[House Hearing, 110 Congress]
[From the U.S. Government Publishing Office]



 
THE PAUL WELLSTONE MENTAL HEALTH AND ADDICTION EQUITY ACT OF 2007 
                           (H.R. 1424)
=======================================================================



                                HEARING

                               before the

                        SUBCOMMITTEE ON HEALTH,
                     EMPLOYMENT, LABOR AND PENSIONS

                              COMMITTEE ON
                          EDUCATION AND LABOR

                     U.S. House of Representatives

                       ONE HUNDRED TENTH CONGRESS

                             FIRST SESSION

                               __________

             HEARING HELD IN WASHINGTON, DC, JULY 10, 2007

                               __________

                           Serial No. 110-53

                               __________

      Printed for the use of the Committee on Education and Labor


                       Available on the Internet:
      http://www.gpoaccess.gov/congress/house/education/index.html



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                    COMMITTEE ON EDUCATION AND LABOR

                  GEORGE MILLER, California, Chairman

Dale E. Kildee, Michigan, Vice       Howard P. ``Buck'' McKeon, 
    Chairman                             California,
Donald M. Payne, New Jersey            Senior Republican Member
Robert E. Andrews, New Jersey        Thomas E. Petri, Wisconsin
Robert C. ``Bobby'' Scott, Virginia  Peter Hoekstra, Michigan
Lynn C. Woolsey, California          Michael N. Castle, Delaware
Ruben Hinojosa, Texas                Mark E. Souder, Indiana
Carolyn McCarthy, New York           Vernon J. Ehlers, Michigan
John F. Tierney, Massachusetts       Judy Biggert, Illinois
Dennis J. Kucinich, Ohio             Todd Russell Platts, Pennsylvania
David Wu, Oregon                     Ric Keller, Florida
Rush D. Holt, New Jersey             Joe Wilson, South Carolina
Susan A. Davis, California           John Kline, Minnesota
Danny K. Davis, Illinois             Cathy McMorris Rodgers, Washington
Raul M. Grijalva, Arizona            Kenny Marchant, Texas
Timothy H. Bishop, New York          Tom Price, Georgia
Linda T. Sanchez, California         Luis G. Fortuno, Puerto Rico
John P. Sarbanes, Maryland           Charles W. Boustany, Jr., 
Joe Sestak, Pennsylvania                 Louisiana
David Loebsack, Iowa                 Virginia Foxx, North Carolina
Mazie Hirono, Hawaii                 John R. ``Randy'' Kuhl, Jr., New 
Jason Altmire, Pennsylvania              York
John A. Yarmuth, Kentucky            Rob Bishop, Utah
Phil Hare, Illinois                  David Davis, Tennessee
Yvette D. Clarke, New York           Timothy Walberg, Michigan
Joe Courtney, Connecticut            Deal Heller, Nevada
Carol Shea-Porter, New Hampshire

                     Mark Zuckerman, Staff Director
                   Vic Klatt, Minority Staff Director
                                 ------                                

         SUBCOMMITTEE ON HEALTH, EMPLOYMENT, LABOR AND PENSIONS

                ROBERT E. ANDREWS, New Jersey, Chairman

George Miller, California            John Kline, Minnesota,
Dale E. Kildee, Michigan               Ranking Minority Member
Carolyn McCarthy, New York           Howard P. ``Buck'' McKeon, 
John F. Tierney, Massachusetts           California
David Wu, Oregon                     Kenny Marchant, Texas
Rush D. Holt, New Jersey             Charles W. Boustany, Jr., 
Linda T. Sanchez, California             Louisiana
Joe Sestak, Pennsylvania             David Davis, Tennessee
David Loebsack, Iowa                 Peter Hoekstra, Michigan
Phil Hare, Illinois                  Cathy McMorris Rodgers, Washington
Yvette D. Clarke, New York           Tom Price, Georgia
Joe Courtney, Connecticut            Virginia Foxx, North Carolina
                                     Timothy Walberg, Michigan


                            C O N T E N T S

                              ----------                              
                                                                   Page

Hearing held on July 10, 2007....................................     1

Statement of Members:
    Andrews, Hon. Robert E., Chairman, Subcommittee on Health, 
      Employment, Labor and Pensions.............................     1
        Prepared statement of....................................     3
        Additional materials submitted for the record:
            Statement of Raymond F. Anton, M.D., president, the 
              Research Society on Alcoholism.....................   106
            Letter from Mila Kofman, associate research 
              professor, Georgetown University...................    69
            Letter from Gregory B. Heller........................    74
            Letters from Connecticut and Maryland attorneys 
              general............................................   100
            Letter from the National Association of Insurance 
              Commissioners......................................   106
    Kline, Hon. John, Senior Republican Member, Subcommittee on 
      Health, Employment, Labor and Pensions.....................     4
        Prepared statement of....................................     5
        Additional materials submitted for the record:
            Letter from Sara Rosenbaum, J.D., George Washington 
              University.........................................    83
            Letter from various organizations....................   109
            Letter from the U.S. Chamber of Commerce.............   110
    Wu, Hon. David, a Representative in Congress from the State 
      of Oregon, statement of the American Occupational Therapy 
      Association (AOTA).........................................   113

Statement of Witnesses:
    Breyfogle, Jon W., Groom Law Group, Chartered, on Behalf of 
      the American Benefits Council..............................    35
        Prepared statement of....................................    37
    Carter, Rosalynn, former First Lady, Chair, Mental Health 
      Task Force, the Carter Center..............................    17
        Prepared statement of....................................    19
    Dilweg, Sean, Wisconsin Insurance Commissioner...............    54
        Prepared statement of....................................    56
        Additional submissions:
            Memorandum, dated May 23, 2007.......................    60
            Letter from Washington State Insurance Commissioner 
              to Senator Cantwell................................    64
            Letter from Vermont State Insurance, Securities, and 
              Health Care Administrator to Senator Leahy.........    65
            Letter from Connecticut State Insurance Commissioner 
              to Senator Dodd....................................    67
    Kennedy, Hon. Patrick J., a Representative in Congress from 
      the State of Rhode Island..................................     6
        Prepared statement of....................................     9
        Additional materials submitted for the record:
            Letter from the American Academy of Pediatrics.......    12
            Letter from Parity NOW Coalition.....................    12
    Melek, Stephen P., actuary, Milliman, Inc....................    42
        Prepared statement of....................................    44
    Ramstad, Hon. Jim, a Representative in Congress from the 
      State of Minnesota.........................................    80
        Prepared statement of....................................    81
    Smith, Amy, vice president, Mental Health Association of 
      Colorado...................................................    28
        Prepared statement of....................................    29
    Trautwein, E. Neil, vice president and employee benefits 
      policy counsel, National Retail Federation.................    31
        Prepared statement of....................................    32
    Wellstone, Paul David, Jr., chairman, Wellstone Action 
      Advisory Board.............................................    20
        Prepared statement of....................................    23
        Congressional Research Service report, ``The Mental 
          Health Parity Act: A Legislative History,'' committee 
          Internet address.......................................    27

                  THE PAUL WELLSTONE MENTAL HEALTH AND
                ADDICTION EQUITY ACT OF 2007 (H.R. 1424)

                              ----------                              


                         Tuesday, July 10, 2007

                     U.S. House of Representatives

         Subcommittee on Health, Employment, Labor and Pensions

                    Committee on Education and Labor

                             Washington, DC

                              ----------                              

    The subcommittee met, pursuant to call, at 3:02 p.m., in 
room 2175, Rayburn House Office Building, Hon. Robert Andrews 
[chairman of the subcommittee] presiding.
    Present: Representatives Andrews, Kildee, McCarthy, 
Loebsack, Hare, Courtney, Kline, McKeon, and Boustany.
    Staff present: Aaron Albright, Press Secretary; Tylease 
Alli, Hearing Clerk; Jody Calemine, Labor Policy Deputy 
Director; Fran-Victoria Cox, Documents Clerk; Carlos Fenwick, 
Policy Advisor for Subcommittee on Health, Employment, Labor 
and Pensions; Michael Gaffin, Staff Assistant, Labor; Jeffrey 
Hancuff, Staff Assistant, Labor; Brian Kennedy, General 
Counsel; Thomas Kiley, Communications Director; Ann-Frances 
Lambert, Administrative Assistant to Director of Education 
Policy; Sara Lonardo, Staff Assistant; Joe Novotny, Chief 
Clerk; Megan O'Reilly, Labor Policy Advisor; Michele Varnhagen, 
Labor Policy Director; Cameron Coursen, Minority Assistant 
Communications Director; Steve Forde, Minority Communications 
Director; Ed Gilroy, Minority Director of Workforce Policy; Rob 
Gregg, Minority Legislative Assistant; Richard Hoar, Minority 
Professional Staff Member; Victor Klatt, Minority Staff 
Director; Jim Paretti, Minority Workforce Policy Counsel; Molly 
McLaughlin Salmi, Minority Deputy Director of Workforce Policy; 
Ken Serafin, Minority Professional Staff Member; and Linda 
Stevens, Minority Chief Clerk/Assistant to the General Counsel.
    Chairman Andrews [presiding]. The subcommittee will be in 
order. I would ask if our guests could take seats.
    Ladies and gentlemen, good afternoon, and welcome to what 
we hope will be an edifying and enlightening discussion this 
afternoon of some very significant legislation that has been 
introduced by our friend and colleague Congressman Kennedy from 
Rhode Island and our friend and colleague Congressman Ramstad 
from Minnesota.
    The legislation bears the distinguished name of the late 
Senator Paul Wellstone of the state of Minnesota, who worked 
very hard for the issue of mental health parity. And that is 
going to be the issue that we have in front of the subcommittee 
this afternoon.
    There are 44 million Americans who are dealing with some 
kind of mental health issue in their lives. But only about one-
third of those Americans are receiving care from a qualified, 
trained, prepared mental health professional for their issues.
    When asked why the other nearly 30 million did not receive 
care, an overwhelming majority of those individuals indicated 
that their problem was related either to insurance or the cost 
of insurance.
    Eighty-seven percent of those who are not receiving mental 
health services but who need them indicated that there were 
issues with their insurance policy which precluded them from 
getting that care.
    Eighty-one percent of those who did not receive care 
indicated that cost was a major consideration in their failure 
to access the care that they need.
    Now, 42 states have understood the problems with our 
present insurance system, and the problem, I think, succinctly 
can be summarized this way.
    It is presently acceptable under the law in many cases for 
an insurance policy to distinguish between a mental health 
issue and a physical health issue.
    So for example, a person who injures her knee may have a 
$500 deductible toward dealing with the knee injury, and then 
after that, the insurance kicks in and pays a substantial part 
or all of what is yet to come.
    And typically, the number of visits the person would need 
to get their knee fit and trim is either unlimited or doesn't 
have much of a limitation on it, so as many trips to the 
surgeon as you need, as many trips to physical therapists as 
you need. You get those trips until your knee is sound.
    On the other hand, if a person suffers from clinical 
depression, and he or she needs the care of a psychiatrist, 
that person may find that there is a $5,000 deductible before 
the insurance policy begins to pay most or all of the cost of 
that psychiatric care.
    A person may also find that if they are fortunate enough to 
have the psychiatric care, there may be a very low limitation 
on the number of visits that he or she is permitted to make in 
a given year.
    So instead of as many visits as you need, you may find that 
you only get three or four or five of them, whether you are 
fully healed and prepared to deal with the rest of your life or 
not.
    I think these distinctions are arbitrary and unwise, and 
this is a view that has gained great currency around the 
country. Forty-two states have enacted some form of mental 
health parity law.
    Now, these are a mixed bag. Some of these state laws 
require specific mental health services. Others require a sort 
of parity between the care of physical and mental health 
issues.
    And still others will deal with requirements that insurers 
and employers must offer mental health coverage without any 
requirement that the coverage actually be provided.
    These are noble efforts by the states, and we are going to 
hear from a distinguished state insurance commissioner from 
Wisconsin later on the second panel about a very excellent 
effort in his state.
    I don't think they are sufficient, for three very important 
reasons. The first important reason is that members of our 
society who are part of ERISA plans--that is, health insurance 
plans governed by the federal statute over which we have 
jurisdiction--are not affected by or protected by these state 
statutes.
    So the 52 percent of our workforce that works for an 
employer that is covered by an ERISA plan does not have the 
benefit of the state law statutes in these 42 states.
    Second, many of these statutes are limited in their reach. 
They don't solve all the problems that we set out to solve.
    And third, I believe that many of these statutes don't 
particularly fit together well with other federal efforts to 
deal with this problem.
    So it is my view that we do need a strong and well-thought-
out federal standard to guarantee mental health parity. And I 
am a supporter of the efforts of Congressman Kennedy and 
Congressman Ramstad.
    I understand there are issues, and we want to hear those 
issues fully vetted today. But this effort by Congressman 
Kennedy and Congressman Ramstad has very broad bipartisan 
support.
    It is by no means the initiative of the majority party. It 
is the initiative of many like-minded members on both sides of 
the aisle from around the country. And I believe that it takes 
us in a direction where we can be successful.
    The final point that I want to make before I yield to my 
friend from Minnesota--very often when we try to expand 
insurance coverage, we get into a debate about whether the cost 
is worth it. And that is a debate we absolutely ought to have.
    We are going to hear this afternoon from an actuarial 
expert who will provide some compelling evidence that the 
results from the field show that the cost of extending true 
parity, which is what the Kennedy-Ramstad bill does--the cost 
of extending true parity is very low.
    The testimony will indicate that it is 0.6 percent, which 
is quite a low number. And I would point out that that is a 
gross number.
    That is a number of the projected increase in the insurance 
premium before one takes into account productivity gains, 
reductions in absenteeism, other physical health gains that 
would take place as a result of the implementation of such a 
policy.
    So I am very pleased that we are here this afternoon. We 
are going to hear first from Congressman Kennedy.
    I would note for the record that Congressman Ramstad, of 
course, has been invited to appear to speak about his bill. His 
plane is evidently delayed because of bad weather conditions. 
But some people from Minnesota were able to soldier on and get 
here nevertheless.
    So I will at this point yield to my friend, the ranking 
member.
    [The statement of Mr. Andrews follows:]

Prepared Statement of Hon. Robert E. Andrews, Chairman, Subcommittee on 
                 Health, Employment, Labor and Pensions

    I welcome you to the HELP Subcommittee's hearing on the ``Paul 
Wellstone Mental Health and Addiction Act of 2007.'' Today, we will 
consider whether a federal law to provide mental health parity is 
necessary to close the gap in coverage for individuals who live without 
adequate coverage. The federal legislation we will focus our attention 
on today is known as the ``Paul Wellstone Mental Health and Addiction 
Equity Act'' (HR 1424), which was introduced by Congressmen Patrick 
Kennedy and Jim Ramstad. This legislation is named in honor of the late 
former Senator Paul Wellstone, who vigorously fought for mental health 
parity.
    I applaud both Patrick and Jim for their tireless efforts to help 
individuals and families who struggle with mental illness everyday. I 
also would like to take this opportunity to thank the former First Lady 
Rosalynn Carter and David Wellstone, son of the late Senator for taking 
time out to testify before our subcommittee today. Mrs. Carter and 
David Wellstone have continuously served as a public voice for those 
with mental illness.
    Mental illness is serious and sometimes life-threatening and should 
be treated just like a debilitating disease. Although having a mental 
illness can be as serious as having a stroke, many private health 
insurers often provide less coverage for mental illnesses than for 
other medical conditions. Furthermore, health plans tend to impose 
lower annual or lifetime dollar limits on mental health coverage, limit 
the treatment of mental health illnesses by covering fewer hospital 
days and outpatient office visits, and increase cost sharing for mental 
health care by raising deductibles and co-payments.
    With only one-third of the 44 million Americans who suffer from a 
mental health disorder receiving treatment, it is imperative that 
Congress act to provide adequate mental health coverage to these 
individuals. Congressional action must produce legislation that is 
cost-effective for our economy, will increase access to mental illness 
treatment, provide meaningful benefits by defining the scope of the 
benefits to be covered under a health plan, pose a nominal cost to 
those employers who currently offer mental health coverage and that 
will not preempt stronger state mental health parity laws.
    I thank all the witnesses for contributing their time to today's 
hearing and we look forward to hearing their testimony.
                                 ______
                                 
    Mr. Kline. I thank you, Mr. Chairman. Some of us soldiered 
on last night, so we were ahead of the weather.
    I am sorry that my Minnesota colleague, Mr. Ramstad, isn't 
here. I hope that he will be able to come sliding in from 
Dulles or wherever his plane safely landed.
    I want to thank you, Mr. Chairman, for holding this hearing 
to hear about, learn about and discuss the Paul Wellstone 
Mental Health and Addiction Equity Act of 2007, named, I would 
point out, after the much-admired and beloved late senator from 
Minnesota.
    I am very pleased to see his son is here and will, in fact, 
be a witness in the second panel. And I will just take this 
opportunity to say what a great panel it is, and we will, of 
course, include Mr. Kennedy sitting there all alone, waiting 
for Jim to show up.
    But the second panel--particularly distinguished witnesses 
from the minority and majority side. And of course, we are 
honored to have the former first lady with us here today.
    Legislation which provides greater parity between the 
health insurance coverage of mental and physical illness I 
think has reached the point where most members of Congress 
agree we need to go.
    We are looking for ways to achieve that parity, and 
tremendous strides have been made, I think, in the last months 
and years in addressing the stigmas which sometimes have been 
attached to mental illness and its treatment. Clearly, more 
needs to be done.
    However, there remains significant differences in how we 
should approach this. The chairman mentioned some of those and 
we will hear some of it today.
    Although it is well-intentioned, this bill, and I would say 
very well-intentioned, I have many concerns with the 
legislation as it is in front of us today.
    Initially, this bill constitutes an employer mandate. It 
seems ironic that at the time many of my colleagues in the 
majority profess to offer solutions to decrease the number of 
uninsured--it is the number one item, I believe, on their 
health care agenda--they are proposing issuing coverage 
mandates that appear to do the exact opposite by making 
coverage more costly and leading to less availability.
    And I don't think we want to do that. So we want to explore 
that here today.
    Secondly, the legislation does not preempt state laws that 
would provide greater consumer protections than those contained 
in the federal legislation.
    This means employers and plans could be subjected to 
multiple state laws, thus defeating the purpose of federal 
preemption of state laws and increasing plan complexity and 
cost.
    Other problems include the bill's broad definition of 
mental health or substance-related disorders and its failure to 
specifically protect a plan's ability to manage mental health 
benefits and control costs.
    Some of my colleagues in the Senate have introduced a 
mental health parity bill. Senate Bill 558 takes a little bit 
different approach.
    It is a product of lengthy bipartisan negotiations between 
patient advocates, mental health providers, business 
organizations and insurers, and we will receive some 
information about that bill today from one of our witnesses.
    Under the circumstances, regardless of whether you think 
the best answer is the Senate bill, the House bill or no bill, 
today's testimony should prove helpful.
    I urge my colleagues to seriously consider the testimony 
provided today by all those, and certainly pay attention to the 
testimony from those talking about the Senate bill.
    And again, I want to thank the chairman for holding the 
hearing and for our distinguished witnesses for joining us 
today, and I look forward to the discussion.
    [The statement of Mr. Kline follows:]

   Prepared Statement of Hon. John Kline, Ranking Republican Member, 
        Subcommittee on Health, Employment, Labor, and Pensions

    Good afternoon.
    I'd like to thank Chairman Andrews for convening this afternoon's 
hearing to discuss a House bill the affects the entire behavioral 
health care system in this country.
    I think legislation which provides greater parity between the 
health insurance coverage of mental and physical illnesses is a point 
on which all Members can agree. Tremendous strides have been made in 
addressing stigmas attached to mental illness and its treatment, and 
more needs to be done. However, there remain significant differences in 
the approach over how to improve health insurance for mental health.
    We are here today to examine H.R. 1424, the Paul Wellstone Mental 
Health and Addiction Equity Act of 2007. Although it is well-
intentioned, I have many concerns with this legislation, as introduced. 
Initially, this bill constitutes an employer mandate. It seems ironic 
that, at the same time my colleagues in the majority profess to offer 
solutions to decrease the number of the uninsured, which is the number 
one item on their health care agenda, they also propose issuing 
coverage mandates that appear to do the exact opposite by making 
coverage more costly and leading to less availability.
    Secondly, the legislation does not preempt state laws that would 
provide greater consumer protections than those contained in the 
federal legislation. This means employers and plans could be subjected 
to multiple state laws, thus defeating the purpose of federal 
preemption of state laws and increasing plan complexity and cost. Other 
problems include the bill's broad definition of mental health or 
substance-related disorders and its failure to specifically protect a 
plan's ability to manage mental health benefits and control costs.
    Some of my colleagues in the Senate have introduced a mental health 
parity bill, Senate Bill 558. That bill is the product of lengthy 
bipartisan negotiations between patient advocates, mental health 
providers, business organizations, and insurers, and we will receive 
detailed testimony regarding that bill.
    Under the circumstances, regardless of whether you think the best 
answer is the Senate bill, the House bill, or no bill, today's 
testimony should prove helpful. I urge my colleagues to seriously 
consider the testimony provided today, especially from those witnesses 
who support the parity approach set forth in Senate bill 558, which 
would reflect a more balanced approach to addressing this serious 
issue.
    I'd like to welcome our distinguished witnesses today, including 
two of my colleagues, Patrick Kennedy and Jim Ramstad, who are here to 
discuss their bill, The Paul Wellstone Mental Health and Addiction 
Equity Act of 2007. I look forward to everyone's testimony.
                                 ______
                                 
    Chairman Andrews. Thank you.
    By unanimous consent, the statement of any other member who 
wishes to have an opening statement will be entered into the 
record, present or absent.
    We will begin with our first panel, and it is a pleasure to 
welcome, hopefully soon, both of our colleagues, but certainly 
one of our colleagues.
    Congressman Patrick J. Kennedy is serving his seventh term 
in Congress as representative of the 1st District of Rhode 
Island. Mr. Kennedy has received numerous awards for his 
advocacy on behalf of the mentally ill, including the Society 
for Neuroscience Public Service Award, the American 
Psychoanalytic Association President's Award, the American 
Psychiatric Association's Alliance Award, and the Depression 
and Bipolar Support Alliance Paul Wellstone Mental Health 
Award.
    It is a pleasure to serve with you, Patrick, as a 
colleague. We welcome you today, and we look forward to your 
statement.

STATEMENT OF HON. PATRICK KENNEDY, A REPRESENTATIVE IN CONGRESS 
                 FROM THE STATE OF RHODE ISLAND

    Mr. Kennedy. Thank you, Chairman Andrews and Ranking Member 
Kline. And to my distinguished colleagues, thank you all for 
the opportunity to invite me to testify today.
    And thank you for your commitment to ending insurance 
coverage discrimination against those with mental illness like 
myself.
    Let me begin by saying I suffer from the disease of 
alcoholism and addiction. I also suffer from bipolar disorder.
    I have, through the course of my life, had periods of time 
where I have had a mental obsession and physical compulsion to 
drink and use drugs in order to cope with a mental anguish that 
I had felt that today I no longer have to deal with through 
drinking and drugging because I am a member of Congress and 
have access to the Federal Employees Health Benefit Plan, which 
has parity.
    And what is before you today is a bill that will extend the 
same treatment coverage that I have had as a member of Congress 
to the rest of the American people.
    So that as a member of Congress, the reason that I am able 
to be here today as a fully productive citizen, as opposed to 
someone who is still out in the society drinking and drugging 
and unproductive, as opposed to someone who is at work, living 
a full and productive life--the different is that I have 
treatment.
    And the difference between me and some other American who 
doesn't have that treatment is that they don't have that 
access.
    And what we need to do today is have parity in this country 
so that millions of Americans who are still out there suffering 
from that same disease that I have, that physical illness--that 
they can get the same coverage that I have and that we all have 
as members of Congress, and so that they can live productive 
lives.
    And if they live productive lives, they can be contributing 
members of society as I hope that I am a contributing member of 
society.
    I know I could never have imagined myself when I first ran 
for office coming up here and saying I was an alcoholic and 
addict.
    I remember very clearly growing up in my family, whispering 
in my household as my mother suffered tremendously from this 
disease of alcoholism. It was a shame growing up to have this 
disease because of the scourge and stigma in this country that 
this disease has been.
    But I think that it is coming out of the shadows now and 
that this country has finally come to a reckoning that this is 
no longer an issue of a moral failing.
    No one can convince me, from looking at what this disease 
has done to my mother, or what this disease has done to 
millions of Americans like her that I have witnesses, let alone 
what I have witnessed in my own personal life, that people have 
chosen this life voluntarily.
    No one voluntarily chooses to live the kind of sordid, 
painful, destructive life that people who are alcoholics and 
addicts or people who are depressed or people who are suffering 
from schizophrenia or bipolar disorder--any number of mental 
illnesses--obsessive-compulsive disorder--any one of those 
illnesses--no one could convince me that that is a voluntary 
choice on their part.
    And essentially, that is what those on the other side of 
this debate would have you believe, that this is a non-illness, 
that this is something that is non-physical because if it were 
non-physical, then they could control it.
    And that is essentially what they would have you suppose, 
because if you were to believe that, then there wouldn't be any 
need for there to be insurance.
    But we know otherwise. The insurance system cannot hide the 
fact that brain science tells us otherwise. We have pictures. 
Modern science shows us, these pictures that are clear as a 
bell, that the brain is a physical organ.
    And you cannot take a picture of the brain and look and say 
that the insurance companies can cover brain diseases like 
Parkinson's that affect the motor cortex and the basal ganglia 
and the sensory cortex and the thalamus, and then other brain 
diseases like depression, which affected the limbic cortex and 
the hypothalamus and the frontal cortex and the hippocampus--
and they don't get covered.
    And yet they are two centimeters or three centimeters away. 
How can you justify 80 percent insurance coverage for one part 
of the brain and 20 percent insurance coverage for two 
centimeters away or zero insurance coverage for two centimeters 
away? How in the world can you explain that?
    Or you can say, ``Well, no, sorry,'' as Mr. Kline said, 
``We want to have the Senate language for the second part of 
the brain but we want the current system of health insurance of 
the first part of the brain.'' It doesn't work. It is totally 
unjustifiable.
    Would you say the same to someone with cancer? Are you 
going to play with someone's life who has cancer that way?
    You take someone from your family who has the disease of 
cancer or diabetes, and you exchange that person's life and put 
in place mental illness and say that you are ready to bargain 
their life away.
    And answer that question. Then I will be happy to sit back 
and let you move on with your argument. But until you can 
honestly look me in the face and say that you are willing to 
put in place and substitute a person with cancer for that 
argument or diabetes with that argument or cardiovascular 
disease with that argument, that argument is specious, because 
otherwise it doesn't wash, frankly.
    This is a civil rights issue at its core. No one asks to 
have this disease. You are born with it. You have certain 
triggers through your environment that set it off.
    We are going to find all these things out in the years to 
come through genomics and personal health medicine, and we are 
going to have great revolutionary science help to solve many of 
these problems.
    But, Mr. Chairman and Ranking Member Kline, if we don't 
move now, we are going to cost millions of Americans their 
lives.
    Thirty-four thousand Americans take their lives every year 
to suicide. That is twice the rate of homicide.
    Think of all the people that are killed by murder in this 
country and think the fact that you multiply that two times, 
and that is how many people successfully take their own lives. 
That is a disgrace to this country.
    Think about the fact that the largest mental health 
institution in this country is our jail system. What an 
indictment on this country.
    And think about the fact that millions of Americans are not 
living up to their full potential all because we have a 
discriminatory insurance system that continues to say that 
people are not living up to their full potential because we are 
not acknowledging this illness.
    I will say but for the work of Paul Wellstone and Rosalyn 
Carter, the former first lady, who has been working on this 
issue for decades, and for Jim Ramstad, we would not have come 
as far as we have.
    And I just want to say today I am standing on the shoulders 
of giants. And Jim Ramstad is with us in spirit. He has been 
absolutely--no better champion for this cause than Jim Ramstad. 
And I am so honored to be his partner in this effort and a 
fellow on the road to recovery.
    And I also want to say to David Wellstone, who is here on 
behalf of his father's legacy, what an honor it is to be 
joining him. He has done such a fantastic job in carrying on 
his dad's legacy.
    And to the former first lady, she has dedicated her life to 
this issue. And the fact that she has done so with such 
compassion has been so moving to all of us. And I want to thank 
her personally for all of her great work on this issue.
    And for everybody today who is working on this issue I want 
to thank them as well.
    And thank you, Mr. Chairman, for the time.
    [The statement of Mr. Kennedy follows:]

  Prepared Statement of Hon. Patrick J. Kennedy, a Representative in 
                Congress From the State of Rhode Island

    Chairman Andrews, Ranking Member Kline, and my distinguished 
colleagues, thank you for inviting me to testify today, and, 
especially, for your commitment to ending insurance discrimination.
    And of course, I must single out my great friend and the strongest 
champion for Americans with mental illnesses and addictions, Jim 
Ramstad. For years he has led this fight, leaning into the stiff wind 
of his own leadership without regard for the political consequences, 
speaking up for what he knows is right. We all owe him a debt of 
gratitude, nobody more than I. Jim, it has been an honor to stand with 
you in these efforts, and a greater privilege to be your friend.
    This issue is first and foremost one of fundamental fairness. Let 
me tell you about Anna Westin. Anna Westin paid her health insurance 
premiums just like everyone else. But when she got sick with anorexia 
and needed her insurance coverage, she didn't get it. That is just not 
fair. And it tragically cost Anna her life.
    Why did Anna's insurance fail to pay for her care? Because of 
stereotypes and stigma. There is no medical or policy rationale for 
discriminating against mental health diagnoses.
    In the attached exhibits, you can see the visual evidence that 
these diseases are physiological brain disorders, diminishing the 
brain's function just as heart disease diminishes the heart's function.
    Some brain diseases, like Parkinson's, affect the motor cortex, the 
basal ganglia, the sensory cortex, and the thalamus. Other brain 
diseases, like depression, affect the limbic cortex, hypothalamus, 
frontal cortex, and hippocampus.
    We provide full coverage to treat certain structures of the brain, 
but erect barriers to the treatment of other structures.
    This discrimination is not only unjustifiable, it is enormously 
costly. Representative Ramstad and I have traveled across this country 
holding informal field hearings on this subject--fourteen in total.
    We've heard from chiefs of police, like Sheriff Baca in Los Angeles 
who says he runs the largest mental health provider in the United 
States: the L.A. County Jail. According to the Justice Department, more 
than half of inmates in jails and prisons in this country have symptoms 
of a mental health problem. Two-thirds of arrestees test positive for 
one of five illegal drugs at the time of arrest, according to the 
National Institutes of Health.
    That's a cost of our insurance discrimination.
    We've heard from hospital presidents and emergency room doctors, 
like Dr. Victor Pincus. He said that 80% of the trauma admissions at 
Rhode Island Hospital, a level-one trauma center, were alcohol and drug 
related. Eighty percent.
    The physical health care costs go beyond the emergency room. 
Research shows, for example, that a person with depression is four 
times more likely to have a heart attack than a person with no history 
of depression. Health care use and health care costs are up to twice as 
high among diabetes and heart disease patients with co-morbid 
depression, compared to those without depression, even when accounting 
for other factors such as age, gender, and other illnesses. Not 
surprisingly then, one study found that limiting employer-sponsored 
specialty behavioral health services increased the direct medical costs 
of beneficiaries who used behavioral healthcare services by as much as 
37%.
    These are costs of our insurance discrimination.
    In our field hearings, we've heard from enlightened business 
leaders and insurance executives who understand that skimping on mental 
health and addiction treatment only winds up driving up other costs. 
That's why Bob Hulsey from the Williams Companies in Tulsa, Rep. 
Sullivan's district, said of parity, ``I absolutely believe that it 
helps the business.''
    Rick Calhoun, an executive in the Denver office of CB Richard 
Ellis, a Fortune 500 company, made a similar point. Mr. Calhoun said 
that the cost of treating mental illness is 50% of the cost of not 
treating it. As he said, ``This is a no-brainer. How could we not cover 
it?''
    Untreated mental health and addiction cost employers and society 
hundreds of billions of dollars in lost productivity. The World Health 
Organization has found that these diseases are far and away the most 
disabling diseases, accounting for more than a fifth of all lost days 
of productive life. Depressed workers miss 5.6 hours per week of 
productivity due to absenteeism and presenteeism, compared to 1.5 hours 
for non-depressed workers. Alcohol-related illness and premature death 
cost over $129.5 billion in lost productivity per year.
    These are costs of our insurance discrimination.
    All of these costs are preventable, and wasteful. But none are as 
tragic as the individual costs. We heard testimony from anguished 
parents like Kitty Westin and Tom O'Clair, who had to bury their 
children whose mental illnesses and addictions went untreated.
    We heard testimony from Steve Winter. He described eating breakfast 
as a teenager, getting a funny feeling in his chest, and looking up 
seeing his mother holding a gun. ``I shot you, and I'm going to shoot 
your sister and myself so we can all be in heaven together,'' she said.
    Steve's mother was off her anti-psychotic medications at that time 
due to insurance problems, and now Steve is spending the rest of his 
life in a wheelchair as a result, having endured a million dollars 
worth of surgeries, treatments, and medical equipment.
    So many Americans have lost their dreams, lost years, and even lost 
their lives--unnecessarily. You'll hear Amy Smith's powerful testimony 
in a few moments about the difference treatment can make.
    In Palo Alto we met Kevin Hines. He is a gregarious, outgoing 
person and is engaged to be married this summer. In 2001 he jumped off 
the Golden Gate Bridge, one of very few to survive that fall. Thirty-
thousand people succeed where Kevin fortunately failed, and take their 
own lives each year. How many of them would, like Kevin, be starting 
families, contributing to their communities, holding jobs, and 
realizing their potential--if only they had access to treatment?
    Mr. Chairman, I'm happy to provide the transcripts from the field 
hearings I have referenced to be included in the record of this 
hearing, as well as our report, ``Ending Insurance Discrimination: 
Fairness and Equality for Americans with Mental Health and Addictive 
Disorders.''
    We will hear arguments that, even if worthwhile, equalizing 
benefits is just too costly. The truth, however, is that the cost of 
doing the right thing and equalizing benefits between mental health and 
addiction care on the one hand and other physical illnesses on the 
other hand is negligible. This is not speculation.
    In 2001, we brought equity to mental health and addiction care in 
the Federal Employees Health Benefits Program (FEHBP), which covers 9 
million lives, including ours as Members of Congress. A detailed, peer-
reviewed analysis found that implementing parity did not raise mental 
health and addiction treatment costs in the FEHBP. Since our bill 
specifically references the FEHBP to define the scope of our bill, this 
analysis provides strong evidence that our legislation will similarly 
have negligible impact on costs. This finding is consistent with 
virtually every study of state parity laws as well.
    But frankly, the very fact that we need to debate how much it costs 
to end insurance discrimination is offensive. Nobody is asked to 
justify the cost-effectiveness of care for diabetes or heart disease or 
cancer. Tell Kitty Westin, Tom O'Clair, Steve Winter, Amy Smith, or 
Kevin Hines, or the millions of others who live with these diseases 
that to keep health care costs down for everyone else, they will not 
have to pay with their lives. Why them?
    People might say that there is a component of personal 
responsibility here, especially with addiction. That's true. I'm 
working hard every day at my recovery, and it's reasonable to ask of 
me. But it's also true that we don't deny insurance coverage to people 
who are genetically predisposed to high cholesterol and eat fatty 
foods. We don't deny insurance coverage to diabetics who fail to 
control their blood sugar.
    At the end of the day, this is about human dignity and whether we 
deliver on the promise of equal opportunity that is at the heart of 
what it means to be American. Nobody chooses to be born with particular 
genetics and anatomy, any more than they choose to be born with a 
particular skin color or gender. And nobody should be denied 
opportunities on the basis of such immutable characteristics. Anybody 
who pays their health insurance premiums is entitled to expect their 
plan to be there when they get sick, whether the disease is in their 
heart, their kidneys, or their brain.
    Mr. Chairman, we just celebrated July 4th and our nation's 
Declaration of Independence. Unlike any other country in the world, 
this one was founded on principles--the ideas of equality and freedom 
and opportunity. The history of America is the history of a country 
striving to live up to those self-evident truths. In pursuit of those 
values we've fought a civil war, chipped away at glass ceilings, 
expanded the vote, renounced immigration exclusion laws, and recognized 
that disabilities need not be barriers. Led by one of our own 
colleagues, a generation of peaceful warriors forced America to look in 
a mirror and ask itself whether its actions matched its promise, and 
they changed history.
    It is time, once again, to ask that question: are our actions 
matching our promises? And once asked, the answer is clear. Jim and I 
know, personally, the power of treatment and recovery. We are able to 
serve in Congress because we have been given the opportunity to manage 
our chronic diseases. Every American deserves the same chance to 
succeed or fail on the basis of talent and industriousness. That's the 
American Dream, and it shouldn't be rationed by diagnosis.
    Thank you.
    
    
    
    
                                 ______
                                 
    [Additional material submitted by Mr. Kennedy follows:]

                            American Academy of Pediatrics,
                                                      July 3, 2007.
Hon. Patrick Kennedy and Hon. Jim Ramstad,
U.S. House of Representatives, Washington, DC.
    Dear Representatives Kennedy and Ramstad: On behalf of the 60,000 
primary care pediatricians, pediatric medical subspecialists, and 
pediatric surgical specialists of the American Academy of Pediatrics, I 
write today to express our support for H.R. 1424, the Paul Wellstone 
Mental Health and Addiction Equity Act of 2007. This bill will take a 
significant step towards eliminating obstacles to mental health and 
substance abuse services for children.
    The mental health needs of children and adolescents are increasing. 
At least 13 million children in American are in need of mental or 
substance abuse care. Yet while growing evidence is demonstrating the 
effectiveness of specific mental health services, benefit packages that 
offer limited mental health care are decreasing access to this vital 
care. Early mental health intervention and care puts children on a firm 
footing for adulthood and reduces the need for more expensive care 
later in life.
    H.R. 1424 builds on the goal of parity legislation passed in 1996 
by closing loopholes that allow employers to offer unequal mental 
health coverage in terms of various out-of-pocket expenses, co-
payments, and treatment frequency limitations. The legislation also 
appropriately requires parity in terms of substance abuse treatment. 
H.R. 1424 will ensure that mental health care is recognized as an 
essential component of child health.
    Thank you for your strong commitment to the mental health of 
children and all Americans. We look forward to working with you to pass 
this crucial legislation.
            Sincerely,
                                  Jay E. Berkelhamer, M.D.,
                                                    FAAP President.
                                 ______
                                 
                                      Parity NOW Coalition,
                                                      July 6, 2007.
Hon. Patrick Kennedy and Hon. Jim Ramstad,
U.S. House of Representatives, Washington, DC.
    Dear Representative Kennedy and Representative Ramstad: The 
undersigned organizations applaud you for your commitment to mental 
health and addiction parity legislation. We wish to thank you and your 
staffs for the countless hours you have dedicated to this bill thus far 
and look forward to working with you towards enacting the Paul 
Wellstone Mental Health and Addiction Equity Act of 2007 into law.
    We hereby lend our formal support to this invaluable piece of 
legislation.

                         NATIONAL ORGANIZATIONS

AIDs Action Council
American Academy of Child and Adolescent Psychiatry
American Academy of Neurology
American Academy of Pediatrics
American Association for Geriatric Psychiatry
American Association for Marriage and Family Therapy
American Association for the Treatment of Opioid Dependence
American Association of Children's Residential Centers
American Association of Pastoral Counselors
American Association of Suicidology
American Counseling Association
American Federation of Teachers
American Foundation for Suicide Prevention
American Group Psychotherapy Association
American Hospital Association
American Medical Association
American Mental Health Counselors Association
American Music Therapy Association
American Occupational Therapy Association
American Psychoanalytic Association
American Probation and Parole Association
American Public Health Association
American School Health Association
American Society of Addiction Medicine
Anna Westin Foundation
Anxiety Disorders Association of America
Association for the Advancement of Psychology
Association for Ambulatory Behavioral Healthcare
Association of Jewish Family & Children's Agencies
Association of Recovery Schools
Association of University Centers on Disabilities
Bazelon Center for Mental Health Law
Betty Ford Center
Bradford Health Services
Caron Treatment Centers
Center for Clinical Social Work
Center for Science in the Public Interest
Children and Adults with Attention-Deficit/Hyperactivity Disorder
Child Welfare League of America
Clinical Social Work Association
Clinical Social Work Guild 49, OPEIU
Community Anti-Drug Coalitions of America (CADCA)
Depression and Bipolar Support Alliance
Easter Seals
Eating Disorders Coalition for Research, Policy and Action
Faces and Voices of Recovery
Families USA
Family Voices
Hazelden Foundation
Institute for the Advancement of Social Work Research
Johnson Institute
Kids Project
Legal Action Center
Mental Health America
NAADAC--The Association for Addiction Professionals
National Alliance of Methadone Advocates
National Alliance to End Homelessness
National Association for Children of Alcoholics
National Association of Addiction Treatment Providers (NAATP)
National Association of Anorexia Nervosa and Associated Disorders--ANAD
National Association of County and City Health Officials
National Association of Mental Health Planning & Advisory Councils
National Association of School Psychologists
National Association of Social Workers
National Association of State Directors of Special Education
National Association on Alcohol, Drugs and Disability, Inc.
National Council for Community Behavioral Healthcare
National Council on Alcoholism and Drug Dependence (NCADD)
National Development and Research Institutes, Inc. (NDRI)
National Educational Alliance for Borderline Personality Disorder
National Education Association
National Mental Health Awareness Campaign
National Recreation and Park Association
National Research Center for Women & Families
Obsessive Compulsive Foundation
Partnership for a Drug-Free America
School Social Work Association of America
Society for Research on Child Development
Suicide Prevention Action Network USA
State Associations of Addiction Services (SAAS)
Therapeutic Communities of America
United Jewish Community
United Methodist Church--General Board of Church and Society
U.S. Psychiatric Rehabilitation Association
Wellstone Action

                     LOCAL AND STATE ORGANIZATIONS

622 Communities Partnership, Inc., Minnesota Affiliate of the National 
        Council on Alcoholism and Drug Dependence, Inc
Addiction Recovery Institute
Addiction Resource Council
Advocates for Recovery
Alabama Voices for Recovery & Drug Education Council
Alcohol and Addictions Resource Center
Alcohol and Drug Council of North Carolina
Alcoholism Council of New York
Alcoholism Council of the Cincinnati Area, NCADD
Alliance for Recovery
Alliance for Substance Abuse Prevention, Inc.
Arizona Council of Human Service Providers
Aspire of Western New York, Inc.
Barbara Schneider Foundation
BRiDGEs, Madison County Council on Alcoholism and Substance Abuse, Inc.
Bucks County Council on Alcoholism and Drug Dependence
California Association of Addiction Recovery Resources
California Association of Alcohol and Drug Program Executives
Chautauqua Alcoholism & Substance Abuse Council (CASAC)
Colorado Association of Alcohol & Drug Service Providers
Connecticut Association of Non-Profits
Council on Addictions of New York State (CANYS) Inc.
Council on Alcohol and Drug Abuse for Greater New Orleans
Council on Alcoholism and Drug Abuse of Sullivan County, Inc.
Council on Substance Abuse--NCADD
County Alcohol and Drug Program Administrators Association of 
        California
DePaul's National Council on Alcoholism and Drug Dependence--Rochester 
        Area
Detroit Recovery Project
Dora Weiner Foundation
Drug and Alcohol Service Providers Organization of Pennsylvania
Employee & Family Resources, Inc.
Erie County Council for the Prevention of Alcohol and Substance Abuse, 
        Inc.
Exponents
Feeling Blue Suicide Prevention Center
Focus on Community
Faces and Voices of Recovery--Westchester
Friends of Delaware and Otsego Counties, Inc.
Friends of Recovery--Monroe County
Friends of Recovery--Vermont
Gateway Foundation
Georgia Council on Substance Abuse
GLAD House, Inc.
Greater Flint Project Vox
Greater Macomb Project Vox
Harbor Hall, Inc.
Hope4you
Illinois Alcoholism and Drug Dependence Association
Iowa Substance Abuse Program Directors' Association
Kingdom Recovery Center
Long Island Council on Alcoholism and Drug Dependence, Inc.
Maine Alliance for Addiction Recovery (MAAR)
Maine Association of Substance Abuse Programs
Maryland Chapter of the National Council on Alcoholism and Drug 
        Dependence
McHenry County Mental Health Board (IL)
McShin Foundation
Methadone Support Org.
Michigan Association of License Substance Abuse Organizations
Missouri Recovery Network
M-Power, Inc.
Nantucket Alliance for Substance Abuse Prevention, Inc.
Nantucket Behavioral Health
National Council on Alcoholism and Drug Dependence of the San Fernando 
        Valley
National Council on Alcoholism and Drug Abuse--St. Louis Area
National Council on Alcoholism and Drug Dependence of Greater Kansas 
        City
National Council on Alcoholism and Drug Dependence of Northwest Florida
National Council on Alcoholism and Drug Dependence of the South Bay
National Council on Alcoholism and Drug Dependence, Greater Detroit 
        Area
National Council on Alcoholism and Drug Dependence, New Jersey
National Council on Alcoholism and Drug Dependence, Sacramento Region 
        Affiliate
National Council on Alcoholism and Drug Dependence--Phoenix
National Council on Alcoholism/Lansing Regional Area, Inc
NCADD in the Silicon Valley
NCADD of Middlesex County, Inc.
NCADD Tulare County, Inc.
Nebraska Association of Behavioral Health Organizations
New England National Alliance of Methadone Advocates
New Hampshire Alcohol & Other Drug Service Providers Association
NJ Advocates--NJ Chapter of NAMA
Northern California Chapter of the National Alliance of Methadone 
        Advocates
Northern Michigan Project Vox
Ohio Citizen Advocates for Chemical Dependency Prevention & Treatment
Ohio Council of Behavioral Healthcare Providers
Oklahoma Faces and Voices of Recovery
PAR--People Advocating Recovery
Parent-To-Parent, Inc.
Pennsylvania Recovery Organization--Achieving Community Together (PRO-
        ACT)
Recovery Center
Recovery Consultants of Atlanta, Inc.
Recovery Resources
Rockland Council on Alcoholism and Other Drug Dependence
Samaritan Village
Substance Abuse and Addiction Recovery Alliance (SAARA) of Virginia
Suicide Awareness Voice of Education
The Council on Substance Abuse & Mental Health
The Maine Association of Substance Abuse Programs
The Maine Substance Abuse Foundation
The RASE Project/Buprenorphine Coordinator Program
The Second Road, Inc.
The Transformation Center
Turning Point Recovery Center
Upstate Cerebral Palsy (NY)
Virginia Association of Alcohol and Drug Counselors
Virginia Association of Drug and Alcohol Programs
Volunteers of America Alaska
                                 ______
                                 
    Chairman Andrews. Thank you very much, Mr. Kennedy.
    I think the members of the panel have agreed that we want 
to get to the second panel of witnesses. If anyone would like 
to ask Mr. Kennedy a question, they are welcome.
    Mr. Loebsack?
    Mr. Loebsack. I just want to make a quick comment. I 
thanked Patrick personally in the cloakroom after he was on 
Larry King for what he has been doing.
    And I have some personal experience with mental illness, 
especially with my mother.
    And I want to thank you again publicly for all you are 
doing. Thank you, Patrick.
    Chairman Andrews. Thank you.
    Patrick, what I would also like to add to that--most of us, 
all of us are privileged to have the opportunity to serve our 
country as legislators, to do what we think is right for our 
country by virtue of the office we hold.
    It is a rare gift to be able to help because of your 
personal experience and your personal commitment, and you are 
certainly doing that today. We admire you for it. We respect 
you for it. And we thank you for being with us today. Thank 
you.
    We are going to move on to the second panel. If Mr. Ramstad 
is able to make it, we will certainly have his testimony when 
he arrives.
    I would ask if the second panel could come forward. I am 
going to begin reading their biographies as they come forward 
so that we can get started as they are settled.
    We are deeply honored to have with us the former first lady 
of the United States, Ms. Rosalyn Carter. In addition to her 
exemplary service as our nation's first lady, Mrs. Carter 
created and chairs the Carter Center's Mental Health Task 
Force, an advisory board of experts, consumers and advocates 
promoting positive change in the mental health field. Each 
year, Mrs. Carter hosts the Rosalyn Carter Symposium on Mental 
Health Policy, bringing together leaders of the nation's mental 
health organizations to address critical issues. During the 
Carter administration, Mrs. Carter became active honorary chair 
of the President's Commission on Mental Health, which resulted 
in the passage of the Mental Health Systems Act of 1980.
    Welcome, Mrs. Carter. It is a great privilege to have you 
with us today.
    Paul David Wellstone, Jr., is the son of the late Senator 
Paul Wellstone. He is the co-chair of the Wellstone Action 
Advisory Board and contributes to advocacy efforts on behalf of 
mental health and domestic violence. He is the co-founder of 
Wellstone Action, a national center for training and leadership 
development, as well as the founding partner of Family Place 
Home Builders, a business dedicated to building affordable 
housing. David graduated from Hamline University in 1987.
    It is great to have you with us, David.
    Amy Smith, welcome.
    Amy is the vice president of recovery programs for Mental 
Health America of Colorado and is the director of Wellness and 
Education Coalition and Advocacy Network of Colorado, which 
acts as a consumer network and conducts the Colorado Leadership 
Academy, a week-long advocacy training for consumers. Ms. Smith 
has been with WECAN since its inception in 2003.
    Welcome, Ms. Smith. It is great to have you with us.
    Neil Trautwein is the vice president and employee benefits 
policy counsel for the National Retail Federation. He currently 
chairs the Coalition on Catastrophic and Chronic Health Care 
Costs and co-chairs the Consumer Directed Health Care 
Conference. He received his B.A. in political science from the 
University of Louisville and his J.D. from the George 
Washington University.
    Welcome, Mr. Trautwein.
    Jon Breyfogle is currently executive principal of the Groom 
Law Group, where he has worked since 1992. And Jon has been a 
frequent witness before our committee, both this subcommittee 
and the full committee. Previously, he served as senior 
legislative officer at the Department of Labor and as special 
assistant to the executive director of the Pension Benefit 
Guaranty Corporation. He received his bachelor's from the 
University of Cincinnati, a master's in public affairs from 
Indiana University, and a J.D. from the George Mason 
University.
    Jon, welcome back. It is great to have you with us.
    Steven Melek has been a principal and consulting actuary 
with Milliman since 1990. He has worked extensively in the 
behavioral health care field and specializes in health care 
product development, management, and financial analyses. He has 
chaired and served on various Societies of Actuaries and the 
American Academy of Actuaries task forces and working groups, 
most of which have been focused on behavioral health care 
issues. He has a B.A. in mathematics from the Illinois 
Institute of Technology.
    Welcome, Mr. Melek.
    And finally, Sean Dilweg is the commissioner of insurance 
for the state of Wisconsin. Prior to his appointment in 2007, 
Mr. Dilweg served as the executive assistant to the secretary 
of the Wisconsin Department of Administration, from 2003 to 
2006. Previously, he worked as director of policy analysis at 
Essie Consulting Group, a major Madison consulting and lobbying 
firm, from 2000 to 2003. He holds a master's in public 
administration from the University of Wisconsin and a 
bachelor's in English from Lawrence University in Appleton.
    This is a very distinguished panel, and we are pleased that 
everyone gave us their time.
    For the record, the written statements that each of you has 
prepared will be submitted by unanimous consent to the hearing 
record and will be there in its entirety.
    We do ask that people try to summarize their oral statement 
in about 5 minutes. There is a light box in front of you. When 
the green light is on, you are in your 5-minute period. When 
the yellow light goes on, it means you have a minute left. And 
when the red light goes on, we would ask you to sum up and stop 
so we can get to questions.
    There is, however, a narrowly drawn exception for former 
first ladies of the United States of America. And so if Mrs. 
Reagan or Mrs. Ford or Senator Clinton--I suppose she would 
also fit the exception--are welcome.
    And, Mrs. Carter, please take as much time as you would 
need so you can--you have graced us with your presence. We 
would welcome you. We would start with you.

 STATEMENT OF ROSALYNN CARTER, FORMER FIRST LADY AND CHAIR OF 
        THE MENTAL HEALTH TASK FORCE, THE CARTER CENTER

    Mrs. Carter. Thank you for saying that. I was worried about 
my remarks.
    Mr. Chairman and members of the subcommittee, thank you for 
the opportunity to speak to you this afternoon about this 
legislation that is so important to so many people, millions in 
our country, parity in insurance.
    I have been working in the mental health field for--I don't 
like to say it because it ages me, but for over 35 years. That 
is a long time.
    When I began, no one understood the brain or how to treat 
mental illnesses. Today, everything has changed, everything 
except the stigma, which still holds back progress in the 
field.
    But today, because of research and our new knowledge of the 
brain, mental illnesses can be diagnosed. They can be treated 
effectively. And the overwhelming majority of people living 
with these diseases can lead normal lives, being contributing 
citizens in our communities.
    Today I join many individuals and hundreds of national 
organizations calling for an end to the fundamental 
stigmatizing inequity of providing far more limited insurance 
coverage for mental health care than for treatment of any other 
illnesses.
    And again, I join forces with my friend Betty Ford in 
urging prompt action on this important issue. Betty and I have 
lobbied many times for this legislation and for care.
    I have now a very good mental health program at the Carter 
Center. Annually, we bring together leaders to take action on a 
major mental health issue. We have focused many times on stigma 
and discrimination and the importance of ensuring adequate 
equitable coverage for people with mental illnesses.
    To me, it is unconscionable in our country and morally 
unacceptable to treat at least 20 percent of our population as 
though they were not worthy of care.
    We preach human rights and civil rights and yet we let 
people suffer because of an illness they did not ask for and 
for which there is treatment.
    Then we pay the price for this folly in homelessness, lives 
lost, families torn apart, loss of productivity, the cost of 
treatment in our prisons and jails. And I could go on.
    I have always believed that if insurance covered mental 
illnesses it would be all right to have them. This may be the 
reason stigma has remained so pervasive, because these 
illnesses are treated differently from other health conditions.
    All mental illnesses are potentially devastating. In my 35 
years, I have seen so many advances in knowledge about the 
brain and improvements in treatment.
    I urge the subcommittee and sponsors to ensure coverage of 
all mental illnesses as defined by the DSM-IV, instead of 
treating some conditions as higher priority over others.
    We had an intern at the Carter Center, for instance, this 
past spring who suffered from obsessive-compulsive disorder and 
depression. And when she was in high school, she once spent 2 
solid weeks in her house, not able to leave or to be with her 
friends.
    I am happy to say that she received treatment, is a college 
graduate with Phi Beta Kappa honors and just got a job here in 
Washington with the Ad Council.
    Without resources and support, she could still be sick and 
shut in her home, which is what happens to so many who do not 
get the help they need, because they can't afford to pay for 
services. Our country loses all the many contributions of these 
wonderful people.
    Through the research of people like Howard Goldman and 
Richard Frank, we know that parity in insurance benefits for 
behavioral health care has no significant increase in total 
cost when coupled with management of care.
    We also know this from a number of enlightened companies 
such as AT&T, Delta Air Lines, Eastman Kodak, General Motors 
and IBM, and others, which have provided comprehensive coverage 
for their employees.
    Tom Johnson is one of my good friends. He is the former 
publisher of the Los Angeles Times and former CEO of CNN, and 
he has struggled with depression.
    He and two other prominent CEOs in the Atlanta community 
who have experienced depression have had an enormous impact on 
mental health benefits offered by businesses in the Atlanta 
area. I am really so pleased about that.
    In the last few years, there have been several major 
reports released--the first ever surgeon general's report on 
mental health, President Bush's new Freedom Commission on 
Mental Health, and the Institute of Medicine, including mental 
and substance-use conditions, in a series of reports on the 
quality of American health care.
    All of the reports reinforce the statement that effective 
treatments are available but that most people who need them do 
not get them.
    The nation has learned a lot about the importance of mental 
health issues through Hurricane Katrina and the needs of our 
returning soldiers and National Guard troops.
    We support our troops in the field, and it is critical that 
we continue to support them when they come home.
    One other issue: Many states have moved ahead with parity. 
These have been long-fought battles, with some states managing 
wonderful successes. It is so important that any federal 
legislation not preempt any of these gains while we finally 
have mental health parity legislation in sight.
    This committee has worked long and hard to bring this 
legislation forward. It is an example of what can be 
accomplished with strong bipartisan support.
    When this legislation is passed, our citizens will be 
healthier and our nation will be stronger, more resilient and 
more productive.
    On behalf of the millions of people affected by mental 
illness and substance-use disorders, I applaud your efforts. 
The benefits to our nation will be enormous. Thank you.
    [The statement of Mrs. Carter follows:]

Prepared Statement of Rosalynn Carter, Former First Lady, Chair, Mental 
                  Health Task Force, the Carter Center

    Mr. Chairman and members of the subcommittee, thank you for the 
opportunity to speak to you regarding legislation that will profoundly 
impact the lives of so many Americans.
    I have been working on mental health issues for more than 35 years. 
When I began no one understood the brain or how to treat mental 
illnesses. Today everything has changed--except stigma, of course, 
which holds back progress in the field.
    Today because of research and our new knowledge of the brain, 
mental illnesses can be diagnosed and treated effectively, and the 
overwhelming majority of those affected can lead normal lives--being 
contributing citizens in our communities.
    I am here today, joining many individuals and hundreds of national 
organizations calling for an end to the fundamental, stigmatizing 
inequity of providing far more limited insurance coverage for mental 
health care than for treatment of any other illnesses. Again I join 
forces with my friend Betty Ford in urging action on this important 
issue.
    Jimmy and I founded The Carter Center 25 years ago, and I have a 
very good Mental Health Program there. Annually we bring together 
leaders to take action on major mental health issues of concern to the 
nation. We have focused many times on stigma and discrimination and the 
importance of ensuring adequate, equitable coverage for people with 
mental illnesses.
    To me, it is unconscionable in our country and morally unacceptable 
to treat 20 percent of our population (1 in every 5 people in our 
country will experience a mental illness this year) as though they were 
not worthy of care. We preach human rights and civil rights and yet we 
let people suffer because of an illness they didn't ask for and for 
which there is sound treatment. Then we pay the price for this folly in 
homelessness, lives lost, families torn apart, loss of productivity, 
and the costs of treatment in our prisons and jails.
    I have always believed that if insurance covered mental illnesses, 
it would be all right to have them. This may be why the stigma has 
remained so pervasive--Because these illnesses are treated differently 
from other health conditions.
    All mental illnesses are potentially devastating. During these 35 
years, I have seen so many advances in our knowledge about the brain 
and improvements in treatment. I urge the subcommittee and sponsors to 
insure coverage of ALL mental illnesses as defined by the DSM-IV 
(Diagnostic and Statistical Manual of Mental Disorders Fourth Edition), 
instead of treating some conditions as a higher priority over others.
    We had an intern at The Carter Center this spring, for example, who 
has Obsessive Compulsive Disorder and depression. While she was in high 
school, she once spent two solid weeks in her house, unable to leave or 
be with her friends. I am happy to say that she received treatment, is 
a college graduate with Phi Beta Kappa honors, and just got a job here 
in Washington, DC. Without resources and support, she could still be 
sick and shut in her home, which is what happens to so many who do not 
get the help they need because they lack the ability to pay for 
services. We as a country lose all the many contributions of these 
wonderful people.
    Through the research of people like Howard Goldman and Richard 
Frank, we know that parity in insurance benefits for behavioral health 
care has no significant increase in total costs when coupled with 
management of care. We also know that a number of enlightened companies 
such as AT&T, Delta Air Lines, Eastman Kodak, General Motors, and IBM 
have provided comprehensive coverage for their employees. (Report to 
the Office of Personnel Management by the Washington Business Group on 
Health)
    I have the pleasure of being friends with Tom Johnson, the former 
publisher of the Los Angeles Times and former CEO of CNN and a person 
who has struggled with depression. He has been interested in the mental 
health benefits offered by employers in Atlanta. He and two other 
prominent CEOs in the Atlanta community have had an enormous impact on 
businesses in the area.
    Since the mental health commission we held during Jimmy's 
presidency, there have been several major reports released including 
the first ever Surgeon General's Report on Mental Health, President 
Bush's New Freedom Commission on Mental Health, and The Institute of 
Medicine's inclusion of mental and substance use conditions in its 
series of reports on the quality of American health care. All of the 
reports reinforce the statement that effective treatments are 
available, but most people who need them do not get them.
    The whole nation has learned a lot about the importance of mental 
health issues through the events of Hurricane Katrina and the needs of 
our returning soldiers and National Guard troops. We support our troops 
in the field, and it is critical that we continue to support them when 
they come home.
    Finally, I would like to comment on the number of states that have 
moved ahead with parity. These have been long-fought battles with some 
states managing wonderful successes. It is so important that any 
federal legislation not preempt any of these gains.
    After waiting for 15 years, we finally have mental health parity 
legislation in sight. This subcommittee has worked long and hard to 
bring forward this legislation, and it is an example of what we can 
accomplish together with strong bipartisan support. If this legislation 
is passed, many of our citizens will be healthier, and our nation will 
be stronger, more resilient, and more productive.
    On behalf of the millions of people affected by mental illnesses, I 
applaud your efforts to pass the mental health parity legislation. I 
know the work has been hard, but the benefits to our nation will be 
enormous.
                                 ______
                                 
    Chairman Andrews. Mrs. Carter, thank you very much for your 
statement and for your presence here today.
    Mr. Wellstone, welcome.

  STATEMENT OF PAUL DAVID WELLSTONE, JR., CHAIRMAN, WELLSTONE 
                     ACTION ADVISORY BOARD

    Mr. Wellstone. Thank you very much.
    Mr. Chairman and members of the subcommittee, I want to 
thank you for the opportunity to speak this afternoon on 
legislation that addresses an extremely critical health issue 
facing millions of Americans, parity for the treatment of 
mental illness and addiction.
    This legislation is very close to my heart, and I want to 
thank Congressman Kennedy and Congressman Ramstad, my good 
friend who is not here, for honoring my father's legacy in 
naming this bill.
    My brother and I founded Wellstone Action to carry on my 
father's work. And through the Wellstone Action organization, 
thousands of people are being trained each year to develop 
grassroots skills in organizing and leadership.
    But nothing represents my father's passion and commitment 
more than his work to end the discrimination against those who 
suffer from mental illness and addiction.
    Please accept the gratitude of my family and that of 
Wellstone Action for this tribute to my father.
    I also want to thank Mrs. Carter for her many years of 
leadership on this issue and many others related to mental 
illness.
    You and my father often worked together, and he was always, 
always very grateful for your support and leadership.
    I have been coming to Washington frequently to speak in 
support of this legislation, but my father started this work 
years ago.
    Many of you are familiar with the milestones in the long 
history of the fight for parity--the 1996 federal law, the 1999 
executive order that gave federal employees mental health and 
addiction parity benefits, the many successes of grassroots 
advocates to strengthen state parity laws, the times that 
Congress came very close to passing the expansion of the 
federal law, and the endorsement by President Bush in 2002.
    For my father, these milestones were very, very personal. 
His dedication began when he witnessed the terrible conditions 
in psychiatric institutions where his own brother, my uncle, 
was hospitalized in the 1950s.
    These conditions and the eventual catastrophic financial 
toll endured by my grandparents inspired my father to do 
everything he could to make things right for those in similar 
circumstances.
    The legislation that my father and Senator Domenici passed 
in 1996 was groundbreaking, for it established in law an 
important first principle of parity, that those with mental 
illness should not be discriminated against in insurance 
coverage.
    But my father knew that that was not enough, and he was 
never satisfied with the compromises that were made at that 
time.
    That is why he immediately began the fight for a more 
comprehensive federal parity law, one that would include 
addiction parity and that would close the loophole that the 
insurance industry had immediately started using to reduce 
benefits.
    His efforts over the years came close to success several 
times, including once during his last term in office. But 
despite promises then and promises made after he died, the 
federal parity law has not yet passed.
    This law is long overdue, and that is why we are here 
today. The bill has been negotiated for years, and important 
and fair compromises and protections are in place in the 
proposed health legislation that is the subject of this hearing 
today.
    It is time to move forward, for while we wait, people are 
suffering and dying from lack of care.
    The House bill has critically important provisions that 
will improve care, and I want to take just a couple of minutes 
to mention them.
    The House legislation recognizes the essential role of 
scientific and medical knowledge in ensuring high-quality 
diagnosis and treatment by requiring the widely accepted DSM as 
the basis for coverage.
    Without this requirement, insurers and employers could 
decide, without the benefit of science of medical expertise, 
which mental illness or addiction diagnosis should be covered.
    I applaud the efforts of the House sponsors to stand firm 
in its effort to be clear about this requirement. It is 
important to close this potential loophole, one that could 
allow discrimination by diagnoses, something that has no place 
anywhere, but least of all in a parity bill.
    The House bill has important protections for state parity 
laws. In contrast to a current effort to preempt stronger state 
parity laws, my father advocated for the inclusion of 
protective language to prevent this preemption in bills he 
sponsored.
    In keeping with the principle of protecting state law, the 
House legislation includes important language, and I urge you 
to maintain those protections.
    We know from numerous reports, including one today, that 
the cost for parity is low, and we are going to hear that. Once 
cost is set aside as a reason for denial of parity, what is 
left is stigma and discrimination.
    Fortunately for our country, there are courageous people 
who fight against this discrimination, people like my friend 
Kitty Westin, who lost her daughter Anna to an eating disorder.
    Kitty's family faced this kind of discrimination but went 
on to help change the health care system in Minnesota and is 
now helping change the federal law.
    My father fought hard for those who had no voice, and he 
had a strong personal commitment to help those with mental 
illness and addiction.
    Congressional members honored his memory by promising to 
name this parity bill after my dad, and for that I am grateful. 
But I do know the kind of man my father was and the kind of 
parity bill he would have wanted finally passed into law.
    The protections for patients that have been included in the 
House bill, such as protection for stronger state laws, full 
diagnosis coverage and transparency of medical necessity, are 
essential to the kind of strong law that he fought for, and I 
urge you to include them in your final markup and passage.
    In the end, I am involved because this is the right thing 
to do. I want to do my part. This Congress has the opportunity 
to play a major role in history, and I urge you to do your part 
to finally enact a strong parity law.
    Thank you for your courage and your commitment to do the 
right thing, and know that I will be there by your side with 
your efforts to pass this legislation. Thank you very much.
    [The statement of Mr. Wellstone follows:]

 Prepared Statement of Paul David Wellstone, Jr., Chairman, Wellstone 
                         Action Advisory Board

    Mr. Chairman and members of the subcommittee, I want to thank you 
for the opportunity to speak to you this morning on legislation that 
addresses an extremely critical health issue facing millions of 
Americans: parity for the treatment of mental illness and substance use 
disorders.
    This legislation is very close to my heart, and I want to thank 
you, and Cong. Patrick Kennedy and Cong. Jim Ramstad, for honoring my 
father's legacy by naming this bill in his honor. My brother and I 
founded Wellstone Action to carry on his work, and through the 
Wellstone Action organization, hundreds of people are being trained 
each year to run for office, and to develop grassroots skills in 
organizing and leadership. But nothing represents my father's passion 
and commitment more than his work to pass legislation that would end 
the discrimination against those who suffer from mental illness and 
substance use disorders. Please accept the gratitude of my family and 
that of Wellstone Action, for this tribute to my father and our family.
    I also want to thank Mrs. Carter for her many years of leadership 
on this issue and many other issues related to mental illness. She and 
my father worked closely together on this issue and he was always 
grateful for her support and leadership.
    I have been coming to Washington frequently to speak on behalf of 
this legislation and a strong mental health and addiction parity bill. 
But my father started this work years ago.
History
    Parity has a long history. Many of you are familiar with its 
milestones: the 1996 federal law; the 1999 Executive Order that gave 
federal employees mental health and addiction parity benefits; the many 
successes at the state level to strengthen their parity laws; the times 
that Congress came very close to passing the expansion of the federal 
law; and the endorsement by President Bush in 2002. For my father, 
these milestones were very personal. His dedication stemmed from his 
personal observations of the terrible conditions in psychiatric 
institutions when his own brother, my uncle, was hospitalized in the 
1950s. These conditions, and the eventual catastrophic financial toll 
that my grandparents had to bear, inspired my father to do everything 
he could to make things right for those in similar circumstances. The 
legislation that my father and Sen. Domenici passed in 1996 was 
groundbreaking and important, for it established in law an important 
first principle of parity--that those with mental illness should not be 
discriminated against in insurance coverage. But my father knew that it 
was not enough, and he was never satisfied with the compromises that 
were made at the time. That is why he immediately began the fight for a 
more comprehensive federal parity law, one that would include substance 
use disorders and that would close the loopholes that the insurance 
industry had immediately started using.
    His efforts over the years came close to success several times, 
including once during his last term in office. But despite promises 
then, and promises made after he died, the federal parity law has not 
yet passed. This law is long overdue, and that is why we are here 
today. The bill has been negotiated for years, and important 
compromises and protections have been put in place in the proposed 
House legislation that is the subject of this hearing today. It is time 
to move forward, and to recognize that while we delay, people are 
suffering and dying from lack of care.
    This bill is the critically important next step toward ending the 
persistent discrimination against people who suffer from mental illness 
and addiction. In the past, some opponents have been satisfied with the 
reauthorization of the 1996 law, and there is the danger that this 
could happen again. It is my view that to merely reauthorize the 1996 
law is worse than simply allowing the law to lapse. Why? Because we 
know that the discrimination against the mentally ill and addiction has 
worsened. As was reported in a GAO report in 2000 (GAO-HEHS-00-95), 
despite the limited objectives of the 1996 law, there were numerous 
examples of violations of not only the spirit, but even the letter of 
the law. GAO found that although most employers complied with the Act, 
they expanded other discriminatory coverage limits. Eighty-seven 
percent of the surveyed employers had a limit on mental health benefits 
lower than what is offered for other medical/surgical benefits, and 
several states were noncompliant. In a recent study of employer 
provided benefits, reported in Health Affairs (2007), the cost-sharing 
for addiction benefits was 46% higher for addiction benefits than for 
medical or surgical benefits and there were no out of pocket spending 
caps for addiction spending in 44 % of the plans studied. It is clear 
from these reports that the gains intended by the 1996 law have not yet 
been attained and that further federal legislation strengthening and 
expanding the 1996 law is still badly needed.
    Many of you knew my dad, and so you would be aware of how often he 
expressed his outrage at the injustice that is rampant throughout the 
health care system in its failure to adequately cover mental illness 
and addiction care. Over the years, the opposition to the many 
legislative efforts focused on whatever they could to prevent the bill 
from going forward, including misinformation, scare tactics, and 
stalling. Today, although we have made progress, we expect increased 
opposition as we move forward to ensure patient protections that are in 
the House bill. I urge you all to stay strong, to fight for the patient 
protections are in the House bill, to do the right thing, and make this 
bill the law of the land.
    I especially want to commend House and Senate sponsors for their 
inclusion of substance use disorders in the parity bills. My dad always 
worked closely with Cong. Ramstad to push for parity for treatment of 
substance use disorders throughout his Senate terms. This inclusion is 
long overdue. In recent years, we know that spending for addiction 
treatment has been drastically shifted from the private sector to the 
federal government. Private insurance accounts for just 9% of substance 
use disorders expenditures (Levit et al, 2006). It is past time for the 
private sector to do its fair share. As my friend, William Moyers, Vice 
President of the Hazelden Foundation said at the parity field hearing 
in Minnesota, many individuals who seek addiction treatment also suffer 
from mental illnesses, and that it is ``folly to treat one illness and 
not the other.'' I would add that it is also folly to allow insurers 
and employers to determine in advance, outside of medical 
considerations, which diagnoses they deem worthy of coverage. And so I 
am pleased to see that HR 1424 includes substance use disorders, and 
that it requires that the standard diagnostic manual--the one used by 
physicians, researchers, government agencies, and insurance companies 
themselves as the standard for diagnosis, treatment, and 
reimbursement--be the standard for mental health and addiction coverage 
in this bill.
Need
    Many of you know the disturbing statistics concerning mental 
illness and addiction for adults and children with these diseases. The 
current estimate from the National Institute of Mental Health is that 
about 26 percent of the U.S. adult population--over 78 million 
Americans--suffer from a diagnosable mental disorder in a given year. 
Twenty-there million people and their families struggle to recover from 
the shattered lives that result from untreated addiction. Although the 
research on children is not as well-documented, the percentage of 
children affected by mental or emotional disorders is very similar, at 
20 percent, with 9 percent severely affected.
    We know that mental illness is a real, painful, and sometimes fatal 
disease. It is also a treatable disease. My father used to say, 
acknowledging the wisdom of his friend, Dr. Kay Redfield Jamison, that 
the gap between what we know and what we do is lethal. Available 
medications and psychological treatments, alone or in combination, can 
help most people who suffer from mental illness and addiction. But 
without adequate treatment, these illnesses can continue or worsen in 
severity. Suicide is the third leading cause of death of young people 
in the U.S. Each year, 30,000 Americans take their lives, hundreds of 
thousands attempt to do so, and in 90% of these situations, the cause 
is untreated mental illness. This is one of the true costs of delaying 
this legislation: Every 16 minutes, a child or adult takes their lives 
because of the unmitigated, searing pain of depression or another 
mental illness.
HR 1424--Important Provisions
    The House bill has other very important provisions that will 
improve care for mental health and addiction patients.
            DSM
    I have mentioned the diagnostic manual that has long been used to 
guide diagnostic and treatment decisions. Much debate has occurred 
around this manual, the Diagnostic and Statistical Manual (DSM), a 
handbook and codebook that lists mental illness disorders and the 
diagnostic criteria for each based on current research. The DSM is the 
coding manual that is used by many government agencies, researchers, 
physicians, and the public and private insurance industry to code 
mandatory health data, understand and diagnose illness, frame research, 
and develop treatment guidelines. The House legislation recognizes the 
essential role of the DSM in ensuring high quality treatment and 
diagnostic decision-making by requiring the DSM as the basis for 
coverage. Without this clarity, insurers and employers could decide, 
without the benefit of science or medical expertise, what kinds of 
mental or addictive disorders should be covered. I applaud the efforts 
of the House sponsors to stand firm in its effort to ensure that mental 
illness and addiction are treated no differently than medical/surgical 
conditions. The DSM is part of the International Classification of 
Disease (ICD), a similar manual that includes codes for over 12,000 
medical and surgical conditions. The DSM, by contrast, has a few 
hundred codes. It is essential that the scientific and research 
findings that developed the DSM, and contribute to high quality care, 
be the basis for mental health and addiction treatment. When it became 
clear in past negotiations that the insurers may undermine the parity 
legislation by restricting coverage by diagnosis, my father fought hard 
against these weakening amendments that could turn into a dangerous 
loophole. I urge you to stand firm on this principle and prevent any 
effort to allow discrimination by diagnosis. The way to do so is to 
keep the standard of the science as the standard in this bill.
            State Protections
    HR 1424 also has important protections for parity laws in the 
states. One positive outcome of the 1996 law was a major surge in the 
passage of parity-related laws in a majority of the states. These laws 
reflect the positive efforts of grass-roots advocacy whereby those in 
need can seek democratic change with their local elected 
representatives. Though not all of these laws are stronger than the 
proposed federal law, many of them are. Unfortunately, in the current 
debate, there is an effort underway to have the federal parity law 
preempt stronger state laws. Contrary to this view, my father 
vehemently opposed any effort to preempt stronger state laws, and even 
advocated for the inclusion of such protective language to prevent this 
in earlier versions of the bills he sponsored. Such preemption would 
severely undermine the benefits of health coverage for those for whom 
the federal law would not apply, as attested to in recent analysis by 
Mila Kaufman of Georgetown University. In keeping with this principle 
of protecting state law, the House legislation includes important 
language, and I would urge you to keep those protections. I ask you to 
consider what kind of federal parity law it would be if it were to 
change decades of health care protections in the states, and do so on 
the backs of those with mental illness and substance use disorders.
            Medical necessity
    With this legislation, the devil is always in the details and that 
is why the details in HR 1424 are so important. The more I have talked 
with people about the need for this legislation, the more I have 
understood that the problems go beyond just parity, as critically 
important as this is. Decisions around so-called ``medical necessity'' 
are often the basis for denial of care, and while these problems may 
continue even after a strong parity bill is enacted, I want to applaud 
the sponsors of this bill for recognizing that patients have a right to 
know on what basis their care is being denied, and that this 
information should be transparent and made quickly available to 
patients. When Kitty Westin's daughter Anna's daughter was in the 
hospital, critically ill, she was denied care and sent home while the 
insurer determined whether it was `medically necessary' to treat her 
severe eating disorder. This kind of callous disregard for her disease 
and her life contributed to enormous suffering for her and her family, 
and in the end, Anna died from her disease, leaving behind a grieving 
family to endure this loss and this injustice.
    I have had the honor to get to know Kitty, one of my father's 
closest friends. She is a fellow Minnesotan, the founder of the Anna 
Westin Foundation, the President of the Eating Disorders Coalition, and 
most importantly, the mother of Anna. Kitty and I have met with many of 
you, and you have heard about the tragedy that her family endured, when 
Anna was repeatedly denied insurance coverage for her eating disorder. 
What happened to Anna and her family, and millions of others, embodies 
the outrage my father spoke about so often. Kitty spoke at the recent 
House Ways and Means subcommittee hearing on this bill, and despite her 
tragic loss, she spoke about hope. She talked about her hope that the 
system can and will change, hope that those in need will finally have 
access to care, and hope that the voices of those who are suffering 
will be heard. The passage of this bill is a life or death issue for 
millions of Americans. This is fact that we can understand in our 
minds. Kitty and her family live with that tragic reality every day. As 
a country, we owe Kitty and her family a debt of gratitude for coming 
forward with their story and their grief, in order to make positive 
changes in Minnesota, and to make positive changes in the federal law.
            Cost
    Another issue we often hear about in relation to this bill is cost. 
Today, you will hear powerful testimony about how badly this treatment 
coverage is needed, how mental illness and substance use disorder have 
affected the lives of so many Americans throughout our country, and how 
the costs for such treatment are very low. Numerous past reports have 
shown that fair and equitable mental health treatment can be offered as 
part of a health benefit package without escalating costs. Today, we 
have even more compelling evidence that this is so. There should be no 
further doubt that treatment for mental illness and substance use 
disorder is a health care benefit that our country can afford, and even 
more important, it is one that the our country should and must provide 
for the millions of Americans covered by private insurance. It is time 
to lay the issue of cost to rest, for we know that with the appropriate 
medical oversight, costs are low. It is no longer a question of can we 
afford it, but rather, can we afford not to provide health care for the 
millions who suffer from mental illness and addiction?
    Many employers already do recognize this basic fact. A series of 
articles published in the Wall Street Journal in 2001 recounted the 
growing recognition of employers that mental illness is a reality in 
the workplace and can be documented as a workplace cost. At the same 
time, the articles noted that when employees are given access and 
benefits to receive proper treatment, companies are able to retain 
highly able and productive employees. The articles noted that the 
stigma associated with mental illness can lead to untreated illnesses 
that turn up as other healthcare costs, lost productivity, or 
absenteeism, so that attempts to reduce overall health care costs by 
targeting those with mental illness may in fact lead to other workplace 
costs, in addition to greater suffering. I have provided citation 
information for these articles below.
    In terms of cost, parity legislation has already been tested for 
years. Testimony by Dr. Howard Goldman in the House Energy and Commerce 
subcommittee on June 15, 2007, attested to the low cost of the federal 
employee parity provision, the fact that no plans dropped out of the 
federal program, and that there was a significant decline in out of 
pocket spending on the part of patients.
    The opponents who still cite cost issues do not recognize these low 
treatment costs, nor do they acknowledge that proper treatment of 
mental illness actually saves money. They fail to recognize that 
untreated mental illness and addiction costs over $100 billion per 
year, and that our country picks up the cost of untreated mental 
illness and addiction in any case, for untreated illnesses don't just 
go away. Children with mental illness and addiction disorders often end 
up in public institutions, foster care, or jail because their parents 
cannot afford their care. Adults who have private insurance are often 
forced into public health care systems financed through State 
governments, Medicare, and Medicaid. These systems are then forced to 
take scarce resources from those who have no insurance. Families are 
forced into bankruptcy; lives are broken; and lives are lost.
            Stigma
    When cost is set aside as the reason for denial of parity, what is 
left is stigma and discrimination. In our country, mental illness and 
substance use disorder continue to be stigmatized as diseases for which 
one should feel shame. People are made to feel that they are lucky or 
should feel grateful when they get any coverage, even when they are 
routinely denied adequate treatment. Why? The stigma associated with 
the illness is one reason, for it not only doubly burdens the person 
who suffers from this illness, but it makes it easier for insurance 
companies to deny treatment, knowing that the person may not want to or 
be able to file public appeals or bring this matter to their employer. 
A cloak of secrecy has surrounded this disease, and people with mental 
illness and addiction are often ashamed and afraid to seek treatment. 
They fear that they may lose their jobs or even their friends and 
family. For those ``lucky'' enough to obtain care, the benefit is 
discriminatory--with co-payments, deductibles and day and visit limits 
that are both higher and more restrictive than for any other illness. 
When more care is needed, the cost is borne by others, i.e., families, 
taxpayers, or the generosity of donors, as John Schwarzlose from the 
Betty Ford Center recently testified. This is, plain and simple, unjust 
and unfair. And sometimes, it is lethal. People die when care is 
denied, as in the case of Kitty Westin's daughter, Anna.
Historic Opportunity
    Congress has a chance with this legislation to play an important 
historic role. The movement for parity for treatment for mental illness 
and substance use disorders is growing. Over these past years, the 
principle of parity in insurance coverage for mental health and 
addiction treatment has received the strong support of numerous 
administrations, including President Bush and his New Freedom 
Commission on Mental Health, the Surgeon General, and many leading 
figures in medicine, business, government, journalism, and 
entertainment who have suffered from mental illness and addiction and 
have been successfully treated. Federal employees, including members of 
Congress, receive full mental health and substance abuse treatment 
parity. Many states have stronger state laws or are moving toward 
enacting them. Mental health and addiction hearings on the Hill have 
frequently highlighted recent major advances in scientific information 
about the diseases, the biological causes or consequences of mental 
illness and addiction, the effectiveness and low cost of treatment, as 
well as many painful, personal stories of people, including children, 
who have been denied treatment. Changes are being made or proposed in 
mental health and addiction coverage in other systems of health care, 
such as the military, the VA, Medicare, and children's health 
insurance. We do not discriminate against other illnesses where the 
brain is affected. Why do we continue to discriminate against mental 
illness and addiction? It is time for the federal government to enact 
legislation that will help move us toward full treatment parity for 
mental illness and addiction. This Congress has the chance to be 
remembered as the one that had the courage and leadership to complete 
this effort.
Conclusion
    People have asked me while I'm here in Washington why I am so 
involved in this issue. I am involved because of my father, of course. 
I loved him and I miss him, and I have learned that many others here in 
Washington and throughout the country miss him too, especially his 
courage and his compassion. He fought hard for those who had no voice, 
and he had a strong personal commitment to helping those with mental 
illness and addiction. Congressional members honored him and my family 
by promising to name the parity bill after my dad, and I am grateful. 
But I do know the kind of man my father was, and the kind of parity 
bill he would have wanted finally passed into law, and I wanted to help 
ensure that the final bill is one worthy of his name. The protections 
for patients that have been included in HR 1424, such as protections of 
stronger state laws, full diagnosis coverage, and transparency of 
medical necessity, are essential to a strong law and I urge you to 
include them in your final markup and passage.
    I, along with millions of Americans, look forward to the day when 
people with mental illness and substance use disorder receive decent, 
humane, and timely care for mental illness and substance use disorders. 
Thank you for your courage and commitment to do the right thing, and 
know that I will be by your side throughout your efforts to pass this 
legislation.
    Thank you.
                               citations
Tanouye, E. (June 13, 2001). Mental illness: A rising workplace cost--
        One form, depression, takes $70 billion toll annually; Bank one 
        intervenes early. Wall Street Journal, NY, NY.
Tanouye, E. (June 13, 2001). Mental illness: A rising workplace cost--
        What happens when it's the boss who's suffering?--Paul 
        Gottleib's story shows upper ranks get hit too; Screaming atop 
        the cliffs. Wall Street Journal, NY, NY.
Tanouye, E. (June 13, 2001). Mental illness: A rising workplace cost--
        New medicines, protective laws cut dismissals. Wall Street 
        Journal, NY, NY.
GAO Report, May 10, 2000, Mental Health Parity Act: Despite New Federal 
        Standards, Mental Health Benefits Remain Limited. (GAO-HEHS-00-
        95).
Levit, K.R., et al. (2006). Projections of National Expenditures for 
        Mental Health Services and Substance Abuse Treatment, 2004-
        2014. SAMHSA Publication. Rockville, MD.
Gabel, J.R., Whitmore, H., Pickreign, J.D., Levit, K.R., Coffey, R.M., 
        and Vandivort-Warren, R. (2007). Substance abuse benefits: 
        Still limited after all these years. Health Affairs, 26 (4), 
        pg. 474-482.
                                 ______
                                 
    [The Congressional Research Service report, ``The Mental 
Health Parity Act: A Legislative History,'' is available on the 
committee website at the following Internet address:]

                  http://edlabor.house.gov/testimony/
                 071007MentalHealthParityCRSReport.pdf

                                 ______
                                 
    Chairman Andrews. David, thank you very, very much for your 
statement.
    You know, your father was kind of shy and retiring. It was 
hard to get him worked up to speak for something, but I sure 
did hear him speak with great passion and commitment about this 
issue. We miss him very much. But I think we can honor the 
legacy of his life by moving forward. We are glad that you are 
here.
    Ms. Smith, I know you have had a long journey to get here 
today, in more ways than one. We are very happy to have you 
with us, and welcome.

     STATEMENT OF AMY SMITH, VICE PRESIDENT, MENTAL HEALTH 
                    ASSOCIATION OF COLORADO

    Ms. Smith. Thank you. Chairman Andrews, Ranking Member 
Kline and distinguished members of the committee, thank you 
very, very much for this opportunity to tell my story.
    My name is Amy Smith, and I have lived my life with a 
serious psychiatric disorder. Most of my life was spent in a 
murky, confusing ocean of extreme emotions. I cycled in and out 
of mental hospitals, jail and rather desperate attempts to lead 
a so-called life. Looking back on my childhood, I realize that 
I was already under the influence of mental illness.
    I remember a time when I was afraid to leave my bed in the 
morning to go to school because I was convinced there was an 
evil woman clad in flowing black robes and riding a black horse 
right outside my door that was going to get me. I did not 
relate to my peers, and I led a very lonely young life.
    As a young adult, my disorder, schizoaffective disorder, 
really blossomed. I had no idea what was happening to me as I 
became increasingly out of touch with reality and began a dark 
descent into profound depression.
    I quickly discovered that drugs and alcohol alleviated some 
of my symptoms. My solution to my difficulties was to stay high 
and drunk all the time, from the moment I woke up in the 
morning until I fell asleep at night.
    I found it increasingly difficult to attend my college 
classes and consequently lost my grants, scholarships and 
loans. I became a drug dealer to support myself.
    And after I was arrested, I became homeless for the first 
time, living in an abandoned trailer that had no doors or 
windows in the middle of a large field.
    As homeless shelters went, it was pretty luxurious. I was 
able to keep a small amount of possessions, and I didn't have 
to worry about other homeless people stealing my stuff or 
attacking me.
    One of the characteristics of severe mental illness is it 
is a very cyclical disorder, and I would experience brief 
windows of lucidity and clarity from time to time.
    When I was a young person, when that happened, I would 
experience momentous surges of hope and, thinking that all the 
darkness was lifted at last, I would craft extravagant plans 
for my life, not realizing that my schemes were grandiose and 
unachievable.
    As I became a more seasoned player in life, I would give 
myself over to my addictions in these times and just quit 
trying.
    The worst product of a severe mental illness, in my 
opinion, is the debilitating loneliness. Even as a very young 
child, I could not connect with the people around me, and it 
only got worse as I aged.
    I tried and tried to build a network of people around me, 
to no avail. I remember one time I was attending a potluck and 
I had managed to wear some reasonable clothes and I brought a 
dish to share. I was so proud of myself.
    I was in this crowded room filled with prospective friends, 
and I went to sit on the couch with a plate of food. As I was 
sitting down, I glanced down at the couch and saw that it was 
covered with hundreds of naked, squirming babies.
    I made a horrible sound and leapt up, my food flying. It 
was humiliating beyond belief, but fairly typical of my stabs 
at making friendships.
    I did, however, manage to have a child, and I did attempt 
to build a family around me. As life went on, my condition 
became worse and worse. I clearly looked like someone to avoid 
at all costs.
    I had dreams about what to wear, and if I didn't have a 
dream, I would wear the same outlandish outfits over and over 
again, sometimes for weeks at a time, so I had hygiene issues.
    I would either shuffle or stride up and down the street, 
depending on my mood, muttering to myself and occasionally 
verbally attacking passers-by.
    My son, who turned out to be a person with a psychiatric 
disorder himself, was living in mental hospitals and 
residential treatment centers. I could not keep him safe and 
lost partial custody of him to social services. My situation 
was pretty bleak.
    Finally, I had just had enough. I made a plan to kill both 
myself and my son. Fortunately, I told someone of my plan, and 
I was whisked away to a community mental health hospital.
    As I was on Medicaid, I entered into the Colorado community 
mental health system and immediately started receiving 
excellent care. I was determined to turn my life around.
    Working with my doctors and therapists, I started taking 
care of myself, sleeping appropriately and eating decent food.
    It took a long time, but we found the cocktail of 
psychotropic medications that worked for me, alleviating my 
symptoms with very few side effects. I regained full custody of 
my son and started working.
    Today, I am a vice president at Mental Health America of 
Colorado. As happy as I am today, I am heartbroken that 45 
years of my life were lost.
    The jobs I managed to hold down had no mental health 
insurance and certainly no substance abuse care available. I 
had to go on welfare to get the care I needed.
    Things that people take for granted, like getting married, 
holding down a real job, driving a car, volunteering in the 
community, were beyond me most of my life. I was nothing but a 
drain on society.
    Today I am a taxpaying citizen with private insurance. I am 
no longer ashamed to be the person who I am. We are very lucky 
in Colorado because we just passed a mental health and 
addiction parity bill.
    You have the same opportunity to do the same here so 
people's lives are not wasted as mine was. Thank you.
    [The statement of Ms. Smith follows:]

    Prepared Statement of Amy Smith, Vice President, Mental Health 
                        Association of Colorado

    Chairman Andrews, Ranking Member Kline, and distinguished Members 
of the Committee, my name is Amy Smith and I have lived my life with a 
serious psychiatric disorder. Most of my life was spent in a murky, 
confusing ocean of extreme emotions. I cycled in and out of mental 
hospitals, jail and rather desperate attempts to live a so-called 
``life''.
    Looking back to my childhood, I realize now I was already under the 
influence of mental illness. I remember a time when I was afraid to 
leave my bed in the morning because I was convinced there was an evil 
woman clad in flowing black robes and riding a black horse right 
outside my door that was out to get me. I did not relate to my peers 
and lived a lonely young life.
    As a young adult my disorder, schizoaffective disorder, really 
blossomed. I had no idea what was happening to me as I became 
increasingly out of touch with reality and began a dark descent into 
profound depression. I quickly discovered drugs and alcohol alleviated 
some of my symptoms. My solution to my difficulties was to stay high 
and drunk all the time, from the minute I woke up in the morning till I 
fell asleep at night. I found it increasingly difficult to attend my 
college classes and consequentially lost my grants, scholarships and 
loans. I became a drug dealer to support myself, and after I was 
arrested I became homeless for the first time, living in an abandoned 
trailer that had no doors or windows in the middle of a large field. As 
homeless shelters went, it was pretty luxurious. I was able to keep a 
small amount of possessions and didn't have to worry about other 
homeless people stealing my stuff or attacking me.
    One of the characteristics of severe mental illness is it's a very 
cyclical disorder, and I would experience brief windows of lucidity and 
clarity from time to time. When I was a young person, I would 
experience momentous surges of hope, and thinking that all that 
darkness was lifted at last, I would craft extravagant plans for my 
life, not realizing that my schemes were grandiose and unachievable. As 
I became a more seasoned player in life, I would give myself over to my 
additions in these times, and just quit trying.
    The worst by-product of a severe mental illness, in my opinion, is 
the debilitating loneliness. Even as a very young child, I could not 
connect with the people around me and it only got worse as I aged. I 
tried and tried to build a network of people around me to no avail. I 
remember one time I was attending a potluck and I had managed to wear 
some reasonable clothes and brought a dish to share. (I was so proud of 
myself!) So I'm in this crowded living room, filled with prospective 
friends, and I went to sit on the couch with a plate of food. As I was 
sitting down I glanced down at the couch and saw it was covered with 
hundreds of naked, squirming, silent babies. I made a horrible sound 
and leapt up, my food flying. It was humiliating beyond belief but 
fairly typical of my stabs at making friendships. I did manage to have 
a child in an attempt to build a family around me.
    As life went on, my condition became worse and worse. I clearly 
looked like someone to avoid at all costs. I had dreams about what to 
wear, and if I didn't have a dream, I would wear the same outlandish 
outfits over and over, sometimes for weeks at a time. So I had hygiene 
issues. I would either shuffle or stride up and down the street, 
depending on my mood, muttering to myself and occasionally verbally 
attacking passers-by. My son, who turned out to be a person with a 
psychiatric disorder himself, was living in mental hospitals and 
residential treatment centers. I could not keep him safe and lost 
partial custody of him to social services. My situation was pretty 
bleak.
    Finally I had just had enough. I made a plan to kill both myself 
and my son. Fortunately I told someone of my plan and I was whisked 
away to a community mental health hospital. As I was on Medicaid, I 
entered into the Colorado community mental health system and 
immediately started receiving excellent care. I was determined to turn 
my life around. Working with my doctors and therapists, I started 
taking care of myself, sleeping appropriately and eating decent food. 
It took a long time, but we found a cocktail of psychotropic 
medications that worked for me, alleviating my symptoms with very few 
side effects. I regained full custody of my son and started working. 
Today, I am a Vice-President at Mental Health America of Colorado!
    As happy as I am today, I am heartbroken that 45 years of my life 
were lost. The jobs I managed to hold down had no mental health 
insurance and certainly no substance abuse care available. I had to go 
on welfare to get the care I needed. Things that people take for 
granted--like getting married, holding down a real job, driving a car, 
volunteering in the community--were beyond me most of my life. I was 
nothing but a drain on society.
    Today I am a tax-paying citizen with private insurance! I am no 
longer to be ashamed to be the person I am. Thank you.
                                 ______
                                 
    Chairman Andrews. Ms. Smith, thank you very, very much. As 
I said, you have had quite a journey to get here, and we are 
inspired by your testimony. I have great, profound admiration 
for you. We are very happy you are with us today. Thank you.
    Ms. Smith. Thank you.
    Chairman Andrews. Mr. Trautwein, thank you for being with 
us, and we look forward to your statement.

 STATEMENT OF NEIL TRAUTWEIN, VICE PRESIDENT, NATIONAL RETAIL 
                           FEDERATION

    Mr. Trautwein. Thank you, Mr. Chairman and Ranking Member 
Kline and members of the committee.
    I appreciate the opportunity to appear before you today. By 
way of introduction, the National Retail Federation is the 
world's largest retail organization.
    We have a membership that comprises all different lines of 
distribution, all retail formats. I think there is a good 
chance you or your families know our members well.
    We are an industry with more than 1.6 million retail 
establishments across the country, more than 24 million 
employees, about one in five workers.
    As a labor-intensive industry, we are very concerned about 
good quality health care, keeping our workers healthy and 
productive and in place.
    As a labor-intensive industry that unfortunately endures 
wafer-thin profit margins from time to time, we are also well-
acquainted with the need to manage the collective cost of labor 
in as cost-effective a manner as possible.
    Maintaining the balance between these two different 
imperatives is not the easiest job. In fact, sometimes it is 
darn near impossible.
    Mandated coverage for benefits tends to disrupt that 
balance and makes it more difficult for our members to provide 
jobs and benefits both, so we have tended to oppose benefit 
mandates.
    Indeed, we oppose the legislation before you today, H.R. 
1424. But our opposition to this bill doesn't mean we oppose 
all mental health parity legislation.
    In fact, we are supporters of the Senate bill, and 
specifically the manager's amendment to S. 588, the bipartisan 
Mental Health Parity Act.
    We think the Senate bill would make the better law by far 
and would support that law being enacted and support that bill 
being enacted into law.
    We feel that the House bill is similar in many respects to 
the previous bills that we have opposed on both the House and 
the Senate side. In some ways, it is a little bit worse than 
the bills that we have worked on in the past.
    We oppose H.R. 1424 primarily because of its broad benefit 
mandate, its lack of protection for medical management, 
provisions allowing the states to enact more extensive 
provisions and provisions mandating out-of-network coverage.
    In the interest of time, I am going to concentrate on the 
first issue and then discuss why I think the collaborative 
Senate process has developed a better bill and one that has 
gotten us working arm in arm with the mental health community.
    Again, as noted, it is fairly confusing, as the House bill 
doesn't specifically address the DSM but instead links to the 
most widely subscribed Federal Employees Health Benefit Plan 
program. That, in turn, references the DSM, so it is really a 
circular process.
    Although advocates of the House bill tend to point to the 
fact that the FEHB Plans have been able to deal with the cost 
of coverage without great cost impact, I would point out that 
the FEHB Plans enjoy the ability to medically manage that 
benefit and do so fairly aggressively.
    And that is why we are particularly troubled by the lack of 
a specific protection for medical management in the House bill.
    In addition, I would note that no other profession has had 
its professional manual enshrined into benefit coverage in the 
way that the House bill would, by indirection, enshrine the 
DSM.
    Typically, insurance plans tend to work the opposite 
direction, by exclusion of specific conditions rather than 
inclusion of conditions. So it is really out of place in 
benefit coverage today.
    We think the better approach has been taken by the Senate 
because it allows plans to define the scope of coverage. It 
also allows the states to continue to define coverage for state 
regulated insurance plans.
    This debate has been long and fierce. It has lasted through 
many, many years. I worked with Mr. Wellstone's father in the 
past on this issue. Certainly, the rhetoric has been tough. I 
have contributed my share of that.
    It is really a shame, because it has obscured what has been 
really a shared purpose to help people get the kind of coverage 
that they need in the process.
    That shared objective has really encouraged the dialogue 
between the different sides and with the Senate sponsors.
    I would particularly like to give thanks to Senator 
Kennedy, Senator Domenici and Senator Enzi for being good 
negotiating partners and fair advocates for both sides of this 
debate.
    The balanced Senate compromise I have highlighted through 
this testimony has been the product of those negotiations.
    What is particularly interesting--and to try to sum up--has 
been that it is not only typical allies like the American 
Benefits Council, like the chamber, like the NAM, but we are 
also working with the National Alliance of Mental Illness, the 
American Psychiatric and Psychological Associations, the 
hospitals and many others.
    And you will find a copy of our joint letter together at 
the end of my written testimony.
    Again, I appreciate the opportunity to appear before you 
today and hope we can continue to make progress on this. And 
hopefully, we would like to work with you to see the Senate 
bill enacted.
    Thank you, Mr. Chairman.
    [The statement of Mr. Trautwein follows:]

 Prepared Statement of E. Neil Trautwein, Vice President and Employee 
          Benefits Policy Counsel, National Retail Federation

    Mr. Chairman and members of the Health, Employment, Labor and 
Pensions Subcommittee, I thank you for the opportunity to appear before 
you today and to share our views regarding the Paul Wellstone Mental 
Health and Addiction Equity Act of 2007. My name is Neil Trautwein and 
I am Vice President and Employee Benefits Policy Counsel of the 
National Retail Federation (NRF).
    The National Retail Federation is the world's largest retail trade 
association, with membership that comprises all retail formats and 
channels of distribution including department, specialty, discount, 
catalog, Internet, independent stores, chain restaurants, drug stores 
and grocery stores as well as the industry's key trading partners of 
retail goods and services. NRF represents an industry with more than 
1.6 million U.S. retail establishments, more than 24 million 
employees--about one in five American workers--and 2006 sales of $4.7 
trillion. As the industry umbrella group, NRF also represents more than 
100 state, national and international retail associations.
    As a labor-intensive industry, retailers are strong advocates of 
quality health coverage for both physical and behavioral needs in order 
to help keep our employees healthy and productive. As an industry that 
frequently endures wafer-thin profit margins, we are also well 
acquainted with the need to manage the collective cost of labor in as 
cost-effective a manner as is possible. Maintaining balance between 
these two imperatives is not always easy--it's borderline impossible.
    Mandated coverage for benefits and other government interventions 
disrupts this balance and increases the cost of health coverage for 
retailer and employee alike. Thus we have tended to resist benefit 
mandates both generally and specifically. Indeed, we strongly oppose 
H.R. 1424, the Paul Wellstone Mental Health and Addiction Equity Act of 
2007.
    However, our opposition to mental health parity legislation is not 
simply reflexive. We support the manager's amendment to the Senate 
bipartisan Mental Health Parity Act of 2007, S. 558. Our first 
preference always is for no governmental intervention into benefit 
design. But, should Congress determine to act, then the Senate bill 
would make the better law by far--an outcome we could support. I will 
discuss our views on these competing approaches in greater depth below.
NRF Opposes House Parity Bill
    The House bill [H.R. 1424, the Paul Wellstone Mental Health and 
Addiction Equity Act of 2007, introduced by Representatives Patrick 
Kennedy (D-RI) and Jim Ramstad (RMN)] is similar in many respects to 
the bills we have opposed in the past. In some respects, it is worse. 
We strongly oppose H.R. 1424, principally because of its broad benefit 
mandate, its lack of protection for medical management, provisions 
allowing the states to enact more extensive provisions and provisions 
mandating out-of-network coverage.
Broad Coverage Mandate
    H.R. 1424 appears on the surface to be less expansive of coverage 
than previous bills, but that appearance is deceiving. Previous mental 
health parity bills have tied coverage to the Diagnostic and 
Statistical Manual of Mental Disorders (DSM-IV). Under H.R. 1424, no 
coverage for behavioral needs must be offered, but if any coverage is 
offered, then coverage must match all that offered under the most 
heavily subscribed plan under the Federal Employee Health Benefit 
Program (FEHB). All FEHB plans must cover all the conditions listed in 
DSM-IV. Thus, H.R. 1424 still ties coverage to DSM-IV. Although 
advocates of the House bill will point to FEHB's low cost impact 
implementation of DSM-IV, I will also note that FEHB plans are allowed 
to medically manage covered benefits--a significant failing of H.R. 
1424, which does not meet the FEHB standard.
    My purpose today is not to make sport of any specific category or 
condition under DSM IV. Employer-sponsored plans cover conditions 
broadly but target to the needs of specific employee populations to 
help keep employees healthy and productive. But, this blanket DSM-IV 
coverage mandate is out of place in a bill addressing parity in covered 
days and reimbursement. It is also out of place in both the benefits 
world and the insurance world. To my knowledge, no other professional 
manual is enshrined as mandated coverage. I suspect other professions 
would quickly beat a path to your door to secure similar treatment if 
H.R. 1424 were to be enacted.
    The better approach is taken by the manager's amendment to S. 558. 
This bill continues to allow employer plans to define the scope of 
covered benefits in their plan. In keeping with the states' traditional 
role in regulating insurance, individual states can define the coverage 
regulated insurers must offer. We favor this status quo approach 
because it works in practice today.
No Protection for Medical Management
    We are troubled by the lack of specific protection for the medical 
management of benefits in H.R. 1424. Previous House and Senate bills 
have included such protections; indeed, such protection was at the 
heart of proponents' arguments that parity legislation would not 
greatly increase health coverage costs. Surely the sponsors of H.R. 
1424 are not advocating unfettered access to coverage and 
reimbursement, are they?
    Medical management is at the heart of coverage for millions of 
retail employees today: a process of matching the type and level of 
coverage to individual need. Most of the states and the FEHB explicitly 
allow for the medical management of benefits. Medical management is 
critical to the provision of good quality and affordable benefits. We 
urge that H.R. 1424 be amended to specifically protect the medical 
management of covered benefits.
Role of the States
    We are also worried by provisions of H.R. 1424 that would allow the 
states to provide ``greater consumer protections, benefits, methods of 
access to benefits, rights or remedies'' than those in the bill. H.R. 
1424 would create an uneven patchwork between the states that could 
ultimately undermine the federal ERISA law which serves as the backbone 
of employer-sponsored coverage.
    Relatively few members of the broad retail community represented by 
NRF are confined to a single state. The ability to maintain common 
benefit designs in stores located in several states is critical to the 
retail community's ability to compete in today's demanding economy. We 
strongly oppose the ``federal floor/state ceiling'' approach taken by 
H.R. 1424 as inherently unworkable.
    Our first preference would be for a completely preemptive federal 
standard covering all plans in all markets. But, good faith 
negotiations brought us to this balanced outcome. We support the final 
negotiated compromise on preemption outlined in the manager's amendment 
to S. 558 that essentially preserves the status quo between federal 
standards for employee benefits and state regulated insurance products. 
Anything that seeks to alter this negotiated compromise would be 
unacceptable to us.
Out-of-Network Coverage
    Finally, I would like to join in drawing attention to the provision 
of H.R. 1424 that mandates out-of-network coverage. As noted by others, 
this provision exceeds that required of FEHB plans and would greatly 
undercut employers' ability to manage networks of providers and thus 
would result in increased costs to everyone, including patients and 
employees. Our shared preference would be for H.R. 1424 to either 
conform to the FEHB standard (parity required only for in-network 
services) or to the manager's amendment to S. 558 (out-of-network 
coverage not required, but parity coverage in financial requirements 
and treatment limitations required if so).
Collaborative Senate Process
    The mental health parity debate has been both long and fierce. I 
have been an advocate in this debate for a number of years, both before 
and after the 1996 law addressing parity in annual and lifetime limits. 
We all have contributed heated rhetoric to this debate. Unfortunately, 
it has really obscured our shared objective of helping individuals get 
the coverage and care they needed.
    It is this last point that has encouraged a running dialogue 
between the advocates and Senate sponsors. I have been privileged to 
have participated over a number of years as a principal representative 
of the employer community in intense discussions and negotiations with 
both the Senate sponsors as well as advocates for the mental health and 
addiction communities. I would like to give special thanks to Senators 
Ted Kennedy (D-MA), Michael Enzi (R-WY) and Pete Domenici (R-NM) for 
their longstanding advocacy on this legislation as well as for their 
willing ear and fair and responsive negotiations through the years.
    The Senate compromise that I have highlighted throughout this 
testimony is the product of those negotiations. It has also created a 
broad coalition among erstwhile opponents--surely somewhat of a 
distinction.
    NRF is joined in this coalition not only by traditional allies like 
the American Benefits Council, Aetna, the U.S. Chamber of Commerce and 
the National Association of Manufacturers (among others) but also by 
the National Alliance on Mental Illness, the American Psychiatric and 
the American Psychological Associations and the American Hospital 
Association and the Federation of American Hospitals (among others). I 
have attached a copy of our joint letter at the conclusion of my 
testimony. I respectfully ask that it be made part of the hearing 
record.
Conclusion
    Again, NRF greatly appreciates the opportunity to appear before you 
today. Though we oppose the legislation before you (H.R. 1424), we are 
not opposed to all parity legislation. We support the balanced Senate 
compromise legislation and would gladly work with you to see it enacted 
into law this year.
    We would also welcome an opportunity to work with you and the House 
sponsors of H.R. 1424 on similar issues in the future. In fact, it is 
our hope that our collaborative work in the Senate will be a model for 
future debates and issues. Who knows--perhaps there is a collaborative 
federal cure for common gridlock after all. We hope so! I thank you and 
will look forward to your questions.
                               attachment
                                                     June 14, 2007.
Hon. Edward M. Kennedy; Hon. Michael B. Enzi; Hon. Pete V. Domenici;
U.S. Senate, Washington, DC.
    Dear Chairman Kennedy and Senators Enzi and Domenici: We write in 
joint and strong support of prompt Senate action on the manager's 
amendment to the bipartisan Mental Health Parity Act of 2007, S. 558. 
We support enactment of your balanced legislation into law this year.
    Organizations representing consumers, family members, health 
professionals, and health care systems and administrators, business 
associations and insurance organizations negotiated in good faith with 
you and your staff over an extended period to produce this bill. We 
believe that it is a strong bill that will advance the interests of the 
greater mental health community while balancing the interests of 
employers who voluntarily sponsor benefit coverage. This bill also 
respects the role of the states in the regulation of insurance.
    We urge its prompt adoption by the full Senate and will join you in 
opposing unacceptable or weakening amendments during the Senate debate 
and will remain committed to this bipartisan approach as this 
legislation moves forward. Thank you again for your joint leadership on 
this important issue.
            Sincerely,
                                National Retail Federation.
                        American Psychological Association.
           National Association of Wholesaler-Distributors.
            Association for Behavioral Health and Wellness.
               National Association of Health Underwriters.
                          Federation of American Hospitals.
                       National Alliance on Mental Illness.
                     Society for Human Resource Management.
        National Association of Psychiatric Health Systems.
                     National Association of Manufacturers.
               National Federation of Independent Business.
                                                     Aetna.
                                  U.S. Chamber of Commerce.
                          BlueCross BlueShield Association.
                                                     CIGNA.
                             American Hospital Association.
                          American Psychiatric Association.
                                 ______
                                 
    Chairman Andrews. Mr. Trautwein, thank you for your very 
thoughtful and comprehensive statement. We appreciate it.
    And, Mr. Breyfogle, welcome back to the committee. We are 
happy to have you with us.

  STATEMENT OF JON BREYFOGLE, EXECUTIVE PRINCIPAL, GROOM LAW 
                             GROUP

    Mr. Breyfogle. Thank you, Mr. Chairman, Mr. Kline, members 
of the committee. It is really an honor to be on this panel 
with such a distinguished group, people with a long history in 
this subject. It is an important subject. It is something that 
employers view as important.
    The American Benefits Council represents predominantly 
large employers and people who provide services to employer 
plans. The plans that the American Benefits Council represents 
cover over 100 million Americans.
    The vast majority of employers and virtually all large 
employers cover mental health in their health plan.
    At the outset, I would like to say that we have been 
privileged to be part of the same negotiation process in the 
Senate in the Senate bill that is being supported by this 
coalition. It is a substantial expansion of the parity 
requirements.
    Current law only requires parity for annual limits and 
lifetime limits. We are supporting a bill that would extend 
parity requirements to virtually all treatment limits and 
financial requirements.
    It is also a bill that would expand the definition of 
mental health to include substance abuse. It is also a bill 
that would substantially narrow the cost exception.
    So under any measure against current law, it is a large 
expansion. It is a large expansion against many state laws. 
Very few state laws measure up to this kind of parity rule.
    There are some basic principles that the council has in 
evaluating this legislation. They are basically the following.
    We need to have some flexibility in how we design our 
health plans in terms of what is covered and what is not.
    We need to have the flexibility to manage health benefits 
so that if we are going to cover something we can attempt to 
control the cost and maintain quality.
    We would like to have uniform federal rules where there is 
a comprehensive federal standard, like the parity rule would be 
in the Senate, while protecting the roles of the states in the 
insurance world where they want to mandate mental health 
benefits and the like.
    Another basic principle is we want to avoid expansions of 
new, special purpose remedies, new lawsuits, new damages 
provisions.
    When we look at the Senate bill, it basically meets our 
requirements. It is not everything that the employer community 
wants. It goes, frankly, much farther than the employer 
community has been over time.
    And I think under any measure it would be a major victory 
for mental health advocates and it would benefit from the 
consensus approach.
    The things that the Senate bill doesn't do that we 
appreciate is that it doesn't have effectively a benefit 
mandate, because it leaves it up to employers to define what 
their health plans cover, so it doesn't follow the DSM-IV rule.
    I read a study. I think only 12 of the states that have 
parity rules follow DSM-IV. So it is not as widely accepted as 
you might think.
    The Senate bill makes clear that medical management 
principles are preserved, at least for self-insured plans. It 
does have a narrow and targeted preemption rule, but just for 
the parity requirements.
    So there are special rules in the Senate that protect state 
authority, traditional state insurance authority, in many, many 
respects.
    I would like to mention there was a pretty comprehensive 
analysis of the Senate's preemption rules done by Professor 
Rosenbaum of G.W.'s School of Public Health, which is, I think, 
reflective of the same analysis that we are providing.
    And she and, I think, we concluded the following, that 
mental health mandates are clearly preserved in the Senate 
bill. Where there are parity requirements coupled with 
mandates, the mandates would be preserved.
    Individual and small group market parity laws are preserved 
from preemption. State authority to define mental health 
benefits for insured plans are preempted.
    State laws that would mandate insurers offer out-of-network 
coverage for mental health would be preempted. So state laws 
that limit the ability of insurers to manage mental health 
benefits would not be preempted.
    So there is this whole body of state insurance law that is 
not preempted under the Senate bill.
    So in terms of the House bill, I think our concerns are 
pretty much mirror-image points. The House bill would limit the 
ability of employers to define what benefits are covered by 
reference to the DSM-IV, through the methodology that Neil 
pointed out.
    It also has no specific protection for medical management. 
It actually shares the same treatment financial limits rules. 
It shares the same cost exemption. So it has many of the same 
basic rules in it.
    There is another major concern we have with the House bill, 
which is that there is a provision in it that specifically 
excepts from preemption remedies, greater consumer protections 
benefits, methods of access to benefits, rights or remedies.
    That is very different than current law. That is not the 
sort of floor-ceiling HIPAA rule, for the technicians in the 
audience.
    The House bill is amending an ERISA provision that already 
preserves state insurance laws, but this provision would 
arguably allow for state lawsuits and remedies just with 
respect to mental health benefits.
    And that is very different from the current rule under 
ERISA, where ERISA provides the exclusive set of remedies as a 
federal statute.
    Thank you for your time. I look forward to the questions.
    [The statement of Mr. Breyfogle follows:]

Prepared Statement of Jon W. Breyfogle, Groom Law Group, Chartered, on 
                Behalf of the American Benefits Council

                                abstract
    The American Benefits Council's members have long recognized the 
importance of effective health coverage for the treatment of both 
physical and behavioral disorders. Employers understand the importance 
of quality mental health coverage for their employees and to 
maintaining a productive, healthy workforce.
    Because of the importance our members place on these services, we 
have repeatedly urged Congress not to expand the current federal parity 
requirements in a way that would add to plan costs or increase the 
complexity of plan administration. Doing so could unintentionally risk 
a reduction in coverage for these or other benefits provided to 
employees and their families.
    The American Benefits Council strongly prefers S. 558 over other 
parity measures that have been considered by the Senate, as well as 
H.R. 1424, the parity bill that is the subject of this hearing. Unlike 
H.R. 1424, the Senate proposal does not mandate that health plans cover 
specific mental health benefits. It leaves those decisions up to 
employers and in the case of fully insured health plans, permits States 
to continue to determine whether to require any particular benefits. 
The Senate bill makes clear that medical management of mental health 
benefits is not prohibited and preserves flexibility for employers and 
health plans in the formation of networks of health care providers who 
deliver these services. These provisions are vitally important because 
they allow employers to appropriately design and manage the health 
coverage they offer to meet their employees' needs.
    Finally, the Senate bill provides for a very targeted and narrow 
preemption of State insurance law (applicable to fully insured plans, 
as well as to self-insured plans) that assures a uniform federal rule 
for the specific parity requirements of S. 558 (e.g., treatment limits, 
financial requirements, cost exemption), while preserving the 
traditional role of the States to regulate mental health benefits 
provided under insurance policies in all other respects.
    Unfortunately, the House parity bill does not address the issues of 
key concern to employers in the same balanced fashion as the Senate 
bill. The American Benefits Council has played a constructive and 
active role in the multi-stakeholder negotiations that have helped 
shape the Senate mental health parity bill and are prepared to do the 
same with the House bill to make the changes we believe are necessary 
to achieve a more balanced approach to expansion of federal mental 
health parity requirements.
                           prepared statement
    Mr. Chairman and members of the Subcommittee, thank you for the 
opportunity to share the views of the American Benefits Council on the 
Paul Wellstone Mental Health and Addiction Equity Act of 2007. My name 
is Jon Breyfogle. I am the Executive Principal of the Groom Law Group. 
Groom Law Group is a Washington DC based law firm that specializes 
exclusively in employee benefits law. In my practice, I represent a 
wide range of large employers and insurers on the legal issues 
surrounding sponsoring health plans and offering services to health 
plans. I am a member of the Board of Directors of the American Benefits 
Council and am testifying on behalf of the Council.
    The American Benefits Council's members are primarily major 
employers and other organizations that collectively sponsor or 
administer health and retirement benefits covering more than 100 
million Americans. Most of our members are very large companies that 
have employees in most or all 50 states and provide extensive health 
coverage to active employees and retirees. The Council's membership 
also includes organizations that provide benefits services to employers 
of all sizes, including small employers who often face the greatest 
challenges in providing health coverage for their workers.
Employers Recognize the Importance of Behavioral Health Care
    The American Benefits Council's members have long recognized the 
importance of effective health coverage for the treatment of both 
physical and behavioral disorders. Because of the importance our 
members place on these services, we have repeatedly urged Congress not 
to expand the current federal parity requirements in a way that would 
add to plan costs or increase the complexity of plan administration. 
Doing so could unintentionally risk a reduction in coverage for these 
or other benefits provided to employees and their families.
    We also recognize that much has changed in the behavioral health 
care field over the past decade since the enactment of the current 
federal mental health parity requirements in 1996. Better medical 
evidence on behavioral health conditions has become available and 
better treatment options have advanced during this period. In many 
cases, the way in which behavioral health conditions are covered by 
health plans has also changed, particularly with the emergence of 
health plan administrators that specialize in the management of 
behavioral health care services in a wide range of outpatient and 
inpatient settings.
    As the field of behavioral health care has changed during this 
time, it has become increasingly clear that the ability of employers to 
provide access to affordable and appropriate health care services, 
including for behavioral health conditions, depends on the ability of 
health plans to do an effective job in the medical management of health 
benefits. This often involves challenging tasks to try to ensure that 
plan participants get the right care and effective care under the terms 
of their plans and for the health conditions they have. Employers have 
a strong interest and an enormous stake in seeing that these tasks are 
performed well, not only because employers are the primary payers for 
the health care coverage for millions of American workers, but also 
because of the importance they place in maintaining a healthy and 
productive workforce.
Senate Parity Legislation
    Before I address the concerns we have with the House of 
Representatives mental health parity bill, H.R. 1424, I want to 
emphasize that employers understand and appreciate how vitally 
important effective behavioral health care is for millions of 
Americans. Employers spend considerable sums of money providing 
behavioral health care coverage and are not irrevocably opposed to any 
legislation enhancing parity requirements.
    Over the past several months, three Senate sponsors of mental 
health parity legislation (Mental Health Parity Act of 2007--S. 558)--
Senate HELP Committee Chairman Kennedy, HELP Committee ranking member 
Senator Enzi and Senator Domenici--have tried to resolve the difficult 
and important issue of changing the current federal parity 
requirements. Their bill has been developed through an inclusive and 
thorough process that has given all the major stakeholders on this 
issue--employers, health plans, behavioral health care providers and 
patient advocates--the opportunity to have their concerns heard and 
addressed.
    The American Benefits Council has been privileged to have 
participated in this process as a representative of employer interests. 
While these discussions have been demanding and have required much give 
and take on all sides, we also think that it has resulted in a bill 
that balances the interests of a divergent set of stakeholders. We 
believe the process employed could serve as a model for how Congress 
might be able to tackle other similarly challenging health policy 
issues.
    S. 558 is not perfect from our perspective, but no true compromise 
proposal ever is. That said, the Senate parity measure has gained the 
support of mental health parity proponents and a broad range of 
organizations representing employers and insurers. In that regard, the 
Senate bill is unique. We hope this good faith effort sends an 
important message that employers will support legislation where their 
priority concerns are addressed in a thoughtful manner and with careful 
attention to details, even when our preferred outcome would be no new 
legislation or an even better bill.
    Here are the key reasons why the American Benefits Council strongly 
prefers the Senate bill over other parity measures that have been 
considered by the Senate, as well as H.R. 1424, the parity bill that is 
the subject of this hearing.
    First, the Senate proposal does not mandate that health plans cover 
specific mental health benefits. It leaves those decisions up to 
employers. In the case of fully insured health plans, however, the 
Senate bill permits States to continue to determine whether to require 
any particular benefits.
    Second, the Senate bill includes a provision making clear that 
medical management of mental health benefits is not prohibited and 
preserves flexibility for employers and health plans in the formation 
of networks of health care providers who deliver these services. These 
provisions are vitally important because they allow employers to 
appropriately design and manage the health coverage they offer to meet 
their employees' needs.
    Finally, the Senate bill provides for a very targeted and narrow 
preemption of State insurance law (applicable to fully insured plans, 
as well as to self-insured plans) that assures a uniform federal rule 
for the specific parity requirements of S. 558 (e.g., treatment limits, 
financial requirements, cost exemption).
    We recognize that this modest preemption rule in the Senate bill 
has generated some criticism and that the provision deviates from the 
``federal floor/state ceiling'' preemption rule that currently applies 
to fully insured plans under the existing federal mental health parity 
requirements in section 712 of the Employee Retirement Income Security 
Act (ERISA). However, this provision is targeted and well justified. 
This narrow preemption rule was included in S. 558 because the sponsors 
of the legislation recognize that the parity rules of the Senate bill 
are very comprehensive and deserving of a uniform Federal approach. In 
fact, it is hard to imagine a broader parity requirement pertaining to 
treatment limits and financial requirements. Indeed, S. 558 would 
extend broad new parity requirements to participants in insured plans 
in the 8 states that currently have no parity requirement and expand 
upon the parity requirements applicable to insured plans in 
approximately 17 other states.
    The sponsors of the Senate bill have approached this matter with 
great thought and care to ensure that the targeted new preemption rule 
preserves the traditional role of the States to regulate mental health 
benefits provided under insurance policies in all other respects. For 
example, special rules are included in the bill that ensure that:
     State laws that mandate mental health benefits for fully 
insured plans are preserved;
     State laws that include parity requirements together with 
non-parity requirements (e.g., some form of mandated benefit) will not 
be completely preempted as they apply to fully insured plans--only the 
State's specific and different parity requirements will be preempted 
and the other aspects of State law will be preserved;
     State laws that set parity requirements for insurance 
offered in the small group market are preserved;
     State laws that set parity requirements for the individual 
insurance market are preserved;
     State laws that define the term ``mental health benefits'' 
will not be preempted for fully insured plans;
     State laws that require that insurers offer out of network 
coverage for mental health benefits are not preempted; and
     State laws that regulate the ability of insurers to manage 
mental health benefits for fully insured plans are not preempted.
    To ensure that there are no unintended preemption consequences 
associated with the Senate bill, the sponsors of the Senate bill have 
set out all of these rules explicitly in the text of S. 558. In my 
view, these provisions are belts and suspenders to begin with--arguably 
they are not even needed because the basic preemption rule in the bill 
is narrowly targeted to begin with. The fact that employers have worked 
closely with the Senate sponsors in the crafting of these comprehensive 
clarifications relating to State insurance laws demonstrates the good 
faith negotiations that have occurred. As a practicing lawyer in this 
area, there is no doubt in my mind that any court or regulator that 
would be called on to interpret the Senate bill will fully understand 
that the Congress went out of its way to preserve and respect the 
traditional role of the States to set standards for participants of 
fully insured plans. Any arguments to the contrary are simply without 
merit.
Employer Concerns with the House Mental Health Parity Bill
    Unfortunately, the House parity bill does not address the issues of 
key concern to employers in the same balanced fashion as the Senate 
bill. As such, we urge that several changes be made to the legislation 
as it is further considered. The primary issues which we believe need 
to be addressed are the following:
            1. Flexibility Needed in Covered Benefits
    Under the House parity bill, if a health plan provides ``any'' 
mental health or substance-related disorder benefits, then the plan 
must cover all of the same mental health and substance disorder 
benefits as are provided to federal employees under the Blue Cross and 
Blue Shield standard option health plan (the most heavily enrolled 
health plan offering under the Federal Employee Health Benefits 
Program). Plans offered to federal employees are required to cover all 
conditions listed in the so-called DSM-IV manual, the diagnostic manual 
used by mental health care professionals to identify and categorize all 
disorders in this area. So, while the benefit mandate is stated 
somewhat differently than it has been in previous mental health parity 
bills, the basic requirement in the House bill is to cover all mental 
health and substance-related disorders if a plan covers any services at 
all in this area. Of course, the vast majority of plans do provide such 
services.
    We have several concerns about this sort of requirement. First, it 
is not necessary to achieve the purposes of the legislation, which is 
to provide parity in any financial requirements and treatment limits 
which a plan applies to the benefits it covers. In our view, requiring 
a plan to provide coverage for all of the conditions which are 
identified in the diagnostic manual used by health care providers is 
not a ``parity'' rule--it is a benefits mandate. In fact, it does not 
establish ``parity'' at all because it requires much more specificity 
of coverage than is required for any non-behavioral health conditions. 
Such a requirement would send an immediate message to employers that 
they no longer have any discretion over decisions about what benefits 
they cover for their employees in this area of their plan, except the 
decision to provide no coverage for these conditions at all.
    In addition, state laws currently govern which benefits are 
required to be covered for fully insured health plans so this is a 
matter that can be, and often is, decided by the states for the health 
plans which they regulate. In terms of self-insured health plans which 
are regulated under federal law, there are no similar requirements 
applied to any other broad category of health conditions or services 
which are typically covered by employer-sponsored health plans, in 
recognition that this is an important area of discretion for employers 
when they voluntarily choose to provide health coverage to their 
employees.
            2. Protection for Medical Management Practices
    Another major concern with the House bill is that, unlike the 
current Senate measure, there is no specific protection for medical 
management practices for self-insured plans. It is important to 
preserve the ability of plans to manage coverage for mental health 
conditions and substance-related disorders. We believe that employers 
should be able to design plans so that proposed treatments for these 
conditions are, whenever possible, consistent with standards for 
evidence-based care. Indeed, in our view, the Senate bill's protection 
for medical management does not go far enough--we would have greatly 
preferred that the Senate bill preempt State insurance laws that limit 
the ability of insurers to manage mental health benefits for fully 
insured plans. But not doing so is one of the many compromises included 
in the Senate bill.
    One of the most important developments now occurring in the health 
care field is in the preparation of measures by numerous clinical 
specialty groups to help define appropriate care and expected outcomes 
for patients for a wide range of conditions. Purchasers, health care 
providers, consumer groups and many others are actively working in 
several different forums to reach consensus on evidence-based measures 
of quality health care. While much more needs to be done to achieve a 
fully transparent and more accountable health care system, there can be 
little doubt that the movement to achieve consistent measures of 
quality care is a major step in the right direction and can help drive 
overall health system reform.
    We need to be careful to ensure that neither State nor federal laws 
undercut or diminish efforts by plans to try to ensure that the health 
care services received by plan participants are medically necessary and 
appropriate for their conditions. Some health plans contract with 
managed behavioral health care organizations for this purpose while 
others perform medical management services as part of their core plan 
operations. Either way, it is essential to safeguard these important 
activities so that plans are able to ensure that coverage is provided 
for quality health care services and protect themselves and their 
participants from unnecessary costs. Advocates of H.R. 1424 maintain 
that it is not their intention to interfere with medical management and 
that nothing in the legislation would explicitly do so (i.e., the bill 
is simply silent on the matter). This is very encouraging, but to 
ensure that result, we urge the House to amend H.R. 1424 to include the 
Senate bill's specific language to make that point absolutely clear.
            3. Discretion Needed for Out-of-Network Coverage
    A third significant concern that employers have with the House bill 
is that it mandates coverage for mental health and substance-related 
disorders by out-ofnetwork providers if a plan provides coverage for 
substantially all medical or surgical services on an out-of-network 
basis in any of three different categories (emergency services, 
inpatient services or outpatient services). This requirement limits 
important discretion in plan design. It also exceeds what is required 
under the Federal Employee Health Benefits Program where parity is 
required only for services provided on an in-network basis.
    We would recommend that the House bill adopt the Senate approach 
which includes a federal standard that calls for parity in plan 
financial requirements and treatment limitations for any out-of-network 
mental health coverage provided by a plan, but the Senate provision 
does not require plans to offer outof-network coverage even where out-
of-network coverage is offered for other medical benefits. As noted 
above, the Senate bill preserves the traditional role of the States to 
regulate fully insured health plans in this area, so it does not 
interfere with State laws which may require insurers to offer out-of-
network mental health coverage.
            4. Changes Needed to Preemption Provisions
    We have significant concerns with the provisions in the House 
parity bill which would authorize States to provide ``greater consumer 
protections, benefits, methods of access to benefits, rights or 
remedies'' than the provisions set out in the legislation. Clearly, 
this language gives States the ability to develop parity laws, at least 
for fully insured health plans, that are more extensive than the 
federal standards provided in the House bill. We prefer the approach 
adopted in the Senate bill, which would establish uniform federal 
parity rules applicable to treatment limitations and financial 
requirements for both self-insured and insured plans while preserving 
the traditional authority of States to require fully insured plans to 
provide mental health coverage.
    The more troubling aspect of this provision in the House bill is 
that it opens the door for greater State law remedies for disputes 
involving mental health benefits for participants in insured plans. The 
Supreme Court has issued numerous rulings making clear that ERISA's 
enforcement scheme is exclusive for both fully insured and self-insured 
plans and completely preempts alternative State remedial schemes. It 
makes no sense whatsoever to allow access to State law remedies for one 
category of benefits--i.e., participants in fully insured plans for 
disputes over mental health benefits. To the extent the House bill is 
interpreted to revise remedies for all types of benefit disputes, H.R. 
1424 is certainly not the vehicle to do so. The debate over ERISA's 
remedies has occurred over many years, generally in the context of the 
Patients' Bill of Rights. Such a fundamental issue as ERISA's remedial 
scheme should not be an adjunct to a bill whose purpose is to address 
mental health parity.
    The uniformity that ERISA establishes for employer-sponsored 
coverage, including its enforcement and remedies scheme, is sound 
public policy and is something employers consider crucial to their 
voluntary decision to offer health coverage to their employees. If 
Congress believes that changes are needed in this area, such changes 
should be debated on their own merits rather than included as one of 
many provisions of a mental health parity bill.
            House and Senate Parity Bills Fail to Apply to Federal 
                    Programs
    One of the many omissions of both the House and Senate parity bills 
is that they fail to extend the same parity requirements to the mental 
health benefits provided to millions of elderly and low-income 
Americans who are covered under Medicare and Medicaid. While we are 
aware that separate legislation sponsored by Rep. Pete Stark, H.R. 
1663, would partially address this situation by requiring parity for 
benefits covered by Medicare, nearly all of the debate and focus 
concerning mental health parity over the past decade in Congress has 
been around employer-sponsored health coverage.
    We believe it is indefensible for Congress to impose parity 
requirements on employer-sponsored health coverage, for both private 
sector employers and state and local government health plans, while 
ignoring the same issues in the programs that the Federal government 
sponsors and pays for. If either the House or Senate bills were 
enacted, mental health parity would be the law for employer-sponsored 
coverage and, through previous action by Executive Order, for coverage 
offered to federal employees (including members of Congress), but not 
for those covered under Medicare or Medicaid.
    It would send a fundamentally different message to employers if 
mental health parity was not simply something that Congress was seeking 
to apply solely to employer-sponsored health coverage, but was being 
done as part of a more omnibus effort to achieve the same standards in 
all federal health programs as well.
Conclusion
    Thank you for the opportunity to testify today and share our views 
with you on these important issues. Employers understand the importance 
of quality mental health coverage for their employees and to 
maintaining a productive, healthy workforce. We also fully understand 
the strong sentiment in Congress to expand upon the current federal 
mental health parity requirements. The American Benefits Council has 
played a constructive and active role in the multi-stakeholder 
negotiations that have helped shape the Senate mental health parity 
bill. We are prepared to do the same with the House bill if a similar 
approach is taken to making what we believe are important and needed 
changes to ensure a more balanced proposal.
                                 ______
                                 
    Chairman Andrews. Thank you very much, Mr. Breyfogle. As 
usual, very well-prepared.
    Mr. Melek, welcome to the committee. We look forward to 
hearing your statement.

       STATEMENT OF STEVE MELEK, ACTUARY, MILLIMAN, INC.

    Mr. Melek. Good afternoon, Chairman Andrews and members of 
the Subcommittee on Health, Employment, Labor and Pensions. It 
is my pleasure and honor to testify before you on the Paul 
Wellstone Mental Health and Addiction Equity Act of 2007.
    My name is Steve Melek, and I am a fellow of the Society of 
Actuaries and member of the American Academy of Actuaries. I am 
a health care actuary with Milliman, which is a leading 
actuarial consulting firm that consults to virtually all health 
insurers and managed care plans in the U.S. and many employers.
    I have been with Milliman for 17 years and have specialized 
in actuarial work related to behavioral health care. Our report 
contains the findings of the Milliman authors. Please note that 
Milliman does not endorse legislation.
    My work with parity dates back to the analysis of the 
Health Insurance Reform Act of 1995. I personally helped health 
insurers, providers, employers, managed behavioral health care 
organizations and state governments price behavioral health 
benefits, including legislation in Nebraska and Washington 
state within the last year.
    Milliman was commissioned by Capital Decisions Inc. on 
behalf of several behavioral provider organizations. Our full 
report contains important details about our findings, sources 
and methodology.
    From an actuarial standpoint, parity will bring the benefit 
limits and cost-sharing for behavioral health care in line with 
medical benefits. For example, a benefit plan might have a $10 
co-pay for an office visit for a medical condition but a $25 
co-pay for a therapy visit to a psychologist.
    In addition, a benefit plan might limit behavioral therapy 
to 20 visits per year but have no physician visit limits for 
medical conditions.
    Obviously, that can increase costs for the insurer or 
employer, and it will decrease the amount the patient pays out 
of pocket.
    Our estimates show that the cost increase is modest 
relative to total health care costs and to the ongoing annual 
cost increases of health benefits.
    We estimate this legislation would increase per capita 
health insurance premiums of typical health plans in 2008 by an 
average of 0.6 percent, or $2.40 per member per month, in our 
baseline scenario.
    In that scenario, we assume that employers and health plans 
will take no steps to compensate for the added cost, such as 
increasing cost-sharing or increasing utilization management. 
Thus, our estimate is conservative, meaning it is on the high 
side.
    Employers and insurers commonly try to compensate for 
increased cost by reducing benefits or increasing employee 
premium contributions. The CBO, in its cost analysis of Senate 
Bill 558, considered that employer responses will remove about 
60 percent of the cost increase.
    Applying this CBO figure to our baseline scenario increase 
of 0.6 percent reduces the net cost increase to about 0.2 
percent.
    Another response of employers and insurers to increased 
cost is to increase the intensity of utilization management. 
The legislation does not appear to prevent the use of 
utilization management, or U.M.
    We developed another scenario, our increased U.M. scenario, 
where payers would tighten their behavioral health care 
utilization management. In this scenario, our cost estimates 
result in an aggregate premium increase of less than 0.1 
percent, or three cents, per member per month.
    As members of the subcommittee are well aware, there is 
enormous variation in the health system, and the increase for 
any specific insurance plan will vary with many factors.
    While we can't construct a set of circumstances where the 
cost increase for a specific plan could be 1 percent to 2 
percent or more, we believe such plans cover a small portion of 
the people with group health coverage, probably less than 5 
percent.
    Increasing benefits for behavioral health care services may 
result in reductions in other health care and employer costs. 
This is because better behavioral health care can improve a 
person's medical conditions.
    It may also lead to an increase in the use of psychotropic 
drugs. We did not consider these effects in our report.
    We assumed coverage consistent with DSM-IV, but we did not 
include treatment for tobacco use, obesity or the side effects 
of medication.
    We provide some information references regarding the well-
established evidence base for diagnosis and treatment of mental 
and substance-related disorders which is on par with that for 
diagnosis and treatment of medical and surgical conditions.
    We also summarized how this evidence should be used for 
medical necessity determinations by payers in the utilization 
management process.
    We also present summary information from Thompson Health 
Care's work for SAMHSA. It shows that spending trend increase 
for mental health and substance abuse-related services was less 
than that for total health care spending between 1993 and 2003.
    Future growth in behavioral spending is also projected to 
lag other health care spending, partly because there is less 
new technology expected for behavioral than for medical care.
    Another trend we report is that the private insurance 
portion of national mental health spending increased from 21 
percent in 1986 to 24 percent in 2006, while substance abuse 
disorder spending decreased from 30 percent to 9 percent.
    Thank you again for the opportunity to present our report 
today.
    [The statement of Mr. Melek follows:]

 An Actuarial Analysis of the Impact of H.R. 1424, by Stephen P. Melek,
                         et al, Milliman, Inc.

I. Executive Summary
    Milliman, Inc. was commissioned by Capitol Decisions, Inc. to 
perform an independent study and actuarial analysis of the impact of 
behavioral health insurance parity legislation on behalf of several 
interested parties.\1\ This report contains the authors' analysis of HR 
1424, cited as the ``Paul Wellstone Mental Health and Addiction Equity 
Act of 2007''.
    HR 1424 would require that each group health plan or health 
insurance issuer offering group health insurance coverage to employers 
with more than 50 employees provide ``parity'' benefits for the 
diagnosis and treatment of all behavioral healthcare. In particular, 
the mental health and substance-related disorder benefits would have to 
be covered on the same terms as for the diagnosis and treatment of all 
physical health conditions. This includes the same treatment limits and 
beneficiary cost sharing for both in-network and out-of-network 
benefits. Additionally, HR 1424 defines a minimum scope of coverage for 
mental health and substance-related disorders as the same range of 
mental illnesses and addiction disorders covered by the health plan 
with the largest enrollment of federal employees (under chapter 89 of 
title 5, United States Code).
Findings
     Our estimates indicate that the legislation will increase 
per capita health insurance premiums of ``typical'' plans in 2008 by 
0.6%, or $2.40 per member per month, if no increase in utilization 
management activities occurs in response to parity. This is our 
``Baseline Scenario.''
     The legislation does not appear to prevent the use of 
utilization management (UM), and under our ``Increased UM Scenario'', 
where all benefit plans would choose to further tighten their degree of 
behavioral healthcare management, our cost estimates result in an 
aggregate premium increase less than 0.1%, or $0.03 per member per 
month. Since some insured plans will likely increase their utilization 
management while others will not, the actual cost increase will likely 
fall between the less than 0.1% and 0.6% aggregate results.
     The Congressional Budget Office (CBO) has estimated that 
typical employer responses to required coverages will result in cost 
reductions of about 60% of the gross cost estimate.\2\ Applying this 
CBO estimate, aggregate employer contributions for health costs would 
rise by about 0.2% under our baseline scenario, and by less than 0.1% 
under our increased UM scenario.
     We project that utilization of facility-based behavioral 
healthcare services would increase by 9.7%, while professional services 
would increase by 30.0% under the Baseline Scenario. Our Increased 
Utilization Management (UM) Scenario shows much different results: a 
21.3% decrease in use of facility-based services (the majority from 
mental health services) and a 3.1% increase for professional services.
     We project that member out-of-pocket costs for behavioral 
health services will decrease by 18%, or about $0.20 per member per 
month under the baseline scenario. This reflects a balance between an 
increase in total out-of-pocket costs from higher service use by 
members under the higher parity benefit limits and a decrease in out-
of-pocket costs per unit due to lower parity cost-sharing. For every 
100,000 fully insured lives, member out-of-pocket costs are estimated 
to drop by $240,000 annually.
     We projected increased administrative costs in proportion 
to the benefit cost increases due to parity. Administrative costs 
account for about 15% of the total increase, or $0.36 or less per 
member per month.
     Increasing benefits for behavioral healthcare services may 
result in cost offsets from other healthcare services, particularly 
visits to primary care physicians and emergent/urgent care visits. 
Increasing benefits may also result in increased use of 
pharmaceuticals. We did not consider the effects of any such offsets or 
dynamics.
Limitations
    Our analysis used actuarial data that reflect the experience of 
individuals covered through commercially available benefit plans. To 
represent current coverage, we selected ``typical'' PPO and HMO benefit 
plans.\3\ We utilized a distribution of covered members by type of 
benefit plan.\4\ The estimates represent averages that may not be 
applicable to any individual underlying population segment or any one 
plan.
    Because the economy and the healthcare system are dynamic, there is 
an intrinsic uncertainty in projecting healthcare costs, especially 
under healthcare reform, and that uncertainty applies to our work. The 
estimates presented here are based on a number of assumptions as 
described in Appendix A. Other researchers who use other assumptions 
and methods may present different estimates, and the actual costs may 
depend in part on factors we have not considered.
    This report is not intended to support or detract from any 
particular legislation. It is intended for the exclusive use of the 
parties who commissioned the study and not intended to benefit any 
third party. This report should not be distributed without the 
permission of Milliman, and any distribution should be of the report in 
its entirety. This report reflects the authors' analysis and should not 
be interpreted as representing Milliman's endorsement.
II. Key Actuarial-Related Elements of HR 1424
    HR 1424 would bring parity in coverage for behavioral health 
benefits. HR 1424 would only apply to large group business, with small 
group business covering 50 employees or less and individual business 
being excluded from the requirement.
    HR 1424 specifies that each group health plan or health insurance 
issuer offering health insurance coverage in connection with a group 
health plan provided to employers, provide benefits for the diagnosis 
and treatment of all behavioral healthcare, including mental health and 
substance-related disorders, on the same terms and conditions as those 
provided under the policy for the diagnosis and treatment of all 
physical health conditions. This includes the same treatment limits and 
beneficiary financial requirements. For coverage of inpatient hospital 
services, outpatient services and medication, the same coinsurance, 
copayments, other cost-sharing, limits on out-of-pocket expenses, and 
individual and family deductibles must apply equally to medical-
surgical benefits and to mental health and substance-related disorder 
benefits. This requirement applies to in-network benefits and out-of-
network benefits.
    We have assumed that for parity benefits to apply, a licensed 
clinician would have to provide the diagnosis and treatment, which is a 
typical requirement for any covered benefit. We have also assumed that 
if a plan covers clinical trials or investigational treatments for 
physical conditions, then such coverage would also apply to behavioral 
conditions.
    We have assumed that covered substance-related disorders are 
consistent with those described in the Diagnostic and Statistical 
Manual of Mental Disorders, Fourth Edition (SM-IV). However, in our 
analysis, we do not include treatment for tobacco use, treatment of 
obesity or side effects of medication.
    We have assumed the legislation would not prevent insurers from 
negotiating terms with behavioral health care providers on 
reimbursement rates and other service delivery terms, managing the 
provision of benefits, the use of pre-admission screening, step 
therapy, or other mechanisms to enforce medical necessity requirements, 
or enforcing the terms and conditions of a policy or plan of benefits.
III. Healthcare Cost and Premium Impact
    HR 1424's mental health and substance-related disorder parity 
provisions would affect commercial health plans' costs principally by:
     Removing benefit limitations that often apply to mental 
illness and substance related conditions, but not physical medical 
conditions
     Requiring beneficiary cost-sharing provisions for such 
services is equal to those for care for all other physical diseases and 
disorders.
    These plan changes would also likely result in increased premium 
rates in the absence of compensating changes to plan design or plan 
operations.
    We estimate that, under our Baseline Scenario, adding full parity 
to behavioral healthcare benefits will increase costs, on average, by 
0.6% for plans affected by the legislation. We estimate that an average 
health plan in the United States will have 2008 monthly premiums of 
about $450 for an employee with single coverage and about $1,200 for an 
employee with family coverage. The increases in monthly premiums due to 
parity are estimated to be $2.80 for single coverage and $7.40 for 
family coverage.
    The increase for any specific insurance plan would vary, depending 
on the type of benefit plan (PPO, HMO, etc.), the scope and design of 
behavioral and other benefits currently covered, demographics of 
covered members, and the level of managed care applied to the 
behavioral health benefits. While the cost increase for a specific plan 
or employer under certain circumstances could be 1% to 2% or more (such 
as a plan without managed care that currently has very little coverage 
for behavioral healthcare services), we believe such plans cover a 
small portion of the people with group plans (probably less than 5%).
    Following is a detailed discussion of our methodology, assumptions 
and findings.
            A. Cost Estimation Approach and Baseline Results
    To estimate the cost associated with HR 1424, we built actuarial 
models that reflect current, typical healthcare coverage and then 
estimated the cost changes due to parity. We assumed national average 
cost and utilization levels and note that both utilization and cost can 
vary dramatically by location, and health insurance coverage varies 
greatly in the scope of covered services and member cost-sharing.
    We used two model benefit designs to represent typical insured plan 
benefits. One is a PPO plan and the other an HMO plan, and the benefit 
designs are consistent with the benefit plan descriptions in Milliman's 
annual Group Health Insurance Survey. Approximately 190 HMO plans and 
210 PPO plans participated in the Survey in 2006.
    We used these two model plans to represent the plan types and 
behavioral benefits that are common today. They vary in benefit 
structure, limitations on choice of providers, and level of managed 
care.
    For both model plans, we estimated current average per member per 
month (PMPM) costs and average premiums charged by insurers. We also 
estimated the costs and premium levels if the behavioral health 
benefits of these plans were increased to comply with the modeled 
parity provisions.
    We show percentage changes in premiums. The same percentage changes 
would also apply to administrative expenses of health insurers or 
health plans, which reflects our assumption that administrative 
expenses would change proportionately to the underlying change in 
benefit costs. For benefit cost changes of the relatively small 
magnitude presented in this report, we believe this proportionate 
assumption is reasonable.
    In developing these estimates, we used the Milliman Health Cost 
Guidelines,\5\ our proprietary actuarial pricing guidelines. We also 
used certain trend, utilization and cost data provided by health plans 
to the Milliman Group Health Insurance Survey for 2006.\6\ Appendix A 
provides more detailed information on our assumptions and approach.
    Table 1 presents the estimated change in premium rates resulting 
from the expected behavioral parity legislation for both model plans. 
These estimates assume no change in benefits other than the behavioral 
health benefits, and they assume no change in the level of utilization 
management within each plan. We refer to this as our ``Baseline 
Scenario''.
    We estimated the distribution of members for our model plans from 
information contained in the Survey of Employer Health Benefits 2006, 
as published by the Henry J. Kaiser Family Foundation and the Health 
Research and Educational Trust.\7\ This distribution is shown in Table 
1 along with the resulting overall premium increase across our model 
plans.

    TABLE 1.--ESTIMATED 2008 CHANGE IN PREMIUM RATES FOR MODEL PLANS
        [BASELINE SCENARIO--NO CHANGE IN UTILIZATION MANAGEMENT]
------------------------------------------------------------------------
                            Estimated Premium           Membership
    Model Plan Type               Change               Distribution
------------------------------------------------------------------------
HMO Plan                 0.6%                     25%
PPO Plan                 0.6%                     75%
------------------------------------------------------------------------
Total                    0.6%                     100%
------------------------------------------------------------------------

    It is important to note that these premium estimates reflect the 
assumptions we have made regarding average plan benefits. Based on the 
information available and our knowledge of today's health insurance 
marketplace, we believe these results represent a reasonable estimate 
of overall average premium changes. However, actual plan provisions 
involve a great deal more variation than exhibited by our model plans. 
If we could evaluate all benefit plans actually applicable to U.S. 
residents, we would find a greater range of premium changes than 
illustrated in Table 1. In particular, some plans have more limited 
behavioral benefits than we have modeled, and the corresponding cost 
increases under parity for these plans could be 1% to 2% or higher, 
while other plans will have very small cost increases of under 0.2%.
            B. Role of Managed Care
    Many HMOs and PPOs delegate management and administration of their 
behavioral healthcare coverage to a specialty managed behavioral 
healthcare organization (MBHO), often paying the MBHO a fixed, 
``capitated'' premium. These business arrangements are sometimes called 
``carve-outs.'' MBHOs may apply utilization management techniques and 
use provider payment arrangements to manage costs. Health plans that do 
not use MBHOs may also apply these techniques ``in-house.''
    Under either the carve-out or in-house approach, we have observed 
managed behavioral healthcare costs are often 25% to 50% lower than 
costs of non-managed benefit packages. When legislative mandates 
require parity for mental health and substance-related disorder 
services, increases in costs are significantly lower for managed care 
plans.
    Because of this dynamic, behavioral healthcare parity tends to 
encourage health insurers to tighten utilization management controls, 
which is allowed by HR 1424. Typical actions would include greater 
application of pre-authorization and concurrent review, including 
stricter adherence to evidence-based clinical protocols. Employers may 
choose to modify some of the benefit plans they offer to their 
employees, substituting plans with greater degrees of managed care 
provisions. This could involve greater use of carve-out MBHO vendors, 
or substituting HMO plans for PPO plans.
    To illustrate the potential impact of such tightening of managed 
care, we developed a scenario that reflects a greater application of 
utilization management (UM). This is our ``Increased UM Scenario''. 
Appendix A provides an explanation of the managed care levels 
described.
    The Baseline Scenario levels of managed care were chosen based on 
reported utilization rates of behavioral healthcare services of health 
plans that participated in the national Milliman Group Health Insurance 
Survey of 2006 and our knowledge of the managed behavioral healthcare 
industry. Table 3 summarizes the estimated premium changes under the 
Increased UM Scenario and compares them with those of the Baseline 
Scenario.

    TABLE 3.--ESTIMATED 2008 CHANGE IN PREMIUM RATES FOR MODEL PLANS
                  [INCREASED UM AND BASELINE SCENARIOS]
------------------------------------------------------------------------
                                     Estimated Premium Change
    Model Plan Type     ------------------------------------------------
                            Baseline Scenario      Increased UM Scenario
------------------------------------------------------------------------
HMO Plan                 0.6%                     < 0.0%
PPO Plan                 0.6%                     < 0.1%
------------------------------------------------------------------------
Total                    0.6%                     < 0.1%
------------------------------------------------------------------------

    Under the increased UM scenario, the cost of the additional parity 
benefits is offset by savings from utilization management. Costs for 
the HMO Plan and PPO Plans would be expected to barely change, despite 
the increase in benefits. This is consistent with our experience, where 
introduction of managed care or increased intensity of managed care 
related to behavioral healthcare services often produces significant 
reductions in costs.
    Some plans will react in the fashion described, while others may 
not make a change (either because they are already managing their 
behavioral healthcare benefits or because they would choose to not 
change after parity). Thus, the actual aggregate impact of the parity 
legislation on premium rates would likely fall between the two high and 
low values (< 0.1% for the Increased UM Scenario and 0.6% for the 
Baseline Scenario).
    When managed care is tightened for behavioral healthcare benefits, 
prescription drug use for treatment of mental illness may increase as 
psychotherapy visits and facility-based care fall. Some believe the 
cost of increased prescription drug utilization offsets some of the 
savings due to increased managed care, although the widespread 
availability of generic drugs could ameliorate this drug cost. We are 
not aware of studies of this dynamic, and our cost estimates do not 
reflect any such increases in prescription drug costs.
            C. Impact on Employers
    The increase in premium rates for specific employers will depend on 
the benefit plan(s) and the level of coverage currently provided. 
Employers already providing full parity for these benefits would incur 
no cost increase.
    Employers could respond to a parity cost increase by changing 
benefit plans or by increasing employee premium contributions, rather 
than absorbing the full increase. In particular, they may choose to 
offer plans with greater levels of managed care or higher insured cost-
sharing. The Congressional Budget Office (CBO) addressed the issue of 
potential employer responses to behavioral health parity in a 1996 
report.\8\ While CBO estimates that approximately 60% of the gross 
increases would be offset by reductions in benefits, the report also 
discusses the uncertainty inherent in such estimates, as follows:
    ``Projections of the relative magnitude of the possible responses 
are, inevitably, speculative. The best studies of the effects of 
mandates on health insurance coverage have large margins of error 
associated with their estimates. Some empirical questions, such as the 
degree to which other components of health benefits would be dropped in 
response to a mandate about a specific component of coverage, have 
simply not been addressed by academic studies.''
    The CBO continued to use this 60% offset assumption in their cost 
estimate of the Mental Health Parity Act of 2007, S. 558.\9\
IV. Impact on Access and Use of Behavioral Health Services
    We expect access to and utilization of certain behavioral 
healthcare services to increase with the proposed behavioral health 
parity because of two dynamics:
    1. Calendar limits on the maximum number of covered inpatient 
hospital days, outpatient professional visits and any other benefit 
limits for behavioral health benefits cannot differ from those used for 
all physical health benefits. While health plans currently include such 
limits on behavioral healthcare benefits, members typically have access 
to unlimited inpatient and outpatient physical healthcare.
    2. Insured copayments and cost-sharing must be on par with physical 
health benefits. Behavioral healthcare benefits often have higher 
levels of insured cost-sharing, and higher out-of-pocket costs tend to 
discourage behavioral healthcare use. However, members may more 
frequently visit psychotherapists if the per visit copay is $10 rather 
than $25.
    In our model, we estimated the impact behavioral healthcare parity 
would have on facility-based services (inpatient hospital, partial 
hospital and other outpatient hospital) and on professional services 
(diagnosis, evaluation, therapies and medication management). Facility-
based utilization would increase by 9.7% and professional utilization 
would increase by 30.0% under our Baseline Scenario. These increases 
reflect both higher numbers of users of behavioral healthcare and 
greater numbers of services used by some patients.
    The expected utilization change would be much lower under the 
Increased UM Scenario. Utilization management can significantly reduce 
utilization of behavioral healthcare services--specifically those that 
may be deemed as not medically necessary. This typically results in 
fewer and shorter inpatient hospital admissions, shifting some use to 
outpatient settings, and shorter treatment duration for selected 
patients. In the Increased UM scenario, we estimate that facility-based 
service utilization would decrease by about 21.3%. Professional service 
utilization would increase by about 3.1%.
V. Impact on Member Out-of-Pocket Costs
    As described above, behavioral healthcare parity is expected to 
reduce insured member out-of-pocket costs as a result of lower cost-
sharing. We modeled the impact of behavioral health parity on these 
costs, using the benefit designs in Appendix B. We project that insured 
out-of-pocket costs will decrease by 18%, or about $0.20 per member per 
month under the Baseline Scenario. This is the net result of increase 
in member costs due to additional service use and decreases in out-of-
pocket costs per unit due to higher coverage levels. For every 100,000 
fully insured lives, insured out-of-pocket costs are estimated to drop 
by about $245,000 per year under this scenario. These figures are for 
behavioral health care only, but are spread across the entire covered 
membership, not just the users of behavioral health benefits.
    Our model PPO plan has an integrated out-of-pocket limit for all 
services (including behavioral). If cost sharing shrinks for behavioral 
care, the contributions of this cost sharing toward out of-pocket 
limits decreases. On average, across a population of covered lives, 
this dynamic produces a very small increase in cost sharing for non-
behavioral services.
VI. Impact on Health Plan Administrative Costs, Risk Margins and 
        Profits
    Health plans' administrative expenses consist of true 
administrative cost, risk margins and profits, and we assumed these 
would change proportionately to the change in benefit costs. This 
reflects the expected impact on claims processing, utilization 
management and other administrative functions, and risk margins. While 
a detailed examination of administrative expense may show particular 
additional changes due to parity, the relatively small magnitude of the 
changes relative to total plan expenditures make the proportionate 
assumption reasonable. We note that this assumption should be revisited 
when considering organizations such as managed behavioral health carve-
out companies, because their business is concentrated in areas affected 
by parity.
    We have assumed that the covered services net of cost sharing 
represent 85% of the total Health Plan premiums. Therefore, the 
remaining 15% of premium is for administrative costs, risk margins and 
profits. We note that some programs may have smaller or larger costs 
for these elements. In particular, self-funded programs often have 
different cost structures, and the application of our figures to those 
programs may require adjustments.
    We project that administrative costs, risk margins and profits will 
increase by 0.6% under the Baseline Scenario and by less than 0.1% 
under the Increased UM Scenario. On a per member per month (PMPM) 
basis, these increases account for $0.36 or less. By contrast, 15% of 
total premium for our 2006 Survey data trended to 2008 is about $59 
PMPM, and the expected annual trend forecast is about 12%.
VII. Medical Cost Offsets
    Many behavioral health advocates promote the concept that effective 
behavioral healthcare can reduce medical costs, but this ``cost 
offset'' has been a controversial subject. There is strong evidence 
that behavioral problems and medical problems are associated with one 
another.\10,11,12\ Some of these associations have been recognized by 
recommended medical practices; for example, screening for post-partum 
depression, depression following heart attack, or alcoholism 
screening.\13,14\ In addition, the behavioral component of wellness and 
disease management programs is well-recognized. For example, behavioral 
components are recognized as important elements of smoking cessation 
and obesity programs.\15,16\ Advocates believe the impact of effective 
behavioral healthcare extends beyond these examples. Some health 
insurers are developing integrated approaches to covering medical and 
behavioral illnesses.
    Because specialty behavioral healthcare is generally a small 
component of total medical spending, even a small percent reduction in 
medical costs through parity benefits could amount to a significant 
cost offset relative to the increased cost of parity benefits. However, 
we did not include any such offsets in this work.
VIII. Preemption of State Laws
    HR 1424 does not appear to preempt any State law that provides 
greater consumer protections, benefits, methods of access to benefits, 
rights or remedies than would occur under HR 1424. Therefore, any State 
laws that include broader requirements for access or coverage of mental 
health or substance-related disorder benefits, such as additional 
mental conditions or diagnoses or applicability to groups of 50 or less 
employees, are not preempted by this legislation.
IX. Evidence Based Practices and Medical Management
            Evidence Based Practices
    The evidence base for diagnosis and treatment of mental and 
substance-related disorders is well established and on par with the 
medical evidence for diagnosis and treatment of medical and surgical 
conditions. Mental and substance-related clinical practice guidelines 
are broadly accepted in the medical community including the American 
Psychiatric Association's evidence based practice guidelines,\17\ those 
of American Academy of Child and Adolescent Psychiatry\18\ and those of 
the American Society of Addiction Medicine Patient Placement 
Criteria.\19\
    Along with the expansion in the documentation of the science base 
of treatments for mental and substance-related disorders, two recent 
seminal reports strengthen the message that mental health is 
fundamental to health and that mental disorders are real health 
conditions that are equally as important as general health conditions. 
The 1999 Surgeon General's Report on Mental Health\20\ provides a 
review of the research supporting the fact that evidence based mental 
health treatments are well established. According to the Report,
     ``The efficacy of mental health treatments is well 
documented, and
     A range of treatments exists for most mental disorders''
    The 2006 Institute of Medicine (IOM) report Improving the Quality 
of Health Care for Mental and Substance-Use Conditions\21\ takes the 
discussion a step further to examine how well evidence based mental 
health treatments are being delivered. The report also examines how the 
framework and strategies to improve the quality of health care 
delivery, proposed in the IOM 2001 report Crossing the Quality Chasm: A 
New Health System for the 21st Century,\22\ should be applied to mental 
health care. The IOM 2006 report highlights the lack of adherence to 
established clinical practice guidelines for many mental health 
conditions and the importance of attending to the quality problems 
using the recommendations in the IOM 2001 report.
            Medical Management of Mental and Substance-Related 
                    Conditions
    Medical management practices by payers can apply to medical as well 
as mental health and substance-related utilization. As a matter of cost 
and quality control, payers often use a process known as medical 
necessity determinations to identify particular patients who do not 
meet indications for needing a particular service.\23\ Medical 
necessity determinations are intended to prevent inappropriate 
utilization of services which can increase utilization and cost without 
improving quality.\24\ Narrowly speaking, medical necessity 
determinations do not affect the benefit design but influence 
utilization of covered benefits for individuals. To oversimplify, 
although an MRI may be a covered service, an insurer will not pay for 
the MRI unless it is reasonably needed for the patient's diagnosis or 
treatment. This distinction between covered benefits and administration 
of benefits also applies to behavioral health.
    Payers making medical necessity determinations should rely on 
evidence based guidelines\25\ or treatment protocols and indicate such 
in contracts with providers. HR 1424 does not appear to interfere with 
the ability of payers to make medical necessity coverage determinations 
and we expect that some payers will increase their application of this 
process in response to parity. As we note above, this application of 
managed care could actually reduce costs under parity for some payers 
to below the pre-parity level. Payers are in a position to assist in 
the measurement of effective evidence based practice in mental health, 
a deficiency identified in the IOM 2006 report. Payers are also 
positioned to incentivize providers to provide quality mental health 
care delivery. Under parity, delivering evidence based mental health 
care and measuring the quality of mental health care delivery would no 
longer be restricted by benefit limits.
X. National Mental Health and Substance-Related Disorder Spending 
        Trends\26\
    National expenditures for the treatment of mental health and 
substance related disorders (MHSRD) disorders increased to $121 billion 
in 2003, up from $70 billion in 1993--an average annual growth rate of 
5.6%. This was lower than the 6.5% average annual growth rate during 
this period for all health services. The projected MHSRD expenditures 
for 2006 were $145 billion. Future growth in MHSRD expenditures are 
expected to continue to lag the growth in all health services, due in 
part to the lesser impact of cost-increasing technology on MHSRD 
service delivery.
    Mental health expenditures make up the majority of the MHSRD 
expenditures. In 1993, they accounted for 78.6% of MHSRD spending at 
$55 billion, and grew to 82.9% of 2003 MHSRD spending at $100 billion. 
The 2006 projection is at 83.8% or $122 billion. The rapid rise in 
prescription drug spending for mental disorders contributes 
substantially to this trend.
    Prescription drug costs within mental health service delivery have 
risen rapidly from just 7% of total mental health spending in 1986 to 
23% in 2003, and are projected to hit 30% of all mental health spending 
by 2014. Meanwhile, total hospital costs (including inpatient acute 
services and outpatient services such as day treatment) dropped from 
41% in 1986 to 28% of total mental health spending in 2003. Physician 
services increased from 11% in 1986 to 14% in 2003.
    The distribution of expenditures by public-private payer differs 
significantly between mental health and substance-related disorder 
services. Private payers (includes private insurance, out-of-pocket, 
and other private sources) accounted for 46% of mental health 
expenditures in 1986, reduced to 42% by 2003, and is currently expected 
to remain at that level for many years. Private insurance accounts for 
24% of all mental health expenditures. Public payers (includes 
Medicare, Medicaid, other federal, and other state and local payers) 
accounted for 54% in 1986 and 58% in 2003. The addition of the Medicare 
Part D benefits increased the Medicare component from 7% in 2003 to an 
estimated 11% in 2006, while the Medicaid component dropped from 26% in 
2003 to 24% in 2006.
    Private payers accounted for 50% of all substance-related disorder 
expenditures in 1986 but dropped to 23% by 2003, while the public 
payers accounted for 50% in 1986 and 77% in 2003. Private insurance 
accounts for just 9% of substance-related disorder expenditures. Other 
state and local payers are the largest payer group of substance-related 
disorder benefits at 46% in 2003. Current projections show the public 
portion of substance-related disorder expenditures continuing to grow 
under current conditions, up to 83% by 2014.
    The largest category of expenditures for substance-related disorder 
treatment are specialty substance-related disorder clinics, increasing 
from 19% in 1986 to 41% in 2003, while total hospital costs dropped 
from 48% of total substance-related disorder expenditures to 24% in 
2003. Those levels are projected to remain fairly flat in the future.
Appendix A.--Assumptions
    This section describes key assumptions and sources for our 
estimates. We also present cautions about how the estimates should be 
interpreted and used.
    We estimated costs for the currently insured commercial population 
in the United States. This does not include individuals covered by 
Medicaid or Medicare. We used standard Milliman demographic 
assumptions, intended to represent the age and gender mix of a typical 
commercially-insured employee group with the demographics of the U.S. 
labor force population.
    We estimated per capita costs for two different typical benefit 
plans in the United States commercial marketplace today--a PPO plan and 
an HMO plan. We applied the benefit plan specification details 
described in Milliman's 2006 Group Health Insurance Survey, to set pre-
parity benefit specifications. These details are summarized in Appendix 
B. We also used an expected annual trend estimate from the Survey to 
project costs to 2008. We note that trend for behavioral health 
benefits has been lower than for medical benefits as a whole, and this 
means our trend assumption may cause our estimates for 2008 to be 
overstated somewhat.
    We used a 25%/75% distribution between the HMO and PPO plan 
designs, based on information contained in the Survey of Employer 
Health Benefits 2006,\27\ published by the Henry J. Kaiser Family 
Foundation and the Health Research and Educational Trust.
    We applied cost estimates using Milliman's 2006 Health Cost 
Guidelines (HCGs). The HCGs are Milliman's actuarial guidelines that 
show how the components of per capita medical claim costs vary with 
benefit design, demography, location, provider reimbursement 
arrangements, degree of managed care delivery, and other factors. In 
most instances, these cost assumptions are based on our evaluation of 
several data sources, and are not specifically attributable to a single 
data source. The HCGs are used by scores of client insurance companies 
and health plans for premium rate setting, evaluating health insurance 
products, and for financial management.
    We used adjustment factors from the HCGs to modify our utilization 
and unit cost assumptions for the modeled plans and included a typical 
allowance for administrative costs, risk margins and profits. We 
incorporated estimates of the effect of managed care delivery within 
each plan. We also applied our knowledge of the managed behavioral 
healthcare delivery systems.
    If HR 1424 were enacted, health insurers will likely choose to 
tighten utilization management controls within their existing benefit 
plans, which is allowed under the legislation. They would typically 
increase use of pre-authorization and concurrent review requirements 
for mental health and substance-related disorder benefits, as well as 
require stricter adherence to clinical criteria. In addition, employers 
may choose to modify some of the benefit plans they offer to their 
employees, substituting plans with greater degrees of managed care 
provisions (for example, more restrictive networks) in place of plans 
with lesser degrees of managed care provisions. This could involve 
greater use of carve-out MBHO vendors, or substituting HMO plans for 
PPO plans.
    Discounted fees are common in HMO and PPO plans for in-network 
healthcare providers. We have assumed that the health plans could 
negotiate a discount of 25% for all in-network professional behavioral 
services, 40% for all in-network facility services for alcoholism and 
substance-related disorders, and 60% for all in-network facility 
services for mental health disorders. These discounts are consistent 
with what we have observed in managed behavioral healthcare contracts 
recently. We assumed that no discount would be obtained for any out-of-
network services provided in the PPO plans.
    In our premium rate estimates, we considered the following items 
and benefit features as appropriate:
     The maximum number of inpatient days and outpatient visits 
for treatment for mental illness and substance-related disorders
     Deductible, copay, coinsurance, and out-of-pocket maximum 
adjustments appropriate to various benefits
     Increases in utilization by service category due to 
benefit richness and induced demand
    Table 3 summarizes the estimated change in premium rates due to the 
behavioral health parity provisions of the expected legislation under 
the Baseline Scenario and the Increased UM Scenario. The premium values 
are on a per member per month basis, meaning an overall average across 
all adults and children. Note that the premium amounts for both 
individual and family coverage would be higher than these member 
values.

 TABLE 3.--ESTIMATED CHANGE IN 2008 PREMIUM RATES FOR MODEL PLANS AFTER
                                 PARITY
------------------------------------------------------------------------
                     Average Monthly           Increase in Premium
                   Premium per Member  ---------------------------------
                     for Behavioral
 Model Plan Type   Healthcare Services                % of        % of
                 ----------------------   Amount   Behavioral    Total
                    Before     After                 Health     Premium
                    Parity     Parity
------------------------------------------------------------------------
                            BASELINE SCENARIO

------------------------------------------------------------------------
HMO Plan........      $7.25      $9.60      $2.36       32.5%       0.6%
------------------------------------------------------------------------
PPO Plan........      $8.15     $10.56      $2.41       29.6%       0.6%
                 -------------------------------------------------------
      TOTAL.....      $7.92     $10.32      $2.40       30.2%       0.6%

------------------------------------------------------------------------
                          INCREASED UM SCENARIO

------------------------------------------------------------------------
HMO Plan........      $7.25      $7.25      $0.00        0.0%       0.0%
------------------------------------------------------------------------
PPO Plan........      $8.15      $8.19      $0.04        0.5%     < 0.1%
                 -------------------------------------------------------
      TOTAL.....      $7.92      $7.95      $0.03        0.4%     < 0.1%
------------------------------------------------------------------------

Appendix B.--Summary of Modeled Benefit Plan Provisions
            Pre-Parity Benefit Designs

                          PLAN NO. 1.--HMO PLAN
------------------------------------------------------------------------
  Benefit Description        Medical/Surgical           Behavioral
------------------------------------------------------------------------
Deductible.............  None                     None
------------------------------------------------------------------------
Out-of-Pocket Limit....  None                     None
------------------------------------------------------------------------
Coverage...............  100% Inpatient after $0  100% Inpatient after
                          copay, 100% Outpatient   $0 copay, 100%
                          after $10 copay          Outpatient after $25
                                                   copay
------------------------------------------------------------------------
Limits.................  No other limits          30 IP days/CY, 20 OP
                                                   visits/CY
------------------------------------------------------------------------


                                              PLAN NO. 2.--PPO PLAN
----------------------------------------------------------------------------------------------------------------
                                     Medical/Surgical                                 Behavioral
                      ------------------------------------------------------------------------------------------
 Benefit Description                              Out-of-Network                               Out-of-Network
                        In-Network Benefits          Benefits         In-Network Benefits         Benefits
----------------------------------------------------------------------------------------------------------------
Deductible...........  $250                   $500                   $250                   $500
----------------------------------------------------------------------------------------------------------------
Out-of-Pocket Limit..  $1,000                 $2,000                 $1,000                 $2,000
----------------------------------------------------------------------------------------------------------------
Coverage.............  90% Inpatient          70% Inpatient          90% Inpatient          70% Inpatient
                       100% Outpatient after  70% Outpatient         100% Outpatient after  70% Outpatient
                        $10 copay                                     $25 copay
----------------------------------------------------------------------------------------------------------------
Limits...............  No other limits        No other limits        30 IP days/CY, 20 OP   30 IP days/CY, 20 OP
                                                                      visits/CY              visits/CY
----------------------------------------------------------------------------------------------------------------

About Milliman
    Milliman serves business, financial, government, and healthcare 
organizations with expertise in managing and analyzing financial and 
other risk. Milliman employs more than 900 qualified consultants and 
actuaries. The Milliman Care Guidelines are the leading evidence-based 
clinical guidelines used by managed care organizations. The company is 
owned only by its principals, not by an insurer, outsourcing company, 
bank or accounting firm. Milliman does not sell insurance or benefits 
programs or broker deals. The firm has helped thousands of managed care 
organizations, insurance companies, payers, and healthcare providers 
measure their financial status, appraise business opportunities, 
develop new products, and determine premium rates.
                                endnotes
    \1\ American Association for Child and Adolescent Psychiatry, 
American Counseling Association, American Society of Addiction 
Medicine, Bradford Health Services, Caron Treatment Centers, Hazelden 
Foundation, NAADAC--The Association for Addiction Professionals, 
National Association of Addiction Treatment Providers, National Board 
for Certified Counselors, and National Council for Community Behavioral 
Healthcare.
    \2\ Congressional Budget Office Cost Estimate, S.558 Mental Health 
Parity Act of 2007, March 20, 2007
    \3\ We used the plan designs in Milliman's annual Group Health 
Insurance Survey. See www.Milliman.com
    \4\ The Survey of Employer Health Benefits 2006 includes detailed 
trend information on health insurance enrollment, premiums and 
contributions between 1988 and 2006. See www.kff.org/insurance/7527/.
    \5\ The Milliman, Inc. Health Cost Guidelines provide a flexible 
but consistent basis for the determination of claim costs and premium 
rates for a wide variety of health benefit plans. The Guidelines are 
developed as a result of Milliman's continuing research on health care 
costs. First developed in 1954, the Guidelines have been updated and 
expanded annually. These Guidelines are continually monitored; Milliman 
consultants and many insurers use the Guidelines for a variety of 
actuarial and financial management purposes.
    \6\ The 15th annual Milliman, Inc. survey of the nation's HMOs and 
fully-insured PPOs. Over one-third of all companies responded to the 
2006 survey. Data collected includes manual premium rates, employee 
tiered rates, renewal rate changes anticipated, medical trend rates, 
inpatient utilization data, cost per utilization data, physician 
reimbursement rates as a percent of Medicare RBRVS, and medical expense 
ratios. Data reported in the survey includes straight average results, 
25th percentile results, and 75th percentile results from all 
contributing companies.
    \7\ The Survey of Employer Health Benefits 2006. Op cit.
    \8\ Congressional Budget Office Cost Estimate, Estimates of the 
Impact on Employers of the Mental Health Parity Amendment in HR3103; 
May 13, 1996
    \9\ CBO Cost Estimate, S558, op cit.
    \10\ World Health Organization press release; October 8, 2004; Dr. 
Matt Muijen, Acting Regional Adviser for Mental Health
    \11\ David Whitehouse, MD, Improving Total Health & Well-Being: An 
Innovative Approach That Integrates Behavioral Health Across the Health 
Care Continuum, Open Minds, September 2006
    \12\ Patrick R. Finley, et al ``Impact of a Collaborative Care 
Model on Depression in a Primary Care Setting: A Randomized Controlled 
Trial, Pharmacotherapy 23(9):1175-1185, 2003.
    \13\ Agency for Healthcare Research and Quality, Research 
Activities, November 2006, No. 315, ``Depression among heart attack 
survivors can persist for a year after leaving the hospital''
    \14\ United States Preventive Services Task Force, Guide to 
Clinical Preventive Services. http://www.ahrq.gov/clinic/cps3dix.htm.
    \15\ Fiore MD, Bailey WC, Cohen SJ et al. Treating tobacco use and 
dependence. Clinical Practice Guidelines. Rockville, MD. US Department 
of Health and Human Services. Public Health Service. June 2000.
    \16\ Centers for Medicare and Medicaid Services, Decision Memo for 
Bariatric Surgery for the Treatment of Morbid Obesity (CAG-00250R), 
February 21, 2006. Available at http://www.cms.hhs.gov/mcd/overview.asp
    \17\ APA Practice Guidelines available at http://www.psych.org/
psych--pract/treatg/pg/prac--guide.cfm
    \18\ AACAP Practice Guidelines. http://www.aacap.org/
page.ww?section=Practice+ Parameters&name =Practice+Parameters
    \19\ http://www.asam.org/PatientPlacementCriteria.html
    \20\ U. S Department of Health and Human Services. Mental Health: A 
Report of the Surgeon General--Executive Summary. Rockville, MD: U.S. 
Department of Health and Human Services, substance Abuse and Mental 
Health Services Administration, Center for Mental Health Services, 
National Institutes of Health, National Institute of Mental Health, 
1999.
    \21\ Institute of Medicine, Committee on Crossing the Quality 
Chasm: Adaptation to Mental Health and Addictive Disorders. Improving 
the quality of health care for mental and substance-use conditions. 
2006. The National Academies Press. Washington, D.C.
    \22\ Institute of Medicine Committee on Quality of Health Care in 
America, Crossing the quality chasm: A new health system for the 21st 
century. 2001. The National Academies Press. Washington, D.C.
    \23\ For example, see Regence Blue Shield, www.or.regence.com/
provider/clinicalCorner/docs/behavioralHealthPracticeGuideline.pdf
    \24\ Dartmouth Atlas, http://www.dartmouthatlas.org/
    \25\ Sackett, DL, Rosenberg WM, Gray JA et al. Evidence based 
medicine: what it is and what it is not. BMJ. 1996;312:71-72.
    \26\ Levit KR et al. Projections of National Expenditures for 
Mental Health Services and Substance Abuse Treatment, 2004-2014. SAMHSA 
Publication. Rockville, MD, 2006
    \27\ The Survey of Employer Health Benefits 2006, op cit.
                                 ______
                                 
    Chairman Andrews. Mr. Melek, thank you very much. And as I 
say, your entire statement has been entered into the record.
    Mr. Dilweg, welcome to the committee all the way from 
Wisconsin. We are happy to have you.

   STATEMENT OF SEAN DILWEG, WISCONSIN INSURANCE COMMISSIONER

    Mr. Dilweg. Thank you, Chairman Andrews, Ranking Member 
Kline and members of the committee.
    My name is Sean Dilweg. I am the insurance commissioner 
from the state of Wisconsin. Thank you for inviting me to 
testify this afternoon on the Paul Wellstone Mental Health and 
Addiction Equity Act of 2007.
    Today I will speak to the importance of parity legislation 
and highlight the importance of H.R. 1424 in addressing unequal 
coverage limitations on mental health services.
    In addition, I will express my concern with preemption 
language included in the amended Senate mental health parity 
bill, which leaves Wisconsin's mental health mandate and laws 
in other states vulnerable to court interpretation.
    There are currently 46 states with laws requiring some 
level of mental health coverage and 27 states with full parity 
laws. I have had discussions with other state commissioners who 
are strongly concerned with the Senate language.
    Individuals diagnosed with a mental illness are too often 
limited in their ability to access treatment due to 
insufficient insurance coverage.
    Such treatment limitations force this population to look to 
their own finances or public programs as means to cover 
expenses. In the worst cases, people forego services 
altogether, given the debilitating nature of many mental 
illnesses.
    Individuals find they cannot maintain employment, health 
conditions related to mental health illness go untreated, and 
people generally find themselves unable to maintain the quality 
of life most of us enjoy.
    The House bill will greatly improve access to mental health 
services by ensuring individuals the same level of insurance 
coverage for their mental health needs as would be available 
for their treatment of other medical conditions.
    In Wisconsin, group health insurers providing coverage for 
inpatient hospital treatment, outpatient treatment or both must 
also provide coverage for mental health and alcohol and other 
drug abuse services.
    This means insurance companies selling health insurance 
coverage to employers in Wisconsin must include coverage for 
mental health-related care.
    State law requires a minimum of $7,000 in coverage be 
provided for these services but also allows plans to limit 
benefits to the statutory amount.
    These coverage requirements do not go far, especially for 
those who have a severe mental illness or dual diagnosis. This 
has been in place for 30 years.
    I have seen Democratically controlled Senate, House and 
governor in our body and also Republican-controlled, and we 
have never been able to change this to full parity. I welcome 
the fact that you are pursuing full parity under the preempted 
ERISA plans.
    The gaps in coverage across the nation with regard to 
mental health services are vast. There are also disparities 
between what group health insurers and the self-insured are 
required to pay within states across the nation.
    Some employers have been known to move to a self-insured 
plan specifically to avoid the state mandates. Once again, I 
welcome the federal mental health parity law and look forward 
to action on this bill.
    I also commend Representatives Kennedy and Ramstad in their 
efforts to improve coverage of mental health benefits in 
private health insurance while ensuring that federal standards 
serve as a floor, not a ceiling.
    This is consistent with the preemption language in the 
Health Insurance Portability and Accountability Act of 1996.
    HIPAA's portability and access provisions affecting private 
health coverage has been a model for how federal and state 
health coverage reforms can work together, with states having 
the flexibility to supplement federal standards to better 
protect consumers when necessary.
    In moving forward toward equity in coverage for mental 
health services, it is important to maintain the recognition 
that state policy makers may determine it necessary to have a 
stronger set of standards to ensure the protection of patients 
in state-regulated health insurance policies.
    Under the Senate version, it would be very problematic for 
Wisconsin and other states if the House were to move in the 
direction of the Senate with regard to preemption.
    The Senate version preempts any state mental health parity 
standard or requirement which differs from the mental health 
parity standards required in the bill. Wisconsin and other 
states are struggling to predict how the preemption language 
may impact our current parity laws.
    Concerns have been expressed on the impact to mental health 
mandates in states including Washington, Vermont, Oregon, 
Connecticut--I just spoke with California this morning--
Montana, Maryland and Nevada.
    In states such as Wisconsin, California, Maryland and 
Montana, where the mental health parity laws apply generally to 
health insurance coverage, and there is no distinction between 
small and large group coverage, it is questionable whether 
courts will uphold these laws as they apply to individual and 
small group policies if challenged under ERISA.
    As a result, the legislative intent in the bill to save 
state individual and small group coverage from preemption may 
not be accomplished.
    Washington and Connecticut have a mandated benefit and 
require parity with medical coverage. If these mandated 
benefits are preempted by unclear language of the manager's 
amendment, carriers would not be required to provide mental 
health benefits, leaving consumers at risk of losing coverage 
they currently rely on.
    In conclusion, as the insurance commissioner charged with 
protecting consumers, I have a responsibility to bring to light 
issues that may put consumers at risk. The intent of the House 
and Senate bill is laudable.
    However, the Senate preemption language opens the door for 
an all-or-nothing situation in Wisconsin and other states with 
similar mental health mandates.
    I have raised several preemption questions. There are 
others that may come to light as other states more carefully 
review the proposed language. These could be open to 
interpretation and based on new ERISA-related litigation that 
will come at a high price tag for people who may lose benefits 
while waiting years for courts to determine if state laws are 
preempted.
    The preemption language included in the House is clear and 
will preserve and strengthen Wisconsin and other states' mental 
health mandates as well as many mental health parity laws 
across the nation.
    Thank you again for this opportunity to testify.
    [The statement of Mr. Dilweg follows:]

  Prepared Statement of Sean Dilweg, Wisconsin Insurance Commissioner

    Good afternoon Chairman Andrews, Ranking Member Kline, and members 
of the committee. My name is Sean Dilweg and I am the Insurance 
Commissioner from the State of Wisconsin. Thank you for inviting me to 
testify this afternoon on H.R. 1424, the Paul Wellstone Mental Health 
and Addiction Equity Act of 2007.
    Today I will speak to the importance of parity legislation and 
highlight the importance of H.R. 1424 in addressing unequal coverage 
limitations on mental health services. In addition, I will express my 
concern with preemption language included in S. 558 (June 13, 2007 
draft manager's amendment), the Senate Mental Health Parity bill, which 
leaves Wisconsin's mental health mandate and laws in other states 
vulnerable to court interpretation. There are 46 states with laws 
requiring some level of mental health coverage and 27 states with full 
parity laws.
Importance of Parity
    Individuals diagnosed with a mental illness are too often limited 
in their ability to access treatment due to insufficient insurance 
coverage. Coverage limits for mental health services are generally more 
restrictive than those applied to other medical conditions. Such 
treatment limitations force this population to look to their own 
finances or public programs as a means to cover expenses. In the worst 
cases, people forgo services altogether. Given the debilitating nature 
of many mental illnesses, individuals find they cannot maintain 
employment, health conditions related to the mental illness go 
untreated and people generally find themselves unable to maintain the 
quality of life most of us enjoy. It is estimated the indirect cost of 
mental illness is $79 billion, with $63 billion of that amount related 
to lost productivity.\1\ H.R. 1424 will greatly improve access to 
mental health services by ensuring individuals the same level of 
insurance coverage for their mental health needs as would be available 
for their treatment of other medical conditions.
    In Wisconsin, group health insurers providing coverage of inpatient 
hospital treatment, outpatient treatment or both, must also provide 
coverage for mental health and alcohol and other drug abuse services. 
This means that insurance companies selling health insurance coverage 
to employers in Wisconsin must include coverage for mental health 
related care. Current state law requires a minimum of $7,000 in 
coverage be provided for these services, but also allows plans to limit 
benefits to this statutory amount. The law allows insurers to offer 
better coverage, but in most cases, policies with more coverage are not 
available.\2\ These coverage requirements do not go far, especially for 
those who have a severe mental illness or duel diagnoses.
H.R. 1424
    I commend Representatives Kennedy and Ramstad in their efforts to 
improve coverage of mental health benefits in private health insurance 
while ensuring that federal standards serve as a ``floor'', not a 
``ceiling.'' As currently drafted, the House bill specifically states 
that nothing in the federal legislation ``shall be construed to preempt 
any State law that provides greater consumer protections, benefits, 
methods of access to benefits, rights or remedies.'' This language is 
consistent with the preemption language in the Health Insurance 
Portability and Accountability Act of 1996 (HIPAA) which has been very 
successful in expanding important access protections throughout the 
country. HIPAA's portability and access provisions affecting private 
health coverage has also been a model for how federal and state health 
coverage reforms can work together, with states having the flexibility 
to supplement federal standards to better protect consumers, when 
necessary.
    In moving forward toward equity in coverage for mental health 
services, it is important to maintain the recognition that state 
policymakers may determine it necessary to have a stronger set of 
standards to ensure the protection of patients in state-regulated 
health insurance policies. For example, H.R. 1424 would not mandate 
that group health insurance policies provide mental health benefits; 
it, however, would set standards for group health plans that choose to 
provide benefits for mental health. Wisconsin's policymakers have 
determined that a mandate is necessary to ensure that some mental 
health benefits are provided in all group policies. Wisconsin's 
requirement to cover mental health care coupled with the proposed 
federal parity is the way to ensure that state-regulated insurance 
policies provide necessary coverage to patients with mental illnesses.
S.558 and Preemption
    It would be very problematic for Wisconsin and other states if the 
House were to move in the direction of the Senate with regard to 
preemption. The Senate version preempts, subject to certain exceptions, 
any state mental health parity standard or requirement which differs 
from the mental health parity standards or requirements as defined in 
subsections (a), (b), or (e) of section 712A.'' The Senate Mental 
Health Parity Bill (manager's amendment draft June 13, 2007), would 
completely preempt all state protections in the following areas:
     Parity in financial requirements, i.e. coverage limits, 
co-pays, deductibles; and
     Exemptions to parity requirements due to increased costs.
    Wisconsin and other states are struggling to predict how the 
preemption language might impact current parity laws. Short of 
litigation in federal court, it is unclear who decides if the state law 
differs from the federal law and what a state's options are if the 
state disagrees with that decision. There are 46 states with laws 
requiring some level of mental health coverage and 27 states have full 
parity laws, requiring insurers to provide the same level of mental 
health benefits as medical and surgical benefits. Coverage in most of 
these states, to varying degrees, is at risk of being weakened or 
completely eliminated by the Senate preemption language. Concerns have 
been expressed on the impact to mental health mandates in states, 
including, Washington, Vermont, Oregon, Connecticut, California, 
Montana, Maryland and Nevada.\3\ Insurance Commissioners in 
Connecticut, Vermont, Washington and Oregon have shared written 
concerns with their Senate members. Copies are attached for your 
review.
National Association of Insurance Commissioners
    In a letter to Chairman Kennedy and Ranking Member Enzi of the 
Senate Health, Education, Labor and Pensions Committee, dated May 2, 
2007 analyzing S. 558 as voted out of committee, the National 
Association of Insurance Commissioners stated that the nation's 
insurance commissioners find the Senate bill's preemption language 
``both excessive and unnecessary.'' They go on to recommend that, 
``should the Senate decide to include any preemption language in the 
bill, we would prefer the language in the Mental Health Parity bill 
currently being considered in the House of Representatives.'' I 
acknowledge that the June 13th language is significantly better; 
however it does not address all preemption concerns and would still 
leave state laws open to potential preemption challenges.
Wisconsin's Mental Health Mandate
    Of particular concern for Wisconsin is the extent to which 
preemption will impact the state's current requirement that a group 
health insurance policy provide coverage of mental health services. Our 
state mandate for coverage and the coverage limits are tied together 
under the same statutory provision. If a Senate Mental Health Parity 
bill preempts coverage requirements, such as Wisconsin's required 
$7,000 minimum, a court must determine whether the entire statutory 
provision (the minimum coverage amount and the requirement to provide 
services) or only the provision mandating a minimum ``floor'' of $7,000 
is preempted.
    Generally, statutory provisions are ``severable'' so one provision 
may avoid preemption even if a related provision is preempted. However, 
the court must determine whether the resulting statutory language is 
consistent with the ``intent of the legislature.''
    The statute resulting from ``partial'' preemption would be a 
mandate to provide mental health benefits up to at least the maximum 
limits otherwise available under the policy. However, the Wisconsin 
legislature specifically included limits on its mandate to provide 
mental health benefits. This may lead a court to rule the entire 
statute preempted because to do otherwise would be inconsistent with 
the intent of the legislature.
    The senate bill raises several questions relating to Wisconsin's 
mandate, and if passed would leave consumers extremely vulnerable to 
losing coverage, as it is anticipated a great number of employers and/
or insurers would take advantage of the new flexibility by challenging 
state law and dropping coverage for mental health. As I mentioned 
earlier, under H.R. 1424, Wisconsin's mandate and those in other states 
would be preserved.
    The argument has been made that laws like Wisconsin's would be 
protected under the exception that reads:
    ``* * * nothing in section 712(A) shall be construed to require a 
group health plan to provide the following: (i) Any mental health 
benefits, except that State insurance laws applicable to health 
insurance coverage that require coverage of specific items, benefits, 
or services (including specific mental health conditions) are 
specifically not preempted * * *''
    While the intent behind the exception may be to preserve state 
mental health mandate laws, the proposed language does not go far 
enough in clearly excluding states from the preemption provisions in 
the bill. It is my understanding that, before this exception can be 
applied, a state's coverage provisions must be consistent with the 
federal parity provision. As I mentioned earlier, Wisconsin's statute 
says coverage ``need not exceed $7,000'' while the proposed federal 
provision requires coverage equal to the medical maximum limit.
    A court would have to determine that the new proposed limits 
qualify as a requirement for a ``specific benefit'' within the 
exception. In other words, if Wisconsin will have to impose the 
coverage limits in the bill, and those new coverage limits are 
considered ``specific benefits,'' Wisconsin's mandate for providing 
coverage of mental health services is preserved under the exception. 
The federal parity would then ``overlay'' the state mandate to 
separately require higher maximum limits.
    The risk under this language is that my state as well as other 
state mental health laws would be preempted. New legislation would be 
necessary to reinstate Wisconsin's mandate; however, one only needs to 
look to the past few sessions in the Wisconsin Legislature to see the 
political will is not there to pass legislation that results in parity. 
Under this scenario, consumers will be left with fewer protections than 
they have under the current model.
    Other states with similar mental health mandate requirements would 
face similar preemption problems. Therefore, the risk of consumers 
losing existing state-based minimum coverage guarantees goes beyond 
Wisconsin's borders.
Cost Exemption
    Preemption with regard to the cost exemption is also extremely 
problematic given Wisconsin and many other states with some level of 
parity do not allow insurers to end coverage if a cost increase is 
demonstrated. S. 558 does not apply if a plan's cost in the first year 
goes up by 2% and 1% in subsequent plan years. S. 558 would preempt any 
state law to the contrary, thus severely weakening Wisconsin's mandate 
to provide coverage. In addition, it will be extremely challenging to 
question plans' allegations with regard to cost increases given the 
exemption does not require actuarial analysis to be independent or 
publicly available.\4\
    There are approximately 12 states' mental health parity laws which 
contain provisions exempting certain employers from the parity 
requirements if they can demonstrate a certain level of increased costs 
due to those requirements.\5\ Approximately half of those states impose 
a cost exemption with more stringent standards than those found in this 
legislation.
    The state of Indiana, for example, requires that insurers 
demonstrate a 4% increase in premiums due to mental health parity 
requirements,\6\ Michigan requires a 3% increase due to substance abuse 
treatments,\7\ and both Nevada and Oklahoma require a 2% increase in 
each year.\8,9\ Each of these exemption provisions would be replaced by 
the less-consumer friendly federal standard, and 34 states would have 
the cost exemption language imposed upon them for the first time. By 
contrast, under the House bill only those states laws providing fewer 
protections to consumers would be affected.
Conclusion
    As the Insurance Commissioner charged with protecting consumers, I 
have a responsibility to bring to light issues that may put consumers 
at risk.
    I have raised several preemption questions; there are others that 
may come to light as other states more carefully review the proposed 
language and the approach the Senate takes. These could be open to 
interpretation and based on a long and difficult history of ERISA-
related preemption litigation, it is likely that different courts will 
reach different conclusions and ultimately the final word will come 
from the Supreme Court. New ERISA-related litigation will come with a 
high price tag for already strained state budgets and even a higher 
price tag for people who may lose benefits while waiting years for 
courts to determine if state laws are preempted.
    The House bill before you today will increase access to mental 
health coverage for people covered by employers that choose to cover 
mental health benefits. The preemption language is clear and will 
preserve and strengthen Wisconsin's mental health mandate as well as 
many mental health and parity laws across the nation. The ``floor'' 
created by H.R. 1424 protects consumers by ensuring states can enforce 
current laws that are stronger than the proposed federal standards.
    Thank you again for this opportunity to testify today.
                                endnotes
    \1\ New Freedom Commission on Mental Health, Achieving the Promise: 
Transforming Mental Health Care in America. Final Report. DHHS Pub. No. 
SMA-03-3832. Rockville, MD: 2003.
    \2\ In part, this is because of adverse selection problems.
    \3\ Mila Kofman, Georgetown University Health Policy Institute, 
``California's mental health parity law is a standard that applies 
generally to health insurance coverage. Unlike a specific law 
applicable to individual or small group coverage, there is no guarantee 
that courts will uphold the law as it applies to individual and small 
group policies if challenged under ERISA and as a result, the 
legislative intent in the bill to save state individual and small group 
coverage from preemption may not be accomplished.''
    ``Montana law requires coverage for severe mental illness and such 
coverage must be provided on parity with coverage for physical illness. 
The standard applies to individual and group coverage with no 
distinction between small group and large group coverage. The parity 
requirements differ from S. 558 and would be preempted, unless the 
exception in the bill is interpreted broadly.''
    In reference to Maryland ``* * * requirements for individual 
coverage and large group coverage are in one section. Litigation may be 
necessary to determine if standards for individual coverage would 
continue. The mandate for large group coverage to include mental health 
benefits and provide coverage on parity with physical illness may also 
be litigated to determine if it is saved from S.558 preemption.''
    In reference to Nevada ``* * * the mental health parity law for 
group coverage applies to groups of more than 25 employees. Similar to 
other states, although there is a mandate to cover mental health 
(severe mental illness), the standards for the mandate are `parity 
type' standards. It may be up to the courts to determine if Nevada's 
law is saved under the new preemption standards.''
    \4\ Randy Revelle, Chairman, Washington Coalition for Insurance 
Parity.
    \5\ Ibid
    \6\ Indiana Code Sec. 27-8-5-15.7
    \7\ Michigan Compiled Laws Sec. 500.3501
    \8\ Nevada Revised Statutes Sec. 689A.0455
    \9\ Oklahoma Statutes Sec. 36-6060.12
                                 ______
                                 
    [Additional submission from Mr. Dilweg follows:]

                             Insurance Division Memorandum,
                                                      May 23, 2007.
Subject: S. 558 Federal Mental Health Parity

    You asked me for an analysis of the S. 558, the Federal Mental 
Health Parity legislation. Below I outline the major issues identified 
and discuss the impact of S. 558 on the protections provided to 
Oregonians under SB 1.
    The major issues identified include:
     Preemption of State parity laws
     Interpretation of the federal parity law--Who decides if a 
state's laws differ from the federal? Who has final interpretation 
authority of what the law means, what if the state interpretation 
differs from DOL or HHS?
     Enforcement--who enforces the parity requirement? Consumer 
protections?
     Cost increase opt-out--the cost opt-out is artificially 
low and allows companies to opt-out of the parity law, but not from a 
state's requirement to offer mental health coverage.
Preemption of Oregon's parity laws
    Section 4(c) of the federal bill would preempt Oregon's Mental 
Health Parity Laws (SB 1) because those laws ``differ'' from the 
federal bill in regards to parity, negotiation and management, in- and 
out-of-network, and the cost opt-out provisions of the bill.
    Effectively, S. 558 creates both a federal floor and ceiling that 
eliminates Oregon's ability to provide greater protection for consumers 
in specified areas:
     Oregon's law requires coverage of mental or nervous 
conditions and chemical dependency in all group health insurance.
     Oregon's law defines mental or nervous condition and 
chemical dependency.
     Oregon's law requires a single definition of ``medical 
necessity'' and ``experimental or investigational'' treatments. There 
is no such requirement in the federal law.
     Oregon's law allows for IRO review of denials based on 
medical necessity and experimental or investigational and requires the 
IRO to determine if the insurer uniformly applies those definitions to 
mental health and other medical conditions. There is no such 
requirement in the federal law.
     The federal law provides a cost opt-out that allows 
employers to waive coverage for one year if mental health costs 
increase more than 2% in the first year or 1% in subsequent years. 
There is no cost cap in Oregon law.
     Oregon's law defines ``provider'' and sets forth the 
requirements for providers to be eligible for reimbursement under the 
law. The federal law allows for the plans to negotiate separate 
reimbursement or provider payment rates and service delivery systems.
Interpretation of the federal parity law
    There are similarities in the two bills:
     Parity--financial requirements for mental health can be no 
more restrictive than those for other medical conditions
     Management tools are allowed including utilization review, 
prior authorization, and use of network providers.
     Provides parity for ``medically necessary'' treatments.
    However, while these requirements are similar, they do ``differ.'' 
The preemption of ``any'' state law that ``differs'' from the federal 
law could come down to a matter of interpretation. Oregon's 
administrative rules set very specific guidelines for insurance 
companies for mental health coverage and for implementing SB 1. There 
is nothing in the federal bill that provides for states to 
``interpret'' the federal statute--this brings up issues of how to 
enforce rate and form review, market regulation, and consumer 
protections. It is unclear who decides if the state law differs from 
the federal law and what a state's options are if the state disagrees 
with that decision.
Enforcement
    The language in the federal law is very broad and much of the 
implementation of this bill will depend on the final regulations 
promulgated by DOL and HHS. Depending on how those regulations are 
worded, the differences in the Oregon law and the final regulations 
could be substantial. There is no clarity in the federal bill as to the 
ability of states to interpret or enforce laws that ``differ'' from the 
federal law. This could be an issue in form reviews for large groups. 
If there has been an audit by DOL or HHS which finds the company in 
compliance, but our Rates and Forms sections believes the form does not 
meet the requires it is unclear if we could disapprove the form. The 
same issues could arise in market surveillance and in consumer 
protection. If our parity laws differ from the federal law how do we 
enforce violations of the law or assist consumers in disputes with 
companies?
Cost increase exemption
    The opt-out because of cost increases is a serious concern as it 
would allow employers to opt-out of mental health parity for one year 
(although in Oregon they would still be required to offer mental health 
coverage) if the actual costs of mental health treatment was more than 
2% greater than medical conditions in the first year or more than 1% in 
subsequent years. The one-year opt-out also raises the question of 
what, if any parity laws or coverage requirements would apply in 
states, such as Oregon, when mental health coverage is required.
Comparison of S. 588 and Oregon's SB 1
    The following chart outlines the difference between S. 558 and SB 
1.

                                         S. 588 AND OREGON SENATE BILL 1
----------------------------------------------------------------------------------------------------------------
       S. 558                                                     SB 1
----------------------------------------------------------------------------------------------------------------
                      ..................................  ORS 743.556          Requires all group health
                                                                                insurance policies issued in
                                                                                Oregon to included coverage for
                                                                                mental or nervous conditions and
                                                                                chemical dependency
----------------------------------------------------------------------------------------------------------------
Section 712A(a)(1)    Requires financial requirements     ORS 743.566(2) OAR   Expenses for treatment of mental
 2705A (a)(1)          for mental health benefits to be    836-053-1405(1)      health conditions must be
                       ``no more restrictive than''                             provided ``at the same level as,
                       those for all medical and                                and subject to limitations no
                       surgical benefits                                        more restrictive than'' those
                                                                                for treatment of other medical
                                                                                conditions
----------------------------------------------------------------------------------------------------------------
712A(a)(1)            Deductible, co-payments,            743.566(2) OAR 836-  Reimbursement and cost-sharing,
                       coinsurance, out-of-pocket          053-1405(2)(a)       including deductible, co-
                       expenses may be ``no more                                payments, coinsurance, out-of-
                       restrictive than'' those for all                         pocket expenses for mental
                       medical and surgical benefits                            health may be no greater than
                                                                                those for treatment of other
                                                                                medical conditions
----------------------------------------------------------------------------------------------------------------
                      ..................................  836-053-1405(2)(b)   Reimbursement and cost-sharing,
                                                                                including deductible, co-
                                                                                payments, coinsurance, out-of-
                                                                                pocket expenses for wellness and
                                                                                preventive services for mental
                                                                                health may be no greater than
                                                                                those for treatment of other
                                                                                medical conditions
----------------------------------------------------------------------------------------------------------------
                      ..................................  836-053-1405(2)(d)   Reimbursement and cost-sharing,
                                                                                including deductible, co-
                                                                                payments, coinsurance, out-of-
                                                                                pocket expenses for prescription
                                                                                drugs for mental health may be
                                                                                no greater than those for
                                                                                treatment of other medical
                                                                                conditions
----------------------------------------------------------------------------------------------------------------
712A(a)(2) 2705A      Treatment limits for mental health  743.566(3) & (7)     Treatment limits including annual
 (a)(2)                may be no more restrictive than     836-053-1405(2)(c)   or lifetime limits, limits on
                       those for all medical and                                total payments, limits on
                       surgical benefits--including                             duration of treatment, or
                       frequency of treatment, number of                        financial requirements may be no
                       visits, days of coverage, or                             less than those for other
                       scope or duration of treatment.                          medical conditions.
----------------------------------------------------------------------------------------------------------------
712A(b) 2705A (b)     Benefits may be managed to provide  743.566(3)           Treatment may be limited to
                       ``medically necessary'' services.                        treatment that is ``medically
                       Management may include                                   necessary'' as determined under
                       utilization review, authorization                        the policy.
                       or management practices and                             Management methods include,
                       contraction with and use of                              selectively contracted provider
                       network providers.                                       panels, policy benefit
                                                                                differential designs,
                                                                                preadmission screening, prior
                                                                                authorization, case management,
                                                                                and utilization review.
----------------------------------------------------------------------------------------------------------------
                      ..................................  836-053-1405(3)      Group health insurance policy
                                                                                must contain a single definition
                                                                                of medical necessity and
                                                                                experimental or investigational.
                                                                               Allows for IRO review of denials
                                                                                of treatment based on
                                                                                experimental or investigation or
                                                                                medical necessity including
                                                                                whether the insurer's definition
                                                                                is uniformly applied to mental
                                                                                health and other medical
                                                                                conditions.
----------------------------------------------------------------------------------------------------------------
712A(c) 2705A (c)     Requires benefits for in- and out-
                       of-network services to be the
                       same for mental health and other
                       medical benefits. Does not
                       require out-of-network coverage
                       of mental health if out-of-
                       network coverage is not provided
                       for medical.
----------------------------------------------------------------------------------------------------------------
712A(c) 2705A (c)     Allows insures to negotiate         743.566(5)           Defines providers who are
                       separate reimbursement or                                eligible for reimbursement.
                       provider payment rates and
                       service delivery systems for
                       different benefits.
----------------------------------------------------------------------------------------------------------------
712A(d) 2705A (d)     Exempt small employers (2-50)       ...................  Does not exempt small employers
----------------------------------------------------------------------------------------------------------------
712A(e) 2705A (e)     Cost cap exemption of 2% year one   ...................  No cost exemption
                       and 1% subsequent years if the
                       application of the law results in
                       an increase for the plan year of
                       the actual total costs of
                       coverage with respect to medical
                       benefits and mental health
                       benefits.
                      Allows exemption for one plan
                       year.
----------------------------------------------------------------------------------------------------------------
712A(g) 2705A (g)     Allows health insurance plan to     836-053-1405(1)      Mental or nervous conditions and
                       define Mental Health Benefits                            chemical dependency are defined
                                                                                by rule. Excepts tobacco and
                                                                                food addictions from definition
                                                                                of chemical dependency.
----------------------------------------------------------------------------------------------------------------
Section 4             ERISA preemption--S. 558
                       supercedes any provision of State
                       law that ``establishes,
                       implements, or continues in
                       effect any standard or
                       requirement which differs'' from
                       (a), (b), (c), or (e)
                      Does not preempt state laws
                       relating to individual or small
                       employer plans.
----------------------------------------------------------------------------------------------------------------
Section 5             Consumer protections:               ...................  Consumer Protections under Oregon
                      DOL and HHS must designate a                              Law:
                       ``group health plan ombudsman''                         Group health insurance policy
                       to serve as an initial point of                          must contain a single definition
                       contact to permit individuals to                         of medical necessity and
                       obtain information and to                                experimental or investigational
                       provided assistance with mental                          for chemical dependency and
                       heath services under health                              mental condition and for all
                       insurance coverage.                                      other medical conditions.
                                                                               Allows for IRO review of denials
                                                                                of mental health treatment based
                                                                                on experimental or investigation
                                                                                or medical necessity including
                                                                                whether the insurer's definition
                                                                                is uniformly applied to mental
                                                                                health and other medical
                                                                                conditions.
----------------------------------------------------------------------------------------------------------------
                      HHU and DOL must conduct ``random   ...................  Requires the Department to do a
                       audits'' of group health plans to                        review of the rules within two
                       ensure compliance with the Act.                          years of the effective date to
                                                                                determine whether the
                                                                                requirements are being met.
                                                                               Requires insurers to have policy
                                                                                and procedures in place to
                                                                                ensure uniform application of
                                                                                the policy's definition of
                                                                                medical necessity to all
                                                                                conditions.
                                                                               Allows the Department to conduct
                                                                                on-going market surveillance of
                                                                                insurers' policies and
                                                                                procedures for implementing SB
                                                                                1.
                                                                               Requires insurer's to file policy
                                                                                forms for review by the
                                                                                Department to ensure compliance
                                                                                with the rules and statutes.
                                                                               The Department has a Consumer
                                                                                Protection section that deals
                                                                                with complaints from consumers,
                                                                                provides information about
                                                                                mental health services and
                                                                                benefits to consumers, and
                                                                                assists consumers in working
                                                                                through disputes with insurers.
----------------------------------------------------------------------------------------------------------------

                                 ______
                                 
                                 
                                 
                                 
                                 
                                 
                                 
                                 
                                 
                                 
                                 
                                ------                                

    Chairman Andrews. Well, thank you, Commissioner.
    And we thank all the witnesses for giving us an excellent 
basis for our discussion as a committee.
    I would ask unanimous consent that two letters dealing with 
the issue of the scope of preemption in the Senate bill be 
entered into the record. The first is from Mila Kofman, 
associate research professor at Georgetown University, and the 
other is a letter from Gregory Heller.
    Without objection, they will be entered into the record.
    [The letters follow:]
    
    
    
    
    
    
    
    
    
    
                                ------                                









                                ------                                

    Chairman Andrews. Again, I would like to thank each of the 
witnesses for very edifying testimony.
    And, Mr. Trautwein, I wanted to come to you for a moment. 
You had said that one of the effective cost control strategies 
for insurers and employers who offer a mental health benefit is 
medical management.
    When you say medical management, what do you mean?
    Mr. Trautwein. This is the process of making sure the 
appropriate care is directed to the individual. So it is a 
question of matching the care to the person.
    Chairman Andrews. So, for example, an insurer would 
determine whether the level of care--whether a psychiatrist 
would be appropriate or a therapist or some other form of care 
provider, is that correct?
    Mr. Trautwein. It is basically a check not only on 
utilization, but you want to make sure that the care is 
effective, that it is helping the particular individual.
    Chairman Andrews. Right. And in your testimony on page two, 
you say that you are troubled by the lack of specific 
protection for medical management of benefits in the bill 
before us.
    Where in the bill that is before the committee is there any 
language that would prohibit the kind of medical management 
that you are making reference to?
    Mr. Trautwein. That is precisely what troubles us. The 
previous House and Senate bills had specific provisions.
    In fact, former members, in the past, very much emphasized 
the protections for medical management as a means of keeping 
the cost, overall cost, of the bills down.
    So this lack of specific provision----
    Chairman Andrews. Yes, I understand that there is not a 
specific provision saying that insurers can do this, but where 
is there language that says they can't?
    Mr. Trautwein. The answer is there is no line, but the lack 
of a positive protection leads us to believe that there could 
be inroads on our ability to do that.
    Chairman Andrews. So if I understand your argument, it is 
that in the matter of an insurance contract that is governed by 
ERISA, if a specific practice isn't authorized by the statute, 
the insurer can't do it? Is that your position?
    Mr. Trautwein. I think our primary concern is at the state 
level, that the states might----
    Chairman Andrews. Well, of course, we are talking about 
this bill, though, what in this bill.
    So is it your position that if ERISA as amended would not 
specifically authorize an insurer or an employer to do 
something, they can't do it? Is that your position?
    Mr. Trautwein. No, sir.
    Chairman Andrews. Well, why would we be concerned, then, 
about this bill?
    It seems to me that the bill's silence about the 
availability of medical management techniques for insurers and 
employers means they could utilize them, doesn't it?
    Mr. Trautwein. I think to an extent it does, but we would 
feel better and more secure if we had that provision in there.
    Chairman Andrews. Mr. Melek, in your testimony, you talked 
about medical management provisions, and I want to make sure I 
understand this correctly.
    In your conservative estimate, meaning, I guess, in this 
case that medical management tools either couldn't be used or 
weren't used as aggressively as they could be, it is your 
conclusion, isn't it, that the average increase is 0.6 percent 
in outlays? Is that correct?
    Mr. Melek. That is correct. If there is no response to 
increase utilization management or the employers didn't take 
additional action to reduce their cost----
    Chairman Andrews. Could you tell us again what your 
conclusion was if under your so-called increased U.M. scenario, 
which I take it means more profound use of the tools that Mr. 
Trautwein just talked about--what was your cost increase 
projection if that happened?
    Mr. Melek. Well, it is as close to zero as you can get. It 
is three cents per member per month.
    Chairman Andrews. Three cents per member per month.
    And let me also ask you--I think I understood that you said 
that your calculations were gross cost calculations, meaning 
that you did not take into your analysis reductions in 
absenteeism, increases in productivity, decreases in physical 
and surgical health outlays, is that correct?
    Mr. Melek. That is correct.
    Chairman Andrews. So it is plausible, isn't it, that if one 
were to take those into consideration that you could make a 
strong argument that the payer, the insurer or the employer, 
actually has a net benefit from implementation of mental health 
parity, is that not correct?
    Mr. Melek. That is correct.
    Chairman Andrews. Mrs. Carter, has that been your 
experience? You mentioned Mr. Johnson from CNN and others. Has 
that been your experience over the years, that employers who 
have voluntarily adopted parity programs have seen a business 
benefit?
    Mrs. Carter. I don't understand what he is talking about, 
because we in the mental health community have been watching 
companies for years who have had parity insurance for their 
employees.
    And what we have seen happen is that over the first few 
years insurance might go up just a very little bit, but over 3 
years or 4 years or 5 years, the total cost of health care for 
the company comes down, because people who go for physical 
health--I don't like to make a distinction, because I don't 
think there should be a distinction.
    But people who go for physical health who are depressed or 
suffer from some mental illnesses and don't realize it keep 
going to the doctor and going to the doctor, and health costs 
are more than when they receive mental health care.
    Then they don't go to their physical health doctors.
    Chairman Andrews. So, Mrs. Carter, it is----
    Mrs. Carter. So over a period of time in all the ones that 
we have studied the health care costs, overall health care 
costs came down.
    Chairman Andrews. This, Mrs. Carter, would be the person 
who gets treatment for clinical depression and therefore 
doesn't suffer significant weight loss and a stroke or a heart 
or attack or something that comes with that, then, right? That 
is what we are really talking about----
    Mrs. Carter. Yes.
    Chairman Andrews [continuing]. Somebody who has that kind 
of--thank you.
    Mrs. Carter. And people who are depressed don't feel good. 
They don't know what is the matter. They have stomach aches and 
all kinds of aches and pains and just keep going to the doctor 
for care.
    Chairman Andrews. Very well.
    I understand that our friend and colleague Mr. Ramstad has 
arrived.
    Is that right, Jim? Are you here? Jim, please come forward.
    And with Mr. Kline's consent, I am going to recognize Mr. 
Ramstad for a statement at this time and then go to Mr. Kline 
for questions, if that is okay.
    Okay. Without objection, there is a seat for you, Jim at 
the end of the table there. We are glad to see you arrived 
safely. We welcome you and thank you for the great work you 
have done on this issue.

  STATEMENT OF HON. JIM RAMSTAD, A REPRESENTATIVE IN CONGRESS 
                  FROM THE STATE OF MINNESOTA

    Mr. Ramstad. Thank you, Mr. Chairman, Mr. Kline and 
distinguished committee members, friends all. Thank you very 
much for your indulgence and for allowing me to testify out of 
order today.
    What is normally a 2-hour flight from Minneapolis turned 
into a 5-hour ordeal by way of Dulles, so thank you very, very 
much.
    As some of you know, on July 31st, 1981, I woke up from my 
last alcoholic blackout under arrest for a variety of offenses 
in Sioux Falls, South Dakota, the city jail.
    I am alive and sober today only because of the access I had 
to treatment, along with the grace of God and the support and 
fellowship of other recovering people over the last 25 years, 
11 months.
    But too many people don't have the access to treatment that 
Patrick Kennedy and I had. I believe it is a national disgrace 
that 270,000 Americans last year were denied addiction 
treatment, according to SAMHSA.
    I think it is a national tragedy that 150,000 of our fellow 
Americans died last year as a direct result of chemical 
addition. Thirty-four thousand Americans committed suicide as a 
direct result of their untreated depression.
    And I know there are some people on this committee 
concerned about cost. Let's look at the cost. It is a national 
crisis that untreated addiction and mental illness cost our 
economy over $550 billion last year. That is according to 
respected actuarial firms that have done those studies.
    And of course, the costs that can't be measured--I am sure 
you have heard today from witness after witness--that can't be 
measured in dollars and cents. The human suffering, the broken 
families, the shattered dreams, the ruined careers, the 
destroyed lives, and on and on and on.
    It is time to end the discrimination against people 
suffering the ravages of chemical addiction and mental illness. 
It is time to end the higher co-payments, the deductibles, the 
out-of-pocket limitations, costs that are higher than people 
who undergo treatment for other diseases pay.
    These are discriminatory barriers to treatment that don't 
exist for other diseases. And if you accept the premise of the 
American Medical Association, 1956, that mental illness is a 
disease, that addiction is a disease, then you can't justify 
this discrimination vis-a-vis other diseases, this 
discrimination in treatment.
    And that is why we have worked so hard on the Paul 
Wellstone Mental Health and Addiction Equity Act, so many of 
us.
    I am sure Patrick Kennedy, our colleague from Rhode Island, 
explained the 14 field hearings that we had across this land--
people desperate for greater access to treatment, people 
suffering the ravages of these diseases, people who want the 
discrimination ended.
    And speaking of cost, we had at these field hearings CEO 
after CEO who have either on their own, as self-insured, or 
through their health plans already provided treatment equity 
for their employees.
    CEO after CEO after CEO testified they are saving dollars. 
They are saving hundreds of thousands of dollars, small-, 
medium-and large-size companies.
    We had six insurance plan CEOs testify in support of this 
legislation. Why? Because they have seen all the empirical data 
in the world that shows parity doesn't cost, it saves dollars.
    So I urge this respected committee, friends all, all of 
you, that you mark up this important lifesaving bill.
    With me, this isn't just another public policy issue. This 
truly is a matter of life and death, because I have seen my two 
uncles die from untreated alcoholism.
    I have seen others suffer immeasurably from their mental 
illness and chemical addiction. I have seen families torn apart 
by the ravages of their child's addiction.
    And we can address this problem as a nation by passing this 
bill. It won't raise premiums. This is according to Milliman & 
Robertson, again addressing my friends' concerns about cost.
    Milliman & Robertson, the highly respected actuarial firm, 
who doesn't have a political axe to grind, said in their study 
that for the price of a cheap cup of coffee per month, 16 
million people on health plans can receive treatment for their 
mental illness or chemical addiction.
    Again, I will be glad to furnish the actuarial studies to 
anybody who argues that this is going to be a costly mandate. 
First of all, it is neither. It is not a mandate, and it is 
going to save literally billions of dollars.
    Let me conclude, Mr. Chairman--and again, you have been 
very generous, and I appreciate the chance to testify here 
today.
    Let me conclude by saying as strongly as I can, it is time 
to end the discrimination against people who need treatment for 
their mental illness and addiction. Thank you, Mr. Chairman and 
members of the committee.
    [The statement of Mr. Ramstad follows:]

 Prepared Statement of Hon. Jim Ramstad, a Representative in Congress 
                      From the State of Minnesota

    Chairman Andrews, Ranking Member Kline, distinguished committee 
members and friends all, thank you for holding this important hearing.
    On July 31, 1981, I woke up in a jail cell in Sioux Falls, S.D., 
under arrest as the result of my last alcoholic blackout.
    I'm alive and sober today only because of the access I had to 
treatment, as well as the grace of God and support of recovering people 
the past 25 years. I'm living proof that treatment works and recovery 
is possible.
    But too many people don't have access to treatment. It's a national 
disgrace that 270,000 Americans were denied addiction treatment last 
year. It's a national tragedy that last year alone, 150,000 of our 
fellow Americans died from chemical addiction and 34,000 Americans 
committed suicide from depression. And it's a national crisis that 
untreated addiction and mental illness cost our economy over $550 
billion last year.
    And think of the costs that can't be measured in dollars and 
cents--human suffering, broken families, shattered dreams, ruined 
careers and destroyed lives.
    It's time to end the discrimination against people suffering the 
ravages of mental illness and chemical addiction. It's time to end the 
higher copayments, deductibles, out-of-pocket costs, and limited 
treatment stays--discriminatory barriers to treatment that don't exist 
for other diseases. According to the GAO, 90 percent of plans impose 
financial limitations and treatment restrictions on mental health and 
addiction care that are not imposed on other illnesses. It's time to 
treat mental illness and chemical addiction under the same rules as 
other medical illnesses.
    The Paul Wellstone Mental Health and Addiction Equity Act will give 
Americans suffering from addiction greater access to treatment by 
prohibiting health insurers from placing discriminatory restrictions on 
treatment.
    It will end the discrimination against people who need treatment 
for mental illness or chemical addiction.
    Expanding access to treatment is not only the right thing to do; 
it's also the cost-effective thing to do. We have all the empirical 
data, including actuarial studies, to prove that equity for mental 
health and addiction treatment will save billions of dollars nationally 
while not raising premiums more than one half of one percent. In other 
words, for the price of a cheap cup of coffee per month, 16 million 
people in health plans could receive treatment for their mental illness 
or chemical addiction.
    Furthermore, it's well-documented that every dollar spent on 
treatment saves up to $12 in health care and criminal justice costs 
alone. That does not even take into account savings in social services, 
lost productivity, absenteeism and injuries in the workplace.
    Let me conclude by repeating as strongly as I can: It's time to end 
the discrimination against people who need treatment for mental illness 
and addiction. It's time to prohibit health insurers from placing 
discriminatory restrictions on treatment. It's time to provide greater 
access to treatment. It's time to pass the Paul Wellstone Mental Health 
and Addiction Equity Act.
    The American people cannot afford to wait any longer for Congress 
to act.
                                 ______
                                 
    Chairman Andrews. Well, Mr. Ramstad, thank you for being 
here and being with us, and we celebrate your continuing 
personal victory as well as your commitment to this cause very, 
very much.
    Mr. Ramstad. By the way, Mr. Chairman, one addendum. I 
would just like to add that we appreciate also the support of 
the president of the United States, who endorsed parity 
legislation in 2002 in a speech in Albuquerque, New Mexico when 
he was with the Senate chief sponsor, Senator Domenici.
    We are anxious to get the bill down to him to sign.
    Chairman Andrews. As we said, we believe we have a lot of 
bipartisan support for this legislation.
    I am going to turn now to my friend from Minnesota, Mr. 
Kline, for his questions.
    Mr. Kline. Thank you, Mr. Chairman.
    And welcome, Jim. I will congratulate myself again for 
having chosen to come back last night. [Laughter.]
    I don't know what moved me, but--so I know what that means 
when a 2-hour flight turns into a multi-hour ordeal. Glad to 
see you, and glad you made it and glad you are safe.
    A couple of comments and questions. I think many of us are 
eager to move forward with some parity legislation.
    And part of what we are talking about today and trying to 
learn about are the differences between the Senate bill co-
sponsored by Senator Kennedy and Senator Domenici and the bill 
that the president was talking about--what is in that bill 
versus what is in the House bill that is sponsored by our 
colleagues Mr. Ramstad and Mr. Kennedy.
    And by the way, I of course always appreciate the passion, 
Jim, that you bring to this and our colleague Patrick as well. 
And so I have got some questions, probably not for you, Jim, 
but for some of the other members of our panel.
    And by the way, Mr. Chairman, I would like unanimous 
consent to submit this letter for the record from----
    Chairman Andrews. Without objection.
    [The letter follows:]

                          The George Washington University,
                                                     June 27, 2007.
Hon. Pete V. Domenici; Hon. Edward M. Kennedy; Hon. Michael B. Enzi;
U.S. Senate, Washington, DC.
    Dear Senators Domenici, Kennedy and Enzi: This letter is written in 
response to your request for an analysis of the preemption provisions 
of S. 558, the Mental Health Parity Act of 2007. The views expressed 
herein are my own and not those of the George Washington University.
    Based on my review, I conclude that the preemption provisions 
contained in the Act save comprehensive state laws that regulate the 
mental health benefit design of insurance products sold in the 
employer-sponsored group health plan market. I further conclude that 
the Act's preemption provisions are wholly consistent with current 
ERISA preemption doctrine, which treats states as full partners in the 
regulation of insured plans. Given the broad policy imperatives 
underlying this legislation, I believe that its enactment would cure 
one of the most serious unaddressed issues in civil rights policy for 
persons with disabilities, while preserving the ultimate power of the 
states to determine the reach of these federal protections in the case 
of ERISA plans that purchase state-regulated health insurance.
    I am a professor of health law and policy at the George Washington 
University School of Public Health and Health Services, where I also 
serve as the founding Chair of the Department of Health Policy. My 30-
plus year legal career has focused on matters related to health care 
access, quality, and equality in the case of low income, minority, 
medically underserved, and vulnerable populations, including persons 
with or at risk for both physical and mental disabilities. Because of 
the unique interaction between the American legal system and the U.S. 
health care system, my health law knowledge and experience span federal 
and state law, with a particular emphasis on laws that finance health 
care and that regulate health care financial arrangements.
    I have written extensively on health insurance, employee health 
benefits, and ERISA. The textbook that I co-authored with Professors 
Rand Rosenblatt and David Frankford, Law and the American Health Care 
System (Foundation Press, 1997, 2001), was the first health law 
textbook to give extensive treatment to ERISA as a central aspect of 
U.S. health law and policy. Over the course of my career, I have 
provided technical assistance, to Members of Congress from both parties 
on matters related to the legal implications of federal legislative 
proposals. In this capacity, I have, on several occasions, raised 
concerns regarding the preemptive effects of pending federal 
legislative measures, particularly when such measures threatened to 
harm underlying state law remedies for injured persons.
    After careful analysis, I have concluded that far from diminishing 
protections for individuals, S. 558 advances long overdue national 
policy while at the same time, preserving states' power to adopt more 
comprehensive regulatory standards for health insurance products sold 
to ERISA-governed group health plans.
    My conclusion is based on the fact that the legislation's special 
preemption provisions give clear and consistent direction to the courts 
regarding how to approach questions of preemption. In my view, S. 558 
delineates its reach with care; a straightforward textual reading shows 
that the legislation honors ERISA's central preemption assumption: 
state laws regulating insurance should remain undisturbed unless they 
clearly conflict with a federal standard. I also believe that the 
legislative text clearly reflects Congress' underlying intent to remedy 
longstanding discrimination against persons with mental illness, while 
continuing to permit states to define the full parameters of these 
important federal safeguards through the application of more rigorous 
standards to insured products.
    The need for a national policy on mental health parity is a 
longstanding and pressing one. I can think of few examples--not simply 
in the case of employer sponsored plans but also with respect to health 
care financing generally--in which the legal protections and safeguards 
established under state law have been weaker. Indeed, the United States 
Supreme Court's decision in Olmstead v L.C.\1\ stands as a testament to 
the pervasive problems that individuals with mental illness encounter 
in attempting to secure equal access to appropriate treatment.
    S. 558 will ensure parity for millions of Americans who are 
currently unprotected by state laws
    If enacted, S. 558 will provide much needed relief in the case of 
ERISA-governed employer-sponsored plans. For two reasons, the 
imperative for federal intervention is overwhelming: first, states 
cannot reach self-funded health plans; second, millions of persons live 
in states whose mental health parity protections are weak to non-
existent.
    S. 558 offers a careful legislative structure that includes a 
special preemption clause, whose provisions save more stringent state 
insurance laws. This structure parallels more than two decades of 
United States Supreme Court decisions, which have interpreted the 
preemptive reach of ERISA Sec. 514 (the original federal ERISA 
preemption statute) as nonetheless saving state insurance laws in the 
case of insured products.\2\
    Furthermore, modern ERISA jurisprudence has extended the reach of 
the term ``state laws that regulate insurance'' under Sec. 514 to reach 
not only benefit and coverage design, but also network structure and 
the power to make final determinations regarding the meaning of 
insurance contract clauses.\3\
    In determining whether the Mental Health Parity Act represents a 
departure from this general and longstanding rule, the starting point 
for any ERISA preemption analysis would be the United States Supreme 
Court's seminal decision in New York State Conference of Blue Cross and 
Blue Shield Plans v Travelers Insurance Co.\4\ In Travelers, a 
unanimous Court reminded lawmakers that ``pre-emption claims turn on 
Congressional intent'' and that the courts do their work ``on the 
assumption that the historic police powers of the States were not to be 
superseded by [a] federal act unless that was the clear and manifest 
purpose of Congress.'' \5\ The regulation of health insurance, as 
recognized by the ERISA preemption statute itself, represents such an 
area of ``historic'' state power to regulate conduct.
    The Mental Health Parity Act's preemption clause has three key 
components. First, the ``special'' preemption section (Section 4) 
provides that the legislation preempts a state ``parity standard or 
requirement'' that ``differs from'' the provisions of subsections (a), 
(c) or (e) of Section 712A of ERISA or Section 2705A. Second, this 
preemption clause is limited by certain clarifications, i.e., special 
rules of construction that, without exception, specifically save state 
laws regulating benefits, services, the treatment of certain 
conditions, and networks. Finally, the legislation clarifies that 
states remain free to regulate, without regard to federal standards, 
the individual and small group markets. Taken together, these 
provisions can be read as placing national minimum standards under 
medium and large group plans, while permitting states to both 
strengthen these standards in the areas of benefits, coverage, 
conditions to be treated and networks, and to regulate the individual 
and small group markets. In short, the ``Special Preemption Rule'' 
found in Sec. 4 is a clear signal to the courts that where mental 
health parity is concerned, their preemption analysis is to follow this 
carefully delineated approach.
    In my view, concerns that S. 558 lacks clear directives on 
``ceilings'' or ``floors'' are misplaced. It is the structure of Sec. 4 
that is critical, and this special preemption rule, taken together with 
other aspects of the bill and its history, protect the key aspects of 
more stringent state laws, including those that cover the small group 
market, mandate coverage of mental health benefits and regulate the 
management of benefits and networks. At the same time, S. 558's robust 
parity requirement, which contains none of the exceptions, limitations 
and exclusions frequently found in state parity laws, will supersede 
weaker state parity statutes. Thus, while commonly described as a 
``ceiling,'' in practice S. 558 functions like a ``floor'' because of 
its saving clause. In sum, S. 558 sets out a special analytic protocol 
when considering preemption in a mental health parity context, and its 
approach quite clearly favors the retention of the more stringent 
features of state mental health parity laws.
    1. The special preemption rule in S. 558 preserves state powers to 
regulate the individual and small group markets.
    The arguments that have been advanced regarding the preemptive 
impact of S. 558 on the small group and individual markets fail to take 
into account the limited scope of S. 558's basic preemption language. 
As noted above, only subsections (a), (c) and (e) of Section 712A of 
ERISA and Section 2705A of the PHSA are given preemptive effect. None 
of these subsections contain any language exempting the small group or 
individual market. S. 558's small group exemption is contained in 
subsection (d). However, this subsection has no preemptive effect. 
Simply put, state laws covering the small group or individual markets 
(whether they cover such markets exclusively or as part of a broader 
statute applicable to all markets) do not ``differ from'' any of the 
provisions of S. 558 that have preemptive effect, and therefore, such 
laws cannot be preempted.
    In addition, even if S. 558's basic preemption provision were not 
so clearly limited, the bill's special preemption rule explicitly 
preserves state laws regulating the individual and small group markets 
in recognition of the fact that S. 558 reaches employer groups of 50 or 
more. The measure states as follows:
    Rule of construction relating to certain state laws--Nothing in 
this subsection shall be construed to preempt State insurance laws 
relating to the individual market or to small employers (as * * * 
defined [under the bill]). ERISA Sec. 731(c) (2)(B) as added.
    In my view, this clarification clearly protects state laws 
applicable to the small group or individual market, without regard to 
whether the law specifically references such markets or applies more 
broadly to all insurance policies. The term ``relating to'' in the 
clarification section is the same phrase used in ERISA's basic 
preemption provision, and will be interpreted in accordance with 
longstanding ERISA preemption case law.\5a\ The courts have 
consistently held that state laws mandating the coverage of particular 
benefits ``relate to'' group health plans, whether or not these laws 
expressly reference such plans or sweep more broadly.\6\
    Furthermore, the special preemption section provides an overarching 
``clarification'' instruction to the courts, which, underscoring 
Congressional intent, cautions the courts not to read its preemptive 
provisions broadly:
    In general--to the extent that any provision of State law is 
preempted under this subsection, any remaining provision of such state 
law shall remain in effect and shall not be preempted. ERISA 
731(c)(2)(A) as added.
    Thus, even if the basic preemption provision of S. 558 preempted 
state laws covering the small group or individual markets, which it 
clearly does not, the clarification language would certainly protect 
any such laws without regard to the manner in which they were 
structured.
    2. S. 558 explicitly saves state laws that define what constitutes 
mental health benefits in connection with health insurance coverage 
offered under an employer-sponsored plan.
    As a matter of federal law, the Act defines the term ``mental 
health benefits'' as what is specified under a group health plan or a 
health insurance issuer offering coverage in connection with a group 
plan. At the same time, the text makes clear that states can go 
farther. Specifically, S. 558 provides that mental health benefits 
mean:
    [B]enefits with respect to mental health services (including 
substance use disorder treatment) as defined under the terms of the 
group plan or coverage, and when applicable, as may be defined under 
state law * * * applicable to health insurance coverage offered in 
connection with a group health plan. Sec. 2705A(f) as added [emphasis 
added]
    The intent of Sec. 2705A is clear: federal law allows plans and 
issuers to define mental health benefits unless such a definition is 
contained in a state law governing health insurance products sold to 
employer groups. S. 558 thus preserves state power to define the reach 
of mental health parity in the case of insured products. Indeed, 
because states are given unconditional power over the central 
definition of the Act, they effectively have the power to delineate the 
parameters of mental health coverage design in the case of insured 
products, not only with respect to the provision of any mental health 
services but also with respect to the amount, duration, and scope of 
mental health services that must be furnished.
    3. The special preemption rule in S. 558 saves state regulatory 
standards mandating coverage of mental health benefits or requiring 
out-of-network coverage, thereby empowering states to effectively 
define the reach of parity in the case of insured products.
    Rather than closing off state protections where parity's scope is 
concerned, S. 558 in fact preserves state laws that define the remedial 
reach of the Act's provisions in the case of the insured market. The 
Act's special preemption rule contains explicit ``Clarifications'' 
whose express purpose--as a textual matter--is to limit the preemptive 
effects of the Act. In this regard, the Act contains an additional rule 
of construction where benefit and coverage design and out-of-network 
provider coverage are concerned:
    Rule of construction relating to mental health and out-of-network 
coverage * * * [N]othing in section 712A [relating to parity] shall be 
construed to require a group health plan (or coverage offered in 
connection with such a plan) to provide the following
    (i) any mental health benefits, except that state insurance laws 
applicable to health insurance coverage that require coverage of 
specific, items, benefits, or services (including for specific mental 
health conditions) are specifically not preempted by this subsection or 
such section 712A [emphasis added]
    (ii) Out-of-network coverage for either medical and surgical 
benefits or mental health benefits, except that state insurance laws 
applicable to health insurance coverage relating to the provision of 
out-of-network mental health coverage are specifically not preempted by 
this subsection or such section 712A ERISA. Sec. 712(c)(2) as added by 
S. 558 [emphasis added]
    This express rule of construction clarifies that, consistent with 
general principles of ERISA preemption under ERISA Sec. 514, state 
benefit mandates applicable to the design and administration of insured 
products sold to employer-sponsored plans, including state laws that 
regulate provider structure and design and laws that govern the 
interpretation of insurance contracts are not preempted.\7\
    The Mental Health Parity Act thus leaves states free to delineate 
the terms of insurance products sold to employer-sponsored group health 
plans, including the items, benefits and services that together 
constitute the coverage design to which the federal parity law applies. 
(The phrase ``items benefits and services'' is a common tern of art 
used in both public and private health insurance law; it is used to 
refer to benefit classes, covered procedures within classes, the 
amount, duration, and scope of benefits, limitations and exclusions, 
and key definitional terms such as ``medical necessity.'')
    State benefit mandates should be protected from preemption whether 
they are ``freestanding mandates'' (e.g., a requirement to cover a 
minimum number of visits per year) or mandates embedded in mental 
health parity laws (i.e., a law requiring insurers to cover mental 
health benefits and to do so at parity with other benefits). Contrary 
to what some have argued, I do not believe there is any conflict 
between the ``Clarifications'' language regarding benefit mandates and 
the basic parity standard contained in S. 558. Although S. 558's parity 
provision does not, by itself, mandate coverage of mental health 
benefits, the ``Clarifications'' language makes it clear that if a 
state parity law does mandate such coverage, that aspect of the state 
law is not preempted.
    It is also worth emphasizing that the often-highlighted distinction 
between ``conditional parity laws'' (which do not mandate the coverage 
of mental health benefits) and ``mandated parity laws'' (which do 
impose such a mandate) is largely irrelevant in practice. Evidence from 
the Kaiser Family Foundation's annual review of employer-sponsored 
benefits suggests that there is no appreciable market for health plans 
that cover no mental health benefits whatsoever, especially in the 
large group market that is subject to S. 558. This evidence suggests 
that only about 2% of all insured individuals have no mental health 
coverage at all, even in states that have conditional parity laws. 
Thus, even when insurers are legally permitted to exclude all mental 
health benefits, it does not appear that they have the ability to do so 
as a practical matter. As a result, I consider ``conditional parity 
laws'' such as S. 558 and ``mandated'' parity laws'' to be distinctions 
without true differences,
    In sum, as a matter of federal law, the Mental Health Parity Act's 
special preemption provision, in combination with the Act's PHS Act 
amendments, clarify the following Congressional intent: (1) that as a 
general matter, state laws regulating insurance products sold in the 
employer group market will be saved unless specifically preempted under 
the Act; (2) that state laws delineating a minimum mental health 
benefit design in the group health insurance coverage market (including 
a minimum mental health benefit and the minimum range of conditions to 
which absolute parity must apply) should be saved; (3) that state laws 
that delineate the range of services, items, benefits and procedures to 
which parity applies are saved; and (4) that state network parity 
requirements are saved.
    4. State laws regulating the manner in which mental health and 
other benefits are managed would not be preempted by S. 558.
    As explained above, only subsections (a), (c) and (e) of Section 
712A of ERISA and 2705A of the PHSA are given preemptive effect. The 
provision of S. 558 authorizing health plans to manage benefits through 
the application of medical necessity reviews or otherwise is contained 
in subsection (b). Moreover, there is nothing in subsections (a), (c) 
or (e) that refers to or is inconsistent with State benefit management 
laws. Accordingly, even if the very general language in subsection (b) 
were somehow construed as inconsistent with such state laws, the laws 
would not be preempted by S. 558. For example, I do not see any basis 
for preemption of Pennsylvania's law restricting health plan medical 
necessity reviews of substance abuse services provided during an 
initial treatment period or the quality standards set forth in 
Vermont's Rule 10.
    There is a compelling policy imperative for the approach taken by 
S. 558, and a ``HIPAA'' approach to preemption is no less susceptible 
to extensive litigation to clarify the terms of the law.
    S. 558 addresses mental health parity, a matter of fundamental 
importance to the health of the American people. Many observers--
including prior Presidential Administrations and numerous legal 
observers including my colleagues Rand Rosenblatt, Sylvia Law, David 
Frankford, and myself in our textbook Law and the American Health Care 
System--assumed that parity was addressed by Titles I and III of the 
Americans with Disabilities Act in combination with the health 
insurance safe harbor. Unfortunately that has turned not to be the 
case; indeed, the United States Supreme Court has given at least 
implicit approval to lower court decisions that effectively interpreted 
questions of health insurance design as beyond the reach of the ADA, 
thereby permitting public and private health insurers and employer-
sponsored group plans to continue blatant discrimination.\8\
    The reforms contained in S. 558 represent an important step toward 
rectifying the injustice of discrimination against persons with mental 
illness. Furthermore, the legislation takes this step while carefully 
balancing the need for a national floor with discretion on the part of 
states to provide a more comprehensive framework in the case of insured 
plans.
    The law should be read as encouraging an expanded state 
intervention, not only because it is a remedial statute, but also 
because of the broad problem of mental health parity across health care 
all categories of state-regulated health care financing arrangements. 
To be sure, states such as Vermont, have made remarkable strides in 
developing a parity policy. At the same time, the decade-long record in 
the case of S. 558 underscores the seriousness of the problem and the 
absence of state protections across the board. Comprehensive state 
parity laws are wanting not only with respect to insurance products 
sold to employee health benefit plans but also with respect to Medicaid 
coverage for adults,\9\ coverage for children under separately 
administered SCHIP plans,\10\ insurance sold in the individual market, 
and public employee health benefit plans (as Vermont's law 
illustrates,\11\ state employee plans may be excluded as a matter of 
state law in the absence of a statute that explicitly extend parity to 
public employee plans).
    There are some who argue that what is needed in order to clarify 
state powers and reduce the risk of litigation is a ``HIPAA approach'' 
to preemption that would save ``more stringent'' state laws. Apart from 
the fact that it is not possible in my view to draft state law 
protections any stronger than the special preemption statute contained 
in S. 558, the notion that a HIPAA standard somehow will avoid legal 
confusion is misplaced. In a federal legal system, preemption disputes 
probably are inevitable, regardless of whether the dispute arises in 
the case of a Commerce Clause or Spending Clause statute. Indeed, along 
with several colleagues I recently published an analysis of the more 
than 500 HIPAA preemption cases decided since the final Privacy Rule 
was promulgated.\12\ To say that the HIPAA preemption framework has 
generated legal disputes regarding which state laws are preempted and 
which are saved because they are more ``stringent'' frankly is the 
understatement of the century.
    Regardless of whether a federal statute purports to establish a 
``ceiling'' or a ``floor'' (both nice catch-phrases but without any 
legal meaning), the critical issue in resolving preemption disputes is 
the clarity of the text and the evidence of underlying Congressional 
legislative intent. In this regard, S. 558 could hardly provide a 
clearer or more consistent roadmap that balances the need for national 
standards with the ability on the part of states to expand upon those 
standards. The drafters have gone to great lengths in my view to 
provide clarity regarding the power of states to regulate the group 
health plan insurance market. It is my hope that this critical national 
debate over parity ultimately will spark a comprehensive vision of 
parity at all levels of government and with respect to all forms of 
health care financing.
    Please do not hesitate to contact me if I can be of further 
assistance.
            Sincerely,
                                      Sara Rosenbaum, J.D.,
Harold and Jane Hirsh Professor of Health Law and Policy and Chair, 
 Department of Health and Human Services, Centers for Medicare and 
                                                 Medicaid Services.
                                endnotes
    \1\ 527 U.S. 581 (1999)
    \2\ Metropolitan Life Ins. Co. v. Massachusetts, 471 U.S. 724 
(1985)
    \3\ Ky. Ass'n of Health Plans, Inc. v Miller 538 U.S. 329 (2003); 
Rush Prudential HMO v Moran 536 U.S. 355 (2002)
    \4\ 514 U.S. 645 (1995)
    \5\ 514 U.S. 655
    \5a\ United States v. Ness, 466 F.3d 79, 81 n. 1 (2d Cir. 2006) 
(``We follow the general rule that the use of identical language in 
different provisions of a statute is a strong indication that they are 
to be given the same interpretation, absent clear evidence that 
Congress intended otherwise.'')
    \6\ See, e.g., Shaw v. Delta Air Lines, 463 U.S. 85, 96-97 (1983); 
Aloha Airlines, Inc. v. Ahue, 12 F.3d 1498, 1504-05 (9th Cir. 1993); 
Standard Oil Co. of Cal. v. Agsalud, 633 F.2d 760 (9th Cir. 1980).
    \7\ In the wake of Rush Prudential HMO v Moran and Kentucky 
Association of Health Plans v Miller, it is difficult to think of any 
state insurance regulation that would not be saved, other than state 
laws that are found to create additional remedies. See Aetna Health 
Inc. v Davila 542 U.S. 200 (2004)
    \8\ See e.g., Doe v Mutual of Omaha 179 F. 3d 2d 557(7th Cir., 
1999), cert. den. 528 U.S. 1106 (2000). Doe involved HIV, the other 
health condition that triggers rampant discrimination in insurance 
design. During the oral argument in the case, Mutual of Omaha 
stipulated that ``it has not shown and cannot show that its AIDS Caps 
are or ever have been consistent with sound actuarial principles, 
actual or reasonably anticipated experience, bona fide risk 
classification, or state law.'' Id., 179 F.3d. 562. Unyielding industry 
resistance to evidence showing the potential for fair and efficient 
management of mental conditions underscores how equally apt this 
stipulation would be in the context of mental health coverage.
    \9\ See.e.g. Rodriguez v Miller 212 F. 3d 211 (2d Cir., 1999) (No 
ADA violation when a state Medicaid program imposes restrictions on 
personal care services for persons with mental illness that do not 
exist in the case of beneficiaries with physical conditions).
    \10\ Rosenbaum, S., Markus, A., and Sonosky, C. Public Health 
Insurance Design for Children: The Evolution from Medicaid to SCHIP. 
The Journal of Health and Biomedical Law. March 2005.
    \11\ See memorandum from Herbert W. Olson to Paulette Thabault 
regarding S. 558 (June 16, 2007)
    \12\ Rosenbaum, S., Borzi, P., Burke, T., and Nath, Sonia W. Does 
HIPAA Preemption Pose a Legal Barrier to Health Information 
Transparency and Interoperability? BNA's Health Care Policy Report. 
Vol. 15, No. 11, 3/19/2007.
                                 ______
                                 
    Mr. Kline [continuing]. George Washington University.
    Medical management has been an issue discussed back and 
forth here, and the chairman correctly asked, ``Well, if it is 
not explicitly excluded, can't we assume that it is there?''
    And I guess I would ask the question what would be the harm 
in making sure that the language is put in there to explicitly 
allow it.
    Can you address that, Mr. Trautwein, and why that would 
make you feel better and what the concerns are?
    Mr. Trautwein. Well, again, in the administration of 
benefits, there is always a tug-of-war about who can do what 
when and where, and not only the tug-of-war in preemption 
between what the federal government can do, what the states can 
do, but in terms of regulation, what plans can do and what the 
restrictions are.
    So I think we would be much more comfortable if that 
language was there, as it has been in past bills.
    Mr. Kline. Okay. Thank you.
    And I think, in fact, when we were talking about the 0.6 
percent, 0.3 percent, 0.2 percent, at least initially, I think, 
Mr. Melek, didn't you make an assumption that there was medical 
management, and then you looked at different levels if you 
didn't have it? Is that correct?
    Mr. Melek. Yes. In our baseline scenario, we had 0.6 
percent increase. That had an underlying----
    Mr. Kline. I don't mean to interrupt--an underlying 
assumption that there was medical management at sort of current 
levels.
    Mr. Melek. That is right, compared to what is currently 
commonly in place in managed care plans.
    Mr. Kline. Okay. And so, in order to sort of solidify your 
analysis, it would be clearer and easier for you if we had 
explicit language allowing medical management, is that correct?
    Mr. Melek. I think that is correct, although, de facto, in 
health care today it is used.
    Mr. Kline. Okay. Thank you very much.
    Now, we were in a discussion earlier talking about the 
House bill, and I think, Jon, you brought it up in your 
testimony about new remedies that might be available and the 
litigation.
    Can you expand on that, what those costs might be and what 
those remedies might be, what the impact would be?
    Mr. Breyfogle. Right. And before I do, on the medical 
management point, there are a couple of provisions in the House 
bill that I do think warrant the clarification we are asking 
for.
    First of all, the House bill imposes a broad requirement 
that there be no differences in treatment limitations, and 
treatment limitations is fairly broadly defined.
    So if you had different U.R. tools that were being applied 
to medical benefits versus mental health benefits, you might 
see somebody arguing that there was non-parity in that regard. 
So there is the issue there.
    The other provision in the House bill is actually the one 
that is the remedies provision, which basically says, to 
paraphrase the medical management point, nothing in the federal 
law should be construed to preempt any state law that provides 
greater methods, provides greater consumer protections methods, 
methods of access to benefits, et cetera.
    So I don't know what methods of access to benefits means, 
but if a state law were to regulate U.R., that is a method or 
imposition on accessing benefits, arguably. So I think there is 
some unclarity there that relates to medical management.
    Mr. Kline. So explicit language authorizing----
    Mr. Breyfogle. There are a couple of provisions----
    Mr. Kline [continuing]. Would fix that?
    Mr. Breyfogle [continuing]. That I do think--and that 
provision might be read to just apply to insured plans, but it 
might be read more broadly.
    And the treatment limits rule clearly applies to self-
insured and insured plans.
    The second point on medical management is the law does not 
preempt state insurance laws as to insured plans, so there are 
states that do bar medical management for mental health and 
limit it.
    So already, there is a built-in preservation of anti-
medical management laws in the insured market in the House 
bill.
    We didn't get everything we wanted in the Senate bill, 
which has essentially the same framework. But those are the 
reasons why we want the clarity in this bill.
    As to the remedies point that you asked, basically there--
ERISA provides the exclusive set of rules for litigating claims 
under ERISA plans. It is in federal court. It has certain 
remedies.
    State laws that provide punitive damages, compensatory 
damages are completely preempted. That is all very settled.
    There is a special rule that is being added just for mental 
health benefits provisions that saves state remedies. I mean, 
remedies is a pretty precise term legally speaking.
    And so I think if you have a dispute over whether a parity 
law is being followed, and you are in an insured plan, you have 
a darn good argument under the House bill that you can sue for 
whatever state law remedies are available, punitive damages, 
compensatory damages, et cetera.
    Mr. Kline. Okay. Thank you.
    And I thank the chairman for letting me go past the time. I 
yield back.
    Chairman Andrews. Thank you very much, Mr. Kline.
    Mr. Kildee is recognized for 5 minutes.
    Mr. Kildee. Thank you, Mr. Chairman.
    First of all, I thank all of you.
    Mrs. Carter, I arrived in Washington with you and your 
husband in 1976. You were very kind, by the way, you and your 
husband, to my children, who were 4, 5 and 6 at that time. They 
used to play in the tree house with Amy in the backyard of the 
White House.
    As a matter of fact, my 4-year-old left for Baghdad last 
night again.
    And it is good to have you here, and thank you for all you 
have done in this field. Let me ask you this.
    We know of the inequality between mental and physical 
health treatment, and there is still some amongst us who have 
either a medieval or superstitious attitude toward mental 
health, and that attitude has changed a great deal in the 30 
years that I have been in Congress.
    But that lack of understanding is found among people in 
government and people in business. Is that lack of 
understanding greater in business or greater in government?
    Or have attitudes changed and it is now more of a false 
concern for cost for mental health?
    Mrs. Carter. Well, first, congratulations on being able to 
stay in Washington.
    Mr. Kildee. Thank you. [Laughter.]
    Mrs. Carter. I think attitudes are changing a little bit. I 
think for the first time since I have been involved the stigma 
is beginning to lift. We still have a long way to go, but I 
think it is beginning to lift.
    I think that Katrina and soldiers coming home, National 
Guardspeople coming home, have helped people to see that mental 
illnesses are real and that people need help.
    The stigma goes back to when--actually, before I first 
started, of course, for generations, but when I first started, 
people were being moved out of the big central hospitals into 
communities with no services available.
    And nobody knew how to treat mental illnesses. There was no 
knowledge about the brain. And that has all changed. And so 
many people still have that same attitude about mental 
illnesses that was prevalent back when I first began.
    But today, mental illnesses can be diagnosed and treated 
and the overwhelmingly majority can lead normal lives, living 
at home, going to school, working.
    And so to me, it is just a tragedy that we don't help 
people. We relegate them to a lower standard because of their 
illness. I hope government is changing, because I really want 
to have this parity bill passed.
    And I do think, from what I have seen over the years, 
businesses are beginning to come around. I don't think it is 
just because Tom Johnson is in Atlanta, Tom Johnson and these 
other CEOs.
    But so many businesses are beginning to see that if they 
provide parity they have a happy, healthier workplace, and the 
productivity goes up. And so I think some businesses, not all 
of them by a long shot--so many are not--but I think it is 
beginning to happen.
    I think there is a new awareness of the necessity to help 
people with mental illness.
    Mr. Kildee. And you have indicated that this concern for 
cost is really a false concern for cost.
    Mrs. Carter. Well, the first argument is it is going to 
break the bank. But we have evidence from all the studies that 
that doesn't happen, that the cost is very minimal.
    And as I said before, over a period of time overall health 
costs for a company actually come down. And I think the main 
reason is because people go to primary care doctors.
    And when mental health services are available to them 
through insurance and they access the professional mental 
health person and get treatment, then they have so many fewer 
trips to doctors, to the primary care doctor.
    Some primary care doctors understand and recognize mental 
illnesses, but they are very few.
    Mr. Kildee. Thank you very much, Mrs. Carter.
    Chairman Andrews. The gentleman yields back his time.
    It is a pleasure to turn to our Dr. Boustany for 5 minutes.
    Mr. Boustany. Thank you, Mr. Chairman. I would like to 
thank you for holding this hearing.
    And I want to thank all the witnesses for your very 
excellent testimony.
    To Ms. Smith, I want to say I have a lot of empathy for 
your situation, and I applaud your courage for being here 
today.
    My daughter, who is 22 years old, would not be alive today 
if we didn't go the extra mile as a family to seek out care for 
her depression several states away because I could not find 
adequate care in my hometown.
    And I have practiced medicine in my home town for 15 years 
as a cardiovascular surgeon and had pretty good access to just 
about any health care in a town of 120,000.
    So the parity issue--it goes way beyond just simply, you 
know, the insurance fix that we are looking at in this bill or 
even the Senate bill.
    And I think Jim is nodding his head. He recognizes that, 
you know, as well, that just doing this is only going to be a 
real scratch on the surface of the problem, because there are 
so many other things that affect access to health care. Some 
have been alluded to today.
    I worry that this whole thing is going to degenerate into 
the usual fight over the ERISA preemption, and, you know, it 
would be a shame if we don't get anything all the way through 
the legislative process and onto the president's desk if that 
were to be the block again.
    And I have a quick question. I guess I will start with Mr. 
Trautwein.
    Do the self-insured groups typically have better mental 
health coverage than other insured groups?
    Mr. Trautwein. I think particularly larger employers were 
first as the ethic changed from treatment to prevention and 
management of chronic conditions. I think the better coverage 
followed that ethic.
    Mr. Boustany. Because I worry that if we dismantle the 
ERISA preemption and take down what a good plan's--then, you 
know, we are actually doing more damage in the long run, and 
that is--I guess that is a concern I have.
    I know the Senate has worked very hard to strike that 
balance, looking at the reality of how do you get everybody 
together to move something forward.
    And I guess that is one concern I have about moving this 
House bill forward, and hopefully we can continue to have 
serious dialogue as we go forward on it.
    Mr. Dilweg, when you were testifying, you mentioned if the 
Senate bill is enacted, consumers would lose existing state-
based coverage guarantees.
    But under the bill, wouldn't the states regulating 
insurance remain undisturbed unless they clearly violate a 
federal standard?
    Mr. Dilweg. I think how we look at the Senate bill is--I 
mean, obviously, it deals with the ERISA side, and in Wisconsin 
about 40 percent of my population is under self-insured plans, 
so we welcome this issue coming to those self-insured plans.
    But I also see that we would need to implement new 
legislation. We have a legislative intent on a very low mandate 
that has been there for 30 years of $7,000 capped on just an 
overall cost not specific to benefits.
    So it would be beholden to our legislature to enact parity. 
And for the past 30 years, we have been unable to enact parity. 
So then I would look at about a third of my population 
potentially losing their current $7,000 coverage.
    And this is also reflected by the state of California as 
well. Although they have full parity, not a lower coverage than 
we do, they share our concerns as well on this.
    Mr. Boustany. Isn't it true that some states have weaker 
requirements, clearly? And you know, I guess if we were to 
enact the Senate bill, it might have a positive impact in some 
25 states with weaker existing requirements.
    Mr. Dilweg. Well, I also worry that it is easier for 
employer groups to move state by state and knock down parity 
laws. So you could have really an all-or-nothing situation in 
some of these areas. And that is a concern of mine, a concern 
in Wisconsin.
    So you know, the House bill may not be as convenient as the 
Senate bill, but I am concerned about my consumers, and I am 
not alone in that, in sharing that.
    Mr. Boustany. Mr. Breyfogle, would you like to comment on 
that?
    Mr. Breyfogle. Yes. There is a specific provision in the 
Senate bill that basically says if a state law has a parity 
component and a mandate component, that the Senate bill only 
preempts the parity component, leaving the mandate component in 
place.
    You know, what that would do in the Wisconsin case is 
basically raise the bar, eliminate the $7,000 limit that is 
permissible in Wisconsin and raise the bar and allow full 
parity on benefits and some existence of the mandate.
    There is a sort of tricky legal question which is because 
of that, then a state court might look at if this provision is 
severed, is the rest of the Wisconsin law preempted.
    I think the answer is probably not, but the important point 
is it is the same legal issue even under the House bill, 
because the House bill says that it would preempt any state law 
that preempts the application of the new federal standard.
    So the problem in Wisconsin is under the House bill, 
because the parity rule in Wisconsin--there is no parity, so 
you would have a situation where the $7,000 limit is preempted 
even under the House bill.
    It would be jacked up so you had full parity, and you would 
still have state courts struggling with the question of given 
that, would the state of Wisconsin legislature have adopted the 
original mandate plus parity. So the House bill creates the 
exact same legal issue for Wisconsin.
    And any state that has coupled parity with mandates where 
the parity rule is not a full one or a complete one has that 
same issue. So it is really a specious comparison----
    Chairman Andrews. I am going to just permit Mr. Dilweg to 
respond. Then we are going to go to Ms. McCarthy.
    Mr. Breyfogle. Sure, sure.
    Mr. Dilweg. Thank you, Mr. Chairman.
    I think, you know, you are getting into the detail of 
preemption here, but I think what I see from my perspective is 
a lot of experts disagreeing on preemption in the Senate with 
the Senate bill and a lot of attorneys much wiser than me 
getting into that.
    But I recognize when attorneys disagree that I am going to 
be in court for about 5 years to 10 years. I look at what is in 
the House bill and I see the HIPAA model moving forward, and 
there is pros and cons to that. But that is a working model, 
and so that is----
    Chairman Andrews. Yes. We certainly don't want to do 
anything that would disrupt the ERISA preemption litigation 
industry. [Laughter.]
    Mr. Breyfogle. Thank you very much.
    Chairman Andrews. The bar that has grown up around 
interpreting ERISA preemption is a very valued part of our 
committee.
    I would go to Ms. McCarthy for 5 minutes.
    Mrs. McCarthy. Thank you, Mr. Chairman, and thank you for 
holding this hearing.
    And my colleague, Mr. Ramstad, I remember being on the 
floor at 2 in the morning several years ago when we actually 
thought we were going to bring the bill up and get it passed.
    Unfortunately, here we are many, many years later. I thank 
you for certainly carrying this through, because it is an 
important issue.
    You know, I think that the majority of us know someone that 
has gone through mental illness. I can speak for someone in my 
family who I have watched over 30 years struggle, and I will 
say that it is only in the last couple of years that, finally--
bipolar, but finally coming up to a medication that actually 
works for him.
    It is a great time right now for what we have seen in the 
advancement of medications to help people. And it is like night 
and day. You know, my brother, who I loved through all those 
years, to see him happy is probably the most rewarding thing.
    You talk about medical management, and you know, I have a 
concern with that, mainly because my office--and I can't speak 
for other offices--when we see a lot of these health plans that 
have medical management, there is a constant fight because they 
are denied, denied, denied, to the point of where our office 
has to get involved to get the treatment.
    And I am not talking about mental illness. I am talking 
about any kind of health care. So I could see this coming down 
into our office on trying to fight for people for the care that 
they should have.
    You know, when I hear about CEOs, we know that CEOs want to 
have mental parity, many because they train a lot of their 
employees, and it costs them a couple hundred thousand dollars, 
and yet when they fight to have--whether it is depression or 
anything else, they are having a hard time, even though they 
are paying the insurance companies to have that treatment.
    It gets down to be a hassle because the patient or the 
employee is not going to fight constantly to get the treatment 
that they need, because they will give up on it. And I have 
seen this too often.
    So hopefully, you know, we are going to go down the road 
and get a bill out that will be good for everybody.
    But I guess the question that I wanted to ask--and I will 
throw this out--on September 11th, we had a national tragedy. 
Katrina, we had a national tragedy.
    And certainly, with 9/11 I am still dealing with--when I 
say I--the children now. They are all going through post-
traumatic syndrome. You can see it through the therapy that 
they have been getting. We have run out of money.
    Those groups that came together to take care of the 
families and now the children--there is no money for them to 
take care of them. Most of them don't have the kind of 
insurance where they can get the treatment that they need.
    So I am probably leaning more toward the Ramstad bill, only 
because people will have the access that is there.
    But I guess my question is do you think that the mental 
health parity regulation would have helped the nation and my 
constituents recover from this disaster more quickly?
    And what do you view as the benefit for having this 
legislation in place in the event of future national tragedies 
and disasters like those that we witnessed on 9/11?
    Mr. Wellstone, if you have an answer for that, I would love 
to hear your input.
    Mr. Wellstone. Yes. Would you be able to repeat that for me 
again? I am sorry.
    Mrs. McCarthy. Talk about 9/11. I mean----
    Mr. Wellstone. Yes. No, I have got your question. I think 
if we had had a mental health parity bill, it would have 
helped, absolutely, because people would have been able to 
access much more treatment.
    So the answer is yes, I think it would have.
    Mrs. McCarthy. Because I dealt with the--certainly, we had 
a very large impact in Nassau County where I live. But I think 
the nation as a whole, you know, suffered a great deal of 
anxiety and depression.
    Mr. Wellstone. I think you are absolutely right, I mean, 
and I think it is just the right thing to do. I think it is the 
right thing to do, to allow everybody to have access to decent 
treatment and care that is going to help them.
    And then when we hear these costs--I mean, it seems like it 
is very, very iffy if there is even costs at all.
    And then when you start to look at the, you know, lost 
productivity, lost days at work and all that stuff, it sounds 
to me that we could not only provide fairness to everybody but 
also save money.
    Mrs. McCarthy. Well, my background was a nurse before I 
came here, and I have to say it has been a very tough argument 
over these years that preventative care or continuous chronic 
care for anything actually saves money in the end.
    But hopefully one day we will win all those battles.
    Chairman Andrews. Thank you. The gentlelady yields back her 
time.
    We go to Mr. Loebsack for 5 minutes.
    Mr. Loebsack. Thank you, Mr. Chairman.
    I want to thank you, Mr. Ramstad, as I did Patrick Kennedy 
for coming in. I am a new member here and getting to know 
folks, and only recently I learned of your involvement in this, 
so I want to thank you very much.
    I mentioned already that my mother suffered from mental 
illness when I was growing up, and I dare say that--or at least 
I would guess that maybe everybody in this room has been 
touched by mental illness in one form or another, and if not 
mental illness, then some kind of addiction.
    So I just think this is such an important hearing that we 
are having today, and I didn't plan to come back this early, 
but I did intentionally so I could be a part of this.
    So I appreciate the testimony from everyone. I want to make 
one comment.
    Mrs. Carter, you know, I have thought about these issues a 
lot in the past, in part from a personal standpoint, but I 
never really made the connection between lack of insurance 
parity and stigma.
    I mean, I have grown up. I am 54 years old. I have thought 
about the stigma aspect a lot as I have grown up, but I never 
thought about it in terms of lack of insurance parity. Can you 
just comment a little bit more on that, that connection?
    Mrs. Carter. I really believe that when insurance covers an 
illness that it makes it all right to have. I really believe 
that. I have seen that with other illnesses, not mental 
illnesses, but cancer, for instance.
    I remember when nobody spoke about cancer and nobody would 
mention the word. And the stigma was terrible. And when you--
are you familiar with Kay Jameson?
    Mr. Loebsack. No, I am not.
    Mrs. Carter. She says that when you find a cure for a 
disease, the stigma goes away. Well, there is cancer treatment 
now, but there is--and there may be a cure for some of them, 
but not for all.
    And I think we are approaching that with mental health. We 
have so much better treatment today, and I think that if 
insurance covers it--for instance, in some of the companies 
that we have been watching for years, when mental health 
coverage was available through the insurance, through the 
company, it took a while for people to access it.
    The stigma was still there. But then after a while, one 
would go, and then another one would go, and then pretty soon 
it just became the thing to do, to access this coverage.
    And so I think parity will not only help people who suffer 
because they cannot pay for help, but it will also lift the 
stigma.
    Mr. Loebsack. Thank you.
    Also, I guess when I listen to folks who are concerned 
about the cost of coverage from an employer standpoint, I get 
very frustrated, obviously. I understand the concerns, the 
costs and all the rest.
    But it also sort of makes me think about just sort of the 
47 million Americans who are without health insurance, period, 
let alone extending it for mental health issues.
    And I have one question for Ms. Smith, because I am not 
sure you have been asked a question yet, but I am a new member 
of Congress, and so when I come to hearings or prior to the 
hearings, I have a very steep learning curve on so many issues.
    And I can only imagine what is going through your mind as 
you are listening to all this today. But I do want to ask you, 
what are your impressions of what you have heard today?
    Because you have a wonderful compelling story that you told 
us, but what do you think about this debate today?
    Ms. Smith. I think that we are right at the dawn of a new 
age in terms of mental health. And I really agree with Mrs. 
Carter that I believe that the stigma is lifting and that the 
treatments are much, much improved over years in the past, 
where they were actually barbaric in some cases.
    And this particular hearing today really fills me with 
hope, because, like so many people have said, it is the right 
thing to do. And to hear that over and over again from all 
these people is really thrilling.
    Mr. Loebsack. Thank you.
    Thanks to all of you.
    And thank you, Mr. Chairman.
    Chairman Andrews. Thank you.
    Mrs. Carter. Could I say one other thing?
    Mr. Loebsack. Yes, please.
    Mrs. Carter. I didn't mean we are approaching the time when 
stigma is gone.
    Mr. Loebsack. I understand.
    Mrs. Carter. I mean we are approaching the time when we 
have good treatments and know a lot more about the brain and 
how to deal with mental illnesses.
    Mr. Loebsack. Thanks for all your efforts.
    Chairman Andrews. Before we go to Mr. Hare, Mrs. Carter, it 
is my understanding that your later flight has been canceled 
and you need to depart by 5 o'clock.
    If you need to leave now, that is fine, but we have one 
more questioner with Mr. Hare, so we will be finished at about 
4:55. It is entirely up to you.
    Mrs. Carter. I think if I leave by--I have to leave by 
5:00, they tell me.
    Chairman Andrews. Very well.
    Mr. Hare, you are on for 5 minutes.
    Mr. Hare. I promise you, Mrs. Carter, I will go fast. I 
know what it is like. I had a 5-hour flight, too, from Illinois 
back.
    And I want to thank you all for coming.
    I, too, like my friend Dave Loebsack, am a new member, but 
just as a personal aside, if I could, Mr. Wellstone, I had the 
honor of meeting your dad twice.
    And I have to tell you that from my perspective, I have 
never met a better public servant than your father. He was a 
tremendous man. And you know, I thank you for picking up that 
torch and moving it.
    It seems to me that if we are talking about this debate 
today--and Ms. Smith said she was glad to hear this--and I 
apologize for being late on the testimony, Mr. Wellstone.
    But one thing you said that was incredibly compelling to me 
is that every 16 minutes a child or adult takes their life 
because of depression and the pain of depression and untreated 
and other mental illnesses associated with it. I think the 
clock is ticking pretty fast here.
    And so I commend you, Mr. Chairman, for having the hearing. 
And I want you to know that from this freshman's perspective, 
H.R. 1424--we need to move this thing very, very quickly.
    And I am honored, Mr. Ramstad, to be a co-sponsor of the 
bill, because I think it is incredibly important.
    And so I just want to thank you all for that. I just had 
two quick questions.
    And one for you, Mrs. Carter, and I know you have to leave. 
You know, from your perspective, could you go into a little bit 
of detail--if Congress doesn't act on this parity act in a 
meaningful period of time here, what, from your perspective--
what it is going to have regarding mental health care treatment 
and why it is so necessary that we get this thing quickly and 
correctly?
    Mrs. Carter. I think it will be a tragedy if this bill is 
not passed now. We have had three reports--I named them before; 
the surgeon general's report, President Bush's New Freedom 
Commission report--and they all confirm that the mental health 
system in this country is in a shambles and that there is no 
way to repair it. We have to start over.
    There is no way to start over and do anything now. I mean, 
it takes a long time. And there is great opportunity now to 
pass parity and get help for people who suffer.
    People are suffering in our country, and I just get very 
distressed about it, because it seems like we don't provide 
help for them, and we don't even have a guilty conscience about 
it.
    I am just so hopeful that parity is going to pass. It will 
mean so much to our country.
    Mr. Hare. Well, I believe, Mrs. Carter, in my heart of 
hearts, it is going to pass.
    You know, I want to thank you for everything you have done 
on this, and you know, one way or another, it is--I am a new 
kid on the block here, but you know, we will get her done. And 
I think it is incredibly important.
    Mr. Breyfogle, you mentioned that the Senate mental health 
parity legislation is better than the House bill because it 
doesn't mandate coverage of all illnesses listed under the DSM-
IV.
    But in Mrs. Carter's experience working with behavioral 
diseases, she says that all mental illnesses are potentially 
devastating, so therefore covering all of them is critical, it 
seems to me.
    And I guess, you know, we need to treat all illnesses 
defined in DSM-IV in order to eliminate the stigma--and we have 
heard about that--surrounding the mental illness which prevents 
people from seeking long-term treatment and costs more in the 
long run.
    I was wondering if you could maybe just respond to that.
    Mr. Breyfogle. I think the point isn't to pick out anything 
in the DSM-IV that we don't think should be covered or we don't 
think is appropriate.
    I think from an employer's perspective being able to design 
the terms of your health plan is critical in terms of how you 
allocate a scarce set of resources to cover a group of people. 
And so it is a basic tenet.
    There is no manual that is mandated for traditional 
inpatient medical benefits that is mandated under law that you 
have to cover every particular thing.
    And it is sort of a critical point that employers have 
which is that they need the flexibility to design their health 
plans to target coverage in a way that they think is most 
effective for their particular workforce.
    It is not that there is anything in the DSM-IV that 
employers would point to and say this is unworthy. Not every 
employer can afford the most expensive health plan. Some 
industries are much more competitive than others. Some 
employers are just struggling to have a health plan.
    And so a mandate that requires really an unprecedented--and 
further than parity--for this as mental health--the statute is 
going to define everything that is covered, whereas for non-
mental health, the statute is silent. That is really not 
parity, in our view.
    Mr. Hare. Well, I think it--just to conclude, Mr. Chairman, 
I think it would be a wonderful day when we pass this 
legislation for people who have mental illness and their 
families, because it isn't just the person with the mental 
illness that is affected. The entire family is.
    And if not now, you know, when? And if not us, you know, 
who?
    So I yield back. Thank you, Mr. Chairman.
    Chairman Andrews. I thank the gentleman for yielding.
    I want to thank each of the witnesses for their efforts and 
their testimony today. I think you have given the committee an 
excellent record with which to work as we go forward.
    Mr. Kline, did you have any concluding remarks?
    I did want to say to Mrs. Carter again how very, very 
honored we are to have you with us.
    And just as a personal aside, I grew up in a town called 
Bellmawr, New Jersey, and in 1976 when then Governor Carter was 
seeking the presidency, you came to our home town. I was not 
present. I was in college at the time.
    But my father and mother went to see you. I think half the 
town did. And I will tell you that your picture is in the town 
hall. Your visit was regarded as one of the great moments in 
the history of our community.
    And I think it shows you the esteem with which you are held 
across the country by people. We thank you very much for your 
participation here today. Thank you, Mrs. Carter.
    And we thank the other witnesses.
    And I would ask unanimous consent that letters from the 
attorney generals of Maryland, Washington and Connecticut and 
from the National Association of Insurance Commissioners be 
entered into the record.
    Without objection.
    [The letters follow:]
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Chairman Andrews. As previously ordered, members will have 
14 days to submit additional materials for the hearing record.
    We thank each of the witnesses for doing a great job today.
    And we declare the hearing closed.
    [Additional submission from Mr. Andrews follows:]

 Prepared Statement of Raymond F. Anton, M.D., President, the Research 
                         Society on Alcoholism

    The Research Society on Alcoholism (RSA) welcomes the opportunity 
to submit this statement in support of the ``The Paul Wellstone Mental 
Health and Addiction Equity Act of 2007,'' (H.R. 1424). RSA is a 
professional research organization whose 1,600 members conduct basic, 
clinical, and psychosocial research on alcoholism and alcohol abuse. 
RSA's physicians, scientists, researchers, clinicians, and other 
experts work closely with the National Institutes of Health (NIH) and 
the National Institute on Alcohol Abuse and Alcoholism (NIAAA) to 
stimulate critical and innovative research initiatives in an effort to 
address the myriad of health problems that are directly attributable to 
heavy alcohol use, alcohol abuse, and alcoholism.
    Alcoholism is a serious disease that affects the lives of millions 
of Americans, devastates families, compromises national preparedness, 
and burdens the country's health care systems. It is beyond cavil that 
each dollar spent on alcoholism research will pay huge dividends for 
all Americans. The fruits of such research will not be fully realized, 
however, unless those who have alcohol-related conditions have access 
to the care and treatments which they need. For this reason, RSA 
respectfully urges the Education and Labor Committee to ensure that the 
Paul Wellstone Mental Health and Addiction Equity Act, introduced by 
Representatives Patrick Kennedy (D-MA) and Jim Ramstad (R-MN), is 
approved and travels an expeditious path to the House floor. The bill 
is a critical step in the prevention and treatment of alcoholism and 
the illnesses, injuries, and personal and economic loss associated with 
the abuse of alcohol.
    Alcoholism is a tragedy that touches virtually all Americans. More 
than half of all adults have a family history of alcoholism or problem 
drinking. One in ten Americans will suffer from alcoholism or alcohol 
abuse and their drinking will impact their families, their communities, 
and society as a whole. Untreated addiction costs America $400 billion 
annually and recent research indicates that alcoholism and alcohol 
abuse alone costs the nation approximately $185 billion annually. One 
tenth of this pays for treatment; the rest is the cost of lost 
productivity, accidents, violence, and premature death.
    The Centers for Disease Control and Prevention (CDC) ranks alcohol 
as the third leading cause of preventable death in the United States. 
Heavy drinking, defined as having five or more drinks at least once a 
week, contributes to illness in each of the top three causes of death: 
heart disease, cancer, and stroke.
    The CDC also links excessive alcohol use, such as heavy drinking 
and binge drinking, to numerous immediate health risks that pose a 
menace not only to those consuming alcohol, but those surrounding them 
including traffic fatalities, unintentional firearm injuries, domestic 
violence and child maltreatment, risky sexual behaviors, sexual 
assault, miscarriage and stillbirth, and a combination of physical and 
mental birth defects that last throughout the life of a child.
    Statistically, alcohol is a factor in 50 percent of all homicides, 
40 percent of motor vehicle fatalities, 30 percent of all suicides, and 
30 percent of all accidental deaths. The long-term effects of alcohol 
abuse are just as extreme, leading to chronic organ diseases, 
neurological and cardiovascular impairment as well as social and 
psychiatric problems.
    The NIAAA, along with the National Institute on Drug Abuse (NIDA), 
and the Substance Abuse & Mental Health Services Administration 
(SAMSHA), have conducted research that demonstrates that substance 
abuse is particularly problematic in younger adolescents because that 
is the time when individuals are most vulnerable to addiction. 
According to the CDC, people aged 12 to 20 years drink almost 20% of 
all alcohol consumed in the United States. The NIAAA's National 
Epidemiologic Survey on Alcohol-Related Conditions (NESARC) states that 
18 million Americans (8.5% of the population age 18 and older) suffer 
from alcohol use disorders (AUD), and only 7.1% of these individuals 
have received any treatment for their AUD in the past year. According 
to SAMHSA, in 2005, 20.9 million Americans needed treatment for AUD but 
did not receive it.
    The scientific community is addressing alcoholism and addiction 
disorders at many different levels, starting at the earliest stages of 
human development. For instance, the NIAAA's NESARC survey sampled 
across the adult lifespan to allow researchers to identify how the 
emergence and progression of drinking behavior is influenced by changes 
in biology, psychology, and in exposure to social and environmental 
inputs over a person's lifetime. Scientists at NIH are supporting 
research to promulgate pre-emptive care for fetuses, early childhood, 
and adolescents; since children who engage in early alcohol use also 
typically display a wide range of adverse behavioral outcomes such as 
teenage pregnancy, delinquency, other substance use problems, and poor 
school achievement.
    NIAAA has been working closely with SAMHSA to play a leading role 
in the work of the Interagency Coordinating Committee for the 
Prevention of Underage Drinking established under the Sober Truth on 
Preventing Underage Drinking Act or STOP Act (P.L. 109-422), and for 
the first Call to Action against underage drinking issued by the 
Surgeon General's Office on March 6, 2007.
    The data on alcohol abuse are particularly disquieting in a 
subsection of the population that is unique for observing the effects 
of alcohol over a large cross-section of individuals. In the military, 
the costs of alcoholism and alcohol abuse are enormous. The 2005 
results of the Department of Defense's (DoD) 2005 Survey of Health 
Related Behaviors among Active Duty Military Personnel demonstrate that 
the rates of heavy drinking remain elevated among U.S. military 
personnel. This was the first time that this survey series has 
evaluated behaviors related to mental well being, work stress and 
family stress associated with deployment to Iraq, Afghanistan, and 
other theaters of operation.
    The prevalence of heavy drinking is higher in the military 
population (16.1%) than in the civilian population (12.9%). About one 
in four Marines (25.4%) and Army soldiers (24.5%) engages in heavy 
drinking; such a high prevalence of heavy alcohol use may be cause for 
concern about military readiness. Furthermore, each individual Service 
branch showed an increasing pattern of heavy drinking from 2002 to 
2005. These patterns of alcohol abuse, which are often acquired in the 
military, frequently persist after discharge and are associated with 
the high rate of alcohol-related health disorders in the veteran 
population.
    While the high rates of use and abuse of alcohol are alarming, the 
good news is that this nation is poised to capitalize on unprecedented 
opportunities in alcohol research, opportunities which must be seized. 
Scientists are currently exploring new and exciting ways to prevent 
alcohol-associated accidents and violence. Importantly, prevention 
trials are developing methods to effectively address problem alcohol 
use. Further, scientists have identified discrete regions of the human 
genome that contribute to the inheritance of alcoholism. Our improved 
genetic research will accelerate the rational design of medications to 
treat alcoholism and also improve our understanding of the interaction 
and importance of heredity and environment in the development of 
alcoholism.
    The field of neuroscience is an important and promising area of 
alcohol research. The development of more effective drug therapies for 
alcoholism requires an improved understanding of how alcohol changes 
brain function to produce craving, loss of control over drinking 
behavior, tolerance to alcohol's effects, and the alcohol withdrawal 
syndrome. NIAAA is testing therapeutic agents that target different 
neurobiological substrates of alcohol dependence.
    Alcohol abuse and alcoholism are devastating problems of national 
importance. Fortunately, alcohol research has reached a critical 
maturity. RSA is committed to stimulating critical and innovative 
research initiatives to address the myriad of health problems that are 
directly attributable to heavy alcohol use, alcohol abuse, and 
alcoholism. RSA understands all too well the substantial costs which 
alcoholism and alcohol abuse impose on individuals and the health care 
system. We also know that mental health and addiction parity 
legislation is necessary to ensure that access to critical services is 
available to those who need it. We urge Congress to pass the Paul 
Wellstone Mental Health and Addiction Equity Act of 2007 as soon as 
possible.
                                 ______
                                 
    [Additional submissions from Mr. Kline follow:]
    
    
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    [Prepared statement of the American Occupational Therapy 
Association, submitted by Mr. Wu, follows:]

  Prepared Statement of the American Occupational Therapy Association 
                                 (AOTA)

    The American Occupational Therapy Association (AOTA) submits this 
statement for the record of the July 10, 2007 hearing. We appreciate 
the opportunity to provide this information regarding the relationship 
of occupational therapy services to mental health and substance abuse 
treatment and highlighting the unique contributions of occupation based 
interventions. AOTA fully supports passage of H.R.1424, The Paul 
Wellstone Mental Health and Addiction Equity Act of 2007 and joins 
several hundred national advocacy organizations and a majority of House 
members in urging rapid passage of the bill.
Occupational Therapy for People with Mental Illness and Substance Abuse 
        Disorders
    Occupational therapy is concerned with an individual's ability to 
do everyday activities, or occupations, so that they can participate 
fully at home, work, and in the community. Occupational therapy 
practitioners use purposeful activities as therapy to help individuals 
with functional impairments, regardless of the cause, to maximize 
performance and independence. The profession has been guided by a 
holistic approach with an emphasis on psychosocial factors that impact 
human function. Occupational therapy brings a rehabilitation 
perspective to mental health and substance abuse treatment in keeping 
with increased emphasis on recovery and functionality.
    The expertise of occupational therapy in the assessment and 
treatment of function and functional impairment across the lifespan 
argues for occupational therapy practitioners' full inclusion in mental 
health and substance abuse systems of care. Inclusion would ensure that 
their unique educational preparation and experience can be utilized for 
the benefit of people with mental illness and substance abuse 
conditions. According to the Institute of Medicine's Quality Chasm 
report, Improving the Quality of Health Care and Substance Abuse 
Conditions (November 2005), integration and collaboration among mental 
health practitioners is crucial to improving the mental health system. 
AOTA believes that inter-disciplinary teams maximize the level of 
expertise and experience available to a patient with mental illness. 
The federal New Freedom Initiative also calls upon the nation's mental 
health system to deliver higher quality, integrated services that 
contribute to more successful outcomes for people with mental illness. 
Occupational therapy is an essential part of the mental health 
assessment, treatment planning, and intervention process that will 
improve and restore function and independence for people affected by 
mental illness. There is also a distinct activity-based role for 
occupational therapy in both the acute treatment and recovery models of 
substance abuse treatment.
    Occupational therapy practitioners work with people throughout the 
lifespan and in all types of settings where mental health services, 
substance abuse treatment and psychiatric rehabilitation are provided. 
Through the use of real life activities as therapy, occupational 
therapy practitioners improve functional capacity and quality of life 
for people with mental illness and substance abuse in the areas of 
employment, education, community living and home and personal care. As 
well as providing care in home and community based settings, in roles 
such as case mangers, occupational therapists continue to work in 
traditional mental health settings such as hospitals, state mental 
health institutions and partial hospitalization programs. Occupational 
therapy is covered by Medicare as a mental health service, especially 
in the partial hospitalization program. It is also recognized in many 
state mental health programs.
    AOTA believes that occupational therapy is an underutilized service 
for people with mental health and substance abuse disorders that can 
meet and address independent living and recovery needs. This limited 
access affects both substance abuse and mental health systems of care 
and the limitation is often due to a lack of understanding about how 
occupational therapy can help or because of perceptions that therapists 
only address impairments of function caused by physical illness or 
injury. Occupational therapy can be invaluable in helping individuals 
maximize performance and develop or maintain skills for independent 
living and recovery consistent with a rehabilitation model of care. 
Recognizing the potential of occupational therapy to address functional 
impairment for people with mental illness and addictive disorders is 
essential to moving toward a recovery model for mental illness and 
substance abuse treatment that takes into account the importance of 
community integration and independence.
    AOTA is committed to working collaboratively with other mental 
health and substance abuse providers and consumer advocacy 
organizations to improve the integration and coordination of services 
to meet the needs of patients suffering from these conditions. 
Occupational therapy's unique perspective and focus on activities of 
meaning can deliver positive outcomes for patients in regard to both 
community integration and recovery. Fully utilizing the expertise and 
knowledge of occupational therapists to minimize functional impairment 
caused by behavioral and substance abuse disorders and to maximize 
independence is an essential part of developing more integrated and 
effective systems of care.
    Again, we thank you for the opportunity to comment on the role of 
occupational therapy in improving mental health and substance abuse 
services and to express our support for mental health and substance 
abuse parity. We look forward to continue working with the Committee to 
improve treatment and outcomes for people with those conditions.
                                 ______
                                 
    [Whereupon, at 4:59 p.m., the subcommittee was adjourned.]

                                 
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