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









         EXAMINING LEGISLATION TO IMPROVE MEDICARE AND MEDICAID

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

                                HEARING

                               BEFORE THE

                         SUBCOMMITTEE ON HEALTH

                                 OF THE

                    COMMITTEE ON ENERGY AND COMMERCE
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED FOURTEENTH CONGRESS

                             FIRST SESSION

                               __________

                            NOVEMBER 3, 2015

                               __________

                           Serial No. 114-98


[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...........................................     3
Hon. Gene Green, a Representative in Congress from the State of 
  Texas, opening statement.......................................     3
    Prepared statement...........................................     5
Hon. Brett Guthrie, a Representative in Congress from the 
  Commonwealth of Kentucky, opening statement....................     6
Hon. Frank Pallone, Jr., a Representative in Congress from the 
  State of New Jersey, prepared statement........................    68

                               Witnesses

Hon. Lynn Jenkins, a Representative in Congress from the State of 
  Kansas.........................................................     7
    Prepared statement...........................................    10
Katherine M. Iritani, Director, Health Care, Government 
  Accountability Office..........................................    12
    Prepared statement...........................................    15
Anne L. Schwartz, Ph.D., Executive Director, Medicaid and CHIP 
  Payment and Access Commission..................................    37
    Prepared statement...........................................    39
    Answers to submitted questions...............................   105

                           Submitted Material

H.R. 2878, Section 1 of Public Law 113-98 Amended, submitted by 
  Mr. Pitts......................................................    70
H.R. [1362], the Medicaid REPORTS Act, submitted by Mr. Pitts....    72
H.R. 2151, the Improving Oversight and Accountability in Medicaid 
  Non-DSH Supplemental Payments Act, submitted by Mr. Pitts......    76
H.R. [1361], Section __ Amended, submitted by Mr. Pitts..........    81
Discussion Draft, H.R. ___, the Quality Care for Moms and Babies 
  Act, submitted by Mr. Pitts....................................    83
Statement of American College of Obstetricians and Gynecologists, 
  November 3, 2015, submitted by Mr. Pitts.......................   104
 
         EXAMINING LEGISLATION TO IMPROVE MEDICARE AND MEDICAID

                              ----------                              


                       TUESDAY, NOVEMBER 3, 2015

                  House of Representatives,
                            Subcommittee on Health,
                          Committee on Energy and Commerce,
                                                    Washington, DC.
    The subcommittee met, pursuant to call, at 10:15 a.m., in 
room 2322 Rayburn House Office Building, Hon. Joseph R. Pitts 
(chairman of the subcommittee) presiding.
    Members present: Representatives Pitts, Guthrie, Shimkus, 
Blackburn, Lance, Griffith, Bilirakis, Long, Bucshon, Brooks, 
Collins, Green, Castor, Sarbanes, Schrader, Kennedy, and 
Pallone (ex officio).
    Also present: Representative Loebsack.
    Staff present: Clay Alspach; Chief Counsel, Health; Rebecca 
Card, Assistant Press Secretary; Karen Christian, General 
Counsel; Graham Pittman, Legislative Clerk; Michelle Rosenberg, 
GAO Detailee, Health; Chris Sarley, Policy Coordinator, 
Environment and the Economy; Heidi Stirrup, Policy Coordinator, 
Health; Josh Trent, Professional Staff Member, Health; 
Christine Brennan, Democratic Press Secretary; Jeff Carroll, 
Democratic Staff Director; 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. OK. I will ask our guests to please take their 
seats, and the subcommittee will come to order. The Chair will 
recognize himself for an opening statement.

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

    Today's hearing will examine five bipartisan legislative 
bills designed to make commonsense improvements to the Medicare 
and Medicaid programs.
    First, the committee is happy to have with us one of our 
own colleagues, Representative Lynn Jenkins from Kansas. 
Representative Jenkins will be testifying on our first panel 
about a bill she is sponsoring, H.R. 2878.
    This bill would simply prohibit Medicare contractors from 
enforcing supervision requirements for outpatient therapeutic 
services and critical access in small rural hospitals for 
another year.
    The Senate companion to this bill was approved by the 
Senate Finance Committee in June, so we are pleased to be able 
to review this bill today.
    On our second panel, we will hear from representatives of 
the Government Accountability Office, GAO, and the Medicaid and 
CHIP Payment and Access Commission, MACPAC.
    GAO and MACPAC will help us in our review of four 
bipartisan bills to improve Medicaid. The first Medicaid bill 
is an updated version of H.R. 1362, the Medicaid REPORTS Act, 
by Vice Chairman Guthrie.
    This bill seeks to address GAO and MACPAC findings that the 
Centers for Medicare and Medicaid Services, CMS, does not 
collect accurate and complete data from all States on the 
various sources of funds to finance the non-Federal share.
    This bill requires States to submit a report at least once 
a year on sources of funds used to finance the non-Federal 
share of expenditures in the Medicaid program.
    This issue is important policy because State financing 
approaches affect Medicaid payment methodologies and payment 
amounts, which may affect enrollees' access to services.
    The next Medicaid bill is H.R. 2151, sponsored by our 
colleague, Representative Chris Collins, the Improving 
Oversight and Accountability in Medicaid Non-DSH Supplemental 
Payments Act, would improve the calculation, oversight, and 
accountability of non-DSH supplemental payments under the 
Medicaid program.
    This is important because GAO founds gaps in Federal 
oversight of high-risk supplemental payments including a lack 
of information on the providers receiving them, inaccurate 
payment calculation method and a lack of assurances the 
payments were used for Medicaid purposes.
    In 2014, MACPAC recommended that the HHS collect, and make 
publically available, provider-label non-DSH supplemental 
payment data in a standard format that enables analysis.
    Thirdly, the updated version of H.R. 1361, Medicaid Home 
Improvement Act, sponsored by Representative Guthrie, would 
establish a Federal cap on the home equity allowance consistent 
with the current Federal default of $552,000.
    This bill would preserve existing beneficiary protections 
but help protect taxpayers by updating the limit of allowable 
equity interest a beneficiary can have in their home. This is a 
commonsense step to prevent cost shifting from the private to 
the public sector.
    And finally, the Quality Care for Moms and Babies Act, 
sponsored by Representatives Engel and Stivers, seeks to 
improve the quality, health outcomes, and value of maternity 
care under the Medicaid and CHIP programs by developing 
maternity care quality measures.
    This bill would authorize the appropriations of $16 million 
for HHS to identify and publish quality measures for maternal 
and infant health.
    Together, these five bills continue the commitment that 
this Congress has to strengthen the Medicare and Medicaid 
programs to help sustain these important safety net programs 
for those most relying on them.
    I want to thank all of our witnesses for agreeing to 
testify today, and I yield back and now recognize the ranking 
member of the subcommittee, Mr. Green, 5 minutes for his 
opening statement.
    [The legislation appears at the conclusion of the hearing.]
    [The prepared statement of Mr. Pitts follows:]

               Prepared statement of Hon. Joseph R. Pitts

    The subcommittee will come to order.
    The chairman will recognize himself for an opening 
statement.
    Today's hearing will examine five bipartisan legislative 
bills designed to make common-sense improvements to the 
Medicare and Medicaid programs.
    First, the committee is happy to have with us one of our 
own colleagues, Representative Lynn Jenkins from Kansas. 
Representative Jenkins will be testifying on our first panel 
about a bill she is sponsoring, H.R. 2878. This bill would 
simply prohibit Medicare contractors from enforcing supervision 
requirements for outpatient therapeutic services in critical 
access and small rural hospitals for another year. The Senate 
companion to this bill was approved by the Senate Finance 
Committee in June, so we are pleased to be able to review the 
bill today.
    For our second panel, we will hear from representatives of 
the Government Accountability Office (GAO) and the Medicaid and 
CHIP Payment and Access Commission (MACPAC). GAO and MACPAC 
will help us in our review of four bipartisan bills to improve 
Medicaid.
    The first Medicaid bill is an updated version of H.R. 1362, 
the Medicaid REPORTS Act, by Vice Chairman Guthrie. This bill 
seeks to address GAO and MACPAC findings that the Centers for 
Medicare and Medicaid Services (CMS) does not collect accurate 
and complete data from all States on the various sources of 
funds to finance the non-Federal share. This bill requires 
States to submit a report at least once a year on sources of 
funds used to finance the non-Federal share of expenditures in 
the Medicaid program. This issue is important policy because 
State financing approaches affect Medicaid payment 
methodologies and payment amounts, which may affect enrollees' 
access to services.
    The next Medicaid bill is H.R. 2151, sponsored by our 
colleague, Rep. Chris Collins. The ``Improving Oversight and 
Accountability in Medicaid Non-DSH Supplemental Payments Act'' 
would improve the calculation, oversight, and accountability of 
non-DSH supplemental payments under the Medicaid program. This 
is important because GAO found gaps in Federal oversight of 
high-risk supplemental payments, including a lack of 
information on the providers receiving them, inaccurate payment 
calculation method, and a lack of assurances the payments were 
used for Medicaid purposes. In 2014, MACPAC recommended that 
the HHS collect and make publicly available provider-level non-
DSH supplemental payment data in a standard format that enables 
analysis.
    Thirdly, the updated version of H.R. 1361, Medicaid HOME 
Improvement Act -sponsored by Rep. Guthrie-would establish a 
Federal cap on the home equity allowance consistent with the 
current Federal default of $552,000. This bill would preserve 
existing beneficiary protections, but help protect taxpayers by 
updating the limit of allowable equity interest a beneficiary 
can have in their home. This is a common-sense step to prevent 
cost-shifting from the private to the public sector.
    Finally, the Quality Care for Moms and Babies Act, 
sponsored Reps. Engel (NY) and Stivers (OH) seeks to improve 
the quality, health outcomes, and value of maternity care under 
the Medicaid and CHIP programs by developing maternity care 
quality measures. This bill would authorize the appropriation 
of $16 million for HHS to identify and publish quality measures 
for maternal and infant health.
    Together these five bills continue the commitment this 
Congress has to strengthen the Medicare and Medicaid programs 
to help sustain these important safety net programs for those 
most relying on them.
    I want to thank our witnesses for agreeing to testify 
today. I will yield to anyone on my side seeking time.

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

    Mr. Green. Thank you, Mr. Chairman, and welcome our 
colleague from Kansas. Thank you for being here today.
    We are here to examine five legislative proposals. One 
impacts the Medicare Part B program and the others affect the 
Medicaid program. As we know, the Medicaid program has served 
as a critical safety net for the American public since its 
creation on 1965, 50 years ago this year.
    Today, over 70 million low-income Americans rely on 
Medicaid for comprehensive affordable health care. Medicaid 
covers more than one in three children, pays for nearly half of 
all births and accounts for more than 40 percent of the 
Nation's total cost for long-term care.
    One in seven Medicare beneficiaries is also a Medicaid 
beneficiary--dual eligible. The Quality Care for Moms and 
Babies Act, the discussion and draft put forth by Reps. Engel 
and Stivers, will improve health outcomes for women and 
children who depend on Medicaid.
    This legislation will authorize funding for HHS to develop 
quality measures for maternal and infant health and award 
grants related to care quality and I support this important 
legislation.
    I am concerned about the other legislation we are 
considering, such as the Medicaid REPORTS Act and proposals 
requiring additional auditing on States that are overly 
burdensome, proscriptive, and likely intended to chip away at 
the Medicaid program.
    Additional transparency on Medicaid payments is a goal we 
all share. My priority is always including ensuring Medicaid 
beneficiaries have access to the care that they need by 
supporting providers that serve beneficiaries who otherwise 
have nowhere else to go for the necessary care.
    However, these bills as structured will not achieve our 
goal of fully understanding Medicaid payments and whether these 
payments are adequate to guarantee equal access for 
beneficiaries within the Medicaid program.
    My State of Texas uses supplemental and Medicaid DSH 
payments in a unique way. These sources of funding are an 
incredible and important revenue stream for hospitals and 
providers that serve a large portion of Medicaid beneficiaries 
and the uninsured.
    For example, in Texas supplemental payments are used for 
DSRIP and I want to make sure we maintain the flexibility so 
CMS and States can deliver each Medicaid program the best way 
for its unique patient base.
    Providers in a Medicaid program must be paid a fair rate. 
Given the complexities and the 56 distinct Medicaid programs, 
there is a nuanced way to address these issues.
    The question you need to ask is its full payment that a 
provider receives for treating a Medicaid enrollee fair and 
sufficient to ensure equal access.
    Unfortunately, legislation like Medicaid REPORTS Act, H.R. 
2125, won't get us the information we need to see the full 
picture and it may actually put more burdens on the States. 
They are not in line with the actions CMS has taken to improve 
in the area and I look forward to learning more about this 
complex issue.
    Reforms done for the right reasons and nuance in an 
intelligence way can truly improve how CMS ensures that 
payments to Medicaid providers are sufficient and enforce equal 
access to Medicaid beneficiaries.
    Such proposals should be a priority for our committee and I 
look forward to a comprehensive discussion on ways we can 
improve transparency, strengthen coverage and expand access to 
providers and increase the quality of health care.
    [The prepared statement of Mr. Green follows:]

                 Prepared statement of Hon. Gene Green

    Good morning and thank you all for being here today. We are 
here to examine five legislative proposals. One impacts the 
Medicare Part B program and the others affect the Medicaid 
program.
    As we know, the Medicaid program has served as a critical 
safety net for the American public since its creation in 1965, 
50 years ago this year.
    Today, over 70 million low-income Americans rely on 
Medicaid for comprehensive, affordable health insurance.
    It is a lifeline for millions of children, pregnant women, 
and people with disabilities, seniors, and low-income adults.
    Medicaid covers more than 1 in 3 children, pays for nearly 
half of all births, and accounts for more than 40 percent of 
the Nation's total costs for long-term care.
    One in 7 Medicare beneficiaries is also a Medicaid 
beneficiary.
    The Quality Care for Moms and Babies Act, a discussion 
draft put forth by Representatives Eliot Engel and Steve 
Stivers, would improve health outcomes for the women and 
children who depend on Medicaid.
    This bipartisan legislation builds on the Pediatric Quality 
Measures Program, which is the only program targeting quality 
performance measurement reporting in the Medicaid and CHIP 
programs.
    Remarkably, it does not currently include a maternal and 
infant quality core set.
    This legislation will authorize funding for HHS to develop 
quality measures for maternal and infant health, and award 
grants related to care quality. I support this important 
legislation.
    I am concerned about other legislation we are considering, 
such as the Medicaid REPORTS Act and proposals requiring 
additional auditing on States that are overly burdensome, 
prescriptive, and likely intended to further chip away at the 
Medicaid program.
    Additional transparency on Medicaid payments is a goal we 
all share.
    My priorities have always included ensuring Medicaid 
beneficiaries have access to the care that they need by 
supporting providers that serve beneficiaries, who would 
otherwise have nowhere else to go for necessary care.
    However, the way these bills are structured will not 
achieve our goal of a full understanding of Medicaid payments, 
and whether those payments are adequate to guarantee equal 
access for beneficiaries within the Medicaid program.
    My State of Texas uses supplemental and Medicaid DSH 
payments in unique way.
    These sources of funding are an incredibly important 
revenue stream for hospitals and providers that serve a large 
portion of Medicaid beneficiaries and the uninsured.
    For example, in Texas, supplemental payments are used for 
the DISRIP (``dis-rip''), and I want to be sure we maintain 
that flexibility so CMS and States can deliver each Medicaid 
program in the best way for each unique patient base.
    Providers in the Medicaid program must be payed fair rate.
    Given the complexities and the 56 distinct Medicaid 
programs, there is a nuanced way to address these issues.
    The question we need to be asking is, ``is the full payment 
that a provider receives for treating a Medicaid enrollee fair 
and sufficient to ensure equal access?''
    Unfortunately, legislation like the Medicaid REPORTS Act 
and H.R. 2125 won't get us the information we need to see the 
full picture and may actually put more burdens on States.
    And, they are not in line with actions CMS has taken to 
improve in this area.
    I look forward to learning more about this complex issue.
    Reforms done for the right reasons, in a nuanced and 
intelligent way, can truly improve how CMS ensures that 
payments to Medicaid providers are sufficient and enforce equal 
access for Medicaid beneficiaries.
    Such proposals should be a priority for this committee, and 
I look forward to a comprehensive discussion on ways to improve 
transparency, strengthen coverage, expand access to providers, 
and increase the quality of care.
    Thank you, Mr. Chairman.

    Mr. Green. And Mr. Chairman, I will yield the remainder of 
my time to my colleague from Iowa, Dave Loebsack.
    Mr. Loebsack. I thank Mr. Green for yielding.
    I also want to thank my colleague, Congresswoman Jenkins, 
for testifying here today on our bill. I am happy to be the 
lead Democratic cosponsor of H.R. 2878.
    It has been a pleasure to work with her on this issue. As a 
native Kansan, she truly understands the needs of rural 
Americans and I thank her for her bipartisan work on the bill.
    Basically, what 2878 would do is suspend the physician 
direct supervision requirement for outpatient therapeutic 
services furnished at critical access hospitals and small rural 
hospitals until January of 2016.
    I often visit critical access hospitals in my district. 
There are many, given that I represent rural Iowa, and the 
number-one concern I have heard about recently was this direct 
supervision issue.
    In 2009, CMS issued a rule that mandated direct supervision 
for all outpatient therapeutic services at these hospitals.
    In response to concerns over the implementation of this 
policy they delay the enforcement through 2013, which was 
extended by Congress to 2014.
    Direct supervision requires that a physician is immediately 
available when the service is provided. This is difficult in 
many of these rural settings.
    Many outpatient services such as continued chemotherapy, 
administration of IV fluids or drawing of blood can be safely 
administered under general supervision, a fact that CMS itself 
recognized in its delay of the policy.
    Further, small rural hospitals often face staffing and 
workforce shortages that make direct supervision of these 
services incredibly difficult.
    There are a lot of challenges facing our rural hospitals, 
as you know all too well, Congresswoman Jenkins. This 
legislation, I think, would go some distance to remedying at 
least one of those issues facing them and I thank you for 
introducing this legislation. I am happy to be a part of it, 
and I yield back.
    Thank you.
    Mr. Pitts. Chair thanks the gentleman and now recognizes 
the vice chair of the subcommittee, Mr. Guthrie, 5 minutes for 
an opening statement.

 OPENING STATEMENT OF HON. BRETT GUTHRIE, A REPRESENTATIVE IN 
           CONGRESS FROM THE COMMONWEALTH OF KENTUCKY

    Mr. Guthrie. Thank you, Mr. Chairman, and I appreciate my 
classmate from the 2008 class coming in, being here with us 
this morning, Ms. Jenkins.
    But thank you, and I appreciate you holding this hearing on 
the number of important bills. Today, the committee is 
examining two bills that I introduced--H.R. 1361, the Medicaid 
Home Improvement Act, and H.R. 1362, the Medicaid REPORTS Act.
    These are both good Government bills that help strengthen 
the Medicaid program and protect valuable taxpayer dollars. 
H.R. 1361, the Medicaid Home Improvement Act, caps the maximum 
allowable equity for beneficiaries to qualify for long-term 
care under Medicaid.
    Currently, in some States those with home equities--not 
home values but home equities--above $828,000 can qualify for 
Medicaid assistance. My bill reindexes the maximum threshold of 
$500,000, adjusted for inflation.
    With an average home sale in the United States at $221,000, 
the current limits allow those not truly in need to access 
Medicaid dollars, draining Federal and State dollars.
    H.R. 1362, the Medicaid REPORTS Act, requires States to 
submit an annual report that identifies the sources and amounts 
of funds used by the State to finance the non-Federal share of 
Medicaid.
    With the growing burden the Medicaid program is placing on 
the Federal budget and those of each of our States, it is 
important that we know how States are coming up with the 
dollars necessary to meet their Medicaid match.
    Again, Mr. Chairman, I appreciate you holding this hearing 
to examine these and other important issues and I look forward 
to talking more with our witnesses and yield back the balance 
of my time.
    Anybody seeking time? I yield back.
    Mr. Pitts. Chair thanks the gentleman.
    As usual, all written opening statements of the committee 
will be made part of the record and we will proceed to our 
first panel.
    On our first panel today we have the Honorable Lynn 
Jenkins, Second District of Kansas, and we thank you for coming 
to talk about your legislation.
    You may proceed.

 STATEMENT OF HON. LYNN JENKINS, A REPRESENTATIVE IN CONGRESS 
                    FROM THE STATE OF KANSAS

    Ms. Jenkins. Chairman Pitts, Ranking Member Green, 
honorable members of the committee, thank you for holding this 
hearing and inviting me to speak on H.R. 2878, a critical piece 
of legislation.
    The bill would delay Medicare's physician direct 
supervision requirement for outpatient therapeutic services in 
critical access and small rural hospitals until 2016.
    In January of 2014, the Centers for Medicaid and Medicare 
Services began enforcing a requirement that physicians must 
supervise outpatient therapy at critical access hospitals and 
other small rural hospitals.
    CMS' decision meant that routine outpatient procedures such 
as drawing blood or undergoing active therapy would have to be 
directly supervised by a physician.
    This decision by CMS would have put a severe strain on 
providers, particularly those in rural areas, while providing 
no quality improvements for the patients they serve.
    Most of these outpatient procedures are relatively simple, 
are very safe and would not benefit from a Federal mandate that 
that physician always be in the room, and as a practical matter 
in rural hospitals across Kansas such a requirement is simply 
not feasible.
    I was proud to introduce legislation last Congress that 
delayed this Medicare direct supervision requirement through 
2014 and it was signed into law with bipartisan support.
    It has been widely recognized as an effective tool to 
improve care in rural hospitals and keep the regulatory burden 
in check.
    Unfortunately, rural hospitals are once again staring down 
the threat of this Federal mandate from CMS. The existing law 
delayed enforcement action from CMS has expired.
    Accordingly, I have now reintroduced similar legislation 
this Congress, further delaying enforcement until 2016. It is 
about this legislation, H.R. 2878, which this committee has 
graciously invited me to speak today.
    When I think about the healthcare needs facing my district, 
there is nothing more challenging than ensuring access to 
quality and accessible rural health care.
    Rural America is struggling and the 84 critical access 
hospital in Kansas are the lifeblood of our rural communities.
    The presence of facilities such as a critical access 
hospital in a community could be the deciding factor in whether 
or not the next generations of children decide to raise their 
family in their home town or perhaps whether or not a business 
decides to locate there.
    Easy access to emergency care can be a life and death 
situation and we cannot threaten the existence of these 
facilities by piling on the regulatory burden from Washington.
    Earlier this year I invited the CEO of Holton Community 
Hospital to testify about this issue before the Ways and Means 
Committee's Subcommittee on Health.
    Holton Community Hospital happens to be responsible for 
serving my hometown, Holton, a community of just over 3,000 
Kansans.
    She explained in great detail that direct supervision would 
be extremely burdensome, costly and is simply unrealistic at a 
hospital serving rural America. The result of enforcing this 
mandate would be to severely limit the type of services rural 
healthcare hospitals could offer and it would threaten their 
financial stability at a complicated and uncertain time in our 
Nation's healthcare system.
    H.R. 2878 will correct this problem. It will do so by 
reinstating the moratorium on enforcement of this unnecessary 
regulation. It has broad bipartisan support in Congress and the 
support of key stakeholders including the American Hospital 
Association, the National Rural Health Association and the 
Kansas Hospital Association.
    As a small town girl, I feel strongly that folks in rural 
communities deserve access to quality health care. I can't 
emphasize enough that rural hospitals--rural communities in 
Kansas and across the country depend on access hospitals like 
critical access hospitals which are directly threatened by CMS' 
action.
    I hope the Members from both parties can come together once 
again to ensure high quality and timely care is available to 
you no matter where you live in America. Companion legislation 
was introduced by Senators Thune, Moran and Jon Tester.
    It has passed the Senate back in September. I also want to 
thank my lead cosponsor on the legislation, Congressman Dave 
Loebsack and for all his hard work and advocacy on the issue as 
well.
    I urge my colleagues to support the legislation and move it 
forward in a timely fashion.
    Thank you all for allowing me to join you today.
    [The statement of Ms. Jenkins follows:]
    
    
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]    
    
    
    Mr. Pitts. Chair thanks the gentlelady. Really appreciate 
you taking time out of your busy schedule to come and present 
testimony to us today.
    As usual, we will not have any questions for our Members 
presenting testimony. So we will excuse the gentlelady with our 
thanks and call our second panel to the witness table. And 
while they are setting up the table I would like to submit the 
following document for UC request for the record. It is a 
statement from the American College of Obstetricians and 
Gynecologists.
    [The information appears at the conclusion of the hearing.]
    Without objection, so ordered. I will introduce our second 
panel in the order they will testify. First, Ms. Katherine 
Iritani, director of Health Care, Government Accountability 
Office, and then Ms. Anne Schwartz, Ph.D., executive director, 
Medicaid and CHIP Payment and Access Commission.
    Thank you very much 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.
    So with that, Ms. Iritani, you are recognized for 5 
minutes.

  STATEMENTS OF KATHERINE M. IRITANI, DIRECTOR, HEALTH CARE, 
GOVERNMENT ACCOUNTABILITY OFFICE, AND ANNE L. SCHWARTZ, PH.D., 
   EXECUTIVE DIRECTOR, MEDICAID AND CHIP PAYMENT AND ACCESS 
                           COMMISSION

               STATEMENT OF KATHERINE M. IRITANI

    Ms. Iritani. Chairman Pitts, Ranking Member Green and 
members of the subcommittee, thank you for this opportunity to 
be here today as you consider ways to strengthen the jointly 
financed Federal and State Medicaid program, now the largest 
healthcare program in the Nation by enrollment.
    My testimony today will cover a body of GAO work from 
recent years on two complex topics--Federal oversight of 
certain large payments States often make known as supplemental 
payments and how States finance the non-Federal share of their 
programs.
    Supplemental payments are above and beyond regular payment 
rates for services and States have considerable flexibility for 
making them. States can distribute them to only a small number 
of providers, often hospitals.
    Congress and CMS have taken important steps to enhance 
Medicaid program integrity through better oversight of these 
payments. We believe there are opportunities for even more 
improvements.
    Our recent work on certain Medicaid supplemental payments 
that States often make has shown that better Federal 
information is needed to understand and oversee them.
    The payments have been growing in size and now total over 
$20 billion a year and can amount to tens or hundreds of 
millions a year to a single provider.
    CMS and others need better information to understand who 
States are paying, how much they are paying and how such 
payments relate to services provided to Medicaid beneficiaries.
    Many States have made supplemental payments that greatly 
exceed the provider's cost of providing Medicaid care. In 2012, 
we found that 39 States had made supplemental payments to over 
500 hospitals that resulted in total Medicaid payments 
exceeding the hospitals' costs of providing Medicaid care by 
$2.7 billion.
    Payments are not limited to costs under Medicaid but 
payments that greatly exceed costs may not be economical and 
efficient as required by law.
    Now, let me turn to our work on State financing, which has 
concluded that better information on State sources of funds to 
finance Medicaid is also needed. States are allowed within 
certain limits to seek funds from providers and local 
governments to fund Medicaid payments.
    States can, for example, tax providers or seek 
intergovernmental fund transfers from local governments to help 
finance the non-Federal share.
    We have found that States are increasingly depending on 
local governments and providers for financing, which can 
ultimately shift Medicaid costs not only to providers and local 
governments but to the Federal Government.
    On the basis of our National survey of State Medicaid 
programs, in 2012 about $46 billion or 26 percent of the non-
Federal share of Medicaid was financed with funds from 
providers and local governments, a 21 percent increase from 
2008.
    Taxes on healthcare providers almost doubled in size during 
that time from $9.7 to $18.7 billion. Such taxes are subject to 
certain restrictions, for example, to ensure that taxes are 
broad based and uniform.
    Cost shifts to the Federal Government can occur through 
financing arrangements that concentrate financing of the 
payments on those providers who receive the payments.
    For example, a State can increase payments for Medicaid 
providers such as hospitals, impose a tax on those providers 
for the nonFederal share and draw down Federal matching funds 
for the payments.
    CMS and other stakeholders are not well positioned to 
assess payments States make to individual institutional 
providers. Federal data on certain supplemental payments States 
often make is not complete, reliable, uniform or accessible.
    CMS has important initiatives underway but CMS has reported 
that legislation is needed to compel States to report such 
payments uniformly and to subject them to audit.
    CMS also lacks good data on State financing sources. Such 
data are needed to ensure financing is appropriate and to 
understand how payments affect beneficiary access to care.
    In conclusion, a needed step towards strengthening the 
Medicaid program is to make payments and financing more 
transparent.
    For this large and growing program, CMS and others need to 
know who States are paying and in what amounts and right now 
CMS lacks sufficient data to know this.
    We have suggested that Congress consider requiring CMS to 
require States to report and audit these payments. We have also 
recommended that CMS develop a strategy for improving 
information on State sources of funds for Medicaid.
    In view of growing costs and enrollments, such transparency 
can help ensure the program is efficiency and effectively 
meeting the promise of providing medical assistance to our 
Nation's low-income populations.
    Mr. Chairman, this concludes my testimony. I am happy to 
answer any questions.
    [The statement of Ms. Iritani follows:]
    
    
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    Mr. Pitts. Chair thanks the gentlelady and now recognizes 
Ms. Schwartz, 5 minutes for her opening statement.

                 STATEMENT OF ANNE L. SCHWARTZ

    Ms. Schwartz. Good morning, Chairman Pitts, Ranking Member 
Green, and members of the Subcommittee on Health.
    I am Anne Schwartz, executive director of MACPAC, the 
Medicaid and CHIP Payment and Access Commission.
    As you know, MACPAC is a congressional advisory body 
charged with analyzing and reviewing Medicaid and CHIP policies 
and making recommendations to Congress, the Secretary of HHS, 
and the States on issues affecting these programs.
    Its members, led by Chair Diane Rowland and Vice Chair 
Marsha Gold, are appointed by GAO, and the insights I will 
share this morning reflect the consensus views of the 
Commission itself anchored in a body of analytic work conducted 
over the past 5 years. And we appreciate the opportunity to 
share our views this morning.
    My comments today will focus on reporting of provider-level 
data on non-DSH supplemental payments and contributions to the 
non-Federal share, the subject of two bills being considered by 
the subcommittee--H.R. 2151 and H.R. 1362.
    The Commission shares the objective of transparency 
reflected in these two bills. There are several compelling 
reasons that providers' specific data should be reported. 
First, these data are necessary for assessing whether State 
payments and rates are consistent with Federal statute.
    While States have considerable flexibility in setting rates 
and payment methods, Section 1902(a)(30)(a) of the Social 
Security Act requires that Medicaid payments be consistent with 
efficiency, economy, quality and access and that they safeguard 
against unnecessary utilization.
    But information on the base Medicaid payments that 
providers receive--that is the per-case or per-diem payment 
associated with the delivery of specific services to specific 
Medicaid beneficiaries--provides only a partial picture of how 
much Medicaid is paying a given provider.
    To assess payment fully, policy makers need to know the 
amount of Medicaid payment that providers receive including 
both claims-based and supplemental payments less the amount 
that providers contribute towards the non-Federal share of 
Medicaid expenditures.
    The level of payment can be considered the most basic 
measure of economy and is essential to an assessment of patient 
efficiency. A measure of value compares what is being spent--
economy--to what is obtained--quality, access, use of specific 
services.
    Typically, an analysis of whether a healthcare payment is 
economical includes comparison to the cost to provide a given 
service and comparison to what other payers pay for a 
comparable service in a given geographic area.
    Other healthcare payers including Medicare commonly conduct 
such assessments. In Medicaid, however, Federal policy makers 
and program administrators do not have complete data to make 
such assessments and therefore to ensure that payments are 
consistent with the delivery of quality necessary care to 
beneficiaries.
    The second reason for collecting provider-level data is 
that Medicaid spending for supplemental payments is substantial 
and growing.
    In fiscal year 2014, States reported making $24.2 billion 
in non-DSH supplemental payments to hospitals, more than 20 
percent of total Medicaid fee for service payments to hospitals 
nationally and more than 50 percent in some States.
    The amount of funds raised through providers and local 
government contributions is also significant and increasing.
    As such, the Federal Government has a reasonable 
expectation of having complete payment and financing data that 
permit it to understand and oversee States' use of Medicaid 
funds.
    In light of these concerns, in March 2014 MACPAC 
recommended that the Secretary of HHS collect and report data 
on non-DSH supplemental payments at the provider level and just 
last week in deliberations on a report on disproportionate 
share hospital payments that is due to Congress on February 
1st, the Commission voted unanimously on a recommendation 
focused on reporting of data for both payments and the non-
Federal share.
    Specifically, MACPAC recommends that the Secretary collect 
and report hospital-specific data on all types of Medicaid 
payments for all hospitals that receive them.
    In addition, the Commission recommends that the Secretary 
collect and report data on the sources of non-Federal share 
necessary to determine net Medicaid payment at the provider 
level.
    Efforts to fully understand provider payment levels are 
more relevant now than at any time in the program's history. 
Use of supplemental payments is growing, particularly to 
hospitals through Section 1115 expenditure authority.
    In addition, interest in payment reforms that incentivize 
greater value in the delivery of health services is also 
growing. Even so, lack of solid data on net payments makes it 
extremely difficult to assess the effectiveness of these 
efforts.
    MACPAC shares this subcommittee's interest in ensuring that 
taxpayer dollars are spent appropriately on delivery quality 
necessary care and preventing and reducing fraud, waste and 
abuse.
    Provider-level data on supplemental payments and 
contributions to the non-Federal share would provide greater 
transparency and facilitate Medicaid payment analysis including 
assessments of Medicaid payment adequacy and analysis of the 
relationship between payment and desired program objectives.
    Again, thank you for this opportunity to share MACPAC's 
work with the subcommittee and I am happy to answer any 
questions.
    [The statement of Ms. Schwartz follows:]
    
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    Mr. Pitts. The Chair thanks the gentlelady, thanks both of 
the witnesses for your testimony. I will begin the questioning 
and recognize myself 5 minutes for that purpose.
    This is for both of you. We will start with you, Ms. 
Iritani. What data does CMS currently collect about the sources 
of the non-Federal share Medicaid funding?
    Ms. Iritani. CMS collects some data on the sources of funds 
on a case-by-case basis. When States submit a new request for 
approval for a State plan, CMS asks several questions about the 
sources of funds.
    It is not very accessible--this data--and it is not in a 
uniform manner. CMS also collects some data on provider taxes. 
But CMS acknowledges that the data are unreliable and 
incomplete.
    Mr. Pitts. Anything to add, Ms. Schwartz? Let me ask you, 
what additional data do you think they need and how will having 
this data improve CMS' ability to oversee States' financing of 
Medicaid? Both of you.
    Ms. Iritani. Additional data that CMS needs includes data 
on all sources of funds used to finance the Medicaid program. 
Currently, CMS does not collect this data.
    In order to understand net payments to providers, as Ms. 
Schwartz has discussed the need for understanding, we need to 
understand whether or not the financing of payments is being 
concentrated on certain providers that also receive payments 
and in order to understand this we need to collect complete 
data on how States finance the non-Federal share of payments.
    Mr. Pitts. Ms. Schwartz, do you want to add anything?
    Ms. Schwartz. Just to add that our primary concern in 
conducting this analysis is to get provider-specific data on 
their contributions to the non-Federal share, which would allow 
us then to net those contributions out from the total payments 
that they are receiving Medicaid to get a true picture of what 
they are being paid.
    Mr. Pitts. OK.
    Now, Ms. Iritani, in your written testimony you indicate 
that HHS acknowledged that additional data was needed to ensure 
that States comply with Federal requirements regarding how much 
local governments may contribute to non-Federal share.
    But despite this, HHS has said that no further action is 
needed. Can you explain these seemingly contradictory 
statements, explain why GAO believes that additional data is 
necessary to properly oversee the program?
    Ms. Iritani. Yes. We made a recommendation to CMS that they 
collect--develop a strategy for collecting better information 
and I think CMS disagreed because they did not believe that 
information on the sources of Medicaid financing was needed on 
a payment specific basis.
    They collect information in the aggregate but they don't 
collect information that would enable us to ascertain how much 
individual providers are collecting, as Ms. Schwartz discussed 
a need for.
    Mr. Pitts. Now, what does the required reporting and 
auditing of DSH payments tell us about the utility of requiring 
similar reporting and auditing for non-DSH supplemental 
payments?
    Ms. Iritani. The DSH payments are subject to complete 
reporting of both the financing of the payments and this--the 
information for non-DSH payments is lacking.
    And I am sorry, could you repeat the question?
    Mr. Pitts. Yes. What does the required reporting and 
auditing of DSH payments tell us about the utility of requiring 
similar reporting and auditing for non-DSH supplemental 
payments?
    Ms. Iritani. Right. So the required reporting and auditing 
of DSH payments has been very important for understanding who 
the payments are going to and at what levels and the non-DSH 
payments are currently not subject to similar requirements.
    Mr. Pitts. OK.
    Ms. Iritani. We have suggested that non-DSH payments really 
need to be comparable to the DSH payments in terms of the 
extent of the reporting.
    Currently, one cannot tell with the non-DSH payments the 
net payments that providers are actually receiving because you 
cannot tell on a provider-specific basis what a provider is 
actually contributing to the financing of a particular payment.
    So the financing of a payment could be, for example, 100 
percent concentrated on the providers who receive the payments. 
Therefore, you know, the net payments that the providers 
receive is actually much lower.
    Mr. Pitts. My time is expired. The Chair recognizes the 
ranking member of the subcommittee, Mr. Green, 5 minutes for 
questions.
    Mr. Green. Thank you, Mr. Chairman, and I would like to ask 
the panel to provide information on how Medicaid payments work. 
I think Medicaid payments are so complicated. Even as I was a 
State legislator in Texas, it was tough.
    I know that we would appreciate a little more information 
about how this actually works. Ms. Schwartz, given that the 
issue of rate setting is so complicated, explain how States set 
these rates and what types of payments are provided to 
providers and what is recorded to CMS.
    Ms. Schwartz. Yes. Setting payment rates and methodologies 
is one of the parts of the Medicaid program that varies the 
most.
    States pay hospitals in very different ways. Some of them 
use a system similar to the prospective payment system in 
Medicare where they make a per-case payment at the diagnosis 
level for a number of different services that are provided in 
the hospital.
    Some States still pay hospitals per diem. The range is all 
over the place in both how they pay, the special adjustors they 
have for that, and the actual payment rate. We have collected 
some of this information from MACPAC, and it is a rather 
unwieldy spreadsheet that gives you a sense of the complexity 
of those payments.
    One of the things that MACPAC is most interested in is 
trying to get a sense of how payments can be used to leverage 
proper, appropriate, greater value care, and as part of that we 
need to be able to know both the methods and the payment rates 
and to be able to net out these additional payments.
    So it is quite complex with considerable State flexibility 
reflecting historical practices and the local markets.
    Mr. Green. OK. Ms. Iritani, my understanding is it is very 
hard to gather Medicaid data and indeed to compare Medicaid 
data, given the time lag on availability of that data and how 
different all these programs are from one another.
    Is that a problem that you encounter regularly in your work 
at the GAO?
    Ms. Iritani. Regular payment data is available to us. But 
the supplemental payments that States often make are not 
reported in the claims data that go to the CMS.
    So States really have all the data that shows who those 
payments are going to, and so that is part of the transparency 
that we believe is needed, is more data at the Federal level on 
who supplemental payments are going to and for what purposes, 
and in what amounts.
    Mr. Green. Ms. Schwartz, I thought your point about linking 
other sources of data to better understand a full picture of 
the payments was interesting.
    Can you expand on that recommendation?
    Ms. Schwartz. Well, as Ms. Iritani says, claims are 
available and are reported up to the Federal level. So we know 
on a per-case or per-diem level what hospitals are making.
    Supplemental payments are not paid associated with claims 
and what is reported by the States to the Federal level is the 
aggregate amount across all institutions in a particular class 
and we can't associate that big chunk of dollars that is being 
reported to the particular institutions that receive them.
    States, clearly, know this information because they are 
making the payments. But States also have many different data 
systems and approaches to making those payments and so you 
can't just go out and ask every State to report this 
information and get the right answer.
    So that is the desire to have the Secretary specify a 
method by which those data would be reported so that they could 
be consistently reported and available to analyze both at the 
national level and across States.
    Mr. Green. OK. Ms. Iritani, both you and Ms. Schwartz 
mentioned that CMS is actually taking quite a number of steps 
on the issue and I am glad the administration is taking those 
steps in recent years to shed light on.
    I know there has been a GAO recommendation through 
administrations on both sides of the aisle. Can you talk about 
CMS work on nonsupplemental payments in recent years?
    Wasn't that work based in part on longstanding GAO 
recommendations and isn't it true that CMS hasn't even finished 
rolling out the new actions on the supplemental payments?
    Ms. Iritani. Yes. CMS has taken some significant steps, we 
would agree, to try to improve the transparency and 
accountability of supplemental payments.
    Recently, CMS has, for example, had initiatives to try to 
require States to submit reports that would provide information 
on the financing and payments for supplemental payments.
    This information is more than what they have had before. It 
is extensive. CMS has provided that information to a contractor 
to assess how they can use it to improve oversight, for 
example.
    CMS also has a initiative known as T-MSIS, Transform 
Medicaid Information System reforms to try to collect better 
information on claims. That would include supplemental 
payments.
    Mr. Green. OK.
    Thank you, Mr. Chairman. I yield back.
    Mr. Pitts. Chair thanks the gentleman.
    I recognize the vice chair of subcommittee, Mr. Guthrie, 5 
minutes for questions.
    Mr. Guthrie. Thank you, Mr. Chairman, and my questions to 
Ms. Iritani will be directed at you, and I know you have talked 
about some of the things I am going to ask you about but I 
would like to give you a chance to elaborate with--through the 
question I am going to move forward.
    So in your testimony you point out that States generally 
use general revenue funds for their Medicaid share but you 
point out that States can use other financing options, 
specifically that States are increasingly relying on providers 
and local governments to finance their Medicaid share.
    Can you discuss some of the ways States are financing their 
Medicaid share? It is not just general revenue?
    Ms. Iritani. What we have reported on, apart from the 
general revenues, which is the majority of how States finance 
Medicaid, is the growing reliance on taxes on healthcare 
providers, for example, to help finance the non-Federal share 
of payments. Intergovernmental transfers, which can be used 
between units of Government to----
    Mr. Guthrie. Can you give an example of one--an example?
    Ms. Iritani. So, for example, a local government may 
operate a hospital and an intergovernmental fund transfer might 
be a transfer from the local government to the State that it is 
in to provide the non-Federal share of a payment that is going 
to the provider.
    And another method is known as certified public 
expenditures, which is basically certifying that an expenditure 
was made for Medicaid. That can also be used as a non-Federal 
share.
    Mr. Guthrie. OK. And I think every member of this committee 
wants to ensure that vulnerable beneficiaries are protected and 
receive the Medicaid benefits, which are eligible.
    But I know many of us also want to ensure that Federal 
Medicaid policy doesn't unnecessarily crowd out private 
sector's role.
    Medicaid long-term care is the largest chunk of Medicaid 
spending and represents one of the biggest challenges to the 
program's sustainability over the long term.
    My bill, H.R. 1361, the Medicaid Home Improvement Act, 
seeks to address the concerns of GAO in this area and requires 
States to submit an annual report identifying the sources and 
amounts of funds used to--as the Medicaid report items are--use 
funds to finance their non-Federal share of Medicaid.
    Can you talk about how that will be beneficial as we move 
forward?
    Ms. Iritani. Yes. Currently CMS does not collect data on 
the sources of funds that States use for Medicaid and there are 
several reasons why we believe that information is needed.
    One is just to enforce Medicaid requirements on limits that 
are set on the extent that States can rely on providers and 
local governments.
    There is a limit that States cannot exceed. It is called 
the 60/40 rule that States can only obtain a certain proportion 
of funds from local governments and providers.
    The other is just to understand net payments that providers 
actually receive. Without having better data on the extent that 
payments are being financed by the providers who receive the 
payments, we can't really understand net payments to providers.
    Mr. Guthrie. OK. Also a bill I have today is the Medicaid 
Home Act that changes the equity requirement to $500,000 plus--
I mean, plus inflation.
    Can you talk about if this policy were adopted how 
individuals could access the equity interest in their home 
through a variety of legal means such as reverse mortgages, 
home equity loan or other financial vehicles?
    Ms. Iritani. I am not prepared to answer that question but 
I would be happy to get information for you--for a question for 
the record.
    Mr. Guthrie. OK. All right.
    And can you talk about there is an exception under current 
law which my bill does not change which allows an individual 
with any level of home equity to qualify for Medicaid if an 
individual spouse, child under 21 or child that is considered 
blind or disabled also live in the home? Are you familiar with 
that provision?
    Is that--maybe, Ms. Schwartz, you have a--checking in on 
that--do you have a----
    Ms. Schwartz. Yes, that is correct.
    Mr. Guthrie. That is correct. OK.
    And given that--there are few seconds here--given the aging 
of the Baby Boomers and the growth of long-term care, have 
MACPAC or GAO conducted any analysis about the challenges 
unrestrained growth in this part of the program imposes on 
Federal and State budgets?
    For example, CBO estimates that Federal spending alone on 
Medicaid long-term care will be $77 billion this year. So is 
GAO or MACPAC looking at the long-term care and ensuing Baby 
Boomer arrival, not just at retirement but also older in life 
so that more demands on long-term care?
     Ms. Iritani. We have several engagements underway around 
long-term care and Medicaid.
    Mr. Guthrie. Thanks.
    Ms. Schwartz. Yes, and MACPAC is engaged in a long-term 
work plan on analyzing spending trends and different aspects of 
the Medicaid program, and we are just beginning that work, and 
since long-term care is such a significant part of the program, 
it will be included as part of that area of work.
    Mr. Guthrie. Thank you. My time is expired and I yield 
back.
    Mr. Pitts. Chair thanks the gentleman.
    I now recognize the ranking member of the full committee, 
Mr. Pallone, 5 minutes for questions.
    Mr. Pallone. Thank you, Mr. Chairman.
    I want to follow up on my colleague's discussion of long-
term care.
    Dr. Schwartz, I would like to discuss how the proposed 
Medicaid Home Improvement Act would affect beneficiary 
eligibility for long-term care services.
    As you know, the Medicaid program is the backbone of our 
country's long-term care system. Sadly, even with Medicaid as 
the safety net, the majority of Americans lack the options or 
resources to sufficiently plan for future long-term care needs.
    And, you know, my questions relate to, obviously, to the 
spend down provision, which I think is a terrible way to pay 
for long-term care--actually shameful, in my opinion.
    The last thing I want to do is to take someone's home to 
pay for their long-term care. Could you briefly describe the 
purpose of the home equity exemption?
    Ms. Schwartz. I think there are two purposes. One is to 
allow living family members to remain in the home while the 
beneficiary is in an institution and the other is to--there is 
the limit that exists on there to ensure that the Government is 
seeing a contribution of assets to their care. So that is the 
purpose of the act.
    Mr. Pallone. Thank you.
    And States are allowed the option of maintaining a higher 
home equity threshold. What is the purpose of allowing States 
to choose between different equity allowances?
    I know for New Jersey, you know, in our State it is much 
higher. We have chosen the option of the higher equity.
    Ms. Schwartz. Well, I am not an expert in this area and it 
is not an area where MACPAC has done any significant work.
    But in general, States exercise flexibility in definitions 
within the program to reflect local circumstances in their 
communities and I do believe New York and New Jersey are two of 
the States that have allowed a higher exemption, presumably 
reflecting the higher market value of real estate in those 
areas.
    Mr. Pallone. I mean, that is absolutely the case. I mean, 
it is not unusual at all for, you know, a person of average 
income, you know, to be living in a home that is worth 
$800,000, which I think would qualify in New Jersey under the 
higher--because New Jersey has opted for the higher equity but 
I think wouldn't qualify if this bill became law because they 
wouldn't allow States to have a higher threshold.
    Would you expect the Medicaid Home Improvement Act to have 
different effects in different States because it wouldn't allow 
this higher threshold?
    Ms. Schwartz. Well, certainly, to the extent that States 
have a higher threshold now, that would affect those States 
more than those who have a threshold similar to what is in the 
bill.
    Mr. Pallone. Thank you.
    I mean, my concern, Mr. Chairman, you know, I find this 
proposed piece of legislation to be very concerning with regard 
to this home equity threshold and not allowing States to raise 
the threshold.
    I mean, our country, we know, has still not implemented a 
thoughtful, comprehensive approach to long-term care, yet this 
bill would only serve to restrict eligibility to long-term 
services and supports, and I would--you know, I can't stress 
enough that in States like New Jersey where real estate--you 
know, you have this much higher ability--it costs a lot more, 
essentially, to have a home in New Jersey. And, I mean, the 
last thing I would want to see is people to have to sell their 
home because the threshold is reduced.
    Let me ask you, Dr. Schwartz, I understand that Medicaid 
and CHIP have experience in quality performance measures 
through the Pediatric Quality Measures Program and this program 
was established in 2009 with the goal of improving the quality 
of care delivered to our Nation's pediatric patients.
    Could you briefly describe the Pediatric Quality Measures 
Program and the effect it has had in advancing pediatric care 
for Medicaid patients? I think you have a minute.
    Ms. Schwartz. Sure.
    The core set of measures, as you mentioned, was developed 
in 2009, and all States are reporting at least two of the 
measures.
    The median is 14 measures, and they are things like the 
share of kids between the ages of 3 and 17 with an outpatient 
visit to a primary care practitioner, the share of children up 
to the age of 2 who are up to date on their vaccines, the share 
of births at low birth weight.
    These are areas that are agreed have a clinical definition 
as being meaningful for the purposes of high quality care.
    MACPAC has commented on the importance of improving the 
number of States reporting those measures, and increasing the 
number of measures, and also strengthening the capacity of CMS 
to calculate those measures for States from claims data to the 
extent that it is possible.
    Mr. Pallone. Do you have any suggestions for improvement? I 
know my time is almost up but if you had to mention one or two.
    Ms. Schwartz. To the extent that data from claims that 
States submit up to CMS that those data can be used and that 
require no additional data collection on the part of the 
States, that would be a really valuable way to get more 
information on the performance of different States in providing 
quality pediatric care.
    Mr. Pallone. Thank you.
    Thank you, Mr. Chairman.
    Mr. Pitts. The Chair thanks the gentleman and now 
recognizes the gentleman from Illinois, Mr. Shimkus, 5 minutes 
for questions.
    Mr. Shimkus. Thank you, Mr. Chairman. And welcome back, it 
is good to see you. This question would be for both of you as I 
begin. Many of us are familiar with the Disproportionate Share 
Hospitals, or DSH, supplemental payments. However, can you 
please explain what non-DSH supplemental payments are, who they 
go to and what purpose they serve? Ms. Iritani, why don't you 
start?
    Ms. Iritani. Yes, the non-DSH payments are a type of 
supplemental payments that States often make under the upper 
payment limit that is established under Medicaid or under 
Medicaid demonstrations. The purposes are largely unknown, 
which is part of why we believe there is a need for more 
reporting so we can understand who these payments are going to 
and for what purposes.
    Mr. Shimkus. Ms. Schwartz, do you want to comment on it?
    Ms. Schwartz. Sure. I can just say that the non-DSH 
supplemental payments are calculated by a State looking across 
a class of providers--say, public hospitals, nonprofit 
hospitals--looking at the total payments under fee-for-service 
that are paid, and then the difference between that payment 
amount and what would have been paid under Medicare principles, 
which is generally more. So the difference there is the amount 
that the State can make in non-DSH supplemental payments, and 
it uses those funds presumably to target different types of 
hospitals.
    But again, as Ms. Iritani said, that is one of the reasons 
we would like to be able to get the provider-specific data to 
see the relationship between the specific payments and which 
hospitals are receiving them.
    Mr. Shimkus. So in the question previously, Ms. Iritani, 
you talked about--we were talking about general funds payment 
and I think you did raise the issues of taxes. So some States 
use provider taxes to finance the non-Federal share of Medicaid 
cost which has been used to shift cost to the Federal 
Government. Can you kind of talk through that?
    Ms. Iritani. Yes, so to the extent that financing of large 
payments is concentrated on the same providers receiving those 
payments, there can be a cost shift. For example, when we 
looked at this issue in a recent report, we looked at certain 
new arrangements that States put in place where they increased 
provider payments but they at the same time imposed a tax on 
those providers, the same providers, to pay for the non-Federal 
share.
    And so then they drew down the Federal matching for those 
payments, and in the end the Federal Government paid much more, 
hundreds more, or tens of millions for those new payments. The 
providers who received the payments funded the non-Federal 
share and the State ended up not having to pay more for those 
payments.
    Mr. Shimkus. Ms. Schwartz, do you want to comment? No. That 
is fine.
    And last for Ms. Iritani, GAO has had longstanding 
recommendation for CMS to require additional reporting and 
auditing of non-DSH supplemental payments. Why don't you think 
CMS has implemented those recommendations?
    Ms. Iritani. CMS has agreed with our findings, but with 
regard to that particular recommendation they said that they 
would need to be required to do so; that because of the effect 
on States that they would need legislation to be ordered and to 
be able to do that.
    Mr. Shimkus. OK, very good. I yield back my time. Thank 
you, Mr. Chairman.
    Mr. Pitts. The Chair thanks the gentleman. I now recognize 
the gentle lady from Florida, Ms. Castor, 5 minutes for 
questions.
    Ms. Castor. Great. And that is where I want to pick up. So 
CMS says that they do not have the authority to go out and 
collect all of the data from States on their supplemental 
payments. Do you agree with that, that legislation is needed?
    Ms. Iritani. We defer to CMS on that. We believe that in 
the past when CMS has tried to require States to report 
information that States didn't necessarily want to report or 
want to report at the level that CMS needed it, CMS needed 
legislation.
    Ms. Castor. Ms. Schwartz, do you agree with that?
    Ms. Schwartz. CMS is collecting information from States to 
demonstrate compliance with the upper payment limit 
regulations. And for the purposes that MACPAC is interested in, 
the payments on provider-specific data on the non-DSH 
supplemental payments from those regulations might be 
sufficient. We don't have any access to those data. CMS does 
not share a lot of details.
    We do know that they have been talking about a regulation 
on supplemental payments, so it does seem that there is 
activity going on and that as part of its oversight activity it 
does have the ability to collect the payment information. I 
believe an audit is another level in which I think it is 
probably fair to say that they would need legislation to 
conduct an audit as they had to do the additional----
    Ms. Castor. And it certainly would give them the leverage 
to say to States we need it to be accessible and we need it to 
be uniform, because these supplemental payments go to all 50 
States, correct? So oftentimes I imagine the data comes back in 
different forms. What impact now has Medicaid expansion in some 
States and not in others had on supplemental payments?
    Ms. Schwartz. I am not sure that we have done the analysis 
of the supplemental payments of expansion versus nonexpansion 
States, and it is something we could do. In any case, it would 
still be at the aggregate State level and not give you a 
picture of what is happening to individual providers.
    Ms. Castor. How about with the expansion of the 1115 
waivers and supplemental payments? Has the trend towards States 
having those Medicaid waivers changed the format of 
supplemental payments at all?
    Ms. Schwartz. Many of those waivers have allowed States to 
continue making supplemental payments, and so we do know that 
those payments under the 1115 waivers are increasing.
    Ms. Castor. So, and in the Medicaid managed care rules that 
were proposed recently, did those rules propose any type of 
standardized reporting for supplemental payments through the 
waivers or----
    Ms. Schwartz. I am not sure if the rules specifically 
mention that, but in general supplemental payments are not 
permitted under managed care because in managed care the plan 
is making a payment to the institution, not the State.
    Ms. Castor. So it is more applicable to the 1115 waivers to 
States than in managed care rules for sure.
    Ms. Schwartz. That is my understanding.
    Ms. Castor. OK. In one example, I wonder if GAO has looked 
at States that have taken supplemental payments and done things 
with them that really are outside the bounds of the intent of 
the Medicaid laws. Do you know of any cases where States have 
said, OK, we are going to provide, use supplemental payments, 
that revenue, and pay providers that don't serve the Medicaid 
population?
     Ms. Iritani. Years ago in prior reports, we have looked at 
how excessive supplemental payments were used by States and did 
find that the payment revenues could be used for non-Medicaid 
purposes. And in more recent years, we have just been looking 
at the level of the supplemental payments and how that they 
relate to costs of the providers for providing Medicaid and 
that is where we have found that many States are making 
payments that are much----
    Ms. Castor. In Florida we had that crop up where the State 
went in and said, here, we are going to take some of the 
supplemental payments and give it to some providers that were 
not serving the Medicaid population. And that is a real worry 
in my home county that has a half-cent sales tax that they use 
as an intergovernmental transfer and to bring down their 
Medicaid match.
    So I think this is a very good idea for us to standardize 
the reporting from States and get all the data so we can ensure 
the funds are being spent accordingly. Thank you, and I yield 
back.
    Mr. Pitts. The Chair thanks the gentle lady. I now 
recognize the gentleman from Missouri, Mr. Long, 5 minutes for 
questions.
    Mr. Long. Thank you, Mr. Chairman. And Ms. Iritani, what 
factors prompted CMS to require audits and reporting of the DSH 
payments?
    Ms. Iritani. CMS identified concerns with States making 
excessive payments over the limits, and Congress had required 
them to also establish reporting and auditing requirements. And 
some of our work also found concerns with excessive payments 
and also requirements on providers to return the non-Federal 
share to the State, so effectively reducing the net payments 
that some providers received. So CMS did, and now requires DSH 
payments, Disproportionate Share payments to be reported on a 
facility-specific basis and subject to audit.
    Mr. Long. OK. These overpayments, were they an anomaly, or 
do you know what percentage they found, find or think are 
overpaid?
    Ms. Iritani. Well, what I can say is the original, the very 
first DSH audits found that the majority of States, I believe 
it was 41, had overpaid at least one hospital. And one of our 
reports reported on the findings of the DSH audits, and 41 
States had paid over 500 hospitals $2.7 billion on the non-DSH 
side, but they also reported on significant noncompliance on 
the DSH side in terms of----
    Mr. Long. Significant. Do you have any idea what percentage 
when you said significant?
    Ms. Iritani. So the DSH payments, payments that were in 
excess of the hospitals' uncompensated care and/or not 
calculated with acceptable data and methods, 41 States made DSH 
payments that exceeded the hospitals'----
    Mr. Long. Yes, but that doesn't tell me what percentage.
    Ms. Iritani. So 24 percent of the hospitals were found to 
have received DSH payments that were noncompliant.
    Mr. Long. Twenty-four percent across the board.
    Ms. Iritani. Twenty-four percent of hospitals.
    Mr. Long. OK. OK, thank you. And Dr. Schwartz, on Thursday, 
MACPAC Commissioners recommended that the Secretary of HHS 
should collect and report hospital-specific data on all types 
of Medicaid payments for all hospitals that receive them. In 
addition, they said the Secretary should collect and report 
data on the sources of non-Federal share necessary to determine 
net Medicaid payments at the provider level.
    As I have been told, HHS said legislation was necessary to 
implement reporting and auditing requirements for DSH payments 
and that legislation would be needed to implement similar 
requirements for non-DSH supplemental payments. So why did 
MACPAC target its recommendations to the Secretary?
    Ms. Schwartz. Sure. We have not asked for nor received a 
review from CMS of our recommendations, so I don't know what 
CMS will say about our specific recommendation. MACPAC's 
recommendation was for reporting of payment information, 
which--we know from what CMS already is asking of States in the 
UPL payment demonstrations that it is already asking for 
similar types of information, and that is why we believe that 
the Secretary had the authority to do this.
    Auditing is a different step, and auditing is a much more 
intense activity as seen in the DSH audits and that is not what 
MACPAC was asking for. MACPAC was asking for collecting and 
reporting payment data, and so we believe that the Secretary 
has the authority to do that.
    Mr. Long. OK, thank you. With that I yield back, Mr. 
Chairman.
    Mr. Pitts. The Chair thanks the gentleman and now 
recognizes the gentleman from Oregon, Mr. Schrader, 5 minutes 
for questions.
    Mr. Schrader. Thank you, Mr. Chairman. I guess for GAO, 
have you evaluated what the cost-benefit might be in changing 
from reporting classes of overpayments versus going to the 
individual providers?
    Ms. Iritani. We have not evaluated the cost-benefit, but we 
would note that this is required on the DSH side. And non-DSH 
payments are now higher in amounts than DSH payments, but the 
non-DSH payments are not subject to reporting and auditing as 
with DSH.
    Mr. Schrader. Has there been any consideration of just 
increasing the Medicaid payments as opposed to going with the 
DSH and non-DSH supplemental payments that we have got?
    Ms. Iritani. Well, ideally, Medicaid payments would be 
sufficient to ensure access in a local area comparable to what 
others outside of Medicaid would be receiving.
    Mr. Schrader. Like everyone in this committee and Congress 
fully realizes, Medicaid payments are not sufficient and as a 
matter of fact are so low that many providers can't accept 
Medicaid patients. We have the same problem with Medicare. I 
think a lot of folks need to be aware that that is a very, very 
low reimbursement rate compared to the private insurance 
market.
    Ms. Iritani. Yes, our work has found that Medicaid payment 
rates are lower generally for certain services than private.
    Mr. Schrader. Has there been any move to just fund Medicaid 
to the various States and providers based on outcomes? There 
has been a lot of talk in health care recently about outcomes, 
quality based health care.
    Ms. Iritani. What I can say is that I think that there are 
some demonstrations that are trying to incentivize outcomes by 
making payments for that.
    Mr. Schrader. MACPAC have any comments on that?
    Ms. Schwartz. I think there is a lot of activity at the 
State level to try and link payment to outcomes through 
different approaches such as health homes, bundling of 
payments, different approaches. We don't know very much yet 
about the outcomes and whether they have affected outcomes. 
That is something we would be very interested to know.
    And it is also very difficult to conduct that research 
because you have to be able to control for everything else that 
is going on in the health system and in the patients' lives to 
be able to attribute the outcomes to specific actions on the 
part of the beneficiary and the provider.
    Mr. Schrader. Well that is interesting and that is always 
true whether it is an education bill or anything we do. But we 
are doing that right now in Medicare. We are trying to get at 
that in Medicare. We are doing that under the Affordable Care 
Act. So I don't think it is impossible, and certainly there 
could be risk based reimbursement to accommodate the types of 
socioeconomic factors that people have.
    And I would argue respectfully that rather than us trying 
to micromanage all the States and the different providers, it 
would be a heck of a lot easier for us, particularly non-
doctors, although I guess I am a veterinarian but I wouldn't 
want to be the guy in charge of your healthcare, that we go to 
an outcome based reimbursement system where we could easily 
judge whether or not the people are staying healthier, staying 
out of the hospitals, getting that quality based healthcare.
    That should really be what we are about, then our task here 
would be pretty easy. We would just be able to have a common 
set of outcomes, and your job would be a little bit easier and 
we could see whether or not things are doing well or not.
    Another question. In the REPORTS bill why do we have the 
40/60 rule? Why is that significant? What is the goal of having 
that rule?
    Ms. Iritani. I can't speak to the legislative history 
around that rule, but I think that the concept generally is 
that States should share in the non-Federal share of the 
financing that----
    Mr. Schrader. Well, why do we specify it can't be more than 
40 or more than 60? What is the point of that? Who cares? Why 
do we care? I am the Federal Government. As long as someone is 
paying their fair share, why do I care?
    Ms. Iritani. Well, I think that to make sure that the 
incentives are for sufficient and economical payments that the 
State should be sharing in the cost of the payment.
    Mr. Schrader. Yes, but who cares if it comes from the local 
government or a private enterprise or the State? Who cares?
    Ms. Iritani. The concern around the reliance on providers 
and local governments for financing the non-Federal share is 
when the burden on financing Medicaid rests with, for example, 
the providers who are serving the beneficiaries. From the 
providers' standpoint, the payment they receive from Medicaid 
is the net payment. It is not the full payment, it is the 
payment less the taxes or other contributions they might be 
making for the payment that they receive.
    Mr. Schrader. Mr. Chair, I would just respectfully suggest 
we are micromanaging and should let the States do what they do 
best and just regulate the outcomes. I think that would be a 
smarter proposal. And I yield back. Thank you, sir.
    Mr. Pitts. The Chair thanks the gentleman. I now recognize 
the gentleman from Indiana, Dr. Bucshon, 5 minutes for 
questions.
    Mr. Bucshon. Thank you, Mr. Chairman. I would agree with 
what you just said and I think we are micromanaging. And I can 
tell you why CMS wants to know the information, because they 
want to decrease payments to the Medicaid program. They want to 
save money. And I was a provider before I was a surgeon, and 
you can't have access if you continue to decrease Medicaid 
payments. Because you have a program that needs fundamentally 
restructured in my view. You can't have both.
    And so now, States, including Indiana with the Healthy 
Indiana Plan 2.0, which is a HSA-based way to manage the 
Medicaid population, now what basically your testimony is 
telling me that, wow, you guys came up with a great system but 
we don't want you to do it because we are concerned it is going 
to cost the Federal Government more money and we are trying to 
save money here.
     So the question--I mean, I am playing a little devil's 
advocate here. The question I have is, Why does the Federal 
Government care? I mean, for example, Healthy Indiana Plan 2.0 
uses hospital taxes to, as you probably know, to help fund the 
expanded State share of the expansion under the Affordable Care 
Act.
    Why does that matter to the Federal Government? Because 
what they are doing then is they are reimbursing providers at a 
higher level than traditional Medicaid. Guess what that does? 
It gets the providers to take Medicaid patients so that we get 
access so low-income people actually can see a doctor. So why 
does that matter to the Federal Government? Does that cost the 
Federal Government any more money than it would if they did it 
in a traditional way?
    Ms. Schwartz. I think the most fundamental reason that the 
Federal Government pays is that when you look at the 
financing--Federal, non-Federal--the Federal Government is 
still paying on average 57 percent of the cost of the Medicaid 
program and much more than that in many States----
    Mr. Bucshon. So?
    Ms. Schwartz [continuing]. Notwithstanding how ----
    Mr. Bucshon. So what?
    Ms. Schwartz. So the interest is ensuring that that amount 
of money is being used consistent with the aims of the statute.
    Mr. Bucshon. OK, so they want to micromanage the Medicaid 
program just like Dr. Schrader said. The basic, and what I am 
getting is that the reason is, is because the Federal 
Government wants to micromanage the States. I mean that is my 
view on that and again I am all for reporting, and I think 
States should be compliant with coverage and make sure people 
are getting adequate coverage.
    But other than that, I mean the question I have is why does 
it matter to the Federal Government? That is why I support 
fundamental Medicaid reform that gives the States a certain 
amount of money and let them do what they need to do with it 
versus having all these strings attached. I mean, I think we 
are just finding today with this hearing why we need to 
fundamentally restructure the Medicaid program, because people 
are spending literally thousands of hours trying to figure all 
this stuff out.
    Like I said, I don't have a problem with needing to be 
reporting if it has an impact on patient access. I mean, if 
there is a concern that based on States using local or State 
funding for the non-Federal portion is having an impact on 
access and people are not getting the services that is one 
thing. If it is just because the Federal Government wants to 
say, well, look, we don't have to pay you as much because you 
have found a way to use local money or State money to help 
yourself, then I am against that.
    And so why does it matter if a State reports, for example, 
in the aggregate versus an individual provider? Why would the 
Federal Government care? It is the same amount of money.
    Ms. Iritani. Well, as you point out, we want to make sure 
that Medicaid payments are going for Medicaid purposes and 
improve access to Medicaid beneficiaries.
    Mr. Bucshon. And I agree with that.
    Ms. Iritani. Without knowing the amount that an individual 
provider is contributing to the payment that they are 
receiving, we can't actually understand whether or not the 
payment is being used basically for fiscal relief for the State 
or actually serving to improve access for Medicaid 
beneficiaries.
    Mr. Bucshon. That is fair enough. But that there what you 
just said is making the assumption that States are purposely 
violating Federal law for their own benefit. If you make--I am 
just saying that CMS needs to know this because they want to 
prevent States from purposely violating the law by using 
Medicaid dollars for non-, for example, giving payments to 
people who are not providing coverage to Medicaid patients. Is 
that true or not true?
    Ms. Iritani. And it is not necessarily even violating the 
law. States can make payments and receive Federal matching up 
to the upper payment limit, and there is no limit on Medicaid 
payments in relation to costs. But this data is really needed 
to understand the extent that payments are going to providers 
who are actually financing the non-Federal share, therefore 
reducing the net payments to the providers because----
    Mr. Bucshon. My time is expired. So again I will just 
finish by saying who cares? Because it is the same cost to the 
Federal Government, who cares? I yield back.
    Mr. Pitts. The Chair thanks the gentleman and now 
recognizes the gentleman from Maryland, Mr. Sarbanes, 5 minutes 
for questions.
    Mr. Sarbanes. Thank you, Mr. Chairman. I had a question 
about--I am very interested in these demonstration projects to 
explore alternative venues or settings for long-term care and 
the financing of those. So I guess the obvious example of 
experimenting with this is there are some waiver and 
demonstration programs that have allowed for Medicaid 
reimbursement for placement in, say, assisted living facilities 
as opposed to long term in nursing care facilities. I don't 
know that there has been, but you would know, I imagine, 
demonstration projects that are reimbursing through Medicaid 
for placement in somebody's home where they are getting some 
home care.
    But my question is, as those kinds of alternatives are 
being explored are there also alternative kind of financing 
structures or formulas being looked at at the same time? So 
obviously you would be looking at different kinds of 
reimbursement amounts depending on this setting, but is there 
any reason, for example, to look at some of these asset 
thresholds and other things depending on--my instinct would say 
no, but I am just wondering, has that kind of analysis 
accompanied the experimenting of just where you might reimburse 
for this kind of care?
    Ms. Iritani. We have work planned to look at Medicaid 
payments for assisted living. We have not done work looking at 
financing of Medicaid payments necessarily directed to long-
term care, if that is your question.
    Mr. Sarbanes. OK. And are there, is it in your bailiwick to 
tell me whether there are demonstrations that are actually 
looking at Medicaid reimbursement for home care where somebody 
is actually staying in the home?
    Ms. Iritani. There are, increasingly, States moving from a 
fee-for-service type of payment for long-term care services to 
managed care which would be a capitated payment amount to cover 
all services including long-term care.
    Mr. Sarbanes. So in that instance there would be a 
capitated payment for providing care along a continuum that 
could include some component of home care along with 
institutional care; is that what you are saying?
    Ms. Iritani. Correct.
    Mr. Sarbanes. OK. All right, thank you. I yield back.
    Ms. Schwartz. I can just add to that that about half of 
payments for long-term services supports in Medicaid are now 
occurring in a noninstitutional setting, and this reflects a 
very big shift over the past 20 years when it was primarily in 
institutional settings. And that is primarily through 1915(c) 
waivers that have allowed States to allow folks to stay in 
their own homes and receive services if that is something that 
is valuable to them.
    And there have also been grants under the money follows the 
person program to help States transition people from nursing 
homes to home settings or to allow people to stay in their 
homes and not end up in a nursing facility.
    Mr. Sarbanes. Thank you.
    Mr. Pitts. The gentleman yields back. The Chair now 
recognizes the gentleman from Maryland, Mr. Bilirakis, 5 
minutes for questions.
    Mr. Bilirakis. Florida.
    Mr. Pitts. I mean Florida, sorry.
    Mr. Bilirakis. That is OK. No problem. Well, I have a 
couple questions here, but I wanted to say how much, with the 
moving the patient from a long-term care facility to the home, 
obviously quality of life is number one, but are we saving 
money at the same time?
    Ms. Schwartz. Those waivers require a demonstration of 
savings and so yes. And in the managed long-term services and 
supports area, I think that is also an area to increase the 
predictability of the amount that is being spent on long-term 
services and supports. So fiscal concerns are obviously a part 
of both of those efforts.
    Mr. Bilirakis. Very good, thank you. A couple more 
questions, Ms. Iritani and Ms. Schwartz. In your testimony you 
talk a lot about non-State sources being used to fund Medicaid. 
Can you explain what these non-State sources are such as 
provider taxes and how they fund State Medicaid programs?
    Ms. Iritani. States are allowed to use up to certain 
sources of funds apart from State general revenues to finance 
Medicaid. Provider taxes are an increasing method that States 
use to fund Medicaid which would be a broad-based uniform tax 
on healthcare providers, and it could be Medicaid providers, to 
fund Medicaid.
    And intergovernmental transfers and certified public 
expenditures are other methods that are increasingly used to 
finance the non-Federal share of Medicaid. These would be 
methods that local governments or a local government provider 
such as county hospitals might use to, for example, in the case 
of certified public expenditures, to certify that they had 
expended a certain amount on Medicaid for purposes of getting 
Federal matching for the payment or the fund.
    Mr. Bilirakis. Do you have anything else to add, please?
    Ms. Schwartz. No, I don't have anything else to add to 
that.
     Mr. Bilirakis. OK, all right. OK, Federal law requires 
that provider taxes must be broad based and uniformly imposed 
and must not hold the providers harmless and cannot provide a 
direct or indirect guarantee those providers will receive all 
or part of the tax payment back.
    How does the use of non-State funding sources such as 
provider taxes reconcile with Federal law?
    Ms. Schwartz. It is permissible under Federal law, and 
changes have been made over time to clarify the circumstances 
under which it is possible and the ones you just named are 
examples of that. But it is a permissible activity. There is no 
intimation that something shady is going on with these taxes 
and they are clearly important in many States as a source of 
funds to support the Medicaid program.
    Mr. Bilirakis. OK, next question. Ms. Iritani, in 2014 you 
asked CMS to ensure States report accurate and complete 
information on all sources of funds used to finance the non-
Federal share of Medicaid. What data did you want to capture 
and what was CMS' response to your recommendations?
    Ms. Iritani. Yes, we suggested that CMS come up with a data 
strategy for obtaining complete and reliable information on 
sources of funds. Currently CMS does not collect specific 
sources of funding. CMS agreed that they needed better data for 
oversight purposes, but disagreed with our suggestion that they 
needed this data at the provider level for in particular 
institutional providers.
    We felt like the data is needed at the institutional level 
so that a net payment to the provider could be understood. For 
example, if a hospital is getting 200 million from CMS in a 
supplemental payment that CMS would also know that that 
provider was being asked to finance a non-Federal share, a 
hundred million or more, whatever the non-Federal share of the 
payment would be.
    This is important not only for understanding the trends in 
financing and the net impact on the provider, but whether it 
would be helpful to understand the extent the payments are 
actually going to improve access to the beneficiaries as 
opposed to cost shifting to the Federal Government or providing 
fiscal relief to the States.
    Mr. Bilirakis. So one final question, if I may, Mr. 
Chairman.
    Mr. Pitts. You may proceed.
    Mr. Bilirakis. OK, thank you. Ms. Iritani, Medicaid is 
listed by GAO as a high-risk program. Can you explain why this 
program is listed as high-risk?
    Ms. Iritani. Yes. There are multiple contributing reasons 
based on our body of work over the last years, but Medicaid is 
a significant program in terms of size, in terms of the number 
of enrollees now, the largest healthcare program in the 
country. It is a diverse program. The Federal-State nature of 
it makes it very difficult for oversight. Our work has 
identified concerns with gaps in oversight including the 
transparency of supplemental payments and many other types of 
issues that contributed to our putting Medicaid on our high 
risk list.
    Mr. Bilirakis. Thank you. Thank you very much. I yield 
back.
    Mr. Pitts. The Chair thanks the gentleman 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 
our panel for being here. I think examining Medicaid programs 
is very important and we have kind of been doing it many ways 
today. I guess I would like to start by standing with Dr. 
Bucshon in saying if we could block grant Medicaid back to the 
States I don't even think there would be a need for today's 
hearing. But unfortunately we haven't done that so that is one 
of the reasons we are having this hearing, which I think is 
timely.
    And maybe to respond a little bit to Mr. Guthrie's comments 
earlier, Medicaid is all over the place when it comes to how 
States administer them. And maybe to sum up a little bit, I am 
from New York, which New York with 20 million Americans spends 
as much on Medicaid as California and Texas combined with 60 
million people. That shows you how crazy this program is. 
Thirty six or so States, as I understand it, absorb the 
Medicaid cost at the State level and there is no local share. 
It is about 36 out of 50.
    Well, the 14 States, of which New York is certainly one, 
pushed this back to the county level. In the case of Erie 
County where I am from, Buffalo, I was the county executive, 
and 100 percent of our property tax did not even cover our 
Medicaid share at the county level; 100-plus percent of our 
county tax covered Medicaid, which meant the county had to live 
on sales tax.
    Well, when it gets to DSH it is worse. In New York State, 
when the Federal Government makes a DSH payment the State pays 
nothing. They force 100 percent of the match for DSH payments 
down to the local level for the county. Erie County, Erie 
County Medical Center, we are talking about $40 million in a 
year.
    Now under the ACA, to speak to the folks on the other side 
that was, the DSH payments were supposed to be reduced 
dramatically by the expansion of Medicaid and Affordable Care. 
Well, it hasn't happened. As I understand it now just maybe we 
will see a DSH reduction in 2018, but that may go the same way 
as SGR and just kicked down the road. And I just bring this up 
to put into context how Medicaid is all over the place through 
the country, and if you are living in Erie County, New York, it 
doesn't get much worse when it comes to what we are having to 
bear for that burden.
    So briefly, the bill that I have put forth, H.R. 2151, 
really addresses the non-DSH supplemental payments. And this 
came from the GAO's own report on we need transparency. I have 
a sign in my office, ``In God we trust, all others bring 
data.'' We don't have the data on the non-DSH supplemental 
payments.
    And so, Ms. Iritani, I am assuming the bill that I am 
putting forth, I am simply asking States, or not asking, 
requiring States to do audits and CMS to do audits on non-DSH 
supplemental payments as something GAO would support.
    Ms. Iritani. Yes, we would agree that that bill is 
consistent with our recommendations.
    Mr. Collins. And really in learning from that I think all 
of us would support payments going where they are supposed to, 
but do you also have any data on the 50 States? I understand it 
is very inconsistent from State to State. And the crazy thing I 
have heard is I don't think New York does as much non-DSH 
supplemental. Is that true? Do you know?
    Ms. Iritani. I cannot speak to that right now, but be happy 
to----
    Mr. Collins. Yes, if you could get back to us it would be 
interesting just to see as a percentage or absolute or both on 
the non-DSH supplemental payments, and then that would also beg 
the questions, and I think we would see, why variances from one 
State to the other? And it would beg the question, why is one 
State doing one thing and another doing something else, but 
without the audits how do we know?
    Ms. Iritani. There are great variations among States in how 
they finance their programs and the extent of supplemental 
payments.
    Mr. Collins. And just from a commonsense standpoint it 
doesn't make any sense to me. So I would certainly urge all my 
colleagues to support that bill, H.R. 2151, which is simply 
trying to gather data in a way that would help us all better 
understand State by State even what is going on. So again, Mr. 
Chairman, thank you for holding this hearing, and I yield back 
the balance of my time.
    Mr. Pitts. The Chair thanks the gentleman. Ms. Schwartz, 
did you want to add anything to that?
    Ms. Schwartz. Well, I have some data here that show that 
nationally supplemental payments as a share of inpatient and 
outpatient hospital payment is about 44 percent, and in New 
York it is 36.8 percent so it is below the national average. 
But the figures go all over the place from two percent to there 
is several States in the '80s and one or two in the '90s. So 
you are slightly below the average, but like all things 
Medicaid, it varies by State.
    Mr. Collins. And I think again we could use some data to 
understand why that variation would be what it is. Thank you 
very much.
    Mr. Pitts. The Chair thanks the gentleman and now 
recognizes Mr. Griffith for 5 minutes.
    Mr. Griffith. Thank you very much, Mr. Chairman. As we have 
discussed in some of the prior testimony, the State may impose 
a broad-based healthcare tax on providers and use the revenue 
raised from that tax to pay for the Medicaid program. Virginia 
looked at that a couple of decades ago and it was rejected 
because it was considered a sick tax or a bed tax and why would 
we want to put more burden on those people who are already sick 
by having a broad based tax on folks who are in the hospital?
    But because of the way the FMAP works, the Federal Medicaid 
Assistance Percentage, the effect of this is that a State can 
draw down more and more Federal spending in its Medicaid 
program. Currently these provider taxes are permissible, as we 
talked about earlier, if they are applied at a rate that 
produces revenues less than or equal to six percent of the 
provider's net patient revenues.
    Now I know, Ms. Schwartz, you said that is not cheating, 
but from a Virginia perspective even though it is legal it 
seems a little bit dicey that you get more money because you 
charge your sick people more taxes, therefore you can get more 
money drawn down from the Federal Government.
    Can you talk about any work that either MACPAC or GAO has 
done to explore provider taxes to see how they are utilized by 
the States and how they drive up the spending or how provider 
taxes can create what we believe in Virginia is a perverse 
incentive in Medicaid? Either of you all want to tackle that 
one?
    Ms. Schwartz. We have written about provider taxes and 
described the statute as you have, and there has been an 
expression of interest in learning more. But it is a topic that 
is difficult to study because you are having to look at the 
finances of the entire State and their tax structure. So it is 
not one that we have a lot to offer now, but I am hopeful that 
in the future we will have more information to be able to share 
on that.
    Mr. Griffith. Well, as Mr. Bucshon said earlier, maybe we 
would be better off if we just decided what was the right 
amount for each State and sent it back to them, and then you 
don't have all these little games being played about we are 
going to charge our people a sick tax so that we can then draw 
down more money.
    I have introduced a bill, the Medicaid Tax Fairness Act, 
which is co-sponsored by some of my colleagues on the 
committee, Blackburn, Bucshon and Guthrie. It doesn't get to 
the whole problem, but it does reduce the current provider-tax 
threshold from 6 percent to 5.5 percent which is what it was 
just a few years ago. What do you all think of that concept? 
And there is a follow-up question too.
    Ms. Iritani. We have looked at States' uses of provider 
taxes at a broad level, at a national level, and have found 
that States are increasingly relying on provider taxes as a 
source of the non-Federal share of Medicaid. And we looked in 
three States' financing arrangements where indeed there was an 
increase in the Medicaid payments and some sort of 
contribution, for example, through provider taxes, from the 
same providers that were receiving payments.
    And so we would agree that there needs to be much more 
transparency on what is reported. And with regard to your 
proposal about reducing the provider tax threshold that I would 
just note that there have been several bodies including CMS in 
its budget that have also suggested reducing provider taxes as 
a way to improve the fiscal integrity of Medicaid.
    Mr. Griffith. Yes, my bill is actually the first step, I 
think, but it is H.R. 1400 and then we can go forward from 
there. And what is interesting is, as folks on the other side 
of the aisle will recognize, is oftentimes I am in conflict 
with the administration. But in December 2010, President 
Obama's Fiscal Commission said Congress and the President 
should eliminate State gaming of Medicaid tax gimmick. They 
recommended restricting and eventually eliminating this 
practice.
    While this policy would obviously need to be phased in 
incrementally, does GAO or MACPAC, and I think you have already 
answered it in part, but do either of you have a position on 
that policy, and if not can you comment on benefits of reducing 
the use of the provider taxes over time?
    And you may have already answered it in your previous 
answer and I recognize that but did want to get it out there 
that this is a bipartisan thought. It is not something that we 
own just on the Republican side or just on the Democrat side. 
But gaming the system moves money around but it doesn't really 
help the sick folk. Comments? Agree, disagree?
    Ms. Schwartz. I would just say that from the Commission's 
perspective that interest at the moment has been on 
transparency and you need those data to be able to then 
evaluate different policy options. The Commission as of this 
time has no position on that.
    Mr. Griffith. And I would just say at some point, and I 
haven't introduced a bill and maybe I should, but at some point 
we need to look at helping folks out. I had a little concept 
when I was in the State legislature in Virginia that would 
allow folks who needed medical care maybe not as intense as a 
nursing home, but needed at least two things a day that were of 
assistance, and we passed a law that--North Carolina has a 
similar law--that would allow a medical cottage to be placed, a 
temporary to be placed in a family member's backyard, side 
yard, whatever, worked under the regular laws but it created a 
zoning exemption for that.
    It might be a way that we can save money for folks all the 
way around because it is cheaper than a nursing home but the 
person is still getting care and they are with their family. I 
appreciate it, Mr. Chairman. I appreciate the time, and I yield 
back.
    Mr. Pitts. The Chair thanks the gentleman, and that 
concludes the questions of the Members present. As usual, 
Members who are in other hearings on our committee may have 
questions who will submit those too in writing along with any 
follow-up questions. We ask that you please respond promptly. 
And I remind Members that they have 10 business days to submit 
questions for the record, so Members should submit their 
questions by the close of business on Tuesday, November 17th.
    Very interesting hearing examining various Medicaid 
programs, a very complex issue. Thank you very much for your 
time and testimony today. Without objection, the subcommittee 
is adjourned.
    [Whereupon, at 11:54 a.m., the subcommittee was adjourned.]
    [Material submitted for inclusion in the record follows:]

             Prepared statement of Hon. Frank Pallone, Jr.

    Good morning, thank you Mr. Chairman for holding this 
hearing to discuss a variety of bills related to healthcare in 
our Medicare and Medicaid program.
    I'm pleased that we will be discussing draft legislation 
today on the Quality Care for Moms and Babies Act. Given that 
Medicaid finances roughly half of all births in this country, 
it is critical that we continue to advance the quality of care 
our Medicaid beneficiaries receive. This bill not only develops 
quality of care metrics for pregnancy and infancy, but would 
also develop maternity care quality collaboratives. I look 
forward to working in a bipartisan manner to advance this 
important bill.
    I do have some concerns over several of the other bills 
under discussion today. H.R. 1362 and H.R. 2151 work in tandem 
to increase reporting and auditing requirements on States' 
Medicaid payments relating to non-DSH supplemental payments and 
the non-Federal share of State Medicaid spending. I agree that 
transparency in these areas is important to ensure that 
payments to providers are sufficient in Medicaid. But these 
bills are duplicative of ongoing CMS initiatives and add a 
burdensome layer of administrative bureaucracy. We need a more 
nuanced approach here, and rather than improving our ability to 
ensure that Medicaid dollars go towards Medicaid beneficiaries, 
I fear these bills will instead do the very opposite of that.
    H.R. 1361, the Medicaid HOME Improvement Act eliminates 
State flexibility in determining home equity levels for the 
determination of long-term care assistance. Unfortunately, our 
country has yet to provide a meaningful solution to our 
country's long-term care crisis. Yet this bill limits State 
flexibility to determine the right eligibility threshold for 
long-term care in their own Medicaid programs. In short, the 
bill does not address the underlying issues in our long-term 
care system, but only serves to restrict access to critical 
services.
    Finally, H.R. 2878 provides an extension on CMS' decision 
to temporarily suspend the enforcement of supervision 
requirements for outpatient health services in critical access 
and small rural hospitals through the end of the calendar year. 
While these hospitals certainly face different workforce 
staffing issues than those in urban areas, I hope my colleagues 
will work to address concerns that this bill may not adequately 
balance patient safety and access to care. I hope that we can 
work in a bipartisan fashion to address this issue.
    Thank you, Mr. Chairman, and I yield back the remainder of 
my time.


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