[Senate Hearing 113-205]
[From the U.S. Government Printing Office]





                                                        S. Hrg. 113-205

                   NOMINATION OF MARILYN B. TAVENNER

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

                                HEARING

                               before the

                          COMMITTEE ON FINANCE
                          UNITED STATES SENATE

                    ONE HUNDRED THIRTEENTH CONGRESS

                             FIRST SESSION

                                 on the

                             NOMINATION OF

  MARILYN B. TAVENNER, TO BE ADMINISTRATOR, CENTERS FOR MEDICARE AND 
       MEDICAID SERVICES, DEPARTMENT OF HEALTH AND HUMAN SERVICES

                               __________

                             APRIL 9, 2013

                               __________











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                          COMMITTEE ON FINANCE

                     MAX BAUCUS, Montana, Chairman

JOHN D. ROCKEFELLER IV, West         ORRIN G. HATCH, Utah
Virginia                             CHUCK GRASSLEY, Iowa
RON WYDEN, Oregon                    MIKE CRAPO, Idaho
CHARLES E. SCHUMER, New York         PAT ROBERTS, Kansas
DEBBIE STABENOW, Michigan            MICHAEL B. ENZI, Wyoming
MARIA CANTWELL, Washington           JOHN CORNYN, Texas
BILL NELSON, Florida                 JOHN THUNE, South Dakota
ROBERT MENENDEZ, New Jersey          RICHARD BURR, North Carolina
THOMAS R. CARPER, Delaware           JOHNNY ISAKSON, Georgia
BENJAMIN L. CARDIN, Maryland         ROB PORTMAN, Ohio
SHERROD BROWN, Ohio                  PATRICK J. TOOMEY, Pennsylvania
MICHAEL F. BENNET, Colorado
ROBERT P. CASEY, Jr., Pennsylvania

                      Amber Cottle, Staff Director

               Chris Campbell, Republican Staff Director

                                  (ii)





















                            C O N T E N T S

                               __________

                           OPENING STATEMENTS

                                                                   Page
Baucus, Hon. Max, a U.S. Senator from Montana, chairman, 
  Committee on Finance...........................................     1
Hatch, Hon. Orrin G., a U.S. Senator from Utah...................     3

                        CONGRESSIONAL WITNESSES

Cantor, Hon. Eric, a U.S. Representative from Virginia...........     5
Warner, Hon. Mark, a U.S. Senator from Virginia..................     6
Kaine, Hon. Tim, a U.S. Senator from Virginia....................     7

                         ADMINISTRATION NOMINEE

Tavenner, Marilyn B., nominated to be Administrator, Centers for 
  Medicare and Medicaid Services, Department of Health and Human 
  Services, Washington, DC.......................................     9

               ALPHABETICAL LISTING AND APPENDIX MATERIAL

Baucus, Hon. Max:
    Opening statement............................................     1
    Prepared statement...........................................    41
Cantor, Hon. Eric:
    Testimony....................................................     5
Grassley, Hon. Chuck:
    ``Tip on Policy Shift Jolted Health Shares,'' by Brody 
      Mullins and Tom McGinty, The Wall Street Journal, April 3, 
      2013.......................................................    44
Hatch, Hon. Orrin G.:
    Opening statement............................................     3
    Prepared statement with attachments..........................    48
Kaine, Hon. Tim:
    Testimony....................................................     7
Tavenner, Marilyn B.:
    Testimony....................................................     9
    Prepared statement...........................................    52
    Biographical information.....................................    57
    Responses to questions from committee members................    71
Warner, Hon. Mark:
    Testimony....................................................     6

                             Communication

American College of Physicians (ACP).............................   185

                                 (iii)

 
                   NOMINATION OF MARILYN B. TAVENNER,
                          TO BE ADMINISTRATOR,
                        CENTERS FOR MEDICARE AND
                    MEDICAID SERVICES, DEPARTMENT OF
                       HEALTH AND HUMAN SERVICES

                              ----------                              


                         TUESDAY, APRIL 9, 2013

                                       U.S. Senate,
                                      Committee on Finance,
                                                    Washington, DC.
    The hearing was convened, pursuant to notice, at 10:05 
a.m., in room SD-215, Dirksen Senate Office Building, Hon. Max 
Baucus (chairman of the committee) presiding.
    Present: Senators Rockefeller, Wyden, Schumer, Cantwell, 
Menendez, Carper, Cardin, Brown, Bennet, Casey, Hatch, 
Grassley, Crapo, Roberts, Enzi, Thune, Burr, Isakson, and 
Portman.
    Also present: Democratic Staff: Mac Campbell, General 
Counsel; David Schwartz, Chief Health Counsel; Rory Murphy, 
International Trade Analyst; and Tony Clapsis, Professional 
Staff. Republican Staff: Chris Campbell, Staff Director; Jay 
Khosla, Chief Health Counsel Policy Director; and Kim Brandt, 
Chief Health Care Investigative Counsel.

   OPENING STATEMENT OF HON. MAX BAUCUS, A U.S. SENATOR FROM 
            MONTANA, CHAIRMAN, COMMITTEE ON FINANCE

    The Chairman. The hearing will come to order.
    Douglas MacArthur once said, ``A true leader has the 
confidence to stand alone, the courage to make tough decisions, 
and the compassion to listen to the needs of others.'' 
Testifying before us today is Marilyn Tavenner, nominated to be 
the Administrator for the Centers for Medicare and Medicaid 
Services, otherwise known as CMS.
    Ms. Tavenner, you are being asked to draw on years of 
extensive experience to lead this agency and administer 
programs upon which millions of Americans rely. You will surely 
need confidence, courage, and compassion in this role.
    The head of CMS has a great responsibility. CMS administers 
health coverage to roughly one in three Americans. That 
includes 50 million Medicare patients, 56 million Medicaid 
patients, and more than 5.5 million children through the 
Children's Health Insurance Program. Some 167,000 seniors and 
8,300 military retirees in Montana rely on Medicare, the 
largest program you will oversee at CMS.
    These Montanans are my employers, and they, as well as 
millions more across the Nation, are your employers as well, 
Ms. Tavenner, so I encourage you to never forget that you are 
working for them.
    It is also important to remember who works for you. The 
Administrator of CMS oversees 5,800 employees. If confirmed, 
you must demand from these employees the utmost efficiency. 
Spread throughout 10 regional offices across the country, CMS 
employees are responsible for distributing more benefits than 
any other Federal agency.
    Benefit outlays for fiscal year 2012 totaled $819 billion. 
The agency's administrative costs made up just one-half of 1 
percent of this amount. That is significantly less than most 
private health care payers spend, and this efficiency must 
continue. There can be no room for error, no wasted time, 
effort, or taxpayers' dollars.
    Ms. Tavenner, you have spent your entire career providing 
care to people in need. You started as a nurse, in my opinion 
one of the most important professions in the world. Then you 
rose up through the ranks to become a hospital administrator, 
and then Virginia's Secretary of Health and Human Services. You 
joined CMS in 2010 and became the Acting Administrator the next 
year. You have the knowledge, you have real-world experience, 
and I believe you have proven yourself to officially take the 
reins of CMS.
    Some have pointed out that CMS has not had a confirmed 
Administrator in several years. I am glad we are moving forward 
today to change that. With new Affordable Care Act programs 
coming online, it is a critical time to have someone with your 
knowledge in charge of CMS. We need strong leadership for 
successful implementation of health insurance marketplaces and 
other key provisions of the health law.
    As Administrator, you will have to make sure these programs 
are ready to go on, go up, and be working on day one. You need 
to ensure that the health care law's programs work for the 
people whom they are intended to serve. There will be a lot of 
people watching you, myself included. The administration and 
CMS need to implement health care reform the way Congress 
intended.
    I was home in Montana the past 2 weeks, and I heard from 
small businesses that they need more clarity about rules. I 
heard this often. They need more information, more 
transparency. They are really quite concerned. I will be 
holding the administration's feet to the fire to ensure that 
this is all done correctly.
    You also need to make sure America's health care safety net 
is working. Medicaid is going through a period of significant 
transformation. The program is changing everything from how 
income is counted to how care is delivered and eligibility 
determinations are made. Millions of low-income Americans will 
have access to coverage for the first time starting next year. 
Medicaid needs strong, stable leadership overseeing these 
changes to ensure they go smoothly.
    Health reform also vastly improved the way Medicare 
delivers and pays for care. Medicare continues to slow its 
spending by transforming from a system that pays for volume to 
one that rewards value. CMS needs a leader focused on payment 
reforms that incentivize providers to provide high-quality care 
in a cost-effective manner.
    One of the highest priorities for the Finance Committee, a 
responsibility I take very seriously, is protecting the 
integrity of Federal health care programs by fighting fraud, 
waste, and abuse. The Affordable Care Act included significant 
new authority and tools for CMS to protect Medicare and 
Medicaid and save taxpayer dollars. A confirmed Administrator 
is necessary to oversee and use the new tools that prevent and 
fight health care fraud.
    Last April, this committee held a hearing to examine what, 
at the time, was the biggest Medicare fraud take-down in 
history. Thanks to tools and increased resources from the 
Affordable Care Act, a joint HHS and Justice task force 
recovered $295 million.
    The fraud involved 70 individuals across six cities. We 
held that hearing to learn lessons to apply to future cases. We 
learned that every dollar invested to fight fraud generates a 
500-percent return. We need the next Administrator to continue 
making fighting fraud a top priority.
    Your experience shows the ability to effectively administer 
health care programs and also an appreciation for the crucial 
services they provide. You are known as a pragmatist with an 
understanding of the ins and outs of health care 
administration.
    I recently read a profile of you in the Washington Post. 
The article detailed an incident in the 1980s. You were working 
as a nurse in an intensive care unit at Johnston-Willis 
Hospital in Richmond. At 2 a.m., a young woman in her late 20s 
was brought to the hospital by a rescue squad. She had been in 
a horrific car accident and crashed through the windshield of 
her old VW Bug. Badly injured and having suffered massive blood 
loss, she was pronounced dead.
    But you and the doctors went to work anyway trying to 
revive her. The surgeon on call told reporters, ``Marilyn was 
very supportive in everything. We came up with a game plan, and 
it was right on target. We used about 60 units of blood, but 
the patient ultimately walked out of the hospital.''
    Ms. Tavenner, it sounds like you are someone who does not 
give up. Your experience is real and varied and will serve you 
well in your position. CMS faces a great task and requires a 
leader with the qualities General MacArthur described: 
confidence, courage, and compassion.
    Ms. Tavenner, I believe you have what it takes and will do 
very well as Administrator. I look forward to your testimony.
    [The prepared statement of Chairman Baucus appears in the 
appendix.]
    The Chairman. Senator Hatch?

           OPENING STATEMENT OF HON. ORRIN G. HATCH, 
                    A U.S. SENATOR FROM UTAH

    Senator Hatch. Well, thank you, Mr. Chairman. I want to 
thank Chairman Baucus for convening this hearing to consider 
the nomination of Marilyn Tavenner to serve as Administrator of 
the Centers for Medicare and Medicaid Services, CMS.
    This is a critical agency and, for a number of reasons, has 
been without a confirmed Administrator since the fall of 2006. 
CMS is the world's largest health insurer. It has a budget of 
nearly $1 trillion and processes over 1.2 billion claims a year 
for services provided to some of our Nation's most vulnerable 
citizens receiving Medicare and Medicaid.
    If confirmed, Ms. Tavenner, you will have a daunting 
challenge ahead of you. While I believe you have the 
qualifications to do the job, there is still much that you will 
need to do in order to assure members of this committee that 
CMS is heading in the right direction and that your leadership 
will help steer the agency through the very turbulent times 
that lie ahead.
    One of the greatest challenges facing CMS in the near 
future is implementation of the Federal and State-based health 
insurance exchanges. In a speech last June you said that the 
health insurance exchanges ``keep you up at night.'' I can 
relate to that. They keep me up at night too, but probably not 
for all the same reasons.
    There are numerous obstacles and issues that will need to 
be addressed as CMS works to implement the exchanges and bring 
them online later this year. To date, CMS has not been able to 
provide satisfactory answers to a number of questions posed by 
myself, the chairman, and other members of the Congress 
regarding the exchanges.
    For example, we still know very little about how the 
exchanges will operate, what the key operational and 
implementation deadlines are, and how CMS is monitoring them to 
determine if things are on track or not. We are still waiting 
to see a breakdown of the budget for the federally facilitated 
exchange.
    If you are confirmed, it is essential that you work with 
this committee to provide us with this level of detail so that 
we can assess the implementation of the exchanges and work with 
you to address issues as they arise. The costs associated with 
the exchanges are of critical importance to this committee, as 
we are already seeing evidence that health insurance premium 
costs are continuing to rise and are projected to be, on 
average, 32 percent higher in the individual market.
    At the same time, the Congressional Budget Office has 
estimated that the number of people enrolled in the exchanges 
in 2014 will be 1 million lower than originally projected, and 
quotes from administration officials indicate that the number 
could be even lower than that.
    This is a perfect storm of unanticipated consequences that 
are combining to make this part of the so-called Affordable 
Care Act seem more like what I prefer to call it, the Un-
Affordable Care Act.
    In addition to overseeing this massive new expansion of 
benefits, you will also be charged with helping to ensure the 
longevity and solvency of the existing Medicare trust fund, 
which is projected to go bankrupt in 2024. All told, between 
now and 2030, 76 million baby boomers will become eligible for 
Medicare. Even factoring in deaths over that period, the 
program will grow from approximately 47 million beneficiaries 
today to roughly 80 million in 2030.
    Maintaining the solvency of the Medicare program while 
continuing to provide care for an ever-increasing beneficiary 
base is going to require creative solutions and a skillful 
Administrator at the helm. I believe that you will be up to 
that challenge, and I strongly support you.
    Overseeing the complex infrastructure of an agency like CMS 
is not a job for the faint of heart. You will be expected to 
ensure that beneficiaries get the care they want from the 
providers they prefer, all while making sure that the claims 
get paid on time, that administrative and overhead costs are 
kept low, and that the congressional mandates are fully 
implemented.
    So I wish you the best of luck as you work to address these 
challenges. As you continue going through the confirmation 
process, you are going to need it, and we will try to help you 
up here to the extent that we can.
    Mr. Chairman, I would also like to take a minute to thank 
my colleagues, Senators Warner and Kaine, for being here to 
introduce Ms. Tavenner. I think it is great for you both to be 
here, and it means a lot to us.
    I would especially like to express my gratitude to Majority 
Leader Cantor for taking time out of what I know is a 
tremendously busy schedule to be here this morning. This 
bipartisan gesture means a lot to the committee, and especially 
to me, so I am really grateful for you folks taking the time to 
be with us.
    Thank you, Mr. Chairman.
    The Chairman. Thank you, Senator. Thank you very much.
    [The prepared statement of Senator Hatch appears in the 
appendix.]
    The Chairman. Congressman Cantor, Senator Warner, and 
Senator Kaine would like to introduce our witness. I would join 
Senator Hatch in thanking all of you for coming over here. But 
before you do introduce our witness, Ms. Tavenner, I would like 
you to take this opportunity to introduce any family you might 
have here with you, because they are all part of the same team.
    Ms. Tavenner. Thank you, Mr. Chairman. To my right, my 
husband Bob.
    The Chairman. Bob.
    Ms. Tavenner. My son-in-law David Leadbeater, and my 
daughter Sarah Leadbeater.
    The Chairman. Good. Let us give them all a round of 
applause. Thank you. [Applause.]
    Congressman Cantor, why don't you proceed?

                STATEMENT OF HON. ERIC CANTOR, 
              A U.S. REPRESENTATIVE FROM VIRGINIA

    Congressman Cantor. Mr. Chairman, thank you very much, 
Ranking Member Hatch also. I appreciate the opportunity to be 
here before the Senate Finance Committee. To members, it is my 
pleasure to be here to join with my colleagues from Virginia in 
introducing and presenting to the committee for your hearing 
today Marilyn Tavenner.
    I know that, Mr. Chairman, you, as well as Senator Hatch, 
spoke about her wealth of experience in the private sector, as 
well as her service to the people of the Commonwealth. I am 
here to just underscore my faith in Marilyn Tavenner as an 
individual who is eminently qualified to take on the challenges 
of which you speak when it comes to the health care 
complexities that our country faces.
    I first met Marilyn when I served in the Virginia House of 
Delegates, and it was plain to me very early on that she not 
only came from the private sector experience, she understood 
people. As you rightly point out, Mr. Chairman, Marilyn started 
as a nurse with the Hospital Corporation of America, having 
served with that company for 20 years, and ultimately rising in 
2001 to be CEO of the Central Atlantic Division.
    Marilyn oversaw 20 hospitals. She really was a force to be 
reckoned with when it came to, not only the State legislature 
and the policies of Virginia at the time, but as somebody who 
was there to speak on behalf of patients. You pointed out the 
story of Marilyn's health care delivery in that very daunting 
situation that you spoke of in the profile, but it is my 
experience with Marilyn that she does approach problems of 
health care from the patients' perspective. Given her long 
experience in the private sector, I have complete faith that 
she is an individual who will be able to take on the challenges 
that we face on behalf of the constituents whom we represent.
    You mentioned also--and I know that both former Governors, 
now Senators, are here. But Marilyn did serve as Secretary of 
Health and Human Resources in Richmond, overseeing the 
Commonwealth's health care agencies, including the Department 
of Medical Assistance Services, which is the State counterpart 
to CMS. It is a $9-billion agency and has 18,000 employees, so 
she has certainly stepped up to the task.
    I would end with saying this, Mr. Chairman. I do not think 
there is any secret that I differ with the Obama administration 
on a lot of matters of health care policy, and obviously the 
issue of Obamacare remains one that is very controversial.
    But if there is anyone whom I trust to try to navigate the 
challenges, it is Marilyn Tavenner. I feel that strongly about 
her, and that is why I am here. I am delighted to be here and 
say that I strongly endorse your confirmation of President 
Obama's nomination of Marilyn Tavenner to be the next 
Administrator of the Centers for Medicare and Medicaid 
Services. Again, I yield back.
    The Chairman. Thank you very much, Congressman, for making 
the effort. I understand there was a little bit of traffic that 
you had to face coming here.
    Congressman Cantor. I apologize for the tardiness.
    The Chairman. I deeply appreciate you making the extra 
effort to make it here. Thank you very much.
    Senator Warner?

                STATEMENT OF HON. MARK WARNER, 
                  A U.S. SENATOR FROM VIRGINIA

    Senator Warner. Thank you, Mr. Chairman and Ranking Member 
Hatch. I want to echo the comments of my friend and colleague 
Eric Cantor, and I know they will be echoed as well by my 
friend Tim Kaine.
    I want to also lend my support. I think the President has 
made a great choice in nominating Marilyn Tavenner to be head 
of CMS. I have known Marilyn for over 20 years and can echo 
firsthand that she is the real deal and I think is a phenomenal 
choice to lead CMS.
    As has been mentioned, and I think will probably come back 
in questions time and again, she brings, I think, a pretty 
unique set of skills to this job. She grew up in Southside, VA, 
in a rural community, and worked her way through school. As has 
been mentioned already, she started as a nurse, worked her way 
up to become a hospital CEO, then became administrator of a 
major hospital company.
    But Marilyn has always had a commitment to public service, 
always had a commitment to the people whom she served. She--and 
I know Tim will make mention of this--did a great, great job as 
the Commonwealth's Secretary of Health. She came in direct 
contact with the kind of administration of the major, at least 
Medicaid programs. At the beginning of this administration, she 
joined CMS, where she served at the highest levels.
    So what I think she will bring to this job is not only a 
depth of background on the public sector side, but echoing what 
Majority Leader Cantor said, from her career in the private 
sector, I think she knows the impact that regulations and rules 
have on the real world and understands the importance, not just 
of achieving a policy goal, but making sure it actually works 
in practice.
    I also think, and I know that she was this way when she 
served in Virginia and from my interactions with her at CMS, 
she knows that it is our job in Congress to hold her feet to 
the fire in this very important--as both you and Senator Hatch 
mentioned--and complicated entity. She has a history of 
welcoming fair, fact-based discussions and will be the first 
person to tell you that she wants things done in a right, fair 
way.
    She is also held in extraordinarily high esteem by her 
peers. I think it is pretty remarkable that in February all the 
previous living Senate-confirmed CMS Administrators, the ones 
who really know what it takes to run that enormous agency, sent 
a letter urging her confirmation, noting that it was ``hard to 
imagine a candidate more worthy of bipartisan support.''
    So, when you have the Majority Leader of the House and two 
Democratic Senators all coming together saying it is time to 
get a CMS Administrator fully confirmed so that she can go 
about her very important work, I commend her without 
reservation to this committee and look forward to having an 
opportunity to work with her in the future, and I thank the 
chairman for the opportunity to come and present her.
    The Chairman. Thank you, Senator, very much. I deeply 
appreciate your confidence in Ms. Tavenner. Thank you.
    Senator Kaine?

                 STATEMENT OF HON. TIM KAINE, 
                  A U.S. SENATOR FROM VIRGINIA

    Senator Kaine. Thank you, Mr. Chairman and Ranking Member 
Hatch, committee members. It is a treat to be here with my 
colleagues from Virginia on behalf of Marilyn Tavenner to be 
the first confirmed CMS Administrator since 2006.
    I was the Mayor of Richmond, dealing with the challenges of 
an urban city and its health care safety net, when I first met 
Marilyn back in the late 1990s. When I was running for 
Governor, I made it a superstitious practice not to think about 
whom I might hire if I became Governor, but Marilyn was one of 
the two people that I sort of broke my superstitious rule about 
and thought: if I ever get to be Governor, I would love to have 
her working on my team.
    I asked Marilyn to be the Cabinet Secretary over the Health 
and Human Resources portfolio and came to know her skills very 
well, and I support her strongly for this position.
    Four quick things. First, I support her because she is a 
nurse and she will always put patient care first. She was not a 
nurse in the past tense; she is a nurse in the present tense. 
There will never be an issue that she will wrestle with as the 
CMS Administrator where she will not be thinking primarily of 
patient care. Budgets are important numbers on a page, policy 
manuals are important, but everything this agency does deals 
with the real lives of people, many of them very vulnerable. 
Marilyn's nursing background is exemplified by the story, Mr. 
Chairman, that you recounted, and so many others that will make 
sure that she will always put that first.
    This qualification is important for her, and I also think 
it is an important tribute to a profession that is increasingly 
at the core of health care. Her confirmation would send a 
wonderful signal.
    Second, her experience, as recounted by Congressman Cantor 
and Senator Warner, gives her a real understanding of the 
practicalities of what CMS needs to do. Again, it is not just 
about numbers on a page or policy regulations or rules, it has 
to be able to be implemented in hospital waiting rooms and in 
doctors' offices, and it has to be simple to the folks in the 
public who are making claims. They have to be able to 
understand it. Marilyn is a person who has dealt her whole 
career with the practicalities and will carry out her mission 
at CMS in a very practical way because of that wide-ranging 
experience.
    Third, I support her because she has proven again and again 
that she is a creative problem solver. As Governor, I gave all 
of my Cabinet Secretaries problems to solve: ``Marilyn, why are 
we 10th in the Nation in per capita income and 35th in the 
Nation in infant mortality? You have to find out the answer to 
that and help us solve it. What can we do to reduce youth 
smoking in a State that has a historical connection, and a 
strong one, to tobacco? Why are we facing shortages among 
nurses; why are we facing shortages among physicians, and what 
can we do about it?''
    Again and again, what Marilyn did was, in a non-ideological 
way, get the data, understand the problem, not just rely on 
conventional wisdom or anecdote, but understand the problem and 
then devise very specific and targeted solutions to go after 
the problem.
    Some of the problems that I gave to her were in her areas 
of expertise, but she oversaw not just health care but also 
human resources areas where she had not worked in her 
professional career. We had a broken foster care system. That 
was not something that she had worked on in the past.
    But I gave her that challenge, and she and her team did a 
wonderful job in helping reform Virginia's foster care system. 
That creative and innovative approach to solving problems is an 
important skill that she will need every day at CMS.
    Finally, the reason I support her is the biggest challenge 
that I did not give to her, but the circumstances gave to her, 
was trying to control costs. I have, I guess, not an accolade, 
it is sort of an achievement through no benefit of my own as 
Governor. I am the only Governor of Virginia who left office 
with a smaller general fund budget than the one I started with. 
I get no credit for it. It was constitutionally mandated, and I 
was Governor during a recession.
    But I had to give to my Cabinet Secretaries the very 
difficult task of, not reducing the rate of growth, but 
actually even reducing the size of expenditures during a tough 
time. The health care portfolio was the second-largest one in 
State government after education. Again and again and again, we 
had to go back and sharpen pencils and erase and start over 
again and find savings.
    I saw Marilyn and her team struggle very mightily with 
that. Her skill in doing that is a skill that is very precisely 
matched with the need of the moment: how to keep patient care 
first, because that is her first attribute, but nevertheless 
wrestle with difficult cost control issues not only for the 
good of the fisc, but also because, the more we control costs, 
the more affordable we make it for people and for businesses. 
Cost control is ultimately about health care access, and 
Marilyn understands that very, very well.
    So, for those four reasons and many others, I am proud to 
be here to support her. Voting to confirm her is a vote that 
you will never regret. Whether you are for patient care or cost 
control or just managerial efficiency, a vote for Marilyn 
Tavenner is a safe vote, and I am proud to recommend her to 
you.
    Thank you very much.
    The Chairman. Thank you very much, Senator. We appreciate 
you taking the time.
    Ms. Tavenner, why don't you proceed? As you know, our 
practice here is for you to submit your testimony for the 
record and then just summarize it, please, the best you can.

       STATEMENT OF MARILYN B. TAVENNER, NOMINATED TO BE 
  ADMINISTRATOR, CENTERS FOR MEDICARE AND MEDICAID SERVICES, 
    DEPARTMENT OF HEALTH AND HUMAN SERVICES, WASHINGT0N, DC

    Ms. Tavenner. Thank you, Mr. Chairman.
    Chairman Baucus, Ranking Member Hatch, I want to thank you 
for holding the hearing today and for the committee's 
consideration of my nomination to be Administrator of the 
Centers for Medicare and Medicaid Services.
    I would like to start by acknowledging what we are all 
aware of: CMS is a large and complex agency. We have a very 
large Federal budget, and we provide services that are critical 
to our Nation's health care. As such, this committee and all of 
Congress have a strong interest in the management of the 
agency, as they should, and as do I.
    So I would like to explain a little bit about myself and my 
background, why CMS is so important to me, how I have spent the 
last 3 years managing the agency, and my vision for moving us 
forward.
    I will begin with my mother, Ruby Martin. I just celebrated 
her birthday with her down in the small rural town of Fieldale, 
VA, where I grew up. As a strong woman who raised four children 
while working full-time in the textile industry for over 40 
years, she has been, and she continues to be, an inspiration in 
everything I do. She relies on Medicare, and not just Medicare. 
She relies on the Qualified Medicare Beneficiary (QMB) or QI 
program, as we tend to call it here in DC. That is critical for 
her health care needs.
    My youngest child, Sarah, who is with me today, was 
diagnosed with type 1 diabetes at the age of 11. She, too, has 
been a strong inspiration in what I do, for different reasons. 
She relies on and needs access to health insurance, no 
questions asked.
    I think all of us know someone who relies on either the 
traditional programs we have been administering at CMS or the 
ones we are embarking on in 2014, and that makes it personal 
for a lot of us. It underscores the fact that what we do at CMS 
directly affects the lives of so many.
    I have been fortunate in my career path that it has given 
me a variety of perspectives on health care that I believe 
uniquely position me to lead CMS. I do have a clinical 
background from my early days as a staff nurse, a business 
perspective from my days as a hospital CEO and division 
president, and a government perspective both from my work as 
Virginia's Secretary of Health and also the previous 3 years at 
CMS.
    Simply put, CMS needs an Administrator, and they need one 
with strong operational skills. While it is very important to 
have a vision for the agency, we also have an over $800-billion 
business to run that a large amount of the country has a stake 
in, from beneficiaries, to providers, to hospitals, to 
insurance companies, to Congress, to this administration, to 
the American taxpayer, and to our CMS employees and 
contractors. Therefore, I consider it essential to my 
leadership role at CMS to be a partner with all of those 
stakeholders, and I view my relationship with this committee 
and with Congress as a whole as a partnership.
    I have personally met with most of the members of this 
committee, and I have appreciated the opportunity to engage 
with all of you in an open dialogue. While we may not always 
share the same views, we have worked together to resolve 
challenges, and I would like the chance to continue to do so.
    My management style centers a lot around listening, 
pragmatism, and consistently trying to do what is right, even 
though it may not be the quickest or easiest path. This style 
has led to many achievements over the last 3 years, and I 
highlighted some of those in my written testimony, and I will 
not go over those now.
    But in closing, I would like to share my vision and the 
three primary focuses that we have for moving the agency 
forward. The first one is, we need to operate CMS as a business 
and act like business partners. This means having an open-door 
policy and to work together and listen to the concerns of all 
the groups that we are accountable to, those groups I listed 
earlier.
    Second, we have a large responsibility in the months ahead 
to implement key pieces of legislation to ensure all Americans 
have access to affordable health care coverage, whether it is 
through the health insurance marketplace, whether it is through 
Medicaid, CHIP, original Medicare, or Medicare Advantage.
    Last, we need to leverage the tools that you all have 
granted us to both reduce overall cost of care and improve the 
health care delivery system. These tools include new payment 
strategies connected to performance, innovative new models of 
care, and enhanced tools to combat fraud.
    Lastly, I would like to thank this committee and the staff 
for the respect and the working relationships we have built 
over the last several years. I want to thank you, Mr. Chairman 
and Senator Hatch, for holding this hearing and giving me the 
opportunity to speak before the committee and answer any 
questions. Thank you.
    The Chairman. Thank you very much, Ms. Tavenner.
    [The prepared statement of Ms. Tavenner appears in the 
appendix.]
    The Chairman. I would like to ask you a few questions about 
the Medicare secondary payment rule. I mention this because, 
living in Montana--I remember once I was visiting there about 
10 years ago, and I met a group of folks there who are 
suffering from 
asbestos-related diseases, especially mesothelioma.
    A large percentage of that town, unfortunately, has passed 
away because of the asbestos produced by the company W.R. 
Grace. That asbestos has affected people in Libby, MT as well 
as around the country, because asbestos is found in lots of 
insulation products.
    When I visited them, one fellow there named Les Scramstad 
very much impressed me. We met earlier, and I told you about 
Les. I found a photograph for you I want you to have. Les said 
to me, ``I am going to be watching you, Senator. A lot of 
people said they would help us, but they have not.'' I knew Les 
meant it. He did not have to say it.
    Every once in a while you come across a situation where you 
are going to do whatever it takes to solve it. This was one. 
That is, make sure that people in Libby, MT can get justice. We 
have a photograph. There is Les. Les has passed away. He died 
of mesothelioma. When he came home from the mine caked with 
dust, he embraced his wife. His wife has the disease now too. 
The kids would jump in his lap. One of his children has now 
died because of mesothelioma.
    I will not go through all the ins and outs of health care 
treatment in Libby. It is also one of the largest super-fund 
sites in the country, and it is very similar to that book, that 
movie, A Civil Action, in Woburn, MA. The company then was W.R. 
Grace. It is the same company here, frankly. The point is this: 
the administration, very correctly, declared a national health 
care emergency for the people in Libby. That meant that people 
received Medicare payments. Even though they are not 65, they 
get Medicare.
    But as you know, under the Medicare Secondary Payer rule, 
if there is a settlement, as between folks in Libby and the 
company, the payments cannot be made pursuant to that 
settlement until Medicare determines what costs, if any, the 
person has to pay back to Medicare so that the settlement 
dollars get paid. There are many people in Libby who waited up 
to a year. There is one instance where a woman was waiting. 
Meanwhile, her husband died.
    Finally, a year later, CMS made a determination under the 
Secondary Payer rule. Even by then, she had died. When the 
determination was made after she died, it turned out that there 
is no reimbursement necessary from her to CMS. So there are a 
lot of people caught in this situation. There have been so many 
levels of injustice in Libby, MT, but this is one of them. It 
is the delays in the Secondary Payer rule. I would deeply 
appreciate it if you could tell me what you are going to do to 
speed up the process so that people there who suffer from 
asbestos-related diseases are going to get some medical care.
    Ms. Tavenner. Chairman Baucus, let me start by first of all 
thanking you on behalf of the residents of Libby. The work 
there has been amazing. When I first came to CMS, it was being 
done through the Health Resources and Services Administration, 
and obviously we were able to get coverage through the Medicare 
program. We have seen so many families benefit from the 
program. So, first of all, I personally thank you for that.
    But second, the Medicare Secondary Payer has also been a 
program that I have been intimately involved with over the last 
several months. We had some performance issues. I think we have 
corrected those, both with staff that we have brought on and 
with contractors that we work with. But more specific to your 
question, we did have a large number of cases that needed to be 
resolved, that needed to be moved through the system, so that 
people could understand what they were eligible for.
    I think by the end of this month we will have completed at 
least 100 individual cases that I am aware of. There is also 
another large group that is moving through in a large 
settlement, so I think we will have done a good job of 
eliminating most of the backlog. You have my commitment that I 
will stay on top of it going forward.
    The Chairman. I appreciate it very much. I neglected to ask 
you four obligatory questions, which I will ask you before I 
turn it over to Senator Hatch.
    First, is there anything that you are aware of in your 
background that might present a conflict of interest with the 
duties of the office to which you have been nominated?
    Ms. Tavenner. There is not anything I am aware of. I have 
signed recusals in two areas, and so I want to make the 
committee aware of those. The first area has to do with my--as 
you heard, I worked a long time for the Hospital Corporation of 
America, so I volunteered and asked for a recusal there in 
certain matters that are specific to HCA. But that was one that 
I initiated with our ethics department.
    The second one is with the State of Virginia. Although I 
had completed my time with the Secretary of Health position and 
I could have participated in matters, my husband works with the 
legislative division within the State, so I have recused myself 
from specific matters with the State of Virginia.
    The Chairman. You know, you are going to do a good job. You 
are the first witness who has answered that question without 
just saying ``no.'' That is, you have explained it. That has 
never happened before. [Laughter.]
    And Senator Grassley, who has been chairman of this 
committee for many years, just now said he could verify that. 
You are an impressive lady!
    Second--we will see what you do with this one. [Laughter.]
    Ms. Tavenner. It can only go downhill from here.
    The Chairman. Yes. [Laughter.]
    Do you know of any reason, personal or otherwise, that 
would in any way prevent you from fully and honorably 
discharging the responsibilities of the office to which you 
have been nominated?
    Ms. Tavenner. I do not.
    The Chairman. Do you agree, without reservation, to respond 
to any reasonable summons to appear and testify before any duly 
constituted committee of Congress, if you are confirmed?
    Ms. Tavenner. Yes, sir.
    The Chairman. Good. One more.
    Do you commit to provide a prompt response in writing to 
any questions addressed to you by any Senator of this 
committee?
    Senator Grassley. And answer fully in the first letter 
back.
    Ms. Tavenner. I will do my best. I know I have some areas 
of improvement there.
    The Chairman. All right. Thanks very much.
    Senator Hatch?
    Senator Hatch. Well, if you do, you will be one of the 
first ones, is all I can say. We hope you will, because this 
committee takes these responsibilities really, really 
seriously. I am proud of you. I am proud of the work that you 
have done through the years. I am really pleased with the 
effort that you are putting forth at CMS and how important it 
is to you and how you value that agency, even though it is a 
very, very difficult agency to administer.
    Let me ask you just a couple of specific questions. CBO 
recently estimated that 7 million people will enroll in the 
exchanges, which is 1 million lower than what CBO estimated at 
the time the law was being debated. Now, how much will the 
exchange user fees go up if enrollment targets are not met, and 
what is the lowest target enrollment that CMS anticipated when 
doing budget projections and will cause the agency to raise the 
user fees if the enrollment targets are not met?
    Ms. Tavenner. That is a great question. Senator Hatch, we 
have actually followed the CBO's guidelines, and so we are 
using the same estimate as the CBO. Our user fee was actually 
predicated on that number. When we were going through 
rulemaking, we had extensive discussions, so I think we believe 
that that number is appropriate and the user fee would cover 
that type of number.
    Senator Hatch. All right.
    Details on the implementation of title 1 of the Patient 
Protection and Affordable Care Act have been lacking, as you 
know, especially as it relates to the establishment of 
exchanges and efforts to educate consumers about enrollment.
    Now, could you commit to providing a bi-weekly update on 
the establishment of exchanges and enrollment, including 
milestones, deadlines, and progress reports?
    Ms. Tavenner. Yes, sir. I think we have submitted some 
early work, but I certainly think at this point--you know, we 
are kind of going through four phases with the exchanges, and I 
think we are now entering the part where consumer outreach and 
education is becoming more important, so I think we will be 
able to give you bi-weekly updates.
    Senator Hatch. We would like to have that because it is 
something that we are really concerned about, and we want to 
make sure that we are on top of it as well. In public speeches, 
you have said that the Patient Protection and Affordable Care 
Act has some of the strongest health care anti-fraud provisions 
in American history.
    Now, you mentioned in your testimony that the Centers for 
Medicare and Medicaid Services, the agency you are going to 
supervise, along with its partners, recovered a record $4.2 
billion last fiscal year from individuals who tried to defraud 
the Federal health care program. Now, I think that is an 
impressive number, but I am interested in what CMS specifically 
did to contribute to that number and how much of it is 
attributable to CMS.
    During your time at CMS, which PPACA provisions has CMS 
used to reduce fraud, and can you provide quantifiable results 
for the CMS-specific actions undertaken? Now, even though that 
$4.2 billion sounds like a lot, we know there is a lot more 
fraud than that, and we know that we are just beginning to 
really go after those who are defrauding our taxpayers. But if 
you could answer that for me.
    Ms. Tavenner. I will. I will try to talk a little bit about 
how we have looked at--you are right, the Affordable Care Act 
gave us several tools to work with. So we have kind of gone 
through an implementation period. I would say we started first 
with the work that was done around providers, making sure we 
had legitimate providers in the system.
    Some of our early proposed and final rules dealt with that; 
also, assigning categories of risk to those providers, because 
I think, not only did we have a system that was probably a bit 
outdated, but it did not assign varying degrees of risk based 
on what we knew to be facts.
    So we have done that. So, if you are in a moderate- or a 
high-risk category, you are going to have on-site visits. There 
are going to be a lot more things, because we believe whatever 
we can do to preempt fraud on the front end versus this pay-
and-chase--and the $4.2 billion is a great number, and I am 
proud of that number--that is also what we want to prevent in 
the first place. So that was the first thing.
    The second area that we went after, if you will, was the 
pre-
payment or our authorizations. The Affordable Care Act gave us 
the ability to withhold payment in the event of something 
suspicious, so we started doing that.
    The third area which we are now approaching will be how we 
look at the moratorium. You all gave us the ability in the Act 
to actually impose moratoriums on certain providers, so we are 
starting to look at that as kind of the third natural stage. 
There is also work in the Small Business Act that was done 
around predictive modeling, and we have had that up and 
running. And we submitted our first report to Congress, but we 
have more work to do in that area.
    So there are a lot of different tools, but I think our 
goal, our absolute primary goal, is to stop it before it 
happens. Once we are in the situation where the money has 
already been paid out, we have great working relationships with 
OIG and with DOJ, but it is much more difficult after the fact.
    Senator Hatch. Well, thank you. Thank you, Mr. Chairman. I 
appreciate that you are willing to serve.
    The Chairman. Thank you, Senator.
    Senator Menendez?
    Senator Menendez. Thank you, Mr. Chairman.
    Ms. Tavenner, congratulations on your nomination, again.
    Ms. Tavenner. Thank you, Senator.
    Senator Menendez. As we discussed when we met, I look 
forward to working with you on ways that we can address 
reducing costs throughout Medicare and improving health care to 
the Nation's seniors. That includes moving past the SGR and 
finding new ways to pay physicians for the efficient, 
coordinated, and quality delivery of health care and utilizing 
methods that improve medication management, which has been 
shown to reduce unnecessary readmissions, provide significant 
savings, and improve health outcomes, and that includes using 
medications to their most efficient use and coordinating care 
delivery across the spectrum, especially for special 
populations like dual Medicare and Medicaid eligibles and those 
with severe disabilities so that both providers and patients 
are at the table to work together to improve health care.
    So, as we work to fully implement health care reform, we 
need to continue to look forward to new and innovative ways to 
reduce costs while improving care. I appreciate some of the 
efforts you have already taken in that regard as the Acting 
Administrator.
    I have a specific question with reference to one of the 
elements of the essential health benefits required of all plans 
offered in the exchange, or marketplace, which is coverage for 
behavioral health, including therapies for autism. It is a 
provision that I had the support of this committee on in 
including into the law. April is currently Autism Awareness 
Month.
    I am hearing from families in New Jersey and throughout the 
Nation, especially those in States without an existing autism 
benefit requirement. We are nervous that the rules regulating 
the essential health benefits will allow insurance companies to 
skirt this requirement by substituting benefit categories and 
offering actuarial equivalence benefits that in reality do not 
really cover these incredibly important services.
    So my question to you is, what specific steps will you take 
to ensure the intent of this committee and of the law to ensure 
that behavioral health benefits, especially those for autism 
and other developmental disabilities, are available in all 
qualified health plans, and that includes plans on federally 
facilitated exchanges and in States that lack existing State-
level requirements?
    Ms. Tavenner. Thank you, Senator Menendez. I also share 
your concerns about reducing costs and improving medication 
adherence. We have some work under way in those areas, and I 
would love the opportunity to come talk to you about those.
    Senator Menendez. I would look forward to that.
    Ms. Tavenner. The same is true with the issue of essential 
health benefits. I think it would be helpful if I could come 
sit down in your office and walk through some of these 
concerns. I had not heard this specifically, so I would like to 
get some more information from your staff and follow up with 
you.
    Senator Menendez. Well, we would love to do that. I mean, 
it clearly was the intent of myself as the author, the broad 
support we received in the committee, and obviously in the 
final version of the law, to have the inclusion of the benefits 
for behavioral health as part of the essential health benefits 
package, and to begin to water that down would clearly violate 
the intention of those of us who offered it.
    Finally, in a New Jersey-specific context, our Governor has 
indicated that he has no intention of doing anything to assist 
HHS with the establishment of the New Jersey health insurance 
exchange. There is not a State-based exchange; there is going 
to be a Federal exchange.
    Since many of the consumer protections and market reforms 
we instituted in health care reform require State regulators to 
enforce, I am concerned that people living in States like New 
Jersey where the State government is uncooperative it will not 
actually benefit from these protections.
    What specific role will State insurance regulators have 
under a federally facilitated exchange, and are you going to 
provide vigorous oversight and reject State certification of 
exchange plans if they do not meet the standards for quality 
required under the Affordable Care Act?
    Ms. Tavenner. That is a great question as well, Senator. In 
most cases, States have continued to implement--if you 
remember, there was a certain section, if you will, of 
insurance reforms separate from the exchanges or the 
marketplace. We have had great cooperation with States, with 
insurance commissioners. We have also had the ability to work 
with the National Association of Insurance Commissioners.
    Wherever possible, both in proposed rulemaking and in final 
rules, we have gotten their feedback. So what we are seeing 
inside States is, they have very active rate review programs. 
We do have the authority under the statute to step in and 
supervise and have more rigorous oversight. We may ultimately 
end up doing that in a couple of States, but right now States 
have been very much a part of that process.
    In States where we are responsible for the exchange, we 
work with the issuers and with the State Insurance Office. The 
issuers will be submitting their plans. They will go through a 
series of reviews, first to make sure they fit, if you will, 
all of the 10 central categories, then to make sure that they 
are appropriate for services covered. So that process is 
actually under way even as we speak, and we handle that for any 
State that does not have a State-based exchange.
    Senator Menendez. Well, my time is up. I would love to get 
feedback from you, as we move forward to----
    Ms. Tavenner. Absolutely.
    Senator Menendez [continuing]. The specific New Jersey 
exchange, on how we are proceeding and whether we are getting 
the cooperation necessary.
    Thank you, Mr. Chairman.
    The Chairman. Thank you, Senator, very much.
    Senator Grassley?
    Senator Grassley. I, too, join my colleagues in welcoming 
you, more importantly, for the work you have done thus far, and 
hopefully you will be able to continue. I particularly 
appreciated your coming to my office for some meetings, and I 
think it reinforces what Senator Kaine said about you as you 
worked for him in that administration. I think you would make a 
fine Administrator, and I want to be able to support your 
confirmation.
    I have just one issue that, in the scheme of things that 
you deal with might be a little issue, I want to bring up with 
you. It is something that maybe back in 2011 from another angle 
I wrote to you about. So I would like to know how you would 
deal with a problem that has recently come to my attention.
    On Monday, April 1st, this year, at 3:42 p.m., Height 
Securities sent an advisory that told their clients of the CMS 
Medicare Advantage policy decision and that they supported 
related stocks. The consequences of a political intelligence 
firm having access to this information 18 minutes before the 
market closed is astonishing.
    In the 18 minutes remaining, trading minutes, on April 1st, 
the volume of Humana, United Healthgroup, and Aetna stock was 
more than half a billion dollars. More stock in those companies 
was traded in those 18 minutes than throughout the rest of the 
day.
    [The related Wall Street Journal article appears in the 
appendix on p. 44.]
    Senator Grassley. When information leaks from the 
administration that has the ability to cause significant market 
movement, it is wrong and quite possibly illegal.
    I sent a letter last Thursday formally seeking information 
from you, and I hope you agree that ultimately you are 
responsible. What are you going to do to hold somebody 
accountable for this leak?
    Ms. Tavenner. Senator Grassley, let me start by saying I, 
too, have appreciated our meetings. Second, I do not consider 
this a small issue. I consider this a huge issue. CMS takes all 
of this seriously, and we did receive your letter. We have 
initiated an internal review. It will be extensive, and 
obviously we will give you feedback from that review.
    But the second thing is, I have also asked that the Office 
of Inspector General be brought in on this issue as well, 
because we need a third impartial, if you will, review of this. 
CMS--I take a lot of pride in the staff at CMS, and this is not 
something that we want to happen ever, so we will do a thorough 
investigation, and we will give you feedback.
    Senator Grassley. All right. And I thank you for inviting 
in the Inspector General, because I was going to ask you if you 
were going to do that, and you are. I assume that that gives 
you the authority that your investigation needs to compel the 
production of information within CMS. Would that be fair to 
conclude that the Inspector General can get all this 
information out, and you do not have to worry about authority?
    Ms. Tavenner. Yes.
    Senator Grassley. All right.
    I would be even more curious what authority your 
investigation has to compel the production of information 
beyond CMS--at HHS, OMB, or the White House. I assume that you 
are saying that that is the Inspector General who is going to 
do that. I hope that, if it is found that other agencies are 
involved, he has the authority to get that information out.
    Ms. Tavenner. I will follow up with that, Senator, because 
I do not want to give you incorrect information as to their 
authorities.
    Senator Grassley. Now, I obviously do not believe that you 
can get the folks at HHS or OMB or the White House without some 
help, so I am going to pursue this. So you inform them that, if 
this is beyond CMS, I expect action to be taken, and I am going 
to get to the bottom of it one way or the other. Thank you very 
much.
    Ms. Tavenner. Thank you.
    Senator Grassley. And I know you are very sincere in what 
you said, and I am going to be following up with the Inspector 
General as well.
    Thank you very much, Mr. Chairman.
    The Chairman. Thank you, Senator.
    Senator Carper, you are next.
    Senator Carper. Thanks very much.
    Welcome. Thank you for your service today and for your 
willingness to continue to serve. One of the things that we 
spoke about when you came to see us was legislation called the 
FAST Act* that Senator Coburn and I, joined by 36 of our 
colleagues in the last Congress, introduced.
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    * The Medicare and Medicaid Fighting Fraud and Abuse to Save 
Taxpayer Dollars Act (S. 1251).
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    CMS was good enough, your department was good enough, to 
adopt a number of those provisions without the legislation 
being passed. We will be reintroducing the legislation. I would 
invite my colleagues to join us in the idea that there can be 
better health care results for the same amount of money or less 
money by going after some of the fraud that we all know exists, 
some of the waste and inefficiencies that exist.
    So I want to just thank you for the cooperation we have 
experienced thus far and invite the continued participation of 
your staff to help make the legislation better. And tell us 
what we need to do to enable you to do your jobs better on that 
front.
    I also want to mention an issue called improper payments. A 
lot of people think improper payments are the same as fraud. 
They are not. Improper payments are mistakes. They are 
accounting mistakes, financial mistakes. They are just human 
mistakes, and they add up to a lot of money, as we know. In 
2002, we passed legislation, signed by former President Bush, 
that said agencies must begin reporting improper payments.
    In 2010, Senator Coburn and I introduced legislation, 
adopted and signed by President Obama, that said not only do 
they have to report improper payments, they have to stop making 
them, they have to begin to try to go out and recover money 
that has been improperly paid, and that we are going to hold 
accountable the folks who are running those agencies to make 
sure that they are adhering to the law.
    We have seen, I think, in the last 2, maybe 3 years now--
even though almost every agency is now reporting them--the 
amount of improper payments actually is dropping, which is a 
very, very good thing. Even though the amount of improper 
payments being reported has gone up, the number of improper 
payments has gone down, which is a real positive.
    Talk to us about your efforts to continue to drive down 
improper payments, not just do this pay-and-chase, where you 
actually pay a bill, a medical bill, and then find that it was 
wrong, and then we try to run the money down. What you are 
doing at the front end of the situation to stop the improper 
payments? Thank you.
    Ms. Tavenner. Thank you, Senator Carper.
    Obviously, one of the first things we do has to do with 
training and education, not only for physicians and hospitals 
but also for their staffs and the individuals they work with. 
So we spend a great deal of time on what I will call the 
training and education piece on the front end.
    The second thing that we do, in some areas where we have 
seen consistent fraud, if you will--and you are right, it is 
not fraud in the terms of deliberate fraud; it is documentation 
difficulties, it is failure to submit the required 
documentation, it is review of documentation after the fact.
    One area where we had a tremendous amount of problems had 
to do with power mobility devices, the power wheelchairs. So we 
implemented a pilot in a prior authorization mode, which is 
somewhat more like private insurance tends to do. So now, since 
September of last year, for individuals who need power 
wheelchairs, there is actually a prior authorization process.
    What we have seen happen there is, it controls some of the 
abuse, and also beneficiaries are still able to get their 
wheelchairs within a short period of time. We have a 10-day 
threshold that we hold ourselves to to get this reviewed and 
turned around and out. So it is those kind of models, I think, 
that help more on the front end.
    We are seeing a reduction in improper payments, which is 
encouraging, but we also are looking at, are there other areas 
we need to look at? Are there things inside labs, or things 
inside DME that we can do on the front end? Obviously, some of 
the work around competitive bidding in DME had to do with some 
of the prevention on the front end. So we are open to new 
ideas. We enjoy working with you and your staff and supporting 
you.
    Senator Carper. All right. Thanks. Thanks very much. I have 
some numbers that you might find interesting. Improper payments 
in 2010, $121 billion--billion! In 2011, down to $115 billion. 
That is still a lot of money. In 2012, down to $108 billion. We 
are seeing drops in Medicaid improper payments of several 
billion dollars. Medicare numbers are actually flat across 
those years, and we want to do better in that regard.
    The last thing. I spent some time this last week in 
Minnesota and visited Mayo, visited United Healthgroup. One of 
the things we talked about was, how do we move away from fee-
for-service, how do we better collaborate delivery of health 
care, and what is the role that Medicare Advantage may play in 
that regard?
    Previously we have overpaid Medicare Advantage. I think we 
have corrected that. Just talk to us about the role you see 
Medicare Advantage playing in the next several years in moving 
away from fee-for-service, please. Thank you.
    Ms. Tavenner. I think, as you are well-aware, the Medicare 
Advantage programs have grown and continue to grow. We have had 
great working relationships with some of their medical 
directors on this issue of, how do we stop paying under a fee-
for-service model? How do we look at, whether it is an 
Accountable Care Organization, if it is some type of 
coordinated approach--some of the folks whom you talked about 
are leaders in that area. So I think we are sharing ideas.
    Some of the things that we have learned in the Innovation 
Center, they are adopting; we are adopting some of their ideas. 
So, I see that role continuing to grow. They are great partners 
with us. Beneficiaries like the programs. They do good quality 
reviews, so I see that partnership continuing.
    Senator Carper. Thanks. Mr. Chairman, I have just one last 
quick point just to share with my Republican colleagues. We 
have been a long time without a confirmed CMS Administrator. I 
think we have a good one here, and I would just hope that we 
can get her reported out of here, get her confirmed with great 
dispatch. She is a good candidate, an excellent candidate, and 
we are lucky that she is willing to serve. Thank you.
    The Chairman. That is my plan: do it quickly.
    Senator Enzi?
    Senator Enzi. Thank you, Mr. Chairman. That was an 
impressive group of introductions, and I really appreciate that 
you listed out the stakeholders in your statement. I used to be 
in the shoe business, so I call those customers. That is a 
great thing to have recognized.
    I am concerned about some recent reports that have 
identified some anti-competitive effects of excessive 
integration of hospital systems, including reductions in access 
and increases in costs for the consumer. What is CMS doing to 
ensure that the incentives that it is building into the 
Medicare program to better coordinate care or integrate 
services do not have an adverse effect on competition and the 
price of health care in the long run? Have you engaged the 
Department of Justice on this issue at all?
    Ms. Tavenner. Senator Enzi, thank you. This is something 
that we do work on with the Department of Justice, but in a 
different way. We tend to look at models through the Innovation 
Center. That tends to be where we are engaging the Department 
of Justice to make sure that we are not creating any anti-
competitive work in the demonstration areas. I think engaging 
them more and having them be a partner is a good suggestion, 
and that is something that we could do.
    Senator Enzi. In your answers to some of the questions, you 
mentioned your involvement with HCA. This one is a hospital 
issue, but I assume that your thing about it not being 
specifically about HCA precludes you from having to recuse 
yourself on that?
    Ms. Tavenner. Right.
    Senator Enzi. All right.
    Now, the Society of Actuaries recently released a report in 
which they estimated that health insurance premiums in the 
individual market will increase 32 percent on the average 
nationally and in Wyoming specifically. The National 
Association of Insurance Commissioners released a paper just in 
the last week that outlined steps States can take to mitigate 
expected rate increases due to the health care law.
    In fact, the NAIC paper concludes that States ``should 
begin evaluating these and other strategies immediately in 
order to mitigate the rate increases when the major market 
reforms take effect in 2014.'' What is CMS doing to address the 
risks identified by that report and other reports?
    Ms. Tavenner. Senator Enzi, first, I would say that we do 
not agree completely with the actuary report. I will give you 
some reasons why, but I will also remind this committee that, 
while I have great respect for actuaries and work with them 
daily, these are estimates or predictions about things that we 
do not know for certain.
    I will take us back to Part D and some of the estimates 
around Part D where I think we ended up at less than 40 percent 
of the original estimates for the cost of Part D. So I would 
just caution us about taking the word or the reports of 
actuaries as more than just estimates or speculation.
    But having said all that, there are some things in the 
Affordable Care Act that I think mitigate any type of insurance 
increases, and I will try to talk about those. But I will talk 
about them in three areas. The first area is, when individuals 
talk about premium increases, I think they would have you 
believe that that is the entire insurance market. I will remind 
you that what the Affordable Care Act is dealing with is the 
small market or the individual market, so less than 20 million 
max.
    Large employers are fairly exempt from the requirements, 
and large employers have seen the most modest increases in the 
last 3 years that they have seen in some time, so I think our 
overall strategy, both in government and in the private sector, 
around controlling cost is bearing some fruit.
    The second issue is, in addition to the size of the market, 
these studies do not take into account those pieces of the 
Affordable Care Act that actually work to decrease premiums. 
First of all, there is the issue of the tax credit, which is 
obviously applied to the premium. Second, there is a variety in 
plans, so you can have a bronze, or a silver, or platinum plan, 
which changes the premium. Third, there is the availability of 
catastrophic coverage for individuals up to 30. Fourth, there 
is the issue of dependent coverage where, thanks to you all and 
the work in the law, we are covering individuals up to the age 
of 26.
    I could go on. There are issues around reinsurance. If you 
will remember, you put $10 billion into a reinsurance pool for 
the next 3 years with the idea of mitigating any type of 
premium increases. The rate bands that we have--there is a long 
list. I will not bore you with the entire list, although I am 
happy to give it to you; we have it.
    The third area that I would mention is a reminder to folks, 
and I think we saw this in the Time magazine article: insurance 
is not necessarily insurance as we all tend to think of it, 
having worked for large employers and having pretty robust 
insurance policies.
    Some of these, if you will, low-cost premiums were low-cost 
for a reason. They did not really offer robust insurance, as 
many folks found out the first time they had to be hospitalized 
or they were diagnosed with cancer or another disease that 
required a lot of treatment. So, as you can tell, I feel pretty 
strongly about this, but I would not agree with the actuarial 
assumptions.
    Senator Enzi. My time has expired, but I will have some 
specific follow-up questions, as the accountant.
    Ms. Tavenner. Right. Thank you.
    Senator Enzi. And also some other questions that I hope you 
will answer.
    Ms. Tavenner. Thank you.
    Senator Enzi. Thank you.
    The Chairman. Thank you, Senator.
    Senator Cardin?
    Senator Cardin. Thank you, Mr. Chairman.
    Ms. Tavenner, I also want to thank you for your public 
service and thank your family for their willingness to serve, 
because it is a family effort, and we appreciate that.
    In your statement, you point out that you have many 
stakeholders, and that is true, but the most important 
stakeholders, as Chairman Baucus has pointed out, are taxpayers 
in this country and the families that depend upon the 
implementation of the Affordable Care Act, Medicare, Medicaid, 
and the CHIP program.
    So I want to talk about one aspect of that, which is 
pediatric dental care. Jon Blum, when he was before our 
committee, the Director of Medicare, said it would be a mistake 
to silo oral healthcare and treat it separately as we once did 
mental healthcare. But I am worried that that is exactly how we 
are moving, in treating pediatric dental care as a secondary 
issue, even though it is an essential health benefit.
    You have pointed out in a response to a letter from me that 
it is clear that the stand-alone policy, Congress wanted that, 
but, even though it is part of the essential health benefits, 
it is not a requirement for an individual to obtain pediatric 
oral health coverage. If their primary policy does not cover 
it, as it does not have to, then it looks like they do not have 
to take a stand-alone policy if they do not want to.
    You also have gone through the deductibles and you started 
with $1,000 in those plans that you are administering. Now you 
are talking about $700 as a separate deductible for dental, 
oral health. You cite as one of the reasons to me the cost 
issue, even though the Millman report reflects that the 
difference between $700 and $270 is less than $2 a month.
    So can you just assure me about how you are going to 
implement the Affordable Care Act to make sure that pediatric 
dental care does not become secondary coverage, that it is what 
Congress intended it to be--part of the essential health 
benefits--and how we are going to assure that all families have 
access to affordable pediatric dental care? We have made 
progress, and I acknowledge that, but I am concerned that this 
could be some backsliding. Please assure me that my fears are 
going to be alleviated.
    Ms. Tavenner. Thank you, Senator Cardin. As you know from 
our conversations, I am very much supportive of pediatric 
dental, and obviously you all have done a tremendous amount of 
work in the Medicaid program, and we have come a long way. 
Obviously the tragedy in Maryland had a lot to do with that.
    But I hear you on this issue, and I will tell you that we 
will go back and take a look at it. We did mitigate some of the 
cost sharing, if you will, at your recommendation. But on the 
coordination of the two, we may have more work to do, and I am 
happy to take a look at it and work with you. But we would have 
to do it in future rulemakings, because we are pretty far along 
right now, and that is the part I wanted to----
    Senator Cardin. I understand that. I just urge you--
Congress allowed you to have stand-alone policies, but I do not 
think we intended that families would not have coverage. Now it 
looks like, because of the combination that you are 
interpreting it as not being required and the fact that you 
have high deductibles, meaning that families would have to make 
a decision, am I really going to reach $700 per child, do I 
really want a policy, it looks like many families will go 
without coverage, which is certainly not what Congress 
intended. I would very much appreciate you following up on 
that.
    Ms. Tavenner. Will do. I would like to come meet with you 
and look at this report as well.
    Senator Cardin. Thank you.
    Ms. Tavenner. Thank you.
    Senator Cardin. I also contacted you about an experience we 
had in our State with a private Medicare plan, Bravo Health 
Plan, that gave notice of termination 1 week before the end of 
the open enrollment period. This plan included a large number 
of people under a federally qualified plan in East Baltimore, 
where the individuals are of modest income. It is very 
difficult for them to travel; many of them do not have 
automobiles, and it is just difficult. It is a pretty closed 
community.
    As a result of the decision to terminate, they no longer 
have their primary care physician whom they had once before. 
They have been given information that they have to travel a 
long distance in order to get to a primary care physician. We 
asked for some relaxation of the open enrollment period in 
order to deal with this hardship. So far we have not heard 
anything positive about this. Can you look into this and 
perhaps find a way in which we can provide help to these 
individuals?
    Ms. Tavenner. I will do that, and I will get back to you.
    Senator Cardin. Thank you, Mr. Chairman.
    The Chairman. Thank you very much, Senator.
    On the list I have several Senators next in order, but I 
understand that Senator Roberts has a pressing engagement and 
is going to ask the indulgence of the Senators ahead of him. 
But that is up to Senator Roberts, as well as the Senators 
ahead of him. On the list I have Senator Isakson next, Senator 
Portman, and following him, Senator Bennet.
    Senator Roberts. I have not asked Senator Isakson if that 
would be possible. I do have permission from my friend and 
colleague, Senator Portman, however. But I would ask the 
Senator's indulgence.
    Senator Isakson. I will voluntarily indulge the Senator 
from Kansas. [Laughter.]
    Senator Roberts. Ms. Tavenner, what do you want to be 
called? Do you want to be called Administrator? Madam 
Administrator? That does not sound very----
    Ms. Tavenner. I actually prefer Marilyn. [Laughter.]
    Senator Roberts. Marilyn. I have a different name. Our 
State motto is, ``To the stars through difficulty.'' I apply 
that to CMS, farmers in Montana--for that matter, anywhere. 
Hope always springs eternal. They would never put the seed in 
the ground unless they thought they were going to have a crop, 
regardless of 3 years of drought.
    You have been endorsed by the Kansas Hospital Association, 
the Kansas Medical Society. You have the support of hospices, 
you have the support of ambulance drivers, you have the support 
of nurses and doctors, you have the support of home health 
care, and the list goes on--all of our providers.
    There is a reason for that. That is because of everything 
that has been said about you. So I think I am going to dub you, 
at least for Kansas and the Dodge City area, as the new sheriff 
in town. You are going to wear a white hat. There are an awful 
lot of people in CMS who wear black hats, and that is just in 
the way that the rural health care delivery system has been 
treated. It is most unfortunate.
    When you say ``CMS,'' the line used by many of our 
providers is that there is a new acronym: ``it's a mess.'' That 
is not a very nice thing to be saying about an agency that is 
supposed to be helping folks, but that is the way it is.
    Now, you and I have talked about this, and I appreciate you 
coming in. You have been through those chairs, which is 
exceedingly important. I expressed my concerns with the current 
regulatory process. We discussed the deviation from the 
traditional regulatory process of notice and comment, the lack 
of stakeholder input, especially as it relates to shortened 
comment periods and through the use of something called sub-
regulatory guidance--postings, e-mails, bulletins, guidance, 
and something called FAQs, frequently asked questions.
    Unfortunately, nobody has any time to read this stuff or to 
be aware of this until somebody who has been contracted out 
knocks on the hospital door with a fine. That is not right.
    So, during our discussions, you had mentioned that these 
are all issues that CMS is aware of and that you expect to be 
addressed. Specifically, I have received commitments that there 
would be no more IFRs, what we call the ``gotchas,'' interim 
final rules, that stakeholders would be given more opportunity 
to participate in the regulatory process by allowing a 60-day 
comment period as has been done in the past; then, if enough 
suggestions have come in to tweak the proposed regulation or to 
change it, you could have another 60 days to get it right, and 
CMS would work with OMB to ensure the cost estimates included 
in the regulations are clear so that all of our health care 
providers can know what to expect as it relates to the costs 
associated with the regulatory actions. And you agreed with me, 
and I agreed with you in regards to your commitment.
    But I was dismayed that, following our most recent 
conversation, an IFR was issued to implement something called 
Benefit and Payment Parameters. Understanding that you are on a 
tight time line, this is a completely unacceptable process, 
however, and I would hope that your previous commitments to 
return to the traditional notice and comment period--i.e., 
transparency--and make it such that CMS is not considered in 
the rural health care areas as welcome as a plague of locusts, 
that you would work with me. I think you said ``yes'' at that 
particular time. I hope that we could continue on that basis. I 
think the answer is ``yes,'' and I will yield back the balance 
of my time to Senator Portman or Senator Isakson.
    Ms. Tavenner. Senator Roberts, the answer is ``yes.'' You 
did educate me about the four corners, and we will try to do 
our best to follow the regular process. There are obviously 
sometimes emergency situations where we do an IFR, so I do not 
want to leave you with the impression that we would never, ever 
consider an IFR, because I think----
    Senator Roberts. I understand that.
    Ms. Tavenner. But yes, I think we are more into the regular 
order of business, and I appreciate your support.
    Senator Roberts. Mr. Chairman, it is not often I give you 
50 seconds back.
    Senator Rockefeller [presiding]. That is true.
    Senator Isakson?
    Senator Isakson. Thank you, Mr. Chairman.
    The SGR. I was sworn in in February of 1999 to the U.S. 
House of Representatives, and, if I am correct, every year in 
December we had to, at the last minute, patch the SGR or 
physicians were going down the tubes on reimbursement. That 
still is the case now, and it is 2013.
    CBO recently gave us a good score, or a much lower score, 
on the cost of fixing the SGR. Will you encourage the 
President, if you are confirmed--and I assume you will be 
confirmed because you have done a great job--to adopt that as a 
priority this year? We have a window of opportunity to do it, 
and I would like to see us fix the SGR.
    Ms. Tavenner. Yes, I will certainly work with the President 
and the President's team. We agree that SGR needs to be 
replaced, and we need a permanent solution.
    Senator Isakson. Every doctor in America would agree with 
you as well.
    Ms. Tavenner. Yes.
    Senator Isakson. The Georgia Department of Community Health 
has a Medicaid waiver application in to allow them to put 
foster children under Georgia's care in a managed care program. 
As you know, foster kids move around a lot; they go from home 
to home a lot. They have, many times, complex medical issues. A 
managed care type of approach allows them to get away from fee-
for-service, do it all over again when they move locations, and 
instead have good quality of coordination on their care.
    I work a lot with foster kids, and did when I was in the 
State legislature in Georgia. If you could check on that 
application and see if you could help expedite it, or help them 
expedite what they need to do, because foster kids are 
important people in our State's care, and I would love to see 
us do that.
    Ms. Tavenner. I can certainly do that.
    Senator Isakson. One other question. In the House, we did a 
piece of legislation, probably 10 years ago now, on needle 
sticks. I have been a member of the Diabetes Caucus for a 
number of years and am aware of the number of complications 
that come from needle sticks with diabetes.
    I understand, from what I am told by my staff, that you 
have the flexibility with regard to diabetes to approve 
reimbursement for ancillary and related diabetes treatment and 
services. Needle stick devices, of which there are any number 
available right now, are an excellent way to avoid unwanted 
needle sticks and further complications and other problems.
    I have a piece of legislation that I have introduced with 
Senator Coons to try to get CMS to approve a reimbursement for 
needle stick devices, but, if you can do it administratively, 
it would seem to be a big help. We have a study done by United 
Healthcare that estimated the savings to those who had a needle 
stick destruction device, and the savings that would bring to 
CMS and to United Healthcare because of the number of other 
ancillary problems it would reduce. Would you look into that 
for me?
    Ms. Tavenner. I certainly will.
    Senator Isakson. And that is all of my questions. Thank 
you.
    Ms. Tavenner. Thank you, Senator Isakson.
    Senator Rockefeller. Senator Casey?
    Senator Casey. Mr. Chairman, thank you very much.
    Ms. Tavenner, I wanted to commend you for your public 
service already, the work that you have done over a long period 
of time in a very difficult area of our government, and also 
the work you have done in the private sector.
    I want to commend as well your family. I think the applause 
that we gave to your family earlier today was entirely 
appropriate, but not at all commensurate with the sacrifice 
that they have made, and we are grateful for that.
    I wanted to focus--and I will try to be brief because I 
know we have a number of other questioners--on children in the 
context of health care as we implement a very difficult piece 
of legislation to implement and get right. Those of us who 
supported it had better be committed to getting it right, 
especially as it relates to children.
    In our State, we have a little more than 900,000--at the 
last count about 919,300--children covered by Medicaid, about 
45 percent of the total. As a lot of the experts tell us about 
children, when it comes to the kind of health care we have to 
provide to them, that children--these are not my words, but I 
try to remember them--are not small adults, they are different. 
Their health care needs are different. You know that from your 
experience better than I do.
    I wanted to focus maybe on two or three areas. One would 
be--instead of asking a broad question, because we probably do 
not have time for that--some of the challenges that will arise 
when we begin to see the exchanges being implemented, in 
particular, where kids in the exchanges who normally would get, 
by way of Medicaid or some other way, but mostly by way of 
Medicaid, so-called wrap-around services if they have 
particularly difficult challenges.
    If a child is covered in the exchange at some future time, 
how do you deal with that to make sure that, if the private 
coverage does not meet their needs, that there is going to be 
something comparable to or similar to wrap-around services? Can 
you address that?
    Ms. Tavenner. Yes, sir. Senator Casey, let me start by 
saying--and I think we heard this from Senator Kaine in the 
opening comments--that we are very much committed to helping 
children in the Medicaid program and in private insurance. I 
think we heard that in regards to the oral care, dental care. 
We have done work around the Strong Start, and I know your 
State has a project there, and we appreciate your support of 
that.
    So there is a lot of work to be done around newborns and 
infant mortality, around childhood obesity, smoking, and so we 
have projects under way inside Medicaid, and I am happy to 
brief your staff on that.
    But we are committed to working on this. What we are seeing 
is that we may have parents in the exchange, children in CHIP, 
and vice versa. We are working with them as a family unit. I am 
happy to come sit down with your staff and walk through how we 
will put those added protections in, because, if they are in 
Medicaid, they obviously are eligible for all of the wrap-
around benefits and the added protections. Wherever possible, 
we try to sync up both Medicaid policy and, if you will, the 
essential health benefits, and we can kind of give you some 
more detail in that area.
    Senator Casey. That would be great. With all the changes, I 
just want to make sure we--meaning myself as well--meet these 
obligations.
    One of the challenges we are facing as well is, as in some 
States like Pennsylvania, we may be confronting a situation 
where the State is not part of the exchange and may not embrace 
the changes as they relate to Medicaid. So, in two major areas 
of health care implementation, our State may be in a different 
position than a lot of other States. I know we will continue to 
talk about this, but do you have any suggestions or any 
insights as it relates to States that are in that position, 
either not part of the exchange or not part of the Medicaid 
elements?
    Ms. Tavenner. Yes, sir. Senator Casey, obviously 
Pennsylvania is one such State. We are actually meeting with 
the Pennsylvania team today. We are continuing to work with 
each State on the issue of Medicaid expansion to see if there 
are at least educational pieces we can give them, ways they can 
look at it, clarifying any questions they may have, and 
encouraging Medicaid expansion.
    In the issue of the exchanges, you actually have a bit of 
an advantage in Pennsylvania in that we have a regional office 
there. But I will remind folks that we do have 10 regional 
offices throughout the country, and so, in States where States 
are not having a State-based exchange or partnership, we will 
be mobilizing our regional staff to work inside each State. We 
will also be doing a series of webinars and educational 
programs, traveling inside the State. There are several other 
things we will be rolling out through the summer to help.
    Senator Casey. Thank you very much.
    Thank you, Mr. Chairman.
    Senator Rockefeller. Thank you.
    Senator Thune?
    Senator Thune. Thank you, Mr. Chairman.
    Ms. Tavenner, welcome. Thank you for your service and 
willingness to come up here and answer all these questions 
today.
    I want to ask a couple of things, really quickly. I am 
interested in the physician supervision of outpatient 
therapeutic services and a 2009 Medicare Prospective Payment 
Systems final rule in which CMS issued a new policy regarding 
direct physician supervision of outpatient therapeutic 
services.
    There are a lot of health care organizations that have 
recognized this as a burdensome and unnecessary policy change, 
but CMS characterized it as a clarification. It seems as if CMS 
retroactively interpreted the policy to require that a 
physician provide direct supervision instead of general 
supervision and be physically present in the same outpatient 
department at all times when outpatient therapeutic services 
are furnished.
    I am concerned that the clarification is in fact instead a 
significant change in Medicare policy that would place 
considerable burden on hospitals, especially facilities in 
rural areas. So I know there has been a panel convened, but I 
am also concerned that that panel is not sufficiently 
considering the input from rural critical access hospitals. So 
I am wondering if you would agree to return to the pre-2009 
interpretation of this policy for critical access hospitals.
    Ms. Tavenner. Senator Thune, I appreciate that question. 
After we talked yesterday, I thought there were a couple of 
things that we could do. First of all--and I think we discussed 
this with your staff yesterday--adding additional members 
representing the rural hospitals and critical access hospitals 
would be helpful so we would make sure we have a balanced 
dialogue about what direct supervision really means and what is 
required in these smaller hospitals in remote areas.
    I will go back and take a look and then sit down with your 
team. I think we have made some progress, so I would want the 
opportunity to sit down with your team and walk through what 
has been done, but we are certainly willing to look at the 
original standards and see where we are different.
    Senator Thune. I guess my concern in all this--and I wish I 
had voiced it to you yesterday--is that there is not a 
sufficient avenue for rural voices to be heard in this process 
when the panel is predominantly from non-rural facilities, so I 
would appreciate any consideration that you could give for 
input from rural hospitals.
    Ms. Tavenner. I think that is an excellent suggestion.
    Senator Thune. The other question I wanted to raise with 
you is, I have been hearing from constituents in South Dakota 
about the impact of preferred pharmacy networks and the Part D 
program. For some seniors, they are not even aware of the 
preferred network until after open enrollment for Part D.
    For some seniors, it means the drug plan that they have 
been using for several years has changed, and those changes 
increase co-pays to go to their regular pharmacy instead of the 
pharmacy in the new preferred network. For some pharmacies, 
this is having an adverse impact, as you might expect, on their 
client base.
    I would like to know what is being done to ensure that 
seniors are aware of the impact of choosing a Part D drug plan 
with a preferred network and what that might mean in terms of 
them being able to access their pharmaceutical services from 
the pharmacy that they have been using previously.
    Ms. Tavenner. Senator Thune, after we talked about this one 
yesterday, I also went back and did a little homework last 
night in this area. I think we certainly try to educate 
beneficiaries about the plan they are in and what is involved, 
what pharmacies are in the network, but we need to do more in 
that area, obviously, if beneficiaries are still confused. So 
that is the first area.
    The second area is--and I think based on your feedback 
yesterday--we need to take a look at the policy and see if 
there are changes that we can make in the policy in the future 
that might make it a little easier on this issue. So I 
appreciate that. I was not as aware of that issue until we 
talked, so we will follow up with it.
    Senator Thune. All right. Thank you. I appreciate your 
responses.
    Mr. Chairman, thank you. I yield back the balance of my 
time.
    The Chairman. Thank you, Senator.
    Senator Portman?
    Senator Portman. Thank you, Mr. Chairman.
    Thank you, Ms. Tavenner, for your willingness to step 
forward. Thank you for coming by the office. I enjoyed our 
conversation on some of the issues I will raise today. Also, I 
think your background is going to be very helpful as you move 
from Acting Administrator, assuming you are successfully 
confirmed--I think you will be--to being the Administrator.
    I like your nursing background, I like your State 
background in Virginia, and I like your private sector 
background. You are going to have a huge job. A number of us 
are deeply concerned about how ACA is going to be implemented. 
We continue to have strong concerns about some of the policy 
decisions that were made here a couple of years ago, and yet, 
because our constituents are looking at huge changes, many of 
them, we want to be sure somebody is there who can help them 
work through that.
    So one thing that I am very concerned about is wellness and 
prevention and what ACA might do or not do to help that. As I 
travel around Ohio, I am constantly amazed by the companies 
that are doing innovative, state-of-the-art things in terms of 
encouraging their employees to get involved in wellness and 
prevention. Some are self-insured, some are not.
    I am very concerned about the regulations and the mandates 
that might actually take the country in the wrong direction in 
terms of what is starting to happen out there in the private 
sector. I would like to hear your comments on that and be sure 
you are sensitive to that.
    Second, within the Federal programs themselves, I think 
there is great opportunity, and particularly with regard to 
Medicare, but also Medicaid. As you know, Senator Wyden and I 
introduced a bill called the Better Health Rewards last year. 
We are planning to re-introduce it soon.
    It is really the only prevention and wellness idea I see 
out there on Medicare, but basically it says that people, as 
they go to their annual physicals that are paid for anyway, go 
through a process voluntarily, if they like, with six different 
criteria, including looking at diabetes, looking at smoking 
cessation, and so on, and then they get a reward if they go 
through the program.
    So, could you comment on those two things? One, are you 
going to be sensitive to private sector initiatives in this 
area, and two, are you willing to look at more innovative 
programs within Medicare and Medicaid, in particular on 
wellness and prevention?
    Ms. Tavenner. Thank you, Senator Portman. First of all, I 
am very much aware of the wellness and prevention programs in 
the private sector, and I certainly think they are critical and 
very important. We actually have a demonstration inside 
Medicaid where we have actually adopted some of those ideas 
around wellness and prevention, more from the standpoint of 
encouraging Medicaid recipients, so it is more the reward than 
the punishment look, if you will. But yes, we are open to 
wellness and prevention opportunities.
    As far as Medicare, I certainly would like to work with you 
on your legislation and offer assistance there. We have tried 
to look at that in a couple of ways, obviously as part of the 
Affordable Care Act, and this administration has been focused 
on covering more preventive services, because we think that it 
is key to preventing long-term, if you will expensive, illness. 
So, not only from a cost but from a quality perspective, it is 
a better place to be.
    Second, in how we are looking at changes in payment, I 
think that sends a strong signal to physicians and other 
providers that it is not about the volume of services you 
provide, it is about, what is the outcome of the individual, 
and that outcome should be as much focused on prevention and 
having optimal health as opposed to waiting until after the 
fact and dealing with expensive and low-quality type outcomes.
    Senator Portman. Well, I appreciate those comments, and I 
hope that you will be willing to show respect for the private 
sector initiatives in this area, and, particularly with regard 
to the way regulations were formulated and mandates on 
coverage, that you are sensitive to that.
    Another issue big in Ohio is durable medical equipment. You 
and I have talked about this. There are a lot of companies in 
Ohio involved in this and a lot of patients in Ohio who rely on 
durable medical equipment. The current program has nine bidding 
areas total, two are located in Ohio. This summer, the number 
of bidding areas will expand to an additional 91 areas, 
including another six in Ohio.
    Again, access to durable medical equipment is critical to 
seniors, particularly in Ohio, but also around the country. 
They depend on it. Also, businesses that supply this equipment 
to our seniors are worried about the uncertainty. We all want 
to see savings, but we want to see it done in a smart way, and 
we certainly do not want to see it done at the expense of 
seniors' access to necessary equipment.
    A number of constituents have contacted me, talking about 
how, once bidders win through this competition, they are not 
able to supply the necessary equipment for beneficiaries, 
because they come in with such a low bid. They get selected, 
and then they cannot complete the responsibilities.
    CMS, in your role as Acting Administrator, has provided 
assurance you are strengthening this bid review process to 
ensure that low bids are sustainable for the suppliers. Can you 
describe for us quickly the measures you have already taken to 
strengthen this review process and what you are going to do in 
the future before expanding this program, including what you 
are going to do before you expand it later this summer?
    Ms. Tavenner. Yes, sir. Senator Portman, let me start with, 
when Congress authorized the competitive bidding for DME--this 
was several years ago--we spent a long time in planning this 
effort, and obviously we rolled out the pilot a couple of years 
ago. The pilot was critical to determining and modifying the 
program, so I will give you some of the results from the pilot.
    In the first areas that we have done, what we have seen is, 
actually there were no issues with access. We have obviously 
seen reduction in cost. In fact, we still have over 90 percent 
of the original folks who bid still in the market, still 
supplying. We also were careful that we did not allow 
individuals to take too much of the market, if you will.
    We have kind of this informal cap, if you will, of about 20 
percent so that we make sure we have at least five suppliers in 
an area providing a piece of equipment. We have ongoing, real-
time evaluation with beneficiaries. We set up a separate call 
center. We have monitored their feedback.
    The feedback has been great from the beneficiaries, but we 
also have been careful to look at, what is the trend? Where are 
we seeing drop-offs in supplies that would cause concerns? We 
actually saw drops in two areas. One area was the CPAP 
disposable monitor, if you will, the mouthpiece, and the second 
area was in diabetic testing strips. So we actually called 
beneficiaries and said, what is going on? Why are you not 
getting these? Because those are pretty critical things, 
particularly diabetics' testing strips.
    In fact, most of them had several months' supply stored, so 
it was more of an inventory thing. They really did not need it, 
which is one of the issues that we were hoping to address in 
the competitive bidding, that we were getting folks what they 
needed but not more than they needed. So I think we have been 
comfortable. We will always continue to try to improve the 
program, but obviously we are getting ready to roll out the 
second portion very soon.
    The Chairman. Thank you very much.
    Senator Burr?
    Senator Burr. Ms. Tavenner, welcome. I join my colleagues 
in urging the chairman for an expeditious confirmation. I have 
enjoyed my meetings, plural, with you, and I am sure we will 
have more in the future.
    Ms. Tavenner. Thank you, Senator.
    Senator Burr. Let me just, in full disclosure, say that I 
am not that confident about the Affordable Care Act and its 
implementation being seamless and its costs being predictable. 
I do not believe it is the panacea that many people present, 
both from that table and in some of the public comments. The 
truth is that the cost of the Affordable Care Act is very 
questionable.
    The most alarming thing to me today is, I cannot find 
anybody in the administration who has a Plan B. What if more 
people enroll in the State exchange, meaning there is an 
employer dump? What if 30 percent of those employees who are 
dumped qualify for a subsidy? What happens when we run out of 
money in a health care plan that has been designed based upon 
fees and taxes that are not unlimited? What happens when there 
is not enough money to make the payments? These are all 
questions that have yet to be answered.
    Now, you quickly pointed to Part D and Part D's success. 
Let me suggest to you, Part D is very different from what we 
have created with the Affordable Care Act. Part D was designed 
to generate fierce competition between suppliers.
    Part D was not designed with subsidies, it was not designed 
with fees, and it certainly did not have the degree of mandates 
that you find in the Affordable Care Act. One thing that I have 
learned in health care is, for everything that you require, 
health care is going to have a reaction to that, and usually it 
is an increasing cost.
    Let me ask you: you said that you are using CBO's 
projections for enrollment in the exchange. Is that 7 million, 
or is it 8 million since CBO's estimate was changed?
    Ms. Tavenner. We are using 7 million.
    Senator Burr. You are using 7 million. What does CMS 
estimate it will cost to run the federally facilitated 
exchange?
    Ms. Tavenner. Senator, I can get you that information, but 
I do not have that today.
    Senator Burr. Would you supply that for us? Would you also 
supply what the total budget for the exchanges is?
    Ms. Tavenner. Yes, sir.
    Senator Burr. Thank you.
    Now, you said earlier that there are going to be no premium 
increases, and you cited a number of reasons as to why there 
would not be. Let me ask you: the 3.5-percent user fee applies 
to insurers in the exchange and outside the exchange, correct?
    Ms. Tavenner. Yes, sir.
    Senator Burr. So, if we are going to require insurers 
outside the exchange to pay a 3.5-percent additional fee, you 
do not believe that is going to have an impact on premium 
increases on people outside the exchange?
    Ms. Tavenner. I think some of the trends that we are seeing 
outside the exchange will offset some of those.
    Senator Burr. Some of those, but there will be a premium 
increase. As a matter of fact, most of the averages from the 
industry looking at this are that there will be a $600-per-year 
increase on a family plan. Do you dispute that?
    Ms. Tavenner. I have not seen that, so I need to take a 
look at that.
    Senator Burr. All right.
    Let me suggest to you that to make the statement that 
subsidies do not allow premiums to go up is somewhat 
disingenuous. Subsidies mask the cost, so, when we put in a 
subsidy so that somebody does not feel the personal effects of 
it, we are masking the cost of that. I think one of the 
problems that we have with the Affordable Care Act is that 
nobody really understands what the costs, not just of 
implementation, but of running the Affordable Care Act, will 
be.
    Now earlier, Senator Enzi talked about actuaries, and you 
expressed your concern over actuaries. Let me ask you, though, 
will you commit to providing the committee with a timely, 
detailed premium impact analysis for all title 1 reforms 
included in the health care law?
    Ms. Tavenner. Yes, sir. But, going back to Senator 
Grassley's comments earlier about Medicare Advantage and what 
happened last Monday, there is a point where we can go public 
with what the premiums are, but it will be later in the game, 
if you will, for the very reasons that we outlined. It is not 
until a premium is actually locked down that we would be able 
to share that, so I suspect that will be probably late August 
or September.
    Senator Burr. All right. That is fine. But I hope you 
understand that it is important for us all to be looking at the 
same numbers. You may interpret the impact differently; you are 
entitled to do that. But, if we are working off of two 
different sets of numbers, it makes it impossible to try to 
analyze where we are and, more importantly, where we are 
headed.
    Ms. Tavenner. I understand. We will share those numbers.
    Senator Burr. Thank you for your time today.
    Thank you, Mr. Chairman.
    The Chairman. Thank you, Senator.
    Senator Schumer?
    Senator Schumer. Just quickly--and thank you for your good 
work. I know we have worked together on many issues, and I 
appreciate your expertise, your concern, and your caring.
    Two quick questions. One relates to a specific hospital 
called Samaritan Hospital Medical Center in Watertown, NY. It 
is less than 250 beds. It is a rural hospital that serves 
120,000 New Yorkers in, actually, a growing area of our State, 
because of Ft. Drum. The medical residency program was supposed 
to be exempt by law from cuts, but Samaritan was 
inappropriately misclassified in the spring of 2011. They were 
notified the Medicare program was reducing graduate medical 
education funding by three slots.
    The slots are important. This is a rural area. It uses NHS, 
the National Health Service, and all of that to get doctors. It 
is a very busy hospital. Now, here is the catch. CMS staff 
agreed that Samaritan was wrongly classified. There is no 
dispute that they should have been excluded, but they said 
there is no method of appeal for a wrong decision. That sounds 
more like Russia, Communist Russia, or Kafka-esque places, or 
whatever. So could you take a look at that for me, please?
    Ms. Tavenner. Certainly, Senator.
    Senator Schumer. Great.
    The second issue is also specific, and then I will be out 
of everyone's hair. Observation days. Senator Brown has 
introduced a bill; I have co-sponsored it. I do not know if he 
addressed it. Under current medical law, patients must be 
categorized as inpatient for 3 days before entering a nursing 
or rehabilitation facility if they want Medicare to cover their 
costs. However, if no operation or major procedure is 
performed, they are in there 3 days, but they are called under 
``observation'' status.
    Then if the hospital says, look, you do not need an 
operation but you need physical therapy, Medicare does not 
cover them. So you have, in my area, hundreds and hundreds of 
seniors--I am sure it is thousands across America--who, because 
of this catch-22 of observation days, end up having to pay 
$8,000, $10,000 for the rehabilitation that they need. Had the 
hospital done a procedure, it would have been fine, they would 
have been inpatient, but they are called ``observation'' 
patients.
    So we have introduced legislation for this. The number of 
observation days is going way up. Could you take a look and see 
if there is a way, without legislation, that that can be 
rectified?
    Ms. Tavenner. Yes, sir. We are happy to work with your team 
on it.
    Senator Schumer. Mr. Chairman, thank you.
    The Chairman. Senator Rockefeller?
    Senator Rockefeller. Senator Schumer, I am working on a 
case in West Virginia which is precisely what you described--
precisely. Then they are caught.
    Senator Schumer. Yes.
    Senator Rockefeller. They cannot pay. Nobody pays.
    First of all, I want to say that both you and the Secretary 
have been before us on a number of occasions, and I have been 
quite critical, sometimes in meetings in my office or in open 
or closed meetings with the Finance Committee, as have others.
    But what has occurred to me is that both of you have sort 
of sat there all by yourselves and taken the questions and the 
hits. I am of the belief that the ACA is probably the most 
complex piece of legislation ever passed by the U.S. Congress.
    Tax reform obviously is going to be huge too, but it means, 
up to this point, it is just beyond comprehensive and adds all 
kinds of requests and individual insults, and this, that, and 
the other thing. But I have to say that I very much admire the 
way both of you handle it, the way you are stoic about it, and 
I look forward to supporting your nomination.
    A couple of questions. You approved for Arkansas--we began 
to talk about this before--premium assistance instead of 
expanding Medicaid as usual, which is in spite of the fact that 
even Arkansas admits that it is going to be 13 to 14 percent 
more expensive to do that.
    I do not understand why that allowance was made, why that 
waiver was given. Now, the whole business of the giving of 
waivers by CMS to States is still something of a mystery to me. 
I am sure there are explanations for some, and I am sure there 
are not very good explanations for the others. I do not know 
really what was involved. But this is a very clear case of 
going to something which is clearly more expensive. Did 
Arkansas want to pay more money?
    Ms. Tavenner. So Arkansas--Senator Rockefeller, I think 
there has been a lot of confusion, and a lot of that generated 
by the press, about actually what is going on with Arkansas as 
it relates to premium assistance. They approached us with the 
idea of taking what has historically been done in premium 
assistance and trying to apply it to the Medicaid expansion, so 
we do not yet have a formal proposal from Arkansas, and we have 
not approved anything. So, let me start there.
    Senator Rockefeller. Oh.
    Ms. Tavenner. The second thing that is important to know, 
though, is we did put out some Q&A--I am glad I am not using 
Q&A right now in a bad way--some clarification around what 
premium assistance is and is not. One of the things that we 
have stressed--we have a handful of States that are interested 
in this program. Arkansas is one of them.
    So we have tried to spend our time educating them that 
these are still Medicaid beneficiaries with the same rights and 
protections of Medicaid. On the issue of cost effectiveness, 
which before has always been a requirement and waiver, we will 
look at, is there a band that we are willing to take a look at 
if in fact this would reduce the churn and the movement back 
and forth? But there have been no decisions made, and there has 
been no approval granted to Arkansas.
    Senator Rockefeller. Well, I am glad.
    I worry also particularly about the level of health care, 
the quality of health care, for children under such a program.
    Ms. Tavenner. Yes.
    Senator Rockefeller. Medicaid does very well by children. 
What premium assistance does for children under a Medicaid 
expansion program, I know not.
    Second, on the matter of Medicaid cost sharing, you put out 
a proposed rule, which means maybe you have not done it, which 
actually sort of goes up against what is authorized by the 
Affordable Care Act, and I am curious about that.
    Medicare beneficiaries obviously do not have much money to 
spend, and any kind of a study has shown that you just tweak a 
little bit in this direction and you cause a whole lot of 
damage. So I am confused by it. Are you still studying it? Are 
you still thinking about it?
    Ms. Tavenner. It is still in a proposed rule, and we are 
accepting comments.
    Senator Rockefeller. When you come to making a decision, 
will they be able to opt out of that?
    Ms. Tavenner. I am happy to sit down and discuss this with 
you and your staff. Basically, if you will remember--you will 
remember well because you were very involved in it--below 100 
percent of the poverty level, there is a very, very small cost 
sharing. In fact, it is in statute. In the 100- to 133-percent 
range, there is a little more openness, if you will, of cost 
sharing, a little higher percentage. So that is what we 
discussed in the proposed rule.
    But there is no opting out if a State decides they want to 
go that route, but there are very small caps. They are like $4 
or $5 a visit. That is something that was in the proposed rule, 
and we are happy to come sit down and go over that with the 
team.
    Senator Rockefeller. So individuals could not opt out?
    Ms. Tavenner. It would depend on what the State applied 
for, so we would have to look at it on a State-by-State basis. 
But this is in a proposed rule, and right now we are just 
getting comments back on, is this something that States are 
interested in, and, if so, what would they like to see?
    Senator Rockefeller. Mr. Chairman, just indulge me for a 
second. I get a lot of answers like that, that we are looking 
at it, when I thought something had been done because the word 
around the circle is that something has been done.
    Ms. Tavenner. I know.
    Senator Rockefeller. Then you say, let me get back to you 
on that, let me come talk with your staff on that--and we have 
had very, very good staff meetings as a result. I mean, you 
have been very faithful and very good on that. But it worries 
me, because it is so complicated. If it is not done right the 
first time, it will simply get worse.
    The bill has been voted on, so it is not a question of 
trying to get constituencies, like exempting the hospitals from 
IPAB until 2019. I mean, maybe that was necessary to get the 
American Hospital Association's support, I have no idea. I did 
not like it. But we are past that point now.
    Ms. Tavenner. Yes, sir.
    Senator Rockefeller. So a rulemaking should be made in 
terms of the best interests of the Affordable Care Act, of 
course taking the needs of the State into mind.
    Ms. Tavenner. Yes, sir.
    Senator Rockefeller. Thank you very much.
    The Chairman. Thank you, Senator.
    Senator Cantwell?
    Senator Cantwell. Thank you, Mr. Chairman.
    Ms. Tavenner, great to see you. Thank you for our previous 
conversations. You know I have been very concerned about the 
failure to implement the basic health plan by 2014. I recently 
received a letter from Secretary Sebelius saying that, no later 
than April 15, 2013, you would issue a time line for guidance 
but that the program would be implemented as the law states, as 
fully operational with States being able to receive 95 percent 
of the tax credit value in 2015.
    So first I wanted to ask you--well, in general I wanted to 
ask you about your beliefs about the basic health plan, what 
you think is valuable about it and your commitment to that 
2013, April 15th deadline.
    Ms. Tavenner. Yes. We are committed to the April 15th 
deadline, and I realize that is Monday. So we will have 
information to you then. We have started to work informally 
with the States on this issue. We certainly understand that the 
basic health plan is an important piece of the Affordable Care 
Act, and so you have our commitment to implement it by January.
    Senator Cantwell. What do you think is important about it?
    Ms. Tavenner. I think it gives States options for those 
States that want to try something innovative, and it is 
obviously a cost-effective strategy as well.
    Senator Cantwell. So you think it saves money?
    Ms. Tavenner. I think it certainly can, but I think that is 
not the only reason for doing it. But I think that is an 
important reason. I think it also can provide a coordinated 
approach and quality care to patients.
    Senator Cantwell. Managed care. Is that what you are 
saying? When you say ``coordinated care'' do you mean ``managed 
care''?
    Ms. Tavenner. No, I mean coordinated care.
    Senator Cantwell. All right. Well, we will look forward to 
seeing those guidelines then by next Monday. Just to be clear, 
the basic health plan for individuals--let us take somebody who 
is making just over $17,000 a year who applies for this, they 
would save about, let us say, $1,161 in health care costs for 
an individual. So that, versus the exchange, is a huge savings 
for the individual.
    The Urban Institute says that if all States implemented 
this--this is a report that they did in 2011--the Federal 
Government would save $1.3 billion a year. So there is 
obviously a lot at stake for the Federal Government in the 
savings, and individual States--for example, our State would 
save something like $173 million per year. This is the Urban 
Institute that has done this analysis.
    So what we have accomplished here is to be able to bundle 
up that population that is just above the Medicaid rate, bundle 
them up and make them interesting, where insurers were not 
interested in them before. The success of that has been to get 
a better rate for individuals and to get a better, obviously, 
cost-effective rate, both for providers--and that is why they 
have participated--and a cost-effective rate for us, the 
taxpayer.
    So I will certainly look forward to seeing that on Monday 
and certainly would love to support your nomination throughout 
the process, but definitely I want to see this information. So, 
thank you very much.
    The Chairman. Thank you, Senator.
    Just a couple of questions, Ms. Tavenner. Did you read the 
Steven Brill piece in Time magazine?
    Ms. Tavenner. I did.
    The Chairman. Could you tell us what you think is most 
valid, the most valid criticisms about the American health care 
system, the most valid reasons in that article as to why we 
spend much more on our health care system in our country than 
we should? What were the best points there?
    Ms. Tavenner. Chairman Baucus, I would say I will start 
with three observations from that piece, which is obviously a 
lengthy piece, and very well done. The first one is that, 
obviously, the issue of hospital charges is a tremendous 
problem. It is a tremendous problem from the standpoint of 
consumers trying to figure it out, and it is a tremendous 
problem from the standpoint of hospitals trying to have charges 
be relevant to their cost.
    The second take-away I had is it kind of highlighted, and I 
mentioned this earlier----
    The Chairman. But that article basically stated and/or 
implied that the charge master was a set indication of prices 
which may or may not be relevant to what the costs actually 
were, and a lot of people did not know what the heck the charge 
master was.
    Ms. Tavenner. Correct. I agree.
    The second piece is that, from the insurance perspective, 
going back to what I said earlier, I think a lot of people 
found out that they thought they had adequate insurance 
coverage, and then, when they got into a costly illness, they 
did not. So that was the second take-away.
    The third take-away is really that I thought--and maybe I 
cannot be objective on this issue--that Medicare and the work 
that Congress and CMS have done around Medicare costs looked 
pretty strong in the article. So my take-away from that is that 
there is no relationship between charges and cost, and how do 
we educate the American public about that? It is difficult to 
be educated when, quite honestly, you have broken your arm and 
you are on your way to the emergency department. So we are 
actually looking at ways we can get more transparency out to 
the public around the issue of hospital charges and costs.
    The Chairman. But I also took away from that article the 
concern you mentioned, that it applies more to people who do 
not have insurance, or the individual market compared with 
employees who have insurance who work for a company.
    Ms. Tavenner. Right.
    The Chairman. But even there, the difference between the 
actual costs and the charges is still quite significant.
    Ms. Tavenner. Yes.
    The Chairman. Even with larger employers who provide health 
insurance for employees.
    Ms. Tavenner. And, obviously, the more we educate employers 
and beneficiaries about that, the more they will start to pay 
attention to it as well.
    The Chairman. How much of this is education, though? This 
is such a complex subject. If someone gets a bill from the 
hospital, nobody can understand it.
    Ms. Tavenner. Right.
    The Chairman. So is there more to it than just educating 
the public?
    Ms. Tavenner. And I think that is what we are looking at 
now, and we would like to work with you on that.
    The Chairman. What might some of those things be?
    Ms. Tavenner. Well, I think initially for us, understanding 
what we think are within our authorities, we certainly have the 
ability to publish this information and do some comparison. We 
also have the ability to encourage States. Some States have 
more robust programs about the relationship between charges and 
costs, so those are a couple of areas that we could start on, 
working with States, working nationally, to get the information 
out.
    The Chairman. Well, I urge you to be very aggressive in 
this area, because Medicare is such a large payer.
    Ms. Tavenner. Yes.
    The Chairman. It can influence others in the private 
sector, that is, the commercial market.
    Second, many of us met with some experts--at least we 
thought they were experts--in health care economics. They are 
experts. One suggested quite strongly--and I will not mention 
his name, but you would certainly know him if I were to mention 
his name--that CMS can do a better job and move much more 
quickly in moving from fee-for-service to reimbursement based 
on quality and outcomes.
    So I asked the question of this person, what can be done? 
This person said, well, what CMS should do is just set a 
deadline. Like, 10 years from now, 90 percent of reimbursement 
will no longer be fee-for-service, but it will be based on 
quality, whether it is through the ACOs, bundled payments, or 
whatnot. But he felt very strongly that somebody needs to light 
a fire under CMS, that it is not moving fast enough.
    Ms. Tavenner. Chairman Baucus, that is interesting. I hear 
the opposite concern, needless to say, from consumers and the 
industries, that we are moving too fast. What we are trying to 
do is take a measured approach. We certainly have made more 
changes, and the Affordable Care Act gave us a lot of that 
authority to do so, to get away from fee-for-service and move 
more to, whether it is payment for quality or avoiding the 
readmissions.
    So I think a lot of work has gone on in the last 3 years, 
and I am proud of that work, but there is no question there is 
a lot more to do. We could probably move faster in some areas, 
particularly if you look at our current growth and spending. It 
has kind of moved some from the work that we have done around 
hospitals to more the outpatient sector, so there are some 
probably targeted things we could do in the outpatient sector 
that could move a little faster.
    But I would be very nervous about setting an arbitrary 
target--and I think I know who the economist is who set that 
target, because I have heard these targets placed before--and 
then trying to back into a target. I would rather that we do an 
incremental, aggressive strategy moving forward.
    The Chairman. I appreciate that, but sometimes you need to 
set deadlines and dates to make things happen. Even if you do 
not make the target, you can just ask yourself, well, why 
didn't we? Maybe the target was the wrong target. Maybe we did 
not do a good enough job. But if you do not set targets, you do 
not set dates, deadlines, and benchmarks, I would just submit 
you are going to not do as well as you otherwise would.
    Ms. Tavenner. Right. And we do set a lot of those each 
year, and I am happy to share those with you.
    The Chairman. Yes. We are going to get to that. At some 
point we are going to ask you to share those so we can work 
together to get things done.
    Ms. Tavenner. All right.
    The Chairman. All right.
    Senator Wyden?
    Senator Wyden. Thank you very much, Mr. Chairman. I was 
chairing a hearing, and I appreciate your courtesy. I know you 
are trying to wrap up.
    Ms. Tavenner, welcome. We have appreciated the discussions 
with you. As you know, I feel very strongly that it is time for 
the government to finally mobilize and take care of the 
millions and millions of seniors who could be taken care of at 
home, and we have not been able to reach them with good quality 
care, largely because, over the years, we have just studied and 
studied and studied.
    It goes back to the days, I was telling my friend Senator 
Rockefeller, when I was director of the Gray Panthers. We were 
circulating petitions for Senator Rockefeller's efforts then to 
get more care for seniors at home. Now we finally got, with 
Chairman Baucus's support, the Independence at Home model into 
the Affordable Care Act. In effect, it is giving us a chance to 
really move like the VA has in order to get people better care 
where they want it and also to save substantial sums of money.
    My understanding is that you all are beginning something 
called the Rapid Cycle Evaluation Group. That is kind of a 
mouthful, but I gather it is a fast way to really determine how 
to look at these care models, like Independence at Home, and, 
when they do show that you can get better quality at less cost, 
they can be accelerated and serve to address the needs of more 
seniors.
    Would you support including the Independence at Home 
program in this Rapid Cycle Evaluation Group? I hope I am using 
the right terminology.
    Ms. Tavenner. You are using the right term. And, yes, of 
course. Independence at Home has been a great project, and I 
too support more care in the home, in the proper setting. So, 
yes, we will use the same type of evaluation, and we should 
know something soon.
    Senator Wyden. Very good.
    The other question I had deals with chronic care. As you 
know, Independence at Home is for the very sickest individuals, 
people who so often are home-bound. But there are millions of 
other seniors who essentially need chronic care. They may not 
face the same kind of challenges in terms of being home-bound, 
but they are walking around, for example, with high blood 
pressure, diabetes, a host of problems.
    It seems to me that not enough has been done to address the 
needs of the chronic care population. Of course, this is about 
70 percent of the Medicare dollar. So, when we find better ways 
to take care of the chronic care population with better quality 
and lower costs, to a great extent we fix Medicare. We are 
having a lot of debate about raising the age and all kinds of 
things. Here is a way to help people get better quality care at 
lower cost.
    Have you all looked at trying to come up with a kind of 
health home option for States and Medicaid programs for the 
chronically ill beneficiary? Because it seems to me that this 
would be another way, using really existing authority, that we 
could step up our attack in terms of improving care for this 
population, as Senator Rockefeller started years and years ago.
    Ms. Tavenner. Yes, sir, we have. We actually have some 
Medicaid health home models that have started. They are small 
in number, but they are starting to catch on. We work with 
States to make that happen. Obviously in Medicare, some of the 
work we are doing in the Innovation Center is around the 
medical health home.
    Senator Wyden. The time for the vote is about to expire.
    Would you look at extending this model? We are talking 
about for Medicaid to Medicare. Yes or no?
    Ms. Tavenner. Yes, I would look at it.
    Senator Wyden. Very good. Thank you. I am looking forward 
to supporting you, and I appreciate your help in the office.
    Senator Rockefeller, thank you for the extra time.
    Senator Rockefeller [presiding]. Thank you very much, Ms. 
Tavenner, for your presence. I look forward to voting for you.
    Ms. Tavenner. Thank you, Senator Rockefeller.
    Senator Rockefeller. The hearing is adjourned.
    [Whereupon, at 12:10 p.m., the hearing was concluded.]










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