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Hearing on the President’s Fiscal Year 2013 Budget Proposal with U.S. Department of Health and Human Services Secretary Kathleen Sebelius

February 28, 2012

Hearing on the President’s Fiscal Year 2013 Budget Proposal
with U.S. Department of Health and Human Services
Secretary Kathleen Sebelius








February 28, 2012

SERIAL 112-21

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
TOM REED, New York

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

JENNIFER M. SAFAVIAN, Staff Director and General Counsel
JANICE MAYS, Minority Chief Counsel





The Honorable Kathleen Sebelius
Secretary, United States Department of Health and Human Services


Hearing on the President’s Fiscal Year 2013 Budget Proposal with U.S.
Department of Health and Human Services Secretary Kathleen Sebelius

Tuesday, February 28, 2012
U.S. House of Representatives,
Committee on Ways and Means,
Washington, D.C.


The committee met, pursuant to notice, at 1:05 p.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.  We do have a vote in progress.  This is a little bit unusual.

     I have visited with Mr. Levin and we will have a looser Gibbons Rule in terms of voting.  We will go by seniority once we return, so members, feel free to come and go, to make sure you are able to make that vote.

     Secretary Sebelius, thank you for joining us today for a discussion of the President’s 2013 budget.

     The Administration’s budget is a reflection of his priorities and vision for the country.  I am disappointed to say that in reviewing the Health and Human Services’ budget for fiscal year 2013, I find myself asking where is the leadership, where is the plan, where is the vision.

     Despite repeated promises by the Administration to strengthen Medicare, to make health care more affordable for all Americans and to reduce the country’s debt and deficits, the President’s budget fails to accomplish any of these goals.

     The President’s budget lacks guidance about one of the greatest challenges facing the Federal Government, and by extension, American taxpayer, the long term solvency of Medicare.

     The Medicare Trustees have made it very clear that Medicare is going broke and that without reform, it will not be able to provide the benefits so many seniors rely on.

     The Hospital Insurance Trust Fund alone has more than $8 trillion in unfunded liabilities and is slated to go bankrupt in roughly ten years.

     With more than 10,000 baby boomers becoming eligible for benefits each day, it is critical that Republicans and Democrats work together to secure Medicare’s future and ensure current and future beneficiaries have continued and uninterrupted access to much needed care.

     This budget also lacks any assurance or evidence that the health care law will make health insurance more affordable.  Last year, health insurance premiums rose by nine percent for the average American family purchasing insurance in the workplace.

     In part, health care costs are directly impacted by regulations and guidance being issued by your Department, including Government mandated health benefit packages and exchanges.

     Take, for example, your Government mandated benefits in actual value and cost saving bulletins.  If implemented, these bulletins will significantly increase the price of health insurance.

     Using these bulletins instead of standard regulatory procedures, you have chosen to hide the expected costs of your decisions for the American people.

     It is clear that each decision your Department makes impacts the price of a monthly insurance premium, and one more mandate, one more service, and one more Washington requirement only adds to the likelihood that costs will increase, not decrease.

     In addition to the costs consumers bear today, this budget ensures they will face even greater costs in the future.

     The President’s fiscal year 2013 budget contains the highest deficit ever proposed and fails to deliver on his promise to cut the deficit in half by the end of his first term.

     For example, in our human resources jurisdiction, instead of consolidating programs and ending those that do not work and making real reforms to others, your budget proposes creating more programs and increasing spending on others by over $10 billion, and how exactly does that help cut the deficit?

     I would also note that in addition to the $1 billion already spent on implementing the health care law, the budget requests an additional $1.35 billion in 2013.

     Even more troubling is the fact that the President’s budget requests funding for an additional 848 full time equivalent IRS employees compared to 136 CMS employees, solely for the purpose of implementing the health care law.

     What does this say about health care when you request more than six times the number of IRS employees than CMS employees?

     Furthermore, over the next ten years, spending in Medicare, Medicaid and Social Security will increase as a percentage of GDP from 9.7 to 11.2 percent.

     Madam Secretary, all this boils down to is more money for Washington to spend, more Government employees to spend it, and not a dime in deficit reduction for the hard working American taxpayer.

     I would like to close with a couple of additional points, Madam Secretary.  On previous occasions, members of the House and Senate have written to you and your agency seeking information about how the health care overhaul is being implemented.

     Too often, these inquiries are either ignored or members receiving incomplete and insufficient explanations.

     Congress and in particular this committee has a responsibility to conduct oversight of your Department.  We expect full cooperation from you and your Department so we can ensure that taxpayer dollars are used effectively, efficiently, and in compliance with the law.

     Many Americans opposed the new health care law because they believed it to be an unconstitutional power grab by Washington, forcing Americans to buy Government approved insurance and then taxing them if they do not was not bad enough, it is something I hope the Supreme Court throws out pretty soon.

     Recent actions by your Department prove that Americans have even more reason to worry, that decisions made behind closed doors, in secret, by a small cadre of insiders, will impact our most fundamental constitutional rights.

     Madam Secretary, I hope you can provide some additional information today on how we address these problems for the American people. I look forward to your testimony.

     I will now recognize Ranking Member Levin for his opening statement.

     *Mr. Levin.  I will shorten my statement and enter a larger statement into the record, Mr. Chairman.

     Actually, I think we can say it quite briefly, health care reform is working.  The prophets of doom and gloom are being proven wrong.  Already ‑‑ and you will testify to this and welcome ‑‑ there are successes.

     For the first time in years, according to the Chief Actuary for the Centers for Medicare and Medicaid Services, growth in national health expenditures was slow, thanks to health care reform.  It is reducing overpayments and will reform the way we deliver services.

     We have strengthened through health care reform Medicare and improved the benefits.  For example, four million Medicare beneficiaries saved more than $2 billion last year because health care reform closed the prescription drug doughnut hole.

     Health reform is not just helping those on Medicare, it is helping all Americans save money.  My statement, for example, shows what has happened for 86 million Americans in terms of preventive care, 2.5 million young adults have been covered through their parents’ policies, nearly 50,000 Americans are now receiving health care who were denied because of preexisting conditions, and 3,800 employers have received much needed help to retain benefits and lower costs for countless retirees and their spouses.

     Let me just repeat once again, we welcome you, and we think this system, this reform, is working.

     It was just a few days ago, Mr. Chairman, that you said “I will not rest until Congress, the Supreme Court or the Attorney General dismantles ObamaCare.”

     Health care reform is working.  I think the trouble with its opponents, the real trouble is they are facing successes for millions and millions of American people.

     *Chairman Camp.  Mr. Price?

     *Mr. Price.  Thank you.  Madam Secretary, I want to welcome you and appreciate you joining us again today, and I look forward to your statement.


     *Secretary Sebelius.  Thank you, Congressman.  It is nice to be here with the Ways and Means Committee.

     I wanted to thank the Chairman, Ranking Member and members of the Committee for the opportunity to discuss the President’s 2013 budget for the Department of Health and Human Services.

     Our budget helps create an American economy that is built to last, by strengthening the nation’s health care, supporting research that will lead to tomorrow’s treatments and cures, promoting opportunity for America’s children and families, so everyone has a fair shot to reach his or her full potential.

     It makes investments that we need right now to keep our economy growing in the right direction, while reducing the deficit in the long term, to make sure that the programs that millions of Americans rely on will be there for generations to come.

     I look forward to answering your questions, but first, I want to share some of the budget highlights.

     Over the last two years, we have been working diligently to deliver the benefits of the Affordable Care Act to the American people.

     Thanks to the law now in place, we have 2.5 million young Americans who have health coverage today, thanks to getting coverage through their parents’ plans.

     More than 25 million of our senior citizens have taken advantage of free recommended preventive services under Medicare.

     Small business owners are taking advantage of the tax breaks on their health care bills that allow them to keep their health insurance and hire more employees.

     This year, we want to build on the important efforts by continuing to support states as they work to establish affordable insurance exchanges by 2014.

     Once these competitive marketplaces are in place, they will ensure that all Americans finally have access to quality affordable health coverage.

     Because we know that the lack of insurance is not the only obstacle to care, our budget also invests in the health care workforce.

     The budget supports training more than 7,100 primary care providers and placing them in parts of the country where they are needed the most.

     We are investing in expanding America’s network of community health centers.

     Together with our 2012 resources, our budget creates more than 240 new access points for access care along with thousands of new jobs.

     Altogether, the health centers will provide access to quality care for 21 million people, 300,000 more than last year.

     This budget also continues our Administration’s commitment to improving the quality and safety of care by spending health care dollars more wisely.  It means increasing our investments in health information technology, and improving care for those who rely on both Medicare and Medicaid.

     It also means funding the first of its kind CMS Innovation Center, our own R&D Support Center, which is supporting and partnering with physicians, nurses, hospitals, private payers and others, who have accepted the challenge to develop a new sustainable health care system.

     In addition, our budget ensures that 21st Century America will continue to lead the world in biomedical research by maintaining funding for the world’s leading researchers at the National Institutes of Health, and will support their work with an emphasis on outcomes research that compares the risks, benefits and effectiveness of medical breakthroughs, so we can get the biggest pay off possible for our research dollars.

     The Administration recognizes that in order for the country to succeed, we need to invest in tomorrow’s scientists, as well as tomorrow’s teachers, engineers, doctors, and architects.

     Today, too many young children have their futures short changed because they start school behind and never catch up.

     We know that high quality early education programs put kids on a path to school success and to lifetimes of opportunity.

     High quality early education does not just lead to higher test scores and graduation rates.  We know it leads to more productive adults, stronger families, and more secure communities.

     That is why our budget increases funding to support the 962,000 children in Head Start, and the 1.5 million American children in federally funded child care assistance programs.

     Our investments also support critical reforms in both Head Start and child care programs to raise the bar on quality.  This year for the first time, we will require Head Start programs that do not meet important quality benchmarks to compete for funding.

     Our budget supports a new child care quality initiative that allows states to invest directly in programs and teachers, so that individual child care programs do a better job of meeting the needs of children and of their families.

     Investing in health care cutting edge medical research, early childhood education and other priorities that help us create an American economy built to last requires resources.

     That means we have to set priorities, make difficult tradeoffs, and ensure we use every dollar wisely.

     Our budget does this, helping reduce the deficit even while we invest in areas critical to our nation’s future.  That starts with continuing support for President Obama’s historic push to stamp out waste, fraud and abuse in our health care system.

     Over the last three years, every dollar we have put into health care fraud and abuse control has returned more than $7.  Last year alone, these efforts recovered more than $4 billion.

     Our budget builds on those efforts by giving law enforcement the technology and data to stop perpetrators early and prevent payments based on fraud from going out in the first place.

     The budget reflects the careful review we gave every program, looking for opportunities to make them leaner and more effective.

     It includes some difficult cuts we would not have made if our nation’s fiscal health in tight budget times did not require them.

     Our budget also contains more than $360 billion in health care savings over ten  years, most of which comes from reforms to Medicare and Medicaid.

     These are significant, but they are carefully crafted to protect beneficiaries.  For example, we proposed significant savings in Medicare by reducing drug costs, a plan that both lowers the overall cost of Medicare and puts money back in the pockets of Medicare beneficiaries.

     Our budget makes smart investments where they will have the greatest impact, and ensures millions of Americans will have access to the health care they need, funds cutting edge biomedical research, and invests in our youngest children, so they can achieve their fullest potential, and it puts us all on a path to build a stronger, healthier and more prosperous America for the future.

     Thank you again for the opportunity to be here today, and I look forward to our conversation.

     [The statement of The Honorable Kathleen Sebelius follows:]

     *Mr. Herger. [Presiding] Thank you, Secretary Sebelius.  I was surprised that you failed to even mention the need to reform the Medicare physician payment formula in your eight page written statement.  Even more troubling is that President Obama continues to recommend that the SGR be dealt with by expanding the deficit and debt.

     The President’s budget proposes to spend $429 billion to fix the SGR, without suggesting any offsets, a deficit financed SGR package failed the Democrat controlled Senate a couple of years ago, and it certainly would not pass this House.

     Instead of doing something to protect seniors’ access to their doctors, the Administration chose to cut Medicare by more than one‑half trillion dollars to fund a new entitlement that our country cannot afford.

     As a result, reforming the SGR has become exponentially more difficult, and doctors in my Northern California District and across the country are wondering if they will ever get more certainty about their payments.

     The Administration has yet to offer a single serious suggestion as to how to reform Medicare for physician payments.  Is this truly a priority for the Administration?

     *Secretary Sebelius.  Mr. Herger, I think the President from the outset of this Administration has recommended a long term fix for the SGR proposal.  In each of the last several HHS budgets, we recommended specific offsets for those proposals, some two, some four years.

     The President’s ten year budget includes a ten year fix to the SGR proposal, unlike the month to month, week to week, day to day operations that we have been seeing.

     I could not agree more that a long term fix is required.  As you know, the President’s budget taken as a whole indeed does propose not only to fix the SGR, but to lower the deficit.

     We feel that we are eager to work with Congress on a long term fix.  We are eager to look at the situation.  I would suggest it is not an HHS fix, it is a budget fix that is required for the 48 million Americans who currently rely on Medicare and more coming in every day.

     Nothing could be more important than ensuring that they will have their health care providers, and we are eager to work with you to make sure that happens.

     Our budget does contain an SGR fix, not only now but into the next ten years.

     *Mr. Herger.  The Medicare savings in the budget, the President’s budget, totals $302.8 billion, but the estimated cost for the SGR fix is $429 billion.  Taken together, that means the President is proposing to increase Medicare spending by nearly $130 billion over the next ten years.

     Is that not just making the entitlement crisis even worse?

     *Secretary Sebelius.  Again, Mr. Herger, I think the President’s budget anticipates a long term Medicare fix, not entirely made up from within the Department of Health and Human Services.

     He feels that making sure that Medicare beneficiaries have access to doctors is something that has failed to be dealt with by Congress for years, the gap keeps growing year in and year out.

     We have proposed a variety of strategies, but his budget as a whole does have a ten year fix built into the budget as well as deficit reduction overall recommended.

     We do have some of those proposals within our budget, but the President’s budget as a whole does recommend a long term fix and no deficit, additional spending for this matter.

     *Mr. Herger.  I might say that the Republicans look forward to working with you and the Administration.

     *Secretary Sebelius.  That would be great.

     *Mr. Herger.  Thank you.  The Ranking Member, Mr. Levin, is recognized for five minutes.

     *Mr. Levin.  Welcome again.  Fortunately, your testimony was given to us in advance, for those of us who went to vote and missed your testimony had a chance to read it.

     Let me just ask you, I tried to touch on it in my opening remarks, about how it is going.  How would you sum up how health reform is going, what it has meant so far?  You live with it every day if not every minute.

     Just give us your very personal view as to what is happening.

     *Secretary Sebelius.  Congressman, I have the opportunity to visit around the country, not only health care providers and some of the best medical systems in the world who are eagerly implementing strategies around care improvements and quality improvements, but also to talk to individuals who have already benefitted from some of the early aspects of the health care law.

     I was with a group of women the other day in Baltimore.  There was a mother of a child born with a preexisting health condition who now knows that her child has insurance coverage, not only now but into the future.

     We had a young recent college graduate who is trying to decide whether to go to law school or work in a social service project who has insurance on her parents’ health plan, one of 2.5 million Americans who has already taken advantage of that.

     We had two new National Health Service Corps’ providers with us in that room, two young doctors who wanted to practice in their community but were afraid that the debts they were acquiring as a result of medical school would be too significant to look at community service.

     The National Health Service Corps is helping them pay those scholarship loans so they can indeed turn around and serve their communities.

     We know efforts are underway in the Medicare system that millions of seniors have already taken advantage of, accessing at least one of the new preventive services that no longer have co‑pays, like mammograms and colon cancer check‑up’s, and have taken advantage of the new wellness visit, which is now a yearly annual visit.

     We have millions of Americans that have now instead of trying to make their prescription payments out of pocket because they reached the doughnut hole, had almost $4 billion worth of relief because of closing of the doughnut hole in the health care plans.

     I talk to people each and every day who are already seeing the benefits.  There are a lot of people who are eager for the new insurance markets to exist, who are paying higher and higher rates, who see their policies not covering the needs for their families, who are locked out or priced out of the market.

     We are seeing new benefits take hold and folks eager for 2014 to arrive and have a reset of the insurance marketplace.

     *Mr. Levin.  As to the exchanges, do you want to just briefly give us a report on that?

     *Secretary Sebelius.  We are working actively with states around the country to implement state based health insurance exchanges.  I would say we have virtually every state in the country who have taken a plan and grant.

     We have about 28 who are in the process of working on implementation grants.  We have states who have strengthened their insurance oversight, which is critical right now, to make sure that they actually are reviewing year to year rate increases.

     I know as a former insurance commissioner, some states have the resources to do that, and a lot did not.

     We are working on IT programs and outreach programs.  We see governors doing everything from issuing executive orders to helping to pass legislation, Republicans and Democrats, who feel a state based exchange is the preferable way to go.

     For those states who do not choose to build an exchange on their own in their own area, we are putting together the framework to make sure that every American has access to the benefits of an exchange marketplace beginning in 2014.

     *Mr. Levin.  Thank you.

     *Chairman Camp. [Presiding] Thank you, Madam Secretary.  In order to put the President’s budget into context, I compared it to what he had proposed spending last year.

     With regard to the health insurance exchange subsidy, using the same time period, 2011 through 2016, this year’s proposal predicts a $33 billion increase, almost a third more will be spent on subsidies than what was anticipated and predicted last year over the exact same budget period.  This is just in the exchanges.

     To me, it means either one of two things.  Either health insurance premiums in the exchange are going to be more expensive than first predicted, or more employers will drop health care coverage, forcing more people into the Government run exchanges, or a combination of those two.

     I would just ask your opinion, which of those do you think that is?

     *Secretary Sebelius.  I have to confess, Chairman Camp, I do not know all the underlying assumptions that those numbers are based on.

     We are clearly watching very closely what is happening in the marketplace.  I do not think there is any question that as rates continue to go up, employers are making a moment by moment decision.

     We are also informed by what has happened in the one fully fledged operational exchange in the State of Massachusetts, which preceded the Affordable Care Act, where employers not only did not drop coverage, did not drop coverage, but additional employers came into the marketplace.

     I think that gives us a real live example of what happens when you have affordable available coverage with some competition in the market.

     *Chairman Camp.  More than a 30 percent increase in the budgeted spending on health insurance exchanges is a significant departure from last year’s prediction.

     I would just wonder what would cause a $33 billion increase?  It either has to be the exchanges are going to be more expensive or more employers are going to drop coverage, and therefore, more people will be in the exchanges, and therefore, they are more expensive.

     *Secretary Sebelius.  Chairman Camp, what is the $33 billion you are referring to?

     *Chairman Camp.  When looking at last year’s budget over the same time period, 2011 to 2016, this year’s budget, using the same time period, just in the exchanges, is saying there will be $33 billion more spent over that period in the exchanges, in that five year period, than last year.

     My question to you is why is it going up by a third?  Why is there a $33 billion increase?  My estimate is it is either the subsidies, the exchange subsidies, are much more expensive, and/or employers are dropping coverage and more people are going in.  I just wanted your opinion on that.

     *Secretary Sebelius.  Nothing has changed in terms of the exchange subsidy rates that was built into the law when this bill was passed almost two years ago.

     I would be delighted to go back and get you a very specific answer, but I am still a little baffled.  It could be the budget window has moved.  I really do not know ‑‑

     *Chairman Camp.  The budget window did not move.

     *Secretary Sebelius.  I mean we are in a different year, so the budget window for five years is out a year further.  I do not know the $33 billion that you are referring to, and I would be glad to try to get you ‑‑

     *Chairman Camp.  Last year’s budget window was also 2011 through 2016.  If maybe you could respond in writing.

     *Secretary Sebelius.  I will do that very quickly.  I just cannot answer that question at the moment.

     *Chairman Camp.  Also in your statement, which I did have a chance to read ‑‑ thank you for getting it to us early, and I apologize for the vote and not being able to hear your oral testimony.

     With regard to entitlement reform, under the section of your statement headed “Living Within Our Means,” the budget proposes to spend $126 billion more on Medicare over the next decade than would otherwise occur under current law.

     The President has said that Medicare reforms are needed to put our nation on stable financial footing, but your statement really does not address Medicare reform or any direction or specifics on how we can protect and preserve Medicare.

     Can you tell me what is the plan to make sure that Medicare is here for today’s and tomorrow’s seniors?  As we all know, it is going to go broke in the next 10 to 15 years.  That does not really change under this budget.

     What is being done to help seniors, to make sure Medicare is there for them?

     *Secretary Sebelius.  Actually, Chairman Camp, passage of the Affordable Care Act according to CBO and various other analyses, added about 12 years to the life of the Medicare Trust Fund.

     The President’s budget adds an additional two years with some additional proposed savings, and we would be the first to acknowledge that is not the next generation and beyond.

     We are eager to engage in a comprehensive conversation about the future of not only Medicare but a variety of entitlement programs while we protect beneficiaries.

     I think what we can tell you pretty definitively is the proposal put forward and passed by the House Republicans that actually shifted costs to the backs of Medicare beneficiaries, whether they be seniors or disabled folks, with no real underlying health care costs transformation, is not something that is able to be supported by this Administration.

     The voucher program, that would essentially end Medicare as we know it.  Shift costs onto seniors, and yet no underlying health reform ‑‑

     *Chairman Camp.  I do not see any plan in this budget for the long term sustainability of Medicare.  I will give you it extends Medicare’s life by two years.

     I do not think that gives much comfort to seniors who are looking for a long term ‑‑ those who are at or near retirement who are looking for the solvency of Medicare over the next 30 or 40 years.

     I will say that sustainability for two years comes largely at the cost of provider cuts in Part A, which how sustainable those will be over the long term, we cannot tell.

     I do not see any real reform to Medicare here.  I appreciate the talking points with regard to our budget, but at least we had a plan that really addressed the long term solvency of the program.

     Medicare is still going broke in the next 10 to 15 years, and I do not see anything in this budget that specifically addresses that.  I see money spent on a doc fix and provider cuts.

     *Secretary Sebelius.  Mr. Chairman, I would suggest that in the Affordable Care Act, for the first time, are the real tools, not only to have an opportunity to look at a sustainable Medicare program long term and a sustainable Medicaid program long term, but really more importantly or as importantly, to address underlying health care costs which affect the private sector.

     What we do not want to do is just keep shifting dollars onto either payments on the backs of beneficiaries or private payers.

     We have to actually get a handle on the overall health care costs.  I think some of the strategies in the Affordable Care Act to use for the first time the public payment system as an innovative strategy, moving us to a value based payment system, moving away from a volume based system, is not only going to be enormously cost effective and patient effective in Medicare and Medicaid, but can be enormously helpful for the private sector, which is why they have enthusiastically embraced a lot of the new innovative strategies that are beginning to be realized.

     *Chairman Camp.  All right.  Thank you.  Mr. Stark may inquire.

     *Mr. Stark.  Thank you, Mr. Chairman.  Madam Secretary, thank you, as always, for your work in these fields.

     If we were to replace traditional Medicare with a voucher or some kind of fixed payment plan as my colleagues on the other side voted for in the Ryan budget, in your position, what would you suggest?  What would be the effect of that on Medicare beneficiaries?

     It is probably a selfish question, but for my kids.  If you throw them into the private insurance market with a voucher that arguably would not pay today’s rates, what happens?

     *Secretary Sebelius.  Well, I do not think there is much question, at least the analyses done on the original proposals is there is a very substantial cost shift onto beneficiaries, and no real indication that overall costs would go down.

     It is not that we are saving money.  The Government is saving money, but health care costs continue to rise, and one could speculate given the fact that Medicare Advantage has been in place for years and was allegedly going to lower costs through competition with the fee for service plan, and that really has not proven to be an effective strategy, that costs would rise even more significantly than they are now.

     The Government would shift the cost of providing health care from a Government beneficiary ratio where it is today much more heavily onto beneficiaries.

     Seniors would pay more and disabled people would pay more overall on their health care costs.

     *Mr. Stark.  Could we speculate for a minute on the doomsday, worse case scenario, whatever you want to call it.

     Whenever people want to project that Medicare is going to go broke, I cannot speak to Medicaid, we have to leave that to our sister committee, but in the case of Medicare, it would be my understanding that the maximum that we would have to increase the payments from employers and employees to keep Medicare solvent for the indefinable future would be about half a percent, a quarter on employees and a quarter on the employers.  Not an insignificant amount.

     If that were the maximum as I am led to believe, it hardly sounds like doomsday to me.  Am I about in the right ballpark of that half a percent?

     *Secretary Sebelius.  I think, Mr. Stark, it is my understanding that if you just froze things in place, what is really incumbent upon all of us, and I would eagerly work with Members of Congress to look at this scenario ‑‑ looking at our overall health spending, not Medicare in isolation or Medicaid in isolation.  Those are frankly two of the largest insurance programs in the world.

     What we are doing in terms of just overall health costs, where we are spending significantly more than any nation on earth, and yet we have fairly mediocre health results.

     That to me is the underlying challenge that we have, and within solving that challenge, how we eliminate duplication, go after waste and fraud, figure out strategies that actually intervene at a much earlier stage with preventive care and wellness care, go to the underlying causes of 75 percent of our deaths here in America, which are smoking and obesity.

     If we could actually address that, it will lower costs overall and produce a healthier country.

     *Mr. Stark.  Thank you very much.  Thank you, Mr. Chairman.

     *Chairman Camp.  Thank you.  Mr. Johnson is recognized for five minutes.

     *Mr. Johnson.  Thank you, Mr. Chairman.  Thank you, Madam Secretary.  The Democratic health care law provided $1 billion to implement the health care overhaul.  Now, the President is requesting another $1 billion for implementation of the same law.

     I do not understand how HHS can blow through this kind of money when many of the provisions it is supposed to implement do not even take effect until 2014.

     Your testimony has a section you refer to as “Living Within Our Means.”  How can you say that HHS is committed to deficit reduction and living within your means when you are continuing to make requests like this?

     It is just another example of how the Administration drastically under reported the cost of the health care law.

     Can you tell us exactly where the money is going and how much more do you think you are going to need before we get to the point where it really takes effect?

     Clearly, those first numbers were off.

     *Secretary Sebelius.  Well, actually, Mr. Johnson, they were off.  The good news is we are under spending what was estimated.  The original estimations for implementation of the health care act, and this was part of the public testimony, and actually would have been in some reconciliation legislation but was not able to be considered, was about $1 billion a year.

     We have to date, as of December of this year, obligated about $475 million of the original $1 billion.  We are spending after two years significantly below what the estimate was.

     *Mr. Johnson.  But you are asking for another billion.

     *Secretary Sebelius.  I would love to finish this.  What we have coming up in the remainder of 2012 and again out of that $475 million, about $260 million is HHS spending.  The rest is with our companion agencies.

     We anticipate that during the remainder of fiscal year 2012, the first $1 billion will be spent.  That will be about two and a half years into implementation, significantly again below the $1 billion a year that was estimated.

     In 2013, we are requesting about $800 million to come into the overall implementation of health reform, to build one time build out for the framework of a federally operated exchange, which is part of the law.

     That will go into everything from education and outreach to building the IT system to setting up the technology, and the remainder of that $1 billion request to the Centers for Medicare and Medicaid Services, Mr. Johnson, is directed toward Medicare and Medicaid activities, not to the exchanges.

     *Mr. Johnson.  You had $1 billion to start with for setting all that up and you are asking for another billion this year.

     I do not think you really adequately answered that, but let me ask you another question.

     Medicare actuaries at CBO have warned it is unclear if current Medicare cuts can be sustained or if they will instead reduce access to care or lower the quality of care for Medicare beneficiaries.

     I hear from back home in all areas of health care, doctors, hospitals, rehabilitation centers, who say they are seriously considering not accepting Medicare or will have to close because of reimbursement issues and burdensome regulations.

     Are you going to put steps in place so you can identify access problems before they become a crisis?  How are you going to keep seniors from being denied access?

     *Secretary Sebelius.  Congressman, I think there is no higher priority within not only this Administration but certainly within CMS to make sure that beneficiaries are getting the health care they need and deserve.

     We have a very active monitoring process.  I would say the most significant blooming challenge, and the Chairman and I discussed this a bit, is the not long term addressing of the doctor payments in Medicare.

     The reason that providers are getting very frustrated is that we have not indeed found a long term solution, making sure that providers know if they engage in the Medicare system, they will be paid, month to month, year to year.

     We are watching that very closely.  As I say, the President’s budget includes a ten year fix to the SGR program.  We would love to engage with you and Congress and have a multi‑year fix.  That has not happened.

     As you know, we have come right up to the precipice, and last year had to actually suspend payments for a period of time to get a fix done.

     We are eager to look at reimbursement to providers being the most essential, I think, component of making sure there is some certainty to deliver benefits.

     *Mr. Johnson.  Doctors are an important part of our society.  Thank you, Mr. Chairman.

     *Chairman Camp.  Thank you.  Mr. Brady is recognized for five minutes.

     *Mr. Brady.  Thank you, Mr. Chairman.  There is no question, I think, and now a year later, we can tell the President’s health care plans costs are exploding.

     Prices are up for families and businesses.  Many businesses are preparing to drop their private coverage and move their workers into the exchanges at cost to taxpayers.  Many other businesses are working hard to stay under the 50 employee limit.

     One thing that worries me is how we will treat the seniors who today rely upon Medicare Advantage, a hugely popular program in my state and others.

     I saw in a recent White House blog that one of the staff, Nancy‑Ann DeParle, stated the $200 billion in cuts to Medicare Advantage programs that was predicted to disrupt seniors’ access to health care “turned out to be wrong.”

     Can you tell me what percentage of the cuts to Medicare Advantage called for under the President’s health care law ‑‑ how many have been implemented so far?

     *Secretary Sebelius.  Well, Mr. Brady, what is not going to happen is a cut to Medicare Advantage.  What is going to happen is a gradual reduction in the overpayments to Medicare Advantage, which were being paid at about 12 to 14 percent more than traditional fee to service ‑‑

     *Mr. Brady.  According to CBO, those reimbursements will be cut from Medicare Advantage.  Your actuary said the impact would be over seven million American seniors would lose coverage and almost 50 percent of seniors would no longer be enrolling in Medicare Advantage.  Is your actuary correct?

     *Secretary Sebelius.  We have seen just the opposite.  Enrollment has increased ten percent.

     *Mr. Brady.  When you say it is just the opposite, is it not true only four percent of the cuts contained in the law have been implemented and you back‑filled it recently with $6 billion of grants to the same Medicare Advantage providers?

     How can you truthfully say that there has not been an impact when in fact these cuts have been delayed, I think, probably for election year gain.

     How can you say there has been no impact when the cuts have not occurred?

     *Secretary Sebelius.  As you just said yourself, cuts have been ‑‑ the reduction in overpayment has begun.

     *Mr. Brady.  But they have been delayed.  Correct?

     *Secretary Sebelius.  No, that is not true, sir.  The average plan premiums are down.

     *Mr. Brady.  I am sorry.  I am asking you about the cuts within the law.

     *Secretary Sebelius.  We are reducing the payments to companies, not to providers.  We are by law reducing the payments, and that actually has begun to be a very successful strategy.

     At the same time, for the first time ever ‑‑

     *Mr. Brady.  I am just trying to get to the truth here.  Are you saying ‑‑ will you agree that according to your actuaries, only four percent of the cuts have taken place?

     *Secretary Sebelius.  I assume that is accurate.

     *Mr. Brady.  You back‑filled that with over $6 billion of grants.

     *Secretary Sebelius.  We have put in place for the first time ever a quality program so that higher performing Medicare Advantage plans for the first time are actually receiving a quality bonus, the lower performing plans are not.

     The beneficiaries finally have a place to make ‑‑

     *Mr. Brady.  There are no real cuts, you have back‑filled it ‑‑

     *Secretary Sebelius.  No, that is not true.  Sir, that just is not true.

     *Mr Brady.  You started your answer to me saying there has been no cuts in Medicare Advantage.

     *Secretary Sebelius.  Four percent is what the actuary quoted.  I am agreeing with your numbers.  We are now in year two of the strategy.  What we are seeing is more plans, lower prices for beneficiaries, better quality.

     I think that is kind of a win‑win situation.

     *Mr. Brady.  You will say that and you are saying that will continue because the $206 million in cuts will occur in the future?

     *Secretary Sebelius.  Yes, sir.  We are seeing more companies ‑‑ the companies are well aware of what the framework of the law is.  We are not saying ‑‑

     *Mr. Brady.  Your own people are saying those cuts will push seven million American seniors off Medicare Advantage, cutting nearly half of them out of enrollment.

     *Secretary Sebelius.  Sir, with all due indifference to actuaries, they are not running the companies.

     *Mr. Brady.  Those are your actuaries.

     *Secretary Sebelius.  We are seeing the companies, the insurance companies running Medicare Advantage programs, coming into the market.  More plans are available ‑‑

     *Mr Brady.  Because the cuts have not occurred, would you not agree?

     *Secretary Sebelius.  They know exactly what the framework is.  I do not agree.

     *Mr Brady.  You are giving them grants to stay in the marketplace.

     *Chairman Camp.  The time has expired.  Mr. McDermott is recognized.

     *Mr. McDermott.  Thank you, Mr. Chairman.  Secretary Sebelius, I do not think the President could have picked a better person to be the Health and Human Services’ Secretary, given your insurance background and your Governor’s background.  I know that you have managed these programs out at the state level.

     As I listen to this debate about whether there are cuts or not, let me clarify something.  Does Medicare guarantee the doctors can submit their usual and customary fees?

     *Secretary Sebelius.  Yes.

     *Mr. McDermott.  They get to set the price, and then you pay how much of that?  Seventy percent?  Sixty percent?

     How do you decide that?  Doctors sound like farmers to me.  I am a doctor, so I can say that.  They sound like farmers.  There is never a good year.  This is the year we had too much rain or too much sun or too much something.

     Doctors always say they are under paid, but they are submitting amounts that you do not pay.  That is your stewardship of the Federal purse, is that not correct?

     *Secretary Sebelius.  The payment schedule, as you know, Mr. McDermott, is determined a year at a time with a global look to provider fees, and it is well known to providers, which is why I think we have 99 or 99.6 percent of all medical providers participating in the Medicare program.

     *Mr. McDermott.  We are actually listening to .4 percent bellyache about the fact that they did not get every dime they billed?

     *Secretary Sebelius.  I think what is true, and I am very sympathetic to this and also eager to work on a long term strategy, is having looming a 30 percent budget cut with the sustainable growth rate not fixed, and having that come up year in and year out, month in and month out provides a level of serious instability to the program long term.

     I think that is something that we must fix, that the President is eager to work on, his budget includes it, but that is the instability of Medicare, not, I do not think, the other payment issues.

     *Mr. McDermott.  That was built into the Medicare system by Chairman Thomas of this committee in 1997 in the Balanced Budget Act.

     *Secretary Sebelius.  It worked for a number of years because it was supposed to rise and fall.  I would suggest over the last decade, it has been not so terrific.

     *Mr. McDermott.  Built into the Affordable Care Act was an attempt to develop a new payment system for doctors, not based on volume.

     I see this press release that just came out on the largest Medicare fraud in Dallas, Texas, $375 million to one doctor.

     I ask myself, how did he get away with that for five years.  Was it revealed because somebody blew the whistle on him or was it because your format of looking at the bills found this guy down there, and he was doing it on the basis of volume.

     He collected the largest number of Medicare beneficiaries in history, in the entire country.  This guy was building up his money by putting through volume.  That is what it looks like to me.

     That is why the efforts in the Affordable Care Act to get to a new payment system really makes sense to me.

     *Secretary Sebelius.  I think all of the above is true.  What the Congressman is referring to is that today in Texas, a single health care provider was arrested, and has been billing 78 Texas home health agencies fraudulently.

     We think the amount is somewhere around $375 million.  It could be well more.

     I think it is part of the effort that is really underway with the HEAT Task Force, which includes not only the Department of Health and Human Services’ personnel, but Justice Department, U.S. Attorneys and investigators on the ground, to really target where we think the fraud hot spots are, and building the predictive modeling which looks at billing errors.

     In the past, you really could not do that very easily because there were six different billing systems, so you could not even look at data real time.

     I think this is an indication that we are beginning to at least turn some of the corner, and we intend to be very serious about it.

     You are absolutely right, in the long run, paying doctors differently is part of an overall reform strategy, and again, not only affects Medicare programs, but will affect private payers.

     Paying on volume, the number of tests you do, the number of days someone spends in a hospital, the number of things done, as opposed to quality outcomes, preventive interventions, more timely access, and a patient center care system, I think, is where we need to go in this country as rapidly as possible.

     In the short term, we need a strategy that assures doctors that if they are taking 48 million Medicare beneficiaries and treating them, we need to make sure the Government is a good payment partner and they do not have to worry month to month, week to week, about whether they are going to get paid.

     *Mr. McDermott.  Thank you.

     *Chairman Camp.  Time has expired.  Chairman Ryan is recognized for five minutes.

     *Mr. Ryan.  Thank you.  Madam Secretary, we had Rick Foster, your chief actuary at CMS, in the Budget Committee this morning to testify, along with Steve Goss from Social Security.

     He went into great length and discussed sort of the virtue of a premium support like model, and how having bid based pricing, competitive bidding, can help to actually reduce cost growth, to help stretch that health care dollar further, and to get the best benefit at the lowest possible price.

     I would just encourage you to listen to some of the testimony he has offered and some of the wisdom he has given, and some of the lessons we have learned through various things like Part D and DME, other issues, where we have been able to, through bid based pricing and competitive bidding, stretch our health care dollars further.

     I want to ask you about your latest budget proposal, page 55 of your budget, where you talk about strengthening IPAB to reduce long term care drivers of Medicare cost growth.

     You take the cap from GDP plus one to GDP .5, and obviously, that achieves savings.  Some of the tools available, it talks about offering new tools to IPAB, including consideration of value based benefit design.

     What does that mean?

     *Secretary Sebelius.  What does “value based benefit design” mean?

     *Mr. Ryan.  Yes.

     *Secretary Sebelius.  I think it means you look at outcome strategies which is part of our direction in the Affordable Care Act, so we are implementing, for instance, through the innovation center everything from bundled payment strategies, to see if that actually lowers hospital re‑admissions, to make sure doctors and follow up placements are coordinating.

     We are looking at medical home models to look at chronically ill and where our care delivery could be more effective, and prevent re‑admissions in the first place.

     We are looking at patient partnerships, to look at hospital acquired infections.

     All of those are value based payment strategies.

     *Mr. Ryan.  Does it mean changing the benefit design to get better value?

     *Secretary Sebelius.  It is not changing necessarily the benefit design.  It is changing the way that the delivery system works.

     *Mr. Ryan.  Does that mean IPAB is given this tool for them to decide how that is to be interpreted?

     The point I am trying to make is in one sentence, the budget and the Affordable Care Act says IPAB cannot change beneficiaries’ benefit designs.

     *Secretary Sebelius.  That is correct.

     *Mr. Ryan.  In another sentence, it says IPAB should be given this tool to implement value based benefit designs.  It seems to me there is a contradiction here.  I am trying to understand how that occurs and how IPAB will come down on that.

     It strikes me that IPAB is given this discretion to interpret what that means and that could clearly collide with beneficiary design.  That is question one.  How is that not a contradiction?  That is the question.

     Question two is what is the status of IPAB?  I understand you are supposed to select the Board this year and it is supposed to be up and running next year.  I think implementing recommendations by 2014, if I am not mistaken.  Can you give me a status update on that?

     *Secretary Sebelius.  Sure.  Let me take the first question.  As you know, Chairman Ryan, the IPAB statutory framework is they are prohibited as an entity from doing certain things, from shifting costs under beneficiaries, from changing the benefit package, so there are a series of prohibitions that control what IPAB’s recommendations need to be as they look at a more efficient and effective way to deliver health care.

     Also, IPAB does not do anything, implement anything.  They make recommendations to Congress.  If the targeted spending is above what the IPAB target is, they are charged with making recommendations to Congress about how to make up that difference.

     *Mr. Ryan.  If Congress does not act, do their recommendations go into place?

     *Secretary Sebelius.  If Congress does not act, if Congress fails to act on the recommendations or substitute those recommendations, I am directed to implement the IPAB recommendations.

     Congress is the intervening body receiving the recommendations.

     *Mr. Ryan.  Is the required threshold more than a majority vote for Congress’ action? 

     *Secretary Sebelius.  Congress clearly can act.  Although the recommendations come to Congress, IPAB does not have the authority to implement anything on its own.

     In terms of the status of IPAB, at this point, as you know, the statute entails having members who would be nominated by a series of both legislative leaders and the President, confirmed by the United States Senate.

     There are active discussions underway about those possible candidates, vetting those folks.  It is not an easy task because this must be a full time job.  They cannot have any conflicts with any of the possible payment sources.  That discussion is underway.

     *Mr. Ryan.  What is your general time line?

     *Secretary Sebelius.  I really do not know, Chairman, because IPAB is not likely to even be operational into 2018 or 2019, given the cost trends.

     *Mr. Ryan.  The recommendation is 2014, correct?

     *Chairman Camp.  The time has expired.  Mr. Tiberi is recognized for five minutes.

     *Mr. Tiberi.  Thank you, Madam Secretary.  Welcome to our committee.  Thank you for being here.

     Three points and then a question.  First point is I had a constituent who met with CMS late last year over a program that he believes would save, and he has documentation on this, $200 million a year to CMS, and also save beneficiaries.

     He was kind of laughed out of the building, he said, because that was not very much money.

     We sent a follow up letter to CMS, and have been given kind of the brush off.  I would like to send you a letter.

     *Secretary Sebelius.  I would appreciate that.

     *Mr. Tiberi.  And have you look into it, thank you very, very much.

     *Secretary Sebelius.  $200 million is real money.

     *Mr. Tiberi.  I agree.  The second issue is you and I had a discussion last year when you were here about my godmother, who just lost her physician because he began not accepting not only new Medicare patients, but got rid of former Medicare patients.

     Just a week ago, I received a letter, a copy of a letter, that was actually sent to your boss, the President of the United States, and I spoke to this doctor who I have never met before or talked to before.  Her name is Deborah Morris.  I would like to read you part of it.

     It says “Dear Mr. President:  I can no longer afford to take new Medicare patients.  I have seen a lot of inadequate management of Medicare patients, including my own parents.  We can no longer afford to spend the time it takes to address multiple problems Medicare patients face.

     Rather than trying to accept inadequate time or costs, I have decided to decline seeing new patients.  I just cannot afford to treat them.  A free market even if for only three to five years would eventually level out the costs so that the true costs could be assessed.

     I am not even going to address the burn out all these issues create.  All my colleagues have expressed concern that we as doctors will not even be able to get medical care when we retire because all the good doctors are burning out and quitting.”

     Mr. Chairman, I would like to submit this letter for the record, along with an attachment that she included from a Medical Journal entitled “Government Medicine is Hazardous to Your Health.”

     Again, I think it is a problem.  You do not need to comment on it.

     *Chairman Camp.  Without objection.

     *Mr. Tiberi.  Thank you, Mr. Chairman.

     [The insert of The Honorable Patrick Tiberi:]

     *Mr. Tiberi.  I think it is a problem that continues to occur throughout our nation.

     The final issue I would like to see if you would answer a question on, the Bishop of Columbus, Bishop Frederick Campbell, put out a letter a couple of weeks ago after the ruling you put out, and I would like to read part of it.

     This was sent out to his constituency within the Columbus Diocese, which also includes, according to Bishop Campbell, a number of schools and a number of charities.

     I quote from his letter regarding the HHS’ recent ruling, “In so ruling, the Administration has cast aside the First Amendment to the Constitution of the United States, denying to Catholics our nation’s first and most fundamental freedom, that of religious liberty, and as a result, unless the rule is overturned, we Catholics will be compelled either to violate our consciences or to drop health care coverage for our employees, and suffer the penalties for doing so.

     The Administration’s sole concession was to give our institutions one year to comply.  We cannot, we will not comply with this unjust law.”

     In talking to Bishop Campbell, he believes the so‑called “accommodation” recently issued by the President does nothing to remedy the problem, and that the regulation encroaches on the religious freedoms and the First Amendment.

     CRS just put out a report saying if employers, for instance, had 100 employees, Madam Secretary, and refused to comply with the mandate, there would be a $100 a day fine for each individual employee.

     You could add that up to $3.65 million for the year.  The Diocese of Columbus has many more than just 100 employees, all of whom when they got hired knew what health care they were getting, and the Bishop and I talked about the President so clearly saying if you like what you have, you can keep it.  He said that over and over many times.

     My question to you is if they refuse the mandate, refuse to violate their First Amendment, refuse to violate their religious beliefs, and refuse to pay the fine, what consequences as an employer will Bishop Campbell face?

     *Secretary Sebelius.  Congressman, I think what you are referring to is a portion of the Affordable Care Act where we were directed to develop a set of preventive health measures specifically for women’s health, which has been a missing piece of a lot of insurance puzzles for a long time.

     We turned to the independent doctors and researchers at the Institute of Medicine who came back with eight recommendations, well women screening and domestic violence screening, contraceptive coverage, mental health services, which are often missing from parts of the plan.

     We then looked around the country at the 28 states which have mandatory contraception laws already in place, many of which existed from the mid‑1990s, and looked at the way those laws are enacted, particularly with regard to religious freedom and religious facilities, and proposed in the rule the exemption that was the most commonly used among states who had any kind of exemption.

     That rule was finalized at the end of January, and it fully exempts churches and church affiliates.  We think it also applies to likely most parochial schools, many religious high schools.

     Those employers who are not fully exempt in the declaration in January would be given a year to comply, and we pledged to work with religious leaders around their religious objections.

     In February, I joined the President in announcing that we will be promulgating a rule which will, I think, both not only ensure religious liberty but also women’s health benefits.

     It mandates that insurance companies, not the providers, but insurance companies will be making available to women at their choice ‑‑ we will have a provision dealing with self‑insured plans who work through third party administrators, to make sure anyone with a religious exemption will not provide or pay for or refer people to contraception services, and maintain their religious freedom.

     On the other hand, we will make sure that women across this country do not by the virtue of where she works or where her spouse works or where her parents work have health benefits that are limited.

     I think the accommodation made to religious providers, which does not come into effect for 18 months, is one that protects religious liberty but makes sure that women’s health services will be full and complete for the first time ever in the history of this country.

     *Chairman Camp.  The time has expired.  I did not hear what would be the penalty if they did not comply, to Mr. Tiberi’s question.  We are way over time here, but if you could.

     *Secretary Sebelius.  I have no idea.  It is a hypothetical.  If you want to submit that in writing, I will get you an answer in writing.

     *Mr. Tiberi.  Thank you.

     *Chairman Camp.  Thank you.  Mr. Lewis is recognized for five minutes.

     *Mr. Lewis.  Thank you very much, Mr. Chairman.  Madam Secretary, thank you for being here today.  Thank you for your vision.  Thank you for your leadership.

     You know, Madam Secretary, I believe that health care is a right and not a privilege.  As we implement the Affordable Care Act, I know we are moving closer and closer to that promise of health care for all Americans.

     I am so proud of the success you are having with the Affordable Care Act.  Already, millions of young people have access to their parents’ health insurance.  Millions of seniors with free preventive care and low costs on prescription drugs.  That is just the beginning.

     I want to take just a moment to thank you for your commitment to women’s health.  That is important.

     No man, no state, no Federal Government, should be able to tell a woman what she can or cannot do with her body.

     Madam Secretary, Republicans in Congress have made it a first priority to repeal the Affordable Care Act and put insurance companies back in charge.  After all the success we have had, I think this is just a bad idea.

     Can you tell us, tell members of this committee, what would happen to American families, consumers and seniors, if Republicans repeal health reform?

     *Secretary Sebelius.  Congressman, I think the benefits that you just recited with 2.5 million young Americans who now have coverage who were uninsured two years ago would go away.

     Clearly, seniors would lose the preventive care measures that now they can access without co‑pays or co‑insurance through Medicare.  We know that millions of seniors are doing just that.

     The 3.5 million almost 4 million seniors who are watching their doughnut hole payments for prescription drugs be cut in half this year would again be in a situation where they would have to choose between buying groceries or buying their medicine.

     We know that parents who have children with preexisting health conditions would once again have the insurance companies lock them out of the marketplace.  Cancer victims who now know their benefits cannot run out in the middle of treatment would be back in the soup.

     I think back to the discussion that I know is of great concern to this committee overall, there would be no opportunity to really look at the overall trajectory of health care costs.

     Insurance companies would pick and choose who gets covered.  The health insurance market would continue to shrink, which it has been doing year in and year out, as young and healthier people drop out because of the lack of competition and the lack of affordable coverage.

     I think short term, it is bad news for millions of people who already have engaged with the benefits.  Long term, it is even worse news.  There would be no health care spending control, and there would be very little opportunity for small business owners and individuals to ever have affordable health coverage.

     *Mr. Lewis.  Madam Secretary, some people suggest that the Affordable Care Act will be bad for small business.  Can you describe how this Act helps small businesses?

     *Secretary Sebelius.  Well, I do not think there is any question, and some of this is based on days in the insurance department in Kansas, small business owners, family farmers and others are often at the shortest end of the stick in the insurance market.

     They do not have any market leverage because they do not have enough employees to negotiate for their own policy.

     If there is a health incident of any family member or any employee, they actually pay significantly higher rates.  I think on average they are paying about 20 percent more than their large competitors are paying for exactly the same coverage.

     Year in and year out, those rates are sky rocketing, again, because often they do not have market power.

     In the days where there will be a state based insurance exchange, small business owners will not have to join an association or provide any membership fee or so anything else, they will have a new shopping marketplace where they will be part of a much larger virtual pool.

     Preexisting conditions may not be considered.  Companies will have to compete on the basis of price and product for the first time ever, and small business owners, I think, not only get tax credits now and into the future, but are potentially the biggest winners in the new marketplace.

     *Mr. Lewis.  Thank you very much, Madam Secretary.

     *Chairman Camp.  Thank you.

     *Mr. Lewis.  Thank you, Mr. Chairman.

     *Chairman Camp.  Thank you.  Mr. Davis is recognized for five minutes.

     *Mr. Davis.  Thank you, Mr. Chairman.  I would like to move away from health issues for a moment and talk about human services, from temporary assistance to needy families, to child care and child support enforcement.

     I know we both share the view that the programs are important to families as they move to self sufficiency.

     While they all have a similar goal of helping low income families, for the most part, they operate independently.  I notice there is a tremendous amount of program redundancy and also a lack of ability of systems to communicate.

     Before I came to Congress, I ran a consulting firm focused on system integration, in effect, helping companies maximize effectiveness by minimizing complexity.

     In the private sector, a well run business will coordinate information and resources between its operating divisions, saving a lot of money in the process in reducing overhead, being much more agile in being able to respond to customers.

     Unfortunately, many of your human services programs do not operate this way.

     I chair the Human Resources Subcommittee and deal with this on a weekly basis here in Congress.

     Inside HHS, there are many legacy systems and processes that are siloed, many of which were actually put in place when you and I were children.

     As you know, the House has moved several bipartisan efforts to standardize the exchange of data and reporting in human service programs.

     The most recent example was in the recent Middle Class Tax Relief and Job Creation Act.  We had referred to a provision inside that as “data standardization,” and the Chairman worked very hard to make sure that got all the way through the Conference Committee.

     My view is that you cannot fix what you cannot measure.  Data standardization will make reported and collected data more interactive and useful to better measure our outcomes and proactively identify problems and improve the effective use of taxpayer dollars.

     Our over arching long term goal was to improve the efficiency and coordination of these programs and to help more families become self-sufficient.

     I think there is some common ground here.

     What I am interested in is hearing your thoughts on data standardization in general, but several questions or a question with several parts.

     First, do you agree the human service programs are siloed and could operate in a more efficient manner?

     Secondly, do you think the data standardization provision will be helpful in better coordinating programs and services, and in fact, should be expanded into other parts of your jurisdiction?

     Third, what more can Congress do to help your Department bring these programs into the 21st Century?

     I am focused very much on the processes.  There will always be ideological or policy issues where we may disagree.  From a fundamental business perspective, I would like to hear your views on this.

     *Secretary Sebelius.  Mr. Davis, my understanding from our staff is this effort on data standardization was not only enormously productive and found a lot of common ground, but we are eager to continue to work with you and others on identifying other areas.

     I do not think there is any question that Government programs are often siloed.  We have done an effort across the Department of Health and Human Services to look at redundancies, try to eliminate areas where we are repeating mechanisms.

     We have gone to a data sharing platform in many systems where people are not any longer building new data systems to support some unique program by looking at ways to share that.

     We would be eager to find additional strategies.  Sometimes new eyes and looks at budgets reveal things that people have not seen from the outside.

     I am a huge believer in the more efficiently we can operate any of our programs, the more strategies we can implement, not only that have been in place in the private sector ten years ago, but some of them 50 years ago are all good news.

     I would look forward to that.  Again, I think the project that you mentioned, my understanding is it is off to a good start.  We would love to find additional ways to continue that.

     *Mr. Davis.  I appreciate that.  One thing that I would note, I know the gentleman from Washington State mentioned earlier about the recent fraud case in Dallas, Texas ‑‑ when we look at improper payments, the wider aspect of this, about 10.5 percent of all payments coming out of the Center for Medicare and Medicaid Services fall into the category of improper.

     Frankly, as an engineer by background, I am not looking at this in terms of that, but most of the challenges that I think we are facing are driven by broken processes in this area with payments.

     We do look forward to working with you on this.  Would you like to see this standardization effort extended into the health care jurisdiction, for us to move that legislation, and would you help us move that data standardization legislation into the space with the Center for Medicare Services to address this issue?

     *Secretary Sebelius.  I would certainly love to continue a conversation.  I am not quite sure what the global question implies.  I can tell you in the improper payment space, I just want to make it very clear to Members of Congress that improper payment and fraud are two very things.

     There are health care providers who do not fill out a form accurately and it is sent back and they fill it out accurately.  That is an improper payment.

     It is important to reduce those numbers, and we have had a program in place of lots of training and outreach.

     Some is fraud.  We are also building, I think, for the first time ever a central data system, a predictive modeling system, using some of the strategies that have been very effective in the private sector for decades, finally bringing them to this program.

     Again, I would just look forward to continuing the conversation and finding ways to make this more applicable across the board.

     *Mr. Davis.  Thank you, Madam Secretary.  Thank you, Mr. Chairman.

     *Chairman Camp.  Thank you.  Mr. Reichert is recognized for five minutes.

     *Mr. Reichert.  Thank you, Mr. Chairman.  Welcome, Madam Secretary.  Thank you for being here today.

     I think that all of us on this panel agree with you on a number of things that you have testified to today.  Some of those, I would like to quickly repeat.

     Quality versus quantity.  I think we can all agree that is a goal.  Efficient service.  Cost effective service.  Accessible service.  All of those things that I think all of us who are trying to resolve this issue would agree would be a great thing to accomplish, but we know it is going to take a while.

     I want to focus on the cost increase.  The Chairman touched on this question as did some others, and a promise that was made by the President.

     This was a promise that everyone could keep their health insurance if they liked it, if you like your health insurance, you can keep it.  I think Mr. Tiberi mentioned that earlier.

     You and I had a conversation the last time you appeared here, I think, regarding this issue.

     Since that time, your own organization has said on regulation on grandfathered health plans, “Seven out of ten employers will not be able to maintain their grandfathered status.”

     According to a survey completed last Fall by Towers Watson, one out of every ten mid‑sized or big employers expect to stop offering health care coverage to workers after insurance exchanges begin in 2014.

     That seems to run contrary, at least from my perspective, to the President’s promise.

     Also connected with this issue is the 11.4 million Americans who have their own health savings accounts have great concerns as to whether or not they will be able to keep their health care plans because of the restrictions of the law placed upon health savings accounts.

     Can you commit today that the 11.4 million Americans with HSAs will be able to keep their plans in 2014 and beyond?

     *Secretary Sebelius.  Congressman, as you know, as part of the implementation strategy, we are looking at what will constitute health insurance, and some of those plans are very much companions to a health insurance plan, and would very much be applicable on into the future.

     Others are not insurance plans.  They are really kind of savings plans for portions of health care costs that are not covered by insurance, but they do not accompany a health care plan.

     It is impossible to say across the board what will happen as part of the goal of the Affordable Care Act, as you know, is to have a health insurance plan which has a comprehensive set of benefits, but also has affordable characteristics.

     Your notion that somehow companies in grandfathered plans will not be able to keep their grandfathered plan is really not accurate.

     What that reflects is employers changing the plan on a voluntary basis in a marketplace where they are looking to newer, innovative strategies or other operations, so they have made the choice to change the insurance plan outside the grandfather rule.  It is nothing that the Affordable Care Act is imposing on them.  It is the employer/issuer’s choice.

     *Mr. Reichert.  Do they not make that decision based upon the language in the law though?

     *Secretary Sebelius.  No, sir.  The language in the law basically defined what you have in 2010, and it put some framework around that snapshot.

     If an employer in a voluntary market chooses to change that plan, he or she is well within their capability of doing that, and they are doing that all the time.  That is what the projection is.

     *Mr. Reichert.  If I may, Madam Secretary.  The bottom line is if you like your health care plan, you are not going to be able to keep it.  It is going to change.

     The last question I have is that thanks to Children’s Hospital’s Graduate Medical Education Program, Children’s Hospitals have not only expanded their residency programs, they have also increased their training experience and services in under served communities, expanding children’s access to care.

     Hospitals like Children’s train over 5,600 full time equivalent residents annually.

     The Administration has proposed cutting this funding by two‑thirds.  Have you looked into the impact of this cut on children’s access to health care, and how it will look in the future?

     *Secretary Sebelius.  I have, Congressman.  I have actually visited with a lot of the leaders at Children’s Hospitals across the country.

     There is no question that in a better budget time, I think a robust funding of all graduate medical education would be the preferred path forward.

     What this budget reflects is a redirection of some of those dollars to research universities and others who are focused primarily on additional primary care providers.

     There are other sources of funding outside of the Children’s Graduate Medical Education that funnel into Children’s Hospitals.

     We are watching very closely the good work they do in the access to care, and will continue to monitor that as we move forward.

     *Mr. Reichert.  Thank you, Mr. Chairman.

     *Chairman Camp.  Thank you.  Mr. Neal is recognized.

     *Mr. Neal.  Thank you, Mr. Chairman.

     Madam Secretary, I do not think we should understate the progress you have been making in the area of fraud.  I think there are many more stories that dominate headlines and evening newscasts.

     During the run up to the health care debate, I pushed the Democratic leadership really hard as an act of credibility to continue to weed out fraud wherever it can be found.

     It is still estimated, as you know, that there is up to $50 billion of fraud in Medicare.  Is that number accurate as you see it?

     *Secretary Sebelius.  I think, Mr. Neal, it is almost impossible ‑‑ if we knew where it was, we would go get it.

     *Mr. Neal.  Sure.  My point is you are making progress.

     *Secretary Sebelius.  It is a substantial program and we think there is probably way too much fraud involved in the operations.

     *Mr. Neal.  I think it should be acknowledged that the effort is now being made on a sustained basis.

     *Secretary Sebelius.  There is no question that the tools that were provided as part of the Affordable Care Act are the toughest anti‑fraud legislation ever in the history of this country, doubling criminal penalties, giving us new civil sanctions, setting up resources for the first time on a department to department basis.  The Justice Department and HHS are very much at the table focused on hot spots.

     The ability to build a predictive modeling system.  Re‑credentialing of providers in some of the most troubled areas, all of which is beginning to pay big dividends.

     The Attorney General and I were able to announce a couple of weeks ago that in calendar year 2011, the largest single year for recovering fraudulent efforts, $4 billion was returned to the Trust Fund.  Medicaid funds were returned to Medicaid.

     These efforts are really just beginning.  We are two years in.  I do not think there is any question that for the first time, there is a very serious, very focused ‑‑ driven from the President on down ‑‑ effort to really target, and not just prosecute after the fact, but prevent before the money goes out the door, and that is going to be a huge change.

     *Mr. Neal.  I think that needs to be acknowledged.  I am pleased with the way you framed it.

     I do share Mr. Reichert’s concerns about Children’s Hospitals.  We have an exceptional one, as you know, in Boston.  They have petitioned me, obviously, to raise the issue with you.  I cannot think of better advocacy than the role they play every day.  That is a jewel in the hospitals across Massachusetts.

     I think where we might be able to find additional money for them, it would be very helpful.

     In addition, the rehabilitation hospitals.  They are concerned their funding has been flat now since about 2004.  I would urge there.  I have a substantial rehab hospital as well.  Of course, across Massachusetts, you could find a hospital in many places.

     It is very important to all of us, not just in terms of first class health care, but as a great economic engine for research across the New England region.

     Thank you, Mr. Chairman.

     *Chairman Camp.  Thank you.  Dr. Boustany is recognized.

     *Mr. Boustany.  Thank you, Mr. Chairman.

     Secretary Sebelius, in July of last year, you told the House Energy and Commerce Committee IPAB may not ration care but you admitted this word remains undefined in the 2010 law.

     The health law only requires IPAB to protect seniors’ access to the extent feasible ‑‑ when dealing with meeting mandatory spending targets.

     As a physician, a heart surgeon, who has dealt with a lot of quality initiatives that gave demonstrable results with regard to quality in the hospital where I practiced, I feel very comfortable in speaking for a number of physicians across this country and Members of Congress in a bipartisan way who have deep concerns about IPAB and how it may affect the doctor/patient relationship.

     Mr. Ryan asked some intricate questions over some of the terms that were laid out.  I want to take it down to a very basic level that I think everybody in the room could easily understand.

     Could you please tell seniors if you plan to define the word “rationing” when you issue rules for setting up and implementing IPAB?

     *Secretary Sebelius.  I am certain that definition will be defined, and just to clarify once again, Congressman ‑‑

     *Mr. Boustany.  You are saying yes?

     *Secretary Sebelius.  IPAB cannot implement any recommendations.  They are a recommending body.  They do not implement anything.  They do not control the Medicare benefit package.  They do not control the spending package.

     The last thing they can do, according to the law, is ration care.

     *Mr. Boustany.  But the IPAB recommendations go into effect unless a majority ‑‑

     *Secretary Sebelius.  If Congress fails to act.  If it fails to object to an IPAB recommendation ‑‑

     *Mr. Boustany.  Why is the bar set so high in the law for Congress?  Two‑thirds vote in the House, two‑thirds in the Senate to change IPAB.

     *Secretary Sebelius.  I think there is a sense that Congress would object to issues or cuts that would harm beneficiaries  IPAB is prohibited from that.  They cannot ration care.  They cannot ‑‑

     *Mr. Boustany.  It is a seeming contradiction.  You are planning to define “rationing” in the implementation?

     *Secretary Sebelius.  I would assume we will make a series of definitions around what IPAB can and cannot do based on the law.

     *Mr. Boustany.  Okay.  Thank you.  Let me change tracks now.  In December 2011, there was an article published in Health Affairs that stated that HHS knew in 2010 that the CLASS Program would not work.

     It was noted the Obama Administration quietly negotiated a series of legislative fixes to the law aimed at maintaining the long run stability of CLASS, but these amendments were never discussed with this committee, yet you waited until February of 2011, nearly a year later, after the law was passed, to announce that CLASS was totally unsustainable as written.

     It seems as if your Department knew for some time that the program would not work, and yet you did not bring this information that was requested forward to Congress.

     I have to tell you, having sent a number of letters on this, working with Senator Thune and others, I am a bit irate that I first learned about these supposed fixes in a journal article because we had been requesting documents since last March.

     However, in the documents we have received from your Department, not one word mentions secret back room deals HHS was making in early 2010.

     Why has not the Department released this information?

     *Secretary Sebelius.  Congressman, I have no idea who was in the back room with whom and making deals.  That was certainly nobody from our Department.

     What I can tell you is that during the Fall when there was discussion about the CLASS Act, and subsequently prior to votes, our actuary, the CMS actuary, did present open testimony that was available, casting some real doubt about the long term viability of the program.

     As you know, when CLASS was put into law, I was directed to come to Congress before a program could be started ‑‑

     *Mr. Boustany.  My time is running short.  In follow up to letters we have recently submitted and in the past, I would like for your Department to disclose details of HHS meetings and contacts with CBO regarding CLASS over the past two years.

     *Secretary Sebelius.  I would be happy to.

     *Mr. Boustany.  Thank you.

     *Chairman Camp.  Mr. Roskam is recognized for five minutes.

     *Mr. Roskam.  Thank you, Mr. Chairman.  Thank you, Madam Secretary.

     Madam Secretary, much of the HHS component of the White House budget deals with the President’s health care overhaul.

     I would like just to have a conversation with you about that.  Back in 2008, then candidate Obama promised that his plan would save the average family $2,500 on their premiums, and yet according to Kaiser Health News, workers paid an average of $132 more for family coverage in 2011 alone.

     The rhetoric did not match the reality, did it?

     *Secretary Sebelius.  As you know, the plan is not implemented yet for families.  That will be the case.  The Congressional Budget Office has actually estimated that families will save thousands of dollars once the exchanges are up and running, but the vast majority of Americans do not yet have access to affordable available coverage.  That is correct.

     What you are seeing is a private market continuing to escalate year in and year out as they have for years prior to the Affordable Care Act.

     *Mr. Roskam.  How about when the President said you can keep your health care coverage if you like it.  If you like it, you get to keep it.  Yet, the reality is, according to Bloomberg at least, nine percent fewer businesses are offering medical coverage than in 2010.

     There, the rhetoric did not meet the reality, did it?

     *Secretary Sebelius.  Well, again, Congressman, I think what you are seeing is it would not have mattered if we had passed the Affordable Care Act or not.

     The private market is in a death spiral and has been in a death spiral I would say for 10 to 15 years, with more and more employers dropping coverage as rates continue to skyrocket.

     For the first time, I think we have an opportunity, and we have seen some pretty good news with new rate review going on in states across the country, where double digit rate increases are being withdrawn, where insurance commissioners are stepping up for the first time and making studies on actuarial soundness.

     We are going to see some stability, but short term, we will still see a very shaky market until we get to 2014.

     *Mr. Roskam.  All right.  Back in 2009, President Obama told the American public that he was “Pledging to cut the deficit that we inherited in half by the end of my first term in office.”

     That rhetoric surely did not meet reality, is that not right?

     *Secretary Sebelius.  Unfortunately, as you well know, Congressman, the President inherited probably the worse down turn in the economy since the Great Depression.

     *Mr. Roskam.  It is true, the rhetoric and reality do not connect?

     *Secretary Sebelius.  We are currently, I think, on a positive trajectory, but that is not likely to happen, which is why he needs a second term.

     *Mr. Roskam.  Yes, so we can keep doing trillion dollar deficits.

     Turning back to your conversation with Congressman Tiberi a minute ago, under this new health care law, the Secretary of Health and Human Services has required a group of individuals to really violate a fundamental belief that they have.

     You walked through and had a little bit of a discussion, but it was not really clear to me what the remedy is for the Department if you have an organization that says look, with all due respect to the Department of Health and Human Services, we are going to follow our conscience.  We are going to follow the fundamental belief that we think we have, and we do not agree with the interpretation in the guidance of the Federal Government.

     What is the remedy, Madam Secretary, that you have?  For example, you have the ability to fine these organizations $100 a day per employee.  Let’s say you have a hospital.  That is $50,000 a day.  That is $1.8 million in fines.

     What else can you do to make them comply?

     *Secretary Sebelius.  Congressman, I think that the issue of religious liberty is one that I and the President take very, very seriously.

     The issue of women’s health coverage is also one that I take very seriously.

     What we have proposed and what we will put into a rule and solicit comments on, and we are already doing outreach to a variety of not only religious employers but labor groups and women’s groups and providers, is an accommodation so that the employers who have a religious objection to contraceptive coverage do not offer, do not pay for, do not refer people to contraception.

     On the other hand, their employees, whether she be a teacher or a doctor or a janitor, will have a choice about her own health care services, and be provided, according to the recommendations of the Institute of Medicine.

     *Chairman Camp.  The time has expired.

     I do hope that the Secretary will give as much weight to the First Amendment to the Constitution as to the other factors you have mentioned.

     Mr. Levin and I have consulted.  There will be a series of votes about 3:15.  We are going to move into three minutes.  I am going to have to keep very tight on the time here so that everyone has an opportunity.

     Mr. Becerra is recognized for three minutes.

     *Mr. Becerra.  Madam Secretary, thank you very much for being here.  I am heartened some by the conversation here because while two years ago we had a very wrenching debate about trying to move reform in this country forward, now it seems like the concerns are around the edges, about improving health care.

     There are some concerns, but I think no one would deny that there have been remarkable improvements made to the system.  You mentioned some.

     I know there are over 54 million Americans who today are receiving expanded preventive health care services.  Some additional 30 million or so seniors who are receiving expanded preventive services.

     There are seniors who today have saved some $2 billion from not having to pay for prescription drugs through the doughnut hole, where they would have to pay out of pocket the whole cost.

     There are some four million small businesses today that can claim a tax credit for providing health care coverage to employees that before they would not cover.

     There are some 72,000 children who have become newly insured because today there are protections against discrimination by health insurers, health insurance companies, against children who have preexisting conditions.

     You mentioned the 2.5 million young adults who today have insurance because they are able to stay on their parents’ insurance coverage.

     There are some 20,000 Americans/consumers who no longer have lifetime limits on their benefits.

     Surprise, surprise, what I think is very important as well, we have been hearing about how this reform would be a job killer.

     In fact, last year, some 300,000 jobs were created in the health care sector.  One in every five jobs created last year was in the health care sector.

     I think there are any number of good surprises, and we thank you for all the work you are doing to try to make it even better as we continue forward.

     A question to you regarding the Medicare Advantage Program, which you were asked about earlier.  It seems to me you made a very important point.  We are not making any cuts to the Medicare Advantage Program.  We are reducing the amount they have been overpaid for years.

     I think you mentioned the amount of overpayment on average.  Do you remember what that number was that you said?

     *Secretary Sebelius.  It is about 13 percent more than fee for service side by side.

     *Mr. Becerra.  If I recollect, no senior would be deprived of health care through Medicare.  They may find their health insurer may decide to change the package of benefits a bit, but not the core benefits that Medicare requires or guarantees to every senior in America.  Is that right?

     *Secretary Sebelius.  That is correct.  If anything, what we are seeing, Congressman, in spite of the accusations two years ago that somehow reducing this subsidy, which was built in by Congress years ago to overpay companies to encourage them to come into the market, reducing that subsidy would somehow have a damaging effect on Medicare Advantage, but what we are seeing is companies do just the opposite.

     They are eagerly coming into the space, staying in the space.  Medicare beneficiaries have choices in virtually every part of the country between fee for service and Medicare Advantage plans, and rates for Medicare Advantage plans are coming down.

     *Mr. Becerra.  All right.  Thank you.

     *Chairman Camp.  Time has expired.  Mr. Gerlach is recognized.

     *Mr. Gerlach.  Thank you, Mr. Chairman.

     Madam Secretary, I would like to get back real quickly to the Medicare fraud issue, if I might.

     The Department of Justice estimates the fraud problem to be about $60 billion a year.  Congressman Neal mentioned the figure of $50 billion a year.  You indicated you do not have a clear estimate of what that is.

     Let’s assume it is $50 billion a year.  Take that times ten.  That is $500 billion over a ten year budgeting window.

     In your testimony, you indicate here that you have some initiatives going on within HHS that by a conservative estimate would save $11.3 billion in Medicare and Medicaid savings, as well as another $3.6 billion over ten years through this comprehensive fraud fighting effort.

     That is $15 billion over ten years compared to a $500 billion problem.  I think that is about three percent, actually.

     Why is there not more being done to really root out fraud?  You said if we knew where it is, we would go after it.  We do know it is phantom billing.  We know it is the criminal use of physicians’ UPIN numbers.  We know it is stealing beneficiary identifications for criminal use.

     We know how it is occurring, so why are you only proposing a three percentage point reduction in fraud over ten years?

     *Secretary Sebelius.  Congressman, I think there is no question we need an “all of the above” strategy, and that is exactly what we are doing, I would say for the first time.

     We have a senior administrator who is for the first time charged with building a fraud and anti‑fraud system throughout the program.

     We are as I said re‑credentialing providers, using the law enforcement tools, building a predictive modeling system, bringing the billing strategies into one ‑‑ we are doing exactly that.

     *Mr. Gerlach.  Have you thought about using a smart card system?  Germany uses a smart card access system, which has eliminated fraud.  The Department of Defense uses a smart card system to prevent fraud.

     Are you looking at that specific effort to tie beneficiary with the service provider at the time of the transaction to eliminate fraud?

     *Secretary Sebelius.  We are.  There are a number of strategies looking at a different kind of Medicare card that would be less easy to access and less easy to steal or share.

     There are about 50 different billing systems that currently take the card.  We are working actively ‑‑

     *Mr. Gerlach.  Could you share that information with us?

     *Secretary Sebelius.  Certainly, sir.

     *Mr. Gerlach.  Okay.  Thank you, Madam Secretary.

     *Secretary Sebelius.  If you have new strategies, I would love to hear them.

     *Mr. Gerlach.  We have a pretty good idea we would love to share.  Thank you, Madam Secretary.

     *Chairman Camp.  Thank you.  Dr. Price is recognized for three minutes.

     *Dr. Price.  Thank you, Mr. Chairman.

     Madam Secretary, welcome back.

     *Secretary Sebelius.  Thank you.

     *Dr. Price.  I wonder if you ever relished the irony of a former state executive director of the Trial Lawyers Association heading the Health and Human Services Department?  Does that ever cross your mind at all?

     *Secretary Sebelius.  No.

     *Dr. Price.  Good.  Some of us relish in that.  Mr. Lewis asked you what would happen if the President’s health care law were repealed.  You went through a whole series of scare tactics that you revealed to the American people.

     You know better than that, Madam Secretary.  There are wonderful, positive proposals and options to be able to get folks covered, to be able to solve the insurance challenges, to address some of the real costs that are driving physicians out of being able to take care of patients, and driving patients away from being able to see doctors, that we ought to have a honest debate about.

     The President has mentioned over and over if you like what you have, you can keep it.  Grandfathered plans have been talked about.  You said yourself if you keep what you had in 2010, then you are eligible for grandfathering.

     The fact of the matter is that the law stipulates that if anything changes, if an employee is added, if there is a benefit that is changed at all, then one is not eligible.

     *Secretary Sebelius.  That is not accurate, Congressman.  I would be glad to provide you the details.

     You cannot shift ‑‑

     *Dr. Price.  I look forward to that.

     *Secretary Sebelius.  You cannot shift costs onto beneficiaries and you cannot cancel benefits to the detriment of beneficiaries.

     *Dr. Price.  It is huge for seniors, and they are being denied right now.  You mentioned that 99.4 percent of physicians are seeing Medicare patients.  Do you know how many are limiting the Medicare patients that they see?

     *Secretary Sebelius.  I do not, sir.

     *Dr. Price.  It would be an important number to know.  I would suspect ‑‑

     *Secretary Sebelius.  I can tell you we have an active monitoring system, and we are not getting complaints from people.

     *Dr. Price.  This is from one of your third party administrators, this is denial of payment to a physician.  This is all that came in the mail.

     It says “Dear Provider:  In January, your facility filed nine claims to Dr. Smith that were suspended because the diagnosis code was not consistent with patient gender.”

     What is he supposed to do with that?  How is he supposed to figure out whether or not he is able to care for that patient again or not?

     This is the kind of hassle that is driving physicians out of the practice of medicine.  The costs of health care are huge challenges.  The practice of defensive medicine, as you know, is massive.

     What does your bill do to address the practice of defensive medicine?

     *Secretary Sebelius.  As you know, Congressman, there is about $50 million in various programs that are currently being funded, some of which look like they have great promise for ‑‑

     *Dr. Price.  Any liability reform, any lawsuit abuse reform in your bill?  Is that not how you address defensive medicine?

     *Chairman Camp.  Time has expired.  Mr. Doggett is recognized.

     *Mr. Doggett.  Thank you.  Madam Secretary, I come, as you know, from a state that officials like some Members of Congress compete to come up with the most critical comments about the Affordable Care Act, and yet only yesterday in our State Capitol in Austin, a state official testified that when this law is implemented, the percentage of Texans who have insurance will go up from 74 percent to 91 percent.  I hope he under estimated it and we can get it higher than that.

     We have heard just now about all these wonderful proposals that are out there, but the Republicans have had more than a year now to advance the “replace” part of “repeal and replace,” and to date, all we have is one page of 12 platitudes that they adopted with enthusiasm last January.

     A concern that I have is what happens in nay sayer states like Texas, which has so many uninsured individuals that could and I hope will benefit from the Affordable Care Act.

     Texas, of course, when it came to those who are high risk, it took the no, we will not help approach, and you reached out, and a number of states for different reasons, did not provide the high risk pool, and provided a network or national network of high risk pools for those states like Texas that said no.

     If Texas, which has sent back about $900,000 of the $1 million grant they got to begin preparing, if Texas is not ready in January, will you be ready to assure people in Texas that they can get access to the exchanges through the Affordable Care Act?

     *Secretary Sebelius.  Congressman, as you know, the way the Act is written, states have the authority and the ability to not only set up a state based exchange, but with resources and technical assistance provided by the Federal Government.

     If indeed a state opts not to take advantage of setting up a program at the state level, we are directed to set up a Federal exchange.

     The discussion earlier about additional resources at the Department of Health and Human Services are to do just that, to put the framework together for a Federal exchange, to make sure that Americans regardless of where they live will have access to the benefits that an exchange can provide come January 2014.

     *Mr. Doggett.  If Texas sets up a program and like our Medicaid program, it is far inferior to that in other states, how much flexibility does the state have, or put another way, how likely is it that our citizens end up with a state program that provides much less in the way of coverage and benefits than those in other states under the announcement you made recently about these state exchanges?

     *Chairman Camp.  If you could answer quickly because time has expired.

     *Secretary Sebelius.  Well, I think the essential health benefit definition that you are talking about tries to balance a comprehensive insurance policy with affordability, and with the notion that insurance is regulated at the state basis.

     I think there are some underlying rules, what categories need to be covered, anti‑discrimination, making sure there is competition and no cherry picking.

     Hopefully, we will have some state flexibility reflecting the fact that those programs as benchmarked plans have been marketed and priced at the state and can be up and running.

     *Chairman Camp.  Thank you.  I do want to remind my friend from Texas that we did have a health care bill that did not cost $1 trillion.  It did cover preexisting conditions, and was the only piece of legislation scored by CBO as reducing health care premiums.

     *Mr. Doggett.  Was that something from this year that you all have introduced or are you talking about the alternative ‑‑

     *Chairman Camp.  The alternative, and it has been re‑introduced by Congressman Herger.  It is currently in the legislative arena.

     Mr. Buchanan is recognized.

     *Mr. Doggett.  Will we be marking it up any time soon?

     *Chairman Camp.  Mr. Buchanan has the time.

     *Mr. Buchanan.  Thank you, Mr. Chairman.  I want to thank Madam Secretary for being here today.

     I want to shift gears a little bit.  I represent a district in Florida, but being the only member of Ways and Means in Florida, I want to talk about pill mills.

     Prescription drug abuse is a national epidemic.  I have an L.A. Times article here.  “Deaths from drugs now out number traffic fatalities in the U.S. data shows.  In 2009, 37,485 deaths.”

     You probably know this, but in Florida, seven people a day are dying from prescription drugs.  There are more pill mills in Florida than McDonald’s.

     They are saying the overall cost, one study, has the abuse at $70 billion a year.

     I had three mothers come in, all of them lost their son or daughter.

     I have a very good friend that was the CEO of the YMCA, which is large in our area.  His son was weight training, hurt his back at 18.  I think he was a football player or wrestling.  He got on OxyContin.  All of a sudden, he is dead now, six months later.

     What are we doing or what are you doing, what is your area doing to address this concern?

     It used to be even in the workplace about drugs and alcohol.  Now, these kids are getting ‑‑ I do not say it is just kids ‑‑ a lot of them are getting hooked up on these pain killers.

     *Secretary Sebelius.  It is a very serious problem and you are absolutely right, the data is enormously alarming where prescription drugs have now out paced criminal drugs in terms of over abuse and deaths and injuries.

     We are trying to approach this along with the private sector in several areas.  We have efforts at the state level through the Medicaid program looking at ‑‑

     *Mr. Buchanan.  Madam Secretary, just because we are so short on time.

     *Secretary Sebelius.  We would love to get you a full answer and tell you what is going on.

     *Mr. Buchanan.  I have introduced a bipartisan bill, a lot of Democrats, every Democrat in Florida, and all the Republicans on it.

     *Secretary Sebelius.  We would like to work with you on that.

     *Mr. Buchanan.  I would like to get you that bill and have you consider it and ideally support it.

     *Secretary Sebelius.  Okay.  Thank you.

     *Mr. Buchanan.  The other thing is I just want to say in terms of Florida, it has been talked about here today, is the whole thing of SGR and doc fix.  We have a lot of doctors very concerned.

     I came to Washington in 2007.  We have addressed the doc fix probably five/six/seven times, last year, three times roughly.

     I do not know how you run a practice, how you run a business this way.  A lot of them are trying to make long term capital investments in their practices.  They said we cannot do it.  The banks will not even support them.

     We really need to have you guys provide some leadership on this because obviously it is not getting done any other way.

     The President and the Administration really needs to step up and address this because in Florida, health care is so critical when we have obviously more seniors than most states, and health care is critical to our seniors.  We need good doctors and to be able to keep them and pay them.

     *Chairman Camp.  All right.  Time has expired.  Mr. Smith is recognized for three minutes.

     *Mr. Smith.  Thank you, Mr. Chairman.  Thank you, Madam Secretary.

     I want to touch on a few budget related health care items.  The first being critical access hospitals, and the second being the Medigap plans, and then also this new fee increase at FDA to cover a 17 percent increase in their budget, if time allows.

     Regarding the critical access hospitals, as you know, and I think you can appreciate, service in a rural state, how important health care is.  These critical access hospitals really are modest gateways to health care and are entry points to health care.

     The President’s budget has proposed reducing the reimbursement to critical access hospitals.  Can you tell us kind of the background to that strategy and what the impact might be?

     *Secretary Sebelius.  I cannot do it with any precision in terms of the years it would hit.  I share your concern about the importance of critical access hospitals.

     I know in the overall payment strategy, we are continuing to pay an increased amount to critical access hospitals as we move forward, recognizing that often they are the only service provider in an area, and it is essential to keep them there.

     I can get you a more detailed answer in writing, sir.

     *Mr. Smith.  I know they are very concerned about the proposed reduction.  I do look forward to hearing more on that.

     The budget also recommends that seniors with the Medigap plans, which have near first dollar coverage, pay a surcharge equal to roughly 30 percent of their Medicare Part B premium.

     Can you speak to why the President recommended this policy?

     *Secretary Sebelius.  Well, I think there is a market strategy that indicates having some investment among consumers, and the Medigap plans are a positive step forward.  He is following some recommendations that have been made over time and looking at some of the market strategies that seem to be effective.

     *Mr. Smith.  What do you see the impact being?  I hear from seniors concerned and obviously providers as well.

     *Secretary Sebelius.  Well, I think there are a variety of plans, many of which, as you know, do not provide dollar one coverage from the outset.  We have looked carefully at the health outcomes, measuring the plans.

     This is seen as a way to not only reduce some revenue in the long run, but also discourage what may be redundant use of services, and have some strategies in place that actually are more cost effective.

     There are a variety of plans that currently without any impact on beneficiaries do not have the dollar one payment by the company.

     *Chairman Camp.  Mr. Thompson is recognized.

     *Mr. Thompson.  Thank you, Mr. Chairman.  Madam Secretary, thank you very much for being here today and for your willingness to stay as long as necessary to answer all these questions.  It is refreshing ‑‑

     *Chairman Camp.  There is a hard stop at 3:15 with our vote, so we do not have all day.

     *Mr. Thompson.  Do I have 12 minutes or three minutes?

     *Mr. Thompson.  Madam Secretary, you were kind of cut off when you were speaking to the issue of medical liability and what some of the promise has shown.  Is there anything else you want to add to that?

     *Secretary Sebelius.  Well, I can tell you, and I will make it very brief, we are encouraged under the Agency for Healthcare Research and Quality.  We were directed to put some dollars out to look at possibilities with hospital systems and provider groups that actually are working in the market.

     I think we will be coming back to Congress very shortly with a robust set of options.  We are encouraged by what we are seeing, some programs that really work.

     *Mr. Thompson.  Thank you.  I am encouraged by what I hear in my district in regard to the Affordable Care Act.  People are glad that they cannot be cut off from their insurance if they get sick.

     They are glad their kids can stay on until they are 26 years old.  Seniors are very, very happy that the doughnut hole is closing.

     Just today, I had a major California insurer in my office who was very complimentary about the things we put forward in health care reform.

     They have some real good statistics as to how that is benefitting California consumers, as well as consumers in other states where they operate.

     It is not all doom and gloom.  I think we are seeing some really positive and refreshing success as a result of this bill.

     I am particularly encouraged by HIT.  Everybody I talk to at home is glad we are moving to health information technology, and they are seeing the improvements, and they are putting it in place.

     Can you discuss why health IT is important and what is the expansion looking like?

     *Secretary Sebelius.  Well, I think there is some great news there, again, we have now twice as many doctors and hospitals using electronic health records as were using them two years ago.  That is a huge up tick.  We think that trajectory is going to continue.

     What we know by looking at the information is that having an electronic record is the best way to coordinate patient care.  It enables providers to eliminate duplication, lower medical errors, and provide much more patient centered care, in that patients actually own their own information, can look at their own information, monitor their own information.

     What we are also seeing, Congressman, is a huge number of jobs being created, not only in the software companies building these systems, which often are companies under 50, and any one of them could be the next Google or Microsoft, but the number of health IT workers ‑‑

     *Chairman Camp.  I am afraid I am going to have to stop you there.

     *Mr. Thompson.  Thank you very much.

     *Chairman Camp.  We are just running short.  Mr. Schock is recognized for three minutes.

     *Mr. Schock.  Thank you, Mr. Chairman.  Welcome, Secretary Sebelius.

     *Secretary Sebelius.  Thank you.

     *Mr. Schock.  Do you agree with the effort to lift the ban on using Federal funds on lobbying campaigns?

     *Secretary Sebelius.  To lift the ban?

     *Mr. Schock.  Correct.

     *Secretary Sebelius.  We just recently got a proposal in the 2012 budget which we are in the process of implementing.  I do not know anything about a proposal lifting the ban.

     *Mr. Schock.  The President’s budget lifts a long‑standing prohibition on using Federal funds in lobbying campaigns.

     *Secretary Sebelius.  I do not know anything about that effort.  I do know that language added to our budget in 2012 went well beyond what has been the long‑standing policy, and I know there are Members of Congress who have expressed some concern that in looking at the 2013 budget, we would look at that expanded language, which the language that has been in place for a long time affects Federal agencies.

     The language in the 2012 resolution that was reached actually reaches down to grantees and stakeholders and implies that their activities can no longer be engaged in any kind of activities to change public policies.

     I am not involved in an effort and I am really not aware of an effort to lift the ban.  I am sorry if I am not answering your question.

     *Mr. Schock.  No, you are.  In fact, I am glad to hear that you are not involved in that.  My question really targets the grantees, which you mentioned just a moment ago.

     *Secretary Sebelius.  Which is brand new language.  This is not a long‑standing policy.  It is brand new language in 2012.

     *Mr. Schock.  To allow them to use Federal funds?

     *Secretary Sebelius.  No.  The ban that we are now expected to implement reaches down into grantees and their activities at a state, local, municipal or a school board level.

     *Mr. Schock.  The folks who are receiving dollars from the Federal Government, grantees, who may be currently using them for lobbying campaigns ‑‑

     *Secretary Sebelius.  To change public policy.

     *Mr. Schock.  Okay, to change public policy.  We call that “lobbying.” Okay.

     The people that are using Federal dollars to change public policy will no longer be able to do that once your rule is fully implemented?

     *Secretary Sebelius.  That is my understanding.  Yes, sir.

     *Mr. Schock.  Okay.  Thank you.  Second, I have a question about the Agency’s desire to change the time period for biologics.  My understanding there is an effort underway to change pharmaceuticals that are biologics based from the current 12 year time period.

     I was just wondering if you could speak to why you believe that is important.

     *Secretary Sebelius.  I am sorry.  I want to make sure I answer the question accurately.  Yes, sir.  I just wanted to make sure what the span was.

     This has been under discussion for a while to lower the strategy from 12 years to 7 years, which I think is seen as an assistance, frankly, to consumers, to get products to the market in an affordable fashion and a much more timely basis.

     *Chairman Camp.  Ms. Jenkins is recognized.

     *Ms. Jenkins.  Thank you, Mr. Chairman.  Thank you for being here, Madam Secretary.

     *Secretary Sebelius.  My Congresswoman, nice to see you.

     *Ms. Jenkins.  That is right.  The Affordable Health Care Act makes it clear that health insurance subsidies are only available to individuals and families enrolled in an American health benefit exchange, which is defined in the law as a state based exchange.

     Further, the law requires that in order to be eligible for exchange subsidies, the “individual must be enrolled through an exchange established by the state.”  That is a quote.

     In response to Mr. Levin’s question, you explained that it is clear that many states will not set up exchanges.  As you know, the law does not allow subsidies to flow through Federal exchanges.

     However, back in August, the IRS issued a proposed rule allowing premium subsidies to be made available in all exchanges, whether state or federally run.

     The IRS Commissioner responded to a congressional letter on this matter stating and I quote “The statute includes language that indicates that individuals are eligible for tax credits whether they are enrolled through a state based exchange or a federally facilitated exchange.”

     I cannot find the term “federally facilitated exchange” in the health care law.  I am just wondering exactly where in the law is the term “federally facilitated exchange” or what specific language authorizes the Administration to allocate subsidies via the Federal exchange.

     *Secretary Sebelius.  Congresswoman, I would be glad to get you that answer in writing.  There are some very detailed legal analysis and also a variety of statutory language.  I will be sending that back right away.

     *Ms. Jenkins.  Okay.  It appears, and I would just be curious if you would agree, that essentially the IRS is amending the health care law through the regulatory process.

     *Secretary Sebelius.  I do not think that is accurate at all.  I will send you the statutory references and the legal interpretation.

     *Ms. Jenkins.  Okay.  If the law provides it is only Federal, it is only allowed for the state run exchanges ‑‑

     *Secretary Sebelius.  I will be happy to answer this question in detail.  It has been analyzed and looked at.  You may disagree with the analysis, but I will be delighted to get you the language in the statute and the legal interpretation of that language.

     *Ms. Jenkins.  Okay.  Those of us in Congress ‑‑ I can get a little defensive when our constitutional authority to write tax policy is taken away from us and imposed through a regulatory agency.

     Thank you.  I yield back.

     *Chairman Camp.  Thank you.  Mr. Larson is recognized.

     *Mr. Larson.  Thank you, Mr. Chairman.  Thank you, Secretary, for being here.

     Let me say that I am very proud of the Affordable Health Care Act.  Sometimes called “ObamaCare,” but I kind of like that as well because it is pretty clear that the President does care.

     At the end of the day, that is what it is all about, even here on this committee where sometimes we appropriately, and good members on both sides of the aisle, deal with all of the economic issues and all of the green shade issues, et cetera, but what an honor to have a person of your capability of both a former Governor who knows how to administrate and get to solutions, and also a woman, who understands the incredible balance that needs to take place in this day and age, and finally, because of the Affordable Health Care Act, bringing into parity the women’s health issues that you talked about.

     I thank you for making and moving responsibly the accommodations that your Agency has to Catholic charities and to our university systems.  It is great to see Father Jenkins and the Affordable Health Care people all coming forward and praising your efforts in this area.

     At the core of this, when you look at these issues, where 15,000 women still are susceptible to cervical cancer and die every year, you begin to appreciate and understand the importance and significance of this, as well as people and constituents who say to me every single day, I do not care whether you are a Democrat or Republican or independent, I have a 19 year old son that needs a liver implant.  Please, keep that Act enforced.

     How many more people do you think will benefit by this?  People want to see solutions.  I commend you and your Agency for being about solutions.

     *Secretary Sebelius.  Thank you.

     *Chairman Camp.  Thank you.  Mr. Paulsen is recognized for three minutes.

     *Mr. Paulsen.  Thank you, Mr. Chairman.  Thank you, Madam Secretary, for being here as well.  We had a chance to talk in the past about some medical device issues.

     I want to just follow up and ask a question here.  All things being equal, do you believe that encouraging the use of lower cost alternatives like generics, generic drugs, for example, makes sense for both the patient as well as the consumer as a way to help lower health care spending overall?  I assume that is a goal you would generally agree with.

     *Secretary Sebelius.  I think the more consumer information that people have about effective outcomes and prices is great, absolutely.

     *Mr. Paulsen.  I think you would probably agree we have a shortage of primary physicians.

     *Secretary Sebelius.  We do.  We are filling that pipeline thanks to some of the resources in the Affordable Care Act.  We do.

     *Mr. Paulsen.  I should just share that one of my chief concerns with the new health care law is a provision in there that does not allow those that have flexible spending accounts or health care savings accounts to access the purchase of over‑the‑counter medications unless they have a doctor’s prescription.

     I have certainly heard from a lot of suburban mom’s and constituents in general that have been frustrated about how they get Claritin for their kids or Advil, whatever it might be.

     They sort of resort to having to visit the doctor or the primary physician to get a prescription for Advil or some of these generic drugs.

     It is not accessing a lower cost alternative to lower health care costs.

     Do you think the prohibition that is in the current law should be changed or repealed or would you be willing to work to modify that to the benefit of more consumer driven health care for those over‑the‑counter/generic drugs?

     *Secretary Sebelius.  I think, Congressman, the notion about the provision was not to discourage the purchase of generic drugs.  It was to recognize that health savings accounts are often for health needs that are not being met.

     The same way that most insurance coverage does not cover over‑the‑counter medicines, the health savings account was brought in line with what insurance policies currently have in place.

     Clearly, people hopefully will continue to buy aspirin and buy a variety of over‑the‑counter drugs.  They just will not use their health insurance policy or their health savings account to do that.

     *Mr. Paulsen.  I just want to mention the flexible spending account as well.  These are their own health care dollars.  They set them aside through their employer’s plan.

     I had one constituent who said this rule is really a burden for consumers as well as physicians since additional office visits are required to get an over‑the‑counter medication prescription, and these FSAs really are a valuable tool.  They are used by a lot of hard working Americans to help manage and hold down these out of pocket costs.

     This is a significant issue.  I do not know if it was overlooked in the concept of the new law passing, both FSAs and HSAs.  This is definitely an issue that I think we should work on.

     *Secretary Sebelius.  I would be glad to talk to you further about that.

     *Mr. Paulsen.  Thank you.  I yield back.

     *Chairman Camp.  Mr. Marchant is recognized.

     *Mr. Marchant.  Thank you, Secretary.  I am very concerned about the Texas women’s health program’s current Medicaid and waiver status.

     This program was first implemented in 2007 and must receive HHS waiver approval.

     It is currently authorized by HHS through the end of next month.  The program currently provides services to over 100,000 Texas women on an annual basis.

     I would like to ask three or four questions, and if we do not have time for you to answer, I would appreciate you submitting an answer in writing to me.

     What is the current status of the HHS’ review of the waiver for the Texas women’s health program?  Number one.

     Number two, please tell us about the HHS’s main reasoning behind its review for the current Texas waiver request.  Is this reasoning consistent with other waiver requests for similar health programs from other states?

     In the past, has not HHS allowed states to make the decision about who can be a qualified provider?  Has HHS ever tried to overturn a state law about who can be a qualified provider, and the last question is is the waiver being refused because of a current Texas law that prohibits state funding to go to Planned Parenthood?

     *Secretary Sebelius.  Congressman, I would be glad to answer those questions in writing, but let me just say at a 30,000 foot view, this ruling is very consistent with what has been Medicaid policy around women with a family planning waiver to be able to choose a provider.

     It is consistent with the information we gave to Indiana in June 2011.  We made it very clear to Texas we are eager to have this program continue.  Their women’s health program provides coverage to, as you say, about 183,000 women in Texas.

     It is very important, and we want to work with them around the policies that are allowable to move this forward.

     I will be glad to answer your specific questions in writing.

     *Mr. Marchant.  Okay.  Thank you.

     *Chairman Camp.  Thank you.  Mr. Blumenauer is recognized.

     *Mr. Blumenauer.  Thank you, Mr. Chairman.  Thank you, Secretary.

     Let me just say coming from one of those states that are low cost, high quality, our legislature just passed legislation.  Governor Kitzhaber, probably the best qualified ‑‑

     *Secretary Sebelius.  I think he is living in my office.

     *Mr. Blumenauer.  We just want to say there is a commitment top to bottom to take advantage of the potential of this legislation.  I think we have demonstrated billions of dollars of savings in the past.  We hope to have flexibility for people that want to charge ahead on this.

     I think you were too kind earlier to Congress when people talked about the fast track provision in the legislation.  It seems to me it is Congress that has been spineless and has had to try to have it both ways.

     They want to cut costs.  They do not want to say no to anybody.  The procedures that are here in this legislation do not have any restriction on majority in the House.

     In the Senate, where it appeared to take a 60 vote threshold to literally do the most mundane of business, it seems to me that putting that in here so there would not be the goofy procedural thing that has driven Republicans and Democrats alike in the House crazy in the other body, it still makes us responsible.

     We have a chance.  I thought you were too kind.  Anybody who is concerned about it ought to look at what is written.  I think it is very, very reasonable.

     I identify with some of the comments my friend, Mr. Gerlach, talked about, smart cards and moving forward.

     I would think there are techniques here that personally I am very interested in pursuing.  Indeed, what can be done under flexible savings accounts, I think, is different than drawing on insurance.  Not just for over‑the‑counter medications but also some types of physician services that are not now eligible, that seem a little goofy to me.

     I wanted to go back to the contraception controversy.  It seems to me that for years, there were Catholic institutions that had provisions exactly like this in their health care coverage, as well as a number of states that have been doing this for years, without controversy.

     Is that correct?  Would you care to elaborate on that at all?  This mystifies me that some Catholic institutions have been doing this for years and now all of a sudden it is a threat to religious liberty.

     *Secretary Sebelius.  I do not think there is any question that there are a variety of religious facilities, Catholic universities, hospitals, systems, others, who have long offered contraceptive benefits to their employees and let the employee pick and choose whether or not to access those benefits based on his or her own faith/belief system, some to comply with state laws in place, some in states where there was not a state law in place.

     *Chairman Camp.  Mr. Berg is recognized.

     *Mr. Berg.  Thank you, Mr. Chairman.  Thank you, Secretary, for being here.

     First of all, I would like to echo my colleagues’ concerns about the President’s health care overhaul, with the un‑elected IPAB, and also the regulatory encroachment on religious freedoms.

     Having said that, coming from North Dakota, I think a state with high access and affordable health care, one of the things I am most concerned about is critical access hospitals.

     North Dakota has 36 of those, and my understanding is this proposal would impact them by about $1.2 million.  With almost 20 percent of our population in rural North Dakota ‑‑ excuse me ‑‑ in rural America, I am concerned about that access.

     Obviously, coming from Kansas, I understand you have many of the same issues.

     My question really relates to what process did you go through in terms of consulting and including the rural practitioners with this proposal that is presented?

     *Secretary Sebelius.  Well, I think, Congressman, I do share your concern about access in rural areas.  It is a critical issue and one that I did see in Kansas.

     I can assure you also that the head of one of our key agencies is a fellow North Dakotan, Mary Wakefield, who each and every day reminds us that every policy as we implement this ‑‑ she informs a lot of our policies ‑‑ need to be done with rural health care providers in place.

     I think we are confident this proposal does not jeopardize long term access because there are other funding streams that increase in this proposal, but we are going to watch this very closely because access in a rural area is critical and a critical care hospital.

     *Mr. Berg.  I will yield back.

     *Chairman Camp.  Ms. Black is recognized.

     *Mrs. Black.  Thank you, Mr. Chairman.  Madam Secretary, we all know and it has been said a couple of times here before that the President did say prior to the passage of this legislation that if you like what you have, you can keep it.

     We are continuing to find out that is not true.  I do want to point to the fact that I have been reading this and I am almost finished with it, but I am astounded with the number of times it says in here “The Secretary shall establish,” “The Secretary shall promulgate rules,” “shall develop standards,” “The Secretary may develop and impose appropriate penalties,” over and over again, a lot of authority is given to you as the Secretary.

     Where I am concerned is knowing that there was a Senate hearing where you said you did not consult with the Bishops before the Administration announced a change in the conscious protections.

     What can we be assured of as we move forward that you are going to have an open rulemaking process and that you are going to involve those entities that are going to be impacted by these rules and regulations that need to be written?

     *Secretary Sebelius.  Congresswoman, I did not talk to the Bishops because the President talked to the Bishops.  I felt that was sufficient since he is my boss.

     We did promulgate a rule in July.  We got 200,000 public comments on that rule.  We consulted with a whole variety of people in addition to those comments.

     This was a very open process.  It was a very inclusive process, and I can guarantee you there was a very robust dialogue that went on between July when the initial rule was put forward and January when it was finalized.

     *Mrs. Black.  In those comments that you got, were there comments from the entities that were going to be directly affected?

     *Secretary Sebelius.  Absolutely.  There were comments from providers.  There were comments from women’s groups.  There were comments from labor organizations.  There were comments from university presidents, religious leaders, charity groups.

     We heard from a whole lot of people, 200,000 comments.  Yes, ma’am.

     *Mrs. Black.  I hear what you are saying, that the President was the one who met with the Bishops.

     *Secretary Sebelius.  Yes.

     *Mrs. Black.  And had those comments.  I guess there was maybe not a communication between what was said to the President and then what eventually came out on this because the Bishops were quite surprised to find that this ruling, which they were told from my understanding, was not going to occur, and there would be no effect on the way in which they were operating.

     Again, going back to the President saying if you like what you have, you can keep it.

     *Secretary Sebelius.  Churches are totally exempt from this ruling.  The Bishops and the churches that they run and their church affiliates are exempt from this rule.

     *Mrs. Black.  It seems to me again we are having our freedoms taken away from us, and I hope we are not going to see that continue as we go through this rulemaking process, and there are a lot of rules to still be made.

     *Chairman Camp.  Mr. Pascrell is recognized for three minutes.

     *Mr. Pascrell.  Thank you, Mr. Chairman.  Madam Secretary, it is obvious that the President recognizes that we cannot simply make Draconian cuts to solve the deficit problem.

     It sounds good.  It is an over simplification and it does not work.  It only adds to the deficit later on.

     New payment models, more efficient delivery of care, and curbing Medicaid fraud are all better options than transitioning to a voucher program that shifts the costs to beneficiaries.  Nobody is denying that.

     I personally believe we can balance the deficit without cutting Medicare for seniors and breaking our promises to them.

     My question is while the Republican budget proposals shift the burden to Medicare beneficiaries by transitioning to a voucher program, how does the President’s budget cut costs without changing the fundamental structure of Medicare or cutting benefits?

     *Secretary Sebelius.  Well, Congressman, the President both as part of the Affordable Care Act and then again in this budget window, has proposed I would say a gradual slowing down of some of the cost increases.

     We have talked about Medicare Advantage.  This budget contains some additional proposals dealing with drug costs, that Medicare should take advantage of some of the drug rebates that are currently in place in the Medicaid program, which would save significant dollars.  Additional fraud efforts.

     The basic package of benefits that is a guarantee to seniors and those with disabilities, the 48 million Americans who rely on Medicare day in and day out, is not harmed by this.

     In fact, what we are seeing is care improvements and beneficiaries, every time the dollars go down and premiums go down, beneficiaries actually have more money in their pockets.

     Seniors have actually had a great deal of relief, those in the doughnut hole, from the closing of the doughnut hole.

     As Medicare Advantage premiums go down, that saves beneficiaries money because they pay less of their co‑pay and their share of those costs.

     It has been a win‑win situation that slows down the growth trend, which was significantly ahead of inflationary costs, and yet protects the guaranteed benefits for the beneficiaries.

     *Mr. Pascrell.  Thank you.

     *Chairman Camp.  Thank you.  Mr. Reed, last but not least, is recognized.

     *Mr. Reed.  Thank you, Mr. Chairman.  Thank you, Madam Secretary.

     Madam Secretary, I have a very direct question for you.  On the individual mandate penalty, is it a tax?  Yes or no?

     *Secretary Sebelius.  I am not a lawyer so I am not equipped to answer that question.

     *Mr. Reed.  When the OMB Director stated before the House Budget Committee that the individual mandate penalty is not a tax, President Obama has publicly stated it is not a tax, yet your legal briefs in the Supreme Court case in writing submitted on your behalf, because you are a named defendant in that proceeding, states the minimum coverage provision is as a tax law.

     Do you agree with your attorneys’ assertions to the Supreme Court that it is a tax provision?

     *Secretary Sebelius.  I think it operates the same way a tax would operate, but it is not per se a tax.

     *Mr. Reed.  It is not a tax but it operates as a tax.  That is your testimony?

     *Secretary Sebelius.  I am not a lawyer.  I do not want to try to quote the legal briefs.  I would defer to my legal team.  I am not really going to try to parse this back and forth.

     *Mr. Reed.  With that, I yield back.  I know we have to vote, Mr. Chairman.

     *Chairman Camp.  All right.  I want to thank the Secretary for her time today.

     We do have votes on the House Floor.

     *Secretary Sebelius.  Thank you, Mr. Chairman.

Take good care of Traverse City.

     *Chairman Camp.  I will.  With that, this hearing is now adjourned.

     [Whereupon, at 3:34 p.m., the committee was adjourned.]

Member Submissions For The Record

The Honorable Patrick Tiberi

Member Questions For The Record

The Honorable Kathleen Sebelius

Public Submissions For The Record

Center for Fiscal Equity

National Health Law Program