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Herger Opening Statement: Hearing on MedPac’s Annual March Report to Congress on Medicare Payment Policy

March 17, 2009

(Remarks as Prepared)

Thank you, Chairman Stark.

MedPAC’s March report to Congress illustrates why we must approachhealth care reform very carefully and thoughtfully.  We don’t need tolook any further than the Medicare program to see that the federalgovernment has often shown itself to be incapable of accurately andappropriately administering health care programs.

MedPAC has once again identified a number of areas where the Medicare program is significantly overpaying for services.

MedPAC describes Medicare’s $10 billion a year hospice benefit aslacking the “data vital to the effective management of the benefit.” 

According to MedPAC, Medicare overpayments to home health agencies have averaged 16.5 percent since 2002.

MedPAC also found that Medicare has overpaid freestanding skillednursing facilities by more than 10 percent for the last 7 years.

MedPAC states that indirect medical education payments are set at twice the amount of the costs they’re intended to cover.

Similarly, MedPAC feels that the key factors determiningreimbursement rates for diagnostic imaging services are nearly twice ashigh as they should be, leading to incentives for overuse.

And let’s not forget that the Chief Counsel at HHS’ Office ofInspector General recently said that, “a lot of career criminals andorganized crime officials have decided that building a Medicare fraudscam is far safer than dealing in crack or dealing in stolen cars, andit’s far more lucrative.  …Right now, it’s a good bet that you can takemillions from us, and chances are you’re not going to get caught.”

We’ll hear Mr. Hackbarth talk a lot today about “efficiency.”  Ithink it’s abundantly clear that the Medicare program is far from beingefficient.

Then there’s the other side of the coin, the side that we exploredat last week’s hearing.  How Medicare significantly underpaysphysicians and hospitals.

Over the last 10 years, MedPAC reports that Medicare has paidphysicians just 80 percent of private insurance rates.   Similarly,MedPAC predicts that hospital’s Medicare margins will be negative 6.9percent this year. 

It isn’t rocket science to figure out that somebody else is carryingMedicare’s water and subsidizing these drastic underpayments.  This“somebody else” is the 160 million Americans with private healthinsurance.

Because of Medicare’s underpayments to hospitals and physicians,those with private health insurance are paying $49 billion more eachyear.

But Medicare isn’t alone.  The government’s other large healthprogram, Medicaid, underpays physicians and hospitals by $40 billionannually.

Hospitals and physicians have to turn to those with private healthinsurance to fill the $89 billion hole left by Medicare and Medicaid. As a result, a recent report by Milliman found that the average privatehealth insurance policy for a family of four costs $1,800 more than itshould.

If you’re still not convinced that Medicare’s reimbursement systemis broken, the Lewin Group found that if the Democrat’s proposedgovernment-run health plan paid its providers Medicare rates, 120million Americans would lose their current health insurance and beforced into the government-run health plan.

I would strongly urge my friends on the other side to consider theevidence we’ll hear today – about the significant problems in theMedicare program – before trying to force 120 million Americans whocurrently have private health insurance into another government-runhealth plan. 

Mr. Stark, I and my colleagues await your call to improve ournation’s health care system.  We all agree that we must make healthinsurance more affordable for all Americans.  Let’s focus on areaswhere we can find agreement, from expanding preventive care and chronicdisease management to eliminating waste, fraud, and abuse.  Who knows,this may build the goodwill that could lead to a truly bipartisanhealth reform proposal.

I yield back the balance of my time.