[Senate Hearing 112-766]
[From the U.S. Government Printing Office]


                                                        S. Hrg. 112-766

 
   THE AFFORDABLE CARE ACT: THE IMPACT OF HEALTH INSURANCE REFORM ON 
                         HEALTH CARE CONSUMERS 

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

                                HEARING

                                 OF THE

                    COMMITTEE ON HEALTH, EDUCATION,
                          LABOR, AND PENSIONS

                          UNITED STATES SENATE

                      ONE HUNDRED TWELFTH CONGRESS

                             FIRST SESSION

                                   ON

  EXAMINING THE AFFORDABLE CARE ACT, FOCUSING ON THE IMPACT OF HEALTH 
               INSURANCE REFORM ON HEALTH CARE CONSUMERS

                               __________

                            JANUARY 27, 2011

                               __________

 Printed for the use of the Committee on Health, Education, Labor, and 
                                Pensions


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          COMMITTEE ON HEALTH, EDUCATION, LABOR, AND PENSIONS

                       TOM HARKIN, Iowa, Chairman

BARBARA A. MIKULSKI, Maryland            MICHAEL B. ENZI, Wyoming
JEFF BINGAMAN, New Mexico                LAMAR ALEXANDER, Tennessee
PATTY MURRAY, Washington                 RICHARD BURR, North Carolina
JACK REED, Rhode Island                  JOHNNY ISAKSON, Georgia
BERNARD SANDERS (I), Vermont             RAND PAUL, Kentucky
ROBERT P. CASEY, JR., Pennsylvania       ORRIN G. HATCH, Utah
KAY R. HAGAN, North Carolina             JOHN McCAIN, Arizona
JEFF MERKLEY, Oregon                     PAT ROBERTS, Kansas
AL FRANKEN, Minnesota                    LISA MURKOWSKI, Alaska
MICHAEL F. BENNET, Colorado              MARK KIRK, Illinois
RICHARD BLUMENTHAL, Connecticut
                                       

                      Daniel Smith, Staff Director

                  Pamela Smith, Deputy Staff Director

     Frank Macchiarola, Republican Staff Director and Chief Counsel

                                  (ii)



                            C O N T E N T S

                               __________

                               STATEMENTS

                       THURSDAY, JANUARY 27, 2011

                                                                   Page

                           Committee Members

Harkin, Hon. Tom, Chairman, Committee on Health, Education, 
  Labor, and Pensions, opening statement.........................     1
Enzi, Hon. Michael B., a U.S. Senator from the State of Wyoming, 
  opening statement..............................................     3
McCain, Hon. John, a U.S. Senator from the State of Arizona, 
  statement......................................................    14
Franken, Hon. Al, a U.S. Senator from the State of Minnesota, 
  statement......................................................    16
Bingaman, Hon. Jeff, a U.S. Senator from the State of New Mexico, 
  statement......................................................    18
Bennet, Hon. Michael F., a U.S. Senator from the State of 
  Colorado, statement............................................    19
Roberts, Hon. Pat, a U.S. Senator from the State of Kansas, 
  statement......................................................    21
Reed, Hon. Jack, a U.S. Senator from the State of Rhode Island, 
  statement......................................................    23
Burr, Hon. Richard, a U.S. Senator from the State of North 
  Carolina, statement............................................    25
Sanders, Hon. Bernard, a U.S. Senator from the State of Vermont, 
  statement......................................................    27
Hagan, Hon. Kay R., a U.S. Senator from the State of North 
  Carolina, statement............................................    29
Murray, Hon. Patty, a U.S. Senator from the State of Washington, 
  statement......................................................    31
Mikulski, Hon. Barbara, a U.S. Senator from the State of 
  Maryland, prepared statement...................................    62

                            Witness--Panel I

Sebelius, Hon. Kathleen, Secretary, U.S. Department of Health and 
  Human Services, Washington, DC.................................     6
    Prepared statement...........................................     8

                          Witnesses--Panel II

Grasshoff, Lisa, Houston, TX.....................................    34
    Prepared statement...........................................    36
Schlichting, Emily, Omaha, NE....................................    38
    Prepared statement...........................................    40
Koller, Christopher, Health Insurance Commissioner, State of 
  Rhode Island, Providence, RI...................................    41
    Prepared statement...........................................    44
Olivo, Joe, President, Perfect Printing, Inc., Moorestown, NJ....    48
    Prepared statement...........................................    49

                          ADDITIONAL MATERIAL

Statements, articles, publications, letters, etc.:
    Response by Secretary Sebelius to questions of:
        Senator Enzi.............................................    63
        Senator Alexander........................................    75
        Senator Roberts..........................................    80
        Senator Hatch............................................    82

                                 (iii)




   THE AFFORDABLE CARE ACT: THE IMPACT OF HEALTH INSURANCE REFORM ON 
                         HEALTH CARE CONSUMERS

                              ----------                              


                       THURSDAY, JANUARY 27, 2011

                                       U.S. Senate,
       Committee on Health, Education, Labor, and Pensions,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 10 a.m. in Room 
SD-430, Dirksen Senate Office Building, Hon. Tom Harkin, 
chairman of the committee, presiding.
    Present: Senators Harkin, Bingaman, Murray, Reed, Sanders, 
Hagan, Franken, Bennet, Enzi, Burr, Isakson, McCain, and 
Roberts.

                  Opening Statement of Senator Harkin

    The Chairman. The Senate Committee on Health, Education, 
Labor, and Pensions will please come to order.
    Today we meet for the first in a series of hearings that 
this committee will hold on The Affordable Care Act; hearings 
that will focus not on the politics of Health Care Reform nor 
on the rhetoric that surrounds it, but rather on the tangible, 
positive impact that reform is having on Americans' lives. I 
think we can all agree that what this debate needs is more 
light and less heat.
    To that end, today's hearing will focus on the benefits of 
health reform that Americans are experiencing right now; 
specifically, the bundle of significant consumer protections 
that went into effect last September, known as the Patient's 
Bill of Rights. These protections are a historic, long-awaited 
improvement in the quality and scope of health coverage for all 
Americans. Every American who pays a health insurance premium 
is now protected against some of the most egregious and abusive 
practices of the health insurance industry.
    Put another way, thanks to health reform Americans now have 
protections that every Senator on this dais has had for many 
years.
    Before the Affordable Care Act, nearly 102 million 
Americans were in health insurance policies with lifetime 
limits; and it was estimated that as many as 20,000 people 
annually could be denied coverage for care due to those limits.
    And, surprisingly, people in danger of hitting a lifetime 
limit are seriously ill, and their benefits run out just when 
they need them the most.
    The Affordable Care Act permanently eliminates all lifetime 
limits and phases out annual limits by 2014, providing economic 
and health security for those who need coverage the most at 
critical times.
    One of those folks, Lisa Grasshoff, is here today and will 
talk a bit later about how the act's ban on lifetime limits has 
helped her care for her son and strengthen her family's 
financial future.
    As I'm sure the Secretary will discuss in her testimony, 
last week the Department of Health and Human Services released 
an important report analyzing preexisting health conditions. 
The report's findings are striking; up to 129 million 
nonelderly Americans have a preexisting condition, and millions 
more are likely to develop such a condition over the next 8 
years. Before the Affordable Care Act these Americans faced 
denial of coverage, restriction of health benefits, or higher 
premiums as a result of their preexisting condition. Their 
ability to take a new job, start their own business or make 
other important life changes was limited. They were, in effect, 
locked into their original insurance coverage.
    Because of health reform, insurance companies are now 
prohibited from restricting or denying coverage to children 
under 19 because of a preexisting condition, and in 2014 this 
protection will be extended to all Americans.
    Between now and 2014, the law establishes an insurance plan 
in every State tailored specifically to adults with preexisting 
conditions who are currently uninsurable, offering coverage at 
standard market rates; thousands of people have enrolled and 
received coverage of life-saving services like chemotherapy.
    Another element of the Patient's Bill of Rights is a 
requirement for every insurance plan to cover evidence-based 
preventive services that will head off many illnesses, 
addressing them in the nurse's office rather than in the 
emergency room.
    The cost of preventable disease consumes 75 percent of 
health care spending annually; dollars that could be used to 
build roads, improve schools, create jobs.
    The prevention investments in the law are down payments on 
the long-term project of transforming our current sick care 
system into a genuine health care system; and first dollar 
coverage of preventive services like mammograms and 
immunizations are a vital part of that.
    Before the Affordable Care Act millions of young adults 
went without health insurance because their jobs didn't offer 
it or because they were ineligible for coverage on their 
parent's policy.
    These young people, starting a new job or a new business--
folks who don't have a lot of money--had to largely fend for 
themselves in a chaotic, unregulated market for individual 
coverage that charges high premiums for only modest benefits.
    Now health reform allows these young people--more than 2 
million of them--to stay on their parent's policy until age 26; 
this reform relieves young people of the burden of high health 
insurance costs.
    We will learn more about this from one of our witnesses 
today, Emily Schlichting, a University of Nebraska student.
    Finally, the Affordable Care Act puts an end to one of the 
most outrageous insurance company abuses, that's cancelling 
insurance coverage right when someone gets sick, and sometimes 
based on technical paperwork error; for example, a California 
insurer, using computer programs, had a dedicated program to 
cancel policies of pregnant women and the chronically ill only 
because they submitted expensive claims.
    Another insurance company started a fraud investigation 
into anyone who submitted a claim reaching a certain cost 
level, looking for reasons to cancel the policy; insurance 
companies were also paying bonuses to employees based on how 
many policies they canceled, and therefore, how much money they 
saved the company.
    Health reform puts an end to that sorry state of affairs.
    So, today we'll hear from public officials at both the 
State and Federal levels charged with implementing and 
overseeing the Affordable Care Act, as well as private citizens 
who will talk about how this has affected them.
    Our first panel, of course, we welcome Secretary of Health 
and Human Services, Kathleen Sebelius to her first hearing of 
this New Congress.
    In addition to expertly implementing the private insurance 
market reforms for folks, today I want to applaud the Secretary 
for her relentless and effective work in eliminating the waste, 
fraud and abuse in Medicare and Medicaid.
    This week the department reported that it had recovered 
more than $4 billion from perpetrators of fraud last year; the 
highest annual recovery ever.
    Thank you very much, Madam Secretary.
    The department released new rules authorized by the 
Affordable Care Act, giving it even more effective tools to 
detect and combat fraud.
    Our second panel is comprised of Rhode Island Insurance 
Commissioner, Chris Koller, and three nongovernment witnesses, 
Lisa Grasshoff, Joe Olivo and Emily Schlichting.
    As always, I am very pleased to be joined by our 
committee's Ranking Member, Senator Mike Enzi.
    And, before I turn for an opening statement from Senator 
Enzi, one administrative matter: I request that the record 
remain open for 10 days from today for statements to be 
submitted to the record.
    Senator Enzi.

                       Statement of Senator Enzi

    Senator Enzi. Thank you, Mr. Chairman. I appreciate the 
Secretary being here today. I was very pleased at the State of 
the Union, that the President mentioned that there are flaws in 
the Health Care bill that need fixing. He specifically 
mentioned tort reform. Of course, a year and a half ago at the 
American Medical Association Convention, he promised that the 
Health Care bill would have tort reform and a permanent doc 
fix; neither of those things wound up in there.
    Now, today's hearing is designed as another marketing tool 
for the health care plan. I don't think we can fault the 
millions that have been spent on the marketing--it's been 
voluminous, but it's the policy that's flawed, not the 
marketing plan.
    It's easy to pick a few paragraphs out of a 2,700-page law 
to find a few provisions that are popular.
    Apparently, the purpose of the hearing today is to identify 
those few issues in the new law that enjoy support; and that's 
often from both sides of the aisle.
    Now, usually, a hearing is to seek solutions. 
Unfortunately, the reality is that Americans won't have the 
luxury of only abiding by their favorite paragraphs of the new 
law; Americans will be forced to comply with the entire law. 
That means, as a direct result of the new law, millions of 
Americans will see their health insurance premiums increase. 
Plans like Blue Shield of California have already announced 
premium increases of 59 percent; a portion of which they 
directly attribute to the mandates in the new law.
    As a result of the new law, children in many States are not 
able to get child-only health plans. I recently got a letter 
from a disabled veteran in Wyoming. He wrote to me that because 
of the new law he can't get health insurance for his kids. He 
gets his health insurance care from the VA So, he doesn't need 
a family policy, he needs a policy for his two kids; but 
because of drafting errors in the new law, he's out of luck.
    No health insurance plans in Wyoming are writing new child-
only policies. I've asked my staff to look into this, and they 
found that to be the case in at least 19 other States. Because 
of the new law, kids are not able to get health insurance.
    Another problem with the new law is that millions of 
seniors on Medicare will see their out-of-pocket costs go up 
and benefits go down, because more than $500 billion was cut 
from Medicare and used to pay for a new entitlement program.
    Because of the new law employers across the country will be 
forced to lay off workers and reduce wages as their health care 
costs continue to increase as a result of all the new taxes in 
the law that will increase their health care costs.
    The new law also forces 16 million Americans into the 
Medicaid Program; one of the worst health care programs in the 
country, that provides some of the lowest-quality care; while 
at the same time, forcing cash-strapped States to pay an 
additional $20 billion over the next 10 years to expand the 
program.
    This is the reality that we face as a result of the new 
health care law; nothing in the testimony we will hear today is 
going to change it. That's why survey after survey shows that 
the American people reject the policy set forth in this new 
law. We recognize there are individuals who will benefit from a 
few of the provisions in the law; and, in fact, many of those 
provisions do enjoy bipartisan support.
    There are many Senators, both Democrat and Republican, that 
support policies, like prohibiting rescissions and making it 
easier for parents to cover their children on their plans up to 
age 26. We could have easily enacted a bill last year that 
would have provided those protections; unfortunately, that's 
not what was done with the new health care law.
    Instead, the new law will force Americans to buy the type 
of health insurance that Washington thinks they should have. 
Employers will be required to offer health insurance or pay $52 
billion in new taxes.
    Americans will not have the luxury of picking which parts 
of the new law apply to them, but instead will have to comply 
with the 2,700 pages in new mandates, taxes, and limitations on 
their freedoms. And that doesn't even count the pages of new 
regulation.
    There is a sign on the side of a building in Worland, WY 
that says: As regulations grow, freedoms die.
    Madam Secretary, you have the unfortunate task of writing 
the hundreds of thousands of pages of regulations to implement 
an unpopular health care law that the American people reject. 
With each page you publish, you will be limiting the freedoms 
of everyday Americans; for example, the freedom of individuals 
to choose whether to spend their hard-earned dollars to pay 
their mortgage or to pay their health insurance premiums has 
vanished.
    The Government now says: Americans have to pick health 
insurance. If you don't have health insurance, you're breaking 
the law, and you'll have to pay a fine.
    Businesses that have more than 51 employees will not have 
the freedom to decide whether to increase an employee's pay or 
buy their employee health insurance. The new law says: If you 
don't provide health insurance you have to pay $52 billion in 
new taxes.
    The freedoms of businesses to make decisions about how to 
run their companies are disappearing. Americans who wish to pay 
lower health insurance premiums by picking a plan that has a 
higher deductible will no longer have this freedom. The new law 
decrees that Washington knows best.
    The Administration will soon be publishing regulations 
capping the amount of out-of-pocket costs and limiting the 
deductible amount small businesses can offer their employees.
    Madam Secretary, I don't envy you your job, and I do 
appreciate, though, that you're here today, and that you have 
been working on those regulations, and meeting a lot of the 
deadlines; and we will have the opportunity to ask some tough 
questions about the new law.
    I do believe this is your first time to appear before this 
committee since your nomination hearing roughly 2 years ago; 
and to perform proper oversight, this committee will need to 
hear more from you; and I will ask you to reaffirm that 
commitment today.
    I'm glad this committee will finally have the opportunity 
to ask you questions about the implementation of the new health 
care law which impacts \1/6\ of our Nation's economy. And, of 
course, I'm always interested in the donut-hole provision where 
PhRMA, by paying 50 percent of the cost to get people through 
the donut hole will then get 95 percent from taxpayers once 
Seniors are through the donut hole because we no longer give 
incentives for people to go to generics.
    I have people from Wyoming talking to me about Medicare 
Advantage because their rates have gone up so much, or have 
completely been eliminated that they're losing a part of what 
they consider to be health care and--invaluable health care--
and there's some animosity toward the AARP because they helped 
to do that, and they are the ones supplying the Medigap policy, 
which these people say they can't afford.
    I believe that we can and should do better. I intend to 
focus on ways to eliminate the provisions in this new law that 
limit our basic freedoms. In their place I will work to enact 
reforms that will focus on increasing consumer choices and 
decreasing health care costs.
    We must make health care more affordable for both consumers 
and the Federal taxpayer.
    Thank you, Mr. Chairman.
    The Chairman. Thank you, Senator Enzi.
    Again, we have an exceptional group of witnesses today. I'd 
like to thank all of you for taking the time and energy for 
being here.
    On our first panel, of course, is Secretary of Health and 
Human Services, Kathleen Sebelius; and we welcome her here, 
again, as Senator Enzi said, for her first appearance before 
this committee.
    Secretary Sebelius was a leading voice involved during the 
passage of the Affordable Care Act. She is responsible for 
implementing many of the key provisions; and of course, we all 
know that prior to joining the Cabinet, Secretary Sebelius 
served first as the Kansas Insurance Commissioner; so she has a 
great deal of knowledge in that area; and then later, of 
course, as the Honorable Governor of the State of Kansas, where 
she worked to expand access to quality affordable health care, 
and fought to protect consumers.
    So, Madam Secretary, thank you for your hard work. Thank 
you for sharing your knowledge with the committee today. I 
commend you for your work on this important issue; your 
statement will be made a part of the record in its entirety. 
Please proceed as you so desire.

        STATEMENT OF HON. KATHLEEN SEBELIUS, SECRETARY, 
  U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES, WASHINGTON, DC

    Secretary Sebelius. Thank you very much, Mr. Chairman. It's 
nice to have a chance to visit with the HELP Committee on this 
important issue, and I want to thank Chairman Harkin, and 
Senator Enzi, and members of the committee for the opportunity 
to discuss the implementation of the Affordable Care Act, and 
talk a little bit about the enormous difference it's already 
making in the lives of Americans since it was passed.
    As you know, in the framework of the bill, over the last 10 
months, our department has worked closely with two other 
departments; with Treasury and Secretary Tim Geithner and with 
Labor and Secretary Hilda L. Solis. But, we've also been 
working very closely with governors across the country; with my 
former colleagues, State insurance commissioners, with health 
care providers, doctors and nurses, with consumer advocates, 
employers and other stake-holders, to deliver the key benefits 
that have already become available to the people of America.
    We've met deadlines, we've established strong, working 
partnerships and begun laying the groundwork for the additional 
reforms that take place in the years to come; and in that time, 
I've had the chance to see the new law through the eyes of 
people it helps every day.
    Mr. Chairman, you've already referenced the new Patient's 
Bill of Rights. And because of the enactment of those 
provisions, millions of Americans don't have to worry about 
losing their health insurance when they need it most; many of 
the worst abuses of the insurance industry, like unfair and 
arbitrary rescission practices and lifetime dollar limits on 
benefits have now been brought to an end.
    In addition, the new law begins to free as many as 129 
million Americans with preexisting health conditions from the 
fear of discrimination by insurance companies.
    Starting this year, it did prevent insurers from denying 
coverage to children because of a disability or illness; and in 
2014 all Americans will be free from discrimination by 
companies based on their health status.
    The law is also beginning to slow down the rising health 
insurance cost for families and small business owners; the new 
resources for States to review questionable premium hikes; the 
new regulations that limit the amount of premium dollars that 
insurers can spend on marketing and CEO bonuses.
    Beginning in 2014 individuals, families, and small 
businesses will be able to pool their purchasing power and 
negotiate lower rates in new health insurance exchanges, which 
many States are already working on, to design and implement.
    I've also seen how the new law is impacting America's 
business owners. Over 5,000 businesses, State and local 
governments, and unions are already using new funds to help 
maintain coverage for a very vulnerable population--folks 
between the age of 55 and 64 and their families, the so-called 
early retirees. Around 4 million small business owners are now 
eligible for tax credits to help them provide insurance for 
their employees. Thanks to the new law, seniors and those 
Americans with disabilities enjoy a stronger and more 
sustainable Medicare.
    We've sent over 3 million checks to those who fell into the 
donut hole last year, and they've received a one-time $250 
rebate check. This year, for those who reach the donut hole 
coverage in 2011, they will begin to receive a 50 percent 
discount on the covered name-brand prescription drugs; and over 
time, that donut hole closes altogether.
    Medicare beneficiaries are now receiving critical 
preventive services and an annual wellness visit which has been 
added to their guaranteed benefits.
    So, in addition to giving Americans more control over their 
health care, the new law is strengthening our economy; just 
recently, the Congressional Budget Office reiterated their 
numbers, that the new law will reduce the Federal deficit by 
$230 billion over the next decade, and over a trillion dollars 
in the following decade.
    Now, on Tuesday night, President Obama laid out a vision 
for how America can win the future by building a foundation for 
long-term growth that allows families and business owners to 
thrive.
    Improving our health care system is vital to making that 
vision a reality; and the Affordable Care Act is an essential 
component to this goal.
    By freeing families from the worst insurance company 
abuses, freeing entrepreneurs to start new businesses without 
worrying about losing their coverage, and freeing all of us 
from the burden of skyrocketing health care costs that make it 
hard for families to pay their bills, the law allows American 
companies to compete and allows the Federal Government to bring 
down the deficit.
    Since March of last year our department has focused on 
working with Congress and our partners across the country to 
implement the law quickly and effectively.
    In the coming months, I look forward to working with all of 
you to continue those efforts and to make sure that Americans 
can take full advantage of all that the law has to offer.
    Again, I thank you for this opportunity, and look forward 
to our discussion.
    [The prepared statement of Secretary Sebelius follows:]
                Prepared Statement of Kathleen Sebelius
                                summary
    Over the last 10 months, the Department of Health and Human 
Services has worked closely with the Departments of Treasury and Labor; 
Governors and State insurance commissioners; doctors, nurses and other 
health care providers; consumer advocates; employers; insurers; and 
other stakeholders to deliver many of the law's key benefits to the 
American people.
    We've established a Patients' Bill of Rights to protect families 
from many of the worst insurance abuses including rescissions and 
lifetime dollar limits on care.
    We've also begun to free as many as 129 million Americans from 
discrimination based on preexisting conditions. Today, it's illegal to 
deny coverage to children because of a preexisting health condition. In 
2014, discrimination based on any individual's health history will be 
outlawed.
    The law is bringing down premiums for consumers by limiting the 
amount of premiums insurers may spend on administrative costs and by 
giving States resources to beef up their rate review processes. In 
2014, State-based Exchanges will bring down premiums further by giving 
individuals and small business owners the ability to pool their 
purchasing power to negotiate lower premiums.
    There are other benefits for America's businesses as well. Over 
5,000 businesses, State and local governments and unions are using 
funds from the Affordable Care Act to maintain coverage for pre-
Medicare retirees and their families. Around 4 million small businesses 
may be eligible for a tax credit to help them provide health insurance 
for their employees.
    Thanks to the law, seniors are gaining a stronger and more 
sustainable Medicare. Over 3 million seniors have already received one-
time $250 donut-hole rebate checks. This year, seniors in the donut 
hole will receive 50 percent discounts on covered brand name 
prescription drugs, and others will have access to many important 
preventive care services for free.
    The law is a key part of the Administration's effort to win the 
future by out-innovating, out-educating and out-building the rest of 
the world. It gives Americans more freedom in their health care 
choices, from greater freedom to change jobs or start a business 
without worry that they'll lose coverage to greater freedom from 
skyrocketing premiums.
    It also puts our budget on a more sustainable path by lowering the 
deficit by $230 billion over the next decade and by over $1 trillion by 
the end of the following decade.
    Since March of last year, our Department has focused on working 
with Congress and our partners across the country to implement this law 
quickly and effectively. In the coming months, we look forward to 
working with all of you to continue that work and make sure that 
Americans can take full advantage of all that the law has to offer.
                                 ______
                                 
    Chairman Harkin, Ranking Member Enzi, and members of the committee, 
thank you for the opportunity to discuss our department's 
implementation of the Affordable Care Act and the enormous difference 
it has made in the lives of Americans since it was passed.
    Over the last 10 months, our department has worked closely with the 
Departments of Treasury and Labor, with Governors and State Insurance 
Commissioners, with doctors, nurses, other health care providers, 
consumer advocates, employers, insurers, and other stakeholders to 
deliver many of the law's key benefits to the American people: from 
establishing a new Patients' Bill of Rights that protects families from 
the worst insurance company abuses, to sending more than 3 million $250 
checks to seniors and other beneficiaries in the Medicare Part D 
coverage gap, from making health insurance tax credits available to up 
to 4 million small businesses, to new reforms that keep premiums down 
by bringing transparency and accountability to our health insurance 
markets.
    We have met deadlines, established strong working partnerships, and 
begun laying the groundwork for reforms that will take effect in the 
years to come.
    In the last year, I've also gotten the chance to see this new law 
through the eyes of the people it helps every day. From the people I've 
talked to around the country, and the letters I get every day, I've 
learned firsthand how the law is giving Americans more freedom in their 
health care choices and more security in their coverage.
    It's making a difference for people like Ralph Byrd from Phoenix. 
His twins have a condition called Spinal Muscular Atrophy that requires 
expensive treatments and a constant need for care. Ralph had health 
insurance but worried that the cost of care for his children would 
quickly reach the lifetime dollar limit on his plan.
    Thanks to the new law, Ralph's family and countless others no 
longer have to worry about losing their health insurance when they need 
it most. In September, the Patients' Bill of Rights began to put an end 
to the worst abuses of the insurance industry, including the imposition 
of lifetime limits. It also put an end to unfair and arbitrary 
rescission practices and began to phase out annual dollar limits. It 
puts an end under most plans to outrageous fees you could be charged 
for going to the nearest emergency room. It allows parents to keep 
their children on family plans in most cases up to age 26.
    By holding insurers accountable, the new law frees Americans from 
the worry that their benefits will be unfairly taken away or capped. It 
has given millions of families peace of mind.
    At the same time, the new law begins to free Americans from the 
cruel practice of discrimination based on preexisting conditions.
    In September, I met Gail O'Brien from Keene, NH. The previous 
March, Gail, who was uninsured, was diagnosed with non-Hodgkins 
Lymphoma. When she tried to get coverage she was declined because of 
her condition or offered coverage at an unaffordable rate. She faced 
the kind of decision that, unfortunately, millions of other Americans 
have faced over the last few years. Should she pay for health care or 
pay for her son's college education? Thanks to the new law, Gail was 
able to get coverage through the Preexisting Condition Insurance Plan 
created in each State by the new law. As a result, she has been able to 
get her treatments and is responding very well.
    Today, Gail is just one of thousands of Americans who had 
previously been locked out of the health insurance market but now have 
coverage thanks to the new law. Even more significant, insurers are no 
longer allowed to deny coverage to children because of a preexisting 
health condition. In 2014, any kind of discrimination based on your 
health history will be outlawed. That's a day we will all celebrate.
    Almost every family in America will benefit from this protection. 
According to a report our department released last week, as many as 129 
million Americans--or nearly one in two people under the age of 65--may 
have a health condition that makes them vulnerable to insurance company 
discrimination today. Things as big as being a cancer survivor or as 
small as treating high blood pressure were enough to catch insurers' 
attention. And we know that they did not hesitate to use this power.
    The new law is freeing these 129 million Americans from the worry 
that if they change jobs, retire, get divorced, or otherwise need 
individual market insurance, they'll be shut out of health insurance or 
denied the coverage they need.
    We also need to make sure that coverage is affordable for 
individuals, families, and businesses. Already, provisions of the 
Affordable Care Act are helping to keep premium increases down by 
demanding transparency and accountability from the insurance industry. 
For too long, it has been a common occurrence for someone to open up 
their mail and find a 25 percent premium increase from their insurer 
with little explanation and no recourse.
    That's changing under the new health care law. States are our 
frontline defense to prevent unreasonable premium increases. As a 
former State insurance commissioner, I am pleased by the State-focused 
approach the law takes to premium review. We are providing States with 
resources to help them beef up their rate review processes, including 
the ability to hire actuaries to perform the necessary analysis of rate 
proposals. In 2010, we provided the first round of what will eventually 
be $250 million in funding to strengthen States' ability to review and 
reject unreasonable rate hikes. Over the last year, States from 
California to Connecticut have shown that vigorous oversight can be 
very effective at stopping unjustified premium increases. We also have 
proposed a system for transparency and consistent, reviews of any 
premium increase over 10 percent in 2011 to identify any that are 
unreasonable.
    In addition, for the first time, insurers will be held accountable 
for the way they spend consumer premiums. The new medical loss ratio 
regulations released last year implement the statutory requirement that 
insurers spend 80 to 85 percent of premium dollars on health care and 
quality improvement efforts instead of marketing and CEO bonuses. Those 
who don't meet the standard will have two choices: reduce premiums or 
send rebates to their customers. We are already seeing indications that 
these policies are causing insurance companies to think twice about 
their premium increases and, in some cases, reducing the size of their 
annual updates.
    This is just the start of how the law will keep down premiums. In 
2014, individuals, families, and many small businesses will be eligible 
for tax credits to help them afford health coverage purchased through 
the new Exchanges. They'll be able to pool their resources in new 
State-based health Exchanges to negotiate lower rates. We estimate that 
a family of four earning $55,000 a year will save nearly $6,000 each 
year as a result of these tax credits. A single mother with an income 
of $33,000 will save nearly $10,000, putting coverage within reach for 
the first time for these vulnerable families. The nonpartisan 
Congressional Budget Office estimates that small businesses will be 
able to purchase coverage in the Exchanges at a significant savings 
than what they are paying now, because of the larger risk pools and 
streamlined administrative costs. Large employers are also benefiting.
    Creation of State-based health insurance Exchanges is a central 
component of the Affordable Care Act and a concept that has a long 
history of bipartisan support. Under the act, States have until 2014 to 
establish Exchanges for their citizens. As part of our partnership with 
the States, we are again providing resources to help them get these 
Exchanges up and running on time. We have provided Exchange Planning 
Grants to 48 States plus the District of Columbia and just last week we 
announced the availability of funds for States to begin the work to 
establish Exchanges. We will continue to work closely with governors, 
State regulators, and legislators to provide them with information and 
resources to complete this critical work on time.
    The law also invests in improving Americans' access to care through 
$11 billion in funding for community health centers to increase 
services, improve facilities and train and support more health care 
professionals to work in the areas they are needed most.
    I've also seen how the new law is helping America's businesses. 
Under the new law, more than 5,000 businesses, local governments, and 
unions have signed up for a new program that helps them maintain 
coverage for retired workers who are not yet eligible for Medicare.
    The California Public Employees Retiree System for example reports 
that by factoring the new program into its 2011 health plans, it was 
able to provide approximately $200 million in premium savings to 
115,000 early retirees and their families.
    We have also notified more than 4 million small businesses and non-
profits that they may be eligible for a tax credit this year to help 
them provide health insurance for their employees. We have already seen 
these credits working. After years of dropping coverage, we have seen 
the trend start to reverse thanks to the law.
    For example, Blue Cross Blue Shield of Kansas City recently 
reported that after letting local businesses know about the new tax 
credit, they enrolled more than 9,000 new members covered by 400 new 
employers, more than a third of which had not previously offered 
coverage. On behalf of the Business Round Table, Hewitt analyzed the 
cost containment policies in the law and found that large employers 
could save up to $3,000 per employee by 2019. Thanks to the new law, 
America's businesses are getting more freedom from soaring costs that 
made it hard for them to compete and keep their best employees.
    The Affordable Care Act is also making Medicare stronger and more 
sustainable. Last week, we sent out our three millionth $250 rebate 
check to help seniors and other beneficiaries who reached the Medicare 
Part D prescription drug benefit gap in 2010. Several of these seniors 
have written to me to say how helpful these checks were, including one 
couple from Minnesota who stapled their receipt to the card, showing 
how they spent the money at their local WalMart.
    This year, seniors are getting more benefits. Those who reach the 
donut hole will receive a 50 percent discount on covered brand-name 
drugs while in the donut hole, the first step toward closing the donut 
hole by the end of the decade. Medicare beneficiaries will be eligible 
to receive recommended preventive services such as mammograms and most 
cancer screenings at no additional charge as well as free annual 
wellness visits.
    In addition to giving Americans more control over their health 
care, the new law is strengthening our economy. More than 1 million new 
private sector jobs have been created since the law passed and the 
health sector is one of the fastest growing parts of our economy. The 
Congressional Budget Office has said that the law will reduce our 
Federal deficit by $230 billion over the next decade and by over $1 
trillion by the end of the following decade.
    I have personally seen the difference this law will make and in 
just a few minutes, you'll hear more about how the law is making it 
easier for Americans to get the health care they need. This law is not 
just words on a page to be debated. There are names and faces that go 
along with this law. We are moving forward with real rights and reforms 
that are improving people's lives every day.
    That's why last week's vote in the House to repeal this law was 
unfortunate. At a time when there is so much more important work to be 
done to rebuild our economy, we can't afford to take these benefits 
away from families, bring back all the worst practices of the insurance 
industry, raise premiums for families, increase health costs for 
businesses, and add $1 trillion to the deficit by the end of the next 
decade.
    Since March of last year, our department has focused on working 
with Congress and our partners across the country to implement this law 
quickly and effectively. In the coming months, I look forward to 
working with all of you to continue that work and make sure that 
Americans can take full advantage of all that the law has to offer. 
Thank you for your time.

    The Chairman. Thank you, Madam Secretary.
    We'll start our round of questions per agreement between 
the Ranking Member and myself earlier on; the order will be, 
The Chair, Ranking Member and then Senators in order of 
appearance; and my staff has written this, so it will be 
Senator McCain, Senator Franken, Senator Bingaman, Senator 
Bennet, Senator Roberts, Senator Reed, Senator Burr, Senator 
Isakson, Senator Sanders in that order.
    Madam Secretary, getting to this child-only issue, could 
you describe the new protections that the Health Reform bill 
provides to children in the private market, and how that 
differs from the status quo before the Affordable Care Act was 
passed?
    Secretary Sebelius. Mr. Chairman, before the Affordable 
Care Act, what a number of companies did is offer child-only 
policies, but eliminated any child with a preexisting health 
condition. So, the parents who really desperately needed 
coverage for their children with anything from asthma to 
diabetes to a cancer survivor, were blocked from getting 
coverage.
    The Affordable Care Act says that if you are going to offer 
child-only policies that it must be open to all children. No 
longer can you only offer policies to children who don't have a 
health condition that may require them to have health 
insurance--what we have found companies doing is--some 
companies may be changing the kind of policy offerings. What 
most companies are doing are keeping in place their coverage 
for children like those referred to by Senator Enzi, and are 
selecting whether or not to offer policies going forward, 
prospective policies.
    A number of States have taken action--I think 19 or 20 so 
far--to say companies who want to offer policies to children 
must offer them across the board, feeling that the 
discrimination against children with preexisting health 
conditions is the worst of all worries for parents; and 
particularly when you have a sick child, to not be able to find 
affordable coverage is just untenable.
    Children are also eligible for the new high-risk insurance 
pools that are run in States across the country, in addition to 
the private health market.
    The Chairman. So, it's kind of the same situation that we 
experience in other areas of insurance, that, if you're really 
healthy you can get a health insurance plan.
    Secretary Sebelius. If you promise not to get sick.
    The Chairman. That's right. And if you have no preexisting 
conditions.
    One other thing that I wanted to just ask is: The first 
dollar coverage for proven cost-effective, preventive services. 
As you know, that's something that I worked very hard on with 
others to get into this bill. Senator Burr was also very active 
on that, to focus on preventive measures. So that has also 
started.
    I just wanted to again ask you how the act's mandated 
coverage of these services are affecting Americans' health, and 
basically, how the provision is being implemented on the 
preventive end right now. How's that being implemented right 
now?
    Secretary Sebelius. Mister Chairman, I know that prevention 
efforts are an area where you have spent a lot of time and 
energy over the years, and one that I think has the potential 
of yielding huge results in terms of not only lowering overall 
health costs--as you say, 75 cents of every dollar is spent on 
chronic diseases, most of which are preventable--but also on a 
healthier population, a healthier workforce. So the new law has 
a couple of provisions: Medicare beneficiaries now have 
eligibility for mammograms and cancer screenings, a variety of 
preventive coverage without co-pays; and that's a big step 
forward in terms of taking down a cost barrier. In new plans 
offered, beginning after January 1, 2011, the private insurers 
will also offer preventive services that are covering a wide 
range of care without co-pays, to encourage, again, people to 
have regular checkups, get screenings, find problems much 
before they get to be acute issues, and deal with them in a 
much more cost-effective and, frankly, life-saving strategy 
before people get acutely ill and spend that time in hospitals, 
or in a condition where their lifespan is reduced and their 
health costs skyrocket.
    The Chairman. Just very simply, do you feel that the 
department has the wherewithal to implement this right now; in 
other words, to really implement these provisions?
    Secretary Sebelius. We are finding that, yes, as we go 
forward we are moving ahead and those policies are becoming 
effective.
    The Chairman. I appreciate that. Thank you, Madam 
Secretary.
    Secretary Sebelius. Yes.
    The Chairman. Senator Enzi.
    Senator Enzi. Thank you, Mr. Chairman.
    I want to go back to the child-only plans question a little 
bit, because we did take a look and found that there are at 
least 20 States where you can't buy child-only insurance 
anymore. If they already have it, they can keep it, but there's 
not any new policies being issued, and consequently, they're 
getting out of that market.
    So, for parents like the disabled veteran in Wyoming that I 
mentioned in my opening statement, who needs to buy a plan, 
it's absolutely devastating. The outcome's unfortunately 
predictable as a result of the drafting; which allows a person 
to buy a policy on their way to the emergency room, and so 
there's some incorrect drafting and incorrect implementation.
    Do you have any specific steps that you're going to take to 
fix the problem in those 20 States? Does Congress need to 
change the law?
    Secretary Sebelius. Senator, we have done a lot of outreach 
with insurers across the country, and while there was an 
initial flurry of announcements, many insurance companies are 
reconsidering their initial plans to leave the marketplace.
    I would suggest it was, in some cases, a pretty cynical 
notion that you would only insure as a health insurer, children 
without a preexisting health condition and keep those policies 
in place.
    Parent's coverage is often available to many of the 
children who had child-only policies. We are finding that a lot 
of children are being insured again, through their parent's 
coverage, which has now been extended, as you know, to the age 
of 26, which has been a huge boom to a lot of families.
    A number of children are also eligible for CHIP coverage 
and the new high-risk plan; so there are a variety of 
strategies in place to make sure that children have coverage. 
And we are continuing to work closely with insurance companies 
to help rethink the strategies between now and 2014. In 2014 
there won't any longer be any barriers for anyone with a 
preexisting condition to have coverage. The child-only 
provisions kicked in, initially, this year.
    Senator Enzi. So, you're saying there's no need for 
changes.
    Secretary Sebelius. Senator, we will continue to look at 
the situation, particularly in States like Wyoming, if all the 
companies have moved out. I think it's untenable for parents 
not to have coverage, but I would suggest--I would hope that we 
could call on the companies who have made ample profits selling 
child-only policies to children who were not ill or had any 
preexisting condition to reconsider their efforts to leave the 
market; and a whole series of companies have, indeed, done 
that.
    Senator Enzi. I would hope that we could make a fix in the 
law as well, so that people don't just buy their insurance on 
their way to the emergency room.
    Yesterday, before the House Budget Committee, your 
Department's Chief Medicare Actuary, Richard Foster, testified 
that the new health care law will not hold down health care 
costs, and will not allow everyone to keep their current 
coverage.
    Specifically when asked about the claim that the law 
reduces costs, Mr. Foster described it as false more so than 
true. Regarding the claim that people would be allowed to keep 
their current coverage, Mr. Foster described that claim as not 
true in all cases.
    Is Mr. Foster wrong in his analysis? What information do 
you have to counter the detailed analysis he's done of the new 
law?
    Secretary Sebelius. Senator, I have not had a chance to 
thoroughly analyze Mr. Foster's testimony. I know in the past 
when he has testified about the quarter of a trillion dollars 
in deficit reduction, he has speculated that if, indeed, the 
law is changed somewhere in the next 10 years, and if, indeed, 
Congress does not implement the law as is, then the quarter of 
a trillion dollars savings would not be realized.
    We are standing by the Congressional Budget Office 
analysis, your Budget Office analysis, which has had a series 
of numbers about not only the impact on families, and says that 
costs will go down, the impact on individual business owners' 
premiums, which say that costs will go down, but also the 
impact on the deficit.
    And the Congressional Budget Office again says that costs 
will go down.
    Senator Enzi. You and I know that the Congressional Budget 
Office is limited by what documents we give them to make their 
analysis on. The doc fix alone creates a substantial loss, but 
they weren't allowed to consider that in the analysis.
    Now, in your testimony you noted the new laws strengthen 
the economy.
    Oh, my time has expired. I will be submitting some 
questions if we don't go additional rounds.
    The Chairman. OK, thank you. Thank you, Senator.
    Senator McCain.

                      Statement of Senator McCain

    Senator McCain. Thank you, Mr. Chairman.
    Madam Secretary, the President said on Tuesday night, that 
he is in favor of repealing the 1099 Small Business tax 
increase from the Health Reform Law, and also believes that 
medical malpractice should be an issue that we should be 
addressing; do you agree with the President?
    Secretary Sebelius. Yes, sir.
    Senator McCain. Would you submit, perhaps for the record, 
some idea of what the parameters of medical malpractice reform 
might be--suggestions that the department might have?
    Secretary Sebelius. Senator, as you know, the department 
has had authority for----
    Senator McCain. The question is, would you submit for the 
record----
    Secretary Sebelius. Would I submit them? Sure.
    Senator McCain. Thank you, very much, since we tried 
repeatedly over a year to get something addressing this issue 
in the 2,700-page health reform document, some action on what 
most experts agree contributes sometimes 20, 30 percent to the 
additional costs of health care.
    You have granted over 700 waivers. Now, for employers and 
union plans from the, ``annual benefit limit restrictions and 
health reform bill,'' why not make those permanent?
    Secretary Sebelius. Senator, the goal of the law in the 
area of the annual limit benefit granted our department the 
discretion to look at situations which would cause, not only 
market disruption, but a dramatic increase in premiums; and 
what we have done, on a case-by-case basis, is receive 
information particularly about the so-called mini-med plans 
that are employer-based coverage throughout the country, and 
grant waivers where the employer indicated that there would 
be----
    Senator McCain. I understand----
    Secretary Sebelius [continuing]. An enormous rate increase.
    Senator McCain [continuing]. How it works. I'm asking why 
you wouldn't want to make them permanent.
    Secretary Sebelius. That isn't----
    Senator McCain. I appreciate if you would make your answers 
short.
    Secretary Sebelius. Why wouldn't we want to make them 
permanent?
    Senator McCain. Yes.
    Secretary Sebelius. We're taking a look at the marketplace; 
they have assured us that they can gradually phase into----
    Senator McCain. They have assured you.
    Secretary Sebelius [continuing]. The annual limit that----
    Senator McCain. They've assured you of that.
    Secretary Sebelius. That's my understanding yes, sir.
    Senator McCain. Thank you. As you know, the States are 
having great difficulty with their budgets, and there's some 
conversations about some States even having to go into some 
kind of bankruptcy, etc; and there are a number of States that 
have great difficulty in complying with the act, as you know.
    In my home State of Arizona, we are facing a serious budget 
crisis. Our governor has written you a letter asking for a 
waiver. She's asking for your assistance in providing Arizona 
with a waiver from the maintenance of effort requirements of 
the Patient Protection and Affordable Care Act.
    She goes on to say:

          ``I'm respectfully requesting that Arizona be allowed 
        to reduce its Medicaid eligibility for certain 
        nondisabled adults in order to preserve its underlying 
        Medicaid Program.''

    Would you give serious consideration to the governor, and 
I'm sure other governors' request that States be able to 
exercise the flexibility that they need to meet their 
compelling budget requirements, and probably know best in the 
view of many of us, how to provide the best health care at the 
least possible cost for our constituents?
    Secretary Sebelius. Senator, we're working very closely 
with governors across the country. I just received, yesterday, 
Governor Brewer's request, which we are taking a very careful 
look at; and also taking a very careful look at the law.
    I can tell you that we are actively working with States 
around the country, with new governors, particularly, about the 
flexibility that they have; many of them aren't aware of the 
wide range of flexibility that they have to have cost savings 
in their Medicaid Programs; and we are actively working to 
provide teams of folks to go through the potential cost savings 
that other States have already implemented.
    Senator McCain. I'm told that you have given a full waiver 
to three States; is that correct?
    Secretary Sebelius. Not of the maintenance of effort, no, 
sir.
    Senator McCain. I see, but you----
    Secretary Sebelius. That has not ever even been raised 
before.
    Senator McCain. I see. Thank you.
    Again, Senator Enzi raised this, but something we all knew 
about CBO, garbage in, garbage out; but the person who we give 
the responsibilities, Medicare's independent economic expert, 
said that both assertions, that the cost will be brought down 
and let people keep their current health insurance, if they 
like it, he strongly disagrees.
    I, of course, disagree, since there's 300,000 citizens in 
my State on Medicare Advantage, and there's no doubt that their 
benefits under that program will be significantly changed, if 
not eliminated.
    I see my time has expired.
    I look forward, Madam Secretary, on this issue of medical 
malpractice reform. The President told the American people 
Tuesday night that he recognizes that this is an issue that 
needs to be addressed.
    We're going to find out whether the trial lawyers run this 
place or whether the American people, and affordable health 
care is reachable for them, because without medical malpractice 
reform it makes that issue, if not impossible, certainly 
extremely difficult; and we look forward to hearing your 
proposals as to how we can implement such as has been 
implemented in the State of Texas.
    I thank you, Mr. Chairman.
    The Chairman. Thank you, Senator.
    All right, next we'll turn to Senator Franken.

                      Statement of Senator Franken

    Senator Franken. Thank you, Mr. Chairman. Speaking of the 
State of Texas, just to pick up from Senator McCain, my 
understanding is that the State of Texas order has this pretty 
dramatic tort reform. Health care there is much, much more 
expensive than it is in my State of Minnesota; is that correct?
    Secretary Sebelius. I think that is correct, Senator.
    Senator Franken. I want to address the Ranking Member who 
said that there's just like a few paragraphs that people like 
in the bill, and that's what we keep talking about.
    That is what I heard from the Ranking Member. I think if 
you go back and look at your opening statement, you'll see 
that, that that's what you said was in the marketing.
    One of those paragraphs I would think that people do like, 
is getting rid of preexisting conditions as a reason to 
discriminate against a child or a patient; right? That's pretty 
popular; isn't it?
    Secretary Sebelius. I think it's very popular with the 
American public, yes, sir.
    Senator Franken. OK, and then the Ranking Member talked 
about the ability to buy a policy on the way to the emergency 
room. Now, I've heard that, and what that is about is, well, if 
you have a preexisting condition you don't have to buy a policy 
until you get sick; that's what that characterization is; isn't 
it? I mean, is that your understanding of it?
    Secretary Sebelius. I think that's what the Senator is 
referring to; that you could opt in and out of the market and 
only purchase coverage when you were sick.
    Senator Franken. So, isn't that the reason for the mandate? 
So, in other words, when I hear my friends who are opposed to 
this reform say, ``Well, we really like the nondiscrimination 
against people with preexisting conditions, but then you can 
buy a health policy on the way to the emergency room''; well, 
that's why you have the mandate, isn't it?
    Secretary Sebelius. The idea is to have a stable insurance 
pool, and to pool risk. As a former regulator, that's important 
to have folks who have coverage; and some use it and some are 
not using it simultaneously. It would be like buying car 
insurance after you've had the wreck.
    Senator Franken. Right. So, if you think of health care 
reform as a three-legged stool--tell me if you agree with this 
analysis: First leg is, you can't discriminate against people 
with a preexisting condition; and I hear everyone say that they 
want that; the second part is that since that means that you 
could buy an insurance policy on the way to the emergency room, 
you need a mandate, so that everyone has insurance, so you 
can't buy an insurance policy on the way to the emergency room, 
everyone would have it; right?
    The third part is subsidizing; people can't afford it, and 
that's why we have a sliding scale up to 400 percent of 
poverty; isn't that correct? Isn't that a good analysis of what 
comprehensive health care reform is?
    Secretary Sebelius. I think if you look at the parts of the 
market that don't function very well right now--for individuals 
buying coverage and for a lot of the small business owners--
that having a much larger purchasing pool, having more people 
involved, eliminating the preexisting condition limitation, and 
then having everybody in, is certainly the way to stabilize the 
private insurance market.
    As you know, that was a discussion that the insurers had; 
and since this plan is built around the private insurers' 
market, it adopts that strategy. You can get rid of the 
preexisting condition if everyone is in the pool.
    Senator Franken. Exactly. OK, so I think this is really a 
discussion about a comprehensive health care reform, and not 
just cherry picking certain paragraphs.
    I wanted to ask you about the medical loss ratio and the 
implementation of that. As you know, I fought for that, which 
basically says that insurance companies that have large group 
policies have to use 85 percent of the premiums that they get 
on actual health care; 15 percent can go to marketing and 
administration and profits, and 80 percent if it's an 
individual or a small group.
    Can you tell me a little bit about the implementation of 
this provision?
    Secretary Sebelius. Senator, the provision has just been 
outlined. As you know, the Congress in the Affordable Care Act, 
directed the Nation's insurance commissioners, who are elected 
and appointed across the country, and who regulate the private 
market, to recommend a policy to us about the medical loss 
ratio provision, which you've just outlined.
    They had a unanimous recommendation about what were the 
categories of health costs that should be included as medical 
costs, what should be outside, and how it should be 
implemented. We turned around and adopted their 
recommendations, and that is, really, the policy that's in 
place.
    This year, for 2011, data will be collected by our 
department about companies meeting that ratio. At the end of 
the day, companies who fail to meet the ratio will owe their 
policy holders a rebate; but the rebates do not start until 
2012, until data has been collected.
    Senator Franken. Thank you. My time is finished.
    Thank you, Mr. Chair.
    The Chairman. Thank you.
    Senator Bingaman.

                     Statement of Senator Bingaman

    Senator Bingaman. Thank you very much.
    Madam Secretary, thank you for being here.
    Let me ask about an issue that is a little bit off the 
subject of your direct testimony here, but it is a very 
important part of the bill that I would like to see us move 
ahead with; it relates to implementation of the workforce 
provisions that are contained in title V.
    A central part of the reform, as I saw it, was creation of 
a new independent and nonpartisan national workforce 
commission; this is something which is not under your 
department directly; it's an independent commission. It's 
tasked with providing Congress and the Administration with 
clear information and guidance on how to align our Federal 
resources to meet the health care workforce needs of the 
Nation.
    It's based on recommendations that the Council on Medicine 
Education made, and modeled after MEPAC, which, of course, 
provides us with expert guidance on Medicare payment issues; it 
had strong support, I believe, bipartisan support when we 
included it in the bill.
    It's my understanding that the commission members were 
selected by GAO; Dr. Peter Buerhaus is the chair. The 
commission may provide a report as early as October 1, but the 
commission cannot begin its work until it gets funding to do 
its work.
    The appropriations bill that came out of the Labor HHS 
Subcommittee and that we tried to pass on the Senate floor, 
included $3 million for operation of the commission; it's 
unclear, now, what the funding status is.
    I wanted to just flag this issue for you. I know, this is 
not your responsibility directly, but I think it is very 
important.
    A very important part of health care reform, is dealing 
with the problem of how to channel Federal funds most 
effectively to meet our health care workforce needs.
    I don't know if you are familiar with the issue. If you 
have any comments you'd like to make, I'd be glad to hear 
those.
    Secretary Sebelius. Senator, I think that the issue of the 
health care workforce is an enormous issue.
    Whether or not we had passed an Affordable Care Act, it's 
an issue that's been looming on the horizon, and frankly, 
ignored for decades. Where are the providers that we need for 
the future? What's the pipeline? How do we get there in an 
expedited fashion; and what's an accurate snapshot?
    The Workforce Commission--I have seen the members' names 
and bios, and it's a stellar group and one that we look forward 
to working with.
    The Health Care Act also expanded the National Health 
Service Corps, which allows, in exchange for scholarship and 
loan payment, providers to serve in underserved areas, which is 
a significant step forward; it increases--thanks to the 
Prevention and Wellness Fund, there was a $250 million 
investment, and again, additional primary care providers, which 
will train about 16,000 new providers over the course of the 
next 5 years.
    We have, as part of the act, some nurse-led community 
health centers, increasing nurse practitioners and providers. 
But I think that the challenge of making sure that all 
Americans have access to health care providers, and 
particularly, primary care, gerontology, mental health 
providers; if we're shifting to a wellness system, we need the 
providers on the ground who are able to deliver that care.
    That's certainly part of the effort that you all have begun 
with the Affordable Care Act, and accelerated what has been a 
long-standing challenge, but one that we are paying very 
careful attention to; and, the President has, as a high, 
personal priority, to make sure we have the workforce needed by 
the American public.
    Senator Bingaman. Could I just ask that you maybe have 
someone on your staff look into the issue of how we can get 
the----
    Secretary Sebelius. Yes, sir.
    Senator Bingaman [continuing]. The funding for this 
commission to do its work? As I say, I think they're ready--up 
and ready to go. They obviously need some staff to assist them, 
and they need to pay that staff; so it's not a substantial 
amount of money, but I do think it's a very important task that 
we've given them.
    If you could look into that, I'd sure appreciate it.
    Thank you.
    Secretary Sebelius. I'd be glad to.
    The Chairman. Thank you, Senator.
    Senator Bennet.

                      Statement of Senator Bennet

    Senator Bennet. Thank you, Mr. Chairman, and I'd like to 
thank you and the Ranking Member for holding this hearing.
    Madam Secretary, thanks for coming back.
    If I had to sum up the last 2 years of my town hall 
meetings in Colorado on this issue, what I would say is that 
people are saying: We hated the system as it existed, the 
health insurance system, and we also believe deeply in your 
capacity--my capacity, not yours--to make it even worse than it 
is now. I think the rancor on the debate on health care didn't 
do much to create a level of confidence in all this.
    One of the things that I talked about was that, when people 
said, ``We don't believe government can do a good job here; 
look at what government has done before,'' I said, ``You have a 
point.''
    At the heart of this reform, in many ways, is an attempt, a 
rare attempt to actually change the incentive structures so 
that we can deliver higher quality at a lower cost; something 
that we historically, have not done, but something we have to 
do, not just for the health of our citizens, but for the 
quality of the care that we've got and so that we don't 
bankrupt the United States of America.
    One of the things I learned during the health care debate 
was that, because of the way the incentive structure worked, 
one out of every five Medicare beneficiaries that went to the 
hospital were re-admitted within a month for conditions that 
were completely preventable.
    Medicare, as a result was spending $17 billion a year on 
these hospital re-admissions that could have been prevented.
    It's one of the reasons why I work so hard on something 
called the Community Base Care Transitions Program. This 
innovative model ensures that each Medicare beneficiary, at 
risk of being re-admitted, is assigned a code to make sure that 
they go in and out of the hospital, nursing home, and even 
their own home, and that they do the follow-up care and take 
their medications.
    This practice known as transitional care, has shown a 
reduction of up to 50 percent in places with high re-admission 
rates; and I'm very proud that this was homegrown in the State 
of Colorado based on work in Mesa County and Denver.
    Madam Secretary, I just wanted to ask whether you're seeing 
this across the country. Are people starting to think about how 
we change the delivery model to create higher quality at a 
lower price; and what can we do to accelerate that work?
    Secretary Sebelius. Senator, I think that's a great 
question. The earlier discussion really focused on some of the 
insurance market changes, but I think the underlying health 
costs and the amount that is spent on things that may not lend 
themselves to the health of anyone, are areas that providers 
and employers and others are eager to work on.
    And, in the case of this coordinated care strategy, when 
someone leaves the hospital, we know it works; it's in pockets 
around the country, but never really taken to scale. It's 
better for patients; it's better for their families; it's 
better for their health, and certainly lowers costs of 
unnecessary re-admission.
    So, having an opportunity to employ those best practices 
across the country, deploy those tactics, that bundled care, 
the medical home model, which we know is again very 
successful--the kind of early intervention.
    A lot of those strategies are incorporated into the 
Affordable Care Act, and give direction to our agencies to 
implement those across the board; and I think that will be very 
good for the American public's health and for our health care 
costs.
    Senator Bennet. I agree, and I will say I think it's been 
lost in the debate, which is why I raise it here today; and, 
the providers in my State that are working on these things, and 
in many ways have some of the most forward-leaning approaches 
to this, are really excited about the possibilities here.
    And, that really brings me to my second point, which is 
that we've heard discussion on both sides today and throughout 
the debate about the CBO numbers; does this really save money; 
is it going to save money over time?
    I think the honest answer to that question is, it depends 
on how well we execute. You know, it depends on how well you 
execute it. It depends on how well the States execute it, and 
it's one of the reasons why I worked with Senator Hagan and 
Senator Warner on a fail-safe amendment that would have said:

          ``Look, if we don't save the money that we are 
        committed to save, that we have said we would save, 
        that we will look at it again as a Congress and make 
        sure we have those savings, because we want to keep 
        faith to the American people who reasonably are saying: 
        `We're not sure what to believe; we're not sure which 
        side, you know, is right'.''

    And since it's a projection, we don't really know.
    My own view is that if we put more of these transitional 
care models in, we may save even more money than we've talked 
about.
    So, I wonder whether you'd be willing to work with me, and 
Senator Hagan, and Senator Warner, and other members of the 
committee, to see whether we might be able to write a piece of 
legislation that could give the American people confidence, 
that when we say we're going to save the money, we mean we're 
going to save the money?
    Secretary Sebelius. I'd be delighted to do that.
    Senator Bennet. Thank you.
    Thank you, Mr. Chairman.
    The Chairman. Thank you, Senator Bennet.
    Senator Roberts.

                      Statement of Senator Roberts

    Senator Roberts. It seems to me that you might want to ask 
Richard Foster to join that group, to save a lot of talking 
back and forth.
    Madam Secretary, thank you for coming.
    I should inform my colleagues that the Secretary and I go 
back quite a ways, from a family standpoint, and also from 
serving at the same time with the Distinguished Secretary when 
she was Governor of Kansas. I worked for her father-in-law when 
he was in the Congress, and worked with her husband, Gary, who 
is now a very prominent judge, when he was a rather rowdy 
student----
    Secretary Sebelius. Just say he was younger.
    [Laughter.]
    Senator Roberts [continuing]. When he was younger at Kansas 
State University, home of the ever optimistic and fighting and 
losing wildcats.
    Secretary Sebelius. I wore my purple for you.
    Senator Roberts. Thank you.
    [Laughter.]
    I appreciate that. Thank you.
    We have a mutual friend who has a preexisting condition 
that we all know about, and--Rudy Brodesco called and indicated 
that he would like to talk with you. He talked with me for 
about an hour, so I transferred him over to your office, so 
then you can----
    Secretary Sebelius. Thank you.
    Senator Roberts [continuing]. You can visit with him.
    I understand that Dr. Berwick is back, that he has not 
parachuted in, that he is going to be recommended by the 
President, or has been recommended by the President to again be 
the Head of CMS; is that correct?
    Secretary Sebelius. He's been re-nominated, yes, sir.
    Senator Roberts. He's been re-nominated. Good, I hope that 
in the Finance Committee we can take enough time to really get 
at some of the challenges that we face.
    Dr. Berwick has, unfortunately, been tagged with the title 
of The Chief Rationer, with all of the regulations that are 
pouring out of your department.
    I understand a couple of weeks ago that some boxes were 
moved and he is now in charge of oversight of the regulations. 
Obviously, they would have to finally be approved by you, but 
historically, it was in the Secretary's Office; now it's under 
Dr. Berwick; is that correct?
    Secretary Sebelius. The office of?
    Senator Roberts. Of CMS.
    Secretary Sebelius. Yes. Yes, sir.
    Senator Roberts. So, that's a recent development. I don't 
know if that gives me pause or what.
    But at any rate----
    Secretary Sebelius. Senator, we did that to maximize, I 
think, efficiencies. It was going to be an independent office; 
and once we looked at overhead costs of duplicating everything, 
from front office help to legal staff, it was seen----
    Senator Roberts. I got it.
    Secretary Sebelius [continuing]. As an expedited way to 
maximize and leverage our assets.
    Senator Roberts. Maximizing Dr. Berwick does give me pause. 
But at any rate, let's go on to another subject.
    As former Governor of Kansas I know you are very well aware 
that we have 83 Critical Access Hospitals out in our State, the 
most of any State, fully two-thirds of our hospitals. You also 
know that the Critical Access Hospitals are not part of the 5-
year exemption from the IPAB review--that's the what, 
Independent----
    Secretary Sebelius. Payment Advisory Board.
    Senator Roberts [continuing]. Payment Advisory Board, yes, 
very independent, to say the least.
    I'm not happy with that. I think we abrogated our 
responsibility as individual members to set the Medicare 
reimbursement rates as best we know them, but that is a battle 
that we lost in the health care reform, and so we have IPAB.
    But the Critical Access Hospitals, of which there are many 
in Wyoming, many in Iowa, many everywhere here, are not part of 
that 5-year exemption from the IPAB review.
    Should the IPAB recommend reductions that take funds away 
from these rural community hospitals, I can assure you Congress 
will act. It's a rather Byzantine-kind of way to do it, but you 
got to get 60 votes. I'm sure the House would do it. Then if 
you did it, the President would veto it. Then you got to come 
back and override the veto with 67 votes. In the meantime, 83 
Critical Access Hospitals--Abilene is a good example--
Ellsworth--you know these folks and they know you.
    So, my question is: Would you support such a recommendation 
to at least include the 83 Critical Access Hospitals?
    I don't know why this happened, and Max Baucus doesn't 
either. Pardon me for interrupting you. But even on 
reconciliation I tried an amendment that would at least make 
them consistent with other hospitals.
    That was during the time that, you know--all those in 
favor, say aye, aye; all those opposed, say no; and there was a 
resounding no. And that's the way it went.
    So, you know, what do you think?
    Secretary Sebelius. I share your belief that Critical 
Access Hospitals are incredibly important in States across the 
country; and I would just say that I'm committed to working 
with you to take a look at what the gap is, and what can be 
done about it, short-term.
    I think it's important that those hospitals not be 
jeopardized, or the care they deliver be cut off from citizens 
around the country, including in Kansas.
    Senator Roberts. Most of us were very pleased to hear about 
the President issuing an Executive order in applying the 
principles: That each agency is directed to use the best 
available techniques, to quantify anticipated present and 
future benefits and costs as accurately as possible.
    But, as we later found out, each agency, as they put up the 
yardstick to figure out the cost-benefit ratio or situation 
with any regulation, there's more language; and it says--and 
this is the part that I have the most concern: Also to be 
considered are values that are difficult or impossible to 
quantify, including equity, human dignity, fairness and 
distributive impacts.
    Are you anticipating you will be able to determine which 
regulations, including the ones recently released from the 
health care regulations that HHS would fall under this 
exemption? Are you exempt; are you not exempt; are the 
regulations your Department oversees exempt--where are we, 
here?
    Secretary Sebelius. We certainly don't consider HHS exempt 
from the--directed by the President; and we've already launched 
a process to examine the whole host of regulations with the 
parameters that he outlined. So, no, we are definitely not 
exempt from that regulatory review.
    The Chairman. Thank you, Senator.
    Senator Roberts. I have a list that I'd like to share with 
her--not now, but I will send you a list. And I look forward to 
working with you.
    Thank you.
    Secretary Sebelius. Thank you, sir.
    The Chairman. Thank you, Senator.
    Senator Reed.

                       Statement of Senator Reed

    Senator Reed. Thank you, Madam Secretary. Thank you, Mr. 
Chairman.
    Recalling some of the discussions in the health care 
debate, one of the issues around the elimination of preexisting 
conditions exclusions in health insurance policies was the need 
to have, frankly, mandatory coverage; and that, I think, was an 
issue that was pushed very aggressively by the insurance 
industry.
    Secretary Sebelius. That's correct.
    Senator Reed. In fact, their view, basically, was that if 
we provide this benefit, which could be, frankly, the most 
popular aspect of the health care reform, that is, if you have 
the resources, you can buy insurance, regardless of your health 
care condition.
    It was, again, just to sort of put it in context, it was as 
much the insistence of the insurance industry than it is any 
sort of policy-making here in Washington, that mandatory 
coverage has to be part of it now.
    Secretary Sebelius. I think, Senator, it was brought to the 
table by the insurance industry, by the Association of Health 
Insurance Plans, and others, to guard against an adversely-
selected marketplace if only the sick are in an insurance pool 
that's immediately unaffordable.
    Senator Reed. So, looking at--sort of turning it around and 
at the logic of this is that, this provision, which people say, 
``Oh, we really like that''--I don't know if you've seen the 
polling data, but I would assume it's in the 1980s or 1990s 
percent; you've got to keep this--would, frankly, require that 
this universal approach to coverage through private markets has 
to be maintained also; is that your view?
    Secretary Sebelius. To have viable, private market, you----
    Senator Reed. Right.
    Secretary Sebelius [continuing]. You have to have a pool of 
sharing the risk, yes, sir.
    Senator Reed. There has been lots of discussion about 
what's popular. We'll keep what's popular, we'll eliminate 
what's unpopular. Popularity is in the eye of the beholder.
    But in order to have a comprehensive system where everyone 
can receive coverage, can buy it through the private markets 
with assistance, if necessary, then you have to have, 
essentially, the framework that you've set up, the interchanges 
and the requirements to participate fully.
    Secretary Sebelius. It's part of a market strategy that 
keeps a market solvent.
    Senator Reed. One of the issues that I thought Senator Enzi 
brought up is very important, is the issue of these child-only 
plans.
    There are some States where there is either actual 
departure of companies with these policies or threatened 
departures; and I'm wondering if there's anything the States 
can do.
    I know we passed significant reform, but you are a former 
insurance commissioner. Up until the passage of this act, most 
of the action of insurance health care and otherwise was at the 
State level.
    The other aspect of this question would be: What about the 
40 States where--some, I know, don't have these child-only 
policies, but have done things to ensure that children are 
protected?
    Secretary Sebelius. Senator, you're absolutely right. 
Again, the Affordable Care Act doesn't change the fact that 
States have the leadership position in this framework; so 
whether it's setting up the insurance exchanges or the high-
risk pool, or regulating their marketplace, it is a State-based 
strategy, and we're working closely with those State 
regulators.
    Many States since the passage of the Affordable Care Act--
and many of them before, had taken action to say that it will--
if you want to sell insurance in our State, you must offer 
policies across the board.
    A number of States have actually passed that legislation 
since the Affordable Care Act and the companies threatening to 
leave the marketplace feeling that that is a very 
discriminatory position for insurance companies to take. So 
that is, indeed, being contemplated.
    As I said earlier to Senator Enzi, there also are a number 
of companies who immediately said that they would likely not 
stay in the market, who have reconsidered that position, and, 
indeed, are very much in the market.
    Senator Reed. Madam Secretary, again, thank you. I think 
you've been given one of the most challenging assignments in 
Washington, and you have been working tirelessly to get it 
done, and I appreciate very, very much what you and your 
colleagues have been doing. And I anticipate that the 
challenges will continue to appear along the road.
    But, thank you, so much.
    Secretary Sebelius. Thank you.
    The Chairman. Thank you, Senator Reed.
    Senator Burr.

                       Statement of Senator Burr

    Senator Burr. Welcome, Secretary.
    Secretary Sebelius. Thank you, Senator.
    Senator Burr. Madam Secretary, if I heard you correctly, 
when Senator Enzi asked you a question about CMS's projections, 
and specifically, they were that this would bend the cost curve 
of $251 billion, and that the national health spending would 
increase $311 billion, and I heard you say, I think, that you 
disagreed with the analysis that came out of CMS.
    Secretary Sebelius. Again, Richard Foster----
    Senator Burr. Richard Foster.
    Secretary Sebelius. Yes, is an independent actuary.
    Senator Burr. Let me ask you, what's the Administration's 
position on fixing the SGR?
    Secretary Sebelius. The President has said, since elected 
he would like to see a permanent fix of the SGR.
    Senator Burr. You used, to make your case to Senator Enzi, 
CBO. Now, CBO says in their estimates they failed to take into 
account $250 billion that would be necessary to fix SGR.
    So, if the President's commitment is to fix SGR, then, in 
fact, that eats up all the savings you've talked about; is that 
correct? All the savings that come from health care reform will 
be eaten up by the addition of a fixed SGR--just by your 
numbers.
    Secretary Sebelius. It would cost $200, yes; I don't know 
what the cost is, but----
    Senator Burr. OK. The Health Care Reform bill creates a new 
tax on medical devices. Would you be supportive of repealing 
that tax?
    Secretary Sebelius. No, sir.
    Senator Burr. Let me ask you: Does that not fly in the face 
of what the President said Tuesday night to Congress, and to 
the country, where he talked about winning the future, and out-
innovating the rest of the world; does that not make us 
uncompetitive and force innovation out of the country by taxing 
innovation?
    Secretary Sebelius. I think that there are taxes on a lot 
of innovative products that actually don't deter the innovation 
from moving forward.
    I don't necessarily think that you have to remove all tax 
payments. As you know----
    Senator Burr. No, I'm talking about----
    Secretary Sebelius [continuing]. The medical device, 
equipment, initially the Congress looked at a significantly 
higher tax, and in the course of discussion and input, they 
decided to significantly lower that tax and to not impede 
progress.
    Senator Burr. But this is a new tax on medical devices that 
are being used by patients, which is one of the contributing 
reasons that the Chief Actuary says, health care cost is going 
to go up, because we've begun to increase the cost, not just of 
the delivery, if we fix SGR, but the actual cost of the 
products that are in the health care system.
    So, let me ask you: NIH has just talked about a new program 
where NIH is going to get involved, in some degree, in drug 
development; is that something you're supportive of?
    Secretary Sebelius. Senator, they have been involved in 
accelerating drug development.
    Senator Burr. They've been involved in research, of 
promising compounds and----
    Secretary Sebelius. That's true.
    Senator Burr [continuing]. Directions. But, I sense a 
distinct difference between that and drug development, which is 
something that the private sector, or academia has been engaged 
in almost 100 percent.
    Secretary Sebelius. Senator, I know that you come from a 
State, as does Senator Hagan, who has a lot of knowledge and 
expertise in drug development. I think what Dr. Collins has 
identified is that there are still way too many promising ideas 
that die somewhere on the vine between the microscope and the 
marketplace, and is trying to mobilize Sherpa teams, 
activities, any incentives that can make sure that we can 
actually get the patients those break-through drug 
developments; and too many of them never make it to the market.
    Senator Burr. Clearly, I think that will have a cost 
involved in it, but it will also have a cost on the private 
sector's inability to chase those promising things if we choose 
to do it as a government.
    Madam Secretary, I think we can all agree that there are 
many things, that if we sat down today, we could tick off in 
this bill that we could all support.
    We could eliminate preexisting conditions. We could make 
sure that every State had a risk pool. We could agree that 
children should stay on their parent's health care plan until 
age 26.
    Now, I lived it. I'm a Federal employee. I'm a participant 
in the largest employer in the country. My kids were kicked off 
of my insurance at 22.
    I guess I would ask you, for those members that were here 
until this plan was passed, that are critical of the private 
sector having their insurance that limited children's inclusion 
to 22 or 23 or 24, but not 26, are they hypocritical in 
questioning that, when they had the opportunity to change the 
OPM guidelines and change the largest employer in the country 
to age 26 before this massive health care reform plan was 
passed?
    Secretary Sebelius. Senator, I don't think it was 
hypercritical. I think it's an unfortunate oversight, and we 
found that the contracts precluded us from changing as rapidly 
as some of the private market plans could change; but that 
change will be made, and Federal employees across the country, 
including Members of Congress, can look forward to keeping 
their children on their plan.
    Senator Burr. In conclusion, Mr. Chairman, we have over a 
thousand employers who have applied for a waiver. Fifty-seven 
hundred-plus have been approved; 50-plus have been denied. In 
addition to that, CMS estimates that in the grandfather 
regulation, it's estimated, your own estimates, 80 percent of 
small business could lose their grandfather status.
    I'm not sure what happened to, if you like it you get to 
keep it. But you said, ``Americans will have more control over 
their health care.''
    My conclusion, after reading the plan numerous times, what 
we've done is, the Federal Government has more control over 
health care, not the American people.
    I thank the Chair.
    The Chairman. I thank the Senator.
    Senator Isakson is gone.
    Senator Sanders.

                      Statement of Senator Sanders

    Senator Sanders. Thank you very much, Mr. Chairman.
    Madam Secretary, thank you for being here; thank you for 
the excellent work that you've been doing under very difficult 
circumstances.
    Just two lines of thought that I want to pursue: In the 
Health Care Reform bill, some of us, including Senator Harkin 
and many other people on this committee, worked very hard to 
expand community health centers, because we believed that one 
of the great crises in this country, and one of the reasons 
that 45,000 Americans die every single year, is they don't have 
access to health care; and, in fact, some of those people even 
have health insurance.
    So, we saw a crisis in primary health care. As a result of 
this legislation, we doubled the number of community health 
centers, opening up an opportunity for 20 million more 
Americans to get good quality health care, dental care, mental 
health counseling and low-cost prescription drugs.
    Can you give us, maybe an update as to how progress is 
coming along in terms of the community health center program?
    Secretary Sebelius. Certainly, Senator, and again, I 
applaud your leadership on this issue. It's an incredibly 
important framework for health care improvements across the 
country; and I try to visit health centers every trip I make, 
and they are impressive neighborhood community organizations, 
delivering high-quality, lower cost care to millions of 
Americans.
    We are working very quickly to implement the strategy 
that's laid out over the next 5 years. The first step was to 
put money in the pipeline for important improvements and 
additional services, additional dental care and mental health 
care.
    We're putting out the new access point, grant proposals 
that will be released this year and over the next several 
years. Also an important feature of the community planning 
proposals is going out the door in 2011; so those communities 
which haven't quite gotten the wherewithal to actually make the 
full-blown proposal will have an opportunity to bring together 
providers and community groups.
    But, certainly that footprint of community health centers 
expanding across the country, and new sites; so it will be both 
new access sites and mobile sites connected to existing health 
centers, whether that be in schools or vans or other----
    Senator Sanders. I should tell you, Madam Secretary, that 
in Vermont we're making real, real success; and if you're 
really nice to us in the next couple of years, and you grant a 
few more requests, every part of the State of Vermont, every 
county, every area in the State of Vermont will enable its 
people to have access to community health centers, which we 
think is a real step forward.
    Would you be in agreement with a study, coming out of 
George Washington University, which says that the investment 
that we made, in fact, is going to save substantially more 
money than we spend, because we're going to keep people out of 
emergency rooms; we're going to let them get to a doctor when 
they should; not get very sick and end up in a hospital at 
great cost.
    Secretary Sebelius. I haven't seen the study, but I 
certainly have seen that practice in place. In fact, some of 
the most creative and, I think, beneficial work going on around 
the country is health care--community health centers working in 
collaboration, with community hospitals----
    Senator Sanders. Right.
    Secretary Sebelius [continuing]. Appropriately, sort of 
reassigning folks to care----
    Senator Sanders. Other than utilizing----
    Secretary Sebelius [continuing]. That is preventive care.
    Senator Sanders [continuing]. An emergency room.
    Secretary Sebelius. You bet, you bet.
    Senator Sanders. All right, let me switch gear, and pick up 
on a point that Senator McCain made a moment ago; and I'm sorry 
he's not here. As you may know, the State of Vermont is giving 
serious thought to moving forward toward a Medicare-for-all-
single-payer program. Our approach and our request for a waiver 
may be a little bit different than Arizona's. We do not want to 
throw people off of health insurance; we want to make sure that 
every person in our State is covered.
    We believe that that approach--and there was a study that 
just came out by Dr. Hsiao, who you may know is an economist at 
Harvard, who developed the health care program in Taiwan.
    We believe that we can save many, many hundreds of millions 
of dollars through a Medicare-for-all-single-payer program. I 
know that we have to work on that waiver legislatively; that's 
not something that you can give us on your own.
    But, would you be prepared to work with us, as we walk down 
that road, saying that in a federalist nation--we have 50 
different States--that maybe the Nation can learn from what 
Vermont or other States are doing with increased flexibility?
    Secretary Sebelius. Senator, I was appreciative of the 
meeting that you attended with your newly elected governor, and 
applaud the work that Vermont has done.
    States across the country often have been well ahead of the 
Federal Government in terms of creative health strategies, to 
expand coverage to citizens, and we very much encourage the 
kind of flexibility, the State-based approaches which this bill 
is built around; and I look forward to working with you.
    Senator Sanders. All right. Our goal there is to maintain 
the high standards of the national legislation, but to give 
States flexibility to show how, in their particular areas, they 
may be able to do it better at a more cost-effective way; so 
we'd appreciate working with you.
    Secretary Sebelius. Sure.
    Senator Sanders. With that, Mr. Chairman, I thank you, very 
much.
    The Chairman. Thanks, Senator.
    Senator Hagan.

                       Statement of Senator Hagan

    Senator Hagan. Thank you, Mr. Chairman.
    Madam Secretary, I, too, want to thank you for all the hard 
work you've put in to date, and for being here today.
    But I also am pleased with the partnership that the 
Department of Health and Human Services is forming in North 
Carolina, especially with our State insurance commissioner, as 
they are moving forward to establishing the exchange.
    I also wanted to talk for just a minute about having the 
young adults on the parent's policies until they're age 26.
    The State of North Carolina actually has done that for 
years for State employees, if the students were still in 
school. I know that when I switched and became a Federal 
employee that my children had to find health insurance.
    I have one son and one daughter; and it was incredibly more 
expensive for the young woman to buy health insurance than it 
was for the man.
    So, I'm very pleased that when you think of two young 
people going out into the workforce, getting the same pay, the 
young woman was drastically affected, in a different way, month 
to month, because of her higher increase in just purchasing 
health insurance. So, I'm pleased that that has been changed.
    In your testimony you mentioned that the new benefit 
impacting hundreds of thousands of families from across the 
country, allowing these young children to remain on their 
parent's insurance until age 26; and we do have about 37,000 of 
them that continue to be insured under their parent's health 
plans.
    I know that in the next panel we'll be hearing about the 
impact of this new benefit; but, I understand that it is so 
popular that Congress extended that benefit to military 
families last year.
    And, with that, I'm wondering if you could elaborate on the 
impact of this benefit; and how many adult children do you know 
that might be participating across the country; and could you 
provide some thoughts on what would happen if this benefit 
happened to be repealed?
    Secretary Sebelius. Senator, I think the situation you 
describe in North Carolina was in place in, again, a number of 
States, but often was tied to school, full-time school.
    So if kids aged out of their policy at 22 and were not in 
school, they, again, lost their coverage. So this is impacting 
lots of families at lots of different ages, in a very 
beneficial way; and, again, I think, is a great illustration of 
putting back together a larger pool of folks and bringing them 
back into the marketplace, because the number of young 
Americans was the second-highest category of uninsured 
Americans.
    The highest was those 55 to 64 who often were really priced 
out of the market; but young Americans were the second-highest 
category of uninsured in this country. So, this family 
strategy, I think, goes a long way.
    I can't give you exact numbers today. We'd be happy to try 
and collect those for you--but, I think clearly, this is 
impacting millions of young adults around the country in a very 
positive way, and allows those young adults to think about 
being an entrepreneur, or start their own business, or 
strategies that, again, were impeding their ability to really 
launch into a professional career if it did not come attached 
with health insurance.
    And, like you, Senator, I had two 20-somethings who lost 
their coverage once they got out of school. We were lucky, 
because both my boys were healthy, but they had friends who 
were not so lucky and not so healthy, who had a terrible time 
finding and purchasing health insurance.
    Senator Hagan. On a whole, young adults are typically very 
healthy individuals. So, really, that's helped from an 
actuarial standpoint to have more of those on policies.
    But also in your testimony, you mentioned the preexisting 
condition insurance plans. The Inclusive Health is running the 
North Carolina plan, and has currently right now, over about 
800 participants to date, which I understand is one of the 
highest in the country; however, I know that one of their 
challenges has been raising the awareness and getting those who 
are uninsured enrolled.
    My question is: Could you talk about some of the challenges 
that States are having in getting people enrolled, and some of 
the other efforts that they are making to raise awareness among 
the uninsured population; and does HHS offer guidance to States 
on ways to increase this awareness?
    Secretary Sebelius. Great question, Senator. I think one of 
the challenges is, as you say, that a lot of people weren't 
aware that these even existed; so we are certainly trying to 
help amplify that message, that in every State in the country 
there is now a new option for adults who still are locked out 
of the market with a preexisting health condition and we'll 
continue to do that.
    We've also done a lot, in conjunction with States, of 
outreach to disease groups, to faith-based communities, to 
community leaders, to again, make them aware that these are 
new.
    In many States the benefits just became available late this 
fall, so we're talking about the early couple of startup 
months, but, we don't miss an opportunity to remind people that 
this is one of the benefits of the new Affordable Care Act that 
did not exist before, and actually, because the rates are 
pegged to market rates, can be a much more affordable option 
for those who have been uninsured for the last 6 months.
    Senator Hagan. I will say, in North Carolina we had put 
that in place earlier, although it is still like a pretty 
expensive policy.
    Secretary Sebelius. Right, right.
    Senator Hagan. Thank you, Madam Secretary.
    Secretary Sebelius. Yes.
    The Chairman. Thank you, Senator.
    Senator Murray.

                      Statement of Senator Murray

    Senator Murray. Thank you, very much, Mr. Chairman for 
having this hearing.
    Madam Secretary, thank you for the tremendous job you and 
all the folks at HHS are doing, implementing this law and 
helping families get access, as we had envisioned.
    I know you have another panel, so I'm just going to ask one 
question and go back to your testimony.
    You talked about the new resources that the Affordable Care 
Act is now providing to States to help prevent unreasonable 
premium increases, and you mentioned that grants have already 
started going out to our States to help strengthen their 
ability to review and reject unreasonable rate hikes.
    Can you talk a little bit about how this will make the 
process of premium increases more transparent for all health 
care consumers?
    Secretary Sebelius. Certainly, Senator. This is another 
area where the bill that you all helped to put in place 
contemplates that States are the leaders in the health 
insurance market, and States are the regulators of their own 
health insurance market, but also recognizes that often those 
resources are not adequate to do a robust job of rate review; 
particularly in tough budget times a lot of States have cut 
back.
    So, there are additional resources available and taken 
advantage of, I think, by virtually every State in the country 
to increase and enhance the oversight provided by those State 
regulators.
    What we are doing right now with healthcare.gov is 
publicizing rates. For the first time, consumers can go on a 
Web site and get an overview of what rates are being charged by 
what plans in their particular jurisdiction; but two other 
important pieces of information: How many people are denied at 
that rate, what percentage are not offered a policy at that 
rate, and how many times the rate deviates from that. So, that, 
again, is available and updated on a regular basis.
    Insurance commissioners are also committed to now, on Web 
sites, and their plans making the rate-review process far more 
transparent; asking for underlying actuarial information from 
companies, holding hearings, having available to the public 
what has often been a very opaque, very misunderstood system--
much more transparency, much more openness, much more 
oversight.
    And, the combination of consumers being able to pick and 
choose, finally, line up plans side by side and choose what's 
best for them, and a much more rigorous review, has already 
yielded results where excessive rates have been turned down and 
new rates have been submitted that are far less impactful on 
the consumers with those policies.
    Senator Murray. I applaud you on that, because we always 
hear about how competition is what drives the cost down. 
Without transparency, it's pretty hard to know how you can 
impact healthcare costs. But, I think this open, transparent 
way that people can now view insurance policies is what we 
envisioned helping to bring those costs down.
    So, I really appreciate your work on that.
    Secretary Sebelius. One could argue that you could get more 
information on the toaster you bought than the health insurance 
plan for yourselves and your families; and we're trying to work 
very closely with our partners at the State level and give a 
very transparent, very open system.
    Just lining the prices up side by side really does begin to 
change strategies of companies. They don't want to be the top 
price in the marketplace. So, that, in and of itself, has been 
very helpful.
    Senator Murray. Great. Thank you, very much.
    Thank you, Mr. Chairman.
    The Chairman. Thank you, Senator.
    Madam Secretary, thank you very much for your appearance 
here, and for your answering questions in great order.
    As I said we'll leave the record open for 10 days; some 
Senators may want to submit some questions in writing.
    But, again, I want to personally also thank you for your 
great leadership in all areas of health care and human 
services, but especially in the area of implementation of the 
Affordable Care Act.
    Secretary Sebelius. Thank you, Mr. Chairman. I look forward 
to working with you and the committee.
    The Chairman. Thank you, Madam Secretary.
    Next, we'll call our second panel.
    I thank this panel for being here; I know that some of you 
came a great distance, and I appreciate your patience in 
sitting through the testimony; I hope that it was informative 
for you as it was for us up here.
    On our second panel, from left to right we have Ms. Lisa 
Grasshoff; she works for the Paragon Hemophilia Solutions in 
Houston, TX, a home-health company focusing on those with 
bleeding disorders. Ms. Grasshoff 's experience with bleeding 
disorders is personal, as her son, Joshua, suffers from two of 
these diseases, Hemophilia-A and Type III von Willebrand 
Disease. She's accompanied today by another member of the 
bleeding disorder community, Ms. Tammy Davenport; is that 
correct?
    Thank you for being here and for sharing your stories.
    Emily Schlichting, a junior at the University of Nebraska, 
our neighbor to the west, majoring in political science and 
communications. Ms. Schlichting suffers from a chronic 
autoimmune disease called Behcet's Syndrome. She knows 
firsthand the anxiety of obtaining health insurance while 
suffering from a dangerous disease.
    We thank you for being here, and we look forward to hearing 
your story.
    I will yield to Senator Reed for the purpose of introducing 
Commissioner Koller.
    Senator Reed. Thank you very much, Mr. Chairman. I'm just 
delighted to be able to welcome Chris Koller to the panel. He 
is officially, the first Health Insurance Commissioner for the 
State of Rhode Island.
    He was appointed by a Republican governor; reappointed by 
an independent governor, and unusually supported by the 
Democratic Delegation of Rhode Island. So, he's managed to 
bring everybody to the table.
    Before Chris became the first Health Care Insurance 
Commissioner, he was instrumental in setting up the 
Neighborhood Health Plan of Rhode Island, which is a safety net 
insurance plan, which not only is effective in providing care, 
but it's also recognized as providing excellent care; it's the 
bulwark of our Medicaid Program in the State of Rhode Island. 
So, he comes to this task with extraordinary skill.
    He's a graduate of Dartmouth College, and holds a Master's 
Degree in Management and Religion from Yale University, and in 
a given day, he needs both theology and management to get 
things done.
    I just say personally, I've had the privilege of knowing 
Chris, and being a friend. There's no one with more 
intelligence, integrity and dedication--and selfless dedication 
than Chris Koller. So I'm just honored that I could introduce 
him, Mr. Chairman.
    The Chairman. Thank you very much, Senator Reed. I'm also 
aware of the travails that you went through to get here. I was 
following your travels yesterday, and my staff kept advising 
me, because of the weather, you were unable to take your 
flight; and as I understand, it took you 10 hours on the train 
to get here; so we really appreciate your diligence and effort 
to be here.
    Last, we have Mr. Olivo?
    Mr. Olivo. Olivo.
    The Chairman. Our final witness is Mr. Joe Olivo. Mr. Olivo 
is the president and co-owner of a burgeoning printing 
business, Perfect Printing.
    Mr. Olivo co-owns the company along with his wife, mother 
and two brothers in New Jersey. He has grown his business from 
10 employees to 45 employees.
    Boy, I wish we could do that all over the country.
    Thank you very much for coming, Mr. Olivo.
    So, again, as you know, we'll take all your testimonies as 
they are written in order, and they will be submitted to the 
record in their entirety.
    I'd just like to ask, as we go through, if each of you will 
just sum up in a few minutes--I don't have a distinct cutoff 
time, but, 5 minutes or so, what it is that you want us to 
know.
    I know I always say this to, a lot of times to witnesses 
who have come a long distance and all of a sudden, Senators 
have disappeared. I assure you that their staffs are here. I 
can assure you of that. And, I can say this, there's an old 
saying around here that Senators are a constitutional 
impediment to the smooth functioning of staff.
    [Laughter.]
    So, our staffs do a lot of the work, so I want to assure 
you that your testimony and your being here is being well-noted 
and supported.
    We'll start with Ms. Grasshoff. Welcome, and, please 
proceed.

            STATEMENT OF LISA GRASSHOFF, HOUSTON, TX

    Ms. Grasshoff. Thank you. Good afternoon, Mr. Chairman, 
Senator Enzi and fellow Senate committee members.
    Thank you for inviting me to share my story about the 
positive impact the Affordable Care Act has had on my family. 
It is both an honor and a privilege to have the opportunity to 
address this committee and have my voice heard.
    Again, my name is Lisa Grasshoff and I live in Houston, TX, 
with my husband, Danny and our 20-year-old son. Danny and I 
have been married for 36 years and after 17 years of marriage, 
we were blessed with the birth of our only child, Joshua. 
Surrounded by many family and friends, Joshua was born 5 weeks 
pre-mature, and immediately I noticed that my baby was bruised 
above his eye and had numerous bruises on his body, which 
didn't make any sense because he was born by C-Section.
    After extensive testing, Joshua was diagnosed with moderate 
Hemophilia A, or Factor VIII deficiency, which is an inherited 
genetic blood-clotting disorder.
    Just to tell you a little bit about Joshua: He's an only 
child and the only grandchild on both sides of our family; and 
he's not spoiled, of course.
    So, you know, obviously he became the focus of our world; 
and, therefore Hemophilia bleeding disorders was often a topic 
of conversation. We began trying to put the pieces together to 
figure out how and why did this happen, because we had no 
family history that we were aware of.
    Thus, began my journey--my 20-year journey into the 
bleeding disorders community, which is where it all began.
    Hemophilia is a very rare and chronic bleeding disorder 
that affects about 20,000 people in the United States, most of 
which are male. People with bleeding disorders require life-
long treatment with high-cost clotting factor therapies, which 
replace the missing or deficient blood protein that allows our 
blood to clot.
    Proper treatment, which must be administered intravenously, 
can prevent debilitating injury and life-threatening internal 
bleeding episodes. A lot of these episodes can occur 
spontaneously without trauma.
    Factor replacement therapy is very expensive, in excess of 
$300,000 annually just to sustain the normal clotting process 
that most people take for granted; and that is without any 
hospitalization or any trauma-induced injury whatsoever. And 
$300,000 a year is unbelievable.
    Our community population is relatively small, and 
therefore, there's a limited number of pharmaceutical companies 
that produce factor. Our costs will never decrease for factor; 
and we pay for it per unit. Our cost will only increase.
    Currently, an infusion for my son, Joshua, runs about 
$8,000 to the insurance company. That's a lot of money. There's 
not even a remote possibility that a generic medication will 
ever become available, like becomes available for so many other 
meds.
    In order for everyone to truly understand why I'm here 
today, it's important that you really understand my family's 
story for the last 20 years, and how important the Affordable 
Care Act is for my family, as well as the bleeding disorders 
community in general.
    In March 1994, at the age of three, Joshua suffered a life-
threatening abdominal bleed. It came on again, spontaneously. 
He had 17 bleeding ulcers in his stomach for no reason. The 
doctors at the Houston Medical Center had never seen that 
before.
    He required a 7-week hospital stay, two surgeries, numerous 
blood infusion, blood transfusions, massive doses of factor 
replacement, to stop the bleeding. During that time he 
literally coded three times; and by, coded, I mean he died and 
they had to bring him back to life. That was one of the worst 
times of my family and friends' life. It was very, very 
frightening.
    Aside from that, our hospital bill was in excess of 
$800,000. And I had a $1 million policy. However, the 
medication expense didn't stop when we left the hospital. 
Because they could not explain why he had the abdominal bleed, 
we had to continue treating him prophilactically to hopefully 
prevent future bleeds. Therefore, he had to receive factor 
replacement on a daily basis for the next 4 years, every day of 
his life, and, every other day until he was 10 years old.
    Currently, today Joshua treats prophlactically three times 
a week. So, again, we still have the costs. And this, again, 
was in 1994.
    Unfortunately, Joshua continued to bleed spontaneously, 
whether it was his mouth or whatever, and we couldn't seem to 
get the bleeding under control, so we underwent further family 
genetic testing in 1995, and that's when he received a second 
diagnosis of Type III von Willebrand Disease, which, again, he 
is missing the complete von Willebrand protein.
    The von Willebrand protein works in conjunction with the 
factor VIII protein to form a clot. Joshua has no von 
Willebrand protein and 4 percent factor VIII protein, which is 
considered moderate Hemophilia. And, they have to work 
together; and without having one factor, the other one doesn't 
work.
    But, also at the same time, my husband and I received the 
diagnosis of mild von Willebrand Disease. We had no idea that 
we had von Willebrand Disease. It was quite a shock--quite a 
shock, because we had never had any symptoms of having that 
disease.
    When Joshua was 16 he had a spontaneous head bleed the day 
before Thanksgiving. It's another day in my life that I'll 
never forget. It started with a really bad headache that we 
thought were migraines, because he also suffered from migraine 
headaches.
    Long story short, I took him to the ER almost immediately, 
and they did a CT Scan, and he was having a brain hemorrhage. 
He was air lifted to the medical center, because I had taken 
him to an outlying Houston hospital; and from that point 
forward his life has changed.
    Since that time he has had three more brain hemorrhages, 
and the reason he continues to take factor three times a week 
currently is to prevent the head bleeds, hopefully prevent the 
head bleeds; and fortunately, we have done that.
    Now, that affected his life in school, because he missed so 
much school.
    The treatment for von Willebrand Disease is different than 
Hemophilia. It requires a different type of factor; and by the 
time that Josh was 7 years old in 1998, we had maxed out three 
insurance policies that had a million dollar cap, because the 
medication is so very expensive.
    But to sustain our son's life, what do you--you know, 
that's a no-brainer. You do what you have to do.
    And, during that period, when I maxed out my policy, 
fortunately, at that time in 1991 you could afford to have two 
health insurance policies because the premiums were so low; so 
therefore, Joshua switched over to his father's policy. We 
maxed that policy out.
    My husband had to change jobs because of the insurance; 
took a lower-paying job. We maxed out that policy. Again, he 
had to take a lower-paying job, as I did as well.
    And, you know, we work for health insurance, that's what we 
work for. And because my husband has had to change jobs so 
often, and we know how that looks on a resume, and the fact 
that he's 57 years old, and he is currently unemployed--he was 
laid off in June 2009. He is working a couple of part-time jobs 
now, but he has not been able to find full-time employment; 
and, you know, it's hard.
    The preexisting condition, the elimination of the 
preexisting condition is totally awesome for us. I mean, it 
will make a world of difference.
    The Affordable Care Act prohibits insurance companies from 
limiting how much they will pay for Joshua's lifetime, and will 
phase out annual caps over the next few years. And the fact 
that he can stay on our plan until he is 26 is phenomenal. That 
should give him enough time to become financially independent 
and get his college education, and find his passion in life.
    But, more importantly, my husband and I now have peace of 
mind knowing that Joshua will continue to have coverage because 
of his bleeding disorder. Having access to affordable health 
care and quality medical care, will help him lead a full and 
active life.
    His future is much brighter today than before the enactment 
of the Affordable Care Act; and for that I am very grateful. He 
now has the opportunity to reach his economical potential 
without health insurance rules dictating his choice of 
profession. His hopes and dreams are now without restriction.
    Thank you very much for inviting me and listening to my 
story.
    [The prepared statement of Ms. Grasshoff follows:]
                  Prepared Statement of Lisa Grasshoff
                                summary
    My name is Lisa Grasshoff and my husband and I have a wonderful 
son, Joshua, who has moderate Hemophilia A, or Factor VIII deficiency, 
an inherited genetic blood clotting disorder.
    After Joshua was diagnosed with Hemophilia A as a baby, I began 
learning everything I could about blood disorders and how to treat 
Joshua's particular condition. Joshua's disorder requires life-long 
treatment with high-cost clotting factor therapies. Factor replacement 
therapy is very expensive; in excess of $300,000 annually. Plus, there 
are a limited number of pharmaceutical companies producing factor, so 
we are not able to purchase a generic drug.
    When Joshua was 3, he suffered a life-threatening abdominal bleed 
that required a 7-week hospital stay, complete with numerous surgeries, 
blood transfusions and factor therapies. Our hospital bill was in 
excess of $800,000. But the expenses did not stop there, as Joshua 
still needs treatments several times a week.
    Not long after, Joshua was diagnosed with type III von Willebrand 
disease, which means he is also deficient in the von Willebrand protein 
needed to form a clot. This disease requires additional treatments. 
Both of Joshua's conditions forced him to max out on three insurance 
policies, each with a $1,000,000 lifetime cap, at age 7. My husband, 
Danny, had no choice but to change jobs, reducing our income by 40 
percent, just to obtain health insurance for our family. Since Danny 
was laid off due to budget cuts, we now receive our insurance through 
my employer.
    Thanks to the Affordable Care Act, our insurance company is 
prohibited from limiting how much care they will pay for during 
Joshua's lifetime, and annual caps are phased out over the next few 
years. The new law also allows Joshua to stay on our plan until he is 
old enough to become financially independent. More importantly, though, 
Danny and I now have peace of mind knowing that Joshua will not be 
denied coverage because of his bleeding disorder. Having access to 
affordable insurance coverage, and quality medical care will help him 
lead a full and active life. The future for Joshua is much brighter 
today thanks to the enactment of the Affordable Care Act, and for that 
I am very grateful.
                                 ______
                                 
    Good afternoon, Mr. Chairman and fellow Senate Committee members.
    Thank you for inviting me to share my story about the positive 
impact the Affordable Care Act has had on my family. It is both an 
honor and a privilege to have the opportunity to address this committee 
and have my voice heard.
    My name is Lisa Grasshoff and I live in Houston, TX with my 
husband, Danny, and our 20-year-old son. Danny and I have been married 
for 36 years and after 17 years of marriage, we were blessed with the 
birth of our only child, Joshua. Surrounded by family and friends, 
Joshua was born 5 weeks pre-mature. Immediately, I noticed that my baby 
was bruised above his eye and had several other bruises on his body, 
which did not make sense because he was delivered by C-section. After 
extensive testing, Joshua was diagnosed with moderate Hemophilia A, or 
Factor VIII deficiency, which is an inherited genetic blood clotting 
disorder.
    Joshua is an only child and the only grandchild on both sides of 
our family. So of course, he became the focus for all of us and 
Hemophilia was often discussed. We began trying to put the pieces of 
the puzzle together; we just wanted answers . . . why and how did this 
happen? Many other questions came to mind and thus, began my 20-year 
journey in the bleeding disorders community.
    Hemophilia is a rare and chronic bleeding disorder affecting about 
20,000 people in the United States, most of who are male. People with 
bleeding disorders require life-long treatment with high-cost clotting 
factor therapies, which replace the missing or deficient blood proteins 
that allow blood to clot. Proper treatment, which must be administered 
intravenously, can prevent debilitating injury and life-threatening 
internal bleeding episodes.
    Factor replacement therapy is very expensive; in excess of $300,000 
annually just to sustain the normal clotting process that most people 
take for granted. Our community population is small; therefore, there 
are a limited number of pharmaceutical companies producing factor. Our 
costs will never decrease, only increase. A generic medication is not 
even a remote possibility for factor, as it is for many other drugs.
    In March 1994, at the age of 3, Joshua suffered a life-threatening 
abdominal bleed that required a 7-week hospital stay. He required two 
surgeries, numerous blood transfusions, and massive doses of factor 
replacement to stop the bleeding in his stomach. His hospital bill was 
in excess of $800,000. However, the medication expense did not stop 
there . . . he required factor replacement daily for the next 4 years 
and every other day until he was 10 years old. Today Joshua treats 
three times a week to prevent bleeds.
    Upon further family genetic testing in 1995, Joshua received a 
second diagnosis--type III von Willebrand disease which means he is not 
only deficient in factor VIII, but he does not have the von Willebrand 
protein needed to form a clot. Both blood proteins must work together 
in order for the clotting process to be complete. Danny and I received 
the diagnosis of mild von Willebrand disease at this time as well.
    Treatment for von Willebrand disease requires a different type of 
factor than hemophilia. Our choices are very limited, factor 
replacement is more expensive, and this placed more pressure on our 
need for the elimination of annual and lifetime caps. By 1998, Joshua 
maxed out three insurance policies with each having a $1,000,000 
lifetime cap. In order to obtain health insurance coverage for our 
family, Danny had no choice, but to change jobs making less money; 
therefore, reducing our income by 40 percent, yet our bills remained 
the same. On that same note, due to budget cuts at his company, he was 
laid off in June 2009, and to date is still not employed full-time. 
However, I have health insurance through my employer and we do not have 
to worry about maxing out another policy nor will we have to be 
concerned about a preexisting clause when Danny does find full-time 
employment.
    The Affordable Care Act prohibits insurance companies from limiting 
how much they will pay for during Joshua's lifetime, and will phase out 
annual caps over the next few years. The new law also allows Joshua to 
stay on our plan until he is 26 and old enough to become financially 
independent. More importantly, though, Danny and I now have peace of 
mind knowing that Joshua will not be denied coverage because of his 
bleeding disorder. Having access to affordable insurance coverage, and 
quality medical care, will help him lead a full and active life.
    The future for Joshua is much brighter today than before the 
enactment of the Affordable Care Act and for that I am very grateful. 
He has the opportunity to reach his economic potential without health 
insurance rules dictating his choice of profession. His hopes and 
dreams are now without restriction.
    Thank you for your time. I will be happy to answer any questions.

    The Chairman. Thank you very much, Ms. Grasshoff, for 
coming this great distance, and for sharing your story. I think 
it's a very poignant one, and right to the point of what we're 
talking about.
    Ms. Grasshoff. Thank you.
    The Chairman. Ms. Schlichting, my neighbor from the West, 
welcome, and please tell us your story.

           STATEMENT OF EMILY SCHLICHTING, OMAHA, NE

    Ms. Schlichting. Good morning, everyone.
    My name is Emily Schlichting. I'm 21 years old and I live 
in Lincoln, NE, and I'm a junior at the University of Nebraska. 
I'm here today because my life has drastically changed for the 
better thanks to the Affordable Care Act. I'd like to share 
with you just how that reform has affected my life.
    I'll start, I guess, at the beginning, so that would be a 
good place.
    The summer before my senior year of high school, when I was 
17, I began experiencing a lot of really odd symptoms, which my 
doctors couldn't pinpoint.
    My symptoms started as open ulcers that would get painfully 
and dangerously infected. It intensified in the next coming 
years to include high-grade fevers, swollen joints. I'd get 
these large, calcified lumps on my legs called Erythema 
nodosum, which hurt a lot; and just a lot of other symptoms 
that never really fit together.
    After about 2 years of visiting multiple specialists, 
receiving MRIs and CT Scans, topped off by a week-long stay in 
the hospital my freshman year of college, I was finally 
diagnosed with Behcet's Syndrome, which is a rare autoimmune 
condition. It's similar to vasculitis.
    As you can imagine, that's kind of a lot to have dropped on 
your head, having barely moved out of your parent's house at 
the age of 18.
    But, despite going through all of that, I consider myself 
extremely lucky because my parents have amazing health 
insurance. And my condition, because of that insurance, was 
completely covered when I got sick.
    I think something that really needs to be stressed here is 
that being sick is hard enough in and of itself. You know, like 
I was 18 years old, and all of a sudden I had swollen joints 
like an 80-year-old man. I was taking medicine that made \2/3\ 
of my hair fall out, and I couldn't go out on the weekends, 
because it hurt to get out of bed and walk to, like a party or 
over to a friend's house.
    So I didn't have to worry about where my care was coming 
from while I was dealing with all that other stuff because of 
my parent's insurance.
    However, when I did start to get my body under control, it 
became very clear to me that just because I had good health 
care under my parent's plan, didn't mean that I wasn't going to 
need to worry about where my care was coming from because I was 
soon to be off that plan.
    When you're chronically ill, young, and your health care is 
tied directly to your employment, your job prospects become a 
lot more limited than you might imagine. Suddenly, taking a few 
years off to work at a nonprofit before I go to graduate or law 
school was no longer an option because a lot of those jobs 
don't offer great comprehensive insurance plans.
    Beyond that, I could never drop off of an insurance plan 
because if I did, given the condition that I've been diagnosed 
with, it would have been almost impossible for me to get back 
on a plan.
    Paying for my own health care would pretty much bankrupt 
me. I see, regularly, two rheumatologists, an ophthalmologist, 
a dermatologist, an internist and a couple other specialists 
for my condition because it's very rare and there's no one 
doctor that specializes in it.
    Add to that medicine and preventive tests that I have to 
get all the time, whether it's a blood test for the kidney 
transplant medicine that I take every morning or just general 
checkups, it's really expensive.
    And that's when things are going well.
    So, the passage of the Affordable Care Act has made all of 
those issues go away for me. The dependent coverage clause has 
been a--it's a godsend. I mean, I can stay on my mother's 
insurance until I'm 26, which, hopefully I won't have to, and 
I'll be on my own feet and providing myself with insurance. But 
having that security, I mean, I don't think there are words to 
describe how important that is.
    But, it gives me buffer time to figure out what career I 
want to pursue, and to work for a couple years to gain 
experience in that field before I go back to graduate or law 
school. Having the time to gain that experience is invaluable 
to me.
    One of the things that struck me the most is how unfair it 
felt that I was being pushed into grad school to stay on an 
insurance plan, or, you know, forced to pay a really high COBRA 
fee, or forced to go uncovered and then not ever have insurance 
because of something that I couldn't control happening to me.
    I believe that allowing young people to stay on their 
parent's insurance gives us a new freedom to work toward our 
goals without being uncovered. But, even more important than 
that is the fact that the Patient's Bill of Rights makes it so 
that I can't be denied coverage for a disease that I can't 
control having.
    I can't put into words for you how scary it is to think 
about being 25 and bankrupt and sick. So, I'll just let you 
take my word for it, that it's absolutely terrifying.
    I can tell you over and over how much health reform has 
positively affected my life, but I'm not the only young 
American that has been affected by this law. I'm one of 
millions and millions of young Americans who have been helped 
by this bill, whether through the dependent coverage clause or 
the Patient's Bill of Rights or a combination of both, like me.
    I think a lot of the issue is that health care is something 
that's really easy not to think about when you're young and 
you're healthy. But eventually, we all get old, and most of us 
get sick. And when that happens, health care matters more than 
anything else; and I can testify to that because I've lived it.
    Most people my age don't think about health on a daily 
basis, and to be honest, I'm kind of jealous of them that they 
don't have to. But, that also means that my generation doesn't 
fully appreciate just how much this bill works for them.
    We are one of the first generations that's given access to 
free lifetime preventive treatments and care that will prevent 
life-threatening illnesses before they start. I think that 
Senator Hagan made a great point. You know, we need to make 
sure that young Americans know these things are out there, and 
that's why it is so important that you're holding hearings like 
this, and that groups like Campus Progress and Young 
Invincibles, who I've worked with, are getting the word out, 
because in order for us to win the future, as President Obama 
so artfully said on Tuesday, we need to have a generation of 
Americans who are healthy enough to do so.
    This legislation makes that a reality.
    And for those reasons I'm personally, and as a member of 
this country, extremely grateful that it was passed.
    Thank you.
    [The prepared statement of Ms. Schlichting follows:]
                Prepared Statement of Emily Schlichting
                                summary
    At 19, after 2 years of unexplained symptoms, she was diagnosed 
with a chronic, autoimmune disease called Behcet's Syndrome. The 
disease affects the veins and can cause rheumatoid arthritis, as well 
as episodic flare-ups that cause open sores in the mouth, eyes, nose 
and throughout the body. Although Emily was covered due to her parent's 
insurance, it soon became apparent that health insurance would be a 
dominant issue in her life. The last few years have found Emily 
reconsidering what she can and will do with her life, a decision that's 
been influenced by her need to maintain health insurance. The political 
science and communications major at University of Nebraska has public 
service and non-profit ambitions, but knows the challenges posed by 
those jobs, which tend to not offer the best benefits. For Emily, being 
uncovered is not an option, so her choice was to go stay in school as 
long as she could to stay on her parent's insurance or try to find a 
job to start immediately after graduation. Now, thanks for the 
Affordable Care Act, Emily can stay on her parent's insurance until 
she's 26 and can seek the non-profit work she thinks will best serve 
her career aspirations.
                                 ______
                                 
    Good morning, everyone. My name is Emily Schlichting. I'm 21 years 
old and live in Lincoln, NE. I am here today because my life has 
drastically changed for the better thanks to the Affordable Care Act. I 
would like to share with you just how health care reform has impacted 
my life.
    The summer before my senior year of high school, when I was 17, I 
began experiencing a lot of odd symptoms, and none of my doctors could 
figure out what was causing them. My symptoms started as open ulcers 
that would get painfully and dangerously infected, and over the next 2 
years intensified to include high-grade fevers, mysterious raised lumps 
on my legs, and swollen joints. After 2 years of visiting multiple 
specialists, receiving MRI's and CAT scans, which was topped off by a 
week-long stay in the hospital during my first semester of college, I 
was finally diagnosed with Behcet's Disease, a rare auto-immune 
condition. As you can imagine, this was a lot to deal with as a young 
18-year-old barely out of my parents' house.
    However, despite all that, I consider myself one of the lucky ones 
because my parents have amazing health insurance. My condition, because 
of that insurance, was completely covered. Being sick is hard enough in 
and of itself. Luckily, I didn't have to worry about where my care was 
coming from or who was paying for it while also trying to adapt to a 
disease that has changed almost everything about my life. But when I 
did start to get my body under control, I realized that just because I 
had good health care under my parents didn't mean that being 
chronically ill at a young age was not going to impact my life.
    When your health care is tied directly to your employment, your 
career opportunities become a lot more limited than you'd imagine. 
Suddenly, taking a few years off to work at a non-profit before 
graduate or law school was not an option because I would have dropped 
off my parents' insurance plan. Beyond that, I had to be extremely 
careful not to ever drop off an insurance plan because I have a 
preexisting condition, which meant if I dropped off I would likely not 
be able to get back on insurance. Paying for my own health care out-of-
pocket would bankrupt me. I regularly see two rheumatologists, an 
opthamologist, a dermatologist, an internist and other specialists for 
my condition. And that's when things are going well.
    But, thankfully, with the passage of the Patient Protection and 
Affordable Care Act last spring, none of that is an issue anymore. The 
dependent coverage clause has been a godsend for me; it allows me to 
stay on my parent's insurance until I'm 26; it gives me that buffer 
time to figure out what career I want to pursue, and work for a couple 
years to gain experience and valuable job skills. Then if I want to go 
to law school or grad school I will be better qualified and better 
prepared for a future career. Gaining that experience is something that 
is invaluable to me. I believe that allowing young people to stay on 
their parent's insurance gives us new freedom to work toward our goals 
without going uncovered. But even more important than that is the fact 
that the Patient's Bill of Rights makes it so that I can't be denied 
insurance simply because I have a disease I can't control. And that . . 
. it's changed my life in so many ways. I can't put into words how 
scary the idea of being sick and bankrupt at 25 is, so you'll have to 
trust me on this one. It's terrifying.
    I can tell you over and over how much health reform has positively 
impacted my life, but I'm not the only young American that has been 
positively impacted by this legislation. I'm one example of millions 
and millions of young Americans who have been helped by this bill, 
whether through the Dependent Care clause or the Patient's Bill of 
Rights or the combination of the two, like me. Health care is something 
that is easy not to care about when you're young and you're healthy. 
But someday, all of us are not going to be young, and in my case, 
sooner, not so healthy. When that happens, health care becomes 
something that matters almost more than anything else. Most people my 
age don't think about their health on a daily basis (and I'm honestly a 
bit jealous of that). However, that also means that my generation 
cannot fully appreciate just how much this bill does for them. We are 
one of the first generations that will be given free access to 
preventive, life saving tests and treatments that can stop fatal 
illnesses before they start. Young people are the future of this 
country and we are the most affected by reform--we're the generation 
that is the most uninsured. We need the Affordable Care Act because it 
is literally an investment in the future of this country. This law is 
important. It's really important.
    Thank you.

    The Chairman. Thank you very much for a very poignant and 
passionate presentation.
    Thank you for being here.
    Mr. Koller, welcome. Please proceed.

STATEMENT OF CHRISTOPHER KOLLER, HEALTH INSURANCE COMMISSIONER 
             STATE OF RHODE ISLAND, PROVIDENCE, RI

    Mr. Koller. Thank you. Chairman Harkin, Ranking Member Enzi 
and members of the committee, thanks for the opportunity to 
speak on this important topic.
    I think my job here is to sort of give a view from the 
States--to speak from an implementation standpoint. I find that 
following this testimony that I've heard, it's just like my job 
at work; you listen to passionate stories and you end up having 
to work the machinery and enforce the rules behind the scenes.
    So, it's hearing the testimony like this that gives us the 
fuel to do our work in the States. I'm going to talk about two 
things: A review of how the States have implemented the 
Consumer Protection portions of the Affordable Care Act, and 
then try to talk a little bit about what the effects have been, 
at least in Rhode Island.
    As Senator Reed so graciously said in his introduction, the 
office was created in 2004. What I want to emphasize is that in 
creating it, the Rhode Island Legislature gave it a broader 
charge than other kinds of insurance. They asked the office to 
look at, in addition to solvency in consumer protection, fair 
treatment of providers, and looking at the system as a whole 
and how to improve it.
    I think that reflects what we've heard today, which is that 
health insurance is fundamentally different from other kinds of 
insurance. We don't ask our auto insurance to pay for our 
preventive health; to pay for our routine maintenance; and if 
you can't afford it, you simply walk.
    We don't want to see that option for the kind of patients 
that we've talked about today; and I think the legislature 
recognized that in creating the Office of the Health Insurance 
Commissioner.
    So, I want to speak to two things: How we've implemented 
the consumer protections, first.
    Secretary Sebelius gave you an overview of the consumer 
protections, and when I begin, I want to say that I speak as an 
insurance commissioner. I am a member of the National 
Association of Insurance Commissioners; what I say here 
reflects my experience, of one insurance commissioner's 
experience. I'm proud of the NAIC's work, but what I say is not 
the official position of the NAIC.
    As a rule, regulators have worked really hard to view this 
as an implementation task. We have a job to do; and we've been 
looking at what we have to do to implement these rules. It's 
nonpartisan. It's just what we got to do, given the laws that 
are out there.
    When we've done this, what we've tried to do is look at the 
process that we have in place, existing; notably, our process 
of reviewing forms as they come in; the subscriber contracts.
    How do we have to change the subscriber contracts to comply 
with the new Federal rules?
    That has really been pretty easy. That's been modifying our 
check list.
    Of a greater challenge has been refining the appeals 
process, working on implementing PCIP within our local laws, 
and doing rate review. I'm particularly doing this with tight 
State budgets.
    The resources that have been provided to the States, 
particularly for myself, we have a small office, have been 
greatly appreciated. They allow us to jump start important 
work.
    And where my--you asked for punch lines. So, my takeaway on 
implementation is that the guidelines and standards for the 
Affordable Care Act have to come from the Federal Government; 
they should be marked by clarity, consistency, constancy and 
sensitivity to local markets. Those processes haven't worked 
flawlessly to date, but I think that the Office of Consumer 
Information Insurance Oversight, the States, have been marked 
by mutually respectful competent and well-intentioned efforts 
that are meant to adhere to the statute, to implement it as 
it's intended.
    I think Secretary Sebelius and her staff have shown 
admirable flexibility in working with these States to adjust to 
their local conditions and deal with transition issues as they 
go through.
    But, implementation enforcement is up to the States. We are 
closer to the consumers, the providers, and the health plans. 
We can work more effectively through a series of relationships 
that we have; and I think that was the wisdom in the act that 
you passed, to leave that flexibility and that enforcement to 
the States.
    Second, in terms of the effects of consumer protection, 
Senator Murray talked about rate review. This is something that 
we have worked really hard with in Rhode Island. We have a 
comprehensive rate-review process. The insurers have to come up 
with their rate factors that they're going to use. They have to 
be reviewed publically, posted on the Web site. I collect 
testimony before I make a decision on what the rates can be, 
going forward.
    The effect of this is to increase the accountability in the 
insurers, to have some stability, and to shift the focus of the 
conversation from how can I shift costs, how can I get rid of 
sick employees or sick enrolls, and how do we address the 
underlying costs to the system.
    That's why we've been able to do--in Rhode Island, we've 
actually taken some of Senator Bennet's ideas from Colorado. 
Yesterday I had a conversation with commercial insurers about, 
how do we take the Colorado ideas around re-admission rates and 
put those things forward in our delivery system?
    We can only do that because I have the authority of rate 
review. It means that when I speak they have to take into 
consideration what I say. The second point is, State variation 
and regulation. Rhode Island has to take relatively small steps 
to do this.
    We had a lot of these measures in place. That is not going 
to be the same for our other States. We took a lot of grief 
doing this going forward. It's taken time. We have to be 
persistent.
    We have to communicate consistently with our State offices, 
to help them understand what's going on.
    But, as a result businesses, like Mr. Olivo's, have a 
stable market; they understand what's driving their costs; they 
have a choice of products with consistent rules for pricing. I 
can't emphasize how important that is, to change the rules for 
pricing from, how do I get rid of my high risk, how do I find 
someone who knows somebody who can get me a special deal, to 
focus on the underlying costs.
    We know what drives health insurance costs for folks. We 
just have to decide if we want to be fair and allow people to 
be part of the insurance pool or not. That's what these rules 
put in place.
    So, I'll just finish by urging you to keep, not only the 
individuals in mind, but the idea that we are creating a 
consistent set of rules, implemented at the State level, with 
flexibility, so that we can get at improving our underlying 
health system and allowing individuals to go forward with 
confidence in the way that we've heard about today; not to 
worry about, is health care going to bankrupt them going 
forward.
    I believe that we did not get this right at the first.
    I think we're going to have to make corrections going 
forward, but I think the trajectory is the right way to do it.
    We continue to look forward to implementing the measures of 
the act going forward.
    Thank you.
    [The prepared statement of Mr. Koller follows:]
              Prepared Statement of Christopher F. Koller
                                summary
               1. implementation of consumer protections
     Guidance and standards for the ACA has to come from the 
Federal Government. It should be marked by clarity, consistency, 
constancy and sensitivity to local markets. While that process has not 
worked flawlessly to date, it has been marked by professionalism on the 
part of States and Federal agencies and fidelity to the statute.
     ACA wisely left implementation and enforcement of these 
reforms to the States. We are closer to consumers, providers and health 
plans and can work more effectively than a Federal agency. States are 
working hard with limited resources to put these protections into 
place. In the wake of tight State budgets, the rate review and consumer 
assistance grants provided to States as a part of ACA have been greatly 
appreciated and the money wisely spent.
                2. effectiveness of consumer protections
     In Rhode Island we have in place a comprehensive health 
insurance rate review process that requires health insurers file the 
rate factors they anticipate they will use in all lines of business the 
coming year. These are posted publicly, analyzed, compared and debated 
before my Office renders a decision, which insurers have the option of 
appealing.
     Rhode Island has had to take relatively small steps to 
implement these consumer protections--our legislature has concurred 
with the Congress and previously had in place an appeals process, 
dependent coverage to age 25, and the disallowance of rescission 
language. Looking ahead we already have adjusted community rating in 
the small group market, as required by ACA and very limited allowance 
of pre-existing conditions.
     These reforms have made our health insurance market more 
stable, our pricing rules less susceptible to special deals that merely 
shift costs and reward the connected, and our vulnerable citizens more 
protected in the market. Small businesses in particular now know 
exactly the short- and long-term steps that must be taken to reduce the 
rate of increase in their premiums.
     You are less likely to hear from people who have benefited 
individually from these protections and from the more stable, 
accountable system of private sector commercial health insurance that 
is resulting. But I urge you to keep them in mind--because this is what 
you have created with the Affordable Care Act. I have no doubt that in 
statute and regulation we did not get everything right, and we will 
have to make corrections as we proceed. However, I am also certain that 
the trajectory of the ACA is the right one for citizens and we in Rhode 
Island look forward to the benefits it will continue to bring.
                                 ______
                                 
            Consumer Protections in the Affordable Care Act
    Chairman Harkin, Ranking Member Enzi and members of the committee. 
Thank you for the opportunity to testify on this important topic. My 
name is Christopher F. Koller and I am the Health Insurance 
Commissioner for the State of Rhode Island. My testimony will be 
divided into two parts:

     A review of the process for implementing the consumer 
protection portions of the Affordable Care Act in States in general and 
Rhode Island in particular.
     An assessment of the effects to date of their 
implementation, and future implications.

    By way of background: The Office of the Health Insurance 
Commissioner was created by statute in 2004. It is a cabinet level post 
and encompasses all aspects of commercial health insurance oversight in 
the State. We have a four-fold statutory charge which is broader than 
that given for the oversight of other types of insurance:

    i. Guarding the solvency of insurers;
    ii. Protecting the interests of consumers;
    iii. Ensuring fair treatment of health care providers; and
    iv. Seeing the health care system as a whole and directing insurers 
towards policies that promote system improvement.

    This broad charge reflects the belief of the Rhode Island 
legislature that health insurance is fundamentally different in nature 
and social value from other types of insurance such as life or property 
and casualty. To the best of my knowledge there are no other insurance 
commissioners focused solely on health insurance in the country.
    I am the first commissioner and assumed the post in 2005. Since 
then, our Office has focused on enforcing existing statutes, 
establishing a consistent, fair and transparent rate oversight system, 
and setting standards for health plan actions to improve the underlying 
performance of Rhode Island health care delivery system. I will speak 
of these activities in more depth later.
               1. implementation of consumer protections
    Secretary Sebelius has given you an overview of consumer 
protections in the ACA. I believe my role is to speak to the experience 
of their implementation. As I begin, I want to note that my testimony 
reflects the experience of an insurance commissioner. While I 
participate actively in the National Association of Insurance 
Commissioners and am proud of their service in the States, and to 
Congress as it debated the ACA, nothing I say should be construed as an 
official position of NAIC.
    As a rule, regulators found it most appropriate to view this as an 
implementation task, not a set of public policy questions--we have had 
a job to do. Thus, a priority of State insurance regulators has been on 
the measures--given existing State statute--a State must have in place 
to meet the statutory deadlines imposed in the ACA, many of which 
centered on commercial policies issued on or after October 1. The 
following have been the broad areas of enhanced consumer protections we 
have addressed:

    1. First dollar coverage of preventive care benefits;
    2. Elimination of lifetime and (in certain cases) annual limits;
    3. Coverage of dependent children up to age 26;
    4. Elimination of preexisting conditions exclusions for children;
    5. Elimination of rescissions in individual coverage;
    6. A process for consumers to appeal insurance company denials;
    7. Disclosure by health plans of justification for rate hikes;
    8. Development of minimum medical loss ratio standards; and
    9. Develop preexisting condition insurance plans (varies by State).

    In implementing these measures, regulators have relied wherever 
possible primarily on existing activities to review and approve health 
plan subscriber contracts (``forms'') and other consumer disclosures. 
In effect, we are modifying our checklists of what contracts must 
contain and permissible language. While this is not a nominal task, in 
our experience it has not been overly taxing. We have been greatly 
aided by the collaborative work of NAIC and good faith efforts by the 
Division of Consumer Insurance and Information Oversight to communicate 
continually to States what is needed and by when.
    Efforts that involve changing processes other than forms review--
such as refining the appeals process, developing medical loss ratio 
standards and implementing the PCIP statute--have been more varied by 
State and somewhat more challenging. In the wake of tight State 
budgets, the rate review and consumer assistance grants provided to 
States as a part of ACA have been greatly appreciated and the money 
wisely spent.
    My message on implementation to date of consumer protections can be 
summarized with the following points:

     Guidance and standards for the ACA has to come from the 
Federal Government. It should be marked by clarity, consistency, 
constancy and sensitivity to local markets. While that process has not 
worked flawlessly to date, it has been marked by professionalism on the 
part of States and Federal agencies and fidelity to the statute.
     ACA wisely left implementation and enforcement of these 
reforms to the States. We are closer to consumers, providers and health 
plans and can work more effectively than a Federal agency. States are 
working hard with limited resources to put these protections into 
place.
                2. effectiveness of consumer protections
    You have heard from individual consumers who can speak more 
powerfully to the effects of the ACA than I could. I would like to 
speak to two systemic effects of the act: the importance of rate 
oversight and State level variation.
    In Rhode Island we have in place a comprehensive health insurance 
rate review process that requires health insurers to file the rate 
factors they anticipate they will use in all lines of business the 
coming year. These are posted publicly, analyzed, compared and debated 
before my Office renders a decision, which insurers have the option of 
appealing. The effect is to increase accountability, and to shift the 
focus of the conversation from ``how can I cost shift to improve my 
rate,'' to ``what is driving underlying health care inflation and how 
can it be addressed.'' A sample of recent rate review analysis is 
enclosed in my testimony.
    As a result, businesses in Rhode Island now have a public agency 
asking health insurers and providers the hard questions of what has to 
be done to reduce system costs, not merely shift them. Rhode Island is 
systematically investing in primary care, in health information 
technology and in provider payment reform, and leveraging the 
opportunities provided in those areas through the ACA and ARRA.
    In the case of the increased consumer protections in ACA, having 
this rate process in place meant that health plans in RI had to state 
publicly how their costs would be effected by these changes in benefit 
levels and subject them to public scrutiny and analysis. OHIC could 
then make final, plan-specific decisions, and Rhode Islanders could be 
assured they were implemented systematically.
    My second point is on State level variation in regulation. Rhode 
Island has had to take relatively small steps to implement these 
consumer protections--our legislature has concurred with the Congress 
and previously had in place an appeals process, dependent coverage to 
age 25, and the disallowance of rescission language. Looking ahead we 
already have adjusted community rating in the small group market, as 
required by ACA and very limited allowance of preexisting conditions.
    These reforms have been implemented steadily over the past decade. 
They have not always been easy--particularly as the rules for pricing 
have become more transparent and defined--and have required patience, 
persistence and continual oversight. But they have made our health 
insurance market more stable, our pricing rules less susceptible to 
special deals that merely shift costs and reward the connected, and our 
vulnerable citizens more protected in the market. Small businesses in 
particular now know exactly the short- and long-term steps that must be 
taken to reduce the rate of increase in their premiums.
    I should caution that even as the efforts of OCIIO to work flexibly 
with States continues, Members of Congress will hear from constituents 
about the implementation of ACA. Indeed, any adverse event experienced 
by anyone in the commercial insurance market will be attributed to the 
act, regardless of its true origin. You are less likely to hear from 
people who have benefited individually from these protections and from 
the more stable, accountable system of private sector commercial health 
insurance that is resulting. But I urge you to keep them in mind--
because this is what you have created with the Affordable Care Act. I 
have no doubt that in statute and regulation we did not get everything 
right, and we will have to make corrections as we proceed. However, I 
am also certain that the trajectory of the ACA is the right one for 
citizens and we in Rhode Island look forward to the benefits it will 
continue to bring. 

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Analysis: Projected increases in hospital inpatient and outpatient 
costs drive most of the rate factor increases requested by all three 
health insurers. Projected administrative cost increases are relatively 
large drivers for Tufts, while profit and reserve increases are 
significant for United and BCBSRI.

    The Chairman. Thank you very much, Mr. Koller, and again, 
thank you for your tremendous efforts in getting here from 
Rhode Island yesterday.
    Mr. Olivo, welcome, and please proceed.

              STATEMENT OF JOE OLIVO, PRESIDENT, 
             PERFECT PRINTING, INC., MOORESTOWN, NJ

    Mr. Olivo. Good morning. Thank you, Chairman, and thank you 
to the committee for not only the opportunity but the honor to 
speak to you today.
    I'd like to share with you my early experiences with the 
health care law, how it's already begun affecting my company, 
and some of the things I expect to see as the plan is fully 
implemented.
    I'm the president and co-owner of Perfect Printing. The 
business was started in 1979. I co-own the company along with 
my wife, my two brothers and my mother. I have been running the 
company for the past 23 years. We've been very fortunate; we've 
been able to grow the company to a high of 54 employees prior 
to the economic downturn where we had to downsize; but we 
currently have 45 employees.
    One of the main concerns I have with the health care law is 
how it's going to affect the coverage, the current coverage 
that I offer to my employees. I'm able to pay 100 percent of 
the premium cost for my employees, and 56 percent toward their 
dependent costs.
    The reason we've been able to do this is by the use of a 
high deductible health savings accounts plans. Now, I know 
during the lead up to the passage of this legislation, we heard 
numerous times, and my employees heard numerous times that they 
would be able to keep the health care that they had.
    Within 30 days of the passage of the legislation I received 
a letter from my insurance carrier that our plan would no 
longer be offered. It's my understanding that because of the 
preventive care portion of how it's treated with high 
deductibles, it was no longer in compliance with the health 
care law. So, as far as I'm concerned, that has proven to be 
untrue.
    Another area of concern for me is the tax credits that have 
been promised to small business in order in which to pay for 
this. Now 45 employees were certainly larger than a lot of 
small businesses, but I don't think anyone would describe my 
company as a large company. There are zero dollars in tax 
credits available to our company.
    I've had conversations with other fellow small-business 
owners; I was speaking a couple of weeks ago to the owner of a 
three-employee bridal shop that had spoken with her accountant. 
She is not eligible for any dollars in tax credits. So, I don't 
anticipate that being of assistance to my business or to my 
employees.
    A third area which is of great concern to me is compliance 
with the 1099 law. This law, as you know, requires me to submit 
a report for every vendor that I spend accumulated expenses of 
$600 or more per year. Simply put, I do not have the systems in 
place to monitor this. This will require myself as a business 
owner, monitoring this and waste my time monitoring receipts 
and keeping track of this. To put it in perspective of a small-
business owner, in a good year my profits are 3 cents on every 
dollar earned.
    Every time there's a new legislation, a regulation from 
Washington like this, a good portion, if not all of that, comes 
out of the profit of my business. It affects my ability to give 
my employees raises and pay for future benefits.
    Then there's the issue of whether I should even decide to 
grow my business at the--we are 45 employees; if I go over the 
50 employee threshold, where we were just 2 years ago, it's my 
understanding that I'm mandated to provide insurance, or I 
would have to face a penalty for not providing that insurance.
    It's also my understanding that I could possibly be 
penalized even if I do provide insurance. So, I find the ironic 
part about this portion of the law is that what it's supposed 
to encourage or mandate employers to provide insurance, I guess 
when you look at the cost of the penalty that is currently in 
the legislation versus what I pay for premiums, is actually an 
incentive for me not to provide insurance for my employees.
    These are the issues that I know that are currently 
affecting my business.
    It's the unknown that's even more of a concern. To put it 
in perspective of myself and a lot of small-business owners, 
when I decide to grow the business and invest funds and take a 
loan out, I have to know cost certainty, because I put my house 
on the line; I put my family's house on the line; I put all my 
personal assets on the line. I cannot afford to be wrong with 
my assumptions.
    So, when you have a health care law like this with so much 
unknown--and I challenge anyone to say, ``Well, here's what 
your health costs will be 2 years from now,'' it causes me to 
be much more hesitant to invest my money.
    I think you're seeing the accumulative effect of this in 
why small business is not participating in the growth of the 
economy.
    So, I'll leave you with this: My story is personal; it is 
by no means unique; there are hundreds of thousands, if not 
millions of small-business owners going through the same issues 
that I am right now.
    Thank you.
    [The prepared statement of Mr. Olivo follows:]
                    Prepared Statement of Joe Olivo
                                summary
    1. Welcome Remarks

        a. Share experiences & additional consequences.

    2. Background

         a. Company description/size.
         b. Health insurance background.
         c. State of New Jersey.

    3. Inability to Continue Existing Coverage

         a. Currently offer plan that pays 100 percent premium.
         b. Offer additional plans.
         c. High deductible plans have controlled cost increases.
         d. High deductible plans create better decisions.
         e. Existing Coverage No Longer Offered.
           i. Due to preventative care mandate.
         f. Cannot keep our existing coverage.

    4. Non-Eligibility for Tax Credits

         a.  Temporary, to narrowly limited and of marginal assistance 
        to most owners that I know.

    5. Effects of 1099 Compliance

         a. $600 or more.
         b. Huge burden, no system currently in place.
         c. Significant drain on already limited resources.
           i. Cannot hire consultants or additional employees.
         d. In the context of a small business owner.
           i. Small profit.
           ii. Lack of time.

    6. Negative Consequences of Going Over 50 Employees

         a. Threat of penalties if I exceed the 50 employee mark.
         b.  Actually an incentive not to provide insurance as the 
        penalty is less than the current premiums that I pay.

    7. Consequences of Cost Uncertainty Due to the Law

         a. Hesitancy to invest because personal assets are on the 
        line.

    8. Concluding Remarks

         a. Personal but not unique.
         b. Economy cannot prosper for all by stifling a main engine of 
        growth.
                                 ______
                                 
    Good morning. I'd like to thank the committee for the opportunity 
and honor of allowing me to present my testimony today. My name is Joe 
Olivo and I own a small business. I appreciate the willingness to have 
an open discussion about some of the concerns that I, along with many 
of my fellow small business owners, face because of the new healthcare 
law. I would like to share with you my early experiences with the law, 
how it is already affecting my business and what additional 
consequences I expect to see as the regulations are fully put into 
place.
    I am the president and co-owner of Perfect Printing. I own the 
company along with my wife, my mother and two brothers. My parents 
started the company as a literal ``mom and pop'' copy center in 1979 
and I have been actively running the company for the past 23 years. We 
have been fortunate in that we were able to grow the company to a high 
of 54 employees prior to having to downsize during the recent economic 
downturn. We currently have 45 full-time and part-time employees.
    One area I am certain will have a profound effect on my business is 
the new, expanded 1099 reporting requirement in this law. As you may 
know, the law now requires that I submit to the IRS a report of any 
transaction adding up to over $600 in business in a year. This is a 
huge requirement and I do not have any sort of system in place to 
account for it. Just to give you a couple of examples, I have drivers 
and sales people that fill up for gas. Based on a quick calculation, I 
estimate they have probably gotten over $600 in gas at 8 to 10 filling 
stations. I will now have to track down who the gas station owners are, 
get the proper information and submit to them a form of how much we 
spent with each business entity. Another example is the salesperson or 
owner who frequently travels. Can you imagine trying to submit 
paperwork to the various airlines, hotels, rental car agencies and 
restaurants that you visit over the course of a year? I will most 
certainly have to purchase some sort of software program and waste my 
resources calculating and collating receipts for purchases of thousands 
of items. I think it is very important to keep in mind the huge costs 
that additional regulatory burdens place on small businesses like mine. 
My business, like most small businesses operate with a very tight 
profit margin and with little extra money to spare on purchases that do 
not directly affect the profitability of the company. In a good year, 
our profit is 3 cents on every dollar earned. Many years it is less 
than that. When additional regulations, like those contained in the 
healthcare law, are instituted the cost to comply with this usually 
comes out of the profit portion. I do not have the luxury of simply 
creating new revenue or cutting additional expenses in order to afford 
the costs to comply. Besides the cost there is the issue of the 
availability of time. As a small business owner, I have to make 
decisions daily as to what issues can be attended to by the end of the 
day and which ones will have to be pushed off to the next day simply 
because I run out of time. My business can't afford the luxury of 
hiring an HR or accounting consultant, or a new employee to fill out 
all of the new government paperwork that is required by this law. 
Simply put, if this part of the legislation is not rescinded this will 
impair by ability to grow my business and the same would apply to the 
millions of other small businesses in this country.
    A key issue for any employer is how and when to grow their 
business. Our company is on the cusp of the 50 employee threshold, at 
which I would be legally bound to offer my employees insurance or pay a 
penalty if I do not. Besides being ridiculously complex, it is my 
understanding that, at the 50 employees or greater mark, I could 
possibly be penalized even if I do offer insurance to my employees and 
one or more of them decide to take a government-subsidized plan. I am 
still in the process of trying to compute the exact ramifications of 
this portion of the law. This being said, in the event I do hit that 50 
employee threshold, based on my current premiums it may actually be 
less expensive for me to not provide any health insurance and just pay 
the penalties. Ironically, the part of the law that mandates that I 
must now provide insurance is actually providing the perverse incentive 
for me not to provide any insurance at all. This would not only be more 
expensive to the Federal Government but it would mean that my employees 
would lose the administrative support that I offer them with their 
health insurance.
    One of the main concerns I have with the law is how it will affect 
the current healthcare coverage that I already offer to my employees. 
We currently offer a plan where the company pays for 100 percent of our 
employees' insurance premium and pays 56 percent toward family 
coverage. We are also able to offer our employees additional plans that 
offer lower deductibles at a higher premium cost. Compared to a lot of 
our competitors we think this is quite substantial. We have only been 
able to do this by offering a high deductible plan with a health 
savings account. We began offering this plan 6 years ago and it has 
been a tremendous tool toward slowing the rate of the escalating 
healthcare premiums that we face, especially since we are located in 
New Jersey. New Jersey is a guaranteed access, community-rated State 
with heavily mandated policies. We have seen double-digit percentage 
increases to our annual premiums going back to 1993. I estimate our 
average premium increase for the past 17 years is around 20 percent 
each year. The high deductible plans have allowed us to continue to pay 
for our employees' premiums. With the savings to the company from 
offering these plans, we have been able to contribute to the employees' 
health savings accounts while encouraging the employees to do the same. 
I have seen how these plans encourage healthier lifestyle choices and 
make everyone more accountable and aware of how they spend their 
healthcare dollars. While I would not say high-deductible accounts are 
the sole answer to the crisis of rising healthcare costs, it has been a 
very effective tool for my company.
    During the debate leading up to the passage of the legislation, I 
heard numerous times that my employees would be able to keep the same 
plan they currently have. Unfortunately, within less than 30 days of 
the law's passage, I received a letter from our insurance carrier 
notifying us that our plan would no longer be available at the end of 
the current term. The reason for this is that the preventative care 
portion of the plan did not meet the requirements of the new law. The 
promise that my employees would be able to keep their existing health 
insurance has proven to not be true. After 20-plus years of voluntarily 
providing coverage for my employees, much of it at my own cost, I am 
now finding out this coverage is no longer acceptable according to the 
government.
    A final area of concern to me is the tax credits that were promised 
to small business in order to help them pay for health insurance. This 
point was made over and over during the debate and even persuaded some 
of my fellow small business owners to mute their criticism of the plan 
in the hopes that maybe the legislation would be a net benefit to their 
companies. The problem with the tax credit is that it depends on the 
government's definition of small. I checked the tax credits that I am 
eligible for and I come up with a big fat zero. Now at 45 employees 
there are certainly smaller businesses out there but I don't think 
anyone would consider us a big business. I have learned from fellow 
business owners with much smaller companies that the tax credit is so 
narrow and so limited that it would provide marginal assistance to a 
very low percentage of small businesses that are out there. For 
example, an 18-person business who pays, on average, $38,000, doesn't 
get anything either. Beyond this, the credit is temporary and, as I 
referenced earlier, the year over year increases in healthcare costs 
certainly aren't.
    While those issues that I have mentioned are the known items that 
will affect my ability to grow my business, it is the uncertainty that 
causes concern as well. Questions such as:

    What portions of the legislation are applicable to my company?
    What are the exact ramifications if I go over 50 employees?
    What taxes, fines and penalties will I be exposed to? How much will 
they be?
    Will I need to hire outside consultants or new employees in order 
to see that I am in compliance with the new laws?
    What is the definition of a part-time employee?

    You should understand that when I make the decision to invest in my 
business and try to grow it further, I cannot afford to be wrong in my 
calculations. Like most small business owners, I put my home and a good 
deal of my personal savings on the line when I make these investments. 
When there is so much uncertainty regarding the costs that will be 
required of me to comply with these new laws, it makes me much more 
hesitant to invest and causes me to take much less risk in those 
investments that I do wish to proceed with.
    My story is very personal but it is not unique. There are hundreds 
of thousands, possibly millions of small businesses owners that are 
facing these same issues. How can we make the economy prosper for all 
when we are stifling one of the main engines of growth? Thank you for 
the opportunity to testify today. I look forward to answering your 
questions.

    The Chairman. Thank you, Mr. Olivo.
    Thank you, very much. Again, we'll start with 5-minute 
rounds.
    First, Ms. Grasshoff, again, thank you very much for 
telling the story about your son, Joshua.
    You mentioned that your husband was forced to change jobs, 
to take one that paid less money; and so were you. I'm just 
curious about how that affected your family's financial 
security; and obviously, you have to be looking forward to your 
own retirement years and that type of thing.
    I just wondered how that might have affected your own 
personal financial security.
    Ms. Grasshoff. It affected it tremendously. It reduced our 
income by approximately 40 percent, but yet our bills didn't 
decrease by 40 percent; and I'm just speaking of the 
necessities: The groceries, the gasoline, you know, utility 
bills.
    It really took away from any outside activities that we 
would do as a family, such as, going to the matinee movies. We 
had to be very, very frugal.
    You do what you have to do. The health insurance was the 
most important thing.
    The Chairman. Now, is Joshua aware of the health care law 
and how it's going to affect him?
    Ms. Grasshoff. Yes, sir. He absolutely is aware of it.
    The Chairman. So, this is just giving him a little bit more 
security that he can go ahead and do things in his own life?
    Ms. Grasshoff. Yes, yes, it is. It has given him a lot more 
security, because he sees that it's given his dad and I the 
security and the peace of mind, knowing that he will be covered 
on a health care plan until he is 26.
    Unfortunately, he's not yet been able to start college, due 
to some medical issues; and he's looking forward to starting 
college. This gives him a little more time to decide.
    He might go to school for a year and then want to be a rock 
musician or what have you.
    The Chairman. Horrors.
    Ms. Grasshoff. But it gives him security, and, his dad and 
I security, knowing that he will have coverage.
    The Chairman. Or like Ms. Schlichting, maybe he might want 
to go to work for a nonprofit or do something generously----
    Ms. Grasshoff. He very well could. I would love for him to 
follow in my footsteps.
    The Chairman. Ms. Schlichting, I was reading the press 
release that happened to be in the Omaha World Herald about 
your appearance here.
    You were quoted as saying, ``It's not just middle-aged 
families who are affected by the reform,'' Schlichting said, 
``It's about America's young people.''
    Ms. Grasshoff. Absolutely.
    The Chairman. The largest group of uninsured Americans. So, 
Ms. Schlichting, I think you put a finger on it. Not too many 
people think about the young people that are affected by this; 
and I think you give evidence of what it means to young people.
    Ms. Schlichting. I would definitely agree with that; and 
that's something that I see a lot, just like at home, with my 
friends and the girls I live with in my sorority. I remember 
when this law was passed, standing in the kitchen at breakfast, 
being like extremely excited; and no one else around me had any 
idea what it meant, and how big of a deal it was; and I think 
it is because, as has been touched upon earlier, young people 
are, by and large, very, very healthy.
    They're a healthy demographic, which is wonderful; but as 
my existence proves, that's not the case for everyone.
    There are young people who get sick. There are young people 
who get really sick. Giving this security to them at that age 
that gives them stability at a young age so they can go on and 
do productive things with their lives, I think it's wonderful; 
it's great.
    The Chairman. I think you put your finger on it; when 
you're young, if you haven't had an illness, like you have, 
young people never think they're ever going to get sick, or 
they might----
    Ms. Schlichting. Oh, yes, not at all. I mean, yes, that's 
definitely something amongst all my friends there. It's another 
part of why it is hard to be ill as a young person, because 
your peers really can't relate to you.
    Like, I can't tell you how many times I've been called 
like, oh, ``You're acting like an old woman,'' and because I'm 
like swollen joints and don't want to go out that night, kind 
of a thing, and when--you get used to it and you deal with it. 
But, yes, it's definitely something that I would say most young 
Americans don't have flying on their radar.
    The Chairman. Right.
    Mr. Olivo--I'm going to skip over Mr. Koller here just 
briefly, but, Mr. Olivo, by 2014 every State will have an 
insurance exchange; a one-stop shop for small businesses like 
yours that can pool their purchasing power to get the same 
leverage on insurance rates that large corporations have.
    Now, as I've looked at that, and as I've discussed it with 
small businesses, their first question to me was, why do we 
have to wait until 2014? If we'd have had that now it would be 
a lot better. It just had to do with the way that legislation 
is done around here, I guess and compromises that are made.
    I just wonder, have you looked down the road at how that 
might affect you in 2014 and your employees; what that exchange 
system might mean to you in 2014?
    Mr. Olivo. I've looked into it because I have no way of 
knowing what the costs are going to be. My concern with any 
exchange is that it's set up as a true competitive exchange.
    My understanding with the law is that the policies being 
offered will still be very heavy in mandates, and preventive 
care items that don't really open up to true, it's not a truly 
competitive product I'll be buying. That was one of the things 
we have with high deductible HSA plans for my employees that 
fit our demographic of our company, and I was able to provide a 
plan that was best for them.
    With the exchanges, I'm not sure it's going to be when 
it's--I'm from New Jersey where we have one of the most heavily 
regulated insurance systems in the Nation, very heavily 
mandated, and we have, I believe it's in the top three of 
insurance premiums in the country.
    I'm not very optimistic that a heavily-regulated mandated 
insurance exchange will be of benefit to me.
    The Chairman. Well, again, companies will have to come on 
the exchange and compete for business.
    Plus the fact, as you know, we also are mandating that, I 
think the Secretary testified to that earlier, that as of 
January 1 of this year, insurance companies have to put 80 to 
85 percent of each premium dollar on health care quality 
improvement. So, they have to start meeting that threshold 
right away.
    It seems to me in that regard, that, coupled with the 
number of exchanges out there, even though there are mandates, 
for example on the prevention side, the reason we mandate on 
the prevention side, is because we know, from all the evidence, 
that an ounce of prevention is worth a pound of cure. If we put 
more in the front end, it's going to save more in the back end. 
I mean, everybody understands that.
    We're trying to move to a system whereby people get more up 
front interventions early on so they don't get in the system 
later on. That's why we have that entered on the wellness and 
the prevention end of it.
    We were hoping, and I don't know, we'll have to wait and 
see, but I was hoping that, as we pass this, that we might have 
some really true competition now out there, and these health 
insurance policies that come on the exchange will be 
transparent; people will know what they are.
    Your business might be on the exchange with others that can 
join together and actually get lower costs but higher quality; 
because everyone's going to be competing for your dollar. Right 
now, I don't know that that's really true, right now in the 
present system that we have.
    If you have any response on that, I don't know.
    Mr. Olivo. Yes. I mean, I like the opportunity of buying 
out of State. Once again, from my perspective as a business 
owner in New Jersey, I've been running it since 1988.
    In 1993 our State went to a guaranteed access community 
rated insurance policy; and the politicians in my State have 
been promising for the last 18 years that our premiums would go 
down as a result; not 1 year has our premiums gone down.
    The Chairman. Thank you, very much. I went way over my 
time, and I apologize.
    Senator Enzi. Thank you, Mr. Chairman. I thank the panel 
for their testimony. I'm going to concentrate on trying to 
figure out what we need to do to eliminate unintended 
consequences of the new law.
    I appreciate Mr. Koller's comments. Thank you, Mr. Koller. 
I appreciate that you have a brother in Greybill, WY, so you 
must have a little understanding of our rural area.
    But, I will be asking, in writing, for you to list out 
those fixes that you see as being needed; and I appreciate that 
you mentioned that.
    One of the comments that I get from people in Wyoming is 
that there's this new high-risk pool; but they can't get in the 
high-risk pool unless they go without insurance for 6 months; 
and they can't afford to go without insurance for 6 months 
because they have problems similar to what we've heard about 
today.
    I want to get a little bit of clarity on some of these 
things.
    Mr. Olivo, you said that the 1099s--and as the accountant 
in the Senate, and I'm now joined by Senator Johnson, who's 
also an accountant, so we'll have an accountants' caucus--I am 
familiar with the 1099s.
    I wondered if you had any evaluation on what the potential 
cost is for you on those 1099s, with the equipment and things 
that you might have to put in or hire a person. I know it's 
early for you to do an evaluation on that, but do you have one?
    Mr. Olivo. I don't have an exact dollar cost, but just to 
give you an idea from my perspective, I can't afford to hire an 
HR consultant or an accounting consultant; that's going to come 
right out of my profits. So, I'm going to have to do it myself, 
as a business owner, or assign someone internally that's going 
to take away their productivity.
    Just to give you an idea: My trip down here, I took a 
train, I took a cab, I stayed in a hotel. I have to monitor, 
did I go over $600 staying in Marriott Hotels this year? Is it 
franchise-owned? Is it corporate-owned? Try to track down who 
the owners are, send them the proper documentations. It's just 
a logistical nightmare that I can't imagine even having to do.
    Senator Enzi. I really appreciate that, and I know that the 
purpose of it, supposedly, was to find $16.9 billion in fraud 
that people are doing; and as an accountant, I can't figure out 
exactly how that's going to do that; but my calculations of 
cost, to find that $16.9 billion for the Federal Government, 
it's going to cost individual businesses about $25 billion to 
collect the information. That's not cost-effective.
    I noticed in your testimony that you obviously have looked 
at the 2,700 pages, and I appreciate--or whatever of them you 
were able to go through. I know as a small businessman--and I 
was in the shoe business for years and years--that it's 
difficult to keep up with the Federal Government; but I 
appreciate that, in your testimony, you had the five questions 
in there that are pertinent for a small business, because we 
don't look at these things from a small-business perspective 
very often.
    I wondered if you wanted to enlarge on those just a little 
bit or mention them? I will be checking on all of those answers 
for you, and appreciate that you were able to list them out so 
concisely.
    Now, in this job market that's been decimated and shed 
millions of jobs, you spoke about the health reform law making 
you think twice about hiring new employees.
    We know that almost \2/3\ of jobs come from small 
businesses, so if we're going to see our economy recover, it's 
the small businesses that will lead the way.
    But, as you point out, the health reform law created a very 
large tax penalty for small companies that can't afford to 
provide health insurance for their employees. So, can you 
expand a bit on your concerns about hiring new employees as a 
result of the health care reform law?
    Mr. Olivo. Certainly. Just to give you an idea when there's 
uncertainty--and some of the questions I had put in, is: Just 
what portions of the legislation are applicable to my company; 
exactly what happens if I go over 50 employees; if I have a 
part-timer; if he's 30 hours or 20 hours? All these questions 
add up to costs.
    When I invest in my business, when I hire new employees, I 
take a loan, and that payment is fixed. I have to pay that loan 
every month. The bank doesn't want to hear, ``Well, I'm sorry, 
I made a little mistake in my calculations; I can't afford it 
this month.''
    When you have all this uncertainty and all this unknown, it 
just creates a much bigger cushion, of which I chose not to 
invest. It affects, not just my business; it affects my 
employees. I can't give the amount of raises I want to give. We 
haven't had a raise in our company in 2 years. And, it makes it 
that much more difficult to grow the business.
    Senator Enzi. I can certainly understand that and 
appreciate it.
    You were asked the question a little bit earlier about the 
exchange creating pooling that will bring down your costs.
    The way I understand the exchange is, there will be a place 
on the Internet that you can go to, and you can put in the 
different criteria of your business, and you will be shown the 
list of companies that will be able to sell you insurance, 
because they will meet the Federal minimum standard.
    I don't see how that's going to drive down the health care 
costs for small businesses. But, I've had a bill that will 
allow small businesses to actually pool their purchasing power 
across State lines to buy less-expensive coverage, and the CBO 
said that would slash premiums.
    Do you think the costs of your health insurance will 
decrease if you are able to get into this exchange?
    Mr. Olivo. As the exchange is currently set up, I'm not 
optimistic. I'm a little leery of it because it's not true 
competition when it's a mandated product.
    We've had the same thing in New Jersey for the past 19 
years. It was supposed to be that there's a lot of heavy 
mandates and preventive care costs, and I have not seen--my 
average premium increase in the last 10 years has been 20 
percent; and it ranges from 12 percent to 49 percent on any 
given year.
    So, I'm just leery. I've seen what mandates have done to 
our State insurance costs, and I'm just a little leery when I 
see the same type of thing on a Federal level.
    Senator Enzi. I appreciate that, and I would mention that 
in the HELP Committee bill, Senator Harkin and I had an 
amendment that would have allowed for some flexibility for 
incentives, which could have provided for some preventive care; 
I did notice that that was accepted by the committee; I did 
notice that after the August recess, when the bill was actually 
printed, that part of it was no longer in there. So, pieces of 
that amendment were deleted.
    Thank you very much for your testimony. I will have more 
questions for all of you in writing and hope that you'll answer 
them.
    Thank you.
    The Chairman. Thank you, Senator Enzi.
    Senator Reed and then Senator Franken.
    Senator Reed. Thank you very much, Mr. Chairman.
    I, too, want to thank Commissioner Koller for braving the 
elements to come down here. You left out the dogsled.
    [Laughter.]
    Train, but the dogsled was the final thing.
    Commissioner Koller, one of the issues we've been talking 
about is ensuring that this system covers everyone in the 
State; and from your perspective as Commissioner, how important 
do you think that is, in terms of both delivering effective and 
cost-effective health care service?
    Commissioner Koller. Thank you, Senator Reed. In our State, 
we have seen our rate of uninsured, the percentage of people 
uninsured in the last 6 years, go from 6 percent to about 14 
percent. That is completely an effect of the economic downturn, 
which, as you know, and have worked hard with us, affected 
Rhode Island particularly severely.
    It is not a result of increasing health care costs; that 
certainly has contributed to it. But, those people who are 
uninsured, we still pay for.
    When I look at a rate--and this is the benefit of a 
comprehensive rate review--when I get a rate request, an annual 
estimated inflation of 12 percent, and then about 4 to 5 points 
of that is the hospital; and then when I go and I ask the 
health insurers what's that about, they say, ``Well, we've got 
to pay the hospitals 9 percent more in price increases''; 1 
percent for utilization, but 9 percent in price increases.
    I ask, ``What's that come from?'' They say, ``That's from 
the number of uninsured.'' The hospitals have not gotten paid 
for their uninsured, so they're looking for commercial insurers 
to make up the bill; and, so, we pay for the costs of the 
uninsured. I also think we pay, long-term with poor public 
health.
    You and Senator Sanders, have been strong advocates for 
community health centers; for having comprehensive primary 
care. That has to be the point of entry for this.
    Uninsured people are not getting good primary care. It's 
not clear that commercially insured people are getting good 
primary care. That is what has to be our focus.
    Senator Reed. In effect, one consequence of not covering 
everyone is that the uninsured will get health care, but 
expensively, through hospitals, and that has shifted, as you 
point out as Commissioner, directly to private insurance 
companies, who, in turn, recoup that from their customers.
    These 20 percent, as Mr. Olivo pointed out, these 20 
percent, 40 percent increases every year are in many respects 
traceable exactly back to the fact that we've got a whole group 
of people who have no coverage but still get care.
    Commissioner Koller. Yes. And if you look at who the 
uninsured are, by and large, they are working, single adults 
who, if they could afford health insurance, would buy it; but 
they are making an economic calculation based on their 
circumstances, to go bare.
    Why are they doing it? Because affordable health insurance 
isn't available; and because they're given the option to opt 
out, absent a mandate.
    Those are exactly the working uninsured, who comprise the 
majority of the uninsured, are exactly the folks we want in the 
pool to make it work.
    Senator Reed. One of the other things that we've got to do 
is not simply sort of fund this system; it's to reform the 
delivery of health care.
    In your capacity at the Neighborhood Health Plan of Rhode 
Island, and in your capacity as Commissioner you've got a 
unique perspective: You've actually run an HMO health insurance 
company and now you regulate them.
    What are some of the delivery improvements that you've seen 
already in Rhode Island; and will they be promoted by national 
health care reform or accelerated? Are there other things that 
are going to be possible?
    Commissioner Koller. The most important thing that I feel 
that we've done in Rhode Island in the commercial health 
insurance market, is to say to health insurers, if you want to 
work in this State, if you want to get the rate increases that 
you're seeking, you have to put more money into primary care. 
Primary care is the only part of our delivery system where the 
more we have, the lower our costs are and the better our health 
is.
    Yet we systemically pay it less over time, led primarily by 
the historical way that we've determined rates within Medicare.
    We have told the commercial and health insurers that we 
spent 6 percent of our insurance premiums on primary care--only 
6 percent. If you look at other countries, it's 15, 20, 25. 
There's no way that we're going to deliver you lower costs if 
we don't--over the long-term--put more money in primary care.
    I think the other thing is to change the way the hospitals 
get paid. It is not in the hospital's financial interest to 
reduce their re-admission rate. That is money in the bank. So 
when you go to health in hospitals and you say, 20 percent of 
your Medicare patients are being re-admitted, they say, ``Yes, 
I know, and for me to work on that is financial suicide.'' So, 
we have to change the way that we pay them.
    There are absolutely things within the Affordable Care Act. 
The investments in community health centers, in the National 
Health Service Corps, in patient centers, Malcomb Home Demos 
within Medicare, changing the way that hospitals get paid. We 
need that kind of Federal leadership so that we can tell the 
commercial health insurers, Do the same thing in the States.
    That's how we get at the underlying costs.
    Senator Reed. Again, I thank you. My time's expired.
    I thank the Chairman and Ranking Member. This has been a 
very informative hearing; and I particularly want to thank you, 
Chris, for joining us; and to all the witnesses, for your 
firsthand testimony.
    And, go, go, Cuskers? Is that the right term?
    Ms. Schlichting. Go, Big Red.
    Senator Reed. Go, Big Red, OK. All right, take care.
    The Chairman. Big Red. I just want to clear up one thing, 
if you don't mind:
    Mr. Koller, you said that 6 percent went to primary care; 
is that 6 percent of the premium dollar?
    Mr. Koller. Six percent of the premium dollar goes, 
actually, it's even less than the premium dollar, because it's 
6 percent of medical expenses. So, it's 6 percent of the 80 or 
85 or 80 percent goes to primary care over time, and yet--it 
has to be absolutely at the core of any kind of delivery system 
reform.
    I would say, Senator Enzi, to your point: My brother and I 
have spirited conversations about the difference between Rhode 
Island and Wyoming, and the fact that you can fit the entire 
State of Rhode Island into one of the counties up there. But I 
have this healthy respect for the importance of flexibility in 
terms of how States implement this.
    They recognize, in Wyoming, and any place, the importance 
of primary care.
    That doesn't change. That's not something that we can be 
flexible about.
    The Chairman. Senator Franken.
    Senator Franken. Thank you, Mr. Chairman.
    Thank you, all of you, for your testimony; Ms. Grasshoff 
for your testimony about your son, Joshua; Ms. Schlichting, for 
speaking about the importance of what we're doing in terms of 
not discriminating against people with preexisting conditions; 
Ms. Grasshoff about the importance of lifetime caps.
    Commissioner Koller, Rhode Island can fit into most 
States--counties, OK?
    [Laughter.]
    So, give it up about Wyoming.
    Mr. Olivo, thank you for your testimony. My dad worked for 
a great printing company for 30 years, in Minneapolis, Johnson 
Printing, as a printing salesman. We got our health insurance 
through Johnson Printing. We got great health insurance for our 
family.
    Your testimony about the 1099s, both here and in your 
written testimony, this is why I've co-sponsored an amendment 
or bill to actually get rid of that burden; and I think we 
will.
    So, thank you, and thank you for contributing to our 
understanding of that.
    Now, you wrote in your written testimony, that your health 
care insurance premiums increased by an average of 20 percent a 
year over the last 17 years; is that right?
    Mr. Olivo. That's correct, and what I mean by that, is, for 
renewing the same type of policy, it would typically come in, 
on the average, around 20 percent over a 10-year period.
    Senator Franken. OK. Over a 10-year period.
    Mr. Olivo. Annually.
    Senator Franken. Annually, OK, that's what I was looking 
at.
    That happened when there was no health care reform at that 
point.
    Now, what if I told you that monthly premiums for 
Massachusetts's businesses, after they passed their health care 
reform, which mandates the same stuff that this mandates, that 
the average monthly premiums rose, on an average of 6.9 percent 
from 2006 to 2007, and by 5 percent from 2007 to 2008? Would 
that be better than the 20 percent that you're----
    Mr. Olivo. From simple economics, that would be better, 
certainly.
    Senator Franken. OK. That's what happened.
    What if I told you that in Massachusetts, after they 
imposed the mandate that a percentage of Massachusetts 
employers who offer health insurance to employees, has 
increased to 76 percent from 70 percent, while during the same 
period, nationally, it declined from 68 percent to 60 percent 
during the same period; might that give you some hope?
    Mr. Olivo. Once again, coming from New Jersey where I've 
heard these tale of mandates and for 18, 19 years, saying, 
we're going to mandate and legislate--we're going to legislate 
our way toward lower premiums, I haven't seen it happen in my 
experience where that's to be the case.
    Senator Franken. But, the Massachusetts mandate is almost 
exactly, precisely what the national mandate is.
    And, do you understand for someone like Ms. Schlichting, if 
there wasn't a mandate, that it would be impossible to provide 
protection for people with preexisting conditions because then 
only people with preexisting conditions would get health care? 
There would be no reason to get health care until you got sick; 
right?
    Mr. Olivo. I certainly understand that. From my point of 
view--and keeping in mind I'm a small business owner who pays 
100 percent of my employees' premiums.
    Senator Franken. Right.
    Mr. Olivo. I'm worried about telling my employees, I can't 
afford your position anymore because of the new health care 
law. So, I'm well aware and I understand the problems. I'm just 
concerned for my own employees right now.
    Senator Franken. I'm sorry. I'm sorry. Why do you provide 
health insurance, you're not mandated to do so, for your 
employees?
    Mr. Olivo. Like any other expense, I look at it as an 
investment. I've chosen to invest in my employees this way; I 
think it's a good investment. I wouldn't presume to tell 
another business owner how they should invest. I would 
definitely say, by choosing to do this, it has affected my 
business' ability to grow, because I choose to forego other 
investments that could grow my capital, because I've chosen to 
do this for my employees.
    Senator Franken. But, you feel it's better for your 
business.
    Mr. Olivo. For me, personally, it is.
    Senator Franken. OK.
    Mr. Olivo. I think it's good business for me.
    Senator Franken. OK. So, now, suddenly, when there was a 
penalty that you'd have to pay if you dropped them, why would 
that incentivize you more to drop them than you've had before? 
That doesn't quite add up to me.
    Mr. Olivo. My competition begins doing it, and that's a 
very real possibility; and they all of a sudden have a less-
expensive expense structure and are gaining profitability, 
where I don't have it. It's natural capitalization at work--
it's something where I can't ignore because it will negatively 
affect my company's ability to have my employees further 
prosper.
    Senator Franken. I understand. And, you're aware in 
Massachusetts there is a penalty, and it very much parallels 
this bill, and yet, contrary to the rest of the country, since 
Massachusetts has adopted its mandate, more companies, more 
employers are insuring their employees in complete opposition 
to the rate in which it goes in the rest of the country, which 
is less companies have--a lower percentage of which have been 
insuring their employees in a way that would then mean that you 
don't have to compete; you'd have to compete against fewer 
companies that weren't insuring their employees.
    So, it would help your competitive advantage, considering 
that you're already someone who does the right thing; and I 
applaud you for that.
    Mr. Olivo. I've read things about Massachusetts that aren't 
working out well. I live in New Jersey, I don't know enough 
about Massachusetts to really comment on it; I could just say 
as a small-business owner, with the way this legislation is set 
up right now, I only see rising cost to my company. I don't see 
where I'm going to gain lesser expense.
    Whether that may happen and time bears it out, that could 
be. I just don't see it.
    Senator Franken. OK.
    Thank you, really all of you, for coming today. My time has 
expired.
    The Chairman. Thank you very much, Senator.
    I thank, again, all of our panelists who are here, for 
their very personal and poignant testimonies, for their 
professional testimonies, and also how this is affecting small 
businesses, who are really the people that employ most 
Americans.
    I agree that we're going to do something about the 1099. 
I've said many times before on this Health Reform bill, these 
are not the Ten Commandments written in stone; it's the law; 
it's the law that's in effect. Laws get changed. We modify 
things as time and circumstances, and as information comes to 
us.
    I've often referred to the Health Care Reform bill as a 
starter home. It's got a pretty good foundation; it's got a 
pretty good roof, but maybe there are some other things that 
need to be filled in and built into it.
    That's why sessions like this are, I think, important for 
us to hear from people about some of the good things, or maybe 
some of the questions that people have that we should be paying 
attention to, as we move ahead, as we probably modify, change 
things as we move into the future.
    Again, I thank you all very much for being here, and thanks 
for your excellent testimony.
    If there's no other business, the committee will stand 
adjourned.
    [Additional material follows.]

                          ADDITIONAL MATERIAL

                 Prepared Statement of Senator Mikulski

    Chairman Harkin, I thank you for organizing today's hearing 
that focuses on the consumer protections in the Affordable Care 
Act. I support the health care reform law and I am proud of the 
benefits that this law gives to Americans.
    The Marylanders I hear from every day tell me this law 
helps them and their families. Health care reform saves lives 
and saves money. It puts more dollars in families' pockets and 
not into insurance company's profits.
    While this law is not perfect, it gets a lot of things 
right. It ends gender discrimination so that a woman isn't 
charged 30 to 40 percent more in health insurance premiums 
simply for being a woman. It holds insurance companies 
accountable for spending money on quality health care instead 
of padding their bottom lines. Companies must now spend at 
least 80 percent of premiums on health care services such as 
mammograms and prescription drugs.
    Insurance companies can no longer deny insurance coverage 
because someone has a preexisting condition like asthma. In 
eight States, being a victim of domestic violence was 
considered a preexisting condition. This law puts a stop to 
that. Insurance companies can no longer abuse women after they 
have been abused by their husbands.
    Moms and Dads can breathe a sigh of relief because their 
child, who has leukemia, can no longer be denied health 
insurance coverage based on a preexisting condition. 
Additionally, insurers can no longer place a cap on lifetime 
limits and say it costs too much to treat a child with cancer.
    Today we are going to hear from Americans who are 
benefiting from the health reform law. We will hear how Lisa 
Grasshoff 's son, who has von Willebrand's disease, will no 
longer have to worry about exceeding lifetime limits. Lisa's 
insurer must now pay for her son's hemophilia care instead of 
denying coverage when her family hits the lifetime limit, which 
can happen pretty fast when you get really sick.
    I have also heard from parents in my own State of Maryland, 
like a woman who wrote to me named Maryanne. She has kids who 
are 22 and 24 years old. The Affordable Care Act lets children 
and young adults stay on their parents' health insurance until 
they are 26. Without these protections, people like Maryanne's 
kids would be without health insurance. Health care reform 
reduces the fear families have about providing medical care to 
their loved ones. Maryanne told me ``It's taken America too 
long to finally do something about health care reform. Please 
do not allow it to become undone.''
    I am proud of what we accomplished in health reform. Health 
care reform saves and strengthens Medicare. It ends the 
punitive practices of insurance companies. It provides 
universal access to health insurance. I am particularly proud 
that this law will also improve the quality of our health care 
and that we made significant investments in preventive care and 
public health.
    I thank the witnesses for being here today and look forward 
to hearing from all of them.
      Responses to Questions of Senator Enzi, Senator Alexander, 
        Senator Roberts and Senator Hatch by Secretary Sebelius
                              senator enzi
                               oversight
    Question 1. Congress has an obligation to conduct oversight of 
Federal agencies, to ensure there is transparency in our government and 
that Federal dollars are used as Congress intended. In order to fulfill 
this duty, my office and other congressional offices have written a 
number of letters to you asking for information on issues regarding 
health care reform implementation and other issues of importance at 
your agency. The answers we have received, however, are often very late 
and they rarely adequately address the issue in question.
    For example, a letter from 30 Senators asking about your plans for 
setting up high-risk pools was sent last year on June 22, yet we did 
not receive a response until September 22d--a full 85 days beyond the 
date a response was requested. In nearly every other case, HHS was late 
in responding or in some instances may have ignored the request.
    We need to have a better flow of information and better response 
rate from the Department. During your confirmation hearing in 2009, I 
believe you personally committed to being responsive to Senators from 
both parties. What do you plan on doing to ensure that HHS is 
responding to congressional requests in a more accurate, thorough and 
timely manner?
    Listed below are information requests that HHS either has not 
answered, or provided an incomplete response. When can I expect a 
response to the outstanding letters and who on your staff will be 
responsible for meeting that commitment so that my staff can speak to 
them?


----------------------------------------------------------------------------------------------------------------
              Date Sent                   Letter Description            Deadline                  Status
----------------------------------------------------------------------------------------------------------------
1/11/2010............................  The committee sent a     19-Jan-10..............  Incomplete response
                                        letter to Secretary                               received 156 days past
                                        Sebelius  regarding                               date requested.
                                        the failure to
                                        disclose a $400,000
                                        contract with HHS
                                        consultant and MIT
                                        Professor Dr. Gruber.
                                        Dr. Gruber has been
                                        one of the
                                        Administration's
                                        foremost sources of
                                        economic analysis in
                                        support of their
                                        health care proposals.
3/26/2010............................  The committee sent a     8-Apr-10...............  No response; currently
                                        letter requesting                                 307 days past date
                                        information relating                              requested (As of
                                        to non-confirmed                                  February 9, 2011).
                                        appointees serving
                                        under the HELP
                                        Committee's
                                        jurisdiction.
                                        Information requested
                                        includes a list of
                                        consultants hired
                                        since Jan. 20, 2009, a
                                        list of all non -
                                        career Senior
                                        Executive Service
                                        (SES) and Schedule C
                                        appointees, and
                                        quarterly updates.
4/22/2010............................  Senators Enzi, Burr and  14-May-10..............  Insufficient response
                                        Coburn sent a letter                              received 53 days past
                                        to  Secretary Sebelius                            date requested.
                                        requesting information
                                        on what HHS is doing
                                        to address the AIDS
                                        Drug Assistance
                                        Program (ADAP) waiting
                                        lists, if statutory
                                        authority is needed to
                                        provide greater
                                        flexibility, and
                                        whether remaining
                                        stimulus funds will be
                                        used to help minimize
                                        ADAP waiting lists.
4/26/2010............................  An oversight letter was  15-May-10..............  Insufficient response
                                        sent to HRSA, which                               received 69 days past
                                        administers the Ryan                              date requested.
                                        White program, to
                                        express concern over a
                                        February 2010
                                        regulation that
                                        rescinded the 24 month
                                        cap on emergency
                                        housing assistance.
                                        The letter requested
                                        documentation on the
                                        Administration's
                                        reasoning for
                                        rescinding the program
                                        cap as well as
                                        information detailing
                                        the amount of funding
                                        awarded for emergency
                                        housing between 2000
                                        and 2009.
5/27/2010............................  A letter was sent to     11-Jun-10..............  Response received 28
                                        Secretary Sebelius                                days past date
                                        relating to the mailer                            requested.
                                        sent by the Centers
                                        for Medicare and
                                        Medicaid Services to
                                        40 million seniors
                                        touting the benefits
                                        of health care reform.
                                        The letter  requests
                                        more information on
                                        who reviewed the new
                                        mailer as well as its
                                        cost to taxpayers.
6/22/2010............................  Senator Enzi and 30      30-Jun-10..............  Incomplete response
                                        other GOP Senators                                received 85 days past
                                        sent a  letter to                                 date requested.
                                        Secretary Sebelius
                                        asking about how the
                                        funding for the high
                                        risk pool program will
                                        work, and what will
                                        happen when it runs
                                        out.
7/22/2010............................  Senators Enzi and        6-Aug-10...............  Response received 49
                                        Grassley sent a letter                            days past date
                                        to  Secretary Sebelius                            requested.
                                        asking for an analysis
                                        of the
                                        Administration's claim
                                        that certain health
                                        insurance reforms
                                        would lead to a
                                        cumulative increase in
                                        health insurance
                                        premiums of likely
                                        less than 1 percent.
                                        The letter requests
                                        actuarial studies
                                        conducted by HHS and
                                        poses several
                                        questions about the
                                        reasoning and
                                        methodology they used
                                        to arrive at their
                                        estimate.
7/29/2010............................  Senator Enzi and other   16-Aug-10..............  Response received 85
                                        HELP Republicans sent                             days past date
                                        a letter requesting                               requested.
                                        information about the
                                        $25  million
                                        reallocation of funds
                                        for Ryan White ADAP
                                        waiting lists.
7/29/2010............................  An oversight letter was  12-Aug-10..............  Response received 95
                                        sent to Secretary                                 days past date
                                        Sebelius requesting                               requested.
                                        information on HRSA's
                                        ability to
                                        effectively oversee
                                        programs under its
                                        jurisdiction and the
                                        additional $250
                                        million of funding
                                        received under the new
                                        health care reform
                                        law. There are
                                        allegations that 25
                                        percent of all HRSA
                                        program grantees are
                                        on restrictive draw
                                        down plans.
----------------------------------------------------------------------------------------------------------------

    Answer 1. I take Congressional oversight very seriously and it is 
key to informed policymaking by the legislative branch. I have directed 
my staff to be forthcoming and as helpful as possible to Congress. I 
have stressed that we need to be prompt and timely in our responses, 
but we do want to make sure that we provide you with accurate 
information. Sometimes that process can require additional time and 
effort on the part of our staff. As far as I am aware, we have provided 
you with accurate and complete information. However, I will take a look 
at the requests you have identified and make sure that we have followed 
up appropriately.
                                  jobs
    Question 2. In your testimony, you noted that the new law is 
strengthening the economy. Please specifically identify what new jobs 
you believe the new health care law has created?
    Answer 2. The Affordable Care Act includes tax credits to help make 
health care affordable for working families. Small businesses can begin 
claiming tax credits to help provide insurance to their employees this 
year. All told, the Affordable Care Act includes the largest middle-
class tax cut for health care in American history. The law lowers costs 
for American businesses--especially small businesses--who are 
struggling to remain profitable and competitive under the status quo. 
The independent Congressional Budget Office confirmed that the law 
would lower health insurance premiums by up to 2 percent for small 
businesses and 3 percent for large businesses, and the Business 
Roundtable estimated that provisions to help bend the health care cost 
curve like those in the law could save $3,000 per person in health 
costs by 2019. Additionally, independent experts predict that the new 
law will create jobs--estimated at more than 250,000 per year.

    Question 3. In recent testimony before the House Budget Committee, 
CBO Director Elmendorf indicated that CBO estimates that the new health 
care law will reduce the number of full-time workers by 800,000 by the 
time the law is fully implemented. Do you disagree with the CBO 
analysis, and if so, what data do you possess that supports this 
belief?
    Answer 3. The CBO report says,

          ``The Congressional Budget Office (CBO) estimates that the 
        legislation, on net, will reduce the amount of labor used in 
        the economy by a small amount--roughly half a percent--
        primarily by reducing the amount of labor that workers choose 
        to supply. That net effect reflects changes in incentives in 
        the labor market that operate in both directions: Some 
        provisions of the legislation will discourage people from 
        working more hours or entering the workforce, and other 
        provisions will encourage them to work more. Moreover, many 
        people will be unaffected by those provisions and will face the 
        same incentives regarding work as they do under current law.''

    Question 4. Has the Department or the Office of Management and 
Budget calculated how many agents and brokers will likely lose their 
jobs as a result of the new insurance regulations proposed by your 
department?
    Answer 4. None of the Affordable Care Act regulations take away 
Americans' ability to continue to buy coverage through an agent or 
broker. The medical loss ratio (MLR) rule, however, does ensure 
consumers are receiving value for their premiums by requiring insurance 
companies offering coverage in the individual market to spend at least 
80 cents of every dollar on medical claims and quality improvement 
activities, not on administrative expenses like overhead and salaries. 
Insurers also have to report how much of their premium dollars are 
spent on agent and broker commissions. Separating broker fees and 
insurance premiums enables consumers to see exactly what percentage of 
their premiums is going toward their health care, and protects them 
from being charged higher premiums to cover an excessive share of non-
health care expenses.

    Question 5. According to the Congressional Budget Office, 
``Requiring employers to offer health insurance--or pay a fee if they 
do not--is likely to reduce employment.'' Do you dispute the validity 
of this analysis? How do you believe employers will respond to the $52 
billion in new taxes on employers imposed by the new health care law?
    Answer 5. The Affordable Care Act makes American businesses more 
competitive by reforming our broken health care system, taking steps to 
control health care costs, and helping to eliminate the ``hidden tax'' 
that drives up the price of employer-based health insurance to cover 
the cost of care for the uninsured. The law also ensures that Americans 
who work for employers that do not offer coverage still have access to 
affordable, high-quality health insurance. In fact the Congressional 
Budget Office emphasizes that the Affordable Care Act will ``encourage 
other workers to take jobs that better match their skills, because they 
would not have to stay in less desirable jobs solely to maintain their 
health insurance.'' Further, independent experts predict that the new 
law will create jobs--estimated at more than 250,000 per year.
                                 costs
    Question 6. In your testimony, you estimate that a family of four 
earning $55,000 a year will save nearly $6,000 each year as a result of 
the tax credits. What percentage of Americans will actually be eligible 
for these tax credits?
    Answer 6. The Congressional Budget Office estimates that in 2019, 
19 million Americans will receive tax credits to purchase coverage in 
the Exchanges.

    Question 7. Your testimony suggested the medical loss ratio 
regulation will increase value for consumers. But most consumers are 
more concerned about health care costs. Do you have any independent 
empirical analysis that demonstrates that the medical loss ratio 
regulation will lower costs?
    Answer 7. The MLR regulation is designed to ensure that consumers 
are getting value for their health care dollar. The regulation was 
issued late last year, but we are already seeing indications that this 
provision, in conjunction with the Affordable Care Act's rate review 
provision, is causing insurance companies to think twice about their 
premium increases and, in some cases, reducing the size of their annual 
premium increases. For example, for the second time in a year we have 
seen insurers in California reduce or delay planned rate increases.

    Question 8. Please identify any independent empirical analysis that 
you are aware of that demonstrates that the rate review regulation will 
lower health care costs?
    Answer 8. Disclosing proposed rate increases, along with the 
insurer's justification, will shed light on industry pricing practices 
that some experts believe have led to unnecessarily high prices. This 
unprecedented new transparency in the health insurance market will 
promote competition, encourage insurers to do more to control health 
care costs and discourage insurers from charging rates which are 
unjustified. Importantly, we know rate review works. For example, 
Connecticut regulators recently rejected a proposed 20 percent rate 
increase after their review found that such an increase would be 
excessive.
                      consequences of the new law
    Question 9. In the preexisting condition exclusion interim final 
rule, the Administration notes:

          ``There are two main categories of children who are most 
        likely to be directly affected by these interim final 
        regulations: First, children who have a preexisting condition 
        and who are uninsured; second, children who are covered by 
        individual insurance with a rider excluding coverage for a 
        preexisting condition or a preexisting condition exclusion 
        period. For the latter category, obtaining coverage for the 
        preexisting condition may require terminating the child's 
        existing policy and beginning a new one.''

The regulation also estimates there are 90,000 children in the latter 
category.
    Of these 90,000 children the Department estimates will benefit from 
the new law, how many live in 1 of the 20 States in which there are no 
carriers selling new child only health plans? How can parents of these 
children consider terminating the child's existing policy if they live 
in 1 of the 20 States in which there are no new child-only policies 
available?
    Answer 9. In March 2010, the insurance industry said they wanted to 
make discriminating against children with preexisting conditions a 
thing of the past. Several months later, they reneged on their 
commitment and unfortunately, some insurance companies made the 
unfortunate decision to stop selling child-only insurance policies. We 
stand ready to work with States and private insurers to facilitate 
their ability to offer child-only health care policies. Already we have 
offered to work with States and private plans to have special open 
seasons and have advised them of other options available to limit 
adverse selection, such as adjusting rates for health status or 
permitting child-only rates to be different from rates for dependent 
children, consistent with State law. We hope that insurers in the 
affected States will examine all of the flexibility available to them 
to continue to offer child-only policies and reconsider their decision 
not to offer child-only policies.
    Additionally, CCIIO will continue its work to ensure that 
Preexisting Condition Insurance Plans (PCIPs) in all States offer 
viable coverage for children. The PCIP program includes coverage of 
pediatric benefits, prescription drugs, and inpatient, outpatient, and 
mental health services. In States where the Federal Government runs the 
PCIP program, one way uninsured children with preexisting conditions 
can qualify for PCIP is if they are offered a commercial insurance 
policy at a premium at least twice as expensive as what they would pay 
in PCIP in lieu of a denial of coverage by an insurer.

    Question 10. In your testimony, you mention 5,000 unions, local 
governments, and businesses have signed up for the early retiree 
reinsurance program. Please provide a detailed accounting of who these 
entities are, which have filed claims, how many claims have been paid 
and how much of the original $5 billion allocated for the program has 
already been spent?
    Answer 10. HHS has administered the Early Retiree Reinsurance 
Program (ERRP) with a great deal of transparency, and all of this 
information is publicly available on our Web site. On March 31, we 
published a report announcing that the program has provided more than 
1,300 employers across all 50 States with nearly $1.8 billion in 
reimbursements. The report details reimbursements received by each 
participating plan sponsor, and is available here: http://
cciio.cms.gov/resources/files/errp_progress_report_3_31_11.pdf.
    A March 2, 2010 report providing additional information can be 
found here: http://www.healthcare.gov/center/reports/
retirement03022011a.pdf.
    In addition, the ERRP page of healthcare.gov contains a searchable 
list of approved plan sponsors by State. The page is directly linked 
here: http://www.healthcare.gov/law/provisions/retirement.

    Question 11. Please provide the most recently collected enrollment 
data by State for the new high-risk pool program authorized in PPACA, 
including the 23 States in which the Federal Government has contracted 
with the Government Employees Health Association (GEHA) to run the 
program.
    Answer 11. Based on data reported as of February 1, 2011, PCIP had 
12,437 members. Of these, 8,762 were enrolled in State-run PCIPs and 
3,675 were enrolled in the federally run PCIP.\1\
---------------------------------------------------------------------------
    \1\ [Note: We should have updated numbers soon.]

    Question 12. Please provide a detailed accounting of how the 
Department has spent the $5 billion allocated for the new high-risk 
pool program, separately identifying the amounts provided to each State 
and the funds spent on advertising.
    Answer 12. This is still being determined.

    Question 13. How many entities have applied for waivers from the 
annual benefit limit requirement? How many of the applications were 
accepted by HHS? How many of the applications were denied by HHS? 
Please also provide a list of all of the names of the entities that 
have applied for waivers and the current status of their applications.
    Answer 13. As of April 1, 2011 a total of 1,168 annual limit waiver 
applications had been granted. As of February 19, 2011, 79 applicants 
were initially denied. Applicants that were denied a waiver were 
informed of their ability to seek a reconsideration of CCIIO's 
determination. Some applicants that have asked for reconsideration have 
been subsequently approved. An updated list of approved applications by 
plan type can be found on CCIIO's Web site here: http://cciio.cms.gov/
resources/files/approved_applications_for_waiver.html.

    Question 14. Please describe the process that the Department has 
used to determine whether to grant a waiver from the annual benefit 
limit requirement. As part of this answer, please identify the criteria 
that are used to assess the merits of the request, as well as the 
policies and procedures that are used by your staff to make waiver 
determinations. Please identify which individuals within the Department 
are responsible for making these determinations, the role the HHS 
General Counsel in reviewing these decisions, and any processes that 
are being used to ensure that the waivers are issued in a manner that 
is consistent with the policies and procedures described above.
    Answer 14. Information on the waiver process is available in our 
guidance, here: http://cciio.cms.gov/resources/files/ociio_2010-
1_20100903_508.pdf.

    Question 15. Have any entities or health plans been issued waivers 
exempting them from any requirements included in PPACA (other than the 
waivers that have been issued exempting plans from meeting the annual 
benefit limits)? Does HHS intend to issue waivers exempting any 
entities from any other requirements included in PPACA?
    Answer 15. As you note, as of April 1, 2011, 1,168 group health 
plans or health insurance issuers had received 1-year waivers from the 
restricted annual limits provision, consistent with the Secretary's 
responsibilities under the statute.
    The Affordable Care Act permits an adjustment to the Medical Loss 
Ratio (MLR) standard for a State's individual health insurance market 
for up to 3 years if it is determined that applying the 80 percent MLR 
standard ``may destabilize the individual market in such State.'' In 
order to qualify for this adjustment, a State must demonstrate that 
requiring insurers in its individual market to meet the 80 percent MLR 
has a reasonable likelihood of destabilizing the State's individual 
insurance market and could result in fewer choices for consumers. Under 
this standard, HHS accepted the Maine Bureau of Insurance request for 
an adjustment to 65 percent for 2011 and 2012. HHS will allow the 
adjustment to continue through 2013, as Maine requested, if the State 
provides additional data at the end of 2012 to support a third year of 
the adjustment to 65 percent.
                            prevention fund
    Question 16. The new health care law established a Prevention and 
Public Health Fund (PPHF), which will provide $15 billion over the next 
10 years for prevention, wellness and public health activities. Recent 
HHS press releases indicated that $500 million was allocated from this 
fund last year for these activities and $750 million will be spent this 
year.
    Please provide a detailed accounting of how these funds have been 
spent. As part of your answer, please provide the names of all entities 
that have received funds, the amounts they received, the stated purpose 
for which the funds are to be used and the agencies within HHS that 
actually dispersed the funds.
    Answer 16. Attached please find spreadsheets that display a 
detailed accounting of how HHS obligated the $500 million from the FY 
2010 Prevention and Public Health Fund (PPHF). The financial 
information displayed represents the most current available as of March 
2011. The attached spreadsheets are organized based upon the agencies 
that awarded the funds \2\:
---------------------------------------------------------------------------
    \2\ [Note: These charts may be found in the attached pdf 
documents].

     HRSA: 1 summary spreadsheet, 5 program-specific 
spreadsheets showing obligations of PPHF funds.
     CDC: 1 spreadsheet showing obligations for PPHF-funded 
programs by grant mechanism (data pulled between 12-1-2010 and 2-9-
2011), 1 spreadsheet that describes the program funded by each grant 
mechanism.
     OS: 2 spreadsheets--1 displays ASPA and ASPE programs, 1 
displays OASH programs funded with the PPHF.
     SAMHSA: 1 spreadsheet showing all awards under the Primary 
and Behavioral Health Integration program.
     AHRQ: 1 spreadsheet showing PPHF funds obligated for the 
U.S. Preventive Services Task Force and Healthy Weight Practice-Based 
Research Networks.

    As of March 23, 2011, HHS has not obligated any of the proposed 
$750 million from the FY 2011 Prevention and Public Health Fund.

    Question 17. Please describe the process that the Department has 
used to determine the eligibility of an entity to receive funds from 
the PPHF. As part of this answer, please identify the criteria that are 
used to assess applications, the policies and procedures used to 
determine eligibility and the amount of funding to be provided to an 
entity, and whether the process used to make determinations was a 
competitive one. Please also identify. Please identify which 
individuals within the Department are responsible for making these 
determinations, how input from stakeholders is collected and used in 
this process, the role the HHS General Counsel in reviewing these 
determinations, and any processes that are being used to ensure that 
all determinations are made in a manner that is consistent with the 
policies and procedures described above.
    Answer 17. The Affordable Care Act states that the purpose of the 
Prevention and Public Health Fund is for an ``expanded and sustained 
national investment in prevention and public health programs that will 
improve health and help restrain the rate of growth in private and 
public sector health care costs.'' The resources from the Fund serve as 
a funding source for many existing HHS programs and new programs that 
meet this purpose, and the Fund does not have its own eligibility 
criteria. Generally, across the range of HHS programs funded with 
Prevention and Public Health Fund resources, grants supported by the 
Fund are available to universities, States and local governments, 
professional health organizations, tribal organizations, community and 
faith-based organizations.
    Each agency's program has its own eligibility requirements, and the 
funding opportunity announcements (FOAs) for each program, which are 
posted on the respective operating division's Web site and on 
grants.gov, describe in full detail the purpose of the award, 
eligibility requirements, estimated award amount(s), application 
deadline, and method of selection. As with other HHS grant programs, 
applications that meet the eligibility requirements and are responsive 
to the FOA are reviewed and scored by an objective review panel based 
on the criteria published in the FOA. The review panels are comprised 
of experts knowledgeable in the relevant field. Applications for awards 
that support research are reviewed for both scientific merit and 
programmatic conformance. Awards are made according to rank score, 
additional published criteria, if any, and the availability of funds. 
After all selections have been made, organizations whose applications 
were reviewed but not funded will be notified of their status. An 
application will remain active for 1 year from the date of 
notification.
    HHS General Counsel reviews all funding opportunity announcements 
related to programs supported by the Prevention and Public Health Fund 
and ensures that all awardee determinations comply with standard HHS 
policies and procedures as well as the laws governing grant authority.

    Question 18. As you prepare to spend the $750 million allocated for 
distribution this year, please identify the criteria that will be used 
to determine the most effective prevention and public health activities 
to fund, how funding will be distributed among prevention and public 
health activities, and whether geographic and demographic 
characteristics were used to determine program funding.
    Answer 18. The Prevention and Public Health Fund offers HHS the 
opportunity to fund the best evidence-based interventions. The 
Affordable Care Act authorizes the award of funds to programs that 
provide for an expanded and sustained national investment in prevention 
and public health improvement. We have engaged in a constructive 
dialogue within the Administration and Congress on specific, high-
impact investments that can make a difference in the health of 
Americans. By investing in State and local public health infrastructure 
and community efforts to implement proven prevention programs, we can 
make a significant impact on the leading causes of death.
    Because of the Prevention and Public Health Fund, businesses, 
schools and other educational institutions, State and local 
governments, and non-profits have received the much-needed financial 
investment for programs such as tobacco cessation, obesity prevention, 
and increasing the primary care and public health workforce. In several 
cases, geographic and/or demographic characteristics were used to 
determine program funding based on population size, burden of disease, 
and ability to reduce health disparities and/or achieve positive health 
outcomes.
    For fiscal year 2011, building on the initial investment of fiscal 
year 2010, new funds are dedicated to expanding on four critical 
priorities:

    1. Community Prevention ($298 million): The initiative supports 
community prevention activities that we know will work to reduce health 
care costs and promote health and wellness.

          Community and State Prevention ($222 million). 
        Implement the Community Transformation Grant program and 
        strengthen other programs to support State and community 
        initiatives to use evidence-based interventions to prevent 
        heart attacks, strokes, cancer and other conditions by reducing 
        tobacco use, preventing obesity, and reducing health 
        disparities. Launch a consolidated chronic disease prevention 
        grant program.
          Tobacco Prevention ($60 million). Implement anti-
        tobacco media campaigns which are proven to work to reduce 
        tobacco use, telephone-based tobacco cessation services, and 
        outreach programs targeting vulnerable populations, consistent 
        with HHS' Tobacco Control Strategic Action Plan.
          Obesity Prevention and Fitness ($16 million). Advance 
        activities to improve nutrition and increase physical activity 
        to promote healthy lifestyles and reduce obesity-related 
        conditions and costs. These activities will support the First 
        Lady's ``Let's Move!'' initiative and help implement 
        recommendations of the President's Childhood Obesity Task 
        Force.

    2. Clinical Prevention ($182 million): The initiative supports 
clinical preventive services that we know will work to reduce health 
care costs and promote health and wellness.

          Access to Critical Wellness and Preventive Health 
        Services ($112 million). Increase awareness of new preventive 
        benefits made available by the Affordable Care Act. Expand 
        immunization services and activities. Strengthen employer 
        participation in wellness programs.
          Behavioral Health Screening and Integration with 
        Primary Health ($70 million). Assist communities with the 
        coordination and integration of primary care services into 
        publicly funded community mental health and other community-
        based behavioral health settings. Expand suicide prevention 
        activities and screenings for substance use disorders.

    3. Public Health Infrastructure and Training ($137 million): The 
allocation strengthens State and local capacity to prepare health 
departments to meet 21st century challenges.

          Public Health Infrastructure ($40 million). Support 
        State, local, and tribal public health infrastructure to 
        advance health promotion and disease prevention through 
        improved information technology, workforce training, and policy 
        development.
          Public Health Workforce ($45 million). Support 
        training of public health providers to advance preventive 
        medicine, health promotion and disease prevention, 
        epidemiology, and improve the access to and quality of health 
        services in medically underserved communities.
          Public Health Capacity ($52 million). Build State and 
        local capacity to prevent, detect, and respond to infectious 
        disease outbreaks through improved epidemiology and laboratory 
        capacity. Increase investments in programs that prevent 
        healthcare associated infections.

    4. Research and Tracking ($133 million): The initiative supports 
the Affordable Care Act's expansion of coverage for community and 
clinical preventive services by increasing resources for research and 
evaluation of preventive services.

          Health Care Surveillance and Planning ($84 million). 
        Fund data collection and analysis to monitor the impact of the 
        Affordable Care Act on the health of Americans. Boost the 
        collection and analysis of environmental hazards data to 
        protect the health of communities.
          Prevention Research ($49 million). Strengthen the 
        CDC-facilitated Community Guide by supporting the Task Force on 
        Community Preventive Services' efforts to identify and 
        disseminate evidence-based recommendations on important public 
        health challenges to inform practitioners, educators, and other 
        decisionmakers. Expand the development of recommendations for 
        clinical preventive services, with enhanced transparency and 
        public involvement in the processes of the U.S. Preventive 
        Services Task Force. Fund cross cutting public health research 
        studies.

    Question 19. Please describe how, on an ongoing basis, the 
Department will inform the public and Congress about how the PPHF funds 
are used.
    Answer 19. Information will be publicly available on an ongoing 
basis which will detail how the PPHF funds are used. As is our usual 
practice, as grants are awarded, HHS will relay that information via 
press releases and fact sheets on the various agencies' Web sites, 
www.hhs.gov and/or www.healthcare.gov. Information regarding the State-
by-State breakdown of the fiscal year 2010 PPHF funds is already 
available on the Web site as is information regarding the categories of 
fiscal year 2011 PPHF dollars. For more information, visit http://
www.healthcare.gov/news/factsheets/prevention02092011a.html and http://
www.healthcare.gov/news/factsheets/prevention02092011b.html.
    Interested parties may also contact Grants Management Specialists 
in the various Operating Divisions to formally request this 
information. In addition, there are useful Web sites that provide 
additional information. For example, the Computer Retrieval of 
Information on Scientific Projects (CRISP) (http://crisp.cit.nih.gov) 
is a public Web site that shows funded grants from CDC's IMPAC II 
grants management system.

    Question 20. Please describe how the Department will measure the 
efficacy of the programs funded under Section 4002, specifically with 
regard to improving the health outcomes of specific individuals and 
reducing health care expenditures.
    Answer 20. Recipients of grants funded with Prevention and Public 
Health Fund resources are expected to achieve the stated outcomes of 
the grant. Awardees will develop evaluation plans to ensure performance 
monitoring and tracking of overall progress on outcome objectives as 
well as specific progress on activities designed to address the core 
objectives of the respective program. In addition, PPHF resources are 
available for healthcare surveillance and statistics activities, which 
will track the impact of the ACA, such as changes in the health care 
system and local, State, and national trends over time. HHS plans to 
use measures such as: percentage of adults who smoke cigarettes, 
percentage of adults with a healthy weight, percentage of children with 
a healthy weight, percentage of infants born at a low-birth weight, 
percentage of people receiving seasonal influenza vaccine in the last 
12 months, and percentage of people who have a specific source of 
ongoing medical care, among others.
   community living assistance services and supports act (class act)
    Question 21. The CLASS Act was passed as part of the Patient 
Protection and Affordable Care Act of 2010. On January 5, you sent a 
letter to Congress stating that the CLASS Act programs would be moved 
to the Administration on Aging (AOA). The following questions concern 
that move and the overall implementation of the CLASS Act.
    Is the Administration on Aging (AOA) receiving funds to administer 
the program? Are Federal funds being transferred from other previously 
appropriated programs, such as Own Your Future and the National Long-
Term Care Clearinghouse, to finance the administrative costs of the 
CLASS Act? Please list any programs whose funding has been shifted to 
implement the CLASS Act, and for each fiscal year. Please specify 
whether these are mandatory or discretionary funds. Please also list 
the statutory authority for the use of these funds for the 
implementation of the CLASS Act.
    Answer 21. The President's fiscal year 2012 Budget requests $120 
million in administrative funding for the CLASS program, including 
significant investments for the development of a national IT system and 
education and outreach to potential participants and employers. The 
requested funds will be used to bridge the period between fiscal year 
2011 when funding is covered under the Health Reform Implementation 
Fund authorized by Section 1005 of P.L. 111-152 and the point at which 
administrative funding can be drawn statutorily from premiums received.
    For fiscal year 2010 and fiscal year 2011, no AOA funding is being 
used to administer CLASS. The program's expenses are being funded 
entirely by the Health Reform Implementation Fund. No funding has been 
transferred from other programs.

    Question 22. Is there expected to be an advertising and/or outreach 
campaign for the CLASS Act programs? If so, what is the 10-year budget 
for the advertising/outreach campaigns? How will the monies be spent? 
Where will the Department of Health and Human Services (HHS) find the 
money for the campaign? Please specify whether these are mandatory or 
discretionary funds. Please also list the statutory authority for the 
use of these funds for the implementation of the CLASS Act.
    Answer 22. The CLASS Act is designed to help Americans prepare for 
their financial future by offering insurance that will help pay for an 
individual's future long-term care needs. The CLASS program is required 
by law to maintain solvency over 20 and 75 years. The Department of 
Health and Human Services (HHS) will ensure CLASS meets these statutory 
requirements, and no taxpayer funds will be used for payment of 
benefits. Outreach and education will be crucial components of 
achieving the goals of the CLASS program for two reasons. First, 
surveys show widespread misunderstanding about the nature of long-term 
care costs and the extent to which Medicare pays for these services and 
supports. Outreach and education will provide Americans with 
information they need to plan responsibly for their own future. Second, 
an informed public is more likely to recognize the benefits that CLASS 
provides and choose to participate in the program, boosting 
participation and improving the fiscal solvency of the program.
    The President's fiscal year 2012 Budget requests $120 million in 
discretionary appropriations to fund outreach, education and 
administration. This funding will be spent pursuant to Title 32 of the 
Public Health Service Act.

    Question 23. Recently, I was informed that HHS intends to contract 
with outside groups, Knowledge Networks and Thompson Reuters, to 
conduct a study and surveys on who is purchasing long-term care 
insurance and related products. Were these contracts put out for 
competitive bid? Will you please supply copies of the contracts?
    Answer 23. The Department of Health and Human Services (HHS) will 
develop CLASS to meet the program's statutory requirements for solvency 
over 20 and 75 years, and no taxpayer funds will be used for the 
payment of benefits. HHS is conducting research to increase our 
understanding of Americans' attitudes, opinions and knowledge of the 
risks of needing long-term care and their likely need for services. The 
information will be used to support development of the CLASS benefit. 
The contracts to Thompson Reuters and Knowledge Networks were awarded 
pursuant to Federal Acquisition Regulations. The Thompson Reuters 
contract was awarded through the Department's competitive indefinite 
delivery/indefinite quantity (ID/IQ) task order contract mechanism. The 
contract to Knowledge Networks was awarded through the GSA Mission 
Oriented Business Integrated Services (MOBIS) Schedule (Survey Services 
874-3). Copies of these contracts are attached.

    Question 24. If surveys were used by these outside groups on behalf 
of a study undertaken for HHS, Federal law requires that the surveys of 
more than 10 individuals must be approved by the Office of Management 
and Budget. Please supply copies of the OMB approval of these surveys 
and copies of all surveys used.
    Answer 24. All surveys that will be conducted to support CLASS 
program development will undergo review by OMB, as required under the 
Paperwork Reduction Act (PRA). All information collection requests 
(ICRs) submitted by agencies for OMB approval under the PRA can be 
found at http://www.reginfo.gov/public/do/PRASearch. OMB has reviewed 
and approved one survey that contained questions related to the CLASS 
Act. These questions added to HHS/CDC's National Health Interview 
Survey (approved by OMB on December 13, 2010) can be found at: http://
www.reginfo.gov/public/do/PRAViewDocument?ref_nbr=201009-0920-002.

    Question 25. In adhering to the President's commitment to 
transparency and abiding by government contract regulations, please 
list all studies that have been submitted to OMB for approval in the 
last 180 days. Include the estimated cost of the study, the source of 
the funding, as well as the organization in charge of its 
administration.
    Answer 25. No studies have been submitted to OMB for approval.

    Question 26. The SCAN Foundation has actively advocated for passage 
of the CLASS Act and has awarded grants to help implement the program. 
In fulfilling Congress' obligation to conduct routine oversight please 
describe the Department's and AOA's relationship and communication with 
the Foundation. Does AOA receive any funding or resources from the SCAN 
Foundation? If so, please provide a breakdown for each fiscal year. Is 
SCAN or any of its employees or representatives currently under 
contract or serve as a consultant to HHS?
    Answer 26. The SCAN Foundation operates independently and does not 
fund any HHS activities. HHS officials and staff meet with 
representatives from a range of outside organizations on numerous aging 
and long-term care issues; SCAN is among those organizations. No 
employees of the SCAN Foundation are under contract with or serve as a 
consultant to HHS related to the CLASS Act.

    Question 27. Has the Department or AOA hired any staff for the 
purposes of running the CLASS Act programs? Please list any employees 
or contractors hired for purposes of the CLASS Act and their roles in 
implementing the CLASS Act. How many full-time employees does HHS or 
AOA anticipate hiring for the implementation of the CLASS Act programs? 
Will employees of other Federal agencies be used for the implementation 
of the CLASS Act programs?
    Answer 27. Yes, currently the CLASS program has a team of 12 full-
time staff. The staff includes program specialists and IT 
professionals. The fiscal year 2012 budget request discusses the 
Administration on Aging's plans to have approximately 22 full-time 
equivalents or FTEs working on the CLASS program in fiscal year 2011. 
The fiscal year 2012 budget requests an appropriation to support 40 
FTEs in fiscal year 2012.

    Question 28. Has the Department of AOA hired an actuary for the 
CLASS Act? Pursuant to Section 3203 of the CLASS Act, you shall develop 
at least three actuarially sound benefit plans as alternatives for the 
CLASS Independence Benefit Plan. Have you consulted with the three 
actuaries, and if so, who are the actuaries? Is the actuary for the 
Centers of Medicare and Medicaid Services (CMS) one of the three 
actuaries? When will the three alternatives be shared with 
Congressional Oversight Committees? When will the final decision be 
made with respect to which actuarial plan alternative will be the basis 
for the CLASS Act implementation? Will you require that each of the 
actuarial analyses contain a 75-year analysis?
    Answer 28. Yes. AOA/CLASS has hired an actuary, Robert Yee, who has 
over 30 years of actuarial and executive experience, including at the 
largest provider of private long-term care insurance in the country. 
Robust actuarial estimates will be crucial components of achieving the 
goals of the CLASS program. The statute requires the development of 
three benefit plans. The methods and assumptions that underlie these 
plans must be certified by the CMS Actuary.

    Question 29. What discussions have taken place between HHS/AOA and 
the Department of Treasury regarding the establishment of enrollment 
mechanisms for collecting CLASS Act program premiums?
    Answer 29. We have had conversations with the Department of 
Treasury for advice on how to establish IT systems for accurate and 
streamlined collection of premiums. The CLASS program is working on 
mechanisms for employers and individuals to pay premiums into the 
program, including through third-party payroll processors.

    Question 30. What discussions have taken place with States and 
related entities and the private sector in the establishment of the 
eligibility assessments pursuant to Section 3205 of the CLASS Act?
    Answer 30. We have not discussed CLASS eligibility assessment 
issues with States. However, we are conducting research on eligibility 
assessments currently used in the private long-term care insurance 
market, and examining closely the assessment procedures used by State 
insurance and Medicaid programs.

    Question 31. When will the first premiums be collected pursuant to 
the CLASS Act programs? Will the collection of premiums begin prior to 
the establishment of the CLASS Independence Benefit Plan? Will the 
collection of premiums begin prior to the establishment of enrollment 
mechanisms for all entities and individuals? What regulations need to 
be finalized before premiums collection commences?
    Answer 31. The Department will announce the CLASS plan by October 
2012, after considering the recommendation of the CLASS Independence 
Advisory Council. Enrollment and premium collection will not begin 
until a benefit plan, enrollment mechanisms, and information systems 
are established.

    Question 32. Recently, you gave a speech to the Kaiser Family 
Foundation concerning the CLASS Act. You claimed that the CLASS Act has 
loopholes and that it only offers two options for setting premiums and 
``[n]either of these options is appealing.'' What loopholes need to be 
fixed? Will these require legislative changes? What other options are 
you considering for premiums? Will these premium issues require 
legislative changes?
    Answer 32. We are not seeking legislative changes. As I said in my 
speech at the Kaiser Family Foundation, we are taking advantage of the 
flexibility allowed us in the statute to structure premiums in order to 
keep CLASS solvent.
    For example, I will use the flexibility the law allows to ensure 
that there are not loopholes in the law that allow people to enroll in 
the program and then strategically skip payments yet remain enrolled.

    Question 33. In recent years, the Federal Government's own long-
term care insurance programs experienced a serious spike in cost of 
premiums to those enrolling in the program. How can you ensure that no 
premium spikes will occur with those enrolling in CLASS Act programs? 
Will enrollees in CLASS Act programs be given the opportunity to 
receive a refund if premium spikes are too high?
    Answer 33. We are looking at options for indexing premiums so that 
they will rise along with benefits. The indexing system would have to 
be completely transparent. That way people can plan ahead without being 
surprised by sudden large rate increases.
                                general
    Question 34. States are having a difficult time balancing their 
budgets due to restrictive Medicaid maintenance of effort (MOE) 
requirements. You recently recommended different strategies for States, 
such as purchasing drugs more efficiently, but many of these strategies 
have already been employed by States over the past few years to rein in 
spending.
    How are States supposed to implement new and innovative approaches 
in the short term AND long term when they are heavily restricted by the 
current MOE requirements?
    Answer 34. As a former Governor, I know the difficult budget 
pressures facing States. The Administration has a strong track record 
on our partnership with States during difficult economic times. Working 
with Congress, we increased Federal support for Medicaid, supporting 
increased enrollment at the same time when State Medicaid resources 
were down. Working again with Congress, we extended the Children's 
Health Insurance Program (CHIP) to secure funding into the future. As a 
result, in 2009, even though Medicaid enrollment rose because of the 
recession, State spending in Medicaid declined by 10 percent.
    There are a number of steps States can take to reduce costs and 
squeeze waste, fraud and abuse from their programs. On February 3, 
2011, I sent a letter to all Governors laying out a broad array of 
options already available to them to reduce their spending and balance 
their budgets, as well as new ideas that can be accomplished through 
existing options or waivers. States have many choices they can make 
including limits on some benefits, changes in cost sharing, and greater 
use of managed care. A copy of the letter can be found at: http://
www.hhs.gov/news/press/2011pres/01/20110203c.html.
    Medicaid cost issues largely reflect the cost issues facing our 
health care system as a whole. Like other payers, States can save 
considerable dollars by focusing on improving the safety and quality of 
care. Efforts to reduce and eliminate unnecessary hospital readmissions 
are a great example. Preventing one readmission of a disabled adult 
with Medicaid can save enough money to cover three adults without 
disabilities for an entire year.
    On February 25, 2011, CMS also sent a letter to State Medicaid 
directors clarifying situations in which the maintenance of effort 
provision does not apply. (Please visit the CMS Web site for a copy of 
the letter to States: http://www.cms.gov/smdl/downloads/SMD11001.pdf.) 
CMS intends to continue to work with Governors on further exploring 
existing flexibility and options to improve Medicaid's performance. CMS 
recently created the Medicaid State Technical Advisory Teams (M-STAT) 
that are responsible for working directly with States to address steps 
they can take to improve efficiency in their programs and develop 
effective cost containment strategies.
    We are also exploring options such as those that will be proposed 
by the National Governor's Association. We continue to work closely 
with States on innovative approaches to improve the quality and 
efficiency of care provided to high-cost beneficiaries, such as those 
eligible for both Medicare and Medicaid (dual eligibles).

    Question 35. Medicare Actuary Richard Foster recently wrote that an 
additional 5 million or more early retirees may be added to the 
Medicaid rolls in 2014 if current adjusted gross income definitions are 
maintained. This represents an increase of 25 percent over initial 
projections.
    How are States expected to respond to these future increases in 
costs when the Federal Government is already facing a $14 trillion 
national debt and major flexibility is not allowed for the States by 
the Federal Government?
    Answer 35. I recognize the challenge that the current fiscal 
environment has posed for State budgets including the increased 
enrollment in Medicaid, which is designed to serve more people during 
downturns, as people lose jobs and their job-based coverage. By 
providing new Medicaid coverage through the Affordable Care Act, we are 
reducing the costs and inefficiencies resulting from the lack of 
insurance that plague our health system, and raise costs for all 
Americans and businesses in all States.
    The Federal Government will pay 100 percent of the Medicaid cost 
for the first 3 years for newly eligible adults. After that, the 
Federal Government will pay at least 90 percent of the cost of the 
expansion. By greatly increasing the number of people with health 
insurance, the Affordable Care Act will also help States save money on 
other safety net programs and uncompensated care. Many services that 
States currently provide for the uninsured and pay for on their own--
like mental health care and hospital treatment--will be matched by 
Federal Medicaid funds.
    As Secretary, I am committed to working closely with States to 
minimize potential financial and administrative burdens of implementing 
the Affordable Care Act. For example, some States have calculated that 
overall they will not bear any new costs under the law. CMS recently 
issued a final rule to provide States with a 90 percent enhanced match 
on investments in their IT systems for the design and implementation of 
changes to their Medicaid eligibility systems and we are committed to 
drive down the overall costs of these investments through shared 
technology.

    Question 36. While implementing $500 billion in Medicare payment 
cuts, please identify how the new health care bill will specifically 
decrease costs for patients as competition decreases and the Federal 
Government takes a larger role in managing health care in the United 
States?
    Answer 36. The Affordable Care Act contains numerous new provisions 
that are specifically directed at reducing the cost of care.
    For example, the Affordable Care Act supports ambitious new efforts 
to reduce fraud and waste in the health care system. New authorities in 
the Affordable Care Act offer additional front-end protections to keep 
those who commit fraud out of Federal health care programs, as well as 
new tools for deterring wasteful and fiscally abusive practices, 
promptly identifying and addressing fraudulent payment issues, and 
ensuring the integrity of our programs.
    Another example is the Center for Medicare and Medicaid Innovation. 
This new cross-cutting resource for improving care access and 
coordination for Medicare, Medicaid, and CHIP beneficiaries will test 
and study the most promising innovative payment and service delivery 
models. In doing so, the Innovation Center will work collaboratively 
with relevant Federal agencies and clinical and analytical experts, as 
well as local, national and regional providers, States and beneficiary 
organizations to identify and promote systems changes that could 
improve quality and outcomes for patients while containing or reducing 
costs.
    The Affordable Care Act also established a Federal Coordinated 
Health Care Office to improve coordination of the care provided to 
beneficiaries eligible for both Medicare and Medicaid, also known as 
dual eligibles. This population consists of the most vulnerable and 
chronically ill beneficiaries, who represent 15 percent of enrollees 
and 39 percent of Medicaid expenditures and 16 percent of enrollees and 
27 percent of Medicare expenditures. These individuals experience many 
challenges obtaining care under the current system. Dual eligibles need 
to navigate two separate systems: Medicare for primary coverage of 
basic health care services (e.g., preventive, primary, acute, and post-
acute care) and prescription drugs, and Medicaid for wraparound 
coverage, including coverage of long-term care supports and services, 
and help with Medicare premiums and cost-sharing. The Federal 
Coordinated Health Care Office will work to better streamline care for 
dual eligibles and partner with States to introduce new integrated care 
delivery models that ensure they receive full access to the items and 
services that will result in better health care outcomes and lower 
overall costs, while reducing duplicative or wasteful care.
    Other cost-saving innovations in Medicare and Medicaid include 
programs to reduce unnecessary hospital readmissions, reduce and 
eliminate healthcare-acquired conditions, and initiate shifts in our 
payment systems that, in the long run, will reward quality of care over 
quantity of care.
    Finally, the Affordable Care Act will reduce premiums by an 
estimated 14-20 percent for Americans who buy health insurance on their 
own in the new competitive insurance Exchanges. Beginning in 2014, the 
law will allow individuals, families, and small business owners to pool 
their purchasing power through new State-based Exchanges. Millions will 
qualify for tax credits to help them buy coverage through the 
Exchanges. Under the new law, it is estimated that a family of four 
making about $33,000 could save nearly $10,000 in premiums, beginning 
in 2014, if they purchase coverage in the Exchange. A family of four 
making $56,000 could save up to $6,000 each year, by purchasing 
Exchange coverage. The Affordable Care Act has brought real change to 
the health insurance marketplace that has immediately benefited 
thousands of Americans, and will improve coverage and provide real 
savings for millions more.

    Question 37. In December 2010, it was announced that Ohio State 
University would receive a $100 million grant for its Radiation 
Oncology Center, pursuant to a provision in the new health care law. 
Please identify all of the hospital systems that applied for this grant 
and the process that was used to determine the winner. Please also 
identify which individuals within the Department who were responsible 
for making this determination and describe the role of the HHS General 
Counsel in reviewing this decision.
    Answer 37. Section 10502 of Affordable Care Act provided for a 
single grant for up to $100 million for debt services on, or direct 
construction or renovation of, a health care facility that provides 
research, inpatient tertiary care, or outpatient clinical services. 
Eligibility for this award was limited to institutions of higher 
education with an academic health center at a public research 
university in the United States that contained the State's sole 
academic medical and dental school. The funding opportunity was 
announced August 18, under Announcement Number: HRSA-11-126.
    Potential applicants were invited to ask the Agency questions about 
the program guidance and application requirements. HRSA staff, after 
consultation with the Office of the General Counsel, responded to 
questions via email, telephone, and conference calls, with the 
questions and answers then posted on the HRSA Web site as Frequently 
Asked Questions for all potential applicants to see.
    Eleven applications were received for funding under the 
Infrastructure to Expand Access to Care funding opportunity 
announcement, four of which were determined by the Agency as not having 
met the programmatic eligibility requirements. The remaining seven 
applications were deemed eligible.
    An external Objective Review Committee was established to evaluate 
the eligible applications. The review committee was staffed with non-
Federal persons free of conflicts of interest with expertise in the 
areas of: health care administration within an institution of higher 
education; health facility construction and design; and capital 
finance. After the committee discussed and evaluated each application 
on its own merit and based on what was in the application alone, each 
member of the Review Committee independently scored that application. A 
Federal grants office determined a rank order based on the committee 
scores. Consistent with HRSA's grant practices, the applicant with the 
highest score, the Ohio State University, was awarded the grant.
                           senator alexander
    Question 1. As a former Governor, I am deeply concerned with the 
Medicaid expansion in the new health law. Tennessee's previous Governor 
Bredesen, a Democrat, has called it ``the mother of all unfunded 
mandates'' and estimated that it will cost Tennessee an additional $1.1 
billion for 2014-19, and that is even with the Federal Government 
paying 100 percent of the expansion population from 2014-16.
    The new law also mandates that Medicaid primary care physicians be 
reimbursed at 100 percent of Medicare rates in 2013-14, for which the 
Federal Government will pay for those 2 years. But this creates a 
funding cliff for 2015. To keep doctors in their programs, States will 
either be forced to continue to pay Medicaid primary care physicians 
100 percent of Medicare rates, or these physicians will effectively see 
a 40-50 percent cut in 2015. According to the TennCare director, the 
requirement to increase provider reimbursement to 100 percent of 
Medicare would cost Tennessee roughly an additional $324 million per 
year.
    How are States going to shoulder these additional burdens in the 
current budget crises most of them are experiencing? Is the 
Administration considering any kind of flexibility options to offer to 
States in order to avoid being crushed by all the mandates and 
maintenance of effort requirements?
    Answer 1. As a former Governor, I know the difficult budget 
pressures facing States. The Administration has a strong track record 
on our partnership with States during difficult economic times. Working 
with Congress, we increased Federal support for Medicaid, supporting 
increased enrollment at the same time when State Medicaid resources 
were down. Working again with Congress, we extended the Children's 
Health Insurance Program (CHIP) to secure funding into the future.
    TennCare relies on private managed care companies to provide care 
to a Medicaid population--a group that often has special needs and 
higher costs. Just 5 percent of Medicaid beneficiaries account for more 
than half (55 percent) of all spending. By contrast, 50 percent of 
beneficiaries--those with the lowest costs--account for only 5 percent 
of spending. To truly get a handle on growing Medicaid costs and to 
improve health status overall, we need to help States find ways to 
better care for these high cost enrollees, people who often have 
multiple chronic conditions or other special health care needs.
    The Affordable Care Act includes a number of provisions to help 
improve care while lowering costs, such as a Medicaid health home State 
plan option and new authorities through the Innovation Center that will 
enable States to design and test new care management and care 
coordination strategies in both managed care and fee-for-service 
contexts.
    There are a number of steps States can take to reduce costs and 
squeeze waste, fraud and abuse from their programs. I recently sent a 
letter to all Governors laying out a broad array of options already 
available to them to reduce their spending and balance their budgets, 
as well as new ideas that can be accomplished through existing options 
or waivers. States have many choices they can make including limits on 
some benefits, changes in cost sharing, and greater use of managed 
care. States can also save considerable dollars by focusing on 
improving the safety and quality of care. I intend to work with 
Governors on exploring existing flexibility and options.

    Question 2. One of the problems with the Medicaid expansion is that 
there is an access problem for patients in the program being unable to 
see a doctor willing to treat them. There are varying reports on 
providers not willing to see Medicaid patients, like the 2006 report 
from the Center for Studying Health System Change Only stating that 
about half of U.S. physicians accept new Medicaid patients.
    Even the CMS chief actuary stated in an analysis done in April, ``. 
. . it is reasonable to expect that a significant portion of the 
increased demand for Medicaid would be difficult to meet, particularly 
over the first few years.''
    By adding 16-18 million more people into the program, what is your 
Administration doing to address access issues for all these new 
beneficiaries?
    Answer 2. As Secretary, I am committed to ensuring access for 
Medicaid beneficiaries. A good first step is a provision in the 
Affordable Care Act that provides a federally funded boost in payment 
rates to primary care physicians for 2 years, which will ensure that 
such providers have a strong incentive to serve program beneficiaries. 
The Affordable Care Act also takes important and significant steps to 
boost the number of primary care providers, including new bonus 
payments for primary care in Medicare and new residency slot 
allowances.
    In addition, the newly formed Medicaid and CHIP Payment and Access 
Commission (MACPAC) will also play an important role by providing 
research and analysis on provider payment rates and access in the 
Medicaid program. We anticipate working closely with them as we do with 
MEDPAC.

    Question 3. Has HHS done an analysis of how many providers are not 
seeing new or any Medicaid patients? If not, can your department look 
into this and get back to me?
    Answer 3. Ensuring access to care is a key goal of this 
Administration, especially as we look ahead to coverage expansions in 
2014. In fact, we are currently undertaking rulemaking to help CMS 
better ensure that Medicaid beneficiaries can access high quality care 
in a timely manner. We expect to have proposed regulations available 
for public comment in the spring and would welcome input in this area.
    CMS does not currently track rates of provider participation in the 
Medicaid program. However, in their March 2011 Report to Congress 
(http://www.macpac.gov/reports), the Medicaid and CHIP Payment and 
Access Commission (MACPAC) provided selected surveys examining provider 
participation in Medicaid and CHIP that may be informative in 
understanding current provider participation rates.

    Question 4. In your testimony, you mention tax credits as a way 
that the law will keep down premiums. I realize that people who receive 
the tax credits or subsidies will pay less out of their own pocket for 
premiums, but are you saying that these tax credits/subsidies will 
bring down the underlying premiums and or the underlying cost of health 
care?
    Answer 4. The Congressional Budget Office (CBO) produced estimates 
of the impact of the Affordable Care Act on premiums, even without the 
impact of the tax credits. For people purchasing non-group coverage 
through the Exchanges, it estimated savings of 7 to 10 percent 
resulting from the increase in the size of the insurance pool as well 
as the nature of the new enrollees, many of whom, in light of the 
premium tax credits and the individual responsibility provisions, are 
likely to be relatively younger, healthier at any given age, and/or 
have lower expected utilization of health services. An additional 7 to 
10 percent savings would result from providing the same set of services 
to the same group of enrollees--primarily because of the new rules in 
the market such as eliminating insurance underwriting. CBO also credits 
some of the savings to increased choices and competition. Together, 
these savings range from 14 to 20 percent.

    Question 5. According to estimates from Senate Finance minority tax 
staff last year, only 7 percent of Americans would qualify for 
subsidies and would see these cost savings. What about everyone else? 
Even CBO has said premiums for families buying coverage on the 
individual market would see premiums increase by $2,100 a year. Blue 
Shield of CA had increases as high as 59 percent--some of that is 
directly attributable to the new health care law.
    Answer 5. The vast majority of Americans who have health insurance 
get coverage through their employer, and that will not change when the 
Affordable Care Act is fully implemented. The Congressional Budget 
Office (CBO) estimates that premiums for small businesses will be up to 
2 percent lower and premiums for large business will be up to 3 percent 
lower because of key reforms in the Affordable Care Act. And longer 
term reforms in the law will reduce the ``hidden tax'' that drives up 
the price of employer-based health insurance to cover the cost of care 
for the uninsured.
    For Americans that purchase insurance in the individual market, 
Exchanges will bring transparency and fairness to a broken system, and 
significant tax credits will be available to offset the costs of 
coverage. Even without factoring in the impact of the tax credits, CBO 
estimates that the cost of comparable coverage in the Exchange will be 
14 to 20 percent lower than they would be without the Affordable Care 
Act. This translates to savings of an estimated $2,300 per year for 
families. CBO also assumed that individuals and families would have, on 
average, coverage that is more comprehensive than what they have now, 
meaning that the savings would be offset by higher premiums due to 
better coverage. It is important to note that this benefit enhancement 
is largely a choice, not a requirement.

    Question 6. You state in your testimony that the new law ``is 
bringing down premiums for consumers by limiting the amount of premiums 
insurers may spend on administrative costs and by giving States 
resources to beef up their review process.''
    How do you square this statement with recent news articles that 
some insurers are raising premiums as a result of the new law?
    Answer 6. The Affordable Care Act holds insurers accountable and 
will help bring down premiums. It ensures every significant health 
insurance rate increase will undergo a thorough review and provides 
$250 million in grants to States to bolster their rate review process. 
For the first time, insurers will be held accountable for the way they 
spend consumer premiums. The new medical loss ratio regulations 
released last year implement the statutory requirement that insurers 
spend at least 80 or 85 percent, depending on the market, of premium 
dollars on health care and quality improvement efforts instead of 
marketing and CEO bonuses. Those insurers who don't meet the standard 
will have two choices: reduce premiums or send rebates to their 
customers. There is growing evidence that these provisions are 
resulting in reductions in premium increases or withdrawal of rate 
increases.

    Question 7. PPACA requires insurers to establish a medical loss 
ratio (MLR) for 80 percent for individuals and 85 percent for group 
coverage plans. Has HHS done premium impact analysis based on this 
change? If so, what were your results?
    Answer 7. HHS anticipates that the transparency and standardization 
of MLR reporting in the interim final regulation will help consumers to 
ensure that they receive good value for their premium dollars. 
Additionally, the inclusion of activities that improve quality in 
calculating the MLR could help to increase the level of investment in 
and implementation of effective quality improvement activities, which 
could result in improved quality outcomes and lead to a healthier 
population. The department estimates that issuers' total one-time 
administrative costs related to the MLR reporting, record retention, 
and rebate payment and notification requirements represent less than 
0.02 percent of their total premiums for accident and health coverage, 
and their total annual ongoing administrative costs related to these 
requirements represent less than 0.01 percent of their total premiums 
for accident and health coverage. Executive Order 12866 also requires 
consideration of the ``distributive impacts'' and ``equity'' of a 
regulation. As described in the regulatory impact analysis (RIA) for 
the MLR regulation this regulatory action will help ensure that issuers 
spend at least a specified portion of premium income on reimbursement 
for clinical services and quality improving activities and will result 
in a decrease in the proportion of health insurance premiums spent on 
administration and profit. It will require issuers to pay rebates to 
consumers if this standard is not met. Although we are unable to 
quantify benefits, the transfers (rebates from issuers to consumers) 
could be substantial--estimated monetized rebates of $0.6 billion to 
$1.4 billion annually.

    Question 8. On June 18, 2010, I sent a letter to the then Centers 
for Medicare & Medicaid Services (CMS) Acting Administrator Marilyn 
Tavenner in reference to a request made by the American College of 
Radiology, the American Society of Radiologic Technologists and the 
American Registry of Radiologic Technologists in regard to the 
adjustment in supervision levels for Radiologist Practitioner 
Assistants and Registered Radiologist Assistants. What action has been 
taken in reference to my inquiry?
    Answer 8. We appreciate your interest in CMS's policies regarding 
supervision levels for services performed by radiology practitioner 
assistants (RPAs) and registered radiologist assistants (RRAs). 
Currently, RPAs and RRAs may not bill Medicare separately for services 
that they provide. However, these services can be covered and paid 
under the diagnostic testing benefit category, as long as the 
appropriate level of supervision is provided by a qualified physician.
    CMS carefully assigns physician supervision levels for diagnostic 
testing services, based in large part upon the judgment of our 
physician clinical advisors. At this time, CMS does not intend to make 
a change in the physician supervision requirements for services 
provided by RPAs and RRAs. However, our medical staff reviews these 
requirements on an ongoing basis. We are happy to continue to work with 
you and your staff on this issue.

    Question 9a. I have had several constituents complain about the 
2011 Physician Fee Schedule final rule policy requiring physician or 
qualified non-physician (NPP) signatures on requisitions for laboratory 
tests reimbursed under the clinical laboratory fee schedule. This rule 
recently adopted by the Centers for Medicare & Medicaid Services (CMS) 
could adversely affect patient care.
    Why is CMS now requiring that doctors sign both the medical chart 
with the doctor's order and the requisition form for the lab test? What 
led CMS to conclude that one signature from the physician was not 
enough?
    Answer 9a. The action taken in the CY 2011 Physician Fee Schedule 
final rule to require a physician's or qualified non-physician 
practitioner's (NPP) signature on laboratory requisitions followed 
earlier efforts in CY 2009 and CY 2010 to address the confusion that 
existed about when a signature was required and for what services. The 
requirement was also intended to respond to numerous stakeholder 
comments urging a consistent policy across Medicare benefits, since 
physician signatures are required for other types of diagnostic 
services. At the same time, CMS believed that it would not increase the 
burden on physicians because it was the agency's understanding that, in 
most instances, physicians are annotating the patient's medical record 
with either a signature or an initial (the ``order''), as well as 
providing a signature on the paperwork that is provided to the clinical 
diagnostic laboratory that identifies the test or tests to be performed 
for a patient (the ``requisition'') as a matter of course. Further, CMS 
recognized that some practitioners use the patient's medical record as 
the order for laboratory services and the policy would not require such 
practitioners to also submit requisitions.
    Because of concerns that some physicians, NPPs, and clinical 
diagnostic laboratories are not aware of, or do not understand, this 
policy, CMS focused its efforts in the first quarter of 2011 on 
developing educational and outreach materials to educate those affected 
by this policy. However, after further input from the laboratory 
community, CMS has decided to focus its resources for the remainder of 
2011 on changing the regulation that requires signatures on laboratory 
requisitions because of concerns that physicians, NPPs, and clinical 
diagnostic laboratories are having difficulty complying with this 
policy.

    Question 9b. Is CMS concerned that this could further increase the 
cost of care by having to have the doctor present twice? (Once to 
examine the patient and again when the test is administered; even 
though the test could be conducted hours or even a day later).
    Answer 9b. The policy does not require the physician to be present 
when the test is performed. In fact, CMS believed that the policy would 
not increase the burden on physicians because it was the agency's 
understanding that, in most instances, physicians are annotating the 
patient's medical record with either a signature or an initial (the 
``order''), as well as providing a signature on the paperwork that is 
provided to the clinical diagnostic laboratory that identifies the test 
or tests to be performed for a patient (the ``requisition'') as a 
matter of course. Further, CMS recognized that some practitioners use 
the patient's medical record as the order for laboratory services and 
the policy would not require such practitioners to also submit 
requisitions.

    Question 9c. Did CMS consult with any providers to engage them on 
the discussion for this rule? If so, what was their response? If not, 
why didn't they?
    Answer 9c. Yes. As mentioned above, CMS engaged in notice and 
comment rulemaking to address the confusion that existed about when a 
signature was required and for what services in CY 2009 and CY 2010 
before finalizing a policy in the CY 2011 Physician Fee Schedule final 
rule. The requirement was intended to respond to numerous stakeholder 
comments urging a consistent policy across Medicare benefits, since 
physician signatures are required for other types of diagnostic 
services. However, after further input from the laboratory community, 
CMS has decided to focus its resources for the remainder of 2011 on 
changing the regulation that requires signatures on laboratory 
requisitions because of concerns that physicians, NPPs, and clinical 
diagnostic laboratories are having difficulty complying with this 
policy.

    Question 10. Why was meaningful tort reform left out of the 2010 
Patient Protection and Affordable Care Act? Medical costs in our 
country are rising steadily and this is threatening access to services. 
Using Texas as a case study, it is fair to extrapolate that tort reform 
leads to cost saving and increases access. Additionally, a CQ Today 
article that ran on January 24, 2011, cites a Congressional Budget 
Office Estimate that medical malpractice reform could save $54 billion 
over 10 years.
    Why did PPACA choose to ignore this?
    Answer 10. As the President noted in his State of the Union 
Address, the Administration strongly supports efforts to reduce health 
care costs, including considering ideas to rein in frivolous medical 
malpractice lawsuits. I agree that our medical liability system needs 
to be examined, to ensure that it improves the quality of care and 
patient safety, compensates patients in a fair and timely manner if 
they are harmed through medical negligence, reduces medical liability 
premiums and the costs associated with defensive medicine, and weeds 
out frivolous lawsuits.
    As you know, prior to the enactment of the Affordable Care Act, the 
Administration established a $25 million initiative to support efforts 
by States and health systems to develop, implement, and evaluate 
patient safety and medical liability reforms. This is the most 
ambitious effort to date by HHS to support and evaluate our medical 
liability system and patient safety reforms. It is also the largest 
government investment connecting medical liability to improving quality 
and avoiding harm rather than just negligence and punishment.
    Building on that effort, the President's fiscal year 2012 Budget 
includes $250 million in grants to States to reform their medical 
liability laws. The Department of Justice, in consultation with the 
HHS, will administer this program. The goal of these reforms would be 
to fairly compensate patients who are harmed by negligence, reduce 
providers' insurance premiums, weed out frivolous lawsuits, improve the 
quality of health care and patient safety, and reduce medical costs 
associated with ``defensive medicine.'' States could propose reforms to 
their medical malpractice system through various approaches, such as 
health courts, safe harbors, early disclosure and offer, or other legal 
reforms.

    Question 11. My office often meets with Nurses, Physicians 
Assistants and Tech Assistants. What is HHS/CMS doing to help work 
these professionals into the delivery system? Specifically, What is 
being done to evaluate on a national level how many responsibilities 
these professionals are capable of handling, in relation to their 
training levels?
    What is being done on a national level to make sure these 
professionals are being used to their full capacity?
    Tennessee has many rural and underserved populations. By maximizing 
the professionals mentioned above, we could increase access to care and 
lower costs. It is important for me to learn what initiatives the 
Secretary is taking to working these individuals into the delivery 
system, and to make sure there are qualified and certified 
professionals to deliver services in their care area.
    Answer 11. The Administration believes that strengthening and 
growing the health care workforce is critical to reforming the Nation's 
health care system. Workforce initiatives funded by the Affordable Care 
Act include a strong focus on nurse practitioners and physician 
assistants. For instance, with $30 million in Affordable Care Act 
funding, 600 new physician assistants will be fully trained by 2015. 
With $31 million in Affordable Care Act funding, 600 new nurse 
practitioners and nurse mid-wives will be fully trained by 2015. In 
addition, the President's fiscal year 2012 budget proposes to begin a 
5-year effort to fund the training of an additional 4,000 new primary 
care providers, including primary care physicians, nurse practitioners 
and physician assistants. The Administration recognizes that these 
providers are an essential component in the health care delivery 
system. We also support the development of inter-professional training 
and of team-based care models, like medical homes, which involve health 
professionals practicing to the full extent of their training. To 
inform Federal, State and private sector workforce planning in the 
future, the President's budget also would enhance the efforts of the 
Health Resources and Services Administration's National Center for 
Health Workforce Analysis to collect and analyze data on the health 
care workforce supply, demand and capacity.
    In addition to creating new training opportunities for nurse 
practitioners and physician assistants, the Affordable Care Act also 
invests in encouraging the placement of these providers in underserved 
areas. About half of National Health Service Corps clinicians, 
including physicians, advanced practice nurses, and physician 
assistants, work in Health Resources and Services Administration-
supported health centers, which have a long record of success providing 
affordable, cost-effective, high quality preventive and primary care 
services to some of our Nation's most vulnerable individuals. The 
Affordable Care Act provided $11 billion to bolster and expand 
Community Health Centers and $1.5 billion for the National Health 
Service Corps over the next 5 years. In addition, the Affordable Care 
Act provided $15 million to fund nurse-managed clinics, which provide 
primary care and wellness services to underserved and vulnerable 
populations, and are managed by advanced practice nurses, including 
nurse practitioners.

    Question 12. Tennessee has many Veterans. My office has been 
hearing that for many of them, their local VA clinics or other 
government treatment centers is out of network for their carrier. Is 
this something into which your department is looking in coordination 
with the Department of Veterans Affairs to make sure our Veterans have 
access to care?
    Answer 12. 38 U.S.C. 1729 provides VA the statutory authority to 
collect its billed charges or an amount a third party payer 
demonstrates it pays to non-governmental providers in the same 
geographic area for the same care and services. Federal law does not 
require third party payers to enter into agreements with VA. However, 
VA has found there are many benefits to entering into agreements with 
third party payers. Formal agreements have been established with 
several third party payers conducting business in Tennessee. 
Collectively, the third party payers with whom VA has entered into 
agreements, according to the 2010 Atlantic Information Systems 
Directory of Health Plans, covers over 80 percent of people enrolled in 
health insurance plans in the State. The third party payers doing 
business in Tennessee, with whom VA has formal agreements include: 
BlueCross BlueShield of Tennessee, Aetna, CIGNA, Great-West Healthcare, 
and United Healthcare. Moreover, VA has a legislative proposal in the 
fiscal year 2012 budget that would amend 38 U.S.C. 1729 to make VA a 
statutory participating provider with all health plans whether or not 
an agreement is in place with a health insurer or third party payer, 
thus preventing the effect of excluding coverage or limiting payment of 
charges for care.
    The VA cannot bill Medicare or Medicaid.
                            senator roberts
    Question 1. I was pleased to learn of President Obama's commitment 
through Executive order to require that Federal agencies ensure that 
regulations protect our safety, health and environment while promoting 
economic growth.
    Based on that commitment I have 2 questions: first, are you at the 
stage where you can tell us what regulations HHS is planning to scrub 
or repeal because of this Executive order and what is the timeline for 
complying?
    Answer 1. The President's Executive order requires each agency, 
including HHS, to conduct a retrospective review of existing 
significant regulations to identify those that can be modified, 
streamlined, harmonized with others, or eliminated in order to increase 
flexibility and reduce burdens and costs on the regulated community. 
Under that Order, the President directed agencies to develop a plan and 
submit that plan to OMB by May 18, 2011. The plan will include a 
preliminary list of regulations HHS will review pursuant to the 
Executive order over the next 2 years.
    OIRA has notified the agencies that it will be working closely with 
them as they develop their respective plans to meet the May 18, 2011, 
deadline. HHS is actively engaged in that process and will have a draft 
plan to OIRA by the end of April. We expect to submit the final HHS 
plan by the May 18 deadline.

    Question 2. We have heard many suggestions from health providers in 
Kansas--people from Kansas you have worked with and know--and we would 
be happy to work with you to address their concerns. I think the 
example of the impact of regulations on the child-only market is a good 
one.
    So my second question is, realistically, what are the chances based 
on the President's commitment that PPACA regulations will be changed or 
repealed?
    Answer 2. HHS is committed to meeting both the spirit and intent of 
the President's Executive order. As the President sets forth, the 
retrospective review process will be an ongoing one--undertaken as part 
of a culture of regulatory review and revision.

    Question 3. The Executive order says:

          ``In applying these principles, each agency is directed to 
        use the best available techniques to quantify anticipated 
        present and future benefits and costs as accurately as 
        possible. Where appropriate and permitted by law, each agency 
        may consider (and discuss qualitatively)''

and this is the part where I have the most concern, ``values that are 
difficult or impossible to quantify, including equity, human dignity, 
fairness, and distributive impacts.''
    Are you anticipating you will be able to determine which 
regulations, including recently released health reform regulations, HHS 
believes would fall under this exemption?
    Answer 3. Along with every regulation, HHS submits a regulatory 
impact analysis that includes a discussion of costs and benefits of the 
regulation. However, determining the costs and benefits of a regulation 
over time can be tricky and difficult when it comes to assessing the 
impact of a regulation on the health and well-being of individuals over 
the long term. We do not read the President's Executive order to permit 
an exemption to the quantitative cost/benefit requirement. Rather, we 
believe the President permits agencies to discuss qualitative factors 
that are difficult or impossible to measure in quantitative terms, but 
which are nevertheless important in assessing the value of the 
regulation in improving the health and well-being of the American 
people.

    Question 4. Beyond the 180 days with which your Agency would now 
have to provide a preliminary plan for the Executive order, what is the 
HHS timeline for complying with the intent of this Executive order and 
creating ``a more cost-effective, transparent and smart regulatory 
system.'' In short, how long is this expected to take, and when can 
Americans expect to see results?
    Answer 4. Consistent with the President's directive, we expect that 
the process will not simply be a one-time exercise, but rather an 
ongoing process of review and change. The effort is to create a culture 
of review and revision, where existing regulations are routinely 
modified, streamlined, or eliminated where appropriate to achieve a 
better regulatory framework. We expect that the American people will 
see certain initial results within the next year. But we also expect to 
produce results year after year as these reviews become 
institutionalized as part of the review and revision process.

    Question 5. Madam Secretary, as the former Governor of Kansas you 
are well aware that Kansas has 83 Critical Access Hospitals (CAHs)--the 
most of any State and fully \2/3\ of our hospitals. And you also know 
that CAHs are not part of the 5-year exemption from IPAB review that 
other hospitals were given in health reform. Should IPAB recommend 
reductions that take funds away from these rural community hospitals I 
can assure you Congress will act, but would you support such a 
recommendation?
    Answer 5. The Independent Payment Advisory Board is one of the key 
features of the Affordable Care Act that will set our system on a path 
to sustainability in the long run. The statute establishing the IPAB 
specifies that the Board recommend proposals that would ``protect and 
improve Medicare beneficiaries' access to necessary and evidence-based 
items and services, including in rural and frontier areas.'' In my 
experience, many of America's rural areas continue to be on the cutting 
edge, leading change and improvement in health care. I'm happy to talk 
to you or your staff about ways to ensure that critical access 
hospitals can continue to provide essential services in many rural 
areas of the country.

    Question 6. It has recently been brought to my attention that there 
is a regulation related to the dialysis transition adjuster that I have 
been told, based on CMS inaccurate estimates, has resulted in 
underpayments for dialysis treatments. Is this one of the regulations 
CMS and HHS are considering revising?
    Answer 6. When adopting a new payment system under Medicare, CMS is 
often statutorily required to ensure that aggregate payments (with the 
exception of any applicable inflation update) are the same as those 
under the previous payment system. In this case, we were required to 
ensure that payments under the new ESRD prospective payment system 
(PPS) were, in aggregate, 98 percent of the total payments that would 
have been made under the previous basic case-adjusted composite payment 
system. In order to meet this requirement, we applied a transition 
budget neutrality adjustment factor of 3.1 percent to ESRD payments in 
the calendar year (CY 2011) ESRD PPS final rule.
    As described in the final rule, CMS' calculation of this factor was 
based on the best available data to estimate payments during the 
transition period. At the same time, we acknowledged that the 
adjustment may not reflect actual choices made by the ESRD facilities 
regarding opting out of the ESRD PPS transition. However, we noted that 
the adjustment would be updated each year of the transition (CY 2012 
and CY 2013) to reflect actual data on providers electing to opt-out of 
the transition.
    We recently issued an interim final rule (76 Fed. Reg. 18930, April 
6, 2011), in which we revised the ESRD transition budget-neutrality 
adjustment finalized in the CY 2011 ESRD Prospective Payments System 
final rule for renal dialysis services furnished April 1, 2011 through 
December 31, 2011, to reflect the actual election decisions of ESRD 
facilities for participating in the ESRD PPS transition.

    Question 7. If CMS and the Department are unwilling or unable to 
exhibit the flexibility necessary to fix something as straight-forward 
as the dialysis transition adjuster then how can this committee and the 
American people be confident that the Department has the wherewithal to 
implement something as daunting and complex as the Affordable Care Act?
    Answer 7. As we noted in our response to the previous question, we 
have already updated the dialysis transition adjuster in response to 
reasonable concerns from the dialysis provider industry. Additionally, 
CMS and the Department share your concerns and implementing the 
Affordable Care Act in a timely and transparent way is a high priority 
for the Administration. We have aggressively moved forward on a number 
of provisions that are already providing seniors with meaningful 
benefits.
    The Administration and HHS remain committed to a transparent 
implementation process that includes feedback from stakeholders. For 
example, CMS has specifically requested comments on portions of the 
regulation implementing the Affordable Care Act provisions to counter 
fraud in the Medicare and Medicaid programs. Feedback, both from the 
notice and comment process and other outreach efforts, will continue to 
be a critical part of the Administration's implementation efforts.

    Question 8. Madam Secretary, Dr. Berwick was renominated to be the 
CMS Administrator by the President. As a representative of your 
Department are you and your Administration committed to allowing or 
encouraging Dr. Berwick to testify before the relevant committees and 
answering all of the questions and concerns of the Members of the 
Senate during this nomination process? I think this is of particular 
importance considering the reorganization of OCIIO under CMS.
    Answer 8. Across the Department, we are all focused on implementing 
the Affordable Care Act and bringing real benefits to all Americans. We 
are committed to our mission of ensuring access to and providing 
efficient, high-quality health care to our beneficiaries, and will 
continue to work with Congress in a bipartisan fashion to achieve this 
core goal.
    Dr. Berwick has already testified before Congress and is fully 
committed to meeting with individual Senators to address all of their 
questions and any areas of concern.
                             senator hatch
    Question 1. Currently the Institute of Medicine (IOM) is reviewing 
and will soon issue a list of specific mandatory benefits to meet the 
Patient Protection and Affordable Care Act's (PPACA) essential health 
benefits requirement. In general, when these mandates are implemented 
in 2014, will individuals living in States, like Utah, with fewer 
benefit mandates see an increase in premiums as a result of adding 
benefits that were previously not required to be covered?
    Answer 1. The IOM will not be making recommendations on specific 
benefits or services. As they state on their Web site:

          ``The IOM will not define specific service elements of the 
        benefit package. Instead, the IOM will review how insurers 
        determine covered benefits and medical necessity and will 
        provide guidance on the policy principles and criteria for the 
        Secretary to take into account when examining QHPs for 
        appropriate balance among categories of care; the health care 
        needs of diverse segments of the population; and 
        nondiscrimination based on age, disability, or expected length 
        of life. Additionally, the IOM may offer advice on criteria and 
        a process for periodically reviewing and updating the benefits 
        package.''

    Question 2. Actuarial analysis by the Council for Affordable Health 
Insurance has found that individual benefit mandates, on average, 
increase premiums by between 1 and 3 percent. If the new benefit 
mandates coming out of the IOM exceed the number of benefits mandated 
in Utah, PPACA will force Utah constituents to pay higher premiums for 
benefits they may not need or want. To that end, can you confirm that 
States with few benefit mandates will see increases in premiums as a 
result of the essential health benefits requirement under PPACA?
    Answer 2. As noted above, the IOM is not making recommendations on 
specific services. The Affordable Care Act defines essential health 
benefits to,

          ``include at least the following general categories and the 
        items and services covered within the categories: ambulatory 
        patient services; emergency services; hospitalization; 
        maternity and newborn care; mental health and substance use 
        disorder services, including behavioral health treatment; 
        prescription drugs; rehabilitative and habilitative services 
        and devices; laboratory services; preventive and wellness 
        services and chronic disease management; and pediatric 
        services, including oral and vision care.''

    Question 3. Can you also confirm that as U.S. Preventive Services 
Task Force (USPSTF) continues to approve new A and B recommendations 
for preventive health benefits premiums will also continue to increase 
if the preventive benefit recommended is not already mandated or 
covered by a plan?
    Answer 3. Too many Americans don't get the preventive health care 
they need to stay healthy, avoid or delay the onset of disease, lead 
productive lives, and reduce health care costs. Cost-sharing (including 
copays, co-insurance and deductibles) reduces the likelihood that 
preventive services will be used. The Affordable Care Act is already 
helping to make wellness and prevention services affordable and 
accessible to individuals by requiring most health plans to cover 
preventive services and by eliminating cost-sharing. High-quality 
preventive care helps Americans stay healthy, avoid or delay the onset 
of disease, lead productive lives, and reduce costs. And yet, despite 
the proven benefits of preventive health services, too many Americans 
go without needed preventive care because of financial barriers. Even 
families with insurance may be deterred by copayments and deductibles 
from getting cancer screenings, immunizations for their children and 
themselves, and well-baby check-ups that they need to keep their 
families healthy.

    Question 4. I was surprised by the announcement made by HHS on 
January 26, 2011, that a total of 948 waivers have been granted from 
the annual benefit limits established under PPACA. This waiver process 
obviously stands in stark contrast to the Administration's claims about 
the value of PPACA in reducing costs and making health care more 
affordable. What is concerning about the announcement is the lack of 
transparency about the waiver process. If the new requirements under 
PPACA were meant to reduce costs and make health care more affordable 
and accessible, then why do these organizations need waivers to 
continue to keep costs down and provide access to insurance?
    Answer 4. The Affordable Care Act is designed to provide Americans 
with affordable, high-quality coverage options--while ensuring that 
those who like their current coverage can keep it. Unfortunately, 
today, limited benefit plans, or ``mini-med'' plans are often the only 
type of insurance offered to some workers. In 2014, the Affordable Care 
Act will end most mini-med plans when Americans will have better access 
to affordable, comprehensive health insurance plans that cannot use 
high deductibles or annual limits to limit benefits. In the meantime, 
the law requires insurers to phase out the use of annual dollar limits 
on benefits. In 2011, most plans can impose an annual limit of no less 
than $750,000.
    Mini-med plans have lower limits than allowed under the Affordable 
Care Act. While mini-med plans do not provide security in the event of 
serious illness or accident, they are unfortunately the only option 
that some employers offer. In order to protect coverage for these 
workers, regulations allow these plans to apply for temporary waivers 
from rules restricting the size of annual limits to some group health 
plans and health insurance issuers.
    Waivers only last for 1 year and are only available if the plan 
certifies that a waiver is necessary to prevent either a large increase 
in premiums or a significant decrease in access to coverage. In 
addition, enrollees must be informed that their plan does not meet the 
requirements of the Affordable Care Act. No other provision of the 
Affordable Care Act is affected by these waivers: they only apply to 
the annual limit policy.

    Question 5. As States are facing a $175 billion collective budget 
shortfall, we must provide them with the flexibility to find 
responsible ways to continue serving beneficiaries and to fulfill their 
constitutional requirements to balance their budgets. I appreciate your 
acknowledgement of the difficult budget circumstances States are 
facing, but I have heard from many States that your February 3, 2011, 
letter fails to provide the level of assistance that States desperately 
need. As you know, dozens of governors have asked for relief from the 
maintenance of effort (MOE) requirements in the Patient Protection and 
Affordable Care Act (PPACA) in order to responsibly manage their 
programs and even to make common-sense modernizations to their 
eligibility determination procedures. As you know, your waiver 
authority under Section 1115 of the Social Security Act allows you to 
waive certain provisions in Section 1902 of the Social Security Act. 
The MOE requirements included in the PPACA are in section 1902. I 
understand that you plan to look at each State's individual 
circumstances and specific budgetary pressures, however knowing that 
there is a $175 billion collective State budget shortfall, do you 
anticipate granting any Section 1115 waivers from MOE restrictions for 
States to allow them greater flexibility in balancing their budgets?
    Answer 5. HHS understands the challenges States are facing and 
we're ready to offer new approaches, listen to new ideas and conduct 
business with States in ways that are responsive to the severity and 
immediacy of these challenges. CMS recently sent a detailed letter to 
State Medicaid directors on February 25, 2011, clarifying situations in 
which the Affordable Care Act maintenance of effort provision does not 
apply. (Please visit the CMS Web site for a copy of the letter to 
States: http://www.cms.gov/smdl/downloads/SMD11001.pdf.) Specifically, 
in States that have or project budget deficits, the Affordable Care Act 
MOE requirements do not apply to certain adult populations, but the 
ARRA MOE does continue to apply through June 2011. The letter also 
provides additional information about the treatment of premiums and 
clarifies that the MOE provision in the Affordable Care Act also does 
not require a State to request that the Secretary continue a 
demonstration under section 1115 upon its expiration.
    The new MOE guidance helps States in three ways. First, it serves 
as a reminder to States that are experiencing budget deficits of the 
ACA provision allowing them to seek an exemption from the ACA MOE 
requirement for certain adult populations (above 133 percent FPL). 
Second, it clarifies that States with 1115 waiver demonstration 
programs may allow those waivers to expire at the end of their waiver 
approval period without violating MOE. Third, it notes that some States 
may be able to increase premiums paid by Medicaid or CHIP 
beneficiaries.
    We're also taking a number of steps to help States implement 
changes that will bring efficiencies to their Medicaid programs and 
improve the quality of care provided. CMS recently created the Medicaid 
State Technical Advisory Teams (M-STAT) that are responsible for 
offering States technical support and fast-track ways for them to 
implement new initiatives--particularly those targeted at ending the 
fragmented care provided to people dually eligible for Medicaid and 
Medicare that comprise a significant amount of Medicaid costs, lowering 
pharmacy costs and improving program integrity. These steps will 
strengthen the program over the long run, improve the quality and 
outcomes of care, and help States run more efficient Medicaid programs.
    We look forward to continuing to work with States.
                              Attachments

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                      SECTION A: STATEMENT OF WORK
                               1.0 TITLE
    Survey on Long-Term Care Awareness and Planning
                              1.1 PURPOSE
    The purpose is to collect questionnaire responses from a sample of 
the American public about their attitudes, experiences, opinions and 
actions related to long-term care services. This will be accomplished 
by using Knowledge Networks' nationwide online panel (KnowledgePanel) 
as a platform for fielding interactive chats, online town hall 
meetings, and an online questionnaire. This is one of three inter-
related task orders intended to assist in the implementation of 
provisions of the Affordable Care Act (ACA) related to long-term care 
financing and awareness. Development of the questionnaire, and the OMB 
clearance package, and analysis of the data will be completed by two 
other contractors through related task orders.
                             1.2 BACKGROUND
    Successful implementation of the new ACA provisions will require a 
well-developed understanding of how the American public assesses their 
possible future need for long-term care. The ACA includes the 
development of a new voluntary insurance program for long-term care as 
well as a national awareness campaign. In order to obtain sufficient 
enrollment in the new insurance program, consumer preferences will need 
to be understood and to some extent accommodated. Results from these 
task orders will be used to develop educational and marketing materials 
as well as to inform the design of the insurance program.
    Knowledge Networks has been selected for the project based on their 
national, probability-based survey panel. The panel was constructed 
using dual-frame sample recruitment that includes both random digit 
dialing and address-based sampling. Knowledge Networks panel provides a 
statistically valid representation of the American public and includes 
many difficult to reach populations.
    Using Knowledge Networks is a less costly method for obtaining 
consumer input than other survey methods. This method has several 
advantages for this particular data collection effort as follows:

      all responses are gathered on-line, reducing both 
administrative costs and the amount of time necessary to collect the 
data;
      respondents that do not have computers or internet access 
are provided these as a part of their participation agreement;
      using a proprietary panel (that uses address and phone-
based sampling) avoids the problem of reaching the increasing share of 
the population without a telephone land line; and,
      extensive demographic and socio-economic data have 
already been collected on the entire sample allowing questionnaires to 
focus solely on areas of interest.

    In addition, Knowledge Network offers the opportunity to gather 
consumer input in a variety of forms including small interactive chats 
that resemble focus groups, online town hall meetings and questionnaire 
responses from a national sample of adults. The use of a variety of 
methods to collect consumer input through one contract vehicle allows 
for a more effective and flexible collection of data that can change as 
conditions or requirements change.
    The contractor for this project must be willing to coordinate with 
the contractors selected for the task orders entitled ``Development of 
a Survey on Long-Term Care Awareness and Planning'' and ``Development 
and Testing of Long-Term Care Awareness Materials.'' It is anticipated 
that each of the three contractors will designate a liaison that will 
be responsible for coordinating with the other contractors.
                           1.3 SPECIFIC TASKS
Task 1.0 Post-Award Logistics
                    Subtask 1.1: Post-Award Meeting
    Within two (2) weeks of award, staff from Knowledge NetWorks and 
other relevant staff (including the liaisons for the other task orders) 
shall meet with the ASPE task order officers to discuss the objectives 
of the contract and any related project issues. The Government 
anticipates a joint post-award meeting for all three task orders. 
Specific topics to be discussed include, but are not limited to: the 
objectives of the project, major deliverables, work schedule, 
questionnaire testing, and contract coordination.
                         Subtask 1.2: Work Plan
    Knowledge Networks shall develop a work plan that will guide the 
activities of the project. The work plan, which will reflect the 
results of the post-award meeting (Sub-task 1.1), will serve as a 
blueprint for their approach to carrying out project activities and 
specific timelines for the project tasks. The draft work plan will 
include a process for communicating with the other task order liaisons. 
The draft work plan shall be submitted to the task order officers for 
review two (2) weeks after the post-award meeting. The work plan shall 
be considered final upon approval of the task order officers.

Task 2.0 Interactive Chats

    Knowledge Networks shall convene three sets of interactive chats 
featuring moderated on-line discussions and manage all logistics and 
chat technologies. Each chat will feature informal, moderated, online 
discussions during which consumers will be offered the opportunity to 
respond to prototype educational/marketing materials. The number of 
chats will be determined as a result of work on a preliminary market 
segmentation framework completed under a separate task order. For 
budget purposes, the contractor should assume three (3) sets of chats. 
Each set will consist of chats with three (3) distinct groups, each 
with no more than nine (9) participants for a grand total of nine (9) 
chats with 81 total participants. Respondents will be selected based on 
the preliminary market segmentation framework. The task order officers 
will approve the final selection of the chat participants within each 
market segment as described in the framework.
    Knowledge Networks shall provide prototype awareness materials 
(also developed in a separate contract) to each participant. The 
materials will be the subject of a facilitated discussion that allows 
each chat participant to offer their own written and/or verbal comments 
and see the written and/or verbal responses of other participants. 
Participants will be asked to comment on any aspect of the materials. 
Knowledge Networks will provide a technical moderator for the chat. A 
content moderator representing another ASPE contractor shall moderate 
the sessions and stimulate conversation as necessary. Knowledge 
Networks shall keep a record of the comments offered during the 
sessions. Knowledge Networks shall also provide technical assistance to 
the task order officers to help facilitate the interactive chats in an 
on-line fashion. The timing of the chats is as follows:
                        Sub-Task 2.1: First Set
    Knowledge Networks, in conjunction with the ASPE task order 
officers, will determine the timing of the first set of interactive 
chats. The government anticipates it will take place no more than 
thirty-six (36) weeks from contract award. A record of the online 
session shall be provided to the task order officers no later than 2 
weeks after completion of the chat.
                        Sub-Task 2.2: Second Set
    Knowledge Networks, in conjunction with the ASPE task order 
officers, will determine the timing of the second set of interactive 
chats. The government anticipates it will take place no more than 
forty-two (42) weeks from contract award. A record of the online 
session shall be provided to the task order officers no later than 2 
weeks after completion of the chat.
                        Sub-Task 2.3: Third Set
    Knowledge Networks, in conjunction with the ASPE task order 
officers, will determine the timing of the third set of interactive 
chats. The government anticipates it will take place no more than 
forty-eight (48) weeks from contract award. A record of the online 
session shall be provided to the task order officers no later than 2 
weeks after completion of the chat.

Task 3.0 Online Town Hall Meetings

    Knowledge Networks shall convene six online town hall meetings. The 
town hall meetings will feature a presentation by a moderator (provided 
through a separate contract) followed by informal discussions and 
instant polling of participants.
    Participants will be offered the opportunity to respond to 
prototype educational/marketing materials, to raise questions and to 
offer responses to instant polls. Each town hall meeting will consist 
of no more than 100 participants. Respondents will be selected based on 
the preliminary market segmentation framework. The task order officers 
will work with Knowledge Networks to align the selection of the 
participants with each market segment. Knowledge Networks shall provide 
a technical moderator to manage all technical aspects of the meetings. 
Knowledge Networks shall provide prototype awareness materials 
(provided by the task order officers) to each meeting participant.
    The government anticipates that the online town hall meetings shall 
be convened between 50-70 weeks after award of the contract. The task 
order officers shall work with Knowledge Networks on the scheduling of 
the meetings. A record of the town hall meetings shall be provided to 
the task order officers no later than 2 weeks after completion of each 
meeting.

Task 4.0 Attitudes and Opinions Questionnaire
                         Sub-Task 4.1: Pretest
    Knowledge Networks shall arrange for a questionnaire pretest with 
no more than 25 cases. This pretest will allow for examining 
questionnaire length, possible coding or respondent answering problems 
and for testing response data delivery. Data from the pretest shall be 
provided to the government. The pretest shall be completed no later 
than sixty (60) weeks after contract award.
                     Sub-Task 4.2: Data Collection
    Knowledge Networks shall invite panel participants between the ages 
of 40 and 70 to respond to the questionnaire. The sample shall be large 
enough to obtain 18,000 responses. The government anticipates that the 
questionnaire will take 40 minutes to complete. Knowledge Networks will 
inform the task order officers of any problems that arise during data 
collection. Collection of data shall occur within eighty (80) weeks 
after contract award.
                      Sub-Task 4.3: Data Delivery
    Questionnaire response data shall be provided to the task order 
officers and the ASPE contractor no later than eighty-four (84) weeks 
after contract award. These files should at least be delivered as flat 
ASCII files and preferably as SAS data files.

Task 5.0 Evaluation Processes Memo

    Knowledge Networks shall provide a short memo that discusses the 
administration of the interactive discussions and questionnaire in the 
above tasks (Tasks 2-4). The purpose of the memo is to describe issues 
or problems that should be taken into consideration when analyzing the 
data. Of particular concern are issues that arose in the testing of 
consumer materials. Knowledge Networks shall note any logistical 
problems or other limitations in the data to be used for this purpose. 
The memo shall be delivered to the ASPE task order officers within 
eighty-four (84) weeks of contract award.
                 2.0 PERIOD OF PERFORMANCE/DELIVERABLES
                       2.1 PERIOD OF PERFORMANCE
    The period of performance shall be 86 weeks from the date of award.
                        2.2 PLACE OF PERFORMANCE
    All work performed under this task order shall be accomplished at 
the Contractor's facility.
                        2.3 DELIVERABLE SCHEDULE
    The Contractor shall deliver the following items in accordance with 
the schedule set forth below:


----------------------------------------------------------------------------------------------------------------
                 Task                        Deliverable                Date Due            # of Copies to TOO
----------------------------------------------------------------------------------------------------------------
Task 1...............................  Post-Award Logistics                              .......................
                                         1: Post-Award Meeting  Week 2.................  1 electronically
                                         1.2: Work Plan.......  Week 4.................  1 electronically
Task 2...............................  Interactive Chats                                 .......................
                                         2.1: First Set.......  Week 36................  1 electronically
                                         2.2: Second Set......  Week 42................  1 electronically
                                         2.3: Third Set.......  Week 48................  1 electronically
Task 3...............................  Town Hall Meetings.....  Weeks 50-70............  1 electronically
Task 4...............................  Survey of Attitudes and
                                        Opinions                Week 60................  1 electronically
                                         4.1: Pretest.........  Week 80................  1 electronically
                                         4.2: Data Collection.  Week 84................  1 electronically
                                         4.3: Data Delivery...
Task 5...............................  Evaluation Processes     Weeks 86...............  1 electronically
                                        Memo.
----------------------------------------------------------------------------------------------------------------

                      2.4 PERFORMANCE REQUIREMENTS
    The Performance Requirements Summary (PRS) below lists requirements 
that the Government will evaluate. The absence of any task order 
requirement from the PRS shall not detract from its enforceability nor 
limit the rights or remedies of the Government under any other 
provision of the task order, including the clauses entitled 
``Inspection of Services'' and ``Default.''


----------------------------------------------------------------------------------------------------------------
                                                           Method of
                                      Performance        Surveillance     Standard to be Met/
     Required Services/Tasks           Standards          (Quality of          Allowable           Deduction
                                                          Assurance)           Deviation
----------------------------------------------------------------------------------------------------------------
Customer satisfaction...........  Contractor adheres  Task order officer  Contractor          Up to 2 percent of
                                   to guidance         will work closely   provides consumer   fixed fee.
                                   provided by task    with contractor.    response data to
                                   order, officer.                         task order
                                                                           officers in a
                                                                           timely fashion.
Task 3--Center-Active Chats.....  Contractor          Task order          Each chat must      Up to 1 percent of
                                   successfully        officers will       have at least       fixed fee.
                                   recruits            participate in      nine
                                   sufficient number   all chats.          participants.
                                   of participants                         Operation of
                                   for inter-active                        technology must
                                   chats and ensures                       not present an
                                   smooth operation                        obstacle to
                                   of communication                        obtaining
                                   technology.                             consumer input.
Task 4--Town Hall Meetings......  Contractor will     Task order officer  Each town hall      Up to 2 percent of
                                   recruit             will participate    meeting should      fixed fee.
                                   sufficient number   in each town hall   have at least 80
                                   of participants     meeting.            participants.
                                   for each town                           Operation of
                                   hall meeting and                        communications
                                   ensure smooth                           technology must
                                   operation of                            not present an
                                   communication                           obstacle to
                                   technology.                             obtaining
                                                                           consumer input.
Task 5--Questionnaire...........  Contractor will     Task order          Questionnaire       Up to 2 percent of
                                   recruit a           officers will       response data       fixed fee.
                                   sufficient sample   work closely with   should be
                                   of panel members    contractor.         provided to the
                                   to obtain desired                       task order
                                   number of                               officers not
                                   questionnaire                           later than 3
                                   responses and                           weeks after
                                   data is submitted                       questionnaire
                                   in a timely                             responses have
                                   fashion.                                been submitted.
----------------------------------------------------------------------------------------------------------------

             3.0 GOVERNMENT FURNISHED PROPERTY/INFORMATION
             3.1 GOVERNMENT FURNISHED PROPERTY/INFORMATION
    The government will provide:

      prototype educational/marketing materials to be tested; 
and,
      an OMB approved questionnaire
                   4.0 TASK ORDER ADMINISTRATION DATA
               4.1 AUTHORIZATION OF GOVERNMENT PERSONNEL
    Notwithstanding the Contractor's responsibility for total 
management during the performance of this task order, the 
administration of the Task order will require maximum coordination 
between the Government and the Contractor. The following individuals 
will be the Government's points of contact during the performance of 
this task order:
                         1. Contract Specialist
    All order administration shall be performed by:

        Kevin McGowan
        Contract Specialist
        Division of Acquisition Management
        Parklawn Building, Room 5-101
        5600 Fishers Lane
        Rockville, MD 20857
        (301) 443-0708
        Kevin.McGowan@psc.hhs.gov

                         2. Contracting Officer
    The PSC Contracting Officer is the only individual authorized to 
modify this order. The Contracting Officer responsible for 
administrative and contractual issues concerning this task order is:

(To be determined upon award.)

     3. Contracting Officers' Technical Representative Appointment 
                             and Authority
    The name and address of the COTR assigned to this project is:

(To be determined upon award.)

    (a) Performance of work under this task order must be subject to 
the technical direction of the Contracting Officers' Technical 
Representative identified above, or a representative designated in 
writing. The term ``technical direction'' includes, without limitation, 
direction to the contractor that directs or redirects the labor effort, 
shifts the work between work areas or locations, fills in details and 
otherwise serves to ensure that tasks outlined in the work statement 
are accomplished satisfactorily.
    (b) Technical direction must be within the scope of the 
specification(s)/work statement.
    The Contracting Officers' Technical Representative does not have 
authority to issue technical direction that:

    (1) Constitutes a change of assignment or additional work outside 
the specification(s)/statement of work;
    (2) Constitutes a change as defined in the clause entitled 
``Changes'';
    (3) In any manner causes an increase or decrease in the task order 
price, or the time required for task order performance;
    (4) Changes any of the terms, conditions, or specification(s)/work 
statement of the task order;
    (5) Interferes with the Contractor's right to perform under the 
terms and conditions of the task order; or
    (6) Directs, supervises or otherwise controls the actions of the 
contractor's employees.
    (c) Technical direction may be oral or in writing. The Contracting 
Officers' Technical Representative shall confirm oral direction in 
writing within 5 work days, with a copy to the Contracting Officer.
    (d) The contractor shall proceed promptly with performance 
resulting from the technical direction issued by the Contracting 
Officers' Technical Representative. If, in the opinion of the 
contractor, any direction of the Contracting Officers' Technical 
Representative, or his/her designee, falls within the limitations in 
(c), above, the contractor shall immediately notify the Contracting 
Officer no later than the beginning of the next Government work day.
    (e) Failure of the contractor and the Contracting Officer to agree 
that technical direction is within the scope of the task order shall be 
subject to the terms of the clause entitled ``Disputes.''
             4.2 HHSAR 352.242-70 KEY PERSONNEL (JAN 2006)
    The key personnel specified in this task order are considered to be 
essential to work performance. At least 30 days prior to diverting any 
of the specified individuals to other programs or contracts (or as soon 
as possible, if an individual must be replaced, for example, as a 
result of leaving the employ of the Contractor), the Contractor shall 
notify the Contracting Officer and shall submit comprehensive 
justification for the diversion or replacement request (including 
proposed substitutions for key personnel) to permit evaluation by the 
Government of the impact on performance under this task order. The 
Contractor shall not divert or otherwise replace any key personnel 
without the written consent of the Contracting Officer. The Government 
may modify the task order to add or delete key personnel at the request 
of the Contractor or Government.

(End of clause)

    The individuals cited below are key personnel:

    Name_______Title

(To be entered upon award.)

                         4.3 INVOICE SUBMISSION
    1. The Contractor shall submit one original monthly invoice 
complete with all required back-up documentation to the Contract 
Specialist, Kevin McGowan, at Kevin.McGowan@psc.hhs.gov or sent by U.S. 
mail and addressed as follows:

        DHHS/Program Support Center
        Division of Acquisition Management
        Attn: Matthew Gormley
        Parklawn Building, Room 5-101
        Rockville, MD 20857

    One complete copy of each invoice with backup documentation shall 
be emailed to the COTR.
    Three hard copies of all invoices with all required back-up 
documentation shall be sent directly to the Finance Office for payment 
or an electronic copy of all invoices with all back-up documentation 
may be e-mailed to psc_invoices@psc.hhs.gov. It is the responsibility 
of the Contractor to verity that the Finance Office has received their 
invoice. Calls concerning contract payment shall be directed to the 
general help-line number on (301) 443-6766. The address for the Finance 
Office responsible for payment is:

        DHHS/Program Support Center
        Financial Management Services/DFO
        Commercial Payments Section
        Parklawn Building, Room 16A-12
        5600 Fishers Lane
        Rockville, MD 20857
        Telephone Number: 301-443-6766

    2. The Contractor agrees to include the following information on 
its invoice:

    a. Contractor's name, invoice number and date;
    b. Contract Number and Task Order Number;
    c. Employee name and title (labor category); the loaded hourly 
rate; number of hours used during the month; number of hours remaining 
for the task order period; dollar amount billed for the month; 
cumulative dollar amount billed to date for the task order period; the 
balance remaining for the task order period;
    d. Payment terms;
    e. Tax identification number;
    f. Signature of an authorized official certifying the voucher to be 
correct and proper for payment;
    g. Contractor's complete remittance or check mailing address; and
    h. COTR's name and telephone number.
                   5.0 OBSERVANCE OF FEDERAL HOLIDAYS
    No services or deliveries shall be performed on Federal property on 
Saturdays, Sundays or Federal legal holidays as shown below:

    Government holidays are:

    1 New Year's Day--January 1st
    2. Martin Luther King's Birthday--Third Monday in January
    3. President's Day--Third Monday in February
    4. Memorial Day--Last Monday in May
    5. Independence Day--July 4th
    6. Labor Day--First Monday in September
    7. Columbus Day--Second Monday in October
    8. Veteran's Day--November 11th
    9. Thanksgiving Day--Fourth Thursday in November
    10. Christmas Day--December 25th
                          6.0 TASK ORDER TYPE
    The Government anticipates award of a Firm Fixed Price Task Order.
    Note: Cancellation costs will not be incorporated into this Non-
Severable Task Order.
                  7.0 SPECIAL TASK ORDER REQUIREMENTS
7.1 HHS Section 508 Accessibility Standards Notice (September 2009)

    Section 508 of the Rehabilitation Act of 1973 (29 U.S.C. 794d) 
requires Federal agencies to purchase electronic and information 
technologies (EIT) that meet specific accessibility standards. This law 
helps to ensure that Federal employees with disabilities have access 
to, and use of, the information and data they need to do their jobs. 
Furthermore, this law ensures that members of the public with 
disabilities have the ability to access government information and 
services.
    There are three regulations addressing the requirements detailed in 
Section 508. The Section 508 technical and functional standards are 
codified at 36 CFR Part 1194 and may be accessed through the Access 
Board's Web site at http://www.access-board.gov. The second regulation 
issued to implement Section 508 is the Federal Acquisition Regulation 
(FAR). FAR Part 39.2 requires that agency acquisitions of Electronic 
and Information Technology (EIT) comply with the Access Board's 
standards. The entire FAR is found at Chapter 1 of the Code of Federal 
Register (CFR) Title 48, located at http://www.acquisition.gov. The FAR 
rule implementing Section 508 can be found at http://
www.section508.gov. The third applicable regulation is the HHS 
Acquisition Regulation (HHSAR).
    Regardless of format, all Web content or communications materials 
produced for publication on or delivery via HHS Web sites--including 
text, audio or video--must conform to applicable Section 508 standards 
to allow Federal employees and members of the public with disabilities 
to access information that is comparable to information provided to 
persons without disabilities. All contractors (including 
subcontractors) or consultants responsible for preparing or posting 
content intended for use on an HHS-funded or HHS-managed Web site must 
comply with applicable Section 508 accessibility standards, and where 
applicable, those set forth in the referenced policy or standards 
documents below. Remediation of any materials that do not comply with 
the applicable provisions of 36 CFR Part 1194 as set forth in the SOW 
or PWS, shall be the responsibility of the contractor or consultant 
retained to produce the Web-suitable content or communications 
material.
    The following Section 508 provisions apply to the content or 
communications material identified in this SOW--PWS: Access Board Final 
Rule 36 CFR Part 1194.22(a)-(p).

7.2 Requirements Regarding Permission to Disclose or Publish Findings 
Prior to Delivery Order End Date

    The contractor and any consultants or subcontractors agree not to 
release or disclose, verbally or in writing, information pertaining to 
the results or findings of work (including data collection, analyses, 
draft or final papers and reports) for the period of this delivery 
order without obtaining prior written approval of the Task Order 
Officer. The contractor must request approval in advance (minimum 21 
days prior to release) and in writing, specifying: who or what is 
generating the request for advance information; when and how project 
results/information will be released; and what information would be 
released. Failure to receive response from the Task Order Officer does 
not constitute approval for releasing information.

7.3 Food And Beverage--Unallowable Costs

    Food and beverage costs, unless part of per diem expenses paid in 
accordance with the Federal Travel Regulations, are unallowable costs 
to this task order.

7.4 Contractor Performance Evaluation

    During the life of this order, the Contractor's performance will be 
evaluated on an interim and final basis pursuant to FAR Subpart 42.15. 
The evaluation will be conducted utilizing the National Institutes of 
Health Contractor Performance System (CPS). The Contractor shall 
register in the CPS. The CPS may be accessed by the Contractor at 
https://cpsContractor.nih.gov.

7.5 Travel

    The Contractor will be reimbursed for travel to provide support at 
a Government site or other site as may be specified and approved by the 
COTR under this effort. All travel shall be approved, by the COTR, 
prior to commencement of travel. The contractor shall be reimbursed for 
actual allowable, allocable, and reasonable travel costs incurred 
during performance of this effort in accordance with the Federal Travel 
Regulations in effect on date of travel.
    The Contractor shall provide supporting documentation and a 
detailed breakdown of incurred travel costs with each invoice.
                    8.0 CONTRACT CLAUSES/PROVISIONS
    In addition to applicable terms and conditions of the Offeror's GSA 
MOBIS contract, the following Federal Acquisition Regulation and Health 
& Human Services Acquisition Regulation Provisions/Clauses apply to 
this acquisition:
   HHSAR 352.239-73 Electronic Information Technology Accessibility 
                               (Oct 2009)
    (a) Section 508 of the Rehabilitation Act of 1973 (29 U.S.C. 794d), 
as amended by the Workforce Investment Act of 1998, and the 
Architectural and Transportation Barriers Compliance Board Electronic 
and Information (EIT) Accessibility Standards (36 CFR Part 1194), 
require that, unless an exception applies, all EIT products and 
services developed, acquired, maintained, or used by any Federal 
department or agency permit--
    (1) Federal employees with disabilities to have access to and use 
information and data that is comparable to the access and use of 
information and data by Federal employees who are not individuals with 
disabilities; and
    (2) Members of the public with disabilities seeking information or 
services from a Federal agency to have access to and use of information 
and data that is comparable to the access and use of information and 
data by members of the public who are not individuals with 
disabilities.
    (b) Accordingly, any vendor submitting a proposal/quotation/bid in 
response to this solicitation must demonstrate compliance with the 
established EIT accessibility standards. Information about Section 508 
is available at www.section508.gov. The complete text of Section 508 
Final Provisions can be accessed at www.access-board.gov/sec508/
provisions.
    (c) The Section 508 accessibility standards applicable to this 
solicitation are identified in the Statement of Work/Specification/
Performance Work Statement. In order to facilitate the Government's 
evaluation to determine whether EIT products and services proposed meet 
applicable Section 508 accessibility standards, offerors must prepare 
an HHS Section 508 Product Assessment Template, in accordance with its 
completion instructions, and provide a binding statement of 
conformance. The purpose of the template is to assist HHS acquisition 
and program officials in determining that EIT products and services 
proposed support applicable Section 508 accessibility standards. The 
template allows vendors or developers to self-evaluate their products 
or services and document in detail how they do or do not conform to a 
specific Section 508 accessibility standard. Instructions for preparing 
the HHS Section 508 Evaluation Template may be found under Section 508 
policy on the HHS Office on Disability Web site www.hhs.gov/od.
    (d) Respondents to this solicitation must also provide any 
additional detailed information necessary for determining applicable 
Section 508 accessibility standards conformance, as well as for 
documenting EIT products or services that are incidental to the 
project, which would constitute an exception to Section 508 
requirements. If a vendor claims its products or services, including 
EIT deliverables such as electronic documents and reports, meet 
applicable Section 508 accessibility standards in its completed HHS 
Section 508 Product Assessment Template, and it is later determined by 
the Government--i.e., after award of a contract/order; that products or 
services delivered do not conform to the described accessibility 
standards in the Product Assessment Template, remediation of the 
products or services to the level of conformance specified in the 
vendor's Product Assessment Template will be the responsibility of the 
Contractor and at its expense. (end of provision)
       FAR 52.252-2 Clauses Incorporated by Reference (FEB 1998)
    This task order incorporates one or more clauses by reference, with 
the same force and effect as if they were given in full text. Upon 
request, the Contracting Officer will make their full text available. 
Also, a full text of a clause may be accessed electronically at these 
addresses: FAR--http://www.acqnet.gov/far and HHSAR--http://
www.hhs.gov/oamp/policies/hssar.doc.
  a. FEDERAL ACQUISITION REGULATION (FAR) (48 CFR CHAPTER 1) CONTRACT 
                                CLAUSES


------------------------------------------------------------------------
              FAR Clause No.                       Title and Date
------------------------------------------------------------------------
1. 52.204-7...............................  Central Contractor
                                             Registration (Apr 2008)
2. 52.212-4...............................  Contract Terms And
                                             Conditions--Commercial
                                             Items (Mar 2009), Alternate
                                             I (Oct 2008)
3. 52.227-14..............................  Rights In Data--General (Dec
                                             2007)
------------------------------------------------------------------------

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
                                             
Contract Number: HHSP23320100022WI
Task Order Number: HHSP23337001T

SECTION C. STATEMENT OF WORK

Title

    Development and Testing of Long-term Care Awareness Materials

I. Purpose

    This task order is one of three inter-related task orders intended 
to assist in the implementation of provisions of the Affordable Care 
Act (ACA) related to long-term care financing and awareness. The two 
related task orders are: (1) Development of a Survey on Long-Term Care 
Awareness and Planning and (2) Survey of Long-Term Care Awareness and 
Planning.
    The purpose of this task order is to develop a set of consumer-
oriented long-term care awareness materials. The Department's current 
set of materials, designed as part of the National Clearinghouse for 
Long-Term Care Information (Clearinghouse), targets a broad 20-year 
(50-70) age bracket. The new materials will focus on different segments 
of the population in an effort to increase the salience of the 
materials. Also, the current materials were developed and tested nearly 
10 years ago. A number of changes are necessary to bring them up to 
date with current planning options as well as changes in the relative 
level of long-term care awareness. The new materials are intended for 
use in a variety of Clearinghouse initiatives including educating 
consumers about a new Federal long-term care insurance program. This 
task order is limited to: (a) identifying this relevant target market 
(i.e., segments of the population), (b) analysis of consumer responses, 
and, (c) revision and design of the educational materials. The 
logistics for the interactive discussions will be coordinated by 
Knowledge Networks in a separate contract.

II. Background

    Approximately 70 percent of Americans 65 years of age can expect to 
experience some level of long-term care need before they die.\1\ Long-
term care refers to a wide variety of services and supports used by 
persons who are unable to perform activities of daily living, such as 
bathing or dressing, because of a disability. Such services can be 
provided informally, by family members or neighbors, or through a 
network of formal long-term care service providers. However, the vast 
majority of such care is provided by informal (unpaid) caregivers. Over 
78 percent of persons receiving long-term care rely solely on some form 
of informal care while 8 percent rely solely on formal, or paid, 
care.\2\ For those without informal caregivers, or for those whose 
needs cannot be met by informal caregivers alone, there are a variety 
of formal long-term care service providers.
---------------------------------------------------------------------------
    \1\ Kemper, Komisar, Alecxih. Long-Term Care Over an Uncertain 
Future: What Can Current Retirees Expect? Inquiry--Excellus Health 
Plans; Winter 2005/2006; 42, 4
    \2\ Lee, Thompson. Long-term Care: Support for Family Caregivers. 
Long-Term Care Financing Project Issue Brief March 2004; Georgetown 
University.
---------------------------------------------------------------------------
    The type of formal long-term care with which consumers are most 
familiar is nursing home care. Approximately 35 percent of those using 
long-term care services will use some nursing home care, and 5 percent 
of long-term care users spend more than 5 years in such a facility.\3\ 
Increasingly, consumers are voicing a preference for remaining in their 
home for as long as possible. For some time, public policy at both the 
State and Federal levels has been moving towards expanding community-
based options for persons needing long-term care.\4\
---------------------------------------------------------------------------
    \3\ Kemper, et al. 343.
    \4\ Shirk, Cynthia. Trading Places: Real Choice Systems Change 
Grants and the Movement to Community-Based Long-Term Supports Issue 
Brief National Health Policy Forum No. 822, May 2007.
---------------------------------------------------------------------------
    Long-term care services are expensive. A semi-private room in a 
nursing home costs an average of $191 a day and home care services cost 
an average of $20 an hour in 2008.\5\ The onset of chronic illness and 
the associated need for long-term care services can threaten the 
security of retirement finances. Johnson, et al. found that the onset 
of disability presented ``a special financing challenge'' for older 
adults. They estimate that spells of nursing home use can reduce 
household wealth by 60 percent for unmarried women.\6\
---------------------------------------------------------------------------
    \5\ MetLife Mature Market Institute. MetLife Market Survey of 
Nursing Home and Assisted Living Costs. October 2008.
    \6\ Johnson, Mermin, Uccello. When the Nest Egg Cracks: Financial 
Consequences of Health Problems, Martial Status Changes, and Job 
Layoffs at Older Ages.
---------------------------------------------------------------------------
    In spite of the number of people who will need such care and the 
significant threat to retirement finances that the high costs of care 
represent, most Americans are unaware of how much long-term care costs 
or who routinely pays for such services. In numerous surveys conducted 
over the last 10 years, a majority of respondents were unable to 
correctly identify who pays for long-term care or to correctly estimate 
the cost of such services. One of the most misunderstood aspects of 
long-term care financing is the role of Medicare. Several surveys 
report that more than half of pre-retiree respondents think that 
Medicare pays for custodial long-term care.\7\ \8\ Other studies assume 
that private health insurance or other public programs will pay.\9\ 
\10\
---------------------------------------------------------------------------
    \7\ Lake Research Partnership and American Viewpoint. Survey of 
California Voters 40 and Older on Long-Term Care. April 2010.
    \8\ Mathematica Policy Research, Inc. Shoring Up the Infrastructure 
for Long-Term Care: What Do Vulnerable Adults Know About Their Options. 
Issue Brief July 2004.
    \9\ MetLife Mature Market Institute. MetLife Long-Term Care IQ 
Removing Myths, Reinforcing Realities. September 2009.
    \10\ Minnesota Department of Human Services. Aging Initiative: 
Project 2030 Baby Boomer Market Research Report June 1997.
---------------------------------------------------------------------------
    In addition, while many believe that private long-term care 
insurance plays a major role in financing long-term care, this has not 
been the case. Long-term care insurance has not achieved any 
significant penetration among retirees and pre-retirees due in part to 
this lack of awareness. The Long-Term Care Financing Strategy Group 
estimated in 2005 that about 8 million long-term care insurance 
policies were in force or about one in six people over age 65 with an 
income over $20,000.\11\ Policy sales in recent years have remained 
virtually flat. Consumers that are uninsured for long-term care and 
unprepared for its associated cost often end up on Medicaid. Medicaid 
is the largest payer of long-term care services in the country.\12\ The 
sheer size of the baby boom generation poses a major challenge to State 
and the Federal Governments to sustaining current access to publicly 
funded long-term care.
---------------------------------------------------------------------------
    \11\ Long-Term Care Financing Strategy Group. Index of the Long-
Term Care Uninsured. Washington, DC: Long-Term Care Financing Strategy 
Group; 2005.
    \12\ Georgetown University Long-Term Care Financing Project. 
National Spending for Long-Term Care Fact Sheet. February, 2007.
---------------------------------------------------------------------------
    In 2005, Congress acted to increase consumer awareness of long-term 
care by establishing The National Clearinghouse for Long-Term Care 
Information (Clearinghouse) in the Deficit Reduction Act of 2005 (DRA). 
Section 6021(d) of the DRA appropriated $15 million in funding for the 
Clearinghouse. The goal was to make consumers more aware of the need to 
plan ahead and to offer information and tools to assist them in 
planning. The premise behind the Clearinghouse is that preparing 
consumers for long-term care may reduce dependence on Medicaid and 
other public sources of financing. Over the last 4 years, ASPE has had 
a major role in administering this effort in coordination with CMS, the 
Administration on Aging, the National Governors Association, and 
individual State governors. The two major components of the 
Clearinghouse are as follows:

    (1) National Clearinghouse Web site.--The Administration on Aging 
(AoA) hosts a Web site (www.longtermcare.gov) that provides consumers 
with information about how to plan for long-term care. The Web site 
contains information on public coverage such as Medicare and Medicaid 
as well as private financing alternatives such as reverse mortgages and 
long-term care insurance. Consumers can obtain general information 
about long-term care as well as links to State-specific resources such 
as local area agencies on aging or State divisions of insurance.
    (2) State-Based Long-Term Care Awareness Campaigns.--State-based 
awareness campaigns combine State and Federal resources to reach out 
directly to consumers. Over the last 4 years, 16 States have launched 
campaigns, reaching over 20 million households. Each State campaign 
featured a letter from the Governor, a State-specific informational 
brochure and included a number of State-specific activities designed to 
take advantage of local messaging opportunities. Consumers are asked to 
respond to the mailings by requesting more information by mail, phone 
or through the internet. The response to these campaigns has exceeded 
expectations; while direct mail campaigns define success as response 
rates over 1 percent, these State campaigns have had rates from a low 
of about 4 percent to a high of over 21 percent.

    Much of the consumer material on the Web site and in the State 
campaigns was designed and tested several years ago. In an effort to 
improve the quality of the campaign materials, a Technical Expert Panel 
(TEP) was convened last year to obtain input from a variety of experts 
with perspectives in social marketing, private insurance marketing, and 
non-profit communications. The TEP provided a review of the materials 
and made three major recommendations. They are:

    A. Segment the target market.--The TEP felt that the age span in 
our target market was too broad to reach with a single set of 
materials. They noted, for example, that younger persons did not like 
the suggestion that they do crossword puzzles to keep their minds 
active or receiving information about programs and options for which 
they are decades away from using, such as reverse mortgages. They 
recommended targeting narrower age groups with greater homogeneity to 
ensure our messaging remains salient.
    B. Reduce the number of calls to action.--The TEP felt that the 
materials contained too many calls to action (9 to 12), even for the 
segments for which the messaging was relevant. Based on the findings of 
research by Barry Schwartz,\13\ and Richard Thaler and Cass 
Sunstein,\14\ the TEP noted that people are often overwhelmed if there 
are too many options or suggestions, even if they are sympathetic to 
the overall message.
---------------------------------------------------------------------------
    \13\ Schwartz, Barry, The Paradox of Choice: Why More is Less. 
Harpers Collins. New York, NY, 2004.
    \14\ Thaler, Richard and Cass Sunstein, Nudge: Improving Decisions 
About Health, Wealth and Happiness. Penguin Books: New York, NY, 2008.
---------------------------------------------------------------------------
    C. Simplify the message.--The TEP also concluded that we were 
asking too much of the target market with materials that were too long 
and too complex. They suggested that we do not try to provide a 
complete education on the topic but just make an appeal for a limited 
set of relevant action steps.
    The impetus for this new work stems from an extension of 
Clearinghouse funding via the recently passed Patient Protection and 
Affordable Care Act. The Clearinghouse was extended and funded for an 
additional 5 years during which new materials will be needed to 
continue to increase consumer awareness about long-term care. This 
project will mainly serve to revise the awareness materials in 
accordance with the recommendations of the TEP. The contractor will 
review the Department's current materials, develop a marketing strategy 
focused on narrower age groups and other segments of the population, 
design separate materials for each segment, and analyze survey and 
focus group information in order to make revisions. The collection of 
information through the survey, the focus groups and other means will 
be done via a separate ASPE contract with Knowledge Networks.

III. Project Summary

    Key Goal: The key goals for this task order are to: (1) develop a 
market segmentation framework for better communicating with the 
American public about long-term care by focusing on narrower age groups 
and other segments, (2) develop materials focused on narrower market 
segments, and (3) test and refine the new materials to reflect the 
preferences of each market segment.
    Study Design: After a market segmentation framework is developed, 
consumer awareness materials will be developed for each segment. These 
materials will be tested in small interactive chats and larger town 
hall meetings. The data will be collected by Knowledge Networks through 
a separate task order, will be analyzed in this task order and will be 
used to revise the materials after each phase to better reflect market 
segment preferences.
    Major Deliverable: This task order has two major deliverables: (1) 
a market segmentation framework that is focused on specific age groups 
and other segments and (2) a series of associated consumer awareness 
materials related to long-term care. The materials will include 
educational information on long-term care as well as calls to action 
for individual planning.
    Contractor Coordination: The contractor for this project must be 
willing to coordinate with Knowledge Networks as well as the contractor 
selected for the task order entitled ``Development of a Survey on Long-
Term Care Awareness and Planning.'' It is anticipated that each of the 
three contractors will designate a liaison that will be responsible for 
coordinating with the other contractors.

IV. Sample Research Questions

     What are the different segments of our target market 
population? What information sources are trusted for issues related to 
retirement and long-term care?
     What kind of information do consumers need to better 
understand the risks and costs associated with needing long-term care 
services?
     Are there differences in how segments of the American 
public use and receive information related to planning for the future 
in general and long-term care specifically? Are some forms of 
information and/or media better suited to specific segments?

V. Specification of Tasks

Task 1.0 Post-Award Meeting

    Within two (2) weeks of award, the contractor and other relevant 
staff (including the liaisons for the other task orders) shall meet 
with the ASPE task order officers to discuss the objectives of the task 
order and any related issues. The Government anticipates a joint post-
award meeting for all three task orders. Specific topics to be 
discussed include, but are not limited to, purpose and goals of the 
task order, scope of work, timetable, format of deliverables, and 
dissemination of findings. The contractor shall prepare a brief 
memorandum summarizing issues discussed at the post-award meeting. The 
memorandum is due one (1) week following the meeting (see Appendix A 
for the Schedule of Deliverables).

Task 2.0 Work Plan

    The contractor shall develop a work plan that will guide their 
activities. The work plan, which will reflect the results of the Post-
Award Meeting (Task 1), will serve as a blueprint for the contractor's 
approach to carrying out task order activities and shall include:

     A strategy for segmenting the target market by extent of 
readiness for long-term care awareness and planning;
     A process for communicating with the other task order 
liaisons;
     Potential members of the Technical Expert Panel and date 
of meeting;
     A timeline for the development of new segment-specific 
consumer materials;
     A strategy and timeline for testing new materials with 
consumers; and,
     A delivery schedule.

    For each task, the work plan shall describe the approach the 
contractor shall take, personnel assignments, and target date for 
completion of specific tasks. The work plan shall be modified as needed 
as the task order progresses at the discretion of the task order 
officers. The draft work plan shall be submitted to the task order 
officers for review within five (5) weeks of contract award. A revised 
work plan, addressing comments from the task order officers, shall be 
submitted two (2) weeks later and be considered final upon approval of 
the task order officers.

Task 3.0 Establish Technical Expert Panel

    The contractor shall provide the task order officers with a 
prioritized list of fifteen (15) candidates with expertise in market 
segmentation, advertising and designing materials for baby boomers and/
or general long-term care and retirement research to serve on a 
Technical Expert Panel (TEP). The TEP will provide substantive advice 
regarding technical decisions, review major reports and documents, and 
be consulted individually and/or collectively throughout the course of 
the task order (see Task 7, Task 8, Subtask 10.1, and Subtask 12.2). 
The contractor shall form a TEP of eight (8) experts from the original 
list of 15 based on consultations and feedback from the task order 
officers. Non-government members of the TEP will receive an honorarium 
of $1,000 and the contractor shall reimburse experts for travel 
expenses related to their participation. For purposes of bidding, the 
contractor shall assume that there will be at least six non-local 
experts who will need to travel to Washington, DC for the TEP meeting. 
The list of potential members of the TEP shall be submitted to the task 
order officers eight (8) weeks following contract award. The contractor 
shall secure agreements for participation from TEP members twelve (12) 
weeks following contract award.

Task 4.0 Literature Review

    The contractor shall conduct a review of the literature and 
materials in the following three areas:

     Survey research related to the attitudes, opinions and 
interests of the target population around long-term care in general, 
and long-term care financing/planning in particular. Of particular 
interest are surveys of ``buyers and non-buyers'' of long-term care 
insurance and surveys related to consumer assessment of long-term care 
risk.
     Evaluations of major public awareness or social marketing 
campaigns that have focused on a similar target market and been 
conducted in the last 7 years. The review shall identify lessons 
learned or findings that might be useful to the current project. Of 
particular interest are evaluations of campaigns related to long-term 
care or to other financial planning-type activities such as advanced 
care planning or estate planning. The goal of the review is to take 
advantage of the lessons from previous public campaigns that have been 
evaluated.
     Current messages and media related to long-term care in 
general and long-term care financing specifically. The contractor shall 
identify messages from news organizations, public entities and private 
industry to members of the target market. It should identify, to the 
extent possible, existing competing and complementary messages from the 
major long term-care insurers, advocacy organizations and government 
agencies. The contractor should use the scan to identify opportunities 
for new messages such as information gaps or other ongoing activities 
that can be utilized. Of particular interest is the range of 
motivational appeals, assumptions about target market financial and 
issue knowledge, and use of various forms of media.

    The draft literature review shall be completed no later than 
fourteen (14) weeks from award of the contract. The contractor shall 
submit a final literature review within 2 weeks of receiving comments 
from the Government.

Task 5.0 Preliminary Market Segmentation Framework

    Using the review of literature (Task 4), the contractor shall 
propose a preliminary conceptual framework for segmenting population 
aged 40-70 into smaller sub-groups. The purpose of the segmentation is 
to allow for the development of messages and calls to action that are 
more relevant to members of each sub-group. The Government anticipates 
that the initial segmentation factor will be age because long-term care 
planning changes over the life span. In addition to age, the contractor 
shall consider a wide range of demographic and other variables 
including attitudes, opinions, and interests before recommending a 
segmentation strategy. The contractor shall present more than one 
approach to segment the market and should outline the advantages and 
disadvantages of each approach. The proposed segmentation should be 
large enough to represent a significant portion of the total target 
market while small enough to allow for the design of awareness messages 
and calls to action with a high degree of salience to each segment. The 
applicability of existing segmentation systems such as Nielsen/PRIZM 
(consumer lifestyle segmentation) and work by Jeremy Pincus of Forbes 
Consulting should be considered as part of the development process.
    The preliminary market segmentation framework shall be completed no 
later than eighteen (18) weeks from award of the contract. The 
Government anticipates that the preliminary framework will be adjusted 
as data become available from the complementary long-term care 
awareness projects and will be finalized in Subtask 12.1.

Task 6.0 Marketing Materials Memo

    After development of the market segmentation framework (Task 5), 
the contractor shall draft a memo outlining preliminary content for 
long-term care planning for each segment. The Government anticipates 
that content for each segment will combine the following four elements:

     Information/knowledge: information and/or data that 
encourage each segment to consider a call to action. For example, does 
the target market need to know how to compute compound interest in 
order to buy long-term care insurance? Information for each segment 
should be included based on how it engages the target market in a call 
for action. This element should include information on risk, types of 
providers and cost of care.
     Call to action: suggested planning actions for each 
segment, restricted to the three most significant steps that members of 
the segment can take now. This element is largely dependent on age. For 
example, the oldest segment may be asked to learn about reverse 
mortgages whereas the youngest one will not.
     Motivational appeal: the rationale the target market could 
consider adopting for answering a call to action. For example 
individuals used to exerting control over their lives may respond 
positively to the suggestion that they need to consider long-term care 
planning to ensure continued control as they require services.
     Delivery: the medium or method used for delivering 
content. Segments may have different preferred media for information 
about long-term care. For example, the Department's logo on a direct 
mail piece may provide issue validation for some segments. Other 
segments may prefer to receive information through social networking or 
from peer issue leaders. Content delivery may vary for each market 
segment but should be held together by similar themes and/or designs.

    The contractor shall submit the memo no later than twenty-two (22) 
weeks from award of contract. The memo shall be considered final upon 
approval of the task order officers.

Task 7.0 Technical Expert Panel (TEP)

    The contractor shall be responsible for making arrangements to 
convene one in-person meeting of the TEP in Washington, DC. The main 
purpose of the TEP is to provide feedback on the marketing materials 
memo (Task 6). However, during the meeting the TEP will also review the 
literature review (Task 4) and the preliminary market segmentation 
framework (Task 5).
    Arrangements for the meeting will include preparing the agenda, 
compiling necessary materials, making logistical arrangements, taking 
minutes, and summarizing proceedings. Agendas and meeting materials 
shall be submitted to the task order officers twenty-three (23) weeks 
after contract award for distribution to TEP members. The TEP meeting 
shall take place no later than twenty-five (25) weeks after contract 
award. The contractor shall submit a summary that outlines the TEP 
comments and makes recommendations regarding the need to revise the 
marketing materials memo no later than twenty-seven (27) weeks after 
contract award.

Task 8.0 Development of Draft Marketing Materials

    Building on the recommendations and comments from the TEP (Task 7), 
the contractor shall develop new marketing materials. The contractor 
must have the capability to create and reproduce prototype marketing 
materials for the various marketing segments as identified in Task 5. 
The materials shall be developed so that they can be reproduced both in 
electronic and hard versions. The draft marketing materials shall be 
developed within thirty-three (33) weeks after contract award. The task 
order officers may seek feedback and comments from selected members of 
the TEP.

Task 9.0 Interactive Chats

    The contractor shall moderate three (3) sets of three (3) 
interactive chats with members of the market segments identified in 
Task 5. The interactive chats will be convened by Knowledge Networks 
using members of their KnowledgePanel. The purpose of these chats is 
to solicit reactions, opinions and ideas related to the draft marketing 
materials as developed in Task 8. Following each set of chats, the 
materials will be revised for testing in the next set of chats.
    Participants will provide feedback on the content of the materials 
and suggest ways for improvement. For budget estimation purposes, the 
contractor should assume nine (9) interactive chats with no more than 
nine (9) participants in each chat.
                         Subtask 9.1: First Set
    The contractor shall work with Knowledge Networks and the task 
order officers to schedule the first of three (3) sets of three (3) 
interactive chats with members of the market segments identified in 
Task 5. Participants will review the draft materials and provide 
reactions/comments. The contractor shall moderate the discussions and 
provide discussion topics when necessary. The contractor shall submit a 
discussion outline for ensuring that all chats cover the same topics. 
The discussion outline shall be considered final upon approval of the 
task order officers and shall be submitted two (2) weeks prior to the 
chat.
    The initial interactive chat shall be conducted no later than 
thirty-six (36) weeks after contract award. The contractor shall submit 
a short memo summarizing the discussion and recommending changes to the 
draft materials. The memo shall be submitted no later than thirty-eight 
(38) weeks after contract award and shall be considered final upon 
approval of the task order officers. The contractor shall then revise 
the materials based on the feedback from the initial chats. The 
materials should be revised no later than forty (40) weeks from 
contract award.
                        Subtask 9.2: Second Set
    Using the newly revised materials from Subtask 9.1, the contractor 
shall again work with Knowledge Networks and the ASPE task order 
officers to convene a second set of three (3) interactive chats with 
members of each market segment as identified in Task 5. Participants in 
each chat will review the revised draft materials and provide 
reactions/comments. The contractor shall moderate the discussions and 
provide discussion topics when necessary. The contractor shall submit a 
discussion outline for ensuring that all chats cover the same topics. 
The discussion outline shall be considered final upon approval of the 
task order officers and shall be submitted two (2) weeks prior to the 
chat.
    The second set of interactive chats shall be conducted no later 
than forty-two (42) weeks after contract award. The contractor shall 
submit a short memo summarizing the discussion and recommendations for 
changes to the draft materials. The memo shall be submitted no later 
than forty-four (44) weeks after contract award and shall be considered 
final upon approval of the task order officers. The contractor shall 
then revise the materials based on the feedback from the second set of 
interactive chats. The materials should be revised no later than forty-
six (46) weeks from contract award.
                         Subtask 9.3: Third Set
    Using the newly revised materials from Subtask 9.2, the contractor 
shall again work with Knowledge Networks and the ASPE task order 
officers to convene a third set of interactive chats with members of 
each market segment as identified in Task 5. Participants in each chat 
will review the revised draft materials and provide reactions/comments. 
The contractor shall moderate the discussions and provide discussion 
topics when necessary. The contractor shall submit a discussion outline 
for ensuring that all chats cover the same topics. The discussion 
outline shall be considered final upon approval of the task order 
officers and shall be submitted two (2) weeks prior to the chat.
    The third set of interactive chats shall be conducted no later than 
forty-eight (48) weeks after contract award. The contractor shall then 
revise the materials based on the feedback from the participants. The 
materials should be revised no later than fifty (50) weeks from 
contract award. These revised draft marketing materials shall be 
considered final upon approval of the task order officers.

Task 10.0 Interactive Town Hall Meetings

    The contractor shall moderate on-line interactive town hall 
meetings on the materials developed in Subtask 9.3. The interactive 
town halls will be convened by Knowledge Networks using members of 
their KnowledgePanel. The number of town hall meetings will be 
determined as a result of the preliminary market segmentation framework 
completed under Task 5. For budget purposes, the contractor should 
assume six (6) town hall meetings. The Government anticipates that the 
online town hall meetings shall be convened between 50-70 weeks after 
award of the contract.
                    Subtask 10.1: Town Hall Content
    The town hall meetings will feature a presentation by a moderator 
followed by informal discussion and instant polling. The presentation 
shall consist of a description and display of the marketing materials 
that were developed in Subtask 9.3. The presentation should provide 
several opportunities for open discussion and instant polling related 
to the materials. Participants will (a) respond to prototype 
educational/marketing materials, (b) raise questions and (c) offer 
responses to instant polls. The contractor shall develop a presentation 
for each segment that displays the educational materials and polls 
participants. The presentations shall be developed three (3) weeks 
before the scheduled town hall meetings. The contractor shall revise 
the presentations reflecting input and edits from the task order 
officers and other reviewers designated by the task order officers.
                    Subtask 10.2: Town Hall Meetings
    Each town hall meeting will consist of no more than one hundred 
(100) participants. Respondents will be selected based on the 
preliminary market segmentation framework. The contractor shall work 
with the task order officers and Knowledge Networks to align the 
selection of the participants with each market segment. The timing of 
the town hall meetings shall be coordinated between the task order 
officers, the contractor and Knowledge Networks.

Task 11.0 Analysis of Town Hall Meetings

    Using a recording provided by Knowledge Networks, the contractor 
shall analyze consumer reactions from the town hall meetings. The 
contractor shall prepare a report that synthesizes how members of each 
market segment reacted to the revised materials. The report shall 
include recommendations for changing the consumer materials in 
accordance with the findings. Analysis of the town hall meetings shall 
be submitted no later than eight (8) weeks after the last town hall 
meeting and shall be considered final upon approval of the task order 
officers.

Task 12.0 Final Deliverables

           Subtask 12.1: Final Market Segmentation Framework
    The contractor shall finalize the preliminary market segmentation 
framework developed in Task 5. The final framework shall incorporate 
any new information that has become available via this project, or 
other complementary long-term care awareness projects, since the 
conclusion of Task 5. Of particular interest will be the comments and 
recommendations of the preliminary framework by the TEP (Task 7).
    The final market segmentation framework shall be submitted to the 
task order officers no later than seventy (70) weeks from contract 
award. The contractor shall make any recommended changes to the 
framework (as determined by the task order officers) within two (2) 
weeks.
                 Subtask 12.2: Final Revised Materials
    The contractor shall revise the final draft materials (from Subtask 
9.3) for each segment (Task 5) based on the analysis of the town hall 
meetings (Task 11) and any feedback from the task order officers and 
any members of the TEP (Task 3) (as solicited by the task order 
officers). These materials are not intended to be the final ``publicly 
distributed'' materials; rather, they are intended to be the final 
materials (both in terms of content and camera-ready ``look and feel'') 
for this task order. It is expected that the materials will be revised, 
as necessary, when they are to be distributed to the public during 
future awareness efforts.
    The final revised materials shall be submitted to the task order 
officers no later than seventy-four (74) weeks from the contract award. 
The contractor shall make any recommended changes to the materials (as 
determined by the task order officers) within four (4) weeks.
                 Subtask 12.3: Draft Task Order Summary
    The contractor shall submit a draft task order summary that 
includes an overview of all activities with timelines. The draft 
summary should be no more than twenty (20) pages and, in addition to 
the overview, should contain detailed summaries of the following:

     the literature review;
     the materials redesign process; and
     the interactive discussions (chats and town hall).

    The draft task order summary shall be submitted to the task order 
officers no later than seventy-eight (78) weeks from the contract 
award.
                 Subtask 12.4: Final Task Order Summary
    The contractor shall submit a revised task order summary that 
incorporates comments and edits from the task order officers no later 
than eighty-two (82) weeks after contract award. The final market 
segmentation framework (Subtask 12.1) and the final revised materials 
(Xeroxed copies of Subtask 12.2) shall be added to the end of the final 
task order summary as appendices for purposes of governmental 
archiving. The entire task order summary will be considered final upon 
approval of the task order officers.

Task 13.0 Monthly Progress Reports and Interim Meetings

                 Subtask 13.1: Monthly Progress Reports
    The contractor shall submit monthly administrative progress reports 
outlining all work accomplished during the previous month. At a 
minimum, such reports shall cover the following items:

     discussion of the progress in accomplishing the tasks in 
this task order;
     activities anticipated during the upcoming reporting 
period; and
     statement of actual costs incurred by task relative to 
budgeted costs per task.

    Monthly reports are due the first week of every month following the 
approval of the work plan and shall be sent by the contractor directly 
to the task order officers via e-mail.
                     Subtask 13.2: Interim Meetings
    The contractor and task order officers shall also have interim 
meetings (in-person or via teleconference) as deemed necessary, but no 
fewer than two, by the task order officers to discuss issues that need 
input or approval. It is expected that the two mandatory interim 
meetings shall be scheduled to update HHS and other Federal Government 
officials on the (1) development of materials before the interactive 
chats and (2) the preliminary analysis from the town hall meetings. The 
timing of these meetings shall be determined by the task order 
officers.

SECTION D. CONTRACT CLAUSES

Section 508 Compliance

    The final report deliverable must comply with the Department of 
Health and Human Services Section 508 Compliance Requirements.
    This language is applicable to Statements of Work (SOW) generated 
by the Department of Health and Human Services (HHS) that require a 
contractor or consultant to (1) produce content in any format that 
could be placed on a Department-owned or Department-funded Web site; or 
(2) write, create or produce any communications materials intended for 
public or internal use; to include reports, documents, charts, posters, 
presentations (such as Microsoft PowerPoint) or video material that 
could be placed on a Department-owned or Department-funded Web site.
    Section 508 of the Rehabilitation Act of 1973 (29 U.S.C. 794d) 
requires Federal agencies to purchase electronic and information 
technologies (EIT) that meet specific accessibility standards. This law 
helps to ensure that Federal employees with disabilities have access 
to, and use of, the information and data they need to do their jobs. 
Furthermore, this law ensures that members of the public with 
disabilities have the ability to access Government information and 
services.
    There are three regulations addressing the requirements detailed in 
Section 508. The Section 508 technical and functional standards are 
codified at 36 CFR Part 1194 and may be accessed through the Access 
Board's Web site at http://www.access-board.gov. The second regulation 
issued to implement Section 508 is the Federal Acquisition Regulation 
(FAR). FAR Part 39.2 requires that agency acquisitions of Electronic 
and Information Technology (EIT) comply with the Access Board's 
standards. The entire FAR is found at Chapter 1 of the Code of Federal 
Register (CFR) Title 48, located at http://www.acquisition.gov. The FAR 
rule implementing Section 508 can be found at http://
www.section508.gov. The third applicable regulation is the HHS 
Acquisition Regulation (HHSAR).
    Regardless of format, all Web content or communications materials 
produced for publication on or delivery via HHS Web sites--including 
text, audio or video--must conform to applicable Section 508 standards 
to allow Federal employees and members of the public with disabilities 
to access information that is comparable to information provided to 
persons without disabilities. All contractors (including 
subcontractors) or consultants responsible for preparing or posting 
content intended for use on an HHS-funded or HHS-managed Web site must 
comply with applicable Section 508 accessibility standards, and where 
applicable, those set forth in the referenced policy or standards 
documents below. Remediation of any materials that do not comply with 
the applicable provisions of 36 CFR Part 1194 as set forth in the SOW 
or PWS, shall be the responsibility of the contractor or consultant 
retained to produce the Web-suitable content or communications 
material.
    The following Section 508 provisions apply to the content or 
communications material identified in this SOW or PWS: Access Board 
Final Rule ``36 CFR 1194.22(a)-(p).''

SECTION E. CONTRACT DOCUMENTS

E.1. Schedule of Deliverables


------------------------------------------------------------------------
              Task                    Deliverable      Date Due in Weeks
------------------------------------------------------------------------
Task 1..........................  Post Award Meeting  Week 2
                                  Post Award Summary  Week 3
Task 2..........................  Work Plan.........  Week 5
                                  Revised Work Plan.  Week 7
Task 3..........................  Establish           Week 8
                                   Technical Expert
                                   Panel.
Task 4..........................  Literature Review.  Week 14
Task 5..........................  Preliminary Market  Week 18
                                   Segmentation
                                   Framework.
Task 6..........................  Marketing           Week 22
                                   Materials Memo.
Task 7..........................  Technical Expert    Week 25
                                   Panel.             Week 27
                                  Summary of TEP
                                   Meeting.
Task 8..........................  Development of      Week 33
                                   Marketing
                                   Materials.
Task 9..........................  Interactive Chats
                                  Subtask 9.1:
                                    Discussion        Week 34
                                   Outline.           Week 36
                                    Initial           Week 38
                                   Interactive Chats. Week 40
                                    Initial
                                   Interactive Chat   Week 40
                                   Memo.              Week 42
                                    Revised           Week 44
                                   Materials.         Week 46
                                  Subtask 9.2:
                                    Discussion        Week 46
                                   Outline.           Week 48
                                    Second            Week 50
                                   Interactive Chats.
                                    Second
                                   Interactive Chat
                                   Memo.
                                    Revised
                                   Materials.
                                  Subtask 9.3:
                                    Discussion
                                   Outline.
                                    Third
                                   Interactive Chats.
                                    Revised
                                   Materials.
Task 10.........................  Interactive Town
                                   Hall Meetings      3 Weeks before
                                    Subtask 10.1:      Subtask 10.2
                                   Town Hall Content. Weeks 50-70
                                    Subtask 10.2:
                                   Town Hall
                                   Meetings.
Task 11.........................  Analysis of Town    8 Weeks after
                                   Hall Meetings.      Subtask 10.2
Task 12.........................  Final Deliverables
                                    Subtask 12.1:     Week 70
                                   Final Market       Week 74
                                   Segmentation       Week 78
                                   Framework.         Week 82
                                    Subtask 12.2:
                                   Final Redesigned
                                   Marketing
                                   Materials.
                                    Subtask 12.3:
                                   Draft Task Order
                                   Summary.
                                    Subtask 12.4:
                                   Final Task Order
                                   Summary.
Task 13.........................  Monthly Progress
                                   Reports and        Monthly
                                   Interim Meetings   As Needed
                                    Subtask 13.1:
                                   Monthly Progress
                                   Reports.
                                    Subtask 13.2:
                                   Interim Meetings.
------------------------------------------------------------------------


E.2. Quality Assurance Surveillance Plan


----------------------------------------------------------------------------------------------------------------
                                                                 Method of Surveillance    Standard to be Met/
       Required Services/tasks          Performance Standards     (Quality Assurance)      Allowable  Deviation
----------------------------------------------------------------------------------------------------------------
Task 5 Market Segmentation Framework.  Contractor develops a    Task order officers      Market Segmentation
                                        clear market             will work closely with   framework is completed
                                        segmentation framework   contractor.              in a timely fashion so
                                        that links development                            as to guide subsequent
                                        and analysis of                                   tasks.
                                        response data to
                                        research questions.
Task 6 Development of Marketing        Contractor develops      Task order officers      Draft marketing
 Materials.                             draft marketing          will work with           materials are ready
                                        materials from           contractor (and any      for dissemination to
                                        information gathered     subcontractors) on the   the Technical Expert
                                        in earlier tasks.        development.             Panel on deadline
                                                                                          outlined in contract.
Task 9 Interactive Chats.............  Contractor moderates     Task order officers      Revisions to the draft
                                        the different sets of    will work closely with   marketing materials
                                        interactive chats and    contractor and review    are made after each
                                        analyzes the             transcripts of all       set of interactive
                                        information that comes   chats.                   chats.
                                        from them.
Task 11 Analysis of Town Hall          Contractor analyzes the  Task order officers      A set of revised draft
 Meetings.                              information that comes   will work closely with   marketing materials
                                        from the different       contractor.              for each identified
                                        sets of interactive                               market segment are
                                        town hall meetings.                               produced.
Task 12 Final Deliverables...........  Contractor develops a    Task order officers      Contractor delivers the
                                        final market             will review drafts of    three distinct final
                                        segmentation framework   all Final Deliverables.  deliverables to the
                                        and a final set of                                task order officer on
                                        marketing materials                               schedule and of
                                        for all the identified                            acceptable quality.
                                        segments and produces
                                        a final report.
Task 12 Monthly Progress Reports.....  Contractor keeps task    Task order officers      Contractor informs task
                                        order officers           will attend all          order officers of
                                        informed as to           monthly and interim      issues that impact
                                        unforeseen problems      meetings and review      schedule of
                                        and/or necessary         all progress reports.    deliverables or costs
                                        changes to work plan.                             associated with the
                                                                                          contract.
----------------------------------------------------------------------------------------------------------------

E.3. Travel Costs

    Travel costs, shall be included in the Firm Fixed Price and will be 
evaluated in accordance with Federal per diem rates and Federal Travel 
Regulation (FTR). All travel shall be approved, by the COTR, prior to 
commencement of travel.

E.4. Rights in Data--Advance Approval for Dissemination of Project 
                    Information Prior to Contract Completion

    The Contractor (including any subcontractors or consultants) agrees 
not to disclose, verbally or in writing, information pertaining to the 
results or findings of work (including data base files, analyses, draft 
or final papers and reports) for the period of an individual delivery 
order under this contract without obtaining prior written approval of 
the task order officers. The Contractor must request approval in 
advance (minimum 21 days prior to release) and in writing, specifying: 
who or what is generating the request for advance information; when and 
how project results/information would be released; and what information 
would be released. Failure to receive response to the task order 
officers does not constitute approval for releasing information.

E.5. Specifications for the Delivery of Digital Copies of Reports

    In addition to the printed copies required under the contract, 
digital copies of the reports shall be delivered on media readable by 
Windows 9x programs. The text, tables, and any charts or other graphics 
shall be organized and formatted as described in the following 
paragraphs.
    Text may be formatted in any of the commonly available word 
processing programs marketed by the IBM, Corel, or Microsoft 
corporations. Lengthy documents (greater than 500 Kb) should be divided 
into several parts and a separate file should be provided for each 
part. Lengthy files (greater than 200 Kb) should be avoided if 
possible.
    The title page, table of contents, and other front matter shall be 
in a separate file. File names should contain consecutive numbers that 
correspond to the numerical labels used in the printed version. For 
example, Chapter 4, Figure 2 can be rendered as C4F2.gif. Suffixes 
shall be those used by the software manufacturer or follow the usual 
industry conventions, e.g., doc, wpd, xls, gif, jpg, etc. Where 
compatibility with earlier versions of the software is in doubt, files 
shall be delivered in the penultimate version of the software.
    Tables and tabular material shall not be converted into graphical 
images, but be included with the word processing files or delivered as 
spreadsheet files.
    Graphic figures such as bar and line charts, diagrams, and other 
drawings shall be delivered in the GIF (Graphics Interchange Format) or 
the JPEG (Joint Photographic Experts Group) format. Even though the 
graphical elements may have been merged with the text to form a single 
file for printing purposes, each graphical image (figure) shall be 
delivered as a separate file and must not be embedded in a word 
processing, spreadsheet, slide show or other composite file.
    Questions regarding the interpretation of these specifications may 
be directed to Brian Sinclair-James, ASPE Coordinator of Information 
Dissemination, at (202) 401-6127.

SECTION F. CONTRACT ADMINISTRATION

F.1. Invoicing and Payment

    One original voucher complete with all required back-up 
documentation shall be submitted to the Contract Specialist and 
addressed to:

        Division of Acquisition Management, SAS/PSC
        Parklawn Building, Room 5C-18
        5600 Fishers Lane
        Rockville, MD 20857
        Contract Number: HHSP23320100022WI
        Task Order Number: HHSP23337001T

    One copy of the voucher with copies of all required back-up 
documentation shall be emailed to PSC_EAPPROVAL.CPMT@PSC.HHS.GOV or 
they may be submitted to:

        PSC/FMS/DFO Commercial Payments Section
        Parklawn Building, Room 16A-12
        5600 Fishers Lane
        Rockville, MD 20857

    The contractor shall list the COTR name and phone number on the 
face page of the voucher.
    One copy of the voucher with copies of all required back-up 
documentation shall be emailed to the COTR (the cover page of all 
invoices must show the Contract Number, and the Government COTR's name 
and telephone number) or they may be submitted to:

        Office of the Assistant Secretary for Planning and Evaluation
        U.S. Dept. of Health and Human Services
        Attn: Hunter McKay and Sam Shipley
        Hubert H. Humphrey Bld., Room 424E
        200 Independence Ave. SW
        Washington, DC 20201
        (202) 690-6443

    All calls concerning contract payments shall be directed to the 
general help line for contract payments on (301) 443-6766.

F.2. Contracting Officer's Technical Representative (COTR) Appointment 
                    and Authority

    (a) Performance of work under this contract must be subject to the 
technical direction of the COTR identified above, or a representative 
designated in writing. The term ``technical direction'' includes, 
without limitation, direction to the Contractor that directs or 
redirects the labor effort, shifts the work between work areas or 
locations, fills in details and otherwise serves to ensure that tasks 
outlined in the work statement are accomplished satisfactorily.

    (b) Technical direction must be within the scope of the 
specification(s)/work statement.
    (c) The COTR does not have authority to issue technical direction 
that:

         (1)  Constitutes a change of assignment or additional work 
        outside the specification(s)/Statement of Work;
         (2)  Constitutes a change as defined in the clause entitled 
        ``Changes'';
         (3)  In any manner causes an increase or decrease in the 
        Contract Price, or the time required for Contract Performance;
         (4)  Changes any of the terms, conditions, or 
        specification(s)/Work Statement of the Contract;
         (5)  Interferes with the Contractor's right to perform under 
        the terms and conditions of the Contract; or
         (6)  Directs, supervises, or otherwise controls the actions of 
        the Contractor's employees.

    (d) Technical direction may be oral or in writing. The COTR shall 
confirm oral direction in writing within 5 work days, with a copy to 
the Contracting Officer.
    (e) The Contractor shall proceed promptly with performance 
resulting from the technical direction issued by the COTR. If, in the 
opinion of the Contractor, any direction of the COTR, or his/her 
designee, falls within the limitations in (c), above, the Contractor 
shall immediately notify the Contracting Officer no later than the 
beginning of the next Government work day.
    (f) Failure of the Contractor and the Contracting Officer to agree 
that technical direction is within the scope of the Contract shall be 
subject to the terms of the clause entitled ``Disputes.''

F.3. Contracting Officer's Technical Representative (COTR)

    The COTR is responsible for the technical requirements covered by 
this Contract, as contemplated by Section F.2., hereof, will be 
designated by separate correspondence.

F.4. Contracting Officer

    Contracting Officer (CO): The CO has the overall responsibility for 
the administration of this Contract. The CO is the only person 
authorized to take actions on behalf of the Government to: amend, 
modify, or deviate from the Contract terms, conditions, requirements, 
specifications, details and/or delivery schedules; make final decisions 
on disputed deductions from Contract payments for non-performance or 
unsatisfactory performance; terminate the Contract for convenience or 
default; issue final decisions regarding Contract questions or matters 
under dispute. Delegation of other responsibilities may be made to 
authorized representatives.

    [Whereupon, at 12 p.m., the hearing was adjourned.]