[Joint House and Senate Hearing, 108 Congress]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 108-319



                RESHAPING THE FUTURE OF AMERICA'S HEALTH

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

                         ROUNDTABLE DISCUSSION

                               BEFORE THE

                        JOINT ECONOMIC COMMITTEE

                     CONGRESS OF THE UNITED STATES

                      ONE HUNDRED EIGHTH CONGRESS

                             FIRST SESSION

                               __________

                            OCTOBER 1, 2003

                               __________

          Printed for the use of the Joint Economic Committee


90-762              U.S. GOVERNMENT PRINTING OFFICE
                            WASHINGTON : 2003
____________________________________________________________________________
For Sale by the Superintendent of Documents, U.S. Government Printing Office
Internet: bookstore.gpo.gov  Phone: toll free (866) 512-1800; (202) 512ï¿½091800  
Fax: (202) 512ï¿½092250 Mail: Stop SSOP, Washington, DC 20402ï¿½090001

                        JOINT ECONOMIC COMMITTEE


    [Created pursuant to Sec. 5(a) of Public Law 304, 79th Congress]


SENATE                               HOUSE OF REPRESENTATIVES
Robert F. Bennett, Utah, Chairman    Jim Saxton, New Jersey, Vice 
Sam Brownback, Kansas                    Chairman
Jeff Sessions, Alabama               Paul Ryan, Wisconsin
John Sununu, New Hampshire           Jennifer Dunn, Washington
Lamar Alexander, Tennessee           Phil English, Pennsylvania
Susan Collins, Maine                 Adam H. Putnam, Florida
Jack Reed, Rhode Island              Ron Paul, Texas
Edward M. Kennedy, Massachusetts     Pete Stark, California
Paul S. Sarbanes, Maryland           Carolyn B. Maloney, New York
Jeff Bingaman, New Mexico            Melvin L. Watt, North Carolina
                                     Baron P. Hill, Indiana



        Donald B. Marron, Executive Director and Chief Economist
                Wendell Primus, Minority Staff Director
                                CONTENTS

                              ----------                              

                      Opening Statement of Member

Senator Robert F. Bennett, Chairman..............................     1

                               Panelists

Richard H. Carmona, M.D., M.P.H., F.A.C.S., Surgeon General, U.S. 
  Public Health Service, Dept. of Health and Human Services......     4
James E. Oatman, Senior Vice President, Fortis Health............     7
Diane Rowland, Sc.D., Executive Vice President, Kaiser Family 
  Foundation and Executive Director..............................     7

                       Submissions for the Record

Prepared Statement of Senator Robert F. Bennett, Chairman........    27
Prepared Statement of Representative Pete Stark, Ranking Minority 
  Member.........................................................    28
Prepared Statement of Richard H. Carmona, M.D., M.P.H., F.A.C.S., 
  Surgeon General, U.S. Public Health Service, Department of 
  Health and Human Services......................................    29
Prepared Statement of James E. Oatman, Senior Vice President, 
  Fortis Health..................................................    31
Prepared Statement of Diane Rowland, Sc.D., Executive Vice 
  President, 
  Kaiser Family Foundation and Executive Director................    32
Center on Budget and Policy Priorities report entitled, ``Number 
  of Americans Without Health Insurance Rose in 2002,'' submitted 
  for the record by Representative Pete Stark, Ranking Minority 
  Member.........................................................    45
Families USA report entitled, ``Census Bureau's Uninsured Number 
  is 
  Largest Increase in Past Decade,'' submitted for the record by 
  Representative Pete Stark, Ranking Minority Member.............    51

 
                        RESHAPING THE FUTURE OF 
                            AMERICA'S HEALTH

                              ----------                              


                       WEDNESDAY, OCTOBER 1, 2003

                     Congress of the United States,
                                  Joint Economic Committee,
                                                     Washington, DC
    The Committee met at 10:45 a.m., in room 216, Hart Senate 
Office Building, the Honorable Robert F. Bennett, Chairman of 
the Joint Economic Committee, presiding.
    Members Present: Senators Bennett, Sessions; 
Representatives Maloney, Ryan.
    Staff Present: Donald Marron, Leah Uhlmann, Colleen J. 
Healy, Melissa Barnson, Lucia Olivera, Rebecca Wilder, Wendell 
Primus, John McInerney, Diane Rogers, Rachel Klastorin, Nan 
Gibson.

        OPENING STATEMENT OF SENATOR ROBERT F. BENNETT, 
                            CHAIRMAN

    Senator Bennett. I want to welcome our panelists. I'll have 
a little more to say about that in a moment and thank them for 
their willingness to come back because this roundtable was 
scheduled from a previous time. The Senate is very 
inconsiderate of our schedules. They require us to vote at very 
odd times, and we had a number of votes that morning that 
required the cancellation, rather postponement to this hour of 
the roundtable. So I'm grateful to the panelists for 
rearranging their schedules and apologize to them for any 
inconvenience that we may have caused.
    We are going to try something different this morning. 
Rather than using the traditional Congressional hearing format, 
we are going to be in a roundtable approach. I want to try this 
approach because too often the traditional adversarial 
atmosphere of a hearing limits the discussion between Members 
and panelists.
    The current debate on health care is dominated by the 
discussion of benefits, deductibles, insurance coverage, 
payment levels, and the like. The attention of policymakers has 
been drawn away from the most important health care issue--the 
actual health of the American people. In the time I've been in 
the Senate, we've spent little or no time discussing health. 
We've spent all our time discussing these other aspects of the 
health care system.
    America has the pre-eminent health care system in the 
world. It is also the most expensive health care system in the 
world. But despite our pre-eminence and our spending, there are 
some disturbing trends emerging with serious implications for 
the health of the American people in the future.
    The numbers are overwhelming. Obesity is epidemic in the 
United States. In recent years, diabetes rates among people 
ages 30 to 39 rose by 70 percent. We know that this year, more 
than 300,000 Americans will die from illnesses related to 
overweight and obesity.
    We also know that about 46.5 million adults in the United 
States smoke cigarettes, even though this single behavior will 
result in disability and premature death for half of them.
    Compounding the problem, more than 60 percent of American 
adults do not get enough physical activity, and more than 25 
percent are not active at all.
    Some groups of Americans are particularly hard hit by these 
disturbing trends, especially the epidemic growth in diabetes. 
Native Americans are two to three times more likely to have 
diabetes than whites. And NIH reports the diabetes among 
African Americans has doubled in just 12 years.
    Many of the problems I just mentioned are completely 
preventable. Having the pre-eminent health care system is not a 
replacement for a healthy lifestyle. Americans need to be 
responsible for their own health and prudent consumers of their 
own health care.
    Much of current medicine is reactive and not proactive. The 
more proactive approach that emphasizes targeted screenings, 
patient education, and proper follow-up by medical providers 
can go a long way to help improve the health and productivity 
of the American people, and incidentally, reduce the cost of 
providing traditional health care.
    However, poor preventive screening, redundant or 
inappropriate treatment, simple medical mistakes, and lack of 
oversight, do little for the health and do increase the cost of 
care.
    So this morning, our goal is to focus on health, and not 
just health insurance. As we examine the challenges that face 
Americans over the next five to ten years, there are at least 
two questions that must be asked. First, what are the major 
health challenges that face Americans over the next five to ten 
years? Second, what are the most innovative tools available to 
meet these challenges?
    Our roundtable discussion this morning will include the 
unique insight of the Surgeon General, Richard Carmona, who is 
spearheading President Bush's HealthierUS initiative. The 
HealthierUS initiative helps Americans to take action to become 
physically active, eat a nutritious diet, get preventive 
screenings, and make healthy choices. We are very happy that 
the Surgeon General was able to find time to join this 
morning's discussion, and we look forward to hearing his 
thoughts on these vital issues.
    We're also pleased to have Mr. Joe Oatman, who is currently 
Senior Vice President of Fortis Health. He is here to elaborate 
on the initiatives the insurance industry is taking to promote 
healthy lifestyles and keep down costs. Many insurance plans 
and employers, including Fortis Health, have taken a ``carrot 
and stick'' approach to encouraging beneficiaries to exercise, 
quit smoking, or follow doctor's orders while monitoring 
chronic illness. Some companies reduce premiums and increase 
interest rates on health care saving accounts, or give away gym 
equipment as rewards for healthier lifestyles. Health and Human 
Services Secretary Tommy Thompson met with Fortis Health and 
other insurers in July to persuade them to find ways to reduce 
the public cost of treating America's obesity epidemic.
    Finally, we are pleased to have Dr. Diane Rowland of the 
Kaiser Family Foundation. Dr. Rowland is a nationally 
recognized expert on Medicaid and the uninsured. Like physical 
inactivity or cigarette smoking, the lack of health care 
coverage is a risk factor for long-term health problems. We 
look forward to Dr. Rowland's insights on the particular 
problems facing lower income Americans and those without access 
to health insurance.
    The ground rules are that we will hear briefly from each of 
our panelists, but we do not want the traditional opening 
statement and presentation of policy, we want a statement that 
will trigger interaction and conversation, and I will recognize 
Members of the Committee for the same kind of statement. 
Congressman Stark, who is the Ranking Member, is maybe 
coincidentally ill today and therefore not able to be with us. 
We will put his statement in the record, and we regret he will 
not be here for his traditional brand of questioning and 
prodding, which always keeps the Committee on its toes.
    Mrs. Maloney, you have the obligation to pick up that 
particular lance and carry it forward. So, with that statement 
on my part and Congressman Stark's statement as the official 
opening statement of the Minority, we will go immediately in 
the roundtable kind of conversation and General Carmona, we 
will start with you.
    [The prepared statement of Senator Robert Bennett appears 
in the Submissions for the Record on page 27.]
    Representative Maloney. Mr. Chairman, on behalf of Mr. 
Stark, I would like to put a statement in the record. He sends 
his regrets, he is very ill today. It's good that you're having 
this health care hearing today.
    Senator Bennett. Yes. His statement is included in the 
record.
    [The prepared statement of Representative Pete Stark 
appears in the Submissions for the Record on page 28.]
    Representative Maloney. He wanted very much to have this 
report from FamiliesUSA on the census numbers of the uninsured 
numbers is the largest increase in the past decade. The total 
number of uninsured now exceeds the cumulative population of 24 
states and the District of Columbia. I'd like permission to 
place this in the record with the accompanying map that shows 
the uninsured. Likewise, a report from the Center on Budget and 
Policy Priorities, ``Number of Americans Without Health 
Insurance Rose in 2002,'' and a report that shows that the 
increase would have been much larger if Medicaid and the SCHIP 
enrollment gains had not offset the loss of private health 
insurance. So I request permission to place both reports, along 
with his statement in the record. Thank you.
    [Families USA report entitled, ``Census Bureau's Uninsured 
Number is Largest Increase in Past Decade,'' submitted by 
Representative Stark appears in the Submissions for the Record 
on page 51.]
    Senator Bennett. Without objection it will appear with his 
statement.
    General Carmona, let's kick this conversation off and be 
prepared to be interrupted and questioned as we go along, in 
ways that are probably not traditional in a congressional 
hearing, but that I hope will be productive in giving us a 
record and understanding of where we are.
    Surgeon General Carmona. Thank you Mr. Chairman.
    Senator Bennett. Don't worry Members. If you have a 
question just ask for recognition and we will do our best to 
accommodate you regardless of when you come or whose turn it 
is. We want it to be a true roundtable.
    Surgeon General Carmona. Thank you, Mr. Chairman. It's a 
pleasure to be with you here today and thank you and your 
colleagues for your leadership in calling this discussion.
    Nearly two out of three of all Americans are overweight or 
obese. That's a 50 percent increase from just a decade ago.
    More than 300,000 Americans will die this year alone from 
heart disease, diabetes, and other illnesses related to 
overweight and obesity.
    Obesity-related illness is the fastest growing killer of 
Americans. The good news is that it's completely preventable 
through healthy eating--nutritious foods and appropriate 
amounts and physical activity. The bad news is, Americans are 
not taking steps to prevent obesity and its co-morbidities.
    The same is true for other diseases related to poor 
lifestyle choices such as smoking and substance abuse.
    Put simply, we need a paradigm shift in American health 
care.
    There is no greater imperative in American health care than 
switching from a treatment-oriented society to a prevention-
oriented society. As American waistlines have expanded, so has 
the economic cost of obesity, now totaling about $93 billion in 
extra medical expenses a year.
    Overweight and obese Americans spend $700 more a year on 
medical bills than those who are not overweight. We simply must 
invest more in prevention, and the time to start is during 
childhood, in fact, even before birth.
    Fifteen percent of our children and teenagers are already 
overweight. Unless we do something now, they will grow up to be 
overweight adults. None of us wants this to happen.
    We can't allow our kids to be condemned to a lifetime of 
serious, costly, and potentially fatal medical complications 
associated with excess weight. The science is clear.
    The fundamental reason that our children are overweight is 
this: Too many children are eating too much and moving too 
little.
    The average American child spends more than four hours 
every day watching television, playing video games or surfing 
the web.
    Instead of playing games on their computers, I want kids to 
play games on the playground. As adults, we must lead by 
example, by adopting healthy behaviors in our own lives. We've 
got to show kids it doesn't matter whether you're picked first 
or last, but that they're in the game. Not all kids are going 
to be athletes, but they can be physically active.
    We've got to show them how to reach for the veggies or 
healthy snacks rather than fatty sugary snacks that they've 
become accustomed to.
    Our commitment to disease prevention through healthy 
eating, physical activity and avoiding risk is one that our 
entire society must be prepared to make in order for this to be 
effective.
    As you mentioned, President Bush is leading the way through 
the HealthierUS prevention initiative.
    HealthierUS simply says, ``Let's teach Americans the 
fundamentals of good health; physical activity, healthy eating, 
getting checkups and avoiding risky behavior.''
    Secretary Thompson is leading the Department of Health and 
Human Service's efforts to advance the President's prevention 
agenda through Steps to a HealthierUS, which emphasizes health 
promotion programs, community initiatives and cooperation among 
policymakers, local health agencies, and the public to invest 
in disease prevention.
    As important as these efforts are, we cannot switch 
America's health care paradigm from treatment to prevention 
through government action alone. The fight has to be fought one 
person at a time, one day at a time. All of us must work 
together, in partnership, to make this happen.
    Secretary Thompson has asked employers to make health 
promotion part of their business strategy. In September, he 
released a report, Prevention Makes Common Sense, highlighting 
the significant, economic toll of preventable diseases on 
business workers and the nation. The key finding of the report, 
obesity-related health problems cost U.S. businesses billions 
of dollars each year in health insurance, sick leave, and 
disability insurance.
    The report highlights the need for and cost effectiveness 
of employment-based prevention strategies. Recently, I joined 
my colleague and former Surgeon General David Satcher and the 
National Football League in kicking off their partnership to 
promote school-based solutions to the obesity epidemic. I also 
joined basketball star, LeBron James in launching Nike's PE2GO 
program, which provides equipment and expertise to schools so 
they can offer fun physical activity, school-based programs.
    As Members of Congress, you can influence the behavior of 
your constituents in many ways, obviously first by leading by 
example. Secretary Thompson put himself on a diet and 
challenged all HHS employees to get in shape by being 
physically active for at least 30 minutes a day. You could 
issue the same challenge to your staff members and your 
constituents. Secretary Thompson has lost 15 pounds and 
continues to work out every day and as you know, follow the 
example of our President, who has a pretty ambitious routine on 
a daily basis of working out and setting that example.
    You can also help educate your constituents about the 
importance of prevention, through town hall meetings and by 
establishing partnerships in your own communities. The total 
direct and indirect cost attributed to obesity is about $117 
billion per year or $400 for every man, woman, and child in the 
country.
    I'm a doctor, not an economist, so I've seen the cost in 
more than just dollars and cents. It's about a mother who can 
no longer provide for her children. It's about a child who can 
no longer ask a father for advise. It's about real human cost, 
300,000 American lives lost each year. Just a 10 percent weight 
loss through healthier eating and moderate physical activity 
can reduce an overweight person's lifetime medical cost by up 
to $5,000, maybe even save that person's life, not to mention 
what it will do for their self esteem and self sense of well-
being and for the well-being of their loved ones. Where else 
can you get that type of return on an investment?
    Thank you and I look forward to our discussion.
    [The prepared statement of Surgeon General Carmona appears 
in the Submissions for the Record on page 29.]
    Senator Bennett. Thank you very much.
    We might as well start the discussion off right at the 
beginning. The one thing you can do to absolutely guarantee 
your financial future is to write a book about diet.
    [Laughter.]
    That is the absolute home run, everybody has a diet book. 
Dr. Atkins was very famous, Mr. Pritikin became famous, and so 
on. And like every household, we have on our shelves a whole 
bunch of diet books.
    There is a growing theme among these diet books, which I 
have raised in my other assignment as Chairman of the 
Agriculture Appropriation Subcommittee, that one of the reasons 
for obesity is that Americans are eating too many carbohydrates 
and that carbohydrates, according to some of these medical 
sources, actually produce more fat than fat does. And that by 
starving themselves from eating fat and pigging out if you will 
on carbohydrates, Americans are getting fatter even while they 
are on diets. And according to some of these folks, the villain 
is the USDA food pyramid, which is very heavy on carbohydrates.
    We have colleagues here in the Senate, Senator Sessions and 
I, who have lost 50 pounds and done it entirely by cutting out 
the carbohydrates. Not cutting them out, but cutting them down 
and saying, we will not eat anything but leafy vegetables as 
carbohydrates, but we will cut out the heavy emphasis on grains 
that the USDA pyramid calls for. We increased our intake of 
protein, and yes, sometimes the fat. And they are walking 
examples that they've been able to lose very substantial 
poundage.
    I've never had a weight problem, I guess because of my 
genes, but joining my wife as she struggles with hers, I've 
lost 8 to 10 pounds by cutting down on the amount of 
carbohydrates that I have consumed and they are supposedly 
healthy carbohydrates. Fruit juice, for example. By switching 
from fruit juice to water, that alone--well I won't go on and 
on about this. Let's not----
    [Laughter.]
    But the reason I raise it is because you emphasize the 
school activity. You emphasized the importance of dealing with 
our children. The USDA pyramid is scripture in schools, and our 
kids are being told over and over again to eat more 
carbohydrates and there is a whole industry that has grown up: 
walk down the aisle of the supermarket and it says ``fat free'' 
and you read the label and they're filled with carbohydrates. 
Now there is no fat, and I love them, and I ate them and I 
thought ``Boy, I'm doing great, look, I've cut down on all my 
fat.'' But, I didn't seem to be able to do anything about my 
weight. It seems to me it is the responsibility of the Federal 
Government, if they are leading this charge, to do more than 
just urge us to eat less and exercise more. If indeed there is 
some scientific basis for this, and I recognize this is a major 
debate within the scientific community, but if, in fact, there 
is some scientific basis for the idea that Americans are not 
eating enough protein and eating too much carbohydrate, then it 
ought to be the government that does the science and the 
government that comes out with the study instead of all of 
these independent gurus who keep getting rich selling books. 
Now, do you have a reaction to that? Or perhaps Mr. Oatman, you 
have experience with that? Let's start the roundtable with a 
very simple one, which is, is the USDA food pyramid good or 
bad?
    Mr. Oatman. I can respond to that. This is not a corporate 
position or a company position, but a personal comment. I have 
worked with the low carbohydrate diet since April of this year 
and lost 40 pounds. My wife has worked with it and lost 50 
pounds and----
    Senator Bennett. Exhibit B.
    Mr. Oatman. I would have to echo your comments considerably 
Mr. Chairman that I think we need lots of good scientific 
research on this very topic and that by working on helping 
people understand the education component, what is the 
appropriate diet and having strong scientific evidence behind 
that is very critical to making the changes that are needed to 
improve this area of obesity, which is an epidemic.
    [The prepared statement of James Oatman appears in the 
Submissions for the Record on page 31.]
    Senator Bennett. Any other comments?
    Surgeon General Carmona. Yes, I think you've covered very 
broadly the whole issue that's so complex before us. An issue 
that often is not discussed as it relates to this is the issue 
of health literacy. Because you know, overall we are largely a 
health illiterate society. You pointed to that in many of your 
statements. People are confused, they read different books, 
they watch infomercials in the middle of the night, they don't 
know what is science and what is hype. And so, there is a 
considerable body of information out there, good scientific 
information about physical activity, about the value of a 
balanced diet. Clearly, carbohydrates are part of that, as are 
proteins, as are fat. Fats are essential in our diet. But it's 
the balance, that's what we're talking about, creating energy 
balance which really is how much you take in, what your needs 
are, which we find are very individualized, depending on how 
old your are, how active you are and so on, and how much you 
put out every day. Marathon runner versus a sedentary officer 
worker.
    So there is no simple answer for each person, but one of 
the things that we feel is important is that we must build the 
health literacy into society so that society has the capacity 
to understand these messages and be able to ask the right 
questions of their health care providers and purchase the right 
foods so that that will constitute a healthy diet.
    Dr. Rowland. Mr. Chairman, I also think one has to take 
into account affordability. For many of the lowest income 
families, the food that's most available at the cheapest price 
is often the food that's the worst for them. We need to really 
think about ways to make carrots more available than some of 
the other kinds of Big Macs that people can get so quickly. 
When people are waiting in line at a hospital for their child 
to be seen, the place you go is Burger King or McDonald's for 
the 99 cent meal. I think that is another part of what we have 
to deal with.
    [The prepared statement of Diane Rowland appears in the 
Submissions for the Record on page 32.]
    Senator Bennett. Senator Craig has a diet that forbids him 
carrots.
    [Laughter.]
    Representative Maloney. Mr. Chairman I would like to follow 
up on the Chairman's comment on the food pyramid and the 
Surgeon General mentioned that the public should be more 
informed and better educated, but if the education coming from 
the federal FDA or the Surgeon General or the federal 
government is faulty, we should be told that. When we go to the 
store, they have all these advertisements that say ``fat 
free.'' Well, maybe we should require them to say that ``fat 
free'' means you may be gaining more weight if you eat it. It's 
the exact opposite of what it is and with all of the diets that 
are out there, and we have two examples here where they lost 50 
pounds--I'm going to go on your diet, I'd like to lose some 
weight.
    Senator Bennett. I lost five.
    Representative Maloney. You lost five. Okay. But in any 
event, there are many, many diets out there that say that the 
Federal Government's food pyramid is faulty, that it is 
incorrect, that it is unhealthy actually. And my question 
really follows up on the Chairman's, what are we doing to 
review the health pyramid? Is this something we have to pass 
legislation on or is this something that is under review right 
now? The public should know. You said they should be more 
informed, but the government needs to tell them what's healthy 
for them and I was taught the food pyramid in school and it's 
still being taught. Should that be changed? Is it under review? 
The scientific evidence seems to indicate, if these books are 
correct, it's a faulty pyramid for health.
    Surgeon General Carmona. I'd be happy to comment. It is 
under review. Heath and Human Services and the Department of 
Agriculture have a group that has been convened for some time 
now, reviewing the elements of the food pyramid, the 
constituents that make that up. But I'd like to, maybe, just 
make a comment about the issue. Is it bad information? You 
know, science evolves very, very quickly and at the time when 
the food pyramid evolved, and the best science was allied to it 
at that time, this was the best that was to offer. But science 
evolves so rapidly now--almost on a daily basis--that it's hard 
to have something fixed for years and say this is the best way 
to do something. Look at the genomic project, for example, and 
how quickly that's come before us.
    So I think what we have is an evolution. We're learning 
much more about the value of different constituents of diet, 
how they should be appropriated across the board and I think 
what we're seeing is really the new science that's come before 
us. And we have to figure out a way that we can keep this as a 
dynamic process. It will never be static, in our lifetime or 
our children's lifetime, because the science is going to move 
too quickly. We always have to be prepared to incorporate that. 
Those meetings are taking place now and there is a recognition 
within the federal government that that needs to occur because 
of the reasons I've mentioned.
    Representative Maloney. When will the report be available? 
And you mentioned, science changes swiftly, yet the food chart 
hasn't changed in my lifetime.
    Surgeon General Carmona. You're absolutely right. 
Representative Maloney. So if it changing swiftly, it's not 
being reflected
    Senator Bennett. It has changed, it has changed, but it's 
gotten heavier on the carbohydrates.
    Representative Maloney. Really? Wow.
    Surgeon General Carmona. This is not a trivial issue.
    Representative Maloney. When will the report be due? When 
was the report due in HHS?
    Surgeon General Carmona. I don't have a date for you. I can 
get that for you. I'm not personally involved in that, but 
there is a group of both USDA and HHS folks that are working on 
this now and have been for some time.
    Senator Bennett. I raised this issue during the 
appropriations hearings with the USDA and put the cat among the 
pigeons, as they say. Rather significantly, there was a lot of 
reaction among the witnesses. Not to beat this, but Dr. 
Rowland, if General Carmona's comment is correct and obesity is 
costing us $117 billion a year, half of that would go a long 
way towards solving some of the problems you are concerned 
about, wouldn't it?
    Dr. Rowland. It certainly would.
    Senator Bennett. Okay.
    Representative Ryan. Do you mind if I go in another 
tangent?
    Senator Bennett. Absolutely.
    Representative Ryan. Mr. Oatman, in your testimony, you 
highlight three elements of lower cost via lifestyle changes 
and the third one you talk about is incentives and I want to 
ask the three of you, to kind of throw it out there.
    Senator Bennett. We haven't asked you for your testimony 
yet, so I'm glad you read it, go ahead.
    Representative Ryan. They are a constituent.
    Senator Bennett. Okay.
    Representative Ryan. But a good one. Incentive structures. 
How do you assemble a good incentive structure to encourage 
people to engage in healthy lifestyles? I'm thinking of an 
employer in Wisconsin who is really cutting edge on this who 
has a program for his employees, has a couple hundred 
employees, who gives them a better deal on their health 
insurance, on their out-of-pocket costs on co-pays and their 
deductibles, if they agree to sign up to this healthier 
lifestyle program in the company. Go to the gym, get a free 
membership, have a better diet, and if they engage in this, 
then they get lower cost out-of-pocket. If they don't, and all 
screening and assessment is a part of that, if they chose not 
to do that, they're going to have to pay for it. And that is a 
real clear incentive structure and the take-up rate for this 
program in this company I think is about 92 percent and their 
health care cost, where you see most employers are talking 
about double digit health care increases in their premiums, 
they have been keeping them at single digit increases.
    So, there is one example of a company, you know, actually 
putting a very solid incentive structure in place. Can you tell 
us more about what the market is doing? What you as a market 
participant are doing to put good incentive structures out 
there so the consumer actually, it pays to have a healthier 
lifestyle. And I'm also interested in the rest of the 
panelists, what you are seeing. I know Kaiser, I mean you are 
the cutting edge: researchers in a lot of these areas, what do 
you see that's taking place, the new phenomenon in the 
marketplace, are there things that we can do in tax laws or 
public policy to improve the availability of these new 
incentive structures? Let me just throw it out for the 
incentive structure discussion.
    Mr. Oatman. Sure. Let me respond to that. I think what that 
employer is doing is very remarkable and what more people need 
to do. We've tried to accomplish similar things in some of the 
products that we sell. There are four basic components to the 
kinds of things that we have done that we think have proven to 
be very, very successful.
    The first is medical saving accounts (MSAs). We are the 
largest writer of medical savings accounts and we have seen 
that the health care of people that decide to pay a significant 
portion of the first dollars of health care spending themselves 
and where they have got more responsibility for that is 
significantly lower. And it's not only significantly lower at 
the time they buy the policy, but it continues for many years 
into the future, that they continue to have lower costs because 
they're very much engaged in the game.
    Senator Bennett. Can I just ask you on that point. Is there 
any indication that because they are paying the costs, they 
don't seek care that they really need, or is it, in fact, the 
change in lifestyle that makes them healthier?
    Mr. Oatman. You would think that if they were not getting 
the care they needed, then you might see an increased incidence 
of the more catastrophic and serious things and we do not see 
that. We see a lower incidence of the serious things as well.
    Senator Bennett. Thank you.
    Mr. Oatman. I think there is evidence that is not 
happening.
    Dr. Rowland. However, some of what we see with the use of 
those accounts is that younger, healthier people who are less 
likely to have a lot of health expenses are the ones who opt 
for that account. Very few people with serious chronic illness, 
which is where most of the cost in our health system occurs, or 
with ongoing diabetes, are in these kinds of programs.
    Representative Ryan. What adverse selections data is out 
there for MSA? I know MSA is going to cap and they're fairly 
limited, but could you address that as well since I think 
that's where we are headed?
    Mr. Oatman. Actually, we were surprised. We thought that 
indeed that might happen, that the younger people would buy 
this product and healthier people would buy this product. In 
fact, we've seen a different pattern. In fact, the average age 
of the buyer is older, generally it's a very much a cross 
section of customers that buy it, that look very much like the 
rest of our business and quite frankly we were surprised by 
that. We felt we would see something different.
    Representative Ryan. Is it because they'll buy an MSA and 
then a catastrophic plan. So it's people who may be less 
healthy, who know that they're really going to need 
catastrophic coverage at some point and they'd rather manager 
their cost and get a better deal in their health insurance. So 
is it, in fact, that you are getting some sicker people into 
these MSAs, for those reasons? That it's actually the reverse 
argument of an adverse selection argument?
    Mr. Oatman. I don't think that it's a reverse selection or 
a positive selection. It seems to me that it is pretty much 
like the same kind of customer. The one interesting thing too 
is that for someone who gets sick, a typical family MSA account 
with a $3,400 deductible, their costs are capped at that 
$3,400. And often, in many other products that are not MSA 
products, a very sick person could end up going to a much 
higher number of out-of-pocket cost. So actually, for the sick 
person, the MSA account tends to work pretty well in limiting 
to a fixed dollar amount, their out-of-pocket expenditures. And 
we see that as people do get sick, they are very pleased with 
their product, and they hang on to it and it serves them very 
well.
    Senator Bennett. Is it portable from employer to employer?
    Mr. Oatman. Currently, the medical savings accounts that 
are offered are only offered to the self-employed and to small 
employers. And quite frankly, our experience has been limited 
to mostly the self-employed. Because of the lack of portability 
many small employers are not adopting it as much. They are 
tending to go for a health reimbursement account, it's tended 
to be the way they have gone. Many of the limitations I think 
on medical savings accounts have limited their applicability to 
a very small subset of self-employed people and with the 
expansion of MSA rules, we think they would have much broader 
applicability.
    Representative Ryan. Your business--I think because you are 
a Wisconsin company I'm familiar with your business--your 
business in HRAs really grew drastically after the IRS ruling 
on Health Reimbursement Accounts (HRA). Could you explain why 
that occurred and what benefits HRAs have over MSAs and why 
it's easier to get that product out to the marketplace?
    Mr. Oatman. We market HRA exclusively to small employers 
and in fact, the average size of employer group that buys our 
product is six lives. We introduced a health reimbursement 
account product and found that our sales very, very quickly 
went to 25 percent of our sales, that employers are hungering 
for this kind of solution to health care costs.
    Representative Ryan. Just for everybody else who isn't 
familiar with the IRS ruling, could you just quickly describe 
that? Some people might want to know that.
    Mr. Oatman. I'm not sure I'm familiar with all of the 
details, but basically, the employer can set up an account for 
an employee and the employee can use that account for health 
care expenses under the deductible, and unlike medical spending 
accounts that many large employers have, this account can be 
carried forward year after year. So, it's a very positive thing 
for the employee as well.
    Representative Ryan. No use-it-or-lose-it rule?
    Mr. Oatman. It's no ``use-it-or-lose-it'' rule with that 
product and we found that employers are looking for a way to 
responsibly partner with their employees in the health care 
cost equation and so have been looking for solutions. As a 
result of this, it took off well beyond our expectations.
    Senator Bennett. Let me ask a question that I think Dr. 
Rowland is interested in. Are these employers those that would 
otherwise cancel their insurance because of the cost and 
therefore increase the number of uninsured? Do you think you 
are reducing the number of uninsured with this product?
    Mr. Oatman. Yes. The data is very early and we haven't done 
all the analytics on health reimbursement accounts. I can give 
you the numbers on medical savings accounts. We are finding 
that half of the people that are buying that product, 
previously had no insurance coverage at all. So it's addressing 
a need for people who previously were not in the market and 
have decided to get into the segment.
    Representative Ryan. Is that just in all MSA, or your pool 
of business?
    Mr. Oatman. Our pool of business. I'm unfamiliar with the 
rest of the business.
    Senator Bennett. Is there anybody else offering this same 
mix that would expand the amount of data that we can look at 
for this phenomenon?
    Mr. Oatman. Yes. There are a number of carriers that are 
offering these products. I think that you will see an expansion 
of health reimbursement accounts, now that the IRS has 
favorably ruled on them. Medical savings accounts are offered 
by rather more limited number of carriers because they didn't 
want to make the investment, given that there was a termination 
date associated with the legislation.
    Senator Bennett. We fought that fight in the Senate--and 
basically we lost it--to try to get more opportunity for 
medical savings account experimentation. I don't think the 
opportunity to experiment is big enough to give us enough data 
to make it complete.
    Dr. Rowland. Mr. Chairman, we do an annual survey of 
employers of the health benefits that they offer, and in this 
year's 2003 survey we saw among some of the jumbo firms, those 
over 2,000 employees, the beginning of offering of a broader 
mix of services, including some of the medical reimbursement 
accounts with the catastrophic plan attached to it. That was 
one area in which many of the employers said they were going to 
look at instituting in the future. Mostly, however, in our 
survey, it was those very, very large firms where they felt 
they could have a whole mix of insurance options as opposed to 
the firms under 200. So, we're talking about very different 
markets here.
    Representative Ryan. Dr. Rowland, have you looked at the 
connection between incentive structures and these health 
reimbursement type of accounts? The question I'm asking is, 
because right now we're in the middle of a Medicare conference 
report, we're debating health savings accounts. It's another 
iteration, but it has all of the benefits basically of all of 
these different products kind of wrapped into one product. No 
use-it-or-lose-it, it's portable for the employee, the employee 
and the employer can put tax deductible dollars into it, you 
have to buy catastrophic coverage.
    The question I'm trying to get at is, do we have evidence 
and data that suggests that you can get the right kind of 
incentive structure set up inside these plans where an employee 
has his or her own money at stake and the first dollar of 
coverage, the employer sets up some kind of incentive system so 
they lead a healthier lifestyle. Their own money is at stake 
because it's money that has been given to them by their 
employer that is part of their property or they put their own 
tax deductible into it. Is there evidence that suggest that you 
can get these incentives set up and if we fix some of the 
strings and the problems that are associated with Medical 
Savings Accounts (MSA), Flexible Spending Accounts (FSA), 
Health Reimbursement Arrangements (HRA), which is essentially 
what Health Savings Accounts (HSA) have attempted to do. I know 
I'm throwing a lot of acronyms out.
    Senator Bennett. You sound like you work for the Pentagon.
    [Laughter.]
    Representative Ryan. Can we get a good--can we really push 
this incentive issue?
    Dr. Rowland. There's really not much data that I'm aware of 
on the use of incentives at all. We're just beginning to pick 
up some of the employer's strategies to contain cost in our 
last survey, but none of them include anything along the lines 
of the wellness incentive. We can certainly ask that in this 
year's survey which is about to go into the field.
    Representative Ryan. It would be interesting to see that.
    Dr. Rowland. What we do know however is, in some of the 
public opinion work we've done trying to assess health 
insurance options that the public views, that many members of 
the public are very concerned about ending up with health care 
costs they can't afford and so they seem very risk-adverse in 
some of our questioning to go into a system with a high 
deductible. So I think there is really a pretty limited 
understanding of what these plans are or how they operate.
    Representative Ryan. Sure. I understand a lot of those 
questions don't necessarily say that you'll have the money in 
your account to cover the deductible and then when you reach 
that level, your insurance kicks in.
    Dr. Rowland. Well, and as you pointed out, one of the 
problems is that the structure of these plans vary so 
tremendously from one to another that you're really comparing 
apples to oranges in most of the cases.
    Representative Maloney. Dr. Rowland, in your comments 
earlier, you mentioned that in some cases, families may not be 
making good health choices because they cannot afford more 
protein. Have you done any studies on what the impact has been 
on granting Medicaid, which has really capped the amount of 
money that can go to the poor and the competition with health 
care, and have you thought about incentives of maybe more food 
stamps would go farther if you bought vegetables as opposed to 
potato chips or that type of thing that could encourage 
healthier eating patterns?
    And the Surgeon General, you mentioned quite a bit about 
exercise and the importance of it. I represent the Rusk 
Institute, which really was a trailblazer in rehab and 
exercises as a tool to heal. And what they do there is 
absolutely remarkable. I feel that future research will really 
change the way we approach our lives because with exercise, you 
can literally heal people that are very, very ill and any 
studies that the government may be doing on the impact of 
exercise.
    Everyone says exercise and build it into your life, but 
when we look at our public school system, oftentimes gym 
classes, after-school programs, the very programs that begin a 
healthy life pattern, where you learn that that has to be part 
of your life, regrettably are being cut out of many public 
education programs. What are we doing to counter that? 
Obviously, if we raise healthy people, the cost on our medical 
system both for individuals, for business, for the government 
is far, far less. Also, any comments on screening?
    Obviously, if we screen people early and find out what 
health ailments they may have, whether it's prostate cancer or 
breast cancer, the degree of probability of healing it and 
healing it in a cost effective way goes up dramatically. So 
those are items if anyone wants to comment from both the panel 
and the Chairman and so forth.
    Senator Bennett. Feel free to dip into your opening 
statement now. This is your opportunity to read those things 
that we didn't give you a chance to read.
    Dr. Rowland. Well let me just comment from the perspective 
from low-income families and their access to affordable foods. 
Most of the work that we've looked at involves the Native 
American population and some of the real disparities in terms 
of the kinds of foods that were made generally available 
through some of our assistance programs. I think there has been 
a lot of work now to try to remedy that, but historically that 
has been an area where we've know that the choice of food has 
been particularly poor for the health of that population.
    In terms of my own statement, I do recognize that advances 
in improving health and combating obesity offer a great promise 
in the health care system. But I also am concerned that for 
many Americans, those gaps will not be closed by just improving 
healthy behavior alone. Health insurance really is a key to the 
door for getting people into the health system for both 
preventive care as well as for the follow-up medical care that 
may be needed. And yesterday's statistics from the Census 
Bureau reporting that we had 43.6 million Americans in 2002 who 
were uninsured, I think provided a wake up call for all of us 
that this is a problem that's growing and not a problem that's 
going away.
    But what I'd like to put before the Committee's 
consideration is that we also have to think about the 
consequences of lack of health insurance. And in my longer 
statement, I reviewed much of the evidence on the fact that an 
uninsured population is also not a healthy population. They 
have less access to care, they tend to postpone or forego 
needed care, go without needed prescriptions, and receive less 
preventive care. I think the Surgeon General would agree, that 
this also brings them in later at a point where their diseases 
have advanced more so they are less likely to gain some of the 
therapeutic advantages that early detection may bring. And as a 
result, they have a higher mortality rate.
    I think we can't be complacent when the Institute of 
Medicine (IOM) is estimating that some 18,000 Americans die 
prematurely each year because of their lack of health 
insurance. But it also is a substantial burden on our society 
as a whole. Lack of coverage in the middle ages means that when 
people come on to the Medicare program, they are in poorer 
health. We now estimate that about $10 billion a year could be 
saved in Medicare alone if we had people engaged in healthier 
behaviors as well as in having health insurance coverage to 
treat illnesses before they age onto the Medicare program.
    I think these statistics compel us to try to provide both a 
coverage initiative as well as a healthy behavior initiative to 
make our nation a healthier place. And unfortunately, in 
today's economy, I think the employer-based coverage we've 
enjoyed, as well as the public coverage, are in serious 
jeopardy.
    Last year, employer premiums rose by 14 percent. We now pay 
$9,000 on average a year for a family health insurance policy, 
unaffordable for many of the lowest income. The employee's 
share for those policies is roughly $2,400 a year, which is a 
very big burden on employees and I think we're going to see in 
the future, more and more low wage employees not able to even 
pick up the health insurance offered by their employer and 
we're seeing employers really struggle with how they can limit 
their cost and now we can expect some employers to decide not 
to offer coverage because of the price tag.
    On employer behavior, we've had very promising statistics 
in that there has been no drop off in the percent of employers 
offering coverage, but there has been a drop off in the 
percentage of employees who are able to gain insurance through 
the workplace.
    On top of that, the good news in this year's Census data 
was that while the employer coverage was slipping and creating 
more uninsured Americans, Medicaid actually grew and provided 
some coverage to pick up at least some of the children who may 
have lost coverage when their families were uninsured. But 
Medicaid itself is now in dire fiscal straits because of the 
revenue depletion at the state level and the fact that states 
are making more and more difficult choices about how to 
restrict their Medicaid budgets. Virtually every state is 
looking at reducing eligibility, reducing benefits, really 
unraveling some of the progress that's been made since 1997 
when the State Children's Health Initiative was passed to 
complement Medicaid and really try to address our uninsured 
children.
    So I think as a society, one of our pressing problems 
remains how do we maintain coverage in the employer-based 
sector and in Medicaid and how do we expand coverage so that 
everyone is on an equal playing field to get the preventive 
care they need and to be able to participate fully in the many 
benefits of our health system--whether that is early education, 
wellness programs or other things. Lack of health insurance 
really is undermining the health of our nation, just as some of 
our unhealthy behaviors are.
    Senator Bennett. Thank you very much. May I offer a slight 
correction? You say the cost is $9,000 a year and $2,400 of 
that is paid by the employee?
    Dr. Rowland. Right.
    Senator Bennett. All of that is paid by the employee?
    Dr. Rowland. Right.
    Senator Bennett. We have created the fiction in this 
country that it's free. But having been an employer, I know 
that if the employee does not return enough economic value to 
me by his labor to cover the full $9,000, I can't afford him. 
And even though it doesn't show up on his W-2, he earned that 
entire $9,000. And if we can get that concept firmly rooted in 
people's minds, that this isn't free, this is your money, it 
might go a long way towards solving the educational problem 
that you talk about, because a lot of folks say ``Well, I don't 
have to worry about that. That's the employer's money, it's 
free to me. So whatever he decides to do, is just so much gravy 
to me.''
    No, it's your money and you ought to take control of it and 
be educated about it and have some degree of say as to how it 
is spent. And that gets us back to cafeteria plans and all the 
rest of that.
    I don't know that you have any numbers on this, I 
discovered when I was running a business, and we did set up a 
cafeteria plan, where we said you have X number of, we called 
them ``flex bucks,'' we will spend--pick a number, it was about 
$350 a month--that you, the employee, can dictate how it's 
going to be spent. And, you tell us ``here is the cafeteria of 
options.'' Well, the first employee comes in and he says, ``Are 
you out of your mind? I've got four children, I want every dime 
of that $350 to go to health coverage, and of course, I'll have 
to add another $150 myself to get the coverage I need for my 
family. I have no options. What do you mean cafeteria plan? I 
need every bit of it.''
    Then the next employee comes in and she says, ``Well you 
know, my husband works at Hill Air Force Base and he is covered 
under the Federal Employee Health Benefits Program, and I don't 
need any health coverage. And I'd like the $350. We've got 
little kids; I'd like it to go to daycare. Could you spend it 
that way?'' We'd say ``Sure. Give us the name of the daycare, 
we'll send the $350 a month check to your daycare.''
    The next employee comes in and says, ``Hey, my husband 
works for a law firm and he has got all kinds of health care 
coverage at his law firm, I don't need health benefits and I 
don't have any small children. Can you put that in my 401K?'' 
And we'd say ``Yeah, we can put it in your 401K,'' etcetera.
    Well, it made for a much happier workforce because they 
began to get control of these benefit dollars. But the great 
thing that hit me, that I would like some statistics on, if 
anybody has them, how much double coverage do we have? Where we 
have two-income families, are both husband and wife in plans 
where the employer is paying for both of them, when in fact, 
they would be covered by just one. Is there some duplication 
there? We are spending more GDP than any other country in the 
world. We're not necessarily healthier than any other country 
in the world. Although we do have better health care than 
anybody else, except for the people who fall between the 
cracks. How much of that is eaten up in duplication and 
administration and checking and all other rest of that. Does 
anybody have any reaction?
    Dr. Rowland. There is some duplicate coverage. Although 
what we do find is that one of the major reasons that an 
individual cites as not taking up their employer's offer is 
that they're getting coverage through their spouse. We see also 
one of the new incentives that many employers are starting to 
offer is they are giving bonuses to employees who will sign up 
for their coverage through a spouse's plan as one of their 
strategies for reducing their overall health care costs.
    So I know in one situation, one employee of ours said her 
spouse was offered $1,000 in additional salary for the year if 
he did not elect the health insurance coverage and instead 
signed with hers through Kaiser.
    Senator Bennett. Yeah, and that $1,000 means that the 
employer probably saved $4,000 or $5,000 on it. You are in the 
insurance business. Do you have any reaction to this?
    Mr. Oatman. We're in, of course, as I mentioned in the 
individual and small group segment and quite frankly, we don't 
see very much duplicate coverage in that end of the market. 
Obviously, if an individual is going to buy coverage, there is 
no duplicate coverage there and similarly with small employers, 
I think that they know their employees, know the situations, 
and often you don't find as much duplicate coverage in our end 
of the market. So our experience with it is pretty limited.
    Senator Sessions. A couple of things, Mr. Oatman, one 
regarding medical savings accounts and those type plans. I have 
heard recently that the uninsured who are often poor, not 
always, but often, much poorer, when they go to the doctor, 
that they pay much more for the same care two, three, four 
times, what someone who is insured would. And I wonder if that 
impacts adversely medical saving account holders also.
    Mr. Oatman. Let me explain.
    Senator Sessions. Medical, less physicians, excuse me, 
hospital care probably more often.
    Mr. Oatman. The medical savings account customer has the 
benefits of the negotiated rates that we have with doctors and 
hospitals, even on the portion which they fund themselves.
    Senator Sessions. Is that true with all the plans that you 
know of?
    Mr. Oatman. Certainly all of the plans that we offer the 
insured has the benefit of those deductions. I do think it's a 
tragedy that the uninsured people who can least afford it have 
to pay full retail.
    Senator Sessions. Unfortunately, that's a serious problem 
Mr. Chairman. One more thing. There was this very moving 
article in one of the newspapers about a lady who was a nurse 
in charge of--I'll ask the Surgeon General and others who want 
to comment--in helping people who were diabetic. And she was 
highly motivated, visited people in their homes, gave rewards 
to people who stayed on their diet and exercised and did the 
things that had the ability to improve their health condition. 
But the science on even that kind of care was not really 
encouraging in the number of people who lost substantial amount 
of weights, who stayed consistently on their diet, it still was 
rather discouraging actually, the numbers there. So I guess my 
question is, I'm not sure we used to have this many people in 
this condition, is this a lifestyle thing that really does need 
to be addressed early, that once you have a lifetime of poor 
eating habits, it's much less like to be able to change than 
otherwise?
    Surgeon General Carmona. Senator, I think you've hit the 
nail on the head. It is a lifestyle issue and I agree with my 
colleague, Dr. Rowland, about the impact of health insurance 
and the need for it. But many of the things that we can do as a 
society really involve lifestyle and really very little cost.
    Getting some physical activity every day, the issue of 
exercise, the word exercise turns off some people. ``I don't 
want to exercise.'' Well, take a walk. Go play with your kids, 
you know, park in the back of the parking lot in the mall and 
walk through the mall rather than looking for the closest spot 
to the door. Take the stairs when you have a few flights, 
rather than the elevator, and put some groupings of physical 
activity together throughout the day. Eating a healthy diet, 
which we've heard some of the barriers to, is hard. Some of the 
barriers that have not been mentioned are also cultural. 
Because even when we have the funds and even when the 
populations who are those that we classify as underserved, 
often people of color--Black, Hispanic, Native Americans--the 
cultural barriers, even with the money, prevent them from 
readily changing their diet. Because the----
    Senator Sessions. Well, frankly, it's cheaper, sometimes a 
good diet is often cheaper.
    Surgeon General Carmona. Yes sir. But you know, when, on 
the Native American reservation--I'll use my own example in my 
family. My grandmother was an immigrant here, spoke no English 
and she made some good food for the family, very poor Latino 
family. But if you evaluated your cooking, based on healthy 
standards, it was filled with grease and lard and tasted 
awfully good. But that's part of the culture and breaking those 
cultural norms, on the Native American reservation, where I 
visit frequently--I was just in Montana on the Crow 
reservation--and as Dr. Rowland pointed out, the diets leave 
something to be desired.
    But, when you look at their cultural norms, how they 
prepare their food, how they buy, even if they have the money, 
it's still an issue or, I termed it literacy earlier, building 
capacity, education into society to make those changes. We have 
the science. The problem is we have this wonderful diversity 
that makes us the best nation in the world, but that diversity 
also makes it very difficult to deliver culturally competent 
messages that would result in transformational behavior. That 
is, eating more healthy, cooking your food the right way and 
such.
    Senator Sessions. I guess--let me be explicit on it. Isn't 
it one of these things where if it's not done early, it's much 
harder to change later? And is there a plan out there to deal--
I know there has been a lot of talk about helping young people 
who are overweight how to confront that and deal with it. Do we 
have any plans that might be effective at this point, you think 
on how to deal with that?
    Surgeon General Carmona. Well, yes sir. Your point again is 
well taken. The earlier we start, the better it is. When you 
move through life it's much more difficult to break those bad 
habits. You know, James Baldwin I think said it best, if I 
quote him correctly, that, ``We spend a lifetime telling our 
kids what to do, but they never fail to imitate us.'' And so, 
our children often end up looking like we do. And if we are 
couch potatoes and not physically active, and eating the wrong 
foods, then our children probably are going to head in that 
direction.
    We have programs within HHS now, and I know of many 
community programs that start in the schools very early in 
getting the kids engaged in physical activity. That's where it 
has to start. Also we must engage the parents and the school 
systems and the administrators for the understanding of what 
constitutes a balanced diet while those children are in school, 
and the physical education part.
    It really does take a whole community to change this. The 
capacity has to be built in throughout society and as early as 
possible. We have the Healthier Steps Program within HHS that 
President Bush and Secretary Thompson have been pushing very 
successfully. I've been out as a Surgeon General throughout the 
United States speaking to school administrators and school 
districts about the value of these very simple measures of 
reducing risks, exercising, or some physical activity and a 
balanced diet. We have spoken out strongly to the National 
Groups of School Administrators and Teachers to not remove 
physical activity from the curriculum as we see being done in 
many school districts because they can't afford the teacher or 
they don't have the time. There are lots of reasons. But the 
bottom line is, there is a huge impact to those children when 
they are not physically active and they are spending four hours 
in front of the TV.
    So, to answer your question, we are starting to target 
these audiences earlier. We're spending a lot of time with 
children. One program I'm specifically involved in, the 50/50, 
50 states, 50 schools, where I have targeted a school in every 
state, working with the leadership in the state to bring a 
symbolic message, if you will, to grammar schools and encourage 
children to stay active. But I'm not just speaking to the 
children, I'm speaking to their parents, speaking to the 
community leaders and hopefully spread that word through the 
country, that this is very important. And it's not just about 
insurance or money, it's about taking some personal 
responsibility, understanding the issues, staying active, 
eating healthy, reducing risk in your life.
    Dr. Rowland. Senator, while much of the work I do with the 
foundation focuses on health insurance coverage, another aspect 
of the work we undertake is to look at the use of the Internet 
and TVs and their availability in the homes and their 
utilization in homes, especially among children. And I know 
that many of our studies are very alarming in terms of the 
number of hours and the increasing number of hours that 
children spend either watching TV or in front of the computer, 
neither of which have a lot of activity to them. We are 
beginning to look more at the messages they get from watching 
TV shows, from watching bad behavior on TV shows and we've 
engaged in trying to do a number of public education and health 
education activities by getting some of the Hollywood writers 
to cover things a little more effectively. I think we need to 
try to change the way entertainment media portrays a child's 
afternoon to one in which they're outside doing physical 
activity instead of inside at the computer and eating 
carbohydrates while they are sitting at the computer. This is 
an area where we could really try to change the way the public 
views this issue with more than just discussion--with actually 
observing how the entertainment media covers this situation.
    Senator Sessions. I believe I saw in The Wall Street 
Journal, something about that and it indicated that one soft 
drink a day was 50,000 calories a year, and I forgot how many 
pounds that translated in and all things else being equal. What 
about PSA? Public Service Ads (PSA) that give some concrete 
suggestions if you'd like to reduce your weight, even for kids 
aimed even at kids, you know, make this change and have some 
kid say that you know, I lost this by doing such and such. Do 
we have any PSAs that might be helpful?
    Surgeon General Carmona. Senator, we've done some PSAs in 
partnering with private organizations who are stakeholders in 
this, but we also are trying to do this much smarter. Some of 
our staff, some of whom are sitting behind me are looking at 
better ways to understand the marketplace just like the private 
sector does to sell products. And we have to do a better job of 
delivering those messages in a culturally competent way. I 
often joke with my staff that the last thing the kids watching 
MTV want to see is some middle aged guy in a white uniform 
telling them to be healthy. But you know, if Carson Daily and 
the latest pop icon says it, you know, with maybe the Surgeon 
General or somebody with a position of authority, it's probably 
going to go over.
    Senator Sessions. That could describe how they keep their 
weight under control. What they do every day.
    Surgeon General Carmona. We're trying to get those best 
practices from the market and looking at--because really what 
we're looking at across society is multiple markets that we 
have to motivate to change their behavior and one size doesn't 
fit all.
    Dr. Rowland. Dr. David Satcher has just joined the Kaiser 
Foundation Board of Trustees and I know that he will be pushing 
us in the work we do with BET and with MTV to try and develop 
more programming and more ads that actually will give some 
better messages about this issue as well. We have found that 
PSA placements are very difficult to get at a good time, but 
have entered in a number of partnership with groups like MTV so 
that we do these ads as part of their programming and we 
develop the ads and they actually give the programming time to 
us to try to further public health education messages. I think 
we should broaden our messaging and work with the Surgeon 
General on that.
    Senator Bennett. I don't want to disparage the ad effort 
because I think it's essential and I'm in favor of everything 
you're talking about, and we do have the example with 
cigarettes. We have seen a cultural change in smoking in this 
country so that now people don't assume it's the norm and you 
really discover that when you go outside the United States. I 
used to own a business in Japan, and over there everybody 
smokes, and that's the norm. And you come to America and it's 
no smoking in this building, no smoking, etcetera, etcetera, 
and we've seen the number of smokers come down particularly 
among young people fairly significantly.
    However, an economic incentive I think has to be linked to 
it. I remember, and Mrs. Maloney has left, but at the height of 
the energy crisis in California, when the demand for energy was 
causing enormous spikes--and ultimately it looks like Gray 
Davis might pay the price for that next week--there were all 
kinds of PSAs saying ``turn off your washing machine in the 
afternoons, only use your appliances at night, help us, help 
us, help us.'' And the behavior did not change appreciably 
until the increased cost of electricity hit the average 
household in California and the crisis almost disappeared 
overnight. ``Oh, it's going to cost me X amount more if I don't 
do what the ad is saying.'' So we've got to link some economic 
incentives here. I'm not quite sure how we can do it.
    Mr. Oatman. Mr. Chairman could I speak momentarily to that 
issue?
    Senator Bennett. Sure.
    Mr. Oatman. We do, in our individual products charge people 
more if they are tobacco users, and we find that gets a strong 
message across to people when they can see tangibly what is the 
economic cost in terms of their health coverage for this. We 
often have people come back and say, ``I'd like to now reapply, 
I've stopped smoking for a year, can I get a lower rate?'' And 
so that is a very effective way not only to communicating the 
message, but getting the behavior change you're looking for.
    Senator Bennett. So that leads to the theoretical question, 
can you say X dollars per pound for a certain level if we have 
indeed an epidemic of obesity?
    Mr. Oatman. Yes, we do, in fact, do that as well. We charge 
extra for people that are BMIs that are overweight and BMIs 
that are obese and we have different levels and we track the 
statistics and know the cost of that and put that into the cost 
of our products so at the end we'll send a message.
    Senator Bennett. Has it produced significant behavior 
change?
    Mr. Oatman. I can't honestly say whether that one has 
produced behavior change. I know the smoking one has, but the 
weight one I don't have any particular data on it to suggest 
that it resulted in changes.
    Senator Bennett. The hour is going and you have been very 
patient. Let me raise one more issue and get your reaction to 
it. Health care is really nothing more than data management. 
``Where does it hurt?'' You are a doctor, you can't cure me 
until you get a body of data about me. ``Where does it hurt? 
How long? When did it start? What happened?'' Okay, you get 
above that level to, ``Let's do an MRI, let's do some other 
kinds of tests.'' All right, now, with this amount of data in 
front of me, I can now make a diagnosis and a decision and 
recommend a course of treatment.
    We do not have anything approaching a significant database 
about our nation's health. There are tiny individual bits of 
data scattered around, but we do not have what our current 
technological capacity could give us. So let me get Buck Rogers 
here for just a minute--and of course; the 21st Century is now 
here, so Buck Rogers is obsolete. Let's say 22nd Century but, 
maybe 21st. We have the capacity for an individual to carry his 
entire medical record around with him on a credit card, in his 
wallet. And we have the capacity to update that continually. So 
you talk about screening and there is evidence from some of the 
other panelists who were scheduled to be with us at the 
previous roundtable and couldn't come back on this occasion, 
that they've been able to increase the health and reduce the 
price in their risk pool quite significantly through screening.
    Now your average HMO is going to say to you, ``We're not 
going to cover the cost of screening every single person, we'll 
wait until somebody shows some symptoms and then we'll cover 
the cost of treating those symptoms, but it's too expensive.'' 
Well, the evidence of this particular group is, it saves money. 
And they screened every single employee of the company with 
whom they were working, for a variety of congenital conditions, 
and discovered, while the percentages were small, those people 
that didn't know they had (fill in the blank), were enormously 
expensive claims on the system walking around with the claims 
to come three to five years down the road. And by screening and 
discovering what they were and then monitoring their activity, 
whether it was exercise or diet or medication, they prevented 
heart attacks, they prevented hospitalizations, they staved 
off, in some cases, diabetes and so on, and saved huge amounts 
of money, even though the initial screening seems to cost 
something now.
    The key to this working is the willingness on the part of 
the employee in this situation, the individual, if we do it on 
a national basis, to have his data in a central databank where 
it can be accessed, and they can be nudged. Where you can say 
to the--you sit down at the console of the giant register as it 
were, and you say, ``Okay, give me the names of everybody here 
who had this kind of result a year ago and let me go out and 
find out what they're doing.''
    The privacy advocates will come at us and say this is an 
enormous violation of privacy. But from a health care 
standpoint, this is the tool that could vastly increase the 
health of Americans and ultimately reduce costs, because as I 
say, the groups that have done this have found that their 
population gets healthier and the cost of providing health care 
goes down.
    Let's take a look at that and get your reactions to it. If 
there was to be some kind of an attempt at creating a truly 
significant large database and Dr. Rowland, maybe some kind of 
public money available to screen every child regardless of 
whether they have coverage or not in public schools, to begin 
to produce that database so that public providers of health 
care would have that tool available for them for people who are 
on Medicaid or Medicare and some way to have portability--I 
mean, the portability is there once the data is there--and so 
the individual says ``Okay, I'm now covered.'' Well, whoever is 
providing their health care coverage now has access to the 
database.
    Mr. Oatman you are in an interesting niche market. How 
would you access the database? Let's just put aside our biases 
about Big Brother and the implications of somebody being able 
to have access to that database for some evil purpose and 
stipulate for the sake of this conversation that the access 
will always be benign. How helpful would it be to producing a 
healthier population and helping do something about this 
skyrocketing cost?
    Dr. Rowland. Well obviously, what you've talked about is 
the ideal of what a Health Maintenance Organization was 
supposed to be all about. It was supposed to be about 
enrolling, having screening and then being followed up. What's 
happened in our current fragmented health care system is that 
nobody really wants to take on the responsibility for screening 
because it's an up-front cost and the long run savings may 
accrue to someone else because health care coverage switches 
back and forth. So, having the screening in our fragmented 
system financed separately is probably an important concept. 
The only program that has a built-in requirement for screening 
is the Medicaid program for children, called the Early Periodic 
Screening Diagnosis and Treatment Program. However, the 
governors have been complaining for many years about that 
particular program because it requires full treatment for 
anything screened in the children. So that's the one example we 
currently have of national screening, and in that program 
screening picks up a lot of disability early among children and 
if they are treated for it, they go to school, they learn 
better and do better.
    So I think that clearly, screening is important if it's 
followed up with treatment, but our current fragmented system 
doesn't provide much of a mechanism for giving insurers an 
incentive to do that.
    Mr. Oatman. Let me speak to that because--I'm a great 
believer of screening and assessment. I think to the extent 
that we could do annual screening on things like weight, 
cholesterol levels, blood pressure, many things which are 
reasonably controllable by the individual, it could have a 
payback for us, if we could then tie that with the incentive. 
But right now, we can not tie it to an incentive. The state 
laws basically wouldn't allow me to adjust my premium every 
year based on that regular assessment to get the message to 
people to get the behavioral change. And if we had the freedom 
with state premium laws to make adjustments, based upon regular 
assessment of health cost, it would have an economic advantage 
and we would be spending the money on it. But right now, we 
don't have the ability to leverage it into incentives for an 
existing customer.
    Senator Bennett. In other words, there is no payback to 
you.
    Mr. Oatman. Right, because I can't----
    Senator Bennett. If you do the screening, it's just a cost 
with no particular benefit.
    Mr. Oatman. Yes. Take for instance someone that has been a 
customer for a few years and perhaps has gained weight, isn't 
managing their health. If I could do a regular assessment of 
that and charge them more for that behavior, I think I can 
impact their behavior and I think that would have a payback in 
doing that. But I don't have the freedom under current state 
laws to make those adjustments to premiums after I've sold the 
policy to the individual. So I do think if we got creative 
about this and thought about it, we could find some ways to 
make it economically feasible to do assessment on an ongoing 
basis, and it would prove valuable.
    Surgeon General Carmona. I think Senator, that's a key, 
what Mr. Oatman said, making it economically feasible. Because 
in fact, as Dr. Rowland pointed out also with the screening, 
not only from a public health standpoint, it's obviously the 
way to go. We're talking about the cost, but when an insurer 
deals with it and takes on that responsibility, often they are 
saddled with more cost after they've made the diagnosis, and 
they are committed then to have to care for that person. So 
from the public health standpoint, I think there is no 
disagreement that screening as the way to go is one of the best 
methods of prevention. We do it now. We've gone through it with 
kids with PKU, with thyroid testing, diabetes, hypertension, 
cholesterol, and it's proven. In fact, within HHS, we have the 
Guide to Clinical Preventive Services put out by ARC, and it's 
one of the best books around that talks about the evidence base 
for screening and the cost benefit analysis for all types of 
screening. More screenings than most people have ever heard of 
that are out there and have been studied. But really, it comes 
down to that cost benefit ratio and who pays for that 
screening.
    Let me make another point on the database though. I think 
one of the things, and I think Dr. Rowland might mention it 
because I always mention it as it relates to Kaiser. We have 
some wonderful national databases in Kaiser. As you know, one 
of those--we don't have a national database, but we do have 
large groups, Fortis for one, Kaiser and many others that we 
have through our statistical centers at HHS, where we study 
large populations for just that reason--to see trends that are 
emerging, to look at epidemiological trends, to try to make 
predictions as to where we are going. We're doing it now 
knowing that we have 9 million children that are overweight and 
obese and we're looking 20 years forward when they become 
middle aged. What will our population look like then? How much 
will it cost? How much diabetes will be in society? How much 
accelerated cardiovascular disease?
    How much cancer as a result of that obesity epidemic? So we 
are doing that. But I agree with you that we probably could do 
it better with larger databases, especially one that relates to 
underserved populations who often don't get picked up in some 
of these databases because they may be the uninsured and are 
not captured. So there are some inequities in the system, but I 
think it has it has improved a great deal.
    Senator Bennett. Well, that's really the reason for these 
hearings, or this discussion and I'm very grateful to you for 
your willingness to participate in it, and I'll just close it 
off with this summary of where we are.
    This is the Joint Economic Committee and we exist to look 
at the economy as a whole, both Houses, that's why it's joint, 
House and Senate. The American economy is really the wonder of 
the world. Our economy is enormously resilient. We've taken 
hits that in past history would have thrown an economy into 
terrible tailspin. One after the other, the bursting of the 
bubble of the late 1990s, which was inevitable, dropped the 
stock market, we lost $7 trillion worth of wealth, numerous 
jobs, particularly in the high tech industry wiped out as some 
of the illusions of that industry were exposed. Followed by the 
shaking of confidence in the governance of American industry. 
People wanted to flee investment in American because of Enron 
and WorldCom and the other shocks, 9/11, the terrorist attack, 
the enormous difficulties that followed that, the geo-political 
uncertainties, the decision to respond to 9/11 militarily, 
which I happen to agree with and support, I think it was the 
right thing to do, but that puts another tremendous strain on 
the economy.
    One after the other and in historic terms, compared to past 
recessions and past problems, the economy weathered that series 
of shocks with enormous resilience and is the envy of every 
other economy in the world. Every other industrialized country, 
even with our unemployment rates where they are, even with our 
GDP growth, as anemic as it has been, every other 
industrialized country in the world would kill to have our 
numbers.
    So, the Joint Economic Committee, we look out into the 
future and say, the future really looks pretty good, and it 
does, until we start looking at health care and the numbers. 
You were talking about it, General Carmona, the numbers in the 
next 50 years become truly frightening. We are living longer, 
which is a good thing. Our population is growing, which is a 
good thing. But the cost, if we do not do something about 
medical cost, the cost that will hit us in the Medicare out 
years as this population starts--the baby boomers start to 
retire in the next decade or less--and they are going to stay 
in that position longer and their demands on Medicare are going 
to be higher. It's happening in the rest of the population, 
ironically we discussed this at a previous hearing. The more 
technology we apply to the health care challenge, the more we 
bring down the cost per procedure and the more procedures we 
stimulate, so the cheaper the procedure becomes, the greater 
the cost to society overall.
    If all we were interested in was money, we'd say, let them 
die and save the money. But we do a tremendous job in keeping 
people living longer and then we have this enormous challenge.
    So, as I say, as we look out over the economy, the one 
thing that truly is frightening, if we cannot get it under 
control, is the health care costs that are waiting for us 
several decades down the road. And we've got to think 
creatively, we've got to start experimenting, Mr. Oatman, with 
the kind of thing that you are doing. We've got to open up the 
question of the database. We've got to face what could happen 
to us if we did more screening and paid for it and say to the 
states, ``Okay, whatever it takes.'' We've got to keep this 
going, because the individual employer may not see the long-
term benefit or the individual insurer may not see the long-
term benefit, America as a whole, 50 years from now, has got to 
see the long-term benefit in healthier people and thereby 
ultimately lower health care cost, or the whole economy will be 
over. So that's a little bit too apocalyptic, but the whole 
economy will be in trouble, would be a better way of saying it. 
So, that's why we have focused on these kinds of discussions 
rather than the traditional political shouting matches over 
current situations in health care and why your observations 
here this morning have been so particularly helpful to us.
    We're building a record, which we hope the appropriate 
legislative committees can take advantage of as they look at 
these challenges that we face. Thank you very much again for 
your willingness to come.
    The hearing is adjourned.
    [Whereupon, at 12:15 p.m. on Wednesday, October 1, 2003, 
the roundtable discussion was adjourned.]

                       Submissions for the Record

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

       Prepared Statement of Senator Robert F. Bennett, Chairman

    Good morning and welcome to today's roundtable discussion: 
``Reshaping The Future Of America's Health.''
    We would like to try something a little different this morning. 
Rather than using the traditional congressional hearing format, we will 
be using a roundtable approach. I want to try this approach because too 
often the traditional approach limits the discussion between the 
Members and the witnesses.
    The current debate on health care is dominated by a discussion of 
benefits, deductibles, insurance coverage, and payment levels. The 
attention of policymakers has been drawn away from the most important 
health care issue--the actual health of the American people.
    America has the pre-eminent health care system in the world. 
America also has the most expensive health care system in the world. 
Despite our pre-eminence and our spending, there are some disturbing 
trends emerging with serious implications for the health of the 
American people in the future.
    The numbers are overwhelming. Obesity is epidemic in the United 
States. In recent years, diabetes rates among people ages 30 to 39 rose 
by 70 percent. We know that this year, more than 300,000 Americans will 
die from illnesses related to overweight and obesity.
    We also know that about 46.5 million adults in the United States 
smoke cigarettes, even though this single behavior will result in 
disability and premature death for half of them.
    Compounding the problem, more than 60 percent of American adults do 
not get enough physical activity, and more than 25 percent are not 
active at all.
    Some groups of Americans are particularly hard hit by these 
disturbing trends, especially the epidemic growth in diabetes. Native 
Americans are two to three times more likely to have diabetes than 
whites. And, NIH reports that diabetes among African Americans has 
doubled in just 12 years.
    Many of the problems I just mentioned are completely preventable. 
Having the pre-eminent health care system is not a replacement for a 
healthy lifestyle. Americans need to be responsible for their own 
health and prudent consumers of their own health care.
    Much of current medicine is reactive, not proactive. A more 
proactive approach that emphasizes targeted screenings, patient 
education and proper follow up by medical providers can go a long way 
to help improve the health and productivity of the American people. 
However, poor preventive screening, redundant or inappropriate 
treatment, simple medical mistakes and lack of oversight do little but 
increase the cost of care.
    This morning our goal is to focus on health, not just health 
insurance. As we examine the challenges that face Americans over the 
next five or ten years, there are at least two questions that must be 
asked: What are the major health challenges that face Americans over 
the next five to ten years? What are the most innovative tools 
available to meet these challenges?
    Our roundtable discussion this morning will include the unique 
insight of Surgeon General Richard Carmona, who is spearheading 
President Bush's HealthierUS initiative. The HealthierUS initiative 
helps Americans to take action to become physically active, eat a 
nutritious diet, get preventive screenings, and make healthy choices. 
We are very happy the Surgeon General was able to find time to join 
this morning's discussion and look forward to hearing his thoughts on 
these vital issues.
    We are also pleased to have Mr. Jim Oatman, currently Senior Vice 
President of Fortis Health. He is here to elaborate on initiatives the 
insurance industry is taking to promote healthy lifestyles and keep 
down costs. Many insurance plans and employers, including Fortis 
Health, have taken a ``carrot and stick'' approach to encouraging 
beneficiaries to exercise, quit smoking or follow doctor's orders while 
monitoring chronic illness. Some companies reduce premiums, increase 
interest rates on health care savings accounts, or give away free gym 
equipment as rewards for healthier lifestyles. Health and Human 
Services (HHS) Secretary Tommy Thompson met with Fortis Health and 
other insurers in July to persuade them to find ways to reduce the 
public cost of treating America's obesity epidemic.
    We are also very pleased to have Dr. Diane Rowland of the Kaiser 
Family Foundation. Dr. Rowland is a nationally recognized expert on 
Medicaid and the uninsured. Like physical inactivity or cigarette 
smoking, the lack of health care coverage is also a risk factor for 
long-term health problems. We look forward to Dr. Rowland's insights on 
the particular problems facing lower income Americans and those without 
access to health insurance.
    We welcome each witness's thoughts on the challenges facing health 
care today. I want to thank Ranking Member Stark for his interest and 
help in organizing this hearing and in bringing these distinguished 
experts before the Committee. I ask all of you to join me in a 
bipartisan spirit as we engage in this important task.

                               __________
           Prepared Statement of Representative Pete Stark, 
                        Ranking Minority Member

    Thank you Chairman Bennett for holding this roundtable discussion 
on ``Reshaping the Future of America's Health.'' I expect this will be 
a far-reaching discussion about ways of improving care and responding 
to the health care challenges facing the nation. Certainly, there are 
public health issues, such as diabetes and heart disease, which are 
going to require new innovations and research. But the most crucial 
issue we face is increasing access to care and improving public health 
insurance programs.
    Our nation--wealthy as it is--continues to leave more than 41 
million people without health insurance. The downturn in our economy 
will only make these numbers grow. Every American should have 
affordable, quality health care coverage and expanding health care 
coverage to the uninsured, especially children, must be a top priority.
    In July, the President unveiled his HealthierUS Initiative, which 
encourages Americans to be physically active, eat a nutritious diet, 
get preventative screenings, and make healthy choices. But the 
President's ``eat your broccoli'' health initiative won't help millions 
of Americans get important preventative screenings, such as mammograms, 
cholesterol tests, or prostate exams. Such potentially life-saving 
preventative tests are skipped by millions of the uninsured and even 
millions more of insured Americans who simply can't afford high out-of-
pocket costs needed to pay for them.
    Medical experts, doctors, hospital executives, and academic leaders 
have increasingly concluded it is time for some form of universal 
health coverage to be considered. Just last month over 7,700 doctors 
nationwide, including the former Surgeon General Dr. David Satcher, 
endorsed a ``Medicare for all'' national health insurance plan.
    The Institute of Medicine of the National Academies recently found 
that the benefits of insuring uninsured Americans would be 
substantially greater than the cost of the increased utilization of 
health services. Specifically, the report found that since uninsured 
Americans have shorter life spans, poorer health, and higher morbidity 
rates than Americans with health insurance, they cumulatively forego 
$65 to $130 billion a year in economic value that could be realized if 
they had health insurance. In contrast, the cost of the additional 
health care the uninsured do not currently access because they are 
uninsured totals $35 to $70 billion a year.
    In short, it's costing us more to leave Americans uninsured than to 
insure them. For what the President wants to spend in Iraq in 2003 and 
2004, we could provide health coverage for the uninsured for a year.
    My favored approach to universal health care is to build on the 
success of the Medicare program, which provides universal coverage for 
our nation's seniors and people with disabilities. Unfortunately, 
Republicans in Congress would like to privatize Medicare. Rather than 
dismantle Medicare as we know it, we should expand and improve the 
program, including broadening preventative benefits and adding a 
prescription drug benefit.
    Protecting Medicaid for low-income Americans is also a vital issue 
in improving the health of the U.S. population and preventing further 
increases in the number of uninsured. However, the program has come 
under increasing economic pressures in both the short- and long-term.
    During the Bush recession and current economic slump states are 
being forced to make tough choices between Medicaid and educational 
programs. Paltry federal relief did not come soon enough this year to 
prevent 44 states from having Medicaid cost overruns, thus forcing many 
states to trim the Medicaid roles and cut back on optional health 
services.
    Millions of low-income Americans would be placed at risk by a Bush 
Administration plan to cap federal government spending by block 
granting the program. But this would only exacerbate the long-term 
structural funding problems of Medicaid as states face mounting costs 
of long-term care for an aging society.
    As we look to the future of health care, the federal government 
needs to assume more responsibility for insuring that all Americans 
receive quality care, not less.
    Thank you Mr. Chairman and I look forward to the discussion with 
our panelists.

                               __________
   Prepared Statement of Richard H. Carmona, M.D., M.P.H., F.A.C.S., 
 Surgeon General, U.S. Public Health Service, Department of Health and 
                             Human Services

    Thank you, Mr. Chairman. It is a pleasure to be here with all of 
you. And I commend you for your leadership in calling for this 
discussion.
    What if I told you 2 in 3 Americans already had symptoms of a 
condition that could kill them, and that the disease rate was growing 
every year?
    You would say, ``You're the Surgeon General. Do something! Now!''
    In fact, it's true.
    Nearly 2 out of 3 of all Americans are overweight and obese; that's 
a 50 percent increase from just a decade ago.
    More than 300,000 Americans will die this year alone from heart 
disease, diabetes, and other illnesses related to overweight and 
obesity.
    Obesity-related illness is the fastest-growing killer of Americans. 
The good news is that it's completely preventable through healthy 
eating--nutritious foods in appropriate amounts--and physical activity. 
The bad news is, Americans are not taking the steps they need to in 
order to prevent obesity and its co-morbidities.
    The same is true for other diseases related to poor lifestyle 
choices, such as smoking and substance abuse.
    Put simply, we need a paradigm shift in American health care.
    There is no greater imperative in American health care than 
switching from a treatment-oriented society, to a prevention-oriented 
society. Right now we've got it backwards. We wait years and years, 
doing nothing about unhealthy eating habits and lack of physical 
activity until people get sick. Then we spend billions of dollars on 
costly treatments, often when it is already too late to make meaningful 
improvements to their quality of life or lifespan.
    Overweight and obese Americans spend $700 more a year on medical 
bills than those who are not overweight. That comes to a total of about 
$93 billion in extra medical expenses a year.
    We simply must invest more in prevention, and the time to start is 
childhood--even before birth.
    Fifteen percent of our children and teenagers are already 
overweight. Unless we do something now, they will grow up to be 
overweight adults.
    None of us want to see that happen.
    We can't allow our kids to be condemned to a lifetime of serious, 
costly, and potentially fatal medical complications associated with 
excess weight. Being overweight or obese increases the risk and 
severity of illnesses such as diabetes, heart disease, and cancer.
    Those are the physical costs. There are also social and emotional 
costs of being overweight.
    We first see this emotional pain on the school playground, when 
children's self-esteem drops because they are teased, or on the dance 
floor, because they are never asked to dance.
    None of us want to see our kids go through that.
    The science is clear. The reason that our children are overweight 
is very simple: Children are eating too much and moving too little.
    The average American child spends more than four hours every day 
watching television, playing video games, or surfing the web. They know 
more about the running style of ``Sponge Bob Square Pants'' than Gail 
Devers or Maurice Green.
    Instead of playing games on their computers, I want kids to play 
games on their playgrounds.
    As adults, we must lead by example by being responsible, and 
adopting healthy behaviors in our own lives.
    We've got to show them it doesn't matter whether you're picked 
first or last, only that you're in the game. Not all kids are going to 
be athletes, but they can all get some exercise.
    We've got to show them how to reach for the veggie tray rather than 
the unhealthy snack.
    We've got to show them how to encourage their peers to adopt 
healthy behaviors rather than ridiculing them.
    As James Baldwin put it, ``Children have never been very good at 
listening to their elders, but they have never failed to imitate 
them.''
    Our commitment to disease prevention through healthy eating, 
physical activity, and avoiding risk--is one our entire society must be 
prepared to make in order for it to be effective.
    President Bush is leading the way through the HealthierUS 
prevention initiative.
    HealthierUS says, ``Let's teach Americans the fundamentals of good 
health: exercise, healthy eating, getting check-ups, and avoiding risky 
behavior.''
    Secretary Thompson and the Department of Health and Human Services 
are advancing the President's prevention agenda through Steps to a 
HealthierUS, which emphasizes health promotion programs, community 
initiatives, and cooperation among policy makers, local health 
agencies, and the public to invest in disease prevention.
    Steps also encourages Americans to make lifestyle choices that will 
prevent disease and promote good health, from youth, such as avoiding 
tobacco use, which is still the leading preventable cause of death and 
disease in America, and avoiding alcohol, drug use and other behaviors 
that result in violence and unintentional injuries.
    Congress has approved funds for Steps in FY 2004 for community 
initiatives to reduce diabetes, obesity, and asthma-related 
hospitalizations.
    We cannot switch America's health care paradigm from treatment to 
prevention through government action alone. This fight has to be fought 
one person at a time, a day at a time.
    All of us must work together, in partnership, to make this happen.
    Last week, I joined former Surgeon General David Satcher and the 
National Football League in kicking off their partnership in promoting 
school-based solutions to the obesity epidemic.
    This week I joined NBA player LeBron James to launch Nike's PE2GO 
program, which provides equipment and expertise to schools so that they 
can offer fun physical activity. School-based programs that focus on 
physical activity offer one of our best opportunities to improve 
children's health--today and in the future. We welcome partnerships 
like these to improve the health of children from the earliest ages.
    As Members of Congress, you can influence the behavior of your 
constituents in many ways, starting through your own example. Secretary 
Thompson put himself and the entire Department of HHS on a diet, and 
lost 15 pounds. I challenge you to do the same with your staff members.
    You can also help educate your constituents about the importance of 
prevention through Town Hall Meetings and by establishing partnerships 
in your own communities.
    As I said, it will take all of us to switch from a treatment-
oriented society to a prevention-oriented society, but the effort will 
be worth it, both to individuals and to the larger community.
    I'm a doctor, not an economist, but I know we can save both the 
human costs in pain and suffering, and economic costs in dollars and 
cents by investing in prevention.
    Think about it: the total direct and indirect costs attributed to 
overweight and obesity is about $117 billion per year, or $400 for 
every man, woman and child in this country.
    Just a 10 percent weight loss--through healthier eating and 
moderate physical activity--can reduce an overweight person's lifetime 
medical cost by up to $5,000. Not to mention what it will do for their 
self-esteem and sense of well-being.
    Where else can you get that type of return on investment?
    Thank you and I look forward to our discussion.

     Prepared Statement of James E. Oatman, Senior Vice President, 
                             Fortis Health

                            I. INTRODUCTION

    As 75 million baby-boomers reach the prime years of their lives 
they are facing an epidemic of chronic disease. In spite of the fact 
that medical advances of the 20th century improved life expectancy from 
47 years at the beginning of the century to 77 years at the end of the 
century, some very troubling trends developed in the last quarter of 
the 20th century.
     The incidence of cancer is up over 25 percent.
     The incidence of heart disease is up over 50 percent.
     The incidence of diabetes has doubled.
     The prevalence of obesity has more than doubled.
    The data is in and we now know that lifestyle changes can make 
significant reductions in all these disease categories. We individually 
need to take personal responsibility for significant lifestyle changes 
to improve our health. When looking at the cause of health care cost 
increases perhaps it is time to stop pointing fingers and literally 
look in the mirror.

         II. KEY ELEMENTS OF LOWER COSTS VIA LIFESTYLE CHANGES

    Three key elements will be required if we are to witness 
significant improvements are:

A. Education
    People need a consistent, reliable source of information on the 
efficacy of health improving behaviors. Health and Human Services has 
done an excellent job of collecting and distributing information on 
health improvements. Our health care providers should be encouraged to 
deliver the message to their patients. Employers can play an active 
role in educating in the workplace.

B. Screening & Assessment
    People need a method to measure their current health status in 
order to calibrate their current health status against a reliable 
standard. Benchmarking key indicators such as diet, exercise, weight, 
cholesterol levels, blood pressure levels, alcohol consumption, and 
driving habits against acceptable standards is the second step towards 
making changes. This is a personal responsibility, we each have to 
maintain our health and well-being.

C. Incentives
    Incentives are the final and essential component to motivate people 
to make behavioral changes. Proper rewards and incentives applied by 
health care payors serve as an important impetus to reinforce the 
message and secure important lifestyle changes.

    III. HEALTH INSURANCE PRODUCTS THAT ENCOURAGE HEALTHY LIFESTYLES

D. Medical Savings Accounts
    At Fortis we have observed that the cost of health care is lower 
and annual increases in costs are also lower for individuals who chose 
to self-fund a significant portion of the first dollars spent on health 
care. Direct personal responsibility for health care costs has an 
impact on controlling costs.

E. Health Reimbursement Accounts
    In increasing numbers employers are embracing health reimbursement 
accounts as a method to engage employees in a partnership to control 
health care spending. Health Reimbursement Accounts are relatively new, 
but reports on early data is encouraging.

F. Lifestyle Discounts at Point of Sale
    For many years Fortis has offered discounts for improved 
lifestyles. We reward people who control their weight, cholesterol and 
blood pressure. We also include smoking habits and driving habits in 
our assessment. We have found people with better lifestyles consume 
less health care and continue to spend at lower levels for long periods 
of time.

G. Renewal Incentives to Encourage Healthy People to Continue to Fund 
        the Pool
    Unfortunately, most state laws significantly restrict the ability 
of an insurance carrier to introduce incentives at renewal. Fortis 
believes that if insurers were granted more latitude in providing 
incentives at renewal to reward healthy lifestyles this would have 
positive outcomes. With appropriate incentives more healthy people 
would retain their coverage at renewal. They would then stay in the 
insured pool helping to finance the less healthy and not enter the 
ranks of the uninsured.

                               __________
 Prepared Statement of Diane Rowland, Sc.D., Executive Vice President, 
            Kaiser Family Foundation and Executive Director

                  HEALTH CHALLENGES FACING THE NATION

    Health insurance coverage remains one of the nation's most pressing 
and persistent health care challenges. When asked to identify the top 
health care priorities for the nation, the public consistently ranks 
lack of health insurance coverage as a top priority. Nearly 1 in 3 
Americans (31 percent) rated increasing the number of Americans covered 
by health insurance as the ``most important'' health issue for Congress 
and the President to deal with, in a public opinion survey this summer.
    The most recent data--released this week from the Census Bureau--
show that 43.6 million adults and children were without health 
insurance in 2002--more than one in every seven Americans. The new 
statistics reveal that this is not only a large problem, but a growing 
problem for millions of Americans. From 2001 to 2002, the number of 
Americans lacking health insurance increased by 2.4 million due to the 
decline in employer-sponsored coverage (Figure 1). Public coverage 
expansions through Medicaid helped to moderate the growth in the 
uninsured, most notably by providing coverage to children in low-income 
families, but were not enough to offset the decline in private 
coverage.
    The uninsured come predominantly from working families with low and 
moderate incomes--families for whom coverage is either not available or 
not affordable in the workplace (Figure 2). Public program expansions 
through Medicaid and the State Children's Health Insurance Program 
(SCHIP) help to fill some gaps, especially for low-income children, but 
the fiscal crisis in the states is now putting public coverage at risk. 
Unfortunately, the economic downturn, coupled with rising health care 
costs and fiscal constraints on public coverage, all point to continued 
growth in our uninsured population.

                 THE CONSEQUENCES OF LACK OF INSURANCE

    The growing number of uninsured Americans should be of concern to 
all of us because health insurance makes a difference in how people 
access the health care system and, ultimately, their health. Leaving a 
substantial share of our population without health insurance affects 
not only those who are uninsured, but also the health and economic 
well-being of our nation.
    There is now a substantial body of research documenting disparities 
in access to care between those with and without insurance. Survey 
after survey finds the uninsured are more likely than those with 
insurance to postpone seeking care; forego needed care; and not get 
needed prescription medications. Many fear that obtaining care will be 
too costly. Over a third of the uninsured report needing care and not 
getting it, and nearly half (47 percent) say they have postponed 
seeking care due to cost (Figure 3). Over a third (36 percent) of the 
uninsured compared to 16 percent of the insured report having problems 
paying medical bills, and nearly a quarter (23 percent) report being 
contacted by a collection agency about medical bills compared to 8 
percent of the insured. The uninsured are also less likely to have a 
regular source of care than the insured--and when they seek care, are 
more likely to use a health clinic or emergency room (Figure 4). Lack 
of insurance thus takes a toll on both access to care and the financial 
well-being of the uninsured.
    There are often serious consequences for those who forgo care. 
Among the uninsured, half report a significant loss of time at 
important life activities, and over half (57 percent) report a painful 
temporary disability, while 19 percent report long-term disability as a 
result (Figure 5). Moreover, there is a growing body of evidence 
showing that access and financial well-being are not all that is at 
stake for the uninsured (Figure 6). Lack of insurance compromises the 
health of the uninsured because they receive less preventive care, are 
diagnosed at more advanced disease stages, and once diagnosed, tend to 
receive less therapeutic care and have higher mortality rates than the 
insured. Uninsured adults are less likely to receive preventive health 
services such as regular mammograms, clinical breast exams, pap tests, 
and colorectal screening. They have higher cancer mortality rates, in 
part, because when cancer is diagnosed late in its progression, the 
survival chances are greatly reduced. Similarly, uninsured persons with 
heart disease are less likely to undergo diagnostic and 
revascularization procedures, less likely to be admitted to hospitals 
with cardiac services, more likely to delay care for chest pain, and 
have a 25 percent higher in-hospital mortality.
    Urban Institute researchers Jack Hadley and John Holahan, drawing 
from a wide range of studies, conservatively estimate that a reduction 
in mortality of 5 to 15 percent could be achieved if the uninsured were 
to gain continuous health coverage. The Institute of Medicine (IOM) in 
its analysis of the consequences of lack of insurance estimates that 
18,000 Americans die prematurely each year due to the effects of lack 
of health insurance coverage.
    Beyond the direct effects on health, lack of insurance also can 
compromise earnings of workers and educational attainment of their 
children. Poor health among adults leads to lower labor force 
participation, lower work effort in the labor force, and lower 
earnings. For children, poor health leads to poorer school attendance 
with both lower school achievement and cognitive development.
    These insurance gaps do not solely affect the uninsured themselves, 
but also affect our communities and society. In 2001, it is estimated 
that $35 billion in uncompensated care was provided in the health 
system with government funding accounting for 75-80 percent of all 
uncompensated care funding (Figure 7). The poorer health of the 
uninsured adds to the health burden of communities because those 
without insurance often forego preventive services, putting them at 
greater risk of communicable diseases. Communities with high rates of 
the uninsured face increased pressure on their public health and 
medical resources.
    A recent IOM report estimates that in the aggregate the diminished 
health and shorter life spans of Americans who lack insurance is worth 
between $65 and $130 billion for each year spent without health 
insurance: (Figure 8). Although they could not quantify the dollar 
impact, the IOM committee concluded that public programs such as Social 
Security Disability Insurance and the criminal justice system are 
likely to have higher budgetary costs than they would if the U.S. 
population under age 65 were fully insured. Research currently underway 
at the Urban Institute by Hadley and Holahan suggests that lack of 
insurance during late middle age leads to significantly poorer health 
at age 65 and that continuous coverage in middle age could lead to a 
$10 billion per year savings to Medicare and Medicaid.

                        THE CURRENT ENVIRONMENT

    Given the growing consensus that lack of insurance is negatively 
affecting not only the health of the uninsured, but also the health of 
the nation, one would expect extending coverage to the uninsured to be 
a national priority. However, all indicators point to this year as one 
in which we can expect little action on coverage, despite the 
significant growth in our uninsured population.
    With the poor economy and rising health care costs, employer-based 
coverage--the mainstay of our health insurance system--is under 
increased strain. Health insurance premiums rose nearly 14 percent this 
year--the third consecutive year of double-digit increases--and a 
marked contrast to only marginal increases in workers' wages (Figure 
9). As a result, workers can expect to pay more for their share of 
premiums and more out-of-pocket when they obtain care, putting 
additional stress on limited family budgets. With average family 
premiums now exceeding $9,000 per year and the workers' contribution to 
premiums averaging $2,400, the cost of coverage is likely to be 
increasingly unaffordable for many families (Figure 10). For many low-
wage workers, the employee share of premiums may now equal 10 to 20 
percent of total income, causing those who are offered coverage to be 
unable to take it up. However, for most low wage workers, especially 
those in small firms, it is not a question of affordability--because 
the firms they work in do not offer coverage.
    From 2000 to 2001, employer-based health insurance coverage 
declined for low-income adults and children. However, Medicaid and 
SCHIP enrollment increased in response to the sharp decline in 
employer-based coverage for children, offsetting a sharper increase in 
the number of uninsured (Figure 11). The latest Census Bureau 
statistics on the uninsured for 2002 underscore the important 
relationship between public coverage and loss of employer-sponsored 
coverage. Between 2001 and 2002, health insurance provided by the 
government increased, but not enough to offset the decline in private 
coverage. Most notably, while the number of uninsured adults increased, 
the number of uninsured children remained stable because public 
coverage helped fill in the gaps resulting from loss of employer 
coverage.
    For many low-income families, Medicaid is the safety net that 
provides health insurance coverage for most low-income children and 
some of their parents. However, Medicaid coverage provides neither 
comprehensive nor stable coverage of the low-income population. In 
2001, Medicaid provided health insurance coverage to over half of all 
poor children, and a third of their parents, but only 22 percent of 
poor childless adults (Figure 12). Most low-income children are 
eligible for assistance through Medicaid or SCHIP, but in most states 
parents' eligibility lags far behind that of their children. While 
eligibility levels for children are at 200 percent of the federal 
poverty level ($28,256 for a family of 3 in 2001) in 39 states, 
parents' eligibility levels are much lower. A parent working full-time 
at minimum wage earns too much to be eligible for Medicaid in 22 states 
(Figure 13). For childless adults, Medicaid funds are not available 
unless the individual is disabled or lives in one of the few states 
with a waiver to permit coverage of childless adults. As a result, over 
40 percent of poor adults and a third of near-poor adults are 
uninsured.
    In recent years, with SCHIP enactment and Medicaid expansions, 
states have made notable progress in broadening outreach, simplifying 
enrollment processes, and extending coverage to more low-income 
families. Participation in public programs has helped to reduce the 
number of uninsured children and demonstrated that outreach and 
streamlined enrollment can improve the reach of public programs. 
However, the combination of the current fiscal situation of states and 
the downward turn in our economy are beginning to undo the progress we 
have seen.
    States are now experiencing the worst fiscal situation they have 
faced since the end of World War II. Over the last two years, state 
revenues have fallen faster and further than anyone predicted, creating 
substantial shortfalls in state budgets. In 2002, state revenue 
collections declined for the first time in at least a decade, falling 
5.6 percent from the previous year (Figure 14). These worsening fiscal 
pressures mean that state budget shortfalls will reach at least $70 
billion in FY2004. At the same time, Medicaid spending has been 
increasing as health care costs for both the public and private markets 
have grown and states face growing enrollment in the program, largely 
as a result of the weak economy. However, even as Medicaid spending 
grows, it is not the primary cause of state budget shortfalls. While 
state Medicaid spending rose in FY2002 by $7 billion more than 
projected based on recent trends, this contribution to state budget 
deficits is modest compared to the $62 billion gap in state revenue 
collections relative to projections.
    The state revenue falloff is placing enormous pressure on state 
budgets and endangering states' ability to provide the funds necessary 
to sustain Medicaid coverage. Turning first to ``rainy day'' and 
tobacco settlement funds, states have tried to preserve Medicaid and 
keep the associated federal dollars in their programs and state 
economies. But, as the sources of state funds become depleted, states 
face a daunting challenge in trying to forestall new or deeper cuts in 
Medicaid spending growth. Earlier this year in the Jobs and Growth Tax 
Relief Reconciliation Act, Congress provided $20 billion in state 
fiscal relief, including an estimated $10 billion through a temporary 
increase in the federal Medicaid matching rate. This has helped states 
avoid making deeper reductions in their Medicaid spending growth. 
However, this fiscal relief will expire next year, and it seems 
unlikely that states' fiscal conditions will improve by then.
    Because Medicaid is the second largest item in most state budgets 
after education, cuts in the program appear inevitable--in the absence 
of new revenue sources--as states seek to balance their budgets. 
Indeed, survey data the Kaiser Commission on Medicaid and the Uninsured 
released at the end of September indicates that every state and the 
District of Columbia put new Medicaid cost containment strategies in 
place in fiscal year 2003, and all of these states planned to take 
additional cost containment action in fiscal year 2004 (Figure 15).
    States have continued to aggressively pursue a variety of cost 
containment strategies, including reducing provider payments, placing 
new limits on prescription drug use and payments, and adopting disease 
management strategies and trying to better manage high-cost cases. 
However, the pressure to reduce Medicaid spending growth further has 
led many states to turn to eligibility and benefit reductions as well 
as increased cost-sharing for beneficiaries. Although in many cases 
these reductions have been targeted fairly narrowly, some states have 
found it necessary to make deeper reductions, affecting tens of 
thousands of people.
    The fiscal situation in the states jeopardizes not only Medicaid's 
role as the health insurer of low-income families, but also its broader 
role as the health and long-term assistance program for the elderly and 
people with disabilities. Although children account for half of 
Medicaid's 51 million enrollees, they account for only 18 percent of 
Medicaid spending (Figure 16). It is the low-income elderly and 
disabled population that account for most of Medicaid spending--they 
represent a quarter of the beneficiaries, but account for 70 percent of 
all spending because of their greater health needs and dependence on 
Medicaid for assistance with long-term care (Figure 17).
    It is these broader roles for the elderly and disabled population 
that drive Medicaid's costs. Most notably, for 7 million low-income 
elderly and disabled Medicare beneficiaries, Medicaid provides 
prescription drug coverage, long-term care assistance, vision care, 
dental care, and other services excluded from Medicare. While these 
dual eligibles represent 10 percent of the Medicaid population, they 
account for over 40 percent of Medicaid spending. Most of the growth 
(77 percent) in Medicaid spending last year was attributable to elderly 
and disabled beneficiaries, reflecting their high use of prescription 
drugs--the fastest growing component of Medicaid spending--and long-
term care, where the bulk of spending on these groups goes. These are 
all areas in which states will find it difficult to achieve painless 
reductions and understandably areas where states are seeking more 
direct federal assistance, especially with the costs associated with 
dual eligibles.

                               CONCLUSION

    Looking ahead, it is hard to see how we will be able to continue to 
make progress in expanding coverage to the uninsured or even 
maintaining the coverage Medicaid now provides. This week's latest 
statistics on the uninsured from the Census Bureau show that lack of 
health coverage is a growing problem for millions of American families. 
The poor economy combined with rising health care costs make further 
declines in employer-sponsored coverage likely. The state fiscal 
situation combined with rising federal deficits complicate any efforts 
at reform. In the absence of additional federal assistance, the fiscal 
crisis at the state level is likely to compromise even the ability to 
maintain coverage through public programs. Although Medicaid has 
demonstrated success as a source of health coverage for low-income 
Americans and a critical resource for those with serious health and 
long-term care needs, that role is now in jeopardy. Assuring the 
stability and adequacy of financing to meet the needs of America's most 
vulnerable and addressing our growing uninsured population ought to be 
among the nation's highest priorities.

[GRAPHIC] [TIFF OMITTED] T0762.001

[GRAPHIC] [TIFF OMITTED] T0762.002

[GRAPHIC] [TIFF OMITTED] T0762.003

[GRAPHIC] [TIFF OMITTED] T0762.004

[GRAPHIC] [TIFF OMITTED] T0762.005

[GRAPHIC] [TIFF OMITTED] T0762.006

[GRAPHIC] [TIFF OMITTED] T0762.007

[GRAPHIC] [TIFF OMITTED] T0762.008

[GRAPHIC] [TIFF OMITTED] T0762.009

[GRAPHIC] [TIFF OMITTED] T0762.010

[GRAPHIC] [TIFF OMITTED] T0762.011

[GRAPHIC] [TIFF OMITTED] T0762.012

[GRAPHIC] [TIFF OMITTED] T0762.013

[GRAPHIC] [TIFF OMITTED] T0762.014

[GRAPHIC] [TIFF OMITTED] T0762.015

[GRAPHIC] [TIFF OMITTED] T0762.016

[GRAPHIC] [TIFF OMITTED] T0762.017

