[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]
HEALTH REFORM IN THE 21ST CENTURY:
PROPOSALS TO REFORM THE HEALTH SYSTEM
=======================================================================
HEARING
before the
COMMITTEE ON WAYS AND MEANS
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED ELEVENTH CONGRESS
FIRST SESSION
__________
JUNE 24, 2009
__________
Serial No. 111-26
__________
Printed for the use of the Committee on Ways and Means
HEALTH REFORM IN THE 21ST CENTURY:
PROPOSALS TO REFORM THE HEALTH SYSTEM
=======================================================================
HEARING
before the
COMMITTEE ON WAYS AND MEANS
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED ELEVENTH CONGRESS
FIRST SESSION
__________
JUNE 24, 2009
__________
Serial No. 111-26
__________
Printed for the use of the Committee on Ways and Means
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
U.S. GOVERNMENT PRINTING OFFICE
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20402-0001
COMMITTEE ON WAYS AND MEANS
CHARLES B. RANGEL, New York, Chairman
FORTNEY PETE STARK, California DAVE CAMP, Michigan
SANDER M. LEVIN, Michigan WALLY HERGER, California
JIM MCDERMOTT, Washington SAM JOHNSON, Texas
JOHN LEWIS, Georgia KEVIN BRADY, Texas
RICHARD E. NEAL, Massachusetts PAUL RYAN, Wisconsin
JOHN S. TANNER, Tennessee ERIC CANTOR, Virginia
XAVIER BECERRA, California JOHN LINDER, Georgia
LLOYD DOGGETT, Texas DEVIN NUNES, California
EARL POMEROY, North Dakota PATRICK J. TIBERI, Ohio
MIKE THOMPSON, California GINNY BROWN-WAITE, Florida
JOHN B. LARSON, Connecticut GEOFF DAVIS, Kentucky
EARL BLUMENAUER, Oregon DAVID G. REICHERT, Washington
RON KIND, Wisconsin CHARLES W. BOUSTANY, JR.,
BILL PASCRELL, JR., New Jersey Louisiana
SHELLEY BERKLEY, Nevada DEAN HELLER, Nevada
JOSEPH CROWLEY, New York PETER J. ROSKAM, Illinois
CHRIS VAN HOLLEN, Maryland
KENDRICK B. MEEK, Florida
ALLYSON Y. SCHWARTZ, Pennsylvania
ARTUR DAVIS, Alabama
DANNY K. DAVIS, Illinois
BOB ETHERIDGE, North Carolina
LINDA T. SANCHEZ, California
BRIAN HIGGINS, New York
JOHN A. YARMUTH, Kentucky
Janice Mays, Chief Counsel and Staff Director
Jon Traub, Minority Staff Director
Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public
hearing records of the Committee on Ways and Means are also published
in electronic form. The printed hearing record remains the official
version. Because electronic submissions are used to prepare both
printed and electronic versions of the hearing record, the process of
converting between various electronic formats may introduce
unintentional errors or omissions. Such occurrences are inherent in the
current publication process and should diminish as the process is
further refined.
C O N T E N T S
__________
Page
Advisory of June 24, 2009, announcing the hearing................ 2
WITNESSES
Karen Pollitz, Policy Director, Health Policy Institute,
Georgetown Public Policy Institute, Georgetown University...... 8
John F. Holahan, Ph.D., Director, The Health Policy Research
Center, The Urban Institute.................................... 22
Quentin Young, M.D., MACP, National Coordinator, Physicians for a
National Health Program, Chicago, Illinois..................... 33
David Gratzer, M.D., Senior Fellow, Manhattan Institute for
Policy Research, New York, New York............................ 39
______
Richard Kirsch, National Campaign Manager, Health Care for
America NOW!................................................... 98
Mike Draper, Owner, SMASH, Des Moines, Iowa...................... 102
Peter Lee, Executive Director for National Health Policy, Pacific
Business Group on Health, San Francisco, California............ 107
Gerald M. Shea, Special Assistant to the President, AFL-CIO...... 116
Jennie Chin Hansen, President, AARP.............................. 127
Randel K. Johnson, Senior Vice President, Labor, Immigration and
Employee Benefits, U.S. Chamber of Commerce.................... 141
______
Daniel Baxter, M.D., Medical Director, William F. Ryan Community
Health Network, New York, New York............................. 209
Ted Epperly, M.D., President, American Academy of Family
Physicians..................................................... 216
Donna Policastro, Executive Director, Rhode Island State Nurses
Association, on behalf of the American Nurses Association,
Silver Spring, Maryland........................................ 227
Charles N. Kahn III, President, Federation of American Hospitals. 235
William L. Minnix, Jr., President and CEO, American Association
of Homes and Services for the Aging............................ 248
Ronald A. Williams, Chairman and CEO, Aetna, Inc., Hartford,
Connecticut.................................................... 203
Richard B. Warner, M.D., Member, Kansas Medical Society House of
Delegates, AMA Alternate Delegate, Past President, Kansas
Medical Society................................................ 258
SUBMISSIONS FOR THE RECORD
Nancy G. Brinker, statement...................................... 275
Albert B. (Al) Baca, statement................................... 280
Association of Professors of Medicine, Association of Program
Directors in Internal Medicine, Association of Specialty
Professors, Clerkship Directors in Internal Medicine, and
Administrators of Internal Medicine, statement................. 283
American Academy of Physician Assistants, statement.............. 290
American Association of Colleges of Pharmacy, letter............. 294
American Farm Bureau Federation, statement....................... 297
American Society for Clinical Pathology, statement............... 299
Paul Crist, statement............................................ 304
Association of Ambulatory Behavioral Healthcare, letter.......... 311
Becton, Dickinson and Co., statement............................. 313
Breyer Foundation, statement..................................... 315
Budd N. Shenkin, M.D., statement................................. 320
Friends Committee on National Legislation, statement............. 323
Richard Kirsch, letter........................................... 325
Kenneth L. Sperling, Hewitt Associates LLC, statement............ 341
Jaci Mairs, R.N., J.D., letter................................... 348
Max Heirich, statement........................................... 350
Medicaid and Medicare Advantage Programs Association of Puerto
Rico, letter................................................... 355
Medical Banking Project, Legislative Committee, statement........ 357
Mark H. Ayers, National Coordinating Committee for Multiemployer
Plans, letter.................................................. 359
National Yogurt Association, statement........................... 365
Nurse Practitioner Roundtable, letter............................ 367
Steve Slagle, Promotional Products Association International,
statement...................................................... 370
RNG Consulting, Inc., statement.................................. 371
Rochelle J. Ascher, Executive Intelligence Review, statement..... 373
Ron Manderscheid, letter......................................... 377
Nancy Schwab, Wendy Warner, Bill Berlinghof, Catherine Borowiec,
Mark Schmid, Connie Guldin, and Mike Fritz, letter............. 377
The Alliance for Academic Internal Medicine, statement........... 378
Cori E. Uccello, American Academy of Actuaries, statement........ 379
ERISA Industry Committee, statement.............................. 384
The Senior Citizens League, statement............................ 387
Larry S. Gage, National Association of Public Hospitals and
Health Systems, statement...................................... 391
HEALTH REFORM IN THE 21ST CENTURY:
PROPOSALS TO REFORM THE HEALTH SYSTEM
----------
WEDNESDAY, JUNE 24, 2009
U.S. House of Representatives,
Committee on Ways and Means,
Washington, DC.
The Committee met, pursuant to notice, at 9:09 a.m., in
room 1100, Longworth House Office Building, Hon. Charles B.
Rangel (Chairman of the Committee), presiding.
[The advisory announcing the hearing follows:]
ADVISORY
FROM THE
COMMITTEE
ON WAYS
AND
MEANS
CONTACT: (202) 225-3625
FOR IMMEDIATE RELEASE
June 24, 2009
Chairman Rangel Announces a Hearing on
Health Reform in the 21st Century:
Proposals To Reform the Health System
House Ways and Means Chairman Charles B. Rangel (D-NY) announced
today that the Committee will hold a hearing to examine proposals to
reform the health system. This is the sixth hearing in the series on
health reform in the 111th Congress. The hearing will take place at
9:00 a.m. on Wednesday, June 24, 2009, in the main Committee hearing
room, 1100 Longworth House Office Building.
In view of the limited time available to hear witnesses, oral
testimony at this hearing will be from the invited witnesses only.
However, any individual or organization not scheduled for an oral
appearance may submit a written statement for consideration by the
Committee and for inclusion in the printed record of the hearing.
BACKGROUND:
Rising health costs threaten access for the 250 million people with
insurance and undermine the competitiveness of American companies. In
addition, nearly 46 million people lack coverage today and millions
more have coverage that fails to meet their needs. A reformed health
system must build on what works in our current system to expand access,
while minimizing disruption for people who have coverage and helping to
slow the rise in health costs. Recent studies have indicated that half
of all bankruptcies are the result of serious illness and medical debt,
and many of these families have coverage.
The Committee has held five health reform hearings this year to
examine the current state of various parts of the health system. These
hearings build upon hearings and legislation that the Committee has
undertaken in previous Congresses. Among other topics, these hearings
have highlighted the need to improve the way care is delivered and the
problems with the current insurance market. The hearings also stressed
the importance of the employer-based system of health insurance and the
need to improve and strengthen current programs like Medicare and
Medicaid.
The Committee has worked with the Committee on Energy and Commerce
and the Committee on Education and Labor to develop a proposal that
reflects President Obama's health reform principles and will begin to
rein in rising health care costs, protect current coverage, preserve
choice of doctors, hospitals and health plans and ensure affordable,
quality health care for all.
In the coming days, this discussion draft health reform proposal
will be released. This hearing will focus on that proposal as well as
other proposals to reform the health system.
``We have an historic opportunity to reform our Nation's health
care system, building on what works and fixing what is broken to reduce
health care costs, protect current coverage and preserve choice for
patients to guarantee affordable, quality care for all,'' said Chairman
Charles B. Rangel. ``Health reform is critical to America's economic
recovery and I look forward to feedback from Members and witnesses so
we can continue working to make this goal a reality.''
FOCUS OF THE HEARING:
The focus of the hearing will be on the forthcoming proposal
developed by the Committees on Ways and Means, Energy and Commerce and
Education and Labor and other proposals to reform the health system.
DETAILS FOR SUBMISSION OF WRITTEN COMMENTS:
Please Note: Any person(s) and/or organization(s) wishing to submit
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From the Committee homepage, http://democrats.waysandmeans.house.gov,
select ``Committee Hearings.'' Select the hearing for which you would
like to submit, and click on the link entitled, ``Click here to provide
a submission for the record.'' Once you have followed the online
instructions, complete all informational forms and click ``submit'' on
the final page. ATTACH your submission as a Word or WordPerfect
document, in compliance with the formatting requirements listed below,
by close of business Wednesday, July 8, 2009. Finally, please note that
due to the change in House mail policy, the U.S. Capitol Police will
refuse sealed-package deliveries to all House Office Buildings. For
questions, or if you encounter technical problems, please call (202)
225-1721.
FORMATTING REQUIREMENTS:
The Committee relies on electronic submissions for printing the
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Note: All Committee advisories and news releases are available on
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The Committee seeks to make its facilities accessible to persons
with disabilities. If you are in need of special accommodations, please
call 202-225-1721 or 202-226-3411 TDD/TTY in advance of the event (four
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noted above.
Chairman RANGEL. The Committee on Ways and Means will come
to order as we begin, I guess, our ninth hearing on health
reform. I want to thank the staffs, minority and majority, for
bringing us to this point in our Nation's history where we do
see light at the end of the tunnel for one of the most serious
domestic problems our great Nation has faced.
It is abundantly clear that we have a serious financial
problem as the cost of health care escalates far beyond our
imagination, and continues in this upward spiral. We have a
moral obligation in terms of the number of people who have lost
their homes, gone into bankruptcy as a result of the costs of
providing health care. And of course, we have a crisis in terms
of the waste and inefficiency and the misuse of our resources
by health providers that find us in need of changing the entire
system.
We hope at the end of the day that we are able to say that
those people who find that their insurance meets their needs,
that they should rest assured that we have enough problems
without interfering with the relationship they have with
private health insurers.
They will have to be able to understand, however, that in
their search for profit, there has to be basic sound principles
that health care providers would have to be involved and
support. One thing for certain: The whole idea that insurance
companies can pick and choose the healthiest of their clients
is wrong, and it will be corrected as we make certain that
those people that have preconditions will be acceptable.
We know that there are so many employers that want to
provide health care for their employees because it is the right
thing to do, and they just can't afford to do it. We have to
give them assistance.
We know that there is nobody in the United States that is
an adult and understands the problems we face that hasn't got a
horror story, with or without insurance, as to what has
happened to their families and, indeed, communities because the
system is broken.
We also know that we just don't have enough primary care
doctors and nurses and support system. And we have to encourage
these people in order for us to be healthy and competitive with
foreign countries to be out there, not just looking for profits
but looking to fulfill their life's work in terms of taking
care of our sick; and, more importantly or just as important,
to make certain that we avoid these serious and expensive
illnesses.
We have the support of the President of the United States.
We sincerely wish that this could be a bipartisan effort. The
book is not closed. We have before us a discussion draft, and
we have had more discussion than we had thought we would have,
which I think is healthy; so that at the end of the day, when
we pass this, more and more Americans would understand that we
have done the right thing.
And certainly the polls, for what it is worth,
overwhelmingly believe that what we are doing in terms of
having a competitive public option so that people can go to
exchange and pick and choose, with a variety of private options
just as we in the Congress have, and also a public option, we
think at the end of the day it is going to be the American
citizens that will be the beneficiary. The industry will be
improved. America will be stronger and more competitive. And we
all are privileged to be able to be participants in this
effort.
Peter Stark is one of the--probably, with me, is
historically the longest-serving Member of this great Committee
that was cited in the Constitution, and the only one cited. And
he has dedicated his entire legislative career to trying to get
a handle on the ever-increasing problems that health care has
caused our Nation to face.
I know that this era is one of the most proudest that he
has enjoyed, and the Committee is grateful for the investment
that he has made in time and dedication to reach this point
that during his stay here, he would be able to say, we finally
have improved the system.
Pete, we are indebted to you, and I would like at this
point in time to yield to you.
Mr. STARK. Thank you, Mr. Chairman. You and my colleagues
and the President are committed to health reform, and I think
we all understand this is the time to act. We have worked with
our colleagues on the Energy and Commerce and the Education and
Labor Committees to write a draft proposal that provides
affordable, quality health care for all, expands choice, and
slows the rate of growth in health care spending.
Some will be unhappy that we still don't have CBO numbers
for provisions. We put this bill out last Friday in draft form
so that all Members of Congress, the American public, and
interested parties can read the discussion draft and provide us
with input.
Today's hearing, we hope, will be long, and we will hear
from three panels. The first will be our panel of policy
experts with their thoughts; second, a panel consisting of
those impacted by health reform--consumers, seniors, businesses
both large and small, labor; third, we will hear from health
care providers who will share with us their thoughts on our
draft legislation.
As I said, it is in draft form. Today's hearing will give
us guidance for meetings over the next couple of weeks as we
work to convert this draft into a final bill.
So I want to thank all of our witnesses in advance for
their testimony. They have had a lot to analyze in a short
time, and we appreciate their willingness to enlighten us
today. Thank you very much.
Chairman RANGEL. Thank you, Mr. Chairman.
Most of you know, and certainly the Committee Members know,
that David Camp and I have tried with the most that we can to
see whether or not we could work together in a bipartisan way.
Many times this is impossible because of the differences, not
of he and I, but certainly of the political direction in which
the parties would want to go.
We know that this is not a Democratic problem. It is not a
Republican problem. And the Nation is going to look at this as
a problem that we hope that we can come together and work
together and bring up a bipartisan bill.
As Peter Stark has indicated, this is a discussion draft
bill that will help us to try to perfect our ideas. And I yield
to my friend David Camp for whatever purposes he would want to
state.
Mr. CAMP. Well, thank you, Mr. Chairman. And thank you for
holding this hearing. And I want to thank all of the witnesses
and the panels that have taken time out to be here today.
Mr. Chairman, I am not sure quite what to focus on this
morning, all we know about the bill or all that we don't know
about the bill. But in either sense, it is very disturbing. And
let me begin with what we don't know.
We don't know how much CBO says it will cost or how it will
be paid for. And hopefully everybody can see page 162 of the
bill on the TV screens. Now, I know a picture is worth a
thousand words, but I think that picture may be worth well over
a trillion dollars.
The bill says other revenue raisers are to be provided.
When will these tax increases be provided? When will the
American public get to know how much this trip to the doctor
will cost them? Those details aren't unimportant.
If you are shopping for a car, even I have to admit that a
Ferrari looks pretty good next to a Ford until you see the
pricetag. A six-bedroom mansion on the waterfront looks pretty
good next to a modest three-bedroom ranch until you see the
pricetag. We need to know the pricetag of this bill if we are
to do our jobs properly, and that is to write a bill our
country can afford that will guarantee every American has
access to affordable quality health care.
Just this morning I received an independent, nonpartisan
analysis of the bill. I know I said this picture was well over
a trillion dollars, but this report makes it clear that I
really don't have much future in appraising because this bill
is actually worth $3.5 trillion.
And let me repeat that for everyone here, especially the
Members who have not been given any information on the cost. An
independent, nonpartisan analysis says this bill costs $3.5
trillion. And I ask that a copy of this report by HIS Network
be included in the record.
Now, that is a staggering figure, even in Washington.
Equally staggering are some of the ideas we have heard floating
around about how to pay for this bill, such as new taxes on
employer-sponsored health benefits, new taxes on sugared soft
drinks, additional taxes on alcohol that will turn Joe Sixpack
into Joe Fourpack, a new national sales tax, new taxes on
American businesses competing worldwide, and higher Medicare
taxes.
Those are pretty darned scary in and of themselves. But
what has me in shock is the fact that those taxes won't even
come close to covering $3.5 trillion in new Federal Government
spending. And it is clear that if we move forward with this
$3.5 trillion bill and with any of those taxes, whatever hope
remained that the President would keep his word not to tax
families earning less than $250,000 will be quickly erased.
The President has also promised repeatedly that Americans
who have and like their insurance will be able to keep it. Now,
I know he is getting pressured to back off that statement. I
would hope both Republicans and Democrats on this Committee
would help him keep that pledge.
But the analysis we received this morning says this bill
would cause 64 million Americans to lose their coverage. Sixty-
four million. That means one out of every three Americans under
the age of 65 would lose their current private health coverage.
We need to strengthen and improve our health care system, not
destroy it.
No matter what comes out of this hearing, unanswered will
be several critical questions. How much will you tax and who
pays those ``other revenues''? What will be the impact on
family budgets? What will be the impact on employees and
employers and on those looking for work? What about the economy
as a whole? I am disappointed that this information isn't
before us since it is impossible to make a thorough evaluation
of the bill without it.
Now to what we do know. It creates a government-run plan
that reimburses at Medicare rates, which will force millions of
Americans to lose their current health care plan. There are
absolutely no prohibitions on new government-run plan or
government programs like Medicare or Medicaid from using cost-
effectiveness research to impose delays or denials of access to
life-saving treatments for patients. And just the new taxes and
penalties on employers that we have already seen will force 4.7
million Americans to lose their job.
Now, those aren't my numbers or my analysis. That is what
you get when you plus the taxes associated with an employer
mandate into the economic models developed by Dr. Christina
Romer, the Chair of the President's Council of Economic
Advisers, and Jared Bernstein, who is in the Office of the Vice
President.
What does this leave us with? In short, a bill in which the
solution costs more than the problem, and health care reform in
which millions of Americans lose their insurance, lose access
to treatment, and maybe even their job.
This is what happens when legislation of this nature is
written in secret by a few behind closed doors without the
input of Members on both sides of the aisle, not to mention the
families and businesses it will affect. I have heard even
Members of this Committee have raised their concerns about the
way this bill was written. So have Blue Dogs in a written
letter, and so have House Republicans.
This painfully reminds me of the stimulus bill. But as
important as it was, we were just talking about money then.
This time we are talking about people's health, about their
lives. We cannot get it wrong again.
The President was right when he said health care reform
should not be a Democrat issue or a Republican issue, but an
American issue. And as you know, last week Republicans outlined
a summary of what we believe successful health care reform
should focus on--affordability, accessibility, and availability
of quality health care for all Americans.
There are a number of areas where we could reach bipartisan
agreement. I and the Republican Members of this Committee stand
ready to meet and work with you to get this bill right, and I
hope we can do that soon.
And with that, I yield back the balance of my time.
Chairman RANGEL. Thank you. I ask you to share with me at
some point in time the firm that did the analysis for you that
estimated the $3.5 trillion cost because it may be helpful for
us to be able to make up numbers since Republicans and
Democrats are stuck with the Congressional Budget Office. And
as you know, they have not been very friendly in their
estimates in terms of costs. But if someone can create just
$3.5 trillion, I can share with you that I will walk away from
any bill that has this type of cost.
The whole idea of cost, however, should not be an issue
because we are going to pay for this not by raising taxes, but
even in this walk-through that we have. Five hundred billion
dollars is reform in the system that we have.
And whatever we do to raise the other revenue, at the end
of the day we will be able to say that the bill is a reform
bill and will not be additional cost. So we have to try to read
from the same page. And I know you won't object to reading from
the pages given to both of us by the Congressional Budget
Office.
And yes, we all would want Ferraris. I was settling for a
Cadillac since it is made in the United States. But after we
look at the cost of the options that are there, then we will
know what we can afford. And so it really doesn't make that
much difference as to what we hope for. We will only do what we
can afford and what will be acceptable to the American people.
I am glad to hear you say that your minds are open. At any
point during the testimony of your witnesses or ours that you
believe we can sit down and work together, we will go into
recess, go into the library, take advantage of that, and then
move forward.
So let today be the beginning of a new start. And as
Chairman Stark has said, we have an extraordinary panel here.
The first panel we have is Karen Pollitz, who is the Policy
Director of the Health Policy Institute from Georgetown Public
Policy Institute, Georgetown University; John Holahan, Dr.
Holahan, who is the Director of the Health Policy Research
Center in The Urban Institute; Quentin Young, Dr. Quentin
Young, National Coordinator for Physicians for a National
Health Program, from Chicago; and David Gratzer, Dr. David
Gratzer, a Fellow, Manhattan Institute for Policy Research,
from my hometown and my city, New York, New York.
We thank you for taking the time to come here to share your
views with us so that we can make a more perfect piece of
legislation. We have--by unanimous consent, all of the
documents that you have will be submitted in our record.
Restrict it this morning to 5 minutes for each witness,
which is indicated by the red light coming on. And the
Republicans and Democrats welcome your appearance here before
the Congress and the Committee.
So we will start off with Dr. Karen Pollitz.
STATEMENT OF KAREN POLLITZ, POLICY DIRECTOR, HEALTH POLICY
INSTITUTE, GEORGETOWN PUBLIC POLICY INSTITUTE, GEORGETOWN
UNIVERSITY
Ms. POLLITZ. Thank you. I am not a doctor. Just call me
Karen.
Chairman RANGEL. Thank you, Karen.
Ms. POLLITZ. And good morning, Mr. Chairman, Members of the
Committee. I want to congratulate you on the tri-committee
draft proposal for health care reform. It contains the key
elements needed to achieve universal coverage and introduce
cost discipline into our health care system. It reflects both
wisdom and practicality. And this time I believe you will get
the job done.
The tri-committee proposal defines a minimum health benefit
standard. It requires all Americans to have at least that
minimum coverage, with shared financing responsibility by
employers. It creates tax credits for small businesses, expands
the Medicaid safety net, and creates new premium and cost-
sharing subsidies for private health insurance coverage to help
other Americans of modest means.
The proposal also establishes a set of strong new market
reforms for private health insurance, with important consumer
protections. It creates a new health insurance exchange, an
organized health insurance market, with greater consumer
protections and support than individuals and small employers
have today.
It will provide competitive information on plan choices,
help with enrollment, appeals, application for subsidies. It
will have a health insurance ombudsman to help individuals and
small businesses navigate the coverage system and make good
choices. And on their behalf, the exchange will negotiate with
insurers over premiums in order to get the best possible
bargain. And importantly, consumers and employers who buy
coverage in the exchange will also have the choice of a new
public plan option.
A recent national poll indicates Americans strongly favor
the establishment of a public plan option to compete with
private health insurers. Such an option can address failures of
competitive health insurance markets today.
First, it offers consumers an alternative to private plans
that for years have competed on the basis of discriminating
against people when they are sick. Just last week your
colleagues on the Energy and Commerce Committee held a hearing
on health insurance rescissions.
There, a woman battling breast cancer testified that her
health insurance was revoked for failure to disclose a visit to
a dermatologist for acne. When consumers are required to buy
coverage, having a public option that doesn't have a track
record of behaving that way will give many peace of mind.
Second, a public plan option will promote cost containment.
Research shows that health insurance markets today do not
compete to hold down costs. Rather, insurers and providers
negotiate to pass costs through to policyholders while
maintaining and growing profits.
For the first few years, the public plan option will be
allowed to base its payment to doctors and hospitals and most
other providers on the Medicare fee schedule--actually,
increases above those fee levels--but over time it will develop
innovative payment methodologies that hold down costs and
promote quality.
Mr. Chairman, clearly, as this bill moves through the
legislative process, there will be opportunities to improve and
modify it. And in my written statement, I offer several
recommendations in this regard, and would briefly describe just
three of those for you now.
First, with respect to the essential benefits package, I
think there are opportunities to strengthen the package and add
specificity. The essential benefits package in particular does
not include a limit on cost-sharing for care received by non-
network-plan physicians. That is an important protection to
add. And the essential benefits package doesn't have a specific
reference to a benchmark plan, the Blue Cross Blue Shield
standard option plan that so many Members of Congress have, and
that has been discussed as a reasonable benchmark for coverage
adequacy.
It is not clear whether the essential benefits package
outlined in the draft proposal meets that standard, but it
should. And if it doesn't, then the standard should be
improved. And if that requires adding more money to the bill,
then you should add it.
Second, with regard to rules governing health insurance,
new rules won't be meaningful unless there are resources for
oversight and enforcement. The Department of Health and Human
Services today has four employees who work part-time on private
health insurance oversight. At the Department of Labor, there
has been testimony indicating that there are resources to
review each employer-sponsored health plan under that
Department's jurisdiction once every 300 years. And State
insurance departments are also strapped for resources.
Your colleague on the Appropriations Committee,
Congresswoman DeLauro, has introduced legislation to provide
resources for health insurance oversight and enforcement, and I
hope you will work with her.
And finally, with regard to subsidies, the bill, the draft
bill, creates sliding scale assistance so that middle-income
Americans with incomes up to 400 percent of the poverty level
would not have to pay more than 10 percent of income toward
their premiums.
But after that level, the subsidies stop, and as the charts
in my written statement indicate, some consumers, including
self-employed individuals, who have incomes above that level
might still face significant affordability problems. That is
essentially likely for people who buy family coverage and for
baby boomers who would face much higher premiums under the age
rating adjustments that are provided for under the bill.
So I hope the Committee will consider making additional
adjustments to your subsidy to protect all Americans so that
they don't have to spend more than 10 percent of their income
on health insurance.
Thank you very much.
[The prepared statement of Ms. Pollitz follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Chairman RANGEL. Thank you so much.
We will now entertain the statement from Dr. John Holahan,
director of the Health Policy Research Center. Thank you for
coming.
STATEMENT OF JOHN F. HOLAHAN, PH.D., DIRECTOR, THE HEALTH
POLICY RESEARCH CENTER, THE URBAN INSTITUTE
Mr. HOLAHAN. Thank you. Mr. Chairman and distinguished
Members of the Committee, thank you for inviting me to share my
views on the discussion draft. The views I express are mine
alone and should not be attributed to The Urban Institute, its
trustees, or its funders.
I believe this plan has many excellent features, and I
commend the Committee for its efforts. The plan builds upon the
successful health reform enacted in the State of Massachusetts,
provides for Medicaid expansion, a set of income-related
subsidies up to 400 percent of the Federal poverty line, a
national health exchange, and extensive insurance market
reforms.
It contains an individual mandate which is essential to
providing for universal coverage. It provides a cap on total
out-of-pocket spending for individuals, and higher payment
rates for primary care doctors.
I want to spend a few minutes on the public insurance
option. A public plan competing with private plans will provide
more choice and place substantial cost-containment pressure on
the health care system. The argument is often made that
competition between public and private plans could never be
fair and that it will lead to a single payer system.
This argument ignores the fact that many health insurance
markets, as well as provider markets, are simply not
competitive and efficient. An extraordinary amount of
concentration in the insurance and hospital industries has
taken place over the last several years, and this concentration
has been a significant contributor to health care cost growth.
No one can be in favor of controlling health care costs and
ignore this reality. Several studies have documented the
increase in concentration and the effect on insurer
profitability and hospital revenues. For example, a number of
studies have shown that hospital rates are higher in more
highly concentrated markets by as much as 40 percent.
The public plan can help with the problem of cost
containment. First, it is likely to have somewhat lower
administrative costs. Second, the public plan can also
establish and negotiate provider payment rates at lower levels
than private payers are able or willing to negotiate today.
Today commercial payment rates are 35 percent above
Medicare for hospitals and 23 percent for physicians. The plan
will likely need to pay higher rates than Medicare does today
to assure access to a sufficient number of providers. Where
these rates are set is critically important. I think there
should be a key role for MedPAC in advising the Congress on
this.
There are a number of aspects of the public plan that are
important to assure fair competition. The public plan should be
legally and administratively separate from exchanges. It should
abide by the same insurance market rules that private plans do.
It should offer the same benefit packages, have the same levels
of cost-sharing, and the same caps on out-of-pocket
liabilities. The income-related subsidies should apply in the
same way to all plans. The plans should be required to maintain
adequate reserves.
On the other hand, the public plan may well get a
disproportionate share of high-risk enrollees. A level playing
field also means that a public plan should be compensated if it
does end up with a less healthy population.
The public plan can reduce the costs of reform
significantly. In a paper being released this week by The Urban
Institute, we estimate that subsidy costs would be lower by
$200 to $400 billion relative to a plan with only private
insurance options.
We also believe that the public plan will not destroy the
private insurance market, in part because the private market
will respond to competition from the public plan, and in itself
become more efficient.
In the same paper, we have estimated that the net loss in
private coverage will be relatively small. While a large number
of those currently in the non-group and small group market will
purchase coverage through the exchange and many will choose to
join the public plan, there are close to 50 million uninsured
who will now obtain coverage. Some will enroll in Medicaid or
the public plan, but many will end up in private plans.
On balance, we estimate that the number of people with
private coverage will fall from about 177 million to 161
million. In the end, the number with private insurance will not
be too different than it is today, and the savings to the
government in lower subsidy costs will be substantial.
I would like to close by saying that while there is not a
cost estimate for this bill, the CBO estimates for one of the
Senate bills last week was $1.6 trillion over 10 years. This
may seem an alarming number, but it should be viewed in
context.
Over the 10-year period, 2010 to 2019, the amount of gross
domestic product projected for the U.S. economy will be $187
trillion. Even a number as high as 1.6 trillion is less than 1
percent of the amount of GDP being produced over this period.
The Nation will also spend $33 trillion in health care over
this period, even without reform.
We clearly need to gain control over this spending, and
there are many proposals for doing this. But these proposals
will require difficult choices. It is important that a good
plan be passed and be fully paid for, but the design should not
be driven by a budget goal, whether it is $1.6 or $1.2 or $1.0.
There are many other key design features, and this is
affordable, and there are plenty of ways to pay for it.
Thank you.
[The prepared statement of Mr. Holahan follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Chairman RANGEL. Thank you, Doctor.
The Committee would now invite Dr. Young, the National
Coordinator for Physicians for a National Health Program, from
Chicago.
STATEMENT OF QUENTIN YOUNG, M.D., MACP, NATIONAL COORDINATOR,
PHYSICIANS FOR A NATIONAL HEALTH PROGRAM, CHICAGO, ILLINOIS
Dr. YOUNG. Mr. Chairman, Members of the Committee, I thank
you for giving me the opportunity to comment on the proposal
that has emerged from the three key House Committees, and to
articulate the single payer alternative. Thank you.
I am the National Coordinator of Physicians for a National
Health Program, an organization of some 16,000 American
physicians who support single payer national health insurance.
Our organization represents the views of the majority of the
U.S. physicians now, 59 percent of whom support national health
insurance in a recent survey. I wish to make two points to the
Members of this Committee.
The first is that the best health policy, science,
literature, and experience indicate that the tri-committee
proposal will fail miserably in its purported goal of providing
comprehensive, sustainable health coverage to all Americans.
And it will fail whether or not it includes the so-called
public option health plan.
The second point I wish to make is that the single payer
national health insurance is not just the only path to
universal coverage, it is the most politically feasible to
health care for all because it pays for itself, requiring no
new sources of revenue.
The difference between single payer and the tri-committee
proposal could not be more stark. Single payor has at its core
the elimination of U.S.-style private insurance, using huge
administrative savings and inherent cost control mechanisms to
provide comprehensive, sustainable, universal coverage.
The tri-committee discussion draft preserves all of the
systemic defects inherent in relying on a patchwork of private
insurance companies to finance health care, a system which has
been a terrible failure both in providing health coverage and
controlling costs heretofore.
Elimination of the U.S.-style private insurance has been a
prerequisite to the achievement of universal health care in
every other industrialized country in the world. In contrast,
public program expansions, coupled with mandates like those in
the tri-committee proposal, have failed everywhere they have
been tried, both domestically and internationally.
First, because the discussion draft is built around the
retention of private insurance companies, it is unable, in
contrast to single payer, to recapture the 400 billion in
administrative waste that private insurers currently generate
in their drive to fight claims, issue denials, and screen out
the sick. A single payer system would redirect these huge
savings back into the system, requiring no net increase in
health spending, and covering those uncovered today.
Second, because the discussion draft fails to contain the
cost control mechanisms inherent in single payer, such as
global budgeting, bulk purchasing, negotiated fees, and planned
capital expenditures, any gains in coverage will quickly be
erased as costs skyrocket and government is forced to choose
between raising revenue and cutting benefits, something we face
today.
Third, because of this inability to control costs or
realize administrative savings, the coverage and benefits that
can be offered under the discussion draft will be of the same
type currently offered by private carriers, which cause
millions of insured Americans to go without needed care due to
the cost and have led to an epidemic of medical bankruptcies, 1
million annually presently.
Virtually all of the reforms contained in the discussion
draft have been tried, and have failed repeatedly. Plans that
combined mandates to purchase coverage with Medicaid expansions
fell apart in Massachusetts in 1988, Oregon in 1992, and
Washington State in 1993. The latest iteration, Massachusetts
2006, is already stumbling with uninsured rates again rising
and costs soaring. Tennessee's experiment with a massive
Medicaid expansion and a public plan option worked for 1 year,
until rising costs sank it.
The inclusion of a so-called public option cannot salvage
this structurally defective reform package. A public plan
option does not lead toward the single payer but toward the
segregation of patients, with profitable ones in private plans
and unprofitable ones in the public plan.
A quarter-century experience with public/private
competition in the Medicare program demonstrates that the
private plans will not allow a level playing field. Despite
strict regulation, private insurers have successfully cherry-
picked healthier seniors and have exploited regional health
spending differences to their advantage.
They have progressively undermined the public plan, which
started as a single payer system for seniors but now has become
a funding mechanism for private HMOs and a place to dump the
unprofitable ill.
The potential $1 trillion pricetag on the tri-committee
proposal already threatens to capsize our new President's
flagship initiative. In contrast, single payer avoids these
hazardous political waters entirely because it requires no new
sources of funding.
In tumultuous economic times, single payer is the only
fiscally responsible option. Two-thirds of the American people
support it. The majority of physicians are in favor of it, as
are the U.S. Conference of Mayors, 39 State labor federations,
and hundreds of local unions across the country. Millions of
Americans are mobilized to struggle for single payer, but your
leadership is crucial. I hope this Committee will see fit to
provide it.
[The prepared statement of Dr. Young follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Chairman RANGEL. Dr. Young, the Chair has been advised that
one of our most distinguished Members in the House and the
Chairman of the Judiciary Committee has arrived and is here
with us, and that is Chairman John Conyers. If he is here, I
want to pause and recognize the fight that he has had over the
decades in support of the single payer.
And I want you to understand, Dr. Young, that our President
has decided that he wants to make every effort to have a
bipartisan bill. And I think there are over 83 Members of
Congress that have supported the single payer. But I don't
think too many of them belong to the other party.
And so in an effort to launch this in a way that we could
accommodate each other, we have the public program that we hope
would compete with the private sector. But having said that,
Members will have questions later. And I hope that if Chairman
Conyers is in the audience, he would stand so that we would
recognize the service he has provided over the years.
John Conyers, we thank you.
[Applause]
Chairman RANGEL. We thank you for your great contribution,
and we would not be where we are today had it not been for your
great efforts here.
The Chair would like to call on Dr. David Gratzer. He is
from Manhattan Institute for Policy Research from the great
town of New York, New York.
Thank you.
STATEMENT OF DAVID GRATZER, M.D., SENIOR FELLOW, MANHATTAN
INSTITUTE FOR POLICY RESEARCH, NEW YORK, NEW YORK
Dr. GRATZER. Thank you, Mr. Chairman. Thank you, Members of
the Committee.
Mr. Chairman, as you gave me that warm introduction, I was
reminded of a comment a colleague of mine had said a few years
ago when he suggested that on paper, I seemed like a remarkable
individual.
Chairman RANGEL. Let's hope so at the end of your
testimony.
Dr. GRATZER. Mr. Chairman, I made a similar comment when I
testified a couple of weeks ago before a Subcommittee of the
Committee on Education and Labor. People also laughed then, and
I am not sure why. Pause for a moment just to soak this up.
I am a kid from the prairie, and it is an enormously
humbling experience to speak before this august body. And I
appreciate the work that you are doing. And we may agree to
disagree on some things, but I am honored to be able to testify
today.
I am going to speak in a few moments about the draft
legislation before us. But I want to pause for a moment and
talk about some personal experiences. You know, health care is
ultimately very personal. And it is important as we discuss
policy details, as we discuss statistics and figures, not to
leave out the human aspects of this.
A few years ago my wife hurt her back. We had gone on a ski
trip in the Rockies. Actually, I had been invited out to a
conference, and they had generously even agreed to pay for my
wife's plane ticket. All I had to do was buy the lift tickets,
and off we went.
My wife is no athlete. She is an emergency doctor, and she
hurt her back. I want to emphasize for the sake of our marriage
that she tells the story a little bit differently than I do.
Her version of events involves gale-like winds of 60 miles an
hour or so, a tall mountain rivaling, perhaps, Everest, and a
small mammal that had crossed her path that needed to be saved.
My version of events is a little less august, involving a small
ski slope, the bunny hill, and a lot of falls on her rear.
But whether or not you accept her version of events or
mine, at the end of the day she ended up seriously hurting her
back. And my wife, who likes to log long hours in the emergency
department, ended up lying on her couch in pain, numbness in
her foot, largely unable to work.
We were uninsured at the time, and interested in getting
her some help. Forty years ago there would have been no help to
be had. She just would have lived her life like that. Twenty-
five years ago there would have been a surgical procedure to
help her out that would have had a long convalescence, a risky
procedure that may not have worked.
My wife ended up getting a procedure that lasted less than
28 minutes, involved a scar that she wears on her back that is
less than a half-inch long, and within a few weeks, she was
able to rise up from that couch and go back to life.
It was in its own ways something of a miracle, something we
see every day in American health care. I would emphasize that
there are so many problems with American health care--and we
are going to talk about that today, in the coming days and the
coming weeks. But we should not forget what is good about this
system, that American medicine is second to none.
I have talked about my wife's back, but certainly we could
cite other examples. Death by cardiovascular disease has
dropped by two-thirds in the last 60 years. Polio is confined
to the history books. Childhood leukemia, once a death
sentence, is eminently treatable for people under the age of
11.
You know, in my other life I am a doctor, and I have seen
miracles there, too. I had a patient who came in covered in his
own urine who was completely psychotic. We gave him an anti-
psychotic, a new one, developed right here in the United
States, and he went back to being a college student and living
out his life. Let us not forget the successes when we talk
about the failures.
Of course, there are problems. It was difficult to find a
neurosurgeon for my wife because quality is so uneven and they
are such a black box. We actually Yahoo'ed ``Neurosurgery, west
New York,'' and got a bunch of porn sites. Costs are uneven and
at times inexplicable. We got a bill that lasted about 3\1/2\
feet and was unanswerable.
People look at these problems and they say, it is time now
for Washington to take a larger role, a more robust role. And I
see that Members of the Committee are entertaining that. I
understand that temptation.
I understand the belief that government expansion will be
compassionate and will increase quality. I understand that
because I used to believe it. I was born and raised in Canada.
I, too, believed in some level of socialized medicine. Then I
got mugged by reality, and I have seen the waiting lists and
the queues for care and how unsatisfying it is.
You have a choice to make, and down one path is the
government temptation. But there is also, my friends, the low
road less traveled of individual choice and true competition.
And that is why I think we need policy reform and regulatory
reform and tax reform to build on what is good with this
system, and not to end up with a system far worse like you see
in Canada or Britain or right across the western world.
Thank you, Mr. Chairman.
[The prepared statement of Dr. Gratzer follows:]
Prepared Statement of David Gratzer, M.D., Senior Fellow,
Manhattan Institute for Policy Research, New York, New York
Thank you for this opportunity to testify at this important time.
My testimony is drawn from personal experience--as a physician born and
trained in Canada, as the author of two books (and the editor of a
third) on comparative health care policy, and as a senior fellow at the
Manhattan Institute. (For the record, the views I present are my own
and do not necessarily represent those of the Manhattan Institute.)
The choices Congress will make on this issue are critical both for
the United States and for patients around the world who benefit from
American advances in diagnostic technology, pharmaceuticals,
biotechnology, surgical techniques, and medical device design.
It is not a coincidence that the United States is so productive in
medical science. America's health care system is unique in its capacity
to mobilize private investment. Many critics of the system look at its
rising share of GDP and see only cost. But we must remember in these
discussions that American medicine is second to none. The achievements
of the last 60 years have been amazing: Polio is confined to the
history books; death by cardiovascular disease has fallen by two-
thirds; childhood leukemia, once a death sentence, is now treatable.
The U.S. system needs reform, yes. Costs continue to rise. Quality
is uneven. Too many lack insurance. But in our effort to make a system
with better coverage and access, we must not lose what is right and
what is good.
1. BUILDING ON WHAT WORKS
U.S. lawmakers should be cautious about borrowing reforms from
other countries; Congress must reform the health care system with made-
in-America solutions.
Congressional leaders would be wise to focus on simple, practical
reforms that build on what works in this system.
We must recognize the forgotten role of health in health
care (policy reform);
We should foster insurance competition in a larger
marketplace (regulatory reform); and
We must level the tax playing field for individuals
seeking insurance outside the workplace (tax reform).
Supporters of a single payer model repeatedly point to America's
lower life expectancy as evidence of a systemic failure. As a
physician, let me assure you that life expectancy is about much more
than what happens in the doctor's office. Indeed, some of the biggest
problems we face are due to choices and not (health) care. Americans
live unhealthily--smoking, drinking, and eating more than their
neighbors to the north, or their Western European cousins. Consider
that the percentage of obese Americans has doubled in the last quarter
century.
The failure to prevent common illnesses like diabetes and lung
cancer carries significant financial consequences for the health care
system. Both Democrats and Republicans can agree with this point.
Significant government and private actions are needed--we must do more
to promote wellness, provide incentives for prevention, and encourage
Americans to take greater responsibility for their own health.
Market competition can contain the high cost of insurance--if
Congress and the States would only allow it to take place. Efforts at
creating equity and fairness in the health insurance market--done with
the best of intentions--have created dramatic differences in price
across the country. For example, a health-insurance plan for a family
of four in New York can cost more than $12,000 a year, but a similar is
about $3,000 in Wisconsin.
The Federal Government can promote regulatory strategies that will
increase interstate insurance competition. Proposals to create a true
national market for health insurance is on the right track, but
Congress must go farther to level the tax and regulatory playing field
for non-group insurance. Once the marketplace of individuals can
compete fairly with employer-provided plans, they can serve as an ideal
vehicle for broadening coverage to the uninsured.
2. THE SOCIAL RISKS OF GOVERNMENT-MANAGED CARE
Single payer advocates and their allies insist that only government
health insurance can solve America's problems. For example, when it
comes to wellness, some claim--without evidence--that preventive care
will be strengthened in a single payer system.
In reality, preventive care has suffered in many single payer
systems because it is not urgent care. Governments in single payer
systems have tended to see ``elective'' and preventative care as a
safer target for rationing, in much the same way that governments
worldwide habitually underbudget for infrastructure maintenance.
For example, it's a common mantra that Canadians can choose their
own family doctor in Canada's socialized health system. But as many as
one-sixth of Canadians cannot find a family doctor. Canada has two-
thirds as many doctors as the OECD average, with severe shortages in
several areas of specialty (for example, gynaecology). When there are
no doctors to choose from, the ``freedom to choose'' is a limited
benefit. The doctor shortage is a direct result of government
rationing, since provinces intervened to restrict class sizes in major
Canadian medical schools in the 1990s.
To further inform Congress about the challenges of government-
managed care, I cite Canadian-sourced data.
(1) CIHI Reports on Provincial Wait-Times ``Progress''
The Canadian Institute for Health Information (CIHI), a government-
funded body, is the designated agency responsible for collecting
provincial wait-times data. Their reports \1\ paint a disturbing
picture. Advocates for the Canadian system often cherry-pick broad
averages or median wait time figures, but CIHI's most recent (2008)
data gives a fuller picture of what service is like at the ``back of
the line.'' Consider just a few examples:
---------------------------------------------------------------------------
\1\ The latest CIHI reports on provincially-reported wait times are
available at www.cihi.ca.
In Alberta, Canada's wealthiest province, 50% of
outpatients waited 41 days or more for an MRI scan. Ten percent of
those patients waited 4\1/2\ months or longer.
In Saskatchewan, 10% of knee replacement patients waited
616 days or more for surgery.
In Nova Scotia, 25% of patients waited 199 days or more
for cataract removal.
All of these and other figures reflect wait times after referral by
a general practitioner. As noted earlier, millions of Canadians do not
have access to a family doctor.
(2) Canadian Wait Times Alliance: Annual Reports, 2004-2009
Canada's Wait Times Alliance offers a counterpoint to CIHI's
reports. The Alliance consists exclusively of Canadian medical
professional associations like the Canadian Medical Association. Their
2009 report, Unfinished Business, opens with the observation that
``Canadians are used to waiting.'' The report \2\ notes that provincial
``progress'' toward wait times targets often represents progress toward
``minimum wait-times standards, rather than desired wait-times
standards.''
---------------------------------------------------------------------------
\2\ The 2009 Report is available, as are previous years' reports,
at www.waittimealliance.ca.
---------------------------------------------------------------------------
(3) Chaoulli v. Quebec (Attorney General), 2005 SCC 35
This recent decision \3\ by the Supreme Court of Canada serves as a
wake-up call to those who see the Canadian system as a utopian mix of
public funding and private choice. The case centred on a patient who
chose to sue for the right to use his own money to secure timely
medical treatment, a right that was denied Canadians until the Chaoulli
decision.
---------------------------------------------------------------------------
\3\ The Chaoulli decision is online at http://
csc.lexum.umontreal.ca/en/2005/2005scc35/2005scc35.html.
---------------------------------------------------------------------------
Writing for the majority, Justice Marie Deschamps concluded that:
``[T]he evidence in this case shows that delays in the public
health care system are widespread, and that, in some serious
cases, patients die as a result of waiting lists for public
health care. The evidence also demonstrates that the
prohibition against private health insurance and its
consequence of denying people vital health care result in
physical and psychological suffering that meets a threshold
test of seriousness.''
Chaoulli v. Quebec (Attorney-General) 2005
(4) [Quebec] Taskforce on the Funding of the Health System, 2008
Finally, consider the most recent report from Quebec, a
comprehensive review of a government-managed system in peril. The
government-appointed Chair of the Taskforce was M. Claude Castonguay,
widely considered ``the father of Quebec medicare,'' as he co-authored
a report in the late 1960s that created Quebec's earliest single payer
model. Almost 40 years later, this report \4\ concluded that ``there is
no ideal system,'' called for an increase in private sector involvement
and cited crippling cost inflation and poorly rationed care as major
flaws in Quebec's single payer model.
---------------------------------------------------------------------------
\4\ The full report is online in English at http://
www.financementsante.gouv.qc.ca/en/rapport/index.asp.
---------------------------------------------------------------------------
3. THE FISCAL RISKS OF GOVERNMENT-MANAGED CARE
These challenges are not unique to Canada. Around the world, the
more public the system, the greater the challenge in managing it. For
example, the United Kingdom recently increased the annual budget of the
National Health Service (NHS) by tens of billions of pounds in an
effort to bring wait times below their own targets. The effort
succeeded, but only if you believe that the NHS guarantee of care no
later than 18 weeks after a referral represents timely service.
Recessionary budget reductions are likely to limit further progress as
the Brown government has ordered the NHS to prepare for increases below
core inflation (1.6%) in fiscal year 2010-2011.
The White House is alarmed by private-sector health inflation, but
it must also acknowledge the same trend in government-managed systems.
Even with pharmaceutical price controls, technology rationing, and
limited capital investments, almost all Canadian provinces carry
substantial debts fuelled mostly by persistent health care inflation.
Ontario's health budget is projected to grow by 7% for each of the next
3 years. The 2008 Taskforce calculated Quebec's annual health inflation
rate at almost 6%. In Britain, the NHS admits to a 60 year average
increase of 3% over inflation. Ireland's single payer system has
experienced constant price turbulence. Despite 3.5% deflation this May,
Irish health costs still grew at an annualized rate of 4.5%.
What causes inflation in public health insurance programs? As
government's role as the primary funder grows, the greater the
political contradiction between demands for fiscal restraint and demand
for service. The pattern is consistent across national boundaries: If
governments provide the insurance, benefits come cheap and easy in the
early years. When the cost of treating older citizens, serving new
patients or providing new treatments climbs, policymakers face a
devil's choice between rationed care or tax-funded cost inflation. Most
often, they try to balance the two bad options, restraining inflation
slightly below U.S. levels with ever-more painful restraints on capital
investment, human resources, technology, and drug access. Waiting lists
for treatment are the inevitable consequence.
4. A PUBLIC PLAN OPTION IS GOVERNMENT-MANAGED CARE
The Administration insists that support for a ``public plan
option'' is not intended to serve as a ``Trojan horse'' for a single
payer health care system. I can only reply with the time-honoured
scientific observation that ``if it walks like a duck, if it quacks
like a duck . . .''
The historic reality is that even if the Administration sincerely
does not want public insurance to serve as a Trojan horse for a single
payer system, the public plan option is certain to deliver exactly that
result, just as more limited public insurance schemes in Canada,
Britain, and other countries, came to dominate their own health
sectors:
As a government program rather than a state-regulated
insurance plan, the public plan option has competitive advantages;
If those advantages are removed, then there is no point
in introducing the public plan when the proposed ``Health Insurance
Exchange'' will increase competition anyhow;
If the advantages are left intact, the United States will
undermine its private-sector health care, as have other western
countries.
The Administration believes a public option is needed to, in the
President's words, ``keep the insurance industry honest.'' If this
argument is carried to its logical conclusion, the public plan must
also be ``honest.''
Will the public plan be financed on a pay-as-you-go basis as many
entitlement programs have been, or will it be properly financed to
future insurance costs?
Will the public option pay market costs for capital, just as
private insurers must?
Will the public plan comply with costly State mandates just as
private insurers do, or will the Federal Government override them?
If the public plan has any built-in government advantages, it will
build market share--not because it is necessarily better insurance, but
because it is subsidized and legally privileged. As the plan grows in
size, Federal taxpayers will foot an ever-larger share of the system's
increasing costs, and governments will be under ever-more pressure to
ration care to contain them.
Further, if the goal of public competition is to reduce the impact
of public health care costs on the U.S. Treasury, then the best policy
choices are those which extend coverage and improve affordability
without significant damage to the U.S. tax base. Will the public plan
pay taxes to simulate the tax costs of a private insurer? If not, then
every dollar attracted to the public plan is a dollar taken from the
taxable private sector, reducing the economy's ability to carry the
costs of public health programs in future.
__________
Let's be clear: American health care is in need of reform. But as
any good doctor knows, it's not enough to get the diagnosis right, we
need a treatment that makes sense. A massive expansion of Washington's
role is not that treatment. Rather, Congress should look to
alternatives:
Prioritize regulatory reforms that will open up true competition
between existing, fully-funded insurers.
Target direct government aid to individuals who really need it,
with incentives for individuals to become a powerful competitive force
in the insurance marketplace.
Promote rapid improvement in the personal health of Americans to
reduce demand on the system's most costly health care services.
These ideas would bring greater choice to American health care;
they would also help instill in the system the oldest of American
virtues: Personal responsibility. While they may not be as catchy as
promising Medicare for those who want it, these ideas have the benefit
of pushing the system toward a sustainable future, not a government
bureaucracy.
Chairman RANGEL. Thank you so much for your testimony. I
can see why our Republican friends have selected you. You are
very persuasive. And I want to make it abundantly clear:
Anybody supporting this concept certainly cannot disregard the
great advancements that have been made in American medicine,
and the great contributions that the private sector have and
continue to give.
And I only wish that you can help us to understand that we
cannot find acceptable 48 million people without health care.
And I know you agree with that. Over half of that amount are
underinsured. And the whole idea that this genius of the
private sector cannot compete with a government operator, or
better than that, that the American people will not seek out
the best that they can find, certainly is a far cry from what
you describe as socialized medicine or whatever derogatory term
that you want to call it.
We are not competing for a French plan or a Canadian plan
or a foreign plan. This is an American problem, and it has to
be an American solution to it.
And so I just ask you, Doctor, if indeed we are talking
about competition, don't you believe that the government can
learn from the private sector and that the private sector can
learn from the government? We as Americans, and certainly the
medical profession, have never run away from the challenge of
competition. Why won't you give us a chance?
Dr. GRATZER. Mr. Chairman, let me agree with you that there
are significant problems here. And certainly I don't wish to
walk--or don't wish for you to walk away from my testimony
today thinking that I am glossing over these problems. There
are too many uninsured Americans.
I am not quite sure that we should be so concerned with
that large number, but within them there is a core group, maybe
8 or 9 million, who really do fall through the cracks. And it
is up to this body in these deliberations to find a way of
reaching out.
But be careful. Be careful what we end up doing because as
any good doctor knows, it is not enough to come up with the
right diagnosis. You have to come up with the right treatment.
And sometimes when you don't do that, the patient gets worse.
As you know, I am pretty libertarian in my thinking. Milton
Friedman wrote the foreword to my last book. He was a mentor
for me.
Chairman RANGEL. What was the name of your book? We might
as well get that in now.
Dr. GRATZER. Well, Mr. Chairman, ``The Cure: How
Capitalization Can Save American Health Care,'' available on
Amazon.com at a very reasonable price, Mr. Chairman.
[Laughter.]
Dr. GRATZER. But today, I will offer you a book at no
charge. But Mr. Chairman, I think one should be very careful
about the language we use. Yes, you and I believe in
competition. Yes, you and I believe in individual choice. But a
public plan option as is being discussed is not true
competition, and it is not true choice.
As you know, the discussions underway are to have Medicare
pricing. In other words, we would build a public plan option
basically modeled after Medicare. Medicare is not really an
insurance. I know you and I throw that term out. And when you
have public plans in other countries, we talk about social
insurance, but they are not true insurance.
Medicare is a Federal program. Medicare is a Federal
program with price controls, one that is opted out of State
regulations, that doesn't require any of the capitalization
required of private insurances, that doesn't account as private
insurances do.
So yes, I believe in competition. But it has to be fair
competition. I think a better----
Chairman RANGEL. Pause there. Tell me, please, what is
unfair about the option? Because I have more respect for the
ingenuity of the private sector. Why would anyone that enjoys
the genius of the private sector walk away from that to a
crumbling, failing, government, irresponsible program?
Dr. GRATZER. Can I quote you on that?
Chairman RANGEL. Well, this is your language. And I am
saying that why would anyone walk away from what you are
describing? The key word that separates you and I is that you
already said the program, the public option program, is unfair.
Well, hell, I am sorry, but if I was losing a lot of money
to a competitor, I would try to find that word, saying, this
competitor is coming in, reducing my profits. I am in business
to make money. That is what my job would be in the private
sector.
And if anyone came in with any idea about just providing
health care, I wouldn't call that unfair. Tell me what is
unfair about the system since we are searching to give
confidence that we want an even playing field?
What could we possibly do to provide that competition,
which I am certain you are not afraid of, as long as it is,
what, fair? Tell me what we could do to perfect this so you can
say, well, at least that is fair, and we can match you patient
for patient, and in your case, dollar for dollar.
Dr. GRATZER. Sure. Three words: Scrap price controls.
Chairman RANGEL. Where would the price control be?
Dr. GRATZER. Well, Medicare price controls. As you know,
there is a committee of----
Chairman RANGEL. We are paying for the private sector with
Medicare. That is how they make their money. It is government
money that goes into these programs. The doctors are reimbursed
with Federal dollars.
Dr. GRATZER. But they are being reimbursed at a fraction of
what they would make in the private sector. And as you know,
there is good evidence that there is cost-shifting going on
whereby private plans end up picking up the weight, the dropped
weight, from the public system.
Chairman RANGEL. Doctor, we have so many programs that the
patients and the clients are supported by Federal dollars and
Medicare where they are doing so well and making profits, if
you will, by cutting a lot of procedures that are truly found
to be unnecessary.
And I might say that a lot of doctors would share with you
the lack of satisfaction that they get with the payment system,
which forces them in many cases to find services that are not
necessary to be funded by the government because they don't
believe that the reimbursement is adequate. We are trying to
take care of that. I don't think we----
Dr. GRATZER. Hold on, Mr. Chairman. I think you have
persuaded me that Medicare is in need of reform. I am not sure
you have persuaded me----
Chairman RANGEL. You bet your sweet life it is.
Dr. GRATZER. But you have not persuaded me that----
Chairman RANGEL. The whole system is broken.
Dr. GRATZER. The whole system is----
Chairman RANGEL. But we don't expect the private sector to
come forward and fix it. We need a partnership. We need a fair
relationship. And the only difference that separates you and I
is that I think you are suggesting that you are not afraid of
fair competition.
Dr. GRATZER. Then let's agree on what fair competition
might be for this public option.
Chairman RANGEL. Exactly.
Dr. GRATZER. No price controls. Reimbursement set by the
private sector. Capitalization required.
Chairman RANGEL. Reimbursement set by the private sector,
did you say?
Dr. GRATZER. Yes. Doctors ought to make a fair wage, don't
you think?
Chairman RANGEL. A fair wage? Okay. Okay. All right.
Dr. GRATZER. I believe in competition. But we are not
talking about competition between insurances.
Chairman RANGEL. Let's talk in New York.
Dr. GRATZER. We are talking about competition between----
Chairman RANGEL. It is all a question of what is fair. And
I would like to yield to the Ranking Member because we have
reduced our differences to price.
Mr. CAMP. Well, thank you, Mr. Chairman. We have had a
number of hearings either in the Committee or Subcommittee--I
think six this year--on various aspects of health reform, seven
if you look at the Income Security Subcommittee's hearing on a
new entitlement program that was incorporated into this draft,
and really nearly two dozen in the last Congress.
So I really want to focus on the specific aspects of this
legislation before us, not necessarily in general what health
reform--what might be right and wrong in the health reform
system.
And so Dr. Gratzer, you mentioned the difference often
between the public and private plans. And I believe in section
1401(b) of the bill, there is a new tax on all non-government
health insurance policies, which would be another way that
competition isn't really fair between the public plan and the
private plans. It would be a $370 million tax to fund the
competitive effectiveness research trust fund.
Would this tax, in your opinion, fall on people at all
income levels? Is it based only on who has a non-government
health insurance policy or private health insurance?
Dr. GRATZER. I thank you for the question. I will be honest
with you: I am not as up on perhaps the specifics of the bill
as I should be. It is an 825-page bill, and I have only had
since Friday to review it.
But my suspicion is besides the structural differences
between a Federal program and insurance, you have hit the nail
on the head that even this bill will exaggerate these
differences from a tax point of view.
Again, I believe in competition, but it ought to be fair
competition. And if really what we are going to do is take this
public plan option and make it just like every other insurance
except it is not for profit, we already have the blues, sir.
Mr. CAMP. All right. Thank you.
And Ms. Pollitz, I am a little confused about whether
insurance policies offered through the exchange would have to
adhere to State benefit mandates. I believe in section 203,
which starts on page 55 of the bill, that the new health
choices commissioner could override State mandates with their
authority. Is that your read of the bill?
Ms. POLLITZ. I don't remember. I am sorry.
Mr. CAMP. Okay. I believe on page 59 you would find that is
the case.
I also have a question for Dr. Holahan. It appears that
there will be, for an employer who does not offer health
insurance, an 8 percent tax on total wages. Is that your
understanding?
Mr. HOLAHAN. Yes.
Mr. CAMP. And if there was an employee who had a spouse who
had an insurance plan with another company, and that employee
decided to go on their spouse's insurance for some reason--it
may have better benefits; it may be cheaper for their family--
and that policy was in the exchange, would the employer still
have to pay the 8 percent tax on that employee who was not
covered by insurance?
Mr. HOLAHAN. So you are saying the employee is covered, the
spouse is not?
Mr. CAMP. The spouse is covered by another plan that is in
an exchange. This employee decides, I will go on my spouse's
plan. I am not going to use my employer's plan. Because it
might be cheaper. It might have different benefit levels.
Mr. HOLAHAN. There are a lot of difficult design issues
in----
Mr. CAMP. My view----
Mr. HOLAHAN. I don't know how they dealt with that, to be
honest. I didn't see that.
Mr. CAMP. My read of the bill is that that employer would
still have to pay an 8 percent tax. So if the employee made
$100,000, the employer would still be on the hook for $8,000--
--
Ms. POLLITZ. Mr. Camp.
Mr. CAMP [continuing]. Even though that employee was
covered.
Ms. POLLITZ. I believe there was a general provision in the
bill that allowed for a delegated authority to the Secretary to
arrange for accounting rules to take care of problems like
that. I don't know that it is specified in the bill, but it is
acknowledged that there would need to be accounting rules about
how families are covered when there is more than one source of
coverage, and that those will need to be addressed.
Mr. CAMP. Yes. The bill, as written now, would indicate
that that tax by the employer has to be paid. It wouldn't
necessarily change anything. The family doesn't pay that; it is
the employer's payment.
I also have a question, Dr. Holahan. The health choices
commissioner who would run the exchange, what protections are
there in the bill to ensure that there is the necessary
independence from the President and the Health and Human
Services Secretary, given that this person would be running the
health care--the government plan? What protections in the bill
are to ensure that that is an independent position?
Mr. HOLAHAN. I don't think I can answer that. I didn't read
that part of it.
Mr. CAMP. Okay. It is my understanding there aren't any
such protections in the bill, and I think that is one of the
concerns that we would have.
Mr. HOLAHAN. As I said in my opening remarks, I would agree
with that. There has to be separation.
Mr. CAMP. Thank you.
I see my time is expired, Mr. Chairman. Thank you very
much.
Chairman RANGEL. Well, I have talked with staff. And as we
told you yesterday, we think the bill is clear that an employer
that offers insurance will not be penalized merely because one
of the employees would want to enjoy the benefits under another
plan.
But in an effort to show the direction in which we want to
go, we are prepared to accept Republican language to make it
abundantly clear that if he is offering the insurance, it
doesn't mean that the employee has to accept it. So there is no
penalty involved.
I would like to yield to the Chairman of the Health
Committee.
Mr. STARK. Thank you, Mr. Chairman. And thank my colleagues
for their patience. I think it is important to note that in
this draft proposal, there are still many issues that are
undecided.
But I did feel that it is important to note that the--well,
there has been a good bit of discussion about a Canadian
system, which the public plan, I would suggest, is not. There
is basically nothing in the public option that would create a
Canadian-style system. Dr. Gratzer indicates that it would be
important to have preventive health. I believe that we have
eliminated copays for preventive procedures, which should
increase preventive health.
Canadians don't get their health care via their employer.
Private insurers do not exist in Canada offering comprehensive
health benefits. There are province-wide caps on spending in
Canada. And these are four major elements of the Canadian
system that are not at least in this discussion draft.
So that I would just like to make crystal clear that this
is an attempt to save money, as they say, bend the curve, and
also a question to make sure that everybody contributes.
Beneficiaries will contribute. Employers will contribute.
Taxpayers will probably end up contributing. And providers
certainly will.
Dr. Gratzer has suggested that physicians ought to set
their own prices. They are currently the highest-paid group of
people in America, averaging substantially over $250,000 a
year, many making $6 or $700,000 a year. And I have repeatedly
said I fail to extend much sympathy to the $600,000-plus
physicians who are back here looking for more, particularly in
this time when so many Americans are just looking for a job.
So that I think we have to move ahead. One of the things
that was in this--whoever wrote this silly $3 trillion analysis
managed to miss 500 pages of the text, and I wonder what else
they missed, because they didn't talk about the savings in the
bill.
And also, I must say, in the analysis they said that in
contrast to the Senate version, our version is more fiscally
prudent and effective. Now, given that CBO has scored the
Senate version at around 1 to 1.6, this certainly indicates
that we are doing a lot better.
So I hope we can continue to analyze the bill, and try and
keep our analysis of it somewhat close to reality, and come up
with a bill that will end up having more than 95 percent of the
American public with an affordable quality access to medical
care.
Thank you, Mr. Chairman.
Chairman RANGEL. Thank you, Chairman Stark.
I would like to recognize Mr. Herger, who has spent quite a
bit of his legislative career working on health reform.
Mr. HERGER. Thank you, Mr. Chairman.
Dr. Gratzer, advocates of a government-run care program
often point to Canada as a model for the U.S. to follow.
However, your experience shows that many Canadians can't find a
family physician, and those that do often face long waits if
they need followup care. In fact, some patients even die while
waiting to receive treatment.
Could you please elaborate?
Dr. GRATZER. I thank the Member for the question. There is
such a severe physician shortage in Canada that there are small
towns where if you win the local lottery, you don't get money
to pay off your mortgage. You don't get a boat. You don't get a
new house. You get a trip to the family doctor.
One in six Canadians, according to the government's own
statistics, are actively looking for a family doctor and can't
find one, the shortage is so severe.
Even the Supreme Court of Canada--arguably, by the way, one
of the most liberal supreme courts in the western world--wrote
in a decision, writing for the majority, according to the chief
justice, that access to wait lists is not access to health
care.
The Canadian system rations. The British system rations.
The Swedish system rations. Right across the board, you see the
same thing--not according to my statistics or right-wing think
tank statistics; according to even their government statistics.
Now, the question is, is any of this relevant today? And
Mr. Stark has suggested that it is irrelevant because we are
just talking about a public plan. But a public plan would
inevitably lead to a government plan, and inevitably lead to a
further skewing of the field, 120 million Americans taking up
public insurance, and ultimately you are well on your way to a
Canadian-style system. That is the danger.
Look north of the 49th parallel, and you don't find a
compassionate system. You find people waiting, and to use your
words, in some cases dying.
Mr. HERGER. Thank you. On a different issue, competitive
effectiveness research, if done right, can be an important
source of trustworthy information for patients and doctors. I
am concerned, however, that if it is done wrong, it could take
us down the path of countries like the U.K., where government
agencies get in the middle of the doctor-patient relationship
and decide whether or not to cover a medical treatment based
solely on its cost.
I have introduced bipartisan legislation that would
prohibit the Federal Government from using competitive
effectiveness research to make cost-based coverage
determinations, while also ensuring that research is conducted
transparently and with adequate opportunity for public comment.
Dr. Gratzer, do you believe it is important for health
reform legislation to include these kinds of safeguards to
protect the doctor-patient relationship?
Dr. GRATZER. Absolutely. I am a huge believer in studying
what is effective and what isn't. You know, in my other life I
am a practicing physician. As a psychiatrist, I tap the CATIE
study funded by the NIMH all the time. It was a direct head-to-
head comparison of different anti-psychotics. It literally
influences my practice every day. That is funding that worked
and helped people.
On the other hand, one must be enormously careful not to
follow the examples of countries like Britain, where you have a
committee of really smart, well-meaning people who end up
making decisions that they ought not to. There is a right way
of doing this and a wrong way of doing this. I fear in the
stimulus bill we took the wrong tack. But I applaud your
efforts and the bipartisanship it has enjoyed. That is the
right way we ought to do it.
Health care is a black box. We are power consumers. No
matter whether you agree with a single payer system or a
government-run system or, as you and I do, a more private
system, we need to inform individuals more correctly--not
through government rationing committees, but through better
information to consumers.
Mr. HERGER. Dr. Gratzer, again, thank you very much. I
believe we all agree--Republican, Democrat, whoever we are--
that the system needs to be fixed. But it needs to be repaired
and fixed in a way that is going to make it better, not make it
worse. So thank you very much for your testimony.
Thank you, Mr. Chairman.
Chairman RANGEL. I would like to recognize a senior Member
of our Committee, Sandy Levin.
Mr. LEVIN. Well, we are having, I guess, a grand debate. So
let's continue it.
Dr. Gratzer, in your testimony you say--I think you mean it
humorously--the honored scientific observation that if it walks
like a duck and it quacks like a duck, it is a duck. We are not
talking about a duck. It is a straw man.
I live next to Windsor. We are not proposing a Canadian
system, and there is no way we are going to allow the opponents
of reform to mischaracterize what we are proposing.
You talk about the rationing of health care in Canada or in
Britain. One of the problems is, and we have a strong health
care system in some respects, but the present American system
rations health care. There is a horrible difference in the
availability of health care for Americans in this country. And
we have a system that needs reform.
I think you said you are a libertarian. You say it
straight. Essentially, you talk about the American system. That
includes Medicare. You essentially would dismantle Medicare. I
think you would.
You talk about price controls. We instituted some control
of reimbursement costs for hospitals in Medicare. You would
turn that over to, essentially, competition without any
government role. At least that alternative is said essentially
straight. But America has essentially rejected it. They don't
think Medicare is a Canadian system of health care.
So if there is any hope for a bipartisan approach, and I
hope there is, to reform our health care system, it will not be
possible if the main effort of those who oppose what we are
proposing is caricature. This is not a duck. That is a straw
man.
And I want to say to Mr. Camp, it is true we do not at this
point indicate how we will pay for it. And you bring out a
study--I don't know, really, its origin--about 3\1/2\ trillion.
We will see what CBO says. But I don't think that kind of a
study should scare us into inaction.
And you also mentioned the problem of where both the
couples, both work. You know, from Michigan, we should be
sensitive to that because we have had a system where both
people work. Essentially, one employer is paying all the costs
for both people. And in 1993-1994, a plan that did not succeed
attempted to address that. And I think it is important that we
face up to the issue, but without caricaturing what it is all
about.
So Dr. Gratzer, you say that there can't be fair
competition with government involvement. We will see. The
reason that we have proposed focusing on reform and then
focusing on how we pay for it is because the system needs to be
revised.
The reimbursement structure today that we have in Medicare
and beyond for physicians is totally unworkable. It is totally
unworkable. And what our proposal does is attempt to begin to
address an unworkable system and an unfair system of physician
reimbursement.
And those of us on the majority side want us to examine how
we go even further. And I think to say that a public plan is
socialism or is Canadian misses the point. We want a public
plan in part so that there will be more competition to address
issues of reform. That is one of the strengths of a proposal
that includes an option for a public plan.
Mr. CAMP. Mr. Levin, would you yield briefly? You used the
words characterizing your plan. I am just trying to find out
what it says.
Mr. LEVIN. I said caricature.
Mr. CAMP. Caricature. On page 115, it says, ``The employer
shall make a timely contribution to the health insurance
exchange if an employee declines such offer but obtains
coverage in an exchange.''
So my read of the plain language of the bill is that an
employer will be required to make that 8 percent. We can debate
whether that is the right thing to do. I think at this hearing
we are just trying to find out what does the bill do.
Mr. LEVIN. Okay. Let me take back my time. Let's talk about
that issue without caricaturing the plan.
It is a problem where both work, and one employer is paying
insurance for both. That is a problem. Let's discuss this on a
bipartisan basis, whether the present proposal adequately
addresses it or not. But don't caricature that provision or any
other provision.
For you to come here and essentially say what we are
proposing is a Canadian system is dead wrong.
Chairman RANGEL. The Chair would like to recognize a
continuous service hero, Sam Johnson.
Mr. JOHNSON. Thank you, Mr. Chairman.
Ms. Pollitz, you state in your testimony, ``Defining a
national standard for health insurance is crucial,'' and that,
``an essential benefit package is necessary.''
I was wondering if you think the benefit package should
include acupuncture like they do in California?
Ms. POLLITZ. No. I think we could get by without that.
Mr. JOHNSON. No? Should it be required to cover the cost of
prosthetic devices, as it is in New Jersey and California?
Ms. POLLITZ. Yes. I think prosthetic devices are very
important for people with disabilities and would be needed.
Mr. JOHNSON. How about covering in vitro fertilization
costs?
Ms. POLLITZ. I am not sure I have an opinion on that.
Mr. JOHNSON. Well, you know, a health insurance policy in
New Jersey costs significantly more than a policy in the
Midwest mainly because of excessive mandates. And I am
concerned that our government bureaucrats in D.C., who in this
bill are tasked with making decisions on what to include in an
essential benefits package, will include too many mandates.
Dr. Gratzer, isn't it likely, by giving all this power to
one individual, they will succumb to the same pressures that
landed New Jersey into their high cost health coverage
situation?
Dr. GRATZER. Or New York or so many States. You know, I
walk out of the think tank in New York City, and if I wanted to
buy a policy out of the individual market, I would pay three
times more for a policy, as you know, than I would if I took
the Metro north 45 minutes to Connecticut. Three times more for
a policy that covers basically the same stuff for me.
So absolutely, these mandates, built with the best of
intentions, drive up costs. And we see them right across the
United States. And the danger with a health insurance exchange
with some czar of regulation is that we just keep adding and
adding and adding until we get to the point, like New York
State, where you have the most fair and equitable policy
available. Just no one can afford it.
Mr. JOHNSON. Yes. You are right. But, you know, we could
have a health czar that could solve all those problems. Right?
Ms. POLLITZ. Mr. Johnson.
Mr. JOHNSON. Yes.
Ms. POLLITZ. I just wanted to correct one thing for the
record. Health insurance in New York and New Jersey is more
expensive than in most other States because those two States
require health insurance companies to sell coverage to people
and to leave coverage with people when they are sick. And in
all other States in the individual market, that is not the
case. The pool excludes people who are sick.
I live in the State of Maryland, which is recognized as
being the champion State of health insurance mandates. I
believe we have more in Maryland than any other State. And yet
individual policies are much cheaper in Maryland than they are
in New Jersey, again for that very same reason----
Mr. JOHNSON. Private insurance.
Ms. POLLITZ [continuing]. That sick people can't buy the
coverage.
Mr. JOHNSON. Private insurance, though.
Ms. POLLITZ. Yes. Private insurance.
Mr. JOHNSON. Oh, okay. But we are about to overturn that,
are we not?
Ms. POLLITZ. Yes. I hope you are.
Mr. JOHNSON. Dr. Gratzer, your experience in the Canadian
health care system seems to suggest reform that focuses on
guaranteeing coverage. And it won't necessarily produce a
quality health care delivery system. And your testimony also
speaks to the fact that Canadians can't find a family
physician, and those that do often face long waits if they need
followup care. And I am told also that in Canada, some lottery
winner accesses a physician.
You know, I am not sure that this type of system, and I
think we are having trouble in this country, too, finding
primary care physicians. Would you comment?
Dr. GRATZER. Well, undoubtedly there are problems with
primary care access in the United States. Emergency room care
also is problematic in terms of overcrowding. But in our
efforts to achieve better reform, we should be careful not to
end up worsening the system.
There is no plan right now put forward by Congress for
single payer option before this Committee. And yet when you are
going to suck up 120 million people out of private plans and
put them into a government system, I fear that is the road we
are going down.
I know that your colleague is very concerned that I would
take apart Medicare were I to be elected President. And for the
record, because of constitutional limitations, I will not be
running in 2012. But it doesn't matter what I am going to do
because who cares what I really want to do? The question is
what you guys are going to do because you are in this
important, august Committee and before Congress.
And what you should be careful of is looking at this
temptation of government and expanding Washington's reach
because inevitably, you get to systems like you see in Canada
or Britain or across western Europe.
Canada, incidentally, didn't start with a single payer
system. Canada started with hospital construction grants in the
1950s, and then hospital insurance in the 1960s, built, by the
way, to compete against private plans; and then physician
reimbursement in the 1970s. And then finally, in 1984 because
costs kept rising and so many people were in the public system
anyway, they just went out and banned private coverage
altogether.
That is the path that I fear Congress is starting to walk
down with this draft legislation, sir.
Mr. JOHNSON. I agree with you.
Thank you, Mr. Chairman.
Chairman RANGEL. It is amazing how the language in
opposition to this bill is basically the same language that was
heard with Medicaid and Medicare: Keep government out of it.
And now it has proven to be one of the most efficient delivery
of services.
No one understands this problem better in the Congress than
Dr. Jim McDermott. And I thank him for the great contribution
he has made over the years, and I know he is thankful that the
moment has come to change the inequities. Dr. McDermott.
Mr. MCDERMOTT. Thank you, Mr. Chairman.
The President has said that cost is the real problem here.
Access is much easier to deal with than controlling costs. And
I want to talk to you, Dr. Quentin Young, who I have known for
not the whole 61 years you have practiced medicine in Chicago,
but certainly a whole lot of them.
And one of the things you said was that you thought that
this plan that we have before us would put the sick people in
the government option and leave the healthy ones for the
private insurance industry.
Now, we built in guaranteed access so anybody can get into
both a private plan or the public option. We said there can be
no exclusion for preexisting conditions in either the public
plan or the private plan.
How do you think the insurance companies will push the sick
ones, as they do presently--how are they going to get around
this bill and push the sick ones into the government plan and
leave the healthy ones who pay premiums but don't get any
benefits?
Dr. YOUNG. Well, the recent history, I mean, the last 20 or
30----
Mr. MCDERMOTT. Hit your button.
Dr. YOUNG. Thank you very much. The recent history of our
national experience with private insurance is the answer to
your question. Private insurance has legendary skills in
turning any system to their selective advantage. Speaking of
Medicare, a superb achievement and still the brightest star on
the insurance horizon in this country, nevertheless it has been
compromised by the insurance skill, sometimes aided with
congressional bills.
They have such things as Medicare Advantage. As you are
probably aware, the President has said he wants to end that
scam, which briefly creates a separate pool with a 12 percent
subsidy per capita. And the insurance companies have
dramatically been able to attract people who are under the
Medicare average as incoming patients, and people when they
leave the plan remarkably are much higher than average and they
go to the public side.
I would describe Medicare Part D, the so-called drug
benefit, which is a catastrophe for people who need to buy a
lot of drugs, as an example of the big PhRMA creating its
tentacles around a much-needed program. It was tragic that
Medicare enacted in 1965 was a spectacular breakthrough, but
remarkably it had no drug benefit. And I think that was an
industry that was able to influence the legislation at the
time.
So my answer, Congressman, is that they are good at that
and they will continue to do it. And I want to expand a little
bit in answer to your question. The problem in this country is
not government medicine. It is private insurance. And private
insurance isn't health. It is a business. And it is remarkably
skilled. Everybody knows we are talking about one-sixth of the
whole gross domestic product.
And let me give another figure that doesn't seem to be
coming up here. We are spending twice per capita, something in
the neighborhood of 8,000 per person in this country, for our
health system, despite the fact that we have, as we all know,
45 going on 50 million uninsured.
And I hasten to add, before somebody adds for me, that that
doesn't mean they don't get any care. Indeed, they frequently
get very expensive care in the ER. But the point is they are
not covered. And 50 million more are underinsured.
And we have--the other nations of the world, which I am not
their representative but I have to defend them, the
achievements of everyone in the countries that have been
revolved for government medicine are spectacular and much more
popular with their nation.
The Canadians, for example, when polled, 96 percent prefer
their system to the American system, which they know. The
border is very porous. As Congressman Levin would point out,
they know what they have and they know what we have, and they
like theirs 96 to 4. People have pointed out 4 percent is the
same percentage of Canadians who think Elvis Presley is alive,
but that is not----
Mr. MCDERMOTT. Can I get you to focus on one other issue?
Dr. YOUNG. Please.
Mr. MCDERMOTT. And that is how does a single payer system
control costs? Dr. Gratzer says that the Canadian system
ultimately was--the costs were getting out of control, and so
ultimately they passed the umbrella law in Canada to control
costs.
Dr. YOUNG. Well, I think single payer is the only
arrangement for payment that allows you to control costs. As is
well known, there are great variations in activities of
doctors, good faith and not in good faith--too many operations,
not enough operations, depending on the incentive.
The single payer system, because everything is paid for
through a single payer, identifies doctors' practice patterns.
And that is used as a guide to best practices, not Big Brother
standing over you repeatedly saying, you can or cannot do this.
Usually that is ascribed to the British system, erroneously or
dishonestly.
But when you have control of all the transactions, which is
by definition what a single payer system does, you can see
abnormalities. And there are, Congressman, huge variations in
this country that can't be explained rationally by the various
public health areas of this country. I think there are 11 of
them.
There are variations in, for example, hysterectomy, as
three is to one. Now, some may be doing too many; some may be
doing too little. But best medical practice has to be sought.
The single payer system allows you to identify these patterns.
And the great tradition of medicine, going all the way
back, of using experience to define behavior can be implemented
because you have the knowledge. In a multi-payer system with
the variety of inhibitions and other distortions of
utilizations, you don't know.
And as a result, we American people don't--despite the fact
that yes, ours is the best in the world when you can get it,
there are tens of millions of people that can't get near that
best. And that is why we are here and you are here.
But I want to, if I may, as an extension of my answer, end
the myth that private is good and public is bad. It ill
behooves the Congress, who enacted it, to neglect the
superiority of the NIH, for example, the best system in the
world for stimulating research, and is the reason for America's
primacy in biomedicine.
And indeed, the VA system, which now sets the standards for
quality for the whole world, and I would add military medicine,
with its mission defined, it is fantastic the achievements they
have been able--these are all government medicine. For the
naysayers, I would like them to find whether they want to
abolish VA and Medicare.
And so my experience, those 61 years you were talking
about, by and large the private control of finances is bad. I
can't name a single improvement that is a result of putting
health insurance in the hands of the private sector.
So I would plead that this Committee have an orientation
that seeks to bring health care to all the American people at
the best price, and even if it means bucking against right-wing
criticism of government medicine. Thank you.
Mr. MCDERMOTT. The Chairman is being more than generous.
Dr. YOUNG. I know. And I have been generous, but I have
been outnumbered.
Chairman RANGEL. Thank you. Thank you so much for your
contribution.
The Chair would like to recognize Mr. Ryan, who has
authored a bill to attempt to deal with this problem.
Mr. RYAN. Thank you, Chairman.
A couple of points I think we ought to dig into in this
Committee. And hopefully we can have some more hearings on this
because this is obviously probably the most important subject
we are going to tackle here this year.
The one point is, we oversee Medicare in this Committee,
and the trustees have just told us that Medicare right now has
a $38 trillion unfunded liability. So we can talk about how
efficient that system is. The system is going broke in just a
few short years. And if we want it to be there for the
generations alive today, we would have to literally set aside
$38 trillion invested at Treasury rates in order to pay the
bills for Medicare.
And the question we ought to be asking ourselves is: Are we
creating a new program, a new entitlement program, that will
rival the size and liabilities of Medicare? And what is
unfortunate about this debate is we are not going to get scores
outside of the 10-year window.
Yes, we will probably in a number of days get scores from
CBO and Joint Tax showing us what this thing will cost in 10
years. But they are not going to give us--and we have already
been asking for them--they are not going to give us scores of
what it will cost in the out years.
So I think it is just a point worth making because we ought
to know what kind of liabilities we are creating here and what
kind of new entitlement this will be in its size.
The second point, and I would like to get into something
with you, Dr. Gratzer, is I will take my colleagues at their
word that their goal here is not to create a Canadian-style or
a British-style system. Unfortunately, just looking at this
bill from an actuarial standpoint, from a mathematical
standpoint, I believe it is impossible to conclude that this
does not create such a system. And here is why we believe this
point.
No. 1, a public plan as designed in this bill has such a
stacked deck, has such a huge competitive advantage over the
private sector, it is impossible to conclude that the private
sector won't buckle under this kind of a confrontation.
What are the advantages? Well, the public plan doesn't have
to pay taxes. The private sector does. The public plan gets to
dictate the prices it pays to providers. We are going to cut
Medicare by, I don't know, $4 or $500 billion, and then pay 5
percent above that for 5 years, and then Medicare after that.
The private sector doesn't get to dictate its prices it pays to
providers.
And the other issue is the private sector does have to have
capital reserves set aside. The public plan doesn't have to do
that. The private sector does have to pay for and account for
its employees and their benefit and wage costs. The public plan
does not have to do that.
So there are enormous, enormous advantages. It is kind of
like my 7-year-old daughter's lemonade stand competing against
McDonald's. It is an impossible stacked deck whereby actuarial
firm after actuarial firm, expert after expert, are telling us
what is going to end up happening here is the private sector
will not be able to compete with the public plan.
And remember, the people who decide for the most part who
gets health insurance in this country are the employers.
Individuals don't choose this. Employers choose this. And most
people in this country like their employer-sponsored care. Most
people would like to keep what they have.
But the talking point, that if you like what you have, you
can keep it, just doesn't add up when all these actuaries are
telling us, an employer faced in a situation of ever-higher-
growing prices for their private insurance, because of the
overwhelming advantage of the public plan, will be faced with.
Pay the 8 percent payroll tax that is indexed at inflation,
which is predictable--they can budget for that--or pay this
unpredictable, ever-higher-growing private health cost. And
what are all the employers telling us? They are going to dump
their people on the public plan. And that is what the actuaries
are telling us. All of the actuaries are telling us this.
So it is not a number. It is not a measure of whether it is
going to be 120 million people or 64 million people or 23
million people. What it is is people are going to get dumped
onto the public plan, and we will have a new program which will
rival the size and liabilities of Medicare.
And my question, Dr. Gratzer, is this: If the intention of
this thing is not to have Canadian-style health care today, the
clear trajectory of this plan is that it will be Canadian-style
health care tomorrow. And the authors of this claim that this
is better to get our hands on health care costs.
So in the out years, we are worried. Medicaid, Medicare,
and then this new entitlement which I don't think we have a
name for this yet, will be so expensive we are going to have to
contain costs in order to, you know, make sure that the next
generation doesn't get swallowed up in debt and high taxes.
And my question is this: Under those models, do they
contain the costs? I mean, we know rationing is the method of
containing costs. But even with all of this rationing, even
with all of these waiting lines, do they actually achieve the
cost containment that these goals are intended to achieve?
Dr. GRATZER. Congressman Ryan, you ask a great question.
Undoubtedly we are concerned about cost inflation of the
private system in the United States, but also the public system
in the United States.
I would point out, though, when you look across western
Europe and you look across Canada and their experiences with
public health care, one finds cost containment isn't as great
as one would assume. I will throw out some numbers, and you
will find them also in my written statement.
Ontario's health budget is growing by 7 percent over the
next 3 years, Quebec 6 percent. In Britain, I will say 60 years
of data where health inflation has outstripped real inflation
by 3 percent, on average, every year. In Ireland, my last
statistic, one finds that they actually had de-inflation this
May of--they had 3.5 percent de-inflation this May, and yet
health costs are growing at an annualized rate of 4.5 percent.
My friend Shakira Delmia has done 30 years' worth of
analysis, and suggested at best a mixed picture on public
containment of costs. But you still have the rationing, the
waiting lists, and the lack of availability of modern care.
Mr. RYAN. Medicare is at 6\1/2\, Medicaid is at 7\1/2\.
Thank you.
Chairman RANGEL. Well, I think all of you have done a
pretty good job of trashing the health care system in Canada
and in Ireland and in Europe generally. But by unanimous
consent, I would like, Mr. Ryan, to introduce a solution for
the record because one of the things that we need is to find
out, if not this bill, what?
I would like to recognize Mr. Neal. But before I do, I want
to make it clear that we have a vote on the floor, and the
Ranking Member and I agreed that to the best we can, we will
keep the Committee going and rotate. And since this is a single
vote, those who want to go and come back, this would be the
right time to do it.
And Mr. Ryan, would you like to start your testimony or
vote or whatever?
Mr. NEAL. We share a similar background, Mr. Chairman,
but--Mr. Neal and Mr. Ryan. You called me Mr. Ryan.
Chairman RANGEL. I am so sorry.
Mr. NEAL. I was just about to give him a bad time, and he
left.
[Laughter.]
Mr. NEAL. Thanks, Mr. Chairman. I find it ironic that our
friends on the other side all of a sudden profess this newfound
interest in adding to the deficit. Their Medicare legislation
in 2003 added $500 billion to the deficit. Two point three
trillion dollars of their tax breaks for wealthy people were
added to the deficit.
The war in Iraq is headed toward a trillion dollars added
to the deficit, much of it borrowed money. And for them to
complain today all of a sudden with this newfound conscience of
debt spending I think falls by the wayside under the magnifying
glass of critical analysis.
Let me, if I can--because a couple of you have mentioned
Massachusetts--let me give you the framework, as an architect
might. The Massachusetts plan was proposed by a Republican
Governor who launched a campaign for President in some measure
based upon that plan; a legislature that is--I think there are
four or five Republicans in the State Senate. There are 19 in
the House of Representatives out of 160. But the Governor did
it with a Democratic legislature.
The plan was blessed by Senator Kennedy, whose credentials
on that I think are unrivaled in the Congress. And there have
been some bumps. I don't think anybody would argue with that
notion. However, it has been well met by business, labor, and
advocates across the State. And in fact, the argument might be
made, I think with accuracy, that the uninsured part of the
population has decreased dramatically, the suggestion being
that there is some skin in the game for everybody.
So with that, Ms. Pollitz, could you perhaps give us some
thoughts about that plan based on your knowledge?
Ms. POLLITZ. Well, John and his colleagues have studied it
far more closely than I.
Mr. NEAL. Let me go back to Dr. Holahan, then.
Ms. POLLITZ. But it is a terrific success, what has been
accomplished in Massachusetts. It is 3 years in the making.
There are certainly still some growing pains. Not every problem
has been worked out, but the State has achieved a coverage rate
now of 98 percent.
Employer-sponsored coverage has increased. Individual
responsibility, individual purchase of coverage, has increased.
They have expanded public programs and created new subsidies
for private coverage similar to what is in the draft bill
today. People are overwhelmingly supportive of the program and
are willing to do their part, and have really kind of stepped
up to make it work as well as it has, which is most impressive.
Mr. NEAL. About 97 percent of the people of Massachusetts
are covered right now.
Dr. Holahan, would you comment, please?
Mr. HOLAHAN. I think Karen covered the most important
things. I think there is a set of surveys that have been done
annually that have tracked what has happened, and they continue
to show reductions in out-of-pocket costs and burdens that
families are facing and improvements in access on almost all
measures.
And so I think in addition to gaining coverage, I think on
other things that you care about in terms of measuring the
success of a program, Massachusetts has done quite well.
In the early years, there was a jump in costs that was
alarming to a lot of people. But a lot of that was explained by
the fact that sicker-than-average people were the first to
join; that the people who were fully subsidized as opposed to
partially subsidized were the first to join; and they
miscounted the number of uninsured low-income people they are
dealing with because of survey issues.
But I think that has generally slowed down. I think the
State does face long-run cost issues that they are going to
have to wrestle with. But, you know, on balance it has been a
big, big success.
Mr. NEAL. Thank you.
Dr. Gratzer, would you list Medicare as one of the maybe
top 20 legislative accomplishments in American history?
Dr. GRATZER. I think Medicare did an enormous amount to
help elderly Americans.
Mr. NEAL. Would you say that it was successful?
Dr. GRATZER. I would say that aspects of it have been
enormously successful, though there are cost problems today and
there are cost problems around reimbursement and other aspects.
Mr. NEAL. During your medical training, did you receive any
reimbursement under graduate medical education from Medicare?
Dr. GRATZER. I actually did my training in another country,
sir, so the answer would be no. But many of my colleagues did,
absolutely.
Mr. NEAL. Would most of your colleagues professionally have
received some benefit under Medicare under GME?
Dr. GRATZER. I would suspect all of them did.
Mr. NEAL. I didn't say that. I said would most of them.
Dr. GRATZER. I suspect all of them, yes. I agree.
Mr. NEAL. Okay. How would you handle the GME portion of
Medicare now?
Dr. GRATZER. I think that is a topic for another day. And I
am, to be blunt, not a Medicare expert. But I would suggest
that both in the public system and the private system, we have
enormous difficulties.
We see costs rise in both systems, costs that are
unsustainable.
Mr. NEAL. I acknowledge that. My point is that Medicare has
been transformative. It has changed the way tens of millions of
people have lived their lives.
Dr. GRATZER. Absolutely.
Mr. NEAL. Overwhelmingly for the better, I think you might
acknowledge.
Dr. GRATZER. Absolutely.
Mr. NEAL. Thank you, Mr. Chairman.
Chairman RANGEL. I would like to leave on that positive
note, but Doctor, you have made it clear that we haven't
impressed you with our health reform plan. Has there been any
Republican plan offered to you to study that you would think
could do a better job?
Dr. GRATZER. I think there are a few proposals out there
that I like. And I don't think that there is one plan that
necessarily excites me. I think plans, particularly bipartisan
plans, that look at prevention and wellness excite me.
Chairman RANGEL. Could you tell me the author? Is the
Republican leadership supporting any one of these plans that
you find to your liking?
Mr. NEAL. There are aspects of different plans I like. I
mean, Congressman Ryan's plan about a tax credit I think has
some worth in it. I think on the Senate side, Senators Bennett
and Wyden have some exciting ideas that they are conveying.
Chairman RANGEL. Well, with all due respect to the Senate,
I really was trying to think of the House of Representatives
because right now we don't have much competing in terms of a
health program before us, even though we are getting more than
our share of criticism.
So since you and I are from New York, if in the course of
your thinking that you think there is something that we could
improve upon, I look forward to meeting with you in New York
and see what we could do.
Dr. GRATZER. I would be excited to draft something with
you. But as I suggested before, I think we need some policy
reform around health, not just health care. I think we need
some regulatory reform to increase competition on insurance
companies. And I also think we need some tax reform that
doesn't--a system that won't discriminate against the self-
employed and the unemployed.
Chairman RANGEL. That goes unchallenged. The thing is, how
do we get together and do it?
Mr. Linder, thank you so much for your patience, and I
welcome the opportunity to allow you to ask questions.
Mr. LINDER. Thank you, Mr. Chairman.
Ms. Pollitz, you referred to the Massachusetts model being
quite a success. Still have some problems to be worked out. The
States' overall costs on health programs have increased 42
percent since 2006. For an individual earning $31,213, the
cheapest plan in Massachusetts can be $9,800 in premiums and
out-of-pocket costs.
The longest wait times in Boston to see a physician, almost
50 days. Double the costs of--double the time of Philadelphia.
The government-run Medicaid plan, MassHealth, denied the
highest share of medical claims in the State, four times more
than the private plans denied.
It has not reduced the rate of adults seeking non-emergency
care in an emergency room. Both before and after reform, 15
percent of adults and 23 percent of low-income adults sought
care in an emergency department.
Is that a success story?
Ms. POLLITZ. I think, Congressman, Massachusetts has been a
success story and they clearly have not solved all the
problems. Massachusetts is unique, I think, from most other
States. They have always had, even prior to reform, very, very
high costs.
They have always had a particular shortage, I think, of
primary care physicians. Many of the best medical schools in
the country are located in Massachusetts, in Boston, and many
of the best medical schools around the country don't even have
a department of family medicine. They are just kind of too good
to train primary care physicians.
So there have been some structural problems that are
throughout the Nation that have been particularly intense in
the State of Massachusetts for a long time, even leading up to
reform. And they still have not all been addressed.
I was on a panel yesterday with someone from the
Commonwealth Connector, who talked about how tackling the cost
problem is particularly difficult in that State, that the
Boston area in particular is one where there has been not only
a high concentration of insurers but also a very high
concentration of providers.
And the competition between, you know, concentrated
providers and insurers you would think would be kind of, you
know, King Kong vs. Godzilla and someone would be lying on the
ground at the end, but that is not the case.
Instead, the high prices are demanded by the providers and
just passed through by the insurers. And they haven't yet been
able to get a handle on that. And what she testified yield was
that if there were a public plan option that were available in
addition to the mix of private plan options that they have made
available, that that might begin to change.
Mr. LINDER. Let me comment just briefly. But first of all,
Dr. Gratzer, do you have a comment on that?
Dr. GRATZER. I just want to add, you know, if you are
suggesting that costs haven't been contained in Massachusetts,
even she has acknowledged that. I will just throw out a few
figures in terms of the rise in health insurance premiums
between 2007 and 2009.
In Massachusetts, 7.4 percent, 2007; 8 to 12 percent, 2008;
and 9 percent is forecasted for this year. Outside of
Massachusetts, 6.1 percent, 4.7 percent, 6.4 percent for those
same years.
I would point out for a family of four in Massachusetts, a
health insurance plan now costs almost $17,000. Nationally, it
is closer to $12,500. Massachusetts has in no way, shape, or
form contained costs.
There are successes there, particularly, I think, for the
self-employed and those in the small business coverage pool.
But yes, costs have just continued to rise.
Mr. LINDER. Thank you. I want to comment on the public
plans. We have had testimony before this Committee in the past
that the typical small business spends about 12 percent of
their payroll on health care costs. Some of the bigger
companies with Cadillac plans spend as much as 14 to 18 percent
of their payroll.
We hear a lot of talk about choice, options. And the
President says, if you like your program today, you know you
will have to give it up. But we don't have--our citizens don't
make these choices. Their employers do. And if the employer can
pay 8 percent instead of 14 percent, my guess is he is going to
put the people on--in fact, that is what they tell us. They
will move their people to the public plan, and there will be no
choices left at all.
I don't know why this is considered such a good option. Dr.
Gratzer.
Dr. GRATZER. I agree.
Mr. LINDER. Thank you all. Thank you, Mr. Chairman.
Chairman RANGEL. Thank you.
The Chair recognizes Mr. Becerra for 5 minutes.
Mr. BECERRA. Thank you, Mr. Chairman. And I don't know if
these charts are ready or not, Mr. Chairman, so I think I will
just quickly run through them.
But in something Dr. Gratzer said earlier, I wanted to just
give him some food for thought. I am sure he is aware of this
already because he mentioned Canada and Great Britain.
I am looking at a chart of the infant mortality rates of
the leading industrialized countries of the world. And as I
look at this chart--I don't know if we have it available, but
this, CRS-54, if it could be put up if we happen to have it; I
don't know if we do--the industrialized country with the
highest infant mortality rate of those industrialized rates,
Turkey.
After Turkey, Mexico. After Mexico and Turkey is the United
States. Well above Canada, well above the United Kingdom in
terms of the rates of infant mortality, in other words,
children, babies, who die early. So our infant mortality rate
is still very high compared to the two countries you rail
against, Canada and Great Britain.
When you take a look at the deaths from medical errors per
100,000 people in the country, the countries with the worst
record of having people die from medical errors are Greece,
Australia, and in third place, the United States, well above,
once again, the United Kingdom and Canada.
And so once again, we seem to be doing worse than Canada
and Great Britain when it comes to the deaths that occur in
this country simply as a result of medical errors.
When you take a look at mortality rates, how long do people
in our countries, respective countries, live, once again
comparing these industrialized countries, you take a look at
the worst mortality rate--or, excuse me, life expectancy rate
of people.
Turkey is least, has the lowest rate. So their average life
expectancy at birth is 71 years. There you see the United
States at 77\1/2\ years. Guess what? Once again, the United
Kingdom does better in letting people live longer than we do.
And guess what? So does Canada. And so--way up here. Canada is
way up here. The U.S. is way down here. And so perhaps there
are reasons to rail against what Canada and Great Britain do.
But I have to tell you, if you want to live longer, you
want to have a better chance of living when you first are born,
or you want to make sure you don't die from some basic medical
error, you may be better off living in some of these other
countries.
That is why, rather than come with a Canadian model or a
Great Britain model for American health care, we are coming up
with a uniquely American solution to that, which offers choice.
To the issue of choice, I guess it is in the terms of the
private for-profit health insurance companies because you seem
to be saying it is good to have competition so long as it is
only on the terms that the private insurance companies wish to
have, but not to have it on an equal basis business.
Because we talk about the fact that there are price
controls. Medicare, you said, Dr. Gratzer, is price control. I
would tell you that anybody who has a private health insurance
company insurance policy cannot go in and negotiate with that
insurance company on what they wish to pay for a doctor or
hospital. There are controls that are put in place by those
insurance companies that doctors have to accept, hospitals have
to accept, and certainly the consumers who asked to have those
insurance policies.
So I guess it is all in the definition, as I think the
Chairman tried to say with regard to the definition of what is
fair. I think most of us are going to try to make it so that it
is not you. It is not me. It is certainly not a private health
insurance company that is there for profit. And it shouldn't be
the government who determines your choice as a consumer. It
should be the consumer's choice.
So if you have a lot of different options where the
consumer chooses which plan to select, then it makes no
difference. If you have an overly burdensome government plan,
as you would like to describe it, or if you have a very abusive
private health insurance plan, consumers won't have to go in
that direction. They can go anywhere they want.
And so no one need fear being dumped, as some would say,
into any particular plan because it is not anyone's choice
where to send that consumer but the consumer's. That is
hopefully what this unique American solution to health care
will provide us.
But Dr. Holahan, I wanted to see if I could ask you one
question. With regard to this choice, can you have real choice
when you have a private sector insurance system where in most
geographical areas of the country there is very little choice
for consumers because most areas of the country only have one
or two health insurance providers to begin with that offer
coverage to Americans.
And can you really have choice if you shackle, as I think
Dr. Gratzer would do to the public health insurance plan, the
opportunity to compete on a level basis, no advantage to the
public health insurance option?
Mr. HOLAHAN. I think that is a good point. In many parts of
this country, there really is only one choice.
Chairman RANGEL. Doctor, I hope you might be able to submit
your answer in writing to the Committee. The gentleman from
California's time has expired, and we have a very long, long
day ahead of us.
The Chair would like to recognize Ms. Brown-Waite from
Florida for 5 minutes.
Ms. BROWN-WAITE. Thank you very much, Mr. Chairman, and I
thank the panelists for being here.
When we look at the Ways and Means Committee, you would
think that we would be looking at ways and means to pay for
this, but when subtitle D says, ``to be provided,'' I just
wanted to list some of the suggestions thus far and get your
reaction to them, if anyone on the panel wants to jump in. One
is tax your employer for providing health insurance; two, tax
your employer for not providing health insurance, tax you for
owning health insurance, tax you for not owning health
insurance, tax you for spending your money on health, tax you
for saving your money for future health-related expenditures,
tax you for drinking soda and other sweetened beverages, tax
you for having an alcoholic beverage, tax you for making
charitable contributions, tax mortgage interest payments,
increase personal income taxes, energy, pollution tax as a part
of the cap and trade taxes, increase taxes on American
companies doing business overseas, increase taxes on domestic
oil and gas production, raise taxes on oil or natural gas
obtained from the Gulf of Mexico, raise taxes on domestic oil
refineries, raise taxes on drilling equipment, raise taxes on
prescription drugs, increase taxes on dividend income, and just
last night I put--I have about eight more. I will not go
through them, but I can just tell you that Americans right now
in this economy are very concerned. Businesses in most of our
districts are having their lines of credit called, and when you
are talking about this kind of additional tax to cover this
kind of health care when estimates are that if this bill is
passed, about 120 million Americans will lose their health
care, I do not see where this is a win/win situation.
I would ask--and I apologize, I do not--Ms. Pollitz, I will
just go from one end of the panel to the other end because I
obviously will run out of time, I would like to have your
reaction to this?
Ms. POLLITZ. Actually, if you would not mind,
Congresswoman, I would defer to Dr. Holahan. I know they are
doing some research on options for funding health care.
Ms. BROWN-WAITE. Okay.
Mr. HOLAHAN. Well, that was a pretty amazing list. I think
some of those things have to be on the table. I think that what
we call sin taxes, I think a cap probably starting at least at
a high level on the employer exclusion and some of the other
things that you mentioned. And certainly we should exploit all
the possibilities for savings that we can, including trying to
reform the way we deal with chronic illness.
I just want to make a point because the issue of the cost
of reform has come up several times. There is a huge cost if
you do nothing. We published a paper about a month ago called,
``Health Reform: The Cost of Failure.'' If there is nothing--no
reform, the number of uninsured could go up into the mid-60's,
65 million roughly in the worst case. The employer-sponsored
coverage will drop quite a bit. The number of people going on
Medicaid will expand, that is a cost to government. The number
of uninsured will mean more uncompensated care that will have
to be financed.
Ms. BROWN-WAITE. Sir, did you miss the part about 120
million will lose their coverage under the proposed plan?
Mr. HOLAHAN. No, that is not possibly right. That is
ridiculous.
Ms. BROWN-WAITE. That is not possibly right?
Mr. HOLAHAN. No, it is ridiculous.
Ms. BROWN-WAITE. You think it is ridiculous? Well, sir, I
really think that employers will be dropping their plan because
the 8 percent may be----
Mr. HOLAHAN. But they offer it now and they pay no penalty,
right?
Ms. BROWN-WAITE. If they offer it now, there is still a
question about if someone is covered by the spouse's plan and
also the percent that they cover of the employee's plan. So I
think we need to be very careful where we go with this.
Dr. Gratzer, I would like to hear your comments?
Dr. GRATZER. With the 120 million figure, by the way, that
you just quoted is not something, as you know, out of a right-
wing think tank or plucked out of thin air but was a Lewin
Group analysis.
I would also point out that Professor Jacob Hacker, who
really came up with this idea of a public plan auction, he
called it Medicare Plus, as you will recall, in fact had worked
with the Lewin Group about 10 years or so ago as he designed
this specifically to pluck more than 100 million people out of
the private insurance market. So to suggest that that estimate
is wrong, it is designed to compete with and overshadow
eventually the private system.
Now, as for your list of taxes, I would simply say that we
are all concerned about health costs. It is curious how much
more we need to spend and how much more we need to tax to get
those costs under control. Needless to say, I share your bias,
we need a more focused plan, a plan that directly helps the
uninsured who need help, and a more innovative plan, for
instance with uncompensated care, trying to get over to the
States to let them innovate. But certainly spending so much
money that even Paul Klugman says, ``Well, it is not as much
money as the Bush tax cuts,'' is hardly a great plan for us to
endorse.
Ms. BROWN-WAITE. Thank you. I see my time has elapsed. With
that, I yield back my time.
Chairman RANGEL. The Chair recognizes Lloyd Doggett of
Texas to inquire.
Mr. DOGGETT. Thank you, Mr. Chairman. Just picking up right
there, we are spending over $2 trillion on a health care system
now that leaves many Americans out, and we are proposing to
add, in order to ensure more Americans are covered, another
$100 billion a year to that system and to finance much of that
by squeezing some of the inefficiencies out of the existing
system. That is hardly spending gone wild.
The notion that compassion is a distinguishing
characteristic of the American health care system is a fantasy.
For those people who lack insurance, they do not find much
compassion in our current system. There is an estimate that
22,000 people died in America last year because they did not
have health insurance. The notion that delay would be a feature
of our system because of the changes we propose in this
legislation ignores the fact that delay is a major
characteristic of the current system.
The American Cancer Society has estimated that an
individual who has cancer and no insurance has a 60 percent
greater chance of dying in America today because of the
``compassion'' that is in the American health care system.
And, of course, one of the hopes that we have with a public
plan is to squeeze some of the inefficiency out of that system,
which has more people in the American health care system today
who are not providing health care themselves directly than
those who are providing health care and a significant number of
people who spend every waking hour of their day trying to find
a way to deny health care to someone else.
Recently, we had testimony here in Congress that three
major insurance companies continue to engage in the practice of
recision, a practice where people who are paying their health
insurance premiums incur substantial bills and find out that
their insurance company has dropped them. That is
``compassion'' in the American system.
As far as independence is concerned, I am reminded of a
conversation I had out in south Austin with my constituent,
Laura Stager, who said, ``My husband is entrepreneurial and
wants to own a business, but he tells me it would be
irresponsible for him to form his own company because we would
lose our health insurance.'' That is the independence of
forcing people to stay where they have insurance even though
that may not be the most productive use of their resources and
their talents.
I had another constituent, Mark Seefgan, talk to me about
what is happening to his small business and the difficulty of
dealing with a huge bureaucracy within the insurance industry
that seems to be bigger than anyone could imagine in Canada or
anywhere else in terms of the challenges to a small business
and how it is hard to explain to his employees that they just
got a $200 increase in their pay but Blue Cross took all of it
in increased health insurance premiums.
Are these problems, Ms. Pollitz, that my constituents face
in Austin, Texas and in other parts, do you find the same kind
of problems in other parts of the country?
Ms. POLLITZ. Yes, sir, and that is how the private
insurance market competes. That is not compassion, that is
competition in the private insurance market. I was at that
hearing on rescission last week, and just yesterday, the
Governor of Connecticut vetoed a bill that was passed in her
State legislature to limit the rescission practice. And the
reason she vetoed it was she said that would raise premiums,
and so we need to let that practice continue because that is
what keeps health insurance cheap.
Clearly, we cannot continue to let health insurance compete
in that way. There has been a lot of talk about a level playing
field, we do not want to be on that playing field anymore. In
that playing field, the house wins every time. And we need to
compete on the basis of compassion. We need to put a plan in
place that is oriented toward patients and not profits and
stimulate the market to compete in that direction.
Mr. DOGGETT. Dr. Holahan, if we just pour more money into
the system that we have now, that permits rescission and this
kind of activity, and do not have an effective, meaningful
public plan, will we really have any reform of our health care
system at all?
Mr. HOLAHAN. I think you could have some but the kind of
insurance reforms that this bill calls for, it would improve
things a great deal. I think the bigger problem is what I talk
about in my testimony, the lack of true competition. And if you
go back to the Massachusetts problem, the costs are growing at
levels that they are not going to be able to sustain but it is
because of a very dominant hospital system, a very dominant
insurer, and the way they negotiate with each other. And that
problem exists around this country.
Mr. DOGGETT. Well, what is it with all these people who are
always here telling us in the rhetoric, ``Government cannot do
anything efficiently, government is broken,'' that they fear
something like a Medicare plan that does not pay Medicare rates
as one alternative to compete with these private insurance
companies?
Mr. HOLAHAN. I think it fails typically to recognize what
really goes on in the market. And the idea that we should not
have price controls because the private system can negotiate
all this, that is what we have today. If you are in one market
and you are a strong insurer, and there are a lot of hospitals
with very little leverage, you get one outcome from those
negotiations. If the opposite is true, that you have a strong
hospital and many insurers or an insurer without enough
leverage, you get a very different outcome. Negotiations simply
are not working unfortunately. As an economist, I would prefer
to have the market work. No one can say that these markets meet
the conditions that you expect to get, the efficiency that you
would expect to get out of competitive markets. It just does
not exist.
Mr. DOGGETT. Thank you.
Chairman RANGEL. Thank you. The Chair recognizes Mr. Davis
of Kentucky.
Mr. DAVIS OF KENTUCKY. Thank you, Mr. Chairman. Just one
comment that Dr. Young made before going on with the questions,
he made the statement that the only way to control cost is a
single payer system, well, the mathematics simply do not work
on that. We have proven that in defense contracting here in the
United States, that the single contractor will ultimately drive
costs and overhead and likewise the former--our former
opponents of the Cold War learned that single State systems did
not tend to deliver quality, they ended up limiting capacity.
I am very concerned, and what I think many of us are really
struggling with here today is that we do not have the facts on
this bill, and we have been told this will be likely our only
hearing. And we are talking about entirely changing the
framework of health care in America with no debate of any
substance other than we think this is great.
This appears to be reform in name only because the actual
delivery cost drivers are not being touched at all. We are not
going to reform the CMS process and dramatically compress it,
which we could do to improve quality. We are not touching true
insurance reform on the process for how pooling is controlled.
And liability is not on the table at all, which drives a huge
portion of costs.
Do any of you have any idea how much this could cost, even
an approximate number, a range? Ultimately, we have to pay for
this, nothing is free, and since you are not going to actually
tamper with the system because you are convinced that the CMS
is to make Medicare basically the dominant market player here,
how are we going to control costs? We are mandating increases
in taxes, and we are mandating reduction in payment to
providers without dealing with the core engine. How much will
it cost?
Mr. HOLAHAN. Are you asking us to make a cost prediction?
Mr. DAVIS OF KENTUCKY. Yes, just as a group. You all have
advocated this, I am just kind of curious how you actually pay
for it? I think the talk of compassion also has to be done with
realism. In Greek it means to ``suffer with.'' And I think that
if we are going to suffer with and come alongside the thousands
of people, who many of us help in our offices, we have to get
down to a legitimate understanding of the nature of the cost.
Dr. YOUNG. Well, I will take a percent at that. Presently,
we have about a 38 to 40 percent add-on by the bureaucratic
practices of the private insurance that add nothing to the
health care of the people, and indeed I think aggravates their
problem. Recovering that money in the single payer system would
be a giant step forward for cutting costs.
I would like to add to the list the Congressmen and women
have made, that we have two big increases in health care needs
and costs in the form of aging of the population and increasing
bio-technical skills, which are costly.
Mr. DAVIS OF KENTUCKY. Okay, I would like to reclaim my
time, Doctor, just because it is limited today. Still nobody
has actually answered the question with a number, and I believe
the reason we cannot answer the question with a number is there
are no true metrics that are framed. All of this at core has
been wrapped around the existing government system. Do any of
you know how many more Americans will be covered under this
bill when you actually factor in the millions estimated to lose
employer-sponsored coverage? Are there any numbers there?
Ms. POLLITZ. Mr. Davis, I am sorry, I am not a budget
estimator and I cannot answer those questions, but I would
suggest that there are very specific metrics in this bill and
that those should be--when the CBO finishes its work, they
should be able to give you----
Mr. DAVIS OF KENTUCKY. The initial CBO scoring on a sister
piece of legislation was well over $1 trillion for about the
first quarter of the bill. I am just concerned that you all
were propounding the benefits of this without laying out a true
cost before the American people. And I know many in my district
that would either lose coverage or not be covered in the
language that this is written.
Without the basic facts, how can you come here today to
support a bill and tell us it is going to lower costs and
increase access when those fundamental answers are not there?
That would be unacceptable in a business system. It would be
unacceptable from any type of appropriation from a contracting
standpoint too because of the precision that is required in
those areas.
Dr. Gratzer, do you have any thoughts on this?
Dr. GRATZER. Well, if you are advocating a CBO scoring
before you vote on it, I am on your side. I think we have to be
very cautious about this. I think that we can all agree there
are problems with American health care. On the other hand, (a)
I have significant issues with the way they are going about
reforming it. It is not just that the government plan would be
price controlled, but I do not see government's role as
providing competition in general to the private sector. I don't
particularly like my cell phone, but I do not think that the
goal then should be or the proposal should be that the Federal
Government create a new cell phone company to compete with
existing providers.
But, second, I think cost is a huge factor. And if you look
at some of the preliminary scoring, we are talking about well
over $1 trillion and still we would have uninsured and still
Medicare and Medicaid remain fundamentally the same.
Mr. DAVIS OF KENTUCKY. My fear, Mr. Chairman, is that this
legislation is actually going to hurt the most those who it is
designed to help based on the economic realities of this. And
with that, I yield back my time.
Chairman RANGEL. Thank you. But I would just like to make
it clear, and I think everyone is in accord, you cannot say how
much it is going to take to pay for it until we have the
Congressional Budget Office give us the numbers. And then we
will have to determine how we are going to pay for it, and we
are not prepared to do it for now. We are not going to ask you
to vote for a bill unless it is fully paid for.
Mr. DAVIS OF KENTUCKY. Mr. Chairman, may I respond?
Chairman RANGEL. Yes.
Mr. DAVIS OF KENTUCKY. Just respectfully I do not
understand how we can do a capital plan for the country without
actually understanding the magnitude of the capital required
before we begin to set priorities by effectively approving
legislation and then determining how to pay for it afterwards.
Chairman RANGEL. Your questions are right on point, but
there is no bill before us to mark up. And we will have answers
for you when we ask for your vote. Right now, we are just
trying to make certain that we perfect this. We would not dare
ask you to support something without knowing how we are going
to pay for it but this is not the forum.
The Chair recognizes the gentlemen from Dakota, Earl
Pomeroy--North Dakota.
Mr. POMEROY. Thank you, Mr. Chairman. The difficulty of
conducting even this hearing in the middle of all these delayed
votes I think is reflective of the fact that the minority
participation in trying to build a health reform package is
more focused on delay and disruption rather than making some
meaningful contribution. I am still frustrated that our meeting
last week was canceled, the joint bipartisan meeting to discuss
the architecture of the plan, because we were on the floor with
procedural votes.
Mr. BOUSTANY. Will the gentleman yield?
Mr. POMEROY. No, I will not yield. I have 5 minutes, and I
have all kinds of votes going on, I have to run and vote, so I
have to get my question in.
I think there is a contribution, I would say this to the
good doctor who was just seeking time, we want to make this
thing work. And we believe that the status quo has gotten out
of control cost inflation that is wrecking our health care
system and threatening our Federal budget. So especially I
would be interested in ideas, referenced for example by my
friend, Congressman Davis, in his questions, he alluded briefly
to CMS payment reform. So if you have ideas about cost
containment you want to put on the table, whether or not you
are for the final bill, I think these are legitimate ideas we
need to study carefully and include where they have merit. And
that would be a much better way to proceed than simply throwing
the usual lines of attack that this is on the one hand going to
cost too much, on the other hand, it is going to do too little,
and we are going to have rationing somewhere in between. This
is not helpful. Let's work together and build a good deal, and
let's focus, among other things, on system reform that contains
costs. I believe that that is absolutely critical.
Now, another thing my friend Mr. Davis said was he thinks
this bill is going to do too little to help those who need the
help the worst. On this one, I believe that he is completely
mistaken. The strength of the bill is going to be getting
coverage to those who do not have coverage, 45 million there,
and assisting at least as many, and maybe even more, that are
struggling mightily to keep their present coverage in place in
the face of rapidly rising costs.
One of the strategies by which premiums have been paid is
to shrink basically the coverage you are buying. And so it is
interesting that recent bankruptcy statistics show the high
number of bankruptcies caused by medical costs and the high
number of people in that bankrupt situation that had insurance
but the co-pays, the deductibles, the out-of-pockets in the end
proved too much to handle.
And so as a former insurance commissioner myself, I have
seen you paying more and more for less and less, more and more
for less and less and the health security of everybody, those
with insurance and without insurance, has been placed squarely
at risk.
Now, one of the things I believe Congress has done when
talking about health reform over the years is we focus on the
intermediary, the insurance layer, and we do not get right down
to cost drivers. And I believe we need to spend a lot of time
dealing with cost drivers.
Dr. Holahan, if I understand your testimony, it is that the
public plan option is a new competitive element in the
marketplace, not just to offer another insurance alternative,
but maybe they will be able to try some things that more
effectively give value to the consumers than the conventional
options. I think those that are opposing a public plan option
have to explain to taxpayers why we are going to put a major
investment into the system, a system that has out-of-control
cost inflation, and essentially not do anything relative to
trying to structurally add some opportunities for innovation.
Would you respond on that point?
Mr. HOLAHAN. Well, I think I could not say it any better
than you did, I totally agree with that. I think it is an
opportunity not only to gain control over the costs of care,
but to innovate, through a lot of payment and delivery system
reform, the development of medical homes.
Mr. POMEROY. There is a final point I want to get in before
my time elapses. I will ask Ms. Pollitz this one. There has
been some discussion about the level of delegation between
Congress and the executive branch relative to running, for
example, a Medicare program relative to payment reforms. So
when my friend on the other side of the aisle talks about CMS
payment reforms, possibly he is contemplating the idea that
there ought to be delegation of authority to the executive
branch, to CMS, relative to being able to initiate payment
reforms. What are your thoughts on that one?
Ms. POLLITZ. I'm sorry, sir, I cannot really comment on
that.
Mr. POMEROY. You are a long-term health expert with
experience in the executive branch yourself. I am surprised
that you cannot comment.
Ms. POLLITZ. I know there is interest in trying to remove
from the political process some of these important decisions so
that they are made on a more scientific basis, and I think
there may be some value in trying to accomplish that.
Mr. POMEROY. Thank you.
Chairman RANGEL. Mr. Boustany.
Mr. BOUSTANY. Thank you, Mr. Chairman. Dr. Gratzer, I am a
cardiac-thoracic surgeon who has 20 years experience, clinical
experience dealing with patients before coming to Congress, and
I appreciate your comments earlier about quality and
innovation, which have been really unique in medical history
worldwide. What we have seen in this country has been
tremendous development. The question is how do we most
efficiently use all that.
I think there are a couple of things missing in this
debate. First of all, the basic things we ought to be talking
about are access to a physician, a doctor/patient relationship
that is actually meaningful, that focuses on prevention and
screening built on trust. And, second, the cost issue. But what
has been missing in this debate are the real drivers of cost,
and it is at the level of the doctor/patient relationship
because you have physician behavior and you have patient
behavior. And this bill does not do much at all to address
either one of those. And, in fact, I would submit that the
bill, there are elements of this bill that will make that
worse.
Would you like to comment?
Dr. GRATZER. So you were a surgeon?
Mr. BOUSTANY. Yes.
Dr. GRATZER. I am a psychiatrist. We have nothing in
common. Look, I could not agree more with you.
Mr. BOUSTANY. Compassion.
Dr. GRATZER. Look, there are certain things we can agree on
no matter whether you are a Republican or Democrat or what your
political affiliation. One is that the doctor/patient
relationship should always be preserved, that it is the
building block of the modern health care system and should
always be preserved within any reform package. But I also think
you would agree that we spend in America and do not always get
results.
Again, I am not arguing that some of the medical technology
has not been extraordinary. You mention cardiac-thoracic, as
you know, death by cardiovascular disease has plummeted by two-
thirds in the last 60 years. And we have seen innovation time
and time and time again. But just because you go to a doctor
and there are new drugs do not necessarily mean that they are
better drugs. Just because you get a procedure does not mean
you needed it or it was well done. I think that goes back to
some of the things that Peter Orszag and others in the White
House are talking about that I agree with, that we need better
value. There is a smart way of doing that and a bad way of
doing it.
Mr. BOUSTANY. I agree and that is what is missing in the
debate.
Dr. GRATZER. Absolutely.
Mr. BOUSTANY. Because I think we are still at the 30,000
foot level. If I can reclaim my time for a moment, I was
listening to the testimony very carefully and, Ms. Pollitz, you
talked about a government controlling costs. Does Medicare
control cost?
Ms. POLLITZ. To some extent, yes.
Mr. BOUSTANY. It does not do a very good job, does it?
Ms. POLLITZ. Well, I think Medicare cost growth in most
years has been at or below that of the growth of private
insurance.
Mr. BOUSTANY. As my colleague from Wisconsin, Mr. Ryan,
pointed out, the looming insolvency of the Medicare Trust Fund.
We have serious Medicare problems that we need to address. And
so I think to pose a government option at a time when we are
dealing with existing government programs is at the very least
problematic.
A question, let's see, for Dr. Holahan. You mentioned
Medicare rates in the government plan. Do you believe that the
Medicare rate structure has caused distortions in the entire
reimbursement structure given that Medicare rates most of the
time do not cover cost of basic goods and services? And do you
advocate price controls extending beyond the provider side to
the suppliers of medical technology and devices?
Mr. HOLAHAN. Well, that is what we do today and the
government sets them, but by and large there----
Mr. BOUSTANY. So you do agree with price controls and you
want to see it extended into the----
Mr. HOLAHAN. Yes, I do not think you really have much
alternative in the current market so it will be some----
Mr. BOUSTANY. Thank you.
Mr. HOLAHAN. But if you had----
Mr. BOUSTANY. I appreciate your answer, thank you. Thank
you, sir. I have a question now for Dr. Young. Dr. Young, you
talked about a single payer using ``inherent cost control
measures.''
Dr. YOUNG. Yes.
Mr. BOUSTANY. Explain what that means?
Dr. YOUNG. Well, I tried to dialogue on that when I
described the single payer giving you a complete record of the
pattern of behavior of doctors.
Mr. BOUSTANY. So, in other words, you are having a
bureaucrat make a medical decision and in fact rationing care?
Dr. YOUNG. I don't think that is what I said. I described
the fact that you have the data that allow you to see patterns
of excess or under service, and that we certainly need
oversight. That is the great tradition of medicine.
Mr. BOUSTANY. Has Medicare done a very good job of that
because we have Medicare data?
Dr. YOUNG. I think it has done a terrific job. I think it
is the far best of the insurers in this country.
Mr. BOUSTANY. Could you comment on the use of the Society
of Thoracic Surgeon's database in cardiovascular disease?
Dr. YOUNG. I cannot help you, I am not acquainted with
that.
Mr. BOUSTANY. I would think as someone who is interested in
data and using best practices, this database has been
outstanding. It was developed in 1989 and has gone a long way
toward the improvement in care in cardiovascular disease. I
suggest you look at it.
I see that my time is up. I thank the Chairman.
Mr. STARK [Presiding]. Mr. Thompson, would you like to
inquire?
Mr. THOMPSON. Thank you, Mr. Chairman. And thanks for
holding today's hearing and for your effort to make sure that
this process has been open, and that we are able to work
through this to address all these issues. I just hope that the
ongoing procedural votes that we are taking do not further
disrupt our efforts here.
I want to first point out there has been a lot of talk
about this independent, nonpartisan study that associates some
pretty high prices with doing what most Americans believe we
need to do, and that is reform health care. And I think it is
important to note for the record that this HSI Network that is
supposed to be nonpartisan and independent is actually a group
that is--one of the participants is the modeler for Senator
McCain's health care and his work. And it has been pointed out
in the press that some of what they said had not always been
based in fact. There was one quote that I found interesting,
``Every candidate should say that these numbers were produced
by my experts, and they are my best estimates but they are not
exact.''
And if you look at what this same group, this HSI, did in
regard to modeling the health bill over in the Senate. They
were four times higher than what the CBO came in with. So I
think we need to know where these numbers are coming from.
And as they relate to our tri-committee effort, I think it
is important also to note that they said that the analysis has
no offsets, their analysis, there are no offsets in this
discussion draft. And that is just patently false. We know that
to be the case. And so if they miss that, it is hard telling
what else they missed.
Mr. CAMP. Would the gentleman yield for just a moment?
Mr. THOMPSON. On a positive note----
Mr. CAMP. Would the gentleman yield for just 30 seconds?
Mr. THOMPSON. I want to finish my thought here, then I will
get back to my other issues there. On a positive note, they did
say one thing that was interesting, and I will quote. They
said, ``In contrast to the Senate version of this bill, the
House version is more fiscally prudent and effective.'' Yes,
for 30--for 15 seconds.
Mr. CAMP. Just to say that CBO did not score the full
Kennedy bill, so the $1 trillion is really not the final
number. I just wanted to clarify the record on that. We are not
comparing apples to apples here.
Mr. THOMPSON. Reclaiming my time, and the numbers that we
are being told are nonpartisan and independent are not real
numbers at all, so it is a very, very biased study.
I want to get some policy changes that I believe will lead
us to better health care and at the same time drive down
prices. I would like to get the experts' opinion on this. I am
one who believes that an expansion of technology can really be
beneficial in all this and think that there is a lot more in
the area of telehealth that we could be doing that would
provide better outcomes and drive down the cost. And there are
a couple of examples that I have seen in my district alone. UC-
Davis does a virtual tumor board, and they have just example
after example of cases where they have helped people and driven
down the cost. They talk about one where they were able to
confer with a local team and diagnose a patient and a treatment
plan for a patient who was in an underserved area, doing this
through telemedicine. And they were able to treat it in a non-
invasive way at a much lower cost. And, ironically, that work
is not reimburseable under the Medicare provisions that we have
now.
I have another case, I could just go on and on and on with
examples of this, but I think it is an area where we can really
pick up some costs and do better health care. And I would like
to hear your impression of that and if you think that we should
really expand the provisions for telehealth in this bill? We
can start with Ms. Pollitz.
Ms. POLLITZ. I am not an expert on this area, but I don't
believe a lot of private insurance health insurance would pay
for that either. And this kind of consulting between
physicians, whether it is face to face or on the phone or
telehealth, I think is very important in patient coordination
of care. And that we do need to find ways to support that and
reimburse it.
Mr. THOMPSON. Anyone else care to?
Mr. HOLAHAN. It seems to me that it is a very good idea,
but you really--you need payment reforms that bundle payments
that can include that kind of contact.
Mr. THOMPSON. Well, these are not even included in many,
many cases. And in underserved areas, there is some expansion
in rural but urban underserved areas do not get the attention.
And underserved is underserved, it does not matter where they
are. And these are people who are going without health care or
were provided at a much higher price.
Mr. HOLAHAN. I agree with you.
Dr. GRATZER. Look, there is a role for other things as
well. I do not think necessarily everyone needs to see a
doctor. There is a greater role for nurses and nurse
practitioners. I really think in the United States we have done
ourselves an enormous disservice by not tapping more in terms
of information technology.
You know, in Denmark--Denmark, everyone's health record who
wants it is put online. You can look up your own cholesterol
and track it over time. I think if that is good enough for the
Danes, it ought to be good enough for the Americans. I think it
also would address to a small extent Mr. Becerra's comment
about the high level of medical errors we have in the United
States. So much technology if you go to Wal-Mart and you buy
your kid a plastic lawnmower but so little technology in terms
of your health records. You can see your doctor right across
the street from a hospital, and go to the hospital because you
are feeling worse, the ER, and no one would know any blood test
that had been done. It is just absurd. So I agree with your
point.
Mr. THOMPSON. Thank you.
Mr. STARK. Mr. Nunes, would you like to inquire?
Mr. NUNES. Yes, thank you, Mr. Chairman. I want to thank
the panel for being here today. Ms. Pollitz, Dr. Holahan and
Dr. Young, the three of you support the underlying bill, right,
even though----
Dr. YOUNG. No.
Mr. NUNES. Oh, you do not? Dr. Young, you do not support
the bill?
Dr. YOUNG. That is right.
Mr. NUNES. Okay, but the first two of you, you do support
the bill?
Ms. POLLITZ. I think it is a very good bill and it could
use some additional improvements.
Mr. NUNES. Okay, like finishing the bill, you guys have
seen this, one of the parts not finished yet? I am wondering if
that is--is that the strategy is to get 50 votes in the Senate
and then let the Administration fill in the bill, do you guys
know?
Ms. POLLITZ. I cannot comment on that.
Mr. NUNES. Well, for the two of you that support the
underlying bill or the basics of the bill, I do not think there
is any argument that under this bill more people would be
eligible for Medicaid and more people would be pushed on to
Medicaid, do you agree with that?
Ms. POLLITZ. More people would definitely be made eligible
for Medicaid, which is a very important reform, but the bill
also provides that people who are in Medicaid can have the
choice of enrolling in a private plan through the exchange.
Mr. NUNES. Can you--go ahead.
Mr. HOLAHAN. I think the answer is basically yes, but I
think there are people that are above the level, the income
level that they talk about who might eventually move off of
Medicaid into the exchanges. So there will be some moving
around.
Mr. NUNES. I have trouble understanding, maybe the two of
you can help me understand, why would we want to put more
American citizens on to Medicaid? I have a lot of people on
Medicaid in my district, and for the life of me, I cannot
understand why we would want to make more people eligible for
Medicaid and why we would want to shove more people on to
Medicaid, can you guys answer that question, why that is a good
idea?
Mr. HOLAHAN. It is a program that is big, it has a lot of
history, a lot of law and regulation around it. And we are
taking on a lot in reform in terms of putting even more people
potentially into these exchanges and potentially into the
public plan. I think it would make the job harder if you did
not build on to some extent on what we already have. And I
think down the road, you might want to revisit whether Medicaid
should stay distinct or how it gets incorporated within the
exchange, but I think that for the moment that would make the
whole job harder.
Mr. NUNES. Right, unless you are on Medicaid right now. I
do not have anyone that I know of, and maybe you guys could
help me dig some folks up, that like being on Medicaid and that
want to be on Medicaid.
Ms. POLLITZ. I do.
Mr. NUNES. You know people who like Medicaid?
Ms. POLLITZ. Yes.
Mr. NUNES. Well, I would love to meet these people.
Ms. POLLITZ. I would be happy to introduce you.
Mr. NUNES. Because I have a whole bunch of people on
Medicaid in my district, and the doctors do not want to see
them, the people that I know are embarrassed to even admit that
they are on Medicaid. They do not want to be on Medicaid. If
that is the case, why don't we just make--why do we need this
big plan, why don't we just put everybody on Medicaid?
Ms. POLLITZ. Congressman, I think there is no question that
the Medicaid program has suffered from underfunding over the
years and that there has been a stigma attached to a poverty
program, but the Medicaid program has incredibly important
protections that it offers people, very comprehensive coverage,
no cost sharing, coverage for all kinds of additional services
that are important and that people with limited means need in
order to get the health care, transportation care services.
Mr. NUNES. But you know someone, you said that you know
people that are on Medicaid that like it?
Ms. POLLITZ. Yes.
Mr. NUNES. And they would prefer to stay on Medicaid?
Ms. POLLITZ. I have a friend--yes, her--a friend of my
daughter, a 14-year-old young lady, her mother just passed
away, she had been on private insurance.
Mr. NUNES. She likes Medicaid better than private
insurance?
Ms. POLLITZ. It was a pretty good plan but it has a $500
deductible and 20 percent call insurance, and she had to go to
the emergency room earlier this year because she was very sick
and her aunt took her and a great big bill generated. My
husband and I ended up paying it for them.
Mr. NUNES. So if the hypothesis is----
Ms. POLLITZ. She just got on Medicaid and now----
Mr. NUNES. The hypothesis is though, your hypothesis that
Medicaid is insurance from what I just heard?
Ms. POLLITZ. No, I am just saying that Medicaid has a lot
of advantages and offers a lot of extra protections for people
and it is important.
Mr. STARK. Would the gentleman yield?
Mr. NUNES. Well, my time is running out. My time is running
out, Mr. Chairman.
Mr. STARK. I will extend it. Just if I could suggest----
Mr. NUNES. Just for 10 seconds here because I do not want
to lose my time.
Mr. STARK. After 5 years, people could choose in the
exchange.
Mr. NUNES. The public option?
Mr. STARK. They could choose private or public and not take
Medicaid if they did not want to. In other words, after the
first 5 years with the exchanges that are running, the bill,
the draft would suggest that at that point people would not
have to go into Medicaid, they could choose an exchange. And we
would welcome other options, but once the bill--it is not the
intent of this draft to force people into Medicaid. That is all
I am saying.
Mr. NUNES. But I think there is no question though that it
would make--it would put people into Medicaid, which I have--
Mr. Chairman, I have a fundamental problem with. I think
Medicaid is broke now, it has a $20 trillion unfunded mandate,
and the more people we throw on to them, how are we going to
pay for this?
Mr. STARK. In California, you have a real problem.
Mr. NUNES. That is our problem I guess to deal with too,
Mr. Chairman.
But in finishing up, I would just say that I really do not
understand a plan that we would put out there that would put
more people into Medicaid even in the short term. I think if we
are going to revamp health care, we ought to look at Medicaid
and try to get as many people off of Medicaid as possible
today, not tomorrow.
And I will yield back. Thanks, Mr. Chairman.
Mr. HOLAHAN. One point to make is that one of the things
that I think that you were concerned about is access to primary
care physicians, and there is a provision in this bill that
would increase those rates.
Mr. STARK. I thank the gentleman. Mr. Blumenauer, would you
like to inquire?
Mr. BLUMENAUER. Thank you, Mr. Chairman. I appreciate the
opportunity for us to start focusing in on some of these items.
And I appreciate in particular Dr. Holahan talking about the
cost of doing nothing. And I think that is one of the things
that is so critical that gets lost. If we float along for
another year or two or three or four, we are going to find more
uninsured. We are going to find fewer people who are insured by
their employers. And those that are, are going to be facing
higher costs and less comprehensive coverage.
I hope that we as a Committee will be able as we go forward
to look at getting more value out of the existing system. There
is some in the draft that I like. There are things that I have
in terms of end of life transitional benefits. There are a
whole series of things that I am excited about, some of which
are in the draft. We can do more. I do not think we have gone
far enough in terms of dealing with radical disparities of
Medicare reimbursement around the country. I am particularly
concerned that what is in the bill for Medicare Advantage will
hurt efficient areas and will have virtually no effect on very
high cost States. But this is a process that I hope we can work
on together.
The notion of how we are going to pay for this is part of
the cost containment. We have 3 or 4 years before this kicks
in, so we will have a chance to refine the getting more value
out. And I do not think any of us feel that when the other
areas where there will be some costs associated, and the polls
show the American public is in favor of paying a little bit
more if they get security and 50 million, more or less, get
health insurance, they think that is a good deal. But it is not
going to kick in this year or next year. We will have a chance
for the economy to regain its footing.
I am a little concerned about the language here about
somehow forcing people on to the public plan because people
will go into the exchange where the public plan is one of their
choices, and that sort of gets lost in the discussion.
And I want to pose my question because, Dr. Holahan, you
referenced it in your testimony, but as I read it, it is a
little esoteric, with all due respect, about where the
Department of Justice thinks it is noncompetitive and there
might be antitrust. My reading of the data is that there are 25
States where one insurance company has 50 percent or more of
the market. If you could perhaps discuss a little bit in
practical terms about the lack of competition that most
Americans face now with meaningful choices of health insurance.
And my read of this is that the insurance companies themselves
are going to be advantaged because we are going to streamline
some of this process and squeeze out some of the goofy stuff
that goes on. Right now, trying to deny people coverage, we are
not going to have preexisting conditions, that is going to be a
level playing field that is going to make I assume a very big
difference.
And if you want to also comment for a second about the
sound bite that you got trapped into saying about cost controls
and then cut off, if time permits to elaborate. But I would
like you to talk for a moment about meaningful competition that
we are going to be providing under the framework that has been
offered.
Mr. HOLAHAN. Yes, a few months back, we had some executives
from a big Blue Cross plan in the Midwest visit us to get
advice on how they could control costs. And the first thing I
asked was how well do you pay relative to Medicare. And the
answer was they paid 79 percent above Medicare rates to
hospitals and 68 percent above Medicare to physicians. And so
like why are you here? They did this because they can. They
have no competition. And they can pass on, to the extent this
means higher premiums, they are able to pass that on. And I
think that is a role that this public plan would have to--I
think could help with, help in those markets and help in others
where there are more insurers but one that is really dominant
and still not able to deal with dominant hospital systems or
single specialty groups that essentially bargain as
monopolists.
Mr. BLUMENAUER. Thank you. I appreciate that. I would just
close by noting it would be interesting to take a test of the
people on this Committee who have health insurance, I assume
most of us probably do, and find out how many of us made the
decision based on what was the cheapest plan? It would be
interesting to find out if we could figure out what was the
cheapest plan. I get my insurance through my wife's company
because I think she has greater contact with their Department
of Human Resources to try and decipher stuff that I cannot, but
I think the record is rather clear that there are lots of
people, including in the Federal system, and I will bet people
on this Committee, who make lots of choices that are not the
cheapest as it appears on that chart. And so I think the fear
somehow that all competition would stampede to a public plan if
it appeared a little more affordable is at least near-fetched.
Thank you.
Mr. STARK. Thank you. Mr. Roskam, would you like to
inquire?
Mr. ROSKAM. Thank you, Mr. Chairman. First of all, thanks
for your time and your attention today. I think all of us have
been enlightened by the nature of your comments. And you have
been fairly transparent, when you have not known what is in the
bill, I appreciate someone saying, ``I have no idea what is in
the bill.'' I do think this time, this season that we are in is
absolutely incredible. There is momentum here, right, and there
is an opportunity I think transformational, but it has struck
me as strange that here we started this hearing at 9 o'clock, I
was out for a couple of minutes for some of the procedural
stuff that is happening on the floor but we are well into this
hearing, and we have not had much of a conversation about
Medicare fraud, about fraud within the system and abuse within
the system.
I have been briefed by experts, and I do not think these
are folks that are pulling punches one way or the other in
terms of donkeys and elephants, but have come to the conclusion
that as much as 13 percent of current Medicare outlays are
fraudulent. I have a quote from the chief counsel to the Health
and Human Services Inspector General who said, ``Building a
Medicare fraud scam is far safer than dealing in crack or
dealing in stolen cars and it is far more lucrative.'' And here
we are on the verge of something that is absolutely enormous in
terms of costs. Frankly, when costs come up, the Majority kind
of loses high contact and gets a little bit defensive, with all
due respect, about, well, who is putting these estimates out
and so forth. But as we are sitting here today, no real number
in terms of a cost estimate.
And, yet, here we have this opportunity to recast resources
and put it in the proper direction that I think ultimately can
have a huge impact. So I would like to shift the conversation a
little bit. Dr. Holahan, something that you said concerned me,
and I want to give you a chance to clean it up. But when you
were having a conversation I think it was with Mr. Nunes a
minute ago, in sort of defense of Medicaid, you said, and I
jotted it down because it really got my attention, and ``these
were attributes that I interpreted as positive attributes,''
right? You said that, ``It is big, it has a history and it has
lots of law and regulation around it,'' meaning sort of this
case law around it. And I would suggest that I think that is
one of the real weaknesses of the current system, that it has
become hidebound, an inability to recognize fraud within the
system and an inability to recognize abuse within the system,
an inability to recognize overutilization and so forth. And I
just wanted to first of all give you an opportunity to--surely
those three adjectives of big, rich history and lots of law and
regulation is not an attribute, those are not characteristics
that you are lauding, are they?
Mr. HOLAHAN. Well, what I meant was--to be more specific, I
think this is a really big deal to reform our health system. To
the extent you have something that you can build upon that
works reasonably well, despite some problems, I think that is a
good thing when we are taking on so much.
A few years back, I did a study with a colleague of mine to
look at whether Medicaid is really high cost relative to
private insurers, so we compared Medicaid to people with
private coverage, all low-income people, and looked at whether
medical benefits, when you controlled for health status and
income and education and other characteristics, controlled
statistically for that, and Medicaid it turns out is less
costly. And that is not to say there is not fraud in Medicaid
and Medicare, but despite that, it is less expensive than
private insurance by some margin. And we certainly should go
after fraud wherever we can. I guess the thing I would be
curious about is whether the same study that you were referring
to had anything to say about fraud in Aetna or Blue Cross plans
or anything like that. I do not know whether it did or not, but
I can't believe it is totally absent.
Mr. ROSKAM. There is no question about it, but I think here
we are 3 hours into a hearing that by the proponents' own
adjective is going to transform the system and yet we really
have not had much of a conversation as it relates to driving,
just rampant abuse out of the system.
Thank you for being transparent about that. The people that
I have interacted with as it relates to Medicaid feel
underserved by it, feel discouraged by it, and it has taken the
joy of the medical practice from physicians.
My time has expired, and I yield back.
Mr. STARK. Thank you. Mr. Kind, would you like to inquire?
Mr. KIND. Thank you, Mr. Chairman. I too want to thank our
witnesses today for your patience and also the task of trying
to absorb an 840-page piece of legislation in a short period of
time, and I think you have been doing a good job today.
But I think my friend, the gentleman from Illinois, Mr.
Roskam, raises a very important issue and that is what is
contained in this health care reform that can really help crack
down on fraud within the Medicare system? And with that, I
would just reference Title 6 of the legislation and go through
those specific provisions.
We are trying to not only enhance resources to the agencies
in charge of detecting fraud and bringing greater
accountability but also enhancing the penalties when it is
ultimately--and that whole section is devoted to cracking down
on fraud and the waste that exists in the system today. And if
the gentleman or others have more ideas on what we can do to
beef this up, we are all ears.
But I think the sweet spot we have to hit here is the
ability to distinguish between unintentional error and
intentional fraud, and I think that does concern a lot of the
providers out there, especially in submitting their billing
claims, that if something was inputted wrong, are they going to
be subject to the full weight of investigation and fraudulent
penalties due to a harmless human error in the system.
But, listen, I want to take my time to direct your
attention to Title 4 of the draft discussion piece. That is
titled, ``Quality,'' and I think this is the key to how
successful we are at the end of the day, of whether or not we
can enhance the quality of care and finding cost savings at the
same time. That section is devoted entirely to the comparative
effectiveness research. And that is what I want to get your
response on, if you had a chance to review that provision.
Let me preface my question by saying I come from western
Wisconsin, which has been recognized as a high-quality, low-
cost area. We have Mayo in there, Marshville Clinic, Gundersen,
even the President has recognized that the health care models
that have been developed in our region, as examples of what we
need to incent in reform in order to achieve the type of cost
savings without jeopardizing quality at the end of the day.
This is coordinated, integrated care practices, more emphasis
on primary, prevent, wellness programs, things that have proven
very effective in helping drive down cost while enhancing care.
And I think that is the key to doing comparative effectiveness
research the right way and not the wrong way and establishing
the center in the legislation for comparative effectiveness
research, establishing an independent commission comprised of
independent, both public and private stakeholders as part of
the commission, to review the research, the data, making
recommendations to the center. And then I think this is the key
distinction, empowering our doctors and patients with the
information so they know what works and what does not work. And
we are placing a huge bet on that, that with doctors and
patients armed with this information, that they are going to
make the right decisions which is going to not only improve
patient care but help drive down costs. And it is tough to
ignore a study of a reputable organization like McKenzie
Institute that claims based on their research that $650 billion
of health care spending every year goes to care and treatment
that does not improve the quality of results at the end of the
day. And that is going to be the key I think to comparative
effectiveness.
I see Mr. Herger has joined us because he raised a very
important issue when it came time for him to question the
panel, and that is how the information is ultimately going to
be used. And I would reference, and he is involved in a
conversation, but on page 446 of the discussion draft, lines
three through six, the construction on the use of comparative
effectiveness. And let me just read that real quick. This is an
important point. It states that, ``Nothing in this section
shall be construed to permit the Commission or the Center on
Comparative Effectiveness Research to mandate coverage,
reimbursement or other policies for any public or private
player.'' And I think that is a hugely important provision in
this legislation, basically saying we are not going to ration,
we are not going to be making those type of cost decisions
based on CER research. And I think that is going to be
important that we recognize that as we move forward.
So, Ms. Pollitz, let me first give you a chance to respond
as far as the role you see CER research playing and how
important or vital that is going to be for the health care
reform that we are trying to offer here today?
Ms. POLLITZ. I think it is very important, Congressman. I
had the pleasure of attending a conference a couple of weeks
ago where the director of the agency in Australia that heads
this up was just talking about how this research gets brought
to bear in decisions in that country and people were left
breathless, like why don't we do that here? So I think it is a
very important investment, and I commend you for including
that.
Mr. KIND. It is interesting a lot of providers are doing
that. In fact, Cleveland Clinic has been doing this for a long
time, and the CEO of Cleveland Clinic just indicated they had
70 countries contact them to find out what they are doing and
how well it has worked, 70 countries. So even countries outside
of the United States are recognizing the type of model of care
that is being provided and the cost savings that comes with it.
Dr. GRATZER. I note as well that there are some private
sector innovations that are also useful. Think about Safeway,
which has actually brought health inflation to a stalemate in
the last 3 years. Some of the information is its comparative
effectiveness, it is transparency of prices. If you are in
certain regions in the country and you are a Safeway employee,
they will actually list out your options for say CAT scan and
the prices and soon they are hoping to put quality on board. So
it is not just a role for government, I think. I am a little
bit more hesitant on comparative effectiveness perhaps than you
are, but there is a role for government undoubtedly, but I
think there is also a role for the private sector as well and
ultimately culturally as people demand more and should be
required to shop around and gain more information, just as they
do for much mundaneness things like food, clothing and shelter.
Mr. KIND. Thank you, Mr. Chairman. I see my time has
expired.
Mr. STARK. Thank you. Mr. Pascrell, would you like to
inquire?
Mr. PASCRELL. Thank you, Mr. Chairman. Chairman, I want to
clear up some things that were mentioned before about New
Jersey.
[Laughter.]
Mr. PASCRELL. New Jersey is more expensive because
insurance companies are required to cover all comers. Without
an individual mandate, healthier people drop coverage, leaving
behind the sickest people. That drives up the cost, doesn't it,
Ms. Pollitz?
Ms. POLLITZ. Yes, it does.
Mr. PASCRELL. If anything New Jersey is a case study in why
we need universal coverage, just the opposite of our
proponents--or opponents, whichever you decide, are talking
about. State mandates are designed to protect people. And I
would argue that if everyone were in the pool, folks in New
Jersey would be better off because they would be guaranteed
access to the services they need, like childhood immunizations.
Let's not mandate that. What is the consequences of not
mandating that? Aren't we talking about preventing diseases and
in that way lowering costs?
How about my favorite chronic diseases, diabetes care. When
we look at the cost of health care, who is seeking aid later in
life because of situations that occurred much earlier, which
they were not able to get hold of? How about prostrate cancer
screening, do you want to mandate that? Do you want to bring
down the cost of health care? Let's mandate it. Would anyone on
the other side say, ``No, we should not mandate that''? How
about mammograms? We thought we had that battle a few years
ago, but that continues to come up. Maternity care, treatment
for alcoholism? Now, why in the world should we mandate that?
Look, the patient is the center of what we are talking about
here, not insurance companies, not Congressmen, the patient
therefore is the main priority of putting a system together
built around that patient. And that is what I have on my mind.
Now, Mr. Gratzer, in your testimony you said that, ``We
must reform our health care system with `made in America'
solutions.'' Well, that goes with a lot of other rhetoric I
have heard. I could not agree more. The discussion draft that
we are considering is a ``made in America'' solution. It builds
on lessons that we have learned right here in the United
States. It brings competition and choice and a system of checks
and balances, we do not have checks and balances now. We do not
even have checks and balances with regard to ferreting out
those who abuse the system, who actually purvey fraud on the
system. In fact, we slap them on the wrist and say, ``Sin no
more,'' but we do not prosecute them.
I take issue with your focus on a single payer system,
which despite your arguments is not the issue at hand. Even Dr.
Young has told us that our plan is not a path to single payer.
Unfortunately, you make fundamentally different underlying
assumptions about a public health insurance option that most of
the individuals on the panel, and many of the questions you
pose about a level playing field can be answered with a
resounding yes. In fact, we have gone to great pains to make
sure that this public health insurance option is indeed on a
level field with its private competitors.
And I would like you to comment on some of the arguments
made by Dr. Holahan. Specifically, in the absence of a public
health option, how would you propose bringing real competition
to health insurance markets that currently have none?
Dr. GRATZER. I think we have regulated ourselves into a
situation where in many States, too many States, you----
Mr. KIND. Who is ``we,'' who is ``we'' regulated?
Dr. GRATZER. It is between Congress and State legislatures.
Mr. KIND. What have we done, what regulations have we put
forth that have resulted in the consequences which you say
exist? What is the regulation. Tell me one regulation, two
regulations, three?
Dr. GRATZER. Well, in some States community rating.
Mr. KIND. ``We,'' we said the Federal Government, you said
the Congress, do not go back to the States. What did the
Congress do?
Dr. GRATZER. Right, I said both, sir. And I would emphasize
that it is a collective problem, and I think that these
mandates end up driving out insurance companies and reducing
choice. But, look, I agree with you, there is not enough
competition in some States. In some States, in the small group
market, you are down to literally one option or two options,
but I think the way around that is through deregulation and
allowing more competition amongst insurance companies rather
than the Federal Government creating an insurance company,
which by the way, as you know, would not be covered by those
regulations, would not pay the tax, would not----
Mr. KIND. Dr. Gratzer, what would you deregulate right now?
Dr. GRATZER. Why would I deregulate?
Mr. KIND. Yes.
Dr. GRATZER. I would allow people to purchase insurance
plans across State lines.
Mr. KIND. That is your deregulation moment?
Dr. GRATZER. Well, that would be one of the things I would
do for sure. And then for the people who, as you point out, are
chronically ill, I would----
Mr. KIND. I'm sorry, go ahead.
Dr. GRATZER [continuing]. Put them in high-risk pools and
the like. I am not going to argue today that some people cannot
afford a private insurance plan, of course, but I think we have
to be focused on our aid.
Mr. KIND. What do you do with those people? What do you do
with those people, Dr. Gratzer, the people that cannot afford--
--
Mr. STARK. We will have to come back to this later, Mr.
Pascrell, and let Mr. Reichert find out what Dr. Gratzer wants.
Mr. REICHERT. Well, thank you, Mr. Chairman. I want to at
least first of all make a statement on I think Mr. Pascrell is
absolutely correct, the patient really is the focus here, and I
think all of us here today who have had a chance and
opportunity to question and hear some of the answers to the
questions are all in agreement that we are trying to do the
best thing for the people of America, for those people who, all
of us at some time or another, who need health care. And so
that is why we are here today.
To fight over one system over another is counterproductive
because I think we all can agree that the patient is the center
of our attention and should be, that there are not enough
checks and balances, I agree with that. There is a lot of
fraud, waste and abuse, I agree with that. We are not doing
anything with that. And we all agree that we would like
Americans today to have better access to health care, better
quality health care. We would like this health care to be cost-
effective. We would like people to have a free choice. And I
think that people, I know myself personally, would like to have
some control over the treatment and the medication that is
prescribed to me for my health care. Those things we all agree
on.
The question, I think the major overarching question is how
do we really overcome this fear of a lot of the American people
today regarding this discussion we are having today about a
government takeover of the health care plan, especially when
you throw in the considerations that Mr. Ryan has expressed
today and one other Member here, and the trillions of dollars
of unfunded mandates. And so the fear of the cost and the fear
of the lack of control and the reduction of your access to
health care and the reduction of the quality of health care.
Dr. Gratzer, I would ask you first maybe to respond to
that?
Dr. GRATZER. I want my colleagues to answer first.
Mr. REICHERT. Okay, anyone else, anyone on the panel?
Ms. POLLITZ. Congressman, I think public opinion polls show
that the public overwhelmingly favor having the choice of a
public plan. I think it is also true, and it was in The
Washington Post this morning, that people are always nervous
about change. I was here in this room, sitting in that row 15
years ago, the last time health reform care was considered and
the Harry and Louise ads were all over the airwaves, and I
think there is no question that the greatest vulnerability of
the reform effort this time is to frighten people into thinking
that they will be worse off.
Mr. REICHERT. I am just going to interrupt you for a
second. I stepped out in the hallway and met with some
representatives of a union who said we want a public health
plan, we want to make sure that those people who are not
insured get health care, we all want that. But the other thing
they said to me was we do not want our health plan to go away
and on top of that, I do not want my health plan taxed. So we
have a problem here. How do you address those concerns, people
who--and I am one of them, and I think as I said most people
here, we all want people without health care to get health
care, but I like the plan that I am in. Others in this room I
am sure do, 75 percent of Americans it said do like their
health care plan. They do not want to be taxed on it. So the
question here again goes back to cost. How much is this going
to cost us and how are we going to pay for it?
And one of the issues around this is the waste, fraud and
abuse. Some estimates place Medicare fraud at $13 billion per
year. The GAO found that Medicare has paid at least $92 million
to Part B for providers who are deceased. How can we reduce the
staggering amount of fraud in the Medicare system? And what is
to prevent this fraud, waste and abuse from happening in the
government takeover of other parts of this system? Anyone want
to respond?
Mr. HOLAHAN. I just was talking to the question about
choice. I think that the way I understand this plan, there
would be more choices. And I think sometimes the way----
Mr. REICHERT. What about the fear though that the private
sector will not be able to compete with----
Mr. HOLAHAN. Well, I do not agree with that. I think there
are some insurers----
Mr. REICHERT. But some people do----
Mr. HOLAHAN. I understand.
Mr. REICHERT [continuing]. How do you explain that?
Mr. HOLAHAN. I think the best insurance companies in this
country are very, very good. They will be able to compete with
the public plan. The weaker ones that have competed by just
going after good risks and not being effective managers of care
delivery could be at risk, but I think it will, at the end of
the day, be an effective and healthy competition between the
public plan and good insurers.
Mr. REICHERT. I appreciate your answer. Thank you, Mr.
Chairman.
Mr. STARK. Ms. Berkley, would you like to inquire?
Ms. BERKLEY. Yes, thank you very much, Chairman Stark. And
thank you all for being here and sharing your expertise with
us. I am strongly in support of passing comprehensive health
reform legislation this year. A third of the people I
represent, and I represent the urban core of Las Vegas, have no
health insurance. So it is imperative for the people that I
represent, that they have some access to health care through
insurance.
It is not as if people that do not have health insurance do
not get sick. They get sick, and the additional cost is borne
by the rest of us. I would say statistically speaking, $1,000
for each of us that is insured, there is an extra $1,000
attached to the cost of our health insurance in order to
subsidize others.
In an effort to give full disclosure, my husband is a
nephrologist, my stepdaughter is a primary care physician, we
need more doctors, and we need to incentivize the opportunity
for people to go to medical school, which is not only multiple
years of their lives but also a great deal of expense. When my
stepdaughter graduated--not graduated, but when she graduated,
she had $190,000 debt. I am a tremendous advocate of loan
forgiveness and also an advocate of increase GMEs. I think it
is very important, and they need to be spread out around the
country a little bit more proportionately than they are now.
I do not think--look, this is a work in progress. I am not
willing to sign off on the legislation. A draft proposal that
was dropped on Friday is the beginning of an important and
comprehensive discussion among all the stakeholders and those
of us that are going to be voting for it. That is why your
being here is so important today. Hopefully, this will be the
first of many hearings in order to improve our expertise and
knowledge so we can do the right thing and fine tune this.
Cost is definitely a factor. There is no doubt about it.
But right now we have the most costly health care system on the
planet. We are not getting a bang for our buck. Doctors do not
like the system. The hospitals do not. The patients do not. And
we need to change the paradigm so that we are investing our
money wisely and having a far better outcome than we have now.
One of the things I am a great advocate of is preventative
medicine, and I am the original sponsor of the DXA bill.
Medicare cuts payments to people that need bone density by 60
percent, which means that the doctors are not administering
them anymore. Nineteen billion dollars it costs this country in
order to pay bone-related osteoporosis fractures every year.
Let us take that money and put in the front end. It is going to
cost us less. We are going to have a whole lot less bone
fractures and statistically speaking, if you are over 70 and
you break your hip, you are going to be dead within 10 months.
It seems that we will improve the quality of life, we will
enhance life, and we are going to save billions of taxpayers'
dollars by using our dollars wisely in the front end of the
process rather than in end of life care.
And if any of you care to discuss any of those, I would
love to hear your point of view.
Ms. Pollitz.
Ms. POLLITZ. That was a lot and all excellent. I think just
on the prevention, an important feature in the required
essential health benefits package is that preventative services
would be covered without any cost sharing so that people can
have access to those services and not face those barriers. That
is an important component.
Ms. BERKLEY. May I say one thing, and it just gets my goat,
I am not the defender of every doctor on the planet, and I know
we have a lot of real stinkers, but I will tell you something
the doctors I know work like dogs and this fraud and abuse
thing as if every doctor is out to scam the system is highly
offensive to me as a spouse. I just want to get that on the
record.
Dr. GRATZER. I would add, it is not just about prevention,
though I fully agree with your comments on this. There is also
some element of people taking more responsibility for their
actions.
Ms. BERKLEY. What do you do with a patient, doctor, and I
know you are a psychiatrist, but my husband does all the
dialysis in Las Vegas, so that we know that smoking, obesity,
lack of exercise----
Dr. GRATZER. Sure, incredible.
Ms. BERKLEY [continuing]. So patients are on the machine
for 3 hours. They get up, they light up a smoke and they go
grab McDonald's. Now, how responsible should that doctor be
because the patient is being irresponsible?
Dr. GRATZER. Well, it is a heartbreaker certainly in your
husband's field of work but so many health costs are in some
ways avoidable. Again, we have to be very clear. There are
people who are genetically endowed to develop certain diseases,
there are people who are just unlucky. On the other hand,
smoking is 100 percent avoidable. We are seeing in America an
obesity crisis, doubling of obesity rates over 25 years. And
the best evidence, it seems to me, it is just we are taking in
too many calories. I think part of that is a government
solution in terms of like school lunch programs, funding better
school lunches. I think part of that comes from the corporate
community. I am excited with Safeway and what they have managed
to do to better people's health. But part of it is also
culturally people have to take more responsibility. It should
not be societally acceptable to smoke and yet in a lot of ways,
it still remains somewhat glamorous.
Dr. YOUNG. I would like to compliment your summary. I am in
complete accord with several points you made, but to make the
point from our purpose being here, I think your goals would be
much more readily achieved in a single payer system with
improved access and for that reason, I commend you to consider
that option.
Ms. BERKLEY. Thank you.
Mr. STARK. Thank you. Ms. Schwartz, would you like to
inquire?
Ms. SCHWARTZ. Yes, thank you. Thank you, Mr. Chairman, and
thank you panelists for your patience and your willingness to
be here for a number of hours.
I think we have covered some ground here but on some of the
things--we get lost a little bit in some of the various
specific details we have been discussing and forget our larger
goals and how we are going to accomplish them. We are really
very committed, as the President has asked us, to contain the
rate of growth costs in health coverage and in health care,
both through the government and for businesses and for
families. And we know we can do that by some of the delivery
system reforms we have, some of the payment reforms we are
intending to--will be created in this way.
And we are also really clear about the fact that we want to
deal with access to health coverage. I do not know that you
would all agree that all Americans ought to have health
insurance. I think at least three of you would. I think one of
you would say, ``Well, they are on their own, good luck. We
will give you some tax credits and go and see what you can
find.''
But one of the things that this draft bill does do very,
very clearly is to say that we are going to create a way to
help all Americans purchase affordable, meaningful health
insurance coverage. And there can be disputes about how we are
going to do that, but the idea here is that there are numbers
of Americans who have insurance that is not very meaningful. I
think, Ms. Pollitz, I would want you to speak about this. We
find particularly for small groups and for individuals buying
meaningful health insurance that is affordable, if you have a
preexisting condition now, if you are a small group that buys
insurance and I just talked to one businessowner who said their
rates just went up 40 percent from one year to the next. We
have all in this country seen our insurance premiums double in
the last 9 years. That is unsustainable for families. It is
unsustainable for businesses. And it is unsustainable for
government. So we believe we have to take action.
Now, one of the things we are going to do, in spite of what
the Republicans say, is to put a whole lot more Americans,
almost 50 million of them, out there purchasing health
insurance, private health insurance by and large. So I think
that insurers should step up to the plate and offer some
meaningful coverage. But we are going to change some of the
market rules because if we are going to help Americans buy
private health insurance, and we are, then we want to make sure
that they meet some rules.
And I would like you, Ms. Pollitz, if you would start with
some of the rules that we are going to change, preexisting
condition exclusions, you cannot do that anymore. You cannot
rate people based on gender. You cannot rate them based on
their health status. We will make some changes in age. We are
going to make it more affordable but also mean something. Now,
you had mentioned in your testimony initially, way back when,
earlier this morning, that one of the ways that you think we
could strengthen the legislation, even though there is language
in there now, is to make sure that a consumer, individual or
small business or bigger business, knows what they are buying.
When they are buying insurance, they know what they are buying.
And right now, that is also very, very difficult.
There was a report recently about a woman who thought
cancer care was covered. It turns out that the cancer care she
was getting was outpatient and what was covered was inpatient.
Now, there was no way of her knowing that when she read the
policy. So, unfortunately, she got cancer, she had health
insurance and it did not cover her care in the least expensive
way possible.
I will just give you one statistic, 61 percent of the 72
million working age adults who had problems paying medical
bills or paying off medical debt in 2007 were insured at the
time the care was provided. That is again unsustainable. We
know 50 percent of bankruptcies are due to medical debt.
So we are going to help people to be able to buy private
insurance. Could you start by telling me what else you think we
ought to be doing? I do have a bill with Congresswoman DeLauro
that we are advocating putting some of that language in this
bill that would make Americans feel more secure that when they
are buying private insurance or public insurance, that they
actually know what they are buying, they get what they are
paying for, and that we reduce the cost of administration of
private insurance companies now, just spending literally
millions and tens of millions of dollars to screen records to
make sure that they do not pay coverage. So could you just--I
know I went on probably more than my allowed but if you would
answer that and give us some information about what else you
are doing, how important you think it might be to be doing
this?
Ms. POLLITZ. I am happy to, and I will talk very fast. I
think it is definitely the case that health insurance today is
very complicated. Industry studies show that people do not
understand overwhelmingly how their coverage works and that
most would prefer to do anything, including work on their
income taxes, rather than try to read the insurance policy and
figure it out.
I think you can make health insurance more predictable and
more understandable for people by making it more standardized.
If there is coverage for hospitalization, it should cover the
whole hospital stay, not leave out the first 2 days. If there
is a deductible, that should mean a deductible. If there is an
out-of-pocket limit, that should actually limit your out-of-
pocket costs. You could have more standardization of terms.
Also, we have suggested a new kind of labeling system for
health insurance that I believe is included in the bill that
you referenced.
Ms. SCHWARTZ. It is a little bit like the way when you buy
a food product?
Ms. POLLITZ. Exactly.
Ms. SCHWARTZ. It is consistent.
Ms. POLLITZ. A coverage fact label, we would suggest that,
our methodology was to simulate what it costs and what the
claims are to have different illnesses and then have insurance
companies process those claims and show you exactly what would
be covered and what you would have to pay for the whole episode
of illness so that people could synthesize and see that.
Ms. SCHWARTZ. We will continue to work together. I thank
the Chairman for his indulgence.
Mr. TANNER [Presiding]. Thank you.
Mr. Davis.
Mr. DAVIS OF ILLINOIS. Thank you very much, Mr. Chairman.
Listening to some of my colleagues would lead us to believe
that the only relevant part of this discussion is not to have a
public option included with our private system. I have heard a
great deal this morning about costs. I have not heard much
about service or quality of care. I have not heard much about
accountability, responsibility or the need for access for the
millions of individuals in our country who have no insurance at
all. And in many instances no place to go if they get sick.
Dr. Young, I want to commend you and my colleague,
Congressman Conyers, for your many years of long struggle and
sometimes suffering to try and push our country toward
understanding of what a single payer system would do.
Sometimes, I did not know whether you were pushing or leading,
but either way, you helped to get us where we are.
You have already told us that we have fallen short of the
goal with this tri-committee draft that I think has been a
tremendous effort led by our Chairman, Representative Rangel.
Given that we have this document that we have put together, and
I know that you are good at dual diagnoses and things like
that, what would you say were the part that you like best or
might be its strongest features?
Dr. YOUNG. Okay.
Mr. DAVIS OF ILLINOIS. And what would you say might be its
weakest features?
Dr. YOUNG. Well, I naturally am pleased with those parts of
the bill that extend coverage to people now not getting it,
that is truism. The part I do not like is that it finds it
necessary to retain the private insurance system, which is the
heart of our present dilemma. I am well aware of the awesome,
real power the industry has, and I think I understand the
legislative process. But having said that, my criticism or
opposition to these other forms is not the purist point of
view, I do not have that. I have had too many life experiences
to have that view. It is that it will not work. And that I feel
that all of--both sides of the aisle with their criticisms and
suggestions have the same goal, but what is emerging is not a
practical arrangement. And it has already been said, and I will
echo it, the cost will sink not only the health economy but the
national economy.
And I am happy, you suggested and I will emphasize, that
the American people are increasingly aware of the desirability
of a national health insurance, treating health care as a human
right by society, emulate the achievements of other countries
with much lower costs. I mean not a little lower, starting the
highest competitor for cost, France, Switzerland and Germany,
spend one half per capita. So with all that money and our
American ingenuity and eliminating the unnecessary waste
associated with the private insurance system, we could have a
fabulous system and the country's mood, solidarity, confidence
in government would go up tremendously.
Mr. DAVIS OF ILLINOIS. Thank you very much. Ms. Pollitz,
let me ask you if I could, in some of our districts, 400
percent of the Federal poverty level seems like pretty high
income. Yet, you propose that subsidies be set at an even
higher level. Why would Congress need to subsidize health care
for a family earning $88,000 a year?
Ms. POLLITZ. Well, if the cost of that coverage is $12,000
or $13,000 a year, that takes a big bite out of the paycheck of
that family. And if the family head is my age, in their 50's,
the cost will be much higher than that because age rating is
provided for in this bill. So I think when you watch and set
your policy about affordability, you need to step away a little
bit from the optics that associate with this measure of the
poverty level. It is in many ways an artificial measure and way
too low for measuring the needs of families to pay for
anything. And really look at what is the cost of good health
care coverage and how much do you want families to have to pay
out-of-pocket for that if they do not have other subsidies?
Mr. DAVIS OF ILLINOIS. Thank you very much. Mr. Chairman, I
see that my time has expired but with your indulgence, could I
just ask Dr. Gratzer, when we talk about costs, do you have any
idea of how much of that cost is plowed back into the economy?
Let's say if we spend a dollar for health care, how much of
that goes back into the economy?
Dr. GRATZER. Well, you have asked a physician whether or
not he likes health spending, you are going to get a pretty
predictable response. And I think what you are hitting on is
the right question, which we cannot just look at costs, we have
to look at effect on lives. My wife's life has infinitely
improved by a procedure. People suffering from cancer are
infinitely improved by the technology we have available. It is
also true that to some extent it is good for an economy. One
must be careful though that we probably do waste money within
the system, and that is I think we would all agree getting
better value for our dollar is worthwhile.
But to turn around and say we spend 16 percent, we would be
economically better off spending 12 percent, I think is just
very simplistic and unfortunately too many economists seem to
fall in that trap.
Mr. DAVIS OF ILLINOIS. Thank you very much. Thank you, Mr.
Chairman.
Mr. TANNER. Mr. Heller, you are recognized.
Mr. HELLER. Thank you, Mr. Chairman. And I want to thank
the panel for your patience. Running back and forth between the
forth, at least I get some exercise. Anyway, thank you very
much for being here, and I appreciate your comments.
One of the things that intrigues me as we go through this
conversation and one of the things that I would like to raise
is a question that I am constantly asked by my constituency
back in Nevada and that is what would happen if Members of
Congress had to live with the same health care system that
everybody else has to live by?
And I will assure you there is a great divide on this side
here, of us sitting in front of you and everybody else out here
in this room. There are people here in this room and in this
audience that do not have the health care options that Members
of Congress, whether it is the House or the Senate, have, and I
believe that if we are going to go forward with this exercise,
regardless of what plan ends up at the end of the day, that we
ought to, if we are intellectually honest, ought to require
Congress to live by those same provisions. Is there anybody on
this panel that disagrees with this?
[No response.]
Mr. HELLER. Having said that, and again I think that is
critical as we move forward in this debate is to make sure that
Members of Congress, as they move forward on this, understand
what their constituents have to live with.
Now, I want to go to you, Dr. Gratzer. In fact, I had a
question for Secretary Sebelius, who was sitting right where
you were a month or so ago, and I was talking about my
district. And this could be rural America as much as rural
Nevada, I have a very large district and talked about access to
health care and the cost, and my question to her is would a
public health care plan solve access and cost? Her response to
it was, ``I do not think anyone is talking about a government-
run program.'' She also went on to say that, ``I think the goal
with this legislation is to have most Americans without health
coverage in a health insurance exchange run by the private
market to stabilize the current private market.''
So, doctor, based on the draft we have in front of us
today, I am pretty sure someone in Washington has a government-
run health care in mind. Do you think this bill reflects a
respect for the power of the private market as Secretary
Sebelius envisioned?
Dr. GRATZER. No. Would you like me to elaborate?
Mr. HELLER. Would you, please?
Dr. GRATZER. I was going to rest on the eloquence of my
response.
[Laughter.]
Dr. GRATZER. Again, I believe in competition, and I think
that we should be very mindful of the fact that the system
works well when we do have competition. The Federal Employee's
Health Benefit Plan has actually kept costs relative to other
types of health insurance down. I think most Members of
Congress are very pleased with the literally hundreds of
options they have available.
I belong to a think tank in New York, we have a choice of
exactly one plan. So I think there are things to learn from
that approach, but I also think we must be very cautious about
this concept of enhancing competition with a government plan.
The government plan is in fact price controlled. It will offer
substantially lower premiums than anyone else can offer because
it is paying a fraction of the amount, as Medicare presently
does.
Mr. HELLER. Sure, similar to what we have in Congress now
as Members?
Dr. GRATZER. And I think it will suck away from the private
sector. So I think one must be very cautious about a public
plan option. But I do think one can learn from what Members of
Congress have, that you have many options available and that is
useful, and the question is how do you get that to Americans
who are too often available--have available just one choice of
plans?
Mr. HELLER. Doctor, I know that you have looked at health
care systems around the world, could you touch on survival
rates, point out some of the statistics that might help this
Committee, survival rates of patients in America and other
nations?
Dr. GRATZER. Sure, look, comparing one system to another is
enormously challenging and crude. Mr. Becerra, your colleague
for instance, infant mortality rates. Unfortunately, as you
know, a lot of health has to do with things other than health
care. Infant mortality statistics would be a wonderful example
of that. It turns out that in America the group with the best
health infant mortality rates are Hispanic Americans. They also
have the least access to health insurance and in fact are most
likely to birth outside of a hospital. I am not advocating
births outside of hospitals. What I am advocating and
suggesting is that one must be cautious. Other factors, drug
use, family structure, and so on has enormous weight.
So what are better ways of comparing systems than just
saying infant mortality statistics? I would suggest looking at
how people fair with different diseases, like cancer survival
rates. Lancet Oncology as an example, compared American
survival rates to European survival rates. Sixty-six percent
versus 44 percent survival rates over 5 years. American
medicine is second to none. We have problems here but do not
lose the good.
Mr. HELLER. Thank you very much. I know my time has run
out, but I just want to reiterate that I think it is critically
important that we make sure Members of Congress live by
whatever plan comes out of here. And I would challenge the
leadership on this Committee to see fit that the necessary
provisions are put into this bill so that Members of Congress
and our constituents live with the same health care programs
across this country.
Thank you, Mr. Chairman. I yield back.
Mr. STARK [Presiding]. Thank you. Mr. Etheridge, would you
like to inquire?
Mr. ETHERIDGE. Thank you, Mr. Chairman. Let me join the
others in thanking you for being willing to stay this long and
stay in your seats. I know it has been tough, so we appreciate
it.
There has been talk here about all the issues that we have
to deal with, and it is a complicated issue. Whether people
want to call it waste, fraud and abuse, whatever you want to
call it, it is savings within the system, and we have to get it
out because that will provide for more care, more quality care.
I cannot imagine any person sitting on this panel, or hopefully
not any Member of Congress, would be opposed to doing that. So
I hope this bill is a start in that direction.
It is a draft, it is not perfect. It probably will not be
perfect after it gets through the House and through the Senate,
but I happen to remember something that Confucius said, he
said, ``The longest journey starts with the first step,'' and
if you are always fussing about where you can go, you will
never get anywhere, so you have to get started. And so at least
the process has started and the dialogue is in place.
And I think the President is right saying that this is the
time to talk about it. He said that if you like the plan you
got, you keep it, you choose your own doctor, you do that and
that the timing is right. I think the quality of care is a
critical issue and you only worry about that if you get sick.
If you are not sick, you do not need a hospital, do not need an
insurance plan and that is why young people a lot of times do
not get one. They choose not to. And the quality care, access
to care and certain affordability, and these are some of the
issues we are talking about.
Let me just tell you a quick little situation I bumped into
Saturday with a friend. I went up to pick up some posts, I was
doing some work on the farm, and this guy was selling them. And
I looked at him and I said--he said, ``Well, I don't feel
well.'' And I said, ``What is your problem?'' He said, ``I
really need to go and have some medical attention. Number one,
I don't have insurance.'' He owned his farm, but he did not
make enough money to afford health insurance, he could not
afford to have the kind of care he needed. So as any other
Member of Congress would do, he happened to be in my district,
we called, we tried to find care, and tried to link him up with
people who do it, but a lot of that happens. The point is that
ought not be the way people have to get care. So my question is
that if you have care in a lot of cases, and in some places
depending on where you are, if you live in a rural area, you
are less likely to have access as you have already heard
because primary care is very difficult, people have figured out
the way we reimburse, and we have to change that, and I hope we
do it in this legislation.
But let me ask a question to you, Ms. Pollitz, because, as
you know, insurers, and you mentioned this earlier in your
testimony or in answer to a question, rescinding health
insurance policies if the policyholder has lied or concealed
information from his or her--on his or her application. Okay,
we understand that, that makes sense. But in a number of cases,
in testimony even before this--not before this Committee but
before other Committees, on June 17th, it was reported that
three major insurance groups went before a Committee and
admitted and said they were going to keep doing it for people
because they were sick. It reminds me if I have fire insurance
and my house burns down, I expect the insurance company to pay
it unless I set it on fire myself. And what they are saying is
if you have a fire, you can pay your fire insurance as long as
you do not have a fire. But if you have a fire, you are out of
luck because we are going to cancel your plan or you are going
to court. Well, we are saying the same thing with insurance,
aren't we? Isn't that the same kind of thing we are talking
about, if you get sick and you are really in bad shape, you
have a policy, where you have a condition that stretches out,
you have cancer, you have liver disease, you have a number of
things, that bothers me. I don't know if we can fix it all but
certainly--if you are going to be in the business of insuring,
if you only choose people that are healthy, you are going to
make money and you are not going to pay much out.
I would be interested in--I know these people are smart, I
want them to make money, but at the same time I don't want them
to discriminate against sick people, especially if they are
people I represent.
Ms. POLLITZ. You are absolutely right, Congressman, and I
was at the hearing, at the table with the executives when they
said they would not cease to practice. And Mr. Barton, the
Republican leader, said to them, ``You do not have a friend in
this room.'' One of the witnesses was a constituent of his who
was a nurse, she had purchased a policy, she had paid her
premiums, she was diagnosed with cancer, and at one point
investigated, re-investigated--everything that they had
investigated previously when she applied, they investigated
again with a fine-tooth comb and they found that she had failed
to disclose a visit to a dermatologist for what turned out to
be acne and on that basis they took her policy away. And Mr.
Barton fought them until they put it back. And there were other
witnesses with similar stories and it is a common practice.
The executives testified that they maintain lists of as
many as 1,000 to 2,000 different conditions and as soon as a
claim comes in on one of those conditions for a new
policyholder, that will trigger the post-claims underwriting
process.
And I think it is important that the draft legislation
makes extra clear, I think it is already illegal under current
legal, but makes extra clear that policy rescission would not
be permitted any longer.
Mr. ETHERIDGE. Thank you. Thank you, Mr. Chairman. I yield
back.
Mr. STARK. Mr. Yarmuth.
Mr. YARMUTH. Thank you, Mr. Chairman. I hate to spend any
of my time on this subject but we now have had four votes since
we convened this hearing this morning. All four were motions by
the Minority to adjourn the House in a dilatory effort to just
gum up the works so that we cannot accomplish what we are
trying to do for the American people. I was not here when we
were in the Minority, maybe my party did the same thing, but I
consider it, and I know many of my colleagues and the
Republicans consider it disrespectful to the American people.
So I hope who is watching would take the opportunity to call
their Representative and urge the Republican leadership to let
us get about the business of the American people.
Now, with that being said, Dr. Gratzer, how many countries
are there in the world?
Dr. GRATZER. Oh, if you looked at my geography marks back
in high school, you would know I am not----
Mr. YARMUTH. About 190, give or take one or two. How many
of those countries have some kind of a health plan, do you
know? They said you studied these.
Dr. GRATZER. Well, I have studied Western Europe and the
United States and Canada, I could not comment on Africa and
Asia.
Mr. YARMUTH. Okay, well, let's just limit our discussion to
the industrialized nations. How many of the industrialized
nations in the world have some form of government single payer
health care?
Dr. GRATZER. Many.
Mr. YARMUTH. Most, if not all but this country, is that
correct? Are you aware of any that do not?
Dr. GRATZER. Well, it depends on what you mean by single
payer. I mean if you think if you take it more broadly to
include social insurance, all except the United States.
Mr. YARMUTH. Thank you, that was the answer I was looking
for.
Dr. GRATZER. There you go.
Mr. YARMUTH. Are there instances in which government single
payer health care co-exists with private insurance?
Dr. GRATZER. Yes, in most countries. Canada would be
exceptional.
Mr. YARMUTH. Canada is the exception, so what you and other
opponents of the public option have chose to do is single out
Canada as the one example, even though it is an outlier of the
supposed plans that we are trying to model. Is there anything
else that we have modeled other than hockey that we have tried
to take from the Canadians?
Dr. GRATZER. I would point out that while you have tried to
model hockey----
Mr. YARMUTH. We have tried to model hockey.
Dr. GRATZER [continuing]. Canadians still have the
advantage.
Mr. YARMUTH. I concede that.
Dr. GRATZER. Well, I was going to----
Mr. YARMUTH. No----
Dr. GRATZER [continuing]. But hold on a second, sir. I
think it is important to draw lessons, and I see your point
that Canada is a bit of an outlier. I would point out though if
you look at countries like Britain or Sweden, while they have
the option of private insurance, those markets remain
incredibly small because they got crowded out and the
problems----
Mr. YARMUTH. What about Germany?
Dr. GRATZER. Germany has a social insurance policy that is
tightly regulated by the government. As you know, France has a
similar one.
Mr. YARMUTH. But there is also a private insurance market,
health insurance market in Germany, isn't there?
Dr. GRATZER. And in Canada, I should point out, you can opt
out as well. You cannot buy private insurance but you can opt
out and buy private service.
Mr. YARMUTH. So the point is we have the opportunity to
follow any number of models, to do none of them, to create
something that is distinctly and uniquely American, don't we?
Dr. GRATZER. I think that that would be a good thing, but I
would be cautious about----
Mr. YARMUTH. I am glad you----
Dr. GRATZER [continuing]. In Washington given the way
government expansion has gone in other countries.
Mr. YARMUTH. I am glad you applaud our effort. Now, I want
to get to this issue of 120 million people who would move from
a private plan to a public option supposedly, the Lewin Report.
Was the Lewin Report based on an analysis of the discussion
draft that we have before us now? Does anybody want to comment,
Dr. Holahan?
Mr. HOLAHAN. Yes, I would. No, it was done before this
draft came out obviously, but there were a lot of assumptions
in there that got them that high a number. There were no
exchanges. They made a big assumption about the difference in
administrative costs. They assumed that the plan would pay
Medicare rates as opposed to Medicare plus something.
And there were some other issues that I cannot recall, but
it was--oh, one of the things that I think was very important
is that they assumed the private system would not respond at
all to competition from the public.
Mr. YARMUTH. Right, so it is fair to say that that analysis
and that projection has nothing to do with the document that is
before us?
Mr. HOLAHAN. It does not.
Mr. YARMUTH. When the representative from the Lewin Group
was here, he mentioned the same thing, he said 70 something
percent of the American people are happy with their insurance,
and they prefer to get it from their employer. And yet he also
said that 120 million people would move. And I asked the
question of him, ``Well, if they love their plans so much, why
would they move?'' And he said, ``Because it would be
cheaper.'' Is that your assessment, Dr. Gratzer, that that is
why they would move because it would be cheaper?
Dr. GRATZER. That is the way it was designed. That is Jacob
Hacker's original analysis, sure.
Mr. YARMUTH. Is it your contention or is the implication of
that that all insurance companies do is compete on the basis of
cost, this was a point that was actually made by Mr. Blumenauer
and others?
Dr. GRATZER. Of course not.
Mr. YARMUTH. Of course not?
Dr. GRATZER. Of course, there are also quality issues for
sure.
Mr. YARMUTH. Right. And if it were just a matter of cost,
then the implication would be that the insurance companies are
basically overcharging. If the government could create a plan
that would provide the same service for less money, then the
implication would have to be the inference that the insurance
companies were overcharging.
Dr. GRATZER. No, the implication is that the Federal
Government does not play fair in price controls.
Mr. YARMUTH. How would the government be able to price
control? There is nothing in this bill that forces a doctor to
participate, is there?
Dr. GRATZER. As with Medicare, one sees that price controls
can have an enormous impact and you can provide cheaper
insurance. Be careful what you wish for.
Mr. YARMUTH. My time is up, Mr. Chairman. Thank you.
Mr. STARK. I know the panel does not believe this, but I
think we have concluded. And I cannot thank you enough for your
patience and discomfort of sitting so long as we have leaned on
you for help and information and it is helpful. I know that
many people, so I can excuse the panel.
I just would summarize that there will be lots of changes
between now and the middle of July when we start to mark up and
know more about the costs than we do now, but I appreciate your
indulgence and your help.
And if the second panel has not escaped, I would ask them
to come forward if they are still here. Mr. Kirsch, who is the
National Campaign Manager of Health Care for America NOW; Mr.
Mike Draper, who is the owner of SMASH from Des Moines, Iowa;
Peter Lee, the Executive Director for National Health Policy,
Pacific Business Group on Health from San Francisco; Mr. Gerald
Shea, who is the Special Assistant to the President of the AFL-
CIO; Ms. Jennie Chin Hansen, who is President of AARP; and Mr.
Randel K. Johnson, who is the Senior Vice President for Labor,
Immigration and Employee Benefits for the U.S. Chamber of
Commerce.
Get a nice soft seat. I would also as you are getting
settled suggest that we may have interruptions from time to
time for votes, but I know that all of the Members have
received your prepared testimony, and I know that they have
prepared questions from that. And while they will be interested
in hearing a summary of that, it is obvious that many of them
are not here. I hope you will forgive our formalized
procedures. We will ask you to summarize your testimony, and we
will get through that. We will start to give the Members a
chance to inquire, which will I think elicit a lot of
information that will help us as we move ahead with this
proposal.
I am looking to say with us and so we are missing Mr. Shea.
He will be back, okay. Mr. Kirsch, would you like to proceed
since you are first on the list?
STATEMENT OF RICHARD KIRSCH, NATIONAL CAMPAIGN MANAGER, HEALTH
CARE FOR AMERICA NOW!
Mr. KIRSCH. Yes, I would. Thank you very much, Chairman
Stark and Members of the Committee for your patience this
morning as well as ours.
My name is Richard Kirsch. I am the National Campaign
Manager of Health Care for America NOW, which is a coalition of
more than 1,000 organizations in 46 States that are committed
to specific principles to provide a guarantee of quality,
affordable health care for all. Those principles have been
endorsed in writing by the President of the United States and
196 Members of Congress, including 176 Members of the House of
Representatives from both parties.
I am so pleased to join you this morning because the
legislation you have drafted meets those principles; it would
deliver on the promise of quality, affordable health care for
all in a health care system that is retooled to deliver better
quality at lower cost. You have done so in this unique, tri-
committee process that recognizes the urgency and historic
imperative of this issue.
Our current health care system is a huge stumbling block to
the American dream. No matter how hard we work, or make
responsible choices for ourselves and our families, our health
care system often gets in the way. For too many families, one
serious illness can mean financial disaster, as medical costs
contributed to more than three out of five personal
bankruptcies, and most of those were people with insurance. And
even those with good insurance have limited choices and dreams
deferred in our system because if you want to look for a new
job, start that new business, retire at 59, you are trapped
because you will not be able to get affordable coverage--if you
can get coverage at all.
And of course, so many working families cannot get coverage
at all. Neither can many small businesses--that other engine of
the American dream--who want to do the right thing for their
employees, but cannot as health care premiums skyrocket every
year.
The good news is that we can fix what is wrong with the
system with a uniquely American solution. For those who say we
cannot do this, it is too complicated, it is too much to take
on, it's too much at once, your legislation is proof positive
that yes we can.
As Americans begin to pay attention to the health care
debate, they are asking what does this mean to me? Here is how
I would explain to people how this works and how your
legislation will make their lives better.
First, if you have good health coverage at work, you can
keep it. But there will be two important changes. Under your
legislation, you will no longer have to worry about your
coverage at work getting skimpier every year, or your employer
taking a bigger chunk each year out of your paycheck. Your
employer coverage will not be barebones. It will cover most of
your health care. It will not stop paying if you get seriously
ill. Your job will pay for a good share of coverage for you and
your family. One more thing, whatever job you take, you will
have good health care. That is because all employers will
either provide coverage or help pay for it.
Now, if you do not get health coverage at work, you work
several part-time jobs, you are self-employed, an early
retiree, or simply out of work, you will now be able to get
good, affordable coverage. You will not be turned down because
of a preexisting condition or charged more because you have
been sick or you are a woman of childbearing age. You can still
be charged more if you are older, but only so much.
And how much will it cost you? That will depend on your
earnings, the size of your family, the assistance for low-,
moderate-, and middle-income families.
You will go to get insurance in a new marketplace, called
an exchange. In the exchange, all plans will have a decent
level of benefits and play by the same rules. And no matter
which plan you choose, your out-of-pocket costs will be
limited; no more catastrophic medical bills.
You will have a choice of the new public health insurance
plan too, so you will not be limited to the same private
insurance companies that have a record of denying and delaying
care while they raise premiums three or four or five times as
much as wages.
As the President says, there are two reasons for the choice
of a public health insurance plan. The first is to lower costs
from a plan that does not pay the average CEO $12 million a
year, or have sky-high administrative costs. The mission of the
public health insurance plan will deliver the kind of delivery
system changes we need to innovate, provide better value and
invest in our communities and make real progress in eliminating
the barriers and disparities and access to services we
experience today.
The second reason the President says we need a public
option is to keep the insurance companies honest. The 93
percent of Americans who do not trust private insurance
companies know that no matter how much we regulate them, their
first order of business, actually their legal fiduciary
responsibility to the shareholders is to make a buck. When they
pay for someone's costly care, their profits go down.
This legislation also answers the crying needs of small
businesses for affordable coverage. By offering tax credits and
allowing small businesses to enter the exchange, it gives them
the advantage of a large pool and lower costs.
Your legislation does a great deal more for the poorest
through Medicaid and for seniors on Medicare to address the
lack of primary care providers and disparities in access to
health care.
Are there ways we would improve on this draft? There are,
although not a great number. And we will detail them in our
written testimony and I can suggest some today if you would
like.
I would like to conclude by asking you to keep in mind one
question over the coming weeks, as you hear from a myriad of
interest groups complaining about this and that. It's the
question your constituents will ask at the end of the day: Will
I have a guarantee of good coverage that I can afford?
The draft legislation you have presented answers with a
resounding yes. And if the answer remains yes, next fall when
you send a bill to the President for his signature, you will
have done your jobs. And in doing so, made history.
Thank you.
[The prepared statement of Mr. Kirsch follows:]
Prepared Statement of Richard Kirsch,
National Campaign Manager, Health Care for America NOW!
Good morning, Chairman Rangel, Chairman Stark and Members of the
Committee. My name is Richard Kirsch. I'm the National Campaign Manager
of Health Care for America NOW, a coalition of more than 1,000
organizations in 46 States that are committed to specific principles to
provide a guarantee of quality, affordable health care for all. Those
principles have been endorsed in writing by the President of the United
States and 196 Members of Congress, including 176 Members of the House
of Representatives from both parties.
I am so pleased to join you this morning because the legislation
you have drafted meets those principles; it would deliver on the
promise of quality, affordable health care for all in a health care
system that is retooled to deliver better quality at lower cost. You
have done so in this unique, tri-committee process that recognizes the
urgency and historic imperative of this issue.
Our current health care system is a huge stumbling block to the
American dream. No matter how hard we work, or make responsible choices
for ourselves and our families, our health care system often gets in
the way. For too many families, one serious illness can mean financial
disaster, as medical costs contributed to more than three out of five
personal bankruptcies, and the great majority of those are people who
are insured. Even having good insurance limits choices and defers
dreams. Want to look for a new job, start that new business, retire at
59? Trapped because you won't be able to get affordable coverage--if
you can get coverage at all.
And of course, so many working families can't afford coverage at
all.
Neither can many small businesses--that other engine of the
American dream--who want to do the right thing for their employees, but
can't as health care premiums skyrocket every year.
The good news is that we can fix what is wrong with the system with
a uniquely American solution. For those who say we can't do this, it's
too complicated, it's too much to take on, it's too much at once, your
legislation is proof positive that yes we can.
As Americans begin to pay attention to the health care debate they
are asking what does this mean to me? Here's how I would explain to
people how this works and why it will make their lives better.
If you have good health coverage at work you can keep it. But there
will be two important changes. Under your legislation, you will no
longer have to worry about your coverage at work getting skimpier every
year, or your employer taking a bigger chunk each year out of your
paycheck. Your employer coverage will not be barebones. It will cover
most of your health care. It won't stop paying if you get seriously
ill. Your job will pay for a good share of coverage for you and your
family.
One more thing, whatever job you take, you'll have good health
care. That's because all employers will either provide coverage or help
pay for it.
If you don't get health coverage at work, you work several part-
time jobs, are self-employed, an early retiree, or simply out of work--
you'll now be able to get good, affordable coverage. You won't be
turned down because of a preexisting condition or charged more because
you've been sick or you're a woman of childbearing age. You can still
be charged more if you are older, but only so much.
How much will it cost? The amount you pay will be based on your
earnings and the size of your family, with assistance for low-,
moderate- and middle-income families.
To get insurance you'll go to a new marketplace, called an
exchange, one-stop shopping for health coverage. All plans will have a
decent level of benefits and play by the same rules. No matter which
plan you choose, your out-of-pocket costs will be limited; no more
catastrophic medical bills.
You'll have a choice of a new public health insurance plan too, so
you won't be limited to the same private insurance companies that have
a record of denying and delaying care while they raise premiums three
or four or five times more than wages.
As the President says, there are two reasons for offering the
choice of a public health insurance plan. The first is to lower costs
from a plan that doesn't pay the average CEO $12 million a year, or
have sky-high administrative costs. The mission of the public health
insurance plan will be to drive the kind of delivery system changes we
need to innovate, provide better value and invest in our communities'
health. A plan that will inject competition into the 94% of markets in
this country that are anti-competitive under Department of Justice
standards.
The second reason the President says we need a public option is to
keep insurance companies honest. The 93% of Americans who don't trust
private insurance companies know that no matter how much we regulate
them their first order of business--actually their legal, fiduciary
responsibility to their shareholders--is to make a buck; when they pay
for someone's costly care, their profits go down.
An additional reason for the public health insurance plan is to
ensure that we make real progress in eliminating the barriers and
disparities in access to needed services that are too often experienced
today.
Poll after poll shows strong support for the choice of a public
health insurance plan. This Sunday the New York Times/CBS poll found
that 72% of those polled support ``offering everyone the choice of a
government-administered health insurance plan--somewhat like the
Medicare coverage that people 65 and older get--that would compete with
private health insurance plans,'' including half of the Republicans,
three-fourths of the independents and nine out of ten Democrats.
This legislation also answers the crying needs of small business
for affordable coverage. By offering tax credits and allowing small
businesses to enter the exchange, it gives them the advantage of a
large pool and lower costs.
To the question of how we will pay for this, you have said with
shared responsibility: Individuals responsible for what they can
afford, employers responsible for paying for more affordable coverage.
Government will fulfill its responsibility by achieving savings in the
system and by raising new revenues that you will soon detail. In doing
so, we would urge you to raise revenues from those who can most afford
it and by closing Wall Street and corporate loopholes. Not by taxing
the health care benefits of those who still are fortunate enough to
have good insurance.
Your legislation does a great deal more, for the poor through
Medicaid, for seniors on Medicare, to address the lack of primary care
providers and the disparities in access to health care.
Are there ways we would improve on this draft? There are, although
not a great number. We will detail them in our written testimony and
I'd be glad to discuss some suggestions during the question period.
I'd like to conclude by asking you to keep in mind one question
over the coming weeks, as you hear from a myriad of interest groups
complaining about this and that. It's the question that your
constituents will ask at the end of the day: Will I have a guarantee of
good coverage I can afford?
The draft legislation you've presented answers with a resounding
yes. And if the answer remains yes next fall when you send a bill to
the President for his signature, you'll have done your jobs. And in
doing so, made history. Thank you.
Mr. STARK. Thank you. And, Mike Draper, the owner of SMASH
from Des Moines, would you like to proceed? Is your microphone
on?
Mr. DRAPER. Yes.
Mr. STARK. Okay.
STATEMENT OF MIKE DRAPER, OWNER, SMASH,
DES MOINES, IOWA
Mr. DRAPER. I may be a little nervous. This is my first
time speaking to so many empty leather chairs.
[Laughter.]
Mr. DRAPER. As I look through this list, I am probably the
only person who is not recognizable with the organization I am
from, and so I thought maybe I would start with explaining
exactly who I am and how I got to be here.
I own a store called SMASH. I am 26 and SMASH is a clothing
store and screen printing shop located in beautiful downtown
Des Moines. So essentially I am the token Main Street guy, the
``Mike Six Pack,'' if you will.
I grew up in a small town in Iowa, studied history at the
University of Pennsylvania, then moved to the United Kingdom
where I married a girl from London, who was more than surprised
when I decided to move back to Iowa and start a screen printing
retail store, not just for the fact that she had to move from
London to Des Moines but for the fact that I had no experience
in retail, design or screen printing. And the closest I had
come at Penn to a formal business education was a
macroeconomics class, which I dropped after getting 42 percent
on the supply and demand test.
I started the company at the bottom, printing shirts and
selling them out of a bag on the street or on college campuses.
While I was selling shirts on the street in Union Square with
other vendors, I thought to myself, ``Well, it is true. You
really cannot do anything with a history degree.'' But I worked
constantly and set up a website in 2004 and then opened SMASH
in 2005 as an 1,100 square foot retail store by myself and
grossed $90,000 the first year. Now, 4 years later, the store
has 4,200 square feet, 12 employees, and we will gross over $1
million this year, having been featured in the New York Times
twice, NPR twice and several other national publications.
Along the way, I got the business education I needed. I
have had to figure out business strategy, management,
bookkeeping but health care has proved probably the most
frustrating. In 2007, after 2 years of being uninsured, I
bought an individual policy and felt like I was one of the
``chosen few.'' And my insurance epiphany probably came when I
had a minor surgery and weeks later was sent a bill for $347
for miscellaneous hospital charges. I started to wonder what
would happen if I started sending out customers $347
miscellaneous T-shirt charge bills after I got done. But that
is kind of the introduction of the system does not work on a
market and it did not make sense.
And you guys probably know most of the problems as well as
I do but the solution is a lot trickier. I think the bill that
everyone has come up with here is a pretty good start. I think
the exchange addresses a lot of those problems with general
regulation, better pricing, transparency and coverage rules.
But in my opinion competition is always more effective than
just regulation and the public option is the only option strong
enough to compete with the private sector.
Now, when I hear ``public option,'' I do not hear ``free
option.'' I am not here asking for free health care, a
government handout. I am asking for rational health care. As a
businessowner, I would gladly pay 8 percent of my payroll into
a public option since that would give me two things: One, peace
of mind that my employees would be covered by something backed
by the government; and, two, more importantly, an ability to
accurately budget per year my company's health care expenses.
Right now, my premiums and bills will fluctuate between 6
percent and 22 percent of payroll in any given year. An expense
that large and unpredictable is what drives companies out of
business, not a tax that they know they have to pay at the
beginning of the year.
Now, it may sound strange that I would be willing to pay a
new tax but rest assured I am not a socialist. I am not here
trying to undermine capitalism. Rather, the small mountain of
money I send to you guys several times a year does not make me
clamor for more government, but the unsustainable cost of my
current health cost, the one thing that could probably ruin the
company, makes me clamor for an actual option.
The public option is less intrusive to me since I would
have the option. I could take the public plan or I could take
the private plan. With simply doing the exchange or by simply
regulating the market, it seems like bigger government. You
could have new rules, possibly required health care, some
subsidized by the government, meaning that my tax money would
go to subsidize some people's money going to the private
insurance industry. On the other hand, my private money has to
go to that same private insurance industry. Now, even somebody
who has dropped out of macroeconomics says that that is a kind
of frustrating thing to deal with.
I understand that the issues are complex. Insurance blends
technical problems with ideological differences and many of the
details of the plan really can only emerge when it is
functioning, making these details impossible to know now, such
as how many people will take the public plan, if rates will
actually go down.
But not knowing every detail of the future should not stop
us in the present from working for a better one. And something
needs to be done for the future of small business health care.
We should not lose sight of the fact that this is one of the
few countries where somebody like me can start a business with
no business knowledge and succeed. And while you guys cannot
legislate entrepreneurial spirit, you can help to take down
some of the hurdles impeding entrepreneurs from starting
companies. Right now, health care is one of the biggest hurdles
to either entrepreneurs trying to start companies or existing
companies staying in business. And I think the public option is
our best option for taking care of that.
Thank you.
[The prepared statement of Mr. Draper follows:]
Prepared Statement of Mike Draper, Owner, SMASH, Des Moines, Iowa
Chairman Rangel, Ranking Member Camp and Members of the Committee,
thank you for inviting me to be here today and to testify on behalf of
my business and small businesses across Iowa.
My name is Mike Draper. I am 26 and own and operate SMASH, a
clothing store and screen printing/design shop in beautiful downtown
Des Moines, Iowa.
Although I grew up in a small town outside of Des Moines, even the
21-year-old me never would have guessed that the 26-year-old me would
be back in Iowa living and working. I left the State for the east coast
at 17 to study history at UPenn in Philadelphia, I spent a year and a
half living in the UK and Germany, and in the UK I met a girl from
London who I would convince to marry me.
And let's just say that of all the people who were surprised I was
moving back to Iowa, she and her parents were definitely in the top 5.
More surprising was that I wanted to run a clothing store and
screen printing shop. I had no experience in design, in printing, or in
retail clothing, but I always say that if I had ever actually stopped
to analyze my situation, I never would have started the business I
started.
After I graduated, I lived with friends while I traveled around
selling shirts out of a bag on college campuses and busy street
corners. One day selling shirts in Union Square I began to worry that
what I had heard from so many people was true: You really can't do much
with a history degree.
But I worked constantly. I built a website to sell shirts. I bought
screen printing equipment. And I realized that my home State of Iowa
offered the affordable space and the niche market I needed to succeed.
So in 2005 I moved back and opened a 1,100 square foot retail and
printing space by myself and I grossed about $90,000 in sales. Now, 4
years later, SMASH has 4,200 square feet, a dozen employees, and will
gross over $1 million in sales this year.
Like many businessowners, I have realized that business is often
less about the idea, and more about finding solutions to the constant
problems that come from dealing with other humans. The closest I ever
came to a formal business education was a macroeconomics class that I
dropped after getting a 42% on my first test that only covered supply
and demand. But even without business training I have successfully
maneuvered my way through small business taxes, building codes,
trademark law, even immigration issues for a web designer from Denmark
who went to college in Des Moines and now works at SMASH.
But health care has always confounded me.
SMASH and the Challenges of Health Care
Right after college, while I traveled and sold t-shirts, I went
without health insurance. When I bought an individual policy in 2007,
after 2 years of being uninsured, I thought I had become part of the
chosen few, the insured. But my ``insurance epiphany,'' when I realized
how odd our system is, came weeks after a minor surgery, when I got an
unannounced $347 bill for ``miscellaneous hospital charges.''
I laughed when I opened it, imagining what would happen if I
started mailing out bills that said, ``miscellaneous t-shirt charges''
to customers weeks later.
It dawned on me how little my individual policy covered: High
deductible, high drug costs, no free doctor's exams. But there was
nothing else I could afford.
As SMASH added more employees, there were now more people
inheriting my situation. As young moderns, none of us want to be tied
to a corporate policy--we would rather have a flexible plan we can
travel with. And so all of the employees at SMASH have individual
policies that the company pays for.
This most basic coverage makes up 8% of our gross payroll.
What alarms me is that this is the most elementary coverage offered
by our provider, Wellmark, and is really only intended to provide the
most basic coverage in case of catastrophic accidents.
If SMASH were to try and provide our employees with full family
coverage, our costs would balloon to about 22% of our gross payroll,
and still we would have plans inferior to those plans of larger
companies.
I can't run away from the cost of health care, either for myself,
my family, or my employees. The way we do things now, where responsible
employers offer coverage and others don't, creates an incredibly uneven
playing field. I'd much rather be part of a system where all employers
are contributing a fair share, instead of this game of shifting costs
that we're playing today. Small businessowners like me are willing to
contribute--73% said so in the Taking the Pulse of Main Street survey
conducted by the Main Street Alliance last year.
Once my wife took a job as a nurse, I moved my insurance to her
family plan, but with our family growing, it becomes more likely that
my family plan will soon go through SMASH. And as the SMASH employees
age and add families, the 22% cost becomes more and more likely.
I have seen being uninsured, being underinsured, now being
``fully'' insured under my wife's plan, and I've spent over a year
living under the UK's national health. I'm as aware of the problems in
each as everyone here is.
Big Steps in the Right Direction
The solution is much trickier, but I think the draft bill released
by this Committee last week is a great start. The ``Exchange'' seems to
address the need for basic regulation, transparent pricing, and
coverage rules. It points out the major holes in our current system and
gets to the heart of the matter: That we need competition. The Exchange
will provide a more competitive, transparent marketplace that will
offer real choices for individuals and small businesses. In the
Exchange, we will actually be able to compare the insurance plans being
offered because the benefit packages will be standardized and the
differences in the plans will be disclosed.
I'm also happy to see the provisions in the draft legislation to
reform insurance practices to prohibit discriminatory coverage and
rating policies. These changes are long overdue--I wish it wasn't
necessary for the Federal Government to step in and pass laws to get
insurers to stop these unfair practices, but if that's what it takes
then I support you taking action as quickly as you can to put them in
place. Reforms that prohibit exclusions based on preexisting conditions
and discrimination in benefits, require plans to meet minimum medical
loss ratios, do away with annual and lifetime limits on coverage and
cost-sharing for preventive care, limit unfair rating practices,
provide for guaranteed issuance and renewal of policies, and assure the
adequacy of provider networks will go a very long way to creating a
sane marketplace where policies are worth their premiums and where
individuals and small businesses can be smart shoppers for the health
care coverage they need.
By creating a Health Insurance Exchange, the bill makes it possible
for small businesses to have the affordable option necessary for
employers and individuals to share the responsibility of providing
quality health care coverage. I like the idea of the ``Exchange,'' but
in my opinion, real competition is always more effective than
regulation alone. The public option set forth in the bill will do more
than anything to ensure competition, and is therefore the most
important component to me. Having a public plan that will compete toe-
to-toe on a fair basis with private plans will guarantee that even in
local insurance markets dominated by one or two private insurers, we'll
have real choices and the leverage that comes from being able to vote
with your feet and take your business elsewhere if you can't get the
insurance coverage you need.
I'm convinced that by encouraging real competition and restoring
vitality to the market, a public health insurance option will really
drive broad-based positive change in the private sector health
insurance industry. According to the Commonwealth Fund, health reform
that includes a public option has been estimated to save employers $231
billion over 2010-2020, and $3 trillion for the Nation. Without the
public plan option, those savings shrink from $3 trillion to less than
$800 billion: We lose three-quarters of the savings. I don't know much
about budget scorekeeping in Congress, but it seems to me like these
are savings we can't afford to pass up.
A public plan is also essential to encourage innovation in coverage
and affordability in a competitive market. Our business has to be
constantly looking for ways to serve customers better, more
efficiently, at lower prices, and we are definitely driven by
competition from other businesses. As a purchaser of health insurance
coverage, I want my insurer to have to compete for my business the same
way that I have to compete for my customers.
I understand that the insurance issue is not only technically
complicated, but also invites ideological differences on government
involvement. But it seems to me that some of those differences are
obscuring the real agreement on the need for a public health insurance
plan. A number of recent polls suggest that somewhere around 70% of the
public supports the creation of a public health insurance option and
from what I've seen most of the small businessowners I know agree. In
the survey I mentioned earlier conducted by the Main Street Alliance,
70% of the responding businesses said they believe government should
play a stronger role in guaranteeing access to quality, affordable
health care. When asked to choose between a reform proposal with a
public insurance option and one with expanded private market options,
59% of the responding businesses chose the plan with a public option,
compared to 26% that preferred a proposal with more private market
options.
The bill also includes a phase-in of eligibility for small
employers to secure coverage through the Exchange and to gain access to
the public health insurance option, with firms employing 10 or fewer
workers eligible in year one and firms up to 20 employees eligible in
year two. I realize that this phase-in is intended to be cautious and
not create unintended consequences by moving too quickly. But from my
viewpoint, we can't make access to the public plan option and the other
private plan options available too soon. I would encourage the
Committee to consider accelerating the phase-in for employers to gain
access to the Exchange.
Now I don't read ``public option'' as ``free option.'' I'm not here
asking for free health care, all I'm asking for is rational health
care.
I and other small businesses in my neighborhood are not tired of
health care premiums. We're tired of health care premiums going to
companies whose sole goal is to turn a profit, with little or no regard
for the impact of their policies and practices on small businesses like
ours. With SMASH's insurer, Wellmark, I know that I am a minute number
on a long balance sheet that can be dropped or dragged through court.
With a public health insurance plan option offered through the
Federal Government, I would have an independent Federal agency
accountable to Congress--you all--on my side, and a system whose goal
is not to maximize profits at all costs, but to actually provide real
health coverage that meets the needs of my business. Which means at
this point, apples to apples, if I had to choose between paying my
premiums to the Federal Government or Wellmark, I'd rather send my
premiums to the government.
It may sound strange to hear a small businessowner like me say I'd
rather send my premium dollars to the Federal Government than to a
private insurer. When it comes to economic issues, the pile of money I
send to Washington, DC makes me fairly conservative. But it is this
conservative streak in me that wants the competition that a public
option will bring.
First of all, I understand that there may be additional taxes
involved, but I don't mind paying taxes that are well spent. Right now,
however, I see my tax money going to pay for high-cost health care that
county hospital ERs are forced to provide for the uninsured, while 8%
of my payroll already goes toward providing only the most basic,
catastrophic coverage for a group of employees who are all single and
in their 20s.
That means I'm paying for two separate yet equally inefficient
systems, and even someone who dropped macroeconomics can see that isn't
rational.
Second, I support the idea of shared responsibilities in the bill
that require individuals and employers to play their part in assuring
that everyone has health care coverage. I agree with the approach of
giving employers an option of providing coverage for their workers or
contributing funds on our worker's behalf. In my own case, I think
paying 8% of my payroll to provide health insurance for my employees is
fair, and the benefits package is likely to actually cover our health
care costs with no preexisting condition exclusions.
For a business, taxes are easy to take into account because they
are a fairly static expense. What are not static are health care bills
that cannot be budgeted each year. I have never met a business that
went under because of their tax burden, but I meet small businesses and
entrepreneurs all the time that can't make it because of their health
insurance burden. If extra taxes will help to stabilize the insurance
market and make it something I can actually depend on for care and
realistically budget for, I am in full support.
While 8% would not be any issue for SMASH, I'm glad to see
provisions in the bill to establish a tax credit to help small
employers bear the cost of providing coverage for their workers. A 50%
credit will give a big boost to businesses with 10 or fewer employees
with average compensation of $20,000. This, too, offers a great deal of
help in improving the health insurance options currently available to
small businesses.
I also understand that requiring employers to provide health
insurance puts another responsibility on me, but it's nothing new for
small business. I already take care of withholding tax and unemployment
tax for employees. If one of you came in to shop, I'd make sure the
government got the sales tax you owed. These are the responsibilities
that come with being at the top of the ladder. Right now, I have the
unpleasant responsibility of knowing that the only health coverage we
have is insufficient coverage, that one catastrophic illness could not
only ruin one of my employees, but could put the entire company in
serious trouble. When compared to that, I would gladly accept the
responsibility of providing insurance coverage that I wouldn't have to
worry about.
Representatives of the Main Street Alliance look forward to
continuing to work with you to assess the interaction of the various
small business related provisions in the bill to ensure there is
affordability across the range of small businesses, whether they
directly provide coverage for their workers or contribute to helping
workers buy their own coverage through an Exchange.
An American Solution
I understand this is a complicated issue, but I think the U.S. is
in a unique situation. We could now create a public-private hybrid that
could work better than any system in the world, one that blends the
stability of a government-backed system with the self-regulation of a
market system.
As we step back, we shouldn't lose sight of the fact that this is
one of the few nations where people like me can jump into business and
succeed with hard work. We should recognize that it is not just a free
market that makes this possible, it is also our country's ability to
provide things like affordable public education to give people the
tools they need to succeed in business.
Health care is currently a huge hurdle that is often too high for
would-be entrepreneurs to surmount, and this creates a serious drag on
a major part of our economic engine.
While you can't legislate the entrepreneurial spirit, it is
possible for you, Congress, to tackle the hurdles holding back many
small businesses and the economy at large. This model of creating
choice and competition is an opportunity to do just that.
Adding a public option to health care would not only ensure care
for the uninsured, it would provide a much needed injection of energy
at the front lines of our market economy, making it easier for young
people like me to strike out on their own and start their own business
like millions of Americans before them and keep our country leading and
prospering in the century to come.
Thank you.
Mr. STARK. Thank you, Mike Draper. Next, Mr. Peter Lee, who
is the Executive Director for National Health Policy of the
Pacific Business Group on Health from San Francisco,
California. Welcome and please proceed as you would like.
STATEMENT OF PETER LEE, EXECUTIVE DIRECTOR FOR NATIONAL HEALTH
POLICY, PACIFIC BUSINESS GROUP ON HEALTH, SAN FRANCISCO,
CALIFORNIA
Mr. LEE. Chairman Stark, Ranking Member Camp, Members of
the Committee, thank you very much for having me here today. I
represent the Pacific Business Group on Health, which is a
nonprofit coalition of some of America's largest employers that
buy health care.
America's employers recognize that we need to dramatically
overhaul the health care system. The recognition comes from the
fact that they face challenges on a daily basis providing
coverage to over 160 million Americans.
We appreciate what this Committee is wrestling with, what
Congress is wrestling with, and what the Administration is
seeking to do to craft reform that will change health care and
make it more affordable.
There is not a single employer perspective on health
reform, no more than there is a single American perspective on
health reform. There are, however, some core beliefs that
employers share in common. And I have detailed those in more
detail in my written testimony, but I want to go through some
of those beliefs and highlight how they relate to the
discussion draft that we are discussing today.
First, employers believe that we must ensure that all
Americans have health insurance, and we should do that by
building on the current employer-sponsored individual and
public program system. In many ways, the discussion draft does
recognize the important role the employer-sponsored coverage
plays in America and builds on that system. Having coverage for
individuals for small businesses through exchanges across the
country is going to be an important tool. With expanded
coverage, employers are hopeful that the cost shift from the
uninsured will be greatly reduced.
Employers believe that we must address health care costs,
which are driving individual Americans to bankruptcy, making
our companies less competitive internationally, creating long-
term structural deficits that our children will have to bear.
The discussion draft supports many of the delivery system
reforms that we believe are essential to reign in out of
control health care cost while fostering quality. Among the
proposals that we think are important are building and
supporting national rules for a more competitive, affordable
insurance marketplace for individuals and small business,
developing better performance measurements for providers,
changing payment and outlining incentives for higher quality,
and expanding investments for wellness and prevention.
In particular, the discussion draft clearly recognizes the
critical role that payment reform must play in creating better
value for Americans. I applaud in the inclusion of the draft a
range of payment reforms, including bolstering payments for
primary care and changing the way we pay for care to move from
volume to value.
Part of changing payment though should include changing how
payment decisions are made. Current payment policies for
Medicare are too inflexible and quite honestly susceptible to
focused interest of the recipients of payment. Congress should
consider creation of a new entity with independent authority to
implement broad direction that Congress provides.
The discussion draft also recognizes that measuring the
performance of health care is the foundation for quality
improvement, giving consumers better tools and payment reform.
Employers are part of a broad coalition called Stand for
Quality, which makes a number of recommendations, many of which
are in the discussion draft. We encourage the Committee to
consider building those recommendations to make sure there is
enough resources to develop new measures and to support
consultative processes so when measures are put into use,
consumers, purchasers and others are at the table.
Employers strongly support the discussion draft proposals
to expand our national commitment to comparative effectiveness
research. Patients and consumers need better information to
make decisions about what is right for the patient.
The discussion draft also recognizes the need to promote
wellness and prevention. Few issues are as close to the heart
of the employer community; we support those significantly.
I would note that nationally there is a lot of discussion
about the 10-year bill for expending coverage of being $1
trillion or $1.5 trillion. I would point out that those are big
numbers and big issues, but over the next 10 years, we will
spend $45 trillion on health care. The President is right that
the real number we need to look at is how do we reduce health
care costs across the board by $2 to $3 trillion. Your proposal
includes many building blocks to put us on a path for reigning
in costs, but we need to have mechanisms to measure our
progress and hold both the public and private sectors
accountable for reducing costs. We truly are on an
unsustainable track in terms of health care costs.
Part of reducing costs and promoting efficiency is aligning
public and private programs. When we looked at the proposal to
have a public plan, many employers were deeply concerned that
that public plan would shift cost to the private sector. What
we need to have is options that align payment models across
public and private purchasers to ensure that providers are
rewarded consistently but do not shift costs from one sector to
the other.
Health reform must be about making high-quality health care
affordable for patients, employers and government. We look
forward to working with this Committee and so many other
Americans who share that goal.
Thank you very much.
[The prepared statement of Mr. Lee follows:]
Prepared Statement of Peter Lee, Executive Director for National Health
Policy, Pacific Business Group on Health, San Francisco, California
Chairman Rangel and Members of the Committee, thank you for the
opportunity to be with you today. America's employers recognize the
need to dramatically overhaul our Nations' health care system. That
recognition comes from the challenges we face on a daily basis
providing health care coverage to over 160 million Americans. We
greatly appreciate that this Committee, Congress and the Administration
are seeking to craft reforms that will change how health care is
delivered and make it more affordable.
The Pacific Business Group on Health makes these comments as a
nonprofit association of many of the Nation's largest purchasers of
health care, based in California. PBGH represents both public and
private purchasers who cover over 3 million Americans, seeking to
improve the quality of health care while moderating costs. The Pacific
Business Group on Health represents large and small employers in
efforts to improve the value of health care. We help our large
purchaser members ``buy smarter,'' and for many years we operated one
of the largest small employer purchasing pools in the Nation.
There is no more a single ``employer perspective'' on health reform
than there is a single ``American perspective'' on reform. Employers
hold a variety of positions on the big issues of financing and payment,
as well as on issues such as the ``public plan'' and the role of
government. There are, however, some core beliefs about health reform
shared by virtually all businesses that we believe should guide the
Committee on Ways and Means and reform discussions in general. Those
core beliefs include:
We must ensure that all Americans have health insurance
by building on the current system of employer-sponsored, individual and
public programs;
We must address health care costs which are driving
individual Americans to bankruptcy, making our companies less
competitive internationally, creating long-term structural deficits
that are breaking the banks of States across the country, and imposing
unacceptable liabilities on our children;
We must address the persistent differences between how
public and private systems measure performance and pay for care. These
differences lead to confusion for consumers and providers, create
unacceptable price pressures on employers and engender disconnected
incentives between public and private payers;
Health care reform must support and encourage clinicians
and hospitals in delivering better quality, more ``patient-centered''
care--which will entail doing a better job measuring what works,
changing how we pay for health care and making better use of
information technologies;
We need to promote wellness and prevention, instead of
focusing only on intervening after the fact; and
All Americans--as engaged patients, caregivers and
consumers--need to be given better tools and incentives to participate
in getting the right care at the right time.
Americans believe in value--we seek to get the best quality
possible for our money. Yet, no one is getting good value for their
health care dollar. Our health care system is broken. Quality of care
varies dramatically between doctors and hospitals, but those
differences are invisible to patients. Payments reward quantity over
quality and fixing problems over prevention. Lack of standardized
performance measures makes it impossible to know which providers are
doing a good job, and which are not. Consumers lack information to make
the choices that are right for them. Health reform must address these
underlying issues and we are heartened that the proposals in the
Discussion Draft recognize and address many of these problems.
Core Employer Belief: We must ensure that all Americans have health
insurance by building on the current system of employer-sponsored,
individual and public programs.
The vast majority of employers continue to believe that reform
should build on the employer-based system that works for millions of
Americans. Employers see health benefits as a crucial tool that fosters
a more productive workforce. The Discussion Draft affirms the role of
employer-sponsored coverage by building on the existing system and
seeking to expand coverage through small business in Exchanges across
the country. Employers that offer coverage believe that the costs of
insurance for their employees is substantially higher than it should be
because of cost-shifting from hospitals and doctors seeking to recoup
costs of caring for the uninsured and receiving underpayment by public
programs (both Medicare and Medicaid). With expanded coverage,
employers are hopeful that the cost-shift from the uninsured will be
greatly reduced.
Particular elements of reform--especially the possibility of
employer mandates--will have support or opposition from the employer
community in direct relation to whether the broader package of reforms
promote meaningful improvements in the cost and quality of care.\1\ As
well articulated in the Position of the HR Policy Association Regarding
Reform of the U.S. Health Care System (April 2009), large employers
support the voluntary nature of the Nation's employer-based system and
would consider the potential employer play-or-pay mandate only insofar
as it is well-crafted, part of a wide array of other reforms and fully
considers ``the interplay of all elements of the package necessary for
reform.''
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\1\ A recent survey of senior health benefits executives for large
companies identified strong support for government playing a role in
making insurance products available for individuals and small
businesses (with over 55% supporting this role). At the same time,
those surveyed held a range of views, but with more than two times as
many having a negative view of the ``play or pay'' requirement for
employers (38% strongly negative; 19% strongly positive) and
establishing a ``public plan'' (40% strongly negative; 21% strongly
positive). Corporate Health Care Policy Forecast Survey, Miller &
Chevalier/American Benefits Council, June 2009.
Core Employer Belief: We must address health care costs--which are
driving individual Americans to bankruptcy, making our companies less
competitive internationally, creating long-term structural deficits
that are breaking the banks of States across the country, and imposing
---------------------------------------------------------------------------
unacceptable liabilities on our children.
There is broad recognition that we must slow the rise of health
care costs. In the Discussion Draft, several proposals have the
potential of reining in out of control health care costs while
simultaneously fostering higher quality care. Among the reforms
proposed that are essential to reining in costs and fostering quality
and access are those that support national rules to create a more
competitive and affordable insurance marketplace for individuals and
small businesses; developing better performance measurement; changing
payment and aligning incentives for higher quality; and expanding
investments in wellness and prevention.
President Obama has repeatedly underscored that health reform that
does not control costs is not health reform. Similarly, Peter Orszag
has been eloquent in articulating that ``health care costs are the key
to our fiscal future.'' There is much discussion in Washington today
about whether the 10-year ``bill'' for reform is $1 trillion or $1.5
trillion. These are indeed big numbers. But these costs need to be
considered in the context of the projected national health expenditures
for the next 10 years are expected to total $45.2 trillion which will
be borne by taxpayers, employers, and individual patients.
America's business community is looking at the scoring done by the
Congressional Budget Office and shares the concern that we have not yet
achieved the bottom-line savings needed. As I have noted, the
Discussion Draft has in it many elements that can reform the delivery
of care and make it more affordable. We believe costs are driven by
inadequate prevention, poor chronic care coordination, and overuse of
supply-sensitive care. To achieve sustainable cost control, the health
system needs to overhaul how care is delivered and the incentives that
today reward more not better care. Also, compared to many other
countries one of the key reasons for our higher costs is that in
America we pay more for the same services. While addressing many of
these elements are part of the reform proposals, employers share the
concern evidenced by the CBO's scoring that not only are we coming up
short on paying for expanded coverage, we are not seeing how the
reforms will achieve the $2 trillion to $3 trillion in savings from
trend that are needed to create a sustainable health care system.
We need to be serious about reducing costs while recognizing that
we cannot restructure almost one-fifth of the Nation's economy
overnight. As we put in place the reforms that will change how we
deliver care, to be credible not just to the Congressional Budget
Office but to the American people, we need to chart out the steps we
will take in the coming years if--through private and public sector
actions--we fail to bend the cost curve. As the Committee for a
Responsible Federal Budget recently said, ``we believe that given the
emphasis on crafting a plan designed to generate longer-term health
care savings, the final bill should include a commitment to a certain
level of longer-term health care savings with an enforceable budget
mechanism to ensure the savings are realized. Such a mechanism could
include automatic reductions in Medicare and/or new taxes if projected
savings are not realized. A similar type of Medicare trigger has been
ignored in the past, and a new budget mechanism would have to include
real teeth and have the support of Congress to be effective.'' \2\ Any
budget mechanism, however, needs to consider not ``just'' Federal
spending, but the total health care expenditures of the Nation.
Congress must recognize that its actions to reduce costs cannot merely
shift costs to the private sector. If we cannot reduce current cost
trends, the Nation must be ready to discuss solutions such as all-payer
pricing or global budgeting.
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\2\ Committee for a Responsible Federal Budget, June 1, 2009. The
concept of a budget mechanism was also recently supported by Health
CEOs for Health Reform, a group of leaders representing providers and
payers who made a series of proposals in ``Realigning U.S. Health Care
Incentives to Better Serve Patients and Taxpayers'' and in ``Crossing
Our Lines: Working Together to Reform the U.S. Health System,'' by
Senators Baker, Daschle and Dole.
Core Employer Belief: We must address the persistent differences
between how public and private systems measure performance and pay for
care. These differences lead to confusion for consumers and providers,
create unacceptable price pressures on employers and engender
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disconnected incentives between public and private payers.
There is a need to align public and private programs on multiple
fronts. The same measures of health care performance should be used to
send consistent signals to providers and consumers to guide
improvement, assist consumer decisionmaking and incent high quality and
efficient care. The Discussion Draft recognizes the need to align
public and private programs in a range of ways, including the efforts
to align Medicare's measurement and payment practices with those of the
plans in the Exchange.
Public payers such as Medicare and Medicaid tend to pay
significantly less for health care services than do private payers.
Sometimes referred to as ``cost-shifting,'' the actual dynamics are
more complicated, as evidenced by innovative research undertaken by
MedPAC. From the perspective of many employers and purchasers of health
care, they face bargaining situations with hospitals and doctors that
are stacked against them: Medicare and Medicaid, with their below-
market fixed prices, result in providers seeking additional above-
market prices from private purchasers. In addition, the payment models
used by Medicare have, historically, incented volume over value.
Private purchasers then face the dual challenge of managing not only
the value of the services they pay for, but also need to overcome the
deeply-embedded incentives offered by public programs' use of the fee-
for-service system and lack of volume controls.
Over time, we must redress this imbalance of payment models and
payment levels. Our physicians and hospitals face a bewildering array
of conflicting quality incentives, payment strategies, and oversight
mechanisms. As large employers evaluate proposals for a ``public
plan,'' they are deeply concerned that such a plan could lead to cost-
shifting or increased misalignment between public and private payments
to providers. While policy options are complex and fraught with hazards
in this space, our priority should be to align the payment models
across public and private purchasers to ensure that providers are
rewarded consistently for safe, high quality, and efficient care.
Core Employer Belief: Health care reform must support and encourage
clinicians and hospitals in delivering better quality care--which will
entail doing a better job measuring what works, changing how we pay for
health care and making better use of information technologies.
As noted earlier, the Discussion Draft includes an array of
proposals to improve the delivery system such as better performance
measurement; changing payment and aligning incentives for higher
quality; and expanding investments in wellness and prevention.
Employers view these as essential building blocks of reforming our
health care system.
Promoting Measurement and Quality Improvement
In the past months there have been many collaborative proposals
developed to reform health care. Two groups, in particular, have come
together to advocate for concrete ways that quality and value can be
built into reform efforts.
First, over 200 groups under the name ``Stand for Quality''--
representing an array of consumers, employers, clinicians and other
providers, hospitals, health plans and more--have come together to call
for dramatically increased Federal leadership in aligning priorities,
developing performance measures to fill gaps, and engaging stakeholders
in how those measures are used by the public sector (see
www.standforquality.org). These recommendations call for the
development of robust, independent systems for collecting and reporting
performance results on patients' outcomes, cost and patients' views of
care, and whether the right processes of care are being delivered by
doctors, medical groups, hospitals, nursing homes, and other providers.
Improving quality requires sharing information about what is
happening inside our health care system with everyone who gets, gives
or pays for care. There are a range of concrete policy options that can
foster better measurement--which is the foundation for all efforts to
improve the value of our health care system. I want to acknowledge and
note my appreciation for the fact that the Discussion Draft embraces
many of the Stand for Quality recommendations, including developing
processes for setting national health care priorities, supporting the
development of performance measures and funding quality improvement
efforts at the point of care.
I would encourage the Committee to build on its initial proposals
by looking at the agreement reached by this diverse range of
stakeholders. Additional actions should include increasing the level of
support for developing measures in key areas such as functional status
and resource use; promoting the use of standardized measures; and
supporting consultative processes that assure that consumers, employers
and providers can provide meaningful input to CMS in how measures are
used for public reporting and payment.
Beyond the common support for expanded measurement, employers
strongly support the Discussion Draft's proposal to expand our national
commitment to comparative effectiveness research so that patients can
have better information to use with their doctors when deciding which
treatment is right for them. We need an ongoing, independent and robust
comparative effectiveness process that will assure that decisions about
care are driven by the evidence and what is in the patient's interest.
Your Discussion Draft also recognizes the importance of releasing
Medicare data--referring to the new Assistant Secretary for Health
Information being charged with making available Medicare datasets.
Beyond that action, CMS should be directed to routinely make available
the Medicare claims database to qualified ``Quality Reporting
Organizations'' via HIPAA-compliant agreements. This would enable
employer-sponsored and individually-sponsored health benefits plans to
use aggregated public and private claims data to generate provider-
specific health care performance results which will ultimately lead to
lower premiums and higher quality of care.
Reforming Payment
Our health care system pays providers for the number of treatments
and procedures they provide and pays more for using expensive
technology or surgical interventions. It does not reward better
quality, care coordination or prevention nor encourage patients to get
the right care at the right time. As Dr. Abraham Verghese said so well
in a recent Wall Street Journal article, we have ``a skewed
reimbursement scheme set up by Medicare, . . . that pays generously
when you do something to a patient, but is stingy when you do something
for a patient.'' \3\ A second broad collaborative--the Center
for Payment Reform (www.CenterforPaymentReform.org)-- has identified
six core principles that should guide both public and private payment
policies:
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\3\ The Myth of Prevention, Dr. Abraham Verghese, Wall Street
Journal, June 20, 2009, W1.
1. Reward the delivery of quality, cost-effective and affordable
care.
2. Encourage and reward patient-centered care that coordinates
services across the spectrum of health care providers and care
settings.
3. Foster alignment between public and private health care
sectors.
4. Make decisions about payment using independent processes.
5. Reduce expenditures on administrative and other processes.
6. Balance urgency to implement changes against the need to have
realistic goals and timelines.
Your Discussion Draft clearly recognizes the critical role that
payment reform must play in creating better value for Americans and
reflects many of these principles. In particular, I applaud the
inclusion in the Discussion Draft of an array of payment reforms, many
of which seek to bridge Medicare and Medicaid and promote alignment
with private plans. These include:
Increasing payments for primary care in a range of ways.
Fee-for-service payments do indeed need to be modified to promote
primary care, better coordination and more efficient care. We need to
rebalance the payment equation to better compensate providers engaged
in preventive care, time spent coaching patients and coordinating care
for those with chronic conditions; and relatively decrease payments for
procedures and testing.
Extending the Physician Quality Reporting Initiative and
calling on that program to better integrate clinical reporting of
performance through electronic health records;
Establishing a robust set of pilot programs for
accountable care organizations;
Establishing a program to reduce payments for avoidable
hospital readmissions;
Moving away from today's quality-blind fee-for-service
and ``pay for quantity'' approach toward support for accountable care
organizations, bundled payments for post-acute care and medical homes.
As these models are implemented, however, I urge you to build in
accountability mechanisms to provide a check against providers'
potential financial incentives to either seek to serve only healthier
individuals (``cherry-picking'') or skimp on care, particularly for the
most vulnerable, at-risk beneficiaries. It is critical that we build in
the means to assess whether these models are enabling us to achieve
better quality, more efficient, and more patient-centered care.
Revaluing Services--Considering Patient and Societal Value
The Discussion Draft recognizes that CMS should be directed to
assess and fix how payments may be misvalued. Getting valuation of
services right is important for Medicare and because these values are
often applied by private health insurance plans. The current relative
undervaluing of primary care and care coordination functions bodes ill
for the aging population that will need more support.
Beyond the assessment called for in the Discussion Draft, CMS
should be directed to establish a mechanism to develop and implement a
multi-year, multi-sectoral payment policy review and approval process.
This mechanism would be charged with developing an integrated approach
to updating existing and emerging payment models to assure aligned
incentives across providers, and in the context of any State-driven
and/or private sector-driven trends and initiatives.
This new mechanism should solicit input from external stakeholders
through a formal multi-stakeholder advisory process that addresses all
provider segments, including post-acute providers, through an annual
notice and comment process. Under the current CMS processes, the
overwhelming majority of comments are submitted by affected providers.
While patients and their advocates and third-party payers can and do
comment, the highly technical nature of the rules and policies, coupled
with the limited impact of payment policies on any single patient or
payer has inadvertently resulted in an unlevel playing field. As a
result, CMS staff, in reviewing comments, often lack meaningful input
from stakeholders outside of the provider community.\4\
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\4\ While this phenomenon is present in all payment systems, it is
most apparent in the area of CMS' annual efforts to update the
Physician Fee Schedule and resource-based relative value scale (RBRVS).
The relative values of the services are determined by CMS using its
rulemaking authority. In practice, CMS relies heavily on
recommendations (provided through the notice and comment rulemaking
process) by an outside committee housed by the American Medical
Association (AMA): the Relative Value Scale Update Committee or the
RUC. The RUC is made up of physicians that represent nearly every
specialty. Many of the RUC's recommendations are based on expert panels
and qualitative, subjective assessments of the physician work and
practice expense components of the RVU value. In response to CMS'
request for comments, the RUC offers its recommendations on values for
new services, and recommends adjustments to values for existing
services on a periodic basis.
Given the cost of analyzing and proposing new or revised RVU
values, great weight is given to the RUC's recommendations. (In March
2006, the Medicare Payment Advisory Commission (MedPAC) noted that CMS'
5-year review ``does not do a good job of identifying services that may
be overvalued.'' They further stated, ``CMS has relied too heavily on
physician specialty societies to identify services that are mis-
valued.'' Five-year reviews have led to ``substantially more increases
in RVUs than decreases, even though many services are likely to become
overvalued over time.'' (MedPAC, Medicare Physician Payment, March
2006.) All too often the perspectives of other health care stakeholders
are notably absent and the broadly dispersed ``public good'' of
assuring valuation for physician services that meets patient-
centeredness and affordability goals is not a business priority for any
one interest group.
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A means to ensure meaningful input from other stakeholders is
urgently needed. As a discrete complement to CMS' regulatory
decisionmaking process, we recommend establishing a federally chartered
body that includes patients, third-party payers and provider
representatives to inform CMS' annual update processes. A standing
Consumer and Health Care Purchaser and Provider Update Committee (CHUC)
would be charged with providing independent input to CMS in its
decisionmaking role with respect to Medicare payment levels, across all
provider sectors. The new advisory group should include patients,
purchasers, providers and payers--with majority representation by those
who receive and pay for care--and serve as a forum for broader multi-
stakeholder input, as well as collection and analysis of relevant
information. This new group would be advisory only, but it could
provide a needed and fresh perspective for CMS and for Congress.
Changing Payment Decisionmaking
Current payment policies--beyond the regulatory process are also
too inflexible and susceptible to the focused interests of the
recipients of payment. Congress should consider creation of a new
entity with independent authority to implement broad direction provided
by Congress. Regardless of the specific structure adopted, new
processes need to be put in place to assure that flexibility,
transparency, and meaningful stakeholder input are in place to assure
that changes to payment policies are considered in the context of their
impact on patients, providers, and health care purchasers.
Congress should set the broad goals and targets for
Federal health care payments, but the specific decisions about payment
should be made through independent processes that are guided by what
serves the patient and helps society as a whole. The decisionmaking
body should be structurally independent, with mechanisms in place to
insulate it as much as possible from political influence in order to
ensure evidence-based decisions and to engender stakeholder trust.
Payment decisions should be guided by evidence and should
balance the perspectives of consumers, purchasers, payers and
physicians and other health care providers--but the perspective of
those who receive and pay for care should have majority control instead
of those who receive payments.
Processes and rules for making payment decisions should
be simple, standardized and align value (to the extent possible) across
physician, hospital and other types of health care payments.
Payment decisions should promote consistency across
private and public payers.
Assuring Competition While Promoting Payment Reform
While employers support payment reforms that encourage coordinated
and integrated care delivery, we also recognize the need for policies
that assure there are functioning markets--where informed patients and
purchasers can fairly negotiate terms with independent providers.
Health reform needs to assure there is an appropriate balance between
coordination and competition.
Aligning incentives across providers and sites of care is essential
to the appropriate focus on ``end-to-end'' quality, affordable care. In
many markets, providers have formed multi-provider organizations,
ostensibly to advance their clinical and financial goals, forming
multi-hospital systems, multi-physician organizations, and combined
hospital-physician entities. In some cases, these collaborations have
resulted in higher quality and lower costs for payers and patients by
focusing on generating clinical and financial efficiencies. In some
instances, however, these new organizations have leveraged their market
power in ways that may increase costs to patients, payers, employers
and other health plan sponsors, with ambiguous impacts on quality.
Because of the concerns about potentially anti-competitive impacts
of some forms of integration and coordination, there are a broad array
of laws and regulations governing competition, anti-kickback, self-
referral, and related issues. Some argue that portions of existing law
and regulations need to be ``loosened,'' as they inhibit providers'
ability to coordinate care effectively. However, many others suggest
that loosening existing laws and regulations is unnecessary to deliver
more efficient care and could result in both higher costs and reduced
choice for consumers.
Given the complex interrelationship between competition and
coordination, we support the recommendation of the Center for Payment
Reform that there be established a framework that will assure that both
goals are promoted. The Secretary of Health and Human Services should
be directed to produce or commission a report to Congress that shall
examine how policies and payment can best balance the need to both
promote coordination and competition. In doing so, the Secretary should
engage representatives of the Attorney General, the Federal Trade
Commission, the Comptroller General, CMS' Office of Inspector General
and the Agency for Healthcare Research and Quality as well as
representatives of consumers, private purchasers and providers. The
report should be provided within 12 months and should address, at a
minimum, the following:
Are new laws or regulations needed to guard against the
provider-based entities having or exercising market power to the
detriment of consumers' interest in higher quality, less costly health
care?
Do existing anti-trust laws and pro-competitive
regulations need to be revised or amended?
Are there existing State or Federal laws that have the
affect of creating inappropriate barriers to healthy competition that
need to be examined?
What is the empirical research on health care markets and
market competition that should inform policy development?
What is the role of promoting transparency with respect
to quality and price in fostering better market functioning?
How can the regulatory and legal oversight promoting
competition best be structured?
Core Employer Belief: We need to move to promoting wellness and
prevention, instead of focusing only on intervening after the fact.
There are few areas around which there is as much agreement in the
employer community as in the importance of investing in wellness and
prevention. The majority of America's employers are making these
investments, with over 90% of large employers supporting wellness and
chronic care programs. The importance of moving from a sick-care system
to one that promotes wellness and prevention is clearly articulated in
the Discussion Draft, which includes proposals for a Public Health
Investment Fund and for the Secretary to develop a National Plan for
Prevention. As a Nation, we need to get beyond the fragmentation that
results in separate planning and strategies for health care delivery,
public health, community prevention and planning, worksite wellness and
other programs. As we move beyond this fragmentation, employers and
consumers need to be at the table as priorities are shaped and
strategies developed.
Core Employer Belief: All Americans--as engaged patients, caregivers
and consumers--need to be given better tools and incentives to
participate in making sure that they get the right care at the right
time.
Health care consumers must be able to compare the quality or
efficiency of care offered by medical practitioners, clinics and
hospitals or the various treatment options available to them to make
good choices. Americans need tools and incentives to help them make
good health care decisions. Some of the routes that your Discussion
Draft supports in this area includes bolstering the Federal role of
making sure that there is valid information consumers can use to
compare quality and cost-efficiency of medical treatments and
providers. Creating that information should allow for any users--public
and private--to build on that information as long as patient privacy is
protected.
The Discussion Draft recognizes the importance of considering the
role consumer incentives play by proposing that Medicare remove cost-
sharing provisions for Medicare beneficiaries. Medicare should join the
private sector in going further. For example, Medicare should provide
information and incentives for wellness and the selection of higher
value providers. Private health plans are increasingly offering not
just tools, but incentives for their enrollees to improve their health
and make better choices among providers. Medicare should follow the
same path, perhaps by requiring that restructuring the standard
Medicare Supplement plans offer information and tools to facilitate
patient choice.
Similarly, Medicare should learn from the cutting-edge work of
providers and private sector groups that are making sure that patients
can fully participate in their own health care. One way that we can be
sure that care is indeed patient-centered is for Medicare to support
shared decisionmaking processes. This support can take the form of
providing incentives to patients to get coaching and/or reducing
payments to providers in cases where preference sensitive care (i.e.,
care for which there is more than one medically reasonable choice, with
choices that differ in risks and benefits--such as treating chest pain
from coronary artery disease or early-stage prostate cancer) was
delivered in the absence of patient participation in decisionmaking.
Conclusion
Health reform must be about making high quality care more
affordable. The employer community will work with you to develop a
coherent package of reforms that foster cost control, and improves
health through health promotion, prevention of illness, and effective
treatment of disease and injury. We look forward to working with this
Committee and with so many other Americans who share this goal.
Mr. STARK. Thank you, Mr. Lee. And next we have Mr. Gerald
Shea, who is Special Assistant to the President, AFL-CIO.
Proceed.
STATEMENT OF GERALD M. SHEA,
SPECIAL ASSISTANT TO THE PRESIDENT, AFL-CIO
Mr. SHEA. Good afternoon, Mr. Chairman and Members of the
Committee. We appreciate this invitation to talk to you about
the experience of the AFL-CIO unions in bargaining health care.
And I am going to restrict my remarks to the interplay between
employment-based coverage, which, as you know, is the backbone
of both coverage and financing for health care in this country,
and the reform proposal before you because you have chosen a
proposal that continues that role for employer-sponsored
insurance.
And my main message to you today is that going down this
road I believe requires that you first and foremost look at how
you stabilize employment-based coverage. Employment-based
coverage has been remarkably resilient despite enormous cost
pressures and it is testimony to how much employers want to
provide benefits and how much employees value those benefits.
But, frankly, it is in a pretty fragile situation. We have lost
5 points percentage of people 18 to 64 who have health care. We
have lost 5 percentage points from 2000 and 2007. The number of
underinsured people in a 4-year span from 2003 to 2007 went up
from 16 percent to 25 percent. This is a system that has done
very well in providing health coverage but today, frankly, is
eroding pretty rapidly. And so we judge the proposals in terms
of how well they support and strengthen the employment-based
coverage if we are going to continue that.
And I want to congratulate you and your colleagues and
other Committees of the House for having produced this bill. We
think it is an excellent start. And, frankly, we think it
really responds to the desires and the interests of the
American people. And so we give you our hats off for that.
In order to stabilize employment-based coverage, we need to
do three things in our opinion. First and foremost, control
costs. If we do not do that, we are not going to do anything
else. Second, we think everybody needs to be included in
coverage, included in financing responsibilities, and included
in health status responsibilities. And, third, we think it is
essential that we reform the health delivery system so that we
really make it a more efficient--much more efficient structure
than it is today.
On the point of full participation, you have a proposal
that has both an individual requirement and an employer
requirement, we think that is appropriate. We think both are
appropriate. And I want to make just a couple of comments on
the employer requirement because I know that is controversial.
I think there are a number of advantages to doing this, to
requiring employers to participate. One is that you reduce the
burden on the Federal Treasury for providing coverage. If you
are going to get universal coverage, the more employer coverage
that is available, the less you will have to fund in terms of
support for the currently uninsured.
Firms that opt to pay instead of play, using the common
parlance here, will be putting money into the fund to pay for
coverage and so you get money that way too. We think this is an
important financing area. And, of course, it would also level
the playing field among businesses because it would eliminate
the free riders.
A corollary to this requirement is that we think you should
look, as you have looked at, providing some relief for those
employers who in the midst of great industrial change have
tried to do the right thing by their workers and maintain
retiree benefits for those who are pre-Medicare. We think that
is extremely important, and we appreciate the fact that it is
included.
In terms of the cost issue, the number one challenge, there
is no question that the long-term answer to this is to change
the delivery system and make it more efficient. My panel
colleague just talked about saving $2 or $3 trillion over the
next 10 years. That is a figure that comes from numerous
studies as something that is in the realm of possibility
depending on the design element.
But those are long-term changes and in the short-term, we
believe strongly that you need a public insurance option to
introduce competition into the marketplace. A lot has been said
about that. I will not elaborate on it further.
But going to delivery system reform issues, your draft
emphasizes and invests in quality and improvement
methodologies. We think this is very important, and we think
your draft could be strengthened frankly in this area along the
lines that Mr. Lee has just talked about.
And we also support the investment you make in the draft in
the expansion of the health care workforce in primary care, and
we would suggest that you look at the importance not only of
the supply of the health workforce but the quality of the work
we are asking them to do. Unfortunately, we have taken some of
the great care professions like nursing, and we turned them in
many places into lousy jobs. That can be corrected, and you
have a perfect vehicle to do that because you have following
examples that already exist in the health care system, the
opportunity to promote the notion that all health care workers
ought to be involved in producing quality care and break down
some of these silos which make these jobs less than totally
desirable.
Finally, I wanted to talk about--more broadly about
financing. I believe it is true what people say, that we ought
to be able to finance health reform out of the money in the
health system now. There is so much of it. But obviously that
is not something we can do overnight, and I think that if we
set our goal, as some people have, of saying we have to
restrict our financing to the health system, we get ourselves
into trouble very quickly. And the danger of this you see in
the Senate Finance Committee deliberations today where taxing
health benefits is being planned. You do not have to go any
further than the front page of today's Washington Post to get
yet more evidence of how strongly people oppose the idea of
taxing health benefits. They already pay a lot of money in
deferred wages or outright out of their pocket. They do not
want to be taxed on top of that.
But beyond the issue of payments and equity, there are
tremendous problems with doing this in a fair fashion because
you can have, and we have examples of this, similar workforces
in similar kinds of health plans or health funds with very,
very different annual cost based on health status, on
geography, on age. Unless you can correct for those, you are
going to wind up discriminating against those people who happen
to be in a workforce that has a higher claims experience. And
so we think it is extremely difficult for that.
Just in conclusion, I will say that we look forward to
working with you on the discussion draft, and we appreciate the
time to talk to you this afternoon.
[The prepared statement of Mr. Shea follows:]
Prepared Statement of Gerald M. Shea,
Special Assistant to the President, AFL-CIO
The AFL-CIO represents 11 million members, including 2.5 million
members in Working America, our community affiliate, and 56 national
and international unions that have bargained for health benefits for
more than 50 years. Together, unions negotiate benefits for some 50
million people in America.
Our members have a significant stake in health care reform because
unions represent the largest block of organized consumers in the
Nation. In addition, unions also sponsor health plans through funds
that are jointly-trusteed with management. Many union members work in
health care, as well, so they have a dual interest in health reform.
Even as unions continue to negotiate benefits for our members,
American labor has long advocated for health care for everyone, not
just those in unions or with stable jobs. For over 100 years, America's
unions have called for universal coverage built on a social insurance
model, an approach that has proven effective and efficient across the
globe and one we have employed successfully for decades to provide
income and health security for the elderly.
The AFL-CIO led the lobbying effort to enact Medicare in 1965, and
we have backed many legislative efforts since then to expand coverage.
We continue to believe that a social insurance model is the simplest
and most cost effective way to provide benefits for all.
However, the condition of health care in America is too dire for
those of us lucky enough to have good coverage to debate endlessly over
what the best approach would be. It is time--indeed, it is past time--
to enact comprehensive health care reform. Today our members are ready
to stand with President Obama and Congress and help pass the
President's plan for comprehensive health care reform.
AFL-CIO'S VIEWS ON COMPREHENSIVE HEALTH CARE REFORM
Today I would like to explain the AFL-CIO's views on what
comprehensive health care reform should look like, and specifically our
views on the historic tri-committee discussion draft unveiled in the
House of Representatives last week.
We start from the premise that we can fix our broken health care
system by building on what works. For most Americans, that means
employer-sponsored health insurance (ESI), which is the backbone of
heath care financing and coverage in America.
The AFL-CIO has advocated a three-point program to guarantee
quality affordable health care for all--a program that consists of: (1)
lowering costs; (2) improving quality; and (3) covering everyone by
ensuring full participation of all public and private sector employers
and making affordable health coverage available to everyone. All three
of these objectives must be achieved together; none can be achieved in
isolation. And we believe the tri-committee discussion draft will in
fact help achieve all three of these objectives simultaneously.
We caution, however, that one financing option under consideration
in the Senate Finance Committee--the taxation of employer-sponsored
health benefits--would go in the exact opposite direction by
destabilizing the employer-based health insurance system.
OUR PRESENT COURSE IS UNSUSTAINABLE
Whatever one may think about the way health care should be
reformed, we can all agree that our present course is not sustainable--
for workers, for businesses, for the Federal budget, or for the economy
as a whole. If we continue down the current path, health care costs
will crush families, business and government at all levels.
Our members are among the most fortunate workers. Thanks to
collective bargaining, they generally have good benefits provided by
their employers. Yet even well-insured workers are struggling with
health care cost increases that are outpacing wage increases. And far
too many working families find themselves joining the ranks of the
uninsured or underinsured as businesses shut down or lay off employees.
In April and May 2009, the AFL-CIO conducted our 2009 Health Care
for America Survey, which showed that people need urgent relief from
the pressure of rising health care costs that are bankrupting families
and endangering their health.
More than half of respondents said they cannot get the care they
need at a price they can afford. Three-quarters were dissatisfied with
their household's health care costs.
Ann from Georgia (self-employed with two children) wrote: ``We have
that HSA plan with supposedly low premiums. However, those `low'
premiums only start low. Every year they get higher and higher. One
year they increased 129 percent in just 1 year. Our health care costs
have exceeded 35 percent of our income for 2 years. We are on the verge
of canceling health care insurance. We would have already done this if
we didn't have two children.''
A third of those with insurance--and three-quarters of those
without--reported that they forgo basic medical care because of high
costs.
Karen from Florida wrote: ``My insurance deductible equals 4 to 5
months of take home pay each year. My insurance bill is split with my
employer but equals 2 days of pay each month. How am I supposed to go
to a doctor?''
Iris from Florida writes: ``I am unemployed because I had to quit
my job to care for my elderly mother. My children decided to pay [for
medical insurance] for me. So what is the problem? The deductibles are
so high that I cannot go to the doctor. And we keep paying $300 monthly
just in case I have to go to the hospital. In the meantime, I cannot
afford to go to the doctor.''
As economic conditions have gotten worse, workers who lose their
jobs have been losing their health care. Nearly a quarter of
respondents said someone in their household lost coverage in the past
year due to losing or changing jobs.
Renee from Ohio wrote: ``It is pretty scary that millions of hard-
working retirees as well as those working may lose their insurance, and
yes I am talking about the auto industry. My husband could lose his
benefits, which he thinks he will. I don't know how my kids will be
able to get their annual checkups. How can anyone get ahead in this
country? I don't understand how it came to this. I just don't want to
think about the future anymore.''
Once workers lose their health care coverage, it is hard for them
to get it back. One-quarter of those without health insurance said they
were denied coverage in the past year due to ``preexisting
conditions.''
Kerry from New Mexico wrote: ``I am desperate for our country to
finally do something for my family so a health crisis does not kill one
of us or leave us completely financially devastated.''
The data bear out the stories these workers are telling us. Between
1999 and 2008, premiums for family coverage increased 119 percent, 3\1/
2\ times faster than cumulative wage increases over the same time
period.\1\
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\1\ Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 2000-
2008. Bureau of Labor Statistics, Consumer Price Index, U.S. City
Average of Annual Inflation (April to April), 2000-2008; Bureau of
Labor Statistics, Seasonally Adjusted Data from the Current Employment
Statistics Survey, 2000-2008 (April to April). Accessed: http://
ehbs.kff.org/images/abstract/EHBS_08_Release_Adds.pdf.
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Workers' out-of-pocket costs are going up as well, leading to more
underinsured workers who can no longer count on their health benefits
to keep health care affordable or protect them from financial ruin.
Between 2003 and 2007, the number of non-elderly adults who were
underinsured jumped from 15.6 million to 25.2 million.\2\
---------------------------------------------------------------------------
\2\ C. Schoen, S.R. Collins, J.L. Kriss and M.M. Doty, ``How Many
Are Underinsured? Trends Among U.S. Adults, 2003 and 2007,'' Health
Affairs Web Exclusive, w298-w309. June 10, 2008.
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Skyrocketing costs are pushing more workers out of insurance
altogether. The current number of uninsured almost certainly exceeds 50
million. The Council of Economic Advisers estimates that number will
rise to 72 million by 2040 in the absence of reform.\3\
---------------------------------------------------------------------------
\3\ Council of Economic Advisors. ``The Economic Case for Health
Care Reform.'' June 2009. Accessed: http://www.whitehouse.gov/assets/
documents/CEA_Health_Care_Report.pdf.
---------------------------------------------------------------------------
Health costs are burdening American businesses, as well as workers.
U.S. firms that provide adequate health benefits are put at a
significant disadvantage when they compete in the global marketplace
with foreign firms that do not carry health care costs on their balance
sheets. The same is true for U.S. businesses in domestic competition
against employers that provide little or no coverage.
The present course is unsustainable for the economy as a whole, as
well. Health care expenditures currently amount to about 18 percent of
our GDP. The Council of Economic Advisers estimates that this
percentage will rise to 34 percent by 2040 in the absence of reform.\4\
The Congressional Budget Office (CBO) projects that health care
expenditures will rise to 49 percent of GDP by 2082.
---------------------------------------------------------------------------
\4\ Council of Economic Advisors. ``The Economic Case for Health
Care Reform.'' June 2009. Accessed: http://www.whitehouse.gov/assets/
documents/CEA_Health_Care_Report.pdf.
---------------------------------------------------------------------------
The present course is likewise unsustainable for the Federal
budget. If we fail to ``bend the cost curve,'' health care spending
will balloon our Federal budget deficit and squeeze out funding for
essential non-health care priorities. Almost half of current health
care spending is covered by Federal, State, and local governments. If
health care costs continue to grow at historical rates, the Council of
Economic Advisers estimates that Medicare and Medicaid spending will
rise to nearly 15 percent of GDP by 2040.\5\ As then CBO Director and
now OMB Director Peter Orszag has noted, health care cost trends are
the ``single most important factor determining the Nation's long term
fiscal condition.''
---------------------------------------------------------------------------
\5\ Ibid.
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To fix our long-term structural budget deficits, we have to fix
Medicare and Medicaid, and to fix Medicare and Medicaid, we have to
control health care costs in the private sector. There is no practical
way to control public health care costs without addressing private
health care costs as well. Private and public health care are delivered
largely by the same providers, using the same drugs, the same
treatments, and the same procedures.
In short, the health of our family budgets, our Federal budget, and
our economy depends on the success of health care reform this year.
BUILDING ON WHAT WORKS
The AFL-CIO believes comprehensive reform can build on what works
in our current health care system while creating new options for
obtaining coverage and lowering costs for families, business, and
government at all levels.
For the majority of Americans, what works in our current health
care system is employer-based coverage--the backbone of health care
coverage and financing in America. Over 160 million people under age 65
have health benefits tied to the workplace.
Employer-sponsored coverage has proven remarkably stable in the
face of exorbitant health care cost inflation. Its survival is
testimony to the strong interest workers have in keeping coverage tied
to the workplace--even at the expense of wage gains for the past 30
years--and the interest of employers to recruit and retain talented
workers through job-based benefits.
In fact, it is hard to imagine successful health reform that does
not include a substantial role for employer-based coverage. Building on
the core foundation of employer-provided health coverage will allow
working families to keep what they now have . . . or choose from a new
set of options to maintain coverage. We think building on this
foundation will also help minimize the disruption that results from the
difficult changes that are a necessary part of any reform, and thereby
maximize public support for reform.
In order to build on this foundation, we must stabilize the
employment-based system, which risks being destabilized by
unsustainable cost inflation. We must reverse the steady erosion of
employer-provided coverage in recent years. The percentage of 18 to 64-
year-olds with ESI dropped 5 percentage points from 2000-2007, and
without prompt dramatic action the rate of decline is expected to
increase sharply.\6\
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\6\ Elise Gould. ``The Erosion of Employer-Sponsored Health
Insurance.'' Economic Policy Institute. October 2008. Accessed: http://
epi.3cdn.net/d1b4356d96c21c91d1_ilm6b5dua.pdf.
---------------------------------------------------------------------------
We believe the tri-committee discussion draft will stabilize the
employer-based health care system through the following specific policy
proposals: (1) a requirement that employers assume responsibility for
contributing to the cost of health care for their employees through a
``pay or play'' system; (2) special assistance for firms that maintain
coverage for pre-Medicare retirees, which will prevent further
deterioration of the employer-based system; (3) a public health
insurance option, which will inject competition into the health care
system and lower costs throughout the system for employers and workers
alike; (4) health care delivery reforms to get better value from our
health care system and contain long-term costs; and (5) insurance
market reforms, individual subsidies, Medicaid expansion, and
improvements to Medicare, which will help make affordable coverage
available to everyone.
PAY OR PLAY
A key reform needed to stabilize the employer-based coverage system
is the requirement that public sector and private sector employers
assume responsibility for contributing toward the cost of health care
for their employees. Employers should be required either to offer
health benefits to their workers directly, or to pay into a public fund
to finance coverage for uninsured workers--a proposal known as ``pay or
play.''
The tri-committee discussion draft outlines a reasonable and
effective employer responsibility requirement that we believe would
help shore up employer-based coverage. The proposal would ensure that
workers could get affordable coverage either through their employer-
sponsored plan or through a national exchange with a contribution from
their employer. And it would extend, on a pro-rated basis, an
employer's responsibility for part-time workers, to eliminate any
incentives for employers to move workers to part-time status to avoid
the new requirement.
We believe such a ``pay or play'' system has many virtues. It would
bring in needed revenue from firms that opt to ``pay,'' which would
hold down Federal costs associated with providing subsidized coverage
for low-income workers in those firms.
``Pay or play'' would likewise hold down Federal costs by keeping
employers from dumping their low-wage employees into new subsidized
plans. In the absence of an employer responsibility requirement,
publicly subsidized coverage for low-wage workers would prompt many
employers of low-wage workers to discontinue current coverage to take
advantage of available subsidies. The resulting increase in Federal
costs could well doom health care reform.
``Pay or play'' would help stabilize the employer-based health care
system in several ways. It would level the playing field so that free
rider businesses could no longer shift their costs to businesses
offering good benefits. A recent study found more than $1,000 of every
family plan premium goes to cover the cost of care for the uninsured,
most of whom are employed.\7\ ``Pay or play'' would encourage employers
to offer their own coverage and penalize employers that do not. And it
would minimize disruption for workers who already have health care
coverage and wish to keep it.
---------------------------------------------------------------------------
\7\ Families USA. ``Hidden Health Tax: Americans Pay a Premium.''
May 2009. Accessed: http://www.familiesusa.org/assets/pdfs/hidden-
health-tax.pdf.
---------------------------------------------------------------------------
``Pay or play'' would thus go a long way toward extending coverage
to the uninsured, since most of the uninsured have at least one full-
time worker in their family. And it would be critical in making
coverage affordable for workers who do not qualify for income-based
credits or subsidies, especially if health care reform includes a new
requirement that all individuals obtain coverage.
Arguments Against Pay or Play
Opponents of an employer responsibility requirement raise the
objection that ``pay or play'' would increase payroll costs for
businesses. We believe this objection is misplaced.
First of all, it should be emphasized that the overwhelming
majority of businesses already provide health benefits that would
likely meet the new requirements, so they would not see any new costs.
In fact, they would see their costs go down as health care coverage is
expanded--thanks to the elimination of cost shifting--and as other
health care reforms take hold that drive down costs throughout the
health care system.
The only firms that might see an increase in costs are firms that
do not currently offer health care benefits, or firms that offer
benefits that are inadequate to meet a reasonable standard. The vast
majority of firms that currently do not offer health care benefits are
small firms, and they are mostly low-wage employers. Comprehensive
health care reform generally would give small firms more affordable
options for providing health benefits for their workers, probably in
combination with additional subsidies for employers of low-wage
employees.
Opponents of an employer responsibility requirement warn that
employers that have to pay more for health insurance would be less
likely to raise wages in the short term. The widely endorsed economic
view, however, is that such employers would still raise wages over the
long term.
Opponents of ``pay or play'' next argue that employers required to
pay more for health insurance might eliminate jobs or hire more slowly
as a result. But the same dire predictions have been made routinely
about proposals to increase the minimum wage, with comparable increases
in employer costs, and those predictions have not been borne out.
Recent studies of minimum wage increases have found no measurable
impact on employment.\8\ Economists have observed that employers faced
with higher payroll costs from a minimum wage increase can offset some
of those costs through savings associated with higher productivity,
decreased turnover and absenteeism, and improved worker morale.\9\
---------------------------------------------------------------------------
\8\ A. Dube, T.W. Lester, M. Reich, ``Minimum Wage Effects Across
State Border: Estimates Using Contiguous Counties,'' Institute for
Research on Labor and Employment Working Paper Series No. iiwps-157-07,
August 1, 2007.
\9\ J. Bernstein, J. Schmitt, ``Making Work Pay: The Impact of the
1996-1997 Minimum Wage Increase,'' Economic Policy Institute (1998); D.
Card, A. Krueger, ``Myth and Measurement: The New Economics of the
Minimum Wage,'' Princeton University Press, 1995.
---------------------------------------------------------------------------
The same would be true of an employer responsibility requirement.
Any increase in employer costs would be offset by productivity gains
and by a healthier workforce. The Council of Economic Advisers notes
that the economy as a whole would benefit from more rational job
mobility and a better match of workers' skills to jobs when health
benefits are no longer influencing employment decisions.\10\ Finally,
it should be noted that the majority of firms that currently do not
offer health benefits compete in markets where their rivals likewise do
not provide benefits, so they would not be put at a competitive
disadvantage.
---------------------------------------------------------------------------
\10\ Council of Economic Advisors. ``The Economic Case for Health
Care Reform.'' June 2009. Accessed: http://www.whitehouse.gov/assets/
documents/CEA_Health_Care_Report.pdf.
---------------------------------------------------------------------------
Pay or Play and Firm Size
Health care reform must make coverage affordable for small
businesses that have difficulty obtaining coverage in the current
market. However, the AFL-CIO believes the ``pay or play'' requirement
should apply to firms regardless of their size.
Smaller businesses will be allowed to meet the ``play'' requirement
by buying coverage that meets fair rating rules through the new
exchange, which would include the option of a public health insurance
plan that makes coverage more affordable. We do support the inclusion
of a small business tax credit, targeted at the smallest firms with
low-wage workers, precisely because we believe an employer requirement
should not exempt businesses based solely on size.
If small businesses are exempted from ``pay or play,'' the number
of employees is a particularly poor measure for the exemption because
it is a poor predictor of a firm's ability to pay. A doctor's office or
small law firm may have more capacity to pay than a larger restaurant
or store. A carve-out for small firms with fewer than a specified
number of employees also creates a potentially costly hurdle for firms
nearing the threshold to hire additional employees. A better approach
would be to apply the requirement based on payroll or gross receipts.
Finally, we believe special treatment for such businesses should be
phased out over time to eliminate disparities based on firm size.
Also, any ``pay or play'' requirement should take into account how
workers in certain segments of our economy, such as airlines and
railroads, schedule their hours and the classification of workers as
full-time or part-time should ensure that these workers are not
inadvertently excluded from coverage.
Special Assistance for Companies That Maintain Benefits for Pre-
Medicare Retirees
We look forward to working with the committees to develop greater
specificity on the proposal for a federally-funded catastrophic
reinsurance program for employers that provide health benefits to
retirees age 55 to 64. Such a reinsurance program would help prevent
further deterioration of the employer-provided health care system, and
is an essential component of any health care reform legislation.
A reinsurance program is critically necessary to help offset costs
for employers that contribute to health benefits for pre-Medicare
retirees. The pre-Medicare population generally has higher health care
costs, and employers offering them coverage incur enormous expense. But
without that coverage, individuals in this age bracket have tremendous
difficulty purchasing health insurance in the individual market, or
they are able to do so only at a very high cost.
We believe such a reinsurance program must have dedicated funding.
In addition, in the longer term, we believe firms should be able to
purchase coverage for their retirees through the exchange. This would
help make coverage more affordable for firms that provide retiree
health benefits.
PUBLIC HEALTH INSURANCE PLAN OPTION
The AFL-CIO supports the creation of a strong public health
insurance option to compete with private health insurance plans. The
tri-committee discussion draft includes a strong public plan that would
compete on a level playing field with reformed private health plan
options in a new national exchange.
We believe a public health insurance plan is the key to making
health care coverage more affordable for working families, businesses,
and governments, all of which are increasingly burdened by escalating
health care costs. A public plan would have lower administrative costs
than private plans and would not have to earn a profit. These features,
combined with its ability to establish payment rates, would result in
lower premiums for the public plan.
A public health insurance plan would also promote competition and
keep private plans honest. Consolidation in the private insurance
industry has narrowed price and quality competition. In fact, in 2005,
private insurance markets in 96 percent of metropolitan areas were
considered highly concentrated and anti-competitive, which left
consumers with little choice.\11\ A public health insurance option,
coupled with a more regulated private insurance market, would break the
stranglehold that a handful of companies have on the insurance market
and would give consumers enough choices to vote with their feet and
change plans.
---------------------------------------------------------------------------
\11\ American Medical Association. ``Competition in Health
Insurance: A Comprehensive Study of U.S. Markets.'' 2007. http://
www.ama-assn.org/ama1/pub/upload/mm/368/compstudy_52006. pdf.
---------------------------------------------------------------------------
We also believe a public health insurance plan would be critical
for driving quality improvements and more rational provider payments
throughout the health care system. A public health insurance plan can
introduce quality advancements and innovation that private insurance
companies or private purchasers have proven themselves unable to
implement. For example, until Medicare took the lead in reforms linking
payment to performance on standardized quality measures, private
insurers and payers were not making appreciable headway toward a value-
based health system. Just as Medicare is driving quality improvements
that private plans are now adopting, a public health insurance plan
could lead the way in developing innovative quality improvement
methodologies, stronger value-based payment mechanisms, more
substantial quality incentives, and more widespread evidence-based
protocols.
Because increased competition and quality reforms would help
contain costs throughout the health care system, employers that
continue to provide benefits directly would benefit from these savings,
as would employers that purchase coverage for their workers through the
exchange. And because premiums would be lower, spending on Federal
subsidies for individuals who qualify for subsidies would also be
lower.
A public health insurance plan would also guarantee that there will
be a stable and high quality source of continuous coverage available to
everyone throughout the country. By contrast, private insurance plans
can change their benefits, alter cost-sharing, contract with different
providers, move in and out of markets, and change benefit or provider
networks. A public health insurance plan would be a reliable and
necessary backstop to a changing private insurance market, and a safe
harbor for working families that lose their workplace coverage.
A public health insurance plan available to everyone would also
provide rural areas with the security of health benefits that are there
when rural residents need them, just as Medicare has been a constant
source of coverage as private Medicare Advantage and Part D plans churn
in and out of rural areas every year.
Clearly, the public supports a public health insurance plan option.
A recent New York Times poll shows that the public health insurance
plan is supported by 72 percent of voters.\12\
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\12\ New York Times/CBS News Poll on Health. Telephone Interviews
conducted June 12-16, 2009. Accessed: http://graphics8.nytimes.com/
packages/images/nytint/docs/latest-new-york-times-cbs-news-poll-on-
health/original.pdf.
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DELIVERY SYSTEM REFORM
Variation in Medicare spending across States suggests that up to 30
percent of health care costs could be saved without compromising health
care outcomes. Differences in health care expenditures across countries
suggest that health care expenditures could be lowered by 5 percent of
GDP without compromising outcomes by reducing inefficiencies in the
current system.
Experts estimate we waste one-third of our health care spending, or
$800 billion, every year on health care that is no real value to
patients. According to the Council of Economic Advisers, the sources of
inefficiency in the U.S. health care system include payment systems
that reward medical inputs rather than outcomes, high administrative
costs, and inadequate focus on disease prevention.\13\
---------------------------------------------------------------------------
\13\ Council of Economic Advisors. ``The Economic Case for Health
Care Reform.'' June 2009. Accessed: http://www.whitehouse.gov/assets/
documents/CEA_Health_Care_Report.pdf.
---------------------------------------------------------------------------
We must restructure our health care system to achieve better
quality and better value, and we must transform our delivery system
into one that rewards better care, not just more care. We can start by
doing the following:
Measure and report on the quality of care, the
comparative effectiveness of drugs and procedures, and what medical
science shows to be best practices and use that information to create
quality improvement tools that allow doctors to individualize high-
quality care for each of their patients;
Put technology in place to automate health care data; and
Reform the way we pay for care so doctors have the
financial incentives to continuously improve care for their patients.
The February 2009 economic recovery package, with its substantial
investment in health information technology (HIT) and research on the
comparative effectiveness of drugs and medical devices, marks a
historic first step in the right direction.
The tri-committee discussion draft builds on the investments of the
economic recovery package by encouraging greater emphasis on primary
care and prevention, and greater emphasis on innovative delivery and
payment models, such as accountable care organizations and bundled
payments for acute and post-acute care. The draft also makes needed
investments in our health care workforce--with emphasis on primary
care--to ensure access to needed care and better reward primary care
providers.
The tri-committee discussion draft emphasizes and invests in
quality measurement and improvement methodologies. But we believe more
can be done to foster innovation in health care delivery by building on
the significant quality measurement and improvement underway within
health care in recent years. The AFL-CIO has invested considerable
resources and time working on system reform, as part of the broad
collaboration of consumers, purchasers, physician organizations,
hospitals, and government agencies at both the State and Federal
levels.
This strong collaboration between payers and providers has created
breakthrough improvements in health care delivery. The process
improvement techniques pioneered in other U.S. industries--for example,
six sigma quality standards and rapid-cycle problem analysis, solution
development and testing, and widespread diffusion in a short time
period--have been shown to work and hold enormous promise, but Federal
leadership in delivery system reform is indispensable.
We must also put into place a system of broad consultation with
consumers, purchasers, physicians, insurers and health care
organizations in setting national priorities for health care quality
improvement and in implementing standardized measures of quality
throughout health care. With quality measurement as a foundation,
reform can empower those who deliver care, pay for care, and oversee
care to work with those who receive care to innovate and modernize
health service delivery.
AFFORDABLE COVERAGE FOR EVERYONE
Today we have a fragmented health care system characterized by
cost-shifting and price distortions because as many as 50 million
people have no coverage.
According to Families USA, the uninsured received $116 billion
worth of care from hospitals, doctors, and other providers in 2008,
about $42.7 billion of which was uncompensated care.\14\ The costs for
uncompensated care are shifted to insurers and then passed on to
families and businesses in the form of higher premiums. For family
health coverage, the additional annual premium due to uncompensated
care was $1,017 in 2008.
---------------------------------------------------------------------------
\14\ Families USA. ``Hidden Health Tax: Americans Pay a Premium.''
May 2009. Accessed: http://www.familiesusa.org/assets/pdfs/hidden-
health-tax.pdf.
---------------------------------------------------------------------------
While our members generally have employer-based health coverage,
stabilizing the employer-based health system will require covering the
uninsured to make health care more efficient and prevent cost-shifting.
We cannot cover everyone without bringing down costs overall, and we
cannot control costs without getting everyone in the system.
The good news is that, according to the Council of Economic
Advisers, expanding health insurance coverage to the uninsured will
increase net U.S. economic well-being by roughly $100 billion per year,
which is substantially more than the cost of insuring the
uninsured.\15\
---------------------------------------------------------------------------
\15\ Council of Economic Advisors. ``The Economic Case for Health
Care Reform.'' June 2009. Accessed: http://www.whitehouse.gov/assets/
documents/CEA_Health_Care_Report.pdf.
---------------------------------------------------------------------------
The most important policy proposal for extending health care
coverage to the uninsured is ``pay or play,'' which I discussed earlier
in my testimony. But the tri-committee discussion draft includes
several other proposals that would also expand health care coverage,
including insurance market reforms, the establishment of an insurance
market exchange, individual subsidies, the expansion of Medicaid, and
improvements to Medicare.
Insurance Market Reforms
Ensuring access to health care coverage will require significant
changes to the current private insurance market, in which people are
now denied coverage or charged more because of their health status.
Market reforms for everyone who buys coverage in the individual and
group market will make coverage more fair, transparent, affordable, and
secure.
The AFL-CIO fully supports the prohibition on rating based on
health status, gender, and class of business; the prohibition on the
imposition of preexisting condition exclusions; guaranteed issue and
renewal; and greater transparency and limits on plans' non-claims
costs. While we would prefer a flat prohibition on rating based on age,
we believe the proposal to limit age rating to 2 to 1 is a strong
alternative. Any variation allowed above that limit threatens to make
coverage unaffordable for older individuals.
Insurance Market Exchange
The AFL-CIO also strongly supports the proposal to create a
national health insurance exchange to provide individuals and
businesses with a place to enroll in plans that meet certain criteria
on benefits, affordability, quality, and transparency. We believe this
will be a mechanism for simplifying enrollment and applying uniform
standards.
The tri-committee discussion draft establishes a mechanism that
offers consumers a way to compare plans based on quality and cost.
While the exchange will initially be open to individuals and small
employers, we believe there should be a commitment to allowing public
and private sector employers beyond the small group definition to
purchase coverage through the exchange after the first 2 years that the
exchange is operational.
Subsidies for Low- and Moderate-Income Workers
Subsidies will be essential for making coverage affordable for low-
and moderate-income individuals and families. We support the proposal
to make subsidies relative to income, with more substantial subsidies
applied to more comprehensive coverage for the lowest income enrollees.
We also support ensuring that coverage is affordable by applying the
subsidies to premiums as well as out-of-pocket costs.
Medicaid Expansion
We strongly support extension of Medicaid coverage to all under 133
percent of poverty, with sufficient resources to States to offset the
new costs.
Medicare Improvements
In addition to eliminating subsidies that give private Medicare
Advantage plans a competitive advantage over traditional Medicare and
deplete the Trust Fund, the tri-committee discussion draft makes needed
improvements in benefits for Medicare beneficiaries. The draft closes
the gap in prescription drug coverage over time, eliminates cost
sharing for preventive services, and improves the low-income subsidy
program.
FINANCING HEALTH CARE REFORM
There are at least three key elements of health care reform that
will also affect savings and revenues available for reform: A public
health insurance option, delivery system reform, and an employer
responsibility requirement. Though these policy proposals are
absolutely necessary to improve the value we get for our health care
spending, in the short run they will not be sufficient to fund reform.
The Senate Finance Committee has said that all savings and revenue
for health reform must come from within the health care budget.
However, because health care reform is an urgent national priority that
will produce benefits across our economy and improve our national
budget outlook, we agree with the President that we should look beyond
health care spending to obtain additional revenues. We support the
major elements of the President's budget proposal for the Health Reform
Reserve Fund, including savings in Medicare and Medicaid, limiting the
itemized deductions for households in the top two tax brackets, and
other modifications to reduce the tax gap, as well as making the tax
system fairer and more progressive.
One financing option under consideration in the Senate Finance
Committee is a cap on the current tax exclusion for employer-provided
health care benefits so that some portion of current health care
benefits would be subject to taxes. We believe this is an
extraordinarily bad idea.
Taxing Benefits Would Disrupt the Employer-Based System
Capping the tax exclusion would undermine efforts to stabilize the
employer-provided health care system. Employers would likely respond by
increasing employee cost-sharing to a level at which benefits would
become unaffordable for low-wage workers, or by eliminating benefits
altogether. Capping the exclusion would also encourage workers to seek
coverage outside their ESI group when this is economically
advantageous, thereby complicating the role of employers enormously and
giving them another incentive to discontinue coverage.
Congress and the President have assured Americans that they will be
able to keep the health care coverage they have if they like it. This
approach makes enormous sense and generates broad public support. A cap
on the tax exclusion would violate this basic understanding and
threaten to disrupt the primary source of health care coverage and
financing for most Americans.
Until health care reform has been proven successful in lowering
costs and making coverage available to uninsured workers through new
private and public plan options, we should not make any changes that
threaten the source of health care coverage for 160 million Americans.
Taxing Benefits Would Be Unfair to High Cost Workers
The Senate Finance Committee is considering capping the tax
exclusion for relatively high cost plans. This would be an unfair tax
on workers whose benefits cost more for reasons beyond their control.
The exact same plan could cost well under $15,000 in one company
and more than $20,000 in another depending on factors that have nothing
to do with the generosity of coverage. According to one study, premiums
for the same health benefits can more than double when an individual
crosses State lines.\16\
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\16\ Stan Dorn, ``Capping the Tax Exclusion of Employer-Sponsored
Health Insurance: Is Equity Feasible,'' Urban Institute. June 2009.
Accessed: http://www.urban.org/UploadedPDF/411894
_cappingthetaxexclusion.pdf.
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The cost of coverage can be the reflection of many factors: The
size of the firm; the demographics of the workforce; the health status
of the covered workers and families; whether the industry is considered
by insurers to be ``high risk''; geographic differences in cost; and
whether there are pre-Medicare retirees covered through the same plan.
Studies show that placing a cap on tax-free benefits would have the
greatest impact on workers in small firms; firms with older workers and
retirees, and workers with family plans that cover children. This is
because insurance companies regularly charge higher rates for coverage
for these workers.
Under one proposal, over 41 percent of workers at a firm with older
workers would be taxed on their health care benefits, but only 16
percent of workers at a firm with younger workers would be taxed.
Almost 30 percent of workers at a smaller firm would be taxed, but only
17 percent of workers at a larger firm. Over 41 percent of workers with
family coverage would be taxed, but less than 20 percent of workers
with individual coverage.\17\
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\17\ Elise Gould. ``How Capping the Tax Exclusion May
Disproportionately Burden Children & Families.'' Economic Policy
Institute and First Focus. May 2009. Accessed: http://www.first
focus.net/Download/GOULD.pdf.
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If workers have to pay more taxes because some of their co-workers
have costly medical conditions, health coverage would be transformed
from a workplace benefit that everyone supports to one that splits
workforces between the healthy and the sick.
Some argue that the existing tax exclusion is regressive, because
higher income workers get a bigger tax advantage. But this is only one
part of the story.
A recent report points out that while households in higher tax
brackets get a greater benefit from the tax exclusion in absolute
dollar amounts, low- and moderate-income workers would be impacted more
from capping the exclusion because their taxes would increase by a
larger share than those of higher-income workers. The report found that
workers with employer-provided health benefits who make between $40,000
and $50,000 would see their tax liability increase on average 28
percent, while those who make between $50,000 and $75,000 would see
their tax liability increase on average 20 percent. By contrast,
workers who make more than $200,000 would see an average increase in
their tax liability of only one-tenth of 1 percent. In short, capping
the tax exclusion would not make it more progressive.\18\
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\18\ Commonwealth Fund. ``Progressive or Regressive: A Second Look
at the Tax Exemption
for Employer-Sponsored Health Insurance Premiums.'' May 2009. Accessed:
http://www. commonwealthfund.org / / media / Files / Publications /
Issue%20Brief / 2009 /May/ Progressive%20or%
20Regressive %20A%20Second%20Look%20at%20the%20Tax%20Exemption /
PDF_1269_Schoen _progressive_or_regressive_ESI.pdf.
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Taxing health care benefits would not bring down health care costs,
either. It would just shift more of those costs onto workers.
Economists say the tax exclusion leads workers to get too much
coverage, but capping the tax exclusion would not do anything to
address a key cost driver: The fact that 20 percent of the population
consumes 80 percent of our health care spending. Taxing health benefits
would not change that fact.
CONCLUSION
The AFL-CIO applauds the work of the committees in outlining a
strong, effective, comprehensive plan for guaranteeing quality
affordable health care for all. We believe the tri-committee discussion
draft would stabilize the employer-based health insurance system by
simultaneously achieving the goals of lowering costs, covering
everyone, and improving quality. We stand ready to work with all three
committees to enact reform that achieves these goals. America's working
families can wait no longer.
Mr. STARK. Ms. Hansen, the President of the AARP, would you
like to talk to us about AARP's positions?
STATEMENT OF JENNIE CHIN HANSEN, PRESIDENT, AARP
Ms. HANSEN. Well, thank you, Congressman Stark, for this
wonderful opportunity to represent AARP. I thank Chairman
Rangel and Ranking Member Camp, as well as the rest of the
Committee, for the opportunity to address this really vital and
critical topic at this time.
Enacting legislation to give all Americans quality,
affordable health coverage options is actually AARP's top
priority this year. The draft tri-committee legislation marks
substantial progress toward this goal.
Today, I am really proud to represent nearly 40 million
members of AARP, half who are over the age of 65 and therefore
in Medicare and half under 65. Both age groups face serious
problems in today's health care system and AARP really
appreciates the tri-committee for including critical reforms in
its draft that will help AARP members of all ages.
For our younger members, the draft would get us closer to
abolishing discriminatory insurance market practices that use a
person's age to block access to health coverage or to keep
prices too high to make a difference. To make insurance
affordable for Americans age 50 to 64, AARP believes these
individuals should be charged no more than twice what somebody
under 50 is required to pay for quality health care. Why is
this? Because older may mean wiser but it does not always mean
richer. In fact, the income of uninsured adults, aged 18 to 24,
is a little over $28,000 for the household and for the 50 to
64, it is $30,000 for the household.
But if insurance companies are allowed to charge people
aged 50 to 64 more because of their age, and especially if it
is more than twice what those under 50 pay, those who need it
should be eligible for a subsidy in order to afford this
coverage. There should also be strict limits placed on what
these individuals are required to pay out of their own pockets.
AARP is also concerned with the so-called ``hardship
exemption.'' While this exemption would save those who cannot
afford to pay for the required insurance policy, it would still
leave them without affordable quality insurance. So the net
result is they still are uncovered.
The tri-committee draft requires everyone, individuals and
employers alike, to participate in health care reform and AARP
applauds the tri-committee for recognizing the importance of
shared responsibility. One of the greatest difficulties faced
by our older members is the extraordinary out-of-pocket costs
for health care. In fact, Medicare beneficiaries right now
spend about 30 percent of their income on health care costs and
they face costs that are six times the costs faced by those of
us who do have employer-sponsored coverage. This is a
particularly stark reality for the nearly half of Medicare
beneficiaries who have incomes of less than $22,000 per year.
Prescription drugs are of course a big piece of Medicare
beneficiaries' out-of-pocket expenses, which is why AARP has
made closing the ``donut hole'' and improving the low-income
assistance program's top priorities in health care reform. The
tri-committee has led the way on both of these vital issues,
including the closure of the ``donut hole,'' as well as the
important improvements to Medicare low-income supports in its
draft legislation.
The draft also fixes Medicare's broken system for paying
doctors. I think we have heard a lot about that, and we know
that this is a whole system that has to be addressed. It also
puts Medicare on a path to fiscal stability by revising payment
systems that Peter Lee has mentioned, as well as Mr. Shea, to
reward quality rather than quantity of care. It includes
incentives to reduce costly and preventable re-
hospitalizations, which will help eliminate some of the waste
in Medicare that is driving up the cost of health care and
threatening Medicare's financial future.
It strengthens our workforce, and we have just addressed
that. And we know that it is already quite fragile and its
ability to meet current needs is quite challenged now, let
alone what will happen in the future.
And it takes important steps to address racial and ethnic
disparities in care that have been documented in research. Many
challenges remain on the road to comprehensive health care
reform but AARP and many of us who have been here to express
those opinions, recognize that the differences that we happen
to have cannot stop us from finding common ground and enacting
comprehensive reform this year. We all know and have said that
the status quo is unsustainable, and we cannot then afford to
fail.
So thank you all for your leadership, and AARP looks to
continue to work with you all. Thank you.
[The prepared statement of Ms. Hansen follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Chairman RANGEL [Presiding]. Let me thank you for your
leadership in helping us to get to at least where we are today.
And I call on Mr. Johnson, who is the Senior Vice President
of Labor, Immigration and Employee Benefits for the Chamber of
Commerce. We need you.
STATEMENT OF RANDEL K. JOHNSON, SENIOR VICE PRESIDENT, LABOR,
IMMIGRATION AND EMPLOYEE BENEFITS, U.S. CHAMBER OF COMMERCE
Mr. RANDEL JOHNSON. Thank you, Mr. Rangel and Ranking
Member Camp and Members of the Committee. I appreciate this
opportunity to testify. The Chamber is the world's largest
business federation, representing more than 3 million
businesses of every size and sector across the economy. I think
more importantly I want to note that half of Americans do
receive their health insurance voluntarily provided by their
employers. And the Chamber is committed to improving the health
care system by lowering cost, improving quality and expanding
coverage.
There are a couple of issues that I want to bring up in my
oral statement. I also have a written statement which is a
little longer. But I want to address process, the employer
mandate, and the so-called ``public option,'' which has already
been much debated here.
As far as process goes, we understand a need for urgency
but lets put it on the table. Only a few days ago, this bill
was released. It is 850 pages long. We all enjoyed our weekends
trying to get through it, but there are many parts that we
still do not understand.
It is clear that the bill is going to be rushed to the
floor. Mark-ups currently have already been scheduled for next
week and the week after, and there will not be adequate time
for consideration or certainly deliberation by the Chamber's
Employee Benefits Committee or my many members.
I did work on the House Labor Committee 10 years ago when
Mrs. Clinton submitted her bill for consideration to the
Congress. She was much criticized for that process because it
came up here almost as a fait accompli, but it was the subject
of many hearings in many, many committees, including this one.
And looking back on that, I would say it was a bit of a model
of transparency as compared to the process we are faced with
today.
So we do hope that the process will be slowed down a bit.
We know what the White House is saying and the schedule that
the President has set for the Congress, but we do believe we
need more time to consider a bill of this length.
There are many good ideas. We would like to be able to
support a bill as it goes to the floor, but it is going to take
some work.
With regard to the employer mandate, certainly that is our
number one issue, along with the so-called ``public option.''
We oppose the pay or play mandate that is in this bill. I was
astounded, frankly, when I read this weekend that it imposes an
8 percent penalty on employers, let's call it what it is, it is
a penalty or tax, if they don't participate in the so-called
``play'' part of the mandate. What is 8 percent? Well, that is
a lot of money. Quick back of the envelope, 8 percent on
someone making $40,000 a year is $3,200. If you have 20
employees, that is $60,000. That is a lot of money for a small
business to pay in addition of course to the FICA taxes they
are already paying.
We realize that is based on the Massachusetts model, which
has, by the way, been roundly criticized by both the left and
the right. In the Massachusetts model, however, the penalty was
about $300 per employee, not certainly 8 percent of payroll.
We think that this sort of imposition on businesses for
those who cannot afford it, and not all businesses can afford
health care or pay this kind of penalty, is going to be one
more incentive frankly, and I will say it, for businesses to
move overseas.
One of the worst aspects of this proposal is a very
peculiar provision, which allows employees who are part of the
employer plan to actually cash out and move to the so-called
public option. And apparently, as we read the bill, this
provision would say that the employer must in fact pay for that
cash out. Obviously, an employer cannot plan on that basis,
where employees move in and out.
We are always concerned of course about the minimum
coverage provisions defined in this bill, which is set by this
ubiquitous board of all-consuming powers, which many others
have talked about.
The public option, much discussed in the first panel, I
will not belabor it, I will just say it is called a ``public
option'' for a reason. It is because one way or the other, it
is going to have government support. Let's face it, if this
plan goes bankrupt or does not have enough premiums coming in,
the government is not going to let it go by the wayside and
die. The government will step in and save it. It is not going
to be taxed like private sector insurance companies are. It is
a public plan, it is a government-supported plan, and that is
why we call it a ``public option.''
Many supporters believe that a public plan is necessary. I
think our position is let's walk before we run. Let's see how
the insurance market reforms work, combined with the gateway,
et cetera, and other kinds of reforms in this bill and let's
see how they work before we move to this so-called new sort of
Medicare-like option applicable to the entire public.
With regard to paying for reform, I know there are a lot of
taxes on the table. It is no surprise that the Chamber is not
too sympathetic to new taxes on our members. We have gone
through a list of those in the written statement, and I will
not go through those in my oral but each one of course is new
money from the bottom line that employers like to use for
hiring new workers, expanding, providing benefits voluntarily,
which they already do, and creating work for American workers.
Now, that does not mean the Chamber is opposed to health
care reform. Our members are paying the money for increasing
health care costs. We want to continue to do that. We want to
continue to cover our workers, so we support reform. But the
public plan, the employer mandate, is something we cannot
support. Peter mentioned many improvements in the system that
we can go along with that are in this bill. Other provisions,
such as medical liability reform, we would like the Committee
to look at. We are ready to work with this Committee and the
other three in the Congress, the jurisdiction of the other two,
but we would ask the process be delayed a bit. Let's take our
time to get this 850-page bill right. And let's not do any harm
before we move on and pass this legislation on to the
President.
Thank you, Mr. Chairman.
[The prepared statement of Mr. Randel Johnson follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. STARK. I just might comment, Mr. Johnson, the timeline
when you were here and we did MMA, if you'll recall, this
Committee has had six hearings and several bipartisan meetings,
and the legislative proposal was released June 19th when we did
MMA we got the draft on June 13th, that was pulled back, and on
June 16th, we got the draft for a markup on June 17th. We have
over a month prior to any proposed markup been having, and I
say this because the Minority staff, unlike in 2003, the
Minority staff has received information as the Majority staff
has.
So I only say as procedure, we have attempted to bring this
out weeks and months ahead of markup consideration, and the
staffs on both sides of the aisle I think have had--everybody's
Father's Day was spoiled reading this thing. So I would just
like to suggest in consideration for both the Minority and
Majority staff who have spent untold hours, that the
information has been out there a long time, and we hope that
will help us come up with a better product. Without--however
you feel about the product, I think the procedures, we've tried
to be very transparent and get the information out as early as
we can.
Mr. RANDEL JOHNSON. Just a quick comment, Mr. Chairman. We
do have a policy process at the Chamber, the Employee Benefits
Committee, and we have a broad membership. It does take us a
little bit of time to get a bill of this enormity out to our
members and try and get feedback so we can figure out that
we're in fact reflecting our membership's views.
Mr. STARK. Thanks. Thanks for your consideration.
Chairman RANGEL. Let me follow up on that. Not only have we
had the hearings, but I wish before I get a chance to talk with
you, we need the Chamber. It's important to the country, it's
important to the Chamber, it's important to our economy, and I
personally think it's important for competition to have a
healthy workforce. Do you agree with all of that? Do you know
the prices are soaring for employers as well as for individual
employees? Some of the things that were laid out there, I would
like to clear up.
What I would want you to do as I go to Mr. Higgins and the
Republicans is to make bullets of the things that you've said,
the mandatory, the inability for small businesses and those
things, because we're too close on this thing for you not to be
able to get to your membership and to recognize that maybe
there's some fine-tuning to be done. That's why this is a draft
bill. But we have to be joined at the hip on this, and I am
convinced in talking with the Chamber people and businesspeople
that we can come together. So just bullet these things and
we'll get back to you. What we can't cover today, we'll cover
this afternoon, fair enough?
Mr. RANDEL JOHNSON. Yes, Mr. Rangel. We have a conference
call to the Chambers on Thursday, we'll be running through the
provisions of the bill, a broad nationwide conference call, and
we will certainly be----
Chairman RANGEL. Terrific. Now, Mr. Higgins through no
fault of his own did not get a chance to question the last
panel. And so you may proceed.
Mr. HIGGINS. Thank you, Mr. Chairman. A lot of the debate
is centered around the so-called public plan or not-for-profit
plan. The proponents of the not-for-profit say that it is
advanced to drive competition, to improve quality, to contain
and lower costs. The opponents of change, the defenders of the
status quo, say that a not-for-profit will put private plans at
a competitive disadvantage. It will lead to a single payer
system. It will be like Canada. It will be a European style. It
will be a massive Federal Government takeover of health care.
These are scare tactics that are designed to confuse people to
a point where they say, well, the system may not be perfect
now, but we can't risk changing things.
What I want to talk about is America. In America today,
there are 298 million people. One hundred fifty-three million
have employer-sponsored coverage. Fifteen million people have
individual coverage. Eighty-one million in Medicare and
Medicaid, and 46.7 million don't have insurance. Nine million
of them are kids. In America, we pay 2.5 trillion dollars a
year for health care, 20 percent of the American economy. These
costs are expected to grow by 6.7 percent annually or up to 8
percent. We have a potential liability of another trillion
dollars to try to cover those without insurance.
So as we focus on this public and private plan, if you look
at all the studies that have been done, the Dartmouth study,
contemporary and historical studies in the problems of the
health care system in America, the Atul Gawande study in the
New Yorker. It always cites the places that do it well. They
cite specifically the Cleveland Clinic. They cite the Mayo
Clinic. And guess what? Those places are delivering highest
quality, low-cost care, and they just happen to be not-for-
profit. The doctors aren't tenured. They're salaried. They have
1-year contracts. There is peer review. Doctors are doing what
doctors are supposed to do and not dealing with insurance
companies. You know, cardiologists, the national average salary
for a cardiologist is $370,000 a year. At the Cleveland Clinic,
the average is $336,000 a year. An oncologist, national average
is $270,000 a year. At the Cleveland Clinic, it's $254,000 a
year. There's a more generous compensation package for those at
the Cleveland Clinic, including covering their malpractice
insurance premiums.
The point here is, if we're going to do a not-for-profit
plan it should be designed to do one thing. It should be a
countervailing force for a system that everybody agrees is
unaffordable, unsustainable and unacceptable. Let's look at
what works. Now I know from information I got this morning that
the President and CEO of the Cleveland Clinic is here in
Washington. The problem is, he's not here before this panel,
and that's who we should be looking to for information about
how to structure the fundamental piece of health care reform,
and that's a not-for-profit, not for unfair competition, but
for fair competition, an American system where we pay more per
capita than anybody else in the world. And our outcomes, our
health care outcomes, are unacceptable and getting worse.
That's all I have, Mr. Chairman. Thank you.
Chairman RANGEL. Thank you. The Chair recognizes Mr. Camp.
Mr. CAMP. Thank you, Mr. Chairman. It was clear in talking
to the last panel that many of them had not had time to read
the bill. I presume that's the same with this panel. I don't
know if any of you spent the weekend. It was just released
Friday night. Have any of you had a chance to read the whole
bill in its entirety? Well, good for you. Two of you have.
Skimmed? All right. Well, I do think what we're trying to get
at today is actually how the provisions in the bill will affect
health care as we know it.
And one of the things that the draft bill would require is
that employers offer to pay for health insurance for full-time
employees and their dependents, and if they don't do that,
there's an 8 percent payroll tax. And I would say to Mr.
Johnson, what impact will that have on the 14 million Americans
currently unemployed? What will the potential of that payroll
tax on health care do for the unemployed? And also for the
prospects of economic recovery in general?
Mr. RANDEL JOHNSON. Well, for better or for worse, there
has been a lot of studies done on the so-called pay-or-play
mandate. Now these studies, because they're not exactly on the
legislation before us because the studies were done before the
legislation was introduced on Friday. But invariably----
Mr. CAMP. Can you speak into the mic a little bit more?
Mr. RANDEL JOHNSON. Yes sir.
Mr. CAMP. Thank you.
Mr. RANDEL JOHNSON. There's been many studies done,
Congressman, on the impact of the pay-or-play mandate on lower-
wage workers. Principally the pay part, a civil penalty, has an
adverse impact on job growth and in fact will result in job
losses and lower wages. Why is that? Because there's only so
much money that employers have for the bottom line, and when
they have to pay a substantial civil penalty, that payment is
going to come from somewhere, and that's going to come from
their operating budget, which is often taken out in terms of
less job growth and adverse impact on workers in terms of their
wages.
Now this isn't the Chamber talking. It's a variety of
studies that I have cited in my testimony. What exactly will be
the 8 percent, the impact of what is in this bill? Well, I
think it would be some interesting modeling, but it's certainly
not going to be helpful to many workers who are going to lose
their jobs because of that mandate. Will it result in some
additional coverage? Hard to say. I mean, these are the--this
is the tension that the Committee is dealing with, I
understand. But they've got to look--I ask that the Committee
look at the true impact of an 8 percent penalty on employers
and the fact that this is real money.
Mr. CAMP. There's also a new tax on employers in Section
411 of the bill, who promise to write health insurance that
meets certain government-approved levels of benefits. And if
employers make an unintentional mistake that really doesn't
bring them up to the level of coverage required by the
government, they're subject to penalties as high as $500,000,
even if those mistakes are unintentional. Does that seem like a
punitive penalty on small business?
Mr. RANDEL JOHNSON. Thank you, Mr. Camp, because I was not
aware of that part of the bill, and I'll certainly bring it to
the attention of our Chambers tomorrow. It seems like an
awfully high penalty for an unintentional violation obviously.
It's certainly in the aspects of employment benefits or on
labor law generally, it's far in excess of anything we see in
other employment laws.
Mr. CAMP. Clearly there will be costs associated with this
pay-or-play mandate, and I would ask you, Ms. Hansen, do you
feel that this cost might cause employers to offset the costs
by dropping retiree health coverage? Do you see that as a
concern?
Ms. HANSEN. Of course, our concern is continuity of
coverage for individuals. So I think it depends on how the
program eventually is structured as well as our ability to make
sure that there's an affordability factor, again, whether it's
the consideration for the employer, or then if it gets passed
on to the employee, that there is some way that that person can
still participate in coverage. So, the difference will be
subsidy. And ultimately it's coverage that we're still looking
for.
Mr. CAMP. So the possibility of losing retiree coverage is
something that would concern you a great deal because it would
mean that continuity would be broken?
Ms. HANSEN. Well, we've been watching how companies have
chosen to go this route, so I don't think it's just this
particular effort. It seems to have been a trend going
regardless of this movement.
Mr. CAMP. Certainly its health care costs have increased,
and so you--certainly it would follow that if employer costs
are increased even more that you might even see that problem
exacerbated?
Ms. HANSEN. Well, I do agree that it's really about how
much cost is, whether it's borne by one party or the other,
it's having it affordable.
Mr. CAMP. All right. Thank you, Mr. Chairman.
Chairman RANGEL. Okay. I want to get back to the business
of the Chamber. It was so good seeing you at the White House as
stakeholders and agreeing that the system is broken, that
employers are doing more than their fair share, that the prices
are soaring, that most industrialized nations are competitive.
General Motors once said they pay more for health care than
they do for steel. Employees can't afford to leave or lose
their job for fear of losing their health insurance. It's a
better, healthier competitive America when they're educated and
when they have health care.
Hey, this is Chamber type of talk. This is America type of
talk. Half of your statement was knocking what we've done. I
want you to help us to improve what we have done, because you
can't challenge that we have mutual goals. You can challenge
the process, but this is draft, D-R-A-F-T, proposal. And to be
able to persuade you as the small businesspeople are persuaded,
because quite frankly, from a political point of view, that's
where I get my jobs, from the small businesses, they need this.
They want to be able to afford to do this.
When we had businesses here at one of our half-dozen
hearings, they said you do what you want. We're going to take
care of our employees. And the employees said that, hey, we got
our policy. We enjoy it. Just stop the premiums. The whole idea
that unions have to negotiate instead of for wages, most of
those things are going for health care. So when we say 8
percent, that was less than what they already pay. And I don't
think you challenged the fact that having a competitor when
you're throwing these hundreds of billions of dollars out there
with people who could never afford health care, heck, your
corporations are paying for the health care of the uninsured in
higher premiums. And now for us to bring those people to the
marketplace with the security that they can get insured, you
know that has to bring down the premiums for your members, and
for the small businesspeople who hope to be your members one
day.
So what it is that we've said that you now have bulleted
that we can talk about but you can think there's a better way
to do it? If you don't like the mandate, that means we've got
to lead the whole for people to--that don't have the same
consents for reform as you and I do to get a free ride? No.
Everyone, the young and the ambitious and those that hope that
they never get sick, has to be there in order to broaden the
pool and reduce the premiums. So I'm disregarding your negative
rhetoric because I have worked so hard with the Chamber to
recognize that you need an educated workforce. It's not a local
issue. And you've worked with me and others. You need a healthy
workforce and not spend so much time in terms of providing
paying for health care and spend more time with wages and being
competitive with the foreigners. So just tick off those things,
if done differently, you can say that's what I was talking
about. Slow down the train and let's get on board.
Mr. RANDEL JOHNSON. Mr. Chairman, first, I can assure you
that we don't, as short as the time we had to review the bill,
we don't come up here without gauging where our membership is
before we testify. The reality of it is, the employer community
spends $500 billion on health care now voluntarily. I suppose--
could they be required to spend more? Well, the Congress could
make us spend more I suppose. We are already doing our fair
share.
Many of our members and the bigger companies----
Chairman RANGEL. That goes unchallenged, so we strike that
off. We want to make certain that you not get increased
premiums for doing more than your fair share, because you're
paying for people who don't have health insurance. You know it,
I know it.
Mr. RANDEL JOHNSON. I understand. And we also have many
members who simply cannot afford to provide health insurance or
pay an 8 percent penalty because they cannot.
Chairman RANGEL. They can't afford to provide health
insurance or pay the penalty, we're there to help them. It's in
the bill. We'll go through that. We're just saying if you agree
not to participate, you've got to pay something so that we can
help your employees get insurance which 99 percent of large
employers will maintain and want to do. I'm spending more time
with the small businesspeople who need more help. There's no
conflict with the CEOs in doing this. They're going to keep
their plan. I want to reduce their premium.
So mandate--we'll talk about that. But anybody would tell
you, you've got to get everyone in the pool if you're going to
bring equity to everyone else. And I really think the major
players are going to be helped by doing this, and they don't
have to be told what to do. We just want to make certain that
no one gets a free ride.
What were the other things that disturbed you about our
behind the closet job that we've done?
Mr. RANDEL JOHNSON. Well, the public plan option, which was
much discussed at the first panel, is troubling to us, because
in various reasons that were laid out. One is it does rely on
Medicare reimbursement rates, which results in a cost
shifting----
Chairman RANGEL. What does it do?
Mr. RANDEL JOHNSON. Relies on Medicare reimbursement rates.
I believe that's right.
Chairman RANGEL. Well, it bumps up the Medicare rates, but
this is what the doctors are relying on. If they don't want to
participate, they don't have to participate.
Mr. RANDEL JOHNSON. I think many doctors feel they have to
participate in Medicare because that's where the money is and
that's where the patients go.
Chairman RANGEL. If that's where the money is, that's what
they're looking for, what do you want us to do, deny them the
money? Where are they going to get the money if we don't assist
50 million people to go out there and to compete?
Mr. RANDEL JOHNSON. Well, Mr. Chairman----
Chairman RANGEL. And not only that, we are including a
whole lot of physicians, primary care physicians, to come in to
help the country to provide basic health care. You support
that. You have to. I'm submitting that we are going to agree to
more. It may be the process, and you're entitled not to like
it. We can make up for it. But I just want you to take off some
of the things that happen in the dark of nightness that you say
that I can't get on board here, because we've got to work it
out.
Okay. We'll pass on and we'll--you say you're having a
conference call?
Mr. RANDEL JOHNSON. We do one Thursday, and I guarantee
there will be a lot of Chambers because a lot of people are
starting to pay attention.
Chairman RANGEL. Well, try to get it in an orderly way
where you can get your questions, your objections so that at
least we can tell you where we stand. But we're not going to
leave this train without you. Okay. Who's supposed to be
recognized? Mr. Herger is recognized for 5 minutes.
Mr. HERGER. Thank you, Mr. Chairman. And I'd just like to
point out, now we've been talking about this for a while now.
This is the first hearing we've had actually since we've had a
bill that's been presented. That bill was just presented on
Friday, 850 pages worth. Of our six panelists here, only two
have mentioned they had an opportunity to read it. So, Mr.
Chairman, we do have some concern. We have some major concerns.
And I don't think these concerns should be overlooked or made
light of. These are major concerns that it isn't just the
Chamber of Commerce that has concerns, small businesspeople and
citizens all over this Nation have concerns of how we're going
to pay for it and how we're going to do it. And bringing this
up on a Friday right before a weekend, Father's Day weekend,
and then just coming up the next week of panelists who were
chosen before, again, I don't think we should be making light
of this.
I also have in front of me, it's not just the Chamber of
Commerce. NFIB, National Federation of Independent Business,
came out, a quote from them. They say NFIB opposes employer
mandates that threaten the viability of our Nation's job
creators, and an 8 percent pay-or-play mandate will inevitably
harm job creation. Research shows an employer mandate could
cost 1.6 million jobs, hardly what this country needs in these
challenging economic times.
Now, Mr. Johnson, in addition to requiring employers to
offer and largely pay for health insurance, this draft Democrat
bill would allow non-elected officials to mandate a minimum
benefit package. And just as Mr. Draper, a small businessman,
mentioned in his testimony, or alluded to, is it possible that
this minimum benefit package would be so expensive that the 8
percent payroll tax could be a cheaper and more predictable
option for employers? And if so, what impact would this have on
employer-sponsored health insurance that the majority of
Americans are accustomed to and who currently like?
Mr. RANDEL JOHNSON. Yes, Congressman. And if you look at
the bill, and that was one of the areas I did get through,
would it be cheaper? Unlikely the way they've spelled it out,
which is this board apparently with the minimum benefits
package would at least have to include hospitalization,
outpatient hospital, professional services, prescription drugs,
rehabilitation, mental health and substance abuse disorders,
preventive services, maternity benefits, baby and child care.
So--and then it says the board can add on to that. We don't
know what the board is really going to do, and this is
important, because it controls both what would be the adequate
package for the purposes of playing instead of paying, and also
who would benefit--what kind of companies could benefit to
participate in the gateway. The bottom line could very well be
that some companies will say, I'm not going to bother to figure
this out. It's complicated. Or, Congressman, that my type of
plan doesn't fit. I have a generous plan, but it doesn't fit
the definition of this board, and so I'm going to walk away
from this, and I'll just do the minimum. I'll do the minimum
benefits package, or perhaps I'll pay the fine, and to heck
with it, you know, I've had it. I've tried to do the best I
can. The government thinks it's doing its best. It knows best.
So, fine. I'll just do the minimum package and skip the hassle.
And that will result in less coverage overall for some number
of Americans. How many? It's hard to say, but that's one of
these uncertainties we don't know because we haven't had
adequate time to sort of vet the bill with our membership.
Mr. HERGER. And of course the big thing we've been hearing
from the President, we've heard from a number of my friends in
the Democratic party have indicated that if you like what you
have, you can keep it. But the bottom line is, even if Mr.
Draper's employees like what they had----
Mr. DRAPER. They don't.
Mr. HERGER. And we see these rates--and they don't--if they
see these rates, let's say they did.
Mr. DRAPER. Okay.
Mr. HERGER. Because most Americans like what they have. So
you have some who don't. But let's say most of the Americans
who work for small business who like what they have, Mr. Draper
could very well be forced into taking this 8 percent because
that's cheaper than perhaps the 10 or 11 percent or whatever it
might be that you could be paying now.
So, therefore, we would not be able to keep what we like.
We'd be forced into a potentially Canadian-U.K. type system
where we're rationalized. Do you see that as a concern?
Mr. RANDEL JOHNSON. I think it's the very uncertainty of
this sort of question that is beginning to alarm the American
public which accounts for the recent poll in the Washington
Post where it says most respondents are very concerned that the
health care reform would lead to higher costs, lower quality,
fewer choices, a bigger deficit, diminished insurance coverage
and more government bureaucracy.
It's these kinds of uncertainties about the bill and the
impact of these kind of provisions I think are getting out and
are troubling people, and that could be the result,
Congressman, who knows. But it's an awfully big question to go
forward without answering.
Mr. DRAPER. In Des Moines we only have two choices, so it's
hard to get fewer than that. I guess you could. You could get
one.
Mr. HERGER. Thank you, Mr. Chairman.
Chairman RANGEL. The situation is, we have about seven
votes on the floor. And so we have to, and we apologize for it,
recess until 3:00 p.m. And for Members, that is 3:00 p.m., or
if there happens to be another vote after that. So, Mr. Levin,
if you would want to stay. So we hope all of you can stay with
us until three and have lunch. We certainly will understand if
your schedules cannot permit it, and the Committee stands in
recess.
[Recess.]
Chairman RANGEL. We can't apologize enough to our dedicated
panel for staying here while we probably did less productive
work than you did during this break, but we certainly want to
thank you for your dedication helping us out, and we'll start
off, or continue rather, with Sandy Levin of Michigan.
Mr. LEVIN. Thank you. Sir, let me, as we reconvene, try to
follow up on what you and Mr. Chairman have raised and to talk
at least for a minute or two with you, Mr. Johnson. In recent
hours, much punctuated, we moved from the public plan as the
focus to a discussion of the employer mandate, and I think in a
sense that was a useful transition, so we talk about a number
of these provisions.
And in your testimony on page 4, you say that you adamantly
oppose the pay-or-play proposal. And you call it a sword of
Damocles. And then after you say employers are already doing
their share and more, you say that those who can't--who don't
cover, don't, because businesses that can afford to offer
benefits already. And then you say further on, a smarter
approach would be to focus on bringing down the costs of health
insurance.
Picking up the theme that our Chairman has put forth, I
would like to encourage the Chamber to participate actively in
the discussion, including the issue of an employer mandate.
Because I think the reality is that there's going to have to be
some requirement of coverage with perhaps some exceptions, and
we left that open in the bill as to what if any exceptions
would be made and what kind of credits would be given to
employers, depending perhaps on size. So this is an issue that
needs to be addressed. I think there will be a requirement in
order to bring more people within insurance, but its exact
shape remains to be determined. And so when you say here that,
on page 4, that you adamantly oppose a proposal and it doesn't
matter what's in it, you essentially withdraw your organization
from a discussion of what the plan might look like. And I think
what Mr. Rangel has said to you and others of us believe, that
it would be better if we could have broader participation. So I
don't know if you want to comment on that, but the issue of
employer participation, look, we're talking about an employer-
based insurance system being maintained, and if that's true, I
think almost certainly that will mean that more employers need
to cover their employees.
So I would hope that you might in future presentations not
talk about a sword of Damocles and it doesn't matter how it's
shaped, you oppose it, to saying that you have whatever you
want to say. Does that make any sense to you?
Mr. RANDEL JOHNSON. Yeah, it does, Congressman, and I
will--obviously, I'm going to go back to my policy committee
and we'll see where we go.
Mr. LEVIN. Good. Mr. Shea, do you want to talk quickly
about the issue of taxation of benefits, of health benefits?
Mr. SHEA. Thank you, Congressman. I said we think this is a
very bad policy because not only is it asking people to pay
when they're already paying a lot of money, pay more, when
they're already paying a lot of money, it is also inequitable
because small firms, any size groups with large numbers of
older workers, really retirees, high-risk industries, there are
a lot of factors, or just health status, there are a lot of
factors. And we've looked at plans side-by-side. So I got an
example from one of the construction trades of two Western
State plans, same trade, same age, and roughly the same
demographics otherwise. The difference in cost in the two plans
for similar benefits was one was 10 thousand and something, one
was 16 thousand and something. And actually the one at 16
thousand had higher copays and deductibles. The difference was
claims experience. And what that means, as you know, is health
status. Well, I don't see how the Congress is going to be able
to go to their constituents and say we're going to do this,
and, you know, some people are going to get hit--smaller firms
are going to get hit harder. So that's a huge issue.
The other thing is, I just--I started my comments by saying
I don't think you can do this without going outside the health
care system in the short term. In the long term, if we can
capture some good percentage of that 30 percent of the annual
expenditure that we waste, according to the Institute of
Medicine, then we'll have a lot of money to fund reform. But
that's going to take a few years.
Mr. LEVIN. My time is up. It gives me 30 seconds, 15
seconds, Mr. Johnson. Regarding bringing down cost of health
care, and it's on page 7, when you get on that telephone call,
talk more, if you would, with those on it specifically about
what kinds of plans might bring down the cost of health care.
Because Jerry, Mr. Shea, I hope it's not only a longer term. A
number of us think we have to find some additional measures to
straighten out, for example, physician reimbursement in the
shorter term, and not only the longer term. And we would like
your assistance on that, too.
Mr. RANDEL JOHNSON. Well, and we're totally committed to
doing this right away as soon as possible. I'm just talking
about the effect. And by the way, while I'm on the subject,
Congressman, thank you for your legislation on quality and
delivery system reform. It's the kind of proposal which really
is moving this whole discussion along, so I just wanted to
thank you.
Mr. LEVIN. Thank you, Mr. Chairman.
Chairman RANGEL. Thank you. Mr. Sam Johnson of Texas.
Mr. JOHNSON. Thank you, Mr. Chairman. You know, Mr.
Johnson, during the first panel, we talked about what would
happen if the health care choices commissioner loaded up the
essential benefits package with a lot of mandates on coverage,
my understanding of this bill is that the commissioner will
have the ability to regulate both government-run and employer-
sponsored health insurance plans. One thing that's yet to come
in the hearing is whether or not this health care choices czar
could unilaterally decide to cover abortion services in this
newly formed government-run plan. And I think the President
said that's something he wanted to do.
If that's the case, that would be an historic reversal of
public policy, and if this government-run plan could be
designed to cover abortion on demand and taxpayer funds are
used, I think that the cost of health care in this country, if
one bureaucrat in Washington had the power to decide what kind
of health--type of health benefits your companies had to
provide to its employees, if, for instance, they decided not
only abortion but acupuncture and hair transplants and
whatever, would employers decide to get out of the health care
system?
Mr. RANDEL JOHNSON. Well, without taking a position
specifically on--I think you pointed to the broad authority
this board has to add a long litany of required procedures or
treatments, depending on who has the most--who has the ear of
which politician on Capitol Hill and the board. So, it's
opening a door to an analyst's list. And I think, Mr. Johnson,
you agree, we've never seen a government program be reduced.
It's always gotten expanded. And so at some point, an employer
would say I'll just pay the fine and get out of this business
instead of trying to figure out how to squeeze my plan, which
is a very generous plan, into the square peg of this new
mandated government board, you know, required health care
benefits package.
So it's a real, you know, unknown peg in a hole that we're
concerned about, given how wide open this bill has left it to
this mandated program.
Mr. JOHNSON. No, I agree with you. I think they would get
out. Mr. Kirsch, you cite the New York Times article as
evidence that Americans are completely sold on a government-run
health care plan. However, that same New York Times poll also
found 63 percent are concerned their own health care would get
worse under a government-run system. Sixty-eight percent
believe a government-run system would limit their access to
treatment and quality care, and 53 percent are concerned they
would have to give up their own doctor under a government-run
system. Sometimes with polls you got to get past the first
question to find a real answer, and I wonder if you would
comment on that.
Mr. KIRSCH. I would love to. In fact, the whole thing about
a poll is if you'd ask it as a negative question, you'll get
that answer. So we actually did a poll back in January to find
out what would happen in a real debate, and I think you'll see
from the questions we asked, we didn't pull our punches. So let
me give you some examples of the questions we asked. The first
one was, ``a public health insurance plan will force people
into lower quality care, including long waiting times and
rationing of care,'' which is the argument that we hear
oftentimes from folks on your side of the aisle, versus ``a
public health insurance plan that would provide people the
choice of an affordable plan that includes at least the same
benefits as Members of Congress get, including a wide choice of
doctors.'' That argument wins by 38 points.
Let me go on. We hear this cost shifting argument: ``Like
Medicare and Medicaid, the new public health insurance plan
will reimburse doctors and hospitals at much lower rates,
causing many doctors and hospitals to shift costs to people who
buy private insurance.'' The other argument was: ``A public
health insurance plan will be able to control overall health
care costs for everyone by using its purchasing power, like the
Veterans Administration does now, to drive competition and
lower the prices paid for health care service and prescription
drugs.'' People favor that argument by 45 points.
Let me do one more that we also hear from people who oppose
the plan make. ``Establishing a government health insurance
plan will mean that millions of people will lose their private
health insurance coverage because employers will drop their
private insurance and dump people on the public plan,'' an
argument that Members on your side of the aisle have made
oftentimes today, versus the argument ``under the current
system, millions of people are already losing their health
coverage every year, having a choice of public or private
health insurance plans will make sure that Americans always
have an option for quality, affordable health care.'' Americans
side with that argument by 47 points.
So we did this poll to find out in a real debate in which
Americans hear both sides of the arguments, where will people
come down. We thought we might win these by a little, may lose
some of them. We won every one of them, mostly 30 to 40, almost
50 points. And so the first question is what Americans want
choice isn't complicated. People like a choice of a public or
private health insurance option, and the choice should not be a
Member of Congress' choice. It should be a choice that each
person makes.
Mr. JOHNSON. Well, I think you got the Member of Congress
thing backward. We don't get free health care by any stretch of
the imagination.
Mr. KIRSCH. This isn't free. People have to pay based on
what they can afford.
Mr. JOHNSON. Thank you, Mr. Chairman. We're out of time. I
yield back.
Mr. MCDERMOTT. Thank you, Mr. Chairman. Thank you all for
waiting, because we need to hear from you, the things you've
got to tell us. But particularly Mr. Draper. These other folks
are here representing organizations and they're paid for
sitting here and so forth, but yours doesn't look like quite
that circumstance, and----
Mr. DRAPER. Our lobbying budget is very small.
Mr. MCDERMOTT. And before I came back to Washington this
last week, I stopped and talked to two people I know in Seattle
who run small businesses. One is ``Cupcake Royale,'' a woman
named Jody Hall, who was down at the White House testifying on
behalf of small business, and the other one was Molly Moon, who
runs an ice cream store. And they have employees about like
you, 10, 12, 14 people.
And what I'm interested in hearing from you is what is a
small business? How should we do that? Should it be by volume
of people that they employ, or should it be on the basis of
their income, or what would you use? And then second, I see in
your testimony you say the most basic coverage makes up 8
percent of our gross payroll. So is that too much to ask of a
small business? Now I know you don't represent the thousands
and thousands of small businesses, but I'd like to hear how you
decided that you could spend up to 8 percent of your payroll on
health care.
Mr. DRAPER. I mean, we didn't have much of a choice on
spending up to 8 percent of our payroll on health care, because
that's the cheapest plans we can get. I think one thing is that
somebody who's in their twenties kind of looks at employer-
sponsored health care as kind of old fashioned and that you're
tied to this company for life. You need to stay with them. If
you leave, you have to try to get COBRA. Once you leave, you
have to try to get another company to pick up your health care.
So it makes it kind of inefficient if you want to move
around and kind of do your own thing. And so the employees at
SMASH didn't want us to even shop for a health care plan
through the company. Everybody wanted individual plans that
then the company subsidizes. So everyone is in their twenties,
single, and their individual plan is about $200 a month, which
comes out to about 8 percent of payroll.
Mr. MCDERMOTT. What does that cover? Could you give me----
Mr. DRAPER. An individual plan through Wellmark under Blue
Cross and Blue Shield is just really rudimentary. It's just
basic. It's not dental, it's not vision. It's pretty high
deductible. I think they say you get one free doctor's visit,
but it costs $10. And the copays kind of depend on what you get
done. So, if I go in for sinus surgery which was $12,000, you
end up paying about $1,500 of that surgery, which is only 10
percent, but when the national savings rate is below zero, I
don't think the average person has $1,500 laying around. As a
small businessperson, I have just money coming out my ears, so
it's not a problem for me.
One of the things that I look at is the difficult thing and
why I say it fluctuates between 8 percent and 24 percent is
that there are the hidden costs, and if you actually use care,
you have to pay for it. And so even if you're paying $200 a
month, if you have several problems that year, you may pay even
more in actual hospital bills than you do in premiums. And so
our company has agreed to pay those bills for our employees.
Just because I know that somebody has to pay them. And if one
of the employees is in financial trouble because of bills, that
puts the whole company in trouble. I mean, they're not easily
replaceable, so if one person goes bankrupt we can just get rid
of them and bring in somebody else.
I don't have a problem with the 8 percent if I knew that
then they could go--if I paid 8 percent, I'd be fine with it if
I knew that they could get full coverage at an affordable price
through the exchange.
Mr. MCDERMOTT. So you're saying that if they--since you're
a small business and you I think you say you have 12 people----
Mr. DRAPER. Yeah.
Mr. MCDERMOTT. So if we set the limit at 20 and said
anybody under 20 is a small business, that those people could
go into the exchange and get their insurance and the subsidies
that might go with that, and you would pay 8 percent, seems
like a reasonable deal to you?
Mr. DRAPER. Yeah. I mean, that would be fine with me just
because our costs are set. I wouldn't be fine with it if, you
know, it's about $600 for an individual--for a family policy
through the individual market. So if I was paying 8 percent and
then they went onto the exchange to get a family policy and it
was the same price as it is now, that would irritate me. So
it's a little tough to see exactly--it's hard to compare in a
hypothetical situation. But if paying 8 percent did lead to a
drop in health care prices, I would support that. And I don't
think 8 percent is necessarily too much to ask, and I don't
think it's too much of a responsibility for small business just
for the fact that I already pay for my employees' withholding
tax and unemployment tax. If you guys came in the shop, I would
pay the sales tax you owed. These are just some of the
responsibilities you have to deal with when being in a small
business and being at the top of the ladder. And I don't mind
paying taxes if they're going to something efficient, I know
they have a purpose. It's only the taxes that are unnecessary,
like what I pay now, which is for private health care, but I'm
also paying taxes subsidizing people without health care to go
to the ER.
Mr. MCDERMOTT. Could I stop you? I see my time is almost
up. I want to ask one question. Some people are saying that we
should not make a small business five people if the five people
have incomes of $100,000, a small lobbying firm here in D.C.,
they shouldn't be eligible for the small business thing, how
much do you pay--what's your average salary in your business?
Mr. DRAPER. It probably comes out to $45,000 a year. It's a
base of $38,000 plus bonus, so that's kind of what it averages
out to. But then there's lower paid employees that are just
hourly. If they're one of our employees, they would essentially
be in the mix. So I think you're pretty much going to have to
do something that's a mix of number of employees versus
payroll. You don't want people just starting sham fake
businesses so they can get out of getting health care and just
pay an 8 percent fee. But I think if you do a mix of employees
and payroll, it should be pretty simple.
Mr. MCDERMOTT. Thank you very much.
Chairman RANGEL. Mr. Ryan.
Mr. RYAN. Thank you, Mr. Chairman. Ms. Hansen, let me ask
you--you took Bob Novelli's job or Bill Novelli's job, or?
Ms. HANSEN. No. Actually, I'm a volunteer. The President's
role in the organization----
Mr. RYAN. Gotcha. Gotcha. Okay. I was just trying to
remember. Bill retired, did he not?
Ms. HANSEN. He went to Georgetown.
Mr. RYAN. Yeah. Right. Great. He's a good guy. I want to
ask you about AARP, your position on these issues, and just
sort of your sense of the future. I've been very impressed with
the--I think you called it your Divided We Fail campaign with
the elephant and the donkey.
As you know, the current unfunded liability for Medicare is
$38 trillion. Medicaid, which does affect the over 65
population, it's a tougher number to crunch because of the
State involvement and Federal--some estimates come in at about
$20 trillion of unfunded liability. Are you concerned that
we're creating a new entitlement here that will rack up a
similar unfunded liability?
Ms. HANSEN. Well, I think framing it as a new entitlement
as compared to looking at the basis of coverage----
Mr. RYAN. You don't see this as a new entitlement?
Ms. HANSEN. I think it's a choice of a health care program
that would cover people. So I personally, from my role, am not
calling it an entitlement. I wouldn't call it that personally.
Mr. RYAN. Just to say, if you qualify for it and you get
it, that's an entitlement. Such as if you're under 400 percent
of poverty, you go in the exchange, you get the subsidy.
Therefore it is by definition an entitlement. Just for the
record.
Ms. HANSEN. Well, I think there's--my understanding, and I
may be wrong, but I think that people are actually going to pay
for that as well, so it's not just a free--it's only if you----
Mr. RYAN. Well, people on Medicare pay part of their
premiums as well, so--and there's copays in Medicaid. So, yeah,
we're not saying it's 100 percent, but it's subsidized. So the
point I'm trying to ask is, is AARP concerned because they had
this great impressive campaign that we have pending insolvency
of Medicare and Social Security, are they not concerned that
we're adding to the list of new programs and liabilities?
Ms. HANSEN. I think AARP is concerned about solvency and
economic stability for the future, yes, we are concerned about
that, because besides the fact that our members are 50 and
above, our members are parents and grandparents and great
grandparents. So we are very much concerned about economic
security for the future of this country.
Mr. RYAN. So every year we delay fixing just Medicare and
Social Security, we go about 4 trillion, 3 to 4 trillion in
debt to those programs, the sooner we act, the more likely we
can prevent those in and near retirement from having effects to
their benefits. Most of the plans that some of us on this side
of the aisle have put out plans to make those programs solvent.
They don't affect people over the age of 55. The more delay
that occurs, the less likely changes will not affect people
over the age of 55. So my--let me ask it this way. If it is
clear that this new benefit creates a new unfunded liability
for the Federal Government on top of the already existing ones
which AARP has put an impressive campaign out there to fix,
will AARP come out against this and have a problem with this?
Ms. HANSEN. No. We're on record for wanting some real
change in the existing program itself.
Mr. RYAN. Are you on record for the public plan?
Ms. HANSEN. We--the board of directors actually met within
the past 2 weeks before any document was seen. We came up with
five core principles, and the principles, I'll read them----
Mr. RYAN. Don't go through all of them, no offense, because
I've got a 5 minute thing. Does this bill satisfy all of your
five principles?
Ms. HANSEN. As it's come out right now, the plan that the--
--
Mr. RYAN. The Tri-Comm plan.
Ms. HANSEN. The Tri-Comm does seem to house the core
principles.
Mr. RYAN. So as far as you know, AARP, this bill satisfies
your principles?
Ms. HANSEN. We're just saying--we're saying elements of the
bill certainly are supportive of the issues we care about.
Mr. RYAN. Mr. Johnson, real quick. If the actuaries are
right, and when I say the actuaries, Lewin, CBO, HSI, all of
them from varying degrees show us slippage, meaning private
sector dumps some people on the public plan, 8 percent payroll
tax. That means a payroll tax eventually goes to 23 percent, at
least for those firms that make this decision, as Mr. Draper
mentioned he would make. What do you think the effects of a 23
percent payroll tax on labor in America are going to be to our
economy?
Mr. RANDEL JOHNSON. Well, it's--it would be devastating.
We're already paying of course the tax and we have this 8
percent proposal, and 23 percent, I mean, that's a 23 percent
jump on wages that you have to pay with no attendant increase
in productivity. So that will result in lower job growth or
elimination of jobs because you've got to make up for that loss
at the bottom line somehow otherwise. I mean, it's pretty
elementary economics I think, Congressman.
Mr. RYAN. Thank you. My time has expired.
Chairman RANGEL. Mr. Becerra of California.
Mr. BECERRA. Thank you, Mr. Chairman, and to all the
panelists, thank you for your great patience and all of your
very important testimony. I'd like to begin by asking a little
bit about this whole notion about what will happen if we have
this new marketplace for options.
Mr. Draper, you're a businessman. You have folks who work
for you. You mentioned how you thought you could live with a
plan that worked to reduce costs so that you could then as an
employer feel comfortable making some contributions. Let me ask
a question. Would it be your intention to dump your employees
into any particular plan?
Mr. DRAPER. What do you mean, like steer them toward one
particular plan?
Mr. BECERRA. People continue to use this word ``dump'' as
if we're going to take a flock of American consumers and just
drop them onto a particular plan in a marketplace where, my
understanding is, the choice will be the consumer's, not the
employer's, not the health insurance company's choice, not even
a public insurance plan's choice, but who it will serve. The
choice will be that of the consumer, your employee. So let's
say you decide you no longer want to offer health insurance,
first I would ask if--because it sounded to me like you would
be willing to provide some contribution, but if you decided not
to, do you think you would want to then dump your employees
onto any particular plan?
Mr. DRAPER. I mean, not really. We already have the
cheapest plan we can get, so I'm not sure what other plan we
would dump them onto.
Mr. BECERRA. And the point here is that, one, you're
willing to make a contribution, so you're willing to try to
help them get a plan. But the way this new program would work
is that your contribution would make it possible for your
employees then, if you were to not offer a plan directly, to
take your contribution, use it to then be able to go into that
marketplace and shop for any number of plans that would be out
there, a competitive menu of plans that would be provided by
private insurers and a public insurance option that would be
out there. And whether somebody would attempt to dump employees
into this new marketplace, ultimately the choice wouldn't be
the employer's about where they would end up.
Mr. DRAPER. Yeah, that's true.
Mr. BECERRA. The choice would be the employee's or the
consumer's about which plan they would select.
Mr. DRAPER. Yeah. And, I mean, I think it doesn't--it
wouldn't have as much of an impact on us, because we already
buy individual policies for the plans. And so we already do
what the exchange is doing, and that they get to pick out
whatever individual plan that they want. I think one of the
biggest problems you have now is that it's kind of like when I
watch old people at Walgreen's trying to enlarge their own
photos, in that it seems easier because, well, you have control
over it, but they don't know how to operate the machines. It
saves Walgreen's some money because they don't have to do it
anymore. But it takes them longer and gets them a worse product
if they do it themselves.
I don't read plans professionally. I mean, it's not what I
sit around doing. Most of my time is spent thinking how can I
generate more money to send in taxes to the Federal Government.
And I think that's probably what you guys want me to be doing
rather than spending time sifting through plans.
The problem we have now is that they're written so
complicated that it's hard to understand exactly what your
deductibles are. So I wouldn't want, you know, just my
employees to be shopping through the complicated plans we have
now in the same way I wouldn't want the employees investing my
money for me. It's just--I don't have faith that they'll be
able to do it. My dad is an insurance attorney, so he actually
reads through our plans for us, but not having that kind of
crutch makes it really hard. So I think on the one hand you
need the exchange to really simplify, like people were saying
earlier, have a standard for how to compare plans one to the
other, which we don't have now.
Mr. BECERRA. Well, the good thing is, it sounds like what
you do is you give your employees a choice of what plan they
want to take.
Mr. DRAPER. Yeah. They can get any plan they want, and we
just, through my dad's recommendations, we'll recommend to them
this one is a good plan.
Mr. BECERRA. And you have goals this health care reform
proposal would in essence build on that model that you
described----
Mr. DRAPER. Yeah. I think it matches up with what I said
earlier. Most young people want to be able to buy a plan that's
not tied to a company. They want to just buy a plan that they
can take with them for life. And so it appeals to us more less
than if we had a huge company plan. It would be more of a
shift, but right now it's not that big of a deal for us.
Mr. BECERRA. Thank you. Mr. Shea, I was wondering if you
could comment on the last series of comment and answer that was
given about a job loss that might occur if we were to move
toward a more cost-effective form of health care.
Mr. SHEA. Well, the ball game here is cost. And if we don't
figure out a way, with all due respect, if you don't figure out
a way with our health control costs, we can't do any of this
stuff. That's really what we've got to focus on. But in terms
of sort of what people could afford, you know, we have probably
5, 6, 7 million people who are in multi-employer plans. These
are people who work in the culinary area and transportation and
janitorial and building and all kinds of trades. You know, in
the building trades, I looked at this. The vast majority of
those employers who pay into these funds and provide good
benefits have under 10 employees.
Now the problem for those employers is they're providing
good wages and good benefits, and they have to compete against
people who don't provide benefits. And that's the economic
distortion that having everybody pay into would play. But then
the other thing is, just in terms of I just think you need to
simplify this, at least for my mind. Most employers now provide
coverage. They want--all employers want to, I think, most do.
Those who don't are either in the lobbying firm that doesn't
want to pay even though they make a lot of money, and those
people ought to pay.
And then there's the people who are probably small, but
certainly low wage. And in your plan, as I read it, you're
going to provide substantial subsidies, tax system subsidies,
for those people. So it seems like you've asked them to do
something but you've given them support in being able to do it.
And you eliminate this economic distortion.
Mr. BECERRA. Thank you very much. Thank you, Mr. Chairman.
Chairman RANGEL. Mr. Nunes for 5 minutes.
Mr. NUNES. Thank you, Mr. Chairman. I have just a quick
question by show of hands. Of the six of you that are up there
at the dais now, how many of you have health care coverage,
health insurance? You all--all six of you have health
insurance. How many of you would like to trade your insurance
in for Medicaid? Anyone?
Mr. DRAPER. I don't know the details on Medicaid. So it's
just hard for me to say that I would trade for Medicaid,
because I don't know how it works.
Mr. NUNES. I'm pretty sure that you probably wouldn't have
a lot of constituents that are on Medicaid.
Mr. KIRSCH. Actually, in New York, Medicaid coverage is
better than private coverage.
Mr. NUNES. In California it's not. But for the record, none
of you----
Mr. KIRSCH. But it is in New York.
Mr. NUNES. For the record, none of you wanted to trade in
your own health insurance for Medicaid.
Mr. KIRSCH. I would actually have no problems. Given New
York, given the excellent benefits and coverage in New York in
Medicaid would be better, and I actually get coverage now
through a State employee plan that my wife's part of.
Mr. NUNES. So one of you would like to trade in your health
insurance for Medicaid. Five of you would not. What was that,
Mr. Draper?
Mr. DRAPER. I'd be willing to try.
Mr. NUNES. You'd be willing to try? You probably wouldn't
have to try for very long.
Mr. DRAPER. Put me down on the record as a maybe.
Mr. NUNES. Okay.
[Laughter.]
Mr. NUNES. We'll have you down as a maybe. So that leaves
four of you who don't want to, of which I think three of the
four are supporting the plan, which, you know, basically what
we're going to do with this plan is we're going to put more
Americans onto Medicaid. And as you may or may not know,
Medicaid in California is completely imploding, and there are
specialists who will not see Medicaid patients, and I haven't
found a constituent yet in my district that likes being on
Medicaid.
And so I can't for the life of me figure out why if we're
doing so-called comprehensive reform on health care that we are
leaving, not only leaving Medicaid alone, which is a $20
trillion unfunded mandate, but why we would be expanding
Medicaid to put more and more Americans onto Medicaid.
Mr. Draper, you said that you had--your business last year
was a million dollar business.
Mr. DRAPER. Yeah. This year it will be a million dollars.
Last year it was probably $820,000.
Mr. NUNES. And you had--you said you had 43 employees
today?
Mr. DRAPER. No, we have 12.
Mr. NUNES. Oh, you have 12 employees? Okay. I misunderstood
you. Okay. So of the 12 employees, how many--do you offer
health care coverage to all 12?
Mr. DRAPER. Yes, we do now.
Mr. NUNES. And of those--and, what, just a private plan?
Mr. DRAPER. Yeah. They each get an individual plan that
they can purchase and then the company pays them back for it,
and we also pay for any bills beyond their insurance.
Mr. NUNES. So 100 percent, there's no--they don't pay
anything on their own? You pay 100 percent of the health care
coverage?
Mr. DRAPER. Yes.
Mr. NUNES. Okay. So of that, you know, one of the plans
that myself and Mr. Ryan have talked about is actually giving
refundable upfront tax credit for your employees to have so
that they'd be able to go out and purchase health care on their
own and get to the question that you asked about or the
comment, you talked about portability. You would like to have
portability coverage for your employees so that if they left
your work, they'd be able to go somewhere else.
Mr. DRAPER. Yeah.
Mr. NUNES. So, I mean, do you see a problem with the plan
that some of the Republicans have of giving basically a
refundable upfront tax credit to your employees to go out and
choose their own health care plan?
Mr. DRAPER. Yeah, I mean, I've said before that I don't see
a problem with regulation, but I just don't think that only
regulation is going to help us. When I talked to Grassley
yesterday, and they said, what we really want to do is just
regulate. A headline in my mind said, from the people who
brought you bank regulation comes health care regulation. And I
worry that if it's only regulation that you'll have the people
from the insurance companies regulating themselves and things
won't actually get that much better. And it's tricky for me to
see how just regulation is going to make rates go down.
Mr. NUNES. But we're--well, our plan calls for----
Mr. DRAPER. I would support a tax break, but I don't
understand if that's actually going to get them any better
health care.
Mr. NUNES. Well, for a family of four, for example, under
our plan, we'd have--they'd get $5,700. And if they were
making--I don't know what your employees' average wage is, but
let's say that you had an employee that was making less than
$20,000 a year. They'd get $11,000 a year to go out and pick
their own health plan, any health plan they want. And I would
imagine that $11,000, is that more than the plan that you offer
today?
Mr. DRAPER. Per employee? Just a second. Let me think.
Mr. NUNES. It probably is.
Mr. DRAPER. Yeah, it would be more than the average.
Mr. NUNES. So one of the things that I'd like----
Mr. DRAPER. If you were going to get a family plan, though,
it would be about $700 a month.
Mr. NUNES. So--yeah. So less--yeah. Under our plan, we
would give the person in your company that's making less than
$20,000 a year, $11,000 to go get their own health plan, which
would be better than the health plan that you offer. And I
appreciate--I mean, I think it's good that you came here to
testify, and I appreciate your openness and honesty. But the
one thing that we want to make sure we do and try to get across
to the American people is that pushing more people to
government-run health care is not necessary. We can have
universal coverage for all Americans if we're willing just to
take time and to come up I think with better legislation, Mr.
Chairman, than the current legislation that we have now. But I
thank you for having the hearing.
Chairman RANGEL. The Chair recognizes Mr. Doggett. And
before any of you get in trouble, don't apply for Medicaid,
because it's for the poor. And I'd like to assume that you've
beaten that barrier, so Medicaid won't be available for any of
you, I hope. Let me call Mr. Doggett and thank him in advance
for the great contributions he's made to the Committee on
health care.
Mr. DOGGETT. Thank you, Mr. Chairman, and thanks to each of
our witnesses for the insights you've offered. Mr. Draper, I
had a small businessperson from Austin, Texas contact me and
say the bureaucracy of the health insurance companies makes the
government look efficient. As a small businessman, I want to
make it clear that I totally disagree with the United States
Chamber of Commerce. Something has to be done. Health insurance
is the biggest expense I have next to payroll. I've not been
able to give raises for several years because the money
budgeted for raises was used up on higher health insurance
premiums.
I tried to let my staff know that the $200 a month raise
that they would get was taken by Blue Cross. Is that similar to
the experience that you hear about? That was from Mark Siefken
in Austin, did you hear that from some of the folks in your
area?
Mr. DRAPER. Yeah. For us it comes out to about a 1 percent
raise for everybody every year that goes to health insurance.
So, it's kind of a good news/bad news situation. The good news,
you got a raise. The bad news, it goes to Wellmark. And for us,
though, the only tough spot that we're in is that everybody we
employ is under the age of 27 and single. And so right now,
even an inefficient system is still pretty affordable for us,
because we don't have much demand.
But within the next 6 years as, you know, everyone starts a
family, then our rates will go up from about 8 percent to 26
percent if we are shopping in the same market that we're in,
and we'll have to totally redo again to figure out, well, we
can't stay in the individual market. We have to go through
somebody else, and you spend time looking for that. And so
that's kind of the tough spot that we're in. And companies that
do employ people who are older with families are the ones that
have it a lot worse than we do.
Mr. DOGGETT. And rather than rely on some State regulatory
agency that may well be owned by the regulated, you believe in
the competitive system and that one type of competition that
should be there is the option for your employees to look at a
public plan?
Mr. DRAPER. Yeah. And, I mean, I look at things a little
differently coming from Iowa in that almost everybody in Iowa
goes to public schools like I did, you know, government runs
efficiently. When Cedar Rapids flooded, everything's been more
or less cleaned up and gotten back to normal. So there isn't
the serious antipathy to a government-run plan as there may be
on the east coast. And so for me, I can't imagine how would you
get a company--anything that runs as inefficiently as the
health care company, even the government.
Mr. DOGGETT. It sounds like my constituent in Austin. And
it is amazing that some of the people that are always up here
criticizing how inefficient government is are so fearful of an
efficient plan of the type we've had with Medicare that has
inspired confidence with millions of people across this
country.
Ms. Hansen, I know you're very familiar with, and I
appreciate the support AARP has offered. You mention it in your
testimony, for legislation that I have advanced last Congress
and again this Congress to try to help the poorest of our
seniors with their prescription drug bills. Isn't it correct
that we still have several million seniors who are not able to
get the full access to prescription drugs they need under the
Extra Help program?
Ms. HANSEN. There are many people, millions of people who
haven't taken advantage of it. So it's an opportunity for us to
continue to make sure that people enter the program they are
qualified for.
Mr. DOGGETT. And to the extent we work from the bottom up,
from helping those most in need with extra help, we actually
can take steps to close the donut hole in coverage there,
because the more people we cover through Extra Help, the less
they're exposed to that donut hole.
Ms. HANSEN. Without a doubt. I think it's a real
opportunity to help that fragile group. But at the same time,
as I mentioned earlier, since our membership is everyone, the
middle-income population is hurting quite a bit, given the fact
that Medicare beneficiaries right now, as you know, pay 30
percent of their revenues, and that's high.
Mr. DOGGETT. Let me just ask Mr. Shea one question here as
my time expires. The notion that we ought to tax employer-
provided health insurance to pay for the serious shortcomings
in our system seems to me to be a tax on the type of insurance
coverage that every American would want. That the policies that
would be taxed are those that might provide dental coverage or
have lower copays, that type of thing. Is that the case, that
these policies that some over in the Senate propose to levy a
tax on, are good policies that most Americans would want?
Mr. SHEA. They certainly are. And as I said before, the
price of those policies varies by the health condition of the
group or the age of the group or where the group is. And so
it's--how you apply a tax across that is unfathomable to me.
But the other point I would make here is, you know, if you
want to throw a hand grenade into the discussion in the
American public about health reform, you know, the figures from
some of the Washington Post stuff this morning, you go out and
advertise that what you're going to do to solve this problem,
this problem is high health costs. That's how people define the
health care problem around the country. They can't afford it
even if they have insurance. If you go out and tell them our
solution to the high health cost problem is we're going to tax
your benefits, they--I don't know what they're going to do in
the voting booth, but they certainly would look at you like
you've got to be crazy.
Mr. DOGGETT. I couldn't agree with you more. Thank you.
Thank you, Mr. Chairman.
Chairman RANGEL. The Chair would like to recognize Ms.
Brown-Waite.
Ms. BROWN-WAITE. Thank you, Mr. Chair. I would like to
address Ms. Hansen for a moment. First of all, my name is Ginny
Brown-Waite. I often get called Jennie. So when I saw your
name, I thought now this is a woman I can relate to.
I just have a couple of questions. I'm concerned that AARP
may not be doing its homework, and let me tell you why. As you
know, as you may know, I have the highest number of people on
Medicare of any Member of Congress. During the stimulus bill,
we realized that the money that was going for health IT in
hospitals was actually coming from the Medicare trust fund Part
A. Are you aware of that?
Ms. HANSEN. No, not directly as to where it's coming from.
I thought the stimulus was an add-on.
Ms. BROWN-WAITE. No. The money for the health--for the
health IT for hospitals came from the hospital trust fund. I
contacted AARP and alerted them to this, and first they denied
it. And then they called back and acknowledged it. But they
said we're still supporting the bill.
I think that Americans are beginning to wonder about AARP
when they would support things that obviously raid a trust
fund, namely Part A, for the hospitals. That is I believe
scheduled to be paying out more than it takes in before the
raid, it was scheduled for 2017. When I talk to AARP folks at
home, they were appalled at this.
So I have to ask the question, and bear in mind, not only
do I have those who are 65 on Medicare, but I also have a lot
of people who are 55 to 64 who fall in that difficult-to-get
insurance gap. I could understand AARP supporting a bill that
helped them that didn't bankrupt the country.
But I have to ask, why would AARP be interested in making
sure that, for example, those under 25 are covered and those
who may be illegal aliens, I just have--I think that the
American public is starting to question AARP and where they're
going. So I really would like to hear from you on that, and
then I'd also like to ask you about Medicare Advantage.
Ms. HANSEN. Yes. If I could answer the first question. I
think we have been on record as supporting health information
technology, and then we have actually had the support of all of
our colleagues under the Divided We Fail banner. And I think--
I'm a nurse by background, and so I also have run a program
that has used IT on behalf of our elders. And one of the things
that researchers show that Medicare beneficiaries, about one in
five in a given year will likely go to a hospital, to your
point that hospital care is critical. But oftentimes it's
because medications are not well used or they come back from a
hospital within 30 days. A lot of it is about information that
was not appropriately recorded or transferred correctly. And so
what has been shown, for example, in the Veterans Hospital,
using IT, that their medication error rate is only 1 percent.
Ms. BROWN-WAITE. Correct. I don't think we disagree about
the use of IT. I think we disagree about should AARP have
supported something that will cause the trust fund Part A to
become insolvent even sooner.
Ms. HANSEN. Right.
Ms. BROWN-WAITE. I mean, I don't think anybody questions
health care IT.
Ms. HANSEN. Right. But I think my followup point is, when
you minimize mistakes through IT, they don't have to go to the
hospital, and therefore you save money actually on Part A just
because the mitigation of unnecessary hospitalization saves
money in the trust fund.
Ms. BROWN-WAITE. It may very well, but initially, the cost,
the total $16 billion, came out of the trust fund. So when I
tell seniors this at home, they are appalled that AARP would
support something such as this. This is a very comprehensive
bill, and I think that AARP needs to be very, very cautious
what they are supporting. There are many good parts to the
proposal, the 800-some page proposal. There are some good parts
to it, and I think we need to work together in a bipartisan
manner to make sure that, you know, what eventually we will all
be voting on is something that is going to benefit the
uninsured.
I have a question, a quick question, though, about the
Medicare Advantage plan. According to CBO proposals, the
proposal to cut Medicare Advantage payments by $160 billion, as
this bill would do, would result in about 3 million seniors
being forced out of Medicare Advantage plans. I know that AARP
even has a Medicare Advantage plan, and there's a very high
satisfaction level. Do you have any concerns about how AARP
members in various Medicare Advantage plans will be affected by
this bill, including those who may be in your program?
Chairman RANGEL. Response in mail.
Ms. HANSEN. I will do that. Thank you.
Chairman RANGEL. The Chair recognizes Mr. Blumenauer.
Mr. BLUMENAUER. Thank you, Mr. Chairman. I'm sorry Mr.
Nunes is not here. I'm mystified by his line of inquiry to
people asking people with insurance whether they would like to
sign up for a program designed for poor people without
insurance. Now, admittedly, there are some States that--New
York--that have a fairly generous program. But it seems to me
to be sort of a disingenuous question. Would you like to have
the insurance program that we have for the poorest people in
America, people who couldn't afford private insurance, people
who would have difficulty even in the subsidized form that
we're talking about here, and the Republicans offering a tax
credit that would not help them at all? It's bizarre. So it
seems to me that we ought to--I'd love to have a further
discussion of this Committee about the merits of Medicaid for
poor people and compare how they would be treated under our
program where it would be expanded so they wouldn't be left
out, and over time if they were able, they could transition
into the exchange. But it is a false choice to somehow ask you
with private insurance if you want to have insurance that was
designed for the poorest people in the United States who have
no other access. But he's not here, so I----
Mr. NUNES. Actually, I am here, if you'd like to----
Mr. BLUMENAUER. Good. Then I look forward at some point----
Mr. NUNES. If you'd like to yield.
Mr. BLUMENAUER [continuing]. Having this debate when you
have time to yield to me. I wanted to just sort of put that as
part of the record.
Mr. NUNES. So you don't want to yield to me to answer your
question?
Mr. BLUMENAUER. I don't have time now. I didn't see you
here, and I didn't want to interrupt you while you were
questioning. I'd like to finish my line of inquiry. But I'll
come back and we can debate this.
Chairman RANGEL. Well, I will give you time to explain why
you asked them whether or not----
Mr. BLUMENAUER. Okay. Thank you. Then I will yield.
Chairman RANGEL [continuing]. Program for the poor.
Mr. BLUMENAUER. Okay. I will yield. Mr. Nunes, do you want
to ask me a question?
Chairman RANGEL. Why did you ask them whether or not they
would want to join a poverty program?
Mr. NUNES. Because the bill that you guys have introduced,
Mr. Chairman, expands Medicaid. And in my opinion----
Chairman RANGEL. I'm asking, why would you ask these people
who are not poor?
Mr. NUNES. Because they are here supporting the underlying
bill, and they are supporting putting more people to Medicaid.
Chairman RANGEL. They are. Poor folks.
Mr. NUNES. And it is my goal in this country, I don't
believe that poor folks in this country need to have Medicaid.
Chairman RANGEL. That's good. Okay.
Mr. NUNES. I think that poor people in this country should
have universal access to coverage. And we have a plan that we'd
love to share with you that would give them access to that.
Chairman RANGEL. I understand. And I want you to understand
his question was that he does not believe that poor people
should be entitled to Medicaid. What that has to do with you
who are not poor, I don't know, but I hope you got an answer,
and this answer will not be taken out of your time. You may
proceed.
Mr. BLUMENAUER. Thank you, Mr. Chairman. And I do look
forward to a spirited debate about how poor people are going to
be helped with a tax credit, how poor people are going to be
helped to jump into the private market. In times past, the
reason we've had Medicaid is because the private market
couldn't deal with them. It's not going to be any cheaper. In
fact, one of the reasons that we restricted a little bit under
this plan is that it will be a little less expensive over time.
But I welcome that debate with my Republican friends about
their vision of taking away Medicaid and giving a tax credit or
forcing them into a private market that they can't afford now.
I welcome it.
I do have one question for Ms. Hansen. You didn't get to it
in your testimony. We both are very interested in getting more
efficiency out of the Medicare system now, and in your
testimony you talk about a transitional benefit and what that
could do. Would you care to make a comment about the
transitional benefit that you didn't have time to refer to in
your testimony?
Ms. HANSEN. Thank you, Congressman Blumenauer. We thank you
as well as Congressman Boustany for jointly supporting this,
the Medicare transition benefit, and that is it actually
relates to the Congresswoman's question about hospital care.
And so I'd like to tie that back together, that the
efficiencies of doing things right and correctly the first time
with giving some support to people upon leaving with evidence,
there is researched information published in journals showing
that there are cost savings to be able to be incurred in which
case the patient, the elder would not have an error happen
after a hospitalization because somebody would be there.
Generally we're speaking about a nurse in this research,
that the cost savings to help people take their medications
safely and know what to do, allows them to then perhaps not
become a statistic, which is shown in Medicare data that within
30 days one out of five people goes back into the hospital.
This particular piece of legislation would help address that,
and I also would then come back to say that this makes such a
big difference on both Part A, Part B and Part D. Savings would
be incurred.
Mr. BLUMENAUER. Thank you. Mr. Chairman, I appreciate your
courtesy. I would hope that we would be able to look, one of
the areas that I hope we can strengthen in our draft is the
transitional benefit. We have some legislation that we've
introduced that I personally think we should look at, because
we may be able to strengthen transitional benefit in the draft.
I think it would save more money over time and help people that
we want to help. Thank you. And I yield back.
Chairman RANGEL. Mr. Thompson.
Mr. THOMPSON. Thank you, Mr. Chairman. I appreciate the
opportunity to question the witnesses. I'd like to talk a
minute about, or ask you some questions about the idea of
preventive health care. I'm one who believes that this is very,
very important and that it will go a long way in accomplishing
what many refer to as bending the cost curve of health care.
And so, to that end, I'd like to know if you think it's
important that we have a minimum benefit standard in order to
achieve good coverage and should preventive health care be part
of any minimum coverage we insist that these plans offer.
Mr. KIRSCH. Well, certainly, yes. And one of the really
good things about the benefit package you've done, is you have
prevention with no out-of-pocket costs. One of the encouraging
things, actually, that many large businesses have done, is move
to that. Understanding that financial barriers to prevention
actually raises costs and you want to get folks in the system.
The other thing that's really good about the legislation is
it includes major investments in developing more primary care
practitioners, because we need the folks actually able to
deliver that preventive care so----
Mr. THOMPSON. As far as it impacts health outcomes, is this
something that we can expect to see better outcomes and better
prices?
Mr. KIRSCH. Absolutely. And, you know, the old adage, an
ounce of prevention is worth a pound of cure. It's not just
true for each person, it's true for the health care system as a
whole.
Mr. THOMPSON. Anybody disagree?
Mr. RANDEL JOHNSON. If you are going to mandate a package,
I certainly think that wellness programs, preventiveness, ought
to have first dollar coverage and be part of that. At the
Chamber we're very much, our members are very aggressively
pursuing wellness programs, Safeway is a very, Steve Burd, the
CEO of Safeway has a very strong program in that area. Great
payoffs, it just takes a while to get the payoff until the
program runs its course. But, sure, I think----
Mr. THOMPSON. Through the long-term impacts, but there are
certainly short-term impacts, cost savings as well, if you
catch your problem, especially for a child, it's a lot cheaper
to treat that, than to treat a child in a hospital. Kids'
hospital costs are more expensive, etc.
Mr. RANDEL JOHNSON. And we have a conference coming----
Mr. THOMPSON. Even the Chamber agrees. On a roll here. I'd
like to ask the AARP witness, why is it that AARP believes that
we should eliminate the cost sharing for preventive care? Why
do you all think that's important?
Ms. HANSEN. Well, there's evidence in research right now
that the barrier of that first payment oftentimes precludes
people from having prevention. And so the ability to minimize
this, and that they've even shown this with certain
medications. There are some programs that have decided to
design their insurance so that they will even cover some
chronic disease medications. So, it's a different way to think
of prevention. It's not just, say, the well checkups, or the
mammography, but it also is about some areas of first dollars
that make a difference for people to get over that threshold,
to use a service and then you do save money on the back end.
Mr. THOMPSON. So, the more folks you get in on that front
end, the more you save, the more expensive and this is even for
older folks, not just youngsters in the front end of the
service.
Ms. HANSEN. That's true for, yes, for different ages.
Mr. THOMPSON. And the AARP has been very supportive of
remote patient monitoring and telehealth as a means by which
to, on the threshold on remote monitoring to stay out of
hospitals and save moneys. Can you elaborate on that a little
bit?
Ms. HANSEN. Certainly. I think oftentimes it's the rural
areas, like Davis, that have really shown the effectiveness
that this, the ability sometimes to deal with even part of the
workforce shortage right now, the ability to have a large
center like UC-Davis, have all the specialists there and have a
smaller clinic that's further away to be able to use this for
both diagnosis and consultation. That's for the providers. But
for patients to have their blood pressure numbers checked
through the phone system and so that your doctor's office has
this information, these are areas that are, that we think are
up and coming.
Mr. THOMPSON. Thank you. Mr. Chairman, I asked questions of
the last panel about the telehealth, as well, and everybody
seems to be in agreement that it not only helps people, but it
saves money. And I have a letter here from a coalition of folks
that, Health IT Now, who are in strong support of the health IT
that we've worked so much on and also on the expansion of
telemedicine.
And they point out that the estimated cost savings to
Medicare from widespread adoption of telehealth services range
between $2 and $4 billion. And I'd like to submit this for the
record and I'd even be willing to use these savings to fund
some of the telehealth ideas that I've been pushing to the
Committee.
Chairman RANGEL. Without objection. Mr. Johnson, you should
feel, for any time you hear these things that people like to
just wave you in and say, count you in. Let's see, Mr. Roskam,
Illinois.
Mr. ROSKAM. Thank you, Mr. Chairman. I'd like to yield 1
minute to Mr. Nunes.
Mr. NUNES. Thank you, Mr. Roskam. I want to make sure, Mr.
Chairman, that I reiterate my point that it's not necessary in
this country to have people on Medicaid. It's not necessary.
And I thought it was rather ironic that the folks that have
health care that are testifying today, in fact, all but one,
didn't want to be on Medicaid. And you point out that, you
know, you'd be poor, you'd have to be on Medicaid.
The point that I'm making and I want to make it perfectly
clear to this Committee, is that we don't have to have Medicaid
in this country. We are spending enough money now to where we
could give, on the plan that we have, up to $11,000 for that
individual that's now on Medicaid, to go choose their own
health plan on an exchange or wherever it may be. That's the
money we're spending today. We don't have to add any money to
the budget, and I want to make sure that I clarified this point
because, you know, I think that it's an important point for
Republicans to say that we believe we have a better plan. We
believe that people don't have to be on Medicaid. We think
there's a better option and a better way. And I thank Mr.
Roskam for yielding his time.
Chairman RANGEL. Well, he can keep his minute because I
don't think that you made your point. You're on the Federal
plan, I'm on the Federal plan. Would you want to turn in your
Federal plan for Medicaid? That's a stupid question for me to
ask you. And I just thought your point is well taken, we should
eliminate Medicaid, we should follow the Republican guidelines.
I just thought your question, the way you were trying to make
your point was not relevant, but you want another minute, I'll
give you another minute.
Mr. NUNES. Well, I thank the gentleman for allowing me to
continue to explain this. What the plan that we have, that we
put out there----
Chairman RANGEL. Talk about Medicaid, mister. For the
minute, talk about why you don't want Medicaid and how relevant
it is for them to be against having Medicaid.
Mr. NUNES. Because I believe that Medicaid is poor quality
health coverage. And we have to improve it. The doctors in my
district do not want to see Medicaid patients. Under the plan
that we've put out, we give $11,000 for anyone that's on
Medicaid, to allow them to go pick a plan just like you and I
have. That would be a minimum plan to what you and I have. I
think that we should give the plan, similar to what we have, to
even people that are on Medicaid. And I believe we have the
money to do that.
Chairman RANGEL. Your point's well taken and the time that
we've taken away from you will be duly restored.
Mr. ROSKAM. Thank you, Mr. Chairman, for your courtesy.
Ms. SCHWARTZ. Excuse me, Mr. Chairman, before we move on,
could I just make a point of, maybe, information? Maybe Mr.
Nunes didn't get through all of the 800 pages. Because, in
fact, this bill says, after 5 years, anyone on Medicaid, which
is the program you object to, will be able to go into the
exchange and choose any private or public option. So, in fact,
it does address your interest and you may want to take a look
at those particular provisions because it does, in fact, allow
individuals to go into the exchange.
Mr. NUNES. If the gentlelady----
Ms. SCHWARTZ. Just pointing out information, and I yield
back.
Chairman RANGEL. Please. Please.
Mr. ROSKAM. Thank you. Thanks, Mr. Chairman. Mr. Shea,
question for you. On page 2 of your testimony, and you've made
it very clear during your answers, I just want to read a
sentence, ``. . . we caution, however, that one financing
option under consideration in the Senate Finance Committee, the
taxation of employer-sponsored health benefits, would go in the
exact opposite direction by destabilizing the employer-based
health insurance system.'' I agree with you and I accept that
premise.
It seems like Mr. Johnson is also making that argument in a
different context, but it's the same argument. And what he's
saying is, look, if you put this tax burden, or if you put this
liability, or this mandate on business, there's going to be a
consequence to it. You're arguing, and I'm paraphrasing, if you
tax this employer-based system, you're going to have less of
it, let's not do that, let's build on it.
Mr. Johnson is saying, if you put this mandate on small
business, or big business, or whoever it happens to be, you're
going to get less of it. Why can you make the argument and why
is he denied the argument?
Mr. SHEA. Thank you, Congressman. I really think there are
two different things and I will explain by saying, it's
destabilizing because this is an important structural element
of how we now put together employment-based coverage.
Mr. ROSKAM. Agreed.
Mr. SHEA. So, if you take out part of that structure, and
you can listen to me, but you can listen to lots of employers.
I sat at this table a month or so.
Mr. ROSKAM. Agreed.
Mr. SHEA. Lots of employers would say that. Employees, some
people, young people might want to go out and get their own
thing. That's very different from saying that all employers
should pay financially to cover people with health care.
Mr. ROSKAM. Okay. Then, let me make his argument maybe a
little bit better than he made it. We're competing all over the
world right now. We've got worldwide American companies that
are competing with nations and so forth. Why are we putting
this disproportionate burden, in this sense, on American
companies? I think that, I'm kind of calling you out. I think
you're arguing in the alternative and----
Mr. SHEA. Well, I, you know, if somebody wanted to put it
on the table, the social insurance system, which spreads the
risk all over the population, gives you much lower costs, as
all of our industrialized competition has, we'd be for that.
We've been for that for 100 years. We're saying that what we
have here is employment-based coverage. It does load costs onto
the payroll, which puts American companies at a disadvantage,
but what alternative would you offer?
Mr. ROSKAM. Well, I think there's a whole host of
alternatives and in 30 or 40 or 50 more seconds, I'm not going
to get through them. Let me make one other point, though. And
I'm happy to, I'm not trying to be clever, but there's, I
represent the western and northwestern suburbs of Chicago. A
lot of building trades. I am hearing from building trades'
members who are very, very concerned about what they're hearing
from this plan. Their attitude is, look, got a good plan here,
we got a good thing going and we've successfully negotiated
what some people would characterize as Cadillac plans. The rank
and file building trades members that I'm hearing from are
communicating to me, as their Congressman, be very careful that
that isn't in jeopardy. The yellow is on, my time is up, and I
yield back.
Mr. SHEA. I'd like to continue the conversation.
Mr. POMEROY. Thank you, Mr. Chairman. Excellent panel. Mr.
Draper, I, in particular, want to commend you. Your testimony
was excellent. You have a silk screen business?
Mr. DRAPER. Thanks. And, yes.
Mr. POMEROY. I feel enormous pressure to enact health
reform in light of knowing that. Are you going to go pick one
of these? I spent all day in the Ways and Means Committee, and
all I got was this lousy shirt. We've got to give you----
Mr. DRAPER. We do have a shirt, though, that says,
American, Only the Insured Survive.
Mr. POMEROY. Very good, very good.
Mr. DRAPER. I did that when I was uninsured.
Mr. POMEROY. Let me ask you about, we have only 5 minutes,
so we have to kick this one around pretty quickly. How's the
status quo working out for you?
Mr. DRAPER. I explained it a little earlier, but I think
it's, for us right now, it's okay, because everybody who works
in the company is single and below the age of 26. The problem
that we get into, that a lot of other businesses are in now, is
that, as people age and we have to try to get family policies,
then we either have to, if we stay in the same market that
we're in now, it'll go from about $200 a month to about $700,
$800 a month, which would mean we'd have to try to take time
and renegotiate to figure out how to do it to get into a plan
with somebody else.
And so, my biggest concern is, for right now, I think what
we have is inefficient, but it's not as crushingly inefficient
as it will be for us in about 6 years.
Mr. POMEROY. Even with coverage in place, and because of
the young, single status of your workforce, affordable
coverage, coverage you've been able to manage in your cost
structure, the uncertainty, in fact, well, I said uncertainty,
I meant actually, certainty, of rapidly rising health care
costs, meaning rapidly rising health insurance premiums is a
great concern to you.
Mr. DRAPER. Yes. I mean, they go up each year. The bigger
concern is, though, that you can't adequately budget how much
it's going to be every year because your cost goes up if people
get sick, which I've always found ironic, that you buy
insurance but you still pay for health care. And so, that's the
biggest problem.
And we've agreed to pay our employees' bills, not because
I'm the nicest guy in the world, but just because I know that
somebody is going to have to pay them. And it's easier for the
company to pay the bills and take the hit than to rely on the
individual. Because if one of the individual employees has to
start paying their own medical bills, if they go into personal
bankruptcy, then the whole company is in trouble. And so, we
kind of have to take that burden upon ourselves.
And the tricky thing about that is, you can't budget for
it. I've never met a business that went out of business because
they didn't realize they had to pay income tax. And they said,
well, duh, things just went really bad, there's this thing
called income tax, and it just hit us like a freight train. But
people do go out of business because of insurance. Because
insurance costs are unpredictable. And anything that's 6 to 24
percent of your payroll, you do not want to be tied to that as
an unpredictable indicator.
Mr. POMEROY. Point very well made. Let's see if we can find
some agreement across the spectrum ends of this panel. I'd like
Mr. Kirsch and Mr. Johnson to give their thoughts on the role
cost containment needs to play in this reform bill. The,
basically, we spend a lot of time talking about the insurance
layer, but what about underlying costs drivers and what must
this bill do to address some of those? Mr. Kirsch, first, and
then Mr. Johnson.
Mr. KIRSCH. Absolutely. As we say, if we're going to fix
the economy, we have to fix health care. Which means we have to
have a system which is retooled to deliver better quality at
lower costs. And we can do that. As we've seen and as Mr.
Higgins was talking about before, there are so many examples
where paying for things that work, finding the right kind of
incentives for providers, having good information out there,
can create a health care system that provides better value. And
one of the reasons we think we need structural changes to do
this, and the kind of structural changes that you've put in
multiple ways through the legislation is to drive a delivery
system that focuses on value as opposed to just paying for
services, oftentimes, that aren't what we need to pay for.
Mr. POMEROY. Thank you. I see my yellow light is now on.
Mr. Johnson, quick response on the same question.
Mr. RANDEL JOHNSON. Yes, I don't disagree with any of that.
I agree with it.
Mr. POMEROY. I thought I could get you guys to agree.
Mr. RANDEL JOHNSON. I think the gateway idea, the exchange
idea, is, it opens up a kind of a website for people to shop
around for the best plan possible, is, depending how it's
structured, is acceptable to the Chamber and something we'll
want to work closely with the Committee on. I think, obviously,
comparative effectiveness, quality initiatives, so there's the
cost control, it's obviously the most difficult part of this
entire debate.
Mr. POMEROY. But it would be irresponsible to put $100
billion into the status quo without trying to do something that
structurally is addressing these cost drivers. Would that be a
fair statement?
Mr. RANDEL JOHNSON. Yes.
Mr. POMEROY. Thank you, Mr. Chairman.
Chairman RANGEL. Mr. Johnson, you keep agreeing. When you
put in your objections, you make certain right next to it, you
put in what you support, right?
Mr. RANDEL JOHNSON. I always do.
Chairman RANGEL. Okay. That would be great.
Mr. RANDEL JOHNSON. Thank you.
Chairman RANGEL. Mr. Pascrell left and he will be
returning, so it's my pleasure to ask Ms. Berkley of Nevada to
inquire.
Ms. BERKLEY. Thank you. Thank you, Mr. Chairman. And thank
you all for staying and helping to educate us on an issue
that's obviously very important to all of us and to millions
and millions of Americans. It's been very interesting sitting
here. My experience with Medicaid in the State is completely
different from my colleagues. People are most anxious to sign
up, but we don't have enough money for it and the reason the
doctors aren't that crazy about taking Medicaid patients is
because they don't get reimbursed. And doctors, like anyone
else, want to get paid for their services.
So, it's not a matter of people not wanting to be on
Medicaid, so many people want to be on Medicaid that it's
constantly a challenge. I know there may be some patients that
don't like Medicaid, but most of my Medicaid patients don't
like dying without any health care, so I just have a different
point of view.
I've learned also, and this came as a big surprise, that
our public plan is going to be taking care of hair transplants
and abortions and cosmetic surgeries. I'm sure that's going to
be a boon to the plastic surgeons in Las Vegas and they can
fully embrace this.
And as far as AARP is concerned, there have been a number
of instances where I disagreed with the official position of
AARP, but your job, as you know, is not to please Members of
Congress, but your membership, and I think AARP does an
outstanding job with that.
Let me ask you a couple of questions. Right now, Las Vegas
is really suffering. We are having an economic meltdown of
monumental proportions. I'm having major layoffs in my major
business, which is the gaming industry. I've got mega-gaming
corporations that are laying off people by the thousands. They
are losing their health insurance and they can't afford COBRA.
I also have a large number, half of the people that were
employed in Las Vegas, before this economic meltdown, were
employed by small business and the number one problem that they
had is providing health care for their employees.
I see the public option as a way of helping all of these
people and I'm just wondering if you have any alternatives to
that that you'd like to share with me but when it comes to a
crisis situation, I've got it, and I've got to provide health
care. Right now a third of the people I represent have no
health care insurance. That's crisis proportions, as far as I'm
concerned and I'll stop so you can speak and if anybody, Mr.
Kirsch, would you like to start?
Mr. KIRSCH. Well, yeah, she reinforces exactly what you've
said and it is a crisis in people's lives, it's a crisis in a
deeply personal way that one health care problem can lead to
not only personal suffering for them or a family member, but
financial bankruptcy. And to have a system like you all have
proposed, which makes health care affordable, has good benefits
and meets people's needs, doesn't have the false calculation
that if we don't cover something it saves money, it just shifts
the cost onto the worker, forcing people like Mike, who are
responsible to pick it up. We need to have health care that's
affordable based on incomes and be sure that it does that so
that you can really afford it, based on your income. And to
have a new entry in the system called a health insurance option
that will drive down costs and care about the public's health
first, as opposed to a corporate bottom line, is exactly the
kind of reforms that we think make great sense and are so much
welcome here.
Ms. BERKLEY. Mr. Shea.
Mr. SHEA. Thank you, Congresswoman. We still talk about 47
million uninsured. There's no question that we're over 50
million as a result of the economic situation. And a lot of the
people who lost coverage are people who had, with their job,
good coverage. And so, the pain is just enormous.
And so, the public plan is just a sensible approach. It
gives us, while I have the microphone, I'll mention I was never
asked whether I opposed Medicaid. I was asked whether or not I
wanted to switch to Medicaid. I have no reason to switch to
anything, the plan that I have. But Medicaid obviously plays a
very important role for very low income people.
And this bill would, Medicaid, people with children who are
very poor have Medicaid. People who are very poor who don't
have children, don't have Medicaid because they don't
categorically, this bill would change that and that's an
important addition in terms of the coverage for very poor
people.
Ms. BERKLEY. I appreciate the distinction because I think
the lumping in, the Medicaid thing, kind of shocked me when
that came up. I didn't know how it was fitting in.
Mr. SHEA. But let me make one other point, which is, I made
it before, but it's really the concern that's my daily
experience. And that is, to try to get some competition into
the insurance market. We don't have any competition in the
insurance market based on our experience for negotiating
benefits every year for 50 million Americans.
There is no competition and when you look at the numbers in
terms of the monopoly situation, we don't have organizations
that are representing people and aggressively fighting for them
with providers and saying how can we reduce these costs. We
have people who make cozy deals with providers in the private,
that's what we have. That's what the private insurance industry
does. Everybody makes a lot of money, everybody's fat and
happy. Except the people who are paying the bills. That's the
problem we have to solve.
Chairman RANGEL. With health insurance going into the,
having the public health option competing with the private
sector, lowering the price of the premiums for employers that
have been doing the right thing all along, hey, that's a great
selling point. We'll have our conference call. You're going to
leave here on this bill, I'm telling you.
Mr. RANDEL JOHNSON. Well, we can take out a few things and
then start from there.
Chairman RANGEL. We got to do it. Mr. Tiberi.
Mr. TIBERI. Thank you, Mr. Chairman. Mr. Shea and Ms.
Hansen, I kind of want to direct my questioning toward you. In
my district, Ms. Hansen first, a third of the seniors have
Medicare Advantage and like it. Obviously, you're an
organization that represents seniors. My mom, who's, my mom and
dad are on Medicare. My mom has had an issue over the last
several years where she's had doctors literally, her doctors,
stop covering Medicare patients. Literally. Including her.
Where she's had to go get a new doctor. We've read about, even
in the New York Times, the distinguished gentleman's hometown
newspaper, where Medicare, many doctors have declined new
Medicare patients.
And so, what many of us on this side of the aisle are
concerned about, and I know from a central Ohio perspective, we
have doctors and hospitals complaining every single day about
health care, about insurance companies. But even more so, about
Medicare fee-for-service and more so about Medicaid. And I
think that's where some of the concern on this side of the
aisle has been, is that, in fact, I had a family in my office
the other day from Columbus, Ohio, complaining about, in
Children's Hospital, the wait to see pediatric specialists is
months. Because of the lack of doctors going into pediatric
specialties.
And this bill specifically doesn't deal with pediatric
specialties. We deal with primary care, but we don't deal with
specialties. And the assumption is, all these specialists make
a lot of money. Well, in Children's Hospital in Columbus, and
in Cleveland and in Cincinnati, they can't get enough
specialists.
But my point to you, ma'am, Ms. Hansen, and then I'll have
a question for you, Mr. Shea. A real life example. But Ms.
Hansen, as an organization that represents people who are 50
years old and older, what do I tell my, the 30 percent of
seniors who like what they have, and believe under the
President's proposal they'll be able to keep what they have
when in actuality, they may not?
Ms. HANSEN. Right. Well, we too are concerned about this
transition that would potentially occur. But I think what we do
support is that there should be value and quality for what you
do get, relative to the Medicare Advantage program. So, I think
the fact that----
Mr. TIBERI. But if the patient's happy with it, isn't that
a good barometer?
Ms. HANSEN. Well, if they're happy with it, is one thing
that is certainly a barometer. But another barometer is the
level of quality that actually gets delivered. So, we support
people getting plans, hospitals, providers, getting paid more
for a level of high quality.
Mr. TIBERI. Would you be opposed to the Majority's plan if
it reimbursed at today's Medicare rates?
Ms. HANSEN. I'm sorry. I couldn't hear.
Mr. TIBERI. Would you be opposed to the Majority's plan if
the public plan reimbursed doctors and hospitals at Medicare
rates.
Ms. HANSEN. I think that my understanding is that that is
part of the potential proposal.
Mr. TIBERI. Would you be opposed to that if it reimbursed
at today's Medicare rates?
Chairman RANGEL. I would be.
Mr. TIBERI. Okay.
Chairman RANGEL. Because they can plan increases, Medicare
rates.
Ms. HANSEN. Well, I think the other point that you also
bring up about having physicians being paid appropriately,
that's something that I said in my oral opening statement that
there needs to be a re-anchoring so that the sustained growth
rate issue that causes specialists in general doesn't cover
your pediatric specialists because it's not Medicare. But the
ability to cover that is important.
Mr. TIBERI. Thank you. Mr. Shea, you represent, obviously,
a perspective. My dad's a retired union official. I have family
members who are steelworker retirees, AFL-CIO, UAW, teachers. I
have my best friend who is a teacher, a union employee. I have
heard from them the concern with respect to the public plan
that ultimately, and my question to you is this. Ultimately, if
the public plan ends up allowing employers, either through a
collective bargaining negotiation or on their own to ultimately
change a current benefit, meaning, if an employer decides, you
know what, I'd rather pay this 8 percent penalty and allow my
employees to go into a public option, or the other view that
the lack of competition will ultimately force private health
care to disappear and all that will be left is a public option.
As somebody who represents union members throughout
America, many of whom collectively bargained for their health
care benefit, is that something that if that happens, you all
would be concerned about?
Mr. SHEA. Well, we'd be concerned about any major
disruption in the market, but job number one, as I've said
repeatedly, is controlling costs. And we see the function of a
public plan as being controlling costs. Our experience in
sponsoring health funds, which we do, and our experience in
dealing with employers is, we see no sentiment for wanting to
dump or put people into a public plan.
It probably would be advantageous for some people, but all
the employers, there's a very strong connection, be it a good
idea or a bad policy, there's a very strong connection between
people who work, and getting health care at work, it is local,
it's there for them. They have a problem, they have a human
resources group to go to, or a union business agent to go to,
to say, can you help me out with this kind of problem. They
like that local connection. So, there is really a strong, even
if there were a cheaper plan, there's a strong reason why
people would want to maintain----
Mr. TIBERI. And most of your members enjoy their plan?
Mr. SHEA. Yes. And most of the people who are on the plans
would tell you, you know, we're going out of business as a
result of the cost. That's the problem.
Chairman RANGEL. Mr. Pascrell, welcome back.
Mr. PASCRELL. Mr. Johnson, thank you for your good faith
testimony today. Some things I do agree with you. And some
things I have questions about, so. You said that businesses are
already doing their fair share and more. I would not disagree
with that. This package that's in front of us, which is, maybe
it'll be different in a week from now. Who knows? But this
package takes steps to make it more affordable for businesses
to continue doing their fair share. And you know quite well
that in the last 8 years, insurance costs for small firms has
increased 130 percent. In just 8 years.
We achieved the affordability in the package that's before
us right now by providing businesses with more choice through a
public insurance option and by eliminating the cost shifting
associated with the uninsured by insuring universal coverage
through shared responsibility. And that's what many of the
questions have been focused on, first panel, second panel.
That's what we're looking for.
The second point is that you stated that the Massachusetts
pay-or-play requirement failed to produce revenue. I believe
that's what you said. Did you say that? In your written
statement, yes, I'm sorry. Put on your mic, please.
Mr. RANDEL JOHNSON. Much less than expected.
Mr. PASCRELL. Yeah. And I would agree with that, by the
way. But that was not the goal of the Massachusetts plan. The
goal of the Massachusetts plan was to shore up employer
provided insurance in Massachusetts. That's what the
legislation said. And in that respect, it's been an
overwhelming success, wouldn't you say? In that respect.
Mr. RANDEL JOHNSON. Perhaps in that, you know, the
Massachusetts plan has come under so much attack from both the
left and the right, perhaps in that individual area, I can't
disagree with you because I can't really respond to it.
Mr. PASCRELL. Okay. Third, you commented on one-size-fits-
all. One-size-fits-all plan designed, if it was designed that
way, implying that employers currently have the ability to work
with their employees and their insurance companies to choose
among endless insurance options. I would encourage you to ask
Mr. Draper or any small employer in this country, several of
them were here today but did not testify, and they will tell
you that the only choice they have is between the cheapest plan
offered to them, you mentioned it, Mr. Draper, that usually
fails to fit their specific needs, or laying off valued
employees, or cutting their salaries, whatever a boss usually
does.
Now, I'm going to give you a chance to respond. You claim
that the business community joins most Americans in opposing a
public plan. That's what you said. But as you've heard from
many panelists, that doesn't mean that they're right, but many
of them believe that they've already spoken, that the public is
not on your side on this issue. They overwhelmingly support
having that choice.
Now, what are your thoughts about the three things I've
just stated?
Mr. RANDEL JOHNSON. Well, to get the last first, but I
think those polls will show, for example, the Kaiser poll asked
that question but then, and I think The Washington Post polled
it too, but once they go on and there's a qualification or
clarification saying, however, that public plan option may have
the result of driving private sector plans out of the market
and therefore leave that public option as the last one
standing, then the support falls away, markedly. That's the
Kaiser poll.
Mr. PASCRELL. But how come the response is never, look at
the savings we're going to have in the delivery system, we're
going to be more efficient, we're going to attempt to end
recidivism, we're going to attempt to look at the procedural
process, but you don't disagree with that, do you?
Mr. RANDEL JOHNSON. Well, I do.
Mr. PASCRELL. Oh, you do disagree with that?
Mr. RANDEL JOHNSON. Well, no. If you're talking about the
public plan, what follows----
Mr. PASCRELL. Well, let's now forget about the public plan.
Let's look at the whole possibility of reducing costs through
different practices than you've been involved in. I mean, we
have anecdotal evidence, people go to the hospital, they're
there 15 to 17 hours, and their bill is $26,000. They go
through the procedures and nothing is wrong with them, that's
legion. In normal hospitals across the United States of
America, and they never see what their bill is. They never get
a bill.
Mr. RANDEL JOHNSON. Right. And then they go back a second
time and they----
Mr. PASCRELL. Yeah.
Mr. RANDEL JOHNSON. Right, no, I agree, that's----
Mr. PASCRELL. What would just the process of giving
everybody a bill to see what it cost them in the hospital take?
Mr. RANDEL JOHNSON. A greater transparency is something we
certainly would support.
Mr. PASCRELL. That would bring religion to the whole
process wouldn't it? Thank you, Mr. Johnson.
Chairman RANGEL. Ms. Schwartz, I wanted to take this
opportunity to thank you for the great opportunity that you
made toward this bill. Okay, well, we have to get them on the
list. Would you yield to Mr. Boustany? Well, we'll have Mr.
Davis here. When I passed over him, he was not here. We adjust
this to Mr. Davis and then we'll go right back to Ms. Schwartz,
okay? Mr. Davis, you're recognized for 5 minutes.
Mr. DAVIS. Thank you, Mr. Chairman. I'm the picture of
flexibility and when I have the opportunity to speak, I
appreciate the opportunity. I just have been a small
businessowner, myself. I would comment that small
businessowners aren't forced only into the cheapest choice. I
ran a company for 12 years and we carried a Cadillac plan. It
was when the public approach, or semi-public approach came to
Kentucky, that we had to search for options because costs went
through the roof and there was no competition.
And contrary to the statements, there's no way to reduce
costs and delivery systems without reengineering the overall
center for Medicare services processed to move into insurance
reform and deal with liability. And I can just say that from a
business finance consultant going through processes, having
seen that.
But the one thing I'd say, though, is the small business
issue, I think, is at the crux. I apologize, Mr. Draper,
because we have some obstacles in the form of human beings
between the two of us. Like the name of your company. When I
was in the Army, there was an operation named SMASH that had a
probably different product than what you're selling there. I'm
sure you're quite innovative in the technology approach. But I
can relate to your situation, very much, dealing with health
issues. I learned a lot about the mandates, how each new one
complicated my processes and increased my costs.
And frankly, the ability and the flexibility we had in
provision of care. You said you have 12 employees now? And the
way I read the tri-committee bill, in subtitle (B) Credit for
Small Business Employee Health Coverage Expenses, pages 153 to
155, you and your business would not qualify for the small
business tax credit. You say your average employee's salary is
$45,000. The ceiling in this bill is $20,000. And it's for
fewer than 10 employees.
And did you know these factors would disqualify you for the
tax credit?
Mr. DRAPER. Are you saying for the tax credit of $11,000
that Nunes was talking about?
Mr. DAVIS. The small business tax credit that's referred to
in subtitle (B).
Mr. DRAPER. A tax credit only for people making under
$20,000.
Mr. DAVIS. Right. You would not qualify for the full tax
credit.
Mr. DRAPER. Yeah, I knew that.
Mr. DAVIS. And yet, you'd still have to comply with either
providing qualifying coverage or, the question is, how do you
feel about that discrepancy, or that inequity, considering
you've got two more employees and your multiplier impact in the
community in terms of creating further taxpayers by the churn
of the income is going to be vastly greater than a company with
$20,000 average income?
Mr. DRAPER. Yeah, I mean, from a personal standpoint, I
don't think we should give money away, you know, to anybody.
So, I think it should be everybody for themselves. From a
business standpoint, I know that the only way our business will
succeed is if we're competing in a steady market. You don't
want a lot of ups and downs. And that's why I support the
public plan because I think it would at least stabilize it. So,
you don't have somebody who loses coverage who has to go off of
coverage, who goes through financial crisis. I think that's
what's dangerous for the economy. I support being required to
have health insurance, in the same way that in Iowa I'm
required to have car insurance. The car insurance requirement
is easier to get past because it's a one to one collision. And
that, when somebody hits you and they don't have car insurance,
you have to pay for it. And you see that directly.
What people don't see with health care is that when
somebody goes to the hospital ER, I still have to pay for it
through my tax revenue. So, while I don't like to be required
arbitrarily to have health insurance, if everyone is required
to have health insurance, I can get behind that. Because then
I'm not paying out of one side for the private and out of the
other side for the public. And so when people talk about
numbers and statistics, I'd like to see how much government
money, even in Iowa or nationally, goes in to medicine for
people who go into ERs. What percentage of income is that? And
therefore, what percentage of my taxes are going to the ERs?
And I think that's kind of the unknown cost of what we have
now.
Mr. DAVIS. Well, do your employees like the coverage that
you're able to give them right now?
Mr. DRAPER. I mean, the coverage that we have to give is
fine. I didn't say that we had to get the cheapest option, I
just said, we have the cheapest option.
Mr. DAVIS. If they had to take less coverage for you to
participate in support of this public plan, would you be
willing to do that?
Mr. DRAPER. If they had to take less coverage?
Mr. DAVIS. Yeah, to reduce, to basically reduce access to
benefits. To be able to comply?
Mr. DRAPER. I mean, the way that I read it, you don't have
to.
Mr. DAVIS. How about waiting periods for services they can
get on 24 to 48 hour notices? Would they support a 6 to 8 week
waiting period for that equity?
Mr. DRAPER. I mean, it depends on what the service is for.
But why do you need the waiting periods?
Mr. DAVIS. Well, that's a good question. But this is the
inevitable outcome of the system that we're talking about.
Mr. DRAPER. But I don't think it's inevitable. I mean, I
think it's inevitable if you have a single payer option in a
country like Canada. But if you are able to blend public and
private in the United States and come up with your own unique
option, you can come up with something that's better than what
they have in other countries. I mean, we shouldn't set the bar
for ourselves so low.
Mr. DAVIS. I don't think we're setting it low. Actually the
question I'm coming back to, we're both businessmen here. And I
appreciate your coming in. But, if the bill were enacted, the
reason I was asking about how you would choose simply this, is
that you deal with a capacity issue in your business. If you
had limited revenue or your revenue was suddenly reduced by 20
percent, there is only things that you could do with that in
terms of capacity to serve your customers. The inventory you
could carry and needless to say, if you have limits on cash or
waiting time, goes out to get product to customer or you're not
potentially able to serve them, and that, without dealing with
these capacity issues, that ultimately is what's in this.
Mr. DRAPER. Yeah, I mean, I think there's a lot of
unknowns, but it's hard to say that revenue is going to go down
by 20 percent just arbitrarily because the theory is that
everybody has to get health insurance.
Mr. DAVIS. No, no, no. I'm speaking in your business
itself.
Chairman RANGEL. Ms. Schwartz.
Ms. SCHWARTZ. Thank you, Mr. Chairman. That was sort of a
spirited discussion. So, I was actually sort of enjoying it.
But thank you for the opportunity to follow up. I think the,
following up on the previous questions, I think the real
question I have for you, and I'll ask particularly Mr. Kirsch
and Mr. Draper, too, to speak to this is, would we be better
off if we actually make some of the changes, the changes that
are in this legislation? I think, but the particular interests
I think that many of us have is that we recognize and it's been
said by a number of the panelists, that we have to contain
costs.
That particularly, for something for government, and our
ability to sustain and our commitment under Medicare, and we
plan to, and our economic competitiveness for both large and
small businesses, we need to both contain costs and improve
quality and get better outcomes on health care. And that we
have to help all Americans get affordable, meaningful coverage.
We think that's a goal we can meet, as Americans, and that we
should. And I appreciate all of you agreeing with that goal.
Now, there are obviously some disagreements as to exactly
how we get there, but I think recognizing the reality, I think
one of the reasons we've spent so much time on small
businesses, is that, and Mr. Draper's situation in particular,
is that the group that has the greatest difficulty right now in
obtaining coverage are people who, as individuals and as small
business. Because they don't have the ability large companies
have to negotiate rates with insurance companies. Or to maybe
do some of the innovative wellness and prevention programs, you
can spend extra dollars on that. You may even have more dollars
to spend on health care coverage and getting really good plans
and the union shop, they might actually have negotiated some
very good benefits.
But the fact is, right now, it is very hard without some of
the protections and opportunities that are going to be provided
in this bill to be able to get affordable, meaningful coverage.
So, I wanted to ask both Mr. Kirsch and Mr. Draper about some
of the market reforms and protections, making sure that when
you buy insurance you don't have to be 27 and healthy to be
able to buy an affordable policy. That if you have preexisting
conditions, if you're older, if you're a woman, if you're in a
business that actually has some high risks, that you will be
able to buy affordable coverage.
The legislation that we're talking about today does that.
It actually says to the insurance industry, large or small
employers, in the exchange, we're going to actually comply with
these changes. We're going to set new rules. And make it more
affordable. We're not pushing anyone into a public option. So,
my question for you is, would it be helpful to, do you think,
to business and to individual Americans to be able to buy
affordable insurance that's meaningful? And it is going to take
a few dollars to get this up and running, but in the long run,
I think we can do some of the quality changes that we want to
talk about with the next panel, that we actually will improve
quality and reduce costs for all of us. So, that's kind of the
bottom line. But Mr. Kirsch, would you just briefly speak to
that?
I feel like we've gotten away from that as we talk about
possibilities that no one really thinks is going to happen.
Mr. KIRSCH. Right. And you're absolutely right. There will
be, as I said in my testimony, one question that individuals
and employers and basically every American is going to ask,
will at the end of the day, will I have a guarantee of good,
affordable coverage?
And your legislation does that. It says, you're not going
to have to worry about denying preexisting conditions, charging
more because you've had a health history. We think one thing
you could do better is you're still allowing people to be
charged more because they're older. There's no reason to do
that because you're making affordability based on income, which
is the right way to do it.
But let's get everybody in a system, and for small
businesses, the legislation is incredibly important. Because
what you've done, you're putting small businesses, which are
now subject to incredible vagaries of the market. One employee
gets sick, rates go through the roof. In an exchange, costs are
predictable with benefits for individuals and small businesses.
Ms. SCHWARTZ. I've heard from small businesses in this
matter, just to answer your comment, who have seen rates go up
40 percent from one year to the next. Someone's gotten sick and
they're in a small policy. Talk about unpredictability for
small businesses. You have 10 employees or, and suddenly you
see increased costs, not just of 10 percent but of 40 percent,
that's pretty unsustainable and maybe unsustainable from one
year to the next, let alone over a long term.
So, as you move forward and you may keep some of your
employees for more than just a few years and they may actually
get older, and even if they're younger, they may actually,
someone finds themselves quite sick, having, understanding that
they're going to have a commitment for ongoing care. I think
that's really important. They won't lose coverage, they won't
be charged more for their health status. I assume that would
help you be able to grow the number of jobs in your business
and grow your company.
Mr. DRAPER. Yeah, I mean, I support the plan, not because I
work for a group that hired me to support the plan. I support
it just because I read through it and think that it makes
sense. And that one thing the exchange does is, the oddest
thing about our free market insurance is that it's not a
market. You can't compare prices between doctors, between
surgeries. You have eliminated the only thing that makes a free
market, which is price comparison. And so, the system we have
now is just so backward and inefficient, that I think you need
to reform part of the exchange but a public option is also
necessary because in a place like Iowa, everything is
controlled by two companies. There's no actual competition.
Ms. SCHWARTZ. There's no real competition.
Mr. DRAPER. So, I think everything working together with
regulation and competition, it would come out better in the
end.
Ms. SCHWARTZ. And maybe some transparencies, you can
actually compare apples to apples in an exchange, for example.
Mr. DRAPER. Yeah.
Ms. SCHWARTZ. All right. Well, thank you very much and
thank you all for your testimonies.
Chairman RANGEL. Mr. Boustany.
Mr. BOUSTANY. Thank you, Mr. Chairman. I have a question
for Mr. Shea and Ms. Hansen, in particular. You know, we're
talking about a government option. But there are a lot of
details that will go into a government option that have not
been fleshed out and I have a lot of concerns about. Now we're
going to put the Secretary in charge of creating an insurance
product. The Secretary is going to have to provide for
reserves, which will be taxpayer money to back up that
insurance product. Of course, it will collect premiums and do
all these other things.
So, you're basically building an insurance company from
scratch. You're going to have to either contract out with
insurance expertise or build it in-house, a very expensive
proposition. You also have to build out a provider network. And
the question I have for the two of you is, what happens if
physicians, by and large, choose not to participate in the
government option?
I mean, currently, a lot of physicians are backing out of
Medicare and Medicaid because of low reimbursement. And all the
bills being proposed, including this one that we're talking
about today, are going to utilize Medicare reimbursement or
near Medicare reimbursement. So, what if physicians choose not
to participate and you have no provider network?
Mr. SHEA. I really think that's an important issue. Because
one of my fears is, if we wind up with a public insurance plan
that is very weak, physicians are simply going to say, I'm not
interested. There's no compunction on me, I don't have to, it's
not like Medicare, I'm not going to tie this to Medicare. We've
got to have some rules that require, I think, require providers
to participate in this.
Mr. BOUSTANY. So, you would have the Secretary require all
physicians?
Mr. SHEA. I'm not saying how it would be done, or all
physicians, but you have to have some sort of a structure so
that if a public plan is going to be at all meaningful, they
have to have a supply of providers. Of course, they have to pay
fewer rates for that. And this whole issue of rates which we've
been discussing is really, really important. And we've lumped
together in a way that I don't think is useful.
Medicaid rates are largely too low. In Massachusetts, when
they passed the plan, part of the deal was, to get the
physicians on board, was to raise the Medicare rates. That
improved everything for everybody. Medicare is a situation
where they do their rates based on cost.
Mr. BOUSTANY. Actually, they're not really based on cost.
Mr. SHEA. Well, let me get, it's their calculation of cost.
What has happened is that we've build such an expensive health
care system----
Mr. BOUSTANY. When you say, you talking about CMS'
calculation?
Mr. SHEA. Yes.
Mr. BOUSTANY. Yes. Okay.
Mr. SHEA. We've built such an expensive system, that a
calculation of minimum costs doesn't cover actual experienced
costs. So, I think you could justify the Medicare rates. I
think it would be wrong to go Medicare rates because it would
be too big a shock to the system.
Mr. BOUSTANY. It would be a problem. I've had 20 years
clinical experience as a physician and also sat on the board of
a community hospital and saw the intense financial pressures
because of reimbursement rates not covering costs. It's a
serious problem. And I would submit that it is a serious
problem about physician participation, based on my knowledge of
physician behavior.
And so, for Ms. Hansen, I would say, I know my colleague,
Mr. Ryan, talked about Medicare. I'm hearing from a lot of my
Medicare constituents who are very concerned about the ongoing
debate and whether this will accelerate the insolvency of the
Medicare trust fund because it's going to put more pressure on
the government in terms of fiscal outlay to create this
government option.
So, you have to have concerns as a leader at AARP in this,
also knowing that physicians, many of them across the country,
and in specialties and in primary care, are backing out of
covering Medicare patients. So, we have a stressed Medicare
system and we're now talking about creating a new government
program, call it an entitlement because it's going to be an
open-ended requirement for funding at the end of the day. So,
I'd like to hear your comments on this.
Ms. HANSEN. Well, I think the ability to make sure that
there is a good provider network, you're absolutely right. I
think right now there are concerns, Medicare or not. I think
that even the commercial market is finding some challenges
there. So, I think that one of the areas that AARP is
supportive of is making sure that physicians are going to be
paid appropriately and we have supported having legislation to
fix the SGR.
Mr. BOUSTANY. Do you support coercive measures by the
Secretary of Health and Human Services to push physicians into
providing care for a government program?
Ms. HANSEN. We have not discussed that. Our principle is
making sure that providers are rewarded for quality as well as
appropriate reimbursement.
Mr. BOUSTANY. Thank you. I yield back.
Chairman THOMPSON. Thank you. Mr. Etheridge.
Mr. ETHERIDGE. Thank you, Mr. Chairman. And I'll, I want to
thank each of you, you've been very good for sticking around
for a long time with the schedule we have today. Let me ask Mr.
Draper just one quick question of you. I ask it from having
been in business for 19 years and had responsibility for
helping with human resources and a host of other areas in
providing, and at one point, responsible for health care so I
know the challenges you face, number one, in paying for it and,
number two, in making sure you have it for your employees as
different plans change from year to year and costs go up.
But you mentioned in your testimony that the most basic
insurance coverage offered to you is catastrophic coverage. And
of course, I think that's one of the issues that most people
fear in this country is that whatever their plan is, they'll
have a catastrophic issue and history has proven that by and
large that's what throws people in bankruptcy. They run into a
huge medical cost and then they tend to lose what they have.
So, my question is, is catastrophic coverage enough for you to
feel that you and your family would be protected from
bankruptcy due to the medical costs and to feel confident that
you would have access to routine medical care if you needed it
within the plans that you now have?
Mr. DRAPER. Now, personally, I have a family plan through
my wife, and so the catastrophic coverage from the employees, I
think, I mean, it covers catastrophic coverage, you want
catastrophic coverage just so you don't develop a brain tumor
when you're uninsured, then you'll never get insured. So, you
have to have some basic insurance. I think the reason why
people go into bankruptcy is because even if they have the
catastrophic coverage, the deductibles each year are so high,
and the savings rate for people is so low that $10,000 is
enough to send somebody into bankruptcy. A $10,000 bill in a
year. It may not make sense for anybody who has saved money or
has money but for the people right on the edge, that's the
problem. So, I don't think that catastrophic coverage will
prevent people from going into bankruptcy.
Mr. ETHERIDGE. Thank you. I'll get that on the record. Mr.
Johnson, let me ask you one question because in looking at the
testimony that you put in, you indicated support for exchange
and inclusion of both nongroup and small group markets, which
would cover small businesses and others. And in that, I think
you said you indicated that the Chamber of Commerce supports
the concept of an exchange as advanced by the President and of
course, I think you have indicated here that, and many of those
views are components of a reform legislation, and now you've
long advocated that position of pooling.
So my question is, do you support the concept of an
exchange to allow for pooling? And would you, and who should be
allowed to go into that exchange?
Mr. RANDEL JOHNSON. Well, we do support the concept of an
exchange. Exactly how it's constructed and should be, I'm not
quite sure. We are concerned, this goes to your question,
Congressman, we are concerned about the Board apparently having
a gateway power to define who goes into the exchange and who
doesn't and we aren't certain what that level would be.
It would appear to be that the government would be
empowered to have, to define, who meets that favored criteria.
Since we don't know what that criteria is, that's an issue to
us. But I think that's something we could work on.
Mr. ETHERIDGE. But your point is that concept makes sense.
Mr. RANDEL JOHNSON. Yes, it does. And the Senate Health
Committee, we said the same thing in the Senate Health
Committee testimony and I think that's a key part of all these
bills, that we can work on together.
Mr. ETHERIDGE. Okay, thank you. And I yield back, Mr.
Chairman.
Chairman THOMPSON. Thank you. Mr. Davis.
Mr. DAVIS. Thank you, Mr. Chairman. Let me, if I can, and
I'll direct this question, I guess, to Mr. Kirsch, Mr. Shea, or
Ms. Hansen. One of the things we're wrestling with, and I
recognize that this is a little bit beyond the scope of the
hearing, but one of the things we're wrestling with is
obviously how we pay for all of this. And just to take
advantage of your expertise while we're here, I want to spend a
minute or so asking you about one option that's the subject of
debate. And that's the plausibility of taxing for some
individuals, the value of the benefits provided by their
employers.
Does anyone on the panel favor taxation? I suppose,
frankly, no one's advocating a full scale taxation, but
taxation beyond a certain level. Who on the panel favors a
partial taxation of employee benefits? Just by a show of hands,
so I can see that. Does anyone on the panel favor a partial
taxation of benefits provided by employers?
Mr. Kirsch, you're nodding your head no. And just tell me
for the record why you don't favor such an option.
Mr. KIRSCH. Well, first of all, we don't think it makes
sense to have health care be more expensive for people when the
big problem is how much health care already costs. So, we don't
think it makes sense to tax people who are fortunate to have
good benefits, which basically means they have things like
maybe dental care or vision care or a larger network or lower
out-of-pocket costs. We want everyone to have that. We don't
want to make it more expensive. And then, in addition, if you
look at what actually happens, when you try to set a value, if
you even buy that premise, there are huge geographic
variations, there are variations based on business size, on age
and health status of workforce, so it's wrong in the first
place and there's no way to arrive at a number that's
equitable.
Mr. DAVIS. So, again, just to make sure I fully understand
this, some people have argued that well, if you set, say, a
reasonably high cap. Let's say you set $16,000 a year and only
tax benefits above that. Some have argued that that would have
the effect of only taxing people with so-called Cadillac plans.
You disagree with that.
Mr. KIRSCH. Let me actually put on another hat. That until
this job, I was a small businessowner. It was a nonprofit small
business, but we had employees in several offices in New York
and because costs in New York City are so much higher than in
Rochester, we are paying, I think $18,000, $19,000 for a family
policy in New York City that had lower benefits than the same
policy in Rochester that was like, $12,000.
If you live in New York City, which has high health care
costs, it has nothing to do with the benefit level, just
happens to be an expensive place to live. Why would we tax
those people?
Mr. DAVIS. So, in other words, someone making, someone who
has a $16,000 benefit, the face and profile of that person
might not be a CEO but it could be someone who's making $70,000
or $80,000 a year, correct?
Mr. KIRSCH. Well, in New York City, you know, we paid
higher salaries than upstate but maybe we paid someone $60,000
for what we paid $45,000 in Rochester. At $60,000 a year you're
not going to be able to afford $18,000 a year, or have to pay
taxes on it, it's crazy.
Mr. DAVIS. And I'm assuming that some people have higher
value plans because their health situation leads to obtain
higher value plans. Is that a fair assumption?
Mr. KIRSCH. Yes. I mean, basically if they've been sick or
are older, their plan is going to cost them more. Not because
it's worth more in terms of the benefits, just, it's going to
cost more.
Mr. DAVIS. Mr. Shea.
Mr. SHEA. We agree with everything that Richard said and I
have spoken on this before, but let me add one other thing
which is that if you look at the companies that have a lot of
early retiree costs, pre-Medicare retirees, and they are
continuing to provide them benefits because the industry is
changed, they've bought the people out, they didn't want to
just dump them off because, you know, it's hard to get
insurance. Everybody knows that 55 and up. The costs, I've
looked at some of the numbers in the union plans, the costs
increase because of that retiree, can be enormous. So, $20,000
a year? Not because of Cadillac benefits, I mean, they're good
benefits, but because there are a lot of retirees in the plan.
Mr. DAVIS. Let me slip in a question, my final 30 seconds.
I thought, I didn't agree with where Mr. Boustany was going but
I think his question is an appropriate one. What is beyond the
extra 5 percent, beyond Medicare, that goes to doctors
participating in the public option, or accepting people who are
participating in the public option? What's an appropriate
incentive for the government to offer doctors? Are there some
ideas you can throw out? Because I think that the concern's a
valid one, that just as some doctors are not accepting Medicare
and Medicaid, they won't accept public option patients beyond
the extra 5 percent the Medicare recipients get, or the doctors
covering Medicare recipients get, what are some appropriate
inducements to offer doctors so they will accept in the public
option? Ms. Hansen.
Ms. HANSEN. You know, when I said the word, quality was
there, and I think looking at the performance of producing good
outcomes on behalf of their patients, practicing with the areas
that show some evidence that this is what should occur, so
there should be bonuses, perhaps, as one way to reward the
effective practice of care for people.
Mr. KIRSCH. And that's a great answer. One of the things we
think is very important that the public option can do, is be
able to do that kind of innovation and payment systems and so
our policy is that should not be tied to Medicare. Starting
with Medicare is ok as a basis, as a way to help you get
started. We want, though, the public option to do the kind of
innovative reimbursement systems, the right incentives, that
Jenny's talking about so that we actually can improve care and
control costs. And so that doctors want to be in a system that
provides the right kind of incentives for them doing good care.
Mr. DAVIS. Thank you, Mr. Chairman.
Chairman RANGEL. The Chair recognizes Mr. Ron Kind.
Mr. KIND. Thank you, Mr. Chairman. I'm going to be brief.
The panelists have been above and beyond the call of duty,
shall we say, with your patience, your testimony today. One of
my main focuses with health care reform is trying to address
the needs of small business and family farmers. Mr. Draper, I'm
looking at you right now. And in the past, I've introduced
bipartisan legislation. I think very good and reasonable
bipartisan legislation, both the House and the Senate called
the Shop Act, which very simply would establish a national
exchange or national purchasing pool for small businesses to be
able to join along with tax credits and incentives to make it
more affordable.
Because a small group market clearly failed. Too many small
businesses and family farmers, if you're talking about the 47
million uninsured, most of them are working Americans, either
in small businesses or on farms that can't afford coverage
because of the lack of a good small group market. A lot of that
Shop Act proposal, the principles are contained in this draft
discussion right now.
The tough decision we have to make is where do we draw the
line as far as exempting small businesses and family farms from
the mandate of providing coverage for their employees. What's
the reasonable line that can be drawn? What factors should be
considered? Mr. Draper, I want to get your thoughts on this.
One, there are a variety of options we can look at. One is
based on gross sales, or gross revenue for that business or
farm. Another is based on the size of the payroll for that
small business. The other is based on an adjusted gross income,
where you back out all the input costs and you're left with
basically net profit at the end of the year.
Mr. Draper, I'd be interested to get your thoughts on where
we should exempt, what level should we exempt small businesses
from having to provide health care coverage for their workers?
Mr. DRAPER. Yeah, I mean, that's one of the many things
that makes me glad I don't have to write this bill. It's tricky
because you could set it at a certain amount, say, income that
they'd be exempt. And so, for 4 years they'd be paying 8
percent, but then say you have a recession like this year.
Company's income goes down, suddenly, 30 percent of the
companies that were paying in now aren't paying in, there's a
budget shortfall, so it's tricky to draw the line. I mean, I
would, I'm more for requiring everybody to have health
insurance, no matter how we do it. Just for the reason that if
you require everybody, the theory is the rates will go down.
If you require everybody to have health insurance and the
rates go up, obviously that will be frustrating, but this is
one of the things that in order to move forward into the
future, you've got to kind of do something and just because you
don't know exactly what's going to happen doesn't mean you
should stop trying to do anything. So, I don't know where it
would be to draw the line. You may just want to require health
care for everybody and not try to worry about, you know.
Mr. KIND. I appreciate that response. But just to be clear,
there will be shared responsibility, so if the business isn't
required to provide coverage, the individual will still be
required to obtain health coverage and that is how we're going
to try to work with them to make it affordable for low-,
middle-income families so they can go into the market and
purchase health care on their own.
But my question, and Mr. Shea, maybe you want to jump in
here, is if we are going to exempt small businesses, many of
whom are really operating on a tight margin and having the
requirement of providing coverage themselves could put them
over the end and they wouldn't be able to stay in business,
what should be the calculation that we use? Mr. Shea. Do you
have?
Mr. SHEA. I'm not going to be very helpful to you,
Congressman. I think, like Mr. Draper, the best approach is to
put everybody in and then subsidize those people who really are
at the low end who warrant it. But once you start keeping some
people out, you're going to get distortions. You're going to
get gaming. So, I think you put everybody in. And the other
reason I say that is just something that hasn't been mentioned
here.
Most of the people who don't provide coverage, who are low
margin, small employers, are competing against other low
margin, small employers. So, if you put all of those people in,
it's not like you're going to give some people a disadvantage,
you know, everybody is going to be in the same situation. And
if you have enough subsidy so that we don't lose wholesale
jobs, and I think that's just something you've got to design
in, I think it'll work.
Mr. KIND. Mr. Kirsch.
Mr. KIRSCH. Yes. I agree. I think shared responsibility
means we make it affordable for all small employers and they
pay in a reasonable way. And I think the analogy here is the
minimum wage. I mean, we don't say to some small businesses,
you don't have to pay a minimum wage. We say, a basic
requirement of being in business is to contribute to long-term
retirement through Social Security, and to pay at least a
minimum wage. And so, let's now do the same for health care,
but let's make it affordable.
The problem right now is, as you know, health care is not
affordable to too many small employers. There are a lot of
things you've done in this legislation, numerous things to make
it affordable and then every employer can pay because you've
made it affordable, even the smallest low-wage employer because
you've made an affordable option in this legislation.
Mr. DRAPER. Yeah, I think you pretty much want to have to
try to include every business just because trying to exempt
some, I mean, it's difficult just because the other side will
say, oh, but what about the small business? But, looking at the
big picture, if you guys wanted to help small business, just
eliminate income tax for small businesspeople and raise capital
gains tax.
But so, it's hard to argue for it. I think it may be tough
for some people, but I think people in small business are used
to getting it, and it's kind of the only way to do it is to
require everybody to have it.
Mr. KIND. Thank you. Thank you, Mr. Chairman.
Chairman RANGEL. You have been one outstanding panel. And
one patient panel, I might add. And I only can offer to you,
remember this day as you kicked off an historic piece of
legislation that is long overdue in our great Nation and that
you have been a part of it.
In the early 1960s, I walked with Dr. Martin Luther King
for 54 miles. I had no idea what I was doing. But I don't tell
that to my grandkids today. I told them I was a part of that
great civil rights movement. And I want you to really and truly
believe that your testimony is going to help get this thing
started. We're going to have the outstanding businesspeople of
our community understanding that their concern with our
country, the employees, competition, education, health care,
and all of you are going to be very proud of the contribution.
We are collectively thankful and I know that Mr. Camp joins
with me that we're going to get this thing done. Thank you so
very, very much. I yield to Mr. Camp.
Mr. CAMP. Well, no, I just want to echo. Thank you all for
taking the time. It's been a long day waiting and then a long
time at the witness table and I certainly appreciate all of
your effort today to help eliminate what we're looking at which
is a health care proposal that is a significant one. And I just
want to thank you for your testimony.
Chairman RANGEL. Thank you. Now, we will call the next
panel. Dr. Baxter. He's from my hometown and if we could
package, where's Dr. Baxter? If we could package the enthusiasm
that the doctors and staff have at William F. Ryan Health
Center, it would be good for the country. You do a great job
and our community appreciates it.
The American Academy of Family Physicians, the President of
that group, Dr. Ted Epperly. We hope that you feel very proud
of this package because we've invested a lot of money in
expanding the number of physicians, especially primary care and
we're going to make certain that we give the opportunity to do
what doctors were trained to do and that is to take care of
patients and provide health care.
And our nurses. The Rhode Island State Nurses Association
on behalf of the American Nurses Association in Silver Spring,
Donna Policastro. Some believe that the nurses are really the
backbone of the hospitals and we want to appreciate, not only
what you've done, but to appreciate and encourage and provide
incentives in terms of pay for the professional work our nurses
do.
Chip Kahn. Chip. Well, it's good to have you with us. I
remember the meetings that we had and I told the hospitals that
we're going to pass you by, but what an opportunity to
participate, to help us, to give us direction and we couldn't
have done it without the professionals. We tried to do the
right thing as legislators, but we can't do it without the
people on the ground that deal with these problems every day
helping us so that we can avoid making big mistakes.
And Richard Warner, a doctor from the Kansas Medical
Society House of Delegates, the AMA Alternate Delegate and past
President of the Kansas Medical Society, we welcome you here
and I'm going to call upon Mr. Larson, John Larson to share
with us his support for Ronald Williams, who's the Chairman and
CEO of Aetna Insurance Company, from Connecticut who,
unfortunately is with the President, as he has joined with us
in sharing his expertise in this field. The Chair would like to
yield to the Chairman of our Caucus, John Larson.
Mr. LARSON. I thank the distinguished Chairman and I make
apologies on behalf of Mr. Williams who was, along with our
other panelists, waiting patiently to bring testimony but he
has, as the Chairman has indicated, been called to the White
House, where he is at a health care event and focusing on
prevention.
I just want to echo what the Chairman has said about Mr.
Williams. The Aetna is an outstanding company in the State of
Connecticut. And Mr. Williams has been an exemplary Chief
Executive. He has toured the State with Senator Dodd conducting
forums on health care. Aetna, as you might suspect, leads the
Nation, in fact, was the first national insurer to offer
consumer directed health care plans. It was the Aetna that
through information technology in bringing new levels of
transparency to the health care system, has paved the way for
innovation and driving them, what the President continues to
emphasize, is at the heart of bringing reform to this system.
And that's the cost. With health care approaching 20 percent of
our GDP, it's important that we focus on this. But also add
that with respect to a public plan, Chairman Williams has been
asked whether he could compete with a public plan or not, and
he said, all things being equal, yes. And I think that's what
these hearings are about to make sure we hear how we can make
all things equal and move forward on behalf of the American
people. Again, I want to thank the Chairman and on behalf of
Ron Williams from the Aetna indicate the gratitude to be here,
but as the Chairman understands, he was called away to a
meeting to a higher authority at the White House. Thank you,
Mr. Chairman.
[The prepared statement of Mr. Williams follows:]
Prepared Statement of Ronald A. Williams,
Chairman and CEO, Aetna, Inc., Hartford, Connecticut
Chairman Rangel, Ranking Member Camp and Members of the Committee,
I am Ronald A. Williams, Chairman and CEO of Aetna. Thank you for the
opportunity to speak here today as we approach a critical juncture in
the national health care reform discussion. Let me start by emphasizing
that we share a common goal. We want to get everyone covered with
adequate health insurance, improve the quality of health outcomes, and
get better value for each dollar spent on care--with the goal of
reducing cost and improving affordability for the American people.
Your effort moves us closer to those goals, and I applaud the
Committee for trying to offer solutions that address the issues of
cost, quality and access. Your plan would maintain the overall strength
of the employer-based system, allow people to keep what they have, and
provide solutions to improve the individual and small group market.
While we may not agree on all the specific details of your overall
plan, our intent is the same.
For example, I called for reforms that would guarantee that health
insurance companies have to issue health insurance regardless of health
status and limit medical underwriting. We can make these reforms if we
also have in place an individual coverage requirement, just like
Massachusetts, so that insurance is not just about getting it when you
are on the way to the hospital.
Facts About the Health Insurance Industry
To fully appreciate that we have common interests, it is important
to understand the goals and values of insurers today. Unfortunately,
many people have made assumptions about our sector that may have been
true 20 years ago but are not based in marketplace realities today.
We are not, in fact, one of the key drivers of health care costs.
U.S. health care spending topped $2.4 trillion in 2007, while the
combined profits of the top 10 health insurers were approximately $8.3
billion. It is important to understand that insurance premiums are
directly tied to the cost of underlying services in health care,
including doctor, hospital and other provider costs. In 2007, the cost
of health care services grew at an annual rate of 6.4%, resulting in
overall premium increases, on average, of 6.1%.
Aetna today processes 206,000 calls a day and well over 50 million
a year--over 45.5 million calls were answered in an average of 19.3
seconds and 94 percent were resolved the first time; we processed 407
million medical, dental and pharmacy claims in 2008. Of these, only
0.3%, or 1.2 million, were not processed correctly. Getting all this
right takes long-term investment, staying current and complying with
the changing regulations from more than 50 jurisdictions and a
commitment to constant improvement that can be implemented carefully.
But it would be a mistake to see our business model as a simple
claims-paying operation. In fact, the competitive nature of our
business requires us to generate strong value on behalf of the members
that we cover. We have become leading innovators in chronic disease
management, wellness and prevention, performance-driven payment models,
quality management, and end-of-life care.
We also have been leading the health information technology (HIT)
movement to give consumers and their doctors tools that empower them to
make better decisions about their care pathway--using their personal
health information in real time. Since 2005, we've invested more than
$1.8 billion in HIT, and we're seeing real value for that investment.
Notably, our unique clinical-decision support technology,
CareEngine, provided through ActiveHealth Management, has been used to
analyze more than 18 million complete patient records against current
standards of care to identify gaps in care and to alert physicians with
``care considerations'' that they can act on. These clinical alerts
have been reviewed by specialists at Harvard, and as a result we are
able to say that Harvard approves of the language and how these
clinical tools have been built. We have also submitted many of these
measures that are used to support the clinicians to the National
Quality Forum, and 33 are being reviewed for endorsement. We feel that
we are raising the bar in the measurement of quality by our ability to
collect diverse data and integrate it into useful decision support for
clinicians.
CareEngine was tested in a randomized clinical trial, with the
results published in 2005 and again in 2008. The use of the technology
and the subsequent physician actions prompted by these care alerts
produced a reduction in patient hospitalizations of 8% and a savings in
charges of more than $8 per member, per month (PMPM). In a 2008
followup study,\1\ the tool's impact was further validated by findings
that showed the use of advanced clinical-decision support with care
alerts reduced overall charges by 6%, with charge savings in excess of
$21 PMPM.
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\1\ The Journal of Health Economics, ``Information Technology and
Medical Missteps: Evidence From a Randomized Trial,'' 2008; 585-60.
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We are an essential element of health care today, helping employers
and consumers get better care. Much of the innovation in our health
care system is fueled by private insurers working alongside employers
to ensure the health and well-being of employees. In fact, many of the
payment and quality reforms currently proposed for the Medicare program
were actually created, tested and proven by employers and insurers
working hand in hand in the private sector.
Our ability, however, to innovate and deliver diverse product
offerings across the country is very much affected by our complex
regulatory environment. We are one of the most heavily regulated
industries in the Nation. We are regulated uniquely by 50 States and by
multiple jurisdictions within each State; we are regulated by cities,
in some cases, and several Federal agencies. Each regulatory body takes
a different approach to how it handles regulation of the health
insurance market and enforcement of the rules. These regulations today
could fill a small town library.
The unintended consequences of these regulations are that each has
a different effect on cost to the consumer and our ability to provide
innovative product offerings. It is one of the reasons we see
individual health insurance in New Jersey that is about 300% more
expensive than similar plans offered in neighboring Pennsylvania.
Bringing a more common approach to regulating the market--if it is with
an eye on simplification--could make the market more responsive and
increase consumer access to more cost-effective products. If we are
going to set national rules, they need to preempt other statutes that
try to accomplish similar outcomes.
We are also committed to continually reducing the administrative
costs, and have made a pledge to the President to simplify our
interactions with doctors, hospitals and other providers to produce
savings and, more importantly, to streamline our system so that
uniformity throughout reduces costs, improves interaction times, and
addresses the key ``friction points'' that the medical community has
asked us to address. The industry has committed to the following
administrative simplification reforms:
Automate and standardize the electronic processes used by
health plans to do business with providers including: claims
submissions, eligibility verification, claims status, payment and
remittance.
Eliminate the variation in how our industry implements
administrative standards through the designation of an organization to
develop uniform rules that would be incorporated in future versions of
IT standards enabling providers to access consistent insurance
information.
Implement uniform standards for health plans' personal
health records (PHRs) to ensure that patients and their providers have
accurate, real-time information available 24 hours a day regardless of
location. PHRs will help reduce duplicate tests, ensure up-to-date
medication history, and facilitate better quality care by physicians.
Adopt uniform quality performance measures that are
actionable for physicians, hospitals, and other clinicians and issue
consumer-friendly reports that assist patients in making more informed
decisions.
Propose that an independent third-party entity is created
to: coordinate the collection of information on provider licensure,
board certification, and adverse actions; and facilitate credentialing
by hospitals and health plans across all private plans and public
programs.
Propose that a multi-stakeholder national task force is
created to develop a process similar to the National Correct Coding
Initiative (NCCI) to address correct coding for all populations and
health care services covered by public programs and private insurers.
The differences between Medicare and private plan administrative
costs are often referenced, despite the significant differences in the
target populations and services provided. Even so, when compared on a
per-member, per-month basis, administrative costs are nearly the same
for Medicare and private plans.
Cost and Quality
Underlying medical trend is rising about 12-15% per year due to the
cost and utilization of medical services. Recently, The New Yorker
magazine, in a story by Atul Gawande, highlighted a worrisome problem
in this country that some are now calling the ``McAllen, Texas
Problem.'' McAllen has one of the highest Medicare expenditures per
capita in the country, yet its population is no sicker than most other
places. But because it has high provider capacity, this capacity drives
up volume and cost. A lesson for our country--we need to align
incentives with quality outcomes, not volume.
The problems we face in health care can be solved. In fact, the
industry came close in the 1990s, when the medical cost trend dipped
from 8.1% in 1992 to (-1.1%) in 1995. Back then, you had a medical home
called a primary care physician whom you needed to consult before you
could see a specialist; you had limited choice of doctors and hospitals
from a closed network, a network that agreed to tighter payment rates
for services; and payments to providers were bundled for highly
intensive procedures and allowed providers to keep some of the savings.
Ultimately, that model did not work as consumers wanted more choice and
more control over their options, and providers wanted more control over
the options they could offer. We don't advocate it now. We may have
achieved many of the right results but in the wrong way.
Consumers' expectations remain essentially the same today as they
were in the '90s. Today most experts agree that 30% of health care is
unnecessary, and yet the majority of Americans believe they don't get
the tests and treatment they need. Fifty-five percent of Americans say
insurers should pay for what a doctor recommends, even if a treatment
has not been proven more effective than a cheaper one. If our
collective goal is to achieve affordable coverage for all Americans, it
is essential that we address these issues and make delivery system
reform happen.
A lot of exceptional work is being done to examine the issue of
paying for quality vs. volume. In cooperation with providers and
employers across the country, we continue to experiment with aligning
quality incentives and payments to providers when they follow the
medically recommended care pathways, as determined by the various
medical professions. As a result, we have seen improving averages in
breast cancer and colorectal screening, improving back surgery outcomes
while reducing the use of imaging, improved use of antibiotic
management leading to fewer readmissions (in one network alone
readmissions went down 19% over a 60-day period), and we have seen
similar results in diabetes management, oncology and cardiac care. When
we focus on the patient in a holistic manner, we get better quality
outcomes for patients and overall reduced costs. These are programs
that have been done in cooperation with groups such as the Leapfrog
Group and our own Bridges to Excellence program. These programs have
reduced cost while improving quality. When people get the right care at
the right time, the whole health system benefits, and we achieve value-
based health care for all.
Making insurance affordable will require us to bend the health care
cost curve; all of us have a role in this effort. But we must start
with a major reform of the payment system, as this is the underlying
cause of the over expenditure we live with today.
Prevention and Wellness
Health care reform needs to include strong prevention and wellness
initiatives; it is the most important investment we can make in our
future. Today, our health care delivery system is largely oriented
toward the treatment of disease, rather than focusing on preventable
health conditions. Refocusing our system to prevent disease and promote
wellness can lead to better health for all Americans and positively
impact costs systemwide.
More than half of Americans are living with at least one chronic
disease. Nearly one in five 4-year-olds is obese, with significant
disparities in prevalence among different racial and ethnic groups. The
United States spent $217.6 billion on direct costs in treating non-
institutionalized Americans for chronic disease in 2003, while
experiencing an added $905 billion in losses associated with indirect
costs.
We must refocus the health care system on getting and keeping
people healthy throughout their lives. I believe a number of strategies
are critical to refocusing our system on wellness and prevention,
including:
Using consumer engagement and targeted incentives to
encourage sustained healthy behavior and change unhealthy behaviors;
Developing an integrated, holistic approach to care
management to allow for early intervention and education; and
Promoting coverage policies and initiatives that
encourage the use of high-value health care and address the needs of
specific population segments.
Our own experience, as both an employer and as a leading national
health insurer, tells us how effective this approach can be. Our
Wellness Works employee programs are engaging employees, helping them
get healthier and contributing to lower medical costs. The Get Active
Aetna program, for example, is a 16-week fitness action campaign
through which 55 percent of employees logged 970,000 exercise hours in
2008--walking a total of 3,397,524 miles, the equivalent of walking 136
times around the Earth.
Aetna Health Connections Disease Management helps people with
chronic conditions get the treatment and preventive care they need by
taking a wider view of an individual's health, rather than focusing
solely on a single disease. Aetna's nurses and clinicians help members
understand and follow their doctor's treatment plan and better manage
ongoing conditions with the goal of helping members achieve their
optimal level of health. Employers who invest in this program have seen
a 2 to 1 return on their investment. Moreover, through disease
management programs, we have seen reductions in emergency room visits
and inpatient admissions, including a 7 percent reduction in ER visits
for asthma, a 13 percent reduction in inpatient admissions for coronary
artery disease and an 18 percent reduction in inpatient admissions for
strokes.
Importantly, the employer-based system provides a critical venue
for implementation of wellness and prevention programs, as insurers can
help employers target interventions to the specific needs of their
employees and their families. Congress should consider providing tax
incentives to employers for offering evidence-based wellness programs,
while also considering vehicles for pre-tax purchase of wellness-
promoting activities. Grants for community-based wellness and fitness
programs should also be considered, and wellness and prevention
initiatives should be implemented in public programs.
Insurance Markets
Keeping what you have: We need to make the health insurance market
work for everyone, and I believe we can. But as the President has
stated: ``If you like what you have you should be able to keep it.''
Choice is always at the center of what Americans want to maintain.
Whatever we do, we need to ensure we do not implement reforms that
adversely affect the ability of the insurance market to offer choice.
In a New York Times poll reported in Sunday's newspaper, 77% of
Americans, an overwhelming majority, said they are happy with the
coverage they have. Your bill recognizes that people want the ability
to keep what they have, but if the rules are too sweeping or strict and
the regulatory structure too complex and constraining, you will limit
choice and destabilize existing markets. If strict rules tilt the
playing field too much in favor of exchanges, consumers will slide out
of their plans into these exchanges and face higher premiums that they
will not find acceptable. Tax credits and/or subsidies should be
offered inside and outside the proposed exchanges. If we fail to do
this, it will destabilize risk pools causing an additional rise in
premiums.
Large Employers (50+)
Today, more than 177 million Americans get their insurance through
the employer-based system, and the large majority of the 50+ market is
self-insured. Employers expect great value for their spend in health
care; they want wellness and prevention for their employees, chronic
disease management, quality outcomes, and they want measurable results
for each of these areas. This is not a system that should be changed,
and by an overwhelming majority most employers don't want to see this
market touched by reform.
More than 95% of employers polled in a recent survey
overwhelmingly want to continue to provide their employees this type of
coverage.
It is the employers' long-term commitment to their
employees' health that has driven much of the innovation we have today
in terms of services that help improve and sustain employee health.
But, outside this market, insurance does not work well for
everyone, and we need to reform these markets if we are gong to achieve
full access for all. We do need specific reforms for the individual
market and those parts of the small group market that are not working.
We also need to remember that 18 million people are insured in the
individual market, 30 million in the 2-9 market, and about 38 million
in the 10-50 small group market. We should not expose these
policyholders to disruptions that include higher rates. Where the
market is not adequate we recommend the following:
Specific Solutions for the Individual and Under-10 Small Group Markets
The Committee's reforms would make important progress in addressing
the lack of coverage in this market. Only about 35% of the people in
this market have access to insurance because of affordability concerns
or preexisting conditions. By reforming the individual market, which
should also include small businesses with fewer than 10 employees, we
can tailor insurance market solutions to effectively address the needs
of the uninsured without disrupting or even unraveling the entire
insurance market.
We can cover the uninsured if we:
Guarantee issue of insurance and align it with a strong
individual coverage requirement.
Subsidize those that truly need help and possibly those
at high risk.
Provide affordable coverage options, which improve choice
and reduce complexity.
Provide modified community rating for age, geographic
location and family size, but toss out health status and gender.
Design benefit options that meet specific needs of
consumers. Most consumers, when using their own money, pick a benefit
design that is similar to the Massachusetts Bronze plan. The premium
for this plan is about 55% lower than the premium for FEHBP's Blue
Cross Blue Shield standard plan.
We think it makes sense for these plans to be offered via an
exchange and believe it should be national or Statewide, run by the
State Insurance Commissioner. If the Federal Government decides to set
the rules for the exchange, they should preempt State rules. Exchanges
should be operated under a consistent set of Federal rules.
Setting rating bands is all about which part of our population
subsidizes which other part. In making policy decisions, we need to be
mindful of how reforms may impact different segments of the population.
While the very purpose of an insurance pool is to spread risk, how much
should a 23-year-old with a lower than average income pay to lower the
rate for a 60-year-old with a higher than average income? It's only
when we truly reduce the cost of health care that we will be able to
provide affordable coverage. The National Association of Insurance
Commissioners should be asked to provide recommendations on rate bands;
once set, they should be reviewed periodically to ensure rate bands are
not unfairly and adversely affecting different segments of the
population. These bands should offer a cap but should not be so tight
as to make insurance unaffordable for too many Americans.
Small Group 10 to 50
For small businesses with between 10 and 50 employees, 85% of whom
offer their employees (about 38 million people) health insurance, we
need a package of solutions that makes the current market work better.
I believe the intent of the Small Business Health Options Program
(SHOP) Act is the right approach, as it provides a package of solutions
intended to address the major issues for these small businesses--rate
volatility and affordability of coverage. We support:
Allowing groups to keep what they have.
Individuals entering the exchange if their employer
doesn't offer coverage.
Rating rules that are consistent nationally (and
consistent in and outside the exchange)--rating rules should not be set
in statute.
Overall age band of 5 : 1.
Subsidies for the costs of high-risk individuals.
I would call on the Committee to leave some details to regulation,
understanding that making our new model work will require time and
experience. This would allow greater flexibility in meeting different
consumer needs and expectations. Examples on this point include benefit
package design, where we need not legislate in a ``one-size-fits-all''
manner. Rate banding is another example; while moving to a national
standard is advisable, we need to allow for flexibility in designing
rate bands that are based on actuarial modeling and reflect our
collective intent to expand access and increase affordability. This may
take some experience with a new system to get right.
The Public Plan
I've been asked whether we could compete with a public plan. All
things being equal, I would say, yes, we can provide better value,
quicker innovation and do a better job in areas such as wellness,
prevention, and chronic disease management.
However, everything I have read so far says that a public plan
would pay providers Medicare rates or something close to them and would
control the delivery of care itself. The government would be, in other
words, setting prices for services and paying below what providers
consider to be market rates. There is no competition in this scenario.
And, the government is missing the point--it is not how much we pay
that is the problem, it is what we pay for that caused high-volume
consumption of health care services. If everyone is paid at the same
rate, how does that spur competition?
It would be extremely difficult for the government to be both a
player and a referee. I cannot support this kind of public plan and see
it as a danger to the stability of community and rural hospitals and to
health care overall. It would lead to continuing to reward episodic
care, as opposed to care management. It will be costly to implement,
taking dollars away from an already burdened health care system. And,
it could be a plan of last resort, creating a new problem for us to
manage.
Conclusion
In closing, I want to be clear that we seem to have many more areas
of agreement than we do areas in dispute. By making insurance coverage
a matter of personal responsibility, you are laying the groundwork
needed to help resolve the problem of access for so many of the
Nation's uninsured. And, this requirement would serve as a key building
block for other important reforms, such as guaranteed issue regardless
of the consumer's health status and preexisting conditions.
I also hope you will take away from this discussion how vital the
private sector is to innovation. Whether we're talking about health
care product designs, quality measures or payment system reforms, the
private sector has worked with employers and consumers to find new ways
of delivering innovation and value to an ever-changing marketplace.
With changes in the regulatory system, that value can be compounded
many times over. We are an integral part of the health care system that
will continue to deliver real value and new ideas if allowed to
participate on a level playing field.
That is why a public plan option makes such little sense for health
care consumers going forward. If we get everyone in the system and
implement needed reforms across the individual and small group markets,
it serves little purpose to weaken the ability of private insurance to
deliver the level of service and value that so many Americans are happy
with today.
Thank you for the chance to offer our perspectives and
recommendations. We look forward to working with you to pass meaningful
reform that addresses affordability, access and quality. I'm confident
that, together, we can arrive at a solution that America can afford,
and we can get it done this year.
Chairman RANGEL. I'm going to call on the Chairman of the
Subcommittee, Mr. Stark, to welcome you, but again, you're an
outstanding panel. I've been talking, Mr. Stark would miss the
camp and we haven't, and we have thought that in order to get
the maximum of the benefit that we know another cluster of
votes are going to take place on the floor. So, if we ask our
witnesses to restrict their comments to 3 minutes and our
Members that are here to 3 minutes, we might avoid the
collision with the people on the floor and get the benefit of
all of your questions in. So, Mr. Stark, would you welcome Dan
Baxter. And I've already introduced them all.
Mr. STARK. Dr. Baxter, would you like to inform us, in any
way that you're comfortable?
STATEMENT OF DANIEL BAXTER, M.D., MEDICAL DIRECTOR, WILLIAM F.
RYAN COMMUNITY HEALTH NETWORK
Dr. BAXTER. Thank you, Chairman Rangel, Ranking Member
Camp, and distinguished Members of the Committee.
I am the Chief Medical Officer of the William F. Ryan
Community Health Center in New York City, which is named after
a beloved, former colleague of yours. The vast majority of
Ryan's 40,000 patients represent those groups most often left
behind in our health care system, including the poor, working
poor, racial or ethnic minorities, those publicly and privately
insured, and those that have no insurance at all.
In fact, in the last year the percentage of patients at the
Ryan Center with no health insurance rose from 20 percent to 25
percent. In our waiting rooms and in the faces of our patients
we are privileged to serve, we witness the urgent need for
fundamental health care reform. From the perspective of the
Nation's health centers, current public programs are uniquely
qualified to meet the needs of our most vulnerable communities.
Patients can access not just primary care, but the full
spectrum of services tailored to meet their individual and
family needs. Despite chronic funding shortfalls and patients
with multiple medical conditions, community health centers have
demonstrated a record of quality care and cost control
unmatched in the health care system. For all of these reasons
we applaud the Committee's inclusion of a public plan option as
part of health reform. Not only are current public programs the
only insurers that cover our low-income and medically
underserved patients, they are also the only payers that
recognize the unique role of safety net providers such as
community health centers, and also public hospital systems such
as New York City's Health And Hospitals Corporation.
The public programs are the only insurers that pay us
adequately. By contrast, private insurers pay health centers
less than 50 cents on the dollar for the care that the health
centers provide; and, in fact, at the Ryan Center we have been
forced to drop certain private insurance plans due to the
unsustainable revenue losses from treating patients covered by
these plans. It is our hope that as more and more patients gain
coverage, a new public plan will follow the example set by
current public payers by reimbursing health centers and other
safety net providers appropriately and predictably for the care
they provide.
At the Ryan Center every day we see new patients who
present with long-term, serious complications of treatable
diseases, such as high blood pressure and diabetes, because of
prior lack of access to primary and preventive care. Also, it's
very common for us to see uninsured patients who cannot afford
medically necessary but very costly outpatient investigation
such as MRIs or cardiac stress tests. A properly regulated and
monitored public health care plan will devote precious
resources to ensure efficient and cost-effective care for such
patients without being preoccupied with the need to balance
medical care against profits.
For more than four decades, long before the term became
fashionable, community health centers have routinely practiced
the model of care that has provided a genuine ``medical home''
for their patients. Even though many patients have complex
problems, including daunting psychosocial issues, community
health centers have met the challenges, preserving both cost
effectiveness and quality of care.
I want to applaud the house proposal for recognizing the
need to preserve and expand this system of care by increasing
funding for the new public health investment fund and for the
``medical home'' demonstration bill. In conclusion, Mr.
Chairman and honorable Members of the Committee, community
health centers across America are proven, established, cost-
effective models that can bring their considerable experience
and expertise to solving many of the challenges facing our
system today. America's community health centers stand ready to
provide you support and guidance as you negotiate final
proposals in the coming weeks and months.
Thank you for your time and attention.
[The prepared statement of Dr. Baxter follows:]
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Mr. STARK. Thank you for your patience and your
contribution.
Dr. Epperly.
STATEMENT OF TED EPPERLY, M.D., PRESIDENT,
AMERICAN ACADEMY OF FAMILY PHYSICIANS
Dr. EPPERLY. Chairman Rangel, Mr. Stark, Ranking Member
Camp and Members of the Ways and Means Committee, I am Dr. Ted
Epperly, President of the American Academy of Family
Physicians, which represents 94,600 across the United States.
On behalf of the academy I am pleased to testify today on
your discussion on draft legislation to reform health care in
this country. Your draft bill goes a long way toward providing
quality, affordable health care coverage for everyone in the
United States; a change AAFP has supported for two decades. We
commend your leadership and we profoundly appreciate the
inclusion of efforts throughout the draft to improve primary
care.
Achieving quality, affordable health care coverage for all
will require a significant investment in the health care
system; however, simply paying for more of the same fragmented,
uncoordinated procedure-based health care will not make us
healthier and we will not begin to control health care costs.
Because of the cost-effectiveness of primary care services, one
of the keys to reforming the health care system is to
reemphasize the centrality of primary care and do so by
supporting primary care including the patient-centered medical
home, where every patient has a personal physician responsible
for their care, emphasizing cognitive clinical decisionmaking,
rather than procedures, aligning incentives to embrace value
over volume and ensuring the adequacy of the primary care
workforce.
We appreciate your work with SGR. Medicare is a critical
component of the U.S. health system and must be stable and
predictable for patients and providers. Eliminating the past
``scoring debt'' accumulated by this arcane, inexact, and
clinically irrelevant SGR formula is critical to restoring
stability and predictability. We applaud this and concur with
the establishment of separate expenditure targets that place a
greater emphasis on the cognitive clinical decisionmaking that
is a hallmark of primary care.
We also applaud the Committee for including a medical home
pilot program in Medicare. The use of the PCMH by Medicare and
other insurers can achieve savings while simultaneously
improving quality. We further applaud the inclusion of 5
percent bonus for primary care services, and up to 10 percent
for those services provided in the health professionals'
shortage area. And, Congress should make the primary care bonus
permanent.
The AAFP supports a health insurance exchange, a market
where Americans can one-stop shop for a health care plan,
private or public; compare benefits and prices, and choose the
option that best meets their needs, much like Members of
Congress and their families do. Patients should have a choice
of health plans and a public plan should be among them. But the
public plan should not be Medicare. While for transition
purposes, there may be some similarities to the program, we
urge Congress to de-link the public plan for Medicare by a date
certain.
Successful and sustainable health reform will require an
adequate primary care physician workforce, equivalent to
approximately 45 percent of the physician workforce. It also
means not allowing unbridled growth of subspecialty training
which fosters costly, fragmented care. The training of U.S.
physicians is currently borne by Medicare to ensure an adequate
primary care workforce for all Americans. GME funding should be
derived from all payers.
In conclusion the problems associated with primary care
medicine are multifaceted and thus require multifaceted
solutions. Payment, student scholarships, loan forgiveness and
tax policy are all parts of the solution. Reforming the health
care system is a complex endeavor. The status quo is not
working. We urge Congress to invest in the health care system
we want; not the one we have. Thank you very much.
[The prepared statement of Dr. Epperly follows:]
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Mr. STARK. Thank you.
Ms. Policastro. Did I pronounce that correctly?
Ms. POLICASTRO. You did a very good job. Thank you.
Mr. STARK. All right. Would you like to proceed?
Ms. POLICASTRO. Yes.
STATEMENT OF DONNA POLICASTRO, EXECUTIVE DIRECTOR, RHODE ISLAND
STATE NURSES ASSOCIATION, ON BEHALF OF THE AMERICAN NURSES
ASSOCIATION
Ms. POLICASTRO. Good evening, Chairman Rangel, Ranking
Member Camp, distinguished Committee Members and congressional
staff. Thank you for inviting the American Nurses Association
to this timely discussion on health care reform. I am Donna
Policastro, a certified nurse practitioner for 33 years, and an
Executive Director of the Rhode Island State Nurses
Association, speaking today on behalf of the American Nurses
Association.
The ANA is the only full service national association
representing the interests of the Nation's 2.9 million
registered nurses in all education and practice settings, and
advances the nursing profession by fostering high standards of
nursing practice, promoting the rights of nurses in the
workplace, and sharing a constructive and realistic view of
nursing's contribution to the health of our Nation. The ANA
commends the work of the House Ways and Means, Energy and
Commerce, and Education and Labor Committees.
The tri-committee draft legislation clearly represents a
movement toward much needed, comprehensive and meaningful
reform for our Nation's health care system. ANA appreciates the
Committees' recognition that in order to meet our Nation's
health care needs we must have an integrated and well resourced
national health care workforce policy that fully recognizes the
vital role of nurses and health care providers and allows them
to practice to the fullest extent of their scope.
ANA remains committed to the principle that health care is
a basic human right and all persons are entitled to ready
access to affordable quality health care services. ANA also
believes that a health care system that is patient centered,
comprehensive, accessible and delivers quality care for all is
something that should not be partisan or a political issue. ANA
supports a restructured health care system that ensures
universal access to its standard package of essential health
care services for all individuals and families. That is why ANA
strongly supports the inclusion of a public health insurance
plan option as an essential part of comprehensive health care
reform.
We believe that inclusion of this public plan option would
assure that patient choice is a reality and not an empty
promise and that a high-quality public plan option will above
all provide the piece of mind that is missing from our current
health care environment. It will help make health care more
affordable for patients, generate needed competition in the
insurance market and guarantee the availability of quality,
affordable coverage for individuals and families, no matter
what happens.
There are a wide variety of ideas currently circulating
about health care reform, but all include discussion of
prevention and screening, health education, chronic disease
management, coordination of care and provision of community-
based primary care. As the Committee has clearly recognized in
its draft, these are precisely the professional services and
skills that registered nurses bring to patient care.
As the largest single group of clinical health care
professionals within the health care system, licensed
registered nurses are educated in practice within an holistic
framework that views the individual family community as an
interconnected system that keep us well and help us heal.
Registered nurses are fundamental to the critical shift needed
in health services delivery with the goal of transferring the
current sick care system into a true health care system.
Our ends are backbones of the health care delivery system.
Advanced practice registered nurses, in particular nurse
practitioners and nurse midwives, are proven providers of high-
quality, cost-effective primary care. ANA nurses are strong
supporters of community and home-based models of care. We
believe that the foundation of a well-based health care system
is built in these settings, reducing the amount of both money
and human suffering that accompany acute care episodes.
ANA supports the renewed focus on new and existing
community-based programs, such as community health centers,
nurse home visitation programs and school-based clinics. ANA
supports the use of community-based, multi-disciplinary teams
to support primary care through the medical home model. This
model demonstrates the commitment to quality, coordinated care
by all health providers, and represents a focus; not just on
treating illness, but on emphasizing wellness and prevention.
ANA is especially pleased that under this proposal nurse
practitioners have been recognized as primary care providers
and we'd be authorized to lead medical homes.
In conclusion, I'd like, once again, the American Nurses
Association thanks you for the opportunity to testify before
this Committee. We appreciate your clear commitment to nursing
and your understanding of the important role nurses play in the
lives of patients and the system at large. Nurses are eager and
willing to work with you to support and enact meaningful health
care reform today.
Thank you very much.
[The prepared statement of Ms. Policastro follows:]
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Mr. STARK. Thank you.
And next we'll hear from Louise's husband, who is well-
acquainted with this Committee; and, I'm happy to introduce
Chip Kahn, the President of the Federation of American
Hospitals.
Chip.
STATEMENT OF CHARLES N. KAHN III, PRESIDENT, FEDERATION OF
AMERICAN HOSPITALS
Mr. KAHN. I hope Mr. Rangel, Mr. Stark, Mr. Camp, and
others on the Committee will forgive me for my checkered past.
On behalf of the Federation of American Hospitals I
appreciate the opportunity to offer our views on the House Tri-
Committee Health Reform draft. FAH is the representative of
over 1,000 investor-owned or managed community hospitals and
health systems from across the country.
President Obama and the Congress are right to place health
reform at the top of the domestic agenda. The House draft
provides a good starting point for reform. The draft raises the
right issues. It gives us a roadmap to coverage for all
Americans. I would cover four or five points about the draft.
We'd make other points in the written testimony that I'll
commend to the Members and then be happy to discuss if you'd
like.
First, after conversations with the Chairman, the members
of FAH set the same goal as our highest priority--affordable
coverage for all.
[Brief power outage.]
Mr. KAHN. And we demonstrated that through a proposal that
we prepared, the health coverage passport, which shows that
universal health coverage can be achieved by building on our
current system. The House draft is consistent with the
principles upon which we based our proposal. It subsidized
those Americans who lack sufficient, disposable income, to
afford coverage. It builds on the employer-based system. It
includes insurance reform and it requires Americans to obtain
coverage.
However, the draft wavers from our prescription an
important aspect of its health insurance exchange. The draft
includes a public option. We understand President Obama and
many of you feel strongly that there should be an alternative
to private insurance and HMOs. But, in our view, the public
option is not necessary to achieve successful reform and will
leave clinicians and providers alike with insufficient payment
to serve our patients. So we respectfully request that you
consider a nonprofit or co-op model, if you believe eligible
consumers should have other choices.
Second, we understand that Congress is going to call upon
hospitals to contribute to the funding of health coverage. We
stand ready to participate if payment effects are fair; but, we
feel strongly that fairness includes reimbursement reductions
calibrated to take effect only with commensurate increases in
coverage. Third, we deeply appreciate that the draft recognizes
the multiple purposes of the safety net-oriented
disproportionate share payment in Medicare and Medicaid and
appreciate the thoughtful approach the Committee's taken toward
that in the draft.
Fourth, we appreciate the Committee draft taking a position
on prohibiting physician ownership and referral to hospitals.
We think you take a sensible approach on bundling. It needs
research and it needs development. And, finally, we are very
appreciative that on readmission policy you focus on those
readmissions that are most vulnerable and ought to be assessed.
Finally, the draft recognizes the need to use care measures
to enable clinicians and hospitals to improve services for
those they serve, and to give consumers information that will
enable citizens and Americans to choose the right caregivers.
However, the draft falls short in supporting the processes
needed to make this quality happen. The draft does not
sufficiently embrace the initiative developed by Stand For
Quality, an organization of 200-plus multi-stakeholders. It
includes patients, consumers, labor, clinicians, hospitals,
nurses, employers; everyone involved in the health care system
in any way.
Stand For Quality has proposed new support for the National
Quality Forum and the Agency for Healthcare Research and
Quality, and recommended a closer, more formal communication
and consultation between the government institutions that
establish and oversee the Nation's quality agenda and the
universe of groups outside government whose shared mission is
to make quality happen. We hope you will review the
recommendations of Stand For Quality and that they may be
included in the mark that you will take up in the next few
days.
Finally, we deeply appreciate the invitation today and look
forward to working with the Committee as the draft develops
toward enactment.
Thank you.
[The prepared statement of Mr. Kahn follows:]
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Mr. STARK. Chip, thank you very much for your contribution.
Mr. Minnix, would you like to enlighten us, please?
STATEMENT OF WILLIAM L. MINNIX, JR., PRESIDENT AND CEO,
AMERICAN ASSOCIATION OF HOMES AND SERVICES FOR THE AGING
Mr. MINNIX. Thank you, Mr. Chairman, and distinguished
public servants.
I am Larry Minnix. I represent the American Association of
Homes and Services for the Aging, 5,600 mission-driven
organizations in everyone's community; everything from small,
adult-based centers to very large and comprehensive retirement
communities.
I represent the issue nobody wants to talk about in health
care reform, but everybody will face sooner or later if we live
long enough, so it's time to confront it. And we believe that
long-term services and supports can be a contributor to health
care reform, not a detraction from it and a burden that many
feel we cannot bear. So I want to talk about how we can finance
long-term care through a public option as we look to the
future, and some things that need to be done to improve the
Medicare program.
We certainly agree with the direction that you all are
taking in health care reform and support the principles. From
our standpoint, you are moving in the right direction as a
matter of helping iron out the details. You may not realize it.
While 40-something million Americans don't have health
insurance, 250 million Americans are uninsured for long-term
care. Ten million, 65 and older, on any given day are in need
of long-term service and support, over 65. It's almost that
many under 65, younger adults, with disabilities.
There are 44 million caregivers, and they spend an average
of 35 hours a week doing that job. It costs employers $2,000 a
year for lost time, work, and stress-related illnesses. They
spent out-of-pocket caregiving, $5,531 a year; $9,000 a year if
they are a long-distance caregiver. The single biggest payer
source is certainly Medicaid, and we have overburdened the
Medicaid system with long-term care costs at $100 billion this
year and growing. But families spend two and a half times that
out of their own pockets.
So we already have a huge problem. Now, what's the
solution? We believe that the HELP Committee bill, the Class
Act, if you will, that Congressman Pallone introduced to this
body previously, and now is embodied in the HELP Committee
bill, is a solution. We all, when we begin work, put into a
national insurance pool; and any of us at any age get daily
cash benefits to help the caregiving stay at home.
For younger, disabled populations, it may be the difference
between being able to work and not being able to work. Had a
plan like this been in place today when the Pepper Commission
recommended some kind of insurance model a generation ago,
Medicaid expenditures for long-term care would be 50 percent of
what they are today. So, if you think of what you could do with
$50 billion to help us address the rest of the health care
system, we also have some recommendations around improvement of
the current Medicare program.
You've heard some things about care management, transitions
care, culture change in nursing homes. You look at some of the
quality improvement things going on in nursing homes,
especially around the advancing excellence campaign. Nursing
home care can get better. We need to stabilize the financing,
overhaul the public oversight to make it more modern and more
accountable and transparent. All of those are fixable problems.
None of it is going to work long-term though without a
different approach to financing aging and disability-type
services in what we believe is a public option.
Private, long-term care insurance cannot do it. It has its
place but it cannot do it, and Medicaid is the fallback for
everybody and you all know what government-imposed poverty and
asset transfer does. So we believe there's a solution, and
let's wrap it into health care reform.
[The prepared statement of Mr. Minnix follows:]
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Mr. STARK. Thank you. Thank you very much.
Dr. Warner will now click his heels three times and give us
the Kansas solution to our problems.
Welcome to the Committee, doctor.
STATEMENT OF RICHARD B. WARNER, M.D., MEMBER, KANSAS MEDICAL
SOCIETY HOUSE OF DELEGATES, AMA ALTERNATE DELEGATE, PAST
PRESIDENT, KANSAS MEDICAL SOCIETY
Dr. WARNER. Thank you, Mr. Stark, and Chairman Rangel,
Ranking Member Camp and Members of the Committee.
I am Richard B. Warner, M.D., from Overland Park, Kansas,
and I appreciate the opportunity to talk with you about the
reform of health insurance and its market. My perspective is
that of a psychiatric physician in private practice. I am a
recent past President of the Kansas Medical Society and a
member of the Kansas delegation to the American Medical
Association.
I also serve on the Board of Directors of the Kansas Health
Insurance Association, which administers the high-risk pool for
the State of Kansas. In 2004 the Kansas Medical Society adopted
a set of principles of health care reform to guide its staff
and leadership in responding to proposals for health care
reform, and these were updated in 2008. They form the
underpinning of my remarks.
The first point to understand about health insurance is
that while it is a resource that helps people to be able to pay
for medical care, it also aggravates the inflation of prices in
the medical market. With third-party payers covering the
largest part of medical expenses, people are insulated from the
financial consequences of their health care purchasing
decisions. The effect of that is profoundly inflationary, and
we have a spiral in which a person needs health insurance to be
able to afford care, but the insurance contributes to the
higher and higher prices that we all see.
We then see a variety of measures put in place to attempt
to restrain prices in spending.
The first KMS principle calls for a pluralistic,
competitive delivery system, with choice of physician, facility
and health plans; not only in private health plans, but to the
extent practical, in publicly financed public health care
programs as well. It suggests that the system should harness
the power of choice, individual responsibility and market
forces as a superior approach to a government-controlled
system.
Applied to the idea of a public option health insurance
plan, it would raise a caution because of the risk that a
government-designed, marketed, and funded health plan would
eventually undermine the markets both for health insurance and
health services. The likely price controls of such a plan would
eventually bring about a shortage of services, as is starting
to be seen in Medicare. A likely cost shifting as is now seen
with Medicare and Medicaid and SCHIP programs would distort
pricing in the private market and result in the crowding out of
private plans.
The second of the KMS principles calls for public policies
which encourage the development of affordable, portable health
insurance products, including those which emphasize greater
consumer financial responsibility for their health care
purchasing decisions, such as through the use of percentage-
based co-insurance and health savings accounts, combined with
higher deductible insurance policies. These approaches would
have patients participating in both the first and the last
dollars of their transactions, which would offer a natural
restraint to both utilization and price inflation.
While asserting that all Kansans should have health
insurance, the KMS principles state that mandating universal
coverage by law is neither desirable nor likely. That would
apply to both individual and employer mandates. To Federally
mandate that individuals purchase health insurance would likely
make it easier for States or the Federal Government to also
insist on various mandated benefits, which would drive up the
price of the insurance. To mandate employer purchase would lock
more people into plans with very small risk pools and it would
defeat the goal of individually owned and portable insurance.
Finally, I would like to say a few words about the
importance of the patient-physician relationship, which is
based on the Hippocratic ideal of placing the patient's best
interest ahead of one's own interest or that of any group. That
relationship forms the moral bedrock upon which medical care
rests; and, it is what allows patients to reveal whatever is
necessary to properly diagnose and treat whatever may ail them.
Financial and clinical systems should have as their mission
to support what the patient and the physician undertake.
Competitive markets in which no insurance plan, private or
governmental, develops monopsony-like control will provide the
best support. Allowing patients and physicians to privately
contract for care also is a step toward them being able to
shape care decisions in the best interest of the patient.
Thank you for the opportunity and I look forward to
discussing these ideas further.
[The prepared statement of Dr. Warner follows:]
Prepared Statement of Richard B. Warner, M.D.,
Member, Kansas Medical Society House of Delegates,
AMA Alternate Delegate, Past President, Kansas Medical Society
Chairman Rangel, Ranking Member Camp, and Members of the Committee,
I am Richard B. Warner, M.D. from Overland Park, Kansas, and I
appreciate the opportunity to talk with you about the reform of health
insurance and its market. My perspective is that of a psychiatric
physician in private practice. I am a recent past President of the
Kansas Medical Society and a member of the Kansas delegation to the
American Medical Association. I also serve on the Board of Directors of
the Kansas Health Insurance Association, which administers the high-
risk pool for the State of Kansas.
In 2004 the Kansas Medical Society (KMS) adopted a set of
Principles of Health Care Reform to guide its staff and leadership in
responding to proposals for health care reform, and these were updated
in 2008. They form the underpinning of my remarks today.
The first point to understand about health insurance is that while
it is a resource that helps people to be able to pay for medical care,
it also aggravates the inflation of prices in the medical market. With
third-party payers covering the largest part of medical expenses,
people are insulated from the financial consequences of their health
care purchasing decisions. The effect of that is profoundly
inflationary, and we have a spiral in which a person needs health
insurance to be able to afford care, but the insurance contributes to
the higher and higher prices that we all see. We then see a variety of
measures put in place to attempt to restrain prices and spending.
The first of the KMS Principles calls for a pluralistic,
competitive delivery system with choice of physician, facility, and
health plans, not only in private health plans, but to the extent
practical, in publicly financed health care programs as well. It
suggests that the system should harness the power of choice, individual
responsibility, and market forces as a superior approach to a
government-controlled system. Applied to the idea of a ``public
option'' health insurance plan, it would raise a caution because of the
risk that a government-designed, marketed, and funded health plan would
eventually undermine the markets both for health insurance and health
services. The likely price controls of such a plan would eventually
bring about a shortage of services, as is starting to be seen in
Medicare. The likely cost-shifting, as is now seen with Medicare,
Medicaid, and SCHIP programs, would distort pricing in the private
market and result in the crowding out of private plans.
The second of the KMS Principles calls for public policies that
encourage the development of affordable, portable health insurance
products, including those which emphasize greater consumer financial
responsibility for their health care purchasing decisions, such as
through the use of percentage-based co-insurance and Health Savings
Accounts combined with higher deductible insurance policies. These
approaches would have patients participating in both the first and the
last dollars of their transactions, which would offer a natural
restraint to both utilization and price inflation.
While asserting that all Kansans should have health insurance, the
KMS Principles state that mandating universal coverage by law is
neither desirable nor likely. That would apply to both individual and
employer mandates. To federally mandate that individuals purchase
health insurance would likely make it easier for States or the Federal
Government to also insist on various mandated benefits, which would
drive up the price of the insurance. To mandate employer purchase would
lock more people into plans with very small risk pools, and it would
defeat the goal of individually owned and portable insurance.
Finally, I would like to say a few words about the importance of
the patient-physician relationship, which is based on the Hippocratic
ideal of placing the patient's best interest ahead of one's own
interest or that of any group. That relationship forms the moral
bedrock upon which medical care rests, and it is what allows patients
to reveal whatever is necessary to properly diagnose and treat whatever
may ail them. Financial and clinical systems should have as their
mission to support what the patient and the physician undertake.
Competitive markets in which no insurance plan, private or
governmental, develops monopsony-like control will provide the best
support. Allowing patients and physicians to privately contract for
care also is a step toward their being able to shape care decisions in
the best interests of the patient.
Thank you for the opportunity of sharing these brief remarks. I
look forward to discussing them further with you.
Sincerely,
Richard B. Warner, M.D.
Mr. STARK. Mr. Chairman.
Chairman RANGEL. I'll be brief. I just want to thank this
panel. I want you to know the diversity of the interest in this
subject matter and the fact that we are dealing with a
discussion draft allows us to try to perfect some of the things
we have. And as far as the Ryan Community Health Center and
health centers around this country, whatever you do, I wish we
could page it.
But, one of the things is that we recognize that doctors
and nurses have to spend so much for their education and
sometimes they can't do what their hearts and minds want done.
They can't afford to practice the medicine; and so we are
providing that in a larger group to let doctors do what doctors
want to do. And, certainly we hope at the end of the day
everybody can be on board.
Chip Kahn, you may remember when we met a couple of years
ago, we knew it wasn't going to be easy. We knew it was going
to be compromise and we still are working on that. And I heard
your concerns about the public health options. This is what I
don't understand. It appears to me that doctors have people
coming in, dish notwithstanding, that just can't afford the
services that you provide.
It seems to me, even though it may be risky to say that if
you can't get it, that's in that inveterate no-insurance,
you've got to get some money; that some way or other somebody's
got to pay for their care. It just doesn't go away. And so
however it is, it would seem to me if I was running hospitals,
I would say, is it true that the Congress is going to give
insurance to 50 million people? Is it true that half of that
number that under insurance will get decent policies?
Is it true that we can dedicate ourselves to health care
and not check and see how much each and every patient has and
how we have to spread this to people who are already paying
high premiums? How does that opportunity to do what hospitals
want to do without having been concerned with their budget?
What has that got to do with the public health option people
who would be uninsured that may end up in your hospital and
they come in with an insurance policy in their hip pocket and
say doctor, whatever you have to do we're prepared to pay?
Mr. KAHN. Let me say two things about that, Mr. Chairman.
On the one hand--and the bill does include insurance reform
for the individual, individual market, and for those in some
level of small group--you are going to create the health
insurance exchanges. And you are going to call for in the
health insurance exchanges a radical, which we support, change
in the regulation of insurance. You are going to have guarantee
issues. You are going to have guarantee renewability. You are
going to have very limited preex. You are going to have
whatever rate bands you have that are very narrow, and you are
going to be watching those guys like a hawk. And it's going to
change how insurance is offered to individuals, particularly.
So we think that's a good thing.
Chairman RANGEL. Isn't that good? Isn't that terrific?
Mr. KAHN. We think it's a good thing, and what we want to
do is see how that works. And from our standpoint, the public
option we think on top of that would make it sort of too
difficult. And let me make one other point which is we
understand, and we can argue about what kind of crowd-out
there's going to be. But at least in the individual market
there are 15 million people that have coverage today that are
individuals; and a lot of those people are going to come into
the exchange, because they are going to be able to do it.
And, right now, they have coverage, probably have 2,500,
5,000 deductible; pay a lot for that. They're going to pay less
in the exchange, but also, quite frankly the policies they have
now pay hospitals a heck of a lot more than the private
insurers are going to pay hospitals inside the exchange before
you even add Medicare. And with all due respect, in the bill,
all the public option would pay hospitals is Medicare. And,
frankly, with the expansion of Medicaid, which we support but
which would affect about 50 percent of the uninsured, you
combine that with a public option that could be sizeable that
adds more Medicare payment and does crowd-out some private
business that we now get better payment for, it could cause us
a problem.
So we would rather see the reforms take place in the
insurance market; and, then, if it doesn't work, if you need to
have this public option, you can always do it. Congress can
always come in and do it in the future, but we think from the
get-go it's something that ought to be avoided and that's why I
took the position I did. But we want to be supportive and
helpful of you as you develop the legislation and figure out a
way to make it work.
Chairman RANGEL. Well, you came in on the ground floor. You
gave your support and you gave your opposition; and that's what
we're encouraging everyone to do. Give this historic
opportunity a chance, and I just want to thank you, because you
came in early on. You are pre-Obama.
Mr. KAHN. Thank you, Mr. Chairman.
Mr. CAMP. Well, thank you, Mr. Chairman.
Mr. Kahn, obviously, if hospitals get Medicare-rate
payments that's going to be a problem. And the Lewin Group
estimates that would be a $36 billion cut to hospitals. Is that
in line with what you estimate?
Mr. KAHN. I've seen the Lewin numbers and I know there's a
debate as to whether those, and I haven't seen the CBO numbers.
Mr. CAMP. Look. Look, let's not talk about numbers. Do you
think your member hospitals could continue to provide the best
quality care to their patients if they got paid Medicare rates?
Mr. KAHN. I believe that if we got paid Medicare rates only
that would be a big problem for hospitals. I know we can get
into a debate about MedPACs.
Mr. CAMP. But they couldn't provide the quality of care
they are providing now. Is that your answer?
Mr. KAHN. I think if it was only a Medicare payment, but
the problem is in the model in the bill, there's a big
expansion of Medicaid, which is useful for the indigents who'll
be covered, particularly the individual adults. But when they
come to the hospital, we are going to get Medicaid rates. So
we're not even talking about necessarily the Medicare side. We
are expanding the Medicaid load.
Mr. CAMP. But both of them cause a problem in the ability
to provide quality care. Let's talk about care instead of
numbers.
Mr. KAHN. Yes, sir. And that's why I said we prefer to have
a system in which at least from the get-go there's private
insurance offered through the exchanges. That's our preference.
Mr. CAMP. And I thought I heard from your testimony that
you feel the bill as drafted would undermine employer-provided
insurance, because you mentioned about people moving into the
public plan and the pressures that would put on providers.
Mr. KAHN. Now, what I said in my testimony regarding
employers is.
Mr. CAMP. It was in answer to a question. It wasn't in your
written testimony.
Mr. KAHN. Yes, at the end, I guess 4 or 5 years from now
when all the employers could potentially become eligible for
the exchange, we are concerned that the public option could
grow. Obviously, that would be up to the individuals that were
sent into the exchange by the employers, but we are concerned
about that. Yes, I think there could be on the price.
Mr. CAMP. Okay. Thank you.
Dr. Warner, look. Medicare pays physicians less than
commercial rates; Medicaid even less than that. You know, a
government-run plan paying Medicare rates would draw people
from a private plan into the government plan. And what impact
would that have on doctors? We've heard about the impact on
hospitals, but what would that do on physicians and their
ability to practice and give patients access?
Dr. WARNER. I think it would have a deleterious effect,
quite frankly. We know with Medicare today 97 percent of
doctors ``participate with Medicare,'' but what that really
means is that 97 percent of doctors have signed an agreement of
participation. It doesn't really tell you how many doctors are
welcoming patients into their offices. And, I know, certainly
anecdotally, I am hearing from patients the difficulty they are
having getting appointments with doctors. Particularly if they
haven't been established with a doctor, to be a brand new
patient, is getting harder and harder.
If you spread that over a larger portion of the population,
I don't even think it's a matter of whether you pay Medicare or
Medicare plus 5 percent. The fact of the matter is you have a
price-controlled arrangement, and price controls always,
ultimately, lead to shortages. It has taken a long time to come
to that with Medicare, but it has finally arrived, and it would
arrive I believe with another similarly constructed program.
That's why I suggest at the end of my comments the idea of
allowing private contracting, which would allow a patient to
use whatever benefit is available from the insurance. But also,
contract with the physician for maybe nothing above that or
something above it that is worked out by the patient and the
physician and allows everybody much more freedom, and will
probably result in many more doctors participating.
Mr. CAMP. All right. Thank you.
Mr. STARK. Thank you.
Dr. Warner, as I read your testimony I would be better off,
if I had a high deductible plan or a health savings account, I
would perhaps be more careful how I spent my medical care
dollars if I did that. Is that your position?
Dr. WARNER. Yes, and I think you can generalize that from
across the country.
Mr. STARK. Let me ask you this, then. In the Overland Park
area, what does an echocardiogram cost?
Dr. WARNER. I couldn't tell you. I'm a psychiatrist.
Mr. STARK. All right. How about knee surgery? What's the
average cost?
Dr. WARNER. It's expensive.
Mr. STARK. You don't know. Okay. How about just an E&M, 15-
minute visit? Do you know what that costs in the Overland Park
area?
Dr. WARNER. I couldn't tell you Congressman. I know my own
fees.
Mr. STARK. Doctor, you just made the case. You are the
expert and you don't know what this stuff costs. How in the
hell would I know what it costs as a pedestrian if a physician
practicing in the community has no concept of what these things
cost? How do you expect the poor patient to be able to
negotiate this without knowing the cost? It's just ridiculous.
It's a wonderful thing to suggest that I should be able to
keep track of my own costs, but if a doctor doesn't know, how
do you expect a patient who can't spell most of these things to
know? It just doesn't make any sense. What you want to do is
just kick these guys out and not let them get the services they
need. I think that is just the most ridiculous thing. The
health savings accounts and the rest of these things are tax
avoidance schemes that do nothing to deliver medical care.
Chip.
Dr. WARNER. Do I get to answer that, Mr. Stark?
Mr. STARK. Well, you did answer it. You don't know what
these things cost. How do you expect me to know?
Dr. WARNER. I did not get a chance to answer your comment.
Mr. STARK. Go ahead. How do you expect me to know if you
don't know?
Dr. WARNER. You will know, if you live in a world in which
patients actually are paying the price of medical.
Mr. STARK. Yeah, if they could get the price. But when the
doctor doesn't know the price, how am I supposed to find it
out, on the Internet?
Dr. WARNER. Well, we have certain antitrust rules that
prevent knowing other doctors' charges for things. So, if I
know it, I know it anecdotally.
Mr. STARK. You made your own case. You don't know the price
of medical care and you expect your patients to know it.
Dr. WARNER. I expect under a condition in which patients
are actually participating in the price, they would know it.
Mr. STARK. You don't actively participate in what you
charge your patients? Come on!
Dr. WARNER. When patients call me, I tell them right up
front. Do you want to know what you're getting into? I tell
them my fee and I tell them the arrangements.
Mr. STARK. Doctor, you made your own case.
Chip, just one issue. On the historical perspective, people
have been suggesting that we have a BRAC-type Medicare Payment
Advisory Commission that would basically set prices; and, we
would just have to react yes or no, which would leave us pretty
much out of the loop in establishing these things. Do you have
a concern about that?
Mr. KAHN. Well, I actually was working here on the staff
when MedPAC was originally formed that's been discussed as the
kind of entity that would have this kind of power. And I think
MedPAC does great work in analysis in providing you advice and
guidance, but I would be really reticent to sort of hand over
to them something as important as setting payment rates. I'd
say 60 or 70 percent of their ideas are great. But 30 or 40
percent of their ideas aren't. And they really need to be
adjudicated both either in the Department through a Secretary
going through the regulatory process or, I think, the Congress
ought to be on top of this. And I think Congress has done a
good job.
And, you know, I know a lot of people say well, gee,
Congress can never act. But if you look over time, over the
last 30 years of Medicare, whether it's DRGs, RBRVS, the
Medicare Advantage program, there are plenty of times when
Congress wanted to change things that could come in and do it.
So I feel that things ought to stick with the regular order in
the old fashioned way, and you're obviously going to make a lot
of changes in this bill. Obviously, there will be new
secretarial powers through this bill, but I would be very
reticent to hand off to some kind of health board or super
MedPAC your responsibilities, frankly.
Mr. STARK. Thank you.
Sam, Mr. Johnson, would you like to inquire?
Mr. JOHNSON. Thank you, Mr. Stark.
I'd like to tell you that the specialists know what the
costs of medicine are, and docs are quite private about their
cost estimates. And they can tell you in a New York minute what
the cost is, if you go to the right guy.
I think that was a bad line of questioning, frankly.
You know, it's unfortunate that the Democrat bill contains
a provision which would gut doc-owned hospitals, and prevent
these facilities from adding hospital beds or additional
operating rooms, et cetera, and force hundreds of hospitals in
this country that are currently under construction to close
their doors.
Dr. Warner, as a physician, have you had any experience
with physician-owned hospitals, and any thoughts about Federal
regulation forcing them to shut their doors?
Dr. WARNER. Well, I think it's unfortunate if Federal
regulation results in the shutting of the doors of such
facilities. I think they've become an integral part of many
communities.
Because of the investment of physicians in the facilities,
you have extra care, I think, in the development of the
standards and the programs of the hospitals. I can tell you
that in the State of Kansas and in Wichita, the Sedgwick
County, and Topeka, Shawnee County and the Metropolitan Kansas
City area, of Wyandotte and Johnson Counties, we have programs
in which specialists and facilities offer charitable care on
referral from safety net clinics, and those facilities are
operating fully in those programs, in some cases more than
others, more than the community.
And so I think they're certainly shouldering their burden
of charitable care as well as providing excellent care and
competition.
Mr. JOHNSON. Thank you. They are in Dallas for sure.
You know, the White House has published a list of options
that include more than $100 billion in cuts from hospitals,
pushing physicians out of the program. I think the Chairman
said that he anticipates $500 billion to come from providers.
So I'm guessing that the rest will come from new taxes of
sorts. Soda maybe; cigarettes, you know, are taxed 61 cents to
pay for children's health care.
And we need about 22 million new people to start smoking to
pay for that expanded program. Makes me wonder how many Cokes
Americans would have to start drinking to pay for trillions of
dollars in health reform.
Dr. Warner, if Americans are drinking more soda and smoking
more cigarettes, what's that going to do to the cost of health
care in this country?
Dr. WARNER. Well, I mean, you're describing a spiral. But
let me also say it's a reservation I've had. Whether we've
talked about it in the State of Kansas or we talk about it at a
Federal level of using particularly cigarette taxes to support
insurance payments, because we're looking to reduce the number
of smoking at the same time that we're trying to draw revenue
from that.
And what you do is you set up a situation in which you
can't possibly raise the revenues that you intend to use to pay
for your program; and therefore you have to start looking for
other ways to raise that. And some of those, I think, will
probably not be too pleasant.
Mr. JOHNSON. Thank you. Mr. Kahn, I think you would agree.
I'm out of time, so I can't let you respond.
Thank you, Mr. Chairman.
Mr. STARK. Thank you.
I'm sorry, Mr. Levin, would you like to inquire?
Mr. LEVIN. Thank you.
I was going to ask Dr. Warner a question. So let me start
with you, Chip, welcome. It's nice to see you again.
So you basically represent hospitals, right?
Mr. KAHN. Yes, sir.
Mr. LEVIN. You know, and I think the spirit with which you
come is important and is constructive. And I think our
questions relate to how you implement that spirit.
And by the way, I'm sorry Dr. Warner had to leave.
I just want to say that, maybe for the record--I'm sorry he
had to leave--with third parties covering the largest part of
medical expenses, people are insulated from the financial
consequences of their health care purchasing decisions. And
then it goes on to say it's profoundly inflationary.
I just urge everybody to talk to a family that has had
illness in the family, of any extensive nature, and ask them
what it means to say that the prices paid should be a matter of
discussion and bargaining between the patient and the provider.
I think for a rather minor procedure, maybe that works. But
for a chronic illness--even I mean, say knee surgery, we're
going to have patients negotiating with providers about the
cost of the knee surgery? It's hard enough to explain to
patients what knee surgery is all about.
And I've met a number of people who have had knee surgery
and they have trouble explaining the wonders that the physician
performed.
So I find that so unrealistic, and Mr. Stark tried to get
at that, and I just think it's worth repeating.
All right. So you represent hospitals. And you say in terms
of the public, in terms of an option, ``it does not disagree
that an alternative could be beneficial,'' but then you kind of
shy away from a public option, and you want some kind of a co-
op, which I don't think most of us quite understand.
And then you talk about the price setting. For the
hospitals you represent, who sets the payment that's received?
Mr. KAHN. Well, in terms of Medicare, it's set by
regulation. Medicaid is a State-by-State basis, but it's
basically set----
Mr. LEVIN. So the government----
Mr. KAHN. And then the private sector payment is negotiated
in almost all cases.
Mr. LEVIN. And so for Medicare and Medicaid, we know it's
government.
Mr. KAHN. Mm-hmm.
Mr. LEVIN. And my time's up. Except to ask you, tell us
some day when you come to our offices about the negotiations
that go on between hospitals and insurance carriers and how
much true collective bargaining there is between the hospital
and the instructed carrier as to the fee you receive.
Mr. KAHN. I actually can say that, I mean, most of my
companies probably have, you know, 1,300 or 1,500 contracts per
hospital. And I can say that there's a lot of give and take
between the Blue Cross plans, between the large carriers, and
the PPOs and the hospitals. I think if----
Mr. LEVIN. That's----
Mr. KAHN. If Bev Wallace was here, who works for one of the
companies, she could, you know, make your hair stand on end in
terms of the contentiousness of those deliberations.
Mr. LEVIN. Okay. We'll talk about that soon, but my time is
up.
Mr. KAHN. Okay.
Mr. STARK. Mr. McDermott, would you like to inquire?
Mr. MCDERMOTT. Thank you, Mr. Chairman.
Dr. Epperly, welcome. University of Washington is well
represented here today.
Dr. EPPERLY. Thank you.
Mr. MCDERMOTT. You are a perfect example for us to get a
response to a question I've had. Washington, Alaska, Montana,
Idaho, and Wyoming are all covered by the University of
Washington Medical School. They put students all over 27
percent of the United States land mass.
Those young people go out there and are trained in rural
areas; but at the end of their training, not very many of them
go back out to those places in Idaho and Montana and Wyoming.
And I think it's largely because of debt.
So I made a recommendation that we would have a tuition-
free at State medical schools in exchange for 4 years of
service in primary care.
Now you've also had to do with the Uniformed Services, so
you know you go to medical school, you have a requirement when
you come out. What percentage of the University of Washington
students would sign up for that kind of a tuition-free
education and guarantee that they would serve 4 years in a
designated area where they were underserved?
Dr. EPPERLY. Excellent question, Mr. McDermott.
I would say to you that hard to know for sure, but more
than are now. Maybe 20-25 percent. You're exactly right. I
chose the United States Army to pay for my medical school. Once
I got accepted to the University of Washington, I served for 4
years, then it became a 21-year career for me.
I would have happily served back in my home State of Idaho
if that had been offered to me as a scholarship.
So I very much support your thought in terms of if we can
look at scholarships or loan repayment to try to create a
workforce of primary care physicians, I think there's a lot of
merit in that, and I think you'd have a lot of takers in that.
A lot of these kids from those areas are looking for
something to help them, so that they don't end up choosing a
sub-specialty as a default to their financial loans.
Mr. MCDERMOTT. Let me give you another element to that. One
of the programs we have is the Health Service Corps. People go
through medical school, accumulate $200,000 worth of debt, and
say ``Oh, my God, what can I do about it?'' And they jump into
the Health Service Corps.
I contend that you would be better off to get them up
front, agreeing that that's what they were going to do, so that
they would train to be a general practitioner, or whatever you
want to call it, primary care servicer, and that it would also
change the teaching in the medical school.
Dr. EPPERLY. Mm-hmm.
Mr. MCDERMOTT. That it would be directed at making them
prepare to go out.
You've been involved in training programs and everything
else, and I went to medical school like you did, where you were
trained by specialists, who trained you in their little area.
And I never saw any of that stuff when I got out.
So I'm looking at the ability--of better to have them up
front make the commitment than at the end, when they're
suddenly facing a huge debt.
Dr. EPPERLY. Excellent question. Totally agree with you.
Scholarships on the front end will align the workforce better
than a loan repayment on the back end.
If you can have people desire primary care on the front end
and make that decision, it will hold them in place to do that.
On the back end, with loan repayment, they can drift off
into all sorts of areas. You may not capture the workforce
you're trying to create.
Mr. MCDERMOTT. What number of people stay in primary care,
once they're trained?
Dr. EPPERLY. Once they're trained, meaning after residency?
Or after medical school?
Mr. MCDERMOTT. Yes. After their residency, they go out into
primary care. How many of them stay?
Dr. EPPERLY. In Family Medicine, almost all of them, 98-99
percent. And in Internal Medicine, however, 98 percent will
sub-specialize. And in Pediatrics, 85 percent will sub-
specialize into sub-specialty areas.
That's why we're facing such a crisis with primary care.
We're not getting them to stay in General Medicine or General
Pediatrics. Family Medicine, family physicians are staying in
that area.
Mr. MCDERMOTT. And if we did those same scholarships for
nurses and PA's?
Dr. EPPERLY. I think it's a great idea.
Mr. MCDERMOTT. Thank you.
Mr. STARK. Thank you.
Mr. Thompson, would you like to inquire?
Mr. THOMPSON. Yes, I would. Thank you, Mr. Chairman.
I want to just follow up on what Dr. McDermott had to say.
It's tough in rural areas to recruit and retain providers. And
I represent one of those areas. And in addition to recruiting
and retaining them, we have an aging problem.
So 48 percent of the docs in my district are over 50 years
old, 30 percent are over 60 years old. So it's a problem that's
not getting better. And we need to be able to figure out how to
solve that, or all of our efforts on health care reform are
going to be for nought.
Dr. Baxter, you're from New York, and I don't know if you
were here earlier, but my questions to all the panels have
dealt with it in part: Telehealth. And telemedicine is
something that's generally talked about in regard to rural
health care.
But there's a lot of underserved areas in urban parts of
the country, as well. And in your area, in your home State,
would an expansion of telemedicine be helpful and help provide
better care and bring the cost down?
Dr. BAXTER. Absolutely, Congressman. And in fact, the Ryan
Center has a form of telemedicine, in terms of having x-rays
done onsite at Ryan, such as ultrasounds, chest x-rays being
read immediately, with our referral hospital, St. Luke's
Roosevelt Hospital.
And well, of course, as you know, New York's a big State,
and there are medically underserved areas, not only within New
York City itself, but elsewhere.
So I think that this is definitely an area that needs
development, and as much as it's practical in a large urban
setting, we're also trying to do that.
In fact, we also for emergency preparedness have a
relationship with specialty hospitals, say involving burns, so
that if there were, God forbid, a major accident----
Mr. THOMPSON. Excellent point. They use it in my area for
treatment of prisoners too, so you don't have to spend a lot of
money with guards bringing prisoners----
Dr. BAXTER. Exactly----
Mr. THOMPSON. So a lot of different applications----
Dr. BAXTER. So for all sorts of applications, yes.
Mr. THOMPSON. Thank you.
Dr. Epperly, you're from Idaho, and certainly a State that
falls into the rural category; but a big percentage of your
health care is performed in metropolitan areas, so, sir, you
would agree is underserved?
Dr. EPPERLY. Yes.
Mr. THOMPSON. Thank you.
Dr. EPPERLY. And in fact we've used tele----
Mr. THOMPSON. Just a yes was good. I've got just a little
bit of time.
Dr. EPPERLY. Yes.
Mr. THOMPSON. I apologize.
Ms. Policastro, I want you to mention, I want to hear from
you on the idea of dealing with the scope of practice laws.
Because I don't think we cracked this nut of fixing the primary
care problems, unless we change how we deliver health care. And
if we can't somehow figure out how to make sure advanced-degree
nurses and physicians' assistants factor into this somehow--and
you referenced it in your opening testimony--we're never going
to get there.
And any comment that you have I would appreciate.
Ms. POLICASTRO. All right. I agree with you. You know, our
scope of practice is defined within our own State's nurse
practice act. So every State has a different nurse practice
act, which is regulated by the board of nursing. For nurse
midwives, many nurse midwives in some States fall under the
board of medicine.
So there's inconsistencies within the definitions and
regulations of scope and practice per State. So we really need
to put all those scopes back into alignment.
Scope of practice generally means that I do not practice as
a nurse practitioner beyond what I'm qualified to do. And
that's when I would collaborate with other health care
professionals to assist my patient in treating and assessing
their problem.
Mr. THOMPSON. Thank you very much.
Thank you, Mr. Chairman, for your indulgence.
Mr. STARK. Mr. Pascrell, would you like to inquire?
Mr. PASCRELL. Thank you, Mr. Chairman.
It's been a long day, Mr. Chairman, for all of us, and you
would think our health system was in good shape, listening to
the opponents of a public health plan. But when you look
through all the data and statistics, I'm sure most of our
panelists are a great panel--the person read that famous New
Yorker article, chapter and verse, specifically the system that
costs more, that doesn't necessarily translate into better
care.
We ought to take--that should be like 101. And that is what
has led to the work at Mayo Clinic and Cleveland clinics and
other places throughout the United States. Thinking outside of
the box I think is very, very, very important.
I think the system is upside down. What's up should be down
and what's down should be up. And what we want to do is raise
quality and reduce cost.
Mr. Kahn, I think there's some merit in what you suggest,
that perhaps we're moving too quickly in trying to do all of
this together, rather than maybe concentrating on the savings,
the changes in procedure that were recommending efficiency in
the system of delivery; and then making judgments about what we
need to pay for and how we're going to pay for it later on,
with this experience.
And the draft--the legislation doesn't go into effect, as
you know, until 2013.
So I might agree to some degree on those things; but I
definitely disagree with you on some of the points. I just had
a point and a question to ask you, if you will.
You say it is non-negotiable, as you know, that the effort
must be fully paid for, whatever we do here. We made that
commitment, the President's made that commitment. I would hope
all of us would be on the same page about fully funding for
what we do, unlike what happened for the last 8 years, when we
paid for nothing. Really.
Mr. KAHN. Mm-hmm.
Mr. PASCRELL. So we cannot make claims of addressing the
impact that health care has on our economy by passing
legislation that is fiscally irresponsible. I think we are
committed to that, all of us.
Some on the panels have pointed out that any pricetag
should be considered in the context of the whole economy in
overall health care spending, since they're so integrally
connected. I think the President has done a fantastic job in
relating the cost of health care to the overall economy. Pretty
soon, one-fifth of every dollar will be health care.
I agree with that approach. But unfortunately that means
that we have to make some very tough decisions to pay for this
package, whatever it winds up to be. And some folks are going
to feel some initial pain.
Several of the panel members have throughout the day
understandably voiced concern about payment policies that
affect their respective industry. And I can understand that. I
can appreciate that.
But in the absence of the savings options that you have
expressed some concern about--I'm almost finished with the
question--I invite you to present to the Committee what
specific alternative Medicare savings options that the CBO will
score as savings. What are your alternatives to present to us
that the CBO would score as a savings that we could put into
that column?
Mr. Kahn.
Mr. KAHN. Let me say first that the hospital community--not
just the ones I represent--understand that there has to be a
great deal of delivery reform, and we're very supportive of
that. The delivery reforms in the short run are not going to
pay for this bill, and we understand the bill has to be paid
for.
And we understand that the Medicare payment is one
potential area for coming up with some funding for this bill,
frankly. And with all due respect, I understand that, we're
ready to work with the Committee, and obviously we need a fair
situation.
But I'll just be blunt with you. I can't sit here and
negotiate with myself. I think it's really up to the Committee,
as you did in the draft, to offer some Medicare policy and then
hopefully offer us an opportunity to work with you.
And what I said in my testimony was, what we asked for,
one, is sort of fairness in terms of how these requests are
made; and two, that you at least consider that if there are
reductions made in payment, that those be calibrated over time
with the increases in coverage, because hopefully as more and
more Americans are covered, hopefully most of them won't go to
the hospital, but some will, and we're ready to provide
services for them. And that will increase revenues to
hospitals.
Mr. PASCRELL. With all due respect----
Mr. KAHN. So I'm looking for a balancing in terms of that--
--
Mr. PASCRELL. I understand that. And what you say makes
sense. But the Chairman has gone out of his way since we
started this process many weeks ago to make sure nothing is off
the table when we get to that part of the legislation. We are
not--as far as I know, nothing's been taken off the table.
So I don't think we should exclude anything or be afraid to
include anything at this particular time. And I think he's made
it very, very clear. I support that situation, and it's not
written in stone.
Mr. STARK. Thank you.
Mr. PASCRELL. Thank you, Mr. Chairman.
Mr. STARK. You bet.
Mr. Blumenauer, would you like to inquire?
Mr. BLUMENAUER. Thank you, Mr. Chairman.
Ms. Policastro, I appreciate your support and focus, your
testimony and the need for a public option. But I wondered if
you would be willing from the perspective of your experience or
that of your organization, to elaborate on the potential
problems of some of the compromises that are being floated
about co-ops or public options that might be sort of a locally
based public insurance plan, as opposed to a national uniform
option, as envisioned in this legislation?
Ms. POLICASTRO. Yes. The American Nurses Association is not
in favor of co-ops. We are in favor of--for a better phrase--
pure public option to deliver health care.
We believe that co-ops equal volume versus quality. We have
seen historically that some co-ops, because of the way they're
governed, are governed by the community in which they serve and
the patients which they serve, but there have been barriers in
the governance issues between the physicians who deliver the
services and the patients who are members of those co-ops.
So historically, I can tell you in Rhode Island, for
example, many years ago, there was a group called the Rhode
Island Health Association that is no longer in the State
because it just didn't work.
And the American Nurses Association believes purely in the
public option. We believe wholeheartedly, we believe that the
public plan will bring needed competition to the market, and
that comparative effective research helps doctors and nurses
make decisions about treatment in medical homes who encourage
primary care.
So we stand tall that we're against the co-op model.
Mr. BLUMENAUER. Thank you. I missed the exchange. I had a
previous speaking engagement. But I would like to, Mr.
Chairman, enter into the record an article about Oregon's
experience with it's last physician-owned hospital calling 911
for assistance before it closed, if you wouldn't mind.
Mr. STARK. Without objection.
Mr. BLUMENAUER. Thank you.
I would conclude on one last point. One of the areas that
we've been working on, that there is bipartisan support, deals
with end-of-life treatment.
It's appalling that Medicare will pay for all sorts of
procedures, test tubes, and needles; but we haven't figured out
a way to reimburse a physician to sit down with a patient and
the family at the most difficult time.
A physician, it could be a nurse practitioner. But somebody
in the medical arena to help people understand their choices,
what they're facing, give them a sense of working through what
the path is. We've got language, and I appreciate the Chairman
and the staff working with us to incorporate some of what we've
got in legislation.
But I wondered if any of you have some thoughts about that
advisability and the long-term consequences of meeting the
needs of families in this condition?
Dr. EPPERLY. Yes, sir. I would speak to that.
It's such a valuable and important time in a person's life.
As a family doctor, I deliver babies, I take care of people at
the end of life. And both of those are incredibly important
moments. And I would say to you the value of primary care in
the patient-centered medical home is having that relationship
with that individual and his or her family, so that you can
make appropriate choices that meet the family's and the
patient's need where they're at.
There can be a lot of dignity and quality in those moments.
There can be a ton of costs savings in those moments. I think
that's all about the relationship with the patient, through
that patient-centered medical home, to make those kind of
decisions. That's what a return to primary care can do to the
health care system. That's why it's important and it's
foundational.
Mr. BLUMENAUER. Thank you.
Mr. STARK. Thank you.
Mr. BLUMENAUER. I would just--may I ask one question that
they submit later?
Mr. STARK. Sure.
Mr. BLUMENAUER. I won't ask for an answer, Mr. Chairman,
now, but we have been working on legislation for a transitional
benefit. There's a lot of talk about readmissions and there may
be penalties here or something there.
We think one of the ways to do that would be to provide a
transitional benefit to be able to work with the patient. We
would ask you to look at--there's a little bit in the language
of the bill I think that needs to be strengthened. And any of
you that have some reflections on that would be deeply
appreciated in the days ahead, so that we're doing the right
thing there.
Thank you very much for your patience.
Mr. STARK. Mr. Meek, would you like to inquire?
Mr. MEEK. Yes, sir. Thank you, Mr. Chairman.
Mr. STARK. Thank you.
Mr. MEEK. I'd like to thank the panel for your testimony
today. And you know, being from a State like Florida, we have
just under 19 million people, some 4 million of those
individuals are uninsured.
We also have a population, 18 percent of Medicare
beneficiaries that are duly ineligible, that would usually be
ineligible for Medicaid or Medicare.
And we know that there will be some folks falling through
the cracks, even with the proposal that we have on the table
now. I know that a lot of folks have been--and I've been
listening to your testimony and also I've read some of your
testimony--very concerned about what we're doing in light of
reform.
In a State like Florida that--talking about the 4 million
citizens that are uninsured, and that's 9 percent of the
Nation's uninsured population--I want to try to address
especially States like mine that have a number of undocumented
individuals that are there, that are running up costs as
relates to our emergency rooms and other critical care
facilities, not only around in our State, but throughout the
country. How do you think we can best address these issues of
the uninsured and the ineligible? How do we bring them under
this tent that we're trying to put them under?
Mr. KAHN. Mr. Meek, I'd like to say two things.
One, I think that the tri-committee draft does preserve the
disproportionate share payments under Medicare and Medicaid
with a study to see what the interaction will be between that
and reform. And clearly the undocumented aliens are going to
fall through the cracks here. I assume they're not going to be
involved in whatever reform is done.
So that's particularly important for hospitals, because
generally they end up at the hospital if they need health care,
and most of that payment goes to hospitals. So that's
critically important.
Second, I think matched with the individual responsibility
mandate that you have in the bill, and the subsidies and the
expansions in Medicaid, it is really critical for hospitals
that there be automatic enrollment, that when someone comes
into the emergency room or enters into the hospital, and in the
new world, once the reform goes into effect, and is not
covered, that we have the ability to very seamlessly sign them
up and get them covered there, so that one, if they have to pay
something, they may have to meet their responsibilities for the
coverage; but at least then they've got the coverage and they
can carry that coverage forward, and we can provide the
services in a way that always goes better when people have
coverage.
Mr. MEEK. Would it be fair to say even when you--and just
real quickly to your question, and I appreciate it--would it be
fair to say in some of these areas where we have the small and
large counties, especially agricultural counties--in the State
of Florida we have a tourism industry--we will have some
individuals that will walk into the emergency room for care,
that are going to be in the middle of--maybe be the wrench
within the machinery----
Mr. KAHN. Right----
Mr. MEEK. To allow us to have this smooth transition that
we would like to deal with. I didn't know if there were any
add-ons or concerns. I know we want to study it. But I think
there's a lot of documentation out there as it relates to that
population, cost that hospitals cannot do anything there----
Mr. KAHN. I----
Mr. MEEK. Yes, sir----
Mr. KAHN. I think if you reduce the uncompensated care,
which you will through all the new people that are covered----
Mr. MEEK. Mm-hmm----
Mr. KAHN. And you maintain the level of the
disproportionate share payments, or maintain them at a high
level, I think you'll solve that problem. I think then there
will be a buffer for the hospitals, for these people that fall
through the cracks, and at the same time, there will be many
more people in the hospital now who are insured, either through
Medicaid because of new eligibility rules, or hopefully most of
them through coverage through the bill.
Mr. MEEK. I'm sorry, can Dr. Baxter, just very quickly, Mr.
Chairman?
Mr. STARK. Go ahead.
Mr. MEEK. I'm sorry----
Mr. STARK. Dr. Baxter.
Dr. BAXTER. Yes. I think the goal, of course, is to keep
undocumented immigrants from having to come to the hospital for
very expensive care that could have been prevented if primary
preventive care had been provided. And that's one area where
community health centers, I think excel.
We, of course, do not at the Ryan Center ask for any proof
of citizenship. But it would be disingenuous of me to say that
I really don't know whether or not we have undocumented
immigrants.
And I think part of the goal is to have a friendly,
welcoming, safe place that mothers can bring their children in
for vaccinations, people can come in for treatment of their
diabetes.
And so again, I think of course the role of my colleagues
in the hospital system is important. But I'm sure that the
Committee agrees that let's try to head them off at the pass,
so to speak, before they really require hospital care.
Mr. MEEK. Okay. Thank you. I'm over my time. I'm sorry.
Thank you, Mr. Chairman.
Mr. STARK. Thank you. And I would like to again thank the
panel for their patience, their indulgence, and their guidance.
We'll be talking to you, I'm sure, as we proceed the next week
or two.
And the Committee is adjourned.
[Whereupon at 7:08 p.m. the hearing was adjourned.]
[Submissions for the Record follow:]
Statement of Nancy G. Brinker
Testimony Highlights
The Susan G. Komen for the Cure Advocacy Alliance
appreciates the Committee's focus on prevention, early detection and
chronic disease management, as well as the goal of access to
affordable, high-quality health coverage for all, including those with
preexisting conditions.
There are two key access issues we recommend adding to
the draft legislation: extending access to patient navigation services
to help guide patients through the complex health care system, and
ensuring access to clinical trials.
As the House of Representatives finalizes legislation to
reform the Nation's health care system, Members are asked to consider
the unique needs of persons who are fighting or who have faced a
disease like cancer, because they encounter the most challenging
obstacles in the current U.S. health care system.
Introduction
Mr. Chairman, Ranking Member and Members of the Committee, the
Susan G. Komen for the Cure Advocacy Alliance appreciates your
attention to prevention, early detection and chronic disease management
in the health care reform draft proposal released earlier this month.
We support your goal of ensuring access to affordable, high-quality
health care for all Americans, including people who are currently
deemed uninsurable because they have a preexisting condition like
cancer.
Komen Advocacy Alliance's Principles for Health Reform
The Komen Advocacy Alliance is the nonpartisan voice for more than
2.5 million breast cancer survivors and the people who love them. Our
mission is to translate the Komen promise to end breast cancer forever
into action at all levels of government to discover and deliver the
cures. Cancer patients and survivors have some of the most challenging
experiences with the health care system at a time in their lives when
they are most vulnerable. Thus, the Susan G. Komen for the Cure
Advocacy Alliance believes that health reform must:
Increase investment in Federal and State programs for
underserved patients.
Protect cancer patients from excessive out-of-pocket
costs.
Ensure access to affordable, high-quality insurance for
all, including those with preexisting conditions.
Enhance quality and value by focusing on prevention,
wellness, and chronic disease management.
Address the shortage of cancer care specialists.
Additional Issues to be Considered
The health care reform draft proposal addresses many of these
priorities. However, there are two additional issues that should be
included in the bill: Extending access to patient navigation services
to help guide patients through the complex health care system, and
ensuring access to clinical trials.
Patient Navigation Services: We recommend that the Committee
reauthorize and fully fund the Patient Navigator Outreach and Chronic
Disease Prevention Act of 2005 (P.L. 109-18) for 5 years, FY2011
through FY2015. Current authorization expires at the end of FY2010.
Komen recommends enhancement of the original Act by adding minimum core
proficiency standards for patient navigators.
Navigating the complex health care system can be an
insurmountable task for patients facing a complicated or chronic
disease, especially if they are underserved, have a lower level of
medical literacy, or do not speak or read English well. Patient
navigators are trained to serve as personal guides and help people
overcome obstacles to receiving timely cancer treatment and care. This
includes obtaining financial resources, tracking appointments and
coordinating transportation.
Patient navigation is a proven concept that is cost-
effective, promotes prevention, saves lives, and addresses health
disparities.
Minimum core proficiency standards are vital because
effective patient navigators should be culturally competent, good
communicators, compassionate, and experts at navigating the health care
system.
The program should be fully funded; between FY2006 and
the current FY2009, the Patient Navigator Act received only about $2.4
million (in FY2008) of the $25 million that was originally authorized.
There is significant support for the Patient Navigator
program in the cancer community, and it is widely applicable to other
chronic diseases.
Access to Clinical Trials: Part of ensuring access to cancer care
includes access to clinical trials. Barriers to clinical trials must be
removed for all patients--including cancer patients--without regard to
the type of health insurance plan or health status. This can be
accomplished by (1) a codification in law of Medicare's current
reimbursement policy for routine expenses for patients in approved
clinical trials, and (2) making needed changes to ERISA, the Public
Health Service Act and the Internal Revenue Code to accomplish the same
policy for private insurance plans.
Each year, thousands of people gain access to the
highest-quality cancer care and receive new treatments before they are
widely available by participating in a clinical trial. Millions more
benefit from the findings. Yet, while more than 1.4 million Americans
are diagnosed with cancer each year, fewer than 5 percent will
participate in an approved clinical trial.
Some health insurance companies do not cover routine
medical care expenses for patients enrolled in approved clinical
trials, or refuse to cover complications that sometimes occur during
the course of an approved clinical trial. Failure to cover these items
may mean otherwise eligible people are turned away, or are exposed to
high out-of-pocket costs when they encounter complications.
These issues could be addressed by including language
from the ``Access to Cancer Clinical Trials Act'' (S. 488) by Senator
Sherrod Brown (D-OH).
Attached to this testimony are more detailed comments on the health
reform draft proposal, including the importance of patient navigation
and clinical trials, as well as the need for a continued focus on
prevention, wellness, chronic disease management and access to care for
underserved populations.
Susan G. Komen for the Cure Advocacy Alliance
Comments on the Health Reform Draft Proposal
Committee on Ways and Means, U.S. House of Representatives
As your Committee continues deliberations on reforms to the
Nation's health care system, we urge you to consider the unique needs
and challenges of people with preexisting conditions like cancer.
Cancer patients and survivors have some of the most challenging
experiences with the health care system at a time in their lives when
they are most vulnerable. Thus, the Susan G. Komen for the Cure
Advocacy Alliance calls on your Committee to:
Increase the investment in Federal and State programs
that provide cancer screening, treatment and patient navigation
services for underserved populations.
Protect cancer patients who have health insurance from
excessive out-of-pocket costs that may lead to severe financial
hardship and even bankruptcy.
Ensure access to affordable, high-quality health
insurance for all, including people with ``preexisting'' conditions
like cancer--so everyone can continue to have health insurance, even if
they lose or change jobs.
Enhance the quality and value of health care by focusing
on prevention, wellness and chronic disease management.
Address the chronic shortage of cancer care specialists,
particularly in underserved areas.
1. Increase the investment in Federal and State programs that provide
cancer screening, treatment and patient navigation services for
underserved populations.
PROBLEM: Almost 46 million Americans lack health insurance.\1\
Without reforms, the number is projected to climb another 7 million or
more by 2010, due in part to rising health costs and high
unemployment.\2\ Lack of adequate health insurance has a decidedly
negative effect on cancer screening rates, as well as the stage at
diagnosis and a person's chances of survival: \3\
---------------------------------------------------------------------------
\1\ U.S. Census Bureau, ``Income, Poverty, and Health Insurance
Coverage in the United States: 2007,'' August 2008. Available online:
http://www.census.gov/prod/2008pubs/p60-235.pdf.
\2\ Todd Gilmer and Richard Kronick, ``Hard Times And Health
Insurance: How Many Americans Will Be Uninsured by 2010?,'' Health
Affairs, Web Exclusive, w573-577, May 28, 2009.
\3\ Elizabeth Ward, et al., ``Association of Insurance with Cancer
Care Utilization and Outcomes,'' CA: A Cancer Journal for Clinicians,
Vol. 58, No. 1, January/February 2008, p. 9-31.
Patients with private insurance are more likely to be
diagnosed at earlier stages, and are more likely to survive at all
stages of diagnosis than the uninsured.
Cancer patients who are uninsured--and those who were
Medicaid-insured at time of diagnosis--are 60 percent more likely to
die in 5 years than those with private insurance.
In addition, disparities in cancer incidence and
mortality rates must be addressed. For example, those with lower socio-
economic status and people in underserved areas are more likely to be
diagnosed and are more likely to die from cancer.\4\
---------------------------------------------------------------------------
\4\ American Cancer Society, ``Cancer Facts & Figures 2009.''
As the ranks of the uninsured swell, demand grows for public health
programs, including programs that provide cancer screening and cancer
care services. Unfortunately, Federal and State safety net programs are
dramatically underfunded, leaving huge gaps for the neediest Americans.
---------------------------------------------------------------------------
For example:
The National Breast and Cervical Cancer Early Detection
Program (NBCCEDP) provides potentially life-saving cancer outreach,
case management, and screening to low-income, uninsured and
underinsured women. Yet, the program is so underfunded it is only able
to reach less than one in five eligible women.\5\ The program is
increasingly forced to turn women away or establish waiting lists for
these vital services.
---------------------------------------------------------------------------
\5\ See the Center for Disease Control's website for the National
Breast and Cervical Cancer Early Detection Program. Available online
at: http://www.cdc.gov/cancer/NBCCEDP/.
---------------------------------------------------------------------------
All States allow underserved women to access Medicaid for
breast or cervical cancer treatment if they are uninsured, need
treatment for breast and cervical cancer, and meet other eligibility
criteria. However, 20 States only allow this access to Medicaid if the
woman's screening is funded by the State or tribal screening program--a
large concern given the dramatic underfunding of those programs.\6\
---------------------------------------------------------------------------
\6\ Tally of States based on M&R Strategic Services, ``Treatment
Act Survey: Final Report,'' February 16, 2007, updated based on the
experience of Susan G. Komen for the Cure Advocacy Alliance. The
Treatment Act is the subject of a forthcoming report by the Government
Accountability Office, which Komen helped initiate.
---------------------------------------------------------------------------
Navigating the complex health care system can be an
insurmountable task for many patients facing a complicated or chronic
disease, especially when they are underserved, have a lower level of
medical literacy, or do not speak or read English well. To address
this, Congress passed the Patient Navigation Act, a pilot grant program
to provide patient navigation services to those in need. Unfortunately,
the Patient Navigation Act has received only a small portion of the $25
million that was originally authorized.
SOLUTIONS: As Congress overhauls the health care system, it must
close the gaps plaguing Federal and State safety net programs that
provide vital cancer screening, treatment and patient navigation
services for our Nation's underserved populations.
2. Protect cancer patients who have health insurance from excessive
out-of-pocket costs that may lead to severe financial hardship and even
bankruptcy.
PROBLEM: Having health insurance does not necessarily protect a
person from financial harm in the event of a health event like a cancer
diagnosis:
A recent survey of employer-sponsored health insurance
plans shows employees' out-of-pocket spending grew more than a third
between 2004 and 2007, while wages remained stagnant.\7\
---------------------------------------------------------------------------
\7\ John Gabel, et al., ``Trends In Underinsurance And The
Affordability of Employer Coverage, 2004-2007, Health Affairs Web
Exclusive, w595, June 2, 2009.
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The exposure to high costs can be disastrous. A recent
study by Harvard University found that half of all bankruptcy filings
were partly the result of medical expenses, and 68 percent of those who
filed for bankruptcy had health insurance.\8\
---------------------------------------------------------------------------
\8\ Himmelstein, et al., ``Illness and Injury as Contributors to
Bankruptcy,'' Health Affairs Web Exclusive, w563, Febrary 2, 2005.
---------------------------------------------------------------------------
A national survey commissioned by the American Cancer
Society Cancer Action Network shows one in five cancer patients has
significantly or completely depleted their savings because of medical
costs--one in seven has incurred thousands of dollars in medical
debt.\9\
---------------------------------------------------------------------------
\9\ Lake Research Partners and American Viewport conducted the
survey, which was sponsored by the American Cancer Society Cancer
Action Network, May 1 through 11, 2009, among a national sample of
1,057 adults age 18 and older, in households with cancer or a history
of cancer. Available online: http://www.acscan.org/pdf/healthcare/
reports/poll-05202009.pdf.
Many health insurance policies have annual and lifetime caps on
benefits or other limitations and exclusions. Patients may be exposed
to large out-of-pocket expenditures because cancer treatments can be
very expensive--some therapies run hundreds of thousands of dollars a
---------------------------------------------------------------------------
year and may require extensive and long-term monitoring and followup.
SOLUTIONS: Congress should protect patients from high out-of-pocket
costs by reducing or eliminating annual or lifetime limits on the
benefits, and possibly by establishing an annual maximum limit on out-
of-pocket medical expenditures.
3. Ensure access to affordable, high-quality health insurance for all,
including people with ``preexisting'' conditions like cancer--so
everyone can continue to have health insurance, even if they lose or
change jobs.
PROBLEMS: For the 161 million Americans with employer-provided
health insurance, a change in employment also likely means a new health
insurance company with different benefits and network providers. But
persons with preexisting conditions like cancer may run into
challenges: \10\
---------------------------------------------------------------------------
\10\ Karen Schwartz, et al., ``Spending to Survive: Cancer Patients
Confront Holes in the Health Insurance System,'' Kaiser Family
Foundation and the American Cancer Society, February 2009. Also see the
Lake Research Partners and American Viewport survey.
Cancer patients and survivors with employer-provided
health insurance may lose jobs, change jobs, or have to cut back hours
or leave a job during treatment--and lose their group health insurance.
As a result, cancer patients or survivors may experience
``job lock,'' in which they cannot leave their current job for fear of
losing their health insurance. This runs counter to the trend of
today's mobile workforce, in which people frequently move from job to
job in pursuit of new opportunities.
Even cancer survivors who have been in remission for
years with a good long-term prognosis have trouble finding coverage in
the individual market because of medical underwriting and the existence
of their preexisting condition.
Clinical Trials: Part of ensuring access to cancer care includes
access to clinical trials.
Each year, thousands of people gain access to the
highest-quality cancer care and receive new treatments before they are
widely available by participating in a clinical trial. Millions more
benefit from the findings. Yet, while more than 1.4 million Americans
are diagnosed with cancer each year, fewer than 5 percent will
participate in an approved clinical trial.\11\
---------------------------------------------------------------------------
\11\ American Cancer Society.
---------------------------------------------------------------------------
Some health insurance companies do not cover routine
medical care expenses for patients enrolled in approved clinical
trials--or refuse to cover extra scans, doctor visits and drugs to
address complications that occur during the course of an approved
clinical trial.
SOLUTIONS: Congress should require health insurance companies to
provide coverage to all, with no preexisting condition limitations. In
addition, barriers to clinical trials must be removed for all
patients--including cancer patients--without regard to the type of
health insurance plan. This can be accomplished by (1) a codification
in law of Medicare's current reimbursement policy for routine expenses
for patients in approved clinical trials, and (2) making needed changes
to ERISA, the Public Health Service Act and the Internal Revenue Code
to accomplish the same policy for private insurance plans. The issues
related to clinical trials could be addressed by including language
from the ``Access to Cancer Clinical Trials Act'' (S. 488) by Senator
Sherrod Brown (D-OH).
4. Enhance the quality and value of health care by focusing on
prevention, wellness and chronic disease management.
PROBLEM: The U.S. health care system often focuses too much
attention on treating people once they become sick, and not enough
attention on keeping people healthy or detecting chronic diseases like
cancer early, when there are more treatment options and the chances of
survival are often greater.
Prevention, Early Detection & Wellness: Prevention saves lives.
Applying proven tobacco control strategies could eliminate a third of
all cancer deaths.\12\ Cancers related to obesity, physical inactivity
and poor nutrition could also be prevented. And many of the more than 1
million skin cancers that are expected to be diagnosed in 2009 could be
prevented by protection from the sun's rays and avoiding indoor
tanning.
---------------------------------------------------------------------------
\12\ American Cancer Society.
---------------------------------------------------------------------------
For other cancers, early detection is the key to survival. Regular
screenings can detect cancers of the cervix, colon and rectum by
detecting precancerous growths that can be removed, and can detect
breast, colon, rectum, cervix, prostate, oral and skin cancers at early
stages when they are most treatable.
For breast cancer, the 5-year relative survival rate is
98 percent when breast cancer is detected at an early stage, 84 percent
for regional disease and 27 percent for distant-stage disease.\13\
---------------------------------------------------------------------------
\13\ American Cancer Society, Breast Cancer Facts & Figures 2007-
2008, Atlanta: American Cancer Society, Inc. (Available online at
http://www. cancer.org/downloads/STT/BCFF-Final.pdf).
---------------------------------------------------------------------------
Yet, for women who are uninsured and underinsured, cost
is a significant barrier to getting preventative care--only 67 percent
of underinsured women over the age of 50 received a mammogram in the
past 2 years, compared with 85 percent of adequately insured women.\14\
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\14\ Sheila Rustgi, et al., ``Women at Risk: Why Many Women are
Forgoing Needed Health Care,'' The Commonwealth Fund, Issue Brief, May
2009. (Available online: http://www.commonwealthfund.org/content/
publications/issue-briefs/2009/may/women-at-risk.aspx.)
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For women with health insurance or Medicare, even a
relatively small copayment can significantly reduce mammography rates,
particularly for underserved populations.\15\
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\15\ Amal N. Trivedi, et al., ``Effect of Cost Sharing on Screening
Mammography in Medicare Health Plans,'' The New England Journal of
Medicine, Vol. 358, January 24, 2008, pp. 375-383. (Available online:
http://content.nejm.org/cgi/content/full/358/4/375). The study examined
174 Medicare managed-care plans from 2001 through 2004, which included
550,082 individual-level observations for 366,475 women between the
ages of 65 and 69 years.
Clinical Effectiveness: Komen supports the use of clinical
effectiveness research (CER), which will arm patients and their doctors
with the best available information on effectiveness and safety of
drugs, devices and diagnostic tests. To that end, a comprehensive
national comparative effectiveness research program should better
identify the most effective health care options, and ensure information
gained through CER is incorporated into clinical practice to better
inform decisions made among patients, their health care providers and
payers. A CER program should also link data from public and private
entities to build upon existing data collection and research
capabilities and support the development of ``personalized'' or
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stratified medicine.
Coordination of Care and Survivorship Care Planning: A key aspect
of chronic disease management is the coordination of care. To that end,
cancer patients should have a coordinated plan for treatment and
followup from the time they are diagnosed through the years of their
survivorship. With a written cancer plan and the opportunity to review
it in person with their doctor, cancer patients will better understand
the process ahead, monitor their health, and participate in decisions
about their care. And a written plan will help coordinate care among a
patient's many doctors and providers, reduce medical errors, and
ultimately improve patient care.
SOLUTIONS: Congress should reduce or eliminate copayments or
deductibles for preventative services like diagnostic imaging and
screening, and should provide incentives for providers to focus on
prevention, wellness and chronic disease management.
5. Address the chronic shortage of cancer care specialists,
particularly in underserved areas.
PROBLEM: There is a shortage of cancer care specialists,
particularly in underserved areas. This shortage will only intensify as
the population ages, which will bring along with it a significant
increase in the number of cancer cases each year. Congress clearly
recognizes this is an issue. The economic stimulus package passed
earlier this year included billions for community health centers,
training for the health care workforce and an investment in health
information technology.
The promotion of a robust health information technology network
could also help alleviate the shortage of cancer care experts,
particularly in rural areas. Electronic medical records will ultimately
improve health care quality for cancer patients by improving
coordination of care. And it also allows for second opinions and
reviews of patient records from anywhere in the world.
SOLUTIONS: Congress should include provisions to strengthen the
health care workforce by forgiving student loans, providing grants to
increase faculty in nursing programs, providing financial incentives to
encourage health care professionals to practice in underserved areas,
and investing in health information technology. Congress should also
encourage partnerships between community hospitals and large cancer
centers.\16\
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\16\ Congress could consider building on the NCI's Community Cancer
Centers Program, which is a pilot program to provide private medical
surgical and radiation oncologists with close links to NCI research and
the network of 63 NCI-designated Cancer Centers principally based at
large universities. http://ncccp.cancer.gov/.
Statement of Albert B. (Al) Baca
The intent of this paper is to explain why our Nation needs a
``Single Payer'' system to pay for medical care. It is my hope that
Sen. Brown will see fit to discuss the points documented in this paper
with people whom he talks with.
I would also deeply appreciate it if Sen. Brown's staffers in
Washington can speak to the Senate Finance Committee staffers about the
contents of this paper. Since the Obama Administration desires to push
health care reform in this Congress, such a discussion with Senate
Finance Committee staffers would be timely and pertinent.
This medical horror story is about my 44-year-old daughter, Vivian
A. (Vandy) Baca, who is almost completely disabled, cannot walk nor
stand, draws SSDI, has Medicare and lives at home under the auspices of
the State of Ohio Medicaid Home Health Care Waiver Program.
Let me tell you about myself. I am a retired civilian employee of
the Air Force. The past 4 years have been very hard on me because of
the way that medical care is done in this country. To quote from two
radio programs I used to listen to when I was a young kid: ``Taint
funny McGee'' and ``What a revolting development this is.''
For people outside of the Dayton, OH area who may not know, in
2005, there was a gigantic squabble between Anthem Blue Cross and Blue
Shield (BC/BS) and Premier Health Partners--i.e. Miami Valley Hospital,
Good Samaritan Hospital, and the doctor groups directly associated with
each hospital--concerning Anthem BC/BS payment of fees to Premier
Health Partners for services rendered.
The bickering lasted for all except 1 week of 2005. During that
time many people in the Dayton, OH area suffered. One of those who
suffered was my daughter, Vandy. The unfortunate thing is that Vandy is
still suffering and she will continue to suffer for a long, long time.
She may never quit suffering and return to normal.
There is no doubt in my mind that the year-long squabble between
Anthem BC/BS and Premier Health Partners was the direct cause of the
medical horror story I am going to tell you. The story is not for the
squeamish.
Before I begin my story, I would like to state that because my wife
and I are senior citizens, we both have Medicare as our primary medical
coverage. I am a retired Federal employee and have BC/BS as my FEHBP
insurance which is secondary to Medicare. Therefore, the Premier Health
Partner and Anthem BC/BS squabble did not impact us because our FEHBP
BC/BS was secondary. My wife and I were lucky. Vandy wasn't.
For those people who are not from the Dayton, OH area, I found
something on the Internet that summarizes the Premier Health Partners
and Anthem BC/BS squabble for you in a very few words:
Source: Redorbit.com
Posted: Wednesday, 4 January 2006
Title: Premier, Anthem Fight Hurt:
Premier Health Partners and Anthem Blue Cross and
Blue Shield had to settle at some point. They need each other
too much.
Three days before Christmas, the area's largest
hospital group and the popular insurer decided that it was
time, that a year was long enough to shoot at each other and
even at their own feet.
Apparently, each side insisted on shooting itself in the foot for a
solid year to prove a point. Was that ridiculous? Yes. Would that have
happened under ``Single Payer''? No.
Back to the story. In April 2005, Vandy had pneumonia and anemia
which required her to be hospitalized. Because of the Premier Health
Partners and Anthem BC/BS squabble, Vandy had to go to a hospital other
than Good Samaritan Hospital which is close to her doctor's office and
which has always been her hospital of choice. While a patient in the
other hospital, Vandy contracted a staphylococcal infection (MRSA)
which developed into encephalopathy or inflammation of the brain. Vandy
spent several weeks in intensive care at the other hospital before
being transferred to a nursing home where she was a resident for almost
2 years.
When Vandy arrived at the nursing home, she was in such terrible
shape that the other residents and the staff thought she would never
survive. But Vandy is a fighter and she did survive. She made progress,
too. I would go to the nursing home every day to play memory games such
as ``name the capitals of the States'' with her. Luckily, her mental
faculties did come all the way back. However, she didn't get to walk
out of the nursing home as she desperately wanted to do. In fact, she
still can not walk. Nor can she stand.
If Vandy would not have had to go to the other hospital because of
the squabble between Anthem BC/BS and Premier Health Partners, she
would not have caught the particular MRSA infection which disabled her.
However, I will concede that Vandy might also have caught a staph
infection at Good Sam. After all, a hospital is not the best place to
be when you are sick.
Wait. There is much, much more to this horror story and why I am so
thoroughly disgusted with the way that we, the American people, have
let the big insurance companies dictate medical care to us. And as you
will see in a few moments, I am equally as disgusted with the way that
the U.S. Government, especially the Social Security Administration, has
let them.
I have fought bureaucratic battle after bureaucratic battle with
the Social Security Administration on behalf of my daughter. Because of
that I have become somewhat of an expert on Social Security and
Medicare. If I had the energy that I had
25 or 30 years ago, I would offer free advice to people on how to fight
Social Security.
I will now delve into the silliness regarding what Vandy has to pay
for her prescription medications. I will begin by telling you that
Vandy is dual eligible for the Medicare and Medicaid low-income
subsidies. Please remember her dual eligibilities as you read the rest
of the story.
Vandy's husband, Stanley Styles, has worked at Wright State
University as a floor custodian for many years. Stan has carried a BC/
BS ``FAMILY'' plan as his group health insurance during all that time.
(Please note that the word ``FAMILY'' is emphasized.) He also carries
the WSU group dental plan and the WSU group vision plan.
In November 2008, Vandy was notified by the Social Security
Administration that Stan's BC/BS group health plan's copays rather than
her Medicare Part D carrier's copays would have to apply when she
ordered her prescription medications. The law is explicit that because
her husband's employer, Wright State University, has more than 100
employees, the WSU BC/BS group health plan copays have to apply rather
than the Medicare Part D copays.
My question to that is why can't the law be changed? The answer to
that is that would be too easy and would make too much sense. Further,
why does the law have to assume that larger employers have better
health plans for their employees than smaller employers? That is not
always the case; which is sad but true.
While Vandy was in the nursing home, I was able to get her
qualified for Social Security Disability Insurance (SSDI). She was
still living in the nursing home when she began receiving her SSDI
payments and became entitled to Medicare. As required by law, the
nursing home kept most of Vandy's SSDI payment to apply against her
nursing home expenses. The remaining nursing home expenses were paid by
the State of Ohio Medicaid Program. In other words, either Medicare or
Medicaid paid for all of Vandy's nursing home expenses, including all
of her medications. She certainly didn't have to pay any BC/BS copays
for prescriptions.
Back to the story: As stated, in early November 2008, Vandy was
notified that the BC/BS copays rather than the Medicare Part D copays
would have to apply to her prescription medications. The BC/BS copays
are $8.00 for generic drugs, $25.00 for brand-name drugs on formulary
and $40.00 for brand-name drugs not on formulary. Since Vandy is
required to take about 30 prescriptions a month, her BC/BS copays would
have been hefty at the generic rate and out of sight at the brand-name
rate.
A pharmacy technician managed to accomplish a ``workaround''
whereby Vandy's Medicare Part D carrier covered her prescriptions
through the months of November and December 2008. I am grateful to the
pharmacy technician for doing that.
During November and December, I called people all over the country
about Vandy's prescription dilemma. The people I called were at 1-800-
Medicare, the SSA national 800 number, the local Social Security
office, the SSA Coordination of Benefits office, three SSA Advanced
Resolution specialists, several SSA CMS specialists in Chicago, the
Ohio Job and Family Services Medicaid Hotline, the Ohio Senior Health
Insurance Information Program office, (SHIIP Ohio) and Congressman
Boehner's office.
Most everybody that I spoke with advised me that the easiest
solution to Vandy's dilemma would be to have her dropped from Stan's
BC/BS coverage at work and to let Medicare and Medicaid cover all of
her medical expenses. However, I was hesitant to recommend that to her
because, if Stan dropped her from his BC/BS group ``FAMILY'' health
plan at work, Vandy would also drop automatically from the WSU group
dental and group vision plans.
SHIIP Ohio advised me to inquire: ``Since Vandy is bedridden and
dual eligible to receive the Medicare and Medicaid low-income
subsidies, how come her dual eligibility for low-income subsidies
doesn't trump the higher BC/BS copays?'' I got absolutely nowhere with
that one.
The WSU Benefits Unit told me that my daughter could be dropped
from her husband's group health policy at any time. SHIIP Ohio told me
the same thing.
Because my daughter's family is strapped financially, there is
absolutely no way that they could afford the more expensive BC/BS
copays for her prescriptions. So Vandy and Stan decided it would be
best to drop Vandy from the WSU BC/BS group ``FAMILY'' medical plan
which also automatically dropped her from the WSU group vision and
dental plans. This was done only to avoid paying the much higher BC/BS
copays for her prescription medications. PLEASE, note that Vandy and
Stan felt that they did not have any other alternative because they
simply could not afford to pay the higher BC/BS copays.
Vandy dropped from her husband's BC/BS coverage at work effective 1
January 2009. On that date, Medicare assigned her to a new Medicare
Part D carrier which is now covering her prescriptions. Please note
that BC/BS does not pay a single DIME on Vandy's prescriptions, even
though Stan has a BC/BS FAMILY plan at work which is supposed to cover
a good part of his family's prescription costs. Instead the American
taxpayer is paying for Vandy's prescriptions. Wouldn't you say that the
American taxpayer is getting the shaft? I would.
I am a firm believer that government is at its best when it is
guided by common sense. I hope that Vandy dropping herself from Stan's
BC/BS coverage at work was the right decision. I am not sure that it
was. Let me tell you why:
Vandy recently had to pay $151.00 for a prescription that was not
on her Medicare Part D carrier's formulary. The cost of paying for that
one expensive prescription ``out-of-pocket'' wiped out a good chunk of
whatever prescription ``savings'' Vandy and Stan had achieved by
dropping her from his BC/BS coverage at work.
Next I want to explain that Vandy recently had to have bariatric
surgery to try to lose some weight. The reason for the bariatric
surgery is that her doctor and her therapists have told her that unless
she loses some weight, she will never have a chance of walking again.
I point out that the bariatric surgery was performed by a
``preferred'' doctor at a ``preferred'' hospital.
NOW FOR THE CLINCHER: The American taxpayer had to pick up the
entire tab for that bariatric surgery even though Stan has a BC/BS
group FAMILY policy at work. IS THAT BRILLIANT?--OR--IS IT JUST PLAIN
STUPID?
It makes me sick to think that the poor American taxpayer is
getting the shaft while the big insurance company is paying nothing,
especially when Stan has a
BC/BS group FAMILY policy at work. And the U.S. Government lets them.
Is that fair to the American taxpayer? You know my answer.
That must be why the insurance companies ``lobby'' Congress so
hard.
If I sound disgusted, it is because I am.
If, after reading this medical horror story you are a bit uneasy,
get busy contacting your congressional delegation to tell them you
don't like the way the Nation does its health care business and that
you want it changed. Together, we can make a difference.
I thank you for reading Vandy's medical horror story. If you want
to contact me to discuss additional aspects to Vandy's medical horror
story, please do so. Believe me, I have only skimmed the surface.
Statement of the Association of Professors of Medicine,
Association of Program Directors in Internal Medicine,
Association of Specialty Professors, Clerkship Directors
in Internal Medicine, and Administrators of Internal Medicine
Abstract
In response to a projected physician workforce shortage, the
Alliance for Academic Internal Medicine (AAIM) recommends:
Strategically increasing the number of Medicare-funded
positions for primary care specialties to adequately meet the Nation's
health care needs. For these new positions, Medicare should support the
entire duration of training, which is typically 3 years but is 4 years
for combined programs such as internal medicine-pediatrics. In
addition, AAIM believes new primary care slots should be added in
geographic areas of demonstrated need. Ultimately, all health care
insurers should have a role in explicitly contributing to GME funding.
Enhancing the attractiveness of primary care careers by
altering the physician reimbursement system, increasing job
satisfaction for current and future primary care practitioners,
providing incentives for geographic distribution of primary care
physicians to areas of greatest need, and applying innovations to
educational models.
Increasing efficiency in the health care delivery system
by broadening the use of electronic health records (EHRs) and other
advances in health information technology and capitalizing on the use
of physician extenders. Additional options for improving health care
delivery should be considered.
While the evidence that the Nation faces a shortfall of physicians
is compelling and difficult to refute, increasing GME positions without
respect to specialty or practice region would be imprudent. Steps must
be taken to ensure access to primary care physicians, better methods
for coordinating care, a physician reimbursement system that values the
work of the primary care physician, incentive programs for physicians
to train and practice in rural areas, adequate financial support for
GME, and steps taken to improve the efficiency of health care delivery.
Introduction
After two decades of consistent predictions that the United States
will face a physician surplus, leading professional organizations and
advisory boards have now altered their calculations and projected that
the Nation may soon face physician shortages (1-5). These organizations
are calling for teaching hospitals, medical schools, and the Federal
Government to respond to predicted shortages (6-8).
The primary determinant of the number of practicing physicians in
the United States is the number of graduate medical education (GME)
positions or training slots. These positions represent the only pathway
to licensure for medical practice in the United States. Since the
Balanced Budget Act of 1997 capped the number of federally funded
positions in each residency program at the 1996 level, increases to the
flow of new physicians into the workforce have been limited despite
evidence of growing demand. The shortage of physicians is particularly
significant in primary care specialties.
AAIM's recommendations to allow strategic growth in positions in
primary care specialties and geographic areas of need would prevent an
unregulated increase in positions for highly specialized training
programs, which might raise health care costs without adding primary
care physicians to address health care needs. However, increasing the
number of primary care positions will not result in an increase of
physicians practicing primary care unless steps are taken to enhance
the attractiveness of primary care careers.
This position paper was created by the AAIM Advocacy Committee,
with representation of its five member organizations: the Association
of Professors of Medicine, Association of Program Directors in Internal
Medicine, Association of Specialty Professors, Clerkship Directors in
Internal Medicine, and Administrators of Internal Medicine. The
committee solicited feedback from the alliance membership before
writing the statement. After vetting by the leadership of each
organization, the consensus statement was finalized and approved as the
alliance position on how to address the projected shortage in the
physician workforce. This paper reviews the data that support the
conclusion that the United States faces the prospect of a shortfall of
physicians, describes certain aspects of these data particularly as
they relate to the supply of primary care physicians, addresses the
mechanisms necessary for expanding the pool of practicing physicians
through increasing Medicare funded GME slots, discusses the expansion
of programs that distribute physicians to geographic areas of need, and
comments on steps that can be taken to improve the efficiency of
physician work.
Physician Supply
COGME issued Physician Workforce Policy Guidelines for the United
States 2000-2020 in January 2005 (9). COGME noted that although the
absolute number of physicians would increase by 24% between 2000 and
2020, the population growth would exceed the rate of growth of
physicians, resulting in a decrease in the ratio of full-time
equivalent (FTE) physicians per 100,000 Americans. COGME also
postulated that the demand for physician services will grow as the
elderly population increases as a proportion of the total population.
The council concluded that U.S. medical school enrollment needed to
increase by 15% by 2012 to meet demand.
In June 2006, the Association of American Medical Colleges (AAMC)
issued the AAMC Statement on the Physician Workforce, which claimed
there was ``sufficient evidence'' to recommend increasing by 30% the
number of entry-level positions in Liaison Committee on Medical
Education accredited medical schools by 2012 (7). AAMC stated the 30%
increase could be accomplished by increasing enrollment at existing
schools as well as creating new medical schools. According to the
statement, increased funding for GME positions should occur
simultaneously to ensure graduating medical students could receive
appropriate postgraduate training.
In December 2008, AAMC released updated projections indicating that
a shortage of 124,000 FTE physicians will occur by 2025 (10). According
to their estimates, 37% of the shortage will be in primary care, 33% in
surgery, 6% in medical specialties, and 23% in other specialties. The
shortage of 124,000 physicians is based on the assumption that current
supply, use, and demand patterns will remain the same for the next 16
years. Since it is unlikely these patterns will remain stable, AAMC
also created an alternative scenario assuming a continued increase in
utilization rates, changes in work schedules, a moderate expansion in
GME capacity, and improvements in productivity, which projects a
shortage of 159,300 FTE physicians by 2025.
While academic institutions have responded to the calls from COGME
and AAMC with an increase in allopathic medical school class size and
the creation of several new medical schools, new Federal funding for
additional U.S. GME slots has not been forthcoming, except in a limited
way from the Department of Veterans Affairs (VA). Increases to
positions funded by other sources, while they exist, have also been
minimal (11).
Beyond increasing support to expand GME positions, interest in
primary care careers among medical school graduates must also increase
to positively affect the supply of primary care physicians. Extensive
data support the observation that decreased numbers of U.S. medical
school graduates are pursuing careers in primary care. For example,
3,884 U.S. medical students matched into internal medicine residency
positions in 1985 compared to 2,660 in 2008 (12). In a recent study by
Hauer et al., only 24 (2%) of the 1,177 students in the 11 medical
schools participating planned to pursue a career in general internal
medicine (13). Conversely, while interest of U.S. seniors in general
internal medicine has declined, the proportion of residents choosing
specialty fellowships has increased from 50% in 1988 to 80% in 2006
(14). According to Hauer's study, today's medical students prioritize
lifestyle issues in career selection and perceive general internal
medicine as a low-satisfaction, low-income, and uncontrollable career
(13). The potential consequence of declining interest in general
internal medicine careers is a decrease in the delivery of preventive
measures and appropriate treatment of chronic diseases that often lead
to disability and premature death. This consequence has direct
implications for the growing number of the elderly in the United States
who require coordination of treatments for multiple complex, chronic
conditions.
The geographic maldistribution of physicians in the United States
also has negative implications for ensuring an adequate supply of
physicians. Several studies indicate a shortage most pronounced in
rural areas and certain urban neighborhoods (15, 16). A study of 20-
year trends in geographic variation of physician distribution shows
that an increase in practicing physicians by 51% did not translate into
regional variation of practice location. Despite long-standing public
policies, physicians continued to locate in areas of adequate-to-high
physician-to-population ratios, further compounding issues for health
professional shortage areas (HPSAs) (17).
Physician Supply
Assessing the country's future needs for physicians is a
challenging and complex estimation of supply and demand. The supply
side involves the output from multiple training pathways for initial
medical degrees as graduates enter the final common pathway of
residency training. Supply is also a product of physician effort and
varies in relation to age, gender, and generational or lifestyle
preferences.
The largest source of physicians entering the ``funnel'' of GME is
provided by U.S. allopathic medical schools. In 2005, 15,760 graduates
of U.S. allopathic schools and 2,800 graduates of U.S. osteopathic
medical schools were eligible to enter GME programs (18, 19). A total
of 24,269 first-year GME positions in training programs approved by the
Accreditation Council for Graduate Medical Education (ACGME) and the
American Osteopathic Association were available for these new gradu-
ates (12, 20). The gap between the number of available positions and
the total graduates of U.S. programs was filled by approximately 6,000
graduates from medical schools in other countries.
Based on 2007 enrollment and class size increases, first-year
enrollment into U.S. medical degree programs is projected to increase
from 16,488 in 2002 to nearly 19,909 in the 2012 academic year (AY).
Similarly, substantial growth in first-year enrollment of osteopathic
schools is expected, from 2,148 in AY 2002 to 5,227 in AY 2012 (a 70%
increase) (21). As a result, unless the number of first-year positions
in GME training increases, not enough positions will exist to
accommodate all U.S. medical graduates by the year 2012 (Figure 1).
Figure 1: Funnel of Graduate Medical Education
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
It is estimated that international medical graduates (IMGs) now
account for 24% of the total U.S. physician workforce (22). Although
concerns about depletion of the physician supply in IMG home countries
also exist, the current demand for physicians in the United States can
only be met by the continued training and retention of IMGs. If more
residency positions are not funded, increasing the number of U.S.
medical school graduates will be a zero-sum game in terms of the number
of practicing physicians in the United States (19). Currently, more
than a quarter of the Nation's primary care physicians are IMGs.
The supply of physicians is also influenced by the rate at which
physicians leave practice. Just as the total U.S. population has aged,
the population of practicing physicians has also aged. It was estimated
that there would be 99,000 U.S. physicians over the age of 65 in 2008
(19). Furthermore, changing demographics and emerging expectations
about professional life by both male and female physi-
cians will lead to increasing numbers of practicing physicians with
reduced work
hours (23, 24).
Projections from 2007 suggest that the number of practicing
physicians in the United States will increase from 733,852 in 2000 to
906,278 in 2010, and will rise further to 988,100 in 2020 (25).
However, in spite of the increase in numbers of physicians, the
projected increase in the U.S. population will mean that the ratio of
active physicians to population (per 100,000) will increase only
modestly from 278.5 in 2000 to 293.4 in 2010, and it will remain
essentially unchanged for the next decade at 294.2 in 2020. These
statistics do not account for the anticipated functional reduction in
work capacity anticipated as a result of changing work habits and
patterns of practice. Assessing the need or demand of the population
for physician services is a complex and controversial topic. However,
it is clear that the physician supply must increase to accommodate the
growing and aging population as well as the growing number of medical
students entering the pipeline.
Responding to Physician Workforce Projections
Recommendation 1: AAIM recommends strategically increasing the number
of Medicare-funded residency positions in primary care specialties to
adequately meet the Nation's health care needs as defined by COGME. In
addition, AAIM believes GME slots should be added in geographic areas
of demonstrated need.
According to COGME, meeting the Nation's future physician workforce
demand and need will require increasing to 27,000 the number of
physicians entering residency training each year by 2015, which would
represent an increase of approximately 3,000 positions annually. Based
on its recent projections, AAMC has advocated for an increase of 5,000
positions annually over an average of 4 years of training to respond to
its recommended 30% increase in medical school class size. A global,
unregulated increase in GME positions is unlikely to meet regional or
specialty-specific shortages. A deliberate and strategic increase
should be considered to justify the creation of new GME slots. AAIM's
recommendation for Medicare to fund new positions in primary care
includes a call for support for an average of 4 years per position.
While training in internal medicine, pediatrics, and family medicine is
3 years, training in combined programs such as internal medicine-
pediatrics takes 4 years.
Current data suggest as many as one-half of physicians trained in a
specific locale will stay there for their practice careers (17). To
allow residents to train in areas of demonstrated need, Medicare GME
funding regulations must change to permit resident time spent outside
of the academic health care setting to count for purposes of GME
funding. Currently, the use of non-hospital training sites is
restricted by Centers for Medicare and Medicaid Services (CMS)
regulations that require a training program to incur 90% of all costs
for a resident or fellow rotating outside of the teaching hospital,
which disallows private practitioners and other community faculty from
volunteering their time and presents a barrier to increasing training
in venues outside of the teaching hospital. Without funding, hospitals
stop sending residents to non-hospital settings or use precious limited
resources for this training at the cost of other programs. Removing
current restrictions and breaking down barriers for reimbursement would
increase residents' opportunities to practice in a variety of settings,
including rural, inner city, and other underserved locations. Aside
from providing experiences in areas where a resident may ultimately
care for patients, allowing residents to practice outside of teaching
hospitals can also serve as a successful recruitment mechanism for
communities in need. While ultimate practice locations of physicians
can not be controlled, increases in GME should be made with geographic
factors in mind.
The Medicare program provides approximately 40% of total GME
funding. The remainder is supported by other sources that vary by
institution and State and are often subject to the annual
appropriations process (26). An increase in PGY-1 slots to respond to
health care needs is only possible with increased funding. AAIM
understands the restrictions of State, institutional, and Federal
budgets to increase funding for medical education. As a result, AAIM
supports a system in which all insurers contribute to GME costs.
As long as Medicare funding is provided for GME positions, the per-
resident amounts paid to hospitals must be reassessed. Per-resident
amounts for Medicare direct GME payments were originally set in 1984.
While adjustments have been made, the per-resident amount has not been
altered to account for changes in training. Mandated competency-based
education and evaluation as well as duty hour restrictions require
significant resources as do health care simulation, centralized
oversight of regulatory compliance, and faculty development. These
changes and many others that require additional resources and resident
time have not been considered in the current GME financing system.
In 2005, CMS redistributed 3,000 unused GME slots to hospitals that
demonstrated greatest need. While this redistribution helped more than
350 hospitals mostly in rural areas, it also proved disadvantageous
because Congress lowered the percentage of indirect graduate medical
education (IME) payments associated with the positions. AAIM recommends
any increase in GME positions must include IME payments equal to those
provided to existing positions.
For hospitals and institutions with the capacity for additional
training positions, funding should remain earmarked for primary care
specialty positions and must not be redirected to other specialty
slots. In addition, institutions and hospitals must make a commitment
to keep current levels of primary care positions to receive funding for
additional positions. Any move to decrease current primary care slots
and use the funding for other specialty positions or fellowship
training will not positively affect the total output of physicians
entering primary care. Also, institutions must document their means and
ability to add positions with respect to teaching resources.
Enhancing the Attractiveness of Primary Care Careers
Recommendation 2: AAIM recommends enhancing the attractiveness of
primary care careers by altering the physician reimbursement system,
increasing job satisfaction for current and future primary care
practitioners, providing incentives for geographic distribution of
primary care physicians in areas of greatest need, and applying
innovations to educational models.
If the capacity for GME in internal medicine is enhanced by
providing more funding for residency slots, simply increasing the
number of graduates from U.S. medical schools without improving the
attractiveness of general internal medicine will not produce the
desired effect. Without providing incentives for selecting a career as
a general internist, larger class sizes will likely increase the number
of specialists in a variety of attractive practice disciplines.
Education, training, and reimbursement should be restructured to ensure
positive exposure to general internal medicine for physicians-in-
training and job satisfaction for individuals who choose a career in
general internal medicine.
Studies of student career choice highlight lifestyle issues as a
high priority in the decisionmaking process. Internal medicine has been
identified as a specialty with uncontrollable lifestyle regarding work
hours and patient care duties. In 2008, a study noted that clerkship
students choosing a career in internal medicine and those choosing
careers in other specialties perceive internal medicine residents as
less satisfied than residents in other specialties (13). Exposure of
medical students and residents to faculty who feel overwhelmed and
devalued will inhibit new physicians entering the field of primary
care.
Aside from training, a major challenge primary care faces in
becoming a successful career option is the current physician
reimbursement system. Today's system proves lucrative for procedure-
based specialties while primary care and cognitive specialties are
inadequately reimbursed for time spent delivering comprehensive patient
care. Reviewing the process for determining the current value of
physician services should be the first step in ensuring the work of
primary care physicians is not devalued. The Medicare Payment Advisory
Commission has made this recommendation to Congress along with
recommendations to increase Medicare payments for primary care services
and establishing a ``medical home'' pilot project through Medicare
(27). The ultimate enhancement of adequate reimbursement by Federal,
State, and private insurers for high-quality cognitive care will
provide tremendous incentive for physicians to seriously consider
primary care as a career of choice.
Understanding job satisfaction for the general internist requires
more than examining physician income. Outpatient schedules with
inadequate time to carefully evaluate the patient results in less than
optimal care and increased frustration for physicians.
Job satisfaction has the potential to increase with adequate
professional support. As the number of primary care physicians decline,
fewer colleagues will share the clinical load. Increasing use of
physician extenders may help to ease the burden of care; however, the
prestige of the generalist must also be considered. While physician
extenders can help ease the amount of work for primary providers, it is
important to note that they are not replacements for physicians who are
uniquely situated to identify and treat multisystem issues and complex
diagnoses.
Successful distribution of physicians to locations where primary
care physicians are most needed will require additional incentives.
Financial incentives for loan repayment may be successful in attracting
primary care physicians to locations of most need. In addition, focus
should be placed on recruiting and providing incentives to potential
trainees from underserved areas. Studies show that medical school
matriculants from underserved areas or with career plans to serve in
such areas are more likely to serve as rural primary care providers
than their peers. Programs developed to increase the supply of rural
primary care physicians have proven successful (28, 29). While
political and other forces that would be needed to make these
adjustments will require considerable strategy, these changes would
improve the overall health of the Nation if the best graduates were
encouraged to consider primary care. Potential strategies at the
national level for increasing the number of physicians in HPSAs include
enhancing the National Health Service Corps (NHSC) and health
professions education programs, passing legislation such as the Rural
Training Act to remove regulatory barriers to having residents train in
nonhospital and rural settings, and increasing the number of waivers
through the J-1 visa waiver program to previous levels. Steps can also
be taken at the State level.
The understanding that the primary care physician is essential to
access and optimal health outcomes underscores the need to address
explanations underlying the current deficiency in the number of these
essential providers. Understanding how best to integrate these
physicians with other professional colleagues such as nurse
practitioners and physician assistants rather than promoting their
displacement by these individuals will ultimately lead to the optimal
team approach. Focusing on the needs of the future health care
workforce is critically important, and national strategies are urgently
required to avoid a shortage of primary care physicians. The challenge
of appropriate funding will require redistribution of financial
resources and reimbursement to reflect the fair cost of delivering
high-quality care to the U.S. population.
Improve Health Care Delivery
Recommendation 3: AAIM recommends increasing efficiency in the health
care delivery system by broadening the use of EHRs and other advances
in health information technology and capitalizing on the use of
physician extenders. Additional options for improving health care
delivery should be considered.
The projected physician shortage could be mitigated by maximizing
the efficiency of physicians. In the future, optimizing efficiency may
actually reduce the number of physicians required to provide optimal
care. AAIM proposes improving the health care delivery system by
promoting widespread use of EHRs, capitalizing on the use of physician
extenders, and considering other options for increasing efficiency such
as improving access to health care screening.
A study conducted at community health centers concluded that EHRs
present a clear value to patients and stakeholders. Patients received
better care and payers were likely to reap EHR-related downstream
benefits in avoided specialist, emergency room, and hospital spending
(30). EHRs help physicians and staff members view, chart, and interact
with patients' health information in a timely and accurate manner.
While computerized physician order entry systems may prove cost-
prohibitive for some institutions, the use of order sets or clinical
practice guidelines could also serve to increase efficiency in patient
care.
Utilizing physician extenders can also increase efficiency by
freeing up the primary physician's time and providing greater
continuity of care. In primary care practices, nurse practitioners and
physician assistants can improve productivity by providing some direct
and indirect patient care, including routine examination and review of
medical histories, telephone triage, patient education, counseling, and
health awareness. Physician satisfaction with the use of the physician
extender model to increase efficiency is very high (31).
Additional options for increasing efficiency in the health care
delivery system should be explored. For example, consideration should
be given to regionalizing expensive treatments and applying the
certificate of need system globally; improving access to health care
screening to reduce the need for future hospitalization; and other
innovative measures to enhance efficiency. AAIM believes addressing the
physician shortage successfully will take both an increase in the
number of physicians and improvements to the health care delivery
system.
Conclusion
The Nation is facing a physician shortage that is likely to
adversely affect public health. AAIM recommends increasing the supply
of Medicare-funded positions in primary care specialties, including
internal medicine and internal medicine-pediatrics. National numerical
targets should coincide with the physician-to-population ratio adequate
to meet the Nation's health care needs as defined by COGME.
The evidence that the Nation faces a shortfall of physicians is
compelling and impossible to ignore. At the same time, an unbridled
increase in GME positions without respect to specialty or practice
region would be imprudent. AAIM believes that selective increases in
GME slots can and should occur in primary care. Allowing local
communities and their legislators to demonstrate the need for primary
care providers could provide a mechanism to address the geographic
maldistribution of physicians. In addition, steps must be taken to
increase efficiency in the current health care delivery system and
enhance the attractiveness of generalist careers, including internal
medicine and combined programs such as internal medicine-pediatrics.
AAIM has already begun such efforts with its statement, Redesigning
Residency Training in Internal Medicine: The Consensus Report of the
Alliance for Academic Internal Medicine Education Redesign Task Force.
While the Nation seeks to increase the physician supply, it also must
examine and implement measures that will improve physician efficiency
and effectiveness. Ignoring the imminent shortage of physicians puts
the Nation's health and well-being at risk.
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Statement of American Academy of Physician Assistants
Physician assistants (PAs) are one of three health care professions
providing primary medical care in the United States today, and are an
integral part of health care reform.
In 2008, over 257 million patient visits were made to
physician assistants, and approximately 332 million prescriptions were
written by PAs.
PAs practice in virtually every area of medicine. Between
35%-40% of all PAs practice in primary care. PA education is based on
the primary care model of care, providing greater flexibility for PA
practice upon graduation.
By design, PAs always work with physicians. However, PAs
make autonomous medical decisions. The physician is always available
for consult, but the physician may not be onsite, in the same county,
or in the case of the State Department, in the same country or
hemisphere. Reimbursement for medical care provided by PAs is separate
than reimbursement provided to physicians.
PAs serve as medical directors in rural health clinics,
community health centers, and other federally qualified health centers.
In rural and other medically underserved communities, a physician
assistant may be the only health care professional available.
PAs provide first contact, continuous, and comprehensive
care for patients throughout the United States. PAs currently manage
care for patients in primary care, chronic care, and other areas of
medicine.
Studies show that in a primary care setting, PAs can
execute at least 80 percent of the responsibilities of a physician with
no diminution of quality and equivalent patient care satisfaction.
By virtue of PA education in primary care and the ability
of PAs to work in all medical and surgical specialties, PAs expand
access to care in medically underserved rural and urban communities.
By design, the physician assistant profession extends the
reach of medicine and the promise of health to the most remote and in-
need communities of our Nation.
In addition to the need to produce more primary care physicians, it is
critical that Congress support expansion of PA programs as they develop
strategies for addressing health care workforce challenges.
Funds should be made available to PA educational programs
to increase the PA workforce, which in turn, will extend physicians'
ability to provide.
The Title VII, Public Health Service Act's Health
Professions Program is successful in training health care professionals
for practice in medically underserved communities. Funding for PA
educational programs is woefully underfunded and must be increased.
The single largest barrier to PA educational programs
educating more PAs is a lack of clinical training sites. Attention must
be directed to investing in the number of these sites, including loan
repayment for preceptors in primary care medical practices and/or the
increased use of VA facilities as clinical training sites for PA
educational programs.
Funds must be made available to increase the number of
faculty at PA educational programs. Eligible PA students are being
turned away because of the lack of faculty and clinical sites.
Faculty loan repayment, including funding to attract
faculty from diverse backgrounds, is also critical for PA educational
programs.
Federally supported student loans and increased
opportunities through the National Health Service Corps are key to
attracting PA students and clinicians to primary care.
Graduate medical education funding should be used to
support the educational preparation of physician assistants in
hospitals and outpatient, community-based settings.
Physician assistants are key to health care reform. However, to be
fully utilized, current barriers to care that exist in Federal law must
be addressed.
The Medicare statute must be amended to allow PAs to
order home health, hospice, and skilled nursing facility care, as well
as to provide hospice care for Medicare beneficiaries. (A 2009 report
by the Lewin Group estimates an overall cost savings through
implementation of the four PA Medicare provisions.)
Medicaid should be updated to require States to reimburse
all covered services provided by PAs under the fee-for-service plan.
Additionally, Medicaid should recognize PAs as primary care case
managers through managed care plans.
The Federal Employee Compensation Act needs to be updated
to allow PAs to diagnose and treat Federal employees who are injured on
the job.
Physician assistants must be fully integrated into new
models of care, including the primary care medical home and chronic
care coordination.
In brief, AAPA recommends the following changes to the House Health
Care Reform Discussion Draft_
Explicitly recognize physician assistants as primary
health care providers throughout the bill.
Incorporate the Senate HELP Committee language on
reauthorization of the Public Health Service Act's Title VII Program,
including a 15% carve for PA educational programs in Title VII training
on primary care medicine, an updated definition of PA educational
programs, and faculty loan repayment for PA education programs.
Revise Medicare to allow PAs to order home health,
hospice and skilled nursing facility care, as well as to provide
hospice care for Medicare beneficiaries. (A 2009 report by the Lewin
Group estimates an overall cost savings through implementation of the
four PA Medicare provisions.)
On behalf of the nearly 75,000 clinically practicing physician
assistants (PAs) represented by the American Academy of Physician
Assistants (AAPA), thank you for the opportunity to submit written
testimony for the hearing record of the House Committees on Education
and Labor, Energy and Commerce, and Ways and Means.
AAPA Principles for Health Care Reform
AAPA has a longstanding history of support for universal health
care coverage. Among the Academy's key principles for health care
reform--
The AAPA believes the primary goal of a comprehensive
health care system reform is to ensure access to quality, affordable,
and cost efficient health care for all residents of the United States.
The AAPA supports a health care system that will provide
basic services to all residents.
The AAPA supports health care that is delivered by
qualified providers in physician-directed teams.
The AAPA supports reform that confronts the limits of
care and resources.
The AAPA believes that fair and comprehensive reform of
the medical liability insurance system is needed.
The AAPA endorses system reform that enhances the
relationship between the patient and the clinician.
Physician Assistants
Physician assistants are licensed health professionals, or in the
case of those employed by the Federal Government, credentialed health
professionals, who--
Practice medicine as a team with their supervising
physicians.
Exercise autonomy in medical decisionmaking.
Provide a comprehensive range of diagnostic and
therapeutic services, including performing physical exams, taking
patient histories, ordering and interpreting laboratory tests,
diagnosing and treating illnesses, assisting in surgery, writing
prescriptions, and providing patient education and counseling.
May also work in educational, research, and
administrative settings.
PAs always work with physicians. However, this does not mean that
the physician is necessarily on site, nor does it suggest that PAs do
not make autonomous medical decisions. PAs employed by the State
Department, for example, may work with a physician who is a continent
away and available for consultation by telecommunication.
PAs are located in almost all health care settings and in every
medical and surgical specialty. Nineteen percent of all PAs practice in
nonmetropolitan areas where they may be the only full-time providers of
care (State laws stipulate the conditions for remote supervision by a
physician). Approximately 41 percent of PAs work in urban and inner-
city areas. Approximately 44 percent of PAs are in primary care. Nearly
one-quarter of clinically practicing PAs practice in surgical
specialties. Roughly 80 percent of PAs practice in outpatient settings.
PAs are covered providers within Medicare, Medicaid, Tri-Care, and
most private insurance plans. Additionally, PAs are employed by the
Federal Government to provide medical care, including the Department of
Defense, the Department of Veterans Affairs, the Public and Indian
Health Services, the State Department, and the Peace Corps.
AAPA estimates that in 2008, over 257 million patient visits were
made to PAs and approximately 332 million medications were written by
PAs.
Overview of Physician Assistant Education
Physician assistant programs provide students with a primary care
education that prepares them to practice medicine with physician
supervision. PA programs are located at schools of medicine or health
sciences, universities, teaching hospitals, and the Armed Services. All
PA educational programs are accredited by the Accreditation Review
Commission on Education for the Physician Assistant, an organization
composed of representatives from national physician groups and PAs.
The average PA program is 26 months and is characterized by a
rigorous, competency-based curriculum with both didactic and clinical
components. The first phase of the program consists of intensive
classroom and laboratory study, providing students with an in-depth
understanding of the medical sciences. More than 400 hours in classroom
and laboratory instruction are devoted to the basic sciences, with over
70 hours in pharmacology, more than 149 hours in behavioral sciences,
and more than 535 hours of clinical medicine.
The second year of PA education consists of clinical rotations. On
average, students devote more than 2,000 hours or 50-55 weeks to
clinical education, divided between primary care medicine and various
specialties, including family medicine, internal medicine, pediatrics,
obstetrics and gynecology, surgery and surgical specialties, internal
medicine subspecialties, emergency medicine, and psychiatry. During
clinical rotations, PA students work directly under the supervision of
physician preceptors, participating in the full range of patient care
activities, including patient assessment and diagnosis, development of
treatment plans, patient education, and counseling.
After graduation from an accredited PA program, the physician
assistant must pass a national certifying examination jointly developed
by the National Board of Medical Examiners and the independent National
Commission on Certification of Physician Assistants. To maintain
certification, PAs must log 100 continuing medical education credits
over a 2-year cycle and reregister every 2 years. Also to maintain
certification, PAs must take a recertification exam every 6 years.
The majority of PA educational programs offer master's degrees, and
the overwhelming majority of recent graduates hold a master's degree.
Title VII Support of PA Education Programs
The Title VII support for PA educational programs is the only
Federal funding available, on a competitive application basis, to PA
programs. Unfortunately, the level of support has eroded from the
highest level of $7.5 million in FY 2005 to $2.6 million in FY 2007.
Targeted Federal support for PA educational programs is authorized
through section 747 of the Public Health Service Act. The funds are
used to encourage PA students, upon graduation, to practice in
underserved communities. These goals are accomplished by funding PA
education programs that have a demonstrated track record of: placing PA
students in health professional shortage areas; exposing PA students to
medically underserved communities during the clinical rotation portion
of their training; and recruiting and retaining students who are
indigenous to communities with unmet health care needs.
The Title VII program works.
A review of PA graduates from 1990-2006 demonstrates that
PAs who have graduated from PA educational programs supported by Title
VII are 59% more likely to be from underrepresented minority
populations and 46% more likely to work in a rural health clinic than
graduates of programs that were not supported by Title VII.
A study by the UCSF Center for California Health
Workforce Studies found a strong association between physician
assistants exposed to Title VII during their PA educational preparation
and those who ever reported working in a federally qualified health
center or other community health center.
The PA programs' success in recruiting underrepresented minority
and disadvantaged students is linked to their ability to creatively use
Title VII funds to enhance existing educational programs. Without Title
VII funding, many special PA training initiatives would be eliminated.
Institutional budgets and student tuition fees are not sufficient to
meet the special, unmet needs of medically underserved areas or
disadvantaged students. The need is very real, and Title VII is
critical in leveraging innovations in PA training.
Need for Increased Targeted Support for PA Education
Federal support must be directed to PA educational programs to
stimulate growth in the PA profession to meet the needs of universal
health care coverage. Targeted funding should be directed to--
The use of Title VII funds for recruitment and loan
repayment for faculty in PA educational programs.
Incentives to increase clinical training sites for PA
education.
Federally backed loans and loan repayment programs for PA
students.
Eliminating Barriers to Care in Federal Law
Eliminating current barriers to medical care provided by PAs that
exist in the Medicare, Medicaid, and the Federal Employees Compensation
Act (FECA) laws would do much to expand access to needed medical care,
particularly for patients living in rural and other medically
underserved areas.
AAPA believes that the intent of the 1997 Balanced Budget
Act was to cover all physician services provided by PAs at a uniform
rate. However, PAs are still not allowed to order home health, hospice,
skilled nursing facility care, or provide the hospice benefit for
Medicare beneficiaries. At best, this creates a misuse of the patient's
physician's and PA's time to find a physician signature for an order or
form. At worst, it causes delayed access to care and inappropriate more
costly utilization of care, such as longer stays in hospitals. For
patients at end-of-life, it creates an unconscionable disruption of
care. (A 2009 report by the Lewin Group estimates an overall cost
savings through implementation of the four PA Medicare provisions.)
Although most States recognize services provided by PAs
in their Medicaid programs, it is not required by law. Consequently,
some State Medicaid Directors pick and choose which services provided
by PAs they will cover. Others impose coverage limitations not required
by State law, such as direct supervision by a physician.
Although nearly all State workers' compensation programs
recognize the ability of PAs to diagnose and treat State employees who
are injured on the job, the Federal program does not. As a result,
Federal workers who are injured on the job may be rerouted to emergency
rooms for workers' compensation-related care, rather than to go to a
practice where the PA is the only available health care professional.
The Medicare, Medicaid, and FECA statutes create Federal barriers
to care that do not exist in State law. The barriers need to be
eliminated to promote increased access to the quality, affordable
medical care provided by PAs.
Integrate PAs into New Models of Care
AAPA is concerned that health care reform could create new,
unintended barriers to care provided by PAs unless special attention is
devoted to ensuring that PAs are fully integrated into the medical home
and chronic care coordination models of care.
PAs always work with physicians, but in many rural and other
underserved areas, the PA is the face of health care. The PA is the
medical professional who develops the care plan and coordinates the
care. PAs also own and/or provide care in rural health clinics and
other settings that may serve as the patient's primary medical home. It
is critical that the medical home and chronic care management models of
care recognize the ability of PAs to develop and manage medical care
plans, without unnecessary limitations. And, it is important that PA-
run clinics and practices be eligible for reimbursement from the new
models of care.
Medicare Physician Payment Reform
It is critically important that health care reform legislation
contains a long-term solution to Medicare's physician payment system.
The current system is simply not sustainable, nor is it fair to the
health care professionals who provide medical care for Medicare
beneficiaries.
American Association of Colleges of Pharmacy
Dear Chairmen Miller, Waxman, and Rangel:
The American Association of Colleges of Pharmacy (AACP) is pleased
with the overall intent of the legislative discussion draft released by
your three Committees last week. Your combined commitment to increasing
all Americans' access to high-quality health care is certainly
commendable. The legislation's focus on opportunities for preventing
unnecessary illness and keeping our citizens well is an approach that
has been too long in coming. Our intent is to work with you and the
Committees to make sure this opportunity becomes a reality.
The issue of how we will pay for reorganizing our health care
delivery system is certainly important, but it is beyond the scope of
our organization's mission. We are fully prepared to assist you in
creating a reorganized system that makes the best use of the research,
teaching, and service mission of pharmacy faculty. Pharmacy faculty can
be of particular assistance, especially in the areas of quality
improvement and measurement, wellness and prevention, workforce
preparation, and the necessary research that establishes the evidence-
base to improve the quality of care patients receive.
Affordable Health Care Choices
We encourage you, in both public and private plans, to make any and
all efforts to ensure that patients have access to team-based, patient-
centered care as discussed in the 2003 report of the Institute of
Medicine, ``Health Professions Education: A Bridge to Quality.''
Quality improvement is predicated on the needs of the patient to be
addressed by a community of care. This approach to care delivery also
reflects another IOM report from 1994 on primary care that was authored
due to the growing complexity of and interdependencies within health
care delivery.
How care delivery is organized is just as important as what care is
included in an essential benefits package, whether in a public or
private plan.
Therefore, we strongly encourage you to create opportunities for
care to be delivered in a collaborative manner, making best use of the
knowledge and skills of all health professionals (acting within their
individual scopes of practice) focused on the needs of the patient, not
the payment expectations of the providers.
This approach will go a long way toward increasing access to the
primary type of care, including medication therapy management, that all
patients need, especially the chronically ill and elderly. This team-
based approach has been successfully employed in several State Medicaid
programs including Community Care of North Carolina and integrated
health care systems such as InterMountain Health in Colorado and
Geisinger Health in Pennsylvania.
Academic pharmacy is actively engaged with the types of delivery
system examples above, as well as a host of others including those
within family physician offices, ambulatory clinics associated with
academic health centers, and increasingly with federally qualified
health centers through a patient safety collaborative administered by
the Health Resources and Services Administration. The research of
pharmacy faculty forms a significant evidence-base supporting
collaborative, team-based approaches to care as the standard of care.
This evidence-base readily leads to the development of quality measures
for plan and provider incentive strategies, important elements in
moving toward a reorganization of care systems.
Medicare and Medicaid Improvements
Medicare beneficiaries and Medicaid eligibles form a significant
population that benefits from strong care coordination. Regardless of
whether the difficulties of accessing care are due to frailty or
ability to pay, efficient and effective management of both clinical and
community-based services is essential to help improve outcomes and
reduce overall costs.
We strongly support provisions within the discussion draft that
direct care to be delivered in a much more comprehensive and
coordinated fashion.
We ask that these provisions more stridently state the need for
care coordination, especially at transitions of care and for the
chronically ill taking multiple medications, to include medication
therapy management services.
With medications contributing a significant cost to any health
plan, including Medicare and Medicaid, the integration of clinical
pharmacy services, including medication therapy management, across the
continuum of care is integral to improving medication-associated
outcomes and controlling costs.
We recommend that your proposed medical home pilot be expanded to
be the standard of care for both Medicare and Medicaid patients.
This coordinated, team-based approach has the ability to focus care
on the needs of a disease-specific patient population as well as a
general community/service area. This is due to the recognition that
including the appropriate community-of-care providers focused on the
needs of the patient population being served improves health outcomes
and can reduce costs associated with care delivery. Academic pharmacy
is actively engaged with these policy concepts. Faculty are currently
working with hospitals to reduce readmissions due to medication-related
problems that should have been addressed at discharge. Pharmacy faculty
work with family physicians, their patients, and their patients'
caregivers to improve the management of prescribed medications, which
improves medication-related outcomes and prevents medication-related
problems that may lead to emergency room visits or hospital admissions.
This team-delivered care can be accomplished within a variety of
contexts including those that utilize telehealth which makes your
interest in increasing the access to telehealth all the more important
to remain in final legislation.
Elderly and chronically ill populations account for a significant
cost to any health plan or delivery system and assistance with the
management of their medication use has been shown to improve health
outcomes, reduce unnecessary care across the continuum of care, and
reduce the overall cost of care delivery.
AACP supports the establishment of a Center for Comparative
Effectiveness. We recommend that the national research agenda include
the comparison of practice patterns.
This is important in developing the evidence-base associated with
support for team-based, patient-centered approaches to care delivery.
For example, team-based, patient-centered care is important in
improving the management of the chronically ill and patients at
transitions of care. The results of this type of research are much more
amenable to the development of quality measures to assist providers in
the delivery of evidence-based care.
We ask you to clearly state that the results of comparative
effectiveness research should not necessarily be focused on payment
issues that have the potential to reduce provider participation in
research networks required for this type of work.
Inclusion of all the stakeholders in the development of this
national research agenda will be important. Therefore, legislative
language should clearly state that all health professionals, not just
physicians, are expected to have a seat on the Commission.
We strongly support the expansion of prevention and wellness
programs and services into the Medicare and Medicaid programs.
The Committees should stress the importance of increasing access to
all public health interventions across a wide range of health
professionals, including pharmacists. Expanded access to prevention and
wellness programs and services through a wide range of health
professionals increases the chances that a patient will make the
behavioral change necessary to become more responsible for their
individual health and that of their community.
Public Health and Workforce Development
Increasing access to high-quality care at an affordable price will
require a substantial reorganization of our health care delivery
system. As we know, the United States spends more and receives less
compared to other industrialized nations when it comes to many common
population health measures. The final division of the discussion draft
does little to support the reorganization of health professions
education toward the creation of professionals prepared to collaborate
and provide culturally competent, team-based, patient-centered care,
supported by informatics.
The Committees could do much more toward this end by reauthorizing
the Public Health Service Act Title VII health professions programs and
requiring all the programs to be interprofessional in nature to the
extent possible.
Until the Federal financial support for health professions
education is focused on meeting the IOM recommendations stated in its
2003 report, ``Health Professions Education: A Bridge to Quality,''
efforts to move toward an interprofessional health professions
education model will languish since Federal policy may give the
impression that it is not of high importance.
The Institute of Medicine defined primary care back in 1978,
revised the definition in 1984 and again in 1994. The rationale for the
1994 revision was to create a definition ``that recognizes two
important trends: the greater complexity of health care delivery and
the greater interdependence of health professionals.'' http://www.
nap.edu/openbook.php?record_id=9153&page=5.
The 1994 IOM definition reflects primary care as a concept
incorporating the ``main, chief, or principle'' aspects of health care
delivery and moves beyond the ``first-contact'' concept that suggests
an initial interaction and then triage to the appropriate level of
care. http://www.nap.edu/openbook.php?record_id=9153&page=9.
``Primary care is the provision of integrated, accessible health
care services by clinicians who are accountable for addressing a large
majority of personal health care needs, developing a sustained
partnership with patients, and practicing in the context of family and
community.'' IOM 1994 http://www.nap.edu/openbook.php?record
_id=9153&page=15#p20003779ddd0000023.
Over several decades, the United States Congress, recognizing the
benefit to both individuals and communities of increased access to
primary care, passed key legislation that authorized programs intended
to increase access to primary care. The need to provide rural and
underserved communities access to primary care was the rationale for
establishing the National Health Service Corps. Increasing the supply
of primary care providers created programs authorized under Title VII
of the Public Health Service Act. Both of these Federal programs are
focused on who is eligible to provide primary care. The legislative
language makes primary care the responsibility of certain health care
professionals. Both of these programs were established prior to the
widespread appreciation, supported by IOM primary care definition
revisions, of the multidimensional aspect of primary care.
The effectiveness of these programs is further questioned in light
of the 2003 IOM report that indicates that health care professionals
competent in team-based, patient-centered practice may be one
opportunity to close the quality chasm. The National Health Service
Corps program, with its placement of those health care professionals
deemed primary care providers through statute, makes no attempt to
recognize the multidimensional aspect of primary care. It focuses
solely on a health care professional. The negative aspects of this
focus can and frequently does leave the designated provider isolated
both from providers of his or her own profession, but more importantly,
from those providers with whom he or she might establish a team-based,
patient-centered approach to primary care delivery in keeping with the
IOM's current definition of primary care.
There are Title VII programs that, at least legislatively,
recognize that the complexity of our health care system creates
significant need for health care professionals to be educated through
interprofessional approaches that establish team-based care as an
acceptable and appropriate expectation upon graduation.
The area health education centers (AHEC), geriatric education
center (GEC), and HIV education center programs all address an area of
national significance--primary, geriatric and HIV care, respectively--
the quality of which is improved by increasing the competence of health
professions students to practice as teams focused on the needs of the
patients for which they provide care. What is of concern is that the
currently operating programs that Congress established to address past
issues of national significance are not being readily considered as
opportunities, through reauthorization and recommitment, for addressing
new (or incompletely addressed) issues that impact the ability or
willingness of our Nation's health professionals to provide recommended
care more than 50% of the time that is evidence-based, culturally
appropriate, and that recognizes both individual and community
determinants of the patients health status.
Therefore, the Committees should first consider how existing health
professions education programs, such as those authorized within Title
VII, could, through reauthorization and recommitment, more readily
address the development of team-based approaches to care, as well as
test the assumptions of the benefits of this approach to quality, cost,
and access.
One recommendation would be for all Title VII programs, to the
extent possible, support interprofessional education of health
professionals that is focused on team-based, patient-centered
approaches to care.
The focus of that care could easily address health care issues that
remain important to the Nation as a whole, such as primary, geriatric,
and HIV care, as well as addressing new issues such as chronic illness,
medication therapy management, and wellness and prevention. Such an
approach would reduce the opportunity for duplication of programmatic
intent, increase buy-in to change from existing stakeholders, and build
a team-based approach to policy development between current program and
new proposal stakeholders.
Academic pharmacy is a rich resource that has provided much of the
medication-related evidence-base used to support many of the provisions
within the proposals offered by your Committees, as well as those in
the Affordable Health Choices Act. Pharmacy faculty remain committed to
working with your Committees to ensure that new evidence is readily
transmitted to policymakers and health care professionals so that our
Nation's health care system continues to meet the needs of the patients
it serves. Please do not hesitate to contact me to discuss how AACP and
its members can be of assistance.
Sincerely,
William G. Lang IV, MPH
VP Policy and Advocacy
American Association of Colleges of Pharmacy
Statement of the American Farm Bureau Federation
The Ways and Means Committee, Energy and Commerce Committee and
Education and Labor Committee recently released a health care reform
discussion draft. The draft document suggests bold new programs such as
a health insurance exchange, a public health insurance option, a
personal responsibility coverage requirement and an employer
requirement to provide coverage. Many items in the discussion draft are
of interest to our Nation's farmers and ranchers.
Farm Bureau supports health care reform that improves and builds on
our current health care delivery system. We believe that health care is
primarily the responsibility of individuals and support efforts to
provide all Americans with access to quality and affordable health
care. We support the promotion of personal wellness, fitness and
preventive care as basic health goals. We oppose compulsory national
health insurance and any national health plan and favor instead tax
incentives and market reforms that will expand health care coverage.
Farm Bureau supports direct government financial assistance for those
unable to pay for their own health care.
Rural Health Care
Farm Bureau believes that any health care reform must address the
disparities that exist between rural and nonrural communities. There
continues to be a critical shortage of health care facilities and
qualified health care professionals in rural areas. According to the
Department of Health and Human Services, 20 percent of Americans live
in rural areas while only 9 percent of physicians in America practice
in those settings. In addition, many rural residents depend on small
rural hospitals that face unique health care delivery challenges due to
their size and case-mix. Transportation needs are also pronounced among
rural residents, who face longer distances to reach health care. As a
result, data shows rural residents are less likely to receive
recommended preventive services and report, on average, fewer visits to
health care providers.
Farm Bureau supports equitable Medicare payment rates to rural
hospitals and physicians as one way to preserve and expand health care
services in rural areas and supports rural access protection provisions
contained in the discussion draft. Prior to 2003, Medicare
reimbursements for rural providers were lower than those for urban and
suburban providers disadvantaging those who live in nonmetropolitan
areas. Since then, the inequity has been corrected through a series of
temporary legislative fixes that need to be made permanent. This is
especially critical if Medicare reimbursement rates become the basis
for establishing payments for other service providers and health care
professionals as proposed.
Farm Bureau believes that Health Information Technology (HIT) has
the capacity to transform our Nation's health care delivery system into
a higher-quality more efficient system. The discussion draft contains
an important new initiative to expand and enhance Medicare beneficiary
access to telehealth services. Such programs will aid the many rural
Americans who are unlikely to enjoy the benefits of HIT due to the
current lack of access to advanced telecommunications services in their
communities. We caution against provisions that would penalize rural
areas that are technically unable to rapidly employ health Internet
technology.
Farm Bureau supports government programs and incentives that
encourage health care professionals to practice in areas without
adequate medical care, many of which are in rural America. We support
provisions contained in the draft proposal that would increase
scholarships and loans to students who agree to provide health care
services in medically underserved areas after graduation.
Individual Requirements
Health care reform must not only address access but also cost.
Farming and ranching businesses operate on tight profit margins and are
cyclical, with unprofitable years nearly as common as profitable ones.
Health insurance costs are an ongoing and significant expense for
farmers and ranchers and for this reason we oppose compulsory health
insurance in the form of an individual coverage mandate.
A high proportion of farmers and ranchers are self-employed
individuals, and as such purchase their own health insurance. We are
concerned that prescribing national minimum benefit requirements will
increase the price of insurance. When coverage is out of reach because
of cost, imposing a 2 percent tax on adjusted gross income will only
create greater financial hardship for our Nation's farms and ranches
and the families they support. The discussion draft allows individuals
and their dependents to keep current coverage and indefinitely continue
their health insurance policies allowing them the option to continue
coverage that they can currently afford.
Farm Bureau supports tax incentives that help individuals pay for
health care and afford health insurance for their families. We
recommend continuation of the tax deduction for health insurance
premiums paid by the self-employed and, because many farmers and
ranchers pay as much or more in self-employment taxes as they do in
income taxes, we recommend that a deduction also be allowed against the
15.3 percent self-employment tax. We support eliminating the 7.5
percent adjusted gross income threshold so that all medical expenses
are deductible and expanding tax incentives for health savings accounts
(HSAs). We are opposed to proposals to limit the deductions for HSAs
and out-of-pocket medical expenses.
Employer Requirements
Any health care reform passed by Congress must not unduly burden
farm and ranch businesses who employ others or impose costs that they
cannot afford. As stated before, farming and ranching businesses
operate on tight profit margins and are cyclical. Requiring employers
to provide insurance coverage or pay a tax equal to 8 percent of
payroll will put added financial strain on already struggling farm and
ranch businesses. Any new tax is troubling because, like insurance
premiums, payment will be due whether or not a farm or ranch business
turns a profit. For this reason, we do not support an employer mandate
to ``play or pay.''
Farm Bureau supports tax credits to help farmers and ranchers who
struggle to provide insurance for their employees. The discussion draft
proposes an important employer exemption for certain yet-to-be-defined
small businesses and would create tax credits for small employers to
help with insurance costs. It also contains an important 5-year grace
period for current group health plans. Farm Bureau supports both a
small employer exemption and tax credits and asks that small farm and
ranch employers not be disqualified from eligibility because they hire
seasonal or temporary workers.
Many farms are small businesses with large labor needs for only a
very short period of time. For example, a small farmer with 50 acres of
cherries might have no full-time employees other than family members
and yet hire 60 or 70 workers for 2 or 3 weeks per year. It will be
counterproductive to the goal of expanded coverage to deny tax credits
to small businesses that temporarily exceed employment thresholds. For
small farm and ranch businesses, the administrative and financial
burden of providing a health care program for temporary or seasonal
workers would be truly overwhelming.
There is also uncertainty about whether or not affordable short-
term coverage will be available for temporary or seasonal agriculture
workers, some of whom may be employed on multiple farms or ranches for
just a few days each. In cases where a seasonal or temporary worker has
multiple employers, there are questions about who would be responsible
to purchase health insurance and how coverage would be coordinated to
avoid duplication and unnecessary expense. Farm Bureau believes
seasonal and temporary workers should be exempt from employer provided
health coverage requirements.
Market Reforms
The discussion draft proposes the creation of a health insurance
``exchange'' to make it easier for individuals and employers to compare
and purchase insurance products. Farm Bureau believes that an exchange
will increase the availability, quality and affordability of health
care without the creation of a public insurance option. Farm Bureau
supports efforts to foster health care competition but believes that
such an exchange should not preempt State regulation or the authority
of States to determine coverage requirements.
Another market reform supported by Farm Bureau is the creation of
voluntary regional insurance purchasing cooperatives to expand the
availability of insurance coverage. Pooling arrangements would allow
business owners to join together to purchase health insurance at lower
rates, expand health care options and lower administrative costs. It is
important to Farm Bureau that such cooperatives remain subject to State
regulation.
Sugar-sweetened Beverage Tax
Farm Bureau is concerned about the proposal to use a sugar-
sweetened beverage excise tax to fund health care reform. We oppose
taxes on any agricultural commodity to fund health care programs. The
obesity problem in this country is rooted in many factors, including a
lack of exercise and poor nutrition education. Taxing sugar-sweetened
beverages is an oversimplified attempt to address a health issue that
goes far beyond consumption.
Statement of the American Society for Clinical Pathology
On behalf of the American Society for Clinical Pathology (ASCP), we
commend you and the Committee for its leadership and efforts to reform
health care delivery in America. ASCP concurs with you about the need
and urgency to reform the way health care is provided in the United
States. Moreover, it is imperative that efforts to reform health care
address many of the long standing inefficiencies and inequities that
have plagued our health system for years.
The ASCP is a 501(c)(3) nonprofit medical specialty society
representing 130,000 members nationwide. Our members are board
certified pathologists, other physicians, clinical scientists,
certified medical technologists and technicians, cytotechnologists, and
educators. ASCP is one of our Nation's largest medical specialty
societies and is the world's largest organizations representing the
field of laboratory medicine and pathology. As the leading provider of
continuing education for pathologists and medical laboratory personnel,
ASCP enhances the quality of the profession through comprehensive
educational programs, publications, and self-assessment materials.
ASCP would like to begin by offering some comments on self-
referral, an issue that has received some attention in discussions
regarding what should be involved in health care reform but not with
the breadth and scope we believe is necessary. Following these
comments, we offer ASCP's views on a number of the policies options
that have been brought up in congressional discussions surrounding
health care reform.
Self-Referral
ASCP firmly believes that health care reform discussions to date
have not adequately explored the impact of self-referral on the
increasing utilization of medical and health care services and the need
for Stark law reform, specifically as it relates to the exclusions
contained within the law's in-office ancillary services exception
(IOASE). ASCP is very concerned about the proliferation of a number of
arrangements designed to enable referring providers to profit from
their referrals. Over the last few years, a number of physician group
practices have increasingly sought to exploit ``so-called'' loopholes
in the IOASE to capture the reimbursement for anatomic pathology
services.
Last year, CMS inadvertently opened the door for additional self-
referral billing abuses. We have seen over the last few years a
significant increase (41 percent between 2002 and 2007) in charges for
and utilization of anatomic pathology services (CPT code 88305). We
believe much of this increase is caused by self-referral. In fact, it
was CMS' concern about abusive billing practices for anatomic pathology
services that prompted a recent multi-year effort to revise the
agency's anti-markup rule.
As CMS noted in its proposed rules implementing the Stark I law,
self-referral, markups and certain abusive contractual arrangements can
distort rational medical decisions, lead to the overutilization of
health care services and higher medical costs for patients and third-
party payers, and ``cause unfair competition by freezing out
competitors'' unwilling to engage in such practices. These arrangements
can also adversely affect patient welfare as well as undermine patient
trust in the medical profession. Patients most likely to be affected by
these inappropriate practices are often uninsured and those covered by
private payers that have not adopted safeguards similar to those
designed to protect the Medicare program from abusive billing
practices.
In 2007, the Department of Health and Human Services Office of the
Inspector General (OIG) launched an investigation into anatomic
pathology-related self-referral. OIG published three audits of
physician group practices to examine their utilization of anatomic
pathology services after entering into business arrangements to capture
pathology reimbursements. These arrangements typically utilized a ``pod
lab'' or other contractual joint venture arrangement to obtain the
revenues intended for the performance of the technical and professional
components of anatomic pathology services.
The OIG audits reveal an alarming increase in the utilization of
anatomic pathology services once these group practices were able to
capture the pathology-related revenues. In the year after the three
urology practices entered into arrangements allowing them to profit
from their referrals, their utilization of pathology services increased
699%, 230%, and 26%, respectively. One urology group practice increased
its per patient utilization of pathology services from one unit of
service to almost 9 units of service. With Medicare reimbursing the
examination of a biopsy speci-
men at about $110 per specimen this represents a cost increase of
almost $900 per patient.
In addition, the OIG audits reveal that all of the audited
physician groups billed significantly more biopsies than the area
Medicare carrier paid on average to other providers--124%, 65%, and
58%, respectively. It is difficult to justify such significant
increases in utilization over a 2-year period on changes in ``clinical
practice,'' considering the comparison with the billing practices of
other area providers.
When CMS first started to examine these billing abuses, much of its
efforts were focused on ``pod labs.'' These arrangements were described
in a 2005 Wall Street Journal article. Since then, and due in part to
CMS' initial efforts to curtail these abusive arrangements, new
arrangements known as in-office histology laboratories have been
established by a number of physicians ordering anatomic pathology
services to enable them to exploit the IOASE under the guise of
``enhanced patient care.''
The IOASE was intended to allow referring physicians to bill for
services that are provided during a patient visit. Anatomic pathology
services, however, are not ancillary services in that the proper
processing of biopsied tissues is time consuming and cannot be
performed during the patient visit. As anatomic pathology is not truly
an ancillary service, ASCP strongly encourages the Committee to remove
anatomic pathology from the Stark Law's IOASE.
Physician Quality Reporting Initiative:
Allowing Participation in a Maintenance of Certification Program
ASCP strongly supports amending the Physicians Quality Reporting
Initiative (PQRI) to allow physicians participating in maintenance of
certification (MOC) program to receive PQRI incentive payments. As a
certification agency for nonphysician clinical laboratory professionals
we can attest to the important role that such programs can have on
quality. Another reason we believe that allowing for participation in a
MOC program is warranted is the concern that inter-specialty payment
differentials could steer the next cadre of physicians away from
specialties that lack approved quality measures, raising the prospect
of shortages within these specialties. Given the difficulty of
developing quality measures for all physician specialties and
subspecialties, we believe allowing for participation in a MOC program
is appropriate.
ASCP supports incentive payments for physicians participating in
initiatives to improve quality, such as the PRQI. While we have
concerns about what we believe are design flaws with the program, we
believe that patient care is best enhanced by the extension of the PQRI
incentive payments. One of our concerns with the PQRI relates to those
physician specialties or subspecialties that are not served by an
approved quality measure, such as molecular pathology. Consequently the
payment structure of PQRI can adversely affect the reimbursement
prospects of certain physicians through no fault of their own. We do
not believe that this is fair, especially since options under
consideration by Congress for the incentive program call for cutting
physician reimbursement in 2013-2014 for those physicians that do not
participate in the program. Allowing physicians to participate in MOC
programs removes this problem with the PRQI.
Transparency and Evidence-Based Decisionmaking for Imaging Services:
Transparency in Self-Referrals
ASCP is concerned about the limited scope of proposals to require
physician disclosure of financial interest in certain imaging services
provided to patients through the IOASE. ASCP believes that it is clear
that abuse of the IOASE is occurring. While Congress' interest on this
issue seems to be focused largely on self-referral related to imaging
and physician-owned hospitals, self-referral, especially as it relates
to abuse of the IOASE, is a growing problem for a number of physician
services.
If Congress truly wishes to rein in utilization increases resulting
from self-referral, it must act to amend the in-office ancillary
services exception to remove those services from the list that are not
truly ancillary services, such as anatomic pathology.
Promotion of Adherence to Appropriateness Criteria for Imaging
Services:
Transparency in Self-Referrals
ASCP appreciates congressional interest and efforts to curb abusive
billing practices, such as abuse of the IOASE. While we appreciate the
intent of this proposal to address self-referral of imaging services by
providing lower differential payments to ordering providers, this
proposal will ultimately fail to stop billing abuse, overutilization,
and its accompanying increases in health care costs.
So as long as the differential payment still provides the ability
for a referring provider to profit from his or her referrals, self-
referral will likely continue. We believe that it would be more
effective to reexamine the Stark law's IOASE or to reexamine
certification of need requirements. Some of the services that are
currently listed in the in-office ancillary services exception, such as
pathology, are not truly ancillary services--services that can be
performed on the patient during a patient visit. For example, anatomic
pathology services require extensive and time-consuming processing that
prevents the analysis of biopsied tissue during a patient visit. We
strongly recommend removing anatomic pathology from the IOASE.
Chronic Care Management Innovation Center
With regard to proposals to establish a Chronic Care Management
Innovation Center at CMS, ASCP is concerned about proposals to utilize
a ``standard process that would be developed to evaluate the design and
performance of payment models under consideration for broad-scale
testing.'' Our concern here is that the criteria that may be most
appropriate to evaluate one demonstration project, may not be
appropriate for other projects. We are particularly concerned about the
criteria that may be adopted to assess quality during a demonstration.
For example, during one recent demonstration project, CMS relied on a
measure akin to accreditation status, which fails to allow for a
quantitative assessment of the facilities performance during the course
of a demonstration project.
The Sustainable Growth Rate
ASCP believes that the Sustainable Growth Rate (SGR) should be
repealed this year and replaced with an updated system that reflects
increases in physicians' and other health professionals' practice
costs. A realistic budget baseline for future Medicare payment updates
that accurately reflects the anticipated costs of providing physicians
with positive updates under a new update system in lieu of SGR-related
cuts should be incorporated into the Federal budget.
Should Congress and the Administration decline to repeal the SGR
this year, it should adopt a transitional approach that does the
following:
Establish by law a roadmap for complete replacement of
the SGR by 2015.
Provide stability and predictability with positive,
funded updates from 2010-2015 set by statute and linked to the Medicare
Economic Index (MEI) for each year until a replacement takes effect.
Establish a realistic baseline for Medicare spending on
physician services that eliminate the assumption that SGR-driven cuts
will be implemented, thereby greatly reducing the score assigned to
legislation to repeal the SGR.
Use regulatory authority to remove physician-administered
drugs from the SGR from 1996 on to help reduce the cost of repeal.
Use regulatory authority to adjust the Medicare Economic
Index to include all the costs of a current medical practice and use
realistic productivity assumptions.
Encouraging Health IT Use and Adoption in Support of Delivery System
Reform Goals
Laboratory medicine and pathology is responsible for 60-70 percent
of all patient diagnoses and treatments, and yet it is responsible for
less than 2 percent of overall Medicare spending. Pathology and
laboratory medicine's contributions are regularly overlooked. Pathology
and laboratory medicine, along with pharmacy and imaging, is one of the
areas of health care best positioned to contribute to Health
Information Technology systems and Electronic Health Records (EHRs).
Much, if not most, of the data that will likely be contained in patient
EHRs will be pathology and laboratory test data.
We suspect that much of the EHR records submitted by hospitals to
qualify for Medicare EHR incentive payments will come from the hospital
clinical laboratory, possibly even when the hospital has contracted out
for much of its laboratory services. Moreover, since an independent
clinical laboratory owned and operated by a pathologist appears to be
eligible for the Medicare EHR incentives, it seems odd, and unfair,
that other independent clinical laboratories would not be able to
qualify for the incentive program. We believe that this could slow the
adoption of HIT/EHR. As a result, ASCP encourages the Committee to
allow all independent clinical laboratories to qualify for EHR
incentive payments.
Physician Payment Sunshine
ASCP supports transparency in the relationship between providers
and manufacturers; however we do not believe that this proposal has
sufficient breadth. ASCP believes that physician self-referral is a
major issue and one that is responsible for a large share of the
increases in health care costs, particularly with respect to increased
utilization of health care services per patient. As a result, ASCP
believes that provider submission of payment and ownership information
should be extended to physicians ordering medical services through
other physicians, providers, or entities with or in which they have an
ownership or financial interest.
One of our concerns has been the increasing utilization of anatomic
pathology services by physicians in a position to profit from (markup)
their referrals. We suggest that as part of the reform process, CMS be
required to revise its Medicare claims forms to better capture
information that would reveal when providers or entities, such as
independent clinical laboratories, are billing for services by a
provider or group practice that has an ownership or other financial
interest in that laboratory or entity. We believe that this latter
proposal will help shed more light on the problems that can be caused
by pod labs and in-office histology (technical component) laboratories,
both of which can facilitate physician self-referral. Moreover, these
entities may be responsible for the significant increases in charges
and utilization of anatomic pathology services (CPT 88305).
Developing a National Workforce Strategy
ASCP believes there is an urgent need to develop a national
workforce strategy. ASCP shares the concerns expressed by the American
Association of Medical Colleges (AAMC) that physician shortages could
impede our Nation's health care reform efforts. Recent findings from
AAMC's Center for Workforce Studies project that an enrollment increase
of 6,000 in medical and osteopathic schools between 2002 and 2013 would
not be enough to ameliorate the estimated shortage of as many as
100,000 physicians or more in the coming years. Furthermore, medical
school enrollment increases will not lead to net increases in the
physician supply without a corresponding increase in residency training
positions.
In addition, ASCP does not believe sufficient attention or funding
is being provided for documented allied health professions shortages,
such as for clinical laboratory professionals. A recent report on
allied health personnel shortages (including nursing) in California was
conducted by Health Workforce Solutions for the Campaign for College
Opportunity. The report concluded that the profession experiencing the
greatest need was technologist-level laboratory practitioners.
Unfortunately, over the last few years many of the accredited clinical
laboratory programs training our next cadre of laboratory professionals
have closed, further eroding our Nation's ability to address staffing
shortages. With laboratory professionals responsible for performing the
laboratory tests that account for 60-70 percent of medical diagnoses
and treatments, increased government attention to this shortage is in
the Nation's best interests.
Health Insurance Benefit Options
We urge Congress to make sure that when legislating the benefits
required for insurance plans, that the list of covered services
includes clinical laboratory diagnostic testing and screening. It is
necessary to include laboratory services to ensure that all insurance
plans provide coverage for these services. Laboratory services are
essential for prompt and effective patient diagnoses and treatments.
Further, clinical laboratory testing is a key component of preventive
medicine and failure to specifically cover these services could
undermine the Committee's previously stated goals to emphasize
prevention and wellness.
Promotion of Prevention and Wellness in Medicine
Given the importance of laboratory testing to early, more
affordable diagnoses and treatments, we believe it is necessary to
specifically add the performance of appropriate clinical laboratory
testing as a central component of a Medicare comprehensive health risk
assessment and personal prevention plan.
Incentives to Utilize Preventive Services and Engage in Healthy
Behaviors
Regarding congressional proposals to remove or limit cost-sharing
(copayment, deductible or both) for preventive services covered under
Medicare and rated ``A'' or ``B'' by the U.S. Preventive Services Task
Force (USPSTF), we do not believe that USPSTF should solely be tasked
with such determinations. Other groups such as the Advisory Committee
on Immunizations Practices, Institutes of Medicine, the Centers for
Disease Control and Prevention, National Institutes of Health, medical
specialty associations, patient care groups, scientific societies and
the Clinical Laboratory Improvement Advisory Committee should be added.
We note that the USPSTF's recommendations do not call for annual
screening of individuals 30 and older who are at risk for having or
developing type 2 diabetes mellitus or screening all patients with
diabetes mellitus for chronic kidney disease annually, both of which is
recommended by the American Association of Clinical Endocrinologists.
We believe that such screening is justifiable not only from a proper
patient care perspective but also on cost benefit grounds.
Moreover, we believe that it would be beneficial for
recommendations from the USPSTF and the aforementioned groups to be
reviewed and approved by the National Quality Forum consensus standards
process for inclusion in CMS' pay-for-performance incentive program.
ASCP also believes that patient care would be enhanced by
broadening the current composition of the USPSTF, which is comprised
solely of primary care physicians, to include other specialties and
public health professionals.
Adjusting Reimbursement for High-Growth, Over-Valued Physician Services
ASCP believes that physician and other health care services, such
as clinical laboratory tests, should be rationally and adequately
valued. While the proposal to adjust reimbursement may have merit, we
have concerns about several congressional proposals that have received
attention. Unless reform clearly allows for readjusting reimbursement
for those services that are currently undervalued, these reforms will
lack rationale and have the potential to adversely affect access to
important health care services. An effort that focuses solely on those
services that are overreimbursed could limit access to essential
services as providers may elect not to provide those services that are
underreimbursed.
Modifying Beneficiary Contributions:
Making Beneficiary Contributions More Predictable
ASCP is concerned about the discussions to apply a 20 percent copay
to all Part B Medicare services, such as clinical laboratory services.
We believe applying a copay to clinical laboratory services is ill-
advised for several reasons. First, because laboratory services are
ordered by the patient's physician and not the patient, a copay on
laboratory services would not likely result in sufficient savings,
which is part of the rationale for a copay. Additionally, laboratory
services are a key component of preventive medicine and applying a
copay to these services could undermine the Committee's previously
stated goals to emphasize prevention and wellness. It would shift an
entirely new cost burden, approximately $24 billion, to Medicare
beneficiaries.
We note that the Institute of Medicine (IOM) considered this issue
as part of its 2000 report Medical Laboratory Payment Policy and noted
that ``cost sharing could create a barrier to appropriate use of
laboratory services for chronically ill and financially disadvantaged
beneficiaries, which could ultimately lead to greater program costs if
deferred testing delays diagnosis and leads to more costly treatment.''
IOM recommended against imposing a copay on clinical laboratory
services, concluding that because of the administrative costs and
burdens . . . , cost sharing for laboratory services is inconsistent
with its goals for a laboratory payment system that ensures beneficiary
access and maintains administrative simplicity.''
__________
ASCP appreciates this opportunity to provide comments on the
Committee's efforts toward health care reform. If you have any
questions about our comments, please do not hesitate to contact Matthew
Schulze, ASCP's Senior Manager for Federal and State Affairs, at (202)
347-4450 or by email at [email protected].
Statement of Paul Crist
Americans for Medicare in Mexico, A.C. is an organization formed in
Mexico by American citizens living either full-time or part-year in
Mexico, who support and promote a Medicare Demonstration Project in
Mexico. These individuals continue to vote and participate in other
civic activities as U.S. citizens, as allowed under State and Federal
elections laws.
The need to cap spending and to find innovative reforms that reduce
Medicare program costs is well documented. Actuarial data predicting a
looming deficit and eventual insolvency of the Medicare Trust Fund make
it ever more urgent to find savings as the percentage of seniors in the
U.S. population increases and health care costs continue to climb.
Based on data from a number of sources, a strong argument can be
made that providing Medicare benefits to eligible beneficiaries in
Mexico would result in substantial savings to the Medicare Trust Fund.
Mexico is home to at least 800,000 American citizens (and many
estimates exceed 1 million). Based on recent demographic studies, over
200,000 of these people are 60+ years old, and thus at or near
eligibility for Medicare benefits. In addition to these full-time,
year-round seniors living in Mexico, an estimated 40% to 60% more live
in Mexico for part of the year (under tourist visas).\1\
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\1\ International Education and Research Center. Preliminary Report
#1. U.S. Expatriates Residing in Mexico. Mexico DF, 2008.
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Besides a moderate climate and warm and welcoming Mexican people,
the cost of living is attracting thousands of retirees south of the
U.S. border every year. In most of the well-known, popular, and safe
American communities in Mexico, such as San Miguel de Allende, Lake
Chapala, and Puerto Vallarta, retirees can live comfortably on a modest
income. Even a U.S. Social Security check is enough to get by on.
According to one survey of expatriate seniors, the median household
income for this group is only US$35,000.\2\
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\2\ Dr. David C. Warner. Medicare in Mexico: Innovating for
Fairness and Cost Savings. University of Texas, LBJ School of Public
Policy, Austin, TX. 2007.
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Lack of access to the Medicare benefits for which they've paid is
the top concern for seniors living in Mexico or considering retiring
there. For seniors who have paid into the Medicare Trust Fund during
their entire working lives, it is unfair to shut them out from coverage
based on where they live. Many choose Mexico because they find it
increasingly difficult to manage on a fixed retirement income in the
United States, so the decision to retire to Mexico is frequently an
economic one.
Further, obtaining private insurance in Mexico is extremely
difficult for anyone with a preexisting condition (which describes most
seniors). Even high cholesterol or blood pressure can shut the door on
insurance coverage. And for those over 75, private insurance is
essentially unavailable in Mexico.
This testimony will show why providing Medicare to eligible seniors
in Mexico is a win-win proposal.
Health care costs in Mexico are a fraction of those in the United
States, while large majorities of seniors report high satisfaction with
the quality of care. Lower-cost health care services provided in Mexico
means Medicare wins by saving money. Seniors in Mexico win, because
they'll have access, where they live, to the high-quality services
they've paid for during their working years.
Medicare Program Cost-Savings Analysis for a Demonstration Project Pro-
viding Medicare Benefits to Eligible Beneficiaries Residing in Mexico
Based on data from a number of sources, a strong argument can be
made that providing Medicare benefits to eligible beneficiaries in
Mexico would result in substantial savings to the Medicare Trust Fund.
According to a report by the Kaiser Family Foundation, Medicare
spent on average $6,255 per beneficiary on health items and services in
2005.\3\ The following chart from that study, based on the CMS Medicare
Current Beneficiary Survey, details the changes in Medicare spending
between 1997 and 2005. It highlights unsustainable cost increases for
Medicare (53.2% increase), for beneficiaries (53.0%), and for third-
party payers (73.4%) during the period.
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\3\ Tricia Neuman, Juliet Cubanski, and Anthony Damico. Medicare:
Revisiting ``Skin in the Game'' Among Medicare Beneficiaries; an
updated analysis of the increasing financial burden of health care
spending from 1997 to 2005. Henry J. Kaiser Family Foundation. February
2009.
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Cost increases for all payers (Medicare, third-party, and
beneficiaries) are at an unsustainable level. Medicare must look to
every available innovation for cost savings for all three payer groups.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
For the approximately 200,000 seniors living in Mexico, the
provision of Medicare benefits would result in substantial savings to
the Medicare Trust Fund, to beneficiaries, and to any third-party
payers providing Medicare Supplementary Policies to this group. It
would also resolve a serious issue of access and utilization of health
care services by this group of seniors, thus improving health outcomes.
In September 2008, the Mexican government published the results of
a survey of expatriate U.S. and Canadian residents in Mexico.\4\ In
that survey, which sought to identify the major obstacles faced by
immigrating foreigners into Mexico, 80% of respondents were U.S.
citizens. Nearly half (48.8%) of respondents were 61 years of age or
older, and 76.5% were retired. Over two-thirds (71.3%) were year-round
residents and 28.8% were part-year residents in Mexico.
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\4\ Dr. Rodrigo Garcia Verdu. Resultados de la Encuesta de
Percepcion entre Ciudadanos Estadounidenses y Canadienses Residentes en
Mexico. Secretaria de Hacienda y Credito Publico; Unidad de Seguros,
Pensiones, y Seguridad Social. September 2008.
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Over half of the respondents (56.8%) indicated some difficulty with
obtaining medical coverage in Mexico, with 17.0% indicating extreme
difficulty. And 66.1% had paid some amount in medical expenses out-of-
pocket, despite having coverage in the United States, while 9% claimed
never to have visited a doctor in Mexico.
Nearly eighty-five percent (84.8%) felt that health care costs were
lower or much lower than in the United States, while 67.3% felt that
service was as good as or better than that available in the United
States. And 82.5% believed that if Medicare benefits were available in
Mexico, more Americans would retire there.
Thus, the overwhelming consensus of expatriate seniors living in
Mexico is that:
Obtaining health care coverage in Mexico is difficult for
non-Mexican citizens, particularly seniors.
Health care costs are substantially lower in Mexico than
they are in the United States.
Quality of care is as good as that available in the
United States.
The perception of seniors responding to this survey, regarding
costs, is supported by solid evidence. Based on our investigations of
health care costs for specific, common medical services and procedures,
the cost of health care in Mexico does not exceed 35% of that in the
United States, and is probably even lower. Obtaining average costs for
medical services is difficult, as prices vary widely both in the United
States and in Mexico, but the following findings make a powerful case
that costs are much lower in Mexico (see charts, below and next page).
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
As the preceding charts show with regards to the cost of medical
services, it is not just the perceptions of expatriate residents that
confirm lower costs in Mexico. Costs range from 70% to 80% lower in
Mexico for common procedures.\5\ And on average for a broad ``basket''
of treatments and procedures, Mexican health care costs certainly do
not exceed 35% of U.S. costs.
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\5\ Prices for these procedures and services are compiled from a
variety of sources, including various online sources and information
provided by individual Mexican and U.S. health care providers. In the
case of major procedures described in the first chart, prices include
estimated post-operative hospital stay. Part of the large difference is
the very high cost of hospitalization in the U.S. relative to Mexico.
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Without doubt, the requirements of additional medical and financial
recordkeeping, certification to international standards and improved
administration will add some costs to Mexican health care providers,
and place some upward pressure on medical services pricing in the
market. However, both the Mexican government and the health care
industry are already pursuing these innovations. Modest cost increases
associated with improved administrative capacity are already a fact in
most urban markets in Mexico.
Even in the unlikely scenario that Mexican prices climbed to 50% of
U.S. prices, the potential for Medicare savings would still be large.
Consider the following:
1. Assume only 20,000 enrollees in a Medicare Demonstration
Project in Mexico.
2. Assume the worst case scenario that Mexican health care costs
climb to 50% of U.S. costs.
3. Using the 2005 Medicare per-beneficiary spending, as shown in
the Kaiser report previously cited.
4. Assume that currently, 64% of Mexico's expatriate seniors are
traveling back to the U.S. for major medical care, but would remain in
Mexico for care if it were covered there.\6\
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\6\ Dr. David C. Warner. Medicare in Mexico: Innovating for
Fairness and Cost Savings. University of Texas, LBJ School of Public
Policy. Austin Texas. 2007.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
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Thus, these calculations show a worst case scenario, in which:
Health care costs in Mexico increased to 50% of U.S.
costs; and
Medicare utilization rates in Mexico are 100% of
enrollees, compared to an estimated 64% now using Medicare by traveling
back to the United States.
Saves $17,524,000 per year, or a 21.9% cost savings to Medicare!
However, the savings are likely to be larger. If enrollees in the
Mexico Demonstration have a greater tendency to seek early diagnosis,
preventive care, and wellness management, a portion of the high-cost
inpatient care they are now obtaining in the United States could be
eliminated. Because seniors in Mexico are currently paying for
outpatient services out-of-pocket, it is almost certain they are now
foregoing early care that would mitigate later inpatient treatments and
procedures. With a Medicare Part B option available in Mexico, more
seniors will seek early interventions, reducing costs and resulting in
improved health outcomes. When hospitalization is required, Medicare
Part A coverage in Mexico will provide the high-quality care that
seniors deserve and Medicare requires, while saving substantial cost.
What is a ``Medicare Demonstration Project?''
Short Answer: A Demonstration Project is the legal name for a
Medicare pilot project, or experiment, in a Medicare program
innovation. Since Medicare has never operated outside the United
States, a Demonstration Project is required to prove that it can be
done. The experiment seeks to prove that it is administratively
feasible; that it will be budget neutral or cost saving; that it will
result in improved health outcomes for participating beneficiaries,
etc.
We are seeking congressional authorization for a Demonstration
Project because the current legislation does not allow for CMS to
implement Demonstration Projects outside of the United States.
More Detail
Historically, Federal policymakers have understood the need to test
new ideas in the complex Medicare and Medicaid programs. Research and
demonstrations projects whether initiated by States, health services
researchers, providers, health plans, CMS, or Congress often lead to
models or reforms available or mandated nationwide.
Therefore, Federal law permits the Secretary of Health and Human
Services to waive certain provisions of the Social Security Act and
associated regulations as needed to conduct demonstration projects in
Medicare, Medicaid, or both Medicare and Medicaid. Waivers are purely
discretionary unless congressional legislation mandates a specific
project.
Medicare Waivers Under Sections 402/222
Under Sections 402/222, the HHS Secretary may waive Medicare
statutes and rules to demonstrate new approaches to provider
reimbursement, including tests of alternative payment methodologies,
demonstrations of new delivery systems, and coverage of additional
services to improve the overall efficiency of Medicare or to improve
health outcomes for beneficiaries. (Sections 402/222 refer to section
402[a] of the Social Security Amendments of 1967, as amended by section
222[a] of the Social Security Amendments of 1972.)
Any organization or individual may propose a Medicare waiver
project. This includes providers, health plans, State Medicaid
agencies, and health services researchers. CMS maintains an open
invitation for outside parties to propose Medicare demonstration
projects and the necessary waivers. However, the bulk of Medicare
waiver-based demo projects are congressionally mandated in legislation
or initiated administratively by CMS. CMS-initiated Medicare
demonstration projects are often developed at the behest of the HHS
Secretary, the White House Office of Management and Budget (OMB), the
Medicare Payment Advisory Commission (MedPAC), or the Office of the
Inspector General.
Unlike many Medicaid waiver-based projects, most Medicare waiver
projects tend to be genuine demonstrations projects with a careful
research design and evaluation methodology.
Once approved, Medicare waiver projects are administered by CMS
either directly, through contractors (e.g., Medicare administrative
contractors, Medicare Advantage plans), or (rarely) through States.
Except for operational waivers, CMS evaluates each demonstration
project. Major Medicare demonstrations, including congressionally
mandated projects, are evaluated by independent health services
researchers hired by CMS.
Every proposed Medicare waiver program must be budget neutral to
the Federal Government. That is, Medicare under the requested waivers
must be projected to cost the Federal program no more than expected
spending without the waivers. There is no set methodology--economic or
actuarial--for determining Federal budget neutrality.
Authority to issue waivers under Sec. Sec. 402/222 rests with the
HHS Secretary. However, all Medicare waivers, regardless of size and
scope, require the prior review and approval of the White House Office
of Management and Budget (OMB). OMB may require changes, additional
terms and conditions, or reject the proposed waivers.
Medicare waiver projects initiated by CMS are typically operated
for 3 or 5 years, depending on how much time is needed to test the
policy change. Congressionally mandated waivers vary in length, with
most 3 to 5 years in length and some indefinite.
A Brief Look at Health Quality Indices in the United States and Mexico
In two separate surveys, overwhelming majorities of seniors living
in Mexico report high levels of satisfaction with the quality of care
available in Mexico.\7\ But is that an adequate measure to determine
the quality of available health care in Mexico?
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\7\ Medicare in Mexico: Innovating for Fairness and Cost Savings, a
study led by Dr. David Warner of the University of Texas, LBJ School of
Public Policy; 2007. Also, Resultados de la Encuesta de Percepcion
entre Ciudadanos Estadounidenses y Canadienses Residentes en Mexico, a
survey for the Mexican government, undertaken by Dr. Rodrigo Garcia
Verdu, an economist with the Ministry of Finance.
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Another way to assess quality of care may be a comparison of some
common indices used to compare health care systems and quality among
countries. These comparisons also have certain limitations, however.
For example:
Differences in health care spending per capita can result
in substantial variation in indices of infant mortality, life
expectancy, and other measures. In wealthy countries, a larger portion
of the population may have access to services than in poorer countries,
which can skew per capita spending statistics. Further, higher spending
is not always a guarantee of better health outcomes. Thus, per-capita
spending statistics must be considered in the context of differences in
wealth; differences in income distribution; and cultural differences.
Differences in first-year infant mortality are affected
by the percentage of births in hospitals or attended by trained health
personnel. In a poorer country, more births occur in the home or
unattended by health professionals, skewing the statistics. As a
consequence, infant mortality differences between countries may not
necessarily reflect differences in quality of care when health
professionals are involved.
Similarly, differences in life expectancy may be
reflective of wealth and income disparity, with associated access and
utilization of health care services, rather than real differences in
the quality of care available in the formal health care system.
Nonetheless, commonly used indices can be helpful guidelines in
assessing differences in quality of health care available between
countries, with the proviso that indices are a snapshot that does not
take into account differences in wealth, income, income distribution,
educational levels, and culture. Given the significant differences that
exist between the United States and Mexico on these factors, the
indices reported by the World Health Organization for Mexico compare
favorably with the indices for the United States.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Data from the World Health Organization Statistical Information System Interactive Database of Core Health Statistics for 193 Member Countries
---------------------------------------------------------------------------------------------------------------------------------------------------------
Per Capita Total
Expenditure on
Health Physician Life Expectancy Infant Mortality
(Purchasing Density per Healthy Life (for persons (deaths during
Power Parity in 10,000 Expectancy 2003 born between the first year/
U.S. $) 2006 population data 2005-2010) 2006 1000 live births)
data 2006 data data 2006 data
--------------------------------------------------------------------------------------------------------------------------------------------------------
U.S.A. $6,714 26.0 69.0 79.0 7
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Mexico $756 20.0 65.0 74.0 29
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The above data reveal some interesting things:
A huge difference in per capita total expenditure on
health care has only a small effect on either healthy life expectancy
or life expectancy for those of the current generation being born.
Differences in physician density per 10,000 population
are not large.
Infant mortality rates are much higher in Mexico.
However, certain infant mortality statistics for Mexico are not readily
available:
Rates for attended or hospital births for Mexico are
known to be much lower in Mexico than in the United States. This can be
expected to result in higher infant mortality in Mexico.
Infant mortality rates among the highest wealth and
education quintiles in Mexico are not available. Attended and hospital
births among these groups would be substantially higher than the
national average, and this would likely be reflected in much lower
infant mortality for births among these population sectors.
Infant mortality in Mexico has been reduced
dramatically. In 1990, the rate was 42/1,000 live births. Government
programs increasing prenatal care and education, expanding access to
health services for expectant mothers, and economic growth have
expanded access to health care services generally.
In sum:
World Health Organization indices appear to show that
Mexico is achieving reasonably good health outcomes at very low cost.
Expatriate Americans' perceptions about the quality and
cost of health care in Mexico are very favorable.
Cost comparisons show that health care services cost less
than 35% of those in the United States.
CMS could achieve substantial savings, improve health
outcomes, and increase beneficiary satisfaction by providing eligible
beneficiaries ac- cess to high-
quality care in Mexico via a Medicare Demonstration Project.
Submitted by Paul D. Crist, President,
Americans for Medicare in Mexico, A.C.
Association of Ambulatory Behavioral Healthcare
Dear Mr. Rangel and Committee Members:
The Association of Ambulatory Behavioral Healthcare (AABH) is
providing Public Comment by way of this letter on issues related to the
Health Reform in the 21st Century: Proposals to Reform the Health
System. We thank you for the opportunity to comment on this issue.
The AABH is a national membership organization of Partial Hospital
Programs (PHP) and Intensive Outpatient Programs (IOP), outpatient
hospital treatment providers, free standing treatment providers,
administrators, doctors, psychologists, nurses, program directors, and
front line therapist and support staff who serve as educators, case
managers, political advocates, and treatment providers of individuals
with mental illness and substance use (M/SU).
The AABH feels that the use of Partial Hospital Programs (PHP) and
Intensive Outpatient Programs (IOP) to treat mental illness and
substance use (M/SU) conditions are proven methods of care and money
saving options to inpatient and emergency care for these individuals
and should be considered as the primary option to manage these
conditions effectively and economically.
The AABH supports the PHP and IOP treatment programs concept within
the M/SU continuum of care, flanked by outpatient/assessment services
and inpatient/acute services. Medical necessity guidelines determine
eligibility for PHP and IOP treatment and reflect an acuity level only
slightly less severe than inpatient treatment.
In general, PHP and IOP treatment is effective when deemed
medically necessary by the treating physician to avert inpatient
hospital treatment. The patient must be experiencing noticeable
impairment in self-care and must be unable to fulfill expected life
functions. Patients may also be referred to PHP or IOP as a step-down
from more expensive inpatient treatment to facilitate base-line
functioning. PHP and IOP services are known for their ease of
accessibility, and low cost treatment for individuals with acute and
chronic mental illness.
PHP and the less intensive IOP treatment, engages the patient in
diagnostic assessments, symptom management and coping skills education,
crisis intervention and relapse prevention, and relies on best
practices and performance benchmarking to provide information as to the
efficacy of the treatment programs.
The continuance of PHP and IOP services within the continuum of
care is vital, as it allows for patients to be treated in the less
restrictive and a considerably less costly level of care, to be treated
in the community in which they live, and takes steps to prevent
decompensation of symptoms establishing a more positive quality of
life.
The AABH supports reform efforts that assist and establishes
integration of the best knowledge and expertise available for M/SU
treatment and prevention services into the health care reform planning
process.
The AABH fully supports utilizing the already proven and effective
interventions provided through outpatient programs such as PHP and IOP
for treating M/SU conditions while new and innovative interventions are
being sought. M/SU treatment benefits already well exceed costs--for
every dollar spent on M/SU treatment, we estimate that $7 in future
health care spending can be saved. PHP and IOP care will save money.
Partial Hospital Programs (PHP) and Intensive Outpatient programs (IOP)
Since as early as 1968, PHPs have been providing mental health and
substance abuse treatment for the Nation's chronic and disabled
mentally ill. Although not widely used until the mid 1990s, the PHP was
developed as a less costly and more accessible treatment option to in-
patient hospital care. As the M/SU patient is treated in the
environment in which he lives, he is able to live in a stable
environment and receive outpatient treatment close to his home. The
savings are significant when the efficacy and cost of a long-term PHP
care is set against the efficacy and cost of short-term hospital or
emergency care.
Partial Hospital Programs (PHP), and the less structured Intensive
Outpatient Programs (IOP), are ambulatory, active and time-limited M/SU
treatment programs that offer therapeutically intensive coordinated and
structured clinical services within a stable therapeutic milieu.
``Partial Hospital and Intensive Outpatient'' implies psychosocial
milieu treatment with group therapy as the primary treatment modality.
While specific program variables often differ, all PHPs and IOPs pursue
the general goals of stabilizing clinical conditions, reducing symptoms
and impairments, averting inpatient hospitalization, reducing the
length of a hospital stay, and providing medically necessary treatment
for individuals who cannot be effectively treated in a less intensive,
strictly outpatient level of care.
All PHPs and IOPs attempt to employ an integrated, comprehensive
and complementary array of evidence-based treatment approaches.
Programs are designed to serve individuals with severe symptoms and
functional impairments resulting from M/SU disorders. They are also
intended to have a positive clinical impact on the individual patient's
support system and therefore the individual's recovery environment.
Treatment services may be provided during the day time, evening time
and on some occasions, on the weekends.
PHPs and IOPs may be free-standing, part of a mental health
organization, or a department within a medical health care system. One
of the unique strengths of a PHP or IOP is its applicability to a
diverse array of circumstances such as clinical conditions, patient
populations, treatment durations, treatment settings, etc.
PARTIAL HOSPITAL PROGRAMS and Intensive Outpatient Programs ARE
INTENDED TO BE COST EFFECTIVE AND:
Provide the M/SU patient a way of managing their illness
in an environment that allows them to remain in their homes and
communities;
Provides Continuum of Care options, as these patients
require psychiatric care of some type for their entire lives;
Provide options, other than inpatient hospitalizations,
which are far more restrictive, far more costly, and far less
effective;
Provide a cost savings, as untreated mentally ill
patients will eventually end up in hospital emergency departments,
jails, prisons, or become part of the growing homeless population.
The concept of PHP and IOP is to maintain patients with chronic
behavioral disorders in a controlled environment, providing
psychotherapeutic and pharmacologic support on a daily basis, without
requiring an inpatient hospitalization. Patients admitted to a PHP or
IOP must be under the care of a physician; patients must provide
written informed consent for treatment; must require comprehensive
treatment due to a M/SU disorder which severely interferes with
multiple areas of daily life, including social, vocational and
educational functioning.
Patients appropriate for the PHP or IOP level of care comprise the
following:
Discharged from an inpatient hospital treatment program;
In lieu of continued inpatient treatment; or
Patients who, in the absence of partial hospitalization,
would require inpatient hospitalization.
Patients admitted to a PHP or IOP are provided comprehensive
treatment and utilize the same services as inpatient psychiatric care
at a greatly reduced cost; the treatment directly addresses the
presenting symptoms and problems and consists of clinically recognized
therapeutic interventions including individual, group, and family
therapies and activities pertinent to the patient's illness. Medical
and psychiatric evaluations and medication management are integral to
treatment.
Admission Criteria to a PHP and IOP
M/SU patients should be treated in the least intensive and
restrictive setting that meets the needs of their M/SU illness. If
patients do not require a 24-hour per day level of care, as provided in
an inpatient setting, the PHP outpatient level of care is the perfect
setting to prevent inpatient hospitalization. The M/SU patients being
treated in a PHP or IOP receive active treatment through a combination
of services such as psychotherapy, occupational, activity therapy and
medical interventions as necessary.
Patients admitted to a PHP or IOP must have an acute onset or
decompensation of a covered Axis I mental disorder which severely
interferes with multiple areas of their daily life and will have a
degree of impairment that is severe enough to require a structured
program.
Services Provided in a PHP or IOP
Medically necessary diagnostic services related to M/SU.
Individual or group therapy; Occupational therapy.
Drugs and biologicals that cannot be self-administered.
Individualized activity therapies that are essential for
progress toward treatment goals.
Treatment plans noting how each therapy fits into the
treatment of the patients illness.
Family counseling to assist the family members in helping
the patient.
Patient education where activities are related to the
care and treatment of the patient.
Diagnostic services for the purpose of identifying
problem areas.
M/SU conditions are tied to physical health and can be addressed
like other chronic and acute conditions in order to provide efficacious
health care. Ignoring one is likely to compound the other. However, for
people that need M/SU treatment services the services vary widely. An
effective health care delivery system must provide:
Providers who are paid for providing services with
desired outcomes;
A comprehensive range of services;
The full continuum of care, including PHP and IOP
services;
Service to those with both acute and chronic condition;
Service to a wide and varied population--some will
present themselves, some will be delivered into the system, and some
the system will need to seek out and serve.
Summary: PHP and IOP Included in Health Care Reform
PHPs and IOPs have evolved over the years until their current
status as an instrumental part of the behavioral health continuum.
Clients are referred both as an alternative to inpatient hospital care
as well as a step-down from inpatient hospital care. PHPs and IOPs are
particularly successful with first episode of care patients and utilize
an educational format combined with group therapy, medication
management, and specialized therapies to assist people in understanding
their diagnosis and initiating a path toward recovery. Most programs
are managed and adhere to strict medical necessity guidelines which
determine individual eligibility for care.
While reform must successfully deal with the medical needs of the
many healthy individuals, the greater challenge is to ensure that a
reformed system better serves the medical and M/SU chronic care and
prevention needs of a small fraction of the population that consumes a
disproportionate number of services.
The AABH supports reform that goes beyond the current standards and
practices of the meeting patient's needs and is looking to be involved
in assisting in the crafting of new and innovative methods of care that
are not only less costly but also more effective. Currently providers
are paid for providing services rather than producing desired outcomes.
There are significant disparities in health and health outcomes as they
exist across sectors of society. Individuals, health practitioners, and
policymakers make decisions based on a limited evidence base regarding
which practices work effectively for which groups or individuals. In
addition, the current system focuses heavily on expensive acute care
for physical and M/SU illnesses to the detriment of an approach that
can prevent and/or stabilize disease well before acute care is ever
needed.
In conclusion, we want to make sure that health care reform
includes the provisions of PHP and IOP services for M/SU in health care
plans, as they maintain a fundamental alternative to inpatient care for
the seriously ill M/SU patient in acute crisis, while providing a
supportive community-based setting that maintains the continuation of
family and community support. This gives the patient the opportunity to
maximize treatment gains through completion of homework assignments,
reconnect with community services, seek out employment options, and be
involved in activities that develop strengths and enhance resiliency
and recovery.
Again, we would again like to thank you for this opportunity to
share our comments. The AABH continues to work with other organizations
and governmental agencies towards an integrated health care system
where the M/SU patient will be able to receive a multitude of services
including treatment in a PHP and IOP economically.
Sincerely,
Larry Meikel--President of the Board
JoAnne Mandel--Co-Chairperson; Public Policy Committee
AABH Board of Directors
Public Policy Committee
Statement of Becton, Dickinson and Company
BD is a leading global medical technology company that develops,
manufactures and sells medical devices, instrument systems and
reagents. The Company is dedicated to improving people's health
throughout the world. BD is focused on improving drug delivery,
enhancing the quality and speed of diagnosing infectious diseases and
cancers, and advancing research, discovery and production of new drugs
and vaccines. BD's capabilities are instrumental in combating many of
the world's most pressing diseases. Founded in 1897 and headquartered
in Franklin Lakes, New Jersey, BD employs approximately 28,000 people
in roughly 50 countries throughout the world. The Company serves health
care institutions, life science researchers, clinical laboratories, the
pharmaceutical industry and the general public.
BD appreciates this opportunity to provide input on landmark health
care reform legislation. One of our highest priorities is to provide
incentives within the Medicare payment system that would reward
hospitals for preventing health care-associated infections (``HAIs'').
Policy Request. Include specific HAI prevention interventions as
quality measures under value-based purchasing authorization in health
reform legislation.
The Department of Health and Human Services (``HHS'') recently
finalized its HHS Action Plan to Prevent Health Care-Associated
Infections (``Action Plan''), which provides a roadmap for a 5-year,
national HAI prevention strategy. BD supports this comprehensive
prevention effort as part of health care reform and quality of care
improvements by the Obama Administration. Specifically, BD supports
efforts to achieve the Action Plan targets for HAI prevention,
including reducing invasive methicillin-resistant Staphylococcus aureus
(MRSA) infections by 50% by 2014 and reducing Clostridium difficile (C.
diff.) infections by 30% by 2014, as measured by case rate per patient
days.
Many health care and Medicare payment reform proposals have
included the establishment of a Medicare hospital value-based
purchasing (``VBP'') program. According to recent proposals from
Senators Baucus and Grassley as well as the Centers for Medicare and
Medicaid Services (``CMS''), a VBP program would increase or decrease
hospitals' DRG payments depending on their success at achieving, or
improving upon, certain quality performance measures. To ensure that
the HHS-established HAI prevention targets are achieved, the Action
Plan's targets and process and outcomes metrics should be incorporated
into any Medicare VBP framework as quality performance measures. VBP
payments to hospitals then would be conditioned, in part, on hospitals
making annual progress toward their HAI prevention goals, creating a
strong incentive for every hospital to take steps to reduce HAIs.
Background. VBP Creates Incentives to Reduce High Rates of
Preventable HAIs
According to the Centers for Disease Control and Prevention, HAIs
caused by MRSA, C. diff., vancomycin-resistant enterococcus (VRE) and
other infectious pathogens are one of the top 10 leading causes of
death in the United States, accounting for approximately 99,000 deaths
annually. Furthermore, in addition to thousands of lost lives, HAIs
cost the U.S. health care system an estimated $20 billion each year.
Yet many of these infections are easily preventable.
We must strengthen HAI prevention efforts. Prevention of HAIs would
improve the quality of patient hospital care, save thousands of lives,
and at the same time lead to billions of dollars in savings. The Action
Plan signals a renewed national commitment to reducing HAIs. However,
successful implementation of the Action Plan depends on an enforcement
mechanism to ensure that hospitals implement infection control policies
and take other precautions to prevent HAIs. Without specific
incentives, such as VBP, hospitals may not achieve the Action Plan
prevention targets, and HAIs will continue to be a major cause of death
and a significant driver of health care system costs.
In a recent announcement, the American Hospital Association, the
Federation of American Hospitals and the Catholic Health Association
embraced VBP in the context of health care reform. As Congress
considers developing the framework of this program, it is important
that HAIs be included as one of the conditions or clinical performances
areas considered in determining hospital payments. According to a
recent survey by the Association for Professionals in Infection Control
and Epidemiology, more than 40% of hospital infection control programs
have experienced budget cuts over the last 18 months. Incorporating
HAIs into the VBP framework would establish a platform for providing
hospitals with the resources they need to support efforts to prevent
infections.
VBP has been considered in health care and Medicare payment reform
proposals on numerous occasions. Most recently, the Senate Committee on
Finance, in a health care reform Policy Options paper released in
April, proposed establishing a hospital VBP program that would build on
the success of the current Reporting Hospital Quality Data for Annual
Payment Update (``RHQDAPU'') program and ``move beyond paying for
reporting on quality measures and activities, to paying for hospitals'
actual performance on these measures.'' This proposal follows a 2007
VBP white paper from CMS proposing that a portion of the hospitals' DRG
payments (2-5%) be contingent on meeting certain quality goals.
Furthermore, in the Medicare hospital inpatient proposed rule for
FY2010, CMS acknowledged the ``growing concern regarding hospital
acquired infections'' and discussed the possibility of adopting new
quality measures for potential future use in the RHQDAPU program, which
could include HAIs.
Attached to this statement is a proposed amendment to the most
recent available congressional discussion draft of a value-based
purchasing bill. We hope that this draft amendment will provide the
Committee with a concrete example of the type of legislative language
that we are proposing.
FOR FURTHER INFORMATION, PLEASE CONTACT:
Paul Seltman
Director, Public Policy and Government Relations
BD
Proposed Amendment to 2008 Value-Based Purchasing Discussion Draft
Include Health Care-Associated Infections in Value-Based Purchasing
Authorization
The Senate Finance Committee released a discussion draft of a
value-based purchasing proposal in 2008. We recommend the following
changes (in bold) to section 2 of the proposal to include prevention of
health care-associated infections as a quality measure under the value-
based purchasing authority.
SEC. 2. HOSPITAL VALUE-BASED PURCHASING PROGRAM.
(a) Program.--
(1) In general.--Section 1886 of the Social Security Act (42 U.S.C.
1395ww) is amended by adding at the end the following new subsection:
``(n) Hospital value-based purchasing program.--
``(1) Establishment.--
``(2) Measures.--
``(A) In general.--The Secretary shall select measures for purposes
of the Program. Such measures shall be selected from the measures
specified under subsection (b)(3)(B)(viii).
``(B) Requirement for fiscal year 2012.--For value-based incentive
payments made with respect to discharges occurring during fiscal year
2012, the Secretary shall ensure the following:
``(i) Conditions or clinical performance areas.--Measures are
selected under subparagraph (A) that cover at least the following four
five specific conditions or procedures:
``(I) Acute myocardial infarction (AMI).
``(II) Heart failure.
``(III) Pneumonia.
``(IV) Surgeries, as measured by the Surgical Care Improvement
Project (formerly referred to as `Surgical Infection Prevention' for
discharges occurring before July 2006).
``(V) Health care-associated infection prevention metrics and
targets, as established in the Department of Health and Human Services'
HHS Action Plan to Prevent Health Care-Associated Infections or any
successor plan.
``(ii) HCAHPS.--Measures selected under subparagraph (A) shall be
related to the Hospital Consumer Assessment of Health Care Providers
and Systems Survey (HCAHPS).''
Statement of the Breyer Foundation
America's health care system is fueled with innovation and
pioneering discoveries leading to the cure, treatment and intervention
of the most challenging diseases in the history of man. The unique
economic structure of this country weaves the interconnection of the
different factors that feeds and sustains the economic growth and
promotes the discoveries of new ideas that changed the history of
science and medicine. With this advancement comes the compassion and
the struggle of every physician, health care provider and educator to
reach out to all the people in disseminating new knowledge and cure.
Since America is still considered quite a young country in comparison
to the rest of the world, such efforts remained to be perfected and
polished to reach the optimum potential that this system and country
can achieve. Our ultimate goal is to be free of the burden of health
care cost and provide the best quality health care for all the people
in this country. Such goal can be achieved through some of the
following key features:
Improvement of the quality of life through an effective
preventive care program, free preventive care coverage for all;
Empowerment of the people through knowledge, access and
control of their own health care portfolio;
Effective communication and efficient dissemination of
new discoveries, best clinical practices and treatments, and other
information that promotes the improvement of the quality of life of the
patients and growth of the system as a whole;
Economically sustainable health care system powered by
the inherent strength of the different stakeholders, and the alignment
of their mutual interests that promotes synergistic growth--a win-win
for all;
Preserve the best of the current system--flexible option;
Health saving system that builds foundation toward
financial independence of health care cost;
Provides solution to the financial problem of Medicare;
An equitable, timely and quality health care system that
addresses the needs of all Americans, including the 47 million
uninsured;
Effective and efficient Central Network System (CNS)
design that eliminates unnecessary bureaucracy;
Promotes innovation, collaboration and economic growth;
Offers incentives such as tax exemptions or credits
instead of tax increase;
Promotes personalized medicine and depositories of
effective treatment protocols and guideline;
Works effectively in rural and urban areas of America;
Provides real solution in eliminating health disparities
representing all racial groups in America;
Empowers each individual with the right to choose and the
right to life;
Eliminates barrier for the health insurance access of
people with preexisting conditions.
Basic Implementation Principles
Sustainable Health Care System Model: The fundamental and basic
structure of the health care system is based on the alignment of the
interest of the different stakeholders that promotes synergistic
growth. A system based on a delicate combination and balance between
the negative and positive rights of an individual and his/her
responsibilities to the welfare of other stakeholders engaged in the
system. The system is based on understanding the fundamental factors
that will provide incentives to the different stakeholders to perform
their optimum task and contribution in the system with minimum
enforcement and barriers.
Emphasis on Preventive Care (Benefits to ALL): Insurance for all
will not be able to resolve the health care needs of the poor. As most
of the current 47 million uninsured are eligible to a basic Medicaid
system but cannot and/or will not access this system until absolutely
necessary through our Emergency facilities. An annual preventive care
visit to a physician could dramatically decrease the need of Emergency
visits for all Americans.
A free annual preventive care visit to a physician should be a
major component of all standard insurance benefits for Americans.
Although it is quite understandable that difficulties exist for the
poor and underserved groups from factors such as transportation, time
and lost wages, it is, however, essential to note that their well-being
and health is their responsibility and their actions impact the rest of
the Nation. Thus with the rights comes the responsibility for the
underserved groups to take advantage of the free preventive care visit
available for them in this program. The program subsidizes the
insurance cost of the people below a certain poverty level. The subsidy
is renewable every year and initiated through their first annual free
preventive care visit to a physician. A decrease in the cost and number
of major catastrophic care would eventually decrease the burden in the
insurance companies and our entire health care system, thus providing
the people a better leverage in reducing insurance premium.
A portable medical electronic record for the system will keep track
of the enrollment and medical history of individual participants. This
will address the need of people who have no permanent residence and
relocate more often than average Americans. Repetitive tests due to
lack of health record history for the uninsured and homeless is one of
the major contributions for high health care cost. Security in the
access of these records will be ensured in order to protect the rights
and privacy of the patients. All access to these health records by a
third party (physicians, nurses, etc.) will be based on patient's
consent (or authorized family members in cases of patient's incapacity
to make a decision). These records will be maintained in the Central
Network System (CNS), a fully independent agency, using a system with a
defined security structure to prevent access of unauthorized
individuals to sensitive information. Insurance companies and employers
will not have access to health results and risk assessments of the
individuals. The Central Network System will facilitate the
communication of benefits and service between the patient-physician and
insurance companies. Access to insurance provider and enrollment to the
CNS program could be accomplished in the physician's office through
automated, online and national standardized forms.
Equitable and Affordable Insurance with Variable Options to Meet
Participant's Needs (Financing, Benefits to Patients) (One size does
not fit ALL!): Standard features such as free annual preventive care
(including dental, vision, mental health, health education credit and
assessment, etc.) visit and a component of a catastrophic care to cover
the needs of an individual over the span of his/her lifetime. These
standard features will be included in the minimum standard benefit
reflecting the needs of the majority of Americans, as evaluated over a
period of time, with additional options available, tailored to
individual's need. Entry to the program is independent of preexisting
condition. CNS, the Federal and State government will leverage the cost
of these premiums for the people in order to optimize the cost savings
of the system.
Small business owners and their employees, self-employed
individuals, employees of large corporations and Federal Government,
and the current uninsured can choose between the different providers
and options in the insurance exchange. The overall base premium (for
all options) should reflect additional 20-30% of a cumulative
individual health savings account (IHSA) components that would provide
the participants with additional reward savings in meeting and
maintaining his/her annual health and wellness goals. The IHSA account
will be maintained and managed for the individual (in similar manner as
the retirement account) and the program by an independent Central
Network System. Interest from the trust fund (with sufficient funds)
could be used to pay future insurance premium for the individual.
Individuals could transfer the benefits/trust funds to their heir after
their death.
Eighty percent of uninsured individuals in the United States live
in households with an employed individual. Breyer's plan will extend
the tax exemptions and coverage to secondary families such as parents
and children in student status. Tax exempt and credit structure will be
set up and optimized to provide incentives for an individual (and their
employers as an optional partner) to sponsor and buy in affordable
insurance to uninsured secondary family members living in the same
household. Children will be covered by the parent's insurance while in
student status and 1 year grace period after school (while finding an
employer-sponsor). Such option would provide not only affordable
insurance to approximately 20%-34% of our uninsured but will also
provide enrollment of these individuals in the individual health
savings account (IHSA) and additional tax credit to sponsors.
Breyer's plan does not require mandatory health insurance.
Uninsured who are in high income brackets (20%-25% of uninsured) who
choose not to buy insurance through the program will have to provide a
set savings bond of at least $20,000-$50,000 to cover a future
catastrophic incident. Since a portion of the individual health savings
account in Breyer's model goes as donation to the underserved and
uninsured, this approach will ensure a fair system where the individual
donation will go to help the poor and uninsured and not the rich who
skip paying insurance and later on will get the benefit from other
people's sacrifice and efforts.
A defined and clear guideline will be established consistent with
taxable income and tax payment/credit structure to provide subsidy to
insurance coverage for individuals who are below the 400% poverty line.
Unemployed individuals will be covered in this subsidized insurance
program. Financing will be provided through a portion of the individual
savings (20 cents for every dollar saved) acquired through leverage
with insurance companies (lower premium) and pharmaceutical industries
(lower drug cost). A small copayment (between $20-$50) will be
established depending on the poverty level above 200%. The program will
not require any out-of-pocket expenses from individuals, such as
increase in taxes, but will provide tax exemptions and credit on the
IHSA and donated funds to the uninsured. (Please see the Breyer's
Model).
Veterans and their families who are not eligible for veteran
hospital benefits (since VA health benefits are limited to war related
injuries) will be able to enroll in the private insurance program and,
with the consent and support of the Department of Veterans Affairs, can
access the state-of-the-art facility of the VA Medical Centers or go to
other hospitals of their choice. A Federal program will be available
for Federal employees through choice of different private insurance and
options. Culturally appropriate financial and infrastructure support
will be provided to the Native American Indian Health System.
Benefits to Participating Hospitals, local clinics and other health
care institutions: All private and public hospitals, local clinics and
other health care institutions who participated in the various programs
of Breyer's plan (preventive, cost reduction through effective,
efficient and quality health care) will receive subsidy for their
uninsured enrolled in the program.
Individual Mandate: Insurance is not mandatory to everyone.
However, to prevent high-income individuals from skipping the insurance
premium cost and taking advantage of the system's benefit in times of
need, individual savings bond (at a minimum of $20,000), to cover
catastrophic incident, would be required for high-income individuals
(based on taxable income adjusted to the cost of living for a given
State) who selected not to buy insurance in the program.
Employer Requirements: Employer will be provided a tax exemption
for employee-sponsored benefits and additional tax credit for extending
sponsorship to secondary family members. Employers will receive the
savings proportional to their contribution in the employees' overall
insurance premium. A similar formula as specified in the Breyer's model
will be applied in their contribution to the uninsured and in their
corresponding tax credit.
Expansion of Public Program (Solution to Medicare Bankruptcy): A
portion of the current stimulus fund of $630 billion and leftover
Medicare funds for 7 years (Medicare funds left until 2017) could be
used to subsidize individuals above 65 years of age who are currently
in Medicare while the rest of the population can slowly transition
their Medicare contribution to their IHSA for their own individual
health care benefits. Thus providing a solution to the unsustainable
structure of Medicare and a path for independence of future health care
cost for the individual. (A more detailed and optimized system (amount
and timing) could be acquired and simulated with a given software
resources/program).
Premium Subsidies to (Benefits to) Employers: Tax exemption and
credit will be available to employers for employee's benefits. No tax
increase but additional savings that can be used to enhance employee's
benefits. Small businesses and self-employed individuals would be able
to access an affordable insurance premium that is currently just
available to large corporations and Federal programs. CNS programs
would be available to employees to improve health and work performance.
Benefit Design: An annual preventive care (includes services that
the American Medical Association and/or other medical associations
considered essential in early prevention of diseases, i.e. vision,
dental, mental health, podiatry, mammogram, lab tests, pre-natal care
if applicable, etc.) is free for ALL. A minimum standard benefit of
equivalent or greater value from the benefits currently enjoyed by a
majority of Americans (such as the Blue Cross/Blue Shield Standard Plan
and the Standard Federal Employees Health Benefit Program, FEHBP).
Additional options are available for long-term disability and types of
long-term care services. An additional component of the standard plan
would be an optional tax credit and/or benefit for (preventive) health
and wellness education program and assessment.
Benefits to Private Insurance: A guaranteed insurance of close to
330 million Americans every year. National support through CNS and all
stakeholders for preventive care and efficient, effective and quality
health care improving the health and quality of life for all. Support
from CNS, Federal and State agencies, scientist and health
professionals through depositories of effective clinical practices,
more standardized cost of medication and services, innovative approach
and effective treatment will be available resources to all. Additional
public support programs for nutrition and wellness classes for the poor
through existing programs, e.g. USDA food stamps and nutrition
programs. CNS will coordinate programs with CDC, VA, NIH and other
national health associations to expedite the dissemination of programs
that will enhance risk assessment, prevention and treatment of various
disorders. Together with various public and private organizations CNS
will provide an efficient bridge in the translation of new discoveries
and best practices from a bench to clinics and hospitals. These
programs will drastically reduce administrative and catastrophic health
care cost for insurance companies.
Benefits to Pharmaceutical Companies: Twenty-five percent of the
cost for pharmaceutical company's drug discovery and development is
focused on marketing and dissemination of information. CNS will
facilitate the dissemination of new discoveries in new drugs and
technologies through its participating hospitals, physicians and health
professionals, remarkably reducing the cost of marketing and
dissemination for the company. Such activities will be done in
coordination with the participating public agencies such as FDA, NIH,
CDC, etc.
CNS will also provide a national depository or listing of clinical
trials for new drugs and technologies so as to provide options for
individual participants to access innovative approach, medication and
studies throughout the Nation. It would be the individual's choice to
participate in any of the listed clinical trials based on the health
benefits that study would provide. This connection will be facilitated
by CNS through close communication with the Food and Drug
Administration and other collaborating agencies (CDC, NIH and other
public and private agencies) that would provide accurate and reliable
information to everyone regarding the risk and health benefits of the
discoveries. This would reduce the inefficiencies in the recruitment
and retention of participants in evaluating the effectiveness of
treatments and other intervention procedures. Reduction in the
administrative, evaluation and dissemination cost for the development
of drugs will help pharmaceutical companies in reducing the cost of
medication in this program.
Benefits to Physicians and Health Professionals: CNS will work with
NIH, CDC and other public and private agencies to provide resources,
medical information and technical support for physicians in urban and
rural areas regarding new and effective treatments and discoveries.
Telemedicine and ready access to specialists will be provided through
this network. CNS will also help facilitate the transition of
technology and approach to personalized medicine. Inter-individual
biological differences exist and thus there will be no mandatory
protocol. Best clinical practice protocols and results of effective
treatment studies would be available in CNS depositories in order to
guide physicians in making informed decisions. Breyer's plan promotes
an integrated approach on health care through collaboration and
communication between physicians and health care professionals beyond
geographical barriers, all within the goal of providing the optimum
care the patient deserves. Physician's decision based on well-founded
and supported knowledge, and readily available support from other
experts in similar and complementary fields will reduce the uncertainty
and risk involved in malpractice lawsuits.
An efficient communication infrastructure between the different
health institutions and professionals will also provide further support
for CDC and NIH in promoting and implementing studies that would
resolve some of the problems in the health of the American people.
Breyer's plan of a centralized network will provide efficient
infrastructure and further support on CDC's and NIH's initiatives for
more comprehensive NHANES and Framingham studies that would provide
more information on the prevalence, risk and effective treatment of
different diseases in various ethnic groups in the Nation.
Understanding of the risk and prevalence of the different disorders
such as cancer, diabetes and other diseases would enable health care
professionals to better implement preventive care and treatment.
Physicians in remote areas do not have ready access to the state-
of-the-art discoveries in medical treatment and technology. CNS'
depository will be the means to bring this innovation to the rural and
remote areas through training, support to physicians and other health
professionals, while utilizing as much of the existing resource and
infrastructure.
State Benefits and Function: Since each State has different
demographics, resources and infrastructure, CNS will work with local
State health agencies to design and implement programs depending on the
States' resources and infrastructure. The dynamic changes and flux in
the different resources and needs of each State will be closely
monitored by State agencies. Corresponding adjustment in the national
CNS system will be performed based on the State quality assessment-
feedback and national process optimization approach. Progress and
effective health care reform from each State will be evaluated based on
their starting baseline. Private insurance and service options may
differ between States but the same guidelines (in overall cost and
benefits) will be observed.
Cost Containment: CNS will leverage the reduced cost of insurance
premiums and drugs for 330 million Americans. A minimum standard
insurance premium will be established equivalent or higher in benefits
to the current standard Blue Cross/Blue Shield or Federal Employee
Benefit Plan (with free annual preventive care). Several payment plan
variations and options of this standard plan would be available to
address the financial needs of the people. Additional savings will be
maintained by CNS and will be placed in individual accounts through
participation and accomplishments in the preventive care programs.
Participating hospitals that report an effective, efficient and quality
health outcome for their patients get the corresponding savings through
subsidy to their uninsured. Results and outcome for cost effective and
quality care for patients can be evaluated through multiple followup
and efficient recording of health results of patients. Thus electronic
medical data and history will guide not only the physicians in
prevention and diagnosis but also provides the patient a portable
medical record and control of their own health. Information summaries
and results of available studies in the service cost, effectiveness of
existing treatment and medication will be available to patients,
physicians and other health professionals for their review and
evaluation. Strict penalties will be placed on fraud and corruption in
the system. The CNS in collaboration with agencies in State, Federal,
and private institutions will set up guidelines, routine audit checks
and oversights of each participating group in this system.
Health Disparities: CNS will work with the U.S. Census, CDC and NIH
towards programs such as NHANES and Framingham studies to evaluate the
risk, prevalence and effective interventions for various diseases for
all the groups (African Americans, Asian Americans, Caucasians,
Latinos, Native American Indians, Pacific Islanders) represented in the
American population. Oversampling of groups will be implemented in
order to provide statistically valid health information, especially for
small underrepresented ethnic groups.
Central Network System: The Central Network is independent of any
entity (Government, insurance and health care providers) and provides
not only insurance leverage but also effective communication
(personalized medicine), treatment, clinical, scientific guidelines and
services in coordination with other private and public agencies--an
integrated approach necessary to run a complex system. CNS' structure
will consist of an oversight board consisting of representatives from
all stakeholders and external advisers.
Statement of Budd N. Shenkin, M.D.
The Obama Health Insurance Reform in Perspective
I'm glad to see that the first step of the Obama Health Plan (OHP)
will rest on creation of a health insurance ``exchange,'' where
consumers are presented each year with a menu of alternative plans at
predetermined standardized levels of benefits, offered by various
companies. Since there will be government subsidies to make at least
the basic plan affordable to everyone, insurance will probably become
nearly universal, and job mobility should improve. It seems that, after
all this time, the problem of the availability of health insurance to
individuals will be largely solved. This will mark a good and important
first step, tactically very smart to take, in fixing health care and
making insurance available.
But it is only a first step. As everyone knows, the whole system
needs revision, to make it relatively efficient, fair, less costly,
higher quality, and progressively gaining ground in all these aspects
instead of losing ground. The basic problems lie in the nature of the
insurance system, the cost and organization of hospitals,
pharmaceuticals and medical devices, and reliance on specialists
instead of primary care. So, while the OHP's first step is a great one,
it needs to lead to bigger changes in the way the system functions as a
whole. Which I think it will.
The key to understanding the current insurance system is this: How
do the companies make their money? Competition in and of itself is not
a good thing if the way they compete doesn't redound to the benefit of
the public. To simply celebrate the existence of competition qua
competition is to celebrate ideology rather than what competition is
supposed to deliver.
I wish I knew more about insurance companies so I could write with
a deeper factual background, but here is the way it seems to me. First
of all, they compete by underwriting. In the individual market they
assess health and age status; in the group market they assess
utilization history and probabilities; in both cases they then price
their products accordingly, and deny applications, raise premiums, or
restrict coverage. (This is called experience-rating; if a company
would give the same price to all comers, this would be called
community-rating). The companies that underwrite most artfully make the
most money. In addition, since benefits are not standardized, the
companies that can write their plans most cleverly also win.
Unfortunately, the underwriting enterprise winds up making coverage
either unobtainable or exorbitant to many people who thus become
uninsured.
Insurance companies also strive for profits in other ways. In the
large company sphere they provide administrative services; if they can
do this most efficiently, they win. They negotiate with care providers,
especially physicians and hospitals, to variable effect, bending to the
pressure of hospitals with a lot of market power, making others bend to
them when the insurance company is more powerful. Market power is more
influential than straight cost-accounting. What a company loses in one
market they gain in another. If they lose to hospitals, they make it up
by short-changing the atomized physicians.
Insurance companies can also profit by the way they pay providers,
or don't. If they declare some services ``included'' with other
services, they can avoid paying for both, although both might have
perfectly valid CPT (service descriptor) codes. They can deny claims on
obscure bases. Some insurance companies have been convicted of setting
``payment denial'' objectives for their staff. They can delay payments
and make money on the float.
Unfortunately, what they have not been able to do to a significant
extent is to assert control over utilization, nor to improve quality,
because they are too far away from the functioning of the system, and
too far away from their own expertise, to do so. Overall, the culture
of the health insurance companies has been such that none have been
described as particularly good citizens, looking out for the health of
the Nation, coming up with schemes that would advance the health care
industry and do better for people. In fact, quite the reverse.
It is clear, then, that when it comes to health insurance, the OHP
has more to reform than accessibility to a policy. The first step will
be to establish the ``exchange.'' The second will be to eliminate the
ability of the companies to reject applicants, and establish community-
rating premiums with governmental subsidies to avert adverse selection.
(Hal Luft of the Palo Alto Medical Foundation Research Institute has
suggested that establishing a Major Risk Pool is a way of achieving
this.) While these changes will save insurance companies the overhead
costs of underwriting, they will also mean that a major modus operandi
of the health insurance industry will be altered. They can still make
money by establishing contracts with providers that rest on their
market power; they can still make money by denying claims; they can
still make money by being efficient in administrative operations. But
they will have to stop making money by experience-rating individuals
and groups, and by cleverly designing plans to their own advantage.
The OHP will of necessity solve the insurance accessibility
problem. What it then needs to do is to influence the insurance
companies to focus their profit motive to add to the public good by
making their own internal operations more efficient, and inventing ways
that make the system as a whole better. The issue is, would inclusion
of the public option make that objective more possible?
The Question of the Public Option
Given that there will be a health insurance exchange, and given
that there will be community-rating, the biggest controversy right now
is: should there be a so-called public plan on the menu? A public plan
would be one sponsored by government--proponents want it to be the
Federal Government, others would like it to be States, or even other
entities such as ``cooperatives.'' I have called this option the BGP,
the Big Government Plan. (Which it wouldn't be if it were to be the
ill-advised cooperatives.) All agree that there would need to be a
level playing field so that competition between public and private
plans would be fair, and there are many suggestions on how to do this.
This is the question I pose and answer today. I think we can only
answer the question by reflecting on the nature of the health insurance
industry, which is why I started this post as I did.
Let's first look at what is being said. The May 28, 2009 issue of
the New England Journal of Medicine contains three invited articles on
the subject. One is by Jacob Hacker, a liberal strongly for the BGP;
one by Mark Pauly, a free-marketeer from the Wharton School who accepts
a BGP to make reform politically viable; and the third by the canny
veteran health economist Victor Fuchs, who thinks the BGP would be
irrelevant. Two weeks later in the June 11 issue of the Wall Street
Journal, Karl Rove stated the hard Right's objections to the BGP as the
pathway to socialism, and the next day in the WSJ Stephen Burd, CEO of
Safeway, didn't address the BGP at all, but gave the preventive
medicine approach to fixing America's health care problem. These are
our texts for today.
Hacker strongly supports a BGP, while acknowledging that public
entities are generally rigid, and private ones are ``more flexible and
more capable of building integrated provider networks.'' He looks to
the BGP ``to provide: stability, wide pooling of risks, transparency,
affordable premiums, broad provider access, and the capacity to collect
and use patient information on a large scale to improve care.'' He also
thinks the BGP would have lower administrative costs (the government
more efficient than private business?); will be able to receive better
volume discounts (this would violate the level playing field provision,
and just who would these discounts come from, and for what?); and would
be nonprofit (OK, but what would the incentive be, then? Virtue?).
Pauly, the free-marketeer, thinks that a very wide array of choices
on the menu would bring public support, and many provisions to allay
the advantages of size and the possible political domination of the
BGP, would make the OHP politically viable. Interestingly, he puts
forward the idea of having two distinct government plans in each area!
I think this is a great idea--it gives a sense of where the incentive
to the public plans would come from. We have experience with this
format in California Medicaid, where in our counties, for instance,
patients can choose either the local initiative (county health
department) plan or the private Medicaid plan, and so can providers.
Pauly also brings up the old issue of Any Willing Provider--could
the BGP(s) choose not to let a duly licensed physician, say, join the
plan? How could a governmental entity do this? Yet, if the BGP had to
admit providers and the private plans didn't, wouldn't that give an
advantage to the private plans? Likewise, if care were to be delivered
in networks that contracted with the BGP, how could the BGP choose to
contract with one group but not another? I think the answer here would
have to be that each provider would have to have access to at least one
plan, with the BGP as the contractor of last resort. More could be
proposed here, but let's go on.
Fuchs says that the three biggest challenges of health care are the
uninsured, cost, and quality, and he doesn't see how a BGP would impact
any of them. Insuring everyone will require a subsidy and compulsion,
and a BGP is not needed for either. Neither cost nor quality have been
positively affected by either Medicare or Medicaid, so why should
another BGP have any effect?
Moreover, says Fuchs, who would join a BGP? Medicare and Medicaid
are already set for the elderly and the poor. Thirty percent of the
populace are covered by large companies who self-insure, the
administration of their plans contracted out to the health insurance
companies for provider network supply and payments. The BGP would have
nothing to offer these companies. Twenty-five percent of the populace
are covered by smaller employers that contract with private health
insurance companies. Again he argues, what would a BGP have to offer
them? Since these contracts for care are generally experience rated
rather than community rated (that is, one price for all despite
historical medical care utilization), only the high utilizers would
want to go to the BGP, thus giving the BGP adverse selection, and
taking the bloom off their rose. (I think community-rating is in the
works, given the nature of an exchange.) Currently 5.9% are
individually insured, and these would go to the BGP. Fifteen percent of
the populace are uninsured, of which three-quarters, or 12%, are too
sick or too poor to buy policies, and the remaining 3% choose not to.
Fuchs doesn't see the value of a BGP for these people either.
I don't agree with Fuchs here. First of all, I think we have to get
to community-rating for everyone, with risk adjustments made as Hacker
suggests. Secondly, even by Fuchs' analysis tens of millions of people
would sign up with the BGP.
Rove asserts that we don't need a BGP because we already have
enough competition. This is a purely ideological argument (surprise!)
that doesn't look at the quality of the companies, nor at the results.
Private insurance companies have a terrible history. Their innovations
are generally pseudo-innovations, and the ways they choose to make
money are not productive to the Nation as a whole--underwriting,
refusing care, reneging on coverage, gaming providers who submit bills,
etc.
His second argument is that the public option will pay providers
less than private companies will (not clear this is so), and thus cause
other providers and patients to subsidize the BGP, the old transfer
game that hospitals play.
His third argument is ``crowd out,'' that in contrast to Fuchs who
thinks hardly anyone will choose the BGP, Rove avers that so many will
choose it that private companies will be stifled. As both Hacker and
Pauly assert, however, if the playing field is indeed made fair, this
will probably not be the case. And if it turns out to be as Rove fears,
would that not be a testament to the underlying vapidity of the current
private companies and their practices? If they can't beat the
government that's a pretty low bar.
Rove's fourth argument is also Fuchs', that Medicare and Medicaid
are too expensive and do not lead to efficiencies, so the BGP would do
the same. It's true that government is not good at innovation and cost
control.
Fifth and finally, Rove asserts that a governmental monopoly will
be unresponsive and a bad, socialistic option. This is the Trojan Horse
or Slippery Slope argument--BGP today, National Health Service
tomorrow. Well, the point is then to make the playing field level, and
as Pauly suggests, let there be competing governmental entities.
Burd, finally, makes a non-BGP point, an argument that reminds me
of the ``Legalize Marijuana'' solution to the California State budget
crisis in its indirect approach. Burd says that Safeway has kept
medical costs stable for the last 4 years by giving their employees
incentives to avoid tobacco, reduce obesity, and keep blood pressure
and cholesterol in normal bounds. The better health of the group has
led to lower costs. It strikes me that only smaller, private insurance
groups could handle this kind of innovative approach, and thus beat the
BGP in competition.
Conclusion
So, given that the OHP can make health insurance accessible by
simply establishing the exchange, but that it needs to do more to
``fix'' health care, does there have to be a BGP option? The answer is
clearly yes. In fact, Pauly's suggestion of having two BGP's available
on the menu would make the most sense--perhaps one a Federal and one a
State program.
If a BGP is on the menu, everyone agrees that the playing field
needs to be made level. Community-rating and risk-adjustment could be
accomplished by the Luft Major Risk Pool plan. The NEJM articles have
cogent suggestions on other leveling procedures. More specifically for
part of the means to this, the BGP needs not to undercut rates. I would
suggest that the BGP start out with 130% of Medicare rates for primary
care, 100% of Medicare for selected specialists (some, such as general
surgery, would need to be higher; some, such as imaging could be
lower).
The temptation for health insurance companies would be to continue
their operations as they have practiced them in the past. The more the
OHP can deny them profit from old, nonproductive practices, the more
they will have to find new means to make profit. Denied profit
possibilities from underwriting and clever plan design, they would be
tempted to continue to deny payments and care, and to assert market
power where possible to glean profit. The presence of the BGP would
blunt their ability to force poor contracts on relatively weaker
providers. If properly designed, the BGP would force the private plans
to compete for the allegiance of providers by ceasing those practices.
What would be left for the insurance plans to do? They would
benefit if they were truly efficient in administration, practiced
prevention as Burd suggests, aligned with groups that were themselves
innovative in the way they delivered care, etc. We would look for
innovation from the private sector as we always have. They would have
the advantage over the BGP by not having to contract with all
providers; if the insurance company and providers shared their profits,
both would have incentives.
In addition, the presence of the BGP would act as a safety net.
Everyone in every part of the country would have insurance available in
a traditional way. If a private company tried to innovate and failed,
the BGP would be there to pick up the pieces for the enrollees with
that failed company. Also in addition, if small or large companies
chose the BGP over private companies, so be it. And with several BGP
entities available, they would themselves have a competitive incentive
and measuring stick to work against.
Some say that a BGP is necessary to ``keep the insurance companies
honest.'' Clearly, left to itself, the industry has not been
trustworthy. I hope that I have shown to some extent how the BGP would
function in keeping the private plans honest.
Finally, it is important to note that the point of the BGP would
not be to be innovative--that's not something the government is good
at, at least not for a long time. (See the OEO experience from the
60's, for instance, on how innovation can begin and then be stifled.)
It should be solid even if stolid, the safety net for everyone; honest,
straightforward, maybe unimaginative, but present. The BGP should also
be a lowest common denominator, in the sense that if the BGP can do
something, then there is no reason other plans can't do it, too.
Statement of the Friends Committee on National Legislation
Chairman Rangel and Members of the Committee:
Thank you for your combined work and expertise to produce the tri-
committee discussion draft. We believe that this plan sets up a
structure that could succeed in making high-quality comprehensive
health care available and affordable for everyone in the United States.
We offer a few comments and recommendations here to strengthen the plan
and to further ensure that no one is excluded from health care coverage
for lack of ability to pay or other reasons.
The Friends Committee on National Legislation is a Quaker lobby in
the public interest. Working in Washington since 1943, the Friends
Committee promotes a vision of a society that lives well with itself
and others. We share a Quaker belief in the essential integrity and
decency of human beings, and support public policies that elicit and
build on these strengths.
In these comments, we lift up four critical elements of the tri-
committee draft: The public plan, subsidies, preventive care, and
regulation of the private health insurance market.
A Successful Launch for a Public Health Insurance Plan
The House tri-committee draft describes a public insurance plan
that would meet or exceed the requirements of all plans in the Health
Care Exchange, which would be available, initially, to uninsured
individuals and employees of very small employers.
We strongly support a public insurance plan, because of its
potential availability to all health care consumers, and because of its
eventual effect on the private market. A comprehensive standard public
plan will set the bar for the private insurance market to meet.
However, in order to have these desired effects, it is important that
the public plan be launched to a broad demographic of potential
participants. Large employers and currently insured individuals should
be free to offer or opt for the public plan, along with those who may
have been excluded from health insurance by prior existing conditions
or high premiums relative to income.
A robust launch accomplishes several intended goals, by:
Offering real competition in the marketplace, at a level
and of a nature that will affect the business decisions of private
companies that also hope to attract large employer buyers;
Including participants who represent a wide range of
health care needs, not be weighted toward those with greater needs and
fewer resources;
Lowering the cost of administration per participant,
relative to a plan that includes only individuals and small employers;
Providing health care providers with a built-in incentive
to participate in the public plan; and
Alowing the plan to begin operating with a strong
financial base.
We are concerned that launching the plan to a relatively limited
population that has not been well served by the current health
insurance system will hamper the chances for the public plan's success.
We urge the three Committees to make the plan available both within and
outside of the Exchange, to currently insured and uninsured individuals
and groups.
Subsidies to Make Health Care Affordable to All
We strongly support income-based subsidies, delivered through the
tax system or in other ways, to make health care affordable for non-
elderly people who have incomes above the (expanded) Medicaid
eligibility level. The tri-committee draft proposal sets tiers of
subsidies between 133 percent and 400 percent of the poverty level,
ending with a standard that an individual or family should spend no
more than 10 percent of income on health care. The draft essentially
defines ``affordable'' as 10 percent of income, which we accept.
However, at 401 percent of the poverty level, a family could easily
be required to spend a much higher percentage of income--perhaps 18
percent or more--on health care premiums alone (ignoring, for the
moment, out-of-pocket expenses). We unite with the comments of your
first witness in the June 24 hearing, Professor Karen Pollitz of the
Georgetown Health Policy Institute, who suggested that the 10-percent-
of-income standard be applied without regard to an income cap. The
anomalies that might occur with relatively high-income families
receiving subsidies could be addressed by specifying that the subsidies
apply only to standard plans that offer what the public plan offers.
Applying the 10-percent-of-income rule uniformly above 400 percent of
poverty would eliminate the ``cliff'' that would almost inevitably
occur just above any cap on subsidies. As a result, the Committees
could better achieve the goal of making health care affordable to all
consumers.
Preventive Care Prevents Costly Intervention
We appreciate the inclusion and recognition of preventive care as a
valuable component of the health care system. Besides its intrinsic
value in contributing to the overall health of the U.S. population,
preventive care and wellness programs will save money for the
government and for individuals.
We are aware of the CBO's critique of the cost-effectiveness of
prevention programs. This critique, and indeed, that of a few of our
respected colleagues, misses the point of investments in preventive and
wellness programs. These analyses incorporate two errors:
(1) They look for a payoff in 10 years. While many prevention and
wellness programs produce profound improvements in health status within
a few years (weight loss, blood pressure decrease, cholesterol control,
etc.), the dramatic cost savings (lack of a need for expensive
medicines or surgical interventions) do not occur until later in life
and are, indeed, difficult to catalog and calculate. Numerous long-
range studies have shown the effectiveness of nutrition and behavioral
changes; cost accounting that reaches beyond 10 years should be able to
recognize and incorporate these savings.
(2) These analyses are based on an inaccurate understanding of
preventive care and wellness programs. Prescribing drugs to control
high blood pressure, cholesterol, and other diseases is a type of
treatment, not prevention. These drugs are prescribed only for
individuals who already suffer from common chronic diseases, and they
tend, if successful, to minimize the need for further intervention.
According to the Milliken Institute, the combined cost of the top
seven modifiable chronic diseases (cancer, diabetes, hypertension,
stroke, heart disease, pulmonary conditions and mental disorders)
exceeds $270 billion per year in direct care costs. A modest focus on
prevention, early intervention and behavior changes can save about 80
percent of that cost annually. Preventive care and wellness programs
address underlying conditions of obesity and physical inactivity and
can and should be promoted broadly on a cost-effective basis to the
public.
Fair Play: Regulating the Private Health Insurance Market
The private health insurance industry has benefited greatly from
tax exemptions provided to both the employer and the employee for
employer-provided health benefits. The Federal Government has every
right to insist that, to qualify for this benefit, health care plans
must meet certain criteria.
To qualify for tax advantages offered in the employment context,
any such plan should be required to meet certain standards, including a
defined comprehensive package of medical, mental health and
prescription services with no exclusions for prior existing conditions,
age, or gender; no termination of individual insurance for expenditures
by the insurance plan; no lifetime caps; and a maximum yearly out-of-
pocket cost for participants.
Rates for the standard package should be the same for all
participants, with adjustments permitted for family coverage and for
broad geographic areas (i.e. States or regions, not redlined
neighborhoods). Discounts for health predictors such as nonsmoking or
healthy weight could be permitted. But rate adjustments for age and
other uncontrollable conditions should be minimized. Even the 2 to 1
ratio for age permitted in the House plan would result in
unrealistically high premiums for older, but not Medicare eligible,
individuals and heads of households. An unrealistically high premium
means the exclusion of certain demographic groups.
ERISA-qualified private plans--the standard private plans that
qualify as an employee benefit--should also be required to be made
available to the individual market, at the same rates.
The Tri-Committee Plan has two real options to catalyze change in
the health care marketplace. One is by competition from a strong,
widely available public plan. The other is by allowing a tax advantage
only from employer-sponsored plans that meet the same criteria as the
public plan, including breadth and depth of coverage, and rules
governing guaranteed issue, renewability and rates. The Tri-Committee
Plan is almost there. We believe that this plan, with some
strengthening, can make an historic difference in health care
availability and indeed in the health of this Nation.
Thank you for the work that you and your staff have devoted to this
important undertaking and for the opportunity to share our reflections
and recommendations.
Letter by Richard Kirsch
Dear Chairman Rangel and Chairman Stark:
Health Care for America Now (HCAN) appreciates the opportunity to
comment on the draft House tri-committee health care reform legislation
that is designed to address the critical health care issues that have
plagued the American health care system for far too long. HCAN is a
national grassroots movement powered by 30 million people and more than
1,000 organizations working to win a guarantee of quality, affordable
health care we all can count on. The draft legislation put forward by
your Committees shows that we can achieve the President's goal of
quality, affordable health care for all this year.
Your draft bill is an excellent example of what can be accomplished
when Members of Congress work together to do what is best for the
people they represent. It provides quality, affordable coverage for
all, requires shared responsibility by individuals, employers and
government, and expands health insurance coverage choices, including
being able to retain one's coverage, have additional private plan
options, and a public health insurance option designed to lower costs
and keep insurance companies honest.
HCAN strongly supports the provisions in the draft bill that make
health insurance and health care services more affordable. In
particular, premium assistance, reduced cost-sharing, and application
of an out-of-pocket cap are central to making health care accessible to
low-income individuals and families. Also, we commend you for your
leadership in extending assistance in purchasing health insurance to
working families who have seen health costs increase four times faster
than wages. Given the significant range in the cost of living across
the country as well as the variance in the cost of health insurance
coverage, these provisions are vital to ensuring that persons in all
corners of our country are able to afford health insurance.
Establishing true affordability is particularly important given that
the draft bill requires individuals to obtain health insurance
coverage.
While the draft bill establishes a framework for achieving quality
affordable health care for all, HCAN believes it should be strengthened
in several critical areas:
In order for the public health insurance plan option to
be effective, it must be truly robust with a strong national network of
providers from the start.
The employer responsibility requirements should match the
average contribution large employers currently pay.
Health insurance must be affordable in terms of premium
and cost-sharing and protect Americans from medical debt and
bankruptcy.
Individuals should not be required to have coverage that
is unaffordable and inaccessible; coverage for all must mean coverage
for everyone.
Medicaid and CHIP need to be strengthened and new
protections need to be put in place to ensure the benefits and cost-
sharing protections of these programs are maintained.
Public Health Insurance Plan Option
HCAN commends the Committees for including in the draft a national
public health insurance option, which is critical to reforming our
health care system. So long as the playing field is not tilted against
it, a public health insurance plan option will promote competition and
efficiency, provide stability and advance innovation. More broadly, the
public health insurance plan option will foster payment and delivery
system reforms, remedy disparities in access to care, and guarantee
that quality, affordable coverage will be there for individuals and
families no matter what happens to their jobs or their health.
HCAN, however, is concerned that the public plan as proposed may
not be large enough to compete on a level playing field with large
national insurers, which have many built in advantages and considerable
experience in State and regional markets. The American Medical
Association reports that 94 percent of insurance markets in the United
States are now highly concentrated. In many State markets, one insurer
already controls more than half and often more than two-thirds of the
market. Two companies alone control more than one-third of the private
health insurance market--WellPoint with 35 million insured and United
Health Group with 18 million insured. The Health Insurance Exchange
will include these well-established plans and other major players,
which will make it very challenging for a new entrant such as a public
plan to enter the market. Therefore, we believe several improvements
are needed to the draft bill to ensure the public health insurance
option can compete on a level playing field with private insurers.
Recommendations
Ensure broad provider participation. Private insurers
have had decades to build their provider networks. To ensure broad
participation in a public plan start-up, the Committees should ensure
that all providers (hospitals, institutional providers, physicians and
other practitioners) that currently participate in public programs also
participate in the public health insurance plan. However, physicians
and other health practitioners should retain the ability to opt out
after a sufficient period that allows the plan to get established.
All employers must be allowed to join the exchange. HCAN
is concerned that the Exchange, and through it the public health
insurance option, is restricted to employers with 10 or fewer employees
in the first year and 20 or fewer employees in the second year.
Allowing larger small businesses to join the Exchange in the first 2
years--for instance up to 100 employees--would give them access to more
affordable health care options and create a much larger market that
would increase the number of people insured both with private and
public plans. While it may be necessary to give the Commissioner the
authority to determine the schedule for phasing-in medium and large
employers, the bill should specify that all employers eventually will
be able to access the Exchange and the public plan. With more enrollees
a public plan would be more viable in a very competitive insurance
environment.
Employer Responsibility
HCAN believes that employers (including public employers) should be
required to fund a meaningful portion of their employees' and
dependents' health care costs. Employer responsibility is a necessary
prerequisite for individual responsibility requirements. Ensuring
continued employer involvement in our health care system is also
critical to the affordability of the package as a whole.
We commend the Committees for recognizing the importance of a
strong employer responsibility requirement. The draft bill also
requires proportionate contributions for those employees who work less
than a full-time schedule. HCAN offers the following recommendations to
strengthen the employer responsibility provisions in the draft bill.
Recommendations
Employer responsibility should match average contribution
requirements made by employers today. HCAN believes large employers
should be responsible for funding at least 80% of the cost of
individual coverage and 75% of family coverage for the defined benefit,
which are the current average employer premium contribution levels for
employer-based health insurance. The employer contribution under the
draft falls short of this goal--72.5% for individual coverage and 65%
for families.
The contribution amount should be applied to plans
employers are currently offering. The contribution percentages in the
draft apply not to the benefit plan offered by the employer but to the
``lowest cost plan that meets the essential benefits package.''
Instead, we believe the contribution amount should be applied to plans
employers are currently offering, or else the minimum required employer
contribution may be significantly less than it would otherwise be if
the coverage actually offered was the basis for the requirement.
Contribution requirements should be based on a sliding
scale. The Committees should also scale the contribution requirements
for small and medium employers based on wage levels, part-time and
full-time employment and number of employees. It is important that the
contribution for part-time employees be scaled so that employers do not
have an incentive to create part-time employment and thus avoid the
employer's share of the responsibility.
Accountability measures need to be in place to ensure
compliance. There should also be an accountability mechanism in place
for employers who alter employee status, such as by hiring people as
``independent contractors'' instead of employees, for the purpose of
evading insurance obligations.
Employers should be responsible for covering their own
workers. The legislation should ensure that employers who cover the
employee of another employer as a dependent should receive
reimbursement equal to the noncovering employer's contribution.
Dependent children of working parents should be assigned to the paying
employer as they are now.
Definitions of family should be expanded to include gay,
lesbian, bisexual and transgender families. For the purposes of
determining access to health insurance coverage, subsidies and related
Federal tax treatment of health care benefits, definitions related to
``family'' should be extended to ensure inclusion of lesbian, gay,
bisexual and transgender families, families headed by domestic
partners, and recognize multiple family structures and diverse kinship
networks.
Establishment of a reinsurance program that encourages
employers to continue to provide coverage to pre-Medicare retirees. A
requirement that individuals purchase coverage could result in
employers dropping coverage for pre-Medicare retirees since reform does
not require them to continue such coverage. This is similar to the
challenge Congress faced with respect to ensuring that employers
continued prescription drug coverage when the Medicare Modernization
Act (MMA) was adopted in 2003. We appreciate the proposal to establish
such a reinsurance program to help ensure that coverage provided by
employers and VEBAs to pre-Medicare retirees will be affordable
(Section 501). This provision represents a positive step in addressing
the health care needs of a vulnerable population. However, we recommend
that the Committees make it a permanent program with sufficient
funding.
All workers should have access to coverage. Employers who
pay into the system should be assured that their workers have access to
coverage, helping to ensure that their workforce remains productive. As
written the bill would exclude certain immigrants from affordable
credits even where the employer is ``paying.'' The House should explore
mechanisms to ensure that all workers of employers who are ``paying''
can benefit from that contribution and can have access to affordable
coverage; in such cases it can be structured so that it is the
employer's payment, and not a Federal payment, that is being used to
make the coverage affordable.
Affordability/Individual Responsibility
HCAN commends the Committees for the affordability and shared
responsibility provisions of the draft bill that place the burden on
the health of our Nation with individuals, employers and the
government. We are pleased with the affordability credits that
recognize that low- and moderate-income families need protection from
both high premiums and high out-of-pocket costs. A sliding scale that
phases out at 400% of the Federal poverty level is the minimum level
necessary to assure consumers that coverage will be affordable.
Similarly, HCAN strongly supports the study, by the Commissioner, of
geographic variation in the application of the FPL. HCAN believes this
report should be completed 12 months prior to year one. This
information is necessary to establishing regionally-adjusted FPL limits
that would more efficiently target subsidies to families that need them
the most.
HCAN, however, is concerned that the public plan as proposed may
not be large enough to compete on a level playing field with large
national insurers, which have many built in advantages and considerable
experience in State and regional markets. The American Medical
Association reports that 94 percent of State insurance markets in the
United States are now highly concentrated based on U.S. Department of
Justice criteria. In many State markets, one insurer already controls
more than half and often more than two-thirds of the market. Two
companies alone control more than one-third of the private health
insurance market--WellPoint with 35 million insured and United Health
Group with 18 million insured. The Health Insurance Exchange will
include these well-established plans and other major players, which
will make it very challenging for a new market entrant such as a public
plan. Therefore, we believe several improvements are needed to the
draft bill to ensure the public health insurance option can compete on
a level playing field with private insurers.
Recommendations
Provide cost-sharing credits to individuals and families
with qualified employer coverage and allow individuals to apply their
cost-sharing credits to their employer-sponsored coverage. Some
individuals and families will face high costs relative to their income
because their employer satisfies the ``play'' requirement or their
income is above 400% FPL. These individuals and families should receive
cost-sharing credits in the year following any year during which they
reach their out-of-pocket maximums in an effort to protect families
from the risk of financial ruin and bankruptcy. Additionally, credit-
eligible full-time (and part-time) workers who are likely to decline
the employer offer should be allowed to apply their credit to the
employer offer rather than enroll in the exchange.
The individual mandate should not apply to everyone
unless everyone has access to affordable coverage. While HCAN supports
provisions of the bill that incentivize individuals to obtain coverage,
there is a lack of congruence between the exceptions from the tax and
the guarantee of affordability, threatening to leave millions of
individuals in the double bind of being penalized even though they lack
access to affordable coverage. Health care should be provided to all
people who pay taxes and contribute to the system and everyone should
be required to pay their fair share.
Oppose expensive verification and documentation
procedures. HCAN is concerned that the positive impact of several
reform proposals on the table may be undermined by additional measures
that would severely restrict access to health coverage by mandating
new, expensive verification and documentation procedures. The best way
to reduce costs in our health care system is to ensure that people do
not have to follow a long paper trail to get to the doctor and that
everyone shares the costs of a new system.
Medicaid and CHIP
HCAN believes the Medicaid protections and standards given to
people below the Federal poverty level should be extended to those with
incomes up to 200% FPL, including no premium contribution requirements
and only nominal cost-sharing requirements. Additionally, HCAN believes
that individuals who are in groups currently with cost-sharing
exemptions or caps should maintain this protection. The Committees'
bill makes substantial improvements in coverage and access to low-
income persons. For instance, the Committees' commitment to ensure that
every newborn and infant born in the United States have health coverage
is a significant step toward improving child health.
Recommendations
Increase Medicaid protections to 200% FPL. HCAN supports
the House tri-committee bill's increasing the across-the-board Medicaid
eligibility to 133% FPL with full Federal funding. However, we urge
that this limit be increased to as close to 200% as possible.
Cover legal immigrants. We are very disappointed that the
draft does not support coverage for legal immigrants in Medicaid. In
particular, HCAN supports requiring States to cover otherwise eligible
legal immigrants in Medicaid at the same levels as citizens, without
waiting periods. We urge similar coverage for legal immigrants, without
a waiting period, in Medicare.
Increase access to primary care. We strongly support the
provision to increase Medicaid provider rates in primary care to
Medicare payment levels by 2012 and believe this will improve access to
important health services. We also encourage consideration of
increasing Medicaid outpatient provider rates for specialty services in
a similar manner.
Preserve cost-sharing protections for children. HCAN
appreciates a number of positive provisions regarding children's
health, including coverage of well-baby, well-child, dental and vision
services. However, it is important to continue the cost-sharing
exemptions or caps currently provided for children in CHIP. If those
affordability protections are discontinued after 2013, children could
be worse off.
Preserve EPSDT for CHIP children. Children enrolled in
CHIP in 13 States and the District of Columbia are currently guaranteed
EPSDT benefits through their Medicaid expansion CHIP programs. Those
children will lose access to these vital protections if moved into the
Exchange, unless benefits in the Exchange can be made comparable.
Cover all children and pregnant women. Low-income
immigrant children and pregnant women should be eligible for Medicaid
and CHIP regardless of their citizenship or immigration status.
Streamline enrollment procedures. HCAN believes the
enrollment process must be simplified across Medicaid and other
insurance options. For example, the Committees should consider applying
the 12-month continuous coverage provision currently proposed for the
credit to Medicaid as well.
Increase protections to ensure seamless delivery of
services covered by Medicaid and not covered by other insurance options
through the exchange. HCAN has serious concerns regarding the
provisions that after 5 years would give States the option to provide
access to the exchange for people eligible for Medicaid. These concerns
include, among others, that stronger protections need to be established
concerning the seamless delivery of services covered by Medicaid, the
affordability of insurance on the exchange (even with subsidies) and
procedural protections available to Medicaid participants that may or
may not be available to those insured through the exchange. We look
forward to working with the Committees to resolve these issues and make
this proposal work for all stakeholders.
Addressing Health Disparities Under Health Care Reform
This draft demonstrates the strong commitment of the three
Committees to achieving health equity for communities across the
country. Health disparities populations--including racial and ethnic
minorities, immigrants, women, the lesbian, gay, bisexual, and
transgender (LGBT) population, people living in rural and tribal areas,
and others--have historically experienced differences in disease
incidence, health outcomes, and access to health care, and these
differences continue to persist in the Nation's health care system
under the status quo. The proposals included in the draft legislation
make substantial, meaningful investments in achieving equitable health
outcomes for all people living in the United States and its
territories.
Please see the attached analyses, which provide section-by-section
recommendations to achieve the greatest impact for health disparities
populations. The first (``Attachment A'') includes recommendations for
health disparities populations broadly, while the second (``Attachment
B'') details recommendations with respect to immigrant populations.
Recommendations
Coverage
Family-based approach should apply to administration of
affordability credits. The bill generally takes a family-based approach
to application and enrollment in health coverage, which helps reduce
paperwork and which ensures that individuals and their dependents can
get the coverage they need. A similar approach should be employed in
administering the affordability credit. An affordable credit eligible
individual should be able to include any dependents seeking coverage on
the application for an affordable credit, without subjecting those
dependents to the same individual eligibility determinations.
Additionally, affordability credits for families should be set at
levels that reflect the true cost of obtaining family coverage, which
is on average 2.7 times more expensive than individual coverage.
Eliminate blanket exclusion for all persons with ``non-
immigrant visas.'' The blanket exclusion of all persons with ``non-
immigrant'' visas would deny access to affordable coverage to a broad
range of individuals who are authorized by law to live, work, and
remain in the United States, such as survivors of trafficking, domestic
violence and other serious crimes who are cooperating in prosecuting
these crimes (T and U visa holders), persons with fiance petitions (K
visa holders), citizens of ``compact of free association states''
(Micronesia, Palau, Marshall Islands) and others.
Reform must be consistent with and responsive to the
Federal Government's trust responsibilities to American Indians and
Alaska Natives.
Government findings that impact the health of a community
should be publicly released. Finally, in order to foster a more
transparent policymaking process, HCAN encourages government decisions
that impact the health of a community to be evaluated, and the findings
publicly released, on the potential positive and negative health
effects of these decisions.
Public Health Infrastructure