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Hearing on Health Care Law’s Impact on the Medicare Program and its Beneficiaries

February 10, 2011











February 10, 2011

SERIAL 112-05

Printed for the use of the Committee on Ways and Means





DAVE CAMP, Michigan, Chairman

WALLY HERGER, California                         
PAUL RYAN, Wisconsin
DEVIN NUNES, California
JIM GERLACH, Pennsylvania
TOM PRICE, Georgia
RICK BERG, North Dakota
DIANE BLACK, Tennessee

RICHARD E. NEAL, Massachusetts
JOHN B. LARSON, Connecticut
RON KIND, Wisconsin

JON TRAUB, Staff Director
JANICE MAYS, Minority Staff Director


Advisory of February 3, 2011 announcing the hearing


Donald M. Berwick M.D., Administrator, Centers for Medicare and Medicaid Services

Richard S. Foster, Chief Actuary, Centers for Medicare and Medicaid Services



  Thursday, February 10, 2011
  U.S. House of Representatives,
Committee on Ways and Means,
Washington, D.C.

The committee met, pursuant to call, at 10:00 a.m., in Room 1100, Longworth House Office Building, Hon. Dave Camp [chairman of the committee] presiding.

[The advisory of the hearing follows:]

Chairman Camp.  The committee will come to order.

Good morning.  I want to welcome everyone here and also extend a special welcome to our guests, Donald Berwick, the Administrator at the Centers for Medicare & Medicaid Services, and Richard Foster, Chief Actuary for the Centers for Medicare & Medicaid Services.

Dr. Berwick, despite three separate requests from the Republicans on the committee to our Democrat counterparts in the last Congress, this is the first time you have actually been invited and appeared before this committee ‑‑ or any House committee, for that matter ‑‑ so we have been especially looking forward to having you here for what I hope will be an informative and spirited discussion about the impact the Democrats’ new health care law will have on Medicare, our seniors, and other beneficiaries who depend on the program to meet their health care needs.

I would note that the spending that runs through your agency is greater than what is spent by the Department of Defense.  So not only do we have a constitutional responsibility to conduct this oversight, we have a clear fiscal responsibility to the American people, given the amount of tax dollars that you control.

And if I were going to pick a subtitle for this hearing, I might well borrow a line from Charles Dickens, “It was the best of times, it was the worst of times,” because, to be honest, as I read through the testimony of our two witnesses and looked back through the information we have seen from CMS, I see two very contrasting perspectives appearing from the same agency. 

On the one hand, we have Dr. Berwick, who has repeatedly touted the benefits of the health care law.  In testimony before the Senate Finance Committee last November, Dr. Berwick stated that “Medicare’s long‑term sustainability is stronger than ever as a result of the new efficiencies, new tools, and resources to reduce waste and fraud and slow growth in Medicare costs.”

On the other side, you have Mr. Foster and his team in the CMS Office of the Actuary, who has a 180 degree perspective on the new health care law.  In report after report, the Office of the Actuary has provided a bleak outlook about the future of Medicare resulting from the new health care law.  This is due in large part to the fact that there are more than one half million dollars in cuts to Medicare that have been made in an effort to finance the law.  Those changes include massive cuts to hospitals, cuts to home health agencies, cuts to skilled nursing facilities, and cuts to hospice providers. 

The concern of many on the committee is the impact of this law and the potential to either lose access to health care services or be forced to pay more for the services they need.  Sadly, that is already happening, from those who depend on local hospitals, to folks who depend on Medicare Advantage plans, to retirees receiving retiree drug coverage, to seniors who will pay higher prices. 

For example, the Medicare actuaries predict that because of the cuts in the Democrats’ health care laws, 725 hospitals, 2,352 nursing homes, and 1,587 home health agencies will become unprofitable.  It is no wonder they warn that seniors’ access to care could be jeopardized.  Three Pennsylvania hospitals have been put up for sale, and drastic changes in the new health care law were cited as a factor in that decision.

CBO has predicted that beneficiaries who remain in the Medicare Advantage plan will see their annual out‑of‑pocket costs increase by an average of $816 by 2019.  The Medicare Trustees predict that 5.8 million seniors will lose their current retiree drug plan provided by their former employer because of the Democrats’ health care law, and another 1.7 million seniors who would have otherwise received an offer of retiree prescription drug coverage in the future will no longer have this option.

And, finally, despite the claims that Medicare donut hole changes will solve the costs facing seniors, the reality is that CBO has predicted that Part D premiums will increase by 4 percent this year and 9 percent for all seniors by 2019 as a result of the Democrats’ health care law. 

These are just a few concerns, and I am sure there are more concerns that will be identified today, including the very fuzzy Washington math that has led some to characterize the financing of the law as a Ponzi scheme. 

Given the impact the new health care law will have on Medicare and the Nation’s seniors, it is my hope that in today’s hearing we can have an honest and open airing about how CMS plans to institute these cuts while still meeting the long‑term needs of our Nation’s seniors and Medicare beneficiaries. 

I now yield to Ranking Member Levin to make an opening statement.

Mr. Levin.  Thank you, Mr. Chairman; and we welcome our two witnesses.  I think this will be an opportunity to shatter many of the myths that have been spread about health care reform. 

For more than 45 years, Medicare has offered important health benefits for senior citizens and people with disabilities and has safeguarded financial stability for them and their families.  The Affordable Care Act builds on the program’s strengths and I emphasize that by investing in Medicare’s future, improving benefits, reducing costs for beneficiaries, and getting a better deal for taxpayers.

During the health reform debate and in the time since its enactment, health reform opponents have relied on myths and scare tactics to create fear and uncertainty among Medicare beneficiaries.  What is really most scary is the plan from Republicans to privatize Medicare through a voucher system.  So let’s set the record straight, and we will have more of that today on health care reform and its impact on Medicare. 

The Act strengthens Medicare’s future, improves benefits for senior citizens and people with disabilities, and saves money for taxpayers. 

Fact one:  The Act lowers cost to Medicare beneficiaries in improved benefits.  Thanks to Medicare payment reforms and efforts to eliminate waste and fraud, beneficiaries will save on average almost $200 on their Part B premiums by 2019, and cost sharing also will go down by more than $200.

Fixing the donut hole created by the Republican plan was a key improvement of the Act.  We offered immediate assistance with drug costs by providing $250 to over 3 million people.  This year, seniors who hit the donut hole will save an average of $500.  By 2020, the donut hole will close completely.  Finally, seniors will reap benefits due to this elimination of cost sharing for most preventive services and the creation of a new annual physical benefit. 

Fact two:  The Act significantly strengthens Medicare’s financial footing.  The Act extends solvency of the trust fund by 12 years.

Fact three:  The Act modernizes the Medicare program.  It contains an array of delivery reform systems to ensure that the program rewards value over volume.  In fact, health care experts, including more than 270 leading economists, agree that the Act creates a more disciplined and effective health care system. 

Fact four:  The Act includes tough new fraud‑fighting tools that are projected to save taxpayers approximately $5 billion.  The law empowers CMS to stop fraud before it happens. 

But there is one more point that needs to be stressed, and it is the Republican agenda to repeal reform.  The repeal agenda would reverse the progress we have made.  It would raise beneficiary costs and substantially shorten Medicare solvency.  It would end delivery innovations and stop important new fraud‑fighting powers in their tracks. 

My Republican colleagues focus on repealing health care reform and privatizing it by turning it into a voucher system.  The repeal agenda shifts medical expenses back onto seniors and their families.  When we passed Medicare, it was to fix these very problems to ensure that seniors would no longer have to spend their retirement in poverty or in fear of the next illness.  Repeal would do more than turn back the clock, it would rip off its hands.  That is a fact we cannot ignore and a possibility we will not accept.

Chairman Camp.  Well, thank you. 

Dr. Donald Berwick is the Administrator for the Centers for Medicare & Medicaid Services.  As Administrator, Dr. Berwick oversees the Medicare, Medicaid, and the Children’s Health Insurance Program.  Together, these programs provide care to nearly one in three Americans.

Before assuming the leadership of CMS, Dr. Berwick was President and Chief Executive Officer of the Institute for Health Improvement, Clinical Professor of Pediatrics and Health Care Policy at the Harvard Medical School, and Professor of Health Policy and Management at the Harvard School of Public Health.  He is also a pediatrician, adjunct staff in the Department of Medicine at Boston’s Children’s Hospital, and a consultant in pediatrics at Massachusetts General Hospital.

Dr. Berwick, your full written statement will be made part of the record.  You have 5 minutes to address the committee, whereupon then members will question you for 5 minutes each. 

So, Dr. Berwick, welcome to the committee, and you have 5 minutes.


Dr. Berwick.  Thank you, Mr. Chairman.  I appreciate the chance to appear here.  It is a privilege and an honor to serve as the Administrator and also to get a chance to be in dialogue with you now and in the future.

I am a physician, I am a pediatrician, I am the son of a physician, and I am the father of a newly‑minted physician.  Almost three‑quarters of a century span the time between when my father first hung out his shingle in a small town in Connecticut where I grew up and when my daughter Jessica showed up last year for her first day as a primary care resident. 

My own career is sort of a bridge also between them, from the typewriters that my father used to the computers that Jessica uses, from ignorance about how genes worked to the decoding of the human genome, from helplessness in the face of almost all cancers to cures for many cancers, from the time before Medicare when seniors lived in fear of medical bankruptcy to now when they do not.

The Affordable Care Act is a bridge, too.  It is our Nation’s answer to many of the problems that modern health care brings, along with its successes.  It is our answers to the questions about health care coverage. 

Will we make sure that our neighbors don’t need to be afraid that they are going to lose health insurance when they get sick or not be able to get it in the first place?  The answer is yes.  People with preexisting conditions will be able to get insurance and insurance companies will not be allowed to withdraw coverage from those who become ill.  Yes, children under 26 can be covered under their parents’ insurance policies. 

Will Medicare beneficiaries get the drugs that they need at the prices they can afford?  The answer is yes now.  We have sent over 3 million tax‑free rebate checks to seniors to get them through the donut hole.  We have discounts now of 50 percent for covered prescription drugs for people in the donut hole.  By 2020, we will close the donut hole completely.

Will we invest in prevention for seniors, not just treat them for the heart attacks and strokes and cancers they could have avoided?  The answer is yes.  We will add annual wellness checks and cost‑free screening tests like mammography and colonoscopy to Medicare benefits. 

In some ways, though, the biggest question of all I know is one that concerns you, which is, can we afford to do that?  Is getting the care that we want and that we need ‑‑ care for everybody ‑‑ sustainable?  The answer to that also is yes. 

Not only does the Affordable Care Act make Medicare fiscally stronger, it also provides us with the tools to make health care better.  And as in the rest of what we do, doing things right is less costly than doing things wrong. 

Can we afford to meet the needs of patients and families?  Yes.  We cannot afford not to.  When a patient gets an avoidable surgical infection or when two different doctors who don’t have a way to coordinate their care mistakenly prescribe two drugs for Mr. Green that ought not to be taken together, the patient, the family, and society all bear the higher costs of the complications.  When Mrs. Miller stops taking her medicines because she can’t afford them, she will suffer the stroke that will become her greater burden and ours.  The diabetes that we fail to prevent or to detect early will become the heart attack or the amputation or the kidney failure that will cost far more in suffering and in dollars to treat later. 

It is a terrible mistake, in my opinion, to think that the root to affordable health care is to deny people insurance, care, and treatment.  That is a very bad plan.  Instead, the proactive, patient‑centered investments that the Affordable Care Act and Medicare and Medicaid themselves represent are our Nation’s best hope for the sustainable excellent health care to which we aspire.  Better care, better health, and lower costs through improvement of care, they come together.  They are a package deal. 

Let me focus on one particular case, the Medicare Advantage program, which I know you have concerns about.  You are concerned about the strength of the program.  We actually have some quite exciting new data just now on enrollments and premiums. 

Despite earlier projections of enrollment declines and premium increases, the actual data we now have in 2011 shows that enrollment in Medicare Advantage increased 6 percent, to more than 12 million beneficiaries.  On average, beneficiaries have seen a 6 percent reduction in their premiums, and there is a 5 percent increase in the number of beneficiaries who are now in four‑ and five‑star Medicare Advantage contracts this year versus last year.  That translates into more beneficiaries being in lower‑cost and higher‑quality plans.

Higher‑quality care is what I want for all patients.  When I practiced pediatrics, I did everything I possibly could to make sure that my patients had the best medical care possible.  I fought for a bone marrow transplant for a young boy for whom that was the last possible chance for success.  He got the transplant, and he lived.  I made sure that kids with asthma got the most modern treatment we had and that their mothers and their fathers and their schoolteachers understood how to help them.  I made sure that immunizations were up to date, that obese kids knew that they had options, because you can never underestimate the value of prevention. 

And now, at CMS, I get to do the same for Medicare and Medicaid and CHIP beneficiaries and for the millions more who will benefit from a healthier private insurance market.  It is the same plan.  Quality pays.  If you want to thrive, don’t run away from a problem.  Do things right.  Better care, better health, and lower costs through improvement.  That was my father’s plan, that is my daughter’s plan, and every day at CMS it is our plan. 

Thank you.

[The statement of Donald M. Berwick M.D., follows:]

Chairman Camp.  Thank you, Dr. Berwick.  Your time has expired, but your full statement will be made part of the record.

Dr. Berwick, is the British health care system, the National Health Service, a good model for us to follow here in the United States? 

Dr. Berwick.  Mr. Chairman, I have seen and worked in many countries.  Every country finds its own solution to its own problems.  America needs an American solution to the American health care problem, and the Affordable Care Act is certainly that ‑‑ or the beginning of that.  It is a system that balances public and private payment.  It depends heavily on the private health care sector.  It is a good partnership between the Federal Government and States.  It is the American way to an American health care system that is sustainable.

Chairman Camp.  Well, regarding the British National Health Service, you made a statement ‑‑ and that is a service that is notoriously known for rationing care ‑‑ you said, “I fell in love with the NHS.  To an American observer, the NHS is such a seductress.” 

Are you still in love with the NHS?  Is this still a view you subscribe to? 

Dr. Berwick.  There are strengths and weaknesses for every health care system around the world.  We have a lot to learn from each other.  But I say again, the American health care system needs an American solution.  That is what excites me about the Affordable Care Act.  It puts a stake in the ground about the kind of system we can have based on the heritage of our system, the assets we have, our investment in our own public trust, and this extraordinary partnership between public and private care.  We are on the route to a solution that fits our country, and that is what really counts.

Chairman Camp.  Would that be a yes or a no? 

Dr. Berwick.  I am saying that every country finds its own solution.  There are strengths in the British health care system.  There are strengths in every health care system I have seen and enormous weaknesses in all of them.  We are all struggling with the same issues.

Chairman Camp.  You also wrote, “I admit to my own devotion to a single‑payer mechanism as the only sensible approach to health care finance I can think of.”  Do you still feel that a government‑run, single‑payer health care system is the only sensible approach? 

Dr. Berwick.  I am really excited by the promise the Affordable Care Act offers, Mr. Chairman, to American health care.  I think we have found our way to a really open door here now to a solution to the American health care problem.  It is an investment in better care, better health, and lower costs through the improvement of care.  And as I understand that law more and more, I see more and more tools that our country now has to make care exactly what it should be for every single person.

Chairman Camp.  Is that a yes or a no to my question?  I am having trouble understanding whether you still believe that the single‑payer system is the only sensible approach. 

Dr. Berwick.  I think the Affordable Care Act is a sensible approach for America, and we are seeing progress already.  I think we will see immense progress if we stick with this law.  I can see the potential for helping our country actually use innovation, an improvement of quality of care, transparency, putting control in the hands of patients.  We are going to find our way to a better health care system, and this is an exciting opportunity. 

Chairman Camp.  If I could have a simple yes or no answer.  You said one time that “competition, in short, will hurt you, not help you.”  Now that you will be in charge of setting up exchanges, determining what health benefit plans will look like, analyzing premiums, do you still feel that competition in health care is a bad thing?  And I think we need some clarity from you.  Is this a yes or a no?  

Dr. Berwick.  Competition certainly has a place in our health care system.  It is the American way to excellence in many forums.  There are other areas in which providing public support to people through a publicly financed system helps, too.  There is not a simple yes or no answer to your question, Mr. Chairman; and I think the Affordable Care Act strikes a superb balance between public and private sector investment and better care.

Chairman Camp.  You have also said that any health care funding plan that is just, equitable, civilized, and humane must redistrict wealth from the richer among us to the poor and less fortunate.  Is this a view you still subscribe to? 

Dr. Berwick.  Statement of fact, Mr. Chairman, sick people tend to be poorer and poor people tend to be sicker; and if we are investing in the health of our neighbors and our Nation, we are going to have to take care of the sicker and poorer in our country.  And we have done that.  That is why Medicare and Medicaid are there in the first place. 

Chairman Camp.  And you think wealth redistribution is the way to go about achieving that goal?

Dr. Berwick.  Poor people tend to be sicker, and sicker people tend to be poor.  And if we really want to help each other we are going to have to understand that and address it, and we have in our public policy.  That is where Medicaid came from in the first place, Mr. Chairman.

Chairman Camp.  We have heard that this legislation will mean that most preventative care will now be free because of this new health care law.  And you once wrote that one over‑demanded service is prevention ‑‑ annual physicals, screening tests, and other measures that supposedly help catch diseases early.  Do you still feel that preventative care isn’t too high of a demand? 

Dr. Berwick.  Mr. Chairman, I am a pediatrician.  I have spent my life in preventive services.  The whole idea in taking care of children is to give them effective prevention so they don’t get the diseases that we will later pay the price for.  There is effective prevention and ineffective prevention.  The Affordable Care Act is a tremendous investment in getting people effective preventive services.  That is why they cover mammography and colonoscopy now at no copayment for the patient.  That is why we introduced the annual wellness physical.  Effective prevention is the best investment we can make in higher quality, better life, and lower cost.

Chairman Camp.  Well, I would take it that is a “no” then.  I would take it that you do not feel that preventative
care is in too high of a demand.

Dr. Berwick.  I am sorry, Mr. Chairman, I don’t understand.

Chairman Camp.  The question I asked you was, after reading your quote, do you still feel that preventative care is in too high demand?  And I guess from our answer you do not feel that preventative care is in too high demand.

Dr. Berwick.  I must say, Mr. Chairman, I don’t recognize your quote.  I am telling you what I think, which is that effective prevention ‑‑

Chairman Camp.  You wrote it once.  It was in your writings.  I am quoting your writings.  I am reading it from “We can cut costs and improve care at the same time,” by Donald Berwick, Medical Economics Office, August 12, 1996, page 186.

Dr. Berwick.  I believe we can cut costs and improve care at the same time by investing in effective care, and that certainly includes investing in effective preventative
services, which is what the Affordable Care Act at last allows us to do for seniors who now can be protected from strokes and heart attacks and complications of diabetes as never before.

Chairman Camp.  So the answer is, no, you don’t feel that preventative care is in too high demand.

Dr. Berwick.  Is in too high demand? 

Chairman Camp.  That is what I am asking.

Dr. Berwick.  I believe that offering effective preventive services is a terrific investment for our Nation, and that is what the Affordable Care Act does.

Chairman Camp.  All right.  Mr. Levin may inquire. 

Mr. Levin.  I was going to say, that I think it is important that everybody hear your answers.

Dr. Berwick.  Thank you.

Mr. Levin.  And so the mic will be clear.  And I am glad that the chairman asked you these questions so that the air can be cleared when it is often, I think, misrepresented and so we can move on and you can provide the services that you have been trained to provide.  I am glad those questions were asked.  I don’t think you were surprised. 

Let me just ask you, in terms of separating fact from myth, Mr. Camp, in his opening statement, talked about more than one half trillion dollars in cuts to Medicare.  Would you comment on that? 

Dr. Berwick.  We have an unsustainable health care system now.  That is the problem we are struggling with no matter which side of the aisle you are on.  We have a system that our country is having trouble affording, and it is failing to meet the needs of many of its citizens, and we are trying to navigate our way to a solution. 

I think the Affordable Care Act offers an opportunity to offer every American better care, not just those in Medicare and Medicaid, but everyone a better system, safer, more effective, more patient‑centered.  There are investments in innovation.  There are investments in continuity of care so that patients with chronic illness who need to be handed off well from hospital to home or from doctor to doctor can get that kind of support.  These all improve the quality of care, And through that we are going to see costs fall over time. 

The Affordable Care Act has many potential elements in it that will, I think, in the long run result in savings for our country and for beneficiaries themselves.

Mr. Levin.  So when there is a reference to a half trillion dollar cuts in Medicare, these so‑called “cuts” relate in most cases to the rate of increase in reimbursements and payments to providers; isn’t that true? 

Dr. Berwick.  We are on an unsustainable trajectory, and we need to find a way to lower costs.  The Affordable Care Act is linking reimbursement to providers more and more to the quality of what they do.  Instead of paying for care in fragments or pieces or high volume care alone, we are orienting more and more payment in this country, on the public and private side both, to paying providers for excellence, for producing the care that we want and need. 

An example would be infections in hospitals.  There are hospitals all over this country that now have reduced many forms of infection to zero.  I have visited those hospitals.  I have seen them.  The question now is, if it can be done there, can it be done everywhere?  The answer is, yes, if we invest in it.  The Affordable Care Act invests in innovations that would allow things like infection control to be spread all over the country now.  Every single hospital offering excellence at the level that the best currently do, that lowers costs and improves quality at the same time.  And that is a plan that will get us to a more sustainable health care system and in the end a more sustainable Medicare Trust Fund, Medicaid system, and health care as a whole.

Mr. Levin.  Do you want to comment on this claim that 5.8 million seniors will lose their current retiree drug plan provided by their former employer, also in the statement of our chairman? 

Dr. Berwick.  We are in a transitional mode in American health care.  The Affordable Care Act helps the retiree drug programs with a retiree drug subsidy.  Businesses will make their decisions about continuing or not continuing their retiree drug plans, and the beneficiaries will choose among the things available to them.  And I am sure there will be some shifts. 

You know, the Part D program, the alternative to the retiree drug program, in many cases has been strengthened immensely over the past year or two now.  We have strong evidence of a much better supply in the Part D program.  And we have the 50 percent drug discount for brand names drugs so that some retiree drug beneficiaries will choose to move over to Part D because it is a better plan for them.

Mr. Levin.  Thank you.

Chairman Camp.  Thank you. 

The Chairman of the Health Subcommittee, Mr. Herger, may inquire. 

Mr. Herger.  Thank you, Mr. Chairman; and, Dr. Berwick, I want to thank you for being here this morning.  I appreciate your dedication to creating a high‑quality health care system, but I think we have some very fundamental disagreements about how to achieve that goal.

Chairman Camp highlighted your past support for a single‑payer system and your comment that “competition, in short, will hurt you, not help you.”  Dr. Berwick, do you believe competition and market forces are good or bad for health care in light of your quote? 

Dr. Berwick.  On the whole, good, Congressman Herger.  We can see that in the durable medical equipment bidding system, for example, in which we are using market forces to enhance the benefits to beneficiaries, reduce their costs of durable medical equipment, at the same time assuring a supply of excellent DME.  That program alone has reduced the spend for the nine areas that the DME program was tried in by 32 percent.  Extrapolating to the country as a whole, that would be a saving over the next 10 years of $27 or $28 billion, of which $17 billion gets returned to the Medicare Trust Fund and $11 billion to the beneficiaries.  That is constructive use of competition in a very important arena, increasing excellence, increasing transparency, decreasing costs, and increasing the well‑being of the people who use those products and services.

Mr. Herger.  So, in other words, you don’t agree with your statement where you said “competition, in short, will hurt you, not help you?” 

Dr. Berwick.  There are instances where competition is very helpful, and I have just cited one.  There are instances where it is probably less useful.  But in a rural setting where there is only a single hospital, critical access hospital, and that is the only supply in town, we can’t use competition as the major lever for improvement in that.  We have to reach out and help that setting and make sure that it can supply the goods and services and excellence that that community needs.  Sometimes it helps; sometimes it doesn’t. 

But the answer to your question before, do I think competition can help?  The answer is, yes, in many cases absolutely.

Mr. Herger.  Which is directly opposite of what your quote was.  But the reason that I and many others find your past statements troubling is because America was built on the free enterprise system.  Going back to our Founding Fathers, Americans have always believed that free people working in free markets make better decisions than any king or dictator or government bureaucrat could ever make for them, and that is what this health care debate is fundamentally about.  Are we going to stick with the free enterprise system that has brought about the greatest prosperity in the history of the world or are we going to hand over the keys to the government?  Will we trust patients’ own doctors to determine the best course of medical treatment or will we leave that decision up to a district bureaucrat who has never met the patient? 

You are now overseeing an agency that provides health care benefits to more than 11 million beneficiaries in Medicare Advantage and 19 million in Medicare prescription drug plans.  Congress designed Medicare Advantage and Medicare Part D to give senior citizens a choice of plans so they can pick the plan that works best for them instead of being forced into a one‑size‑fits‑all government plan.

Given your repeated statements expressing skepticism about the private health care market and competition, how will you reconcile your personal beliefs with your responsibility to administer these programs that are built on the principles of competition and consumer choice? 

Dr. Berwick.  Congressman, I can’t think of a better example of American‑style competition benefiting everyone than, say, with the evolution right now of the Medicare Part C program, the Medicare Advantage program.  Look at what is happening: more transparency, more negotiation, more visible understanding by beneficiaries of the quality of the plans they can choose from, an open market in the Medicare and You handbook and on the Web where they can search for the plan they want and then they buy it.  And what happens?  Quality goes up and costs go down.  That is the free market at work with the support of Medicare to make this a transparent environment in which the beneficiary can make choices.  We are interested in more choice, not less, and it is working.

Mr. Herger.  And I couldn’t agree with you more.  But I hope you recognize that what you have just said in your statements and answers to Chairman Camp are very different, very different than these quotes that you have made in the past, but thank you very much.

Chairman Camp.  Thank you.  The gentleman’s time has expired.

Mr. Johnson is recognized. 

Mr. Johnson.  Thank you, Mr. Chairman, and Doctor. 

You know, the administration and Democrats here in Congress made promises to seniors about their health care and unfortunately didn’t live up to them.  In many cases, the law’s provisions are going to harm, not help, Americans primarily by raising premiums and reducing access.  I mean, the Medicare actuaries warn that the one half trillion dollars in Medicare cuts in the Democrat health care law are so drastic that providers might end their participation in the program, probably jeopardizing access to care for beneficiaries. 

You know as well as I do there are docs that are getting out of Medicare now because they can’t deal with it.  And I don’t know if you have a private office or not, but most of the docs I know have to hire two or three extra people just to track the administrative work that goes along with that Medicare junk.

The Congressional Budget Office also expressed concern that it is unclear if the law’s Medicare cuts can be sustained and whether this slower rate of growth will be accomplished through greater efficiency or instead reduce access to care or diminish the quality of care for Medicare beneficiaries.

In Texas, more than 300 doctors have dropped the Medicare program in the last 2 years ‑‑ you are aware of that, I am sure ‑‑ including 50 in the first 3 months of 2010.  Some docs feel the only way they can have control over their practice is to stop taking Medicare patients.  Of course, not all docs drop out of the program.  Some doctors are choosing to increase fees, reduce staff wages and benefits and reduce charity care.  Those alternatives don’t sound good to me. 

As a CMS administrator, how do you plan to prevent seniors from being denied access to care as a result of the massive Medicare cuts in the program? 

Dr. Berwick.  It is tough times for all.  Everyone is tightening their belt in this economy.  I know that.  But let me say that I have never been more optimistic about the future of the health care system in our country with the Affordable Care Act in our hands.  I am told now that the participation in the Medicare system is the highest this year than it has ever been in history among physicians.  The Affordable Care Act was supported by the American Medical Association, the American Hospital Association, professional societies, and trade associations.  I don’t think they would be supporting an Act that they think spells doom for them.

Mr. Johnson.  Well, how do you account for 300 doctors dropping it in Texas? 

Dr. Berwick.  Not everyone agrees with the Affordable Care Act, of course, but the associations, whose job is to make sure that the wellbeing of their part of the industry proceeds well, are supporting this act.  They know that the future lies in better care, better health, and lower cost; and I think they are interested in engaging with us ‑‑ with us on the public and private side both ‑‑ in making health care better.  That is what they say to me when they meet with me. 

I have been going all over the country meeting with hospital leaders and professional leaders, and I think everybody that I am speaking with knows we have got to navigate our way to a better health care system together in public and private partnership, and I think we are headed in that direction.

Mr. Johnson.  I don’t know how you plan to prevent seniors from being denied access.  What kind of steps are you going to put in place so you can identify a problem before it becomes a crisis? 

Dr. Berwick.  More transparency, more knowledge about what is going on, more linkage of quality to payment. 

Mr. Johnson.  And how do you do that if the docs refuse to be part of Medicare anymore? 

Dr. Berwick.  Ninety‑six percent of the docs are participating in Medicare, and they are more than willing to work with us, the ones that I have met with.  They know that in the long run better care is the answer for them, for their patients, and for the sustainability of the country.  And we are going to work hard with the providers of care all over this country to make that care better.  They know in the long run that that is how they will do the best for their patients, and that is what counts. 

The hospitals want to be safer, they want to be higher quality, and we will work with them to get them in that direction.  In the end, extra readmission that shouldn’t have happened because we dropped the ball helps no one.  Hospitals know that, doctors know that, and we are going to work for better care.  That will be why people came into health care in the first place and why they will want to stay there.

Mr. Johnson.  Well, I don’t know how you are going to get to the docs that quit the system because they can’t stand it. 

Thank you, Mr. Chairman.

Chairman Camp.  Thank you. 

Mr. Rangel is recognized. 

Mr. Rangel.  Thank you so much, Mr. Chairman; and, Doctor, thank you so much for sharing with us the knowledge that you have so that our government can do a better job which you and your family have dedicated your life to.

I just want to correct the record, because the chairman had indicated in his opening statement that three Catholic Universities in Pennsylvania were closed because of the Affordable Care Act.  They rushed to make certain that some of us knew that the Affordable Care Act had nothing to do at all with the sale and that they had indicated that they wanted to do this long before the Act.  The president is a Roman Catholic nun, and she is the one that wanted to clarify the record and her support for the Act.

Having said that, it just amazes me as to the opposition to this revolutionary concept of broad national coverage.  What is your guesstimate of the number of Americans that have health insurance coverage? 

Dr. Berwick.  The number that have health insurance coverage? 

Mr. Rangel.  That have health coverage of some kind. 

Dr. Berwick.  I don’t know the exact number.  I know that we have closed the gap a lot with the Affordable Care Act that now have access to ‑‑

Mr. Rangel.  I heard it is about 30 percent that don’t have coverage. 

Dr. Berwick.  As the Affordable Care Act gets into play, we are going to be closing that by over 30 million Americans that will have coverage. 

Mr. Rangel.  But these people somehow manage to get health care even though they are not covered by insurance; is that true? 

Dr. Berwick.  That is true.

Mr. Rangel.  And normally ‑‑ not normally, but many of them go to emergency clinics in order to get this health care, and it is my understanding that this is a very expensive way to get health care treatment. 

Dr. Berwick.  You are absolutely right, Congressman.  It is you pay me now or you pay me later.  When the patient comes in and you detect their diabetes early, they don’t get kidney failure later.  If they don’t have access to care, complications will occur and they will show up later in the emergency room or the safety system and they will be expensive in a different way, right out of our public treasury, often.

Mr. Rangel.  When I was a kid, things were that you never went to see a doctor unless you were sick, but now I think it is abundantly clear that you can prevent so many serious illnesses, as you said in your testimony, by being able to go without having enormous cost to prevent these things from happening.

Dr. Berwick.  Absolutely right.  We know the Director of the Centers for Disease Control, Dr. Frieden, has pointed out that with three or four simple, preventive steps we could reduce hundreds of thousands of heart attacks and strokes and other cardiovascular diseases in our country. 

Mr. Rangel.  Now if you already have coverage and you are paying your premiums, are not included in the premiums the costs for the people who don’t have coverage? 

Dr. Berwick.  Eventually, it comes around.  Somebody has to pay.

Mr. Rangel.  So if those who have premiums can find some way to reduce the costs of those who are not insured, does that not mean that your premium should be expected to be lowered? 

Dr. Berwick.  Your premiums can be lowered.  And in the long run the savings will be there because somewhere in the tax system and wages and in premiums that money will be saved and will come back into the American economy instead of being wasted in ill health that we could have avoided.

Mr. Rangel.  And so if we could develop a plan where most all people one way or the other would be able to get preventive care, would be able to get some type of care to prevent them from being hospitalized or prevent their illnesses from becoming chronic, then everybody not only gets the better quality of care but the cost per capita is dramatically lower.

Dr. Berwick.  Exactly, Congressman.

Mr. Rangel.  Now if that is true ‑‑ I guess coming from Lenox Avenue in Harlem, New York ‑‑ that those who have coverage probably take the attitude, I got mine, Jack, it is up to you to get yours.  Because I think we have done a terrible job.  And I want to thank the Republican majority for giving us a second chance of really showing the benefits of the program.  Because the law is complicated. 

But if you have a child with a precondition, you can better appreciate it today.  If you have a kid that is under 26 and you couldn’t get coverage, if you have high costs for prescription drugs, all of these things, the public is beginning to understand what is in the bill. 

So I would like to take this opportunity to thank the Republican majority for giving us an opportunity not only to defend the bill that this committee majority was so proud of playing a major part in and giving us an opportunity not just to defend but to point out that, in the short and long run, this is best for our Nation; and I appreciate your patience with us. 

And, Mr. Chairman, these hospitals that you referred to have sent out a release that I would like unanimous consent to be included in the record in saying sale it was, but it had nothing to do with the law that is before the committee.

Chairman Camp.  Without objection.

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Chairman Camp.  The gentleman’s gratitude to the majority is duly noted.  His time has expired, and Mr. Brady is recognized.

Mr. Brady.  I, too, am grateful.  Republicans oppose this health care plan because it won’t lower prices for Americans, it will drive people out of plans they prefer, we can never hope to afford it, and a lot of companies that provide health care today are going to drop them, none of which we think is the right solution for health care reform in America. 

So let’s get specific.  How many seniors have lost their Medicare Advantage plan since President Obama’s plan was put in place? 

Dr. Berwick.  Congressman, there is always turnover in Medicare Advantage.  I don’t know the exact the number that have changed ‑‑

Mr. Brady.  No, these aren’t turnovers.  How many have been forced out of their preferred Medicare Advantage plan?  Your agency says 700,000.  Are they right? 

Dr. Berwick.  That is a turnover number.  They can choose to be in Medicare Advantage or not.  It is a system in which people can choose ‑‑

Mr. Brady.  No.  Your actuaries said 700,000 seniors have already been forced out of their preferred Medicare Advantage plan.  Is your agency correct? 

Dr. Berwick.  Medicare Advantage plans are a market system in which beneficiaries can choose, and they ‑‑

Mr. Brady.  Is your actuary, their report accurate? 

Dr. Berwick.  What I know right now, sir, is enrollment in Medicare advantage plans is up 6 percent this year.  People are exercising their choices, and they have choices. 

Mr. Brady.  Is that a little misleading since the cuts on Medicare Advantage haven’t taken place yet? 

Dr. Berwick.  Well, we are seeing heavy marketing by Medicare Advantage, by Medicare Advantage plans.  There is growth in those plans.  There are reductions in premiums ‑‑

Mr. Brady.  If you could send back to us how many seniors have lost their Medicare Advantage plan, been forced out of their preferred plan, by State, I would appreciate it.

How many seniors will lose their preferred Medicare Advantage plan under the President’s new national health care plan? 

Dr. Berwick.  Medicare Advantage options are robust for Medicare Advantage beneficiaries, and they choose the plan that meets their needs ‑‑

Mr. Brady.  Your actuaries say 7.4 million.  Are your people correct? 

Dr. Berwick.  We are seeing an increase, sir, in the enrollment in Medicare Advantage ‑‑

Mr. Brady.  Because the cuts haven’t taken place. 

Dr. Berwick.  We are seeing investments in Medicare Advantage plans ‑‑

Mr. Brady.  If you could get me that answer.  I am not trying to interrupt, but since you already have these numbers, it would be great to refer to them.

Dr. Berwick.  We will be happy to ‑‑

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Mr. Brady.  How many of those ‑‑ in the Part D prescription plan for seniors, how many of those have lost their preferred plan since the President’s plan took place? 

Dr. Berwick.  Sir, the number of sound options, meaningful choices for Medicare beneficiaries in both C and D are increasing; and beneficiaries are taking advantage of those higher rates.

Mr. Brady.  Your agency says 3 million this past year have already been forced out of their plan.  Are your actuaries right? 

Dr. Berwick.  We are seeing turnover in Medicare Part D and C, as we always do.  Some plans, when you are leaving the market ‑‑

Mr. Brady.  How many seniors in Part D have been automatically enrolled in a Medicare Part D plan that costs them more? 

Dr. Berwick.  I don’t know the answer to that, sir. 

Mr. Brady.  Your folks say 1.5 million.  Can you provide both for Part D and those forced into a higher cost plan, can you provide that to us by State? 

Dr. Berwick.  Happily.

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Mr. Brady.  The donut hole, the way that was closed is highly flawed, creates cost shifting within it.  For the 90 percent of seniors who do not reach the donut hole, can you guarantee that they will not see higher premiums as a result of closing the donut hole for those who are not in it and not touched by it? 

Dr. Berwick.  As a result of closing the donut hole? 

Mr. Brady.  Yes.

Dr. Berwick.  Part D premiums rose slightly this year from I think $29 or $30, on average.  I am not quite sure I understand what you mean that their premiums will rise as a consequence of closing the donut hole.

Mr. Brady.  Yes.  Because you are cost shifting within the donut hole.  You are taking the 90 percent who do not reach it and taking the cost of closing it and applying it to them.  Your actuaries say their premiums will go up.

Dr. Berwick.  Congressman, what I know is that a patient that gets to the donut hole and needs their medications to preserve their life and their health and their function, if they can’t afford them, they get sicker, and we end up paying and their families ‑‑

Mr. Brady.  So can you guarantee for seniors who are not in the donut hole that their premiums won’t go up? 

Dr. Berwick.  It is so important to provide people medications when they reach that donut hole, and I think that we are seeing much more confidence on the part of seniors that they can get the medications they can’t afford.

Mr. Brady.  Does the Deceptive Trade Practices Act apply to ObamaCare? 

Dr. Berwick.  Does the Deceptive Trade Practices Act apply to ObamaCare?  Is that your question? 

Mr. Brady.  I am being only halfway factitious.  It seems to me none of the promises made to our seniors under the President’s national health care plan will come true.  Many are forced out of their plans, will see higher premiums.  That is why Republicans are serious about coming back with better solutions for seniors.

Dr. Berwick.  Congressman ‑‑

Chairman Camp.  The gentleman’s time has expired.  If you would like to submit a response in writing, you are certainly welcome to do that. 

Dr. Berwick.  Thank you.

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Chairman Camp.  Mr. Tiberi is recognized for 5 minutes. 

Mr. Tiberi.  Thank you, Mr. Chairman, for having this hearing today.  And kind of dovetailing on Chairman Brady’s comments about Republicans wanting to have better solutions for seniors kind of goes along with my line of questioning. 

It was disappointing to hear the ranking member express concern in the rhetorical fashion that he did with respect to this hearing and what Republicans believe.  Why Republicans voted to repeal this bill is because we do care about the impact of this bill to real people, and having $500 billion taken out of the system is a good reason to have this hearing today and get information from Dr. Berwick and Mr. Foster and continuing the discussion.  Because, Dr. Berwick, thank you for doing what you are doing and being here today, but we represent a lot of people in a lot of different parts in this country. 

In my district in central Ohio ‑‑ and Mr. Levin has been to my district, not on my behalf, but he has been to my district ‑‑ there are doctors, there are seniors, there are hospital administrators, there is the largest ‑‑ Dr. Berwick, the largest Medicare Advantage provider in my district is a nonprofit Catholic hospital.  And they are all very, very concerned about the impact that this bill, this law has with seniors.  Not insurance companies, not wealthy seniors, I am talking about real people. 

My dad has a sixth‑grade education.  My mom has an eighth‑grade education.  They are on Medicare.  My physician ‑‑ Dr. Randy I will call him ‑‑ a primary care physician, his father‑in‑law lost his primary care physician because he no longer was going to take Medicare patients.  So my physician, Dr. Randy, said, Dad, I will find you a doc.  I know a lot of doctors out there.  Columbus, Ohio, is the 15th largest city in America.  This doctor friend of mine could not find a doctor for his father‑in‑law because nobody would take new Medicare patients based upon the new law.  So he is now taking his father‑in‑law as a new patient, which he said he would never do.

A lady in my district, Joan, came to me teary eyed because her mother, a Medicare patient, first lost her Medicare Advantage program, so she had to go into Medicare fee‑for‑service ‑‑ and I just give you this as examples ‑‑ and then lost her doctor, who said I am done with Medicare. 

We have a large city.  We have four healthy hospitals, three of which are very concerned about the new law.  We have a doctor’s association ‑‑ unlike the American Medical Association ‑‑ the Ohio State Medical Association, who oppose the bill, who support repeal.  They want reform.  Don’t get me wrong.  They want reform, but they are very concerned about what this legislation does.

Mr. Tiberi.  And so I understand what the minority has said.  I appreciate your testimony.  But the reality on the ground that I see, as a son of seniors, as someone who wants to improve our health care system, who wants better access, who wants lower cost, who really wants people to keep what they have, which is one of the President’s goals, a wonderful goal by the way, Dr. Berwick, I thought the President was spot‑on on that, but the reality on the ground, at least in central Ohio, is people are not being able to keep what they have.  Seniors are frightened that they are losing coverage in reality that they had and they liked, that they chose.  Seniors are frightened that they are losing doctors. 

My mom lost her doctor.  And when you are 70 years old and you have had a doctor for a long time and you build a really good relationship with that doctor, you are frightened to face a situation where now you have to go on to another doctor that you don’t know who that is going to be, but you are talking with other seniors.  My mom and dad walk every morning at a local mall, a senior’s club, and we know what they are talking about.  Are there going to be any doctors left that take senior citizens?  And this is a year after this bill went into effect. 

And Dr. Berwick, you are a physician.  These physicians talk to their patients and they express concern about the new health care bill, many of whom supported it when it first was talked about, but opposed it in the end. 

So my question to you is let’s not talk about the statistics, let’s talk about what I say, what you say, what the chairman says, to constituents who on the ground, are seeing a reality that is much different than the rhetoric of when this bill passed and what the goals were.  People are losing the coverage they had, and they are losing their doctors, and their doctors are blaming the bill. 

Dr. Berwick.  And your question, Congressman. 

Chairman Camp.  If you want to respond briefly, the gentleman’s time just expired; I will give you a few seconds to answer and then you can supplement it in writing.

Dr. Berwick.  I am meeting all the time, Congressman, with doctors and I have the same objective you do.  We need a robust medical profession, a strong support to that profession.  And we are committed to that, you and I both are.  I am hearing a different story.  The physicians I meet with want to participate in the change of health care that the Affordable Care Act offers.  They are actively engaging in issues related to changing the form of care to make it sustainable, better for them and their patients.  And I think we can get there and apparently, unlike you, I think the Affordable Care Act provides a very strong foundation for that progress, for the professions as well as for the beneficiaries.

Mr. Tiberi.  Thank you.

Chairman Camp.  Thank you.  Mr. Stark is recognized.

Mr. Stark.  Thank you, Mr. Chairman.  Thank you for holding this hearing and thank you, Dr. Berwick, for being here to enlighten us. 

The Affordable Care Act has a variety of initiatives to modernize the Medicare program and make sure that we are, I hope, recognizing value more than volume. 

What has your value as you move among the provider community across the country, and what is the reaction you are hearing? 

Dr. Berwick.  To the modernization of health care, it is excitement, it is excitement everywhere.  We are seeing it first in some of the information technology work that is going on now.  We are finally at the threshold of really modernizing information technology for the providers of care and the beneficiaries of this care in this country.  It is going to make a tremendous difference. 

Beyond that, physicians today can be very frustrated by the fragmentation in the health care system.  People move from place to place and get dropped.  The Affordable Care Act has in it the opportunity now to reward and support continuous seamless care.  So the patient with diabetes that is seeing three or four different doctors knows that her journey is being crafted.  We will be able to build accountable care organizations, move payment toward bundled payment, link payment to quality of care for both health plans and hospitals, so that continuity gets established. 

Doctors all over this country and providers of care are quite excited about this progress into a better care system.  And Congress in its wisdom has given us these gifts of the Innovation Center in the Affordable Care Act and the Federal Coordinated Health Care Office for dual eligibles.  I can’t tell you how important these are.  The Innovation Center is going to liberate all of the imagination around the country, place by place, community by community, to find better ways to deliver care. 

And when a hospital in Nebraska or Maine develops a better way to make patients safer or to take better care of someone with multiple sclerosis, we can learn about that and spread that news all over the country.  We are on the threshold of a tremendous boost in innovation, creativity and spread of better care around this country.  And the doctors know that.  That is what they are talking to me about.

Mr. Stark.  Would it be your understanding that ‑‑ I guess this isn’t a yes or no, but that there is a positive role for government to play in the delivery of medical care in this country, and that that could be led by the Members of Congress if they decided to work together and do it? 

Dr. Berwick.  We are already doing it.  I mean it is a catalytic role.  You have set the stage for the health care system to do what it wants to do for doctors to thrive and commit themselves to patients.  You do that as you provide the resources to help them make care more continuous, safer, to invest in prevention like the Affordable Care Act does. 

But let’s make no mistake about it.  Government has no role at all in the encounter between the doctor and patient.  Honoring the sanctity of that consulting room is really, really key.  I am totally committed to that.  But we set the stage for those two people to meet each other and work together when things are done right.  So it is a combination of government support, encouragement, reward, and the confidence and the commitment that professionals have when they encounter patients, and the patients have when they are confident in the professional.  It is a balance. 

Mr. Stark.  Thank you very much for what you are doing.  And I look forward to, as I know members of our committee do, to working with you over the next couple of years to see that we can improve the system and with your cooperation.  Appreciate it very much.  Thank you.

Dr. Berwick.  Thank you, Mr. Stark.  Thank you for your leadership.

Chairman Camp.  Thank you.  Mr. Davis is recognized. 

Mr. Davis.  Thank you, Mr. Chairman.  Your comment on health care being liberated, the private sector has been innovating for decades and sharing common information among the professions.  I just find it hard to believe, to talk about innovation in the context that we have, in a variety of issues from programmatic perspectives to the issue just recently discussed. 

I didn’t go to Harvard, I went to West Point.  And the one thing I would have to say at the beginning of this, listening to this hearing, having watched my mother navigate through the system that was managed by your agency, and we talk about affordability and innovation, in the world where I grew up, both academically and professionally, these answers would be called equivocation.  There are straight yes‑and‑no answers about cuts on issues.  And I think it is very important to share the truth of this and avoid the posturing for the lives to save that we want to save. 

Successful physicians that I know are known for their candor as well as their bedside manner in sharing factually what is before people.  I have not heard one doctor, save one who is in a very different place politically than the rest of the entire Kentucky Medical Association, whose head I met with yesterday, who has not said this is going to limit their capacity, increase their overhead, increase their cost and is going to cause a very serious problem for senior citizens.

When you talked about competitive bidding being a good thing, it is not pay me now or pay me later.  It is pay me now and pay me later.  Directly, I have a long term DME provider that is well established in my community, lost their ability to bid.  A California company won.  And coming on the back side of this, because they had no local capacity to deliver, guess who they turned around to subcontract with?  The company that had been doing the business at a lower cost before. 

The, let’s say, counter‑intuitive answers are not here.  And admittedly I am not a doctor.  One of my opponents once played one on television, but I will have to say that I am most disappointed in the lack of candid answers on these issues, because we want to help you improve this system.  It has been made more complicated by the bill.  And in my other life it would be “read the problem.”  If you read the bill, it does not connect the dots by creating 162 new agencies, commissions, and boards.  Cutting direct benefit and increasing taxes is not a recipe for improved capacity.  I want increased access. 

In coming to that, many of my constituents are on Medicare Advantage.  Do you know how many people are actually in the program, Dr. Berwick? 

Dr. Berwick.  About 12 million, I believe.

Mr. Davis.  That is correct.  It is about 12 million people.  Do you know how many people were in the program in 2005? 

Dr. Berwick.  I don’t, sir. 

Mr. Davis.  It is about 5.3 million, less than half of what it is today.  So the market working competitively, seniors were moving to this as a preferred program of choice.  And I think the numbers say something about the popularity, don’t you? 

Dr. Berwick.  Yes.  I think Medicare Advantage has tremendous opportunities embedded in it as well as significant problems.

Mr. Davis.  Well, I would say that the customers tend to vote with their feet, no different than the doctors who are pulling out of Medicare in droves.  I am seeing the same thing happening in the Ohio Valley.  I am in the same vicinity as Mr. Tiberi here.  We are seeing that happen in the medical profession.

It is getting to a point because of this bill ‑‑ I have a daughter who wants to go to medical school, has been told by seven different physicians not to go because of the truncation and the complication in the health care system that is going to be placed upon future physicians. 

But coming back to Medicare Advantage, your own actuaries said last year, as Mr. Brady pointed out, that 7.4 million seniors would lose their coverage in Medicare Advantage.  Is your actuary correct? 

Dr. Berwick.  The actuary is making predictions of the future, sir.  What I have is the evidence before us today.  We have ‑‑

Mr. Davis.  I didn’t ask you that question.  I asked you, is your actuary correct in his calculations? 

Dr. Berwick.  The actuary is making a prediction.  I can’t judge whether he is correct or not.  What I can tell you are the facts now, sir ‑‑

Mr. Davis.  I will go back to our academic education.  The commander is responsible for what the unit does or fails to do.  I am not interested in an academic salon answer. 

Is your actuary correct in the assumptions that your department submitted to this committee? 

Dr. Berwick.  Sir, I am not a commander.

Mr. Davis.  You are the leader of ‑‑ you lead a budget larger than the Defense Department, sir.  Please answer the question.

Dr. Berwick.  I lead an agency in which the growth rate of Medicare Advantage this year is 6 percent and the actuary predicted a decrease.  So the actuary’s prediction was incorrect.  Our Medicare Advantage is healthier now than it ever was before. 

Mr. Davis.  So if the Medicare Advantage is a good program, then why would he say that the people are going to be cut out of the program by the very legislation that you are advocating? 

Dr. Berwick.  What I am saying is that I have the facts on the ground before me now, and the facts are that Medicare Advantage is looking stronger and stronger.  We are seeing plans invest in expansion of Medicare Advantage.  We are seeing robust choices for beneficiaries, 26 choices per county on average in this country, average premiums going down 6 percent, enrollment going up 6 percent.  That looks like a very robust program.  And these are smart businessmen out there.  People who run the Medicare Advantage plans are investing in a future that looks pretty bright to them, or I don’t think they would be investing in the way we are seeing them invest right now.  Medicare Advantage looks healthy.

Mr. Camp.  Thank you.  The gentleman’s time has expired.

Mr. Reichert is recognized. 

Mr. Reichert.  Thank you, Mr. Chairman. 

Doctor, thank you for being here today.  I am not a doctor either, but I have been a patient many times.  So I am looking at the system as most Americans would, from that side of the issue.  I am disappointed too, as Mr. Davis has stated, in the way that you are answering or not answering some of the questions.  So I hope that you understand our frustration here with some of your responses. 

Most Americans are just trying to figure this thing out.  They need your help to do that.  A lot of people are listening today.  This is streamed live C‑SPAN, so there will be a lot of Americans listening to your words. 

You obviously support the Affordable Care Act.  We had a witness in a couple of weeks ago whose name is Austan Goolsbee.  Do you know him? 

Dr. Berwick.  Yes.

Mr. Reichert.  Chairman of the Council of Economic Advisory.  He said that the health care bill would increase access, decrease costs, increase benefits, reduce the deficit, and people would be allowed to keep their health care if they wanted to.  Do you agree with those statements?  Does the bill accomplish those things? 

Dr. Berwick.  It appears to be, yes. 

Mr. Reichert.  It that a yes? 

Dr. Berwick.  Yes.

Mr. Reichert.  Is there anything at all in the bill that you would change? 

Dr. Berwick.  We are going to learn over time.  That is a complex question. 

Mr. Reichert.  But you have had some time to read the bill and look at the bill.  Is there anything that stands out in your mind that you would change? 

What don’t you like about the bill?  Or is it all good. 

Dr. Berwick.  It is a very complicated bill, sir.

Mr. Reichert.  Is there anything about the bill you don’t like? 

Dr. Berwick.  Right now I am implementing the bill ‑‑

Mr. Reichert.  Yes or no, I guess, because I am not going to get a straight answer.  Is there anything about the bill that you would change?  Yes?  No? 

Dr. Berwick.  Over time, we are going to learn about this bill, sir, and I can tell you ‑‑

Mr. Reichert.  From what you know today.  From what you know today, sir, is there anything that you would change? 

Dr. Berwick.  In the whole ‑‑

Mr. Reichert.  Can you tell me when the $206 billion cuts to Medicare Advantage begin? 

Dr. Berwick.  Well, right now the payments are stabilized.

Mr. Reichert.  When do the $206 billion cuts begin?  What is the target date, the set date?  What year? 

Dr. Berwick.  The cuts are phased in over time.  It depends on the plan. 

Mr. Reichert.  When do they begin? 

Dr. Berwick.  It depends on the plan ‑‑

Mr. Reichert.  What year do the cuts begin?  Can you give me a year? 

Dr. Berwick.  It is variable depending on the plan and the area, sir.

Mr. Reichert.  2017, $206 billion in cuts will begin to take place.  Your actuaries say, as Mr. Davis has asked you, that there would be 7.4 million seniors then leaving that system, losing their health care.  So the statement that you agreed with earlier that Mr. Goolsbee also agreed with ‑‑ you can keep your health care if you want to ‑‑ isn’t a true statement.  Even the President of the United States has said in a public forum, which I was present at, he said there may have been some ‑‑ in regard to this statement that you can keep your health care plan if you like it, he said there may have been some language snuck into the bill that runs contrary to that premise. 

Now, if there is language in the bill that runs contrary to this premise, and according to the President it does, would you change that language? 

Dr. Berwick.  Sir, Medicare Advantage ‑‑

Mr. Reichert.  Would you change the language if there is language in the bill, as the President says there is, that got snuck into the bill, would you change the language that prohibits people from keeping the health care they like?  Would you change the language, sir? 

Dr. Berwick.  People on Medicare Advantage ‑‑

Mr. Reichert.  Would you change the language, sir, if there is language in the bill?  That is a yes‑or‑no question.  If there is language in the bill, yes or no? 

Dr. Berwick.  I would love to be able to answer your question yes or no.  I cannot, sir.

Mr. Reichert.  Why can’t you answer the question?  It is a simple question.  If there is language in the bill that says, as the President has said, that runs contrary to the promise that you can keep your health care if you like it, why would you not say “yes” to that question, that I will change that language because we believe and we have said over and over again, if you like your health care plan, you can keep it.  Why would you not change that language? 

Dr. Berwick.  Congressman, to me ‑‑

Mr. Reichert.  Why would you not change that language, sir?  Answer the question.

Dr. Berwick.  Sir, you are asking a hypothetical question, sir.  What I can tell you is our job ‑‑

Mr. Reichert.  No, sir, I am not.  The President of the United States has made this statement.  There is language in the bill ‑‑

Mr. Levin.  Mr. Chairman, I need to object.

Mr. Reichert.  Well, it is my time, Mr. Camp.

Chairman Camp.  If the gentleman from Washington State would suspend.  Mr. Levin.

Mr. Levin.  I will find a way to object.  I think we have to let witnesses answer questions, sir.  This is not the Star Chamber.

Chairman Camp.  Back to regular order.  The gentleman from Washington’s time is about to expire, so you have about 2 or 3 seconds left, and then we will leave a few seconds for Mr. Berwick to answer the question. 

The gentleman is entitled to an answer to his question. 

Mr. Reichert.  Mr. Chairman, I would just ask for a straight answer from the witness.  Thank you, and I yield back.

Chairman Camp.  Mr. Berwick, you have a few seconds, as I have done to the minority, to respond to the question.

Dr. Berwick.  Mr. Chairman, I am not aware of any such language in the bill, and the question to me sounds hypothetical.

Chairman Camp.  Thank you. 

Mr. McDermott is recognized. 

Mr. McDermott.  Thank you, Mr. Chairman. 

Dr. Berwick, you have given a bravura performance in political theater.  You have been brought to a stage today and put into a play that you really don’t want to be in; you want to be doing your job.  This is a stage being set to get rid of Medicare.  The Republicans have never liked Medicare.  When Harry Truman proposed it in 1946, the Republicans started talking of socialized medicine, playing on the fears of what was going on in the Soviet Union.  They have used these fear and misinformation tactics then, and they are using them again here today. 

Now, when Medicare passed in 1965, most Republicans voted no.  And what we are really doing here today is trying to poke holes in the bill.  But we have been here 100 days, and the committee has laid no proposal on the table to make it better.  Everybody is talking about what is wrong with it.  Bill Frist said, don’t repeal, make it better. 

So all we have in front of us is one plan that is on the table, Paul Ryan’s road map.  He wants to give a voucher to every senior citizen in this country.  Now, let’s be serious.  The point of that is that the Republicans believe that seniors need to put more skin in the game.  And I want to be crystal clear here.  Seniors already spend one third of their income on health care.  They can’t afford any more skin in the game. 

So whatever I hear here is really about the Paul Ryan plan.  And I would like you to take the time to tell us what you think will happen when they repeal or begin to undercut and destroy this and work toward putting a voucher plan, because that is the only thing they have put on the table, and I believe that all the Republicans are for it, because none of them have stood up and said, we don’t want a voucher system, we want to make this system better, we hate ObamaCare.  We want to get rid of it and put in the voucher system.  So tell us what a voucher system would do to seniors in this country.

Dr. Berwick.  It would put them at risk.  People, they already have skin in the game.  Their bodies are in the game.  The whole idea here is to give seniors security so they don’t have to wake up in the morning wondering whether they can get to the care that they need and that will help them preserve long and fruitful lives. 

Mr. McDermott.  Do you think seniors could take a 6‑ or $7,000 dollar voucher out at age 75 and get a health care plan? 

Dr. Berwick.  Not a senior whose actuarial risks are 11‑ or $12,000 ‑‑ or worse if they get something ‑‑ a worse disease than that.  We are putting them at risk.  We are partners with the seniors in Medicare.  We have got their backs.  I wake up every day thinking about how to help these beneficiaries make sure they can get the care they want and they need.  I think that is an important role to fill.  And my colleagues in CMS have the same commitment. 

Sending them out on their own to go navigate this very difficult system, which isn’t always friendly to their needs, is not the right answer.  And taking the law down strikes me as a terrible answer.  It means taking away the wellness visits we have just added, removing access, first‑dollar access to preventive coverage.  It means putting the people in the doughnut hole back at risk now, so the lady I met in Atlanta, who can’t afford her medications right now, is going to have her blood pressure rise and get a stroke as a result of that. 

It means, by the way, that we decrease our focus on quality because this law has in it unparalleled tools for transparency and improvement of care through measurement, support to quality, and rewarding quality.  In this bill, we now can reward hospitals for making their care safer.  We couldn’t do that before.  Because of this bill, we can reward Medicare Advantage plans that reach 3‑ or 4‑ or 5‑star levels with more and more reward.  That is going to focus the whole industry on doing better for the beneficiary.  When the bill goes away, that goes away. 

This bill gives us tools to fight fraud and abuse at a level never possible before.  Do we want to let the criminals get away now?  Just let them out scot‑free, by taking the law away; it makes no sense to me.  The bill is going to invest in a transparency of beneficiaries and the public at large and providers can find out much more because of this bill about their own performance.

Mr. McDermott.  Do you think that if seniors understood what a voucher plan really meant, they would be in favor of it, as opposed to the Medicare plan that we have and we are trying to amend and make better? 

Dr. Berwick.  I don’t think; I know.  I have been out talking to seniors.  And when I go to senior centers and I explain this bill and I tell them where we are, they applaud.  They want this.  They understand how this bill works in their interests and how when I go to work every morning I have their interest in mind.  A voucher system says go out on your own, God bless you, I hope you do okay.

Mr. McDermott.  Can I clarify one other thing? 

Chairman Camp.  The gentleman’s time has expired. 

I do think it is important to note for the record that the Republican plan on health care that was introduced in the Congress was the only plan that was scored by the Congressional Budget Office that reduced premiums across the board, did not cut Medicare, and did not increase taxes. 

And with that, I would recognize the gentleman from Louisiana. 

Mr. Becerra.  Mr. Chairman, I hope that if we are going to be allowed to comment in between, outside of regular order ‑‑

Chairman Camp.  When you are the chair, you will be allowed to comment.

Mr. Becerra.  We will ask for regular order as often as we can. 

Chairman Camp.  Dr. Boustany has the time.

Mr. Boustany.  Dr. Berwick, I too come from a family line of physicians.  I am a cardiac surgeon and know of the importance of the doctor‑patient relationship as you do. 

How do you reconcile your views on provider oversupply?  You have made multiple statements with regard to oversupply in markets and so forth, your actuary’s concerns about shortages, which are real, and the prospect of those shortages getting worse with the current reimbursement rates that inevitably will be cut.  We are seeing reimbursement pressures on physician practices.  We already have shortages.  Would you agree that we have a shortage in primary care physicians in this country? 

Dr. Berwick.  We have a shortage of primary care in this country, yes. 

Mr. Boustany.  Physicians? 

Dr. Berwick.  Physicians and nurses.  Yes.

Mr. Boustany.  Do you agree that we have a shortage of general surgeons in this country? 

Dr. Berwick.  In some areas we do, sir.

Mr. Boustany.  What about rural areas? 

Dr. Berwick.  Some rural areas are having trouble with access to general surgery, I know that. 

Mr. Boustany.  I think it is more widespread than you seem to be suggesting, sir.  How do you reconcile your view with this?  Because your statements seem contrary to what your actuaries are saying. 

Dr. Berwick.  Sir, please explain to me what contradiction you see.  I will be happy to address it.

Mr. Boustany.  Well, the contradiction is we are going to see shortages ‑‑

Dr. Berwick.  Yes.

Mr. Boustany.  And worsening shortages, which will hurt access to care for seniors and particularly folks who live in rural communities.

Dr. Berwick.  Yeah.  Well, again, the actuary is making a prediction here.  What I see in the Affordable Care Act is an investment in expansion of primary care and primary care services.  I think over time it will have that effect, investments in health centers, teaching ‑‑

Mr. Boustany.  Reclaiming my time, sir.  Without fixing the reimbursement system, we are going to see more and more physicians either opting out for early retirement, we are seeing fewer people going into medicine.  How do you reconcile this? 

Dr. Berwick.  I agree with that.  The President has committed to fixing the SGR problem, which we are absolutely committed to working with you and your colleagues on, in trying to get past that.  That is a serious looming problem in the health care system for sure.  And as ‑‑

Mr. Boustany.  That leads me to my next question, because you have talked often about rewarding quality versus quantity, and yet in your testimony I see nothing but platitudes and nothing specific to suggest the path you are going to take on this.  And I suggest that there is going to be a lot of work that this committee is going to have to do, to dig down working with you on this issue.

Dr. Berwick.  I will be happy to work with you, sir.  Within the work outlined for us in the Affordable Care Act and other legislation, there are very specific ways in which quality will be linked to payment, hospital‑based, value‑based purchasing, physician modifiers ‑‑

Mr. Boustany.  But we have seen those specifics.  Those are platitudes.  I understand what needs to be done in terms of quality.  I have done that in hospitals.  I took a community hospital from being sort of average to the top 100 hospital in cardiac surgery.  I understand those things.  But we have to get beyond the platitudes on changing this reimbursement system, because it is at the heart of access problems for seniors and particularly for rural families, because we are going to see access problems.  This reimbursement issue is causing physician shortages.

Dr. Berwick.  Sure.  Congressman, I assure you the specifics are there, they are out there, and I would be happy to work with you at any point afterward to explain what those specifics are.  And I welcome your comments and improvements in those specifics.

Mr. Boustany.  Thank you.  Now, with regard to technology, you have made a number of statements that seem to be of concern to me, obviously, about downplaying the importance of new technology innovation in health care.  We have an innovation tax in this bill that is going to hurt innovation, I believe, in the long run.  But you have made statements ‑‑ I will quote one.  “One of the drivers of low value in health care today is the continuous entrance of new technologies, devices, and drugs that add no value to care.” 

Can you explain that. 

Dr. Berwick.  Of course, yes.  Some new devices, drugs, are miracles.  They save lives and they add tremendous value to care.  Others do not.

Mr. Boustany.  So who should decide? 

Dr. Berwick.  Professions, the scientific community ‑‑

Mr. Boustany.  So when you suggest there should be a national policy, who is going to make those decisions? 

Dr. Berwick.  A national policy.

Mr. Boustany.  National policy, that is what I am referring to.  You referred to a national policy.  In fact your quote is, “If we had a national policy, it would allow us to know the difference.”

Dr. Berwick.  Investments in supports to the scientific community to allow us to understand more and more about what works and what works better than other things is very important ‑‑

Mr. Boustany.  So let me ask you this.  Back in the 1950s when a surgeon saw a patient die from a pulmonary embolus, he put his mind to work on this and he actually came up with an idea.  And working in his garage, he put together the first heart‑lung machine.  Would that have fit into national policy?  What impediments would there have there been?

Chairman Camp.  The gentleman’s time is expired.  If you want to respond quickly to that.

Dr. Berwick.  I am very excited by the Innovation Center and what it can offer for people exactly like that all over the country.  We have a good idea.  We now have the ability to help him invest further in that idea and grow as a country as a whole.

Chairman Camp.  The gentleman’s time has expired.  Mr. Heller is recognized. 

Mr. Heller.  Thank you, Mr. Chairman. 

Dr. Berwick, I appreciate you being here today.  I am going through some of your quotes and I know we have heard some of them already today, but frankly I think they are worth repeating, quotes like “The NHS is not a national treasure, it is a global treasure.”  “The decision is not whether or not we will ration care, the decision is whether we will ration care with our eyes open.”  Quotes like “Competition in short will hurt you, not help you.”  Another one, “I admit to my devotion to a single payer mechanism as the only sensible approach to the health care finance I can think of.”  And finally, “Any health care funding plan must redistribute wealth from the richer among us to the poor.” 

Sometimes reading your quotes, Dr. Berwick, I wonder what country we live in. 

Having said that, I have a significantly large district and, as you know, this health care bill significantly reduces the funding for the Medicare Advantage program.  Nearly one‑third of all Medicare beneficiaries in my district are enrolled in the Medicare Advantage, and that is more than 100,000 seniors in my largely rural district. 

You just made a comment that you go to these senior centers and you talk to them and they applaud you on what this new program, this new care provided for them.  I go to senior centers in my district and try to explain the new health care system to them, and I assure you, I don’t get a round of applause. 

You just said that it is a good model.  I guess my question is how you, in your mind, say that this is a good deal for seniors if the net Medicare savings is $575 billion in this piece of legislation, and yet the amount reinvested in the Medicare benefits is $24 billion?  If you are going to take $575 billion out of the Medicare system, what benefits do seniors have with only $24 billion put back in? 

Dr. Berwick. The projections, as you heard earlier, say that co‑payments in Parts A and B are going to go down by $200 a year by 2019; fee‑for‑service premiums will be down by $200; the doughnut hole will have closed and seniors will no longer be afraid of losing their drug benefits; and out‑of‑pocket costs in American health care are projected to go down $237 billion.  This is a very good deal for seniors and a very good deal for America.

Mr. Heller.  So do you believe protecting the patient‑doctor relationship is a goal of this health care bill? 

Dr. Berwick.  Definitely.

Mr. Heller.  Do you believe that patients, their families, their doctors, should be the ultimate authority for the individual health decisions? 

Dr. Berwick.  I believe ‑‑ yes, I do.

Mr. Heller.  Do you believe one of the goals of the health care bill is streamlining the system so patients can navigate it more easily? 

Dr. Berwick.  Yes, I do.

Mr. Heller.  If that is the goal of the health care bill, wouldn’t a reasonable person think that 100 new boards, agencies, and programs would violate all three of those questions? 

Dr. Berwick.  I think the health care bill will accomplish all of the goals you just articulated:  a smoother, more seamless care.  I can name the parts of the bill that will help us do that as a Nation in partnership between the public and the private sector.  We can see how quality will be improved as a result of this bill and costs will fall as a result of the improvement of quality.  People will be better off because of this bill, I am sure of it.

Mr. Heller.  Maybe in another country.  Thank you.  Thank you, Mr. Chairman.

Chairman Camp.  All right, thank you.  Mr. Lewis is recognized. 

Mr. Lewis.  Thank you very much, Doctor, for being here.  Thank you for your service.  As one member, I must tell you that I love your testimony, not just like it but I loved it.  And I love your response, your answers to the questions.  This is my beginning of my 25th year here, and you have been one of the better witnesses.  And I just want to thank you.  Thank you and your family for your great service. 

Dr. Berwick.  I can’t help saying, Congressman, what an honor it is to be in the same room as you.

Mr. Lewis.  Thank you, sir. 

Doctor, what would happen to cost sharing for Medicare beneficiaries if reform was repealed? 

Dr. Berwick.  Costs would go up for beneficiaries if reform is repealed, beginning just with the drug coverage issue.  Seniors are very, very dependent on access to medications.  It preserves their health and their life and their vitality, and they know it.  If this bill were repealed, more and more seniors will lack access to the drugs that they really need.  If this bill is repealed, they won’t be able to get as easily the preventive services they need that will keep them healthy over time.  A little bit less directly, because this bill so much invests in delivery system reform, making care better, smoother.  Ask a senior who is seeing four or five different doctors, taking three or four medications, what her life is like in a fragmented health care system.  It is a nightmare.  She can’t be sure that two doctors are prescribing drugs that are not incompatible with each other.  She can’t be sure that her lab test report will go to the right place. 

Delivery system reform, improvement of care is what is behind this bill.  That is where we will end up, a better care system to be a doctor in, to be a nurse in, to be a patient in.  We can make care safer.  If this bill goes away, we don’t have a plan anymore then for crafting the kind of journeys our patients and our families and our communities really want.  Costs will go up.  Health care quality will go down.  The bill is an open door to the new American health care system that we really want and all need and can afford. 

Mr. Lewis.  Doctor, if the Affordable Care Act was repealed, would those 3 million seniors who receive $250 from the government have to pay that money back? 

Dr. Berwick.  We are looking at that now.  I hope we don’t ever have to face that question for real. 

Mr. Lewis.  Doctor, like Mr. Rangel and others, when I was growing up in rural Alabama as a young child, I never saw a doctor, never went to a doctor.  Tell me what is in this bill that would help children growing up, poor people in rural America, black, white, Latinos, Asian American, Native American, or growing up and just happen to be poor, family can’t afford a doctor.  Do you think this is a major step toward providing health care for all of our people and especially young people? 

Dr. Berwick.  Yes.  High‑quality health care, which is what we all want, begins with health care.  You have to be able to get to it.  And this bill assures the old and the young and millions of people that they can get access to the care that then can be made great for them.  If they can’t get in, they can’t get help. 

If this bill goes away, people will wake up in the morning, tens of millions of Americans will wake up wondering whether they are going to lose their health care coverage and not be able to get it.  Children and adults.  We are talking about a bill that has in it now a guaranteed issue of insurance to children despite preexisting conditions.  That is a major step forward.  That means a kid who has asthma, who happens to be in transition, their parents between jobs, cannot be denied access to health care insurance as a result of this bill.  Take that away, you hurt that child. 

Mr. Lewis.  Thank you very much, Doctor. 

Mr. Camp.  Thank you.  Mr. Gerlach is recognized. 

Mr. Gerlach.  Thank you, Mr. Chairman. 

Doctor, thank you for testifying today.  To switch gears just a bit, one of the gaping holes, in my opinion, in the health care enactment last year was the lack of medical liability reform legislation.  And it was interesting to hear the President in the State of the Union indicate his support for medical liability reform. 

Do you support medical liability reform legislation? 

Dr. Berwick.  Yes, I do, Mr. Gerlach.

Mr. Gerlach.  Do you support a cap on noneconomic losses? 

Dr. Berwick.  I support an exploration now in the country as to what forms of improvement in the medical liability system would actually work to the benefit of patients and the quality of the system.  I don’t know exactly what those will be, but I think we have got to start on that process. 

Mr. Gerlach.  Are you aware of the State statutes in California and Texas that do have cap on noneconomic losses? 

Dr. Berwick.  It is not my area of specialty and it is not CMS’ direct area; but, yes, I am aware of them.

Mr. Gerlach.  So you are open to Federal legislation that would include languages that supports caps on noneconomic loss? 

Dr. Berwick.  Sir, I am not in a position to commit myself right now to what I think about any particular set of solutions, but I think we need to begin the national exploration for solutions.  Indeed we are, the Agency of Health Care Research and Quality has demonstration projects underway now, but we need more.  And I was happy to see that in the President’s language.

Mr. Gerlach.  In your testimony, you have the sentence, “CMS has new tools to fight fraud that will return money to the trust funds and the Treasury.” 

What new tools does the agency have to really ferret out the waste, fraud, and abuse that is contained in the system? 

Dr. Berwick.  Two big kinds of tools, I would call them detection tools, which will allow us to identity patterns of abuses; abuse of the public trust and actually criminal behaviors.  And working very closely with the Department of Justice and the FBI and others, we are engaging in more and more enforcement with quite a bit of return.  I think the return on investment calculation shows something like 6.8 to 1 for the dollars we are putting into that.  That is the pay‑and‑chase part of enforcement. 

The other part, very exciting for me, is prevention.  Why do these people get into the system in the first place?  So we now have rules out there that will eventually allow us to prequalify Medicare providers at different tiers of risk by screening them in advance, in some cases in the riskiest levels, with actual criminal background checks that will keep the criminals out of the system in the first place.

Mr. Gerlach.  Last fall I had a constituent that came to me.  He sought medical care for a knee problem.  The doctor prescribed a knee brace for him.  A knee brace was then provided, and under the reimbursement schedule of Medicare, the provider was provided $686 for a knee brace.  My constituent then went online and found online that same knee brace for the cost of $194. 

So how is it that Medicare, if you are searching for opportunities to find where the waste is, why is it reimbursing a $194 knee brace for $686? 

Dr. Berwick.  Congressman, I would love to look into that particular case with you afterwards if you are willing to do that with me.

Mr. Gerlach.  I will submit all the documentation with you, and I have been corresponding back and forth with your branch on this, but keep getting a bureaucratic answer as to why the schedule is the way it is.  And I would like to have a more specific answer to why we are paying $686 for a $194 knee brace.

Dr. Berwick.  I am delighted to pursue that with you.  I will note that the DME competitive bidding system will more and more allow us to get much better deals for our beneficiaries and for the Congress as my board.  I think it is really important for us to be acting in a market system on behalf of beneficiaries to find the best deals for them.

Mr. Gerlach.  Thank you, Doctor.  Thank you, Chairman.

Chairman Camp.  Dr. Price is recognized. 

Mr. Price.  Thank you, Mr. Chairman. 

Welcome, Dr. Berwick.  I too am a third generation physician.  My father and my grandfather were docs, as you are a family of three generations of physicians.  But I really think you missed your calling.  I think you would have made a great lawyer for all of the reasons that we can imagine. 

The issue here isn’t between Democrats and Republicans, isn’t whether or not Americans have access to the highest quality of care.  The issue is whether or not patients and families are going to be in charge of that care, or government is going to be in charge of that care.  And by and large, our friends on the other side of the aisle believe that government can make better decisions about this than people. 

You in your answers have confirmed that you basically believe the same thing as well, that government needs to be in place to be able to make these decisions for people because clearly they wouldn’t be able to make them themselves.  So it gets down to who decides.  Who is going to decide these fundamental questions about health care? 

In the sale of this bill, as has been cited, the President said, and many of our friends on the other side said, Don’t worry; if you like the kind of health care coverage that you have you can keep it.  Is that true? 

Dr. Berwick.  That the President said that. 

Mr. Price.  No.  Is it true that if you like what you have, you can keep it? 

Dr. Berwick.  I don’t understand your question, Congressman.

Mr. Price.  Are there any Americans that have lost coverage that they liked? 

Dr. Berwick.  There is always turnover in the supply ‑‑

Mr. Price.  That is not the question.  The question is, because of this bill, there are Americans that have lost the coverage that they want and in fact can’t have the coverage that they like.

Dr. Berwick.  Dr. Price, my answer is that there is turnover always in what is available to beneficiaries ‑‑

Mr. Price.  Dr. Berwick, that is not responsive to the question, which is why you see the frustration up here.

Dr. Berwick.  Yes, I know it.

Mr. Price.  The fact of the matter is, there are millions of Americans who have health care coverage, have had health care coverage, and that coverage is going away because of this law.  And that is what they are concerned about.  Many of them were out on the lawn of the Capitol over the past 2 years, expressing this frustration.  Were they wrong? 

Dr. Berwick.  What I am hearing from the beneficiaries is that they have more choices, more options, they are able to find the care ‑‑

Mr. Price.  Dr. Berwick, with all due respect, you are hearing from beneficiaries who are selected by individuals to come and give you a story that is not reflective of the real world.  The real word is reflected by the individuals right here who are going home and hearing from their constituents, patients that you and I used to care for, that they are no longer able to get the coverage and the treatment that they desire. 

I want to move to quality.  Quality is the pivotal issue in this.

Dr. Berwick.  Yes.

Mr. Price.  And the question is, who is going to decide what quality health care is?  Because as you know, treating thousands of patients, what is the right treatment for one patient, even with the same diagnosis, isn’t necessarily what is right for another patient, because patients are unique and it takes those patients and families and doctors together making those decisions. 

Do you believe that that is the case? 

Dr. Berwick.  Yes, I do sir.  The importance of addressing the needs of every single individual patient is at the heart of my ‑‑

Mr. Price.  Who ought to make that final decision about what treatment that patients receives? 

Dr. Berwick.  The doctor and the patient.

Mr. Price.  The doctor and the patient.  If I were to tell you that this law violates that principle and that your agency has the power to negate a decision made by a patient and the doctor, would you agree with me? 

Dr. Berwick.  No, I would not.

Mr. Price.  So if we can demonstrate that in fact that is the case, then you will be supportive of us changing this law to make it so that doctors and families and patients are in fact given the right to make that clinical decision; is that correct? 

Dr. Berwick.  Dr. Price, I honor the encounter between the doctor and the patient.  I also think this law gives us as a country tremendous tools for turning the lights on to understanding the quality of the care that is going on ‑‑

Mr. Price.  Dr. Berwick, I will show you line and verse of this law that I believe removes that, through the Independent Payment Advisory Board, through the Comparative Effectiveness Research Council.  There are many who believe that you support rationing and have said that.  Do you support rationing of care?

Dr. Berwick.  I abhor rationing.  My entire life has been spent fighting rationing.  There is no substance whatsoever to the concept that I support rationing. 

Mr. Price.  I appreciate that, because we are going to be able to demonstrate for you how this bill ‑‑ this bill ‑‑ provides for rationing of care in this Nation.  And I welcome your participation in making certain that it is overturned. 

In my brief time left, I want to make certain I get to the physicians who are trying their hardest to take care of patients in this country.  Many are concerned about the likelihood that they see coming down the pike that their licensure will be tied to participation in this plan. 

Can you state unequivocally that you believe that physicians’ licensure in a State to practice medicine ought not be tied to participation in any health care plan? 

Dr. Berwick.  Dr. Price, I am not aware of the issue that your question refers to.  If you are willing to talk with me afterwards about it, I would be happy to ‑‑

Mr. Price.  Do you believe that physician licensure ought to be tied to physician participation in any plan? 

Dr. Berwick.  I don’t understand your question, sir, and I apologize for that.  I would be happy to talk with you about it afterwards and you can explain it to me.

Mr. Price.  I look forward to that.  Thank you.

Dr. Berwick.  Thank you, Dr. Price.

Chairman Camp.  The gentleman’s time has expired.  And I will say that, Doctor, you are able to answer in writing at a later time if you so choose to do that.

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Chairman Camp.  Mr. Neal is recognized for 5 minutes. 

Mr. Neal.  Thank you, very much Mr. Chairman. 

Dr. Berwick, first of all, a word of thanks.  Your medical DNA is in Massachusetts.

Dr. Berwick.  It is.

Mr. Neal.  What  arguably is the Mecca of health care delivery in the country.  I think that any State would be envious of the first‑class hospitals that we have, including the teaching hospitals which are evenly distributed across the entire Commonwealth.  The law that is under assault here this morning has high customer satisfaction across the State.  North of 77 or 78 percent of the people are satisfied with the delivery that they have witnessed. 

Now the term “actuary” has been thrown around here frequently.  Could you succinctly tell us what an actuary does Doctor? 

Dr. Berwick.  I regard our actuary as a kind of consultant.  He looks at the financial situation of the agency and of the trust funds, and he advises us on what he thinks about them and their future.

Mr. Neal.  Thank you.  And let me bring you to the next point.  At rotary clubs and chamber of commerce get‑togethers and neighborhood events, our friends on the other side are going to be routinely asked, Do you favor a ban on preexisting condition?  And I can tell you, the chorus from them is going to be yes.  Do you favor a cap on out‑of‑pocket expenses?  Yes.  Do you favor keeping children on their parents’ health care until they are 26?  The answer is going to be yes.  Do you offer and support more preventive care?  Yes.  How about more women’s health care?  Yes. 

Do you favor, based upon the actuarial references they have made today, getting there through the mandate which the insurance industry would say it is the only way that it can be done?  How might you respond to that? 

Dr. Berwick.  Well, I agree with all of the above.  The not having preexisting conditions keep you from getting insurance seems to be only logical.  Why would we have a system in which if you need the care, you cannot get the care?  That makes no sense at all. 

So we want a system in which people can be guaranteed they can get care, even if they don’t need it, which is the idea behind this law.  You have to have an individual mandate of some form; otherwise the whole thing unravels, because then people who don’t need insurance won’t buy it until they do need it, and the whole actuarial calculation falls apart.  It is simply logic.  It is mathematically true.  I didn’t invent that. 

Mr. Neal.  Something that an actuary might assert?

Dr. Berwick.  Absolutely.

Mr. Neal.  Dr. Berwick, would you talk a little bit just in the closing minutes that I have to give you kind of a forum here, would you tell me what you intend to with waste, fraud, and abuse and the cost‑saving mechanisms you are putting in place with Medicare in particular? 

Dr. Berwick.  Yes.  There are actually two parts to that.  I have learned a lot since I have arrived.  There is more fraud and abuse than I thought.  I now can see the data.  I also know that we can root it out and find it, and with the tools given us in the Affordable Care Act now and the support of Congress, we will stop the criminals and we will stop the abuse and we will stop the waste.  We are diligent about that.  My deputy, Peter Budetti, is doing a great job and the Administration is fully committed to it.  And I now understand how important and possible that is.

There is the other area of error which is not the same as waste, fraud, and abuse.  There are honest errors.  There are errors that get in because of billing and coding systems.  We have to work on those also.  The President has set a goal of by 2012 reducing the Medicare error rate by half.  We are on track.  We will do that.  And that also will help us have a much more ‑‑ better stewardship of the public trust in support of a better health care system.

Mr. Neal.  So that number that we have seen of $50 billion annually could be attributed to fraud; is that an accurate number in your estimate?

Dr. Berwick.  It is sometimes misinterpreted to be the number that applies to Medicare.  That is not true.  That number is a rough estimate of fraud and abuse costs for the American health care system as a whole, which of course affects the private payers and providers as well as the public side of payment.  But that is a large number and it seems to be there.

Mr. Neal.  Thank you very much, Doctor. 

Chairman Camp.  Thank you.  Mr. Buchanan is recognized. 

Mr. Buchanan.  Thank you, Mr. Chairman, for the opportunity for this hearing today.  It is very important. 

Dr. Berwick, I represent a part of Florida.  We have probably more seniors than any other district in the country.  We have 155,000 that are on Medicare.  I do a lot of town halls.  I have got one this Saturday.  What comes up with a lot of them is the whole thing on Medicare Advantage.  We have 30,000 that have been on Medicare Advantage.  I don’t know what that number is today.  But the general perception in all these places is that they are going to lose their Medicare Advantage. 

And you are saying, yet that it is ticking up.  I don’t see it.  I don’t hear it.  And it is something you have to deal with.  You have a heck of a PR problem if you are saying that it is moving the other way. 

Dr. Berwick.  Congressman, I agree with you.  We have a communication problem.  I can tell it from the questions I am getting.  People have a lot of misconceptions about Medicare Advantage.  It is stronger now than it was before.  There are quality measurements now that apply to it.  There are bonuses that will be awarded to stronger and more effective Medicare Advantage plans.  Enrollment is going up.  And I think that the Medicare Advantage plans are seeing the business opportunities and the growth ‑‑

Mr. Buchanan.  I have a couple of other questions. 

So you would disagree with Richard Foster, his assessment that millions of Medicare Advantage recipients will lose their coverage?  That was something that he said.

Dr. Berwick.  He is making a prediction, sir, and it is his job.  What I can see is the facts on the ground.  Now, he predicted a decrease in Medicare Advantage this year.  It is not going down; it is going up.  We are seeing decreases in premiums, a healthier system.  So he is doing his best at prediction.  But I can see the facts, and the facts are that the system looks stronger every day, and the plans are behaving as if this is a good area to be in because ‑‑

Mr. Buchanan.  Well, give me the facts of how many people have dropped off, how many are adding?  Because I would like to see that so I can communicate that back to our district. 

He also mentioned two‑thirds of hospitals are already losing money under terms of Medicare patients, and the ObamaCare is going to make it much worse, and they are talking about hospitals having to shut down.  What is your response to that? 

Dr. Berwick.  My response is I meet with the hospital industry all the time now.  I regard them as key partners, and we have been working together.  They know and I know that the solution for them and for Medicare and for the country is better care, to move the forms of care delivery toward higher and higher quality.  That reduces costs.  It improves care and it makes them more robust. 

I got an e‑mail yesterday from Denver Health where they now have documented, through improvement of processes in that hospital, $100 million of savings while making ‑‑

Mr. Buchanan.  Let me get to this last key point.  You call the law the Affordable Care Act.  But let me just mention to you that I met with a large company in our area, one of the largest employers.  His health care cost went up this year, same employees, went up $1.5 million. 

Another pharmacist ‑‑ we went there to talk about issues for small pharmacists and then he hands me on the way ‑‑ he said Congressman, I just got my bill, it went up 22 percent.  I was chairman of the Florida chamber and chairman of our local chambers, I can tell you with small businesses throughout Florida, throughout our region, it is going up 20 percent a year.  They are saying, what is this health care bill going to do? 

Are you out talking to any people that are in business or create 15, 20 jobs?  Everybody is very, very concerned.  They don’t see the savings.  It is, across the board, substantial increases.  How do you respond to that? 

Dr. Berwick.  All the time I see it, Mr. Buchanan, and that is sort of the point I want to make.  It is not the law that is doing that, it is the state of American health care.  It is fragmented, it is not paid for correctly.  It is a heritage of a system with high levels of lack of coordination, safety problems, infections, injuries to patients ‑‑

Mr. Buchanan.  People see this as just another big entitlement program.  They are not seeing where, for a family of four, and a small businesses is going to pay half or 25, they are not seeing any reductions.  They don’t see anything coming down the road.  Is this just another big entitlement program?  Is that what we are talking about here? 

Dr. Berwick.  I would be happy to meet with them and with you, sir, because the answer lies in the Affordable Care Act ‑‑

Mr. Buchanan.  By the way, I would love to have you come down.  It is real nice in February in Sarasota.  Come down, meet with our business people and talk to them.

Dr. Berwick.  What I would explain to them is that their interests and the interests of our patients in our Nation lie in making better care, making care get better, and then I can show them, and be happy to talk with you, about the elements of the bill that will allow us to move the country toward better and better care, safer, more reliable, more streamlined ‑‑

Mr. Buchanan.  One other point.  Our cardiologists wrote you a letter.  They would love to meet with you.  Many of them are concerned about being able to stay in business because of the substantial cuts on Medicare.  I am sure you have got a lot of this feedback.  What are you doing about it? 

Dr. Berwick.  I am meeting regularly with specialty societies and talking with physicians.  They, like I, know that if they can work together with us and with the private sector to make health care better, smoother, more streamlined, safer, costs will go down.  That makes the system more sustainable and in the end will be the foundation for their incomes to remain where they want them to be.

Chairman Camp.  The gentleman’s time has expired.  Mr. Smith is recognized. 

Mr. Smith.  Thank you, Mr. Chairman.  Thank you, Dr. Berwick for being here today. 

I do want to touch on an issue.  My concerns are that the complexity of health care is compounded with this new legislation, and therefore making it ‑‑ especially in rural areas, the job of medical professionals even more difficult.  The last two annual OPPS rules have included provisions requiring a physician be onsite and available whenever an outpatient procedure is being performed, regardless of its simplicity.  I understand CMS takes the position this change is a clarification of existing policy and not a new rule.  I also appreciate CMS taking action to suspend its enforcement for the critical access hospitals most impacted by it. 

However, the fact is the rule wasn’t impacting hospitals until it was restated in 2010, and many of the small towns and hospitals affected don’t have enough practitioners to meet the letter of this rule.  And actually the people who will suffer, the patients in small community hospitals, but certainly the distance between facilities is very great but this would further compound it. 

I will ask in writing, for the record, questions relating to that so we can get some specific responses. 

But when you look at this new legislation that is now law, I am concerned that the addition of over 100 new agencies adds to the complexity.  Do you see any mechanism in the law that does not actually centralize discretionary authority in these agencies rather than out among the health care professionals across our country? 

Dr. Berwick.  Let me go back to your point about the rural hospitals, because they are related.  I think it is very important for us to remain mindful of what it is like to give care in every setting around the country and to make that more feasible.  That is one of the reasons why we delayed implementation of the physician direct supervision rule while we reconsider those requirements for rural and critical access hospitals.  We also included rural hospitals under 100 beds, as you know, as well as critical access hospitals.  So I am very sensitive to the issue you are raising. 

The more general issue of complexity is of serious concern, and we need to make sure that every step we take in implementing this law is value added, that it makes things easier for patients and beneficiaries ‑‑

Mr. Smith.  I mean, of the over 100 new agencies, do they not have some discretionary authority that did not previously exist? 

Dr. Berwick.  I am committed to simplification, sir.  What I want to have is, no matter how many agencies are involved, I want to make sure that the beneficiaries’ needs are addressed and that the doctors and hospitals that you are concerned about are feeling that when Medicare takes an action, it is something that they understand and it is value added and not just bureaucracy.  I am thoroughly committed to that.  You saw the President’s executive order just 2 weeks ago talking about simplifications of regulations and procedures.  Medicare is going to be very much a part of that direction of work. 

Mr. Smith.  I just want to bring the message that many health care professionals, almost all of them that I talk to, are very nervous about this, about the power of the government increasing and telling them what to do, when to do it, how to do it, not to do it, whatever the case might be. 

And I just had a very positive experience at my local hospital relating to a family member in the last few months, where I stood amazed at how great our current system is, and certainly I do not want to jeopardize that. 

And I yield back.

Dr. Berwick.  We share that in common, Congressman.  Thank you.

Chairman Camp.  Mr. Becerra is recognized. 

Mr. Becerra.  Thank you, Mr. Chairman.  Dr. Berwick, thank you very much for being here and for all your testimony. 

I wouldn’t be surprised if anyone is watching, this is somewhat confused.  A lot of consumers aren’t quite sure they are beginning to reap the benefits of ‑‑ as my colleague Mr. Neal pointed out, that no longer can an insurance company discriminate against them because of a preexisting condition.  All of a sudden they are finding that their recent graduate child from some college, who can’t yet find a job, is still able to stay on the health insurance coverage of that parent.  So they are beginning to see the benefits, but I don’t doubt that some of them are confused, because they hear all of these anecdotal stories or they hear about these projections or they hear about these scare tactics, death panels and all the rest. 

But I think you started off your testimony by saying, where we are being told that seniors should be very scared when it comes to HMO Medicare that they are going to lose their insurance coverage, that it is just the opposite. 

Can you repeat what the actual numbers show, not the projections or the speculation is? 

Dr. Berwick.  The projections were of a decrease in enrollment to Medicare Advantage.  This year we are seeing a 6 percent increase in enrollment.  There are now, on average, 26 Medicare Advantage plans available in every county in this country on the average.  We have made those choices more meaningful.  A lot of them need two plans.  The nonsense that was there, that there really wasn’t any difference, they are gone now.  And when a beneficiary looks at their options, they are meaningful options.  They can scan down a list of Medicare Advantage plans and pick out and say that is the one I want, that is the one that meets my needs.  Equal choices being exercised, and lower cost.

Mr. Becerra.  I was about to go there.  The other scare tactic is seniors in America, be afraid because your costs are going to rise.  And those are the scare tactics and the projections.  What is the actual result on paper? 

Dr. Berwick.  On average, the Medicare Advantage premiums are down 6 percent this year.  Now, that is not for every single person.  Some people will choose a Medicare Advantage plan where the premium goes up because it has a different benefit structure that they prefer.  But the average premium went down this year not up.

Mr. Becerra.  Let me make sure I understand this.  Some 3 million beneficiaries under Medicare, close to 3 million seniors, got a $250 tax‑free check to help them pay for their prescription drugs if they fell into this doughnut hole.

Dr. Berwick.  Over 3 million if they fell in the doughnut hole in 2010.  This year, if they are in the doughnut hole, they will see a 50 percent reduction in the prices, in the cost they are paying for many brand‑name drugs.

Mr. Becerra.  Hopefully we will be able to continue to have you come and others testify about what actually is in the bill, not what might be or is projected to be in the bill. 

The other thing I wanted to get into ‑‑ let me make sure I understand this ‑‑ you are within the Federal Government, as I am, as every one of my colleagues is, so you qualify for the Federal Employee Health Benefit program for your health care.

Dr. Berwick.  I do.

Mr. Becerra.  And everything that I understand from the bill, and having helped push that through and get it enacted and knowing how we are going to try to reduce the costs, one of the things we try to do is give people choices.  And as we, you and I, and every one of my colleagues has a choice of plans through the Federal Health Employee Benefit plan, this new law, historic new law, will give a lot of Americans a choice in what plan they decide to select; is that correct? 

Dr. Berwick.  Many choices, more meaningful choices.

Mr. Becerra.  And just as Members of Congress and you and other members of the Federal Government receive government support, public support to help pay for the cost of your health care plan, of each of our health care plan, so under this new historic law will Americans get some support, public support ‑‑ some would say government support ‑‑ for the cost or the paying of those health care plans. 

Dr. Berwick.  That is correct.

Mr. Becerra.  Now, some would say that is a government takeover.  And I think I did a quick survey.  I think that plan, which is now law as a result of the historic passage of health care reform last year, which now gives Americans those same choices through these options, this marketplace and exchange of options that will be available, and with some Federal subsidies, taxpayer‑subsidized assistance, is very similar to what we get, each and every one of the members of this committee get for health care as well.  In fact my recollection is the subsidy that Members of Congress, Republican and Democrat, get for their health care under the Federal Employee Health Care Benefit plan is actually greater than the taxpayer support that will be provided in subsidies for the new law; is that correct? 

Dr. Berwick.  I believe so.

Mr. Becerra.  So every time we hear folks talk about government takeover of health care, it is interesting, it is not good enough for the American consumer, but it is okay for Members of Congress to continue to get government‑sponsored health care, and it is okay to have the choices there; but to give that to the American people seems like we are not quite hearing the full story.  So I hope we will have a chance to hear you more often and talk to us more about the implementation of the legislation.  And I thank you for your testimony.

Dr. Berwick.  Thank you, Congressman.

Chairman Camp.  Thank you.  Mr. Schock is recognized. 

Mr. Schock.  Thank you, Mr. Chairman. 

Thank you, Dr. Berwick, for being here.  I had a real‑life story myself this week.  I was back on my district work period and I had some time with my father, which is sometimes rare.  He is a family physician.  And he is a young man.  He is 62 and he informed me that he is calling it quits, much to my surprise.  Six kids in his family, five of them are doctors, and not a single one of them is convinced this is going to be good for their profession. 

And so I guess I challenge you when you suggest that this association or that association or this group or that group supports it.  When I go home every weekend, I go home during these district work periods and I run into doctor after doctor after doctor who tells me this is going to be bad for their profession.

Mr. Schock.  So I just put that out there as not some statistical fact but a reality check, for me at least, in my district and specifically in my family. 

Would you agree that most Americans get their health insurance from their employer ‑‑ private health insurance, but those who have private health insurance get it from their employer at this point? 

Dr. Berwick.  I think it is about 160 million people, yes. 

Mr. Schock.  Is that most Americans who have private health insurance? 

Dr. Berwick.  It is the majority, I think.

Mr. Schock.  Okay.  Are you aware last year, when this bill first passed, that publicly held companies ‑‑ specifically, again, coming back home to my home area, Caterpillar Tractor Company, which is in Peoria, other companies like Verizon, John Deere, had to submit to the SEC what one provision would do to their bottom line, specifically the change to the Medicare Part D reimbursements; and for Caterpillar it was a $100 million hit to their bottom line.  Are you aware of that? 

Dr. Berwick.  I was not, but please go ahead.

Mr. Schock.  You were not aware of that.

Dr. Berwick.  No.

Mr. Schock.  Well, let me back up.  Your assumption is that the bill as it stands, as it has been passed, will lower health care costs for employers in the long term. 

Dr. Berwick.  I believe that by improving care in America, which this bill takes a long step toward, care will become more affordable for everybody, not just Medicare, and better.

Mr. Schock.  But specifically my question is, since most Americans get their health care coverage from their employer, my constituents are specifically interested, do you believe that the employers’ health care that they are paying for will become less expensive? 

Dr. Berwick.  The route to that goal, which is my goal, is the improvement of care.  And so the improvement of care affects all.  We are not going to make a better American health care system ‑‑ doctors, nurses, hospitals, all of us together ‑‑ only for Medicare and Medicaid beneficiaries.  That would be impossible.  So the agenda of making care better, safer, more reliable, smoother, more seamless, that is a benefit to all.  And yes, indeed, if successfully executed ‑‑ and I think that is what our country is headed for now ‑‑ ‑ altogether, public and private, it will benefit the private side as well as the public side of payment. 

Mr. Schock.  Well, I find that interesting, because I have heard that a lot when I am in Washington, D.C.  But are you aware of any publicly traded company who has to put out for the public their books and for their investors their projections on cost, any publicly traded company who is predicting their health care costs going down over the next 5 years? 

Dr. Berwick.  I wouldn’t know that, Congressman.  What I know is that it is possible to get there, and we are going to be changing that way of thinking over time by making care better.  I want to work with the private sector, employers, hospitals, professional societies, those who give care, and health plans altogether, to make care better. 

Have you ever seen a patient with a post‑operative infection that they didn’t need to get?  Do you understand what that costs in time and morbidity?  Well, that could be a private‑paid patient or a public‑paid patient.  It is still costing money. 

So I want to change the game in American health care with my colleagues in the private sector to make that care safer and better.  And when we do that, the care will get more affordable.  And I am not an accountant or a stockbroker, but I bet you will see companies around this country understand that their health lies in a healthier health care system, which is what we are headed for.

Mr. Schock.  Again, at the end of the day I think we are interested in the realities, with all due respect.  And the realities are most major companies ‑‑ and, again, I am not aware of any, you don’t seem to be aware of any major employers who are providing health care coverage health insurance premiums going down, nor are there predictions that their health care coverage will be going down. 

I have one final question since my time is about to expire.  And it is with regard to, you are aware of the two Federal courts that have now ruled that individual mandate portion of the health law unconstitutional.

Dr. Berwick.  Two have held one way, two the other.

Mr. Schock.  Okay.  I am curious, if the administration is required by the justice system to stop implementing this law, how you plan to comply with that.

Dr. Berwick.  You will have to speak with my colleagues in the Department of Justice and others more qualified than I to answer that question.  Right now, my job is to forge ahead and try to make American health care improve, protect the beneficiaries, and implement the provisions of the law unless and until I am told otherwise. 

Mr. Schock.  Have there been any discussions in the Department relative to that? 

Chairman Camp.  The gentleman’s time has expired. 

Mr. Doggett is recognized.  Time is very short, and we are trying to get everybody in. 

Mr. Doggett.  Thank you, Mr. Chairman.

Dr. Berwick, thank you for your distinguished service and your candor this morning. 

We know that an earlier generation of Republicans fought Lyndon Johnson in getting Medicare created in the first place with the same fervor that our Republican colleagues are fighting health insurance reform today.  We know that Newt Gingrich was determined to let Medicare wither on the vine and had the support of some of the Republicans who continue to serve on this committee.  And now they have laid out a roadmap ‑‑ you have discussed it with Dr. McDermott ‑‑ where their ultimate goal is to move seniors to the uncertainty of vouchers, away from the guarantees that Lyndon Johnson signed into law in Medicare, and to shift responsibility to seniors to meet their health care needs, to fend for themselves with private insurance companies to provide for their needs. 

That is the longer‑term goal.  But in the short‑term goal, it has become increasingly apparent when you cut through all of their repeal rhetoric that what they are really presenting to seniors and individuals with disabilities is a plan to increase the cost of their health care. 

I would like to go through and itemize how this Republican plan will increase the cost of health care for seniors and individuals with disabilities who rely on Medicare. 

Under existing law that you administer today, if a senior needs a mammogram, colorectal cancer screening, bone mass measurement, will they have to make any copay? 

Dr. Berwick.  Not as we implement the law.

Mr. Doggett.  And so if we repeal that guarantee of no copayment, seniors will have to pay more for those services.  Their health care costs under the Republican plan will increase, will they not? 

Dr. Berwick.  For those services, yes.

Mr. Doggett.  Let’s discuss the effect of seniors and the increased costs that Republicans want to impose on them right now with the bill that they have already passed with reference to prescription drugs.  The best estimate I have seen through the Assistant Secretary for Planning and Valuation ‑‑ and I would ask you about this ‑‑ is that the average individual who would reach this donut hole gap in coverage ‑‑ a gap in coverage created by the Republicans with their prescription drug plan a few years back ‑‑ when they reach that gap today in 2011, each of those people on average will get a little over $500 in benefits under existing law, total benefits to Medicare beneficiaries of about $2 billion in savings this year under the law.  Does that sound about right? 

Dr. Berwick.  That is correct.  And when we get to 2019 or 2020 ‑‑

Mr. Doggett.  And so what the Republicans are proposing in repealing that law is to hike the cost for prescription drugs to seniors in America this year by over $2 billion, over $500 apiece for those who enter the prescription drug gap. 

You have discussed this with Mr. Lewis, but do you have a mechanism under their increased health care bill to demand of seniors that they give back the $250 that we gave them through this bill last year for prescription drugs ‑‑ about 3 million people you said. 

Dr. Berwick.  Yes, over 3 million.  I hope we don’t have to ‑‑

Mr. Doggett.  Is there any mechanism there?  Because I assume under their repeal bill we are going to be asking seniors not only to pay more this year but to give back the $250 that they received if they reached that gap last year. 

Now what about on the issue of the Part B premium that we asked seniors and individuals with disabilities to pay?  Under existing law, according to all the estimates you have seen, won’t those premiums be lower than if we adopt the Republican higher senior cost bill?  Won’t those seniors have to pay more for the Part B premium if Republicans are successful in their attack on Medicare? 

Dr. Berwick.  Yes, I believe they would.

Mr. Doggett.  And with reference to Mr. Camp’s assertion that some Part D premiums could go up for seniors, that is true only to the extent that they get more coverage under this bill; isn’t that true? 

Dr. Berwick.  Yes, they have a selection.

Mr. Doggett.  And any increase is really fairly modest. 

And finally, with reference to the “Medi‑scare” argument, that seniors are going to lose the ability to select their own doctor, there are actually incentives under the law that they want to repeal to pay your primary care doctors more under Medicare than they have received at any time in the history of Medicare, isn’t that right? 

Dr. Berwick.  That is correct.

Mr. Doggett.  And that ought to give seniors not only lower health care costs but more choice than they have ever enjoyed in the history of Medicare, don’t you agree? 

Dr. Berwick.  I agree.

Mr. Doggett.  Thank you very much for your service and for your candid answers.  I hope that we can work together to ensure that this Republican plan to eventually privatize Medicare through a voucher system, but in the meantime, this year, the hike cost to every senior and individual with disabilities who relies on the Medicare system, that that plan ‑‑ they can call it repeal, they can call it an attack on President Obama, whatever they want to, but we have to stop this Republican plan to increase seniors’ cost. 

Thank you.

Chairman Camp.  Thank you. 

Ms. Jenkins is recognized.

Ms. Jenkins.  Thank you, Mr. Chairman; and thank you, Dr. Berwick, for being here.

As you all know, the Independent Payment Advisory Board, the IPAB, created under the new health care law is charged to determine whether Medicare is spending more than is budgeted and, if so, to offer fixes to cut back on Medicare spending that are then fast tracked with very little opportunity for congressional input.  While I have numerous concerns with this board ‑‑ including the 15 unelected bureaucrats who will serve on it and the lack of congressional oversight and approval of their recommendations ‑‑ I am also concerned as to whether rural issues will be addressed and protected by it. 

Currently, most hospitals were granted a 10‑year exemption from any changes proposed by this board, but critical‑access hospitals were not included in that exemption.  Kansas has one of the largest number of critical‑access hospitals in the country, and any further cuts or payments could determine whether they keep their doors open. 

Can you please just speak to us on this issue and further challenges that rural Medicare patients have accessing care and whether or not they will be protected by this board? 

Dr. Berwick.  Well, the board, as you know, does not lie within CMS.  It is independent.  The President supports the Independent Payment Advisory Board, and I support the Administration.

With respect to rural health care, my commitment could not be stronger, Congresswoman.  I care deeply about that sector.  It is crucial to Americans.  It is crucial to the health of our system as a whole.  Indeed, some of the best care I have ever seen in the country emerges in the rural sectors, and I think that gives us an opportunity to learn from them and spread ideas elsewhere. 

That is one of the reasons why I did suspend enforcement of the physician supervision rule in the critical access and rural hospitals that I was asked about before.  I want to make sure that we don’t do anything that impedes not just good care but fabulous care in the rural settings.  I am committed to that. 

The Affordable Care Act gives us a chance to understand more about the input costs in rural hospitals.  We will be looking carefully at that.  But it is a sector I care a lot about, and I look forward to working with you to make it a healthier and healthier part of our health care system.

Ms. Jenkins.  Are you willing to work with the administration to give the critical‑access hospitals the same exemption? 

Dr. Berwick.  I am happy to talk with you further about that, Congresswoman.  It is not an issue that I know in any detail. 

Ms. Jenkins.  Okay.  And I just wanted to follow up on my colleague from Illinois and his discussion about what the Supreme Court could be asked to do. 

I visited with many small businesses and large businesses in my district in Kansas, and many of them are investing a tremendous amount of money in implementing a law which one of the cornerstones is the individual mandate.  And I am just curious, do you think it really is in the best interest of the American people for us to continue to implement this law, spending a whole lot of taxpayer dollars before we have a final judgment? 

Dr. Berwick.  Congresswoman, I am not a lawyer.  I can’t deal with the legal aspects of that.  I will take counsel from the members of the administration that are there to help me understand what to do. 

I think the Affordable Care Act is good for America, and my job right now is to make sure that that goes as well as it possibly can.  That is what I am committed to do every single day, make care better for our beneficiaries, and I will continue to do that.

Ms. Jenkins.  Do you have any idea what the price tag is that business is having to spend that will be lost should the individual mandate be overturned? 

Dr. Berwick.  Business is a key stakeholder in the American health care system, and those costs are not sustainable now.  Businessmen can tell you that as well as our beneficiaries can.  We have to solve that problem.  The Affordable Care Act gives us a chance to build an American health care system that will thrive, that is sustainable, that is higher quality and lower cost.  That is where the interests of our public investment in health care law is, and that is where the interests of businesses lies.  That is what I am keeping my eye on right now, better care for everyone and lower cost through improvement.

Ms. Jenkins.  So you have no idea how much will be lost in the economy because of businesses ‑‑

Dr. Berwick.  I have a better idea of what will be lost in our economy if we don’t get American health care on track.  It ought to be going toward better care through care redesign and better services to patients, safer care, better care.

Ms. Jenkins.  Do you have any idea what the cost to CMS will be?  How much will be spent that will be lost should the individual mandate be found unconstitutional? 

Dr. Berwick.  I don’t have a particular number there, no, Congresswoman.

Ms. Jenkins.  No.  Okay. 

How do you suggest that we might recoup any of the loss that you do incur should that happen? 

Dr. Berwick.  Why don’t we address that downstream?  I hope this law survives.  It is a great law, and I look forward to being able to continue to implement it.

Ms. Jenkins.  So you don’t have any plan to recoup the costs? 

Dr. Berwick.  I go to work to try to make care better for beneficiaries, Congresswoman.  That is my job, and that is what I am doing right now.

Chairman Camp.  Time has expired. 

Mr. Thompson is recognized.

Mr. Thompson.  Thank you, Mr. Chairman.

Dr. Berwick, thank you very much for being here and for your excellent testimony. 

I agree with one of the previous speakers who said anyone watching this is probably wondering what in the world could possibly be going on; and some probably even think it is Democrats versus Republicans, a partisan deal here.  So I would like to just add in a couple of comments that I have that have been made by advocacy groups for seniors. 

This committee hearing is on Medicare and the effect on seniors, and the same groups that work hard to make sure seniors have access to good quality health care have spoken out on this. 

Families USA said Medicare’s benefits are improved under the Affordable Care Act. 

The Center for Medicare Advocacy said Medicare reforms included in the Affordable Care Act do not reduce Medicare’s guaranteed benefits, they improve Medicare and help safeguard the Medicare Trust Fund. 

The Alliance for Retired Americans says that this measure strengthens the Medicare program, provides protections to millions of Americans against insurance company abuses, makes prescription drugs more affordable, and provides prevention and wellness screenings as well, which will enhance the quality of life for our Nation’s seniors. 

The Leadership Council of Aging Organizations said that millions of Americans have already benefited because of this bill and that the economic and physical health of seniors and their families will continue to benefit as the law is implemented further. 

Do you agree with that, Dr. Berwick? 

Dr. Berwick.  I agree with all of those, yes.

Mr. Thompson.  Let me ask you, in my little district in northern California, what would happen to the 10,300 seniors in my district who hit Part D donut hole if my Republican friends are successful in repealing this health care legislation? 

Dr. Berwick.  I assume many of them would have to choose between medicines and other things that they want in their lives.  I have seen seniors that have to choose between medicine and food.  I have met seniors who can’t afford their medicine, stop taking it, and face the consequences of doing that, stopping their anticoagulants, stopping their blood pressure medicine, having their diabetes get worse because they can’t afford to control it; and they are scared.

Mr. Thompson.  And you may have answered this question before.  I apologize.  I had competing hearings this morning.  But those same seniors, what would happen with the $250 check that they received to help pay for their medicines during the time they are in the donut hole?  Would they have to send that $250 back? 

Dr. Berwick.  I believe we are looking at that issue right now just to make sure we understand what would have to happen, and I do not have an answer yet.  I fear that might be the case.  I don’t even want to think about it if I don’t have to.

Mr. Thompson.  Mr. Doggett mentioned that primary care doctors get an incentive to be able to provide the health care that we all know has been lacking and helped lead to the situation where health care in our country was unsustainable.  I think it is also important to note that rural doctors also get an increase in their reimbursement rates.  In my area, and in any rural area in the country, this is a huge, huge issue as to how we attract doctors to provide health care for the many, many seniors that live in rural areas. 

And I just can’t emphasize enough how important preventive health care is.  Not only is it good for individuals who receive it, but it saves so much money, so many health care dollars when you can detect a problem early on and fix it.  What would happen to the 110,000 Medicare beneficiaries in my district who right now, today, under the law that we passed, receive free preventive services and free annual wellness exams?  Would they lose this under the Republicans bill? 

Dr. Berwick.  They would have higher copayments if they want it, and some of them would avoid it.  We now know, due to good science and research, that a colonoscopy allows detection of colon cancer at early stages.  It saves lives.  It keeps you from dying of colon cancer because we find the colon cancer earlier.  So there are beneficiaries in your district who wouldn’t have a colonoscopy because they couldn’t afford it if this law is withdrawn, their cancers will advance, they will die of colon cancer, and their lives would otherwise have been saved.

Mr. Thompson.  Thank you. 

And one final question, Doctor.  If our Republican friends are successful in repealing this legislation and passing their bill, what would happen to the solvency of the Medicare program? 

Dr. Berwick.  According to the Medicare Trustees Report from the Actuary, the Medicare Trust Fund life is extended from 2017 to 2029, 12 years of extension of Medicare.

Mr. Thompson.  So Medicare would be shortened.

Chairman Camp.  Thank you.  The gentleman’s time has expired.

I appreciate Dr. Berwick for extending in time here.  We will have one more person question, and then what we will do is recess for 5 minutes, and then we will reconvene for a second panel. 

So Mr. Paulson is recognized for 5 minutes.

Mr. Paulsen.  Thank you, Mr. Chairman and Dr. Berwick.

The issue of geographic disparities in Medicare payment is a long‑standing problem that has resulted in unfair low payments to health care providers in Minnesota and other high‑quality, low‑cost States.  In fact, well‑documented studies show that a variation of Medicare payments are not tied to quality and efficiency.  But, for example, the Dartmouth Atlas of Health Care puts Minnesota in the bottom quintile of per‑enrollee Medicare payments, yet on measures that indicate high quality of care, like avoiding hospitalizations for conditions that be can treated and handled in a different setting that is more appropriate for care for patients with chronic conditions, et cetera, Minnesota ranks really highly. 

How will this new health care law ensure that the Medicare beneficiaries in my district or in Minnesota, these high‑quality, low‑cost States, are going to have the same access to services as those in other parts of the country? 

Dr. Berwick.  Congressman, I know this issue very well, and it is a very important one to make sure that payment is fair and adequate and that geographic variation and costs are well respected in the payment system. 

Under the Affordable Care Act, there are actually three different processes under way right now.  An Institute of Medicine study on input costs for geographic areas that will be due back to us in May or June ‑‑ and probably in enough time to map that into payment rules for 2012.  The Secretary has been required by the law to have a study of geographic variation and costs for hospitals that will be due at the end of the year, also available for use in 2012.  And there is a really important longer term Institute of Medicine study under‑way now on geographic variation in Medicare as a whole, cost and quality variation.  Based on this information, I think we will be able to craft much more rational regulation and policy to help make sure that payment is fair and equitable and respects the variation in costs and outcomes in different areas.

Mr. Paulsen.  And, Dr. Berwick, I think this is essential to actually get to the crux of the problem.  This has been an ongoing issue, and my physician community has certainly talked about it for a long period of time. 

Let me ask this, too.  One of the fundamental shortcomings I believe of the health care law as well is the failure to recognize that in some States like Minnesota we have a pretty low uninsured rate and a well‑functioning marketplace, that costs could rise in the presence of unnecessary and unwarranted regulation from now the Federal Government.  For example, the new State exchanges are likely to require new levels of certification of health plans, essential benefit offerings, and even network adequacy standards.  These activities are now currently overseen by our Department of Commerce.  Why do we need Washington or the Federal Government to ensure that Minnesota’s Department of Commerce is acting appropriately right now? 

Dr. Berwick.  I would be happy to talk with you afterwards, Congressman, about the various kinds of administrative costs you are talking about.  We do, under the law, have the opportunity now to help States set up enrollment systems which are new and crafted for the enrollment processes that appear under the law through exchanges, integrating exchange and Medicaid enrollment, for example.  You know, there is a 90‑10 Federal match for that, 90 cents out of every dollar that States have put into that kind of administrative process will come from the Federal Government.  So I would be happy to talk with you further if you would like about the concerns you have about those administrative procedures.

Mr. Paulsen.  And I actually would be interested in that because I want to make sure that the new law does not provide any additional layers of regulation that would stifle, I guess, innovation and raise costs. 

And I will give you another example, too.  I have heard that there is something like 250,000 pages of additional regulations that are going to come out of this law.  That is certainly going to be a challenge if it is a heavily bureaucratic load that is put from a top‑down perspective down on our providers in an already very tangled and unwieldy behemoth of health care regulation that is out there right now, and I hear that from my providers on a regular basis.

Dr. Berwick.  Yes, sir.  I would be concerned as you are.

Let me make it clear.  My attitude, from my view as administrator, is a partnership with providers and States; and making things harder for them isn’t a good idea.  I am interested in my job of making sure the Federal Treasury Funds are protected and beneficiaries are protected, but I think we can do that in partnership.  And if you are concerned about regulatory burden, I am, too; and we should talk about it. 

Mr. Paulsen.  Thank you, Dr. Berwick.

I just want to follow up one more time on this Medicare Advantage issue because it has been forecasted that about $200 billion out of the Medicare Advantage program is going to be cut or overhauled; and that is going to be, according to our next witness, Mr. Foster, who is coming forward, about a 50 percent reduction in enrollment. 

When I travel around my district and around Minnesota, it is very clear that seniors enrolled in Medicare Advantage are worried about losing benefits or the Medicare Advantage options altogether.  For the past year, the administration has been trying to reassure seniors that nothing is going to change, but I don’t believe that is the case.  You talked about the 6 percent rise in Medicare Advantage for 2011.  Obviously, a lot of provisions of the law have not been phased in, but let me just ask you this:  I am worried we are going to go back to the days when seniors in Minnesota, for instance, don’t have the same options as seniors in Miami or in New York City.  Do you agree that Minnesota seniors should have the same Medicare options as seniors in Miami or in New York City or around the country? 

Dr. Berwick.  I think they should have robust options, as beneficiaries all over the country should; and I think they are getting them with the improvements that we are seeing in the Medicare Advantage system right now.  I don’t want your seniors to be worried.  The Medicare Advantage program is stronger for them, it is more available to them, and the choices are more meaningful now, and they need to know that.  And, yes, I am committed to their options.

Mr. Paulsen.  Thank you.

Chairman Camp.  Thank you.  The gentleman’s time has expired. 

Thank you, Dr. Berwick, for being here today and for your testimony.  Thank you for extending the time before the committee and accommodating as many members as possible.  You can see by the member participation that the issues before your department are of great importance to the people we represent and to America’s seniors.  So thank you for your testimony about the effects of implementation of this health care law.

If members would like to, they can submit in writing to you any questions and you can be happy to respond.

Yes, the gentlewoman from Nevada.

Ms. Berkley.  Thank you for recognizing me. 

Do you think in the future we might be able to make this a little more equitable?  Perhaps if those sitting in the more expensive seats had 4 minutes to question, those of us in the cheap seats might have had an opportunity to question the witness.  I was very patient and very anxious to do that. 

Chairman Camp.  What we will do is, on the second panel, we will start with where we left off.  Dr. Berwick had limited time.  Many times our witnesses come without time limit.  Dr. Berwick had a time limit, as does happen on occasion.

Ms. Berkley.  This has happened a few times; and, frankly, it was Mr. Berwick that I wanted to question.

Chairman Camp.  All right.  Thank you.

Yes, Doctor.

Dr. Berwick.  Mr. Chairman, first, I want to thank you for having me here.  I enjoyed it, and I really welcome a chance to join you any time.  And with respect to any members who would like to meet with me personally, that is an open door.  I will be happy to do that at any point. 

Chairman Camp.  Maybe that is something that can be arranged.  Thank you. 

The committee will stand in recess until 12:30. 


Chairman Camp.  The committee will reconvene for our second panel; and I want to welcome Richard S. Foster, the Chief Actuary for the Centers for Medicare & Medicaid Services.

Since 1995, Mr. Foster has been Chief Actuary for the Centers for Medicare & Medicaid Services.  He is responsible for all the actuarial and other financial analyses for the Medicare and Medicaid programs. 

Previously, he served as Deputy Chief Actuary for the Social Security Administration for 13 years.  He is a fellow of the Society of Actuaries and a member of the American Academy of Actuaries, American Statistical Association, American Economic Association, National Academy of Social Insurance, and Senior Executives Association.  Welcome to the committee. 

Mr. Foster, you will have 5 minutes to give us your testimony.  Your full written statement will be made part of the record.  Welcome to the Ways and Means Committee.  You have 5 minutes.

Mr. Foster.  Thank you, Chairman Camp, Representative Levin, and distinguished members of the committee.  Thank you for inviting me to testify today about the impact of the Affordable Care Act on the Medicare program and its beneficiaries.

The Office of the Actuary and CMS provides actuarial, economic, and other technical assistance to policymakers in both the administration and in Congress; and we do so on an independent, objective, and nonpartisan basis.  We have performed this role throughout the last 45 years, since enactment of Medicare and Medicaid. 

I am accompanied today by Suzanne Codespote, ASA, who is the Deputy Director of our Medicare and Medicaid Cost Estimates Group, and also by my special assistant, Cathy Curtis, Ph.D.  My statements are my own and do not necessarily represent an official position of the Department of Health and Human Services.

Considerably more information about the financial status of Medicare and the impact of the Affordable Care Act on the program is available in my written testimony, in my April 22 memorandum on the Affordable Care Act, and of course in the 2010 Medicare Trustees Report.

The Affordable Care Act has numerous provisions affecting Medicare and its financial operations.  We estimate in the first 10 years, 2010 through 2019, that the Act would result in Medicare savings that total $575 billion over this period.  Most of that is in the form of lower expenditures, about $486 billion.  Those lower expenditures, as of 2019, represent a reduction of 11 percent in expenditures for Medicare compared to what would have happened under the old law. 

Now the magnitude of the reduction continues to increase over time.  We estimate by 2030 that the reduction in expenditures will be 20 percent; in 2050, 32 percent; and in 2080, 43 percent.  The Act is estimated to reduce the long‑range Hospital Insurance Actuarial Deficit by four‑fifths.  It is also estimated, as we have heard, to postpone the exhaustion of the HI trust fund by 12 years, using the 2010 Trustee’s report baseline. 

I note that the HI savings under the Affordable Care Act cannot directly be used to both offset the cost of the coverage expansions in the health reform act and at the same time to pay for future HI benefits.  There are budget and trust fund accounting conventions that result in both these conclusions, and we can discuss this issue further if it would be helpful.

As most of you know, I have had some concerns about one particular provision of the Affordable Care Act which has to do with reducing the payment updates, the annual payment updates for most categories of Medicare providers, other than physicians, by the increase in economy‑wide productivity.  Now these lower payment updates will provide a strong incentive for hospitals and other providers to be as efficient as possible, but it is doubtful that many providers, other than physicians, can improve productivity to match economy‑wide levels.  Possible consequences are that the payment rates for the affected providers will grow at about 1.1 percent slower than the increase in those providers’ input prices, in other words, the input prices they have to pay for wages, office space, energy supplies, things like that.  So unless providers can improve their productivity or make efficiency gains otherwise, over time the payment rates will become inadequate to cover input costs.  If that happens, and absent legislation to do anything about it, then providers might have to end participation in Medicare, and that leads to possible issues with access to care for Medicare beneficiaries. 

Now, more likely, Congress would act to override the productivity adjustments if this occurs, as you had to do many times with the physician payment system under current law; and, if so, then that implies that the actual future costs for Medicare would be quite a bit higher than we have projected under current law. 

To help illustrate the possible understatement of the current law cost projections, the trustees use an illustrative alternative to current law and show a projection based on that.

[The statement of Richard S. Foster follows:]

Chairman Camp.  Mr. Foster, your time has expired, but we will make your full statement a part of the record.

Mr. Blumenauer is recognized for 5 minutes.

Mr. Blumenauer.  Thank you very much, Mr. Chairman.

Mr. Foster, good to see you again. 

I am interested in exploring three points with you.  You were here, I thought I saw, for much if not all of the previous discussion.  You heard one of my colleagues describe with dismay, I believe it was my friend from Pennsylvania, who talked about somebody with a knee brace that under the existing schedule was $686 versus $194 that could be obtained just going on the Internet. 

Have you examined the current system’s trend lines in terms of its sustainability?  You are talking about problems under the Affordable Care Act.  Absent the Affordable Care Act, have you done a projection of what America’s health care looks like in terms of deterioration of quality, of people being shed by plans, other plans being shut down?  Do you have a report on that?  Have you examined it? 

Mr. Foster.  We don’t have a formal report.  We try to keep up with these various kinds of issues, yes.

Mr. Blumenauer.  Would you say that it is safe to assume that if we don’t do something that the trend lines are actually worse in terms of people losing care, costs exploding, inefficiencies in the system? 

Mr. Foster.  Without question, something needs to be done.  Because historically, for a variety of reasons, health care costs have grown faster than people’s wages or the economy at large, and that can’t be sustainable indefinitely over time.

Mr. Blumenauer.  I take that to say that you acknowledge that it is actually worse if we don’t do something, that people are going to lose care, that quality is going to go down, that the budget is going to be broken if we don’t something.

Mr. Foster.  I don’t know about worse or better.  That is something I would have to think about.

Mr. Blumenauer.  I would appreciate it if you would, because you have thought about it here.  You have made the decision that actuarially, and your assumptions, your hunches, being around here for a long time, that you think some of this isn’t going to happen.  I would appreciate if you would add your intellect to what the consequences are for the current system absent doing something, whether it is going to be better or worse.

My second point, I wonder if you had a chance to look at the Republican roadmap that my good friend and colleague Paul Ryan has advanced that actually posits greater reductions in Medicare spending over time.  And I would ask if you think that is greater or less likely that Congress would stand by and allow greater reductions.  If you think there are problems under the existing Act, would there be greater or lesser reductions under my friend Paul Ryan’s approach? 

Mr. Foster.  My office looked at Mr. Ryan’s plan several years ago when he first developed it.  We discussed with him at the time ‑‑ and it continues to be the case ‑‑ that if you have a voucher program for Medicare and Medicaid and the voucher payments increase at a slower rate than health care costs are increasing, then over time people cannot buy as comprehensive an insurance coverage as they started out, and at some point that can become quite an issue.  So there are risks to either approach.  They are different in nature, but they both exist.

Mr. Blumenauer.  I don’t want to catch you unawares, but I would respectfully request that you think about that, maybe look at them and if you have an opinion about which is the greater risk of Congress caving, those draconian cuts or the things that are imposed under the Affordable Care Act, at some point.

I would like to turn to Medicare Advantage, because this is one of the areas that you think there is instability.  You were here when Dr. Berwick testified that current Medicare Advantage enrollment increased 6 percent to more than 12 million beneficiaries.  You heard that, on average, beneficiaries have seen a 6 percent reduction in their premiums.  And you heard, most important, there is a 5 percent increase in the people who are investing in the better, higher‑quality programs.  I mean, there are some that give health club memberships that aren’t very good programs, and we don’t want to subsidize ones that aren’t doing a very good job.  I note in my community you get about $586 on average, and we have the highest percentage of Medicare Advantage in the country.  In Louisiana, there is one that is over $1,300 a month.

Chairman Camp.  The gentleman’s time has expired. 

Mrs. Black is recognized for 5 minutes. 

Mrs. Black.  Thank you, Mr. Chairman; and thank you, Mr. Foster, for being here.

As part of the Democrats’ health care law, employers who provide retiree drug coverage can no longer deduct that subsidy, the so called “RDS,” and we have seen companies take huge write‑offs as a result of this tax increase.  And an example of that has already been talked about in the last session with AT&T with $1 billion and Deere and Company with $150 million.  These are big numbers, and it means that less money will be available for investment and creating jobs. 

But my question relates to the impact on seniors.  The President reiterated on Sunday, “If you have health care that you like, you keep it.”  In your opinion, does the Democrats’ health care law provide further incentive for these companies to drop the retiree drug coverage plan, resulting in seniors losing their coverage? 

Mr. Foster.  Yes to the first part, probably not to the second part.  In other words, without the tax deductibility, that changes the financial balance, so we expect that many employers will drop their retiree drug coverage because of these changes.  We also expect that most of them ‑‑ not all ‑‑ most of them will help get their retirees into regular Part D prescription drug plans.

Mrs. Black.  As a follow‑up to that, how is this going to affect the regular Part D moving forward? 

Mr. Foster.  It won’t make a lot of difference.  Instead of Medicare paying a Federal subsidy for these same people within the retiree plans, will pay a Federal subsidy for them within the Part D plan.

Mrs. Black.  I see.

Mr. Foster.  It will slightly decrease the premiums.  Because these tend to be lower‑cost people.  They have had full employment histories, so it will help bring down the overall cost within the Part D plan world but not by very much.

Mrs. Black.  I want to go in another direction that really hasn’t been mentioned much here.  There was some talk in the last section about how these senior groups have promoted the recent reform, and AARP was certainly a part of that.  However, as a part of the new law, insurance companies are required to spend 80 to 85 percent of the premium on government‑approved spending services and this is called that medical loss ratio.  However, Medigap policies that seniors purchase to supplement traditional Medicare are only required to meet a medical loss ratio of 65 percent.  And AARP and United are a part of this.  And while I am not in support of government mandating how private industry operates, do you think that the MLR policy should be applied equitably across the line? 

Mr. Foster.  Well, I confess that is not an issue that I have thought much about, and I don’t get into policy issues, but you could probably make a good case that if it makes sense in general then it would make sense for the broader spectrum, including Medigap policies. 

Mrs. Black.  Well, I would think that most people would agree that if we are going to do something we should do it equally and that if we have one particular company that is advocating for a policy and then gets the break to be less, that does not seem to be very fair.

Mr. Foster.  There is one other difference that I would mention, which is, when you think of a normal health insurance policy like a private insurance policy that covers the whole gamut of health care services, there is sort of a lot of money to work with.  If you think about a Medigap policy, which wraps around Medicare, it is a much lower dollar value policy.  So to the extent that you have given administrative costs, they are going to tend to represent a greater share for a small dollar policy.  So you might not be able to do 80 or 85 percent, but, on the other hand, you could certainly specify a loss ratio standard that is perhaps somewhat higher than the existing one.

Mrs. Black.  Thank you. 

I yield back my time, Mr. Chairman.

Chairman Camp.  Thank you. 

Mr. Pascrell is recognized. 

Mr. Pascrell.  Thank you, Mr. Chairman.

Mr. Foster, it is good to see you again. 

At many town hall meetings that I have attended, Mr. Foster, it has been my goal to dispel some of the myths that we have heard discussed today and other days.  Seniors have been grateful as they have begun benefiting from health care reform, for example, in getting a $250 check ‑‑ which doesn’t seem much to you or me but means a lot to a lot of seniors ‑‑ to help them pay for prescription drugs under Medicare.  I don’t have any trick questions about that, but I just wanted to lay the facts out.

Mr. Foster.  I appreciate that.

Mr. Pascrell.  Well, I am not finished yet, though. 

I also learned something this morning.  It seems like both sides are convinced that we finally laid it out, chapter and verse ‑‑ and would you confirm this ‑‑ that there are no cuts in guaranteed benefits under the Medicare program?  Could you verify that?  Except we are not talking about the private plans, we are not talking about doing away with gym privileges, we are talking about substance, and you know what I am talking about. 

Mr. Foster.  Yes, sir.  There are no cuts in what is referred to as guaranteed benefits, in other words, the standard Medicare benefit package.  In fact, that has been expanded.

Mr. Pascrell.  Thank you very much for your conciseness.  I hope people will choose to go back and read the bill, which we were accused of not doing, but that is a fact of life.

Now I want to ask you something which I would ask you to be as precise as you can be.  I want to talk a little bit about how health care reform creates what I would consider to be positive incentives for providers to focus on the quality of their care, thereby benefiting seniors. 

I understand that your office did not score innovative ideas such as hospital value‑based purchasing or the Independence at Home Demonstration program as part of your analysis.  In fact, I look at the sheet from the estimated Medicare costs, and section 3003, the expansion of the Physician Feedback Program, sections 3006, 3007, value‑based purchasing, which I know you believe in, but you did not score.  I am not criticizing.  I am going to ask you a question. 

CMS Innovation Centers, the Medicare Shared Savings program, National Program on Payment Bundling ‑‑ I have seen a lot written about that in the last 3 or 4 years ‑‑ Hospital Readmissions Reduction Program.  Let me ask you this question:  Don’t any of these specific areas ‑‑ I could name five more ‑‑ have any potential for savings?  And why specifically were they not scored?  Because you did score some other things.

Mr. Foster.  Sure.  In a number of cases, we actually did estimate savings.  For example, for the lower payments for readmissions, unnecessary readmissions, the hospital‑acquired conditions, what it really depends on, sir, is when you have enough information about how the proposal will actually work.  On some of these, for example, at the time of enactment the Medicare Shared Savings program was not adequately specified for us to be able to estimate what the impact would be.

Mr. Pascrell.  So it wasn’t a question that you thought that they would not work, it was a question ‑‑ and correct me ‑‑ it was a question of gathering enough information to say that they definitely would work.  Am I putting words in your mouth? 

Mr. Foster.  Only slightly.  It is a question of having enough information to determine that they work well, they don’t work so well, as the case may be.

Mr. Pascrell.  So you are not questioning whether these things would work. 

Mr. Foster.  I am saying we don’t always have an opportunity or enough information to try and figure that out.

Mr. Pascrell.  Well, let’s take the five things that I mentioned.  You would think, from what I have read and what I have looked into ‑‑ to my amateur abilities ‑‑ that we could possibly save a heck of a lot of money if these things work as well as they are expected to work.

Mr. Foster.  There is the potential in almost all of these.  But if I may give you one example. 

Mr. Pascrell.  Sure.

Mr. Foster.  The Medicaid Shared Savings program, as you know, the regulation is due out within another couple of weeks.  We have been working closely with the folks on that.  The original design of the regulation we estimated would actually increase costs.  The design was modified somewhat to lower the cost, and the current version now achieves some degree of savings overall.

Chairman Camp.  Thank you.

Mr. Pascrell.  This is quite a bit of money we are talking about here now.

Chairman Camp.  The gentleman’s time has expired.

Mr. Pascrell.  Thank you.

Chairman Camp.  Mr. Crowley is recognized.

Mr. Crowley.  It is unusual, two for the road here.

Chairman Camp.  We are playing catch‑up.

Mr. Crowley.  Thank you, Mr. Chairman. 

I want to just follow up on the line of questioning of Mrs. Black as it pertains to the corporate tax advantage that she mentions will be phased out in 2013, what is, in effect, a case of, in my opinion ‑‑ and I think many ‑‑ double dipping.  Now I would hope that my Republican colleagues aren’t defending double dipping, but that is what it sounded like to me. 

The loophole that will expire in 2013 pertains to a law that allows businesses to deduct the value of that subsidy twice.  They can exclude the 28 percent from their income and at the same time deduct 28 percent from their income for tax purposes.  If that is not double dipping, I don’t know what is.  The health care reform legislation closes that loophole by allowing businesses to deduct this money once rather than getting a double deduction on taxpayer dollars.  These businesses will still get a generous subsidy to help them cover retiree prescription drug costs, and they still get to exclude that benefit from their income.  They just don’t get to do it twice and double the deduction on the backs of taxpayer dollars.

But, Mr. Foster, what I want to do is follow up on the questioning of my colleague from New Jersey just a bit more.  One of the Affordable Care Act’s greatest tangible benefits was the assistance it provided to our seniors with high prescription drug costs, particularly those who got caught in what is known as the Medicare Part D donut hole or coverage gap.  The law gave every senior who was hit in that coverage gap in 2010 a check for $250; is that correct? 

Mr. Foster.  Yes, the ones who made it to the coverage gap.

Mr. Crowley.  That is the equivalent of 7,300 seniors in my district alone and over 3 million seniors nationwide.  These are checks that seniors have already received that they are already using to help them to pay for the high cost of prescription drugs.  Is it true that the Republicans’ efforts to repeal the Affordable Care Act, which each of my colleagues on the other side of the aisle voted for, as if it had not been enacted would force seniors to return that $250 check that they received to help them with the cost of prescription drugs?  Would that be the case? 

Mr. Foster.  If the legislation were repealed entirely and retroactively, including provisions that have already taken effect, then, yes, in theory you would have to pay back those rebate checks.

Mr. Crowley.  Let me ask you this question:  If that were the case, if they had to pay back those checks ‑‑ and that would amount to over $650 million that has been paid out ‑‑ is it possible that when seniors are forced to return those $250 checks that they got that they would have to pay interest on those $250 checks as well?  It is $650 million.  I assume that had that stayed in the Treasury that it would have accumulated some interest.  Would they have to pay the interest back on those checks as well? 

Mr. Foster.  I am not aware of any situation, if there is a benefit or an overpayment and a recovery, that interest is involved. 

Mr. Crowley.  But it is quite possible they may have to pay interest on it.

Mr. Foster.  I have not seen it before.

Mr. Crowley.  So then it would be a loss to the Treasury, the interest that would have otherwise been gone had it remained where it was.

Mr. Foster.  In effect ‑‑

Mr. Crowley.  It is quite possible. 

Mr. Foster.  Right.

Mr. Crowley.  Thank you. 

My Republican colleagues have said that they want to completely take away all funding for the Affordable Care Act, and they have made it clear that they will use the continuing resolution to cut off any funds for the implementation of this law.  Will this mean that the remaining seniors who hit the prescription drug coverage gap towards the end of 2010, just like their neighbors, and are waiting desperately for the help will now be denied the check that is rightfully theirs if funding for this were to be cut off? 

Mr. Foster.  Again, if it is repealed in its entirely and retroactively. 

Mr. Crowley.  Thank you.

Mr. Foster, the Department of Health and Human Services estimated that under the Affordable Care Act Medicare beneficiaries ‑‑ seniors ‑‑ who have hit the prescription drug coverage gap will each save $526 this year alone as a result of further closing the coverage gap.  By 2020, when the gap is fully closed, each beneficiary will save $1,540.  This means a total savings of $8.8 billion in savings to a projected 5.7 million beneficiaries. 

If the Affordable Care Act were repealed, Medicaid beneficiaries would effectively see an $8.8 billion cut just from this particular provision being repealed; is that true? 

Mr. Foster.  I would have to look up the figures, but those are in the right ballpark. 

Mr. Crowley.  Thank you.  I thank you for your honesty and your candor, and I thank the chairman.

Chairman Camp.  Mr. Foster, would you agree that health care spending and rising health care costs are the most significant drag on our Nation’s fiscal health? 

Mr. Foster.  Oh, I don’t know about that.  They certainly represent ‑‑

Chairman Camp.  Or a significant drag on our Nation’s fiscal health? 

Mr. Foster.  Well, certainly, yes.

Chairman Camp.  And one of the claims that is often made is that this health care law will “bend the curve” of health care spending.  In your expert analysis, would you say that their law increases or decreases national health expenditures? 

Mr. Foster.  We have estimated that overall national health expenditures would increase under the health reform act.

Chairman Camp.  So a significant drag on our economy is actually made worse under this law. 

My second question is, the nonpartisan Congressional Budget Office has made clear that the Medicare “savings” as a result of the health care law can’t be counted twice, first to shore up the solvency of the Medicare program and then also pay for a new health care entitlement.  Your office’s April 22, 2010, report on the effects of the law on the Medicare Trust Fund pointed out, “In practice, the improved Part A financing cannot be simultaneously used to finance other Federal outlays, such as the coverage expansions under the PPACA, and to extend the trust fund, despite the appearance of this result from the respective accounting conventions.” 

Can you sort of settle for this committee with a yes or no answer if the funds that are designated to finance a new entitlement under the health care reform law, can they be simultaneously used to make the Medicare trust fund more solvent? 

Mr. Foster.  Not directly, no.

Chairman Camp.  So what is the implication of that truth about the solvency of the Medicare program and on the alleged deficit reduction in the Democrats’ health care law? 

Mr. Foster.  Well, what I would like to do would be to explain it as follows:  Clearly, there are very large Medicare savings under the health reform act.  Those savings, the actual cash that shows up in higher payments, higher taxes, whatever, that is loaned to the rest of government.  The Medicare trust funds get Treasury bonds, IOUs.

Mr. Foster.  The money is immediately spent.  Whether for the purpose of offsetting the cost of the coverage expansions or building roads or whatever, it is spent.  In a few years when we need the money, we can cash in those Treasury bonds and it has to be repaid with interest.  But the original money we are talking about, if it was $100 in higher taxes, the $100 is spent.  It is gone.  We now need the $100.  We will get it back, but Treasury will have to come up with a new $100 to pay it back for us.  So to spend $100 for the ACA and $100 for Medicare takes $200, and the original $100 can only be used once.

Chairman Camp.  So the costs of the bill are understated.

Mr. Foster.  I think that is a different issue.

Chairman Camp.  I wanted to just touch on something else.  Health and Human Services, HHS, spent about $20 million to convince seniors that the health care law was good for Medicare.  And one of the first attempts to do that was the caller mailing that was glossy, that went out to seniors to inform them of a number of new government programs, even though they were ineligible for many of those programs. 

Was your office asked to review the Medicare mailer that went to seniors or to review the scripts that appeared in the media that were aimed at seniors?  Did your office review those? 

Mr. Foster.  No, we were not asked and we did not look at them.

Chairman Camp.  I would like you to comment on two statements included in the Medicare mailer and to just give your comments on whether those were accurate, inaccurate, or misleading.  One was it keeps Medicare strong and solvent.  Is that inaccurate or misleading, given that the Medicare cuts are unsustainable and that the, quote, savings are double‑counted as you mentioned earlier in your testimony, double‑counted as both trying to extend the Medicare solvency and also pay for a new entitlement? 

Mr. Foster.  Technically and in an important way, the savings for Medicare under the Affordable Care Act do extend solvency.  Now we lend the money out, we get it back, we can continue paying benefits longer than before.  Now, there is the appearance and good bit of reality of the double‑counting so that is an issue.  But technically it does help in that regard.

Chairman Camp.  The quote that Medicare benefits won’t change whether you get them through original Medicare or Medicare Advantage plan, is that an accurate statement? 

Mr. Foster.  I will be quite honest.  I have been troubled with that statement.  We had the question earlier about the guaranteed benefits.  It is true enough that the, quote, guaranteed benefits which are the original fee‑for‑service package, nobody is reducing that.  That actually expands a little bit.  It is also true that for Medicare Advantage enrollees, their extra benefits, their lower cost‑sharing, their lower premiums will be reduced  under the Affordable Care Act.

Chairman Camp.  And when you reviewed whether this legislation, quote, bent the cost curve or not, did it include any analysis of the physician payment formula or any extension of that or a, quote, doctor fix, as it is often called here? 

Mr. Foster.  No, not directly.  Other than the original Ways and Means Committee bill, the legislation did not have a doctor fix it in it.

Chairman Camp.  So that is a fairly significant cost to Medicare that has not been accounted for or included in this legislation? 

Mr. Foster.  Yes.  It has been treated as a separate issue.

Chairman Camp.  So in response to my question about increasing or decreasing health care spending, even your analysis would be pretty significantly understated if this were included.

Mr. Foster.  The cost of a permanent fix for the SGR system over 10 years is about $300 billion.  That provision was not in the Affordable Care Act.  It is a continuing issue, as you know, but that is roughly the cost.

Chairman Camp.  So that would mean health care expenditures would increase by that additional amount over that period? 

Mr. Foster.  That is correct.

Chairman Camp.  Thank you.  Mr. Levin may inquire. 

Mr. Levin.  Mr. Foster, welcome.  And I think this may give us an opportunity for further reference to the facts. 

You answered the question of the chairman about benefits.  The guaranteed benefits are different than the extra benefits under the Advantage programs; isn’t that true. 

Mr. Foster.  Yes, sir, that is correct.

Mr. Levin.  See, there tends to be always confusion or an attempt to confuse.  For example, there were references done earlier today, cuts in the payments.  So let me just quickly review your testimony because I think it is important to get to the facts.  On page 3, you say that it is estimated that the number of uninsured persons in the U.S. would reduce it by 34 million.  You don’t challenge that, do you? 

Mr. Foster.  No, sir, that is our best estimate. 

Mr. Levin.  Good.  You then, going to page 5, say that expenditures are expected to increase by about 200 billion due to the substantial expansions of coverage under the Affordable Care Act.  So if 34 more million are insured, it is likely the costs will go up overall, no? 

Mr. Foster.  Yes, that is correct.

Mr. Levin.  So let me just go on to page 5, and you talk about the Medicare savings.  There have been references here to cuts in Medicare payments.  Isn’t it more accurate to say that these cuts will come from a reduction in the increase in Medicare payments? 

Mr. Foster.  There are a lot of each.  Certainly for the productivity adjustments that I mentioned, that is a slower growth in payment updates.  If you think of the disproportionate share of hospital payments, that is a flat‑out reduction in the level.  So there are examples of each.

Mr. Levin.  So to simply talk about cuts, as has been done in many of the statements, including advertisements, whatever, about over $500 billion, half trillion in cuts in Medicare payments, much of that is in the reduction of the increase in Medicare payments; isn’t that correct? 

Mr. Foster.  Yes.  A significant part of it is in that form.

Mr. Levin.  Also, bending the curve; when we talk about bending the curve, we are talking about bending the curve in terms of the rate of increase in bending the curve in the rate of payments to providers, are we not? 

Mr. Foster.  Bending the curve generally refers to slowing the overall rate of health care costs growth, not necessarily how it might be done.

Mr. Levin.  But it also, when we talk about bending the curve, there is an effort, it indicates an effort to try to bring down the cost of the payments to those who provide care, no? 

Mr. Foster.  Well, clearly that is one way that the Affordable Care Act works to try to slow the growth of health care costs.

Mr. Levin.  And it really does try to do that, does it not? 

Mr. Foster.  Yes, sir, primarily through the Medicare productivity adjustments.

Mr. Levin.  Now, I just want to finish by referring to that, because there is a statement to take.  There is an indication, an effort often, to take somewhat qualified statements of yours and to indicate that essentially it is sure to happen.  And I think that we need to look at your testimony, because you say on page 8, Although this policy could be monitored over time to avoid such outcome, changes would likely result in smaller actionable savings than described for these provisions. 

Essentially what you are doing is projecting.  For example, you did as to the Advantage programs, and so far this year it has turned out your projections are wrong.  Right? 

Mr. Foster.  I would stop short of calling them wrong without appearing to be defensive.  The real issue is 2011 is not much affected by the Affordable Care Act.  2012 through 2017, there will be big effects.  There are factors unrelated to our estimate of the Affordable Care Act that have resulted in 2011 Medicare Advantage enrollment increasing by more than we thought it would.

Chairman Camp.  All right, thank you.  Mr. Herger is recognized. 

Mr. Herger.  Thank you, Mr. Chairman. 

Mr. Foster, the President and his administration have repeatedly said that we must pass their health care overhaul because controlling health care costs would help the economy. 

On June 2, 2009, the Council of Economic Advisers said, quote, we estimate that slowing the annual growth rate of health care costs by 1.5 percentage points would increase real growth domestic product relative to the no‑reform baseline by over 2 percent in 2020, closed quote. 

The President’s economic advisers also stated that slowing cost growth would lower the unemployment rate.  The President’s economists also argue that slowing the growth rate of health care costs raises standards of living by freeing up resources that can be used to produce other desired goods and services, closed quote. 

Based on your analysis, will the Democrats’ health care law slow the rate of health care costs so we can get these outcomes like more growth and more jobs? 

Mr. Foster.  Overall, the Affordable Care Act increases total health spending and it increases Federal spending on health care.  There are some factors in there that would help slow the growth rate further out in the projection period.  One of the largest of those factors is the one that I question the long‑range viability of.

Mr. Herger.  And Mr. Foster, in an auxiliary report to the Medicare Trustees 2010 Report, CMS actuaries predicted that under the new health care law by 2019, Medicare payment rates will be lower than current Medicaid rates.  In your recent testimony before the House Budget Committee, you confirmed that the best‑case scenario under current law is that Medicare rates will be equal to Medicaid rates in 10 years. 

What impact would these rates have on beneficiaries’ access to care? 

Mr. Foster.  If Medicare payment rates become lower than the current level for Medicaid, which in fact would happen over time under the Affordable Care Act, then it raises questions about the ability of beneficiaries to have access to care.  Within the Medicaid program, as I am sure you know, there are a number of studies that suggest access has been something of a problem and getting worse.  So you basically have to provide a reasonable payment rate for physicians and hospitals and anybody else in order to enable them to provide health care services to Medicare beneficiaries or anybody else.

Mr. Herger.  That would be a major problem, wouldn’t it?  I mean, we are already seeing a problem of doctors not taking new patients.  And to think that that would be more dramatically affected, does that concern you?

Mr. Foster.  It concerns me primarily because I think this would tend to happen over time, and whether it is 10 years or 20 years or somewhat longer is a little bit hard to say, but I believe it will happen.  I believe you folks, Congress at large, would have to respond to it because it makes no sense to have a Medicare program where Medicare beneficiaries cannot get access to care. 

So I believe you would have to override the provisions and that would result in a higher cost than we now project under current law.  That is my primary concern.

Mr. Herger.  Thank you Mr. Foster.

Chairman Camp.  All right.  Mr. Rangel is recognized.

Mr. Rangel.  Thank you, Mr. Chairman.  And welcome back, Mr. Foster. 

I would want you to clarify your status as an independent analysis.  I gather it is not your job to evaluate whether or not you think this program is good, bad, whether it is going to work or whether it is not going to work.  But one thing you did say is that it would increase medical costs.  And I wonder whether your job title and responsibility would say that while it would initially increase the amount of money the Federal Government is paying, that in terms of prevention and the fact that everyone will have access to health care, does it come within your protocol to determine whether or not in the long run medical costs would be reduced as a national expenditure? 

Mr. Foster.  The which part of medical costs, sir. 

Mr. Rangel.  Overall medical costs.  In other words, many of us lay people believe that if indeed people who now have no coverage, that we are paying for their very high emergency costs and we are paying for it through the Federal Government, we are paying for it with increased premiums, actually the Federal Government initially would be paying more money for health care.  But would you evaluate what is preventing from happening that would also cost money?  Is that a part of your responsibility? 

Mr. Foster.  Yes, sir.  You correctly stated that we don’t evaluate whether a proposed policy is a good idea or a bad idea.  Our role is to help policymakers understand the technical aspects.  Will something work the way they intend?  Will something have a savings or a cost?  And we try very hard to do that.  Evaluating the policy implications, of course, that is your job and we don’t step on your toes in that regard. 

Now, in terms of your specific question, we do try to estimate the impact of the Affordable Care Act on total national health expenditures, taking all the factors you mentioned into account, either directly or implicitly. 

Mr. Rangel.  How long have you been doing this? 

Mr. Foster.  Today it seems like quite a while, sir.

Mr. Rangel.  I know the feeling.

Mr. Foster.  I don’t mean to be a wise guy.  I have been working as an actuary for 38 years now, 16 years as chief actuary of CMS.

Mr. Rangel.  And how many of those years have you advised the Federal Government? 

Mr. Foster.  All of them.

Mr. Rangel.  And I assume if indeed you deviated in terms of being political, you would never have survived all of these different administrations for 38 years? 

Mr. Foster.  If anybody thought I was taking a political role or allowing political beliefs or preferences to affect my work and my office’s work, my own staff would be the first ones to throw me out of the office.

Mr. Rangel.  And I think my recollection is correct that you have taken on quite a few administrations in terms of what they wanted and what your reports indicated.

Mr. Foster.  I would like to think that we have offered sound, objective, technical advice to many administrations, some of the time for which it was appreciated.

Mr. Rangel.  Very wisely put. 

Could you evaluate what would happen in terms of health costs if indeed we were using a voucher system instead of the one that is outlined in this bill, and the health costs for the potential patient would be higher than the voucher?  What would happen fiscally as relates to overall health costs? 

Mr. Foster.  There is certainly a possibility that if the voucher payments don’t increase fast enough, people might have very limited insurance options, very low‑value insurance, or perhaps no options at all. 

The hope, I believe, and I am sure Representative Ryan could explain this better, is that it would change the underlying nature of health care cost increases.  That is a worthy goal for everybody.  But it involves risks that if you try to do it through a voucher program or you try to do it through lower and lower relative payments under Medicare for providers, that either the vouchers are inadequate or the payments are inadequate, and you can’t buy what you would like to buy.  That is the risk.

Mr. Rangel.  So the risk would not be just the Treasury in terms of costs, but it would be the potential patient.  I mean, I think also I would like to ask if they raise the age of Medicare in order to be eligible, what impact would that have fiscally?  Well, you could ‑‑ I would like to follow through on the chairman’s suggestion that we send you questions, and I appreciate your services to this committee and to our country.

Chairman Camp.  Thank you.  Mr. Johnson is recognized. 

Mr. Johnson.  Thank you, Mr. Chairman.  Thank you for being here, Mr. Foster.  The health care law cuts Medicare payments to hospitals by more than $150 billion according to our estimates, and that estimate includes the impact of several provisions, the market basket reduction and the permanent loss of their annual productivity adjustment. 

MedPAC’s latest data estimates the inpatient hospitals will have Medicare margins of a negative 5 percent in 2009.  And is it possible that some hospitals might be forced to cut back their staffs to survive the cuts and may be reducing the quality of care provided to seniors and other patients? 

Mr. Foster.  That is a conceivable outcome.  I would like to think that MedPAC and my office and others would continue to monitor the situation and advise you all, and if something like that happened, you would step in and say that we want to change the law to avoid that outcome.

Mr. Johnson.  Well, how would we change the law?  We are cutting the amount that we are paying them, so what would you have to do, increase the pay? 

Mr. Foster.  Basically yes, sir.  If you passed a law that said I personally get paid, say, half of what I am getting paid now, I would probably quit.  And if you came back and said, okay, we will pay you what you used to get, I would probably come back.

Mr. Johnson.  That is what is happening in our hospitals, at least in the Texas arena.  You know nurses, docs, and practitioners are laying off.  They have to pay salaries and rent, and those are still going up, as you know.  They will be paid less than cost of goods.  And do you think that is sustainable in the long term? 

Mr. Foster.  It is possible if they can improve their productivity at much better rates than they ever have historically, which is perhaps not likely, or if they can get rid of the admittedly significant level of inefficiency that exists, if they can take other steps through innovations and joining in provider organizations, ACOs and so forth, then all of that is possible.  Now, what I am afraid of is it may not be probable. 

Mr. Johnson.  I agree with you totally, and thank you for your testimony.  Mr. Chairman, I yield back.

Chairman Camp.  Thank you.  Mr. Brady is recognized. 

Mr. Brady.  Thank you, Chairman, and thank you, Mr. Foster, for joining us.  I am concerned about the damage that will be done for our seniors as a result of this new health care law. 

Dr. Berwick wasn’t able to answer a number of my questions on the impact, so I went to your report to get the answers and I want to confirm them.  I am concerned that many seniors that get prescription drug benefits under Medicare will have higher Part D costs because of the flawed way in which the doughnut hole is supposedly closed. 

On page 13 of your report, you say, “Providing additional coverage for prescription drugs dispensed in the coverage gap, the doughnut hole, will cause an increase in costs for the prescription drug plans and therefore an increase in the average Part D premium rate.” 

In plain English, are you saying that prescription Part D premiums will increase for seniors who are not in the doughnut hole? 

Mr. Foster.  They would increase for all Part D enrollees who pay premiums.  In other words ‑‑

Mr. Brady.  Including those who are not in the doughnut hole? 

Mr. Foster.  Their premiums would increase, on average, not by very much.  The amount is shown in the table on page 12.  Now, for people who make it to the coverage gap, where the coverage gap ‑‑

Mr. Brady.  That I understand.  I have some more questions. 

The second point you make on Medicare Advantage, the new provisions will reduce Medicare Advantage rebates to plans and thereby result in less generous benefit packages, an estimated $1,500 a year over time.  In plain English, is that saying that seniors within Medicare Advantage will have less benefits under the new health care bill? 

Mr. Foster.  Yes, sir.

Mr. Brady.  On the same page, “The reduction in Medicare Advantage rebates will cause a large increase in the out‑of‑pocket costs incurred by Medicare Advantage enrollees, estimated $873 more a year over time.”  In plain English, does that mean seniors in Medicare Advantage will have to pay more as a result of this new health care law? 

Mr. Foster.  If the Medicare Advantage plan benefit package, in other words the supplemental benefit package, stays the same ‑‑

Mr. Brady.  They will have to make up the difference out of their pocket.

Mr. Foster.  Enrollees will have to make up the difference.

Mr. Brady.  That is my fear. 

Final point.  There is concern that the way this new health care plan was structured, it punishes seniors who are getting their retirement plan through their business that they retire from, versus those perhaps of State, Federal Government workers.  Removing the tax deductibility of their assistance for their medicines is going to have an impact. 

You say here, that you have, quote, the anticipated movement of many of the Medicare beneficiaries currently enrolled through the retiree drug subsidy program of Part D plans. 

Does that mean that you anticipate seniors who are currently getting medicine help through their retirement plan from their business will be either forced or will move to the Medicare plan, as a result of the cut in their health ‑‑ under this health care plan. 

Mr. Foster.  Yes, sir.  As a result of the change in the tax status of the subsidy payments to employers.

Mr. Brady.  They left in place that subsidy help in its entirety for those government workers on retirement plans.  Do you anticipate government workers being forced off or leaving their plan for Medicare? 

Mr. Foster.  I don’t have any idea.  I think it is a somewhat different issue.

Mr. Brady.  Well, it is the impact of removing the subsidy.  When it was put in place they were equal.  Workers in a government retirement plan and workers in a business plan were treated equally.  That parity is now gone with removal of the tax deductibility that was done to make them whole.  So at this point at least, you didn’t at least estimate that, unlike private sector workers, government workers will not be leaving their plan? 

Mr. Foster.  No.  Again, it is a little bit different, sir.  For the retiree drug subsidy within Medicare, you had an employer who was paying the drug cost for drug insurance for his or her retired workers.  The employer could deduct that full amount.

Mr. Brady.  I know how it works.

Mr. Foster.  And the Medicare payment through the retiree drug subsidy to the employer was not counted as income and did not reduce the amount that the employer could deduct.

Mr. Brady.  At some point we need to continue this discussion, because I think there is a direct correlation there.  So thank you, Mr. Chairman.

Ranking Member Levin.  Thank you.  The gentleman’s time has expired. 

Mr. Stark is recognized. 

Mr. Stark.  Thank you, Mr. Chairman.  Thank you for having this hearing and welcome back, Mr. Foster. 

In Medicare Advantage, under the ACA, would Medicare benefits be reduced? 

Mr. Foster.  The traditional Medicare benefit package would not be affected.  The extra benefits that most plans offer would definitely be reduced over time.

Mr. Stark.  The ACA extends solvency by about 12 years, correct? 

Mr. Foster.  Yes, sir, based on the 2010 trustee’s report baseline.

Mr. Stark.  And ACA lowers cost‑sharing under Part B saving beneficiaries at the doctors’ offices; is that correct? 

Mr. Foster.  Yes, sir, for fee‑for‑service beneficiaries.

Mr. Stark.  And it reduces out‑of‑pocket spending for prescription drugs, does it not? 

Mr. Foster.  Yes, sir, by closing the coverage gap.

Mr. Stark.  And the ACA leaves Part B premiums which are presently made up of Social Security deductions the same; is that correct? 

Mr. Foster.  It would actually for fee‑for‑service beneficiaries, actually all beneficiaries, it would lower the Part B premiums.

Mr. Stark.  And would repeal raise costs for beneficiaries and reduce solvency? 

Mr. Foster.  It would essentially do the opposite of everything that the ACA did; in other words, putting it back where it had been. 

Mr. Stark.  Can I go back just very quickly to the Medicare Advantage benefits?  It has always been a concern of mine that the benefits offered in Medicare Advantage are far different from those that are actually used.  In other words, a Medicare Advantage plan may offer trips to China and all kinds of things that the members of the Medicare Advantage plan would have no possible chance to use.  Do you have any figures that relate to the benefits “offered,” and as opposed to those that are actually used? 

Mr. Foster.  Directly, no.  Indirectly, yes.  In other words, when a plan submits a bid for Medicare Advantage, and they have to specify the per‑member‑per‑month cost of the various supplemental coverages that they offer, they have to justify that cost based on the past experience of the cost for those provisions.

Mr. Stark.  How much they actually paid out? 

Mr. Foster.  Yes.  So you can’t have too much of a difference there without our challenging it and asking for a justification for the difference.

Mr. Stark.  So it would be difficult for those plans to offer spurious benefits that are just there in name only but aren’t really very attractive to the members; is that fair? 

Mr. Foster.  I am sure it happens to some degree in some cases, the gym club memberships perhaps, that kind of thing.

Mr. Stark.  For me, they don’t do me much good.  Thank you very much. 

Thank you, Mr. Chairman.

Chairman Camp.  Thank you.  Mr. Tiberi is recognized.

Mr. Tiberi.  Thank you, Mr. Chairman.  Thank you for being here, sir.  Medicare Advantage is voluntary; right, sir? 

Mr. Foster.  Yes, sir.

Mr. Tiberi.  So you can sign up or you can drop off.

Mr. Foster.  That is right.

Mr. Tiberi.  Every senior I have talked to who is on Medicare Advantage said that they liked the Medicare Advantage plan they are on because it offers them a comprehensive health care package whereas Medicare fee‑for‑service does not. 

Do you know off the top of your head how many, what percentage of seniors who are on Medicare, traditional Medicare fee‑for‑service, are in another additional plan, whether it be Medicaid, Medigap, retiree coverage? 

Mr. Foster.  It is a fairly high percentage.

Mr. Tiberi.  Like maybe 90? 

Mr. Foster.  Probably not quite that high, but 75 perhaps.  I could look those up for you.

Mr. Tiberi.  I would love that number.  Thank you sir.

[The information follows: Did not receive]

Mr. Tiberi.  So is it fair to say that under the current system, Medicare fee‑for‑service is not meeting the needs of most seniors because they are choosing other forms of coverage? 

Mr. Foster.  I would put it it slightly differently.  I would agree generally, but I would put it slightly differently.  The Medicare benefit package, the fee‑for‑service package is not exceptionally generous.  It has significant cost‑sharing requirements and it doesn’t have catastrophic coverage protection.  So most Medicare beneficiaries who are able to seek additional coverage, either through Medigap or they have it through their employer plans, or if you are low income you have it through Medicaid just in order to avoid the risk of financial catastrophe.

Mr. Tiberi.  And most Medicare Advantage beneficiaries do not seek that additional coverage, correct? 

Mr. Foster.  Generally not.  Many plans have catastrophic coverage but not all.

Mr. Tiberi.  So if you reduced the number of enrollees on Medicare Advantage and they go in Medicare fee‑for‑service, then they will have an additional out‑of‑pocket expense, potentially a new Medigap, that they would have to pay for.

Mr. Foster.  Typically.

Mr. Tiberi.  Do you know who the largest Medigap provider is in America? 

Mr. Foster.  United Health Care. 

Mr. Tiberi.  Is it affiliated with any other organization? 

Mr. Foster.  Like AARP. 

Mr. Tiberi.  Are they the largest? 

Mr. Foster.  I don’t know.

Mr. Tiberi.  Could you get that information?  Could CMS provide that? 

Mr. Foster.  I could try to find out.

[The information follows: Did not receive]

Mr. Tiberi.  So is it safe, then, to say that if you are in a position to gain market share, you would be opposed to the Medicare Advantage program to continue to exist if you were a provider of an additional product? 

Mr. Foster.  I am sorry, I didn’t quite understand.

Mr. Tiberi.  If you were in the business of providing coverage for seniors and you are providing that holistic coverage as an addition to Medicare fee‑for‑service, the more Medicare fee‑for‑service beneficiaries there are, the better it is potentially for you to supplement your business by offering more coverage to supplement Medicaid fee‑for‑service.  Meaning if there are fewer Medicare Advantage beneficiaries, they have to go back in the Medicare fee‑for‑service, so you would be potentially benefited.

Mr. Foster.  Yes, you would have a broader market opportunity.

Mr. Tiberi.  Because the odds are that if you are no longer on Medicare Advantage, you would need something other than just Medicare fee‑for‑service based upon what we already know, right? 

Mr. Foster.  Yes, sir. 

Mr. Tiberi.  So is it fair to say that what Mr. Ryan is trying to do, what he has been criticized for trying to do, doesn’t acknowledge the fact that most Medicare ‑‑ most, the majority, you said 75 percent, look forward to the number ‑‑ but most Medicare fee‑for‑service individuals today don’t believe that they have enough coverage, therefore are either supplementing their coverage.  So it is not fair because we are not, to be critical, we are not comparing apples to apples.  Is that fair? 

Mr. Foster.  Well, fee‑for‑service Medicare by itself is a basic package without catastrophic protection or some other features. 

Mr. Tiberi.  And what Mr. Ryan is also providing is a basic package that is for the senior.

Mr. Foster.  That is correct.

Mr. Tiberi.  Thank you.  I appreciate that.  I yield back.

Chairman Camp.  Thank you.  Mr. Davis is recognized. 

Mr. Davis.  Thank you, Mr. Chairman. 

Mr. Foster, I appreciate the work that you have done to try to make sense of the health care law and the impact it will have on seniors’ coverage under Medicare.  You do an important job.  I thank you for your service.  Surviving 38 years in the mosh pit of politics is a credit to a Job‑like stability of mind to be able to keep focus. 

Mr. Foster.  Or limited mental faculties.

Mr. Davis.  I think that is over in the United States Senate, probably, where we would find that. 

But earlier this morning, many of us would asked Dr. Berwick his thoughts about the numbers that your office has put out.  I come from an operations and planning background where the metrics are everything and the assumptions behind the metrics are really how you can formulate effective policy decisions, make business decisions, and have some adequate degree of predictability about the way trends are going. 

I understand that there is no actuarial formula that is is perfect, unless you had the ability to see into the future.  And I am sure you would not be working here if that were the case.  You would have clients in other places.  But the projections are hypothetical, but they are very critical to understand how these assumptions would play out for policy. 

And I think that I felt rather uncomfortable this morning asking specific questions that are based on data and not getting an answer. 

But I was wondering, technically speaking, if you can take a moment to explain for us the role of your office and how you do what you do.  If you could give us kind of a sound‑bite version of that, outside of it being perceived by many non‑numerically‑oriented folks as kind of a black art to come up with things that can get batted around.  I would like to hear your perspective on how you come to your conclusions.

Mr. Foster.  Sure.  There are many techniques for estimation, cost projection, that actuaries use both in government and in the private sector.  The better the data, the better job we can do.  It is hard, of course, when you have something new, not tried before, where it is hard to predict people’s behavioral response, people, employers, whatever. 

We have a staff of about 90 percent people in the Office of the Actuary at CMS.  They are all sharp, above average, handsome and beautiful respectively, and they work very hard to try to estimate the financial and other impacts of any proposal that is asked of us. 

Mr. Davis.  Well, following on that, the nonpartisan Congressional Budget Office has made clear that Medicare savings as a result of the health care law can’t be counted twice; first, to shore up solvency of the Medicare program while also paying for a new health care entitlement program.  Further, your office’s April 22, 2010, report on the effects of the Democrats’ health care law, and the Medicare Trust Fund pointed out ‑‑ and I am quoting ‑‑ In practice, the improved party financing cannot be simultaneously used to finance other Federal outlays, such as the coverage expansions under the PPACA, and to extend the trust fund, despite the appearance of this resolve from respective accounting conventions. 

I was wondering if you could tell us about this double‑counting issue, maybe elaborate for us a little bit. 

Mr. Foster.  I would be glad to.  It is nothing new, but it is relevant and important.  I will go back to the example that I used a bit ago, where suppose under the Affordable Care Act a given worker has to pay $100 higher hospital insurance payroll tax.  So that hundred dollars, the true cash, the hundred dollars is sent to the Treasury.  The Treasury credits the Hospital Insurance Trust Fund with $100 Treasury security, and then the money goes into the general fund, and from there it is spent pretty much immediately, whether it is to offset the cost of the coverage expansions under the Affordable Care Act or for SSI benefits or anything else.  But the money is spent. 

Now, later on, a couple years down the road, we need our hundred dollars so we cash in our Treasury security, we get the $100 back with some interest.  Obviously, it is not the same $100.  That money is already spent.  We need to spend $100, so Treasury has to come up with $100, say, by borrowing that much to then give to us.  So the original $100 can’t both spend $100 over here for coverage expansions and $100 over here for HI.  On the other hand, because of the way the trust funds are set up, we do get the help when we need it in the future.  I don’t know if that helps or not.

Mr. Davis.  That helps very much.  I think a few of my colleagues’ assumptions on the other side of the aisle remind me of a production manager once who quipped they were losing money on every product, but they would make it up on volume.  And we certainly want to avoid that.  Thank you very much for your service.  I yield back.

Chairman Camp.  Thank you. 

Mr. McDermott is recognized. 

Mr. McDermott.  Thank you, Mr. Chairman. 

It is good to see you, Mr. Foster.  We haven’t seen you for a while.  You have been around as long as I have been here, so I have got to see you on a number of occasions and I liked what you said earlier:  You like to know how it actually works. 

And as I look at Medicare, Medicare’s administrative cost is 3 percent.  That is the generally accepted figure.  Do you accept that figure? 

Mr. Foster.  The way it is normally calculated it is actually quite a bit lower.  If you look at all the Federal and related administrative costs for Medicare, it represents about 1.3 percent of total expenditures. 

Mr. McDermott.  1.3 percent.

Mr. Foster.  Yes, sir.

Mr. McDermott.  Now, insurance companies’ administrative costs are estimated on average about 14 percent, sometimes as high as 40 in the individual market; is that correct? 

Mr. Foster.  Yes, sir.  That is in the ballpark, depending on the nature of the insurance.

Mr. McDermott.  So if Mr. Ryan and the Republicans succeed in moving to a voucher system ‑‑ that is, we hand 5,700 or 6,300 or whatever amount to seniors every month ‑‑ how will that administrative cost on the insurance companies, will that be an added cost on top of what they are getting already?  I don’t understand where that administrative cost goes. 

Mr. Foster.  Well, any insurance premium that you see, just about any will normally include amounts to cover the medical expenses and also the administrative costs and whatever profit margin is built in.  So under Mr. Ryan’s plan, a voucher pavement would help a beneficiary purchase some level of coverage that would include the cost of administering the program.

Mr. McDermott.  And when you look at it from the two standpoints of the government and the senior citizen, the government cost would go down if we had a voucher system; is that correct? 

Mr. Foster.  Yes, sir.

Mr. McDermott.  And what would happen to the costs to the senior citizen, above the voucher?  Would that pay for their cost, do you think? 

Mr. Foster.  It would depend on how the voucher amount is escalated each year.  If it grows at a slower rate than health care costs ‑‑

Mr. McDermott.  That is what Mr. Ryan is talking about, less than the medical inflation rate.

Mr. Foster.  In his original proposal, that is correct.  I believe it is ‑‑ the modified version with Dr. Alice Rivlin, it would grow at a faster rate.  But if you assume that the voucher payment increases more slowly than health care costs, then over time people would initially have to buy less comprehensive coverage.  Now, that might help them purchase health care more prudently because they have more of a direct financial stake in it.

Mr. McDermott.  You mean as they are getting older, they would be buying less health care coverage.  Is that what you are saying? 

Mr. Foster.  Yes.  Whether it is an individual who is getting older or a new person who comes along and qualifies for Medicare, they might buy a catastrophic coverage instead of more comprehensive one.  What I am saying is that can feed back into how much they spend.

Mr. McDermott.  Does that make sense, that as you get older you need less health care coverage? 

Mr. Foster.  No.  Of course, obviously, as people age, they typically run into higher health care costs.  The issue here would be, how is the voucher handled?  Is it adjusted for age?  Is it one amount for all, and the insurance companies have to provide guaranteed issue regardless of age.  Those are details to be worked out.

Mr. McDermott.  So it would be ‑‑ you would have to have some kind of regulatory system to make sure that insurance companies would sell a policy to an 85‑year‑old who had had several cancers.

Mr. Foster.  Yes, I think that would be required.

Mr. McDermott.  You couldn’t get away without regulation; you would need the Federal Government involved in it? 

Mr. Foster.  I would tend to think so.  In fact, I think Mr. Ryan’s plan has that sort of thing involved.  But as I said before, it has been a couple of years since I looked at it.

Mr. McDermott.  Would his be called a government takeover of health care? 

Mr. Foster.  You would probably have to ask him that question, sir.

Mr. McDermott.  Do you see any way that you can make the system that we put in last year in law better? 

Mr. Foster.  Sure. 

Mr. McDermott.  Give me a couple of suggestions.

Mr. Foster.  Okay.  If you think about Medicaid for a minute, the expansion of Medicaid eligibility applies to people under 65.  So picture somebody who is 63 or 64 and qualifies for the Medicaid coverage.  They turn 65, and of course they qualify for Medicare, and they then would no longer qualify for Medicaid.  So that is, I hate to use the word “notch” for reasons you all remember, but I think that would represent a notch in benefit coverage.  So that is a limitation that I think will need to be addressed. 

Let me give you one other example, if I may ‑‑

Chairman Camp.  Your time has expired.  If you want to complete that in writing that would certainly be welcome.

Mr. McDermott.  Thank you.

[The information follows: Did not receive]

Chairman Levin.  Mr. Reichert is recognized.

Mr. Reichert.  Thank you, Mr. Chairman.  Welcome, and I am pleased to hear your answers to the questions that my colleague, Mr. McDermott, asked.  I asked a similar question of the previous witness and didn’t get an answer as to what he might change or improve in the health care law, so thank you for those answers.

I want to sort of stick to the theme that I was with earlier this morning, and that is if you like your health care plan you can keep it, and specifically for seniors.  So as I understand the health care current law, there are substantial cuts to Medicare in the area of $200 billion.  And according to your figures, by 2017 you are predicting that maybe 50 percent of the seniors who would otherwise enroll in Medicare will probably not enroll in Medicare.  Is that an accurate statement? 

Mr. Foster.  Yes, sir.  We have estimated that about 50 percent of the people who would have been enrolled in Medicare Advantage plans would no longer be enrolled under the Affordable Care Act.  A slightly better updated estimate is closer to 40 percent.

Mr. Reichert.  So if that happens, would it be fair to assume that there could be a large reduction in enrollment; in this large reduction in enrollment, there could be fewer choices in plans offered? 

Mr. Foster.  Yes.  We have not modeled the number of plans that could be offered, but the private plans like to offer a certain kind of benefit package consistent with HMO’s or PPO practice.  If they can no longer offer that package because of the reduced Medicare rebates that are payable, then they might choose to exit the market.

Mr. Reichert.  So those seniors that are in those plans, because of the reduction of the choices that might be made available, would no longer be able to keep the health care plan that they like? 

Mr. Foster.  I anticipate that is what will happen. 

I might add that that is not going to happen in 2011.  It is going to happen gradually, between 2012 and 2017.

Mr. Reichert.  So while your report doesn’t speak to the contraction of plans, can you give me your opinion on which plans would most likely survive in that sort of scenario? 

Mr. Foster.  We anticipate that it would vary geographically.  The payment rates will be directly tied to Medicare fee‑for‑service costs in the area in question.  In some parts of the country, fee‑for‑service expenditures are very, very high.  South Florida comes to mind, obviously.  In areas like that, the Medicare Advantage plans can comfortably have a cost under the fee‑for‑service level and they should be able to continue and do pretty well.

Mr. Reichert.  So would it be fair to say, too, that plans with a larger market share might be those that survive? 

Mr. Foster.  I would have to think about that.  They get an economy of scale, so that would probably help.  But that is not the biggest factor, I don’t think.

Mr. Reichert.  So what about the Medigap insurance?  Would that be one of those you think that would still be around as plans are reduced through Medicare Advantage cuts? 

Mr. Foster.  Yes.  There is a distinction.  The Medicare Advantage plans have different payment rules and they are governed by Medicare.  The Medigap plans are overseen by the States, but that is a voluntary program that individuals decide to do on their own or not.  It is unrelated to Medicare Advantage.

Mr. Reichert.  But as Medicare Advantage plans go away, seniors are going to have to make a choice to go someplace, as Mr. Nunes said, or Mr. Tiberi said, they are going to have to go somewhere, and Medigap would be one of those. 

I just find it interesting that, I don’t know if you are aware or not, but Mr. Herger and I have been investigating AARP’s strong financial public support of this health care bill and their interest in the Medigap insurance plans.  And as Medicare Advantage disappears, Medigap insurance, United, for example, stand to gain a lot in my opinion.  Would you agree with that statement? 

Mr. Foster.  Well, I think that if our projection ends up being correct, as I have every reason to expect, and something like 6 to 7 million people, beneficiaries, leave Medicare Advantage plans, many of them, perhaps most of them, will want auxiliary coverage and Medigap will be the most straightforward way to get it. 

Mr. Reichert.  I yield back, Mr. Chairman.  Thank you.

Chairman Camp.  Thank you.  Dr. Boustany is recognized. 

Mr. Boustany.  Thank you, Mr. Chairman.  And, Mr. Foster, thank you for appearing before the committee today. 

Mr. Foster, it is my understanding that the insurance experts, many insurance experts outside of government, all conclude that the long‑term care program in this law, the so‑called CLASS act, is likely to suffer from severe adverse selection, and the program will primarily appeal to less healthy enrollees and this will drive up premiums. 

This month, a report by the Center for Retirement Research concluded that without adjustments, adverse selection will create a death spiral of rising premiums and declining participation.  It noted that even with regulatory changes by the administration, premiums may never reach an affordable level for middle‑class households. 

So, considering your prior warnings, written warnings to Congress in April of 2010, do you agree with the conclusion that CLASS, as structured by the new health law, is likely to suffer from severe adverse selection in a death spiral of unaffordable premiums? 

Mr. Foster.  I certainly agree that, as written, the CLASS program would be subject to various severe adverse selection which could cause the so‑called death spiral or assessment spiral.  It may be possible administratively to adjust the program enough to make it viable, and I know people are working to that end. 

Mr. Boustany.  But if indeed these premiums were to go up, clearly folks that are on Medicare, who have looked for some way to provide for their long‑term care needs, will suffer.  Is that true? 

Mr. Foster.  Well, the CLASS program I think was designed to try and meet two different sets of needs.  One is as a form of Federal long‑term care insurance for younger people, who over a long period would participate and then qualify for benefits ‑‑

Mr. Boustany.  Right.  But the Medicare program today doesn’t cover long‑term care so it is really targeted for that population.  Prior planning, obviously. 

Mr. Foster.  Well, the other thing it tried to accomplish was for people who were in not so good health or who are older, to give them an opportunity to acquire long‑term care insurance.

Mr. Boustany.  So you have real concerns about the solvency of this program as it is constructed today.

Mr. Foster.  Yes, sir, I do. 

Mr. Boustany.  Thank you. 

I want to change tracks now and just pursue a line of questioning I had with the previous witness with regard to physician shortages reimbursement linkage that is there.  And in your testimony you describe unless providers could reduce their cost per service correspondingly through productivity improvements or other steps, they would eventually become unwilling or unable to treat Medicare beneficiaries, and that is because of declining reimbursements that are built into the system.  Is that correct? 

Mr. Foster.  Yes, sir, for affected providers like hospitals and skilled nursing facilities, et cetera.

Mr. Boustany.  Right.  So if that is the case, that is clearly going to hurt access for Medicare patients and most likely be very acute in rural areas where there is obviously less opportunities for these institutions in rural communities to make appropriate adjustments.

Mr. Foster.  Yes, sir.  If over some period of time, the reimbursement rates become inadequate and you don’t do anything about it, then I think access would be a significant issue.

Mr. Boustany.  And we heard some platitudes about innovations in reimbursement, but no specific detail.  And further down in your testimony, you talk about some of these payment system reforms and delivery system reforms facilitated through the research programs that are described in the bill.  But you say that these outcomes are far from certain, and many experts doubt the feasibility of such sustained improvements, and anticipate that over time Medicare price constraints would become unworkable and that Congress would likely override them, much as they have done to prevent reductions in physician payment rates, otherwise required by the sustainable

Mr. Boustany.  So I take that to mean that Congress will make adjustments to prevent these kinds of draconian cuts which were built into the original assumptions on cost savings for the bill, and so we won’t achieve some of those cost savings and in fact we are perpetuating the same problem.  Is that a fair statement? 

Mr. Foster.  Yes.  That is a reasonable summary of my concern.

Mr. Boustany.  Thank you.  And I sense that you don’t have a lot of confidence in these prospective delivery system and reimbursement reforms that are being talked about.  I mean, we have created a bureaucratic entity, but we don’t really know what is going to materialize there.

Mr. Foster.  I have a lot of optimism, but it remains to be seen whether it can be fulfilled.

Mr. Boustany.  Thank you. 

Thank you, Mr. Chairman.

Mr. Johnson.  Thank you. 

Mr. Lewis is recognized. 

Mr. Lewis.  Thank you very much, Mr. Johnson. 

I thank you, Dr. Foster ‑‑ Mr. Foster.

Mr. Foster.  Mr. Foster.  Dr. Foster is my father.

Mr. Lewis.  Okay.  Well, thank you, Mr. Foster, for being here.  Thank you for your service for many, many years. 

Let me just ask you, Mr. Foster, is it true that for the first two decades all of the plan paid by 95 percent? 

Mr. Foster.  Are you asking whether the Medicare Advantage plan started off being paid 95 percent of the traditional level of cost? 

Mr. Lewis.  Yes.

Mr. Foster.  Yes, sir, that is correct.

Mr. Lewis.  Prior to health reform, did Medicare overpay Medicare Advantage plan? 

Mr. Foster.  Subsequent to the Medicare Modernization Act, the benchmarks for payments to private plans and the payment levels were clearly such that for a given beneficiary Medicare tended to pay roughly 12 to 15 percent more than if that person had been in fee‑for‑service.

Mr. Lewis.  What percentage of beneficiaries are enrolled in private plans? 

Mr. Foster.  Currently, it is about 27 percent.

Mr. Lewis.  Let me ask you another question:  Do fee‑for‑service beneficiaries pay higher Part B premiums to cover these overpayments? 

Mr. Foster.  Yes, sir.  The fact that the Medicare Advantage enrollees to date have a higher per‑person cost for Medicare, that higher cost feeds through to Part B and affects the Part B premium, which is paid by all Part B enrollees.  Now that difference will shrink over time under the Affordable Care Act.

Mr. Lewis.  Many of my colleagues keep asserting that benefits will be reduced, but I want to clarify that there will not be a reduction of Medicare benefits even for those in private plans.  Is that right?  Am I right? 

Mr. Foster.  Not in this case, sir.  For the people who are in the private plans, they will actually see an outright reduction in their total ‑‑

Mr. Lewis.  But will those in Medicare benefits? 

Mr. Foster.  If you are referring to the traditional Medicare.

Mr. Lewis.  No, the guaranteed benefits.

Mr. Foster.  Yes, there is no change in those, other than to expand them a little bit.

Mr. Lewis.  Thank you very much.

Mr. Johnson.  Thank you. 

Mr. Paulsen, do you wish to question? 

Mr. Paulsen.  Thank you, Mr. Chairman.  I would like to ask maybe one or two questions.  Thank you, Mr. Foster. 

I was just going to ask your perspective.  The health care law includes now multiple potential Medicare payment reductions for all health care providers, and in addition there will be significant pressure and requirements to improve quality outcomes at the same or reduced costs.  So layering on top of that now we have this new medical device tax in the new law that will make the tools these providers need to achieve their quality outcomes much more expensive because that tax is likely to begin to be passed on to health care providers and consumers as well.  Do you see how the medical device tax is in conflict or direct conflict with the goals to improve patient care and reduce costs within our health care system? 

Mr. Foster.  The tax on the medical devices, I agree with your assessment that that tax is likely to be passed on through a higher price for the devices, which would, other things being equal, raise health care expenditures.

Mr. Paulsen.  Thank you, Mr. Chairman. 

I will have one other question. 

I think one of the elements of the accountable care organization oversight model that is included as a part of this shared savings, this means if an ACO, as its known, succeeds in reducing costs by a certain amount and also meets selected quality measures, the hospitals and the physicians that are in the ACO will each receive a share of the savings that were generated.  So this type of arrangement in which providers essentially have a financial interest to reduce care has been part of the several gain‑sharing demonstration programs that are currently under way. 

Independent monitoring of each ACO or shared savings program site must be an essential part of the ACO program to ensure that these financial incentives are appropriate and do not induce providers to limit a patient’s treatment options and negatively affect quality of care.  Can you comment regarding independent monitoring of ACOs, just independent monitoring of these accountable care organizations? 

Mr. Foster.  Well, I think what I would say is, obviously, you do have to monitor the quality that is part of the program, that you don’t want providers to stint on care or avoid services that are really necessary.  If they can avoid unnecessary services, that is great for everybody, but you do have to make sure, because of the financial incentive, that it doesn’t go too far.

Mr. Paulsen.  Thank you, Mr. Foster. 

Mr. Chairman, I yield back.

Mr. Johnson.  Thank you. 

Mr. Berg, do you care to question? 

Mr. Berg.  Mr. Foster, your office authorized an appendix to the Medicare Trustees 2010 report in which you question the Trustees’ projections that Medicare party solvency would be extended.  And you stated that their estimates do not represent the best estimate of actual future Medicare expenditures.  I understand your office does not typically issue an ancillary report to the annual Medicare Trustee’s Report giving an alternative projection.  What were the key concerns that you had with the Trustees’ report that compelled you to issue this ancillary report? 

Mr. Foster.  Well, there are two factors there, sir.  One is, by law, I am required to certify that the assumptions and methods used in the Trustees’ report are reasonable.  In my comment in that certification I said that the current law projection is probably not a reasonable projection, given that the current law itself may not be viable, some of the provisions may not be viable.

Now, in addition to that, we issued an auxiliary memorandum with the illustrative alternative projection that showed, under a different version of the law, if the parts that we worried about the viability ‑‑ the physician payments and the productivity adjustments ‑‑ if those are assumed to go away, to be overridden, then what would the cost look like? 

Now we had done that in the past just for the physician SGR issue, and the Trustees have asked us to do this.  So I wouldn’t say I am at major odds with the Trustees in any respect.  We all recognize the concerns and want to make sure the public understands and you understand the concerns.

Mr. Berg.  One additional question.  As you know, the health care law cuts Medicare Advantage by $206 billion, according to the CBO.  Can you elaborate on how these cuts will impact enrollee benefits and premiums and plan availability? 

Mr. Foster.  Under the current law, if a plan’s cost is lower than the so‑called “benchmark” level, then the difference, a portion of the difference ‑‑ and to date it has been 75 percent ‑‑ it is paid to the plans in the form of a rebate.  They have to use the rebate amounts to either reduce cautionary requirements or add extra benefits, like dental or vision coverage, or reduce Part B or Part D premiums.

Now under the Affordable Care Act, the benchmarks will be reduced significantly and the percentage, what used to be 75 of this difference, benchmark versus bid, that will be reduced to 50 percent, although it can be increased for quality bonuses.  But the bottom line is the rebate amounts are going to be reduced substantially.  And in the written testimony, we estimate about $1,500 on average by 2019.  So that will cut back to the tune of $1,500 the extra benefits that can be offered. 

Now the MA beneficiaries will also benefit from the fee‑for‑service effects.  They will have to pay a lower Part B premium and other changes.  So they gain from that but not as much as they lose from the lower benchmarks.

Mr. Berg.  Thank you.  I will yield back my time.

Mr. Johnson.  Thank you. 

Mr. Levin, Do you have one more comment? 

Mr. Levin.  Well, just as a follow up to that last question about Medicare Advantage programs. 

Mr. Foster, I think if your testimony is taken as a whole and not taken apart just for some advantage, talking about Medicare Advantage, it is clear that essentially a lot of Medicare beneficiaries were subsidizing extra benefits for others and that subsidization essentially led to an advantage for Medicare Advantage plans.  Now that advantage is being reduced and, as a result, a large number, the larger percentage of people covered by Medicare won’t be subsidizing advantages for others. 

As that advantage is reduced, I think you would agree that there are other ways for carriers to make up the difference.  They can become more efficient, no?  The insurance carrier can become more efficient? 

Mr. Foster.  Yes, sir, there is potential for that.

Mr. Levin.  Indeed, I think there is a recent report from one of them that have reduced premiums because of the more efficient way that care is being delivered.  And one can very readily argue that the reduction in that subsidy will lead to more carefully and effectively delivered health care. 

Mr. Foster.  At the margin, I think you are probably correct.  In the big picture, I don’t think that is enough to counteract the changes of the benchmarks. 

Now I might add, because I don’t want anybody to misunderstand me, I have no position on the policy issue of whether it makes sense or does not make sense for one group of Medicare beneficiaries to get an advantage and another group not to get it.  That is a policy issue.  That has been the case for the Medicare Advantage enrollees, benefit from the nature or the design of the formula for payment.  That has been very valuable and has been very popular.  To the extent that the Affordable Care Act removes most of that advantage, is that good policy?  That is for you all to decide.

Mr. Levin.  I think you described it accurately.  A lot paid for an advantage for a minority, and we are now reducing that advantage.  Hopefully, reducing a subsidy paid for by the majority can lead to more effective delivery of care. 

Thank you very much.

Mr. Johnson.  Thank you, Mr. Levin. 

And I want to thank you, Mr. Foster.  I appreciate your lengthy stay with us this morning, and I would ask that if any members want to submit questions that you be allowed to provide written responses for the record, if you would. 

With that, this hearing is adjourned.

[Whereupon, at 2:15 p.m., the committee was adjourned.]

Questions for the Record:
Mr. Berwick
Mr. Berwick- Tiberi DME Data request

Members Submissions for the Record:

Mr. Rangel

Submissions for the Record:
Families USA
American College of Physicians
America’s Health Insurance Plans
Alliance for Retired Americans
Campaign for Better Care
Center for Medicare Advocacy
Health Industry Distributors Association
Medicare Rights Center
National Partnership for Women Families
National Senior Citizens Law Center
Roundtable on Critical Care Policy