is the issue that GAO is concerned about. 
Is that correct, Ms.----
    Ms. Iritani. That is correct.
    Mr. Green. OK. The GAO is not determining what is or is not 
appropriate for Medicaid objective because that determination 
lies with the Secretary of HHS. And our States--rather, the GAO 
is recommending that better documentation reflect the tide of 
Medicaid objectives for these funds, and that CMS ensure that 
States are not drawing down Federal matching funds based on the 
input of other sources of Federal funds. Is that pretty 
accurate?
    Ms. Iritani. Yes, that is correct. I think our concern with 
the approval documentation around potential duplication was 
that there was variation in the level of protections in the 
approval documentation with regard to assuring that if programs 
were receiving Federal funds from other sources, that they were 
offsetting those against the Medicaid funds that they received.
    Mr. Green. OK. Thank you, Mr. Chairman. I yield back my 
time.
    Mr. Pitts. The Chair thanks the gentleman.
    Now recognize the gentleman from Illinois, Mr. Shimkus, 5 
minutes for questions.
    Mr. Shimkus. Thank you very much, Mr. Chairman. Ms. 
Iritani, it is great to have you here.
    And I have been focused on this budget waiver neutrality 
debate, to the chagrin of some of some of my friends, and 
actually I think my own State, because the concern has been, 
since there is no transparency or clear answer, the premise is, 
which I agree, properly done, that give States their authority 
to meld their own program, you also get better outcomes and you 
will get a savings. I mean that is what we are always told. And 
if not a savings, there is an implied aspect in 1115 that says 
at least it should be neutral, but for the past 10 years you 
all have looked at this, and what have you found?
    Ms. Iritani. Yes, we have found that the documentation did 
not support that spending limits were budget neutral. We found 
that it is likely that Federal Medicaid costs could be 
increased significantly for Medicaid based on these 
demonstration approvals.
    Mr. Shimkus. So just using the facts of dollars, the 
claims, they are not being substantiated by the facts. The 
facts don't substantiate the claims that States have made that 
we can build a better mousetrap, provide better care, and 
actually have a savings to the Medicaid system.
    Ms. Iritani. Yes.
    Mr. Shimkus. So--and again, to the chagrin of even my 
State, because as--the State of Illinois, we are almost a 
failed State these days. Our pension obligations far outstrip 
per capita any in the union. Medicaid is also a big driver. So 
there is sometimes an intent, I--so I am not being encouraged, 
let me put it this way, to ask these questions on budget 
neutrality because of, I think, a desire for the States to be 
able to gain the system a little bit, based upon the vagueness 
of what CMS is doing. And I hate to kind of tell--weave the 
story this way, but it is--I think it is just a--it is a fact, 
based upon the numbers.
    So we have dropped a bill, H.R. 2119, I don't know if you 
are familiar with it, and I know your position of not 
commenting on legislation, but the intent of the bill is to do 
at least an analysis and have the chief actuary of the CMS 
certify that the proposed budget neutrality or implied savings 
is actually there. I mean it is a guess, but at least it has 
actuaries doing the number crunching to say, yes, we believe 
the State, we think there is going to be a savings, at a 
minimum there is going to be budget neutrality. If we brought 
in and had that actuary analysis before a decision was 
rendered, do you think that would be helpful?
    Ms. Iritani. Yes, I think that what I can say is that, in a 
recent--we have noted that the actuary isn't involved in the 
process typically. In our most recent report in 2014, the--
which was looking at the budget neutrality of one State's 
approval, we did note that the actuary was asked to review the 
State's proposal, including the proposed spending limits and 
the basis for it, and had raised questions with it, but was--
but--and asked for further documentation that was not provided 
by the State. And the spending limit was approved, and we found 
that it was likely going to raise Federal costs.
    Mr. Shimkus. So, you know, that story kind of just supports 
our concern and the reason why we dropped the bill, and it is a 
very--it is very short. But what we require then is a 
certification process by the actuaries which would then, I 
think, empower them to make sure they get all the information 
they need to be able to make a--to certify based upon the best 
available information that this is going to be budget neutral 
or, in essence, an implied savings.
    So I appreciate you being here. It is a tough issue. Money 
is always what you fight about. So thanks for coming.
    I yield back my time.
    Mr. Pitts. The Chair thanks the gentleman.
    Now recognize the gentlelady from California, Mrs. Capps, 5 
minutes for questions.
    Mrs. Capps. Thank you, Mr. Chairman, for holding this 
hearing, and to our witness for your testimony. I am happy we 
have this opportunity to come together to talk about these 
important Medicaid waivers; something that has really, truly 
helped my State respond creatively to its challenges and 
provide healthcare coverage to many more than before.
    Our Nation faces a significant challenge of caring for our 
growing patient population with limited resources, and as was 
mentioned, the challenge even with the number of providers 
available to meet the needs. We must ensure that the Medicaid 
Program has the flexibility through these waivers to address 
these needs. As has been said, these waivers are negotiated 
between the State and CMS, but especially as we have seen in 
California, the agreement affects many more stakeholders once 
it is in place. Recognizing this fact, the ACA included an 
important provision to encourage broader stakeholder input 
during the waiver process. Now there is a formulized process 
for the broader coalition of stakeholders to contribute, and I 
think that range of perspectives has created better and more 
effective waiver programs. I think both sides of the aisle 
agree that this aspect of transparency is so vitally important.
    Ms. Iritani, can you talk more about how public comments 
have helped and will help to increase transparency throughout 
the Medicaid waiver process?
    Ms. Iritani. Certainly. Yes, we raised concerns with the 
lack of transparency in the approval process, dating back to 
the early 2000s. In a report in 2002, we talked to a number of 
different States and advocacy groups and others about 
demonstrations that had been recently approved that 
significantly affected beneficiaries, and found that there are 
great concerns about groups even being able to see a copy of 
the proposal prior to the approval. In some cases, I think that 
there were FOIAs involved to try to get transparency over what 
was being approved. And the Patient Protection Affordable Care 
Act did require a public input process at the Federal level, 
which we think greatly enhances transparency of what is being 
proposed, and provides for input to the process prior to the 
approval. So we would agree that that is an important reform.
    Mrs. Capps. And so you have seen progress since this has 
been initiated?
    Ms. Iritani. We have not looked at public----
    Mrs. Capps. You are not----
    Ms. Iritani [continuing]. Input since----
    Mrs. Capps [continuing]. Measuring it.
    Ms. Iritani [continuing]. Since the law was passed. But----
    Mrs. Capps. OK.
    Ms. Iritani. But we----
    Mrs. Capps. Do you intend to?
    Ms. Iritani [continuing]. We agree that it has increased 
transparency.
    Mrs. Capps. I mean, how are States responding to these kind 
of comments?
    Ms. Iritani. We have looked at that. In terms of how are 
States responding to the proposals?
    Mrs. Capps. The proposals and the process of the whole 
transparency issues.
    Ms. Iritani. We have not looked at that, at how States are 
responding to the process.
    Mrs. Capps. Do you see this as part of your overall 
objective, or is it up to somebody else to do this piece of it?
    Ms. Iritani. Well, we would be happy to look at that. The 
work that we have been requested to do in recent years has 
focused on budget neutrality and the new costs that were 
approved in the demonstrations.
    Mrs. Capps. Which is a lot to be assigned to and be----
    Ms. Iritani. Yes.
    Mrs. Capps [continuing]. Grappling with in light 
especially, in my view, of the total, I won't say overwhelm, 
but increase in volume. I mean there has really been a sea 
change. You want to explain--I have a few more seconds left, 
and what are some of the issues that you have faced, or how has 
this process been received?
    Ms. Iritani. The public input process?
    Mrs. Capps. Right.
    Ms. Iritani. Well, you know, as I say, we haven't looked at 
it since it was implemented, but we did look at the regulations 
that implemented it and agree that it was responsive to our 
recommendations that they provide for a Federal input process.
    Mrs. Capps. Um-hum. So we are on the path, but it is early 
yet to interpret any results, is that what I am hearing you 
say?
    Ms. Iritani. I would say it is an important step to 
improving transparency, yes.
    Mrs. Capps. Right, but we need to keep checking back and--
do you have the means by which you can accomplish some of these 
goals?
    Ms. Iritani. I would be happy to work with the subcommittee 
on work----
    Mrs. Capps. Thank you.
    Ms. Iritani [continuing]. Looking at that.
    Mrs. Capps. I thank you for the time. I yield back.
    Mr. Pitts. The Chair thanks the gentlelady.
    Now recognize the gentleman from Pennsylvania, Dr. Murphy, 
5 minutes for questions.
    Mr. Murphy. Thank you. I am over. Good morning. It is good 
to be with you, and thank you for your work.
    I want to ask about one demonstration project that was 
authorized in the Affordable Care Act that relates to the 
Institution for Mental Disease exclusion, IMD exclusions, for 
emergency care for people with psychiatric conditions. As part 
of comprehensive mental health reform, this committee will be 
deciding and considering modifications in these IMD exclusions 
to increase access to timely and cost-effect short-term 
psychiatric care as opposed to boarding in emergency rooms, and 
that is what I understand is the demonstration report that is--
was worked on for that study.
    Can you tell the committee, if you are aware of this, what 
CMS has learned from current Medicaid emergency psychiatric 
demonstrations, and which created an exception for this IMD 
exclusion for adult Medicaid enrollees who have been determined 
to have emergency psychiatric conditions? Are you aware of any 
of this?
    Ms. Iritani. I am not. That demonstration was not within 
the scope of our work.
    Mr. Murphy. Is that something that you would be able to 
look at, because it is--was one of the demonstration programs? 
Is it totally excluded from your work to review that?
    Ms. Iritani. I believe that that is a separately 
authorized--not under the 1115----
    Mr. Murphy. Well, let me ask a little bit more about this 
because I mean I value your input on this----
    Ms. Iritani. Um-hum.
    Mr. Murphy [continuing]. But I understand the final 
evaluation though for the demonstration will be completed in 
the fall of 2016, so it is still ongoing. Do you have any 
advice or suggestions you could make to this committee to help 
us shape how we review these to make the most effective 
policies, for example, on these IMD exclusions? Is that 
something you would be able to advise us on?
    Ms. Iritani. Well, I need to see more specific information, 
but yes, we would be happy to talk to the subcommittee about 
new work on this----
    Mr. Murphy. Thank you.
    Ms. Iritani [continuing]. Issue.
    Mr. Murphy. And also with CMS support, extending the 
current Medicaid emergency psychiatric demonstration until at 
least the final evaluation is available. The--because we have 
an initial 2013 report, but we don't have--I mean the rest is 
going to take some more time. And what we see is in the States 
involved, because we limit hospitals to have less than 17 beds 
because it seems to only cover people who are suicide or the 
most severe cases, it still leaves us in a position where we 
are having problems putting these pieces together. We want to 
provide effective care for people, we want to do it in the most 
cost-effective way, but also recognizing that you can be cost-
effective--you can do cost care without providing anything. We 
don't want to do that. We want to make sure we are providing 
effective services. And believe that the Government 
Accountability Office is a record of really helping us look at 
and analyze those numbers, so I would be grateful if that is 
something you could help us with. It is a key issue that this 
committee has got to deal with, because otherwise what happens 
with Medicaid, for people ages 22 to 64, is they have nowhere 
to go. We had a recent hearing in this subcommittee where 
Senator Creigh Deeds of Virginia was here. His case was one 
where he took his son to a hospital in Virginia, and the 
hospital said we don't have any beds. And what happens so often 
is these men and women are--they may be boarded in an emergency 
room, they may be tied to a bed, if they are assaultive they 
may be given chemical sedatives, and they say there is just no 
room, and it is this Medicaid rule which was based upon closing 
down those old institutions and hopefully having some other 
support services. If we close the institutions down, we don't 
have enough hospitals because Medicaid has said you can't have 
them. And so in his case, he took his son home. His son took a 
knife and tried to kill his father. Slashed him up pretty bad. 
Father escaped. Luckily, some driver picked him up as he was 
running up, but unfortunately, his son killed himself.
    Now, I know that these aren't the cost-effective measures 
that GAO looks at, but it is something we all care deeply 
about. How do you put a number on that? How does he put a 
number on his son's life? And given the 40,000 suicides that 
occurred in this country last year, given the 43,000 drug 
overdose deaths that occurred in this country last year, those 
numbers are staggering and they are getting worse every year, 
so we have to effect this.
    So your input, GAO's input, I would value greatly as we 
help address this to find--to look at these numbers and costs 
and saying this is not acceptable to this committee, it is not 
acceptable to this country. Quite frankly, it is not acceptable 
to the human race that we have done this, and the outcomes too 
often are death.
    I yield back.
    Mr. Pitts. The Chair thanks the gentleman.
    And now recognize the gentleman from Oregon, Mr. Schrader, 
5 minutes for questions.
    Mr. Schrader. Thank you, Mr. Chairman.
    Ms. Iritani, what is the rate of Medicaid reimbursement 
compared to private insurance coverage in general?
    Ms. Iritani. That is going to vary by service and State. 
Oftentimes, fee-for-service Medicaid rates may be lower, but 
again, it is going to vary.
    Mr. Schrader. They are pretty--they are always lower, and 
significantly lower. I know in my State it is very dramatic. It 
is hard to get providers sometimes to see Medicaid patients 
unless they are a mix because the rate is, you know, almost \1/
2\, and sometimes not even covering the cost of these services.
    What is the rate of--well, is there a general rate of 
medical inflation that GAO uses to estimate savings when they 
are evaluating these different programs and----
    Ms. Iritani. We apply HHS' own criteria for how States 
should develop spending limits, and that criteria is that 
States should project what Medicaid will cost, which becomes 
the basis for the spending limit, based on the lower of either 
the State's historical spending trends in recent years, or the 
President's budget projections of Medicaid growth for the 
Nation as used in the President's budget.
    Mr. Schrader. But wouldn't you say it is always more than 
the general rate of inflation?
    Ms. Iritani. I----
    Mr. Schrader. Medical inflation is generally higher than 
regular inflation.
    Ms. Iritani. I cannot----
    Mr. Schrader. Well, the answer is yes.
    Ms. Iritani. OK.
    Mr. Schrader. I mean there is not a State in this country 
that----
    Ms. Iritani. Um-hum.
    Mr. Schrader [continuing]. Doesn't budget for a higher rate 
of medical inflation for its healthcare programs compared to 
services and supplies----
    Ms. Iritani. Uh-huh.
    Mr. Schrader [continuing]. You know. My State was easily 3, 
4, or sometimes 5 times, historically----
    Ms. Iritani. Um-hum.
    Mr. Schrader [continuing]. Prior to the advent of the ACA, 
which has now driven down healthcare expenditure increases 
dramatically. A little shocked that GAO doesn't have this 
information, actually.
    Isn't it correct that, for these designated State health 
programs, that these have been around a long time? Not recent--
--
    Ms. Iritani. Some of the approvals----
    Mr. Schrader [continuing]. Figment of this--
    Ms. Iritani. Some of the original approvals of the 
demonstrations we reported on in our recent report had been 
approved years ago, yes.
    Mr. Schrader. So prior to this administration?
    Ms. Iritani. Yes.
    Mr. Schrader. OK. Good. Good. And isn't it accurate that 
CMS, with your latest report, has agreed with most all of your 
recommendations and is inclined to supposedly work to improve 
them?
    Ms. Iritani. Yes, we had three recommendations around 
issuing criteria about how to further Medicaid demonstration 
objectives around improving the documentation about how they 
apply that criteria, and about making sure that they 
consistently provided assurances and approvals that there 
wouldn't be duplication of funding.
    Mr. Schrader. Good.
    Ms. Iritani. And they agreed with two of those, 
documentation-related recommendations. They partially agreed 
with the first one, indicating that they had general criteria 
that they used. They did not commit to issuing criteria.
    Mr. Schrader. And I guess I have a concern as I listened to 
your testimony and some of the queries by some of my 
colleagues. I am a little concerned we are--you are encouraging 
CMS to actually get into the micromanagement of these State 
waivers, and I think that is a big concern. Criteria defining 
how States have to have, or have to have certain procedures in 
place, and--shouldn't we be outcome-based, shouldn't we be 
outcome-focused, don't we just want to see more coverage for 
more people, better healthcare outcomes? I mean that is 
something that my colleagues and I can evaluate. Some of my 
medical physician colleagues, they perhaps have the greater 
degree of understanding, but for those of us in the lay field, 
I feel more comfortable evaluating the outcomes, not defining 
criteria by which these States, who we are trying to give more 
flexibility to give better coverage to more people over the 
long-haul. That really should be the goal. I am concerned that 
CMS may interpret, or my colleagues may interpret, your queries 
as to wanting to micromanage these States, and I think that is 
the wrong way to go. I think that is really the wrong way to 
go. Don't you feel that outcomes are the most important 
criteria by which we should judge success in these programs?
    Ms. Iritani. I would agree that improved outcomes for 
Federal spending is important. Healthcare costs are increasing 
and we are concerned about the long-term sustainability of the 
Medicaid Program. The--our work has really focused on the 
spending aspect and the approvals of the spending. And 
certainly, I think the goal of many demonstrations is to 
improve outcomes, but given the longstanding policy that they 
not raise Federal costs, I think that has been the focus of our 
work, and that is where we think reforms are needed because it 
is the long-term sustainability of the program that is--could 
be at risk.
    Mr. Schrader. I yield back. Thank you, Mr. Chairman.
    Mr. Pitts. The Chair thanks the gentleman.
    Now recognizes Dr. Burgess 5 minutes for questions.
    Mr. Burgess. Thank you, Mr. Chairman.
    And just picking up on Representative Schrader's questions, 
and the observation of outcomes versus micromanagement at CMS, 
we as physicians are always held to the standard we are going 
to pay for performance, and we are going to pay for value not 
volume. Do you ever provide or look to a pay-for-performance 
standard for CMS when evaluating these programs?
    Ms. Iritani. We have not looked at that, but I know some of 
the demonstrations I think are evaluating that.
    Mr. Burgess. Well, it just seems like, again, we are all 
too willing to burden every physician across the land with new 
requirements, and yet never ask the same of the bureaucracy, 
and really, we ought to be for patients before we are for the 
bureaucracy.
    I do have a question, it may require an answer in writing, 
but let me pose it to you. And I will get it to you in writing 
because the answer may be longer than time will permit us to do 
here. But we have heard several times this morning that 
applying for one of these waivers, an 1115 waiver, can be 
burdensome, time-consuming. I know it happened in Texas. Mr. 
Bucshon referenced Indiana. Can you discuss ways in which the 
Department of Health and Human Services could streamline the 
approval process for the 1115 waiver?
    Ms. Iritani. Our work is really focused on the approval 
processes for the spending, and we have examined the approval 
times, which vary greatly among demonstrations. There are many 
factors that we have been told contribute to that.
    Mr. Burgess. Well--but I would like, if you would, and I 
apologize for interrupting because--but time is short, I would 
like your evaluation of why that variability exists. Again, we 
in health care, if we had that degree, or when we have that 
degree of variability, people are always willing to ask 
questions and point fingers at us, just like that same standard 
applied to CMS when issuing these waivers. Just very briefly, 
according to your report, the Department of Health and Human 
Services actually did not have specific criteria for these 1115 
waivers. Now they do, but do you have a sense of what the 
criteria was before you issued your report?
    Ms. Iritani. They did not have any written criteria 
regarding how they made these approvals.
    Mr. Burgess. So it was flip a coin, draw straws, just how I 
feel that morning when I get up? No criteria at all?
    Ms. Iritani. Officials told us that it wasn't within the 
Secretary's interests to specify criteria.
    Mr. Burgess. Well, that brings up the point, because we 
kind of watched what is happening down in Florida, and now that 
expansion of Medicaid is the number 1 issue for the Obama 
administration going forward, this is the sine qua non of 
President Obama's legacy is the expansion of Medicaid. It 
really does seem like that power is being brought to bear on a 
State that had a functional 1115 waiver for their low-income 
pool, now it needs to be re-upped but the pressure is coming 
that you have to do something different that you haven't been 
doing before. Am I wrong to get that impression?
    Ms. Iritani. Well, we would agree that transparency is 
needed in the approvals and approval process, and the criteria 
that is used, and our concerns have been longstanding based on 
reviews of many, many States' demonstrations.
    Mr. Burgess. Well, the good news for both of us is that 
this is the most transparent administration in the history of 
the country, so we, I guess, can take some degree of solace on 
that.
    The question about the neutrality, and you brought that up 
a couple of times, when approaching and approving these 1115 
waivers, but GAO has had some concerns about this, actually 
going back into 2008, into the Bush administration. Center for 
Medicare and Medicaid Services has consistently asserted the 
policies are adequate and applied consistently, but really, to 
me, they are not. Could you share with us, and again, this may 
be an answer in writing because of time, but can you share with 
us ways that you think Congress could use to remedy this issue?
    Ms. Iritani. Yes, we believe congressional intervention 
would be helpful in this case. As I mentioned in my statement, 
our concerns about the approvals are longstanding. I think we 
have a report dating back to the mid-'90s on the budget 
neutrality process raising concerns, and the Secretary has 
consistently disagreed with our recommendations to reform the 
criteria and process around approving the spending limits. So 
we have elevated the recommendations that we made to the 
Secretary about improving the process as a matter for 
congressional consideration.
    Mr. Burgess. Well, I thank the gentlelady for her 
testimony. I will submit those questions in writing.
    And, Mr. Chairman, if I could, if you would yield to me for 
a unanimous consent request?
    Mr. Pitts. The gentleman may proceed.
    Mr. Burgess. Chairman, I request unanimous consent to enter 
into the record a letter by my attorney general in Texas, Ken 
Paxton, several other attorneys general, about the issue of the 
1115 waivers. And I would ask----
    Ms. Castor. And, Mr. Chairman----
    Mr. Burgess [continuing]. For its inclusion in the record.
    Ms. Castor [continuing]. I reserve the right to object.
    Mr. Pitts. All right. The----
    Mr. Burgess. Again, I make the unanimous consent request--
--
    Mr. Pitts. He has made----
    Mr. Burgess [continuing]. As a matter of----
    Mr. Pitts [continuing]. The unanimous consent request. Do 
you object?
    Ms. Castor. I would just like to make a short statement, 
and then I would----
    Mr. Pitts. All right, the Chair recognizes the gentlelady.
    Ms. Castor. I just want to point out that part of that 
letter is inaccurate when it comes to the State of Florida and 
what transpired there, since the State of Florida was on notice 
since 2011 that it was unlikely that the low-income pool was 
likely to survive in its current form, and due to the fact that 
CMS and the State of Florida have, in fact, negotiated the 
matter. The State did not expand Medicaid, and the LIP does 
survive. This simply points to the fact that we have all got to 
work harder to make sure we are working on behalf of the 
taxpayers. GAO has been critical of not allowing Federal 
waivers to spend extra money, and we have all got to be mindful 
of that. And if we take this tact that States have coverage, 
but they get these uncompensated care pools that don't have 
much accountability and transparency, that is not going to 
serve Medicaid patients very well, and the congressional intent 
to be strict and wise with taxpayer dollars.
    But at this time, I will remove my objection. Thank you.
    Mr. Pitts. Thank you.
    Without objection, the letter is entered into the record.
    [The information appears at the conclusion of the hearing.]
    Mr. Pitts. The Chair thanks the gentleman.
    Now recognizes the gentlelady, Ms. Castor, 5 minutes for 
her questions.
    Ms. Castor. Yes, I just have a quick question. The 
transparency regulations also require States to be more 
transparent; have hearings, have comment periods, but this is 
so difficult for folks who rely on Medicaid services back home, 
because remember, Medicaid really it serves primarily children, 
the disabled population, elderly in nursing homes, especially 
for States that have an expanded Medicaid. They have 
transitioned now, many States, to Medicaid managed care. And 
what I hear from folks at home is it is very difficult to have 
any real idea on where accountability lies, where they can go 
for recourse when they have an issue. For example, I had a 
woman in my office from Florida last week who has a severely 
autistic son, and she--under managed care, they have changed 
providers and she hasn't had the ability to weigh-in with 
policymakers on how care is going to be delivered to her son 
and other families.
    Here is another example, doctors are extremely frustrated. 
I had a pediatric dentist in my office just a few weeks ago 
from Florida. He does the Lord's work in taking care of 
hundreds and hundreds of children across my State and their 
dental health care needs. And that is smart because you take 
care of dental health needs and you save the State and Federal 
Government money down the road. But they do not have any 
recourse into inquiring at the State level what is happening 
with changes in demonstration projects and waivers. Can the GAO 
take a closer look at how States can do a better job? Have you 
done that and what recommendations do you have to help these 
families, patients and providers, have more access to what is 
happening?
    Ms. Iritani. We haven't looked at the public input process 
since the year 2000s. We haven't been asked to, but we would be 
happy to work with your staff regarding re-examining how things 
are working.
    As I said earlier, we thought that the Federal input 
process that was provided for in recent legislation was a very 
good step because, before, it was really just up to the States 
to get input, and that was often difficult for beneficiaries 
and others to weigh-in.
    Ms. Castor. I will look forward to doing that with you.
    Thank you. I yield back my time.
    Mr. Pitts. The Chair thanks the gentlelady.
    Now recognize the gentlelady from North Carolina, Mrs. 
Ellmers, 5 minutes for questions.
    Mrs. Ellmers. Thank you, Mr. Chairman. And thank you, Ms. 
Iritani, for being here today with us.
    You know, based on your testimony and some of the questions 
and discussion today, it looks like CMS is creating overlap and 
duplication through its funding of State health programs. Under 
Section 1115, basically CMS is authorizing Federal matching 
funds for State programs, despite the fact that other Federal 
agencies already provide funding for these causes. It would 
seem that we are duplicating billions of dollars.
    With that, could you discuss the steps that CMS is taking 
to ensure that the funding of these State-based programs does 
not result in overlap of duplication of Federal funding?
    Ms. Iritani. We found really mixed results in what CMS was 
doing in the documentation around--providing for assurances 
that the new spending that they were approving for the 
demonstrations would not duplicate other Federal funding 
sources. There were some States where the documentation would 
actually provide for a specific weighing-out of the different 
funding streams----
    Mrs. Ellmers. Um-hum.
    Ms. Iritani [continuing]. And requirements on how to 
offset----
    Mrs. Ellmers. Um-hum.
    Ms. Iritani [continuing]. The Medicaid funds with other 
Federal funding streams, but in many cases, there wasn't such a 
requirement, which raised concerns to us.
    Mrs. Ellmers. In your report, it lists 150 State programs 
for which CMS authorized Federal Medicaid funding, and many of 
the programs, based on their name, appear to be worthwhile and 
for good causes. I would like you to expand on how some of 
these programs promote Medicaid's objectives. And I want to 
give you three examples, and if you can just help us understand 
how this fits into the Medicaid space and should be approved 
for funding. How about licensing fees in Oregon?
    Ms. Iritani. Yes, you know, the point of our report is that 
we could not tell how that and other examples of the State 
programs that were approved actually related to Medicaid 
objectives.
    Mrs. Ellmers. So the other two now: one example I have, 
healthcare workforce retaining in New York. Now, certainly, we 
need a good, strong health workforce. Do you feel that that 
fits into the Medicaid space as well?
    Ms. Iritani. We felt like many of the approvals that CMS 
had approved were on their face only tangentially related to 
Medicaid.
    Mrs. Ellmers. Um-hum. Um-hum.
    Ms. Iritani. And without any criteria about how the 
Secretary was making these decisions----
    Mrs. Ellmers. Um-hum.
    Ms. Iritani [continuing]. We could not----
    Mrs. Ellmers. Determine.
    Ms. Iritani [continuing]. Make an assessment.
    Mrs. Ellmers. Yes. And then the last one I have is 
Fisherman's Partnership in Massachusetts. I am like you, I am 
just going to assume that you are going to say that also fits 
into that same characterization.
    Ms. Iritani. Yes.
    Mrs. Ellmers. And lastly, I just want to ask a little bit 
about the broad authority of the 1115 statute. What are the 
outer boundaries that the Secretary has to approve Medicaid 
funding?
    Ms. Iritani. The 1115 authority is very broad, and gives 
the Secretary discretion to waive certain Medicaid requirements 
in 1902, i.e., the Social Security Act, and approve new costs 
that are not otherwise eligible for Medicaid that, in the 
Secretary's judgment, are likely to promote Medicaid 
objectives. It is a broad authority.
    Mrs. Ellmers. I think that probably is about the best 
characterization. It is quite a broad authority, and gives 
quite an incredible amount of discretion.
    Well, thank you, Ms. Iritani.
    That is all I have, Mr. Chairman. Thank you. I yield back 
the remainder of my time.
    Mr. Pitts. The Chair thanks the gentlelady.
    Now recognize the gentleman from California, Mr. Cardenas, 
for 5 minutes for questions.
    Mr. Cardenas. Thank you very much, Mr. Chairman. Appreciate 
this opportunity to go through these issues, Ms. Iritani.
    I hear of some of the concerns about budget neutrality, but 
I also understand that CMS has taken new steps to make their 
approach to budget neutrality more transparent and enhance 
understanding between CMS and the States. On October 5, 2012, 
the released a Section 1115 template for States to use in order 
to clarify the requirements and simplify the application 
process. This template includes instructions and an 
accompanying budget worksheet that provides guidance on some of 
the most commonly used data elements for demonstrating budget 
neutrality.
    That being the case, is this a step in the right direction?
    Ms. Iritani. We would still maintain that much more is 
needed. That template that was issued provides guidance, but it 
is a voluntary--States do not need to use it. And CMS' written 
policy is quite outdated in terms of their typical practices 
for what they review and how they review things and what data 
they require, and we believe that more reforms to those things 
are needed to ensure that there is more consistency and 
approvals.
    Mr. Cardenas. Is it the case that, prior to October 2012, 
that HHS had not issued anything like this?
    Ms. Iritani. As far as I know, yes.
    Mr. Cardenas. OK. Well--so hopefully, what that means is 
HHS recognizes the--that they need to have a better 
transparency and understanding, and--with everybody involved 
when it comes to their responsibilities in giving the States 
this flexibility, correct?
    Ms. Iritani. I--the Secretary has consistently disagreed 
with our recommendations that any sort of reforms to their 
process for reviewing are needed, and this dates back to the 
early 2000s when we first made recommendations to the Secretary 
around transparency. And we have multiple reports, there is a 
list attached to my testimony statement, dating back to the 
mid-'90s. And regarding our recommendations to the Secretary on 
transparency and accountability in the review and approval of 
spending limits, the Secretary has consistently disagreed that 
anything is needed.
    Mr. Cardenas. Can you give us an example of one of those 
statements of disagreement, based on your reports?
    Ms. Iritani. We have recommended that the Secretary issue 
criteria for how they review and approve the spending limits, 
and provide for better documentation regarding the basis for 
approvals of the spending limits and make that publicly 
available, as well as ensure that States are required to use 
appropriate methods for projecting Medicaid costs.
    Mr. Cardenas. Um-hum.
    Ms. Iritani. And the Secretary has indicated that--
generally has disagreed with--that any of those reforms are 
needed to the process. And that is why we have elevated our 
recommendations to the Congress as a matter for consideration 
to require the Secretary to do these things.
    Mr. Cardenas. So those objections on behalf of the 
Secretary based on those recommendations, are--was there any 
indication that it is something that they couldn't do, or just 
something that they disagree with? Because one of the problems 
that I have experienced being a policymaker for 18-plus years 
now is that it is one thing to make recommendations to a 
department or a Government entity, and it is another thing for 
them to admit that if we had the resources, maybe we would do 
so, but we don't have the people power or the resources to 
actually implement those recommendations. Is there any 
indication whatsoever that resources are an issue as well, on 
behalf of the department?
    Ms. Iritani. That has not been something that the Secretary 
has said. I think that their response has generally been that 
they are--they use consistent criteria, and that they have 
treated States consistently, and that they believe that their 
current policy and practices do not need reform.
    Mr. Cardenas. And overall, are you aware of States overall 
on balance not appreciating that flexibility, or that they do, 
in fact, want to continue that flexibility relationship with 
HHS and the individual States?
    Ms. Iritani. We have not, you know, discussed with States 
the spending limit process particularly but, you know, given 
that the Secretary has authority to approve new costs not 
otherwise matchable, and to approve spending limits that may be 
much higher than what, you know, the State has justified, I 
would think States would actually embrace it. But our concern, 
again, is with the long-term fiscal sustainability of Medicaid 
and, you know, how this affects the Federal budget and Federal 
taxpayers.
    Mr. Cardenas. Thank you. I yield back the balance of my 
time.
    Mr. Pitts. The Chair thanks the gentleman.
    Now recognize the gentleman from Indiana, Dr. Bucshon, 5 
minutes for questions.
    Mr. Bucshon. Thank you, Mr. Chairman.
    As a physician who has taken care of Medicaid patients for, 
you know, a couple of decades, this hearing is very valuable to 
me today. I want to point out that, you know, Medicaid is a 
critical program that we need to--that our citizens need and--
but clearly, we need more oversight. I do want to point out 
that, in my view though, the traditional Medicaid is not good 
insurance coverage, and that has been shown already with the 
Medicaid expansion, under the Affordable Care Act where 
emergency room visits are actually up, not down, across the 
country. That is not my opinion, that is factual. And when I 
was a practicing physician, when I first came to Evansville, 
Indiana, there wasn't a single fellowship trained OB/GYN that 
would take a Medicaid patient in our community. Now, that has 
changed some now that physicians have been essentially kind of 
forced into being employed by hospitals, especially in that 
area. In one of the surrounding States surrounding Indiana, 
some of the anesthesiologists in my hospital didn't even both 
to bill Medicaid for the care that they provided for those 
patients because the State ran out of money before the end of 
the year, and the reimbursement was so low it didn't even make 
sense to spend the administrative costs to bill them.
    So that said, some of the things you pointed out about 
where waivers are using--it appears to be given with no 
specific approval criteria. It is not in a rule, it is not in a 
statute, it is not in a law, and that has resulted in some 
money, billions of dollars, being spent on non-Medicaid really 
type spending that should be associated with that program. 
Further, spending money that could be used for direct patient 
care, as has been pointed out by a number of members. So it 
seems to me that specifically legislation likely is needed. 
Would you agree or disagree with that?
    Ms. Iritani. Well, we would agree that congressional 
intervention would--and oversight is--would be important to 
addressing these issues.
    Mr. Bucshon. Yes. And some States, as you probably know, 
have been operating under an 1115 waiver for decades, and some 
have suggested that as part of that process, Congress create a 
process where longstanding core elements of an 1115 waiver can 
effective be grandfathered into the State's State plan 
amendment, which directs the operation of the program. Do you 
have any thoughts on that?
    Ms. Iritani. I do not have a comment. Our work has not 
looked at that kind of process.
    Mr. Bucshon. Because it seems to me, I mean if you have a 
program in your State that is working, and you have been 
getting waivers for decades sometimes, that--during the, you 
know, how we utilize the Medicaid Program, we should just 
change it so that we don't have to continue to ask for these 
waivers. And, you know, Healthy Indian Plan 2.0, which was put 
into place after the original Healthy Indiana Plan was 
successful, and has data to prove so, you know, we had to fight 
for 2 years to get a waiver for something that has been shown 
to be effective, and also that the patients, over 90 percent, 
approve of. And it actually saved probably 2 or 3 percent in 
our Medicaid budget in our State, and has allowed us to cover 
individuals with a--low-income individuals with a program not--
that is not traditional Medicaid, that actually reimburses 
providers at a level that they can accept. And so it actually 
is increasing access to patient care.
    So I don't have a specific question, other than those 
comments. I think that many of the questions I have asked--I 
were--was going to ask have been answered, but just to say 
that, you know, it really is hard to believe that after decades 
of recommendations from you all, that we are still wasting 
money in the--it seems, in the Medicaid Program, at the same 
time where the reimbursement rates to providers is limiting 
access to direct care for patient. And it seems to me, Mr. 
Chairman, that we are going to need legislative action.
    I yield back.
    Mr. Pitts. The Chair thanks the gentleman.
    Now recognize the gentleman from Virginia, Mr. Griffith, 5 
minutes for questions.
    Mr. Griffith. Thank you, Mr. Chairman. Thank you for being 
here this morning.
    Despite the fact that CBO has indicated that under 
ObamaCare, ACA's Medicaid expansion would, on balance, reduce 
incentives to work, and that a work requirement component for 
the able-bodied would increase available resources for 
Americans. To date, CMS has refused to approve work 
requirements as a part of Republican State demonstration 
waivers. Is there anything in the Section 1115 statute that 
would prevent CMS from approving work-related requirements?
    Ms. Iritani. We have not encountered that kind of proposal 
in the work that we have done, so I can't comment on the 
Secretary's authority in that case. But as I mentioned, the 
1115 does provide the Secretary with quite broad authority.
    Mr. Griffith. So a cursory view would not be unreasonable 
for some of us to think that that broad authority would not 
preclude a work component requirement for the able-bodied?
    Ms. Iritani. As I said, we haven't encountered that kind of 
requirement in our work, so I can't comment on that.
    Mr. Griffith. I appreciate that.
    Since 1115 demonstration programs are intended to be 
experimental or pilot projects to test new ways of providing 
services, it is my understanding that each demonstration is to 
be evaluated. Has GAO reviewed the evaluations of demonstration 
programs, and if so, what have those evaluations taught about 
the ways to reform the Medicaid Program to provide better 
access and services to beneficiaries?
    Ms. Iritani. We have not been asked to look at that 
component of the demonstration, but you are correct, these 
demonstrations are supposed to be evaluations and have an 
evaluation component. We did, in the mid-'90s, in a report, 
discuss the major impact that some of these demonstrations had 
on beneficiaries and other things, and looked at the progress 
reports that States were submitting to CMS and also the 
planning for the evaluations, and found both were lacking. We 
made recommendations to the Secretary to improve both those 
things, and we have not since been asked to look at that.
    Mr. Griffith. Did they ever get back to you and say that 
they had implemented your recommendations that you made back in 
the mid-'90s?
    Ms. Iritani. They agreed with the recommendations at the 
time, and then at some point, and this is years ago, I think 
they said they were no longer--reform was no longer needed.
    Mr. Griffith. Thank you. I know that as a part of waiver 
renewal, some States send CMS evaluation reports that may be 
posted on the CMS Web site. Do you know if CMS also conducts 
its own analysis?
    Ms. Iritani. We haven't look at evaluations for years, so I 
can't comment on that.
    Mr. Griffith. All right. So you don't know if they are 
doing their own evaluations----
    Ms. Iritani. Well, what I do----
    Mr. Griffith [continuing]. Because of what the State says?
    Ms. Iritani. What I do know from our work from the----
    Mr. Griffith. Yes, ma'am.
    Ms. Iritani [continuing]. Mid-2000s is that, you know, the 
demonstration terms are typically 5 years, but they can be 
less, and that, you know, CMS required at the time that the 
State plan an evaluation and that they also, because they 
wanted to understand how the demonstrations were working and if 
information was being collected to actually do the evaluation, 
they required progress reports. But, you know, that is, again, 
where we found that the progress reports weren't always, you 
know, complete or being turned in timely, et cetera. So we feel 
like the evaluation component of the, you know, the 
demonstration is--already is an important one.
    Mr. Griffith. And, of course, if CMS doesn't do their own 
evaluation of those demonstrations, it is kind of hard for them 
to really assess it if they are just relying on the States.
    I do appreciate you being here today. Appreciate your 
testimony. Thank you so much for answering my questions.
    And, Mr. Chairman, I yield back.
    Mr. Pitts. The Chair thanks the gentleman.
    Now recognize the vice chairman of the subcommittee, Mr. 
Guthrie, 5 minutes for questions.
    Mr. Guthrie. Thank you very much. Thank you, Mr. Chairman, 
for yielding. And thank you for being here today and answering 
the questions.
    I want to talk about the budget neutrality policy. In your 
testimony, you indicated that one of the problems with CMS' 
implementation of its budget neutrality is that it allowed some 
States to include hypothetical costs. Can you provide--define 
hypothetical costs that CMS has implemented and some examples 
of that?
    Ms. Iritani. Sure. There are two main components to 
basically the budget neutrality process and projecting the cost 
of Medicaid without the demonstration, which becomes a basis 
for the spending limit that would be allowed. One is a spending 
base, which is by the policy supposed to be based on actual 
historical expenditures for Medicaid in the State for the 
recent year. The other is the growth rates that project costs 
over the course of the demonstration.
    CMS has, since we first started looking at this issue in 
the mid-'90s, allowed hypothetical costs that is in the 
spending base, so they would allow States to project or use 
baselines based on not what they were actually covering, 
historical costs, in their Medicaid Program, but what they 
could potentially cover, for example, populations, hypothetical 
populations that they could cover under the flexibility under 
the Medicaid Program, but were not covering, or payment rates. 
In more recent demonstrations we found that CMS has allowed 
States to assume that they would be paying providers more than 
they were actually paying, as part of their baseline for 
developing the spending limits.
    Mr. Guthrie. And then so is there anything that stops CMS 
from applying budget neutrality to one State but not another 
State? Could they favor one State over another in the way they 
apply budget neutrality? Anything to stop them from doing that? 
And could this cost--you know, this seems to cost--could cost 
billions by allowing hypothetical costs.
    Ms. Iritani. There are tens of billions of dollars being 
approved in these demonstrations, and a lack of transparency 
over the basis.
    Mr. Guthrie. So they could favor one State over--there is 
nothing to prevent them from favoring one State over another in 
that--they make the decision on a State-by-State basis I guess 
is--and so they could----
    Ms. Iritani. I think oversight----
    Mr. Guthrie. Needs to be----
    Ms. Iritani. Oversight.
    Mr. Guthrie. OK. So what would GAO say to the charge that 
some have made that budget neutrality would prevent CMS from 
making an important investment in State innovations?
    Ms. Iritani. Could you repeat the question?
    Mr. Guthrie. So what would GAO say to the charge that some 
have made that budget neutrality prevents CMS from making 
important investments in some State innovations?
    Ms. Iritani. Well, the whole concept of budget neutrality 
is that States would figure out how to innovate and get 
flexibility from traditional Medicaid rules, but within their 
current constraints of what they have been spending for 
Medicaid. I think it is one thing to innovate when you are 
getting a lot more money to do so.
    Mr. Guthrie. Um-hum.
    Ms. Iritani. It is another thing to innovate with, you 
know, with flexibility around Medicaid's traditional 
requirements, but creating efficiencies in doing so and not 
raising costs for the program. And we think that is a very 
important concept again----
    Mr. Guthrie. Um-hum.
    Ms. Iritani [continuing]. Getting back to the long-term 
sustainability of the program.
    Mr. Guthrie. But if one State is receiving X amount of 
dollars and they want to innovate, and they say you can 
innovate within that X amount of dollars, but if one State is 
receiving X amount of dollars and CMS says you get X amount of 
dollars plus hypothetical cost dollars, that could be applied 
on a State-by-State and not consistent, correct? So that 
essentially, a State is getting more money to innovate, is 
that--am I reading that wrong----
    Ms. Iritani. Well----
    Mr. Guthrie [continuing]. Or understanding that wrong?
    Ms. Iritani. Yes, different States ask--develop their 
spending limits different ways.
    Mr. Guthrie. Well, thank you.
    I yield back, Mr. Chairman.
    Mr. Pitts. The Chair thanks the gentleman.
    And now recognizes the gentleman from Florida, Mr. 
Bilirakis, 5 minutes for questions.
    Mr. Bilirakis. Thank you, Mr. Chairman. Appreciate it very 
much. Thank you for your testimony.
    In Florida, we recently finished getting an 1115 waiver 
with CMS. I am sure you are aware. It was a long hard process 
that included a State lawsuit against the Federal Government 
over the process. Florida has had an uncompensated care fund 
which we call the LIP, the Low-Income Pool, for our Medicaid 
Program for almost a decade now. What should have been a simple 
process, in my opinion, to renew that fund turned into a long, 
drawn-out affair by CMS who decided to change the rules this 
year.
    Ms. Iritani, when HHS reviews and issues 1115 waivers, do 
they follow precedent established with other approvals, or is 
every application reviewed from the beginning?
    Ms. Iritani. If I understand the question, is it when HHS 
approves a demonstration, does that set precedent for others?
    Mr. Bilirakis. Yes, for others and maybe previous 
applications for that particular State as well. Or is that--do 
we have to start from the beginning?
    Ms. Iritani. Well, we have----
    Mr. Bilirakis. First with others. Yes.
    Ms. Iritani. Well, we haven't look at differences in, you 
know, how HHS approves new approvals versus extensions versus 
amendments, which are all different ways that HHS can approve 
things. That said, you know, I think HHS, with every new 
approval, does set precedents for other States to follow. And 
there are many demonstrations that have been operating for many 
years----
    Mr. Bilirakis. Right.
    Ms. Iritani [continuing]. As someone mentioned.
    Mr. Bilirakis. OK, next question. HHS provides GAO with 
four general criteria--you stated that--that State programs 
must meet to receive the funding through the 1115 Medicaid 
waiver. However, the criteria are so broad that they can be 
interpreted in many different ways. The question: Is such 
activity fair to States and stakeholders, and does GAO think 
that HHS needs to issue regulatory guidance explaining these 
criteria?
    Ms. Iritani. Well, we believe that more specific criteria--
written criteria are needed and--otherwise we believe that many 
questions about the basis for the decisions, as well as the 
consistency of approvals, will continue to rise.
    Mr. Bilirakis. And I understand that GAO was not even aware 
of these criteria, is that correct?
    Ms. Iritani. Yes, correct.
    Mr. Bilirakis. OK, next question. GAO's work suggests that 
there is likely significant duplicative Federal funding streams 
for State programs and the waivers and other HHS programs. Do 
we know if HHS reviews for duplicative payments prior to or 
after approval? If not, is there a mechanism for HHS to prevent 
duplication or at a minimum recoup duplicative funding, save 
billions of dollars for us?
    Ms. Iritani. We have not looked at how HHS monitors 
spending post-approval. We have looked at, you know, what 
protections they provided in the terms and--of the 
demonstrations regarding preventing duplication and found 
variation and, in some cases, no assurances that the new 
spending for Medicaid would not duplicate other purposes.
    Mr. Bilirakis. OK, next question. In my estimation, there 
is a clear lack of uniformity in CMS decision-making. I think 
it is pretty obvious from the testimony. Are there criteria 
that could explain why 2 States of a similar nature get 
uncompensated care pools approved for different lengths of 
time? And I know my friend, Mr. Guthrie, touched on this as 
well.
    Ms. Iritani. There are no criteria that would explain that, 
and that is part of why we are recommending that there be 
criteria. We feel like that is important for transparency and 
for a common understanding of why the Secretary is making 
certain approvals.
    Mr. Bilirakis. Thank you. One last question, if you don't 
mind. I have a few more seconds. Have you ever encountered an 
instance when CMS would force a State to take an action that 
their Governor and the legislature did not want to take in 
order to renew the 1115 waiver that was already in existence?
    Ms. Iritani. I am not aware of that kind of circumstance, 
but we typically haven't--have looked really at the approvals 
at the Federal level.
    Mr. Bilirakis. All right, very good. I yield back. Thank 
you, Mr. Chairman.
    Mr. Pitts. The Chair thanks the gentleman.
    Now recognize the gentleman from Missouri, Mr. Long, 5 
minutes for questions.
    Mr. Long. Thank you, Mr. Chairman.
    Doctor, we--if we are facing serious budgetary challenges, 
wouldn't it be better for us to prioritize medical care for 
patients in Medicaid rather than some of the questionable 
projects being approved for Federal spending in these 1115 
waivers?
    Ms. Iritani. We would agree that many of the approved new 
costs in the recent demonstrations, that documentation was 
lacking as to how they related to Medicaid purposes. And our 
position has always been that Medicaid funds should be for, 
ideally, covered Medicaid services for Medicaid beneficiaries. 
You know, the demonstrations give authority to the Secretary to 
approve new costs for purposes of the demonstration, but they 
should be furthering Medicaid objectives, and that is why we 
think there needs to be more articulation on the Secretary's 
part of how she makes the decisions.
    Mr. Long. So you do agree that it would be better to 
prioritize medical care for patients in Medicaid?
    Ms. Iritani. We would agree that, yes, Medicaid objectives 
should be the driving--is within--the 1115 is--should be the 
driving factor for decisions, and it is just not clear how the 
Secretary defines those.
    Mr. Long. OK. One of my big concerns about the growth of 
the Medicaid Program is there is the temptation to just cover 
more people. Everybody always wants to be philanthropic and, 
oh, let's cover more, cover more people, without ensuring that 
the access is timely and meaningful for these patients that 
they are wanting to cover. But from what I understand of GAO's 
work, CMS said they define low-income patients as 250 percent 
of the Federal poverty level. 250 percent, that is a fairly 
decent income in several districts around the country. And do 
you think it is appropriate for CMS to approve spending 
Medicaid dollars on what would be middle-class income in a lot 
of areas?
    Ms. Iritani. One of the things we were looking for when we 
looked at what new costs that CMS was approving was whether or 
not those costs, for example, with the State programs in the 
low-income pools, were for providers that were serving low 
income and Medicaid individuals. And didn't--found that some of 
the programs were for the general public and--or not clearly 
linked to low-income populations, and we find that 
questionable.
    Mr. Long. But do you think--so you do find it questionable, 
the 250 percent mark?
    Ms. Iritani. We have--you know, States have great 
flexibility to define how they define low income. You know, the 
poverty level--levels that they cover under Medicaid vary 
greatly. So we don't--we feel like it is the Secretary's 
decision and discretion to define what she considers to be 
Medicaid purposes----
    Mr. Long. Which apparently----
    Ms. Iritani [continuing]. We just don't know what they are.
    Mr. Long. --is 250 percent.
    Ms. Iritani. It is, you know, within the authority of the 
Secretary to define how she defines low income and Medicaid----
    Mr. Long. OK, I have about a minute left here. So 1115 
waivers are supposed to further Medicaid's objectives. Medicaid 
is a program which exists to provide access to medical care for 
vulnerable populations, so how does the administration get away 
with justifying some of these spending approvals?
    Ms. Iritani. The Secretary--and it is--and the response to 
our draft report, said that they had general criteria that we 
discussed earlier that they applied, and that they apply 
criteria consistently and treat States consistently. And that 
is the general response they had.
    Mr. Long. OK, thank you, Dr. Iritani.
    And I yield back, Mr. Chairman.
    Mr. Pitts. The Chair thanks the gentleman.
    Now recognize the gentlelady from Indiana, Mrs. Brooks, 5 
minutes for questions.
    Mrs. Brooks. Thank you, Mr. Chairman.
    I think you have already heard a little bit about the 
Healthy Indiana Plan, and at the beginning of 2015, Indiana was 
fortunate enough to have its demonstration approved by CMS. 
Now, the Healthy Indiana Plan 2.0, or what we call HIP 2.0 as 
we call it, is really an extension, an expansion, and some 
changes made to a very successful Healthy Indiana Plan. Started 
under Governor Daniels, and then expanded and changed slightly 
under Governor Pence. It provides 350,000 uninsured Hoosiers 
with access to healthcare services, but what was very different 
about it, and I thought what was really so effective, started 
under the first HIP plan, was that individuals would pay small 
contributions, and this was a huge sticking point for CMS, 
ranging from $1 up to $27 a month based on their income level, 
into power accounts. And POWER accounts stand for personal 
wellness and responsibility--responsible accounts. Now, this 
allows people to create a sense of personal responsibility for 
their own health care, put in $1 a month, up to $27. And it 
took our State years, as the gentleman from my delegation has 
already stated, to get this type of plan approved. And it has 
had--demonstrated tremendous success. So after it was finally 
approved, after our Governor had to speak with the President 
personally about a very successful program in order to get it 
approved, the Governor sent--Governor Pence sent out entire 
delegation a letter suggesting that the manner--celebrating the 
success of finally getting it approved, but also the delay in 
the approval process itself caused so much stress and anxiety 
among the Hoosiers who were on the plan that it is just 
completely unnecessary. And it was all about the timing, quite 
frankly, that I am complaining about, and the manner in which 
the approval process took place.
    It is my understanding CMS has no set time period, is that 
right, Ms. Iritani, about how to approve these requests for 
waivers. Is that true that there is no time period in which the 
CMS director has to provide their decision on these requests, 
even of programs that are already in place?
    Ms. Iritani. I believe there is a time limit on extensions, 
but otherwise, no.
    Mrs. Brooks. And so if any changes or improvements want to 
be made to--really speaking of the fact that we haven't 
evaluated or delved into the evaluations, the evaluations, as I 
understand, of our HIP program were outstanding----
    Ms. Iritani. Um-hum.
    Mrs. Brooks [continuing]. And that is why we chose to 
expand it for more Hoosiers, and to change it to try to bring 
more Hoosiers into the program. The Upton-Hatch, Making 
Medicaid Work Blueprint included a proposal for a waiver clock. 
Would it make sense for a timeframe to be implemented related 
to these Section 1115 waivers, and what kind of guidance should 
we have from you and from your study of the waiver process, 
what should Congress be taking into consideration as we try and 
tighten the timeframe for these waivers for CMS to approve or 
to not approve these programs, because they keep our State 
legislators in knots, those who are receiving the benefits of 
these programs, what kind of factors should we consider in 
trying to put a timeframe around these decisions?
    Ms. Iritani. Yes, other than the 2013 report that I 
mentioned where we looked at the variation in the timeframes 
and the factors that CMS told us contributed, including the 
complexity and comprehensiveness of the proposals, we haven't 
addressed timeframes in our work. We have really focused on the 
spending limits and new spending approved, that has been the 
scope of our work.
    Mrs. Brooks. Do you agree though that the timeframe issue 
is a significant issue for the States?
    Ms. Iritani. Some of the factors that CMS said contributed 
to the more lengthy approval times included things like how 
comprehensive the proposal was. You know, some States operate 
their entire Medicaid demonstrations--or Medicaid Programs 
under the demonstrations, so it effectively changes the entire 
program. It could be the States need to go back to the 
legislatures to get new legislation, and when they do, then 
there may be changes to the proposal that CMS has to review. It 
is very complicated to sort out why things take so long.
    Mrs. Brooks. Thank you. Thank you for your work.
    I yield back.
    Mr. Pitts. The Chair thanks the gentlelady.
    Now recognize the gentleman from New York, Mr. Collins, 5 
minutes for questions.
    Mr. Collins. Thank you, Mr. Chairman. And thank you, Ms. 
Iritani. Is that correct?
    Ms. Iritani. Yes.
    Mr. Collins. Yes.
    Ms. Iritani. Thank you.
    Mr. Collins. For all your testimony. This is an area, I 
guess you could say, of overall concern when, as I understand 
it, the CBO recently issued their 2015 long-term budget 
outlook, and in that, said that in just a little more than a 
decade our entitlement spending will consume, along with 
service on our debt, 100 percent of the inflow of monies into 
the U.S. Government. If we look back 40-some-odd years ago, it 
was $1 in $3; today, these same programs are $2 in $3, and it 
is truly a major concern when it would hit $3 in $3.
    So something is going to have to give, and unfortunately in 
Congress, all too long the kick-the-can mindset of let me get 
past my next election is very much alive. And so here we have 
the CBO which should be--send a chilling effect to all of us 
that we have to make some changes. And Medicaid is certainly a 
major contributor on the expense side of those entitlement 
programs.
    So my question really comes down to maybe asking you do you 
have some suggestions for Congress, and as we are looking at 
these 1115 waivers, and in particular I think your testimony 
indicated that some of these waivers really didn't go to the 
core proposition of what Medicaid is there for, but very 
tangentially associated with it, and it is even hard to get 
your arms around how some of these waivers are benefitting or 
could benefit us in the long-term. Do you have any idea how 
much--how many dollars are in that kind of bucket, and do you 
have any recommendations for anything Congress could do, 
however small that might be, to at least try to stem some of 
these expenses that we wouldn't have to have?
    Ms. Iritani. Yes, we share your concerns about the impact 
of these waivers. The spending trends of the funds that are 
governed by the terms of demonstrations are rising 
significantly. In 2011, we reported that about \1/5\ of 
Medicaid spending was governed by the terms and conditions of 
demonstrations. In 2013, we said it was about \1/4\. In our 
most recent report it is almost \1/3\ of Medicaid spending, 
the--over $500 billion program. So we believe that, given that 
the Secretary has disagreed with the need for reforms, that the 
Congress should consider requiring the Secretary to take 
certain steps to reform the process.
    Mr. Collins. Well, I think we agree, and I certainly 
appreciate you being very forthright in that observation, and I 
really do thank you for your testimony.
    And with that, Mr. Chairman, I yield back.
    Mr. Pitts. The Chair thanks the gentleman.
    Now recognize the vice chair of the full committee, Mrs. 
Blackburn, 5 minutes for questions.
    Mrs. Blackburn. Thank you, Mr. Chairman. And in the spirit 
of the College World Series, I am here to bat cleanup, and I am 
going to be fast so we can move to our second panel.
    I am going to pick right up where Mr. Collins left off. 
$344 billion program, and \1/3\ of that is now in the 1115 
waivers, correct?
    Ms. Iritani. Well, total spending including Federal and 
State, is actually over $500 billion.
    Mrs. Blackburn. So in total, over $500 billion, with that 
once they do the State match to the Federal.
    Ms. Iritani. Yes, $304 billion----
    Mrs. Blackburn. OK.
    Ms. Iritani [continuing]. Federal, correct.
    Mrs. Blackburn. All right. And one of the things that we 
are looking at with this, if I have my notes right, and I want 
to be sure that we have it right for the record, is that you 
have a lot of gray area here on how decisions are being made--
--
    Ms. Iritani. Um-hum.
    Mrs. Blackburn [continuing]. That meeting the objectives 
has become very subjective, and that you have not gone in, if I 
understood your response to Mr. Bilirakis, you said that you 
all have not looked at spending post-approval, or looked at the 
outcomes, you have just looked at that process of pushing the 
money forward. Am I correct on that?
    Ms. Iritani. Yes.
    Mrs. Blackburn. OK.
    Ms. Iritani. We have only looked at the approvals of the 
spending limits and the basis for them.
    Mrs. Blackburn. OK.
    Ms. Iritani. And----
    Mrs. Blackburn. But not the outcomes----
    Ms. Iritani. Correct.
    Mrs. Blackburn [continuing]. Of the delivery. All right, 
and so that is something that we definitely need to circle back 
and do some oversight on. Let me go back to Ms. Castor's 
question. Did I understand you to say you have looked and 
reviewed the Federal end, but you have not looked at the public 
input process----
    Ms. Iritani. Not----
    Mrs. Blackburn [continuing]. On the 1115 waivers?
    Ms. Iritani. Not since the mid-2000s.
    Mrs. Blackburn. OK.
    Ms. Iritani.. That is when we raised concerns about the 
lack of a Federal public input process that was then addressed 
in the recent House reform legislation.
    Mrs. Blackburn. OK, and I think that gets to part of Mrs. 
Brooks' question also. There have been mixed results, and you 
have mentioned that. You have States as diverse as what Indiana 
has done, you have Arizona which was one of your first 1115s. I 
am from Tennessee. We have a very mixed result history, if you 
will, with the 1115 waiver process. So I--it concerns me that 
you all have not done a deep dive, if you will, on looking at 
the outcomes, reviewing these results, looking at that public 
input process, going through that, because if I am following 
what you are saying, a conclusion would be that when you set up 
a demonstration project, and there are four criteria that have 
to be met for this to move forward, and with the subjective 
nature of the decisionmaking process, a State can meet one of 
four criteria and be approved and be considered a success. Is 
that correct?
    Ms. Iritani. I believe so. That is the----
    Mrs. Blackburn. So they could have a failing grade, if you 
will. If you are on a grading scale of 100, and you meet one of 
four criteria, you are at 25 percent effectiveness, but CMS 
would consider that a success.
    Ms. Iritani. The criteria--the first time we saw them again 
was just in CMS' response to our report. They were not issued, 
you know, in any written guidance. And we have not since 
circled back to CMS to see how they apply it, but the way that 
they stated it in their response was that, basically, one of 
these criteria is----
    Mrs. Blackburn. OK, and----
    Ms. Iritani [continuing]. You know, basically what we 
apply.
    Mrs. Blackburn. And then setting the spending limits, they 
pretty much make it up as they go along, and are subjective in 
that approach, if I understood you correct in your response to 
Mr. Bucshon.
    Ms. Iritani. There is a lack of transparency, definitely--
--
    Mrs. Blackburn. OK.
    Ms. Iritani [continuing]. How they are set.
    Mrs. Blackburn. With that, Mr. Chairman, I yield back. And 
I thank you, Madam Director, for your time today.
    Ms. Iritani. Thank you.
    Mr. Pitts. The Chair thanks the gentlelady.
    And now recognize the ranking member of the full committee, 
Mr. Pallone, to bat cleanup, 5 minutes for questions.
    Mr. Pallone. Thank you, Mr. Chairman. And I apologize that 
I wasn't able to be here until now.
    And, you know, I may be repeating some things that already 
have been said or have been asked, and so, you know, forgive me 
for that. I just wanted to say that after close to 20 years of 
recommendations for more transparency into the Medicaid waiver 
process, the Affordable Care Act included a bipartisan 
provision to improve the transparency of Medicaid waivers in 
line with longstanding recommendations from GAO. Today, because 
of this provision, the public has meaningful opportunities to 
provide input into the waiver process of both the State and 
Federal level, and waivers are now evaluated on a periodic 
basis, and States submit reports on implementation, and this is 
a huge step in the right direction, in my opinion.
    I am further encouraged by CMS' concurrence with GAO 
recommendations, specifically in their April 2015 report for 
better ongoing and transparent documentation of how States 
spend Medicaid dollars. This is a recommendation that prior 
administrations had refused to correct, and I continue to 
believe it is the right thing to do, ensure dollars are 
following our Medicaid beneficiaries.
    But let me ask a couple of questions, if I can. In 
reviewing the GAO recommendations over the last 20 years, it 
appears as though your recommendations have remained the same 
until only recently. Isn't it true that the majority of these 
recommendations were not acted upon until Obama administration 
initiatives and the Affordable Care Act, which placed many of 
your recommendations into action?
    Ms. Iritani. Well, we have made many--over a dozen 
recommendations over the course of this time, and only a couple 
have been implemented, including the public input process that 
you mentioned that was implemented in 2012.
    Mr. Pallone. OK. And, of course, that was under the--under 
President Obama, 2012. Based on the GAO reports, it appears 
that GAO recommendations on the budget neutrality accounting 
principles have remained unchanged since as far back as the 
1990s. So is it true to say that this fundamental disagreement 
between HHS and GAO has remained the same, regardless of which 
political party has controlled the presidency?
    Ms. Iritani. Yes.
    Mr. Pallone. OK. And then the last thing I wanted to ask, 
and to follow up on that, isn't it true that GAO went so far as 
to issue a letter to HHS from GAO's chief legal counsel 
regarding budget neutrality issues in the prior 
administration--I mean under the last President Bush?
    Ms. Iritani. It is true in 2007, our legal counsel did 
issue a letter to the Secretary at the time, raising concerns 
with two States' approvals, yes.
    Mr. Pallone. And have you had to take such action under the 
current administration, under the Obama administration?
    Ms. Iritani. We have not.
    Mr. Pallone. OK. All right, thanks a lot.
    Again, Mr. Chairman, I am not going to take up too much 
time because I came in at the end here, but thank you for the 
opportunity here.
    Mr. Pitts. The Chair thanks the gentleman.
    That concludes the questions of members present. We will 
have follow-up questions in writing. I know some of the members 
not here have questions. We will send those to you in writing. 
We ask that you please respond promptly. Thank you very much--
--
    Ms. Iritani. Thank you.
    Mr. Pitts [continuing]. For your testimony this morning.
    Now, as our staff sets up the table for the second panel, 
we will take a 3-minute recess.
    The committee stands in recess.
    [Recess.]
    Mr. Pitts. OK, the time for recess having expired, we will 
reconvene the subcommittee. And I will introduce our second 
panel in the order of their presentations.
    We are delighted to have today the Honorable Haley Barbour, 
former Governor of Mississippi, and Founding Partner of BGR 
Group, with us this morning. Mr. Matt Salo, Executive Director, 
National Association of Medicaid Directors. And Ms. Joan Alker, 
Executive Director, Georgetown University Center for Children 
and Families. Thank you each for coming today. Your written 
testimony will be made a part of the record. You will each be 
given 5 minutes to summarize your testimony. There is a series 
of lights on--so when the yellow light goes on, that is 1 
minute left, and red light means you can wrap up at your 
convenience.
    And at this point, the Chair recognizes Governor Barbour, 5 
minutes for your summary.

STATEMENTS OF HALEY BARBOUR, FORMER GOVERNOR OF MISSISSIPPI AND 
  FOUNDING PARTNER, BGR GROUP; MATT SALO, EXECUTIVE DIRECTOR, 
NATIONAL ASSOCIATION OF MEDICAID DIRECTORS; AND JOAN C. ALKER, 
 EXECUTIVE DIRECTOR, GEORGETOWN UNIVERSITY CENTER FOR CHILDREN 
                          AND FAMILIES

                   STATEMENT OF HALEY BARBOUR

    Mr. Barbour. Thank you, Mr. Chairman. When I last testified 
before the committee, I was actually Governor. I want to make 
plain that I am not Governor anymore. I don't speak for the 
Governors or the Republican Governors, or even the Governor of 
Mississippi. This is what I think.
    You know, States are trying to juggle demands of increasing 
health care costs while trying to balance their budget. Most of 
our States actually literally balance the budget every year, 
and this is a huge part of it. In 2014, the Federal Government 
spent $300 billion on Medicaid; $344 billion this year as I 
understand it, but also the States spend a ton of money on 
Medicaid. Medicaid expects in the next 10 years that that 
budget for the Federal Government is going to go to $575 
billion. And when you put in what the States do, it will be 
about $1 trillion. About $1 trillion. So this is a big burden 
on the States' budgets and on the Federal budget. I think we 
all ought to remember that about \2/3\ of all Federal spending 
is mandated for entitlements or payments on the national debt. 
That is--and that percentage is growing. Any discussion of 
Medicaid and our healthcare programs must include some mention 
of our ability to pay the bills that we are accumulating, 
because what we do today affects future generations' ability to 
pay the debt that we burden them with, and affects their chance 
to experience the American dream that we have been blessed to 
experience.
    Since January of 2009, the Federal debt has gone up 73 
percent, and that can't continue. We have to provide quality 
health care for the truly needy in a cost-effective manner, and 
one way to help do that is to give each State the flexibility 
to run its Medicaid Program in the manner that best meets the 
needs of its population. I personally believe Congress should 
give States authority to adjust their programs without any CMS 
waiver, as long as it is within the law. But at a minimum, the 
waiver process needs to be improved.
    For instance, should States be able to ask some nondisabled 
adults if they prefer to pay a small copay if it better ensured 
their being able to see a doctor. Not really a problem in 
Mississippi. Eighty-three percent of our doctors take new 
Medicaid patients. But you all have already cited a story in 
California where somebody got on Medicaid and then couldn't see 
a doctor. In New Jersey, about 38 percent of doctors take new 
Medicaid patients. Wouldn't our patients be better off if they 
really did have a way to get care, even if it meant paying 
voluntarily, on their own choice, a small copay? I believe 
copays really help make the system work. When people miss an 
appointment, there ought to be a copay because they have cost 
somebody else an appointment, they have cost another Medicaid 
person or some other patient. I believe States should be 
allowed to do work requirements, or job training and 
retraining, for able-bodied adults who are on Medicaid. CMS is 
standing in the way of a lot of State innovation by not 
approving commonsense waivers, and taking long, long periods of 
time to improve--to approve the ones they do.
    It has been talked about already about the opacity that 
this is not transparent, inconsistent standards, and the 
concerns about favoritism or about using waivers as a way to 
coerce States. CMS has reached an agreement principle with 
Florida on the Florida LIP program. The bottom line though is 
Massachusetts got theirs last year in October, about the same 
time that Florida was applying. The Medicaid Program in Florida 
asked CMS in the fall, and just now there is an agreement in 
principle. By the way, that agreement in principle cuts the 
contribution to the program by more than \1/2\ in the first 
year, and by \2/3\ in the second year for what Florida will 
receive.
    We do need transparency so that the States understand the 
process, how to get things approved, and I would say to you, 
not only should there not be different rules for different 
States, I believe when a State like Indiana institutes a 
program and it works well, and we test whether it is working 
well and find that the results are good, it ought to be an 
easier process for another State to adopt that. Things that 
work, we ought to encourage. If Oregon has something that works 
and we think it fits Mississippi, it ought to be easier to get 
a waiver for that than starting at scratch. So I would 
encourage the committee to go to block grants, but I would 
certainly encourage you to adopt a waiver clock, to adopt some 
rules about transparency, and remember, a successful program 
under a 1115 also ought to be allowed to become permanent if we 
see that the results are such, why should they have to go back 
every couple of years?
    Sorry, I ran 14 seconds over. Pretty good with my accent.
    [The prepared statement of Mr. Barbour follows:]
    
    
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    Mr. Pitts. You are pretty good. Thank you.
    The Chair recognizes Mr. Salo, 5 minutes for your summary.

                     STATEMENT OF MATT SALO

    Mr. Salo. All right, thank you, Mr. Chairman, Ranking 
Member Green, members of the committee.
    I represent the 56 State and territorial Medicaid agency 
directors. We have talked a lot about how big Medicaid is. I 
don't want to belabor that, but I do want to underscore how 
complex it is, and I think a lot of people don't fully 
appreciate that.
    We cover, yes, a lot of children, lot of pregnant women, 
lot of low-income families, but we also cover a lot of 
individuals with disabilities; intellectual, developmental, 
physical, as well as a lot of people who need long-term 
services and supports. In fact, we are the largest payer in the 
healthcare system of long-term care, of mental health, of HIV/
AIDS care, et cetera. It is a complex, it is a difficult 
program.
    Our members are responsible and accountable for the 
program. They are striving to provide the best possible health 
care to the citizens we serve, and also be wise stewards of the 
taxpayer dollar. They are also hard at work actively driving 
program reform.
    Now, less people think that driving program reform means 
that the underlying program is broken. I would say 
unequivocally, no. And, in fact, I would posit to you the 
challenges of the broader U.S. healthcare system, which is 
failing us. Take a look at this. Costs--health care cost 
inflation has exceeded CPI for decades. Health care is now 18 
percent of the Nation's GDP. We have suboptimal outcomes to 
show for that. We also have profound political division about 
what the future is--of health care is. But I think an important 
piece here is that we have also had decades of either proactive 
or passive policies in this country of either ignoring or 
actively shifting responsibility for many of these difficult 
populations directly to Medicaid, and that is why we are the 
largest payer for the most complex, the most expensive, and the 
most difficult to serve populations in this country.
    So what are we doing about it? We are actively trying to 
reform a healthcare system, a fee-for-service system that does 
not serve these populations well. As Dennis Smith once said, 
fee-for-service, FFS, ought to stand for fend for self, because 
that is what we are requiring of the sickest, the frailest, and 
the most complex patients.
    This--but this is hard, and part of the challenge is that 
the statute at 50 does not allow us to do what we need to do, 
so we rely on waivers. And we have been relying on waivers for 
decades to drive program improvement. In Arizona in 1982, in a 
number of States in the mid-'90s, with the private option in 
Arkansas and other States who have done the expansion recently. 
With Indiana, as we have heard, and with many other States that 
are doing DSRIP or other types of programs. We have a long 
history of success with this, and accountability does exist. 
There are evaluations, there is reporting, and even though GAO 
may not particularly like it, there are budget neutrality 
calculations. And finally, there is significant public input.
    Which is not to say we think the system is working 
perfectly. We think there are a number of changes that can and 
should be made. We have been fairly vocal in what these kinds 
of things should be. Our short--is the system should be more of 
an HOV program, and the HOV for us stands for healthy patients, 
outcomes, and value to the taxpayer and value to the healthcare 
system. These principles ought to drive what we are doing and 
how we are able to do it.
    We have a number of ideas that we--I am more than happy to 
talk about; ways that we can get there. Some are incremental, 
some are bigger, some of them will require congressional input. 
One of those, as Governor Barbour referenced, is sort of a 
pathway to permanency, and we can talk more about how that 
might play out. But I do also think there is a--we need more--
we do need more timely approvals and renewals. We can talk 
about what that might look like, but I think a big challenge, 
in all honesty, is capacity; capacity at CMS to be able to do 
the reviews in a timely manner. And I think we need to keep in 
mind that there needs to be a balance between transparency and 
flexibility. The flexibility--we do need transparency, but we 
do need the flexibility to innovate, and I think we need to be 
careful about proscribed definitive checklists of what can or 
what cannot be done because that sets a ceiling for what can be 
innovated, not a floor. And I think we need to be very mindful 
about how do we spread the innovation once we know that it 
works.
    So let me close on this and just say that I think a lot of 
States spend a lot of time, energy, resources, on chasing paper 
trails, on trying to, you know, prove to everyone's 
satisfaction budget neutrality or other types of process 
requirements, too much time arguing about the cost per unit of 
widgets that do not contribute to the overall value of the 
healthcare experience, and that we need to start investing more 
in State capacity to actually drive the changes that we seek. 
And I would be happy to talk about some solutions to that as 
well. Thank you.
    [The prepared statement of Mr. Salo follows:]
    
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    Mr. Pitts. The Chair thanks the gentleman.
    Now recognizes Ms. Alker, 5 minutes for her opening 
statement.

                   STATEMENT OF JOAN C. ALKER

    Ms. Alker. Thank you so much, Chairman Pitts, Ranking 
Member Green, and members of the committee.
    I really appreciate the opportunity to be here today 
because I have been studying Medicaid waiver policy for many, 
many years now, and while I find it fascinating, many think it 
is sort of boring. So I am thrilled that you are interested in 
this issue.
    I would also like to commend the GAO for their long history 
of excellent work on this issue. It has been 20 years now that 
GAO has been writing reports that I have been reading, raising 
questions and concerns about Medicaid waiver policy, and these 
issues have arisen regardless of which party; Democrats or 
Republicans, have controlled the Executive Branch.
    And today, I am going to focus on two areas of concern 
raised by the GAO; the need for transparency and robust public 
input, as well as the question of budget neutrality. And the 
good news from my perspective is that after 20 years of 
scrutiny by GAO and others on these issues, I think we are 
finally making significant progress on both of these issues, 
but there is still some work that needs to be done.
    So first on the issue of transparency, I do believe it is 
vitally important to have a very strong and robust process for 
public comment at both the State and the Federal levels. This 
is an idea that has long bipartisan support. Senators Grassley 
and Baucus worked on this on the Senate side. And language was 
included, as you heard, in the Affordable Care Act, and that 
was implemented through regulations in 2012 by the Obama 
administration.
    So these changes have led to dramatic improvements in the 
public comment process, but I would like to make a few 
suggestions to the committee for you to consider that might 
lead to greater transparency and better public input in the 
waiver process.
    The first suggestion is that current public input 
requirements only apply to new Section 1115 applications or 
renewals, but not to amendments to existing Section 1115 
waivers. Since so many States already have Section 1115 
waivers, there are many important changes that occur through 
the amendment process. So I believe it would be a valuable 
amendment to the law to ensure that amendments were also 
subject to the public input requirements.
    Second, while significant progress has been made with 
respect to having waiver applications and approvals online at 
Medicaid.gov, there is more work to be done here. Many 
important documents such as operational protocols, quarterly 
and annual reports, and other significant deliverables often 
required in terms and conditions that come with Section 1115 
waivers are not always publicly available on Medicaid.gov, and 
I would urge you to urge CMS to make sure those are publicly 
available as soon as possible.
    And then finally I will just say, I think the suggestion 
came up from a number of committee members earlier in the day, 
I think it would be terrific to have GAO do a report that looks 
specifically at how the public comment process is working, 
particularly at the State level.
    Now, let's turn to budget neutrality. Again, GAO has found 
that administrations of both parties have approved budget 
neutrality, Section 1115 agreements, which in GAO's judgment 
were not adequately supported by sound documentation and 
adequate methodology.
    So budget neutrality is very complex and, of course, when 
the Secretary makes decisions about what State programs to 
include or how to assess budget neutrality, the Secretary is 
responding to State requests. CMS is not just making these 
things up; CMS is always responding to a State's request. And 
so by definition, every State's request is different. But I 
think in the past few months we have seen some encouraging 
signs from the Obama administration with respect to how 
Secretary Burwell plans to approach budget neutrality 
agreements going forward. In particular, on April 14, 2015, CMS 
Director, Vikki Wachino, sent a letter to the State of Florida 
indicating three principles by which they would approach their 
review of Florida's low-income pool, which has been discussed 
here today. In addition to sending this letter to Florida, 
press reports indicated that CMS also made calls to eight other 
States that currently have some kind of uncompensated care pool 
through a Section 1115 waiver agreement. These were both States 
that have done Medicaid expansion and States that have not done 
Medicaid expansion, and they have shared the same principles to 
signal their intent to apply these criteria across States. Even 
more recently, I understand CMS has started including specific 
ways in which expenditures authority, and I believe this is 
part of the Oregon health plan extension that was just 
approved, where they tie, in the Secretary's judgment, how 
those expenditure authorities are linked to the objectives of 
these programs.
    So both of these actions that I have just described, 
something that I have never seen before in the last 20 years, 
so that is encouraging to me, but I do think we will need to 
continue to monitor this issue very closely.
    So thank you very much for the opportunity to testify.
    [The prepared statement of Ms. Alker follows:]
    
    
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    Mr. Pitts. The Chair thanks the gentlelady, and thanks all 
of you for your testimony.
    We will begin questioning now. I will recognize myself 5 
minutes for that purpose.
    Governor Barbour, yesterday, 10 Republican attorneys 
general wrote Chairman Upton expressing their concern over CMS' 
coercion to try and get Florida to expand Medicaid under the 
Affordable Care Act. As you know well, the Supreme Court's NFIB 
v. Sebelius ruling made such an expansion voluntary for States. 
Do you believe the administration's actions here are legally 
problematic?
    Mr. Barbour. I do. These attorneys general are there 
because of something we have been talking about; the lack of 
transparency, the lack of real hard rules so you don't--you 
have so much discretion. And certainly, States see it as 
coercion because they did not choose to expand Medicaid under 
the ACA. So that appears to be the case. We will see what the 
court decides. But I will say this, for a lot of States, this 
idea of 1115 waivers would affect them tremendously, and they 
think they are not getting their waivers treated the same, and 
there is some evidence of that. If you look at the low-income 
pool program in Massachusetts and the one in Florida, both of 
them have been in effect for a long time, yet Massachusetts was 
approved last year, well before the time needed so that they 
could plan for their budget. Florida got really hung up, ended 
up going through a special session because they didn't get 
approved the same time as Massachusetts. So I think that is why 
these people are thinking that.
    Mr. Pitts. Thank you, Governor. And I will let each of the 
others also respond to this. It is my understanding that CMS 
has no set period of time for reviewing and responding to a 
request for an 1115 waiver, but CMS has to review and respond 
to other waivers for managed care and home and committee-based 
services within a certain timeframe. So my question is, would 
it make sense for a timeframe to be implemented related to the 
Section 1115 waivers?
    Mr. Barbour. Yes, sir.
    Mr. Pitts. Mr. Salo?
    Mr. Sale. I think conceptually that makes sense because I 
do think the challenge is that you are correct, there is a lot 
of frustration that sometimes approvals and--or renewals can 
take a very long time to get. I would caution though that in 
practice, I would worry that a definitive clock might just--if 
we don't have the rules in--if we don't have the structure in 
place to ensure that CMS has the capacity to look through 
these, that a short clock might just get them to know faster--
--
    Mr. Pitts. Ms. Alker?
    Mr. Salo [continuing]. Which is not what we want. We want 
to be able to get to yes faster, and I think we need to focus 
on that. But certainly, to speed the process up.
    Mr. Pitts. Ms. Alker?
    Ms. Alker. So I would say a few things. First of all, I 
think many of the recent substantial waiver approvals, like 
Arkansas and Iowa, happened pretty darned quickly. And we have 
to balance the committee's interest and the need for 
transparency and public input with this desire to have quick 
approvals, and I think we have to find kind of the sweet spot 
where you allow sufficient time for public input and comment 
with adequate time for CMS to review this very complex policy 
and make decisions. And I will just give one example. The GAO 
in, I believe, 2007 did a report criticizing approvals at that 
time by the Bush administration of the Florida waiver and the 
Vermont waivers, and underscored the lack of public input. And 
I believe the world record approval for Section 1115 went from 
Governor Bush to President Bush, and it was 8 business days. So 
that wasn't great because, clearly, a lot of that was sort of 
wired out of the public eye. So again, I think we need to 
balance the need for timely and efficient Government action 
with the need for appropriate public comment and oversight by 
yourselves, as well as the public.
    Mr. Pitts. Mr. Salo, you mentioned in your testimony the 
length of waiver process. You indicate it took nearly a year on 
average from the time a waiver application is submitted until 
it is approved. My understanding is that there are often months 
of negotiations that occur even before the application is 
submitted. Can you please discuss a little bit more the 
difficulty that such a lengthy process, nearly \1/4\ of a 
Governor's term, nearly \1/2\ of a term of a Member of the 
House, like myself, creates for States and for Medicaid Program 
beneficiaries?
    Mr. Salo. Sure. And I think, you know, I do want to be 
careful to acknowledge the--and respect the dialogue that has 
to go on between the States and their Federal partners on this. 
That dialogue is important. And, you know, and there is a 
certain amount of deference that we should allow the 
administration, any administration, as the payers of \1/2\ this 
program. But as you pointed out, when you drag out these 
negotiations, oftentimes what you will have is amendments that 
need to follow, and other things that are related get backed 
up, and that can bring the effective, you know, functioning of 
good Government to a slow crawl. And that is not going to be in 
the best interests of the patients, it is not going to be in 
the best interests of the healthcare system.
    Mr. Pitts. The Chair thanks the gentleman.
    And now recognize the ranking member, Mr. Green, 5 minutes 
for questions.
    Mr. Green. Thank you, Mr. Chairman.
    Ms. Alker, my home State of Texas is next in line for 
renewal of their waiver, and I want to be clear I am proud of 
what my State has accomplished through the delivery system, 
reform efforts have dramatically improved the quality of care 
for the Medicaid beneficiaries, and look forward to working 
with CMS and Texas to start the process. But I also want to 
make sure that, as a former State legislator, I think it is 
almost medical malpractice not to expand Medicaid in--for the 
States based purely on politics, which is what we are doing. 
And in Texas, I know every hospital executive I know has asked 
the legislature expanded, just like they have in other States, 
because people are not being served. And so--but that is, 
again, the States' decision by the Supreme Court.
    And I want to correct the record here because there is a 
lot of misinformation flying around about Texas is just like 
Florida. Isn't it true that some undeniable similarities that 
both of our States have so-called uncompensated care pools, but 
that part of their respective Medicaid waivers and that Florida 
seems to have a tough time with. Ms. Alker, isn't it true that 
no one State has the same type of so-called uncompensated care 
pool?
    Ms. Alker. That is definitely true, and Texas' waiver, I 
would say, is a lot more complicated than Florida's.
    Mr. Green. OK. And wasn't there a fact that the longer term 
issues at play with the structure of Florida's pool?
    Ms. Alker. Yes, in 2008 actually, GAO issued a report that 
criticized the budget neutrality assumptions underlying 
Florida's low-income pool.
    Mr. Green. Is it true that Florida actually would have been 
able to get more Federal dollars from the expansion plan that 
was under--than that that was under consideration by the 
legislature?
    Ms. Alker. That is definitely true, and of course, those 
matching dollars would come in at 100 percent match currently, 
as opposed to their regular match rate which is about 60/40, so 
they would get a lot better return on investments by taking up 
the expansion dollars.
    Mr. Green. Ms. Alker, Governor Barbour's written testimony 
is very critical in that--cost sharing in Medicaid, however, in 
2013, CMS issued a final rule that revised Medicaid's cost 
sharing policies. The rule increased in the maximum allowable 
cost sharing amounts that the States can impose on Medicare 
beneficiaries, including individuals below the poverty line 
without a waiver. Ms. Alker, would you say that States have 
considerable flexibility to whether we agree or not with it--
not here today implement cost-sharing policies for Medicaid?
    Ms. Alker. That is true, and I think one of the common 
misconceptions about Medicaid is that you have to get a waiver 
to do any--everything, and that is just not true. We see that 
time and time again. As you mentioned, States are allowed to 
impose nominal copays on the adult population, and they don't 
need a waiver to do so.
    Mr. Green. OK. And again, in Governor Barbour's written 
testimony he noted that Medicaid providers should be able to 
charge beneficiaries a fine if they miss their appointments 
without notifying their doctors. And I am concerned that we are 
pushing ineffective policy we know don't work because, while 
CMS actually approved Arizona's request to impose a $3 missed 
provider fine back in 2011, the State ultimately let the 
authority expire because there was so little provider 
participation. Is that correct?
    Ms. Alker. Yes, I think that speaks to the issue that came 
up earlier, that we need really robust evaluations of waiver 
demonstrations that have happened in the past, some of which we 
already know that are not--simply not good policy.
    Mr. Green. One of the issues I know with Arizona findings, 
but also like Georgia's emergency room demonstration, goes 
unnoticed. Do you think it is--or it might be worthwhile to 
explore how we can evaluate and make publicly available the 
results of these demonstrations so that we might learn what 
strategies work to actually improve care and lower cost?
    Ms. Alker. Absolutely. I am certain, obviously, as a public 
policy professor, very much a fan of evidence and research base 
to inform our public policy decisions. I would say a couple of 
things about the evaluation process. I do believe that it would 
be a great question to ask CMS that they have commissioned an 
overall evaluation of some of these new Section 1115 waiver 
approvals--recent approvals, that that is in process. It would 
be great to learn more about that, because one thing I have 
observed is that sometimes in the evaluation process, 
particularly at the State level, that if you have the State 
paying the evaluator, that the researchers may not always be 
objective. So we need to ensure that we have independent 
evaluations to assess these policy choices going forward.
    Mr. Green. OK. Mr. Salo, in balancing transparent 
flexibility, you noted that you fear strict guidelines for 
wavier approval might quickly become obsolete as our medical 
system advances. Would you agree that a set of broad principles 
should be--such as those put forth by the administration is, in 
fact, the best balance to achieve these program goals?
    Mr. Salo. In short, I would say yes. I think it is more 
important to have broad guidelines than clearly delineated 
checklists because, let's face it, what is approvable today 
would not have been conceived of or approvable 15 years ago.
    Mr. Green. Yes.
    Mr. Salo. And it is in all likelihood the innovations that 
are going to be driving real healthcare system improvement 10 
years from now, many of which we probably haven't thought of 
today. So we are going to need the ability to think about 
things very different. This is an iterative process. Innovation 
is a dynamic and fluid process.
    Mr. Green. Thank you, Mr. Chairman.
    Mr. Pitts. The Chair thanks the gentleman.
    Now recognize the gentleman from Indiana, Dr. Bucshon, 5 
minutes for questions.
    Mr. Bucshon. Thank you, Mr. Chairman. I think, again, it 
just strikes me the mere fact that we are talking about waivers 
shows you that maybe the program itself needs to be changed so 
we don't have to have so many waivers. Same thing is probably 
true in education with No Child Left Behind, it needs 
reauthorized in a different way. We are giving waivers to 
States because of poor policy that needs to be changed by 
Congress, and it seems like this may be an area that needs to 
be addressed. We are continuing to address today, and as a 
healthcare provider, I can say it is, you know, coverage and 
not really delving into cost. And I think some of you in your 
testimony have pointed out that, you know, the rising cost of 
health care and the inflation in health care is something that 
has to be addressed. I mean we are not going to keep up with 
the cost of the system going up, like the Governor pointed out, 
if you don't start to address that as an issue and not just 
address coverage.
    And if you are going to address coverage, you should 
address good coverage. And as I pointed out in the previous 
panel, I can tell you from experience that the Medicaid 
Program, although critical, is financially strapped and doesn't 
necessarily guarantee access to physicians. Again, Governor 
Barbour pointed out that in New Jersey, only 38 percent of 
physicians are taking new Medicaid patients.
    So that said, and the other thing I--someone mentioned 
earlier that hospitals in certain States are asking for 
Medicaid expansion. I would too because it means a huge 
financial gain for the hospitals, and the implication that that 
means that it is, you know, for all truism of covering people 
is not necessarily the case. And I just wanted to point that 
out.
    So with that, Mr. Salo, some have mentioned today that in 
recent years there has been greater transparency in the waiver 
process, such as through the adoption of requirements for 
public input both at the State and Federal level. The ability 
for the public to provide input on proposed Section 1115 
waivers is very important, of course, but it sounds like there 
has been still a lack of transparency and consistency regarding 
CMS' criteria for assessing 1115 demonstration applications. 
How does this lack of transparency affect State Medicaid 
Programs, and what recommendations do you have for improving 
the demonstration application and approval process?
    Mr. Salo. So I think a couple of things probably need to be 
done. Again, we--several of us have referred to this pathway to 
permanency. Because, as we have heard from GAO, \1/3\ of all 
program spending is now incorporated into an 1115 waiver, 
pretty much--pretty soon that is going to become the norm, 
rather than the--than a different example. So--and a lot of the 
things that we have been doing, Arizona has been doing this for 
30 years. Tennessee and other States have been doing it for 
decades. There are certain things we just shouldn't need to get 
a waiver for anymore, you know. Thoughtful managed care, 
coordinated care is one of them. Home and community-based 
alternatives to nursing home care is another example. If we can 
make the waiver process less necessary, if we can build some of 
those commonsense developments into the underlying program, we 
can free-up resources that can really be focused on real 
innovation, but I think it does still need to exist because as 
we are seeing with States like Massachusetts and New York and 
Texas and others where the delivery system incentive payments 
are being implemented, there are different things we need to 
try, and the system has to be accommodating to thinking outside 
of the box. And so I would say let's make the 1115 waiver 
process less necessary, but still nimble and fluid enough to be 
able to accommodate the innovations that need to happen, not 
just today, but tomorrow.
    Mr. Bucshon. Governor Barbour, you have some comments on 
that?
    Mr. Barbour. Yes, Doctor, I agree with that. That is very 
in line with what I have said earlier. I would think for many 
things there shouldn't be any necessity for coming and seeking 
a waiver, particularly something that has already been proven 
to work well in other States. But one of the things that 
strikes me is, we ought to base this on results, and yet GAO's 
witness here told us that CMS doesn't even test the results, 
that they don't look at the outcomes, and that is news to me. I 
hope it is really--that that is not quite accurate. But 
certainly, that ought to be part of the test. Did it achieve 
what you said it was going to achieve, and budget neutrality 
wasn't within the money. I testified, Mr. Chairman, 4 years ago 
that if you would give us a block grant, we would take \1/2\ 
the annual increase in Medicaid that our State would be 
entitled to because I thought we could save way, way more than 
that. I think if you have a budget--if you have a waiver, and 
you don't meet budget neutrality, the State ought to have to 
pay it. You will get very good programs if the State knows they 
are on the line. And most States, I believe, most States 
wouldn't prefer that, but if that was the difference, they 
would take it.
    Mr. Bucshon. I yield back.
    Mr. Pitts. The Chair thanks the gentleman.
    Now recognizes the gentleman from Oregon, Mr. Schrader, 5 
minutes for questions.
    Mr. Schrader. Thank you, Mr. Chairman.
    A couple of comments, I guess. The course of the hearing, I 
find it astonishing that some States, some Governors find it a 
burden to take care of the most disadvantaged people in our 
society, that Medicaid is not something--especially when the 
Federal Government is kicking in 90 percent of the cost. I 
mean, I am a little budgeteer from Oregon, a small business 
person, if someone is going to pay 90 percent of the cost of 
something, I am going to find 10 percent of the money to get it 
done, especially for this population. And who are these people? 
Who are these shiftless people on Medicaid? They are children, 
they are seniors, they are disabled people. Eighty percent of 
the Medicaid population is that group. I don't consider that 
shiftless. Seventy percent of the people that are able to 
actually work, they are all on Medicaid, that little 20--70 
percent of them working, and they can't afford health care. I 
mean Medicaid, 138 percent of poverty level, that is like, 
what, 14, $15,000 a year? I challenge any of us to try and live 
on something like that. Afford health care? You can't do that. 
Oregon had a small demonstration project that at the time I 
thought was very good. Yes, everyone should pay something for 
their health care. Let's see, we sort of do that under the ACA 
that is being demagogued on a regular basis. Yes, people that 
are lower income but can afford some--yes, we make them pay on 
a graduated basis, based on their income and their 
socioeconomic level, but somehow what we are hearing today, you 
know, we don't like that because it is Medicaid? Medicaid is 
tougher though. We had this demonstration project in our State 
and we found that those people that are on Medicaid, they have 
lots of issues, they have multiple risk factors, folks. It is 
not like you and I that just decide not to work. There may be a 
few of those but most have multiple issues. And, frankly, they 
are not going to pay $5, you know. And enlightened self-
interest ought to dictate to every one of us, even if we don't 
care about children, seniors, disabled, or the people that have 
multiple risk factors, that if we don't take care of these 
folks, their diabetes cost is going to go into our health 
insurance premium. And that has been proven. That is one of the 
predicates over healthcare reform. Whether you like the ACA or 
not, that is one of the predicates of why healthcare reform is 
so important; to get the costs aligned like they should.
    And there are some good projects out there though. I agree 
with the general sense of this panel that the whole waiver 
system, the whole Medicaid system itself seems to be 
antiquated, and we should update it to be, I believe, outcome 
and results-based. I agree with that 100 percent. That is the 
future; not micromanaging. Very concerned when I heard GAO 
talking about, well, we have more criteria here and a little 
more definition there, and count more waits that are being 
processed on--that is not the goal. The goal is to have higher 
quality health care at, frankly, less cost. And the way to do 
that, and it is in the ACA, and like it or not, even without 
the ACA, it is coordinated care. Aligning things so you don't 
have the duplication that GAO talks about.
    Oregon has a great demonstration project that they are 
doing right now that I think is very accountable. It is pretty 
gutsy. They say they got a bunch of money from CMS to develop 
this coordinated care organizations for Medicaid patients. That 
means that there are primary care docs, specialists, dentists, 
mental health professionals, coordinating the care for Medicaid 
patients so that they will know what each other is doing, they 
will have an accountability in there, and they get--they are--
in return for this money, the goal was to keep--not only get 
better outcomes, but get better value, not just for the 
individual but for the taxpayer. Limit healthcare inflation to 
2 percent through the duration of it.
    And I--you know, as a health care--well, as a budget guy, I 
got--ran--helped run the budget back in Oregon back in the day. 
You know, healthcare costs for healthcare inflation, 6, 7, 8, 9 
percent annually. It was a big deal. We always budgeted more 
than annual inflation on a regular basis, which was anywhere 
from, you know, 1 \1/2\ to 2 \1/2\ percent. So Oregon is going 
to keep it at 2 percent. That is impossible. Well, the results 
so far are pretty amazing. We are under 2 percent. Under 2 
percent inflation because of the coordinated care system. 
Emergency visits, I don't know about other States, emergency 
visits are down 21 percent from a couple of years ago. That is 
substantial. Complications from diabetes down 10 percent 
already. This is the early stages of coordinated care. And 
chronic obstructive pulmonary diseases, you know, hospital 
stays, down 50 percent. That is what we are talking about. That 
should be the outcome-based type of information that every 
waiver should be judged by, and hopefully, ultimately, Medicaid 
reimbursement in general.
    I yield back.
    Mr. Pitts. The Chair thanks the gentleman.
    Now recognize the gentleman from Florida, Mr. Bilirakis, 5 
minutes for questions.
    Mr. Bilirakis. Thank you very much, Mr. Chairman, I 
appreciate it.
    And good to see you, Governor.
    Mr. Barbour. I remember your dad, Congressman.
    Mr. Bilirakis. Good. Yes, thank you. Governor, some States 
have been operating under an 1115 waiver. You mentioned Arizona 
has been operating, I believe, since 1982, well, at least 30 
years. Some have suggested Congress create a process where 
longstanding core elements of an 1115 waiver can be effectively 
grandfathered into the State Plan Amendment. Do you have any 
thoughts on that? And I know that the Doctor had mentioned that 
too. I am just following up on his question.
    Mr. Barbour. Yes, sir. I think that is absolutely a step in 
the right direction. If you have a demonstration project that 
has demonstrated that it works, that you are able to do it in a 
budget neutral or better way, and that the outcomes are what 
you were expecting and what you told was going to happen, if 
that is the case, at some point--it shouldn't be years and 
years and years later, at some point, you ought to just be able 
to make that permanent. And I think importantly to your sister 
States, if we are the laboratories of democracy, and if Florida 
has got something that really works, it ought to be easier for 
us to go adopt what Florida is doing, make it--make some 
adjustments for us, but generally adopt what is proven to work 
in another State if we choose to, and not have to go through a 
big long process that takes 337 days.
    Mr. Bilirakis. Sounds good. Thank you.
    Mr. Salo, one of the things that the many Republican 
Governors have been interested in, they are interested in using 
1115 waivers to test consumer-directed accounts with modest 
copay structures to encourage health literacy and individuals 
participating in their own health care. I agree with that. CMS 
has approved a few demonstration programs for this but they 
have been stringent on the copays under the waiver program, I 
understand. How do you think that fact squares with the reality 
that consumers who make a few dollars more are suddenly 
expected to be shoppers on the exchanges, for example, at 133 
percent of the Federal poverty level you could be on Medicaid 
with no copay, but at 134 percent of the Federal poverty level, 
you would be on the exchange with no copays?
    Mr. Salo. Yes, I think the issue there is--and again with 
deference to the administration's priorities, every 
administration is going to have priorities about what it wants 
to see done with its share of the Medicaid dollars. The current 
administration is not a huge fan of copays in the Medicaid 
Program, but I think it is clear that a key point of what we 
need to do in the overall system to make health care better for 
people is that we have to have greater accountability, but for 
everyone. Yes, we need better consumer engagement, but we need 
to give--we need to make sure that consumers have the tools to 
be able to do that effectively. And we need to also make sure 
that providers; primary care physicians or what have you, are 
accountable. We have to give them the tools to be able to do 
that. And ultimately, whether it is a health plan or whether it 
is the State, we have to have the tools to create an 
environment where all of those other pieces can succeed. You 
know, we don't want to just leave anyone out there with, you 
know, ``Here is a ticket, good luck out there.'' We have to 
create, you know, with--it is not the Peter Principle, it is 
the Peter Parker Principle: With great power comes great 
responsibility. We have a responsibility to be able to ensure 
that everybody within the system is going to succeed as we 
change it from a dysfunctional fee-for-service model to a 
better integrated, coordinated managed care model. And that is 
going to involve consumer engagement, provider engagement, and 
State engagement as well.
    Mr. Bilirakis. Thank you. Last question. Governor, CBO has 
indicated Obamacare's Medicaid expansion would, on balance, 
reduce incentives to work, yet CMS has refused to approve work 
requirements as part of the Republican Governors' State 
demonstration waivers. Are you aware of anything in Section 
1115 that would prevent CMS from approving work-related 
requirements?
    Mr. Barbour. No, sir, I am not. And clearly, having a plan 
where more people work in our economy--today, only 48 \1/2\ 
percent of adult Americans have a full-time job. The labor 
participation rates are about 62.9 percent; the lowest since 
the '70s, before women had really come into the workforce in 
the numbers that they have in the last 40-some years. So yes, 
it is absolutely--now that we allow able-bodied childless 
people to be on Medicaid, there is absolutely no reason we 
shouldn't look back at Bill Clinton's welfare reform law, which 
had work or retraining requirements.
    Mr. Bilirakis. Thank you very much.
    I yield back, Mr. Chairman.
    Mr. Pitts. The Chair thanks the gentleman.
    Now recognize the gentlelady from Florida, Ms. Castor, 5 
minutes for questions.
    Ms. Castor. Thank you, Mr. Chairman. And welcome, panel.
    I would like to read from a Miami Herald article from about 
6 months ago relating to Florida's Medicaid Program. It says, 
in a sweeping decision, the judge says Florida systematically 
has shortchanged poor and disabled children by providing 
inadequate money for their health care. A Federal judge 
Wednesday declared Florida's healthcare system for needy and 
disabled children to be in violation of several Federal laws, 
handing a stunning victory to doctors and children's advocates 
who have fought for almost a decade to force the State to pay 
pediatricians enough money to ensure impoverished children can 
receive adequate care. In his 153-page ruling, U.S. Circuit 
Judge Adalberto Jordan said lawmakers had for years set the 
State's Medicaid budget at an all--artificially low level, 
causing pediatricians and other specialists for children to opt 
out of the insurance program for the needy. In some areas of 
the State, parents had to travel long distances to see 
specialists. The low spending plans which forced Medicaid 
providers for needy children to be paid far below what private 
insurers would spend, and well below what doctors were paid in 
the Medicare Program for a more powerful group; elders, 
amounted to rationing of care, the order said. And here are a 
few examples of what the judge found. Almost 80 percent of 
children enrolled in the Medicaid Program are getting no dental 
services at all. By squeezing doctor payments, Florida health 
regulators left \1/3\ of the State's children on Medicaid with 
no preventative medical care, despite the Federal legal 
requirements. And this was true for both children paying fee-
for-service or under managed care. In addition, the judge 
wrote, an unacceptable percentage of infants do not received a 
single well child visit in the first 18 months of their lives. 
Florida health regulators sometimes switch needy children from 
one Medicaid provider to another without their parents' 
knowledge or consent. So these sweeping violations of Federal 
law within a demonstration project, and Medicare--Medicaid 
waiver raised a lot of questions.
    And, Governor, I heard you said, well, for Florida--for all 
States, if it is working, maybe we should keep it. But clearly 
here, if something is not working, they need to take a look at 
it. I think everyone would agree.
    So, Ms. Alker, you are fairly familiar with what has been 
happening in Florida. This is part of the reason that the low-
income pool and these multibillion-dollar--in Florida, these 
large uncompensated care pools have gotten a lot of attention 
over past years. A lack of transparency in the way the funds 
are distributed by the State. They are distributed not by--they 
don't follow beneficiaries, they go--depending on--the pool of 
money goes to--depending on what counties have contributed. And 
they have raised serious questions about provider rates that 
have been cut over the years. What is to be done in a waiver 
situation when you have these uncompensated care pools, and yet 
providers, doctors are not being paid adequately, and children 
aren't getting the care they need?
    Ms. Alker. So I think you raised a number of issues, and 
one of the really important questions is having, I think, 
strong oversight of Medicaid managed care, particularly in 
Florida; there has been serious problems over the years with 
your managed care companies. And so part of what, you know, if 
you build it into the waiver process or through the new 
Medicaid managed care regs that CMS has just issued, that we 
really are going to need accountability for the taxpayer dollar 
with respect to these managed care companies. And I worry 
because I think that States have lost personnel, their 
departments are often underfunded, and they don't have the 
ability to oversee these managed care companies, ensure that we 
really are paying for care for very vulnerable children and 
others.
    And I guess with respect to the uncompensated care pool, I 
think it is also important to emphasize, as you mentioned 
earlier, Representative Castor, that the low-income pool in 
Florida doesn't cover a single person, and uncompensated care 
pools don't cover people. They came out of a time when 
particularly States had very high uninsured rates, but coverage 
is really a better way to approach the healthcare needs of 
citizens of your State and others, because the low-income pool 
doesn't protect families from bankruptcy, it doesn't ensure 
that folks get primary and preventative care, and to my mind, 
it is a smarter use of taxpayer dollars to make sure that 
people get coverage so they get the primary and preventative 
care they need so they don't get sicker and have to wind up 
taking uncompensated care from your State's hospitals.
    Ms. Castor. Thank you. I yield back.
    Mr. Pitts. The Chair thanks the gentlelady.
    And now recognizes the gentleman from New York, Mr. 
Collins, 5 minutes for questions.
    Mr. Collins. Thank you, Mr. Chairman. And I want to thank 
all of the witnesses today for your testimony on what we know 
is a major concern for all of us. And I may direct this to 
Governor Barbour. As the CEO of Mississippi, I can just tell 
you, in my past life, I was the county executive of the largest 
upstate county in New York, where Medicaid actually was 115 
percent of our budget, of our property taxes. So every single 
dollar that we collected in property taxes, every single dollar 
we collected was not enough to cover our Medicaid burden, 
because in New York, the counties pay a portion of the fee. 
That is not true in a lot of States. I don't know what it was 
in Mississippi, but in New York our Medicaid costs are so 
outrageous that we pass a--you know, a big chunk of it down to 
the 62 counties, to the point in Erie County, one of the 
poorest counties in the State of New York, home to Buffalo, it 
was 115 percent of our property tax levy. So we lived on only 
sales tax. The entire--everything we did with highways and 
roads and supports of our culturals, our prisons, our holding 
center, 100 percent of everything we did outside of Medicaid 
was sales tax revenue, which is not a predictable source.
    So I will get back to commonsense. When commonsense meets 
good Government, I think that is a good day for all of us. And 
I want to talk about how nominal copays can make a big 
difference. I mean we teach our kids, you know, you raise 50 
cents, I will give you 50 cents. You want a new bike, you go 
raise this, I will do that. A fundamental part of America is 
teaching people at a young age the value of $1, but in 
Medicaid, when there is no copay--let me tell you another 
story. I mean I can get pretty animated on this. We had in Erie 
County what we called the frequent fliers that use ambulances 
as a taxi service. They call 911, they climb in an ambulance, 
it takes them to the Erie County Medical Center, they get out 
and they start walking somewhere else. It was an--a free taxi 
cab, that is what it was, because we don't have a copay. I 
suggested why not a $50 copay. Fifty dollars to get into an 
ambulance and take you to the hospital, and we would even have 
a way to potentially, for some of those, waive that, but that 
would be more expensive than a taxi cab. So if you are looking 
for a taxi ride, call a taxi, don't call an ambulance. And I 
was told absolutely not, this isn't going to go that way. I 
chaired a commission, County Executives for Medicaid Reform, 
asking that we would have the ability at the county level to 
set up our own programs, and I was turned down on that one. So 
I just have a fundamental belief that having some level of pay, 
however little it is, invests a person in what it is they are 
getting, and that nothing in life should be free.
    So, you know, do you have any comments, Governor?
    Mr. Barbour. We try very hard to get CMS to agree to let us 
make copayments enforceable, and could not--we were not allowed 
to do that. Governor Daniels is quoted in some of the material, 
when they started the HIP program he--you know, everybody is 
going to have to pay something, and I think the lady from 
Indiana said it starts at $1 a month, but I remember him saying 
if you can afford a Big Mac you can afford the copayment. And 
for people to be--for patients to be participating in their 
health care, making decisions because of copays, the decision 
may be generic versus brand name, the decision may be something 
else, but as an old Scotch-Irish descendent, if it is a cash 
bar or a free bar, I know who drinks more. And if you--if it 
costs you something, if you have to be part of it, you are 
going to be a better healthcare receiver because you are going 
to be conscious about that. And the copays don't have to be 
very large, as you say, or as Governor Daniels says, where they 
have $1, a $1 copay. There is not anybody that can't afford $1 
a month.
    But anyway, I agree with you. My legislature we had 
Democratic majorities in both the House and Senate when I was 
Governor. They were for copays and enforceable copays. It is 
just commonsense.
    Mr. Collins. Well, and that is what I would say. It is 
commonsense meets Government. We should do something like this. 
In fact, to me, it should be part of the basic Medicaid Program 
because if we teach our 6-year-old kids the value of $1, and 
let's go out and do some work in the garage and clean up the 
house, and then you earn--and I will buy the--pay the rest of 
your bicycle, we fundamentally know that anything that is free 
has less value than something you even pay a nominal part for. 
So certainly within the 1115 program there should, in my 
opinion, definitely be a place for something for very small 
copays, and anyone who would debate otherwise I think is kind 
of leaving commonsense at the door, unfortunately.
    Well, thank you again for your testimony. My time has 
expired. I yield back, Mr. Chairman.
    Mr. Pitts. The Chair thanks the gentleman.
    Now recognize the gentleman from Massachusetts, Mr. 
Kennedy, 5 minutes for questions.
    Mr. Kennedy. Thank you, Mr. Chairman. I want to thank the 
witnesses for coming today, and for your testimony on an 
extraordinarily important topic.
    I apologize, I was bouncing around a little bit and so I 
think I missed some comments earlier about the Massachusetts 
low-income pool. So, Ms. Alker, I was hoping you might be able 
to clarify--I know my colleague, Ms. Castor, brought up the 
Florida low-income pool, and I think there were some 
comparisons that were made earlier. In your assessment, ma'am, 
are there any noticeable differences between the way that the--
Massachusetts has set up its low-income pool and that of 
Florida?
    Ms. Alker. I think there are. I am not as familiar with 
Massachusetts. I think though when you look at the nine States 
that CMS has identified with these kinds of uncompensated care 
pools, they are all different from each other. And as I 
mentioned before, one important step forward is that CMS, 
earlier this year, sent a letter to Florida about the 
principles they are going to use to apply to all States, excuse 
me, going forward as they consider their uncompensated care 
pool, and they are applying those principles both to States who 
have expanded Medicaid, like Massachusetts, and States who have 
not, like Florida.
    Mr. Kennedy. Excuse me. Right. So thank you for pointing 
out at least one important distinction. I also wanted to talk 
about--this has come up a couple of times today, but the work 
requirements, and with regards specifically to an issue that 
has come up also a couple of times today, mental health. One 
group that is particularly hit hard by unemployment are 
individuals that are suffering with mental illness. Committee 
had a hearing just a couple of days ago on improving our mental 
healthcare system in this country, and it is an issue that I 
know a lot of us care an awful lot about.
    In 2012, 17.8 percent of the seriously mentally ill were 
unemployed. This group of individuals could succeed at work if 
given the right opportunity for--excuse me, the right 
employment supports, which is why Medicaid coverage is so 
important. Medicaid--States to provide supportive improvements 
like skills assessments, assistance with job search, and 
completing job applications, job development and placement, job 
training, negotiations with prospective employers. And Medicaid 
dollars can be leveraged to support State training programs for 
mental health providers who, in turn, serve low-income 
beneficiaries. In fact, Mississippi and Massachusetts have 
something in common. Both States are taking advantage of these 
types of opportunities. Mississippi is, I think, a great 
example of using Medicaid support to help State health 
programs. And, Governor, your State goes so far as to provide 
services to help individuals start their own businesses, such 
as helping the with a business plan, finding potential 
financing, and ongoing guidance once the business has been 
launched. Massachusetts is doing some pretty outstanding work 
as well when it comes to treating mental illness and substance 
abuse. Flexibility in that waiver process allows Massachusetts 
to leverage State dollars to conduct community support 
programs, psychiatric day treatment, and acute treatment for 
children and adolescents.
    So, Ms. Alker, to start with you, do you agree that 
flexibility the States have today leverages Medicaid dollars to 
serve communities through the designated State health programs, 
and the--it is a hallmark of the Medicaid Program that should 
be protected?
    Ms. Alker. Well, so let me say two things, and then if it 
is oK, I would like to go back to the work requirement issue as 
well.
    So the kinds of programs that you are mentioning, I mean 
this has been a hallmark of Section 1115 waivers for many 
decades now. This is not something new that the Obama 
administration has started doing, and also it is not something 
which the Obama administration just simply says we are going to 
give you money for. The States come to them with ideas and, you 
know, I think we would all agree, if it is a good idea that 
supports the objectives of the Medicaid Program, that then that 
is the kind of thing exactly the Section 1115 waiver should 
test. And so I think again, if we look at it from that long-
term perspective, it is exactly what Mr. Salo was saying is 
that, over time, there are more innovative ideas that emanate 
from States, and that is a hallmark of Section 1115 waivers.
    With respect to the work requirement question, because I 
think there is an intersection between the mental health issue 
and the work requirement that I would like to point out, work 
requirements strike me as a bad idea both from a policy 
perspective and they are possibly outside the purview of the 
Secretary's legal authority to approve, although I am not a 
lawyer so I am going to leave that to others to comment on it, 
but I think they are a bad idea for the following reasons. I 
think we all share the same objective here, which is we would 
like to see people work. We would like to maximize employment. 
But it seems to me that imposing the arbitrary work requirement 
may, in fact, have the precise opposite effect because you have 
folks perhaps who have a mental health condition that needs to 
be treated, and the health care--providing them with the health 
care will allow them to work in greater--there will be a 
greater chance of them becoming employed. So I worry very much 
that a work requirement would have precisely the opposite 
effect of what is intended.
    Mr. Kennedy. Thank you. And I am, unfortunately, over time, 
so I yield back 5 seconds.
    Mr. Pitts. The Chair thanks the gentleman.
    Now recognize the vice chair of the full committee, Mrs. 
Blackburn, 5 minutes for questions.
    Mrs. Blackburn. Thank you, Mr. Chairman. And I want to 
thank each of you for your patience as we worked through the 
first panel, and then for staying with us. This makes for a 
long morning, we understand that, but as we look at the 
demonstration projects, we do want to come back in and review 
this, and maybe as the director said earlier in the first 
panel, be able to put some guidelines in place, and some more 
components for oversight and also for conduct, put these in the 
statute. So today is important for us.
    Mr. Salo, I want to come with--to you. In your testimony, 
you had said that simple accounting for Medicaid is extremely 
difficult, if not impossible. And we are talking about a 
program that is probably the world's largest health insurance 
program, and the spending is pretty much on autopilot at the 
Federal level. Lot of problems with how this is playing out. 
And as a former State senator in Tennessee, and the experiment 
we had with TennCare, I fully understand the challenging nature 
of Medicaid and of working through these waivers in the 1115 
program, but I want to give you a chance to explain this 
because surely, you are not suggesting that benefits cannot be 
quantified, and that dollars cannot be tracked effectively, or 
that accountability is not needed. So would you like to respond 
to that?
    Mr. Salo. I would love to, thank you.
    Mrs. Blackburn. Good.
    Mr. Salo. So I guess what I am saying is I think what the 
GAO is searching for here is akin to--there is an old joke 
where there is a policeman walking down the street and he sees 
a guy on his hands and knees, looking for something in the 
street under the streetlight, and it is dark. And policeman 
comes over, says, you know, what are you doing? He says, I am 
looking for my keys. I lost my keys. So the policeman helps 
him. And he is there for like 5 or 10 minutes. He says, I can't 
find them, are you sure you dropped them here? He says, oh, no, 
I dropped them down the block, just the light is better over 
here. I think that is what is going on. I think the GAO is 
struggling for something that is really simple and really easy, 
that for the green eyeshade approach of, well, I can put this 
in a checklist, this is simple, this is simple, check, check, 
check. And I am here to argue that Medicaid is much more 
complex than that. I am not saying it doesn't need 
accountability. It does. It has. And I am not saying that we 
cannot--we should not track the dollars, track the benefits. 
You should, and we do. What I am saying is, I think what the 
GAO is pushing for may not actually be good for the ultimate 
value and health care--health of the program itself. That as we 
start getting into very narrow definitions----
    Mrs. Blackburn. Well, sir, I am----
    Mr. Salo [continuing]. Of what budget neutrality is----
    Mrs. Blackburn [continuing]. Going to interrupt you right 
there. If the program is too expensive to afford, it is not 
good for anybody. And what we need to make certain is that we 
are looking at this from access to affordable health care, and 
to approach it from a viewpoint that, well, this is too 
challenging, the problem is too big to solve so let's leave it 
on autopilot, that is not a responsible course of action, and 
that is something that we ought not to do, and it is exactly 
the reason we need to pull this back in and look at these 1115 
waiver situations, and look at the subjectivity with which 
these waivers are being given.
    Governor Barbour, I want to come to you. Talking about the 
subjective nature of this, and looking back through these 
uncompensated care pools, and you look at what happened with 
Massachusetts and Hawaii, and they are being given a much 
longer period of time for their extension on their pool as 
opposed to Florida, and I--what I don't like where this--you 
look at how this is playing out, and it seems like you have CMS 
treating States differently if they are friendly to the 
administration as opposed to those that are not friendly to the 
administration. And that is troubling to me. I think it is 
troubling to a lot of people that are looking at Medicaid and 
Medicaid delivery.
    Mr. Barbour. Certainly, that is the contention of the 
attorneys general law suit, that because their States did not 
expand Medicaid, they are being coerced or they are being 
punished in doing this. GAO did not say different States get 
different treatment, but they did publish a list of who got 
their waivers redone, and it is pretty politically consistent. 
If you look down the list, they all voted for the same 
candidate for President. They got two senators in the same 
party. They all expanded Medicaid. Now, I can't look into 
anybody's heart and say they are--that is why they made the 
decision, but that is why we need more transparency, not just 
in a Democratic administrations, but in Republican 
administrations, of why did the decision get made.
    Mrs. Blackburn. Thank you. Mr. Chairman, I have one other 
question for Governor Barbour. I will submit it--it has to do 
with eligibility-- get an answer from him relative to that.
    I yield back.
    Mr. Pitts. The Chair thanks the gentlelady.
    That concludes the questions of the members present. We 
will have follow-up questions. We will send those to you in 
writing. We ask that you please respond promptly.
    I remind members that they have 10 business days to submit 
questions for the record. Members should submit their questions 
by the close of business on Wednesday, July the 8th.
    Another very important, interesting hearing. A critical 
program needs attention of Congress. This has been very 
informative. We thank you for coming.
    And without objection, the subcommittee stands adjourned.
    [Whereupon, at 1:11 p.m., the subcommittee was adjourned.]
    [Material submitted for inclusion in the record follows:]

             Prepared statement of Hon. Frank Pallone, Jr.

    Mr. Chairman, thank you for calling today's hearing on 
Medicaid demonstration projects, and thank you to all of our 
witnesses for coming to testify.
    Section 1115 waivers were established for the express 
purpose of allowing States to dream big in their Medicaid 
programs-to design and pilot new ways of delivering care that 
support the overarching objectives of the Medicaid program: to 
strengthen coverage, expand access to providers, improve health 
outcomes, and increase the quality of care for beneficiaries.
    States already have extremely broad flexibility under an 
1115 waiver, and that flexibility is a good thing. But in 
exchange, it's important that there remains strong public 
transparency and evaluation.
    That's why I am pleased that after close to 20 years of 
recommendations for more transparency into the Medicaid waiver 
process, the Affordable Care Act included a bipartisan 
provision to improve the transparency of Medicaid waivers, in 
line with longstanding recommendations from GAO. Today, because 
of this provision, the public has meaningful opportunities to 
provide input into the waiver process at both the State and 
Federal level, waivers are now evaluated on a periodic basis, 
and States submit reports on implementation. This was a huge 
step in the right direction.
    I am further encouraged by CMS' concurrence with GAO 
recommendations specifically in their April 2015 report for 
better ongoing and transparent documentation of how States 
spend Medicaid dollars. This is a recommendation that prior 
administrations had refused to correct, and I continue to 
believe it is the right thing to do to ensure dollars are 
following our Medicaid beneficiaries.
    I was also encouraged by the administration's clear and 
public articulation over the past year with States regarding 
the specific criteria that it would use for approval of waivers 
for States with so-called ``uncompensated care pools.'' In many 
past reports, GAO has expressed concerns with the structure and 
distribution mechanisms for uncompensated-care dollars that 
some States have used. This is another step in the right 
direction.
    Despite these advancements, I believe there is still more 
to be done. A real conversation about improving transparency of 
Medicaid waivers, while carefully balancing the need to 
preserve State flexibility, is a conversation worth having.
    To be clear, however, States already have broad 
flexibility. Disguising punitive, ideological philosophies like 
work requirements and increased cost-sharing as vital 
``flexibility'' needed by States has no place in this 
conversation. Those are policies that undermine the foundation 
of our safety net.
    There is a real opportunity today to evaluate and learn how 
to improve the Medicaid waiver process so we can provide better 
care to millions of people that count on Medicaid. I look 
forward to that discussion.



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