[Joint House and Senate Hearing, 108 Congress]
[From the U.S. Government Publishing Office]
S. Hrg. 108-605
THE BURDEN OF HEALTH SERVICES REGULATION
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HEARING
BEFORE THE
JOINT ECONOMIC COMMITTEE
CONGRESS OF THE UNITED STATES
ONE HUNDRED EIGHTH CONGRESS
SECOND SESSION
__________
MAY 13, 2004
__________
Printed for the use of the Joint Economic Committee
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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
C O N T E N T S
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Opening Statement of Members
Senator Robert F. Bennett, Chairman.............................. 1
Representative Pete Stark........................................ 2
Witnesses
Conover, Christopher J., Ph.D., Assistant Research Professor of
Public Policy Studies, Terry Sanford Institute of Public
Policy, Duke University, Durham, NC............................ 4
Mulholland, Dan, J.D., Horty, Springer & Mattern, Pittsburgh, PA. 6
Hyman, Professor David A., M.D., J.D., University of Maryland
School of Law, Baltimore, MD................................... 8
Gottlich, Vicki, J.D., L.L.M., Center for Medicare Advocacy,
Inc., Washington, DC........................................... 10
Submissions for the Record
Prepared statement of Senator Robert F. Bennett, Chairman........ 31
Prepared statement of Representative Pete Stark, Ranking Minority
Member......................................................... 32
Prepared statement of Christopher J. Conover, Ph.D., Assistant
Research Professor of Public Policy Studies, Terry Sanford
Institute of Public Policy, Duke University, Durham, NC........ 33
Prepared statement of Dan Mulholland, J.D., Horty, Springer &
Mattern, Pittsburgh, PA........................................ 59
Prepared statement of Professor David A. Hyman, M.D., J.D.,
University of Maryland School of Law, Baltimore, MD............ 70
Prepared statement of Vicki Gottlich, J.D., L.L.M., Center for
Medicare
Advocacy, Inc., Washington, DC................................. 94
Additional Submissions
Responses to questions submitted by Senator Bennett from:
Dr. Conover.................................................. 54
Mr. Mulholland............................................... 67
Dr. Hyman.................................................... 89
THE BURDEN OF HEALTH SERVICES REGULATION
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THURSDAY, May 13, 2004
United States Congress,
Joint Economic Committee,
Washington, DC
The Committee met, pursuant to notice, at 10:05 a.m., in
room SD-628 of the Dirksen Senate Office Building, the
Honorable
Robert F. Bennett, Chairman of the Committee, presiding.
Senators present: Senator Bennett.
Representatives present: Representative Stark.
Staff present: Tom Miller, Donald Marron, Colleen J. Healy,
Mike Ashton, Nancy Marano, Wendell Primus, John McInerney, and
Deborah Veres.
OPENING STATEMENT OF SENATOR ROBERT F. BENNETT,
CHAIRMAN
Senator Bennett. The hearing will come to order.
We want to welcome you all to today's hearing where we will
explore how regulation of health care services affects their
cost, quality and availability.
Health care is the most intensively regulated sector of our
economy. It's also one of the largest, accounting for more than
15 percent of GDP. Significant attention has been paid to the
relative costs and benefits of regulation in other industries,
as well as for the economy as a whole. But the costs and
benefits of health care regulation have often been overlooked.
We need to learn more about the impact of the complex web of
rules and regulations that govern how we spend and use more
than $1.7 trillion annually.
Health care is certainly a vital item in all our lives, and
regulations can improve its quality and reduce its costs.
However, there's a significant risk that the promised benefits
of health service regulations will fall well short of their
costs.
One challenge is that some proponents of regulation are
often not the ones who bear its ultimate burden. This
disconnect can lead to excessive regulation. A related
challenge is that many regulatory costs are less visible than
spending outlays and higher taxes. As a result, the political
calculus may tilt toward using less visible regulatory means to
accomplish objectives that would lack sufficient support if
they required a more transparent commitment of public funds.
There's often another disconnect in which people do not
appreciate how the burdens of regulation are ultimately borne.
Many consumers believe that insurers or employers pay the extra
costs that result from tighter regulations, required expansions
in covered services, et cetera, when in reality, those costs
eventually come out of their own pockets in one form or
another.
Today, we plan to examine whether health services
regulations are delivering sufficient benefits to justify their
costs. This is a new and developing area of research with
important policy implications. Patients, consumers and
taxpayers are the ones who bear their ultimate costs of
unnecessary regulation. Excessive regulatory burdens can also
harm our most vulnerable individuals, such as the uninsured and
lower-income health care customers.
I have some personal experience on that, as I will
undoubtedly be moved to relate as the hearing goes forward,
based on some members of my family who have been caught up in
some excessive regulations.
Now much health care regulation is premised on the judgment
that most health care consumers don't know, don't want to know,
and cannot know enough to make important decisions for
themselves.
I don't know if that's true often enough to justify the
level of health regulations that we have, but we hope to find
that out today because we have a panel filled with people who
all have their own experience examining the costs and benefits
of health services regulation and how our regulatory system
works.
I will introduce the panel one by one after we've heard
from the Ranking Member, Mr. Stark.
[The prepared statement of Senator Bennett appears in the
Submissions for the Record on page 31.]
OPENING STATEMENT OF REPRESENTATIVE PETE STARK,
RANKING MINORITY MEMBER
Representative Stark. Mr. Chairman, thank you. I must, as I
don't often do, take issue with the premise of today's
hearing--The Burden of Health Services Regulation--because it
assumes that regulations are simply useless impediments to
economic efficiency and prevent the lowering of health care
costs.
Many regulations are created or borne from the abuse of
human beings and the degradation of their fundamental rights.
Simply put, many regulations protect people's lives. So there
can be no rational debate, it seems to me, about doing away
with health care regulations writ large for the sake of
efficiency and thrift.
We've seen, unhappily, the prisoner abuse scandal in Iraq
and what happens when regulations break down--in this case,
military regulations. But the human toll that followed that
breakdown was unacceptable.
Countless examples of regulations that curb abuses in
health services exist. In the good old days, hospitals
routinely turned away poor women in labor until Congress
intervened and enacted MCOLA, which prohibited this practice
and guaranteed access to emergency care to all people,
regardless of their ability to pay.
Ms. Gottlich will give us her account of how nursing home
regulations have reduced patient neglect and mistreatment that
was widespread before consumer protections were put in place.
Right now, CMS claims it's heavily regulating the Medicare
prescription drug discount cards because there are already
instances across the country of seniors being defrauded.
Regulations at the FDA ensure that the drugs that are sold
and the devices we use are safe and efficacious. Should we roll
back those and should we let whatever that new pill is be sold
without any regulation?
There's a bit of concern there.
So I'd like to challenge our witnesses to pinpoint a group
of regulations that would save a great deal of money without
unleashing disastrous consequences.
We'll hear a lot about reigning in Medicare malpractice
costs, a popular example this year--talking about untold
savings in health care. But the Congressional Budget Office has
found that malpractice insurance and legal fees have a
negligible effect on overall health care costs.
In fact, CBO estimates savings of less than one-half of 1
percent if liability limits were enacted and the President's
budget shows no savings from such caps.
Now, ironically, Dr. Conover shares this vision and
advocates regulating the malpractice tort system. So I guess
that regulation is okay. It's just other regulations we don't
like.
I'm troubled that we're having this hearing focusing on
some very complex and preliminary calculations of costs and
benefits, where no detailed documentation supporting of various
analyses exists.
These studies aren't widely accepted or recognized among a
broad range of health economists. And even more disturbing is
that in some instances, zero benefits have been assigned to
important sets of regulations where, clearly, the benefits are
not zero.
Eliminating regulations will do nothing to increase access
and affordability of health care, as some witnesses have
argued. There's no guarantee that money ostensibly saved from
less regulation would be put towards covering the uninsured.
The likely result would be that insurance companies,
doctors, hospitals and pharmaceutical companies would merely
pocket any savings.
So I think that the premise of rolling back regulations is
foolish. It won't lower costs. It won't increase access or
affordability. And it may very well kill some innocent people,
which is the bottom line of what we ought to be careful about
in what we're hearing today.
But I look forward to hearing the witnesses and being able
to challenge these assumptions.
[The prepared statement of Representative Stark appears in
the Submissions for the Record on page 32.]
Senator Bennett. Thank you very much. I think you've
highlighted the issues in the debate and maybe that's the
reason we're having the hearing, to find out exactly where it
comes on.
I don't come into it with any pre-conceptions one way the
other, except, as I say, some anecdotal information. And each
of us is the prisoner of his own experience. And the hearing,
maybe, can help us break out of that particular prison.
Professor Christopher Conover of Duke University has worked
for several years to develop an initial set of estimates of the
net burden of health services regulation as a whole, as well as
that of its primary components. If there's a regulatory
elephant in the room that's increasing the cost of care and
reducing its quality and availability, Dr. Conover may be able
to provide us with some initial measurement of its size and
scope.
Professor David Hyman of the University of Maryland has
written extensively about health care regulation, most notably
in the areas of managed care, emergency room treatment, and
mandated benefits. He's also coordinated recently 2 years of
hearings on health care competition conducted jointly by the
Federal Trade Commission and the Department of Justice.
Dan Mulholland is a senior partner at Horty, Springer &
Mattern. He is one of the nation's leading health care
attorneys and serves as chair of the credentialing and peer
review practice group of the American Health Lawyers
Association.
And Vicki Gottlich, who is an attorney in Washington as
well, she's in the Washington, DC office of the Center For
Medicare Advocacy, where she provides legal assistance,
research, consultation, and litigation support regarding
Medicare and employer-sponsored health benefits.
We appreciate all of your willingness to be here with us
and we will hear from you in the order in which I've introduced
you.
So Dr. Conover, if you would go first.
STATEMENT OF CHRISTOPHER J. CONOVER, PH.D., ASSISTANT RESEARCH
PROFESSOR OF PUBLIC POLICY STUDIES, TERRY SANFORD INSTITUTE OF
PUBLIC POLICY, DUKE UNIVERSITY, DURHAM, NC
Dr. Conover. Mr. Chairman, and Members of the Committee, it
is a great privilege to testify today.
How much of the phenomenally high level of health costs in
the U.S. can be attributed to health services regulation and
how many uninsured might be covered were we to reduce this
sizable regulatory burden? My remarks today will provide some
tentative answers to both questions based upon the preliminary
results of more than 2 years of research conducted in part
under contract to the Department of Health and Human Services.
My comments this morning are my own and not intended to
represent the views either of the department, my university,
Coach K or the Duke Blue Devils.
[Laughter.]
We used two approaches to determine the net impact of
regulation. The first was a top-down approach that relied on
extrapolations from other industries. If we take the percent of
costs due to regulation in other industries such as airlines,
telecommunications and the like, and apply these to health
services, we find that health regulation could have imposed an
annual cost of at least $28 billion, but it may have been as
high as $657 billion.
The sizable difference between our lower and upper bounds
illustrates neatly the limitations of this approach. Moreover,
it is easily possible that the regulatory burden in health care
is even higher than a simple extrapolation from other
industries would suggest. That is why it is worth investing
effort in our second, much more fine-grained, bottoms-up
approach.
We examined the literature for nearly 50 different kinds of
federal and state health services regulation, including
regulation of health facilities, health professionals, health
insurance, pharmaceuticals and medical devices and the medical
tort system. These cover the gamut from mandated health
benefits to state certificate of need requirements for
hospitals and nursing homes.
We systematically tallied both the benefits and costs
associated with these regulations and found that the expected
costs of regulation and health care amounted to $340 billion in
2002 alone. As shown in the bottom of my first chart, our
estimate of the benefits from this was $212 billion, leaving a
net cost of $128 billion.
Three areas account for the lion's share of this net
burden. The medical tort system, including litigation costs,
court expenses, and defense of medicine, totals $81 billion.
FDA regulation adds another $42 billion. And health facilities
regulation adds $29 billion.
This suggests that the states and Federal Government both
have important roles to play in finding ways to trim regulatory
excess.
If we could get the next chart.
The $32 billion in net benefits from health insurance
regulation arises from one simple fact. It includes $46 billion
in savings due to ERISA. Recall that ERISA protects self-
insured plans from having to comply with state benefits
mandates, premium taxes, and other insurance regulations. If we
left ERISA out of our analysis, the net cost of regulation
would rise to $174 billion, as shown in my second chart.
It was not the purpose of our study to make recommendations
on specific regulatory reforms to be pursued, either in medical
torts or any other domain. Instead, we were trying to provide
something that has never been achieved previously--a big-
picture view of the overall impact of health services
regulation with the intent of identifying broad areas where
regulation may be excessive, while sizable health care
regulatory costs should be put into context.
For example, our analysis has ignored entirely tax policy
as it relates to health care. Yet, federal and state tax
subsidies for employer-provided health care in 2004 will exceed
$210 billion.
Thus, there are areas apart from health regulation where
Americans could get much more bang for the buck.
More than a decade ago, some pioneers in estimating
regulatory costs stated: We believe that improving and
disseminating better information is likely to induce decision-
makers to scrutinize the costs and benefits of regulation more
carefully. We hope that this increased care will lead to more
efficient decisions. The estimates in our synthesis, as
uncertain and incomplete as they may be, have been assembled
with the same motivation.
How do all these numbers relate to the uninsured?
Our bottoms-up look found that the net cost of regulation
imposed directly on the health industry itself is 6.4 percent,
meaning that health expenditures and health insurance premiums
are at least that much higher than they would be absent
regulation.
Based on consensus estimate about the impact of higher
prices on how many would be likely to drop health insurance,
this increased cost implies a 2.2 percent reduction in the
demand for coverage. This translates into 4 million uninsured
whose plight arguably could be attributed to excess regulatory
costs, or roughly one in 11 of the average daily uninsured.
In these calculations, we have simply assumed that all
regulatory costs are spread relatively evenly across all payers
in the system, but some forms of regulation such as state
insurance regulation, tend to be more narrowly focused on
individuals and small groups.
So were we to more finely calibrate our estimates of net
impact and look at the impact on small firms, for example, we
would find that it would be greater than the 6.4 percent
average effect. But, of course, there's a different way to look
at this burden as well.
Admittedly, our estimates are still preliminary and we are
now engaged in a process of careful review of all of them. But
it seems unlikely that the adjustments yet to come would alter
this central conclusion.
The net burden of health services regulation likely exceeds
the $48 billion annual cost of covering all 44 million
uninsured by a considerable margin. So a legitimate policy
question is whether the benefits of excess regulation outweigh
the benefits of coverage for all Americans?
With 18,000 uninsured dying every year due to lack of
coverage, is maintaining our current regime of excess health
regulation worth letting that continue?
This is a question worthy of serious consideration,
especially during ``Cover The Uninsured Week.''
Thank you for your time.
[The prepared statement of Dr. Conover appears in the
Submissions for the Record on page 33.]
Senator Bennett. Thank you very much.
Mr. Mulholland we'll do you next. We're not capable of
moving around. We have to go in linear fashion up here.
So, even though I introduced Dr. Hyman before you, let's
just go down in the order in which you're sitting.
STATEMENT OF DAN MULHOLLAND, J.D.,
HORTY, SPRINGER & MATTERN, PITTSBURGH, PA
Mr. Mulholland. Thank you, Mr. Chairman. I'm not Dr. Hyman,
but I play him on TV.
Senator Bennett. Yes, that's right.
[Laughter.]
Mr. Mulholland. Mr. Chairman, Representative Stark, thank
you very much for the opportunity to speak to the Committee
today.
My name is Dan Mulholland. I'm an attorney with the law
firm of Horty, Springer & Mattern in Pittsburgh, Pennsylvania.
Our firm practices exclusively in the area of health care law.
We provide legal representation as well as educational
opportunities to hospitals, their boards, management and
physician leadership across the country. I've been with the
firm since 1976.
Our firm and the nature of our practice put us in a unique
position--to directly observe both the effects and the workings
of the health care regulatory system in this country.
And I'm here today to tell you that it's not pretty.
There are a number of disturbing practical effects that
come from over-regulation of health care. Patient care
sometimes takes a backseat to paperwork. The ability of people
in health care to simply make decisions based on common sense
is often trumped by bureaucratic rules and fiat.
But most disturbing is the fact that some of the major
federal, as well as state, regulatory initiatives in the past
20 years that were designed to address legitimate problems and
to come up with workable solutions for those problems have had
a lot of unintended negative consequences and in some cases,
have actually worked to destroy the trust and the teamwork
that's necessary in health care to deliver quality services to
patients. All of us are affected by that.
Professor Conover described the quantitative effects of
this regulatory structure on health care. But I'd like to
address this effect from a qualitative standpoint.
A lot of times when hospitals and doctors are faced with
regulations, the level of complexity has grown to the point
where they really don't understand or fully comprehend how
those regulations can affect them. And this has one of three
effects.
In most cases, hospitals, doctors, nurses, others in health
care do the best they can to try to comply with these health
care regulations. But because they are so complicated, because
these regulations continue to proliferate and because sensible
laws sometimes are implemented in a less-than-sensible fashion
with complicated regulations, the people who are involved on
the front lines of health care often don't know that they're
violating a particular law until after the fact.
This can be compounded by the fact that almost every
decision that a hospital board makes, that a physician makes,
that hospitals and physicians make together, can be second-
guessed at one level or another, either by a whistle-blower, by
a plaintiff's attorney, or by a regulatory agency.
And the way in which these laws are implemented, the way in
which the laws are applied, is anything but even. That's caused
a lot of people to simply adopt a cynical attitude towards
government in general and towards the regulatory system in
particular.
It's caused some people to try to look for ways around the
law and not only spend a lot of unneeded resources in terms of
consultant and legal fees, which from my perspective, isn't
that bad of a thing, but from the perspective of society, is
not a good thing at all.
It also allows unscrupulous individuals to come up with
schemes to not only avoid the regulatory structures that apply
to them, but actually engage in conduct that any reasonable
person would think to be improper.
Finally, you have a situation where a lot of people, good
volunteers on hospital boards, non-profit community hospitals,
physicians who have long served their communities as practicing
clinicians, nurses, and other people involved in providing
health care, have simply thrown up their hands and said, it's
time for me to cash in my chips and leave.
In the case of the volunteers, they have no chips to cash
in. They simply get worn down by having to deal with one new
regulatory problem after another, and the best and the
brightest in health care, who we all rely on for our daily
health care needs and in some cases, place our lives in their
hands, are deserting the health care industry.
Again, these costs cannot be quantified. But they are very
real. We see them every day, day in and day out in our practice
when we represent hospitals, their boards and their physician
leadership.
And what we would urge the Committee to consider is that
any new regulatory initiative should be carefully vetted to
make sure that it will not have these unintended consequences
and would be absolutely necessary, rather than reacting to a
particular problem that gets a lot of media attention and then
coming up with a solution that causes more problems than it
solves.
I'd be happy to answer questions after the other witnesses
have given their statements.
Thank you very much for your time.
[The prepared statement of Mr. Mulholland appears in the
Submissions for the Record on page 59.]
Senator Bennett. Thank you, sir, for your comments.
Dr. Hyman.
STATEMENT OF DAVID A. HYMAN, M.D., J.D., UNIVERSITY OF MARYLAND
SCHOOL OF LAW, BALTIMORE, MD
Dr. Hyman. Mr. Chairman, and Representative Stark, thank
you for inviting me to testify before you today.
The last time I testified before the Senate was just over
10 years ago in front of the Senate Finance Committee, when
Daniel Patrick Moynihan was presiding.
It took me 10 years to recover. I'm hoping it won't be as
long between my next appearance.
[Laughter.]
I'm currently a Professor at the University of Maryland
School of Law. I'm also currently serving as special counsel to
the Federal Trade Commission. I'm here only in my academic
capacity. None of my remarks, whether written or oral, should
be imputed to the commission or any of the individual
commissioners. Much of what I'm going to say today is drawn
from a series of articles I've written over the last decade on
the regulation of health care.
Generally speaking, although I have submitted extensive
written testimony, my remarks are drawn from regulatory theory
and things that I've written about mandates, including the
Patient Bill of Rights.
First, I want to commend the Committee for considering
these issues. The impact of regulation of health care is a
matter of vital importance because it affects the cost, quality
and availability of medical services. Regulation has both
benefits and costs. And we're focusing today on costs, but it's
important to appreciate that benefits matter as well. You can't
have a system to deliver services that doesn't have regulation
constraining and addressing misconduct by a whole range of
participants.
For obvious reasons, we tend to focus on the benefits of
regulation. But regulation has costs as well and you have to
carefully factor in those costs when deciding whether you're
making things better or making things worse.
Excess regulation, as the two previous speakers have noted,
makes health care more expensive and at the margins, makes
health care coverage unaffordable, leading to an increase in
the uninsured.
It's economically inefficient to adopt regulations whose
costs exceed their benefits. And it's a difficult challenge to
quantify both sides of the equation, but there is plenty of
evidence to suggest that we routinely do exactly that in health
care.
Such regulation is often popular. But that doesn't change
the fact that it wastes our scarce resources and worsens the
straits of the poorest and least powerful among us--those who
the regulations are often sold as protecting.
The problem has been studied at considerable length by lots
of scholars. Just to briefly summarize some of the
difficulties, when you're enacting legislation, it's difficult
to have both the time and the training to weigh the conflicting
evidence on costs and benefits. Evidence on cost is often
unavailable. Estimates are subject to considerable uncertainty.
The timeframe for regulating is days, weeks and months. The
timeframe for studying the problem as academics need to arrive
at a broad-based assessment of costs and benefits, is more on
the order of months, years, and so on. When one enacts
regulation, it's important to recognize that it comes on top of
a whole series of prior attempts to regulate the field. And
every time you go back, you look at the lowest-hanging fruit
and try and address that problem. And obviously, at some point,
all the low-hanging fruit is gone and you have to climb higher
in the tree. To strain the metaphor unnecessarily, the risks of
falling out of the tree start to go up the higher you have to
climb.
There's also a real problem with the drafting of
legislation because providers have their own interests at heart
and lobby heavily for solutions that reflect their interests
rather than those of beneficiaries or the general public. When
you couple all of those things with the emotional overlay of
health care issues, the off-budget feature of lots of the
regulations and the extensive scope of pre-existing regulation,
it shouldn't come as a big surprise that health care is
particularly prone to regulatory over-reach.
The consequences for the nation's health are quite
significant. Higher prices make it more difficult for Americans
to obtain health insurance and needed care. Lots of small
employers don't offer health insurance at all. When employers
do offer health insurance, price increases that can result from
regulation such as mandates result in limitations on coverage,
employees refusing to sign up, and employers dropping coverage.
There are a range of estimates of the elasticity of health
insurance purchasing decisions, but I don't think anybody
believes that increasing prices above their current level is
going to result in more people purchasing insurance. And there
are a number of studies--there are volumes of studies
establishing the adverse consequences that result from not
having health insurance.
Stated more broadly, non-costworthy regulation is likely to
have a systemic adverse effect on the quality of care actually
provided to the population as a whole. A policy of quality
above all else can price the standard of care beyond the budget
of many Americans. And we should not place the poor and less
fortunate in a position of choosing between nothing but the
best and nothing when it comes to health care coverage. But
excessive regulation will do exactly that.
This concludes my prepared remarks.
[The prepared statement of Dr. Hyman appears in the
Submissions for the Record on page 70.]
Senator Bennett. Thank you very much.
Ms. Gottlich.
STATEMENT OF VICKI GOTTLICH, J.D., L.L.M., CENTER FOR MEDICARE
ADVOCACY, INC., WASHINGTON, DC
Ms. Gottlich. Good morning. I'm Vicki Gottlich, an attorney
with the Center for Medicare Advocacy. I'm presenting the
testimony along with my colleague, Toby Edelman, who got the
better end of the deal and is giving a speech in Florida this
morning to nursing home ombudsmen.
[Laughter.]
We thank you for the invitation to testify before the
Committee on behalf of health care consumers and their
advocates.
From our perspective, representing the rights and interests
of older people and people with disabilities for more than 25
years, we do not think that health care regulations are the
cause of high health care costs. And we do not think that
reducing regulations will, per se, reduce savings.
Without laws and regulations mandating specific conduct,
health care providers may not provide adequate care or a safe
environment. Laws and regulations are frequently enacted to
correct problems and bad outcomes that have already occurred
after they have occurred. And when fully and effectively
implemented, laws and regulations can both improve care and
reduce costs.
We use examples related to nursing home residents in our
testimony today because, by definition, nursing home residents
are among the most vulnerable populations and the benefits to
them from standards and regulations are well documented.
Recent experiences with fires in nursing homes show that,
too often, facilities will not provide a safe environment for
residents if the rules allow them to do otherwise.
While sprinklers are recognized as the best mechanism to
avoid deaths from fire, the rules grandfather in older
facilities and allow them to use less effective measures with
predictable results.
Last September, a fire broke out in a Tennessee facility.
Eight residents were killed in the fire. More died later. And
80 residents were sent to the hospital. After the fire, the
nursing home corporation committed itself to installing
sprinklers in 16 of its facilities that did not have any, at an
estimated cost of $10 million, approximately $625,000 per
facility. The state began considering legislation to require
sprinklers and the National Fire Protection Association called
for all nursing homes nationwide to be equipped with
sprinklers. Regulations followed disaster. They tried to
correct problems that have already happened.
For this nursing home corporation, the costs of installing
the sprinklers after the fact were much greater than the costs
would have been had they installed sprinklers originally.
There have been lots of hearings in the Senate about the
cost of poor care. Nearly 13 years ago, the Subcommittee on
Aging of the then-Labor and Human Resources Committee, issued a
report describing the high cost of poor care in nursing homes.
Avoidable incontinence, avoidable pressure sores, and avoidable
restraints were all found to cost the health care system
billions of dollars, as it tried to undo avoidable damage to
residents.
The Nursing Home Reform Law of 1987 and its implementing
rules are a prime example of laws that improve the quality of
care for residents in important respects, while being cost-
effective in savings billions of dollars. When the reform law
was enacted, nursing practice and the nursing home industry
generally believed that restraints would protect residents from
injuries and falls. As a result, in the late 1980s, an
estimated 41 percent of all residents were physically
restrained. The law and its regulations changed that paradigm.
In 2003, 8.79 percent of residents were physically
restrained, a dramatic reduction in a relatively few years. The
Institute of Medicine report on long-term care quality in 2001
called the reduction in restraints the greatest improvement in
nursing home care and credited what were then HCFA's
regulations in oversight.
Being restraint-free is clearly better for residents, both
physically and psychologically, and cheaper for government
payers as well. The other example involves the minimum data set
which was developed by HCFA through an intensive public process
that involved all sectors of long-term care.
An evaluation in 1996 found that the MDS resulted in more
positive outcomes. More residents had hearing aids and were
involved in activities and fewer negative outcomes. Fewer
residents had catheters. Hospitalizations were reduced by 26
percent, reflecting an annual estimated savings to the Medicare
program of $2 billion in hospital costs in 1992 alone.
As we describe in our written testimony, clinical staff and
administrators continue to resist using the MDS, even as they
acknowledge that it gave them better information about
residents and helped them to provide better care.
Unfortunately, as we describe in our testimony, and as the
GAO and IOM have documented, the government is often too timid
in exercising its rule-making authority and overly deferential
to health care providers.
However, strong Congressional oversight and the Clinton
Administration's nursing home initiative in 1998, helped
redirect CMS's--what was then HCFA's--approach, making the
enforcement system more consistent with federal law and more
likely to achieve its goal of assuring prompt correction of
deficiencies and sustained compliance by facilities.
Nevertheless, many beneficiaries have been hurt by what the
GAO described as the lax and overly tolerant enforcement system
that the federal agency at first created in deference to the
nursing home industry.
I know I'm over time, but I'd like to end with one current
example of the misunderstanding about the burden of
regulations.
Currently, CMS in January implemented a new fast-track
appeals process for HMO appeals when care is terminated from
home health agencies and other agencies.
The home health agencies complain that the notice
requirements in this new process are overly burdensome because
they have to give notice two days in advance before home health
services are terminated. The real issue in this situation is
not the notices, but the HMOs themselves are only approving one
or two home health visits at a time, rather than the 60-day
care plan required in the traditional Medicare program. As a
result, the home health agencies are having to give a notice at
every single visit.
What we've really discovered in this instance, and the home
health agencies agree, is that the Medicare beneficiaries are
not getting the home health services to which they're entitled.
We also know, based on a lot of litigation that we've done,
when individuals don't get notice of their appeal rights, they
don't appeal and they don't get care to which they're entitled.
We further know that when our clients don't get the home
health care services to which they're entitled, their
conditions deteriorate, they often get placed in nursing homes,
and we have unfortunately seen too many of our clients die in
this situation.
From our perspective, the regulations that are issued
really are issued to protect the beneficiaries. The regulatory
process, as found through what happened in the nursing home
reform law, reflects the practices of the industry itself. And
when regulations reflect the best practices of the industry,
they are not burdensome. They are instead implementing good
quality of care.
Thank you for holding the hearing and thank you for
inviting me to testify.
[The prepared statement of Ms. Gottlich appears in the
Submissions for the Record on page 94.]
Senator Bennett. Thank you very much. I appreciate your
comments. And you do give me the opening to talk about the
anecdote that I hope is not controlling my approach here, but
that I think is perhaps instructive, and it occurred in a
nursing home.
I have a daughter of whom I'm very proud--I'm proud of all
of my children. But this one in particular that I'm talking
about got her master's degree in speech therapy from George
Washington University, and her first job was in a nursing home.
You have to know this daughter to understand that she is
not very patient. She gets quite passionate about things. She
had been there, I think, about a week before we got a phone
call late one night and she said, ``Dad, you're a Senator.
You've got to fix Medicare. Medicare is a disaster.'' I said,
``Now calm down, Heather. Tell me about it.''
This was the example that occurred to her. She was called
in--here's a woman in a nursing home who is having swallowing
problems. The doctor said, get the speech therapist. She's the
expert in these kinds of things.
And so, Heather shows up all excited. Examines the woman,
makes a diagnosis--this is what you need to do. And says that
she needs this kind of treatment.
The woman's family says, ``Not on your life. You're not
touching our grandmother until we find out whether or not this
is covered by Medicare, because we won't pay for it. If it's
covered by Medicare, you can go ahead and do the treatment. But
if it's not, we won't pay for it.''
Well, Heather says, ``Fine.'' And she naively says, ``Is
this covered by Medicare?'' I think it was 3 days later, the
woman in the nursing home whose assignment it is to cull
through the Medicare regulations to determine what is covered
and what is not, came up with an answer.
And back to my daughter, she says, ``Dad, do you know who
the highest-paid person in this nursing home is? It's the woman
who handles the Medicare regulations. That skill is in such
small supply that we pay her more than we pay the administrator
of the hospital or any of the doctors or any of the nurses, and
she controls the nursing home. Because until she says yes or
no, nothing can happen.''
And unfortunately, for an impressionable, idealistic young
woman fresh out of college, she had some patients die as she
was waiting to get the word from this woman who handled the
Medicare regulations as to whether or not she could, in fact,
provide the treatment.
She said, ``I can't tell any of my coworkers here at the
nursing home that my father is a Senator because they're all so
mad about Medicare and how it gets in the way of our providing
treatment with the labyrinthine regulations.''
And then came the final one, which I probably shouldn't say
in public, but will anyway, removing any names.
A doctor said to her, ``Heather, go ahead and do it. I will
prescribe a procedure that is covered by Medicare so that we
can be paid. And just don't tell anybody that you're not
performing that procedure. You are, in fact, performing the
procedure that the patient needs.'' Highly illegal, and the
potential for abuse is enormous.
I resonate with what Mr. Mulholland said when he said these
impenetrable regulations run the risk--and indeed, if I heard
you correctly, produce the result of disrespect and disregard
for the law as people on the firing line see them getting in
the way of providing treatment.
Now with all due respect to Dr. Conover, whose research I
think is tremendously valuable, I'm with Mr. Stark on this
issue. I'm less concerned with the dollars than I am with the
treatment.
I'm less concerned with an economic analysis that says it
costs us this many dollars and yes, we could use those dollars
elsewhere and so on.
If the case can be made, however, that you're getting
better treatment and it's impossible to put a dollar value on
what that treatment might be, I'm willing to accept higher
costs.
But the driving experience here is that the regulations
produced worse care. And I think I heard Mr. Mulholland say the
same kind of thing from his experience as a lawyer handling
cases connected with this, that the regulatory burden, costs
aside--and really, Dr. Conover, I'm not trying to put down your
research because I think it's very valuable and I appreciate
your sharing it with us. But costs aside, there is a care
problem here.
I accept your analysis of the restraints and obviously, the
sprinkler thing--that's easy. That's very clear. Anybody can
say, putting sprinklers in outmoded facilities is the right
thing to do. And a mandate that that be done clearly makes some
sense.
Ms. Gottlich. Senator, can I----
Senator Bennett. Yes. The experience at least in this one
nursing home, if my daughter is telling me accurately,
everybody in the nursing home, except perhaps the woman in the
corner office who is making the decisions as to who can do
what, is thoroughly frustrated in their ability to provide care
by the complexity of the regulations.
Now, yes, I'd like to have your response.
Ms. Gottlich. Actually, I have had similar experiences in a
variety of different payment systems. So what I wanted to share
with you was a situation in a self-insured plan where an
individual was trying to get coverage for a child who had been
severely injured in a car accident and needed continued
therapy.
He couldn't get the information from his self-insured plan,
which is not subject to regulation. And it took so long. And it
was clear that if the child didn't get the therapy, his
condition was going to deteriorate. So what the family ended up
doing was applying for Medicaid for that child.
I was really troubled by that situation because the care
decision affected, quite frankly, not only the child, but it
affected me because the child suddenly became somebody on
Medicaid.
I think a lot of these issues are not necessarily
determined based on regulations, but they're cost mechanisms
because the way our health care system is devised, it's better
for the health payer, regardless if it's Medicare, Medicaid, or
private ERISA plan, if they don't pay for health care.
I think a lot of the regulations are designed to actually
limit rather than provide the care that the doctor in your
daughter's situation felt was medically necessary.
I think that it's a bad situation. There are lots of issues
going on with Medicare in terms of some of the complexity.
But I think that it happens in other payment systems as
well.
Senator Bennett. I don't dispute that for a minute, that
Medicare is not by any means the only culprit.
Mr. Stark, I think as we've done in the past, you take your
question period here, and then the six of us will simply have a
roundtable and go back and forth.
Representative Stark. I apologize to the witnesses. Pollen
seems to be not well-regulated and my ears are stuffed up as a
result. So I don't know whether I'm shouting or whispering and
I apologize for that.
Let me ask a couple of questions. First of all, the
principal regulations--somebody did a chart between federal and
state.
If you take Medicare off the table, you haven't got much
beef with the Federal Government other than HCFA, right?
We don't regulate torts. We regulate pharmaceuticals. I
would love to have you there when we argue with my constituents
who want to bring their pharmaceuticals in from Canada.
Would any of you object to allowing that without
regulation? It would save a lot of money. Does anybody find
that a regulation that we ought to keep?
Ms. Gottlich. Well, of course, you know that we would
support the importation of drugs from Canada.
Representative Stark. I wonder if the other three witnesses
would, too.
Mr. Mulholland. Representative Stark, I think you can argue
on both sides of that.
But I think your observation earlier was correct that, in
large part, the regulatory problems that have been caused as a
result of federal regulations are ultimately tied to the
Medicare program, which again gets tied to the costs.
Representative Stark. Okay.
Mr. Mulholland. And that creates----
Representative Stark. But Conover here is talking about
$600 billion or some figure. We only spend approximately $300
billion on Medicare. How are you going to save--if you take
that off the table and you guys are in the wrong forum? You
ought to go back to the states--Maryland or North Carolina.
[Laughter.]
States are the ones who--they regulate doctors. They
regulate lawyers, right?
Should we do away with the bar exam?
Mr. Mulholland. I've already passed, so it wouldn't matter
to me.
Representative Stark. That's right.
[Laughter.]
Then NOLO would take over the legal profession.
At some point, we spend your money, the taxpayers' money.
We have some obligation to make sure that it's spent fairly.
Now the Defense Department doesn't care. They'll give
Boeing whatever they need, as long as they get kickbacks. But
that's not what we try to do in Medicare. We spend--we have,
admittedly, 14 percent of Medicare money is spent incorrectly.
About half of that is fraud and about half of that is just
mistakes.
I'll bet you that Blue Cross doesn't do any better. Because
as a matter of fact, it's Blue Cross who administers Medicare
under contract, so I suspect for the private market--and then
if you walk around and you're under 65, like the witnesses are,
you can do anything you want.
The doctors can treat you. The doctors aren't under any--
there are the privacy regulations, but, again, that has nothing
to do with Medicare. That has to do with the whole general
issue of privacy in this country. And there are people who are
concerned about that and civil libertarians are concerned--I
hope. Scalia and Thomas and Ashcroft, the great civil
libertarians of all time. But you're beating a dead horse here.
You want to go home. Talk to your state legislators about
this.
California, we've already passed tort reform. So don't talk
to us. Let the rest of the states pass it if they think it's
the right thing to do. Has Maryland got tort reform?
Dr. Hyman. That would be for me. Yes. And my friends who
are plaintiffs' lawyers complain bitterly about it.
Representative Stark. Yes, but they have it, right? So you
don't care whether we have federal or not. Correct?
Dr. Hyman. I actually was talking earlier about insurance
mandates, which are both federal and state level.
Representative Stark. Where?
Dr. Hyman. It's also important----
Representative Stark. Whoa.
Dr. Hyman. The Pregnancy Discrimination Act of 1976, the
Newborns and Mothers Protection Act. I can list a number of the
mental health parity requirements that are found in HPPA. There
are federal mandates. The disproportionate percentages are at
the state level.
Representative Stark. But you like ERISA.
Dr. Hyman. I think ERISA serves its function quite
effectively. Actually, when I started, I said that----
Representative Stark. I get the sense that you guys are
picking and choosing here the regulations that----
Dr. Conover. But the reason that ERISA saves money is
because it exempts plans from----
Representative Stark. But it's a regulation, though, isn't
it? It's a regulation that keeps lawyers like these other
guys----
Dr. Conover. It's a very funny regulation in that regard.
Representative Stark. Wait a minute. It's a regulation,
right?
Dr. Conover. It's a regulation that exempts----
Representative Stark. You like it, don't you?
Dr. Conover [continuing]. Exempts plans from a lot of other
regulation, yes.
Dr. Hyman. Representative Stark, I don't think--I didn't
hear anyone at the panel to say that all regulations are bad.
I thought the point of the testimony was that regulations
can be good, except to the extent that their costs exceed their
benefits.
Representative Stark. But Dr. Conover over here doesn't
have any benefit in any of his analysis, right? You've got zip
for benefits.
Dr. Conover. No, that's not right at all.
Representative Stark. Wait a minute. You told me--you don't
show any benefits in your analysis.
Dr. Conover. If you look at that chart, you can see we're
showing $207 billion worth of benefits.
Representative Stark. In nursing homes, it's zero. Right?
Dr. Conover. In that particular one, we didn't find
literature that showed----
Representative Stark. You've got to find literature.
Dr. Conover. That showed a cost.
Representative Stark. You can talk to lawyers here and
they'll tell you that there's some kind of a system for
determining the value of life. I don't know how you guys figure
that, but I'm sure that you'll find some literature that will
tell you that life has some value. Do you believe that?
Dr. Conover. I do believe that life has some value, yes.
Absolutely.
Representative Stark. Okay. Can you quantify it?
Dr. Conover. Well, in our estimates, we were using a value
of life of $4.4 million.
Representative Stark. Okay. And you can't find any cost
benefit in regulating nursing homes?
Dr. Conover. In the evidence that we went through, we did
not.
Representative Stark. Ever been in a nursing home?
Dr. Conover. Well, yes. I've visited people in a nursing
home.
Representative Stark. Ever had a relative in one?
Dr. Conover. My granny was in one for a while.
Representative Stark. As I say, I find this highly
selective. You think that reimportation shouldn't be regulated,
right? Or not. I'm not getting an answer.
Mr. Mulholland. I really haven't formed an opinion on that,
Representative Stark. But I think your point about Medicare
being responsible for a lot of the regulations to some extent
underscores what Professor Conover was talking about because
Medicare is the largest payer by far in the country for health
care----
Representative Stark. Whoa, whoa, whoa. We paid $300
billion out of about $1.4 trillion spent on health care
services in this country. Now, c'mon. Do your math. If you've
got your shoes and socks off, you can do that math.
Mr. Mulholland. I'm not saying it's the majority of
payment, but it's the largest payer. There's no other payer
that's as big as Medicare in terms of being a single source of
payment.
Representative Stark. Okay.
Mr. Mulholland. If Professor Conover's figures are right,
$128 billion net cost of regulations, that would mean that
Medicare is bearing approximately a third of that based on the
numbers that you had just given, Representative, which mean
that the regulatory system, the Federal Government has imposed
on the system, on the health care system, actually is costing
the Federal Government more money.
So it becomes a self-fulfilling prophecy. More payment,
more regulation, more cost.
Representative Stark. That's the wackiest thing I've ever
heard, I'll tell you.
Okay, guys. As I say, libertarianism is alive and well in
the world. And the Cato Institute and the American Enterprise
and the Club For Growth, God help us if they were ever to
provide medical care to our indigent.
Mr. Chairman, they're all yours.
[Laughter.]
Senator Bennett. Well, let me make the same point that I
think was trying to be made.
I certainly do not believe that all regulations should be
repealed. Nor do I believe that the regulatory scheme, the
careful regulatory scheme is not absolutely essential.
I think everybody will agree that we have a responsibility
at both federal and state level to provide a sensible scheme of
regulation. Having conceded that, I would trust that you would
concede that such a scheme of regulation should be reviewed
from time to time to see if there are some regulations that
don't make sense, that do in fact end up costing the system
more than the benefits, and, in the exchange that Ms. Gottlich
and I had, actually reduce the level of the quality of care,
that the regulations get in the way of providing intelligent
care.
I'm satisfied that Medicare has reached that point, that it
has become so labyrinthine to try to find your way through the
Medicare regulations and come up with an understanding of what
Medicare really does require and does not require, has reached
the point where it's appropriate for the Federal Government,
particularly those of us who pass the laws, to say it's time to
take a long, hard look at this. It's getting in the way of
providing quality care.
But I will certainly join with you that regulation is
essential. And I don't think there's anybody on the panel that
would disagree with that.
Representative Stark. Let me----
Senator Bennett. Yes.
Representative Stark. My name was taken in vain in some of
this testimony, but it was taken in vain long before that by
whichever administration was in when we wrote what are called,
obscenely, I think, the Stark Laws.
It's important--I think Dr. Hyman raised the issue of the
Stark Laws, right?
Mr. Mulholland. I believe I did.
Representative Stark. You did. Okay. The Stark Laws were
written at the behest of a Republican administration, okay,
initially over my objection. I said, what the hell. These guys
ought to be able to go make money any way they can. Well, they
finally showed me, some place in Florida and the AMA finally
came around, that there was very excessive utilization because
of kickbacks, basically.
But the initial law--and I'm not a lawyer, but I have to
paraphrase it, about a paragraph. And it says, and correct me
if I'm wrong, Mr. Mulholland, but the original federal law
said, whomsoever will taketh or receiveth or generate a
kickback, a spiff, a commission, in cash or in kind for
referring a service to another under Medicare or Medicaid, will
do 5 years or $50,000. That was it. That's all it was.
I was told that the prosecutors wanted a clear line to
prove intent. What did I know? I'm just a politician. I don't
know law. I am not a lawyer. But I said, all right. We'll have
a line. And we wrote the bill and then the regulations came.
And you know what? Those regulations just became a set of
instructions for you, Mr. Mulholland, to draw loopholes, to
say, now to my clients, aha, here are the clear lines. And you
can get around them by this and this and this.
So when they came back, we had to have Stark 2. The more
the lawyers dreamed up loopholes, the more we had to have
regulations to close the loopholes.
I would go back to the original bill. That's just one
paragraph, if I had my way, and then you'd have to tell all
these docs, you'd better be careful, doc, because they could
come after you for criminal activity. But I don't know. And
being able to say I don't know to the doc would probably have
as good an effect as this big stack of regulations.
So I'll make a deal with you. Let's go back to that
original. But then let's put a few docs--you've got some guys
who are good criminal guys in your law firm? Let's put one or
two in jail for doing what we probably both agree is wrong, and
you wouldn't need all the regulations.
But it's just like the tax law. We write laws to close the
loopholes that you guys get paid big money to get them through.
So the lawyers, Mr. Chairman, share equally in this blame for
regulation. Right?
Mr. Mulholland. Representative Stark, I'm prepared to shake
on that deal right now.
[Laughter.]
Representative Stark. Okay.
Mr. Mulholland. And that was exactly the point I was trying
to make in my written remarks. That original law, the anti-
kickback law, is still on the books and the reasoning behind
the first ``Stark Law'' is let's make it a little bit simpler,
draw a little bright line.
I don't quibble at all with that. But it's the complexity
of the regulations. Once you start thinking, well, what about
this, what about that--you've gotten to the point now where
hospitals are worried that if they serve a meal that costs
$25.25 to their doctors, that a whistle-blower can come after
both of them and recover literally millions of dollars in false
claims actions.
So there is some question about proportionality. But I'd
love to have that.
Representative Stark. We got our limit up to $50 in
Congress. So you could buy us a meal. I think $50 is the limit.
Mr. Mulholland. We once had----
Senator Bennett. It's $50 in the Senate. I don't know what
it is in the House.
[Laughter.]
Mr. Mulholland. We once had the Chief Counsel for the
Office of Inspector General visiting the health lawyers in
Pittsburgh and we wanted to give him something. But he said,
I'm subject to this, too.
So we got him a $100,000 Bar and said, here, take this home
to your kids. But that's the level of complexity that's
happened. When an otherwise legitimate statute has grown out of
control, it's metastasized--and you're right. It's almost not
sporting to blame lawyers. Lawyers are responsible for some of
this, too.
On the other hand, this has served like a millstone around
doctors and hospitals.
Actually, we represent a lot of people in this. We give a
lot of educational programs. In fact, we're giving a series of
audio conferences on the new Stark regulations. You'd be more
than welcome to join if you want to be a guest star on it,
Representative.
But this is something that----
Representative Stark. It's out of control. It's like a
virus.
Mr. Mulholland. My partner and I were giving a little talk
on this about two weeks ago and we started explaining it. And
we suddenly had a very frightening revelation.
We understood those regulations. And we thought about
seeking some mental health counseling as a result.
[Laughter.]
So if there's anything you can do to simplify the
regulations or get back to the basics, I think that would be
welcomed with open arms because then, only the truly
unscrupulous would have something to worry about.
Now the people who want to follow the law are burdened down
with worries about compliance, and there are still crooks who
are bilking the Medicare system for billions.
Representative Stark. At least what I see is that there are
areas in which those of us who are powerless need some
protection, which laws can turn out to be regulations, the
complexity of which will drive you nuts.
I concur in that. I am subject to it, as the Chairman is.
Apply for a building permit in Maryland, just once, I urge you.
I'm now in my third year of the same permit. So I'm
sympathetic.
And then I realize that I'm probably the person who caused
those problems, or my colleagues, in the first place. But it is
frustrating.
Senator Bennett. We'll be glad to blame you specifically.
[Laughter.]
Representative Stark. I can't quite accept the
quantification as a way to say, we're going to pay for--I would
agree with you that we should review our regulations. Our
oversight functions should be more thorough. We should listen
to Mr. Mulholland and get the advice of experts, who agree with
us.
It's a problem that ought to be resolved. How do we do it?
I'm with you. But the idea that a regulation, as a systemic
problem in the world, if it's any different with medical care
than it with pharmaceuticals or flying an airplane and running
an airline, or running a bank.
These are there and generally not--because the Chairman and
I sit back here and say, what kind of a regulation could we
dream up today to make Dr. Conover's research exciting and make
Dr. Hyman's life awful.
We don't do that. We hear from people that had something
bad happen to them. And we say, well--and then we find out that
maybe more bad things are happening to people and we, somehow
in our enthusiasm, try to put a stop to it.
Does that often become burdensome? Yes. Does it save lives?
Many times.
So I don't know how we can get to a happy medium.
Senator Bennett. Well, I do think it's useful for us to
have some kind of economic analysis of cost. I agree that the
cost should not be the controlling factor in the decision we
make.
But it's one thing for Ms. Gottlich and me to exchange
anecdotes--and I can prove that Medicare, Medicare regulations
and their complexity, has caused delivery of health care
problems in a particular nursing home, and arguably,
contributed to some deaths. But I have no idea in the universe
how expensive that is.
I can intuit that there's an expense connected with it, but
I can't come up with anything.
So in defense of Dr. Conover, I think these kinds of
studies are helpful and useful because they give us a guideline
as to how big the problem is.
I don't think we're ever going to get to the point where
all of the regulations are understandable or all of the
regulations are easily enforced. Human nature is such that you
don't get there.
But I think that we ought to recognize that there is a lot
of money tied up in this and therefore, a lot of opportunity
to, Ms. Gottlich, improve care and improve safety, and Dr.
Conover, save some money at the same time. And that strikes me
as a win/win.
Dr. Conover. Right. I wanted to talk about the 48-hour
maternity stay mandate because that's a good example of
regulation that came about because of a concern about a
problem. And we crafted a solution and it imposes a cost on the
system.
And yet, when you look at the clinical evidence about
whether that saves lives, there really isn't any. So it's an
example where there was this impulse to put regulation on the
books, and we didn't have any evidence about--there was just a
supposition that, well, gee, if women get discharged too
quickly, that's going to be a problem for quality.
And so, we put this regulation on the books and,
retrospectively, we've now done the clinical studies to look at
whether it made a difference or not. In terms of outcomes, it
appears not to have. But once it's on the books, it's sort of
there forever.
So we're continuing to incur the annual cost of that. But
we're really not getting a health benefit that would be
commensurate with that cost. And that's problematic. And that's
an example of how regulation sort of accretes onto the system.
Ms. Gottlich. But I'd like to address that, as the only
person in this discussion to whom that applies.
There's a quality of life issue. From personal experience,
having gone through this twice, there are definitely people who
want to go home immediately and there are definitely people for
whom 48 hours is not going to save their lives. But it means
that they're going to be better able to cope.
And so, the other things that we have to look at are post-
partum depression, how they're able to deal with their kids,
what systems do they have in place.
So it's more than the really adverse outcomes. Benefits
sometimes are just not measurable.
What does it mean for a nursing home resident to be able to
have her breakfast at 9:00, as opposed to 6:00 in the morning?
That's certainly a burden on a nursing home that improves the
quality of life of the resident. I could tell you my extra day
in the hospital after my second child was born really did a lot
for my second child and me because I didn't have to deal with
my first child. That's an anecdote.
Representative Stark. My most recent two children were
twins who were born within the past 3 years. And I want to tell
you, I wanted to stay the extra day at the hospital with my
wife and the twins, regardless of what she might have wanted.
[Laughter.]
May I?
Senator Bennett. Yes. For the record, our last children
were twins as well. And when the nurse asked my wife, ``Do you
have any more children at home?'', and she said, ``there are
four.'' ``Oh, you poor thing. You poor thing,'' the nurse kept
repeating over and over again.
But that's just one of the things that bonds us--you have
twins and so do I. Go ahead.
Representative Stark. Dr. Conover, I gather you feel that
the zero benefit for nursing homes may change.
Dr. Conover. They may change, right. That's why we're going
through all of these, yes.
Representative Stark. In the acute care area, you have a
zero benefit for--is that just for the accreditation?
Dr. Conover. For hospital accreditation and licensure.
Representative Stark. Now I'll let you and Dr. Hyman get
into this. I'll just start an argument and stand back and watch
you guys.
[Laughter.]
Representative Stark. I would say that, and this is an area
of pure economics, that in some states--the best state in the
country, I might add, is the State of Maryland in terms of
regulating hospitals.
They have one of the best hospitals in the world. They come
in by law at 10 percent below the national average for Medicare
rates. They've never had a hospital go broke because they won't
let them.
But we've recently come up with this issue of, if you don't
control the market, are you apt to cause the demise of a
hospital? And is that something to be regulated?
In this case, I don't have an opinion. But in every state
except the State of Maryland, we're seeing boutique hospitals
appear in an effort for doctors to make some extra money
because they participate through a loophole in the Stark Law,
in the profits of those boutique hospitals.
And again, I don't get morally indignant about that, but
it's tending to cause some real problems with community or
broader acute care hospitals, who find profit centers being
taken away by the cardiologists or the eye surgeons or
whatever, and leaving our community hospitals with just the
expensive stuff that doesn't have much profit.
That's not an area really that I see us regulating unless
the hospital industry decides that maybe there's a reason like
accreditation to decide whether we need hospitals on an
economic basis.
Now do you think that's something that the state should get
into or not?
I don't know as we will--I don't want to unless the
hospital association comes almost unanimously and says, look,
this ought to be controlled or you're going to cannibalize the
structure under which hospitals have grown over the last 50
years in this country.
And if we suddenly take that apart, we may have some fiscal
problems that we'll get called on to solve. Is that an area
that we should regulate?
Dr. Conover. Well, when you talk about accreditation, I
think of that as quality regulation. And I guess I'm not aware
that the specialty hospitals are creating----
Representative Stark. Well, there's also the certificate of
need.
Dr. Conover. The certificate of need.
Representative Stark. Which is accreditation.
Dr. Conover. Okay. But certificate of need is something
that I've studied a fair amount. And when you look at the
evidence about certificate of need, we generally find that it
doesn't do what it was intended to do, which is to save costs.
And almost half the states have gotten rid of certificate of
need because of that.
Representative Stark. Yes.
Dr. Conover. But the states that continue with certificate
of need defend it on either access or quality grounds.
And on the access issue, I think any community would have
to ask the question, if you basically reduce competition, and
we know that if you reduce competition, you're going to end up
with higher prices in an area----
Representative Stark. What about accreditation just then on
federal standards? Don't you think that there is a benefit to
having some minimal standards under which you, say, put a stamp
of approval on this thing and say, this qualifies as a
hospital?
In other words, you and I could go out and buy a Motel 6,
paint a red cross on the side and say, ha, we've got a
hospital, and up our rates from $39 a night to $500 a night.
Dr. Conover. Well, accreditation historically has been a
state responsibility.
Representative Stark. Yes.
Dr. Conover. I'm not sure I would be in a position to argue
why the Federal Government could do that better than state
governments could.
Representative Stark. Well, the only reason we do--I don't
know if we do it better--is that Medicare pays hospitals in all
50 states.
So that if we are going to say, you meet our standard for
collecting from Uncle Sam, you've got to meet these standards.
And there's no reason that we should go easy on California and
be tough--Maryland gets a waiver because they're good guys.
So that's the reason, possibly we should leave it to the
states. We leave it to the states with regard to doctors.
Dr. Conover. Right.
Senator Bennett. Is ``good guys'' a term of legal art?
Representative Stark. Yes.
[Laughter.]
Senator Bennett. Yes. Okay.
Dr. Conover. So what you're describing is the very reason
that Medicare gets involved in all of this. And that's why I
wasn't sure I understood----
Representative Stark. Well, I'm just saying, is there a
cost--you say there's zero benefit to it. And I've got to think
there's some benefit, whether it's a state regulation that
gives them the seal of approval or federal.
Dr. Conover. The issue is what would happen otherwise
absent regulation. Would a hospital go into business and
provide shoddy care and start killing people?
Representative Stark. Try Tenet. Try Tenet in Redwood,
California, where they killed 167 people through outrageous
cardiological practices that were giving people heart
transplants when they were healthy. And hopefully, some of the
Tenet officials go to jail because of this.
Yes. The answer is, yes, indeed, there are scalawags in any
area. There are even some of our colleagues who have gone to
jail on occasion.
But what I'm suggesting is that, yes. It's worse in the
nursing homes where we can have 6-packs and mom and pop can
decide to take six people in like Jim Jones did in Guyana. Yes,
there are people who will prey on those who are susceptible.
Dr. Conover. Regulation is a continuum. There's zero
regulation and then there's what we've got now. I'm not arguing
to go back to zero, okay?
Representative Stark. Okay.
Dr. Conover. What I'm saying is, let's look at the areas
where it looks like regulations' costs are disproportionate to
any benefits and dial back to that level.
Representative Stark. No quarrel.
Dr. Conover. In most domains, it doesn't mean it's going to
be zero regulation. But I think we've heard lots of testimony
today about the extent to which regulation has gone beyond the
point of being--where the benefits are now less than the costs
that are being imposed on the system. We need to look at that.
Representative Stark. What about, Dr. Hyman--do you like
Maryland's hospital system, the all-payer system?
Dr. Hyman. No.
Representative Stark. You don't?
Dr. Hyman. No.
Representative Stark. Why? The hospitals do.
Dr. Hyman. Well, it's not an accident that the hospitals
do, which is alone a reason to be skeptical about it as a
taxpayer.
Representative Stark. They fought it when it went in.
Dr. Hyman. I know. But then it turned out, like lots of
these things, to reward them. It's not an accident, as you
observe, that there's only one state left in the union that has
rate-setting. And that's because the history of rate-setting,
like the history of certificate of need, does not bear close
examination.
It does--rate-setting, like certificate of need, can be
used to maintain safety-net institutions. Sometimes those
institutions should be maintained. Often direct, overt
subsidies are a better way of doing that than embedding it in
the price and pretending that there isn't a cost associated
with it.
But sometimes hospitals shouldn't be kept open. And the
rate-setting system, which takes as its mandate--keep every
hospital open forever--doesn't discipline that process.
Representative Stark. I think that's unfair with Maryland.
What they have done is to--yes, they do set rates. But so
does everybody. I don't know that there's a hospital around
that gets the sticker price, unless you just walk in with cash.
Blue Cross sets rates. Aetna sets rates. Medicaid sets
rates in various states. That's not uncommon.
It's just that the net effect in Maryland was to set the
rates on a hospital-specific basis. They recognized, for
example, that Johns Hopkins, as a teaching institution, perhaps
had a need for a different rate structure than a smaller rural
hospital.
But that smaller rural hospital also had some needs because
of a lower population and having fewer services. But what they
cut out was the discounting and the uncompensated care. So
that, basically, every patient who came through the door paid
the rate, the same rate, including Medicare and Medicaid.
So the issue of not wanting to take Medicaid patients
because they pay less, in California, was off the table. And
then if a hospital was going broke, rather than just keep it
alive, they might have paid a neighboring hospital a little
extra to take that hospital under its wing and provide the
services.
As an observer from far away, I've always felt that the
Maryland system was one that states should look at because, in
terms of price and quality, it's come out with a pretty good
mix.
Dr. Hyman. Again, I think this is one of these things that,
if you have perfect information and good incentives, rate-
setting, if it were done by angels, it would probably work
well. It's not.
And again, it's no accident that a whole series of states
experimented with rate-setting and then, with the exception of
Maryland, everyone else has walked away from it.
Like certificate of need, there are problems with
information and incentives that mean, in the real world, it
doesn't work as expected to in the journals written by
academics.
Representative Stark. Would you suggest that we shouldn't
rate-set in Medicare?
Dr. Hyman. Well, let me just be clear. There's a difference
between rate-setting and payers saying, here's what we'll pay
and vendors saying, here's what we'll take.
Rate-setting is everybody pays sticker price and nobody can
discount. And it has a series of distributional consequences.
The question that you should ask yourself is, if it's good
for hospitals, why shouldn't it be good for Wal-Mart and
hardware stores and everything else? The state ought to say,
the right number----
Representative Stark. There's a very good reason, Doctor.
Dr. Hyman. Well----
Representative Stark. You and I--I'd challenge the panel to
take the test. The Chairman's taken it with me and we've both
failed.
We don't know what it is we're purchasing as consumers. We
can't spell it. We hurt. Often we're not in a mental state,
because of pain, to make a reasonable decision.
We take the advice of a professional. And we take that
advise--we swallow the bait whole.
Now with the Internet, we may get a little bit more
information. But, basically, it isn't like shopping for a
digital camera where we can't go to Consumer Reports. You can
go to U.S. News & World Report and figure it's a good hospital.
But I've often challenged my witnesses to say that I have
this special arrangement with Georgetown Hospital because I'm
such a good guy, they love me. And I can arrange for all four
of you this afternoon--I'll give you my business card and I'll
write your name on the back and you can go over and get a
proctoscopic examination or a pap smear at half price if you go
there today between 2:00 and 3:00.
Now I've never had anyone take me up on that. This isn't
what we buy. It isn't like going to Wal-Mart and shopping.
That's a long argument with the people who say, let the
market--let people decide how to buy medical care. They can't.
It's not like buying a Chevrolet or a Ford.
Dr. Hyman. Representative Stark, if you view the problem as
an informational deficit, then the sensible strategy is to try
and get more information out and have people be more effective
agents for patients.
But rate-setting is not going to be the strategy you're
going to employ to address that problem.
I certainly agree with you. Lots of patients have
difficulty knowing what's going on. Although, people who have
chronic illnesses, not surprisingly, are much better at this
than patients with an acute attack of something that happens
once and never again.
But regardless of your views on how severe or minimal that
problem is, you wouldn't use rate-setting to fix that problem.
It doesn't synchronize with the problem that I think you've
accurately identified.
Mr. Mulholland. If I could just turn to two things that you
talked about.
That's an example of regulations that are fairly benign.
They're not as complex as a lot of state hospital licensing
regulation.
For the most part, they make sense. They say that you have
to have a board, you have to have a medical staff, and you have
to have nurses--common sense. The problem there is how they're
enforced. And again, it's because various regulations have
accreted over the years that drive the enforcers in a manner
that they have no control over.
I'll give you an example.
Most complaints about violations of conditions of
participation fall in one of two areas for hospitals. One is
restraints and I think that some of the more forward-thinking
restraint regulation reforms that Ms. Gottlich talked about are
good. People shouldn't be tied up in strait-jackets.
But sometimes people need to be restrained for their own
good. There can be a difference of opinion. Somebody complains
to the government. That's all well and good. That's everybody's
right.
At that point, they respond to what could be a fairly
easily resolvable situation--talking to the doctor, the nurses,
the patient, family--and turn it into a huge federal case
because they're required to do a complete resurvey of the
hospital--not just with restraints, not with respect to this
issue, but with respect to everything.
Not only that, the government is then required by their own
regulations to put a notice in the paper that unless the
hospital corrects everything within 60 or 90 days, that they're
going to be excluded from the Medicare program.
That happened once in New Orleans a couple of years ago
where a very well respected institution was being subjected to
an investigation. This notice got out. And senior citizens went
berserk. They were very frightened that their hospital was not
going to be open for them. And it's still taken well over a
year to settle down the public relations nightmare that that
hospital faced. But more importantly, the kind of consternation
it forced on all of those senior citizens.
So even common sense regulations can be applied in a way
that create a lot of unintended results and a lot of negative
results.
Also, once that happens, the hospital is then going to be
resurveyed by the joint commission, the private accreditation
body that Medicare relies on----
Representative Stark. Questionable----
Mr. Mulholland. One could raise questions about any of
these agencies. But that's the second one.
Then the office of inspector general will come in and see
what the joint commission did to make sure that it's fulfilling
its deem status responsibility.
So what would be a relatively easy to resolve situation
results in three separate major investigations that completely
ties up the nursing administration.
Using an anecdote, Senator, similar to yours, my cousin
runs a nursing home in New Jersey. She right now, because of
all the assessment requirements that came with the prospective
payment system for skilled nursing care, has a situation where
if someone is in the nursing home for 6 months, they're going
to get at least eight separate, federally-mandated assessments.
Now the concept of looking at a patient's needs again makes
sense. But these are multi-page forms that are very
complicated, take a lot of time to resolve. And she has to pull
her best nurses off of clinical duties to do this.
Her nurse administrators do nothing but handle paperwork.
And that's one of the things contributing to the nursing
shortage.
The other thing you mentioned, Representative Stark, was
specialty hospitals.
There was the moratorium imposed last year which was an
amendment to one of the exceptions in the so-called ``Stark
Law.'' CMS is studying this issue.
But one of the problems hospitals have is that they're
dealing with this in a competitive marketplace with one hand
tied behind their back. One of the things that the doctor-
owners who are threatening the viability of a lot of community
hospitals by pulling out well-paying cases into these specialty
hospitals, and then dumping, if you will, Medicaid and indigent
patients on the hospital, one of the things that they're
concerned about is, well, maybe the hospitals say, we don't
want you around here at all any more.
It would be like me going to my law firm and saying, hey
guys, I want an office. I want secretarial help. I want a
computer. But I'm going to be working for the law firm down the
street, and there's nothing you can do about it because if you
did, that would be called economic credentialing.
So I think that the market could deal with that problem
just as effectively, if not more so, than regulation if
hospitals and doctors were able to compete on an even playing
field, and the hospital saying to the doctor, you have a
conflict of interest. Now you have to leave.
Representative Stark. Several hospitals have, haven't they?
Mr. Mulholland. They have done so and several courts have
upheld it.
But there is this strange case in Little Rock, Arkansas
about 2 months ago where the court said that if a patient wants
to be treated by any particular doctor in any hospital,
regardless of the circumstances, the hospital has to let the
doctor in.
And that would apply theoretically even if the doctor was
proven to be incompetent or disruptive.
I think that, to the extent that Congress can resist the
impulse that now is being applied to several state legislators,
to outlaw this so-called economic credentialing, which is
nothing more than protecting physicians who have these
ownership interests, I think that would be a big plus as well.
Simply letting the market operate in some areas can provide
more efficient solutions. Certainly not in every solution.
And I'm not suggesting that all regulations should be
destroyed. But Congress and state legislators need to consider
carefully the unintended consequences of addressing one problem
and creating five more.
And they also need to see how the enforcement agencies
apply the laws that might make sense, but in a way that
wouldn't make sense.
Representative Stark. Let me follow--may I?
Senator Bennett. Sure.
Representative Stark. There is a question about JCAHO and
their ability to regulate, particularly because they're paid by
the guys they regulate, which may create some odd incentives.
I am a strong believer in regulating by the spirit of the
law rather than by the letter of the law.
But I believe that when you regulate with the spirit of the
law, you need some well-trained, highly-qualified regulators.
The reason that you go by the letter of the law is you've
got guys who really may not understand all the details of how
to operate a nursing home or whether a lawyer has been
unethical or not. So they just go down a checklist. That's
easier than the person who has to reason it through and then
say, well, maybe we should have done it a little bit this way
and not so much that way, which takes some reasoning ability.
Savings and Loans in California are regulated by the letter
of the law and it may have led to our disaster some years ago.
National banks, however, are pretty much by the spirit of
the law. Bank regulators who come in have wide latitude to make
changes in the bank, suggest that board members are changed,
get rid of executives. And their enforcement is just to stay
there until the bank goes along.
And I find it better and we've had a better record in
regulating. I would like to see that type of regulation in the
hospital area. I would like to see people come in and rather
than having to go through each medical record, fly speck at a
time, be able to look at the hospital administrator and say,
look, you're 3 weeks or you're 3 months behind in getting these
forms filled out, without even talking about how well they're
filled out, and say, I'm going to come back in two weeks and if
they're not done, you're not going to take any more patients
for a while.
But I'd feel more comfortable with that type of situation.
That's hard to legislate, Mr. Mulholland.
Mr. Mulholland. Absolutely.
Representative Stark. To legislate kindness and sympathy
and all those things, it's difficult to get into words.
Mr. Mulholland. But the more you micro-manage through
regulations that proscribe every single thing, the more you
invite exactly what you're trying to avoid.
Representative Stark. We don't. With the exception of the
Internal Revenue Code, which I spend a lot of time with, our
laws are generally quite general.
It is the regulation process and the ability for people to
review those and complain, and the bureaucracy, for better or
for worse, that leads to this.
Now it's our job to change it, perhaps, and review it. But
as all of you who have either studied or been involved with it,
these regulations don't come out of what we see on the floor.
Thank you.
Senator Bennett. Yes. The time is going by. When the
Ranking Member said, no quarrel, I was ready to end the hearing
instantly because we very seldom come to that point.
But I think, Mr. Stark, you've put your finger on the
issue. I don't know how this shows up in the record, but we
pass laws like this [indicating].
They go to the regulators, who write regulations like this
[indicating bigger].
And then, all too often, the people in the field administer
them like this [indicating bigger still], as if they have all
the power in the world and things happen that Congress does not
intend.
But we come back again to the item that is intriguing me in
this whole thing.
If the total burden in dollars that comes as a result of
this excessive regulation, and we will stipulate it is not our
fault--we've managed to do that. If the total burden that is
put on the system of this regulation absorbs something like the
dollars that Dr. Conover has laid out, those are dollars that
could in fact be going to the less visible victims, the ones
who do not get into the nursing home because they do not have
any kind of insurance.
Well, okay, they get in there if it's Medicare if they're
old enough.
But if they have other kinds of problems, they don't get
what they need because the system is paying too much for this
over-regulation.
I will stipulate, Dr. Conover, that your numbers are wrong.
But I don't know whether they're wrong on the high side or the
low side. And I think you provided a service to us by
indicating that whatever they are, they're significant in size.
And this is something that all of us ought to be concerned
about and see if we can find some remedy for.
With that, let me thank you all for your participation. We
appreciate the effort that went into your preparing your
testimony.
If you have written testimony, it will of course be
included in the record in full.
The hearing is adjourned.
[Whereupon, at 11:40 a.m., the hearing was adjourned.]
Submissions for the Record
=======================================================================
Prepared Statement of Senator Robert F. Bennett, Chairman
Good morning and welcome to today's hearing where we will explore
how regulation of health care services affects their cost, quality, and
availability.
Health care is the most intensively regulated sector of our
economy. It is also one of the largest, accounting for more than 15% of
GDP. Significant attention has been paid to the relative costs and
benefits of regulation in other industries, as well as for the economy
as a whole, but the costs and benefits of health care regulation have
often been overlooked. We need to learn more about the impact of the
complex web of rules and regulations that govern how we spend and use
more than $1.7 trillion annually.
Health care is certainly a vital item in all our lives, and some
regulations can improve its quality and even reduce its cost. However,
there is a significant risk that the promised benefits of health
services regulations will fall well short of their costs.
One challenge is that proponents of regulation are often not the
ones who bear its ultimate burden. This disconnect can lead to
excessive regulation. A related challenge is that many regulatory costs
are less visible than spending outlays and higher taxes. As a result,
the political calculus may tilt toward using less visible regulatory
means to accomplish objectives that would lack sufficient support if
they required more transparent commitments of public funds.
There is often another disconnect in which people do not appreciate
how the burdens of regulation are ultimately borne. Many consumers
believe that insurers or employers pay the extra costs that result from
tighter regulations, required expansions in covered services, etc.,
when in reality those costs eventually come out of their own pockets in
one form or another.
Today, we plan to examine whether health services regulations are
delivering sufficient benefits to justify their costs. This is a new
and developing area of research, with important policy implications.
Patients, consumers, and taxpayers are the ones who bear their ultimate
costs of unnecessary regulation. Excessive regulatory burdens can also
harm our most vulnerable individuals, such as the uninsured and lower-
income health care consumers.
Much health regulation is premised on the judgment that most health
care consumers don't know, don't want to know, and cannot know enough
to make important decisions for themselves. I don't know if that's true
often enough to justify the level of health regulation we have, but we
hope to find that out today.
Today we have a panel filled with people who all have their own
experience examining the costs and benefits of health services
regulation, and how our regulatory system works.
Professor Christopher Conover of Duke University has worked for
several years to develop an initial set of estimates of the net burden
of health services regulation as a whole, as well as that of its
primary components. If there's a regulatory elephant in the room that
is increasing the cost of care and reducing its quality and
availability, he may be able to provide us with some initial
measurements of its size and scope.
Professor David Hyman of the University of Maryland has written
extensively about health care regulation, most notably in the areas of
managed care, emergency room treatment, and mandated benefits. He also
recently coordinated 2 years of hearings on health care competition,
conducted jointly by the Federal Trade Commission and the Department of
Justice.
Dan Mulholland is a senior partner in Horty, Springer & Mattern. He
is one of the nation's leading health care attorneys and serves as
Chair of the Credentialing and Peer Review Practice Group of the
American Health Lawyers Association.
We'll also hear from Vicki Gottlich, an attorney in the Washington,
DC office of the Center for Medicare Advocacy, Inc. where she provides
legal assistance, research, consultation, and litigation support
regarding Medicare and employer-sponsored health benefits.
We welcome you here today and look forward to your testimony.
__________
Prepared Statement of Representative Pete Stark,
Ranking Minority Member
Thank you, Chairman Bennett. I have to take issue with the premise
of today's hearing--``The Burden of Health Services Regulation''--
because it implicitly assumes that regulations are simply useless
impediments to economic efficiency and lowering health care costs.
In fact, many health care regulations are borne of the abuse of
human beings and the degradation of their fundamental rights. Simply
put, these regulations protect people's lives. So there can be no
rational debate about doing away with health care regulations writ
large for the sake of efficiency and thrift.
We've seen with the prisoner abuse scandal in Iraq that when
regulations break down--in this case military regulations--the human
toll that follows is simply unacceptable.
Countless examples of regulations that curb abuses in health
services exist. Hospitals routinely turned away poor women in labor
until Congress intervened and enacted the Emergency Medical Treatment
and Active Labor Act (EMTALA) which prohibited this practice and
guaranteed access to emergency care to all people, regardless of their
ability to pay. Ms. Gottlich will give us her account of how nursing
home regulations have reduced patient neglect and mistreatment that was
widespread before consumer protections were put in place.
Right now, the Centers for Medicare and Medicaid Services claims it
is heavily regulating the Medicare prescription drug discount cards,
because there are already instances across the country of seniors being
defrauded. The Bush Administration has admitted that they have to keep
a close eye on the private companies that are providing drug cards, in
order to prevent seniors from being fleeced. Not withstanding these
regulations, I still doubt that these cards will be able to provide
much value to the elderly--but these concerns stem from loopholes in
the underlying statute.
Regulations at the Food and Drug Administration ensure that the
drugs we are sold and devices we use are safe and efficacious. Do we
want to roll back those protections? I support re-importation from
selected countries as a method to lower prescription drug costs and
think we can do so in a manner that preserves important safety
measures, but in this case many on the other side of the aisle oppose
doing so precisely because they claim it might undermine our regulatory
structure.
I think our witnesses will be hard pressed to pinpoint a group of
regulations that would save a great deal of money without unleashing
disastrous consequences. Reining in medical malpractice costs is the
popular example of untold savings in health care, but the Congressional
Budget Office has found that malpractice insurance and legal fees have
only a negligible effect on overall health care costs. In fact, C$O
estimated savings of less than one-half of 1 percent if strict
liability limits were enacted, and the President's budget shows no
savings from such caps.
Ironically, Dr. Conover shares this vision and also advocates
regulating the malpractice tort system by limiting damages patients and
consumers can collect from providers and companies--so apparently
regulation isn't all bad.
I am also troubled that we are having this hearing focusing on some
very complex and preliminary calculations of the costs and benefits of
health services regulations. There is no detailed documentation
supporting the analysis by Dr. Conover. The study is not widely
recognized or accepted among a broad range of health economists. But
even more disturbing is that in some instances zero benefits have been
assigned to important set of regulations where clearly the benefits are
not zero.
Let's be clear. Eliminating regulations will do nothing to increase
access and affordability to health care, as some of our witnesses have
argued. There is no guarantee that money ``saved'' from less regulation
would be put toward covering the uninsured. Indeed, the likely result
would be insurance companies, hospitals, doctors, and pharmaceutical
companies pocketing the savings.
Rolling back regulations is foolish because it won't lower costs,
and it won't increase access or affordability to health care. More
importantly, it's just too dangerous to our health.
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