[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]
THE TRI-COMMITTEE DRAFT PROPOSAL
FOR HEALTH CARE REFORM
=======================================================================
HEARING
before the
COMMITTEE ON
EDUCATION AND LABOR
U.S. House of Representatives
ONE HUNDRED ELEVENTH CONGRESS
FIRST SESSION
__________
HEARING HELD IN WASHINGTON, DC, JUNE 23, 2009
__________
Serial No. 111-29
__________
Printed for the use of the Committee on Education and Labor
Available on the Internet:
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COMMITTEE ON EDUCATION AND LABOR
GEORGE MILLER, California, Chairman
Dale E. Kildee, Michigan, Vice John Kline, Minnesota,
Chairman Senior Republican Member
Donald M. Payne, New Jersey Thomas E. Petri, Wisconsin
Robert E. Andrews, New Jersey Howard P. ``Buck'' McKeon,
Robert C. ``Bobby'' Scott, Virginia California
Lynn C. Woolsey, California Peter Hoekstra, Michigan
Ruben Hinojosa, Texas Michael N. Castle, Delaware
Carolyn McCarthy, New York Mark E. Souder, Indiana
John F. Tierney, Massachusetts Vernon J. Ehlers, Michigan
Dennis J. Kucinich, Ohio Judy Biggert, Illinois
David Wu, Oregon Todd Russell Platts, Pennsylvania
Rush D. Holt, New Jersey Joe Wilson, South Carolina
Susan A. Davis, California Cathy McMorris Rodgers, Washington
Raul M. Grijalva, Arizona Tom Price, Georgia
Timothy H. Bishop, New York Rob Bishop, Utah
Joe Sestak, Pennsylvania Brett Guthrie, Kentucky
David Loebsack, Iowa Bill Cassidy, Louisiana
Mazie Hirono, Hawaii Tom McClintock, California
Jason Altmire, Pennsylvania Duncan Hunter, California
Phil Hare, Illinois David P. Roe, Tennessee
Yvette D. Clarke, New York Glenn Thompson, Pennsylvania
Joe Courtney, Connecticut
Carol Shea-Porter, New Hampshire
Marcia L. Fudge, Ohio
Jared Polis, Colorado
Paul Tonko, New York
Pedro R. Pierluisi, Puerto Rico
Gregorio Kilili Camacho Sablan,
Northern Mariana Islands
Dina Titus, Nevada
[Vacant]
Mark Zuckerman, Staff Director
Sally Stroup, Republican Staff Director
C O N T E N T S
----------
Page
Hearing held on June 23, 2009.................................... 1
Statement of Members:
Andrews, Hon. Robert E., a Representative in Congress from
the State of New Jersey.................................... 8
Submission for the record: Statement of Hewitt Associates
LLC.................................................... 209
Kline, Hon. John, Senior Republican Member, Committee on
Education and Labor........................................ 5
Prepared statement of.................................... 7
Miller, Hon. George, Chairman, Committee on Education and
Labor...................................................... 1
Prepared statement of.................................... 4
Questions for the record submitted to Dr. Hacker......... 194
Questions for the record submitted to Dr. Romer.......... 29
Submissions for the record:
Statement of the HR Policy Association, Internet
address to......................................... 195
Price, Hon. Tom, a Representative in Congress from the State
of Georgia................................................. 10
Prepared statement of.................................... 12
Articles submitted:
From the Hill, June 10, 2009, ``A Back-Door Path to a
Government Takeover''.............................. 218
From Politico, May 3, 2009, ``To Reform, Create a
Real Marketplace''................................. 220
From the Washington Times, April 1, 2009, ``Getting
Health Care Reform Right''......................... 221
Sablan, Hon. Gregorio Kilili Camacho, a Delegate in Congress
from the Northern Mariana Islands, prepared statement of... 13
Scott, Hon. Robert C. ``Bobby,'' a Representative in Congress
from the State of Virginia, submissions for the record:
Policy brief by the George Washington University
Department of Health Policy............................ 195
EPSDT amendment.......................................... 207
300 percent amendment.................................... 208
Medicaid and CHIP amendment.............................. 208
Statement of Witnesses:
Arensmeyer, John, founder & CEO, Small Business Majority..... 80
Prepared statement of.................................... 82
Hacker, Jacob S., Ph.D., University of California, Berkeley,
professor of political science; faculty co-director, Center
on Health Economic & Family Security, Berkeley School of
Law........................................................ 68
Prepared statement of.................................... 70
Responses to questions for the record.................... 194
Klein, James A., president, American Benefits Council........ 138
Prepared statement of.................................... 141
Moffit Robert E., Ph.D., director, Center for Health Policy
Studies, the Heritage Foundation........................... 156
Prepared statement of.................................... 157
Harvard Health Policy Review article, Internet address to 156
Mullan, Fitzhugh, M.D., Murdock head professor of medicine
and health policy, George Washington University............ 167
Prepared statement of.................................... 169
Pollack, Ron, executive director, Families USA............... 46
Prepared statement of.................................... 48
Pollitz, Karen, research professor, Georgetown University
Health Policy Institute.................................... 127
Prepared statement of.................................... 129
Romer, Christina D., Chair, Council of Economic Advisers..... 14
Prepared statement of.................................... 18
Additional submission, ``The Economic Case for Health
Care Reform,'' Internet address to..................... 24
Responses to questions for the record.................... 30
Shea, Gerald M., assistant to the president, American
Federation of Labor and Congress of Industrial
Organizations (AFL-CIO).................................... 52
Prepared statement of.................................... 54
Speranza, Paul S., Jr., vice chairman, general counsel and
secretary, Wegmans Food Markets, Inc....................... 63
Prepared statement of.................................... 64
Stapley, Michael, on behalf of the ERISA Industry Committee.. 75
Prepared statement of.................................... 77
Vaughan, William, senior health policy analyst, Consumers
Union...................................................... 149
Prepared statement of.................................... 151
Visco, Fran, J.D., president, National Breast Cancer
Coalition.................................................. 86
Prepared statement of.................................... 87
Wcislo, Celia, assistant division director, SEIU United
Healthcare Workers East.................................... 134
Prepared statement of.................................... 136
Young, ReShonda, Alpha Express, Inc.......................... 164
Prepared statement of.................................... 165
THE TRI-COMMITTEE DRAFT PROPOSAL
FOR HEALTH CARE REFORM
----------
Tuesday, June 23, 2009
U.S. House of Representatives
Committee on Education and Labor
Washington, DC
----------
The committee met, pursuant to call, at 12:05 p.m., in room
2175, Rayburn House Office Building, Hon. George Miller
[chairman of the committee] presiding.
Present: Representatives Miller, Kildee, Payne, Andrews,
Scott, Woolsey, Hinojosa, McCarthy, Tierney, Kucinich, Davis,
Loebsack, Hirono, Hare, Clarke, Courtney, Fudge, Polis, Tonko,
Sablan, Titus, Kline, Petri, Castle, McMorris Rodgers, Price,
Guthrie, Cassidy, Hunter, Roe, and Thompson,
Staff Present: Aaron Albright, Press Secretary; Tylease
Alli, Hearing Clerk; Jody Calemine, General Counsel; Carlos
Fenwick, Policy Advisor, Subcommittee on Health, Employment,
Labor and Pensions; David Hartzler, Systems Administrator
Jessica Kahanek, Press Assistant; Ricardo Martinez, Policy
Advisor, Subcommittee on Higher Education, Lifelong Learning
and Competitiveness; Alex Nock, Deputy Staff Director; Joe
Novotny, Chief Clerk; Megan O'Reilly, Labor Counsel; Rachel
Racusen, Communications Director; Meredith Regine, Junior
Legislative Associate, Labor; James Schroll, Junior Legislative
Associate, Labor; Michele Varnhagen, Labor Policy Director;
Mark Zuckerman, Staff Director; Robert Borden, Minority General
Counsel; Cameron Coursen, Minority Assistant Communications
Director; Ed Gilroy, Minority Director of Worforce Policy; Rob
Gregg, Minority Senior Legislative Assistant; Alexa Marrero,
Minority Communications Director; Jim Paretti, Minority
Workforce Policy Counsel; Molly McLaughlin Salmi, Minority
Deputy Director of Workforce Policy; Ken Serafin, Minority
Professional Staff Member; Linda Stevens, Minority Chief Clerk/
Assistant to the General Counsel; and Sally Stroup, Minority
Staff Director.
Chairman Miller. Good afternoon. The Committee on Education
and Labor will come to order for purposes of conducting the
hearing on the Tri-Committee Discussion Draft for health care
reform in our country.
But before we begin this hearing, I would like to welcome
Congressman Kline to his first hearing as our new incoming
Ranking Member from the Republican Party, the senior Republican
on our committee, and welcome him to the committee in that
position and say congratulations to him and that I look forward
to working with him to continue our efforts to rebuild our
country and improve the lives of American families.
Welcome, Mr. Kline. Congratulations to you.
Mr. Kline. Thank you, Mr. Chairman.
Chairman Miller. Today, as I said, we will examine the
House tri-committee discussion draft for health care reform.
This hearing marks the next step in our critical and historical
effort to guarantee all Americans access to quality affordable
health care.
No one can argue that our Nation's current health care path
is sustainable. Premiums and health care costs have skyrocketed
for families and businesses alike. In today's system, insurance
company bureaucrats hold all of the power. They get to decide
whether to cover a care that a doctor recommends for their
patient. They can deny coverage or delay treatment based upon
preexisting conditions, sending millions of people into
devastating debt and prolonging anxiety or suffering from
unattended care.
Americans with health care are deeply concerned that their
employer may scale back or even cancel their coverage, and if
they lose their job they will lose their health insurance, too.
The cost of 47 million uninsured people in our country is
also unsustainable. The lack of coverage jeopardizes not only
their personal health but our Nation's economic condition. The
uninsured costs the rest of us about $1,100 per family in
higher premiums. The numerous and serious weaknesses in our
health care system have combined to deliver a crushing blow to
America's families, businesses and to our country's fiscal
future.
Last Friday the three committees of jurisdiction in the
House of Representatives unveiled our discussion draft for
health care reform. It reflects months of hard work, of
extensive meetings with Democrats and Republicans, with the
Senators, with the Congressional Budget Office, with the
administration officials and stakeholders in an opening
collaborative process.
Consistent with President Obama's goals, our draft builds
on what works and fixes what is broken in our current system.
It lays the foundation for an American solution that will
reduce costs, guarantee choice of doctors and plans and ensure
access to affordable quality health care for all.
For Americans just beginning to pay attention to this
health care debate, here are some critical ways that the reform
will directly help you and your family. Our proposed reform
will cover about 95 percent of all Americans. If you like your
doctor or your health care plan, you can keep them. You won't
have to worry about coverage if your employer drops it or you
lose your job. Copays for preventive care won't exist. Premiums
or coverage will not be based upon preexisting conditions,
gender or occupation. You will have a choice of a high-quality,
affordable public health insurance plan, and your doctors and
nurses will have access to the best information organized in
the best way to offer you individualized care.
Our draft will help drive down health care costs in several
ways.
First, it ensures competition in the marketplace by
establishing a new health insurance exchange that includes a
strong public health insurance option that will compete on a
level playing field to keep the insurance companies honest.
This will help lower costs for everyone.
Second, it trims costs by simplifying paperwork and
preventing waste, fraud and abuse.
Third and most importantly, it controls costs by reducing
spending.
These health care reforms will be fully paid for. President
Obama has outlined a menu of cost reductions that we will
consider and have to make some very tough decisions about. But
this weekend's pledge by the pharmaceutical companies
demonstrates that the President is successful in building a
diverse coalition committed to reducing spending while
improving affordability.
Our draft outlines where other significant portions of this
funding will come from, promotes efficiencies in Medicare and
Medicaid, and ending overpayments to private plans. This does
not mean that we will be cutting services; instead we will
improve them and strengthen the long-term sustainability so we
can continue to provide the quality and dependable health care
service for years to come.
Next, our reform will guarantee people a real choice of
doctors, nurses and insurance plans through the exchange. Under
our draft, as we said, if you like it you can keep it. People
who aren't covered will be able to choose a menu of affordable
plans, both public and private. This coverage will be portable
and guaranteed no matter if an employer drops coverage or
people lose their jobs.
Finally, our draft ensures that all Americans can afford
quality health care based upon a sliding scale. Every plan
offered through the exchange will include essential benefits,
including no copays for preventative service, coverage for
dental and vision coverage for children, caps on annual out-of-
pocket expenses that will protect against medical bankruptcy.
It ensures that care will be as it should be, and that is
patient-centered, driven by patients' needs and the expertise
of doctors. It will simply not invest in utilization, but more
so in outcomes. It invests in prevention and wellness. It ends
the insurance companies' discriminatory practices. It also
requires shared responsibilities by individuals, employers, and
the government to ensure that all Americans have access to
these benefits.
In the coming weeks we will continue to seek input from
stakeholders and lawmakers, but many are also clamoring for
inaction. Let me be clear on this one point. On behalf of every
parent seeking care for their sick child, for every American
hoping that health care costs are not their last stop before
bankruptcy, I assure you that the one thing that is in fact off
the table in this effort is saying no to health care reform.
To succeed we will need the cooperation of all of our
colleagues and of our President. There will be a tremendous
pressure to think only about one narrow interest or another,
but instead we must think about the future of our country and
every American who expects that this year, this will be the
year that we will make a health care system part of America's
shiny future and not a cause of further financial chaos.
[The statement of Mr. Miller follows:]
Prepared Statement of Hon. George Miller, Chairman, Committee on
Education and Labor
Good afternoon.
First, I'd like to welcome Congressman Kline to his first hearing
as our committee's incoming Senior Republican.
I look forward to working together to rebuild our country and
improve the lives of America's families.
Today, we will examine the House Tri-Committee discussion draft for
health care reform.
This hearing marks the next step in our critical and historic
effort to guarantee all Americans access to quality, affordable health
care.
Unsustainable costs to families
No one can argue that our nation's current health care path is
sustainable. Premiums and health care costs have skyrocketed for
families and businesses alike.
In today's system, insurance company bureaucrats hold all the
power. They get to decide whether to cover the care a doctor recommends
for their patient.
They can deny coverage or delay treatment based on a pre-existing
condition--sending millions of people into devastating debt and
prolonging anxiety or suffering from unattended care.
Portability
Americans with health care are deeply concerned that their employer
may scale back or cancel their coverage, and that if they lose their
job they will lose their health insurance too.
The cost of the 47 million uninsured people in our country is also
unsustainable. Lack of coverage jeopardizes not only their personal
health but our nation's economic condition.
The uninsured cost the rest of us about $1,100 extra per year per
family in higher premiums.
These numerous and serious weaknesses in our health care system
have combined to deliver a crushing blow to America's families,
businesses and our country's fiscal future.
Tri-committee draft proposal
Last Friday, the three committees of jurisdiction unveiled our
discussion draft for health care reform.
It reflects months of hard work and extensive meetings with
Democrats and Republicans, Senators, the Congressional Budget Office,
Administration officials, and stakeholders, engaged in an open and
collaborative process.
Consistent with President Obama's goals, our draft builds on what
works and fixes what's broken in our current system.
It lays the foundation for an American solution that will reduce
costs, guarantee choice of doctors and plans, and ensure access to
affordable, quality health care for all.
For Americans just beginning to pay attention to the health care
debate, here are critical ways that our reforms will directly help you
and your family:
Our proposed reforms will cover at least 95 percent of
Americans;
If you like your doctor or health plan, you can keep them;
You won't have to worry about coverage if your employer
drops it or you lose your job;
Co-pays for preventive care won't exist;
Premiums or coverage will not be based on pre-existing
conditions, gender, or occupation;
You will have the choice of a high-quality, affordable
public health insurance plan; and
Your doctors and nurses will have access to the best
information to offer you individualized care.
Reduce costs
Our draft will drive down health care costs in several ways.
Second, it trims costs by simplifying paperwork and preventing
waste, fraud and abuse.
Third--and most importantly--it controls costs by reducing
spending. Health reform will be fully paid for.
President Obama has outlined a menu of cost reductions that we will
consider and have to make very tough decisions about.
But this weekend's pledge by pharmaceutical companies demonstrates
that the President is successfully building a diverse coalition
committed to reducing spending while improving affordability.
Our draft outlines where another significant portion of this
funding will come from: promoting efficiencies in Medicare and Medicaid
and ending overpayments to private plans.
This does not mean cutting services. Instead, we will improve them
and strengthen their long-term sustainability, so they can continue to
provide quality, dependable health care for years to come.
Guarantee choice
Next, our reforms will guarantee people a real choice of doctors,
nurses, and insurance plans through the exchange.
Under our draft, if you like what you have, you keep it.
People who aren't covered will be able to choose from a menu of
affordable plans, including quality public and private health insurance
plans.
This coverage will be portable and guaranteed--no matter if an
employer drops coverage or people lose their jobs.
Quality and affordable care
Finally, our draft ensures that all Americans can afford quality
health care, based on a sliding scale.
Every plan offered through the exchange will include essential
benefits, including no copays for preventative care, dental and vision
coverage for children, and caps on annual out-of-pocket expenses that
will protect against medical bankruptcy.
It invests in prevention and wellness and it ends insurance
companies' discriminatory practices.
It also requires shared responsibility by individuals, employers
and the government to ensure that all Americans have access to these
benefits.
`No' is off the table
In the coming weeks, we will continue to seek input from
stakeholders and lawmakers. But many are also clamoring for inaction.
Let me be very clear on this one point. On behalf of every parent
seeking care for their sick child, and every American hoping that
health care costs are not their last stop before bankruptcy, I can
assure you: The one thing that is `off the table' in this effort is
saying `No' to health care reform. To succeed, we will need the
cooperation of all of our colleagues and our President.
There will be tremendous pressure to think only about one narrow
interest or another. Instead, we must think of the future of our
country and every American who expects that this year will be the year
that we make our health care system part of America's shining future
and not the cause of further financial chaos.
______
Chairman Miller. With that, I would like to recognize Mr.
Kline for the purposes of an opening statement.
Mr. Kline. Thank you, Mr. Chairman, and thank you for your
kind welcome. That may be the only time I ever get a round of
applause from you, Mr. Chairman, so I am going to savor it as
long as I can.
I want to thank our witnesses for being here. I know you
are going to introduce some very distinguished panels. There
are a lot of interested parties sitting out here in front of us
today, as well they should be, because health care spending
today accounts for approximately one-sixth of our economy, more
than any other industry.
Millions of Americans have limited coverage or no coverage
at all. Some of them, particularly young adults, voluntarily
choose not to secure coverage, whether from a youthful sense of
invincibility or an understandable skepticism that the cost is
not worth the benefit. Still others are eligible for coverage
through the job, but choose for a variety of reasons not to
enroll. Many of the uninsured work for small businesses which
cannot achieve the efficiencies or economies of scale of larger
employers. As a result their costs are much higher, often too
high for both the small business owner and the worker.
I could go on, but the point is simple: The root causes of
the high rate of uninsured Americans are many and varied, as
are the reasons for the sustained increase in cost for those
who are covered. The solution, however, is far from simple. A
one-size-fits-all approach will not eliminate the problem or
its root causes. Yet here we are this afternoon looking at the
very definition of a one-size-fits-all approach, a health care
system increasingly controlled and administered by the Federal
Government. This draft legislation, as far as I can tell, fails
to address many of the structural flaws at the root of our
current crisis.
The President has pledged, and I quote: If you like your
doctor, you will be able to keep your doctor, period; if you
like your health care plan, you will be able to keep your
health care plan, period, no one will take it away, no matter
what, closed quote.
But the Congressional Budget Office projects that 23
million Americans will lose their current coverage under a plan
being debated in the U.S. Senate. Ideas in the bill before us,
such as the National Health Exchange, would shift millions of
Americans out of their current coverage and into a government-
run plan. It might be the 23 million in the Senate plan, it
might be more, we just don't know. What we do know about the
Democrats' plan, it is the Democrats' plan. We haven't seen it
until we got a glimpse of the 852-page monster on Friday. The
Democrats' plan is it increases the role of the Federal
Government through a new government-run plan and an expansion
of Medicaid. With government spending on health care already
exploding and the Federal Medicare and Medicaid programs
already on the road to insolvency, I can't imagine the
reasoning behind intensifying the stress placed on these
programs.
Employers are struggling to maintain coverage for their
workers at a time when costs continue to rise and the economy
continues to flail. But rather than offer relief, the
Democrats' plan saddles employers with a pay-or-play scheme
that threatens harsh financial sanctions and puts jobs at risk.
This may be my first hearing as the Education and Labor
senior Republican, but today we are all first-timers. In fact,
this is the very first hearing on health care reform held by
the full committee in the 111th Congress. And unfortunately, it
may be the only hearing before the Democrats' plan is marked
up.
The Speaker has announced earlier this year that a health
care overhaul will be voted on in the House before the August
district work period. That doesn't give us much time for a
serious debate. And that is too bad, Mr. Chairman, because this
is a very serious issue. It deserves a real debate. The
American people deserve an opportunity to weigh in. You haven't
allowed that to happen. The so-called tri-committee draft is
852 pages. It was released on Friday afternoon. Perhaps most
troubling, today's hearing has taken place when many Members of
Congress are still in their congressional districts or on their
way back to Washington. And I have to say, Mr. Chairman, I am
very pleased at the turnout here today. I was skeptical that we
would get this many to come in this early.
It doesn't have to be this way. Last week the Republican
Health Care Solutions Group released a plan that we believe
could serve as a basis of a bipartisan reform package. It
contains commonsense solutions such as allowing children to
remain covered by their parents' plans until they reach age 25,
and making it easier for Americans to get health coverage when
they lose or change jobs. It makes these changes while
maintaining and improving upon the parts of the system that
function well.
Of particular interest to this committee, the Republican
plan keeps much of the ERISA-based system in place, which would
enable Americans who like their current coverage, many of whom
receive it through their employer, to keep what they have.
But as much as I support these principles of the Republican
plan I wish we didn't need to frame this debate in partisan
terms. Health care reform is far too important for partisan
gamesmanship. It is also far too important to rush. Today may
be our first hearing, but I hope it won't be our last. The
proposal we are debating today is clearly partisan, but I
continue to believe that Republicans and Democrats can and
should come together to develop an American plan that will make
health care more affordable, reduce the number of uninsured
Americans and increase quality at a price that our country can
afford.
Thank you, Mr. Chairman. I yield back.
Chairman Miller. Thank you.
[The statement of Mr. Kline follows:]
Prepared Statement of Hon. John Kline, Senior Republican Member,
Committee on Education and Labor
Thank you Chairman Miller, and good afternoon.
America is facing a crisis in our health care system. Costs are
spiraling out of control, leaving families, employers, and taxpayers to
shoulder the burden.
Health care spending today accounts for approximately one-sixth of
our economy--more than any other industry. That's up from 13.8 percent
of GDP in 2000 and 5.2 percent in 1960.
Millions of Americans have limited coverage or no coverage at all.
Some of them, particularly young adults, voluntarily choose not to
secure coverage--whether from a youthful sense of invincibility or an
understandable skepticism that the cost is not worth the benefit. Still
others are eligible for coverage through their job, but choose--for a
variety of reasons--not to enroll. Many of the uninsured work for small
businesses, which cannot achieve the efficiencies or economies of scale
of larger employers. As a result, their costs are much higher--often
too high for both the small business owner and the worker.
I could go on, but the point is simple: the root causes of the high
rate of uninsured Americans are many and varied--as are the reasons for
the sustained increase in costs for those who are covered.
The solution, however, is far from simple. A one-size-fits-all
approach will not eliminate the problem or its root causes.
Yet here we are this afternoon looking at the very definition of a
one-size-fits-all approach: a health care system increasingly
controlled and administered by federal government. This draft
legislation, as far as I can tell, fails to address many of the
structural flaws at the root of our current crisis.
President Obama has pledged, and I quote, ``If you like your
doctor, you will be able to keep your doctor, period. If you like your
health care plan, you'll be able to keep your health care plan, period.
No one will take it away, no matter what.''
But the Congressional Budget Office projects that 23 million
Americans would lose their current coverage under a plan being debated
in the U.S. Senate. Ideas in the bill before us, such as the national
health exchange, would shift millions of Americans out of their current
coverage and into a government-run plan. It might be the 23 million in
the Senate plan. It might be more. We just don't know.
What we do know about the Democrats' plan is that it increases the
role of the federal government through a new, government-run plan and
an expansion of Medicaid. With government spending on health care
already exploding, and the federal Medicare and Medicaid programs
already on the road to insolvency, I can't imagine the reasoning behind
intensifying the stress placed on these programs.
Employers are struggling to maintain coverage for their workers at
a time when costs continue to rise and the economy continues to flail.
But rather than offer relief, the Democrats' plan saddles employers
with a ``pay or play'' scheme that threatens harsh financial sanctions
and puts jobs at risk.
This may be my first hearing as the Education and Labor Committee's
Senior Republican, but today, we're all first-timers. In fact, this is
the very first hearing on health care reform held by the full committee
in the 111th Congress.
And unfortunately, it may be the only hearing before the Democrats'
plan is marked up. Speaker Pelosi announced earlier this year that a
health care overhaul would be voted on in the House before the August
district work period. That doesn't give us much time for a serious
debate.
That's too bad, Mr. Chairman, because this is a very serious issue.
It deserves a real debate. The American people deserve an opportunity
to weigh in. But you haven't allowed that to happen.
The so-called Tri-Committee draft is 852 pages. It was released on
a Friday afternoon. Perhaps most troubling, today's hearing is taking
place when many Members of Congress are still in their congressional
districts or on their way back to Washington.
It doesn't have to be this way. Last week, the Republican Health
Care Solutions Group released a plan that we believe could serve as the
basis of a bipartisan reform package.
It contains commonsense solutions, such as allowing children to
remain covered by their parents' plans until they reach age 25 and
making it easier for Americans to get health coverage when they lose or
change jobs.
It makes these changes while maintaining and improving upon the
parts of the system that function well. Of particular interest to this
committee, the GOP plan keeps much of the ERISA-based system in place,
which would enable Americans who like their current coverage--many of
whom receive it through their employer--to keep what they have.
But as much as I support the principles of the Republican plan, I
wish we didn't need to frame this debate in partisan terms. Health care
reform is far too important for partisan gamesmanship. It is also far
too important to rush.
Today may be our first hearing, but I hope it won't be our last.
The proposal we are debating today is clearly partisan, but I continue
to believe that Republicans and Democrats can--and should--come
together to develop an American plan that will make health care more
affordable, reduce the number of uninsured Americans, and increase
quality at a price our country can afford.
Thank you, I yield back.
______
Chairman Miller. I would now recognize the Chairman of the
subcommittee of jurisdiction, the Subcommittee on Health,
Employment, Labor and Pensions, Mr. Andrews, for an opening
statement.
Mr. Andrews. I thank the Chairman. I also would like to
welcome Mr. Kline to his new position and wish him the best.
And we will get to Dr. Romer as well. Thank you.
I did want to take a minute and respond to some of the
things that Mr. Kline said in his remarks, that there is an
estimate that 23 million would lose their coverage under the
Senate bill. The Congressional Budget Office has not yet
reviewed the House draft that was released on Friday. I am
confident that when they do, they will find that employer-based
coverage will be very strong for a very long time. As the
President has promised, if you like the plan that you are in,
you get to keep it. That is one of the cornerstones of the
legislation that we have here.
And the substance that backs up that promise is this: About
80 percent of American employers are already doing what this
bill calls for. That is, to provide a very healthy benefits
package for people. And when they do, that employer gets
exposed to what we call the Hippocratic principle: We do no
harm. We say to about 80 percent of American employers, thank
you for what you are doing, we are leaving you alone, we are
not making any significant change to your ERISA preemption, we
are not forcing you to join any exchange or any other
marketplace, we are leaving you alone.
What we are trying to do for American businesses and
families and labor unions and other institutions is to make
health care more affordable. And the way that we are doing that
is to require something that has really never been required
before under Federal law but that has always been required
under our system of organizing our economy, which is
competition.
In too many instances, Americans live in circumstances
where insurance companies are not compelled to compete for
their business. In 36 States, in 36 States, the top two
companies in the marketplace have at least 65 percent of the
business. Let me say that again. In 36 States today, the top
two providers have about two-thirds of the covered lives in
two-thirds of the business.
There is insufficient competition. Americans benefit from
competition. At our grocery stores, in the housing market,
financial services, in so many other areas of American life,
when someone has to compete for your business, you as a
consumer do better, you have higher quality, more choice and
lower cost. That is not the reality of the health care
insurance market in our country today, and this plan makes it
the reality. One of the ways we make it the reality is to
assure that every American who is in the exchange, who is
uninsured and looking for health care, and eventually every
buyer of health care in this country, will have the choice of a
robust, nonprofit, public competitor to the private insurance
plans.
Let me be very clear about this. Rhetoric has been thrown
about about nationalizing health care and forcing everyone to
live under a government health care system. I would, first of
all, say we should ask some of our moms and dads how they feel
about a government health care system called Medicare. They are
rather happy with it for the most part. But putting that aside
for the moment, what this plan does is to say that uninsured
people will have a choice, a choice of which health insurer is
better for them. If they choose a private employer, that is
where they will go and they will make a significant
contribution from their own income to get there, and they will
receive a subsidy to help them get the insurance they don't
presently have. If they prefer the public option, they will
have that.
But for the first time, we will have a marketplace in
health insurance policies that really does require competition
among the insurance companies who offer this coverage.
The final thing that I would say is that there was a
reference to my friend from Minnesota about the pay-or-play
structure and the confiscatory problems for employers. Let me
be very clear about this. This plan divides the employer world
into three categories: the vast majority of American employers
who do provide very generous benefits voluntarily; this plan
leaves them alone. For small businesses, for the person who is
running a small business and struggling to stay ahead, this
plan recognizes that an exemption from the employer mandate is
necessary. The draft does not specifically speak to the scope
of that exemption.
Part of the purpose of the debate that begins today is to
fill in that blank. It is for the Members on both sides of the
aisle to come up with their best analysis of what that
exemption ought to be. But I assure you this: There will be a
small business exemption that takes into account the
hardworking, struggling, entrepreneur who simply can't afford
health insurance because his or her business would go under.
And there is a third category of employer; that is, an employer
that has the wherewithal to insure his or her employees but
chooses not to. That will change. That employer will have the
obligation to cover employees at a decent level, because when
he or she chooses not to do that everyone else pays for that
now--the employer who does insure, the family who does insure,
the taxpayer who pays taxes. So we look forward to this
beginning of a process to deliberate, look at these issues, and
come to a solution.
I just close with this one thought, Mr. Chairman. There is
some concern about this being rushed. I think it is about 50
years too late, and I think it is long past time we got to this
business. I look forward to it and yield back.
Chairman Miller. The gentleman's time has expired.
Dr. Price is recognized.
Dr. Price. Thank you. Thank you, Mr. Chairman. I want to
thank you and Ranking Member Kline for holding this hearing
today. I want to thank our distinguished panels of witnesses
today, many with great experience. I appreciate the time that
they have taken out of their busy schedules to be with us.
As a physician, there is one certainty that I hear from my
former colleagues, and that is that the status quo in health
care is unacceptable. So no one--let me be clear--no one is
clamoring for inaction.
Today we are at a crossroads. Our broken medical delivery
structure is in dire need of meaningful reform, and today's
hearing represents the beginning of an historic debate on how
we achieve full access to affordable, quality health care while
preserving the patient-doctor relationship without undue
governmental interference.
When Congress established Medicare, a national health
insurance program for seniors, over 40 years ago, it wrote into
the law, quote: Nothing in this title shall be construed to
authorize any Federal officer or employee to exercise any
supervision or control over the practice of medicine or the
manner in which medical services are provided.
And that remains the law of the land. However, as any
physician on the front lines of health care can tell you, these
words ring hollow, as does its promise. As time has passed, and
as I can attest to firsthand after nearly a quarter of a
century as a practicing surgeon, there may have been no greater
negative impact on the, quote, manner in which medical services
are provided, unquote, than the intrusion of the Federal
Government into health care.
Under the current Medicare program, patients are told which
doctors they may see and how frequently. Doctors in turn are
often told which procedures or tests they may or may not order
or provide.
This is really the ability of patients and doctors to make
independent health care decisions, some of the most personal
that we make. And the doctor-patient relationship, once
sacrosanct, is being trampled by coverage rules, inflexible
regulations and one-size-fits-all policies. To exacerbate the
matter, most medical practices, including some of the largest
and most respected institutions in our Nation, find it
necessary to limit, yes limit, the number of Medicare patients
they see. The delivery system devised and controlled by
Washington is clearly not the model for reform.
As this committee begins to critically analyze this tri-
committee draft proposal, I raise these specific points because
I fear that we are not only repeating the same mistakes, but
taking them a step further by permanently institutionalizing
them into our health care delivery system for all.
Take, for instance, the newly created Health Benefits
Advisory Committee that is being established to make
recommendations on minimum health benefit standards and cost-
sharing levels. It will be comprised mainly of Federal
bureaucrats and Presidential appointees, and, just like the
Comparative Effective Research Council enacted earlier this
year, will not necessarily have a single actively practicing
physician among its members. Not one.
This is the very type of Federal health board envisioned by
some proponents of a government takeover which will dictate
personal medical treatments allowed solely on the basis of
cost. Having the government defining what quality medical care
is, this is not what Americans view as the right direction or
the change they desire. They know what you know; and that is
that quality is best evaluated by patients and their families
making decisions with a knowledgeable, concerned, and
compassionate physician.
Ask the veteran waiting endlessly for needed surgery,
because the surgical unit has met its quotas. Ask the senior,
the new Medicare patient, who can't find a doctor able to see
any more Medicare patients. Ask those who utilize the Indian
Health Service if they receive the choices necessary to respond
appropriately to their needs. And ask the Medicaid mom if the
system facilitates her treatment. Ask them. Ask them if their
health care delivery system best responds to their needs.
These are the four health systems Washington currently
controls and none of them meet the principles of health care we
all hold dear: accessibility, affordability, quality,
responsiveness, innovation, choices.
Now, there are positive solutions, ones that would improve
each of these systems and ease coverage opportunities for those
currently uninsured or underinsured. And that is what we should
be doing; not forcing every single American into a system that,
of necessity, will betray those principles dear to all.
In the final analysis the question becomes: Will we allow
Americans the opportunity to opt out? Will we allow free people
the right to decide that this isn't the system that they want
for themselves or for their family? And I would hope that the
panelists would address that question. This is hardly a step in
preserving the patient-doctor relationship.
When you pore through the pages of this bill, as you will
note, Mr. Chairman, and others on the panel, isn't on our desk
this morning, we see that it is based on a government-as-
solution philosophy. This means more Federal supervision and
more Federal administration. And it will ultimately come to
rely on mandates, rationing, bureaucracy and third-party
decision making, all of which interfere with personal-private
medical decisions.
This is hardly a step that preserves the patient-doctor
relationship, the one thing that arguably has allowed America
to have some of the greatest health care in the world. This
bill offers an approach that is incapable of providing quality
care which is accessible, innovative, and responsive. Achieving
this positive type of change will only be possible by embracing
a fundamental rethinking of our health care delivery system
which champions personal ownership of coverage.
There are positive solutions to the challenge we face, and
I am hopeful that the committees in the House will allow for an
open, vibrant, robust debate and deliberative process, one that
respects America's doctors, but most of all, one that respects
America's patients, and I yield back.
Chairman Miller. I thank the gentleman.
[The statement of Dr. Price follows:]
Prepared Statement of Hon. Tom Price, a Representative in Congress From
the State of Georgia
Good morning and thank you, Chairman Miller and Ranking Member
Kline. I would like to begin by thanking our distinguished panels of
witnesses for appearing today. We appreciate that they have taken time
out of their busy schedules to share their expertise and experiences
with us.
As a physician, there is one certainty I hear from my former
colleagues--the status quo in health care is unacceptable. So today, we
are at a crossroads. Our broken medical delivery structure is in dire
need of meaningful reform. And today's hearing represents the beginning
of an historic debate on how we achieve full access to affordable,
quality health care, while preserving the patient-doctor relationship,
without undue governmental interference.
When Congress established Medicare, a national health insurance
program for seniors more than 40 years ago, it wrote into law,
``Nothing in this title shall be construed to authorize any Federal
officer or employee to exercise any supervision or control over the
practice of medicine or the manner in which medical services are
provided * * *''. This remains the law of the land. However, as any
physician on the front lines of health care can tell you, those words
and that promise ring hollow.
As time has passed, and as I can attest to firsthand after nearly a
quarter century as a practicing surgeon, there may have been no greater
negative impact on the ``manner in which medical services are
provided'' than the intrusion of the federal government into health
care.
Under the current Medicare program, patients are often told which
doctors they may see and how frequently. Doctors, in turn, are often
told which procedures or tests they may and may not order or provide.
This has eroded the ability of patients and their doctors to make
independent health care decisions--some of the most personal we make.
And the doctor-patient relationship, once sacrosanct, is being trampled
by coverage rules, inflexible regulations, and one-size-fits-all
policies.
To exasperate the matter, most medical practices, including some of
the largest and most respected institutions in the nation, find it
necessary to limit the number of Medicare patients they see. The
delivery system devised and controlled by Washington is clearly not the
model for reform.
As this Committee begins to critically analyze the Tri-Committee
Draft Proposal for Health Care Reform, I raise these specific points
because I fear we are not only repeating the same mistakes but taking
them a step further by permanently institutionalizing them into our
health care delivery system.
Take for instance the newly created Health Benefits Advisory
Committee. It is being established to make recommendations on minimum
health benefit standards and cost-sharing levels. It will be comprised
mainly of federal bureaucrats and presidential appointees. It, just
like the Comparative Effectiveness Research Council enacted earlier
this year, will not necessarily have a single actively practicing
physician among its members. Not one! And this is the very type of
federal health board, envisioned by some proponents of a government
takeover, which could dictate personal medical treatments allowed--
solely on the basis of cost.
Having the government defining what ``quality'' medical care is,
this is not what Americans view as the right direction. They know what
you know, and that is that quality is best evaluated by patients and
their families, making decisions with a knowledgeable, concerned,
compassionate physician.
Ask the veteran waiting endlessly for needed surgery because the
surgical unit has met its `quota'. Ask the senior, the new Medicare
patient, who cannot find a doctor able to see anymore Medicare
patients. Ask those who utilize the Indian Health Service if they
receive the choices necessary to respond appropriately to their needs.
And ask the Medicaid mom, if the system facilitates her treatment. Ask
them.
Ask them if their health care delivery system best responds to
their needs. Those are the four health systems Washington currently
controls. None of them meet the principles of health care we should
hold dear--accessibility, affordability, quality, responsiveness,
innovation, and choices.
There are positive solutions--ones that would improve each of these
systems--and ease coverage opportunities for those currently uninsured
or underinsured. That is what we should be doing, not forcing every
single American into a system that, of necessity, will betray those
principles dear to all.
In the final analysis, the question becomes, will we allow
Americans the opportunity to opt out? Will we allow free people the
right to decide? This is not the system I want for my family, and I'd
like the panelists to address that question.
When you pour through the pages of this bill, you will see that the
Tri-Committee Draft Proposal for Health Care Reform is based on a
``government-as-solution'' philosophy. This means more federal
supervision and administration. It will ultimately come to rely on
mandates, rationing, bureaucracy, and third-party decision-making, all
of which interfere with personal, private medical decisions. This is
hardly a step that preserves the doctor-patient relationship--the one
thing that, arguably, has allowed America to have some of the greatest
health care in the world.
This bill offers an approach that is incapable of providing quality
care which is accessible, innovative and responsive. Achieving this
positive type of change will only be possible by embracing a
fundamental rethinking of our health care delivery system which
champions personal ownership of coverage.
There are positive solutions to the challenges we face. I'm hopeful
the House will allow for an open, vibrant, robust debate and
deliberative process--one that respects America's doctors--but most of
all--America's patients.
Thank you, and I look forward to hearing from the witnesses.
______
Chairman Miller. Pursuant to committee rule 7(c) all
members may submit opening statements in writing which will be
made part of the permanent record.
[The statement of Mr. Sablan follows:]
Prepared Statement of Hon. Gregorio Kilili Camacho Sablan, a Delegate
in Congress From the Northern Mariana Islands
I want to thank Chairman Miller, Mr. Andrews, the other Members of
the Committee, and the staff for all the time and effort put forth
towards the drafting of this plan to reform health care for all
Americans. Thanks also to the witnesses for taking the time to discuss
these issues. And thank you to my staff for their hard work examining
and briefing me on this bill. Obviously this proposed legislation
represents an enormous shift in American health care policy, and it is
important that we take all available information into account before
making decisions with such huge consequences.
That having been said, I would also like to express my concern that
Americans living in the territories, including my constituents in the
Northern Mariana Islands, will not benefit from our work here if the
current draft becomes law. These citizens, who face some of the
greatest health disparities and the greatest challenges in finding and
accessing affordable health care, must be included before we can
consider the transformation of American health care complete.
I agree with my colleagues that individual and employer health
insurance mandates, along with the other reforms that this Congress
will introduce into our health care system, will help fulfill the
promise made by our President and my colleagues in Congress that all
Americans should have access to affordable, quality health care. I hope
my colleagues in the Committee will work with me towards the inclusion
of all Americans in these programs, including the four and a half
million Americans living in the territories.
______
Chairman Miller. Our first panel this morning will be made
up of Dr. Romer. Dr. Christina Romer is the Chair of the
Council of Economic Advisors in President Obama's
administration. She is also the former Vice President of the
American Economic Association and the Garth B. Wilson Professor
of Economics at the University of California, Berkeley. Dr.
Romer holds a B.A. From the College of William and Mary and her
Ph.D. from Massachusetts Institute of Technology.
Dr. Romer, welcome to the committee. I know there were a
lot of scheduling changes over the weekend to get you here, and
I appreciate your cooperation and the administration's
cooperation to make you available to the committee.
I also know that we have a very short leash on your time,
and Dr. Romer will be leaving pretty close to 1:30 if everybody
holds to their schedule. That means not everybody is going to
get to ask her a question, but we will go as rapidly and as
quickly as we are allowed under the rules.
Chairman Miller. Welcome to the committee, and your entire
statement will be placed in the record, and you can proceed in
the manner in which you are most comfortable. Thank you.
STATEMENT OF DR. CHRISTINA ROMER, CHAIR, COUNCIL OF ECONOMIC
ADVISERS
Ms. Romer. Thank you very much.
Chairman Miller. You will have ten minutes. Then at nine
minutes an orange light will go on, I believe. And then you can
start summarizing and we will allow for questions. Thank you.
Ms. Romer. Wonderful. Chairman Miller, Ranking Member
Kline, and members of the committee it is indeed an honor to be
with you today to discuss the economics of health care reform.
The President, as you know, has identified comprehensive
meaningful health care reform as a top priority, and the
administration is grateful to the Congress for working so
quickly and tirelessly on this important issue.
In my remarks today, I will discuss the economic
comparative of reform that satisfies the President's dual goals
of slowing the growth rate of health care costs significantly
and providing quality, affordable, health insurance coverage
for all Americans. The figures in the analysis that underlie my
testimony today are contained in the Council of Economic
Advisors report, ``The Economic Case For Health Care Reform.''
With your permission I would like to include a copy of that
report in my testimony so that the sources and methodology are
fully documented for the committee.
Well, many of the crucial trends in American health care
are well known, but the Council of Economic Advisors worked
with others in the administration to develop projections of
what will happen in the absence of reform. Spelling out these
facts and trends makes a compelling case that the status quo is
simply not an option.
Now, one key fact is that health care expenditures in the
United States are about 18 percent of GDP, thereby the highest
of any country.
And if we can go to the first figure. This figure shows our
projections of the likely path of national health care
expenditures. These expenditures are projected to rise sharply.
By 2040, health expenditures could be roughly one-third of
total output in the U.S. economy.
How about for households? Well, for households rising
health care expenditures will likely show up in rising
insurance premiums. Even if employers continue to pay the
lion's share of premiums, both economic theory and empirical
evidence suggest that this trend will show up in stagnating
take-home wages.
This next figure shows our projections of total
compensation and compensation less insurance costs, both in
inflation-adjusted dollars. The wedge-shaped area between the
two lines shows our predicted levels of insurance premiums.
What you see is that without reform, the noninsurance part of
compensation will grow very slowly and will likely fall
eventually as premiums rise rapidly.
Rising health care costs also mean that government spending
on Medicare and Medicaid will rise sharply over time.
If we go to the next figure, in this picture the dash line
shows the projected path of combined Federal and State spending
on Medicare and Medicaid. Our projections show that these
expenditures, which are currently 6 percent of GDP, will rise
to 15 percent of GDP by 2040. In the absence of tremendous
increases in taxes or reductions in other types of government
spending, this trend implies a devastating and frankly
unsustainable rise in the Federal budget deficit.
Another trend that is too crucial to be ignored is the rise
in the number of Americans without health insurance. Currently
46 million people in the United States are uninsured.
In the absence of reform, if we look at the next picture,
this number is projected to rise to about 72 million in 2040,
an increase of 26 million people over the next 30 years. The
President has emphasized that providing quality, affordable,
health insurance for all Americans is a key goal of reform.
For the many Americans who currently have health insurance,
as has been noted here this morning, the President has promised
that if you like your doctor and your existing plan you can
keep them. The President and Congress are also proposing
methods to make the existing system work better for all
families, such as simplification of insurance forms and
electronic health records that reduce duplication of tests and
prevent medical errors.
For the millions of Americans without insurance, the
President is committed to working with Congress to design a
sensible cost-effective method of coverage expansion. Expanding
coverage will likely involve the creation of a health insurance
exchange that gives individuals and small groups the same
benefits of risk pooling and elimination of adverse selection
that employees of large firms enjoy.
One feature of health reform that the President has
emphasized is that no one should be denied health coverage due
to preexisting conditions. Americans with health problems need
the security of knowing that if they change jobs or lose their
jobs, they will still be able to get health insurance coverage.
Now, there are important benefits to the economy and to
society of coverage expansion. The most important of these
involves the health and economic well-being of the uninsured.
In our report we use the best available estimates to try to
quantify the costs and benefits of expanding coverage to all
Americans. Among the benefits that we attempt to put a dollar
value on are the increase in life expectancy, the improvement
in health, and the decreased risk of financial ruin from high
medical bills.
We find the benefits of expanding coverage to the uninsured
are very large, and substantially greater than the costs. Our
estimates show that the net benefits, the benefits minus the
costs, are roughly $100 billion per year or about two-thirds of
a percent of GDP.
Another effect of expanding coverage is increased labor
supply. With expanded coverage, some people who would not be
able to work because of disability would be able to get health
care that prevents or effectively treats the disability. They
would therefore be able to stay in the labor force.
Similarly, some workers currently in the labor force would
be more productive if they had health care. We believe that the
net impact on effective labor supply will be positive and will
increase GDP.
Expanding coverage will also improve the efficiency of the
labor market. Creating an insurance exchange and eliminating
restrictions on preexisting conditions would end the phenomenon
of job lock, where worries about health insurance cause workers
to stay in jobs even when better ones are available. Our
estimate is that this benefit could be about two-tenths of a
percent of GDP each year.
Similarly, we examine the fact that small businesses are
disadvantaged in the labor market because current employer-
sponsored insurance is so expensive for them. Moving to a
system that removes that disadvantage could be beneficial to
the competitiveness of the important small business sector of
the economy.
Now, while the benefits of expanding coverage are
substantial, slowing the growth rate of health care costs is
essential to moving the economy off its unsustainable path and
securing a better economic future for the American people.
And in discussing cost containment, I want to focus on the
slowing of the growth rate of cost. This is the so-called
curve-bending that can last for decades. Slowing cost growth is
quite separate from the actions we might take immediately to
cut the level of government medical spending. These immediate
reductions are crucial for paying for the expansion of coverage
and other health care reforms in the short run. But thinking
about the changes that will save us from the unsustainable
long-run trends slowing cost growth year after year is
essential.
Now, many meaningful reforms are necessary to slow the
growth rate of cost over time. The CEA report focused on the
conceptual importance of reforms rather than the mechanics. But
the report does describe in broad terms the kind of changes
that might be implemented. We discuss, for example, changes in
payment systems such as bundling of payments for hospital and
post-hospital care and change in the organization of care
delivery, such as the formation of accountable care
organizations and medical homes as ways to reduce fragmentation
and promote more effective and more efficient care. We
emphasize the crucial role of investments in health information
technology and research on what works and what doesn't could
play in reining in cost growth.
The President in his speech last week to the American
Medical Association made some specific suggestions for reforms
along the lines that I have described. He also said that he was
open to changes that would give the recommendations of the
Medicare Payment Advisory Commission greater chance of adoption
and implementation.
The Congressional Budget Office has also outlined a large
number of game-changing reforms that experts believe could slow
cost growth. In our report we speak of the benefits of slowing
the growth rate of health care costs, but each of our figures
implicitly shows the impact of not slowing cost growth.
To help emphasize the importance of doing reform well, I
will describe them from that perspective this morning.
Fundamentally, what slowing cost growth does is to free up
resources. If we restrain costs by eliminating waste and
inefficiency, we could have the same real amount of health care
with resources left over to produce the other things that we
value. This causes standards of living to be higher.
In our analysis we consider varying degrees of cost
containment. In particular, we look at the effect of slowing
the annual growth rate of health care costs by 1\1/2\, 1, and
just half a percentage point. We analyze the effects of freeing
up resources in a standard growth accounting framework. Our
framework includes the effect of slowing cost growth on the
deficit and capital formation or investment.
If we go to the next figure, this figure shows the crucial
importance of slowing cost growth for standards of living. To
make these numbers more concrete, we translate them into the
effects on the income for a typical family of four, again in
constant inflation-adjusted dollars. The bottom line shows the
projected path of real family income without reform. The higher
path show family income under different degrees of cost
containment. Our numbers suggest that failing to slow cost
growth results in substantially lower standards of living for
American families. Without reform, our analysis predicts that
the typical family income in 2020 will be roughly $2,600 lower
than it would be if we managed to slow the growth rate of costs
by 1\1/2\ percentage points. By 2030 it will be nearly $10,000
lower than if we managed to slow cost growth.
Failing to control the growth of health care costs will
condemn American families to much lower standards of living
than they would experience with successful reform. Slowing the
growth of health care costs will also have enormous effects on
the budget deficit.
This last figure shows the reduction in the Federal budget
deficit due to different degrees of cost containment. Consider
the numbers in the middle for 2030. They show that slowing the
growth rate of health care costs by 1\1/2\ percentage points
will reduce the deficit by 3 percent of GDP. Put another way,
failing to slow cost growth by 1\1/2\ points per year will
result in a deficit that is higher by 3 percent of GDP. By not
slowing costs we will leave our children a budget deficit in
2040 that is 6 percent of GDP higher than it would have been
with successful reform.
The numbers illustrate the crucial truth that serious
health care cost growth containment is central to our long-run
fiscal stability. Taken together, the analysis by the Council
of Economic Advisors shows that doing nothing on health care
reform is simply not an option. Expanding coverage will
unquestionably have benefits for economic well-being, the
efficiency of the labor market, and the competitiveness of
small businesses. But only by undertaking meaningful reforms of
slowing the growth of health care costs can we assure American
families of rising standards of living and falling, rather than
ever-increasing, budget deficits.
The President has spoken frequently of the need to provide
the American economy with a new foundation. His goal is that we
not only come through the current economic crisis, but emerge a
stronger, more durable economy. Health care reform that
provides quality affordable coverage for all Americans and
genuinely slows the growth rate of cost significantly is a
crucial part of that new foundation. Successful reform is
fundamental to the long-run health of the American economy.
Thank you.
[The statement of Ms. Romer follows:]
Prepared Statement of Dr. Christina D. Romer, Chair,
Council of Economic Advisers
Chairman Miller, Ranking Member McKeon, members of the Committee,
it is an honor to be with you today to discuss the economics of health
care reform. The President has identified comprehensive health care
reform as a top priority. The Administration is grateful to the
Congress for working so quickly and tirelessly on this important issue.
In my remarks today I will discuss the economic imperative of health
care reform that satisfies the President's dual goals of slowing the
growth rate of health care costs significantly and providing quality,
affordable health insurance coverage for all Americans.
I will first discuss the obvious, but sometimes forgotten point
that the status quo is not an option. The projections for health care
spending and what it means for households and the government budget
show that we are on an unsustainable path. Without reform that slows
the growth rate of costs, take-home pay for working families will
stagnate and the budget deficit will mushroom. The projections for
insurance coverage show that small employers are likely to reduce
health insurance coverage substantially, leading to a swelling of the
number of people without insurance in the United States over the coming
decades.
I will then discuss the economic impact of coverage expansion and
the importance of cost containment. A study released by the Council of
Economic Advisers (CEA) on June 2, 2009 estimated the benefits to
society and the economy of expanding coverage.\1\ Our study found that
coverage expansion has crucial positive effects on overall economic
well-being, the efficiency of the labor market, and the competitiveness
of the crucial small businesses sector. The CEA study also showed that
successful cost growth containment was essential to the long-run health
of our economy. I cannot emphasize enough the need to make meaningful
changes that will genuinely slow the growth rate of health care costs.
Only by doing so will we be able to avoid the dire long-term
projections of stagnating living standards and crushing budget
deficits.
The figures and analysis that underlie my testimony today are
contained in the CEA report The Economic Case for Health Care Reform.
With your permission, I would like to include a copy of that report
with my testimony, so that the sources and methodology are fully
documented for the Committee.
I. Trends in the absence of reform
Let me start with a discussion of where we are and where we are
headed. Many of the crucial economic trends in American health care are
well known. But, the Council of Economic Advisers worked with others in
the Administration to develop projections of what will happen in the
absence of reform. Spelling out these facts and trends makes a
compelling case that doing nothing is simply not an option.
Rising Health Expenditures. One key fact is that health care
expenditures in the United States are currently about 18 percent of
GDP, by far the highest of any country. These expenditures are
projected to rise sharply. This figure shows our projection of the
likely path of national health care expenditures. By 2040, health
expenditures could be roughly one-third of total output in the U.S.
economy.
Effect on Households. For households, rising health care
expenditures will likely show up in rising insurance premiums. Even if
employers continue to pay the lion's share of premiums, both economic
theory and empirical evidence suggest that this trend will show up in
stagnating take-home wages for American working families. This figure
shows our projection of total compensation and compensation less
insurance costs, both in inflation-adjusted dollars. The wedge-shaped
area between the two lines shows our predicted level of insurance
premiums, again in constant dollars. We project that without reform,
the non-insurance part of compensation will grow very slowly, and
likely fall eventually, as premiums rise sharply over time.
Effect on Government. Rapidly rising health care costs also mean
that government spending on Medicare and Medicaid will rise sharply
over time. The dashed line in this figure shows the projected path of
combined Federal and state spending on Medicare and Medicaid. Our
projections show that these expenditures, which are currently about 6
percent of GDP, will rise to 15 percent of GDP by 2040. The solid line
shows the projected rise in Medicare and Medicaid expenditures due only
to demographic factors, such as the aging of the baby-boom generation.
A crucial fact is that only about one-quarter of the total rise in
government health expenditures is due to demographic changes. The other
three-quarters is due to the fact that health care spending per
enrollee is rising much more rapidly than GDP. In the absence of
tremendous increases in taxes or reductions in other types of
government spending, this trend implies a devastating, and frankly
unsustainable, rise in the Federal budget deficit.
Trends in Lack of Insurance. Another trend that is well known, but
too crucial to be ignored, is the rise in the number of Americans
without health insurance. Currently 46 million people in the United
States are uninsured. In the absence of reform, this number is
projected to rise to about 72 million by 2040, an increase of 26
million people over the next thirty years.
II. The economic impact of coverage expansion
The President has emphasized that providing quality, affordable
health insurance coverage for all Americans is a key goal of reform.
For the many Americans who currently have health insurance, the
President has emphasized that if you like your doctor and your existing
plan, you can keep them. He is committed to maintaining and building
upon the employer-based health care system. The President and Congress
are also proposing methods to make the existing system work better for
all families, such as administrative simplification of insurance forms
and electronic health records that reduce duplication of tests and
prevent medical errors.
Needed Reforms. For the millions of Americans without insurance,
the President is committed to working with Congress to design a
sensible, cost-effective method of coverage expansion. A crucial
challenge of coverage expansion is designing mechanisms that overcome
market failures. For example, the fact that individuals know more about
their likely health expenditures than potential insurers leads insurers
to charge rates for individual and small group coverage that are above
the average cost of providing coverage for these segments in the
population. Expanding coverage will likely involve the creation of a
health insurance exchange that gives individuals and small groups the
same benefits of risk-pooling and elimination of adverse selection that
employees of large firms enjoy.
One feature of health reform that the President has emphasized is
that no one should be denied health coverage due to pre-existing
conditions. Americans with health problems need the security of knowing
that if they change jobs or lose their job, they will still be able to
get health insurance coverage.
Effects on Economic Well-Being. There are important benefits to the
economy and society of coverage expansion. The most important of these
involves the health and economic well-being of the uninsured. In our
report, we use the best available estimates to try to quantify the
costs and benefits of expanding coverage to all Americans. Among the
benefits we attempt to put a dollar value on are the increase in life
expectancy and the improvement in health. Evidence from the health
economics literature suggests that if all of the uninsured had health
insurance, there would be many fewer deaths among adults with chronic
conditions, such as cancer and hypertension, and with acute conditions,
such as heart attacks and injuries resulting from automobile accidents.
Indeed, a 2002 study by the Institute of Medicine estimated that there
are approximately 18,000 more deaths among uninsured adults each year
than would occur if they had health insurance.\2\ We also consider the
benefit of health insurance as a way to reduce individuals' chance of
financial ruin from high medical bills.
The costs to society of covering the uninsured represent a mix of
public and private costs and come from existing studies, not estimates
of plans currently being contemplated by Congress. We find the benefits
of coverage to the uninsured are very large and substantially greater
than the costs. Our estimates show that the net benefits--the benefits
minus the costs--are roughly $100 billion per year, or about \2/3\ of a
percent of GDP.
Effects on Labor Supply. Another effect of expanding coverage that
we consider is increased labor supply. With full health insurance
coverage, some people who would not be able to work because of
disability would be able to get health care that prevents or
effectively treats the disability. They would therefore be able to stay
in the labor force longer. A related effect is that some workers
currently in the labor force would be more productive with better
health care. How large these effects might be are hard to predict. And,
there could be offsetting effects: for example, with a better insurance
market some workers who are working just to get health insurance might
retire earlier. But, we believe that the net impact on effective labor
supply will be positive and will further increase GDP.
Effects on the Efficiency of the Labor Market. The final impact
that we identify is the effect of expanding coverage on the efficiency
of the labor market. Expanding coverage and eliminating restrictions on
pre-existing conditions would end the phenomenon of ``job lock,'' where
worries about health insurance cause workers to stay in their jobs even
when ones that pay more or are a better match are available. Our
estimates, based on a range of economic studies, are that this benefit
could be about \2/10\ of a percent of GDP each year. Similarly, we
examine the fact that small businesses are currently disadvantaged in
the labor market because current employer-sponsored insurance is so
expensive for them (due in large part to the fact that they do not have
a large workforce over which to pool risk). Moving to an insurance
system that removes this disadvantage should be beneficial to the
competitiveness of the important small business sector of the economy.
III. The crucial impact of slowing the growth rate of health care costs
While the benefits of coverage expansion are substantial, slowing
the growth rate of health care costs is also essential to achieving
some of the fundamental benefits of health care reform. As discussed
previously, the U.S. health care system is on an unsustainable path.
Successful cost growth containment is central to changing that path and
securing a better economic future for the American people.
Needed Reforms. In discussing cost containment, I want to focus on
slowing the growth rate of costs. This is the so-called ``curve-
bending'' that can last for decades. Slowing the growth rate of costs
is quite separate from actions that we might take immediately to cut
the level of government medical spending, such as the more than $300
billion of Medicare and Medicaid savings proposed in our budget and the
roughly $313 billion of additional savings the Administration proposed
two weeks ago.\3\ These immediate reductions are unquestionably
important for paying for the expansion of coverage and other health
care reforms in the short run. Indeed, the President has frequently
emphasized that health care reform must not add to the deficit in the
next decade. But, for thinking about the changes that will save us from
the unsustainable long-run trends I discussed earlier, slowing cost
growth year after year is essential, and what we focus on in our study.
Of course, coverage expansion is likely to make some types of cost
growth containment possible. For example, with coverage, individuals
have improved access to primary care and may be more likely to receive
education about disease prevention and management of chronic
conditions. Smoking cessation and weight management are two
preventative measures that could reduce cost growth over time, while
improving health and quality of life.
Many other meaningful reforms are necessary to slow the growth rate
of costs over time. The CEA report focused on the conceptual importance
of reforms, rather than the mechanics. But the report does describe in
broad terms the kind of changes that might be implemented. For example,
we discuss changes in payments systems, such as bundling of payments
for hospital and post-hospital care. We also discuss changes in the
organization of care delivery, such as the formation of accountable
care organizations and medical homes, as ways to reduce fragmentation
and promote more effective and more efficient care delivery. We
emphasize the crucial role that investments in health information
technology and research on what works and what doesn't could play in
reining in cost growth over time. The President, in his speech last
week to the American Medical Association, made some specific
suggestions for reform along these lines.\4\ He also said that he was
open to changes that would give the recommendations of the Medicare
Payment Advisory Commission greater chance of adoption and
implementation. The Congressional Budget Office has also outlined a
large number of ``game changing'' reforms that experts believe would
slow cost growth.\5\
Evidence that Slowing Cost Growth is Possible. The CEA report also
surveys the evidence, much of it from international comparisons and
comparisons across different parts of the United States, that there is
substantial inefficiency in the current system. The finding of this
survey is that up to 30 percent of health expenditures in the United
States (which is equivalent to about 5 percent of GDP) could be cut
without affecting health care quality or outcomes. This is important in
making the case that slowing the growth rate of costs by improving
efficiency is possible. For example, our estimates suggest that we
could slow cost growth by 1.5 percentage points per year for almost a
quarter of a century before we have exhausted the existing
inefficiency.
In our report, we speak of the benefits of slowing the growth rate
of health care costs. But, each of our figures implicitly shows the
impact of not slowing the growth rate of costs. To help emphasize the
importance of doing reform well, I will describe them from that
perspective this morning.
Effect on Living Standards. Fundamentally, what slowing cost growth
does is free up resources. If we restrain costs by eliminating waste
and inefficiency, we can have the same real amount of health care with
resources left over to produce other things that we value. This causes
standards of living to be higher with a slower growth rate of health
care costs. In our analysis, we consider varying degrees of cost
containment. In particular, we look at the effects of slowing the
annual growth rate of health care costs by 1.5, 1.0, and 0.5 percentage
points. To be conservative, we assume that it takes a few years for
genuine curve-bending to kick in.
We analyze the effects of this freeing up of resources in a
standard growth accounting framework. Our framework includes the effect
of slowing cost growth on the deficit and capital formation (or
investment). Because the government is a major provider of health care,
slowing the growth rate of health care costs would lower the deficit
and thus raise public saving. And, efficiency gains that raise income
would lead to some additional private saving. All of this increased
saving would tend to lower interest rates and encourage investment.
This extra investment increases output even more.
This figure shows the crucial importance of slowing cost growth for
standards of living. To make these numbers more concrete, we translate
them into the effects on the income of a typical family of four (in
constant dollars). The bottom line shows the projected path of real
family income without reform. The higher paths show family income under
different degrees of cost containment.
Our numbers suggest that failing to slow cost growth results in
substantially lower standards of living for American families. Without
reform, our analysis predicts that typical family income in 2020 will
be roughly $2,600 lower than it would be if we managed to slow the
growth rate of costs by 1.5 percentage points. By 2030, it will be
nearly $10,000 lower than if we managed to slow cost growth. Failing to
control the growth rate of costs will condemn American families to much
lower standards of living than they would experience with successful
reform.
Effect on the Budget Deficit. I also want to discuss what our
analysis implies about the effect of health care cost containment on
the Federal budget deficit. I need to be very clear that our estimates
are not official budget projections, which would be based on detailed
projections of spending and revenues. Ours are more a back-of-the-
envelope calculation. And, they do not include the costs of coverage
expansion, because the President has suggested spending cuts and
revenue increases that are expected to cover the additional costs in
the next decade. Our numbers show the effect of slowing cost growth
over the long term.
We find that the implications of not slowing cost growth for the
deficit are very large. This figure shows the reduction in the Federal
budget deficit due to different degrees of cost containment. Consider
the numbers for 2030. They show that slowing the growth rate of health
care costs by 1.5 percentage points will reduce the deficit by 3
percent of GDP relative to the case of no reform. Put another way,
failing to slow the growth rate of health care costs by 1.5 percentage
points per year will result in a deficit that is higher by 3 percent of
GDP. By not slowing costs, we will leave our children a budget deficit
in 2040 that is 6 percent of GDP higher than it would have been with
successful reform. The numbers illustrate the crucial truth that
serious health care cost growth containment is central to long-run
fiscal stability.
Effect on Short-Run Macroeconomic Performance. Finally, by not
slowing the growth rate of costs, we will also likely forego a period
of better-than-average economic performance. When health care costs are
growing more slowly, wages can grow without firms' costs rising, so
firms do not raise prices as much. This allows monetary policy to lower
the unemployment rate while keeping inflation steady. Our estimates
suggest that slowing cost growth by 1.5 percentage points per year
would lower normal unemployment by around \1/4\ of a percentage point.
This translates into an increase in employment of about 500,000 jobs.
While this is almost surely not a permanent effect, it could last for a
number of years.
Taken together, the analysis by the Council of Economic Advisers
shows that doing nothing on health care is not an option. The country
is on an unsustainable path. Expanding coverage will unquestionably
have benefits for economic well-being, the efficiency of the labor
market, and the competitiveness of small businesses. But, undertaking
meaningful reforms to slow the growth rate of health care costs is
absolutely essential. Only by doing so can we avoid a stagnation of
living standards and skyrocketing budget deficits.
The President has spoken frequently of the need to provide the
American economy with ``a new foundation.'' His goal is that we not
only come through the current economic crisis, but emerge a stronger,
more durable economy. Health care reform that provides quality,
affordable coverage for all Americans and genuinely slows the growth
rate of costs significantly is a crucial part of that new foundation.
Meaningful reform is absolutely essential to the long-run health of the
American economy.
---------------------------------------------------------------------------
\1\ Council of Economic Advisers, The Economic Case for Health Care
Reform, June 2, 2009, http://www.whitehouse.gov/administration/eop/cea/
TheEconomicCaseforHealthCareReform/
\2\ Institute of Medicine. ``Care Without Coverage: Too Little, Too
Late.'' May 2002. http://www.iom.edu/CMS/3809/4660/4333.aspx.
\3\ Office of Management and Budget, Fiscal 2010 Budget Fact Sheet,
Transforming and Modernizing America's Health Care System, http://
www.whitehouse.gov/omb/fy2010--key--healthcare/; and The White House,
``Paying for Health Care Reform,'' June 13, 2009, http://
www.whitehouse.gov/MedicareFactSheetFinal/.
\4\ The White House, ``Remarks by the President at the Annual
Conference of the American Medical Association, June 15, 2009, http://
www.whitehouse.gov/the--press--office/Remarks-by-the-President-to-the-
Annual-Conference-of-the-American-Medical-Association/
\5\ Congressional Budget Office, ``Health Care Reform and the
Federal Budget,'' Letter to the Honorable Kent Conrad and the Honorable
Judd Gregg, June 16, 2009, http://www.cbo.gov/ftpdocs/103xx/doc10311/
06-16-HealthReformAndFederalBudget.pdf; and Budget Options, Volume 1:
Health Care, December 2008, http://www.cbo.gov/ftpdocs/99xx/doc9925/12-
18-HealthOptions.pdf.
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______
[An additional submission by Dr. Romer, ``The Economic Case
for Health Care Reform,'' may be accessed at the following
Internet address:]
http://www.whitehouse.gov/assets/documents/CEA--Health--Care--
Report.pdf
______
Chairman Miller. Thank you for the study that the Council
did, and also, again, for your testimony and being with us.
I would like to return to--and speaking of concept level,
the idea that the President has put on the table now, I think
twice or more times, and that is that there are internal
savings and cost-cutting that need to be made within how we
deliver medicine today, how we deliver health care today.
You, I believe, said it is 18 percent of the gross domestic
product. Mr. Kline, or one of you, said that in your
statements. And I think that is much higher than almost every
other nation in terms of what we are spending.
And yet we are saddled with the other side of that
argument, which is our health status is not much better, and in
many important indicators is worse than nations that spend
less. And the President has suggested, I think, almost $600
billion in cost-cuttings, changes, and savings that need to
take place. Some of those I suspect will not be adopted by the
Congress, but they all reflect the understanding that in the
current system we are sort of just paying for utilization; the
more you use, the more you are getting reimbursed, wherever you
are, whatever plan you are in, whether you are in Medicaid,
Medicare, and the private health insurance plans.
And it also suggests that providers of health care, because
of consolidation and changes, are becoming more and more
powerful in how that is done. So we back up and these costs
really become fundamental to--you talk about bending the curve,
but if in fact we are going to get out of this box we are in
now, most middle-class working people, any wage increase that
they might get is taken over by increased share of their
premiums or exclusions or co payments that have been added, and
that has been the trend over the last ten years. They are
offloading that onto workers. So as you point out, they
essentially eat up any possible wage increase that you might
have. Any discretionary income that you might get from that
increase is essentially gone in those payments.
I would just like you to expand a little bit on that idea,
that to change from a utilization-based system to a system that
is based upon outcomes and procedures and efficiencies, that
there are an awful lot of studies suggesting that it would make
a dramatic difference in the total cost to this Nation, whether
it be a government program or with businesses and families who
are paying for their coverage.
Ms. Romer. I couldn't agree with you more that we
absolutely--at the rate we are going, the numbers that we have
show very much that most of that rising in total compensation
that comes to workers because of productivity changes and all
of that will be taken up by bigger health insurance premiums,
so that they see their take-home wages basically being flat or
even going down towards the end of the period.
I think a crucial point that you make is that when we talk
about curve-bending, slowing the growth rate of cost, we are
talking about doing it through improving efficiency. And the
crucial part is that as good as the American health care system
is--we know it is a technological leader for example--we do
feel there is a lot of inefficiency.
And you mentioned the international evidence. People also
talk about the huge differences in expenditure on medical care
across the country, or even in the same counties within a
State, that people say that--researchers say we just can't
explain by differences in health needs or differences in the
demographics of the population. So that the experts tell us
there is up to about 30 percent of health care expenditure that
is just being wasted.
What that means is we have got a lot of fat that we can cut
out of the system without having any diminution of care. And
indeed what the President is committed to is maintaining and
improving the quality of care.
And I would just give you one other number, which is we
have talked a lot about can we slow the growth rate of cost by
say 1\1/2\ points a year. Well, the crucial thing is with the
kind of inefficiency that is there, we can do that for 25 years
before we actually use up the existing amount of inefficiency.
So the kind of changes that we have mentioned, that the
President has talked about, absolutely can do that. And they
are just absolutely crucial to do.
Chairman Miller. They are not without controversy, I might
add. They are crucial. But I know that the President met with a
number of the providers, with pharmaceutical groups, insurance
groups, hospitals and others and they talked about taking out,
I guess, about 1\1/2\ percent, about $2 trillion over the next
ten years. Obviously, laying pencil to paper became more
controversial than the discussions.
But I think we as policymakers should recognize what they
are telling us. We may have to screw up the courage to make the
decisions, but that kind of money is lying on the table with
that kind of rather small annual changes and outlays. And,
again, if it is accompanied with a policy directed toward
efficiencies and better outcomes and a better health care
status for American citizens, it seems to me that a big chunk
of this bill should take us in that direction. Thank you very
much.
Go ahead.
Ms. Romer. I was going to say you are absolutely right, the
1\1/2\ points may sound small, but it is enormous in terms of
its effect on the economy. And you are absolutely right that it
is going to step on some toes to get any of these.
One example that I give, the bundling of care, one of the
things we often talk about is a bundling post, you know, your
hospitalization and the 30 days after. That is just such a win
for patients and for cost effectiveness because we think that
it gives hospitals and providers the right incentives to make
sure you don't get sent home too early and that you don't end
up back in the hospital. And that is just one that is going to
be just a win-win and should absolutely not be as controversial
as some of the others.
Chairman Miller. Thank you. Mr. Kline.
Mr. Kline. Thank you, Mr. Chairman. Thank you, Dr. Romer,
for your testimony.
I think that there is absolute agreement on both sides of
the aisle here, as Dr. Price mentioned, that we all recognize
that we need health care reform. And certainly if you could be
reducing costs, that needs to be part of it.
I must say I always cringe a little bit when I think about
the government being the one stepping on toes, as you say, to
make that happen. And I am also going to say that I am a little
skeptical. Getting the government to cut out the fat would seem
to defy its history, but I guess hope does spring eternal.
We don't know, of course, right now what the cost of this
draft is. We have looked at the CBO estimates already on the
version in the Senate. We don't know what this is. It almost
certainly is going to be over $1 trillion. So it is a little
bit hard, I would think, for an economist--and you are here as
an economist--to really assess the impact. But I know that or I
suspect that you have looked at the issue of employer mandate
and what it might--the employer mandate to provide health
insurance coverage, what it might do to job losses.
Do you know, is there any professional literature or some
estimate of what the job losses might be with an employer
mandate? And by the way, I might note that this draft has not
only an employer mandate, but an individual mandate, thereby
solving the debate that has been going on for several months
about which way it should be. And I will have to give you
credit, you did solve the debate, Mr. Chairman. Not in the way
I expected, but there it is.
So back to you, Dr. Romer. Have you seen estimates as to
what job losses might be with an employer mandate such as is
held in this draft?
Ms. Romer. I think in answering that question the first
thing we have to make clear is that the vast majority of
employers currently do provide health insurance for their
employees, and so an employer mandate will just be telling them
to keep on doing what they have been doing. So it would have no
effect at all on them. And then what effects it could have on
other employers depends very much on how it is structured.
And as has been mentioned, one of the things that people
are being very cognizant of is how do we treat small employers
and those kind of things. I think there is literature, but it
certainly has a whole range of estimates, depending on how the
system is structured. I do think it is important to realize the
reason people talk about having shared responsibilities with
employers, and that is that we do think that the employer-based
system that we have is something that people are familiar with,
and the President has committed to keeping that as a system
going forward.
Mr. Kline. So you don't have any estimates what the job
losses might be? I have seen numbers as high as 4 million or 5
million job losses with an employer mandate.
Ms. Romer. I certainly have not seen numbers like that.
That would be, I would think, exceptionally large.
Mr. Kline. But again, we simply--we just don't know. And
there are certainly some concerns with this draft bill that
there would be reverse incentives or incentives for employers
to drop their coverage. And that is something we are going to
be analyzing as we go forward here with the debate on this and
the other versions that are out there.
And, of course, we are anxiously awaiting a score from the
CBO so we know what we are talking about in terms of dollars
here.
I have several of my colleagues here who want to ask
questions, including--I think we have three physicians with us
here today. So in the interest of time and being ever the
optimist that we can keep moving, Mr. Chairman, I am going to
waive my time back.
Chairman Miller. I thank the gentleman for that. Mr. Kildee
is recognized.
Mr. Kildee. Thank you, Mr. Chairman. Following through
somewhat on Mr. Kline's question, Ms. Romer, CBO scores the
Senate bill at $1.6 trillion, largely because it does not
provide an employer mandate or a payroll tax. The House bill
will cost about $1 trillion, largely due to the mandate to
provide insurance or pay the 8 percent payroll tax except for
small employers.
How important is it that the employers continue to provide
insurance or pay the 8 percent payroll tax along with other
nonproviding employees? Is 8 percent adequate or realistic?
Does the Senate bill meet the President's standards?
Ms. Romer. I think you are all getting at certainly a key
issue, which is how one structures the employer shared
responsibility that is important to maintaining the system that
we have, the insurance being employer-based, and for
controlling costs, so that is certainly important. I think the
details are something that we will be analyzing more and I am
sure the Congressional Budget Office and your staffs will be
analyzing more.
One issue I do want to bring up that, as Mr. Kline was
talking about, employment effects from the mandate. I have to
tell you that slowing the growth rate of cost, in our report
one of the things that we say is that that has a beneficial
effect on employment; that by having a period when costs are
not rising as much, that helps to give us a period of unusually
good economic performance.
And so I think we certainly want to look at the totality of
the plan because we think it can certainly have some positive
employment benefits.
Mr. Kildee. But the omission in the Senate bill of the
employer mandate is not a small issue. It is a rather
fundamental part of the President's plan, is it not?
Ms. Romer. The President has certainly expressed the view
that he does very much want to stay within the current largely
employer-sponsored health insurance, and some sort of shared
responsibility is very important.
Mr. Kildee. And the cost to the government of $1.6 trillion
must concern the President, too, rather have part of that cost
retained or taken up by the employer.
Ms. Romer. Absolutely. The President has from the beginning
said that we need to certainly make sure that anything we do
does not increase the deficit in the 10-year budget window. And
it needs to have the fundamental kind of reforms that I was
talking about that will actually lower the budget deficit
outside that window. So that is a top priority for the
President.
Mr. Kildee. Thank you, Ms. Romer.
Chairman Miller. Dr. Price.
Dr. Price. Thank you, Mr. Chairman.
I want to thank you for your testimony, Dr. Romer. You
mentioned at the beginning of your testimony that you are an
economist, and we are going to talk about the economics of it,
but you delved into the health care, so my questions will
bounce back and forth, if that is all right. You started out
talking about the fact that we spend 18 percent of our GDP on
health care in this Nation. As an economist, how much should we
spend?
Ms. Romer. I think there is no single number. You are
getting at a point, a good point, that is there is not some
fixed amount. What I do feel we know is that we shouldn't be
wasting; and so the estimates that maybe as much as 5 percent
of GDP that we are spending is just wasted.
Dr. Price. But it is not your testimony that the government
ought to set a specific amount that we ought to be spending on
health care; is that correct?
Ms. Romer. No, of course not.
Dr. Price. And in your testimony you also say that 46
million folks are uninsured. Is that uninsured today?
Ms. Romer. That is actually a crucial point. It is at a
point in time. Because experts will certainly tell you over,
say, a 2-year period, probably twice that many people go
through some period of lack of insurance.
Dr. Price. Isn't the 46 million number, though, those that
are episodically uninsured at some point during the course of
the last 12 months?
Ms. Romer. No. That is at a point in time. And the number
is like 82 million for over some 2-year period.
Dr. Price. If you could provide the data on that, I would
appreciate it.
Ms. Romer. I believe the citations are in our report, but I
will absolutely make sure you have it.
Dr. Price. Thanks. And a breakdown of those 46 million is
helpful to decide how we in fact get them insured, right? So it
would be helpful to know exactly who those folks are and why
they are not insured.
[The information follows:]
Questions for the Record Submitted to Dr. Romer
Thank you for testifying at the Tuesday, June 23, 2009, Committee
on Education and Labor hearing on ``The Tri-Committee Draft Proposal
for Health Care Reform.''
One of the Committee members had additional questions for which she
would like written responses from you for the hearing record.
Congresswoman Carolyn McCarthy (D-NY) asks the following questions:
1. In many cases payments to providers from private insurance
companies, as well as Medicaid and Medicare, do not reimburse providers
for the full cost of the care provided. What, if anything, is being
done to address this issue?
2. There has been a great deal of discussion regarding the practice
of payment bundling. Could you explain what this bundling is and how it
would work?
3. How can we address waste and fraud in a way that does not
penalize providers who are providing appropriate services?
4. Regarding efforts to close or reduce the donut hole--how will we
pay for these efforts?
5. The United States spends much more than other nations on
healthcare. Part of this has been attributed to high administrative
costs. Where do these high administrative costs come from? How will
this reform bill reduce these administrative costs?
6. The United States Currently Spends 18% of GDP on healthcare.
Estimates suggest that if nothing is done to reduce those costs, the
percentage could increase to 33% of GDP by 2040. How will this reform
bill help to address this issue? What size reduction in growth in
healthcare spending as a percentage of GDP is expected?
7. Millions of people face financial hardships, including
bankruptcy, as a result of healthcare costs. I've recently been working
with the bleeding disorders community on a resolution calling for
improvements in the diagnosis of care for bleeding disorders. These
disorders, however, are costly and continue throughout the life of the
individual. As a result, many individuals reach their lifetime
insurance cap. Can you talk about the number of people that insurance
caps affect and the expected benefits of removing the insurance cap?
8. As you know, the United States is currently experiencing a
severe nursing shortage and we are unable to meet our current and
future healthcare needs. I have proposed a number of bills to be
included in healthcare reform, including the Nurse Training and
Retention Act, which I am pleased has been included in the released
draft, and the Student-to-School Nurse Ratio Improvement Act. In
addition, I had a number of provisions included in the Higher Education
Act to increase the number of nurse faculty and nursing students. Do
you have any proposals for how we can address the nursing shortage and
how healthcare reform will affect nurses?
Please send your written response to the Committee on Education and
Labor staff by COB on Tuesday, July 24, 2009--the date on which the
hearing record will close. If you have any questions, please contact
the Committee. Once again, we greatly appreciate your testimony at this
hearing.
Sincerely,
George Miller, Chairman.
______
Responses to Questions for the Record From Dr. Romer
1. In many cases payments to providers from private insurance
companies, as well as Medicaid and Medicare, do not reimburse providers
for the full cost of the care provided. What, if anything, is being
done to address this issue?
Based on analysis of the 2006 American Hospital Association Annual
Survey data (the most recent year available), among community
hospitals, the aggregate hospital payment to cost ratio was 91.3% for
Medicare, 85.8% for Medicaid (includes DSH payments), and 130.3% for
private payers. It is important to be mindful that these aggregate
statistics do not suggest that all hospitals lose money on Medicare and
Medicaid patients. Hospitals that are more efficient in their provision
of care often make money.
Since the final legislative language has not yet been released from
the three committees, we are unable to comment on any specific
proposals that are being considered with respect to Medicare and
Medicaid payment rates.
2. There has been a great deal of discussion regarding the practice
of payment bundling. Could you explain what this bundling is and how it
would work?
Bundled payments represent one strategy to lower the number of
unnecessary services and improve the quality of care in hospital-based,
post-discharge, and outpatient care settings. Under a bundled payment
system, an appropriately set payment is allocated for all treatment
surrounding a well-defined episode of care (e.g., knee replacement, 6
month period of care for a person with congestive heart failure),
rather than independent charges for each prescribed service (e.g.,
office visit, lab tests, MRI).
Bundled payments would function much like the prospective payment
for hospitalizations that currently exist in Medicare today, but would
extend across provider types and/or within the outpatient setting.
There are exciting new innovations coming from the private sector with
respect to developing the clinical coding algorithms and implementation
designs to integrate bundled payments into current systems used by
insurers.
Bundled payments give providers a strong incentive to use resources
wisely and get the treatment right the first time because if the costs
of care exceed the bundled payment, providers bear financial liability.
Bundled payment systems increase the efficiency of resource use by
promoting care coordination among the multiple providers who supply
care during an episode. Lack of care coordination has often been cited
as a major contributing factor to preventable re-admissions among
Medicare beneficiaries. The idea is not to reduce the amount of care,
but to eliminate low value or redundant care, thereby reducing costs
without compromising quality. Indeed, bundled payments can increase
quality be giving a single provider crucial oversight responsibility,
and by encouraging infection control, patient education, and other
health investment measures that improve outcomes.
3. How can we address waste and fraud in a way that does not
penalize providers who are providing appropriate services?
Private insurers, Medicare and Medicaid are making important
investments to identify waste and fraud in the health care system.
Examples of fraud include billing for services or items that were not
provided, billing for work already reimbursed by another insurer, or
altering claim forms; examples of waste may include claims for services
that are not medically necessary.
Insurers use a variety of tools when analyzing their data in order
to detect fraud and waste. These techniques include edits, alerts, and
pattern detection. Both private insurers and government purchasers
continue to develop refinements to predictive models that will
accurately detect fraud and waste and not inadvertently target
providers who are prescribing appropriate services.
Perhaps one of the most important things that private insurers,
Medicare, and Medicaid can do is to have regular communications with
providers about the importance of identifying fraud and waste so that
everyone can be made better off (providers, government, and taxpayers)
when the few ``bad apples'' are identified, denied payment, and in some
cases prosecuted.
4. Regarding efforts to close or reduce the donut hole--how will we
pay for these efforts?
In general, Medicare Part D is financed by beneficiary premiums and
general revenues.
In June, the pharmaceutical industry pledged to reduce by at least
50% the cost of brand-name prescription drugs for Medicare
beneficiaries who fall into the doughnut hole (the gap in coverage
between annual total spending of $2700 and $6154 in 2009). We are
currently awaiting details about how such a pledge will be formally
implemented, including the mechanism by which plans and pharmaceutical
companies will be able to distinguish when a beneficiary hits the
doughnut hole.
5. The United States spends much more than other nations on
healthcare. Part of this has been attributed to high administrative
costs. Where do these high administrative costs come from? How will
this reform bill reduce these administrative costs?
The United States spends significantly more on health care
administrative costs than other countries. A McKinsey Institute report
indicated that as of December 2008, administrative costs accounted for
7% of overall health care costs ($145 billion) in the U.S., or $486 per
person compared to an average of $103 for other OECD countries. For a
typical medical group (including clinicians' time), the cost of
administration ranges from 10% to 27% of revenues.
High administrative costs are partially due to fragmentation in our
health care system. Our system of multiple payers, independent
providers, and the lack of coordination between them leads to greater
administrative costs for hospitals and physicians. For instance, forms,
billing, and other administrative details are not standardized across
payers and providers, thereby increasing costs and potential mistakes.
The individual and small group markets, where the high initial
administrative cost burdens cannot be spread across a large pool of
beneficiaries as in the large employer market are another source of
high administrative costs.
An insurance exchange may reduce administrative costs, especially
those associated with the individual and small-group market, by
standardizing application forms and streamlining insurance purchases
for larger groups of employees. Other proposed strategies for
administrative simplification and cost reduction include creating a
standardized electronic billing system that could be used by all
providers, suppliers and payers and increased adoption of health
information technology in general to reduce mistakes and increase
coordination.
6. The United States Currently Spends 18% of GDP on healthcare.
Estimates suggest that if nothing is done to reduce those costs, the
percentage could increase to 33% of GDP by 2040. How will this reform
bill help to address this issue? What size reduction in growth in
healthcare spending as a percentage of GDP is expected?
Any reform legislation needs to provide ways to not only pay for
the new expenditures associated with the expansion of coverage and
health care investments, but also to slow the growth rate of health
care costs. Proposals to slow the growth rather of costs, often
referred to as ``game changers,'' need to be targeted to address some
of the key drivers of inefficiency in the health care system. In
particular, ``game changer'' proposals should align provider incentives
to promote efficiency and provision of high quality care. They should
increase the flexibility of administered pricing systems to incorporate
new information about the effectiveness of treatment and improvements
in the productivity of inputs to medical care. They should reduce
fragmentation in the system through standardization of billing and
other administrative processes. And, they should include investments to
strengthen the system, including implementation of information
technology and electronic medical records, comparative effectiveness
research, creation and dissemination of price and quality information
for consumers, and generation of timely performance feedback for
providers.
Estimates by the Council of Economic Advisers suggest that slowing
the growth rate of health care costs by 1.5 percentage points per year
would result in health care expenditures in 2040 equal to 23% of GDP.
This is dramatically less than the 34% of GDP that we project will
occur in the absence of successful health care reform.
7. Millions of people face financial hardships, including
bankruptcy, as a result of healthcare costs. I've recently been working
with the bleeding disorders community on a resolution calling for
improvements in the diagnosis of care for bleeding disorders. These
disorders, however, are costly and continue throughout the life of the
individual. As a result, many individuals reach their lifetime
insurance cap. Can you talk about the number of people that insurance
caps affect and the expected benefits of removing the insurance cap?
According to the AHIP December 2007 survey of individual health
insurance plans, the average lifetime maximum benefit is $4.2 million
for single coverage in a PPO or POS plan, $3.0 million for HMOs and
$4.3 million for HSAs.
Unfortunately, there are no public sources of data to tell us how
many individuals with private insurance have reached annual and/or
lifetime insurance maximum benefit limits on their policies.
8. As you know, the United States is currently experiencing a
severe nursing shortage and we are unable to meet our current and
future healthcare needs. I have proposed a number of bills to be
included in healthcare reform, including the Nurse Training and
Retention Act, which I am pleased has been included in the released
draft, and the Student-to-School Nurse Ratio Improvement Act. In
addition, I had a number of provisions included in the Higher Education
Act to increase the number of nurse faculty and nursing students. Do
you have any proposals for how we can address the nursing shortage and
how healthcare reform will affect nurses?
The research literature suggests that there will likely be some
workforce shortages in coming decades, particularly for nurses, non-
physician clinicians, and primary care physicians. Assuming health care
reform expands coverage to a significant proportion of the 46 million
Americans who are uninsured, there could be a noticeable increase in
the demand for medical care. In turn, this will increase the demand for
nursing labor as well as other types of medical personnel. While CEA
does not have any specific workforce proposals that it endorses, we are
working with the Department of Health and Human Services in the
development of ideas to address this issue.
______
Dr. Price. You also mentioned, as other folks have, that
the President's goal--and it is reiterated over and over and
over--that if you like your current plan or if you like your
current doctor, you can keep them. Do you know where that is in
the bill?
Ms. Romer. Absolutely. And things like the employer mandate
is part of making sure that large employers, that today the
vast majority of them do provide health insurance.
Dr. Price. I am asking about if an individual likes their
current plan, and maybe they don't get it through their
employer and maybe in fact their plan doesn't comply with every
parameter of the current draft bill, how are they going to be
able to keep that?
Ms. Romer. The President is fundamentally talking about
maintaining what is good about the system that we have.
Dr. Price. That is not my question.
Ms. Romer. One of the things that he has been saying is,
for example, you may like your plan. And one of the things we
may do is slow the growth rate of cost of your plan. So that is
something that is not only----
Dr. Price. The question is whether or not patients are
going to be able to keep their plan if they like it. What if,
for example, there is an employer out there--and you have said
that if the employers that already provide health insurance,
health coverage, for their employees that they will be just
fine, right?
Ms. Romer. Uh-huh.
Dr. Price. What if the policy that those employees and that
employer like and provide for their employers doesn't comply
with the specifics of the bill; will they be able to keep that
one?
Ms. Romer. Certainly my understanding--and I won't pretend
to be an expert in the bill--but certainly I think what is
being planned is, for example, for plans in the exchange to
have a minimum level of benefits.
Dr. Price. So if I were to tell you that in the bill it
says that if a plan doesn't comply with the specifics that are
outlined in the bill, that that employer is going to have to
move to a different plan within 5 years, would that be unusual
or would that seem outrageous to you?
Ms. Romer. I think the crucial thing is what kind of
changes are we talking about? The President was saying he
wanted the American people to know that fundamentally if you
like what you have, it will still be there.
Dr. Price. What if you like what you have, Dr. Romer,
though, and it doesn't fit with the definition in the bill? My
reading of the bill is that you can't keep that.
Ms. Romer. I think the crucial thing, the bill is talking
about setting a minimum standard of what can count as a plan.
Dr. Price. So it is possible that you may like what you
have, but you may not be able to keep it, right?
Ms. Romer. I would have to look at the specifics.
Dr. Price. Good. You talk about portability and the
importance of portability. And it is extremely important. You
got to be able to take your insurance with you. Isn't there a
different way to do that, or aren't there other ways to do that
besides what is being outlined in the bill? For example, if you
owned your health insurance policy regardless of who would pay
for it, wouldn't that be a way to accomplish portability?
Ms. Romer. We certainly have seen, for example, a lot of
trouble. People have trouble with portability. Certainly given
that the vast majority of Americans have employer-provided,
they don't have something that is----
Dr. Price. Dr. Romer, if an individual owned their policy,
regardless of who paid for it, couldn't they take it with them
regardless of their job situation?
Ms. Romer. Yes, that would seem to me that----
Dr. Price. I notice in your testimony you didn't mention
either liability reform or regulatory reform. Would you be able
to tell the committee how much that contributes to the cost of
health care in the Nation, liability cost and regulatory cost?
Ms. Romer. We have actually been looking at that. One of
the things in our report is to point out that there are a large
number of things that are behind how much health care costs are
today and how much they have been rising. My read of the
professional literature is that the estimates are all over the
map. It is certainly a part of why costs are high and a part of
why they are rising. I think my read of the evidence is it is
not the primary reason.
Dr. Price. As an economist, though, you could put a number
on that and you could get that for the committee.
Ms. Romer. I will certainly do the research.
Dr. Price. Thank you so much. Thank you, Mr. Chairman.
Chairman Miller. Mr. Payne.
Mr. Payne. Thank you very much. With expanded coverage, I
assume that there should be more wellness prevention. When you
are poor--you know when I was young, you know people think you
are crazy when you go to a doctor if you weren't sick, because
well people couldn't afford to go to the doctor even when we
were sick, more or less when you weren't.
However, how much do you think as this moves on the
wellness, the prevention, if that can be an educational part of
the coverage? Is there any quantifiable number that you think
would show a slowing in the increase, or have you kicked in any
leveling off by virtue of the preventive part?
Ms. Romer. That is an excellent question because it does--
you know in our report, we often talk about the benefits of
coverage expansion and the benefits of slowing the growth rate
of costs. And, of course, those two things do intersect exactly
where you talk about--with wellness and prevention--because
when someone has health insurance coverage, they tend to have a
relationship with a primary care physician who does do the
education and the focus on wellness that we do think can slow
the growth rate of cost.
Especially, again, my understanding of the literature,
things like smoking cessation programs, weight management, are
absolutely things that can slow the growth rate of cost over
time. I think the important thing is it is not the only thing
we need to do, and that there are other things like how we
reward value over volume and changing the delivery system that
are also very important to slowing cost, but certainly wellness
is one component.
Mr. Payne. Thank you. Also I have had concerns. As we do
know, there are certainly underserved communities in rural
areas where it is difficult, and of course in urban areas, the
type of part of the district that I represent--and of course,
my concern continually is access to a physician or to quality
care.
And I am wondering, you know, kind of getting ahead of
things, but how are we going to ensure in towns in the district
that I represent that there will be the opportunity for
wellness and the opportunity for preventive services, because
we do know that there is certainly a lack of quality--or lack
of any physicians in general in many of the underserved
districts?
Ms. Romer. I think, again, one the very strong features of
the tri-committee bill is that it does address these workforce
issues that we know. Especially if we are going to move to a
system where there is more coverage, more access to primary
care, we need more primary care physicians. So I think these
workforce issues are going to be important. I know it is
something that my staff and others in the White House are
absolutely thinking about because that is going to be an issue.
And your point about the geographical, it is not just the
numbers but the geographical distribution is going to be very
important.
Mr. Payne. I will just yield back the balance of my time.
Chairman Miller. Dr. Cassidy.
Dr. Cassidy. Thank you, Dr. Romer.
I enjoyed your Council of Economic Advisors report on the
problem, but there are no prescriptions, as you say, and this
effectively is a prescription. And in your testimony, you
allude to some stuff; some of it seems as if you are telling me
down is up and up is down. For example, Medicaid and Medicare,
quite impressively, is driving cost. And yet we are going to
increase Medicaid to 133 percent of Federal poverty level.
I have an article here from Health Affairs, out of the
Lewin Group, that points out when you have increased Medicare
and Medicaid as a proportion of your payer mix, for the private
insurance company it drives their cost up, the hydraulic
effect. You push down here because you use your monopsony power
to drive up rates and it pushes up there, gaming the system for
the public thing.
So one question I have is, how are we going to control
Medicaid when we are increasing the reimbursement levels and we
are increasing eligibility? Again, that is just cost purposes.
Secondly, you know, next Tuesday morning, I am going to be
treating lots of Medicaid patients in a public hospital in
Louisiana, as I have for 20 years. I don't think a single one
of them would say it is patient-centered. As I looked through
800 pages this last weekend, I didn't see much that said
``patient-centered.'' We are using that rhetoric, but as a guy
that has been spending 20 years trying to address that, I don't
see it.
And the accountable care organization is an unproven
concept. And even the advocates admit that there are lots of
obstacles for it to be instituted. Bundling is unproven,
frankly. I keep on wondering how we are going to save money and
lessons by using the States' monopsony power to drive down the
provider reimbursement. Which brings me back to this, which
says that you are going to drive up the cost for the private
insurance companies, effectively gaming the system so that
people migrate towards the public.
I have asked several questions, and I apologize. If you can
address those, please.
Ms. Romer. So the crucial thing that you are mentioning--
and something the President is well aware of--is what we are
talking about in terms of extending coverage in some of the
reforms we are doing now, like health information technology
and the payment reforms. Those are absolutely going to cost
money and that is why he has put $948
billion of suggested savings and other revenue sources to
pay for those kinds of expansions now in the budget window, and
then to make the kind of fundamental changes that will slow the
growth rate of costs over time.
One of the things you did mention, like the accountable
care organizations, one of the strengths, again, of the bill,
the pilot programs that surely are going to be a part of how we
move forward on this, is figuring out what does slow the growth
rate of costs.
Dr. Cassidy. We do know a couple of things that slow the
growth rate. ACOs have not been proven to do so. But one thing
that slows the growth rate is HSAs, Health Savings Accounts. I
have a Kaiser Family Foundation thing that shows for similar
benefits, similar demographics among beneficiaries, an HSA has
30 percent lower costs than a fee-for-service. There is nothing
in here and--that is a very patient-centered concept--there is
nothing in here about an HSA.
Secondly, I would say that there is nothing in here about
what the Safeway program has, which has variable premiums for
people who enroll in preventive medicine. Indeed, as best as I
could tell, this would not allow that in the public option, and
yet the one preventative measure that has worked is actually
making the patient a little fiscally responsible for lifestyle
choices.
Ms. Romer. The main thing I would say is I would highly
recommened the Big Fix CBO volume that I actually keep on my
bedside table on budget options. There are 108 things that they
proposed as things that could help to slow the growth rate of
cost.
What you are pointing out, there are a range of things; the
tri-committee bill has some of them in it. The important thing
is we have absolutely got to take these measures and and they
are absolutely ones that the vast majority----
Dr. Cassidy. I am almost out of time.
Except for using monopsony power to negotiate lower rates,
is there one thing in here that is proven to lower cost?
Ms. Romer. Absolutely. I believe things like bundling, that
the evidence is that that has worked in other places where we
are bundling. So we are thinking of expanding that.
Dr. Cassidy. If you had to bet your house on that, would
you bet your house on that evidence? Because it is slender and
it goes both ways.
Ms. Romer. It is cited in our report, and I will make sure
we track it down for you.
Dr. Cassidy. Thank you very much.
Chairman Miller. Mr. Andrews.
Mr. Andrews. A lot of Americans are betting the house. That
is the problem. They lose their house, they lose everything
they had. So we are betting on fixing the problem.
I want to come back to Dr. Price's questions to you about
the President's commitment that if you like your plan, you get
to keep it.
Dr. Price posed an example where if a plan that an employer
provides falls short of the credible minimum coverage that is
in the House draft, the question is what would happen? The
answer is the employer would have to come up with that, that is
true. But I want to examine with you whether someone is likely
to like that plan.
The President said if you like that plan, you get to keep
it.
Ms. Romer. I think most people like something that is
better.
Mr. Andrews. It is my understanding in the House draft that
the minimum coverage is based upon 70 percent of the actuarial
value of the Federal Employees Health Benefit Plan. That is a
pretty modest number. And do you think it would be likely that
a plan below that number might not have access to primary care
like OB-GYN care, annual checkups?
Ms. Romer. There are certainly going to be limitations.
Mr. Andrews. Do you think it is likely that a plan that
would fall below that would probably have an immense copay in
the middle, or deductible in the middle, where you get some
primary care coverage but then have an enormous donut hole,
something the majority is very familiar with and we are going
to fill. Do you think it is very likely that they have that
huge donut hole in the middle?
Ms. Romer. I think it is likely.
Mr. Andrews. How likely do you think that somebody would
have catastrophic care coverage if their plan fell below that
70 percent threshold?
Ms. Romer. Exactly. They are likely to have high out-of-
pocket expenses.
Mr. Andrews. So I guess it is metaphysically possible that
somebody would like that kind of plan, and we think that the
reality is that people would not like something like that.
Let me come back to employee mandates that Mr. Kline asked
about. Your projections of economic growth are based upon the
President's conceptual plan; is that right?
Ms. Romer. They are based--I mean, the crucial thing, the
principles that the President laid down----
Mr. Andrews. One of those was that all employers would have
some fair share of responsibility, right?
Ms. Romer. The main thing we were focusing on was slowing
the growth of costs.
Mr. Andrews. Your projections take into account the
dynamics of a requirement of employer responsibilities; is that
correct?
Ms. Romer. Our projections are on a much broader level, so
they don't have those kind of details in them, so they are
based on----
Mr. Andrews. But that is one of the ways we would get that
cost growth curve to bend, I assume.
What happens--you are an economist and I am sure you can
tell us this--but let us say that you run a retail store and I
run a retail store, and you voluntarily insure your employees
and you are in excess of this minimum standard so this bill
leaves you alone, lets you keep doing whatever you want to keep
doing. And I don't, I don't provide health care to my
employees. And one of my employees gets into a motorcycle
accident, who pays the bill?
Ms. Romer. Depends on whether they had private----
Mr. Andrews. Let's assume that she is one of the uninsured.
Ms. Romer. So it would be uncompensated care.
Mr. Andrews. Who pays for uncompensated care?
Ms. Romer. Well, all of us as taxpayers and all of us who
have private insurance.
Mr. Andrews. So you, as the retail owner who does insure
your employees, is picking up part of the cost for me, who
doesn't. Is that right?
Ms. Romer. Absolutely, as do the rest of us.
Mr. Andrews. So this plan would also take into account that
economic issue where we are leveling that playing field a bit,
and there are taxes imposed, aren't there, also at the State
and local level to cover uncompensated care?
Ms. Romer. Absolutely.
Mr. Andrews. What would happen to those State and local
taxes if this draft were enacted and people got health
insurance under this plan?
Ms. Romer. We absolutely expect that uncompensated care
would go down.
Mr. Andrews. Let me ask you one other question about your
economic assumptions here.
How many jobs do you think it would cost us to do nothing?
And I know the other side says no one is in favor of doing
nothing. That is rather odd; since everyone is in favor of
doing something, nothing has been done for 50 years. What would
it cost to do nothing in terms of lost jobs for the economy?
Ms. Romer. Certainly. What we have numbers on are it what
is going to cost in terms of, you know, our total standard of
living; and there we have enormous numbers about how we are
absolutely going to have lower standards of living. We
certainly have the short-run impact on jobs.
So our numbers were that, by not having successful reform,
we get numbers like we are costing ourselves maybe 50,000 jobs
that we could be having if we had successful reform, at least
for a while, in terms of better economic performance.
Mr. Andrews. I thank you and yield back.
Mr. Castle. Dr. Romer, I have been trying to figure out out
exactly what context you are here for. Is the administration
supporting the tri-committee bill? Or there are other bills out
there. There are Senate bills, there are Republican
propositions. I am not exactly sure where the administration
is. Is this now your bill?
Ms. Romer. The crucial thing is I am here representing the
administration, to tell you that health care reform is the
President's number one priority, and I think what I was
describing is what the President sees as kind of the key
principles. We do know there are lots of bills, and each one of
them has certain strength. And so we are here to help move that
conversation along.
Mr. Castle. So you are not supporting this bill, per se,
but you are supporting the principles?
Ms. Romer. We are absolutely supporting successful health
care reform, which is the number one thing on the President's
agenda.
Mr. Castle. My numbers may not be exactly correct, and you
can correct me. I have seen a chart on the 46 million people
who are uninsured, and something like 9- or 10 million of those
are people who are not legally in the United States of America.
My question to you is, what would this plan or what does
the administration propose with respect to those individuals;
that they would have to be insured and would the government be
in a position, if they are low-income, to have to pay for that
insurance? I mean, you are dealing with a situation where it is
what do we do with somebody who perhaps should not be here to
begin with.
Ms. Romer. So there are several things to point out. One is
we talk--we mentioned with Dr. Price about the 46 million. That
actually is more like 82 million when you think of people who
are uninsured at a point in time. A crucial fact of that is
probably 80 percent
of those are workers, most of them are middle-class
families that go kind of in and out of insurance.
On the issue of undocumented workers, the President has
said that he does not support government-provided health
insurance for undocumented workers, but he has certainly also
talked about the importance of comprehensive immigration reform
that he thinks is important.
Mr. Castle. So we should take that number away from the 46
million in terms of those who we are concerned about protecting
at this point?
Ms. Romer. Yes.
Mr. Castle. I am from Delaware. In my State--this is
probably true of a lot of States--there is a lot of free or
subsidized medical help. The Federal community health centers
are a perfect example of that, but prescription drug programs
that exist throughout the country, volunteer position programs.
I just read about a cancer program we have in Delaware for
people who are low-income. We have employer-based clinics,
hospital clinics, et cetera.
If we go to a universal system, what is going to happen to
those programs? And my concern is that all of a sudden, people
are going to say everybody is insured now and we don't have to
do these. And we are going to lose a lot--from an economic
point of view--a lot of relatively free medical help which is
being provided in this country. Has that been factored
economically into what is being done at the White House, or in
this legislation or anywhere else that you know about?
Ms. Romer. We certainly do know that there is a lot of
uncompensated care in the country, and a lot of it ends up
being paid for by the government. So I would think as we moved,
certainly, from government-run programs that are providing
uncompensated care, we would just be changing how they are paid
for by making these now--workers that are currently uninsured
would now have insurance. But so many of these wonderful
programs, I would assume they would continue but in a different
guise.
Mr. Castle. I wish somebody would look at that. I don't
think a lot of these are necessarily with cost-shifting over to
the government, with the exception of public community health
centers, the things I need are mostly volunteer activities by
either corporations or different entities who are willing to
help. I am concerned about that loss.
Another insurance area that concerns me is the whole area
of prevention and wellness, which I think is in this
legislation. I haven't read it carefully at this point. And
certainly, I think we all agree it is a key for improving
health care for all of us in America. But has anyone looked at
what cost savings can realistically be obtained by imposing
prevention and wellness programs, preventing diabetes, that
kind of thing? That may be a little bit too difficult to do,
but do you have a grasp on that?
Ms. Romer. It is something I know--it is something that is
heavily studied. Actually, I will tell you about I was doing an
interview on television and someone said, aren't you just going
to make people live longer? And I said yes, guilty as charged.
But that is sort of one of the key issues here is that we
do know wellness often is cost-effective over a range, but then
people live longer. So figuring out what it saves in general,
you're absolutely right, there are some estimates. The things I
cited like smoking cessation, weight management, those do seem
to help. But if we make people live longer, I don't apologize
for that.
Chairman Miller. At this point, I am going to call on Mr.
Scott and then Dr. Roe and then Ms. Woolsey and then Mr.
Hunter. And then Ms. Romer is going to be allowed to leave the
committee under our arrangement of getting her here today. Then
we will hear from our second panel.
So, Mr. Scott.
Mr. Scott. I need to follow up on the comments from Mr.
Andrews on the cost shifting.
I have heard that it is about a hundred dollars per family
that goes to paying for the costs of indigent care. Is that
about right?
Ms. Romer. I would have to check the numbers, but it is
certainly substantial.
Mr. Scott. Can you say a word about the importance of
covering prenatal care and early child comprehensive care?
Ms. Romer. I think that goes to Mr. Castle's point that in
terms of preventative care that has a good payoff, I feel very
strongly that the evidence suggests that prenatal and child
care--child well care is crucial.
Mr. Scott. Now, the Medicaid program has a program called
EPSDT. It is a comprehensive set of benefits. Is it essential
that same comprehensive set of benefits, which includes
preventative and screening tests, be available on all policies?
Ms. Romer. So I think the specifics--I mean, that is part
of this bill certainly talks about setting up a professional
advisory board to decide what benefits. I think that certainly
is a crucial issue and something that requires very careful
thought.
Mr. Scott. And in terms of competition, what portion of the
public plans, Medicare and Medicaid, actually go to health
care, and how much is spent in administration compared to the
private plans? How much is spent on administration and how much
actually goes to health care?
Ms. Romer. I think you are making an important point, which
is that we do know the public plans, Medicare and Medicaid, do
have lower administrative costs. And that is one of the
reasons, when we think about setting up a public option, one of
the ways that it will be able to put competitive pressure on
private firms, because it is likely to have lower
administrative costs.
Mr. Scott. Is there much difference between the two?
Ms. Romer. Yes. I believe it is substantial.
Mr. Scott. Does 25 to 40 percent administration in these
private plans, is that an order of magnitude that you
understand, and about 3 percent in the public plans?
Ms. Romer. I would definitely have to check the numbers to
make sure I was answering correctly, but I am happy to get back
to you on that.
Mr. Scott. One of the things that we are trying to do is
transform health care at the same time we are trying to get
coverage and change the health delivery system at the same time
we are doing financial access. Should we do them one at a time
or all at the same time?
Ms. Romer. I think the President has very smartly said that
we can certainly do many things at once, and I have complete
confidence in the Congress as well--and these are all crucial
issues. These are all part of what the President has called the
new foundation, and they are all aimed at the same thing, which
is making this a healthier, stronger economy.
Mr. Scott. One of the things that we have been asked is,
how we are going to pay for it? We are going to be making some
decisions on taxes in the next few months--the estate tax, what
I call the bare minimum fair share tax, that is the alternative
minimum tax. Where would these be in the list of priorities
compared to universal health care?
Ms. Romer. So what the President has said is absolutely
that he thinks comprehensive health care reform is crucial, and
he has given a list of ways to pay for it. About two-thirds are
suggested savings for Medicare and Medicaid and about one-third
coming from new tax revenues. And he had a suggestion which is
limiting the itemized deductions on high-income earners. You
listed some others.
Mr. Scott. Should we enact health care and then figure out
how much in terms of tax cuts we can afford? Or should we pass
all of the tax cuts first and see if we can get around to
health care?
Ms. Romer. I think we should do a sensible health care
reform that does what we need to do for health care and make
sure that it doesn't increase the deficit in the crucial 10-
year budget window.
Chairman Miller. Dr. Roe.
Dr. Roe. I would like to agree with all of your economic
arguments if they didn't go exactly the opposite of what
happened to us in Tennessee.
We got a Medicaid waiver, as you know, 16 years ago in this
State to form a managed-care health care plan called TennCare
to hopefully cover most of the people in Tennessee. What
happened was, it was a very rich plan and offered a lot of
benefits, like I believe this government-run option is going to
be. And what happened was small businesses first, but others
made a perfectly logical decision to drop their private health
insurance and go into the government-run TennCare plan. And 45
percent of the people who are in the TennCare plan, or were in
the TennCare plan, had private health care insurance but
dropped it for this government option.
The problem with the government plans is this: When you
talk to the providers, the hospitals, and the other providers,
TennCare paid 60 percent of the costs of providing the care--
very rich in the promises but only 60 percent of the costs.
Medicare pays about 90 percent of the costs. So you've got two
of the government plans that don't pay the costs of the care.
And the uninsured pay somewhere in between, shifting more and
more and more costs onto the private insurers.
And to answer Mr. Scott's question, it is about $100-$150 a
month is what the answer is, the cost that is shifted. That is
the data that I have seen.
What I fear in a government option, a government-run
bureaucratic plan, is this very thing will happen again on a
national scale. You are going to have a very rich plan that has
offered all of these benefits, and here you are in private
health insurance out here, and you are going to have your cost
shifted to you even more and more. And businesses will make a
perfectly logical decision, which is to drop the the government
option.
So over time--it won't happen immediately, it will happen
over time.
In Tennessee what our Democratic Governor did, along with
the legislature, was he cut the rolls because it was
bankrupting the State. And your assumption it is going to save
money goes in the face of what our experience has been in
Tennessee. Could you respond to that?
Ms. Romer. I think the crucial thing is what it shows is
how important it is to get the details correct. And that
absolutely how one sets up the public plan and all of that is
going to be important. But one of the things that the tri-
committee bill does--and that the President certainly
emphasized--is it needs to be on a level playing field and
that, for example, being paid for by premiums that are paid
into the public plans. I think that is important.
Dr. Roe. If what you have just said happens, you don't need
a public plan. You can have another insurance plan. It will be
a subsidized plan. The premiums, I will guarantee you, will not
pay for the cost of that care.
Let me answer a question Dr. Price had just a moment ago. I
went back to my own group. I am in a medical group at home that
had about 350 employees. And this astonished me. We had offered
last year a high-deductible insurance plan, a health savings
account. First we offered it to the physicians and then we
offered it to every one in our group, which is over 300 people.
What percent do you think took that plan? 10 percent? 15?
84. And the reason was because they could look at a $5,000
deductible--this is a plan that will be gone with this current
plan. I can tell you those will be gone because there is no
health savings account in this current legislation or any that
I have seen.
And what these employees found out, along with me--that is
what plan I had--was if you do believe in the wellness and
prevention, this economically incentivizes you to do that. You
get to keep the money at the end of the day. So all of the
health savings accounts in the country--and I was amazed that
84 percent of the 294 that we have health insurance, 248 got a
high-deductible plan in our group and didn't take traditional
insurance.
Could you comment on that?
Ms. Romer. Certainly I would like to do more research to
know whether that is a common occurrence. We do know that
health savings accounts do tend to be most popular with the
healthy and the affluent.
But I want to come back to your TennCare example because
one of things, if you are worried about the employers dropping
their coverage, again that goes to much of our discussion as to
how important the shared employer responsibility can be to
ensure that that system remains.
Dr. Roe. They didn't drop the coverage. They just allowed
them to get the government plan which, again, didn't pay the
providers but two-thirds of the cost of providing the care,
which shifted costs back to private insurers.
So I would certainly like to know how many people would
lose, because all of the HSAs lose there. The 250 right there I
know will.
What I would like to know also when you provide all of this
extra--when all of this other care comes in, who is going to
provide it? Right now, we don't have enough doctors in America.
We have more doctors dying and retiring in the next 10 years
than we are producing in this country.
Chairman Miller. Ms. Woolsey.
Ms. Woolsey. Dr. Romer, you give me great confidence that
we are on our way to doing something very reasonable and we
have got good leadership, and thank you for yours.
I have a short question, and then I have a little bit
larger discussion.
Choice. We are assuming that employer coverage is something
that every single employee likes. If you like your coverage,
you get to keep it. How many people are going to feel trapped
because they have to keep it? Have you looked at that at all?
And how do you see the phasing in when everybody will have a
choice?
Ms. Romer. I certainly think that is an issue we do need to
look at more. What the President has emphasized is the
importance of choice. That is one reason he wanted the public
plan to exist in the exchange, to make sure that even in areas
where there might only be one or two providers, that you do
have a choice. So that is certainly a principle that he thinks
is important.
Ms. Woolsey. Well, I will move on to kind of a broad
question that a lot of us ask ourselves up here.
What exactly is the economic value for having private
insurance carriers in the system in the first place?
Ms. Romer. We certainly think that in general--what I tell
my introductory students is that competition is a good thing
and that it is something that does tend to lead to innovation,
it does tend to lead to cost containment. And so I think that
would be certainly one of the benefits that one could see from
having a private system.
Ms. Woolsey. But real competition, if we don't offer a
robust public plan as one of our choices, will there actually
be competition in the system when we rewrite it?
Ms. Romer. We certainly think--again, depending on how
narrow the insurance exchange is, we do know there are many
markets where there isn't robust competition now, where there
are just one or two providers. So that is a role that the
public plan can play.
Ms. Woolsey. Do you have any hesitation in the Federal
Government providing that good plan with the--are you worried
that insurance companies can't compete? They seem to be quite
worried.
Ms. Romer. I think the important thing is how it is
designed. I think the tri-committee proposal certainly is
trying to address that and make sure that the public plan is on
a level playing field, and I think that is important.
Ms. Woolsey. Is our role, our primary role, to offer the
public a choice of a good public plan--if they want it--or is
our role to be very worried about what happens to the insurance
companies?
Ms. Romer. I think in general your role is to come up with
a comprehensive reform of health care and--I do want to say
that the tri-committee bill, I think, is an important step in
coming up with a bill that does encompass so many of the
principles that the President has said were important. And that
dual thing of expanding coverage and making the kinds of
meaningful reforms that will slow the growth rates of cost,
those are absolutely crucial.
Chairman Miller. Mr. Hunter.
Mr. Hunter. Thank you, Mr. Chairman. And thank you, Dr.
Romer, for being here.
Quick question. Under the draft bill, individuals face an
actual tax penalty of 2 percent of adjusted gross income, up to
the amount of the national average premium through the new
exchange if they failed to obtain acceptable coverage.
Have you, your office, or anybody in the administration
done any projection as to the level of a tax on an individual
that will make it effective as a penalty? So basically, how
much of a punishment tax is it going to take to make people
sign on to this to get an acceptable coverage that meets 100
percent of all of the mandates? How much do we have to punish
them?
Ms. Romer. I think certainly there are a range of estimates
out there. One of the things that the administration has been
very cognizant of is just how important things like auto-
enrollment can be for getting people to sign up for things that
we think we can actually get a very long way by just making the
information available or making it easy.
And then I would have to do more research to know how much
more shared responsibility it would take.
Mr. Hunter. What I am asking is--it is in this bill that
you basically punish, through different taxes, people until
they sign on to acceptable coverage. So you haven't done any
projections to what equals an acceptable punishment tax for
people to sign on to this?
Ms. Romer. I think one of the things the Congressional
Budget Office will do is figure out if what has been proposed
is large enough to get a large number of----
Mr. Hunter. There will have to be some punishment tax, some
acceptable level of some kind of inclination for people to sign
on to this, those that don't want to.
Ms. Romer. Certainly that is one of the issues. My
understanding is there are lots of different views in the
different bills coming through Congress. One of the things I
believe is true in the tri-committee bill--and I know is a
focus of many bills--is to have a hardship waiver for a family
that says they can't do it for a particular reason. And I think
most of the bills do have a clause like that.
Mr. Hunter. I am going to yield the balance of my time to
Mr. Guthrie.
Mr. Guthrie. Thank you. Just a quick question.
I was in Human Resources for a manufacturing company that
offered a plan better than the Federal plan. My question for
this, if we are going to tax employer-based benefits--which is
certainly on the table and I think the President has not ruled
that out--and you say you can keep what you currently have, and
I think most people that are satisfied with their health
insurance are probably getting it from an employer because it
is subsidized by the employer. If we tax that benefit, it will
go up 38\1/2\ percent, what the corporate income tax rate is.
So economics would say the business would probably lower what
they offer in order to meet that benefit.
So if we are going to increase the cost of employer-based
benefit 38 percent, then it will probably drop down to the
credible minimal coverage. So people will actually lose the
value of their benefit.
The second thing is, I am from Kentucky, and we did health
care reform in the mid-1990s and people were allowed the keep
their plan if they were happy with it, but it disrupted the
marketplace, and that was impossible because people quit
offering insurance.
So basically I want to focus in the remaining time on
taxing the benefit and the behavior that will cause people who
provide employer-based benefits.
Ms. Romer. One of the things that you are getting at, the
President has not supported getting rid of the exclusion on--
for employer-provided health insurance--for some of the reasons
that you talked about--and for the second one, the issue of
disruption.
He does--I mean, part of saying that if you like what you
have, you can keep it, is he doesn't want to make changes that
will cause major changes in who is providing health insurance.
Mr. Guthrie. So he is not supporting a bill that will
include taxing employer-based benefits? Because it will cause
disruptions. So he is not supporting that?
Ms. Romer. The President has put forward a suggestion. He
thinks a better way to pay for this is limiting the itemized
deductions with these $600-plus billion of savings from the
Medicare and Medicaid programs, and that is what he supports.
Chairman Miller. Dr. Romer, thank you very much for taking
your time to appear before the committee and to answer
questions. I apologize to other members of the committee that
did not get the chance to speak to Dr. Romer and ask her a
question. I think there are some who would like to submit
questions to you. If you could respond to those in a timely
fashion we would appreciate. Thank you so very much.
Our second panel will be made up of Ron Pollack, Gerald
Shea, Paul Speranza, Jacob Hacker, Michael Stapley, John
Arensmeyer and Fran Visco.
Ron Pollack is the founding executive director of Families
USA, a national organization for health care consumers whose
mission is to achieve high-quality affordable health care for
all Americans. Mr. Pollack received his degree from New York
University.
Mr. Gerald Shea is the Assistant to the President of the
Governmental Affairs, the AFL-CIO. Mr. Shea is a member of the
Prospective Payment Advisement Committee, a congressionally
appointed advisory board on Medicare, and also a founding
member of the Foundation on Accountability and National
Coalition of Organizations that helps consumers make health
care choices based upon quality. Mr. Shea earned his B.A. From
Boston College.
Mr. Paul Speranza is the Senior Vice President, General
Counsel, and Secretary of Wegmans Food Markets, a family-owned
supermarket chain. He is the senior counsel of the board of
directors of the U.S. Chamber of Commerce and the past chairman
of Lifetime Health. Mr. Speranza holds a B.S. Degree from
Syracuse University and a J.D. and a LL.M from New York
University.
Dr. Jacob Hacker is a political science professor and the
Codirector of the Berkeley Center on Health, Economic and
Family Security at U.C. Berkeley. He is also the author of
Health Care for America: A Proposal for Guaranteed Affordable
Health Care for All Americans. Dr. Hacker has a B.A. From
Harvard University and a Ph.D. From Yale University.
Mr. Michael Stapley is the CEO of Deseret Mutual Insurance
Company and Deseret Mutual Benefit Administration. He is the
founder and member of the board of Utah Health Information
Network and Electronic Health Care Company. Mr. Stapley earned
his B.A. And his MPA from Brigham Young University.
Mr. John Arensmeyer is the founder and CEO of Small
Business Majority, a leading small business advocate for
comprehensive health care reforms. Mr. Arensmeyer earned his
B.A. From the University of Pennsylvania and his J.D. From
Rutgers University.
Ms. Fran Visco is the first president of the National
Breast Cancer Coalition and Fund, and is serving as a member of
the board of directors of the Executive Committee. In 1993, Ms.
Visco was appointed to the President's Cancer Panel and was
reappointed in 1996 and 1999. Ms. Visco is a graduate of St.
Joseph's University and earned her J.D. from Villanova Law
School.
Welcome to the committee. We look forward to your
testimony. We thank you for taking your time to share your
expertise and experience with the committee.
As you know, those who have testified before, when you
begin to testify, a green light will go on and you will have 5
minutes. At the 4-minute mark, an orange light will go on and
you can think about wrapping up your testimony. But we want you
to feel free to finish in a way that you get to present a
coherent case.
Ron Pollack, we are going to begin with you.
STATEMENT OF RON POLLACK, FOUNDING EXECUTIVE DIRECTOR, FAMILIES
USA
Mr. Pollack. Thank you, Mr. Chairman, and thank you,
members of the committee.
Chairman Miller. Can we ask you to pull the microphone a
little bit closer?
Mr. Pollack. Mr. Chairman, I want to thank you--
particularly you and Congressman Rangel and Congressman Waxman
for coming up with a unified bill. For those of us who have
been around in other iterations of health care reform, it is
rather unusual to have a unified bill, and we thank you very
much for doing that.
We at Families USA strongly endorse the House bill that has
been introduced, because we think it significantly deals with
the key values that consumers are really looking for as part of
health care reform. It provides choice; it makes coverage
affordable; it ensures that coverage will be stable; and it
ends discrimination among insurance companies.
Now, with respect to choice, we have heard said numerous
times that this plan, as well as the President's principles,
you can keep the coverage that you have if you like it. I
remember Mr. Kline indicated early on in the hearing that he
raised questions about 23 million losing coverage as a result
of the CBO score of the Senate Health Committee. If you look at
the CBO score, you will see that they have said it is an
incomplete analysis of an incomplete bill. And I don't think we
are going to see anything like that with respect to the House
bill.
This provides new opportunities to get coverage if you are
in a small business. It creates a health insurance exchange
which does something which the American public wants; namely,
they want to have the same kind of options that Members of
Congress have, and the health exchange is going to provide that
opportunity. And in so doing, it will provide accurate and
helpful information about benefits and rights.
It creates reasonable rules about how insurance companies
should operate, so that if you have insurance you actually know
what you are getting, as opposed to finding out that you didn't
have something at a point when you need care. And it provides a
public option that we think is very helpful because it not only
provides more choice, but it provides a real opportunity for
getting costs down, and it provides a stable, portable option.
Now, another value that consumers care deeply about is
making coverage affordable. And one of the key ways that this
plan makes coverage affordable is through the new subsidies
that are provided on a sliding scale up to 400 percent of the
Federal poverty level. We think that is absolutely critical. It
also places a cap on out-of-pocket costs. It is not simply the
premiums that people pay in order to get coverage. They also
pay deductibles, copays, and there may be a cap in how much an
insurance company pays out.
Now, when people have coverage they won't be bankrupted,
they won't be surprised, and the care will be affordable to
them. And it provides an important safety net, through the
Medicaid program, by establishing a floor on eligibility of 133
percent of the Federal poverty level.
Mr. Andrews and Mr. Scott were talking earlier about the
kind of cost shifts that take place when people don't have
coverage, and we released a study that the President cited last
week that showed in 2008, the cost shift--the hidden health
tax, if you will--for those who have coverage to pay for the
uncompensated health care costs for the uninsured in 2008 was
$1,017. And I would suggest that this year it is considerably
higher, because more people lost their jobs, and in the process
lost their health care. It is probably closer to $1,100.
This plan also ends insurance company discrimination. You
no longer can be denied coverage due to a preexisting
condition. When you get coverage, you are not going to have a
loophole so that everything is covered other than your
preexisting condition. It means that insurance companies are
not going to drop you or raise your rates due to the filing of
a claim. It is going to mean that post-claims underwriting,
that happens all too frequently, that you get coverage and then
when you need care, the insurance company says to you, you
actually didn't disclose certain kinds of things, and they drop
you from your coverage. And it makes sure that insurance
premiums are not going to vary based on health conditions.
Lastly, this plan provides coverage we can count on. It
provides coverage for preventative services that are very
important. It will provide coverage based on the best science.
Yes, there will be a Health Benefits Council that will work
with the Secretary, but that Health Benefits Council will be
charged with coming up with the best science, so that health
plans are developed that really make sense and therefore we
won't have enormous waste in our system, which we have today.
And it will provide a range of insurance options.
In short, I don't remember, one of you talked about health
insurance coverage like a house. Well, this plan doesn't make
you get out of the house. It doesn't make you sell the house.
But what it does do is it gives you tools. So if you have got a
leak in your roof, it can be fixed. If you need an addition to
your house, it can be fixed. It means if you need some
remodeling, it can be fixed.
So I say to you, Mr. Chairman, we are delighted to be able
to say we strongly support the bill that has been introduced,
and we will work tirelessly to see that it is enacted this
year.
[The statement of Mr. Pollack follows:]
Prepared Statement of Ron Pollack, Executive Director, Families USA
Mr. Chairman, Members of the Committee: Thank you for inviting
Families USA to participate in today's hearing on health care reform.
Families USA is a non-profit organization that advocates on behalf of
consumers in health care policy debates. Our analysis of the House
bill, grounded in our consumer perspective, finds that the House bill
will provide significant help to both uninsured and insured Americans.
We applaud the three House Committees that worked cooperatively to
draft this pro-consumer proposal. It will end discrimination and unfair
practices by insurance companies, make quality health insurance
coverage truly affordable for hard-working families, give Americans the
choice to keep the coverage they have now or choose from new options,
and make sure that everyone of us has health insurance coverage we can
count on to protect our families.
The Urgent Need for Coverage Stability
For consumers who can't buy coverage now, the House bill is
significant help on the way. For consumers who struggle to pay more and
more for premiums and get less and less coverage each year, the House
bill shows that significant help is on the way.
And none too soon. For the American people, fundamentally reforming
our nation's health care system is of utmost urgency. One out of three
Americans under the age of 65, 86.7 million people, went without health
insurance for some period of time during 2007 and 2008. Of these
uninsured, four out of five were from working families. The crisis of
the uninsured is not about a small segment of our population; it is
about our friends, our neighbors and our family members.
There are millions of people like Christine and her husband from
North Carolina. Christine works two part-time jobs--a total of 60 hours
per week. Her husband is a carpenter. While he used to make good money,
he hasn't been getting any business because of the economic downturn.
That's why Christine had to take a second job, and why they had to
cancel their medically underwritten, non-group private insurance
coverage. The premiums rose to $600 a month for the two of them, and
they just couldn't afford to pay. And Christine says it wasn't even
good coverage. She describes it as a discount plan for the self-
employed. ``Do we pay the light bill this month, or do we keep our
insurance?'' asks Christine. These were the kinds of choices
Christine's family had to make. And, of course, neither of her part-
time jobs offers health insurance. ``Everything is scary when you're
uninsured,'' she says. ``I had a breast cancer scare about a year
ago.'' Breast cancer runs in her family, so of course they paid out of
pocket to get her a mammogram. Fortunately, it turned out she didn't
have cancer. They also pay out of pocket to manage her husband's
diabetes. Christine reports that even those costs can really add up and
squeeze their family budget. Just recently Christine told us that she
paid $220 to get treatment for bronchitis and strep throat. She let it
go for a week, trying to get over-the-counter remedies, hoping that is
was just allergies.
When you factor in the effects of the recession--job losses and the
accompanying loss of job-based coverage, the tightening of family
budgets, and pressure on the bottom lines of American businesses--you
can expect the number of uninsured Americans to rise to record levels
if nothing is done. We can't afford to do nothing. If left as is, the
rising costs of health care will be unsustainable for individuals,
businesses, and our overall economy. Take, for example, John in South
Carolina who lost his IT job last November. He couldn't afford to pay
the full premiums to keep the insurance he had through his job. The
family tried to keep coverage through the medically underwritten, non-
group private market, but it didn't cover any of his children's
allergies, psoriasis, or other pre-existing conditions. As John put it,
maintaining even this private market coverage ``completely cleaned them
out.''
American families want peace of mind--knowing that if they lose
their job or move to a new job they will still have health insurance
coverage. Mr. Chairman, the House bill will provide that peace of mind
to American families--providing affordable, quality health coverage
through the good times and the tough times.
Even before the recession, many small businesses were already
struggling to be able to help their workers pay for insurance coverage.
A couple examples from Maryland are small business owners Eileen and
Mark. Eileen has owned a small communications and design firm for 30
years. She recently had to reduce the amount she contributes to
premiums for her employees again--this time from 65 percent to 60
percent. She'd like to provide more help to her workers but her
premiums in the small group market keep going up higher and higher as
her employees grow older and some have health problems. Mark owns a
moving and storage company that his father started in 1956. He wants to
keep providing family coverage for his workers but says he is giving
into the pressure of rising premiums and may only offer individual
coverage soon. He doesn't know how long he will be able to afford to
offer any coverage for his workers.
Small business owners across our nation need help so that they can
afford to provide health insurance to their workers. Businessmen
understand that if their workers are covered by insurance and have
access to health care, they will be more productive on the job and less
turn-over from illness can be prevented. Thank you, Mr. Chairman, for
including in the Housel bill concrete help to small businesses by
stabilizing premium increases and providing small business owners
subsides to help with the cost of coverage.
The Urgent Need for Cost Stability
At the same time that the number of Americans going without
insurance is rising, people who have insurance are struggling to be
able to keep what they have and pay for their share of rising premiums.
We have a crisis of affordability. Premiums for both job-based and
individually purchased health insurance have risen rapidly over the
last few decades: From 2000 to 2008, the average worker's share of
average annual family premiums rose from $1,656 to $3,354, an increase
of nearly 103 percent. Although families are paying more and more for
coverage, they are getting less and less: On average, deductibles and
copayments are increasing, there are more limits on covered services,
and other limits are being placed on benefits in an effort to hold down
the cost of coverage. Insured families across our nation are at clear
risk of going into debt and bankruptcy because of costly medical bills.
The House bill will deliver very concrete relief to people with
insurance in a number of ways. First, individuals, families, and
businesses will have a new and transparent place to go to compare plans
and premiums in a standard format--the Exchange. The Exchange will
offer four standard levels of insurance benefits packages; all levels
will cover core benefits and include cost-sharing protections.
Consumers and businesses will understand what they are buying. The
coverage won't leave people with more holes than coverage or a denial
slip and an unpaid medical bill when they get sick and file a claim.
Second, the insurance companies offering plans in the Exchange will be
required to abide by reasonable regulations that help hold down premium
growth. For example, the Exchange will restrict how high an insurance
company can set premiums for a given plan, and if premiums are too high
in relation to the cost of health care services paid for by an insurer,
refunds will be provided to consumers. Third, the Exchange will offer a
public plan option that will compete with private insurers to make sure
the purchasers of insurance (individuals and businesses) are able to
secure the most value for their premium dollars.
Coverage Stability = Cost Stability
The House bill--by providing access to quality, affordable health
coverage to millions of Americans--will save countless lives. And the
American people understand the moral imperative of the issue. Less
obvious, however, is the fact that covering the uninsured will help
contain rising health care costs for people with health coverage today
and improve the quality and efficiency of our health care system--both
primary goals for national health reform. These two problems--
uninsurance and high premiums--are interrelated. In fact, the presence
of uninsured people in our nation's health care system adds to the cost
of the health insurance premiums that American consumers and businesses
must pay for coverage. If we reduce the number of uninsured, we reduce
the cost of health insurance. This is true for several reasons.
First, the cost of care for people who don't have insurance doesn't
just disappear. We all pay--in the form of higher medical bills and
higher insurance premiums--for the care provided to the uninsured. When
people who don't have insurance get sick, many delay or forgo care. And
when they can no longer ignore serious symptoms, they see doctors and
go to hospitals. They struggle to pay as much as they can of their
medical bills (nationally, more than one-third of the cost of care for
the uninsured is paid by the uninsured themselves, out of their own
pockets). Much of the remaining cost is financed by doctors and
hospitals charging higher rates for services provided to people with
insurance. Insurance companies pass these increased costs on to
purchasers of insurance through higher premiums. In 2008, on average,
$1017 of the cost of family health insurance coverage was attributed to
the cost of caring for the uninsured--an amount that can be
characterized as a ``hidden health tax'' that all of us with insurance
now pay.
Second, if everyone is in the health care system, we can slow down
the growth of health care spending. If everyone has quality, affordable
health care--including preventive services, as well as early diagnosis
and treatment of conditions--we can manage chronic disease rather than
manage the crises that result from delayed care. When everyone has
coverage, health conditions can be treated early, before they become
expensive problems that drive up total health care spending. If we can
slow the growth of health care spending as a share of our GDP, we'll be
better able to invest in education, our national infrastructure, and
other national priorities.
Third, when everyone has quality, affordable coverage, cost-saving
public health goals are achievable. Doctors play a key role in
motivating patients to reduce obesity, control high blood pressure,
lower cholesterol, and reduce other risk factors. Efforts to improve
our nation's overall health through public health initiatives cannot be
successful if millions of people are left behind because they don't
have insurance.
Fourth, public health threats and epidemics cannot be monitored and
addressed when so many people in our nation are uninsured. In order to
address health threats such as flu viruses, Lyme disease, West Nile
virus, and tuberculosis, we need to be able to develop a complete
picture of disease prevalence and patterns of transmission. When we
leave millions of people outside the health care system, we hinder our
efforts to identify patterns and deal with these threats early and
effectively.
Mr. Chairman, the House bill--by providing affordable, quality
health insurance to all--is a win-win for every American in this
country. Health care reform is not ``just'' about the one out of three
Americans who went without health insurance coverage during the last
two years, it is also about making our health insurance more affordable
and our health care system work better for every one of us who has
insurance today.
Health Care Reform that Builds on the Foundation of Our Current,
Uniquely American System
Now some fear mongers are telling consumers that they will lose the
choice to keep the coverage they have now through their job. This is
odd to me. For anyone who has been following the debate and reads the
draft of the House bill must know they are misleading American
consumers. No one will be forced to leave the coverage they have now or
change doctors. Yes, they might choose to leave it--because there will
be new options that may work better and be more affordable for some
families. That's how a robust marketplace works--it offers a range of
choices and provides good information about those choices to consumers.
Families USA applauds the approach of the House bill. It builds on
the system we have today. I think of it this way. We are doing some
``re-modeling''--making improvements and additions. The House bill
takes the current system and keeps what works and fixes some of the
leaks and problems--so that insurance is more affordable, covers what
you need when you need it, and doesn't take away choices but actually
provides more choices.
Health Care Reform: Real Help to Consumers
From the American consumer's perspective, there are numerous
important features in the House bill that will improve the current
health insurance system for consumers. The following are some of the
important attributes of the legislation.
1. The House bill will stop insurance company
discrimination
The House Bill will stop insurance companies from denying
coverage to people because they have a pre-existing condition or are in
less-than-perfect health.
The House bill will stop insurance companies from
excluding from coverage pre-existing conditions. Insurance companies
will have to cover what you need--not write loopholes into policies
that leave consumers with unpaid medical bills.
The House Bill will stop insurance companies from dropping
your coverage or raising your rates because you filed a claim for
payment of a medical bill.
The House Bill will stop insurance companies from putting
confusing clauses and fine print into policies so not even a health
policy professor can tell what is covered and what is not.
The House bill will stop insurance companies from denying
payment of medical bills because you didn't dot an ``i'' or cross a
``t'' on your insurance application form or because you didn't know--
even though your doctor didn't either--that you had a health care
problem.
2. The House bill will make health insurance coverage more
affordable for all Americans
The House bill provides robust premium subsidies to help
individuals and families for the purchase of insurance coverage.
Subsidies will be available to hard-working American families with
incomes up to $88,200 for a family of four. Subsidies will be provided
on a sliding scale so people needing the most help get it.
The House bill caps how much consumers have to spend out-
of-pocket on deductibles, copayments and other costs so that people
with insurance are protected from high medical expenses and bankruptcy
when they or their family members get sick.
The House bill provides health care safety net coverage
through the Medicaid program to people with disabilities and people at
the very lowest income levels--people who often have special health
care needs and no current coverage options available. Virtually all
major health care stakeholders--including the American Medical
Association, the American College of Physicians, the Federation of
American Hospitals, the U.S. Chamber of Commerce, the National
Federation of Independent Businesses, the Business Roundtable, the
AARP, the Pharmaceutical Researchers and Manufacturers of America, and
America's Health Insurance Plans, to name only a few--are on record
expressing support for serving the lowest income populations through
Medicaid. These diverse groups recognize that the Medicaid program
provides unique services and protections for our most vulnerable
Americans.
3. The House bill gives consumers more choices of health
insurance plans and options
The House bill creates an insurance exchange--a new
marketplace of insurance plans that will be easy for consumers to use
and will provide accurate, understandable information about benefits
and consumer rights.
The House bill's new exchange or marketplace will have
reasonable rules about how insurance companies operate--how they must
treat their customers and when they must promptly pay medical bills.
There will be help available to consumers when they have a problem with
their insurance company--they won't have to fight the company on their
own and all alone.
The House bill's new exchange will give consumers the
choice to purchase a public health insurance plan. This plan won't have
special rules or money to give it an advantage over private insurance;
it will provide new competition to private insurance plans on value for
the dollar and service. We believe that such a public plan option will
drive value through reduced administrative costs, and will provide a
stable, portable option for consumers.
Not a single consumer across the nation will be forced out
of their current employer-based coverage. In fact, the House bill makes
sure that more employers offer coverage to their workers. Many
uninsured today work for small businesses that want to provide coverage
but can't afford to do so. The House Bill provides a new small business
tax credit for some small businesses with 23 or fewer employees to help
with the cost of coverage.
4. The House bill provides for health insurance coverage
consumer can count on
The House bill will stop insurance companies from offering
benefit packages that are more holes than coverage. Plans will cover
essential medical services without odd limits on how much is covered or
for how long a time. Plans will cover preventive services like check-
ups, screenings, and lab tests without any copayments. And insurance
companies won't be able to design plans that work for the young and
healthy and leave the rest of us behind.
The House bill will provide a range of insurance options
that can be easily compared. Consumers will know what a plan covers,
what they may have to pay out of their own pockets, and won't have any
surprise bills. Sick consumers will be able to focus on their getting
better rather than dealing with a possible medical bankruptcy.
There is clearly a long list of ``pluses'' for consumers in health
care reform. What will be expected from consumers in return? The House
Bill asks that each and every American be responsible for having health
insurance--but only after the new fair insurance rules and marketplaces
are in place and premium subsidies are available. Even then, the
responsibility to purchase insurance will be waived for individuals and
families who would face a special financial hardship to do so. No
legislation can see into the future to understand the kinds of special
family situations that might arise, so there is room to protect
families with special financial struggles.
In conclusion, for American consumers who believe the current
health insurance system works well for them--the House bill protects
you. For American consumers who believe that the current health
insurance system is like that house in the real estate ads coined a
``handy-man's special''--that is, it needs some leaks fixed, perhaps an
addition, a little re-modeling, but it holds great promise--the U.S.
House of Representatives provides a toolbox to get the improvements
done.
______
Chairman Miller. Mr. Shea, welcome to the committee.
STATEMENT OF GERALD SHEA, ASSISTANT TO THE PRESIDENT, AFL-CIO
Mr. Shea. Thank you, Mr. Chairman, and good afternoon to
all of the committee members.
I want to start by congratulating you for putting forward a
bill that we think really addresses the issues that the
American people are concerned about, and we look forward to
working with you on this bill.
Our druthers might be to be talking today about a single-
payer plan. But we think the bill that you put forward, based
on the current system anchored in employer-based coverage, does
provide a way to get the reform we need.
What I want to talk to you about briefly today is what we
think it takes to stabilize the employment-based system, which
is the backbone of both the coverage and the financing of
health care in the United States, as you know. It has proved
remarkably resilient despite enormous cost pressure. It has
shown that employers want to continue to offer coverage and
that employees highly value the coverage they get at work. But
we have lost 5 percentage points in coverage of people between
the ages of 18 and 64 in an employment-based coverage from 2000
to 2007. And frankly, this is a pretty fragile system at the
moment.
We think that it takes three things to stabilize this
system, and we think that your draft version of the bill is a
very good start on providing those three things.
One, we need to control costs. That is the core problem
that we are facing in here. If we don't do that and we don't
take strong steps to do it, nothing else we want to do will be
possible.
Secondly, we have to put everybody into coverage. That
means everybody has coverage, everybody participates in
financing coverage, everybody takes responsibility for their
own personal health coverage.
And then lastly, we really do need to reform the way care
is delivered. We have started on that in the last few years.
There was a consensus, I think, in the health field that we can
do that. We really need to move that forward, and this bill is
a great opportunity to do it.
I wanted to start just by commenting on your provisions
that all employers would be required to pay, along with all
employees. This pay-or-play kind of proposal is essential, in
our view, if you are going to base your reform on employer-
sponsored insurance because, one, it takes some cost pressure
off the Federal Government for providing the subsidies.
Everybody we get covered in this is someone who doesn't need to
have a Federal subsidy out of tax dollars.
Two, it helps stabilize those employers who are providing
coverage, because they are no longer picking up the extra
costs. They are covering the costs of care for those people
whose employers are not covering. And an overwhelming majority
of businesses do now provide coverages, as has been cited here,
and want to continue providing it.
The only firms that would really see an increase in costs
are those firms that are not now currently offering benefits,
mostly small, low-wage firms. And your bill addresses their
concerns in terms of subsidies and tax credits to provide
benefits, but also offers the option that they could pay into a
fund that would allow employees to get coverage not based in
the workplace.
In terms of controlling costs, there are two core issues
here. One is--or strategies. One is the public insurance plan
option. This is an important element in terms of assuring
coverage and guaranteeing benefits; but it is essential, from
our point of view, in terms of introducing competition into the
insurance mark. We now don't have any in our experience
bargaining health benefits for 50 million people per year. We
do not have any effective competition in the insurance market,
but we believe that a public insurance plan would spur that
kind of competition.
I know there are a lot of issues, and those similar issues
have been said here about the design of a public plan. I think
these are design issues that can be addressed and they can be
solved, and we can do this in a way that protects all of the
interests in health care. No one has an interest in turning the
situation topsy-turvey.
The second strategy that is really key in terms of
controlling costs is delivery system reform. And your bill
makes a very strong start in that direction. You put an
emphasis on primary care, and that is important.
We would urge you also to look at the quality improvement
sections of the legislation to make sure that all health care
workers are involved in this quality enterprise. We have to not
only address the supply of physicians and nurses, we have to
assess the quality of the job they do. And in the last 15
years, we have turned--certainly for nurses and other frontline
health care workers--this caring profession into some lousy
jobs in many cases. We can correct that, but it takes
addressing the work situation, not just the supply situation,
of health care workers. You have vehicles to do that, and we
are talking about that with staff about the best way to
approach that.
There has been a strong collaboration between payers and
consumers and people in the medical professions and hospitals
over the past 10 years in terms of doing this delivery system
reform and changing to a system that is based on quality and
rewards value. It starts with measuring quality performance on
standardized measures, reporting that, those results, and then
linking payments to the performance in terms of quality.
This is really the opportunity to take what has been
developed in the wake of, and is based on, President Clinton's
quality commission some years ago, and put it into practice.
And then lastly, Mr. Chairman, I want to comment on the
financing aspects. As I said, we think that everybody needs to
participate in this. And we believe that there is enough money
in the system to pay for health reform and to cover everybody.
But those people who want to say we have to pay for reform
solely out of money in this system, we think are just chasing
fool's gold. It is not possible to do this without additional
money. We believe we have to look outside the health care
system to do it, even though over time the reform will reap
substantial advantage.
And additionally and finally, this really is a way to
undermine the political and the public support for reasons that
have been discussed earlier.
[The statement of Mr. Shea follows:]
Prepared Statement of Gerald M. Shea, Assistant to the President,
American Federation of Labor and Congress of Industrial Organizations
(AFL-CIO)
The AFL-CIO represents 11 million members, including 2.5 million
members in Working America, our community affiliate, and 56 national
and international unions that have bargained for health benefits for
more than fifty years. Together, unions negotiate benefits for some 50
million people in America.
Our members have a significant stake in health care reform because
unions represent the largest block of organized consumers in the
nation. In addition, unions also sponsor health plans through funds
that are jointly-trusteed with management. Many union members work in
health care, as well, so they have a dual interest in health reform.
Even as unions continue to negotiate benefits for our members,
American labor has long advocated for health care for everyone, not
just those in unions or with stable jobs. For over 100 years, America's
unions have called for universal coverage built on a social insurance
model, an approach that has proven effective and efficient across the
globe and one we have employed successfully for decades to provide
income and health security for the elderly.
The AFL-CIO led the lobbying effort to enact Medicare in 1965, and
we have backed many legislative efforts since then to expand coverage.
We continue to believe that a social insurance model is the simplest
and most cost effective way to provide benefits for all.
However, the condition of health care in America is too dire for
those of us lucky enough to have good coverage to debate endlessly over
what the best approach would be. It is time--indeed, it is past time--
to enact comprehensive health care reform. Today our members are ready
to stand with President Obama and Congress and help pass the
President's plan for comprehensive health care reform.
AFL-CIO's views on comprehensive health care reform
Today I would like to explain the AFL-CIO's views on what
comprehensive health care reform should look like, and specifically our
views on the historic tri-committee discussion draft unveiled in the
House of Representatives last week.
We start from the premise that we can fix our broken health care
system by building on what works. For most Americans, that means
employer-sponsored health insurance (ESI), which is the backbone of
heath care financing and coverage in America.
The AFL-CIO has advocated a three-point program to guarantee
quality affordable health care for all--a program that consists of: (1)
lowering costs; (2) improving quality; and (3) covering everyone by
ensuring full participation of all public and private sector employers
and making affordable health coverage available to everyone. All three
of these objectives must be achieved together; none can be achieved in
isolation. And we believe the tri-committee discussion draft will in
fact help achieve all three of these objectives simultaneously.
We caution, however, that one financing option under consideration
in the Senate Finance Committee--the taxation of employer-sponsored
health benefits--would go in the exact opposite direction by
destabilizing the employer-based health insurance system.
Our present course is unsustainable
Whatever one may think about the way health care should be
reformed, we can all agree that our present course is not sustainable--
for workers, for businesses, for the federal budget, or for the economy
as a whole. If we continue down the current path, health care costs
will crush families, business and government at all levels.
Our members are among the most fortunate workers. Thanks to
collective bargaining, they generally have good benefits provided by
their employers. Yet even well-insured workers are struggling with
health care cost increases that are outpacing wage increases. And far
too many working families find themselves joining the ranks of the
uninsured or under-insured as businesses shut down or lay off
employees.
In April and May 2009, the AFL-CIO conducted our 2009 Health Care
for America Survey, which showed that people need urgent relief from
the pressure of rising health care costs that are bankrupting families
and endangering their health.
More than half of respondents said they cannot get the care they
need at a price they can afford. Three quarters were dissatisfied with
their household's health care costs.
Ann from Georgia (self-employed with two children) wrote: ``We have
that HSA plan with supposedly low premiums. However, those `low'
premiums only start low. Every year they get higher and higher. One
year they increased 129 percent in just one year. Our health care costs
have exceeded 35 percent of our income for two years. We are on the
verge of canceling health care insurance. We would have already done
this if we didn't have two children.''
A third of those with insurance--and three quarters of those
without--reported that they forgo basic medical care because of high
costs.
Karen from Florida wrote: ``My insurance deductible equals four to
five months of take home pay each year. My insurance bill is split with
my employer but equals two days of pay each month. How am I supposed to
go to a doctor?''
Iris from Florida writes: ``I am unemployed because I had to quit
my job to care for my elderly mother. My children decided to pay [for
medical insurance] for me. So what is the problem? The deductibles are
so high that I cannot go to the doctor. And we keep paying $300 monthly
just in case I have to go to the hospital. In the meantime, I cannot
afford to go to the doctor.''
As economic conditions have gotten worse, workers who lose their
jobs have been losing their health care. Nearly a quarter of
respondents said someone in their household lost coverage in the past
year due to losing or changing jobs.
Renee from Ohio wrote: ``It is pretty scary that millions of hard
working retirees as well as those working may lose their insurance, and
yes I am talking about the auto industry. My husband could lose his
benefits, which he thinks he will. I don't know how my kids will be
able to get their annual checkups. How can anyone get ahead in this
country? I don't understand how it came to this. I just don't want to
think about the future anymore.''
Once workers lose their health care coverage, it is hard for them
to get it back. One quarter of those without health insurance said they
were denied coverage in the past year due to ``pre-existing
conditions.''
Kerry from New Mexico wrote: ``I am desperate for our country to
finally do something for my family so a health crisis does not kill one
of us or leave us completely financially devastated.''
The data bear out the stories these workers are telling us. Between
1999 and 2008, premiums for family coverage increased 119 percent,
three and a half times faster than cumulative wage increases over the
same time period.\1\
Workers' out-of-pocket costs are going up as well, leading to more
under-insured workers who can no longer count on their health benefits
to keep health care affordable or protect them from financial ruin.
Between 2003 and 2007, the number of non-elderly adults who were under-
insured jumped from 15.6 million to 25.2 million.\2\
Skyrocketing costs are pushing more workers out of insurance
altogether. The current number of uninsured almost certainly exceeds 50
million. The Council of Economic Advisers estimates that number will
rise to 72 million by 2040 in the absence of reform.\3\
Health costs are burdening American businesses, as well as workers.
U.S. firms that provide adequate health benefits are put at a
significant disadvantage when they compete in the global marketplace
with foreign firms that do not carry health care costs on their balance
sheets. The same is true for U.S. businesses in domestic competition
against employers that provide little or no coverage.
The present course is unsustainable for the economy as a whole, as
well. Health care expenditures currently amount to about 18 percent of
our GDP. The Council of Economic Advisers estimates that this
percentage will rise to 34 percent by 2040 in the absence of reform.\4\
The Congressional Budget Office (CBO) projects that health care
expenditures will rise to 49 percent of GDP by 2082.
The present course is likewise unsustainable for the federal
budget. If we fail to ``bend the cost curve,'' health care spending
will balloon our federal budget deficit and squeeze out funding for
essential non-health care priorities. Almost half of current health
care spending is covered by federal, state, and local governments. If
health care costs continue to grow at historical rates, the Council of
Economic Advisers estimates that Medicare and Medicaid spending will
rise to nearly 15 percent of GDP by 2040.\5\ As then CBO director and
now OMB director Peter Orszag has noted, health care cost trends are
the ``single most important factor determining the nation's long term
fiscal condition.''
To fix our long-term structural budget deficits, we have to fix
Medicare and Medicaid, and to fix Medicare and Medicaid, we have to
control health care costs in the private sector. There is no practical
way to control public health care costs without addressing private
health care costs as well. Private and public health care are delivered
largely by the same providers, using the same drugs, the same
treatments, and the same procedures.
In short, the health of our family budgets, our federal budget, and
our economy depends on the success of health care reform this year.
Building on what works
The AFL-CIO believes comprehensive reform can build on what works
in our current health care system while creating new options for
obtaining coverage and lowering costs for families, business, and
government at all levels.
For the majority of Americans, what works in our current health
care system is employer-based coverage--the backbone of health care
coverage and financing in America. Over 160 million people under age 65
have health benefits tied to the workplace.
Employer-sponsored coverage has proven remarkably stable in the
face of exorbitant health care cost inflation. Its survival is
testimony to the strong interest workers have in keeping coverage tied
to the workplace--even at the expense of wage gains for the past 30
years--and the interest of employers to recruit and retain talented
workers through job-based benefits.
In fact, it is hard to imagine successful health reform that does
not include a substantial role for employer-based coverage. Building on
the core foundation of employer-provided health coverage will allow
working families to keep what they now have * * * or choose from a new
set of options to maintain coverage. We think building on this
foundation will also help minimize the disruption that results from the
difficult changes that are a necessary part of any reform, and thereby
maximize public support for reform.
In order to build on this foundation, we must stabilize the
employment-based system, which risks being destabilized by
unsustainable cost inflation. We must reverse the steady erosion of
employer-provided coverage in recent years. The percentage of 18 to 64-
year-olds with ESI dropped five percentage points from 2000-2007, and
without prompt dramatic action the rate of decline is expected to
increase sharply.\6\
We believe the tri-committee discussion draft will stabilize the
employer-based health care system through the following specific policy
proposals: (1) a requirement that employers assume responsibility for
contributing to the cost of health care for their employees through a
``pay or play'' system; (2) special assistance for firms that maintain
coverage for pre-Medicare retirees, which will prevent further
deterioration of the employer-based system; (3) a public health
insurance option, which will inject competition into the health care
system and lower costs throughout the system for employers and workers
alike; (4) health care delivery reforms to get better value from our
health care system and contain long-term costs; and (5) insurance
market reforms, individual subsidies, Medicaid expansion, and
improvements to Medicare, which will help make affordable coverage
available to everyone.
Pay or Play
A key reform needed to stabilize the employer-based coverage system
is the requirement that public sector and private sector employers
assume responsibility for contributing toward the cost of health care
for their employees. Employers should be required either to offer
health benefits to their workers directly, or to pay into a public fund
to finance coverage for uninsured workers--a proposal known as ``pay or
play.''
The tri-committee discussion draft outlines a reasonable and
effective employer responsibility requirement that we believe would
help shore up employer-based coverage. The proposal would ensure that
workers could get affordable coverage either through their employer-
sponsored plan or through a national exchange with a contribution from
their employer. And it would extend, on a pro-rated basis, an
employer's responsibility for part time workers, to eliminate any
incentives for employers to move workers to part-time status to avoid
the new requirement.
We believe such a ``pay or play'' system has many virtues. It would
bring in needed revenue from firms that opt to ``pay,'' which would
hold down federal costs associated with providing subsidized coverage
for low-income workers in those firms.
``Pay or play'' would likewise hold down federal costs by keeping
employers from dumping their low-wage employees into new subsidized
plans. In the absence of an employer responsibility requirement,
publicly subsidized coverage for low-wage workers would prompt many
employers of low-wage workers to discontinue current coverage to take
advantage of available subsidies. The resulting increase in federal
costs could well doom health care reform.
``Pay or play'' would help stabilize the employer-based health care
system in several ways. It would level the playing field so that free
rider businesses could no longer shift their costs to businesses
offering good benefits. A recent study found more than $1,000 of every
family plan premium goes to cover the cost of care for the uninsured,
most of whom are employed.\7\ ``Pay or play'' would encourage employers
to offer their own coverage and penalize employers that do not. And it
would minimize disruption for workers who already have health care
coverage and wish to keep it.
``Pay or play'' would thus go a long way towards extending coverage
to the uninsured, since most of the uninsured have at least one full-
time worker in their family. And it would be critical in making
coverage affordable for workers who do not qualify for income-based
credits or subsidies, especially if health care reform includes a new
requirement that all individuals obtain coverage.
Arguments against Pay or Play
Opponents of an employer responsibility requirement raise the
objection that ``pay or play'' would increase payroll costs for
businesses. We believe this objection is misplaced.
First of all, it should be emphasized that the overwhelming
majority of businesses already provide health benefits that would
likely meet the new requirements, so they would not see any new costs.
In fact, they would see their costs go down as health care coverage is
expanded--thanks to the elimination of cost shifting--and as other
health care reforms take hold that drive down costs throughout the
health care system.
The only firms that might see an increase in costs are firms that
do not currently offer health care benefits, or firms that offer
benefits that are inadequate to meet a reasonable standard. The vast
majority of firms that currently do not offer health care benefits are
small firms, and they are mostly low-wage employers. Comprehensive
health care reform generally would give small firms more affordable
options for providing health benefits for their workers, probably in
combination with additional subsidies for employers of low-wage
employees.
Opponents of an employer responsibility requirement warn that
employers that have to pay more for health insurance would be less
likely to raise wages in the short term. The widely endorsed economic
view, however, is that such employers would still raise wages over the
long term.
Opponents of ``pay or play'' next argue that employers required to
pay more for health insurance might eliminate jobs or hire more slowly
as a result. But the same dire predictions have been made routinely
about proposals to increase the minimum wage, with comparable increases
in employer costs, and those predictions have not been borne out.
Recent studies of minimum wage increases have found no measurable
impact on employment.\8\ Economists have observed that employers faced
with higher payroll costs from a minimum wage increase can offset some
of those costs through savings associated with higher productivity,
decreased turnover and absenteeism, and improved worker morale.\9\
The same would be true of an employer responsibility requirement.
Any increase in employer costs would be offset by productivity gains
and by a healthier workforce. The Council of Economic Advisers notes
that the economy as a whole would benefit from more rational job
mobility and a better match of workers' skills to jobs when health
benefits are no longer influencing employment decisions.\10\ Finally,
it should be noted that the majority of firms that currently do not
offer health benefits compete in markets where their rivals likewise do
not provide benefits, so they would not be put at a competitive
disadvantage.
Pay or Play and firm size
Health care reform must make coverage affordable for small
businesses that have difficulty obtaining coverage in the current
market. However, the AFL-CIO believes the ``pay or play'' requirement
should apply to firms regardless of their size.
Smaller businesses will be allowed to meet the ``play'' requirement
by buying coverage that meets fair rating rules through the new
exchange, which would include the option of a public health insurance
plan that makes coverage more affordable. We do support the inclusion
of a small business tax credit, targeted at the smallest firms with
low-wage workers, precisely because we believe an employer requirement
should not exempt businesses based solely on size.
If small businesses are exempted from ``pay or play,'' the number
of employees is a particularly poor measure for the exemption because
it is a poor predictor of a firm's ability to pay. A doctor's office or
small law firm may have more capacity to pay than a larger restaurant
or store. A carve-out for small firms with fewer than a specified
number of employees also creates a potentially costly hurdle for firms
nearing the threshold to hire additional employees. A better approach
would be to apply the requirement based on payroll or gross receipts.
Finally, we believe special treatment for such businesses should be
phased out over time to eliminate disparities based on firm size.
Also, any ``pay or play'' requirement should take into account how
workers in certain segments of our economy, such as airlines and
railroads, schedule their hours and the classification of workers as
full-time or part-time should ensure that these workers are not
inadvertently excluded from coverage.
Special assistance for companies that maintain benefits for
pre-Medicare retirees
We look forward to working with the committees to develop greater
specificity on the proposal for a federally-funded catastrophic
reinsurance program for employers that provide health benefits to
retirees age 55 to 64. Such a reinsurance program would help prevent
further deterioration of the employer-provided health care system, and
is an essential component of any health care reform legislation.
A reinsurance program is critically necessary to help offset costs
for employers that contribute to health benefits for pre-Medicare
retirees. The pre-Medicare population generally has higher health care
costs, and employers offering them coverage retirees incur enormous
expense. But without that coverage, individuals in this age bracket
have tremendous difficulty purchasing health insurance in the
individual market, or they are able to do so only at a very high cost.
We believe such a reinsurance program must have dedicated funding.
In addition, in the longer term, we believe firms should be able to
purchase coverage for their retirees through the exchange. This would
help make coverage more affordable for firms that provide retiree
health benefits.
Public health insurance plan option
The AFL-CIO supports the creation of a strong public health
insurance option to compete with private health insurance plans. The
tri-committee discussion draft includes a strong public plan that would
compete on a level playing field with reformed private health plan
options in a new national exchange.
We believe a public health insurance plan is the key to making
health care coverage more affordable for working families, businesses,
and governments, all of which are increasingly burdened by escalating
health care costs. A public plan would have lower administrative costs
than private plans and would not have to earn a profit. These features,
combined with its ability to establish payment rates, would result in
lower premiums for the public plan.
A public health insurance plan would also promote competition and
keep private plans honest. Consolidation in the private insurance
industry has narrowed price and quality competition. In fact, in 2005,
private insurance markets in 96 percent of metropolitan areas were
considered highly concentrated and anti-competitive, which left
consumers with little choice.\11\ A public health insurance option,
coupled with a more regulated private insurance market, would break the
stranglehold that a handful of companies have on the insurance market
and would give consumers enough choices to vote with their feet and
change plans.
We also believe a public health insurance plan would be critical
for driving quality improvements and more rational provider payments
throughout the health care system. A public health insurance plan can
introduce quality advancements and innovation that private insurance
companies or private purchasers have proven themselves unable to
implement. For example, until Medicare took the lead in reforms linking
payment to performance on standardized quality measures, private
insures and payers were not making appreciable headway towards a value-
based health system. Just as Medicare is driving quality improvements
that private plans are now adopting, a public health insurance plan
could lead the way in developing innovative quality improvement
methodologies, stronger value-based payment mechanisms, more
substantial quality incentives, and more widespread evidence-based
protocols.
Because increased competition and quality reforms would help
contain costs throughout the health care system, employers that
continue to provide benefits directly would benefit from these savings,
as would employers that purchase coverage for their workers through the
exchange. And because premiums would be lower, spending on federal
subsidies for individuals who qualify for subsidies would also be
lower.
A public health insurance plan would also guarantee that there will
be a stable and high quality source of continuous coverage available to
everyone throughout the country. By contrast, private insurance plans
can change their benefits, alter cost-sharing, contract with different
providers, move in and out of markets, and change benefit or provider
networks. A public health insurance plan would be a reliable and
necessary backstop to a changing private insurance market, and a safe
harbor for working families that lose their workplace coverage.
A public health insurance plan available to everyone would also
provide rural areas with the security of health benefits that are there
when rural residents need them, just as Medicare has been a constant
source of coverage as private Medicare Advantage and Part D plans churn
in and out of rural areas every year.
Clearly, the public supports a public health insurance plan option.
A recent New York Times poll shows that the public health insurance
plan is supported by 72 percent of voters.\12\
Delivery system reform
Variation in Medicare spending across states suggests that up to 30
percent of health care costs could be saved without compromising health
care outcomes. Differences in health care expenditures across countries
suggest that health care expenditures could be lowered by 5 percent of
GDP without compromising outcomes by reducing inefficiencies in the
current system.
Experts estimate we waste one third of our health care spending, or
$800 billion, every year on health care that is no real value to
patients. According to the Council of Economic Advisers, the sources of
inefficiency in the U.S. health care system include payment systems
that reward medical inputs rather than outcomes, high administrative
costs, and inadequate focus on disease prevention.\13\
We must restructure our health care system to achieve better
quality and better value, and we must transform our delivery system
into one that rewards better care, not just more care. We can start by
doing the following:
Measure and report on the quality of care, the comparative
effectiveness of drugs and procedures, and what medical science shows
to be best practices and use that information to create quality
improvement tools that allow doctors to individualize high-quality care
for each of their patients;
Put technology in place to automate health care data; and
Reform the way we pay for care so doctors have the
financial incentives to continuously improve care for their patients.
The February 2009 economic recovery package, with its substantial
investment in health information technology (HIT) and research on the
comparative effectiveness of drugs and medical devices, marks an
historic first step in the right direction.
The tri-committee discussion draft builds on the investments of the
economic recovery package by encouraging greater emphasis on primary
care and prevention, and greater emphasis on innovative delivery and
payment models, such as accountable care organizations and bundled
payments for acute and post-acute care. The draft also makes needed
investments in our health care workforce--with emphasis on primary
care--to ensure access to needed care and better reward primary care
providers.
The tri-committee discussion draft emphasizes and invests in
quality measurement and improvement methodologies. But we believe more
can be done to foster innovation in health care delivery by building on
the significant quality measurement and improvement underway within
health care in recent years. The AFL-CIO has invested considerable
resources and time working on system reform, as part of the broad
collaboration of consumers, purchasers, physician organizations,
hospitals, and government agencies at both the state and federal
levels.
This strong collaboration between payers and providers has created
breakthrough improvements in health care delivery. The process
improvement techniques pioneered in other U.S. industries--for example,
six sigma quality standards and rapid-cycle problem analysis, solution
development and testing, and wide-spread diffusion in a short time
period--have been shown to work and hold enormous promise, but federal
leadership in delivery system reform is indispensable.
We must also put into place a system of broad consultation with
consumers, purchasers, physicians, insurers and health care
organizations in setting national priorities for health care quality
improvement and in implementing standardized measures of quality
throughout health care. With quality measurement as a foundation,
reform can empower those who deliver care, pay for care, and oversee
care to work with those who receive care to innovate and modernize
health service delivery.
Affordable coverage for everyone
Today we have a fragmented health care system characterized by cost
shifting and price distortions because as many as 50 million people
have no coverage.
According to Families USA, the uninsured received $116 billion
worth of care from hospitals, doctors, and other providers in 2008,
about $42.7 billion of which was uncompensated care.\14\ The costs for
uncompensated care are shifted to insurers and then passed on to
families and businesses in the form of higher premiums. For family
health coverage, the additional annual premium due to uncompensated
care was $1,017 in 2008.
While our members generally have employer-based health coverage,
stabilizing the employer-based health system will require covering the
uninsured to make health care more efficient and prevent cost-shifting.
We cannot cover everyone without bringing down costs overall, and we
cannot control costs without getting everyone in the system.
The good news is that, according to the Council of Economic
Advisers, expanding health insurance coverage to the uninsured will
increase net U.S. economic well-being by roughly $100 billion per year,
which is substantially more than the cost of insuring the
uninsured.\15\
The most important policy proposal for extending health care
coverage to the uninsured is ``pay or play,'' which I discussed earlier
in my testimony. But the tri-committee discussion draft includes
several other proposals that would also expand health care coverage,
including insurance market reforms, the establishment of an insurance
market exchange, individual subsidies, the expansion of Medicaid, and
improvements to Medicare.
Insurance market reforms
Ensuring access to health care coverage will require significant
changes to the current private insurance market, in which people are
now denied coverage or charged more because of their health status.
Market reforms for everyone who buys coverage in the individual and
group market will make coverage more fair, transparent, affordable, and
secure.
The AFL-CIO fully supports the prohibition on rating based on
health status, gender, and class of business; the prohibition on the
imposition of pre-existing condition exclusions; guaranteed issue and
renewal; and greater transparency and limits on plans' non-claims
costs. While we would prefer a flat prohibition on rating based on age,
we believe the proposal to limit age rating to 2 to 1 is a strong
alternative. Any variation allowed above that limit threatens to make
coverage unaffordable for older individuals.
Insurance market exchange
The AFL-CIO also strongly supports the proposal to create a
national health insurance exchange to provide individuals and
businesses with a place to enroll in plans that meet certain criteria
on benefits, affordability, quality, and transparency. We believe this
will be a mechanism for simplifying enrollment and applying uniform
standards.
The tri-committee discussion draft establishes a mechanism that
offers consumers a way to compare plans based on quality and cost.
While the exchange will initially be open to individuals and small
employers, we believe there should be a commitment to allowing public
and private sector employers beyond the small group definition to
purchase coverage through the exchange after the first two years that
the exchange is operational.
Subsidies for low- and moderate-income workers
Subsidies will be essential for making coverage affordable for low-
and moderate-income individuals and families. We support the proposal
to make subsidies relative to income, with more substantial subsidies
applied to more comprehensive coverage for the lowest income enrollees.
We also support ensuring that coverage is affordable by applying the
subsidies to premiums as well as out of pocket costs.
Medicaid expansion
We strongly support extension of Medicaid coverage to all under 133
percent of poverty, with sufficient resources to states to offset the
new costs.
Medicare improvements
In addition to eliminating subsidies that give private Medicare
Advantage plans a competitive advantage over traditional Medicare and
deplete the Trust Fund, the tri-committee discussion draft makes needed
improvements in benefits for Medicare beneficiaries. The draft closes
the gap in prescription drug coverage over time, eliminates cost
sharing for preventive services, and improves the low-income subsidy
program.
Financing health care reform
There are at least three key elements of health care reform that
will also affect savings and revenues available for reform: a public
health insurance option, delivery system reform, and an employer
responsibility requirement. Though these policy proposals are
absolutely necessary to improve the value we get for our health care
spending, in the short run they will not be sufficient to fund reform.
The Senate Finance Committee has said that all savings and revenue
for health reform must come from within the health care budget.
However, because health care reform is an urgent national priority that
will produce benefits across our economy and improve our national
budget outlook, we agree with the President that we should look beyond
health care spending to obtain additional revenues. We support the
major elements of the President's budget proposal for the Health Reform
Reserve Fund, including savings in Medicare and Medicaid, limiting the
itemized deductions for households in the top two tax brackets, and
other modifications to reduce the tax gap, as well as making the tax
system fairer and more progressive.
One financing option under consideration in the Senate Finance
Committee is a cap on the current tax exclusion for employer-provided
health care benefits so that some portion of current health care
benefits would be subject to taxes. We believe this is an
extraordinarily bad idea.
Taxing benefits would disrupt the employer-based system
Capping the tax exclusion would undermine efforts to stabilize the
employer-provided health care system. Employers would likely respond by
increasing employee cost-sharing to a level at which benefits would
become unaffordable for low-wage workers, or by eliminating benefits
altogether. Capping the exclusion would also encourage workers to seek
coverage outside their ESI group when this is economically
advantageous, thereby complicating the role of employers enormously and
giving them another incentive to discontinue coverage.
Congress and the President have assured Americans that they will be
able to keep the health care coverage they have if they like it. This
approach makes enormous sense and generates broad public support. A cap
on the tax exclusion would violate this basic understanding and
threaten to disrupt the primary source of health care coverage and
financing for most Americans.
Until health care reform has been proven successful in lowering
costs and making coverage available to uninsured workers through new
private and public plan options, we should not make any changes that
threaten the source of health care coverage for 160 million Americans.
Taxing benefits would be unfair to high cost workers
The Senate Finance Committee is considering capping the tax
exclusion for relatively high cost plans. This would be an unfair tax
on workers whose benefits cost more for reasons beyond their control.
The exact same plan could cost well under $15,000 in one company
and more than $20,000 in another depending on factors that have nothing
to do with the generosity of coverage. According to one study, premiums
for the same health benefits can more than double when an individual
crosses state lines.\16\
The cost of coverage can be the reflection of many factors: the
size of the firm; the demographics of the workforce; the health status
of the covered workers and families; whether the industry is considered
by insurers to be ``high risk;'' geographic differences in cost; and
whether there are pre-Medicare retirees covered through the same plan.
Studies show that placing a cap on tax-free benefits would have the
greatest impact on workers in small firms; firms with older workers and
retirees, and workers with family plans that cover children. This is
because insurance companies regularly charge higher rates for coverage
for these workers.
Under one proposal, over 41 percent of workers at a firm with older
workers would be taxed on their health care benefits, but only 16
percent of workers at a firm with younger workers would be taxed.
Almost 30 percent of workers at a smaller firm would be taxed, but only
17 percent of workers at a larger firm. Over 41 percent of workers with
family coverage would be taxed, but less than 20 percent of workers
with individual coverage.\17\
If workers have to pay more taxes because some of their co-workers
have costly medical conditions, health coverage would be transformed
from a workplace benefit that everyone supports to one that splits
workforces between the healthy and the sick.
Some argue that the existing tax exclusion is regressive, because
higher income workers get a bigger tax advantage. But this is only one
part of the story.
A recent report points out that while households in higher tax
brackets get a greater benefit from the tax exclusion in absolute
dollar amounts, low and moderate income workers would be impacted more
from capping the exclusion because their taxes would increase by a
larger share than those of higher income workers. The report found that
workers with employer-provided health benefits who make between $40,000
and $50,000 would see their tax liability increase on average 28
percent, while those who make between $50,000 and $75,000 would see
their tax liability increase on average 20 percent. By contrast,
workers who make more than $200,000 would see an average increase in
their tax liability of only one tenth of one percent. In short, capping
the tax exclusion would not make it more progressive.\18\
Taxing health care benefits would not bring down health care costs,
either. It would just shift more of those costs onto workers.
Economists say the tax exclusion leads workers to get too much
coverage, but capping the tax exclusion would not do anything to
address a key cost driver: the fact that 20 percent of the population
consumes 80 percent of our health care spending. Taxing health benefits
would not change that fact.
Conclusion
The AFL-CIO applauds the work of the committees in outlining a
strong, effective, comprehensive plan for guaranteeing quality
affordable health care for all. We believe the tri-committee discussion
draft would stabilize the employer-based health insurance system by
simultaneously achieving the goals of lowering costs, covering
everyone, and improving quality. We stand ready to work with all three
committees to enact reform that achieves these goals. America's working
families can wait no longer.
ENDNOTES
\1\ Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 2000-
2008. Bureau of Labor Statistics, Consumer Price Index, U.S. City
Average of Annual Inflation (April to April), 2000-2008; Bureau of
Labor Statistics, Seasonally Adjusted Data from the Current Employment
Statistics Survey, 2000-2008 (April to April). Accessed: http://
ehbs.kff.org/images/abstract/EHBS--08--Release--Adds.pdf.
\2\ C. Schoen, S.R. Collins, J.L. Kriss and M. M. Doty, ``How Many
Are Underinsured? Trends Among U.S. Adults, 2003 and 2007,'' Health
Affairs Web Exclusive, w298-w309. June 10, 2008.
\3\ Council of Economic Advisors. ``The Economic Case for Health
Care Reform.'' June 2009. Accessed: http://www.whitehouse.gov/assets/
documents/CEA--Health--Care--Report.pdf.
\4\ Council of Economic Advisors. ``The Economic Case for Health
Care Reform.'' June 2009. Accessed: http://www.whitehouse.gov/assets/
documents/CEA--Health--Care--Report.pdf.
\5\ Ibid.
\6\ Elise Gould. ``The Erosion of Employer-Sponsored Health
Insurance.'' Economic Policy Institute. October 2008. Accessed: http://
epi.3cdn.net/d1b4356d96c21c91d1--ilm6b5dua.pdf.
\7\ Families USA. ``Hidden Health Tax: Americans Pay a Premium.''
May 2009. Accessed: http://www.familiesusa.org/assets/pdfs/hidden-
health-tax.pdf.
\8\ A. Dube, T. W. Lester, M. Reich, ``Minimum Wage Effects Across
State Border: Estimates Using Contiguous Counties,'' Institute for
Research on Labor and Employment Working Paper Series No. iiwps-157-07,
August 1, 2007.
\9\ J. Bernstein, J. Schmitt, ``Making Work Pay: The Impact of the
1996-1997 Minimum Wage Increase,'' Economic Policy Institute (1998); D.
Card, A. Krueger, ``Myth and Measurement: The New Economics of the
Minimum Wage,'' Princeton University Press, 1995.
\10\ Council of Economic Advisors. ``The Economic Case for Health
Care Reform.'' June 2009. Accessed: http://www.whitehouse.gov/assets/
documents/CEA--Health--Care--Report.pdf.
\11\ American Medical Association. ``Competition in Health
Insurance: A Comprehensive Study of U.S. Markets.'' 2007. http://
www.ama-assn.org/ama1/pub/upload/mm/368/compstudy--52006.pdf.
\12\ New York Times/CBS News Poll on Health. Telephone Interviews
conducted June 12-16, 2009. Accessed: http://graphics8.nytimes.com/
packages/images/nytint/docs/latest-new-york-times-cbs-news-poll-on-
health/original.pdf.
\13\ Council of Economic Advisors. ``The Economic Case for Health
Care Reform.'' June 2009. Accessed: http://www.whitehouse.gov/assets/
documents/CEA--Health--Care--Report.pdf.
\14\ Families USA. ``Hidden Health Tax: Americans Pay a Premium.''
May 2009. Accessed: http://www.familiesusa.org/assets/pdfs/hidden-
health-tax.pdf.
\15\ Council of Economic Advisors. ``The Economic Case for Health
Care Reform.'' June 2009. Accessed: http://www.whitehouse.gov/assets/
documents/CEA--Health--Care--Report.pdf.
\16\ Stan Dorn, ``Capping the Tax Exclusion of Employer-Sponsored
Health Insurance: Is Equity Feasible,'' Urban Institute. June 2009.
Accessed: http://www.urban.org/UploadedPDF/411894--
cappingthetaxexclusion.pdf.
\17\ Elise Gould. ``How Capping the Tax Exclusion May
Disproportionately Burden Children & Families.'' Economic Policy
Institute and First Focus. May 2009. Accessed: http://
www.firstfocus.net/Download/GOULD.pdf.
\18\ Commonwealth Fund. ``Progressive or Regressive: A Second Look
at the Tax Exemption for Employer-Sponsored Health Insurance
Premiums.'' May 2009. Accessed: http://www.commonwealthfund.org/?/
media/Files/Publications/Issue%20Brief/2009/May/
Progressive%20or%20Regressive%20A%20Second%20Look%20at%20the%20Tax%20Exe
mption/PDF--1269--Schoen--progressive--or--regressive--ESI.pdf.
______
Chairman Miller. Mr. Speranza.
STATEMENT OF PAUL SPERANZA, JR., SENIOR VICE PRESIDENT, GENERAL
COUNSEL AND SECRETARY, WEGMANS FOOD MARKETS ON BEHALF OF THE
CHAMBER OF COMMERCE
Mr. Speranza. I want to thank you for being here this
afternoon.
I am Vice Chairman and General Counsel of Wegmans Food
Markets, and I am here representing the United States Chamber
of Commerce, where I am former past chairman of the board. I am
also representing the Rochester Business Alliance which is the
Rochester, New York, Chamber of Commerce. It is a handy
opportunity to travel around the country on behalf of the U.S.
Chamber of Commerce.
My number one issue was the quality and affordability and
accessibility of health care. As I would talk to audiences
large and small, this is what was on people's minds: the
quality and affordability in health care. And they also want to
have programs that they can understand and programs that are
transparent, which we think is of critical importance.
The two words that I would like to share with you today are
finding common ground and collaboration. The United States
Chamber of Commerce, the Rochester Chamber of Commerce, we
agree to at least 90 percent of what is in this bill, and I
think it needs to be stressed that is indeed the case.
I would like to share with you an example. Rochester, New
York, back in the early 1990s--according to President Bill
Clinton when he did a nationally televised speech on health
care last time around--he said Rochester, New York was a
community that got it right, was the only one that got it
right.
What has transpired since is 4 years ago, the U.S. Chamber
that I represented, the American Medical Association, the
American Hospital Association, large insurers, large health
care companies, came together in Washington--about 15 people--
and their task was to find programs and policies that can be
rolled back to local communities. Didn't cost a lot of money to
be done relatively quickly, that didn't require change in
nonregulation. We in Rochester took that seriously. We put
together a consortium of seven large businesses--Wegmans is one
of them--and we have had very good results.
For example, we have put into place a regional health
information organization. We took efficiency experts from our
manufacturing companies and put them into the hospital systems
to make them more efficient. We developed a wellness program
called ``Eat Well, Live Well'' that my company developed. We
encouraged employees to walk 10,000 steps a day, eat five cups
of fruits and vegetables a day. We turned it over to this group
and last year, we had over 200 organizations in Rochester
participate, more than 44,000 employees. It is the largest
community-wide wellness program in the world.
More recently, we have entered into a partnership, this
consortium of businesses, with a health systems organization,
the only one of its kind in the State that is given statutory
authority by New York. They represent all of the health care
stakeholders in our community. They also represent labor
unions. They represent the religious organizations, minority
communities, et cetera. We have figured out how to collaborate
in Rochester. Common ground is the key to that.
What we would like to be able to do is invite members of
this committee, President Obama, to come to Rochester to see
how we have done it. We think we owe it to the American people
to get collaboration right.
With respect to the bill before us today, a couple of
points. We need to have enough time to digest the bill. Each
Member of Congress needs to do that. We do as well. I had 24
hours' notice to be here today, 2 hours to write my testimony.
My sense is we don't want to take so long that this idea gets
killed, but we need to take enough time where people will
really understand. And there are best practices in the country
that you can look at. Rochester isn't the only community. Many
others do as well.
Second, cost. We have heard costs anywhere from $1 trillion
to $1.6 trillion. Either there are not enough rich people in
this country to pay for that cost, so directly or indirectly
many more Americans will pay for the cost of the programs. And
also with programs like this and other ones that have been put
in place over the last months and the last number of years,
there will be more inflation; and inflation is a tax on
everyone in America, including the poorest of the poor.
In terms of a couple of other points, with respect to the
health care government option for insurance, I disagree with
that approach. Mr. Andrews had talked about food companies a
little bit earlier. I wouldn't want to have a government-run
grocery store across the street from me, a manufacturer
wouldn't want to have a government run manufacturing plant
across the street from them. Yes, there should be competition,
but it seems to me that Congress could figure out a way to
change State and Federal regulation and law to enhance that
competition. We think that is important and the way to be able
to do that.
With respect to pay-or-play, we disagree with that
approach.
With respect to ERISA--I know my time is running short--we
think ERISA works and works well. There are so many
complexities as relates to this bill, we think that ought to be
left alone.
So in conclusion, we need to find the common ground--
believe me, there is a lot of common ground--for the good of
the American people. The American people do want change. We
want change. And we want meaningful change, transparent change.
We should be able to buy health care the same way we buy
automobiles and other goods and services in this country.
Health care should be no different. If you give people the
information and transparency and quality, they will do the
right thing. Competition is the American way. Thank you.
Chairman Miller. Thank you.
[The statement of Mr. Speranza follows:]
Prepared Statement of Paul S. Speranza, Jr., Vice Chairman, General
Counsel and Secretary, Wegmans Food Markets, Inc.
Chairman Miller, Congressman Kline, members of the Education and
Labor Committee, thank you for the invitation to testify at this
hearing. I am Paul Speranza, Vice Chairman, General Counsel and
Secretary of Wegmans Food Markets. Wegmans is a regional food chain
with 39,000 employees. I am pleased to be here today to testify on
behalf of the U.S. Chamber of Commerce, the world's largest business
federation, representing more than three million businesses of every
size, sector and region. I am past Chairman of the Board of the Chamber
and previously chaired the Chamber's Employee Benefits Committee, which
develops Chamber policy governing health issues, for seven years. I am
also representing the Rochester Business Alliance, where I lead its
health care initiatives.
The key concepts I want to share with you today are collaboration
and common ground, just as we have done in Rochester, New York. In a
nationally televised speech in the early 1990's President William
Clinton singled out Rochester as the one community in America that got
health care right. For the last four years a collaboration of seven
large employers, including Wegmans, has worked hard to regain its
national health care status. We have worked on several initiatives
including establishing a regional health information organization and
employing lean six sigma concepts to assist the local hospital systems
to be more efficient. The collaboration also instituted a wellness
program called ``eat well, live well'' which encourages its employees
to eat 5 cups of fruits and vegetables per day and walk 10,000 steps
per day. Last year over 44,000 employees from over 200 organizations
participated, making this (to our knowledge) the largest community-wide
wellness program in the world. The last United States Secretary of
Health and Human Services, Michael Leavitt gave Rochester an award for
its overall health care efforts, and another award for its wellness
program.
Recently our RBA employer consortium entered into a partnership
with the Finger Lakes Health Systems Agency, the only organization of
its kind in New York State which is granted its authority by New York
State. It represents all relevant stakeholders in the community
including minority groups, religious groups, labor unions and all
health care stake holders. We are about to embark on a massive
community-wide hypertension initiative. Hypertension impacts members of
minority communities much more than other groups. Our community has
come together and worked together to improve the quality, affordability
and access to health care. Our goal is to be the healthiest community
in America.
We invite each committee member and President Obama to come to
Rochester to learn about what we have done. If we can do it in
Rochester, we can do it anywhere. Other American communities also have
experiences to share, showing that many of our health care problems can
be improved by dedicated people in local communities. Around America we
all need enough time to share our best practices. Congress can help us
with information technology, wellness, end-of-life matters, incentives
to change behavior of our citizens and appropriate incentives for our
physicians and other health care providers to manage systems
efficiently. All of these items will save substantial money.
As you know, more than half of all Americans receive health
insurance benefits voluntarily provided by their employers, and the
Chamber is committed to reforming the health system to lower costs,
improve quality, and expand coverage. The employer-based system
voluntarily provides health benefits to over 130 million Americans, who
are overwhelmingly satisfied with their benefits and want their
employers to continue providing them. Employers have been great
innovators in health care, and many reforms we have led the way on have
kept the unsustainable rising costs of health insurance from reaching
the breaking point.
Process
The Chamber applauds Congress for making health reform a priority.
However, we have grave concerns about process being used to advance
this legislation. This Committee, in cooperation with the two other
committees of primary jurisdiction, crafted legislation behind closed
doors. This more than 850-page bill was released just four days ago,
and although it still contains significant gaps (including missing cost
estimates and expected offsets), already we are engaged in hearings,
markups possibly scheduled soon, and the bill will be rushed to the
floor without proper time for consideration and revision. The Chamber
hopes that the sponsors of this legislation will conduct a process that
truly engages stakeholders and discards this rush to legislate, and
that they build a piece of legislation that solves the problems we face
without creating massive new problems or significantly disrupting the
current system. We need a reasonable amount of time to understand the
implications of what has been proposed and the opportunity to suggest
alternatives that will work.
The business community has been supportive of reform for some time
now, as health care costs have continued to rise much faster than the
rate of inflation. Even as health insurance premium costs have more
than doubled in the past decade, employers continue to pay $500 billion
a year into the system voluntarily to cover employees.\1\ It should be
easy to draft a bill that employers can support--we are desperate in
the face of these unsustainable cost increases. Unfortunately, rather
than focusing on common sense, pragmatic reforms (as we have done in
Rochester) that both sides of the aisle could support, this legislation
embodies a range of bad ideas that threaten to bring down many good
initiatives that deserve your support.
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\1\ Employee Benefit Research Institute: ``EBRI Databook on
Employee Benefits, Chapter 2: Finances of the Employee Benefit
System.'' Updated September 2008. http://www.ebri.org/pdf/publications/
books/databook/DB.Chapter%2002.pdf
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Employer Mandate (``Pay-or-Play'')
The Chamber does not believe that a mandate on employers to sponsor
health insurance will make serious headway to cover the uninsured, but
rather could lead to a loss of jobs. Employers who can afford to
sponsor health insurance typically provide generous benefits--and most
large employers do. Employers who cannot currently afford to offer
health insurance benefits will not be able to do so simply because they
are mandated to do so--small employers, seasonal employers and
businesses that operate on very small profit margins will still be
unable to afford to provide benefits. The Massachusetts employer
mandate failed to have a meaningful effect on the uninsured, and
actually exempted most of the businesses that didn't offer insurance--
but it was disruptive to existing plans. In fact, reliance on that
employer mandate in part contributed to serious funding problems in the
Massachusetts plan.\2\
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\2\ See Congressional Budget Office: ``Key Issues in Analyzing
Major Health Insurance Proposals--December 2008''. Available at: http:/
/www.cbo.gov/ftpdocs/99xx/doc9924/12-18-KeyIssues.pdf.
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A better, smarter approach would be to focus on bringing down the
costs of health insurance, and encouraging individuals to obtain
coverage. This would bring market forces to bear on employers, as their
employees would ask anew for benefits that satisfied their individual
requirements, without hurting the economy--while also helping more
people to obtain insurance and making health care more affordable for
all.
Minimum Coverage (``Essential Benefits'')
Even businesses that already offer generous benefits are determined
not to be burdened by government-mandated levels of benefits. Because
most government employees enjoy the extremely expensive FEHBP (Federal
Employees Health Benefit Plan), there is a belief in Congress that it
makes sense to force all businesses offering benefits to approach the
offerings of FEHBP. However, this would be completely unaffordable and
impractical. The design of benefits is a decision that needs to be left
between employers and employees. Government-dictated one-size-fits-all
plan designs will be disastrous for business--to suppose that a
computer programming company and a coal-mining company can afford the
same kinds and levels of benefits reveals a lack of understanding of
the realities faced by businesses and working Americans.
We are especially concerned about proposals to anoint a new
committee of unelected bureaucrats, the majority of which will have had
no experience in designing benefits plans, who will basically make laws
regarding required levels of benefits. Although Congress may feel an
urge to punt this controversial issue to an outside ``public-private''
group, it is too important, and represents too great a threat to the
economic wellbeing of America's job creators, to be allowed to be
handed off.
Government-Run Insurance Plan (``Public Option'')
This legislation contains an especially egregious proposal to
create a new government-run health insurance plan to ``compete'' with
the private sector. Recent studies continue to find that government
cannot and would not compete on a level playing field with private
competitors in the insurance market. Government programs tend to hide
administrative costs by outsourcing to various other departments and
agencies, forcing individuals, enrollees, and participating businesses
to pick up the slack. Government costs are artificially low due to
cost-shifting to private payers--the consulting firm Milliman recently
found that private insurance costs 20-30 percent more because of
underpayment by government payers.\3\ Proponents of government plans
usually cite to MedPAC reports that say government plans pay fairly and
private plans overpay--however, numerous providers, hospitals and
businesses have reported to the Chamber that private payers tend to
support public plan enrollees, and reductions in payment from private
plans (or increased enrollment in public plans) would be likely to put
many out of business, or at least to severely curtail access to care.
The fact that this proposal would directly use Medicare rates is
extremely dangerous.
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\3\ Hospital & Physician Cost Shift, Payment Level Comparison of
Medicare, Medicaid, and Commercial Payers. Milliman, December 2008.
http://www.ahip.org/content/default.aspx?docid=25216
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This would be compounded by the problem of a massive shift from the
private sector to the public sector. The Lewin Group actuarial firm
recently found that tens of millions would be drawn to a public plan by
artificially low premiums--a situation that would only worsen the
already debilitating cost-shift private payers experience.\4\ A loss of
119 million Americans from the private sector to the public sector
would devastate the remaining private sector, and likely could lead to
the eventuality of a government-run insurance ``option'' being the only
option available.
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\4\ The Cost and Coverage Impacts of a Public Plan: Alternative
Design Options. Lewin Group staff working paper #4, April 2009. http://
www.lewin.com/content/publications/
LewinCostandCoverageImpactsofPublicPlan-Alternative%20DesignOptions.pdf
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The business community joins most Americans in opposing a ``public
option'' that would likely be an unfair competitor or lead us toward
government-run health care for all. A recent poll by the Kaiser Family
Foundation found that while Americans are initially open to a ``public
option'', when they learn that it might have an unfair advantage over
the private sector or that it might lead to single-payer, they strongly
opposed it.\5\
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\5\ Kaiser Family Foundation Health Tracking Poll, April 2009.
http://www.kff.org/kaiserpolls/upload/7891.pdf.
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Even an editorial in the Washington Post has cited the ``public
option'' as a backdoor way to bring the nation to single-payer,
socialized medicine. The President's promise that Americans will be
able to keep the health insurance they have cannot be kept if we move
to such a system.
We can find no meaningful justification for creation of a new
government-run insurance plan other than to gut the private market and
bring a large portion of America into government-run health care.
Whether or not this proposal is a Trojan horse for single-payer health
care, it is apparent that its cause is ideological, not pragmatic or
driven by a desire for market competition or good health policy.
ERISA Changes
The reason so many employers are able to offer quality, affordable
health insurance to their tens of millions of employees is because the
Employee Retirement Income Security Act of 1974 (ERISA) allows them to
administer uniform benefits across state lines, with maximum
flexibility to allow employers to design plans that meet their
employees' needs.\6\ This proposal would threaten the success of ERISA
plans by apparently allowing a new host of lawsuits under state law,
revisiting many issues raised by the Patients' Bill of Rights of past
Congresses. Obviously, if this is true, we would be very troubled by
these provisions.
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\6\ Over a hundred million Americans have health, retirement and
other valuable benefits voluntarily provided by their employer under a
nationally uniform framework established by the Employee Retirement
Income Security Act. See National Coalition on Benefits: About the
Coalition. Available at: http://www.coalitiononbenefits.org/About/
---------------------------------------------------------------------------
Congress should be focused on lowering the costs of health care and
expanding access to those currently without coverage. Why is there an
effort to interfere with the parts of the system that are working well?
The Chamber views such initiatives as counterproductive at best, and at
worst, efforts to force more Americans out of private, voluntary
employer-provided coverage, and into a government-controlled exchange
that will inevitably lure individuals into a government-run insurance
plan. These solutions in search of a problem will cause unnecessary
disruption in current plan offerings--contrasting with the President
and many leaders in Congress' constant claim that ``if you like the
plan you have, you can keep it.''
Financing of Health Reform
This Congress made the bold and fiscally responsible decision to
offset new spending and operate under a pay-as-you-go structure to
avoid increasing the deficit. This proposal may end up appearing
deficit neutral on its face, but only because there are numerous
proposals to pair it with massive new taxes. These taxes would be
devastating to the economy, to businesses, and to the workers they
employ. Among these wrong-headed proposals is a movement to create a
European-style Value-Added Tax (VAT). A VAT would have negative
implications throughout the entire economy, particularly hurting those
with the lowest incomes, who would see the same increases in the costs
of affected goods that those with higher incomes would see. This would
hurt the already lowered consumption levels we are currently
experiencing, lengthening the economic downturn. There are not enough
``rich'' people in America to pay for this. Taxes of many others will
rise. With this and other major government expenditures of the recent
past, the inflation that will flow from all of this will be a tax on
everybody.
Proposals to tax sugary drinks and alcohol would be similarly
regressive. The revenues gained under such a proposal would come
directly from those with the lowest incomes who have the fewest options
to purchase and the least time and ability to change their dietary
habits. These would also be the people most likely to further forego
needed care if health expenditures through tax-free vehicles like
Flexible Spending Arrangements and Health Savings Accounts were
threatened.
Proposals to tax employee health benefits would also have extremely
negative reverberations in the economy. These taxes would fall directly
on workers, who would see their taxable income increased--although
employers would also see FICA and payroll taxes increase, and would
have to pass some or all of those costs on to the workers.
Reforms Widely Supported
Congress has rightly recognized that now is the time to reform the
insurance markets. This will necessitate some hard decisions about how
to enact and enforce guaranteed issue of insurance to all comers,
guaranteed renewals, rate control, increased access to competing
options, and more. And Congress has rightly recognized that these
reforms will not be feasible unless everyone is in the system and has
skin in the game--no gaming the system and waiting to buy insurance
until you are sick.
If we can build connectors that work, and reform the insurance
market, much of the work is done. We need to focus on controlling costs
and making coverage affordable, and the initial task will be complete.
This will be extremely challenging, necessitating a variety of delivery
system reforms, payment and reimbursement reform, implementation of
comprehensive strategies to boost health information technology,
wellness, prevention, disease management, coordination of care,
initiatives to support primary care and much more. This will require
sacrifice on the part of many groups--insurers, hospitals,
pharmaceutical companies, providers, workers, and yes, employers.
Further, this large bill has left out many of the key solutions we
believe could lower health care costs and improve quality. Medical
liability reform was not explored, not even test projects through
creation of specialized health courts. The massive Medicare claims
database, which could be used to jump start quality and transparency
efforts, is left out. Employers are not given any safe harbors or
encouragement to create wellness programs for employees. Enrollees in
public programs are not given the option to instead take their
government premiums and enroll in competing private options. And
individuals and the self-employed are not given options to use pre-tax
dollars to purchase health insurance, and thus still will not have tax
parity.
The business community stands ready to work with Congress to pass
such reforms. The Chamber will be on the front line fighting for the
success of legislation that truly addresses these problems and proposes
these solutions. But the Tri-Committee bill is a far cry from such a
targeted piece of legislation. All of us, as Americans, can find common
ground and collaborate just as we have done in Rochester, New York.
______
Chairman Miller. Dr. Hacker, welcome.
STATEMENT OF DR. JACOB HACKER, PROFESSOR AND CO-DIRECTOR OF THE
BERKELEY CENTER ON HEALTH, ECONOMIC, AND FAMILY SECURITY,
UNIVERSITY OF CALIFORNIA BERKELEY
Mr. Hacker. Thank you, Chairman Miller, and members of the
committee. It is an honor to speak with you today. Health care
is at the epicenter of economic insecurity in the United
States, a reflection of our Nation's uniquely fragmented and
costly framework of health insurance. Now, this framework is
distinctively American, and any effort to improve it must be
distinctively American as well, building on the best elements
of the present system: large group health plans in the public
and private sectors.
But an American solution must also fix what is not working.
By allowing Americans without access to secure workplace
coverage, to choose among group insurance plans, will provide
strong guarantees of quality, affordable coverage over time.
To succeed, these reforms must be based on three strong
pillars: shared risk, shared responsibility, and personal
responsibility. Shared risk means we need a new national
insurance exchange that allows workers without secure coverage
to access good group health plans with premium assistance to
ensure affordability. To promote competition and accountability
this exchange must also include as a choice a public health
insurance plan competing with private insurers.
Now, this public health insurance plan is a linchpin of a
distinctively American strategy. It will provide a backup for
those without workplace insurance in all parts of the Nation.
Indeed in most of the country, especially rural areas,
insurance markets are highly consolidated, and private plans
are passing on costs to enroll these employers rather than
bargaining with increasingly consolidated provider groups or
improving their own efficiency.
A public plan must also provide a benchmark for private
plans, pressing them to focus on value and innovation rather
than shifting costs or screening out high-risk patients.
And, finally, a public plan will provide a cost-controlled
backstop. Public insurance has lowered administrative expenses
in private plans. It obtains larger volume discounts. It does
not have to earn a profit, and experience suggests it has a
superior ability to control spending while maintaining broad
access over time.
Now, I would encourage the committee to ensure that the
public plan has an extensive network of hospitals and doctors
immediately. And the simplest and most efficient way to build
the network is to assume that all doctors and hospitals that
accept Medicare payments are in the network but give them a
choice to opt out.
The plan should also have the authority to use modified
Medicare rates and to employ information technology and new
payment approaches and care coordination strategies to improve
efficiency and quality. If we are to truly bend the curve of
health spending, the public and private sectors will have to
work together competing on a level playing field. This task
cannot fall on private insurers or the Medicare program alone.
Make no mistake, Americans want to have the choice of
enrolling in a public insurance plan. In a recent poll, 72
percent supported this option, including a majority of
Republicans. Another recent poll found 83 percent support.
The other two pillars of an American solution are shared
and personal responsibility. This means that employers and
individuals should be expected to contribute to the cost of
their coverage once affordable options are available.
Employer responsibility, sometimes known as play-or-pay, is
vital in ways that are not always properly understood. Yes, it
provides an important source of funding, reducing the direct
cost of reform to the Federal Government. But it also ensures
that reform will not undermine employment-based health
insurance. In the absence of a play-or-pay requirement, firms
with large numbers of low-wage workers who qualify for new
subsidies for insurance within the exchange will have less
incentive to insure their workers directly. Moreover, employer
responsibility requirements serve to level the playing field
between firms that do and do not provide coverage.
In play-or-pay proposals, employer contributions are not
penalties, they are payments for the coverage of workers whose
enrollment in the exchange flows from the employer's decision
to contribute. This ensures that the roughly 95 percent of non-
elderly Americans who work or live in the family of a worker
have access to good insurance through the workplace connection.
And while there are valid concerns about small employers, a
survey by Small Business Majority found support for more than
half of small business owners in California for reform along
these lines. They were willing to accept the requirement to
contribute to health care in return for the ability to access
an affordable plan for their workers.
Concerns about small businesses, where most uninsured
workers are employed, will be best addressed through a sliding-
scale requirement on firms rather than by excluding small firms
from the requirement altogether.
Shared risk, shared responsibility, personal
responsibility, these are the pillars of a uniquely American
solution. Together they will create accountability in American
health insurance, expand coverage while making it more
affordable for workers and their families, and adequately fund
our health care priorities while putting in place the
preconditions for long-term savings to the Federal Government.
Chairman Miller. Thank you.
[The statement of Mr. Hacker follows:]
Prepared Statement of Jacob S. Hacker, Ph.D., University of California,
Berkeley, Professor of Political Science; Faculty Co-Director, Center
on Health Economic & Family Security, Berkeley School of Law
Public Plan Choice and Play-or-Pay: Critical Elements to Ensure
Accountability and Affordability and Control Costs
I thank the committee for the honor of speaking today about the
pressing need for national health reform based on the principles of
shared risk, shared responsibility, and personal responsibility. For
national reform to succeed, it must create accountability in American
health insurance, expand coverage while making it more affordable for
workers and their families, and adequately fund our health care
priorities while putting in place the preconditions for long-term
savings to the federal budget. The draft legislation prepared by this
special tri-committee promises enormous progress in meeting all three
of these goals.
My remarks are divided into two parts. In the first, I explain why
the ``publicprivate hybrid'' approach embodied in the tri-committee
draft legislation is vital to ensuring accountability in American
health insurance. I focus in particular on the need for a public health
insurance plan that Americans without secure workplace coverage can
choose as a coverage option that will compete with private plans. In
the second part, I emphasize the need for shared responsibility to
expand affordable coverage, emphasizing the constructive role that
employers can play in providing or helping to finance coverage so that
affordable insurance is available to all Americans through the
workplace connection. Both accountability within the insurance market
and shared responsibility are necessary to slow the growth in health
care costs not just for workers and their families but also for
employers, states, and the federal government.
I. THE NEED FOR ACCOUNTABILITY IN AMERICAN HEALTH INSURANCE \1\
In recent years, the need for comprehensive health reform has
become glaringly apparent. Health insurance premiums have skyrocketed,
more than doubling from 1999 to 2008,\2\ while the scope and generosity
of private coverage have plummeted. Not only have the ranks of the
uninsured continued to expand, but, in addition, the number of
Americans who have insurance yet lack adequate protection against
medical costs has increased dramatically.\3\ More than half of
bankruptcy filings are related to medical care, with the vast majority
of medical bankruptcies involving households that have insurance
coverage.\4\ Employers, workers, states and localities, and the federal
government--all have seen their budgets under siege because of runaway
health care costs and all require long-term relief.
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\1\ This section is based on Jacob S. Hacker, ``The Case for Public
Plan Choice,'' and ``Healthy Competition,'' both available at http://
www.law.berkeley.edu/chefs.htm. Additional citations are available in
these briefs.
\2\ The Kaiser Family Foundation and Health Research & Educational
Trust, Employer Health Benefits, 2008 Summary of Findings, 1.
\3\ Cathy Schoen, et al., ``How Many are Underinsured? Trends Among
US Adults, 2003 and 2007.'' The Commonwealth Fund. June 2008. Accessed
November 25, http://www.commonwealthfund.org/publications/
publications--show.htm?doc--id=688615.
\4\ David U. Himmelstein, Deborah Thorne, Elizabeth Warren, Steffie
Woolhander, Medical Bankruptcy in the United States, 2007: Results of a
National Study, The American Journal of Medicine, June 2009, David
Himmelstein, et al., ``Illness and Injury As Contributors To
Bankruptcy.'' Health Affairs, 2005. Accessed November 25, http://
content.healthaffairs.org/cgi/reprint/hlthaff.w5.63v1.
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Amid the crisis, there has emerged a growing recognition not just
of the need for action but also of the virtues of a public-private
``hybrid'' approach to health reform. The approach to reform embodied
in the tri-committee draft legislation is such a model--a model that
builds on the best elements of the present system: large group plans in
the public and private sectors. By lowering the cost of care and
requiring that all firms eventually contribute to the cost of coverage,
the legislation would encourage employers to continue to provide health
insurance. At the same time, it would put in place a new means--the so-
called health insurance exchange--of allowing Americans without access
to secure workplace coverage to choose among insurance plans that
provide strong guarantees of quality affordable coverage over time.
The Case for Public Plan Choice
An essential feature of this new framework for obtaining group
coverage is ``public plan choice,'' the creation of a new public plan
modeled after Medicare that would be available to Americans younger
than 65 who lack good employment-based coverage. Public plan choice is
not by any stretch of the imagination ``Medicare for all.'' Rather, it
simply creates a public health insurance plan with incentives to focus
on value and innovation that competes on a level playing field with
private insurers within the new insurance exchange. Private employment-
based coverage would continue, and workers without such coverage would
be able to choose from a menu of options that includes a range of
private insurance plans as well as the new public health insurance
plan.
Moreover, this new public health insurance plan should be--and is,
in the draft legislation--self-supporting after initial setup costs are
financed (that is, it should be financed by the same sources as any
other plan within the exchange, notably, individual premiums, employer
contributions, and income-related subsidies). It should also be--and
is--subject to the same rules as the private plans and be separate from
the national exchange, so the referee (the exchange) does not have a
player (the plan) in the game.
This idea is overwhelmingly popular. In a recent poll conducted by
the New York Times and CBS News, 72 percent of those questioned
supported a government-administered insurance plan that would compete
with private insurance. The support for a public plan came from
Republicans and Democrats alike. Half of those who identified as
Republicans said they would support a public plan, along with three-
quarters of independents and nine out of ten Democrats.
Choice, Accountability, and ``Healthy Competition''
The aim of public plan choice is healthy competition--that is,
competition to make Americans better cared for and more secure. Such
competition requires not an endless array of choices, but rather a
reasonable number of meaningfully different choices. In much of the
country today, health insurance competition is remarkably limited. Most
metropolitan areas have no more than a few dominant insurers in control
of the market. And these companies are often unable or unwilling to
rein in health care costs. It is often in their interest to pay higher
rates to key doctors and hospitals because they can pass on these costs
to individuals and employers. In the process, they make it difficult
for weaker insurers to build competitive provider networks and bring
costs down. Even the largest insurers are hard-pressed to enter
established markets.
Because the hospital market has grown increasingly concentrated,
moreover, providers wield considerable power of their own to drive up
the rates they receive from insurers and restrict competition. In areas
where hospital market concentration has grown the most, hospital prices
and profitability are very high, yet service and quality of care is no
better than in other areas, the evidence suggests.\5\ As John Holahan
and Linda Blumberg of the Urban Institute explain, ``Dominant insurers
do not seem to use their market power to drive hard bargains with
providers * * *. Competition in insurance markets is often about
getting the lowest risk enrollees as opposed to competing on price and
the efficient delivery of care.''\6\
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\5\ John Holahan and Linda Blumberg, ``Can a Public Insurance Plan
Increase Competition and Lower the Costs of Health Reform?'' Urban
Institute Health Policy Center, 2008, http://www.urban.org/UploadedPDF/
411762--public--insurance.pdf, 3.
\6\ Ibid., 3.
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A public health insurance plan would provide greater competition
for insurers and providers and greater choice for Americans. Indeed, a
key reason for public plan choice is that public health insurance
offers a set of valued features that private plans are generally unable
or unwilling to provide. Stability, wide pooling of risks,
transparency, affordability of premiums, broad provider access, the
capacity to collect and use patient information on a large scale to
improve care--these are all hallmarks of public health insurance that
private plans have inherent difficulties providing. On the other hand,
private plans are generally more flexible and more capable of building
integrated provider networks, and they have at times moved into new
areas of care management in advance of the public sector.
In short, public and private plans have unique strengths, and both
should have an important role in a reformed system. Public plan choice
simply means that all Americans without good workplace coverage, not
just the elderly or the poor, should have access to the distinctive
strengths of a public health insurance plan, as well as the strengths
of private plans. Such healthy competition has long been the stated
rationale for encouraging Medicare to include private plans alongside
the public program. The argument for a competitive partnership between
public insurance and private plans applies at least as strongly to
nonelderly Americans as it does to those in Medicare.
Healthy competition is about accountability. If public and private
plans are competing on fair and equal terms, the choice of enrollees
between the two will place a crucial check on each. If the public plan
becomes too rigid, more Americans will opt for private plans. If
private plans engage in practices that obstruct access to needed care
and undermine health security, then the public plan will offer a
release valve. New rules for private insurance could go some way toward
encouraging private plans to focus on providing value. But without a
public plan as a benchmark, backup, and check on private plans, key
problems in the insurance market will remain.
Public Plan Choice is Essential to Cost Control
Perhaps the most pressing of these problems is skyrocketing costs.
Public health insurance has much lower administrative expenses than
private plans, it obtains larger volume discounts because of its broad
reach, and it does not have to earn profits as many private plans do.
Furthermore, experience suggests that these lower costs are accompanied
by a superior ability to control spending over time. Medicare has a
better track record than private health plans in controlling costs
while maintaining broad access to care, especially over the last
fifteen years. By way of illustration, between 1997 and 2006, health
spending per enrollee (for comparable benefits) grew at 4.6 percent a
year under Medicare, compared with 7.3 percent a year under private
health insurance.\7\
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\7\ Hacker, ``The Case for Public Plan Choice,'' available at
http://www.law.berkeley.edu/chefs.htm.
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Over the last generation, public insurance has pioneered new
payment and quality-improvement methods that have frequently set the
standard for private plans. More important, it has the potential to
carry out these vital tasks much more effectively in the future, using
information technology, large databases of practices and outcomes, and
new payment approaches and care-coordination strategies. Indeed, a new
public plan could spearhead improvement of existing public programs as
well as private plans.
To be sure, there are reasonable concerns about how a new public
plan will use its bargaining power--concerns reflected in current
proposals for state-based public plans, consumer cooperatives
established by the states, or even private insurers under public
contract. Yet a watered-down public plan or a private alternative to a
public plan would not serve the three vital functions of a competing
public health insurance plan--to be a ``benchmark'' for private plans,
a ``backup'' to allow consumers access to a good plan with broad access
to providers in all parts of the country, and to serve as a cost-
control ``backstop.'' Consumer cooperatives, for example, will be
extremely difficult to create and are unlikely to serve as a backup in
most of the nation. They will also lack the ability to be a cost-
control backstop, much less a benchmark for private plans, because they
will not have the reach or authority to implement innovative delivery
and payment reforms.
In sum, public plan choice is essential to set a standard against
which private plans must compete. Without a public plan competing with
private plans, we will continue to lack strong mechanisms to rein in
costs and drive value down the road.
II. THE NEED FOR SHARED RESPONSIBILITY \8\
The other aspect of the draft legislation I wish to comment on is
the requirement that employers either provide health insurance to their
workers or help fund coverage for those workers through the new
national insurance exchange. In my view, the exchange should eventually
be open to all employees of firms that choose to pay regardless of
worker income or firm size, with reasonable premiums for higher-income
workers.
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\8\ This section is based on Ken Jacobs and Jacob S. Hacker, ``How
to Structure a `Play-or-Pay' Requirement on Employers,'' available
online at http://www.law.berkeley.edu/chefs.htm. Additional citations
are available in the brief.
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A play-or-pay requirement is essential to any hybrid health reform
proposal that builds on the current system of job-based coverage while
providing new options to broaden coverage to the uninsured. Financing
any health coverage expansion will be challenging. An employer
requirement makes it easier by providing an important source of funding
and reducing the direct cost to the federal government. At the same
time, such a requirement is essential if reform is to avoid greatly
reducing the provision of employment-based insurance.
Why Have a Play-or-Pay Requirement?
Job-based coverage is still the major means that non-elderly
Americans receive health benefits. Nationally, about 62 percent of
Americans under age 65 get their health coverage through their employer
or the employer of a family member. Replacing employer financing would
require substituting highly visible taxes or mandates on individuals
for the relatively hidden contributions now made (nominally at least)
by employers.
In the absence of a binding employer requirement, moreover, the
direct costs to the federal government would substantially increase.
Firms with large numbers of low-wage workers who would qualify for new
subsidies for insurance would have less incentive to cover their
workers directly, allowing their workers to obtain insurance outside
the workplace with the new subsidies. How extensive such crowd-out
would be is a matter of debate. Employee benefits tend to be
``sticky,'' at least in the short run. Benefits are highly valued by
employees, and risk-averse employers may be reluctant to take advantage
of the option of dropping coverage. But over time employers should be
expected to move toward benefit strategies that minimize their costs,
including allowing their workers to be covered by public programs or
subsidized individual insurance.
Finally, employer responsibility requirements serve to level the
playing field between firms that do and do not provide coverage. The
vast majority of medium and large firms offer health care on the job,
at least to their full-time workers. Many small firms, particularly
higher-wage firms, also provide coverage. Yet a substantial share of
firms do not, with rates of non-provision highest among small
employers. In firms that do offer coverage, eligibility and benefits
vary substantially. Nationally, 77 percent of the uninsured work or
have a family member who works, and are not self-employed. A quarter of
the working uninsured are in firms with less than ten workers; another
third are in firms with 10 to 99 employees. The final 41 percent work
for employers with more than 100 workers. Nearly one-third of those who
are covered through a job are covered by a business with fewer than 100
workers.
When firms do not provide coverage, or only provide coverage to a
limited fraction of their workforce, it raises the costs of employment-
based coverage and puts pressure on firms that do offer benefits to cut
back their offerings. One path by which this occurs is the shifting of
the costs of caring for the uninsured: As uninsured workers and their
dependents are forced to rely on emergency rooms for care, costs are
shifted not only onto the public but also into the health premiums of
firms that do offer coverage. It is estimated that the cost of
uncompensated care raises health premiums by between 5 and 10 percent.
Another path is spousal and dependent coverage: A firm offering family
benefits picks up the cost of spouses working in firms without health
care and the costs of dependents that might have been insured by
another firm.
How the Play-or-Pay Requirement Should be Structured
Play-or-pay should apply to as broad a range of firms as possible.
While there are valid concerns about the effect of such a requirement
on small employers, it is important to keep in mind small employers
would benefit from a health-care expansion that would provide coverage
to their employees. A survey by Small Business Majority found support
from more than half of small business owners in California for a health
reform proposal along these lines. They were willing to accept the
requirement that they contribute to health care in return for the
ability to access an affordable plan for their workers. Concerns about
economic impacts on small businesses would be best addressed through a
sliding scale requirement on firms, rather than by excluding small
firms from the requirement altogether.
Moreover, the play-or-pay requirement should apply to all of a
firm's employees as well as their employees' spouses and non-working
children. While 97 percent of large firms offer health coverage, they
only cover an average of 70 percent of their employees. In fact, three
out of four workers who do not have coverage through their employer
work at firms where fellow workers have coverage. The plurality of
these uncovered workers are not eligible for coverage (45 percent); the
next largest share have not taken-up coverage (30 percent), often
because the costs are viewed as prohibitive. If part-time workers are
excluded, it creates a strong incentive for employers to offer part-
time employment as a way of reducing costs. There is evidence of
significant labor market sorting along these lines in Hawaii as a
result of its health-care mandate. A requirement on part-time workers
can be structured so that it is not economically burdensome on
employers.
The Economic Benefits of Shared Responsibility
The main argument against employer requirements is that they place
a tax on employment, leading to fewer jobs. Recent economics research
as well as the experience of California strongly suggests, however,
that these concerns are overstated when it comes to the play-or-pay
proposals currently under consideration, with their relatively modest
employer requirements.
Firms may absorb the costs of an employer requirement in a variety
of ways. Over time, we would expect a large share of the cost to be
passed on to workers through forgone wage increases. Pass-throughs to
consumers are also well documented. After the passage of the health-
care ordinance in San Francisco, many restaurants added small health-
care surcharges to their checks to cover the costs of the program.
The main concern is for workers at or near the minimum wage. As
long as all employers face the same rules, however, firms with workers
at or near the minimum wage may pass on part of the cost to consumers
without impacting their ability to compete. The vast majority of firms
that currently do not offer health benefits are in markets where their
competitors also do not provide benefits, and thus would see increases
similar to those of their competitors. Moreover, the incremental costs
even for these firms would be small.
It is also important to keep in mind that health reforms with
employer requirements promise new benefits for firms and workers as
well as new costs. Many firms that provide coverage for working
dependents of their employees would no longer have to. Some firms that
provide coverage would also benefit from the option of enrolling their
workers in the new exchange, which would effectively cap their direct
obligations. All firms would benefit from the reduction in unpaid
medical bills incurred by the uninsured. Firms would further benefit
from any savings due to a reduced rate of health-care cost growth.
Expanded access to health care can also be expected to raise
productivity through improved worker health and labor force
participation, and better matches of jobs to workers skills. Workers
without health coverage are more likely to miss necessary care, less
likely to receive treatment for chronic conditions, and more likely to
suffer from debilitating conditions that will keep them out of the
workforce. Broader coverage is likely to result in decreased
absenteeism and exits from the labor force due to disability. There is
strong evidence that health insurance plays an important role in worker
mobility decisions. Universal coverage would decrease ``job-lock'' and
improve matches between workers skills and positions.
In sum, the net impact of a broad health-care reform that included
shared responsibility for employers would be positive for business and
the economy as a whole.
CONCLUSION
Health reform is essential for improving the economic security of
American workers and their families. By far the largest effect of
broadening and upgrading coverage and lowering and subsidizing premiums
is to immediately help struggling Americans who are currently facing
the worst economic downturn in at least a generation. These vital
reforms will also provide a rescue package for state and local
governments facing rising Medicaid and CHIP costs, for doctors and
hospitals that treat the uninsured and inadequately insured, for
community institutions that help people in distress--in short, for all
the rapidly fraying threads of our health care safety net. No less
important, creating a public plan to compete with private plans while
bringing as many Americans as possible into a reformed insurance
framework is essential for bringing down the rate of increase of costs
over time and to reducing the long-term financial threat of health care
to workers and their families and to employers, states, and the federal
government.
______
Chairman Miller. Mr. Stapley, welcome.
STATEMENT OF MICHAEL J. STAPLEY, PRESIDENT AND CHIEF EXECUTIVE
OFFICER, DESERET MUTUAL INSURANCE COMPANY AND DESERET MUTUAL
BENEFIT ADMINISTRATORS
Mr. Stapley. Thank you, Chairman Miller and Congressman
Kline, for the opportunity to testify today on behalf of the
ERISA Industry Committee whose members provide comprehensive
health benefits directly to some 25 million active and retired
workers and their families. ERIC has long supported reforms to
the Nation's health care system that change the way we pay for
health care, increase its efficiency, reduce cost, extend
health coverage to those who are uninsured or underinsured, and
improve quality.
To that end, we released in 2007 a new benefits platform
for life security that lays out an innovative national
framework for health and retirement security. As we contemplate
the issues that are before us, there are three basic principles
that we think are important:
First, do no harm. There has been a stated commitment to
the employer-based system by the President and others. Health
care reform should build on the success of this system that
serves 170 million Americans and their employers, not hurt it.
Second, control costs. Spiraling health care costs threaten
our global competitiveness as well as our national solvency.
Reform must focus on reducing these costs and ensure that what
we pay for has value. Without cost containment, effective cost
containment, we will not change the system.
Thirdly, expand access. Access to the 47 million or 82
million, however we choose to count it, Americans who do not
have it must be expanded while recognizing that a chief cause
of inadequate access is the high cost of care.
Now, we recognize as an organization that there is a lot in
our current system that is not working well. To this end, we
created the new benefits platform that we released a couple of
years ago.
With these principles in mind that we just articulated, and
this new benefits platform we articulated, the following things
that we support that are a part of health care reform and in
large measure a part of the many proposals that are being
considered by the President and Congress.
First, we support a competitive pluralistic health care
system in which employers and individuals have choices among
health plans that compete on the basis of quality, cost and
effectiveness.
Second, we support an insurance exchange or gateway,
provided that it follows uniform national standards.
Thirdly, broad flexibility for employers to choose how they
provide health benefits to their employees and their families
while protecting employers from systematic adverse selection.
Fourth, incentives in the current financing system that
promote responsible cost management rather than risk avoidance
and aggressive claims administration.
Fifth, improvements in the transparency and accountability
of both providers and health plans.
Sixth, payment reforms that secure financial incentives
that drive desired changes.
And, lastly, an individual mandate with subsidies to assist
financially disadvantaged individuals.
Now, there are also some issues, some concerns with the
current proposals, that we feel like need more discussion.
First, the tax cap is difficult to define so it can be
administered in a fair and equitable way. Second, it may mean
that some employers would redesign their plan so that the
benefits they provide would fall below the level that was
taxed. In fact, we might create an incentive to do that with
the result that their employees would be provided with less
generous health coverage. Other employers would choose to keep
their existing plans which could result in adverse selection as
young and healthy employees leave the employer plan to seek
cheaper coverage elsewhere that would not be taxed. This could
compromise many large viable risk pools and could also greatly
diminish an employer's ability to offer efficient and
innovative health care coverage to its employees.
As the cost of providing benefits increases, more employers
would exit the system.
The public plan. If a public plan could fairly be
fashioned, it must be structured in a way that the employer
plans end up bearing the burden of additional--do not end of
bearing the burden of additional cost shifts. There is
currently--and there is no question about it--there is
currently unfair cost shifting from Medicare to employer plans
in the current system. Expansion of cost shifting would cause
employers to rethink whether they can afford to provide high-
quality health care to their employees, and it also compromises
the notion with respect to whether or not you really got a plan
that is competing on a fair and equitable basis.
There are also concerns about the adverse selection that
would be experienced if individuals in employer-sponsored plans
were permitted to opt out of the employer plan and into a
public plan, especially if the employer were compelled to pay
for the individual's participation in the public plan and/or
finance any subsidy given low-income individuals who opted out.
Employer mandates. Including minimum benefit packages by
definition restricts our ability to devise and operate health
care plans that best meet the need of our employers. Mandates
increase cost and limit flexibility. They are also difficult to
define so they can be simply and uniformly applied. Coupled
with punitive regulatory regimes, employer mandates will
discourage employers from continuing to provide quality
affordable health care to their employees.
Finally, talking about preemption. Without national
uniformity made possible by ERISA's preemptive doctrine, large
multi-State employers simply could not offer quality health
care coverage to their employees. Any future legislation must
continue to accord preemption and national uniformity of
regulation in a similar priority.
There are many employers that offer benefits in all 50
States. We can testify to the fact that in most States where we
have some responsibility to comply with State mandates, the
administration is costly and complex and difficult to comply
with.
In conclusion, ERIC is committed to the goal of responsibly
reforming the Nation's health care system to cover the
uninsured, control costs, and improve quality and do all three
in a manner that does not undermine the system that currently
offers quality health care to 170 million satisfied Americans.
ERIC members have a major stake in America's health care system
and we intend to continue to play a constructive role in this
debate.
Thank you for your time.
Chairman Miller. Thank you very much.
[The statement of Mr. Stapley follows:]
Prepared Statement of Michael Stapley, on Behalf of the
ERISA Industry Committee
Chairman Miller, Ranking Member Kline, and other Members of the
Committee: thank you for the opportunity to testify on the important
subject of healthcare reform. I am speaking today on behalf of the
ERISA Industry Committee, an association committed to the advancement
of the employee retirement, health, incentive, and welfare benefit
plans of America's largest employers. ERIC's members provide
comprehensive health benefits directly to some 25 million active and
retired workers and their families. ERIC has a strong interest in
proposals that affect its members' ability to continue to deliver high-
quality, cost-effective benefits.
We must change the way we pay for and deliver health care in the
United States. Reining in health care costs is absolutely essential to
this country's future economic success. ERIC strongly supports reforms
to the nation's healthcare system that will increase its efficiency,
reduce costs, and extend health care coverage to those who are
uninsured or underinsured.
ERIC has thought deeply about this subject. In 2007, we released A
New Benefits Platform for Life Security that lays out our vision of a
conceptual framework for overhauling our national approach to providing
health and retirement security. Many of the positions we staked out in
this Platform have been incorporated into proposals currently under
consideration in Congress. Although we believe our Platform could make
further significant contributions to the present debate, we will
concentrate our remarks today on the legislative concepts that are
currently under discussion.
Three basic principles are of fundamental importance to change and
must be considered as we move forward.
1. Do no harm. The current voluntary employment-based system
provides health coverage to 170 million people, about 61% of the non-
Medicare population. This system has served both employers and
employees well. Employers have the flexibility they need to tailor
their plans to the needs of their workforce while also aggressively
pursuing the innovative changes that have lead to substantial
advancements in so many arenas, including the fields of wellness and
prevention. Employees strongly support their employer provided benefits
and benefit significantly from this system. They enjoy access to high-
quality care with guaranteed issue, limited preexisting condition
exclusions, a uniform premium structure, and the other advantages
afforded participants in the large risk pools of group plans. Any
health care reforms should build on the strengths of this system.
2. Control costs. The relentless increases in the cost of health
care threaten the viability of U.S. corporations in a global economy,
while the upward spiral in the costs of Medicare and Medicaid threatens
our national solvency. In addition, a substantial portion of the health
care we now consume, perhaps as much as 20% to 40%, has no value. The
centerpiece of healthcare reform must focus on reducing these costs.
Reform that fails to focus on cost control will not only ultimately
prove ineffective but will undermine health care coverage.
3. Expand access. 47 million Americans do not have adequate access
to health care. Of those, approximately half are unable to afford
coverage. History will not judge kindly an affluent society that
ignores this problem. We must remember, however, that inadequate access
is aggravated, if not caused, by the high level of cost. Our
effectiveness in solving the access problem depends on restraining the
growth of health care costs.
With these foundation principles in mind, I would like to focus on
what we can support in a responsible healthcare reform initiative.
1. ERIC strongly supports a competitive, pluralistic health care
system in which employers and individuals have choices among several
health plans that compete on the basis of quality, cost, and
effectiveness. There is an urgent need to eliminate the significant
waste in the current health care delivery system, establish a
foundation for responsible cost management in the future, and
systematically ensure quality health care for all Americans. Too many
reforms pursued in the past have made changes at the edges of health
care delivery when fundamental structural changes are needed. ERIC
believes that a properly designed, responsibly regulated pluralistic
system will be able to correct the deficiencies in the current system
and produce significant improvements in costs, quality, and access.
2. ERIC's Benefits Platform supports the establishment of an
insurance exchange or gateway that provides a fair and equitable method
for the distribution of insurance products. If exchanges are
established, they should follow uniform national standards.
3. Employers should be given broad flexibility regarding how they
choose to provide health benefits to their employees and their families
but should be protected from systematic adverse selection by the plans
in the exchange. Employers should be given the option of choosing to
continue in the current system and arrange for and sponsor their own
health plan alternatives. At the same time, employers should have the
flexibility to provide financial resources to their employees to
purchase health plans through the insurance exchange from among
competing health plans. The employer should not be required under any
circumstance to provide financial resources to employees to purchase
insurance through an insurance exchange when the employer has chosen to
continue in the current system. To allow this would create systematic
adverse selection problems that could ultimately result in the demise
of the employer-based system. This is inconsistent with the stated
objectives of the President to support the continuation of the current
system.
4. Incentives in the current financing system must be changed from
risk avoidance to responsible cost management. The foundation principle
of a fair and equitable financing system for health care must be that
the cost of disease and injury must be distributed across all plans
offered through the exchange. In the end it is the expectation that
health plans offered through the exchange should be strongly
incentivized to differentiate their products and premiums based on
efficiencies generated by better administrative practices derived from
improved payment systems, disease management, utilization management,
case management, lifestyle management and other innovative initiatives
designed to lower cost, increase quality and improve accountability.
Large employer plans have pursued these goals with notable success.
5. Transparency and accountability of both providers and health
plans must be improved.
There has been much discussion on the need for better
provider transparency in terms of both cost and quality. We are fully
supportive of these initiatives.
There has been less discussion about the need for better
health plan transparency and accountability. It is widely recognized
that the practices of some private health plans create an enormous
frustration to both consumers and providers of health care. Medicare
does provide a good example of more consistent administration of health
plans. In a restructured system, it will be important to establish
mechanisms where there can be standardization and full transparency of
administrative practices of health plans that are offered through the
exchange. This might include disclosure of health expense loadings, the
number and cost of denied claims, the efficiency of claims
administration and other administrative practices, and consumer
assessments of each health plan.
6. ERIC strongly supports payment reform. There is strong evidence
that financial incentives must drive the changes that are desired.
President Obama's budget director, Peter Orszag, recently stated that,
for example, ``nearly 30% of Medicare's cost could be saved without
negatively affecting health outcomes if spending in high and medium
cost areas could be reduced to the level in low cost areas''. In both
the private and public sectors, we must stop rewarding providers for
doing more and instead incentivize them to provide high quality health
care that delivers true value to the American consumer. It is
irresponsible to perpetuate a system in which between 20% and 40% of
the health care delivered has no value. Payment reform is essential to
this objective.
7. Every citizen should be required to obtain health care coverage,
with standards established at the federal level. Because a significant
portion of the population is unable to afford adequate coverage, ERIC
would support subsidies to assist financially disadvantaged
individuals.
I would like to devote my remaining remarks to the areas in current
legislative proposals where the ``Do no harm'' principle is most at
risk.
Taxation of benefits: Several proposals have been made to curtail
the favorable tax treatment for employees of employer-provided health
benefits. One proposal would eliminate the exclusion entirely. Others
would impose a cap based on the value of health insurance, an
individual's income, or a combination of the two.
ERIC has serious concerns with limiting the ability of an employee
to exclude from income the value of employer-provided health insurance.
If this exclusion were curtailed, many large employers would follow one
of two approaches. Some would redesign their plans to meet the new cost
standard in the legislation, below which taxation would not be imposed.
This would necessarily mean that their employees would be provided with
less generous health coverage.
Other employers would choose to keep their existing plans; if the
value of the plan exceeded the standard in the legislation, employees
would face taxation on the ``excess'' value. If this were to occur,
employment-based insurance would suffer. Young, healthy employees would
either seek to exit their employers' plans in search of cheaper
coverage rather than pay taxes on a more expensive plan or pressure
their employers to reduce coverage. If younger workers sought cheaper
coverage elsewhere, an employer plan that once had a favorable and
balanced risk pool would now be left with an older, sicker, more costly
population whose premiums would eventually become unsustainable. Loss
of a large, viable risk pool would greatly diminish an employer's
ability to offer efficient and innovative health care coverage to its
employees. As the cost of providing benefits increased, more employers
would exit the system.
There are also equity and administrative issues associated with a
tax cap that need to be carefully assessed. We are concerned that if a
cap is to be imposed, it not discriminate against individuals by virtue
of higher premium costs due to geography, the demographic composition
of the group, or because they happen to work for a small firm.
A public plan: ERIC has several serious concerns with the creation
of a public plan that would compete with the current private
marketplace. Although at present we do not know how this new plan would
be structured, we have profound reservations with the prospect of a
public plan modeled after Medicare. Medicare does provide an example of
an efficient, consistent, and fair claims administrator; there are also
examples of consistent, fair claims administrators among private health
plans. Medicare is not, however, a sterling example of what a
restructured financing system should look like. In fact, Medicare has
perpetuated some of the cost problems that we have in our current
health care system by rewarding those who provide more care, regardless
of value.
Our most fundamental concern with a public plan based on Medicare,
however, is the potential for even greater cost-shifting than exists
today. Right now ERIC members subsidize the cost of Medicare. This
includes both administrative and claim costs. One example of the
administrative subsidy relates to the fact that Medicare does not pay
anything for transaction fees associated with the electronic movement
of claims from providers to Medicare intermediaries. These transaction
costs are not free. They must be absorbed by other paying customers,
including employer plans.
Moreover, according to most providers, Medicare's reimbursement
rates do not cover their costs. Contrary to what many people say, these
rates are not negotiated, they are mandated. Providers argue that in
most cases they accept these rates because they want to continue
treating patients that have been treated all of their lives. Hospitals
argue that they have no choice. They believe that they survive only
because they are able to charge higher rates to private plans and other
customers. In short, the provider shortfall from Medicare is shifted to
the private sector, a practice that is unacceptable in a reformed
system.
At the end of the day, ERIC's position is that if a public plan
could be fairly fashioned, it must not be structured in such a way that
employer plans end up bearing the burden of additional cost shifts.
Health care costs are already rising at an unsustainable rate.
Increased cost-shifting would trigger the warning light that causes
employers to rethink whether they can afford to provide high quality
health care to their employees. An exodus of employment-based plans
from the nation's healthcare system would diminish the development of
practices to improve the quality of health care and the pursuit of
innovative strategies to bring healthcare costs under control that are
core strengths of the employment-based system.
Employee opt-outs: We are also concerned about the adverse
selection that would be experienced if individual participants in
employer-sponsored plans were permitted to opt out of the employer plan
and into a public plan, especially if the employer were compelled to
pay for the individual's participation in the public plan and/or
finance any subsidy given low-income individuals who opted out. If
permitted, an opt-out would undermine the demographic fairness of a
large risk pool that is a feature of employer plans. Over time, young,
healthy employees would seek cheaper coverage outside of the employer's
plan, and older, sicker employees would remain in the plan. Eventually,
employer plans would become havens for employees with the worst risk
profiles, and this would be reflected in ever-higher premium costs. At
some point, employers would no longer be able to provide affordable
coverage to their workers.
Employer mandates: Employer mandates, especially their
manifestation in the ``pay-or-play'' penalties currently under
discussion, have the potential to seriously harm employer-sponsored
plans. ERIC members generally provide high quality benefits with
generous employer contributions; thus, it would appear that a ``pay or
play'' requirement would have little or no relevance for us. As we have
learned from the experience in Massachusetts, however, this is not
always the case, and--as is so often true in life--the devil is in the
details. For instance, if the employer mandate only required that
employers offer a set minimum package of benefits to employees that met
a specified, modest actuarial value, then many--but not all--major
employers would meet that bar. But if the mandate were to require that
all full-time employees were to be covered, and full-time were defined
as working 25 hours per week, many other employers would drop below the
bar. If the mandate were to further include no cost-sharing for
prevention or wellness and full coverage of mental health benefits,
others would drop out.
Employer mandates by definition restrict our ability to devise and
operate health care plans that best meet the needs of our employees.
Mandates increase costs and limit flexibility. Coupled with punitive
regulatory regimes, employer mandates will discourage employers from
continuing to provide quality, affordable health care to their
employees. This is not an idle threat; one need look no farther than
the nation's moribund defined benefit plan system to see the effects of
overly complex rules and regulations.
Preemption: I would be remiss if I did not take this opportunity to
underscore the absolute inviolability of ERISA preemption. Without the
national uniformity made possible by ERISA's preemption doctrine, large
multistate employers simply could not offer quality healthcare coverage
to their employees. Its importance was recognized by the original
sponsors of ERISA as critical to ensuring that employers provided sound
and secure benefits. Any future legislation must continue to accord
preemption and national uniformity of regulation a similar priority.
Conclusion: ERIC is committed to the goal of reforming the nation's
healthcare system in a responsible manner that will extend health care
to those without it and that will reverse the current fatal escalation
in the costs of health care. Equally important, I believe, is that this
reform be accomplished without undermining the system that currently
offers quality health care to 170 million satisfied Americans.
ERIC intends to continue to play a constructive role in this
debate.
Thank you, and I would be happy to respond to any questions.
______
Chairman Miller. Mr. Arensmeyer.
STATEMENT OF JOHN ARENSMEYER, FOUNDER AND CEO, SMALL BUSINESS
MAJORITY
Mr. Arensmeyer. Thank you, Chairman Miller, Ranking Member
Kline, and members of the committee. The Small Business
Majority appreciates this opportunity to present the small
business perspective on the House tri-committee draft health
care reform plan. We support the effort to move this
legislation through the Congress expeditiously, and thank you
for bringing this forward in a timely manner.
Small Business Majority is a nonprofit, nonpartisan
organization founded and run by small business owners and
focused on solving our biggest problem that we face today, the
skyrocketing cost of health care. We represent the 27 million
Americans who are self-employed or own businesses of up to 100
employees. Our organization uses scientific research to
understand and represent the interests of all small businesses.
I have been an entrepreneur for more than 20 years,
including 12 years owning and managing an Internet
communications company. Together with the other senior managers
in our organization, we have a total of 70 years running
successful small businesses ranging from high-tech to food
production to retail. We hear stories every day from small
business owners who can't get affordable coverage.
Louise Hardaway, a would-be entrepreneur in Nashville,
Tennessee had to abandon her business stream after just a few
months, because she couldn't get decent coverage. One company
quoted her a $13,000 monthly premium.
Others, such as Larry Pierson, owner of a mail order bakery
in Santa Cruz, California, struggled to do the right thing and
provide health care coverage. Larry notes that, ``The
tremendous downside to being uninsured can be instant poverty
and bankruptcy. That is not something my employees deserve.''
Our polling confirms that controlling health costs to small
business owners is number one concern. Indeed, on average, we
pay more than 18 percent more for health care coverage than big
businesses. An economic study that we released earlier this
month, based upon research by noted MIT economist Jonathan
Gruber, found that without reform, health care will cost small
businesses $2.4 trillion over the next ten years. As such, we
are pleased to see that the House bill addresses key cost
containment measures such as expanded use of health IT,
transparency, prevention, primary care and chronic disease
management.
Our polling shows that 80 percent of small business owners
believe that the key to controlling costs is a marketplace
where there is healthy competition. To this end, there must be
an insurance exchange that is well-designed and robust.
We are very pleased that the committee's bill proposes a
national insurance marketplace with the option for State or
regional exchanges that adhere to national rules. Moreover, we
are encouraged by the committee's proposal that there be
standardized benefit packages along with guaranteed coverage
without regard to preexisting conditions or health status, a
cap on premiums and out-of-pocket costs, and marketplace
transparency.
We understand that a balanced set of reforms will require
everyone to participate; 66 percent of small business owners in
our recent polls, in 16 States for which we are releasing
preliminary data today, support the idea that the
responsibility for financing a health care system should be
shared among individuals, employers, providers and government.
It should be noted that respondents to our surveys included
an average of 17 percent more Republicans than Democrats, 40
percent to 23 percent, while 28 identified as Independent.
According to the results of the economic modeling done for
us by Professor Gruber, comprehensive reform that includes even
modest cost containment measures and a well-designed structure
of employer responsibility will offer a vast improvement over
the status quo. A system with appropriate levels of tax
credits, sliding scales and exclusions will give small
businesses the relief they need, potentially saving us as much
as $855 billion over the next ten years, reducing lost wages by
up to $339 billion--and, in response to the question that the
Ranking Member asked Dr. Romer--minimizing job losses up to 72
percent.
We are very pleased that the committees have addressed some
of the affordability concerns of the smallest businesses.
Professor Gruber has modeled specific scenarios, described in
detail in our report, and we look forward to working with you
to ensure the best balance between the need to finance the
system and our ability to pay.
Finally, another issue of great concern to us is the unfair
tax treatment of the 21 million self-employed Americans. Under
the current Tax Code, self-employed individuals are unable to
deduct premiums as a business expense and are required to pay
an additional 15.3 percent self-employment tax on their health
care costs. We encourage that this inequity be rectified in the
final bill passed by the House.
Chairman Miller, when you announced this historic bill you
noted that health care premiums had spiraled out of control,
quote, placing our fiscal future in peril. As small business
owners, we agree wholeheartedly, health care reform is not an
ideological issue, it is an economic and practical one. We are
encouraged by the overall approach of this bill and look
forward to working with you to make it a reality this year.
Thank you.
Chairman Miller. Thank you.
[The statement of Mr. Arensmeyer follows:]
Prepared Statement of John Arensmeyer, Founder & CEO,
Small Business Majority
Good afternoon Chairman Miller, Ranking Member Kline and members of
the committee. Small Business Majority appreciates the opportunity to
present the small business perspective on the draft healthcare reform
plan being considered by the House Education and Labor Committee. We
support the effort to move this legislation through Congress
expeditiously, and thank you, along with the leadership of both the
Ways and Means and Energy and Commerce committees, for bringing a
proposal forward for discussion in such a timely manner.
Small Business Majority is a nonprofit, nonpartisan organization
founded and run by small business owners and focused on solving the
biggest problem facing small businesses today: the skyrocketing cost of
healthcare. We represent the 27 million Americans who are self-employed
or own businesses of up to 100 employees. Our organization uses
scientific research to understand and represent the interests of all
small businesses.
I have been an entrepreneur for more than 20 years, including 12
years owning and managing an Internet communications company
specializing in financial services. Together with two other senior
managers in our organization, we have a total of 70 years running
successful small businesses ranging from high-tech to food production
to retail.
We are pleased to be here today to support comprehensive healthcare
reform that will reduce the costs of insurance and medical care, while
making coverage affordable, fair and accessible. Our research shows
that comprehensive health insurance reform is small business owners'
number one need, and controlling costs is essential to ensuring our
ability to obtain high-quality, affordable healthcare for ourselves,
our families and our employees.
My testimony will highlight the issues of most interest to small
businesses. I'll discuss what we have learned from our scientific
research about both the opinions of small business owners and the
projected economic impact of various reform options--and the impact of
failing to act. The points I'll be making include:
Our research shows that small business owners want and
need reform now. The high cost of healthcare is killing us.
Small businesses are willing to be part of the solution.
A properly designed shared responsibility reform model
will significantly help small businesses, according to an economic
study we commissioned from M.I.T. economist Jonathan Gruber
The committees' discussion draft addresses many of the
necessary elements in comprehensive reform, particularly controlling
costs, creating a robust exchange, instituting insurance market reforms
and establishing a workable system of shared responsibility that takes
into account the needs of the smallest businesses.
We look forward to working with the committees to ensure
that their recommendations on small business obligations, exemptions
and tax credits are most helpful to small businesses and are consistent
with our ability to pay.
The tax rules for purchase of health insurance by the
self-employed must be brought in line with those of all other
businesses.
Healthcare Costs are Killing Small Business and Sapping Our Economic
Vitality
National surveys of small business owners consistently show that
the cost of health insurance is our biggest overall problem. In fact,
the crushing costs of healthcare outranked fuel and energy costs and
the weak economy for 78% of small business people polled by the Robert
Wood Johnson Foundation in 2008.\1\
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\1\ ``Study shows small business owners support health reform,''
Robert Wood Johnson Foundation, 2008.
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Small businesses are at a disadvantage in the marketplace largely
because our small numbers make rates higher. According to research
supported by the Commonwealth Fund, on average we pay 18% more than big
businesses for coverage.\2\ Small businesses, including the growing
legions of the self-employed, need a level playing field to succeed and
continue as the job generator for the U.S. economy.
---------------------------------------------------------------------------
\2\ J Gabel et al, Generosity and Adjusted Premiums in Job-Based
Insurance: Hawaii is Up, Wyoming is Down, Health Affairs, May/June
2006.
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We hear stories every day from small business owners who can't get
coverage because they've been sick in the past or the health plans they
are offered are outrageously priced. Louise Hardaway, a would-be
entrepreneur in the pharmaceutical products industry in Nashville, had
to give up on starting her own business after just a few months because
she couldn't get decent coverage--one company quoted her a $13,000
monthly premium.
Many other businesses maintain coverage for employees, but the cost
is taking a bigger and bigger chunk out of their operating budgets.
It's common to hear about double-digit premium increases each year,
eating into profits and sometimes forcing staff reductions. These
rising bills frequently force business owners to hack away at the
insurance benefit to the point where it's little more than catastrophic
coverage. That leaves employees with huge out-of-pocket expenses or a
share of the premium they can't afford, forcing them to drop coverage.
That concerns Larry Pierson, owner of a mail-order bakery in Santa
Cruz, California, who says that ``the tremendous downside to being
uninsured can be instant poverty and bankruptcy, and that's not
something my employees deserve.''
Small business owners want to offer health coverage, and our
surveys show that most of us feel we have a responsibility to do so.
With staffs of 5, 10 or even 20 people, we run tight-knit
organizations, know our employees well and depend on each employee for
our businesses' success. We don't want to see our valuable employees
wiped out financially by a health problem, or ignore illnesses because
they can't afford to go to the doctor.
Many small businesses are forced to drop coverage altogether.
According to the Kaiser Family Foundation, among firms with 3 to 9
workers, the percentage that offers insurance dropped from 57% in 2000
to 49% in 2008.\3\
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\3\ Kaiser Family Foundation/HRET Employer Health Benefits Annual
Survey, 2008
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This makes small business employees a significant portion of the
uninsured population. Of the 45 million Americans without health
insurance in 2007, nearly 23 million were small business owners,
employees or their dependents, according to Employee Benefit Research
Institute estimates.\4\
---------------------------------------------------------------------------
\4\ Employee Benefit Research Institute, Sources of Health
Insurance and Characteristics of the Uninsured: Analysis of the March
2008 Current Population
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Our scientific research reinforces what we hear anecdotally every
day: High healthcare costs are putting enormous pressure on small
business owners. We have just completed a series of telephone surveys
of a scientific sample of small business owners in 16 states. The
staggering cost of health coverage is reflected in some of the key
findings:
An average of 72% say they are struggling to afford health
insurance;
An average of 69% overall say reform is necessary to save
the economy;
and when asked about the most important goals for
healthcare reform, the top choice is most often ``control costs.''
Finally, if we don't get control of the healthcare crisis facing
small businesses, we will impede our overall economic growth. Small
businesses under 100 employees employ 42% of American workers.\5\
Traditionally, small businesses lead the way out of recessions.
Addressing this crisis is essential to our vitality as a nation.
---------------------------------------------------------------------------
\5\ U.S. Bureau of Census, 2006 County Business Patterns
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Cost Containment Comes First
We have sponsored research that actually models what would happen
to small business without comprehensive reform, contrasted with three
different levels of support to small business. The research underlying
this report, made public earlier this month, was conducted for Small
Business Majority by Jonathan Gruber, noted economist at the
Massachusetts Institute of Technology. Dr. Gruber's research found that
without reform, the continued rising cost of healthcare coverage will
cost small businesses $2.4 trillion over the next ten years.\6\
---------------------------------------------------------------------------
\6\ The Economic Impact of Healthcare Reform on Small Business,
Small Business Majority; available at www.smallbusinessmajority.org
---------------------------------------------------------------------------
We need to slow the growth of overall healthcare costs to make
coverage affordable and to improve the competitiveness of small
businesses. The key to cost containment is to create a marketplace
where there is healthy competition among insurers, which would create
incentives to lower costs by increasing price competition. Specific
actions that are likely to have the most impact include expanded use of
health IT, research about what works in medicine, transparency and
public reporting of costs and quality, incentives for expanded use of
preventive services, primary care and effective management of chronic
conditions, malpractice reform, and reduction in waste, fraud and
abuse. We are pleased to see that the House discussion draft addresses
many of these approaches.
A Robust Exchange Coupled with Insurance Market Reforms is Essential
We believe that it is essential to have an insurance exchange that
is well-designed and robust. A broad, well-functioning marketplace
offering consistency, fairness and healthy competition will vastly
improve the availability and affordability of coverage to small
businesses and the self-employed. Indeed, our recent opinion research
shows that 80% of small business owners in those states surveyed
support a health insurance pool to create a marketplace where small
businesses and individuals choose their coverage.
The current insurance marketplace is broken, particularly for small
businesses, which cannot access plans with favorable rates because of
their small size. Kaiser Family Foundation research shows that
insurers' administrative costs are 18% higher for individual and small
business health plans than for large groups. Those costs are passed
along in higher premiums.
We are very pleased that the committees' discussion draft would
establish a national insurance marketplace for individuals and
businesses to comparison shop for coverage. It is good policy for
states to establish state or regional exchanges that adhere to the
national rules to ensure maximum flexibility and incorporation of
particular local needs.
Moreover, we are encouraged by the committees' proposal that there
be standardized benefit packages to make it easier to make informed
choices on cost and quality, along with guaranteed availability of
coverage, no exclusions for preexisting health conditions, health
insurance rating rules that prohibit adjustments for health status, a
cap on premiums and out-of-pocket spending, marketplace transparency,
and affordability credits to ensure that small business employees and
others can actually participate without financial hardship.
To be financially successful, the exchange must ensure that it
avoids adverse selection. Requirements that individuals and businesses
purchase insurance, accompanied by guarantees of affordability, will
help provide a wide, diverse base for the exchange. It is vital that
the ultimate design of the exchange include as broad a group as
possible and potentially include incentives for people to buy into it.
To create stability it is important that the exchange can grow in
strength as quickly as possible, taking into account the need to ensure
a smooth transition.
For small businesses, this kind of exchange will go far in reducing
the chaos and decreasing the administrative burden involved in choosing
and maintaining health insurance both for business owners and for their
employees if they offer coverage.
Healthcare Reform Based on Shared Responsibility Benefits Small
Business
Small business owners understand that a balanced set of
comprehensive reforms will require everyone to participate. 66% of
small business owners responding to our recent state surveys support
the idea that the responsibility for financing a more affordable
healthcare system should be shared among individuals, employers,
insurance companies, providers and government. It should be noted that
respondents to our surveys included an average of 20% more Republicans
(40%) than Democrats (22%), while 28% identified as independent.
According to the results of our economic modeling, comprehensive
reform that includes even modest cost containment measures and a well-
designed structure for employer responsibility will offer a vast
improvement over the status quo and spiraling future costs for small
businesses. A system requiring an employer contribution, with
appropriate levels of tax credits, sliding scales and exclusions, will
give small businesses the relief they need, potentially saving as much
as $855 billion over the next 10 years, reducing lost wages by up to
$339 billion and minimizing job losses by 72%.
The committees' discussion draft proposes an employer requirement
to provide health insurance to workers. As shown by our research, this
framework is workable, and, if properly designed, can produce
substantial benefits for small businesses. Our modeling of the most
successful reform scenarios presumes an exemption for the smallest
businesses, a sliding scale of obligations based upon the size of
payroll or the number of employees up to 6.5% of payroll and tax
credits of 50% of health costs for employees earning under $100,000 at
businesses with fewer than 50 employees. We are very pleased that the
committees have addressed many of the affordability concerns of the
smallest businesses, and we look forward to working with you to ensure
the best balance between benefit to small businesses and our ability to
pay.
Tax Equity for the Self-Employed
Finally, another issue of great concern to us is the unfair tax
treatment of the 21 million self-employed people in this country. Under
the current tax code, self-employed individuals are unable to deduct
premiums as a business expense and are required to pay an additional
15.3% self-employment tax on their healthcare costs. These business
owners are at a significant tax disadvantage to larger businesses,
which do not pay payroll taxes on the health insurance they provide
employees. It is one of many barriers these Americans face in trying to
access affordable health insurance for themselves and their families.
The self-employed should be allowed to fully deduct their health
insurance premiums for the purposes of their income tax and self-
employment tax. We encourage the addition of this provision in the
final bill passed by the committees.
Conclusion
When Chairman Miller announced this historic bill, six months in
the making, he noted that healthcare premiums had spiraled out of
control, ``placing our fiscal future in peril.''
We agree. Healthcare reform is not an ideological issue--it's an
economic one. Small business owners know this, which is why they
overwhelmingly support a comprehensive solution to reforming the way we
pay for healthcare. We are encouraged by the overall approach of this
bill and look forward to working with you to make it a reality this
year.
______
Chairman Miller. Ms. Visco.
STATEMENT OF FRAN VISCO, J.D., PRESIDENT, NATIONAL BREAST
CANCER COALITION
Ms. Visco. Chairman Miller, Ranking Member Kline, members
of the committee, I am a 22-year breast cancer survivor, and I
represent the National Breast Cancer Coalition, a coalition of
hundreds of organizations and tens of thousands of individuals
dedicated to ending breast cancer. We recognize that we will
not achieve that mission unless everyone has access to the
quality care they need.
NBCC is grateful for the opportunity to present our
positions to this committee, and we are excited about the
possibility, which we want to make a certainty, that this
country will enact guaranteed access to quality health care for
all now.
We have a grassroots board of directors. It is 25 of our
member organizations, and they spent several years working on
this issue. We invested resources in educating them, our field
network, and the public about the various approaches and issues
surrounding health care reform, and we developed a framework
for a health care system guaranteeing access, which was
submitted for the record with my written testimony.
We need a system of patient-centered care; yes, a term that
gets thrown around quite freely. But you know the problems.
There were some stories identified in my written testimony and
there are so many more. Women sharing prescription drugs,
delaying treatments, losing their jobs and losing insurance
facing a diagnosis of breast cancer.
Our focus as a Nation should be on solving those issues,
always centered on the patient, on the individual. How do we
reform the system so that everyone has access to the quality
care they need, when they need it; that guarantees everyone a
comprehensive set of basic benefits that are based on evidence
or are contributing to the evidence base?
We know you have many pressures from many different fronts,
but we need to always keep focused on the patient, on the
individual, centered on that goal. We should not begin by
figuring out how to maintain drug prices or physician
reimbursement or maintain the existing insurance industry.
Those issues should only be addressed within the context of,
first and foremost, the patients, the health of the individuals
in this country.
The history of health care reform is the story of all
constituencies that don't want to give anything up. We all have
to give something up to achieve our goal; money, certainly, and
the National Breast Cancer Coalition understands that.
And our framework makes clear we believe in shared
responsibility. We should all share the financial cost of
reforming the system. Perhaps we have to accept the longer wait
for a test that would adversely impact our expectations, but
not our health. But what we don't want to give up is our
health, our lives.
We have all been working on these issues for many years. We
know what to do, we just need the courage to do it. We applaud
the approach outlined by this committee. It meets many of the
principles of our framework for access to care. Our efforts in
this area were led by Carolina Hinestrosa, the Executive Vice
President of NBCC. She died on Sunday as a result of side
effects from her breast cancer treatment. She spent her last
days working on this, and we will work our hearts out
passionately, committed for Carolina, but also because we know
it is the right thing to do and it is necessary to reach our
goal of ending breast cancer.
We need make certain that this system supports the right
care. We need comparative effectiveness research to reach that
goal.
Now, we have spent some time understanding the issue beyond
the sound bites and recognize without question the need for
this approach in health care. Comparative effectiveness
research is research in the real-life settings all doctors and
patients face.
This is an extraordinary time. We are ready to change for
the better the system of health care in this country. The
infrastructure we build to get there needs consumers and
patients at all tables. Their perspective is necessary to
ensure that decisions regarding health care will have a
meaningful positive impact for those on the receiving end of
care: the patients and their families. And they are the ones
who will have to navigate the complex web of rules and
requirements in any health insurance system.
It is important that it is not just any patient or
consumer. They must be accountable. They must represent to and
report back to organizations that represent those affected by
their issue, by their medical condition, and must be
knowledgeable about the health care system and well-trained.
I didn't understand why in the 1990s when the health care
reform effort failed, the American public did not storm
Washington and demand that Congress and the White House make
access to care a reality. This time we are ready and we are
passionately committed to achieve that reality.
On behalf of the National Breast Cancer Coalition, we
pledge to work with you to achieve the goal of guaranteed
access to quality health care for all. Thank you.
Chairman Miller. Thank you very much.
[The statement of Ms. Visco follows:]
Prepared Statement of Fran Visco, J.D., President,
National Breast Cancer Coalition
Thank you, Chairman Miller and members of the House Education and
Labor Committee for the opportunity to testify at your hearing on the
Tri-Committee Draft Proposal for Health Reform. I am honored to have
this opportunity to appear before you today.
I am Fran Visco, a 21-year breast cancer survivor, a wife and
mother, a lawyer, and President of the National Breast Cancer Coalition
(NBCC). This organization and the testimony I present today represent
the hundreds of member organizations and thousands of individual
members from across the country.
NBCC's mission is to eradicate breast cancer. NBCC's main goals are
to increase federal funding for breast cancer research and collaborate
with the scientific community to implement new models of research;
improve access to high quality health care and breast cancer clinical
trials for all women; and expand the influence of breast cancer
advocates wherever breast cancer decisions are made.
The National Breast Cancer Coalition Framework for Health Care Reform
Since its inception in 1991, NBCC has known that the only way to
achieve our mission to end breast cancer is to ensure guaranteed access
to comprehensive, quality health care for all. After several years of
research and analysis, in 2007, NBCC articulated its vision for
accomplishing this goal when our grassroots Board of Directors approved
a Framework for a Health Care System Guaranteeing Access to Quality
Health Care for All which builds on Principles it adopted in 2003.
Throughout the process of developing the Framework, NBCC applied its
longstanding commitment to advancing evidence-based medicine and
training consumers to strive towards systems change. NBCC believes
strongly in guaranteed access to coverage for all, educated patient
participation at all levels of health system decision making, shared
responsibility and benefits that are based on medical evidence and cost
effectiveness so that patients can be assured of consistent, high
quality health care. I am submitting a copy of the NBCC Framework for
the record.
There are three million women living with breast cancer in this
country today. This year, more than 40,000 will die of the disease and
more than 240,000 will be diagnosed. We still do not know how to
prevent breast cancer, how to diagnose it truly early or how to cure
it. It is an incredibly complex disease, and too few women have access
to the care they need. We simply can no longer afford to accept the
status quo when it comes to our health care system.
Our long standing commitment to health care reform is driven by the
experiences and stories of the millions of women who have not only
received the devastating diagnosis of breast cancer but have also had
to suffer the injustices of our current health insurance system. We
hear and live these stories, from women who share their breast cancer
drugs with others who are un- or underinsured, to those who delay
treatment or who ignore symptoms because they do not know how to pay
for care. There are far too many stories.
Carolyn, from Los Angeles, had insurance and access to tamoxifen.
So did one other woman in her breast cancer support group. But others
lacked insurance and the funds to pay for treatment. So Carolyn and her
friend shared their tamoxifen with these women. No one received the
right amount of the drug.
Patricia from New Hampshire is 61, her husband 64. When he was laid
off after 27 years, they lost their health insurance. Then she was
diagnosed with breast cancer. She found insurance, for herself, at $929
per month. Their joint income was $40,000.
Sonia from Florida was also uninsured at the time of her breast
cancer diagnosis. She managed to find fragmented care, and was refused
further treatment at other institutions. She could not find insurance--
even if she could afford it--because of her pre-existing condition.
Mary, from Waterloo, Iowa worked for a large corporation that
changed health plans in the middle of her breast cancer treatment. Her
doctors and hospital were no longer covered and she was forced to leave
her doctors in the midst of a complex treatment regimen.
These are just some of the representative stories of what women
face today in our existing health care system.
The House Tri-Committee Health Reform Discussion Draft
Mr. Chairman, on behalf of NBCC, I commend you as well as the
Chairmen of the House Energy and Commerce and the House Ways and Means
Committees for your leadership and hard work in putting together a
health care reform proposal to provide quality affordable health care
for all Americans and control health care costs. We are also pleased to
see that your draft legislation includes many of the key elements that
are reflected in NBCC's Framework for a Health Care System Guaranteeing
Access to Quality Health Care for All (Framework).
NBCC's Framework calls for a health care system in which coverage
is guaranteed to all individuals, does not discriminate or deny
coverage for any reason, including pre-existing conditions. We are
pleased that the draft legislation establishes options and expands
Medicaid eligibility. All of these elements are critical to ensuring
that those with insurance they like can keep it while also giving those
for whom insurance has been out of reach the opportunity to finally
afford coverage for themselves and their family.
While the public plan option was not included in our original
Framework, the NBCC Board of Directors recently endorsed this approach
because it believes a public plan is important to providing patients'
choice and injecting more competition into the insurance market, with
the goal of keeping costs down.
We are pleased that the House Tri-Committee discussion draft bill
guarantees coverage and ends many of the discriminatory insurance
practices that have put meaningful coverage out of reach for many
Americans with millions more in fear of losing their coverage should
they experience a catastrophic illness such as breast cancer.
Specifically, your bill prohibits pre-existing condition exclusions and
also bars plans from rating based on gender or health status. The bill
also includes several provisions to keep health care affordable,
including no annual or lifetime limits on benefits as well as an annual
cap on out of pocket spending and sliding scale credits based on income
to help people afford to purchase insurance.
NBCC's Framework calls for an independent public/private Federal-
level board to determine the benefits package. The basic benefits
package should be equivalent to the most comprehensive plan available
to members of Congress through the Federal Employees Health Benefit
Plan (FEHBP) and should guarantee coverage for care that is based on
scientific evidence and is continuously reviewed and updated based on
evidence.
We are pleased that your legislation proposes a new 18-member
public/private independent Federal-level Health Benefits Advisory
Committee (Committee) that will recommend a new essential benefit
package that will establish a core set of comprehensive benefits, make
periodic updates to the benefits, and caps the amount of money a person
or family spends on covered services in a year. We urge the Committee
to ensure that the basic benefit package is as comprehensive and
guarantees coverage for care that is based on the best available
scientific evidence and is cost effective. It is imperative that the
core set of benefits be available to everyone, regardless of ability to
pay. Moreover, the benefits should be limited to those interventions
determined to be efficacious, safe, cost-effective and based on sound
evidence, or as part of a clinical trial or otherwise appropriately
contributing to the evidence base.
NBCC strongly supports comparative effectiveness research and
believes that it is necessary to help ensure quality, affordable health
care for all. We need a high level of evidence for doctors and patients
to choose which care is appropriate, for whom, and under what
circumstances and who should pay for it. This is critical to patient-
centered care. There are two necessary components to this evidence: the
first is high quality clinical research of new interventions and the
second, and equally necessary component, is research of interventions
in the real life settings all doctors and patients face. Comparative
effectiveness research is a term to describe this second component. It
provides an opportunity to conduct research to find these answers, in
settings that reflect the situations of the average person, adding
value beyond what we obtain from the highly controlled setting of
traditional clinical trials.
Women--all individuals--should have access to care that helps them,
care that improves their lives. Today there is increasing use of
technology in health care, certainly in breast cancer, with increased
cost and little known benefit to patients. Comparative effectiveness
will help guide us through this maze. For example, it could tell us
which of the many gene based tests on the market actually are accurate
and clinically useful. Also, as we strive to detect breast cancer
earlier and earlier, we tend to find many abnormalities that will never
become life threatening, yet we do not know how to deal with this
information. Ductal carcinoma in situ (DCIS) is one such condition.
DCIS is treated like it is cancer, so we over treat many women with
significant harmful side effects. Comparative effectiveness research
can tell us which of the various interventions for DCIS are the most
helpful and least harmful.
There is a breast cancer drug that has been hailed as a
breakthrough. It is a targeted therapy that costs tens of thousands of
dollars a year. There are at least two tests to determine which women
will benefit from this drug and we have known for over a decade that
one provides much more accurate information. Yet we still pay for both
tests and for the drug in women who will not benefit. And many women
who would benefit do not get the drug. There are many similar questions
that we have known for years that women face every day. We do not have
the answers, but we could.
This rational approach to health care can significantly improve
care. However, for comparative effectiveness research to do so, it
depends on the following:
Quality--Comparative effectiveness research must be held
to the highest standards of quality. This research must employ rigorous
methods that can provide reliable answers to our specific questions.
These may include experimental designs, observational studies like
registries, systematic reviews and other methods. Incorporating new
technologies to better understand the utility of biomarkers and the
interplay of co-morbidities will help achieve the promises of
biomedical research progress on an individual level. Great care needs
to be taken to ensure that there are clear standards of quality so the
investment in comparative effectiveness research delivers value to the
public.
Transparency--Doctors, patients and policy makers must be
able to trust the results of comparative effectiveness research. While
quality is vital to that goal, transparency and accountability are also
key. The processes for setting priorities, defining criteria and
reporting results must be transparent and easily accessible to all.
Methods and data must be shared so they can be publicly critiqued and
widely used in a practical manner. Moreover, trained lay consumer
advocates must be meaningfully involved in all aspects of decision-
making that affects comparative effectiveness research.
Independence--Comparative effectiveness research
infrastructure must be sheltered from political pressure. The
usefulness and value of comparative effectiveness research lie in its
independent assessment of different interventions, the results of which
can be used by all the different stakeholders in decision-making. The
process for selection of topics to be studied must be objective, and
the results must be credible. The entire research process must be
insulated from political pressures and conflicts of interest generated
by both government and private-sector stakeholders.
Integrity--Comparative effectiveness research must be
conducted with integrity. High quality methods, accurate and detailed
record keeping, and honest publication of the results, regardless of
the outcome, must be emphasized. All contributors to comparative
effectiveness research must publicly disclose all relevant
relationships and conflicts of interest. Institutional guidelines and
procedures must be in place to define and address conflicts.
Comparative effectiveness research must deliver value to the
individual and society by strengthening the evidence base, enabling
better decision-making, improving health outcomes, more fairly
allocating healthcare resources, and containing the currently
unsustainable health care costs.
We are pleased that your draft legislation builds upon the
foundation that was set forth in the American Recovery and Reinvestment
Act of 2009 (ARRA) to provide for a robust and rigorous comparative
effectiveness research program. Specifically, your legislation creates
a Comparative Effectiveness Commission that has been tasked with
advising, overseeing and evaluating the research and findings of the
Center for Comparative Effectiveness Research at the Agency for
Healthcare Research and Quality. Your legislation seeks to ensure
transparency, credibility, and access to research by requiring the
disclosure of any conflicts; providing stakeholders input into the
process; requiring the dissemination of the findings; and creating a
Comparative Effectiveness Research Trust Fund (CERTF) to ensure that
this critical research receives adequate funding and is not subject to
an annual appropriations process. Such efforts are essential to
ensuring that the public and providers are informed, and therefore
patients receive, the most effective and appropriate treatment for
their particular condition. Such research will greatly enhance the
delivery of efficient, effective and high quality care that provides
true benefit to patients in need. We simply cannot and should not
continue to tolerate the massive amounts of wasteful, inefficient and
in some cases, harmful care being administered in today's broken health
care system.
NBCC's Framework calls for a significant number (25%) of educated
patient/consumer members on all committees, commissions and boards
involved in health care including those established to review and
assess the best evidenced-based treatment options, their cost
effectiveness, decide the level of benefits and determine effective
methods for communicating health care information to consumers,
providers and plans. Patient advocates--members of the lay public who
are educated and trained--can play an integral role in ensuring that
the health care system is responsive to the needs of the medical and
scientific communities as well as health care consumers. Their
perspective is necessary to ensure that decisions regarding benefit
packages, insurance reforms, research and other aspects of the health
care system are meaningful and will have a positive impact for those on
the receiving end of health care--the patients and their families. The
perspective of patients and families is also important as they are the
ones who must navigate the complex web of rules and requirements in any
health insurance system.
The leadership and membership of the various committees and
commissions contemplated by your bill will determine its success. These
individuals, no matter which constituency they represent, must be
chosen based on their proven ability to participate in these types of
decisions. We are pleased that your draft bill demonstrates your
commitment to ensuring that patients, consumers and their families have
a strong voice and role to play in a reformed health care system. In
particular, we are heartened to see that the independent private-public
Health Benefits Advisory Committee assigned to provide recommendations
on a benefit package would include consumer representatives. We also
appreciate that your bill provides patient advocates a role to play on
the Comparative Effectiveness Commission. We would however encourage
you to specify that 25 % of these committees are comprised of consumers
or patient advocates to ensure that they can contribute to this process
in a meaningful way. We also would ask that you consider integrating
the following language everywhere such entities are described in your
bill:
``The term `educated consumer or patient advocate' means an
individual who is accountable to, represents and reports back to
organizations that represent those affected by a specific disease or
medical condition and is knowledgeable about the health care system and
has received training to make informed decisions regarding health,
medical and scientific matters.''
NBCC's Framework calls for the implementation of strategies to
significantly reduce the administrative cost of the health care system,
to simplify the current system, reduce duplication, inaccuracies, and
inefficient record keeping and provide for system-wide electronic
record keeping.
We are pleased that your discussion draft makes a priority of
appropriately controlling the rising cost of health care. Your proposal
will reduce the growth in health care spending in numerous ways
including health care delivery system reform and improvements in
payment accuracy. Your legislation will realign payment incentives to
reduce overuse, slow the growth of health care costs, and improve
Americans' health. Your bill will also ensure physician and patient
access to the latest and most scientifically complete information on
available medical treatments and will Invest in development of robust
quality measures on health outcomes.
NBCC's Framework calls for shared responsibility. The system should
be financed in part through cost savings and shared responsibility.
Everyone--individuals, employers, and government--share responsibility
to support the health care system. Individuals should be required to
financially contribute to the system based on their ability to pay. All
employers should be required to contribute to the system. Subsidies or
a sliding scale should be implemented to ensure that small businesses
are not disproportionately affected by these payments. And no
individual can be denied coverage for inability to pay.
We are pleased that your plan provides sliding scale affordability
credits to low and moderate income families and assistance to small
employers.
We are pleased that your draft legislation recognizes that for
health care reform to be successful and sustainable over the long-term,
it will require the shared responsibility and commitment of all
participants in the system--individuals, employers and the government.
Commitment of the National Breast Cancer Coalition
NBCC is strongly committed to achieving meaningful health care
reform this year, as we truly believe it is essential for all women
with or at risk for breast cancer and for everyone to have access to
high quality, affordable and reliable health insurance coverage.
Without it, advances in medical research will remain out of reach for
many individuals and patients in need and we cannot guarantee those who
have been diagnosed with breast cancer will receive the necessary
treatment or medical care that is critical to their successful
recovery. NBCC and its members are dedicated to working with you to
achieve affordable quality health care for all.
Thank you again for the opportunity to testify today and for giving
hope to all women and their families, and especially to the 3 million
women in the United States living with breast cancer. I look forward to
working with you to ensure that health care reform is enacted into law
this year.
April 2008
NBCC's Framework for a Health Care System
Guaranteeing Access to Quality Health Care for All
The National Breast Cancer Coalition (NBCC) has advocated for
guaranteed access to quality health care for all since its inception in
1991. In 2003 NBCC adopted its Principles for Achieving Guaranteed
Access to Quality Health Care for All. NBCC analyzed various approaches
to achieving its goal in order to develop public policy that moves
beyond incremental changes to the existing health care system toward
true comprehensive reform. NBCC's extensive research and analysis gave
rise to its Framework for a Health Care System Guaranteeing Access to
Quality Health Care for All. This Framework is intended primarily to
address the issue of health care coverage. NBCC continues to work on
approaches to quality and access beyond coverage.
NBCC presented the Framework at its Annual Advocacy Training
Conference in April 2008 and NBCC advocates presented it to their
Members of Congress during Lobby Day on April 29th. NBCC looks forward
to working with Members of Congress and other stakeholders to advance
the goals articulated in the Framework.
Key Points of NBCC's Framework
The Framework is premised on the fundamental belief that
health care is a right and that all people present in the United States
should have access to quality health care regardless of their
immigration, residency status, or ability to pay.
The Framework is an outline for legislation that will
support a system of evidence-based health care coverage for everyone.
The Framework provides that the basic benefits covered are
comprehensive and evidence-based.
The system resulting from the Framework will include
mechanisms to:
Support development of new evidence through clinical
research
Continually refine benefits through comparative
effectiveness and cost effectiveness analyses
Reduce over and under use of care
Include educated consumers in all decision making
The system will be financed in part through cost savings
and shared responsibility:
Everyone--individuals, employers, and government--share
responsibility to support the system.
Individuals will be required to financially contribute to
the system based on their ability to pay.
All employers will be required to contribute to the
system. The Framework would phase out employer-sponsored health
insurance. Subsidies or a sliding scale should be implemented to ensure
that small businesses are not disproportionately affected by these
payments.
The National Breast Cancer Coalition's number one public policy
priority is guaranteed access to quality health care for all. This
document outlines a Framework developed by NBCC's Board of Directors
that is based on the organization's Principles for Guaranteed Access to
Quality Health Care for All adopted in 2003. This Framework addresses a
legislative approach to coverage issues. NBCC recognizes that access to
quality health care goes beyond coverage.
A health care system that is built on this Framework will:
provide a basic benefits package that is comprehensive and
based on sound scientific evidence;
maintain continuity of coverage;
be efficient and cost-effective;
be fully-funded through shared financial responsibility;
be sustainable and affordable.
The health care system must be accountable to the users and the
public. A system must be established to:
evaluate and support development of medical evidence for
health interventions upon which coverage will be based;
support ongoing and continuous comparison of interventions
to ensure access to appropriate and cost-effective health care;
modify and expand current benefits as appropriate based on
evidence.
I. Benefits Package
1. All eligible individuals will be provided with coverage for a
benefits package equivalent to the most comprehensive plan available to
Members of Congress through the Federal Employees Health Benefit Plan.
2. The benefits package guarantees coverage for care that is based
on the best available scientific evidence and is cost effective (as
determined by the Federal board described below). Care that does not
meet these criteria will not be covered, unless it is being provided as
part of a quality clinical trial or otherwise appropriately
contributing to the further development of the evidence base.
II. Eligibility
1. Coverage is guaranteed to all eligible individuals.
a. An eligible individual is one who is present in the United
States. (Note: the extent of coverage will vary based upon reason for
presence and duration of stay).
2. All eligible individuals will be automatically enrolled and
covered at the point of attaining eligibility.
III. Determination of, Modifications to and Expansion of
Benefits
1. A Federal-level board shall have the authority to implement a
system of coverage determination based on evidence. The board shall be
appointed and include members representing the lay public (at least
25%). The members shall have staggered terms longer than 4 years.
a. Cost-effectiveness shall be a factor considered by the Board in
making benefit coverage decisions.
2. A separate and independent body, including at least 25%
membership from the lay public, shall be appointed to develop a system
for assessing comparative effectiveness of interventions, the results
of which must be utilized by the board determining coverage benefits.
3. The comprehensive benefits package and any modifications thereto
shall be limited to those interventions that the boards deem to be:
efficacious, safe, cost-effective, based on sound evidence; or either
as part of a quality clinical trial or otherwise appropriately
contributing to the evidence base.
4. Elective Benefits
a. Commercially available private health plans may provide coverage
of benefits not included in the benefit package.
IV. Efficiency
1. The government shall implement strategies to significantly
reduce the current administrative costs of the health care system and
all such savings shall go toward providing coverage.
2. The government shall also develop and implement strategies to
simplify the current system, reduce duplication, inaccuracies, and
inefficient record keeping and provide for system-wide, interoperable
electronic record keeping.
V. Information and Education
1. Accurate, timely, and readily accessible information about
health care coverage, access and the scientific evidence base shall be
available to everyone. All health care providers must offer clear
information to consumers on the benefits and harms of all options, and
the quality of the evidence for each option.
2. A national panel shall be established to work with the public to
review evidence and help design effective methods for communicating
health care information to consumers, providers and plans.
VI. Financing
1. All individuals are required to financially contribute to the
system according to their ability to pay.
2. All employers are also required to financially contribute to the
system.
Under this Framework employer-sponsored health insurance will be
phased out, however, all employers are required to financially
contribute to the system.
3. The federal government shall establish a method for determining
the financial contributions for individuals and employers.
4. No individual can be denied coverage because of inability to
pay.
5. In addition to individual and employer contributions, the system
will be financed by the public and private savings from efficiencies
(referred to in the section on efficiency) as well as other government
funding sources.
______
Chairman Miller. Thank you all for your testimony, and
again for taking your time to be with us and sharing your
expertise and your experience with us. We will pick up where we
left off with the members on our side.
Mr. Hinojosa is recognized.
Mr. Hinojosa. Mr. Chairman, I apologize that I was at
another commitment, and I am going to yield back my time and
listen to my colleagues ask their questions.
Chairman Miller. Why don't you yield your time to Mrs.
McCarthy?
Mr. Hinojosa. I yield my time to the gentlewoman from New
York, Mrs. McCarthy.
Mrs. McCarthy. I thank you, and I thank the gentleman for
his time. Listening to the testimony from the first panel and
this panel, one of the things that I am going to be focusing
on--I spent 32 years as a nurse, and the nursing shortage in
this country is severe. Not only the nursing shortage, but
almost all health care workers, plus primary care doctors. I
don't see how this plan could actually work unless we have the
workforce that can go behind it.
I am pleased that we have some initiatives in this bill
that will work on towards primary care doctors and nurses, but
also the public health centers, if that is where we are going
to go, especially for those that have the insurance.
I grew up with a public health center. That is where I went
for all my medical care, my shots, my polio shots, all of that,
because my mother and father didn't have health care insurance.
There is nothing wrong with that as long as we teach the
patient or give the patient the dignity that they should
deserve wherever they go to get an examination.
And to be very honest with you, on some of our hospitals,
which are overworked, have no money to improve their
facilities, and to see those that don't have health care
insurance--and that is a lot of people that have just gotten
out of work--you are treated like cattle, and the dignity is
taken away from the person and the patient. And that is totally
wrong.
They say that a country is as great only as the health of
their people. And I consider this a great country, but I do not
believe that our health care is the best out there. So with
that being said, we have a lot of work to do. And I hope that
both sides actually come together because this is the time that
we need to have this done. It is the time to have it done.
From the first witness, Dr. Romer, she talked about
bundling; but a lot of people don't understand or know how the
bundling is actually going to work between the hospital and the
patient. The waste and fraud, where is that going to--you know,
how are we going weed that out to save money but not punish the
doctors that are out there?
Payment to the doctors and the hospital. I have to tell
you, if anyone gets the health care that I have, I see what
they pay to the doctors and to the hospital, and I will tell
you it is outrageous; they don't get paid enough. And you
wonder why a lot of them are not accepting any patients. That
has to be taken care of.
So I am hoping as we go forward that we can work on this. I
am glad to see that the donut hole has been closed, I think
that is terrific. Certainly that is the biggest complaint of
most of my----
Chairman Miller. It is not closed yet.
Mrs. McCarthy. Sorry?
Chairman Miller. We have a contribution toward closing it.
It is not closed yet. It is a fairly large donut hole. It is
very helpful, what has taken place this weekend.
Mrs. McCarthy. Well, if we are going to make that
sacrifice, I mean this is the time, this is our time to do the
right thing. That is my opinion. And the donut hole for all my
seniors is something that should be concerned about, because,
let's face it, the majority of our seniors, unfortunately,
start getting the most care, health care, when they are over 65
to 70, to 75. That is when our bodies start breaking down.
So with that, I am hoping--and, again, with all the
witnesses, they had--I know this is kind of more of a speech,
and everybody here knows I don't give many speeches, but this
is something I feel passionate about.
You know, when you talk about your cancer patients and not
being able to get the care that they need because they can't
afford it, to talk about the cancer patients that the families
will spend all of their money to take care of someone that they
love, I mean if we as a Nation can't share those costs to be
helpful to the family and to the people, I believe our country,
I believe our Americans actually do believe in taking care of
each other.
With that, I yield back the balance of my time.
Chairman Miller. The gentlewoman yields back. Mr. Thompson.
Mr. Thompson. Thank you, Mr. Chairman and Ranking Member,
for having this hearing today. Health care has been--up until
January, I spent 28 years in health care. I thought maybe I
would retire from there, actually. It wasn't to be. And I find
myself here today.
And I come to Congress, actually, with many of my freshman
colleagues with health care backgrounds. And so you know my
commitment. I got involved in public policy because of health
care and working to ensure access, affordability, quality and
choice of health care; a frustration of costs that I saw that
were being driven up, frankly, by government intervention, as a
result of regulations that were piled on like layers on an
onion. The regulations probably made sense at one time, but we
have to go back to the 1960s to find the roots of many of them.
And one thing we don't do is peel things away in government, we
just add layers on, and the frustration that I had on behalf of
my patients of how that was increasing costs and decreasing
access.
And I appreciate this opportunity today. This is really one
of the first opportunities to engage in this discussion, which
has been pretty frustrating for someone who came to Washington,
after almost 30 years in health care, with ideas that we could
do things a little better. And so I appreciate the opportunity
today.
Frankly, the change that we need needs to be the proper
change, and a result of full debate and full discussions. And
we have not had that opportunity. That has been a real
frustration of mine and, I think, a number of my colleagues.
There are some serious concerns. A few of these I just
mention briefly with the proposal on the table. It is creating
a taxpayer Federal Government provider that will not really
compete, but ultimately will consume the private health
providers. We will wind up with a monopoly and it will be a
government provider.
Most of my frustration has been a result of dealing with
Medicaid and Medicare in terms of the access and the quality of
services for the consumers I have served for three decades.
Frankly, I find the flawed funding mechanisms in terms of
competition being named, yet we are going to ultimately, I
believe, decrease competition because of this new government
entity that is taxpayer-funded.
The savings from HIT I have concerns with. I think there
are immediate gains for HIT, obviously for health information
record, but in the long run is it sustainable? That is the type
of thing that you have to be able to reinvest in every time a
new generation of technology comes along.
And I raised that question in a previous forum and there
were no thoughts about what happens a number of years from now
when the technology changes and our health care providers find
themselves without the resources to do that.
So frankly, marching ahead, my first question, Mr.
Speranza, you noted that an employer mandate will lead to loss
of jobs. Some studies have found economic analysis prepared by
our previous witness, Dr. Romer, that an employer mandate
costing $300 billion over ten years will result in a loss of
3.7 million jobs. Can you elaborate on how an employer mandate
would work in your company?
Mr. Speranza. Wegmans Food Markets provides full health
insurance and has for decades. As a matter of fact, one of the
things we take pride in is Fortune Magazine has listed us as
one of the top 100 companies to work for. In the last 5 years
we have either been number 1 through 5 on the list, and we are
the only company in America to have that designation. Our
corporate philosophy is our employees always come first, and we
mean it. If we take care of our employees, our customers take
care of themselves. And if our customers are taken care of, our
bottom line takes care of itself.
Our view as it relates to our own business, and quite
frankly our industry, is we make our own decisions as to what
benefits we should provide. If competition doesn't do that, we
attract, we think, better employees as is shown how we have
done this in the past.
I will share one other thing with you. I talked about
collaboration before. Over the years--we have 39,000 employees,
about 2,000 are in unions, Teamsters union and the bakers
union. And for years it would be the company against the union,
and we changed that and we worked very hard. Right now we have
provision in our labor contracts where if there are
enhancements in our employee benefits in health care without
negotiation, the union people get them as well. If,
unfortunately, there has to be a reduction in health care
benefits without negotiation, that happens as well. We built a
team and we built a team that works.
That is what I think America is all about. You make those
choices at the lowest possible level, which is company by
company. If there are companies, Mr. Thompson, that choose not
to do that under the present system, I think they will pay the
price by not being able to retain employees, which is very
costly, or not to get the quality of employees. That is one
approach.
The only other thing I would say, going back to the
testimony, is that there hasn't been much said about the fact
that we don't have enough physicians, we don't have enough
nurses, we don't have enough health care workers. Why shouldn't
there be incentives?
I am a lawyer. Do you know that there are three times more
law schools in this country than there are medical schools?
Creating incentives for health care workers. I would love
to come back on another day when you are talking about
education. Quite frankly, one of the things--and if you want to
come to Rochester, I invited you with respect to health care.
Perhaps you would come back as it relates to education. We have
a number of programs to help economically disadvantaged
children. We encourage them to go into the health care
industry, whether that is physicians, whether to anything else
in health care. So my sense is let the market prevail as much
as we can. That is the American way.
Mr. Thompson. And I appreciate your comments on the supply
side of providing accessible and affordable health care. I
think that has been pretty much ignored. And with that, my time
is expired, Mr. Chairman.
Chairman Miller. Mr. Kucinich.
Mr. Kucinich. Thank you, Mr. Chairman.
To Mr. Speranza, I want to call your attention to a
documented letter that was in the New England Journal of
Medicine in the June 4, 2009 edition, where it says that the
insurance industry has over $4.4 billion in investments in
tobacco companies. Do you have any comment on that?
Mr. Speranza. Well, I guess my first comment would be we
were the first major chain in the United States to stop selling
cigarettes, so I think that is where we stand.
Mr. Kucinich. I am asking about the industry, though.
Mr. Speranza. I guess I would say with respect to that, I
haven't given that a lot of thought. I do know that the
insurance companies most likely have a fiduciary responsibility
to do the best they can with their investments.
Mr. Kucinich. Right.
Mr. Speranza. I am not an economist.
Mr. Kucinich. Thank you. You know, Melton Friedman said
this--I am not often someone who quotes him, but it is worth
quoting in light of what you just said. He said, ``Few trends
could so thoroughly undermine the very foundations of our free
society as the acceptance by corporate officials of a social
responsibility other than to make as much money for their
stockholders as possible: That is a quote that is included in
this article in the New England Journal.
Now, I would just like to say, Mr. Chairman, the fact that
insurance companies can invest in tobacco companies--seemingly
contradictory assumptions if you are talking about public
health--ought to be of note to this committee when we start
marking up the legislation.
Now, Professor Hacker, I believe health care is a human
right. I think everyone deserves it. That means no financial
barriers to care. It means all medically necessary services are
covered. The draft bill under consideration today is many badly
needed reforms and has a very strong public plan option. But
even with this, it is clear that millions will still remain
uninsured and underinsured.
What are the models for health care finance that would be
consistent with the principle that health care is a human
right?
Mr. Hacker. Thank you, Congressman. I think that it is
first worth noting that the broadening of coverage, that I
would think is going to be foreseen when we look seriously at
the effects of this piece of legislation, is going to be very
substantial. The proposal that I developed some years ago,
Health Care for America, which is very similar to this draft
legislation, would cover almost all Americans. And when I say
``almost all,'' my proposal would cover all but a tiny, tiny
share, roughly.
Mr. Kucinich. Are you saying that this bill that we have
heard widely discussed at this committee--we will soon be
marking up the bill that has been fairly well described--meets
the test of health care as a human right?
Mr. Hacker. I think that it meets the test of providing
affordable quality coverage.
Mr. Kucinich. Does it meet the test of health care as a
human right?
Mr. Hacker. I think that it does. That is a very high
standard. I teach in my university the idea of democracy is an
ideal. No system actually lives up to that standard.
Mr. Kucinich. So you are saying some people have the rights
and other people don't, even in a democracy; is that what you
are saying?
Mr. Hacker. No. I am actually saying that I believe that
the standard of health care is a human right, that this
proposal will move us dramatically closer to that ideal in our
present system.
Mr. Kucinich. I am concerned about medical bankruptcies.
There is an update of a landmark Harvard study published on
June 4, 2009 that found that two out of every three
bankruptcies are related to medical bills. In 2001 that number
is about 51 percent; 78 percent of those medical bankruptcies
happen to people who actually had insurance before they got
sick. It is a stark illustration of the consequence of giving
health insurance companies the ability to sell plans that don't
provide an adequate level of coverage.
How many medical bankruptcies would the bill under
consideration today allow?
Mr. Hacker. I cannot give you an exact estimate, but I can
say it would dramatically reduce the number of medical
bankruptcies.
Mr. Kucinich. Would there be no medical bankruptcies?
Mr. Hacker. Well, I don't know if there would be no medical
bankruptcies. However, it is worth noting that some of those
medical bankruptcies are due to lost income due to sickness in
the Himmelstein-Warren study. So it is not clear to me that
those would be prevented, even if we had the most stringent
requirements of affordability.
Mr. Kucinich. This study says two out of every three
bankruptcies are related to medical bills. This is the landmark
Harvard study. It didn't say it is related to people losing
their income.
Mr. Hacker. Some portion of that total is due to people--
lost income due to sickness rather than to medical cost.
Mr. Kucinich. Did you read this study?
Mr. Hacker. I have indeed.
Mr. Kucinich. And you are saying that it has to do with
that the two out of every three bankruptcies--which the Harvard
study says relates to medical bills--you are saying that a more
correct characterization would be that it is also related to
people losing their income.
Mr. Hacker. I don't know the exact division within the
study. I am saying that some portion of medical bankruptcies in
that study are due to lost income due to sickness.
But I want to reiterate that the two ways in which this
legislation would dramatically reduce medical bankruptcies are,
one, it would make a dramatic move towards ensuring that
coverage is affordable through the exchange as well as through
employer coverage plans that now have to meet minimum
requirements.
Two, it would create a true public insurance plan competing
with private plans that would have set benefits in law that
would offer people guaranteed security.
Mr. Kucinich. Mr. Chairman, I just want to point out that
just saying that insurance is affordable doesn't mean the
hospital bills are. Thank you.
Mr. Hacker. But there are limits on cost sharing within the
bill of $5,000.
Chairman Miller. The gentleman's time has expired. Mrs.
McMorris.
Mrs. McMorris Rodgers. Thank you, Mr. Chairman. And I too
want to say thank you to everyone for their testimony.
I think this is an important issue that we are facing. I am
a big supporter of health IT. I think it has huge potential to
save costs and also improve health care delivery. I am excited
about wellness. I think we as a country have become way too lax
in our own personal responsibility for taking care of our
health.
I do have very very deep concerns about this government
option, though, and I wanted to direct a question to Mr.
Stapley. Because when you look at who is insured today, 50
percent are in some kind of a government plan--Medicare,
Medicaid, TRICARE--50 percent are in private, and then we have
the uninsured that we need to address. And I continue to hear
that the reason that we need this government plan is to control
cost.
And yet what happens today is that we know Medicare,
Medicaid, TRICARE, doesn't pay the cost, and that it is the
private sector that has to subsidize the cost of government not
paying the cost of these plans.
So I wanted to ask Mr. Stapley if he would just comment on
what you believe the impact of the government option would be
on private health insurance, and will it create competition or
is it simply going to centralize control with the Federal
Government?
Mr. Stapley. Those are outstanding questions. I don't know
that I could quantify what I think the impact is. I think from
the perspective of employers it is more of a fear of the
unknown in terms of what might happen. I would say, first of
all, that in terms of an insurance exchange, aside from the
issue of the public plan, that it is very important that the
plans that are offered through the insurance exchange be
accountable. And I think it is a fair criticism of the current
system. I don't think the financing system in the United States
today is accountable. I think they do all kinds of things that
are abusive, and so forth and so forth, that we have to
correct.
Now, when you move to the public plan, the concern is that
if they pay at Medicare--or make Medicaid-like rates, or they
continue to do some of the sorts of things they do on the
administrative side, it could create problems.
Now, let me give you two examples that I think are very
appropriate. I was involved in the creation of the Utah Health
Information Network. I am the current chairman of their board.
I think it is one of the most successful health information
exchanges in the United States. We transact an enormously high
percentage of our administrative transactions in Utah
electronically. We do Medicare transactions as well. We do all
of their transactions. We send them from providers in the State
of Utah to the intermediary in South Dakota. They pay us not
one red cent for those transactions. We transact them free.
UHIN, Utah Health Information Network, is made up of a
consortium of payers, physicians, hospitals and so forth. Those
transactions are not free; they cost money. Every transaction
costs something. So the fact that Medicare pays nothing means
that the rest of us have to pay more to accommodate that. That
is true, as I understand it, with every health information
exchange in the United States.
Now, if you move to the care side, I think it is a little
more complicated question. But I can tell you that we sit down
every year and negotiate with a very respected health care
system in the State of Utah that all of you probably heard
about in the last couple of weeks, because they have been part
of the debate. And we sit down and we say, okay, let's talk
about what we are going to pay you next year. And they say,
well, I will tell you what is going to happen here. Our charge
masters, or our cost of doing business, has gone up by, say, 3
percent or 4 percent. Medicare comes along and says, guess
what? We are going to give you 1 percent. Now, this is a
theoretical example. Therefore, they tell us, you are going to
pay 5 percent because we have got to make up what Medicare is
not going to pay to us.
Now, how that translates out into the system in its
entirety in terms of higher health care cost, I don't know. I
personally think that one of the questions you have to ask is,
if 100 percent of the reimbursement in our health care system
today were based on Medicare rates, what kind of an impact
would that have on the health care system?
And I am not in a position to answer that question, but it
would have an impact.
Mrs. McMorris Rodgers. Thank you. I appreciate your answer.
I am going to quickly run out of time, and I had a question
I wanted to direct to Ms. Visco. Just talking about cancer in
this country and survivability, because you know we actually
lead the world in survivability rates. When you compare America
with breast cancer, 84 percent survival versus 69 percent in
the U.K.; prostate, 92 percent survival rates in America, 51
percent in the U.K., are you concerned--or what would you
attribute that to compared to what is happening around the
world?
Ms. Visco. Well, I think it is a very--the answer to that
question is incredibly complex, the extent to which you look at
survivability and see what percentage is due to earlier
detection; in some situations, what is due to better treatment.
Of course, the incidence of cancer is incredibly high in this
country compared to many other countries. And certainly the
incidence of breast cancer is incredibly high compared to many
other countries. But it is an incredibly complicated analysis
to sort of tease out what results in a mortality benefit or a
survivor benefit.
Mrs. McMorris Rodgers. Thank you.
Chairman Miller. Mrs. Davis of California.
Mrs. Davis. Thank you very much, Mr. Chairman. I wanted to
just quickly--and I know this probably would have been a better
question for Ms. Romer--but I wanted to just focus on the
Medicaid and Medicare issue and the concern that we would be
trying to pick up some cost savings through that.
As you know, in California and New York, people start
getting a little nervous about this because we look to those
costs. Could any of you comment on that, and whether or not--
she had mentioned limiting the itemized reductions for Medicare
and Medicaid, that that would be one place of picking up some
savings. Do you all have experience with that enough to know
what are we talking about there realistically? And does that
bring us to a question of whether the large States and the
small States, if the competition is going to be such that both
are paying essentially the same thing for that care, which we
know today is not true? Do you want to comment on that, Mr.
Shea?
Mr. Shea. Congresswoman, if I understand your question
correctly, let me answer it this way. There has been under way,
ever since the first Institute of Medicine report, an effort, a
cooperative effort across the board in health care to
understand how it is that we can address the systemic quality
problems that we have; because it is clear that we have
problems, and there are costs, enormous costs linked to that.
The Institute's own estimate well publicizes that 30 percent of
the money that we spend every year is for care that really
doesn't help people. So we need to have--and the field knows
this, and they recognize it and people are working on doing
this.
So that we are on track now to change the way care is done
and the way care is paid for, to make it based on quality in a
way it has never done before.
I would like to quote something my business colleagues say
to us across the bargaining table. They say, We pay for health
care like nothing else we do in business.'' We pay the same,
regardless of whether it is world-class care, okay care, or
downright dangerous care. And we don't even know which is
which, because we don't get that information back. We just got
to change the way we approach this.
And the current system has done some things very well, but
it has caused a train wreck of costs.
Mrs. Davis. Is there a way that we can talk, though, about
the cost of health care as being equitable across all States?
Is that a realistic even assumption that that can be done?
Mr. Shea. I think it is really part of this whole approach.
People were shocked when the numbers first came out that showed
in controlled studies how the cost in Florida was much higher
than the cost in Minnesota, one of the famous ones. People know
that these are practice patterns. They don't have to do with
the science of care, they don't have to do with what is best
medicine. These are solvable problems as are many of the other
things in health care. We know how to go about it.
We need the structure that your bill would give us, or at
least begins to give us, to get at that so that we can take a
coordinated national strategy in dealing with this. I could go
on for several hours about this if you would like, but there
are elements in your bill that really put us on this road to an
entirely different kind of health care delivery system.
Mrs. Davis. Mr. Pollack, and then I wanted to go to a cost-
sharing question. I know that Mr. Kucinich raised that in terms
of copays, and again whether or not we can include equitable
cost-sharing provisions in the health care reforms themselves.
Mr. Pollack.
Mr. Pollack. In terms of cost-sharing, obviously cost-
sharing affects people at different income levels very
differently. And one of the things that I think is a real
benefit in this legislation is you provide certain kinds of
cost-sharing protections that are predicated on income. And I
think that is very important. Now, with respect to your----
Mrs. Davis. Is that not limiting copayments?
Mr. Pollack. I am sorry?
Mrs. Davis. Limiting copayments by income, is that
specifically what you mean?
Mr. Pollack. There should be some out-of-pocket cap, which
this legislation includes, which would preclude the kind of
things that Congressman Kucinich was worried about in terms of
medical bankruptcies. I think this legislation goes a long
distance in providing protection on that.
Now, with respect to differences in care, I just say two
quick things. One of the most remarkable pieces of work that I
have seen in a long time was in a recent article in the New
Yorker by Dr. Atule Gawande who actually examined not just the
differences, say, between Miami and Minneapolis--which is often
what people look at--but he actually compared McAllen, Texas
with El Paso, Texas. And he found that in McAllen, Texas the
costs were about double what they are in El Paso.
I think there are a number of things that we can do. I
think there are some things that this bill would do that would
help change those disparities. I think the promotion of
comparative effectiveness research is very important in getting
that proliferated as substantially as possible. Not precluding
a doctor from making a clinical decision, but at least
providing guidance to the physician and to the patient, I think
that is very important.
So I think there are some things that can be done which I
think will reduce this wasteful spending that occurs in too
many places. One last thing, and that is----
Chairman Miller. That will be your last thing.
Mr. Pollack. Sorry?
Mrs. Davis. The Chairman is ready to gavel us down here. I
wanted to follow up with Mr. Speranza.
Chairman Miller. I don't know whether Mr. Speranza wanted
to jump in on your question. It looked like at one point he
wanted to jump in in response. Go ahead.
Mr. Speranza. Just very briefly. With respect to the cost
of care, I think we really need to focus in on that. There are
so many things that communities can do: unwarranted variation
in hospitals, infection rates in hospitals, those sorts of
things. And if there were medical guidelines evidence-based
throughout the country, that would go a long way toward this.
So if you gave incentives to physicians--right now they are
on piece work like a manufacturing line--if you paid physicians
based on outcomes and encouraged them to get into wellness and
those sorts of things.
And that is the last thing I would say, whether it be
Wegmans or Safeway and others, we want to have the opportunity
as employers to work with our employees to change behavior. It
helps the employee. Nobody wants to get a heart attack, nobody
wants to get sick. And so this bill, it looks like, stops you
from doing that. We really ought to be looking at it the other
way. We need to change behavior in a positive way.
Chairman Miller. Mr. Loebsack.
Mr. Loebsack. Thank you, Mr. Chairman. And thanks to our
witnesses. Great questions all around.
I think the idea of personal responsibility, Mr. Speranza,
is really important, and I agree with my colleague
Congresswoman McMorris Rodgers, on that. I think we can all
agree on that.
Obviously I think we have to do all we can to promote
personal responsibility. And when it comes to wellness, I think
that is absolutely critical. There is no doubt about it.
There is a lot to like, I think, about this bill. Certainly
I think wellness is a part of it, important part of it. Health
IT is an important part of it as well, as was mentioned. I
think a public plan option is the way to go. And I am going ask
Dr. Hacker about that in a second.
Dealing with catastrophic costs, clearly that is something
we have to deal with. There is no doubt about it. And I could
go on and on.
I do want to pick up a little bit on the regional and
geographic disparities questions. I am from Iowa so that may
not surprise you why I want to pick up on that. Iowa, as maybe
everyone on the panel--maybe not--knows, is consistently ranked
at or near the top in terms of outcomes and efficiency, quality
of service, all the rest. We are among the best, if not the
best.
Yet Iowa--and not just Iowa, but there are a number of
States that rank high in terms of outcomes but rank low in
terms of reimbursement rates.
I just want to ask any of you here to offer any remarks
that you might with respect to the current bill and whether it
really gets at that issue or not, and what we might be able to
do to really remedy some of those geographic disparities that
we see.
In particular, I think Mr. Pollack and Mr. Shea might be
willing to speak to that.
Mr. Shea. I appreciate the question, Mr. Congressman, and I
think you are right on track.
I think one of the ideas that has been widely discussed is
that notion that as we link payments to quality we need to do
rapid-cycle testing of the way to do that so that we are not in
the system where Medicare once a year sets rates and so forth.
We need a more flexible and nimble approach that really matches
the quality improvement efforts that are being done around the
country and that rewards those and incentivizes those.
I know that in the Senate health bill I was admiring some
of the things that they did that were just beginning steps to
do this but that were just sensible kinds of things like, well,
we are going to pay a physician's office extra money if they do
follow-up on hospital discharges. This is a huge problem. It
costs us an enormous amount of money. It is very simple to
solve, but the current system we have has nobody responsible
for that. Well, why not pay a little bit extra money to save
some money? So I think this is one big point.
The other thing I would just say is I really think that,
with the advent of a public plan, we are going to see a much
more responsive public system to payment rates because it is
not going to be just the elderly or just the poor. If we
mainstream public insurance, I think we are going to get a much
more responsive public insurance system all the way around.
Mr. Loebsack. Okay. Thank you.
Did you want to say anything, Mr. Pollack?
Mr. Pollack. I would just add, too, that I think that the
more we move health care into a more group planned system I
think we are going to create a lot of efficiencies, and we are
going to provide greater coordination of care. Particularly for
people who have got chronic conditions, many of them have
multiple chronic conditions, and if they go to one specialist
and then they go to another specialist, this specialist may be
terrific but may not know how that treatment affects another
problem. So we do need greater coordination of care. We need
medical homes. I think if we do that we are going to not just
improve quality but I think we are going to create cost
efficiencies in the process.
Mr. Loebsack. Thank you.
Dr. Hacker, I am a former political scientist, by the way,
so it is nice to see you here. Thank you.
I do want to ask you about the public plan choice and how
it will create competition and, in particular, if you could
rebut the argument that private insurances are simply going to
be pushed out of business by the creation of a public plan. Can
you sort of help us resolve that issue?
Mr. Hacker. Well, first of all, I am glad to be speaking to
a fellow political scientist. You can see why I am glad. We do
not get a lot of representation. No pun intended. That was why
I immediately reached for the Ideal of Democracy in talking to
Congressman Kucinich.
This argument that is often made that a public plan would
undermine or would destroy private insurance I think is
absolutely backwards. It will change the business of private
insurance, but it will not put private insurance out of
business, and I think there are two reasons to emphasize why
that is the case.
First of all, remember that the core of this legislation
and this approach is to build on employment-based coverage and
is to encourage employers to continue to provide insurance,
which is why I emphasize requiring that employers either
provide health insurance or help fund coverage for their
workers, which will prevent the kind of erosion of employment-
based coverage that is often a source of concern.
Second of all, the public plan would be an option within
the exchange alongside private plans, and that is why I think
it is so crucial. Because, as I said, it would be a benchmark
for the private plans, creating accountability where it often
does not exist. In your own home State, I believe the largest
insurer has 80 percent of the market, so having this benchmark
and this competitive pressure is going to improve private
insurers.
Second of all, it will be a crucial backstop for cost
control, and it will be a backup for people who want to have an
alternative to these dominant insurers.
Just as was said, with regard to public insurance, it needs
to innovate and improve its practices and that that kind of
innovation needs to take place in the private insurance market.
Having that competition will encourage innovation.
Within the Medicare program, for example, plans like
Kaiser, for example, do very well precisely because they have
an innovative business model. Private plans have more
flexibility to adapt provider networks. They have what might be
called a ``grand advantage'' in many cases.
As we know, for many Americans, the idea of a public plan
is still something that still does need to be mainstreamed. I
think we should understand this, therefore, as not a threat to
private insurance but as a threat of the old way of doing
private insurance. It is healthy competition that will improve
both the public plan and the private insurers.
Mr. Loebsack. Thank you.
Thank you, Mr. Chair.
Chairman Miller. Thank you.
In calling on the members, the Chair has made a mistake. We
are going to keep doing what we are doing on our side, which is
working down the members who have not had a question. I should
have come back, since this is the second panel, and recognized
the Republican members for a second round. So we have finished
with Mr. Loebsack, and we will go to Mr. Kline. Then we will go
back on our side and work through our members.
Mr. Kline. Thank you, Mr. Chairman, for sorting that out. I
must admit it got a little bit confusing. There are a lot of
members, a lot of panels.
It is my first day. That is my excuse.
Chairman Miller. Mine, too.
Mr. Kline. Mr. Arensmeyer, I wanted to talk a little bit
about small businesses. There are some unanswered questions in
the draft legislation, but there are some things that are in
there. So the first thing I want to sort of grapple here with
for a minute is what you are defining as a ``small business.''
Is that 10 employees, 25, 50, 100? Do you have a working
definition that you are working with?
Mr. Arensmeyer. Well, we represent the interests of those
of 100 employees or fewer, but it may be that the legislation
ends up setting different standards at different amounts that
are less than that.
Mr. Kline. Okay. It does. I was just trying to put it in
context what the bulk of your comments addressed concerning
businesses up to 100 employees.
In the legislation, it seems to me it says that it provides
a health insurance tax credit for small businesses equal to 50
percent of the cost of coverage for firms where the average
employee compensation is less than $20,000, which I suppose is
an incentive to keep your wages low. Firms with 10 or fewer
employees are eligible for the full credit, which phases out
entirely for firms with more than 25 workers. So that certainly
clearly would not address a large portion of the small
businesses that you represent if they stop at 25.
Mr. Arensmeyer. In the modeling that Professor Gruber did
for us, we did generally look at tax credits that are a little
bit more robust than that. That is absolutely true. There are a
series of dials and levers as you look at sliding scales and
tax credits and exemptions. You cannot look at these in the
absolute. But we definitely have some models, and clearly those
models that are more ``generous'' in the sense of tax credits
for larger amounts, sliding scales that are not as high,
greater exemptions, there is obviously going to be a greater
benefit financially to small businesses. So you have to look at
this all together.
Mr. Kline. Well, this sliding scale apparently stops at 25,
and we are not sure about the exemptions yet. That will be an
interesting question.
I notice in the modeling, Jonathan Gruber's model, the
scenario that was most advantageous for small employers was the
scenario that exempted small businesses. I think that was a 1
to 10 employer. Was that what he was looking at there?
Mr. Arensmeyer. Correct.
Mr. Kline. So we still have not answered the question of 11
to 100.
Mr. Arensmeyer. But there were substantial benefits. Even
with that model, there were huge benefits for small business
with the reform and with the shared responsibility.
Mr. Kline. But it depends upon where that small business
exemption comes in; is that not true?
Mr. Arensmeyer. Well, pretty much every model of the
Professor Gruber model produced a better result than the status
quo. Because the status quo is such an absolute disaster for
small business. Fewer than 50 percent of the smallest
businesses are even offering it anymore.
So clearly we would love to work with the committee to
figure out the right balance of tax credits, sliding scales,
and exemptions, but virtually any system where some recognition
is given to the special needs of small business that has reform
in it and that deals with the cost containment is going to be
far better for small businesses than the status quo.
Mr. Kline. I certainly agree that small businesses need
some help in a lot of areas.
Let me move to Mr. Speranza, if I could. I appreciate your
comments about Rochester. Of course, in Minnesota, we have
Rochester, Minnesota, which has been referred to a couple of
times here. We are pretty proud of the Mayo Clinic and of the
work that it has done there. There has been some real
collaborative work in changing things.
Do you have any more comments about reforms that were left
out of the bill that you would like to have seen, from your
perspective, such as strong medical liability provisions or
things that would help control costs?
Mr. Speranza. Yes. I think the few things that I think
would make the most sense are, as I mentioned earlier,
liability reform is very important. We know that medicine is
practiced in a defensive way, which is very costly. That would
be number one.
Health information technology. I know there is already $19
billion allocated to that. Having nationwide standards, being
able to actually implement that and to get the savings would be
very important.
Wellness. With respect to the kinds of programs we have
talked about, we would like to have more incentives to change
behavior, not less. Those are very important.
The last point I would make, with respect to what was in
the bill is the insurance option. This has everything to do
with capitalism. It really does. There are other ways for us
smart people, in a collaborative way, to solve that problem.
In a different forum, I would like to challenge Dr. Hacker
to a debate on capitalism, and we will do that at a different
time and at a different place or we can agree to collaborate
and to find a way and come back to you. Because, quite frankly,
I think he has got it backwards. I firmly believe in the
American way and in capitalism, and that is a slippery slope
you are talking about going down.
Mr. Kline. Thank you. I yield back.
Chairman Miller. Ms. Hirono.
Ms. Hirono. Thank you, Mr. Chairman.
I have a very quick question for Mr. Stapley, and then I
want to move on to some questions for some other members of the
panel.
Mr. Stapley, since you are representing the ERISA industry
committee, I am wondering whether you are familiar with
Hawaii's exemption from ERISA.
Mr. Stapley. Yes, I am.
Ms. Hirono. If so, do you think that----
Mr. Stapley. We have a large employer in Hawaii, as a
matter of fact.
Ms. Hirono. Do you think that Hawaii's exemption or waiver
from ERISA should continue in any health care reform bill just
to make sure that they can continue doing what they are doing?
Mr. Stapley. Well, you have put me, really, on the spot.
Ms. Hirono. If you can answer the question----
Mr. Stapley. In Hawaii, we have a couple of large
employers--the Polynesian Cultural Center, for example, and
Brigham University Hawaii. They are our players in the State of
Hawaii.
I would say this. I guess I would say no, very simply; and
my concern is that in a restructured system, which I do think
needs to be significantly restructured, you have to have
national uniformity. To the extent that you do not have
national uniformity, it does create interesting challenges.
Now, we comply with the Hawaii Prepaid Health Act, and we
appear before the Hawaii Prepaid Health Council all of the
time. I would say that we spend enormously more effort in one
State than we spend in combinations of other States by virtue
of the fact that we have to comply with unique requirements. At
the same time, I know that it does provide some benefits to the
citizens of the State of Hawaii.
The other thing that it does is--we actually have an
employer in the State of Hawaii and their employees who have
requested a plan that we offer in all 49 States except for
Hawaii, and we do not offer it simply because we cannot comply
with the Hawaii Prepaid Health Act. From their perspective,
that is wrong. We would like that choice, but because of
prepaid health we cannot provide it.
Ms. Hirono. Thank you for that perspective. Obviously, I
will have to think about it a little bit more.
For some of the other panelists, I think, from what I know
about the private health care insurance system, there is really
a lack of transparency. For example, I do not know of any State
that requires the health insurance carriers to file their rates
and to justify their rates. We do that in workers'
compensation; and for those States that have no-fault auto
insurance, it is prior approval. So there is really a lack of
transparency. I do think that the public option will bring more
transparency into the whole system.
Some of you also mentioned that we should have nationwide
standards. Mr. Shea and Dr. Hacker, it is astounding to me that
such a high percentage--Dr. Romer mentioned that maybe 30
percent of the money that we spend on health care is really
wasted. So I wanted to ask you gentleman in particular whether
there are enough specific requirements or language in this bill
that addresses the waste that is in the system currently.
Mr. Shea. If I may, Congresswoman, thank you.
I think that the bill, as drafted, has a number of the
elements of what we need to have a national effective strategy
for addressing quality problems and for improving delivery
system. I do not think it is as well integrated or as robust as
it could be, and we had discussions even over the weekend with
some of the staff about this. I think it needs some work.
One of the things that I think is really important is that
currently we have a consensus development process for quality
standards. It is not mandated by HHS. It is developed in a
public-private organization called the National Quality Forum.
This has full representation of all of the people who are going
to asked to move up to this--the physician organizations, the
hospital organizations. So, if we are going to get the kind of
change, the really big change we want, the people who deliver
the care have to be brought into this, and they have to have
their 2 cents. So that is sort of a process that we think needs
a strong place in the bill. In the draft, it does not appear at
this moment.
Ms. Hirono. Do you agree, Dr. Hacker?
Mr. Hacker. I do agree. I also would say that you are
absolutely right to emphasize the benefits of transparency in
this broad process. It is the case that we know about this 30
percent precisely because Medicare has collected this
information and has made it public so that researchers can use
it. The Dartmouth Atlas studies that have been so influential
are based on Medicare data. I think, just as a starting point,
the commitment has to be toward much greater availability of
the kind of information we need to make these judgments.
I would say that we often understand the public plan, quite
rightly, as a central way of providing people with secure
coverage, but it also really needs to be on the forefront of
improving the delivery and the quality of care in conjunction
with and in coordination with private insurance plans and with
these kinds of public-private partnerships that Mr. Shea
mentioned.
I would say, on that front, one thing that has not been
mentioned is that President Obama has rightly said that the
Medicare Payment Advisory Commission should play an improved
role in trying to make sure that Medicare is paying for
services more efficiently. I believe strongly that both
Medicare and the new public plan should be doing a much better
job of encouraging the right care and quality care, rather than
just more care.
Ms. Hirono. I do not have time, but with the Chair's
indulgence I just want to say, as we move toward a national
standard, I think it is really important that these standards
acknowledge evidence-based differences based on race, for
example, American Indians and native Hawaiians. Would you
agree?
Mr. Hacker. [Nods head.]
Ms. Hirono. Thank you.
Chairman Miller. Dr. Price.
Dr. Price. Thank you, Mr. Chairman.
Mr. Chairman, the final comment in my opening statement was
that there are positive solutions to the challenges that we
face; and I am hopeful that the House will allow for an open,
vibrant, robust debate and a deliberative process, one that
respects America's doctors but, most of all, one that respects
America's patients. We have heard less talk about the patients
specifically in this discussion than I had hoped. I think there
is a lot of common ground, however, the common ground being in
health IT, the common ground being in the area of wellness, and
the common ground being in the area of prevention.
I want to have folks address, if you would, one of the
comments that I made in my opening statement, which is, if this
grandiose plan comes to pass and if there are some Americans
out there who believe that it is not addressing their health
care needs and if, for example, they want to go visit a
physician of their choosing and if they decide that they want
that physician to treat him or her for a specific illness or
malady or problem, should they have the right to do that
outside of the current structure, Mr. Pollack?
Mr. Pollack. I think they should have that right. They may
be required to pay some additional amount of money outside of
the network.
Dr. Price. So if they wanted to use their own resources,
they ought to have that right?
Mr. Pollack. I do believe that, yes.
Dr. Price. Are you aware that that is not included in the
present bill? Would that give you pause?
Mr. Pollack. Well, most health plans, even things like
PPOs--I am in a PPO. We can go outside of the network. I am
presuming that that will be retained.
Dr. Price. Thanks.
Mr. Shea, you would agree with that?
Mr. Shea. Yes, sir, I would.
Dr. Price. Does anybody disagree that Americans ought to be
able to opt out if they so desire?
Mr. Pollack and Mr. Shea, I am interested in following up
on the issue of who decides what ``quality'' is and who decides
what specific care patients receive. As a physician, I was
always frustrated when somebody stepped between me and my
patients and said, ``you cannot do that,'' even though I felt
it was in the best interest of the patient and the patient
clearly trusted that decision.
On the comparative effect of this research council and on
this new health choices panel that is in the bill, there does
not appear to be any language that provides for specialty
societies to be the final determinant of what is quality and
what care ought to be provided patients. Is that something that
you believe to be important?
Mr. Pollack. As I read the bill, what happened is the
Health Benefits Council would provide some recommendations
concerning what would be in the standard benefit. That would
then go to the Secretary. Now, that does not mean that somebody
cannot get care that might not be included as part of a plan.
That happens today.
Dr. Price. But that language itself is not in the current
bill as it relates to the government option.
Mr. Pollack. I am not sure I follow.
Dr. Price. That the final determinant of who decides what
care to be provided is----
Mr. Pollack. No, there is nothing in the bill that says
that somebody is going to make a decision, a clinical decision,
about what care you receive.
Dr. Price. Reclaiming my time, I would respectfully
disagree; and I would hope that what we could agree upon is
that that language itself needs to be in the bill, that
clinical decisions ought not be provided by the Comparative
Effective Research Council, by the health benefits----
Mr. Pollack. I do not think anyone disagrees with that. You
know, today, an insurance company decides what is in a plan.
Dr. Price. Exactly. Exactly. That is wrong.
Mr. Pollack. That, some might say, might come between a
clinical decision----
Dr. Price. Without a doubt.
Mr. Pollack. I guess what I am saying is you will know what
your coverage is, but nobody is going to tell you you cannot
get this procedure or that procedure. There is nothing in the
bill.
Dr. Price. I hope that that is all included in the bill,
and I look forward to your support for that kind of language.
Mr. Pollack. It is already there.
Dr. Price. Then please show me where it is, not this second
but as we move forward. I look forward to talking with you
about it.
Mr. Hacker, you talked about there being no real worry
about crowd-out if there is a government option. You are
familiar with Medicare Part B, the physicians' component of
Medicare?
Mr. Hacker. Am I familiar with Medicare, Part B?
Dr. Price. Yes.
Mr. Hacker. Yes.
Dr. Price. It is a public option. It is a voluntary
program. It is a voluntary program. What percentage of the
market share does it hold?
Mr. Hacker. The market share of Medicare, Part B is about--
I think, essentially, 99 percent of elderly Americans are
enrolled in it.
Dr. Price. Do you not believe that that has resulted in the
crowd-out of other private entities that would have provided
health coverage for seniors if they had been given an
opportunity to without the subsidies that are placed in
Medicare?
Mr. Hacker. Well, Medicare, Part B is essentially a faux
voluntary program in the sense that it is 75 percent financed
by general revenues. At the time it was created, there were
very few private options that were of any quality for elderly
Americans. What we are talking about here with the public plan
choices is an option available only to people within the
exchange where there would be no subsidies from general
revenues. So I think that they are not analogous examples at
all.
Dr. Price. I would agree with that at the very beginning of
the bill. But over a period of 5 years everybody comes into the
plan that is defined by the government through this bill as it
is currently constructed, and that is the concern that many of
us have.
Mr. Hacker. I understand that is a concern. I really do not
believe that it is a valid concern, and I have tried to explain
why.
I think that it is important to understand that, first of
all, many people will want to be in a private plan.
Second of all, many private plans are offering an
innovative alternative to what the public plan would be
providing.
Third, most people would still get private coverage through
their places of employment under this legislation.
Fourth, I have argued--and the bill embodies this
argument--that this should be on a level playing field with no
special treatment for the public plan vis-a-vis the private
plans.
Dr. Price. I would suggest, Mr. Chairman, that that is not
what is incorporated in the bill. I would hope that that is
what the final product will be, but, at the current moment,
that is not what is incorporated in the bill.
Chairman Miller. Mr. Hare.
Mr. Hare. Thank you, Mr. Chairman.
I am not a physician. I am not an attorney. I am a former
clothing worker who cut the lining for men's suits in a factory
for 13 years. I am trying to look at this from a commonsense
perspective.
Dr. Hacker, if I have it correct, you said that 72 percent
of Americans support a public option.
Mr. Hacker. That was in the recent New York Times/CBS poll.
Mr. Hare. So almost three-fourths of the people in this
country support a public option?
Mr. Hacker. Yes. In fact, 83 percent supported it in the
Employee Benefit Research Institute poll just before this one.
Mr. Hare. Well, I do, too, so count me in as one of those
72 percent of the people; and I think it will grow larger when
they find out about it.
What I find interesting about all of this--and I am not
here to defend the trial attorneys, but I was just at my
doctor's the other day. He has been an internist now for 20
years. He has never had a med-mal suit ever filed against him.
His insurance rates have quadrupled in the last 3 years. He has
never had a claim.
I spoke to another doctor who had one claim filed against
her in 18 years. She said it was frivolous. Her insurance
company that was supposed to be representing her told her to
plead it out because it was easier and because it would take
too much time to go to court.
So I think if we are going to beat up on one end of it, I
think we ought to take a look at the other end of it. I mean,
usually, under an automobile policy, if you are driving safely,
don't you get a discount for safe driving?
My doctor got his rates quadrupled for never having
anything filed against him, and one doctor was told by her
insurance company to plead out. I said, doctor, why did you do
it? I said, that would be like the equivalent of my going into
a store, walking out, and being accused of shoplifting when I
did not do it; and my attorney is saying, I would just plead
out because you do not want to have to take time off from work.
The fact of the matter is your reputation is at stake here.
So I think we need to take a look at that aspect of it,
too.
The other thing and the reason I support this public
option--and I want to ask Mr. Shea about this and Mr. Pollack.
We have heard today about the wonders of medical savings
accounts. I do not know how in heaven's name people can save
money when they are barely holding on to their homes, when
their hours are cut, and then we hear about what a great thing
it is.
Quite frankly, isn't it true that the vast majority of
people in health savings accounts are wealthy people and that
they are not middle-income people or lower-income people
really? Are they or am I missing this?
Mr. Pollack. I would say that the assumption that a medical
savings account is going to save this country money on health
care is a mistake. The overwhelming majority of costs in our
health care system are for major interventions. It is not at
the front end with deductibility.
So if you create higher deductibles it is not going to save
significant money for America's health care system. What it
might do is prevent people from getting preventative care, from
getting tests, from getting initial examinations. I think that
is a mistake.
I also think it is a mistake to provide tax incentives that
are clearly regressive. Because the higher the tax bracket you
are in the higher the tax benefit you get from a medical
savings account. It turns out that those people who tend to opt
into a medical savings account are somewhat wealthier and are
somewhat healthier. Those who are wealthier are not so worried
about a high deductible. It is not going to faze them at all.
For those people who are less wealthy, it is going to faze
them. That wealthier person who is in a higher tax bracket is
going to get a higher tax benefit.
So I think it is a mistake to go in that direction. It is
not going to save money. It is regressive, and I think it is a
disincentive for getting the preventative care we should be
encouraging.
Mr. Hare. Mr. Shea, I wanted to ask you about the
portability thing here because my time is running out.
I met a couple whose son worked in a factory in Galesburg,
Illinois. The factory closed. He had 9 years in. When they shut
down, he lost his insurance. He went to work part time doing
some jobs until he could find a job. He died at 31 years of age
because he had a heart attack and he had no insurance.
I asked one of his parents, are you mad at God for taking
your son? He said, God did not take my son. He made a special
place. This government did because they did not have an
insurance plan that would cover him when he lost his job and
went to another.
Under this bill, that man could have gone into the public
system. If we do not have a public plan, how in heaven's name
are people who lose their jobs going to afford a health care
plan? I mean, are these benevolent insurance companies just
going to hand it to them and charge them basically nothing?
Mr. Shea. Congressman, we just released a survey this
morning. We did an online survey, which we have done for a
couple of years. Twenty-three thousand people responded to the
survey. It is not scientific, but 23,000 people is a pretty
good number. Six thousand people wrote us their individual
stories. One of the phrases that kept on coming up is, you
know, ``I lost my insurance'' or ``I ran into the cap on my
insurance and I never knew about it.'' People say, ``well, you
know, I am now on the faith-based plan. I pray I do not get
sick.''
There is no way without--just going back to Ron's point, I
think what we need to focus on is basic health security. Let's
get the trains running right, which they are not now, and then
if we want to talk about bells and whistles and special things,
that is a different story, but we do not have the basics right.
Chairman Miller. Mr. Castle.
Mr. Castle. Well, thank you, Mr. Chairman.
Mr. Chairman, I have been listening to this panel, which I
think has been excellent, and obviously, I have been reading
and studying all this as well as all the rest of us have. I
have got to tell you that my concerns are almost increasing
rather than diminishing at this point.
When you look at the costs in the health care system and
when you look at the cost of prescription drugs--and you can
argue whatever the reasons for that may be or you want to do
something like take the prescription Part D plan and close the
donut hole, for example, or medical inventions, both hard
inventions and procedures which are going on now, which are
becoming more and more extensive and complicated out there.
There are the costs of education for medical personnel.
Somebody mentioned that there are three times as many law
schools as medical schools. That is going to go up probably to
about six to one. Law schools make money for universities, in
case nobody has realized that. Medical schools are generally
losers for universities. It is just a high-cost item.
There are medical malpractice costs, which we are not doing
a lot about in this particular legislation. There are the
insurance rates, the salaries of medical personnel, be it those
running hospitals or whatever it may be. There is the whole
idea of adding portability and preexisting conditions to
existing health care plans in this country.
I look at Medicaid and Medicare and how they are driving
the budgetary situations in this country into a corner in terms
of where we are going. I even worry about the cost of things
like health information technology, which I think ultimately is
something we need to do and that might even be helpful in terms
of saving money, but the initial cost of it is so great. I even
worry about the cost of the public option. Even though it is
theoretically paid for, my hunch is there would be a lot of
backroom costs to that that we have not seen completely yet.
I happen to believe in a lot of concepts I am hearing about
today. I would love to see everybody insured in some way or
another, at least provided with health care in some way or
another, but I am worried that we are biting off a lot here. I
have seen the estimates for the Senate plans. I am not sure
what the estimate costs for these plans are going to be. Can we
afford it or are we just going to make the political decision
that we are going to afford it and that we are going to pay for
it?
I would just hope, as a committee and as we listen to
expert witnesses and as we put this together, that we are being
thoughtful and careful about what we are doing. Maybe we have
to do something less. I do not mean lesser. I mean just perhaps
less than the grand approach in this particular situation so
there will be a manageable circumstance. We have to continually
look at every single cost-saving component we can in terms of
how we are dealing with any of these issues.
So I have no questions of the panel. I will be happy to
yield back my time, but as just one member sitting on this
committee I do express concerns about where this is going to
all end up, and I think we need to always know the details of
the costs and how we are paying for it.
Chairman Miller. Mr. Tierney.
Mr. Tierney. Thank you, Mr. Chairman.
I just generally want to ask a little bit here. It seems to
me that everybody has sort of walked away from the single-payer
thing without much of a fight, which is sort of surprising to
me, for a number of people on the panel here. So we are looking
at how we are going to try to keep costs down.
When I talk to people, they are usually more in line when
they find out the size of the salaries that private insurance
companies are getting, when they find out the amount of money
that is being spent on overhead and on marketing, when they see
the size of the profit that is out there. We are going to have
to do some kind of regulation in order to try and make people
who are paying health insurance premiums already think they are
getting something for their buck if they are going to be paying
more money in some way to help other people get insured. So it
would seem to me that the idea of the medical loss ratio is
something that we ought to at least consider and try to make
that a reasonable number.
Mr. Hacker, what do you think about that?
Mr. Hacker. I think that one reason to have the public plan
is precisely to address those concerns.
I think that it is also worth noting that, while there is
no intention in this public plan to have a Medicare for all
systems, that some of the virtues of having that system are
achieved by having a competitor in the market, in this
exchange, that embodies those values of putting patients before
profits by making sure that people have broad coverage, by
making sure that the focus is on improving care and on
innovating over time.
Mr. Tierney. That sense of competition may eventually bring
some sense back to the premiums usage of the private companies.
Why don't we just initially require, if they want to get
into the exchange--or whatever you are going to call it--that
they have to meet some sort of a particular level as a consumer
right here and that they have to spend at least a certain
number of premium dollars on direct medical care?
Mr. Hacker. I believe there actually is a medical loss
ratio standard in the legislation.
Mr. Tierney. Well, I know. I know who put it there. The
point is, do you agree that it ought to be there? What is the
purpose for it? I think it is at a rather low number at 85
percent. It ought to be more.
Mr. Hacker. Actually, it may sound very low, but,
unfortunately, as you well know, many insurance companies today
spend well less than 85 percent of their income on care. Even
within Medicare Advantage plans, there are many cases where
only 82 or 83 percent of their spending is on the actual
delivery of care to patients.
Mr. Tierney. Of course, in Mr. Pollack's USA families
today, there was a study done where it shows people are doing
far less than that. Some do as low as 60 percent; am I right?
Mr. Pollack. Some of them go as low as 60 percent.
Mr. Tierney. I guess the only point I am trying to make--
and I do not mean to be too sarcastic about it--is it is
ridiculous that we are worried. I hear people say, well, we are
worried about a public option plan. It might put these private
companies out of business or they will not make enough profit.
What should be our primary concern is making sure we get
the best deal for the consumer. They get health care, and they
get the premium dollar spent on health care. I do not care
whether you are from the United States Chamber of Commerce or
from the labor unions or if you are anybody else. All of your
members want to get a decent deal on this; and all of them,
when I talked to them, were outraged at the high salaries the
executives make, at the amount of money that is spent on
marketing, at the amount of money that goes into not just
profit but into outrageous profit. And I do not understand the
sensitivities of all of us around here about being so concerned
about their existence and about their ability to keep on doing
that to the consumer.
So I think that is the point to be made. If we are going to
waltz away from single payer, which sort of disturbs me
considerably, at least we ought to fight to make sure they are
going to participate in the exchange, which is going to be a
benefit to them. They ought to at least have to give something
back to the consumer and not be allowed to continue to do that.
Mr. Shea, if you want to respond to that, it is fine with
me.
Mr. Shea. I was just sitting back and saying, well said. I
think that is right.
The other thing I would say, though, Congressman, is that
we have to realize that these costs are not just at the highest
level. They are not just in the advertising or in the marking
or in the obscene executive salaries, as I would consider them,
as I have read the numbers. They have to do with the basic
relationship between insurance companies and the people who are
providing the care.
There was a great example given by the Boston Globe
recently of the relationship. Usually these things are not
revealed. It revealed the BlueCross relationship with Partners
Health Care, the biggest system in Boston.
We need public service organizations. They may be private
companies, but they claim to do a public service. We need them
to be watchdogs, not lapdogs, in terms of this issue. So I
think you are exactly right.
Mr. Tierney. I will not ask it again, but Mr. Pollack was
on the last panel. I asked him--and I do not think anybody was
satisfactory in answering it. I have yet to hear a description
of what value-added insurance companies really bring to direct
patient care. Just what is it they bring to the table? Mr.
Hacker, do you want to tell me what it is that insurance
companies do to move a patient's care forward?
Mr. Hacker. I think the best insurance companies have been
able to innovate and to provide high-quality care and good
customer service to their patients. I believe that insurance
companies in the current environment have incentives to engage
in the kinds of practices that Mr. Shea just spoke about, which
is passing costs on to consumers and employers rather than
bargaining for better prices with providers or trying to weed
out unhealthy people rather than providing care to those who
need it.
If we change the incentives and say, as a condition of
entering the exchange, you have to abide by these strict rules
and you are going to have to compete with a public-service-
oriented plan, a public health plan on fair and equal terms, I
think that public--the insurance plans, I hope that they can
rise to this moment and can provide the kind of innovation,
customer service, and delivery system benefits that we have
seen among the best plans.
Chairman Miller. It certainly would be a statement of hope
over experience.
Dr. Roe.
Dr. Roe. Thank you, Mr. Chairman. Just a couple of things.
Mr. Pollack, you are wrong about who would have that plan.
In our own practice, out of the 294 people who have a health
savings account, I would dare say that the people who work in
doctors' offices consider themselves wealthy, and those are the
folks that have those plans.
Just a comment. Having practiced medicine for 31 years, let
me explain to you how, until you get malpractice straightened
out, you are going to have a difficult time controlling costs.
You came to me in the emergency room 30 years ago. You had
right-sided pain, right low-quadrant pain. I would examine you
and say, you know, let's get a blood count that costs $25, a
temperature, and a physical exam. That is what we did. Come
back if you are not feeling better.
Today when you come in, you are going to get a CT scan,
because that is now the standard of care to diagnose
appendicitis. What happens is that is a $1,000 test, as opposed
to a $50 emergency room visit; and if you do not do that, just
get the pencil out and write commas and zeros, because that is
what you are going to pay.
Access to this technology and then to the legal climate has
created this. Unless you get meaningful malpractice reform,
doctors are going to behave in their own self-interest, which
is not to get sued. If they are sued, what they are going to do
is they are going to have all of the documentation they can
possibly get their hands on to prove they did not do
malpractice.
So I am just pointing that out as a given.
One of the things that I think Ms. Visco said that was
very, very important and one of the reasons that I am concerned
about this government plan is that you are absolutely right.
Patients and doctors should be making decisions, not health
insurance companies and not public plans. Let me give you an
example.
When I began my practice, about 50 percent of women died of
breast cancer when I started practice. That was why the big
argument came: Do you do a radical surgery or a simple surgery?
It did not matter. The results were the same.
What has occurred now over time is that we have almost
above a 95 percent 5-year survival rate; and that is a
wonderful thing, when a patient comes in, to be able to tell
her you are going to live through this awful disease. Our
practice averaged seeing one new breast cancer patient a week.
That is how often we saw that disease.
In England, they have quit doing screening mammography, and
the reason they quit doing it was that, with the wire-guided
biopsy, the false positive rate of the test tells you you have
something when you do not. The wire-guided biopsy, using a
radiologist, costs more than the screening mammography. So nice
their comparative effectiveness made a decision not to continue
to do routine mammographies. I would argue, as you just did so
eloquently, that screening mammography with the new digital
mammograms, with patient education, and with new medicines
raise this level of survival.
In the single-payer system, what happens and the way they
all work at the bottom of the day, at the end of the day, is
they ration care. That is how they work. You have so many
dollars spent on health care, and then after you have spent
those dollars, waits occur.
In Canada, a great place, it takes 117 days to get a bypass
operation. This is not Phil Roe talking. This is the president
of the Canadian Medical Association. In the past, he has stated
you can get your dog's hip replaced in a week, but it takes you
2 to 3 years to get your own hip replaced in that system.
So that is my concern, is that a government bureaucrat will
be making that decision based on a budgetary number, not on the
patient and the doctor.
Let me tell you what. I am not here to defend private
health insurance companies. I can promise you, when I was a
young doctor, I thought they would provide health care, and I
think Mr. Pollack pointed out that they are there to make
money.
Comment.
Ms. Visco. Well, what I would like to say is that what we
want, what patients want, is care based on evidence. That is
what we want.
I did not mean to say the decision should be made solely by
patients and doctors. I did not mean to say that decisions
should be made by insurance companies.
What we want is a system that supports decisions based on a
high level of evidence or on interventions that are helping us
get evidence, and that is the way it should work. It does not
work that way now, and a significant percentage of care is not
based on a high level of evidence. Those are decisions that,
unfortunately, are often made by physicians. But if we had a
system that supported evidence-based interventions and
supported care----
Dr. Roe. Excuse me. You would not support a system that
would not do screening mammography, would you?
Ms. Visco. I would support a system that only used
screening mammography in appropriate age groups and in
appropriate situations.
Dr. Roe. Oh, absolutely. I agree. But not at all. This is
not at all at any age.
Ms. Visco. I am unaware of that, and I will go back to my
office and look up that the U.K. has stopped screening
mammography. I was unaware that that happened.
Dr. Roe. One other question, Mr. Stapley. Medical loss
ratio, would you comment on that?
Mr. Stapley. You know, I think that there are a lot of
plans that have been abusive, that have very, very terrible
loss ratios, but there are a lot of private plans that have
very good loss ratios, in the neighborhood of 94, 95, 96
percent, and so we have a tendency to focus on the extreme. I
would simply say that there are private plans out there that
have a community focus, that are interested in the people they
serve, and that want to make sure they get cost-effective,
high-quality health care and that they do it at a very low
cost.
I would also point out--I mean, I am not opposed to
Medicare. I think Medicare, in terms of consistent, fair
administration, I think they are probably one of the best plans
in the marketplace. They are a very good plan. But I do not
think that Medicare is a sterling example of what we want our
financing system to look like. Because Medicare has issues,
too, with respect to the fact that they incentivize a lot of
unnecessary care. In fact, a lot of the things that you saw in
McAllen, Texas, that have been referred to in contrast with El
Paso are based on a reimbursement system that has been
perpetuated by Medicare.
I do not say that the private system is any better. It is
not. They have followed suit. They have done the same thing.
They are incentivizing more care, not high-quality care, not
cost-effective care. But there are examples of private plans
that do a pretty good job.
Chairman Miller. Mr. Courtney.
Mr. Courtney. Thank you, Mr. Chairman.
I would like to focus the panel for a moment on the self-
employed, which Mr. Arensmeyer talked about a little bit in his
testimony. He told the story about Louise Hardaway, who could
not find insurance or was quoted $13,000 a month.
You know, I just want to ask you just to confirm what I
think is true and, actually, know is true. Her situation is not
created by government, by government option programs or by
mandates. I mean, in fact, the self-employed right now are
completely exposed to the marketplace with absolutely no
protection under prior HIPAA laws and, in most States, with
virtually no regulatory protection. I mean, that group needs
help, isn't that correct, Mr. Arensmeyer?
Mr. Arensmeyer. Absolutely. It is a growing part of our
economy, 21 million now and growing. It is a critical part of
our 21st century, high-tech economy. You are absolutely right.
I mean, the system could not work any worse than it is working
for them. It is directly impeding our economic growth.
Mr. Courtney. I am trying, Mr. Speranza, to sort of
decipher where the Chamber is on this issue. I mean you sort,
of at the end of your statement talked about the Chamber thinks
it is time to reform insurance markets, but you sort of danced
around the question about making the folks in that end of the
market participate or not. I guess the question I want to ask
you is, does the Chamber support or does it not support an
individual mandate?
Mr. Speranza. I would say that we would certainly consider
that. Again, I am not an accountant.
Mr. Courtney. Wait a minute. You are here, representing the
Chamber, as someone speaking on health insurance.
Mr. Speranza. Yes.
Mr. Courtney. I come from Connecticut, and we are
surrounded by insurance companies. When you talk about
reforming the market, their response always is, fine, but you
have to have an individual mandate. Because, otherwise, you are
basically creating a system of adverse selection, and rates are
just going to go through the roof, and the Chamber is smart
enough and experienced enough to understand that dilemma.
Really, I think this committee and the people of this
country and, frankly, your members, of which I was one of them
up till about 2 years ago, deserve an answer in terms of where
the Chamber stands on this issue.
Mr. Speranza. I cannot make policy for the Chamber.
Mr. Courtney. Well, I would ask that the Chamber come back
to----
Mr. Speranza. From my discussion with the health care
experts, it is something that, as I understand, they would
seriously consider. Personally, I would as well.
Mr. Courtney. Frankly, I think the issue has been out there
for years, and the Chamber has enough staff and experience in
this issue and, frankly, it has enough members who are directly
impacted by it that they deserve an answer, and we need to
understand that as we go forward over the next 6 weeks or so.
Mr. Speranza. What I would promise is getting an answer
back from staff on that point.
Mr. Courtney. Mr. Hacker, in your testimony, I noticed you
were very clear about supporting an employer mandate. It was
sort of an absence of comment in terms of the individual
mandate. I was just wondering if you wanted to chime in.
Mr. Hacker. No. In my original proposal, Health Care for
America, there is, indeed, an individual mandate. All I would
say is that I think it is essential that you have both an
employer and an individual requirement and that there be a real
emphasis on the affordability of coverage if you do have an
individual requirement.
My main concern is always how do you ensure that people get
enrolled. An individual requirement without strong measures to
ensure enrollment will not work, and I think this is
particularly true with populations like the self-employed, who
I think would benefit the most of any employment group in many
ways from having the choice of plans within an exchange.
So what I would say--and this is not in the legislation--
is, if there is a tax penalty associated with failure to
provide insurance, that at the same time that that penalty is
assessed or before it is assessed that people should be given
the menu of options within the exchange and should be given the
option to enroll for coverage within the exchange. I think that
is exactly the kind of constructive step that is being proposed
in a lot of other areas. Try to give people these choices and
to make sure that, when possible, people are opting out rather
than opting in, automatic enrollment. I think if we did that we
would move towards a system of seamless coverage that would get
us very close to covering all Americans and achieving
Congressman Kucinich's goal of health care as a human right.
Mr. Courtney. Mr. Arensmeyer, again, your members go
through the experience of applying for insurance as a self-
employed. Again, they are the risk takers, the capitalists, who
want to go out and pursue their dreams, but if they have old
sports' injuries or cesareans or chronic illnesses, they get
shut out either with outrageous premiums or with the denial of
coverage completely.
For them, I mean, we have got to fix this. If we really
care about the market and a capitalist system, these are the
people for whom we have got to create a path to health
insurance coverage; isn't that correct, Mr. Arensmeyer?
Mr. Arensmeyer. Exactly. There is tax inequality, too, the
15.3 percent self-employment tax that a self-employed person
cannot deduct the way a business owner can deduct.
I mean, if you think about this country prides itself on
entrepreneurism. The health care system does nothing but put
impediments in the way of going out on your own, striking out,
taking risks.
Also, if you look at traditionally pulling out of
recessions in the past, it is the small business sector that
leads the way out of the recession. Usually, at some point in
time, the small business sector is creating 100 percent of the
net new jobs when moving out of recession.
So it is completely crazy. We have heard a lot of talk
today about the private sector and competition, but we do not
have a system that has got the kind of competition we need. We
do not have a system that encourages competition among
businesses. It is precisely this type of approach that the
committee has put forward that is going to enhance the ability
for everyone in the system to compete and ultimately to allow
the businesses out there to compete, those that are building
products and that are providing services.
Mr. Courtney. Thank you, Mr. Chairman.
Chairman Miller. Mr. Thompson.
Mr. Thompson. Mr. Stapley, you noted in your testimony that
private employers already subsidize costs of Medicare. Can you
provide an example of that?
Mr. Stapley. I provided two examples earlier. There is a
situation, for example, on the electronic transmittal of claims
where Medicare does not pay for that, so the private
participants in the system have to subsidize that.
On the other hand, I just gave the example of just a
classic negotiation when you are working out rates so that you
are going to pay providers. Where they say Medicare is giving
me a 2 percent increase and my charge max is going up by 4
percent, that means yours is going up by 6 percent.
Now, you know, from my perspective, the issue really is if
the public plan truly does compete on a level playing field. In
other words, I am not having to pay them money to compete
against me, so they can compete on a level playing field. I
mean, if you can resolve that issue, then I think that you will
find that large employers will probably feel a little better
about it. I do not know if they would feel totally good about
it, but if you can guarantee that the public plan, in terms of
a reimbursement perspective, is playing on a level playing
field, that makes it easier to deal with. Yet we do not want to
subsidize them and then turn around and they have lower rates
so they create an incentive, actually, for our employees to
leave the system and go to the public plan.
Mr. Thompson. Some of the recurring themes we have heard
this afternoon were innovation, competition, decreasing costs.
They are all important things when it comes to improving our
health care system.
Other than rolling out, taking out of the equation a
taxpayer-funded government competitor, are there other
methods--and this is for the whole panel--that you would
recommend or that would do that among private health insurance
providers where they would encourage competition, decrease
costs, and motivate innovation?
I will open that up to the entire panel.
Mr. Stapley. I would be happy to speak to that to a degree.
I think the establishment of an insurance exchange is a
huge step forward in a positive direction if you do this so
that you level the playing field for the system. I think it is
very true that the current small group and individual market is
totally dysfunctional. It is an embarrassment to this country.
This has to be reformed.
In the process of putting together the ground rules in
terms of how the insurance exchange works, you have to make
sure that every individual American, whether they come from an
employer plan, a small employer plan, or they are individuals,
they access the exchange and the plans in the exchange on the
same basis. That means that the private plans have a set of
rules they have to play by. There is community rating. There
is, perhaps, risk adjustment. You might do modified community
rating.
All of those things are essential insurance reforms that
must absolutely, unequivocally, uniformly, equitably apply to
every plan that is offered through the exchange. In and of
itself, that is a huge step forward in creating a better basis
for competition than we have in the present system.
Beyond that, I would say, in my opinion, the centerpiece
for reform still has to be cost management. We talked about
competition. You have to have payment reform, and you have to
create an incentive for the payers and for the health care
systems that are engaged with the system to do something
differently than incentivize the provider system to do more
even if it has no value. So you have got to look at episodic
reimbursement--at different kinds of reimbursement systems that
reward providers that provide high-quality, low-cost care that
is focused on medical guidelines and so forth and that
disincentivizes the provision of care that has no value.
So I think there are challenges in terms of the number of
plans that are available in some marketplaces. You would hope
that the availability of exchange and the establishment of a
uniform, level playing field would make it so that you have
more entrants in the system. I think we all hope that that
would be the case and that that, in and of itself, would
promote competition.
Mr. Arensmeyer. Congressman, I think we need to look at the
exchange of the ultimate free marketplace. It needs to be as
robust as possible. There need to be rules of the road.
Beyond that, insurance companies, whoever is providing
insurance, whether it is a public plan or a private plan, is
going to be judged. Their success is going to be based on their
level of service, the quality of what they are providing, and
it is something that is going to be transparent. It is going to
be there for everyone to see--for individuals, for small
employers, for whatever size can participate in the exchange.
It has got to be as robust as possible in order to really get
the level of competition that is needed.
Mr. Stapley. Can I make one more statement?
One of the unique provisions of the proposal that was set
forth by ERIC a couple of years ago is the section that deals
with health plan transparency. I guess I would honestly have to
say that the regulatory structure in the United States has not
done a very good job of regulating insurance companies. You
have to have transparency to the extent that a lot of things
that are not public now with respect to how insurance companies
do business become public.
Denial rates, for example, have a huge impact on what your
ultimate benefit is. You might have a plan that says, I pay 90
percent of your benefit after a deductible. But, at the end of
the day, their administrative practices in terms of how they
adjudicate claims can actually result in a lesser benefit.
We have experienced that. We offer benefits in all 50
States. We have seen insurance plans that we offer in some
States that, because of their aggressive administrative
practices, end up delivering lower benefits.
So health plan transparency, which is the cornerstone of
the initiative put forth by ERIC, is critical to the proper
functioning of the exchange as part of leveling the playing
field, as part of making sure that the public knows exactly
what they are buying when they purchase it.
Chairman Miller. Ms. Fudge.
Ms. Fudge. No questions, Mr. Chairman.
Chairman Miller. Mr. Kildee.
Mr. Kildee. I have no more questions.
Chairman Miller. Mr. Scott.
Mr. Scott. Thank you, Mr. Chairman.
We have heard a lot about the difference in the
reimbursement rate of the Medicaid/Medicare programs as opposed
to the private plans. I was not aware that there was that much
difference. Do any of the insurance plans pay less than
Medicare or Medicaid? Does anybody know?
Dr. Hacker.
Mr. Hacker. I should just say Medicaid rates are
substantially lower than private insurance rates so that it is
highly unlikely. There are probably some plans that do not pay
on the same basis as Medicare, that is, on a more or less fee-
for-service basis, that are paying something equivalent or
close to equivalent to what Medicare pays. The evidence is that
most private insurance plans that pay on a fee-for-service
basis pay something higher than what Medicare rates are.
Mr. Scott. Well, should we require all insurance companies
in the exchange, including the public option, to pay the same
reimbursement rate, including HMOs?
Mr. Hacker. Well, I do not think that we should require
HMOs to pay the same reimbursement rate precisely for the
reason I just mentioned, which is that they pay in a different
way. If you are paying your doctors on a per-person basis or on
a salary or if you are using bundled payments, then it is not
comparable to the way in which Medicare pays.
As we have argued and as Mr. Shea and I have argued, we
think strongly that Medicare should move towards innovative
ways of paying for care. There are proposals that have been
discussed in the past for having private plans that pay on a
more or less fee-for-service basis that are competing with a
public plan or separately from a public plan. They pay at the
rates that a public plan would. In many countries, they have
something like this. It is called ``all-payer rate setting.''
It is not actually being discussed today. The Medicare
Advantage fee-for-service plans are allowed to pay Medicare
rates, the private fee-for-service plans.
I think one thing that should be said--and this is very
important--is that Medicare has passed innovations in the way
it pays for care, such as the DRG system for hospitals. They
have frequently set the standard for the way in which private
plans pay for care.
So this is one of the reasons why I think we need a public
plan that is focused on the non-elderly, who have very
different needs than the elderly, which is coming up with new
and innovative payment methods that I believe strongly, through
transparency, not only will be made available but also will
disseminate into the private sector.
Mr. Scott. Well, one of the ways you can make money is to
underwrite and make sure you only get healthy people in the
plan, and this is technically prohibited in the plan.
How do you avoid informal underwriting where you market the
benefits, if you have very poor benefits for diabetes, HIV/
AIDS, things like that, so that those with those problems will
not choose your product? How do you avoid informal
underwriting?
Mr. Stapley. I think there are a lot of things that have to
be part of the exchange to prevent that sort of thing from
happening. My opinion is there are lots of ways to avoid risks.
In fact, the name of the game in the current private system is
risk avoidance. The reason that that is the case is that the
incentives in our system create that. You can make a lot more
money if you are a for-profit plan, for example, by avoiding
risk than you can by being an efficient administrator. So what
you have to do is you have to structure the design of the
exchange in such a way that you take away those incentives.
Now, you have the classic things like underwriting. You
have this small group and individual market and so forth, but,
beyond that, you can have benefit design that is intended to
make it so that sicker people would not take the plan. So you
would have to have some, in my opinion, standardization of
benefits to make it so that it is harder to do that.
You can have, for example, geographic risk selection. We
have employers in Illinois. It is really fascinating to me the
kind of coverage that we can get in Chicago that we cannot get
in Nauvoo, which is in the central part of Illinois. That is
simply because those plans have made the decision: I cannot
make as much money in Central Illinois as I can make in
Chicago. Therefore, I am not going to offer my coverage there.
So the plans ought to be required to cover the entire
service area and so forth. That has to be kind of a regulatory
scheme to eliminate the externalities that make it so that
plans compete on an unfair basis.
Mr. Scott. I am trying to get another question in before my
time runs out.
Mr. Shea, there is a pay-or-play in Massachusetts where
your employees don't get any insurance. Is it important that if
you choose the ``pay'' option that the employees actually get
coverage.
Mr. Shea. Absolutely. And it is also important that there
is a meaningful payment option, not like Massachusetts, that
they are $300 a year per employee, or whatever it is, and you
are proposing something that is substantial. I think that is a
way to design it.
Chairman Miller. Dr. Cassidy.
Dr. Cassidy. Ms. Visco, my wife is a breast cancer surgeon,
and when you speak I just think, oh, my gosh, isn't that just
music to my ears and my wife's ears? We share your concern.
Dr. Hacker, a couple of things. Your proposal--and, by the
way, congratulations. I think this is your brainchild, and
obviously it has really become something. The public option is
really innovative in that it nationalizes an insurance company
or creates a government-run health insurance company. But as
you are speaking about the payment methods, Medicaid and
Medicare have lagged far behind ERISA companies, for example,
in coming up with innovative payment schemes. Way behind.
So as I look at this--and I try to think the patient is
central in this proposal which we have--I don't really ever see
that the patient is really central to cost savings or the
patient is central to improving outcomes. What I do see is that
there is a great emphasis on using bargaining power to decrease
costs, even though in your paper you mention that probably for
physicians that bargaining power has been used to excess and
you can demonstrably show in some cases that physicians--that
access has decreased because of it. Indeed, the CBO scoring of
this, or maybe the Senate document, the CBO scoring said there
would be limited access to some specialists because of rates
paid by the public option.
So I don't see that much innovative. So let me bounce it
back to you. If we are really going to come up with a patient-
centered plan, I think the only way that history has shown us
that we can save money is by doing so. The only way we can
improve outcomes is by doing so. Why not HSAs? HSAs, according
to Kaiser--I keep on saying this but it is just--I feel like a
tree farm in the forest--for a similar demographic, a similar
set of benefits, HSAs cost 30 percent less than do a fee-for-
service plan. The patient is now in control.
Yesterday, I was speaking to someone. They have an HSA.
They said that their doctor prescribed them a $150 proton pump
inhibitor. They went to him and said, listen, we are paying for
this out of our HSA, and they asked for a substitute, and they
got a $20 generic substitute. That is because the patient
initiated it. By the way, her health care was not compromised.
I don't see much innovative beyond using monopsony power to
drive down costs and presumably shifting whatever degree you
shift. We can argue over that.
Two, how do we effectively make the patients central, as
opposed to the payment mechanisms or the government bureaucracy
which must administer this program?
Mr. Hacker. Thanks for the compliment. At this particular
moment, I don't want to be considered the author of this
proposal.
Dr. Cassidy. I wouldn't, either, but that is okay.
Mr. Hacker. So I want to address each of your questions in
turn.
With regard to the question of whether or not this is an
innovative approach, I think it is very important to emphasize,
as I have, and this is emphasized in the legislation, that the
idea would not be to replicate the Medicare program but to
create a new program that had a broader set of benefits, a
different risk----
Dr. Cassidy. You are very explicit that you are using the
same way to control costs as Medicare, which is through
monopsony power and using your bargaining power to lower rates.
Mr. Hacker. I believe I said that it should be one tool
that the plan should have.
Dr. Cassidy. The other tools that you suggest have not been
proven to work. For example, accountable care organizations are
theoretical, but even the proponents will admit that it is
basically a pilot project.
Now, health IT--and in your paper--and thank you for your
intellectual honesty--you point out the preventions, benefits,
and controlling costs are limited.
Mr. Hacker. That is interesting. I don't remember saying
prevention was limited. I do say that there has been great
skepticism on the part of the Congressional Budget Office with
regard to the cost-control effects of some of these measures,
and it should be noted that, whether or not prevention reduces
cost, it is a good thing to do.
But I was going to just say quickly that one tool that the
plan should have is to use its bargaining power, but it should
be allowed to innovate. I was very pleased to see in this
legislation that after a period of time that the plan would
actually be developing new payment modalities. And I said--and
care coordination strategies.
I said repeatedly that I believe that is what needs to
happen and that it will be easier to do with a public plan that
is focused on the non-elderly than it is in the current
Medicare program.
I also think it is important to think about how to separate
this plan from some of the political forces that have made it
hard for Medicare to do the more value-oriented purchasing that
we would like it to do.
I agree completely that patients should be central. It is
worth noting, for all of its flaws within the Medicare
programs, there are very high levels of patient satisfaction.
Dr. Cassidy. Yes, but that is because they are relatively
screened from the costs, and that is one of the reasons it is
going bankrupt in 2017. And in your proposal there is no
requirement for market capitalization or for business
capitalization. Rather, it is the full faith and credit of the
Federal Government.
Mr. Hacker. I believe there are many reasons why patients
are satisfied with Medicare, but my read of the surveys are
that they are favorable for it because of the ease that they
have in finding physicians and having access to specialists and
the sense that they don't have to wait for doctors. And those
are things that I think that the public plan can provide.
Chairman Miller. Thank you very much for the patience with
the committee and for all of your testimony that you have given
us today.
I hope that we can continue to engage you as we move
forward in this process. There are a number of very good and
relevant suggestions that have been made by this panel, and we
hope that you would agree to let us continue to pick your
brains on this one. Thank you very much.
I will introduce the next panel.
Ms. Karen Pollitz is the Research Professor and Project
Director at the Georgetown University where she directs
research on health insurance reform. From 1993 to 1997, she
served as Deputy Assistant Secretary of Health Legislation at
the U.S. Department of Health and Human Services. Ms. Pollitz
has a BA from Overland College and an MPP from the University
of California, Berkeley.
Ms. Celia Wcislo is an executive board member of the
Service Employees International Union as well as Assistant
Division Director of 1199 SCIU United Health Care Workers East,
a union of more than 300,000 health care workers. She also
serves as a board member of the Commonwealth Connector
Authority. And Ms. Wcislo holds a BS from the University of
Massachusetts, Boston, as a graduate of the Harvard Trade Union
Program.
Mr. James Klein is the President of the American Benefits
Council, the trade association representing Fortune 500
companies that sponsor and administer health and retirement
benefits. Mr. Klein is a graduate of Tufts University and a
graduate of the National Law Center at George Washington
University.
Mr. William Vaughan is Senior Health Policy Analyst for
Consumers Union. Starting in 1965, he worked for various
Members of the House of Representatives, the Ways and Means
Committee, and retired in 2001 as the Health Subcommittee
Minority Staff Director. Mr. Vaughan has graduated with a BA
from American University.
Dr. Robert Moffit is the Director of Health Policy Studies
at the Heritage Foundation, specializing in health policy
issues. He is a former senior official at the U.S. Department
of Health and Human Research Services and was involved in
Massachusetts health insurance reform initiatives in 2005. Mr.
Moffit holds his BA from LaSalle University and his Ph.D from
the University of Arizona.
Ms. ReShonda Young is the operations manager of Alpha
Express, a small business in Waterloo, Iowa, where she serves
as the company's operations manager. Ms. Young is also a leader
in the Iowa Main Street Alliance, a coalition of small
businesses across Iowa. Ms. Young has a BA from Wartburg
College.
Dr. Fitzhugh Mullan is a Murdock Head Professor of Medicine
and Health Policy at George Washington University. He earned
his rank of Assistant Surgeon General when he directed the
Bureau of Health Professions. Dr. Mullan holds a BA from
Harvard and an MD from the University of Chicago.
Welcome to all of you. Thank you for your patience today.
You have watched the drill here. You will be given 5
minutes to summarize your written statement. Also, if you think
there is something you want to comment on during your
presentation that you have heard from the previous panel, do so
if you think it would be helpful.
Chairman Miller. Professor Pollitz, welcome.
STATEMENT OF KAREN POLLITZ, RESEARCH PROFESSOR AND PROJECT
DIRECTOR OF THE HEALTH POLICY INSTITUTE, GEORGETOWN UNIVERSITY
Ms. Pollitz. Thank you, Mr. Chairman.
Congratulations on a very fine tri-committee draft proposal
for health care reform. It is an impressive accomplishment
worthy of the challenge we face to make health care available,
affordable, and adequate for all Americans. Your hard work and
wisdom and practicality and that of your excellent staff is
evident in this proposal, and this time I know you will get the
job done.
Your proposal defines a minimum health benefits standard.
It requires all Americans to have at least that level of
coverage, with shared responsibility for paying for that by
employers. It creates tax credits for small businesses. It
expands Medicaid and creates new premium and cost-sharing
subsidies for private coverage to help other Americans of
modest means.
The proposal also establishes strong new market reforms for
private insurance with important consumer protections. It
creates a new health insurance exchange, an organized
marketplace that will give consumers, individuals, and small
employers a great deal of assistance with enrollment, appeals,
applications for subsidies, provide comparative information
about plan choices; and, on their behalf, the exchange will
negotiate with insurers over the premiums for health insurance
in order to get the best possible bargains. And, importantly,
consumers and employers who buy coverage in the exchange will
also have the choice of a new public plan option.
You have heard about the recent national poll that
indicates Americans strongly favor such an option. It can
address the failures of competitive health insurance markets
today.
First, it offers consumers an alternative to private health
plans that for years have competed on the basis of
discriminating against people when they are sick. Just last
week, your colleagues on the Energy and Commerce Committee held
a hearing on health insurance rescissions. One woman who was
battling breast cancer testified that her coverage had been
revoked for failure to disclose a visit to a dermatologist for
acne. When consumers are required to buy coverage, having a
public option that doesn't have a track record of behaving in
this way will give many peace of mind.
And, second, a public plan option will promote cost
containment. Research shows that insurance markets today do not
compete to hold down costs. Rather, insurers and providers
negotiate to pass costs through to policyholders while
maintaining and even growing profits.
For the first few years, the public plan option will be
allowed to base its payments to doctors and hospitals on the
fee schedules used by Medicare. Thereafter, it will develop
innovative payment methodologies to hold down costs.
Mr. Chairman, clearly as this bill moves through the
legislative process there will be opportunities to modify and
improve it; and in my written statement, I offered several
recommendations in that regard and would briefly just describe
three of those for you now.
First, with respect to the essential benefit package, the
bill does create a benefit standard, and it appears to be a
solid one, but it doesn't create an out-of-pocket limit on cost
sharing for care received outside of a plan network, and that
is an important omission to correct. And your plan does not
specifically reference as a benchmark the BlueCross/BlueShield
standard option plan offered through the FEHBP today.
Many have talked about that plan which so many Members of
Congress have as coverage today as being an appropriate
benchmark of minimum coverage for all Americans. It is not
clear whether your essential benefit package meets that
standard, but it should; and if it doesn't, the standard should
be improved. And if that raises the cost of the bill, it will
be imperative to find additional resources.
Over the next decade, our economy will generate more than
$187 trillion in gross domestic product, and we will spend a
projected $33 trillion on medical care. Investment in health
care reform that guarantees adequate protection for individuals
and families is worthwhile.
Second, with regard to rules governing health insurance,
new rules won't be meaningful unless there are resources for
oversight and enforcement. After the enactment of HIPAA, a
witness at a congressional hearing for the Department of Labor
testified that the Department had resources to review each
employer-sponsored health plan under its jurisdiction once
every 300 years.
For health reform bills, your final health reform bill must
appropriate resources for the Department of Labor as well as
for HHS and State insurance departments so that there is
capacity to oversee and enforce the new standards. Your
colleague on the Appropriations Committee, Congresswoman
DeLauro, has introduced legislation to do this.
And, finally, with regard to subsidies, the bill creates a
sliding-scale assistance so that middle-class Americans with
income up to 400 percent of the poverty level will not have to
pay more than 10 percent of their income toward premiums. As
charts in my written statement illustrate, however, some
consumers--including self-employed, who have been mentioned a
lot today--who have incomes above that level may still face
affordability problems. This is especially likely for people
who have to buy family coverage and for baby boomers who could
face much higher premiums under age rating that is allowed
under this bill.
I hope the committee will consider setting a premium so
that no American will have to spend more than 10 percent of
their income on health insurance.
Chairman Miller. Thank you.
[The statement of Ms. Pollitz follows:]
Prepared Statement of Karen Pollitz, Research Professor, Georgetown
University Health Policy Institute
Good afternoon, Mr. Chairman and Members of the Committee.
I am Karen Pollitz, a Research Professor at the Georgetown
University Health Policy Institute, where I study the regulation of
private health insurance.
I commend the Members of the three House Committees, including this
one, for the Tri-Committee Draft Proposal for Health Care Reform. Your
hard work, wisdom, and practicality are evident in this proposal. It
contains the key elements necessary for effective health care reform
that will achieve universal coverage and introduce cost discipline into
the health care system. I congratulate you on this effort, and as a
citizen, I thank you for it. This time, you will get the job done.
In my remarks today, I will comment on some of the central health
care reform provisions contained primarily in the first five titles of
the draft legislation and offer several suggestions that I hope you
will find helpful and constructive as you work toward enactment later
this year.
For health care reform to provide all Americans with secure
coverage, changes must be adopted and enforced to ensure that health
insurance is always available, affordable, and adequate. Key elements
of the Tri-Committee proposal will address these critical needs.
Individual responsibility The legislation requires all Americans to
have health insurance coverage. More importantly, it makes other
changes to our coverage system to enable people to comply with this
requirement.
Essential benefit standard A most basic component of health care
reform is to define what constitutes health insurance. Far too many
policies that provide inadequate coverage are on the market today, and
as a result, almost as many Americans are under-insured as uninsured.
Recent studies find that 57 million Americans are burdened with medical
debt, and 75 percent of them have health insurance.\1\ Medical bills
continue to be a leading contributor to personal bankruptcy and most
medical bankruptcies also occur among people who are insured. This
spring, Consumer Reports magazine reported on a host of health
insurance products that nonetheless left policyholders on their own to
pay tens of thousands of dollars (or more) in medical bills.\2\ Studies
show the under-insured, similar to the uninsured, have difficulty
accessing timely and quality health care.\3\
A fundamental purpose of health care reform must be to put an end
to medical debt and medical bankruptcy, and to ensure that health
coverage is, indeed, a ticket to health care. The Tri-Committee draft
proposal sets national standards for an essential health benefits
package that includes hospital care, inpatient and outpatient medical
care, prescription drugs, mental health and substance abuse treatment,
rehab services, preventive care services, and maternity care. The
essential benefits package includes additional, enhanced benefits for
children. Cost sharing for covered services provided in-network cannot
exceed $5,000 per year for an individual, $10,000 for a family. The
annual limit on cost sharing is a comprehensive limit that applies to
all forms of cost sharing, similar to that required for tax preferred
HSA-eligible health plans today.
All qualified health benefit plans will be required to cover the
essential benefits package. Three levels of plan options can be
offered. The Basic Plan level must set cost sharing to achieve an
actuarial value of 70 percent of the essential benefits package.
Enhanced and Premium Plan options must have actuarial values of 85 and
95 percent, respectively, of the essential benefits package.
A Health Benefits Advisory Committee chaired by the Surgeon General
will fill in other important details on plan features, such as the
annual deductible(s) and update the benefit package over time.
Recommendation--The essential benefit package must include a
maximum outof-pocket limit whether people receive care in or out of
network. Though the bill provides for the establishment of network
adequacy standards, patients nonetheless need protection against
unlimited cost sharing when they must seek care out of network. The
sickest people are most likely to need care from sub-specialists who
may not participate in their plan network. And any patient who is
hospitalized may inadvertently receive costly care from non-network
doctors whom they do not choose (for example, anesthesiologists,
radiologists, pathologists, emergency physicians.)
In addition, an often mentioned benchmark standard for coverage
adequacy is the Standard Option plan offered by Blue Cross Blue Shield
under the Federal Employees Health Benefits Program (FEHBP)--coverage
that most federal employees and many Members of Congress have today.
The essential benefits package outlined in the draft proposal appears
to provide less coverage than this FEHBP standard. If that is the case,
additional resources should be included to raise the minimum benefit
standard. Over the next decade, our economy will generate more than
$187 trillion in gross domestic product and we will spend a projected
$33 trillion on medical care. The investment in health care reform that
guarantees an adequate level of protection for individuals and families
is worthwhile.
Whatever benefit standard is ultimately adopted, the Health
Benefits Advisory Committee should be required to regularly report on
medical bills that individuals and families incur. Updates to the
essential benefits package over time should strengthen coverage
adequacy.
Finally, the draft proposal continues to permit the sale of certain
so-called ``excepted benefits'' in traditional health insurance
markets. These would include cancer policies and other dread disease
and limited benefit policies. Consumers are vulnerable to abusive
marketing practices when it comes to these policies and state
regulators have long warned they are a poor value.\4\ At a minimum,
such policies should contain warning labels that they do not constitute
qualified health benefit plans and that coverage is duplicative of that
provided under qualified health benefit plans.
Subsidies and Medicaid expansion Overwhelmingly, today, the
uninsured have low incomes and lack coverage chiefly because they
cannot afford it. The Tri-Committee proposal addresses affordability in
two ways.
First, it expands Medicaid coverage to all Americans with family
incomes up to 133\1/3\ percent of the federal poverty level (FPL). This
is an important departure from the current Medicaid program, which only
provides coverage for certain categories of individuals--children and
their parents, and other adults only if they are elderly or disabled--
and which applies varied income eligibility standards that often vary
significantly by state. To make this expansion affordable for states,
the draft legislation provides that the federal government will pay the
full cost of covering new expansion populations--childless adults and
other adults for whom income eligibility levels are below 133\1/3\
percent FPL. Further, to ensure individual choice, Medicaid-eligible
individuals will have the choice between enrolling in Medicaid or
seeking other subsidized private health insurance coverage
Second, the discussion draft provides for sliding scale financial
assistance for individuals and families to purchase private health
insurance. Premium subsidies would be offered on a sliding scale for
people with family income up to 400 percent of FPL. At last count, ten
percent of the uninsured, or some 5 million Americans, had incomes
equal to 400 percent FPL or more. This is due to the fact that our
measure of poverty level income is very low, while the cost of good
health coverage is relatively expensive. For a family of 3, an income
of 400 percent of FPL is $73,240. For that family to enroll in the
FEHBP Blue Cross Blue Shield Standard Option plan, the annual premium
would cost $13,446, or 18 percent of gross family income.
Because people with incomes above the subsidy levels provided in
this bill may find quality health insurance coverage costs more than
they can afford, you should consider improvements to the premium
subsidy schedule as you work through the legislative process this year.
Importantly, the discussion draft also provides subsidies for cost
sharing under private health insurance. This is also critically
important. Deductibles, co-pays, and coinsurance are additional
payments required of insured individuals at the point when they seek
health care. Decades of research shows that cost sharing deters the use
of care, including medically necessary care, particularly by people
with limited income. Further, research shows that when out-of-pocket
spending for medical bills (not including premiums) exceeds just 2.5
percent of family income, patients become burdened by medical debt,
face barriers to accessing care, and have problems paying other
bills.\5\ Cost sharing subsidies are necessary to ensure that people
can afford to access covered benefits.
Recommendation--Depending on what premiums are charged for
qualified health benefit plans, subsidies capped at 400 percent of FPL
may prove to be insufficient to ensure affordable health care for all
Americans. The Committee might consider instead a rule that no
individual or family will have to pay more than 10 percent of income on
health insurance premiums (with lower limits set for low-income
individuals, as the Tri-Committee draft does.) Cutting subsidies off
entirely at an arbitrary income level can leave families vulnerable.
The Massachusetts health care reform experience is instructive. In that
state, subsidies are limited to residents with incomes to 300 percent
of FPL, and as a result, the state waives the individual mandate on
grounds of affordability for approximately 2 percent of residents.\6\
As shown in Figures 1 and 2, if the intent of the Committees is to
assure that no families or individuals will have to pay more than 10
percent of income for health insurance premiums, and if the FEHBP Blue
Cross plan is used as a benchmark premium, then people will need help
beyond that provided for in the draft proposal. The cost of good
coverage is will be sizeable compared to what many working families
earn. (See Figure 3) A subsidy system that caps people's liability for
premiums at no more than 10 percent of income would be more protective
and subsidies would taper off gradually, avoiding a cliff. Some
assistance would reach people at higher income levels, though help
provided to higher earners would be modest.
Private health insurance market reforms The Tri-Committee proposal
prohibits the use of common insurance industry practices today that
have the effect of discriminating against people based on health
status. Under reform, health insurance would have to be offered on a
guaranteed issue basis. No longer could individuals or employer groups
be denied coverage based on health status or health history, although
insurers would be allowed to surcharge premiums by as much as 100
percent based on age--a strong proxy for health status. The discussion
draft also provides for guaranteed renewability of coverage--a
requirement of current law--with clarification that the rescission of
health insurance is also prohibited. In other words, insurers will be
explicitly prohibited from a common practice today of taking back
coverage from individuals and employer groups after claims are made.
The draft legislation also prohibits the imposition of pre-existing
condition exclusion periods and prohibits insurers from varying
premiums based on health status. These market rules will promote the
spreading of risk, instead of today's industry practices of segregating
risk. And they are essential in a world where people are required to
have health insurance.
Other new market rules will ensure that coverage works well and
efficiently for consumers. Standards for network adequacy and the
timely payment of claims are provided for under the bill. In addition,
insurers will be required to meet minimum loss ratios of 85 percent, so
that no more than 15 percent of premium dollars can be spent on
marketing, administrative costs, and profits.
Recommendation--Consideration should be given to tighter limits on
age adjustments to premiums, or for elimination of such adjustments
altogether. Particularly if premium subsidies are capped at 400 percent
FPL, affordability problems may be substantial for members of the
``Baby Boom'' generation. Premiums for coverage sold today in
Massachusetts, where age rating of 2:1 is also permitted, illustrate
the affordability problem for people as we age. See Figure 4.
Finally, for market reforms to be meaningful, Congress must
authorize and appropriate resources for oversight and enforcement, both
at the federal and state level. The Tri-Committee proposal wisely
requires extensive data disclosure by health plans so that regulators
may monitor compliance with market rules. But regulators will need
expert staff to review and analyze data, as well as to conduct
compliance audits and respond to consumer problems and complaints.
Resources at the federal level are particularly lacking and must be
increased. At a hearing last summer of the House Committee on Oversight
and Government Reform, a representative of the Bush Administration
testified that the Centers for Medicare and Medicaid Services (CMS),
which is responsible for oversight of HIPAA private health insurance
protections, then dedicated only four part-time staff to HIPAA health
insurance issues. Further, despite press reports alleging abusive
rescission practices, the Agency did not investigate or even make
inquiries as to whether federal law guaranteed renewability protections
were being adequately enforced.\7\
Additional resources will also be needed at the U.S. Department of
Labor (DOL). After the enactment of HIPAA, a witness for DOL testified
the Department had resources to review each employer-sponsored health
plan under its jurisdiction once every 300 years.\8\
At the state level, limited regulatory resources are also an issue.
In addition to regulation of health coverage, state commissioners
oversee all other lines of insurance. In several states the Insurance
Commissioner also regulates banking, commerce, securities, or real
estate. In four states, the Insurance Commissioner is also the fire
marshal. State insurance departments collectively experienced an 11
percent staffing reduction in 2007 while the premium volume they
oversaw increased 12 percent. State regulators necessarily focus
primarily on licensing and solvency.\9\ Dedicated staff to oversee
health insurance and, in particular, health insurer compliance with
HIPAA rules are limited. Enforcement of consumer protections is often
triggered by complaints.
In order for new insurance market rules to deliver on promised
consumer protections, strong oversight and enforcement will be
essential. Your colleague, Congresswoman Rosa DeLauro, has wisely
introduced legislation (HR 2427) to strengthen oversight and
enforcement capacity at the federal and state level.
Establishment of a national health insurance Exchange The Tri-
Committee proposal also provides for the establishment of a national
health insurance Exchange. An Exchange is a more organized health
insurance market than what individuals, employers, and insurers are
used to today. For purchasers in the Exchange, there will be subsidies
to make premiums affordable. There will also be considerable new
sources and types of assistance--for example, the provision of
comparative information about plan choices, as well as assistance with
enrollment, determination of eligibility for subsidies and/or Medicaid,
appeals, and so on. Many of these services will be provided by a new
Health Insurance Ombudsman, created solely to help consumers navigate
the coverage system and make choices that are best for them.
For sellers of health insurance, the Exchange will accept bids and
negotiate with insurers over the premiums they charge. The Exchange
will also exercise much closer oversight over health insurance than
generally occurs today. Insurers will be required to report data on
their products and practices in order to make more transparent the
black box that is private health insurance today. These data will be
used in the establishment of risk adjustments to premiums, and to
monitor compliance with market rules and consumer protections.
Initially, the Exchange will serve those consumers who are most in
need of these added protections--individuals and the smallest employers
(with fewer than 20 employees) who lack market clout and the resources
to hire human resources experts of their own. Authority to permit other
employers to participate in the Exchange is delegated to a Commissioner
starting in the fourth year of implementation.
The Commissioner is also authorized to require that certain
consumer protections--such as network adequacy protections,
transparency standards, and external appeals--apply to all qualified
health benefit plans, including those outside the Exchange. However,
the Commissioner might not require parallel protections. Further, the
legislation does not require that insurers offer the same plan options
at the same prices both inside and outside the Exchange.
Recommendation--In order to protect against risk selection, it is
important for requirements to be identical for all qualified health
benefit plans, no matter where they are sold, in or outside of the
Exchange. If insurers can vary the plan options and prices they offer
in different markets, they will be more able to steer risk. The Tri-
Committee plan includes sanctions for employers found to steer risk
into the Exchange. Similar sanctions should be applied to insurers, in
addition to parallel rules to minimize this possibility.
A public plan option Within the health insurance Exchange,
consumers will have a choice of private health insurance plans and
carriers, as well as a public plan option. This is a key provision in
the draft reform bill that will promote both choice and cost
containment. A recent national poll indicates Americans are strongly
behind the establishment of a public plan option to compete with
private health insurers.\10\ The public plan option must meet the
requirements of other qualified health benefit plans offered by private
insurers. By introducing this option into the marketplace, a public
plan option can address failures of competitive health insurance
markets today.
First, it offers consumers an alternative to private health plans
that, for years, have competed on the basis of discriminating against
people when they are sick. At a hearing of the House Energy and
Commerce Committee just last week, patients testified about having
their health insurance policies rescinded soon after making claims for
serious health conditions. One woman who is currently battling breast
cancer testified that her coverage was revoked for failure to disclose
a visit to a dermatologist for acne. At this hearing, when asked
whether they would cease the practice of rescission except in cases of
fraud, executives of leading private health insurance companies
testified that they would not. Experiences like these make some
consumers distrust private insurers.\11\ If consumers are required to
buy health insurance, having a public coverage option that does not
have to compete on the basis of profits will give many peace of mind.
Second, a public plan option will promote cost containment.
Research shows that competitive health insurance markets today do not
operate to hold down costs. Rather, insurers and providers negotiate to
pass cost increases on to policyholders while maintaining and even
growing corporate profits.\12\ Under the Tri-Committee proposal, the
public plan option will initially be allowed to base its payments to
doctors, hospitals, and most other providers on the fee schedules used
by Medicare, albeit at a higher level than Medicare pays today. The
public plan will negotiate new payment rates for prescription drugs
with pharmaceutical companies. And it will be able to offer bonus
payments for providers that participate in both Medicare and the public
plan. The public plan option is further tasked with development of
innovative payment methodologies that hold down cost and promote
quality. This will help move the market in the direction of competition
based on the efficient delivery of health care services.
Shared responsibility Finally, the Tri-Committee draft proposal
provides for a continued role by employers in the provision of health
benefits. Most insured Americans today get health coverage at work and
a stated goal of health care reform is to let people keep current
coverage if they are satisfied with it. A requirement for employers to
provide health benefits (``play'') or contribute toward the cost of
other public subsidies for coverage (``pay'') is consistent with this
goal and will help keep employer resources in the financing system.
Conclusion Mr. Chairman, the Tri-Committee draft proposal for
health care reform is an impressive accomplishment, worthy of the
challenges we face to make health coverage available, affordable, and
adequate for all Americans. Your proposal defines a minimum health
benefits standard, requires all Americans to have it, and institutes
reforms to ensure affordable coverage in reformed markets with added,
important consumer protections. You also make available a new public
plan option that will add to consumer choice and move insurance markets
to compete on the basis of cost efficiency, not risk selection.
No doubt, others will recommend modifications as I have today. The
legislative process was intended to consider all points of view and
then to act in the best interests of the public you represent. I could
not be more pleased to see this legislative process at work. I thank
you for your courage and commitment to health care reform that secures
good, affordable health coverage for all Americans, and will be happy
to provide you any additional information or assistance that I can.
ENDNOTES
\1\ Peter Cunningham, ``Tradeoffs Getting Tougher: Problems Paying
Medical Bills Increase for US Families, 2003-2007,'' Center for
Studying Health System Change, Tracking Report No. 21, September 2008.
\2\ ``Hazardous health plans: Coverage gaps can leave you in big
trouble,'' Consumer Reports, May 2009.
\3\ Cathy Schoen, et al., ``How Many Are Underinsured? Trends Among
U.S. Adults, 2003 and 2007,'' The Commonwealth Fund, June 10, 2008.
\4\ See, for example, http://www.ncdoi.com/consumer/consumer--
publications/health%
\5\ Peter Cunningham, ``Living on the Edge: Health Care Expenses
Strain Family Budgets,'' Center for Studying Health System Change
Tracking Research Brief No. 10, December 2008.
\6\ Health Care Reform Facts and Figures, Commonwealth Connector,
June 2009.
\7\ Testimony of Abby Block, Hearing on Business Practices in the
Individual Health Insurance Market: Termination of Coverage, Committee
on Oversight and Government Reform, U.S. House of Representatives, July
17, 2008.
\8\ Testimony of Olena Berg, Assistant Secretary of Labor, Pension
and Welfare Benefits Administration, Senate Labor and Human Resources
Committee, October 1, 1997.
\9\ National Association of Insurance Commissioners, 2007 Insurance
Department Resources Report, 2008.
\10\ Kevin Sack and Marjorie Connelly, ``In Poll, Wide Support for
Government-Run Health'' New York Times, June 21, 2009.
\11\ Gallup poll, June 17, 2009, available at http://
www.gallup.com/poll/120890/Healthcare-AmericansTrust-Physicians-
Politicians.aspx
\12\ James Robinson, ``Consolidation and the Transformation of
Competition in Health Insurance,'' Health Affairs, November/December
2004.
______
Chairman Miller. Ms. Wcislo.
STATEMENT OF CELIA WCISLO, EXECUTIVE BOARD MEMBER, SERVICE
EMPLOYEES INTERNATIONAL UNION
Ms. Wcislo. Thank you.
I am testifying today on behalf of the Service Employees
International Union. Chairman Miller, members of the committee,
I applaud you for your draft bill that was released last week.
I am a local and national officer as well as a board member of
the Connector, which is implementing health care reform in
Massachusetts.
First, Americans are ready to fix health care. I have no
doubt about it. Your draft bill includes many of the essential
elements that will start that fix today.
SEIU supports a robust health insurance exchange. That is
what I do on a regular basis as a Connector board member. We
found three very good reasons for it.
One, it has allowed consumers to compare and find insurance
plans all in one place so they have some choices and they
understand their choices.
Secondly, we built on our Medicaid program so as people
move off Medicaid into subsidized care or into the employer
market they have a path through which they can go and they can
call one place and find out what they are entitled to.
And, finally, we have set a minimum standard of what health
insurance is, which is protect our markets and models what you
were going to do in the advisory committee.
SEIU supports the public health insurance option in your
bill as a way to keep costs down and foster price competition
in the private market. While the Connector board has been very
effective in providing subsidized care to the low-income folks,
we do not have a model of how to intervene in the private
market, and I believe this approach will do that. It could pool
the costs alone--small employers and individual folks in the
market in our State, when we did that, it saved 30 to 40
percent for individuals who were forced to buy it on their own.
One way of addressing some of the concerns about unfair
competition that I heard today is to make sure that the public
plan pays rates equivalent to Medicare or a little higher. In
particular, I am concerned that Medicaid does not pay as well
for primary care, and you would have to look at that, but that
would level the playing field because it will provide a closer
to a single--a sole--you know, a joint-payer system where
people are each paying the same amount and will limit the
amount of shifting onto the private insurance premiums.
SEIU supports the setting of minimum benefit standards that
connect to such standards for health insurance, and we applaud
the House for this proposal in this bill. Our standards have
been critical to keeping the floor from dropping out of our
insurance market and have protected consumers from predatory
insurance companies.
We also support the 400 percent affordability scale. Our
scale stops at 300 percent, and clearly 60,000 of the people
who are waived out of our individual mandate were waived out
because they could not afford it. Your bill fixes that.
And, finally, we support shared responsibility. Employers,
individuals, and the government must alter the part to make it
a sustainable and affordable system that covers everyone.
Massachusetts reform continues to be successful for many
reasons, but I would say the major reason is the approach of
shared responsibility that the House tri-committee bill adopts.
We have an individual mandate, we have government support and
an employer mandate, and it has worked. And, in fact, a recent
study by Health Affairs showed that people more likely--the
public more likely supports any kind of change in health care
if all of us chip in, and they are left more resistant if it
falls on only individuals.
Our individual mandate and our employer mandate have
worked, and 70 percent of our residents still approve of the
reform. SEIU applauds your proposal to make employers continue
paying.
One of the representatives mentioned Tennessee. There was
no pay-or-play system in Tennessee.
In closing, I would not like the choice to dump it onto the
backs of government. I think we need to keep the moneys that
employees put into the system in the system, and your pay-or-
play idea would do that.
To date, those two combined purchases in Massachusetts, an
individual and an employer mandate, appear to have worked. We
have 440,000 people out of 650,000 insured in less than 3
years. That is pretty amazing. That is 70 percent of our
uninsured. Of those, 191,000 were paid by employers or
individuals buying through the connector. That is, 44 percent
was paid not with government subsidies at all but through
business and individuals contributing. That is very important,
and your plan will do that.
Additionally, since 2003, the number of our employers that
provide insurance has gone up--68 percent to 72 percent. That
is contrary to the entire national States' markets. We have
proved that by having such a mandate we will bring in employers
who weren't offering it before.
And your requirement that looks at the entire payroll, your
entire payer payroll, is more fair because it does not hit low-
income employers in a more difficult way based on the size and
their ability to pay. It is critical that reform mandates--both
business and individuals--contribute to the cost of everyone,
along with government.
We must build a safety net for those individuals and small
businesses that do not have access now and access to affordable
insurance. We want a health plan to provide competition and
continuity in the market. We believe your draft bill is a great
step forward for that, and we support it.
Mr. Andrews [presiding]. Thank you.
[The statement of Ms. Wcislo follows:]
Prepared Statement of Celia Wcislo, Assistant Division Director,
SEIU United Healthcare Workers East
My name is Celia Wcislo, and I am testifying today on behalf of the
Service Employees International Union. Chairman Miller and members of
the committee, SEIU applauds you for the discussion draft bill released
on June 19. I am a local and national officer of SEIU as well as a
board member of the Commonwealth Connector Authority. This authority
was set up to implement Massachusetts' healthcare reform legislation,
and I have been a board member since the first meeting in 2006.
Americans are ready to fix healthcare. According to a poll
conducted in April by the Kaiser Family Foundation, a solid majority of
the respondents agree that the current economic crisis makes it more
important that we reform healthcare now. Your discussion draft includes
some essential elements that will promote coverage and access, cost
containment, and improved quality and value:
A Robust Health Insurance Exchange: As a member of the Connector
Board, we have found this form of exchange important for many reasons:
1. It has created a set of products, and a Web portal that, for the
first time, allows consumers to compare insurance products in one
place, helping them to find the information and comparisons they need
to select the plan that best fits their needs.
2. The Connector has also built on top of the state's Medicaid
virtual gateway, so individuals can quickly be enrolled in the
appropriate subsidized plans.
3. We have established a ``minimum wage'' type standard for what
minimum benefit coverage should look like, much as the proposed
advisory committee chaired by the surgeon general would do in the
discussion draft. I will speak to this more in a few minutes.
A Public Health Insurance Option: SEIU fully supports a public
health insurance option as a way to keep costs down and foster price
competition in the private market. While the Connector has been able to
keep the cost of our subsidized plans low because of our exclusive
market position and our role in defining benefits and co-pays, we have
had little impact on the private market. That has meant that premiums
continue to rise, and many small business owners are feeling the
financial impact. In particular, in Massachusetts we have only just
begun to offer plans to the small group market and it is still in the
pilot stage.
One way of addressing some of the concerns of ``unfair
competition'' that have been raised by private insurance plans is to
make sure the public option pays adequate provider rates. In
Massachusetts, the use of Medicaid Disproportionate Share funding to
pay for coverage expansion has meant a dramatic cut in both Medicaid
and DSH hospital rates that is devastating for the safety net delivery
system. Currently, hospitals that are treating those on Medicaid are
facing cuts that could destabilize these systems that treat low-income
individuals. To avoid a cost-shift to private insurance plans, a public
plan should pay above Medicare rates (and pay better for primary care
services which are dramatically underpaid in Medicare).
Massachusetts has recently set up a Payment Reform Commission to
solve this problem of different methods of payment. We are looking to
move away from paying for volume and toward paying to promote
prevention and health. Additionally, we are trying to solve the
problems of cost-shifting between Medicaid, Medicare and private
coverage. A public plan could help in demonstrating how all three areas
of insurance can be better moved to one playing field.
Minimum Benefit Standards: The Connector sets minimum standards for
health insurance, and we applaud the House proposal for setting minimum
standards. While resisted by some insurance companies, the Connector
has set a floor of what health insurance should be and has allowed the
Division of Insurance and attorney general's office to better police
the insurance market and protect consumers. Our minimum standards are
meaningful and include most, if not all, of the benefits we mandate in
state law.
This has been critical in keeping the floor from dropping out of
our current market and giving consumers' confidence that what they are
buying provides real health protection.
Affordability: We are pleased to see that the Tri-Committee bill
proposes an affordability scale that goes to 400 percent FPL, or
$88,000 for a family of four. In Massachusetts one of the largest
groups of residents which have received waivers from the individual
mandate are those with incomes between 300 percent to 400 percent FPL,
which fall outside of the Connector's authority. We still have a cliff
at 300 percent, where individuals who have been buying subsidized
coverage may not be able to afford even our lowest coverage level once
they are no longer subsidized. In 2007 and 2008, at least 60,000 and
then 51,000 individuals were ruled to be unable to afford the insurance
available to them. By providing assistance for individuals and families
with incomes at four times the poverty level, your legislation makes an
individual requirement fairer and less burdensome for individuals and
families.
Shared Responsibility: Employers, individuals, and government must
all do their part to make sure we have a sustainable and affordable
system that covers everybody. The journal Health Affairs recently
published a paper by Bob Blendon and colleagues showing stronger public
support for a shared responsibility approach to reform compared to an
approach that relies solely on individual responsibility.
Massachusetts' reform continues to be successful for many reasons, but
I would say the major reason and context of our work has been the
approach of shared responsibility that the House Tri-Committee bill
adopts.
We have both an individual mandate and an employer mandate to
provide coverage. These have both been phased in gradually and have, in
fact, received very little real opposition from residents. By making
government, business and individuals share in responsibility and cost,
healthcare reform still receives high public support (close to 70
percent).
Businesses that do not provide coverage face two types of
penalties: a per-worker ``play-or-pay'' payment, as well as potential
penalty assessed for the cost of care if their worker needs government
help with healthcare costs. This was designed into the bill to avoid
``crowd out,'' or the action of companies to drop coverage and pass the
cost onto government programs. A play-or-pay mechanism based on the
size of payroll, such as your bill proposes, is a better approach than
a per-worker fee because it is more reflective of the employers'
ability to pay and less regressive.
To date, these two combined approaches appear to have worked better
in Massachusetts than most predicted. The Division of Healthcare
Financing and Policy reports that 438,000 residents are newly insured
since reform started, of which 150,000 have purchased insurance through
employer-sponsored insurance, and 41,000 have bought through the
individual market. So while there may have been some small number of
employers who have dropped coverage, fully 44 percent of the newly
insured have bought coverage in the private market with no subsidies.
Additionally, from 2003 until 2007, the number of employers which
offer health insurance has risen from 68 percent to 72 percent, heading
in a better direction than the national trend, which continues to see
the erosion of ESI. However, Massachusetts is not representative of the
nation in this regard. We had a higher rate of employer-sponsored
coverage than the national average when we began our reforms.
Opponents of the play-or-pay proposal say that it will result in
massive job losses and high costs to employers. This is not the case.
Two recent studies, one by Philip Cryan at Berkeley and the other by
Ken Jacobs and Jacob Hacker, using the proposed play-or-pay
requirement--with the ``pay'' being between 6 percent and 8 percent of
payroll--found that the net effect of such a policy would result in
minimal job losses--between one-tenth of 1 percent and .03 percent.
Minimal job losses likely to be offset by other impacts of healthcare
reform including improved efficiency and productivity of the labor
market. Nearly 75 percent of the 45 million uninsured could gain
coverage through an employer mandate. Under the play-or-pay proposal,
the studies indicate that the increase in payroll costs from the
employer requirement is likely to again be offset through declines in
the cost of coverage and increased productivity.\i\
---------------------------------------------------------------------------
\i\ Philip Cryan, June 2009. ``Will A Play-or-pay Policy for
Healthcare Cause Job Losses? Goldman School, University of California,
Berkeley For the Institute for America's Future and the Economic Policy
Institute, And Ken Jacobs and Jacob Hacker June 2009 ``How to structure
a play-or-pay requirement for employers: lessons from California for
national healthcare reform.'' Advancing National Healthcare Reform:
Policy Brief.
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Reform has fundamentally improved coverage for Massachusetts'
residents. But it has not solved all of our problems. Close to 3
percent remain uninsured, with many others underinsured. Large
employers, while providing generous benefits for their full-time
employees, still have many employees whose work status as part time,
temporary, or not eligible for coverage means they are eligible to
receive subsidized care. The House draft proposal would require
employers to either contribute a pro rata share for part-time employees
or pay into a fund, an important provision of the bill that
Massachusetts could have benefited from.
If Congress were only to adopt a ``fair share'' approach for
employers who do not provide affordable coverage, there could be some
serious consequences:
The proposal would have a much greater effect on employers
not offering coverage who have employees with lower family incomes than
employers not offering coverage who have higher income employees.
Employers would have incentives to tilt hiring toward
people who have health coverage through a family member, who have a
spouse who has a good income, teenagers whose parents make a decent
living, and people without children (since the income limits for
Medicaid and subsidies rise with family size). Poor parents with
children in one-earner families would be particularly disadvantaged.
Employees (or prospective employees) who know their
employer would be charged might be discouraged from applying for
Medicaid or subsidies even though they are eligible, and might forgo
healthcare that they need as a consequence. And this could discourage
employers from hiring persons with disabilities since they are often
enrolled in Medicaid programs.
I would also make several suggestions about how the employer
mandate should be structured:
Base the required payment on the size of an employer's
payroll rather than the number or type of employees. A per-employee
requirement would disproportionately affect firms with larger numbers
of low-wage workers, as compared with firms with smaller numbers of
highly compensated individuals. The House proposal contains a flat 8%
of payroll penalty, which is reasonable and fair, and will take into
account firms with a significant numbers of low-wage workers. In
Massachusetts, we considered taking similar steps, but was dropped
because of concerns from our state leaders of an ERISA challenge.
To protect small firms with low-wage workers, exempt a
specified dollar amount from the amount of payroll subject to tax. The
amount of payroll exempted from tax should be kept small, however, so
that as many firms as possible are subject to the play-or-pay
requirement.
It is critical that reform mandates both businesses and individuals
to contribute to the cost of insuring everyone, along with the
government. We must build a safety net for those individuals and small
businesses that do not have adequate access to affordable insurance. We
need a public plan to provide needed competition and continuity in the
market. And we have to make sure we set a floor on what essential
insurance is, so that we truly make available coverage that is as good
as what you all receive as Members of Congress.
______
Mr. Andrews. Mr. Klein.
STATEMENT OF JAMES KLEIN, PRESIDENT, AMERICAN BENEFITS COUNCIL
Mr. Klein. Thank you very much, Mr. Chairman, Mr. Kline,
members of the committee.
The American Benefits Council represents companies that
either sponsor directly or provide services to health and
retirement plans that cover more than 100 million Americans, so
we are very privileged and grateful for the opportunity to be
here today.
President Obama and many congressional leaders and
certainly many people who we have heard from today have all
said that health care reform should ensure that if people are
happy with their health care coverage, they should be allowed
to keep it. That seems to be a basic understanding that
everyone agrees upon.
Over 160 million Americans receive their coverage from an
employer-sponsored plan at a cost to employers of over $530
billion per year. According to recent surveys, over two-thirds
of Americans rate their coverage as either excellent or very
good. So that means that for many people letting them keep the
coverage that is right for them and for their families requires
maintaining the employer-sponsored health coverage system.
But, frankly, to give meaning to President Obama's pledge,
it is essential that the ability to retain one's coverage is
not just true as a technical, legal matter that the employer-
sponsored system would continue but rather that as a practical
matter that what emerges from health care reform legislation is
a system that employers want to continue to participate in and
a system that does not skew individuals' choices as to whether
or not they should remain with their employer plan or seek
their coverage elsewhere.
To respond to a question that Representative Woolsey asked
earlier, we are not interested in trapping employees in their
employer plans, but neither do we want the structure of the
system to be such that they would be induced to leave their
employer plan.
So with that by way of background, let me share some of the
chief concerns that employers have as they examine the emerging
health care debate.
First, the employer pay-or-play mandate. One employer
concern is the slippery slope argument that even if employers
can meet the financial obligations of the mandate today that,
over time, it will grow and become unaffordable. But, frankly,
that is really only one part of the concern. The equally if not
more compelling concern for employers is that the regulatory
structure that would necessarily accompany a mandate of this
type would inevitably, if unintentionally, leave many employers
to choose to pay rather than to play. Put another way,
employers so strongly believe in the value added by employers'
sponsorship and administration of health plans that they are
concerned that the structure could erode rather than build upon
the employer-based system.
Secondly, ERISA. It is well-known that ERISA's Federal
framework is essential to design and maintain a consistent set
of benefits for workers wherever they live or work, operating
under a uniformed regulatory structure. But, again, that is
only part of the story. The other dimension of employers'
concerns around potential changes to ERISA is that Congress
might make substantive changes to ERISA itself that will expose
employers to substantial financial liability.
So let me put that another way. It is not enough to just
have uniform Federal rules. The rules themselves have to be
reasonable and administrable, protecting the interests and
concerns of participants and beneficiaries, at the same time
not inducing employers to exit the system. Again, not causing
them to pay rather than to play.
From our initial review of the tri-committee draft
proposal, it appears that three different penalty regimes would
result from this bill. For employers operating outside the
insurance exchange, the current system of remedies would
largely continue. For employers and individuals obtaining
coverage within the new insurance exchanges, varied and limited
State remedies would be permitted; and for the new public plan
operating within the exchange, the uniform Federal rules that
currently apply to Medicare would prevail.
This does not create the proverbial level playing field for
employers selecting to obtain coverage for their workers
through one of the exchange plans.
Third, the public plan. Many people assume that employers
have some kind of visceral, philosophical opposition to any
program run by the government. That is not so. It certainly is
not the case for the American Benefits Council and our very
comprehensive proposals on reforming the health care system. It
certainly calls for an important role for the government to
play.
There really are two important roles for the government to
play. First, public plans are essential to help the lowest-
income individuals and those whose connection with the
workforce may be so intermittent that an employer-based plan
may not be the best venue for them to obtain coverage; and, of
course, a reformed individual insurance market also helps that
group.
And, secondly, the government can facilitate and regulate
the system whereby people select from a variety of different
competing private plans, such as the role of government to
operate these exchanges, for example, or a Medicare Part D part
of a model where people select again among different private
plans.
Employers' concerns about a public plan option emerges from
decades of experience that we have heard a lot about,
particularly on the prior panel, of massive cost shifts from
public plans, notably Medicare. The government sets the
reimbursement rates to providers very low, and then other
purchasers end up paying more. There are no cost savings
achieved. They are simply moved from one payer to another.
I see that my time is up here. So, on the other hand, I was
just about to get to the part of the bill that I like. I am
sure it won't take very long.
I guess the last point I would make about the public plan,
though, is if they are going to operate by different rules,
then obviously it won't fairly complete with the private plans.
If they're going to operate by the same rules, what is the
point?
But, on a positive note, employers want to be sure that
health care reform gives full attention to improving quality
outcomes. If health reform only results in expanding coverage
for the uninsured, it will be a magnificent achievement but
also a terrible missed opportunity.
We want to commend you for recognizing the need to address
quality issues in the legislation. Perhaps rather than taking
up more time during the prepared statements, I will just answer
any questions.
Chairman Miller [presiding]. Thank you.
[The statement of Mr. Klein follows:]
Prepared Statement of James A. Klein, President,
American Benefits Council
Mr. Chairman, Ranking Member Kline and members of the committee,
thank you for the opportunity to join you today at this important
hearing on the ``Tri-Committee Draft Proposal for Health Care Reform.''
My name is James A. Klein, and I am President of the American Benefits
Council (the ``Council''). The Council is a public policy organization
representing major U.S. employers that operate nationwide, as well as
other organizations that assist employers of all sizes in providing
benefits to their workers and families. Collectively, the Council's
members either sponsor directly or provide services to retirement and
health plans that cover more than 100 million Americans.
We commend the Education and Labor, Ways and Means and Energy and
Commerce committees, for the collective commitment to reform of the
nation's health care system and for providing the Council with this
opportunity to share our perspectives on how best to achieve it.
Coverage, Cost and Quality
The Council's recommendations on health reform are contained in the
January 2009 report Condition Critical,\1\ which is aimed at achieving
a stronger, more sustainable health care system. The Council's Health
Care Reform Task Force worked throughout last year analyzing our health
care system and developing a set of specific policy proposals that we
believe would build on the system's strengths while improving health
quality, lowering health costs and extending coverage to all Americans.
As a country, we spent approximately $2.4 trillion on health care
in 2007, according to the most recent available data from the U.S.
Department of Health and Human Services.\2\ This amount is almost twice
as much as we spent in 1996, and total national health care spending is
projected to double yet again by 2017.\3\ That level of increase is not
sustainable. We already spend far more per capita on health care than
any other developed nation, yet we rank well below other countries on
many vital indicators of health status. However, perhaps even more
troubling is the well-documented evidence that patients receive
appropriate care for their conditions only about 55 percent of the
time,\4\ and medical errors may account for as many as 98,000
fatalities each year.
It all adds up to an annual rate of increase in health care
spending that exceeds by three or more times projected increases in the
gross domestic product or the future growth in employee wages and far
outpaces the expected growth in federal or state revenues.\5\ Taken
together, these projections make it abundantly clear that no matter who
ultimately pays the bill, health care must be made more affordable, or
it cannot be made more available. In addition, our health care system
is marked by wide and unexplained variations in both the overuse and
underuse of health services and all too frequently subjects patients to
preventable medical errors. Moreover, despite widespread agreement on
the importance of extending health coverage for all Americans, too many
people are left without coverage entirely, including an estimated nine
million children.
There is now a broad consensus that we need to take well-reasoned
steps to reform the current health care system. However, while doing so
undoubtedly will be costly, simply spending more money is not the
solution to the system's challenges. Indeed, among the most compelling
reforms required are those that, if designed properly, will help reduce
costs and obviate, to some extent, the need to raise revenue.
Building on the Employer-Sponsored Health Coverage System
The Council firmly believes that the employer-based health care
system provides a solid foundation upon which to build toward the
shared goal of achieving universal coverage. The current employer-based
model for health care has been, and continues to be, very successful in
delivering comprehensive health care to a majority of American
families. In 2007, 61% of non-elderly Americans--or nearly 160 million
Americans--were covered by employer-based health insurance.\6\
All available data indicates that, by and large, those 160 million
Americans who receive health care coverage through the employment
setting are exceedingly happy with the coverage. In a 2007 study by the
National Business Group on Health, over 67% considered their employer-
provided coverage to be either ``excellent'' or ``very good''. Thus,
for most Americans, the current employer-based system is not just
working, it is winning at delivering critical and comprehensive health
care coverage to our nation's families.
The Value of Employer Engagement
In the Council's Condition Critical report, Prescription #1 calls
for building on what works. For us, the best reform options are those
that preserve and strengthen the voluntary role employers play as the
largest source of health coverage for most Americans. By keeping
employers engaged as sponsors of health coverage, we also keep the
innovation and expertise employers bring to the table in the collective
effort to achieve broad-based, practical health system reform.
One of the many strengths of our voluntary employer-based system is
that group purchasing lowers health care costs because employers,
especially larger employers, are able to effectively pool the risks of
employees. In addition, employers are very demanding purchasers of
health care services. They are focused on leveraging their health care
dollars with those who can demonstrate proven value and improved health
care status for their employees and their families. Because employers
have a strong interest in the health and productivity of their
workforce, they work hard to identify solutions that improve
productivity, reduce chronic illness, and lower disability costs. These
investments in the health of their workforce not only provide broad
access to primary care and specialty services, they increasingly have
engaged employees in innovative health coaching and healthy lifestyle
programs, cost and quality transparency initiatives, pharmaceutical
management programs, and value-based health plan designs.
Concerns with Pay or Play Mandate
Like the tri-committee reform proposals, the Council believes that
all individuals should have an obligation to obtain health coverage
and, accordingly, financial assistance will be required to enable some
low and moderate income people to obtain that coverage. However, it
does not follow that an employer requirement to provide coverage is
needed to achieve universal coverage. It is important to keep in mind
that nearly all employers with 200 or more employees provide health
care coverage today. In fact, data from a 2008 Kaiser Family Foundation
survey\7\ shows that 99 percent of employers with 200 or more employees
offered health benefits to their workers, and that this percentage has
never been lower than 98 percent at any time over the last ten years.
By comparison, the same survey shows that 62 percent of firms with
fewer than 200 employees offered health coverage.
One important reason we believe that a ``pay or play'' employer
mandate approach would be an inappropriate coverage solution is that
the myriad requirements that would inevitably be imposed on those who
might prefer to sponsor health coverage would ultimately, if
unintentionally, result in a net reduction in employer-sponsored
coverage by leading some companies to simply ``pay'' rather than
``play''. This would lower the level of active employer engagement and
their important role as innovative and demanding purchasers of health
care services.
Further, we are concerned about proposals under consideration that
could require employers to pay their ``normal'' premium contribution to
a health insurance exchange if an employee opts out of an employer
plan. In particular, it would be inappropriate for such opt-out
requirements to apply where employees are offered qualified coverage
through an employer plan to satisfy their individual coverage
obligation. Opt-out provisions would be particularly problematic for
self-insured employers who could be required to contribute
significantly more to the exchange than what some of these employees
may have actually cost the employer if they had remained in their plan.
This would occur whenever younger, healthier employees opt-out of the
employer plan and obtain coverage through the insurance exchange. In
effect, employers would be required to both ``pay and play'' for those
employees who opt-out of their employer-sponsored plan and obtain
coverage elsewhere.
Minimum Benefit Standard
We also believe that a federal minimum benefit standard is needed
only for the purpose of determining whether individuals have enrolled
in qualified health coverage and have met their individual coverage
obligation. Once this standard is defined, employers will have strong
incentives to ensure that their plans meet or exceed the minimum
coverage standard applied to individuals. To not do so would leave
their employees without adequate levels of coverage and subject to
year-end penalties. Individuals who enroll in these employer plans will
therefore satisfy their individual coverage obligation and those
without employer coverage will be able to enroll in a wide range of
health plan choices in the reformed insurance marketplace.
Further, we recommend that a safe harbor be available for qualified
high deductible health care coverage. By doing so, individuals who
enroll in a high deductible plan that meets existing federal standards
would be assured of fulfilling their individual coverage obligation.
This also helps ensure that high deductible plans are not required to
become more costly and retains this affordable health plan choice.
Maintaining the ERISA Framework
We believe that a vitally important component of maintaining a
strong employer-based health system starts with protecting the federal
regulatory framework established by the Employee Retirement Income
Security Act (ERISA) that allows employers to offer valuable benefits
to their employees under a single set of rules, rather than being
subjected to conflicting and costly state or local regulations.
Employers that operate across state borders consider ERISA's framework
essential to their ability to offer and administer employee benefits
consistently and efficiently. This regulatory approach also translates
into better benefits and lower costs for employees. In addition,
holding employer-sponsored benefits accountable under a single set of
rules--interpreted at the federal level, as ERISA now does--is
fundamentally fair to all employees covered under the same plan
regardless of where they may live.
State benefit mandates alone can add as much as 12 percent to the
total premium according to a 2008 report by the Massachusetts Division
of Health Care Finance and Policy,\8\ a cost that must be borne by both
employers and employees who share the full cost of coverage.
Importantly, most large employers who operate on a multi-state or
national basis consistently report that without the ERISA framework
they would face the untenable choice of attempting to maintain health
coverage for their employees at even higher costs because of the need
to meet each state's separate set of benefits and regulatory
requirements, or dropping health coverage entirely.
However, ensuring the maintenance of a federal framework is not the
only concern that employers have with regard to ERISA. Equally
important is to ensure that new burdensome requirements are not imposed
in ERISA itself. Such changes that might expose employers to greater
liability would have a chilling effect on employers' willingness and
ability to continue sponsoring plans.
Our initial review of the tri-committee draft proposal raises
serious concerns with regard to ERISA, since it appears to establish
two different penalty regimes within the insurance exchanges. For
health plans there would be varied and unlimited penalties prescribed
under state law. By contrast, in the federal public plan outlined in
the draft, a uniform federal enforcement regime (i.e. as prescribed for
Medicare) would apply. Yet a third regime would apply for health
coverage provided outside the exchanges. Inasmuch as employers will be
permitted to obtain coverage through the exchanges, this will subject
employers to expansive new liabilities.
The potential for varied state remedies or onerous new federal
remedies to erode private employer-sponsored health coverage cannot be
overestimated. Employers would face the prospect of either maintaining
health benefits for their employees or being subject to unlimited state
law remedies or dropping coverage to avoid excessive financial risk. We
believe that this provision alone could seriously destabilize employer-
based coverage.
Improving the Individual Insurance Market and Public Programs
Health care reform will also require measures to ensure that those
outside of employment-based health coverage are able to obtain
meaningful, affordable coverage through the individual health insurance
market. The Council's proposals enumerated in Condition Critical
include recommendations that would ensure that any person without
health coverage through an employer and who is not otherwise eligible
for coverage under a state or federal health insurance program could
obtain in any state at least one individual market insurance plan that
meets minimum federal requirements. These insurance products should be
exempt from additional state benefit mandates, but for all other
purposes--such as consumer protections, solvency requirements, rating
rules and other requirements--state standards would continue to apply.
We also believe that reformed state-based high-risk pools that meet
minimum federal standards for coverage and rating can play a
significant role in helping to keep the individual insurance market
more affordable and competitive. In order to keep coverage affordable
for those enrolled in high-risk pools, we propose that premiums paid by
enrollees in these state-based programs be limited and claims expenses
that exceed the funding from enrollee premiums be shared by state and
federal governments.
In addition to employer-based health coverage and improving the
individual health insurance market, we believe that public health
insurance programs such as Medicaid, Medicare and the Children's Health
Insurance Program (CHIP) all must be improved, particularly by moving
toward payment systems that reward health care providers who
consistently meet evidence-based performance standards and away from
payments based simply on the quantity of services delivered. Our
recommendations for health care reform also call for the establishment
of a federal eligibility floor for coverage for adults under Medicaid
and more effective outreach and incentives for states to reach the more
than 10 million individuals who are estimated to be eligible for health
coverage under state-based health programs, but are not yet enrolled.
We recognize that several public plan alternatives are still under
consideration by Congress. These alternatives range from permitting a
``Medicare-like'' plan to compete with private health plan options in
the reformed health insurance market, to having a third party
administrator or public cooperative organize networks of health
providers and negotiate payment rates for public plan options that
would compete with private health plans, or possible fallback options
similar to the approach Congress adopted as part of the Medicare Part D
program.
The conditions needed to achieve a reformed and well regulated
private market will be challenging enough without attempting to
introduce public plan options that risk destabilizing the insurance
market at the time when it will be undergoing significant change and
meeting demanding new standards. Moreover, we are confident that
responsible federal insurance reform standards will lead to wide
availability of private health plan options in all parts of the
country, as it did for plans providing the Medicare prescription drug
benefit. In this regard, it is very encouraging that the private
insurance industry has already expressed its clear support for the
range of reforms (e.g. guaranteed issue and renewability, prohibitions
on pre-existing condition exclusions, etc.) that are needed and that
acceptable in a system in which everyone has the obligation to obtain
coverage.
The appropriate role for public health insurance programs is to
complement, rather than compete with, private health plan options. Our
vision of health reform calls for improvements in both private health
insurance products, especially in the individual insurance market, and
in public programs. Both have important roles to play in a reformed and
robust health care system. However, we also think that both sources of
health coverage have worked best by serving distinctly different roles
and populations.
Improving the Quality and Efficiency of Health Care
According to the most recent Towers Perrin survey of health care
costs,\9\ employers reported that the average per employee cost for
health coverage in 2009 is $9,660 and that this represents an average
increase of 6 percent over last year. As in previous years, the survey
also indicates that employers will shoulder the lion's share of these
costs, subsidizing, on average, 78 percent of the premium and asking
employees to cover the remaining 22 percent, plus applicable cost
sharing for co-pays, deductibles and coinsurance for covered services.
Average employee health care costs vary significantly depending on
whether the coverage is for an employee-only, where average 2009 costs
are $4,860, while the average cost of family coverage is expected to be
$14,244 this year. While these numbers are remarkable in themselves,
the impact of annual health care cost increases is most starkly evident
when compared with average wage increases over the last eight or 10
years. This gap between average increases in health costs and average
wage increases forms what we refer to as the ``affordability gap''.
Over time, this results in erosion of total compensation and employee
purchasing power.
Reform Through System-Based Savings
The Council's Condition Critical report includes numerous
recommendations directed at achieving higher quality, more affordable
health care.
Reduced Costs Through Increased Quality of Care
Health care may be the one service or product in the United States,
where many purchasers routinely and willingly pay as much, or more, for
poor quality as for good quality. Notably, some of the largest
contributing--and most controllable--factors fueling the rapid rise in
health care costs are the uneven quality of care and a system that too
often provides unnecessary, ineffective, or insufficient treatment.
The Council believes there are a host of reforms that can be
undertaken to increase the quality of care, and that will also result
in significant cost savings system-wide. They include the following:
Implement nationwide interoperable health information
technology. Providers and other stakeholders must be linked to ensure
that patient records and other information are readily available.
Overall, the health care system lags far behind other industries in the
use of information technology to advance efficiency, consistency and
safety.
Provide safe harbor protections for health care providers
and payers for decisions and practices that are evidence-based.
Determinations that are consistent with consensus-based quality
measures or comparative effectiveness research should be protected by
liability safe harbors.
Establish a national review process to rigorously examine
existing and proposed state and federal benefit mandates. This review
process should aim to sunset existing benefit mandates that are not
evidence-based, consistent with best practices in benefits design and
clinical care, or are contributing unnecessarily to increases in health
care costs.
Promote personal wellness and ownership for maintaining a
healthy lifestyle. Incentives should be strengthened for the expansion
of benefit plans, workplace wellness programs and educational programs
that promote wellness and encourage greater personal responsibility for
adopting a healthy and safe lifestyle.
Increase participation in chronic disease management
programs. The availability of, and participation in, focused care
management initiatives to address chronic diseases and other health
care priorities should be significantly expanded.
Expand the understanding and availability of appropriate
end-of-life care options. Best practices research should be expanded to
assist patients, families, health care providers and other caregivers
in considering therapeutically appropriate end-of-life care options.
Increased Savings Through Transparency in Pricing and
Quality
Another area where system-based reforms can deliver significant
cost savings is by making price and performance information more easily
accessible, so consumers can identify providers with a proven record of
delivering high quality care. A more transparent system also gives
health care providers needed tools to evaluate their performance and
encourages continuous quality improvement. A transparent health care
system provides incentives to move consumers and health care providers
in the direction of evidence-based care by relying on clear, objective
information on treatment options and costs. Transparency also protects
patients from unsafe or unproven care. Finally, while consumers should
certainly be armed with information to identify high performance health
care providers, they should also be able to steer clear of those with
high rates of medical errors or who fail to deliver evidence-based
care.
Employers play a unique role in making the health care system more
transparent by working with health care providers, insurers, consumer
groups and government officials to help identify and disseminate the
type and amount of information needed for better health care decision
making. Many employers have developed effective incentives to encourage
broad employee participation in a wide range of health improvement
initiatives. This experience will be essential in creating a critical
mass of users of cost and quality information in order to establish a
consumer-centric health care system.
The following changes can help increase transparency, thus leading
to better, more informed health care purchasing decisions and
significant cost savings for the system as a whole:
Design and implement consensus-based quality and cost
measures. Public-private partnerships representing major health care
system stakeholders have proven to be effective in developing initial
sets of quality measures. Cost measures should also be developed based
on episodes of care rather than unit prices for components of health
care services.
Transform the current payment structure from a procedure-
based, fee-for-service system to a value-based system. Health care
providers should be rewarded by a payment system that initially
provides financial incentives for routine reporting of quality and cost
information based on nationally adopted consensus measures. Ultimately,
health providers should be rewarded for their demonstrated performance
in the delivery of quality care, rather than simply the volume of
services provided.
Foster continuous improvement by health care providers.
Health care providers should be equipped with comparative clinical
performance information to support continuous improvement in patient
care.
Expand the use of consumer incentives in a broader range
of health plan options. Health plans should provide incentives for plan
participants to choose services from health care providers who deliver
care consistent with consensus-based quality measures and demonstrate a
commitment to quality improvement. Greater use of ``consumer-directed''
plans is one such strategy to achieve this objective.
Expand the practice of nonpayment for serious preventable
medical errors. All payers for health care services should adopt the
practice, used by Medicare, where no payments are made for certain
serious preventable medical errors, also known as ``never events''. A
consistent response by all public and private payers to end such
payments will lead to more effective internal controls to improve
patient care and safety. Health care providers also should be required
to report all medical errors as a condition of payment by Medicare.
Establish a national entity with a broad-based governance
body to significantly increase the capacity for independent, valid
comparative research on clinical and cost effectiveness of medical
technology and services. Rigorous comparative effectiveness research is
needed to examine clinical and cost evidence to support decisions on
medical technology, treatment options and services to help ensure that
more patients receive the right care for their condition.
All of the above-mentioned proposals are systemic improvements that
should generate cost savings that can be used as part of a fiscally
sound approach to overall health system reform. In addition, reform of
medical liability rules that address unwarranted attorney's fees and
excessive damage awards is an important component of legal system
reform that will have beneficial affects on the health system in terms
of reducing the need for unneeded tests and procedures that are
performed not because of any medical necessity but purely as a means of
curtailing the risk of medical malpractice lawsuits.
Shared Responsibility
There is broad national consensus that we need health reform. The
Council strongly shares that view. We do, however, believe that the
costs associated with health reform should be shared equitably by all
stakeholders within the system. Although the proposals to finance
health reform do not lie directly within the purview of the Education
and Labor Committee, we appreciate that all three committees of
jurisdiction are working closely with one another and therefore we wish
to share our thoughts on these matters for the formal hearing record.
Significantly, employers and employees already expend a significant
amount of financial resources to ensure that employees and their
families have health coverage. In 2007, employers as a group paid an
astounding $530+ billion for group health plan coverage for their
workers and their families.\10\ On average, this amounted to $9,325 per
employee for family coverage in 2008.\11\ Notably, employees have also
been working hard to pay their share of our nation's health care
burden. In 2008, in addition to the employer premium contributions
noted above, employees paid on average $3,354 towards the premium costs
associated with their employment-based health coverage.\12\
Accordingly, to the extent that additional revenue sources are needed,
after taking into account those generated from system-based changes,
Congress should acknowledge that employers and employees already are
contributing a substantial sum.
On a related note, given that the costs associated with health
reform will not be insignificant, Congress should ensure that any
reforms are both desirable and effective. History has shown that where
the American taxpayer is asked to ``foot the bill,'' reforms enacted
without deliberate consideration can result in taxpayer disapproval,
unanticipated additional costs and even wholesale repeal of the reform.
Perhaps the best example of this is the enactment and prompt repeal of
the Medicare Catastrophic Coverage Act in the late 1980s.\13\ The
reform was intended to help our aging population enhance Medicare
coverage, and was to be paid for by Medicare-eligible individuals in
the form of higher Medicare premiums. Once enacted, however, many of
these individuals were soon confronted with higher premium costs for a
benefit they were already receiving from other sources or did not
desire. With widespread and growing dissatisfaction among seniors over
the change, Congress eventually repealed the measure.\14\
Undoubtedly, Congress recalls the lessons learned by this
experience. Even where reforms are based on lawmakers' best intentions,
if the reform is not one valued or desired by the American public,
especially where we are asking them to pay for the reforms in the form
of higher taxes or reduced employer-based benefits, this can lead to an
unsustainable system of changes.
Notably, in the Medicare catastrophic example, many of the benefit
improvements were lost when the financing mechanism proved
unsustainable and the law was repealed. With comprehensive health care
reform, if we fail to move in a reasoned and fiscally sound manner, it
is likely to be very difficult, if not impossible, to undo any
unintended negative consequences. Accordingly, the Council urges
Congress to carefully consider any and all legislative changes only if
economically and politically sustainable sources of financing are
available.
Capping the Exclusion on Employer-Provided Health Coverage
There has been considerable discussion as to whether the employee
exclusion for employer-provided coverage should be modified. Some have
suggested that the value of the current employee exclusion should
limited or otherwise ``capped''--either by limiting the amount of the
exclusion to some specific amount--thereby taxing employer-paid
coverage in excess of such amount--or by allowing the availability of
the employee exclusion only to persons with incomes below a certain
threshold.
It would be a mistake to limit or otherwise undermine the
exclusion. Accounting for less than 10% of our annual health
expenditures, there can be little doubt that the employee exclusion
makes possible essential coverage for a significant majority of
American families. Limiting the exclusion based upon the cost of some
level of coverage raises a number of issues:
Geographical differences in cost. In order to ensure that
all individuals are taxed fairly, any limit to the employee exclusion
would need to take into account the very real variations in cost
depending on where an individual resides. Unless this reality is taken
into account, any limit on the current employee exclusion would operate
as nothing more a tax on individuals who live in higher-cost areas. But
even those in lower-cost areas might not be protected. For example, if
an individual works for a large multi-state employer, with most of its
employees in high cost areas, such individual might be subject to tax
because the insurance cost for the group as a whole is generally
higher.
Differences in age among employees. Any limit on the
employee exclusion could penalize workers based on age. Most notably,
older workers likely would be subject to a higher tax than younger
workers because their coverage generally costs more. Additionally,
younger workers who are employed by a company with a comparatively
older, more expensive workforce, likely would be taxed more than their
counterpart sat another company with an overall younger workforce.
Family and other coverage classes. Almost all employers
provide a set number of classes of coverage. They can be as few as
self-only coverage or self-only and family coverage. Alternatively,
they can be more numerous, based on an individual's specific number of
dependents (such as employee +1 dependent, employee +2 dependents,
employee +3 dependents, etc.), although most employers have some upper
limit at which all persons with this number or more dependents are all
placed within the same class for purposes of determining their premium
cost. Unless any limit on the exclusion takes this fact into account,
it is quite likely that the limit could treat people inequitably
because, for example, all persons who are enrolled in family coverage
with a given employer would likely pay the same tax even though persons
with fewer dependents effectively have much less valuable coverage than
those with more dependents.
Treatment of multi-state plans. In order for any limit not
to result in tax inequities, an extraordinarily complex set of rules
would need to be devised to specify if, and how, multi-state employers
can combine worksite employee groups for purposes of valuing and
pricing health insurance. Without such rules, workers whose employers
combine their workforces from high cost areas would be more likely to
run afoul of any limit on the employee exclusion than workers whose
employer combines workforces from high and low cost areas for purposes
of valuing and pricing health coverage. Complexity and inequity would
result.
Indexing. Unless any limit on the current employee
exclusion is indexed using an appropriate measure that reflects real
cost increases, any such limit is unlikely to keep pace with increasing
health costs. The end result would be that the tax benefits delivered
vis-a-vis the employee exclusion in Year 1 would be less in each
subsequent year. Notably, this is, in part, how the Bush
Administration's health reform proposal was scored as revenue neutral
over 10 years, by indexing the proposed standard above-the-line
deduction based on the overall Consumer Price Index (CPI), not the
health factor of the CPI, which is a much more reliable indicator of
annual health cost increases.
Some have suggested that a ``cap'' on the amount of the exclusion
and/or the absence of any meaningful indexing would help contain health
costs. It is true that changes in the employee exclusion would likely
make health care more expensive for employees and that generally when
you make something more expensive people tend to use less of it. If
only it were that simple when it comes to health coverage! It is hard
to imagine that employers or employees need any additional incentives
to try and reduce health care costs. It is unclear whether such cost
containment would in fact be realized. We doubt that the nation would
want to experience diminished health care coverage based on such an
untested theory.
As the above discussion is intended to demonstrate, it would be
very difficult, if not impossible, to design a limit to the current
employee exclusion that did not result in tax inequities and/or require
a burdensome and costly set of valuation rules for employers and
workers. Notably, this was tried once before with the enactment of
Internal Revenue Code Section 89 and it was famously unsuccessful.
Despite best intentions, the statutory and regulatory regime
established by Congress and the Treasury Department for purposes of
valuing employer-provided health coverage proved completely unworkable.
The regime was extremely expensive and burdensome for employers to
administer and would have resulted in diminished coverage for American
workers. Congress was left with no choice but to repeal section 89 just
as the law was going into effect after employers had wasted countless
millions of dollars in a futile effort to comply with a set of ill-
advised requirements.
One reason the valuation rules were so complex under section 89 is
because there is great diversity among employer plans. This diversity
is driven in large part by employer innovations in plan design
fashioned to provide the coverage that best meets a workforce's
specific coverage needs. So quite apart from the cost and complexity
that section 89 imposed on employers, had it gone into effect, it would
have stifled innovation and inexorably led to coverage that was less
responsive to workers' needs.
A limit on the exclusion based not upon the extent of coverage, but
rather on the income of the family receiving such coverage has its own
set of complexities and inequities. It is essentially nothing more than
an effective tax increase on higher-income individuals, just a less
straightforward and explicit one. This is because the value of any
employer-paid coverage would be taxable to such individuals as
additional W-2 wages. One can only begin to imagine the complexities
and inequities that would result from imposing a tax on families who
incomes are above the specified threshold, but whose members have
differing levels of health coverage from multiple sources. Limits on
the employee exclusion undoubtedly would have a destabilizing effect on
the employer-sponsored health coverage system. An even more obvious and
greater destabilization of the system would result if limits were
imposed on employers' ability to deduct health care expenditures.
Conclusion
These are times of extraordinary economic turmoil and challenges.
If approached with great care, addressing the nation's health policy
challenges can be an integral element of--rather than an obstacle to--
economic recovery and achieving personal financial security. The
American Benefits Council stands ready to continue providing
information and the perspectives of the companies and professionals who
are designing, administering and paying for health plans providing
comprehensive health coverage for workers and their families. We thank
you for the opportunity to serve the Congress as you undertake the
important task upon which you have embarked.
ENDNOTES
\1\ AMERICAN BENEFITS COUNCIL, CRITICAL CONDITION: TEN
PRESCRIPTIONS FOR REFORMING HEALTH CARE QUALITY, COST AND COVERAGE
(2009), available at http://www.americanbenefitscouncil.com/documents/
condition--critical2009.pdf.
\2\ NATIONAL COALITION ON HEALTH CARE, HEALTH INSURANCE COSTS
(2008), available at http://www.nchc.org/documents/Cost%20Fact%20Sheet-
2009.pdf.
\3\ See id.
\4\ Elizabeth McGlynn et al., The Quality of Health Care Delivered
to Adults in the United States, 348;26 NEW ENG. J. MED. 2635 (June 26,
2003), available at http://content.nejm.org/cgi/content/full/348/26/
2635.
\5\ NATIONAL COALITION ON HEALTH CARE, HEALTH INSURANCE COSTS
(2008), available at http://www.nchc.org/documents/Cost%20Fact%20Sheet-
2009.pdf.
\6\ KAISER FAMILY FOUNDATION, THE UNINSURED: A PRIMER, KEY FACTS
ABOUT AMERICANS WITHOUT HEALTH INSURANCE (2007).
\7\ THE KAISER FAMILY FOUNDATION & HEALTH RESEARCH & EDUCATIONAL
TRUST, EMPLOYER HEALTH BENEFITS 2008 ANNUAL SURVEY (2008), available at
http://ehbs.kff.org/.
\8\ MASSACHUSETTS DIVISION OF HEALTH CARE FINANCE AND POLICY,
COMPREHENSIVE REVIEW OF MANDATED BENEFITS IN MASSACHUSETTS REPORT TO
THE LEGISLATURE (2008), available at http://www.heartland.org/custom/
semod--policybot/pdf/23617.pdf
\9\ TOWERS PERRIN, HEALTH CARE COST SURVEY (2008), available at
http://www.towersperrin.com/tp/showdctmdoc.jsp?url=Master--Brand--2/
USA/Press--Releases/2008/20080924/2008--09--24b.htm&country=global.
\10\ EMPLOYEE BENEFIT RESEARCH INST., EBRI DATABOOK ON EMPLOYEE
BENEFITS tbl.2.2f (2009), http://www.ebri.org/publications/books/
index.cfm?fa=databook.
\11\ THE KAISER FAMILY FOUNDATION & HEALTH RESEARCH & EDUCATIONAL
TRUST, EMPLOYER HEALTH BENEFITS 2008 ANNUAL SURVEY (2008), available at
http://ehbs.kff.org/.
\12\ Id. This amount reflects the portion of the premium paid by an
employee for coverage for a family of four.
\13\ Medicare Catastrophic Coverage Act of 1988, Pub. L. No. 100-
360.
\14\ Medicare Catastrophic Coverage Repeal Act of 1989, Pub. L. No.
101-234.
______
Chairman Miller. Mr. Vaughan.
STATEMENT OF WILLIAM VAUGHAN, SENIOR HEALTH POLICY ANALYST,
CONSUMERS UNION
Mr. Vaughan. Thank you for inviting us to testify.
With Consumers Union, the independent, non-profit publisher
of Consumer Reports, we don't just test tires and toys. We try
to help people with good medical products, and we are
enthusiastic users of comparative research to help consumers
save money and get the cheapest but most effective and safest
drugs. And, Dr. Cassidy, we would go with that $20 generic over
that purple pill because they are scientifically equivalent.
We for a long time advocated health care for everybody, and
we have written to our subscribers saying that it has become
obvious that the people of the country intend to see to it that
the whole population shall benefit from the discoveries of
modern medical science. The only question before the country
now is how soon.
That, unfortunately, is our 1939 auto issue. Seventy years.
Chairman Andrews, you were saying 50 years. I would argue 70
years. And if we had only had reform--this was the old Dingell
dad's bill, Wagner-Dingell, we were endorsing. If we had passed
that, I think some of the auto plants of northern Ohio and
Michigan would still be making the great models that are in
this issue.
We think that not only would it be good for the industries
of those States but, more importantly, the Institute of
Medicine has noted that each year about 18,000 people die
prematurely and unnecessarily because of not having health
insurance. And when you think about it, since this magazine
issued, about twice as many people have died from not having
health insurance as were killed in World War II and all of our
conflicts since.
So it is so far past time to do something, and this will be
one of the great Congresses of all time if you can pass a good
bill. And we think the draft bill that you have before you is
such a bill. We are pleased to endorse its principles and
intent. We assume there will be some more savings or regressive
financing to make it budget neutral and sustainable. But this
is a bill that would bring health security, peace of mind,
affordable and comprehensive care to American families.
There are too many good things in the bill to list in a 5-
minute statement, but there are some that haven't got a lot of
attention.
Mr. Scott had mentioned well baby care. That is a benefit
spelled out on page 25. And Dr. Price and the other doctors who
take on Medicaid patients, which is basically charity care now,
you do the rates you are reimbursed for primary care, you will
be paid a lot more, and I think that is important.
Major nursing home reforms for quality, exposing the flood
of drug and device money to doctors in medical schools that we
think can so often distort medical practice, and promoting
primary care and the training of new doctors. So the bill is
filled with these kinds of provisions.
Our testimony lays out our health care reform principles
from our August magazine and how well the bill matches with
those, and it is a great match. So we thank you.
A bill this size, you would be shocked if we didn't have a
few subjects for small improvements, and we hope you will
consider them.
One is help consumers drive towards quality more. We have
been here for about 4\1/2\ half hours, and that means that
about 51 to 52 fellow Americans have died of hospital-acquired,
health-care-acquired infections. During the course of the day,
it is an Air France plane crashing. We need to know more about
how hospitals do in fighting these infections and help
consumers with that kind of public information.
And the other thing is both the Chamber and ERIC spoke
about consumers being better shoppers. We are lousy health
insurance shoppers. We leave a lot of money on the table. We
are confused by the whole process. If you give us exchanges
where the insurance definitions are identical, where we can
compare hospitalization means hospitalization, not starting on
the second day or some fine print like that, and if you make
the plans more like Medigap policies so that people can shop on
identical plans, then we can drive price and we can move
towards quality.
But thank you very much, and good luck in this wonderful
project you have started.
Chairman Miller. Thank you.
[The statement of Mr. Vaughan follows:]
Prepared Statement of William Vaughan, Senior Health Policy Analyst,
Consumers Union
Consumers Union is the independent, non-profit publisher of
Consumer Reports.
We strongly endorse the approach taken in the Tri-Committee Draft,
assuming that additional cost containment or progressive financing will
be added to ensure that it is budget neutral.
We believe the Draft is a plan that would at long last ensure
access to affordable, quality, ``peace of mind'' health insurance for
every American.
The Draft has too many major improvements to list separately. A
table in the testimony lays out our health reform principles from our
August magazine issue, and how the Draft would dramatically advance
these key consumer issues.
Of course, in a bill this size, we have a few suggestions for ways
to make it even better. (You'd be shocked if we didn't!) But these are
minor suggestions compared to the important reforms proposed in the
bill:
We urge that you more clearly help consumers encourage
quality, by increasing the public reporting of infections and other
medical errors.
If Congress wants an efficient marketplace that can help
hold down costs, you need to provide more consumer tools in that
marketplace. The Health Choices Administration and Insurance Ombudsman
are a good start. We hope you can flesh out their powers and duties. We
believe standard benefit packages (and definitions) are the key to
facilitating meaningful competition
Consumers are desperately worried about the high cost of
health care. We hope you can do more to obtain savings. We will be
forwarding a separate set of ideas for major savings, particularly in
the pharmaceutical sector, imaging and self-referral abuse, and
ensuring the operation of the Medicare Secondary Payer program, etc.
The American health care system must and can be fixed.
The Tri-Committee proposal will bring us to the goal of affordable,
quality, dependable health care for all, and we hope you give consumers
even more tools to help drive the system toward quality and cost
savings.
Mr. Chairman, Members of the Committee: Thank you for inviting
Consumers Union to testify on the Tri-Committee Draft health care
reform proposal.
Consumers Union is the independent, non-profit publisher of
Consumer Reports.\1\
We not only evaluate consumer products like cars and toasters, we
evaluate various health products, and we apply comparative
effectiveness research that can save consumers hundreds and even
thousands of dollars in purchasing the safest, most effective brand and
generic drugs.\2\
Since 1939 we have been advocating for an affordable,
secure, quality health insurance system for everyone.
Our national polls have frequently shown that the high
cost of health care is one of the greatest concerns for consumers, and
many fear they would be bankrupted if a major medical problem hit their
family.
Our May 2009 issue features an article on ``hazardous
health plans,'' and points out that many policies are ``junk
insurance'' with coverage gaps that leave you with a financial
disaster. One of the most prevalent stories we have heard from our
readers is that they thought they had good insurance--until they had a
major health problem, and then it was too late.
Our about-to-be-released August issue includes a 10-page
special editorial feature, using examples of families across the
country, on why American consumers so desperately need comprehensive
reform. We've attached a copy of this special issue.
Tri-Committee Draft
Therefore, we strongly endorse the approach taken in the Tri-
Committee draft, assuming that additional cost containment or
progressive financing will be added to ensure that it is budget
neutral.
We believe the Draft is a plan that would at long last ensure
access to affordable, quality, ``peace of mind'' health insurance for
every American.
The Draft has too many major improvements to list separately. The
following table lays out our health reform principles from our August
magazine issue, and how the Draft would dramatically advance these key
consumer issues.
------------------------------------------------------------------------
Consumer Union Goals in Health
Reform Tri-Committee Draft
------------------------------------------------------------------------
Ensure health access to every The Health Insurance Exchange, with
American: Make insurance simple by reformed private policies
creating a national health (guaranteed issue, no pre-existing
insurance exchange where one can conditions) and a public plan
always go--regardless of one's option, with premium and cost-
health or situation in life--to sharing subsidies phasing out at
choose a private or public plan, 400% of poverty, achieve this
with sliding scale subsidies based goal. Those who have good plans
on income to make it affordable. today can keep what they have.
The insurance offered should be The minimum standard benefit
comprehensive, bringing financial package (and at least 2 distinct,
security and peace of mind. more valuable options), with no
yearly or life-time limits and
with out-of-pocket catastrophic
protection at $5,000 for an
individual and $10,000 for a
couple, would achieve this goal.
The low-income get even more
protection.
Coverage should be especially good The packages all include
for preventive care. comprehensive preventive services;
Medicare is improved to make
preventive care more affordable;
and a new Wellness and Prevention
Trust Fund would help spur
community wellness.
------------------------------------------------------------------------
Eliminating pre-existing conditions The individual mandate to have at
and guaranteeing issue can't work least the `Essential' benefit
for insurers, unless everyone has plan, coupled with subsidies, and
to have insurance. But we can't efforts to control cost, achieve
force people to buy policies they this goal.
can't afford or that are Cost containment includes the
inadequate, so subsidies are public plan option, medical loss
needed. And a public plan option ratio requirements, comparative
working on a level playing field effectiveness research, form
can use competition to minimize simplification, stepped up anti-
the need for subsidies by holding fraud, stopping drug and device
costs down and driving quality up. company `gifts' to providers, new
ways for doctors to deliver
quality coordinated care, and
implementation of MedPAC
recommendations.
Consumers Union urges even more be
done to control costs.
------------------------------------------------------------------------
Increase quality and help consumers Division B's Section 1151 reduces
choose quality, by making error payments for hospital readmissions
rates public, particularly due to poor quality and section
infection rates (largely 1441 establishes a new center to
preventable infections kill set priorities for quality
100,000 Americans per year). improvement. State Medicaid plans
are rewarded for not paying for
poor care such as infections.
We hope it is clearer that
infection rates are to be public
on a facility specific basis, and
that more is done to report `never
events,' and require periodic
quality recertification of
providers, per the recommendations
of the IOM.
Encourage care based on quality, Efforts to develop accountable care
not just quantity, and help spread organizations and medical homes
the use of electronic medical will help ensure better care
records. coordination. The Stimulus package
HIT monies should help
productivity over time and improve
quality.
Encourage more primary care The Draft's major sections on the
doctors. workforce, graduate medical
education, and increased payments
to primary care doctors should all
help.
------------------------------------------------------------------------
Help small businessmen get The Health Insurance Exchange will
affordable health insurance for make policies more affordable;
themselves and their employees. subsidies to small and lower wage
firms will make it affordable.
------------------------------------------------------------------------
Areas Where We Hope More Refinement Can Occur
Of course, in a bill this size, we have a few suggestions for ways
to make it even better. (You'd be shocked if we didn't!) But these are
minor suggestions compared to the important reforms proposed in the
bill.
On quality
We urge that you more clearly help consumers encourage quality, by
increasing the public reporting of infections and other medical errors.
Consumer pressure can inspire providers to focus more on preventing
infections and other errors--but first, consumers need to be informed.
Ten years ago, the Institute of Medicine issued its report, To Err
is Human, noting that medical errors were killing up to 98,000 people a
year and costing the health system tens of billions in unnecessary
costs. The CDC now says that 100,000 are dying just from largely
preventable infections, which add an extra $35.7 to $45 billion per
year in treatment costs. No one can say whether anything has really
improved over the last decade: the IOM's recommendations have been
largely ignored.
We urge you, in addition to the 7 hospital re-admission conditions
discussed on page 222 of the Draft, to include public reporting of
healthcare-acquired infections such as MRSA and other deadly
conditions. We also hope you will take another look at the IOM report,
and move to require public reporting of `never events' (like surgery on
the wrong part of the body) the way Minnesota has done. It is way past
time to adopt the IOM's proposals for periodic quality re-certification
of providers. We retest pilots and others for competency--we should
retest providers on a periodic basis. Finally, we urge you to consider
some of the excellent language in the Senate HELP bill to improve our
nation's failing Emergency Medical Systems.
Do More to Help the Consumer in the Health Insurance Exchange
The honest, sad truth is that most of us consumers are terrible
shoppers when it comes to insurance. The proof is all around you.
In FEHBP, hundreds of thousands of educated Federal
workers spend much more than they should on plans that have no
actuarial value over lower-cost plans.\3\
In the somewhat structured Medigap market where there is a
choice of plans A-L, some people spend up to 16 times the cost of an
identical policy.\4\
In Medicare Part D, only 9 percent of seniors at most are
making the best economic choice (based on their past use of drugs being
likely to continue into a new plan year), and most are spending $360-
$520 or more than the lowest cost plan available covering the same
drugs.\5\
In Part C, Medicare has reported that 27% of plans have
less than 10 enrollees, thus providing nothing but clutter and
confusion to the shopping place.\6\
The Institute of Medicine reports that 30 percent of us are health
illiterate. That is about 90 million people who have a terrible time
understanding 6th grade or 8th grade level descriptions of health
terms. Only 12 percent of us, using a table, can calculate an
employee's share of health insurance costs for a year.\7\ Yet consumers
are expected to understand ``actuarial value,'' ``co-insurance'' versus
``co-payment,'' etc.
If Congress wants an efficient marketplace that can help hold down
costs, you need to provide more consumer tools in that marketplace. The
Health Choices Administration and Insurance Ombudsman are a good start.
We hope you can flesh out their powers and duties as follows:
We believe standard benefit packages (and definitions) are the key
to facilitating meaningful competition. The Draft bill provides 3 broad
categories of policies, and we appreciate the fact that these broad
groupings will be helpful to consumers. But like Medigap policies A-L,
we urge you to make the policies sold in each of these broad categories
identical, so that consumers can shop on the basis of price and
quality, and not on tiny, confusing differences (10 rehab visits v. a
plan with 12, etc.). To only require these broad groupings to be
`actuarially equivalent' is to invite a Tower of Babel of tiny plan
differences, designed by the insurers to attract the healthy and avoid
the most expensive--and with the end result of confusing the consumer.
Consumers want choice of doctor and hospital. We do not believe
that they are excited by an unlimited choice of middlemen insurers.\8\
Fewer offerings of meaningful choices would be appreciated. There are
empirical studies showing that there is such a thing as too much
choice, and dozens and dozens of choices can paralyze decision-
making.\9\ The insurance market can be so bewildering and overwhelming
that people avoid it. We think that is a major reason so many people
having picked a Part D plan, do not review their plan and fail to make
rational, advantageous economic changes during the open enrollment
period.
In the past, CMS allowed roughly 1400 Part C plans with less than
10 members to continue to clutter the marketplace. What a waste of time
and money for all concerned. Reform legislation should prevent the
proliferation of many plans with tiny differences that just serve to
confuse a consumer's ability to shop on price and quality.
Require standardization of insurance definitions so
consumers can easily compare policies on an ``apples-to-apples' basis.
This is key. Hospitalization should mean hospitalization. Drug coverage
should mean drug coverage, etc. Attached on the last page of this
testimony is an article from our May magazine which demonstrates what
radically different coverage two similar sounding policies can provide.
It is not clear that the ``benefit standards defined'' (p. 29, line 11)
will guarantee comparability of terms among plans.
Require insurers to clearly state (in standardized
formats) what's covered and what's not in every plan offering, and to
estimate out-of-pocket costs under typical treatment scenarios. The
Washington Consumers' Checkbook's ``Guide to Health Plans for Federal
Employees (FEHBP)'' does a nice job showing what consumers can expect,
but even in FEHB policies they find it impossible to provide clear data
on all plans.\10\ HR 2427 by Rep. DeLauro and Rep. Courtney and 23
others is excellent language on how to design such scenarios.
Maintain an insurance information and complaint hotline,
and compile federal and state data on insurance complaints and report
this data publicly on a Web site. The States would continue to regulate
and supervise insurers operating in their state, but with the continual
merger and growing concentration of insurers, consumers need a simple
place where complaints can be lodged and data collected, analyzed, and
reported nationally concerning the quality of service offered by
insurers. This type of central complaint office may have allowed
quicker detection of the UnitedHealth-Ingenix abuse of underpaying
`out-of-network' claims.
Institute and operate quality rating programs of insurance
products and services. This would be similar to the Medicare Part D
website, with its `5 star' system.
Manage a greatly expanded State Health Insurance
Assistance Program that would provide technical and financial support
(through federal grants) to community-based non-profit organizations
providing one-on-one insurance counseling to consumers. These programs
need to be greatly expanded if you want the HIE connector to work. The
SHIPs should be further professionalized, with increased training and
testing of the quality of their responses to the public.
Require plans to provide year-long benefit, price, and
provider network stability. In Medicare Part D, we saw plans advertise
certain drug costs during the autumn open enrollment period, and then
by February or March increase prices on various drugs so much that the
consumer's effort to pick the most economical plan for their drugs was
totally defeated. This type of price change--where the consumer has to
sign up for the year and the insurer can change prices anytime--is a
type of bait and switch that should be outlawed.
Make consumers fully aware of their rights to register
complaints about health plan service, coverage denials, balance-billing
and co-pay problems, and to appeal coverage denials. We appreciate the
requirement in Sec. 132 for `fair grievance and appeals mechanisms,'
but urge that the Commissioner, perhaps with the help of the NAIC,
develop a model system that all participating insurers have to use.
Many are worrying that comparative effectiveness research (CER) may
lead to limits of what is covered. We believe CER will help us all get
the best and safest care. It makes sense to give preference to those
items which objective, hard science says are the best, especially if
the research takes into consideration relevant differences such as
gender, ethnicity, or age. But if a drug, device, or service does not
work for an individual, then that individual must be able to try
another drug, device, or service without hassle or delay. The key to
this is ensuring that the nation's insurers have honest, usable
exceptions processes in place. This legislative effort is where we
should be putting our energy to address the otherwise legitimate
concern of many people about CER.
Do More to Obtain Savings. Consumers are desperately worried about
the high cost of health care. We hope you can do more to obtain
savings. We will be forwarding a separate set of ideas for major
savings, particularly in the pharmaceutical sector, imaging and self-
referral abuse, and ensuring the operation of the Medicare Secondary
Payer program, etc.
Conclusion
We thank you again for this opportunity to testify.
The American health care system must and can be fixed.
The Tri-Committee proposal will bring us to the goal of affordable,
quality, dependable health care for all, and we hope you give consumers
even more tools to help drive the system toward quality and cost
savings.
APPENDIX II
------------------------------------------------------------------------
* * * and out-of-
pocket expenses can Massachusetts plan California plan
vary widely
------------------------------------------------------------------------
With its lower premium Monthly premium for any Monthly premium for a
and deductible, the 55-year-old: $399 healthy 55-year-old:
California plan at Annual deductible: $246
right would seem the $2,200 Annual deductible:
better deal. But Co-pays: $25 office $1,000
because California, visit, $250 outpatient Co-pays: $25 preventive
unlike Massachusetts, surgery after care office visits
allows the sale of deductible, $10 for Co-insurance: 20% for
plans with large generic drugs, $25 for most covered services
coverage gaps, a nonpreferred generic Out-of-pocket maximum:
patient there will and brand name, $45 $2,500, includes
pay far more than a for nonpreferred brand hospital and surgical
Massachusetts patient name co-insurance only
for the same breast Co-insurance: 20% for Exclusions and limits:
cancer treatments, as some services Prescription drugs,
the breakdown below Out-of-pocket maximum: most mental-health
shows. $5,000, includes care, and wigs for
deductible, co- chemotherapy patients
insurance, and all co- not covered.
payments Outpatient care not
Exclusions and limits: covered until out-of-
Cap of 24 mental- pocket maximum
health visits,$3,000 satisfied from
cap on equipment hospital/surgical co-
Lifetime benefits: insurance
Unlimited Lifetime benefits: $5
million
------------------------------------------------------------------------
Service and total cost Patient pays Patient pays
------------------------------------------------------------------------
Hospital $0 $705
Surgery 981 1,136
Office visits and 1,833 2,010
procedures
Prescription drugs 1,108 5,985
Laboratory and imaging 808 3,772
tests
Chemotherapy and 1,987 21,113
radiation therapy
Mental-health care 950 2,700
Prosthesis 0 350
-------------------------------------------------
Total $104,535 $7,668 $37,767
------------------------------------------------------------------------
Source: Karen Pollitz, Georgetown University Health Policy Institute,
using real policies and claims data from state high-risk pool.
Copyright (c) 2002-2007 Consumers Union of U.S., Inc. May, 2009 issue.
ENDNOTES
\1\ Consumers Union, the nonprofit publisher of Consumer Reports,
is an expert, independent organization whose mission is to work for a
fair, just, and safe marketplace for all consumers and to empower
consumers to protect themselves. To achieve this mission, we test,
inform, and protect. To maintain our independence and impartiality,
Consumers Union accepts no outside advertising, no free test samples,
and has no agenda other than the interests of consumers. Consumers
Union supports itself through the sale of our information products and
services, individual contributions, and a few noncommercial grants.
\2\ See www.ConsumerReportsHealth.org/BBD
\3\ Washington Consumers' Checkbook Guide to Health Plans, 2008
edition, p. 5.
\4\ See also, TheStreet.com Ratings: Medigap Plans Vary in Price,
9/15/06.
\5\ Jonathan Gruber, ``Choosing a Medicare Part D Plan: Are
Medicare Beneficiaries Choosing Low-Cost Plans?'' (prepared for the
Henry J. Kaiser Foundation) March, 2009.
\6\ SeniorJournal.com, March 29, 2009.
\7\ HHS Office of Disease Prevention and Health Promotion
\8\ ``Nearly three-fourths (73 percent) of people ages 65 and older
felt that the Medicare Prescription drug benefit was too complicated,
along with 91 percent of pharmacists and 92 percent of doctors. When
asked if they agreed with the statement: ``Medicare should select a
handful of plans that meet certain standards so seniors have an easier
time choosing,'' 60 percent of seniors answered in the affirmative.''
Jonathan Gruber, ``Choosing a Medicare Part D Plan: Are Medicare
Beneficiaries Choosing Low-Cost Plans?'' (prepared for the Henry J.
Kaiser Foundation) March, 2009. Page 2.
\9\ Mechanic, David. Commentary, Health Affairs, ``Consumer Choice
Among Health Insurance Options,'' Health Affairs, Spring, 1989, p. 138.
\10\ Op. cit., p. 68.
______
Chairman Miller. Dr. Moffit.
STATEMENT OF ROBERT MOFFIT, DIRECTOR, CENTER FOR HEALTH POLICY
STUDIES AT THE HERITAGE FOUNDATION
Mr. Moffit. Thank you very much, Mr. Chairman. I wish to
express to you my deep appreciation to present my views this
afternoon.
I hasten to add that the views I express today are solely
my own. They do not necessarily represent the views of the
Heritage Foundation or its officers or board of trustees.
You and your fellow committee members are considering an
ambitious and comprehensive health care reform proposal. The
draft bill contains both an individual and an employer mandate.
As the Congressional Budget Office reported in 1994, an
individual mandate on American citizens to purchase health
insurance is unprecedented.
I deeply understand and appreciate the rationale for that
mandate to offset the cost shifting and to address the free
rider problem. Individuals do, in fact, have a personal
responsibility to protect themselves and impose no unnecessary
costs on the rest of us. Nonetheless, an individual mandate is
a restriction on personal liberty; and given the fact that it
is such a restriction on personal liberty, I think we ought to
look for other opportunities to expand coverage, such as
positive incentives combined with mechanisms to facilitate the
ease of enrollment in health insurance, and that way achieve a
dramatic reduction in health insurance.
I have suggested such alternatives in the Harvard Health
Policy Review; and, with your permission, Mr. Chairman, I would
like to submit those for the record.
Chairman Miller. We will make that part of the file of the
committee.
[The article, in the spring 2008 issue of the Harvard
Health Policy Review, may be accessed at the following Internet
address:]
http://www.hhpr.org/currentissue/
______
Mr. Moffit. And as for the employer mandate, the costs of
an employer mandate are invariably visited upon employees, not
employers, in the form of reductions in wages or other
compensation or even a reduction in employment. In my view, it
is inadvisable to impose a such a mandate, especially during a
recession.
In the limited time available to me, I would like to focus
my remarks on three key areas of the bill: the national health
insurance exchange, the public plan and Federal regulation of
insurance.
The concept of a health insurance exchange is hardly new.
It has had only limited application at the State level. Some
may argue that the Federal Employee Health Benefits Program, a
defined contribution arrangement, is analogous to an exchange,
a national exchange, but I would note that there is no
government-sponsored health plan in the FEHBP, nor does the
FEHBP have anything remotely approaching the statutory or
regulatory regime that is embodied in the draft bill.
The former Governor of Massachusetts, Mitt Romney, and
State officials who framed the major 2006 reform in
Massachusetts developed an exchange. One of the key advantages
of that State-based health insurance exchange called the
Connector, which one of my colleagues is involved with, is that
it would allow employers and employees in small businesses to
get access to personal and portable health insurance tax free.
In other words, since the coverage would be available through
the exchange and because the exchange itself would be
considered group coverage, it would enjoy the powerful
advantages of the existing Federal tax treatment of health
insurance.
In my own view, the health insurance exchange is an
excellent idea. It should, however, be aggressively promoted as
a State institution at the State level.
With regard to the public plan, the bill proposes that the
Secretary of the Department of Health and Human Services
establish the public insurance plan and it is to play on a
level playing field in plain language of the bill. However, I
would add that in basing the public plan's payments to
providers on Medicare payment rates, which are routinely set
below those of the private sector, as Professor Hacker pointed
out, the public plan would enjoy an advantage over competing
private health plans. Independent analyses
show that the use of Medicare payment rates would result in
an erosion of existing private health insurance.
I would add just one more point with regard to this issue
of the level playing field. It has been said constantly. If you
are serious about a level playing field, that means that all of
the rules and regulations that apply to private health
insurance must apply, must apply to the public plan. If
Congress wishes to achieve a level playing field between public
and private health plans, then the public health insurance
option--just like any other private option--should be allowed
to compete for market share and also be allowed to fail. That
means without being kept on artificial life support through the
infusion of taxpayers' money. That would be a key test of
congressional commitment to a level playing field.
With regard to Federal benefit setting, under Title I of
the bill the Congress would require every American to have
health insurance coverage that Congress would define as
acceptable. The bill specifies various standards.
I would only say in closing that my concern about the
Federal benefit setting is that you may very well undermine the
creativity of States in an insurance market reform. States as
culturally and politically different as Massachusetts and Utah
have undertaken some very far-reaching and consequential
reforms. Those kinds of experimentation and innovations should
be encouraged.
Thank you, Mr. Chairman.
Chairman Miller. Thank you.
[The statement of Mr. Moffit follows:]
Prepared Statement of Robert E. Moffit Ph.D., Director, Center for
Health Policy Studies, the Heritage Foundation
Mr. Chairman and Members of the Committee: My name is Robert E.
Moffit. I am Director of the Center for Health Policy Studies at the
Heritage Foundation. I wish to express to you my deep appreciation for
the opportunity to present my views to you today on major legislation
governing the future of the large and growing health care sector of the
American economy, now approximately 17 percent of the Gross Domestic
Product. I hasten to add that the views that I express today are solely
my own, and they do not necessarily represent the views of the Heritage
Foundation, its officers or its Board of Trustees.
The Committee is considering ambitious and comprehensive
legislation. It covers an enormous range of policy items and issues.
Provisions cover the reform of the health insurance markets, the
composition of health insurance benefits packages, and health insurance
premium and payment policy; new legal obligations on employers and
employees to purchase health insurance; the creation of new federal
agencies and entities, such as the Health Choices Administration
administered by a Health Choices Commissioner, the creation of a new
public health insurance option, and new responsibilities for the
Secretary of the United States Department of Health and Human Services;
new subsidies for individuals and employers, changes to traditional
Medicare and Medicaid, Medicare Advantage and the Medicare prescription
drug program; new federal policies governing the provision of primary
care, prevention and wellness, mental health care, and coordinated
care; new quality initiatives and comparative effectiveness research,
new initiatives to combat waste, fraud and abuse; new public health
initiatives, public health and workforce development, community health
centers, and policies governing the health care workforce.
Needless to say, in the next few days and weeks, a variety of
independent analysts, as well as the staff of the Congressional Budget
Office and others, will have an opportunity to examine the impact of
these and other provisions in greater detail.
The draft bill contains both an individual and employer mandate. As
the Congressional Budget Office reported in 1994, an individual mandate
on American citizens to purchase health insurance is unprecedented.
While President Obama has recently stated that he is open to the
imposition of such a mandate, his earlier reasoning for opposition
should not be forgotten, as he noted that it would be unenforceable as
a mechanism to secure universal coverage and that he thought it
inappropriate to force Americans to purchase coverage that they
determined they could not afford. I appreciate the rationale for the
mandate as a means to offset cost-shifting and as a remedy for the
``free-rider'' problem; individuals have a personal responsibility to
protect themselves and impose no unnecessary costs on the rest of us.
Nonetheless, an individual mandate is a restriction on personal
liberty, and that the use of positive incentives combined with new
mechanisms to facilitate ease of enrollment can achieve the broader
goal of dramatically expanded coverage. I have suggested such
alternatives, and, with your permission Mr. Chairman, would like to
submit them for the record.
Since most Americans under the age of 65 are today enrolled in
employment-based health insurance, it is easy to see why so many
policymakers are enamored by the idea of an employer mandate. I would
simply remind the Committee that the costs of an employer mandate are
invariably visited upon employees in the form of reductions in wages or
other compensation or even a reduction in employment. It is inadvisable
to impose such a mandate, especially during a recession.
In the limited time available to me, I would like to focus my
remarks on three key areas: the establishment of a national health
insurance exchange, the creation of a public plan to compete with
private health plans in that exchange, and the creation of a new
authorities for the federal government to standardize and regulate
health insurance, and a process for federal officials to define and
refine the health benefits that will be available to American citizens.
The Health Insurance Exchange. Under Section 141 of the bill of
Title II, Congress would create a new independent agency, the Health
Choices Administration. The new agency would be headed by a Health
Choice Commissioner appointed by the President with the advice and
consent of the Senate. Under Section 142, listed among the many duties
of the Commissioner, would be the establishment and operation of a
Health Insurance Exchange. Under Section 201 of Title II of the bill,
the Congress would create the Health Insurance Exchange in order to
``facilitate access of individuals and employers, through a transparent
process, to a variety of choices of affordable quality health
insurance, including a public insurance option.''
Under the terms of the provision, the Commissioner would establish
``standards for, and accept bids from'', ``qualified health benefit
plans'', and negotiate and enter into contracts with these qualified
health benefit plans, which must offer at least three different levels
of benefits that are statutorily required with a high degree of
specificity.
Under Section 202, the bill says that a person is eligible to
enroll in the exchange unless that person is enrolled in another
qualified health benefit plan or other statutorily defined ``acceptable
coverage'' For the enrollment of eligible employers and employees, and
individuals, the bill provides a three year transition period for the
categories starting with the smallest employers (with ten or fewer
workers), to the smaller employers (20 or fewer workers) and to larger
employers. The bill specifies that individuals, with some exceptions,
who are enrolled in existing government programs such as Medicare,
Medicaid, the military health programs(``Tri-Care'') and the Veterans
Administration (VA) program are ineligible for enrollment in the Health
Insurance Exchange. A noteworthy exception to this set of categorical
exclusions are what are deemed ``Non-Traditional'' Medicaid enrollees,
persons who had a ``qualified health plan'' or who were enrolled in a
``statutorily grand-fathered'' health plan (an individual or group
insurance plan) in the previous six months. The several states, under
certain conditions, are also given the opportunity to enroll Medicaid
beneficiaries in the Exchange.
Under Section 203, The Commissioner ``shall specify the benefits''
to be made available in the Exchange for ``Exchange Participating
Plans'' each year, but these specifications are to be consistent with
other health benefit requirements that are elsewhere established in the
statute. The provision also prohibits the Commissioner from entering
into a contract with an insurer unless the insurer offers the three
benefits levels that are required by statute: the ``basic'',
``enhanced'' or ``premium'' benefit plans for the service areas in
which they offer coverage.
Under Section 204, the Congress would enact standards for the
insurers who offer qualified health benefit plans that are eligible to
participate in the Exchange. Specifically, they must be licensed under
state law where their insurance coverage is offered; they must report
data and other information to the Commissioner that he may require;
implement the ``affordability credits'' that are offered to enrollees;
accept all eligible enrollees; provide ``wrap around coverage'' for
Medicaid enrollees; participate in pooling mechanisms established by
the Commissioner; contract with ``essential community providers'' as
specified by the Commissioner; provide ``culturally and linguistically
appropriate services and communications'' to enrollees; and comply with
``other applicable standards'' such as billing and premium collection
practices, that the Commissioner may specify.
Interestingly, the plans participating in the Health Insurance
Exchange would still be required to offer benefit packages within the
states that they serve that comply with state legislative requirements
for state mandated benefits. This is a significant requirement,
inasmuch as there are today more than 2000 state mandated benefits and
provider services that are required for inclusion in health insurance
offerings. The number and cost, of course, vary significantly from
state to state.
For insurers who participate, the initial contract is to be for not
less than one year, but subsequent contracts with the Exchange may be
automatically renewed from year to year.
Insurers would also be under statutory requirements to comply with
``network adequacy'' standards that are determined by the Commissioner,
and comply with Commissioner's standards and procedures for
``grievances and complaints''. In the enrollment of persons in the
Health Insurance Exchange, the Commissioner is not only required to
provide comparative plan information, but also ``shall establish
``outreach activities for particularly ``vulnerable'' segments of the
population, including adults and children with disabilities or
cognitive impairments.
Under Section 207 of Title II, the Congress would create a Health
Insurance Exchange Trust Fund. This new trust fund would contain monies
appropriated by Congress, as well as a class of dedicated funds,
including taxes levied on individuals who do not obtain ``acceptable
coverage'' and employers who do not provide ``acceptable coverage'' to
their employees and certain excise taxes on insurance.
Under Section 208, individual states, or a group of states, are
permitted to set up a state based health insurance exchange or a multi-
state exchange. But they can only initiate such an action with the
approval of the Commissioner, and the Commissioner may only approve the
creation of a state-based health insurance exchange only if they can
demonstrate to the satisfaction of the Commissioner their capacity to
undertake such an enterprise; contract with health plans that meet the
federal health insurance benefit requirements and standards outlined
under Title I of the bill; enroll the eligible employers and employees
and individuals; and if they do not have another exchange already
operating within the state. If the Commissioner determines that the
state health insurance exchange does not meet federal rules and
standards, the Commissioner can with notice, terminate the state
exchange.
Comment. The concept of a health insurance exchange, to facilitate
access to a choice of coverage for individuals and employers,
especially small employers, is hardly new. It has had only limited
application at the state level, though some may argue that the Federal
Employees Health Benefits Program, a defined contribution arrangement
that is characterized by a wide variety of private health benefit
options (ranging from traditional health plans to health savings
accounts, from relatively inexpensive health plans to very expensive
benefit offerings), is analogous to a health insurance exchange. Of
course, there is no government sponsored health plan in the FEHBP; nor
does the FEHBP have anything remotely approaching the statutory or
regulatory regime embodied in Title I and Title II of the bill.
In its practical application, a key policy question is whether
policymakers want the health insurance exchange to serve as an
administrative body or a regulatory body. They are widely different in
their conception and practical effects. As an administrative body, an
exchange would provide comparative information on prices, plans and
benefits, facilitate enrollment of individuals and employees, collect
and transmit premiums payments, and thus reduce the administrative
costs for small businesses and thus the premium costs of the
individuals and families employed by them. As an administrative body,
the exchange would serve as a mechanism to permit a defined
contribution on the part of employers for their employees, enabling
them to pick and choose the health insurance plan of their choice while
securing the existing tax advantages of group health insurance. This
would enable individuals to buy and own the health plan they determine
as best for them, and thus be able to take with them from job to job.
This added portability in health insurance would, in and of itself,
result in a dramatic reduction in the number of the uninsured, most of
whom are persons who had coverage and lost it, and experience spells of
un-insurance, in what is clearly an unstable and deficient health
insurance market.
If the exchange is conceived as more than an administrative body,
and is designed as another regulatory agency, it can become a mechanism
to constrain personal choice and frustrate competition by limiting the
kind and number of suppliers that can enter the market, and thus
increase the costs of coverage.
It is not necessary to create a national health insurance exchange
for the purpose of creating a national market for health insurance. The
United States already has a national market for a variety of goods and
services, and the distribution of those services is not contingent upon
the creation of anything remotely resembling a national exchange for
these goods and services. If Congress wanted to create a national
market for health insurance, all it would have to do is repeal existing
federal laws that are a barrier to such a market, and exercise its
authority to promote interstate commerce under Article I section 8 of
the Constitution, and authorize the U.S. Department of Commerce to
issue such regulations as are necessary to ensure that promotion.
For state officials, such as those who framed the major 2006 reform
in Massachusetts, one of the key advantages of a state based health
insurance exchange ( called ``the connector'') was that it would allow
employers and employees in small business to get access to personal and
portable health insurance tax free, since the coverage available
through the exchange would be considered group coverage and thus enjoy
the powerful advantages of the existing federal tax treatment of health
insurance. If Congress wanted to assist individuals and families,
particularly those employed in small businesses who do not have access
to group coverage, and who are penalized by the federal tax treatment
of health insurance if they attempt secure coverage outside of the
place of work, then all Congress would have to do is to reform the
federal tax treatment of health insurance, and guarantee tax breaks for
individuals regardless of where they work, eliminate the inequities and
disparities in the tax code and thus make health insurance affordable
and available for everyone.
For lower income persons, those who do not have federal tax
liabilities, the correct remedy would of course be the provision of
generous assistance, either in the form of premium assistance, some
sort of refundable tax credit or direct, income related subsidy to
offset the cost of health insurance and thus guarantee coverage.
Health insurance markets differ radically from state to state. For
some states, a health insurance exchange may be appropriate; for
others, there may be other, perhaps more innovative options. Federal
policy should recognize and accommodate that diversity among the
states, and foster state creativity in finding workable solutions to
coverage, especially for the most vulnerable, the poorest and the
sickest who need the most help.
Finally, I would note that the draft bill vests extraordinary power
in the hands of the Commissioner, including the power to decide what
state or group of states can or cannot set up or manage or maintain a
state health insurance exchange. Federalism is a remarkable
constitutional achievement. It means that the national government and
the state governments are each supreme in their respective
constitutional spheres; that the encroachment of one upon the other
violates the spirit of federalism, the unique division of power
enshrined in our Constitution. This is not a federal state partnership;
it is federal domination of the states. It is also a prescription that
could, and probably would, undermine much needed innovation in the
provision of new health insurance options.
The Public Plan Under Title II, Subtitle B, Section 221 of the
draft bill, Congress would require the Secretary of the U.S. Department
of Health and Human Services to establish a ``public health insurance
option'' in the national health insurance exchange. In the language of
the legislative text, the option is designed to ensure ``choice,
competition, and stability of affordable, high quality coverage
throughout the United States in accordance with this subtitle.''
The range of competition for the new public plan is to be limited
to the national health insurance exchange. In competing with private
health plans, the public plan is to play on ``a level playing field.''
In the language of the legislative text: ``The public plan shall comply
with the requirements that are applicable under this title to an
exchange participating health benefits plan, including requirements
related to benefits, benefit levels, provider networks, notices,
consumer protections, and cost sharing.'' Like private health plans
competing in the exchange, the new public plan is to offer three types
of coverage: basic, enhanced and premium coverage.
In terms of the rights of enrollees, the legislative text specifies
that the same rights that are enjoyed by Medicare beneficiaries today
will be extended to enrollees in the new public plan, and that these
enrollees will have access to the federal courts for the enforcement of
their rights in the same way that Medicare beneficiaries have access to
the courts. This is a key provision defining the range of action
available to enrollees in the public plan.
Under Section 221, the Secretary can enter into contracts for the
administration of the public plan, but that contractual arrangement
with these entities cannot ``involve the transfer of insurance risk to
such entity.'' This is also a key provision.
The Secretary is also authorized to set premiums for the public
plan: ``The Secretary shall collect such data as may be required to
establish premium and payment rates for the public insurance option and
for other purposes of this subtitle, including to improve quality and
to reduce racial and ethnic disparities in health care.'' Under Section
222, the authors of the bill further specify that the Secretary ``shall
establish'' geographically adjusted premium rates for the public plan
that comply with the premium rules set by the Commissioner for private
plans at a level ``sufficient to fully finance'' the costs of the
benefits, the administrative costs and ``contingency margins'' of the
new public plan. Within the Department of the Treasury, Congress would
create an account to handle receipts and disbursements for the
operation of the public plan, including the finds necessary for start
up costs. Under Section 222, there is no other authorization for
additional appropriations for the account. This is also a noteworthy
provision, though there is nothing to prevent Congress from
appropriating additional funds to the account.
Under Section 223, the Secretary is to establish payment rates for
services and procedures under the public plan. Initially, these payment
rates, under Section 223(2)(a) are to be based on the payment rates for
medical services and providers under Medicare Parts A and B. The
Secretary is given some leeway in adjusting or modifying payments
rates, particularly for services, such as well child visits, that are
obviously not covered under Medicare. Moreover, the rates for payment
for prescription drugs will be ``negotiated'' directly by the
Secretary. The Secretary is also to adopt anticipated payment reforms
for the public plan, based on those initiated in the Medicare program
designed to secure better value for taxpayer dollars.
Comment. In a normally functioning, consumer-driven private market,
the price of goods and services is determined dynamically by the
conditions of supply and demand, the goods and services available by
suppliers and the demand for those goods and services. In a consumer
driven health insurance market, the premium payments reflect a
reasonable relationship between the benefits that are offered,
including any discounted payments to providers, and the demand for
those benefits.
In this case, the Secretary is to set premium payments in such a
way that they would fully finance the benefits, as well as meet other
goals, such as the provision of quality care and the reduction in
racial and ethnic disparities. This would require the Secretary to go
beyond an assessment of prevailing market conditions, and also do so in
accordance with rules for premium payment set by the Commissioner. This
is likely to be a challenge.
In basing the public plan's payment to providers on the Medicare
payment rates, which are routinely set below those of the private
sector payment rates, the public plan would naturally enjoy an
advantage over competing private health plans. Because, by law, the
payment rates would be set at such a level, rather than at the market
rates that would otherwise prevail on a level playing field, the public
plan would be given a legal advantage in competition with the private
sector plans. This would undercut the claim of a level playing field.
Under Medicare, physicians, for example, are paid at a rate of 81
percent of average market rates. Independent analyses, by the Lewin
Group and others, have shown that the use of Medicare payment rates
would not only result in a significant reduction in revenues for
doctors and hospitals, but also an erosion of private health insurance
coverage.
The simplest way to achieve the stated goal of the level playing
field is to require the public plan to compete for doctors and
hospitals and other medical professionals by negotiating market rates
with such providers just like the officials of private health plans do
routinely.
If one of the stated goals of the bill is to ensure a ``level
playing field'', there are other features of this legislation to be
addressed. In Section 221, as noted, Medicare enrollees are to be given
access to the federal courts in the same way as Medicare beneficiaries
in securing their rights under the Medicare entitlement, presumably
over the same range of questions and controversies as routinely apply
in these cases. This may be necessary, but it is not a sufficient legal
protection. First, private health plans are everywhere subject to
various laws governing torts and contracts, and private health plans
and their officers can be sued for contract violations or torts. To
secure a level playing field, the same should apply to the public plan
and its officers. This point should be clarified in statute, assuming
the range of legal actions available to enrollees in the public plan
are not to be limited. Second, private health insurance companies, as
with other private firms, are subject to strict accounting standards
governing liabilities and financial standards. Perhaps this is implied
within the broad authority of the Commissioner to set rules for plan
participation in the exchange; nonetheless, it should also be clarified
that the public plan is subject to the same rules. Specifically,
Congress should, under no circumstances, allow the public plan to
accumulate the kind of massive un-funded liabilities that burden the
current Medicare program, and threaten a crisis in the government's
entitlement programs. Third, as specified under Section 221, the
Secretary is authorized to contract with administrators to carry out
the functions of the public plan, but that contractual authority cannot
involve the transfer of risk. This obviously means that the entire risk
of the public plan will remain with the taxpayers, not the public plan
itself, as a government-sponsored enterprise. Since private health
plans competing with the public plan have no such taxpayer guarantee,
regardless of the wisdom or folly of providing such a guarantee, the
public plan would have an advantage incompatible with the goal of a
level playing field.
In the final analysis, in competitive markets, where consumers'
preferences prevail, some firms are extraordinarily successful in
offering individuals and families what they want, and other firms are
not. On the level playing field, some firms are highly profitable and
other firms rack up losses. In the field of health insurance, the
history of the Federal Employees Health Benefits Program (FEHBP) is one
of a free entry and exit of health plans. If Congress wishes to achieve
a level playing field between public and private health plans, then the
public health insurance option, just like any private health option,
should also be allowed to fail, without being kept on artificial life
support through the infusion of taxpayer monies. That would be a key
test of congressional commitment to a level playing field.
Federal Benefit Setting. Under Division A, Title I of the bill, the
Congress would require every American to have health insurance coverage
that Congress would define as ``acceptable coverage''. This is defined
in Section 202 as coverage in a series of categories: a ``qualified
health benefits plan;'' a ``grand-fathered'' health insurance plan
(individual and group coverage in effect for individuals and groups
during a specified period of time); coverage under Part A of Medicare,
Medicaid, ``Tri-care'', the Veterans Administration program, and
``other such coverage'' as the Commissioner, in consultation with the
Secretaries of Treasury and Labor, shall define as ``acceptable
coverage''.
Under Title I, the bill specifies the various standards that must
apply for a plan to be acceptable coverage, including ``grand-
fathered'' coverage. Grand-fathered coverage, as noted, is coverage
that persons and employers would have and would be in effect for a time
to be specified, and it would be subject to specific limitations. There
would be limitations on the enrollment in such a plan, limit on changes
to any terms and conditions of coverage and premium increases. After a
given period of time, individual health insurance, as it exists today,
would no longer qualify as ``acceptable coverage''. For group
insurance, however, there would be a ``grace period'' for current group
health coverage before such coverage would have to meet the new federal
standards to be considered ``qualified health benefits plans'' that are
in accord with federal benefit standards and levels.
Under Title I, Subtitle B, Sections 111-116, the Congress specifies
standards for access for a plan to be designated as a ``qualified
health benefits plan''. These include a prohibition on pre-existing
condition exclusions; guaranteed issue and guaranteed renewability of
coverage; insurance rating limited to age, geography and family
enrollment; ``non-discrimination standards'' to be set by the
Commissioner; the adequacy of provider networks, to be determined by
the Commissioner; and a federal minimum loss ratio.
Under Title I, Subtitle C, the bill specifies standards for access
to ``essential benefits''. Under Section 121, there is a distinction
between standards for health plans that participate in the national
Health Insurance Exchange and those who do not. For plans that do not
participate, they may offer coverage in addition to the ``essential
benefits'' that are defined in statute. For health plans that
participate in the Exchange, the health plans are required to offer
``specified levels of benefits;'' a more detailed and higher standard
of compliance.
Under Section 122, the bill defines ``essential benefits''. The
provisions are subject to other provisions of the bill , however, that
impose limits on cost sharing for covered items and services, and it
would eliminate both ``annual and lifetime'' limits on services or
covered health care items. The ``minimum services'' to be covered are:
hospitalization; outpatient services; physicians services and the
services of other health professionals; supplies and equipment incident
to the provision of physician and hospital services; drugs;
rehabilitative services; mental health and substance abuse; preventive
services; maternity benefits; well baby and well child care; oral,
vision and hearing services and equipment and supplies for children
under 21 years of age. The bill specifies that there is to be no cost
sharing for preventive services and well baby and well child care. It
also specifies that preventive services are to be updated on the basis
of the recommendations of the U.S. Preventive Services Task Force and
vaccines to be included are those to be recommended by the Director of
the Center for Disease Control and Prevention.
Under Section 123, the bill establishes a Health Benefits Advisory
Committee, comprised of federal and non-federal employees, and chaired
by the Surgeon General of the United States. The Committee would make
recommendations on benefit standards, and specify the kinds of cost
sharing that should be adopted in the basic, enhanced and premium
health plans packages that participate in the Health Insurance
Exchange. According to the legislative language, the Committee, in
making its recommendations, ``will take into account innovations in
health care'' and work to ``ensure that the essential benefits coverage
does not lead to rationing in health care''. This is a key provision.
Under Section 124, the bill specifies how the benefit
recommendations are to be adopted. The Advisory Committee makes its
recommendation to the Secretary of HHS. The Secretary then must review
these within 45 days, and determine whether or not to adopt them and
publish them in the Federal Register to become applicable to qualified
health benefit plans. For health plans participating in the Health
Insurance Exchange, the Commissioner would enforce federal benefit
standards.
Comment. Health insurance is one of the most highly regulated
sectors of the American economy. Today, with the exception of the ERISA
and the provisions of the Health Insurance Portability and
Accountability Act, the bulk of this regulation is within the
jurisdiction of the states. The bill would concentrate enormous
regulatory authority over health insurance in the federal government,
where the content of health benefit packages, and even the levels of
these benefits, would be under the direct authority of the Secretary of
HHS and the Advisory Committee. The obvious problem is that this
centralization of decision-making and the attendant special interest
lobbying that must and will accompany it will almost certainly result
in dynamics similar to what has taken place in state legislatures and
agencies, where health benefit decisions are often highly politicized.
As in so many other areas of domestic policy, the states have been
leaders in reform efforts, whether it has been education reform or
welfare reform, providing graphic examples of progress, and a platform
for change that can be further encouraged by federal authorities. In a
search for a federal remedy, Congress ought to be wary of pre-empting
progress in the 50 state capitols of this vast and very diverse
country.
In health care reform, states as different, culturally and
politically, as Massachusetts and Utah, have embarked on profoundly
consequential and far-reaching health care reforms. Whatever one may
think of the specific reforms in either state, there is no doubt that
they are serious and they hold lessons for other states.
Finally, I would ask the Committee to consider the large areas of
agreement that exist in Congress and the nation at large on health care
reform. Americans agree that all citizens should have adequate coverage
to protect them and their families against the financial devastation of
catastrophic illness. Americans generally agree that the working
Americans who have no health insurance at the place of work,
particularly low income working Americans, should be the beneficiaries
of direct assistance to enable them to get health insurance coverage.
There is also increasing agreement, across the political spectrum, that
we must end the inequities of the existing tax treatment of health
insurance. No taxpayer should be denied tax relief, merely because of
an accident of her employment.
Within Congress, there is widespread agreement, stretching the
ideological spectrum from Democratic Representative Tammy Baldwin of
Wisconsin to Republican Representative Tom Price of Georgia--that
Congress would do well to encourage in concrete ways, with generous
grants and technical assistance, state experimentation and promote
innovation in coverage expansions, improvements in quality of care, and
the adoption of health policy proposals that best accommodate the very
different cultural and political dynamics of the several states.
Thank you Mr. Chairman and Members of the Committee, I would be
happy to answer any questions you may have.
______
Chairman Miller. Ms. Young.
STATEMENT OF RE SHONDA YOUNG, SMALL BUSINESS OWNER, ALPHA
EXPRESS, INC., ON BEHALF OF THE MAIN STREET ALLIANCE
Ms. Young. Chairman Miller, Ranking Member Kline, and other
members of the committee. I am honored to be here today. I
thank you for inviting me.
My name is ReShonda Young. I serve as operation's manager
for my father's small business in Waterloo, Iowa. I am also a
member of the Iowa Main Street Alliance, which is a coalition
of small businesses across Iowa working for a solution on
health care.
I am here today to share some experiences of an actual
small business desperately trying to provide health care
coverage for our employees.
My father started Alpha Express 20 years ago. When he
started, it was him and one other person. Since then, we have
grown to almost 40 employees. Now that my father is 68 years
old, he is ready to retire for a second time; and we are hoping
that my oldest brother will come back and help to run the
business, because I do not want to do it by myself.
So as operation's manager for the business, I am constantly
thinking of how to provide health insurance for our employees.
We have 33 total employees, 13 of whom are full-time
employees. The quotes that I have been getting since 2006 are
only for our full-time employees; and, even with that, the
quotes that I got in 2006 raised our payroll expenses by 13
percent, which was absolutely unaffordable to us at that time.
So, instead, we were left offering a small stipend to employees
who decided to purchase health insurance on their own to help
them out a little bit. Even with doing that, most of them could
not afford the coverage. Actually, there are only three people
right now who are purchasing their own health insurance because
they can afford it.
My father has retiree coverage from his days of working at
John Deere, and I have coverage through my husband, so neither
one of us are worried about our own personal health insurance.
But most of our employees are not in that position, and we have
a really tight-knit group of people. We have husband-and-wife
teams and other people who are like our family members, and we
really want to be responsible to them and for them and be able
to provide them with coverage.
The other thing is my brother, who is wanting to come back
from St. Louis to help out in the family business. He has a
family and two small children and cannot afford to go without
health care. And a decision that should be really easy to come
back and help to run the family business and leave a legacy is
really becoming really complicated because he can't afford to
without the health insurance.
So from a small business perspective, after looking at the
draft proposal, I believe legislation that has been drafted by
this and the other two House committees is a major step forward
in addressing the health insurance problems that we face. It
meets the priorities identified by the Main Street Small
Business Owners, and I hope that action will be taken sooner
rather than later to help with passage by the full House of
Representatives.
A thing I think is most important with insurance market
reform is the creation of a really strong public health
insurance option. Having a public insurance option that will
compete on a fair basis with the private plans will be a huge
benefit to small businesses, and it will guarantee that even in
local insurance markets that are dominated by only one or two
private insurers that we will still have real choices and the
leverage that comes with being able to take our business
elsewhere if we don't like the ones that are offered.
When I was looking for plans this past year, I got eight
quotes; and all eight quotes were from one company, which was
Wellmark. There are no other companies that would provide
quotes for our business within our area. And in our area, there
are really only two companies that really hold the market
share, which is Wellmark and United Health Care.
So small businesses across Iowa are really looking to
Congress to act quickly on the House reform, to rein in costs
and increase the competition, to give us some real choices
instead of just one company with just eight plans. We are
looking to you for leadership, and we need your support to
enact some real health care reform that will help solve this
problem.
[The statement of Ms. Young follows:]
Prepared Statement of ReShonda Young, Alpha Express, Inc.
Chairman Miller, Ranking Member Kline and members of the Committee,
thank you for inviting me to be here today and to testify on behalf of
my business and small businesses across Iowa. My name is ReShonda
Young, and I serve as Operations Manager for my family's business,
Alpha Express, Inc, based in Waterloo, Iowa. I am also a leader with
the Iowa Main Street Alliance--a coalition of small businesses across
Iowa working for a solution on health care.
I will make some specific comments on the committee's discussion
draft proposal from a small business perspective. First, I want to
share briefly about our business's experience with health care.
Alpha Express, Inc and the Realities of Health Care
Alpha Express is a transportation and contracting business. We
provide transportation services across the U.S. and Canada, contract
work for companies like John Deere, and exterior property maintenance
services.
Our business is a true family business. My father started the
company 20 years ago--back then it was just him and one partner--and my
dad has grown the business to almost 40 employees. Now my dad is 68 and
ready to retire. We're hoping my brother will come back and help run
the business.
As Operations Manager for the business, I think about health
insurance for our employees all the time. It's been years since we've
been able to afford group health insurance. When I came in full-time
with my dad in 2006, we got quotes from a couple different places, but
the quotes came in at about 13 percent of our payroll. We're willing to
pay our fair share of the cost of coverage, but we just couldn't afford
13 percent and there weren't any affordable options for us.
So instead, we're left offering a small stipend to help employees
who buy insurance on their own. But most of them still can't afford the
cost of coverage on the individual market. My father has retiree
coverage from his days working at John Deere, and I've got coverage for
myself through my husband. But most of our people are not in that
position--if they can't get health coverage through our business,
they're not going to be able to get it anywhere.
This spring, I started looking into group plans again, but the
plans we've looked at would mean at least a 12 percent increase in our
payroll expenses. And the plan would include a waiting period of 12 to
18 months before any pre-existing conditions would be covered, so the
money we put out in premiums wouldn't even cover some of the medical
expenses we would incur. We also had no guarantee the premium will
remain stable from one year to the next, and in fact they could ratchet
up the premium the second year and drive us out of the market again. I
received eight bids for coverage for our employees--but they were all
from the same insurance company, Wellmark. In Waterloo-Cedar Falls and
in most of Iowa, there are one or maybe two health insurers to choose
from. That's not competition, and it's not giving us affordable
choices.
Providing health insurance has always been something my father has
wanted to do, something that's important to us. We have a couple of
husband and wife teams who work for us. They need insurance for
themselves and their kids. We have long-time employees who are like
family members to us. This makes it especially important that our
employees are healthy and well taken care of. Some nights I lay awake
just worrying about health care.
Health care creates real problems for family businesses. My
brother, who wants to move back from St. Louis to help run the
business, can't afford to go without health coverage for his family.
Because of health care costs, decisions that should be easy for my
family to make have become complicated.
That's why I'm here today, and that's why it's so important that
you are taking leadership in addressing the health care challenges we
face.
Comments on the Committee's Discussion Draft
From the small business perspective, I believe the legislation
drafted by this and the two other House committees is a major step
forward in addressing the health insurance problems we face. It meets
the priorities identified by Main Street small business owners, and I
hope this committee will take action soon to approve it and encourage
its passage by the full House of Representatives.
Specifically, given that new insurance options will be opened up to
small business, either through the insurance market reforms or through
the Exchange, the Main Street Alliance supports the shared
responsibility provisions under Title III that require individuals and
employers to play their part in ensuring that everyone has health care
coverage.
I agree with the idea of giving employers the option of providing
coverage or contributing funds on our workers' behalf. I think the bill
would create a really good system, encouraging employers to be
responsible for their employees by whichever approach makes the most
sense in their circumstances. As I mentioned earlier, our firm faces
health insurance premium expenditures that would add 12--13 percent to
our payroll expenses in order to provide health insurance for our
workers. The contribution level in the bill--even without the small
business tax credit--would reduce our contribution amount by one third,
to 8 percent of payroll. And the insurance package would actually cover
our health care costs, with no preexisting condition exclusions. This
is a tremendous improvement over our current options.
I'm glad to see the provisions of the bill that will establish a
tax credit to help small employers bear the cost of providing coverage
for their workers. A 50 percent credit will provide important
assistance to businesses with 10 or fewer employees whose average
annual employee compensation is $20,000. And the small business
assistance is extended on a sliding scale to firms with average wages
up to $40,000 and up to 25 employees. This, too, offers significant
help in improving our current health insurance options.
Representatives of the Main Street Alliance look forward to
continuing to work with you to assess the interaction of the various
small business related provisions in the bill to ensure there is
affordability across the range of small businesses, whether they
directly provide coverage for their workers or contribute to helping
workers buy their own coverage through an exchange.
The shared responsibility called for in the bill for funding health
insurance is first made workable by the expanded options created in the
bill for purchasing affordable health insurance coverage. The
legislation does this by creating a Health Insurance Exchange to
provide a more competitive, transparent marketplace that will offer
real coverage choices for individuals and small businesses. In the
Exchange, we will actually be able to compare the insurance plans being
offered because the benefit packages will be standardized and the
differences in the plans will be disclosed.
I'm also happy to see the provisions in the draft legislation that
will reform practices in the insurance market to prohibit
discriminatory coverage and rating policies. These changes are long
overdue--I wish it were not necessary for the federal government to
have to step in and pass laws and impose regulations to get insurers to
stop these unfair practices, but if that's what it takes I support
putting them in place as soon as possible.
But I think the most important insurance market reform--and the one
that will go the farthest in ensuring competition among health plans--
is the creation of a strong public health insurance option. Having a
public plan that will compete on a fair basis with private plans will
be a huge benefit to small businesses. It will guarantee that even in
local insurance markets dominated by one or two private insurers, we
will have real choices and the leverage that comes with the ability to
take your business elsewhere if you don't like the insurance plan you
have.
I think a public health insurance plan is also critical to
encourage innovation in coverage and affordability in a competitive
marketplace. I know that our business is always looking for ways to
serve our customers better, more efficiently, at lower prices, and
we're driven by the competition from other businesses. As a purchaser
of health insurance coverage, I want my insurer to have to compete for
my business as hard as I have to compete for my customers.
The bill includes a phase-in of which businesses are eligible to
secure coverage through the exchange, and through the exchange gain
access to the public health insurance option, with firms with 10 or
fewer employees eligible in year one and firms with 20 or fewer
employees eligible in year two. I understand the intention with the
phase-in is to be cautious and not create unintended consequences by
moving too quickly. But from my vantage point, we can't have the public
option and the other private plan options available too soon. I would
encourage the committee to consider accelerating the phase-in of the
employers who can access the exchange.
Small Businesses Need Real Health Reform
Small businesses across Iowa and across the country are looking to
Congress to act quickly on health reform to rein in costs, increase
competition and give us real choices. Last fall, our coalition in Iowa
participated in a national small business survey where surveyors went
door to door and asked Main Street business owners face to face what
should be done to fix health care.
The results of this survey, reported in ``Taking the Pulse of Main
Street: Small Businesses, Health Insurance, and Priorities for Reform''
(full report available at http://mainstreetalliance.org/wordpress/home/
publications/), are worth noting in three key areas:
1. Small business owners' willingness to contribute toward health
coverage: When asked if we were willing to contribute for health
coverage for our employees, more than two thirds (73 percent) of small
employers said yes.
2. Support for real choices, including the choice of a public
health insurance plan: When asked to choose between a proposal with a
public health insurance option and a proposal with only private
options, responding business owners chose the proposal with a public
plan option by a margin of over two to one (59 percent to 26 percent).
3. Views on the role of government in making health care work: When
asked about public oversight and the role of government, small business
owners supported more public oversight of the insurance industry by
almost six to one (75 to 13 percent), and a stronger government role in
guaranteeing access to quality, affordable health coverage by over four
to one (70 to 16 percent).
We are looking to you for leadership. We need your support to enact
real health care reform that will solve this problem for family
businesses like mine and allow us to continue creating jobs and serving
the needs of communities across America. Thank you.
______
Chairman Miller. Dr. Mullan.
STATEMENT OF DR. FITZHUGH MULLAN, MURDOCK HEAD PROFESSOR OF
MEDICINE AND HEALTH POLICY, GEORGE WASHINGTON UNIVERSITY
Dr. Mullan. Chairman Miller, thank you. You certainly get
kudos for stick-to-it-iveness--not only writing the bill but as
much testimony as you have had. A credit to you.
My name is Fitzhugh Mullan. I am a pediatrician. I am a
medical educator. I once was in the National Health Service
Corps. I once ran the National Health Service Corps. Today, I
am a professor at Health Policy and Pediatrics at George
Washington, and workforce is my area, and I am happy to bring
that to the deliberations today.
This bill comes with context, and I want to give a little
bit of workforce context very quickly.
In the United States, we have large numbers of health
professionals, large numbers of physicians. In my judgment, we
have an adequate number of physicians. We need to grow the
physician workforce as the population grows, and we need to
make much better use of it.
The workforce is not well distributed. It tends to be in
urban areas. It tends to be in areas that are well-to-do. Rural
areas and poor areas have great trouble not only with
physicians and nurses but other health workers.
One out of three positions in the United States is in
primary care, two-thirds are specialists, and interest and
commitment to primary care is flagging in the pipeline.
Good evidence suggests across the board that primary care
is associated with better outcomes and less cost. Nurse
practitioners and physicians' assistants are very important
components of our workforce today, and they need to be grown,
as this bill suggests they do.
And, finally, in terms of the context, we do very little
planning. One-sixth of our economy is in health. We have a
large health workforce. We do little or no downstream planning.
No business would run like this. We need to put more brain
power and more data and more thoughtful deliberation with what
we invest in in regard to the workforce.
I want to suggest a way to look at the workforce. The last
graphic that I have in my testimony suggests three parts to the
life cycle of a health professional. The first would be the
pre-service, the training, medical school in the context of
physicians. The second would be post-graduate or specialized
training, graduate medical education; and the third is
practice. If we are going to reform the workforce and build the
workforce that is more aligned with our needs, particularly
with regard to primary care, we need to move in all three
sectors. Same for the other health professions. Very important
concept. And I will talk about the bill in regard to those
three areas of the workforce.
The committees have done, in my judgment, a very creative
job of putting many ideas to work in the proposed legislation
that would move us considerably in terms of building a better
workforce.
The National Health Service Corps, a very tried and proven
program, has increased support for title VII and VIII. That is
training in medicine for MPs and PAs, and diversity is upscaled
and reinvigorated.
In terms of graduate education, Medicare funding graduate
education, unused slots, funded slots are repurposed for
primary care. There is a teaching health center demonstration
proposal which would put young doctors to work in community
health settings. There are significant payment improvements for
primary care physicians, something very important in terms of a
demoralized and underpaid workforce.
There is support for new instruments, new structures to
organize the workforce, primary care medical homes as well as
accountable care organizations. And there is attention to
planning and brain trust, and that is an Advisory Committee for
Health Workforce Evaluation and Assessment and a National
Center for Health Workforce Analysis.
Concerns. The National Health Service Corps is funded
insufficiently in the judgment of many. I would agree. Great
unmet needs. And many, many young people in medicine and other
health professions prepared to do community service for
reduction of student debt could be a much more effective
instrument even as--more so than proposed in the bill.
Teaching health centers, as I mentioned, are an important
instrument. They are a demonstration project. Many feel that
having them as an actual part of how we do business would be
important, along with startup funds to get health centers able
to host residencies and residency programs.
Primary care payment, while upgraded, is modestly so, 5
percent on the basic E&M services for primary care, which nets
out to about $2,000 to $3,000 per primary care provider, hardly
the kind of incentive that we want to have thousands of more of
our young physicians choose primary care. A 50 percent upgrade,
which sounds like a lot, would net about $25,000, arguably a
pretty good incentive. That would cost about six-tenths of one
percent of Medicare. So it would cost rather modest, because,
of course, primary care space is very modest.
A primary care extension program has been proposed. Like
the agricultural extension program, it would help translate new
findings and new ways of doing business, including better
organization of practice, health IT from the universities, from
the centers of knowledge and innovation into primary care
practice. Not in the bill. Something worth considering.
And, finally, the planning activity, I would like to see it
not an advisory committee but a national commission level. This
is the level of importance that I think it deserves.
Once again, I think this bill is a great start. It does
bring to the legislative agenda, the national agenda ideas that
have floated around but not really been taken seriously or
codified previously and sets the stage for what could be a very
important renovation in our health force thinking to build a
base for the overall bill and the overall efforts.
Chairman Miller. Thank you.
[The statement of Dr. Mullan follows:]
Prepared Statement of Fitzhugh Mullan, M.D., Murdock Head Professor of
Medicine and Health Policy, George Washington University
Background Perspectives on Health Workforce
Improving access to health care in the United States will require
modifications in the structure of the US health workforce, the foremost
of which will be the construction of a strong primary care delivery
base.
The distribution of physicians (and other health professionals) in
the U.S. heavily favors urban areas. Metropolitan areas have 2-5 times
as many physicians as non-metropolitan areas. Economically
disadvantaged areas have significant physician access problems.
Two-thirds of the U.S. physician workforce practice as specialists.
The number of young physicians indicating an interest in primary care
is declining. Approximately 100,000 nurse practitioners (NPs) and
70,000 physician assistants (PAs) are practicing in the United States
today. This represents an important asset for service delivery.
Today's physician-to-population ratio is in the zone of adequacy
and should be maintained with appropriate growth in the number of
physicians trained to parallel growth in the population. Increased
requirements for patient care due to the aging of the population or the
inclusion of more Americans as a result of health care reform
legislation should be met by more strategic distribution of physicians,
both geographically and across the primary care--specialty spectrum,
and the expanded use of physician assistants and nurse practitioners.
The role of PAs and NPs should be in both the generalist and specialist
sectors of the care delivery system.
Medical schools--The current expansion of medical schools is
welcome but Title VII legislation needs to be reinvigorated and up-
funded to augment primary care training in medical schools.
Graduate Medical Education--The current number of Medicare funded
slots is sufficient to maintain workforce numbers. However, reforms
need to be made in current legislation to prioritize and incentivize
community-based and ambulatory training. Support for Teaching Health
Centers would significantly advance this goal. Beyond that, serious
consideration needs to be given to aligning Medicare GME with the
workforce needs of the country.
Medical Practice--Primary care payment reform, support for new
practice organizations such as primary care medical homes, and
investment in health information technology are all important reforms
that will help to promote a strong primary care practice base in the
country.
Data and leadership in the field of U.S. health workforce
development is insufficient. A National Center for Health Workforce
Studies and a National Health Workforce Commission would both be
important assets at the federal level in managing health care workforce
reform.
Summary of Testimony
The Tri-Committee draft legislation takes a significant step
towards establishing a health care workforce which will sustain a high-
quality, cost-effective, fully accessible health care system. Moves to
establish an Advisory Committee on Health Workforce Evaluation and
Assessment, re-invest in the National Health Service Corps and Title
VII of the Public Health Service Act, redistribute unused Medicare GME
positions to primary care programs and establish teaching health
centers, and address payment and practice challenges to primary care
through the medical home and accountable care organization pilot
programs are all positive moves towards a sustainable health care
workforce. However, to fully achieve workforce reform, the following
are recommended:
Promoting the Advisory Committee on Health Workforce Evaluation and
Assessment to a ``National Commission on the Health Workforce'',
providing it with an authorization and clarifying its role in reporting
to Congress, including addressing Medicare GME payments.
Fully supporting the Teaching Health Centers program, converting it
to at minimum a pilot program rather than a demonstration project and
creating a Teaching Health Centers Development Grant within Title VII.
Further increasing National Health Service Corps authorization for
appropriations to maximize the program's full potential to provide
health care in the most underserved areas.
Increasing primary care bonus payments and SGR target growth rate
to ensure effective maintenance and incentives for primary care.
Invest in a primary care extension program to provide technical
assistance and training programs for strengthening primary care
practice.
Introduction
Thank you Mr. Chairman for this opportunity to testify today.
During the 40 years since I graduated from medical school, I have been
a member of the health care workforce of the United States working as a
pediatrician; I have directed workforce programs such as the National
Health Service Corps while serving as a member of the United States
Public Health Service Commissioned Corps; and I have been a student of
and commentator on U.S. workforce policy in my current role as a
Professor of Health Policy at The George Washington University.
Therefore, it is with experience as a practitioner, administrator,
and scholar that I come before you this morning.
Background
The Health care workforce is a necessary component to any health
care system and addressing the deficiencies in the current workforce is
critical to ensuring any form of health care reform succeeds.
Primary care, in particular, is essential to a cost-effective,
quality, fully accessible health care system. This is supported by:
The Dartmouth group--examined differences in Medicare spending in
different regions in the U.S. Found regional differences largely
explained by more inpatient and specialist-oriented practice in higher
spending regions.
Barbara Starfield et al--showed primary care is associated with
improved health outcomes
Massachusetts example--MA health care reform increased coverage but
failed to address workforce and therefore access, featured in the New
York Times article, ``In Massachusetts, Universal Coverage Strains
Care''
GAO report February 2008--``Ample research concludes in recent
years that the nation's over reliance on specialty care services at the
expense of primary care leads to a health system that is less efficient
* * * research shows that preventive care, care coordination for the
chronically ill, and continuity of care--all hallmarks of primary care
medicine--can achieve better health outcomes and cost savings.''
Primary care is declining (Figure 1) due to:
Large payment disparities between primary care and specialties--
Median annual salary of a primary care physician is $190,000 compared
to a dermatologist ($345,000), a cardiologist ($380,000), a radiologist
($462,000) and an orthopedic surgeon ($450,000) (Figure 2).
Practice conditions which make primary care less attractive to
future physicians--\2/3\ of primary care practitioners work in
practices of 4 or fewer physicians and the institutional infrastructure
to drive practice improvements doesn't exist.
Declining support for primary care educational and pipeline
programs, such as Title VII of the Public Health Service Act (Figure
3).
The Career Lifecycle of a Physician
Before considering questions of the sufficiency of the workforce or
policy options to modify its direction, I would like to suggest a
framework for considering physician careers. I call this the career
lifecycle of a physician. It has three phases--one of which is
educational, one of which is transitional and the final one of which is
vocational (Figure 4). The phases are medical school, graduate medical
education, and practice. The first two might be considered ``pipeline
phases'' since they determine the quantity and nature of physicians
prepared for practice. The final phase is the ``payout'' phase when the
physicians are actually providing health care to the nation.
This framework allows us to consider capacity, cost and performance
in three separate but interlinked longitudinal phases of the career
path of physicians.
The Tri-Committee Draft Bill
The House Committees on Education and Labor, Energy and Commerce,
and Ways and Means are to be commended on the Tri-Committee Draft Bill
that we are discussing today. It proposes legislative action that would
go a long way toward providing a floor of access to quality health care
for all Americans--a major unmet American agenda. The workforce
components of this bill will do a great deal to rebalance the health
professions training systems of the country to produce a healthcare
workforce more aligned with the needs of the American people and the
coverage envisioned in this bill. The particularly important issues
that this bill addresses are: (1) the need for expanded incentives and
support for primary care education and practice, (2) strong measures to
build the health workforce in areas of chronic need and underservice,
and (3) support for a broad spectrum of health workers, including
physicians, nurses, physician assistants, and public health
professionals. Finally, this bill envisions better deliberations on the
future of the workforce through the Advisory Committee on Health
Workforce Evaluation and Assessment and better information through the
National Center for Health Workforce Analysis.
Tri-Committee Draft Legislation Recommendations
Advisory Committee
The draft legislation proposes an Advisory Committee on Health
Workforce Evaluation and Assessment. Given that the health workforce of
our country staffs \1/6\ of our national economy, it is an area where
we need to be smart, agile, and prescient. Virtually all health
professional education programs receive public support, and as such, we
have a particular responsibility to manage those human and financial
resources with prudence and intelligence. At the present, there is no
national deliberative body that looks ahead at national needs and
informs the Congress or the Administration on a regular basis about
broad directions and preferable investment strategies. Therefore, the
National Advisory Committee proposed is a major step ahead.
However, the term ``Advisory Committee'' connotes a body whose
influence is considerably less than that of a ``National Commission''.
Moreover, the details of this Advisory Committee do not distinguish it
substantially from a number of other advisory committees (listed in the
legislation) whose reach is generally modest. The legislation provides
no specific authorization level for its work. Consideration should be
given to making the Advisory Committee on Health Workforce Evaluation
and Assessment to a ``National Commission on the Health Workforce'',
providing it with an authorization, and clarifying its role in
reporting to Congress.
National Health Service Corps
The draft legislation increases National Health Service Corps
scholarship and loan repayment funding levels to $300,000,000 annually,
effectively maintaining the ARRA funding for NHSC and increasing the
total NHSC from approximately 4,000 providers to 8,000 providers.
However, the NHSC has the potential for further growth. Last year, over
4,500 health care providers applied for NHSC positions. Only 950
positions (20% of applicants) were awarded due to funding limitations.
Physician Assistants and Nurse Practitioners
The United States is a global pioneer in the creation of new
categories of health professionals who contribute to the delivery of
clinical services. Separate pilot programs in the 1960s introduced the
world to the idea of the nurse practitioner (NP) and the physician
assistant (PA). Since those early programs, both professions have grown
enormously in size, stature and public acceptance. Approximately
125,000 nurse practitioners have been trained in the United States, the
majority of whom are engaged in clinical practice. There are almost
70,000 certified physician assistants in the United States and more
than 100 training programs.
Both of these professions are associated with primary care and
practice in rural and underserved areas. About 25% of all nurse
practitioners are located in non-metropolitan areas and an estimated
85% of them practice primary care. Physician assistants are active
across the spectrum of medical specialties with more than one third of
them working in primary care practices and approximately one fifth of
them working in rural areas.
The Tri-Committee bill addresses the importance of these two
professions, and this is particularly important in the context of the
current workforce shortages in primary care. Specifically, I commend
the bill's support to expand nursing education, practice and retention
programs, nursing faculty loan repayment programs, and the training of
advanced practice nurses who will deliver care in shortage areas. The
bill also supports and gives preference to the development of physician
assistantship training programs with demonstrated success in producing
primary care providers and providers from underrepresented racial and
ethnic groups and disadvantaged backgrounds. Additionally, the bill
provides grants to programs that promote interdisciplinary and team-
based models of care as well as coordination with academic health
centers and across health professions settings for training and
practice. Building out the nursing and PA workforce will, in the face
of the primary care crisis, help support a robust primary care delivery
system.
Diversity in the Workforce
Diversity in the physician workforce is critical to adequate,
accessible, and culturally responsive care. Health professionals from
racial and ethnic minority groups are more likely to enter primary
care, practice in health profession shortage areas, and care for
minority, poor, underinsured, and uninsured individuals than their
white counterparts.\1\ One national survey reported that while African
American physicians comprise only 4% of the workforce, they serve more
than 20% of African American patients in the U.S.\2\ Another study
found that African American physicians practice in high density African
American communities, and Hispanic physicians practice in high density
Hispanic communities.\3\ Finally, diversity among physicians help with
efforts to improve cross-cultural training and competencies throughout
the profession by broadening physician perspectives regarding racial,
ethnic and cultural differences.
---------------------------------------------------------------------------
\1\ Council on Graduate Medical Education, Twelfth Report
Minorities in Medicine, 1998.
\2\ S. Saha et al, ``Do Patients Choose Physicians of Their Own
Race?'' Heath Affairs 19, no. 4 (2000): 76-84.
\3\ M. Kamaromy et al. ``The Role of Black and Hispanic Physicians
in Providing Health Care for Underserved Populations,'' New England
Journal of Medicine334, no. 20 (1996): 1305-1310.
---------------------------------------------------------------------------
The Tri-Committee bill recognizes the unique importance of training
a diverse health professions workforce to meet the expanding and
evolving needs of the current health system and the population it
serves. It supports the development of primary care training programs
that have a record of training individuals from underrepresented groups
as well as disadvantaged backgrounds, strengthens existing programs
that promote diversity in the health care workforce, and increases
funding to support the training of individuals from disadvantaged
backgrounds.
Teaching Health Centers
The proposed Demonstration Project for Approved Teaching Health
Centers represents an important preliminary step towards aligning our
graduate medical education system with our nation's primary care
workforce needs. Through this Demonstration Project, teaching health
centers including FQHCs and rural health clinics would be eligible for
direct Medicare GME funding to train medical residents in community-
based clinical settings. Not only will these programs better prepare
the next generation of physicians to cost-effectively serve our
nation's health care needs and expand access to primary care services,
they have also been shown to improve recruitment and retention of
physicians in underserved areas.\4,5\
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\4\ Morris CG et al. Training Family Physicians in Community Health
Centers: A Health Workforce Solution. Fam Med. 2008 Apr;40(4):271-6.
\5\ Ferguson WJ et al. Family Medicine Residency Characteristics
Associated With Practice in a Health Professions Shortage Area. Fam
Med. 2009 Jun;41(6):405-10.
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Medicare Graduate Medical Education
The Committee also deserves great credit for resisting pressure to
lift the Medicare cap on graduate medical education. By dedicating the
reassignment of unused residency positions to primary care, the
Committee has sent an important signal that smart growth in federally
funded graduate medical education should focus on primary care
specialties. Any expansion of Medicare-sponsored GME should, at a
minimum, be tied to medical school expansion and focus future support
on carefully documented national needs.
The $8.6 billion that Medicare currently pays to teaching hospitals
in the United States for Graduate Medical Education represents by far
the largest federal investment in medical education at any level. This
system is of great value for hospitals since it provides stable funding
for their residency workforce with minimal reporting requirements.
Moreover, the program is an entitlement under Medicare legislation
driven by formulas for direct and indirect payments. Hospitals have
been able to train the types of residents that meet their needs without
either application or outcomes reporting. Since the teaching hospitals
of the country are the training grounds for the physician workforce,
the workforce of the country is effectively determined by the staffing
needs of teaching hospitals. This circumstance has resulted in a
workforce that is, by all measures, highly subspecialized and weak in
primary care. It tends to be located closer to medical centers and
areas of advanced technology, and not as well represented in rural and
financially disadvantaged areas of the country.
This situation is not new and has been subject to increasing calls
for scrutiny and reconsideration. While no single alternative to the
current GME funding system has gained a consensus among medical
educators and policy makers, the Medicare GME system needs a thoughtful
reexamination at the highest levels of government. This task might be
specifically assigned to the Advisory Committee on Health Workforce
Evaluation and Assessment, to MEDPAC, or to a specially constituted
commission. The Tri-Committee draft bill would be greatly strengthened
by addressing this important issue.
National Health Service Corps
The draft legislation increases National Health Service Corps
scholarship and loan repayment funding levels to $300,000,000 annually,
effectively maintaining the ARRA funding for NHSC and increasing the
total NHSC from approximately 4,000 providers to 8,000 providers.
However, the NHSC has the potential for further growth. Last year, over
4,500 health care providers applied for NHSC positions. Only 950
positions (20% of applicants) were awarded due to funding limitations.
Practice Reform
A number of provisions in the House draft legislation support
primary care through programs which will promote practice and payment
reform. The conversion of the Medicare Medical Home Demonstration
Project to a pilot program and the establishment of a Medicaid Medical
Home pilot program further patient-centered, comprehensive, coordinated
and accessible health care which is largely primary care focused. The
establishment of a Medicare Accountable Care Organization pilot program
promotes accountability in the health care system and provides an
incentive for high quality, efficient care--and recognizes the
importance of primary care through requirements of qualifying ACO
groups to include ``sufficient number of primary care physicians'' and
``patient-centered processes of care.''
Draft legislation includes a Medicare primary care bonus for
designated services provided by primary care practitioners--5% in
general or 10% if the practitioner practices in a health professional
shortage area. The Medicare Sustainable Growth Rate (SGR) is also
rebased at the 2009 level for calculating future update adjustments and
divided into 2 ``service categories''--one including evaluation and
management services (including primary care services), the other
including all other services--with a separate target growth rate
increase of 2% annually rather than 1% for all other services.
These changes begin to address both the practice and payment
disparities which have contributed to the decline of primary care in
the U.S. However, recent work done by the Robert Graham Center
indicates a 5% primary care bonus will translate to only a $2,500
annual revenue increase for family medicine physicians.\6\ When faced
with primary care to specialist payment gaps over $200,000, this
primary care bonus is unlikely to influence future physician career
choices. A 50% primary care bonus, or a $25,000 annual revenue
increase, is more likely to achieve the desired effect. Additional
analysis by the Graham Center evaluating separate service categories
for SGR calculations indicate that a target growth rate of GDP+2% will
be insufficient to maintain current trends in increasing evaluation and
management payments, which will surely increase even more with
increasing health care coverage. GDP+3% for primary care services will
prevent future cuts to primary care payments.
---------------------------------------------------------------------------
\6\ The Robert Graham Center. Effects of Proposed Primary Care
Incentive Payments on Average Physician Medicare Revenue and Total
Medicare Allowed Charges: White Paper. May, 2009
---------------------------------------------------------------------------
Finally, while medical homes and accountable care organizations
provide incentives for strengthening primary care practice, they do
little to provide the technical assistance and training needed to
transform the current struggling primary care system into a high-
functioning quality care system. A primary care extension program
modeled off of the agricultural cooperative extension program would
link the Department of Health and Human Services to State level hubs
and local extension offices which could then provide the technical
assistance and training programs needed to establish a higher quality
and more cost-efficient primary care health care service network in the
U.S.
Conclusion
The Tri-Committee draft legislation takes a significant step
towards establishing a health care workforce which will sustain a high-
quality, cost-effective, fully accessible health care system. Moves to
establish an Advisory Committee on Health Workforce Evaluation and
Assessment, re-invest in the National Health Service Corps and Title
VII of the Public Health Service Act, redistribute unused Medicare GME
positions to primary care programs and establish teaching health
centers, and address payment and practice challenges to primary care
through the medical home and accountable care organization pilot
programs are all positive moves towards a sustainable health care
workforce. However, to fully achieve workforce reform, the following
are recommended:
Promoting the Advisory Committee on Health Workforce Evaluation and
Assessment to a ``National Commission on the Health Workforce'',
providing it with an authorization and clarifying its role in reporting
to Congress, including addressing Medicare GME payments.
Fully supporting the Teaching Health Centers program, converting it
to at minimum a pilot program rather than a demonstration project and
creating a Teaching Health Centers Development Grant within Title VII.
Further increasing National Health Service Corps authorization for
appropriations to maximize the program's full potential to provide
health care in the most underserved areas.
Increasing primary care bonus payments and SGR target growth rate
to ensure effective maintenance and incentives for primary care.
Invest in a primary care extension program to provide technical
assistance and training programs for strengthening primary care
practice.
Thank you.
______
Chairman Miller. Mr. Kildee.
Mr. Kildee. Mr. Klein and Mr. Vaughan have both spoke of
quality issues, and we all understand the ethical aspect of
quality in health care. Can both of you address the fiscal
aspect of quality in this field?
Mr. Klein.
Mr. Klein. The fiscal aspect of it? Thank you for that
terrific question, some of which is elaborated more fully in
the written statement.
Admittedly, this is a very difficult area to quantify, but
it is one we really urge Congress to pay attention to if it is
serious about these quality initiatives, which we believe you
genuinely are.
There is every reason to believe that there would be
substantial savings through the kinds of things that we have
talked about: comparative effectiveness efforts. Health care is
the one product or service in this country where we pay as
much, if not more, for poor quality as we do for good quality.
We wouldn't tolerate that in any other area of our commerce.
Having disclosure about outcomes and aligning what we pay
providers based upon those outcomes, those are all examples.
And, again, I can't give you a specific dollar amount to it,
but those are all examples of where efforts that are geared
toward improving quality will also achieve savings.
Mr. Kildee. Mr. Vaughan.
Mr. Vaughan. Just in March the CDC said, on the infections
alone that kill about 100,000 a year, the extra cost of
treating people--and there is like 2 million people get some
infection--treating that is $35.7 to $45 billion extra a year,
and that is in the infection area.
And there are some great quotes. Dr. Thompson out of
Pennsylvania, of hospital administrators saying, we didn't like
this public reporting thing right away, but we find out if we
do it right the first time, if we keep that infection from
happening, we are saving money.
So we think quality is a big saver, sir.
Mr. Kildee. Mr. Klein, you mentioned that I think the
better part of the bill was the quality control. Do you think
we have touched that adequately in this committee bill?
Mr. Klein. We would like to examine it more fully, quite
honestly, having just received it. I think there definitely are
provisions in there around comparative effectiveness and around
some wellness promotion efforts as well I didn't see. So
forgive me if I have sort of overlooked it in my review of that
part.
But chronic disease management programs, having a sort of a
whole safe harbor protection for practitioners who follow
evidence-based standards, all of those kinds of things would be
areas that, if they are not fully developed, need to be
included as part of that.
Mr. Kildee. Mr. Vaughan, how close do we come to achieving
a good level of quality control?
Mr. Vaughan. Well, we think the bill is a great step
forward, and we are very excited about it. We would just urge
as a technical amendment but in the seven conditions that the
bill calls for when you are readmitted to the hospital for bad
quality, tell the public. Tell the public what the readmission
rates are so that the public can go out there and say to a
local hospital, hey, how come you are not as good as the
hospital in the next county?
So we would like more public. But that is a tricky thing.
It is a good bill, sir.
Mr. Klein. Mr. Kildee, one additional one in response to
your question.
Right now, a lot of employers would like some clarity from
Congress that, as part of the health risk assessments that they
conduct of their workforce, that asking certain kinds of
information relative to family history and other kinds of
conditions like that do not violate the terms of the Genetic
Information Nondiscrimination Act. So clarity around something
like that, which has definitely shown these health risk
assessments can play a meaningful role in promoting good
health, would be a very, very helpful feature.
Chairman Miller. Mr. Kline.
Mr. Kline. Mr. Klein, you mentioned comparative effective
research that Dr. Price was talking about earlier. I am not
sure--it is 852 pages. I am not sure how many of you have had a
chance to look at this. But I was looking a little bit deeper
into this comparative effectiveness research, and I am a little
bit concerned about it.
This says, in title IV, that a Center for Comparative
Effective Research is established, gives a number of duties.
There are 17 members, I think. Dr. Price will be very relieved
to know that one of the 17 is indeed a physician, and I know he
will be doubly relieved to know that that includes surgeons in
the physicians category.
In the language, it says there will be a perspective
advisory panel for each research priority determined under
subparagraph, so forth; that says they will advise the center
on research questions and methods for the specific research
inquiry to be examined with respect to such priority to ensure
that the information produced from such research is clinically
relevant to decisions made by clinicians and patients at the
point of care.
And I am a little bit concerned there. Because I think
where Dr. Price was going earlier, I don't see the language in
here that says this cannot be prescriptive for doctors
providing care. And it seems to me that that would be, if I
were a physician--and we have a whole row of them here--that
would be useful to make sure you have the protection that says
that this panel and this center will not be prescribing which
treatment you have to use.
And I have another concern with that, that even if it
doesn't, if it prescribes or puts out standards from the
government, from this panel, hard to argue with that the
physicians who choose not to opt for that would be exposing
themselves to some serious litigation.
I don't know if any of you have had a chance to look at
that and would like to comment. If so, please do. If not, I
will move on to something else.
Mr. Klein. I think that those are all legitimate points,
and the issue here has to be not on overarching prescriptive
regulation but on making sure that we have much better
information for people to make decisions around. So I think
that all of the concerns that you referenced are ones that
would benefit if there is any lack of clarity in the
legislation.
Mr. Kline. Thank you. I think that having research by
experts is very useful, but I am concerned that it leaves us
sort of open-ended. It may be exposing physicians to some
liability.
Mr. Vaughan, you wanted to comment. Go ahead, please.
Mr. Vaughan. In the earlier part of the bill where they set
up in these insurance plans that there has to be--it doesn't
say model, but there has to be grievance and appeals and
exceptions processes. And it sort of gets us back to the old
patient's bill of rights discussions. Most medicines will--that
generic will work for most people in most States. But it might
not work for everybody, and that person ought to be able to get
an exception real quickly. And I would urge that people work on
that language a little bit more and maybe worry less that the
knowledge of having more data in comparative effectiveness is
going to be some sort of stranglehold.
What we need to do is take that science and make it usable,
and if it is wrong for a person----
Mr. Kline. Reclaiming my time, don't you think it would be
useful to have language like that in the bill, that it cannot
be used to dictate a treatment? I mean, I really would like to
have the research done out there that gives you some ideas of
standards, but we want to make sure that physicians are allowed
to use their art and skill in a way that they see fit with the
patients.
I am about out of time.
I want to go back to Mr. Klein very quickly because we have
talked a lot here in the hearing today about President Obama's
quote, ``If you like your health plan, you will be able to keep
your health care plan.'' And you started to make some comments
that you were concerned that that wasn't specifically covered
and there may be some reasons why employees or employers would
part.
Mr. Klein. I guess my point really is that it is not enough
to simply say that as a technical, legal matter that under this
legislation or any legislation that the employer-based system
would continue to exist.
The issue really is a more practical one. Looking at the
totality of the changes that would have to be made, the
establishment of a public plan, the existence of a pay-or-play
mandate and the nature of it--we, by the way, happen to agree
with the importance of having an individual mandate--the
possible tax consequences to individuals and all of that, will
it lead to a system where the employers simply don't want to
participate anymore?
If the structure is such that because the public plan, for
example, is less expensive that people opt in or the nature of
the subsidies will be such that younger and healthier
employees, for example, will do better by going into the plan
through an exchange and getting a subsidy than staying with
their employer, that will clearly destabilize the employer-
based system.
So it will exist as a legal matter, but it will suffer very
significant consequences as a practical matter.
Chairman Miller. Mr. Andrews.
Mr. Andrews. Thank you.
It strikes me that we have had a lot of expert testimony
all day about how small employers can buy health insurance. We
have had one person, Ms. Young, speak very authoritatively
about what it is really like because she has tried to do it. If
I heard her testimony correctly, she put out bids for her
business and got eight proposals, all from the same insurance
company. And in her testimony, she says, in her area, which is
Waterloo, Cedar Falls, in Iowa, there are one or maybe two
health insurers to choose from. That is not competition.
Dr. Moffit, I want to ask you about the idea of a public
option being available to people like Ms. Young and her
colleagues to have some competition. And I read through your
testimony and I identified some criteria that you have
identified that would constitute a level playing field, if I
read this correctly.
You say the simplest way to achieve the stated goal of a
level playing field is to require the public plan to compete
for doctors and hospitals by negotiating market rates. That is
what the bill does, doesn't it? It doesn't require anyone to
take the public option, does it?
Mr. Moffit. Doesn't require anyone to take the public rate,
but if the plan is going to pay Medicare rates, the plan is
going to have an advantage over private competitors.
Mr. Andrews. It is going to pay them for a while, but, as I
read the bill, there is no hospital or doctor required to take
a public plan participant. They can negotiate and say, no, we
don't want that; isn't that right?
Mr. Moffit. It is my understanding, too, though----
Mr. Andrews. Am I right or am I wrong?
Mr. Vaughan. Yes, you are right.
Mr. Andrews. Okay.
Let's see. Your second criteria that you talk about is the
tort liability, a very subtle point, that the public option
would have to have the same tort liability and not be able to
hide behind 11th amendment sovereign immunity. I agree with
that. It is an arcane point that we would have to work out.
The third thing that you talk about is the accounting
standards, the FASB and other standards that the insurers have
to deal with that the public plan would have to as well. I
think that is basically right. I think the bill takes us in
that direction. Probably is not a hundred percent there, but
takes us in that direction.
And, finally, you say that the public health insurance
option, just like any other private health option, should also
be allowed the fail without being kept on artificial life
support through the infusion of taxpayer moneys. It is correct,
though, isn't it that the draft before us, the only public
appropriation that is mentioned in the bill would be some
start-up capital to get them started, and would you support the
public option if we required that to be repaid out of revenues?
Mr. Moffit. That would not be the only reason to support
the public option. But let me just make one other--let me make
a clarification on this. What I noticed is--I noticed that, and
I marked it when I was reading it. And I thought to myself,
well, there is nothing in this account. Of course, the next
sentence in my testimony is, the question is whether there is
nothing in the bill that doesn't prevent Congress basically
from coming back and doing precisely that.
Mr. Andrews. Well, of course there is nothing that prevents
us from appropriating funds to Bank of America. We did that
too.
Mr. Moffit. You read my mind.
Mr. Andrews. But you do agree with me here that the present
bill before us contemplates the public option of having two
sources of revenue: premiums it earns, and investment income on
those premiums, just like any other insurance company. Isn't
that right?
Mr. Moffit. Yes, but there is one other issue.
Mr. Andrews. What issue is that?
Mr. Moffit. Well, I will tell you. When the Secretary is
given the authority to contract for administrators--and I am
thinking the idea here of contracting for the administrators is
to contract out with maybe some third-party carrier to carry
out the functions of the public plan. But one thing I noticed
about that was that in any contractual agreement, the Secretary
cannot make a contractual agreement that would involve the
transfer of risk. Which means that in the public plan, the
taxpayer assumes all of the risk of the plan. The private
sector health plans do not--are not in the same wavelength in
that sense. They are going to have to assume risk on their own.
My view is----
Mr. Andrews. Okay. I just want to be clear that you do
agree that the proposal before us does not require anyone to
take a public plan participant, a doctor or hospital.
Tort liability, I agree, there is some work that has to be
done on that. The same accounting rules, I think we are
basically in the same place. And that the only revenues that
the public plan option gets is the premiums and the earned
investment income. So doesn't it meet your criteria? Are you
now for the public option?
Mr. Moffit. No, I am not for the public option.
Mr. Andrews. Why not?
Mr. Moffit. Let me say this to you. Maybe I will answer the
question with a question.
Mr. Andrews. I rather you answer it with an answer. Why
aren't you for the public option? It meets your criteria,
doesn't it?
Mr. Moffit. My view is that if all of the health plans
basically are on the same level playing field, we all have the
same rules, everybody is guaranteed access to affordable health
insurance, and that is true everywhere, why would you need a
public option?
Mr. Andrews. Well, maybe because of what Ms. Young was
talking about that, you know, in 36 States the three largest
providers have at least 65 percent of the market. Maybe that is
why.
Mr. Moffit. Well, I would say that there are a lot of other
ways to promote competition than just creating a public option.
In fact, Congressman, one of the problems I have with Professor
Hacker's views on this is he is saying we have a problem with
consolidation in the health insurance market. My difficulty
with Professor Hacker's argument, and implicitly perhaps yours,
is that the public option doesn't necessarily solve that
problem of consolidation. In fact, it may make it worse because
you may even have a greater erosion of private health insurance
options.
Mr. Andrews. My time is expired. I appreciate that. Thank
you very much.
Chairman Miller. Dr. Price.
Dr. Price. Thank you, Mr. Chairman. I want to continue to
go down this thought line, because I think it is incredibly
important that the fact of the matter is that no public option
can be on a level playing field with private industry, just
virtually by definition.
Dr. Moffit, in the bill, will the public option or the
government-run program be required to pay local, State and
Federal taxes?
Mr. Moffit. It is not clear in the bill that they would.
Dr. Price. And if it weren't, wouldn't that be a subsidy to
the public plan and therefore put it on a nonlevel playing
field?
Mr. Moffit. Yes, Congressman, it would in effect.
Dr. Price. Mr. Klein, would you agree with that?
Mr. Klein. I was just reading my notes here about the
payment rates. I want to make sure I am responsive to your
question. But under the public option--and one of the reasons
that we have tremendous concerns about it, quite frankly, is
that the public plan would get to use these Medicare payment
rates for the first 3 years to pay providers, generally--as we
heard on the earlier panel--at a substantially lower level than
private payers would pay them. And then after 3 years there is
really no requirement that the public plan set its rates
competitively at all.
Dr. Price. My question was as to whether or not the public
plan, the government-run plan, would have to pay local, State
and Federal tax.
Mr. Klein. It is hard to see how it would, or how you could
even make the same type of reserve requirements.
Dr. Price. And, therefore, it would have an unfair
advantage over some private plans.
Mr. Klein. Yes.
Dr. Price. I think it is also important to point out that
sometimes Medicare rates are thrown out there as the panacea.
In fact, new Medicare patients all across this land are having
extreme difficulty finding a Medicare provider because of the
rates that are paid.
So just because the government-run program would pay
Medicare rates for a period of 3 years--and then who knows
what--ought not give anybody warm fuzzies about the
availability of physicians out there being able to care for
these patients.
Dr. Moffit, I want to talk also about the government-
defined parameters for the benefits package in the bill. My
reading of the bill is that within a period of 5 years, every
single plan offered out there must comply with the government-
defined parameters for a benefits package; is that correct?
Mr. Moffit. That is correct.
Dr. Price. And therefore, there must be individuals out
there in society right now, I believe, who are happy, content,
desirous of a plan that doesn't necessarily fulfill all of the
options that would be present in a government-defined program;
is that correct?
Mr. Moffit. I am quite sure that is true, Congressman.
Dr. Price. Do you believe in your reading of the bill,
then, that those individuals would not even be able to find
those policies out there in the marketplace?
Mr. Moffit. There seems to be in the bill, if I read it
correctly--it was good beach reading this weekend--but if I
read it correctly, it seems like in the bill there is a grace
period for the small group market, and there is a limitation
that is unspecified for individual insurance. And at a certain
point in time, the bill was very, very specific that the
individual insurance policy will no longer be acceptable
coverage under the terms of the bill. That is in black and
white.
Dr. Price. And, Mr. Klein, would you agree with that?
Mr. Klein. That is right. I also would like to clarify one
other point.
Dr. Price. Please.
Mr. Klein. When I cited the Medicare reimbursement rates
for the first 3 years, it was not to suggest that that should
give any great comfort. It is to the contrary; that they
traditionally are substantially lower, and we in the employer
purchaser private sector world end up being the recipients of
that cost shift. And the problem is that after the 3 years,
they are not even bound by the Medicare rate even.
Dr. Price. You are absolutely right. I would also like to
just point out that the President, apparently today in his news
conference, said this line that has been used by so many, ``If
you like the plan that you have, you can keep it.'' In fact
what he said is that that is not actually the case. It would be
that the government wouldn't mandate that you had to give it
up.
But if, for example, the plan that you like is no longer
available in the marketplace, then you can't keep it, right?
Wouldn't that be the case? In fact, doesn't that get to your
issue of crowding out not by law, Mr. Klein, but by effect of
the rules put in place?
Mr. Klein. Yeah, we would like to--that is correct. We
would like to have the plurality multiple choices from among
which people can select. And I think that is the stated goal of
the legislation, but I don't know that it is necessarily the
outcome.
Dr. Price. Thank you. Thank you, Mr. Chairman.
Chairman Miller. Thank you. Mr. Hare.
Mr. Hare. Thank you, Mr. Chairman.
Ms. Young, how many employees, again, do you have?
Ms. Young. We have 33 full- and part-time; 13 full-time.
Mr. Hare. If there was a public plan available, would you
be able to provide insurance for your employees?
Ms. Young. Yes.
Mr. Hare. For all of them?
Ms. Young. Yes.
Mr. Hare. And you can't do that now because the insurance
companies--there is no competition. You have two to pick from,
if I understand.
Ms. Young. We have one to choose one.
Mr. Hare. Wow. That is real competition out there. Those
poor insurance companies, I don't know how they do it every
day. So you have one person, right--one company right now, and
you can't afford that. In the public plan you could provide
those 33 people with health care.
Ms. Young. Yes.
Mr. Hare. For them, their spouse, and their families.
Ms. Young. Yes.
Mr. Hare. So while we nitpick this public plan, the fact of
the matter is those people go without health care because you
have no other option.
Ms. Young. We have no other option.
Mr. Hare. I just sit here today, and I just feel so bad for
our friends in the insurance company. I don't know, I suppose I
will have to send them a card.
Professor Pollitz and Mr. Vaughan, I have a district that
is very rural in west central Illinois. And the majority of
individuals live in communities, in rural communities, yet
access to mental health treatment is limited. Of those 1,700
federally designated mental health professional shortage areas,
more than 85 percent of those are designated as rural.
So my question is to maybe both of you. In light of that,
do you think we should expand the capacity of frontline
community mental health centers to offer safety net providers
for mental health care. Because that hasn't come up at all
today but I think it is clearly something that we need to be
looking at here, and something I like in the bill is the mental
health perspective. But in a rural community it is just very
tough to get access there.
Mr. Vaughan. Absolutely. And one of the neat things in this
bill is in efficient areas, like Iowa, low-cost areas, there is
going to be a bonus for all primary care docs, and I think that
is important.
Mr. Hare. Professor.
Ms. Pollitz. And I remember seeing in the bill requirements
to contract--for plans to contract with essential community
providers that would include those very providers.
Mr. Hare. Ms. Wcislo, you were going say something?
Ms. Wcislo. Yes. In Massachusetts we have a log for that
and in fact require that they have an adequate contract with
mental health providers as well as community health centers. So
we have done it already, and I think it is an important point
to raise.
Mr. Hare. If you wouldn't mind for just one second, could
you repeat the numbers in your testimony again that you talked
about for the people that--the insured people you were talking
about? I am sorry, I didn't write them down.
Ms. Wcislo. Some 650,000 were uninsured at the beginning of
reform.
Mr. Hare. Six hundred fifty thousand were uninsured.
Ms. Wcislo. Right. Four hundred forty have now been
insured, of which 191 are paying for it themselves or through
their employers. So 44 percent of the ones we have insured have
come through business or through the individual market where we
have lowered the rate for individuals because we have pooled
them with small businesses.
Mr. Hare. Wow. That actually can work.
Ms. Wcislo. And we only had three plans for small
businesses, and you had the choice of--you could only pick one.
So exactly what she is saying is true. And you had to have 75
of your employees to sign up or they wouldn't take you.
Mr. Hare. Dr. Mullan, just a quick question. Do you believe
that the draft bill provides doctors and hospitals with enough
incentives to encourage participation of the providers?
Dr. Mullan. Well, in regard to the incentives for payment
around primary care, yes. Beyond that, in terms of hospital
incentives I don't think I saw that in the bill in a way that
would directly--the bill didn't directly direct those payments.
I think what they provide, or what the strategy is in the
bill, is to try to provide incentives for those areas of the
system which we know are in short supply. And that is
particularly rural areas, underserved areas, and primary care
providers. So there is an effort to upscale the incentives in
practice and also in training, particularly around loan
repayments for, you know, work in very tough areas, National
Health Service Corps, or there is also loan repayment for
people who go into primary care who don't necessarily want to
go into the most remote rural areas or the toughest inner city.
There is also loan repayment there.
So it is a strategy to incentivize loan repayment, and yet
the most benefit if you are willing to serve in the toughest
areas.
Mr. Hare. I just have one quick question, Mr. Chairman. Dr.
Moffit, I just want to know--and we can agree to disagree
here--you don't support the public plan. My question would be
to you, for people who lose their jobs and they close a factory
and move it someplace, if there is no public option for these
people to go into, they are forced to either have COBRA or
something, what do they do?
Mr. Moffit. Well, I actually strongly believe that what you
have just talked about is the core of reform of the health
insurance market. And that is one of the reasons why I was
involved with Governor Romney in creating the Connector in the
State of Massachusetts, where in fact you don't have a public
plan; what you have is you have health insurance that is
available to people within the market, and they can pick and
choose the plans they want and take it with them. It is not
necessarily dependent upon their place of work. What we need is
portability in health insurance.
We don't have that today, Congressman. If we had
portability in health insurance, even without spending any
money, because we know an awful lot about the uninsured, if we
had portability in health insurance where people could--where
the insurance was tied to the person, not just simply the place
where they work, the numbers of the uninsured would drop
dramatically.
That is what we have to do. That is where we have to get
to. Believe me, I agree with you entirely on this issue. We
have too many people who are moving jobs, leaving jobs, going
from one place to another, and they lose their health
insurance. They don't lose their life insurance or their auto
insurance or their homeowners insurance, but they lose their
health insurance. And that is, frankly, terrible social policy
and we should fix it. And I would like to see it fixed.
Chairman Miller. Dr. Cassidy.
Dr. Cassidy. A couple of things, Mr. Vaughan. I love what
Consumer Report does. I subscribe, at least on line I do, when
I need to buy a new washing machine.
Mr. Vaughan. You pay my salary.
Dr. Cassidy. But let me say that one of my concerns about
this bill, you have always been very consumer-oriented and you
were speaking earlier about, my gosh, if the purple pill didn't
work, do we have an intervention process? And in this 865
pages, which was plane reading for me, there is one paragraph
about an ombudsman. And so my concern is that this is more
about government than it is about the patient.
That said, Mr. Moffit, going back to the point of whether
or not there is an additional subsidy, frankly theoretically
until a year ago, we didn't give an additional taxpayer subsidy
to Fannie Mae or Freddie Mac, correct?
Mr. Moffit. I don't recall.
Dr. Cassidy. Yeah, it didn't. It was GFE, government
whatever. And so in this document where we don't require that--
there is one line that says that the public health insurance
plan must have a contingency, very kind of ill-defined.
Mr. Moffit. A ``contingency margin'' was the phrase.
Dr. Cassidy. Yeah. And Mr. Hacker in his document says that
it would be backed by the full faith and credit of the Federal
Government.
Mr. Moffit. Well, that is it; and the taxpayer is on the
hook, of course. That is why I raised the question earlier in
response to Congressman Andrews.
Dr. Cassidy. Hang on there. We are in agreement. I just
wanted to make that point because we are all on the hook
whether or not--and in Medicare, as of 2018, will be.
Dr. Mullan, up until like 6 months ago, man, I was full-
time teaching young internists hepatology. He is the only guy
in here who knows hepatology. And so I am very familiar with
the fact that these young folks are not going into primary
care.
Let me give you a scenario and you tell me how reasonable
it is. It has been what I have learned, is that if you go to
the pediatrician and you tell her, listen, we are going
decrease your reimbursement by 5 percent because we now have a
public health option plan which quite overtly is going to
negotiate down and save money by hard-balling you, so she has
got a fixed overhead, and she has got to see patients, but now
she is getting paid less per patient, her only option is to
increase volume.
Now, if she is increasing volume and spending less time
with that patient, she is going to make more referrals and she
is going to order more tests. She has just got to move
patients, because otherwise she goes out of business.
Now, that has been my observation in primary care. In fact,
I will say it is kind of like when I inflate a helium balloon
for my daughter. I press the spigot, you know, I am squeezing
that cost a little bit. The public health option is going to
just, man, get that ounce of blood out of her. And then costs
inflate because she is making so many referrals and she is
ordering so many tests because she has to move that many more
patients.
Paradoxically when public health, Medicaid, or Medicare
squeezes the primary care doctor, spending goes up. Would you
agree with that or would you dispute that?
Dr. Mullan. I think the law speaks to Medicare payments
which are within the parameter of the law and the Federal
Government. And indeed the proposal within the law is to create
two buckets of funding. One would be for primary care, the
other would be for all other services. To the extent there is
squeezing to be done, it is not in pediatrics where there is no
money to begin with, either on the practitioner side or the
government side.
Dr. Cassidy. So if they squeeze more--and that is what they
say quite overtly, we are going save money by using our
monopsony power, our bargaining power, to bring down what we
pay providers. What you are saying, they are already being
squeezed and we are going to squeeze a little bit more?
Dr. Mullan. I mean, Medicare is constructed with a
sustainable growth rate, with a relative--with the annual
upgrades and the various aspects that control or attempt to
control physician costs within Medicare. That is in law
already. That is not at issue in the bill in particular. And
the public health option does not speak to that directly.
Dr. Cassidy. Except it does say--and quite overtly--that it
is going to use the Medicare-type paradigm, and it is just
going to now apply to pediatrics. And, again, going back to
what Dr. Hacker had to say in his paper--which again is the
inspiration to this--is that they would use their bargaining
power to lower rates to reimbursements. He had one reference he
cited that it is the prices, stupid; meaning that we are paying
too much, stupid; and therefore if we just squeeze those
providers a little bit more, we save money. Now, that actually
seems a recipe for disaster for the average pediatrician.
Dr. Mullan. Well, we do have a problem with the cost of
Medicare, I think we all agree, and with the cost of a system
in general. And there have been over the years a history of
attempting to----
Dr. Cassidy. But let me ask you again, if they reduced
reimbursement to the average pediatrician, what would that do
to our practice?
Dr. Mullan. Well, there is a long history of increasing
volume when the fees are limited. That has largely not been in
the primary care sector. That has largely been in the specialty
sector where fees are much larger and volume has grown much
more rapidly, and that has distorted the system.
Dr. Cassidy. Isn't it fair to say that is because the
internist or primary care physician has such limited time?
There is only so much you can stack in, but they have stacked
in.
Dr. Mullan. Well, to the extent that all of us are being
required to be accountable for our time, it is a tight day. And
the pediatrician's day, the primary care day, is a tight day.
And people are not happy with that. But the question of how you
control cost is one that is not the problem of the public
health plan or the problem of Medicare. It is a problem of all
of ours, I think, in terms of how we manage it. It has been out
of hand for a long time, and I think there are efforts which
are in this bill to try to get a better handle on that.
Dr. Cassidy. That is more of the same in my book. It hasn't
worked in the past. We are trying for a hopeful experience.
Thank you. I yield back.
Chairman Miller. Thank you. Dr. Roe.
Dr. Roe. Thank you, Mr. Chairman.
A couple of things. To start with, Ms. Young, I certainly
appreciate the fact that I have been in small business my
entire career also. I think that competition is a good thing.
There is no question about it, it makes me better as a
physician. But because there is a public option there, that
doesn't necessarily mean the price will be less. It might be,
but it might not be.
And what my concern is that every single government plan we
have right now relies on the private sector to pick up their
not paying their fair share of the costs. TennCare, for
instance, our Tennessee Medicaid system, pays only 60 percent.
Now, the person getting the care could care less. They are
getting their care, and it is being taken care of. And that is
a prescription for overutilization.
I can tell you that is exactly what we saw where we were.
Medicare does not pay its total expense. I mean, the Medicare
payments are not paying the costs, at least in Tennessee, of
providing the care.
And what Dr. Cassidy and others have said, I did a lot of
pelvic reconstructive surgery, and I had a difficult time
finding a primary care physician for my patients.
So, a lot of this plan that I like in here. Certainly there
needs to be insurance reform; I have no question about that.
But that doesn't necessarily mean that it would be--that your
costs would be less. I would hope they would be, but that
doesn't necessarily mean that they would be.
Ms. Young. And I agree with that. Before working with my
father, I worked in the insurance industry for 12 years, so I
am really knowledgeable about how the insurance industry works.
And I do agree that there does need to be a fix to Medicare,
but there absolutely does need to be a fix to the private
health insurance industry as well. Because it is very unfair
for the little person, like us, to have to try and compete with
the big businesses or whoever else for competitive rates,
because we are not getting them.
Dr. Roe. No question. I think one of the things that you
can do--this is an extremely complex plan. Let me just give you
one little view here of the affordable health care choices of
the private insurance market, just the individual market--is
that insurance purchased on the individual market after the
bill's effective date would not be considered acceptable
coverage for the purpose of compliance for Federal mandates.
These plans would also be prohibited from enrolling new
members, ensuring that their risk pools can only get sicker and
older, increasing the cost of coverage under the plan, which
means you are going to shift people to the government plan.
I guess the question to the panel is, what happens when
they don't pay the cost of care? What happens? And here you
are--I mean, the patient doesn't care, but the facility has got
to provide that care and get the money from somewhere.
Mr. Klein. Two things. One, I think that a lot of this
dialogue has led to a point that hasn't maybe been explicitly
stated. And that is, it makes no sense to argue on behalf of
the need for a public plan based upon the current flaws of the
insurance system when everyone, Republican and Democratic
alike, employer community, the insurance industry itself,
acknowledges that there have to be widespread and fundamental
reforms to insurance rules: no preexisting condition
exclusions; guaranteed issue and renewability and all of those
things. So it is a bit of a false straw man.
And to answer your question, the answer is that someone
else in the system ends up paying for it.
Dr. Roe. Either the taxpayer, or it is shifted. Last year I
worked for myself in a medical practice. We had 70 providers,
350 employees. I retired and ran for Congress. The next day I
have to pay first dollar for my health insurance. It makes no
sense to me to not make that tax deductible for an individual.
That would make health care cheaper for, what, 21 million I
heard, automatically.
Ms. Young, even if you couldn't afford whatever, it would
lower whatever your tax rate is; it would lower your cost that
much, like a large business can do. Any comments on that?
Mr. Vaughan. Well, sir, I would like to say the March
MedPAC report to Congress, one of the most pages in it is page
67 where basically they found an eighth of the Nation's
hospitals that are the best in terms of getting people well and
not killing you and not giving you infection, they make money
on Medicare. And the point of MedPAC is the private insurers
are paying 132 percent of cost. We keep saying, oh, gosh,
Medicare doesn't pay enough. Maybe it is the private guys who
aren't able to manage and aren't able to get a handle on cost.
Dr. Roe. I would argue, Mr. Vaughan--my time is short--I
would argue they are paying 132 percent of cost because of what
Medicare and the others are not doing. And I think you won't
find that across the country. I will be glad to look at that
later.
One other quick comment. Until we get our malpractice under
control in this country--when I began my practice, it was
$4,000 a year. When I left, it was $72,000 for an obstetrician.
We have got to do something to help the doctors and the
providers out there to be able to provide affordable care.
I yield back the balance of my time.
Chairman Miller. The gentleman yields back. Mr. Thompson.
Mr. Thompson. Thank you, Mr. Chairman. I want to thank the
panel for all of your contributions this afternoon. It is an
important debate, important discussion, and I appreciate your
expertise and experiences.
Dr. Pollitz, from your remarks and looking at your
submitted testimony, you talk about coverage adequacy and
about--and I agree that is important. That was part of my
frustration as a health care manager administrator with health
care, the inadequacy at times. But the way I read it--I want to
make sure I am portraying it accurately--that you see that the
government entity to be created as a competitor is something
that would assure that coverage adequacy, as you addressed in
your testimony.
Ms. Pollitz. The public plan option would have to offer the
same essential benefit standard that every private insurance
plan and employer plan would have to offer. It would be subject
to the exact same coverage rules.
Mr. Thompson. As a starting point, my concern is--I mean,
if you had looked at the record of denial, which essentially
speaks to coverage adequacy of, frankly, cost-effective care by
Medicare A and Medicare B.
Ms. Pollitz. I am sorry, the rate of coverage denial?
Mr. Thompson. The rate of, yeah, coverage denial under the
current--two of the, well, I guess consolidated under one,
Medicare, Medicare Part A and Medicare Part B, the rate of
denial of coverage were many times what I consider cost-
effective care.
Ms. Pollitz. I am sorry, I can't answer that question for
you.
Mr. Thompson. Okay. Well, my point being--I mean, that is
an area for me, the source of frustration in the different
health care areas where I practice in. And frankly,
unfortunately, it fell on me to do many of the appeals and
different levels of appeals of what I thought was very cost-
effective care that was being denied under our current
government plan. And the appeal process was and continues to be
pretty challenging to get that coverage covered.
And my concern that going forward, that frankly I don't
think there is any assurance when the government gets involved
in providing a plan. As we are looking at now, the coverage
adequacy is going to continue. That won't be resolved.
Ms. Pollitz. But, Mr. Thompson, I do believe, I haven't
been a Medicare expert for many years, I have sort of shifted
more to private insurance over the last ten years. But it
continues to be the case that Medicare contracts out to private
insurers, different ones, one in each State, and that the
coverage decisions often get made by the private insurers, and
they often get made differently.
That has been a long-running problem with the Medicare
program; that the carrier in Indiana may say something is not
covered when it is covered in 48 other States. So I think
consistency in coverage decisions is certainly important.
And the question that was being asked earlier, I think,
about denials and the importance of getting people good
coverage and other good consumer protections, is an important
problem that is addressed in this plan. In particular, in this
bill the standards for prompt and available appeals programs
for everybody. Those aren't available for everybody now. And
particularly external appeals are not available to a lot of
people, and most people in employer-sponsored plans. And prompt
payment of claims standards, I think those are incredibly
important.
I had my daughter play soccer. She broke her arm in a
soccer game 2 years ago when she was 12. And I had to fight
with my insurance company for 10 months to get that claim paid.
They said I had to send it to Workers Comp, and I had to fight
about that for ten months. That was just silly.
So I mean, I think when we talk about changing, not
leveling the playing field so much as changing the playing
field, and just starting from the assumption that health
insurance is going to take care of people and it is going to
pay their claims, and if we could get that across the board, I
think that would be just a tremendous thing for Americans.
Mr. Thompson. I agree that we need change. But I would come
back to my original statement. We need the right change, and to
do this in a systemic way that we are really designing this.
Just real quickly, because I am running out of time, Mr.
Klein, can you please explain how new State law privilege--or I
am sorry, State law private rights of action would apply to
coverage offered through the health insurance exchanges?
Mr. Klein. Yes. The tri-committee draft legislation permits
really varied and unlimited types of remedies that would be
prescribed under State law for those plans that are sold
through the exchange. So it could be punitive and compensatory
damages. All the types of remedies that are not currently
available under the ERISA regime, nor would be prescribed, nor,
frankly, necessarily available under the public plan, that
would be offered through the exchange.
Where the Medicare remedial scheme would apply, that also,
for example, does not provide for compensatory or punitive
damages. So it really sets up a dual standard within the
exchange.
Mr. Thompson. Thank you.
Chairman Miller. Thank you. Of course, you understand that
the people in the exchange aren't in ERISA. There are not ERISA
plans in the exchange.
Mr. Klein. Right.
Chairman Miller. Right. So that would be existing law.
Mr. Klein. Exactly. In my oral remarks, there would be
certain standards.
Chairman Miller. So the privates would be treated as
privates and publics would be treated as privates for the
purpose of the discussion draft, and that is existing law.
Mr. Klein. Except that employers who want to purchase
coverage for their employees through the exchange, then they
would be subjected to those new remedies.
Chairman Miller. That would be a decision that an ERISA
employer would have to make 5 years from now.
Mr. Klein. Right.
Chairman Miller. But you tried to suggest that somehow this
was a new level of exposure; the fact is that is existing law.
Mr. Klein. Well, what I was trying to demonstrate was there
are two different standards.
Chairman Miller. No, the people in the public sector today
would be treated--if you created a public plan--would be
treated as if it was a public plan. You guys keep calling it
Medicare so it would be treated like Medicare, and the private
parts of the exchange would be treated as private plans are
today under State law.
Mr. Klein. Right. My concern, though, is if there is a
recognition that those kinds of remedies are not needed or
appropriate in Medicare or under the new public plan, why then
apply it to the other carriers?
Chairman Miller. Well, we will see. That is the purpose of
the mark; that we treat likes like. For the purposes of the
discussion, the committees will make those decisions.
Ms. Wcislo, if I might, could you respond again, what has
happened to the unemployed in Massachusetts? You cited some
figures in responding.
Ms. Wcislo. In fact, if you get laid off and you can't
afford COBRA--let's say that is the full freight of the
insurance--you can in fact come into the Connector and stay
there for 3 months until you find another job, or 6 months
until you are under their coverage. We meet a lot of the needs
of those people going in and out of the market in transition.
Chairman Miller. And most of those people came through the
job from the private sector. They lost their jobs and that is
how you are picking them.
Ms. Wcislo. And so they have COBRA, and now their family
plan is costing them $1,200 a month, but they can't afford it
because they are unemployed. That is not considered health
insurance for purposes of us, and they can stay there as long
as they don't have employer-sponsored insurance. Once they have
employer-sponsored insurance, they sign up at work, and we are
the safety net for them.
Chairman Miller. So if you go into--you have lost your job.
You had insurance, you lost your job, you go into the
Connector--you go to COBRA, then go to the Connector, and then
you take a new job. And if they don't provide insurance, you
stay in the Connector?
Ms. Wcislo. If you are low income, you can stay in the
Connector or you can stay in ComChoice, which is the
nonsubsidized piece. If your employer offers it, you have to
take what your employer offers, as long as it is affordable.
Chairman Miller. And if your employer doesn't offer it, how
is that shared?
Ms. Wcislo. If the employer doesn't offer it and you are
low income, you can stay in the Connector products and you can
have them subsidized, or you can sign up for one of our three
levels in the private sector. And that is where a lot of the
individual market has gone. They have joined up through the
Connector in the individual market, because we have lowered the
rates paid by 30 percent in their premiums, and they have been
declining, and now they are going back up.
Chairman Miller. I think in our draft, if I am correct, we
grandfathered the individual plans. People can keep them as
long as they want.
Ms. Wcislo. Right. And we allow people to keep them. But if
they choose to come into one, and they are all private
insurance unless they are subsidized, they can come in or they
can keep what they have.
Chairman Miller. Now, what has happened with employers in
this? You have a $300 penalty.
Ms. Wcislo. Yeah. And employers are starting to pay the
penalty. In fact, we have such a high insurance rate now, it is
now up to 72 percent, very few of them are having to pay the
penalty. And what we found is that almost half of our new
insured folks are through the private sector. Our employers
have stepped up to the plate.
Chairman Miller. I guess I don't think $300 to give up the
cost of insurance for an employee is much of a penalty. But
that is what you decided on because you had ERISA.
Ms. Wcislo. We decided on that just because of ERISA. There
was a list of limitations and we were afraid of the challenge.
And the political wisdom was we don't want the whole financing
of it thrown out. You have the advantage of being able to do a
larger penalty. If we had a larger penalty, in fact, the 2\1/2\
that remain uninsured could be insured. We are down to 2\1/2\
percent uninsurance now. We could do the rest of it.
Chairman Miller. But employers who continued to offer
insurance turned out to be stickier than people suggested,
right? There was a lot of suggestion that $300, they are out of
there.
Ms. Wcislo. We found a lot of people would drop it. If you
had asked me, I wasn't--when I was placed on this panel, the
Connector, I thought the individual mandate is going to blow
up; the employer thing is going to mean employers are going to
dump all their employees into it.
The exact opposite has happened. And I think it really is a
shared responsibility. Everyone in our State understands we all
have to be part of the solution. The employers did the right
thing and are continuing to do the right thing. Individuals
have bought and are continuing to do the right thing. And the
government stepped up to subsidize for low-income people.
Because we are all in it together, everyone is trying to make
it work. And so far it has been successful.
Chairman Miller. So what is your take on the pay-or-play
here?
Ms. Wcislo. I think it is important, because we were a very
unusual State. We had 68 percent, as we were going into it,
already offering insurance. We got it to go up. We were able to
convince the business community. I know other States are much
worse. And I think getting business to rethink what their
responsibility is, someone is going to pay for it. Employers
should be paying their share, individuals should, and not just
government.
And I think a balanced shared responsibility approach, like
your bill says, is the way to go after that. You see, everyone
has to be a part of this system. You can't just transfer it
over to government to pay for everything. You can't just
transfer it to individuals, because they can't afford it. All
three of us have to pay it together. And I think your proposal
is right on.
Chairman Miller. Thank you. Well, thank you very much.
Excuse me. Mr. Scott, I am sorry.
Mr. Scott. Thank you, Mr. Chairman. I appreciate it. I had
been detained at another meeting, and I just wanted to ask one
question just for the record.
Prenatal and well child care is an extremely important
element to this plan. Does anybody disagree with that? Medicaid
right now has a state-of-the-art kind of benefit package called
EPSDT. Does anybody question whether or not that good package
would be appropriate for the public plan or the entire choices,
private or public choices? I thank you. Thank you, Mr.
Chairman.
Chairman Miller. Mr. Vaughan.
Mr. Vaughan. I would just urge--it is on page 25 of the
discussion where they say the things to be covered are well
baby and well child and the oral health, vision, hearing
services, equipment and supplies, at least for children under
21 years of age. At least in report language, you may want to
flesh that out a little bit more to make the parallel to EPSDT.
But it sure smells like EPSDT to me.
Mr. Scott. That is what we are hoping. Thank you.
Mr. Klein. Congressman, I would just respond to your
question by saying I think the one thing you would want to
avoid is the experience that has developed over decades now in
the States where every imaginable provider group, or group that
wants to cover some specific disease or condition or treatment,
comes and advocates for why its particular treatment or
condition has to be covered.
What you do want in terms of a minimum benefit package
that, for example, would be applied to the individual mandate,
would be to allow for actuarial equivalency. And I think there
is some suggestion and direction to try to go there as well. So
be very, very cautious about enumerating specific things.
Mr. Scott. But the EPSDT doesn't enumerate the providers or
anything. It is just a comprehensive set of benefits, early
periodic diagnostic treatment to make sure that they are
covered with all necessary medical treatment.
Chairman Miller. Ms. Wcislo, did you want to comment?
Ms. Wcislo. Well, we just ruled in the Connector that--I
beg to disagree with him. Some ERISA plans in our State will
provide a family plan, but if the young daughter gets pregnant,
too bad; you are out of luck, we are not covering it.
And I think setting a minimal standard about prenatal care,
about maternity for all individuals covered by any plan, is
really important. And that is a flaw in the ERISA system. On
one hand, they make choices. We as a union are in ERISA plans
and often make choices, but we need to--as a government and as
a people--know that someone is going to be covered, and that
one business can't decide, oh, by the way, your daughter can't
be covered, even though the rest of your family and your wife
is.
We need to make sure those are covered for health care
costs in the long term for the wellness of that baby and for
the impact a baby that wasn't treated appropriately has on the
school system and the health care system later. I think that
standard is really important to have.
Mr. Scott. Thank you. Thank you, Mr. Chairman.
Chairman Miller. Thank you. Thank you very much. Thank you
for your patience, but more importantly, thank you for your
testimony and your answers to the committee members' questions,
and your experience.
With that, the committee will stand adjourned. The record
is open for 14 days for all members. And, again, if members
have questions that they want to submit for the record we would
appreciate if you could get back to us.
[The information follows:]
Questions for the Record Submitted to Dr. Hacker
Thank you for testifying at the Tuesday, June 23, 2009, Committee
on Education and Labor hearing on ``The Tri-Committee Draft Proposal
for Health Care Reform.''
One of the Committee members had additional questions for which he
would like written responses from you for the hearing record.
Congressman Bill Cassidy (R-LA) asks the following questions:
During a speech you gave on July 21, 2008, you stated, ``Someone
once said to me this is a Trojan horse for single payer and I said well
it's not a Trojan horse, right? It's just right there. I am telling
you, we are going to get there over time, slowly, but we will move away
slowly from reliance on employer-based health insurance. As we should.
But, we will do it in a way that we aren't going to frighten people
into thinking they are going to lose their private insurance.''
Many advocates of a public health insurance plan deny that it will
lead to a single payer system. However, you do not appear to be one of
them as your quote acknowledges quite clearly that the inclusion of a
public health insurance plan option will create such a system.
1. Is this good or bad for the American health system?
2. Do you think Americans would be happy to learn that they would
lose their private health insurance coverage if a public health
insurance plan option is widely available?
Please send your written response to the Committee on Education and
Labor staff by COB on Tuesday, July 24, 2009--the date on which the
hearing record will close. If you have any questions, please contact
the Committee. Once again, we greatly appreciate your testimony at this
hearing.
Sincerely,
George Miller, Chairman.
______
Responses to Questions for the Record From Dr. Hacker
Thank you for your question. I have argued repeatedly that I do not
believe that a new public plan will evolve into a single payer covering
the whole nation--by which I mean a single public insurer paying
doctors and hospitals directly. My comment at this 2008 forum was that
the new public plan is not a hidden ``Trojan Horse.'' The public plan
is right out in the open, as it should be, since most Americans say
they want the choice of a new public plan. As I said in my testimony to
the committee, I believe that this new public plan should work
alongside employment-based health insurance. It should also be required
to compete on a level playing field with private health plans within a
new national insurance exchange. The Congressional Budget Office (CBO),
in its July 14 letter to Chairman Rangel on the House legislation,
projects that the national insurance exchange will enroll approximately
37 million Americans. According to the CBO, a third of those in the
exchange would enroll in the new public plan, which would mean that
less than 5 percent of the U.S. population would be covered by the new
public plan.
______
[Additional submission of Mr. Miller follows:]
[The statement of the HR Policy Association may be accessed
at the following Internet address:]
http://www.hrpolicy.org/downloads/2009/Healthcare%20Tri-
Committee%20bill%20-%20Education%20and%20Labor%20-
%20Statement%20of%20HR%20Policy%20Association.pdf
______
Mr. Scott. Mr. Chairman, there is a report on EPSDT, a
policy brief by the Department of Health Policy. I would like
this entered for the record.
Chairman Miller. It will be made part of the file of the
hearing. Thank you.
[Policy brief by the George Washington University
Department of Health Policy follows:]
------
[Additional submissions of Mr. Scott follow:]
EPSDT Amendment Proposed by Mr. Scott
Application of Medicaid EPSDT benefit requirements to all health
programs.
At the appropriate place in the bill, insert the following:
``Sec.__. Coverage of EPSDT benefits for all children
``Not withstanding any other provision of law, every individual
under the age of 21 eligible for health coverage under this or any
other Act, including the Children's Health Insurance Program under
title XXI of the Social Security Act, shall be entitled to benefits for
all medically necessary health care, including early and periodic
screening, diagnostic, and treatment services (as defined in section
1905(r) of the Social Security Act) consistent with the requirements of
section 1902 (a)(43) of that Act.''
______
300 Percent Amendment Proposed by Mr. Scott
Providing a national eligibility floor for children and pregnant
women up to 300% of the federal poverty level.
At the appropriate place in the bill, insert the following:
``Sec.__. Eligibility of children and pregnant women whose family
income does not exceed 300 percent of the federal poverty line for
Medicaid or CHIP.
``As a condition of participating in the programs established under
this Act and under titles XIX and XXI of the Social Security Act, a
state shall ensure that all children under the age of 21 and pregnant
women whose family income does not exceed 300 percent of the federal
poverty line shall be eligible to enroll in the state's Medicaid or
Children's Health Insurance Program as established under the Social
Security Act.''
______
Medicaid and CHIP Amendment Proposed by Mr. Scott
Provisions relating to prompt enrollment of children into Medicaid,
CHIP, and the programs established under this Act.
At the appropriate place in the bill, insert the following:
``Sec.__. Simplified, Automatic Enrollment Systems.
``(a) Finding. Congress finds that approximately 6 million children
currently uninsured are eligible for but unenrolled in Medicaid and
CHIP, and prompt enrollment of all children in health coverage programs
is critical.
``(b) Purpose. The purpose of this section is to require states to
simplify systems for enrolling low-income children and pregnant women
in Medicaid and CHIP, retaining eligible children and pregnant women in
those programs, and helping ensure that all children receive health
coverage in a timely fashion, without lapses in coverage.
``(c) State plans. Each state plan provided for under title XVIII
and title XXI of the Social Security Act shall provide for a system of
streamlined enrollment of children below the age of 21 that includes
the following (as specified by the Secretary):
(1) A simple, short joint application form translated into multiple
languages that can be used for both Medicaid and CHIP.
(2) Applicant self-attestation of eligibility, subject to
verification, random audits, or both.
(3) The option for applications to be submitted in-person, online,
by mail, or as part of applications for other programs.
(4) Express lane enrollment, as provided for in section 203 of the
Children's Health Insurance Program Reauthorization Act of 2009, Public
Law 111-3.
(5) 12-month continuous eligibility
(6) Presumptive eligibility during an interim period of coverage
for individuals who appear to qualify for assistance under this title,
on the basis of preliminary information.
(7) A determination of continued eligibility at the end of the
individual's eligibility period, based on all data available to the
State. If such determination cannot be made, the individual or family
shall be contacted for additional information, but only to the extent
such information is not available to State officials from other
sources. The family shall be notified of all determinations and
findings and given an opportunity to contest and appeal them. An
individual's eligibility shall continue until the redetermination
process is complete.
Provided that such plan may not impose an asset test or waiting
period for enrollment of children.
``(d) Automatic enrollment systems for all children. The Secretary
shall establish mechanisms to ensure the prompt enrollment of a child
in a public or private health program upon establishment of the child's
eligibility to participate in any federally-funded program, the birth
of a child in the United States, the assignment of a social security
account for a child, a visit with any health care provider eligible to
participate in the programs established under this Act, enrollment in
any public elementary or secondary school or any other elementary or
secondary school subject to mandatory immunization requirements,
enrollment in a publicly-subsidized child care program, upon discharge
of a child from a public institution or other institution where the
child has been confined, and such other points of enrollment as the
Secretary may establish.''
______
[Submission of Mr. Andrews follows:]
------
[Additional submissions of Dr. Price follow:]
[From The Hill, June 10, 2009]
A Back-Door Path to a Government Takeover
By Rep. Tom Price (R-Ga.)
Amidst all the moving parts of a national healthcare reform
package, one simple, but central question must rise above everything
else to guide our efforts: Who do we empower to provide the highest
quality healthcare--patients and doctors, or the federal government?
With President Obama's recent endorsement of a ``public option,''
it appears his answer is ``the federal government.'' From the editorial
page of The Washington Post to candid confessions from a handful of
congressional Democrats, the truth is out that a ``public option'' is
nothing more than a back-door path to a government takeover of personal
and private healthcare.
While patient-centered reforms are needed, the average American
appreciates that the quality of our healthcare remains the world's
best. Increasing access to this care and lowering costs are important.
However, those with coverage are reliably satisfied with the care
they receive. Waiting times are typically short, Americans have access
to the most innovative procedures, and we have some of the highest
survival rates for critical diseases in the world.
As a physician, I know firsthand that government intervention has a
harmful effect on each of these. Yet Democrats are convinced government
is the best provider of care. For a glimpse at what a government
takeover of our health system would look like, we need only examine how
such as system is carried out across the Atlantic Ocean.
In the United Kingdom, the misnamed National Institute for Health
and Clinical Excellence (NICE) determines what treatments, procedures
and drugs should be made available to patients. (An analogous board,
the Comparative Effectiveness Research Council, was created this year
in the president's ``stimulus'' bill.) The NICE board determines
whether a remedy meets its fiscal goals. Comparing cost to potential
for survival or cure, the board places a government-endorsed price tag
on a patient's well-being. It is not unusual for an otherwise effective
remedy to be judged too expensive. Care is denied or delayed, and the
patient is left out.
Take Pamela Smith of Darlington, England. In 2007, Mrs. Smith
petitioned the government to pay for the drug Erbitux to treat her
bowel cancer. The drug was already widely used here in the United
States and deemed by her oncologist as the best treatment to slow the
progression of her disease.
Unfortunately for Mrs. Smith, officials from NICE decided that
treating her with Erbitux, as suggested by her doctor, was not cost-
effective. She was forced to turn to the supplemental healthcare market
to purchase her treatment. The government pencil-pushers only relented
when it was clear that Erbitux had significantly reduced the size of
her tumor. By that point, Mrs. Smith's life savings had disappeared.
Democrats sell a government option as the ultimate solution to our
insufficient level of access. Yet since governments view care in terms
of dollars and cents, rather than patients and doctors, they limit care
to such a degree that the majority of patients are forced to purchase
additional health coverage. In France, for example, 92 percent of
patients pay for supplemental health insurance on top of their
inadequate federal plan. Even here at home, over 90 percent of people
on Medicare, our ``public option'' for seniors, have some type of extra
coverage.
Proponents of a government takeover disingenuously point to studies
asserting that nations abroad have healthier populations. This is
dangerously misleading. We must not confuse healthy lifestyles with
healthcare outcomes. According to a 2008 study by CONCORD, the European
NGO Confederation for Relief and Development, five-year survival rates
for breast, colon, rectum, colorectal and prostate cancer are all
significantly higher in the United States than the United Kingdom.
The five-year survival rate for breast cancer is 83.9 percent in
the U.S. but only 69.7 percent in the U.K. The difference in the rate
of survival for prostate cancer patients is a shocking 40.8 percentage
points, with a U.S. five-year survival rate of 91.9 percent compared to
only 51.1 percent in the U.K.!
Healthcare delivery in America needs serious reform, but these
stark differences in survival rates clearly show we must increase
access to patient-centered and controlled care, not eliminate it.
Positive health system reform will put patients in charge by
empowering them with ownership of their coverage. This way, insurers
will have to be accountable to the patient rather than the government
or a corporation. An improved system must also include reform of the
tax code so that it makes financial sense for all Americans to purchase
care. This way we can reach universal access to care without inflexible
government mandates and lower quality.
The experiences of our friends in the United Kingdom offer valuable
lessons about a government takeover of health care. If we choose not to
learn from their mistakes, we will surely be doomed to repeat them.
There is a positive solution: Providing all Americans access to
affordable, quality healthcare with patients and their families in
control--not the government.
Price, M.D., practiced orthopaedic surgery for over 20 years. He
chairs the Republican Study Committee.
______
[From Politico, May 3, 2009]
To Reform, Create a Real Marketplace
By Rep. Tom Price
As chairman of the Republican Study Committee, I have been as
vocally concerned as any in Congress about the priorities set forth by
President Barack Obama and the Democratic leadership. As a physician,
however, one area in which we agree is that we can no longer put off
reform of our terribly broken health care system.
Conservatives are energized about the coming debate over health
care. Our vision for positive reform is consistent with our principles
and singularly focused on that which health care should be all about:
the patient.
Where we diverge with our Democratic colleagues is that we believe
empowering patients, not Washington, is the key to responsible reform.
Our goal must be to create a system that is accessible, affordable,
innovative, responsive and of the highest quality. Surely, none of
these adjectives describe routine services from the federal government.
Because of Washington's inability to deliver high-quality care, the
American people remain wholly opposed to turning control of medical
decisions over to the government. To overcome this, Democrats in
Congress have begun promoting an innocent-sounding ``public option.''
They claim the public option would simply ``compete'' with private
plans.
Proponents of such a plan assert that the inadequacies of our
current health care system are the product of a failed free market. Yet
the irrefutable truth is there is no free market in American health
care. Market mechanisms have been trampled by governmental involvement
in care, primarily through Medicare--the government's public option for
seniors.Since it would be backed by the federal treasury, not built
upon market principles and efficiencies, any public option would
effectively destroy the private insurance market. With the government
subsidizing costs through higher taxes, the plan would offer ``lower''
fees for the services it offers.
But what the plan would actually offer patients is the key.
As Washington bureaucracies view health care in terms of dollars
and cents, instead of patients and doctors, this government-run plan
would, like Medicare, end up limiting access to treatments,
prescriptions and procedures that it deems ``ineffective.'' You may
know this process by another word: rationing.
The groundwork for a health rationing bureaucracy has already been
laid. The Comparative Effectiveness Research Council created by
February's nonstimulus package has been tasked with determining the
cost and effectiveness of different treatment options. It is noteworthy
that not one of the 15 members of the council is a practicing
physician.
While Democrats continue their predictable call for more
bureaucracy in the lives of the American people, there is a positive
solution to reforming American health care so that patients are put
first. This reform must be built upon dual pillars: a tax structure in
which care is accessible to all Americans and a system in which care is
truly owned and controlled by patients.
First, to ensure that every American has access to health care, we
must reform the tax code so it makes financial sense for everyone to
have coverage. Measures such as tax equity for the purchase of care,
active pooling mechanisms to increase purchasing power and focused use
of tax deductions and credits will allow all to obtain coverage that
meets their needs. Providing proper incentives, we can achieve
universal access to coverage without one-size-fits-all government
mandates.
Secondly, we must return purchasing power to patients. Today, most
Americans receive coverage through their employer or the government. As
a result, coverage is too often designed to meet the needs of a third
party, not the patient. The remedy is a structure that gives patients
full ownership of their coverage. This will make insurers truly
accountable to patients, reduce gaps in coverage resulting from job
loss and provide patients greater choice and flexibility. Added
benefits will be lower costs and the innovation essential for 21st-
century health care.
We stand at a crossroads in American health care. One direction
leads to more government interference in personal decisions and,
eventually, health care rationing. The other direction will ensure
coverage, empower patients, foster innovation of new treatments and
coverage options and provide the highest quality care.
The decision we make will reverberate far into the future, and the
choice preferred by the American people is obvious. The question is:
Will Washington listen?
Rep. Tom Price (R-Ga.) is the chairman of the Republican Study
Committee. Before coming to Congress, he practiced orthopedic surgery
for two decades.
______
[From the Washington Times, Wednesday, April 1, 2009]
Getting Health Care Reform Right
By Tom Price
Conservatives are comfortable with issues like spending and taxes,
but reluctant to tackle with similar passion issues like education,
energy, the environment and health care.
As a conservative and a physician, I call on my party to transform
our terribly broken health care system by making it patient-centered.
Our perceived reluctance to address the issue has left many Americans
without a basic understanding even of what a conservative approach to
health care looks like. Yet the cost of health care continues to rise,
and millions of Americans are without adequate coverage.
Health care reform, while an enormous challenge, is perfect for
demonstrating the effectiveness of conservative principles. Patient-
centered health care is conservative. Empowering that personal
relationship between a patient and a physician ensures the finest
health care. Our goal must be to provide access to quality, affordable
care that preserves this relationship without governmental
interference.
As usual, adherents to the ``government-as-solution'' philosophy
advocate more federal supervision and administration. This liberal
approach relies on mandates, rationing, bureaucracy and third-party
decision-making--all of which interfere with personal, private medical
decisions.
Their approach to health care reform is incapable of providing
quality care that is accessible, innovative and responsive. Achieving
this type of care will require a fundamental change that honors one of
the most basic conservative principles--personal ownership. Only when
patients truly control their care will we see the positive change
Americans desire.
To succeed, our conservative solution should be built on two
pillars: access to care for all Americans, and coverage that is truly
owned by patients and their families.
First, to provide access, we must reform our tax code so it makes
financial sense for all Americans to have health care coverage.
Conservatives understand that consumers respond to incentives.
Through the adoption of tax equity for the purchase of insurance,
active and robust pooling mechanisms for increased purchasing power,
and focused use of tax deductions and credits, we can ensure that it
makes financial sense for all Americans to have coverage. Patients
should be able to purchase care that fits their needs, not
Washington's.
The second pillar, patient-owned coverage, is vital for a
successful patient-centered system. Currently, most Americans get
health insurance through a third-party--either their employer or the
government.
This system strips patients of their rightful decision-making power
and results in a lack of accountability, flexibility and efficiency for
you--the patient. To put people in control, rather than bureaucrats, we
must create a new delivery structure in which patients have full
ownership of their coverage.
When patients have the ability to ``vote with their feet,''
insurance providers will, of necessity, be more accountable and
responsive to patient needs.
These two pillars would provide a platform for a host of positive,
patient-centered changes to our health care system based on the
conservative principles of choices, competition, ownership and
individual control.
With conservatism providing the path, we can offer the American
people 21st century health care that is accessible, affordable,
innovative, responsive and of the highest quality.
A great debate is upon us about what health care system we will
leave for future generations. To ensure patient-centered care is not
sacrificed for government control, we must provide principled solutions
and communicate them with passion.
In doing so, we will not only succeed in implementing sustainable
and long-needed reform, we will renew the faith of the American people
that a broad application of conservative ideas will provide solutions
to the issues of the day.
It is time for conservatives to expand the comfort zone in which we
operate. Our solutions to the many challenges we face are more
consistent with what the American people want. By applying positive
principles to every problem, we will reinvent conservatism in the eyes
of the American people and set the course for a better tomorrow.
Rep. Tom Price, Georgia Republican, is a doctor who practiced
orthopedic surgery for more than 20 years. He also is a member of the
House Financial Services Committee and chairman of the Republican Study
Committee.
______
[Whereupon, at 5:50 p.m., the committee was adjourned.]