kavanaugh on roe v. wade. tuesday on 8:00 p.m. eastern, landmark cases present an in-depth look at roe v. wade. we will also hear from "los angeles times" supreme court reporter. next, health-care industry leaders and economic scholars testify on what can be done to reduce health care administrative cost. this runs for one hour and 42 minutes. >> senate committee on health education will come to order. senator murray and i will each have an opening statement.

let's pause for a moment and realize what a remarkable statement that is. the institute of of medicine, we had a panel of their of equally impressive witnesses and nobody really disagreed with his estimate. ont hearing, we focus reducing what we spend on health care by examining two things. one, reducing unnecessary health care tests and prescription drugs. -- how tonting -- it is all the time spent filling out insurance claims. are muchative costs

higher and united states than to a countries according witness on our first hearing, administrative costs account for 8% of all health care spending in the u.s., roughly, that a student at $64 billion in 1% to 3% for other countries. while many administrative tasks in the health-care system come from outside the federal government such as insurance company or state requirements, the federal government is clearly at fault for some of this burden. for example, there is a a lot of excitement over electronic health care records in washington dc. many said the systems would make it easier for doctors and patients to access a health record and share the information with other doctors. federal11, the government has spent 38 billion dollars requiring doctors and hospitals to install electronic health record systems tre the federal government provided

payments to doctors and hospitals to buy those systems and created specific requirements for how doctors must use the system, penalizing doctors who did not comply. have endedrd systems up being something that physicians to often dread. family physician who shares a residency program with three clinics in the eastities areas of tennessee is required to have an electronic health record system because he sees medicare and medicaid patients. he initially received payments but now he has to pay a monthly maintenance fee to electronic health records company as well as paying for periodic upgrades to the system. all of these costs add up to being far more expensive than the paper records he used to keep or the initial payment the government provided.

unable to see the health record of a patient discharged from across the street. that is because the hospital does not use the same software so instead, he has to called a hospital and have paper copies of his patient records faxed to his office. there is technology to make as electronic health record system communicate with a local hospital record system so he would not have to have them fax to the office however, he would have to pay $300 per month to the company for each of the 88 doctors and nurses in his practice. what this means is that for his 88 doctors and the nurses, the doctor would have to spend $26,400 every months. 316,000 a year just to see his

patient's health records from across the street or other doctors. the system that was opposed to make things easier has instead made it record keeping more expensive and doctors still cannot see the patient records. this is just one example of how it can add to the administrative burden that doctors face. to the american hospital association, there are 600 29 different regulatory requirements from four different federal agencies. doctors, hospitals, and other health care providers have to comply with them. from requiring doctors and nurses to dissipating and medicare and maintaining clients with privacy law to make sure the right signs are hanging around the office. need 23 full-time employees just to keep up with the regulations about what a to.'sal needs to do

opinion medicare called the conditions of participation according to the american hospital association. when the federal government adds one more ruled, it may not seem like it makes much of a difference but added together , those questions and roles added up to more time spent on paperwork and less time treating patients. the trump administration is taken a look at what administrative tasks are required by the federal government and i am glad to see that the administrator of cms which oversees medicare and medicaid recently proposed streamlining many of the reporting requirements. this is one step. i look forward to hearing about of what the present government can do. we should keep in mind that what may seem with a good idea or a dcic bullet in washington

may actually result in something very different for doctors, nurses, and hospitals. senator murray. >> thank you mr. chairman. i am glad we are continuing conversation. in my home state, many of them struggled to hear the care they need, and i look forward to hearing from all of our guests today. i think they're all -- there are opportunities. we know the current administrative system is fragmented with different federal, state, and private protocols for things like billing and measuring the quality of care. i am interested to hear from our witnesses for ideas to simple if i requirements while maintaining . instead of pursuing policies to

address high administrative ists, president trump pursuing a path of health care sabotage including ideas that will make this problem worse. of management and budget is currently reviewing a new sabotage step that will do even more to let insurance companies offer junk plans that protectionsermine for people with pre-existing conditions, but also no requirements that ensures that it is spending most of its money on patients. an analysis from the national association of insurance commissioners shows the most spend onunk plans average half of their revenue on things that have nothing to do with patients'health care needs. president trump wants to make it easier for insurance companies to discriminate against people with pre-existing conditions and reward themselves with bigger

executive bonuses. we should be looking for steps to reduce administrative costs .nd make health care affordable this idea moves us in the exactly the wrong direction. unfortunately, the administration's focuses on satisfies -- on sabotaging. from day one, president trump has focused on rolling back family health care and protection for people with pre-existing conditions, even though the people have utterly rejected the agenda. a year ago, when they spoke up against the mean spirited -- fortunately, those efforts failed and president trump has now decided to sabotage health care from the oval office and said. the dramatic -- instead. pushed aically

partisan tax-cut bill which meant lower rates for massive insurers, higher premiums for families. he handed the reins back to insurance companies by looking for ways to make it easier to sell junk insurance with dodge is a patient protections like those with people of pre-existing conditions, women, and seniors. had his justice department take the highly unusual step of refusing to defend pre-existing conditions and core. and now many of us are concerned that they have elected a supreme court justice that he is a serious threat to families health care and protections to people with pre-existing conditions. i hope republicans join us and rejecting his nomination just like they joined us and rejecting trumpcare when it threatened our families across the country. i do hope they will come back to

the table to bring down health care costs. >> i will ask sandra michalski's interviews are first witness who was come along way. including onu for beckyistinguished panel hallward. andhas been a great friend in assistance to my staff and my office, she has been a strong leader in alaska. of the alaska state hospital and nursing home association. this, the commissioner for administration under the governor where she provided business support services to our state government.

that department oversees management of the retiree health plans for more than 80,000 covered lives. she has served as the regional director of communication and marketing for providence health in alaska. breadthan extraordinary of understanding of the associated health care cost in rural states and recognizing some of the challenges that we have heard before this committee. and the impact to our smaller facilities, more remote facilities. she brings extraordinary experience to the committee. i appreciate that we will have her voice added to this important discussion this morning as to how we can work to decrease administrative spending when it comes to health care costs. thank you. i look forward to the comments

we will get from becky this and appreciate her making the long haul from alaska to begin this morning to get -- morning. our second witness is president of america's health insurance plans financial trade association representing health insurance providers. he held a number of other leadership positions at fortune 200 companies. he worked for the congressional budget office. dr. david cutler is our next witness. professor of applied economics at harvard. he served on the council of economic advisories for the national economic council during the clinton administration. he held a number of positions with the national institute of health. book is our fourth

witness. he is a health economist who advises at the health care and economic expert forum. he is a senior research director at health systems innovation network llc. he is a wide range of experience including senior research fellow at thelth economics heritage foundation on the faculty of the industrial college of the armed forces. senior associate of the lowland group. wecome to our witnesses, will go down the road. >> good morning. i'm the president ceo of the alaska state hospital and home association. thank you for having me here to testify today. health care providers face a variety of administrative burdens from regulations. i will focus my remarks on the growing number of federal regulations and the impact of this on our health care system.

health care provider share the same goals of improving quality and keeping patients a. providers recognize the importance of a stable regulatory framework that allows them to focus on patients and invest resources in improving health care access. we appreciate recent work done by cms and addressing regulatory burdens. more must be done. of regulations were published in 2016 alone. the american hospital association quantify the cost in a recent report. they must comply with 629 discrete regulatory requirements. spending $39 billion annually in restraint of activities related to regulatory compliance. for an average sized community over $7.5this is million on regulatory compliance.

for skilled nursing facilities, exceeds of complying 735 men in annually. marginsnot a time when for skilled nursing facilities are less than 1%. it is important to recognize the opportunity costs. it is the next best thing you could of done with the financial and human resources spent on something for the value of the foregone alternative. it highlights the reality of scarcity. a dollar spent on administrative cost is not available for something else. financial and human resources spent in regulatory compliance cannot be used routing services, and limiting patient safety initiatives, or addressing community needs. there are steps the federal government can take to adjust the mountain of peggy relations will ensuring -- regulations while ensuring safety.

regulators should provide clear guidelines and reasonable timelines for the limitation of their rules. conditions of participation for medicare, a significant source of the cost of regulatory compliance, should be evidence-based. requirements for the meaningful use program should be streamlined and increasingly focused on interoperability. congress and the office of inspector general should revisit requirements aimed at combating fraud to provide the flexibility necessary to support high-quality care. skilled nursing facilities face unfunded mandates to hire staff and establish compliance programs. to their sheer volume and specificity, they are difficult to implement. cms should revise the requirements of participation to make them more outcome focused and fiction -- patient centered.

we urge congress to a trust the receive at that 5% federal survey each year. this unfairly penalizes small states with few facilities and i want to thank senator michalski from interest in this issue. rapid improvement in patient safety are occurring at scale in our nation's hospitals. voluntary partnerships between cms and providers to improve partnership for patients and the american health care association's quality initiative resulting in measurable improvements in patient care. skilled nursing facilities are improving. alaska providers are exceeding national trends in several areas. alaska hospitals reduce the rate of death from severe sepsis from 20% to just under 5% in two years. behind the statistics are real people. some of his mother, friend,

child. alive today because of this collaborative work. we must focus our resources on the quality improvement partnership really real results for patients. the issue of administrative burden comes under sharp focus in role america. it requires to implement and rural areas lack scale. small hospitals simply cannot complye to effectively with an ever-growing burden of federal regulations. for large hospital, the opportunity cost of a regulation may me an a program to land. in a small town, the choice is more difficult. the opportunity cost for rural communities may be the loss of services. i want to thank the committee for the commitment to improving the nation's health care system and having me here today. >> mr. isles, welcome. am the president and ceo of america's health insurance plans. i appreciate the opportunity to

testify on reducing health care costs. every american deserves access to comprehensive coverage choices without regard to pre-existing conditions that help to improve their health and financial security. committed tore advancing this goal. we invest in a wide range of initiatives to improve patient care and protect patients from unnecessary treatments. our testimony focuses on four areas. we provide an overview of how consumer dollars are invested in the commercial market. shows that the vast majority of every health care dollar goes to pay directly for medical treatment and services. the rest funds programs and services that improve health and increase health care choices. some of the administrative activities carried out by health insurance providers, including medical management, and care coordination.

these all work together to improve the health care experience and reduce costs for consumers. of how healthles insurance providers are working to simplify administration for doctors and nurses. we outline our recommendations on steps that can be taken with help from industry partners and policymakers to address barriers to simplifying processes providing more value to patients. health insurance providers have a 365 degree viewing to how people use their coverage and care. members have pioneered many strategies for making health care more effective and affordable. several research studies show wasteful spending and health care. two thirds of physicians report that at least 15-30% of care is unnecessary. providers usece medical management tools to help patients get the right care at the rate time with a focus on better care. we work with clinicians to help confirm treatment regiments ahead of time and ensure the use

of the most cost effective therapies. prior authorization is one example of an effective medical management tool to ensure smarter care. it effectively addresses over use and misuse of procedures in commercial and public programs. authorization, our members analyze whether a treatment is safe and effective for a particular patient based on the best available clinical evidence. providers also ensure the treatment is provided in the most important care setting by qualified provider and it is provided with other needed services. othersworking with many to improve prior authorization processes and by making bit more fully electronic, we can improve its effectiveness and efficiency. health insurance providers have invested billions of dollars to monitor and eliminate fraud. of thea founding member health care fraud prevention partnership which includes the

federal government, stated as, and health plans. the hfp b has saved hundreds of millions of dollars through the detection and prevention of fraud. we are working with others to simplify operations without sacrificing quality. through partnership with the council for affordable quality health care, our members collaborate with other stakeholders to develop standard rules for electronic transactions. an increasing number of transactions are now electronic. there is more work to be done. sc hq which report estimated that more than 3 billion manual transactions a cure -- occur each year. insurance providers have played webading role in solving portals to provide easy access for physicians to multiple plans for key eligibility and determination information. such as co-pays, and adaptable. it provides access to current

information on claim status, reducing time and paperwork. core qualityare measures collaborative report high-quality evidence-based care. working toy is encourage further improvements including moving away from paper transactions, achieving interoperability for measuring quality, creating privacy laws for behavioral health, improving electronic transactions, recognizing fraud detection and prevention. thank you for the opportunity to testify and i look forward task during -- to answering committee questions. thank you for inviting me to testify today. i'm a professor of economics at harvard where i have been teaching and working in health care for about 25 years. i'm delighted to talk about the role that the administration and others can play in reducing administrative expenses in u.s.

health care. expenses areve -- a major drain on the economy. 30% of the health care bill in the u.s. is devoted to administrative expense. what the united states spends on caring for cardiovascular disease and three times what we spend on treating cancer. for billingexpenses services, two thirds of which are occurring providers offices. there are several reforms that would reduce administrative costs in the u.s.. some of these have been picked up by other witnesses. let me try to give them a bit of a typology. first is simplifying the complexity with which patients are coated. patient visits the emergency department, they are one of five different codes that can be put in.

the particular code depends on the past history of the patient and other conditions. an enormous amount of manpower spent searching through the record and finding every possible condition the patient could of had so that he or she can be put into a higher category for reimbursement. this is wasted time, effort, and money that could be directed to other uses. second, something that has been mentioned, standardizing preauthorization requirements. cost isshare of the documenting things associated with prior authorization. if one service is going to be proof that it occurred and had the requisite outcome. i have been in hospitals where they show me the procedures for billing radiology. in the manuals they have to comply with her over a foot thick.

each different insurer will have their own policies and each payer working with that ensure will have the wrong policies related to preauthorization. there is an army of coders and medical record keepers who are kept employed keeping up-to-date with that. the third issue is the integration of medical record and billing systems. this is something that chairman alexander mentioned. industries, computers take over for people. what happens in health care administration is that people take over for computers. you have an electronic medical record system that keeps some information, a billing system that keeps separate information, the two don't talk to each other. it is extremely costly to do that. said, theirman automation -- the requirements

as to integration have not kept up with where we need to be. that's a serious problem. the best guess of researchers is that we could eliminate at least half of the immense rate of cost burden and reduce medical spending in the u.s. by 15% if we were to simplify the administrative transactions associated with billing and insurance. the unfortunate circumstance is that these changes will not occur on their own. players in the private sector and health care are not enough to make these changes occur without additional help from the federal government. at other industries that have successfully reduced administrative expense, this common theme. the single biggest player in the industry has been intimately involved with this. retail, it was the product of companies like walmart that standardized billing packaging and coding and also its of things so that the transaction, which in health

care involve several people, involves nobody in retail. the second example is the federal reserve which standardized financial transactions in the 1970's and ken -- kept that. that has saved extends for banks and other financial institutions. it could only happen with the federal government being involved. the big player has to take part or it doesn't happen. i will beommend, explicit, is that the department of health and human services develop and implement a plan to reduce the administrative burden and health care by 50% within the next five years. i believe that such a plan is achievable and attainable. it would have enormous benefits for the economy and i don't think it will happen without action by this congress and the administration.

i encourage you to act rapidly. thank you for having me here and i look forward to answering any questions you may have. >> thank you. following dr. books testimony, i will step out for an appointment. i think her for that. thanks for the opportunity to discuss my research on health care administrative costs. to summarize, casa grid three levels. at theplan level, provider level, and at the patient level. there is a significant amount of research at the health care level. smaller amount at the ministry of cost at the provider level.

there is no research at the patient level. it affects all of us. that we haveroblem in this discussion is that most reports give administrative cost as a percentage of total spending. it is a problem in talking about someistrative process -- might claim that medicare administrative costs are 5%, those of private are 20%. mainly patients who are 65 and older or disabled. on average, they need more health care the people covered in private plans. we take a ministry to costs, divided by much longer, we get a smaller percentage. it makes them look very efficient. their cost percentages lower not because they are more efficient but because they have sicker patients. that has nothing to do with her administrative costs. the correct way to do this, look at it in terms of

how much administrative cost the risk of percent. they don't scale with the dollar value of claims. don't scale that much with the number of claims. if you look at the claims process and medicare, it is a quarter percent of medicare's entire budget. doing that more efficiently are having fewer plans is not going to affect their administrative costs are a much. because ministry of cost averaged $509 per person and private costs were $453 per person. they were a lot closer and medicare turned out to be a little bit higher. the same occurs when we occur systems in different countries. that is either at the health plan level or the provider level. that attempted to compare hospital administrative cost and noted that hospitals employ large numbers of fishes

and. that is not the way health care is organized in the united states. the positions are paid separately. they proceeded to report administrative cost as a percentage of total hospital expenditures. if the hospital expenditures physicians,ents to as in administration is going to be a lower percentage. the countries that did that looked so much more efficient. they were just being measured differently. the don't tell us anything about whether costs are higher in one country or another because we have not made an appropriate comparison. it is a problem sometimes to identify and collect administered of costs, documents were not designed for researchers. costshard to track down and we end up making estimates. sure, if theu for answer is a percentage, it is wrong. asking for percentage in this case is asking the wrong question. the, i have looked into how

-- exchanges were supposed reduce the ministry of cost of covering private sector individuals. it turns out the insurance companies did save the money. from $414 for percent to 206i-5 dollars per person. a hundred $93 up because the federal government spent more money setting up the exchanges that they saved in administrative costs for the companies. i would like to address one story that has been going around. the duke university hospital has 900 beds and 5000 billing clerks. i thought that seems like the wrong comparison because they have a lot of outpatient care which has nothing to do with hospital bills -- best. but in patient care represents about 2% of the visits.

i talked to the associate vice president of their health care, they do have a staff of 1500. they also handle medical records, patient check-in, cass management, and all other sorts of functions. we asked how many people actually handle just billing for duke hospital, turned out to be 15. i think i am out of time. thank you very much. >> thank you all. i appreciate what you have contributed this morning. we will begin with questions. senator young's first up but he is not here. senator vitter. sure i heardmake this right. you said you thought we got to have a goal of reducing a ministry to the expenses by 50%

within five years. is that true? >> that is correct. >> you think that is doable? >> i do. >> what is the largest single thing you could do? >> the three items i gave he would be the three, simplifying the complexity with with we are you don't have, to search everything that the patient has ever had. standardizing preauthorization requirements. the don't have to deal with and are systems for preauthorization from every insurer and every business. electronically integrating medical records and billing systems that you didn't have to have people to take information from one system and put it in another. those three would go a great deal of the way. point, in terms those of two of

the bigger ones it. ?s it true that they are not interoperable doesn't that at tremendously to the costs? >> that is exactly what i was thinking of. >> you are making me look good. >> i appreciate making me look good, too. >> let me make this point for everybody. chairman of the veterans committee, we have just gone through a process of deciding to make our software interoperable with the department of defense. they have been totally separate. different software systems, different everything else. they have just signed one of the largest contracts in the history of the federal government to , it covers the dod as well. marginal veterans health care

to one health care service. you think things like that will help reduce the overall costs? >> i do believe so. especially if done in a way where you can view across all the different systems so they can really see what is needed for each particular patient when you need it and avoid all of the integration hassles. georgia tech and it led developed a system called fire. are you familiar with that? >> i'm not. >> interoperable software different ip systems for health care so that they can talk to each other. , i end up in the united states senate and we're dealing with merging cerner. what i have basically come to learn is that all the great

simplifications and technology is complicated when you have two separate sets of systems operating and i have to talk to each other. that one of the most important things you can do to reduce the cost of administration and record-keeping, i would think free authorization, too, will be to have as much standardization possible soas wherever the patient comes from, and whatever hospital or position is serving them, the sotem is common survey -- they don't have to unscramble the egg all over again. that is one of the major costs we have seen. doing in thewe are v.a. and we hope we are proven to be right in the future. preauthorization, how much preauthorization -- is that primarily on surgeries? >> it occurs throughout the

health -- throughout health care. it is on surgeries, radiology, minor procedures, it happens all over. thes it designed to reduce amount of health care claims that are filed? >> yes. there is nothing wrong with having some differences in policies, some are more generous. the issue is that there are so many different ones that it is impossible to keep up with them. typical providers may be facing thousands of different preauthorization requirements depending on exactly which company the patient is insured by and which individual employer sponsored that. they may have customize their own preauthorization requirements. >> one quick question. i had a case a number of years ago where someone in my company went to the dermatologist to have a mole removed and had to

have it tested. the insurance would not pay for it. they would've paid for it had been malignant. it seems like that's a catch-22. the system the one? -- does that still go on? >> it does. >> senator murray? >> thank you to all of our witnesses for being her today. in april, your association commented on the medicaid services proposal to expand the availability of short-term plans. you wrote that you are concerned that substantially extending access to limited duration insurance will negatively impact conditions in individual health insurance market, exacerbating problems of access to affordable coverage. one of the reasons you stated was that short-term plans a offered to consumers only after

submitting information about their health status or prior medical conditions. we spent a lot of time focusing on paperwork that provider still within our health care system. one of the problems with the trump administration sabotage of our health care system is the burden it will impose on patients and families. more about the information patients are often required to >> sure. i think as a basic starting point, is important that we have access to coverage for pre-existing conditions. there are some incidences where short-term plans are in the market and they will be asking consumers for a particular medical information. it will very depending on the insurance provider. depending on the insurance provider.

it could be around use of medical services in the past or other risk factors. that is the type of information that would be asked for in short-term policies. when we are talking about the impact on the individual market, that is why we asked rest some concern about how this would impact the rest of the market. we said they should be short-term and nonrenewable. and we emphasize the need for clear disclosure to consumers. we want to make sure there is no policy a as to what consumer is buying. they need to know if it is comprehensive coverage or a short-term plan. we emphasize the need for clear communication. >> i appreciate that. i am glad we are looking at a bipartisan way to look at this but i want to make sure we do not impose new paperwork burdens for our patients. dr. cutler, i am worried that in

addition to putting burdens on patients, there will also be burdens on providers that will then be cast onto patients in the form of health care cost. talk about how the coverage in short-term plans compared to normal market coverage. do patients have to typically pay more out-of-pocket if the use short-term? >> typically, yes. the short term policy will not cover services as generously. it as to the different set of policies that providers have to be aware of. many times there will be limitation on medications or services they might access, in which case the providers have to then spend more in the way of resources trying to figure out where to direct the patient. this complex of the ads to expense without reducing the needs of the patients. clinicshospitals and

receive less of the payment from insurers and more out-of-pocket, does this increase or decrease the amount of time they spend on bill collection? >> a much greater increase. more resources are being devoted to collecting money from patients than used to be. this has been a big burden. >> what is the likelihood patients will not be able to pay, leaving hospitals with uncompensated bills? >> there he high. the typical american family has $600 in its bank account. so in face with a $3000 deductible, they do not have the resources on hand to pay for it. so they either put it on a or the provider institution works out an arrangement and then spends a lot of money collecting down the road.

>> i am really concerned. ofwe expand the use insurance plans, hospitals and clinics will have to do more work to collect bills. and when patients can't afford bills, hospitals will have more uncompensated costs. that increases cost for everyone. thisis my concerned with and when we should all be aware of. i appreciate your responses. dr. cutler, in your testimony you discuss an economic arms race between payers and providers. insurers introduce requirements, providers must fulfill before they can get paid in response to the new rules provider hires additional personnel, it goes on

and on. consumers get stuck with the bill. other actions that congress can take to incentivize payers and providers from avoiding this escalation? federal payers, like medicare and medicaid, are they part of this problem? yes, the first question, there is a good deal that could be done on standardization. i want to go back to the question asked before. the complex city of coding is a clear example of this, where an insurer will require additional codes before it pays a higher then more people have to be hired to code the codes. standardizing or eliminating the severity of adjustments

would make a lot of sense, because then you do not have to get into an arms race. on the preauthorization requirements, again you have a situation where it could be reasonable for one insurance to a tougherill have preauthorization requirement, and they do not recognize the burden placed on the providers and other insurers by now contributing to the cacophony of different things a small provider system has to deal with. and integrating filling systems and medical record systems, this the federalhere government has responsibility of standardization and it has not done so in this dimension, which has been a lost opportunity so far. i think in all of these, there are areas where the federal government will have to be involved. in terms of the federal payers, they very -- vary. the medicare program involves

less administered of cost than medicaid does. preauthorization requirements are minimal in medicare. preauthorization is relatively small other than you have things associated with complexity. but by and large it eliminates costs. medicaid is different in part turn from onets kind to another. so sometimes it is not entirely clear who will be ensuring the forent when they come services -- ensuring -- insuring the patient when they come for services. so there is a sows -- so there -- so there is an

additional expense. in your response to me, dr., you referenced the coating and severity levels. you discussed in your testimony the potential for severity neutral payments whereby purveyors are paid -- providers are paid for more severe cases. payersreements between and providers to allow providers to share in some of those savings for agreeing to severity neutral compensation required new legislation or regular -- or legislation or regulation? to be effective, you would have to do it for the vast part of the health-care system, because it is very difficult to have different payers different requirements. so the greatest gains would come from standardization and harmonization.

the reason why many providers and insurers have knock on there is because if the federal government is asking it -- is acting a different way, there it is no reason. has to be in harmony. good point. as we think about prior authorization, things that are important enough with there are a number of private efforts in the congressional purview, what is happening with affordable quality health care, they have created a committee with over 100 organizations looking at how can you standardize these transactions to get more civil -- mores of operating simplified ways of operating.

so there are efforts that are happening that more needs to be done. >> thank you. >> senator hassan. >> thank you for being here today. we are talking a lot this morning about administrative burdens in the health care system. i think it is important that we remember the most significant part of this whole discussion, which is patients other families. i am the mother of a son with complex medical needs. -- he has times severe cerebral palsy. .e does not speak we have been very fortunate has hadthen -- ben

incredible providers and caregivers. but i have experienced what it is like to jump through hoops and to be stuck in the middle between insurers and providers. dealing with an insurance company employee who does not have the expertise to understand the significance of the medical record he is looking at. i have also been there when insurance all of a sudden decides to switch them from one medication that works for him that he has been on for years to another medication. i hear from granite stators who experience these frustrations. it is hard to spend all day on the phone, wondering if prior authorization went through. it is particularly hard when you are juggling a job in caring for kids.

-- and caring for kids. we have talked about the importance of integrating medical records. it is also important to patient safety. at 3:00 in the morning when your hospital tells you they cannot get access to your sons primary because theyecord are on different electronic systems, and all of a sudden your doctor is saying, do you remember 15 years ago what antibiotic we used? it is scary. so when we are talking about administrative burdens, what really would make a difference is to eliminate these burdens for patients on these families, not just for the time and effort, but for good patient outcomes. what can congress do to help reduce administrative burdens in the health care system for patients and their family? >> thank you for that excellent

question. to echo what others have said, i think more alignment within private payers around things like preauthorization, around billing, and to dr. cutler's point, not just private ayers, that federal payers as well. from a hospital perspective, the federal government, with the many ways it funds health care, does not handle all of these things consistently. i think there is a role for the federal government in looking at federal payers and how federal payers manage preauthorization, billy requirements. requirements. and there is much more role in health insurance plans in taking steps to streamline these requirements to make it easier for patients. thank you for sharing your story. i think it is important to

recognize the impact on patients. that is where we need to start. thinking about the burden on families and caregivers, i think getting to and interoperable system where medical records are able to be accessed from anywhere at any time in an electronic fashion, i think on someisakson touched of the challenges. health plans can only be one part of the solution. it has stored between plants, providers, and the government. so making it simpler in real time would alleviate a lot of the burden to have to bring in the patient in the first place. >> i want to echo what was said. i also want to make a comment. while the federal government has been slow to act in some areas,

a number of states have been progress in terms of trying to inrease interoperability terms of your right to access records everywhere. i think we can do much more with the technology backbone but also the personal interactions to make sure that people have access to their records. your story illustrates exactly what i was going to mention in my testimony about the administrative burden on patients that people do not talk about. i've experienced that myself. not just in health care. thiserience an issue with

-- like this with the irs. one person says i pay, then i got a letter saying i didn't pay. one thing we could do is establish a safe harbor from anti-trust that could inhibit different information systems from talking to each other so they would not be afraid they would be prosecuted for pollution because they talk to also thereabout -- is a lot of restrictions on patient records -- patient access to their own data. there used to be a web portal where patients could access their own data. it was shut down. i appreciate that. thank you for letting me go over . i will cement a question on transparent these and outcomes -- transparency and outcomes. >> thank you, senator.

when we talk about the administrative burden, it sounds technical. but at the end of the day, it comes back to the patient and their families. about the minimum role of five where cms requires -- nost 5% but no flavor fewer than five skilled nursing facilities in his state every every year. state in alaska we have 17 facilities. whereare in a situation we have the benefit of about 30% cms surveys, five each year. you put that in a state like california, i do not know how --y's the syllabus they have i do not know how many facilities they have. we all know it is well over 17.

girl --ion that the scale and thatk forces even greater costs on a facility, because of these requirements. you have civil penalties you have to deal with and the reality of undergoing the frequency of these surveys. to thisbriefly state issue of scale in our rural facilities, and how regulations just like this can add to the already heightened cost? >> sure. you accurately describe the minimum of five rule. i happen to know that california has 1200 facilities.

so they received a federal survey every 20 years. mine is every three to four years. that is important because the federal surveys have two responsibilities. oversee and to check the facility itself. so there tend to be a high number of deficiencies, not all related to patient care. there is a tremendous burden on the facility after a survey, they get a write up of detailed plans of correction. they couldesources be devoted to patient care. it could be devoted to other things. why is it hard in a rural facility? you have 11 beds. and five facilitators to send on

you for week. it is a tremendous direct and opportunity cost. we think there should be one standard framework for surveys that is consistent across states. our facilities welcome the opportunity to correct things related to patient care. but many of these things are not. for example, we had a facility working really hard to serve culturally appropriate food to its elders. they received a report saying they served too much fish. these are the kinds of things that are costing resources, staff time, dollars and put burdens on small facilities. rural me ask about the health care strategy. cms announced this several months ago and wants to focus on

this rural health care strategy. i sent a letter suggesting there lens.one rural that it needs to be broader. speak to that aspect of it? ,ou have urban, you have rural and you treat them differently that way. spillane to the committee -- explain to the committee. rural, we think about our definition is different. in colorado, 800 beds would be considered rural. in taranto, they have eight.

so we appreciate the desire to have arural lens but we think it needs to be not just a single lens. it needs to consider the different geography and patient populations and types of facilities. i think the operative word is flexibility. when you look at alaska, the needs will be much different than they are in iowa. i think there are many examples like a point to of ways that cms could take that philosophy and develop more flexibility and be more responsive to the needs of our community, whether it is electronic health wears -- health records or other areas. put as weome that and work forward on the strategy. thank you. senator smith? >> thank you. i am going to brag on minnesota. we are national leaders when it

comes to delivering high-quality care and we have been an innovator when it comes to reducing administrative costs. one is the minnesota health care administrative simplification initiative. it launched a series of reforms to stand her eyes and automate health care transactions and it is saving tens of millions of dollars in minnesota. automatendardize and health care transactions and it is saving tens of millions of dollars in minnesota. how can this inform changes we can make at the federal level? states have so much to do with how these programs are implemented and how insurance companies are regulated. can you speak about that? >> yes. there are a number of areas miss states can make in or -- enormous progress.

minnesota should be proud. progress.lso made those are very good and that they provide great examples to work from. they show concrete savings and satisfaction on the provider system. they show how insurers and providers and patients can come together. they also reach a limit in terms of what they can do. they cannot do things that affect medicare because that is federal and they cannot do that. affect theannot large firm market. i think they provide significant savings and proof of concept we can then use to build both remove -- and in

related domains. what they can demonstrate works, experimenting and then that could inform we do it the federal level. i think that is a good observation. you can learn a lot from the state level. but when we think about how health care operates in different regions of the country, how it is practiced in ,he upper midwest or california to scale it on a national level is informative in terms of the steps the federal government or congress could take to move things forward. it is hard to replicate exactly what minnesota would have done in every other state. i am interested in this as a way of demonstrating what we might be able to do as we try to this. out how to tackle

i have been working on legislation to figure out how to support these kinds of partnerships at the state level and i look forward to talking with other members of this committee. i would like to go to the question of preauthorization that senator hassan was talking about, the impact it has on people. so many people in minnesota have told me about their frustration of getting caught in this catch-22 amateur and to get the care -- catch-22, trying to get the care they need and getting hung up on the documentation they need. you raise this as an opportunity for simplification reforms. i wonder if you would support the kind of standardizing of

prior authorization protocols that dr. cutler was talking about? think it has potential. i think it is important to look at which population is being served by which program. medicaid is different than medicare. but there are elements that could be standardized. are working through examples to create a standardization and make it easier for providers to take patients out of it. i think it has a lot of potential. >> thank you. dr. cutler, where do you see the resistance to this kind of ofrtization -- this kind stanardize a show in -- dardization? >> it is more reluctance.

comes from the insurers because they have customized their systems and put them in place. they wonder what will happen to what they put in place. so the cost of change is staring them in the face and they are perplexed as to how to deal with that. it reminds me of providers when they were faced with the choice of buying electronic medical records are not. once of -- most of them had a hard time buying it, but once they did, they are extremely glad they did. so it is a question of getting .ver the hop -- hump >> there is a complexity in the way that america uniquely provides health care to people. most complexity is there for a reason that made sense some time. forhave you clear that out

the benefit of the patients and their families? thank you. >> sen. cassidy:. i am very interested in this topic. on my website i have making health care affordable again. we just administrative cost. there is a cognitive dissidents. -- cognitive dissonance. it makes me feel it i have dropped acid. for the record, i have never dropped acid. [laughter] >> having practiced medicine, it

is incredible how much the federal government loads upon us. my job dropped when you said most providers are pleased about the electronic health record. it is the leading cause of burnout. so i am much or who was so enamored. the electronic health record is so burdensome. clicking for every five minutes of seeing a patient. reality.arallel chide ort not to confront, but just to observe. dr. book, i like your perspective. we have now put the

are notrator -- we looking at the administrative burden on the patient or physician, but on the administration. primaryabout the direct care model, in which a patient pays a monthly fee and the doctor does not know the insurance company for those services paid for by the monthly fee and the patient does not have a adoptable. just the monthly fee. senator cantwell and i have the bill that would promote this. familiar with it but it sounds like it has potential. is whatwant to know percentage of health-care system will be affected by that? it could be effective for a large percentage of patients, but the large dollars are going into very sick patients needing specialty care. >> the way it works is you would

still have catastrophic coverage on top. if i have a headache on friday afternoon, i don't go to the emergency room, i go to the doctor with whom i have a contract. it sounds like it has potential. i would be happy to look into it later. >> you mentioned the issue with prior authorization. a huge amount of waste fraud abuse. i like your concept of standardizing. but for you to suggest it is not a burden on the patient, when i

would see patients, miners would just put the phone on speaker as she heard over and over again, your call is very important to us, please hang on. perceive the prior -- why could this not be integrated into the electronic medical record? why does miners have to be on the phone, as opposed to the insurance company otherwise accessing? sen. cassidy:, the challenges .round interoperability >> one of the use my billing data? >> and might not be for all systems. might be a good example of something we can learn from in terms of how we could apply it

more broadly. amended -- he you mentioned there's an increased overhead associated with the plans, and yet what i have read that in countries that only use private plans like the netherlands, they still have half hour administrative overhead. so it does not seem inherent that it will be the federal government. there is something the netherlands does that is different. they have competing private regulated.are highly standardization. they have eliminated a lot of the administrative things. >> two more things. i have heard of a real-time benefit analysis going to the interchange between senator

murray and dr. cutler, the patient does not know how much .omething costs a real-time benefit analysis where you can press a button and the patient automatically knows how much they owe relative to their co-pay, i am sure -- i am told some insurers have it but it is not widely implemented. the vast majority have these types of tools. are they being used? >> i am saying they have not been deployed. dr. cutler: it is true. some do not have it. some have it and they do not make it available, or it is difficult to access.

>> sometimes they get it wrong. a provider told me there was some left on my deductible when i had filled my out of pocket for the year. so the information is not always correct. and it great concept works well in the pharmacy but it does not seem to work anywhere else. >> i am way over. thank you for your indulgence. : the cost ofn health care is too high and today we are focused on in ministry to cost. i want to talk about how much private insurance companies pay -- spent on administration. there has been debate about how to do this comparison. the 2018 trustees report states administrative costs for medicare are $8.1 billion.

that is 1% 2% of expenditures. that is a lot lower than in private insurance, which is between 10% and 12%, depending on who paid for the study. some people argue medicare beneficiaries have higher medical costs than younger people on private coverage. so we should use dollar amounts instead. dr. book, you made this argument and did an analysis that claims medicare actually spends more dollars per that of his chari -- per beneficiary on administrative cost than private insurance. >> correct. senator warren: how did you reach that conclusion? you argue that we should the

cost the federal government sizes medicare. maintaining federal buildings, the list goes on. urinalysis says you want to take inlat percentage of expenses the general government function. general government function part of the federal budget and really let as medicare administrative costs. saying that because we're sitting here today discussing medicare at this we should count as medicare costs a piece of the salary of every member of this committee, a piece of the cost to keep the lights and electricity and air-conditioning in the room, a piece of the

salary for the capitol hill allce officer at the door, as part of medicare's administrative cost? >> i was trying to do an apples to apples comparison between medicare and private. the items you mentioned are pennies. --t is more important : look. warren i am trying to use the best data possible. this approach does not have any credibility at all. this is a game to inflate the numbers. i want to look at some of the numbers that are not industries. -- not in dispute.

mr. iles, you are here working today for the insurance company. $20 billion profit was reported last year. how does that compare to the prophets the federal government makes on medicare and medicaid? >> it is important to look at the context of profit. senator warren: how does it compare? >> i cannot say. senator warren: zero. it compares to zero. and the indian health service, tri-care, veterans health service. these programs are about providing health care, not raking in money for profits and handing out dividends to shareholders. we can go back and forth on whether in ministry of cost in medicare are 2% or 7%. but one thing is clear. companies for-profit

decide who gets what out of the premium dollars that they rate again, they never forget to set aside a few billion dollars for themselves. that is why it is time to crack down on shady practices that insurance companies use to juice their profits at the expense of families who are struggling to get by emma and it is -- to get by, and it is time for everyone to be covered and we start treating health care like the basic human right that it is, not like a profit center for multibillion-dollar corporations. thank you. : i have decided to pass my time on two mr. cassidy. but having spent 25 years in the insurance industry, one of the understando do is

and appreciate the overall cost that the government bears for every program we have. trillionre spending $4 and bringing in $3 trillion, the taxpayers are the ones who are losing because their money is coming to washington for programs that could better be provided to the private sector. you cannot not look at every facet of what causes something. articulate with great specificity the real challenge the taxpayer has, all of the nuances the government brings with it when it provides health care or any other service. mr. cassidy: dr. book,

urinalysis has credibility with me. the first am i saw the doj was doing a major fraud thing on the ripoffs in florida and louisiana on medicare, and i realized blue cross was running on their own dojet and instead it is the doing a cms, it realized -- i realized it was not being included in part of it. the tax policy center has come up with numbers roughly the same that medicare for all would increase federal budget commitments by $32.6 trillion in the first 10 years of full implementation. we would have to double taxes and it would not be enough.

so there has to be a note of reality as opposed to wishful thinking. back to the questions i had. iles, a major part of the administrative overhead associated with all of this is negotiating prices. some but he pointed out that medigap policies proliferate even in the obamacare markets. paygap policies are able to back onto medicare pricing. all of that effort to negotiate has been done. you can say i am going to pay a medicare pricing and the insurance company can come in. if iles, what would you say you only had one or two insurance companies in a state, like in louisiana, you said,

we're going to allow insurers to come in and use medicare pricing and they are immediately in business to provide competition to the stakeholders? why is it important? costs go up when you only have one or two insurers. competition drives down cost. in the netherlands, what of the ways they regulate is by pricing. as a provider, what would you think of that? >> i am going to defer a detailed answer to my insurance colleague. what i will note that medicare is not cover costs in my state. there are insurance companies currently were basing multiples off of medicare.

whether it is medicare for all or some other variation of medicare pricing, it is important to note that medicare does not often cover costs. >> underground cassidy, the medicaid in put up, alaska would have had their true cost recognized. for some reason, your governor opposed it, but that is up to him. access toort having choice and competition in the marketplace. i think that is important. knowledge about the medicare fee schedule, what medicaid is paying is available out there. we want to make sure plans are negotiating with physicians in the most effective way and we are moving the system toward paying for the value, not just looking at what medicaid or medicare will be paying. >> the problem is that all of that requires a lot of

negotiating and putting together a provider panel. right now we have whole counties in iowa that do not have a single insurer. dr. book, any thoughts? interesting tos note how medicare makes its prices. they do not negotiate with providers. they set prices by regulation. and look at cost reports they survey 100 physicians for each code they are reviewing and ask them to evaluate the service compared to other services and answer a few questions on a five-part scale. physician does not have to take medicare. insurance companies can set rates to physicians and other providers.

i am looking for a solution. -- dr.olor, any comments cutler, any comments? getting more firms into insurance, more competition is beneficial. anything we can do to make it easier. that is less of .n issue than some other things i do think we ought to be moving medicare payments away from a fee-for-service level. when one would think about some kind of transition, it here are how we are going to move rates over time. reference pricing has been used effectively to lower expenses. they do a service -- a survey of providers.

-- it ends up we pay the same across the board. price transparency and bringing it relevant to the patient. what are your thoughts about insurance companies using it more? we're over time. >> i think there is interest in looking at innovative pricing models to mature we are getting the most value. the question comes down to participation in networks and if you will have access to an adequate range of providers and do they have real-time transparency. there are a lot of things to think about. anything that provides greater transparency to the patience and

understanding about what the difference is in quality is a good thing. so i think there is interest in those kinds of activities. add that inike to california, you are dealing with a very large market of providers . as we have this conversation, we cannot forget the safety net providers who are like hospitals, open 24 hours a day. we need to make sure that as we look at things like competition and price transparency, we are also addressing our safety net and making sure we do not lose it. >> the reference pricing has been a huge success. say,call the patient and you are scheduled for hip replacement. if you go to this institution, it is $50,000. the other one is $20,000. youou do not do that, if

just say there is a high deductible policy and so on, people do not switch where they go. it goes back to what we were talking about with senator murray. people do not understand insurance policies at all so they do very little price shopping. in a high deductible policy there is zero price shopping. tois more intensive to go you and say, mr. cutler, you can either pay $40,000 or $200. which would you like? then people will switch. so it works well, but it is not as easy as we would like it to be. in some cases, the administrative costs might be work that -- worth it. sometimes administrative costs are actually spent on useful things. that is an example of it. you're calling the people up, explaining the situation.

making more information available is costly, but it is worth it. thank you. murray: i want to thank our witnesses for being here. i will cement additional questions to the record. to wrap up on prior authorization, i think senator hassan spoke to it. there is so much frustration that goes on on the patient side and administratively. it seems it is one of these where, in order to meet the requirements, you have are either sure you

putting your administrative assistant on speaker phone for 45 minutes, and you have to stay on. requires greater burden to provide the authorization that will effectively work to reduce the cost. it seems to me that there is a line here when you are bringing on people to handle this. thatthe standardization , is thatsuggested enough? point where we effectively started a secondary business with dealing with the insurance companies to get the sign off and to get the approval?

is it just standardization that will address this, or is there more to this? dr. cutler? dr. color: i think beingrdization and i.t. related. you want to standardize and you want to make it easy to transfer the information from the medical record as proof that the requirement has been met. so that it can be seamless. clearere policies are because of standardization and then i.t. systems can provide verification that it was done. so you get part of the way there by standardizing. you get another part of the way through easy interchange. understandray: i that, that i go back to the hospital where we have eight beds and your staff is limited

and the requirements are as significant as they are for a major hospital in seattle. so back to the issue of scale and why a rural strategy is going to be important to recognizing that it is not equally situated. integratione full of electronic medical records, i do not know if you have additional suggestions that speak to these smaller facilities that they are extraordinary cost. >> i think technology is a piece of this. , but right nowp it is a hindrance. we have to figure out the technology piece, recognizing there might be other steps we need to take to really enable us to continue to have a rural

health care structure that is meaningful. center oniny medical an island is going to spend $65,000 this year on upgrading to meet meaningful use. they are not going to see patient benefits for those dollars. they are having to purchase a software package with functionality they do notthey ae patientand earlier this year, td less than 10 days cash on hand. with00 when you deal billions of dollars in my not seem like a lot, but for the residents of that community it is very important. so one of the things we encourage is revisiting our current framework for electronic health records, removing some of the barriers, ensuring we have interoperability, which was a problem that has not been realized. then we might see enough improvement that it could be sufficient. >> thank you.

the hearing record will remain open for 10 days. witnesses may submit additional information. we will meet august 15. thank you for being with us and providing such great testimony to the committee. we stand adjourned. [captioning performed by the national captioning institute, which is responsible for its caption content and accuracy. visit ncicap.org]

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