    [Senate Hearing 108-41]
    [From the U.S. Government Publishing Office]

                                                             S. Hrg. 108-41

           IN CRITICAL CONDITION: AMERICA'S AILING HEALTH CARE SYSTEM

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

                                    HEARING

                                   before the

                           SPECIAL COMMITTEE ON AGING
                              UNITED STATES SENATE

                          ONE HUNDRED EIGHTH CONGRESS

                                 FIRST SESSION

                                   __________

                                 WASHINGTON, DC

                                   __________

                                 MARCH 10, 2003

                                   __________

                                Serial No. 108-5

             Printed for the use of the Special Committee on Aging

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                                WASHINGTON : 2003
    ____________________________________________________________________________
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                           SPECIAL COMMITTEE ON AGING

                          LARRY CRAIG, Idaho, Chairman
    RICHARD SHELBY, Alabama              JOHN B. BREAUX, Louisiana, Ranking
    SUSAN COLLINS, Maine                     Member
    MIKE ENZI, Wyoming                   HARRY REID, Nevada
    GORDON SMITH, Oregon                 HERB KOHL, Wisconsin
    JAMES M. TALENT, Missouri            JAMES M. JEFFORDS, Vermont
    PETER G. FITZGERALD, Illinois        RUSSELL D. FEINGOLD, Wisconsin
    ORRIN G. HATCH, Utah                 RON WYDEN, Oregon
    ELIZABETH DOLE, North Carolina       BLANCHE L. LINCOLN, Arkansas
    TED STEVENS, Pennsylvania            EVAN BAYH, Indiana
    RICK SANTORUM, Pennsylvania          THOMAS R. CARPER, Delaware
                                         DEBBIE STABENOW, Michigan
                          Lupe Wissel, Staff Director
                 Michelle Easton, Ranking Member Staff Director

                                      (ii)

                                C O N T E N T S

                                  ----------
                                                                       Page
    Opening Statement of Senator John Breaux.........................     1
    Statement of Senator Larry E. Craig..............................     3
    Statement of Senator Susan Collins...............................     3
    Prepared Statement of Senator Ted Steven.........................     5

                               Panel of Witnesses

    Dan Crippen, Former Director of the Congressional Budget Office,
      Washington, DC.................................................     6
    Len M. Nichols, Ph.D., Vice President, Center for Studying Health
      System Change, Washington, DC..................................    17
    Karen Davis, Ph.D., President, The Commonwealth Fund, New York,
      NY.............................................................    30
    Stuart Butler, Vice President, Domestic Policy Studies, The
      Heritage Foundation, Washington, DC............................    68

                                     (iii)

           IN CRITICAL CONDITION: AMERICA'S AILING HEALTH CARE SYSTEM

                                  ----------                              --

                             MONDAY, MARCH 10, 2003

                                           U.S. Senate,
                                    Special Committee on Aging,
                                                        Washington, DC.
        The committee convened, pursuant to notice, at 2:02 p.m.,
    in room SD-628, Dirksen Senate Office Building, Hon. John
    Breaux presiding.
        Present: Senators Breaux, Craig, Stevens, and Collins.

                OPENING STATEMENT OF SENATOR JOHN BREAUX

        Senator Breaux. The Committee on Aging will please come to
    order, and good afternoon, everyone. Thank you for being with
    us.
        This week, as many of you may or may not have seen already,
    is referred to as ``Cover the Uninsured Week,'' the week of
    March 10 through 16. There are a number of organizations
    ranging from the U.S. Chamber of Commerce to the AFL-CIO, the
    Business Roundtable, a number of international unions, the
    Health Care Leadership Council, you name it. If you are
    involved in health care, they have all joined together, really,
    in an effort to try and point to America and to Congress, I am
    certain, the importance of addressing the question of the
    uninsured in dealing with health care in this country.
        So we thought it would be appropriate to use the Aging
    Committee as a forum this afternoon to have a discussion on the
    state of America's health care, and particularly emphasizing
    the uninsured in our country. Obviously, in meetings that we
    have been having, in talking to large employers, the problems
    that they have in providing insurance, particularly for their
    retired workers, the older Americans, is becoming an
    increasingly more and more difficult problem. So I think it is
    appropriate that the Aging Committee use this forum to have a
    discussion this afternoon on the overall question of the
    uninsured, and in doing so, keeping it with the Uninsured Week
    of March 10 through 16.
        If you look at the news, we find that health premiums are
    going up. The number of small businesses that offer health
    insurance is going down. The number of uninsured Americans is
    going up. The financial conditions of both Medicare and the
    Medicaid program are heading downward.
        Last year, premiums for the employer-sponsored health
    insurance increased by nearly 13 percent. The number of small
    businesses offering health insurance to their employees
    continues to decline, dropping from 67 percent down to 61
    percent just last year. Medicare, I have argued, in its current
    form is unsustainable. Medicaid, the safety net for our most
    vulnerable, is crippling State budgets and many benefits on the
    State level are being scaled back or eliminated completely.
        We depend on our coverage on health care in this country
    under what I have called the box system of health care, which
    means that if you are an older American, you are in the
    Medicare box, which spends $236 billion a year. If you are a
    veteran, you are in the VA box, where we spend $26 billion a
    year. If you are poor, you fall into the Medicaid box, which is
    $170 billion a year. If you are working and have the fortunate
    situation where your employer provides health insurance, you
    are in the employer-sponsored box, where we spend $140 billion
    a year in government subsidies. That adds up to about $1.4
    trillion that we spend on health care annually in the United
    States of America.
        Yet, there is a box that is not on that table but on the
    bottom, rather, that has 41 million Americans in it that have
    no insurance whatsoever because they don't fit in any one of
    the boxes up on top. So we have a situation where we are
    spending an incredible, large amount of money every year and
    yet we still have a relatively large percentage of our citizens
    who have no access to health care insurance whatsoever.
        It seems to me that Congress spends an inordinate amount of
    time just trying to tinker with the boxes. We are trying to
    tinker with the Medicare box this year, with adding
    prescription drug benefits, and the President has proposed a
    reform program which I think moves it in the right direction.
    We continue to tinker with the Medicaid box, trying to help the
    States. Just this week, the National Governors Association made
    that one of their priority concerns, not having enough money
    for the Medicaid program within their States. Every year, we
    try to do things for the employer-sponsored box in terms of tax
    credits or other means to allow them to do a better job and to
    stay in the program.
        So the problem is, we tinker with all the boxes, but we
    very seldom take a look at the overall problems that our health
    care delivery system has in this country in the larger picture,
    and hopefully, we can get some discussion on that this
    afternoon.
        We have got a good group of witnesses that are with us.
    They have been around almost as long as I have, dealing with
    these problems from different perspectives, and I think that is
    healthy. They have got different perspectives, but we are all
    going to talk about the same subject matter.
        With that, I would like to recognize our Chairman, Senator
    Craig, who has allowed me to chair this hearing. Senator Craig.

              OPENING STATEMENT OF SENATOR LARRY E. CRAIG

        The Chairman. Mr. Chairman, thank you very much. You have
    outlined clearly, I think, a great concern that we have here in
    the Congress as it relates health care and the insured, the
    cared for and the uninsured.
        After nearly a decade of relatively modest health care cost
    growth, we are now back into the double-digit annual increases,
    partly driven by prescription drugs and a lot of other issues
    coming together, and I think the failure of us to move with
    some degree of speed in a comprehensive way prolongs and causes
    the whole situation to worsen.
        Last month, we had the Chairman of the Federal Reserve,
    Alan Greenspan, here, not to talk about interest rates but to
    talk about another passion of his and that is the aging of the
    world and the costs of that. I think his testimony was very
    sobering. He warned us that we simply cannot afford to wait
    much longer to begin seriously tackling the long-term
    challenges of Medicare and Social Security and, of course, the
    uninsured was not mentioned, but clearly is a reality out there
    that is being brought to our attention for the balance of the
    month, coupled with these hearings.
        I think the idea of comparing and relating and looking at
    the overall impact that these programs have is an important
    part of what this committee can do and must do as we put
    together the record that the Finance Committee will ultimately
    have to deal with in working on these issues.
        I would ask unanimous consent that the balance of my
    statement become a part of the record.
        Senator Breaux. Without objection, so ordered.
        The Chairman. I look forward to the testimony of our
    witnesses.
        Senator Breaux. Thank you, Mr. Chairman.
        Any comments from Senator Collins?

                   STATEMENT OF SENATOR SUSAN COLLINS

        Senator Collins. Thank you very much, Mr. Chairman. I was
    trying to decide how I address you both. Is it Mr. Chairmen?
    Mr. Chairman and Mr. Chairman? What would work? [Laughter.]
        I want to thank you both for holding this extremely
    important hearing to focus on the problems plaguing our
    nation's health care system and the options for reform to
    ensure that more Americans--indeed, our goal should be that all
    Americans--have access to affordable health care.
        The United States health care system is experiencing
    serious problems that are driving more and more Americans into
    the ranks of the uninsured. Rising health care costs, spiraling
    health insurance premiums, coupled with the recent slowdown in
    the economy have created conditions that one commentator has
    likened to the ``perfect storm,'' a confluence of forces, each
    worrisome in itself, but together posing a lethal threat.
        One of my top priorities in the Senate has been to expand
    access to affordable health care for all Americans. There are
    far too many of our citizens without health insurance or with
    woefully inadequate coverage. Last fall, the Census Bureau told
    us the number of uninsured Americans had increased to more than
    41 million. Moreover, just last week, Families USA released a
    study that estimates that some 75 million Americans have been
    without health insurance at some point during the past 2 years.
        Health insurance matters. The simple fact is that people
    with health insurance are healthier than those without. People
    without health insurance are less likely to seek care when they
    need it and tend to forego services, such as periodic check-ups
    and preventive services. As a consequence, they are more likely
    to be hospitalized or require costly medical attention for
    conditions that could have been prevented or treated
    successfully at an early, curable stage. Not only does this put
    the health of those individuals at greater risk, but it also
    puts additional pressures on our hospitals and emergency rooms,
    many of which are already financially stressed.
        Maine, like many States, is in the midst of a health
    insurance crisis, with premiums rising at alarming rates.
    Whether I am talking to a self-employed fisherman, a displaced
    worker, the owner of a struggling small business, or the human
    resources manager of a large corporation, the soaring cost of
    health insurance is a common concern.
        Maine's employers are facing premium increases of 20, 30,
    or even 40 percent a year. This is particularly burdensome for
    our smaller businesses, which are facing a dilemma. If they
    pass on the cost of the health insurance to their employees,
    more and more of their employees will decline coverage because
    they simply cannot afford their share of the premium. On the
    other hand, the smaller businesses cannot continue to absorb
    double-digit increases in rates.
        The problem is even more acute for the many Mainers who are
    self-employed and must purchase health insurance on their own.
    What we are finding in Maine is that monthly health insurance
    premiums often exceed the family's mortgage payment. So it is
    no wonder that more than 150,000 Mainers are now uninsured.
        Earlier this year, I joined with my colleague, the other
    distinguished Senator from Louisiana, Senator Landrieu, in
    introducing a plan that combines a variety of public and
    private approaches to make quality health coverage more
    affordable and available. I also believe that we need to press
    hard to include in the administration's economic recovery
    package some fiscal relief to the States that is targeted to
    the Medicaid program. We need to increase the Medicaid match
    over the next 18 months to help preserve the health care safety
    net for our low-income families that is now in danger of being
    shredded due to State budget cuts.
        I know that the distinguished chairman for the day, Senator
    Breaux, has also introduced an important proposal, as have
    others, to lay out their vision for reform. My hope is that
    this hearing will serve as a springboard for further
    discussions to find a bipartisan solution to this pressing and
    growing problem. Thank you, Mr. Chairman.
        [The prepared statement of Senator Susan Collins follows
    along with prepared statement of Senator Ted Stevens:]

                  Prepared Statement of Senator Susan Collins

        Mr. Chairman, I want to thank both you and the Ranking
    Member of the Aging Committee for holding this hearing to
    examine the problems plaguing our nation's health care system
    and the options for reform to ensure that all Americans have
    access to affordable health care.
        The U.S. health care system is experiencing serious
    problems that are driving more and more Americans into the
    ranks of the uninsured. Rising health care costs and health
    insurance premiums, coupled with the recent slowdown in the
    economy have created conditions that a recent David Broder
    column likened to ``The Perfect Storm: a confluence of forces,
    each worrisome in itself, but together posing a lethal
    threat.''
        One of my top priorities in the Senate is to expand access
    to affordable health care for all Americans. There are far too
    many Americans without health insurance or with woefully
    inadequate coverage. Last fall, the Census Bureau announced
    that the number of uninsured Americans increased to more than
    41 million in 2002. Moreover, just last week, Families USA
    released a study that estimates that 75 million Americans have
    been without health insurance at some point during the last two
    years.
        Health insurance matters. The simple fact is that people
    with health insurance are healthier than those who are
    uninsured. People without health insurance are less likely to
    seek care when they need it, and to forgo services such as
    periodic check-ups and preventive services. As a consequence,
    they are more likely to be hospitalized or require costly
    medical attention for conditions that could have been prevented
    or treated at a curable stage. Not only does this put the
    health of these individuals at greater risk, but it also puts
    additional pressure on our hospitals and emergency rooms, many
    of which are already financially challenged.
        Maine, like many states, is in the midst of a growing
    health insurance crisis, with premiums rising at alarming
    rates. Whether I am talking to a self-employed fisherman, a
    displaced worker, the owner of a struggling small business, or
    the human resource manager of a large company, the soaring
    costs of health insurance is a common concern.
        Maine's employers are currently facing premium increases of
    as much as 40 percent a year. These premium increases have been
    particularly burdensome for small businesses, the backbone of
    the Maine economy. Many small business owners are caught in a
    cost-squeeze: they know that if they pass on the premium
    increases to their employees, more of them will decline
    coverage. Yet, these small businesses simply cannot afford to
    absorb double-digit increases of 20, 30 or 40 percent, year
    after year.
        The problem of rising costs is even more acute for
    individuals and families who must purchase health insurance on
    their own. Monthly health premiums in Maine often exceed a
    family's mortgage payment. It is no wonder that more than
    150,000 Mainers are now uninsured. Clearly, we must do more to
    make our health care system more efficient and health insurance
    more available and affordable.
        Earlier this year, I joined my colleague from Louisiana,
    Senator Mary Landrieu, in introducing the Access to Affordable
    Health Care Act, a seven-point plan that combines a variety of
    public and private approaches to make quality health care
    coverage more affordable and available. Our bill will bring
    millions more Americans into the health system by providing tax
    credits for small businesses that offer health insurance to
    their employees. It would strengthen the health care safety net
    by increasing funding for Community Health Centers, and it
    would address inequities in the Medicare system that hurt rural
    states like Maine.
        Mr. Chairman, I know that Senator Breaux and others have
    also introduced proposals that lay out their visions for
    reform. This hearing will serve as a springboard to further
    discussions, and I look forward to working with my colleagues
    to find a bipartisan solution to this pressing and growing
    problem.
                                    ------

                   Prepared Statement of Senator Ted Stevens

        Thank you, Mr. Chairman. I'm pleased to be here today to
    discuss ways in which our American health care system might be
    changed to make sure that more people get health coverage at a
    cost our society can afford.
        Our employer-based health care system has served us well
    for many decades now, but there are new pressures on that
    system--and on our public health programs like Medicare and
    Medicaid--that are causing large holes in the system that leave
    many with no coverage, or with coverage that doesn't provide
    basic necessities like prescription drugs.
        In Alaska we have many small businesses for which the cost
    of providing health benefits to their employees is very high.
    Alaska thus has a higher rate of uninsured than does the rest
    of the country.
        I'm also, however, concerned about access to care for those
    who do have health insurance.
        The Medicare program, for example, in Alaska, pays doctors
    less than 40 percent of the cost of seeing Alaska seniors. As a
    result, many physicians are unable to accept new Medicare
    patients, leaving those patients with few options for getting
    needed care.
        Some of these patients end up using costly services in
    hospital emergency rooms because they can't find a physician.
        We're also finding it harder to recruit new doctors to
    Alaska because of the extremely low payment rates compared to
    the cost of seeing patients. Yet, more than 50 percent of our
    primary care doctors in my State are over 50 years old and are
    looking to retirement.
        The fast rising costs of malpractice insurance, due in some
    part to extremely large jury awards to patients for ``pain and
    suffering'' are also contributors to fast rising health costs
    as well as to decreased access to services like those needed by
    pregnant women.
        These access issues must also be considered as we proceed
    with this debate.
        I look forward to hearing from our panel.

        Senator Breaux. Thank you, Senator Collins, for that
    excellent statement.
        I would like to welcome our witnesses, and under the rule,
    the last shall be first. We will start left to right from the
    chair with Mr. Dan Crippen. Dan, of course, served as our
    Director of the Congressional Budget Office from February 1999
    until January of this year. He has also served in senior
    positions in the White House and the U.S. Senate and has done a
    great deal of work on the Federal budget as it relates to the
    issue of health care and retirement and we are delighted to
    have him this afternoon. Dan, welcome to the committee.

    STATEMENT OF DAN CRIPPEN, FORMER DIRECTOR OF THE CONGRESSIONAL
                     BUDGET OFFICE, WASHINGTON, DC

        Mr. Crippen. Mr. Chairman, Senator Collins, first, let me
    apologize for my tardiness. It has been 4 years since I have
    had to look for a parking place on the Senate side. [Laughter.]
        It is not as easy as it used to be.
        Mr. Chairman, as you observed on many occasions and just a
    few minutes ago, we have developed an array of health care
    delivery systems in this country which result in a disparate
    treatment in payments, unequal quality of care, substantial
    numbers of people who may not be receiving adequate care, all
    the while spending more than any other nation. Further, our
    attempts to fix parts of this system, our so-called incremental
    reforms, well intentioned as they may have been, have often
    caused as many problems as they have solved.
        I am reminded though, Mr. Chairman, at the outset of this
    hearing, as in many other gatherings like this, of a friend of
    mine who I don't think I have told you about. He is a tunneling
    engineer. After he graduated from college, he took a qualifying
    exam, I guess to be a tunneling engineer, and he failed it, and
    it, needless to say, irritated him a great deal. So he studied
    a lot for the second chance, and as he was taking the exam, he
    finished, he looked up, he had an hour left. So he turned over
    his test booklet and he wrote on the back side, ``These things
    I also know.'' [Laughter.]
        Very often, we find ourselves with such a broad topic
    before us that we wander into the very tempting position of
    talking about all the things we happen to know. I am going to
    try to avoid that today and speaking only for a few minutes, I
    want to propose to focus on one thing. We ought to know the
    nature of the problem before we try to fix it.
        That sounds pretty straightforward, and I have
    characterized that in the past, Mr. Chairman. You have heard me
    talk about Moynihan's several laws. Well, the first Moynihan
    law that I think is appropriate here is, if you don't ask the
    right questions, you are not likely to get the right answers.
    The second Moynihan law, also appropriate here, is before you
    can solve a problem, you have to be able to measure it, to size
    it correctly.
        I will use two quick examples today, but two issues that
    are very much in the forefront of your concerns in the Senate
    to hopefully make this point. Since, as you said, this is the
    ``Week of the Uninsured,'' I will start there.
        Ask almost anyone in this room, as we have already heard,
    how many uninsured Americans there are and the answer is likely
    to be the one you have in your chart, 40 million, plus or
    minus, thereabouts. Inquire further about the nature of these
    40 million and most people will say that these are folks who
    have extended periods of uninsurance, who you might say are
    chronically uninsured.
        The truth is, the number of chronically uninsured--for this
    purpose, I will use 12 months or more without insurance--is
    substantially lower than 40 million, perhaps as much as 20
    million lower than 40 million when you examine other surveys on
    this issue. How can that be, because headline after headline,
    newspaper and television advertisements all use the number 40
    million?
        Well, the 40 million may be uninsured today as we sit here
    for a given day, but it turns out that about half of the 40
    million people are temporarily between coverage of some kind,
    between employers, between spousal coverage, between public
    programs, so much so that the average period of uninsurance for
    the 40 million in the CPS survey is less than 7 months. Only 40
    percent of this 40 million are uninsured for less than 4
    months.
        This perspective, I would suggest, deals a much different
    picture and one that likely suggests different policies. A tax
    credit, for example, may be unnecessary and ineffective for
    filling short gaps. A policy along the lines of COBRA coverage
    might be more suited.
        As for those who are without insurance for 12 months or
    more, we might want to look even more closely at them before
    deciding on the right policy. Of these, one-quarter are
    families with incomes over 200 percent of poverty. Another 20
    percent, likely the younger of this group, say they have no
    need for insurance. Some number, perhaps a very substantial
    number, are eligible for Medicaid, but either unaware they are
    eligible or don't yet need medical care.
        Mr. Chairman, there is an underlying metaphysical question
    here, of course, with public programs. If you are eligible for
    Medicaid but haven't used it, are you uninsured? I strongly
    believe the answer is no. I think you are insured, because the
    first time anyone eligible shows up at a hospital, they will be
    enrolled, and the 3 months' prior expenditures will be
    reimbursed, as well. To say otherwise is akin to saying that
    anyone who is privately insured should be counted as uninsured
    until they make a claim.
        Similarly, as you know better than I, there are many
    veterans who rely on VA for health care and do not buy
    insurance. Are they really uninsured as well?
        Let me hasten to add at this point, I am not trying to
    downplay the important problem making sure citizens get health
    care. Even if there are only 15 to 20 million chronically
    uninsured in this country, that is a potentially big problem
    and certainly deserving the attention of government. What I am
    saying is that until the nature of the problem is clear, the
    solutions we devise may be ineffective and unnecessarily
    costly.
        With your indulgence, Mr. Chairman, I want to quickly turn
    to another issue before the Congress and the country, that of
    providing pharmaceutical benefits for Medicare beneficiaries,
    something you have all been very involved in, Senator Collins
    in particular, and you, Senator Breaux, as well. The debate
    thus far is largely predicated, in my view, on the need to
    prescribe prescription medicines to the elderly. The truth is,
    Mr. Chairman, three-quarter of the elderly already have
    insurance of one kind or another that covers some drug
    spending, maybe not enough, maybe with hardship, maybe with
    deprivation. But again, it is not that we have 40 million
    seniors without any drug coverage.
        If you look behind this, those 30 million beneficiaries
    with insurance fill about 32 prescriptions a year at an average
    cost of $45. Importantly, the quarter of the Medicare
    population that has no insurance for pharmaceuticals fills 25
    prescriptions a year at an average cost of $37. It may well be
    that this gap of seven prescriptions per year is important,
    critical, necessary, to put a word on it, but the perfectly
    targeted policy if you are worried about access could be
    ensuring access for these seven prescriptions for the 25
    percent of the population that aren't insured, and the cost of
    that would maybe be around $3 billion a year, not 30, not 300,
    but three.
        The issue, I would suggest, is not necessarily access. What
    is really at issue, and we are not debating it in these terms,
    I understand, but what is really at issue is the financing of
    drug benefits. Drugs are being supplied now. The question is,
    who should pay? There may be very good and compelling reasons
    to change the financing from what exists today and place it in
    the Federal budget and on current workers, but that reason is
    not access.
        I will conclude, Mr. Chairman, by saying everyone at this
    table and many in this room have spoken eloquently, certainly
    more eloquently than I am able, about the need for Medicare
    reform and the desirability of adding drugs to that benefit.
    Mr. Chairman, I would suggest until we are clear-eyed about the
    nature of the problem, until we understand better than we do
    today the current system, hodgepodge and inefficient as it is,
    until we understand what kind and quality of health care we are
    buying in programs like Medicare, it is very hard to see how we
    might productively reform them. As Senator Moynihan would say
    if he were here, if we don't take the time to ask the right
    question, we aren't likely to get the right answer.
        Thank you, Mr. Chairman.
        [The prepared statement of Mr. Crippen follows:]

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        The Chairman. Thank you, Mr. Crippen, very much. Dan, would
    you give me, just before we move to the next witness, what were
    the numbers you had, the 32 prescriptions at $45 a year versus
    what, 47 prescriptions at what?
        Mr. Crippen. I want to be precise. I looked it up just this
    morning. Thirty-two prescriptions a year for those who have
    insurance at a cost of $45 per prescription. Those who are
    uninsured fill 25 prescriptions a year, on average, at a cost
    of $37 per prescription. The lower cost, it is assumed, because
    of more use of generics.
        The Chairman. OK, thank you.
        Our next witness will be Mr. Len Nichols. Mr. Nichols
    joined the Urban Institute's Health Policy Center in November
    1994, but prior to that, he was a Senior Advisor for Health
    Policy at OMB, where he managed and coordinated the cost and
    revenue estimates for President Clinton's Health Security Act
    and the Congressional successors. We thank him for being with
    us this afternoon.

    STATEMENT OF LEN. M. NICHOLS, PH.D., VICE PRESIDENT, CENTER FOR
             STUDYING HEALTH SYSTEM CHANGE, WASHINGTON, DC

        Mr. Nichols. Thank you, Mr. Chairman, Mr. Chairman, and
    Senator Collins. My name is Len Nichols. I am the Vice
    President of the Center for Studying Health System Change,
    which is a nonpartisan health policy research organization
    exclusively funded by the Robert Wood Johnson Foundation, and I
    will try to address the question of the hearing, is our health
    care system in a crisis, in the 4\1/2\ minutes I have left.
        I think our health care system looks like it is in a crisis
    from a number of different vantage points, but our health care
    system also performs amazing feats every day and it serves most
    of us very well most of the time. But we do have three key
    interrelated problems. I will label them waste, uneven quality,
    and uneven access to care, and these problems add great stress
    to our system every day. We cannot solve any of these problems
    without attacking them all simultaneously, and systemwide
    reform, as you yourselves know quite well, will require Federal
    leadership, and I will come back to that in a moment.
        On waste, you probably know we spend substantially more on
    health care than any nation on earth, yet we rank 28th in
    infant mortality, right below Cuba, Ireland, and Portugal,
    countries that usually beat us at soccer, but not at health
    care, and 26th in life expectancy after 60. One way to
    interpret these numbers is we perform much costly unnecessary
    care. Rates of excess care vary inexplicably across the nation.
    One major consequence of waste is that an increasing fraction
    of our workforce cannot afford comprehensive health insurance.
    Growth in per capita health care cost has outstripped earnings
    growth by 260 percent since 1980.
        On uneven quality, it is unambiguously true we have many of
    the best doctors, nurses, and hospitals in the world, but our
    Institute of Medicine tells us that between 50,000 and 100,000
    people each year die in our hospitals due to medical errors.
    The biggest quality gaps stem from not doing what we know
    should be done, that is to say, for example, providing routine
    medication after heart attacks and performing certain tests
    regularly for diabetics. The most spectacular quality failures,
    as the recent transplants at Duke indicate, result from
    endemically poor communication among different parts of our
    incredibly talented health care system.
        Finally, but by no means least, we suffer from uneven
    access to care. As you know and as will be pointed out later,
    the uninsured are disproportionately low-income and minority,
    especially Latino. The uninsured are less likely to access
    care, and delayed access often leads to unnecessarily poor
    outcomes and even death. All of us could become uninsured as a
    result of bad luck, as all of us know. Even controlling for
    insurance and income, et cetera, minority death rates are
    higher than whites for a large number of diseases. We are a
    long way from color-blind equality in our health care system.
        Now, most recently, it is true, as Senator Collins pointed
    out, our three key problems of waste, uneven quality, and
    uneven access have been intensified by a reacceleration of
    health care cost growth, which is, in my view, has been ignited
    by a wholesale retreat from effective but unpopular techniques
    of managed care. As a result, our three major problems are,
    indeed, deeply connected. Waste and poor quality raise costs,
    which creates more uninsured, especially among low-income
    working families, and the cost of paying for universal coverage
    in our current system seems so daunting that policy is easily
    paralyzed.
        The market return to investing in the quality enhancing
    infrastructure, which are primarily measurement and
    communications tools, has been low because most patients are
    not aware of our health care system's quality problems and
    because knowledgeable payers fear they are too small to make a
    difference. Profound fear of malpractice claims and economic
    loss generally have retarded provider engagement in quality-
    enhancing and error-reducing efforts, which keeps costs high,
    and this is how the dysfunctional set of interactions continues
    to stress our health care system.
        Therefore, in my view, we have to attack all these problems
    simultaneously and Federal leadership will be necessary and
    this will require substantial new resources to be committed.
        But before I outline specific roles for Federal leadership,
    I would like to take just a second and celebrate the fact that
    we are entering into a new national conversation. Senator
    Breaux has recently laid out a vision for system reform that
    includes a new kind of social contract between individual
    responsibility and our collective obligation to make group
    health insurance affordable and available to every American.
    His vision, in my view, can serve as a cohesive and catalytic
    springboard for ongoing discussions by this committee, Members
    of Congress, Presidential candidates, the Secretary of HHS, and
    the President himself.
        Indeed, this might be a good time to remind ourselves of
    some key lessons from the last national conversation we had
    about health care reform in the 1993-94 period under the
    leadership of President Clinton, and my written testimony lays
    a number of these out. I will focus on the one that I think is
    the key analytic one today.
        The Clinton proposal at its core assumed that the health
    plan is the key unit in our health care system, as the agent
    that would solve all problems. It is becoming increasingly
    clear to me that the key unit in our health care system is
    actually the patient-provider interaction. We must get
    incentives right at that level. If we do, much else will take
    care of itself. If we do not, no matter what else we do, we
    will fail to reduce waste and improve quality and thus will
    never feel able to afford more equal access for all.
        Now, what kind of system is most likely to get these
    incentives right? A system that pays for good quality health
    care and good health outcomes and does not pay for failure to
    provide quality care. This kind of system will require public
    investment in information infrastructure so that providers and
    patients will find it easier to jointly produce good health
    care and the best health outcomes possible.
        Current efforts underway at IOM, AHRQ, and CMS are a good
    start, but they need your unwavering and continued support.
    This kind of system will also require group purchasing.
    Information economies of scale are simply too great to expect
    comparable efficiencies from individual health care consumers
    acting with their own knowledge alone. Our major Federal
    purchasing agencies, CMS and OPM, if equipped with the tools
    and the power and discretion to use quality data to guide
    choices, can provide essential and catalytic leadership in this
    area.
        Finally, the system will have to extend access to all
    Americans, which will require Federal subsidies, else will
    always suffer too many inequities to solve our uneven quality
    problems.
        In the long run, I think research is very clear. Technology
    drives cost growth. Our decentralized health care financing
    system, however, is biased in favor of paying for virtually
    everything the medical industrial complex offers us, regardless
    of its effectiveness for many types of patients.
        So my plea to you is and my claim is, we have to learn how
    to buy health services and technologies now so that we can
    reduce waste, improve quality, and learn how to decide which
    future technologies we will pay for together and which we will
    leave to individuals on their own. As we become better buyers,
    we will be better able to afford quality health care for all
    Americans. Thank you very much.
        Senator Breaux. Thank you very much, Mr. Nichols, for a
    very detailed statement.
        [The prepared statement of Mr. Nichols follows:]

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        Senator Breaux. Our next witness will be Ms. Karen Davis.
    Welcome. Ms. Davis is currently the President of The
    Commonwealth Fund, which is a national philanthropy that does
    independent research on both health and social policy issues.
    Before joining The Commonwealth Fund, she served as Chairman of
    the Department of Health Policy and Management at Johns Hopkins
    School of Hygiene and Public Health, where she is also a
    professor of economics and currently one of the promoters of an
    annual conference on health care that brings together some real
    experts, and we thank her for that participation. Ms. Davis,
    thank you very much.

     STATEMENT OF KAREN DAVIS, PH.D., PRESIDENT, THE COMMONWEALTH
                           FUND, NEW YORK, NY

        Ms. Davis. Thank you, Mr. Chairman, Mr. Chairman, Senator
    Collins, Senator Stevens, for this opportunity to be with you
    today.
        We have entered the 21st century encumbered by a health
    system that is not up to the challenge of ensuring a healthy
    and productive nation. It was really set in motion over 50
    years ago, after World War II, and it has resulted in a system
    that is costly, complex, and confusing. Most important, it is
    failing to meet the twin objectives of health insurance, to
    ensure that people have access to needed medical care and to
    protect them from the financial burdens of costly medical
    bills.
        Today, I would like to focus on five types of costs that
    are inflicted by our fragmented health insurance system. First
    of all, we have already heard today about the costs of the
    growing number of uninsured. I include in my testimony a number
    of charts at the end that demonstrate, for example, in Chart 1,
    that we are not making any progress in reducing the numbers of
    uninsured. They have gone up steadily since the mid-1970's and
    we do have 41 million Americans today that, as Senator Breaux
    reminded us, fall between the boxes of our American health care
    system because they are not lucky enough to be covered by
    employer-based coverage, Medicare, Medicaid, or the Children's
    Health Insurance Plan.
        We also know that coverage is eroding dramatically for
    retirees. Senator Breaux mentioned the situation of retiree
    health insurance coverage. In Chart 11, I note that it has
    dropped from 66 percent of large firms in 1988 that provided
    retiree coverage to 34 percent today, and only 3 percent of
    small firms provide retiree coverage. We know that Medicare is
    not enough on its own, that people need prescription drug
    coverage, and yet there are a fourth of Medicare beneficiaries
    who do not have such coverage.
        I think it is important to know that there are both health
    and economic consequences of the gaps in health insurance
    coverage. The Institute of Medicine released a study last year,
    which I have shown in Chart 16, indicating that there are
    18,000 deaths of adults ages 25 to 64 that occur each year as a
    direct consequence of the absence of health insurance coverage.
    If you look at deaths of those non-elderly adults, it makes
    uninsurance the sixth leading cause of deaths in this age
    group, greater than the number of deaths from HIV/AIDS or from
    diabetes.
        At The Commonwealth Fund, we have supported numerous
    studies that look at those who do not have health insurance
    coverage, either part-year or full-year, and we find that
    whether you are a long-term uninsured or a short-term
    uninsured, you have greater difficulty getting needed care,
    greater difficulty getting preventive services, and you incur
    much greater financial problems as a consequence of that
    exposure.
        We also know that the cost shifting that occurs in a
    fragmented financing system, especially as health care costs
    accelerate, as Senator Collins mentioned, creates inefficiency
    in the system.
        There are 70 million American workers who are covered by
    their own employer. There are 20 million more workers who are
    covered under a family member's coverage, typically a spouse's,
    and there are 30 million workers who are not covered at all. So
    we really have a ``pass the buck'' system of health insurance,
    where we are perpetually shifting costs from one party to
    another.
        Those large employers that cover their workers cover that
    cost as well as the cost of dependents whose own employer is
    not picking them up, and they also pick up the costs of the
    uninsured that are reflected in higher rates charged by
    hospitals, and some physicians, that result in higher health
    insurance premiums. Employers, in turn, try to shift more cost
    to workers in the form of higher premiums or cost sharing.
        States allege that the Federal Government shifts costs to
    them by not picking up all of the costs of Medicare
    beneficiaries. I give one example in Chart 23, where State
    Medicaid prescription drug spending for dual-eligibles that are
    covered by both Medicare and Medicaid comes to $6.8 billion a
    year, and I have indicated how that breaks down across the
    various States.
        In addition, hospitals shift costs from one to the other.
    Those hospitals that are willing to serve the uninsured are
    much more financially fragile than those who do not provide
    care to the uninsured, and care is increasingly concentrated in
    a limited number of safety net and teaching hospitals.
        But my basic point is that far more energy goes to shifting
    costs than to enhancing efficiency or quality of health care.
    Insurance companies are profitable because they attract
    favorable risk and drop unfavorable risk, not necessarily
    because they provide innovative incentives to improve quality
    and efficiency.
        There also is the cost of churning in health insurance
    coverage as people's economic and personal circumstances
    change. Mr. Crippen pointed to the fact that about half of
    people who are uninsured at some point during the year, 62
    million people, were uninsured all year long. About half were
    insured part of the year, and about, as Senator Collins noted,
    75 million people were uninsured over a 2-year period.
        But as this churning occurs, these people are at risk for
    not getting care when needed and they face unaffordable medical
    bills when care could be incurred. But I think most
    importantly, we pay a high price in high administrative costs.
    Every time somebody enrolls, disenrolls, reenrolls, it is
    administrative cost to the insurance company or the public
    program. It is also an administrative cost to the health care
    providers that have to change their records, perhaps forward
    medical records to another provider.
        As I show in Chart 29, the U.S. spent $111 billion in 2002
    on private insurance or government program administrative
    costs, and that doesn't include the administrative cost that is
    incurred by hospitals and other health care providers or by
    individuals as they enroll, disenroll, and reenroll, changing
    insurance coverage and plan.
        The final point I want to make is simply the cost of
    complexity from a pluralistic system of health insurance
    without an integrating framework and consensus on basic
    principles. As I show in Chart 31, Professor Reinhardt has
    developed a chart that he uses to explain the U.S. health care
    system, and it is a Mondrian diagram of cuts that are on the
    basis of whether you are a child, an adult, or an elderly,
    whether you are poor, near-poor, working income, middle class,
    or rich, and there are separate ways in which you get covered
    depending upon which of those categories you fall in.
        But I also provide in Chart 32 at the very back of the
    testimony an example of the complexity of different benefit
    packages. This is just in our Medicare+Choice program in Tampa,
    where there are eight different plans available, but they each
    have their own set of premiums, cost sharing requirements, drug
    formularies. It is really impossible for either the beneficiary
    or a family member or a consumer advocacy group to explain
    which plan best fits the circumstances of those individuals.
        Thus complexity leads to the costs of large numbers of
    people who are eligible but not enrolled. It leads to costs of
    lost productivity, and lost resources wasted on administration.
    It also leads to the cost of inefficient and low-quality care.
    Senator Collins mentioned the high costs in emergency rooms for
    preventable conditions and for hospitalizations and the costs
    of different standards of care that depend on insurance status.
    In fact, the U.S. spends twice as much per capita on health
    care as other industrialized nations, and yet is the only one
    to fail to cover everyone.
        There simply has to be a better way to go about providing
    coverage, and that should include automatic and affordable
    coverage for all, a balance between choice, flexibility, and
    innovation, and between simplicity, efficient administration,
    and standardization that facilitates informed choice; shared
    responsibility for financing coverage, including, I would
    argue, contributions from employers, both the insured and the
    uninsured, health care providers, Federal, State and local
    government; a commitment to quality improvement and greater
    efficiency in care and in insurance administration using modern
    information technology. Finally, we need to set the goal of
    high-quality health care for all as the top national policy
    priority essential to a strong and healthy and productive
    nation. Thank you.
        The Chairman. Thank you very much, Ms. Davis.
        [The prepared statement of Ms. Davis follows:]

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        Senator Breaux. Next, we will hear from Mr. Stuart Butler,
    who is from the Heritage Foundation. He is currently the Vice
    President of Domestic and Economic Policy Studies there and he
    has argued for a long time for a health care system based on
    consumer choice and also market competition and we are
    delighted to have him with us. Mr. Butler.

      STATEMENT OF STUART BUTLER, VICE PRESIDENT, DOMESTIC POLICY
            STUDIES, THE HERITAGE FOUNDATION, WASHINGTON, DC

        Mr. Butler. Thank you, Mr. Chairman and Senators. All of us
    in this room want to see an America in which everyone can count
    on a decent basic level of health care, but we need to make
    sure we reach that goal in a manner that is affordable,
    efficient, fair, and as seamless as possible. Our current
    system has none of these features.
        As you mentioned, Mr. Chairman, and others have done on
    this panel, millions of Americans currently have no regular
    coverage at all, and most with coverage move over time from one
    program or plan to another, each with different benefits and
    eligibility rules depending on the person's situation at that
    time. For instance, an American faces totally different health
    care coverage depending on whether he or she currently is
    employed in a small firm, a large firm, has changed jobs, is
    unemployed, is unemployed because of the impact of trade, is a
    veteran, is poor and on welfare, is poor but not on welfare, is
    retired and age 64, is retired and age 66, or is a member of
    this committee. Everyone is different.
        Not only is there a fragmented patchwork of programs, but
    also, these programs or plans are run on totally different
    operational principles with wide variations in Federal
    subsidies that defy logic. Some, like the VA, are run directly
    by the government. In Medicare, by contrast, the government
    contracts out the delivery of services,  but  Congress  fixes
    the  benefits. Elsewhere,  employers basically decide whether a
    sick child will or will not see a specialist. Meanwhile, the
    Federal Government gives Bill Gates thousands of dollars each
    year in tax breaks to help him because he no doubt struggles to
    afford his dental check-ups, yet gives little or nothing to
    help the busboy down the street pay for minimal medical care
    for his family.
        Mr. Chairman, we will never achieve universal coverage
    simply by adding here and there to this mishmash of programs
    and this indefensible method of subsidizing people. Moving
    toward a fairer and more rational system will, of course, be
    difficult, but the best way to do so would be to take some
    steps consistent with four strategies that I discuss in my
    written testimony.
        First, I agree with others on the panel and with you that
    we should commit ourselves to a social contract on health care
    that is explicit and fair. In a rich country like America, we
    should declare that it is the obligation of society to assure
    that all residents will have affordable access to at least a
    basic level of health care. But a contract is a two-way
    process. Residents should also have the legal obligation to use
    a reasonable level of their finances to contribute to the cost
    of basic coverage so that others in society are not needlessly
    called upon to help.
        Second, tax breaks or other subsidies to help people afford
    coverage should not vary significantly because of the
    particular piece of the patchwork people happen to be in, or
    very significantly, if they move from one piece to another.
    This implies such things as delinking the eligibility of tax
    relief from employment status. It also means gradually
    redesigning the method of tax relief so that help is focused
    where it is really needed. For Medicare, it means that
    assistance toward the cost of such things as Part B premiums or
    new benefits, such as a drug benefit, should be focused on
    those who need that help the most.
        Third, the place of work should function more as a
    clearinghouse for choosing and enrolling in health coverage and
    less as the place where an employer decides what your coverage
    will be. The place of work is a convenient place today for
    people to pay their taxes through the withholding system, yet
    employers do not sponsor the tax system. They do not decide
    what taxes their employees will pay. It should be the same in
    health care. In the case of workers in small firms especially,
    the health subsidy reforms I have suggested would permit
    employees to sign up at the place of work for coverage that
    they want rather than coverage decided by their employer.
        Fourth, Mr. Chairman, there remains the obvious question of
    how do we move from a patchwork with many holes to a more
    consistent and complete tapestry. To be sure, there are deep
    disagreements about what a reform system should look like, and
    you will hear disagreements on this panel. There is also
    uncertainty about what will actually happen on the ground when
    certain policy changes are made.
        Recognizing this, I suggest that the Federal Government,
    with the States, should embark on a systematic strategy of
    creative federalism to test comprehensive approaches to
    achieving universal coverage. To do this, the Federal
    Government should establish the goals and dedicate some
    funding. Congress should also enact a menu of policy tools that
    would be available to States, but not imposed upon them. These
    tools might include such things as association plans, as
    opening up the FEHBP, or modifying Medicare and SCHIP. A State
    could then propose a covenant combining State actions with
    selections from the Federal menu designed to test an approach
    to achieving universal coverage. Rather than arguing endlessly
    about what the end result should look like, let us instead
    learn systematically what really works.
        Mr. Chairman, thank you for the opportunity to testify.
        [The prepared statement of Mr. Butler follows:]

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        Senator Breaux. Well, thank you, Mr. Butler, and thanks to
    all the members of the panel for your comments and thoughts and
    suggestions. I think they are very, very important.
        Let me ask each one of you if you could just maybe comment.
    The only question I have is to the point of looking at all the
    boxes. As I have said, and you have all heard me say it, that
    this boxed area of getting health care just cannot continue. We
    try to put band-aids on each one of the boxes and each one of
    the boxes is a huge bureaucracy with red tape and regulations
    and fraud, waste, and abuse, and what I have suggested, that in
    the long term, what we ought to do is guarantee that Americans
    get health care, not because they fit into one of the boxes but
    because they, in fact, are an American citizen, which means I
    am talking about an individual mandate that people buy health
    insurance in this country which would be subsidized by the
    Federal Government for low-income individuals.
        I would involve the States in sort of the role that OPM
    provides for those of us who are Federal workers, to create the
    pooling arrangements to allow for purchasing and group rates as
    opposed to individual rates. That is the concept I think most
    of you are fairly familiar with.
        Can you give me a short comment, and we will start the
    opposite way, Mr. Butler, and work back to Dan.
        Mr. Butler. I strongly agree with that approach. I believe
    that it is important to try to gradually move toward
    consistency in the system for the very reasons that you mention
    and to make sure that if we do require people to obtain at
    least basic coverage, coverage that protects the rest of us
    from unnecessary expense, then we have to give that subsidy in
    a form that is far more rational than it is today. I think the
    best way forward is to experiment with States, but also, as we
    begin to move forward, to rationalize the subsidy system so
    that it becomes easier for these different boxes right now to
    begin to function in a similar manner.
        For example, in the Medicare program, let us look at
    premium support approaches that recognize that we have got to
    help people in certain situations get assistance, such as the
    SLIMBY and QUIMBY case that Karen Davis mentioned. This
    recognizes that lower-income people need a lot more help to
    afford what is even available in Medicare today. We need to
    begin to start fixing that particular inequity will help all of
    these boxes in the first instance to start functioning in a
    rather more similar way than they do today.
        Then simultaneously, we have got to look at the
    infrastructure of information that others have mentioned so
    people can navigate the system that they currently are in. So I
    think if----
        Senator Breaux. You hit upon a thought that I hadn't really
    thought about. We have got this box theory, but each one of the
    boxes is actually, in most cases, a different type of delivery
    system.
        Mr. Butler. Absolutely. Absolutely.
        Senator Breaux. You are in a box because of whether you are
    old or whether you are poor or whether you are a veteran, but
    not only are you in the box that is supposed to be for you,
    each box is sort of a different delivery system on top of it.
        Mr. Butler. Right.
        Senator Breaux. Ms. Davis.
        Ms. Davis. Mr. Chairman, I think you are to be
    congratulated for really calling for making comprehensive
    health insurance for all a top priority. I think until we are
    serious about really committing the resources that it takes to
    make coverage automatic and affordable for everyone, we are
    going to continue to suffer both the health and the economic
    consequences of our current system.
        So I think trying to set up a simpler system where coverage
    is automatic is key. It can go as far as an individual mandate
    or simply just making it so easy for people and so affordable
    that you get virtually everybody covered.
        I think looking at the experience of the Federal Employees
    Health Plan makes a lot of sense. I think that works well for
    Federal employees, and works well for Members of Congress. I
    don't think one wants to add new groups into that plan
    specifically, but instead use it as a model, for something that
    I call the Congressional Health Plan that would cover Members
    of Congress, small businesses, and individuals. But link the
    two by requiring any plan providing coverage through the
    Federal employees plan to also provide coverage through this
    new pool.
        I think having premium assistance that is income-related
    makes a lot of sense. I think building on the income tax
    system, makes a lot of sense because that is one thing that we
    do verify and it is an administrative system that is out there.
    I think there is a way of really checking people's insurance
    status at tax time and then referring people who are uninsured
    to something like a Congressional Health Plan pool. So I like
    all of those ideas.
        I think the ones that I think need to be looked at fairly
    carefully and are very difficult to look at is the employer-
    based health insurance system that we have now. There are about
    160 million people covered under employer plans. Employers put
    up $335 billion a year for that coverage, so I don't think we
    want to risk moving backwards and eroding that coverage. I
    think that is going to require looking at a fair contribution
    from all employers, everybody contributing at least something
    toward coverage, whether they provide coverage to their workers
    or their workers wind up getting covered through something like
    the Congressional Health Plan.
        Finally, we have to think about the role of public
    programs. I think that Medicaid and Medicare are very important
    programs. They cover the sickest and the poorest of all
    beneficiaries and these are beneficiaries that are, for the
    most part, not attractive to private insurance firms. Medicaid,
    for example, covers the homeless, people with HIV/AIDS, people
    with very serious physical and mental problems, children with
    special health care needs, quadriplegics. So there are subsets
    of the Medicaid population, that represent a large portion of
    Medicaid dollars and that really need this coverage. We are
    going to need to turn to public programs to cover the sickest
    and poorest, but perhaps we can offer people choices of other
    options, as well.
        So I think the broad framework that you have set forward is
    critical and the commitment of resources is also very
    important, to begin thinking about moving from where we are
    today to getting to such a system is the major challenge.
        Senator Breaux. Mr. Nichols.
        Mr. Nichols. Mr. Chairman, when I think about your theory
    of the boxes and how your proposal attempts to create a
    framework where everyone would have a home, I have to applaud.
    I think there are five major goals we want to achieve here and
    I keep coming back to something like the group purchasing
    arrangement as the best way to achieve those goals. We have to
    have a system that is efficient. We have to be good both at
    enrolling people--we can only get low administrative costs
    through group enrollment. At the same time, all the quality
    issues and waste issues I talked about in my testimony, I
    think, can only be addressed in a big group purchasing kind of
    arrangement.
        We want to have good risk pooling so that people of
    different risks can be pooled together so that you are not held
    accountable for being unlucky in life. At the same time, you
    want to make sure that those who are healthy don't pay premiums
    that are way out of balance with what they are expected to
    cost. You have to have some compression there.
        You have to have a choice. I think Stuart's point about how
    most individuals today in the employer system really don't have
    much choice because they basically end up with the one choice
    their employer makes for them. Maybe it is best for some group
    of workers, but it is surely not best for all workers. So we
    want to make sure we have more choices.
        We want to have subsidies tied to the circumstances of
    individuals. I am very impressed with the notion that the
    individuals who most need subsidies in our country tend to
    float in and out of different kinds of employment arrangements.
    That is why they are sometimes uninsured and sometimes not.
    That is why that is the common circumstance. The notion that
    one subsidy will be right for them at all times is probably not
    true. Therefore, we want to have a system that follows
    individuals and not other kinds of circumstances.
        Finally, we want seamless. We want a system where when they
    have a life change, they don't have to change their health care
    system or have to change their providers who they know and, our
    surveys at least show, they trust, and that is the good news
    about our health care system today.
        To me, the way you accomplish all of that is to make one
    big box, that is to say, to make a box where everyone has a
    right to go. As you know, I have argued that you don't want to
    force people into that box. You want to leave people with
    choices outside the box if, indeed, they think they can do
    better on their own. But it is perfectly consistent with my
    view of what we want here and what we all agree on to enforce
    an individual mandate to buy coverage, but you can choose to
    get it where you want. In my view, most people will, as Karen
    said, drift to the bigger box over time. If you create it, they
    will come, but you don't want to force them all to come the
    first day.
        Senator Breaux. Thank you, Mr. Nichols. Dan.
        Mr. Crippen. Mr. Chairman, a couple of kind of disparate
    comments, but, I think, saving the most important for the last.
        Looking at Federal programs, of course, we can often find
    what we are looking for and ignore some of the more obvious
    points. The FEHB works well in large measure because it is 72
    percent subsidized. If we had other health care systems that
    were as heavily subsidized, they would work better, too, but it
    is not that we probably can't afford them.
        Similarly with Medicare, while, as Len says, central
    purchasing may give you some efficiencies, we only spend 3
    percent on administrative costs on Medicare. At the same time,
    Medicare, since 1965, on a per capita basis, has increased in
    cost more than any other system we know of, more than other
    public programs, more than private, more than private premiums
    plus cost sharing, and substantially faster than the economy
    itself, inherently, by definition, unsustainable.
        So we can point to some aspects that are advantageous, but
    taken as a whole, it is not clear these systems are
    sustainable. What we do think we know--that is a real
    statement, we do think we know---- [Laughter.]
        The economists tend to believe, at least, that incentives
    matter and that if you develop a system in which individuals at
    least have some responsibility for making the decisions and
    paying in part for their own care, whether it is small amounts,
    and whether they are subsidized or not, that that is important.
        For example, we believe that the existence of Medigap,
    because it very often provides first dollar coverage, results
    in the average Medicare beneficiary spending $2,000 to $3,000 a
    year more than they would otherwise. Now, they may have better
    health care because of it. I don't want to interpret that
    otherwise. But the point is that first dollar coverage incents
    people to use a lot more health care, and so as we have
    discovered in things like pharmaceuticals, where we have
    multiple or tiered copays, other things, those kinds of
    incentives work if individuals are faced with those choices. So
    any system you develop needs, I think, to keep that very
    clearly in mind.
        Senator Breaux. Thank you all for that comment. I have some
    additional questions, but I want to recognize Senator Collins.
        Senator Collins. Thanks very much, Mr. Chairman, and let me
    commend you for putting together a truly extraordinary and
    balanced panel. Your testimony has been excellent and very
    thought provoking and I really appreciate your taking the time
    to be with us.
        When I approach the issue of the uninsured, I start with
    the fact, and I think one of you, maybe Ms. Davis, said it
    today, that 82 percent of uninsured Americans are part of
    households where at least one person works. This is contrary to
    what most people think of when they think of the uninsured.
    They believe that uninsured individuals are unemployed
    individuals, yet the majority of them are in households where
    someone is working.
        Of those who are uninsured and working, 60 percent of
    uninsured workers are employed by small firms. If we could
    figure out how to make insurance more affordable to those small
    employers so that population, that 60 percent, had access to
    affordable health insurance, we could go a significant way
    toward lessening the number of uninsured. We would bring
    literally millions into the system.
        The legislation that I have introduced tries to take a
    variety of approaches. It would provide tax credits for small
    employers. It would allow them to form purchasing coalitions to
    increase their bargaining power. What it would not do, however,
    is authorize, as the administration has proposed to deal with
    this problem, association health plans. Having supervised the
    Bureau of Insurance in the State of Maine for 5 years, I have a
    lot of reservations and concerns about association health plans
    because I think they will lead to cherry picking. I also don't
    like the idea of such plans being preempted from State
    regulation, which I think is problematic.
        I would like to get your views on the merits of association
    health plans now that I have told you my bias against them. So,
    Mr. Nichols, I am going to start with you in the hopes that I
    am starting with someone who might agree with my opinion before
    I move on to the other panelists. [Laughter.]
        Mr. Nichols.
        Mr. Nichols. Well, I am impressed you picked me out of a
    crowd.[Laughter.]
        You may have heard I testified before your Senator from
    Maine about a month ago on precisely this issue and I would
    just say you are right in spades on this matter. There is no
    question that a number of us are very concerned about small
    business's ability to offer health insurance. I think the one
    thing that I think all of us hope is that we can find a way for
    them to find the cheapest possible coverage available.
        What association health plans would like do, as the
    legislation that was introduced in the House last session and
    as legislation introduced by Senator Snowe a few days ago, I am
    afraid, would permit, or would indeed encourage a situation
    where the healthiest would join those association health plans,
    where those who wanted to join and couldn't would be the less
    healthy, and, thus, it would serve to destabilize the existing
    risk pools, which as you know in Maine are already fragile
    enough in that small group market and, therefore, would make
    kind of a bad situation worse, except for the few who got the
    good coverage in the short run.
        The problem would be some of them who were the healthiest
    would always want to peel off from the existing group, and so
    it would introduce instability, which brings you back to the
    point about regulation. Exempting them from solvency
    requirements that are serious, exempting them from oversight on
    the part of people who actually know how solvency matters, what
    guarantee funds are all about, would leave a lot of workers at
    great risk.
        I will say the problem of small business offering insurance
    needs to be thought about, I think, in a context of the way
    labor markets work. What most of us observe who study these
    markets carefully is that there are kind of two kinds of labor
    markets. There are markets where most of us have lived most of
    our lives, and that is where jobs have health insurance
    attached because the productivity of workers is high enough to
    merit and to pay for that in the marketplace.
        Then there is a set of jobs, they are not as many jobs, but
    there is a set of jobs where health insurance is never
    attached, and in fact, those workers tend to have lower
    productivity, lower human capital. It is not fair, but it is
    the way it is. In those firms that need those kinds of workers
    exclusively, there is just not enough surplus there to pay for
    health insurance. The workers who get those jobs have low
    wages. They are not willing to pay out of their own wages. The
    employers who employ them don't make enough money to make it
    something they can just give away.
        Firms do what they do to compete for labor and margins are
    driven down to those competitive edges. So I am afraid for some
    class of workers in some firms, we are never going to get them
    to offer unless we can offer two things, serious subsidies to
    defray the costs so they can afford it, just like other low-
    income people are sometimes eligible for public programs they
    are not, as well as a home.
        I come back to Senator Breaux's idea. There is going to
    have to be a home where they can buy. In my view, the place to
    do that is building on existing pools. State employee plans are
    a natural experiment. I love Stuart's idea of allowing States
    to do this in lots of different ways. I would climb onto that
    this afternoon or this morning or whenever it is we can sign.
        Mr. Butler. I will sign you up.
        Mr. Nichols. That is the way to go. Let people buy into
    existing pools that are large and not create a new
    destabilizing force, and you can refer to my testimony for
    details if you would like.
        Senator Collins. You raise a really good point that I want
    to emphasize. The small employers in my State that don't
    provide health insurance don't provide it because they can't
    afford it. They don't even have it for themselves in most
    cases. It is not only their employees. They can't afford the
    coverage for themselves.
        Mr. Crippen, any comments or thoughts on how we expand
    access to health insurance for this critical group?
        Mr. Crippen. I think it is important to recognize, Senator,
    that without attributing motives, the reason insurers or
    companies or associations are trying to change the nature of
    the pools they are dealing with is they are not looking so much
    for least risk as they are looking for something like average
    risk or stable risk. In fact, least-risk pools may be very
    unprofitable in some ways. So by trying to eliminate or cordon
    off or deal with a more knowable risk pool, they come up with
    an average risk that is easier to underwrite, easier to manage,
    all those kinds of things.
        Clearly, the smaller the pools, the harder it is to do
    that, and if the result of policy is to make smaller and
    smaller pools, it is going to be harder and harder to get
    something that has average risk.
        I am more familiar with public programs, of course, given
    my last 4 years, and I can tell you that for Medicare, we have
    done a lot of simulations that suggest you need about 100,000
    elderly in any given risk pool to have average risk. Now, the
    distribution of expenditures by the elderly are a little more
    skewed than they are for a non-elderly population, but it is
    still a very skewed distribution. High-cost individuals drive
    the average, and those are a relative handful compared to the
    non-high-cost.
        So one needs to be concerned about size of the pool, how
    average risks are determined, but there are many ways to adjust
    risk, many that we haven't thought about, frankly, particularly
    in public programs. Medicare, for example, you could look at
    high-cost individuals and see if there were a way to compensate
    for them perhaps differently. If they were removed from a risk
    pool, then the average risk would be much more stable and
    lower.
        So the same phenomenon applies to non-elderly, as well,
    whether it is State risk pools, as I think Len was talking
    about, other ways to say risk or insure catastrophic cost, the
    high cost, the extreme costs, would then give you a much more
    manageable risk pool with much lower cost and, therefore, lower
    premiums. So you might think about reinsurance or State pools
    for catastrophic ways to manage the high cost risk that will
    then allow more normal risk to permeate the rest of the pool.
        Senator Collins. Ms. Davis.
        Ms. Davis. I agree with many of the points that Mr. Nichols
    made. I think you are right, based on your experience at the
    Bureau of Insurance in Maine, to be concerned about association
    health plans. I think what we need is broad risk pooling, not
    risk segmentation, because risk segmentation would just
    accelerate the deterioration of the better risk sorting out
    into certain plans, leaving the worst risk for others. So I
    also am attracted to the notion of either something like a
    State public employees' health plan as a pool or an analog to
    the Federal Employees Health Plan as an option.
        I, too, support the notion of State demonstrations. I was a
    member of the Institute of Medicine committee that issued a
    report last November called ``Fostering Rapid Advances in
    Health Care'' that called for Federal funding of the
    incremental cost of providing universal coverage in three to
    five States and testing either a tax credit, private insurance
    approach, or expansion of public programs or a combination of
    those. So I do think that we need to move forward. State
    demonstrations with Federal funding, because I don't think
    States are in a situation to do this with their own money, is a
    good first stop.
        I also believe the deck is stacked against small
    businesses. They pay much higher premiums than large business.
    Administrative costs for a very small firm can run 30 percent,
    contrasted with 10 to 15 percent in large firms. Large firms
    are more likely to have plans available to them with large
    provider price discounts, physician fees, hospital rates. So
    large firms, ironically, can get coverage cheaper than small
    firms and that is why I think we do need pools, larger pools
    available at either the State level or the national level,
    available to small businesses.
        You mentioned tax credits for businesses, and Len talked
    about the money following the worker. I tend to favor the money
    following the worker and to have tax credits for workers to
    make sure they can afford the coverage that employers offer to
    them and have premium assistance that would pick up a big
    portion of the premium in excess of, say, 5 percent of income
    of a low-wage worker.
        I personally am an outlier in that I think every firm ought
    to contribute something. I think we will find an erosion and a
    deterioration of the coverage that employers now provide if
    there is assistance for firms that don't provide, since they
    would get left holding the bill. So it can be modest, whether
    it is a dollar an hour or 5 percent of earnings, but I think
    every firm ought to contribute something into a pool to finance
    this coverage.
        Mr. Crippen mentioned reinsurance. I do think that looking
    at adding a publicly subsidized reinsurance to something like a
    Federal Employees Health Plan is important, but I also think we
    need to keep the worst risk in public programs, Medicare
    covering the disabled, Medicaid covering many of the sickest
    and the poorest, and that those programs have the effect of
    helping private insurance markets work by pulling the worst
    risk out. We know that if you take the 1 percent of the people
    with the most serious health problems and take them out of the
    individual market or out of the small business market, it will
    reduce premiums by 28 percent.
        So certainly covering all of the disabled, not having a 2-
    year waiting period for coverage under Medicare, and opening up
    Medicaid to everyone below a certain income level with a
    serious problem, are ways in which we can help the private
    market to work better. Thank you.
        Senator Collins. Thank you. Mr. Butler.
        Mr. Butler. Senator, I have wrestled with the whole idea of
    employment-based coverage for many years, trying to think about
    what is the proper role and appropriate function of employer-
    sponsored coverage. It is interesting that I believe this is
    the only country in the world, certainly the only large country
    in the world, that has an employment-based system. You could
    say maybe Germany does, but that is more of an industry-based
    system.
        That is an interesting point to just bear in mind, because
    when you look at the employment-based system in this country,
    you do see a spectrum of effectiveness. If you work for the
    Federal Government, or if you work for General Motors you have
    lots of choices. If you intend to work for either of those for
    all of your life, it is a pretty good, stable system.
        When you get down to the other extreme, however, such as
    the ones you mentioned in Maine of the small firm in the
    fishing industry or something like that, or a restaurant, where
    the people who are working for you next year may not even be
    the same people who are working for you this year, it begs the
    question. Is this really the best place to help people organize
    their health care?
        I have come to the conclusion that the more you go down the
    employment system, to smaller firms, to low-paid firms,
    particularly in firms with people moving in and out of the
    workforce, the less and less that makes sense as the basic
    method to get coverage. Therefore, I am leery of approaches,
    that say, ``Well, let us help people get coverage, but let us
    do it via the employer.'' When you have got employers that may
    be facing 30 percent more of overhead costs for getting
    coverage, and may not know anything about insurance, or may
    have three different people working for them, one is 18, one is
    65, and one has got a major heart problem, how can they
    possibly figure out and organize insurance?
        I think that leads you into starting to think about pooling
    arrangements, whether it be association plans or whatever, and
    you almost get to the stage eventually where you say, ``Well,
    if we do all these things, in what sense is this an employer-
    based system anymore?'' The place of employment ends up being
    really where you sign up and where you become eligible for a
    subsidy.
        So that is why I am very interested in looking at
    approaches that say, ``Let us use the place of employment,
    particularly in the case of smaller firms, as a convenient
    place to sign up.'' But let us make the subsidy system, and the
    kind of plans available to you in the system you are in, not
    connected to your place of work for these people.
        Let me just go on to talk about specifically association
    plans. I am really open-minded on that particular approach. I
    do agree with the others on the panel that we must look at
    people who work for these small firms, people who do move in
    and out of the workforce for different employers, and try to
    group them in a different way. Maybe the way you do it in Maine
    is not the right way in Texas or in Alaska, Senator Stevens.
        That is why I think it is important to say to States, well,
    we are not going to tell you to put an association plan in
    place or open up the FEHBP, as Karen Davis suggested, but let
    us make that available and if you think in your State that that
    is something you think might be part of the equation, well,
    then that is available to you. I think that is the way to look
    at these things.
        Quite frankly, I am sure Len and others would be hard-
    pressed to say that they were 100 percent certain in their
    views of any of these approaches and how they would work, and
    therefore I think the Federal Government should not impose them
    on anybody. We should make them an available menu to be tried
    in these different places, and that is why I favor going down
    that road.
        Senator Collins. Thank you.
        Senator Breaux. I thank the panel. Let me just ask one
    other question with regard to the concept of the individual
    mandate. We have tried the employer mandate in the first
    Clinton Administration and we saw the problems that that
    brought up and the intense political opposition that that had.
    If we had an individual mandate, two questions--I mean, there
    are a million questions, but two of them that we are still
    wrestling with.
        First how do you enforce it? I think there are ways to do
    that. I mean, obviously, we have an individual mandate that
    people buy liability insurance before they drive a car in this
    country and people have sort of accepted that and there are
    penalties if you don't do that. But the question is, how do you
    enforce an individual mandate, and second, how do you enforce--
    or maybe I should say it this way--how do you continue to have
    the participation by employers, which are very, very important
    if any system is going to work? There is some fear that if we
    went to an individual mandate, that employers would just bail
    out of their participation in the system and we can't have that
    happen, at least not initially, because of the huge amount of
    costs that would be associated if their contributions were not
    available.
        So can I have anybody talk about either one of those or
    both of those, enforcement of an individual mandate, and
    second, how do we guarantee the continued participation of
    employers who are currently providing employer-sponsored health
    insurance? Anybody?
        Mr. Butler. Well, maybe I can take a crack at it first.
    First of all, I think it would be unjust to require somebody,
    to put a mandate on somebody to do something if they do not
    have the capabilities of discharging that mandate. I mean, in
    the case of automobiles, we do that, and if you can't afford
    it, you don't have a car. But obviously if you say you have got
    to have health insurance and so on and it is is illegal if you
    don't, if you have to have this and you can't afford it, you
    are in a problem. So I think that does require you----
        Senator Breaux. Although the concept, obviously, is in the
    context of a subsidy for those who would be low-income.
        Mr. Butler. Right. I do think that there are various forms
    of enforcement that you can consider. You can have something
    that is called hard enforcement or a soft enforcement. You can
    say, ``It is illegal, and if you don't do it we put you in
    jail.'' That would be hard enforcement. I certainly wouldn't
    recommend that.
        But you can also say that there are certain things you
    can't avail yourself of if you don't do this. For example,
    certain tax benefits could be contingent on that. You can also
    say to a State, ``Well, if certain people don't sign up, rather
    than sending the State police out to find them, maybe at the
    Federal level we will compensate the State in some way in the
    amount these people would have gotten in tax subsidies had they
    actually signed up so the State, at least, is not left holding
    the bag on people who don't take part in that enforcement.''
        As far as how to keep employers involved, I do think it is
    important to recognize that employers today are not under any
    obligation to provide health insurance to people. There is no
    law that says you must, as an employer, do this. They do it for
    certain very sound economic reasons. They do it because of the
    labor market, because employees expect this. So I don't think
    for a moment that if you said, ``Well, we will help your
    employees to obtain coverage, then somehow that will then mean
    suddenly the whole logic of providing health insurance to
    employees suddenly disappears.''
        It might in certain parts of the market, where an employer
    may say, ``Look, I have got four employees, and may have four
    different people next year.'' It really makes more sense for me
    to add a little bit to your wages, take your subsidy and then
    go and join a plan that is far better than anything I can find
    for you. I don't find that such a problem.
        I think within that range, you can look at approaches that
    have requirements on employers to continue coverage for a
    period if they already provide it, such as maintenance of
    effort approaches. Under these if they do for whatever reason
    eliminate their coverage, then they must compensate the
    employee, at least in the first year, to the equivalent cash
    amounts. There are all kinds of ways, I think, to minimize a
    kind of change in the approach of employers that you want to
    avoid. But if some employers decide to drop coverage, give
    cash, and allow that person to join an FEHBP-type plan that is,
    in fact, far better in the current situation and should not be
    avoided.
        Senator Breaux. Any other comments?
        Ms. Davis. Well, I have given a little bit of thought to
    how one might enforce an individual mandate or something just
    short of that that I call an automatic enrollment with opt-out,
    but it is basically using the income tax system. So, first of
    all, each year there is insurance verification, so just like
    you submit forms from your employer saying what your earnings
    were, you get a form saying you had health insurance coverage
    or Medicare, SCHIP provides the documentation of coverage.
        But if you don't have coverage, then you are automatically
    enrolled in what I call the Congressional Health Plan and you
    are charged a premium which you pay through the income tax
    system. So if you are filing in April, you pay a premium that
    is roughly 5 percent of your income in the lower tax brackets
    or 10 percent in the higher brackets for coverage that starts
    on July 1 and you get the packet just as Federal employees get
    a packet of insurance choices and then there is a default
    mechanism that assigns you to a plan.
        So I think there is a way to enforce it by having the
    enrollment happen through the income tax system, through an
    OPM-like administrative structure, but assessing a premium and
    giving people effectively a tax credit for any portion of the
    premium over 5 percent of income.
        Senator Breaux. It has been suggested on that point--sorry
    to interrupt you, but that if a person during the year went to
    an emergency room, for instance, for health care and did not
    have insurance, they could be enrolled at that point, as well.
        Ms. Davis. Absolutely. So you would also, and again, this
    was part of the Institute of Medicine recommendation, have an
    electronic insurance clearinghouse, so once you get this up and
    running, you know at tax time what people's coverage is, and if
    anybody goes to a provider at any point during the year and
    they are uninsured, the provider says, ``These are your
    circumstances, you qualify for this and you are signed up and
    you start paying a premium through the tax system that is based
    on your income over a year's period.''
        In this particular scheme that I have had modeled and some
    cost estimates done, for it also gives people below 150 percent
    of poverty the right to go into a Medicaid or a SCHIP family
    health insurance plan. That would be done without premiums, so
    you have got that option, 5 percent of income in the lower tax
    brackets, 10 percent of income in the higher tax brackets.
        So I certainly agree with Stuart that you need to make it
    affordable and people may have different amounts that they
    consider affordable, but that is what I have looked at.
        Your second question was how to have employers continue to
    make contributions toward coverage. Obviously, as Stuart says,
    they do it voluntarily now, so many will continue. But I am
    concerned that many might drop if they felt like their workers
    can always get this coverage in an affordable way through the
    Congressional Health Plan. So I have leaned towards something
    that was called ``play or pay.'' If you don't provide coverage
    to your workers, you have to contribute something.
        In this particular model, employers are contributing a
    dollar per hour up to 5 percent of earnings, and the estimates
    are that if you did that, you would keep roughly the same mix
    of public-private coverage that you have now. About two-thirds
    of the population under age 65 would be covered under private
    insurance. About a third would continue to be covered under
    public programs, Medicare.
        Now, some small businesses would shift from the coverage
    that they now buy to buying coverage through the Congressional
    Health Plan because they would be getting better premiums, so
    they would move their workers in there, but would still have
    the private plan coverage like that available to Federal
    employees.
        Mr. Nichols. Mr. Chairman, I would just add on the
    individual mandate piece that the one thing I would be sure of,
    to speak back to Stuart's point, is that we are never going to
    get 100 percent of Americans signed up for anything, but that
    is kind of OK, because, in fact, the ones you would miss
    through all the nets that others have talked about, so I won't
    belabor the point, are healthy. So they're not sort of the
    problem. I mean, the problem would be contributing money, and
    you would certainly want to catch them, but you could catch
    them, I think, in lots of these nets. But most of them, if they
    are going to need to go to the services, the providers will
    sign them up just like they do Medicaid now and that problem
    will take care of itself, coupled with the tax incentive.
        Senator Breaux. But the question is, I mean, for those that
    do not have insurance today, they tell me the largest
    percentage of the 40 million, or whatever they are, are between
    18 and 41 years of age and basically in fairly good health. We
    want those people in an insurance plan.
        Mr. Nichols. Yes, sir, we do, and over half of them go to
    the doctor every year and a fair number of them know exactly
    how tenuous their situation is, and so I think the ones that
    are sort of not 22 and immortal are going to think hard about
    signing up for something that is going to be basically free for
    them.
        So I think the problem you would have, as you are always
    going to have, is on that margin where people have to pay
    something out of pocket because we can't afford to do better
    and it is perceived to be relatively high compared to what they
    used to have to pay because they used to get their care for
    free. Those folks are going to be the margin you have got to
    worry about, but, therefore, what you want to do is not destroy
    the safety net but keep that safety net there so they can have
    access and we can get them signed up. So on that front, I am
    less worried.
        On the employer side, I think it is a very interesting kind
    of analytical question. My view is, as you know, is that a lot
    of employers offer today because they have to in the labor
    market. That compulsion will not go away once this kind of
    system would be in place. If they didn't continue to make a
    contribution toward my health insurance, they would have to
    give me wages or I would switch employers. So I am not worried
    about that.
        Karen is right. There is a class of firms who are on the
    cusp. They tend to be those smaller firms who are trying to
    offer now and are finding it increasingly difficult. Those
    firms may very well find an incentive to pull out, and I think
    the way to deal with that is a 1-year maintenance of effort
    kind of requirement, where you say if you contributed to health
    insurance last year and you drop, then you have to give workers
    the wages equal to what you contributed last year. Then from
    that moment on, those workers' compensation has been raised
    equivalent to what the premium would have been. In a sense,
    they are made whole from what they were, but they have relieved
    the firm from the fear of having these premium increases over
    time.
        Senator Breaux. Mr. Crippen.
        Mr. Crippen. I think, Mr. Chairman, as Len just said,
    ``While it may be possible in a transition to force employers
    to do something they wouldn't otherwise do, it is probably
    ephemeral and temporary, and there is a lot of evidence that it
    doesn't matter.'' That is, as Len just said, ``If, as the
    evidence shows, fringe benefits are an alternative to wages, if
    fringe benefits change, wages will change to compensate the
    other way.'' So trying to force companies to do something or
    other probably is unproductive and unnecessary.
        Equally importantly, I mean, it depends on what the plan is
    that you are mandating, obviously, and you have thought a lot
    more about this than I have, and if it is a mandatory
    catastrophic kind of coverage, then there is certainly a lot of
    insurable risk left for employers and others to give as fringe
    benefits or to work with at individual markets, as well. So it
    really depends on the nature of the package that you are
    mandating.
        Senator Breaux. I think this has been very helpful, Senator
    Collins. I think that it has been a good discussion. You all
    are experts in this area. You have been very helpful up to this
    point and we would encourage you to continue your involvement
    with all of us who are looking at these issues.
        The question of uninsured and the question of these boxes
    that are up there are not going to go away in any short-term
    venue. It is going to be an ongoing battle to come up with
    answers. I mean, I just happen to think it is time to think
    outside of the boxes, so to speak, and think in a broader
    picture about where we are going to be down the road in this
    country when it comes to health insurance and that people
    should get it because they are an American citizen, not because
    they fit into one of the boxes.
        We thank you very much, and that will conclude this
    hearing.
        [Whereupon, at 3:26 p.m., the committee was adjourned.]