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Hearing on the Independent Payment Advisory Board

March 06, 2012

Hearing on the Independent Payment Advisory Board










March 6, 2012


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

WALLY HERGER, California, Chairman

SAM JOHNSON, Texas                   
PAUL RYAN, Wisconsin
DEVIN NUNES, California
JIM GERLACH, Pennsylvania
TOM PRICE, Georgia

RON KIND, Wisconsin





Scott Gottlieb, M.D.
Resident Fellow, American Enterprise Institute for Public Policy Research

Katherine Beh Neas
Senior Vice President, Government Relations Easter Seals, Office Of Public Affairs

David F. Penson, M.D., MPH
Vice Chair, Health Policy Council, American Urological Association

Marilyn Moon, Ph.D.
Senior Vice President and Director, Health ProgramAmerican Institutes for Research


Hearing on the Independent Payment Advisory Board

Tuesday, March 6, 2012
U.S. House of Representatives,
Committee on Ways and Means,
Washington, D.C.


The subcommittee met, pursuant to notice, at 10:02 a.m. in Room 1100 Longworth House Office Building, Honorable Wally Herger [chairman of the subcommittee] presiding.

[The  advisory of the hearing follows:]


     *Chairman Herger.  The subcommittee will come to order.  We are meeting today to hear from those who will be directly and adversely impacted by the Independent Payment Advisory Board, or IPAB.  In an era where our two political parties are best known for their deep divisions, this is one area where there appears to be bipartisan concern.

     IPAB was created in the Democrat’s health care overhaul, and is designed to reduce the per capita rate of growth in Medicare spending.  That might sound benign, but when you peel back a couple of layers it is clear that IPAB is a real threat to Medicare beneficiaries’ health.  Those concerned about a government takeover of health care need look no further than IPAB.

     If implemented, the board will consist of 15 unelected and unaccountable Washington appointees.  IPAB is given the authority to meet in secret, make its decisions in secret, and it does not need to consider the perspective of Medicare patients or their health care providers.  To top it off, IPAB’s rulings cannot be challenged in a court of law.  My good friend from California, the ranking member, Mr. Stark, characterized IPAB as a “mindless rate‑cutting machine that sets up for unsustainable cuts that would endanger the health of American seniors and people with disabilities.”

     Yet, despite the growing bipartisan opposition to this unaccountable board, the President once again proposed further expanding its authority in his most recent budget.

     Why is IPAB so dangerous?  I have heard numerous concerns from patients and doctors.  But to me, nothing is more troubling than IPAB’s ability to drive a wedge between Medicare beneficiaries and their doctors.  There is nothing in the Democrat’s health care law from preventing IPAB from slashing Medicare reimbursements for services or procedures that IPAB members feel are unnecessary or ineffective to levels so low that physicians would be willing to provide such care.  As long as IPAB is allowed to exist, access to care for seniors and those with disabilities will forever be in jeopardy.

     IPAB supporters argue that it cannot ration care.  What they won’t tell you is that the term “ration” is not defined anywhere in the Medicare statute.  This means that what is and is not rationing will be left to 15 faceless, unaccountable and unelected appointees to decide.

     There is a better way.  Rather than endangering Medicare beneficiaries, we should empower them.  House Republicans have put forth such a plan.  Our plan would let beneficiaries, not bureaucrats, decide the coverage they want and need.  We have an excellent and diverse panel of witnesses here today who will share their thoughts and concerns about IPAB.  We should all take note that when patients and providers are in agreement that access to care is in jeopardy, where those concerns exist it is our fiduciary responsibility to address them.

     Before I recognize Ranking Member Stark for the purpose of an opening statement, I ask unanimous consent that all Members’ written statements be included in the record.

     [No response.]

     *Chairman Herger.  Without objection, so ordered.  I now recognize Ranking Member Stark for five minutes for the purpose of his opening statement.

     *Mr. Stark.  Thank you, Mr. Chairman.  I guess you saw how long this was so you slipped that five minutes in there on me.  That is okay.

     I am proud of what we have done with the Affordable Care Act.  We have provided more than two‑and‑a‑half million young adults with health coverage.  We have reduced prescription drug costs for nearly 4 million seniors, provided free preventative care to 86 million people of all ages.  And in 2014 it will go fully into effect, and expand coverage to over 30 million uninsured Americans, providing security, permanent security, for those who already have coverage.

     That said, the Affordable Care Act is a large bill with many provisions.  And none of us probably agrees with every single provision.  To that point, the Independent Payment Advisory Board, or IPAB, is a provision I strongly oppose.  Remember, the House included no similar provision in our health reform bill.  It is a product of the other body and we really had no part in it.

     Let me be clear.  I oppose IPAB for reasons different, perhaps, from my other colleagues.  Congress has always stepped in to strengthen Medicare’s finances when needed.  I have always worked on this subcommittee to protect and strengthen Medicare, and ensure that it works for its 50 million beneficiaries.

     One only has to look at the Accountable Care Act, which extended solvency, slowed spending growth, lowered beneficiary costs, improved benefits, modernized the delivery system, and created new fraud‑fighting tools, to see that we have done a good job on this committee.

     I see no reason why Congress should hand that authority over to the executive branch.  That undermines the separation of powers.  And I won’t go into detail now, but I have other concerns about IPAB’s process.  I am sure we will hear more about that today.

     No one should interpret my opposition to IPAB as a knock against the ACA.  I stand by my vote there.  Nor should anyone interpret Republican support to repeal IPAB as an attempt to improve or preserve Medicare.  I still believe that the other side of the aisle would like to end Medicare, provide it as a voucher, and that would underfund what is needed for individuals’ disabilities.

     Despite my opposition to IPAB, I think it is far less dangerous than a voucher plan.  It doesn’t undermine Medicare’s guaranteed benefits.  And its ability the reduce Medicare spending has guardrails.  It doesn’t permit cuts to come from reduced Medicare benefits.  It prohibits rationing and has annual limits on Medicare cuts.  The Republican voucher plan does not have these protections.

     So, I believe that the witnesses may share my confusion or skepticism, but I look forward to discussing with them, if they believe there is a better plan on the other side of the aisle for Medicare’s future.  And I will see what the witnesses have to say.

     Thanks, Mr. Chairman.

     *Chairman Herger.  Thank you, Mr. Stark.  Today we are joined by four witnesses:  Dr. Scott Gottlieb, resident fellow at the American Enterprise Institute; Katherine Beh Neas, vice president of government relations at Easter Seals; Dr. David Penson, a practicing urologist from Nashville, Tennessee, who is vice chair of the American Urological Association Health Policy Council; and Marilyn Moon, senior vice president and director of the health program at the American Institute for Research.

     You will each have five minutes to present your oral testimony.  Your entire written statement will be made a part of the record.

     Dr. Gottlieb, you are now recognized for five minutes.


     *Dr. Gottlieb.  Mr. Chairman, Mr. Ranking Member, thank you for the opportunity to testify before the committee.

     IPAB was created based on the premise that decisions about the pricing of Medicare benefits are simply too contentious to be handled by a political system.  But changes to the way Medicare pays for medical services affect too many people in significant ways to be made behind closed doors.  How Medicare prices medical products and services has sweeping implications across the entire private market.  They are some of the most important policy choices that we make in health care.

     To these ends there are some considerable shortcomings with the way that IPAB is structured and how it will operate.  Among these problems, IPAB has no obligation to engage in public notice and comment that is customary to regulatory agencies whose decisions have similarly broad implications.  IPAB’s decisions are restricted from traditional review.  In creating IPAB, Congress provided effective patients, providers, and product developers no mechanism for appealing the board’s pronouncements.  IPAB’s recommendations will be fast‑tracked through Congress in a way that provides only a veneer of congressional review and consent.

     And for practical purposes, IPAB has been given the authority to legislate.  Moreover, there is a belief that if IPAB fails to fulfill its mandate, these decisions will default to Congress.  Actually, under the law they default to the Secretary of Health and Human Services.

     But most significantly, IPAB is unlikely to take the steps to actually improve the quality of medical care and the delivery of services under Medicare.  That is because IPAB does not have any practical alternative to simply squeezing prices in the Medicare program.

     The program we have in Medicare is a problem with the existing price controls that erode health care productivity in Medicare’s outdated fee‑for‑service payment system.  This leads to inefficient medical care.  There is too little support for better, more innovative ways of delivering health care.

     IPAB can pursue longer‑term reforms to change incentives and behavior.  These ideas ‑‑ for example, aligning reimbursement with value and quality, or expanding cost sharing ‑‑ don’t generate savings in the short run, since they are premised on long‑term changes on how efficiently doctors and patients use medical services.  These proposals will not produce the kind of immediate savings that IPAB needs to achieve a narrow budget window that will be its focus.  Yet these are precisely the kinds of reforms that Congress has aimed to pursue on a bipartisan basis.

     By doubling down on the existing practice of simply whacking price schedules with no meaningful eye to how these changes impact long‑term incentives.  IPAB will put more systemic payment reform further out of reach.  IPAB will be working at cross purposes to Congress’s broader reform goals.

     IPAB’s need to focus on short‑run manipulation and price schedules and coding procedures is evidenced by the fact that longer‑term payment reforms don’t score saving money by either the CBO or the Medicare actuary who has to sign off on IPAB’s recommendations.

     All of these ideas for broader payment reform also rely on changes in payment to providers, especially hospitals.  IPAB can’t do these kinds of structural reforms if these constituencies remain off limits until 2019.

     Moreover, because IPAB has its purview narrowly targeted to specific slices of the industry to achieve its targeted savings, IPAB may be forced to implement unusually deep cuts to the limited terrain where it can operate.  These deep cuts could forestall access all together to certain products and services.

     Medicare must continue to implement reforms to align its coverage and payment policies with a value delivered to beneficiaries.  Congress needs to focus on real ways to get longer‑term savings, like premium support, modernizing benefits in the traditional Medicare program, and paying for better outcomes.  IPAB makes it even harder to do all of these things.

     If Congress believes that the political process is incapable of making enduring decisions about the payment of medical benefits, then all of this is an argument for getting the government out of making these kinds of judgements in the first place.  It is not, in my view, an argument for creating an insular panel that is removed from the usual scrutiny to take decisions that other federal agencies have failed to discharge, precisely because those decisions couldn’t survive public examination.  Thank you.

     [The statement of Dr. Gottlieb follows:]

     *Chairman Herger.  Thank you.

     Ms. Neas, you are now recognized for five minutes.


     *Ms. Neas.  Thank you, Mr. Chairman, for this opportunity to testify.  I am Katie Neas, senior vice president for government relations at Easter Seals.  For nearly 100 years, Easter Seals has provided exceptional services so that children and adults with disabilities in their families can live, learn, work, and play in the community.  Last year, Easter Seals served 1.6 million individuals through a network of 75 affiliates across the country.

     Easter Seals’s experience over these many decades has solidified our belief that when people with disabilities, regardless of age, receive appropriate health care services, they live with greater independence.  This experience was one of the main reasons Easter Seals supported and continues to support the Affordable Care Act.  At the same time, we strongly concur that there must be cost containment within the health care system, and believe that more can and must be done to control costs within both public and private health care systems.

     To achieve true cost containment, Easter Seals believes that two important steps must be in place.  First, the cost containment reforms established in the ACA must be given time to be implemented.  Second, any new policies must be designed to ensure that people with disabilities can attain appropriate, medically necessary services in a timely fashion as to promote overall health and wellness.

     We too have concerns about the effectiveness of the IPAB that was included in the ACA.  IPAB is not designed to be an instrument of delivery reform, or to improve the quality of care.  The charge for this board is to reduce the per capita rate of growth in Medicare spending.  For people with disabilities and chronic conditions, it is through better coordination and provision of quality care that real changes in health status can be achieved, and savings in the health care system can be realized.

     The language of the Affordable Care Act so limits where the IPAB can make changes, that all that is really left is reducing reimbursements to providers.  The board cannot take any action that would deny access to care, increase revenue, restrict benefits, or change reimbursements to hospitals or hospices.  If circumstances bring about a mandated cut in reimbursement to providers, it is likely that access to quality care will be reduced, and cost will be shifted to the patient.

     We are already experiencing a reduction in the number of health care providers who will participate in public insurance programs.  The result is the same as if benefits were eliminated.

     A legislative correction such as the Medicare Decisions Accountability Act would ensure transparency and an opportunity for any beneficiary to talk with their Member of Congress about how the Medicare program can reduce cost and increase quality.  It would also leave on the table more options for slowing the growth of Medicare expenditures, and the support of new delivery reform models.  This seems the brighter path for people with disabilities and chronic conditions, to assure the most impact from money spent through the Medicaid program.

     Again, thank you for this opportunity to speak with you today.

     [The statement of Ms. Neas follows:]

     *Chairman Herger.  Thank you.

     Dr. Penson, you are now recognized for five minutes.


     *Dr. Penson.  Chairman Herger, Ranking Member Stark, and other members of the subcommittee, I want to thank you for the opportunity to testify on the IPAB.  My name is David Penson, and I am a practicing urologist from Nashville, Tennessee.  I am speaking today on behalf of the American Urological Association, or the AUA, which has over 18,000 members, and has promoted the highest standards of urologic care in the United States and the world for the last 110 years.  I serve as the vice chair of the AUA’s health policy council.  My testimony today does not represent the opinion of my primary employer of Vanderbilt University.

     The AUA strongly opposes the IPAB, and calls on Congress to pass legislation that would repeal it.  The AUA also participates in the IPAB Coalition and is a member of the Alliance of Specialty Medicine.  Both groups support full repeal of the IPAB.  We believe that the IPAB, if enacted, will result in reduced access to health care for Medicare beneficiaries.

     Why do we believe this?  We know the subcommittee is keenly aware of the ongoing issues with the SGR.  Despite recent action to temporarily prevent the steep cuts to the SGR, physicians now face a 32 percent cut on January 1, 2013.  Clearly, this affects physicians’ confidence in the Medicare program.  To understand how much it affects confidence, and to determine if the cuts would impact access to health care, the Alliance of Specialty Medicine last year surveyed physicians and found that more than one‑third planned to change their Medicare status to non‑participating if reimbursement is significantly cut.  Another third will opt out of Medicare for two years and privately contract with patients.

     The IPAB will only make matters worse.  Hospitals and other Part A providers are exempt from IPAB until 2020.  In addition, the IPAB is required to make recommendations that prioritize primary care.  The result will be a disproportionate share of reductions on physicians with an emphasis on specialists, including urologists.

     Like the SGR, the IPAB, by its very nature, is flawed and will result in providers leaving Medicare.  Specifically, the IPAB will consist of a board of unelected individuals that lacks accountability, clinical expertise, and transparency in its proceedings.  In addition, the IPAB’s recommendations will be precluded from administrative or judicial review, and will be enacted unless Congress specifically acts to prevent this from occurring.

     To understand the negative impact that IPAB would have on Americans, we can look to the current impact of a similar body, the United States Preventative Services Task Force.  The task force is an independent panel composed exclusively of primary care providers, and charged with making recommendations on the value of preventative services.  The task force is not required, nor does it consult with the specialty areas relevant to the specific recommendations, and only recently added a public comment period in response to criticism.

     The task force got our attention this fall when it released new draft recommendations to discourage PSA‑based screening of prostate cancer, giving it a D rating, asserting that there is no net benefit, or that the harms outweigh the benefits.  Based upon our review of the evidence, we strongly disagree with these draft recommendations.  But the task force did not seek our opinion.  In fact, the draft recommendations were developed without consultation of urologists, medical oncologists, or radiation oncologists, the very specialists who diagnose and treat prostrate cancer every day.

     Prior to the Affordable Care Act, the task force recommendations were advisory and non‑binding.  Now, however, their recommendations are tied to patient cost sharing, intended to encourage or limit access to certain provider services, preventative services.  In short, the recommendations of the task force will limit Medicare beneficiaries’ right to decide if they can be screened for prostate cancer, and have reduced access to health care.

     You may recall a couple of years ago that the task force made similar recommendations discouraging mammograms for women in their forties.  Like the task force, the IAB [sic] is another board of unelected, unaccountable individuals that will have a similar impact on Medicare beneficiaries.  However, its impact will be more severe, since the IPAB has much broader authority to alter the delivery of care.  Appointed members cannot be individuals directly involved in the provision of Medicare services or have other employment.  Thus, practicing clinicians, the very people who treat the patients impacted by the IPAB, are excluded from participation on the board.

     Although the IPAB is argued to bend the cost curve, it only serves to ratchet down costs without clinical expertise or consideration of medical evidence.  Similar to the task force, it doesn’t have the research capability or accountability to examine the effects of its recommendations and determine whether the recommendations will threaten access to care.

     While we are in agreement that Medicare spending growth is unsustainable and payment policies are challenging, it is your duty and responsibility as elected officials to address these issues.  The care of our nation’s seniors and individuals with disabilities is far too important to leave in the hands of unelected board members.

     Thank you for the opportunity to testify.  I look forward to your questions.

     [The statement of Dr. Penson follows:]

     *Chairman Herger.  Thank you.

     Ms. Moon, you are now recognized for five minutes.


     *Ms. Moon.  Thank you.  I appreciate the opportunity to be here.  My name is Marilyn Moon, and I am a long‑term researcher in the area of Medicare, with a particular emphasis on the issues that affect the consumers of the program, the beneficiaries.  In this testimony I address both the context and rationale for the IPAB, and some practical issues and concerns that need to be addressed.

     While the IPAB raises a number of very legitimate concerns, it can be reasonable as a tool, if appropriately applied.

     In addition to the Independent Payment Advisory Board which is the subject of this testimony, substantial resources have been given under the ACA to the Centers for Medicare and Medicaid Services to identify, evaluate, and introduce innovations to the delivery and payment of care.  This large infusion of funds to find ways to improve delivery and quality while holding down costs is at the heart of efforts to slow growth over time.

     It is only by identifying and implementing such changes that we can expect to see improvements over time, and that is the important aspect of reform that we should be focusing on.  On the other hand, the IPAB can play a role here as a backstop.  Until we understand better how to use our resources more effectively, and what organizations and treatments work well, it will be impossible to move forward to slow spending growth.  So it is important to fully ‑‑ it is fully appropriate for this to be done at the federal level, which will ensure both a very broad look at innovations, and make the information available to all providers of care.

     Research conducted by private insurers or providers is likely to remain proprietary and to not be of the needed scope to achieve the tasks that loom before us.  With these other activities, the IPAB makes considerably more sense than if it had been enacted as a stand‑alone gatekeeper of spending.

     Moreover, it is important to contrast it with other alternatives that people talk about.  For example, those who advocate decentralizing our Medicare program and turning decision‑making over to beneficiaries place an enormous burden and risk on those beneficiaries.  This is the hallmark of options that would require Medicare beneficiaries to buy insurance with a limited guarantee of subsidy from the Federal Government.

     Supporters of such an approach often talk about having beneficiaries put more skin in the game as a way of improving health care decision making.  Despite claims that this would create better consumers of care, they are asking the most vulnerable members of our society to make decisions for which they are likely to be poorly equipped.  And I believe the evidence underscores that from the RAND experiment and other places.

     One positive aspect of IPAB that is often ignored, particularly when the idea is broadly challenged, is that it was explicitly set up to avoid cuts in benefits to beneficiaries and reductions in their coverage.  And although the rationing aspect has some ‑‑ I have some concerns about how well it is drafted, that is part of the idea, that you are not trying to harm beneficiaries.      And treating this only as a backstop after other things have not worked and as a way of providing incentives to providers to be supportive of other kinds of changes I think is the way to view the IPAB over time.

     There are, nonetheless ‑‑ though I have spoken somewhat positively about the IPAB ‑‑ concerns I have that reflect the same kinds of concerns that you have already heard on the panel this morning.

     First, setting goals on limited time horizons and then having short periods to implement change will put enormous pressure on a system that needs to change in many ways, but is not yet set up to readily adopt reforms.  Fortunately, we will probably have until 2020 or 2021 before that is an issue, because the changes that were made in the ACA are likely to slow the growth of Medicare sufficiently to avoid having the IPAB have to go into effect.  It could use that period of time, for example, to focus on ways to incorporate more effectively these kinds of changes in the decision making that it undertakes.

     Second, I have concerns about the tight conflict of interest requirements and the full‑time paid status of board members that are similar to issues that other people have raised.

     Finally, I think the cumulative effect of very stringent controls over a long period of time needs to also be carefully examined.  Tightening up on payments, requiring coordination of care, and improving the overall delivery of care are all desirable activities.

     But what happens if over a period of time these have happened and, as a society we want to see spending on health care decisions ‑‑ on health care increase?  The IPAB would be a penalty in that regard.

     So, I think that the IPAB should certainly be changed, but I think it can be viewed as an appropriate tool in a broader context.

     [The statement of Ms. Moon follows:]

     *Chairman Herger.  Thank you for your testimony.

     Dr. Gottlieb, some have suggested that IPAB could rely on information garnered from the experiments of another Democrat health care tool, the Center for Medicare and Medicaid Innovation, to develop cost‑saving policies.  However, many Members, including myself, have serious concerns that CMMI was given a blank check with no accountability to beneficiaries or to Congress.

     Are you concerned that the interactions between IPAB and CMMI could lead to a perfect storm such as ‑‑ these government bodies will have unchecked powers to change Medicare in ways that neither beneficiaries, providers, nor Congress can appeal?

     *Dr. Gottlieb.  I think the interplay between IPAB and CMMI certainly ‑‑ it could be significantly problematic.  You know, IPAB could effectively authorize new authorities onto CMS, and then CMMI could provide the funding for it.  So you basically completely sidestep Congress.

     I think one can imagine IPAB skirting prohibitions on changes in cost sharing of benefit by authorizing or instructing the Innovation Center to use a more restrictive standard for what Medicare will cover, and then providing ‑‑ CMMI would provide the funding to implement that.  I think it is almost a foregone conclusion that, if IPAB is constituted, it will pursue some kind of reference pricing scheme like LCA authority, conferring LCA authority explicitly onto Part B drugs, something CMS has already sought and lost a number of federal court cases in seeking that authority.  And CMMI could effectively create the infrastructure to execute that.  And so you would have the two entities working together to effectively accomplish what traditionally has been done by Congress, granting authority and then providing funding for it.

     *Chairman Herger.  Thank you.  Ms. Neas, you are not alone in expressing unease about IPAB.  In fact, I have heard from a number of patient groups that have shared similar concerns that IPAB need not count a single patient representative among its 15 members.

     Can you discuss why you think it is important for beneficiaries to have a strong voice while this unelected board is making decisions to cut Medicare?

     *Ms. Neas.  Absolutely.  In the disability rights movement we have a phrase, “Nothing about us without us.”  Patients and beneficiaries are essential in this decision‑making process.  People know what their bodies need, they know what they need.  And simply having the dollars of what you pay a provider be the only factor in the decision‑making process to us is simply missing the point.  We really need people to be invested in their own health, and to make that opinion be part of this decision‑making process.

     *Chairman Herger.  Thank you.  Dr. Penson, the President and key officials in his Administration claim that IPAB will strengthen Medicare.  The President and these officials are also quick to claim that IPAB supposedly cannot ration care, increase beneficiary cost sharing, or reduce benefits.  To me, this means that the only thing that IPAB can do to cut Medicare spending is to slash payments to providers.

     Do you believe that simply cutting provider payments strengthen the Medicare program?  Or do you think it will weaken the program by reducing beneficiary access to care?

     *Dr. Penson.  I absolutely am ‑‑ agree with you that I think it will weaken the program.  The fact of the matter is that if you reduce reimbursements to physicians ‑‑ there are many physicians out there in the community now who are struggling, particularly primary care providers.  But specialists, as well.  And what I think will happen is, if you reduce reimbursements, you will have providers leaving the system, leaving the program, and then that will reduce access for beneficiaries.

     *Chairman Herger.  Thank you.  Mr. Stark is now recognized for five minutes.

     *Mr. Stark.  Thank you, Mr. Chairman.  We ‑‑ one of the reasons that I was happy to see ACA pass is that it was successful in constraining health care spending, and extended the solvency of the Medicare trust fund, slowed the cost growth in Medicare, and growth in overall national health spending, all while lowering beneficiary cost sharing.  In fact, CBO estimates that Medicare spending growth is so low, given the Accountable Care Act, that IPAB won’t be triggered until after 2021, I think, as Ms. Moon indicated.

     Could you tell us, Ms. Moon, how ACA is lowering the Medicare spending, and how you suspect it may continue to do that in the future?  It is my understanding that the cost containment from ACA means that, as you said, IPAB won’t be triggered for years.  Can you elaborate on that a bit?

     *Ms. Moon.  Certainly.  A number of the changes that were made in the Medicare program will reduce the level of spending over time.  There are a number of them.  One of them that I think was particularly important, for example, was to try to set on an equal footing with the traditional Medicare program, the Medicare Advantage aspects of the program in which now those private plans will be paid on a level comparable to what Medicare beneficiaries and traditional Medicare will get.  I think that was a very positive move forward, for example, and a substantial piece of this.

     I think other areas in which the projections of lower spending are important are going to come from the innovation center of the ‑‑ of this new activity by the Centers for Medicare and Medicaid Services.  And unlike those who fear what it will do, I think that finally we are putting resources into looking at, very systematically and carefully, what things work to improve the delivery of care in the United States, recognizing that a lot of changes are going to have to be made.

     Some of these are not going to be easy, and they are going to be tough changes, but I think they will get the kind of scrutiny that they need when they are put out there as the CMMI does, the Center for Medicare and Medicaid Innovations, and that is by doing research and analysis and then talking about the findings and how they can change over time.  That is much more transparent than will happen, for example, if these changes are made by private insurance companies in their own efforts to hold down costs.

     *Mr. Stark.  I am sure you are aware of ‑‑ well, not only Canada, but I think almost all nations except Somalia and someplace else have basically an effectiveness study which would help patients and physicians, without regard to cost, but through a study of how effective various procedures or various pharmaceuticals are ‑‑ is aspirin better than Tylenol?  Somebody will do a study on that and suggest to Dr. Penson that for this particular issue or that particular issue the statistics would show that this is more effective.

     Should that, over time, provide better service to our ‑‑ to all Americans, but in particular to the Medicare beneficiaries, if the physicians chose ‑‑ it is a voluntary issue ‑‑ to follow its recommendations?

     *Ms. Moon.  I think ‑‑

     *Mr. Stark.  I will ask Dr. Penson if that would be useful ‑‑ would be helpful in his practice.

     *Dr. Penson.  Well, I am ‑‑ as I also wear a second hat as a health services researcher who focuses on comparative effectiveness, so evidence‑based medicine is very important.  The AUA supports it.  I support it.  I will add, though, that sometimes we do a study and it clouds this issue even more so.  But evidence is very important for the practice of medicine, absolutely.

     *Mr. Stark.  Ms. Moon?

     *Ms. Moon.  I think that that is key to the future, because we really have to understand how to use our resources wisely.  And, as you indicated, this should be advisory to physicians and other providers of care.  It is difficult to ask physicians in this very fast‑changing world to be on top of everything.  And good and reliable information about what works and what doesn’t it going to be an essential piece of that.

     *Mr. Stark.  Thank you.  I want to thank the entire panel for their contribution.  Mr. Chairman, thank you.

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

     *Mr. Johnson.  Thank you, Mr. Chairman.  I am appalled by the government control of everything, and I think we need to get the government out of it.  You know, unelected and unaccountable board trying to tell you docs what you can and cannot do is ridiculous.

     Are you still doing Medicare?

     *Dr. Penson.  I am, personally.  I work for a large academic medical center, so I suspect my medical center will always be in Medicare.  I can tell you many of my colleagues are considering not participating, particularly if the SGR cuts go through.

     *Mr. Johnson.  Yes, I know.  I am aware of a couple of docs that are thinking about going to the military and getting out of private medicine.  That is ridiculous.

     Dr. Gottlieb, Secretary Sebelius testified before the committee just last week and claimed IPAB is prohibited from rationing care‑altering benefits.  It is difficult to imagine that with this Administration and its Washington‑knows‑best mentality, that they could decide services and procedures aren’t warranted.  As a result, they might recommend slashing Medicare reimbursements for those services and procedures.

     Do you see this as a possibility, and could you comment on it?

     *Dr. Gottlieb.  Well, I think they are going to be forced to manipulate payment schedules and coding because they need to achieve budget savings in the near term, and in the near term that is all you can really do, given the other constraints.

     And what they are likely to do is import price schedules that exist in one aspect of the market into new aspects of the market so you can envision things like maybe VA pricing for the specialty, tier drugs in the Part D benefit, they are likely to just burn down existing payment rates, just drive them lower.  And they are likely to try to do things to the coding process to try to change how certain products are reimbursed, maybe giving CMS authority to engage in forms of reference pricing.

     I think that the way that IPAB is likely to ration, if you will, is by just conferring new authorities onto CMS, authorities that CMS has long wanted to be able to engage in, you know, aspects of what really amounts to reference pricing, where you would categorize products along a judgement made by CMS that products are clinically interchangeable.

     So, for example, consolidating drugs with separate Orange Book listings under the same payment code, even if those drugs are paid separately, CMS could theoretically say that they think that they are clinically interchangeable.  And just applying least cost, saying that within a category of approaches to a given medical problem CMS doesn’t recognize the clinical difference between different approaches and is therefore going to pay for the lowest rate.  I think that that is what we are likely to see.

     As far as rationing, I am not sure ‑‑ there is no definition of rationing in the statute, so I am not sure how that is likely to be interpreted.  And since you can’t sue IPAB for implementations of its recommendations, I am not sure how you can challenge that.

     *Mr. Johnson.  Thank you.  I appreciate that.  Do you think Medicare can be saved with arbitrary reimbursement cuts, or do we need more fundamental reform?

     *Dr. Gottlieb.  Well, I agree with you, Congressman.  I think we need more fundamental reform.  I think that this endless series of just burning down payment schedules and trying to lump different treatments under the same payment code to bring sort of bureaucratic efficiency to the management of the program just makes more fundamental ‑‑ far more difficult.

     So, as we go through successive cycles of these arbitrary cuts, I think it makes it harder and harder to achieve something fundamental.

     *Mr. Johnson.  Yes.  I am seeing some docs just getting out of it, they are not accepting it any more.  Do you still?  You said you did.

     *Dr. Penson.  I do, because I am an employee of a medical center.  But I will repeat what I said before, which is I know many of my colleagues have either left Medicare or are considering leaving Medicare because they are worried, frankly, about keeping the lights on.

     *Mr. Johnson.  Yes, yes.  It is a serious problem.  Thank you, Mr. Chairman.  Yield back.

     *Chairman Herger.  Thank you.  Mr. Reichert is recognized.

     *Mr. Reichert.  Thank you, Mr. Chairman.  Thank you all for being here.  As you can see, there is some agreement on this panel this morning.  And you have, I think, answered most questions through your testimony, so some of these might be repetitive.  But I think that some of the topics bear a highlighting during the questioning.

     And I have only been on this committee ‑‑ this is going on my fourth year.  I know some Members have been here much longer than that, and they have been struggling with health care and health care reform and lowering costs and increasing accessibility and quality versus quantity for a lot longer than I have.  But it has become obvious to me in my short tenure on this committee that there are some serious problems with this so‑called Affordable Health Care Act.

     We have already removed language regarding the 1099 form.  We have also ‑‑ the Class Act is one part of the program removed from the health care law.  It is not affordable.  The ‑‑ there are other issues, as you know, regarding mandates.  So now we have lawsuits filed as a result of this law being passed.  And now we have also discovered that, if you like your health care plan, you can’t keep it.

     And then, so today we are here to talk about another problem that there is agreement on with this panel, at least in the beginning of this discussion, and that is this advisory board.  And most of you, you have touched on this already.

     But again, I want to highlight the ‑‑ what Dr. Penson especially said in his testimony.  The advisory board only serves to worsen the problem of physicians leaving Medicare.  And Mr. Johnson just spoke briefly to this, too.  Can you explain how the advisory board can restrict access to care for our nation’s seniors?  You have explained, at least in one case, prostate cancer, for example.  The screening has been rated now as a D rating, which is going to restrict some coverage there and some access.  Patient cost sharing is designed to limit access.  Can you give some other examples of how access will be limited, and why?

     *Dr. Penson.  Well, I think specifically with the IPAB, it is primarily going to be cutting reimbursements to physicians, and not just specific tests like the task force did with prostate cancer.

     With that being said, if we continue to cut reimbursement to physicians, we are going to have a crisis, because physicians are going to leave the Medicare program.  And it is going to happen not just with primary care providers, but specialists.  These days doctors, particularly community physicians, are working on a very tight margin.  And if you continue to cut their reimbursements, they are going to close their doors, or they are going to stop seeing Medicare patients.  And effectively, you are going to have American seniors saying, “Well, maybe I need to pay out of pocket to see my doctor I have been seeing for 10 years, because he no longer will accept Medicare.”  I see that as a huge problem.  And it effectively is rationing, depending on how you define it.

     *Mr. Reichert.  And just to follow up on this idea, Ms. Neas, your ‑‑ I liked your “no discussions about us without us.”  And if you could, just elaborate a little more on that just to help us understand how Medicare changes and reforms are impacting beneficiaries, and especially if they are not there to represent their own views, thoughts, and ideas, and us as representatives have no place at the table to represent those individuals most in need that your organization particularly represents.  Can you go into some detail on that?

     *Ms. Neas.  Sure.  And I think, if I could be so bold, I think Dr. Penson might agree with us.  One of the ways that we are healthy is when we have good relationships with our health care providers.  It is a two‑way street.  Your doctor tells you what to do, and then you are supposed to do it.  And that doesn’t always happen, but there needs to be direct communication with the patient and their health care provider.  And when that happens in a positive way, people have better health.  It is not very complicated.

     If you take that patient‑doctor relationship out of the delivery of health care so that it is harder to stay with your doctor, you are going to somebody new every time, it can be very, very difficult.  I think you ‑‑

     *Mr. Reichert.  Would you say the board is sort of doing this, then?

     *Ms. Neas.  If you make it so doctors can’t stay in the Medicare program ‑‑ and we are seeing this ‑‑ and I know it is not the jurisdiction of this committee, but we are seeing this every day in the Medicaid program, where health care providers simply are no longer taking children with disabilities who are on Medicaid because they cannot afford to pay their light bill and do this.  It is not that they are being inappropriate in any way.  They cannot stay open if they continue to serve these patients.  We fear the same thing may be true with Medicaid ‑‑ with Medicare, if it is constantly ‑‑ if there are fewer people.

     I can give you one very quick example.  I have a very dear friend who has spina bifida.  She is in her mid‑fifties.  She has been on Medicare for times when she ‑‑ and she has had over 50 surgical procedures.  When she goes to a new doctor, they want a full medical history.  She is 50 years old.  She has had 50 surgeries.  They don’t want ‑‑ they don’t need to know if she has got something wrong with her stomach when her legs were amputated.  It is ‑‑ but ‑‑ and that is an inefficiency in the system, that if you make it harder for the people who know their patients to stay in Medicare, you are going to have less good health outcomes for patients.

     *Mr. Reichert.  Thank you.

     *Chairman Herger.  The gentleman’s time has expired.  Mr. Pascrell is recognized.

     *Mr. Pascrell.  Thank you, Mr. Chairman.  It has been pointed out many times in this room, Mr. Chairman, how critical it was that health care reform included the cutting edge delivery and payment reforms that it did.  I will refer back to this in a moment.

     But I have never believed that the Independent Payment Advisory Board, as it stands now, would ‑‑ will effectively fulfill its stated mission to ‑‑ in terms of cost containment.  I never really accepted that.  I have concerns with how IPAB will operate, and that it gives us important congressional authority over pricing.  That is why I am cosponsor of the bill, and I intend to support it in committee and on the floor.

     But let’s be clear, that the IPAB was originally designed to protect beneficiaries.  That was its purpose.  Despite what my friends on the other side would have you believe, it is their voucher plan that they endorsed, the majority endorsed, that would end Medicare as we know it.  That is what would end Medicare as we know it.

     So, while we may be talking about repealing IPAB today, we should not lose the big picture, and that is the Affordable Care Act was entitlement reform.  Nobody wants to say that on the other side.  I don’t know why.  One‑third of the Act was entitlement reform, as far as I am concerned, concerning Medicare.  Very specific.  Unlike their plan, it will actually contain Medicare costs while improving benefits, not ending the Medicare guarantee.

     And I had a question for Dr. Moon, but I have ‑‑ want a quick question, if you would, Ms. Neas.  You know, the vouchers are not going to work for individuals with disabilities.  Let’s set the record straight here.

     *Ms. Neas.  That is absolutely right.  Our experience, whether it has been in health care or in education, what people with disabilities need is what they need.

     *Mr. Pascrell.  So what the voucher program does is turn people with disabilities and senior citizens over to private health insurance industry.  It turns it over to them to determine what care and how much care they are going to receive.  Can you just briefly talk about converting Medicare to a voucher and what it would do to the very people you are focused on?

     *Ms. Neas.  Over time, the Medicare program and others have been altered to include specific services and supports.  Those were because people needed them, and we needed to spell out in very specific ways that there was a range of services that needed to be reimbursed by the Medicare program.  People need those services.

     And because it is a big pool, not everyone is going to need the same amount.  But they need to be able to have medically necessary service available to them, as decided by their health care provider, and not say, “If you cost more than $15,000 a year, too bad for you.”  If you have a stroke and you need ongoing physical therapy to regain the strength in one side ‑‑

     *Mr. Pascrell.  Right.

     *Ms. Neas.  ‑‑ you need that.  And it is not ‑‑ and you may need, depending on you as an individual, you might need physical therapy for two months, or you might need it for a year.

     *Mr. Pascrell.  Thank you.  Dr. Moon, we know of the various and very specific cost containment under the Affordable Care Act ‑‑ just to name a few, efforts to reduce preventable hospital re‑admissions, improving payment accuracy ‑‑ has an effect on what we are talking about.  Promoting value‑based purchasing, et cetera, encouraging innovation through the new Center for Medicare and Medicaid Center, establishing ‑‑ and funds research on effectiveness of different clinical interventions with the Patient Centered Outcomes Research Institute.  These are among many.

     Now, do you think it is likely that IPAB will focus on improving quality through delivery system reforms, considering how hard CBO showed it is to create any savings in such a small time frame?

     *Ms. Moon.  I think that is a very legitimate concern about IPAB, and I think that if there were to be changes in the program that kept it, it should allow it to have a longer time frame than the one year.  I think that is a dangerous aspect of the IPAB program.

     *Mr. Pascrell.  What do you think would be the result of that?

     *Ms. Moon.  I think that does bias you in favor of some of the cuts in payments, and that is something that I think you want to avoid.

     Again, I see IPAB mostly as a backstop, if absolutely necessary, and I would hope it would be viewed that way, and not as a first line.

     *Mr. Pascrell.  Thank you.  Mr. ‑‑

     *Chairman Herger.  The gentleman’s time has expired.  Thank you.

     *Mr. Pascrell.  Mr. Chairman, if I may?

     *Chairman Herger.  Yes.

     *Mr. Pascrell.  Mr. Chairman, I think the witnesses that we have heard over many, many weeks and many hearings are an indication.  They are an indication of the concerns, legitimate concerns, of folks who are involved day in and day out with health care.

     I think all sides should just back off an inch or two at least, and take a look at what we are learning as might not be the causes of the major problems we are facing in health care, and that we could all take a deep breath, Mr. Chairman, all take a deep breath, and understand that we are combined in intellect here, need to look at reducing ‑‑

     *Chairman Herger.  The gentleman’s time has expired.  Thank you very much.

     *Mr. Pascrell.  ‑‑ reducing one thing and not throwing away the entire essence of the bill.

     *Chairman Herger.  Mr. Roskam is recognized.

     *Mr. Roskam.  Thank you, Mr. Chairman.  You know, in that spirit of taking a deep breath, the Democratic leader of the House, when she was the speaker, sort of famously now prophesied that we had to pass the bill in order to see what was in it.  And she did, and we do.  Now we are walking through this IPAB adventure.

     And I think what is interesting, to the gentleman from New Jersey’s point ‑‑ and I accept the premise of what he is saying ‑‑ and that is there is nobody here ‑‑ it is interesting ‑‑ no voice on this panel is defending IPAB.  Nobody.  We have heard, well, it didn’t start in this chamber.  We have heard it is not ‑‑ you know, this wasn’t the real purpose.  But it is fascinating that, at least to date, an hour into this hearing, there has been no voice that has defended on this panel the status quo of IPAB.  So let’s talk about why.

     Dr. Gottlieb, can I turn to you?  And let me ask you this.  Under IPAB, will health care providers’ ability to provide care to patients be affected by reimbursements being cut for particular services?

     *Dr. Gottlieb.  I think it absolutely will.  I ‑‑ you know, as we have been saying, I think IPAB’s sort of scope is so narrow and constrained, in terms of what it can do, and how far out it can look ‑‑ getting to Ms. Moon’s point ‑‑ that it is going to just have to burn down payment rates.  And we have seen time and time again, when payment rates get driven too low, certain services just become unavailable.

     If you look even under the DRG system, when DRGs get driven down too low, certain technologies will fall out and just won’t be available in a hospitalized setting.  I think the same thing is likely to happen on the Part B side in the outpatient setting, is IPAB has to just burn down payment rates and manipulate coding schedules.

     *Mr. Roskam.  So the downward pressure ‑‑ in a nutshell, the downward pressure is so fierce that it will have an impact.

     Let me ask you this.  The debate around the word “rationing” has created a high level of anxiety.  You know, and so the proponents of the Affordable Care Act say, “Well, IPAB can’t ration.”  Rationing, as you know, is not defined in the statute.  Let me ask you this.  Can you have per se rationing, based on what the Independent Payment Advisory Board makes decisions to reimburse?

     *Dr. Gottlieb.  Sure.  You are going to have payment driven so low in some settings that certain services just won’t be available.  Physicians won’t be available to take patients.  I think entrepreneurship is going to suffer, because you are going to have less investment in certain sectors in anticipation of the inability to get reimbursement for certain things.  And I think the third leg of this is the fact that IPAB could confer authorities ‑‑ give CMS new authority so CMS can engage in the rationing.

     I don’t see ‑‑ I am not an attorney, I am a physician, but you know, I have spoken to attorneys in town.  There is mixed opinion about this issue.  But most people seem to agree that IPAB can confer authorities onto CMS that CMS would then use in ways to explicitly change benefit design and coverage rules.

     *Mr. Roskam.  Ms. Neas, on behalf of Easter Seals, I am interested.  I have got a world class Easter Seals facility ‑‑

     *Ms. Neas.  Yes, you do.

     *Mr. Roskam.  ‑‑ in Villa Park, Illinois, which is doing remarkable work.  And I have had the privilege of visiting, and really commend you and the vision and the mission that you have.

     Can you comment on what you are hearing from, let’s say, parents of children whom you are serving, and their level of concern about what patients ‑‑ or what physicians might be prescribing based on an IPAB decision?  In other words, if IPAB makes a decision, is the smorgasbord of options, the treatment options, possibly cut down as a result of the bureaucratic decision‑making process?

     *Ms. Neas.  Yes, thank you for that.  Yes, you do have one of our superstars in your district, which serves predominantly children, and children with very significant physical disabilities.

     Our biggest concern is when you make it impossible for providers to stay in business and serve this population, they have no place else to go.  And so the practical realities, particularly in smaller communities, where you may not have the same degree ‑‑ breadth and scope of providers, if they cannot keep their doors open because reimbursement is the only thing that is keeping them afloat and that just gets cut, then, practically speaking, people are just afraid that those services, regardless of what is on the benefit package, if there is nobody to provide them, then they cannot access those services.

     *Mr. Roskam.  Thank you.  Dr. Penson, quickly.  Can ‑‑ there is a lot of discussion in this town about income inequality.  You mentioned this a minute ago, but can you give us a little bit of a highlight?  What happens, for example, if a person of means goes in and a physician ‑‑ well, my time has expired.  I will ‑‑

     *Chairman Herger.  Maybe he will answer it in writing.  You want to finish the question?

     *Mr. Roskam.  That is okay.  I will follow up with you.  Thank you.

     *Chairman Herger.  Mr. Kind is recognized.

     *Mr. Kind.  Thank you, Mr. Chairman.  Thanks for holding this important hearing.  And I appreciate the witnesses’ testimony here today.

     I would be the first to admit that IPAB requires a leap of faith.  But I supported it.  I think it makes sense.  I think it is a fail‑safe backstop effort to constrain the largest and fasting growing area of spending in the federal budget and state budgets and local budgets and business budgets and family budgets, which is health care costs.  And if people have a better idea of how we can bend the cost curve out in the future, I am all for that as well.

     But I think the key to reforming a health care system that was in desperate need of reform was through delivery system reform and through payment reform.  It had to change the way health care is delivered, so it is more integrated and coordinated and patient‑focused.  And we have a lot of models throughout the country that have shown us ways to do that.

     And then, ultimately, we have got to change the way we pay for health care, so that we are paying for the value or the quality or the outcome of care that is given, and no longer the volume of care.  And that has been the nemesis of the so‑called fee‑for‑service system for years.  And everyone on this panel, I think, recognizes the challenge that we are facing.  Fee‑for‑service is not producing the type of outcomes or the bang for the buck that we need with our health care dollars.  IPAB is merely ‑‑ from my perspective  ‑‑ is a fail‑safe mechanism that, if certain reforms don’t lead to spending reductions and better outcomes, there is a way to address that.

     And one of the big problems out there is the over‑utilization of health care:  more tests, more procedures, more things being done, but without the desired results.  But we have got competing ideas on which way to go.  The other side, from what I can tell, would just as soon shift the cost on the backs of people who can least afford it.

     Ms. Moon, let me start with you.  For example, under the so‑called Ryan budget plan that virtually all of them had supported last year, the Republican plan would end Medicare’s guaranteed benefits for things like hospital stays and doctor visits.  They would replace it with a cash voucher.  Can IPAB do that?

     *Ms. Moon.  No, it cannot.

     *Mr. Kind.  Also under the Republican plan would increase the cost for Medicare beneficiaries, according to the CBO analysis of it, by more than doubling out‑of‑pocket costs for new enrollees up to $6,000 a year when it is fully implemented.  Can IPAB accomplish that?

     *Ms. Moon.  No.  Fortunately, it would not.

     *Mr. Kind.  And finally, the latest version apparently that they are toying with and might include in their next budget resolution, is the so‑called Ryan‑Wyden Plan that embraces this concept of a target growth rate, that if certain spending reductions don’t occur, automatic spending reductions occur under this target growth rate.  Does IPAB mirror any of that?

     *Ms. Moon.  No.

     *Mr. Kind.  You know, so there is really a choice here of what we can do, moving forward.  Allow time to transpire for delivery of system and payment reform to take place, or there is the ACO models or medical homes for the better coordinated care, the Center for Innovation coming up with ideas on how we can get better value for the dollar, and have IPAB as a backstop for that, ultimately.  Or, we can go down another route, which merely privatizes Medicare, turns it into a private voucher plan, shifts the cost on the backs of seniors, an additional $6,000.

     And when I look at my congressional district, 80 percent of the seniors in western Wisconsin rely on Social Security as their sole source of retirement income, 80 percent.  They can’t take a $6,000 hit in Medicare.  So what I think we need to be working on is what we can do together of trying to reform a delivery system so we do get better value out of the dollar.

     So am I wrong here, Ms. Moon?  Am I missing something of what needs to be accomplished in the health care system?

     *Ms. Moon.  No, I think that is exactly right.  I think that this is a very tough problem, and the Federal Government has a role to play, along with consumers and providers, and everybody else.  And to shift it off on to beneficiaries and make them responsible, I think ‑‑

     *Mr. Kind.  Well, the way I see IPAB ultimately is a panel.  Again, a backstop if cost constraints don’t occur, but they would kick in, their relevancy would kick in.  But their whole task is to find out what is working and what isn’t, and then stop creating incentives for doing things that don’t work.

     I mean, in its simplicity, that is what IPAB is really all about.  And I support it, because I have been around here long enough to see how feckless Congress is, trying to act on these reimbursement issues ourselves.  I know there is great cause for representative democracy, but you just look back at SGR, and what an abysmal failure SGR has been throughout the years.  It was a budget savings mechanism inserted in 1997 that has always been restored.  And that is the problem we always have with these reimbursement issues.

     Congress doesn’t have the backbone or the guts to stand up and try to make these decisions ourselves, because we are not experts.  And yet IPAB is supposed to be staffed with people with greater knowledge and greater expertise in order to make some of these difficult decisions.  Congress can still intervene.  There is still that mechanism.  But I would feel more confident going down the IPAB road than not, given what we face today.  Thank you, Mr. Chairman.

     *Chairman Herger.  Thank you.  Dr. Price is recognized.

     *Mr. Price.  Thank you, Mr. Chairman.  There is so much misinformation in the last five minutes, I don’t know quite where to start.  But maybe I will start by saying that the SGR, which all of us agree is a disaster, in terms of its compensation of physician ‑‑ reimbursements for physician services for seniors, everybody understands that.  The IPAB has been called the SGR on steroids.  So if you liked the SGR, you will love the IPAB.

     Our whole goal here is the highest quality of care.  We disagree drastically about how to get to that highest quality of care.  Our side believes that patients and families and doctors ought to be making medical decisions.  The other side believes that Washington ought to be influencing those medical decisions in very intimate ways, which is why I think it is important to point out, Mr. Chairman, that a list of medical entities, physician entities, folks taking care of patients, nearly 500 of them ‑‑ 500 of them ‑‑ supporting repeal of the Independent Payment Advisory Board.

     So, it is important to remember that we are talking about patients, and the people that are taking care of the patients are saying that this will be a disaster, a disaster.

     We have heard a couple of things from our friends on the other side who say, “Oh, don’t worry about it, it is 2020, 2021, not going to happen.”  I draw their attention to appendix A in their packet.  The first date where something regarding IPAB must occur by law, April 30, 2013 ‑‑ 2013.  That is when the chief actuary has to begin to state whether or not these costs are going up at rates that are unacceptable, not according to patients, not according to any market at all, but according to Washington.

     We have heard that the ‑‑ words tossed around like “voluntary” and “advisory,” as it relates to IPAB.  There is nothing voluntary or advisory about the Independent Payment Advisory Board.  It is a denial of care board.  And its sole purpose is not quality of care, as my colleague just talked about.  Its sole charge is to “decrease” ‑‑ “recommend cuts in areas of excess cost growth.”  Decrease costs ‑‑ excess cost growth, which ‑‑ then you got to look at why the cost of health care is rising.  And it is rising higher than the gross domestic product.  Why?  For two main reasons.

     We heard this last week from the chief actuary for CMS as well as the OMB director.  The 2.5 percent is due to “utilization and innovation,” utilization and innovation.  So if you are going to decrease the cost, what do you have to do?  You have to decrease innovation ‑‑ that is quality of care ‑‑ and utilization ‑‑ that is access to care, which brings me to my questions to, first, Dr. Penson.

     There is some notion that if you decrease payment to physicians, that that doesn’t decrease the access to care for patients.  Can you put ‑‑ can you help us understand that, that mechanism, a little bit?

     *Dr. Penson.  Well, it is going to affect ‑‑ you decrease reimbursement to physicians, it is going to affect things in two ways.  First is the example I have thrown out there already, which is at a certain point physicians are going to close their doors and turn off the lights, simply because they can’t make ends meet.  And so, for many physicians, they will just opt out of Medicare.  And we have already seen this in Medicaid.

     The other thing that physicians will do is that they get paid ‑‑ if the reimbursement gets paid less, if they try and keep their doors open and keep things open for Medicare, they will just try to see more patients.

     Now, you say, “Okay, well, that is good.  We want our doctors to see as many patients as possible.”  But Ms. Neas will back me up on this.  There is a big difference between when you get ‑‑ and you know this, as a physician ‑‑ you get a good, long visit with your doc, where you get to talk with him or her, or you are sort of in and out really quickly, because that is what he or she has to do, just to keep the office open.

     *Mr. Price.  Dr. Gottlieb, I want to talk about some real‑world consequences for the physicians out there trying to care for their patients, in spite of the rules that we toss upon them.

     My understanding is that if a physician is continuing to try to see Medicare patients, and if a payment for a service in Medicare is not of a rate that would allow the physician to continue to keep his or her doors open, that physician can’t see that Medicare patient and provide that service if they agree upon another price that the patient would want to pay to that physician to see him or her.  Is that right?

     *Dr. Gottlieb.  That is right.  Under the law you can’t balance bill the patient.  You have to accept the customary rate under Medicare if you opt into the Medicare program.

     I think the other caveat here, and what I am seeing in my clinical practice ‑‑ I practice hospital‑based medicine, but I will refer the patients to primary care providers as they are discharged from the hospital, and what I see more and more is just physicians capping how many Medicare patients ‑‑

     *Mr. Price.  Exactly.

     *Dr. Gottlieb.  ‑‑ they will allow into their practice, and they will say, “I am closed to new Medicare patients.”  We have seen this in Medicaid for years now.  It is very hard to get specialty care for Medicaid patients that I am discharging from the hospital, and it is quite unfortunate.

     *Mr. Price.  And, therefore, huge decrease in access to care.  In fact, last week, when the Secretary was here, she said 98.4 percent of physicians see Medicare patients.  And I asked her specifically how many physicians are decreasing the number of Medicare patients that they are seeing, and the Secretary could not answer that.  And it is a huge, huge number.  Access to care is being compromised.  IPAB damages access to care, and it is time to repeal it.

     Thank you, Mr. Chairman.

     *Chairman Herger.  Thank you.  Mr. Buchanan is recognized.

     *Mr. Buchanan.  Thank you, Mr. Chairman.  And I also want to thank the witnesses for being here today, taking your time.

     I represent 170,000 seniors in southwest Florida, Sarasota and Manatee Counties.  And many of the seniors that I talk to are very concerned about what this unelected board of bureaucrats will mean to Medicare, as it decides what constitutes necessary care for our seniors.

     Dr. Penson, you represent doctors who are concerned about this board.  How do doctors feel about President Obama’s call to expand the reach, in terms of this board?

     *Dr. Penson.  I think, in general, the doctors who I represent in the American Urological Association are strongly opposed to this board, and they certainly wouldn’t favor any expansion of it.

     *Mr. Buchanan.  Dr. Gottlieb, I had a quick question.  You mentioned in your testimony that the decision of this unelected board of bureaucrats are exempt from judicial review.  I find this very concerning.  Please explain to us what the full consequences of this exemption are.

     *Dr. Gottlieb.  Well, my understanding, by talking to attorneys in town, is that the implementation of the board’s provisions are exempt from judicial review.  So, effectively, if you are a sponsor, if you are a company manufacturing a product or even a provider group affected by a decision of the board, you wouldn’t have legal standing to challenge a decision in court.  You also don’t have any ability to appeal, there is no appeals mechanism.

     I had my research assistant ‑‑ and I don’t have her with me here today ‑‑ do a survey ‑‑ we are going to be publishing it soon ‑‑ of all the mechanisms in place on private health care plans, what they have in terms of adjudication.  And, you know, I don’t think Congress would ever allow a private plan to operate the way IPAB is going to operate, in terms of not allowing any mechanism for appeal, or any open process, in terms of how these decisions get made.  And the private sector obviously does a much better job because ‑‑ frankly, because they have to, under the law.

     *Mr. Buchanan.  And let me ‑‑ just a follow‑on question that was brought up the other day, that if the Congress doesn’t like what gets done at IPAB, what kind of reach ‑‑ or what is their ability to try to overturn a decision, as you understand it?  Because I have heard different comments on that.

     *Dr. Gottlieb.  Well, there is sort of a veneer of congressional consent built in, right, where the proposals of IPAB go to Congress for a very limited time, and that Congress would have to come up with proposals that cut Medicare by the same magnitude, if they didn’t like the proposals that IPAB put forward.  I think it is unlikely Congress is going to be able to come up with competing proposals in the time frame that they are allowed under the law.

     So, it is effectively a way to fast‑track the IPAB proposals into law and provide a veneer of congressional consent, I assume, because there were separation of powers issues if it didn’t go before Congress.

     Now, Congress can always pass a law later to repeal the IPAB provisions.  But I think the whole idea here is that the idea was to make it very politically hard to do anything to stop the implementation of IPAB’s proposals.

     *Mr. Buchanan.  Thank you, Mr. Chairman.  I yield back.

     *Chairman Herger.  Thank you.  Mr. McDermott.

     *Mr. McDermott.  Thank you, Mr. Chairman.  I would ask unanimous consent to enter into the record an article from the New York Times called “Knotty Challenges in Health Care Costs.”

     *Chairman Herger.  Without objection.

     [The in of The Honorable Jim McDermott follows:]

     *Mr. McDermott.  This points out that the average cost of health care per capita in the United States is $8,000, which is twice what it is in every European country.  So we all know there is a cost problem.  I don’t think anybody up here disagrees.

     And the question is ‑‑ I guess Bill Friske said it pretty well, in my view.  He said, “Don’t repeal it, fix it.”  So I am sitting here, trying to figure out ‑‑ people don’t like the IPAB.  I think it is as good a mechanism as we have, and we will fix it on the way, maybe we will figure out better ways.  But the question is, how do you fix ‑‑ let’s just take one area, doctor’s fees.

     Now, when we started Medicare, we said to the doctors, “You can submit your usual and customary fees.”  That was the deal.  Doctors weren’t coming in unless they got their usual and customary fees.  Okay.  So now, Dr. Penson, you sit out there at Vanderbilt University.  Do you decide your fees?

     *Dr. Penson.  No, I do not.


     *Mr. McDermott.  Well, who does?

     *Dr. Penson.  Well, I ‑‑

     *Mr. McDermott.  An accountant?

     *Dr. Penson.  I believe the physicians and the leadership at Vanderbilt University, and I understand ‑‑

     *Mr. McDermott.  No, wait a minute.  You mean you don’t set them?  They are set by the university?

     *Dr. Penson.  And by the payers in the region.

     *Mr. McDermott.  The payers of the regions?

     *Dr. Penson.  The payers in the region, the insurers.

     *Mr. McDermott.  Ah, so United Health sits down with Vanderbilt and says, “Here is what we will pay.  Send me a bill for that amount.”  Is that the idea?

     *Dr. Penson.  I don’t know the exact mechanism, honestly.

     *Mr. McDermott.  Isn’t that interesting?  Now, here we have a doctor who doesn’t know how his pay comes.  And what we have written into law right now is doctors can submit any pay ‑‑ any fee they want, and then the government is supposed to write a check and pay them exactly what they ask for.  Well, then somebody has got to make a decision on how much doctors should be paid, right?

     Now the question.  Here is what I would like Ms. Moon and Dr. Penson and Mr. Gottlieb ‑‑ Dr. Gottlieb to talk about.  How should it be done?  Should it be Members of Congress up on this dais decide?  Or should it be by the doctors, the doctors should decide how much they are paid?  Because doctors will always say, “I was not paid my fees.”  Of course you weren’t paid your fees, they were too high.  And Aetna or United Health or somebody said, “No, no, no, no.  We are only paying this much.”  Or should it be done by a board that sits and talks about it?

     What is the answer to this question of setting fees?  How should it be done?

     *Dr. Gottlieb.  Thank you, Congressman.  I would just say up front we don’t have a cost problem in medicine.  I think we have a value problem in medicine.  And the question is are we getting what we paid for.  And I think most of us would agree we are not.

     *Mr. McDermott.  Well, who decides the value?

     *Dr. Gottlieb.  I know how my fees are established, and they are established, frankly, by Medicare.  I mean I am paid ‑‑ most of the patients I see are Medicare patients or Medicaid patients.  And where I do have private‑pay patients ‑‑

     *Mr. McDermott.  What do you get ‑‑ you submit ‑‑

     *Dr. Gottlieb.  ‑‑ I am paid off of a Medicare rate.

     *Mr. McDermott.  You submit $100, what do you get back, $70?

     *Dr. Gottlieb.  I ‑‑ when I see patients in the hospital, I will fill out a sheet at the end of a day, and I will submit billing codes.  They are Medicare billing codes, regardless of whether it is a Medicare patient or a private patient.  The private plans use the same billing codes.  And there is a fee schedule assigned to the billing codes.  And that fee schedule is established by Medicare.  And the private plans will pay a percentage off of that schedule.

     *Mr. McDermott.  And ‑‑

     *Dr. Gottlieb.  Medicare rate vary across the country, because doctors ‑‑ because costs vary across the country.  So Medicare varies the rates, based on surveys that it does of the actual cost of providing care.  But that is how all physicians are paid, unless they are taking cash.

     *Mr. McDermott.  Well, how would you fix that?  You don’t like that system.  And it is costing us too much.  We are paying twice what the French and the British and the German ‑‑ everybody else is paying for health care, and our health statistics aren’t better.  So how do you fix this payment thing?

     *Dr. Gottlieb.  Well, it ‑‑

     *Mr. McDermott.  Because paying whatever we are paying isn’t buying it.

     *Dr. Gottlieb.  This gets to the question of, you know, do we have ‑‑ do we tweak things, or do we go for a fundamental reform?

     I mean, first of all, the whole coding process for how physicians are paid is done behind closed doors.  AMA effectively has a monopoly on establishing the codes.  And I ‑‑

     *Mr. McDermott.  So you would be willing to look at the RUC committee.

     *Dr. Gottlieb.  I think you have to open up the RUC.  I think it should be a competitive process.  And I think ideally you want to move as many services and products as you can into places where they can be bid in competitive markets.  We have seen that bidding products in a competitive market works in Part D.  Prices have been driven down.  I would move other aspects of Medicare into competitive schemes where those services and products get bid in competitive markets.

     *Mr. McDermott.  Dr. Penson?

     *Dr. Penson.  Well, Dr. Gottlieb is clearly smarter than I am.  I am just a dumb urologist.  But I will tell you, having practiced in Los Angeles before I was in Tennessee, it is a similar experience, in as far as what I get paid is set by the payer, whether it is Medicare or the private payer.  And the institution I work for obviously negotiates that charge.

     I don’t have the fix.  But the fix isn’t just simply cutting physician fees.  It is ‑‑ you need fundamental reform.  I don’t have the answer.  I don’t think anyone does, that is why we are here.

     *Chairman Herger.  The gentleman’s time has expired.  Mr. Gerlach is recognized.

     *Mr. Gerlach.  Thank you, Mr. Chairman.  Maybe that is a good segue into a line of questioning particularly to Dr. Moon.

     Thank you for testifying today, by the way, all of you on the panel.

     Dr. Moon, in your written testimony, you indicate that you support the reasonableness of the goals of IPAB, but there are some “serious challenges” that ought to be addressed.  And specifically, you say that setting goals on limited time horizons and then having short periods to implement change will put enormous pressure on the system.  Instant savings should not be expected nor used to measure success.  This may create a bias in favor of less complicated changes, such as payment limits, which is what the doctors have described and others have described, as well, that there needs to be perhaps a more nuanced approach encouraging delivery system reforms.

     That leads to this whole issue of how are we finally going to attack the fraud that is in the system, in particular?  We had Secretary Sebelius here last week, and she indicated in her testimony that they have undertaken health care fraud reforms that will generate $3 billion over 10 years of savings.  Well, that sounds like a pretty good step in the right direction, except for the fact there is widespread agreement there is $50 billion in fraud every year in Medicare.  That is $500 billion over 10 years.  So, a $3 billion savings through these efforts, and a $500 billion problem over 10 years seems minuscule.

     So, isn’t that the area that everybody ought to start focusing in on to try to get a handle on the growth of the Medicare program ‑‑ growth and spending in the Medicare program, issues like phantom billing, stolen identification of seniors’ patient information, stolen unique physician identification numbers that lead to, again, fraudulent and criminal activity?  Shouldn’t that be the focus of this panel?  Shouldn’t that have been the focus of the Affordable Care Act, to really get to the real fundamental problems in the system, rather than keep setting up situations where doctors are going to get dinged for another one or two percent every year?  Should that not be the focus of this panel, and everybody in the health care delivery system?

     *Ms. Moon.  I believe that going after fraud is a very important aspect of trying to improve the health care system over time.  But I also believe that a lot of the numbers that get thrown around are into the broader category of fraud, waste, and abuse.  And once you get beyond fraudulent billing and some of the things that you can easily throw someone into an orange jumpsuit in a federal penitentiary, you have more difficulty in terms of the subtleties of what is waste or abuse.  You have the difficulties of patients and physicians, in some cases, wanting to do things for the right reasons but then overdoing things, doing things inappropriately.  And how accountable we hold them is a difficult thing.  That puts you also down the road to a lot of very tough controls that people have been reluctant to do.

     In the fraud area, though, I would say some of the improvements that people are seeking in terms of the ability to track what happens, what the bills are, how large they are before the fact, before you actually pay, and going after them is a worthy thing to do.  It is just going to be a little more difficult to get the big numbers, I think, because there is a sort of happy conspiracy out there that people ‑‑ what may be viewed as waste by some people is viewed as someone else’s very important ‑‑

     *Mr. Gerlach.  Well, the Government Accounting Office put out a report that in 2010 there was $48 billion of improper payments.  That is not just fraudulent activity, that is also just erroneous, unintentional administrative errors, but nonetheless is a waste of dollars that otherwise could be used to make sure there is quality and affordable care for the beneficiaries of the program.

     So, we seem to get these reports periodically that there is massive amounts of waste, fraud, and abuse, and yet the best we can hear from the current Secretary of HHS is we are going to come up with $3 billion in savings over 10 years, and somehow, wow, we have done our job in all of this?

     Don’t you ‑‑ has your institute ‑‑ have you done any studies on how to deal with waste, fraud, and abuse, so that we tackle these very large numbers which, in turn ‑‑ a portion of which could be making sure that physicians are getting a fair level of compensation for the patients they take care of?

     *Ms. Moon.  We haven’t looked at the fraud issue, but we have been focusing a lot on comparative effectiveness, and some of the kinds of things of trying to talk about getting value for your dollar.

     I don’t know about the recent GAO study, but an earlier one that they did that focused on fraud, waste, and abuse found that many of the ‑‑ much of the amount was where the physician had not signed appropriately.  And you don’t know whether that is really fraud, or whether it is simply administrative error.  So I think we have to be a little careful of being optimistic we can get all our dollars from there.  I wish it were true, because that would keep us ‑‑

     *Mr. Gerlach.  Okay.  Well, you would agree we can hopefully get more than $3 billion over 10 years ‑‑

     *Ms. Moon.  Yes, I hope we could do more than that.

     *Mr. Gerlach.  ‑‑ in savings than what the Secretary described?

     *Ms. Moon.  I would like to see us get more than ‑‑

     *Chairman Herger.  The gentleman’s time has expired.

     *Mr. Gerlach.  Thank you.  Appreciate it.

     *Chairman Herger.  Mr. Blumenauer is recognized.

     *Mr. Blumenauer.  Thank you, Mr. Chairman.  Thanks again for an opportunity to have this discussion, think through some of the issues.

     I was struck by Dr. Penson saying he didn’t have the answers, he has some concerns about application, and I appreciate that.  But I do think that the Affordable Care Act actually incorporates most of what the answers are.  Unlike Dr. Gottlieb, you know, we are not going to unwind Medicare.  In fact, the Federal Government now pays about half the health care bill in this country.

     And we are sort of ‑‑ this is part of the system.  That is not going to go away.  Hearken our Tea Party friends saying, “Keep Government’s hands off our Medicare.”  It is ingrained in the system.  What we need to do is make it work better.

     And I couldn’t agree more about the SGR.  I thought it was bogus when I was here, I voted against it.  I think an artificial formula that we can just kind of put it on autopilot and turn our back is wrong, and it is destructive.

     It is interesting to note, despite sort of some of the payment limitations, expenses continue to skyrocket up because ‑‑ and I think you, several of you, mentioned we need to change the system that rewards value in outcomes, not just procedures.

     I agree with my friend from Pennsylvania.  I don’t know whether ‑‑ how big the fraud piece is, but I have joined him in legislation for secure card, whether it is 10 billion, 20 billion, 40 billion, there is a chunk of money that will enable us to be able not just to prevent loss of resources, but also have better control and protection for patients, and have better data.

     I don’t think there is a silver bullet.  I don’t think there is one thing that is going to solve the problem.  I know SGR isn’t.  And if I had my way, I would get rid of it entirely.  I would, in fact, be willing to have some of the permanent tax cuts ‑‑ you know, we battle over that ‑‑ I would have some of the tax cuts go away, buy out the SGR, get rid of it.  It is a goofy thing, and we are always going to try and stop it, except when we stub our toe.  And the uncertainty, I think, does cloud the practice of medicine for patients and doctors.

     But for me, the Affordable Care Act had all the elements that used to be bipartisan.  You know, a mandate ‑‑ the dreaded mandate ‑‑ was the creation of conservative think tanks as an alternative to Hillary Care.  This was touted by some of our Republican friends.  It was what Governor Romney, in a bipartisan way, established in Massachusetts.

     We have, you know, end of life care that came out of this committee without dissent, strongly supported, somehow morphed into death panels and weirdness.  I am hopeful that we can take this conversation about the IPAB and use it to kind of unwind some of these things.

     I don’t want that to be the default mechanism.  I think ‑‑ and I appreciate suggestions people have to try and make it better.  But it is there because Congress has consistently failed.  It won’t take recommendations.  You know, everybody wants to go to heaven, nobody wants to die.  So we talk about restraint and care, but then we blink on some things that aren’t particularly controversial.  And even now, we have had people on the committee talking about government problems with the health care reform, and then looking at ways to spend more money.

     I am hopeful that we can work with you to find out ways that there might be some modest adjustment.  But I hope it doesn’t get to that point.  It was specifically set up to give Congress a chance.  And it isn’t something that will happen unless Congress fails again.

     We have got the better part of a decade.  Start moving.  We have seen ‑‑ and, Ms. Moon, I appreciate you referencing it ‑‑ there is some areas where we are seeing some progress made.  Health care costs have not exploded of late.  There has actually been a little restraint, while we have been able to give some better service.  I have people thank me that the kids are still on the parents’ insurance policy, where kids are not going to be ‑‑ have a problem with the pre‑existing condition.

     But we need to ‑‑ Congress needs a tool like this, because otherwise we will do something really stupid, like SGR.  And I hope the framework of health care reform, good suggestions from people like you, and Congress realizing that we can’t continue to blink, will result in this never having to be put in effect, and we will do our job.

     Thank you.  Thank you, Mr. Chairman.  I didn’t get to my question, I am sorry.


     *Mr. Blumenauer.  But I feel so much better.  I feel so much better.


     *Chairman Herger.  Good.  The gentleman’s time has expired.

     I want to thank our witnesses for your testimony today.  It is my sincere hope that, given the bipartisan concerns that were raised here today, that this hearing will provide the foundation for this committee to move forward in addressing the dangers posed by this ill‑conceived board.

     As a reminder, any Member wishing to submit a question for the record will have 14 days to do so.  If any questions are submitted, I ask that the witnesses respond in a timely manner.

     With that, the subcommittee stands adjourned.

     [Whereupon, at 11:29 a.m., the subcommittee was adjourned.]

Member Submission For The Record

The Honorable Jim McDermott

Public Submissions For The Record

American Academy of Physical Medicine and Rehabilitation
American Association of Orthopaedic Surgeons
American Osteopathic Association
American Physical Therapy Association Private Practice Section
American Society of Anesthesiologists
Center for Fiscal Equity
Healthcare Leadership Council
National Right to Life Committee
Retire Safe