[inaudible conversations] president Abraham Lincoln once said, the best way to predict your future is to create it. In 2009 we didnt like the future we saw for the Healthcare System based on a feeforservice payment model. Doctors and hospitals being paid nor amount of care delivered instead of how well they delivered care to patients. So in the Affordable Care act we created new and better ways to deliver health care. Save taxpayer dollars and improve patient care, medicare and medicaid in partnership with the private sector, are now working to create the road map for future Healthcare Delivery and were here today to make sure theyre on the right track. Theres a clear slowdown in healthcare spending. But we need to do more and do it faster to change the way medicare and medicaid pay for healthcare. How to boost the countrys economy, we learned from economists the number one way to reduce healthcare spending is to end feeforservice. Everyone agree that feeforservice drives volumes, excesses, and waste. We know this encourages the wrong things. Thats why healthcare reform changed incentives to providers. And medicare and medicaid are testing different programs to determine which work best. In october, medicare rolled out a program with a simple yet revolutionary premise. Medicare is going to pay hospitals to get the job done right the first time. The hospitals are penalized if patients are readmitted too soon after being discharged. Communities from montana to maryland are rising to the challenge. In miss sue los angeles montana, the local earth is partnering with medicare on care transitions. Under the program, patients at reaction of readmission will get extra help making the transmission from the hospital back to the community. Today well hear about data showing significant first step in bending the curve o. Medicare Hospital Readmissions. The raise for medicare babies return though hospital for fremont has fallen by more than a full percent over the past several months, after being firmly stuck for years and decree okayed. Medicare and medicaid implemented a new program in october that pays hospitals more for delivering better care, and penalized them financially for poor outcomes. For those outside of health care, this idea will not sound revolutionary. It makes sense. When you take your car to the repair shop to get the brakes fixed and they brake the were, you shouldnt have to pay for the prone windshield. Starting in october hospitals can be penalize evidence you go in for a heart attack and the hospital gives you a surgical infection, and hospitals can be rewarded for Good Customer Service and patient care. That means fors and nurses share information and tests, explain medications, and develop plan of coordinated care for a patient leaving the hospital. Need to get more value out of each taxpayer dollar spent and help providers coordinate care. Medicare and medicaid need to reimburse hospitals, doctors, and nursing homes, to keep patients healthy. The Accountable Care organizations are starting to make this happen. Medicare almost 300 Accountable Care organizations, including in billings, montana, have teamed up to serve more than four million beneficiaries. In these organizations, doctors, hospitals, and other providers, Work Together to give patients coordinated care. The providers are make talking to each other a priority. And give patients the right care at the right time. Medicaid is also come to the table to provide solutions to the cost challenges facing states. Medicaid byfrizz minnesota bill among the first to be in a program new program. My state of montana started a program to lower diabetes and cardiovascular disease in its medicaid population. The goal is to help participants lose weight and keep it off, which makes. The healthier reduces costs in the Medicaid Program. We need medicare and medicaid to support these state efforts and offer flexibility to test innovative ideas, find out what we can do more. So, listen to president lincoln, and realize we are in charge of creating our future. Let us do more to lower cost and defend medicare and medicaid and create the future of Healthcare Delivery. Thank you, mr. Chairman. Thank you for convening this timely and muchneeded hearing this morning. Now, last week, Time Magazine had an article, in the longest article in the publications history. An exploration of the high cost of medical care in this country and what the costs mean for pensions. There was a fascinating article and got me thinking. Over the last five years we have spent a lot of time here in Congress Talking about health care. And while the affordable carry was signed into law nearly three years ago and was supposed to make healthcare more affordable for patients and consumers. Now, the socalled affordable kerr act did a lot of things but it has done very little to address the Biggest Health concern people have, the actual cost of care. I hope that at some point we can take a serious look at the drivers of healthcare costs in the u. S. I think it would be well work the committees time to do so. Today, however, were here for a different reason. The finance Committee Held a hearing where we heard from provider ands thirdparty payers in the private sector who have come together to do some interesting things. To try to improve care while reducing costs. I believe the private sector can and will make Great Strides in this area, we cannot forget that medicare is the nations largest healthcare payer. That being the case, if were serious about reducing costs, our efforts to encourage innovation must include medicare. Ive been very clear about my opposition to obamacare. My concerns about the adverse impact of this law on family premiums and National Health spending continue to grow with every passing day. However the chairman and i agree that Healthcare Providers and payers of all shapes and sizes need to Work Together to provide patients with highquality, better coordinated care. According to the medicare payment advise commissions most recent report in 2010. Individuals, government, and businesses, spent a total of 2. 6 trillion on health care. Today about 45 of all healthcare spending comes from government. And in 2014, when the medication expansions begin, that share will rise to 50 . The Congressional Budget Office projected by 2021, just eight years from now, spending on medicare and medicaid will grow to 1. 6 trillion. By virtue of the sheer size, medicare has an important influence on the Overall Health care delivery our country, and with the right policies in place, medicare can be a driver of change. Now, that being said, also hope the program can be as nimble for the private sector in making imapproachs. Mr. Blum, i hope you can reassure us that can be, and in addition the rapid edge can of our population, we have to contend with an increasing number of patients with chronic diseases, such as diabetes and Heart Disease. These patients are sicker and more expensive to treat, and while provider ares are doing their best to manage these patients, often times our Healthcare System is not structured for our care to be easily coordinated. Currently we have a system of isolated silos. Patients rev care in a variety of settings, doctors offices, hospitals, nursing homes, et cetera and its not uncommon for a Healthcare Provider to have an incomplete picture of a patients overall care in addition, provider incentives created by potential malpractice liability and patient incentives, created by insurance choice, are not wellaligned to put the proper focus on better results and lower costs. We can certainly continue to think around the edges of delivering care in new ways but providers continue to tell me that fear of lawsuits drives the volume of service, and our feeforservice system former medical defense lawyer might have to say, it was bad back then. 37 more than 37 years ago. Its even worse today. When talking about Delivery System reform, our goal should be to ensure that patients receive the right care in the right place at the right time. Theres an appropriate rule for both the private pairs and the federal government to put pressure on providers to provide better care and Better Health outcomes. I know rome wasnt built in a day but i think we have to move beyond simply reporting what providers are doing, holding them more accountable for healthcare outcomes. In my own home state of utah we are privileged to have some of the best, important efitchet Healthcare Providers in the country, not all providers are created equal. Often the right hand doesnt know what the left hand is doing. Unfortunately the patient is caught in the middle trying to coordinate care. Im anxious to hear from you, mr. Blum, about any progress made towards greater care coordination. We know errors can be avoided when providers focus on plans. Theres been a lot of attention paid the attention from the center for met care and medicaid innovation, also nope as cmmi. Like many of my colleagues i remain concerned that cmmi has an enormous budget and very little accountability. Im hopeful well hold another hearing this spring that focuses on ccmmi and the result of the 7 billion0s taxpayer money given to them to advance cause of Higher Quality and lower cost. Thank you for convening this hearing today. I look forward to hearing from mr. Blum and hopefully he has some good news on bringing down the cost of health care. Thank you, senator. My colleague and friends here, mr. Blum is no stranger to the finances committee. He was on my staff and also the principle advisory for this table on mma not too long ago. Its hard to resist mr. I dont think ive met anybody smarter, certainly glad youre here. As an introduction, Jonathan Blum is acting Principal Deputy administrator and director, center of medicare, centers for medicare and medicaid services. Good to see you. You know the rules here. Your statement will be in the record. Chairman bachus, thank you member hatch, committee members. Thank you for the opportunity to discuss our progress in the Medicare Program and transform the if therey of care in the three years since passage of the Affordable Care act im pleased to report on our progress. We have put in place many new programs and policies following the goals of the Health Reform legislation. For the first time we can say were paying for value, not simply the volume of care. Quality is improving and costs are growing more slowly. Simply put, medicares cost curve has been bent downward. Over the last here to years cms has put in place payment mechanisms to reward hospitals for the overall quality of care. Cms has finalized regulations to define what it means to provide Accountable Care. The socalled acl regulations. We have transformed our physician Payment System to shift its emphasis towards primary Care Services and care coordination. We have established a new center for innovation, which is currently testing more than 35 new programs and is working with over 50,000 Healthcare Providers and over 3700 hospitals. We have shiftedded the Business Model for private plans competing in medicare. Before the Affordable Care acten, plans competed on low premiums and extra benefits. Today they compete on low premiums, extra benefits, and the quality of care they provide their members. Cms has transferred transform our framework to respond to fraud and abuse, to stop fraud before it happens, rather than chasing down providers for payments after they occur. Cms has overhauled the payment model for durable medical supplies and home health care, dramatically lowering spending without compromising quality of care. Over the next self mop months cms will focus on new areas. Were work with hundreds of hospitals and Healthcare Providers to test how to bundle fee force Service Payments together in new ways to figure out the best way to pay for a total episode of care. Well continue to work to implement the value modifier policy to continue to share our physician Payment System, to reward Top Performing physicians and providers. Well continue to partner with states to test ways to best provide and coordinate care, including to vulnerable populations such as the dual eligibles. Given our worked to, we we can now provide this Committee Data that the strategies are working. There are four data points i believe that should give us great optimism. As senator backus said we have more than 250acls operating in the tradition feeforservice program. This tells us that providers, physicians are stepping forward to participate in new payment and delivery models. Data point number two. After more than five years of holding steady, the rates for all cause Hospital Readmissions is starting to trend downward. Point three. 37 of Medicare Beneficiaries who have chosen a private medicare plan are in a forced r5 star plan, 5 star being the highest quality. Up 16 from four years ago. Quality of care is improving. Data point number 5 and most exciting. The rate of growth and per capita medicare spending has been at historic low rates for a three years in a row. This is tremendously exciting to be sure we have more, who to do, it in work to date and the data were seeing should give us great hope we can bring medicare to nonnable financial footing and improve the quality of care. Ill be happy to answer your questions. Thank you, mr. Blum. First, my first question is, youre coordinating with the private sector. Its one thing for medicare and tim has to put together organizations to set up but clearly if this is going to work, been talking with, working with, coordinating with the private sector to get some of the same agreedupon incentives for results. If you could just describe all how successful that has been, and the degree to which youre working with Insurance Companies and providers, et cetera. Theres a couple ways to answer your question, senator. The first is we study very carefully best practices and talk to private payer, state Medicaid Programs so we can repeat or build off of best practices. There are some very exciting programs within private payers to foster medical homes, for example. So we try very hard to understand how the private sector is creating new financial incentives. We also tried to craft our regulations in a way that is open, transparent, to private payers can copy not copy but try to build often the cms medicare experience. For example, we hear from large private health plans theyre working to establish acos for their contracted physicians, built off the regulations cms has finalized. Finally, self of our new innovation models have a allpayer component to it. The pioneer model, for example, in order to get the pioneer contract for the acl pilot, the pioneers had to demonstrate they also had riskbased contracts with private payers to demonstrate theyre not just wok can with the Medicare Program but working in the entire Healthcare System. We have another pilot at the Innovation Center to test how to build primary care medical homes that do have an allpayer concept where the providers who get the contracts from cms have to demonstrate theyre also working with private payers to make sure were all pointing in the same direction. We hear from others theyre building off the valuebased purchasing strategies, so were always trying to learn from betts practices, try to innocent all players to point in the same direction and craft our regulations to serve as models for private payers. A lot of demonstrations going. When am i going to see results . You have demonstrations, i think, aligned with cmmi. Senator hatch referred to it. You mentioned that 250acos. A lot of other demonstrations going on. When are we going to see some results . I think one result were seeing, i believe, is due to a combination of different factors, is the reduction in all cost Hospital Readmissions. When you think about one percentage point being lower than the previous five years, that translates roughly to 20,000 fewer readmissions per month, and i believe that its due to the payment policies, the new innovation model being create. So there is some result elf challenge is how to assign cause and effect. Many of these models were started in the last one or two years. We expect that to fully see results it will take two or three years. Theres upfront costs to providers to Building Models to create the data systems so we need to be cautious looking at firstyear results. Were very much committed to sharing the data we see. My boss, secretary sebelius, is very anxious to see results as well. Any model that is scalable, that can be scaledhas to go through rigorous review of the chief actuary so we will share our learning. And one positive learning is providers are very eager to step up. Were overwhelmed by interest. Theres some due you have a sy