[House Hearing, 109 Congress]
[From the U.S. Government Publishing Office]



 
          WHAT'S THE COST?: PROPOSALS TO 
          PROVIDE CONSUMERS WITH BETTER
          INFORMATION ABOUT HEALTHCARE
                   SERVICE COSTS

_____________________________________________________________________

                   HEARING

                  BEFORE THE

             SUBCOMMITTEE ON HEALTH

                   OF THE 

            COMMITTEE ON ENERGY AND 
                 COMMERCE
           HOUSE OF REPRESENTATIVES

        ONE HUNDRED NINTH CONGRESS

              SECOND SESSION
                 _______  
         
              MARCH 15, 2006
                 _______
                 
            Serial No. 109-70

    Printed for the use of the Committee on Energy and Commerce







 Available via the World Wide Web:  http://www.access.gpo.gov/congress/house
 
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                   COMMITTEE ON ENERGY AND COMMERCE
                      Joe Barton, Texas, Chairman
Ralph M. Hall, Texas                      John D. Dingell, Michigan
Michael Bilirakis, Florida                 Ranking Member
  Vice Chairman                           Henry A. Waxman, California
Fred Upton, Michigan                      Edward J. Markey, Massachusetts
Cliff Stearns, Florida                    Rick Boucher, Virginia
Paul E. Gillmor, Ohio                     Edolphus Towns, New York
Nathan Deal, Georgia                      Frank Pallone, Jr., New Jersey 
Ed Whitfield, Kentucky                    Sherrod Brown, Ohio           
Charlie Norwood, Georgia                  Bart Gordon, Tennessee           
Barbara Cubin, Wyoming                    Bobby L. Rush, Illinois
John Shimkus, Illinois                    Anna G. Eshoo, California        
Heather Wilson, New Mexico                Bart Stupak, Michigan
John B. Shadegg, Arizona                  Eliot L. Engel, New York   
Charles W. "Chip" Pickering,  Mississippi Albert R. Wynn, Maryland
  Vice Chairman                           Gene Green, Texas
Vito Fossella, New York                   Ted Strickland, Ohio
Roy Blunt, Missouri                       Diana DeGette, Colorado     
Steve Buyer, Indiana                      Lois Capps, California     
George Radanovich, California             Mike Doyle, Pennsylvania     
Charles F. Bass, New Hampshire            Tom Allen, Maine  
Joseph R. Pitts, Pennsylvania             Jim Davis, Florida      
Mary Bono, California                     Jan Schakowsky, Illinois    
Greg Walden, Oregon                       Hilda L. Solis, California
Lee Terry, Nebraska                       Charles A. Gonzalez, Texas
Mike Ferguson, New Jersey                 Jay Inslee, Washington        
Mike Rogers, Michigan                     Tammy Baldwin, Wisconsin     
C.L. "Butch" Otter, Idaho                 Mike Ross, Arkansas
Sue Myrick, North Carolina
John Sullivan, Oklahoma
Tim Murphy, Pennsylvania
Michael C. Burgess, Texas
Marsha Blackburn, Tennessee

                           Bud Albright, Staff Director
                          David Cavicke, General Counsel
        Reid P. F. Stuntz, Minority Staff Director and Chief Counsel

                                 _______
                                 
                                 
                         SUBCOMMITTEE ON HEALTH
                     Nathan Deal, Georgia, Chairman
Ralph M. Hall, Texas                       Sherrod Brown, Ohio
Michael Bilirakis, Florida                  Ranking Member
Fred Upton, Michigan                       Henry A. Waxman, California
Paul E. Gillmor, Ohio                      Edolphus Towns, New York
Charlie Norwood, Georgia                   Frank Pallone, Jr., New Jersey       
Barbara Cubin, Wyoming                     Bart Gordon, Tennessee
John Shimkus, Illinois                     Bobby L. Rush, Illinois 
John B. Shadegg, Arizona                   Anna G. Eshoo, California 
Charles W. "Chip" Pickering,  Mississippi  Gene Green, Texas
Steve Buyer, Indiana                       Ted Strickland, Ohio    
Joseph R. Pitts, Pennsylvania              Diana DeGette, Colorado   
Mary Bono, California                      Lois Capps, California          
Mike Ferguson, New Jersey                  Tom Allen, Maine           
Mike Rogers, Michigan                      Jim Davis, Florida                 
Sue Myrick, North Carolina                 Tammy Baldwin, Wisconsin
Michael C. Burgess, Texas                  John D. Dingell, Michigan             
Joe Barton, Texas                           (Ex Officio)
  (Ex Officio)















CONTENTS

                                                                 Page
Testimony of:
  Lipinski, Hon. Daniel, Member, U.S. House of Representatives...23
  Gingrich, Hon. Newt, Former Speaker of the House, Founder, 
    Center for Health Transformation.............................30  
    Gedwed, William, Chairman, President and CEO, UICI...........35
    Ginsburg, Paul B.,President, Center for Studying Health 
      System Change..............................................41
      MacDonald, Dr. David, President, Liberty Health Group......48
      Collins, Dr. Sara R., Senior Program Officer, Future of 
      Health Insurance, The Commonwealth Fund....................54
      Goodman, Dr. John, President and CEO, National Center for 
        Policy Analysis..........................................93
        Anderson, Dr. Gerard F., Johns Hopkins Bloomberg School 
        of Public Health, Health Policy and Management...........99
Additional material submitted for the record:
       Inglis, Bob, prepared statement of........................129














































WHAT'S THE COST?:  PROPOSALS TO PROVIDE CONSUMERS WITH BETTER 
INFORMATION ABOUT HEALTHCARE SERVICE COSTS

                       ________
                 WEDNESDAY, MARCH 15, 2006

                 House of Representatives,
              Committee on Energy and Commerce,
                 Subcommittee on Health,
                                                  Washington, DC.


The subcommittee met, pursuant to call, at 10:03 a.m., in Room 2123 
of the Rayburn House Office Building, Hon. Nathan Deal (chairman) 
presiding.
	Members present:  Representatives Bilirakis, Shimkus, Pitts, 
	Bono, Burgess, Barton (ex officio), Brown, Waxman, Pallone, 
	Green, Capps, Allen, Baldwin, Dingell (ex officio), and Deal.
	Staff present:  Chuck Clapton, Chief Counsel for Health; 
	Melissa Bartlett, Counsel; Ryan Long, Counsel; Nandan 
	Kenkeremath, Counsel; Bill O'Brien, Legislative Analyst; 
	David Rosenfeld, Counsel; Brandon Clark, Policy Coordinator; 
	Chad Grant, Legislative Clerk; John Ford, Minority Counsel; 
	Chris Knauer, Minority Investigator; Purvee Kempf, Minority
	Counsel; Amy Hall, Minority Professional Staff Member; 
	Bridgett Taylor, Minority Professional Staff Member; Jessica 
	McNiece, Minority Research Assistant; and Jonathan Brater, 
	Minority Staff Assistant.
Mr. Deal.  We will welcome our guests to our members of our 
distinguished panel this morning and some are not here and will be 
joining us hopefully before the opening statements are concluded.
	I recognize myself at this time for an opening statement.  
	Certainly, I think all of us are concerned with the 
	subject that is the text for the hearing today and that is 
	how to best increase the level of transparency in our health 
	care delivery system.  We all know that in order for markets 
	to function properly, consumers must have information about 
	the goods and services they are purchasing, and the health 
	care market is no exception to that rule.  Each year, 
	Americans spend over $2 trillion on their health care, which 
	accounts for 16 percent of our annual gross domestic product.  
	Despite the unmountable importance of these purchasing 
	decisions, it is virtually impossible for the average American 
	consumer to find any quality or pricing information about 
	health care providers.  This situation is unacceptable and I 
	hope will soon change.
	American consumers have the right to choose their health 
	care providers and these consumers deserve to know pricing 
	and quality information about these providers so that they 
	can make the right decisions.  No one purchases a car without 
	first gathering information on the prices and quality of the 
	different available models.  Why should health care be any 
	different?  If one hospital charges several thousand dollars 
	more for the same procedure, shouldn't the consumer have 
	access to this information?  If I am paying for it, out of 
	my own pocket, I would like to know that.  If one surgeon 
	is significantly more successful at performing a certain 
	procedure than another surgeon, shouldn't the consumer have 
	access to this information as well?  If it is a member of 
	your family or if it is you, I think all of us would agree 
	we would like to know that.
	At a recent visit to one of the largest hospitals in my 
	congressional district, the administrator stated that one of 
	their biggest concerns was that 90 percent of their self pay 
	patients, which are mainly patients without health insurance, 
	never paid for any of the services they received.  Well, in 
	some ways that is not surprising given the fact that we 
	really know that these people are asked to pay some two to 
	four times as much as those patients with similar procedures 
	who have health insurance.  It simply doesn't make any sense 
	to charge people that cannot afford health insurance or choose 
	to pay for some procedures out of pocket much more for the 
	same procedure.  The uninsured deserve to know what prices 
	they are going to pay.  I believe that if these patients had 
	access to meaningful and understandable pricing and quality 
	information, providers would no longer be able to get away 
	with this kind of injustice.  As we have seen in so many 
	other areas, empowered consumers increase the level of 
	quality when driving out inefficiencies and waste.  It is 
	my hope that we can do the same thing in health care.
	Again, I want to welcome our witnesses and at this time, I 
	would recognize my friend from California, Mr. Waxman, for 
	an opening statement.
	[The prepared statement of Hon. Nathan Deal follows:]

Prepared Statement of the Hon. Nathan Deal, Chairman, Subcommittee 
on Health

The Committee will come to order, and the Chair recognizes himself 
for an opening statement.
I am proud to say that we have a very distinguished and expert 
panel of witnesses appearing before us today that will help us 
explore how to best increase the level of transparency in our 
healthcare delivery system.  
We all know that in order for markets to function properly, 
consumers must have information about the goods and services 
that they are purchasing, and the healthcare market is no 
exception to this rule.
Each year, Americans spend over $2 trillion on their healthcare, 
which accounts for 16% of our annual Gross Domestic Product. 
Despite the undeniable importance of these purchasing decisions, 
it is virtually impossible for the average American consumer to 
find any quality or pricing information about healthcare providers.
This situation is unacceptable and must change.
American consumers have the right to choose their healthcare 
providers, and these consumers deserve to know pricing and quality 
information about these providers so that they can make the right 
decision.
No one purchases a car without first gathering information on the 
prices and quality of the different available models.
Why should healthcare be any different?
If one hospital charges several thousand dollars more for the same 
procedure, shouldn't the consumer have access to this information?
If I'm paying for it out of my own pocket, I know I would like to 
know.
If one surgeon is significantly more successful at performing a
certain procedure than another surgeon, shouldn't the consumer have
access to this information?
If it's my son or daughter having this procedure done, I know I 
would like to know
At a recent visit to one of the largest hospitals in my district, 
an administrator stated that one of their biggest concerns was that 
90% of their "self-pay" patients, which are mainly patients without 
health insurance, never paid for the services they received.
Of course, this isn't too surprising given the fact that self-pay 
patients are often forced to pay between 2 and 4 times more for the 
same procedure than a patient with health insurance.
It simply doesn't make any sense to charge people that cannot 
afford health insurance or choose to pay for some procedures 
out-of-pocket so much more for the same procedure.
The uninsured deserve to know what prices they are going to pay, and 
I believe that if these patients had access to meaningful and 
understandable pricing and quality information, providers would no 
longer be able to get away with this injustice.
As we have seen in so many other areas, empowered consumers increased 
the level of quality while driving out inefficiencies and waste.
And it is my hope that we can do the same thing for healthcare.
Again, I welcome our witnesses and thank them for their participation.  
I now recognize my friend from Ohio, Mr. Brown, for five minutes for 
his opening statement.

	Mr. Waxman.  Mr. Chairman, since Mr. Brown may yet arrive 
	would you give me the three minutes rather than five minutes?
	Mr. Deal.  Certainly.
	Mr. Waxman.  This hearing is a worthwhile one to have.  
	Transparency in prices is good.  In some cases, particularly 
	in the area of drug prices, it can be a benefit to the 
	consumer.  But no one should think that the topic we are 
	addressing today comes to grips with the serious issues facing
	our health care system.  Transparency in prices doesn't 
	provide health insurance coverage for the nearly 46 million 
	Americans that are uninsured in this country today.  
	Transparency in prices is no substitute for real coverage.  
	Transparency in prices doesn't give the individual the ability 
	to negotiate in any effective way.  Individuals need the 
	negotiating power of a group to secure good prices.  Employer
	sponsored group health insurance can negotiate meaningful 
	discounts, individuals cannot.
	And transparency in prices does not make them lower.  We only 
	need to look at the recent reports of the pricing policy of 
	Genentech for its cancer drug Avastan.  Why the $100,000 price 
	and dramatic increase this year?  Because a manufacturer 
	decided it could get away with it.  That is the reason, pure 
	and simple.  So transparency of price is not going to help 
		that woman with breast cancer or the man dying of 
		lung cancer.  This is the kind of cost that won't be 
		effectively addressed unless someone who has strong 
		negotiating power enters the picture.  
	It is ironic that this Republican Congress turned its back on 
	giving the Secretary of HHS the authority to use the 
	negotiating power of 40 million Medicare beneficiaries to get 
	lower drug prices.  And it is equally ironic that the actual 
	deals and rebates that the private insurance plans are 
	negotiating with the drug companies are not made available to 
	the public.  Instead, we get a list of prices that can be 
	changed by the plans at any point.
	So that just points out several concerns that we have got to 
	keep in mind when we hear of the value of transparency in 
	prices.  It is no substitute for real negotiation.  What 
	benefit it can provide is limited.  It only helps if it is 
	accurate, does not change, and is in useable form.  It does not 
	help if the information is so voluminous and confusing that 
	the average person cannot use it.  It does not help if it is 
	not related in a meaningful way to quality measures.  And it 
	certainly does not help if it is really an excuse to justify 
	putting more of the burden of the costs of the health care 
	system on the individual.  High deductible health plans are 
	exactly the wrong answer when people need affordable coverage.  
	Putting the individual out there on his own to negotiate 
	better deals from the health care system is exactly contrary 
	to what works.
	So I welcome transparency in prices so long as we all 
	understand that is an approach that offers some slight 
	advantage at the margin but it should never be confused with 
	an answer to the real problems of the high costs of health 
	care and of the millions of Americans who are uninsured or 
	underinsured in America today.
	Mr. Deal.  I thank the gentleman.
	Mr. Bilirakis is recognized for an opening statement.
	Mr. Bilirakis.  Thank you, Mr. Chairman.
	How much does it cost?  That is the question we ask almost 
	daily.  Why?  Because we are smart consumers and want to know 
	that we are getting the most bang for our hard earned bucks.  
	This often does not apply, however, when talking about health 
	care costs.  Too many consumers have become oblivious as to 
	how much our health care actually costs.  We may know that 
	we have to pay a co-pay to visit the doctor or go to the 
	hospital but we do not know how much the tests they run or 
	surgeons they provide actually cost, or who really pays for 
	them.  In many cases, it is not because we do not want to 
	know, it is because pricing information is difficult to find 
	or not available at all.  I hope that is beginning to change.
	We will hear from our former colleague and House Speaker Newt 
	Gingrich in a few moments about how health savings accounts 
	in his words have unleashed the value driven American 
	consumer on the efficient health care market.  I agree with 
	Speaker Gingrich when he recently wrote that every American 
	has their right to know price and quality information before 
	making their health care purchases.  I am pleased that 
	Florida, led by Governor Jeb Bush, has been a national leader 
	when it comes to increasing transparency in health care 
	pricing.  My State has established a website at 
	Floridacomparecare.com which allows Floridians to research 
	prices for various medical procedures at State hospitals and 
	compare hospital to hospital patient outcomes in the State.  
	Florida's Attorney General Charlie Crist, and the State's 
	Agency for Health Care Administration, created a website at 
	Myfloridarx.com to help consumers shop for the lowest prices 
	in the area for prescription drugs.  This prescription drug 
	website provides pricing information on the 50 most commonly 
	used prescription drugs in Florida.
	Mr. Chairman, I am eager to hear today's witness and believe 
	giving consumers better information about their health care 
	costs can improve health care quality and lower prices.  I 
	look forward to working with you, Mr. Chairman, and members 
	of the committee as we determine how to better educate 
	consumers about their health care choices and the increased 
	transparency in health care costs.
	Thank you, Mr. Chairman.
	Mr. Deal.  I thank the gentleman. 
	Mr. Pallone is recognized.
	Mr. Pallone.  Thank you, Mr. Chairman.
	According to my Republican colleagues if consumers have a 
	greater financial stake in their health care and have access 
	to better pricing information, they will be magically 
	transformed into a Nation of health care bargain hunters that 
	will help bring runaway health care costs under control.  And 
	I have to tell you, Mr. Chairman, I just do not buy it.  I do 
	not think it works that way.  I made up a little chart over 
	here on the left which I am going to use during questions 
	which basically tries to point out that, you know, if you 
	think about what the Republicans said, they said, okay, I 
	am going to open up the Sunday paper, I am going to look at 
	an ad like that, you know, buy two stents get free same day 
	installation best buy and somehow, you know, it is as simple 
	as saying two stents for the price of one in order to figure 
	out how you are going to save costs.  And I just do not buy 
	it.  Again, I am going to talk about that later during 
	questions.
	But first of all, our Nation is nowhere near providing 
	patients with the pricing and quality information they need 
	or in the context that they can easily understand.  I 
	recently heard someone liken shopping for health care to 
	putting together a thousand piece jigsaw puzzle and it is 
	just that complicated.  And providing public access to a 
	hospital's charge master or price list I do not think 
	changes that.
	The second thing is who is going to want to buy a bargain 
	basement pacemaker or get a mammogram done cheaply?  When 
	it comes to their health, people do not want, they want the 
	best possible care available, not the cheapest care.  A man 
	who just had a heart attack is not going to shop around 
	before he goes to the emergency room.  Similarly, a woman 
	who has a lump in her breast is not going to wait so she 
	can search for the least costly biopsy.  These people want 
	to be treated for their illnesses as soon as possible.  
	Even if consumers had access to pricing information and 
	they were able to understand it and use it to shop around 
	for low cost health care, consumer directed health plans 
	would still do nothing to reign in out of control health 
	care costs.  That is because they do not address what is 
	really driving health care spending; providing care for 
	the elderly and people with chronic conditions.  What my 
	Republican colleagues suggest we force these people to 
	clip coupons and shop around for their care.  Just ask 
	all the seniors that had to shop for a Medicare 
	prescription drug plan how they would feel about doing 
	that every time they needed to see a doctor.  It would 
	be chaos.
	Now let us be honest about what is going on here.  The 
	truth of the matter is that consumer driven health plans 
	are not about empowering consumers to take control over 
	the health care nor is it about lowering prices.  It is 
	about shifting more health care costs onto the backs of 
	those who were the most sick and the least able to 
	afford it.  And I do not think we should be fooled.  The 
	Republicans in this hearing today and their rhetoric, I 
	think are trying to sell the American people a lemon.  
	And this idea of this brave new world of consumer 
	directed health care envisioned by my colleagues, I just 
	do not think exists.  It is not going to really result 
	in any price reductions.  
	Thank you, Mr. Chairman.
	Mr. Deal.  I thank the gentleman.
	We are pleased to have the Chairman of the full committee, 
	Mr. Barton and I recognize him at this time for an 
	opening statement.
	Chairman Barton.  Thank you, Mr. Chairman.
	I appreciate our panelists being here this morning.  I am 
	looking forward to hearing your testimony regarding the 
	transparency in our health care market.
	Unfortunately, the term health care market is an oxymoron 
	in this country.  Instead of a marketplace, we have a 
	system that prevents patients from seeing how much their 
	health care services actually cost.  The health care 
	system hides prices and it blurs quality and it is most 
	perverse.  The system treats the poorest like they were 
	the richest and charges them the very most.  
	I can tell you personally that the moments during which 
	a patient is not interested in learning the price of a 
	health care procedure.  I had a heart attack on December 
	the 15th.  When I was on the gurney in the emergency room 
	at George Washington Hospital, I was not real interested 
	in what the cost was.  I was interested in what the 
	quality was.  As it turned out, what they billed Blue 
	Cross Blue Shield was over $75,000.  I think it was worth 
	every penny of it but I do not know personally how much 
	they actually paid, but I think it was worth every penny 
	of it.  It is a true statement though that if I had asked 
	while I was in the emergency room what it was going to 
	cost for these lifesaving procedures, nobody could have 
	told me that was actually providing the treatment.  The 
	emergency room staff could not have told me, the doctor 
	who provided the surgery procedure could not have told 
	me, and quite frankly the hospital administrator could 
	not have told me.  And that is why health care costs are 
	different from virtually from every other economic 
	activity in our life.
	Most of us would never agree to let a mechanic repair our 
	car or have a plumber fix a leaky faucet without first 
	receiving at least an estimate of what those expected 
	costs would be.  At the same time as I have just pointed 
	out, we routinely seek treatment for vital health care 
	services with no information about the comparative costs 
	or the quality.  And the power of the system is such that 
	we never even think to ask.  
	I cannot think of another sector of our economy where 
	consumers have less to say about it or have less say.  By 
	limiting patient's access to comparative information, we 
	restrict competition and cripple the ability of market 
	forces to make health care more affordable.  Not 
	surprisingly, spending on health care has soared in this 
	country, but does anybody here feel like the quality of 
	the care has improved at the same rate as its cost?  We 
	deserve a better health care system which breaks through 
	the conspiracy of silence regarding health care prices and 
	quality.  Too often patients are charged amounts that 
	really do not accurately reflect real cost and rarely reflect 
	the rate that providers are paid by private health insurers.  
	These list charges should be shown the light of day to 
	highlight their impact on unsuspecting consumers.
	Uninsured individuals are sometimes charged the full amount 
	of these charges while insured individual can still be 
	effected by them if they go out of network or if your 
	insure base is negotiated rates off of the list price.  The 
	Oversight and Investigations Subcommittee of this committee 
	has done great work on this issue, and I would like to thank 
	Congressman Whitfield and Congressman Greenwood, the former 
	Subcommittee Chairman, for helping to bring to light some of 
	the problems that we are talking about today.
	We know that transparency in pricing does drive down the 
	cost everywhere else in our economy.  We have seen how 
	better access to prices has allowed customers to receive 
	lower prices for airline tickets, cars, and now even homes 
	in some of the markets around our country.  Price 
	transparency forces sellers to compete and allows purchasers 
	to negotiate better deals and save them more money.  With 
	increased transparency, consumers could examine pricing 
	information.  For example, to see that an arthroscopic 
	surgery procedure must cost $5,000 at one facility in 
	Florida, while the same procedure in another facility in 
	the same town is listed at $12,000.  Rather than trying 
	to regulate or restrict variations, consumers could simply 
	be given the ability to see the differences and spend their 
	health care dollars as they think they should.  Maybe the 
	$13,000 procedure is worth it.  Maybe it features the 
	world's best surgeon.  Who knows, but maybe it does not.  
	If the patient does not see the value in spending the 
	extra money, he or she should have the choice on spending 
	less.  
	Some providers and insurance are already working towards 
	greater transparency.  We are going to hear from some of 
	them today about what they are doing to show their 
	enrollees the cost that they will pay at each provider in 
	their area.  These negotiated rates that insurers could 
	make transparent which would be most helpful to patients 
	who want to know what they will pay out of their own 
	pocket for a specific procedure.
	I want to applaud Congressman Lipinski who is here to 
	testify today and another Congressman who is not here, 
	Congressman Pete Sessions of Texas for their work on 
	legislation that would provide consumers with better 
	information about the cost and quality of their health 
	care services.  
	Mr. Chairman, thank you again and I look forward to the 
	hearing.
	[The prepared statement of Hon. Joe Barton follows:]

Prepared Statement of the Hon. Joe Barton, Chairman, Committee 
on Energy and Commerce
Good morning.  I'd like to welcome the distinguished witnesses 
we have before the Committee today, especially former Speaker 
of the House Newt Gingrich and my two fellow Texans on the 
panel.   I am looking forward to the hearing today regarding 
transparency in the health care market.
Unfortunately, the term "health care market" is an oxymoron in 
this country.  Instead of a marketplace, we have a system that 
prevents patients from seeing how much their healthcare 
services actually costs.  The health care system hides prices 
and blurs quality.  At its most perverse, the system treats 
the poorest like they were the richest and charges them the 
very most.  
Now, I can tell you that there are moments during which a 
patient is just not very interested in learning the price of a 
health care procedure.  When you need it to survive, issues of 
cost do not come to mind.  But it is also true that if you 
asked, nobody could tell you.   That's how health care is 
different from virtually every other economic activity in our 
lives.  Most of us would never agree to let a mechanic repair 
our car or have a plumber fix a leaky faucet without first 
receiving at least an estimate of what the expected costs 
would be.  At the same time, we routinely are expected to 
blindly seek treatment for vital health care services, with 
no information about the comparative cost or quality of these 
services.  And the power of the system is such that we never 
even think to ask, even when the circumstance does not involve 
an emergency.
I cannot think of another sector of our economy where consumers 
have less say.  By limiting patients' access to comparative 
information about prices and quality, we restrict competition 
and cripple the ability of market forces to make health care 
more affordable. Not surprisingly, our national spending on 
health care has soared, but does anybody here feel like the 
quality of their care has improved at the same rate as its 
cost?
We deserve a better health care system, which breaks through 
the conspiracy of silence regarding health care prices and 
quality.  Too often, patients are charged amounts that do not 
accurately measure real costs and rarely reflect the rates 
these providers are paid by private health insurers.  These 
list charges should be shown the light of day, to highlight 
their impact on unsuspecting consumers.  Uninsured 
individuals are sometimes charged the full amount of these 
charges, while insured individuals can still be affected by 
them if they go out of network or if their insurer bases 
their negotiated rates off of the list price.
Our Oversight and Investigations Subcommittee has done great 
work on this issue.  I want to applaud Chairman Whitfield 
and former Congressman Jim Greenwood for helping bring to 
light the great problems caused by a lack of transparency 
in hospital pricing.
We already know that transparency in pricing drives down the 
cost everywhere else in our economic lives.  We have seen how 
better access to prices has allowed customers to receive much 
lower prices for airline tickets, cars and now even homes in 
some markets.  Price transparency forces sellers to compete 
and allows purchasers to negotiate better deals that save 
them more money.  
With increased transparency, consumers could examine pricing 
information and, for example, see that an arthroscopic surgery 
procedure would cost $5,204 at one facility in Florida, while 
this same surgery in another facility in the same town is 
listed at $12,926.  Rather than trying to regulate or restrict 
these variations, consumers could simply be given the ability 
to see these differences and spend their health care dollars 
accordingly.   Maybe the $13,000 procedure features the world's 
best surgeon and mints on your pillow every evening, but 
maybe it doesn't.   If the patient does not see value in 
spending the extra $7,000, he should have the choice of s
pending less.  That's how competition works, and it seems to 
work everywhere but the hospital. 
Some providers and insurers are already working towards greater 
transparency.  I know we are going to hear from one health 
plan today about what they are doing to show their enrollees 
the costs they will pay at each provider in their area.  In 
many cases, it is these negotiated rates that insurers could 
make transparent, which would be most helpful to patients who 
just want to know what they will pay out of their own pocket 
for a specific procedure or office visit.  I also want to 
applaud Congressmen Dan Lipinski and my fellow Texan, Pete 
Sessions for their work on legislation that would provide 
consumers with better information about the cost and quality of 
their healthcare services.
I've said it many times, but free markets work, and it's 
something I think the health care sector needs badly.  Nobody's 
interested in turning the hospital into the health care 
supermarket, but when you're charged $50 for a mucus recovery 
system that turns out to be a box of Kleenex, something's wrong.  
Greater transparency is important, both to control the growth of 
costs and eliminate inefficiencies, but also to get patients to 
take an interest in the cost-effectiveness of their care.  
Thank you Chairman Deal for holding this important hearing 
today, and I look forward to hearing from our witnesses on this 
subject.  

	Mr. Deal.  I thank the gentleman.
	I know recognize the Ranking Member of the Subcommittee 
	on Health, Mr. Brown, for an opening statement.
	Mr. Brown.  Thank you, Mr. Chairman.
	Thanks to our witnesses for joining us today.  I commend 
	our guests and colleagues, Mr. Lipinski and Mr. Emanuel 
	and other members of both sides of the isle for their 
	efforts to increase the information available to 
	patients.  Patients should pay a fair price for health 
	care and that accurate information on price quality and 
	effectiveness can in fact be empowering.  I agree that 
	no one least of all the uninsured should pay inflated 
	prices for hospital care or any other health care.
	There is an article in Monday's Congressional Quarterly 
	about a letter our colleague Bill Thomas, sent to Health 
	and Human Services Inspector General chastising that 
	office for failing to calculate "an excessive level of 
	charges" for hospitals and medical equipment suppliers.  
	The goal Mr. Thomas described is to establish a standard 
	price for each hospital service and piece of medical 
	equipment.  And providers who charge more than that price 
	will be excluded from participation in Medicare and other 
	programs.  He called that scheme a powerful economic 
	incentive, I call it price controls.  Mr. Thomas went 
	on to say that absent such a benchmark pricing system 
	of "a broad transparent pricing initiative that 
	concludes hospitals will fail before it starts."  I am 
	not questioning his logic or his goal, I am questioning 
	that it is right to set prices for hospitals and wrong 
	to negotiate prices for prescription drugs.  Somehow it 
	is okay to send small medical suppliers into bankruptcy 
	unless they reduce their prices, but it is un-American 
	to question why U.S. drug prices are two to five times 
	higher than prices in other rich countries.
	The pharmacies in our country could safely import 
	medicine from these countries which would stimulate price 
	competition.  The Federal government could negotiate for 
	reasonable drug prices forcing drug makers to strike 
	harder bargains with other countries instead of gouging 
	U.S. consumers.  We can pass Mr. Emanuel's legislation 
	and shed some light on the nebulous link between the 
	price that drug makers charge and the true cost of their 
	products.  But the Bush Administration and Republican 
	leaders in Congress do not take kindly to initiatives 
	that take aim at the brand name drug industry, nor do 
	they have any interest in going after the insurance 
	companies.  According to Health Affairs, 20 percent of 
	health care costs are associated with insurance, 
	administrative, and daily functions.  Maybe if we had 
	transparency for insurers we could get those costs under 
	control.
	There is one thing you can say about the current crop of 
	Republican leaders whether in Congress or in the White 
	House.  You can say that they are loyal to their friends, 
	particularly the ones with deep pockets.  They are all 
	for posting hospital prices and encouraging consumers 
	to comparison shop.  They are all for keeping hospitals 
	and other providers out of Medicare unless they agree 
	to the government price, but they will not hold the 
	drug makers accountable for treating U.S. consumers, 
	U.S. businesses, and the U.S. Government like a piggy 
	bank.  Why the double standard?  My guess has something 
	to do with political ties and dollar signs.  
	The two health care sectors are largely responsible for 
	the dramatic increase in health care costs; hospital 
	services, prescription drugs.  We should not treat one 
	like a sinner and the other like a saint.  One more 
	thought on transparent, accurate information is good, 	
	but all the information in the world will not shrink a 
	$5,000 deductible.  Price competition is good but the 
	best price in the world will not transform health 
	savings accounts into a pro-consumer initiative.  HSAs 
	are tethered to high deductible insurance.  High 
	deductible coverage shifts major costs onto consumers.  
	If you have to spend $2,000 up front, your insurer is 
	probably pocketing your premium and paying out nothing.  
	Evidence shows that for many people, having a high 
	deductible policy is the same as having no insurance at 
	all.  People on these policies have similar problems 
	accessing and delaying care as those without insurance.
	I was visiting a plant near my district yesterday where 
	people who work there 25 years are making $14 an hour 
	and they have a $2,000 deductible health insurance 
	plan.  They all agree, we just never go to the doctor 
	or hospital unless we are just deathly ill, of course.  
	There is a link to these poorly conceived policies and 
	increased consumer medical debt.  Whether your 
	deductible is in your pocket or in your HSA, it is 
	still your money, it is still replacing dollars that 
	used to be paid by insurance.  Transparency is good, 
	so is real insurance.
	Thank you, Mr. Chairman.
	Mr. Deal.  I thank the gentleman.
	I recognize Mr. Shimkus at this time for an opening 
	statement.
	Mr. Shimkus.  Thank you, Mr. Chairman.
	And just for the benefit of our panelists, I will not 
	go into the big debate and rebut, but I would just say 
	that transparency is important; competition, individual 
	choices, whether it is a full line of insurance of 
	associated health plans or health savings accounts.  I 
	mean the more choices the better in getting the consumer 
	involved.
	By the way, I am taking this time to welcome my Illinois 
	colleagues.  First as was mentioned earlier, Mr. Lipinski 
	has a bill along with a similar bill by Pete Sessions, 
	that would require the disclosure of hospital and 
	ambulatory surgery care center pricing.  And obviously, 
	I am interested in hearing how he proposes that helps 
	in this price disclosure debate and I am glad that he is 
	here.  I am assuming he will be joined by my other 
	Illinois colleague, Mr. Emanuel, and I am sure he is going 
	to thank us for the Deficit Reduction Act and the fact 
	that we have included the price disclosure on A&P prices 
	which he has requested and which is part of his bill, so 
	I think he will come thanking the Republican Congress and 
	the Deficit Reduction Act, and I look forward to hearing 
	his testimony.
	With that, Mr. Chairman, I yield back my time.
	Mr. Deal.  I thank the gentleman.
	Ms. Capps is recognized for an opening statement.
	Ms. Capps.  I thank you, Mr. Chairman and thank you for 
	holding this hearing today, for each of our witnesses for 
	being here especially our colleagues in Congress.
	I can tell even before we get to your testimony that there 
	is a difference in this room between those who believe that 
	health care is simply a commodity that can be bought and 
	sold, and those of us who believe it is an essential service 
	with the goals of quality and access.
	I wish we were here to discuss other ways to expand health 
	coverage to the growing number of uninsured in our country.  
	But when it comes to health care, transparency of cost, as 
	big as it is, will not necessarily result in patients 
	receiving the best quality of care.  And ensuring that 
	patients receive the best quality of care has to be our 	
	primary objective.  Making costs more transparent so that 
	Medicare, Medicaid, the VA, and insurance companies can 
	negotiate more appropriate rates of reimbursement makes 
	sense, however, encouraging individuals to participate 
	in health savings accounts and determining their 
	obtainment of health care based primarily on prices could 
	be a disaster for patients' health.  We can recall the 
	study conducted by Employee Benefit and Research Institute 
	which found that individuals participating in HSAs who 
	earned under $50,000 per year are more likely to avoid or 
	delay necessary medical procedures.  If low-income people 
	are forced to bear greater cost sharing and they cannot 
	afford it, we can expect to see people foregoing 
	inexpensive primary care, ending up in the hospital with 
	expensive care once the condition has worsened.  This will 
	perpetuate a vicious cycle whereby patients will be left 
	picking up the tab for expensive emergency and acute care 
	because they were encouraged to spend less in the first 
	place.
	Individuals are less likely to consider costs in emergency 
	situations that require high priced care.  When emergencies 
	arise, a patient's only concern should be accessing care as 
	quickly as possible.  Every American deserves to know that 
	he or she can get the health care services they may require.  
	Promoting plans that may discourage preventive and primary 
	care are leaving low-income and sicker patients to pay 
	higher costs.  It will not result in the best possible 
	quality care for our country.  It is unrealistic to conduct 
	health care that way.  It is also unrealistic to compare 
	choosing your health care provider like you choose a car or 
	television set.  When lives are at stake, there is no time 
	for price shopping.  And if someone is incapacitated, they 
	certainly do not have a choice in the matter.  But instead 
	of worrying about worst case scenarios, let us try to prevent 
	them by reducing the number of uninsured with the goal being 
	that everyone have access to primary and preventative care.
	I yield back the balance of my time.
	Mr. Deal.  I thank the gentlelady.
	I recognize Dr. Burgess for an opening statement.
	Mr. Burgess.  Thank you, Mr. Chairman.  And I too want to 
	thank you for convening this panel today.  We are very 
	fortunate today in that we have two Texans on the panel, 
	Dr. Goodman who is the Patron Saint of Patient Power, the 
	book 	that he wrote many years ago, and Mr. Gedwed from 
	my backyard 	down in North Richland Hills, Texas, who 
	I will speak a 
	little bit more of later on.
	I came to Congress having owned a medical savings account 
	for five years before I arrived here.  I am a believer in 
	medical savings accounts.  When patients would ask me, gee, 
	doctor, you always complain about HMOs and insurance 
	companies, what would you recommend, and I never hesitated, 
	I said, I would get a medical savings account.  I made it 
	available for every physician and non-physician staff member 
	in my office.  At that time, we numbered about 45.  Only 
	about five of us took it, but those of us who took it over 
	the years saw the dollars in that account grow and it made 
	me a believer in the private ownership of Social Security 
	accounts when we had that discussion up here last year.  
	The number one things that drives me on every piece of 
	legislation that I look at and every piece of legislation 
	that I have hoped for that deals with health care or whether
	or not I cosponsor a bill has to do with affordability.  We 
	were told back in medical school that there are three things 
	people look for in health care; affordability, access, and 
	quality.  And you can only have two at a time.  Taking that 
	to heart, I am only going to focus on affordability during my 
	congressional tenure however long that is because I believe 
	that the American medical system does provide quality care 
	and I trust it to continue to do so and I believe we will 
	increase access by increasing affordability.
	The uninsured are not uninsured by choice, they are 
	uninsured because they cannot afford the $9,500 insurance 
	premium that we require them to pay because of the all the 
	mandates that we put on health insurance.  We need to take 
	a minute and think about the phenomena known as specialty 
	hospitals.  Specialty hospitals have a mechanism at their 
	disposal for reducing the cost of care by increasing 
	competition, increasing the quality of care through 
	communities, but we do have to be careful about not running 
	out the community hospital while the specialty hospitals 
	increase.
	We also have to recognize that there is a dark side to 
	transparency in the health care market.  Opacity exists not 
	because people like opacity, but because it brings value to 
	the system.  And as long as we require the cross subsidization 
	of our Medicare and Medicaid programs, how is the private 
	sector going to make up that difference?  There is going to be 
	a need for opacity in the system so we need to look at that.  
	Our Chairman brought up the issue about the mechanic and you 
	do not go to the mechanic and leave your car without knowing 
	what it is going to cost.  But I would also submit to you the 
	Government would never go to the mechanic shop and say since 
	it is up on the rack anyway, we will pay for the brake job but 
	the muffler and changing the transmission fluid are bundled in 
	and those are just included in the cost of the brake job.  We 
	see this every day in the Medicare system in this country.
	We do want to be careful not to disrupt what is already there 
	and working and again, Mr. Gedwed, from my neck of the woods 
	has a very valuable product that is proprietary, but he has 
	assembled that product from public data that is readily 
	available.  	I understand he has data on my practice 
	performance.  I hope it is satisfactory.  I look forward to 
	learning that today.  I look forward to hearing the rest of 
	our panel members.  
	Thank you, Mr. Chairman, I will yield back.
	Mr. Deal.  I thank the gentleman.
	We are pleased to have the Ranking Member of the full 
	committee with us and I will recognize Mr. Dingell at this 
	time for an opening statement.
	Mr. Dingell.  Mr. Chairman, I thank you for your courtesy and 
	I thank you for holding this hearing on price transparency.
	I want to welcome my two colleagues, Mr. Lipinski and 
	Mr. Emanuel, thank you for being here.
	I want to comment about this matter of disclosing prices.  It 
	is a good thing, particularly if it is extended to prices on 
	pharmaceuticals and for health insurance companies.  I have 
	less hope of that happening than I do for other things.  The 
	hope is that the consumers will know how much their health 
	care costs then they will then be able to shop around for 
	the 	best deal and therefore reduce the overall cost of 
	health care; 	a wonderful hope.
	That is the market.  How medical care is currently 
	administered 	and delivered, there is no guarantee that 
	it will bring down health care costs.  It has never been 
	so as it is now administered, and if that process continues 
	as it is, it probably never will, unless extraordinary 
	changes are made.  This is a gross misconception.  Health 
	care does not work like a trip to the grocery store or to 
	buy a sink.  You do not always know what items you need or 
	even what items are available.  And more often than not, 
	someone else such as your physician is by necessity 
	selecting the items that go into your shopping cart and 
	also addressing the question of prices.  
	Transparency is not enough.  In addition to prices, 
	consumers must know about quality.  Today's health care 
	systems are a long way from having the infrastructure to 
	support reasonable assessments and reasonable comparisons 
	of quality.  We need to encourage collaboration to promote 
	the development of quality measures and studies of the 
	comparative effectiveness of different medicines and 
	treatments.  Then we need to figure out how best to 
	communicate this often complex information to those who are 
	frightened and off times uninformed people who are in a 
	state of a little desperation.
	Of course the question we should ask is why now are we 
	seeking to turn people out on their own in the health care 
	market?  Is an individual really going to be able to 
	negotiating anywhere near as good a discount as an entity 
	negotiated on behalf of tens of thousands of individuals?  
	If an individual can, why are my Republican colleagues so 
	intent on harnessing the power of the group to get better 
	discounts through association health plans?
	Finally, a central tenet of this consumer driven philosophy 
	is shifting more financial responsibility onto families, 
	passing the buck for the hospital bed down the line through 
	high deductible health care plans.  American families are 
	already burdened by out of pocket medical expenses.  
	Sometimes they are terrifying in size and scope.  More than 
	one in five people with chronic conditions live in 
	families with problems paying their medical bills.  And 
	research shows that the medical bill problems are more common 
	amongst those in insurance with higher deductibles.  Asking 
	people to pay more does not necessarily produce better 
	outcomes.  It can, and frequently does, produce vastly worse.  
	In fact, it has been shown to have a negative effect on care, 
	most significantly for those who are of low-income or 
	chronically ill.  The end result is people skipping or 
	delaying care.  And the one remarkable thing about this is 
	it results in much more costly treatment later and much 
	larger costs to all concerned.  
	To conclude, more price transparency in the American health 
	care system is a good thing but we should not delude 
	ourselves into thinking it is a panacea for our Nation's 
	health care costs or for the problems of the uninsured.  
	I would note, speaking on the subject of transparency, that 
	I have been having many meetings with my constituents 
	lately on these kinds of subjects.  I have been asked not 
	once about price transparency.  Many have asked me about 
	the continuing and serious problems of the selection and 
	other matters of Medicare Part D drug benefits.  People 
	are confused.  People are outraged.  People feel that they 
	cannot come to a sensible or workable conclusion and that 
	there is no place that they can get that kind of information.  
	So I hope my friends in the Majority will find time in the 
	coming weeks to allow the Democrats to have the additional 
	round of hearings on Part D that we are entitled to under 
	the rules of the House which we have requested.  
	I thank you, Mr. Chairman.
	Mr. Deal.  I thank the gentleman.
	Ms. Bono is recognized for an opening statement.
	Ms. Bono.  Thank you, Mr. Chairman.
	I just would like to thank our panelists and waive my 
	opening statement.
	[The prepared statement of Hon. Mary Bono follows:]

Prepared Statement of the Hon. Mary Bono, A Representative in 
Congress from the State of California

Chairman Deal and Ranking Member Brown, I would like to take this 
opportunity to thank you for allowing a hearing on this important 
issue.  It is critical that we evaluate how to increase transparency 
in our healthcare market.  Improved transparency will improve the 
costs and quality of healthcare services.  
A recent Wall Street Journal article pointed out that it is difficult 
to enlist consumers in the effort to reduce healthcare costs if they 
don't know what those costs are.  Simply put, informed consumers 
make the best decisions and informed consumers need information.  
The public has a right to know price and quality information when 
making decisions and what decision could be more important than 
choosing life sustaining and life saving medical services?
The healthcare industry should be centered on the consumer.  Consumers 
rely on pricing and quality information to make intelligent and 
cost-effective decisions.   
There are an estimated 45 million uninsured Americans, seven million 
of which reside in my home state of California.  The uninsured are 
frequently victims of outrageous price gouging and, even worse, are 
generally unaware of the extreme prices that they will be forced to 
pay in the coming weeks.  This is not right and it is simply not fair.  
I believe that increased transparency has an important role to play 
in creating a more level playing field for those who seek medical 
services.  I also believe that it is an important step in establishing 
and maintaining a healthcare system that is cost-effective, efficient 
and accessible.
I look forward to hearing from our witnesses today as to what their 
policy recommendations are and how we can continue to move towards 
such a system.
Thank you Mr. Chairman and I yield back the remainder of my time. 

	Mr. Deal.  I thank the gentlelady.
	Mr. Allen is recognized for an opening statement.
	Mr. Allen.  Thank you, Mr. Chairman.
	I appreciate the importance of this hearing of providing 
	consumers with better information about their health care 
	costs.  I think based on the conversation we have had 
	already it is pretty clear that the information about quality 
	is probably more important to a great many people.  
	I do question the underlying assumption of this hearing which 
	is that if patients can easily obtain the price of different 
	health care services they will then shop around for the least 
	expensive care.  Chairman Barton made it quite clear that 
	when he had his heart attack that was not foremost in his 
	mind and it is not likely to be foremost in the minds of 
	others who have a serious health condition.
	It is important that we deal with this system in all of its 
	complexity.  We mentioned a couple of things.  We know that 
	the health care costs are driven largely by people who have 
	two or more chronic conditions and the treatment of that, 
	those conditions, can be very expensive.  We know that the 
	increase in health care costs is driven largely by developing 
	technologies and we know that compared to other countries, 
	our system is much more expensive because of the 
	administrative costs that come with a complicated private 
	insurance system that is much more complicated and much more 
	expensive than other countries have.  But within the system 
	itself there are also complexities.
	Uma Rinehart has laid out I believe a compelling argument 
	that if you combine HSAs with high deductible health plans, 
	that shifts costs within the system or it shifts the burden 
	within the system, within the health care system.  
	Particularly it shifts costs from wealthier people to poorer 
	people and it shifts costs from healthier people to sicker 
	people.  And that is something that is, that is a direction 
	that consumer driven health care will take us--HSAs we saw 
	just recently articles saying that 2 million people so far 
	have taken out HSAs in this country but only 1 million have 
	put any money into them.  And the bottom line is if you are 
	relatively wealthy in this society, you can set up an HSA, 
	you can put money into that kind of account, and as 
	Dr. Burgess said and others I will admit it works for 
	people.  But it does not work for people who cannot afford 
	health insurance today.  And it does not reduce the overall 
	cost of the system.  
	One closing comment, when I first ran for Congress, I went 
	to the head of the main medical center and he said well 
	think of the health care system as being 14 percent of our 
	GDP, a giant pool of money and every player in the system 
	is getting a certain amount of money out of that pool and 
	now he said just you try to change it.  And that is the 
	complexity.  That is the difficulty.  We ought to be 
	looking at those things that will reduce system costs, 
	not simply shift the cost of health care within the system 
	to those who can least afford it and to those who are the 
	sickest.
	I yield back the balance of my time.
	Mr. Deal.  I thank the gentleman.
	Ms. Baldwin is recognized at this time for an opening 
	statement.
	Ms. Baldwin.  Thank you, Mr. Chairman and I thank the 
	witnesses.
	Like my colleagues, I support increased price transparency.  
	And I think that price transparency efforts we are 
	discussing today should go hand in hand with increased 
	reporting of quality measures.  We certainly do not want 
	to encourage people to simply seek out the cheapest health 
	care if that means sacrificing quality to do so.
	In my home State of Wisconsin there has been a number of 
	exciting efforts on both the price and quality reporting 
	front.  The Wisconsin Hospital Association has been a 
	leader in this effort.  They have developed two systems; 
	one that reports on quality and the other that reports 
	on charges and this information is now available on line.  
	The Wisconsin Collaborative for Healthcare Quality has 
	initiated a similar system that goes one step further.  
	It combines both quality and pricing data in the same 
	reporting system so consumers can look on one chart to 
	see where a given hospital would fall on both the quality 
	and price spectrum.
	In order to truly educate consumers, we need to ensure 
	that they are able to access the full picture.  Consumers 
	need to know about where they can get the best health care 
	at the most affordable price.  And in many aspects, the 
	health care prices must be a part of this, including 
	prescription drug prices.  So our efforts regarding 
	increased transparency must focus on both of these pieces.  
	But I do think it is important to keep in mind that 
	increased health care transparency has limitations as many 
	of my colleagues have pointed out.  Knowing that a certain 
	procedure costs $500 in one setting and $625 in another 
	does little to help a family that has no health insurance 
	and no spare resources to pay the price.  Comparison 
	shopping only works if you have the financial comfort to 
	afford the purchase and the time and ability to investigate 
	the options.  
	Similarly, I am concerned that proposal is such as health 
	savings accounts which rely heavily on increased price 
	transparency would predominately benefit the healthy and 
	the wealthy in our society.  Having a health savings 
	account is not going to help a family who cannot afford to 
	put money into their account.  Instead, HSAs will only 
	serve to accelerate the erosion of our already crumbling 
	health care system by causing more employers to switch 
	from comprehensive health care coverage to high deductible 
	HSAs, weakening the risk pooling system that we have and 
	making comprehensive health care coverage even harder to 
	obtain in our country.
	Thank you, Mr. Chairman.
	Mr. Deal.  I thank the gentlelady.  
	Mr. Green is recognized for an opening statement.
	Mr. Green.  Thank you, Mr. Chairman.
	I would like to welcome my colleagues on both sides of the 
	aisle.  And I support like all we have heard the efforts 
	to provide additional transparency in the health 
	care system to allow consumers and medical professionals 
	and policymakers the insight into the cost of health care.  
	But it is clearly the Administration's push for pricing 
	transparency as part of the larger effort to promote 
	health savings accounts and I would hope we can support 
	price transparency without supporting health savings 
	accounts.  Now that health savings accounts are not part 
	of the problem, the solution to deal with the lack of 
	health care coverage, but I do not think it covers 
	anywhere near the number of people that they think it 
	would be.  Because similarly not only with the increased 
	health care costs but also the burden for negotiating 
	their health care with the provider.
	And I know, like our Chairman and all of us, when we go 
	to a physician or a hospital specifically on an emergency 
	basis instead of being able to say by the way I am 
	going to save $50 by going to this one instead of that 
	other one.  And I believe pricing information should be 
	available, but this information alone will not help 
	consumers make better decisions.  Consumers also need 
	information about the quality of the care, the delivered 
	products.  And I know there has been an effort and I see 
	that at least on the hospital side.  So maybe we need to
	see both consumer information on pricing and also the 
	quality as it is rated, otherwise consumers are likely to 
	use the cheapest health care which may or may not always 
	be the best.  It is also practical to expect consumers 
	to shop around.  As I said for example, a pregnant woman 
	has months maybe to make a decision about who is going to 
	provide her maternity care and can take into account 
	the many factors but a parent with a child that needs 
	an emergency surgery may not be able to.  Getting the 
	child the health care quickly is the most important 
	factor in the parent's decision process.  
	The pricing transparency as part of the consumer directed 
	health care is supposed to lower health care costs.  We 
	must also ask ourselves lowered at what price?  If a 
	50-year-old with an HSA and a high deductible health plan 
	knows the cost of a colostomy yet forgoes the procedure 
	because of those cost implications, is that consumer 
	really getting better health care?  No, in fact, I think 
	that is what we have seen from HSAs.  People will 
	postpone some of the easier things until they actually 
	have to go and have the catastrophic and get to that 
	$5,000 amount.
	So that, Mr. Chairman, again, I think we can support 
	price transparency and better consumer information 
	without necessarily signing on to HSAs panacea for our 
	health care crisis.
	Thank you.
	Mr. Deal.  I thank the gentleman.
	Mr. Pitts is recognized for an opening statement.  I 
	thank the gentleman.
	Well we will proceed.  I believe we have covered everyone's 
	opening statements here.  We will proceed with our very 
	distinguished members of our panel.  We are pleased to have 
	two of our colleagues who are here to testify and I will 
	recognize these two gentlemen first, and then we will proceed 
	after that to recognize the other remaining members of the 
	panel.  First of all, we are pleased to have Mr. Daniel 
	Lipinski who is here, a Member of our current congressional 
	delegation from Illinois and his colleague also, Mr. Rahm 
	Emanuel from Illinois is here as well.  We will begin with 
	you two gentlemen and Mr. Lipinski I will recognize you 
	first for five minutes.

STATEMENTS OF HON. DANIEL LIPINSKI, A REPRESENTATIVE IN CONGRESS FROM 
THE STATE OF ILLINOIS; AND HON. RAHM EMANUEL, A REPRESENTATIVE IN 
CONGRESS FROM THE STATE OF ILLINOIS

Mr. Lipinski.  Mr. Chairman, I would like to thank you and Ranking 
Member Brown who looks a lot like Mr. Pallone right now, and all the 
members of the Health Subcommittee for giving me the opportunity to 
speak about H.R. 3139, the Hospital Price Reporting and Disclosure 
Act, which I introduced last year with Representative Bob Inglis of 
South Carolina.
	As health care costs continue to rise, families are 
	struggling more and more to figure out how to pay for the 
	medical bills.  This problem is made worse by the fact that 
	there is no way to know how much you are going to be charged 
	when you check into the hospital for care.  Lack of 
	information prevents families from making well-informed 
	cost-effective choices.  That is why I introduced this 
	bipartisan bill to require every hospital to give Americans 
	clear, concise information about what they charge for common 
	procedures and medications.
	Many of us would never consider getting our car repaired 
	without first getting an estimate.  Well this is exactly 
	what we do when we go into a hospital for health care.  
	Two years ago, I was involved in a serious bike accident, a 
	bicycle not a motorbike that has been sometimes reported.  
	But in the sense that I broke my hip which was certainly the 
	biggest shock but as anyone who has gone into a hospital has 
	had happen to them, I got a second shock when I got the bill.  
	Just to give you one small example, I was charged $5 for 
	this tiny packet of ointment.  When you go to any pharmacy 
	and get the same thing 32 times the size for $7.  Now this 
	and the other costs charged to me on the itemized bill lead 
	me to the question why can't we know what hospitals charge 
	before we get admitted to the hospital.  At that point, I 
	do what most people do.  I do a Google search to see if 
	anyone else was working on this problem.  I found that 
	California had just recently required hospitals to 
	disclose all the prices that they charge.  That is the 
	hospital's charge master.  Now this disclosure revealed a 
	big disparity between hospitals and what they charge for 
	the same procedures.  And actually one hospital cost $120 
	for the same chest X-ray another hospital costs $1,500.  
	At one hospital they would give you a Tylenol capsule for 
	free another hospital would charge you $7 for the same 
	capsule.  
	So last year, I introduced the Hospital Price Recording 
	and Disclosure Act, to make information available for all 
	hospitals across the country and give all Americans the 
	ability to make informed choices about where they seek 
	medical care.  This bill would require hospitals to report 
	twice a year to the Secretary of Health and Human 
	Services the average and median price that they charged 
	over the last six months for the 25 most commonly performed 
	in-patient procedures, 25 most common out-patient 
	procedures, and the 50 most used medications.  These prices 
	would then be posted on a user friendly website where 
	Americans could easily access them.  This type of 
	information would be simpler for the average person to 
	understand than if the entire dense charge master list 
	was provided.  
	Numerous States besides California have also taken recent 
	action on this issue.  My home State of Illinois has 
	passed legislation to require disclosure of prices for 
	both in-patient and out-patient procedures.  Florida, 
	Georgia, Ohio, and South Dakota have all passed similar 
	legislation.  Wisconsin, as Representative Baldwin's 
	talked about, has this type of information available on 
	a public easy access website and I highly recommend 
	that website.  At least two more States right now are 
	currently talking about this as they have legislation 
	pending on hospital price disclosure.  On a national 
	level, it was initially reported that the Administration 
	has discussed the proposal to have HHS implement and 
	oversee a voluntary program that publicizes the prices 
	health care providers charge for their services.  All 
	of these are a good start.  I believe Congress should 
	act to make price disclosure mandatory on a national 
	level. 
	Obviously price is not the only factor that a family 
	should take into account when making health care 
	choices.  Quality information is also critical and I 
	am happy that the Centers for Medicare and Medicaid 
	Services are making some of this quality information 
	available now, but much more is needed.  We must 
	always remember though that when seeking medical care
	the advice of professionals will always be essential 
	in making health care choices.  But these are not 
	reasons to oppose making hospital price information 
	available.  Price information is especially critical 
	to 46 million uninsured Americans.  A recent report 
	on 60 Minutes demonstrated the high impact that 
	undisclosed hospital prices have on uninsured 
	Americans.  While you work to get coverage for the 
	uninsured which is something that is very critical, 
	we should give them the information that will help 
	them to make more cost-effective health care choices.  
	This issue is not Democratic or Republican.  We no
	t only have bipartisan support for this bill in the 
	House, but a companion bill was introduced in the 
	Senate by Democrat Dick Durbin and Republicans 
	Jim DeMint and John Cornyn.  President Bush has also 
	stated his support for price transparency.  When I 
	am home in Illinois and I talk about this bill, they 
	call it one thing, common sense.  We expect to have 
	price information for every other purchase that we 
	make, why do we not have this information available 
	when we go into the hospital?  Because when it comes 
	to health care, information is good for you.  
	I would like to thank the Chairman for this 
	opportunity to testify and I look forward to working 
	on this issue in the future with the committee.  
	Thank you.
	[The prepared statement of Hon. Daniel Lipinski 
	follows:]

Prepared Statement of the Hon. Daniel Lipinski, A Representative 
in Congress from the State of Illinois

Mr. Chairman:
I would like to thank you, Ranking Member Brown, and all the 
members of the Health Subcommittee, for allowing me the 
opportunity to speak about healthcare price transparency, 
specifically, H.R. 3139, the Hospital Price Reporting and 
Disclosure Act, which I introduced with Representative Bob 
Inglis of South Carolina.  
As healthcare costs continue to rise, families are struggling 
more and more to figure out how to pay their medical bills.  
This problem is made worse by the fact that there is no way to 
know how much you will be charged when you go to a particular 
hospital for care.  Lack of information prevents families from 
making well-informed, cost-effective choices.  This is why I 
have introduced the Hospital Price Reporting and Disclosure 
Act, a bipartisan effort to require every hospital to give 
consumers clear, concise information about what they charge for 
common procedures and medications. 
Most of us would never consider getting our car repaired without 
first receiving an estimate of the charges, but this is exactly 
what we do when we need to go to a hospital for treatment.  
Two summers ago I was involved in a serious bicycle accident.  
Breaking my hip was certainly the most serious shock, but like 
anyone else who has experienced time in a hospital, I was hit 
with a second shock when I received the bill.  Just to give you 
one example, a tiny single-use packet of ointment was billed to 
me at almost five dollars.  If you walk down the street to any 
pharmacy you can get a tube 32 times the size for about seven 
dollars.  This led me to ask the question, "Why can't we know 
what hospitals charge before we are admitted?"  At that point 
I did what most people would do, conduct a Google search to 
see if anyone else was asking this question.  I found that the 
state of California had just recently required hospitals to 
disclose their entire price list - their "charge master."  
This disclosure revealed that there was a great disparity 
between California hospitals in what they charge for common 
procedures and medications.  One hospital charged $120 for a 
chest x-ray while another charged more than $1500.  And while 
a Tylenol capsule was free at one hospital another charged 
over 7 dollars for the same medicine.  
So last year I introduced The Hospital Price Reporting and 
Disclosure Act to make price information available for all 
hospitals across the country, and give all Americans the 
ability to make informed choices about where they seek medical 
care.  This bill would require hospitals to report twice a 
year to the Secretary of Health and Human Services (HHS) the 
price they charge for the twenty-five most commonly performed 
inpatient procedures, the twenty-five most common outpatient 
procedures, and the fifty most frequently administered 
medications.  These prices would then be posted on a 
user-friendly web site so that Americans could easily access 
this information.  Our bill does not require the disclosure 
of the entire charge master because the experience of 
Californians has suggested that the size and complexity of 
these lists make it difficult for the average person to 
find helpful information.  
Numerous states besides California have also taken recent 
action on this issue.  My home state of Illinois has passed 
legislation that provides for disclosure of prices charged 
by hospitals for both in-patient and out-patient procedures, 
and states like Wisconsin and Oregon already have this kind 
of information available to the public on easy to access 
websites.  I highly recommend the Wisconsin website 
(http://wipricepoint.org) to see how well this can be done.  
Obviously price is not the only factor that families should 
take into account when making health care choices.  Quality 
information is also critical, and I am happy that the 
Centers for Medicare and Medicaid Services (CMS) is beginning 
to make some quality measures available; more is certainly 
needed.  And the advice of health care professionals will 
always be essential when making care decisions.  But these 
are not reasons to oppose making price information available.
Price information is especially critical to the 46 million 
uninsured Americans. The recent report on 60 Minutes 
demonstrated the high impact that undisclosed hospital 
prices have on uninsured Americans.  While we work to get 
coverage for the uninsured, we should give them information 
that will help in their health care choices.  We expect to 
have price information for every other purchase that we make, 
why shouldn't we have the same when it comes to health care?
This is not a Democratic or a Republican bill.  We not only 
have bipartisan support in the House, but Senators Dick 
Durbin, Jim Demint, and John Cornyn introduced a companion 
bill in the Senate.  President Bush has also stated his 
support for price transparency and it's been reported that 
the Administration has discussed a proposal to have the 
Department of Health and Human Services implement and oversee 
a voluntary program that would publicize the prices healthcare 
providers charge for their services.  But when I'm home in 
Illinois talking to my constituents, they call this bill one 
thing - common sense.  Because when it comes to health care, 
information is good for you.  
I would like to thank the Chairman for the opportunity to 
speak on my legislation, and I look forward to hearing the 
testimony of the other witnesses.

	Mr. Deal.  I thank the gentleman.
	Mr. Emanuel, you are recognized for five minutes for 
	your presentation.
Mr. Emanuel.  Thank you, Mr. Chairman.  Thank you for this 
hearing.
	In the concept of transparency, I not only advocate 
	for legislation as I have done on the prescription 
	drug pricing and Medicaid Fraud Prevention Act--I also 
	practice it.  If you go to my website, you can see a 
	Costco in Chicago pricing for ten of the most common 
	drugs used by seniors and Costco in Toronto.  Now the 
	Costco in Toronto, and we update it every month, on 
	average is $1,200 cheaper for those same ten drugs, 
	same dosage, than they are at the Costco in Chicago.  
	And I want everybody in the Chicago area to know and 
	that is why I instituted it.  And remember it is 
	Costco which is a price competitive shopping area.  It 
	is the same ten drugs so we are comparing the same 
	drugs that seniors most commonly use--blood thinners, 
	arthritis, blood pressure, all types of medication.  
	And so I believe in the notion of transparency is 
	making people better shoppers and getting price 
	competition.
	That is also why I wrote a letter to the Secretary of 
	Health and Human Services asking them originally when 
	they put up on their website the pricing Medicare.gov 
	that they include the prices in Europe which they--I 
	know it is going to come as a shock to you, they did 
	not do but for everybody to know then about the 
	competition and what pricing was.  That is why I 
	believe in re-importation as a concept of allowing 
	people access and allowing competition and choice to 
	exist in the market and you can have price competition.  
	And I practice that at our office so people in Chicago, 
	the old Costco in Chicago and Costco in Toronto.  
	Toronto is an hour away and $1,200 cheaper for Chicago.
	Now I introduced this legislation, which my colleague 
	from Illinois, Congressman Shimkus said some of the 
	stuff was implemented in the budget reconciliation 
	but not all of it.  Today, Medicaid covers about a 
	third of the budget, a third of the cost of the 
	budgets for our State governments.  And we all know 
	they are going on a fast track to about half the State 
	budgets.  And one of the biggest price points in there, 
	if not the biggest, one of the driving factors is the 
	cost of prescription drugs.  And that is what we are 
	paying now.  I think about a third of the States right 
	now pay more for Medicaid than they do for access to 
	higher education.  And in short order that is what we 
	need for every State.  That is going to happen.  And 
	prescription drugs and the price of prescription drugs 
	is one of the driving factors there.
	So we introduced this to give both competition and 
	also as a way to fight fraud.  Now what we did last 
	year was halfway but not the full effort.  And what we 
	have to do is get all of the information, all of the 
	transparency there, not just the average manufacturing 
	price or the second, how you compute the average 
	manufacturing price.  Without that information, all 
	that information we will never know.  And in fact, in 
	2004, Schering-Plough settled with the Government for 
	$345 million on the issue of pricing and Medicaid.  
	There were also in 2003 Bayer, I think the exact price 
	was $257 million and GlaxoSmithKline for $86 million.  
	So in fact, fraud to taxpayers exists as it relates 
	to pricing prescription drugs through Medicaid and the 
	payments. 
	Lastly, we have to get the best prices out there.  So 
	although we have done certain things, we have to finish 
	the job as it relates to transparency, otherwise 
	taxpayers are going to continue to be paying for bills 
	they should not be paying and paying money they should 
	not be paying and we cannot have a position where 
	Medicaid is going to go from a third of our State budgets 
	up to half of our State budgets.  And all this information 
	would make our State governments and therefore our 
	taxpayers better buyers of prescription drugs.  We now 
	know there is a problem up there.  That is why we settled 
	these cases in the last two years and made millions of 
	dollars.  But how you compute the average manufacturing 
	price and the best prices is essential because right now 
	we are playing hide the ball with the prescription drug 
	companies and that is wrong.  Now we know there is a 
	problem here and we cannot do halfhearted efforts to get 
	all the pricing and all the information.  We would not 
	have addressed it in the budget reconciliation unless we 
	thought it was a problem and yet fraud is being committed 
	on taxpayers, and on Medicaid, and on the consumers and 
	yet we are not doing what we should be doing.  And all 
	we are asking for is the type of information to be 
	available.  And as Secretary Michael Leavitt said just 
	yesterday, people deserve to know, they have a right to 
	know the quality of care they are receiving and its cost.  
	And unless you know how you compute the average 
	manufacturing price and unless you know what the best 
	prices are available, we are never going to get the best 
	costs for our taxpayers and for the people who use 
	Medicaid, the most vulnerable in our society.  And these 
	costs are rising.
	And I know I am out of time so I want to thank you very 
	much for holding this hearing and hope that rather than 
	doing half of it as we did last year, we finish the job 
	this year when it comes to full transparency.
	Mr. Deal.  I want to thank both gentlemen for being with
	us and would invite you to join us on the dais if you 
	would choose to do so.
	Mr. Emanuel.  I am on my way to a Medicare event on the 
	issue of pricing.
	Mr. Deal.  Thank you for being here.  
	And Mr. Lipinski you have the same invitation to join us 
	if you would like or I understand you have other schedules 
	like most of us do.  But thank you both for being here.
	Mr. Lipinski.  Thank you.
	Mr. Deal.  It is my pleasure now to introduce the remaining 
	members of the panel and they are certainly distinguished 
	individuals.  First of all my former colleague from Georgia 
	and our Former Speaker of the House of Representatives, 
	the Honorable Newt Gingrich, we are pleased to have you 
	with us today.  Mr. William Gedwed who is the Chairman and 
	President and CEO of UICI from New Richland Hills, Texas 
	that I believe Mr. Burgess referred to earlier in his 
	statement; Mr. Paul Ginsburg who is President of the Center 
	for Studying Health System Change, pleased to have you as 
	well.  Dr. David MacDonald, President of Liberty Health 
	Group from Charlottesville, Virginia; Dr. Sara Collins, 
	Senior Program Officer, Future of Health Insurance of the 
	Commonwealth Fund from New York; Dr. John Goodman, President
	and CEO of the National Center for Policy Analysis from 
	Dallas, Texas; and Dr. Gerard Anderson, Johns Hopkins 
	Bloomberg School of Public Health and Health Policy and 
	Management from Baltimore.  Certainly a distinguished group 
	and Speaker Gingrich we will start with you.  

STATEMENTS OF THE HON. NEWT GINGRICH, FORMER SPEAKER OF THE HOUSE, 
FOUNDER, CENTER FOR HEALTH TRANSFORMATION; WILLIAM GEDWED, CHAIRMAN, 
PRESIDENT & CEO, UICI; PAUL B. GINSBURG, PRESIDENT, CENTER FOR 
STUDYING HEALTH SYSTEM CHANGE; DR. DAVID MACDONALD, PRESIDENT, 
LIBERTY HEALTH GROUP; DR. SARA R. COLLINS, SENIOR PROGRAM OFFICER, 
FUTURE HEALTH INSURANCE, THE COMMONWEALTH FUND; DR. JOHN GOODMAN,
PRESIDENT & CEO, NATIONAL CENTER FOR POLICY ANALYSIS; AND 
DR. GERARD F. ANDERSON, JOHNS HOPKINS BLOOMBERG SCHOOL OF PUBLIC 
HEALTH, HEALTH POLICY AND MANAGEMENT

	Mr. Gingrich.  Thank you, Mr. Chairman.
	I very much appreciate this hearing and the focus on the 
	public's right to know, to use Secretary Leavitt's language, 
	I might point out to the committee that 93 percent of the 
	country at least in one recent poll, said people should have 
	the right to know price and quality information before they 
	make decisions on health care.
	I would also point out that in terms of fraud, there is 
	dramatically less fraud in a place like McDonald's or UPS 
	or FedEx than there is in Medicaid because you have a 
	direct relationship between the buyer and the seller.  If 
	UPS or FedEx does not pick up your package, you do not 
	pay them.  And if they do not deliver the package, you 
	call because you know what is going on.  The New York Times 
	reported that in Medicaid in New York State there is an 
	estimated $4.4 billion a year in fraud, just in New York 
	alone.  And I think that is because the current system is 
	inherently impossible.  You cannot have a third party 
	payment model in which for example in New York they had 
	one dentist who applied for 982 procedures per day and got 
	paid.  The system is just simply hopeless.
	And so I want to start with, and Congressman Allen made a 
	point about, the complexity of the system and that is 
	exactly why the Austrian School of Economics emphasizes 
	markets.  Because the Austrian School looked at the fact 
	that if you hold all the decisions, and actually the 
	original story was they looked at the pricing of fish in 
	a pre-refrigerated world in Vienna and the fact that the 
	price dropped every 15 minutes all day and that different 
	people would come to buy fish at different times of the 
	day as a function of how wealthy they were or what they 
	were going to use the fish for.  And their conclusion was 
	that just in trying to price fish, the bureaucracy was 
	hopeless because it could never keep up with the changing 
	pattern of values and opportunities.  Now you apply this 
	to 15 or 18 percent of the economy and it is hopeless.
	I mean, I said this years ago and got in trouble but 
	I am going to repeat it.  The Centers for Medicaid and 
	Medicare Services is inherently a Soviet style command 
	bureaucracy.  It has 44,000 thousand pages of regulations.  
	It is impossible.  And if the Congress had simply found 
	the fraud in New York State, you would solve all of your 
	five year budget number without affecting anybody who 
	was delivering honest health care.  But you cannot find 
	it inside the current model.  George Rowe wrote the 
	perfect article in describing Gorbachev's crisis.  And 
	this says something that Von Misis and Hayek wrote about 
	70 and 100 years ago.  He said Gorbachev was a true 
	communist and he wanted to have Perestroika and Glasnost 
	to have an open, innovative communist.  And he said you 
	are either for markets or you are for bureaucracy.  But 
	to try to be for half and half is like asking the 
	citizens of your country for half of them to drive on 
	the right side of the road and half of them to drive on 
	the left side.  It is not possible.
	And that is the muddle we are in right now.  We pretend 
	we want a market oriented system.  We have a Medicare 
	system, a Medicaid system, a veteran system, a tri-care 
	system that are in fact command bureaucracies.  We have 
	private corporations that go out and buy huge quantities 
	of health insurance by a human resources department that 
	is a bureaucracy.  And then we wonder why you get all 
	these problems.  Let me give you a few examples.  The 
	current system is a hopeless mess.  I would argue if 
	you go to a market oriented system with real information, 
	you will both get better care and lower costs, in fact,	
	enough lower cost that I believe you could get to 
	100 percent insurance coverage with a savings.  That is 
	how big I think the waste and fraud is in the current 
	system.  And it is not the government one is better.  The 
	Florida Medicaid system, only 16 percent of the children 
	get dental screenings, only 4 percent of the women get 
	mammograms.  Government delivered health care has not 
	proven in this country to be a better system.  Look at 
	the Indian Health Service as an example.
	I think that Congresswoman Baldwin was right; you ought 
	to be looking at both quality and price.  I think that 
	is exactly right.  We will not have a 300 million payer 
	system with the savings out of the--by getting a better 
	system.  But let me give you a couple quick examples.  
	Those who oppose the right to choose by citizens refer 
	to emergencies and a $50 savings.  Both are erroneous.  
	Less than 1 percent of all the decisions in health care 
	are a function of emergencies.  More than 99 percent 
	are decisions about which you can make rational 
	decisions.  
	Second, the savings are radically greater than $50.  
	The Henry Ford Health System in Detroit went through a 
	model of putting the information about drugs on a PDA 
	so that doctors knew price as well as drug choice.  The 
	first year on a million dollar investment they saved 
	$3.5 million because doctors moved to less expensive 
	drugs.  You cannot put the congressional budget off.  
	It is a score there which is another issue.  You should 
	have an accurate scoring caucus because nobody at this 
	CBO can score marketplace behavior.  In fact, they do 
	not believe in it, they are a bureaucracy.  And so the 
	Henry Ford System invested $1 million and the first 
	year saved $3.5 million and saved three hours per nurse 
	per week of time not spent talking to pharmacists. 
	The second example, I would urge this committee to go 
	to myfloridarx.gov which Governor Jeb Bush developed 
	with great leadership from Alan Levine, the Commissioner 
	of Health.  They put in real pricing for the State of 
	Florida.  You put in your zip code, you put in the drug 
	you want to buy, in one instance which was in my 
	testimony which I have submitted for the record, in one 
	instance for the same drug in a 2 mile area you can pay 
	as much as $202 and as little as $131.  So in that one 
	transaction, we pass the $50 number that was mentioned 
	earlier by one of your colleagues.
	We believe that a Travelocity model which Med Impact
	has developed for us, that if you would force Medicare 
	to move to a Travelocity model of real time pricing for 
	real time choice, we think you would take 40 percent 
	out of the cost of drugs, and it would be cheaper than 
	Canada because theoretically the bigger markets should 
	be less expensive.  It is an anomaly of the current 
	structure that the American market is expensive.  
	Finally, I recommend you go to floridacomparecare.gov 
	which is another thing that Governor Bush has put up 
	where you can look at the number of times a hospital 
	performs a procedure, the price of the procedure, and 
	the quality.  And it turns out, by the way, consistently 
	the best hospitals are cheaper.  This is not like buying
	a car or jewelry.  In health care, better systems have 
	fewer mistakes, fewer infections, greater accuracy, move 
	patients back home faster, and as a result your choice 
	is a hospital that does 300 procedures a year or two. 
	Always pick the 300 procedures because they actually 
	know what they are doing, whereas the guy doing two is 
	thrilled that he has another chance to experiment.  
	So these are real cases.
	Lastly, I want to encourage this committee to look at 
	something we have run across at the Center for Health 
	Transformation that I am absolutely amazed at.  There 
	are some medical device companies that now require 
	hospitals to sign contracts that they will not, they 
	cannot tell the patient or the doctor what the device
	costs.  Now this is turning the price of the medical 
	device into a trade secret in a way which is insane.  
	I use that word deliberately.  How can you talk about 
	a free market?  How can you talk about any kind of 
	transactions and say that the price is secret?  And 
	I would urge this committee first of all to hold 
	hearings on this which we have been checking on and 
	find to be absolutely correct and we can submit 
	contract language to you that has $65 billion a year 
	in sales.  And I would suggest to you that you 
	ultimately want to move towards legislation that says 
	any medical device that is going to be sold to any 
	aspect of the Federal government which normally 
	includes Federal employee health benefit plans, 
	Tri-care, Veterans' Administration, Indian Health 
	Service, Medicaid, and Medicare, the price ought to 
	be public.  These are commodities.  They may be 
	scientifically based commodities, they may be 
	sophisticated commodities, but they are commodities.  
	If you walked into a store and said I would like to 
	buy a TV set and they said well, we can show you four 
	options but by the way we are not allowed to tell you 
	the price.  You would think they were crazy.  And for 
	medical device companies to be so arrogant as to think 
	that they can keep their price a secret by contract, 
	I think is a violation of everything that we are 
	trying to accomplish in transparency, and I would 
	urge you to look into that particular area as a 
	particularly egregious example of an unjustifiable 
	secrecy in the health system.
	And I appreciate the chance to testify.
	[The prepared statement of Hon. Newt Gingrich follows:]

Prepared Statement of the  Hon. Newt Gingrich, Former Speaker of 
the House, Founder, Center for Health Transformation

Chairman Deal, Ranking Member Brown, and members of the 
subcommittee: 
I appreciate the opportunity to testify today about how giving 
health consumers access to price and quality information for 
medical services will help us build a 21st Century Intelligent 
Health System that saves lives and saves money for all 
Americans.
If healthcare in America is to transcend the challenges of the 
future, America must build this 21st Century Intelligent 
Health System.  Building such a system will require fundamental 
changes of the health system we know today, but they are 
changes that are absolutely necessary.  
To get there, ensuring that every American has the right-to-know 
price and quality information about health and healthcare 
products and services is absolutely critical.  
Let me describe a 21st Century Intelligent Health System.  In a 
21st Century Intelligent Health System, every American will be 
covered by insurance, have access to the care that they need 
when they need it, own their health records, and will be 
empowered to make responsible decisions about their own health 
and healthcare because they will have the right-to-know the 
price and quality of health products and services before 
making purchasing decisions.  
In a 21st Century Intelligent Health System, the focus will be 
on prevention and wellness.  Innovation will be rapid, and the 
dissemination of health knowledge will be in real time and 
available to all Americans.  Reimbursement for health care 
will be a function of quality outcomes, not a function of 
volume.  
We are right at the edge of moving forward toward a 21st Century 
Intelligent Health System centered on the individual. This system 
I am describing is a wholesale departure from the bureaucratic, 
third party payer model that has dominated our healthcare 
financing for the last forty years. The new model promises 
better health outcomes at lower cost. 
In order to be successful in this transition, healthcare 
consumers must have complete and total access to information 
about their healthcare providers and the products and services 
they provide. Yet lack of price and quality information about 
various healthcare services may cripple this much-needed 
transformation before it can ever get off the ground.
Americans are accustomed to leading their lives empowered with 
the responsibility and knowledge to determine what is best for 
them.  Outside of healthcare, we live in the world of Expedia, 
Travelocity, CraigsList and Consumer Reports.  Within minutes, 
any citizen can find price, cost, and performance data on an 
infinite number of products and services.  This transparent 
system puts the consumer squarely at the center of the 
market-and as a result, consumers have more choices of greater 
quality at lower cost.  
Healthcare is the only area of America's economy where the 
consumer and the provider have no idea what the goods and 
services they trade cost. Think about that for a minute. 
Patients and doctors truly do not know the cost of even a 
standard office visit, not to mention myriad of complicated 
procedures delivered in an emergency room. 
Sometimes there is a very determined effort to keep the 
prices of medical products and services hidden and/or 
deliberately vague.  
Not surprisingly, this has the intended effect of keeping 
prices artificially high for consumers because there are 
no natural market forces to create downward cost pressures. 
If healthcare were a real market we would see more choices 
of higher quality coupled with falling prices. 
There is no other sector of our economy with as little 
information about price and quality as in the $2 trillion 
healthcare industry. American consumers can find all types 
of cost and quality information about cars, computers, homes 
and vacation destinations.  It is even common these days for 
potential buyers and owners to have lengthy online 
discussions about the pros and cons of, and alternatives to, 
every make and model. 
But this type of rich consumer information is sorely lacking 
when it comes to something as important as choosing a 
physician or a hospital. More important than the lack of 
available information about prices is the stunning absence of 
quality data in the hands of patients. Few Americans could 
tell you which of the five hospitals nearest to them has 
the best outcomes for cancer care, or obstetrics, or 
orthopedic surgery. Significantly, they would have trouble 
even getting this information if their health or their life 
depended on it. This is wrong and it must change. 
	Individuals are at the mercy of an antiquated system 
	that has not kept pace with the technological 
	advancement, transparency, and modernization that 
	nearly every other industry has embraced. The 
	information age has left healthcare behind, and the 
	consequences are tragic: medical errors continue to 
	kill thousands; costs continue to rise faster than 
	inflation; the number of uninsured continues to 
	climb; and consumers still remain at the edges of 
	the system.  We can change this.  But in order to 
	do so, informed and proactive consumers must be at 
	the center of the healthcare system.  
The American people clearly want this to change. In one 
survey, 93 percent of Americans believe they have the 
right-to-know price and quality information about their 
healthcare providers.
It's hard to find any issue that garners the support of more 
Americans. By comparison, "only" 91 percent of Americans 
support keeping the words "under God" in the Pledge of 
Allegiance.
January 1, 2004, will be looked back upon as the "big bang" 
in healthcare policy. It was on this date that health 
savings accounts (HSAs) became available to all Americans 
who buy private health insurance. This was the most 
significant improvement in healthcare financing in two 
generations because it began to unleash the value-driven 
American consumer on the inefficient healthcare market. 
The most comprehensive, real world survey of HSAs was 
released last week by the trade group America's Health 
Insurance Plans. It showed that nearly 3.2 million Americans 
own HSAs as of January, 2006. The U.S. Treasury Department 
estimates that there will be 14 million Americans with 
HSAs by 2010, less than four years from now. 
We should extend the opportunity to own HSAs to those on 
Medicaid and Medicare, and allow them to enjoy the 
advantages of having more control over their healthcare 
dollars and the opportunity to build wealth by staying 
healthy.
Owners of HSA-health insurance plans are starting to ask 
their doctors a long-overdue question: "How much does it 
cost?" That question, so commonplace everywhere else in 
the economy, has been almost unheard of, until now, in the 
doctor's office. As the number of these plans grows, it 
will create greater and greater pressure for accurate 
information about prices and more and better information 
about quality of health services. In a world of Google, 
Ebay, Edmunds.com, Travelocity, and Craigslist, where 
detailed information is available on nearly everyone and 
everything, it is indefensible that healthcare lags 
behind. 
U.S. News and World Report, for example, is looked to as 
the best rater of colleges and universities.  Today, 
some private sector companies are also beginning to 
provide much more health information to rate healthcare 
services. Websites like Subimo and HealthGrades offer 
subscription services where paying customers can gain 
access to information about quality. Insurers like Aetna 
and Humana are in the early stages of providing their 
enrollees with details about hospital outcome data. Not 
all hospital administrators are enthralled with these 
rating systems, but up until now they have failed to 
develop a nationally agreed upon set of standards whereby 
hospitals would rank themselves. They may never agree, 
but because this information is so valuable to consumers, 
we must ensure that it is not kept from them.
Government at the federal, state, and even county level 
can play a critical role in addressing the dearth of 
price and quality information available to consumers of 
healthcare. 
Secretary Leavitt and CMS Administrator Mark McClellan 
deserve considerable credit for pursuing more transparency 
with hospitalcompare.hhs.gov, which allows patients, family 
members, and physicians to get quality measures on how often 
hospitals provide the recommended care to get the best 
results for most patients. Available on the site is the 
standard recommended care that an adult should get if being 
treated for a heart attack, pneumonia, and other complications.
The Administration is also moving ahead with additional 
transparency measures. Over the course of the next several weeks 
the Medicare website will begin to display the prices it pays 
hospital and physicians. Additionally, the Office of Personnel 
Management is exploring the possibility of requiring plans 
participating in the Federal Employee Health Benefit Program 
to make public the reimbursement rates they pay to providers. 
The State of Florida now has two websites FloridaCompareCare.com 
and MyFloridarx.com that display hospital price and outcome 
data, and prescription drug prices respectively. These websites 
cost less than $200,000 per year to operate. They are cheap and 
highly effective. Every state in America should follow Florida's 
lead and make this critical information available to all citizens.
 An article from this past Sunday's South Florida Sun-Sentinel 
 reports about the real life impact of the new web site 
 MyFloridaRx.gov. I recommend this story by health writer 
 Bob LaMendola to anyone wanting to learn about the tremendous 
 price discrepancies in price for the same medicine in the same 
 neighborhood. At Morrison's RX pharmacy in the city of 
 Plantation, for example, 30 Nexium pills sell for $202. Two 
 miles away at the Costco in Davie, the exact same pills cost 
 $131. Visitors to MyFloridaRx can get the "usual and customary" 
 prices for the 50 most common prescribed drugs in the state.
 In an additional example, a month's supply of albuterol for 
 asthma inhalers can cost as little at $6.16 at Sam's Club in 
 South Florida. The average cost around the region is $21. 
 Green's pharmacy in Palm Beach sells the identical product for 
 $43 and it retails for $88 in Broward County at ProScript in 
 Davie. This is the kind of information that is critical to 
 asthmatics, particularly if they are uninsured, own a HSA, or 
 don't have a co-pay and therefore have to pay for prescription 
 drugs out of their own pockets. Now, they have an objective 
 online tool to help them compare prices and save money. 
At the Center for Health Transformation2 we have developed a 
model of drug purchasing called Pilot Rx modeled on Travelocity. 
We believe that this model could take between 20 - 40 percent
out of the cost of prescription drugs by offering real-time 
online prices to patients. Each individual's plan would reimburse 
for 100 percent of the cost of the lowest cost generic drug in a 
therapeutic class. From that point on up, the patient would be 
responsible for paying the difference. This visibility of 
prices, we believe, would crash costs significantly. 
FloridaCompareCare.gov is the other Florida website that is 
proving itself of significant value to patients and potential 
patients. This very user-friendly site allows visitors to search 
for a wide range of price and outcome data for all hospitals and 
ambulatory surgery centers in the state. Visitors can retrieve 
the risk-adjusted number of hospitalizations, average length of 
stays, charges, and readmission, infection, complication, and 
mortality rates for every facility in the state. Certainly this 
is data you would want and deserve if you or a loved one needed 
an operation.  
Florida officials are also shining the light on the 
underperformance of the traditional Medicaid fee-for-service 
system. It turns out that only half of the children in standard 
fee-for-service are getting well child check ups. Only 
16 percent of children are getting preventive dental screenings. 
Only 4 percent of women are getting mammograms. The highest 
death rates from breast cancer are among African-American women.
50 percent of Florida Medicaid beneficiaries are either black 
or Hispanic. These populations are two to three times more likely 
to suffer from asthma, diabetes, heart disease, and infant 
mortality. These figures are troubling to be sure. But they need 
to be out in the open before we can begin discussing how to 
close these unacceptable gaps in health outcomes. 
Florida's innovative new Medicaid waiver includes important 
innovations in information transparency.  It will include 
participation from a range of health plans that will receive 
risk-adjusted premiums per enrollee. HMOs, Minority Physician 
Network, or a hospital-based Provider Service Network will have 
their performance monitored by the state. The state will be 
measuring plans in a range of areas including: percentage of 
kids getting well child check ups, percentage of kids getting 
dental screenings, and the percentage of kids getting the proper 
vaccinations. Consumer satisfaction will also be measured. Most 
importantly, these measurements will be made available for all 
to see. 
It is the nature of a science and technology based 
entrepreneurial free market to provide more choices of higher 
quality at lower cost.  
Americans deserve exactly this but are not getting it from our 
current health system. A major reason for this is the lack of 
reliable, useful information about price and quality of health 
and healthcare products and services. We can and must do better 
in order to create a 21st Century Intelligent Health System that 
will save lives and save money.

	Mr. Deal.  I thank you.
	Mr. Gedwed, we will recognize you next.
	I will say to all of you, we have made your testimony 
	that you have submitted in advance a part of the record 
	so you can feel free just to take excerpts from it if 
	you would choose to do so.  
	Mr. Gedwed?
Mr. Gedwed.  Thank you, Mr. Chairman and members.
	On behalf of the 2,700 employees of UICI, it is a 
	pleasure to offer--
	Mr. Deal.  Would you turn on the microphone so we can 
	hear you?
	Mr. Gedwed.  Thank you.
	It is a pleasure to offer comments today on price 
	transparency in the health care industry.  UICI, a New 
	York Stock Exchange company based in North Richland 
	Hills, Texas, is a leader in providing affordable health 
	care coverage to individuals, small businesses, and the
	self-employed.  For more than 20 years, UICI has focused 
	on delivering innovative products and services to help 
	our customers in 44 States better manage their health 
	care needs.
	As you know, most insured Americans receive their health 
	care coverage through an employer sponsored plan.  That 
	coverage is costly, averaging just under $11,000 per 
	year.  Out of that, the employee typically is responsible 
	for paying about 25 percent.  In short, most Americans 
	receive coverage that is highly subsidized by the 
	employer.  It should be noted, however, that the number 
	of Americans receiving coverage from these employer 
	subsidized health programs is declining as costs continue 
	to rise.  And even to make it clearer that at UICI, our 
	customers live in very different circumstances.  We serve 
	the guy who owns the independent muffler shop on the 
	corner, the entrepreneur with a start-up firm, and the 
	single mom waiting tables.  But most of our 1.2 million 
	customers, if UICI was not there with affordable health 
	insurance coverage, chances are they would have no 
	insurance at all.  
	But a concept of consumerism has recently entered into the 
	health care debate.  Our members have always had to be 
	smart consumers.  When you have to pay 100 percent of the 
	cost of health care coverage, you have to be a smart 
	consumer.  Health care decisions are some of the most 
	important and potentially costly choices Americans face.  
	Often these health care decisions are made without the 
	benefit of knowing ahead of time the true cost and/or 
	quality of that service.  In fact, based on recent 
	research, customers are likely to spend more time 
	researching the purchase of a car or a computer than 
	evaluating a doctor or hospital.  Our company has 
	changed that for our customers.
	Through our HealthMarket division, we have pioneered 
	benefit and price transparency.  HealthMarkets award-
	winning web-based tools which took more than four years 
	and over $100 million to build and perfect.  We provide 
	our members with unparallelled power to manage their 
	health care spending.  We believe consumers should have 
	at least as much information about health care cost and 
	quality as they do about cars or computers.  When the 
	cost of health care coverage represents nearly 10 percent 
	of our customer's annual income, it is our responsibility 
	to ensure they have all the information necessary to make 
	informed decisions.  
	While many of our competitors are today just beginning to 
	introduce limited forms of price transparency, we already 
	have invented true transparency into every facet of our 
	business.  Our members have access to detailed information 
	on approximately two-thirds of the Nation's medical 
	providers located in all 50 States.  That means more than 
	430,000 medical professionals, 4,000 hospitals and medical 
	centers, and 26,000 other resources such as labs, MRI 
	centers, medical equipment providers, and home health 
	care providers.  Our members benefit from price 
	transparency on more than 20,000 procedures or services 
	from the cost of a routine office visit to a consultation 
	by a specialist.  Most important to our customers, all 
	this information is available in advance of an office 
	visit or procedure.
	Now how do we provide this information to our customers?  
	Our company aggregates information from provider networks 
	in a wide variety of services and then we share it with 
	our members in an easy to use format.  We use a green, 
	yellow, red pricing structure to inform consumers on the 
	cost of a provider relative to their benefits.  In short, 
	we match the level of their plan benefits that we offer 
	them with expected costs so our customers can seek 
	medical care and not incur any out-of-pocket expense if 
	they so choose.  We provide the wealth of information 
	over a range of channels, like the Internet, mail, and 
	telephone access.  In addition, when customers need help, 
	trained nurses are available to guide them through the 
	health care decisions.
	And I am pleased to tell you our tools can be applied to 
	help State and Federal agencies better manage their 
	Medicare and Medicaid costs.  In fact, today UICI is 
	engaged in conversations with several State agencies 
	about using our tools.  
	Be at rest that I look forward to a day when all 
	Americans will have access to health care HealthMarkets 
	customers have today.
	Thank you very much.
	[The prepared statement of William Gedwed follows:]

Prepared Statement of William Gedwed, Chairman, President and 
CEO, UICI

On behalf of the more than 2,700 employees of UICI, I am honored 
to submit these remarks regarding price transparency in the 
health care industry. In particular, I'm here to emphasize our 
strong support for further actions the 109th Congress may 
consider taking to empower consumers to make better informed 
choices about health care.
UICI is a leader in providing affordable health care coverage 
to individuals, small businesses and the self-employed. For 
most of our 1.2 million customers, if UICI was not there to 
deliver, chances are they would not have insurance at all.
The word consumerism has recently appeared on the Health Care 
horizon. but for our company, it has long been a way of life - 
reflecting the special needs of our customers. Unlike most 
Americans who receive health care from their employer and pay 
only a fraction of the true costs of that coverage, our 
customers pay 100 percent of theirs.
For this reason, UICI for more than 20 years has focused on 
developing innovative products and services to help our 
customers better manage their health care. 
Health care decisions are some of the most important, costly 
choices people face. 
And yet, Americans often make them without any real way to 
evaluate the cost and/or quality of medical service providers.
Often these health care decisions are made without the benefit 
of knowing - ahead of time - this valuable information.
In fact, consumers are far more likely to use the Internet 
to research a car or computer than a doctor or hospital, 
according to recent research, including a survey our company 
commissioned last year. It is our position that one reason 
consumers don't use the Internet to research health care is 
it's simply not available to most Americans.
We believe that's wrong. Consumers should have at least as 
much information about health care cost and quality as they 
do about cars or computers. When the cost of health care 
represents nearly 10 percent of our customers' annual income, 
it's our responsibility to ensure they have all the 
information necessary to make informed decisions.
It is for this reason our company acquired HealthMarket in 
2004. We saw great potential in HealthMarket's technology 
and innovative products, which pioneered the category of 
consumer-guided insurance.
The crown jewel of HealthMarket is its award-winning 
web-based tools, which provide cost and benefit transparency. 
These innovative tools took more than four years and over 
$100 million to build and perfect. Armed with these resources, 
our members enjoy unparalleled power to manage their health 
care spending.
While many of our competitors are today just beginning to 
introduce limited forms of price transparency, we already 
have embedded true transparency into every facet of our 
business. As a result of our commitment to our customers: 
Our members have access to detailed information on 
approximately two-thirds of the nation's medical providers 
located in all 50 states -- that means more than 430,000 
medical professionals, 4,000 hospitals and medical centers, 
and 26,000 other resources such as labs, MRI centers, medical 
equipment providers and home health care centers.
Our members benefit from price transparency not for just 
25 or 30 procedures like some of our competitors provide, 
but for virtually every procedure and supply code imaginable - 
more than 20,000 procedures or services in all, from the cost 
of a routine office visit to a specialist consultation to 
knee surgery.
Our members have access to health plans that utilize price 
transparency in more than a dozen states, with another five 
states currently pending.
Our members have access to data that is updated monthly, 
putting at their fingertips the most comprehensive, up-to-date 
price information available in the marketplace.
Our members use our site to look up participating physicians 
and hospitals anywhere in the country and compare cost 
information.
Many of our customers are surprised to learn that excellent, 
board-certified doctors may charge vastly different prices 
for the same medical procedure.  
Here's how our website works.
The first screen provides a quick overview of providers' 
charges.  A unique "thermometer scale" allows members to 
visually scan the list of providers and quickly determine who 
charges a lot or a little compared with the rest of the market.  
A doctor "In the Green" is less expensive than a doctor 
colored red.  A doctor who is "In the Green" will not likely 
require any out of pocket payments from the consumer, after 
the deductible and co-insurance.
The low-cost physicians are listed first, with the high-cost 
physicians last.  A physician can move up in the ranking by 
bringing charges into line with the rest of the market.  
that means providers compete, and they have an incentive to 
keep costs in check. 
If members wants more detail, they can click to the next 
screen. This provides costs for each specific service a doctor 
or hospital provides. As I mentioned, we have cost data on 
more than 20,000 services or procedures, organized by their 
CPT code. For those without computer access, this information 
is also available over the telephone.
Most importantly, cost information is available to enrollees 
in advance of an office visit or procedure so that they may 
take this information into account when making healthcare 
decisions.
But not knowing the cost of services is just one major problem 
wih managed-care health plans. Two others are: 
1. 	Enrollees lack any sense of ownership over the money 
they spend.
2. 	Information on quality, outcomes, and training of 
physicians and hospital staff is often hard to find.
Now, a word of caution. Some insurance companies seem to use 
the Consumer Directed term as little more than a marketing 
buzzword meaning "low benefits / low cost."
A plan that truly puts the consumer in the driver's seat must 
do several things: 
The plan must offer price transparency, as discussed.
Members need a reason to care about price - a sense of 
ownership over the money they spend.
Members need access to quality and outcomes information. 
When insurance companies set up the co-pay as the only 
responsibility an enrollee has, it's no wonder the enrollee 
doesn't care what the overall charges are. 
At HealthMarket, our consumer plans give enrollees a sense 
of ownership through several innovative structural designs:  
--  The MAC, or Maximum Allowable Charge, is the foundation 
of all HealthMarket Consumer Guided plans. 
The MAC is the maximum  fee the plan pays for a given 
service. It is set for each covered service, with a large 
portion of contracted providers within a given area at or 
below the MAC. It is set locally, based on provider 
contracts.  If the member goes to a provider who charges 
more than the MAC, the member is responsible for paying the 
difference out of his or her own pocket.
Providers who charge below the MAC and are depicted as "In 
the Green" on the member's website.
Market forces point the way to those physicians who charge 
reasonable rates in relation to their experience, location, 
and qualifications.
-- The StartWell Account is available in many plan designs 
and presents an excellent example of how to create a sense 
of ownership over spending.
On day one of coverage, enrollees take ownership of a 
spending account for many routine, preventive, and diagnostic 
care services (options range from $500 to $1,250). If the 
member ends the year with a positive balance, he or she is 
entitled to roll over all or a portion of that balance on 
renewal of the policy, which is added to the next year's 
replenished beginning balance. If the fund is depleted, 
routine services remain covered, but are subject to 
deductibles and coinsurance.  
The StartWell Account is applied to services such as check-ups, 
mammograms, allergy testing, and lab tests - all with no 
deductible, coinsurance, or co-payment.  This plan design is 
actually richer than most co-pay plans, but with the critical 
difference that the enrollee now has his or her first 
experience in caring about the cost of care.  
Our members receive a rich benefit for preventative, diagnostic 
care - but also have a strong incentive to spend money only 
when needed - and to take cost into account when choosing a 
provider.
Many CDHP companies today use Health Savings Accounts (HSAs) 
to create a sense of ownership over healthcare spending.  
These accounts set up a personal financial asset that 
enrollees can spend as they see fit.  
This is an excellent way to encourage consumerism since 
enrollees now have a personal stake in their spending.  What 
is important - and often lacking - is that the insurance 
company must give enrollees the tools and information they 
need to be able to spend their own money wisely.  This means 
knowing the costs before buying services.  The best HSA plan, 
without cost information, is only half the puzzle.  It's a 
superficial solution that leaves enrollees frustrated and 
unable to spend their own money wisely.  
In addition to cost transparency, a consumer guided plan 
must provide access to provider quality and outcomes 
information.
We believe that to focus only on the money and not on 
quality would be to miss the whole point of health care.
We provide our members with access to best-in-class quality 
data from Subimo. 
Our partnership with Subimo gives our members information 
on doctor backgrounds - such as board certification, 
medical school, and years in practice.
It offers information on hospitals such as adherence to 
patient safety standards, volume of procedures, and 
clinical outcomes.  
Our website even allows enrollees to offer feedback on 
physicians, so that once results are made available, one 
enrollee will be able to benefit from the feedback of 
another, just as eBay or Amazon.com users can read what 
other users have said about various sellers.  
All this information is made available to enrollees before 
they make what may be life-altering healthcare decisions.  
The goal is to provide the most information for the best 
decision possible.
Our members also receive access to detailed sources of 
health information such as in-depth health libraries. 
These enable enrollees to research symptoms, conditions, 
and treatments; determine a physician's hospital-admitting 
privileges; and even compare hospital survival rates for 
various procedures.  
As much as a Consumer-guided plan tries to make life easier 
for members, health care consumerism can be complicated. 
Therefore, it is imperative to provide members with 
outstanding education and support.  Without this component, 
plans may frustrate customers who understand the importance 
of making wise spending decisions and who know that the 
information is out there somewhere - but just don't know 
how to navigate the system to get it.
The otherwise glowing McKinsey & Company June 2005 report 
found an "Achilles' heel" in many consumer plans: 80 percent 
did not provide sufficient information on the prices doctors 
charge. Less than half of the consumers studied reported 
that they were at least as satisfied with their consumer-
driven plan as they had been with their previous plan. "The 
long-term success of CDHPs will be highly dependent not 
only on whether consumers receive appropriately transparent 
information to help them make decisions, but also on whether 
the information can be easily obtained," the report concluded. 
We offer an unparalleled array of support services that help 
to make them savvy users of the consumer tools described above.  
Following are just a few examples.
Our Consumer-Guided members are asked to participate in A 
"Verification Call" upon joining the plan. This call allows 
a customer service representative to describe in detail how 
the plan works and how the member can use the online and 
telephonic support tools to their advantage.
 	Another source of education about the plan are our 
 	personal assistants. In addition to handling 
 	traditional health insurance questions, these 
 	representatives are trained to discuss the critical 
 	issues faced by healthcare consumers: how to compare 
 	costs among various providers; how to use online 
 	self-service tools; and how to manage financial accounts, 
 	such as the StartWell Account.
 	The Personal Assistant program allows enrollees access 
 	to a toll-free number staffed by professionals who act 
 	as a concierge service.  Some of the actions they take 
 	on behalf of enrollees and their family members include 
Getting medical records transferred
Arranging for transportation
Discussing bills or unexpected charges with the provider 
Finding home-care or adult daycare programs for an enrollee's 
elderly parent
Setting up appointments to see specialists
Putting the enrollee in touch with our 24/7 Nurse Line.
In Conclusion...
Consumer guided plans should be evaluated based on whether they 
provide:
-- price and quality transparency
-- a sense of ownership over health dollars spent
-- and adequate customer support.
The nation did not arrive at its current consumer-unfriendly 
system overnight, so unleashing the power of consumerism in 
America will take time. We at HealthMarket look forward to a day 
when most Americans become strong health care consumers. We look 
forward to a future that offers top-notch health care without 
skyrocketing costs that have come under the current system of 
managed care. 
At HealthMarket, we believe in a future where all health plans
sold in America will be of the consumer-guided variety - serving 
consumers who are able to manage their healthcare decisions as 
well as they do their vacation-planning or refrigerator 
inventory.  
We are building this future now, because consumerism in health 
care is an idea whose time has come.

	Mr. Deal.  Thank you.
	Dr. Ginsburg.
Mr. Ginsburg.  Thank you, Mr. Chairman, members of the subcommittee.
	I am President of the Center for Studying Health System 
	Change which is an independent, non-partisan, health policy 
	research organization funded principally by the Robert Wood 
	Johnson Foundation and affiliated with Mathematica Policy 
	Research.  Its mission is to provide policymakers with 
	objective and timely research on developments in health care 
	financing and delivery and their impacts on people.
	With funding from the California HealthCare Foundation, HSC 
	has conducted research on shopping for price in medical 
	services.  The research has covered the overall potential of 
	the approach to improve value, and the experience in 
	self-paying markets such as LASIK, and working papers on 
	these two studies are available on request.
	My statement makes three key points.  First, fostering 
	price 
	shopping does have the potential to contain costs.  Some 
	people will use higher value providers and many providers 
	will feel market pressure to increase the value of their 
	services.  But some are overselling the potential of price 
	shopping to solve our health care problems.  For one thing, 
	many services are too complex or too urgent for effective 
	shopping and those patients responsible for the bulk of 
	dollars spent in health care are beyond the reach of 
	patient financial incentives in typical benefit structures.  
	The second point is that health plans play a key role in 
	consumer price shopping but some advocates have been 
	ignoring this role.  Health plans have long been consumers 
	most powerful asset through their substantial discounts 
	negotiated with providers.  As benefit structures change 
	to put more emphasis on price shopping, a lot of innovation 
	and tools to increase plan value are starting to go on like 
	my colleague mentioned from his company.  Some of these 
	innovations are high performance networks providing 
	incentives for patients to use providers with higher value 
	data on the right of costs of different providers.  
	Insurers basically have the potential to employ their 
	formidable data and analysis resources to translate the 
	complexity of health care pricing into something usable 
	by consumers.  Forcing disclosure of contracts between 
	health plans and providers especially hospitals will have 
	unintended effects of raising prices.  It is well known 
	in anti-trust circles that in concentrated markets, 
	posting of price information leads to higher prices.  It 
	can do this either by facilitating collusion among sellers 
	or buyers and also by leading to smaller market share 
	gains for those who are willing to offer discounts.  My 
	testimony describes a well intention attempt at disclose 
	that misfired.  
	Third, consumers experience in self-pay markets, such as 
	LASIK, have been romanticized.  We studied LASIK, dental 
	crowns, in utero fertilization, and cosmetic surgery.  
	We found serious price shopping only in the market for 
	LASIK.  There has been a decline in price for LASIK over 
	time but consumer protection has been a problem and the 
	FCC and State Attorney's General have been involved for 
	a number of years.  Some of the issues are misleading 
	advertising.  For example, the commercials for $299 per 
	eye are very misleading because very few people are 
	eligible for that price.  In fact, only 3 percent of 
	LASIK procedures cost less than $1,000.  Second, 
	misrepresentation of what services are included in the 
	price is also a consumer protection issue.  And one 
	implication of the LASIK experience is the degree to 
	which the presence of insurers actually prevents some 
	of the consumer protection issues that we found.
	In conclusion, increased price transparency is 
	generally a good thing but it will not solve all the 
	problems of the health care system, not even the 
	problem of decreasing affordability of health care.  
	And we must proceed with caution and selectivity 
	providing information truly useful to consumers and 
	not inadvertently increasing the power of entities 
	in concentrated markets.
	Thank you very much.
	[The prepared statement of Paul B. Ginsburg follows:]

Prepared Statement of Paul B. Ginsburg, President, Center 
for Studying Health System Change

Mr. Chairman, Representative Brown and members of the 
Subcommittee, thank you for the invitation to testify about 
providing consumers with better information about the cost of 
health care services.  My name is Paul B. Ginsburg, and I am 
an economist and president of the Center for Studying Health 
System Change (HSC).  HSC is an independent, nonpartisan 
health policy research organization funded principally by The
Robert Wood Johnson Foundation and affiliated with 
Mathematica Policy Research. 
HSC's main research tool is the Community Tracking Study, 
which consists of national surveys of households and 
physicians in 60 nationally representatives communities 
across the country and intensive site visits to 12 of these 
communities.  We also monitor secondary data and general 
health system trends.  Our goal is to provide members of 
Congress and other policy makers with objective and timely 
research on developments in health care markets and their 
impacts on people.  Our various research and communication 
activities may be found on our Web site at www.hschange.org.
With funding from the California HealthCare Foundation, 
HSC has conducted research on consumer price shopping for 
health services, focusing both on self-pay services, such 
as LASIK, and analyzing the issue of price transparency 
for medical services that tend to be insured.\1\
	My testimony today will make three points:
Fostering consumer price shopping for health services 
does have potential for containing costs without sacrificing 
quality-but some are overselling the magnitude of this 
potential. 
For most consumers who are insured, their health plan has 
long been their most powerful asset in shopping for lower 
prices, and insurers have the potential to become even more 
effective agents as they develop more sophisticated benefit 
structures and information tools to support consumers in 
choosing effective treatments from higher-quality, lower-cost 
providers.
Consumers' experiences with markets for self-pay services, 
such as LASIK, have been romanticized and do not offer much 
encouragement as a model of effective shopping for health 
care services without either a large role for insurers or 
regulation.

BACKGROUND
I perceive the current policy interest in price transparency 
as essentially a second stage of the evolution of consumer-
driven health care.  The first stage was financial incentives 
for consumers in the form of greater cost sharing-high 
deductibles and greater coinsurance.  Now, we are focusing on 
the tools needed by consumers to make effective decisions on 
reducing the costs of their care.  As insurers compete 
vigorously to sell consumer-driven products, they seek to 
differentiate their products on the basis of the tools 
offered to consumers to compare price and quality across 
providers.  Policy makers are interested in government's 
role in fostering greater cost-consciousness and a more 
favorable environment for consumers to make informed 
choices about health care services.
Traditionally, health insurance has either removed or 
sharply diluted consumer incentives to consider price in 
choosing a provider or treatment strategy.  It is difficult 
for consumers to get price and quality information from 
providers, who have to date shown little interest in 
competing for patients on this basis.  Likewise, there 
is little information available to help patients examine 
the effectiveness of treatment alternatives.  The lack of 
quality information understandably makes consumers reluctant 
to choose a provider on the basis of a lower price.  It is 
one thing to wind up with a low-quality provider when price 
is not an issue but another to get there as a result of 
opting for a lower price.  Similarly, lack of information 
on effectiveness of treatment alternatives makes consumers 
more reluctant to consider price in the choice of treatment.
Unfortunately, much of the recent policy discussion about 
price transparency downplays the complexity of decisions 
about medical care and the dependence of consumers on 
physicians for guidance about what services are appropriate.  
It also ignores the role of managed care plans as agents 
for consumers and purchasers in shopping for lower prices.  
Well-intentioned but ill-conceived policies to force 
extensive disclosure of contracts between managed care 
plans and providers may backfire by leading to higher 
prices.

POTENTIAL FOR MORE EFFECTIVE PRICE SHOPPING
If you define effective shopping as obtaining better value 
for money spent, then consumers do have the potential to be 
more effective shoppers for health care services.  There 
are direct and indirect benefits of choosing providers 
that offer better value.  The direct benefits are simply 
the cost savings, for example, of choosing the lower-cost 
of two providers of comparable quality.
But the indirect benefits are potentially more important.  
If enough consumers become active in comparing price and 
quality, this will lead to market pressure on providers 
to improve their performance on both cost and quality 
dimensions.  Providers that measure up poorly on the value 
dimension will lose market share and will be motivated to 
revamp their operations to remain viable.  Our market 
economy offers many examples of competitors responding to 
loss of market share by making difficult changes and 
regaining their edge, and examples are starting to appear 
in health care as well.  The gains from providers improving 
their operations will accrue broadly to the health care 
system.
But we need to be realistic about the magnitudes of 
potential gains from more effective shopping by consumers.  
For one thing, a large portion of medical care may be 
beyond the reach of patient financial incentives.  Most 
patients who are hospitalized will not be subject to the 
financial incentives of either a consumer-driven health 
plan or a more traditional plan with extensive patient 
cost sharing.  They will have exceeded their annual 
deductible and often the maximum on out-of-pocket 
spending.  Recall that in any year, 10 percent of people 
account for 70 percent of health spending, and most of 
them will not be subject to financial incentives to 
economize.
When services are covered by health insurance, the value 
of price information to consumers depends a great deal on 
the type of benefit structure.  For example, if the 
consumer has to pay $15 for a physician visit or $100 per 
day in the hospital, then information on the price for 
these services is not relevant.  If the consumer pays 
20 percent of the bill, price information is more relevant,
but still the consumer gets only 20 percent of any savings 
from using lower-priced providers.  And the savings to the 
consumer end once limits on out-of-pocket spending are 
reached.
In addition to those with the largest expenses not being 
subject to financial incentives, much care does not lend 
itself to effective shopping.  Many patients' health care 
needs are too urgent to price shop.  Some illnesses are so 
complex that significant diagnostic resources are needed 
before determining treatment alternatives.  By this time, 
the patient is unlikely to consider shopping for a different 
provider.
Some of these constraints could be addressed by consumers' 
committing themselves, either formally or informally, to 
providers.  Many consumers have chosen a primary care 
physician as their initial point of contact for medical 
problems that may arise.  Patients served by a multi-
specialty group practice informally commit themselves to 
this group of specialists-and the hospitals that they 
practice in-as well.  So shopping has been done in advance 
and can be applied to new medical problems that require 
urgent care.  This is a key concept behind the high-
performance networks that are being developed by some 
large insurers.
Even when services are good candidates for shopping by 
consumers, comparison of prices is not easy.  Much 
treatment is customized.  For example, an elective 
rhinoplasty, more commonly known as a nose reconstruction, 
is not a commodity, and a plastic surgeon cannot provide 
an estimate without examining the patient.  Often a 
medical treatment involves an uncertain number of services 
by a number of separate providers, but few bundled prices 
are available in the marketplace today.  As mentioned 
above, limitations in useful comparative quality data make 
patients reluctant to choose a provider based on lower 
price.
Shifting from choosing a provider to choosing treatment 
strategies, the absence of neutral financial incentives for 
providers is a serious problem.  The most typical situation 
today is one where the provider gets paid on a fee-for-
service basis, so the incentive is to recommend more 
services, especially those that have higher unit profitability.\2\  
Increasingly, physicians have an ownership interest in services, 
such as imaging, beyond their usual professional services, 
creating an additional conflict between physicians' interests 
and those of their patients.

SELF-PAY MARKETS
Many have pointed to markets for medical services that are not 
covered by insurance to show the potential of consumer price 
shopping.  Since these services are not medically necessary-the 
basis for not being covered by insurance-they should be prime 
candidates for more effective consumer price shopping.  HSC has 
studied markets for LASIK, in-vitro fertilization (IVF), dental 
crowns and cosmetic surgery by interviewing providers, 
consultants and regulators in these fields.  Our findings are 
not as encouraging as one hears from advocates of consumerism.
LASIK has the greatest potential for effective price shopping 
because it is elective, non-urgent, and consumers can get 
somewhat useful price information over the telephone.  Prices 
have indeed fallen over time.  But consumer protection problems 
have tarnished this market, with both the Federal Trade 
Commission and some state attorneys general intervening to curb 
deceptive advertising and poorly communicated bundling practices.  
Many of us have seen LASIK advertisements for prices of $299 per 
eye, but in fact only a tiny proportion of consumers seeking the 
LASIK procedure meet the clinical qualifications for those prices.  
Indeed, only 3 percent of LASIK procedures cost less than $1,000 
per eye, and the average price is about $2,000.  I can only 
wonder about the extent to which policy advocates have themselves 
been deceived by these advertisements and inadvertently perceived 
a sharper decline in prices than has been the case.
For the other procedures that we studied, we found little 
evidence of consumer price shopping.  For dental crowns and IVF 
services, many consumers are unwilling to shop because they 
perceive an urgent need for the procedure, and other consumers 
are discouraged from shopping by the time and expense of visiting 
multiple providers to get estimates.  In cosmetic surgery, a 
limited amount of shopping does occur, facilitated by free screening 
exams offered by some surgeons.  However, quality rather than 
price is the key concern to most consumers in this market; in the 
absence of reliable quality information, most consumers rely on 
word-of-mouth recommendation as a proxy for quality, instead of 
shopping on price.   

ROLE OF INSURERS IN PRICE SHOPPING
Much of the policy discussion about price transparency has neglected 
the important role that insurers play as agents for consumers and 
purchasers of health insurance in obtaining favorable prices from 
providers.  Even though managed care plans have lost some clout in 
negotiating with providers in recent years, they still obtain 
sharply discounted prices from contracted providers.  Indeed, in my 
experience as a consumer, I often find that the discounts obtained 
for the PPO network for routine physician, laboratory and imaging 
services are worth more to me than the payments by the insurer.
Insurers are in a strong position to further support their enrollees 
who have significant financial incentives, especially those in 
consumer-driven products.  Insurers have the ability to analyze 
complex data and present it to consumers as simple choices.  For 
example, they can analyze data on costs and quality of care in a 
specialty and then offer their enrollees an incentive to choose 
providers in the high-performance network.  Insurers also have the 
potential to innovate in benefit design to further support effective 
shopping by consumers, such as increasing cost sharing for services 
that are more discretionary and reducing cost sharing for services 
that research shows are highly effective. 
Insurers certainly are motivated to support effective price shopping 
by their enrollees.   Employers who are moving cautiously to offer 
consumer-driven plans want to choose products that offer useful tools 
to inform enrollees about provider price and quality.  When 
enrollees become more sensitive to price differences among providers, 
this increases health plan bargaining power with providers.  
Negotiating lower rates further improves a health plan's competitive 
position.  One thing that insurers could do that they are not doing 
today is to assist enrollees in making choices between network 
providers and those outside of the network by providing data on 
likely out-of-pocket costs for using non-network providers.
The Administration has recently been pushing hospitals and physicians 
to provide more information on prices to the public.  If this is 
limited to prices paid by those who are not insured or those who are 
insured but are opting to use a non-network provider, additional 
price information for the public is likely to be a positive.  But if 
hospitals and insurers are precluded from continuing their current 
practice of keeping their contracts confidential, this could damage 
the interests of those who pay for services, especially hospital 
care.\3\
Antitrust authorities throughout the world have recognized that 
posting of contracted prices tends to lead to higher prices.  In 
highly concentrated markets, posting of prices facilitates collusion. 
Even in the absence of collusion, posting would mean that a hospital 
offering an extra discount to an insurer would gain less market share 
because their competitors would seek to match it.  Of course, this 
works on both the buying and selling side of the market, but if 
hospitals tend to be more concentrated than insurers, disclosure will 
raise rather than lower prices.  
The experience in Denmark, where the government, in a misguided 
attempt to foster more competition in a concentrated market, posted 
contracted prices in the ready-mix concrete industry is instructive.  
Within six months of this policy change, prices increased by 15-20 
percent, despite falling input prices.\4\  Drawing on this and other 
experience, the Federal Trade Commission in 2004 testified in the 
California Legislature against Assembly Bill 1960, which would have 
required the disclosure of certain price information from contracts 
between pharmacy benefits managers (PBMs) and pharmaceutical 
manufacturers.\5\
Some health plans are now experimenting with ways to communicate 
to their enrollees the fact that certain hospitals have particularly 
high or low negotiated fees, without violating their agreements to 
hospitals and their desire to maintain the confidentiality of their 
price negotiations.  For example, Blue Cross of California, which 
tends to rely heavily on coinsurance in its benefit structures, 
has been posting ratings of the costliness of hospitals for PPO 
enrollees.  It follows the approach of Zagat guides to restaurants, 
where "$" is assigned to the lowest cost hospitals and "$$$$" is 
assigned to the highest cost hospitals.  This approach not only 
maintains the confidentiality of contracts with hospitals, but it 
also engages the formidable actuarial resources of the plan to 
simplify complex and voluminous hospital data for consumers.  
Humana Inc. has presented hospital price information to some of 
its Milwaukee enrollees that maintains confidentiality by using 
ranges and combining hospital costs with physician costs.  I expect 
that insurers will come up with more innovative ways to present 
price information to enrollees.  

CONCLUSION
The need for consumers to compare prices of providers and treatment 
alternatives is increasing and has the potential to improve the 
value equation in health care.  But we need to be realistic about 
the magnitude of the potential for improvement from making consumers 
more effective shoppers for health care.  Whatever the gains from 
increased shopping activity, rising health care costs will, 
nevertheless, price more consumers out of the market for health 
insurance and burden governments struggling to pay for health care 
from a revenue base that is not growing as fast as their financing 
commitment.  For those who have health insurance, their health plan 
will be a key agent in facilitating their obtaining better value.  
Government needs to take care not to interfere with this 
relationship and should focus instead on the needs of those 
without insurance. 

	Mr. Deal.  Thank you.
	Dr. MacDonald?
Dr. MacDonald.  Thank you very much, Mr. Chairman and Ranking 
Member Brown.
	I am Dan MacDonald.  I am a family physician.  And I would 
	like to share some thoughts from the front line.  I have 
	listened with interest to some opinions.  They have been 
	very interesting opinions of people that are not even 
	involved in the situation.
	One is the situation of health care delivery, how does it 
	impact the uninsured?  I would like to share a few thoughts 
	with you.  As a family doctor, I started posting my prices 
	in 1997 and I did that because I could not stay alive with 
	the reimbursement from insurance carriers.  I had people 
	come in and see me that did not have insurance.  For 
	example, one guy came in and he needed to have his hernia 
	repaired.  He is a construction guy, had no insurance, 
	and he came in.  So what did I do?  I called the local 
	hospital.  I found out that the bill was going to be 
	$10,000 plus.  Actually I did a price comparison on my own 
	back in '97 which was very hard.  I found out it was actually 
	$15,000.  So this guy did not have that.  What can we do?  
	I called a surgeon that I know, a very good surgeon, 
	anesthesia, told him the situation.  We got everything done 
	for $1,800.  The guy could easily pay $1,800.  He could not 
	even fathom paying $15,000.  As a result, an old man on the 
	work site came to see me.  He said, I have a hernia, too.  
	I put off getting care because I do not have insurance but 
	I can afford $1,800.  Can you set up the same deal?  So we 
	did it.
	I am here to talk about practical application, not theory.  
	I am not in politics.  I appreciate the tennis games that 
	happen in politics, but let me tell you from the streets 
	it hurts.  How does transparency hurt the uninsured or the 
	lack of transparency?  I included in my briefing a recent 
	example in California.  Somebody asked me to help them 
	with their hospital bill.  He was uninsured, hospitalized, 
	did not plan on it, certainly did not plan on the bill 
	that he got.  And if you look at the briefing that I did, 
	I summarized Tri-Care pricing.  It is the only reference 
	point I could get, the hospital would not give me any 
	prices, they would not deal with me, it was very tough.  
	I took the bill that they gave him and if you look at 
	the comparison that this uninsured person was expected to 
	pay just in two areas they expected to pay ten times what 
	they are accepting from insurance carriers.  This is the 
	reality of what the lack of transparency is doing.  
	Am I a fan of HSAs?  I love the application.  The concept 
	is a great, but the application is not so great for this 
	reason.  There is no real transparency when you are passing 
	dollars in those health care HSAs.  For those that are in 
	favor of HSAs, I applaud you, it is a good deal.  If you 
	are not including transparency on what the thing costs, you 
	are in la-la land if you think it is going to control costs 
	over time.  It just is not.  We have to have transparency on 
	the insurance end.  We have to have transparency on the 
	pharmacy end.
	In my little world, and I remind you, I am going to remind 
	you I am only a family doc, okay?  But in my world a 
	pharmacy, here is what happens.  The drug is not that 
	expensive when it hits the streets.  What do I mean by the 
	streets?  When it comes out of the pharmacy, the production 
	line, it is approved, and then it goes through the pipeline.  
	There are so many little people that are taking off money 
	and rebates.  There are so many funny things happening, we 
	have to address that issue.  One small company we helped in 
	Spokane was able to save $55,000 just on the pharmacy 
	rebates.  How about lab cost?  Well in my world costs, if 
	you go through the insurance world, a typical panel of 
	chemistry lipid, thyroid, and CBC will cost about $400 to 
	$500.  How do I know?  I just had it done.  Six months ago 
	I had it done, and I thought that is crazy.  There has got 
	to be a better way.  While through a lot of other venues 
	were able to get that same group of tests for $89.  So we 
	are able to bring down costs for the surgery, we are able 
	to bring down costs of pharmacy when you get all the 
	middle people out.  We are able to bring down costs of 
	out-patient costs when there is real transparency.
	I am here today to ask this committee for help.  The 
	hospital is a big deal.  They are some very powerful folks 
	and without your help transparency at the hospital level 
	is almost impossible.  I appreciate one side of this room 
	saying that they are in favor of hospital pricing but let 
	us not just focus on hospitals.  I applaud you.  Let us 
	have transparency on everything.  The uninsured are 
	uninsured for a reason.  I believe we might have 250 
	million over-insured and 42 million underinsured.  I 
	believe the market will drive costs where they need to 
	be.  I believe you can take out the waste, the 
	administrative waste, and in Washington State it is 
	reported to be 68 percent of every dollar that goes 
	through the health care pipeline.  Let us get the waste 
	out.  There is enough money in there.  
	Here's the kicker, let us not be naive to think 
	providing insurance for everybody answers the problem.  
	Why do I say that?  There are two references in my 
	briefing.  One is from USA Today, Kaiser Family 
	Foundation, and Harvard.  They did a survey and they 
	found that of those wrestling to pay health care costs, 
	61 percent had insurance.  If you do not believe that, 
	look at the Harvard study where 47 percent of 
	bankruptcies were related to health care costs.  And if 
	you read the study, 75 percent of those had insurance.  
	So let us not be naive to think that providing insurance 
	is the panacea that is going to fix it.  
	I am a free market guy.  I love free market because it 
	works.  I also want to take care of the uninsured.  I 
	get frustrated with health care when it becomes a 
	ployable tennis match.
	Thank you very much.  I guess that means I am out of 
	time, thank you.
	[The prepared statement of Dr. David MacDonald 
	follows:]

Prepared Statement of Dr. David MacDonald, President, Liberty 
Health Group

Chairman Deal, Ranking Member Brown, and members of the 
Subcommittee...
I appreciate the opportunity to testify today about the need 
for transparency in health care prices.  As a family physician, 
former residency director and LTC, U.S. Army, co-founder of 
SimpleCare, and President of Liberty Health Group, I have a wide 
variety of experience.  Today the focus is transparency.
Most will never experience what the uninsured/underinsured face 
when trying to access health.  You may be surprised that it could 
take more than a dozen phone calls before you get an answer to a 
simple question, "What does 'this' cost?"  One can even outline 
scenarios of care (complicated/ uncomplicated visit; EKG; Echo; 
etc) and it is still a challenge to get a price.  If the educated 
have a hard time getting a price, imagine how challenging it is 
for those who know nothing about the system! 
I recently visited a prestigious university medical center for a 
cardiology visit.  I received bills that were four times the amount 
quoted! Also, I observed courtroom proceedings by this hospital 
for "judgments" of unpaid hospital bills. Those in court were the 
ones who should benefit from the non-profit status afforded 
hospitals.  We cannot expect hospitals to give away care, but 
neither should they continue with billing practices that border on 
extortion.  
"I know what I know; I know what I don't know; but I don't know what 
I don't know."    Robert Ricciardelli 
Nobody would tolerate a "managed grocery" card that enabled you to 
go the grocery store, purchase various items and then get a bill 
30 days later.  Either the purchaser of the card would financially 
collapse because consumers abused the card; or the consumer would 
become irate when they had to pay their bill. Basically, this is 
what is happening in health care.
For those who think that providing insurance for everyone is the 
answer, there are two reports that suggest that this will not be 
the answer many hope forï¿½
USA Today/Kaiser Family Foundation/Harvard Survey regarding health 
care - of those who reported experiencing challenges paying medical 
bills, 61% had insurance.
Health Affairs, 2 February 2005 - 47% of bankruptcies are related 
to medical bills; yet 75% had insurance at the beginning of the 
medical challenge.  
Without addressing transparency issues, providing insurance is not 
the answer.  Individuals must still pay their maximum out of pocket 
charge and other bills not covered by their insurance (Ambulance 
services).  Many believe increasing costs of insurance is because 
the cost of health care is rising so fast.  When health care costs 
are insulated from free market forces, costs escalate at a rate 
much greater than medical inflation.
According the HealthINFLATION News (3/31/04; Vol. 13, No. 3), 
inflation for various aspects of health care is as follows:

Annual Inflation			March		February 	Net Increase
Health Care Indexes		2003		2004		in inflation
Dental Care				3.6			5.2			1.6
Eye Care					-0.1			1.4			1.5
Medical Equipment			-0.2			1.2			1.4
Non-prescription drugs		1.2			1.6			0.4
Physician Care			3.0			3.4			0.4
Health Care				4.3			4.2			-0.1
Prescription Drugs			3.7			2.8			-0.9
Inpatient Hospital Care		7.2			5.9			-1.3
Nursing Home Care		5.5			4.4			-1.1
Misc. Professional Care		3.2			1.8			-1.4
Outpatient Hospital Care		11.9			6.0			-5.9
If benefits were based upon actual costs of health care, we would not 
have a health care "crisis."  Health care consumers are insulated by 
co-pays, deductibles, nondisclosure of prices by hospitals, and fear 
of posting prices by physicians.
Costs are not the only issue to be concerned about.  Innovation, 
quality and access to care are also important.  In a free market 
world, costs should be controlled while increasing access to better 
quality products.  The United States has "invested" in health care 
more than other countries.  Our investments have paid off by the 
innovative medications and interventions that have been discovered.  
The United States has more Nobel Prizes than any other nation.  
In fact, we have more Nobel awards for Physiology and Medicine 
than all other countries combined!  Many are benefiting from the 
United States' investment in new technology and medications.
The computer is the best example of the power of free market 
forces controlling technology costs.  Computers are consistently 
less expensive while the features and options continue to improve.  
Innovative technology is responsive to free market forces.  Health 
care technology may be more expensive initially but should become 
progressively less expensive when exposed to market forces.
Liberty Health Group has experienced success in controlling costs 
in most aspects of health care delivery.  Lab tests, surgical 
procedures, and diagnostic studies are less expensive with 
transparency and an engaged consumer.   When the consumer has 
knowledge of costs and quality, they make decisions tailored to 
their preferences.  Some may prefer a more expensive option 
because of better quality or service.  Others may prefer less 
expensive options and save money for future medical needs.  
Transparency in prices should not be confused with socialism (all 
prices are the same).  In fact, the freedom to charge different 
prices rewards innovative services.
The ones who suffer the most from hidden costs are the uninsured 
and underinsured.  Hospitals routinely charge 400% more for the 
uninsured/underinsured.  It is impossible to determine what a 
hospital receives from insurance carriers for comparable visits 
or procedures.  Supposedly, insurance carriers represent large 
purchasing groups that justify deeper discounts.  42 million 
uninsured are a significant purchasing group and should be 
afforded the same discounts as insurance carriers!  False scales 
can never be justified!
	Here is an example of the prices an uninsured individual 
	faced when hospitalized in California.  I compared CMAC/ 
	Tricare pricing to the hospital prices.  The hospital 
	would not tell what they accepted from other insurance 
	carriers for similar care and services.  Our goal - pay 
	an amount  accepted from an insurance carrier.  The 
	billing department was not cooperative and resisted giving 
	any information. 

	Lab Tests (code)		CMAC/Tricare Pricing		Hospital Prices
	80053					$16.09				$229
	84484					$14.98				$218
	82805					$43.19				$480
	83520					$19.70				$234
 
	Summary of some tests		$229.62				$2832

	Procedure Codes		CMAC/Tricare Pricing		Hospital Prices
	CT Scan (71260)		Global $348.05				$2,614
	HHN (94640)			$12.90	X 31 = $399		$125 X 31 = $3875
	ER (99285)					$149.20				$419
	EKG tracing (93005)			$17.93				$329
	Pulse Oximeter (94760)			$4.75				$328
	
The discrepancies are glaring and beg an explanation!  Our goal was 
to resolve this matter without legal intervention.  Even if the 
CMAC/Tricare numbers are low, there cannot be such a wide disparity 
between the hospital bills and the CMAC/Tricare maximum allowable 
charge.  The hand held nebulizer (HHN) therapy bill and pulse 
oximeter bills are almost unbelievable!  Sadly, this is not an 
uncommon example. 
The notion that hospitals must charge more to make up for the "abuse 
by the uninsured" is not supported by sound ethical or business 
discussions.  A study by Alwyn Cassil, Center for Studying Health 
System Change, focused on the frequency of ER visits 1996/97 - 
2000/01.  They found a 16% increase (108 million/year) in ER visits.  
Those with insurance or Medicare accounted for 66%.  The self-pay 
or those not charged accounted for 10%.  Medicaid/Cash patients 
reported waiting longer and rated the service they received lower 
than insured patients.  The uninsured were not a major factor for 
increased crowding in the ER.
It is imperative that hospitals reveal the amount they accept from 
insurance carriers for a procedure, lab, or service.  Mandating 
they post a price will not resolve the disparity.  The result be 
like the Average Wholesale Price (AWP) used for pharmacy prices, 
or the shadow that "discounts" create - neither one is practically 
useful.  AWP is a meaningless business term.  A 30% "discount" of 
an inflated price is often worse than 100% payment of a legitimate 
price.
It is unconscionable to allow this two-tiered billing practice to 
continue.  I have spoken to Hospital Administrators who fear the 
wrath of the "Medicare Fraud Squad."  They are concerned that they 
cannot accept less than their billed rate from the uninsured/
underinsured.  A transparent price would eliminate this fear.  
Furthermore, it does not seem logical to give insurance carriers 
a price break when they pay their executives multiple million 
dollar salaries.  Sliding scales do not produce transparency.
Liberty Health Group has success with outpatient costs.  We have 
seen progressively less expensive lab tests, diagnostic tests, 
medication costs controlled, and renewal rates that are consistent 
with medical inflation (2-4%).  New technology and medications will 
always be more expensive.  The individual should be allowed to 
decide if the more expensive medication is worth the money.
Small businesses are also affected by non-transparent pricing.  
They are challenged to keep up with premium inflation that is 
triple medical inflation.  Many business owners cannot afford to 
continue to offer benefits.  Mandating coverage does not resolve 
the problem posed by non-transparent prices. 
The Department of Treasury and IRS issued guidance that gave small 
businesses more leverage in their health benefits options by 
expanding the use of Health Reimbursement Arrangements (HRA), 
Section 105 of the Internal Revenue Code (June 2002).  The 
employer credits pre-tax money to their employees that may only 
be used for qualified medical expenses. Unspent money can 
accumulate for future medical needs.  
Cafeteria plans (Section 125 of the Internal Revenue Code) are 
similar.  The employer and employee can contribute pre-tax money 
into these accounts for qualified medical expenses. These plans 
work best for predictable medical expenses.  However, unspent 
money in the Cafeteria plans does not accumulate.  As a result, 
there are end of year spending sprees with the remaining money.
Health Savings Accounts (HSA) are another exciting option.  The 
employer and employee may contribute to these plans that include 
a pre-tax medical account and a qualified high-deductible policy.  
In my experience these plans are rich in concept but disappointing 
in application.  The main reasons they are disappointing are: a 
lack of transparency regarding pricing (HSA holders pay "retail" 
prices at the doctor and hospital); and renewal rates are 
disproportionately high after 2-3 years into the plan.
When employees have control of a portion of their health care 
dollars, they will shop for health care. Preventive services are 
more likely to be used, less expensive medication options will be 
pursued, and routine care/immunizations are not neglected.   
Legislative efforts that would help control costs, increase access 
to care, and encourage saving unspent money for unpredictable 
medical events might focus on the following:

Hospitals:
Remove the fear Hospital Administrators have expressed regarding the 
"Medicare Fraud Squad" evaluating and assessing fines.
Assess non-profit status of hospitals who continue to expect payment 
from the uninsured that is 400% higher that what is accepted from 
insurance carriers.
The word "profit" must be defined.  There are "for profit" hospitals 
that are efficient, less expensive than comparable hospitals, and 
treat all in the ER.  Society would be much better served by a "for 
profit" hospital that posted prices than a non-profit hospital that
charges those who need help the most 400% above an acceptable 
insurance payment.
Something to ponderï¿½Why can hospitals own physicians but physicians 
cannot own hospitals?  Is there ethical superiority of one 
relationship to the other?

"You must deodorize profit and make people understand that profit is 
not something offensive, but as important to a company as breathing"						
Sir Peter Parker  
Chairman, British Rail

"End of year spending sprees by the Federal Government is an 
egregious waste of tax payer's dollars."  ï¿½unknown

Pharmacy prices:
Disclose rebates and all financial benefits related to pharmacy 
issues.
Average Wholesale Price (AWP) is a meaningless number for most 
discussions.  The question is rather simple, "What does the drug 
cost?"
Insurance costs:  Eliminate restrictions for purchasing health 
insurance across state borders.
Physician fees:  Encourage physicians to "post their prices" without 
fear of fines.  I posted my prices since 1997 without any legal 
problems.  Those concerned about a "two-tiered system" must agree 
that our health care delivery system currently has a "two-tiered 
system" that favors the insurance carriers and discriminates against 
the uninsured.  This must end!

Transparency issues in health care are vital for the success of any 
health care delivery system. Costs are controlled, access improved, 
and innovation appropriately rewarded when prices are transparent 
and free market forces are allowed to work. I know from the front 
lines of health care that we could rapidly and dramatically improve 
health care for the uninsured and underinsured with 
non-discriminatory, transparent pricing. 

"We do not have to see eye to eye to walk hand in hand."     	
                                                     						
                                                    Phillip Gambel 

	Mr. Deal.  No, but you are.
	Dr. MacDonald.  Well, thanks.  
	Mr. Deal.  What that means is we have got some business on 
	the Floor we may have to attend to in just a minute but 
	thank you, very interesting testimony.
	Dr. Collins?
Dr. Collins.  Thank you, Mr. Chairman for this invitation to testify 
on the importance of making health care cost information publicly 
available.
	Mr. Deal.  Would you pull that a little closer, Doctor?  
	There you go.
	Dr. Collins.  Transparency and better public information on 
	cost and quality are essential for three reasons: to help 
	providers improve by benchmarking their performance against 
	other providers, to encourage private insurers and public 
	insurance programs to reward quality and efficiency, and to 
	help patients make informed choices about their care.  
	Transparency is also important to level the playing field.  
	The widespread practice of charging patients different 
	prices for the same care is not equitable, especially when 
	the uninsured are charged more than other patients.  But it 
	is unreasonable to expect that information on prices, total 
	bills, and quality will cause health care markets to perform 
	like markets for other goods and services.  Health care is 
	not homogeneous and patients will never have as much 
	information about the care they need as the physicians who 
	care for them.  Health care decisions are made under 
	emergency conditions, emotional stress, and in many 
	occasions both the insurance industry and the health care 
	delivery sector are highly concentrated, leaving patients 
	with few real choices.
	As important as price transparency is, price information 
	is of little value by itself.  Knowing the prices of health 
	care services is not very helpful when you do not have 
	information on the total cost of caring for a given 
	condition and the quality of the outcomes of that care.  
	The current state of health care information is inadequate.  
	Patients report that they rarely have cost and quality 
	information available to them.  Physicians rarely have 
	comparative information on the quality of their own care 
	or on the quality of the care to physicians to whom they 
	refer patients.  Patient use of information, however, is 
	not likely to transform the health care market.  Patients 
	are in the weakest position to demand greater quality and 
	efficiency.  Payers, Federal and State governments, 
	accrediting organizations, and professional societies are 
	much better positioned to insist on high performance.
	Posting a greater financial burden on the sickest and 
	poorest patients through cost sharing and high deductibles 
	is not the right prescription for what currently ails the 
	health care system.  Americans already pay far more out of 
	pocket for their health care than citizens in other 
	industrialized countries and people in high deductible 
	health plans either coupled with health savings accounts 
	or not allocate substantial amounts of their income to 
	their health care.  They also are much less satisfied with 
	their care than adults in more comprehensive plans.  Most 
	troubling is that people in high deductible plans are far 
	more likely to delay, avoid, or skip health care because 
	of cost.  The problem is particularly pronounced among 
	people with low-incomes and health problems.  When people 
	in high deductible plans do access care, there is evidence 
	that they are more likely to have problems paying bills 
	and to accumulate medical debt.  
	So what needs to be done to achieve transparency in our 
	health care system?  Medicare should assume a leadership 
	role in making cost and quality information by provider 
	and by patient condition publicly available.  It should 
	forge public and private partnerships to create a 
	multi-payer database, uniform quality measures, and 
	transparent methodologies for adjusting quality and cost.  
	As the IOM has recommended, a national quality 
	coordination board within HHS could be created.  The 
	board could set priorities, oversee the development of 
	quality and efficiency measures, and ensure the 
	collection of information on those measures.  Health 
	information technology should be invested in and 
	fundamental changes in current payment methods should 
	be made.  Medicare's physician group demonstration 
	project is a step in the right direction.  
	HSA health savings account legislation should be modified 
	to reduce its potentially harmful effects on vulnerable 
	populations.  Legislative modifications might include 
	permitting lower HSA eligible deductibles for lower wage 
	workers, exempting primary care, as well as preventative 
	services from the deductible, exempting prescription 
	drugs essential for the management of chronic conditions, 
	and guaranteeing choice of a comprehensive plan to workers 
	who are covered under employer plans, permitting greater 
	flexibility and benefit design, and setting an income 
	ceiling on eligibility for HSAs to reduce the tax subsidy 
	for higher income individuals.  
	Price transparency is the beginning, but it is unlikely 
	to have a major impact in the absence of better information 
	on quality and the total bills for the treatment of various 
	acute and chronic conditions.  Creating a database with 
	this information is certainly feasible but it requires 
	Federal leadership.  This hearing is an important step 
	towards achieving that outcome.
	Thank you.
	[The prepared statement of Dr. Sara R. Collins follows:]

Prepared Statement of Dr. Sara R. Collins, Senior Program Officer, 
Future of Health Insurance, The Commonwealth Fund

[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
	Mr. Deal.  Thank you, Dr. Collins.
	I am going to try to get both of you in before we have to 
	break for a series of three votes and as you know that 
	would take us a little while to get back.  So Dr. Goodman, 
	we will proceed with you now.
Mr. Goodman.  Thank you, Mr. Chairman and members of the committee.
	Will we some day be able to buy health care the way we buy 
	groceries?  Some people think that day is coming but before 
	our consumers can be savvy shoppers in the medical 
	marketplace, they must have information about prices and 
	quality and must be able to compare prices and compare 
	value.
	A recent Harris Poll found that Americans could guess the 
	price of a new Honda within $300 of the actual price, but 
	when asked to guess the price of the cost of four days in 
	the hospital, they were off on average by $8,000.
	Now some have suggested in this hearing that we need new 
	legislation, but I would say before we legislate, we 
	should stop and ask why are we having this problem in 
	the first place?  It is not normal for sellers to hide 
	their prices.  In normal marketplaces the sellers 
	advertise prices, they attract buyers by offering 
	discounts.  So what is it that is so different about the 
	medical marketplace?  I would suggest to you that the 
	big overriding difference is that decade after decade, 
	going back almost 100 years, we have various institutions 
	actively suppressing normal market forces.  And so today 
	we are living with the effects of 100 years of, in my 
	opinion, unwise legislation.  
	Doctors today primarily do not compete with each other 
	on the basis of price.  And prices in the doctor market 
	price are primarily not allocated research.  That is not 
	the way we allocate doctor time.  And the same is true of 
	hospitals.  The hospitals are not competing with each 
	other on the basis of price, and prices in the hospital 
	marketplace are not allocating resources.  The examples 
	of hospital prices that Representative Lipinski gave us 
	are examples of prices that are pure artifacts.  They were 
	chosen by hospitals in order to maximize reimbursement 
	formulas.  They are not equating supply and demand.  
	Now, although we like to think that our health care system 
	is very different from the system in Canada, the fact of 
	the matter is that we pay doctors here about the same way 
	that doctors are paid in Canada.  On average, every time 
	patients spend $1 in this system, only .10 is paid out of 
	pocket at a doctor's office.  In Canada the physicians and 
	services are free.  In America they are almost free.  In 
	both countries we are not allocating the doctor's time on 
	the basis of price.  We are not rationing on the basis of 
	money.  We are rationing by the patient's time.  We are 
	rationing by waiting.
	Now, does the health care marketplace have to work this 
	way?  The answer is no.  And Dr. Ginsburg pointed to the 
	example of cosmetic surgery and LASIK surgery.  These are 
	important markets.  Third party payers have not been in 
	these markets for years.  For cosmetic surgeries probably 
	two decades since third party payers paid.  What we found 
	in these markets is price is readily available.  It is not 
	just a price, it is a package price that covers doctor, 
	nurse, and anesthetists, and facility.  People know what 
	they are going to pay.  Now Dr. Ginsburg said we have 
	some problems in this market.  Well, we may have problems 
	but they pale in comparison.  They are miniscule in 
	comparison to the problems that Dan Rather talked about 
	on Sunday night on 60 Minutes that we are having with 
	other kinds of surgery.
	Now, we can find other examples in the medical marketplace 
	where third party payers are not involved.  Wherever the 
	third party is not involved, we find prices performing 
	the normal function that we expect prices to be found.  
	Minute clinics in the Target stores in the upper Midwest 
	have prices for all their procedures.  People know what 
	they are going to pay, there is very little waiting, and 
	they work very well.  Wal-Mart wants to take this system 
	nationwide.  Steve Kassis' organization also wants to 
	take them nationwide.  No third parties are involved.  
	The TelaDoc service, you can actually talk to doctors on 
	the telephone with this service.  You know what you are 
	going to pay, you are charged for the number of minutes 
	you talk.  Prices are very visible, they are very 
	transparent, and it works very well.  Luminous now 
	allows patients to email their doctors and have email 
	consultations.  People know exactly what they are going 
	to pay.  They pay from their health savings accounts.
	Going forward, we have remarkable new technologies that 
	I think do not require any legislation.  We simply need 
	to let these technologies spread.  For drugs, RX Examiner 
	allows patients to see where the authentic and generic 
	substitutes and over the counter substitutes for expensive 
	brand name drugs.  And DestinationRx.com allows patients 
	to compare prices nationwide.  And I would guess that the 
	average patient can cut his drug prices in half simply by 
	shopping nationwide for drugs.  Some patients can cut 
	their cost by 90 percent, enormous opportunity for 
	reduction in cost.  
	In HealthMarket we have already heard has a brand new 
	technology that is really exciting.  Prices for 400,000 
	doctors and 20,000 procedures readily available with a 
	computer program.  Simbro is a company that has developed 
	a product that allows a lot of quality comparisons among 
	hospitals.  eMedicalfiles allows another kind of 
	transparency.  It allows the doctors to see what other 
	doctors have done and what is happening in other facilities 
	for the patient, and does it all while protecting the 
	privacy in accordance with the HIPAA regulations.
	I would say that the most important factor that we can 
	identify in all of this is empowering patients.  That is 
	why I think we need expanded medical savings accounts, 
	and flexible medical savings accounts.  Forget the high 
	deductible, forget the co-payment, we just need the 
	patients being in charge of the money.  The supply side 
	will respond.
	Thank you, Mr. Chairman.
	[The prepared statement of Dr. John Goodman follows:]

Prepared Statement of Dr. John Goodman, President and CEO, 
National Center for Policy Analysis

Will consumers some day be able to shop for health care the way 
they shop for groceries?  As farfetched as that idea may seem, 
some believe it will become a reality.  But in order for 
patients to become savvy shoppers in the medical marketplace, 
they must be able to discover what things cost and to compare 
prices as well as value.  Today, that is not easy to do.
A recent Harris Poll found that consumers can guess the price 
of a new Honda Accord within $300.  But when asked to estimate 
the cost of a four-day stay in the hospital, those same 
consumers were off by $8,100!  Further, 63 percent of those who 
had received medical care the last two years did not know the 
cost of the treatment until the bill arrived.  Ten percent 
said they never learned the cost.\1\
This is not an academic issue.  If you are like most other 
Americans, your employer has raised your health insurance 
deductible and copayment within the last few years.  And, 
you may have a special account from which to pay bills directly.  
Increasingly, employees are being asked to make their own 
choices and manage their own health care dollars.
The medical marketplace is not prepared for these changes.  
Not only do patients typically not know the cost of the medical 
services they receive, the institutions of health care 
delivery often make price and quality information difficult, 
if not impossible, to obtain.
Why is information consumers have ready access to in other 
markets not generally available in health care?  What 
institutional and technological changes are needed in order to 
make such information routinely available prior to health 
purchases?  What is the appropriate role for public policy?

Source of the Problem
The principal reason why prices are not publicly quoted and 
commonly known in health care is that prices do not serve the 
function in health care that they do in other markets.  
Specifically, doctors and hospitals do not compete on the 
basis of price and prices do not ration scarce resources the 
way they do in other markets.
Although ours is a very different system from the health 
care system of Canada,\2\ the way in which we pay providers 
in both countries is surprisingly similar.  In general, fees 
are set by third-party institutions and those institutions 
pay all, or almost all, of those fees.
On the average, every time Americans spend a dollar on 
physicians' services, only 11 cents is paid out-of-pocket; 
the remainder is paid by a third party (an employer, insurance 
company or government).\3\  From a purely economic perspective, 
then, our incentive is to consume these services until their 
value to us is only 11 cents on the dollar.  Moreover, 
millions of Americans do not even pay the 11 cents.  Medicaid 
enrollees, Medicare enrollees who have medigap insurance, 
and people who get free care from community health centers 
and hospital emergency rooms pay nothing at the point of 
service.  Most members of HMOs and PPOs make only a modest 
copayment for primary care services.  Clearly we are not 
rationing health care on the basis of price.  
But if not price rationing, how do we ration physicians' 
services?  We ration the same way other developed countries 
ration care.  We force people to pay for care with their time.  
The services of physicians are a scarce resource and a valuable 
resource.  So at a price of zero (or at a very low out-of-pocket 
price) the demand for these services far exceeds supply.  Unable 
to bring supply and demand into balance with money prices, our 
system does that next best thing.  We ration by waiting.  
Some may object that the real demand for physicians' services 
is not determined by time or money but by the amount of sickness 
in society.  Yet this view is surely wrong.\4\  Consider that 
12 billion times a year Americans purchase over-the-counter 
(OTC) drugs and suppose that on their way to these acts of 
self-medication all of the purchasers stopped to get professional 
advice.  To meet that demand, we would need 25 times the number 
of primary care physicians we currently have!\5\  
Now suppose that instead of physically going to a doctor's 
office, purchasers of OTC drugs could get professional advice 
by means of telephone or email.  The same problem would arise.  
The demand for advice would far exceed the ability of physicians 
to supply it.  
In general, patients cannot have the best of both worlds.  If 
they communicate with doctors the way they communicate with 
lawyers, they will have to be charged money prices for the use 
of the doctor's time (the way they pay legal fees).  Health care 
cannot be both easily accessible and free.  It must be one or 
the other.  Waiting is not an accidental by product of modern 
health care delivery.  It is an essential ingredient.  
What difference does this make?  A great deal of difference.  
In general, if doctors do not compete with each other on the basis 
of price, they do not compete at all.
One consequence of rationing by waiting is that the time of the 
primary care physician is usually fully booked, unless she is 
starting a new practice or working in a rural area.  This means 
that almost all the physician's hours are spent on billable 
activities.  Further, there is very little incentive to compete 
for patients the way other professionals compete for clients.  
The reason: neither the loss of existing patients nor a gain of 
new patients would affect the doctor's income very much.  Loss 
of existing patients for example, would tend to reduce the average 
waiting time for the remaining patients.  But with shorter waiting 
times, those patients would be encouraged to make more visits.  
Conversely, a gain of new patients would tend to lengthen waiting 
times, causing some patients to reduce their number of visits.  
Because time, not money, is the currency we use to pay for care, 
the physician doesn't benefit (very much) from patient pleasing 
improvements and is not harmed (very much) by an increase in 
patient irritations.  
What about the hospital sector?  As is the case for physician 
services, fees for hospital services are set and paid by 
third-party payers.  And, as is the case for physician services, 
the scarce resource again is the doctor's time.  Here, however, 
it is not patients who are waiting on doctors; it is hospital 
beds (and other facilities) that wait on doctors.
In many ways, the two sectors are mirror images of each other.  
In neither sector do prices clear markets.  And in neither sector 
is competition among providers based on price. 

Can Health Markets be Different?
There is nothing normal or natural about rationing by waiting.  
The exterior offices of lawyers, accountants, architects and 
other professionals are called "reception areas," not "waiting 
rooms," and very little waiting actually goes on.  The reason: 
waiting is a wasteful way to allocate resources.  In markets 
for other goods and services, the consumer's cost is typically 
the producer/seller's income.  But when people pay for goods 
with their time, their waiting cost is not someone else's income.  
It is a net social loss.  
Rationing by waiting is not only socially wasteful, it is a poor 
way of delivering health care.  Under such a system, there is no 
way to insure that those who need care the most get it first, or 
even get care at all.\6\  Human resource experts estimate that 
one-quarter of physicians visits are for conditions that patients 
could easily treat themselves.\7\  Balanced against these 
"unnecessary" visits are all of the potential visitors who choose 
not to seek care.  Undoubtedly, many of those are "necessary" but 
unrealized visits; and, hence, the patients go without professional 
treatment.  
To find radically different physician behavior, one must look at 
markets where third-party payers are not involved at all, such as 
the markets for cosmetic and lasik surgery.  Unlike other forms of 
surgery, the typical cosmetic surgery patient can (a) find a package 
price in advance covering all services and facilities, (b) compare 
prices prior to the surgery and (c) pay a price that is lower in 
real terms than the price charged a decade ago for comparable 
procedures - despite the considerable technological innovations in 
the interim.\8\ 
Ironically, many physicians who perform cosmetic surgery also 
perform other types of surgery.  The difference in behavior is 
apparently related to how they are paid.  A cosmetic surgery 
transaction has all the characteristics of a normal market 
transaction in which the seller has a financial interest in how 
all aspects of the transition affect the buyer.  In more typical 
doctor-patient interactions, doctors are not paid to be concerned 
about all aspects of care and therefore typically ignore the 
effects on the patient of the cost of time, the cost of drugs, and 
other ancillary costs.  Note, this holds for HMO doctors as well 
as fee-for-service doctors and what is true for U.S. doctors in 
general is also true of doctors who practice in the government-run 
health systems of other developed countries.
Whenever there is waste and inefficiency in a market, there is an 
opportunity for entrepreneurs to make profits by eliminating that 
waste and inefficiency.  The health care market is no exception.  
What makes entrepreneurship difficult in health care is that in 
order to eliminate waste and inefficiency, the entrepreneurs must 
step outside of the normal payment mechanisms.  This means that 
patients who take advantage of these services often must pay 
out-of-pocket for what theoretically should be covered by their 
insurer.  
The entrepreneurial activities we have identified tend to have 
two characteristics: (a) they allow patients to economize on time 
and (b) they step outside the normal reimbursement channels, 
usually asking for payment at the time of service.  Here are some 
examples:   
Minute clinics.  These are walk-in clinics located in selected 
Target and Club Food stores and some CVS Pharmacies, and Wal-Mart 
has signaled its interest in providing a similar service through 
its stores nationwide.  They are staffed by nurse practitioners.  
No appointments necessary and most office visits take only 
15 minutes.  Treatments range from $25 to $105.  In contrast to 
standard physician practice, medical records are stored 
electronically and prescriptions are also ordered that way.
TelaDoc.  This service offers medical consultations by telephone.  
A doctor usually returns patient's calls within 30 to 40 minutes.  
If the call is returned later than 3 hours the consultation is 
free.  Access is available around the clock.  Registration for 
the service costs $18.  Phone consultations are $35 each, with a 
monthly membership fee ranging from $4.25 to $7. 
Doctokr.  This is the Virginia medical practice of Dr. Alan 
Dappen.  Although he offers in-office appointments, he encourages 
most patients to have either an e-mail consultation or a phone 
consultation.  Dappen charges based on the amount of time required.  
A simple consultation generally costs less than $20. 
CashDoctor.com.  This is a loosely-structured network for doctors 
across the country that are "cash friendly."  Practices styles and 
fee schedules are available online. 

Is Needed Technology Available?
It is possible to have a health care system in which third-party 
payers neither set the fees nor pay the fees of providers.  For 
example if health insurance worked like casualty insurance (the 
type of insurance people purchase for their homes and automobiles), 
insurance reimbursements would cover the expected cost of care for 
most providers; but patients would be free to negotiate with 
individual providers and pay more (for better service) if they 
found extra value warranted the extra charge.
Even in this imaginary market, however, there has to be a way 
for patients to gain access to price and quality information.  
So how exactly would that work?  Some assume that we need a new 
government program to kick-start needed technological changes.  
Yet while pundits talk and politicians threaten to legislate, 
the private sector already has developed many of the tools to 
solve these problems.
In the market for drugs, the web site Rxaminer.com allows patients 
to discover therapeutic and generic substitutes for brand name 
drugs as well as over-the-counter alternatives; the site 
DestinationRx.com allows patients to compare prices nationwide.
A model developed by Health Market allows its insureds to compare 
the price they will pay for 20,000 procedures performed by 
virtually every doctor in the country.
A product developed by Subimo allows patients to compare quality 
and price data for most hospitals in the country.
A product developed by eMedicalfiles creates needed 
transparency for doctors - it allows medical records to travel 
electronically as patients go from doctor to doctor and hospital 
to hospital.

What Public Policy Changes are Needed?
If we do not need government to fund or regulate new technologies, 
what changes are needed?  New government policies can help in 
two ways.  First, in markets where government is the primary 
third-party payer (e.g., Medicare or Medicaid), policymakers can 
use existing technology to let its own insureds have access to 
price and quality information.  (Some modest steps in the right 
direction are already underway.)
Second, we need to change the tax law to make it easier for 
people to self-insure for medical expenses instead of 
over-relying on third-party insurance.  In order to have a 
workable, well-functioning medical marketplace, we need to 
fundamentally change the way we pay for health care, including 
the way we pay doctors.  A step in the right direction is the 
creation of Health Savings Accounts (HSAs).  Instead of an 
employer or insurer paying all the medical bills, about 
3.2 million people are managing some of their own health care 
dollars through these accounts and another 3 million have Health 
Reimbursement Arrangements.\9\
Despite their many advantages, HSAs can be made even better.  
Under the current system, HSA plans with deductibles and 
copayments graph onto the current payment system and reinforce 
it rather than challenge it.  Under the current HSA rules, if 
a patient pays for care with dollars, those dollars count 
toward a deductible and move the patient closer to the point 
when a third-party will pay all remaining financial costs.  
But if a patient pays for care with time, this does not count 
toward the deductible.  Further under most HSA plans, time-saving 
innovations are typically not covered expenses.  In these ways, 
most HSA plans are tacked on to the existing payment system, 
rather than an alternative to it. 
The current HSA law's primary problem is that decisions the 
market should make have been made by the tax-writing committees 
of the U.S. Congress instead.  What is the appropriate deductible 
for which service?  How much should be deposited in the HSAs of 
different employees?  How can we use these accounts to meet the 
needs of the chronically ill?  In finding answers, markets are 
smarter than any one of us because they benefit from the best 
thinking of everyone.  Further, as medical science and technology 
advance, the best answer today may not be the best answer 
tomorrow.  

	Mr. Deal.  Thank you.
	Dr. Anderson?
Dr. Anderson.  I do not know if I am going to make it.
	Mr. Deal.  Switch chairs?
	Dr. Anderson.  No, I think I will be fine, I am a loud 
	person.
	Thank you, Mr. Chairman for the opportunity to testify 
	this morning.  
	My overall message is that simply publishing prices will 
	not allow consumer to comparison shop and will not bring 
	prices down.  Additional information will be necessary 
	for comparison shopping to occur.  Let us assume you went 
	to the hospital and the hospital presented you with their 
	price list.  The price list is called a charge master file 
	and it lists the prices for approximately 25,000 different 
	items.  First, you probably would not understand most of 
	the items on the charge master file.  As a result of the 
	testimony I gave two years ago at an Energy and Commerce 
	Committee hearing, I have been involved in numerous court 
	suits involving the rates that hospitals charge the 
	uninsured.  I also was on 60 Minutes last week talking 
	about this issue.  
	Because of many of these court suits, I have been reading 
	far too many charge master files.  One of the items on the 
	charge master file for example is the head bugger upper 
	body cover.  The charge for one hospital is $77.50 for 
	that.  Another item on the charge master file was the 
	lactated wingers and the charge at that hospital is $189.  
	Charge master files have 25,000 different items like this.  
	The normal person and probably most doctors cannot 
	understand what is on the charge master file.  In order 
	for price lists to be useful, the price lists need to be 
	understandable.
	Second, a patient needs to know which of these 25,000 
	items on the charge master file he or she will need.  Most 
	patients entering the hospital have no idea what services 
	they would need.  Should they compare prices for the head 
	bugger upper body cover?  Should they compare it for the 
	lactated ringers?  The typical patient, in-patient, will 
	probably need only 50 different items.  The problem is you 
	do not know which of these 25,000 items you are going to 
	need, and it is unlikely the hospital or the doctor can 
	tell you in advance which of these 50 items you are likely 
	to need.  Transparency, price transparency works only if 
	you know what you are going to buy.
	Third, the patient is unlikely to be making the final 
	decisions.  The team of doctors caring for you is the one 
	who makes the final decisions.  When you go to the 
	emergency room because you broke your wrist, you do not 
	make the final decisions.  Same story when you go to the 
	hospital for cancer treatments or to treat your diabetes.  
	The decisions are generally left to the doctor because 
	most of us do not know what a head bugger upper body 
	cover or a lactated ringer even does.  
	Fourth, the prices that you will be quoted on the charge 
	master file are not the prices that most people pay.  
	In my testimony, I include a tape of the charge to cost 
	ratios for hospitals in each State.  In 2003, New Jersey 
	had the highest charge to cost ratio at 3.75.  What this 
	means is that New Jersey hospitals charge $3.75 for an 
	item that costs them $1.  Does this mean that hospitals 
	in New Jersey are earning enormous profits?  No.  Available
	data suggested New Jersey hospitals are earning only 
	small profits.  The reason is clear.  Although they charge 
	$3.75 for an item that costs them a dollar, they do not 
	receive $3.75 from these patients.  Health insurers, health 
	plans, Medicare, and Medicaid do not pay full charges. 
	They negotiate rates, we negotiate rates which are much 
	closer to cost than to full charges.  The only patients 
	asked to pay these full charges are the uninsured, some 
	people with high deductible health savings accounts, and 
	the international visitors.  It does not make sense to 
	post prices that only a few patients actually pay.  For 
	the prices to be useful, they need to reflect what most 
	insurers are actually paying and not the hospitals price 
	wish list.  
	Fifth, the prices can change daily.  A person could do 
	comparison shopping and find the best price.  Then when 
	they actually enter the hospital, they would find that 
	all the prices have changed.  In fact, the prices could 
	change while the person was in the hospital.  It would 
	be necessary to force the hospital to maintain its price 
	to allow comparison shopping.
	Sixth, if you require hospitals to disclose prices for 
	just a limited set of procedures, it would lower the 
	prices for just those limited set of procedures.  Would 
	you go into a Wal-Mart if they would tell you the prices 
	for only 50 items but wanted you to buy everything?
	My testimony so far has only focused on hospitals.  
	Inadequacy of simply posting prices also applies to 
	physicians and drug plans.  For example, the Medicare 
	prescription drug plans can change the prices of 
	prescription drugs any time they choose.  They can also 
	change the co-insure amounts any time they choose.  As 
	a result, a Medicare beneficiary who initially found 
	the least expensive plan may quickly find that these 
	prices have all changed.
	So what can be done to improve price transparency?  My 
	proposal is to require all providers to quote their 
	prices in terms of Medicare rates.  The hospital or 
	physician could say I charge X percent of the Medicare 
	rate.  One hospital might charge 120 percent of the 
	Medicare rate and other hospital would charge 125 percent 
	of the Medicare rate.  For certain items, the hospital or 
	physician could deviate from the Medicare rate.  The 
	advantage to this is it would allow each patient to 
	compare one number, one price.  The Medicare rates are 
	publicly available information and nearly all doctors 
	and hospitals are familiar with Medicare prices.  
	Currently there are 25,000 items on the hospital charge 
	master file and over 10,000 items CPT codes that 
	physicians use.  There is no way for a patient to 
	compare this many prices especially when he or she 
	does not even know what services she is going to use.
	I appreciate the opportunity to testify this morning.
	[The prepared statement of Dr. Gerard F. Anderson 
	follows:]

Prepared Statement of Dr. Gerald F. Anderson, Johns Hopkins 
Bloomberg School of Public Health, Health Policy and Management

Mr. Chairman, members of the Committee, thank you for this 
opportunity to testify this morning. My name is Gerard Anderson 
and I am a professor in the Bloomberg School of Public Health 
and a professor in the School of Medicine at Johns Hopkins 
University. I am also the Director of the Johns Hopkins Center 
for Hospital Finance and Management.
I believe health care prices should be more transparent. 
Currently, it is very difficult for consumers to be aware of 
the prices that they will pay for hospital, physician, and other 
medical services as well as the prices they will pay for products 
such as drugs. However, simply publishing the price will not allow 
patients to compare prices and will not bring prices down. Two 
additional steps are necessary. First, patients need to know what 
services they will use. Most patients do not understand what goods 
and services they may need and so they cannot do comparative 
shopping. Second, prices must reflect market forces. List prices 
are established by the hospitals and physicians without any market 
constraints. Too often list prices have no relationship to the 
prices that are actually being paid by insurers. The prices should 
reflect the market place and should not be dictated by only the 
hospitals and physicians. One way to allow prices to be more 
transparent is to base all rates on a single price standard. The 
Medicare payment rate is one logical suggestion and one that is 
commonly used in negotiations between insurers and providers. 
Providers could simply say that they charge X% of the Medicare 
rate.

Why Does The United States Spend So Much on Medical Care?  - Its 
Prices Stupid
Making patients aware of the prices they are paying for medical 
services is especially important when you compare the prices that 
Americans pay for medical services to the prices people pay in 
other countries for similar services. Every year I write an 
article in the journal Health Affairs which compares the level 
of spending on health care services in the United States to the 
level of spending in other countries. I have attached a copy of 
the most recent article in this series.
What the article shows every year is that the United States spends 
nearly twice as much for medical care as many other industrialized 
countries. In 2003 (the most recent year comparative data is 
available) the United States spent $ 5635 per person compared to 
$ 3003 in Canada, $2996 in Germany, $2231 in the United Kingdom and 
$ 2139 in Japan.
These higher levels of expenditures can make it difficult for 
American industry to compete in the international market place. 
For example, the financial problem the American auto industry is 
having is partially related to the high costs of medical care. The 
price of a car sold by General Motors includes over $1500 in health 
care costs. In other countries, cars incorporate much lower health 
care costs.
Each year we use the article in Health Affairs to investigate why 
health care in the United States is so much more expensive compared 
to the other countries. We have investigated a number of hypotheses 
including: malpractice costs, defensive medicine, aging of the 
population, the lack of waiting lists in the United States, the 
obesity levels in the United States, and the high level of 
technology that is available in the United States. We have 
investigated each of these factors in one or more of the articles.
What we have found is that each factor is partially responsible for 
the higher costs in the United States. However, none of them really
explains why the United States spends nearly twice as much as other 
industrialized countries.
As we continue to examine the data we have reached the following 
conclusion - "Its Prices Stupid." This was the title of our article 
in Health Affairs in 2003 and it remains our primary conclusion of 
why health care in the United States is so expensive today. 

Comparing Drug , Hospital and Physician  Prices in the United States 
to the Prices Other Countries
In 2004, we published an article in Health Affairs entitled Doughnut 
Holes and Price Controls which compared the drug prices for the 
25 most commonly prescribed drugs ( both brand name and generic) in 
the United States to the drug prices for the same 25 drugs in 
Canada, France and, the United Kingdom.  What the article shows is 
that the United States patient is paying approximately double the 
prices for drugs as patients in Canada, France and the United 
Kingdom are paying. This explains the desire for reimportation 
among United States consumers.
We have also compared the expenditures for hospital and physician 
services. The United States spends twice as much per capita for 
hospital and physician services as other industrialized countries. 
When we examined the reason we first discovered that quantity was 
not the reason - Americans are receiving fewer hospital days per 
capita and fewer physician visits per capita than people in most 
other industrialized countries. In fact, managed care and other 
initiatives have eliminated many unnecessary hospitalizations and 
shortened the average length of a hospital stay. 
A second explanation we examined was technology and we found that 
access to expensive technology was not a major reason for the 
higher per capita hospital spending.  The United States, for 
example, has approximately the same number of CT scanners and MRI 
machines as the average industrialized country. The Japanese have 
access to the most technology. For example, Japan has 4 times more 
MRIs per capita and 7 times more CT scanners per capita than the 
United States. In spite of using all this technology, health 
expenditures per capita in Japan are only 38 percent of the 
United States.
Per capita spending for American hospital services is more much 
more expensive than other industrialized countries because of the 
price of a hospital day. The price of a day in an American 
hospital is nearly two and a half times the price of a hospital 
stay in other industrialized countries.
A similar argument can be made for physician services. Americans 
do not receive more physician services than people in other 
industrialized countries. Yet the price of a physician visit in 
the United States is over twice the price in other countries.
Because of the work we have done comparing the prices in the 
United States to the prices in other countries I am in total 
support of the efforts to control prices in the United States. 
The reason why the United States health care system is much more 
expensive can be summarized in three words - "Its Prices Stupid." 

Policy Initiatives To Control Prices in the United States
Public payors such as Medicare and Medicaid have undertaken a 
number of initiatives to control prices. The first major 
initiative was the Prospective Payment System to control hospital 
rates in the Medicare program. It was soon followed by the 
Resource Based Relative Value System that is used to pay physicians 
in Medicare. Other prospective payment systems have followed for 
other types of providers. Medicaid programs have followed a similar 
approach to Medicare.
Over the past 20 years little public policy attention has focused 
on controlling prices in the private sector. The last public 
policy attempt to control prices in the private sector was 
President Carter's Hospital Cost Containment initiative. This was 
an attempt to control the rate of increase in hospital rates for 
all insurers and for self pay patients.
It is always surprising to me that prices are substantially 
higher in the private sector than they are in the public sector. 
MedPAC numbers continually show that the private sector pays 
10 - 20 percent (and in some years more) than the public sector. 
I have often wondered why the private sector cannot get better 
rates. Some have argued that the public sector shifts costs to 
the private sector. The real policy question is why the private 
sector allows the "cost shift" to occur. Why can not the private 
sector use competitive forces to get lower rates than the public 
sector?
Because the private sector is paying higher rates than the public 
sector, the public sector has difficulty keeping prices low. If 
the public sector was paying substantially lower rates then the 
hospitals and physicians could restrict access to public 
beneficiaries. The differential between the public and private 
rates cannot become too great. The public and private sectors 
need to be able to work together to keep prices low. In the 
United States this means the private sector becoming a strong 
force in controlling prices.

Does the United States Get Value For the Higher Prices?
It is difficult to compare outcomes across countries. Without 
an ability to compare outcomes it is impossible to calculate 
value. There have been a number of initiatives to compare 
outcomes.
For years we have known that the life expectancy is lower in the 
United States than in many other industrialized countries and 
that the infant mortality rates are generally higher. This would 
suggest that we are not getting value for the much higher 
spending in the United States. Critics of these comparisons 
have correctly pointed out that life expectancy and infant 
mortality rates are determined by many factors and that health 
care may play only a minor role.
To examine if the health care in the United States is better 
than the health care in other countries we conducted a study 
comparing the clinical outcomes in the United States to the 
clinical outcomes in England, Australia, New Zealand, and 
Canada. We selected 21 indicators to compare. For example, two 
of the indicators were 5 year survival rates following a 
diagnosis of breast cancer and mortality from asthma in 
people are 5 -39. The 21 indicators covered a number of 
illness categories but were not designed to be a comprehensive 
list. 
What we found was that the United States was the best on a 
few indicators, the worst on a few indicators, and in the 
middle on most indicators. Not a good showing for a country 
that spends more than twice as much per capita as these other 
countries. Internationally it is clear that higher prices in 
the United States do not necessarily result in better outcomes.
 We have also looked at how these other countries have been 
 able to control prices for hospitals, physicians, drugs and  
 other goods and services. The answer in some other countries 
 is that the prices are set by the government. In other 
 countries all the insurers get together and negotiate as a 
 group with the providers. Imagine all the insurers on one 
 side of the table and all the providers on the other side of 
 the table and the end result of the negotiation is a set of 
 prices that all insurers will pay.
An examination of the experiences of these other countries 
suggests that either regulation or collective negotiation 
could work if the objective was to control health care prices. 
There are, however, a number of obstacles to overcome. United 
States policy makers have not believed that regulation is an 
effective way to control prices and having all insurers 
negotiate together would violate antitrust policy.
 
Pricing Transparency - What Else Is Needed
For the reasons discussed above, I am in favor of a renewed 
policy emphasis on lowering health care prices. The United 
States is now considering a different approach - to make prices 
more transparent. This approach has some merit although simply 
posting prices will not achieve the objective of allowing 
consumers to engage in comparison shopping and will not bring 
down prices without additional steps being taken. The remainder 
of my testimony suggests what else needs to be done and finally 
makes suggestions regarding what actions the Congress should take 
in addition to requiring prices to be posted 
First, it is critical for patients to know the services they are 
going to use. Comparison shopping is not possible if the patient 
does not know what goods and services he/she is are going to buy. 
Second, the prices need to be reasonable. By reasonable I mean the 
prices must reflect what is being paid in the market place. The list 
prices that are established by hospitals and doctors generally do 
not reflect what insurers are actually paying. 

Comparison Shopping
Imagine going into a grocery store or a department store and not 
understanding: (1) what most of the products you are purchasing 
actually do, (2) what is actually on the bill, and (3) having no 
idea what you are going to buy when you enter the store. In this 
case you would not be a good comparative shopper even if you knew 
the prices. You need to understand what you are buying before you 
make the purchase.
In health care there is often an additional factor. Imagine that 
you are not even the person picking out the goods in the grocery 
store or the department store. Imagine that someone else is making 
the decisions about what to buy for you. Health professionals, most 
commonly doctors, make most of the decisions when you go to the 
doctor's office or the hospital. For many clinical conditions this 
will always be the case.
The following sections explain why simply requiring hospitals, 
physicians, and drug plans to post prices is insufficient. Without 
these additional steps, the market place will not work and 
comparison shopping will not be possible. 

Hospitals
The hospital charge master file lists the prices for each service 
the hospital provides. The hospital charge master file contains 
10,000 items in a small hospital and 50,000 items in a large hospital. 
Simply posting the prices on the charge master file will provide 
the patient little information if the patient wants to do comparison 
shopping for hospital services. 
1. The typical hospital bill contains 10 to 500 items. These could be 
$1000 for an hour of operating room time or $5 for a Tylenol. The 
patient will never use most of the items on the charge master file. 
Without knowing what services he/she will use it is impossible for 
the patient to do comparison shopping. 
2. Unfortunately, in most cases hospitals and/or the doctor cannot 
tell the patient in advance which services they will need. The 
hospital or the physician may estimate that the procedure may require 
an hour of operating room time but the operation may require only 
30 minutes or may require two hours. The hospital or the physician 
cannot know if the patient will want or need a Tylenol. Without 
knowing precisely what services are going to be used it is impossible 
to really do comparison shopping. Should the patient compare prices 
for 30 minutes, 60 minutes or 120 minutes of operating room time? 
Should the patient compare prices for Tylenol or ibuprofen? 
3. Comparing the 10,000 to 50,000 items on the charge master file is 
foolish when the patient will probably use less than 100. The problem 
is that the patient does not know exactly which 100.
4. Many of the items on the charge master file and ultimately on the 
hospital bill are written in code so that only the hospital 
administrators and a few other experts in the field can understand. 
The charge master file will need to be translated if the consumer 
is going to understand what he/she is buying.
5. I examined a hospital bill for a person who was charged over 
$30000 for an outpatient procedure. A $30000 charge for a procedure 
that did not even require an overnight stay.  
6. The bill contained numerous charges. Many of the services on the 
bill were written in a strange language. I wonder how many people in 
this hearing room know what a "Bairhugger upper body cov'" is or why 
the charge is $77.55. The same hospital bill  contained the following 
items and associated charges:  
a. Furosemide/20MG/2ML/V - $4.54
b. Toradol 30MG/ML 1ML S - $ 22.02
c. Versed 1 MG/ML 2CC VIA - $11.37
d. Lactated Ringers 2B2324 - $189.00
e. Valve IV - $7.15
f. Pack Custom Cysto - $58.00
g. Set Tur - $35.35
h. **Zofran 1 Mg dose - 155.18 
If the consumer is going to effectively comparison shop, then these 
items will need to be described in English.
7. Hospitals are currently allowed to change their prices at any time. 
A patient could comparative shop for hospital services on Monday 
and enter the hospital on Tuesday and find that the prices have all 
been changed. In fact, the patient could enter the hospital on 
Tuesday and remain in the hospital until Friday and see the prices 
changed every day they were in the hospital. This same issue applies 
to the Medicare Prescription Drug benefit. The drug plans are able 
to change their prices at any time. If patients are going to engage 
in comparative shopping the prices have to be fixed so that the 
patients can compare prices.

Physicians 
1. In most cases it is the physician who is making the decision about 
what type of care the patient will receive. The physician is unable 
to provide any guarantees in most cases concerning what services 
he/she will ultimately provide. As a result, comparative shopping 
will be impossible since you do not know the prices of what services 
to compare.
2. Comparison shopping for certain physician services is possible. 
Probably the best example is LASIK surgery. It is a relatively 
standard procedure and therefore it is possible for the physician 
and the patient to compare services and compare prices. In this case 
a price list is probably sufficient. LASIK, however, is more the 
exception than the rule.
3. The more common encounter between a physician and a patient is when 
the patient does not exactly know what is wrong and the physician 
has to order a series of tests to discover what is wrong and then to 
decide on the appropriate treatment. This cannot be predicted at the 
beginning. Then once the treatment starts it is often unclear what 
will be needed and how long it will take.
4. For example, each woman with breast cancer will probably respond 
differently to treatment. As a result, the oncologist cannot specify 
in advance what services will be provided or what will be charged. 
If a woman was trying to comparative shop for an oncologist she 
would need to know what services will be provided and not just the 
prices that will be charged for services that she may or may not 
need. The same principle applies to people with chronic conditions 
such as diabetes, congestive heart failure, or asthma. No physician 
can tell the patient in advance what services he/she will require 
in the next year and therefore true comparison shopping will be 
impossible. 
5. In the Medicare program two thirds of Medicare spending is by the 
23% of beneficiaries with 5 or more chronic conditions. These 
beneficiaries see an average of 13 different physicians during 
the year. Their condition is always changing. It will be impossible 
for these beneficiaries to predict what services they will need in 
the coming year and therefore comparison shopping for physician 
services is impossible.

Pharmaceuticals
1. The Medicare Modernization Act allows Medicare beneficiaries to 
compare drug prices in different health plans. Many consumers have 
found this comparison shopping very difficult. 
2. The drug plans participating in Medicare Part D do not have to 
disclose the price that they are paying for the drugs. All that is 
provided to the Medicare beneficiary is the retail price. Drug 
plans are likely to obtain discounts from the pharmaceutical 
companies.
3. Medicare beneficiaries are locked in to a specific drug plan which 
they choose based on the prices of the drugs and the cost sharing 
arrangements. However, the drug plans are free to change prices 
and change cost sharing arrangements during the year. A drug plan 
that was the least expensive for a beneficiary with one set of 
prices could become a very expensive plan if the drug plan 
changed the prices during the year or changed the cost sharing 
arrangements.
4. Next year another problem is likely to arise - Medicare 
beneficiaries developing new diseases which require new drugs 
that they did not anticipate. 
5. A major problem for Medicare beneficiaries doing comparative 
shopping is that they are locked in to a particular plan for a 
year. Many have found the least expensive plan assuming their 
use of drugs does not change during the year. However, for 
millions of Medicare beneficiaries the drug regimen is likely 
to change and at that time they may not have the least expensive 
plan.  
6. Unfortunately, Medicare beneficiaries get sicker as they age. 
Some years they develop a new chronic condition and that 
chronic condition may require them to take a new drug or 
multiple new drugs. The typical Medicare beneficiary acquires 
an additional chronic condition every two or three years. As 
noted earlier in this testimony, 23% of Medicare beneficiaries 
have 5 or more chronic conditions. These beneficiaries fill 
an average of 50 prescriptions during the calendar year. Many 
of them change prescriptions during the year.
7. Without knowing what drugs you are going to use in the year 
it is difficult to do comparative shopping.
In summary, price comparisons have little value unless the 
person knows exactly what goods and services they are buying. 
In health care it is difficult to predict in advance what 
goods and services will be needed and doing comparison 
shopping while a procedure is being done is not generally 
feasible.

Reasonable Prices
It is not sufficient simply to post prices. The prices must 
be reasonable. By reasonable I mean that the prices must 
reflect the market place. The list prices that are in the 
hospital charge master file do not reflect market forces 
for reasons that will be described below. The same applies 
to most physician charges. 
Let's assume that a hospital had prices of $1,000,000 per 
day. Would that be a reasonable price? I suspect most 
reasonable people would say no. What if a doctor had prices 
of $1,000,000 for an office visit - would that be a 
reasonable price? Again I believe most reasonable people 
would argue that $1,000,000 for an office visit is an 
unreasonable price.
Under the current system hospitals and physicians have the 
ability to post any price they choose. There is not a 
requirement that anyone ever pays that posted price and in 
fact the posted price is seldom paid.
The question then becomes how does Congress determine 
what is a reasonable price? It makes no sense to require 
hospitals and physicians and others to post unreasonable 
prices. Two possible standards to determine if the prices 
are reasonable are (1) costs and (2) the market place.
Costs are relatively easy to calculate for hospitals. 
Groups such as MedPAC routinely use costs to compare to 
what Medicare is paying.  The Medicare Cost Report 
calculates Medicare allowable costs for nearly every 
hospital in the United States. Costs are more difficult 
to calculate for physicians, health plans, etc.
One reason for not using costs is that they do not 
encourage efficiency. The prices could be high because 
the hospital is very inefficient. A second reason for 
not using costs to determine if the price is reasonable 
is that costs may not reflect market forces. A hospital 
with very high costs may be unable to lower its prices 
sufficiently to enter into an agreement with a health 
plan or an insurer.
An alternative is to use the prices that are actually 
being paid in the market place. The prices reflect the 
discounts that hospitals, physicians and other groups 
negotiate with insurers. 
The charge master file submitted by the hospital does 
not reflect market prices. In most cases neither do the 
charges established by physicians. Few patients actually 
pay these charges. Insurers obtain large discounts off 
these list prices - often as high as 75 percent.  I have 
actually seen contracts where the discount from list 
price was over 900 percent and in this case the hospital 
was still earning a profit from the insurer because the 
negotiated rate was above the hospital's actual costs. 
For a price list to be reasonable it needs to reflect 
what is actually being charged in the market place.
Because the issue is easier to understand in the 
hospital context, I will focus on the unreasonableness 
of hospital charges as shown in the charge master file.

How Charges Are Set By Hospitals
Hospital charges are determined by a charge master file 
and the hospital or hospital system determines the 
charges in the charge master file.  The hospital or 
hospital system has complete discretion to set each 
and every charge on the charge master file.
 	The hospitals often do not know how they set 
 	each charge on the charge master file. There 
 	is not a formula that hospitals use to set 
 	charges. 
According a December 2005 MedPAC report entitled "A 
Study of Hospital Charge Setting Practices" "The 
hospital charge description master (CDM), or "charge 
master" is extensive, usually containing between 
12,000 and 45,000 individual charge items and 
procedures across hospital department providing 
patient services.  Every chargeable item in the 
hospital must be part of the charge master in order 
to bill the patient, payer, or health care provider."
 	The MedPAC report was based on interviews 
 	with 57 participating hospitals and/or 
 	systems involving 238 hospitals. Some of the 
 	quotes in the Report from the interviews the 
 	team conducted with hospital executives 
 	involved in setting hospital charges 
 	demonstrate that the charges are not set by 
 	market forces or using a systematic 	
 	methodology.
"With over 45,000 items in the charge master, the 
vast majority have no relation to anything, and 
certainly not to cost."
"There is no rationality to the charge master and 
costs still do not have much relevance."
"Charges have less and less meaning each yearï¿½"
There have been numerous academic articles written 
describing how hospitals determine their charges. 
However, perhaps the most illuminating presentation 
was a newspaper article that was published in the 
Wall Street Journal on December 27, 2004 and written 
by Lucette Lagnado. The article takes advantage of 
the data on hospital charges that California hospitals 
are required to report. The article also contained a 
quote from William McGowan, chief financial officer at 
the University of California, Davis Health System and 
a 30 year veteran of hospital pricing policy 
implementation. In the article Mr. McGowen explained 
the rationale of hospitals charges   "There is no 
method to the madness.  As we went through the years, 
we had these cockamamie formulas." His conclusion is 
not much different than what the hospital executives 
said to MedPAC in the December 2005 report.
The same Wall Street Journal article includes a chart 
that shows the variation in charges in seven 
California hospitals for services such as chest 
x-rays, complete blood count, CT Scan, Tylenol, etc. 
The chart below shows the variation in charges at 
the seven California hospitals for just Tylenol 
and a chest x-ray.  The range for one tablet of 
Tylenol was free to 7.06.  The range for a routine 
chest x-ray was from $120 to $1519.00. These are 
substantial charge variations.



	As noted earlier it would therefore be 
	unreasonable to expect a person to do comparison 
	shopping on all items in the charge master file, 
	the vast majority of which he/she would never use. 
	If you only had the information on this chart which 
	hospital would you choose? The two hospitals that 
	do not charge for Tylenol have the highest charges 
	for an X-ray. Unless the patient knew if he/she 
	would need an X-ray or would need Tylenol the 
	price information is useless.
There are a few items on the charge master file where a 
consumer would know the products and could compare prices. 
These are items the person might purchase outside of the 
hospital. I reviewed the charge master file at one hospital 
and this is what I found.
In 2002, the charge for one tablet of ibuprofen was over 
$5.00. The charge for one chewable tablet of a multivitamin 
was also over $5.00. A 12 packet of Rolaids was over $10.00. 
If the person needed a 15 minute massage the charge was over 
$50.00 or over $200 per hour. In 2002, the person was being 
charged over $600 per day for a semiprivate room. Many of 
these charges increased in 2003, 2004, and 2005. 

 Why Hospital Charges Are Set So High
    	When a person goes to the drug store to purchase 
    	ibuprofen, multivitamins, or Rolaids the prices are 
    	clearly labeled. The prices in other drug stores 
    	are clearly labeled. A drug store that charges 
    	high prices will likely lose business. The market 
    	place operates.
In contrast, the amount that any hospital proposes to 
charge for ibuprofen, multivitamins or Rolaids or any of 
the other 25000+ items on the charge master file is not 
set by market forces. As a result, they are much higher 
than they would be if market forces prevailed. The 
following section explains why it is inappropriate for 
consumers to pay what is on the charge master file.
Before 1929, patients did not have health insurance and 
patients paid hospitals directly for each service.  
Patients paid charges.  To some extent, market forces 
influenced the amount a hospital could charge.  One 
hospital might charge $4.00 for a day in the hospital 
while another hospital charged $5.00.  It was relatively 
simple for patients to compare hospital charges when all 
that the patient was comparing was one number - the price 
for a day in the hospital.
As the depression worsened in the 1930s, the ability of 
people to pay their hospital bills worsened.  Blue Cross 
and other insurance programs developed in response to 
the inability of people to pay their hospital bills.  
During this period, hospitals' charges were based on the 
cost of providing care, plus a markup typically of less 
than 10%.  Because health insurers paid the charges, 
there was little or no gap between the amount billed and 
the amount collected by hospitals.  Market forces were 
operating to some extent to hold-down charges.
By 1960 most hospitals had moved away from a per day 
charge and were using a charge master file to bill 
patients. In 1960, however, the charges set by hospitals 
were still based on the cost of providing care plus a 
small allowance for profit.  Most insurers continued to 
pay charges. The charge master listed all the services 
the hospital provided for the patient: ibuprofen, 
multivitamins, Rolaids, etc. 
In 1960, the typical charge master file established by 
hospitals had 5000 separate items. This was a major 
expansion from 1930 when there was typically only a 
room and board charge. It was becoming difficult for 
market forces to operate by 1960 because an individual 
patient did not know which of the 5000 different items 
he/she would need.  Comparison shopping was becoming 
more difficult.
The hospital bill was calculated by multiplying the 
amount on this charge master file by the number of 
units received.  For example, if the hospital charged 
$1000 per day in the hospital for room and board and 
the person remained in the hospital for 4 days, the 
room and board charge would be $4000.  Two hours in 
the operating room might cost $500.  Other services 
the patient received would be added to this bill to 
calculate a total charge.
Competition for patients kept hospital charges close 
to the level of hospital costs.  Nearly all hospital 
bills were paid on a charge basis.  Market forces 
continued to operate to some extent through the 
early 1960s.

Fewer and Fewer Insurers Pay Full Charges After 1960
Between 1960 and 2003 fewer and fewer insurers paid 
hospitals on the basis of charges.  First the public 
sector and then the private sector stopped paying 
full charges. When public and private insurers 
stopped paying hospitals on the basis of charges, 
market forces no longer served to hold down 
hospital charges. By 2003, market forces and 
regulations were operating to hold down hospital 
prices for many public and private insurers such 
as Medicare, Medicaid, United Healthcare, Anthem, 
and Premier. 
At the same time, hospital charges were being 
increased to very high rates. This became know 
as "cost shifting." Cost shifting meant that 
patients being asked to pay full charges were 
paying higher and higher charges while the rate 
increases for insurers like Medicare, Medicaid, 
United Healthcare, Anthem, and Premier were 
much lower.
When the Medicare program was established in 
1965, Congress decided that the Medicare program 
would pay hospital costs and not hospital 
charges.  Congress recognized that charges were 
greater than costs and that the Medicare program 
would be able to exert little control over 
hospital charges. This was the first real break 
from paying hospital charges.
	A very detailed hospital accounting form 
	called the Medicare Cost Report was 
	created to determine Medicare's allowable 
	costs. In order to allocate costs between 
	the Medicare program and other insurers, 
	the Medicare program required hospitals 
	to collect uniform charge information.  
	For example, if 40% of the charges 
	were attributed to the Medicare program, 
	then the cost accounting system would 
	allocate 40% of the costs to the 
	Medicare program.
In order to prevent fraud and abuse, the Medicare 
program required hospitals to establish a uniform 
set of charges that would apply to all insurers.  
Otherwise, the hospital could allocate charges 
in such a way that would result in more costs 
to the Medicare program.
Hospitals continued to have complete discretion 
on how they established their charges.  The 
Medicare program did not interfere with how 
hospitals set charges for specific services.  
The Medicare cost report simply required the 
hospitals to report their charges. 
Two major changes occurred in the 1980s that 
severed any impact that market forces would 
have on hospital charges.  One occurred in 
the public sector and the other occurred in 
the private sector. 
First, Medicare created the Prospective 
Payment System for inpatient hospital services 
in 1983. In 1990, the Medicare program moved 
away from paying costs for outpatient services 
and instituted the Ambulatory Payment 
Classification System that sets rates for 
outpatient services. Most Medicaid programs 
adopted their own Prospective Payment Systems.
Second, most private insurers began negotiating 
discounts or using some other mechanism other 
than paying charges to pay hospitals.  Managed 
care plans began to negotiate with hospitals in 
the early 1980s.  They wanted discounts in 
return for placing the hospital in their network.  
They successfully negotiated sizeable discounts 
with hospitals. As indemnity insurers began to 
compete with managed care plans in the mid 
1980s, they also began to move away from paying 
full charges and started negotiating their own 
deals.  Nearly all indemnity insurers and 
managed care plans stopped using full charges 
as the basis of payment by 1990.
Insurers such as Aetna, Cigna, Medical Mutual, 
and United Healthcare get substantial discounts.  
In many hospitals these insurers are paying 
only one third of the billed charges.
		
Comparing Hospital Charges
Because of these regulations and negotiations few 
if any insurers actually pay full charges. Because 
virtually no public or private insurer actually 
pays full charges, charges are an unrealistic 
standard for comparison. A more realistic standard 
is what insurers actually pay and what the 
hospitals have been willing to accept. That should 
be a standard of comparison to see if the amount 
paid is reasonable.
The amount charged is determined solely by one 
party in the transaction - the hospital. It is not 
a market transaction. The amount paid that is 
determined by both parties in the transaction is a 
reasonable amount. These are the rates determined 
in a negotiation between insurers and hospitals.

Self Pay Patients
In 2006, only three groups routinely paid full charges.  
The three groups were: (1) the uninsured, (2) 
international visitors and (3) some health savings 
accounts that carry a high deductible.  Together these 
are commonly known as "self pay" patients
Because the federal government, state governments, 
private insurers, or managed care plans do pay full 
charges, the regulatory and market constraints on 
hospital charges were virtually eliminated.  Each 
insurer has developed a different way to pay hospitals; 
this lead to a phenomenon known as "cost shifting".   
The self pay patients continued to pay higher and 
higher charges as hospitals "shifted" costs to self 
pay patients.
Between 1960 and 2006 hospitals began increasing their 
charges much faster than their costs.  The reason is 
that market forces were not holding down charges. The 
greatest acceleration occurred after 1995. This can 
be seen by examining the ratio of charges to costs 
and by examining the rate of increase in hospital 
charges compared to the rate of increase in hospital 
costs.
Self pay patients have virtually no bargaining power. 
A patient with an emergency does not have the ability 
to compare prices and comparison shop. They are 
likely to go to the nearest facility or where the 
ambulance takes them. During an emergency situation 
the person or their family cannot bargain or 
negotiate. The provider has all the power.
Most visits are not emergencies and so it would be 
possible for self pay patients to comparison shop. 
However, the ability of a person to negotiate with 
a hospital or physician is very limited. For the 
reasons stated earlier the self pay person does not 
know what services he/she will need with any 
certainty and therefore would not know what prices 
to compare. Going to a doctor or going to a hospital 
is not like going to the Wal-Mart and filling your 
shopping cart. In the medical setting you do not 
select the services and you do not know what 
services that you will need until you receive them. 
A person contemplating open heart surgery, a person 
with diabetes, a person with a pain in their hip 
will not know what services they will need and 
cannot therefore realistically compare prices.
The relative bargaining power is totally skewed 
in favor of the provider for a self pay patient. 
I have read numerous depositions where a self pay 
patient needed hospital care and tried to 
negotiate a discount off of list price. In 
virtually every case the person was turned down. 
Some hospitals have a discount policy for self 
insured patients but it is often very complicated 
for the person to access. The rates that self 
patients pay are often three times the rates that 
health plans are paying. Health plans pay a rate 
that is generally 10-20 percent above cost, not 
100 - 300 percent above cost.

Ratio of Charges to Costs
The most common way to examine the relationship 
between charges and cost is by the ratio of 
charges to cost.  It is a routinely used statistic 
in the hospital management and hospital finance 
literature.  As the ratio between charges and cost 
increases, the divergence between charges and 
costs increases.  A ratio of 3.0 means that charges 
are three times costs.  This suggests a 200% profit 
margin if the patient pays the full charges.  
Table 1 shows the ratio of charges to cost by state 
for 2000-2003. In 2003 New Jersey was the state 
with the highest ratio of charges to costs. 
According to table 1, the ratio of charges to cost 
for all hospitals in New Jersey was 4.51 in 2003. 
In other words, the average hospital in New Jersey 
was charging $4.51 for each $1.00 it cost. This 
is a 351% profit margin. 
Maryland has the lowest charge to cost ratio. 
Since the mid 1970s Maryland has been regulating 
hospital prices and not allowing the ratio of 
charges to cost to exceed certain values. In 
Maryland the prices for self pay patients are the 
same as for people with health insurance, only 
Medicaid gets a slight discount. 
Table 1 also shows that charges were increasing 
much faster than costs in most states
during the 2000 -2003 period. The relationship 
between charges and costs was continuing 
to erode over this time. In New Jersey, for 
example, the ratio of charges to costs
increased from 3.16 in 2000 to4.51 in 2003. In 
other words, the markup over costs 
increased from 216 percent to 351 percent over 
a three year period in New Jersey. Other
states had similar increases in their ratios of 
charges to cost. 

What Can Be Done To Improve Price Transparency?
Patients cannot ever understand the 10-50,000 
items on the charge master file. Also it does 
not make sense for them to examine all the items 
on the charge master file when they will only 
need 10-500 items. The same holds true for the 
10,000+ CPT codes that physicians use. There 
needs to be a way for hospitals and physicians 
to signal their relative prices.
When each hospital and each physician has 
complete discretion to establish its own price 
list, it will be impossible for the patient to 
do comparison shopping. Because they do not 
know what services they are going to need, 
they cannot be good comparison shoppers.
Also because each hospital and each physician 
has discretion to set the rates for each 
individual service, it is difficult to 
determine if the prices are reasonable. If 
there were one basic price list, then it 
would be possible to easily compare prices. 
Not all insurers would have to pay the same 
rate but they would use the same set of 
relative prices. 
One possibility is for the hospitals, 
physicians and other providers to say that their 
prices are X% of the Medicare rate. One hospital 
could say that they accept 125% of the Medicare 
DRG rate. They would accept the same percentage 
above or below the DRG rate for all DRGs unless 
they explicitly made an exception for certain DRGs. 
Another hospital could accept 120% of the Medicare 
Prospective Payment rate. 
For physician services a physician could say that 
he/she charges 125% of the RBRVS rate. The physician 
could say that for certain procedures he/she charges 
more or less than 125% of the Medicare rate. The 
same principles would hold for other providers. 
The providers would announce their prices with 
reference to Medicare rates.
This could solve both problems that I have mentioned. 
The patient would know the price of one provider 
relative to another provider. The patient would not 
have to know the price for any specific service; 
instead the patient would know how the prices generally 
at one hospital compare to the prices at another 
hospital. Second, it would be obvious when a provider 
set a price that was not in the market range. It would 
be obvious that hospitals and physicians are charging 
patients much more than what insures such as Medicare 
are paying.
Thank you for the opportunity to testify this morning. 
I would be happy to answer any questions.

	Mr. Deal.  Thank you.
	I apologize, we are going to have to take a 
	brief recess while we go vote and we will be 
	back and reconvene at that time.
	[Recess]
	Mr. Deal.  I call the hearing back to order.  
	We have several witnesses who need to leave, 
	Speaker Gingrich being one of them, I understand 
	very soon so Members will come as you have noticed, 
	they sometimes come, sometimes they go.  Hopefully 
	some will come back.
	I will begin the questioning and let me just tell 
	all of you that I think this has been one of the 
	more interesting panels that I have heard because 
	certainly, first of all, the issue is a current 
	and important issue.  Your points of view I think 
	have all been well taken and I appreciate that, 
	and I am sure the members of this committee do, too.  
	So let me try to get a handle on some of it though.
	First of all, I am a supporter of health savings 
	accounts but as Dr. MacDonald said, if we do not 
	know what we are paying for and we are taking the 
	money out of our own health savings accounts that 
	is one thing we need to know what we are actually 
	going to be charged.  The one that bothers me, I 
	suppose even more than that, is we have all heard 
	the arguments that the Government is negotiating 
	the prices on behalf of the government programs, 
	primarily Medicare and Medicaid.  The health 
	insurance industry is negotiating their prices on 
	behalf of their insured's.  Therefore, the only ones 
	that do not have anybody negotiating for them are 
	the ones where they get hit the hardest.  The 
	argument being that we have been squeezed so much by 
	the Government and we have been squeezed so much by 
	the private insurance industry that that is the 
	only place that we can stay alive.  Now is there any 
	validity to that argument first of all?  Mr. Speaker, 
	what is your take on that?
	Mr. Gingrich.  Well I want to say again thank you 
	for letting us come and talk today.  And I thought 
	the panel was actually very, very interesting and 
	this is a topic that could go on endlessly.
	I just want to start with a very important 
	ascertation that this system is a mess.  Any time 
	you go to somebody that is trying to pay the 
	bills at a hospital, at a doctor's office, at a 
	pharmacy, a pharmaceutical company, or you name it.  
	They are always going to have reasons inside this 
	system that are perfectly reasonable because they 
	get up every morning saying how do I maximize my 
	revenue in a system that is a mess?  So everybody 
	has good stories.  I mean if you have malpractice 
	litigation reform, prices can come down.  You see 
	that in Texas and Missouri right now.  If you have 
	other kinds of reforms, prices can come down.  So 
	the last suspects who are unable to defend 
	themselves are small businesses and the uninsured.  
	Small businesses and the uninsured both get gouged 
	and that is just a fact.
	But in a true market where price transparency was 
	available and quality information was available, 
	people would in fact rapidly migrate to less 
	expensive better solutions.  In airlines, the price 
	has dropped from .23 a mile in 1979 or '78 in 
	constant dollars to .12 a mile in 2003.  Now that 
	is a breathtaking change and the average American 
	today can fly more places at lower costs than any 
	time in history, and as a result more people fly.  
	So I would argue that until you decide you are 
	really going to be in a market, and, it is going 
	to be.  Look, I used to represent Delta Airlines, 
	Eastern Airlines, Southern Republic, PanAm, go 
	down the list.  It is very painful to make a 
	transition from a regulated secret operation to 
	an open market operation.  I will tell you, it is 
	going to be painful in the health field too, but in 
	the end you are going to get better results for more 
	people and I would take the money saved on waste and 
	fraud and I would turn that money into tax credits 
	so that every American of every income level was 
	inside 100 percent.  I am for a 300 million payer 
	system where every American has insurance coverage.  
	You can afford that if you take the waste and fraud 
	out of the system.  You cannot afford that inside 
	the current system.
	Mr. Deal.  Yes, Dr. Goodman.  Push the button down.
	Mr. Goodman.  If an uninsured person goes to the 
	hospital and gets emergency care, there never was a 
	contract and there never was a meeting of the minds.  
	You might consider legislatively determining what a 
	fair price is.  It might be what the cost is paying.  
	Or if the hospital is getting a significant 
	disproportionate share of money, you might say that 
	a fair price is the Medicare price or the Medicaid 
	price whichever is lower.  If an uninsured person 
	goes in for elective surgery again, if there is a 
	meeting of the minds and agreement on price, that 
	is fine, but if there is not, again you might go 
	back and rely on some legislative benchmark of what 
	is a fair price.  
	Mr. Deal.  Dr. MacDonald, I am very intrigued by 
	what you have done and I apologize that I am running 
	out of time.  Maybe we will have some time for more 
	questions but, you know, it seemed to me in the 
	whole context of this that if you are paying cash 
	or paying out of your pocket or reaching into your 
	health savings account and that is the source of 
	the money, it is not going through all the 
	bureaucracy of having to file the insurance claims 
	and having to argue with the insurance company as 
	to whether this is appropriate or that is appropriate.  
	You know it would seem to me that ought to be the 
	cheapest customer because they have cost you less in 
	overhead.  Am I wrong?
	Dr. MacDonald.  No, you are correct.  And actually 
	that is part of the problem with the HSAs, I mean 
	you go in and use your HSA dollar, you are paying 
	retail price not wholesale price.  So it should not 
	be a surprise that people with a high deductible are 
	not pursuing care.  A lot of people are missing the 
	point.  They are using high deductibles as the 
	deterrent to care.  Well the deterrent to care is 
	paying ten times what is accepted from an insurance 
	carrier.  What I do not consider is places like 
	California.  Take the frequent flyers in the 
	emergency room, the people that are coming in and 
	they do not understand, attach them with mentor.  
	Get dollars currently being spent in Medicaid or 
	Medicare, whatever pot you want and let us look at 
	those dollars.  Track them, qualified medical 
	expenses, only so it is not beer and pretzels that 
	they use the money for.  It is real things, and let 
	us see if we can make an impact on the frequent 
	flyers in the emergency room.  A lot of people 
	think they are the reason for the high cost and 
	that is not true.  Cassil in my briefing, I 
	referenced the article you can look at it and 
	see.  They looked at the emergency room visits 
	for about four years, 16 percent increase, 66 
	percent were Medicare and those with insurance,
	ten percent for those without insurance.  The 
	burden to care is not a high deductible policy.  
	The burden to care is the reality if it is confusing.  
	And I am glad the gentleman had spoke, they do not 
	understand 25,000 lists, master lists.  Well they 
	do not really care, and you do not care either.  
	You only care about the one thing that is on your 
	list.  See no one in this room cares about 25,000 
	doodads.  They really do not.  You only care when 
	you get sick and you see that bill.  That is what 
	you care about.  I mean, you pay with a dollar that 
	swipes and it is gone, you should not pay the 
	administrative burden.
	Mr. Deal.  Mr. Pallone?
	Mr. Pallone.  Thank you, Mr. Chairman.
	I wanted to ask either Dr. Anderson or Dr. Collins 
	or both of them a question that relates to my poster.  
	They have seen my poster before about buying two 
	stents and you get free same day installation.  I 
	developed this basically to highlight to absurdity 
	of trying to transform the health care market into 
	other types of commodity markets.  And reality is 
	you cannot treat health care like a simple commodity 
	in my opinion.  But that is what I wanted to ask you.  
	I mean, do you think, can you treat health care like 
	a simple commodity?  I mean part of the problem is 
	the tremendous amount of uncertainty that exists 
	within health care.  It is not like going to buy a 
	car and saying you want to pay X amount of dollars 
	to get power steering and power brakes.  That is my 
	opinion but that is what I want to ask you.  In other 
	words, you know, do you think we can look at this 
	like a simple commodity?  Do you think we can look at 
	it in the way that we buy a car or, you know, get 
	power brakes?  And are there other unknown variables 
	that may factor into the price?
	Dr. Anderson.  When you go and buy a car, you can kick 
	the tires, you can look at the power steering, you can 
	make all those decisions.  When you go to the doctor, 
	when you go to the hospital, you cannot do all that 
	because you do not know what services you are going 
	to need until you actually receive those services.  
	So to take your stent example, you do not know which 
	of the many stents you are going to use so you could 
	not do comparison shopping to say I want this stent 
	or that stent.  You do not know clinically which 
	stent is the best you have got to rely on your doctor.  
	He or she is going to make those decisions for you.  
	I had the privilege of being on 60 Minutes last Sunday 
	and the stent example was used actually in a particular 
	hospital and they were charging, they essentially 
	bought it for less than $10,000 and were charging the 
	patient $50,000 so they had a markup of basically 
	5 to 1 on this particular stent.  But as a consumer, 
	I would not know whether $50,000 was the appropriate 
	price or $10,000 was the appropriate price.  I would 
	not even know whether or not I was going to need a 
	stent until I showed up at the hospital and my doctor 
	said that is the way that we are going to treat your 
	heart attack or that is the way we are going to take 
	care of your veins.  So it is much more complicated 
	than buying a car.
	Mr. Pallone.  Dr. Collins?
	Dr. Collins.  Patients are really in the weakest 
	position really to demand lower prices and higher 
	quality from their providers.  Accrediting 
	organizations, the Federal government, State governments 
	are in a much stronger position to negotiate prices.  
	It is really unreasonable to think that this market is 
	ever going to function like markets for other goods and 
	services.  It is far too concentrated both on the 
	insurer side and also on the provider side.  So we 
	really need to look at different ways to solve both the 
	quality and the cost problem.
	Mr. Pallone.  And she brings me into the next question 
	which relates to individual consumers not having, you 
	know, the ability to negotiate, you know, discounts on 
	provider payment rates.  In other words, the individual 
	versus, you know, large volume consumers.  And I wanted 
	to ask Dr. Ginsburg, you know, basically that.  There 
	seems to be some idea that consumers, particularly the 
	uninsured if they know the actual price for a medical 
	procedure will be able to negotiate a better rate with 
	a provider of their choice.  But Dr. Ginsburg, that 
	seems to fly in the face of what we know about how 
	markets work today.  Discounts are granted based on 
	volume for the most part.  And one side to an 
	individual in need of an appendectomy for example does 
	not have a lot of leverage to try to negotiate a better 
	rate for that procedure.  So I wanted you to comment 
	on this.  How well are consumers going to be able to 
	negotiate discounts on their own?  Isn't that what 
	insurance is supposed to do?
	Mr. Ginsburg.  I agree with you that consumers are in 
	a very weak position in medical care and other markets 
	to actually negotiate.  What consumers can do is if 
	they are aware of the prices and different providers, 
	they can decide to go to a provider with a lower price.  
	They are more likely to do that if they not only find, 
	but have good price information but if they have 
	information on quality which usually is not the case.
	The key thing in this area is that uninsured people 
	have very different needs than insured people.  For 
	the most part insured people have their insurer 
	negotiating for them and for all the other enrollees 
	so that if you are considering whether Government 
	should do something to increase price transparency, 
	the focus should be on uninsured people and so just 
	to make it easier for them to compare, not to 
	negotiate but to make comparisons across providers.
	Mr. Pallone.  And just to, I do not know if we have 
	time for this, Mr. Chairman, but one of the health 
	care proposals that we wind up discussing this year 
	is association health plans.  And the premise behind 
	those is by allowing small businesses to band together, 
	they can negotiate better prices largely exempt from 
	consumer protection laws.  Now isn't the premise there 
	exactly the opposite of what many who would also 
	support AHP's are arguing today, that it is the 
	individual would could potentially negotiate the 
	discount.  The whole premise is the opposite, it seems 
	to me.
	Mr. Ginsburg.  Yes, that is right.  I think the 
	motivation, you know, that is stated is the combining 
	and being able to, I mean, larger groups do get better 
	rates for health insurance.  That is well understood.  
	And the notion is that by smaller groups coming 
	together into a larger group they can get a better 
	rate.  And there are a lot of other things involved 
	with the association health plan issues such as risk 
	selection and whether you are going to form a pool of 
	healthier than average people, get a better rate on 
	that basis and wind up in a sense imposing costs on 
	people not in your pool.
	Mr. Pallone.  Thank you. 
	Thank you, Mr. Chairman.
	Mr. Deal.  Chairman Barton?
	Chairman Barton.  Thank you, Mr. Chairman.
	Mr. Speaker, in your remarks you talked about health 
	care being a commodity like any other commodity.  
	When I took economics way back in the '70s, my 
	recollection is that my economics professor indicated
		that health care was a little bit different 
		kind of a product.  That it wasn't a pure 
		commodity because it actually affected people's 
		health and was just a little bit different.  
		So do you want to elaborate on that?
	Mr. Gingrich.  Yes, thank you for the question.  Let 
	me say first of all the term commodity does not 
	simply apply.  There are very complex commodities.  
	But the question is does the interaction tend to 
	respond to market behaviors?  And so I am going to 
	just say a couple of comments have been made in the 
	last couple minutes.  You have very large markets for 
	airline tickets in which individuals get dramatically 
	better choices because collectively they apply amazing 
	downward pricing pressure on the airlines.  They do not 
	negotiate directly with the airline, they negotiate 
	with the market.  And they say to the market, I am not 
	going to pay this price and the result is prices come 
	down.  The evidence is overwhelming, but you can in 
	fact describe most hospital costs and the people can 
	make rational decisions.  And again I am not talking 
	about in an emergency room when you are in a crisis 
	whether it is a heart problem or it is an automobile 
	accident, but I would suggest to you that most 
	decisions in health care are not in fact situations 
	of absolute helplessness.  In every other aspect of 
	American life where people make complex decisions, 
	what kind of home do you want to live in?  What kind 
	of job do you want?  How far from your job do you 
	want to live?  What kind of car do you want to build?  
	Which kind of vacation do you want to go on?  We have 
	amazing complexity even for senior citizens.  Senior 
	citizens are allowed to go to Wal-Mart with 258,000 
	items and nobody has suggested that they are too 
	stupid to go around Wal-Mart, but you get to health 
	and we say gee, people cannot understand this.  They 
	cannot understand it because the current system is 
	professionals, bureaucrats, and regulators talking 
	to themselves.  So people never make it simple 
	enough, all right?  That happened even with the 
	Medicare Part B where the CMS bureaucracy, despite 
	its best efforts, could not talk in a language that 
	would be perfectly normal for most people.
	So I am going to start and just say that if you look 
	at general patterns, and there was discussion 
	mentioned earlier, look at dentistry, which is not a 
	simple process.  When you go to the dentist's office, 
	the dental assistant is giving you an X-ray and it is 
	being read in real time while you are sitting there 
	and you are discussing with the dentist what ought 
	to happen to your mouth.  And people have this 
	conversation every day.  Look at laser surgery.  I 
	do think the problem of fraud is real, but that is 
	a commercial market problem with any product.  You 
	can have fraud with automobiles, you can fraud with 
	stock, and there is always something that gets fraud 
	because some people are nasty and mean spirited.
	Chairman Barton.  Even if we agree that health care 
	is a different kind of commodity or is not the same 
	as airline tickets exactly or some of the other 
	automobile parts, there is no reason to state that 
	transparency and pricing information would not help.  
	Does anybody disagree with that, regardless of what 
	you think health care is that more transparency is 
	a good thing not a bad thing and price information 
	is a good thing not a bad thing?  Does anybody 
	disagree with that?
	I hope I did not make the Speaker mad.  We do not 
	normally have witnesses just get up and walk out of 
	the room.  Yes, sir?
	Dr. Anderson.  Well I think that transparency is a 
	good idea at the same time it is very different in 
	health care than it is in other services.  So I do 
	not think transparency will buy you very much.  In 
	my testimony, I talked about this but let me take 
	Speaker Gingrich's example of Wal-Mart versus health 
	care.  In Wal-Mart, you go out with your shopping 
	cart and you make all the choices yourself, you know 
	all of the prices.  When you go into the doctor's 
	office or go into the hospital, you are not the person 
	making the choices as to what to put in your shopping 
	cart.  When you got E care at Georgetown University 
	Hospital you were not making the choices of which 
	service to get, which stent to get, which kinds of 
	activities and you were not in a position most of 
	the time nor was your family member at that time in 
	the position to make it.  So as somebody who still 
	teaches health economics at Johns Hopkins University, 
	I can tell you that at least I am not teaching it as 
	a commodity.
	Chairman Barton.  My time has expired but this I think 
	is worth telling.  They asked me as I was going into 
	the surgical room for my operation or incision for my 
	heart attack if I wanted to be sedated and I said not 
	unless you have to.  I want to be awake if it is allowed.  
	So they gave me some sort of mild drug to make me feel 
	good, but I was conscious.  So I am watching the doctors 
	get ready to put these stents in my heart and they are 
	talking about it and so I did ask the doctor, I said do 
	you mind if I ask you what that stent costs?  He said 
	well this stent, it costs, I am not sure but it costs 
	between $2,000 and $3,000.  He said we are going to put 
	three of them in your heart, and I said that is a good 
	thing, right?  And he said, yeah, that is a good thing.  
	He said I do not want to talk politics with you because 
	he had learned that I was a congressman and I was 
	Chairman of the committee that had jurisdiction over 
	health care, but he said if you were a Medicare patient, 
	Medicare would only pay for one of these stents.  He 
	said now we practice the best practices of medicine.  
	You need three and we are going to put three in your 
	heart, but if you were a Medicare patient, Medicare 
	would only pay for one.  I said we will change that, 
	and we are trying to change it.  I may have changed it, 
	and do not know it because since I had my heart attack 
	I did not finish the final negotiations on the 
	Medicare/Medicaid budget reform package but I instructed 
	that we change it in that package.  So even on the 
	operating table I was asking the cost question but I 
	did not say do not put it in because it costs to much, 
	I said put all of them in you need.
	I yield back, Mr. Chairman.
	Mr. Deal.  Where did you send the bill?
	Chairman Barton.  Blue Cross Blue Shield.
	Mr. Deal.  Ms. Capps is recognized for questions.
	Ms. Capps.  Thank you, Mr. Chairman.  
	And thank you each of you.  I am sitting here very 
	frustrated and I will come out with my bias as having a 
	background in public health in just a minute.  But I 
	want to associate myself with the Chairman's remarks.  
	Mr. Barton, when you were willing to sort of own up to 
	your experience, both in your opening remarks and now, 
	it seemed to fly in the face of a lot of the discussion 
	about free market commodity and all of this; but I agree 
	with you.  If we are talking about health care as a 
	commodity, it certainly is a very complex and service 
	laden quality based situation we are talking about.  And 
	Dr. MacDonald knew I was frustrated too and he, as 
	provider of care--and I have a lot of respect for family 
	physicians--and there is something about being on the 
	front lines and seeing whatever comes in the door and 
	understanding what you acknowledged to me personally.  
	And the Speaker also said this is a broken system and 
	we have too many people on the panel, and we are taking 
	on too many topics.  Transparency is a good thing.  
	Health savings accounts are an important discussion 
	point but they are not going to save health care.  They 
	are not the solution.  I am not a big fan because it 
	skims off a lot of people.  When Mr. Gingrich got up 
	and left I was going to say, you know, a lot of people 
	luckily can talk about choosing their home, choosing 
	the credit card they are going to buy, choosing their 
	job.  But what about the people who never have those 
	kind of choices who also need health care who are barely 
	lucky to be able to rent, who get the job that nobody 
	else wants, and cannot afford--here is where my bias 
	comes out.  I remember when managed care came to 
	California.  I have been a nurse there all my adult 
	life before I came here and it was non-profit, it was 
	Kaiser.  And it was effective to me in that it allowed 
	people in the plans, it incentivized people to do 
	preventative health care, to lose weight, to change.  
	The most important thing we should do as a Nation is to 
	give people incentives to practice the behaviors that 
	will lower their health care costs and keep them out of 
	the hospitals where it is very expensive to get health 
	care.  But I have watched managed care do a number on 
	my State in my area and there are not any programs left 
	because it became profit making and they could not 
	afford to do all those things.  
	But I am concerned about one aspect of medical savings 
	accounts because it seems like if people choose a 
	savings account, they are going to choose a high 
	deductible plan.  Most of us think we are not going to 
	get sick.  Dr. Collins, I will pick on you but anybody 
	else can jump in if there is time.  When the people 
	choose high deductible plans, what does that say about 
	the public health system at large and about doing the 
	kinds of things that will be the most cost effective 
	as a Nation providing care or receiving care?
	Dr. Collins.  The Commonwealth Fund sponsored a survey 
	with the Employee Benefit Research Institute where we 
	did a nationwide survey of people who had both 
	comprehensive plans and also people in consumer driven 
	plans, plans with high deductibles and no savings 
	accounts and plans with high deductibles and savings 
	accounts.  What we find is that people in the plans 
	have much higher out of pocket costs in the plans
	being the consumer driven plans or high deductible 
	plans have much higher out of pocket costs than those 
	in the more comprehensive plans.  Most worrisome is 
	that we do find that people when asked if they skipped 
	care, avoided care, delayed care because of the cost 
	when they were sick.  People in the high deductible 
	plans, in the consumer driven plans, the plans with 
	savings accounts and without were much more likely to 
	say yes to that question.  So there is some evidence 
	that people are avoiding the kinds of care that they 
	need to keep them healthy over the long term.  We also 
	asked about prescription drugs.  We asked if other 
	people had skipped those just to make their medication 
	last longer.
	Ms. Capps.  Right.
	Dr. Collins.  If they had not filled a prescription 
	because of the cost and we find the same thing.  With 
	a particular, the problems particularly pronounced 
	among people who have health problems and low-incomes.
	Ms. Capps.  I hate to be so rude to see if anyone 
	knows are there studies that demonstrate that this 
	actually adds to the cost of health care for this 
	Nation by people doing this, by seniors?  I mean 
	that is what I would like to find out.  If we are 
	talking about fixing a broken system, a system that 
	is way too expensive, is there anybody who knows of 
	studies that when people do not get the care they 
	need because they cannot afford the high deductible, 
	where is that cost going?
	Dr. Collins.  There was a study done by Tamblyn that 
	looked at whether people who had high out-of-pocket 
	costs reduced their prescription drug use and they 
	found that they did and that there were adverse 
	health consequences as a result of that.
	Ms. Capps.  Which could be more--could Dr. MacDonald 
	just--he wants to answer that.
	Dr. MacDonald.  Well the Rand data is contrary to 
	what you said in that when people had control of 
	their money, mothers would pursue preventative care, 
	immunizations, and routine care so there is data to 
	support contrary to what your study showed.  In my 
	experience with Medicaid patients, many came in to 
	see if I could help them pay for the medication.  
	We actually worked on ways to get rid of the 
	medication.  So my practical experience of seeing 
	people without money, they would ask how can we get 
	rid of the need for the medicine.
	Ms. Capps.  I just submit to you that a lot of them 
	came to me as a Member of Congress and said they 
	cannot take their medicine and, they did not have a 
	doctor who would work with them like you did.  So I 
	think we need more information.
	Okay, well I went over my time.
	Mr. Goodman.  Well the Commonwealth study was a 
	really bad study because it confused the difference 
	between a high deductible plan which was in the 
	market for decades, and plans in which people actually 
	managed their own health care dollars.  All reporting 
	for the industry is when the health savings accounts 
	are funded, when people have the money there, they get 
	more preventative care than under traditional plans 
	and they do quite well and there is no evidence that 
	they skimp on needed care.  There is evidence that 
	they skimp on or cut back on unneeded services, have 
	fewer unnecessary trips to the doctor, and fewer 
	prescription drugs.
	Ms. Capps.  Okay.
	Mr. Goodman.  Especially from brand name to generic.
	Ms. Capps.  Right, so those who are in the savings 
	accounts but again I come back to the point that a lot 
	of people have never, so many people do not have a 
	savings account at all and this is a moot point for a 
	lot of the people that I represent in my congressional 
	district.
	Mr. Deal.  Mr. Shimkus is recognized for questions.
	Mr. Shimkus.  Thank you, Mr. Chairman.
	This is really a telling hearing because it does highlight 
	a huge difference between protecting bureaucracies or the
	Government versus empowering individuals and giving them 
	choices.  One of the benefits of health savings accounts 
	is where you have 44 to 46 million uninsured Americans.  I 
	think most Americans are concerned about catastrophic 
	issues. 
	With health savings accounts you would make catastrophic 
	coverage more affordable for everybody.  And that is a 
	fact.  And then so the question is that I would like to 
	in talking about this Dr. MacDonald, how much of the 
	health care costs are in these emergency room aspects, 
	the emergency visits of all the health care costs what 
	is the percentage of that?
	Dr. MacDonald.  I do not know the number, I just know in 
	the emergency room.
	Mr. Shimkus.  Yes.
	Dr. MacDonald.  I thought this discussion was what was the 
	cost.  I am confused because I think we are distracted 
	into an HSA discussion.  I thought we wanted to talk about 
	what is the cost.  What is the cost in the ER, it is 
	inflated about ten times what is accepted from insurance 
	carriers.  The uninsured cannot bear that bill so what is 
	the percentage, I am not sophisticated enough to know that 
	number.
	Mr. Shimkus.  Well ask around, let us follow up on your 
	comment then.
	Dr. MacDonald.  In the emergency room, the average bill 
	right now for the insured is about $400 to $500 starting 
	plus whatever goes on top of that.  When the insurance 
	carrier coded the right visit 99C85, $149 is what they 
	pay.
	Mr. Shimkus.  See I am from the Midwest, from Southern 
	Illinois, a rural area where people still want to pay 
	their bills and people will do all they can to make sure 
	they pay bills do.  If they have no coverage and if they 
	have an inflated emergency room cost, do you think that 
	is a system which would encourage them to try to pay 
	their costs, or if it is inflated by ten fold, what would 
	the person with moderate to no income, what would they 
	probably do?
	Dr. MacDonald.  I have talked to a lot of administrators, 
	hospital administrators, who write it off.  I have looked 
	at the 5500's of a lot of hospitals and if you analyze 
	and scrutinize the 5500 which is the tax reporting and 
	see where all the money is going, it has been a very 
	interesting event for me.  I have learned things that I 
	did not want to learn and that is when people say they 
	are not making money.  Look at the 5500's and you will 
	see what non-profits are doing.  I think the non-profit 
	status needs to be reevaluated because someone goes to 
	the ER and gets a bill they are not going to pay it.  
	They are just not going to pay it.  They are going to 
	write it off or go to collections or get a judgment.  
	I have been in the courtroom with people that are having 
	judgments put against them by a non-profit hospital for 
	a bill that is ten times what is accepted for an 
	insurance carrier.  It has just got to end.
	Mr. Shimkus.  One of the reasons why I kind of try to 
	stay off this committee for a couple cycles was the 
	funding aspects of health care is just too confusing 
	and it is.  What I have come to the conclusion is such 
	cost shifting that does, it is the uncompensated care, 
	all these millions of uninsured, people claiming that 
	they are writing off and they are writing off inflated 
	costs, that is why the transparency debate.  What is the 
	best model to clean up waste, fraud, and abuse?  And I 
	would like--go ahead, sir.
	Mr. Goodman.  This is not confusing in those areas of 
	health marketplace where third party payers are not 
	paying most of the bills.  If you went to a Target 
	Store in the upper Midwest in a shopping mall you would 
	see a list of prices.  You know exactly what you are 
	going to pay.  I would bet that those prices that are 
	being charged to people in Target Stores are less than 
	what Blue Cross pays and I would bet they are even 
	less than what Medicare or Medicaid pays.  So markets 
	really can work, people can shop, and people can 
	compare prices for a lot of health care services and 
	there is no reason to deny them this opportunity.
	Mr. Shimkus.  And we see some of this already.  I 
	would like to claim the name of a former colleague, 
	Dr. Greg Gansky who served with us here.  He is very 
	knowledgeable, and was great on the Health Subcommittee.  
	Who can answer the question of as far as LASIK surgery 
	or elective plastic surgery one that is not in essence 
	regulated, how has a competitive model worked in those
	two areas?
	Mr. Goodman.  It is very good.  Over the decade of the 
	1990's, the price of all cosmetic surgery, the real 
	price went down.
	Mr. Shimkus.  Even Dr. Gansky would--I have heard him 
	say that a number of times as a Member of Congress 
	because that is the type of medicine that he practiced.
	Mr. Goodman.  For every other surgery we are getting 
	10 percent a year increases where prices are going up 
	and down in real terms in this market and even though 
	we have all kinds of technological innovations, huge 
	surgeon demand, huge surgeon procedures, this is a 
	market that works like real market, people get prices.  
	The thing that I think that needs to be emphasized 
	here is you are not getting transparency because 
	anybody negotiated for it or because anybody regulated 
	it.  You are getting transparency because markets are 
	always transparent when they have to deal with 
	consumers spending their own money.
	Mr. Shimkus.  And my time has expired, Mr. Chairman, 
	I yield back.
	Mr. Deal.  Mr. Green you are recognized.
	Mr. Green.  Thank you, Mr. Chairman.
	And following my colleague from Illinois, I can 
	understand the concern about, I like to empower an 
	individual.  The problem I have is most insurance 
	spreads the risk.  So I can buy a high deductible 
	for my auto insurance and save a lot of money.  How 
	many people have $5,000 for their auto insurance 
	for, you know, if they have an accident?  You know 
	they may have $250, $500, maybe $1,000.  But we are 
	talking about a $5,000 deductible for health care 
	and you are spreading that risk.  If I am healthy, 
	then I am probably going to want an HSA and have the 
	income to be able to put that money aside.  But if 
	I am not, if I am a blue collar worker that has to 
	pay those every month or the employer requires him 
	to pay monthly, HSAs are really not going to be 
	helpful to them very much and I think that is what a 
	lot of the studies that I have seen.  But I like 
	the idea of, and that is the focus of this hearing 
	is, transparency.  I have no problem with 
	transparency.
	And I will follow up on our Chairman who really did 
	not have a choice on his stents because it was 
	emergency.  But I was diagnosed up here two years 
	ago that I needed to have a CAT Scan, and because 
	I might need stents, I said well wait a minute, it 
	is going to take me five days if that is going to 
	happen?  My family is in Houston, I have two great 
	heart facilities there with both Dr. Cooley and 
	Dr. DeBakey.  I said I am going to go home.  So I 
	went home.  Admittedly, I did not call Dr. Cooley 
	and ask him by the way, how much will you charge 
	for my CAT Scan or call Dr. DeBakey at Baylor and 
	compare to UT.  I did not do that.  I called my 
	daughter who said the best one she thought would 
	be Dr. Cooley because she is also a UT doctor.  But 
	be that as it may, I do not thing consumers can make 
	that even when they have that choice.  Now, and that 
	is what bothers me, but I like the transparency 
	because in all honesty it works for the things that 
	are elected.  LASIK surgery, I wear glasses most of 
	the time.  I have not wanted to do LASIK surgery 
	because I do not know of the comfort level of me not 
	wearing glasses would be worth whatever risk, the 
	concern I have about the process.  But it also does 
	not always work when you have children because again 
	having two children that grew up, you know, we 
	wanted them to go to their pediatrician.  I do not 
	know if my wife would have been willing to shop 
	around for pediatricians that charged $25 instead of 
	$30.  She went with a pediatrician that was recommended 
	by her OB-GYN.  And so again, I like the transparency 
	and I like to do that but I also do not think that it 
	works, it is the panacea that everybody is looking for.  
	And again, my problem with the hearing is that if we 
	are trying to do transparency and is the next step to 
	show HSAs are really good, I think you have a long way 
	to go.
	Let me ask Dr. Ginsburg, one of the other witnesses, 
	Mr. Goodman talks about HSAs as devices to motivate 
	shopping.  In fact is it the high deductible plans that 
	motivate shopping while the HSAs delete the incentives 
	especially for high income people because people have 
	what essentially amounts to free cash to spend on their 
	HAS?
	Mr. Ginsburg.  Yes, I agree with that.  It is the high 
	deductible plan that qualifies you for an HSA that 
	proves the incentives for you to be careful in your 
	health care shopping.  If you just had a high deductible 
	plan, you would have the sharpest incentives.  If you are 
	fortunate enough to have an HSA as well, in a sense the 
	HSA dilutes your incentives because here is money in an 
	account that I can only use for health care.
	Mr. Green.  Yes.
	Mr. Ginsburg.  And I also know that if I can afford to 
	and if it is used, I can put more in it and get a very 
	substantial tax subsidy.  If I am high income, it is 
	probably worth a 45 percent tax subsidy.  So in a sense 
	it is not the HSA which is the cost saving thing, it is 
	the high deductible plan and the HAS, if anything, makes 
	that plan more acceptable to consumers if they are going 
	to have a balance to buffer them.
	Mr. Green.  Sure.  If you are getting a tax incentive to 
	do it.
	Mr. Ginsburg.  That is right.
	Mr. Green.  But we could also encourage and I would hope 
	business, you know, because we are seeing a lessening of 
	businesses providing not only better care for their 
	employees but also attended care, higher cost to the 
	employee based on their care, and also their dependence.  
	But maybe it is Congress and this is not the committee to 
	talk about tax incentives but maybe if Ways and Means 
	look at tax incentives for--that would include these 
	other than HSAs.  Sure, let us put HSAs in there but let 
	us also look at other health plans that we could buy 
	instead of making just a regular deduction.  We could 
	actually incentivize people to say hey, I want a full 
	service plan because particularly I have two small 
	children and they have to go get shots, it is going to 
	have to do all this.
	Mr. Ginsburg.  Because there is really a lot that can 
	be done as far as thinking through the entire structure 
	of tax subsidies for health care and making them more 
	rational.  For example, making greater use of tax 
	credits instead of the exclusion of the employer 
	contributions from taxable income would have some very 
	different distributional effects.  And even the HSA, 
	I think a lot of people have complained about the 
	rigidity of the requirements and it has to be $1,000 
	deductible for individual, $2,000 for a family.  I am 
	sure that if the idea is to encourage people to have a 
	plan that leaves them with some incentives to economize 
	in the cost of care, there must be better ways of doing 
	this.  In particular if you just specified what I would 
	call the technical term the actuarial value of the term 
	of the plan which basically is the percentage of the 
	bill that the insurance pays.  If you just say that we 
	do not want actuarial values above a certain percentage 
	that then would give the insurance industry all the 
	flexibility to come up with benefit structures that are 
	suitable and people like rather than having legislated 
	a very specific benefit structure that some people do 
	not like.
	Mr. Green.  Thank you, Mr. Chairman.
	Mr. Shimkus.  [Presiding]  Thank you.
	I would now like to recognize the doctor from the State 
	of Texas, Dr. Burgess.
	Mr. Burgess.  Thank you, Mr. Chairman.
	I appreciate the panel's forbearance for staying with 
	us so long today.  I guess I need to make a personal 
	observation too since everyone else is doing it and the 
	Chairman's no longer here.  The Chairman of the full 
	committee is no longer here but he needs to understand 
	that the doctor was offering him a sedative before the 
	cath for the doctor's benefit so that he would not ask 
	questions during the cath.  At least that is what I 
	always used to do in my practice.  I did not do 
	cardiology but it worked in my--
	Mr. Shimkus.  Who paid for that sedative?  Should the 
	doctor or the patient?
	Mr. Burgess.  You did on April 15.
	Doctor, your story, is a very compelling story and I 
	have actually been in the same place on more than one 
	occasion myself.  A patient needed a tubal ligation 
	and we tried to take her to the hospital.  It was 
	$12,000.  She could go to a surgery center down the 
	street where it is $1,000.  It was a pretty easy 
	choice to make.  And the question then would come up 
	why am I not going down to the street to the surgery 
	center for all tubal ligations.  You ask a very good 
	question in your testimony and forgive me if you 
	covered it and I just missed it but under your points 
	in the end is something to ponder, why can hospitals 
	own physicians but physicians not own hospitals?  
	That is an opinion that we struggle with on this 
	committee a great deal and I thank you for bringing 
	that observation to the committee because while it 
	may not be germane to the discussion today, it is 
	very germane to a number of things that we do take 
	up on this committee.  You make another point about 
	eliminating the restrictions for purchasing health 
	insurance across State borders that would be what 
	was described as a blood feud here one night about 
	ten months ago when we marked up a bill to that extent.  
	But again, you just have to ask the question who are 
	we serving here?  Are we serving one side or the other 
	or are we serving patients?  And I think we cannot 
	understand why we cannot get together and decide on a 
	basic package of benefits that might be offered 
	across State lines and agree on that, tie it up in a 
	nice package and make it available to people.
	I had a situation a little over ten years ago where 
	I had a family member, a child, an adult child who 
	was unemployed by choice as it turns out, but 
	nevertheless, it was almost impossible in 1994 to 
	buy insurance for a young single adult.  I was a 
	physician, I was willing to write a big check, it 
	did not need to be a little check, I would have 
	paid for the cost because I did not want the cost 
	of the hospitalization over a car wreck or an 
	accident of some type, a couple of days in the ICU 
	can be absolutely prohibitive to try to pay for 
	that.  But there was no product available.  Contrast 
	that with now you can go on the Internet, type in 
	health savings account in Google and you have a 
	whole panoply of products that are available to 
	you; some of which cost as little as $55 a month 
	for a person in the 20-year-old age bracket.  So 
	there are new tools, and I guess I would just ask 
	the question and Dr. MacDonald, please feel free 
	to start off, but what percentage of people who 
	have health savings accounts would you reckon were 
	previously uninsured that are taking advantage of 
	this?
	Dr. MacDonald.  Well I would like to preface that 
	with again this discussion is about transparency and 
	cost, and I am not in favor of health savings accounts 
	as much as some are because it is a distorted price.  
	So I want to just clarify that many people are still 
	on the delusion and misconception that group policies 
	are cheaper than individual policies.  And having done 
	this for a long time, and check it out yourself and 
	prove me wrong, you can get an individual policy in 
	most States cheaper than the group policy that you are 
	under at your job.  Prove me wrong, check it out, send 
	me an email, I would love to hear the response and I 
	have done this because we have a lot of companies.  
	People get insurance, and we help them get insurance.  
	A health savings account is not always the best buy.
	Mr. Burgess.  Correct.  And I thank you for doing it.  
	I am going to interrupt you because the time is 
	running out and I want to ask Mr. Gedwed about our 
	premise here today of course was to talk about some of 
	the legislative products that are out there that could 
	be enacted into law.  Do you see in your business and 
	I just got to tell you, I think it is a fantastic thing 
	that you are doing.  And really the whole hearing 
	should be about you, sir, but is anything that we are 
	likely to do bothersome to you?  Is it going to hurt 
	your business or help your business?
	Mr. Gedwed.  No, I think, Congressman, it is going to 
	help our business.  I can tell you today as we talk we 
	are getting really confused a lot.  We work with people 
	every day who are single moms who wait tables and 
	cannot afford coverage.  The first question they ask 
	us is what can I get in health coverage for this 
	amount of money, and that is all I have available.  
	All we do is give them as much information on quality 
	and price.  They now can walk into the provider when 
	yesterday they would charge them $100 per particular 
	visit and they can say well why does the doctor down 
	the street only charge $80?  And at that point, the 
	provider gives them a lower point.
	Mr. Burgess.  Let me just interrupt you there because 
	quickly I want to go to Dr. Goodman.
	Do you see any downsize to legislation that we might 
	be doing?
	Mr. Goodman.  I think if you require hospitals to 
	post prices that will not accomplish very much at all 
	because if you watched 60 Minutes Sunday night, the 
	hospital association said we have the same price for 
	everybody, the difference is is that some people get 
	huge discounts and other people do not.  What I wish 
	you would do is to go back to who owns the hospital.  
	I wish you would appeal the stock amendment or 
	greatly roll it back so that hospitals and doctors 
	can get together on the same team and make profitable 
	improvements in their product and offer package prices.  
	I would like to see us take all the restrictions at 
	the same time off the specialty hospitals.  If doctors 
	want to go from their own hospital they can.  I would 
	like to see an override of all State laws that say 
	that the hospital cannot charge a lower price to the 
	uninsured than they charge to Blue Cross.  So there 
	are some things that you could do that I think would 
	be very, very positive.
	Mr. Burgess.  Thank you.
	Thanks, Mr. Chairman.
	Mr. Shimkus.  Thank you.  
	The Chair recognizes the Ranking Member of the full 
	committee, John Dingell.  You are recognized, sir.
	Mr. Dingell.  Mr. Chairman, thank you for your courtesy.  
	This has been a very useful hearing and I commend you 
	for it. 
	These questions are for Dr. MacDonald.  Doctor, good 
	morning.  The question, the first question at least we 
	need only a yes or no answer.  Now let me ask you about 
	your view on these matters.  You favor and support price 
	disclosure for hospitals, for physicians, and 
	pharmaceutical manufacturers.  Is that correct?
	Mr. Goodman.  I do not think that kind of legislation 
	will help.
	Mr. Dingell.  I am sorry?
	Mr. Goodman.  I do not think that kind of legislation 
	will be helpful. 
	Mr. Dingell.  I did not ask about helpful, I just said 
	do you favor that kind of situation?
	Mr. Goodman.  I do not favor legislation to force imposed 
	prices, no.
	Mr. Dingell.  My question is a very simple one.  I am 
	addressing this question to Dr. MacDonald.  Is that your 
	name? 
	Mr. Goodman.  I am sorry.
	Mr. Dingell.  Since you have become Dr. MacDonald and I 
	have addressed Dr. MacDonald, I hope you will respond 
	that you were a little bit early.  Dr. MacDonald, do I 
	have your attention?
	Dr. MacDonald.  Yes.
	Mr. Dingell.  Is there only one Dr. MacDonald at the 
	table?
	Dr. MacDonald.  To my knowledge.
	Mr. Dingell.  I am comforted to hear it.  Doctor, is it 
	true that you support price disclosure for hospitals, 
	for physicians, and for pharmaceutical manufacturers?
	Dr. MacDonald.  The cost of reimbursement yes, posting 
	prices is meaningless.  The cost of what they receive 
	from insurance carriers is more meaningful.
	Mr. Dingell.  And is it true that you also support our 
	transparency for insurance companies?
	Dr. MacDonald.  Absolutely.
	Mr. Dingell.  Absolutely.  Now Doctor, according to a 
	December Health Affairs study, 20 percent of the health 
	care costs are associated with billing and administrative 
	functions of insurers.  Isn't it true that transparency 
	in this area would be enormously helpful to enable 
	consumers to pick and choose a better health plan?  To 
	pick one that devoted more of the premium to actual 
	health care?
	Dr. MacDonald.  Yes.
	Mr. Dingell.  Thank you.  Now is it also true that while 
	price disclosure can be good, making it only for hospitals, 
	doctors, and pharmaceutical houses is just another way 
	to help insurance companies to negotiate better prices 
	without assuring that these better prices will do 
	anything other than to increase their profits?
	Dr. MacDonald.  In my experience that is not true because 
	we stabilize the long term re-insurance cost, renewal 
	rates for the businesses we are trying to help.  And if 
	the insurance company does not continue to come through, 
	we get a different insurance carrier.
	Mr. Dingell.  I sense that you are a man of the most 
	exquisitely trusting character and I am comforted to 
	know that there is a man of that character about 
	especially where it concerns dealing with insurance 
	companies.  Now according to one source, United Health
	Care made a profit of $66,265 per employee in 2005.  
	Aetna suffered along with only $61,217 per employee.  
	Large hospital chain HCA had only a profit for employee 
	of $10,253 in 2005.  Now Dr. MacDonald, isn't it true 
	that given this information, insurance companies are 
	doing splendidly and if we are really concerned about 
	where our health care dollars are going maybe we should 
	be looking at insurance company disclosures as well?
	Dr. MacDonald.  Yes, sir.  If you stop watering the 
	plant, it dies.
	Mr. Dingell.  So you do think we ought to require a 
	measure of helpful disclosure by insurance companies?
	Dr. MacDonald.  Absolutely.  We actually are getting 
	that, we are getting disclosure and competition.
	Mr. Dingell.  Good.
	Dr. MacDonald.  We are not in agreement with the 
	multiple million dollar executive salaries and then 
	going to the hospital and they are getting a better 
	price than the uninsured.  It does not make sense and 
	I hope this committee does something about that.
	Mr. Dingell.  Thank you, Doctor.
	And Dr. Goodman, I will thank you for your assistance.  
	I will try and be more clear next time.
	Thank you, Mr. Chairman. 
	Mr. Shimkus.  Thank you.
	The Chair would like to thank our panel today for your 
	patience obviously through debates but also your great 
	testimony has given us a lot of food for thought and we 
	appreciate it.  This hearing is adjourned.
	[Whereupon, at 1:07 p.m., the subcommittee was 
	adjourned.]

Submission for the Record by Bob Inglis

Statement for the Record

The Honorable Nathan Deal
Chairman, Subcommittee on Health
The Committee on Energy and Commerce

Dear Mr. Chairman,

I want to thank you for holding a hearing on the important 
issue of hospital price transparency.  The difficulty in 
obtaining affordable health care is one of the greatest 
challenges facing American families.  An estimated 46 million 
Americans are uninsured, and the cost of health care continues 
to grow far faster than inflation.  Our current health care 
system encourages over utilization of services, restricts 
choice, and gives consumers little incentive to look for 
low-cost alternatives (like generic drugs).  In other words, 
it's broken.  
Consumer-driven health care models must be part of the fix.   
By bringing increased market forces to bear on the insulated 
world of health care, consumer-driven health care models can 
apply the brakes to runaway growth in health care costs.  
Health Savings Accounts, for instance, hold the potential to 
transform our complex managed care system of PPOs and HMOs 
into a cost-effective system in which consumers turn to the 
insurance company only for the big things. ï¿½For the same 
(or less) money than we're currently spending for managed care 
coverage, we can (1) buy high deductible (less expensive) 
policies; and (2) put the remainder in health savings accounts 
to cover the deductibles, rolling the extra from year to year. 
Millions of Americans have already adopted HSAs, and millions 
more are expected to adopt them in coming years.
However, the long-term prospects of consumer-driven health 
economy depend on our ability to help consumers gain access 
to accurate and understandable information about the cost of 
health care services.  An increasing number of policy experts 
are recognizing the importance of increased price transparency 
in the health care sector.  The President has been actively 
publicizing the need for hospital price transparency in recent 
weeks; media outlets regularly publish the stories of uninsured 
consumers stuck with inflated bills after hospital visits; and 
several states have already passed laws requiring hospitals to 
make their charges public.  Hospital price disclosure is an 
idea whose time has come.  
Ideally, hospitals and physicians would make price lists 
available voluntarily.  In fact, some insurance 
companies-including Aetna and Humana-are already experimenting 
with making pricing information available online.  These 
forward-looking companies should be encouraged.  However, other 
providers will need some prodding.  As the largest payer in our 
health care system, the federal government must take the lead.  
The hospital pricing system is a labryinthe that traps too many 
consumers, leaving them wandering and confused.  Prices for 
simple procedures and drugs vary wildly from hospital to 
hospital, and list prices often bear little relationship to 
cost.  Theseus successfully navigated the original labyrinthe 
only because he had the help of a magic ball of yarn that led 
him safely through the maze.  Congress needs to act now and 
provide health care consumers with their own "ball of yarn," a 
system of easy-to-access information that will help them make 
cost-effective  decisions.  
That is why I am pleased to serve as the primary cosponsor of 
H.R. 3139, the Hospital Price Reporting and Disclosure Act of 
2005.  This bipartisan legislation-introduced by Rep. Dan 
Lipinski-would require hospitals and ambulatory surgical 
centers to report the prices they charge for the most frequently 
performed procedures and most frequently administered inpatient 
drugs.  The Secretary of Health and Human Services would then 
post that information on a publicly available, user-friendly 
website.  This bill will not solve all of our health care woes; 
but increased transparency can only help consumers navigate 
the twists and turns of America's health care system.  

							Best regards,



							Bob Inglis
							
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